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J O L L I B E E F O O D S C O R P O R A T I O N

10/F J O L L I B E E P L A Z A B U I L D I N G

10 F. O R T I G A S J R . A V E N U E

O R T I G A S C E N T E R , P A S I G C I T Y

Dept. Requiring this Doc.

Remarks = please use black ink for scanning purposes

Domestic Foreign

Year

Secondary License Type, If Applicable

Fiscal Year

Definitive Information Statement

S T A M P S

To be accomplished by SEC Personnel concerned

File Number

Document I.D.

LCU

Amended Articles Number/Section

Total Amount of Borrowings

Cashier

Total no. of Stockholders

COVER SHEET

(Company's Full Name)

(Business Address: No. Street City / Town / Province)

Atty. Angeline L. Chong (632) 634-1111 local 7817

Month Day

Any Day in June

S.E.C. Registration Number

SEC Form 20-IS

Contact Person Company Telephone Number

Year

Annual Meeting

Month Day

31-Dec

COVER SHEET

JOLLIBEE FOODS CORPORATION

(Company’s Full Name)

10/F Jollibee Plaza Building 10 F. Ortigas Jr. Avenue,

Ortigas Center, Pasig City (Company’s Address)

(632) 634-1111

Telephone Number

December 31 Any day in the month of June (Fiscal Year Ending) (Annual Meeting)

SEC Form 20-IS 2018 Definitive Information Statement

(Form Type)

________________________________ Amendment Designation (If applicable)

Registered and Listed

(Secondary License Type and File Number)

___________________ ___________________ Cashier LCU

___________________ DTU 77487 S.E.C REG. No.

___________________ ___________________ Central Receiving Unit File Number

___________________ Document I.D.

NOTICE OF ANNUAL STOCKHOLDERS’ MEETING

NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of Jollibee

Foods Corporation (the “Corporation”) will be held on June 29, 2018 at 2:00pm, at

The Blue Leaf Cosmopolitan (Monet Hall) Robinsons Bridgetowne, E. Rodriguez Jr.

Avenue, Libis, Quezon City.

The agenda for the meeting shall be as follows:

1. Call to Order;

2. Certification by the Corporate Secretary on Notice and Quorum;

3. Reading and approval of the minutes of the last Annual Stockholders’

Meeting;

4. Management’s Report;

5. Approval of the 2017 Audited Financial Statements and Annual Report;

6. Ratification of Actions by the Board of Directors and Officers of the

Corporation;

7. Election of Directors;

8. Appointment of External Auditors;

9. Approval of proposed amendments to the Title and Article First of the

Articles of Incorporation to include in the corporate name “Doing

business under the name and style ‘Jollibee’”;

10. Approval of the delegation of authority to the Board of Directors, in

accordance with Article VIII of the Amended By-Laws, for the

amendment of By-Laws to comply with SEC issuances and for other

purposes;

11. Other matters; and

12. Adjournment.

Registration begins at 1:00pm. Only stockholders of record as of May 28, 2018 are

entitled to vote and be voted for during the meeting. For your convenience in

registering your attendance, please bring any form of government-issued

identification such as passport, SSS identification or driver’s license.

PROXY

KNOW ALL MEN BY THESE PRESENTS:

That I, the undersigned stockholder of JOLLIBEE FOODS CORPORATION,

do hereby nominate, constitute and appoint ______________________ as my

true and lawful attorney-in-fact and proxy to represent me and vote all my

shares registered in my name in the books of said corporation, in the annual

stockholders’ meeting to be held on June 29, 2018 and any adjournments

thereof, as fully to all intents and purposes as I might or could do if present in

person, hereby ratifying and confirming any and all actions taken during any

said meetings, or adjournments thereof.

This proxy shall be valid for the above meeting only, or any adjournments

thereof, unless withdrawn by me earlier through notice in writing delivered to

the Corporate Secretary. In case I shall be present at any particular meeting, or

shall have given my proxy to another to represent me at any meeting, this

proxy shall be deemed revoked.

Dated this ____ day of _______________________.

Signature: ___________________________

Printed Name: ___________________________

(Do Not Fill This Portion)

No. of Shares Registered: ____________________________

Verified By: _____________________________

2

GENERAL INFORMATION

NO SOLICITATION SHALL BE CONDUCTED AND NO PROXIES SHALL BE

SOLICITED FOR PURPOSES OF THE COMPANY’S REGULAR STOCKHOLDERS’

MEETING TO BE HELD ON JUNE 29, 2018.

DATE, TIME AND PLACE OF MEETING OF SECURITY HOLDERS

The Annual Stockholders’ Meeting of Jollibee Foods Corporation (the “Company”) will be

held on June 29, 2018 at 2:00 p.m. at The Blue Leaf Cosmopolitan (Monet Hall), Robinsons

Bridgetowne, E. Rodriguez Jr. Avenue, Libis, Quezon City 1110 Philippines (the “Meeting”). This

Information Statement shall be first distributed to the stockholders of record as of May 28, 2018

on or before May 31, 2018.

The Company’s mailing address is at the 10/F Jollibee Plaza Building, 10 F. Ortigas Jr.,

Avenue, Ortigas Center, Pasig City, Metro Manila.

DISSENTERS’ RIGHT OF APPRAISAL

There are no corporate matters or actions that will entitle dissenting stockholders to exercise

their right of appraisal as provided in Title X of the Corporation Code. In any event, the

Company shall observe the procedure set forth in Title X of the Corporation Code with respect

to a dissenters’ right of appraisal.1

INTERESTS OF PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED

UPON

None of the directors or officers of the Company, or any nominee to the Board of Directors, or

any associate of the foregoing persons have substantial interest, direct or indirect, by security

holdings or otherwise, in any matter to be acted upon during the Meeting. Likewise, there are

no persons who have substantial interest, directly or indirectly, in any matter to be acted upon,

other than elections to office.

There is no director who has informed the Company in writing that he or she intends to oppose

any action to be taken by the Company at the Meeting.

1 Section 82. How right is exercised. – The appraisal right may be exercised by any stockholder who shall have voted

against the proposed corporate action, by making a written demand on the corporation within thirty (30) days after the date on which the vote was taken for payment of the fair value his shares: Provided, That failure to make the demand within such period

shall be deemed a waiver of the appraisal right. If the proposed corporate action is implemented or affected, the corporation shall

pay to such stockholder, upon surrender of the certificate or certificates of stock representing his shares, the fair value thereof as of the day prior to the date on which the vote was taken, excluding any appreciation or depreciation in anticipation of such

corporate action.

If within a period of sixty (60) days from the date the corporate action was approved by the stockholders, the

withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it shall be determined and appraised by

three (3) disinterested persons, one of whom shall be named by the stockholder, another by the corporation, and the third by the two thus chosen. The findings of the majority of the appraisers shall be final, and their award shall be paid by the corporation

within thirty (30) days after such award is made; Provided, That no payment shall be made to any dissenting stockholder unless

the corporation has unrestricted retained earnings in its books to cover such payment: and Provided, further, That upon payment by the corporation of the agreed or awarded price, the stockholder shall forthwith transfer his shares to the corporation.

3

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

(a) The Company has, as of April 30, 2018, 1,086,702,465 outstanding common

shares of stock and each share is entitled to one vote.

(b) Pursuant to the Resolution of the Board of Directors at a meeting held on May

9, 2018 the Board fixed May 28, 2018 as the record date for purposes of

determining stockholders entitled to notice of and to vote at the Meeting.

(c) Pursuant to Article III, Section 2 of the Company’s by-laws, a stockholder may

vote during the Meeting either in person or by proxy.

Applying Section 24 of the Corporation Code, each stockholder may vote in

any of the following manner:

1) He/she may vote such number of shares for as many

persons as there are directors to be elected;

2) He/she may cumulate said shares and give one candidate

as many votes as the number of directors to be elected

multiplied by his shares; or

3) He/she may distribute them on the same principle among

as many candidates as he shall see fit.

In any of the foregoing instances, the total number of votes cast by the

shareholder shall not exceed the number of shares owned by him/her as shown

in the books of the Company multiplied by the whole number of directors to be

elected.

(d) Security Ownership of Certain Record and Beneficial Owner and Management

Security Ownership of Certain Record and Beneficial Owners (as of April 30, 2018):

Title of

Class

Name and Address of

Record Owner

Name of Beneficial Owner and

Relationship with Record

Owner

Citizenship No. of Shares

Held

Percent

Common

Hyper Dynamic

Corporation

6th Floor Jollibee Center

San Miguel Ave., Pasig

City

Majority of the shares in Hyper

Dynamic Corporation are owned or controlled by Tony

Tan Caktiong and certain

relatives within the second

degree of consanguinity or

affinity.

Filipino

273,218,750

25.14%

Common

PCD Nominee

Corporation

G/F Makati Stock Exchange

6767 Ayala Ave., Makati

City

Approximately 646,528 scripless shares lodged with

Deutsche Regis Partners Inc.

are owned by Queenbee Resources Corporation, a

special purpose vehicle which is the issuer of warrants over such

shares.

Non-Filipino

308,396,103

28.38%

4

Title of

Class

Name and Address of

Record Owner

Name of Beneficial Owner and

Relationship with Record

Owner

Citizenship No. of Shares

Held

Percent

Common

Honeysea Corporation

6th Floor Jollibee Center San Miguel Ave., Pasig

City

Majority of the shares in Honeysea Corporation are

owned or controlled by Tony

Tan Caktiong and certain relatives within the second

degree of consanguinity or

affinity.

Filipino

127,743,747

11.76%

Common

PCD Nominee

Corporation

G/F Makati Stock

Exchange 6767 Ayala Ave., Makati

City

Filipino

121,707,161

11.20%

Common

Winall Holding

Corporation

6th Floor Jollibee Center San Miguel Ave., Pasig

City

Majority of the shares in Winall

Holding Corporation are

owned or controlled by certain

relatives within the fourth degree of consanguinity or

affinity.

Filipino

54,140,736

4.98%

Security Ownership of Directors (as of April 30, 2018):

Name and Position Citizenship Nature of Beneficial

Ownership

Number of

Shares

Percent of Class

Tony Tan Caktiong

Filipino

Direct -

8,254,565 Total: 0.78%

Director, Chairman Indirect (through Deutsche)

240,000

Ernesto Tanmantiong

Filipino

Direct

7,075,951

Total: 0.69% Director, President and Chief Executive Officer

Indirect (through Deutsche)

457,019

William Tan Untiong

Filipino

Direct

8,200,055

Total: 0.78% Director, Corporate Secretary and

Chief Real Estate Executive

Indirect

(through Deutsche)

279,667

Joseph C. Tanbuntiong

Filipino Direct

64,630

Total: 0.01% Director, Treasurer, and Head,

Country Business Group – Philippines


-

Ang Cho Sit

Filipino

Direct

11

Total: 0.00% Director Indirect

(through Deutsche)

-

Antonio Chua Poe Eng

Director

Filipino

Direct

1

Total: 3.70% Direct

(through Honeyworth)

38,857,446

Indirect (through Honeyworth)

1,402,177

C.J. Artemio V. Panganiban

Filipino

Direct

1

Total: 0.00%

Director Indirect (through Deutsche)

9,500

Monico V. Jacob

Filipino

Direct

100 Total: 0.00%

Independent Director Indirect (through Deutsche)

-

5


Ownership

Number of

Shares

Percent of Class

Cezar P. Consing

Filipino

Direct

1 Total: 0.00% Independent Director Indirect

(through Deutsche)

-

Security Ownership of Corporate Officers (as of April 30, 2018):


Ownership

Number of

Shares

Percent of Class

Ysmael V. Baysa

Filipino

Direct

811,667

Total: 0.07% Chief Financial Officer, Vice

President for Corporate Finance

Indirect

(through Deutsche)

-

Daniel Rafael Ramon Gomez

Filipino

Direct

-

Total: 0.00% Chief Marketing Officer Indirect

(through Deutsche)

-

Valerie F. Amante

Assistant Corporate Secretary; Vice President, Head, Corporate Legal

and Head, Corporate Ethics

Filipino

Direct

-

Total: 0.00% Indirect

(through Deutsche) -

Security Ownership of Heads of Local Units (as of April 30, 2018):


Ownership

Number of

Shares

Percent of Class

Justo S. Alano III

President, Jollibee Business

Filipino

Direct

- Total: 0.00%

Indirect

(through Deutsche)

-

Rowel D. Vijandre

Filipino

Direct

-

Total: 0.00% President, Chowking Business

Indirect

(through Deutsche)

-

Albert C. Cuadrante

Filipino

Direct

-

Total: 0.00% President, Greenwich Business


-

Zinnia Carmencita S. Rivera

Filipino

Direct

-

Total: 0.00% President, Red Ribbon Business


1,050

Jose Alexander P. Subido

President, Mang Inasal Business

Filipino

Direct

500

Total: 0.00%

Indirect

(through Deutsche)

-

Joan K. Aquino

Filipino

Direct

-

Total: 0.00% General Manager, Burger King

Business

Indirect

(through Deutsche)

7,000

6

Security Ownership of Heads of Corporate Units (as of April 30, 2018):


Ownership

Number of

Shares

Percent of Class

Fernando S. Yu, Jr. Filipino

Direct

45,000

Total: 0.00% Chief Business Support Officer Indirect

(through Deutsche)

-

Susana K. Tanmantiong

Filipino

Direct

1.063,857

Total: 0.11% Chief Procurement Officer Indirect

(through Deutsche)

138,000

Anastacia S. Masancay

Filipino

Direct

300,000 Total: 0.07%

Vice President – Special Projects

Indirect

(through Deutsche)

446,000

Lorna D. Atun Filipino Direct - Total: 0.00%

Assistant Vice President – Corporate

Audit

Indirect

(through Deutsche)

-

The aggregate number of shares directly owned by all officers and directors as a group as of

April 30, 2018 is 28,377,459 shares or approximately 2.61% of the Company’s outstanding

capital stock (net of treasury shares).

There is no voting trust agreement or any similar agreement for persons holding more than 5%

of a class.

There are no arrangements which may result in a change in control of the Company.

(e) There has been no change in control of the Company since the beginning of its

last fiscal year.

DIRECTORS AND EXECUTIVE OFFICERS

(a) Directors and Executive Officers

The Company’s directors are:

Tony Tan Caktiong

Mr. Tan Caktiong, born in 1953, 65, Filipino, is the Chairman of the Board of Directors of the

Company. He has been a member of the Board since 1978 and was President and Chief

Executive Officer of the Company until July 1, 2014, after which he continued to serve as

Chairman of the Board. Mr. Tan Caktiong is also a member of the Executive, Nomination,

Corporate Governance and Compensation Committees of the Board of Directors.

Other directorships and trusteeships are:

Listed Companies2

Non-Executive Director

and Co-Chairman

DoubleDragon Properties Corp.

2 Mr. Tony Tan Caktiong ceased to be a member of the Board of Directors of First Gen Corporation as of May 9, 2018, date of Organizational Board Meeting.

7

Non-listed Companies

Director Fresh N’ Famous Foods, Inc.

Director Mang Inasal Phils. Inc.

Director Coffeetap Corporation3

Director BK Titans, Inc.

Director PFN Holdings Corporation

Director Perf Restaurants, Inc.

Director Perf Trinoma, Inc.

Director Perf MOA Pasay, Inc.

Director RRB Holdings, Inc.

Director Red Ribbon Bakeshop, Inc.

Director Honeystar Holdings Corporation

Director Chanceux, Inc.

Director Bee Good! Inc.

Director SJBF LLC

Director Honeybee Foods Corp.

Director Red Ribbon Bakeshop Inc. (USA)

Director Chowking Food Corporation (USA)

Director Jollibee Worldwide Pte. Ltd.

Director Belmont Enterprises Ventures Ltd.

Director Jollibee International (BVI) Ltd.

Director WJ Investments Limited

Director JSF Investments Pte. Ltd.

Director Golden Cup Pte. Ltd.

Director Golden Plate Pte. Ltd.

Director Golden Beeworks Pte. Ltd.

Director SF Vung Tau Joint Stock Company

Director Blue Sky Holdings Ltd.

Director Southsea Binaries Limited

Director Happy Bee Foods Processing Pte. Ltd.

Director Jollibee (China) Food & Beverage Management Co. Ltd.

Director Beijing Golden Coffee Cup Food & Beverage Management Co.

Ltd.

Director Beijing New Hongzhuangyuan Food & Beverage

Management Co. Ltd.

Director Hangzhou Yonghe Food and Beverage Co. Ltd.

Director Hangzhou Yongtong Food and Beverage Co. Ltd.

Director Tianjin Yong He King Food & Beverage Co. Ltd.

Director Beijing Yong He King Food and Beverage Co. Ltd.

Director Shenzhen Yong He King Food and Beverage Co. Ltd.

Director Wuhan Yong He King Food and Beverage Co. Ltd.

Director Happy Bee Foods Processing (Anhui) Co. Ltd.

Director 12 Sabu (Shanghai) Food & Beverage Management Co. Ltd.4

Director Yong He Holdings Co. Ltd.

Director Centenary Ventures Limited

Director Shanghai Belmont Enterprises Management & Adviser Co. Ltd.5

Director Honeysea Corporation

Director Hyper Dynamic Corporation

Director Mainspring Resources Corporation

3 Pending dissolution. 4 Pending liquidation and deregistration. 5 Pending deregistration.

8

Director Winall Holding Corporation

Director Imperial Premium Treasures, Inc.

Director Queenbee Resources Corporation

Director6 STI College Tanauan Inc.

Director Centregold Corporation

Board Director Temasek Foundation International CLG Limited

Trustee Jollibee Group Foundation, Inc.

Trustee St. Luke’s Medical Hospital

Member International Advisory Board, The Philharmonic-Symphony

Society of New York, Inc.

William Tan Untiong

Mr. Tan Untiong, born in 1953, 64, Filipino, has been the Corporate Secretary of the Company

since 1994, and a member of the Board since 1993. He is a member of the Executive,

Nomination and Audit Committees of the Board of Directors.

Mr. Tan Untiong has also been the Vice President for Real Estate since 1989. Effective January

1, 2014, Mr. Tan Untiong is the Chief Real Estate Officer of JFC.

Other directorships and trusteeships are:

Listed Companies

Executive Director



Director Fresh N’ Famous Foods Inc.

Director Mang Inasal Phils. Inc.

Director Coffeetap Corporation7




Director Grandworth Resources Corporation

Director Zenith Foods Corporation






Director Adgraphix, Inc.

Director Belmont Enterprises Ventures Ltd. (BVI)


Director Golden Cup Pte. Ltd.

Director JSF Investments Pte. Ltd.


Director Hangzhou Yong He Food and Beverage Co. Ltd.



Director Shenzhen Yong He King Food and Beverage Co. Ltd.

Director Wuhan Yong He King Food and Beverage Co. Ltd.

6 Mr. Tan Caktiong is also the Chairman. 7 Pending dissolution.

9

Director Beijing Golden Coffee Cup Food & Beverage Management Co.

Ltd.

Director 12 Sabu (Shanghai) Food & Beverage Management Co. Ltd.8



Director WJ Investments Limited

Director Blue Sky Holdings Limited

Director JC Properties & Ventures Corporation



Director Iconnect Multimedia Network, Inc.

Director Honeyworth Corporation




Director Kingsworth Corporation



Ernesto Tanmantiong

Mr. Tanmantiong, born in 1958, 59, Filipino, is the President and Chief Executive Officer of

the Corporation, effective January 1, 2014. He has been a member of the Board since 1987, and

previously served as the Treasurer and Chief Operating Officer of the Company. He is also a

member of the Executive and Nomination Committees of the Board of Directors.

Other directorships9 and trusteeships are:

Director Fresh N’ Famous Foods, Inc.




Director Cargill Joy Poultry Meats Production Inc.

Director Cargill Joy Poultry Realty Inc.





Director Adgraphix, Inc.

Director Grandworth Resources Corp.

Director EST58 Corporation

Director Jollibee Worldwide Pte. Ltd.

Director Belmont Enterprises Ventures Ltd.

Director Jollibee International (BVI) Ltd.

Director Jollibee Hong Kong Ltd.

Director Hanover Holdings Ltd.

Director Jollibee Vietnam Co. Ltd.

Commissioner P.T. Jollibee Indonesia

Commissioner P.T. Chowking Indonesia


Director Golden Beeworks Pte. Ltd.

8 Pending liquidation and deregistration. 9 Non-listed companies.

10

Director Happy Bee Foods Processing Pte. Ltd.

Director Happy Bee Foods Processing (Anhui) Co. Ltd.


Director Hangzhou Yonghe Food and Beverage Co. Ltd.



Director Wuhan Yonghe King Food and Beverage Co. Ltd.



Director Kingsworth Corporation

Director Imperial Premium Treasures, Inc.









Joseph C. Tanbuntiong

Mr. Tanbuntiong, born in 1963, 54, Filipino, was elected to the Board in 2013. He was elected

as the Company’s Treasurer on June 27, 2014. He is a member of the Executive and

Compensation Committees of the Board of Directors.

Mr. Tanbuntiong joined the Company in 1993 and is the Head, Country Business Group –

Philippines for the Jollibee Group of Companies. He was previously President of the Jollibee

Business Unit (Philippines).

Other directorships are:

Listed Companies

Non- Executive

Director






Director Perf Restaurants, Inc.

Director Perf MOA Pasay, Inc.

Director Perf Trinoma, Inc.

Director PFN Holdings Corporation


Director Jaysforjay, Inc.

Director 4Jays San Juan Holdings, Inc.


11

Ang Cho Sit

Mr. Ang, born in 1950, 67, Filipino, has been a member of the Board since 1978. He is a

member of the Compensation Committee of the Board of Directors.

Other directorships10 are:

Director Freemont Foods Corp.

Director Grandworth Resources Corporation

Director A-Star Holding Company

Director Longshore Corporation


Director Venice Corporation

Antonio Chua Poe Eng

Mr. Chua Poe Eng, born in 1947, 70, Filipino, has been a member of the Board since 1978. He

is a member of the Audit Committee of the Board of Directors.

Other directorships11 are:

Chairman, President Honeyworth Corporation

Director Albany Resources Corporation


Ret. Chief Justice Artemio V. Panganiban

Mr. Panganiban, born in 1936, 81, was elected to the Board of Directors in 2012. Mr.

Panganiban was the Chief Justice of the Philippine Supreme Court from 2005 to 2006.

Concurrent with his position as Chief Justice, he was also the Chairperson of the Presidential

Electoral Tribunal, the Judicial and Bar Council and the Philippine Judicial Academy. Prior to

his elevation as Chief Justice in 2005, Mr. Panganiban was a Justice of the Supreme Court in

1995 to 2005.

Mr. Panganiban is a member of the Executive and Compensation Committees and is the

Chairman of the Nomination Committee.

Other directorships and affiliations are:

Listed Companies

Independent Director MERALCO

Independent Director Petron Corporation

Independent Director First Philippine Holdings Corp.

Independent Director Philippine Long Distance Telephone Company

Independent Director Metro Pacific Investment Corp.

Independent Director Robinsons Land Corp.

Independent Director GMA Network, Inc.

Independent Director GMA Holdings, Inc.

Independent Director Asian Terminals, Inc.

10 Non-listed corporations. 11 Non-listed corporations.

12

Senior Adviser Metropolitan Bank and Trust Company

Member, Advisory Council Bank of the Philippine Islands

Adviser



Chairman, Board of Trustees Foundation for Liberty and Prosperity

Chairman, Board of Trustees Philippine Judges Foundation

Chairman, Philippine Chapter ASEAN Law Association

Chairman Emeritus Philippine Dispute Resolution Center, Inc.

President Manila Metropolitan Cathedral – Basilica Foundation

Monico V. Jacob

Mr. Jacob, born in 1945, 72, Filipino, has been a member of the Board since 2000. Mr. Jacob

is an Independent Director and is a member of the Nomination Committee of the Board of

Directors. He is also the chairman of the Audit Committee.

Other directorships and affiliations are:

Listed Companies

Non-executive Director Asian Terminals, Inc.

Independent Director Lopez Holdings Corp.

Non-executive Director Phoenix Petroleum Philippines, Inc.

Independent Director Rockwell Land Corporation

President STI Education Systems Holdings, Inc.


Director De Los Santos – STI College

President Eximious Holdings, Inc.

President GROW Vite, Inc.

Director Information and Communications Technology (i-Academy), Inc.

Director/President Maestro Holdings, Inc. (formerly STI Investments, Inc.)

Chairman Global Resource for Outsourced Workers, Inc.

Director MegaClinic

Chairman Philippine Life Financial Assurance, Inc.

Director Philippines First Insurance Company, Inc.

Director Philhealthcare, Inc.

Director Philplans First, Inc.

Chairman Rosehills Memorial Management, Inc.

Director/Vice-

Chairman and CEO

STI Education Services Group, Inc.

President STI West Negros University

President Tantivy Holdings, Inc.

Vice-President Techzone Philippines, Inc.

Chairman Total Consolidated Asset Management, Inc.

Cezar P. Consing

Mr. Consing, born in 1959, 58, Filipino, was elected as an Independent Director of the

Company in 2010. He is a member of the Compensation and Audit Committees of the Board

of Directors. He is also the chairman of the Corporate Governance Committee.

13

Mr. Consing is the President and Chief Executive Officer of the Bank of the Philippine Islands.

From 2004 to 2013, Mr. Consing was a partner with The Rohatyn Group, a New York-based

investment management company. From 1985 to 2004, he was an investment banker with J.P.

Morgan & Co., and was head or co-head of Investment Banking in Asia Pacific (ex-Japan) from

1999 to 2004.

Other directorships are:

Listed Companies

Director Bank of the Philippine Islands

Director

National Reinsurance Corp. of the Philippines (PhilNare)


Chairman BPI Family Savings Bank, Inc.

Director BPI Direct BanKO, Inc.

Chairman BPI/MS Insurance Corp.

Director BPI-Philam Life Assurance Corp.

Chairman BPI Capital Corp.

Chairman BPI Europe PLC

Director BPI Asset Management and Trust Corporation

Chairman BPI Century Tokyo Lease & Finance Corp.

Chairman BPI Century Tokyo Rental Corp.

Vice-Chairman Board of Trustees, BPI Foundation, Inc.

Chairman BPI Computer Systems Corp.

Director BancNet, Inc.

Director LGU Guarantee Corp.

Board Director & Non-

Executive Chairman

Filgifts.com

Board Partner TRG Management Principals LP

Director Sqreem Technologies Private Ltd.

Director Endeavor Philippines

Assistant Corporate Secretary

Valerie Feria Amante

Atty. Amante, born in 1974, 43, Filipino is the Assistant Corporate Secretary of the Company.

She is also Vice-President, Head, Corporate Legal and Head, Corporate Ethics. She joined the

Company in January 2007. She was previously connected with Ayala Land, Inc. and previous

to that, SyCip Salazar Hernandez & Gatmaitan.

Attendance in Board Meetings in 2017

In 2017, the Board of Directors met eleven (11) times during the period from January to

December. Mr. Cezar Consing had three (3) absences; Messrs. Joseph Tanbuntiong, Ang Cho

Sit and Antonio Chua Poe Eng had two (2) absences each; Messrs. William Tan Untiong and

Monico Jacob had one (1) absence each.

14

Independent Directors

Pursuant to SEC Memorandum Circular No. 4, series of 2017, a company’s independent

director shall serve for a maximum cumulative term of nine (9) years. It further provides that

the reckoning of the cumulative nine-year term is from 2012. The independent directors of the

Company have not yet exceeded the maximum term limit.

The Certifications of Independent Directors are attached hereto as Annex “D”.

The Company’s directors were nominated and voted for by the stockholders during the

Company’s Annual Stockholders’ Meeting on June 30, 2017.

CORPORATE OFFICERS

The Company’s Corporate Officers are Messrs. Tony Tan Caktiong, Ernesto Tanmantiong,

William Tan Untiong, Joseph Tanbuntiong, Ysmael V. Baysa and Daniel Rafael Ramon Z.

Gomez III.

Ysmael V. Baysa

Mr. Baysa, born in 1956, 62, Filipino, is Chief Financial Officer and Compliance Officer. He

joined the Company in 2003. Previously, Mr. Baysa was Senior Vice-President for Financial

Comptrollership, Human Resources and Corporate Planning of Union Bank. He was also

Finance Director of Procter & Gamble from 1993 to 2001.

Daniel Rafael Ramon Z. Gomez III

Mr. Gomez, born in 1972, 45, Filipino, is Chief Marketing Officer. He joined the Company in

July 2008. He was previously Managing Director for Skin, Deodorants and Home Care of

Unilever Philippines and prior to that, Category Director for Skin & Deodorants in the same

company.

SIGNIFICANT EMPLOYEES

Other than the mentioned directors and executive officers and the entire workforce of the

Company, the Company has no employees expected to make a significant contribution to the

business.

INVOLVEMENT IN LEGAL PROCEEDINGS

None of the directors, executive officer or nominees for election as director or executive officer

has been involved for the past five (5) years in any litigation that would affect their integrity

and ability to manage the Company.

15

(b) Certain Relationships and Related Transactions

Tony Tan Caktiong, Ernesto Tanmantiong, William Tan Untiong and Joseph Tanbuntiong are

brothers. Ang Cho Sit is the brother-in-law of Tony Tan Caktiong. Susana K. Tanmantiong is

the wife of Ernesto Tanmantiong and sister-in-law of Tony Tan Caktiong, William Tan Untiong

and Joseph Tanbuntiong. Antonio Chua Poe Eng is the brother-in-law of Tony Tan Caktiong,

Ernesto Tanmantiong, William Tan Untiong and Joseph Tanbuntiong. Grace A. Tan is the wife

of Tony Tan Caktiong.

Some of the Company’s directors own franchises or have minority interests in companies which

own and operate franchised stores of the Company. All such franchises are subject to contracts

which have been entered into on an arms-length basis and on terms similar to those granted to

other franchisees.

The Company has no parent company.

The Company has no transaction with promoters.

(c) No Director has resigned or declined to stand re-election to the Board of Directors since

the date of the last annual meeting.

NOMINATION AND ELECTION PROCEDURES

Article III of the Company’s By-laws provide:

Section 12. NOMINATION OF DIRECTORS. The Board shall constitute

a Nomination Committee in accordance with Article IV, Section 9 of these By-

Laws.

Nomination to the Board of Directors (including the independent director)

shall be submitted to the Nominations Committee for consideration by the

latter prior to the annual meeting of the stockholders or a special meeting

called for the purpose of electing the Corporation’s Directors. All such

submissions shall be signed by the stockholders nominating a particular

nominee together with the written acceptance of such nominee. The

Nominations Committee shall review the qualifications of the nominees for

directors and prepare a final list of candidates. (As amended on June 27, 2008).

After such nomination process, the Nominations Committee shall prepare a

Final List of Candidates containing all information about all nominees for

directors. All nominations for election of Directors by stockholders must be

submitted in writing to the Corporate Secretary at least Fifteen (15) Business

Days prior to the date of the relevant stockholders’ meeting.

The Final List of Candidates shall be made available to the Securities and

Exchange Commission (“SEC”) and to all stockholders through the

Information or Proxy Statement. The name of the person or group of persons

who submitted a particular nominee’s name shall be identified in such report

including any relationship with the nominee.

16

Only nominees whose names appear on the Final List of Candidates shall be

eligible for election as directors. No other nominations shall be entertained or

allowed on the floor during the annual stockholders meeting. (As amended on

June 27, 2008).

Section 13. ELECTION OF DIRECTORS. Subject to existing laws, rules

and regulations of the SEC or any stock exchange having jurisdiction over the

Company, the conduct of election of directors shall be made in accordance

with the standard election procedures contained in these By-Laws.

It shall be the responsibility of the Chairman of the meeting to inform all

stockholders of the requirement of electing independent directors. The

Chairman of the Meeting shall ensure that the independent director is elected

during the stockholders’ meeting.

Specific slots for independent Directors shall not be filled up by unqualified

nominees. (As amended on June 27, 2008).

The nine (9) directors of the Corporation shall be elected by plurality vote at

the annual meeting of the stockholders for the year at which a quorum is

present. At each election for directors every stockholder shall have the right to

vote, in person or by proxy, the number of shares owned by him for as many

persons as there are directors to be elected, or to cumulate his votes by giving

one candidate as many votes as the number of such directors multiplied by the

number of his shares shall equal, or by distributing such votes as the same

principle among any number of candidates. The persons receiving the first nine

(9) highest number of votes shall be the directors. (As amended on June 27,

2008).

In the event of a failure of election for independent directors, the Chairman of

the Meeting shall call a separate election during the same meeting to fill up the

vacancy. (As amended on June 24, 2005)

NOMINEES FOR DIRECTORS

As of the preparation of this Report, all the above incumbent members of the Board of

Directors, including the independent directors, are the Management’s nominees for re-election

in the next election for membership in the Board. None of the nominating directors are related

to the nominee for the independent director.

17

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

Pursuant to Part IV, Paragraph (B) of Annex C of SRC Rule 12, below is a summary

compensation table of the Chief Executive Officer and the four (4) most highly compensated

officers of the Company:

Name and Position Year Salary (PhP) Bonus (PhP) Total (PhP)

Tony Tan Caktiong Chairman

Ernesto Tanmantiong President and Chief Executive Officer

2016 101,283,470.00 56,892,767.00 158,176,237.00

Joseph Tanbuntiong Treasurer, Head, Country Business Group – Philippines

2017 110,593,624.00 65,137,389.00 175,744,689.00

Ysmael V. Baysa Chief Financial Officer

2018* 120,181,244.00 76,745,334.00 196,926,578.00

Jose Maria A. Minana, Jr. Head, Foreign Franchised Brands and Country Head, North America (US and Canada)

All other officers and directors as a group unnamed

2016 418,111,683.00 211,051,189.00 629,162,872.00

2017 469,305,159.00 239,320,286.00 708,611,769.00

2018* 518,894,870.00 247,792,723.00 766,687,593.00

*Estimates

COMPENSATION OF DIRECTORS

Standard Arrangements

Directors of the Company receive a per diem of PhP60,000.00 for attendance in a Board

meeting. Board meetings are scheduled monthly. A director who attends all regular meetings

earns a total of PhP720,000.00 annually. In addition, the Company instituted a performance-

based incentive for its directors. The incentive shall be determined by the Compensation

Committee.

Other Arrangements

The Company has no other arrangements pursuant to which a director is compensated or to be

compensated, directly or indirectly.

Employment Contracts

The Company maintains standard employment contracts with executive officers. The contracts

provide for annual salary increases and bonuses. Other than these employment contracts, there

are no special compensatory plans or arrangements which result from the resignation,

retirement or any other termination of employment of executive officers other than the

Company’s retirement plan which is made applicable to all of the Company’s employees.

18

Senior Management Stock Option and Incentive Plan

On January 10, 2017 and December 17, 2002, the SEC approved the exemption requested by

the Jollibee Group on the registration requirements of 31,500,000 and 101,500,000 options,

respectively, underlying the Parent Company’s common shares to be issued pursuant to the

Jollibee Group’s Senior Management Stock Option and Incentive Plan (the Plan). The Plan

covers selected key members of management of the Jollibee Group.

The Plan is divided into two programs, namely, the Management Stock Option Program

(MSOP) and the Executive Long-term Incentive Program (ELTIP). The MSOP provides a

yearly stock option grant program based on company and individual performance while the

ELTIP provides stock ownership as an incentive to reinforce entrepreneurial and long-term

ownership behavior of executive participants.

MSOP. The MSOP is a yearly stock option grant program open to members of the senior

management committee of the Jollibee Group and members of the management committee, key

talents and designated consultants of some of the business units.

Each MSOP cycle refers to the period commencing on the MSOP grant date and ending on the

last day of the MSOP exercise period. Vesting is conditional on the employment of the

employee-participants in the Jollibee Group within the vesting period. The options will vest at

the rate of one-third of the total options granted on each anniversary of the MSOP grant date

until the third anniversary.

The exercise price of the stock options is determined by the Jollibee Group with reference to

prevailing market prices over the three months immediately preceding the date of grant for the

1st up to the 7th MSOP cycle. Starting with the 8th MSOP cycle, the exercise price of the option

is determined by the Jollibee Group with reference to the market closing price at date of grant.

The options will vest at the rate of one-third of the total options granted from the start of the

grant date on each anniversary date which will start after a year from the grant date. For

instance, under the 1st MSOP cycle, the Compensation Committee of the Jollibee Group granted

2,385,000 options to eligible participants on July 1, 2004. One-third of the options granted, or

795,000 options, vested and may be exercised starting July 1, 2005. The exercise period for the

1st MSOP cycle was until June 30, 2012. From July 1, 2005 to September 9, 2016, the

Compensation Committee granted series of MSOP grants under the 2nd to 13th MSOP cycle to

eligible participants. Under the most recent grant (July 3, 2017), the 14th MSOP cycle, the

Compensation Committee granted 4,198,500 options. These options are similar to 1st MSOP

cycle.

The options under MSOP expire eight years after grant date. The 1st, 2nd, 3rd, 4th, 5th and 6th

MSOP cycles expired on June 30, 2012, 2013, 2014, 2015, 2016 and 2017, respectively.

The Jollibee Group does not pay cash as a form of settlement.

The movements in the number of stock options outstanding under MSOP and related weighted

average exercise prices (WAEP) are as follows:

19

2017 2016 2015

Number of

Options WAEP

Number of Options WAEP


Total options granted at beginning of year 42,986,294 P=92.47 40,120,794 P=82.22 36,863,194 P=73.58

Options granted during the year 4,198,500 206.20 2,865,500 236.00 3,257,600 179.99

Total options granted at end of year 47,184,794 P=102.59 42,986,294 P=92.47 40,120,794 P=82.22

Outstanding at beginning of year 15,256,198 P=159.46 14,868,437 P=133.32 13,609,275 P=117.51 Options granted during the year 4,198,500 206.20 2,865,500 236.00 3,257,600 179.99

Options exercised during the year (2,672,040) 110.35 (2,259,125) 87.40 (1,380,628) 100.42

Options forfeited during the year (2,108) 213.28 (218,614) 129.31 (617,810) 104.73

Outstanding at end of year 16,780,550 P=176.63 15,256,198 P=159.46 14,868,437 P=133.32

Exercisable at end of year 9,688,683 P=151.94 9,141,965 P=128.20 8,262,670 P=100.95

The weighted average share price of the Parent Company common shares is P=222.86, P=227.53

and P=206.05 in 2017, 2016 and 2015, respectively. The weighted average remaining contractual

life for the stock options outstanding as at December 31, 2017, 2016 and 2015 is 5.21 years,

5.17 years and 5.19 years, respectively.

The weighted average fair value of stock options granted in 2017, 2016 and 2015 is P=29.88,

P=31.16 and P=26.13, respectively. The fair value of share options as at the date of grant is

estimated using the Black-Scholes Option Pricing Model, taking into account, the terms and

conditions upon which the options were granted. The option style used for this plan is the

American style because the option plan allows exercise before the expiry date.

The inputs in the valuation of the options granted on the dates of grant for each MSOP cycle

are shown below:

MSOP Cycle Year of Grant Dividend Yield

Expected

Volatility

Risk-free

Interest

Rate

Expected

Life of

the Option

Stock Price

on Grant

Date

Exercise

Price

1st 2004 1.72% 36.91% 6.20% 5-7 years P=24.00 P=20.00

2nd 2005 1.72% 36.91% 6.20% 5-7 years 29.00 27.50

3rd 2006 1.72% 36.91% 6.20% 5-7 years 35.00 32.32 4th 2007 1.70% 28.06% 6.41% 3-4 years 52.50 50.77

5th 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.85

6th 2009 2.00% 30.37% 5.28% 3-4 years 48.00 45.45 7th 2010 2.00% 29.72% 5.25% 3-4 years 70.00 57.77

8th 2011 2.00% 34.53% 4.18% 3-4 years 89.90 89.90

9th 2012 2.00% 28.72% 3.50% 3-4 years 107.90 107.90 10th 2013 2.00% 29.38% 2.68% 3-4 years 145.00 145.00

11th 2014 2.00% 24.87% 2.64% 3-4 years 179.80 179.80

12th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.00 13th 2016 2.00% 17.76% 2.63% 3-4 years 236.00 236.00

14th 2017 2.00% 16.70% 3.92% 3-4 years 206.20 206.20

The expected life of the stock options is based on historical data and current expectations and

is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects

the assumption that the historical volatility over a period similar to the life of the options is

indicative of future trends, which may also not necessarily be the actual outcome.

ELTIP. The ELTIP entitlement is given to members of the senior management committee and

designated consultants of the Jollibee Group.

Each ELTIP cycle refers to the period commencing on the ELTIP entitlement date and ending

on the last day of the ELTIP exercise period. Actual grant and vesting is conditional upon

achievement of the Jollibee Group’s medium to long-term goals and individual targets in a

given period, and the employment of the employee-participants in the Jollibee Group within

20

the vesting period. If the goals are achieved, the options will be granted. For the 3rd ELTIP

cycle, a percentage of the options to be granted are based on the percentage of growth in annual

earnings per share such that 100%, 50% or 25% of the options granted when percentage of

growth in annual earnings per share are 12% and above, 10% to less than 12% or 8% to less

than 10%, respectively. For the 4th ELTIP cycle, the percentage of the options to be granted and

the targeted percentage of growth in annual earnings per share have been further revised such

that 150%, 100% or 50% of the options granted when percentage of growth in annual earnings

per share are 15% and above, 12% to less than 15% or 10% to less than 12%, respectively.

The exercise price of the stock options under ELTIP is determined by the Jollibee Group with

reference to prevailing market prices over the three months immediately preceding the date of

entitlement for the first and second ELTIP cycles. Starting with the 3rd ELTIP cycle, the

exercise price of the option is determined by the Jollibee Group with reference to the closing

market price as at the date of entitlement.

The options will vest at the rate of one-third of the total options granted on each anniversary

date which will start after the goals are achieved. For instance, on July 1, 2004, the

Compensation Committee gave an entitlement of 22,750,000 options under the 1st ELTIP cycle

to eligible participants. One-third of the options granted, or 7,583,333 options, vested and

exercised starting July 1, 2007 until June 30, 2012. On July 1, 2008, October 19, 2012 and

August 25, 2015, entitlement to 20,399,999, 24,350,000 and 11,470,000 options were given to

eligible participants under the 2nd, 3rd and 4th ELTIP cycles, respectively. The 1st and 2nd ELTIP

cycles expired on June 30, 2012 and April 30, 2017, respectively. The stock options granted

under the 3rd and 4th ELTIP cycles will expire in 2020 and 2023, respectively.


The movements in the number of stock options outstanding for the 2nd to 4th ELTIP cycles and

related WAEP for the years ended December 31, 2017, 2016 and 2015 follow:

2017 2016 2015

Number of

Options WAEP




Options granted during the year − − − − 11,470,000 180.00


Outstanding at beginning of year 35,118,896 P=122.65 38,344,999 P=117.74 31,270,560 P=90.06 Options granted during the year − − − − 11,470,000 180.00

Options exercised during the year (7,682,230) 73.69 (2,892,770) 59.59 (3,728,468) 79.46

Options forfeited during the year − − (333,333) 105.00 (667,093) 105.00

Outstanding at end of year 27,436,666 P=136.35 35,118,896 P=122.65 38,344,999 P=117.74


The weighted average remaining contractual life for the stock options outstanding as of 2017,

2016 and 2015 is 3.59 years, 4.00 years and 4.85 years, respectively.

The fair value of stock options granted is P=26.13 in 2015. There were no additional stock option

grants under ELTIP in 2017 and 2016. The fair value of share options as at the date of grant is

estimated using the Black-Scholes Option Pricing Model, taking into account the terms and

conditions upon which the options were granted. The option style used for this plan is the

American style because this option plan allows exercise before the maturity date.

21

The inputs to the model used for the options granted on the dates of grant for each ELTIP cycle

are shown below:

ELTIP Cycle Year of Grant

Dividend

Yield

Expected

Volatility

Risk-free

Interest Rate

Expected

Life of

the Option

Stock Price

on Grant

Date

Exercise

Price

1st 2004 1.72% 36.91% 6.20% 5 years P=24.00 P=20.00

2nd 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.85

3rd 2012 2.00% 28.74% 3.60% 3-4 years 105.00 105.00 4th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.00

The expected life of the stock options is based on historical data and current expectations and

is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects

the assumption that the historical volatility over a period similar to the life of the options is

indicative of future trends, which may also not necessarily be the actual outcome.

The cost of the stock options expense charged to operations for both MSOP and ELTIP in the

“General and administrative expenses” account amounted to P=227.5 million, P=241.3 million

and P=173.2 million in 2017, 2016 and 2015, respectively (see Note 22). Correspondingly, a

credit was made to additional paid-in-capital (see Note 19).

Warrants Outstanding

There are no outstanding warrants held by the Chief Executive Officer, other officers and

directors as a group.

INDEPENDENT PUBLIC ACCOUNTANTS

The accounting firm of SyCip Gorres Velayo & Co. (“SGV”) with address at SGV Building,

6760 Ayala Avenue, Makati City, has been the Company’s External Auditors for the past 40

years. SGV is expected to be represented in the coming Annual Stockholders’ Meeting with an

opportunity to make any statements, if they so desire, and will be available to respond to

appropriate questions.

During the Annual Stockholders’ Meeting on June 29, 2018, it shall be proposed that SGV be

appointed as the Company’s independent auditors.

JFC has not had any disagreements on accounting and financial disclosures with Sycip Gorres

Velayo & Co., its external auditor, in the past (2) two recent fiscal years or any subsequent

interim period.

COMPENSATION PLANS

There is no action to be taken with respect to any plan to which cash or non-cash compensation

may be paid or distributed.

ISSUANCE AND EXCHANGE OF SECURITIES

There are no actions to be taken with respect to the authorization or issuance of any securities

otherwise than for exchange for outstanding securities of the Company, or with respect to the

modification of any class of securities of the Company.

22

ACQUISITIONS, INVESTMENTS AND JOINT VENTURES

Acquisitions– United States of America (March 13, 2017)

On March 13, 2017, the Company disclosed that its wholly-owned subsidiary Bee Good! Inc.

(BGI) and Smashburger Master LLC (Master) amended their agreement to enable BGI to

purchase from Master more shares in SJBF LLC (the parent company of the Smashburger

business) between the years 2018 to 2021. Under the original agreement, BGI was entitled to

purchase from Master an additional 35% of SJBF LLC between the years 2018 and 2021, and

to acquire the balance of 25% between 2019 at the earliest and 2026 at the latest. With the

amendment, BGI shall be entitled to purchase from Master an additional 45% of SJBF LLC

between the years 2018 and 2021 and acquire the balance of 15% between the years 2019 at

the earliest and 2026 at the latest.

Joint Venture – Singapore (March 31, 2017)

On March 31, 2017, the Company disclosed that its wholly-owned subsidiary Golden Plate Pte.

Ltd. (GPPL) entered into a joint venture agreement with Blackbird Holdings Pte. Ltd.

(Blackbird) to own and operate the first Jollibee store in Italy. GPPL and Blackbird shall

incorporate a Singapore company (the JV Company) to be owned by GPPL to the extent of

75% and to be owned by Blackbird to the extent of 25%. The JV Company shall incorporate a

wholly-owned subsidiary in Italy to own and operate the store.

GPPL and Blackbird have committed to invest up to EUR1 Million to the JV, of which up to

EUR750,000 will be contributed by GPPL in proportion to its ownership in the business. GPPL

shall have full management control of the JV and the operations of the 1st store.

Investment – Vietnam (May 11, 2017)

On May 11, 2017, the Company disclosed that its wholly-owned subsidiary JSF Investments

Pte. Ltd. and its partner, Viet Thai International Joint Stock Company (VTI), in their joint

venture, SuperFoods Group with business mostly in the Socialist Republic of Vietnam have

just completed a key step in their plan to list SuperFoods Group as a public company in a Stock

Exchange in Vietnam by adjusting the ownership interest in the SuperFoods Group to 60% JFC

and 40% VTI from its previous 50-50 ownership share. This step is in line with the partners’

agreement to make SuperFoods a public company by July 2019 as disclosed by JFC to the

Philippine Stock Exchange on November 18, 2016.

Discontinuation of Operations – People’s Republic of China (November 2, 2017)

On November 2, 2017, the Company disclosed that, effective October 31, 2017, its 48%-owned

subsidiary 12 Hotpot (Shanghai) Food and Beverage Management Co. Ltd. (Operating

Company), discontinued operations of the 12 Hotpot brand in the People’s Republic of China.

The Operating Company owns and operated 16 stores in the Shanghai area.

Acquisitions– United States of America (February 13, March 8, and April 17, 2018)

On February 13, 2018, the Company disclosed that, through its wholly-owned subsidiary Bee

Good! Inc. (BGI), it will purchase from Smashburger Master LLC (Master) an additional 45%

of SJBF LLC, the parent company of the entities comprising the Smashburger® business. This

will increase BGI’s ownership in SJBF LLC from current 40% to 85%. Master will retain the

balance 15% ownership. The transaction, valued at USD 100 million is expected to be

completed in one to two months, subject to government approvals in the United States and

meeting certain closing conditions. JFC will pay Master through BGI in cash.

23

On March 8, 2018, the Company disclosed that BGI has executed the Purchase Agreement with

Master for the acquisition of the additional 45% share of SJBF LLC.

On April 17, 2018, the Company disclosed that closing conditions, including required

government approvals, have been obtained as provided under the Purchase Agreement for

BGI’s acquisition of additional 45% share of SJBF LLC. The Company, through BGI, now

owns 85% of Smashburger. With the completion of the acquisition, the Company shall include

Smashburger in its financial consolidation starting April 17, 2018.

New Business - Philippines (April 25, 2018)

On April 25, 2018, the Company disclosed that, further to its November 18, 2016 disclosure,

the Company, through its wholly-owned subsidiary Fresh N’ Famous Foods Inc., will bring

PHO24 to the Philippines. In its November 2016 disclosure, the Company disclosed that the

SuperFoods Group aims to serve consumers in Asia and key cities in the world high quality and

healthy Vietnamese food at affordable prices through PHO24 brand.

Investment – Philippines (May 8, 2018)

On May 8, 2018, the Company disclosed, that through its wholly-owned subsidiary Jollibee

Worldwide Pte. Ltd., it shall invest up to 45 Million Singapore Dollars in Titan Dining LP

(“Titan”), a private equity fund that has executed (through a wholly owned subsidiary) a binding

agreement for the acquisition of 100% of the Asia Pacific master franchise holder of the “Tim

Ho Wan” brand, Tim Ho Wan Pte. Ltd. (THWPL), and its affiliate Dim Sum Pte. Ltd. (DSPL),

which owns and operates Tim Ho Wan stores in Singapore (the Companies).

RESTATEMENT OF ACCOUNTS

There are no actions to be taken with respect to the restatement of any asset, capital or surplus

account.

ACTION WITH RESPECT TO REPORTS

The following are included in the Agenda for the Annual Stockholders’ Meeting for the

approval of the stockholders:

1. Call to Order;

2. Certification by the Corporate Secretary on Notice and Quorum;

3. Reading and approval of the minutes of the last Annual Stockholders’ Meeting;

4. Management’s Report;

5. Approval of the 2017 Audited Financial Statements and Annual Report;

Proposed Resolution:

RESOLVED, that the stockholders of Jollibee Foods Corporation

approve, as they hereby approve, the Consolidated Audited Financial

Statements of Jollibee Foods Corporation for the year ended

December 31, 2017 as audited by SyCip Gorres Velayo & Co., and the

Annual Report for the year ended December 31, 2017.

24

6. Ratification of Actions by the Board of Directors and Officers of the

Corporation;


RESOLVED, that the stockholders of Jollibee Foods Corporation (the

“Corporation”) approve, as they hereby confirm, ratify and approve

the actions taken by the Board of Directors and Officers of the

Corporation, since the last annual stockholders’ meeting held on June

30, 2017.

7. Election of Directors;

8. Appointment of External Auditors;



“Corporation”) approve, as they hereby approve, the re-appointment

of the firm of SyCip, Gorres, Velayo & Co. as independent external

auditors of the Corporation.

9. Approval of proposed amendments to the Title and Article First of the

Amended Articles of Incorporation to include in the corporate name “Doing

business under the name and style ‘Jollibee’”;



“Corporation”) approve, as they hereby approve, the amendment to

the Title and Article First of the Amended Articles of Incorporation to

include in the corporate name “Doing business under the name and

style ‘Jollibee’” to read as follows:

FIRST: That the name of the said corporation shall be:

JOLLIBEE FOODS CORPORATION

Doing business under the name and style of ‘Jollibee’

10. Approval of the delegation of authority to the Board of Directors, in accordance

with Article VIII of the Amended By-Laws, for the amendment of By-Laws to

comply with SEC issuances and for other purposes;



“Corporation”) approve, as they hereby approve, the delegation of

authority to the Board of Directors, in accordance with Article VIII of

the Amended By-Laws, for the amendment of By-Laws to comply with

SEC issuances and for other purposes.”

11. Other matters; and

12. Adjournment.

25

CORPORATE GOVERNANCE

The Board of Directors, Management and employees of Jollibee Foods Corporation commit

themselves to the principles and best practices of corporate governance as contained in its new

Manual on Corporate Governance, as filed on May 30, 2017, in compliance with SEC

Memorandum Circular No. 19, series of 2016 (Code of Corporate Governance for Publicly-

Listed Companies) and further acknowledge that the same may guide the attainment of the

Company’s values, mission and vision.

The Board of Directors, officers, employees and stockholders of the Company believe that

corporate governance is a necessary component of sound strategic business management and

will undertake every effort necessary to create awareness within the organization as soon as

possible.

The Company has adapted implementing policies of the new Manual on Corporate Governance,

including, among others, (i) membership of the Company’s directors in other corporate boards,

(ii) standard of conduct of the Board and Senior Management and conflict of interest policy;

(iii) selection process for directors and senior management; (iv) major capital expenditures; (v)

principles in developing remuneration policies, (vi) risk management, (vii) financial

management policies and procedures, (viii) shareholder grievance procedure and (ix) an

evaluation system for determining and measuring compliance with the Company’s new Manual

on Corporate Governance.

To ensure adherence to corporate principles and best practices of good corporate governance,

the Compliance Officer monitors compliance with the provisions and requirements of the new

Manual on Corporate Governance.

In compliance with SEC Memorandum Circular No. 15, series of 2017, the Company shall

submit its Integrated Annual Corporate Governance Report within the period required by the

Securities and Exchange Commission.

MATTERS NOT REQUIRED TO BE SUBMITTED

There is no action to be taken with respect to any matter which is not required to be submitted

to a vote of security holders.

OTHER PROPOSED ACTIONS

There are no other actions to be taken with respect to any other matter not specifically referred

to above.

26

VOTING PROCEDURES

a) Voting Requirement

1) For election of Directors

Pursuant to Section 24 of the Corporation Code, candidates receiving

the highest number of votes shall be declared elected.

2) For election of External Auditors

The nominee receiving the highest number of votes shall be declared

as elected.

3) For approval and ratification of all the acts of Management and the

Board of Directors for the period from June 30, 2017 to June 28, 2018.

Majority vote of the stockholders present or represented at the 2018

Meeting shall carry the vote.

b) Voting Method

Counting of the Ayes and Nays or showing of hands shall be the

method by which votes will be counted unless a stockholder requests

balloting, in which case, the votes of the stockholders shall be cast by

ballot. Votes shall be counted by SGV and the Corporate Secretary

who shall serve as members of the Committee on Elections.

UNDERTAKING

The Company undertakes, upon written request of the stockholder, to provide such stockholder

with a copy of the SEC Form 17-A and SEC Form 17-Q for 2018 First Quarter, free of charge,

except for exhibits attached thereto which shall be charged at cost. Written requests for copies

of the SEC Form 17-A and SEC Form 17-Q for 2018 First Quarter shall be addressed to:

Jollibee Foods Corporation

10/F Jollibee Plaza Building

10 F. Ortigas Jr. Avenue, Ortigas Center,

Pasig City

Attention: Mr. William Tan Untiong

Office of the Corporate Secretary

Annex “A”

Management Report

ANNEXES

The attachments to this Information Statement are the following:

Annex Document

A Management Report

A-1 Management Discussion and Analysis of Results of Operations and Financial

Condition for the year ended December 31, 2017

A-2 Management Discussion and Analysis of Results of Operations and Financial

Condition for the quarter ended March 31, 2018

A-3 Business Description of the Company

A-4 List of Local and International Trademarks

A-5 Discussion on Properties, Legal Proceedings and Financial Information

B Summary of Resolutions of the Board of Directors and Executive Committee

since the Last Annual Stockholders’ Meeting

C Financial Statements

Note: The Statement of Management Responsibility is duly marked with blue-

colored tab while the page showing the stamped received marking of both BIR

and SEC is duly marked with a green-colored tab.

C-1 Audited Consolidated Financial Statements for the year ended December 31,

2017

C-2 Audited Parent Financial Statements for the year ended December 31, 2017

C-3 Interim Financial Statements for the quarter ended March 31, 2018

D Certifications of Nominee as an Independent Director

D-1 Certification and Curriculum Vitae of Mr. Monico V. Jacob

D-2 Certification and Curriculum Vitae of Mr. Cezar P. Consing

2

MANAGEMENT REPORT

FINANCIAL STATEMENTS

The audited financial statements of the Company are attached herein as Annexes “C-1” and

“C-2” while the results of the operations for the quarter ended March 31, 2018 is attached

herein as Annex “C-3”.

EXTERNAL AUDIT FEES

The audit and audit-related fees cover professional services related to the performance of the

audit or review of the Company’s annual financial statements by the external auditor. The Audit

Committee reviews and approves the audit and non-audit services rendered by the Company’s

external auditors to ensure that the Company does not engage the external auditors for certain

non-audit services expressly prohibited by regulations of the Securities and Exchange

Commission to be performed by an external auditor for its audit clients. The proposal of

external auditors for professional services was submitted to, and reviewed by, the Audit

Committee which, in turn, is endorsed to the Board of Directors for approval.

For the 2017 audit, the aggregate fee for professional services rendered by the external auditors

is approximately Php22.1 Million. For the 2016 audit, the aggregate fee for professional

services rendered by the external auditors is approximately Php18.5 Million.

Tax Fees: In 2017 and 2016, fees for professional services rendered by the external auditors

for tax accounting, compliance, advise and other tax services are included in the external audit

fees.

Other Fees: There are no other fees billed for 2017 and 2016 professional services rendered by

external auditors other than those mentioned above.

Annex “A-1”

Management Discussion and

Analysis of Results of Operations

and Financial Condition for the

year ended December 31, 2017

MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL

CONDITION FOR THE YEAR ENDED DECEMBER 31, 2017

JOLLIBEE FOODS CORPORATION (JFC) AND SUBSIDIARIES

Management Discussion and Analysis of

Results of Operations and Financial Condition

The following Management Discussion and Analysis should be read in conjunction with the

submitted Audited Consolidated Financial Statements as at December 31, 2017 and 2016 and

for the years ended December 31, 2017, 2016 and 2015.

The accounting policies adopted are consistent with those of the previous financial year, except

for the adoption of new PFRS and amendments to existing PFRS which became effective on

January 1, 2017.

Please refer to Note 2 of the attached Audited Consolidated Financial Statements for the Basis

of Preparation, Statement of Compliance, Changes in Accounting Policies and Basis of

Consolidation.

Causes for Any Material Changes (Increase or decrease of 5% or more in the financial

statements)

Results of Operations

For the Year Ended December 31, 2017 vs. December 31, 2016 (All Amounts are in Million Pesos)

Revenues and System Wide Sales

System wide sales (SWS), a measure of all sales to consumers, both from company-owned and

franchised stores grew by 15.2% for the entire year of 2017 driven by the expansion of store

network and strong same store sales. The JFC Group opened 465 new stores in 2017, the

highest number of new stores opened in a year in JFC’s 39-year history. The sales growth also

included the impact of the newly-consolidated SuperFoods Group and the divestments of San

Pin Wang and Jinja Bar in 2016. Without SuperFoods Group and divestments, system wide

sales grew by 15.0%.

System wide sales of the Philippine business grew by 13.2% driven by the acceleration of store

network expansion and continued strong same store sales growth. The JFC group opened 328

new stores (232 net of closures) in the country in 2017, 34.4% higher than the 244 new stores

(167 net of closures) opened in the Philippines in 2016.

Systemwide sales of the foreign business grew by 23.3% (excluding divestments and

acquisition) with the Southeast Asia (ex-Philippines) business growing by 39.1%. China

business by 18.2%, North America business by 25.6%, and the Middle East business by 26.6%.

This growth rate excluded the impact of the divestments in 2016 and the consolidation of the

SuperFoods Group starting May, 2017. System wide sales of the foreign business increased by

23.4%, including the SuperFoods Group and the divestments.

2017 2016 Amount Pct

System Wide Sales 171,761.0 149,142.1 22,618.9 15.2%

Revenues 131,576.6 113,811.5 17,765.1 15.6%

ChangeYear Ended December

Consolidated revenues, which consist of sales by company-owned stores, fees from stores

operated by franchisees and commissary sales to stores operated by franchisees grew by 15.6%

in 2017 compared with 2016. Sales discounts increased, from 0.9% of revenues in 2016 to 1.2%

in 2017 driven mostly by promotional discounts from the China brands’ delivery business.

The JFC Group opened 465 stores (Philippines 328; Foreign 137) and closed 151 stores

(Philippines 96; Foreign business 55) during the year. It ended the 2017 with 3,797 stores,

16.7% higher compared to the number of stores at the end of 2016. The total stores for 2017

included store network of the SuperFoods Group, with 244 for Highlands Coffee, 29 for Pho

24 and 8 for Hard Rock Café. Excluding the SuperFoods Group and divestments, JFC’s store

network grew by 8.1% YoY.

Cost of Sales

Consolidated cost of sales increased to P107,658.1 million, which is P14,842.7 million or 16.0%

higher than consolidated cost of sales for the year 2016.

The following table summarizes the breakdown of the Jollibee Group’s cost of sales for the

years ended December 31, 2017 and 2016 and the percentage of each component and the

consolidated cost of sales to consolidated revenues:

See Note 21 to the accompanying Audited Consolidated Financial Statements for details.

Consolidated cost of inventories increased almost at the same rate as revenues. Cost of raw

materials, particularly imported items such as beef, frozen potatoes, pork and dairy products

increased due to increase in cost per unit and the impact of peso depreciation. As a percentage

of revenues, cost of inventories still improved slightly driven by upward price adjustments

implemented by the domestic brands during the year.

The improvement in cost of inventories was however offset by higher store and manufacturing

costs, which increased by 17.2% year-on-year (YoY) due to increase in practically all cost items

driven by increase in number of stores and the consolidation of the SuperFoods Group starting

May 2017. As a percentage of revenues, store and manufacturing costs increased by 0.4%

points, driven by the following:

- Increase in consolidated depreciation expense due to higher investment in new stores.

- Increase in consolidated rent expenses due to annual rent escalation, consolidation of the

SuperFoods’ Group rent expenses and the impact of PFRS-related adjustments on operating

leases (i.e., recognition of rent expenses under the straight-line method).

- Increase in consolidated supplies due to increase in the cost of Liquified Petroleum Gas

(LPG).

- Increase in consolidated professional fees due to higher headhunter fees for recruiting

services, arising from store network expansion and higher legal fees incurred by a US

subsidiary of the Parent Company; and,

- Increase in consolidated contracted services due to headcount increase needed to support

store operations and the impact of the implementation of the new labor regulations. The

increase was partly offset by the slower increase in salaries and wages and decrease in

expenses related to Project SEEDS*. Following are the details:

2017 2016 Amount Pct 2017 2016

Cost of Sales

Cost of inventories 62,725.5 54,475.0 8,250.5 15.1% 47.7% 47.9%

Personnel costs:

Salaries, wages and other employee benefits 11,021.8 10,472.7 549.1 5.2% 8.4% 9.2%

Pension expense 168.1 171.5 (3.4) -2.0% 0.1% 0.2%

Rent 9,719.9 8,234.5 1,485.4 18.0% 7.4% 7.2%

Contracted services 7,305.0 4,875.1 2,429.9 49.8% 5.6% 4.3%

Electricity and other utilities 4,587.2 4,022.8 564.4 14.0% 3.5% 3.5%

Depreciation and amortization 4,307.8 3,542.6 765.2 21.6% 3.3% 3.1%

Supplies 2,570.0 2,155.0 415.0 19.3% 2.0% 1.9%

Repairs and maintenance 1,218.6 1,327.9 (109.3) -8.2% 0.9% 1.2%

Security and janitorial 795.8 638.3 157.5 24.7% 0.6% 0.6%

Communication 227.2 190.8 36.4 19.1% 0.2% 0.2%

Professional fees 57.6 35.0 22.6 64.6% 0.0% 0.0%

Representation and entertainment 39.2 33.2 6.0 18.1% 0.0% 0.0%

Others 2,914.5 2,641.0 273.5 10.4% 2.2% 2.3%

107,658.2 92,815.4 14,843.8 16.0% 81.8% 81.6%

Pct to RevYear Ended December Change

- Consolidated repairs and maintenance decreased on account of higher base from late

billings for store repairs and maintenance for 2015, which were recognized only in 2016.

As a percentage of consolidated revenues, consolidated cost of sales was slightly higher

compared to the previous year due to higher store and manufacturing costs, as discussed above.

Gross Profit

Consolidated gross profit for 2017 increased to P23,918.4 million, P2,922.4 million or 13.9%

higher than the consolidated gross profit of P20,996.0 million for 2016. Gross profit margin

for 2017 was 18.2%, lower than the 18.4% gross profit margin for 2016 as store and

manufacturing costs increased at a much faster rate than revenues.

General and Administrative Expenses

Consolidated expenses for 2017 increased to P17,248.8 million, P2,717.9 million or 18.7%

higher compared to the consolidated expenses for 2016 of P14,530.9 million.

The following table summarizes the breakdown of the Jollibee Group’s consolidated expenses

for the years ended December 31, 2017 and 2016, and the percentage of each expense item to

the consolidated revenues:

2017 2016 Amount Pct 2017 2016

Salaries, wages and benefits 11,189.9 10,644.2 545.7 5.1% 8.5% 9.4%


Project SEEDS* 194.9 408.7 (213.8) -52.3% 0.1% 0.4%

18,689.8 15,928.0 2,761.9 17.3% 14.2% 14.0%

Pct to RevYear Ended December 31 Change

*SEEDS stands for Skills Enhancement and Educational Development for Students, a joint project of JFC and the Department of Labor and

Employment. The program aims to help qualified students pursue post-secondary education through the provision of financial assistance

to enable students to acquire job competencies - skills, attitudes and work values through in-store training, thus enhancing employability

upon completion of post-secondary education. Expenses related to the SEEDS Project are booked under the account Cost of sales -

Others.


- Consolidated personnel costs increased due to an increase in the Corporate Office’s

headcount, performance-related increases in basic pay, employee promotions, upgrades in

employee benefits and fringe benefit tax on stock options exercised. The consolidation of

the SuperFoods Group’s personnel costs also contributed to the increase in operating

expenses.

- Consolidated taxes and licenses expense increased due to higher business-related taxes and

license fees resulting from higher revenues.

- Consolidated professional fees increased primarily driven by higher legal fees related to

M&A projects, engineering and design, market research, site sourcing, digital marketing

projects, Information Management and HR-related consultancy fees.

- Consolidated transportation and travel expenses increased due to higher lodging, mileage

and per diem expenses for activities related to store expansion (e.g. site visits for store

construction and renovation, site evaluation and sourcing, etc.) and various projects in the

Philippines and foreign markets.

- Consolidated rent expense increased due to annual rent escalation and additional office

spaces for the Corporate Offices in the Philippines, China and the United States due to the

2017 2016 Amount Pct 2017 2016

Personnel costs:

Salaries, wages and other employee benefits 6,850.4 5,543.2 1,307.2 23.6% 5.2% 4.9%

Stock option expense 227.5 241.3 (13.8) -5.7% 0.2% 0.2%

Pension expense 194.8 192.3 2.5 1.3% 0.1% 0.2%

Taxes and licenses 1,394.4 1,271.1 123.3 9.7% 1.1% 1.1%


Transportation and travel 577.4 504.5 72.9 14.5% 0.4% 0.4%

Rent 516.7 470.0 46.7 9.9% 0.4% 0.4%

Contracted services 474.6 499.5 (24.9) -5.0% 0.4% 0.4%

Depreciation and amortization 437.3 453.2 (15.9) -3.5% 0.3% 0.4%

Impairment in value of:

Property, plant & equipment 431.9 42.7 389.2 911.5% 0.3% 0.0%

Receivables 143.8 91.4 52.4 57.3% 0.1% 0.1%

Other Assets 122.8 - 122.8 0.0% 0.1% 0.0%

Inventories 7.4 78.6 (71.2) -90.6% 0.0% 0.1%

Corporate events 192.2 161.6 30.6 18.9% 0.1% 0.1%

Repairs and maintenance 157.5 191.3 (33.8) -17.7% 0.1% 0.2%

Membership and subscriptions 139.6 112.1 27.5 24.5% 0.1% 0.1%

Training 134.4 161.7 (27.3) -16.9% 0.1% 0.1%

Communication 116.1 98.8 17.3 17.5% 0.1% 0.1%

Donations 93.3 82.6 10.7 13.0% 0.1% 0.1%

Supplies 89.6 78.8 10.8 13.7% 0.1% 0.1%


Reversals of provision for impairment on:

Inventories (53.8) (18.1) (35.7) 197.2% 0.0% 0.0%

Receivables (20.7) (3.2) (17.5) 546.9% 0.0% 0.0%

Property, plant & equipment (2.1) (2.0) (0.1) 5.6% 0.0% 0.0%

Loss (gain) on retirement and disposals of:

Investment properties (231.0) - (231.0) 100.0% -0.2% 0.0%

Property, plant & equipment 174.5 236.8 (62.3) -28.9% 0.1% 0.2%

Electricity and other utilities 55.8 52.6 3.2 6.1% 0.0% 0.0%

Association dues 52.0 50.5 1.5 3.0% 0.0% 0.0%


Insurance 21.2 16.8 4.4 26.2% 0.0% 0.0%

Others 688.3 568.5 119.8 21.1% 0.5% 0.5%

Total General and Administrative Expenses 13,905.8 11,861.4 2,044.4 17.2% 10.6% 10.4%

Advertising and promotions 3,342.9 2,669.5 673.4 25.2% 2.5% 2.3%

17,248.8 14,530.9 2,717.9 18.7% 13.1% 12.8%


JFC Group’s growing organization and the inclusion of the SuperFoods Group’s rent

expenses.

- Consolidated contracted services declined, primarily driven by Burger King, which shifted

its accounting services, from a third-party contractor to JFC’s subsidiary, Jollibee

Worldwide Services.

- Provision for impairment loss on receivables and other assets were recognized as a result

of specific and collective impairment assessments performed by the Jollibee Group. The

Jollibee Group performed impairment assessments of its fixed assets considering that there

are observable indications that the assets’ values have significantly declined during the

period as a result of the passage of time.

- Provision for impairment of fixed assets pertains to allowance for impairment loss on office,

store and food processing equipment.

- Provision for inventory obsolescence was recognized after the Jollibee Group’s assessment

that the net realizable value for some inventories is lower than cost.

- Consolidated corporate events increased driven by higher expenses incurred for

conventions, corporate awards and corporate program launches due to higher number of

participants arising from increase in headcount.

- Consolidated repairs and maintenance decreased due to higher base arising from late

billings for repairs and maintenance expenses in 2015, which were recognized only in 2016.

- Consolidated memberships and subscriptions due to higher expenses related to

memberships in golf, leisure clubs and various professional organizations

- Consolidated training expenses decreased because of training programs for the Jollibee

business supposedly scheduled in 2017, but were postponed or cancelled.

- Consolidated communication expense increased due to higher telephone and internet

charges, particularly of the Philippine business and the consolidation of the SuperFoods

Group’s expenses with the JFC Group.

- Consolidated donations increased, mainly due to increase in Consolidated Net Income,

which is used as basis for calculating the amount of donation as part of the JFC Group’s

social responsibility.

- Consolidated supplies expense increased due to higher office supplies expense and

consolidation of the SuperFoods Group expenses with the JFC Group.

- Consolidated representation and entertainment, increased due to the consolidation of the

SuperFoods Group’s expenses with the JFC Group.

- The Jollibee Group also recognized reversal of previously recognized provisions for

impairment loss on receivables, inventories, and property, plant and equipment.

- Loss (gain) on retirement and disposals of assets pertains to loss incurred arising from

change in store ownership, store closures and fixed asset disposals.

- Consolidated electricity and other utilities expenses increased due to increase in usage and

power rates.

- Consolidated security and janitorial expense increased due to increase in manpower as a

result of additional office spaces as well as increase in rate per hour.

- Consolidated insurance expense increased due to higher number of stores that were

constructed and renovated in 2017 compared to 2016.

- Consolidated other expenses increased due to increase in miscellaneous expenses.

- The increase in consolidated advertising and promotions expense was driven by marketing

campaigns for new products and flagship products, both for the Philippine business and the

foreign business. Some domestic brands also used new celebrity product endorsers.

Operating Income

Consolidated operating income for 2017 increased by 3.2% or P204.6 million to P6,669.7

million driven by strong revenue growth. As a percentage of revenues, operating income

declined from 5.7% in 2016 to 5.1 % in 2017 despite the strong growth in revenues (+15.6%),

as the increase in store and manufacturing expenses reduced the JFC Group’s gross profit

margin. General and administrative expenses and advertising and promotions likewise

increased faster than revenues.

Interest Income (Expense)


Consolidated interest income decreased primarily due to lower interest income earned from

cash in banks, short-term deposits and short-term investments. Also, with the acquisition of

additional interest in the SuperFoods Group, loans and advances as at December 31, 2016,

including accrued interest income were converted into additional equity. See Note 11 to the

accompanying Audited Consolidated Financial Statements for more information.

Consolidated interest expense in 2017 was higher than the consolidated interest expense in 2016

due to higher bank loans. See Notes 18 and 23 to the accompanying Audited Consolidated

Financial Statements for more information.

Equity in Net Losses of Joint Ventures and Associates


Consolidated equity in net losses of joint ventures and associates pertains to JFC’s share in the

net losses of Smashburger, Wow Prime and Cargill partly offset by the net earnings of the

SuperFoods Group (for January to May 2017), Entrek - the Company that operates Jollibee

stores in Brunei and Golden Crown - the Company that operates Jollibee stores in the UAE.

2017 2016 Amount Pct 2017 2016

Interest income 259.6 286.9 (27.3) -9.5% 0.2% 0.3%

Interest expense (405.8) (267.6) (138.2) 51.6% -0.3% -0.2%

(146.3) 19.3 (165.5) -858.0% -0.1% 0.0%

Year Ended December Change Pct to Rev

2017 2016 Amount Pct 2017 2016

Equity in net losses of joint ventures and

associates - net (282.6) (337.1) 54.5 16.2% -0.2% -0.3%


Other Income


Consolidated other income increased year-on-year, mainly due to the gain on re-measurement

of previously held investment in SuperFoods and higher write-off of long-outstanding accruals

and other liabilities. The increase was partly offset by the provisions of P794.6 million

recognized by the Jollibee Group and the marked-to-market loss on derivatives in 2017.

Income Taxes


Net Income

Consolidated net income for 2017 amounted to P6,672.6 million, 10.2% higher than last year’s

consolidated net income of P6,053.5 million. Net income margin (consolidated net income as

a percentage of consolidated revenues) was slightly lower at 5.1% for 2017 compared to 5.3%

for 2016. Net Income Attributable to the Equity Holders of the Parent Company amounted to

P7,109.1 million, 15.3% higher versus P6,164.7 million in 2016. Earnings per Share amounted

to P6.580, 14.5% higher than 2016.

Financial Condition

As at December 31, 2017 Vs. December 31, 2016

The Jollibee Group ended 2017 with consolidated total assets of P89,783.9 million, 23.5%

higher than the P72,728.4 million balance at the end of 2016. The following explain the

significant movements in the asset accounts:

- The Jollibee Group’s consolidated cash and cash equivalents increased to P21,107.5

million, P4,374.2 million or 26.1% higher than the balance at year-end 2016, mainly due

2017 2016 Amount Pct 2017 2016

Write-off of liabilities 1,547.2 1,111.9 435.2 39.1% 1.2% 1.0%

Gain from the re-measurement of the

previously held interest 1,328.7 - 1,328.7 100.0% 1.0% 0.0%

Provisions (794.6) - (794.6) -100.0% -0.6% 0.0%

Rebates and suppliers' incentives 189.5 206.7 (17.3) -8.3% 0.1% 0.2%

Bank charges (165.3) (118.6) (46.7) 39.4% -0.1% -0.1%

Marked-to-market gain (loss) on derivatives (129.4) 3.3 (132.7) -4021.2% -0.1% 0.0%

Divestment of subsidiaries and interest in ajoint venture (116.2) 66.7 (182.9) -274.2% -0.1% 0.1%

Penalties and charges 69.6 53.3 16.3 30.7% 0.1% 0.0%

Foreign exchange gain (loss) - net (63.5) 41.5 (105.0) -253.2% 0.0% 0.0%

Charges to franchisees 19.0 19.9 (0.9) -4.4% 0.0% 0.0%

Other rentals 17.5 16.4 1.1 6.7% 0.0% 0.0%

Pre-termination of operating leases 15.9 9.5 6.4 66.7% 0.0% 0.0%

Insurance claims and others 180.5 172.4 8.1 4.7% 0.1% 0.2%

2,098.8 1,582.9 515.8 32.6% 1.6% 1.4%

Year Ended December Change Pct to Rev

2017 2016 Amount Pct 2017 2016

Current 2,310.6 2,334.9 (24.2) -1.0% 1.8% 2.1%

Deferred (643.7) (658.2) 14.5 2.2% -0.5% -0.6%

1,666.9 1,676.5 (9.6) -0.6% 1.3% 1.5%


to the bank loans acquired by the Jollibee Group in December 2017. The movements in

the Jollibee Group’s cash will be explained further in the cash flow discussion.

- Short-term investments increased by P687.4 million or 94.7%. These pertain to deposits

with maturities of more than three months, but less than a year.

- Consolidated receivables increased by P564.4 million or 16.7% to P3,941.1 million

primarily due to higher receivables from franchisees for their commissary purchases and

royalty billings, relative to the increase in sales. Average collection period was lower, from

14 days as at December 2016 to 10 days as at December 31, 2017.

- Consolidated inventories increased by P848.2 million or 14.2% due to commodity price

increases, particularly for beef, pork, frozen potatoes and milk as well as the impact of the

depreciation of the Philippine Peso and increase in average diesel price.

- Consolidated other assets increased mainly due to increase in prepaid taxes and deposits to

suppliers and other third parties, partly offset by lower prepaid rent and lower receivable

from the sale of business that pertains to the current portion of receivables from Guangxi

Zong Kai Food Beverage Investment Company Limited (GZK) as a result of the Jollibee

Group’s divestment in SPW.

The Company has a current ratio of 1.39:1.00 as at December 31, 2017, higher than the current

ratio of 1.27:1.00 as at December 31, 2016.

- Available-for-sale financial assets consist mainly of shares in golf and leisure clubs

amounting to P= 29.9 million and P= 26.2 million as at December 31, 2017 and 2016,

respectively.

- Interests in and advances to joint ventures, co-venturers and associates decreased by

P2,380.5 million or 24.1% to P7,492.8 million mainly due to the conversion of the

SuperFoods Group’s advances to equity, from P3,257.4 million to P1,535.6 million as a

result of JFC’s acquisition of the additional 10% of the SuperFoods Group. As owner of

60% of the SuperFoods Group, JFC has included the SuperFoods Group in its financial

consolidation. The decrease was offset by additional advances to co-venturers, investments

in SJBF LLC and equity in net earnings of Golden Bee and Entrek, partly reduced by equity

in net losses of other joint ventures and associates. See Note 11 to the accompanying

Audited Consolidated Financial Statements for more information.

- Consolidated property, plant and equipment increased by P4,238.2 million or 25.4% to

P20,893.8 million, net of accumulated depreciation, primarily due to investments in new

stores, renovation of existing stores and investments in commissaries. See Note 12 to the

accompanying Audited Consolidated Financial Statements for details.

- Consolidated investment properties declined by P134.4 million or 13.7% to P849.0. In

2017, the Parent Company sold its land located at Sta. Rosa Laguna and Luisita Industrial

Park in Tarlac for a total consideration of P365.5 million. Net gain arising from the

disposals of these investment properties amounted to P231.0 million.

- The increase in goodwill and other intangible assets pertains to the goodwill of P2,507.8

million and trademarks of P4,145.0 million arising from the acquisition of the SuperFoods

Group, owner and operator of Highlands Coffee and Pho 24. The acquisition was

completed on May 11, 2017. See Note 11 to the accompanying Audited Consolidated

Financial Statements for details.

- Operating lease receivables increased by P2.0 million or 7.7% to P28.0 million, which is

the cumulative difference of rent income recognized under the straight-line method and the

rent amounts in accordance with the terms of the lease agreements.

- The consolidated derivative asset pertains to the unrealized gain position on the interest

rate swap that amounted to P11.9 million. This is due to the lower fixed rate compared to

the current floating rate, which is based on the 3 months USD LIBOR. See Note 18 to the


- Deferred tax assets increased by P1,323.3 million or 51.2% to P3,908.8 million,

substantially due to the recognition of deferred tax assets on vested and unexercised options

amounting to P1,033.2 million. See Note 24 to the accompanying Audited Consolidated


- Consolidated other noncurrent assets increased by P653.8 million or 21.5% primarily due

to higher security and other deposits and other long-term prepayments.

Consolidated current liabilities amounted to P26,694.6 million, P2,863.2 million or 12.0%

higher than the 2016 year-end balance of P23,831.4 million. The following explain the

significant movements in current liabilities:

- Consolidated trade payables and other current liabilities increased by P3,294.0 million or

15.0% to P25,254.6 million due to increase in trade payables relative to the increase in

inventories, higher employee-related accruals, higher accruals for local and other taxes,

store operations, rent and advertising and promotions and increase in other current

liabilities which consist of staled checks, amounts payable for mascots and various

subscriptions in newspapers given to customers as a complimentary to their meals.

- Consolidated income tax payable decreased by P85.5 million or 27.6% to P223.8 million

due to change in the tax positions of certain subsidiaries, from Regular Corporate Income

Tax (RCIT) to Minimum Corporate Income Tax (MCIT) and utilization of prior year’s Net

Operating Loss Carryover (NOLCO).

- Current portion of long-term debt decreased, from P1,561.5 million to P1,216.2 million due

to loan payments made during the year.

Consolidated noncurrent liabilities amounted to P20,507.3 million, 40.3% or P5,891.8 million

higher than the December 31, 2016 audited balance of P14,615.5 million. The following

explain the significant movements in noncurrent liabilities:

- Consolidated noncurrent portion of long-term debt increased by P4,307.2 million to

P14,901.1 million due to bank loans with a total amount of P5,100.0 million, acquired from

local banks in December 2017. See Notes 18, 30 and 31 to the accompanying Audited

Consolidated Financial Statements for details.

- Consolidated pension liability decreased by P168.7 million to P1,489.5 million due to

additional contributions to plan assets and actuarial changes arising from changes in

financial assumptions. See Note 25 to the accompanying Audited Consolidated Financial

Statements for details.

- Operating lease payables increased by P258.7 million or 14.4% to P2,051.6 million arising

from increase in number of company-owned stores. Operating lease payable is the

difference of rent expense recognized under the straight-line method and the rent amounts

due in accordance with the terms of the lease agreements.

- The derivative liability pertains to Smashburger’s put and call valuation. As a result of the

first and second Put/Call Rights in the agreement, the Jollibee Group allocated P75.0

million of the purchase price to a derivative asset in 2015, representing the fair value of the

First and Second Put/Call Rights on transaction date. The Jollibee Group recognized a

derivative liability amounting to P51.0 million as at December 31, 2017 and a derivative

assets amounting to P78.3 million as at December 31, 2016 related to Put/Call Rights. See

Note 11 to the accompanying Audited Consolidated Financial Statements for details.

- Consolidated provisions increased by P794.6 million to P825.1 million mainly due to the

recognition of additional provision for contingencies. See Notes 4, 17 and 29 to the


- The deferred tax liabilities for 2017 increased by P682.4 million or 134.7% to P1,189.0

million compared to the 2016 year-end audited balance of Php506.6 million. The increase

largely pertains to the P663.8-million excess of fair market value over book value of the

net identifiable assets arising from the acquisition of additional interest in the SuperFoods

Group, owner and operator of Highlands Coffee and Pho 24. See Note 24 to the


Consolidated total equity increased by P8,300.6 million or 24.2% to P42,582.0 million

primarily due to increase in retained earnings by P4,753.6 million, increase in capital stock and

additional paid in capital by P1,870.7 million arising from issuance of new shares, increase in

non-controlling interests by P1,120.2 million primarily due to the consolidation of the

SuperFoods Group. The following explain the other movements in Equity:

- The change of P361.2 million (income) in cumulative translation adjustment was due to the

depreciation of the Philippine Peso versus the RMB for 2017 (Peso to RMB: 7.64)

compared to December 31, 2016 (Peso to RMB: 7.16) and the depreciation of the Philippine

Peso versus the USD for 2017 (Peso to USD: 49.93) compared to December 31, 2016 (Peso

to USD: 49.72) which resulted in the increase in value of the Jollibee Group’s net assets.

- Remeasurement loss on net defined benefit plan (net of tax) declined as a result of actuarial

valuations of the retirement plan.

- The improvement in consolidated other comprehensive income (loss) on derivative liability

by P45.4 million was due to the recognition of derivative asset for the interest rate swap

compared to a derivative liability last year.

- The increase in consolidated retained earnings by P4,753.6 million was due to the

consolidated net income (attributable to equity holders of the Parent Company) of P7,109.1

million for 2017, partly offset by cash dividends declared and paid during the period which

amounted to P2,355.5 million.

Liquidity and Capital Resources

Consolidated net cash provided by operating activities amounted to P12,843.6 million at end of

December 31, 2017, P1,916.7 million or 13.0% lower compared to the consolidated net cash

provided by operating activities of P14,760.3 million in 2016, mainly driven by increase in

working capital.

Consolidated net cash used in investing activities amounted to P10,544.4 million at end of

December 2017, 4.6% or P467.6 million higher compared to the consolidated net cash used for

investing activities of P10,076.8 million in 2016. The increase was due to higher capital

expenditures for store expansion and renovations and advances to the SuperFoods Group,

increase in short term investments, offset by proceeds from the disposal of property, plant and

equipment and investment properties.

Consolidated net cash provided by financing activities amounted to P2,077.3 million at the end

of December 2017 mainly due to the proceeds from the bank loans availed in December 2017

and proceeds from issuances of and subscriptions to capital stock, partly offset by payments of

cash dividends, long-term bank loans and interest on bank loans.

Cash and cash equivalents at the end of December 2017 stood at P21,107.5 million, P4,374.2

million or 26.1% higher than December 31, 2016 audited balance.

Discussion and Analysis of Material Events and Uncertainties

1. There were no events during the period that will trigger direct or contingent financial

obligation that is material to the Jollibee Group.

2. There were no material off-balance sheet transactions, arrangements, obligations created

during the reporting period.

3. Consolidated capital expenditures budget for 2018 amounted to P12,000.00 million, of

which P6,500.0 million will be used for new stores and renovations and the rest will mostly

be for commissary expansion.

4. Food service operations have both peak and lean seasons. Historically, sales in the second

and fourth quarters are strong due to the summer and the Christmas seasons, respectively.

Demand during the first and third quarters usually slackens. The material financial impact

of this seasonality has been considered in the Jollibee Group’s consolidated financial

forecast.

5. All of the Jollibee Group’s income arose from its continuing operations.

6. Events after the Reporting Period

Dividend Declaration

On April 6, 2018, the Board of Directors approved a regular cash dividend of P1.14 per

share of common stock to all stockholders of record as of April 24, 2018. Consequently,

the cash dividend is expected to be paid out by May 9, 2018. The cash dividend is 14.0%

higher than the P 1.00 regular dividend per share declared on April 5, 2017.

Acquisition of Additional Shares in Smashburger

On February 13, 2018, the BOD approved the purchase of additional 45% of SJBF LLC

(the parent company of the entities comprising the Smashburger business), through the

Jollibee Group’s wholly-owned subsidiary, Bee Good! Inc. (BGI), pursuant to the

mechanism in the agreement with Smashburger Master LLC as previously disclosed. This

will increase BGI’s ownership in SJBF LLC to a total of 85%.

Discussion of the Jollibee Group’s Top Five (5) Key Performance Indicators

System Wide Sales

System Wide Sales is a measure of all sales to consumers both from company-owned and

franchised stores.

As at end Dec 2017 As at end Dec 2016

System Wide Sales P171,761.0 million P149,142.1 million

% Growth vs LY 15.2% 14.1%

Revenues

Revenues is a measure of (1) all sales made by the Jollibee Group’s company-owned stores

(both food and novelty sales); (2) Commissary sales to franchised stores; (3) fees from stores

operated by franchisees; (4) rental revenues of the Jollibee Group’s investment properties; and

(5) revenues from services rendered by the in-house Construction and Business Support Service

Groups.


Revenues P131,576.6 million P113,811.5 million

% Growth vs LY 15.6% 12.9%

Net Income Margin

Net Income Margin is the ratio of the Jollibee Group’s earnings after interest and tax. This is

computed by dividing consolidated net income by consolidated revenues. The quotient is

expressed in percentage. This measures the Jollibee Group’s return for every peso of revenue

earned, after deducting cost of sales, operating expenses, interests and taxes.


Net Income P6,672.6 million P6,053.5 million

% to Revenues 5.1% 5.3%

Basic Earnings Per Share (EPS)

EPS is the portion of the Jollibee Group’s profit allocated to each outstanding share of common

stock. This is computed by dividing the net income for the period attributable to the equity

holders of the Parent Company by the weighted average outstanding shares during the same

period. This serves as an indicator of the Jollibee Group’s profitability.


EPS (Basic) P6.580 P5.747

% Growth vs LY 14.5% 24.4%

Return on Equity (ROE)

ROE is the ratio of the JFC Group’s net income attributable to equity holders of the Parent

Company to equity. It is computed by dividing annualized net income attributable to equity

holders of the Parent Company by average equity attributable to equity holders of the Parent

Company. ROE is a measure of return for every peso of invested equity. The JFC Group also

uses ROE for comparing its profitability with other firms in the same industry.

Annualized As at end Dec 2017 As at end Dec 2016

Return on Equity 19.1% 19.2%

Financial Ratios

Jollibee Foods Corporation and Subsidiaries

Dec-17 Dec-16

Formula Audited Audited

Liquidity Ratios

Current Assets 1.39 1.27

Current Liabilities

Financial Leverage Ratios

Total Assets 2.20 2.16

Total Equity Attributable to Equity Holders

of the Parent Company

Total Debt* 53.6% 53.4%

Total Debt + Equity Attributable to Equity

Holders of the Parent Company

Total Debt* - Cash and Cash Equivalents - Short-

term Investments 37.7% 38.4%

(Total Debt* - Cash and Cash Equivalents - Short-

term Investments) + Equity Attributable to Equity


Earnings before Interest and Taxes** 22.2 32.3

Interest Expense**

Net Income** + Depreciation and Amortization** 0.24 0.26

Total Liabilities

Net Income** 0.14 0.16

Total Liabilities

* Including both total current and total noncurrent liabilities

** Annualized

Debt Service Coverage Ratio

Current Ratio

Asset to Equity Ratio

Debt Ratio

Net Debt Ratio

Interest Coverage Ratio

Solvency Ratio




The following Management Discussion and Analysis should be read in conjunction with the

submitted Audited Consolidated Financial Statements as at December 31, 2016 and 2015 and

for the years ended December 31, 2016, 2015 and 2014.

The accounting policies adopted are consistent with those of the previous financial year, except

for the adoption of new PFRS and amendments to existing PFRS which became effective on

January 1, 2016.

Please refer to Note 2 of the attached Audited Consolidated Financial Statements for the Basis

of Preparation, Statement of Compliance, Changes in Accounting Policies and Basis of

Consolidation.

Causes for Any Material Changes (Increase or decrease of 5% or more in the financial

statements)


For Year Ended December 31, 2016 vs. December 31, 2015

(All Amounts are in Million Pesos)


System wide sales, a measure of all sales to consumers, both from company-owned and

franchised stores grew by 14.1% in 2016 compared to 2015, even without acquiring a new

business. The sales increase was driven by global store network expansion, which accounted

for 6.4% while same store sales growth on a worldwide basis contributed 8%. Same store sales

growth pertains to restaurants that were already open for at least 15 months. It excludes sales

growth from new store opening.

System wide sales of the Philippine business grew by 15.5%, supported by same store sales

growth of 8.3% driven by higher customer traffic and higher amount of purchases per visit per

customer compared with a year ago. Store network grew by 6.7% versus 2015 against a

historical organic network growth of 4%. All six brands of Jollibee Foods Corporation (JFC)

in the Philippines: Jollibee, Chowking, Greenwich, Red Ribbon, Mang Inasal and the Burger

King franchise grew strongly, with each one’s system wide sales increasing by double-digit

percentage over those of 2015. Each of JFC’s owned brand in the Philippines is a market leader

in its particular food category segment.

JFC’s businesses abroad had mixed performance, however. Southeast Asia grew by 39.4% led

by Singapore which delivered a 55.9% growth and Vietnam with 47.4%. The Middle East

business rose by 22.1% while the United States increased by 15.6%. China’s sales were flat as

the business experienced challenges during most part of the year, but was able to recover in the

fourth quarter.



Revenues 113,907.8 100,779.7 13,128.0 13.0%

Year Ended December 31 Change

Consolidated revenues, which consist of sales from company-owned stores, fees from stores

operated by franchisees and commissary sales from stores operated by franchisees grew by 13.0%

in 2016 compared to 2015.

The Jollibee Group opened 342 stores, the highest number of store opening in a single year in

JFC’s history, broken down as follows; in the Philippines, 244 new stores; in the People’s

Republic of China 60; in the United States 7; in Southeast Asia and the Middle East 31 for a

total of 98 new stores in foreign operations. The JFC Group also completed on December 30,

2016 the divestment of San Pin Wang (China) which had 72 stores and Jinja Bar with 3 stores.

It ended the year with 3,253 stores, 4.3% higher than a year ago.

Cost of Sales

Consolidated cost of sales for the year 2016 increased to P92,815.5 million, which is P9,923.8

million or 12.0% higher than consolidated cost of sales for the year 2015. The following table

summarizes the breakdown of the Jollibee Group’s cost of sales for the years ended December

31, 2016 and 2015 and the percentage of each component and the consolidated cost of sales to

consolidated revenues:


- Consolidated cost of inventories increased at a slower rate compared to revenues. As a

percentage of revenues, consolidated cost of inventories decreased due to slight price

adjustments implemented in the Philippines even as raw material prices remained stable.

- The increase in consolidated store and manufacturing costs was driven mainly by the

increase (+52.6%) in contracted services as the Jollibee Group took proactive steps to adapt

to the changing requirements of the Department of Labor and Employment (DOLE).

Combined personnel costs of the Jollibee Group employees, contracted services and SEEDs

increased only by 16.2% to P15,928.0 million, 14.0% of consolidated revenues in 2016

compared to 13.6% of consolidated revenues in 2015.

2016 2015 Amount Pct 2016 2015

COST OF SALES


Personnel costs:


Pension expense 171.5 153.3 18.2 11.9% 0.2% 0.2%

Rent 8,234.5 7,450.9 783.6 10.5% 7.2% 7.4%



Depreciation and amortization 3,542.6 3,084.2 458.4 14.9% 3.1% 3.1%

Supplies 2,155.0 1,887.5 267.5 14.2% 1.9% 1.9%

Repairs and maintenance 1,327.9 1,107.7 220.2 19.9% 1.2% 1.1%


Communication 190.8 160.5 30.3 18.9% 0.2% 0.2%


Entertainment, amusement and recreation 33.2 33.0 0.2 0.6% 0.0% 0.0%

Others 2,641.0 2,411.0 230.1 9.5% 2.3% 2.4%

92,815.5 82,891.7 9,923.8 12.0% 81.5% 82.3%

Year Ended December 31 Change Pct to Rev

2016 2015 Amount Pct 2016 2015

Personnel costs 10,644.2 10,024.0 620.2 6.2% 9.3% 9.9%


Project SEEDS* 408.7 484.0 (75.3) -15.6% 0.4% 0.5%

15,928.0 13,702.3 2,225.7 16.2% 14.0% 13.6%


*SEEDS stands for Skills Enhancement and Educational Development for Students, a joint project of JFC and the Department of Labor and Employment.

The program aims to help qualified students pursue post-secondary education through the provision of financial assistance to enable students to

acquire job competencies --- skills, attitudes and work values through in-store training, thus enhancing employability upon completion of post-secondary

Expenses related to the SEEDS Project are booked under the account Cost of sales - Others.

- The increase in other consolidated cost items such as rent, electricity and other utilities,

depreciation and amortization, supplies, communication and other expenses was driven

mainly by store expansion.

- The increase in consolidated repairs and maintenance expenses was due to higher regular

preventive maintenance expenses driven by increasing number of stores as well as cost of

spare parts used for repairs of store and commissary equipment.

- The increase in consolidated securities and janitorial expense was also due to higher

expenses related to pans and crates washing.

Gross Profit

Consolidated gross profit for the year 2016 increased to P21,092.3 million, P3.2 billion or 17.9%

higher than the consolidated gross profit of P17,888.0 million for the year 2015. Gross profit

margin for the year 2016 was 18.5%, 0.8% point higher than the 17.7% gross profit margin for

the year 2015.

Expenses

Consolidated expenses increased to P14,627.2 million, P2,094.2 million or 16.7% higher than

prior year. The following table summarizes the breakdown of the Jollibee Group’s consolidated

expenses for the years ended December 31, 2016 and 2015 and the percentage of each expense

item to the consolidated revenues:


2016 2015 Amount Pct 2016 2015

EXPENSES

Personnel costs:


Stock option expense 241.3 173.2 68.1 39.3% 0.2% 0.2%

Pension expense 192.3 159.3 33.0 20.7% 0.2% 0.2%

Taxes and licenses 1,271.1 1,143.8 127.3 11.1% 1.1% 1.1%



Contracted services 499.5 544.3 (44.8) -8.2% 0.4% 0.5%

Rent 470.0 390.9 79.1 20.2% 0.4% 0.4%

Depreciation and amortization 453.2 341.5 111.7 32.7% 0.4% 0.3%

Loss on retirement of assets 236.8 136.7 100.1 73.2% 0.2% 0.1%

Provisions for impairment losses 212.8 337.0 (124.2) -36.9% 0.2% 0.3%

Repairs and maintenance 191.3 136.2 55.1 40.5% 0.2% 0.1%

Training 161.7 101.6 60.1 59.2% 0.1% 0.1%

Corporate events 161.6 163.1 (1.5) -0.9% 0.1% 0.2%

Communication 98.8 113.7 (14.9) -13.1% 0.1% 0.1%

Donations 82.6 105.8 (23.2) -21.9% 0.1% 0.1%

Supplies 78.8 74.3 4.5 6.1% 0.1% 0.1%

Entertainment, amusement and recreation 53.8 64.6 (10.8) -16.7% 0.0% 0.1%

Electricity and other utilities 52.6 56.8 (4.2) -7.4% 0.0% 0.1%

Association dues 50.5 52.5 (2.0) -3.8% 0.0% 0.1%


Insurance 16.8 16.1 0.7 4.3% 0.0% 0.0%

Reversals of provision for impairment losses (23.3) (16.7) (6.6) 39.5% 0.0% 0.0%

Others 680.4 478.3 202.1 42.3% 0.6% 0.5%

Total General and Administrative Expenses 11,861.4 10,288.0 1,573.4 15.3% 10.4% 10.2%

Advertising and promotions 2,765.8 2,245.0 520.8 23.2% 2.4% 2.2%

14,627.2 12,533.0 2,094.2 16.7% 12.8% 12.4%


- Consolidated personnel costs increased due to higher Fringe Benefits Tax on stock options

exercised in 2016 compared to 2015. The increase was also driven by an increase in the

Corporate Office's headcount, performance-related increases in basic pay, employee

promotions, upgrades in employee benefits and additional accrual for stock option expense

(based on Black Scholes). Pension expense likewise increased due to additional accrual for

retirement benefits in relation to the increase in basic pay of regular employees.

- Consolidated taxes and licenses expense increased due to higher business-related taxes and

license fees resulting from higher revenues.

- Consolidated professional fees increased primarily driven by higher consultancy fees for

various projects in the Philippines, Vietnam, China and the United States.

- Consolidated transportation and travel expense increased due to higher lodging, mileage

and per diem expenses for activities related to store expansion (e.g. site visits for store

construction and renovation, site evaluation and sourcing, etc.) and various projects in the

Philippines and foreign markets.

- Consolidated contracted services were lower compared to last year on account of higher

base. Expenses related to Information Management (IT) in 2015 were higher as more

contracted IT specialists were deployed to support the initial stages of the SAP

implementation.

- Consolidated rent expense increased due to annual rent escalation and additional office

space for the Dunkin’ Donuts business in Beijing, People’s Republic of China.

- Consolidated depreciation and amortization increased due to the growing fixed asset base

of the Jollibee Group, including commissary and information technology investments.

- Loss on retirement of fixed assets increased due to higher number of stores closed in 2016

compared to 2015, particularly the China business, which closed 42 stores in 2016

compared to 19 stores in 2015.

- Consolidated provisions substantially pertain to provisions for impairment of receivables

and inventories of the Philippine business.

- Consolidated repairs and maintenance expense increased driven by charges for SAP

maintenance, ORACLE license update, China business’ software maintenance costs and

other software maintenance.

- Consolidated training expenses increased driven by the JFC University, leadership trainings

of various business units, E-Cornell courses and SAP trainings.

- Consolidated communication expense decreased due to lower telephone and internet

charges, particularly of the Philippine business.

- Consolidated donations decreased on account of higher base --- in the first semester last

year, on top of the regular donations to the Jollibee Group Foundation, various donations

were made by some subsidiaries of the Parent Company.

- Consolidated supplies expense increased due to higher office supplies expense.

- Consolidated entertainment, amusement and recreation expenses decreased due to the

Jollibee Group’s deliberate effort to cut down on these expenses.

- Consolidated electricity and other utilities expenses decreased due to lower power rates in

2016 compared to 2015.

- Consolidated security and janitorial expense increased driven by the Red Ribbon business

due to pan and crate washing.

- Reversals of provisions for impairment losses substantially pertain to inventories and

receivables.


campaigns for new products and flagship products, both for the Philippine business and

foreign business.

- The increase in consolidated other expenses was due to higher association dues,

membership and subscriptions.

Operating Income

Consolidated operating income for 2016 increased by 20.7% or P1,110.0 million to P6,465.0

million. Operating income margin was likewise higher by 0.4% points, from 5.3% last year to

5.7% for 2016 driven by the improvement in gross profit margin.


See Note 23 to the accompanying Audited Consolidated Financial Statements for more

information.

Consolidated interest income increased primarily due to interest income earned from cash in

banks, short-term deposits and short-term investments. Interest income from loans to the

SuperFoods Group co-venturers and joint venture and from loans to third parties likewise

increased compared to 2015.

Consolidated interest expense increased due to higher bank loans.

Equity in Net Losses of Joint Ventures and an Associate


information.

Consolidated equity in net losses of joint ventures and an associate pertains to JFC’s share in

the net losses of Smashburger, SuperFoods Group and Wow Prime partly offset by the net

earnings of Entrek (operates Jollibee stores in Brunei), and Golden Bee (operates Jollibee in

Dubai).

2016 2015 Amount Pct 2016 2015

INTEREST INCOME (EXPENSE)

Interest income 286.9 257.8 29.1 11.3% 0.3% 0.3%

Interest expense (267.6) (225.6) 42.0 -18.6% -0.2% -0.2%

19.3 32.2 (12.9) -40.1% 0.0% 0.0%


2016 2015 Amount Pct 2016 2015

Equity in net loss of joint ventures and

an associate (337.1) (189.1) (148.0) -78.3% -0.3% -0.2%

Pct to RevYear Ended December 31 Change

Other Income


information.

Consolidated other income increased year-on-year, mainly due to write-off of long outstanding

other liabilities and excess accruals. Insurance claims and others likewise increased driven by

claims pertaining to 2012-2015 that were paid and settled only in 2016.

Income Taxes


information.

Consolidated provision for income tax increased driven by higher taxable income of the Parent

Company and several subsidiaries.

Net Income

Consolidated net income for 2016 was P6,053.5 million, 20.0% higher than last year’s

consolidated net income of P5,046.3 million. Net income margin (consolidated net income as

a percentage of consolidated revenues) also improved, from 5.0% in 2015 to 5.3% this year.

Net income attributable to the equity holders of the Parent Company amounted to P6,164.7

million, 25.1% higher than last year while earnings per share amounted to P5.747, 24.4%

higher year-on-year.

Financial Condition

As of December 31, 2016 vs. December 31, 2015

The Jollibee Group ended 2016 with consolidated total assets of P72,728.4 million, 12.3%

higher than the P64,763.0 million balance at the end of 2015. The following explain the

significant movements in the asset accounts:

- The Jollibee Group’s consolidated cash and cash equivalents increased to P16,733.3

million, P5,235.8 million or 45.5% higher than the balance at year-end 2015, mainly due

to improvement in the Jollibee Group’s working capital. The movements in the Jollibee

Group’s cash will be explained further in the cash flow discussion.

2016 2015 Amount Pct 2016 2015

OTHER INCOME

Write-off of other liabilities 1,111.9 905.1 206.8 22.8% 1.0% 0.9%


Insurance claims and others 123.8 (15.0) 138.8 925.3% 0.1% 0.0%


Charges to franchisees 19.9 18.3 1.6 8.7% 0.0% 0.0%

Other rentals 16.3 13.8 2.5 18.1% 0.0% 0.0%

Pre-termination of operating leases 9.5 3.5 6.0 171.4% 0.0% 0.0%

Foreign exchange gain (loss) - net 41.5 36.8 4.7 12.8% 0.0% 0.0%

1,582.9 1,236.8 346.1 28.0% 1.4% 1.2%


2016 2015 Amount Pct 2016 2015

PROVISION FOR INCOME TAX

Current 2,334.9 1,926.1 408.8 21.2% 2.0% 1.9%

Deferred (658.3) (537.5) (120.8) -22.5% -0.6% -0.5%

1,676.6 1,388.6 287.9 20.7% 1.5% 1.4%


- The decrease of P196.3 million or 21.3% in short-term investments was primarily due to

the payment of cash dividends and the 50% funding for the acquisition of the remaining

30% of Mang Inasal.

- Consolidated receivables decreased by P2,056.1 million or 37.8% to P3,376.7 million

primarily due to collection from franchisees for their commissary purchases. Average

collection period improved significantly, from 24 days as at December 31, 2015 to 14 days

as at December 31, 2016.

- Consolidated inventories increased by P508.9 million or 9.3% to P5,987.3 million from

P5,478.4 million at the end of 2015 driven by higher packaging, store and other supplies

which increased by 151.3% year-on-year. The Jollibee Group’s days inventory outstanding

decreased from 42 days as at December 31, 2015 to 38 days as at December 31, 2016.

- Other current assets decreased, primarily due to decrease in deposits to suppliers.

The Company has a current ratio of 1.27:1.00 as at December 31, 2016, lower than the current

ratio of 1.29:1.00 as at December 31, 2015.

- Consolidated available-for-sale financial assets, which consist mainly of shares in golf and

leisure clubs increased by P4.8 million or 22.4% to P26.2 million pertaining to unrealized

gain on changes in fair value.

- Interests in and advances to joint ventures, co-venturers and an associate increased by

P1,424.0 million or 16.9% to P9,873.3 million due to additional investments in joint

ventures partly offset by equity in net losses of joint ventures and an associate.

- Consolidated property, plant and equipment increased by P2,108.4 million or 14.5% to

P16,655.6 net of accumulated depreciation, primarily due to investments in new stores,

renovation of existing stores and investments in commissaries.

- Consolidated operating lease receivables increased by 107.7% to P26.0 million, which is

the cumulative difference of rent income recognized under the straight-line method and the

rent amounts in accordance with the terms of the lease agreements.

- Deferred tax assets increased byP1,177.0 million or 83.6% to P2,585.5 million due to

higher Net Operating Loss Carry Over (NOLCO) arising from tax losses of some entities

which may be carried forward to future periods, operating lease payables and the excess of

Minimum Corporate Income Tax (MCIT) over Regular Corporate Income Tax and others.

Also, for 2016, Mang Inasal and Red Ribbon were in a net deferred tax liability position

totaling P506.6 million, which were separately presented under non-current liabilities

instead of being offset against deferred tax assets. See Note 24 to the accompanying

Audited Consolidated Financial Statements for details.

- Consolidated other noncurrent assets increased by P374.9 million or 14.0% to P3,044.6

million primarily due to refundable and security deposits, which increased by 17.2%

compared to the 2015 year-end balance.

Consolidated current liabilities amounted to P23,831.4 million, P2,763.2 million or 13.1%

higher than the 2015 year-end balance of P21,068.2 million. The following explain the

significant movements in current liabilities:

- Consolidated trade payables and other current liabilities increased by P2,433.5million or

12.5% to P21,960.6 million attributable to higher accruals for store-related expenses,

advertising, local and other taxes arising from increase in store network.

- The remaining consolidated short-term loan of JWPL amounting to USD6.0 million

(P276.4 million) and interest amounting to P1.0 million were paid in full on February 5,

2016, the date of maturity. See Note 18 of the accompanying Audited Consolidated


- Consolidated current portion of long-term debt increased by P633.6 million or 68.3% to

P1,561.5 million due to reclassification of bank loans (from long-term to current portion)

maturing in 2017, partly offset by payments made during the year. See Note 18 of the


- Consolidated liability for acquisition of businesses (current portion) was settled in the first

semester of 2016, as follows: P36.0 million for the post-closing adjustment of USD0.8

million (P36.6 million) for Bee Good! Inc.’s 40% stake in SJBF, P34.6 million for

acquisition of Fortune Capital (Chowking USA) and P23.6 million for the final payment

for San Pin Wang acquisition. See Note 11 of the accompanying Audited Consolidated


Consolidated noncurrent liabilities amounted to P14,615.5 million, 22.4% or P2,677.2 million

higher than the December 31, 2015 balance of P11,938.3 million. The following explain the

significant movements in noncurrent liabilities:

- Consolidated long-term debt increased by P1,803.1 million or 20.5%mainly due to the

P1,000.0 million 5-year Peso-denominated loan availed from a local bank on April 21, 2016,

offset by maturing loans in 2016 which were reclassified to current portion. See Note 18 of

the accompanying Audited Consolidated Financial Statements for details.

- Consolidated pension liability increased by P191.6 million or 13.1% to P1,658.2 million

due to additional pension accruals for the year.

- Consolidated operating lease payable increased by P177.3 million or 11.0% to P1,792.9

million, arising from increase in number of company-owned stores. Operating lease

payable is the difference of rent expense recognized under the straight-line method and the

rent amounts due in accordance with the terms of the lease agreements.

- Deferred tax liabilities are taxable temporary differences pertaining substantially to excess

of fair value over book value of property, plant and equipment and other intangibles of

acquired businesses. There is no comparable 2015 amount since no entity within the

Jollibee Group had a net deferred tax liability position in 2015. See Note 24 of the


Consolidated total equity increased by P2,524.8 million or 8.0% to P34,281.4 million. The

following explain the significant movements in total stockholders’ equity:

- Increase in capital stock and additional paid in capital of P5.2 million and P604.8 million,

respectively, arising from issuance of new shares.

- The change of P128.0 million (loss) in cumulative translation adjustment was due to the

appreciation of the Philippine Peso versus the RMB for December 31, 2016 (Peso to RMB:

7.16) compared to December 31, 2015 (Peso to RMB: 7.27) and the depreciation of the

Philippine Peso versus the USD this year (Peso to USD: 49.72) compared to last year (Peso

to USD: 47.06). The former contributed to the reduction in value of the Jollibee Group’s

net assets, which was slightly offset by the effect of the latter.

- Change of P72.2 million in remeasurement loss on net defined benefit plan due to changes

in actuarial assumptions and experience adjustments. See Note 25 of the accompanying

Audited Consolidated Financial Statements for details.

- Decrease in consolidated other comprehensive loss on derivative liability by P1.9 million

due to the additional recognition of derivative liability for the interest rate swap.

- The increase in excess of cost over the carrying value of non-controlling interests acquired

pertains to Mang Inasal (P1,217.6 million) and HBFPPL (P391.8 million). See Note 11 of

the accompanying Audited Consolidated Financial Statements for details.

- On April 6, 2016, the Board of Directors of the Company approved the appropriation of

additional P=8,000.0 million for future expansion to support the Company’s growth strategy.

As a result, the appropriated retained earnings of the Company increased from P=10,200.0

million to P=18,200.0 million.

- The decrease in unappropriated retained earnings by P3,827.5 million was due to the

appropriation of retained earnings amounting to P=8,000.0 million and dividends declared

amounting P1,992.2 million partly offset by the consolidated net income attributable to

equity holders of the Parent Company amounting to P=6,164.7 million for the year 2016.

- The decrease in non-controlling interests was due to the divestment of San Pin Wang and

Chowfun and the acquisition of the remaining 30% of Mang Inasal, making it wholly

owned by JFC. See Note 11 of the accompanying Audited Consolidated Financial



Consolidated net cash provided by operating activities amounted to P14,760.3 million at the

end of 2016, P1,275.2 million or 9.5% higher compared to the consolidated net cash provided

by operating activities of P13,485.1 million for the same period of 2015 mainly due to higher

earnings before income tax and decrease in receivables.

Consolidated net cash used in investing activities amounted to P10,076.8 million at the end of

2016, 6.8% or P737.0 million lower compared to the consolidated net cash used for investing

activities of P10,813.8 million for the same period of 2015 substantially due to the acquisition

of interest in SJBF LLC and acquisitions of short-term investments in 2015.

Consolidated net cash provided by financing activities amounted to P550.5 million, 54.8%

lower compared to last year mainly due to lower proceeds from long-term bank loans partly

offset by contributions from non-controlling interests.

Cash and cash equivalents at the end of December 2016 stood at P16,733.3 million, P5,235.8

million or 45.5% higher than December 31, 2015 balance.


1. There were no events during the period that will trigger direct or contingent financial

obligation that is material to the Jollibee Group.

2. There were no material off-balance sheet transactions, arrangements, obligations created

during the reporting period.

3. Consolidated capital expenditures for 2016 amounted to P6,717.8 million, 35.4% lower

than the P10,400 million budget for 2016. For 2017, the Jollibee Group is allocating

P14,000.0 million for capital expenditures, of which P7,500.0 million is for new stores and

renovations and the rest will mostly be for commissary expansion.

4. Food service operations have both peak and lean seasons. Historically, sales in the second

and fourth quarters are strong due to the summer and the Christmas seasons, respectively.

Demand during the first and third quarters usually slackens. The material financial impact

of this seasonality has been considered in the Jollibee Group’s consolidated financial

forecast.


7. Events after the reporting period:


Parent Company. On April 5, 2017, the BOD approved a regular cash dividend of P=1.00

per share of common stock to all stockholders of record as of April 21, 2017. Consequently,

the cash dividend is expected to be paid out by May 5, 2017. The cash dividend is 16.3%

higher than the P=0.86 regular cash dividend per share declared on April 6, 2016.

Loan to SuperFoods

Jollibee Worldwide Pte. Ltd (JWPL). On April 5, 2017, the BOD approved a US$1.0

million shareholder loan to SuperFoods Group to finance its capital expenditures.

Payment of Loans

JWPL. On March 31, 2017, the Jollibee Group through GPPL, entered into a Joint Venture

Agreement with Blackbird Holdings Pte. Ltd. (Blackbird) to own and operate the first

Jollibee store in Italy. GPPL and Blackbird shall incorporate a Singapore company (the JV

Company) to be owned by GPPL to the extent of 75% and to be owned by Blackbird to the

extent of 25%. The JV Company shall incorporate a wholly owned subsidiary in Italy to

own and operate the Jollibee store.

Additional Capital Contribution to SJBF LLC

JWPL. On March 14, 2017, the BOD approved an additional capital contribution of US$8.0

million to SJBF LLC through the Parent Company’s wholly owned subsidiary, Bee Good!

Inc.

Discussion of the Jollibee Group’s Top Five (5) Key Performance Indicators

System Wide Sales

System Wide Sales is a measure of all sales to consumers both from company-owned and

franchised stores.

As of end Dec 2016 As of end Dec 2015

System Wide Sales P149,142.1million P130,732.9 million

% Growth vs LY 14.1% 10.9%

Revenues

Revenues is a measure of (1) all sales made by the Jollibee Group’s owned stores (both food

and novelty sales); (2) Commissary sales to franchised stores; (3) rental revenues of the Jollibee

Group’s property division; and (4) revenues from services rendered by the in-house

Construction and Service Groups.


Revenues P113,907.8million P100,779.7 million

% Growth vs LY 13.0% 11.1%

Net Income Margin

Net Income Margin is the ratio of the Jollibee Group’s earnings after interest and tax. This is

computed by dividing consolidated net income by consolidated revenues. The quotient is

expressed in percentage. This measures the Jollibee Group’s return for every peso of revenue

earned, after deducting cost of sales, operating expenses, interests and taxes.




Basic Earnings per Share (EPS)

EPS is the portion of the Jollibee Group’s profit allocated to each outstanding share of common

stock. This is computed by dividing the net income for the year attributable to the equity

holders of the Parent Company by the weighted average outstanding shares during the year.

This serves as an indicator of the Jollibee Group’s profitability.


EPS - Basic P5.747 P4.618

% Growth vs LY 24.4% -9.0%


ROE is the ratio of the Jollibee Group’s consolidated net income (attributable to equity holders

of the parent) to equity (before non-controlling interests). It is computed by dividing

consolidated net income by average equity. Average equity is calculated by adding the equity

at the beginning of the year to the consolidated equity at year end and dividing the result by

two. ROE is a measure of return for every peso of invested equity. The Jollibee Group also

uses ROE for comparing its profitability to that of other firms in the same industry.



Financial Ratios


Dec-16 Dec-15

Formula Audited Audited

Liquidity Ratios


Current Liabilities





Total Debt* 53.4% 51.9%



Total Debt* - Cash and Cash Equivalents -

Short-term Investements 38.4% 40.2%

(Total Debt* - Cash and Cash Equivalents -

Short-term Investments) + Equity Attributable to

Equity Holders of the Parent Company


Interest Expense

Net Income** + Depreciation** 0.26 0.26

Total Liabilities


Total Liabilities


** Annualized


Current Ratio


Debt Ratio

Net Debt Ratio


Solvency Ratio

Annex “A-2”

Management Discussion and

Analysis of Results of Operations

and Financial Condition for the

quarter ended March 31, 2018

1




The following Management Discussion and Analysis should be read in conjunction with the submitted

Unaudited Consolidated Financial Statements as at March 31, 2018 and 2017 and for the quarters ended

March 31, 2018 and 2017.

The accounting policies adopted are consistent with those of the previous financial year, except for the

adoption of new PFRS and amendments to existing PFRS which became effective on January 1, 2018.

Please refer to Note 2 of the attached Unaudited Consolidated Financial Statements for the Basis of

Preparation, Statement of Compliance, Changes in Accounting Policies and Basis of Consolidation.

Causes for Any Material Changes (Increase or decrease of 5% or more in the financial statements)


For the Quarter Ended March 31, 2018 vs. March 31, 2017

(All Amounts are in Million Pesos)


System wide sales (SWS), a measure of all sales to consumers, both from company-owned and

franchised stores grew by 19.3% to P45,979.1 million in the first quarter of 2018 versus the same period

last year. Of this growth rate, global store network expansion accounted for 10.0%, same store sales

contributed 7.6% and currency exchange rate changes added 1.7%. Same store sales growth pertains

to restaurants that were already open for at least 15 months. It excludes sales growth from new store

opening. The consolidation of the SuperFoods Group contributed 2.8% to the 19.3% sales growth.

Philippine brands reported a 16.5% growth in system wide sales compared to the first quarter of 2017

from continued strong same store sales growth driven by the price adjustments implemented in January

2018 and in 2017 and more product purchase per customer. JFC also attributes the strong same store

sales growth to it continuous product improvement, new product introductions, marketing campaigns

and restaurant renovations.

The foreign business reported a 16.7% growth (+30.8%, with SuperFoods) in system wide sales, with

China growing by 17.9%, EMEAA (Europe, Middle East and Asia ex-SuperFoods) by 22.6% and North

America by 8.5%. JFC opened its very first Jollibee store in Europe, in Milan, Italy on March 18, 2018.

JFC’s foreign business (ex-Smashburger) accounts for 22.0% of its global system wide sales. Starting

April 17, 2018, Smashburger will be included in JFC’s financial consolidation and will increase the

foreign business’ contribution to almost 30% of global system wide sales.

Consolidated revenues, which consist of sales by company-owned stores, fees from stores operated by

franchisees and commissary sales to stores operated by franchisees grew by 18.8% in the first quarter

of 2018 compared with the same period in 2017. Sales discounts increased by 39.8%, and from 1.2%

of revenues in the first quarter of 2017 to 1.4% in the first quarter of 2018, driven mostly by promotional

discounts from the China brands’ delivery business.



Revenues 34,800.0 29,288.9 5,511.1 18.8%

ChangeQuarters Ended March 31

2

The JFC Group opened 75 stores (Philippines 42; Foreign 33) and closed 34 stores (Philippines 22;

Foreign business 12) during the quarter. It ended the March 2018 with 3,838 stores, 16.2% higher

compared to the number of stores at the end of March 2017. The total stores for the first quarter of

2018 included store network of the SuperFoods Group, with 253 for Highlands Coffee, 30 for PHO24

and 8 for Hard Rock Café. Excluding the SuperFoods Group, JFC’s store network grew by 7.4% YoY.

Cost of Sales

Consolidated cost of sales increased to P28,653.0 million, which is P4,591.4 million or 19.1% higher

than consolidated cost of sales for the first quarter of 2017.

The following table summarizes the breakdown of the Jollibee Group’s cost of sales for the quarters

ended March 31, 2018 and 2017 and the percentage of each component and the consolidated cost of

sales to consolidated revenues:

See Note 21 to the accompanying Unaudited Consolidated Financial Statements for details.

Consolidated cost of inventories increased at a slower rate compared to revenues. As a percentage of

revenues, cost of inventories improved by 0.6% points. The improvement was due to the consolidation

of the SuperFoods Group, which increased JFC’s revenues by 3.7% as well as the upward price

adjustments implemented by the domestic brands in 2017 and in January 2018.

The improvement in cost of inventories was however offset by higher store and manufacturing costs,

which increased by 21.3% year-on-year (YoY) due to increase in all cost items driven by increase in

number of stores and the consolidation of the SuperFoods Group starting May 2017.

As a percentage of revenues, store and manufacturing costs increased by 0.7% points, driven by the

following:

- Increase in consolidated rent expenses due to annual rent escalation, consolidation of the

SuperFoods’ Group rent expenses and the impact of PFRS-related adjustments on operating leases

(i.e., recognition of rent expenses under the straight-line method).

- Increase in consolidated contracted services due to headcount increase needed to support store

operations and the impact of the implementation of the new labor regulations. The increase was

offset by the slower increase in salaries and wages and decrease in expenses related to Project

SEEDS*. Following are the details:

2018 2017 Amount Pct 2018 2017

Cost of Sales


Personnel costs:


Pension expense 35.5 32.1 3.4 10.6% 0.1% 0.1%

Rent 2,660.1 2,151.3 508.8 23.7% 7.6% 7.3%

Contracted services 1,974.6 1,620.9 353.7 21.8% 5.7% 5.5%

Depreciation and amortization 1,191.9 971.6 220.3 22.7% 3.4% 3.3%


Supplies 686.7 582.6 104.1 17.9% 2.0% 2.0%

Repairs and maintenance 345.7 229.5 116.2 50.6% 1.0% 0.8%


Communication 61.4 52.6 8.8 16.7% 0.2% 0.2%



Others 791.3 640.5 150.8 23.5% 2.3% 2.2%

28,653.0 24,061.6 4,591.4 19.1% 82.3% 82.2%

Pct to RevQuarters Ended March 31 Change

3

- Increase in consolidated depreciation expense due to higher investment in new stores and increase

fixed assets resulting from the consolidation of SuperFoods;

- Increase in electricity and other utilities due to increase in usage and power rates;

- Increase in repairs and maintenance due to higher expenses related to hardware maintenance and

preventive maintenance, particularly for the domestic business;

- Increase in consolidated supplies due to increase in the cost of Liquified Petroleum Gas (LPG);

- Increase in consolidated professional fees due to higher headhunter fees for recruiting services

arising from store network expansion and higher legal fees incurred by a US subsidiary of the Parent

Company; and,

- Increase in other expenses mainly due to higher input VAT attributable to exempt sales and senior

citizen transactions.

As a percentage of consolidated revenues, consolidated cost of sales was slightly higher compared to

the previous year due to higher store and manufacturing costs, as discussed above.

Gross Profit

Consolidated gross profit for the first quarter of 2018 increased to P6,147.0 million, P919.6 million or

17.6% higher than the consolidated gross profit of P5,227.3 million for 2017. Gross profit margin for

the first quarter of 2018 was 17.7%, only slightly lower than the 17.8% gross profit margin for the first

quarter of 2017 despite rising inflation rate and cost increases brought by the tax reform and the peso

depreciation.

General and Administrative Expenses

Consolidated expenses for the first quarter of 2018 increased to P3,457.3 million, P671.1 million or

24.1% higher compared to the consolidated expenses for the first quarter of 2017 of P2,786.1 million.

The following table summarizes the breakdown of the Jollibee Group’s consolidated expenses for the

quarters ended March 31, 2018 and 2017, and the percentage of each expense item to the consolidated

revenues:

2018 2017 Amount Pct 2018 2017


Contracted services 1,974.6 1,620.9 353.7 21.8% 5.7% 5.5%

Project SEEDS* 30.7 61.8 (31.1) -50.4% 0.1% 0.2%

5,008.7 4,217.1 791.7 18.8% 14.4% 14.4%

Pct to RevQuarter Ended March 31 Change

*SEEDS stands for Skills Enhancement and Educational Development for Students, a joint project of JFC and the

Department of Labor and Employment. The program aims to help qualified students pursue post-secondary education

through the provision of financial assistance to enable students to acquire job competencies --- skills, attitudes and work

values through in-store training, thus enhancing employability upon completion of post-secondary education. Expenses

related to the Project SEEDS are booked under the account Cost of sales - Others.

4


- Consolidated personnel costs increased due to increase in the Corporate Office's headcount,

performance-related increases in basic pay, employee promotions, upgrades in employee benefits

and fringe benefit tax on stock options exercised. The consolidation of the SuperFoods Group’s

personnel costs also contributed to the increase in operating expenses.

- Consolidated taxes and licenses expense increased due to higher business-related taxes and license

fees resulting from higher revenues.

- Consolidated professional fees increased primarily driven by market research for the foreign

business, higher Information Management and HR-related consultancy fees, increased legal fees

related to M&A projects, engineering and design, site sourcing, digital marketing projects.

- Consolidated transportation and travel expenses increased due to higher lodging, mileage and per

diem expenses for activities related to store expansion (e.g. site visits for store construction and

renovation, site evaluation and sourcing, etc.) and various projects in the Philippines and foreign

markets.

- Consolidated rent expense increased due to annual rent escalation and additional office spaces for

the Corporate Offices in the Philippines, China and the United States due to the Jollibee Group’s

growing organization and the inclusion of the SuperFoods Group’s rent expenses.

2018 2017 Amount Pct 2018 2017

Personnel costs:


Stock options expense 66.0 56.9 9.1 16.0% 0.2% 0.2%

Pension expense 36.7 33.3 3.4 10.2% 0.1% 0.1%

Taxes and licenses 356.3 338.4 17.9 5.3% 1.0% 1.2%



Rent 143.4 119.1 24.3 20.4% 0.4% 0.4%

Contracted services 127.2 90.9 36.3 39.9% 0.4% 0.3%

Depreciation and amortization 114.1 103.2 10.9 10.6% 0.3% 0.4%

Repairs and maintenance 64.2 70.4 (6.2) -8.8% 0.2% 0.2%

Corporate events 55.0 45.3 9.7 21.4% 0.2% 0.2%

Communication 36.5 25.6 10.9 42.6% 0.1% 0.1%

Membership and subscriptions 36.5 32.1 4.4 13.7% 0.1% 0.1%


Training 28.5 35.2 (6.7) -19.0% 0.1% 0.1%

Supplies 19.6 21.0 (1.4) -6.7% 0.1% 0.1%

Loss on retirement and disposals of property,

plant and equipment 18.8 80.7 (61.9) -76.7% 0.1% 0.3%

Association dues 16.1 13.0 3.1 23.8% 0.1% 0.1%

Electricity and other utilities 14.3 12.3 2.0 16.3% 0.1% 0.1%

Insurance 6.2 4.0 2.2 55.0% 0.0% 0.0%

Security and janitorial 5.8 6.0 (0.2) -3.3% 0.0% 0.0%

Impairment in value of:

Receivables 0.8 - 0.8 100.0% 0.0% 0.0%

Inventories 2.4 19.0 (16.6) -87.4% 0.0% 0.1%

Reversals of provision for impairment on:

Inventories (1.1) (48.5) (47.4) -97.7% -0.0% -0.2%

Receivables (0.3) (12.6) (12.3) -97.6% -0.0% -0.1%

Property, plant & equipment - (1.4) (1.4) -100.0% 0.0% -0.0%

Donations 0.3 0.3 (0.0) -13.2% 0.0% 0.0%

Others 143.7 3.2 140.5 4390.6% 0.4% 0.0%

Total General and Administrative Expenses 3,457.3 2,786.1 671.2 24.1% 9.9% 9.5%

Advertising and promotions 720.7 612.6 108.1 17.6% 2.1% 2.1%

4,178.0 3,398.7 779.3 22.9% 12.0% 11.6%


5

- Consolidated contracted services increased due to increase in outsourced services for Jollibee

Group’s information management and network development.

- Consolidated depreciation and amortization increased due to the growing fixed asset base of the

Jollibee Group.

- Consolidated repairs and maintenance expense decreased due to higher base – last year’s repairs

and maintenance expenses included major SAP upgrade expenses that should be capitalized. The

reclassification adjustment was booked in the second quarter of 2017.

- Consolidated corporate events increased driven by higher expenses incurred for conventions,

corporate awards and corporate program launches due to higher number of participants arising from

increase in headcount.

- Consolidated communication expense increased due to higher telephone and internet charges,

Office 365 implementation particularly for the Philippine business and the consolidation of the

SuperFood Group’s expenses, which were not yet part of Jollibee Group’s consolidated expenses

in the first quarter of 2017.

- Consolidated membership and subscriptions due to higher expenses related to memberships in golf,

leisure clubs and various professional organizations.

- Consolidated representation and entertainment expenses, increased due to the consolidation of the

SuperFood Group’s expenses, which were not yet part of Jollibee Group’s consolidated expenses

in the first quarter of 2017.

.

- Consolidated training expenses decreased, more due to timing issue. More trainings were scheduled

in the first quarter of 2017 compared to the first quarter of 2018.

- Consolidated supplies expense decreased due to lower office and janitorial supplies expenses of

practically all businesses of the Jollibee.

- Loss on retirement and disposals of property, plant and equipment pertains to loss incurred arising

from change in store ownership, store closures and fixed asset disposals. The loss on retirement

and disposal of assets booked in the first quarter of 2017 was higher driven by the foreign business.

- Consolidated association dues increased relative to increase in number of office units of JFC and

increase in rate per square meter for building units.

- Consolidated electricity and other utilities expenses increased due to increase in usage and power

rates.

- Consolidated insurance expense increased due to increase in value of properties as a result asset

appraisal.

- Provision for impairment loss on receivables were recognized as a result of specific and collective

impairment assessments performed by the Jollibee Group.

- Provision for inventory obsolescence was recognized after the Jollibee Group’s assessment that the

net realizable value for some inventories is lower than cost.

- The Jollibee Group also recognized reversal of previously recognized provisions for impairment

loss on receivables and inventories.

6

- Consolidated donations decreased, mainly due to lower corporate sponsorships made in the first

quarter of 2018 compared to first quarter of 2017.

- Consolidated other expenses increased due to higher expenses related to market research and

increase in input VAT attributable to exempt sales and senior citizen transactions.


campaigns for new products and flagship products, both for the Philippine business and the foreign

business.

Operating Income

Consolidated operating income for the first quarter of 2018 increased by 7.7% or P140.4 million to

P1,969.0 million compared with revenue growth of 18.8%. As a percentage of revenues, operating

income declined from 6.2% in the first quarter of 2017 to 5.7 % in the first quarter of 2018 despite the

strong growth in revenues as the increase in store and manufacturing expenses reduced the Jollibee

Group’s gross profit margin. General and administrative expenses likewise increased faster than

revenues.



Consolidated interest income decreased primarily due to lower interest income earned from cash in

banks, short-term deposits and short-term investments. Also, with the acquisition of additional interest

in the SuperFoods Group, loans and advances as at December 31, 2016, including accrued interest

income were converted into additional equity. See Note 11 to the accompanying Unaudited

Consolidated Financial Statements for more information.

Consolidated interest expense for the first quarter of 2018 was higher than the consolidated interest

expense for the first quarter of 2017 due to higher bank loans. See Notes 18 and 23 to the accompanying

Unaudited Consolidated Financial Statements for more information.

Equity in Net Earnings (Losses) of Joint Ventures and Associates


Consolidated equity in net earning (losses) of joint ventures and associates pertains to Jollibee Group’s

share in the net losses of Smashburger and Cargill offset by the net earnings of Entrek - the Company

that operates Jollibee stores in Brunei and Golden Crown - the Company that operates Jollibee stores in

the UAE. The improvement in JFC’s share in the net earnings of joint ventures by P112.6 million was

due to the significant improvement in Smashburger’s profitability for the first quarter of 2018 versus

its loss for the same quarter last year.

2018 2017 Amount Pct 2018 2017

Interest income 57.6 63.6 (5.9) -9.3% 0.2% 0.2%

Interest expense (142.9) (94.8) (48.1) 50.7% -0.4% -0.3%

(85.3) (31.3) (54.0) 172.6% -0.2% -0.1%

Quarters Ended March 31 Change Pct to Rev

2018 2017 Amount Pct 2018 2017

Equity in net earning (losses) of joint ventures and

associates - net 2.9 (109.6) 112.6 -102.7% 0.0% -0.4%


7

Other Income


Income Taxes

The increase in provision for income tax was due to the impact of the consolidation of the SuperFoods

Group and increase in the China business’ tax provision resulting from higher taxable income. See

Note 24 to the accompanying Unaudited Consolidated Financial Statements for details.

Net Income

Consolidated net income for the first quarter of 2018 amounted to P1,667.6 million, 13.1% higher than

last year’s consolidated net income of P1,473.9 million. Net income margin (consolidated net income

as a percentage of consolidated revenues) was slightly lower at 4.8% for the first quarter of 2018

compared with 5.0% for the first quarter of 2017. Net Income Attributable to the Equity Holders of the

Parent Company amounted to P1,799.2 million, 17.3% higher versus P1,533.2 million in the first

quarter of 2017. Earnings per Share amounted to P1.656, 16.1% higher than the first quarter of 2017.

Financial Condition

As at March 31, 2018 Versus December 31, 2017

The Jollibee Group ended the first quarter of 2018 with consolidated total assets of P95,851.9 million,

6.8% higher than the P89,783.9 million as at the end of 2017. The following explain the significant

movements in the asset accounts:

- The Jollibee Group’s consolidated cash and cash equivalents increased to P27,197.1 million,

P6,089.6 million or 28.9% higher than the balance at year-end 2017, mainly due to the bank loans

availed by the Jollibee Group in March 2018. The movements in the Jollibee Group’s cash will be

explained further in the cash flow discussion.

- Short-term investments decreased by P889.2 million or 62.9% due to reclassification to cash and

cash equivalents of deposits that have matured.

2018 2017 Amount Pct 2018 2017

Write-off of liabilities 94.3 122.4 (28.1) -22.9% 0.3% 0.4%

Foreign exchange gain (loss) - net 81.1 (24.1) 105.2 -436.5% 0.2% -0.1%

Bank charges (43.6) (35.1) (8.6) 24.5% -0.1% -0.1%


Reversal of impairment loss on interest in an associate 16.7 - 16.7 100.0% 0.0% 0.0%


Pre-termination of operating leases 10.9 (0.1) 11.0 63295.8% 0.0% -0.0%

Charges to franchisees 4.5 4.5 0.0 1.7% 0.0% 0.0%

Other rentals 1.8 3.5 (1.7) 48.6% 0.0% 0.0%

Insurance claims and others 48.0 28.4 19.6 69.0% 0.1% 0.1%

251.9 174.9 77.0 44.0% 0.7% 0.6%

Quarters Ended March 31 Change Pct to Rev

2018 2017 Amount Pct 2018 2017

Current 590.6 527.6 63.0 11.9% 1.7% 1.8%

Deferred (119.7) (138.9) 19.2 -13.8% -0.3% -0.5%

470.9 388.7 82.2 21.1% 1.4% 1.3%


8

- Consolidated receivables decreased by P851.5 million or 21.6% to P3,089.5 million primarily due

to a more efficient collection of receivables from franchisees for their commissary purchases and

royalty fees. Average collection period improved, from 10 days as at December 2017 to 9 days as

at March 31, 2018.

- Consolidated other current assets increased mainly due to increase in prepaid taxes, prepaid rent

and deposits to suppliers and other third parties.

The Company has a current ratio of 1.61:1.00 as at March 31, 2018, higher than the current ratio of

1.39:1.00 as at December 31, 2017.

- The consolidated derivative asset pertains to the unrealized gain position on the interest rate swap

that amounted to P88.3 million. This is due to the lower fixed rate compared to the current floating

rate, which is based on the 3 months USD LIBOR. See Note 18 to the accompanying Unaudited

Consolidated Financial Statements for details.

- Deferred tax assets increased by P223.9 million or 5.7% to P4,132.8 million, due to the recognition

of deferred tax assets on accrued expenses of US-based entities. See Note 24 to the accompanying

Unaudited Consolidated Financial Statements for details.

Consolidated current liabilities amounted to P25,903.8 million, P790.8 million or 3.0% lower than the

2017 year-end balance of P26,694.6 million. The following explain the significant movements in

current liabilities:

- Consolidated income tax payable increased by P20.8 million or 9.3% to P244.6 million due to the

income tax payable for the first quarter of 2018, partly offset by decline in the foreign business’

income tax payable arising from the tax payment made by the SuperFoods Group in the first quarter

of 2018 amounting to P75.4 million. - Current portion of long-term debt increased, from P1,216.2 million to P1,442.3 million due to

reclassification of loans maturing in 2018 from non-current portion to current portion of long-term

debt, partly offset by payments made during the quarter.

Consolidated noncurrent liabilities amounted to P24,648.6 million, 20.2% or P4,141.3 million higher

than the December 31, 2017 audited balance of P20,507.3 million. The following explain the significant

movements in noncurrent liabilities:

- Consolidated noncurrent portion of long-term debt increased by P3,922.3 million to P18,823.4

million due to bank loans with a total amount of P4,200.00 million, availed from local banks in

March 2018. See Notes 18, 30 and 31 to the accompanying Unaudited Consolidated Financial


- The deferred tax liabilities as of the first quarter of 2018 increased by P59.0 million or 5.0% to

P1,248.0 million compared to the 2017 year-end audited balance of P1,189.0 million. The increase

pertains to the change in deferred tax position of a Philippine-based entity from deferred tax liability

position in 2017 to deferred tax asset position as at March 31, 2018. See Note 24 to the

accompanying Unaudited Consolidated Financial Statements for details.

Consolidated total equity increased by P2,717.5 million or 6.4% to P45,299.4 million primarily due to

increase in retained earnings by P1,799.2 million and increase in cumulative translation adjustments by

P692.2 million. The following explain the significant movements in Equity:

- The change of P692.2 million (income) in cumulative translation adjustment was due to the

depreciation of the Philippine Peso versus the RMB for the first quarter of 2018 (Peso to RMB:

8.32) compared to December 31, 2017 (Peso to RMB: 7.64) and the depreciation of the Philippine

9

Peso versus the USD for the first quarter of 2018 (Peso to USD: 52.16) compared to December 31,

2017 (Peso to USD: 49.93) which resulted in the increase in value of the Jollibee Group’s net assets.

- The improvement in consolidated other comprehensive income on derivative liability by P76.4

million was due to the recognition of derivative asset for the interest rate swap compared to a

derivative liability last year.

- The increase in consolidated retained earnings of P1,799.2 million pertains to the consolidated net

income (attributable to equity holders of the Parent Company) for the first quarter of 2018.


Consolidated net cash provided by operating activities amounted to P3,052.9 million at end of March

2018, P1,683.3 million or 122.9% higher compared to the consolidated net cash provided by operating

activities of P1,369.6 million in the first quarter of 2017 primarily related to the timing of payments for

trade payables. Payments of trade payables made in the first quarter of 2017 were significantly higher

compared with the payments made for the first quarter of 2018. The increase in other current assets (as

explained in the balance sheet analysis) also contributed to the increase.

Consolidated net cash used in investing activities amounted to P805.5 million at end of March 2018,

P3,368.8 million or 80.7% lower compared with the net cash used in investing activities at the end of

March 2017. Capital expenditures for the first quarter of 2018 was P510.6 million higher compared

with the capital expenditures for the first quarter of 2017. Short term investments decreased by P889.2

million in the first quarter of 2018, from an increase P1,782.2 million in the first quarter of 2017.

Consolidated net cash provided by financing activities amounted to P3,840.8 million at the end of March

2018, mainly from proceeds from bank loans availed in March 2018 and proceeds from issuances of

and subscriptions to capital stock, partly offset by payments of bank loans, interest on bank loans and

cash dividends.

Cash and cash equivalents at the end of March 2018 stood at P27,197.1 million, P6,089.6 million or

28.9% higher than December 31, 2017 audited balance.


1. There were no events during the period that will trigger direct or contingent financial obligation

that is material to the Jollibee Group.

2. There were no material off-balance sheet transactions, arrangements, obligations created during the

reporting period.

3. Consolidated capital expenditures budget for 2018 amounted to P12,000.00 million, of which

P6,500.0 million will be used for new stores and renovations and the rest will mostly be for

commissary expansion.

4. Food service operations have both peak and lean seasons. Historically, sales in the second and

fourth quarters are strong due to the summer and the Christmas seasons, respectively. Demand

during the first and third quarters usually slackens. The material financial impact of this seasonality

has been considered in the Jollibee Group’s consolidated financial forecast.



10

Investment to a Private Equity Fund

On May 8, 2018, the Jollibee Group, through its wholly-owned subsidiary JWPL, shall invest up to

SGD45 million in Titan Dining LP., a private equity fund that has executed (through a wholly-

owned subsidiary) a binding agreement for the acquisition of 100% of the Asia Pacific master

franchise holder of the “Tim Ho Wan” brand, Tim Ho Wan Pte. Ltd. and its affiliate Dim Sum Pte.

Ltd, which owns and operates Tim Ho Wan stores in Singapore.

Business Expansion

On April 25, 2018, the Parent Company announced that its wholly-owned subsidiary Fresh N’

Famous Foods Inc., will bring the PHO24 brand to the Philippines. PHO24 is owned and operated

by the SuperFoods Group, a majority-owned (60%) subsidiary of JFC.

Issuance of 2015 ELTIP Cycle 4

On April 17, 2018, the Compensation Committee of the Board of Directors approved the grant of

the 2015 ELTIP Cycle 4 at 40% of the total shares allocated equal to 4.5 million shares.


On April 6, 2018, the Board of Directors approved a regular cash dividend of P1.14 per of common

stock to all stockholders of record as at April 24, 2018. Consequently, the cash dividend is expected

to be paid out by May 9, 2018. The cash dividend is 14.0% higher than the P 1.00 regular cash

dividend per share declared on April 5, 2017.

11

Discussion of the Jollibee Group's Top Five (5) Key Performance Indicators

System Wide Sales

System Wide Sales is a measure of all sales to consumers both from company-owned and franchised

stores.

As at March 31, 2018 As at March 31, 2017

System Wide Sales P45,979.1 million P38,537.3 million

% Growth vs LY 19.3% 12.2%

Revenues

Revenues is a measure of (1) all sales made by the Jollibee Group’s company-owned stores (both food

and novelty sales); (2) Commissary sales to franchised stores; (3) fees from stores operated by

franchisees; (4) rental revenues of the Jollibee Group’s investment properties; and (5) revenues from

services rendered by the in-house Construction.


Revenues P34,800.0 million P29,288.9 million % Growth vs LY 18.8% 12.2%

Net Income Margin

Net Income Margin is the ratio of the Jollibee Group's earnings after interest and tax. This is computed

by dividing consolidated net income by consolidated revenues. The quotient is expressed in percentage.

This measures the Jollibee Group’s return for every peso of revenue earned, after deducting cost of

sales, operating expenses, interests and taxes.




Basic Earnings Per Share (EPS)

EPS is the portion of the Jollibee Group’s profit allocated to each outstanding share of common stock.

This is computed by dividing the net income for the period attributable to the equity holders of the

Parent Company by the weighted average outstanding shares during the same period. This serves as an

indicator of the Jollibee Group’s profitability.


EPS (Basic) P1.656 P1.426

% Growth vs LY 16.1% 9.1%


ROE is the ratio of the JFC Group’s net income attributable to equity holders of the Parent Company to

equity. It is computed by dividing annualized net income attributable to equity holders of the Parent

Company by average equity attributable to equity holders of the Parent Company. ROE is a measure

of return for every peso of invested equity. The JFC Group also uses ROE for comparing its profitability

with other firms in the same industry.

Annualized As at March 31, 2018 As at March 31, 2017


12

Financial Ratios


Mar-18 Mar-17

Formula Unaudited Unaudited

Liquidity Ratios


Current Liabilities





Total Debt* 53.7% 50.2%



Total Debt* - Cash and Cash Equivalents - Short-

term Investments 34.4% 35.7%

(Total Debt* - Cash and Cash Equivalents - Short-

term Investments) + Equity Attributable to Equity



Interest Expense**

Net Income** + Depreciation and Amortization** 0.24 0.29

Total Liabilities


Total Liabilities


** Annualized


Current Ratio


Debt Ratio

Net Debt Ratio


Solvency Ratio

Annex “A-3”

Business Description of the

Company

BUSINESS DESCRIPTION

JOLLIBEE FOODS CORPORATION (“JFC” or the “Company”) was incorporated on January 11,

1978. Its principal business is the development, operation and franchising of quick-service

restaurants (“QSR”) under the trade name “Jollibee.” In the Philippines, the Company has, as

subsidiaries, FRESH N’ FAMOUS FOODS, INC., which develops, operates and franchises quick-

service restaurants under the trade names “Chowking” and “Greenwich,” RED RIBBON

BAKESHOP, INC. (through RRB HOLDINGS, INC.), which develops, operates and franchises

restaurants under the “Red Ribbon” trade name, MANG INASAL PHILS., INC., which develops,

operates and franchises restaurants under the “Mang Inasal” trade name, and PERF

RESTAURANTS INC., (through holding companies, of which the Company owns 54%) which

franchises restaurants under the “Burger King” trademark in the Philippines. The Company

also has subsidiaries and affiliates which develop and operate its international brands, “Yonghe

King,” “Hong Zhuang Yuan,” brands under the SuperFoods Group (including Highlands

Coffee and Pho 24), “Smashburger” and “Dunkin’ Donuts”. Milestones and updates for

subsidiaries and affiliates are discussed further in other parts of this Report.

2017 was marked by Jollibee’s stellar record-breaking results achievement and unparalleled

network dominance in the local quick service restaurant industry.

Strong focus and support for its flagship products, service and product improvement, network

expansion and improved store productivity were among the key factors that helped the brand

achieve double digit system wide sales growth and strong profit growth. Jollibee achieved its

highest post presidential election year rolling base sales growth since 1998. Jollibee opened a

record 96 new stores in the Philippines, bringing its total store network to 1,062 - including the

milestone 1000th store at BGC Triangle Drive, Taguig City.

Jollibee brought back nostalgic favorites that thrilled its customers like the Choco Mallow Pie,

Tuna Pie, Halo Halo Sundae and Amazing Aloha Yumburger. It also introduced exciting

flavors of Jolly Crispy Flavored Fries, Floats and Salted Caramel Sundae.

Jollisavers was very strong in digital marketing with the launch of the first of its kind Jolliserye

dubbed 14/29. This helped drive brand ownership of the “Petsa de Peligro” occasion while

pushing for the variety of delicious and affordable line-up of Jollisavers meals.

2017 also cemented Jollibee’s position as a digital marketing thought leader with the

phenomenal success of the Kwentong Jollibee Valentine series with close to 50 million views

and record engagement. This was followed by equally heartwarming short films for special

family occasions that helped further drive brand love. All these hit campaigns, viral videos and

brand public relations activities made Jollibee the brand buzz and engagement leader among all

QSR brands and harvested a total of 37 marketing awards for the brand.

By the end of 2017, there were 1,062 Jollibee stores nationwide, of which 530 were franchised

and 532 were company-owned.

2017 was a record-breaking year for Jollibee North America – ending with double-digit rolling

base sales growth, the highest ever in its history. This surpassed its growth target and far

outpaced the US restaurant industry’s growth rate pegged at 4%.

The results were a function of focused execution on its flagship products and key store openings. Brand engagement thru digital marketing proved effective – with the Jollibee US Facebook

page doubling its likes and followers and tripling its daily total reach. In addition, Jollibee North

America launched the first-ever Kwentong Jollibee campaign outside the Philippines,

2

highlighting the unique experiences of the Filipino immigrant family – further strengthening its

relevance amongst Filipinos.

Key store openings generated buzz for the brand in 2017. In March, it opened its 36th store in

Jacksonville, the first Jollibee in the state of Florida. The second Jollibee store in Winnipeg,

Canada soon followed, as well as in Kapolei, the 5th in Oahu, Hawaii. This brought to 39 the

total number of stores in Jollibee’s network in North America.

Jollibee Hong Kong exhibited promise for future growth through the increased patronage of

both Filipino and local mainstream customers, clamoring for the same Crispylicious,

Juicylicious Chickenjoy. This Jollibee flagship product was named “Hong Kong’s Best Fast

Food Fried Chicken,” according to editors of the local English-language newspaper, South

China Morning Post. Another notable achievement in 2017 was the continued expansion of its

store network from 3 to 8 stores. Jollibee Singapore was a driver of innovation for the Company

in 2017, pioneering the adoption of the self-ordering kiosk and the pay & claim system to make

the service faster and more convenient for the customers.

Jollibee Vietnam ended the fiscal year with a rolling base sales growth in high teens driven by

a strong focus on its flagship products and disciplined FSC practices. This double-digit rolling

base sales growth was sustained for 25 consecutive months, breaking all past records. The

business continued to expand its store network in 2017 with 17 new stores, paving the way for

its historic 100th store opening in Can Tho.

Jollibee Brunei celebrated its 30th anniversary in 2017 as one of the business units that has

achieved a truly mainstream presence in an international market. With the milestone opening

of the 15th Brunei halal-certified store in the International Airport, Jollibee was able to cement

its position as the dominant QSR brand in the country.

In the Middle East, Jollibee was able to sustain growth amidst the economic challenges in the

region. The opening of Jollibee Oman last May 2017 completed the presence of Jollibee in the

Gulf. In UAE, store expansion accelerated, nearly doubling from 5 to 9 stores, focused on the

largest and most populated emirates, Abu Dhabi and Dubai.

As of December 2017, Jollibee International had 198 stores, with 37 in the United States, 2 in

Canada, 98 in Vietnam, 15 in Brunei, 8 in Hong Kong, 5 in Singapore, and 33 in the Middle

East.

The Corporate Supply Chain provides manufacturing and logistics services to the various

brands of JFC through Zenith Foods Corporation (“ZFC”) and JWS Logistics.

ZFC, a wholly-owned subsidiary of JFC, serves as the major manufacturing arm of the

Company. The major facility, located in Carmelray Industrial Park 1 in Canlubang has a

combined capacity of about 400 metric tons of various products daily. Together with a second

site in Mandaue City, Cebu, ZFC can supply the requirements of over a thousand stores

nationwide. Manufacturing expansion plans are underway in Luzon and in VisMin to support

the projected growth of the JFC brands.

JWS Logistics (JWSL) is part of Jollibee Worldwide Pte. Ltd., the regional operating

headquarters of the Jollibee Group of companies. JWSL ensures the delivery of goods to the

JFC stores on-time and in-full through its services which include supply planning, warehousing,

distribution, and customer support and order management. It operates distribution centers in

strategic locations to service the growing network of stores in the JFC system. The biggest

distribution center which serves as a major hub for Metro Manila and South Luzon is located

in a 5-hectare property in Barangay Marcelo Green, Parañaque City with over 20,000 combined

3

pallet locations for both dry and cold storages. Like its manufacturing partner ZFC, JWSL is

poised for expansion by increasing its storage capacities in its distribution centers nationwide.

The Company is currently embarking on major expansion projects for completion in 2018-2019

to increase capacity of the plants and distribution centers in Luzon and VisMin, addressing the

growth requirements of the stores nationwide.

The Company’s main suppliers are:

Food Supplier

Chicken SAN MIGUEL FOODS, INC.

JMT Building, ADB Avenue, Pasig City

Carbonated COCA-COLA BOTTLERS PHILIPPINES, INC.

Beverages 1890 Paz Guazon Street, Otis, Paco, Manila

Sauces and DEL MONTE PHILIPPINES, INC.

Beverages Bugo, Cagayan De Oro City

Beverages NESTLE PROFESSIONALS

Nestle Center, Rockwell Center, Makati City

Dressings UNILEVER PHILIPPINES

UN Avenue, Paco, Manila

Oils OLEO-FATS INC.

#5 Mercury Avenue, Bagumbayan, Quezon City

The Company has existing agreements with all suppliers.

The Company’s subsidiaries have their own commissaries for their respective specialty

products, i.e., pizza and pasta for Greenwich, Chinese dishes for Chowking, cakes and pastries

for Red Ribbon, grilled chicken and Filipino food items for Mang Inasal, products for Burger

King and Chinese food items for Yonghe King and Hong Zhuang Yuan in the People’s Republic

of China (“PRC”).

Food quality, service, price-value relationship, store location and ambience, and efficient

operations continue to be critical elements of the Company’s success in the quick-service

restaurant industry.

4

ACQUISITIONS, INVESTMENTS AND JOINT VENTURES

Acquisitions– United States of America (March 13, 2017)

On March 13, 2017, the Company disclosed that its wholly-owned subsidiary Bee Good! Inc.

(BGI) and Smashburger Master LLC (Master) amended their agreement to enable BGI to

purchase from Master more shares in SJBF LLC (the parent company of the Smashburger

business) between the years 2018 to 2021. Under the original agreement, BGI was entitled to

purchase from Master an additional 35% of SJBF LLC between the years 2018 and 2021, and

to acquire the balance of 25% between 2019 at the earliest and 2026 at the latest. With the

amendment, BGI shall be entitled to purchase from Master an additional 45% of SJBF LLC

between the years 2018 and 2021 and acquire the balance of 15% between the years 2019 at

the earliest and 2026 at the latest.

Joint Venture – Singapore (March 31, 2017)

On March 31, 2017, the Company disclosed that its wholly-owned subsidiary Golden Plate Pte.

Ltd. (GPPL) entered into a joint venture agreement with Blackbird Holdings Pte. Ltd.

(Blackbird) to own and operate the first Jollibee store in Italy. GPPL and Blackbird shall

incorporate a Singapore company (the JV Company) to be owned by GPPL to the extent of

75% and to be owned by Blackbird to the extent of 25%. The JV Company shall incorporate a

wholly-owned subsidiary in Italy to own and operate the store.

GPPL and Blackbird have committed to invest up to EUR1 Million to the JV, of which up to

EUR750,000 will be contributed by GPPL in proportion to its ownership in the business. GPPL

shall have full management control of the JV and the operations of the 1st store.

Investment – Vietnam (May 11, 2017)

On May 11, 2017, the Company disclosed that its wholly-owned subsidiary JSF Investments

Pte. Ltd. and its partner, Viet Thai International Joint Stock Company (VTI), in their joint

venture, SuperFoods Group with business mostly in the Socialist Republic of Vietnam have

just completed a key step in their plan to list SuperFoods Group as a public company in a Stock

Exchange in Vietnam by adjusting the ownership interest in the SuperFoods Group to 60% JFC

and 40% VTI from its previous 50-50 ownership share. This step is in line with the partners’

agreement to make SuperFoods a public company by July 2019 as disclosed by JFC to the

Philippine Stock Exchange on November 18, 2016.

Discontinuation of Operations – People’s Republic of China (November 2, 2017)





Acquisitions– United States of America (February 13, March 8, and April 17, 2018)

On February 13, 2018, the Company disclosed that, through its wholly-owned subsidiary Bee

Good! Inc. (BGI), it will purchase from Smashburger Master LLC (Master) an additional 45%

of SJBF LLC, the parent company of the entities comprising the Smashburger® business. This

will increase BGI’s ownership in SJBF LLC from current 40% to 85%. Master will retain the

balance 15% ownership. The transaction, valued at USD 100 million is expected to be

5

completed in one to two months, subject to government approvals in the United States and

meeting certain closing conditions. JFC will pay Master through BGI in cash.

On March 8, 2018, the Company disclosed that BGI has executed the Purchase Agreement with

Master for the acquisition of the additional 45% share of SJBF LLC.

On April 17, 2018, the Company disclosed that closing conditions, including required

government approvals, have been obtained as provided under the Purchase Agreement for

BGI’s acquisition of additional 45% share of SJBF LLC. The Company, through BGI, now

owns 85% of Smashburger. With the completion of the acquisition, the Company shall include

Smashburger in its financial consolidation starting April 17, 2018.

New Business - Philippines (April 25, 2018)

On April 25, 2018, the Company disclosed that, further to its November 18, 2016 disclosure,

the Company, through its wholly-owned subsidiary Fresh N’ Famous Foods Inc., will bring

PHO24 to the Philippines. In its November 2016 disclosure, the Company disclosed that the

SuperFoods Group aims to serve consumers in Asia and key cities in the world high quality and

healthy Vietnamese food at affordable prices through PHO24 brand.

Investment – Philippines (May 8, 2018)

On May 8, 2018, the Company disclosed, that through its wholly-owned subsidiary Jollibee

Worldwide Pte. Ltd., it shall invest up to 45 Million Singapore Dollars in Titan Dining LP

(“Titan”), a private equity fund that has executed (through a wholly owned subsidiary) a binding

agreement for the acquisition of 100% of the Asia Pacific master franchise holder of the “Tim

Ho Wan” brand, Tim Ho Wan Pte. Ltd. (THWPL), and its affiliate Dim Sum Pte. Ltd. (DSPL),

which owns and operates Tim Ho Wan stores in Singapore (the Companies).

EMPLOYEES

The Company, its local business and support units have approximately 12,309 employees in

the Philippines as of December 31, 2017. The regular daily-paid employees of Company-

owned Jollibee stores are subject to a collective bargaining agreement which was renewed and

signed on March 3, 2017.

Aside from all benefits mandated by law, the Company provides training opportunities (internal

and external) to its employees. Qualified employees are also entitled to avail of options under

the Company’s Stock Option Plan.

COMPETITION

The Company competes in the quick-service restaurant industry. The Company’s competitive

edge includes strict adherence to its policy of maintaining high standards in food quality,

reasonable prices, excellent service and cleanliness in its stores. Taking the Jollibee group in

its entirety, competition includes, but is not limited to, McDonald’s, Wendy’s, KFC, and other

burger, pizza and pasta chains, Chinese fast-food restaurants, grilled chicken and Filipino

restaurants, and bakeshops.

6

CUSTOMERS

The Company serves a wide spectrum of customers from all economic classes. It is not

dependent on a single customer or a few customers. Neither is there a single customer that

accounts for, or will account for, 20% or more of the Company’s sales.

RELATED PARTIES

The Company runs its business independently of its subsidiaries and other related parties. There

is no dependence on the Company’s related parties.

PERMITS AND APPROVALS

Other than the reportorial requirements of the Securities and Exchange Commission (“SEC”),

The Philippine Stock Exchange (“PSE”), the Bureau of Internal Revenue (“BIR”), and the local

permits for the opening and continued operations of stores, there are no other permits, licenses

or approvals required from the Company for its operations. The Company is in compliance

with the requirements of the SEC, PSE, BIR and local government units.

RESEARCH AND DEVELOPMENT

Research and development is an integral part of the Company’s operations. New products,

concepts and ideas are critical to the continued success of the Company and its subsidiaries.

For this reason, the Company allocates a Research and Development budget as indicated below

for the Jollibee Philippines brand:

Year Amount Percentage to Systemwide Sales of Jollibee Brand

2016 PhP78,564,317.00 0.11%

2017 PhP73,235,141.00 0.09%

ENVIRONMENTAL LAWS

In keeping with its Corporate Social Responsibility (“CSR”), JFC places great premium in its

commitment to environmental conservation and protection. A dedicated office was assigned to

reduce the total environmental footprint of its businesses. Despite the lack of standards for the

Restaurant Sector, the Company exerts efforts to meet the industrial standards being applied to

it by government regulators. Several measures were included in its operations, covering both

procedural and technological aspects, which pay heed to the environmental laws and

regulations being applied to the quick-service restaurant sector.

Part of the proactive measures being undertaken at the store level, the Company continues to

implement its ongoing training programs that equip the store teams with the knowledge and

skills for environmental management and best management practices in the kitchen.

JFC continues its energy saving initiatives in the use of Grid-tied Solar Power in some stores

to reduce power consumption from the Grid by about 10%-15% for a typical free-standing store.

Use of solar power even with limited capacity will provide environmental benefits. Low-E high

7

performance glass is used in some stores to reduce the air-conditioning requirement by about

10% thus reducing power consumption.

In addition, evaporative fresh air blowers are also employed, which draw warm outside air

through wet filter pads, resulting in a similar cooling effect through evaporation. This reduces

the use of air conditioners, saving around 25,000 kilowatt-hours of energy per year with every

installed unit. Additional energy economy is achieved with the heat recovery water heater,

which traps the heat emitted by the air conditioner to produce hot water for cleaning the floors.

This mechanism results in additional savings of 20,700 kilowatt-hours of energy per unit per

year, enough to provide the electrical requirement of 2,678 households for every 220 Jollibee

stores using this facility. The exhaust systems of the kitchens contain variable speed drives,

programmed to automatically reduce the speed of exhaust motors during off-peak hours when

less food is cooked, saving up to 14,000 kilowatt-hours of energy per motor per year. The use

of light-colored roofing materials, which reflect heat, contribute to a much cooler building as

well as reduced electrical bills. Additionally, for general lighting, conversion CFL to Light

Emitting Diodes (LED), capable of over 50,000 “burning” hours while consuming less power,

have been implemented in stores.

Hand in hand with its mission of bringing the joy of eating to everyone, the Company also

believes in inculcating the spirit of environmental responsibility both inside and outside the

Company. More than a one-time effort, this unceasing pledge to the environment can be best

seen in its proactive efforts to anticipate and address issues through continuous feedback and

communication with the Company’s partners in the government and the customer base.

RISKS

The Company and its subsidiaries are all in the quick-service restaurant sector. Quick-service

restaurants like those maintained by the Company are expected to maintain high quality in terms

of food, service and cleanliness (“FSC”). The Company responds by observing stringent

guidelines, processes and procedures in its FSC, and conducting regular and spot audits to

ensure that FSC standards are maintained not only in stores but also in commissaries. The

Company has likewise instituted a system of incentives to reward excellent performance in

terms of FSC by stores.

The Company encourages the implementation of systems that allow it to adequately identify,

measure, manage and control significant and relevant risks that affect its activities and

businesses. These systems and risk management policies enable the Company to: a) attain the

strategic objectives formulated by the Company with controlled unpredictability; b) provide the

maximum level of assurance to its shareholders; c) protect the Company’s reputation; d) defend

the interests of customers, shareholders, other groups interested in the Company’s progress;

and e) ensure sustained corporate stability and financial strength.

To ensure the effective availability of essential and critical services, the Company maintains its

business continuity management policy in support of a comprehensive program for business

continuity, limiting the impact and losses caused by major incidents, and business recovery.

The Company maintains its business continuity management policy and business continuity

plan in compliance with ISO 22301 Societal Security – Business Continuity Management

Systems as part of its risk management procedures.

8

ADDITIONAL REQUIREMENTS AS TO CERTAIN ISSUES OR ISSUERS

The Company has no additional requirements as to certain issues or issuers.

SUBSIDIARIES AND AFFILIATES

The Company owns, develops, operates and franchises the following brands through various

subsidiaries:

Chowking

The Chowking Philippines business came out rising with profitable growth in 2017. It was a

year for the books as Chowking reached its 500th store mark, while garnering growth and profit

across its business units nationwide. These achievements have helped the brand become the

fastest-growing QSR brand in the young market segment.

With all these, the business stays true to its priorities to: elevate the brand experience, grow its

flagship products, and achieve excellence in the restaurant.

Chowking continued to maintain a strategic mix of TV, digital, out-of-home, radio retail trade

area and in-store marketing efforts. These platforms have helped the brand communicate the

unique, delicious, and good value of Chowking’s products. Chowking is committed to attract

the millennial market segment, as it pushes to win them over with creative executions and

engaging media placements.

With growing its flagship products, Chowking stays true to its unique Chinese positioning.

Sales growth in 2017 was delivered by Pork Chao Fan, Lauriat, Sweet and Sour Pork, and

Wonton Mami—dishes that Filipinos have come to love through Chowking.

Chowking elevates excellence in restaurants through its growing presence and strategic

locations. It opened 59 new stores in 2017. Renovations were also made to improve existing

stores. All these new and renovated stores have the modern Chinatown food street theme which

customers enjoy capturing on social media. Business channels, specifically delivery and drive-

thru, have also elevated customer experience, so that guests can enjoy Chowking at their

convenience.

As of December 2017, there were 526 Chowking stores nationwide, of which 265 were

franchised and 261 were company-owned.

Chowking USA set its sights in becoming the preferred Chinese limited-service restaurant

among Filipinos in the region. In 2017, Chowking USA focused on improving its taste and

value superiority. Product improvements were made on both flagship and core products. Leading the way was the improvement on one of the brand’s flagship products. Now with more

beef chunks and better tasting noodles, Beef Wonton Noodles led to sustained double digit

growth of the product for the whole year. In May, the brand launched the improved Lauriat

Combo Meals with bigger portions and more entrée choices, it jumpstarted the aggressive

growth of Chowking’s Rice Meals category.

2017 was a strong year for Chowking Middle East, showcasing continued store network

expansion coupled with strengthening of flagship products within the markets.

With the store network expansion throughout 2017, the brand now has a stronger presence in

the region with a total of 30 stores. Key store openings include the opening of a store in the

9

Mall of Emirates (MOE) in the UAE that led to record-breaking sales performance – the highest

opening week sales in CK UAE history. In Kuwait, the brand launched its latest store featuring

the latest Chinatown design concept, immediately followed by a store opening in Muscat – the

capital and largest metropolitan city of Oman. To couple the store network expansion in the

region, the brand strengthened their menu line-up by launching the Chinese style Fried Chicken

in UAE and Oman. The launch generated significant growth in the chicken and lauriat category,

exhibiting promise for accelerated, sustainable growth for the succeeding years.

The efforts on network expansion and flagship focus did not go unrecognized as Chowking was

awarded “The Preferred Casual Dining Restaurant of the Year” by the Filipino Times – the

largest Filipino newspaper in the UAE.

As of year-end, Chowking had 45 stores outside the Philippines - 15 stores in the United States,

20 in UAE, 3 in Qatar, 3 in Oman, 3 in Kuwait and 1 in Saudi Arabia.

Greenwich

The pizza segment was intensely competitive last 2017 as major players fought for precious

consumers’ share of stomach and wallet amidst a high inflation economic environment.

Greenwich remained focused with its growth strategies driven by the expansion of its new

Pizzeria stores, opening close to 40 new Pizzerias last year. This propelled the brand to grow

its systemwide sales by double-digits. This furthered Greenwich’s store network dominance

ending 2017 with a total of 272 stores.

Greenwich’s delivery business also continued its strong performance, growing over 20% in the

second half of 2017 behind strong product offers and broader coverage with new delivery

stores.

A big reason Greenwich remains the barkada’s favorite go-to place for bonding is its array of

great-tasting menu offerings. The brand’s all-time favorite best sellers -- Ultimate Overload,

Hawaiian Overload and Lasagna Supreme continue to be the brand’s loyal customers’ main

reasons for coming back, driving “Great Tasting Food” as the top reason for the achievement

of its highest customer satisfaction rating so far.

As of December 2017, Greenwich had 272 stores nationwide. Greenwich ended the year 2017

with 102 franchised stores and 170 company-owned stores.

“Chowking” and “Greenwich” are business units of Fresh N’ Famous Foods, Inc., a wholly-

owned subsidiary of the Company.

Red Ribbon

2017 was a banner year for Red Ribbon. In the past 5 years, Red Ribbon continuously achieved

double-digit systemwide sales growth, expanding its business to more than double its size 5

years ago.

Rolling base sales, on the other hand, grew in high single-digits - the highest in 3 years - driven

by consistent growth in transaction count and average check. Moreover, all districts and

flagship products, Chocolate Dedication Cake and Black Forest Cake, delivered high rolling

base growth.

Key to the brand’s success in 2017 were winning products, significant improvements in end to

end quality and cost efficiencies from the commissaries to stores, strengthened supply

10

reliability and the roll out of the company’s brand purpose of ‘Make Every Moment Sweeter’

across all levels in the organization, thus, strengthening the culture of service orientation.

Red Ribbon also grew its business by opening 53 new stores across all districts, propelling the

brand to cross the 400 mark in its network. It ended 2017 with 427 strong stores, a network that

is double than what it was 5 years ago.

In addition, the brand renovated 26 more stores to the Dynasty design concept to deliver the

best bakeshop store experience to customers, and ultimately generate better performance

compared to the stores in the old store design. To date, 107 out of the 427 stores, or 25% of the

store network are already in the Dynasty design.

In the Philippines, Red Ribbon had 427 stores as of December 2017, 237 of which were

franchised stores and 190 of which were company-owned.

Red Ribbon Bakeshop continues to bring sweet moments to its customers in the United States.

With 31 stores as of December 2017, Red Ribbon USA saw systemwide sales grow by an

impressive 10.6% versus 2016 and a mid-single digit same store sales growth, amidst the

presence of stiff competition and rising labor costs.

A key factor to its sweet success is its strategic focus to position its flagship pastry products for

everyday snacking. It launched an advertising campaign for its flagship, Butter Mamon, by

positioning it as the only mamon with irresistible value for money. Butter Mamon volume grew

by 9% versus 2016. Red Ribbon USA also launched a digital advertising campaign for its other

flagship pastry, Chicken Empanada. This led to a volume growth of 8% versus 2016. Red

Ribbon USA also introduced innovative pastry products to build on its ensaimada platform.

Ube Ensaimada and Chocolate Ensaimada were successfully launched, exceeding targets and

expectations.

As of December 2017, Red Ribbon USA had a total of 31 stores.

Mang Inasal

Mang Inasal continued posting strong results in 2017 as total systemwide sales grew by 15.2%

over previous year.

The double-digit sales improvement in the average daily quantity (ADQ) of Mang Inasal’s

flagship and primary core products contributed to this sustained performance. Chicken Inasal

grew by 10%, Pinoy Halo-Halo by 13%, and Pork Sisig by 67% over the previous year’s ADQ.

Mang Inasal continued to streamline processes and improve systems to support its expansion,

maintain its consistent delivery of quality products, and ensure customer satisfaction.

In 2017, Mang Inasal opened 64 new stores and renovated 57 outlets. This helped push a 5.3%

increase in its average daily transaction count from 2016. Meanwhile, its average daily sales

registered a 9.5% growth from previous year.

Mang Inasal again bagged the Franchise Excellence Award in 2017 and consequently became

a Hall of Fame awardee. Meanwhile, its marketing initiatives also got several internal and

industry accolades, further reinforcing Mang Inasal’s position as a leader among quick service

restaurants.

As of December 2017, Mang Inasal had 495 stores, 452 of which were franchised stores and

43 of which were company-owned.

11

Burger King

Burger King followed up the record-breaking 18 store openings in 2016 with another 20 new

stores in 2017, bringing the total network to 93 stores by end-2017, with new geographical

entries in South Luzon in Quezon province, and in North Luzon in Cagayan Valley and Isabela.

The renovation and modernization of the stores continued in 2017, with 96% of stores having

the latest rolled out store concepts: Garden Grill, 20/20 Garden Grill and the latest 20/20 Prime.

Accompanied by this upgrade in store design is the launch of the new Burger King visual

identity spanning new uniforms, new packaging, new in-store and delivery merchandising,

which all align with the new, modern aesthetic for the brand.

2017 also saw the launch of Online Delivery with www.burgerkingdelivery.com.ph which

allowed the brand to extend its reach to even more guests.

Burger King stepped up in its mission to deliver the best burger experience, with 100% of stores

achieving Quality Service Cleanliness certified as per the latest audits, and 10% of which

achieved Gold status. This is accompanied by an increase in Net Promoter Score to 70.6, which

points towards a levelled up overall experience.

Burger King further developed its flagship products with investment in advertising campaigns

for Whopper, 4-Cheese Whopper and Flame-Grilled Cheeseburger, and strengthened its

product line-up with new launches and limited time offers such as the Cheetos 4-Cheese

Crunch, Bacon King and a new line of value burgers -- Flame-Grilled Hamburger and Flame-

grilled BBQ Burger.

The brand was recognized as “Best Fast Food Burger” for the third year in a row by The Choice

Awards, bringing it to Hall of Fame status among this online community with thousands of

food enthusiasts.

Burger King ended the year 2017 with 93 stores.

Yonghe King

2017 marked a milestone year for Yonghe King with record-breaking sales and profit

performance.

Systemwide sales grew by 16.8% in 2017 with double-digit growth in same-store sales for 11

consecutive months, outperforming its competitors in the China market. Yonghe King’s solid

topline growth translated to a significant profit growth, overtaking other brands within the JFC

Group.

In 2017, Yonghe King has aligned its overall strategic focus on brand building and product

innovation. Its flagship products - Freshly-ground Soya Milk, Crispy Tender Chicken Thigh

Rice, Premium Tomato Beef Noodle Soup – which accounted for 32% of its total sales,

remained the favorite product choices of customers. A new product, Soya Milk Ice-cream Float,

was launched during the year and a series of marketing campaigns were also rolled out. These

advertising campaigns include marketing posters on bus stop kiosks and inside lifts and on-line

video marketing which was able to reach up to a billion online viewers. For the first time,

Yonghe King used top celebrities as brand ambassadors resulting in increased brand exposure

and awareness. Digitalization also took another step further. Followers of Yonghe King’s

official WeChat account exceeded 1.4 million and the “access and read” rate of the top story of

12

WeChat reached 3.5%, 91.7% better than other WeChat accounts in terms of consumer’s

influence.

31 stores were remodeled in 2017, resulting in 10% incremental sales growth.

For the second consecutive year, Yonghe King was recognized as the number one Chinese

Quick Service Restaurant brand in the China Net Promoter Score survey 2017, which was

certified by the China Branding Influence Research Center. Yonghe King also received the

“Seven Star” award for Food Safety for the 6th consecutive year and the “Golden Chopsticks”

recognition for Chinese Fast Food business. Ali Pay, China’s leading third-party online

payment solution, also recognized Yonghe King as the “Most Favorable Business”.

As of December 2017, Yonghe King had 309 stores, 56 of which were franchised stores and

253 of which were company-owned.

Hong Zhuang Yuan

2017 was another successful year for Hong Zhuang Yuan, with double-digit growth in

systemwide sales, driven by strong same-store sales growth. Delivery business, which grew by

14.7% and accounted for 34% of its systemwide sales, continued to be the main driver of Hong

Zhuang Yuan’s sales growth. Hong Zhuang Yuan’s strong delivery business earned recognition

for the company as the “2017 Green Delivery Brand” and the “2017 Remarkable Delivery

Brand” presented by Meituan-Dianping and Ele.me, the two major players in the food delivery

sector in China. Hong Zhuang Yuan’s outstanding sales translated to a strong profit growth in

2017 that even exceeded its profit target for the year.

In 2017, Hong Zhuang Yuan further enhanced its iconic products through identifying 5 most

remarkable Congee, 5 most consumer’s delight Staples and 10 most welcome hot dishes, which

included Lean Pork & Preserved Egg Congee, Five Black Congee, Sautéed Assorted Vegetable

served with Pancake. These products generated incremental sales for the business and were

widely accepted by its customers. In addition to this, the brand also continued with its seasonal

product launching activities with the mission of satisfying ever changing customer needs.

Hong Zhuang Yuan opened 2 new stores and renovated 5 stores during the year. One of the

remodeled stores had been equipped with digital ordering system that allows self-ordering with

the use of an iPad. This new ordering system has proven to enhance the speed of service and

increase the number of customers being served at any given time. Hong Zhuang Yuan has also

launched an in-store digital payment in all of its 42 stores as it responds to China’s

transformation into cashless society.

All of these efforts have strengthened Hong Zhuang Yuan’s brand positioning as the famous

casual restaurant serving variety of great tasting Beijing cuisine that offers customers good

value for money, delightful and comfortable eating experience.

As of December 2017, Hong Zhuang Yuan had 43 stores, 42 of which were company-owned.

Dunkin’ Donuts

Targeting the customers of middle-and-up income, Dunkin’ Donuts in China positioned itself

as an American coffee and bakery shop serving great tasting coffee and donuts at value-for-

money prices that brings back a dose of happiness into the daily life.

13

Starting in February 2016 with the 1st store opening in the Shunyi district, the gathering area of

expatriates and returnees, Beijing Golden Coffee Cup Food & Beverage Management Co., Ltd.

(“BJGCC”), the operating entity in PRC, followed through with its expansion in key locations

in the city -- LongDe, XiangYun, FangHengPlaza, etc., with well-calculated speed and great

attention to operational excellence. The store that opened on the Exchange Walk Street in

Beijing had achieved historical high sales record of opening day sales in JFC which is more

than 50,000 RMB. In December 2016, BJGCC opened its 1st flagship Dunkin’ Donuts store in

Beijing U-town which received high compliments from members of the media and key opinion

leaders regarding the superior in-store experience and great taste of coffee and donuts.

As of December 2017, BJGCC had 15 stores in Beijing with mixed type of location in

transportation, office building, community and commercial areas. The brand positioned itself

to offer its customers the best value for money with great product taste and started transforming

to coffee and donuts brand instead of donuts centric starting November 2017. “Coffee Forward+”

project was launched with flagship store U-town design upgrade as pilot to meet coffee shop

image, flagship product recipe improving, coffee culture training in whole market, and

beverage shares increased from 24% to 31% by year-end. More complementary categories such

as food and retail products have been introduced and these categories offered multiple choices

to customers to fulfill different day part needs. Delivery channel as 3rd platform became a

growth driver, reaching out to more on-line customers which accounted for 15% of total sales

in the last quarter of 2017.

SuperFoods

The SuperFoods Group owns and operates various brands, including Highlands Coffee Shops

in Vietnam, Highlands Coffee Packaged Products, and Hard Rock Café franchised stores in

Macau, Hong Kong and Vietnam. Highlands Coffee serves Vietnamese coffee and light meals

in trendy coffee shops, and also sells packaged coffee through retail outlets.

2017 was another successful year for Highlands Coffee, Vietnam’s leading mass aspirational

café chain, with the brand being recognized as one of the world’s 25 fastest growing chains, by

Technomic. The brand grew strongly in both its home market, Vietnam, and in the Philippines.

Total revenues increased significantly, while profit doubled. Growth was driven by a

combination of strong same-store sales growth and 82 new café openings. At year end, the total

store count was 244 cafes (212 Vietnam, 32 Philippines).

The SuperFoods Group also owns and operates the Pho 24 brand and restaurants which have

presence in Vietnam, Indonesia, Korea and Australia. Pho 24 serves traditional Vietnamese

dishes with rice noodles as its core products. 2017 was the year Pho 24 moved its business

away from casual dining, and into fast casual dining. All stores in the system were renovated

into the new operating model, allowing for faster ordering, product delivery and cleaner store

environments.

The SuperFoods Group, which is one of the fastest growing businesses in the JFC Group started

to be included in JFC’s financial consolidation in May, 2017 after JFC increased its ownership

interest in SuperFoods to 60%. The consolidation of SuperFoods to JFC increased JFC’s

worldwide store network by 281 or +8.6%. SuperFoods also increased JFC’s geographical

presence to other countries, adding Indonesia, Korea and Australia. In 2017, the SuperFoods

Group contributed 9% to the growth in JFC’s foreign business’ sales and about 2% to the JFC’s

worldwide sales growth.

As of December 2017, SuperFoods had 281 stores (Highlands Coffee 244 stores in Vietnam

and the Philippines; Pho 24 29 stores in Vietnam, Indonesia, Korea and Australia; and, other

SuperFoods brands 8 restaurants).

14

12 Hotpot

The 12 Hotpot brand features low-priced hot pot dishes served in a clean and bright dining

environment. It highlights safe and fresh food which each customer cooks in individual fast-

heating stone hot pots.





JOLLIBEE GROUP FOUNDATION, INC.

As the corporate social responsibility arm of one of the largest food service companies in the

world, Jollibee Group Foundation (JGF) continued to collaborate with partners to enable

communities to work together and help families put food on their table.

Farmer Entrepreneurship Program (FEP)

Launched in 2008, the Farmer Entrepreneurship Program (FEP) continued to help smallholder

farmers by training them in agro-entrepreneurship to supply vegetables that meets the standards

of corporate buyers such as JFC, while ensuring farmers make a profit. In 2017, 12 farmer

groups supplied various vegetables which were delivered to the JFC commissary as well as

directly to Chowking stores in Cebu. The farmers’ transactions reached a combined total of

more than 1,200 metric tons, and total sales of over P55 million.

To engage young people in agriculture, JGF launched two initiatives in 2017. First is the FEP

Agri-Yo, an agro-entrepreneurship training program for 1,000 youth farmers nationwide. The

second initiative is the FEP Youth Challenge for university students to develop innovative

solutions for smallholder farmer entrepreneurs. For 2017, 20 student teams from 7 schools and

universities participated.

Busog, Lusog, Talino School Feeding Program (BLT)

To support the Department of Education’s (DepEd) School-Based Feeding Program, JGF

started to build BLT School Feeding Kitchens in 2015, which centralized the preparation of

meals in one school and distributed to surrounding schools, feeding hundreds of undernourished

schoolchildren, with less time and effort.

By 2017, JGF had constructed a total of 22 kitchens across the country which served 16,000

pupils in 156 public schools. Since the program started serving affordable and nutritious meals

in 2007, more than 180,000 pupils have benefitted from BLT. JGF also teamed up with DepEd

to cascade the BLT Standards on food safety, accountability and community ownership to its

Division Offices.

ACE Scholarship Program

JGF has also partnered with different schools and universities to provide technical vocation and

college scholarships to underprivileged but deserving youth. In 2017, JGF assisted 412 scholars

bringing the total number of students supported to more than 1,100 since 2005.

15

In addition to financial support, scholars were prepared for the workplace through internships

with the company’s service providers and stores. Scholars also underwent life skills trainings

to further sharpen their abilities to match what employers seek.

Jollibee Group FoodAID

In 2017, JGF provided food assistance to a total of 26,665 individuals affected by various

calamities across the country. During the Marawi City crisis, JFC and franchisee employee

volunteers distributed food packs to thousands of families in evacuation centers and special gift

packs to more than 1,300 school children in Marawi.

OTHERS

Other subsidiaries of the Company include FREEMONT FOODS CORPORATION, a wholly-owned

subsidiary which owns and operates the Company’s Jollibee stores across the country, primarily

in the Visayas and Mindanao areas, and GRANDWORTH RESOURCES CORPORATION, a real

estate company which owns or leases some of the properties used as store sites.

PERCENTAGE OF FOREIGN SALES

The percentage of foreign sales to total net sales for the last four (4) years is as follows:

2017 2016 2015 2014

Total Sales 124,663,547,749 108,020,745,396 95,810,688,792 86,209,777,710

Foreign Sales 28,393,358,940 23,153,252,197 22,353,890,989 20,428,092,190

Percentage 22.78% 21.43% 23.30% 23.70%

The percentage of foreign sales to net income is as follows:

2017 2016 2015 2014

Net Income 6,672,581,542 6,053,508,622 5,046,333,392 5,488,941,506

Foreign Sales 28,393,358,940 23,153,252,197 22,353,890,989 20,428,092,190

Percentage 425.52% 382.50% 443.00% 372.20%

TRADEMARK REGISTRATION

Following is a list of the local and international trademark registrations and pending

applications for registration for the “Jollibee” brand as of December 31, 2017.

The Company’s subsidiaries have likewise procured the relevant trademark registrations for

their respective brands.

[List is found on the following page.]

Annex “A-4”

List of Local and International

Trademarks

Country Title of Trademark

Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Afghanistan BEE DEVICE 5987 7-May-

16 17632 20-Nov-

16 Registered 29

Afghanistan BEE DEVICE 5988 7-May-

16 17634 20-Nov-

16 Registered 43

Afghanistan BEE HEAD

DEVICE

5986 7-May-

16 17631 20-Nov-

16 Registered 43

Afghanistan BEE HEAD

DEVICE 5985 7-May-

16 17630 20-Nov-

16 Registered 29

Afghanistan

CHAMP (WORD MARK)

5995

7-May-16 17640

20-Nov-16 Registered 29

Afghanistan

CHICKENJOY (WORD MARK) 5991

7-May-16 17636


Afghanistan

CHICKENJOY (WORD MARK) 5992

7-May-16 17637


Afghanistan

EVERYDAY DELICIOUS

(WORD MARK) 5996

7-May-16 17641


Afghanistan

JOLLIBEE (WORD MARK) 5990

7-May-16 17635


Afghanistan


7-May-16 17634


Afghanistan

JOLLY WORD MARK

5993

7-May-16 17638


Afghanistan

YUM WORD MARK 5994

7-May-16 17639


Argentina

JOLLIBEE GREAT

BURGERS GREAT

CHICKEN & DEVICE 1997309

29-Aug-95 1,652,377 3-Dec-97 Registered 42

Australia

BEE HEAD DEVICE

(BLACK & WHITE) 1666161

23-Dec-14 1666161

23-Dec-14 Registered

29, 43

Australia

CHICKENJOY WORD MARK 1666176

23-Dec-14 1666176


29, 43

Australia

EVERYDAY DELICIOUS

SLOGAN 1666177 23-Dec-

14 1666177 23-Dec-

14 Registered 35

2


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Australia

HOME OF

THE FAMOUS

CHICKENJOY 1879000

10-Oct-17 Pending

29, 43

Australia

JOLLIBEE MASCOT DESIGN


23-Dec-14 1666168


29, 43

Australia

JOLLIBEE MASCOT DEVICE 654121

24-Feb-95 654121

24-Feb-95 Registered 42

Australia

JOLLIBEE WORD MARK 1666158

23-Dec-14 1666158


29, 43

Bahrain BEE DEVICE 80980 15-Apr-

10 80980 15-Apr-

10 Registered 43


10 80978 15-Apr-

10 Registered 29


10 80979 15-Apr-

10 Registered 30

Bahrain

BEE HEAD DEVICE

(BLACK & WHITE)

91758

24-Apr-12 91758

24-Apr-12 Registered 43

Bahrain

BEE HEAD DEVICE


24-Apr-12 91757


Bahrain

CHAMP WORD MARK 96797

17-Mar-13 96797

17-Mar-13 Registered 29

Bahrain


24-Apr-12 91759


Bahrain


24-Apr-12 91760


Bahrain

EVERYDAY DELICIOUS

SLOGAN 96788 17-Mar-

13 96788 17-Mar-

13 Registered 35

Bahrain

HOME OF THE

FAMOUS CHICKENJOY 120580

10-Oct-17 Pending 29

Bahrain

HOME OF THE

FAMOUS CHICKENJOY

120581 10-Oct-

17 Pending 43

Bahrain JOLLIBEE 91755 24-Apr-

12 91755 24-Apr-

12 Registered 29

3


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Bahrain JOLLIBEE 91756 24-Apr-

12 91756 24-Apr-

12 Registered 43

Bahrain

JOLLIBEE & MASCOT DEVICE 1070/95

2-Aug-95 S1718 2-Aug-95 Registered 42

Bahrain

JOLLIBEE (IN ARABIC

SCRIPT) 116614 28-Jun-

16 116614 6-Jun-17 Registered 43

Bahrain

JOLLIBEE GREAT

BURGERS GREAT

CHICKEN & DEVICE 1068/95

2-Aug-95 TM 19220


Bahrain

JOLLIBEE GREAT

BURGERS GREAT


2-Aug-95 SM 1717

18-Dec-96 Registered 42

Bahrain

JOLLIBEE LOGO & DEVICE 80975

15-Apr-10 80975


Bahrain


15-Apr-10 80976


Bahrain


15-Apr-10 80977


Bahrain



17-Mar-13 96798


Bahrain



17-Mar-13 96786


Bahrain

JOLLY WORD MARK 100636

3-Nov-13 100636


Bahrain

YUM WORD MARK 96817

17-Mar-13 96817


Brazil

JOLLIBEE GREAT

BURGERS GREAT

CHICKEN

818935359

15-Dec-95

818935359


Brunei Darussalam

BEE HEAD DEVICE

(BLACK & WHITE) 42,856

26-Apr-12 42,856

26-Apr-12 Registered

29, 43

Brunei Darussalam


14-Mar-13 43909


4


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Brunei Darussalam


26-Apr-12 42,855


29, 43

Brunei Darussalam

EVERYDAY DELICIOUS


13 43908 14-Mar-

13 Registered 35

Brunei Darussalam

HOME OF THE

FAMOUS CHICKENJOY

TM/49226 2-Oct-17 Pending 29, 43

Brunei Darussalam JOLLIBEE TM42857

26-Apr-12 42857


29, 43

Brunei Darussalam JOLLIBEE 36,341

24-Jun-04 36,341

24-Jun-04 Registered 43

Brunei Darussalam


(BLACK & WHITE) 43,918

14-Mar-13 43918

14-Mar-13 Registered

29, 42

Brunei Darussalam

YUM WORD MARK 43937

14-Mar-13 43937


Cambodia

BEE HEAD DEVICE

(BLACK & WHITE)

KH/46002/12

11-May-12

KH/43235/12


Cambodia

BEE HEAD DEVICE

(BLACK & WHITE)

KH/46001/12

11-May-12

KH/43234/12


Cambodia


12-Mar-13 47542 4-Sep-13 Registered 29

Cambodia

CHICKENJOY WORD MARK - MAIN

KH/46004/12

11-May-12

KH/44011/13


Cambodia

CHICKENJOY WORD MARK

KH/46003/12

11-May-12

KH/44094/13 1-Apr-13 Registered 29

Cambodia

EVERYDAY DELICIOUS


13 47543 4-Sep-13 Registered 35

Cambodia JOLLIBEE

KH/45999/12

11-May-12

KH/43232/12


Cambodia JOLLIBEE

KH/46000/12

11-May-12

KH/43233/12


Cambodia




Cambodia

JOLLIBEE MASCOT DESIGN 50598


5


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

(BLACK & WHITE)

Cambodia YUM

KH/50599/13

12-Mar-13

KH/50876/14


Canada BEE HEAD

DEVICE 1324318 16-Nov-

06 761468 11-Mar-

10 Registered 43

Canada BEE HEAD

DEVICE 1563176 8-Feb-12 TMA961881 2-Feb-17 Registered 29

Canada

CHAMP WORD MARK - MAIN 1617855

20-Mar-13 Pending 29

Canada JOLLIBEE 1324317 16-Nov-

06 761476 11-Mar-

10 Registered

29, 30, 32, 42, 43

Canada

JOLLIBEE CHICKENJOY

(WORD MARK) 1685662

17-Jul-14 Pending

29, 43

Canada

JOLLIBEE GREAT

BURGERS GREAT

CHICKEN & DESIGN 783671

26-May-95 727149

28-Oct-08 Registered

29, 42

Canada

JOLLIBEE HALO HALO

SUNDAE 1786752 13-Jun-

16 Pending 29, 30

Canada


(BLACK & WHITE) -

MAIN 1617851 20-Mar-

13 TMA965563


29, 43

Canada JOLLY 1756916 27-Nov-

15 Pending 30

Canada JOLLY

BURGER 1757228 1-Dec-15 Pending 30

Canada JOLLY

CHICKEN 1757227 1-Dec-15 Pending 29

Canada

JOLLY CRISPY

CHICKEN 1786751 13-Jun-

16 Pending 29

Canada

JOLLY CRISPY FRIES 1761602

30-Dec-15 Pending 29

Canada JOLLY

HOTDOG 1756914 27-Nov-

15 Pending 29

Canada

JOLLY KRUNCHY

TWIRL 1761599 30-Dec-

15 Pending 29, 30

Canada JOLLY

SPAGHETTI 1757226 1-Dec-15 Pending 30

6


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Canada

JOLLY VANILLA TWIRL

1761601

30-Dec-15 Pending

29, 30

Canada

YUM WORD MARK 1617850

20-Mar-13

TMA962253 8-Feb-17 Registered 29

Czech Republic

JOLLIBEE & DEVICE 104009

19-Sep-95 196474 3-Jan-97 Registered

29, 30, 32, 42

Egypt JOLLIBEE &

DEVICE 95740 18-May-

95 95740 14-Feb-

01 Registered 42

Egypt JOLLIBEE &


95 95741 17-Jan-

01 Registered 29

Egypt


18-May-95 95742

17-Jan-01 Registered 42

Hong Kong JOLLIBEE

300352025

11-Jan-05

300352025


Hong Kong

JOLLIBEE NAME (IN CHINESE

CHARACTERS ''SIU

LOK FUNG'')

09486 of 1996 1-Mar-95 Registered 29

Hong Kong


CHARACTERS ''SIU

LOK FUNG'')


Hong Kong


CHARACTERS ''SIU

LOK FUNG'')


Hong Kong


CHARACTERS ''SIU

LOK FUNG'')

09489 of 1996 Registered 42

India

BEE HEAD DEVICE

(BLACK & WHITE) -

MAIN 2860866 10-Dec-

14 2860866 12-Oct-

14 Registered 29, 43

India CHAMP 3238600 19-Apr-

16 Pending 30

7


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

India

CHAMP WORD MARK 2855781 3-Dec-14 Pending 29

India

CHICKENJOY WORD MARK 2855782 3-Dec-14 Pending

29, 43

India CRISPYLICIOUS 3339898 18-Aug-

16 3339898 18-Aug-

16 Registered 29

India

HOME OF THE

FAMOUS CHICKENJOY

3253269 6-May-

16 Pending 29, 43

India JOLLIBEE &


05 1356313 10-May-

05 Registered 42

India JOLLIBEE &

DEVICE 1367743 29-Jun-

05 1367743 29-Jun-

05 Registered 29, 30

India


(BLACK & WHITE) 2855779 3-Dec-14 Pending

29, 43

India


10-Dec-14 Pending

29, 43

India JOLLY

SPAGHETTI 3252108 5-May-

16 3252108 5-May-16 Registered 30

India JUICYLICIOUS 3339899 18-Aug-

16 3339899 18-Aug-

16 Registered 29

India YUM 3238599 19-Apr-

16 Pending 30

India YUM 2855780 3-Dec-14 Pending 29

Indonesia BEE HEAD

DEVICE

D002015001765

16-Jan-15 Pending 25

Indonesia

BEE HEAD DEVICE

(BLACK & WHITE)

J00-2012-022539

11-May-12

IDM000445781


Indonesia

BEE HEAD DEVICE

(BLACK & WHITE)

D00-2012-022535

11-May-12

IDM000441097 5-Dec-14 Registered 29

Indonesia

CHAMP WORD MARK

D00.2013.015229 3-Apr-13 Pending 29

Indonesia


J00-2012-022547

11-May-12

IDM000445786


Indonesia


D00-2012-022543

11-May-12

IDM000441084 5-Sep-14 Registered 29

8


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Indonesia

EVERYDAY DELICIOUS

SLOGAN

J00.2013.015227 3-Apr-13

IDM000485452 27-Jul-15 Registered 35

Indonesia

HOME OF THE

FAMOUS CHICKENJOY

D00-2017-051064


Indonesia

HOME OF THE

FAMOUS CHICKENJOY

J00-2017-051067


Indonesia JOLLIBEE

D00-2012-0022546

11-May-12

IDM000441083 5-Dec-14 Registered 29

Indonesia JOLLIBEE

J00-2012-022551

11-May-12

IDM000445784


Indonesia JOLLIBEE &

DEVICE

R14885/2013

30-Sep-13

IDM000004618

30-Sep-13 Registered 43

Indonesia

JOLLIBEE (WORD MARK)

D002015001767


Indonesia

JOLLIBEE BEEFBURGER

GREAT BURGERS

GREAT CHICKEN &

DEVICE

R5853/2015 9-Apr-15

IDM000431821


Indonesia

JOLLIBEE BEEFBURGER

GREAT BURGERS

GREAT CHICKEN &

DEVICE

R7455/2015

6-May-15

IDM000431820


Indonesia


D002015001763


Indonesia


(BLACK & WHITE)

J00.2013.015228 3-Apr-13

IDM000485987 Registered 43

Indonesia


(BLACK & WHITE)

D00.2013.015232 3-Apr-13

idm000491932 Registered 29

Indonesia

YUM WORD MARK

D00.2013.015230 3-Apr-13 Pending 29

Israel

JOLLIBEE GREAT

BURGERS GREAT 100922

20-Sep-95 100922


9


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

CHICKEN & DEVICE

Israel

JOLLIBEE GREAT

BURGERS GREAT


20-Sep-95 100923


Italy

BEE HEAD DEVICE

(BLACK & WHITE)

MI2012C004989

15-May-12 1521187


29, 43

Italy

CHAMP WORD MARK

MI2013C002500

13-Mar-13 1571901


Italy


MI2012C004988

15-May-12 1521186


29, 43

Italy

EVERYDAY DELICIOUS SLOGAN -

MAIN

MI2013C002501

13-Mar-13 1561497 2-Oct-13 Registered 35

Italy

HOME OF THE

FAMOUS CHICKENJOY

3.02015E+14

27-Nov-15

3.02015E+14

22-Jun-17 Registered

29, 43

Italy JOLLIBEE

MI2012C004987

15-May-12 1521185


29, 43

Italy


(BLACK & WHITE)

MI2013C002502

13-Mar-13 1561496 2-Oct-13 Registered

29, 43

Italy

YUM WORD MARK

MI2013C002503

13-Mar-13 1571900


Japan

BEE HEAD DEVICE

(BLACK & WHITE)

2014-104750

11-Dec-14 5814835


29, 30, 32, 43

Japan

CHAMP WORD MARK

2014-104753

11-Dec-14 5842079


Japan


2014-104754

11-Dec-14 5755936 3-Apr-15 Registered

29, 43

Japan

EVERYDAY DELICIOUS SLOGAN –

MAIN

2014-104755

11-Dec-14 5753946


Japan

HOME OF THE

FAMOUS CHICKENJOY

2017-128409

26-Sep-17 Pending

29, 43

10


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Japan JOLLIBEE &

DEVICE 3249420 31-Jan-

97 Registered 29

Japan JOLLIBEE &

DEVICE 3251544 31-Jan-

97 Registered 30

Japan JOLLIBEE &

DEVICE 3282959 18-Apr-

97 Registered 32

Japan JOLLIBEE &


97 Registered 42

Japan JOLLIBEE CHAMP

2015-056995

16-Jun-15 5803627

30-Oct-15 Registered 30

Japan


(BLACK & WHITE)

2014-104751

11-Dec-14 5814836


29, 30, 32, 43

Japan

JOLLIBEE WORD MARK

2014-104749

11-Dec-14 5854408

27-May-16 Registered

29, 30, 32, 43

Japan

YUM WORD MARK

2014-104752

11-Dec-14 5755935 3-Apr-15 Registered 30

Jordan

BEE HEAD DEVICE


22-Nov-11 121001 6-Dec-12 Registered 43

Jordan


22-Nov-11 121002 6-Dec-12 Registered 43

Korea - Republic of (South)

BEE HEAD DEVICE

(BLACK & WHITE)

45-2012-0002341

7-May-12 48276

21-Feb-14 Registered

29, 43


CHAMP WORD MARK

40-2013-0016098




45-2012-0002342

7-May-12 46615


29, 43

Korea - Republic of (South) JOLLIBEE

45-2012-0002340

7-May-12 48272


29, 43


JOLLIBEE & DESIGN

40-0358457


29, 30


JOLLIBEE & DESIGN

40-0372192 9-Aug-97 Registered 32


JOLLIBEE & DESIGN

40-0372105 8-Aug-97 Registered

29, 30

11


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es


JOLLIBEE GREAT

BURGERS GREAT

CHICKEN & DEVICE 96-11545

23-Mar-96 377580 8-Oct-97 Registered 29


JOLLIBEE GREAT

BURGERS GREAT


21-Dec-95 369351 18-Jul-97 Registered 29


JOLLIBEE GREAT

BURGERS GREAT


21-Dec-95 Pending 42



(BLACK & WHITE)

45-2013-0001412

14-Mar-13 48629


29, 43


YUM WORD MARK

40-2013-0016097



YUM WORD MARK

40-2013-0087644

31-Dec-13

40-1080537



CHAMP CHAMP 40-2013-0087645

31-Dec-13

40-1071265

21-Nov-14

Registered 30

Kuwait

JOLLIBEE LOGO AND


10 95849 13-Jun-

10 Registered 43

Kuwait BEE DEVICE 112418 13-Jun-

10 95851 13-Jun-

10 Registered 30


10 95852 13-Jun-

10 Registered 43


10 95850 13-Jun-

10 Registered 29

Kuwait

BEE HEAD DEVICE


23-Apr-12 Pending 29

Kuwait

BEE HEAD DEVICE

(BLACK & WHITE)

129538


Kuwait

CHAMP WORD MARK 138830 2-Apr-13 Pending 29

12


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Kuwait



Kuwait



Kuwait

EVERYDAY DELICIOUS

SLOGAN

138831 2-Apr-13 Pending 35

Kuwait

HOME OF THE

FAMOUS CHICKENJOY

194303 8-Oct-17 Pending 43

Kuwait

HOME OF THE

FAMOUS CHICKENJOY 194302 8-Oct-17 Pending 29

Kuwait JOLLIBEE 129535 23-Apr-

12 Pending 29

Kuwait JOLLIBEE 129536 23-Apr-

12 Pending 43

Kuwait JOLLIBEE &


97 99734 28-May-

97 Registered 29

Kuwait JOLLIBEE &


97 99735 28-May-

97 Registered 42

Kuwait JOLLIBEE &

DEVICE 32460 26-Nov-

95 29945 26-Nov-

95 Registered 29

Kuwait

JOLLIBEE & THREE BEE

DEVICE (JOLLIBEE MASCOT)

36671

28-May-97 99736

28-May-97 Registered 42

Kuwait

JOLLIBEE (IN ARABIC

SCRIPT) 180970 8-Jun-16 Pending 43

Kuwait

JOLLIBEE (WORD)

AND DEVICE 32461

26-Nov-95 29947


Kuwait

JOLLIBEE (WORD)

AND DEVICE 32462

26-Nov-95 29403


Kuwait JOLLIBEE DEVICE & 32463

26-Nov-95 29946


Kuwait

JOLLIBEE LOGO AND


10 95848 13-Jun-

10 Registered 30

13


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Kuwait

JOLLIBEE LOGO AND


10 95847 13-Jun-

10 Registered 29

Kuwait


(BLACK & WHITE) 138827 2-Apr-13 Pending 29

Kuwait


(BLACK & WHITE) 138828 2-Apr-13 Pending 43

Kuwait

YUM WORD MARK 138829 2-Apr-13 Pending 29

Lebanon

JOLLIBEE GREAT

BURGERS GREAT


20-Sep-95 66960

20-Sep-95 Registered

29, 42

Malaysia BEE HEAD

DEVICE

2014069069

17-Dec-14

2014069069


Malaysia

BEE HEAD DEVICE

(BLACK & WHITE)

2012052510

23-Apr-12

2012052510


Malaysia

BEE HEAD DEVICE

(BLACK & WHITE)

2012052508

23-Apr-12

2012052508


Malaysia

CHAMP WORD MARK

2013052208

13-Mar-13

2013052208


Malaysia


2012052511

23-Apr-12

2012052511


Malaysia


2012052512

23-Apr-12

2012052512


Malaysia

EVERYDAY DELICIOUS

SLOGAN

2013052209

13-Mar-13

2013052209


Malaysia

HOME OF THE

FAMOUS CHICKENJOY

2015070163

27-Nov-15 Pending 29

Malaysia

HOME OF THE

FAMOUS CHICKENJOY

2015070165

27-Nov-15 Pending 43

14


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Malaysia JOLLIBEE

2012052507

23-Apr-12

2012052507


Malaysia JOLLIBEE 2359 3-Mar-

00 2359 3-Mar-00 Registered 43

Malaysia JOLLIBEE &

DEVICE 95003171 8-Apr-95 95003171 8-Apr-95 Registered 29

Malaysia


2014069065

17-Dec-14

2014069065


Malaysia

JOLLIBEE MASCOT

(SERIES OF 3)

2000-02358

3-Mar-00

2000-02358 3-Mar-00 Registered 43

Malaysia


2014069071

17-Dec-14

2014069071


Malaysia


(BLACK & WHITE)

2013052205

13-Mar-13

2013052205


Malaysia


(BLACK & WHITE)

2013052204

13-Mar-13

2013052204


Malaysia YUM

2013052206

13-Mar-13

2013052206

20-Sep-16

Registered 29

Mexico

JOLLIBEE GREAT

BURGERS GREAT

CHICKEN & DESIGN 405557 6-Jan-00 764426


Myanmar

BEE HEAD DEVICE

(BLACK & WHITE)

N/A 6-Feb-15 2162


29, 43

Myanmar

CHAMP WORD MARK

N/A 6-Feb-15 2165


Myanmar

CHICKENJOY WORD MARK N/A 6-Feb-15 2166


29, 43

Myanmar

EVERYDAY DELICIOUS

SLOGAN N/A 6-Feb-15 2167 23-Feb-

15 Registered 35

Myanmar


(BLACK & WHITE) N/A 6-Feb-15 2163


29, 43

15


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Myanmar

JOLLIBEE WORD MARK N/A 6-Feb-15 2161


29, 43

Myanmar

YUM WORD MARK N/A 6-Feb-15 2164


New Zealand

JOLLIBEE GREAT

BURGERS GREAT

CHICKEN & DEVICE 254483 6-Oct-95 254483 6-Oct-95 Registered 29

New Zealand

JOLLIBEE GREAT

BURGERS GREAT

CHICKEN & DEVICE 254484 6-Oct-95 254484 6-Oct-95 Registered 42

Oman

BEE HEAD DEVICE

(BLACK & WHITE) -

MAIN 73974 23-Apr-

12 73974 20-May-

13 Registered 29

Oman

BEE HEAD DEVICE

(BLACK & WHITE) -

MAIN 73975 23-Apr-

12 73975 20-May-

13 Registered 43

Oman


13-Mar-13 79630

25-Aug-14 Registered 29

Oman


23-Apr-12 73976


Oman


23-Apr-12 73977


Oman

EVERYDAY DELICIOUS


13 79631 25-Aug-

14 Registered 35

Oman

HOME OF THE

FAMOUS CHICKENJOY

113349 8-Oct-17 Pending 29

Oman

HOME OF THE

FAMOUS CHICKENJOY

113350 8-Oct-17 Pending 43

Oman

JOLLIBEE (IN ARABIC

SCRIPT) 103059 7-Jun-16 103059 17-Jul-17 Registered 43

Oman


20-Jul-11 69397 4-Mar-14 Registered 29

Oman



16


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Oman



Oman

JOLLIBEE GREAT

BURGERS GREAT


29-May-95 11659


Oman JOLLIBEE MASCOT 11658

29-May-95 Pending 42

Oman


(BLACK & WHITE)

79627

13-Mar-13 79627


Oman



13-Mar-13 79628


Oman

YUM WORD MARK

79629

13-Mar-13 79629


Pakistan BEE HEAD

DEVICE

461104 9-Jun-17 Pending 29

Pakistan BEE HEAD

DEVICE

461106 9-Jun-17 Pending 30

Pakistan BEE HEAD

DEVICE

461108 9-Jun-17 Pending 43

Pakistan JOLLIBEE 461107 9-Jun-17 Pending 30



Papua New Guinea

JOLLIBEE GREAT

BURGERS GREAT


11-Sep-95 59020


Papua New Guinea

JOLLIBEE GREAT

BURGERS GREAT


11-Sep-95 59021


17


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Philippines

CRISPYJUICYEXTRAORDINARYLICI

OUS

4/2014/00505926

17-Dec-14

4/2014/00505926


Philippines

HETTY MASCOT HOUSE

DEVICE (IN BLACK & WHITE)

4-2010-005365

20-May-10

4-2010-005365


16, 18, 25, 28, 41

Philippines

HETTY MASCOT HOUSE

DEVICE (IN COLOR)

4-2010-005368

20-May-10

4-2010-005368


16, 18, 25, 28, 41

Philippines

POPO MASCOT HOUSE


4-2010-005364

20-May-10

4-2010-005364


16, 18, 25, 28, 41

Philippines

POPO MASCOT HOUSE

DEVICE (IN COLOR)

4-2010-005369

20-May-10

4-2010-005369


16, 18, 25, 28, 41

Philippines SPAGHETTIEST

4-2009-003358

31-Mar-09

4-2009-003358


29, 30, 32

Philippines

TWIRLIE MASCOT HOUSE


4-2010-005363

20-May-10

4-2010-005363


16, 18, 25, 28, 41

Philippines

TWIRLIE MASCOT HOUSE

DEVICE (IN COLOR)

4-2010-005370

20-May-10

4-2010-005370


16, 18, 25, 28, 41

Philippines

YUM (WORD MARK)

4-2003-008177 4-Sep-03

4-2003-008177

11-Nov-10 Registered

29, 43

Philippines

YUM MASCOT HOUSE


4-2010-005362

20-May-10

4-2010-005362 6-Jan-11 Registered

16, 18, 25, 28, 41

Philippines

YUM MASCOT HOUSE

DEVICE (IN COLOR)

4-2010-005371

20-May-10

4-2010-005371


16, 18, 25, 28, 41

Philippines JOLLIBEE

4-2000-004772

8-Jun-00 4-2000-004772

10-Mar-16

Renewed 29, 30, 32, 42

18


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es


4-2000-007421

31-Aug-00

4-2000-007421

24-Sep-15

Renewed 16, 28

Philippines

JOLLIBEE CHICKEN

BARBECUE DELICIOUS INSIDE AND OUT INSIDE

A RECTANGULAR

DEVICE

4-2010-004237

21-Apr-10

4-2010-004237


29, 35

Philippines

JOLLIBEE MAAGA

ANG PASKO LOGO

(BLACK & WHITE)

4-2012-001250 1-Feb-12

4-2012-001250


Philippines JOLLY CRISPY FRIES

4-2004-006392

20-Jul-04

4-2004-006392


Philippines CHICKENJOY (WORD MARK)

4-2004-006569

23-Jul-04

4-2004-006569

26-May-16

Renewed 29

Philippines BEE HEAD DEVICE

4-2004-006570

23-Jul-04

4-2004-006570

6-Jan-16 Renewed 43

Philippines JOLLIKIDS JOLLIKIDS 4-2005-000388

13-Jan-05

4-2005-000388

8-Jun-16 Renewed 16, 18, 25, 26

Philippines JOLLY KRUNCHY

TWIRL

JOLLY KRUNCHY TWIRL

4-2005-001998

2-Mar-05

4-2005-001998

18-Sep-16

Renewed 29, 30

Philippines JOLLIBEE SUPER MEALS

JOLLIBEE SUPER MEALS

4-2005-002450

15-Mar-05

4-2005-002450

18-Dec-06

Renewed 43

Philippines JOLLITOWN AND

DEVICE

4-2008-005395

8-May-08

4-2008-005395

25-Mar-10

Registered 16, 18, 20, 24, 25, 27, 28, 41

19


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Philippines TWIRLIE MASCOT DESIGN

4-2008-007561

25-Jun-08

4-2008-007561

23-Jul-09 Registered 16, 18, 20, 21, 24, 25, 27, 28, 41

Philippines JOLLIBEE MASCOT DESIGN

4-2008-007562

25-Jun-08

4-2008-007562

23-Jul-09 Registered 16, 18, 20, 21, 24, 25, 27, 28, 41

Philippines HETTY MASCOT DESIGN

4-2008-007563

25-Jun-08

4-2008-007563

23-Jul-09 Registered 16, 18, 20, 21, 24, 25, 27, 28, 41

Philippines POPO MASCOT DESIGN

4-2008-007564

25-Jun-08

4-2008-007564

23-Jul-09 Registered 16, 18, 20, 21, 24, 25, 27, 28, 41

Philippines YUM MASCOT DESIGN

4-2008-007565

25-Jun-08

4-2008-007565

23-Jul-09 Registered 16, 18, 20, 21, 24, 25, 27, 28, 41

Philippines LANGHAP SARAP

LANGHAP SARAP

4-2009-003033

23-Mar-09

4-2009-003033

12-Nov-09

Registered 29, 30

Philippines JOLLIBEE CHAMP

JOLLIBEE CHAMP

4-2009-006900

13-Jul-09

4-2009-006900

12-Nov-09

Registered 29, 35

Philippines JOLLIBEE BREAKFAST

JOYS

4-2009-006901

13-Jul-09

4-2009-006901

24-Dec-09

Registered 29, 35

20


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Philippines JOLLIBEE CHAMP.

BIG BURGER

GOODNESS LIKE NO OTHER.

4-2009-006905

13-Jul-09

4-2009-006905

12-Nov-09

Registered 35

Philippines JOLLY HOTDOG

JOLLY HOTDOG

4-2009-006903

13-Jul-09

4-2009-006903

24-Dec-09

Registered 29, 35

Philippines JOLLY HOTDOG.

SARAP ON-THE-MOVE.

JOLLY HOTDOG. SARAP ON-THE-MOVE

4-2009-006906

13-Jul-09

4-2009-006906

19-Nov-09

Registered 35

Philippines JOLLY CRISPY

FRIES. BEST FRIENDS

FRIES.

JOLLY CRISPY FRIES. BEST FRIENDS FRIES.

4-2009-006907

13-Jul-09

4-2009-006907

19-Nov-09

Registered 35

Philippines JOLLY CRISPY FRIES

4-2009-006965

14-Jul-09

4-2009-006965

15-Apr-10

Registered 35


4-2010-002055

24-Feb-10

4-2010-002055

22-Jul-10 Registered 29, 30, 43

Philippines CHAMP CHAMP 4-2010-004236

21-Apr-10

4-2010-004236

28-Jan-11

Registered 29, 35

Philippines JOLLIBEE KIDS CLUB INSIDE A CIRCLE

4-2010-005155

17-May-10

4-2010-005155

31-Dec-10

Registered 16, 35


4-2010-005156

17-May-10

4-2010-005156

31-Dec-10

Registered 16, 35


4-2010-005302

20-May-10

4-2010-005302

31-Dec-10

Registered 16, 35


4-2010-005303

20-May-10

4-2010-005303

31-Dec-10

Registered 16, 35

Philippines JOLLIBEE MASCOT HOUSE

4-2010-005366

20-May-10

4-2010-005366

21-Oct-10

Registered 16, 18, 25, 28, 41

Philippines JOLLIBEE MASCOT HOUSE

4-2010-005367

20-May-10

4-2010-005367

21-Oct-10

Registered 16, 18, 25, 28, 41

21


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Philippines CRISPYLICIOUS (WORD MARK)

4-2012-000563

16-Jan-12

4-2012-000563

31-May-12

Registered 29

Philippines JUICYLICIOUS

4-2012-000564

16-Jan-12

4-2012-000564


Philippines JOLLIBEE GRILLED

PORK TENDERS

JOLLIBEE GRILLED PORK TENDERS

4-2012-000614

17-Jan-12

4-2012-000614


Philippines MAAGA ANG

PASKO

MAAGA ANG PASKO

4-2012-001251

1-Feb-12 4-2012-001251

11-May-12

Registered 36

Philippines BEE HAPPY BEE HAPPY

4-2012-003129

12-Mar-12

4-2012-003129

24-May-12

Registered 35

Philippines CHICKENJOY WORD MARK

4-2012-004770

19-Apr-12

4-2012-004770

12-Jul-12 Registered 43

Philippines BEE HEAD

4-2012-004771

19-Apr-12

4-2012-004771

23-Aug-12

Registered 29

Philippines DITO ANG SARAP

MAGING PAMILYA

DITO ANG SARAP MAGING PAMILYA

4-2013-001089

31-Jan-13

4-2013-001089

20-Feb-15

Registered 35

Philippines DITO ANG SARAP

MAGING

DITO ANG SARAP MAGING

4-2013-001090

31-Jan-13

4-2013-001090

20-Feb-15

Registered 35

Philippines JOLLIBEE MASCOT DESIGN

4-2013-002707

11-Mar-13

4-2013-002707

20-Jun-13

Registered 29, 43

Philippines ULTIMATE BURGER STEAK

ULTIMATE BURGER STEAK

4-2013-006004

24-May-13

Pending 29

Philippines ULTIMATE BURGER STEAK

4-2013-006363

3-Jun-13 4-2013-006363

23-Oct-14

Registered 29

Philippines FAMILY VALUES

AWARDS

FAMILY VALUES AWARDS

4-2013-010435

2-Sept-13

4-2013-010435

19-Dec-13

Registered 35

Philippines JOLLIBEE FAMILY VALUES

AWARDS CELEBRATING EXEMPLARY FILIPINO FAMILIES

4-2013-010436

2-Sept-13

4-2013-010436

12-Jun-14

Registered 35

Philippines JOLLY WORD MARK

4-2013-012443

16-Oct-13

4-2013-012443

15-Oct-16

Registered 29, 30, 32

22


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Philippines JOLLIBEE MAAGA

ANG PASKO LOGO

4-2015-500315

22-Jan-15

4-2015-500315

31-Mar-16

Registered 36

Philippines JOLLISAVERS JOLLISAVERS 4-2015-503892

14-Jul-15

4-2015-503892

12-Nov-15


Philippines JOLLIBEE BURGER STEAK

SUPREME

Jollibee Burger Steak Supreme

4-2015-506500

11-Nov-15

Pending 29

Philippines JOLLY JOY BOX

JOLLY JOY BOX

4-2015-507151

17-Dec-15

4-2015-507151

17-Aug-17



JOLLY JOY BOX

4-2015-507152

17-Dec-15

4-2015-507152

26-May-16



JOLLY JOY BOX

4-2015-507153

17-Dec-15

4-2015-507153

26-May-16


Philippines 3-D BOX DESIGN

4-2015-507226

22-Dec-15

4-2015-507226

27-Oct-16


Philippines GRAVYLICIOUS

4-2016-503206

28-Jun-16

4-2016-503206


Philippines P99 PAIRS P99 PAIRS

4-2016-504734

14-Sep-16

Pending 29, 30, 32, 43

Philippines PERFECT PAIRS

PERFECT PAIRS

4-2016-504735

14-Sep-16

4-2016-504735

22-Dec-16

Registered 29, 30, 32, 43

Philippines P99 PERFECT

PAIRS

P99 PERFECT PAIRS

4-2016-504736

14-Sep-16

Pending 29, 30, 32, 43


FLAVORED FRIES

JOLLY CRISPY FLAVORED FRIES

4-2016-505391

20-Oct-16

Pending 29


FLAVORED FRIES

(STYLIZED)

4-2016-505392

20-Oct-16

Pending 29

Philippines CRISPY HOT CHICKENJOY

4-2016-505399

20-Oct-16

Pending 29

Philippines CREAMY FLOATS

CREAMY FLOATS

4-2016-505415

21-Oct-16

Pending 32

Philippines CREAMY FLOATS

(STYLIZED)

4-2016-505416

21-Oct-16

Pending 32

23


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Philippines FRUITY

FLOATS FRUITY FLOATS

4-2016-505417

21-Oct-16

Pending 32

Philippines FRUITY FLOATS

(STYLIZED)

4-2016-505418

21-Oct-16

Pending 32

Philippines JOLLIBEE SWEET-

SPICY BBQ BURGER STEAK

4-2016-505446

21-Oct-16

Pending 29

Philippines CHAMP MADE

WITH 100% PURE BEEF 1/3 POUND

PATTY LANGHAP-

SARAP

4-2016-506284

2-Dec-16 4-2016-506284

25-May-17

Registered 29, 43

Philippines FRAMILY FRAMILY 4-2016-506373

8-Dec-16 4-2016-506373

2-Mar-17 Registered 29, 35, 43

Philippines JOLLY KIDDIE MEAL

4-2016-506501

15-Dec-16

4-2016-506501

25-May-17

Registered 16, 35

Philippines JOLLY KIDDIE MEAL

4-2016-506504

15-Dec-16

4-2016-506504

6-Jul-17 Registered 16, 35

Philippines JK jk 4-2005-008738

5-Sep-05 4-2005-008738

23-Jul-07 Registered 16, 18, 25, 26

Philippines TOP-YOUR-OWN JOLLY

HOTDOG

TOP-YOUR-OWN JOLLY HOTDOG

4-2017-501751

27-Apr-17

Pending 29, 43

24


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Philippines BEE HEAD DEVICE

4-2005-007557

5-Aug-05

4-2005-007557

19-Feb-17

Registered 9, 16, 18, 20, 21, 24, 25, 28

Philippines JOLLIBEE Jollibee 4-2005-007558

5-Aug-05

4-2005-007558

19-Feb-17

Registered 9, 18, 20, 21, 24, 25

Philippines JOLLY JOLLY 4-2014-003233

14-Mar-14

4-2014-003233

18-Aug-16

Registered 29

Philippines AFFORDELICIOUS

AFFORDELICIOUS

4-2010-010083

15-Sep-10

4-2010-010083


Philippines CONE TWIRL

CONE TWIRL

4-2010-010089

15-Sep-10

4-2010-010089


Philippines HOME OF THE

FAMOUS CHICKENJOY

4-2017-501502

10-Apr-17

4-2017-501502

22-Jun-17

Registered 29, 43

Philippines ICE CRAZE COFFEE

JELLY

ICE CRAZE COFFEE JELLY

4-2005-003299

12-Apr-05

4-2005-003299


Philippines EVERYDAY DESERVES A SUNDAE

4-2011-010765

8-Sep-11 4-2011-010765

20-Nov-14

Registered 30

Philippines AMAZING ALOHA

AND PINEAPPLE

SLICE DEVICE

4-1996-108683

4-Mar-96

4-1996-108683


Philippines JOLLIBEE GREAT

BURGERS GREAT

CHICKEN

4-1995-100403

9-Feb-95 4-1995-100403

15-May-00

Registered 29

Philippines (JOLLIBEE) PEACH

MANGO PIE LABEL

SR-8713 14-Feb-91

SR-8713 28-Sep-92

For Renewal

30

Qatar BEE DEVICE 80980 15-Apr-

10 80980 15-Apr-

10 Registered 43

Qatar

BEE HEAD DEVICE


30-Apr-12 74466


Qatar BEE HEAD

DEVICE 74467 30-Apr-

12 74467 16-Oct-

14 Registered 43

25


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

(BLACK & WHITE)

Qatar


14-Mar-13 80276


Qatar


74469

30-Apr-12 74469


Qatar


30-Apr-12 74468


Qatar

EVERYDAY DELICIOUS


13 80277 22-Oct-

15 Registered 35

Qatar

HOME OF THE

FAMOUS CHICKENJOY

117443 26-Sep-

17 Pending 29

Qatar

HOME OF THE

FAMOUS CHICKENJOY

117444 26-Sep-

17 Pending 43

Qatar JOLLIBEE 74464 30-Apr-

12 74464 11-Oct-

15 Registered 29

Qatar JOLLIBEE 74465 30-Apr-

12 74465 23-Nov-

14 Registered 43

Qatar

JOLLIBEE (IN ARABIC


Qatar

JOLLIBEE CHARACTER

AND DEVICE 57954 8-Jul-09 57954


Qatar

JOLLIBEE CHARACTER

AND DEVICE 57955 8-Jul-09 57955


Qatar

JOLLIBEE CHARACTER

AND DEVICE 57956 8-Jul-09 57956


Qatar

JOLLIBEE GREAT

BURGERS GREAT


11-Oct-95 14073


Qatar

JOLLIBEE GREAT

BURGERS GREAT

CHICKEN & DEVICE

14074

11-Oct-95 14074


26


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Qatar

JOLLIBEE LOGO & DEVICE 57951 8-Jul-09 57951


Qatar



Qatar



Qatar



14-Mar-13 80273


Qatar



14-Mar-13 80274


Qatar

JOLLY WORD MARK 84753

23-Oct-13 84753


Qatar

YUM WORD MARK 80275

14-Mar-13 80275


Romania

JOLLIBEE GREAT

BURGERS GREAT


8-Mar-95 29524 8-Mar-05 Registered

29, 42

Romania


8-Mar-95 29525 1-Jul-99 Registered 42

Saudi Arabia

BEE HEAD DEVICE


21-May-12

143307687


Saudi Arabia

BEE HEAD DEVICE


21-May-12

143307688


Saudi Arabia


21-May-12

143307686 4-Apr-14 Registered 29

Saudi Arabia


21-May-12

143307685 4-Apr-14 Registered 43

Saudi Arabia

EVERYDAY DELICIOUS


13 143406467 1-Jul-14 Registered 35

Saudi Arabia

HOME OF THE

FAMOUS CHICKENJOY

120088 25-Oct-

17 Pending 29

27


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Saudi Arabia

HOME OF THE

FAMOUS CHICKENJOY

120089 25-Oct-

17 Pending 43

Saudi Arabia JOLLIBEE 182344

21-May-12

143307683 25-Jul-13 Registered 29

Saudi Arabia JOLLIBEE 182345

21-May-12

143307684


Saudi Arabia

JOLLIBEE & BEE DEVICE (WORD &

DEVICE MARK) 122600 1-Oct-07

142809331


Saudi Arabia

JOLLIBEE (IN ARABIC

SCRIPT)

1437020649

16-Jun-16

1437020649


Saudi Arabia

JOLLIBEE CHAMP

1436008326 8-Feb-15

1436008326


Saudi Arabia

JOLLIBEE CHAMP

1436008327 8-Feb-15

1436008327


Saudi Arabia

JOLLIBEE GREAT

BURGERS GREAT



Saudi Arabia

JOLLIBEE GREAT

BURGERS GREAT



Saudi Arabia



26-Mar-13

143406471 3-Jul-14 Registered 29

Saudi Arabia



26-Mar-13


Saudi Arabia

JOLLIBEE MASCOT DEVICE 379/25 2-Jul-96 Registered 42

Saudi Arabia


26-Mar-13


Singapore

BEE HEAD DEVICE

(BLACK & WHITE)

T1205981F

26-Apr-12

T1205981F


29, 43

Singapore

CHAMP WORD MARK

T1304014J

11-Mar-13

T1304014J


28


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Singapore


T1205748A

20-Apr-12

T1205748A


29, 43

Singapore

EVERYDAY DELICIOUS

SLOGAN

T1304015I

11-Mar-13

T1304015I


Singapore

HOME OF THE

FAMOUS CHICKENJOY

40201520749Y

26-Nov-15

40201520749Y

26-Nov-15 Registered

29, 43

Singapore JOLLIBEE

T1205747C

20-Apr-12

T1205747C


29, 43

Singapore

JOLLIBEE CHARACTER

AND DEVICE

T0908261F

24-Jul-09

T0908261F 24-Jul-09 Registered

29, 30, 43

Singapore

JOLLIBEE LOGO AND

DEVICE

T0908260H

24-Jul-09

T0908260H 24-Jul-09 Registered

29, 30, 43

Singapore


(BLACK & WHITE)

T1304012D

11-Mar-13

T1304012D


29, 43

Singapore

JOLLIBEE WORD & DEVICE 3473/93


Singapore

JOLLIBEE WORD & DEVICE 3472/93


Singapore

YUM WORD MARK

T1304013B


South Africa

JOLLIBEE GREAT

BURGERS GREAT


8-Aug-95 95/10214


South Africa

JOLLIBEE GREAT

BURGERS GREAT


8-Aug-95 95/10215


Spain

BEE HEAD DEVICE

(BLACK & WHITE) 3012444 5-Jan-12 3012444 1-Jun-12 Registered

29, 43

Spain

CHAMP WORD MARK

M3066988

11-Mar-13 3066988


29


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Spain


5-Jan-12 3012445


29, 43

Spain

EVERYDAY DELICIOUS

SLOGAN

M3066991

11-Mar-13 3066991


Spain

HOME OF THE

FAMOUS CHICKENJOY

3684349 27-Sep-

17 Pending 29, 43

Spain


(BLACK & WHITE)

M3066986

11-Mar-13 3066986

12-Jun-13 Registered

29, 43

Spain

JOLLIBEE WORD MARK 5-Jan-12 3012443


29, 43

Sri Lanka


29-Sep-16 Pending 29

Sri Lanka


211719


Sri Lanka

JOLLIBEE BEE HEAD

DEVICE 211713 29-Sep-

16 Pending 29

Sri Lanka

JOLLIBEE BEE HEAD

DEVICE 211714 29-Sep-

16 Pending 43

Sri Lanka



Sri Lanka



Syria



29, 30, 42

Thailand BEE HEAD

DEVICE

969051 8-Jan-15 171107466 8-Jan-15 Registered 25

Thailand

BEE HEAD DEVICE

(BLACK & WHITE) -

MAIN 970144 19-Jan-

15 171108418


Thailand

BEE HEAD DEVICE


19-Jan-15

171101348


30


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Thailand


19-Jan-15

KOR414568


Thailand



Thailand



Thailand

EVERYDAY DELICIOUS

SLOGAN 970151 19-Jan-

15 Pending 35

Thailand

HOME OF THE

FAMOUS CHICKENJOY

170135814 9-Oct-17 Pending 29

Thailand

HOME OF THE

FAMOUS CHICKENJOY

170135815 9-Oct-17 Pending 43

Thailand

JOLLIBEE & THREE BEE

DEVICE (JOLLIBEE MASCOT) 284093

19-Apr-95 BOR4134


Thailand

JOLLIBEE (WORD MARK) 969050 8-Jan-15

171108692 8-Jan-15 Registered 25

Thailand

JOLLIBEE GREAT

BURGERS GREAT


19-Apr-95

KOR41802


Thailand

JOLLIBEE GREAT

BURGERS GREAT


19-Apr-95 BOR4135


Thailand

JOLLIBEE MASCOT DESIGN 969052 8-Jan-15

171107470 8-Jan-15 Registered 25

Thailand



19-Jan-15

171102032


Thailand



19-Jan-15

171108423


31


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Thailand


19-Jan-15

161109652


Thailand


19-Jan-15

171101347


Thailand


19-Jan-15

KOR415934


Turkey

BEE HEAD DEVICE

(BLACK & WHITE)

2014/82416

13-Oct-14

2014/82416


29, 43

Turkey

JOLLIBEE WORD MARK

2014/82414

13-Oct-14

2014/82414


United Arab Emirates

BEE HEAD DEVICE


20-May-12 173869



BEE HEAD DEVICE


20-May-12 173870







20-May-12 173871




20-May-12 173872



CHOWKING (IN ARABIC) 259171

29-Aug-16 259171



EVERYDAY DELICIOUS


13 189045 3-Sep-14 Registered 35


HOME OF THE

FAMOUS CHICKENJOY

280804 10-Oct-

17 Pending 43


HOME OF THE

FAMOUS CHICKENJOY

280803 10-Oct-

17 Pending 29

United Arab Emirates JOLLIBEE 173867

20-May-12 173867


United Arab Emirates JOLLIBEE 173868

20-May-12 173868



JOLLIBEE (IN ARABIC


32


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es


JOLLIBEE CHARACTER & DEVICE 126847

10-Mar-09 126847




10-Mar-09 126844




10-Mar-09 126845




10-Mar-09 126846



JOLLIBEE GREAT

BURGERS GREAT


27-May-96 15560



JOLLIBEE GREAT

BURGERS GREAT


27-May-96 15559




10-Mar-09 126




10-Mar-09 126842




10-Mar-09 126841




10-Mar-09 126843








(BLACK & WHITE)

189042


33


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es



27-May-96 14694





United Kingdom

BEE HEAD DEVICE


17-Dec-14 3086509


29, 43

United Kingdom


17-Dec-14 3086550


United Kingdom


18-Dec-14 3086685


29, 43

United Kingdom

EVERYDAY DELICIOUS

SLOGAN 3086549 17-Dec-

14 3086549 27-Mar-

15 Registered 35

United Kingdom

HOME OF THE

FAMOUS CHICKENJOY 3138210

27-Nov-15

UK00003138210


29, 43

United Kingdom

JOLLIBEE (STYLISED) & DEVICE 2572105

14-Feb-11 2572105


United Kingdom



17-Dec-14 3086533


29, 43

United Kingdom


17-Dec-14 3086498


29, 43

United Kingdom


18-Dec-14 3086691


United States of America

AMAZING ALOHA

78/773483

14-Dec-05 3399726


United States of America BEE HAPPY

76/355920 7-Jan-02 2,830,503 6-Apr-04 Registered 43


BEE HEAD DEVICE

(BLACK & WHITE)

85/513900

11-Jan-12 4426087


29, 43

United States of America CHICKENJOY

85/524814

25-Jan-12 4874637


United States of America CHICKENJOY

78/773490

14-Dec-05 3949145


34


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es


HOME OF THE

FAMOUS CHICKENJOY 86836564 2-Dec-15 Pending

29, 43

United States of America JOLLIBEE

78/683906

2-Aug-05 3196017 9-Jan-07 Registered 43


JOLLIBEE & DEVICE

78/546427

12-Jan-05 3152057 3-Oct-06 Registered 43


JOLLIBEE BURGER STEAK

78/773477

14-Dec-05 3562559




(BLACK & WHITE)

85/872818

11-Mar-13 5146897


29, 43



25-Jan-12 4426109



JOLLY BURGER 87028166

6-May-16 Pending

29, 30


JOLLY CHICKEN 87028174

6-May-16 Pending 29


JOLLY CRISPY FRIES 87030021

9-May-16 Pending 29


JOLLY HOTDOG 87028187

6-May-16 5239427 11-Jul-17 Registered

29, 30


JOLLY KRUNCHY

TWIRL

87028194 6-May-

16 5253889 1-Aug-17 Registered 29, 30


JOLLY SPAGHETTI

78/773476

14-Dec-05 3374063



JOLLY VANILLA TWIRL 87028182

6-May-16 Pending

29, 30


PALABOK FIESTA

78/773470

14-Dec-05 3393101 4-Mar-08 Registered 29

United States of America YUM

78-773,415

14-Dec-05 3,363,459 1-Jan-08 Registered 30

United States of America YUMBURGER

78/773383

14-Dec-05 3349864 4-Dec-07 Registered 30

Vietnam JOLLIBEE EVERYDAY DELICIOUS

4-2014-15419

07-Jul-14

254335 12-Nov-15

Registered 29, 30

Vietnam YUM

4-2013-04471

12-Mar-13

Pending 29

35


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Vietnam BEE DEVICE

4201304474

12-Mar-13 225456 3-Jun-14 Registered

29, 43

Vietnam BEE HEAD DEVICE

(BLACK & WHITE)

4201208039

24-Apr-12

210299 13-Aug-13

Registered 29, 43

Vietnam CHAMP WORD MARK

4201304470

12-Mar-13

225455 3-Jun-14 Registered 30

Vietnam CHICKENJOY WORD MARK

4201208038

24-Apr-12

210298 13-Aug-13

Registered 29, 43

Vietnam HOME OF THE

FAMOUS CHICKENJOY

4201731269

27-Sep-17

Pending 29, 43

Vietnam JOLLIBEE

4200502046

25-Feb-05

89304 20-Sep-07

Registered 43

Vietnam JOLLIBEE

4-2012-08037

24-Apr-12

210739 21-Aug-13

Registered 29, 43

Vietnam JOLLIBEE MASCOT

4200825172

25-Nov-08

153633 28-Oct-10

Registered 29, 43

Vietnam JOLLIBEE MASCOT DEVICE

4-1995-22974

18-May-95

19997 10-Feb-96

Registered 29

36


Representation of

Trademark

Application Number

Application Date

Registration Number

Registration Date

Status Class/es

Vietnam JOLLIBEE STACKED

LOGO

4-2008-25170

25-Nov-08

153631 28-Oct-10

Registered 29, 43

Vietnam PEEKING BEE

4200825171

25-Nov-08

153632 28-Oct-10

Registered 29, 43

Annex “A-5”

Discussion on Properties, Legal

Proceedings and Financial

Information

1

PROPERTIES The Company’s properties are, primarily, its company-owned Jollibee stores which are located

either on company-owned premises or on land or buildings leased by the Company from third

parties under land or building lease agreements. In terms of store floor area, the largest

company-owned Jollibee stores are the following:

STORE LOCATION SITE OWNER TYPE OF

LEASE

Davao Maa DT Julian Rodriguez, Jr. Land

Tuguegarao Tanza

Junction Romeo Babaran Land

FTI Sunshine Shoppers Paradise FTI Corporation Building

Tuguegarao Buntun Magno Y. Lim Corporation Land

Carmona Highway Grandworth Resources Corporation Land

Puerto Princesa Junction Palawan Jolly Foods Corporation Land

Palo Leyte V Lava and Company Incorporated Land

Paciano / Mayapa STF Realty and Development Corp. Land

Atimonan Paul Barley P. Chito/ Kein Harvey P. Chito Land

Tanay Highway Geronimo M. Custodio / Darwin B. Garcia Land

Gen Maxilom Cebu Super Development Corporation and Jesa

Management Corporation Land

Fairview Regalado Brixton Builders Corporation / Sanrox

Development Corporation Land

North Harbour Chong 119 Philippines Corporation Land

Binalonan Lolita Co; Quirino Tan Co; John Tan Co;

Tolentino Co Land

Davao Talomo Emelito Yparraguirre Land

Canlubang Sugar Junction Inc./ Leandro Y. Locsin, Jr. Land

Dolores Junction Jolly Palate Foods Corp Land

Ortigas Roosevelt Alben Holdings Corporation Land

Bauang Eufranio Eriguel and Sandra Eriguel Land

Bacao Pablo Tobiano Land

The Company houses its main office in the Jollibee Plaza located in 10 F. Ortigas Jr. Avenue,

Ortigas Center, Pasig City (where it occupies an area totaling approximately 11,289.48 square

meters) and in the Jollibee Center located in San Miguel Avenue (where it occupies an area

totaling approximately 3,089.50 square meters). It also leases additional office spaces in the

Jollibee Plaza, Jollibee Center, Karina, JJACISS and Pioneer Center buildings. In Cebu City,

satellite main office at the Insular Life Building, Ayala Center Cebu enables the Company to

take direct and timely advantage of the business opportunities in the Visayas and Mindanao

Areas. Additional office spaces are being leased out at the Mercedes Benz Tower in Cebu and

Ayala Business Center in Matina, Davao City.

The 10-hectare property occupied by ZFC in Calamba, Laguna is owned by the Company, while

the 7,719-square meter property occupied by ZFC in Mandaue City is owned by Freemont

Foods Corporation. The Company also has a warehousing and distribution center in Brgy.

Marcelo Green Village, Paranaque City.

2

To keep up with demand, the Company leases and operates various warehousing and

distribution centers nationwide. The latest addition being the building leased at Brgy. La

Huerta, Parañaque City.

All of the properties owned by the Company are free of liens and encumbrances.

LEGAL PROCEEDINGS

For purposes of this discussion, a legal proceeding is deemed “material” if the claim involved

amounts to at least PhP5,000,000.00. Following are the material pending legal proceedings to

which the Company is a party, as of December 31, 2017:

SPS. ESCAT, ET AL., VS. JOLLIBEE FOODS CORP., ET AL.

Civil Case No. Q-93-17683

Regional Trial Court, Branch 85, Quezon City

This is a claim for damages amounting to PhP5.3 Million arising from various illnesses

allegedly suffered by the children of the plaintiffs after dining at the Jollibee Crossroads Arcade,

a franchised store owned and operated by Great Foods Corp.

Federal Phoenix Assurance Co. Inc. who was impleaded as third-party defendant by Great

Foods Corp. has already presented its case and all of its documentary evidence were admitted

by the Court on February 29, 2016. Plaintiffs were considered to have waived their rights to

present rebuttal evidence and to submit the required judicial affidavit for failure to appear at

the scheduled hearing date on June 6, 2016. On November 18, 2016, the Court issued a

Decision dismissing the case for lack of merit.

L.O.L. FOOD VENTURES CORP. VS. JOLLIBEE FOODS CORP., ET AL.

Civil Case No. 02-105339

Regional Trial Court, Branch 37, Manila

LOL Food Ventures Corporation, MALL Food Ventures Corporation (“MALL”) and Royal

Garden Restaurant, Inc. (“Royal Garden”) are sub-lessees of the Company. The Company, on

the other hand, is the lessee of LOL Realty Corporation. While the Company is the sub-lessor

of LOL Food Ventures, MALL and Royal Garden, these sub-lessees remit their rent directly to

LOL Realty Corporation, the principal lessor.

LOL Food Ventures filed this case seeking reimbursement from MALL and Royal Garden for

the leased premises’ common area expenses that LOL Food Ventures allegedly advanced since

1999 on behalf of MALL and Royal Garden in the amount of PhP3,394,482.24 for Royal

Garden and PhP2,740,311.57 for MALL. LOL Food Ventures impleaded the Company as a

party defendant and holds the Company liable for the total amount of PhP6,134,793.81 in view

of the Company’s role as the sub-lessor of the leased premises and therefore, according to LOL

Food Ventures Corporation, responsible for collecting the common area expenses from MALL

and Royal Garden.

3

On 7 March 2002, the Company filed its “Answer With Counterclaim and Cross-claim”

maintaining that the common area expenses pertain to the operation of the common area as a

food court and include the following items: electric and water utility charges, security services,

janitorial services and other related food court operating expenses. While the Company is the

sub-lessor of the plaintiff, MALL and Royal Garden, the Company never agreed to act as the

operator of the food court (the common area) charged with collecting the expenses connected

with its day-to-day operation.

On 3 December 2014, the Court rendered a Decision holding the Company and other defendants

jointly and severally liable to the plaintiff. The total amount awarded was approximately PhP6

Million. On 17 January 2015, the Company filed a Motion for Reconsideration which was

subsequently denied. The Company appealed to the Court of Appeals. The Company filed its

Appellant’s Brief and on 11 July 2015, LOL filed its Appellee’s Brief. On 20 August 2015, the

Company filed its Reply Brief.

In January 2016, mediation before the Court of Appeals was terminated due to failure of the

parties to enter into an amicable settlement. On 7 November 2017, the Court of Appeals

rendered its Decision denying the appeal of the Company. On 6 December 2017, the Company

filed a Motion Reconsideration of the Court of Appeal’s Decision. On 30 January 2018, LOL

filed its Comment on the Motion for Reconsideration. On 20 February 2018, the Company

filed its Reply to the said Comment. LOL may file a Rejoinder after which the Motion for

Reconsideration shall be submitted for Decision.

FINANCIAL INFORMATION

(1) MARKET INFORMATION

Shares traded at the Philippine Stock Exchange

2017 2016

High Low High Low

1st Quarter 219.60 182.10 234.40 194.00

2nd Quarter 219.00 197.00 242.00 221.80

3rd Quarter 249.80 206.20 260.00 236.00

4th Quarter 259.80 241.40 251.40 185.50

Source: The Philippine Stock Exchange

The high and low daily closing prices for the first quarter of 2018 are Php305.40 and

Php253.00, respectively. The high and low prices as of May 23, 2018 are Php285.00

and Php280.00.

(2) HOLDERS

There are approximately 3,031 holders as of April 30, 2018. The Company’s top 20

shareholders as of this date are:

4

(3) EQUITY OWNERSHIP OF FOREIGNERS

The foreign ownership percentage, as of April 30, 2018, is as follows:

Citizenship Number of Shares Held % over Total Issued and

Outstanding Shares French 900 0.00%

British 1,250 0.00%

Australian 3,402 0.00%

Chinese 6,000 0.00%

Singaporean 18,000 0.00%

American 364,845 0.03%

Other Alien 308,441,548 28.38%

TOTAL 308,835,945 28.42%

Jollibee Foods Corporation

Top 20 Stockholders

As of April 30, 2018

Total Direct

& Indirect Shares

1 PCD Nominee Corporation (Non-Filipino) 307,612,093

2 Hyper Dynamic Corporation 273,218,750

3 Honeysea Corporation 127,743,747

4 PCD Nominee Corporation (Filipino) 118,144,298

5 Winall Holding Corporation 54,140,736

6 Honeyworth Corporation 40,259,623

7 Kingsworth Corporation 29,168,935

8 Centregold Corporation 27,430,964

9 Gemma Tanbuntiong 21,910,601

10 Venice Corporation 17,423,735

11 A-Star Holding Corporation 17,160,393

12 Tony Tan Caktiong 8,494,565

13 William Tan Untiong 8,479,722

14 Ernesto Tanmantiong 7,532,970

15 Azucena T. King 7,491,199

16 Susana Tanmantiong 1,201,857

17 Paul Rosenberg 1,084,010

18 Ysmael V. Baysa 811,667

19 Anastacia S. Masancay 746,000

20 Armando Medina 515,625

Total 1,070,571,490

Others 16,130,975

Total Issued and Outstanding 1,103,149,805

Treasury Shares ( per SEC 11-C) 16,447,340

Total Issued and Outstanding* 1,086,702,465

*(net of Treasury Shares)

Annex “B”

Summary of Resolutions of the

Board of Directors and Executive

Committee since the Last Annual

Stockholders’ Meeting

Date

Resolutions

2017

June 1, 2017

(Approvals by the

Executive Committee)

- Approval of Execution of Loan Agreement by Subsidiary

- Approval of Execution of Guarantee to Standard Chartered

Bank for Non-Wholly Owned Subsidiary

- Contract of Lease with Prime Spots, Inc.

June 30, 2017

(Organizational

Meeting of the Board of

Directors)

- Approval of Minutes of Previous Meeting

- Certification of Election of Directors for the year 2017-

2018

- Election of Officers for the year 2017-2018

- Designation of Members of Board Committees

- Independent Advisor; Appointment of Assistant

Corporate Secretary

July 12, 2017

(Approvals by the


- Designation of Authorized Representatives and Cruz

Marcelo & Tenefrancia Law Firm as external counsel for

cases filed against LF (Philippines), Inc.

August 1, 2017

(Approvals by the


- Designation of Authorized Signatories for Import Entries

August 11, 2017

(Regular Meeting of the

Board of Directors)

- Approval of Minutes of Previous Meeting and Ratification

of Acts of Executive Committee

- Presentation and Approval of the 2nd Quarter 2017 Results

- Authorized Representative – Sale of Property

- Designation of Data Protection Officer for Jollibee Foods

Corporation and its subsidiaries (Jollibee Group of

Companies)

August 24, 2017

(Approvals by the


- Approval of Additional Capital Contribution to SJBF LLC

September 5, 2017


Board of Directors)



- Presentation of Mang Inasal Business Unit

October 2, 2017

(Approvals by the


- Designation of Authorized Signatory for Lease Agreement

of Playing Rights for Wack Wack Golf & Country Club

Membership

October 12, 2017


Board of Directors)



- Presentation of Updates for United States of America

Business

2

Date

Resolutions

October 27, 2017

(Approvals by the


- Designation of Authorized Representatives – Execution of

Guaranty for Honeybee Foods Corporation for Jollibee

Torrance

November 2, 2017

(Special Meeting of the

Board of Directors)

- Approval on the Discontinuation of the Operations of 12

Hotpot

November 6, 2017

(Approvals by the


- Designation of Authorized Signatories - Data line

Application

November 10, 2017


Board of Directors)



- Presentation and Approval of 3rd Quarter 2017 Results

- Dividend Declaration

- Approval of positions from Assistant Vice President up

December 4, 2017

(Approvals by the


- Designation of Authorized Signatories – Master Agreement

for Services with BackOffice Associates Asia Pte. Ltd.

- Designation of Authorized Representatives – Processing of

Claims under the Life and Accident Insurance Policies

December 7, 2017


Board of Directors)



- Presentation and Approval of 2018 Budget

- Capital Investment to Jollibee Worldwide Pte. Ltd.

- Presentation of Superfoods Business Unit

-

December 28, 2017

(Approvals by the


- Approval of Additional Capital Contribution to Cibo Felice

S.R.L.

2018

January 2, 2018

(Approvals by the


- Designation of Authorized Representative - Contract of

Lease with China Banking Corporation

January 12, 2018


Board of Directors)



- Presentation of China Business Unit

-

February 6, 2018

(Approvals by the


- Updating of Authorized Signatories – Escrow Agreement

with Rizal Commercial Banking Corporation for Jollibee

North Luzon Stores

- Designation of Authorized Signatory

3

Date

Resolutions

February 13, 2018


Board of Directors)



- Presentation and Approval of the 4th Quarter 2017 Results

- Approval of Smashburger First Put Option

February 26, 2018

(Approvals by the


- Designation of Authorized Signatories for Civil, Criminal,

Administrative and Labor Cases involving corporate units

performing shared services for the Corporation

March 5, 2018

(Approvals by the


- Designation of Authorized Representative for Application

with the Optical Media Board

- Designation of Authorized Signatories for Intellectual

Property Cases and Proceedings for North America matters

- Designation of Authorized Signatories for Intellectual

Property Cases and Proceedings for EMEAA matters

- Designation of Authorized Representative for Application

for Temporary Lifting Order

March 8, 2018


Board of Directors)

- Approval of Execution of Agreement by its Wholly-owned

Subsidiary

March 23, 2018


Board of Directors)

- Authorization to Enter into a Loan Agreement with

Metropolitan Bank and Trust Company

- Approval of Additional Capital Contribution to Subsidiary

and Execution of Loan Agreement by Subsidiary

April 6, 2018


Board of Directors)



- Presentation and Approval of the 2017 Audited Financial

Statements

- Designation of Authorized Signatories to the Statement of

Management Responsibility

- Dividend Declaration

May 9, 2018


Board of Directors)



- Approval of Record Date for Purposes of Annual

Stockholders’ Meeting

- Presentation and Approval of the 1st Quarter 2018 Results

- Authorization to Execute Loan Transactions and Other

Financial Transactions with Bank of the Philippine Islands

in the amount of Three Billion Pesos (Php3Bn)

- Authorization to Execute Loan Transactions with BDO

Unibank, Inc. in the amount of One Billion Pesos

(Php1Bn)

Annex “C”

Financial Statements

Annex “C-1”

Audited Consolidated Financial

Statements for the year ended

December 31, 2017

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any impact on the Jollibee Group’s financial condition and performance.

ƒ Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative

The amendments require entities to provide disclosure of changes in their liabilities arising fromfinancing activities, including both changes arising from cash flows and non-cash changes (suchas foreign exchange gains or losses).

The Jollibee Group has provided the required information in Note 34 to the consolidated financialstatements. As allowed under the transition provisions of the standard, the Jollibee Group did notpresent comparative information for the year ended December 31, 2016.

ƒ Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for UnrealizedLosses

The amendments clarify that an entity needs to consider whether tax law restricts the sources oftaxable profits against which it may make deductions on the reversal of the deductible temporarydifference related to unrealized losses. Furthermore, the amendments provide guidance on howan entity should determine future taxable profits and explain the circumstances in which taxableprofit may include the recovery of some assets for more than their carrying amount.

The Jollibee Group applied the amendments retrospectively. However, their application has noeffect on the Jollibee Group’s financial position and performance as the Jollibee Group has nodeductible temporary differences or assets that are in the scope of the amendments.

New Accounting Standards, Interpretations and Amendments to Existing StandardsEffective Subsequent to December 31, 2017Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the JollibeeGroup does not expect that the future adoption of the said pronouncements will have a significantimpact on its consolidated financial statements. The Jollibee Group intends to adopt the followingpronouncements when they become effective.

Effective January 1, 2018

ƒ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-basedPayment Transactions

The amendments to PFRS 2 address three main areas: the effects of vesting conditions on themeasurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and theaccounting where a modification to the terms and conditions of a share-based paymenttransaction changes its classification from cash settled to equity settled.

On adoption, entities are required to apply the amendments without restating prior periods, butretrospective application is permitted if elected for all three amendments and if other criteria aremet. Early application of the amendments is permitted. The Jollibee Group is currently assessingthe potential effect of the amendments on the consolidated financial statements.

ƒ PFRS 9, Financial Instruments

PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, FinancialInstruments: Recognition and Measurement, and all previous versions of PFRS 9. The standardintroduces new requirements for classification and measurement, impairment, and hedge

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accounting. Retrospective application is required but providing comparative information is notcompulsory. For hedge accounting, the requirements are generally applied prospectively, withsome limited exceptions.

The Jollibee Group plans to adopt the new standard on the mandatory effective date and will notrestate comparative information.

The adoption of PFRS 9 will have an effect on the classification and measurement of the JollibeeGroup’s financial assets and impairment methodology for financial assets, but will have noimpact on the classification and measurement of the Jollibee Group’s financial liabilities. Theadoption will have an effect on the Jollibee Group’s impairment of financial assets. The adoptionwill not have significant impact on the Jollibee Group’s effective hedge since PFRS 9 does notchange the general principles of how an entity accounts for effective hedges. The Jollibee Groupis currently assessing the impact of adopting this standard.

ƒ Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, withPFRS 4

The amendments address concerns arising from implementing PFRS 9, the new financialinstruments standard before implementing the new insurance contracts standard. Theamendments introduce two options for entities issuing insurance contracts: a temporaryexemption from applying PFRS 9 and an overlay approach. The temporary exemption is firstapplied for reporting periods beginning on or after January 1, 2018. An entity may elect theoverlay approach when it first applies PFRS 9 and apply that approach retrospectively to financialassets designated on transition to PFRS 9. The entity restates comparative information reflectingthe overlay approach if, and only if, the entity restates comparative information when applyingPFRS 9.

The amendments are not applicable to the Jollibee Group since none of the entities within theJollibee Group have activities that are predominantly connected with insurance or issue insurancecontracts.

ƒ PFRS 15, Revenue from Contracts with Customers

PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts withcustomers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration towhich an entity expects to be entitled in exchange for transferring goods or services to acustomer. The principles in PFRS 15 provide a more structured approach to measuring andrecognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenuerecognition requirements under PFRSs. Either a full or modified retrospective application isrequired for annual periods beginning on or after January 1, 2018. The Jollibee Group plans toadopt the new standard on the required effective date. The Jollibee Group is currently assessingthe impact of the new standard to the Jollibee Group’s consolidated financial statements.

ƒ Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of AnnualImprovements to PFRSs 2014 - 2016 Cycle)

The amendments clarify that an entity that is a venture capital organization, or other qualifyingentity, may elect, at initial recognition on an investment-by-investment basis, to measure itsinvestments in associates and joint ventures at fair value through profit or loss. They also clarifythat if an entity that is not itself an investment entity has an interest in an associate or joint

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venture that is an investment entity, the entity may, when applying the equity method, elect toretain the fair value measurement applied by that investment entity associate or joint venture tothe investment entity associate’s or joint venture’s interests in subsidiaries. This election is madeseparately for each investment entity associate or joint venture, at the later of the date on which(a) the investment entity associate or joint venture is initially recognized; (b) the associate or jointventure becomes an investment entity; and (c) the investment entity associate or joint venture firstbecomes a parent.

The amendments should be applied retrospectively, with earlier application permitted. TheJollibee Group is currently assessing the impact of the amendments on its consolidated financialstatements.

ƒ Amendments to PAS 40, Investment Property, Transfers of Investment Property

The amendments clarify when an entity should transfer property, including property underconstruction or development into, or out of investment property. The amendments state that achange in use occurs when the property meets, or ceases to meet, the definition of investmentproperty and there is evidence of the change in use. A mere change in management’s intentionsfor the use of a property does not provide evidence of a change in use. The amendments shouldbe applied prospectively to changes in use that occur on or after the beginning of the annualreporting period in which the entity first applies the amendments. Retrospective application isonly permitted if this is possible without the use of hindsight.

Since the Jollibee Group’s current practice is in line with the clarifications issued, the JollibeeGroup does not expect any effect on its consolidated financial statements upon adoption of theseamendments.

ƒ Philippine Interpretation International Financial Reporting Interpretations Committee(IFRIC) - 22, Foreign Currency Transactions and Advance Consideration

The interpretation clarifies that, in determining the spot exchange rate to use on initial recognitionof the related asset, expense or income (or part of it) on the derecognition of a non-monetary assetor non-monetary liability relating to advance consideration, the date of the transaction is the dateon which an entity initially recognizes the nonmonetary asset or non-monetary liability arisingfrom the advance consideration. If there are multiple payments or receipts in advance, then theentity must determine a date of the transactions for each payment or receipt of advanceconsideration. Entities may apply the amendments on a fully retrospective basis. Alternatively,an entity may apply the interpretation prospectively to all assets, expenses and income in itsscope that are initially recognized on or after the beginning of the reporting period in which theentity first applies the interpretation or the beginning of a prior reporting period presented ascomparative information in the financial statements of the reporting period in which the entityfirst applies the interpretation.

Since the Jollibee Group’s current practice is in line with the clarifications issued, the JollibeeGroup does not expect any effect on its consolidated financial statements upon adoption of thisinterpretation.

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Effective January 1, 2019

ƒ Amendments to PFRS 9, Prepayment Features with Negative Compensation

The amendments to PFRS 9 allow debt instruments with negative compensation prepaymentfeatures to be measured at amortized cost or fair value through other comprehensive income. Anentity shall apply these amendments for annual reporting periods beginning on or after January 1,2019. Earlier application is permitted. The Jollibee Group is currently assessing the impact ofadopting these amendments.

ƒ PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure ofleases and requires lessees to account for all leases under a single on-balance sheet model similarto the accounting for finance leases under PAS 17, Leases. The standard includes tworecognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) andshort-term leases (i.e., leases with a lease term of 12 months or less). At the commencement dateof a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) andan asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the leaseliability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events(e.g., a change in the lease term, a change in future lease payments resulting from a change in anindex or rate used to determine those payments). The lessee will generally recognize the amountof the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting underPAS 17. Lessors will continue to classify all leases using the same classification principle as inPAS 17 and distinguish between two types of leases: operating and finance leases.

PFRS 16 also requires lessees and lessors to make more extensive disclosures than underPAS 17.

Early application is permitted, but not before an entity applies PFRS 15. A lessee can choose toapply the standard using either a full retrospective or a modified retrospective approach. Thestandard’s transition provisions permit certain reliefs. The Jollibee Group is currently assessingthe impact of adopting PFRS 16.

ƒ Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The amendments to PAS 28 clarify that entities should account for long-term interests in anassociate or joint venture to which the equity method is not applied using PFRS 9. An entity shallapply these amendments for annual reporting periods beginning on or after January 1, 2019.Earlier application is permitted. The Jollibee Group is currently assessing the impact of theseamendments on its consolidated financial statements.

ƒ Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involveuncertainty that affects the application of PAS 12 and does not apply to taxes or levies outside thescope of PAS 12, nor does it specifically include requirements relating to interest and penaltiesassociated with uncertain tax treatments.

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The interpretation specifically addresses the following:

ƒ Whether an entity considers uncertain tax treatments separatelyƒ The assumptions an entity makes about the examination of tax treatments by taxation

authoritiesƒ How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax

credits and tax ratesƒ How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or togetherwith one or more other uncertain tax treatments. The approach that better predicts the resolutionof the uncertainty should be followed. The Jollibee Group is currently assessing the impact ofadopting this interpretation.

Deferred Effectivity

ƒ Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and itsAssociate or Joint Venture

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss ofcontrol of a subsidiary that is sold or contributed to an associate or joint venture. Theamendments clarify that a full gain or loss is recognized when a transfer to an associate or jointventure involves a business as defined in PFRS 3. Any gain or loss resulting from the sale orcontribution of assets that does not constitute a business, however, is recognized only to theextent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council postponed the original effectivedate of January 1, 2016 of the said amendments until the International Accounting StandardsBoard has completed its broader review of the research project on equity accounting that mayresult in the simplification of accounting for such transactions and of other aspects of accountingfor associates and joint ventures.

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Company andits subsidiaries as at December 31, 2017 and for each of the three years in the period endedDecember 31, 2017.

Control is achieved when the Jollibee Group is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over theinvestee.

There is a general presumption that a majority of voting rights results in control. To support thispresumption when the Jollibee Group has less than a majority of the voting or similar rights of aninvestee, the Jollibee Group considers all relevant facts and circumstances in assessing whether it haspower over an investee, including:

ƒ The contractual arrangement with the other vote holders of the investee;ƒ Rights arising from other contractual arrangements; or,ƒ The Jollibee Group’s voting rights and potential voting rights.

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The Jollibee Group re-assesses whether or not it controls an investee if facts and circumstancesindicate that there are changes to one or more of the three elements of control. Consolidation of asubsidiary begins when the Jollibee Group obtains control over the subsidiary and ceases when theJollibee Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiaryacquired or disposed of during the year are included in the consolidated financial statements from thedate the Jollibee Group gains control until the date the Jollibee Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the equity holdersof the Parent Company and to the non-controlling interests, even if this results in the non-controllinginterests having a deficit balance. When necessary, adjustments are made to the financial statementsof subsidiaries to bring their accounting policies into line with the Jollibee Group’s accountingpolicies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating totransactions between members of the Jollibee Group are eliminated in full on consolidation. Thereporting dates of the Parent Company and the associate or joint ventures are identical and the latter’saccounting policies conform to those used by the Parent Company for like transactions and events insimilar circumstances.

If the Jollibee Group loses control over a subsidiary, it:

ƒ Derecognizes the assets (including goodwill) and liabilities of the subsidiary;ƒ Derecognizes the carrying amount of any non-controlling interests;ƒ Derecognizes the cumulative translation differences recorded in equity;ƒ Recognizes the fair value of the consideration received;ƒ Recognizes the fair value of any investment retained;ƒ Recognizes any surplus or deficit in profit or loss; and,ƒ Reclassifies the parent’s share of components previously recognized in other comprehensive

income to profit or loss or retained earnings, as appropriate, as would be required if the JollibeeGroup had directly disposed of the related assets or liabilities.

Non-controlling interest represent the interests in the subsidiaries not held by the Parent Company,and are presented separately in the consolidated statement of income and within equity in theconsolidated statement of financial position, separately from equity attributable to holders of theParent Company.

An increase or decrease in ownership interest in a subsidiary that does not result in a loss of control isaccounted for as an equity transaction. The carrying amounts of the controlling and non-controllinginterests are adjusted to reflect the changes in the Jollibee Group’s relative interests in the subsidiary.The Jollibee Group recognizes directly in equity any difference between the amount by which thenon-controlling interests are adjusted and the fair value of the consideration paid or received, andattribute it to the equity holders of the Parent Company. These include acquisitions of non-controlling interests of Greenwich, Yong He King, Mang Inasal and HBFPPL. In particular caseswhere the Jollibee Group acquires non-controlling interest in a subsidiary at a consideration in excessof its carrying amount, the excess is charged to the “Excess of cost over the carrying value of non-controlling interests acquired” account under equity. These increases or decreases in the ownershipinterest in a subsidiary do not result in the recognition of a gain or loss.

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The consolidated financial statements include the accounts of the Parent Company and the followingwholly-owned and majority-owned subsidiaries as at December 31, 2017 and 2016:

Countryof Incorporation

2017 2016

Principal ActivitiesDirect

OwnershipIndirect

OwnershipDirect

OwnershipIndirect

OwnershipFresh N’ Famous Foods Inc. (Fresh N’ Famous): Philippines Food service 100 – 100 –

Chowking Food Corporation USA United States ofAmerica(USA) Holding company – 100 – 100

Zenith Foods Corporation (Zenith) Philippines Food service 100 – 100 –Freemont Foods Corporation (Freemont) Philippines Food service 100 – 100 –RRB Holdings, Inc. (RRBHI): Philippines Holding company 100 – 100 –

Red Ribbon Bakeshop, Inc. (RRBI) Philippines Food service – 100 – 100Red Ribbon Bakeshop, Inc. USA (RRBI USA) USA Food service – 100 – 100

Mang Inasal Philippines Inc. (Mang Inasal) (d) Philippines Food service 100 – 100 –Grandworth Resources Corporation (Grandworth): Philippines Leasing 100 – 100 –

Adgraphix, Inc. (Adgraphix) Philippines Digital printing – 100 – 100IConnect Multi Media Network, Inc. (IConnect) Philippines Advertising – 60 – 60JC Properties & Ventures Co. Philippines Dormant – 50 – 50

Honeybee Foods Corporation (HFC): USA Food service 100 – 100 –Tokyo Teriyaki Corporation (TTC) USA Food service – 100 – 100Honeybee Foods (Canada) Corporation (HFCC) Canada Food service – 100 – 100

Jollibee Worldwide Pte. Ltd. (JWPL): Singapore Holding company 100 – 100 –Regional Operating Headquarters of JWPL (JWS) Philippines Financial accounting,

human resourcesand logisticsservices – 100 – 100

Golden Plate Pte., Ltd. (GPPL): Singapore Holding company – 100 – 100- Golden Beeworks Pte. Ltd. Singapore Food service – 60 – 60- Golden Piatto Pte. Ltd. (c) Singapore Holding company – 75 – –� Cibo Felice S.R.L. (a) Italy Food service – 100 – –

Golden Cup Pte.Ltd. Singapore Holding company – 60 – 60- Beijing Golden Coffee Cup Food & Beverage

Management Co., Ltd.People’s

Republic ofChina (PRC) Food service – 100 – 100

Beijing New Hongzhuangyuan Food and BeverageManagement Co., Ltd. (Hong Zhuang Yuan) PRC Food service – 100 – 100

Southsea Binaries Ltd. (Southsea) British Virgin Island(BVI) Holding company – 100 – 100

Beijing Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Shenzhen Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Hangzhou Yongtong Food and Beverage Co., Ltd. PRC Food service – 100 – 100Hangzhou Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Wuhan Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Tianjin Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Happy Bee Foods Processing Pte. Ltd. (HBFPPL)(e) Singapore Holding company – 100 – 100- Happy Bee Foods Processing (Anhui) Co. Ltd. (e) PRC Food service – 100 – 100JSF Investments Pte. Ltd. (JSF): Singapore Holding company – 99 – 99- SF Vung Tau Joint Stock Company (b) Vietnam Holding company – 60 – –� Highland Coffee Service Joint-stock Company (b) Vietnam Food service – 100 – –� Quantum Corporation (b) Vietnam Food service – 100 – – Pho Viet Joint Stock Company (b) Vietnam Food service – 100 – – Pho 24 Service Trade Manufacture Corporation(b) Vietnam Food service – 100 – –

- Blue Sky Holdings Limited (b) Hong Kong Holding company – 60 – –� Sino Ocean Limited (b) Hong Kong Food service – 100 – –� Blue Sky Holdings (Macau) Limited (b) Macau Food service – 100 – –

Jollibee (China) Food & Beverage Management Co. Ltd. PRC Management company – 100 – 100Jollibee International (BVI) Ltd. (JIBL): BVI Holding company – 100 – 100- Jollibee Vietnam Corporation Ltd. Vietnam Food service – 100 – 100

∂ Goldstar Food Trade and Service Company Ltd (GSC) (f) Vietnam Food service – 100 – 100- PT Chowking Indonesia Indonesia Food service – 100 – 100- PT Jollibee Indonesia Indonesia Dormant – 100 – 100- Jollibee (Hong Kong) Limited and Subsidiaries Hong Kong Dormant – 85 – 85- Belmont Enterprises Ventures Limited (Belmont): BVI Holding company – 100 – 100� Shanghai Belmont Enterprises Management and

Adviser Co., Ltd. (SBEMAC) PRCBusiness management

service – 100 – 100� Yong He Holdings Co., Ltd. BVI Holding company – 100 – 100 Centenary Ventures Ltd. BVI Holding company – 100 – 100

Bee Good! Inc. (BGI) USA Holding company – 100 – 100Chanceux, Inc. Philippines Holding company 100 – 100 –

BKTitans Inc. (BKTitans) Philippines Holding company – 54 – 54- PFN Holdings Corporation Philippines Holding company – 99 – 99� PERF Restaurants, Inc.(g) Philippines Food service – 100 – 100

Donut Magic Phils., Inc. (Donut Magic)(h) Philippines Dormant 100 – 100 –Ice Cream Copenhagen Phils., Inc. (ICCP)(h) Philippines Dormant 100 – 100 –Mary’s Foods Corporation (Mary’s)(h) Philippines Dormant 100 – 100 –QSR Builders, Inc. Philippines Dormant 100 – 100 –Jollibee USA USA Dormant 100 – 100 –

(a) On July 31, 2017, the Jollibee Group, through Golden Piatto Pte. Ltd. incorporated Cibo Felice in Italy.(b) On May 10, 2017, the Jollibee Group, through JSF increase its shareholding in SF Vung Tau Joint Stock Company (SFVT) and Blue Sky Holdings Limited (Blue Sky) to 60%.(c) On April 12, 2017, the Jollibee Group, through GPPL, incorporated Golden Piatto Pte. Ltd. to own and operate Jollibee restaurants in Italy.(d) On April 22, 2016, the Parent Company acquired the remaining 30% stake in Mang Inasal.(e) On November 23, 2016, the Jollibee Group, through JWPL obtained government and regulatory approval for the transfer of assets in Anhui and completed the acquisition of shares

in HBFPPL to make its ownership 100%.(f) On September 1, 2016, the Jollibee Group, through its wholly owned subsidiary, Jollibee Vietnam Company Ltd., acquired 100% equity of GSC.(g) PERF Restaurants, Inc. also holds shares in PERF Trinoma and PERF MOA.(h) On June 18, 2004, the stockholders of the Jollibee Group approved the Plan of Merger of the three dormant companies. The application is pending approval from the SEC as at

December 31, 2017.

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3. Significant Accounting Policies

Current versus Noncurrent ClassificationThe Jollibee Group presents assets and liabilities in the consolidated statement of financial positionbased on current/noncurrent classification.

An asset is classified as current when it is:

ƒ Expected to be realized or intended to be sold or consumed in the normal operating cycle;ƒ Held primarily for the purpose of trading;ƒ Expected to be realized within twelve months after the reporting period; orƒ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at

least twelve months after the reporting period.

The Jollibee Group classifies all other assets as noncurrent.

A liability is classified as current when:

ƒ It is expected to be settled in the normal operating cycle;ƒ It is held primarily for the purpose of trading;ƒ It is due to be settled within twelve months after the reporting period; orƒ There is no unconditional right to defer the settlement of the liability for at least twelve months

after the reporting period.

The Jollibee Group classifies all other liabilities as noncurrent. Deferred tax assets and liabilities areclassified as noncurrent assets and liabilities.

Fair Value MeasurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. The fair value measurement isbased on the presumption that the transaction to sell the asset or transfer the liability takes placeeither:ƒ In the principal market for the asset or liability; orƒ In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Jollibee Group.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in their economicbest interest. A fair value measurement of a non-financial asset takes into account a marketparticipant’s ability to generate economic benefits by using the asset in its highest and best use or byselling it to another market participant that would use the asset in its highest and best use.

The fair value for financial instruments traded in active markets at the reporting date is based on theirquoted price or binding dealer price quotations, without any deduction for transaction costs. Wherethe Jollibee Group has financial assets and financial liabilities with offsetting positions in market risksor counterparty credit risk, it has elected to use the measurement exception to measure the fair valueof its net risk exposure by applying the bid or ask price to the net open position as appropriate. Forall other financial instruments not traded in an active market, the fair value is determined by usingvaluation techniques deemed to be appropriate in the circumstances. Valuation techniques includethe market approach (i.e., using recent arm’s length market transactions adjusted as necessary andreference to the current market value of another instrument that is substantially the same) and theincome approach (i.e., discounted cash flow analysis and option pricing models making as much use

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of available and supportable market data as possible) and the cost approach (i.e., based on the amountrequired to replace the service capacity of an asset).

The Jollibee Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observable inputsand minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financialstatements are categorized within the fair value hierarchy, described as follows, based on the lowest-level input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.Level 2 - Valuation techniques for which the lowest-level input that is significant to the fair value

measurement is directly or indirectly observable.Level 3 - Valuation techniques for which the lowest-level input that is significant to the fair value

measurement is unobservable.

For assets and liabilities that are recognized in the consolidated financial statements on a recurringbasis, the Jollibee Group determines whether transfers have occurred between levels in the hierarchyby reassessing categorization (based on the lowest-level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

The Jollibee Group’s management determines the policies and procedures for both recurring fairvalue measurement and non-recurring measurement. At each reporting date, the managementanalyzes the movements in the values of assets and liabilities which are required to be remeasured orreassessed as per the Jollibee Group’s accounting policies. For this analysis, the management verifiesthe major inputs applied in the latest valuation by agreeing the information in the valuationcomputation to contracts and other relevant documents.

For the purpose of fair value disclosures, the Jollibee Group has determined classes of assets andliabilities based on the nature, characteristics and risks of the asset or liability and the level of the fairvalue hierarchy as explained above.

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investmentsthat are readily convertible to known amounts of cash with original maturities of three months or lessfrom the date of acquisition and are subject to an insignificant risk of change in value.

Short-term InvestmentsShort-term investments are deposits with original maturities of more than three months to one yearfrom acquisition date.

Financial InstrumentsA financial instrument is any contract that gives rise to a financial asset of one entity and a financialliability or equity instrument of another entity.

Financial Assets

Initial Recognition and MeasurementFinancial assets are classified, at initial recognition, as financial assets at fair value through profit orloss (FVPL), loans and receivables, held-to-maturity (HTM) investments, AFS financial assets, or asderivatives designated as hedging instruments in an effective hedge, as appropriate. All financial

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assets are recognized initially at fair value plus, except for financial assets at FVPL, transaction coststhat are attributable to the acquisition of the financial asset.

The Jollibee Group has no financial assets classified under the HTM investments category.

Purchases or sales of financial assets that require delivery of assets within a time frame established byregulation or convention in the market place (regular way trades) are recognized on the trade date,i.e., the date that the Jollibee Group commits to purchase or sell the asset.

The Jollibee Group’s financial assets include cash and cash equivalents, short-term investments,receivables, receivable from sale of business, security and other deposits and operating leasereceivables.

Subsequent Measurement

Financial Assets at FVPL. Financial assets at FVPL include financial assets held for trading andfinancial assets designated upon initial recognition at FVPL. Financial assets are classified as heldfor trading if they are acquired for the purpose of selling or repurchasing in the near term.Derivatives, including separated embedded derivatives, are also classified as held for trading unlessthey are designated as effective hedging instruments as defined by PAS 39. The Jollibee Group hasnot designated any financial assets at FVPL. Financial assets at FVPL are carried in the consolidatedstatement of financial position at fair value with net changes in fair value recognized in profit or loss .

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fairvalue if their economic characteristics and risks are not closely related to those of the host contractsand the host contracts are not held for trading or designated at FVPL. These embedded derivativesare measured at fair value with changes in fair value recognized in profit or loss. Reassessment onlyoccurs if there is either a change in the terms of the contract that significantly modifies the cash flowsthat would otherwise be required or a reclassification of a financial asset out of the FVPL.

This category generally applies to the Jollibee Group’s derivative assets.

Loans and Receivables. This category is the most relevant to the Jollibee Group. Loans andreceivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. After initial measurement, such financial assets are subsequentlymeasured at amortized cost using the effective interest rate method, except for short-term loans andreceivables with no stated interest which are measured at undiscounted amounts less impairment.Amortized cost is calculated by taking into account any discount or premium on acquisition and feesor costs that are an integral part of the effective interest rate. The effective interest rate amortizationis recognized in profit or loss. The losses arising from impairment are recognized also in profit orloss.

This category generally applies to cash and cash equivalents, short-term investments, receivables,refundable security and other deposits, operating lease receivables and employee car plan receivables.

AFS Financial Assets. AFS financial assets include equity investments. Equity investmentsclassified as AFS financial assets are those that are neither classified as held for trading nordesignated at FVPL.

After initial measurement, AFS financial assets are subsequently measured at fair value withunrealized gains or losses recognized in other comprehensive income and credited directly in equityuntil the investment is derecognized, at which time, the cumulative gain or loss is recognized in profitor loss, or the investment is determined to be impaired, when the cumulative loss is reclassified from

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equity to profit or loss. Dividends earned while holding AFS financial assets is recognized in profitor loss.

This category generally applies to golf and leisure club shares.

DerecognitionA financial asset (or, where applicable, a part of a financial asset or part of a group of similarfinancial assets) is primarily derecognized (i.e., removed from the consolidated statement of financialposition) when:

ƒ The rights to receive cash flows from the asset have expired; orƒ The Jollibee Group has transferred its rights to receive cash flows from the asset or has assumed

an obligation to pay the received cash flows in full without material delay to a third party under a‘pass-through’ arrangement; and either (a) the Jollibee Group has transferred substantially all therisks and rewards of the asset, or (b) the Jollibee Group has neither transferred nor retainedsubstantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Jollibee Group has transferred its rights to receive cash flows from an asset or has enteredinto a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks andrewards of ownership. When it has neither transferred nor retained substantially all of the risks andrewards of the asset, nor transferred control of the asset, the Jollibee Group continues to recognize thetransferred asset to the extent of its continuing involvement. In that case, the Jollibee Group alsorecognizes an associated liability. The transferred asset and the associated liability are measured on abasis that reflects the rights and obligations that the Jollibee Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured atthe lower of the original carrying amount of the asset and the maximum amount of consideration thatthe Jollibee Group could be required to repay.

Impairment of Financial AssetsThe Jollibee Group assesses, at each reporting date, whether there is objective evidence that afinancial asset or a group of financial assets is impaired. An impairment exists if one or more eventsthat has occurred since the initial recognition of the asset (an incurred ‘loss event’), has an impact onthe estimated future cash flows of the financial asset or the group of financial assets that can bereliably estimated. Evidence of impairment may include indications that the debtors or a group ofdebtors is experiencing significant financial difficulty, default or delinquency in interest or principalpayments, the probability that they will enter bankruptcy or other financial reorganization andobservable data indicating that there is a measurable decrease in the estimated future cash flows, suchas changes in arrears or economic conditions that correlate with defaults.

Financial Assets Carried at Amortized Cost. For financial assets carried at amortized cost, theJollibee Group first assesses whether impairment exists individually for financial assets that areindividually significant, and individually or collectively for financial assets that are not individuallysignificant. If the Jollibee Group determines that no objective evidence of impairment exists for anindividually assessed financial asset, whether significant or not, it includes the asset in a group offinancial assets with similar credit risk characteristics and collectively assesses them for impairment.Assets that are individually assessed for impairment and for which an impairment loss is, or continuesto be, recognized are not included in a collective assessment of impairment. The amount of anyimpairment loss identified is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows (excluding future expected credit losses that have not yetbeen incurred). The present value of the estimated future cash flows is discounted at the financialasset’s original effective interest rate.

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The carrying amount of the asset is reduced through the use of an allowance account and the loss isrecognized in profit or loss. Interest income continues to be accrued on the reduced carrying amountusing the rate of interest used to discount the future cash flows for the purpose of measuring theimpairment loss. Loans and receivables, together with the associated allowance, are written off whenthere is no realistic prospect of future recovery and all collateral has been realized or has beentransferred to the Jollibee Group. If, in a subsequent year, the amount of the estimated impairmentloss increases or decreases because of an event occurring after the impairment was recognized, thepreviously recognized impairment loss is increased or reduced by adjusting the allowance account. Ifa write-off is later recovered, the recovery is recognized in profit and loss to the extent that thecarrying value of the asset does not exceed what the amortized cost would have been had theimpairment not been recognized at the date the impairment is reversed.

AFS Financial Assets. For AFS financial assets, the Jollibee Group assesses at each reporting datewhether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as AFS financial assets, objective evidence would includea significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ isevaluated against the original cost of the investment and ‘prolonged’ against the period in which thefair value has been below its original cost. When there is evidence of impairment, the cumulativeloss measured as the difference between the acquisition cost and the current fair value, less anyimpairment loss on that investment previously recognized in profit or loss is removed from othercomprehensive income and recognized in profit or loss. For unquoted equity investments that are notcarried at fair value because such cannot be reliably measured, or on a derivative asset that is linkedto and must be settled by delivery of such unquoted equity instruments, the amount of loss ismeasured as the difference between the assets carrying amount and the present value of estimatedfuture cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses on equity investments are not reversed through profit or loss; increases in their fairvalue after impairment are recognized in other comprehensive income.

The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making thisjudgment, the Jollibee Group evaluates, among other factors, the duration or extent to which the fairvalue of an investment is less than its cost.

Financial Liabilities

Initial Recognition and MeasurementFinancial liabilities are classified, at initial recognition, as financial liabilities at FVPL, loans andborrowings, payables or as derivatives designated as hedging instruments in an effective hedge, asappropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowingsand payables, net of directly attributable transaction costs.

The Jollibee Group’s financial liabilities include loans and borrowings and derivative financialinstruments.


Financial Liabilities at FVPL. Financial liabilities at FVPL include financial liabilities held fortrading and financial liabilities designated upon initial recognition as at FVPL. Financial liabilitiesare classified as held for trading if they are incurred for the purpose of repurchasing in the near term.This category also includes derivative financial instruments entered into by the Jollibee Group that

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are not designated as hedging instruments in hedge relationships as defined by PAS 39. Separatedembedded derivatives are also classified as held for trading unless they are designated as effectivehedging instruments.

Gains or losses on liabilities held for trading are recognized in profit or loss.

Financial liabilities designated upon initial recognition at FVPL are designated at the initial date ofrecognition, and only if the criteria in PAS 39 are satisfied. The Jollibee Group has not designatedany financial liability as at FVPL.

Loans and Borrowings. This is the category most relevant to the Jollibee Group. After initialrecognition, interest-bearing loans and borrowings are subsequently measured at amortized cost usingthe effective interest rate method. Gains and losses are recognized in profit or loss when theliabilities are derecognized as well as through the effective interest rate amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and feesor costs, including debt issue costs for the Jollibee Group’s debts that are an integral part of theeffective interest rate. The effective interest rate amortization is included as interest expense in theconsolidated statement of comprehensive income.

This category generally applies to trade payables, and other current liabilities (excluding accrual forlocal and other taxes, liabilities to government agencies and unearned revenue from gift certificate)and long-term debts.

Debt Issue Costs. Debt issue costs are specific incremental costs, other than those paid to the lender,that are directly related to issuing a debt instrument. These are presented in the statements offinancial position as a reduction from the related debt instrument and are amortized through theeffective interest rate amortization process.

Derecognition. A financial liability is derecognized when the obligation under the liability isdischarged, cancelled or has expired. When an existing financial liability is replaced by another fromthe same lender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as the derecognition of the original liability andthe recognition of a new liability. The difference in the respective carrying amounts is recognized inprofit or loss.

Offsetting of Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the consolidatedstatement of financial position if there is a currently enforceable legal right to offset the recognizedamounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilitiessimultaneously. The Jollibee Group assesses that it has a currently enforceable right of offset if theright is not contingent on a future event, and is legally enforceable in the normal course of business,event of default, and event of insolvency or bankruptcy of the Jollibee Group and all of thecounterparties.

Derivative Financial Instruments and Hedge Accounting

Initial recognition and subsequent measurement. The Group uses derivative financial instruments,such as cross currency swaps and interest rate swaps to hedge its foreign currency risks and interestrate risks, respectively. Such derivative financial instruments are initially recognized at fair value onthe date on which a derivative contract is entered into and are subsequently remeasured at fair value.Derivatives are carried as financial assets when the fair value is positive and as financial liabilitieswhen the fair value is negative.

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Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit orloss, except for the effective portion of cash flow hedges, which is recognized in other comprehensiveincome and later reclassified to profit or loss when the hedge item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as:ƒ Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or

liability or an unrecognized firm commitment;ƒ Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable

to a particular risk associated with a recognized asset or liability or a highly probable forecasttransaction or the foreign currency risk in an unrecognized firm commitment; or

ƒ Hedges of a net investment in a foreign operation.

The Jollibee Group’s interest rate swap is cash flow hedge. The Jollibee Group has no fair valuehedge and hedge of a net investment in a foreign operation as at December 31, 2017 and 2016.

At the inception of a hedge relationship, the Jollibee Group formally designates and documents thehedge relationship to which it wishes to apply hedge accounting and the risk management objectiveand strategy for undertaking the hedge. The documentation includes identification of the hedginginstrument, the hedged item or transaction, the nature of the risk being hedged and how the entity willassess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure tochanges in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges areexpected to be highly effective in achieving offsetting changes in fair value or cash flows and areassessed on an ongoing basis to determine that they actually have been highly effective throughoutthe financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:

Cash Flow Hedges. Cash flow hedges are hedges of the exposure to variability in cash flows that isattributable to a particular risk associated with a recognized asset, liability or a highly probableforecast transaction and could affect the consolidated statements of comprehensive income. Changesin the fair value of a hedging instrument that qualifies as a highly effective cash flow hedge arerecognized as “Comprehensive income (loss) on derivative liability” in the consolidated statements ofcomprehensive income, whereas any hedge ineffectiveness is immediately recognized in profit orloss.

The Jollibee Group has an interest rate swap for its exposure to volatility in interest rates.

Amounts recognized as other comprehensive are transferred to profit or loss when the hedgedtransaction affects profit or loss, such as when the hedged income or expense is recognized or when aforecast sale occurs.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover(as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge nolonger meets the criteria for hedge accounting, any cumulative gain or loss previously recognized inother comprehensive income remains separately in equity until the forecast transaction occurs or theforeign currency firm commitment is met.

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InventoriesInventories are valued at the lower of cost and net realizable value. Costs are accounted for asfollows:

Processed inventories - Standard costing, which is reviewedon a quarterly basis and revised asnecessary to approximate currentcosts determined using first in, firstout (FIFO). Cost includes directmaterials, labor and a proportion ofmanufacturing overhead costs basedon normal operating capacity.

Food supplies, packaging, store andother supplies, and novelty items

- Standard costing which is reviewedon a quarterly basis and revised asnecessary to approximate currentcosts determined using FIFO.

Net realizable value of processed inventories is the estimated selling price in the ordinary course ofbusiness, less estimated costs of completion and the estimated costs necessary to make the sale.

Net realizable value of food supplies, packaging, store and other supplies is the current replacementcost. Food and other supplies are held for use in the production of processed inventories.

Net realizable value of novelty items is the estimated selling price in the ordinary course of business,less the estimated costs necessary to make the sale.

Other Current AssetsOther current assets include deposits which pertain to advance payments to suppliers to be applied forfuture purchases, prepaid expenses which are paid in advance and recorded as asset before these areutilized; and creditable withholding taxes, which will be applied in the following year againstcorporate income tax or be claimed for refund with the Bureau of Internal Revenue. Prepaid expensesare amortized over time and recognized as expense as the benefit is derived from the asset.

Borrowing CostBorrowing costs directly attributable to the acquisition, construction or production of an asset thatnecessarily takes a substantial period of time to get ready for its intended use or sale are capitalized aspart of the cost of asset. Capitalization of borrowing costs commences when the activities to preparethe asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costsare capitalized until the assets are substantially ready for their intended use. All other borrowingcosts are expensed as incurred. Borrowing costs consist of interest and other cost that an entity incursin connection with the borrowing of funds.

Property, Plant and EquipmentProperty, plant and equipment, except land and construction in progress, are stated at cost lessaccumulated depreciation and amortization and any accumulated impairment in value. Such costincludes the cost of replacing part of property, plant and equipment at the time that cost is incurred, ifthe recognition criteria are met, and excludes the costs of day-to-day servicing. Land is stated at costless any impairment in value.

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The initial cost of property, plant and equipment consists of its purchase price, including importduties and nonrefundable taxes and any other costs directly attributable in bringing the asset to itsworking condition and location for its intended use. Cost also includes any related asset retirementobligation and interest incurred during the construction period on funds borrowed to finance theconstruction of the asset. Expenditures incurred after the property, plant and equipment have beenput into operation, such as repairs and maintenance, are normally charged to profit or loss in the yearin which the costs are incurred. In situations where it can be clearly demonstrated that theexpenditures have resulted in an increase in the future economic benefits expected to be obtainedfrom the use of an item of property, plant and equipment beyond its originally assessed standard ofperformance, the expenditures are capitalized as additional costs of property, plant and equipment.

Depreciation and amortization are calculated on a straight-line basis over the following estimateduseful lives of the assets:

Land improvements 5 yearsPlant, buildings, commercial condominium units and

improvements 5–40 yearsLeasehold rights and improvements 2–10 years or term of the lease,

whichever is shorterOffice, store and food processing equipment 1–15 yearsFurniture and fixtures 3–5 yearsTransportation equipment 3–5 years

The residual values, if any, useful lives and depreciation and amortization method of the assets arereviewed at the end of each financial period and adjusted prospectively, if appropriate.

Fully depreciated assets are retained in the accounts until they are disposed or retired.

An item of property, plant and equipment is derecognized upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset(calculated as the difference between the disposal proceeds and the carrying amount of the asset) isincluded in profit or loss in the year the asset is derecognized.

Construction in progress represents assets under construction and is stated at cost less any impairmentin value. This includes the cost of construction and other direct costs. Cost also includes interest onborrowed funds incurred during the construction period. Construction in progress is not depreciateduntil such time that the relevant assets are completed and ready for use.

Investment PropertiesInvestment properties consist of land and buildings and building improvements held by the JollibeeGroup for capital appreciation and rental purposes. Investment properties, except land, are carried atcost, including transaction costs, less accumulated depreciation and amortization and any impairmentin value. Cost also includes the cost of replacing part of an existing investment property at the timethat cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicingof an investment property. Land is carried at cost less any impairment in value.

The depreciation of buildings and building improvements are calculated on a straight-line basis overthe estimated useful lives of the assets which are five (5) to twenty (20) years.

The residual values, if any, useful lives and method of depreciation and amortization of the assets arereviewed at each financial year-end and adjusted prospectively, if appropriate.

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Investment property is derecognized when either it has been disposed of or when the investmentproperty is permanently withdrawn from use and no future economic benefit is expected from itsdisposal. Any gains or losses on the retirement or disposal of an investment property are recognizedin profit or loss in the year of retirement or disposal.

Transfers to investment property are made only when there is a change in use, evidenced by ending ofownership-occupation, or commencement of an operating lease to another party. Transfers frominvestment property are made only when there is a change in use, evidenced by commencement ofowner-occupation or commencement of development with a view to sell.

For a transfer from investment property to owner-occupied property, the cost of property forsubsequent accounting is its carrying value at the date of change in use. If the property occupied bythe Jollibee Group as an owner-occupied property becomes an investment property, the Companyaccounts for such property in accordance with the policy stated under property and equipment up tothe date of change in use.

Business CombinationsBusiness combinations are accounted for using the acquisition method. Applying the acquisitionmethod requires the (a) determination whether the Jollibee Group will be identified as the acquirer;(b) determination of the acquisition date; (c) recognition and measurement of the identifiable assetsacquired, liabilities assumed and any non-controlling interest in the acquiree; and (d) recognition andmeasurement of goodwill or a gain from a bargain purchase.

When the Jollibee Group acquires a business, it assesses the financial assets and liabilities assumedfor appropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as at acquisition date.

The cost of an acquisition is measured as the aggregate of the (a) consideration transferred by theJollibee Group, measured at acquisition-date fair value, (b) amount of any non-controlling interest inthe acquiree and (c) acquisition-date fair value of the Jollibee Group’s previously held equity interestin the acquiree in a business combination achieved in stages. Acquisition costs incurred are expensedand included in “General and administrative expenses” account in the consolidated statement ofcomprehensive income.

Initial Measurement of Non-controlling Interest. For each business combination, the Jollibee Groupmeasures the non-controlling interest in the acquiree using the proportionate share of the acquiree’sfair value of identifiable net assets.

Business Combination Achieved in Stages. In a business combination achieved in stages, the JollibeeGroup remeasures its previously held equity interests in the acquiree at its acquisition-date fair valueand recognizes the resulting gain or loss, if any, in profit or loss.

Measurement Period. If the initial accounting for a business combination is incomplete by the end ofthe reporting period in which the combination occurs, the Jollibee Group reports in its consolidatedfinancial statements provisional amounts for the items for which the accounting is incomplete. Themeasurement period ends as soon as the Jollibee Group receives the information it was seeking aboutfacts and circumstances that existed as at the acquisition date or learns that more information is notobtainable. The measurement period does not exceed one year from the acquisition date.

Contingent Consideration or Earn-out. Any contingent consideration or earn-out in relation to abusiness combination is recognized at fair value at the acquisition date. Subsequent changes to thefair value of the contingent consideration which is deemed to be an asset or liability, is recognized inprofit or loss.

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Initial Measurement of Goodwill or Gain on a Bargain Purchase. Goodwill is initially measured bythe Jollibee Group at cost being the excess of the total consideration transferred over the netidentifiable assets acquired and liabilities assumed. If this consideration is lower than the fair valueof the net assets of the subsidiary acquired, the difference is recognized in profit or loss as gain on abargain purchase. Before recognizing a gain on a bargain purchase, the Jollibee Group determineswhether it has correctly identified all of the assets acquired and all of the liabilities assumed andrecognize any additional assets or liabilities that are identified in that review.

Subsequent Measurement of Goodwill. Following initial recognition, goodwill is measured at costless any accumulated impairment losses.

Impairment Testing of Goodwill. For the purpose of impairment testing, goodwill acquired in abusiness combination is, from the acquisition date, allocated to each of the Jollibee Group’sCGU, or groups of CGUs, that are expected to benefit from the synergies of the combination,irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groupsof units. Each unit or group of units to which the goodwill is allocated:

ƒ represents the lowest level within the Jollibee Group at which the goodwill is monitored forinternal management purposes; and

ƒ is not larger than an operating segment as defined in PFRS 8, Operating Segments, beforeaggregation.

Frequency of Impairment Testing. Irrespective of whether there is any indication of impairment, theJollibee Group tests goodwill acquired in a business combination for impairment annually as atDecember 31 and more frequently when circumstances indicate that the carrying amount is impaired.

Allocation of Impairment Loss. An impairment loss is recognized for a CGU if the recoverableamount of the unit or group of units is less than the carrying amount of the unit or group of units. Theimpairment loss is allocated to reduce the carrying amount of the assets of the unit or group of unitsfirst to reduce the carrying amount of goodwill allocated to the CGU or group of units and then to theother assets of the unit or group of units pro rata on the basis of the carrying amount of each asset inthe unit or group of units. In allocating the impairment loss, the Jollibee Group cannot reduce thecarrying amount of an asset below the highest of its fair value less costs of disposal if measurable, itsvalue in use if determinable and zero.

Intangible AssetsIntangible assets acquired separately are measured at cost on initial recognition. Following initialrecognition, intangible assets are carried at cost less any accumulated amortization and anyaccumulated impairment loss. The useful lives of intangible assets are assessed at the individual assetlevel as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life using the straight-linemethod and assessed for impairment whenever there is an indication that the intangible assets may beimpaired. At a minimum, the amortization period and the amortization method for an intangible assetwith a finite useful life are reviewed at least at each financial year-end. Changes in the expecteduseful life or the expected pattern of consumption of future economic benefits embodied in the assetare accounted for by changing the amortization period or method, as appropriate, and treated aschanges in accounting estimates.

Intangible assets with indefinite useful lives are tested for impairment annually either individually orat the CGU level. Such intangible assets are not amortized. The useful life of an intangible assetwith an indefinite life is reviewed annually to determine whether the indefinite life assessment

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continues to be supportable. If not, the change in the useful life assessment from indefinite to finite ismade on a prospective basis.

Amortization of computer software, trademarks and other intangible assets are calculated on astraight-line basis over the following estimated useful lives of the assets:

Computer software 10 yearsTrademark 5 yearsOther intangible assets 5 years

Gains or losses arising from derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset, and are recognized in profitor loss when the asset is derecognized.

Interests in and Advances to Joint Ventures, Co-venturers and AssociatesAn associate is an entity over which the Company has significant influence. Significant influence isthe power to participate in the financial and operating policy decisions of the investee, but is not incontrol or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the net assets of the joint venture. Joint control is the contractually agreedsharing of control of an arrangement, which exists only when decisions about the relevant activitiesrequire unanimous consent of the parties sharing control.

The Jollibee Group’s investments in its associates and joint ventures are accounted for using theequity method based on the percentage share of ownership and capitalization. Interests in jointventures are accounted for under the equity method from the date the joint control is obtained.

Under the equity method, the Jollibee Group’s investments in joint ventures and associates are carriedin the consolidated statement of financial position at cost plus the Jollibee Group’s share in post-acquisition changes in the net assets of associates or joint ventures, less any impairment in value.Goodwill relating to the associates or joint ventures is included in the carrying amount of theinvestment and is not amortized. The consolidated statement of comprehensive income includes theJollibee Group’s share in the financial performance of the associates or joint ventures. The JollibeeGroup’s share in profit or loss of the associates is shown on the face of the consolidated statement ofcomprehensive income as “Equity in net losses of joint ventures and associates - net”, which is theprofit or loss attributable to equity holders of the joint ventures and associates.

When the Jollibee Group’s share of losses in the associates or joint ventures equals or exceeds itsinterest, including any other unsecured receivables, the Jollibee Group does not recognize furtherlosses, unless it has incurred obligations or made payments on behalf of the associates or jointventures. Where there has been a change recognized directly in the equity of the associate or jointventure, the Jollibee Group recognizes its share in any changes and discloses this, when applicable, inthe consolidated statement of changes in equity.

The reporting dates of the Parent Company and the associate or joint ventures are identical and thelatter’s accounting policies conform to those used by the Parent Company for like transactions andevents in similar circumstances. Unrealized gains arising from transactions with the associates orjoint ventures are eliminated to the extent of the Jollibee Group’s interests in the associates or jointventures against the related investments. Unrealized losses are eliminated similarly but only to theextent that there is no evidence of impairment in the asset transferred.

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The Jollibee Group ceases to use the equity method of accounting on the date from which it no longerhas joint control in the joint ventures, no longer has significant influence over the associates, or whenthe interest becomes held for sale.

Upon loss of significant influence over the associate or joint control over the joint ventures, theJollibee Group measures and recognizes its remaining investment at its fair value. Any differencebetween the carrying amount of the former associate or former jointly controlled entities upon loss ofsignificant influence or joint control, and the fair value of the remaining investment and proceedsfrom disposal is recognized in profit or loss. When the remaining interest in the former jointlycontrolled entity constitutes significant influence, it is accounted for as interest in an associate.

Impairment of Nonfinancial AssetsThe carrying values of interests in and advances to joint ventures, co-venturers and associates,property, plant and equipment, investment properties, goodwill and other intangible assets, and othernoncurrent assets are reviewed for impairment when events or changes in circumstances indicate thatthe carrying value may not be recoverable. If any such indication exists, and if the carrying valueexceeds the estimated recoverable amount, the assets or CGU are written down to their recoverableamounts. The recoverable amount of the asset is the greater of fair value less costs to sell or value inuse. The fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s-length transaction between knowledgeable, willing parties, less costs of disposal. In assessing valuein use, the estimated future cash flows are discounted to their present value using a pre-tax discountrate that reflects current market assessments of the time value of money and the risks specific to theasset. For an asset that does not generate largely independent cash inflows, the recoverable amount isdetermined for the CGU to which the asset belongs. Impairment losses are recognized in profit orloss in those expense categories consistent with the function of the impaired asset.

For nonfinancial assets, excluding goodwill, an assessment is made at each reporting date as towhether there is any indication that previously recognized impairment losses may no longer exist ormay have decreased. If such indication exists, the recoverable amount is estimated. A previouslyrecognized impairment loss is reversed only if there has been a change in the estimates used todetermine the asset’s recoverable amount since the last impairment loss was recognized. If that is thecase, the carrying amount of the asset is increased to its recoverable amount. That increased amountcannot exceed the carrying amount that would have been determined, net of depreciation andamortization, had no impairment loss been recognized for the asset in prior years.

Such reversal is recognized in profit or loss. After such a reversal, the depreciation charge is adjustedin future periods to allocate the asset’s revised carrying amount, less any residual value on asystematic basis over its remaining useful life.

Equity

Capital Stock and Additional Paid-in Capital. Capital stock is measured at par value for all sharesissued. Proceeds and/or fair value of considerations received in excess of par value, if any, arerecognized as additional paid-in capital. Incremental costs incurred directly attributable to theissuance of new shares are shown in equity as a deduction from proceeds, net of tax.

Additional paid-in capital is also credited for the cost of the Jollibee Group’s equity settled share-based payments to its employees.

Subscriptions Receivable. Subscriptions receivable represents the unpaid balance of the subscriptionprice for subscribed common stock of the Parent Company.

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Retained Earnings. Retained earnings represent the Jollibee Group’s accumulated earnings, net ofdividends declared. The balance includes accumulated earnings of subsidiaries, joint ventures andassociates, which are not available for dividend declaration.

Dividends. The Jollibee Group recognizes a liability to make cash distribution to its equity holderswhen the distribution is authorized and the distribution is no longer at the discretion of the JollibeeGroup. A corresponding amount is recognized directly in the equity. Dividends for the year that areapproved after the financial reporting date are dealt with as an event after the reporting period.

Other Comprehensive Income. Other comprehensive income comprises items of income and expense(including reclassification adjustments) that are not recognized in profit or loss. These includecumulative translation adjustments, gains or losses on derivatives designated as hedging instrumentsin an effective hedge, unrealized gains or losses on AFS financial assets, remeasurement gains orlosses on pension and their income tax effects.

Treasury Shares. Acquisitions of treasury shares are recorded at cost. The total cost of treasuryshares is shown in the consolidated statement of financial position as a deduction from the totalequity. Upon re-issuance or resale of the treasury shares, cost of common stock held in treasuryaccount is credited for the cost of the treasury shares determined using the simple average method.Gain on sale is credited to additional paid-in capital. Losses are charged against additional paid-incapital but only to the extent of previous gain from original issuance, sale or retirement for the sameclass of stock. Otherwise, losses are charged to retained earnings.

RevenuesRevenue is recognized to the extent that it is probable that the economic benefits associated with thetransaction will flow to the Jollibee Group and the amount of revenue can be reliably measured,regardless of when the payment is being made. Revenue is measured at the fair value of theconsideration received or receivable, taking into account contractually defined terms of payment andexcluding discounts, rebates, sales taxes and duties. The Jollibee Group assesses its revenuearrangements against specific criteria in order to determine if it is acting as principal or agent. TheJollibee Group has concluded that it is acting as a principal in all of its revenue arrangements since itis the primary obligor in all the revenue arrangements, has pricing latitude, and is also exposed tocredit risks.

The following specific recognition criteria must also be met before revenue is recognized:

Sale of Goods. Revenue from sale of goods is recognized when the significant risks and rewards ofownership of the goods have passed to the customers, which is normally upon delivery. Sales returnsand sales discounts are deducted from sales to arrive at net sales shown in the consolidated statementof comprehensive income.

Royalty Fees. Revenue from royalty fees is recognized as the royalty accrues based on a certainpercentage of the franchisees’ net sales in accordance with the franchise agreements.

Set-up Fees. Revenue from set-up fees is recognized when all services or conditions relating to thepayment of set-up fees have been substantially performed.

Service Fees. Revenue is recognized in the period in which the service has been rendered.

Rent Income. Rent income from operating leases is recognized on a straight-line basis over the leaseterms.

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Interest Income. Interest income is recognized as the interest accrues, taking into account theeffective yield on the asset.

Other Income. Other income is recognized when there is an incidental economic benefit, other thanthe usual business operations, that will flow to the Jollibee Group through an increase in asset orreduction in liability and that can be measured reliably.

Cost and ExpensesCost and expenses are decreases in economic benefits during the reporting period in the form ofoutflows or decrease of assets or incurrence of liabilities that result in decreases in equity, other thanthose relating to distributions to equity participants. Cost and expenses are recognized as incurred.

Advertising and promotions expenses include costs incurred for advertising schemes and promotionalactivities for new products. The amount of expenses incurred by the Jollibee Group is reduced by thenetwork advertising and promotional costs reimbursed by the Jollibee Group’s franchisees.

Pension BenefitsThe pension liability or asset is the aggregate of the present value of the defined benefit obligation atthe end of the reporting period reduced by the fair value of plan assets (if any), adjusted for any effectof limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of anyeconomic benefits available in the form of refunds from the plan or reductions in future contributionsto the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Pension Expense comprises the following:ƒ Service costƒ Net interest on the net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as part of pension expense. Past service costs are recognized whenplan amendment or curtailment occurs. These amounts are calculated periodically by independentqualified actuaries.

Net interest on the pension liability or asset is the change during the period in the liability or asset thatarises from the passage of time which is determined by applying the discount rate based ongovernment bonds to the pension liability or asset. Net interest on the pension liability or asset isrecognized under “Cost of sales” and “General and administrative expenses” in the consolidatedstatement of comprehensive income.

Remeasurements comprising actuarial gains and losses, return on plan liability or assets and anychange in the effect of the asset ceiling (excluding net interest on defined benefit liability) arerecognized immediately in other comprehensive income in the period in which they arise.Remeasurements are not reclassified to profit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Jollibee Group, nor can they be paiddirectly to the Jollibee Group. Fair value of plan assets is based on market price information. Whenno market price is available, the fair value of plan assets is estimated by discounting expected futurecash flows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expected perioduntil the settlement of the related obligations). If the fair value of the plan assets is higher than the

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present value of the defined benefit obligation, the measurement of the resulting defined benefit assetis limited to the present value of economic benefits available in the form of refunds from the plan orreductions in future contributions to the plan.

The Jollibee Group also participates in various government-defined contribution schemes for thePRC-based and USA-based subsidiaries. Under these schemes, pension benefits of existing andretired employees are guaranteed by the local pension benefit plan, and each subsidiary has no furtherobligations beyond the annual contribution.

Employee Leave EntitlementEmployee entitlements to annual leave are recognized as a liability when they are accrued to theemployees. Jollibee Group recognizes undiscounted liability for leave expected to be settled whollybefore twelve months after the end of the annual reporting period.

Share-based PaymentsThe Jollibee Group has stock option plans granting its management and employees an option topurchase a fixed number of shares of stock at a stated price during a specified period (“equity-settledtransactions”).

The cost of the options granted to the Jollibee Group’s management and employees that becomesvested is recognized in profit or loss over the period in which the performance and/or serviceconditions are fulfilled, ending on the date on which the relevant management and employees becomefully entitled to the award (“vesting date”).

The fair value is determined using the Black-Scholes Option Pricing Model. The cumulative expenserecognized for the share-based transactions at each reporting date until the vesting date reflects theextent to which the vesting period has expired and the Jollibee Group’s best estimate of the number ofequity instruments that will ultimately vest. The charge or credit in profit or loss or the investmentaccount for a period represents the movement in cumulative expense recognized as of the beginningand end of that period.

No expense is recognized for awards that do not ultimately vest.

Where the terms of a share-based award are modified, at a minimum, an expense is recognized as ifthe terms had not been modified. In addition, an expense is recognized for any modification, whichincreases the total fair value of the share-based payment agreement, or is otherwise beneficial to themanagement and employees as measured at the date of modification.

Where a share-based award is cancelled, it is treated as if it had vested on the date of cancellation, andany expense not yet recognized for the award is recognized immediately. However, if a new award issubstituted for the cancelled award, and designated as a replacement award on the date that it isgranted, the cancelled and new awards are treated as if there were a modification of the originalaward.

Research CostsResearch costs are expensed as incurred.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance of theagreement at inception date of whether the fulfillment of the arrangement is dependent on the use of aspecific asset or assets or the arrangement conveys a right to use the asset.

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Jollibee Group as Lessee. Leases which do not transfer to the Jollibee Group substantially all therisks and benefits of ownership of the asset are classified as operating leases. Operating leasepayments are recognized as expense in profit or loss on a straight-line basis over the lease term.Associated costs, such as maintenance and insurance, are expensed as incurred. Contingent rent isrecognized as expense in the period in which they are incurred.

Jollibee Group as Lessor. Leases which do not transfer to the lessee substantially all the risks andbenefits of ownership of the asset are classified as operating leases. Initial direct costs incurred innegotiating an operating lease are added to the carrying amount of the operating lease receivable andrecognized over the lease term on the same basis as rent income. Rent income from operating leasesis recognized as income in profit or loss on a straight-line basis over the lease term. Contingent rentsare recognized as revenue in the period in which they are earned.

ProvisionsProvisions are recognized when the Jollibee Group has a present obligation (legal or constructive) asa result of a past event, it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of theobligation. If the effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflects current market assessmentof the time value of money and, where appropriate, the risks specific to the liability. Wherediscounting is used, the increase in the provision due to the passage of time is recognized as interestexpense.

Foreign Currency Transactions and TranslationsThe consolidated financial statements are presented in Philippine peso, which is the ParentCompany’s functional and presentation currency. Each entity in the Jollibee Group determines itsown functional currency and items included in the financial statements of each entity are measuredusing that functional currency. The functional currency of subsidiaries domiciled and operating in thePhilippines are also determined to be the Philippine Peso. Where the functional currency is thePhilippine Peso, transactions in foreign currencies are recorded in Philippine Peso using the exchangerate at the date of the transaction. Monetary assets and liabilities denominated in foreign currenciesare restated using the closing rate of exchange at reporting date. All differences are recognized inprofit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currencyare translated using the exchange rates as at the dates of the initial transactions.

The functional currencies of the Jollibee Group’s foreign operations are US dollar (USD), PRCRenminbi (RMB), Indonesia rupiah, Vietnam dong, Singapore dollar and Hong Kong dollar. As ofthe reporting date, the assets and liabilities of foreign subsidiaries are translated into the presentationcurrency of the Parent Company at the rate of exchange ruling at the reporting date while the incomeand expense accounts are translated at the weighted average exchange rates for the year. Theresulting translation differences are included in equity under the account “Cumulative translationadjustments of foreign subsidiaries and interests in joint ventures and an associate”. On disposal of aforeign subsidiary, the accumulated exchange differences are recognized in profit or loss.

Taxes

Current Tax. Current tax liabilities for the current and prior periods are measured at the amountexpected to be paid to the tax authority. The tax rates and tax laws used to compute the amount arethose that are enacted or substantively enacted at reporting date.

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Current income tax relating to items recognized directly in equity is recognized in equity (not in theprofit or loss). Management periodically evaluates positions taken in the tax returns with respect tosituations in which applicable tax regulations are subject to interpretation and establishes provisionswhere appropriate.

Deferred Tax. Deferred tax is provided using balance sheet liability method, on all temporarydifferences at reporting date between the tax bases of assets and liabilities and their carrying amountsfor financial reporting purposes.

Deferred tax assets are recognized for all deductible temporary differences and carryforward benefitsof unused tax credits from excess of minimum corporate income tax (MCIT) over regular corporateincome tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it is probable thattaxable profit will be available against which the deductible temporary differences and carry forwardbenefits of excess of MCIT over RCIT and NOLCO can be utilized, except:

ƒ where the deferred tax asset relating to the deductible temporary difference arises from the initialrecognition of an asset or liability in a transaction that is not a business combination and, at thetime of the transaction, affects neither the accounting profit nor taxable profit; and

ƒ in respect of deductible temporary differences associated with investments in subsidiaries andinterest in joint ventures and associates, deferred tax assets are recognized only to the extent thatit is probable that the temporary differences will reverse in the foreseeable future and taxableprofit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all or part ofthe deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at eachreporting date and are recognized to the extent that it has become probable that future taxable profitwill allow the deferred tax assets to be recovered.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

ƒ where the deferred tax liability arises from the initial recognition of goodwill or of an asset orliability in a transaction that is not a business combination and, at the time of the transactions,affects neither the accounting profit nor taxable profit; and

ƒ in respect of taxable temporary differences associated with investments in subsidiaries andinterests in joint ventures and associates, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will not reverse inthe foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the yearwhen the asset is realized or the liability is settled, based on tax rates and tax laws that have beenenacted or substantially enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.Deferred tax items are recognized in correlation to the underlying transaction either in othercomprehensive income or directly in another equity account.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separaterecognition at that date, are recognized subsequently if new information about facts andcircumstances change. The adjustment is either treated as reduction in goodwill, as long as it doesnot exceed goodwill, if it was incurred during the measurement period or recognize in profit or loss.

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Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current taxassets against current tax liabilities and the deferred taxes relate to the same taxable entity and thesame taxation authority.

Value Added Tax (VAT). Revenue, expenses and assets are recognized net of the amount of VAT, ifapplicable.

When VAT from sales of goods and/or services (output VAT) exceeds VAT passed on frompurchases of goods or services (input VAT), the excess is recognized as part of “Trade payables andother current liabilities” account in the consolidated statement of financial position. When VATpassed on from purchases of gods or services (input VAT) exceeds VAT from sales of goods and/orservices (output VAT), the excess is recognized as part of “Other current assets” account in theconsolidated statement of financial position.

Earnings per Share (EPS) Attributable to Equity Holders of the Parent CompanyBasic EPS is calculated by dividing the net income for the year attributable to the equity holders ofthe Parent Company by the weighted average number of common shares outstanding during the year,after considering the retroactive effect of stock dividend declaration, if any.

Diluted EPS is computed by dividing the net income for the year attributable to the equity holders ofthe Parent Company by the weighted average number of common shares outstanding during theperiod, adjusted for any potential common shares resulting from the assumed exercise of outstandingstock options. Outstanding stock options will have dilutive effect under the treasury stock methodonly when the average market price of the underlying common share during the period exceeds theexercise price of the option.

Where the EPS effect of the shares to be issued to management and employees under the stock optionplan would be anti-dilutive, the basic and diluted EPS would be stated at the same amount.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements but are disclosed inthe notes to financial statements unless the possibility of an outflow of resources embodyingeconomic benefits is remote. Contingent assets are not recognized in the consolidated financialstatements but are disclosed when an inflow of economic benefits is probable.

Business SegmentsThe Jollibee Group is organized and managed separately according to the nature of operations andgeographical locations of businesses. The three major operating businesses of the Jollibee Group arefood service, franchising and leasing while geographical segments are segregated to Philippinebusinesses and international businesses. These operating and geographical businesses are the basisupon which the Jollibee Group reports its primary segment information presented in Note 5.

Events after the Reporting PeriodPost year-end events that provide additional information about the Jollibee Group’s financial positionat reporting date (adjusting events) are reflected in the Jollibee Group’s consolidated financialstatements. Post year-end events that are not adjusting events are disclosed in the notes toconsolidated financial statements when material.

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4. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements requires management to make judgments,estimates and assumptions that affect the reported amounts in the consolidated financial statementsand related notes at the end of the reporting period. However, uncertainty about these assumptionsand estimates could result in outcomes that could require a material adjustment to the carryingamount of the affected asset or liability in the future. The Jollibee Group believes the followingrepresents a summary of these significant judgments, estimates and assumptions and the relatedimpact and associated risks on the Jollibee Group’s consolidated financial statements.

JudgmentsIn the process of applying the Jollibee Group’s accounting policies, management has made the followingjudgments, apart from those involving estimations, which have the most significant effect on the amountsrecognized in the consolidated financial statements.

Functional Currency. Management has determined that the functional and presentation currency of theParent Company and its Philippine-based subsidiaries is the Philippine peso, being the currency of theprimary environment in which the Parent Company and its major subsidiaries operate. The functionalcurrencies of its foreign operations are determined as the currency in the country where the subsidiaryoperates. For consolidation purposes, the foreign subsidiaries’ balances are translated to Philippine pesowhich is the Parent Company’s functional and presentation currency.

Operating Lease Commitments - Jollibee Group as Lessee. The Jollibee Group has entered intocommercial property leases for its QSRs and offices as a lessee. Management has determined, basedon an evaluation of the terms and condition of the arrangements that all the significant risks andbenefits of ownership of these properties, which the Jollibee Group leases under various leasearrangements, remain with the lessors. Accordingly, the leases are accounted for as operating leases.

Rent expense amounted to P=10,236.6 million, P=8,704.5 million and P=7,841.9 million in 2017, 2016and 2015, respectively (see Notes 21, 22 and 29).

Operating Lease Commitments - Jollibee Group as Lessor. The Jollibee Group has entered intocommercial property leases on its investment property portfolio and various sublease agreements.Management has determined, based on an evaluation of the terms and conditions of the arrangements,that the Jollibee Group retains all the significant risks and benefits of ownership of the properties whichare leased out. Accordingly, the leases are accounted for as operating leases.

Rent income amounted to P=57.2 million, P=91.4 million and P=92.4 million in 2017, 2016 and 2015,respectively (see Notes 13, 20 and 29).

Assessing Joint Control of an Arrangement and the Type of Arrangement. Joint control is thecontractually agreed sharing of control of an arrangement which exists only when decisions about therelevant activities require the unanimous consent of the parties sharing control. The Jollibee Groupassessed that it has joint control in all joint arrangements by virtue of a contractual agreement withother stockholders. The Jollibee Group’s joint ventures have separate legal entities and theshareholders have right to their net assets (see Note 11).

Material Partly-Owned SubsidiariesThe consolidated financial statements include additional information about subsidiaries that havenon-controlling interests that are material to the Jollibee Group (see Note 11). Managementdetermined material partly-owned subsidiaries as those with balance of non-controlling interestgreater than 5% of total non-controlling interests and those subsidiaries which type of activities theyengage in is important to the Jollibee Group as at end of the year.

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Material Associates and Joint VenturesThe consolidated financial statements include additional information about associates and jointventures that are material to the Jollibee Group (see Note 11). Management determined materialassociates and joint ventures as those associates and joint ventures where the Jollibee Group’scarrying amount of investment is greater than 5% of the total investments in an associate and interestsin joint ventures as at end of the year.

Estimates and AssumptionsThe key estimates and assumptions concerning the future and other key sources of estimationuncertainty at reporting date that has a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below. The JollibeeGroup based its assumptions and estimates on parameters available when the consolidated financialstatements were prepared. Existing circumstances and assumptions about future developments,however, may change due to changes on market circumstances arising beyond the control of theJollibee Group. Such changes are reflected in the assumptions when they occur.

Determination of Purchase Price Allocation. In 2017, the Jollibee Group, through JSF, increased itsownership interest in SF Vung Tau Joint Stock Company and Blue Sky Holdings Ltd. (collectivelySuperFoods Group) from 50% to 60% ownership interest for a total consideration of P=4,812.5 million(see Note 11). In identifying the assets acquired and liabilities assumed, management has determinedthat part of the assets being acquired pertains to the trademarks of Highlands Coffee and Pho 24. Further,management has measured the trademarks and the property, plant and equipment that were acquiredusing the appraisal reports that were prepared by the external appraiser. The trademarks were valuedusing the relief-from-royalty method wherein fair value of trademarks is based on cost savings fromowning the trademarks. Significant assumptions and estimates used include comparable royalty rates,long-term growth rates, discount rates based on available market data and revenue growth rate forecasts.The property, plant and equipment were valued using the replacement cost, specifically reproduction costless depreciation for physical deterioration, functional and economic obsolescence. Adjustments weremade to reproduction cost to reflect depreciation.

Recoverability of Goodwill and Other Intangible Assets. The Jollibee Group determines whethergoodwill and other intangible assets with indefinite useful life is impaired at least on an annual basis ormore frequently if events or changes in circumstances indicate that the carrying value may be impaired.This requires an estimation of the value in use of the CGU to which the goodwill is allocated. Estimatingthe value in use requires the Jollibee Group to make an estimate of the expected long-term growth ratesand earnings before interest, taxes, depreciation and amortization (EBITDA) from the CGU and alsoconsider market data in determining discount rate in order to calculate the present value of those cashflows.

Management has determined that goodwill and other intangible assets are not impaired. The carryingamount of goodwill and other intangible assets amounted to P=15,730.2 million and P=9,086.7 million as atDecember 31, 2017 and 2016, respectively (see Note 14).

Recoverability of Interests in and Advances to Joint Ventures, Co-venturers and Associates. The JollibeeGroup performs impairment test of its interests in and advances to joint ventures, co-venturers andassociates when there are facts and circumstances indicating that their carrying amounts exceed theirrecoverable amounts. Determining the recoverable amount of assets, which requires the determination offuture cash flows expected to be generated from the continued operations of joint ventures and associates,requires the Jollibee Group to make significant assumptions that can materially affect the consolidatedfinancial statements. These assumptions include long-term growth rates, EBITDA and discount rate.Future events could cause the Jollibee Group to conclude that the assets are impaired. Any resultingimpairment loss could have a material adverse impact on the Jollibee Group’s financial position andperformance.

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The gain (loss) from divestment of subsidiaries and interest in a joint venture recognized in 2017, 2016and 2015 amounted to (P=116.2 million), P=66.7 million and nil, respectively (see Notes 11 and 23). Thecarrying amount of interests in and advances to joint ventures, co-venturers and associates amounted toP=7,492.8 million and P=9,873.3 million as at December 31, 2017 and 2016, respectively (see Note 11).

Realizability of Deferred Tax Assets. The carrying amounts of deferred tax assets at each reporting dateis reviewed and reduced to the extent that sufficient taxable profits are available to allow all or part of thedeferred tax assets to be utilized. The Jollibee Group’s assessment on the recognition of deferred taxassets is based on the forecasted taxable income. This forecast is based on future expectations onrevenue and expenses as well as management’s plans and strategies for the relevant entities.

The carrying amount of deferred tax assets amounted to P=4,372.7 million and P=2,894.1 million as atDecember 31, 2017 and 2016, respectively (see Note 24).

Provisions and Contingencies. The Jollibee Group is involved in litigations, claims and disputeswhich are normal to its business. The estimate of the probable costs for the resolution of these claimshas been developed in consultation with the Jollibee Group’s legal counsels and based upon ananalysis of potential results (see Note 17). The inherent uncertainty over the outcome of thesematters is brought about by the differences in the interpretation and application of laws and rulings.Management believes that the ultimate liability, if any, with respect to the litigations, claims anddisputes will not materially affect the financial position and performance of the Jollibee Group.

Total outstanding provisions amounted to P=825.1 million and P=30.5 million as atDecember 31, 2017 and 2016, respectively (see Notes 17 and 29).

Recoverability of Property, Plant and Equipment and Investment Properties. The Jollibee Groupperforms impairment review of property, plant and equipment and investment properties when certainimpairment indicators are present. Determining the fair value of assets, which requires the determinationof future cash flows expected to be generated from the continued use and ultimate disposition of suchassets, requires the Jollibee Group to make estimates and assumptions that can materially affect theconsolidated financial statements. Future events could cause the Jollibee Group to conclude that theassets are impaired. Any resulting impairment loss could have a material adverse impact on the JollibeeGroup’s financial position and performance.

Reversal of impairment loss amounted to P=2.1 million, P=2.0 million and nil in 2017, 2016 and 2015,respectively, while the provision for impairment loss amounted to P=431.9 million, P=42.7 million andnil in 2017, 2016 and 2015, respectively (see Notes 12 and 22).

The aggregate carrying values of property, plant and equipment and investment properties amountedto P=21,742.8 million and P=17,639.0 million as at December 31, 2017 and 2016, respectively(see Notes 12 and 13).

Impairment of Receivables. The Jollibee Group maintains an allowance for impairment losses at a levelconsidered adequate to provide for potential uncollectible receivables. The level of allowance isevaluated on the basis of factors that affect the collectability of the accounts. These factors include, butare not limited to, the length of the Jollibee Group’s relationship with the customers and counterparties,average age of accounts and collection experience. The Jollibee Group performs a regular review of theage and status of these accounts, designed to identify accounts with objective evidence of impairment andprovide the appropriate allowance for impairment losses. The review is done quarterly and annuallyusing a combination of specific and collective assessments. The amount and timing of recorded expensesfor any period would differ if the Jollibee Group made different judgments or utilized differentmethodologies. An increase in allowance account would increase general and administrative expensesand decrease current assets.

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Provision for impairment loss on receivables in 2017, 2016 and 2015 amounted to P=143.8 million,P=91.4 million and P=325.9 million, respectively, resulting from specific and collective assessments(see Note 22). In addition, reversal of previously recognized provisions amounting to P=20.7 million,P=3.2 million and P=4.6 million were recognized in 2017, 2016 and 2015, respectively (see Note 22).The carrying amount of receivables amounted to P=3,941.1 million and P=3,376.7 million as atDecember 31, 2017 and 2016, respectively (see Note 7).

Net Realizable Value of Inventories. The Jollibee Group writes down inventories to net realizablevalue, through the use of an allowance account, whenever the net realizable value of inventoriesbecomes lower than the cost due to damage, physical deterioration, obsolescence, changes in pricelevels or other causes.

The estimates of net realizable value are based on the most reliable evidence available at the time theestimates are made of the amounts the inventories are expected to be realized. These estimates takeinto consideration fluctuations of prices or costs directly relating to events occurring after reportingdate to the extent that such events confirm conditions existing at reporting date. The allowanceaccount is reviewed on a regular basis to reflect the accurate valuation in the financial records.

The Jollibee Group assessed that the net realizable value for some inventories is lower than cost,hence, it recognized provision for inventory obsolescence amounting to P=7.4 million, P=78.6 millionand P=11.0 million in 2017, 2016 and 2015, respectively (see Note 22).

In addition, reversal of previously recognized provisions amounting to P=53.8 million, P=18.1 millionand P=12.0 million were recognized in 2017, 2016 and 2015, respectively (see Note 22). The carryingamount of inventories amounted to P=6,835.5 million and P=5,987.3 million as at December 31, 2017and 2016, respectively (see Note 8).

Present Value of Defined Benefit Obligation. The pension expense as well as the present value of thedefined benefit obligation are determined using actuarial valuations. The actuarial valuation involvesmaking various assumptions. These include the determination of the discount rates and the future salaryincreases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature,defined benefit obligations are highly sensitive to changes in these assumptions. All assumptions arereviewed at each reporting date.

In determining the appropriate discount rate, management considers the interest rates of governmentbonds that are denominated in the currency in which the benefits will be paid, with extrapolatedmaturities corresponding to the expected duration of the defined benefit obligation.

Future salary increases are based on budgetary salary increases.

The carrying amount of pension liability amounted to P=1,489.5 million and P=1,658.2 million as atDecember 31, 2017 and 2016, respectively (see Note 25).

Share-based Payments. The Parent Company measures the cost of its equity-settled transactions withmanagement and employees by reference to the fair value of the equity instruments at the grant date.Estimating fair value for share-based payment transactions requires determining the most appropriatevaluation model, which is dependent on the terms and conditions of the grant. The estimate also requiresdetermining the most appropriate inputs to the valuation model including the expected life of the shareoption, volatility and dividend yield and making assumptions about these inputs. The fair value of theshare option is being determined using the Black-Scholes Option Pricing Model. The expected life of thestock options is based on the expected exercise behavior of the stock option holders and is not necessarilyindicative of the exercise patterns that may occur. The volatility is based on the average historical pricevolatility which may be different from the expected volatility of the shares of the Parent Company.

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Total expense arising from share-based payment recognized by the Jollibee Group amounted toP=227.5 million, P=241.3 million and P=173.2 million in 2017, 2016 and 2015, respectively (see Notes 22and 26).

Estimation of Useful Lives of Property, Plant and Equipment, Investment Properties and IntangibleAssets with Definite Useful Lives. The Jollibee Group estimates the useful lives of property, plant andequipment, investment properties and intangible assets with definite useful lives based on the periodover which the property, plant and equipment, investment properties and intangible assets areexpected to be available for use and on the collective assessment of the industry practice, internaltechnical evaluation and experience with similar assets. The estimated useful lives of property, plantand equipment, investment properties and intangible assets are reviewed periodically and updated ifexpectations differ from previous estimates due to physical wear and tear, technical or commercialobsolescence and legal or other limits in the use of the said assets. However, it is possible that futurefinancial performance could be materially affected by changes in the estimates brought about bychanges in the factors mentioned above. The amount and timing of recording the depreciation andamortization for any period would be affected by changes in these factors and circumstances. Areduction in the estimated useful lives of property, plant and equipment, investment properties andintangible assets would increase the recorded depreciation and amortization and decrease noncurrentassets.

There was no change in the estimated useful lives of property, plant and equipment, investmentproperties and intangible assets in 2017 and 2016.

Derivative on Put / Call Rights on SJBF LLC. The Jollibee Group has a derivative arising fromput / call rights on the controlling interest in SJBF LLC.

The derivative from put / call rights derive value from the fair value of SJBF LLC’s equity, whichconsiders forecasted cash flows from its operations and its cost of capital, and the price to exercisesuch put / call rights, which consider SJBF LLC’s EBITDA near transaction date and exit multiplesbased on SJBF LLC’s achievement of sales targets. Such derivative is valued using discounted cashflows model, which also takes into account assumptions on the volatility of the fair value of SJBFLLC’s equity and discount rate to arrive at present value, among others. Changes in the assumptionsmentioned above can result to change in the amount recognized as derivative and may result to eithera derivative asset or liability as recognized in the consolidated statements of financial position.

The Jollibee Group recognized a derivative liability amounting to P=51.0 million as atDecember 31, 2017 and a derivative asset amounting to P=78.3 million as at December 31, 2016 fromput / call rights (see Note 11).

Fair Value of Financial Assets and Liabilities. When the fair values of financial assets and financialliabilities recorded or disclosed in the consolidated statement of financial position cannot bemeasured based on quoted prices in active markets, their fair value is measured using valuationtechniques, including the discounted cash flow model. The inputs to these models are taken fromobservable markets where possible, but when this is not feasible, a degree of judgment is required inestablishing fair values. Judgments include considerations of inputs such as liquidity risk, credit riskand volatility. Changes in assumptions about these factors could affect the reported fair value offinancial instruments.

The fair value of financial assets and liabilities are discussed in Note 31.

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5. Segment Information

For management purposes, the Jollibee Group is organized into segments based on the nature of theproducts and services offered and geographical locations. The Executive Management Committeemonitors the operating results of its segments separately for resource allocation and performanceassessment. Segment results are evaluated based on operating profit or loss and is measuredconsistently with operating profit or loss in the consolidated financial statements.

Business SegmentsThe Jollibee Group’s operating businesses are organized and managed separately according to thenature of the products and services provided, with each segment representing a strategic business unitthat offers different products and serves different markets.

ƒ The food service segment is involved in the operations of QSRs and the manufacture of foodproducts to be sold to Jollibee Group-owned and franchised QSR outlets.

ƒ The franchising segment is involved in the franchising of the Jollibee Group’s QSR storeconcepts.

ƒ The leasing segment leases store sites mainly to the Jollibee Group’s independent franchisees.

The following tables present certain information on revenues, expenses, assets and liabilities andother segment information of the different business segments as at and for the years endedDecember 31, 2017, 2016 and 2015:

2017Food Service Franchising Leasing Eliminations Consolidated

Revenues from external customers P=124,972,802 P=6,038,664 P=565,085 P=– P=131,576,551Inter-segment revenues 38,836,601 2,928,473 8,205,610 (49,970,684) –Segment revenues 163,809,403 8,967,137 8,770,695 (49,970,684) 131,576,551Segment expenses (162,923,487) (2,928,473) (8,396,342) 49,970,684 (124,277,618)Impairment losses on receivables, inventories,

property, plant and equipment and otherassets - net of reversals (629,278) – – – (629,278)

Equity in net losses of joint ventures andassociates - net (282,645) – – – (282,645)

Other segment income 2,072,932 – 25,821 – 2,098,753Segment result P=2,046,925 P=6,038,664 P=400,174 P=– 8,485,763Interest income 259,567Interest expense (405,820)Income before income tax 8,339,510Provision for income tax (1,666,928)Net income P=6,672,582

Assets and LiabilitiesSegment assets P=85,523,719 P=– ₱351,363 P=– P=85,875,082Deferred tax assets - net 3,908,103 – 710 – 3,908,813Consolidated assets P=89,431,822 P=– P=352,073 P=– P=89,783,895

Segment liabilities P=29,587,940 P=– P=83,937 P=– P=29,671,877Deferred tax liabilities - net 1,188,995 – – – 1,188,995Long-term debt - including current portion 16,117,271 – – – 16,117,271Income tax payable 221,713 – 2,060 – 223,773Consolidated liabilities P=47,115,919 P=– P=85,997 P=– P=47,201,916

Other Segment InformationCapital expenditures P=8,974,430 P=– P=– P=– P=8,974,430Depreciation and amortization 4,739,924 – 5,242 – 4,745,166

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Revenues from external customers P=108,263,045 P=5,268,921 P=279,504 P=– P=113,811,470Inter-segment revenues 33,576,257 1,757,050 5,386,826 (40,720,133) –Segment revenues 141,839,302 7,025,971 5,666,330 (40,720,133) 113,811,470Segment expenses (140,568,751) (1,757,050) (5,551,305) 40,720,133 (107,156,973)Impairment losses on receivables, inventories and

property, plant and equipment - net of reversals (189,450) – – – (189,450)Equity in net losses of joint ventures and associates - net (337,145) – – – (337,145)Other segment income 1,576,667 – 6,256 – 1,582,923Segment result P=2,320,623 P=5,268,921 P=121,281 P=– 7,710,825Interest income 286,913Interest expense (267,618)Income before income tax 7,730,120Provision for income tax (1,676,611)Net income P=6,053,509

Assets and LiabilitiesSegment assets P=69,760,738 P=– P=382,119 P=– P=70,142,857Deferred tax assets - net 2,582,785 – 2,710 – 2,585,495Consolidated assets P=72,343,523 P=– P=384,829 P=– P=72,728,352

Segment liabilities P=25,391,995 P=– P=83,679 P=– P=25,475,674Deferred tax liabilities - net 506,577 – – – 506,577Long-term debt - including current portion 12,155,366 – – – 12,155,366Income tax payable 307,505 – 1,826 – 309,331Consolidated liabilities P=38,361,443 P=– P=85,505 P=– P=38,446,948



Revenues from external customers P=96,052,831 P=4,518,123 P=208,764 P=– P=100,779,718Inter-segment revenues 31,188,088 1,493,169 4,284,181 (36,965,438) –Segment revenues 127,240,919 6,011,292 4,492,945 (36,965,438) 100,779,718Segment expenses (126,142,364) (1,493,169) (4,434,288) 36,965,438 (95,104,383)Impairment losses on receivables and inventories -

net of reversals (320,304) – – – (320,304)Equity in net losses of joint ventures and an associate (189,086) – – – (189,086)Other segment income 1,229,687 – 7,070 – 1,236,757Segment result P=1,818,852 P=4,518,123 P=65,727 P=– 6,402,702Interest income 257,783Interest expense (225,544)Income before income tax 6,434,941Provision for income tax (1,388,608)Net income P=5,046,333


Geographical SegmentsThe Jollibee Group’s geographical segments are based on the location of the assets producingrevenues in the Philippines and in other locations (which includes PRC, USA, UAE, Hongkong,Brunei, Saudi Arabia, Singapore, Kuwait, Qatar and Vietnam). Sales to external customers disclosedin the geographical segments are based on the geographical location of the customers.

Majority of the Jollibee Group’s revenues were generated from the Philippines, which is the ParentCompany’s country of domicile.

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The Jollibee Group does not have a single external customer which revenue amounts to 10% or moreof the Jollibee Group’s revenues.

The following tables present segment revenues, segment assets and capital expenditures of theJollibee Group’s geographical segments:

2017Philippines International Eliminations Consolidated

Segment revenues P=103,157,177 P=28,937,959 (P=518,585) P=131,576,551Segment assets 47,459,418 38,415,664 – 85,875,082Capital expenditures 7,382,960 1,591,470 – 8,974,430


Segment revenues P=90,625,295 P=23,594,721 (P=408,546) P=113,811,470Segment assets 42,562,829 27,580,028 – 70,142,857Capital expenditures 5,493,783 1,224,056 – 6,717,839


Segment revenues P=78,421,701 P=22,675,693 (P=317,676) P=100,779,718Capital expenditures 3,547,641 1,149,126 – 4,696,767

6. Cash and Cash Equivalents and Short-term Investments

This account consists of:

2017 2016Cash on hand P=344,976 P=295,716Cash in banks 15,120,958 9,672,006Short-term deposits 5,641,540 6,765,624

P=21,107,474 P=16,733,346

Cash in banks earn interest at the respective savings or special demand deposit rates. Short-termdeposits are made for varying periods of up to three months depending on the immediate cashrequirements of the Jollibee Group, and earn interest at the respective short-term deposit rates.

The Jollibee Group also has short-term investments amounting to P=1,413.4 million andP=726.0 million as at December 31, 2017 and 2016, respectively. These pertain to deposits withmaturities of more than three months but less than a year.

Interest income earned from cash and cash equivalents and short-term investments amounted toP=149.3 million, P=136.7 million and P=118.0 million in 2017, 2016 and 2017, respectively(see Note 23).

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7. Receivables


2017 2016Trade P=4,224,981 P=3,608,583Less allowance for impairment loss 690,119 579,792

3,534,862 3,028,791Advances to employees 144,791 112,652Current portion of employee car plan receivables 88,971 83,383Interest receivable 11,911 10,807Others 160,538 141,069

P=3,941,073 P=3,376,702

The terms and conditions of the receivables are as follows:

ƒ Trade receivables are noninterest-bearing and are generally settled on 30-60 day terms.

ƒ Advances to employees, current portion of employee car plan receivables and other receivablesare normally collectible within the next financial year. Other receivables consist of receivablesfrom the retirement plan, the Social Security System (SSS) and insurance claims.

The movements in the allowance for impairment loss on trade receivables as at December 31 are asfollows:

2017 2016Balance at beginning of year P=579,792 P=520,055Provisions (see Note 22) 143,772 91,415Reversals (see Note 22) (20,705) (3,188)Write-offs (12,797) (29,327)Translation adjustments 57 837Balance at end of year P=690,119 P=579,792

The provisions in 2017 and 2016 resulted from specific and collective impairment assessments ontrade receivables performed by the Jollibee Group.

8. Inventories


2017 2016At cost:

Food supplies and processed inventories P=6,377,956 P=5,458,186Packaging, store and other supplies 434,999 461,630

6,812,955 5,919,816At net realizable value -

Novelty items 22,559 67,530Total inventories at lower of cost and net

realizable value P=6,835,514 P=5,987,346

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The cost of novelty items carried at net realizable value amounted to P=55.1 million andP=146.2 million as at December 31, 2017 and 2016, respectively.

The movements in the allowance for inventory obsolescence for novelty items as at December 31 areas follows:

2017 2016Balance at beginning of year P=78,647 P=18,180Reversals (see Note 22) (53,819) (18,129)Provisions (see Note 22) 7,443 78,621Translation adjustments 294 (25)Balance at end of year P=32,565 P=78,647

9. Other Current Assets


2017 2016Deposits to suppliers and other third parties P=1,417,735 P=1,278,972Prepaid expenses:

Taxes 1,499,728 1,019,538Rent 526,809 625,560Insurance and others 211,505 288,887

Receivable from sale of business (see Note 11) 76,400 214,836Supplies 111,378 117,546

P=3,843,555 P=3,545,339

Terms and conditions of other current assets are as follows:

ƒ Deposits to suppliers and other third parties are generally applied to purchase of inventories andavailment of services within the next financial year.

ƒ Prepaid taxes mainly represent creditable withholding taxes that can be applied in the followingyear against the corporate income tax due or can be claimed as tax refund from the BIR. Thisalso includes prepaid real property taxes which are expected to be utilized within the next twelvemonths.

ƒ Prepaid rent pertains to the rent of store and office spaces that are paid in advance. Prepaid rent,insurance and others are normally utilized within the next financial period.

ƒ Receivable from sale of business pertains to the current portion of receivables from GuangxiZong Kai Food Beverage Investment Company Limited (GZK) as a result of the Jollibee Group’sdivestment in SPW (see Note 11).

ƒ Supplies consist of various office and administrative supplies.

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10. Available-for-Sale Financial Assets

This account consists mainly of shares in golf and leisure clubs as at December 31, 2017 and 2016.

The movements in this account are as follows:

2017 2016Balance at beginning of the year P=26,212 P=21,462Additions 450 –Change in fair value 3,200 4,750Balance at end of the year P=29,862 P=26,212

The movement in unrealized gain on change in fair value of AFS financial assets account in 2017 and2016 are as follows:

2017 2016Balance at beginning of the year P=4,750 P=–Unrealized gain due to change in fair value 3,200 4,750Balance at end of the year P=7,950 P=4,750

11. Business Combinations, Incorporation of New Subsidiaries, Interests in and Advances to JointVentures, Co-venturers and Associates, Divestments and Cessation of Operations

A. Business Combinations

Business Combination Achieved in Stages

SuperFoods Group. On January 20, 2012, upon fulfillment of certain legal and regulatoryrequirements in Vietnam, the Jollibee Group, through JWPL, acquired effective ownership of 50%share in the business of the SuperFoods Group (includes SF Vung Tau Joint Stock Company (SFVT),Highlands Coffee Service JSC, Quantum Corp., Pho24 Corp., Blue Sky Holdings Limited Hongkong(Blue Sky), Sino Ocean Asia Limited Hongkong and Blue Sky Holdings Limited Macau) throughformation of joint ventures. This consists of a 49% share in SFVT in Vietnam and a 60% share inBlue Sky in Hongkong (the SuperFoods Group Holding Companies). The formation of joint venturesis an implementation of the Framework Agreement made on May 20, 2011 between the JollibeeGroup, through JSF, a 99% subsidiary of JWPL, and its co-venturers, Viet Thai International JointStock Company (VTIJS) and Viet Thai International Company Limited (VTI) (collectively, VTIGroup). The SuperFoods Group operates the chain of Highlands Coffee shops, Pho 24 restaurantsand Hard Rock Cafe stores, whose market is mostly in Vietnam, Hong Kong and Macau. TheFramework Agreement provided for the Jollibee Group to contribute a total of USD25.0 million(P=1,079.6 million) to gain 50% effective ownership in the joint ventures. Loans and deposits weremade to the SuperFoods Group and the co-venturers prior to the formation of the joint ventures in2012.

Pursuant to the Framework Agreement, the preliminary consideration for the 50% share inSuperFoods Group amounted to a cash payment of USD25.0 million (P=1,079.6 million) in 2011.

On October 22, 2015, JSF contributed additional investment in SuperFoods Group amounting toUSD0.7 million (P=34.1 million).

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The Supplemental Agreement further provides that JWPL shall be required to pay the co-venturers anadditional amount in 2016 based upon achieving a positive amount determined in accordance with aformula contained in the agreement (earn-out formula). Based on management’s assessment usingthe earn-out formula, no additional consideration needs to be recognized as at January 20, 2012, dateof acquisition, and as at December 31, 2012 to 2016.

In accordance with the Framework Agreement, the Jollibee Group, through JSF, extended loans toSurperFoods Group. First and Second Supplements to the Loan Agreement were executed thatbasically extended the loan due dates.

On November 18, 2016, the Jollibee Group, through JSF, entered into an agreement with its co-venturers, VTIJS, to make SuperFoods Group a public company by listing in the Vietnam StockExchange with an Initial Public Offering (IPO) on or before July 2019. As part of the agreement, theownership of the SuperFoods Group will be adjusted with the Jollibee Group, owning 60% of thejoint venture and VTI owning 40%. With this agreement, the following loan structures wereamended, as documented in the Third and Fourth Supplements to the Loan Agreement signed onDecember 29, 2016 and March 28, 2017, respectively.

Advances to SuperFoods Group

Advances to SFVT. On April 30, 2013, an additional loan was extended to the co-venturers in theSuperFoods Group amounting to USD1.0 million (P=41.2 million) payable in February 2014 but wasextended to September 30, 2017. The loan bears interest of 5% per annum. With the extension toSeptember 30, 2017, the sum of principal and the accumulated interest as at April 2015, weresubjected to 4.99% interest per annum. The loan was agreed to be used for general corporatepurposes. Total interest from this loan recognized as interest income amounted to USD0.003 million(P=0.1 million), USD0.06 million (P=2.8 million) and USD0.05 million (P=2.7 million) for the periodended May 10, 2017 and years ended December 31, 2016 and 2015, respectively.

On August 22, 2013, an additional loan was extended to the co-venturers in the SuperFoods Groupamounting to USD1.0 million (P=44.1 million) payable in August 2014 but was extended to September30, 2017. As at August 21, 2014, the principal was subject to 5% interest per annum. However, withthe extension to September 30, 2017, the sum of principal and the accumulated interest startingAugust 22, 2014 were subjected to 4.99% interest per annum. Total interest from this loanrecognized as interest income amounted to USD0.003 million (P=0.1 million), USD0.06 million(P=2.8 million) and USD0.05 million (P=2.7 million) for the period ended May 10, 2017 and yearsended December 31, 2016 and 2015, respectively.

The loans granted on April 30, 2013 and August 22, 2013, including accrued interests as at May 10,2017, were converted to additional equity on SFVT upon the completion of the SettlementTransaction Documents and the approval of certain legal and regulatory requirements in Vietnam onMay 10, 2017 as provided in the Third Supplement to the Loan Agreement signed on December 29,2016.

Advances to Blue Sky. On June 10, 2011, a loan was extended to Blue Sky, the Hong Kong-basedholding company, amounting to USD5.0 million (P=216.0 million) payable in June 2014. As at June2014, the principal was subject to 5% interest per annum. However, with the extension of the duedate to September 30, 2017, the sum of principal and the accumulated interest as at June 2014 weresubjected to 4.99% interest per annum. Total interest from this loan recognized as interest incomeamounted to USD0.01 million (P=0.7 million), USD0.3 million (P=15.4 million) and USD0.3 million(P=14.7 million) for the period ended May 10, 2017 and years ended December 31, 2016 and 2015,respectively.

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On May 7, 2012, an additional loan was extended to Blue Sky amounting to USD2.5 million(P=105.9 million) payable in May 2014. As at May 9, 2014, the principal was subjected to 5% interestper annum. However, with the extension of the due date to September 30, 2017, the sum of principaland the accumulated interest starting May 10, 2014 were subjected to 4.99% interest per annum.Total interest from this loan recognized as interest income amounted to USD0.01 million(P=0.3 million), USD0.1 million (P=7.4 million) and USD0.1 million (P=7.1 million) for the periodended May 10, 2017 and years ended December 31, 2016 and 2015, respectively.

With the Third Supplement to the Loan Agreement signed on December 29, 2016 and upon thecompletion of the Settlement Transaction Documents, the loans to Blue Sky including accruedinterests as at May 10, 2017 were converted into equity except for the balance of USD2.9 million(P=145.8 million). The carrying value of the remaining loan of Blue Sky to the Parent Company iseliminated in the consolidation process as at December 31, 2017.

The conversion of the loans and related accrued interests into equity is part of the agreement enteredinto by the Jollibee Group with VTI Group in adjusting the ownership in SuperFoods Group.

On May 10, 2017, a key step in the plan to list SuperFoods Group as a public company in theVietnam Stock Exchange was completed by adjusting the ownership interest in the SuperFoodsGroup to 60% Jollibee Group and 40% VTI Group from its previous 50-50 ownership share. As aresult, Jollibee Group obtained control over SuperFoods Group and started consolidating thesecompanies as of acquisition date.

To help fund the SuperFoods Group’s expansion plans, the Jollibee Group will henceforth take thelead in the former’s capital raising activities and will work with various financial institutions inVietnam and other part of Asia in this undertaking.

The details of the Jollibee Group’s interests in the SuperFoods Group as at December 31 are asfollows:

2017 2016Interest in a joint venture – cost P=1,120,659 P=1,120,659Cumulative equity in net losses:

Balance at beginning of year (367,155) (323,331)Equity in net earnings (loss) for the period 17,484 (43,824)Balance at transfer date/end of year (349,671) (367,155)

Transferred to investment in a subsidiary in 2017 (770,988) −− 753,504

Advances to SuperFoods Group:Balance at beginning of year 604,638 559,825Converted to equity during the year (458,871) −Accrual of interest − 28,441Transferred to advances to a subsidiary (145,767) −Translation adjustments and others − 16,372Balance at end of year − 604,638

P=− P=1,358,142

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The fair value of the identifiable assets acquired and liabilities assumed as at the date of theacquisition were as follows:

Cash and cash equivalents P=105,251Receivables 99,746Inventories 86,664Other current assets 137,035Property, plant and equipment (see Note 12) 846,327Trademarks (see Note 14) 4,145,013Other noncurrent assets 223,240

Total identifiable assets acquired 5,643,276Less:

Trade payables and other current liabilities 488,645Loans and other noncurrent liabilities (see Note 18) 569,523Deferred tax liability 744,006Total identifiable liabilities assumed 1,802,174

Net identifiable assets acquired P=3,841,102

The Jollibee Group’s investment in SuperFoods Group was previously accounted for as investment ina joint venture. In accordance with PFRS 3, with the Jollibee Group’s acquisition of control overSuperFoods Group in 2017, the fair value of the previously held interest amounted toP=2,099.7 million and the resulting gain from the re-measurement of the 50% previously held interestamounted to P=1,328.7 million. A total of P=2,712.7 million loan to SuperFoods Group was alsoconverted to equity which was included in the consideration transferred.

The non-controlling interest was recognized as a proportion of the net assets acquired.

The amount of provisional goodwill recorded at acquisition date amounted to P=2,507.8 milliondetermined as follows:

Fair value of consideration transferred:Fair value of previously held interest P=2,099,721Advances converted to equity:

Advances to VTI Group (see Part D of this note) 2,253,870Advances to SuperFoods Group 458,871

2,712,741Non-controlling interest’s share in the net assets acquired 1,536,441Aggregate amount 6,348,903Less acquisition date - fair value of net assets acquired 3,841,102Goodwill (see Note 14) P=2,507,801

The net cash inflow from the acquisition is as follows:Cash acquired from subsidiary P=105,251

The provisional goodwill of P=2,507.8 million is attributable to synergies and other benefits from theacquisition of SuperFoods Group.

From the acquisition date, SuperFoods Group contributed P=67.3 million net income to the JollibeeGroup. If the business combination had taken place at the beginning of 2017, contribution toconsolidated revenue and net income for the year would have been P=3,715.0 million andP=100.9 million, respectively.

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Summarized financial information of the SuperFoods Group based on its financial statements andreconciliation with the carrying amount of the investment in the consolidated financial statements forthe year ended December 31, 2016 are as follows:

Current assets P=564,801Noncurrent assets 1,244,239Total assets P=1,809,040

Current liabilities P=772,840Noncurrent liabilities 1,032,085Total liabilities P=1,804,925

Cash and cash equivalents P=69,880Current financial liabilities (excluding trade

payables and other current liabilities andprovisions) −

Noncurrent financial liabilities (excludingprovisions) 1,032,085

The amounts of the income and expense accounts for the period ended May 10, 2017 and for the yearended December 31, 2016 include the following:

May 2017 December 2016Revenues P=1,467,717 P=3,213,339Depreciation and amortization 67,865 201,971Interest income 1,456 6Interest expense 24,284 74,645Provision for income tax 27,406 38,727Net income (loss) 34,968 (87,648)Total comprehensive income (loss) 34,968 (87,648)

2016Net assets P=4,115Proportion of the Jollibee Group’s ownership 50%

2,057Goodwill 708,891Cumulative translation adjustments 42,556

P=753,504

Business Combination through Acquisition of Equity Shares

Acquisition in 2016

Goldstar Food Trade and Service Company Ltd (GSC). The Jollibee Group, through its wholly-owned subsidiary, Jollibee Vietnam Corporation Ltd., entered into a Capital Transfer Agreement toacquire 100% equity of GSC, a local Vietnamese company operating as miscellaneous food stores inPho Tu, Vietnam. The capital transfer was for a cash consideration of USD0.2 million (P=8.6 million).The transfer was duly approved by the government of Vietnam in September 2016.

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The fair value of the identifiable assets acquired and liabilities assumed as at the date of theacquisition were as follows:

Cash and cash equivalents P=121,959Receivables 1,480Inventories 15,886Other current assets 80,447Property, plant and equipment (see Note 12) 174,088Other noncurrent assets 19,400

Total identifiable assets acquired 413,260Less:

Trade payables and other current liabilities 213,463Short-term loans 358,127Total identifiable liabilities assumed 571,590

Net identifiable liabilities assumed P=158,330

The amount of final goodwill recorded at acquisition date amounted to P=166.9 million, determined asfollows:

Fair value of the consideration transferred:Cash consideration P=8,601Add acquisition date - net of the fair value of liabilities assumed 158,330Goodwill (see Note 14) P=166,931

The net cash inflow from the acquisition is as follows:Cash acquired from subsidiary P=121,959Less cash paid on acquisition 8,601Total P=113,358

The goodwill of P=166.9 million recognized arising from the acquisition of GSC consists largely of thesynergies and economies of scale expected from combining the operations of GSC and the JollibeeGroup.

In 2016, GSC contributed P=15.9 million net income to the Jollibee Group. If the acquisition hadtaken place at the beginning of 2016, revenues would have been P=169.5 million and net income forthe Jollibee Group would have been P=49.2 million in 2016.

Business Combination through Purchase of Assets

Chowking US Operations. On May 27, 2011, the Jollibee Group, through its wholly-ownedsubsidiary, TTC, entered into an Asset Purchase Agreement with Fortune Capital Corporation (FCC),owner and operator of all Chowking stores in the USA as the master licensee therein, to purchase theproperty and equipment, inventories and security deposits of the twenty (20) existing stores of FCC.The purchase consideration amounted to USD16.0 million (P=693.3 million). The Jollibee Group paidUSD12.0 million (P=520.0 million) of the total consideration as at December 31, 2011, balance ispayable over the next five (5) years.

The balance of the liability for acquisition of Chowking US operations amounting to USD0.7 million(P=34.6 million) in 2015 was fully settled on May 27, 2016.

With this acquisition, the Jollibee Group took a more active role to further the growth of theChowking business in the USA.

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B. Incorporation of New Subsidiaries

Golden Piatto Pte. Ltd. (Golden Piatto). On March 31, 2017, the Jollibee Group, through its whollyowned subsidiary, GPPL, entered into an agreement with Blackbird Holdings Pte. Ltd. (Blackbird) toown and operate Cibo Felice S. R. L. (Cibo Felice), the first Jollibee store in Italy. As atDecember 31, 2017, Cibo Felice has not yet started its commercial operations.

Golden Piatto incorporated on April 12, 2017, is 75% owned by GPPL and 25% owned by Blackbird.GPPL and Blackbird have committed to invest up to EUR1million (P=60.2 million) to Golden Piatto,of which EUR0.8 million (P=48.2 million) will be contributed by GPPL in proportion to its ownershipin the business. As at December 31, 2017, capital contribution of GPPL to Golden Piatto amountedto USD0.9 million (P=43.7 million).

Honeybee Foods (Canada) Corporation (HFCC). On May 7, 2015, the Jollibee Group, throughHFC, incorporated HFCC to own and operate Jollibee restaurants in Canada. As at December 31,2017, no capital investment has been made other than the investment to incorporate.

HFCC’s first Jollibee store located in Winnipeg, Canada started its commercial operations onDecember 15, 2016.

Golden Cup Pte. Ltd. (Golden Cup). On December 19, 2014, the Jollibee Group, through JWPL,entered into a joint agreement to form Golden Cup together with Jasmine Asset Holding Ltd.(Jasmine), to own and operate Dunkin’ Donuts restaurants in the PRC.

JWPL owns 60% of the business and Jasmine owns the other 40%. JWPL and Jasmine havecommitted to invest up to USD300.0 million to the Joint Venture, of which up to USD180.0 millionwill be contributed by JWPL in proportion to its ownership in the business. Golden Cup wasincorporated on December 22, 2014. The first store started its commercial operations in February2016.

As at December 31, 2017 and 2016, capital contributions of the Jollibee Group to Golden Cupamounted to USD27.6 million (P=1,340.0 million).

Pursuant to the Master Franchise Agreement signed on January 5, 2015 between Dunkin’ DonutsFranchising LLC and Golden Cup, a market entry fee amounting to USD2.1 million(P=93.9 million) was paid by Golden Cup to Dunkin’ Donuts on the signing date (see Note 15).

C. Material Non-Controlling InterestThe Jollibee Group has subsidiaries with material non-controlling interest as provided below.

Proportion of equity interest held by non-controlling interest:

Country of incorporation and operation 2017 2016 2015GCPL Singapore 40% 40% −Mang Inasal Philippines − − 30%HBFPPL Singapore − − 30%San Ping Wang PRC − − 45%

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During 2016, the following non-controlling interest were derecognized either by acquisition of theminority interest or by divestment of interest as set out below:

Mang InasalOn April 22, 2016, the Parent Company acquired the remaining 30% minority stake in Mang Inasalfor the purchase price of P=2,000.0 million in a cash transaction. The acquisition resulted to MangInasal becoming a wholly owned subsidiary of the Parent Company.

The difference between the acquisition cost and the carrying value of the minority interest at the dateof the acquisition, amounting to P=1,217.6 million, was recognized under the “Excess of cost over thecarrying value of non-controlling interests acquired”, a separate component of “Equity Attributable toEquity Holders of the Parent Company” in the consolidated statements of financial position (seeNote 19).

HBFPPLOn February 23, 2016, JWPL entered into an agreement with Hua Xia Harvest Holdings Pte. Ltd.(Hua Xia) to acquire Hua Xia’s 30% equity shareholding in its subsidiary, HBFPPL. Under the termsof the agreement, Hua Xia shall sell and convey to JWPL its 30% equity interests in HBFPPL whileHBF-Anhui shall sell and convey to Hua Xia’s nominee entity the assets and contracts related to thethird-party supply business.

The acquisition by JWPL was completed on November 21, 2016 with the approval of the Chinagovernment on the transfer of assets related to the third-party supply business. This resulted to a losson transfer of assets amounting to P=8.2 million which is recognized in the statements ofcomprehensive income (see Note 23). The transfer of the 30% equity was approved and registered inSingapore on November 22, 2016. With the transfer, JWPL now owns 100% of HBFPPL.

The purchase price was USD10.3 million (P=514.9 million). The difference between the acquisitioncost and the carrying value of the minority interest at the date of the acquisition amounting toP=391.8 million was recognized under the “Excess of cost over the carrying value of non-controllinginterests acquired” (see Note 19).

San Pin WangSee Part E of this note for the discussion on the divestment of San Pin Wang.

The summarized financial information of GCPL in 2017 and 2016 are provided below. Theseinformation are based on amounts before intercompany elimination.

Summarized Statements of Comprehensive Income

2017 2016Revenues P=318,082 P=100,920Net loss (674,982) (324,509)Other comprehensive income 8,109 8,269Total comprehensive loss (666,873) (316,240)Total comprehensive loss attributable to

non-controlling interests (266,749) (126,496)Dividends paid to non-controlling

interests – −

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Summarized Statements of Financial Position

2017 2016Current assets P=1,513,179 P=2,001,100Noncurrent assets 373,698 439,532Current liabilities 709,617 596,500Noncurrent liabilities - -Total equity 1,177,260 1,844,132Equity attributable to non-controlling

interests 470,904 737,653

Summarized Cash Flow Information

2017 2016Net cash used in operating activities (P=430,134) P=31,950Net cash provided by investing activities 57,512 (237,729)Net cash provided by financing activities – 1,789,020Net decrease in cash and cash equivalents (372,622) 1,583,241

D. Interests in and Advances to Joint Ventures, Co-venturers and Associates

2017 2016Interests in joint ventures:

SJBF LLC P=5,460,055 P=5,258,923Cargill Joy Poultry Meats Production, Inc. 151,458 229,481Golden Bee Foods Restaurant LLC 198,767 100,163WJ Investments Limited – 151,629SuperFoods Group – 753,504

5,810,280 6,493,700Interests in associates:

Entrek (B) SDN BHD 137,237 112,227Cargill Joy Poultry Realty, Inc. 9,664 9,984

146,901 122,211Advances to:

VTI Group 1,535,590 2,652,748SuperFoods Group – 604,638

1,535,590 3,257,386P=7,492,771 P=9,873,297

Interests in Joint Ventures

Advances to VTI Group. The details of the Jollibee Group’s advances to VTI Group as atDecember 31 are as follows:

2017 2016Balance at beginning of year P=2,652,748 P=1,988,400Converted to equity during the year (2,253,870) –Additions during the year 1,059,786 447,480Accrual of interest 38,952 89,200Translation adjustments and others 37,974 127,668Balance at end of year P=1,535,590 P=2,652,748

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Loan to VTI Group amounting to USD35.0 million (P=1,523.9 million), extended on June 9, 2011, ispayable in December 2016. In accordance with the Fourth Supplement to the Loan Agreement signedon March 28, 2017, the due date of the loan was further extended to May 31, 2017. This loan issecured by a mortgage by the VTI Group of all their shares in SuperFoods Group.

The loan bears interest of 5% per annum payable in lump sum on the due date. The loan was agreedto be used for general corporate purposes. Total interest from this loan, recognized as interestincome, amounted to USD0.6 million (P=31.6 million), USD1.8 million (P=88.5 million) andUSD1.8 million (P=88.2 million) for the period ended May 10, 2017 and years ended December 31,2016 and 2015, respectively.

The Third Supplement to the Loan Agreement signed on December 29, 2016 provides the assignmentof the USD35.0 million (P=1,735.3 million) loan receivable including accrued interests as atDecember 31, 2016 from JSF to JWPL. With the completion of the Settlement TransactionDocuments and upon the approval of certain legal and regulatory requirements in Vietnam onMay 10, 2017, the loan, including interests as at the same day, was contributed as additional capital tothe SuperFoods Group.

On December 14, 2016, a loan of USD9.0 million (P=447.5 million) was extended to the VTI Groupwith an interest rate of 3.5% per annum. The loan was agreed to be used for SuperFoods Group’scapital needs. The loan is part of the total agreed loan of USD30.0 million payable in eight (8) yearsfrom the first utilization date. On June 2, 2017, the additional loan of USD21.0 million(P=1,060.0 million) was granted to the VTI Group. The loan is secured by pledged shares in SFVTand Blue Sky which will be released in proportion to the amount of the principal paid. Total interestfrom this loan recognized as interest income amounted to USD0.8 million (P=37.6 million) andUSD0.1 million (P=0.8 million) for the years ended December 31, 2017 and 2016.

SuperFoods Group. See Part A of this note for the discussion on the Interest and advances toSuperFoods Group.

SJBF LLC (SJBF). On October 8, 2015, the Jollibee Group, through JWPL, incorporated Bee Good!Inc. (BGI) in the state of Delaware, USA.

On October 13, 2015, BGI entered into an agreement with Smashburger Master LLC (Master) toacquire 40% of the outstanding equity interest of SJBF, the parent company of the entities comprisingthe Smashburger business, a fast casual better burger restaurant business based in the United States.

The consideration for BGI’s 40% stake in SJBF amounted to USD99.5 million (P=4,629.5 million).Thereafter, a post-closing adjustment of USD0.8 million (P=36.6 million) to the purchase price at theclosing date was recognized based on a pre-agreed mechanism with Master. The Jollibee Groupsettled with Master USD99.5 million (P=4,629.5 million) of the transaction price in December 2015.The remaining USD0.8 million (P=36.6 million) was settled in January 2016. In addition, acquisition-related costs consisting of professional fees for the Jollibee Group’s financial, tax, accounting andlegal advisors for the transaction amounted to P=221.8 million.

In February 2016, September 2016 and November 2016, BGI made additional investments to SJBFamounting to USD4.0 million (P=189.0 million), USD4.6 million (P=221.4 million) andUSD8.0 million (P=397.8 million), respectively.

On September 7, 2017 and March 24, 2017, BGI made additional investments to SJBF amounting toUSD2.5 million (P=128.5 million) and USD8.0 million (P=402.6 million), respectively. The additionalinvestments did not change BGI’s equity interest in SJBF.

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The agreement between BGI and Master dated October 27, 2015 provides for a mechanism whereinMaster can sell or BGI can purchase up to an additional 35% equity interest in SJBF (First Put/CallRight) between January 1, 2018 and January 1, 2021, and up to an additional 25% equity interestfrom the closing date or after expiration of the First Put/Call Right and five years thereafter (SecondPut/Call Right). The purchase price of the remaining 60% will be based on the achievement ofcertain financial performance targets agreed between BGI and Master.

However, on March 14, 2017, BGI and Master have amended their original agreement to enable BGIto purchase more shares in SJBF. With the amendment, BGI shall be entitled to purchase fromMaster an additional 45% of SJBF shares between the years 2018 and 2021, and to acquire thebalance of 15% between 2019 at the earliest and 2026 at the latest.

On March 8, 2018, BGI executed the Purchase Agreement with Master for the acquisition of anadditional 45% share of SJBF. This will increase BGI’s ownership in SJBF from current 40% to85%. The transaction, valued at USD100.0 million (P=5.2 billion), is expected to be completed in oneto two months subject to government approvals in the USA and meeting certain closing conditions.JFC will pay Master through BGI in cash.

As a result of the first and second Put/Call Rights in the agreement, the Jollibee Group allocatedP=75.0 million of the purchase price to a derivative asset in 2015, representing the fair value of theFirst and Second Put/Call Rights on transaction date. The Jollibee Group recognized a derivativeliability amounting to P=51.0 million as at December 31, 2017 and a derivative asset amounting toP=78.3 million as at December 31, 2016 related to Put/Call Rights. The marked-to-market loss in 2017amounted to P=129.3 million and the marked-to-market gain in 2016 amounted to P=3.3 million(see Note 23).

The details of Jollibee Group’s interest in SJBF as at December 31, 2017 and 2016 are as follows:

2017 2016Interest in a joint venture - cost:

Balance at beginning of year P=5,620,834 P=4,812,854Additions during the year 531,147 807,980Balance at end of year 6,151,981 5,620,834

Cumulative equity in net losses:Balance at beginning of year (361,911) (70,122)Equity in net loss during the year (330,015) (291,789)Balance at end of year (691,926) (361,911)

P=5,460,055 P=5,258,923

Summarized financial information of SJBF based on its financial statements and reconciliation withthe carrying amount of the investment in the consolidated financial statements are set out below:

2017 2016Current assets P=2,024,938 P=1,910,435Noncurrent assets 4,792,879 5,886,847Total assets P=6,817,817 P=7,797,282

Current liabilities P=5,164,688 P=1,287,258Noncurrent liabilities 941,102 5,439,780Total liabilities P=6,105,790 P=6,727,038

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The amounts of assets and liabilities above include the following:

2017 2016Cash and cash equivalents P=1,459,318 P=1,338,834Current financial liabilities (excluding trade

payables and other current liabilities andprovisions) 4,047,423 −

Noncurrent financial liabilities (excludingprovisions) 20,613 4,217,929

The amounts of the income and expense accounts include the following:

2017 2016 2015Revenues P=9,905,070 P=10,318,671 P=1,590,617Depreciation and amortization 599,675 576,811 85,023Interest expense 340,820 332,618 45,588Net loss (825,038) (729,474) (175,304)Total comprehensive loss (825,038) (729,474) (175,304)

2017 2016Net assets P=712,027 P=1,070,244Proportion of the Jollibee Group’s ownership 40% 40%

284,811 428,098Goodwill 4,837,671 4,837,671Cumulative translation adjustments 337,573 (6,846)

P=5,460,055 P=5,258,923

Cargill Joy Poultry Meats Productions, Inc. (Cargill Joy Poultry). On May 24, 2016, the ParentCompany entered into an agreement with Cargill Philippines, Inc., a wholly owned subsidiary ofCargill, Inc. (Cargill), to establish a joint venture entity to build and operate a poultry processingplant in Sto. Tomas, Batangas, Philippines. Cargill will oversee the setting up, management andoperations of this facility.

The joint venture entity, incorporated as Cargill Joy Poultry Meats Production, Inc., is 70% owned byCargill and 30% owned by the Parent Company. This entity will create an estimated 1,000 new full-time jobs and develop new opportunities in the farming community in Batangas and nearby provincesas local poultry farmers are contracted to grow chicken to supply the requirements of the processingplant. The poultry processing plant started its commercial operations on December 5, 2017.

The details of Jollibee Group’s interest in Cargill Joy Poultry as at December 31, 2017 and 2016 areas follows:

2017 2016Interest in a joint venture – cost P=233,406 P=233,406Cumulative equity in net losses:

Balance at beginning of year (3,925) −Equity in net loss during the year (78,023) (3,925)Balance at end of year (81,948) (3,925)

P=151,458 P=229,481

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Summarized financial information of the Cargill Joy Poultry based on its financial statements andreconciliation with the carrying amount of the investment in the consolidated financial statements areset out below:

2017 2016Current assets P=992,531 P=769,608Noncurrent assets 1,600,832 −Total Assets P=2,593,363 P=769,608

Current liabilities P=2,060,619 P=4,672Noncurrent liabilities 27,884 −Total liabilities P=2,088,503 P=4,672


2017 2016Cash and cash equivalents P=83,406 P=631,739Current financial liabilities (excluding trade

payables and other current liabilities andprovisions) 375,116 1,105

Noncurrent financial liabilities (excludingprovisions) 27,884 −


2017 2016Revenues P=1,929,850 P=−Depreciation and amortization 5,510 −Taxes and licenses 6,890 −Interest income 6,727 8,643Interest expense 1,091 −Net loss (260,076) (13,083)Total comprehensive loss (260,076) (13,083)

2017 2016Net assets P=504,860 P=764,936Proportion of the Jollibee Group’s ownership 30% 30%

P=151,458 P=229,481

Golden Bee Foods Restaurants LLC (Golden Bee). On February 25, 2014, the Jollibee Group,through GPPL, signed a joint agreement with Golden Crown Foods LLC (GCFL) to establish a jointventure entity to own and operate the Jollibee brand in the United Arab Emirates.

The joint venture entity, incorporated as Golden Bee on January 28, 2015, is 49% owned by GPPLand 51% owned by GCFL. GPPL and GCFL will share joint control and management of GoldenBee.

As at December 31, 2017, the Jollibee Group has invested USD0.8 million (P=33.9 million) in GoldenBee. The first store started commercial operations on May 4, 2015.

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The details of the Jollibee Group’s interest in the Golden Bee joint venture as at December 31, 2017and 2016 are as follows:

2017 2016Interest in a joint venture - cost P=33,926 P=33,926Cumulative equity in net earnings:

Balance at beginning of year 66,237 14,017Equity in net earnings during the year 118,641 52,220Dividends received during the year (20,037) −Balance at end of year 164,841 66,237

P=198,767 P=100,163

Summarized financial information of Golden Bee based on its financial statements and reconciliationwith the carrying amount of the investment in the consolidated financial statements are set out below:

2017 2016Current assets P=371,611 P=92,129Noncurrent assets 258,303 209,806Total assets P=629,914 P=301,935

Current liabilities P=224,935 P=96,606



payables and other current liabilities andprovisions) − −


2017 2016 2015Revenues P=1,313,210 P=689,150 P=203,010Depreciation and amortization 54,539 14,652 2,531Net income 242,124 106,571 28,607Total comprehensive income 242,124 106,571 28,607


198,440 100,611Cumulative translation adjustments 327 (448)

P=198,767 P=100,163

WJ Investments Limited (WJ)See Part F of this note for the discussion on the cessation of WJ’s operations.

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Interest in Associates

Entrek (B) SDN BHD (Entrek). The Jollibee Group, through JIBL, has 1/3 or 33.3% ownership inEntrek, a company that operates Jollibee stores in Brunei.

The details of the Jollibee Group’s interest in Entrek as at December 31, 2017 and 2016 are asfollows:

2017 2016Interest in an associate - cost P=16,660 P=16,660Cumulative equity in net earnings:

Balance at beginning of year 95,567 75,612Equity in net earnings during the year 25,010 19,955Balance at end of year 120,577 95,567

P=137,237 P=112,227

Summarized financial information of Entrek based on its financial statements and reconciliation withthe carrying amount of the investment in the consolidated financial statements are set out below:


Current liabilities P=330,429 P=270,199Noncurrent liabilities 5,427 4,505Total liabilities P=335,856 P=274,704


2017 2016 2015Revenues P=733,217 P=629,123 P=507,255Depreciation 38,381 32,177 21,016Net income 75,031 59,865 40,694Total comprehensive income 75,031 59,865 40,694

2017 2016Net assets P=495,371 P=390,149Proportion of the Jollibee Group’s ownership 33.33% 33.33%

165,124 130,050Impairment loss recognized in 2011 (16,660) (16,660)Cumulative translation adjustments (11,227) (1,163)

P=137,237 P=112,227

Cargill Joy Poultry Realty, Inc. (Cargill Joy Realty). On May 24, 2016, the Parent Company enteredinto an agreement with Cargill Philippines to establish Cargill Joy Realty, which lease the land wherethe Cargill Joy Poultry plant is located.

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The details of the Jollibee Group’s interest in Cargill Joy Realty as at December 31, 2017 and 2016are as follows:

2017 2016Interest in an associate – cost P=10,586 P=10,586Cumulative equity in net losses:

Balance at beginning of year (602) −Equity in net loss during the year (320) (602)Balance at end of year (922) (602)

P=9,664 P=9,984

Summarized financial information of Cargill Joy Realty based on its financial statements andreconciliation with the carrying amount of the investment in the consolidated financial statements areset out below:


Current liabilities P=689 P=18,338Noncurrent liabilities 35,285 35,546Total liabilities P=35,974 P=53,884


2017 2016Cash and cash equivalents P=5,746 P=25,548Current financial liabilities (excluding trade payables

and other current liabilities and provisions) 185 2Noncurrent financial liabilities 35,285 35,546


2017 2016Revenues P=1,400 P=−Taxes and licenses 60 1,358Interest expense 1,414 350Net loss (1,067) (2,005)Total comprehensive loss (1,067) (2,005)


P=9,664 ₱9,984

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E. Divestments

San Pin Wang. On March 9, 2012, the Jollibee Group, through JWPL, completed its acquisition of55% equity interest of Guangxi San Pin Wang Food and Beverage Management Company Limited(San Pin Wang) which operates the San Pin Wang beef noodle business in South China. The other45% of San Pin Wang is held by GZK.

A contingent consideration had been agreed as part of the purchase agreement with GZK. Thisconsideration is contingent on meeting target net income after tax of San Pin Wang for the next threeyears. In May 2013, the Jollibee Group paid RMB7.5 million (P=50.1 million) as the contingentconsideration for the year 2012. In May 2015, another payment was made amounting toRMB6.8 million (P=50.1 million) as the contingent consideration for the year 2014. The remainingfinal contingent consideration for the year 2015 amounting to RMB3.3 million(P=23.6 million) was fully settled on May 13, 2016.

On December 30, 2016, JWPL divested its shareholdings in San Pin Wang making GZK the 100%registered owner of San Pin Wang. This resulted to a gain on sale of P=158.9 million which isrecognized in the statements of comprehensive income (see Note 23). The divestment is part of theJollibee Group’s intention to focus on building its Yonghe King business, its largest business inChina.

The consideration for the 55% stake of JWPL of about RMB90.0 million (P=644.5 million) is payablein five tranches, as follows:

Tranche Date Amount1 December 19, 2016 RMB25,0002 December 28, 2016 25,0003 January 20, 2017 20,0004 October 30, 2017 10,0005 October 30, 2018 10,000

RMB90,000

The first tranche was collected on December 31, 2016. The second to fourth tranches are shown aspart of “Other current assets” and the fifth tranche is included as part of “Other noncurrent assets” inthe consolidated statements of financial position as at December 31, 2016 (see Notes 9 and 15).

The second and third tranches were collected in January 2017 and the fourth tranche onOctober 27, 2017. Consequently, the fifth tranche is shown as part of “Other current assets” in theconsolidated statements of financial position as at December 31, 2017 (see Note 9).

ChowFun. On March 31, 2011, the Jollibee Group, through its wholly-owned subsidiary, JWPL,acquired from Aspen Partners, LLC 2,400 shares of ChowFun Holdings, LLC (Chowfun) forUSD3.4 million (PHP139.6 million), bringing its equity share to ChowFun to 80.55%. ChowFun isthe developer and owner of Jinja Bar and Bistro in New Mexico, USA.

On December 31, 2016, the Jollibee Group divested its shareholdings in ChowFun for a considerationof USD1.6 million (P=79.6 million). The divestment was completed on December 23, 2016.ChowFun paid JWPL to redeem JWPL’s 2,900 Class A Membership Units, equivalent to 80.55%equity shares. This resulted to a loss on sale of P=84.0 million which is recognized in the statements ofcomprehensive income (see Note 23). The divestment is part of Jollibee Group’s intention toconcentrate its resources in building its larger businesses.

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F. Cessation of Operations

WJ Investments Limited (WJ). On August 22, 2012, the Jollibee Group, through JWPL and GPPL,entered into an agreement with Hoppime Ltd., a subsidiary of Wowprime Corporation of Taiwan(Wowprime) and some key executives of Wowprime, to establish a joint venture entity to own andoperate the 12 Hotpot brand in the People’s Republic of China, Hong Kong and Macau. The “12Hotpot” restaurant is known in Taiwan for its low-priced hotpot dishes.

The joint venture entity, incorporated as WJ Investments Limited (WJ), is 48%-owned by the JollibeeGroup and 48%-owned by Wowprime’s subsidiary and executives. The remaining 4% is owned bycertain individuals with experience in the retail sector in China. Through their subsidiaries, Jollibeeand Wowprime have joint control and management of WJ.

On October 31, 2017, WJ ceased the operations of the 16 stores of the 12 Hotpot brand in thePeople’s Republic of China to focus in building the Jollibee Group’s larger and fast-growing businessin China and other parts of the world. With this, WJ will be dissolved and liquidated. The JollibeeGroup recognized a loss of P=116.2 million in the statements of comprehensive income in 2017 (seeNote 23).

The details of Jollibee Group’s interest in WJ as at December 31, 2017 and 2016 are as follows:

2017 2016Interest in a joint venture – cost P=414,872 P=414,872Cumulative equity in net losses:

Balance at beginning of year (263,243) (194,063)Equity in net loss during the year (35,422) (69,180)Balance at end of year (298,665) (263,243)

Loss on cessation of operations (see Note 23) (116,207) −P=− P=151,629

Summarized financial information of WJ based on its financial statements and reconciliation with thecarrying amount of the investment in the consolidated financial statements are set out below:


Current liabilities P=43,060 P=54,592Noncurrent liabilities 548 −

P=43,608 P=54,592



payables and other current liabilities andprovisions) − −

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2017 2016 2015Revenues P=328,479 P=411,844 P=411,197Depreciation and amortization 30,380 43,268 46,811Interest income - net 357 6,673 3,309Net loss (73,796) (144,126) (172,407)Total comprehensive loss (73,796) (144,126) (172,407)


134,372 161,201Cumulative translation adjustments (18,165) (9,572)

116,207 151,629Loss on cessation of operations (116,207) −

P=− P=151,629

12. Property, Plant and Equipment

The rollforward analysis of property, plant and equipment are as follows:

2017

Land andLand

Improvements

Plant,Buildings,

CommercialCondominium

Units andImprovements

LeaseholdRights and

Improvements

Office, Storeand Food

ProcessingEquipment

Furnitureand

FixturesTransportation

EquipmentConstruction

in Progress TotalCostBalance at beginning of year P=673,250 P=2,743,294 P=17,177,082 P=15,529,426 P=1,230,895 P=611,648 P=902,457 P=38,868,052Additions – 125,603 1,378,159 1,357,891 120,455 62,795 5,859,893 8,904,796Acquisition of a subsidiary (see Note 11) – 345,548 18,615 447,010 – 54 35,100 846,327Retirements and disposals – (32,056) (855,947) (645,084) (52,011) (6,276) (266,498) (1,857,872)Reclassifications – 146,073 2,497,428 1,383,419 141,582 2,008 (4,170,510) –Translation adjustments 264 17,065 246,509 104,869 865 2,037 10,411 382,020Balance at end of year 673,514 3,345,527 20,461,846 18,177,531 1,441,786 672,266 2,370,853 47,143,323Accumulated Depreciation andAmortizationBalance at beginning of year 7,564 1,246,145 9,737,843 9,978,599 802,982 396,621 – 22,169,754Depreciation and amortization

(see Notes 21 and 22) – 192,164 1,938,143 2,236,415 220,570 73,631 – 4,660,923Retirements and disposals – (32,047) (628,037) (583,365) (40,843) (6,177) – (1,290,469)Reclassifications – – 5,686 (263) (5,423) – – –Translation adjustments – 2,951 192,511 67,931 1,597 1,618 – 266,608Balance at end of year 7,564 1,409,213 11,246,146 11,699,317 978,883 465,693 – 25,806,816Accumulated Impairment LossesBalance at beginning of year – – – 42,731 – – – 42,731Additions (see Note 22) – – – 431,939 – – – 431,939Write-offs – – – (30,605) – – – (30,605)Reversals (see Note 22) – – – (2,111) – – – (2,111)Translation adjustments – – – 739 – – – 739Balance at end of year – – – 442,693 – – – 442,693Net Book Value P=665,950 P=1,936,314 P=9,215,700 P=6,035,521 P=462,903 P=206,573 P=2,370,853 P=20,893,814

2016

Land andLand

Improvements

Plant,Buildings,



LeaseholdRights and

Improvements


ProcessingEquipment

Furnitureand



in Progress TotalCostBalance at beginning of year P=669,735 P=2,873,961 P=14,912,782 P=13,759,957 P=1,123,037 P=542,761 P=1,267,898 P=35,150,131Additions – 5,642 1,174,705 1,398,054 137,559 87,482 3,890,691 6,694,133Acquisition of a subsidiary (see Note 11) – – 134,860 92,924 1,820 – 46 229,650Divestments – (253,293) (278,354) (357,315) (65,829) (7,114) (2,728) (964,633)Retirements and disposals – (400) (1,243,336) (890,892) (129,080) (14,565) (104,532) (2,382,805)Reclassifications (see Note 13) – 124,376 2,401,801 1,488,539 150,393 3,155 (4,151,214) 17,050Translation adjustments 3,515 (6,992) 74,624 38,159 12,995 (71) 2,296 124,526Balance at end of year 673,250 2,743,294 17,177,082 15,529,426 1,230,895 611,648 902,457 38,868,052

(Forward)

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2016

Land andLand

Improvements

Plant,Buildings,



LeaseholdRights and

Improvements


ProcessingEquipment

Furnitureand



in Progress TotalAccumulated Depreciation andAmortizationBalance at beginning of year P=7,528 P=1,157,960 P=9,138,113 P=9,206,534 P=750,596 P=340,248 P=– P=20,600,979Depreciation and amortization

(see Notes 21 and 22) 36 81,479 1,729,314 1,848,220 177,586 70,984 – 3,907,619Acquisition of a subsidiary (see Note 11) – – 23,372 32,190 – – – 55,562Divestments – (9,721) (123,369) (288,583) (7,076) (3,292) – (432,041)Retirements and disposals – (39) (1,064,683) (851,189) (126,081) (11,274) – (2,053,266)Reclassifications (see Note 13) – 17,050 7,744 (7,725) (7) (12) – 17,050Translation adjustments – (584) 27,352 39,152 7,964 (33) – 73,851Balance at end of year 7,564 1,246,145 9,737,843 9,978,599 802,982 396,621 – 22,169,754Accumulated Impairment LossesBalance at beginning of year – – – 2,000 – – – 2,000Additions (see Note 22) – – – 42,731 – – – 42,731Reversals (see Note 22) – – – (2,000) – – – (2,000)Balance at end of year – – – 42,731 – – – 42,731Net Book Value P=665,686 P=1,497,149 P=7,439,239 P=5,508,096 P=427,913 P=215,027 P=902,457 P=16,655,567

Construction in progress account mainly pertains to costs incurred for ongoing construction ofproperties, including soon-to-open stores. As at December 31, 2017 and 2016, no borrowing cost hasbeen capitalized.

Loss on disposals and retirements of property, plant and equipment amounted to P=174.5 million,P=236.8 million and P=136.7 million in 2017, 2016 and 2015, respectively (see Note 22).

The cost of fully depreciated property, plant and equipment still in use amounted toP=12,935.4 million and P=9,929.9 million as at December 31, 2017 and 2016, respectively.

The Jollibee Group performed impairment assessments of its fixed assets considering that there areobservable indications that the assets’ values have significantly declined during the period as a resultof the passage of time. Consequently, allowance for impairment loss on office, store and foodprocessing equipment amounted to P=442.7 million and P=42.7 million as at December 31, 2017 and2016, respectively.

No property, plant and equipment as at December 31, 2017 and 2016 have been pledged as securityor collateral.

13. Investment Properties

The rollforward analysis of this account follows:

2017

Land

Buildingsand Building

Improvements TotalCostBalance at beginning of year P=983,428 P=182,901 P=1,166,329Retirements and disposals (134,454) (3,524) (137,978)Balance at end of year 848,974 179,377 1,028,351Accumulated Depreciation and

AmortizationBalance at beginning of year – 182,901 182,901Retirements and disposals – (3,524) (3,524)Balance at end of year – 179,377 179,377Net Book Value P=848,974 P=– P=848,974

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2016

Land

Buildingsand Building

Improvements TotalCostBalance at beginning of year P=983,428 P=199,951 P=1,183,379Reclassifications (see Note 12) – (17,050) (17,050)Balance at end of year 983,428 182,901 1,166,329Accumulated Depreciation and

AmortizationBalance at beginning of year – 185,266 185,266Depreciation (see Notes 21 and 22) – 14,685 14,685Reclassifications (see Note 12) – (17,050) (17,050)Balance at end of year – 182,901 182,901Net Book Value P=983,428 P=– P=983,428

In 2016, the Jollibee Group transferred cost of fully depreciated units of a building from investmentproperty to owner-occupied property.

The cost of fully depreciated buildings and building improvements still being leased out by theJollibee Group amounted to P=178.1 million and P=182.0 million as at December 31, 2017 and 2016,respectively.

The Jollibee Group’s investment properties have an aggregate fair value of P=1,747.3 million as atDecember 31, 2017 as determined by independent appraisers who holds a recognized and relevantprofessional qualification. The fair value represents the amount at which the assets and liabilities canbe exchanged in an orderly transaction between market participants to sell the asset or transfer theliability at the measurement date under current market conditions in accordance with InternationalValuation Standards.

In determining the fair value of the investment properties, the independent appraisers used the marketdata approach for land and cost approach for buildings and building improvements. For land, fairvalue is based on sales and listings of comparable properties within the vicinity after adjustments fordifferences in location, size and shape of the lot, time elements and other factors between theproperties and their comparable properties. For buildings and building improvements, fair value isbased on the current cost to replace the properties in accordance with prevailing market prices formaterials, labor, and contractors’ overhead, profit and fees in the locality after adjustments fordepreciation due to physical deterioration, and functional and economic obsolescence based onpersonal inspection of the buildings and building improvements and in comparison to similarproperties. Fair value hierarchy disclosures for investment properties have been provided in Note 31.

Rent income derived from income-generating properties amounted to P=27.8 million, P=31.6 millionand P=31.6 million in 2017, 2016 and 2015, respectively (see Notes 20 and 29).

Direct operating costs relating to the investment properties which include depreciation andmaintenance expenses totaled to P=28.9 million, P=15.1 million and P=24.8 million in 2017, 2016 and2015, respectively.

In 2017, the Parent Company sold its land located at Sta. Rosa Laguna and Luisita Industrial Park inTarlac for a total consideration of P=365.5 million. Net gain arising from the disposals of theseinvestment properties amounted to P=231.0 million (see Note 22).

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In 2015, the Parent Company entered into an agreement to develop a commercial and officecondominium building (the “Project”) in a parcel of its land in consideration for cash and assignedunits in the Project. The completion of the transaction is conditional upon fifty percent (50%)completion of the Project, as certified by the general contractor of the Project, and when all of theassigned units are fully constructed.

No investment properties as at December 31, 2017 and 2016 have been pledged as security orcollateral for the Jollibee Group’s debts.

14. Goodwill and Other Intangible Assets


2017 2016Goodwill (Note 11) P=9,050,223 P=6,542,422Trademarks (Note 11) 6,149,269 2,004,256Computer software, net of accumulated amortization 512,589 513,337Other intangible assets, net of accumulated

amortization 18,158 26,727P=15,730,239 P=9,086,742

Goodwill and TrademarksGoodwill and trademarks acquired through business combinations are attributable to the followinggroup of CGUs as at December 31:

2017 2016Goodwill:

SuperFoods Group (see Note 11) P=2,507,801 P=–Hong Zhuang Yuan 2,497,253 2,497,253Mang Inasal 1,781,267 1,781,267Red Ribbon Bakeshop:

Philippine operations 737,939 737,939US operations 434,651 434,651

Yong He King 535,281 535,281Chowking US operations 383,855 383,855GSC (see Note 11) 166,931 166,931Burger King 5,245 5,245

9,050,223 6,542,422Trademarks:

SuperFoods Group (see Note 11)Highlands Coffee 3,681,912 –Pho 24 463,101 –

Mang Inasal 2,004,256 2,004,2566,149,269 2,004,256

Goodwill and trademarks P=15,199,492 P=8,546,678

Computer SoftwareThe Jollibee Group’s computer software pertains to the Enterprise Resource Planning (ERP) systemwhich the Jollibee Group started to use on August 1, 2014.

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The rollforward analysis of the Jollibee Group’s computer software as at December 31 are as follows:

2017 2016CostBalance at beginning of year P=670,762 P=656,177Additions 69,498 14,585Balance at end of year 740,260 670,762

Accumulated AmortizationBalance at beginning of year 157,425 96,935Amortizations (see Note 22) 70,246 60,490Balance at end of year 227,671 157,425Net Book Value P=512,589 P=513,337

Other Intangible AssetsThe Jollibee Group’s other intangible assets include other trademarks and patents amortized over itsuseful life of five years.

The roll forward analysis of other intangible assets as at December 31 are as follows:

2017 2016CostBalance at beginning of year P=56,983 P=47,863Additions 136 9,120Balance at end of year 57,119 56,983Accumulated AmortizationBalance at beginning of year 30,256 21,753Amortizations (see Note 22) 8,705 8,503Balance at end of year 38,961 30,256Net Book Value P=18,158 P=26,727

Impairment Testing of Goodwill and TrademarkGoodwill acquired through business combinations have been allocated to nine (9) groups of CGUs,which are subsidiaries of the Parent Company, owned directly or indirectly. The recoverable amountsof the groups of CGUs have been determined based on value in use calculations using cash flowprojections from financial budgets approved by the BOD covering a five-year period. Furthermore,the trademark of Mang Inasal and SuperFoods Group are allocated to the CGU of Mang Inasal andSuperFoods Group, respectively.

The calculation of value in use is most sensitive to the following assumptions which vary pergeographical location:

CGUsGeographical

LocationPre-tax

Discount RateLong-term Revenue

Growth RateHong Zhuang Yuan PRC 10.2% 6.4%Mang Inasal Philippines 12.5% 6.8%Red Ribbon Bakeshop:

Philippine operations Philippines 12.5% 6.8%US operations USA 10.5% 2.1%

Yong He King PRC 10.6% 6.4%Chowking US operations USA 10.2% 2.1%Burger King Philippines 14.9% 6.8%Goldstar Vietnam 13.3% 6.2%SuperFoods Group Vietnam 13.8% 6.2%

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Key assumptions with respect to the calculation of value in use of the groups of CGUs as atDecember 31, 2017 and 2016 used by management in its cash flow projections to undertakeimpairment testing of goodwill are as follows:

a) Discount rates - discount rates represent the current market assessment of the risks specific toeach group of CGUs, regarding the time value of money and individual risks of the underlyingassets which have not been incorporated in the cash flow estimates. The discount rate calculationis based on the specific circumstances of the Jollibee Group’s group of CGUs, derived fromweighted average cost of capital (WACC) of each group of CGUs. The WACC takes intoaccount both the cost of debt and equity. The cost of equity is calculated using the Capital AssetPricing Model (CAPM). The cost of debt is based on the assumed interest-bearing borrowingseach group of CGUs is obliged to service. CGU-specific risk is incorporated by applyingindividual alpha and beta factors. The beta factors are evaluated annually based on publiclyavailable market data.

b) Long-term growth rates - rates are determined in consideration of historical and projected results,as well as the economic environment where the group of CGUs operates.

c) EBITDA - is based on the most recent value achieved in the year preceding the start of the budgetperiod, and adjusted for planned efficiency improvement, if any.

Management believes that any reasonably possible change in the key assumptions on whichrecoverable amount is based would not cause the carrying amount of the CGUs to exceed itsrecoverable amount.

No impairment losses were recognized for goodwill and trademarks for the year endedDecember 31, 2017 and 2016.

15. Other Noncurrent Assets


2017 2016Security and other deposits (see Notes 30 and 31) P=2,464,995 P=2,103,707Noncurrent portion of:

Rent and other long-term prepayments 494,363 379,393Employee car plan receivables

(see Notes 30 and 31) 186,000 130,584Prepaid market entry fee - net of accumulated

amortization of P=9.9 million and P=4.6 million in2017 and 2016, respectively (see Notes 11 and 22) 94,786 99,626

Returnable containers and others 71,910 21,121Deferred rent expense 72,338 49,196Deferred compensation 26,319 17,710Receivable from sale of business (see Note 11) – 71,612Other assets 287,712 171,603

P=3,698,423 P=3,044,552

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Terms and conditions of other noncurrent assets are as follows:

ƒ Security and other deposits generally represent deposits for operating leases entered into by theJollibee Group as lessee. The security deposits are recoverable from the lessors at the end of thelease terms, which range from three to twenty years. These are carried at amortized cost. Thediscount rates used range from 2.44%-5.71% and 2.36%-5.38% in 2017 and 2016, respectively.The difference between the fair value at initial recognition and the notional amount of the securitydeposits is charged to “Deferred rent expense” account and amortized on straight-line basis overthe lease terms.

ƒ Employee car plan receivables are presented at amortized cost. The difference between the fairvalue at initial recognition and the notional amount of the employees’ car plan receivables isrecognized as deferred compensation and is amortized on a straight-line basis over the creditperiod.

Accretion of interest on security and other deposits and employee car plan receivables amountedto P=33.1 million, P=25.2 million and P=19.8 million in 2017, 2016 and 2015, respectively(see Note 23).

ƒ Prepaid market entry fee represents upfront fee paid to the franchisor prior to the operations ofDunkin’ Donuts restaurants in the PRC (see Note 11). Market entry fee is amortized over twenty(20) years effective February 2016, start of Dunkin’ Donuts operations.

The rollforward analysis of prepaid market entry fee as at December 31 is as follows:

2017 2016Market Entry FeeBalance at beginning and end of year P=93,870 P=93,870

Accumulated AmortizationBalance at beginning of year 4,571 –Amortizations (see Note 22) 5,292 4,571Balance at end of year 9,863 4,571Translation adjustment 10,779 10,327

P=94,786 P=99,626

ƒ Receivable from sale of business pertains to noncurrent portion of receivables from GZK as aresult of the Jollibee Group’s divestment in SPW (see Note 11).

ƒ Other assets represent tools for repairs and maintenance of office and store equipment which werestill unused as at December 31, 2017 and 2016.

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16. Trade Payables and Other Current Liabilities


2017 2016Trade P=10,877,674 P=9,944,749Accruals for:

Salaries, wages and employee benefits 1,864,278 1,406,605Store operations 1,887,316 1,397,179Advertising and promotions 1,571,660 1,206,902Rent 1,053,952 923,430Repairs and maintenance 482,739 300,594Utilities 423,596 393,389Freight 388,992 374,225Corporate events 274,086 250,673Operating supplies 280,753 326,017Professional fees 212,739 203,089Security 161,304 140,547Trainings and seminars 95,045 124,801Interest (Note 18) 83,117 51,384Communication 78,095 76,569Transportation and travel 49,247 54,131Insurance 21,833 20,207Service fees and others 1,348,608 1,455,559

Local and other taxes payable 1,939,187 1,599,791Customers’ deposits 798,352 617,218Unearned revenue from gift certificates 171,891 147,098Dividends payable 56,053 47,705Other current liabilities 1,134,096 898,705

P=25,254,613 P=21,960,567

The terms and conditions of the above liabilities are as follows:

ƒ Trade payables to suppliers are noninterest-bearing and are normally settled on a 30 to 60-dayterm.

ƒ Accrued expenses are noninterest-bearing and are normally settled within the next financial year.Other accrued liabilities consist of charges related to representations and other miscellaneousexpenses.

ƒ Customers’ deposits pertain to security deposits from operating leases with franchisees, which arerefundable at the end of the lease term, deposits for kiddie party packages and deposits fromfranchisees for the sale of store assets.

Accretion of interest on customer’s deposits amounted to P=13.2 million, P=20.4 million andP=19.9 million in 2017, 2016 and 2015, respectively (see Note 23).

ƒ Other current liabilities consist of staled checks, amounts payable for mascots and varioussubscriptions in newspapers given to customers as a complementary to their meals.

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17. Provisions

In 2017, the Jollibee Group recognized provision amounting to P=794.6 million. Consequently, theJollibee Group has outstanding provisions amounting to P=825.1 million and P=30.5 million as atDecember 31, 2017 and 2016, respectively, consisting mainly of provisions for asserted claims whichare normal to its business.

These include estimates of legal services, settlement amounts and other costs of claims made againstthe Jollibee Group. Other information on the claims is not disclosed as this may prejudice theJollibee Group’s position on such claims (see Note 29).

18. Short and Long-term Debts

Short-term DebtOn February 12, 2015, JWPL availed a short-term loan from a local bank amounting toUSD6.0 million (P=282.4 million) with an interest rate of 1.5% per annum, subject to monthlyrepricing. The principal of USD6.0 million (P=276.4 million) and interest amounting toP=1.0 million were paid in full on February 5, 2016, the date of maturity.

Interest expense recognized on short-term debt amounted to P=0.2 million and P=52.4 million in 2016and 2015, respectively (see Note 23).

Long-term DebtThe long-term debt consists of the following:

2017 2016Principal P=16,149,740 P=12,165,608Unamortized debt issue cost (32,469) (10,242)

P=16,117,271 P=12,155,366

The details of long-term debt follow:

2017 2016USD-denominated:

Loan 1 P=4,881,067 P=5,469,200Loan 2 124,800 621,500Loan 3 – 298,320Loan 4 1,482,624 1,491,600Loan 5 395,367 397,760Loan 6 199,680 198,880Loan 7 294,528 293,348

VND-denominated (see Note 11):Loan 8 142,293 –Loan 9 122,998 –Loan 10 151,383 –

PHP-denominated:Loan 11 1,467,955 1,481,591Loan 12 798,933 798,133Loan 13 871,583 995,584Loan 14 1,592,000 –Loan 15 2,089,500 –

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2017 2016PHP-denominated:

Loan 16 P=796,000 P=–Loan 17 597,000 –Loan 18 109,560 109,450

16,117,271 12,155,366Less current portion - net of debt issue costs

of P=2.4 million and P=0.6 million in 2017 and2016, respectively 1,216,219 1,561,516

P=14,901,052 P=10,593,850

USD-denominated loans of JWPL. Loan 1 consists of a 10-year unsecured loan acquired from a localbank on October 21, 2015 amounting to USD110.0 million (P=5,111.7 million) subject to a variableinterest rate based on three-month London Interbank Offered Rate (LIBOR) plus spread of 1.20%which is payable and is reset on a quarterly basis. The spread applies provided the Republic of thePhilippines’ 5-year credit default swap remains under 1.10%. The principal is payable in quarterlyinstallments commencing on January 23, 2017 up to October 21, 2025, the maturity date. As atDecember 31, 2017 and 2016, the carrying value of the loan amounted to P=4,881.1 million andP=5,469.2 million, respectively.

Loan 2 consists of a 5-year unsecured loan acquired on February 25, 2013 amounting toUSD40.0 million (P=1,632.0 million) subject to quarterly interest repricing with one-time option to fixin the future. The interest rate is based on three-month US Dollar LIBOR plus spread of 1.0%. Theprincipal is payable in sixteen (16) quarterly installments commencing on May 26, 2014 up toFebruary 26, 2018, the maturity date. As at December 31, 2017 and 2016, the carrying value of theloan amounted to P=124.8 million and P=621.5 million, respectively.

Under the loan agreements above (Loans 1 and 2), the Parent Company as the guarantor is subject tocertain debt covenants which include among others, maintaining a Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0 or below. As at December 31, 2017 and 2016, the Parent Company is incompliance with the terms of the loan covenants.

Loan 3 consists of a 4-year unsecured loan acquired on October 25, 2013 amounting toUSD18.0 million (P=777.8 million) with an interest rate based on three-month USD LIBOR plusspread of 1.0% subject to interest repricing every quarter. The principal is payable in twelve (12)quarterly installments commencing on January 25, 2015 up to October 25, 2017, the date of maturity.As at December 31, 2017 and 2016, the carrying value of the loan amounted to nil andP=298.3 million, respectively. The loan was fully settled on October 25, 2017.

Loan 4 consists of an 8-year unsecured loan acquired on November 29, 2016 amounting toUSD30.0 million (P=1,491.9 million) with an interest rate of 3.0% per annum. The principal ispayable in six (6) yearly installments commencing on November 29, 2017 up to November 29, 2022amounting to USD0.3 million, and the remaining balance on November 29, 2024, the maturity date.As at December 31, 2017 and 2016, the carrying value of the loan amounted toP=1,482.6 million and P=1,491.6 million, respectively.

The loan agreements above (Loans 3 and 4), provide certain restrictions and requirements withrespect to maintaining financial ratios, which include maintaining a Debt-to-Equity ratio of 3.0 orbelow and Debt Service Coverage ratio of at least 1.3. As at December 31, 2017 and 2016, the ParentCompany as the guarantor is in compliance with the terms of its loan covenants.

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Loan 5 consists of a 6-year unsecured loan acquired on November 29, 2016 amounting toUSD8.0 million (P=397.8 million) with an interest rate based on interpolated ROP 2021 and ROP 2024plus spread of 0.5%. The principal is payable in five (5) yearly installments commencing onNovember 29, 2017 up to November 29, 2021 amounting to USD0.08 million, and the remainingbalance on November 29, 2022, the maturity date. As at December 31, 2017 and 2016, the carryingvalue of the loan amounted to P=395.4 million and P=397.8 million, respectively.

USD-denominated loans of HBFPPL. Loan 6 consists of a 5-year unsecured loan acquired on May 8,2013 amounting to USD4.0 million (P=163.3 million) with an interest rate based on three-month USDLIBOR plus spread of 1.0% subject to repricing every quarter. The principal is payable on May 7,2018, the maturity date. As at December 31, 2017 and 2016, the carrying value of the loan amountedto P=199.7 million and P=198.9 million, respectively.

Loan 7 consists of a 5-year unsecured loan acquired on April 25, 2014 amounting to USD5.9 million(P=257.5 million) with an interest rate of 1.48% subject to repricing every quarter. The principal ispayable on April 24, 2019, the maturity date. As at December 31, 2017 and 2016, the carrying valueof the loan amounted to P=294.5 million and P=293.3 million, respectively.

Under the loan agreements above (Loans 5 to 7), the Parent Company as the guarantor is subject tocertain restrictions and requirements with respect to maintaining financial ratios, which include Debt-to-Equity ratio and Debt-to-EBITDA ratio not to exceed 3.0. As at December 31, 2017 and 2016, theParent Company as the guarantor is in compliance with the terms of its loan covenants.

VND-denominated loans of SuperFoods Group. Loan 8 consists of a 5-year loan acquired from alocal bank in Vietnam on February 19, 2014 amounting to VND118.0 billion (P=250.2 million). Theloan is subject to a variable interest rate based on thirty (30) day Vietnam Interbank Offered Ratesplus spread of 1.5%. The principal is payable in monthly installments commencing on the 13thmonth after the first utilization date until the maturity date. As at December 31, 2017, the carryingvalue of the loan amounted to P=142.3 million.

Loan 9 consists of a 5-year loan acquired on December 30, 2015 from a local bank in Vietnamamounting to VND68.0 billion (P=146.7 million). The loan is subject to a variable interest rate basedon three-month VND COF plus spread of 1.5%. The principal is payable in sixteen (16) quarterlyinstallments commencing on the 15th month after the first utilization. As at December 31, 2017, thecarrying value of the loan amounted to P=123.0 million.

Loan 10 consists of a 5-year loan acquired on April 3, 2017 from a local bank in Vietnam amountingto VND68.0 billion (P=151.2 million) with an interest rate of 6.10% subject to quarterly repricing. Theprincipal is payable in sixteen (16) quarterly installments commencing on the 15th month from thefirst drawdown date. As at December 31, 2017, the carrying value of the loan amounted toP=151.4 million.

PHP-denominated loans of the Parent Company. On December 9, 2013, the Parent Companyrefinanced its P=1,500.0 million term loan from a local bank due on December 16, 2013 by availing aterm loan of the same amount (Loan 11). The loan is payable over five years and six months from thedate of drawdown with annual principal repayments of P=15.0 million starting on the 30th month fromthe date of drawdown and P=1,455.0 million upon maturity. The loan is subject to a variable interestrate based on three-month Philippine Dealing System Treasury Fixing (PDST-F) rate plus spread of1.25%, which is payable and is reset on a quarterly basis, and to an interest rate floor based on theBangko Sentral ng Pilipinas (BSP) Overnight Reverse Repurchase Agreement Rate. The loan wasdrawn on December 16, 2013 and will mature on June 17, 2019. The Parent Company incurred debtissue costs of P=7.5 million, representing documentary stamp tax, in relation to this loan in 2013. TheParent Company has an option to convert the variable interest rate into a fixed interest rate on any

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interest payment date based on the PDST-F rate for the remaining term of the loan and the spread of1.0%. The Parent Company also has an option to prepay the loan in full or in multiples ofP=10.0 million on any interest payment date.

Under the loan agreement, the Parent Company is subject to certain debt covenants which includeamong others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0or below. The Parent Company is in compliance with these debt covenants as at December 31, 2017and 2016.

Loan 12 consists of a 5-year unsecured loan acquired from a local bank on April 21, 2014 amountingto P=800.0 million. The loan is subject to a variable interest rate based on three-month PDST-F rateplus spread of 1.0%, which is payable and is reset on a quarterly basis, and to an interest rate floorbased on the BSP Special Deposit Account (SDA) Rate plus spread of 1.0% or BSP OvernightBorrowing Rate plus spread of 1.0%. The Parent Company incurred debt issue costs of P=4.0 million,representing documentary stamp tax, in relation to this loan in 2014. The principal is payable onApril 21, 2019, the date of maturity. The Parent Company has an option to convert the variableinterest rate into a fixed interest rate based on a five-year treasury securities benchmark yield plusspread of 1.0% on the date the option to convert is exercised, subject to an annual interest rate floor of4.75%. The Parent Company also has an option to prepay the loan, wholly or partially, withoutpenalty at any time during the term of the loan subject to certain conditions.

Under the loan agreement, the Parent Company is subject to certain debt covenants which include,among others, maintaining a Debt-to-Equity ratio of 3.0 or below and Debt-to-Service Coverage ratioof at least 1.3. The Parent Company is in compliance with these debt covenants as at December 31,2017 and 2016.

Loan 13 consists of 5-year unsecured loan acquired from a local bank on April 22, 2016 amounting toP=1,000.0 million. The loan is subject to a variable interest rate based on three-month PhilippineDealing System Treasury - Reference Rate Two (PDST-R2) plus spread of 0.55%, subject torepricing every quarter, and to an interest rate floor of BSP SDA. Provided, however that on anyInterest Payment Date, in lieu of a floating interest rate, the Parent Company shall have a one-timeoption to convert into a fixed-interest rate loan not later than 730 days from drawdown date. Theconversion to fixed interest rate is based on the applicable PDST-R2 rate plus spread of 2% if theoption is exercised from day 1 to day 365 from drawdown date and based on the applicable PDST-R2rate plus spread of 2.75% if the option is exercised from day 366 to day 730 from drawdown date.The principal is payable in sixteen (16) quarterly installments commencing on the 15th month fromdrawdown date amounting to P=62.5 million. The Parent Company incurred debt issue cost ofP=5.0 million, representing documentary stamp tax, for this loan. The Parent Company has an optionto prepay the loan in part or in full on any interest payment date.

Under the loan agreement, the Parent Company is subject to certain debt covenants which includeamong others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0and below. The Parent Company is in compliance with these debt covenants as at December 31,2017 and 2016.

Loan 14 consists of 5-year unsecured loan acquired from a local bank on December 22, 2017amounting to P=1,600.0 million. The loan is subject to a variable interest based on the simple averageof the preceding five (5) days of the three-month PDST-R2 plus spread of 0.50%, which is payableand repriced on a quarterly basis, and to an interest rate floor of 2.70%. Provided, however that onany interest payment date, but in no case later than 365 days from the initial drawdown date, in lieu ofa floating interest rate, the Parent Company shall have a one-time option to convert into a fixed-interest rate loan based on the applicable three-month PDST-R2 rate plus spread of 0.60%. The

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principal is payable in sixteen (16) quarterly installments commencing on the 15th month fromdrawdown date amounting to P=100.0 million. The Parent Company incurred debt issue cost ofP=8.0 million, representing documentary stamp tax, for this loan. The Parent Company also has anoption to prepay the loan in part or in full on any interest payment date subject to certain conditions.

Under the loan agreement, the Parent Company is subject to certain debt covenants which includeamong others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0or below. The Parent Company is in compliance with these debt covenants as at December 31, 2017.

Loan 15 consists of 5-year unsecured loan acquired from a local bank on December 22, 2017amounting to P=2,100.0 million. The loan is subject to a variable interest rate based on the simpleaverage of the five (5) trading days of the three-month Treasury Securities Benchmark Yield, aspublished in the PDST-R2 page of the PDEX preceding and inclusive of the Interest Rate SettingDate plus spread of 0.50%. The principal is payable on December 22, 2022, the date of maturity withan option to prepay the loan, wholly or partially, without penalty at any time during the term of theloan subject to certain conditions. The Parent Company incurred debt issue cost of P=10.5 million,representing documentary stamp tax, for this loan.

Under the loan agreement, the Parent Company is subject to certain debt covenants which includeamong others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0or below and Debt-to-Service Coverage ratio of at least 1.3. The Parent Company is in compliancewith these debt covenants as at December 31, 2017.

Loan 16 consists of 5-year unsecured loan acquired from a local bank on December 22, 2017amounting to P=800.0 million. The loan is subject to a variable interest based on the simple average ofthe preceding five (5) days of the three-month PDST-R2 rate plus spread of 0.50%, which is payableand is reset on a quarterly basis, and to an interest rate floor based on BSP Overnight Deposit FacilityRate. The principal is payable in sixteen (16) quarterly installments commencing on the 15th monthfrom drawdown date amounting to P=50.0 million. The Parent Company incurred debt issue cost ofP=4.0 million, representing documentary stamp tax, for this loan. The Parent Company has an optionto prepay the loan in part or in full on any interest payment date subject to certain conditions.

Under the loan agreement, the Parent Company is subject to certain debt covenants which includeamong others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0or below. The Parent Company is in compliance with these debt covenants as at December 31, 2017.

Loan 17 consists of 5-year unsecured loan acquired from a local bank on December 27, 2017amounting to P=600.0 million. The loan is subject to a variable interest equal to the three-monthPDST-R2 rate plus spread of 0.50%, which is payable and is reset on a quarterly basis, and to aninterest rate floor based on BSP Overnight Deposit Facility Rate plus 0.50%. The principal is payablein sixteen (16) quarterly installments commencing on the 15th month from drawdown date amountingto P=37.5 million. The Parent Company incurred debt issue cost of P=3.0 million, representingdocumentary stamp tax, for this loan. The Parent Company has an option to convert the variableinterest rate into a fixed interest rate on any interest payment date but in no case later than 365 daysfrom the drawdown date. The conversion to fixed interest rate is based on a five year PDST-R2 rateplus spread of 0.75%. The Parent Company also has an option to prepay the loan in part of in full onany interest payment date subject to certain conditions.

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Under the loan agreement, the Parent Company is subject to certain debt covenants which includeamong others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0or below and Debt-to-Service Coverage ratio of at least 1.3. The Parent Company is in compliancewith these debt covenants as at December 31, 2017.

The Parent Company’s PHP denominated long-term debt (Loans 11 to 17) amounts toP=8,213.0 million and P=3,275.3 million, net of unamortized debt issue cost of P=32.0 million andP=9.7 million as at December 31, 2017 and 2016, respectively. The current portion amounted toP=261.8 million and P=139.4 million, net of debt issue costs of P=3.2 million and P=0.6 million as atDecember 31, 2017 and 2016, respectively.

PHP-denominated loan of PERF Restaurants, Inc. (PERF). Loan 18 is a 5-year unsecured loanacquired from local a bank on December 21, 2016 amounting to P=110.0 million with an interest ratebased on three-month PDST-R2 plus spread of 1.0% with interest rate floor computed as BSPOvernight Deposit Facility Rate plus spread of 0.5%. PERF incurred debt issue costs ofP=0.6 million, representing documentary stamp tax, in relation to this loan in 2016. The carryingamount of the loan is P=109.6 million and P=109.5 million, net of unamortized debt issue cost ofP=0.4 million and P=0.6 million as at December 31, 2017 and 2016, respectively.

The loan is guaranteed by the Parent Company. Consequently, the Parent Company is subject tocertain debt covenants which include, among others, maintaining a Debt-to-Equity ratio of 3.0 orbelow and Debt-to-Service Coverage ratio of at least 1.3. The Parent Company is in compliance withthese debt covenants as at December 31, 2017 and 2016, respectively.

Interest expense recognized on long-term debt including amortization of debt issue cost, amounted toP=392.6 million, P=247.0 million and P=153.2 million in 2017, 2016 and 2015, respectively(see Note 23).

The future expected principal settlements of the Jollibee Group’s loans follow:

2017 20162017 P=– P=1,562,1022018 1,218,583 1,508,1102019 4,320,923 3,131,5822020 1,752,102 250,0002021 to 2025 8,858,132 5,713,813

16,149,740 12,165,607Less debt issue costs (32,469) (10,242)

P=16,117,271 P=12,155,365

Embedded DerivativesCertain long-term loans of the Jollibee Group include provisions for an option to convert the variableinterest rate into a fixed interest rate. Certain long-term loans are also subject to an interest ratefloor. In addition, the Jollibee Group’s long-term loans generally provide an option to pre-pay theloan in full before the maturity date.

The Jollibee Group assessed that the derivatives embedded in the loan contracts need not bebifurcated since they are clearly and closely related to the economic characteristics and risks of thehost loan contract and do not qualify for separate accounting as at December 31, 2017 and 2016.

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Freestanding Derivatives, Hedges and Hedge Effectiveness TestingOn November 20, 2015, the Jollibee Group entered into an Interest Rate Swap (IRS) with a bank toconvert its exposure in the variable interest rate of Loan 1 to a fixed interest rate. The IRS willterminate and the loan will mature simultaneously on October 21, 2025. The Jollibee Group hasdesignated the IRS as a cash flow hedge.

The IRS with a notional amount equal to the principal amount of the loan requires the Jollibee Groupto pay fixed interest payments at 3.36% in exchange of variable interest payments at three-monthLIBOR plus spread of 1.20% from the bank throughout the term of the IRS on the notionalamount. The IRS settles quarterly on a net basis.

The fair value of the IRS amounted to P=11.9 million and P=33.5 million as at December 31, 2017 and2016, respectively, which were presented as a derivative asset and derivative liability, respectively, inthe statements of financial position. The terms of the IRS approximately match the terms of theinterest payments on the loan. Accordingly, there is no hedge ineffectiveness to be recognized inprofit or loss.

Unrealized income (loss) of P=45.5 million, P=1.4 million and (P=34.9 million) were recognized in othercomprehensive income in 2017, 2016 and 2015, respectively.

In 2012, PERF converted a loan into a deliverable cross-currency swap transaction to hedge in full theforeign currency risk and interest rate risk on its floating rate. Under the cross-currency swap, PERFreceived at inception PHP notional amount of P=149.2 million and paid USD notional amount ofUSD3.4 million based on the PHP/USD spot reference rate of P=43.87. At every interest paymentdate, PERF received variable interest based on 3-month US Dollar LIBOR plus spread and paid fix-interest rate. At maturity date, PERF received USD notional amount of USD3.4 million and paidPHP notional amount of P=149.2 million. The USD receipts from the cross-currency swapcorresponded to the expected interest fixed principal amount due on the hedged loan. Similar to thehedged loan, the cross-currency swap was non-amortizing and it matured on December 20, 2016.

Effectively, the cross-currency swap transformed the floating rate USD loan into fixed rate PHP loan.The foreign exchange revaluation of the hedged loan, amounting to P=10.9 million was recognized inother comprehensive income in 2016.

19. Equity

a. Capital Stock

The movements in the account are as follows:

2017 2016Authorized - P=1 par value P=1,450,000 P=1,450,000

Issued and subscribed:Balance at beginning of year P=1,091,301 P=1,086,149Issuances during the year 10,355 5,152Balance at end of year 1,101,656 1,091,301Subscriptions receivable (17,178) (17,178)

P=1,084,478 P=1,074,123

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The total number of shareholders of the Parent Company is 3,042 and 3,075 as atDecember 31, 2017 and 2016, respectively.

b. Additional Paid-in-Capital

The movements in the Additional paid in-capital pertain to the difference between the exerciseprices of stock options exercised and the par value of Parent Company’s shares. In 2017 and2016, stock options totaling 10,354,270 shares and 5,151,895 shares, respectively, were exercised(see Note 26). These resulted to an additional paid in capital amounting to P=850.8 million andP=363.5 million in 2017 and 2016, respectively.

Stock options expense, amounting to P=227.5 million, P=241.3 million and P=173.2 million in 2017,2016 and 2015, respectively, were also recognized as part of additional paid in capital (see Notes22 and 26).

In 2017, the Parent Company recognized deferred tax assets on MSOP and ELTIP, resulting toadditional paid-in capital of P=782.0 million.

As at December 31, 2017 and 2016, total additional-paid in capital amounted toP=7,520.4 million and P=5,660.1 million, respectively.

c. Treasury Shares

The cost of common stock of the Parent Company held in treasury of P=180.5 million consists of16,447,340 shares as at December 31, 2017 and 2016.

d. Excess of Cost over the Carrying Value of Non-controlling Interests Acquired

The amount of excess of cost over the carrying value of non-controlling interests acquired as atDecember 31, 2017 and 2016, recognized as part of “Equity Attributable to Equity Holders of theParent Company” section in the consolidated statements of financial position, resulted from thefollowing acquisitions of non-controlling interests:

20% of Greenwich in 2006 P=168,25715% of Belmont in 2007 375,72140% of Adgraphix in 2010 (1,214)30% of Mang Inasal in 2016 (see Note 11) 1,217,61530% of HBFPPL in 2016 (see Note 11) 391,782

P=2,152,161

e. Retained Earnings

The Jollibee Group has a cash dividend policy of declaring one-third of the Jollibee Group’s netincome for the year as cash dividends. It uses best estimate of its net income as basis fordeclaring cash dividends. Actual cash dividends per share declared as a percentage of the EPSare 33.1%, 32.4% and 38.3% in 2017, 2016 and 2015, respectively.

The Parent Company’s retained earnings available for dividend declaration, computed based onthe guidelines provided in SEC Memorandum Circular No. 11, amounted to P=10,876.0 million,P=6,046.3 million and P=11,409.3 million as at December 31, 2017, 2016 and 2015, respectively.

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The Parent Company’s cash dividend declarations for 2017, 2016 and 2015 follow:

Declaration Date Record Date Payment DateCash Dividend

per Share

Total CashDividends

Declared(In Thousands, except dividend per share)

2017April 5 April 21 May 5 P=1.00 P=1,077,527November 10 November 27 December 11 1.18 1,277,984

P=2.18 P=2,355,511

2016April 6 April 21 May 6 P=0.86 P=919,435November 11 November 28 December 12 1.00 1,072,808

P=1.86 P=1,992,243

2015April 7 May 7 May 29 P=0.80 P=851,350November 9 November 25 December 9 0.97 1,035,510

P=1.77 P=1,886,860

An important part of the Jollibee Group’s growth strategy is the acquisition of new businesses inthe Philippines and abroad. Examples were acquisitions of 85% of Yonghe King in 2004 in PRC(P=1,200.0 million), 100% of Red Ribbon in 2005 (P=1,700.0 million), the remaining 20% minorityshare in Greenwich in 2007 (P=384.0 million), the remaining 15% share of Yonghe King in 2007(P=413.7 million), 100% of Hong Zhuang Yuan restaurant chain in PRC in 2008(P=2,600.0 million), 70% of Mang Inasal in 2010 (P=2,976.2 million), 100% of Chowking USoperations in 2011 (P=693.3 million), 48% of WJ Investments Limited in 2012 (P=98.0 million),40% of SJBF LLC, the parent company of the entities comprising the Smashburger business inUS (P=4,812.8 million), including transaction costs in 2015, the remaining 30% minority shareeach in Mang Inasal (P=2,000.0 million) and HBFPPL (P=514.9 million), acquisition of GSC(P=8.6 million) in 2016 and the acquisition of additional 10% share in SuperFoods Group(P=2,712.7 million) in 2017.

The Jollibee Group plans to continue to make substantial acquisitions in the coming years. TheJollibee Group uses its cash generated from operations to finance these acquisitions and capitalexpenditures. These limit the amount of cash dividends that it can declare and pay, making thelevel of the retained earnings higher than the paid-up capital stock.

In support of the Jollibee Group’s strategy, the BOD approved additional appropriations ofP=8,000.0 million, P=5,200.0 million, P=3,800.0 million and P=1,200.0 million on April 6, 2016,April 11, 2013, February 15, 2012 and in 2009, respectively, for future acquisitions and capitalexpenditures.

Details of the appropriated retained earnings as at December 31, 2017 and 2016 follow:

Projects Timeline AmountCapital Expenditures 2013 - 2018 P=10,600,000Acquisition of Businesses 2013 - 2018 7,600,000

P=18,200,000

The unappropriated retained earnings of the Parent Company is also restricted to the extent ofcost of common stock held in treasury amounting to P=180.5 million as well as the undistributed

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retained earnings of its subsidiaries which amounted to P=3,525.2 million, P=3,664.8 million andP=2,718.1 million as at December 31, 2017, 2016 and 2015, respectively.

In relation with the SRC Rule 68, as Amended (2011), Annex 68-D, below is the summary of theParent Company’s track record of registration of securities.

Number ofShares

registered

Initialissue/offer

price

Number of holders of securitiesas at December 31

Listing Date 2017 2016Common shares 75,000,000 P=9 July14, 1993 3,042 3,075

20. Royalty, Set-up Fees and Others


2017 2016 2015Royalty fees P=5,614,447 P=4,959,568 P=4,329,041Set-up fees 424,217 309,354 189,083Service fees 380,149 119,262 65,727Scrap sales 199,077 154,628 146,660Rent income (see Notes 13 and 29) 57,234 91,387 92,424Other revenues 237,879 252,817 146,094

P=6,913,003 P=5,887,016 P=4,969,029

The Jollibee Group has existing Royalty and Service Agreements with independent franchisees forthe latter to operate quick service restaurant outlets under the “Jollibee”, “Chowking”, “Greenwich”,“Red Ribbon”, “Mang Inasal”, “Yong He King”, “Hong Zhuang Yuan”, “Highlands Coffee” and“Pho 24” concepts and trade names. In consideration thereof, the franchisees agree to pay set-up feesand monthly royalty fees equivalent to a certain percentage of the franchisees’ net sales.

The Jollibee Group’s franchisees pay service fees for various services, including repairs andmaintenance services, rendered by the Jollibee Group’s personnel.

Other revenues pertain to delivery fees and other miscellaneous revenues earned by the JollibeeGroup.

21. Cost of Sales


2017 2016 2015Cost of inventories P=62,725,504 P=54,475,007 P=49,202,290Personnel costs:

Salaries, wages and other employee benefits 11,021,803 10,472,700 9,870,706Pension expense (see Note 25) 168,059 171,515 153,311

Rent (see Note 29) 9,719,896 8,234,530 7,450,952Contracted services 7,305,046 4,875,092 3,194,297Electricity and other utilities 4,587,166 4,022,779 3,808,056

(Forward)

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2017 2016 2015Depreciation and amortization

(see Notes 12 and 13) P=4,307,821 P=3,542,624 P=3,084,155Supplies 2,570,007 2,155,033 1,887,540Repairs and maintenance 1,218,581 1,327,943 1,107,659Security and janitorial 795,773 638,303 502,856Communication 227,195 190,811 160,537Professional fees 57,575 34,972 25,266Representation and entertainment 39,191 33,181 33,039Others 2,914,523 2,640,998 2,411,037

P=107,658,140 P=92,815,488 P=82,891,701

Others consist of delivery costs, insurance and other miscellaneous expenses.

22. General and Administrative Expenses


2017 2016 2015Personnel costs:

Salaries, wages and other employee benefits P=6,850,398 P=5,543,159 P=4,837,802Stock options expense (see Notes 19 and 26) 227,483 241,324 173,212Pension expense (see Note 25) 194,781 192,266 159,325

Taxes and licenses 1,394,412 1,271,104 1,143,765Professional fees 825,264 608,586 418,556Transportation and travel 577,374 504,469 438,990Rent (see Note 29) 516,717 470,004 390,934Contracted services 474,622 499,533 544,279Depreciation and amortization

(see Notes 12, 13, 14 and 15) 437,345 453,244 341,522Impairment in value of:

Property, plant and equipment (see Note 12) 431,939 42,731 –Receivables (see Note 7) 143,772 91,415 325,908Other assets 122,759 – –Inventories (see Note 8) 7,443 78,621 11,049

Corporate events 192,187 161,628 163,136Repairs and maintenance 157,495 191,253 136,228Membership and subscriptions 139,552 112,110 94,812Training 134,448 161,683 101,565Communication 116,101 98,769 113,654Donations 93,294 82,642 105,831Supplies 89,641 78,769 74,257Representation and entertainment 70,282 53,781 64,585Reversals of provision for impairment on:

Inventories (see Note 8) (53,819) (18,129) (12,047)Receivables (see Note 7) (20,705) (3,188) (4,606)Property, plant and equipment (see Note 12) (2,111) (2,000) –

Loss (gain) on retirement and disposals of:Investment properties (see Note 13) (231,036) – –Property, plant and equipment (see Note 12) 174,510 236,809 136,747

(Forward)

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2017 2016 2015Electricity and other utilities P=55,806 P=52,596 P=56,807Association dues 51,994 50,517 52,509Security and janitorial 24,408 22,464 19,606Insurance 21,182 16,782 16,147Others 688,307 568,498 383,470

P=13,905,845 P=11,861,440 P=10,288,043

23. Interest Income (Expense) and Other Income (Expense)

2017 2016 2015Interest income:

Cash and cash equivalents and short-terminvestments (see Note 6) P=149,298 P=136,671 P=118,032

Loans and advances* (see Note 11) 77,120 125,070 119,977Accretion of interest on security and other

deposits and employee car planreceivables (see Note 15) 33,149 25,172 19,774

P=259,567 P=286,913 P=257,783*Including interest income of other subsidiaries other than those mentioned in Note 11.

2017 2016 2015Interest expense:

Long-term debt (see Note 18) (P=392,589) (P=247,036) (P=153,206)Accretion of customers’ deposits

(see Note 16) (13,231) (20,354) (19,894)Short-term debt (see Note 18) – (228) (52,444)

(P=405,820) (P=267,618) (P=225,544)

2017 2016 2015Other income (expense):

Gain from the re-measurement of thepreviously held interest (see Note 11) P=1,328,733 P=– P=–

Write-off of liabilities 1,547,166 1,111,924 905,088Provisions (see Note 17) (794,609) – –Rebates and suppliers’ incentives 189,452 206,712 228,961Bank charges (165,348) (118,627) (108,181)Marked-to-market gain (loss) on derivatives (see Note 11) (129,371) 3,298 –Divestment of subsidiaries and interest in a

joint venture (see Note 11) (116,207) 66,695 –Penalties and charges 69,610 53,274 45,336Foreign exchange gain (loss) - net (63,535) 41,485 36,823Charges to franchisees 18,979 19,858 18,265Other rentals 17,484 16,392 13,821Pre-termination of operating leases 15,884 9,528 3,461Insurance claims and others 180,515 172,384 93,183

P=2,098,753 P=1,582,923 P=1,236,757

In the normal course of business, the Jollibee Group accrues liabilities based on management’s bestestimate of costs incurred, particularly in cases when the Jollibee Group has not yet received finalbillings from suppliers and vendors. There are also ongoing negotiations and reconciliations with

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suppliers and vendors on certain liabilities recorded. These balances are continuously reviewed bymanagement and are adjusted based on these reviews, resulting to write-off of certain liabilities asother income.

24. Income Taxes

The Jollibee Group’s provision for current income tax consists of the following:

2017 2016 2015Final tax withheld on:

Royalty income P=1,260,352 P=1,120,247 P=965,199Interest income 16,349 16,135 10,891

RCIT:With Optional Standard Deduction (OSD) 369,839 214,249 229,912With itemized deduction 306,010 805,092 552,757

MCIT 336,152 179,132 167,319Capital gains 21,928 – –

P=2,310,630 P=2,334,855 P=1,926,078

RCIT consists of corporate income taxes from the Jollibee Group’s operations in the Philippines,PRC, USA and Singapore.

For the years ended December 31, 2017 and 2016, Zenith, Grandworth and RRBHI, wholly-ownedsubsidiaries, elected to use OSD in computing for their taxable income. The net tax benefit (loss)from the availment of OSD amounted to (P=15.3 million), P=57.9 million and P=40.4 million in 2017,2016 and 2015, respectively.

The components of the Jollibee Group’s recognized net deferred tax assets as at December 31 follow:

2017 2016Deferred tax assets:

MSOP and ELTIP P=1,033,184 P=–NOLCO:

Philippine-based entities 553,035 844,872PRC-based entities 250,973 228,101USA-based entities 7,218 –

Operating lease payables 566,066 470,202Pension liability and other benefits 551,921 545,489Excess of MCIT over RCIT 513,072 460,009Accrued royalty fees of US based entities 497,590 –Accumulated impairment loss in value of receivables,

inventories, property, plant and equipment and othernonfinancial assets 105,190 109,328

Unrealized foreign exchange loss 62,395 17,918Unaccreted discount on security deposits and employee

car plan receivables 53,992 21,236Unamortized past service costs 9,689 13,146Others 15,136 8,390

4,219,461 2,718,691

(Forward)

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2017 2016Deferred tax liabilities:

Excess of fair value over book value of identifiableassets of acquired businesses P=69,281 P=711

State income taxes 82,382 –Unrealized foreign exchange gain 57,342 43,292Prepaid rent 46,768 60,796Unaccreted discount on employee car plan receivables

and security deposits 23,172 14,907Operating lease receivables 17,049 3,708Deferred rent expense 13,461 9,322Unrealized gain on change in fair value of

AFS financial assets 1,193 460310,648 133,196

Deferred tax assets - net P=3,908,813 P=2,585,495

The components of the Jollibee Group’s recognized net deferred tax liabilities as at December 31follow:


Allowance for impairment loss on receivables andinventories P=85,041 P=84,942

Pension liability and other benefits 40,905 41,605Excess of MCIT over RCIT 18,359 24,921Operating lease payables 7,142 8,371Unaccreted discount on security deposits and employee

car plan receivables 1,790 1,022Unrealized foreign exchange loss 14 33NOLCO - Philippine-based – 10,474Unamortized past service costs – 3,997

153,251 175,365Deferred tax liabilities:

Excess of fair value over book value of identifiableassets of acquired businesses 1,340,894 677,106

Unaccreted discount on employee car plan receivables,security and product security deposits 1,338 4,183

Unrealized foreign exchange gain 14 6531,342,246 681,942

Deferred tax liabilities - net P=1,188,995 P=506,577

The rollforward analysis of the net deferred tax assets and liabilities of the Jollibee Group follows:

2017 2016Balance at beginning of year P=2,078,918 P=1,408,489Additions 685,089 643,506Income tax effect of other remeasurements

of net defined benefit plan (59,440) 29,646Translation adjustments 15,251 (2,723)

P=2,719,818 P=2,078,918

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OSDThe availment of the OSD method also affected the recognition of several deferred tax assets andliabilities. Deferred tax assets and liabilities, for which the related income and expense are notconsidered in determining gross income for income tax purposes, are not recognized. This is becausethe manner by which the Jollibee Group expects to recover or settle the underlying assets andliabilities, for which the deferred tax assets and liabilities were initially recognized, would not resultto any future tax consequence under the OSD method. Meanwhile, deferred tax assets and liabilities,for which the related income and expense are considered in determining gross income for income taxpurposes, are recognized only to the extent of their future tax consequence under OSD method.Hence, the tax base of these deferred tax assets and liabilities is reduced by the 40% allowablededuction provided for under the OSD method.

Accordingly, the Jollibee Group’s deferred tax assets and liabilities, which were not recognized dueto the use of the OSD method, are as follows:


Allowance for impairment losses on receivables andnonfinancial assets P=30,421 P=20,341

Pension liability and other benefits 23,121 17,932Operating lease payables 13,429 18,917Unaccredited discount on financial instruments and

others 458 605Unamortized past service cost 139 261Excess of MCIT over RCIT – 2,450

67,568 60,506Deferred tax liabilities:

Operating lease receivables 5,437 4,496Others 551 643

5,988 5,139Deferred tax assets - net P=61,580 P=55,367

As at December 31, 2017, NOLCO and excess of MCIT over RCIT of the Philippine-based entitiesthat can be claimed as deductions from taxable income and income tax due, respectively, are asfollows:

Year Incurred/PaidCarryforwardBenefit up to NOLCO

Excess ofMCIT over

RCIT2017 December 31, 2020 P=– P=190,6332016 December 31, 2019 1,033,062 179,2242015 December 31, 2018 1,042,330 167,3182014 December 31, 2017 1,269,524 138,388

3,344,916 675,563Utilized during the year (1,370,518) –Write-offs and expirations (40,630) (144,132)

P=1,933,768 P=531,431

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The PRC enterprise income tax law provides that income tax rates are unified at 25%. As atDecember 31, 2017, NOLCO of the PRC-based entities that can be claimed as deductions fromtaxable income are as follows:

Year IncurredCarryforwardBenefit Up to Tax Losses

Deferred Tax at 25%

2017 December 31, 2022 P=502,496 P=125,6242016 December 31, 2021 240,988 60,2472015 December 31, 2020 234,393 58,5982014 December 31, 2019 157,498 39,3752013 December 31, 2018 145,789 36,4472012 December 31, 2017 133,737 33,434

1,414,901 353,725Utilized during the year (411,008) (102,752)

P=1,003,893 P=250,973

The following are the movements in deferred tax assets on NOLCO of the Jollibee Group:

2017 2016 2015Balance at beginning of year P=1,083,447 P=782,610 P=544,953Additions 172,041 355,025 365,753Utilized during the year (447,324) (51,416) (126,174)Write-offs and expirations (12,189) – (4,221)Translation adjustments 15,251 (2,772) 2,299

P=811,226 P=1,083,447 P=782,610

The following are the movements in deferred tax assets on Excess of MCIT over RCIT of the JollibeeGroup:

2017 2016 2015Balance at beginning of year P=484,930 P=318,340 P=160,358Additions 190,633 179,224 167,318Write-offs and expirations (144,132) (4,387) (9,336)Utilized during the year – (8,247) –

P=531,431 P=484,930 P=318,340

The net change in deferred tax liabilities recognized in equity amounted to (P=59.4 million),P=29.6 million and P=104.8 million in 2017, 2016 and 2015, respectively.

The reconciliation of provision for income tax computed at the statutory income tax rates to provisionfor income tax as shown in the consolidated statements of comprehensive income are as follows:

2017 2016 2015Provision for income tax at various

statutory income tax rates P=2,501,853 P=2,388,798 P=1,925,372Income tax effects of:

Effect of different tax rate forroyalty and interest income (638,351) (567,363) (485,655)

Nontaxable income (313,827) – –

(Forward)

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2017 2016 2015Income tax effects of:

Intrinsic value of stock optionsexercised (P=323,503) (P=208,494) (P=109,092)

Tax effect of MSOP and ELTIP (175,401) – –Expired/written off NOLCO and

excess of MCIT over RCIT 156,321 4,387 13,557Effect of different tax rates for

capital gains tax (47,382) – –Nondeductible expenses 35,754 74,371 60,271Difference between OSD and

itemized deductions 12,621 (57,925) (40,392)Net movement in unrecognized

DTA (28,325) 34,549 6,882Others 487,168 8,288 17,665

P=1,666,928 P=1,676,611 P=1,388,608

Provision for current income tax of foreign entities operating in United States, PRC and Singaporeamounted to P=55.1 million, P=119.3 million and P=2.3 million, respectively, in 2017, P=67.6 million,P=99.7 million and P=1.3 million, respectively, in 2016, and P=36.1 million, P=72.2 million andP=2.4 million, respectively, in 2015.

For Philippine-based entities, Republic Act (RA) No.10963 or the Tax Reform for Acceleration andInclusion Act (TRAIN) was signed into law on December 19, 2017 and took effect January 1, 2018,making the new tax law enacted as of the reporting date. Although the TRAIN changes existing taxlaw and includes several provisions that will generally affect businesses on a prospective basis, themanagement assessed that the same will not have any significant impact on the consolidated financialstatement balances as of the reporting date.

For US-based entities, Tax Cuts and Jobs Act (the US Tax Reform) was signed into law onDecember 22, 2017, making the new law enacted by that date under Philippine Financial ReportingStandards (PFRSs) and therefore applicable as of the reporting date. The US Tax Reform resulted inthe re-measurement of deferred tax assets and liabilities as of December 31, 2017 as a result of thechange in the corporate income tax rate from 35% to 21%. The recognized net deferred tax assets ofUS-based entities amounted to P=452.4 million.

25. Pension Liability

Defined Benefit PlanThe Parent Company and certain Philippine-based subsidiaries have funded, independently-administered, non-contributory defined benefit pension plan covering all permanent employees. Thebenefits are based on the employees’ projected salaries and number of years of service.

The funds are administered by trustee banks. Subject to the specific instructions provided in writing,the Parent Company and certain Philippine-based subsidiaries direct the trustee banks to hold, investand reinvest the funds and keep the same invested, in its sole discretion, without distinction betweenprincipal and income in, but not limited to, certain cash and other short-term deposits, investments ingovernment and corporate debt securities and quoted equity securities.

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Under the existing regulatory framework, Republic Act No. 7641 requires a provision for retirementpay to qualified private sector employees in the absence of any retirement plan in the entity, providedhowever that the employees’ retirement benefits under any collective bargaining and otheragreements shall not be less than those provided under the law. The law does not require minimumfunding of the plan.

The following tables summarize the components of pension expense, included under “Cost of sales”and “General and administrative expenses” accounts in the consolidated statements of comprehensiveincome and pension liability in the consolidated statements of financial position, which are based onactuarial valuations.

Changes in pension liability of the Jollibee Group in 2017 are as follows:

Present Valueof Defined

BenefitObligation

Fair Valueof Plan Assets

PensionLiability

At January 1, 2017 P=3,378,892 P=1,720,714 P=1,658,178Pension expense (see Notes 21

and 22):Current service cost 279,419 – 279,419Net interest 176,704 90,072 86,632Past service cost (3,211) – (3,211)

452,912 90,072 362,840Benefits paid (103,553) (103,553) –Remeasurements in other

comprehensive income:Return on plan assets (excluding

amount included in net interest) – 52,498 (52,498)Actuarial changes arising from

changes in financialassumptions (235,902) – (235,902)

Actuarial changes due toexperience adjustment 81,928 – 81,928

(153,974) 52,498 (206,472)Contributions – 325,000 (325,000)At December 31, 2017 P=3,574,277 P=2,084,731 P=1,489,546

Changes in pension liability of the Jollibee Group in 2016 are as follows:


BenefitObligation


PensionLiability

At January 1, 2016 P=2,999,152 P=1,532,622 P=1,466,530Pension expense (see Notes 21

and 22):Current service cost 252,342 – 252,342Net interest 151,737 77,018 74,719Past service cost 36,720 – 36,720

440,799 77,018 363,781Benefits paid (100,874) (100,874) –

(Forward)

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BenefitObligation


PensionLiability

Remeasurements in othercomprehensive income:Return on plan assets (excluding

amount included in net interest) P=– (P=62,052) P=62,052Actuarial changes arising from

changes in financialassumptions (73,382) – (73,382)

Actuarial changes due toexperience adjustment 113,197 – 113,197

39,815 (62,052) 101,867Contributions – 274,000 (274,000)At December 31, 2016 P=3,378,892 P=1,720,714 P=1,658,178

The maximum economic benefit available is a combination of expected refunds from the plan andreductions in future contributions.

The following table presents the carrying amounts, which approximate the estimated fair values, ofthe assets of the plan:

2017 2016Cash and cash equivalents P=487,772 P=369,024Investments in government and corporate debt

securities 1,123,443 1,075,581Investments in quoted equity securities:

Holding firms 203,216 142,308Property 117,714 73,507Banks 115,258 53,375Food and beverage 55,978 55,749Telecommunications 32,531 17,038Electricity, energy, power and water 24,976 27,107Others 42,119 12,359

Interest and dividends receivable 15,478 17,545Fund liabilities (Note 27) (133,754) (122,879)

P=2,084,731 P=1,720,714

The plan assets consist of the following:

ƒ Investments in government securities which consist of retail treasury bonds that bear interestranging from 3.24%-7.38% and have maturities from August 2020 to October 2037 and fixed-ratetreasury notes that bear interest ranging from 2.13%-11.70% and have maturities from May 2018to October 2037.

ƒ Investments in debt securities consist of long-term corporate bonds in the property sector, whichbear interest ranging from 5.17%-5.35% maturing from March to May 2024.

ƒ Investments in equity securities consist of investments in listed equity securities, including equitysecurities of the Parent Company, for certain retirement plans of the Jollibee Group (see Note 27).

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ƒ Other financial assets held by the retirement plan are primarily accrued interest income on cashand cash equivalents, debt instruments and other securities.

Pension expense as well as the present value of the pension liability is determined using actuarialvaluations. The actuarial valuation involves making various assumptions. The principal assumptionsused in determining pension expense and liability for the defined benefit plans are shown below:

December 31,2017

December 31,2016

January 1,2016

Discount rate 5.90%–6.30% 5.20%–5.70% 5.00%–5.10%Salary increase rate 6.00% 6.00% 6.00%

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the present value of the defined benefit obligation as at the end of thereporting period, assuming all other assumptions were held constant:

Increase(Decrease)

Philippine Plan2017 2016 2015

Discount rates +0.50% (P=142,506) (P=156,602) (P=144,519)-0.50% 195,703 169,836 156,999

Future salary increases +0.50% 194,789 167,757 154,738-0.50% (143,116) (156,240) (143,898)

Shown below is the maturity analysis of the undiscounted benefit payments as at December 31:

2017 2016Less than 1 year P=705,649 P=492,013More than 1 year to 5 years 1,000,883 1,036,202More than 5 years to 10 years 2,328,122 1,996,378More than 10 years to 15 years 2,533,937 2,301,591More than 15 years to 20 years 2,638,048 2,451,602More than 20 years 8,531,203 7,615,074

The Parent Company and certain Philippine-based subsidiaries do not have a formal asset-liabilitymatching strategy. The overall investment policy and strategy of the retirement plans is based on theclient suitability assessment, as provided by trustee banks, in compliance with the BSP requirements.Nevertheless, the Parent Company and certain Philippine-based subsidiaries ensure that there will besufficient assets to pay the retirement benefits as they fall due while attempting to mitigate the variousrisks of the plans.

The plan assets are primarily exposed to financial risks such as liquidity risk and price risk. Liquidityrisk pertains to the plans’ ability to meet obligation to the employees upon retirement. To effectivelymanage liquidity risk, the trustee banks maintain assets in cash and short-term deposits. Price riskpertains mainly to fluctuation in market prices of the retirement funds’ marketable securities. In orderto effectively manage price risk, the trustee banks continuously assess these risks by closelymonitoring the market value of the securities and implementing prudent investment strategies.

The Parent Company and certain Philippine-based subsidiaries expect to contribute P=636.0 million tothe defined benefit pension plans in 2018.

The average duration of the defined benefit obligation is 10 years as at December 31, 2017 and 2016.

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Defined Contribution PlanThe employees of the PRC-domiciled and USA-based subsidiaries of the Jollibee Group are membersof a state-managed pension benefit scheme operated by the national governments. These subsidiariesare required to contribute a specified percentage of their payroll costs to the pension benefit schemeto fund the benefits. The only obligation of these subsidiaries with respect to the pension benefitscheme is to make the specified contributions.

Pension expense under the defined contribution plan amounted to P=569.8 million, P=603.7 million andP=637.2 million in 2017, 2016 and 2015, respectively.

26. Stock Options Plan

Senior Management Stock Option and Incentive PlanOn January 10, 2017 and December 17, 2002, the SEC approved the exemption requested by theJollibee Group on the registration requirements of 31,500,000 and 101,500,000 options, respectively,underlying the Parent Company’s common shares to be issued pursuant to the Jollibee Group’s SeniorManagement Stock Option and Incentive Plan (the Plan). The Plan covers selected key members ofmanagement of the Jollibee Group.

The Plan is divided into two programs, namely, the Management Stock Option Program (MSOP) andthe Executive Long-term Incentive Program (ELTIP). The MSOP provides a yearly stock optiongrant program based on company and individual performance while the ELTIP provides stockownership as an incentive to reinforce entrepreneurial and long-term ownership behavior of executiveparticipants.

MSOP. The MSOP is a yearly stock option grant program open to members of the seniormanagement committee of the Jollibee Group and members of the management committee, keytalents and designated consultants of some of the business units.

Each MSOP cycle refers to the period commencing on the MSOP grant date and ending on the lastday of the MSOP exercise period. Vesting is conditional on the employment of the employee-participants in the Jollibee Group within the vesting period. The options will vest at the rate of one-third of the total options granted on each anniversary of the MSOP grant date until the thirdanniversary.

The exercise price of the stock options is determined by the Jollibee Group with reference toprevailing market prices over the three months immediately preceding the date of grant for the 1st upto the 7th MSOP cycle. Starting with the 8th MSOP cycle, the exercise price of the option isdetermined by the Jollibee Group with reference to the market closing price at date of grant.

The options will vest at the rate of one-third of the total options granted from the start of the grantdate on each anniversary date which will start after a year from the grant date. For instance, under the1st MSOP cycle, the Compensation Committee of the Jollibee Group granted 2,385,000 options toeligible participants on July 1, 2004. One-third of the options granted, or 795,000 options, vested andmay be exercised starting July 1, 2005. The exercise period for the 1st MSOP cycle was until June30, 2012. From July 1, 2005 to September 9, 2016, the Compensation Committee granted series ofMSOP grants under the 2nd to 13th MSOP cycle to eligible participants. Under the most recent grant(July 3, 2017), the 14th MSOP cycle, the Compensation Committee granted 4,198,500 options.These options are similar to 1st MSOP cycle.

The options under MSOP expire eight years after grant date. The 1st, 2nd, 3rd 4th, 5th and 6thMSOP cycles expired on June 30, 2012, 2013, 2014, 2015, 2016 and 2017, respectively.

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The movements in the number of stock options outstanding under MSOP and related weightedaverage exercise prices (WAEP) are as follows:

2017 2016 2015Number of

Options WAEPNumber of


Options WAEPTotal options granted at beginning of year 42,986,294 P=92.47 40,120,794 P=82.22 36,863,194 P=73.58Options granted during the year 4,198,500 206.20 2,865,500 236.00 3,257,600 179.99Total options granted at end of year 47,184,794 P=102.59 42,986,294 P=92.47 40,120,794 P=82.22

Outstanding at beginning of year 15,256,198 P=159.46 14,868,437 P=133.32 13,609,275 P=117.51Options granted during the year 4,198,500 206.20 2,865,500 236.00 3,257,600 179.99Options exercised during the year (2,672,040) 110.35 (2,259,125) 87.40 (1,380,628) 100.42Options forfeited during the year (2,108) 213.28 (218,614) 129.31 (617,810) 104.73Outstanding at end of year 16,780,550 P=176.63 15,256,198 P=159.46 14,868,437 P=133.32


The weighted average share price of the Parent Company common shares is P=222.86, P=227.53 andP=206.05 in 2017, 2016 and 2015, respectively. The weighted average remaining contractual life forthe stock options outstanding as at December 31, 2017, 2016 and 2015 is 5.21 years,5.17 years and 5.19 years, respectively.

The weighted average fair value of stock options granted in 2017, 2016 and 2015 is P=29.88,P=31.16 and P=26.13, respectively. The fair value of share options as at the date of grant is estimatedusing the Black-Scholes Option Pricing Model, taking into account, the terms and conditions uponwhich the options were granted. The option style used for this plan is the American style because theoption plan allows exercise before the expiry date.

The inputs in the valuation of the options granted on the dates of grant for each MSOP cycle areshown below:

MSOP Cycle Year of Grant Dividend YieldExpectedVolatility

Risk-freeInterest

Rate

Expected Life of

the Option

Stock Priceon Grant

DateExercise

Price1st 2004 1.72% 36.91% 6.20% 5-7 years P=24.00 P=20.002nd 2005 1.72% 36.91% 6.20% 5-7 years 29.00 27.503rd 2006 1.72% 36.91% 6.20% 5-7 years 35.00 32.324th 2007 1.70% 28.06% 6.41% 3-4 years 52.50 50.775th 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.856th 2009 2.00% 30.37% 5.28% 3-4 years 48.00 45.457th 2010 2.00% 29.72% 5.25% 3-4 years 70.00 57.778th 2011 2.00% 34.53% 4.18% 3-4 years 89.90 89.909th 2012 2.00% 28.72% 3.50% 3-4 years 107.90 107.9010th 2013 2.00% 29.38% 2.68% 3-4 years 145.00 145.0011th 2014 2.00% 24.87% 2.64% 3-4 years 179.80 179.8012th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.0013th 2016 2.00% 17.76% 2.63% 3-4 years 236.00 236.0014th 2017 2.00% 16.70% 3.92% 3-4 years 206.20 206.20

The expected life of the stock options is based on historical data and current expectations and is notnecessarily indicative of exercise patterns that may occur. The expected volatility reflects theassumption that the historical volatility over a period similar to the life of the options is indicative offuture trends, which may also not necessarily be the actual outcome.

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ELTIP. The ELTIP entitlement is given to members of the senior management committee anddesignated consultants of the Jollibee Group.

Each ELTIP cycle refers to the period commencing on the ELTIP entitlement date and ending on thelast day of the ELTIP exercise period. Actual grant and vesting is conditional upon achievement ofthe Jollibee Group’s medium to long-term goals and individual targets in a given period, and theemployment of the employee-participants in the Jollibee Group within the vesting period. If the goalsare achieved, the options will be granted. For the 3rd ELTIP cycle, a percentage of the options to begranted are based on the percentage of growth in annual earnings per share such that 100%, 50% or25% of the options granted when percentage of growth in annual earnings per share are 12% andabove, 10% to less than 12% or 8% to less than 10%, respectively. For the 4th ELTIP cycle, thepercentage of the options to be granted and the targeted percentage of growth in annual earnings pershare have been further revised such that 150%, 100% or 50% of the options granted whenpercentage of growth in annual earnings per share are 15% and above, 12% to less than 15% or 10%to less than 12%, respectively.

The exercise price of the stock options under ELTIP is determined by the Jollibee Group withreference to prevailing market prices over the three months immediately preceding the date ofentitlement for the first and second ELTIP cycles. Starting with the 3rd ELTIP cycle, the exerciseprice of the option is determined by the Jollibee Group with reference to the closing market price as atthe date of entitlement.

The options will vest at the rate of one-third of the total options granted on each anniversary datewhich will start after the goals are achieved. For instance, on July 1, 2004, the CompensationCommittee gave an entitlement of 22,750,000 options under the 1st ELTIP cycle to eligibleparticipants. One-third of the options granted, or 7,583,333 options, vested and exercised startingJuly 1, 2007 until June 30, 2012. On July 1, 2008, October 19, 2012 and August 25, 2015,entitlement to 20,399,999, 24,350,000 and 11,470,000 options were given to eligible participantsunder the 2nd, 3rd and 4th ELTIP cycles, respectively. The 1st and 2nd ELTIP cycles expired onJune 30, 2012 and April 30, 2017, respectively. The stock options granted under the 3rd and 4thELTIP cycles will expire in 2020 and 2023, respectively.


The movements in the number of stock options outstanding for the 2nd to 4th ELTIP cycles andrelated WAEP for the years ended December 31, 2017, 2016 and 2015 follow:

2017 2016 2015Number of



Options WAEPTotal options granted at end of year 78,969,999 P=74.58 78,969,999 P=74.58 67,499,999 P=56.66Options granted during the year − − − − 11,470,000 180.00Total options granted at end of year 78,969,999 P=74.58 78,969,999 P=74.58 78,969,999 P=74.58

Outstanding at beginning of year 35,118,896 P=122.65 38,344,999 P=117.74 31,270,560 P=90.06Options granted during the year − − − − 11,470,000 180.00Options exercised during the year (7,682,230) 73.69 (2,892,770) 59.59 (3,728,468) 79.46Options forfeited during the year − − (333,333) 105.00 (667,093) 105.00Outstanding at end of year 27,436,666 P=136.35 35,118,896 P=122.65 38,344,999 P=117.74


The weighted average remaining contractual life for the stock options outstanding as of 2017, 2016and 2015 is 3.59 years, 4.00 years and 4.85 years, respectively.

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The fair value of stock options granted is P=26.13 in 2015. There were no additional stock optiongrants under ELTIP in 2017 and 2016. The fair value of share options as at the date of grant isestimated using the Black-Scholes Option Pricing Model, taking into account the terms andconditions upon which the options were granted. The option style used for this plan is the Americanstyle because this option plan allows exercise before the maturity date.

The inputs to the model used for the options granted on the dates of grant for each ELTIP cycle areshown below:

ELTIP Cycle Year of GrantDividend

YieldExpectedVolatility

Risk-freeInterest Rate

Expected Life of

the Option

Stock Priceon Grant

DateExercise

Price1st 2004 1.72% 36.91% 6.20% 5 years P=24.00 P=20.002nd 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.853rd 2012 2.00% 28.74% 3.60% 3-4 years 105.00 105.004th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.00

The expected life of the stock options is based on historical data and current expectations and is notnecessarily indicative of exercise patterns that may occur. The expected volatility reflects theassumption that the historical volatility over a period similar to the life of the options is indicative offuture trends, which may also not necessarily be the actual outcome.

The cost of the stock options expense charged to operations for both MSOP and ELTIP in the“General and administrative expenses” account amounted to P=227.5 million, P=241.3 million andP=173.2 million in 2017, 2016 and 2015, respectively (see Note 22). Correspondingly, a credit wasmade to additional paid-in-capital (see Note 19).

27. Related Party Transactions

The Jollibee Group has transactions with related parties. Enterprises and individuals that directly, orindirectly through one or more intermediaries, control or are controlled by, or under common controlwith the Jollibee Group, including holding companies, subsidiaries and fellow subsidiaries are relatedentities of the Jollibee Group. Individuals owning, directly or indirectly, an interest in the votingpower of the Jollibee Group that give them significant influence over the enterprise; key managementpersonnel, including directors and officers of the Jollibee Group, and close members of the family ofthese individuals and companies associated with these individuals also constitute related parties.

Compensation of Key Management Personnel of the Jollibee GroupThe aggregate compensation and benefits to key management personnel of the Jollibee Group in2017, 2016 and 2015 are as follows:

2017 2016 2015Salaries and short-term benefits P=1,107,515 P=1,001,048 P=798,882Stock options expense

(see Notes 22 and 26) 227,483 241,324 173,212Net pension expense 65,075 59,701 47,584Employee car plan and other long-

term benefits 48,948 47,673 42,803P=1,449,021 P=1,349,746 P=1,062,481

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Transactions with the Retirement PlansAs at December 31, 2017 and 2016, certain retirement funds of the Jollibee Group include investmentin equity securities of the Parent Company with details as follows:

2017 2016Number of shares 163,150 192,860

Market value P=41,277 P=37,415Cost 9,417 9,187Unrealized gain P=31,860 P=28,228

The Jollibee Group’s receivable from retirement fund amounted to P=131.7 million andP=122.9 million as at December 31, 2017 and 2016, respectively (see Note 25). The receivable arosefrom benefit payments made by the Jollibee Group for and in behalf of the retirement plans. Thereceivable is noninterest-bearing.

Transaction with a Joint VentureAs at December 31, 2016 the Jollibee Group has outstanding advances to SuperFoods Group. Theterms of these advances are disclosed in Note 11.

Terms and Conditions of Transactions with other Related PartiesTransactions with related parties are made at market prices and are normally settled in cash. Otherrelated party transactions between entities under the Jollibee Group are eliminated in theconsolidation process.

28. Earnings Per Share

Basic and diluted EPS are computed as follows:

2017 2016 2015(In Thousand pesos, except for EPS)

(a) Net income attributable to the equity holdersof the Parent Company P=7,109,120 P=6,164,735 P=4,928,236

(b) Weighted average number of shares - basic 1,080,488,873 1,072,616,009 1,067,293,108Weighted average number of shares

outstanding under the stock options plan 32,366,508 38,387,061 42,717,799Weighted average number of shares that

would have been purchased at fairmarket value (18,180,717) (18,545,923) (21,689,263)

(c) Adjusted weighted average shares - diluted 1,094,674,664 1,092,457,147 1,088,321,644

EPS:Basic (a/b) P=6.580 P=5.747 P=4.618Diluted (a/c) 6.494 5.643 4.528

Potential common shares for stock options under the 13th MSOP cycle were not included in thecalculation of the diluted EPS in 2017 and 2016 because they are antidilutive. Contingently issuableshares for stock options under the 4th ELTIP cycle have not been included in the calculation of thediluted EPS in 2017 and 2016.

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29. Commitments and Contingencies

a. Operating lease commitments - Jollibee Group as lessee

The Jollibee Group has various operating lease commitments for quick service restaurant outletsand offices. The noncancellable periods of the leases range from 3 to 20 years, mostly containingrenewal options. Some of the leases contain escalation clauses. The lease contracts on certainsales outlets provide for the payment of additional rentals based on certain percentages of sales ofthe outlets. Contingent rent expense amounted to P=2,057.8 million, P=1,703.3 million andP=1,428.2 million in 2017, 2016 and 2015, respectively (see Notes 21 and 22).

The future minimum lease payments for the noncancellable periods of the operating leasesfollow:

2017 2016 2015Within one year P=2,229,282 P=1,546,661 P=1,532,583After one year but not more than five years 8,405,865 5,916,716 5,581,731More than five years 9,942,645 8,093,585 6,443,631

P=20,577,792 P=15,556,962 P=13,557,945

Rent expense recognized on a straight-line basis amounted to P=10,236.6 million, P=8,704.5 millionand P=7,841.9 million in 2017, 2016 and 2015, respectively (see Notes 21 and 22). The differenceof rent expense recognized under the straight-line method and the rent amounts due in accordancewith the terms of the lease agreements are charged to “Operating lease payables” account whichamounted to P=2,051.6 million and P=1,792.9 million as at December 31, 2017 and 2016,respectively.

b. Operating lease commitments - Jollibee Group as lessor

The Jollibee Group entered into commercial property leases for its investment property units andvarious sublease agreements. Noncancellable periods of the leases range from 3 to 20 years,mostly containing renewal options. Leases generally include a clause to enable upward revisionof the rent charges on an annual basis based on prevailing market conditions.

The future minimum lease payments for the noncancellable periods of the operating leases,wherein Jollibee Group is the lessor, follow:

2017 2016 2015Within one year P=174,333 P=142,011 P=63,359After one year but not more than five years 500,520 393,154 244,123More than five years 163,067 184,930 598,950

P=837,920 P=720,095 P=906,432

Rent income recognized on a straight-line basis amounted to P=57.2 million, P=91.4 million andP=92.4 million in 2017, 2016 and 2015, respectively (see Note 20). The difference of rent incomerecognized under the straight-line method and the rent amounts in accordance with the terms ofthe lease are included under “Operating lease receivables” which amounted to P=28.0 million andP=26.0 million as at December 31, 2017 and 2016, respectively.

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c. Contingencies

The Jollibee Group is involved in litigations, claims and disputes which are normal to itsbusiness. Management believes that the ultimate liability, if any, with respect to these litigations,claims and disputes will not materially affect the financial position and financial performance ofthe Jollibee Group. Thus, other than the provisions in Note 17, there were no other provisionsmade for contingencies.

The Jollibee Group does not provide further information on these provisions and contingencies inorder not to impair the outcome of the litigations, claims and disputes.

30. Financial Risk Management Objectives and Policies

The Jollibee Group is exposed to a variety of financial risks from its operating, investing andfinancing activities. The Jollibee Group’s risk management policies focus on actively securing theJollibee Group’s short-term to medium-term cash flows by minimizing the exposure to financialmarkets.

The Jollibee Group’s principal financial instruments comprise of cash and cash equivalents, short-term investments, receivables and long-term debts. The main purpose of these financial instrumentsis to obtain financing for the Jollibee Group’s operations. The Jollibee Group has other financialassets and liabilities such as receivable from sale of business, security and other deposits, operatinglease receivables and trade payables and other current liabilities (excluding accrual for local and othertaxes, liabilities to government agencies and unearned revenue from gift certificates) which arisedirectly from its operations.

The main risks arising from these financial instruments are interest rate risk, foreign currency risk,credit risk and liquidity risk. The risk management policies reviewed regularly by the ParentCompany’s BOD and management for managing each of these risks are summarized as follows:

Interest Rate RiskInterest rate risk arises from the possibility that the fair value or future cash flows of financialinstruments will fluctuate because of changes in market interest rates.

The Jollibee Group’s exposure to interest rate risk relates primarily to long-term debts with floatinginterest rates. Floating rate financial instruments are subject to cash flow interest rate risk. TheJollibee Group’s interest rate exposure management policy centers on reducing the Company’soverall interest expense and exposure to changes in the interest rates.

To manage the interest rate risk related to the Jollibee Group’s long-term debts, the Jollibee Groupused a derivative instrument to fix the interest rate over the term of one of its long-term debts (seeNote 18). With the Jollibee Group's Corporate Planning Team, it enters into loan contracts withvariable interest rates and option to fix interest rates which can be availed to manage its loan risks.

There is minimal exposure on the other sources of the Jollibee Group’s interest rate risk. These othersources are from the Jollibee Group’s cash in banks, short-term deposits and short-term investments.

The following tables demonstrate the sensitivity to a reasonably possible change in interest rates, withall other variables held constant, of the Jollibee Group’s income before income tax as atDecember 31, 2017 and 2016. The impact on the Jollibee Group’s income before income tax is dueto changes in the fair value of floating interest rates.

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Long-term Debt with Floating Interest Rates

Increase/Decrease

in Basis Points

Effect in Profit or LossBefore Income Tax

2017 2016USD +100 (80,599) (87,706)

-100 80,599 87,706

PHP +100 (64,245) (33,848)-100 64,245 33,848

VND +100 (4,167) −-100 4,167 −

The assumed movement in basis point for interest rate sensitivity analysis is based on the currentlyobservable market environment.

Foreign Currency RiskThe Jollibee Group’s exposure to foreign currency risk arises from the Parent Company’s investmentsoutside the Philippines, which are mainly in PRC and USA. The net assets of foreign businessesaccount for only 2.55% and 5.74% of the consolidated net assets of the Jollibee Group as atDecember 31, 2017 and 2016, respectively, and the businesses have been rapidly growing.

The Jollibee Group also has transactional foreign currency exposures. Such exposure arises from theJollibee Group’s Philippine operations’ cash and cash equivalents and receivables in foreigncurrencies.

The following table shows the Jollibee Group’s Philippine operations’ foreign currency-denominatedmonetary assets and their peso equivalents as at December 31, 2017 and 2016:

2017 2016

USD RMBPHP

Equivalent USD RMBPHP

EquivalentAssetsCash and cash equivalents 407 6 20,364 687 8 34,185Receivables 32 − 1,598 4,991 − 248,164Foreign currency

denominated assets 439 6 21,962 5,678 8 282,349Accounts payable - trade (1,155) − (57,669) − − −Foreign currency

denominated assets - net (716) 6 (35,707) 5,678 8 282,349

Foreign Currency Risk Sensitivity AnalysisThe Jollibee Group has recognized in profit or loss, foreign currency exchange gain or loss, includedunder “Other income” account, which amounted to a net foreign exchange loss of P=63.5 millionin 2017 and net foreign exchange gain of P=41.5 million and P=36.8 million in 2016 and 2015,respectively (see Note 23). This resulted from the movements of the Philippine peso against the USDand RMB as shown in the following table:

Peso toUSD RMB

December 31, 2017 49.93 7.64December 31, 2016 49.72 7.16

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The following table demonstrates the sensitivity to a reasonably possible change in USD and RMB toPhilippine peso exchange rate, with all other variables held constant, of the Jollibee Group’s incomebefore income tax (due to changes in the fair value of monetary assets and liabilities) as atDecember 31, 2017 and 2016:

2017 2016

Appreciation (Depreciation)of P= against Foreign Currency

Effect onIncome

before IncomeTax

Effect onEquity before

Income Tax

Effect onIncome

before IncomeTax

Effect onEquity before

Income TaxUSD 1.50 (P=1,074) (P=1,074) (P=8,517) (P=8,517)

(1.50) 1,074 1,074 8,517 8,5171.00 (716) (716) (5,678) (5,678)

(1.00) 716 716 5,678 5,678

RMB 0.95 (5.3) (5.3) (7.6) (7.6)(0.95) 5.3 5.3 7.6 7.60.63 (3.5) (3.5) (5.0) (5.0)

(0.63) 3.5 3.5 5.0 5.0

Credit RiskCredit risk is the risk that a customer or counterparty fails to fulfill its contractual obligations to theJollibee Group. This includes risk of non-payment by borrowers, failed settlement of transactions anddefault on outstanding contracts.

The Jollibee Group has a strict credit policy. Its credit transactions are with franchisees andcustomers that have gone through rigorous screening before granting them the franchise. The creditterms are very short, while deposits and advance payments are also required before rendering theservices or delivering the goods, thus, mitigating the possibility of non-collection. In cases of non-collection, defaults of the debtors are not tolerated; the exposure is contained the moment a defaultoccurs and transactions that will further increase the exposure of the Jollibee Group are discontinued.

The Jollibee Group has no significant concentration of credit risk with counterparty. The JollibeeGroup’s franchisee profile is such that no single franchisee accounts for more than 5% of the totalsystem wide sales of the Jollibee Group.

The aging analysis of loans and receivables as at December 31, 2017 and 2016 are as follows:

2017Neither

PastDue nor Past Due but not Impaired (Age in Days)

Total Impaired 1-30 31-60 61-120 Over 120 Impaired(In Millions)

Cash and cash equivalents* P=20,762.5 P=20,762.5 P=– P=– P=– P=– P=–Short-term investments 1,413.4 1,413.4 – – – – –Receivables: Trade 4,225.0 2,527.7 488.8 150.1 134.7 233.6 690.1 Employee car plan receivables** 275.0 275.0 – – – – – Advances to employees 144.8 144.8 – – – – – Other receivables*** 145.2 89.2 0.7 1.6 2.0 51.7 –Other noncurrent assets: Security and other deposits 2,465.0 2,465.0 – – – – – Operating lease receivables 28.0 28.0 – – – – –

Receivable from sale of business(including current portion) 76.4 76.4 – – – – –

29,535.3 27,782.0 489.5 151.7 136.7 285.3 690.1AFS financial assets 29.9 29.9 – – – – –

29,565.2 P=27,811.9 P=489.5 P=151.7 P=136.7 P=285.3 P=690.1***Excluding cash on hand amounting to P=345.0 million in 2017.***Including noncurrent portion of employee car plan receivables.***Excluding receivables from government agencies amounting to P=27.2 million in 2017.

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2016Neither

PastDue nor Past Due but not Impaired (Age in Days)

Total Impaired 1-30 31-60 61-120 Over 120 Impaired(In Millions)

Cash and cash equivalents* P=16,437.6 P=16,437.6 P=– P=– P=– P=– P=–Short-term investments 726.0 726.0 – – – – –Receivables: Trade 3,608.6 1,777.6 448.6 77.4 78.9 646.3 579.8 Employee car plan receivables** 214.0 205.2 1.3 0.7 0.9 5.9 – Advances to employees 112.7 112.7 – – – – – Other receivables*** 132.8 125.2 1.5 0.7 – 5.4 –Other noncurrent assets: Security and other deposits 2,103.7 2,103.7 – – – – – Operating lease receivables 26.0 26.0 – – – – – Receivable from sale of business

(including current portion) 286.4 286.4 – – – – –23,647.8 21,800.4 451.4 78.8 79.8 657.6 579.8

AFS financial assets 26.2 26.2 – – – – –P=23,674.0 P=21,826.6 P=451.4 P=78.8 P=79.8 P=657.6 P=579.8

***Excluding cash on hand amounting to P=295.7 million in 2016.***Including noncurrent portion of employee car plan receivables.***Excluding receivables from government agencies amounting to P=19.1 million in 2016.

Credit Risk Exposure. The tables below show the maximum exposure to credit risk of the JollibeeGroup as at December 31, 2017 and 2016 without considering the effects of collaterals and othercredit risk mitigation techniques:

2017

Gross Maximum Exposure

(a)

Fair Value and Financial Effect of

Collateral orCredit

Enhancement(b)

Net Exposure(c) = (a) - (b)

(In Millions)Financial AssetsCash and cash equivalents* P=20,762.5 P=150.1 P=20,612.4**Short-term investments 1,413.4 – 1,413.4Receivables: Trade 3,534.9 42.1 3,492.8*** Employee car plan receivables 275.0 – 275.0 Advances to employees 144.8 – 144.8 Other receivables**** 145.2 – 145.2Other noncurrent assets: Security and other deposits 2,465.0 – 2,465.0 Operating lease receivables 28.0 – 28.0

Receivable from sale of business(including current portion) 76.4 – 76.4

AFS financial asset 29.9 – 29.9P=28,875.1 P=192.2 P=28,682.9

* Excluding cash on hand amounting to P=345.0 million in 2017.**** Gross financial assets after taking into account insurance bank deposits for cash and cash equivalents.**** Gross financial assets after taking into account payables to the same counterparty.**** Excluding receivables from government agencies amounting to P=27.2 million in 2017.

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2016

Gross Maximum Exposure

(a)

Fair Value and Financial Effect of

Collateral or Credit Enhancement

(b)Net Exposure(c) = (a) - (b)

(In Millions)Financial AssetsCash and cash equivalents* P=16,437.6 P=236.8 P=16,200.8**Short-term investments 726.0 – 726.0Receivables: Trade 3,028.8 81.7 2,947.1*** Employee car plan receivables 214.0 – 214.0 Advances to employees 112.7 – 112.7 Other receivables**** 132.8 – 132.8Other noncurrent assets: Security and other deposits 2,103.7 – 2,103.7 Operating lease receivables 26.0 – 26.0AFS financial asset 26.2 – 26.2Receivable from sale of business

(including current portion) 286.4 – 286.4P=23,094.2 P=318.5 P=22,775.7

* Excluding cash on hand amounting to P=295.7 million in 2016.**** Gross financial assets after taking into account insurance bank deposits for cash and cash equivalents.**** Gross financial assets after taking into account payables to the same counterparty.**** Excluding receivables from government agencies amounting to P=19.1 million in 2016.

With respect to credit risk arising from financial assets of the Jollibee Group, the Jollibee Group’sexposure to credit risk arises from default of the counterparty, with a gross maximum exposure equalto the carrying amount of these instruments.

Credit Quality. The tables below show the credit quality by class of financial assets that are neitherpast due nor impaired, based on the Jollibee Group’s credit rating system as atDecember 31, 2017 and 2016.

2017Neither Past Due nor Impaired Past Due or

ImpairedTotal A B C(In Millions)

Receivables Trade P=4,225.0 P=1,110.2 P=1,298.9 P=118.6 P=1,697.3 Employee car plan receivables* 275.0 275.0 – – – Advances to employees 144.8 144.8 – – – Other receivables** 145.2 89.2 – – 56.0Receivable from sale of business 76.4 76.4 – – –AFS financial asset 29.9 29.9 – – –

P=4,896.3 P=1,725.5 P=1,298.9 P=118.6 P=1,753.3*Including noncurrent portion of employee car plan receivables.

**Excluding receivables from government agencies amounting to P=27.2 million in 2017.

2016Neither Past Due nor Impaired Past Due or

ImpairedTotal A B C(In Millions)

Receivables Trade P=3,608.6 P=744.5 P=946.7 P=86.4 P=1,831.0 Employee car plan receivables* 214.0 205.2 – – 8.8 Advances to employees 112.7 112.7 – – – Other receivables** 132.8 125.2 – – 7.6Receivable from sale of business 286.4 286.4 – – –AFS financial asset 26.2 26.2 – – –

P=4,380.7 P=1,500.2 P=946.7 P=86.4 P=1,847.4*Including noncurrent portion of employee car plan receivables.

**Excluding receivables from government agencies amounting to P=19.1 million in 2016.

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The credit quality of financial assets is managed by the Jollibee Group using internal credit ratings, asshown below:

A - For counterparty that is not expected by the Jollibee Group to default in settling itsobligations, thus, credit risk exposure is minimal. This counterparty normally includesfinancial institutions, certain related parties and customers who pay on or before duedate.

B - For counterparty with tolerable delays (normally from 1 to 30 days) in settling itsobligations to the Jollibee Group. The delays may be due to cut-off differences and/orclarifications on contracts/billings.

C - For counterparty who consistently defaults in settling its obligations, but with continuingbusiness transactions with the Jollibee Group, and may be or actually referred to legaland/or subjected to cash before delivery (CBD) scheme. Under this scheme, thecustomer’s credit line is suspended and all subsequent orders are paid in cash beforedelivery. The CBD status will only be lifted upon full settlement of the receivables andapproval by management. Thereafter, the regular credit term and normal billing andcollection processes will resume.

Liquidity RiskThe Jollibee Group’s exposure to liquidity risk refers to the risk that its financial liabilities are notserviced in a timely manner and that its working capital requirements and planned capitalexpenditures are not met. To manage this exposure and to ensure sufficient liquidity levels, theJollibee Group closely monitors its cash flows to be able to finance its capital expenditures and to payits obligations as and when they fall due.

On a weekly basis, the Jollibee Group’s Cash and Banking Team monitors its collections,expenditures and any excess/deficiency in the working capital requirements, by preparing cashposition reports that present actual and projected cash flows for the subsequent week. Cash outflowsresulting from major expenditures are planned so that money market placements are available in timewith the planned major expenditure. In addition, the Jollibee Group has short-term cash deposits andhas available credit lines with accredited banking institutions, in case there is a sudden deficiency.The Jollibee Group maintains a level of cash and cash equivalents deemed sufficient to finance theoperations. No changes were made in the objectives, policies or processes of the Jollibee Groupduring the years ended December 31, 2017 and 2016.

The Jollibee Group’s financial assets, which have maturity of less than 12 months and are used tomeet its short-term liquidity needs, are cash and cash equivalents, short-term investments and tradereceivables amounting to P=21,107.5 million, P=1,413.4 million and P=3,534.9 million, respectively, asat December 31, 2017 and P=16,733.3 million, P=726.0 million and P=3,028.8 million, respectively,as at December 31, 2016.

The tables below summarize the maturity profile of the Jollibee Group’s other financial liabilitiesbased on the contractual undiscounted cash flows as at December 31, 2017 and 2016:

2017Due and

DemandableLess than

1 Year 1 to 5 YearsOver

5 Years Total(In Millions)

Financial LiabilitiesTrade payables and other current liabilities* P=6,372.5 P=16,698.8 P=, P=, P=23,071.3Long-term debt (including current portion) 73.9 1,801.6 12,897.7 1,344.1 16,117.3Operating lease payables , 277.7 1,313.0 460.9 2,051.6Total Financial Liabilities P=6,446.4 P=18,778.1 P=14,210.7 P=1,805.0 P=41,240.2*Excluding statutory obligations such as local and other taxes payable, PHIC, SSS, HDMF and NHMFC payables and unearned revenue from gift certificates amounting to₱2,183.3 million as at December 31, 2017.

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2016Due and

DemandableLess than


5 Years Total(In Millions)

Financial LiabilitiesTrade payables and other current liabilities* P=, P=20,099.0 P=, P=, P=20,099.0Long-term debt (including current portion) , 1,562.1 4,639.7 5,953.6 12,155.4Operating lease payables , 602.9 523.9 666.0 1,792.8Total Financial Liabilities P=, P=22,264.0 P=5,163.6 P=6,619.6 34,047.2*Excluding statutory obligations such as local and other taxes payable, PHIC, SSS, HDMF and NHMFC payables and unearned revenue from gift certificates amounting to ₱1,861.6 million as at December 31, 2016.

Equity Price RiskThe Jollibee Group is not exposed to significant equity price risk on its investment in quoted equitysecurities consisting of investment in club shares.

Capital Management PolicyCapital includes equity attributable to equity holders of the Parent Company.

The primary objective of the Jollibee Group’s capital management is to ensure that it maintains astrong credit rating and healthy capital ratios in order to support its business and maximizeshareholder value. The Jollibee Group has sufficient capitalization.

The Jollibee Group generates cash flows from operations sufficient to finance its organic growth. Itdeclares cash dividends representing at least one-third of its consolidated net income, a ratio thatwould still leave some additional cash for future expansion. If needed, the Jollibee Group wouldborrow money for acquisitions of new businesses.

As at December 31, 2017 and 2016, the Jollibee Group’s debt ratio and net debt ratio are as follows:

Debt Ratio2017 2016

Total debt (a) P=47,201,916 P=38,446,948Total equity attributable to equity holders

of the Parent Company 40,782,635 33,602,216Total debt and equity attributable to equity

holders of the Parent Company (b) P=87,984,551 P=72,049,164

Debt ratio (a/b) 54% 53%

Net Debt Ratio2017 2016

Total debt P=47,201,916 P=38,446,948Less cash and cash equivalents and short-term

investments 22,520,874 17,459,348Net debt (a) 24,681,042 20,987,600Total equity attributable to equity holders

of the Parent Company 40,782,635 33,602,216Net debt and equity attributable

to equity holders of the Parent Company (b) P=65,463,677 P=54,589,816

Net debt ratio (a/b) 38% 38%

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31. Fair Value of Financial Assets and Liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at measurement date.

Financial Instruments Whose Carrying Amounts Approximate Fair Value. Management hasdetermined that the carrying amounts of cash and cash equivalents, short-term investments,receivables, operating lease receivables, trade payables and other current liabilities and operatinglease payables, based on their notional amounts, reasonably approximate their fair values because oftheir short-term nature or due to the immaterial effect of discounting when the present value of futurecash flows from these instruments are calculated.

AFS Financial Assets. The fair value of investments in quoted shares of stock is based on quotedprices. The Jollibee Group does not have the intention to dispose these financial assets in the nearterm.

Investment Properties. The fair value of the investment properties are determined by independentappraisers using the market data and cost approach, which considers the local market conditions, theextent, character and utility of the property, sales and holding prices of similar parcels of land and thehighest and best use of the investment properties.

Security and Other Deposits, Employee Car Plan Receivables, Long-term Debt and Derivative Assetor Liability. Management has determined that the estimated fair value of security and other deposits,noncurrent portion of employee car plan receivables, long-term debt and derivative assets or liabilityare based on the discounted value of future cash flows using applicable rates as follows:

2017 2016Security and other deposits 2.44%-5.71% 2.45%-5.38%Employee car plan receivables 2.50%-4.92% 1.89%-4.74%Derivative assets 2.08%-4.09% 2.08%-4.09%Long-term debt 2.56%-4.92% 2.45%-4.74%Derivative liability 0.95%-1.05% 0.95%-1.05%

The following tables provide the fair value measurement hierarchy of the Jollibee Group’s recurringfinancial assets and liabilities.

Quantitative disclosure fair value measurement hierarchy for assets as at December 31, 2017:

Fair Value Measurement Using

Carrying Value Total

QuotedPrices in

Active Markets(Level 1)

SignificantObservable

Inputs(Level 2)

SignificantUnobservable

Inputs(Level 3)

Assets measured at fair value: Available-for-sale financial assets

Quoted equity shares - club shares P=29,862 P=29,862 P=, P=29,862 P=,Derivative asset - interest rate swap 11,948 11,948 , 11,948 ,

Assets for which fair values are disclosed: Investment properties: 848,974 3,038,347 , 3,038,347 , Land 848,974 2,083,920 , 2,083,920 , Buildings , 954,427 , 954,427 , Other noncurrent assets: Security and other deposits 2,464,995 2,506,400 , 2,506,400 , Employee car plan receivables 186,000 251,492 , 251,492 ,

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Quantitative fair value measurement hierarchy for assets as at December 31, 2016:


Carrying Value Total

QuotedPrices in



Inputs(Level 2)


Inputs(Level 3)

Assets measured at fair value: Available-for-sale financial assets

Quoted equity shares - club shares P=26,212 P=26,212 P=, P=26,212 P=,Derivative asset - put/call rights 78,329 78,329 , , 78,329

Assets for which fair values are disclosed: Investment properties: 983,428 2,088,764 , 2,088,764 , Land 983,428 1,876,625 , 1,876,625 , Buildings , 212,139 , 212,139 , Other noncurrent assets: Security and other deposits 2,103,707 1,877,227 , 1,877,227 , Employee car plan receivables 130,584 196,224 , 196,224 , Receivables from sale of business 286,448 286,448 , 286,448 ,

Quantitative fair value measurement hierarchy for liabilities as at December 31, 2017:


Date of Valuation Total

Quoted Pricesin ActiveMarkets(Level 1)


Inputs(Level 2)


Inputs(Level 3)

Liabilities measured at fair value:Derivative liability - put/call rights December 31, 2017 P=51,042 P=, P=51,042 P=,

Liabilities disclosed at fair value:Product Security Deposit December 31, 2017 221,973 , 221,973 ,Tenants' Deposit December 31, 2017 8,339 , 8,339 ,Long-term debt December 31, 2017 15,749,921 , 15,749,921 ,

Quantitative disclosure fair value measurement hierarchy for liabilities as at December 31, 2016:



Quoted Pricesin ActiveMarkets(Level 1)


Inputs(Level 2)


Inputs(Level 3)

Liabilities measured at fair value:Derivative liability - interest rate swap December 31, 2016 P=33,531 P=, P=33,531 P=,

Liabilities disclosed at fair value:Product Security Deposit December 31, 2016 171,782 , 171,782 ,Tenants' Deposit December 31, 2016 12,781 , 12,781 ,Long-term debt December 31, 2016 12,750,225 , 12,750,225 ,

There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers intoand out of Level 3 fair value measurements during the year.

Description of significant unobservable input to the measurement of the derivative asset – put/callrights as at December 31, 2017 and 2016 is as follows:

Valuation TechniqueSignificantUnobservable Input Range of Input

Sensitivity of the Input toFair Value

Derivative asset – put/callrights

Discounted cash flowmethod

Long-term growth rate usedto calculate equity value

6.0% to 7.0% Increase (decrease) in the long-termrate would increase (decrease)the fair value.

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32. Reclassification

The sales discounts of PRC-based subsidiaries taken up as advertising and promotions in the 2016statement of comprehensive income and supporting note disclosures have been reclassified toconform with the presentation used in the statement of comprehensive income in 2017.

The reclassification did not affect the total assets, total liabilities and total equity in the statement offinancial position as at December 31, 2016 and the net income and total comprehensive income in thestatement of comprehensive income in 2016.

The effects of the reclassification in the 2016 statement of comprehensive income are as follows:

Account As previously reported Reclassification As reclassifiedSales discounts P=971,595 P=96,292 P=1,067,887Advertising and promotions 2,765,787 (96,292) 2,669,495

33. Event after the Reporting Period

Dividend DeclarationOn April 6, 2018, the BOD of the Parent Company approved a regular cash dividend of P=1.14 pershare of common stock to all stockholders of record as of April 24, 2018. Consequently, the cash isexpected to be paid out by May 9, 2018. The cash dividend is 14% higher than the P=1.00 regulardividend declared on April 5, 2017.

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34. Notes to the Statement of Cash Flows

Changes in liabilities and equity arising from financing activities are as follows:

January 1,2017 Cash flows

Dividendsdeclared

(Note 19)

Grantedstock optionsto employees

andsubsidiaries

Deferred taxassets (Note 24)

Interestexpense

(Note 24)

Amortizationof debt

issue cost(Note 17)

Foreignexchange

loss

Acquisitionof a

subsidiary(Note 11)

Share in netlosses of

Non-controlling

interest(Note 11)

Share incumulativetranslation

adjustmentsof Non-

controllinginterest

(Note 11)December 31,

2017(In Millions)

Dividends payable(Note 16) P=47.7 (P=2,347.2) P=2,355.5 P=– P=– P=– P=– P=– P=– P=– P=– P=56.0

Long-term debt (Note 18) 12,155.4 3,909.7 – – – – 3.2 49.0 – – – 16,117.3Interest payable (Note 16) 51.4 (360.9) – – – 392.6 – – – – – 83.1Capital stock (Note 19) 1,091.3 10.4 – – – – – – – – – 1,101.7Additional paid-in capital

(Note 19) 5,660.1 850.8 – 227.5 782.0 – – – – – – 7,520.4Non-controlling interest

(Note 11) 679.2 14.5 – – – – – – 1,536.4 (436.5) 5.7 1,799.3Total liabilities and equity

on financing activities P=19,685.1 P=2,077.3 P=2,355.5 P=227.5 P=782.0 P=392.6 P=3.2 P=49.0 P=1,536.4 (P=436.5) P=5.7 P=26,677.8

Annex “C-2”

Audited Parent Financial

Statements for the year ended

December 31, 2017

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ƒ Amendments to PFRS 12, Disclosure of Interests in Other Entities, Clarification of the Scope ofthe Standard (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle)

The amendments clarify that the disclosure requirements in PFRS 12, other than those relating tosummarized financial information, apply to an entity’s interest in a subsidiary, a joint venture oran associate (or a portion of its interest in a joint venture or an associate) that is classified (orincluded in a disposal group that is classified) as held for sale.

ƒ Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative

The amendments require entities to provide disclosure of changes in their liabilities arising fromfinancing activities, including both changes arising from cash flows and non-cash changes (suchas foreign exchange gains or losses).

The Company has provided the required information in Note 34 to the parent company financialstatements. As allowed under the transition provisions of the standard, the Company did notpresent comparative information for the year ended December 31, 2016.

ƒ Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for UnrealizedLosses

The amendments clarify that an entity needs to consider whether tax law restricts the sources oftaxable profits against which it may make deductions on the reversal of that deductible temporarydifference. Furthermore, the amendments provide guidance on how an entity should determinefuture taxable profits and explain the circumstances in which taxable profit may include therecovery of some assets for more than their carrying amount.

New Accounting Standards, Interpretations and Amendments to Existing StandardsEffective Subsequent to December 31, 2017Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, theCompany does not expect that the future adoption of the said pronouncements will have a significantimpact on its parent company financial statements. The Company intends to adopt the followingpronouncements when these become effective.

The Company continues to assess the impact of adopting these pronouncements. The effects andrequired disclosures, if any, will be included in the parent company financial statements when theseamendments are adopted.

Effective beginning on or after January 1, 2018

ƒ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-basedPayment Transactions

The amendments to PFRS 2 address three main areas: the effects of vesting conditions on themeasurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and theaccounting where a modification to the terms and conditions of a share-based paymenttransaction changes its classification from cash settled to equity settled.

On adoption, entities are required to apply the amendments without restating prior periods, butretrospective application is permitted if elected for all three amendments and if other criteria aremet. Early application of the amendments is permitted.

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ƒ PFRS 9, Financial Instruments

PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, FinancialInstruments: Recognition and Measurement, and all previous versions of PFRS 9. The standardintroduces new requirements for classification and measurement, impairment, and hedgeaccounting. Retrospective application is required but providing comparative information is notcompulsory. For hedge accounting, the requirements are generally applied prospectively, withsome limited exceptions.

The adoption of PFRS 9 will have an effect on the classification and measurement of theCompany’s financial assets and impairment methodology for financial assets, but will have noimpact on the classification and measurement of the Company’s financial liabilities. Theadoption will have an effect on the Company’s impairment of financial assets. The Company iscurrently assessing the impact of adopting this standard.

ƒ Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, withPFRS 4

The amendments address concerns arising from implementing PFRS 9, the new financialinstruments standard before implementing the new insurance contracts standard. Theamendments introduce two options for entities issuing insurance contracts: a temporaryexemption from applying PFRS 9 and an overlay approach. The temporary exemption is firstapplied for reporting periods beginning on or after January 1, 2018. An entity may elect theoverlay approach when it first applies PFRS 9 and apply that approach retrospectively to financialassets designated on transition to PFRS 9. The entity restates comparative information reflectingthe overlay approach if, and only if, the entity restates comparative information when applyingPFRS 9.

The amendments are not applicable since the Company have no activities that are predominantlyconnected with insurance or issue insurance contracts.

ƒ PFRS 15, Revenue from Contracts with Customers

PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts withcustomers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration towhich an entity expects to be entitled in exchange for transferring goods or services to acustomer. The principles in PFRS 15 provide a more structured approach to measuring andrecognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenuerecognition requirements under PFRSs. Either a full retrospective application or a modifiedretrospective application is required for annual periods beginning on or after January 1, 2018.The Company plans to adopt the new standard on the required effective date. The Company iscurrently assessing the impact of adopting this standard.

ƒ Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of AnnualImprovements to PFRSs 2014 - 2016 Cycle)

The amendments clarify that an entity that is a venture capital organization, or other qualifyingentity, may elect, at initial recognition on an investment-by-investment basis, to measure itsinvestments in associates and joint ventures at fair value through profit or loss. They also clarifythat if an entity that is not itself an investment entity has an interest in an associate or joint

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venture that is an investment entity, the entity may, when applying the equity method, elect toretain the fair value measurement applied by that investment entity associate or joint venture tothe investment entity associate’s or joint venture’s interests in subsidiaries. This election is madeseparately for each investment entity associate or joint venture, at the later of the date on which(a) the investment entity associate or joint venture is initially recognized; (b) the associate or jointventure becomes an investment entity; and (c) the investment entity associate or joint venture firstbecomes a parent. The amendments should be applied retrospectively, with earlier applicationpermitted.

ƒ Amendments to PAS 40, Investment Property, Transfers of Investment Property

The amendments clarify when an entity should transfer property, including property underconstruction or development into, or out of investment property. The amendments state that achange in use occurs when the property meets, or ceases to meet, the definition of investmentproperty and there is evidence of the change in use. A mere change in management’s intentionsfor the use of a property does not provide evidence of a change in use. The amendments shouldbe applied prospectively to changes in use that occur on or after the beginning of the annualreporting period in which the entity first applies the amendments. Retrospective application isonly permitted if this is possible without the use of hindsight.

Since the Company’s current practice is in line with the clarifications issued, the Company doesnot expect any effect on its parent company financial statements upon adoption of theseamendments

ƒ Philippine Interpretation International Financial Reporting Interpretations Committee(IFRIC) - 22, Foreign Currency Transactions and Advance Consideration

The interpretation clarifies that in determining the spot exchange rate to use on initial recognitionof the related asset, expense or income (or part of it) on the derecognition of a non-monetary assetor non-monetary liability relating to advance consideration, the date of the transaction is the dateon which an entity initially recognizes the nonmonetary asset or non-monetary liability arisingfrom the advance consideration. If there are multiple payments or receipts in advance, then theentity must determine a date of the transaction for each payment or receipt of advanceconsideration. The interpretation may be applied on a fully retrospective basis. Entities mayapply the interpretation prospectively to all assets, expenses and income in its scope that areinitially recognized on or after the beginning of the reporting period in which the entity firstapplies the interpretation or the beginning of a prior reporting period presented as comparativeinformation in the financial statements of the reporting period in which the entity first applies theinterpretation. The Company is currently assessing the impact of adopting this standard.

Effective beginning on or after January 1, 2019

ƒ Amendments to PFRS 9, Prepayment Features with Negative Compensation

The amendments to PFRS 9 allow debt instruments with negative compensation prepaymentfeatures to be measured at amortized cost or fair value through other comprehensive income. Anentity shall apply these amendments for annual reporting periods beginning on or after January 1,2019. Earlier application is permitted.

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ƒ PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure ofleases and requires lessees to account for all leases under a single on-balance sheet model similarto the accounting for finance leases under PAS 17, Leases. The standard includes tworecognition exemptions for lessees - leases of ’low-value’ assets (e.g., personal computers) andshort-term leases (i.e., leases with a lease term of 12 months or less). At the commencement dateof a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) andan asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the leaseliability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events(e.g., a change in the lease term, a change in future lease payments resulting from a change in anindex or rate used to determine those payments). The lessee will generally recognize the amountof the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting underPAS 17. Lessors will continue to classify all leases using the same classification principle as inPAS 17 and distinguish between two types of leases: operating and finance leases.

PFRS 16 also requires lessees and lessors to make more extensive disclosures than underPAS 17.

Early application is permitted, but not before an entity applies PFRS 15. A lessee can choose toapply the standard using either a full retrospective or a modified retrospective approach. Thestandard’s transition provisions permit certain reliefs. The Company is currently assessing theimpact of adopting PFRS 16.

ƒ Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The amendments to PAS 28 clarify that entities should account for long-term interests in anassociate or joint venture to which the equity method is not applied using PFRS 9. An entity shallapply these amendments for annual reporting periods beginning on or after January 1, 2019.Earlier application is permitted.

ƒ Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involveuncertainty that affects the application of PAS 12 and does not apply to taxes or levies outside thescope of PAS 12, nor does it specifically include requirements relating to interest and penaltiesassociated with uncertain tax treatments.

The interpretation specifically addresses the following:

• Whether an entity considers uncertain tax treatments separately• The assumptions an entity makes about the examination of tax treatments by taxation

authorities• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax

credits and tax rates• How an entity considers changes in facts and circumstances

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An entity must determine whether to consider each uncertain tax treatment separately or togetherwith one or more other uncertain tax treatments. The approach that better predicts the resolutionof the uncertainty should be followed.

The Company is currently assessing the impact of adopting this interpretation.

Deferred Effectivity

ƒ Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and itsAssociate or Joint Venture

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss ofcontrol of a subsidiary that is sold or contributed to an associate or joint venture. Theamendments clarify that a full gain or loss is recognized when a transfer to an associate or jointventure involves a business as defined in PFRS 3, Business Combinations. Any gain or lossresulting from the sale or contribution of assets that does not constitute a business, however, isrecognized only to the extent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council deferred the original effectivedate of January 1, 2016 of the said amendments until the International Accounting StandardsBoard (IASB) completes its broader review of the research project on equity accounting that mayresult in the simplification of accounting for such transactions and of other aspects of accountingfor associates and joint ventures.

3. Summary of Significant Accounting Policies

Current versus Noncurrent ClassificationThe Company presents assets and liabilities in the parent company statement of financial positionbased on current/noncurrent classification. An asset is classified as current when it is:

ƒ Expected to be realized or intended to be sold or consumed in the normal operating cycle;ƒ Held primarily for the purpose of trading;ƒ Expected to be realized within twelve months after the reporting period; orƒ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at

least twelve months after the reporting period.

All other assets are classified as noncurrent.

A liability is classified as current when it is:

ƒ Expected to be settled in the normal operating cycle;ƒ Held primarily for the purpose of trading;ƒ Due to be settled within twelve months after the reporting period; orƒ There is no unconditional right to defer the settlement of the liability for at least twelve months

after the reporting period.

The Company classifies all other liabilities as noncurrent. Deferred tax assets and liabilities areclassified as noncurrent assets and liabilities.

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Fair Value MeasurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. The fair value measurement isbased on the presumption that the transaction to sell the asset or transfer the liability takes placeeither:ƒ In the principal market for the asset or liability; orƒ In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in their besteconomic interest. A fair value measurement of a non-financial asset takes into account a marketparticipant’s ability to generate economic benefits by using the asset in its highest and best use or byselling it to another market participant that would use the asset in its highest and best use.

The fair value for financial instruments traded in active markets at the reporting date is based on theirquoted price or binding dealer price quotations, without any deduction for transaction costs. Wherethe Company has financial assets and financial liabilities with offsetting positions in market risks orcounterparty credit risk, it has elected to use the measurement exception to measure the fair value ofits net risk exposure by applying the bid or ask price to the net open position as appropriate. For allother financial instruments not traded in an active market, the fair value is determined by usingvaluation techniques deemed to be appropriate in the circumstances. Valuation techniques includethe market approach (i.e., using recent arm’s length market transactions adjusted as necessary andreference to the current market value of another instrument that is substantially the same), the incomeapproach (i.e., discounted cash flow analysis and option pricing models making as much use ofavailable and supportable market data as possible) and the cost approach (i.e., based on the amountrequired to replace the service capacity of an asset).

The Company uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observable inputsand minimizing the use of unobservable inputs. All assets and liabilities for which fair value ismeasured or disclosed in the parent company financial statements are categorized within the fairvalue hierarchy, described, as follows, based on the lowest-level input that is significant to the fairvalue measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilitiesLevel 2 - Valuation techniques for which the lowest-level input that is significant to the fair value

measurement is directly or indirectly observableLevel 3 - Valuation techniques for which the lowest-level input that is significant to the fair value

measurement is unobservable

For assets and liabilities that are recognized in the parent company financial statements on a recurringbasis, the Company determines whether transfers have occurred between levels in the hierarchy byreassessing categorization (based on the lowest-level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

The Company’s management determines the policies and procedures for both recurring fair valuemeasurement and non-recurring measurement. At each reporting date, management analyzes themovements in the values of assets and liabilities which are required to be remeasured or reassessed asper the Company’s accounting policies. For this analysis, management verifies the major inputsapplied in the latest valuation by agreeing the information in the valuation computation to contracts

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and other relevant documents. For short-term trade receivables and payables, the Companydetermines the fair value based on their invoice amount, when the effect of discounting is immaterial.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilitiesbased on the nature, characteristics and risks of the asset or liability and the level of the fair valuehierarchy as explained above.

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investmentsthat are readily convertible to known amounts of cash with original maturities of three months or lessfrom the date of acquisition and are subject to an insignificant risk of change in value.

Financial InstrumentsA financial instrument is any contract that gives rise to a financial asset of one entity and a financialliability or equity instrument of another entity.

Financial Assets

Initial recognition and measurementFinancial assets are classified, at initial recognition, as financial assets at fair value through profit orloss (FVPL), loans and receivables, held-to-maturity (HTM) investments, AFS financial assets, or asderivatives designated as hedging instruments in an effective hedge, as appropriate. All financialassets are recognized initially at fair value plus, except for financial assets at FVPL, transaction coststhat are attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame established byregulation or convention in the market place (regular way trades) are recognized on the trade date,i.e., the date that the Company commits to purchase or sell the asset.

The Company’s financial assets as at December 31, 2017 and 2016 consist of loans and receivablesand AFS financial assets.


Loans and Receivables. This category is the most relevant to the Company. Loans and receivablesare non-derivative financial assets with fixed or determinable payments that are not quoted in anactive market. After initial measurement, such financial assets are subsequently measured atamortized cost using the Effective Interest Rate (EIR) method, less impairment. Amortized cost iscalculated by taking into account any discount or premium on acquisition and fees or costs that are anintegral part of the EIR. The EIR amortization is recognized as part of interest income. The lossesarising from impairment are recognized as part of the “General and administrative expenses” accountin the parent company statement of comprehensive income.

This category generally applies to the Company’s cash and cash equivalents, receivables, operatinglease receivables, advances to related parties and refundable deposits.

AFS Financial Assets. AFS financial assets include equity investments that are neither classified asheld for trading nor designated at FVPL.

After initial measurement, AFS financial assets are subsequently measured at fair value withunrealized gains or losses recognized in Other Comprehensive Income (OCI) and retained in equityuntil the investment is derecognized, at which time, the cumulative gain or loss is recognized in profitor loss, or when the investment is determined to be impaired, wherein the cumulative loss is

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reclassified from equity to profit or loss. Dividends earned while holding AFS financial assets arerecognized in profit or loss.

DerecognitionA financial asset (or, where applicable, a part of a financial asset or part of a group of similarfinancial assets) is primarily derecognized (i.e., removed from the statement of financial position)when:

ƒ The rights to receive cash flows from the asset have expired; orƒ The Company has transferred its rights to receive cash flows from the asset or has assumed an

obligation to pay the received cash flows in full without material delay to a third party under a‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risksand rewards of the asset, or (b) the Company has neither transferred nor retained substantially allthe risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into apass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards ofownership. When it has neither transferred nor retained substantially all of the risks and rewards ofthe asset, nor transferred control of the asset, the Company continues to recognize the transferredasset to the extent of its continuing involvement. In that case, the Company also recognizes anassociated liability. The transferred asset and the associated liability are measured on a basis thatreflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured atthe lower of the original carrying amount of the asset and the maximum amount of consideration thatthe Company could be required to repay.

Impairment of Financial AssetsThe Company assesses, at each reporting date, whether there is objective evidence that a financialasset or a group of financial assets is impaired. An impairment exists if one or more events that hasoccurred since the initial recognition of the asset (an incurred ‘loss event’), has an impact on theestimated future cash flows of the financial asset or the group of financial assets that can be reliablyestimated. Evidence of impairment may include indications that the debtors or a group of debtors isexperiencing significant financial difficulty, default or delinquency in interest or principal payments,the probability that they will enter bankruptcy or other financial reorganization and observable dataindicating that there is a measurable decrease in the estimated future cash flows, such as changes inarrears or economic conditions that correlate with defaults.

Financial Assets Carried at Amortized Cost. For financial assets carried at amortized cost, theCompany first assesses whether impairment exists individually for financial assets that areindividually significant, and individually or collectively for financial assets that are not individuallysignificant. If the Company determines that no objective evidence of impairment exists for anindividually assessed financial asset, whether significant or not, it includes the asset in a group offinancial assets with similar credit risk characteristics and collectively assesses them for impairment.Assets that are individually assessed for impairment and for which an impairment loss is, or continuesto be, recognized are not included in a collective assessment of impairment. The amount of anyimpairment loss identified is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows (excluding future expected credit losses that have not yetbeen incurred). The present value of the estimated future cash flows is discounted at the financialasset’s original EIR.

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The carrying amount of the asset is reduced through the use of an allowance account and theimpairment loss is recognized in profit or loss. Interest income continues to be accrued on thereduced carrying amount using the rate of interest used to discount the future cash flows for thepurpose of measuring the impairment loss. Loans and receivables, together with the associatedallowance are written off when there is no realistic prospect of future recovery and all collateral hasbeen realized or has been transferred to the Company. If, in a subsequent year, the amount of theestimated impairment loss increases or decreases because of an event occurring after the impairmentwas recognized, the previously recognized impairment loss is increased or reduced by adjusting theallowance account. If a write-off is later recovered, the recovery is recognized in profit or loss to theextent that the carrying value of the asset does not exceed what the amortized cost would have beenhad the impairment not been recognized at the date the impairment is reversed.

AFS Financial Assets. For AFS financial assets, the Company assesses at each reporting datewhether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as AFS financial assets, objective evidence would includea significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ isevaluated against the original cost of the investment and ‘prolonged’ against the period in which thefair value has been below its original cost. When there is evidence of impairment, the cumulativeloss measured as the difference between the acquisition cost and the current fair value, less anyimpairment loss on that investment previously recognized in profit or loss, is removed from OCI andrecognized in profit or loss. For unquoted equity investments that is not carried at fair value becauseits fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settledby delivery of such unquoted equity instruments, the amount of loss is measured as the differencebetween the asset’s carrying amount and the present value of estimated future cash flows discountedat the current market rate of return for a similar financial asset.

Impairment losses on equity investments are not reversed through profit or loss; increases in their fairvalue after impairment are recognized in OCI.

The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making thisjudgment, the Company evaluates, among other factors, the duration or extent to which the fair valueof an investment is less than its cost.

Financial Liabilities

Initial Recognition and MeasurementFinancial liabilities are classified, at initial recognition, as financial liabilities at FVPL, loans andborrowings or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings,net of directly attributable transaction costs.

The Company’s financial liabilities include trade payables and other current liabilities, long-termdebt, due to related parties and operating lease payables, which are all classified as loans andborrowings.


Loans and Borrowings. This is the category relevant to the Company. After initial recognition,interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIRmethod. Gains and losses are recognized in profit or loss when the liabilities are derecognized as wellas through the EIR amortization process.

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Amortized cost is calculated by taking into account any discount or premium on acquisition and feesor costs that are an integral part of the EIR. The EIR amortization is included as interest expense inthe parent company statement of comprehensive income.

Debt Issue Costs. Debt issue costs are specific incremental costs, other than those paid to the lender,that are directly related to issuing a debt instrument. These are presented in the statements offinancial position as a reduction from the related debt instrument and are amortized through the EIRamortization process.

Derecognition. A financial liability is derecognized when the obligation under the liability isdischarged or cancelled or expires. When an existing financial liability is replaced by another fromthe same lender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as the derecognition of the original liability andthe recognition of a new liability. The difference in the respective carrying amounts is recognized inprofit or loss.

Offsetting of Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the parentcompany statement of financial position if there is a currently enforceable legal right to offset therecognized amounts and there is an intention to settle on a net basis, to realize the assets and settle theliabilities simultaneously. The Company assesses that it has a currently enforceable right of offset ifthe right is not contingent on a future event, and is legally enforceable in the normal course ofbusiness, event of default, and event of insolvency or bankruptcy of the Company and all of thecounterparties.

InventoriesInventories are valued at the lower of cost and net realizable value. Costs are accounted for asfollows:

Processed inventories - Standard costing, which is reviewed on aquarterly basis and revised as necessaryto approximate current costs determinedusing first in, first out (FIFO). Costincludes direct materials, labor and aproportion of manufacturing overheadcosts based on normal operating capacity.

Food supplies, packaging, store andother supplies, and novelty items

- Standard costing, which is reviewed on aquarterly basis and revised as necessaryto approximate current costs determinedusing FIFO.

Net realizable value of processed inventories is the estimated selling price in the ordinary course ofbusiness, less estimated costs of completion and the estimated costs necessary to make the sale.

Net realizable value of food supplies, packaging, store and other supplies is the current replacementcost.

Net realizable value of novelty items is the estimated selling price in the ordinary course of business,less the estimated costs necessary to make the sale.

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Other Current AssetsOther current assets include deposits which pertain to deposits to suppliers to be applied for futurepurchases; prepaid expenses which are expenses paid in advance and recorded as asset before they areutilized or expire; and creditable withholding taxes, which will be applied against the Company’scorporate income tax due.

Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of an asset thatnecessarily takes a substantial period of time to get ready for its intended use or sale are capitalized aspart of the cost the asset. Capitalization of borrowing costs commences when the activities to preparethe asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costsare capitalized until the assets are substantially ready for their intended use. All other borrowingcosts are expensed as incurred. Borrowing costs consist of interest and other cost that an entity incursin connection with the borrowing of funds.

Property, Plant and EquipmentProperty, plant and equipment, except land and construction in progress, are stated at cost lessaccumulated depreciation and amortization and any accumulated impairment in value. Such costincludes the cost of replacing part of property, plant and equipment at the time that cost is incurred, ifthe recognition criteria are met, and excludes the costs of day-to-day servicing. Land is stated at costless any impairment in value.

The initial cost of property, plant and equipment consists of its purchase price, including importduties and nonrefundable taxes and any other costs directly attributable to bringing the asset to itsworking condition and location for its intended use. Cost also includes any related asset retirementobligation and interest incurred during the construction period on funds borrowed to finance theconstruction of the asset. Expenditures incurred after the property, plant and equipment have beenput into operation, such as repairs and maintenance, are normally charged to profit or loss in the yearin which the costs are incurred. In situations where it can be clearly demonstrated that theexpenditures have resulted in an increase in the future economic benefits expected to be obtainedfrom the use of an item of property, plant and equipment beyond its originally assessed standard ofperformance, the expenditures are capitalized as additional costs of property, plant and equipment.

Depreciation and amortization are calculated on a straight-line basis over the following estimateduseful lives of the assets:

Buildings, commercial condominiumunits and improvements

5 - 40 years

Leasehold rights and improvements 2 - 10 years or term of the lease,whichever is shorter

Office, store and food processing equipment 1 - 15 yearsFurniture and fixtures 3 - 5 yearsTransportation equipment 3 - 5 years

The residual values, if any, useful lives and depreciation and amortization method of the assets arereviewed at the end of each financial period and adjusted prospectively, if appropriate.

Fully depreciated assets are retained in the accounts until they are disposed or retired.

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An item of property, plant and equipment is derecognized upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising from the derecognition of theasset (calculated as the difference between the disposal proceeds and the carrying amount of the asset)is recognized in profit or loss in the period the asset is derecognized.

Construction in progress represents assets under construction and is stated at cost less any impairmentin value. This includes the cost of construction and other direct costs. Cost also includes interest onborrowed funds incurred during the construction period. Construction in progress is not depreciateduntil such time that the relevant assets are completed and ready for use.

Intangible AssetsIntangible assets acquired separately are measured at cost on initial recognition. Following initialrecognition, intangible assets are carried at cost less any accumulated amortization and anyaccumulated impairment loss. The useful lives of intangible assets are assessed at the individual assetlevel as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life using the straight-linemethod and assessed for impairment whenever there is an indication that the intangible assets may beimpaired. At a minimum, the amortization period and the amortization method for an intangible assetwith a finite useful life are reviewed at least at each financial year-end. Changes in the expecteduseful life or the expected pattern of consumption of future economic benefits embodied in the assetare accounted for by changing the amortization period or method, as appropriate, and treated aschanges in accounting estimates.

The estimated useful lives used in amortizing the intangible assets are disclosed in Note 12.

Gains or losses arising from derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset, and are recognized in profitor loss when the asset is derecognized.

Investment PropertiesInvestment properties consist of land and buildings and building improvements held by the Companyfor capital appreciation and rental purposes. Investment properties, except land, are carried at cost,including transaction costs, less accumulated depreciation and amortization and any impairment invalue. Cost also includes the cost of replacing part of an existing investment property at the time thatcost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of aninvestment property. Land is carried at cost less any impairment in value.

The depreciation of buildings and building improvements are calculated on a straight-line basis overthe estimated useful lives of the assets which are five (5) to twenty (20) years.

The residual values, if any, useful lives and method of depreciation and amortization of the assets arereviewed and adjusted, if appropriate, at each financial year-end.

Investment property is derecognized when either it has been disposed of or when the investmentproperty is permanently withdrawn from use and no future economic benefit is expected from itsdisposal. Any gains or losses on the retirement or disposal of an investment property are recognizedin profit or loss in the year of retirement or disposal.

Transfers to investment property are made only when there is a change in use, evidenced by ending ofownership-occupation, or commencement of an operating lease to another party. Transfers frominvestment property are made only when there is a change in use, evidenced by commencement ofowner-occupation or commencement of development with a view to sell.

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Impairment of Nonfinancial AssetsThe carrying values of investments in and advances to subsidiaries and interests in a joint venture andan associate, property, plant and equipment, investment properties, intangible assets and othernoncurrent assets are reviewed for impairment when events or changes in circumstances indicate thatthe carrying value may not be recoverable. If any such indication exists, and if the carrying valueexceeds the estimated recoverable amount, the asset or cash generating unit (CGU) are written downto their recoverable amounts. The recoverable amount of the asset is the greater of fair value lesscosts to sell or value in use.

The fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s-lengthtransaction between knowledgeable, willing parties, less costs of disposal. In assessing value in use,the estimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset. Foran asset that does not generate largely independent cash inflows, the recoverable amount isdetermined for the CGU to which the asset belongs. Impairment losses are recognized in profit orloss in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indication exists,the recoverable amount is estimated. A previously recognized impairment loss is reversed only ifthere has been a change in the estimates used to determine the asset’s recoverable amount since thelast impairment loss was recognized. If that is the case, the carrying amount of the asset is increasedto its recoverable amount. That increased amount cannot exceed the carrying amount that would havebeen determined, net of depreciation and amortization, had no impairment loss been recognized forthe asset in prior years. Such reversal is recognized in profit or loss. After such a reversal, thedepreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, lessany residual value on a systematic basis over its remaining useful life.

Equity

Capital Stock and Additional Paid-in Capital. Capital stock is measured at par value for all sharesissued. Proceeds and/or fair value of considerations received in excess of par value, if any, arerecognized as additional paid-in capital. Incremental costs incurred directly attributable to theissuance of new shares are shown in equity as a deduction from proceeds, net of tax.

Additional paid-in capital is also credited for the cost, including income tax effect, of the Company’sequity-settled share-based payments to its employees and employees of its subsidiaries.

Subscriptions Receivable. Subscriptions receivable represents common stock subscribed and issuedby the Parent Company but payment from the shareholders has not yet been received.

Retained Earnings. Retained earnings represent the Company’s accumulated earnings, net ofdividends declared.

Dividends. The Company recognizes a liability to make cash distribution to its equity holders whenthe distribution is authorized by the BOD and the distribution is no longer at the discretion of theGroup. A corresponding amount is recognized directly in equity. Dividends for the year that areapproved after the financial reporting date are dealt with as an event after the reporting period.

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Other Comprehensive Income. Other comprehensive income comprises items of income and expense(including reclassification adjustments) that are not recognized in profit or loss. These includeunrealized gains or losses on AFS financial assets, remeasurement gains or losses on pension andtheir income tax effects.

Treasury Shares. Acquisitions of treasury shares are recorded at cost. The total cost of treasuryshares is shown in the parent company statement of financial position as a deduction from the totalequity. Upon re-issuance or resale of the treasury shares, cost of common stock held in treasuryaccount is credited for the cost of the treasury shares determined using the simple average method.Gain on sale is credited to additional paid-in capital. Losses are charged against additional paid-incapital but only to the extent of previous gain from original issuance, sale or retirement for the sameclass of stock. Otherwise, losses are charged directly to retained earnings.

RevenuesRevenue is recognized to the extent that it is probable that the economic benefits associated with thetransaction will flow to the Company and the amount of revenue can be reliably measured, regardlessof when the payment is being made. Revenue is measured at the fair value of the considerationreceived or receivable, excluding discounts, rebates and value-added taxes. The Company assessesits revenue arrangements against specific criteria in order to determine if it is acting as principal oragent. The Company has assessed that it is acting as principal in all of its revenue arrangements. TheCompany considers both the legal form and the substance of its agreement to determine each party’srespective roles in the agreement.

The following specific recognition criteria must also be met before revenue is recognized:

Sale of Goods. Revenue from sale of goods is recognized when the significant risks and rewards ofownership of the goods have passed to the customers, which is normally upon delivery. Sales returnsand sales discounts are deducted from sales to arrive at net sales shown in the parent companystatement of comprehensive income.

Royalty Fees. Revenue from royalty fees is recognized as the royalty accrues based on certainpercentages of the franchisees’ net sales.

Set-up Fees. Revenue from set-up fees is recognized when all services or conditions relating to thepayment of set-up fees have been substantially performed.

Service Fees. Revenue is recognized in the period in which the service has been rendered.

Management Fees. Revenue is recognized in the period in which the administration services has beenrendered based on a certain percentages of the total costs incurred.

Dividend Income. Dividend income is recognized when the Company’s rights as a shareholder toreceive the payment is established.

Rent Income. Rent income from operating leases is recognized on a straight-line basis over the leaseterms.

Interest Income. Interest income is recognized as the interest accrues, taking into account theeffective yield on the asset.

Other Income. Other income is recognized when there is an incidental economic benefit, other thanthe usual business operations, that will flow to the Company through an increase in asset or reductionin liability and that can be measured reliably.

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Cost and ExpensesCost and expenses are decreases in economic benefits during the accounting period in the form ofoutflows or decreases in assets or incurrence of liabilities that result in decreases in equity, other thanthose relating to distributions to equity participants. Cost and expenses are recognized as incurred.

Advertising and promotions expenses include costs incurred for advertising schemes and promotionalactivities for new products. The amount of expenses incurred by the Company is reduced by thenetwork advertising and promotional costs reimbursed by the Company’s franchisees andsubsidiaries.

Pension BenefitsThe pension liability is the aggregate of the present value of the defined benefit obligation at the endof the reporting period reduced by the fair value of plan assets.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Pension expense comprise the following:ƒ Service cost; andƒ Net interest on the pension liability.

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as part of pension expense in profit or loss. Past service costs arerecognized when plan amendment or curtailment occurs. These amounts are calculated periodicallyby independent qualified actuaries.

Net interest on the pension liability is the change during the period in the liability that arises from thepassage of time which is determined by applying the discount rate based on government bonds to thepension liability. Net interest on the pension liability is recognized under “Cost of Sales” and“General and Administrative expenses” in the parent company statement of comprehensive income aspart of pension expense.

Remeasurements comprising actuarial gains and losses, return on plan assets (excluding net interest)are recognized immediately in OCI in the period in which they arise. Remeasurements are notreclassified to profit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Company, nor can they be paid directlyto the Company. Fair value of plan assets is based on market price information. When no marketprice is available, the fair value of plan assets is estimated by discounting expected future cash flowsusing a discount rate that reflects both the risk associated with the plan assets and the maturity orexpected disposal date of those assets (or, if they have no maturity, the expected period until thesettlement of the related obligations). If the fair value of the plan assets is higher than the presentvalue of the defined benefit obligation, the measurement of the resulting pension asset is limited tothe present value of economic benefits available in the form of refunds from the plan or reductions infuture contributions to the plan.

Share-based PaymentsThe Company has stock option plans granting management, consultants and selected employees anoption to purchase a fixed number of the Company’s shares of stock at a stated price during aspecified period (“equity-settled transactions”).

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The cost of the options granted to the Company’s management, consultants and employees thatbecome vested is recognized in profit or loss with an equivalent credit to additional paid-in capitalover the period in which the performance and/or service conditions are fulfilled, ending on the dateon which the relevant employees become fully entitled to the award (“vesting date”). The cost of theoptions granted to management, consultants and employees of subsidiaries, on the other hand, isrecognized as additional investment in those subsidiaries.

The fair value is determined using the Black-Scholes Option Pricing Model. The cumulative expenserecognized for share-based transactions at each reporting date until the vesting date reflects the extentto which the vesting period has expired and the Company’s best estimate of the number of equityinstruments that will ultimately vest. The charge or credit in profit or loss or the investment accountfor a period represents the movement in cumulative expense recognized as of the beginning and endof that period.

No expense is recognized for awards that do not ultimately vest, provided that all other performanceconditions are satisfied.

Where the terms of a share-based award are modified, as a minimum, an expense is recognized as ifthe terms had not been modified. In addition, an expense is recognized for any modification, whichincreases the total fair value of the share-based payment agreement, or is otherwise beneficial tomanagement and employees as measured at the date of modification.

Where a share-based award is cancelled, it is treated as if it had vested on the date of cancellation, andany expense not yet recognized for the award is recognized immediately. However, if a new award issubstituted for the cancelled award, and designated as a replacement award on the date that it isgranted, the cancelled and new awards are treated as if there were a modification of the originalaward.

Research CostsResearch costs are expensed as incurred.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance of theagreement at inception date of whether the fulfillment of the arrangement is dependent on the use of aspecific asset or assets or the arrangement conveys a right to use the asset, even if that is not explicitlyspecified in an arrangement.

Company as Lessee. Leases which do not transfer to the Company substantially all the risks andbenefits of ownership of the asset are classified as operating leases. Operating lease payments arerecognized as expense in profit or loss on a straight-line basis over the lease term. Associated costs,such as maintenance and insurance, are expensed as incurred. Variable rents are recognized asexpense in the period in which they are incurred.

Company as Lessor. Leases which do not transfer to the lessee substantially all the risks and benefitsof ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiatingan operating lease are added to the carrying amount of the leased asset and recognized over the leaseterm on the same basis as rent income. Rent income from operating leases is recognized as income inprofit or loss on a straight-line basis over the lease term.

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ProvisionsProvisions are recognized when the Company has a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligation.If the effect of the time value of money is material, provisions are determined by discounting theexpected future cash flows at a pre-tax rate that reflects current market assessmentof the time value of money and, where appropriate, the risks specific to the liability. Wherediscounting is used, the increase in the provision due to the passage of time is recognized as interestexpense.

Foreign Currency Denominated TransactionsTransactions in foreign currencies are recorded in Philippine peso using the exchange rate at the dateof the transaction. Monetary assets and liabilities denominated in foreign currencies are restatedusing the closing rate of exchange at the reporting date. All differences are taken to profit or loss.Non-monetary items that are measured in terms of historical cost in a foreign currency are translatedusing the exchange rates as at the dates of the initial transactions. Nonmonetary items measured atfair value in a foreign currency are translated using the exchange rates at the date when the fair valuewas determined.

TaxesCurrent Tax. Current tax liabilities for the current and prior periods are measured at the amountexpected to be paid to the tax authority. The tax rates and tax laws used to compute the amount arethose that are enacted or substantively enacted at reporting date.

Current income tax relating to items recognized directly in equity is recognized directly in equity (notin profit or loss). Management periodically evaluates positions taken in the tax returns with respect tosituations in which applicable tax regulations are subject to interpretation and establishes provisionswhere appropriate.

Deferred Tax. Deferred tax is provided, using the balance sheet liability method, on all temporarydifferences at reporting date between the tax bases of assets and liabilities and their carrying amountsfor financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:ƒ where the deferred tax liability arises from the initial recognition of goodwill or of an asset or

liability in a transaction that is not a business combination and, at the time of the transactions,affects neither the accounting profit nor taxable profit; and

ƒ in respect of taxable temporary differences associated with investments in subsidiaries andinterests in a joint venture and an associate, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will not reverse inthe foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences and carryforward benefitsof unused tax credits from excess minimum corporate income tax (MCIT) over regular corporateincome tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it is probable thatfuture taxable profit will be available against which the deductible temporary differences andcarryforward benefits of excess MCIT over RCIT and NOLCO can be utilized except:ƒ where the deferred tax asset relating to the deductible temporary difference arises from the initial

recognition of an asset or liability in a transaction that is not a business combination and, at thetime of the transaction, affects neither the accounting profit nor taxable profit; and

ƒ in respect of deductible temporary differences associated with investments in subsidiaries andinterests in a joint venture and an associate, deferred tax assets are recognized only to the extent

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that it is probable that the temporary differences will reverse in the foreseeable future and taxableprofit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient future taxable profit will be available to allow all orpart of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at eachreporting date and are recognized to the extent that it has become probable that future taxable profitwill allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the yearwhen the asset is realized or the liability is settled, based on tax rates and tax laws that have beenenacted or substantially enacted at reporting date.

Deferred tax relating to items recognized outside profit or loss are recognized also outside profit orloss. Deferred tax items are recognized in correlation to the underlying transaction either in OCI ordirectly in equity.

Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current taxassets against current tax liabilities and the deferred taxes relate to the same taxable entity and thesame taxation authority.

Value-added Tax. Revenue, expenses and assets are recognized net of the amount of VAT, ifapplicable.

When VAT from sales of goods and/or services (output VAT) exceeds VAT passed on frompurchases of goods or services (input VAT), the excess is recognized as part of “Trade payables andother current liabilities” account in the parent company statement of financial position. When VATpassed on from purchases of gods or services (input VAT) exceeds VAT from sales of goods and/orservices (output VAT), the excess is recognized as part of “Other current assets” account in the parentcompany statement of financial position.

Earnings per Share (EPS) Attributable to Equity Holders of the Parent CompanyBasic EPS is calculated by dividing the net income for the year attributable to the equity holders ofthe Parent Company by the weighted average number of common shares outstanding during the year,after considering the retroactive effect of stock dividend declaration, if any.

Diluted EPS is computed by dividing the net income for the year attributable to the equity holders ofthe Parent Company by the weighted average number of common shares outstanding during theperiod, adjusted for any potential common shares resulting from the assumed exercise of outstandingstock options. Outstanding stock options will have dilutive effect under the treasury stock methodonly when the average market price of the underlying common share during the period exceeds theexercise price of the option.

Where the EPS effect of the shares to be issued to management and employees under the stock optionplan would be anti-dilutive, the basic and diluted EPS would be stated at the same amount.

For the parent company financial statements, the EPS is presented on the basis of the consolidated netincome.

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ContingenciesContingent liabilities are not recognized in the parent company financial statements. These aredisclosed in the notes to the parent company financial statements unless the possibility of an outflowof resources embodying economic benefits is remote. Contingent assets are not recognized in theparent company financial statements but disclosed in the notes to the parent company financialstatements when an inflow of economic benefits is probable.

Business SegmentsThe Company is organized and managed separately according to the nature of business. The threemajor operating businesses of the Company are food service, franchising and leasing. Theseoperating businesses are the basis upon which the Company reports its operating segment informationpresented in the consolidated financial statements filed with the SEC.

Events after the Reporting PeriodPost year-end events that provide additional information about the parent company financial positionat the reporting date (adjusting events) are reflected in the parent company financial statements. Postyear-end events that are not adjusting events are disclosed in the notes to the parent companyfinancial statements when material.

4. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the parent company financial statements requires management to make judgments,estimates and assumptions that affect the reported amounts of revenues, expenses, assets andliabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertaintyabout these assumptions and estimates could result in outcomes that could require a materialadjustment to the carrying amount of the affected asset or liability in the future.

The Company believes the following represents a summary of these significant judgments, estimatesand assumptions and the related impact and associated risks on the parent company financialstatements.

JudgmentsIn the process of applying the Company’s accounting policies, management has made the followingjudgments, apart from those involving estimations and assumptions, which have the most significanteffect on the amounts recognized in the parent company financial statements:

Operating Lease Commitments - Company as Lessor. The Company has entered into commercialproperty leases on its investment property portfolio and subleased properties. The Company hasdetermined, based on an evaluation of the terms and conditions of the arrangements, that it retains allsignificant risks and benefits of these properties which are being leased out. Accordingly, the leasesare accounted for as operating leases.

Rent income amounted to P=232.5 million and P=245.7 million in 2017 and 2016, respectively(see Note 29).

Operating Lease Commitments - Company as Lessee. The Company has entered into commercialproperty leases for its QSR outlets and offices as the lessee. The Company has determined, based onan evaluation of the terms and conditions of the arrangements, that all significant risks and benefits ofownership of these properties remain with the lessors. Accordingly, the leases are accounted for asoperating leases.

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Rent expense amounted to P=1,855.0 million and P=1,684.5 million in 2017 and 2016, respectively(see Notes 21, 22 and 29).

Estimates and AssumptionsThe key estimates and assumptions concerning the future and other key sources of estimationuncertainty at reporting date that has a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below. The Companybased its assumptions and estimates on parameters available when the parent company financialstatements were prepared. Existing circumstances and assumptions about future developments,however, may change due to market changes or circumstances arising beyond the control of theCompany. Such changes are reflected in the assumptions when they occur.

Impairment of Receivables. The Company maintains an allowance for impairment loss at a levelconsidered adequate to provide for potential uncollectible receivables. The level of allowance isevaluated on the basis of factors that affect the collectability of the accounts. These factors include, butare not limited to, the length of the Company’s relationship with the customers and counterparties,average age of accounts, collection experience and average actual write-off. The Company performs aregular review of the age and status of these accounts, designed to identify accounts with objectiveevidence of impairment and provide the appropriate allowance for impairment loss. The review is doneannually using specific and collective assessments, respectively. The amount and timing of recordedexpenses for any period would differ if the Company made different judgments or utilized differentmethodologies. An increase in allowance account would increase the Company’s general andadministrative expenses and decrease current assets.

Provision for impairment loss on receivables amounted to nil and P=10.2 million in 2017 and 2016,respectively, resulting from specific assessments (see Notes 6 and 22). Reversal of allowance forimpairment loss on receivables amounted to P=0.8 million and nil in 2017 and 2016, respectively(see Notes 6 and 22). The carrying value of receivables amounted to P=6,852.3 million andP=3,963.1 million as at December 31, 2017 and 2016, respectively (see Note 6).

Net Realizable Value of Inventories. The Company writes down inventories to net realizable value,through the use of an allowance account, whenever the net realizable value of inventories becomeslower than cost due to damage, physical deterioration, obsolescence, changes in price levels or othercauses.

Estimates of net realizable value are based on the most reliable evidence available at the time theestimates are made of the amounts the inventories are expected to be realized. These estimates take intoconsideration fluctuations of prices or costs directly relating to events occurring after reporting date to theextent that such events confirm conditions existing at the reporting date. The allowance account isreviewed on a regular basis to reflect the accurate valuation in the financial records.

Provision for inventory obsolescence amounted to nil and P=53.6 in 2017 and 2016, respectively(see Notes 7 and 22). Reversal of allowance for inventory obsolescence amounted to P=43.5 million andnil in 2017 and 2016, respectively (see Notes 7 and 22). The carrying value of inventories amounted toP=2,004.0 million and P=1,940.9 million as at December 31, 2017 and 2016, respectively (see Note 7).

Impairment of Property, Plant and Equipment, Intangible Assets and Investment Properties. TheCompany performs annual impairment review of property, plant and equipment, intangible assets andinvestment properties when certain impairment indicators are present. Determining the fair value ofassets, which requires the determination of future cash flows expected to be generated from the continueduse and ultimate disposition of such assets, requires the Company to make estimates and assumptionsthat can materially affect the parent company financial statements. Future events could cause the

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Company to conclude that the assets are impaired. Any resulting impairment loss could have a materialadverse impact on the Company’s financial position and performance.

The aggregate carrying amounts of property, plant and equipment, intangible assets and investmentproperties amounted to P=6,537.3 million and P=6,016.2 million as at December 31, 2017 and 2016,respectively (see Notes 11, 12 and 13).

Estimating Useful Lives of Depreciable Property, Plant and Equipment, Intangible Assets andDepreciable Investment Properties. The Company estimates the useful lives of depreciable property,plant and equipment, intangible assets and depreciable investment properties based on the period overwhich the assets are expected to be available for use and based on the collective assessment of theindustry practice, internal technical evaluation and experience with similar assets. The estimateduseful lives of depreciable property, plant and equipment, intangible assets with finite useful life anddepreciable investment properties are reviewed periodically and are updated if expectations differfrom previous estimates due to physical wear and tear, technical or commercial obsolescence andlegal or other limits in the use of the assets as applicable. However, it is possible that future financialperformance could be materially affected by changes in the estimates brought about by changes in thefactors mentioned above. The amounts and timing of recording of depreciation and amortization forany period would be affected by changes in these factors and circumstances. A reduction in theestimated useful lives of depreciable property, plant and equipment, intangible assets with finiteuseful lives and depreciable investment properties would increase the recorded depreciation andamortization and decrease noncurrent assets.

There were no changes in the estimated useful lives of depreciable property, plant and equipment anddepreciable investment properties in 2017 and 2016.

Impairment of Investments in and Advances to Subsidiaries and Interests in a Joint Venture and in anAssociate. An impairment test of investments in subsidiaries and interests in a joint venture and anassociate is performed when events or changes in circumstances indicate that the carrying value maynot be recoverable. This requires management to make an estimate of the expected long-term growthrates and earnings before interest, taxes, depreciation and amortization (EBITDA) from thesubsidiaries, joint venture and associate, and also consider market data in determining a discount ratein order to calculate the present value of those cash flows.

There were no provisions for impairment losses on investments in and advances to subsidiaries andinterests in a joint venture and an associate in 2017 and 2016. The carrying values of investments in andadvances to subsidiaries and interests in a joint venture and an associate amounted to P=35,577.1 millionand P=27,862.5 million as at December 31, 2017 and 2016, respectively (see Note 10).

Realizability of Deferred Tax Assets. The carrying amount of deferred tax assets at each reporting date isreviewed and reduced to the extent that sufficient taxable profits will not be available to allow all or partof the deferred tax assets to be utilized. The Company’s assessment on the recognition of deferred taxassets is based on forecasted taxable income. This forecast is based on future expectations on revenueand expenses as well as management’s plans and strategies.

The carrying amount of deferred tax assets amounted to P=2,774.1 million and P=2,024.7 million as atDecember 31, 2017 and 2016, respectively (see Note 25). There were no unrecognized deferred taxassets as at December 31, 2017 and 2016.

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Pension Benefits. The pension expense as well as the present value of the defined benefit obligation aredetermined using actuarial valuations. The actuarial valuation involves making various assumptions.These include the determination of the discount rates and future salary increases. Due to the complexityof the valuation, the underlying assumptions and its long-term nature, defined benefit obligations arehighly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

In determining the appropriate discount rate, management considers the interest rates of governmentbonds that are denominated in the currency in which the benefits will be paid, with extrapolatedmaturities corresponding to the expected duration of the defined benefit obligation.

Future salary increases are based on budgeted salary increases.

Pension liability amounted to P=1,025.8 million and P=1,125.6 million as at December 31, 2017 and2016, respectively. Total pension expense recognized by the Company amounted to P=213.6 millionand P=206.2 million as at December 31, 2017 and 2016, respectively (see Notes 21, 22 and 26).

Share-based Payments. The Company measures the cost of its equity-settled transactions withmanagement and employees by reference to the fair value of the equity instruments at the grant date.Estimating fair value for share-based payment transactions requires determining the most appropriatevaluation model, which is dependent on the terms and conditions of the grant. The estimate also requiresdetermining the most appropriate inputs to the valuation model including the expected life of the shareoption, volatility and dividend yield and making assumptions about these inputs. The fair value of theshare option is being determined using the Black-Scholes Option Pricing Model. The expected life of thestock options is based on the expected exercise behavior of the stock option holders and is not necessarilyindicative of the exercise patterns that may occur. The volatility is based on the average historical pricevolatility which may be different from the expected volatility of the shares of the Company.

Total expense arising from share-based payments recognized by the Company amounted toP=209.7 million and P=221.7 million in 2017 and 2016, respectively (see Notes 22 and 27).

Provisions and Contingencies. The Company is currently involved in litigations, claims and disputeswhich are normal to its business. Cost estimates for the resolution of these claims has been developedin consultation with the Company’s legal counsels and based upon an analysis of potential results.The inherent uncertainty over the outcome of these matters is brought about by the differences in theinterpretation and application of laws and rulings. Management believes that the ultimate liability, ifany, with respect to these litigations, claims and disputes will not materially affect the financialposition and performance of the Company.

The carrying amount of the Company’s provisions for litigations, claims and disputes amounted toP=30.5 million each as at December 31, 2017 and 2016 (see Notes 16 and 29).

5. Cash and Cash Equivalents


2017 2016Cash on hand P=118,635,127 P=109,357,543Cash in banks 1,398,200,689 1,154,500,902Short-term deposits 1,831,385,480 2,545,702,529

P=3,348,221,296 P=3,809,560,974

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Cash in banks earn interest at the respective savings or special demand deposit rates. Short-termdeposits are made for varying periods of up to three months depending on the immediate cashrequirements of the Company and earn interest at the respective short-term deposit rates.

Interest income earned from cash in banks and short-term deposits amounted to P=26.9 million andP=15.4 million in 2017 and 2016, respectively (see Note 23).

6. Receivables


2017 2016Trade receivables from:

Franchisees and customers P=1,869,482,598 P=1,778,027,120Related parties (see Note 28) 4,896,192,040 2,124,321,144

6,765,674,638 3,902,348,264Less allowance for impairment loss 207,088,508 207,873,249

6,558,586,130 3,694,475,015Employee advances 57,393,854 55,989,614Current portion of employees’ car plan receivables

(see Note 14) 52,333,175 36,721,831Interest receivable 1,894,348 7,884,502Others (see Notes 26 and 28) 182,135,780 168,071,787

P=6,852,343,287 P=3,963,142,749

The terms and conditions of the receivables are as follows:

ƒ Trade receivables from franchisees and customers are noninterest-bearing and are generallycollectible on a 15-day term.

ƒ The terms and conditions of receivables from related parties are discussed in Note 28.

ƒ Employee advances, current portion of employees’ car plan receivables, interest receivable, andother receivables are expected to be collected within the next financial year.

ƒ Other receivables consist of receivables from the retirement plan, from the Social SecuritySystem (SSS) and insurance claims.

The movements in allowance for impairment loss on trade receivables as at December 31 follow:

2017 2016Balance at beginning of year P=207,873,249 P=197,656,163Provisions (see Note 22) – 10,217,086Reversal (see Note 22) (784,741) –Balance at end of year P=207,088,508 P=207,873,249

The provision in 2016 resulted from the specific impairment assessments on trade receivablesperformed by the Company.

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7. Inventories


2017 2016At cost:

Food supplies and processed inventories P=1,789,551,914 P=1,517,974,045Packaging, store and other supplies 193,689,356 352,769,582

At net realizable value -Novelty items 20,755,582 70,107,106

P=2,003,996,852 P=1,940,850,733

The cost of novelty items carried at net realizable value amounted to P=37.0 million andP=129.9 million as at December 31, 2017 and 2016, respectively.

The Company assesses the age of novelty items on hand in determining the amount of provision forinventory obsolescence or reversal to be recognized. Based on this assessment, the Company bookeda provision for inventory obsolescence amounting to nil and P=53.6 million in 2017 and 2016,respectively (see Note 22). Reversal of allowance for inventory obsolescence amounted toP=43.5 million and nil in 2017 and 2016, respectively (see Note 22). Inventory allowance for noveltyitems amounted to P=16.2 million and P=59.8 million as at December 31, 2017 and 2016, respectively.

8. Other Current Assets


2017 2016Prepaid taxes P=967,348,178 P=616,433,298Current portion of prepaid car plan (see Note 14) 59,565,454 53,474,579Prepaid expenses 55,114,934 49,725,626Prepaid rent 48,536,758 106,639,616Deposits to suppliers and others 288,298,585 211,618,745

P=1,418,863,909 P=1,037,891,864

Terms and conditions of other current assets are as follows:

ƒ Prepaid taxes represent creditable withholding taxes that the Company can apply against itscorporate income tax in the following year and prepaid real property taxes.

ƒ Prepaid expenses consist of unused office and operating supplies and the unexpired portion ofadvertising, insurance and other expenses paid in advance.

ƒ Prepaid rent pertains to the rent of store and office spaces that are paid in advance.

ƒ Deposits to suppliers are generally applied to purchases of inventories and services within thenext financial year.

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9. Available-for-Sale Financial Assets

This account consists mainly of shares in golf and leisure clubs as at December 31, 2017 and 2016.

The movements in the available-for-sale financial assets account are as follows:

2017 2016Balance at beginning of year P=24,418,040 P=19,668,040Additions 450,000 –Changes in fair value 3,200,000 4,750,000Balance at end of year P=28,068,040 P=24,418,040

The movement in unrealized gain on change in fair value of AFS financial assets account in 2017 and2016 are as follows:

2017 2016Balance at beginning of the year P=4,750,000 P=–Unrealized gain due to change in fair value 3,200,000 4,750,000Balance at end of the year P=7,950,000 P=4,750,000

10. Investments in and Advances to Subsidiaries and Interests in a Joint Venture and an Associate

The carrying values of investments are as follows:

2017 2016Subsidiaries:

Jollibee Worldwide Pte. Ltd. (JWPL) P=22,409,663,919 P=14,483,903,333Mang Inasal Philippines Inc. 4,981,172,389 4,980,411,828RRB Holdings, Inc. 2,527,979,245 2,526,320,187Fresh N’ Famous Foods Inc. 2,345,600,212 2,339,254,742Honeybee Foods Corporation 1,671,659,097 1,670,842,377Zenith Foods Corporation 997,633,612 996,773,945Grandworth Resources Corporation 270,000,000 270,000,000BKTitans, Inc.* 66,679,106 66,478,388Freemont Foods Corporation 59,930,558 59,930,558Jollibee USA 2,800,000 2,800,000

35,333,118,138 27,396,715,358Joint Venture -

Cargill Joy Poultry Meats Production Inc.** 233,406,000 233,406,000Associate -

Cargill Joy Poultry Realty Inc.** 10,585,500 10,585,500Advances to JWPL – 221,780,383

P=35,577,109,638 P=27,862,487,241**Owned through Chanceux, Inc., which is wholly owned by the Company.**Investments made by the Company in 2016.

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The movements in this account are as follows:

2017 2016Investments in subsidiaries:

Balance at beginning of year P=27,409,830,358 P=23,282,742,145Additional investments 7,918,627,247 4,107,458,753Share-based payments to employees of subsidiaries (see Note 27) 17,775,533 19,629,460Balance at end of year 35,346,233,138 27,409,830,358Less allowance for impairment loss 13,115,000 13,115,000

35,333,118,138 27,396,715,358Interests in a joint venture and an associate -

Balance at beginning and end of year 243,991,500 243,991,500Advances to JWPL (Note 28):

Balance at beginning of year 221,780,383 221,780,383Capital infusion (221,780,383) –Balance at end of year – 221,780,383

P=35,577,109,638 P=27,862,487,241

The Company’s subsidiaries as at December 31, 2017 and 2016 include the following:

Country of Incorporation

2017 2016


OwnershipIndirect

OwnershipDirect

OwnershipIndirect

OwnershipFresh N’ Famous Foods Inc. (Fresh N’ Famous): Philippines Food service 100 – 100 –

Chowking Food Corporation USA United States ofAmerica (USA) Holding company – 100 – 100

Zenith Foods Corporation (Zenith) Philippines Food service 100 – 100 –Freemont Foods Corporation (Freemont) Philippines Food service 100 – 100 –RRB Holdings, Inc. (RRBHI): Philippines Holding company 100 – 100 –

Red Ribbon Bakeshop, Inc. (RRBI) Philippines Food service – 100 – 100Red Ribbon Bakeshop, Inc. USA (RRBI USA) USA Food service – 100 – 100

Mang Inasal Philippines Inc. (Mang Inasal) (a) Philippines Food service 100 – 100 –Grandworth Resources Corporation (Grandworth): Philippines Leasing 100 – 100 –

Adgraphix, Inc. (Adgraphix) Philippines Digital printing – 100 – 100IConnect Multi Media Network, Inc. (IConnect) Philippines Advertising – 60 – 60JC Properties & Ventures Co. Philippines Dormant – 50 – 50

Honeybee Foods Corporation (HFC) USA Food service 100 – 100 –Tokyo Teriyaki Corporation (TTC) USA Food service – 100 – 100Honeybee Foods (Canada) Corporation (HFCC) Canada Food service – 100 – 100

Jollibee Worldwide Pte. Ltd. (JWPL): Singapore Holding company 100 – 100 –Regional Operating Headquarters of JWPL (JWS) Philippines Financial

accounting,human resourcesand logisticsservices – 100 – 100

Golden Plate Pte., Ltd. (GPPL) Singapore Holding company – 100 – 100- Golden Beeworks Pte., Ltd. Singapore Food service – 60 – 60- Golden Piatto Pte., Ltd. (b) Singapore Holding company – 75 – –

� Cibo Felice S.L.R. (Cibo Felice) (b) Italy Food service – 100 – –Golden Cup Pte.Ltd. Singapore Holding company – 60 – 60- Beijing Golden Coffee Cup Food & Beverage

Management Co., Ltd. PRC Food Service – 100 – 100Beijing New Hongzhuangyuan Food and Beverage Management Co., Ltd. (Hong Zhuang Yuan)

People’s Republic ofChina (PRC) Food service – 100 – 100

Southsea Binaries Ltd. (Southsea) British Virgin Island (BVI) Holding company – 100 – 100

Beijing Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Shenzhen Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Hangzhou Yongtong Food and Beverage Co., Ltd. PRC Food service – 100 – 100Hangzhou Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Wuhan Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Tianjin Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100Happy Bee Foods Processing Pte. Ltd. (HBFPPL) (c) Singapore Holding company – 100 – 100- Happy Bee Foods Processing (Anhui) Co. Ltd. (c) PRC Food service – 100 – 100

JSF Investments Pte. Ltd. (JSF) (d) Singapore Holding company – 99 – 99- SF Vung Tau Joint Stock Company and

subsidiaries (SFVT) (d) Vietnam Holding company – 60 – –- Blue Sky Holdings Ltd. and subsidiaries (Blue Sky) (d) Hong Kong Holding company – 60 – –

Jollibee (China) Food & Beverage Management Co. Ltd.(JFCC and formerly Shanghai Chunlv Co. Ltd)

PRC Managementcompany – 100 – 100

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Country of Incorporation

2017 2016


OwnershipIndirect

OwnershipDirect

OwnershipIndirect

OwnershipJollibee International (BVI) Ltd. (JIBL): BVI Holding company – 100 – 100- Jollibee Vietnam Corporation Ltd. Vietnam Food service – 100 – 100

� Goldstar Food Trade and Service Company Ltd.(GSC) (e) Vietnam Food Service – 100 – –

- PT Chowking Indonesia Indonesia Food service – 100 – 100- PT Jollibee Indonesia Indonesia Dormant – 100 – 100- Jollibee (Hong Kong) Limited and Subsidiaries Hong Kong Dormant – 85 – 85- Belmont Enterprises Ventures Limited (Belmont): BVI Holding company – 100 – 100

� Shanghai Belmont Enterprises Management andAdviser Co., Ltd. (SBEMAC)

PRC Business managementservice – 100 – 100

� Yong He Holdings Co., Ltd. BVI Holding company – 100 – 100 Centenary Ventures Ltd. BVI Holding company – 100 – 100

Bee Good! Inc. (BGI) USA Holding company – 100 – 100Chanceux, Inc. Philippines Holding company 100 – 100 –

BKTitans, Inc. (BKTitans) Philippines Holding company – 54 – 54- PFN Holdings Corporation Philippines Holding company – 99 – 99

� PERF Restaurants, Inc. (PERFI)(f) Philippines Food service – 100 – 100Donut Magic Phils., Inc. (Donut Magic) (g) Philippines Dormant 100 – 100 –Ice Cream Copenhagen Phils., Inc. (ICCP) (g) Philippines Dormant 100 – 100 –Mary’s Foods Corporation (Mary’s) (g) Philippines Dormant 100 – 100 –QSR Builders, Inc. Philippines Dormant 100 – 100 –Jollibee USA USA Dormant 100 – 100 –(a) On April 22, 2016, the Jollibee Group acquired the remaining 30% interest in Mang Inasal, making it a wholly owned subsidiary.(b) On April 12, 2017, the Jollibee Group, through its wholly owned subsidiary, GPPL, entered into a joint agreement to form Golden Piatto with Blackbird Holdings Pte. Ltd

(Blackbird), to own and operate the first Jollibee store in Italy through Cibo Felice which was incorporated on July 31, 2017.(c) On November 23, 2016, the Jollibee Group, through JWPL, obtained government and regulatory approval for the transfer of assets in Anhui and completed the transfer of shares in

HBFPPL to make its ownership 100%.(d) On May 10, 2017, upon the approval of certain legal and regulatory requirements in Vietnam and completion of Settlement Transaction Documents, Jollibee Group, through its

subsidiary, JSF, obtained additional 10% interest resulting to 60% controlling interest over SuperFoods Group.(e) On September 1, 2016, the Jollibee Group, through its wholly owned subsidiary, Jollibee Vietnam Corporation Ltd., acquired 100% interest in GSC.(f) Burger King also holds shares in PERF Trinoma and PERF MOA.(g) On June 18, 2004, the stockholders of the Jollibee Group approved the Plan of Merger of the three dormant companies. The application is pending approval from the SEC as at

December 31, 2017.

Investments in JWPLThe Company made additional cash investments of P=7,696.8 million and P=2,070.2 million in 2017and 2016, respectively. These additional investments were used to finance JWPL’s financing andinvesting activities in 2017 and 2016.

Investments in HoneybeeIn 2016, the Company made an additional cash investment of P=37.3 million, which in turn was usedto finance TTC’s installment payment for the purchase of Chowking US. The Chowking USoperations were acquired by TTC from Fortune Capital Corporation on May 27, 2011.

Investment in Mang InasalOn April 22, 2016, the Company acquired the remaining 30% of the issued and outstanding shares ofMang Inasal for a total cash consideration of P=2,000.0 million.

Interest in Cargill Joy Poultry Meats and RealtyOn May 24, 2016, the Company entered into an agreement with Cargill Philippines, Inc., a whollyowned subsidiary of Cargill, Inc. (Cargill), to establish a joint venture to build and operate a poultryprocessing plant in Sto. Tomas, Batangas, Philippines. Cargill will oversee the setting up,management and operations of this facility.

The joint venture entity, incorporated as Cargill Joy Poultry Meats Production, Inc. (Cargill PoultryMeats), is 70% owned by Cargill and 30% owned by the Company. The Company also owns 30% ofCargill Joy Poultry Realty, Inc. (Cargill Realty) which will lease the land where Cargill PoultryMeats’ plant will be located. The Company contributed investments of P=233.4 million andP=10.6 million in the joint venture entity and associate, respectively. Both Cargill Poultry Meats andCargill Realty were incorporated in the Philippines.

Advances to JWPLAdvances to JWPL pertain to advances made by the Company for the transaction costs of Bee Good!Inc.’s (BGI) investment in SJBF LLC (see Note 28). BGI is a wholly owned subsidiary of theCompany through JWPL. In 2017, these advances were converted into additional investment toJWPL.

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Stock Option Grants to Employees of SubsidiariesThe Company has stock option grants to the employees of its subsidiaries under the ManagementStock Option Program (MSOP). Details about the MSOP are disclosed in Note 27. The cost of thosestock option grants for the years ended December 31, 2017 and 2016 were charged to the investmentin the relevant subsidiary as follows:

2017 2016Jollibee Worldwide Pte. Ltd. P=7,133,338 P=5,915,944Fresh N’ Famous Foods Inc. 6,345,470 10,673,029RRB Holdings, Inc. 1,659,058 2,130,880Zenith Foods Corporation 859,667 600,706Honeybee Foods Corporation 816,720 –Mang Inasal Philippines Inc. 760,562 177,902BK Titans, Inc. 200,718 130,999

P=17,775,533 P=19,629,460

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11. Property, Plant and Equipment


2017

Land

Buildings,Commercial

CondominiumUnits and

Improvements

LeaseholdRights

andImprovements


ProcessingEquipment

Furnitureand Fixtures

TransportationEquipment

Constructionin Progress Total

Cost Balance at beginning of year P=28,586,733 P=453,814,275 P=3,912,033,337 P=4,058,310,544 P=418,426,555 P=449,756,791 P=141,726,113 P=9,462,654,348 Additions – 109,186 206,547,097 374,947,913 32,061,675 57,350,796 1,361,391,339 2,032,408,006 Retirements and disposals – – (200,291,966) (143,363,490) (13,785,667) – (1,674,945) (359,116,068) Reclassifications – 37,405,931 734,060,782 441,079,145 69,416,854 – (1,281,962,712) – Balance at end of year 28,586,733 491,329,392 4,652,349,250 4,730,974,112 506,119,417 507,107,587 219,479,795 11,135,946,286Accumulated Depreciation

and Amortization Balance at beginning of year – 413,523,153 1,967,461,408 2,526,160,205 274,485,082 264,245,793 – 5,445,875,641 Additions (see Notes 21 and 22) – 12,821,470 477,910,837 621,029,679 71,740,714 62,224,570 – 1,245,727,270 Retirements and disposals – – (133,558,193) (123,112,392) (12,294,693) – – (268,965,278) Reclassifications – – – 32,544 (32,544) – – –

Balance at end of year – 426,344,623 2,311,814,052 3,024,110,036 333,898,559 326,470,363 – 6,422,637,633Net Book Value P=28,586,733 P=64,984,769 P=2,340,535,198 P=1,706,864,076 P=172,220,858 P=180,637,224 P=219,479,795 P=4,713,308,653

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2016

Land

Buildings,Commercial

CondominiumUnits and

Improvements

LeaseholdRights

andImprovements


ProcessingEquipment

Furnitureand Fixtures

TransportationEquipment

Constructionin Progress Total

Cost Balance at beginning of year P=28,586,733 P=453,814,275 P=3,417,251,831 P=3,600,585,194 P=403,796,863 P=376,340,287 P=291,459,311 P=8,571,834,494 Additions – – 223,998,521 361,351,226 32,862,637 74,979,882 1,059,433,436 1,752,625,702 Retirements and disposals – – (379,004,856) (394,446,818) (70,244,123) (4,706,365) (13,403,686) (861,805,848)

Transfers – – 2,867,834 (1,807,037) 221,890 – (1,282,687) – Reclassifications – – 646,920,007 492,627,979 51,789,288 3,142,987 (1,194,480,261) – Balance at end of year 28,586,733 453,814,275 3,912,033,337 4,058,310,544 418,426,555 449,756,791 141,726,113 9,462,654,348Accumulated Depreciation and

Amortization Balance at beginning of year – 403,750,003 1,892,793,950 2,381,877,626 288,593,141 210,755,046 – 5,177,769,766 Additions

(see Notes 21 and 22) – 9,773,150 422,267,461 525,054,508 54,085,499 55,876,547 – 1,067,057,165 Retirements and disposals – – (348,815,934) (379,705,428) (68,056,616) (2,373,312) – (798,951,290)

Transfers – – 2,249,878 (2,120,313) (129,565) – – – Reclassifications – – (1,033,947) 1,053,812 (7,377) (12,488) – –

Balance at end of year – 413,523,153 1,967,461,408 2,526,160,205 274,485,082 264,245,793 – 5,445,875,641Net Book Value P=28,586,733 P=40,291,122 P=1,944,571,929 P=1,532,150,339 P=143,941,473 P=185,510,998 P=141,726,113 P=4,016,778,707

Construction in progress as at December 31, 2017 and 2016 mainly pertains to costs incurred for ongoing construction of soon-to-open stores and storesunder refurbishment. As at December 31, 2017 and 2016, no borrowing costs have been capitalized.

Net loss on retirements of property, plant and equipment amounted to P=38.3 million and P=29.9 million in 2017 and 2016, respectively. The Company solditems of property, plant and equipment for a total consideration of P=60.2 million and P=35.2 million in 2017 and 2016, respectively. Net gain arising from thedisposals of property, plant, and equipment amounted to P=25.5 million and P=2.3 million in 2017 and 2016, respectively (see Note 24).

No impairment of property, plant and equipment was recognized by the Company in 2017 and 2016.

The cost of fully depreciated assets still in use by the Company amounted to P=3,344.2 million and P=2,789.1 million as at December 31, 2017 and 2016,respectively.

No property, plant and equipment has been pledged as security or collateral as at December 31, 2017 and 2016.

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12. Intangible Assets


2017 2016Cost

Balance at beginning of year P=726,455,339 P=702,749,758Additions 69,633,935 23,705,581Balance at end of year 796,089,274 726,455,339

Accumulated AmortizationBalance at beginning of year 186,390,748 117,397,846Amortization (see Note 22) 78,950,871 68,992,902Balance at end of year 265,341,619 186,390,748

Net Book Value P=530,747,655 P=540,064,591

Intangible assets mainly pertain to computer software relating to the Company’s Enterprise ResourcePlanning (ERP) application which the Company started using on August 1, 2014. The useful life ofthese computer software is 10 years. In 2017 and 2016, the Company continued to capitalize costsfor new functionalities.

The Company’s intangible assets also include trademarks and patents amortized over its useful life offive years with net book value of P=18.2 million and P=26.7 million as at December 31, 2017 and 2016,respectively.

13. Investment Properties


2017

Land

Buildings andBuilding

Improvements TotalCost Balance at beginning of year P=759,181,799 P=985,738,865 P=1,744,920,664 Disposals (134,454,066) − (134,454,066)

Balance at end of year 624,727,733 985,738,865 1,610,466,598Accumulated Depreciation Balance at beginning of year − 285,590,944 285,590,944 Additions (see Notes 21 and 22) − 31,669,990 31,669,990

Balance at end of year − 317,260,934 317,260,934Net Book Value P=624,727,733 P=668,477,931 P=1,293,205,664

2016

Land

Buildings andBuilding

Improvements TotalCost Balance at beginning and end of year P=759,181,799 P=985,738,865 P=1,744,920,664Accumulated Depreciation Balance at beginning of year − 253,920,954 253,920,954 Additions (see Notes 21 and 22) − 31,669,990 31,669,990

Balance at end of year − 285,590,944 285,590,944Net Book Value P=759,181,799 P=700,147,921 P=1,459,329,720

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The cost of fully depreciated investment properties still being leased out by the Company underoperating leases amounted to P=107.5 million as at December 31, 2017 and 2016.

The Company’s investment properties have an aggregate fair value of P=2,397.1 million as atDecember 31, 2017 as determined by independent appraisers who holds a recognized and relevantprofessional qualification. The fair value represents the amount at which the assets and liabilities canbe exchanged in an orderly transaction between market participants to sell the asset or transfer theliability at the measurement date under current market conditions in accordance with InternationalValuation Standards. In determining the fair value of the investment properties, the independentappraisers used the market data approach for land and cost approach for buildings and buildingimprovements. For land, fair value is based on sales and listings of comparable properties within thevicinity after adjustments for differences in location, size and shape of the lot, time elements andother factors between the properties and their comparable properties. For buildings and buildingimprovements, fair value is based on the current cost to replace the properties in accordance withprevailing market prices for materials, labor, contractors’ overhead, profit and fees in the locality afteradjustments for depreciation due to physical deterioration, and functional and economic obsolescencebased on personal inspection of the buildings and building improvements and in comparison tosimilar new properties. Fair value hierarchy disclosures for investment properties have been providedin Note 31.

Rent income derived from income-generating properties amounted to P=210.2 million andP=121.1 million in 2017 and 2016, respectively, recorded under “Rent income” account. Directoperating costs relating to the investment properties, which include depreciation and maintenanceexpenses, totaled P=40.0 million and P=39.9 million in 2017 and 2016, respectively.

In 2017, the Company sold its investment properties in Sta. Rosa, Laguna and Luisita Industrial Park,Tarlac for a total consideration of P=365.5 million. Net gain arising from the disposals of theseinvestment properties amounted to P=231.0 million (see Note 24).

In 2015, the Company entered into an agreement to develop a commercial and office condominiumbuilding (the “Project”) in a parcel of its land in consideration for cash and assigned units in theProject. The completion of the transaction is conditional upon fifty percent (50%) completion of theProject, as certified by the general contractor of the Project, and when all of the assigned units arefully constructed.

No investment properties has been pledged as security or collateral as at December 31, 2017 and2016.

14. Other Noncurrent Assets


2017 2016Refundable deposits P=585,675,381 P=522,965,030Noncurrent portion of:

Prepaid rent 107,358,108 96,012,577Employees’ car plan receivables 107,288,228 89,845,027Prepaid car plan 98,671,409 115,658,393

Deferred rent and compensation 53,885,598 45,172,162Returnable containers − 20,217,038Others 8,682,370 19,066,238

P=961,561,094 P=908,936,465

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The terms and conditions of other noncurrent assets are as follows:

ƒ Refundable deposits represent security deposits for operating leases entered into by the Companyas a lessee (see Note 29). The refundable deposits are recoverable from the lessors at the end ofthe related lease terms and are presented at amortized cost. The discount rates used range from2% to 22% in 2017 and 2016. The difference between the fair value at initial recognition and thenotional amount of the refundable deposits is recognized as deferred rent and amortized on astraight-line basis over the lease terms. Accretion of interest pertaining to refundable depositsamounted to P=7.2 million and P=6.3 million in 2017 and 2016, respectively (see Note 23).

ƒ Prepaid rent pertains to the rent of store and office spaces that are paid in advance which is net ofcurrent portion.

ƒ Employees’ car plan receivables are presented at amortized cost. The difference between the fairvalue at initial recognition and the notional amount of the employees’ car plan receivables isrecognized as deferred compensation and amortized on a straight-line basis over the credit period.Accretion of interest pertaining to employees’ car plan receivables amounted to P=5.5 million andP=5.9 million in 2017 and 2016, respectively (see Note 23).

15. Trade Payables and Other Current Liabilities


2017 2016Trade payables:

Suppliers P=4,438,358,684 P=4,083,302,029Related parties (see Note 28) 924,429,772 569,727,247

Accruals for:Advertising and promotions 987,893,457 731,203,957Salaries, wages and employee benefits 593,875,367 458,658,363Rent 264,618,191 228,884,891Corporate events and research 263,293,436 299,279,853Gift certificates 141,066,583 121,744,991Store operations 135,475,182 176,658,799Professional fees 131,224,196 140,989,623Repairs, maintenance and security 101,580,978 106,512,948Electricity, other utilities and communication 97,157,272 102,239,889Supplies 91,410,004 111,306,930Trainings and seminars 91,244,276 121,566,981Delivery expenses 79,832,154 112,019,884Novelties 57,821,828 56,317,473Retention 49,019,137 36,298,494Interest (see Notes 17 and 34) 14,350,960 13,097,129Transportation and travel 9,765,722 19,472,674Insurance 3,408,926 4,758,538Others 543,353,820 510,247,970

Local and other taxes payable 1,265,257,471 954,346,948Happy plus liabilities 541,874,914 409,674,679Customers’ deposits 85,668,086 107,266,609Dividends payable (see Note 34) 56,052,555 47,705,414Other current liabilities 279,096,755 270,427,599

P=11,247,129,726 P=9,793,709,912

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The terms and conditions of the above liabilities are as follows:

ƒ Trade payables are noninterest-bearing and are generally settled within a 30-day term.

ƒ The terms and conditions of payables to related parties are discussed in Note 28.

ƒ Accruals, local and other taxes payable, customers’ deposits and dividends payable arenoninterest-bearing and are normally settled within the next financial year.

ƒ Other accruals generally consist of amounts payable for representation and various activities ofthe Company.

ƒ Customers’ deposits pertain to security deposits from operating leases with franchisees andsubsidiaries, which are refundable at the end of the lease term and deposits for kiddie partypackages. Accretion of interest pertaining to customers’ deposits from operating leases amountedto P=0.4 million and P=1.0 million in 2017 and 2016 (see Note 23).

ƒ Other current liabilities consist of staled checks, amounts payable for mascots and varioussubscriptions in newspapers given to customers as a complementary to their meals.

16. Provisions

This mainly represents provisions for legal claims, which include estimates of legal services,settlement amounts and other costs of claims made against the Company. Other information on theclaims are not disclosed as this may prejudice the Company’s position on such claims (see Note 29).

17. Long-term Debts

The long-term debts consist of the following:

P=1,500.0 Million Metropolitan Bank and Trust Company (MBTC) LoanOn December 9, 2013, the Company refinanced a 2011 loan from MBTC amounting toP=1,500.0 million. The new loan is payable over five years and six months from the date of drawdownwith annual principal repayments of P=15.0 million starting on the 30th month from the date ofdrawdown and P=1,455.0 million upon maturity. The loan is subject to a variable interest rate basedon three-month Philippine Dealing System Treasury Fixing (PDST-F) rate plus spread of 1.25%,which is payable and is reset on a quarterly basis, and to an interest rate floor based on the BangkoSentral ng Pilipinas (BSP) Overnight Reverse Repurchase Agreement Rate. The loan was drawn onDecember 16, 2013 and will mature on June 17, 2019. The Company incurred debt issue costs ofP=7.5 million, representing documentary stamp tax, in relation to this loan in 2013.

Under the loan agreement with MBTC, the Company has an option to convert the variable interestrate into a fixed interest rate on any interest payment date based on the PDST-F rate for the remainingterm of the loan and the spread of 1.00%. The Company also has an option to prepay the loan in fullor in multiples of P=10.0 million on any interest payment date.

P=800.0 Million Bank of the Philippine Islands (BPI) LoanOn April 21, 2014, the Company obtained an unsecured loan from BPI amounting toP=800.0 million. The principal is payable after five years upon maturity on April 21, 2019. The loanis subject to a variable interest rate based on three-month PDST-F rate plus spread of 1.00%, which ispayable and is reset on a quarterly basis, and to an interest rate floor based on the BSP Special

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*SGVFS028332*

Deposit Account (SDA) Rate plus spread of 1.00% or BSP Overnight Borrowing rate plus spread of1.00%. The Company incurred debt issue costs of P=4.0 million, representing documentary stamp tax,in relation to this loan.

Under the loan agreement with BPI, the Company has an option to convert the variable interest rateinto a fixed interest rate based on a five-year treasury securities benchmark yield plus spread of1.00% on the date the option to convert is exercised, subject to an annual interest rate floor of 4.75%.The Company also has an option to prepay the loan, wholly or partially, without penalty at any timeduring the term of the loan subject to certain conditions.

P=1,000.0 Million MBTC LoanOn April 22, 2016, the Company obtained an unsecured loan from MBTC amounting toP=1,000.0 million. The loan is payable over five years from the date of drawdown with quarterlyprincipal payments of P=62.5 million starting on the 15th month from the date of drawdown. The loanis subject to a variable interest rate based on three-month Philippine Dealing SystemTreasury - Reference Rate Two (PDST-R2) plus spread of 0.55%, which is payable and is repriced ona quarterly basis, and to an interest rate floor of BSP SDA Rate. The loan will mature onApril 22, 2021. The Company incurred debt issue cost of P=5.0 million representing documentarystamp tax, in relation to this loan.

Under the loan agreement with MBTC, the Company has an option to convert the variable interestrate into a fixed interest rate on any interest payment date but in no case later than 730 days fromdrawdown date. The conversion to fixed interest rate is based on the applicable PDST-R2 rate plusspread of 2% if the option is exercised from day 1 to day 365 from drawdown date and based on theapplicable PDST-R2 rate plus spread of 2.75% if the option is exercised from day 366 to day 730from drawdown date. The Company also has an option to prepay the loan in part or in full on anyinterest payment date.

P=1,600.0 Million MBTC LoanOn December 22, 2017, the Company obtained an unsecured loan from MBTC amounting toP=1,600.0 million. The loan is payable over five years from the date of drawdown with quarterlyprincipal payments of P=100.0 million starting on the 15th month from the date of drawdown. The loanis subject to a variable interest rate based on the simple average of the preceding five (5) days of thethree-month PDST-R2 plus spread of 0.50%, which is payable and is repriced on a quarterly basis,and to an interest rate floor of 2.70%. The loan will mature on December 22, 2022. The Companyincurred debt issue cost of P=8.0 million representing documentary stamp tax, in relation to this loan.

Under the loan agreement with MBTC, the Company has an option to convert the variable interestrate into a fixed interest rate on any interest payment date but in no case later than 365 days fromdrawdown date. The conversion to fixed interest rate is based on the applicable three month PDST-R2 rate plus spread of 0.60%. The Company also has an option to prepay the loan in part or in full onany interest payment date subject to certain conditions.

P=2,100.0 Million BPI LoanOn December 22, 2017, the Company obtained an unsecured loan from BPI amounting toP=2,100.0 million. The principal is payable after five years upon maturity on December 22, 2022. Theloan is subject to a variable interest rate based on the simple average of five (5) trading days of thethree-month Treasury Securities Benchmark Yield, as published in the PDST-R2 page of the PDEXpreceding and inclusive of the Interest Rate Setting Date plus spread of 0.50%, which is payable andis reset on a quarterly basis. The Company incurred debt issue costs of P=10.5 million, representingdocumentary stamp tax, in relation to this loan.

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Under the loan agreement with BPI, the Company has an option to convert the variable interest rateinto a fixed interest rate based on treasury securities benchmark yield on the remaining tenor of theloan plus spread of 0.50%. The Company also has an option to prepay the loan, wholly or partially,without penalty at any time during the term of the loan subject to certain conditions.

P=800.0 Million Bank of Tokyo-Mitsubishi UFJ, LTD. (MUFG) LoanOn December 22, 2017, the Company obtained an unsecured loan from MUFG amounting toP=800.0 million. The principal is payable after five years upon maturity on December 22, 2022 withquarterly principal payments of P=50.0 million starting on the 15th month from the date of drawdown.The loan is subject to a variable interest rate based on the simple average of the preceding five (5)days of the three-month PDST-R2 rate plus spread of 0.50%, which is payable and is reset on aquarterly basis, and to an interest rate floor based on Overnight Deposit Facility Rate of the BSP. TheCompany incurred debt issue costs of P=4.0 million representing documentary stamp tax, in relation tothis loan.

Under the loan agreement with MUFG, the Company has an option to prepay the loan in part or infull on any interest payment date subject to certain conditions.

P=600.0 Million Citibank (Citi) LoanOn December 27, 2017, the Company obtained an unsecured loan from Citi amounting toP=600.0 million. The principal is payable after five years upon maturity on December 27, 2022 withquarterly principal payments of P=37.5 million starting on the 15th month from the date of drawdown.The loan is subject to a variable interest rate based on three-month PDST-R2 rate plus spread of0.50%, which is payable and is reset on a quarterly basis, and to an interest rate floor based onOvernight Deposit Facility Rate of BSP plus 0.50%. The Company incurred debt issue costs ofP=3.0 million representing documentary stamp tax, in relation to this loan.

Under the loan agreement with Citi, the Company has an option to convert the variable interest rateinto a fixed interest rate on any interest payment date but in no case later than 365 days fromdrawdown date. The conversion to fixed interest rate is based on a five year PDST-R2 rate plusspread of 0.75%. The Company also has an option to prepay the loan in part or in full on any interestpayment date subject to certain conditions.

The balance of the Company’s long-term debts as at December 31 is as follows:

2017 2016Principal P=8,245,000,000 P=3,285,000,000Unamortized debt issue cost (32,028,788) (9,692,424)

8,212,971,212 3,275,307,576Less current portion:

Principal 265,000,000 140,000,000Unamortized debt issue cost (3,163,637) (586,518)

261,836,363 139,413,482Noncurrent portion - net of debt issue cost P=7,951,134,849 P=3,135,894,094

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*SGVFS028332*

Debt Issue CostThe movements in unamortized debt issue cost in 2017 and 2016 are as follows:

2017 2016Balance at beginning of year P=9,692,424 P=7,439,394Additions 25,500,000 5,000,000Amortization (3,163,636) (2,746,970)Balance at end of year P=32,028,788 P=9,692,424

The future expected principal settlements of the long-term debt as at December 31 follow:

2017 20162017 P=– P=140,000,0002018 265,000,000 265,000,0002019 3,780,000,000 2,505,000,0002020 1,525,000,000 250,000,0002021 1,400,000,000 125,000,0002022 1,275,000,000 –

P=8,245,000,000 P=3,285,000,000

Interest expense incurred related to long-term debt amounted to P=116.0 million and P=103.9 million in2017 and 2016, respectively (see Note 23), which include amortization of debt issue cost amountingto P=3.2 million and P=2.7 million, respectively. Accrued interest expense included in “Trade payablesand other current liabilities” account amounted to P=14.4 million and P=13.1 million as atDecember 31, 2017 and 2016, respectively (see Note 15).

Debt CovenantsThe Company’s P=1,500.0 million, P=1,000.0 million and P=1,600.0 million loans with MBTC aresubject to affirmative debt covenants, including maintaining business, maintaining propertyinsurance, paying taxes, notifying MBTC of material legal proceedings and agreements, andmaintaining accurate accounting records, among others. They are also subject to negative debtcovenants, including not making material changes in business, not permitting material changes inownership and voting control, and not guaranteeing debt of non-subsidiaries and non-affiliates,among others. Noncompliance with these debt covenants may result to the acceleration of thematurity of the loans. In addition, the Company is required not to exceed a Debt-to-Equity ratio andDebt-to-EBITDA ratio of 3.0. The Company is in compliance with these debt covenants as atDecember 31, 2017 and 2016.

The Company’s P=800.0 million and P=2,100.0 million loans with BPI are subject to affirmative debtcovenants, including maintaining and preserving corporate existence, rights, privileges andfranchises, keeping proper and adequate accounting records, complying with laws, and furnishingBPI with audited financial statements and interim financial reporting statements, among others. Theyare also subject to negative covenants, including not making material changes in business, not makingmaterial changes in its ownership, engaging in business not authorized by its articles of incorporation,and assigning, transferring or conveying any right to receive income or revenues except in theordinary course of business, among others. In addition, the Company is required not to exceed aDebt-to-Equity ratio of 3.0 and to maintain a Debt Service Coverage ratio of at least 1.3. TheCompany is in compliance with these debt covenants as at December 31, 2017 and 2016.

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The Company’s P=800.0 million loan with MUFG is subject to affirmative debt covenants, includingmaintaining business, maintaining property insurance, paying taxes, notifying MUFG of materiallegal proceedings and agreements, and maintaining accurate accounting records, among others. It isalso subject to negative debt covenants, including not making material changes in business, notpermitting material changes in ownership and voting control, and not guaranteeing debt of non-subsidiaries and non-affiliates, among others. In addition, the Company is required not to exceed aDebt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0. The Company is in compliance with thesedebt covenants as at December 31, 2017.

The Company’s P=600.0 million loan with Citi is subject to affirmative debt covenants, includingmaintaining business, maintaining property insurance, compliance with law, paying all indebtednessand contractual obligations, paying taxes, notifying Citi of material legal proceedings andagreements, maintaining accurate accounting records, and furnishing Citi with audited financialstatements and interim financial reporting statements, among others. It is also subject to negativedebt covenants, including not making material changes in business, not permitting material changesin ownership and voting control, and not guaranteeing debt of non-subsidiaries and non-affiliates,among others. In addition, the Company is required not to exceed a Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0 and to maintain a Debt Service Coverage ratio of at least 1.3. The Company isin compliance with these debt covenants as at December 31, 2017.

18. Capital Stock

The movements in the number of shares are as follows:

2017 2016Authorized - P=1 par value P=1,450,000,000 P=1,450,000,000Issued and subscribed:

Balance at beginning of the year P=1,091,268,535 P=1,086,149,410Issuances during the year 10,387,040 5,119,125Balance at end of year 1,101,655,575 1,091,268,535Subscriptions receivable (17,177,884) (17,177,884)

P=1,084,477,691 P=1,074,090,651

The Company’s common stock held in treasury consists of 16.4 million shares costingP=180.5 million as at December 31, 2017 and 2016.

As required by SRC Rule 68, as Amended (2011), Annex 68-D, below is the summary of theCompany’s track record of registration of securities.

Number of shares Issue/offer Date

Number of holders of securitiesas at December 31

registered price of approval 2017 2016Common shares 75,000,000 P=9 June 21, 1993 3,042 3,075

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19. Retained Earnings

Cash dividend declarations for 2017 and 2016 follow:

2017

Declaration Date Record Date Payment Date

CashDividend

per Share

Total CashDividendsDeclared

April 5 April 21 May 5 P=1.00 P=1,077,526,675November 10 November 27 December 11 1.18 1,277,983,973

P=2.18 P=2,355,510,648

2016

Declaration Date Record Date Payment Date

CashDividendper Share

Total CashDividends

DeclaredApril 6 April 21 May 6 P=0.86 P=919,434,837November 11 November 28 December 12 1.00 1,072,807,848

P=1.86 P=1,992,242,685

The Company has a cash dividend policy of declaring one-third of its net income for the year as cashdividends. It uses its best estimate of its net income as basis for declaring such cash dividends.Actual cash dividends per share declared as a percentage of the consolidated basic earnings per shareof the Jollibee Group are 33.1% and 32.4% in 2017 and 2016, respectively.

An important part of the Company’s growth strategy is the acquisition of new businesses in thePhilippines and abroad. Examples were acquisitions of 85% of Yonghe King in 2004 in PRC(P=1,200.0 million), 100% of Red Ribbon in 2005 (P=1,700.0 million), the remaining 20% minorityshare in Greenwich in 2007 (P=384.0 million), the remaining 15% share of Yonghe King in 2007(P=413.7 million), 100% of Hong Zhuang Yuan restaurant chain in PRC in 2008 (P=2,600.0 million),70% of Mang Inasal in 2010 (P=2,979.8 million), 100% of Chowking US operations in 2011(P=659.9 million), 55% of San Pin Wang (P=195.9 million) in 2012, 48% of WJ Investments Limited(P=98.0 million) in 2012, 40% of Smashburger in the USA in 2015 (P=4,629.5 million), the remaining30% minority share in Mang Inasal in 2016 (P=2,000.0 million), 30% of Cargill Poultry Meats in 2016(P=233.4 million), 30% of Cargill Realty in 2016 (P=10.6 million), 100% of GSC in 2016(P=8.6 million), additional 10% of SuperFoods Group in 2017.

The Company plans to continue to make substantial acquisitions in the coming years. The Companyuses its cash generated from operations and from debt financing to finance these acquisitions andcapital expenditures. These limit the amount of cash dividends that it can declare and pay making thelevel of retained earnings higher than the paid-in capital stock.

On February 15, 2012, the BOD of the Company approved an additional appropriation of retainedearnings to be used for future expansion and to support the Company’s growth strategy, increasingthe existing appropriation to P=5,000.0 million as at December 31, 2012. On April 11, 2013 andApril 6, 2016, the BOD of the Company approved the appropriation of another P=5,200.0 million andP=8,000.0 million, respectively, for capital expenditures covering new stores, store renovations andcommissary improvements and expansion.

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*SGVFS028332*

The appropriated retained earnings of the Company amounted to P=18,200.0 million as atDecember 31, 2017, details of which are as follows:

Project Timeline AmountAcquisition of businesses 2013-2018 P=7,600,000,000Capital expenditures 2013-2018 2,600,000,000Capital expenditures 2016-2018 8,000,000,000

P=18,200,000,000

The unappropriated retained earnings is also restricted for the payment of dividends to the extent ofthe cost of common stock held in treasury amounting to P=180.5 million as at December 31, 2017 and2016. The Company’s retained earnings available for dividend declaration, determined based on theguidelines provided by the SEC, is presented in the consolidated financial statements filed with theSEC.

20. Revenues

Net Sales. Net sales pertains to sale of inventories less sales discounts for the year endedDecember 31, 2017 and 2016.

Royalty and Set-up Fees. The Company has existing Royalty and Service Agreements with certainsubsidiaries and independent franchisees for the latter to operate QSR outlets under the “Jollibee”concept and trade name. In consideration thereof, the franchisees agree to pay set-up fees andmonthly royalty fees equivalent to a certain percentage of the subsidiaries’ and independentfranchisees’ net sales. Royalty and set-up fee revenues amounted to P=4,768.6 million andP=4,224.5 million in 2017 and 2016, respectively (see Note 28).

21. Cost of Sales and Services


2017 2016Cost of SalesCost of inventories (see Note 28) P=32,460,538,607 P=28,700,960,737Personnel expenses:

Salaries, wages and employee benefits 1,738,553,813 2,015,184,130Pension expense (see Note 26) 53,835,478 70,910,825

Contracted services 2,287,867,795 1,513,710,308Rent (see Notes 28 and 29) 1,690,639,319 1,361,860,501Freight (see Note 28) 1,382,028,512 1,258,682,914Electricity and other utilities 1,175,387,899 1,016,273,791Depreciation and amortization (see Notes 11 and 13) 1,005,245,072 847,169,123Service fees (see Note 28) 974,931,161 791,464,105Supplies 593,064,159 500,248,899Repairs and maintenance 443,719,501 399,500,196Security and janitorial 236,915,627 182,009,029Transportation and travel 103,117,796 96,124,061

(Forward)

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2017 2016Taxes and licenses P=84,518,463 P=70,220,406Communication 35,281,583 32,385,680Representation and entertainment 17,470,647 13,755,089Professional fees 1,170,874 716,252Others 809,764,971 685,627,143

45,094,051,277 39,556,803,189

Cost of ServicesCost of labor and materials 483,607,194 325,386,626Rent (see Note 29) 67,759,624 73,498,954Service fees (see Note 28) 58,728,510 55,914,351Depreciation and amortization (see Notes 11 and 13) 36,181,348 36,882,681Taxes and licenses 32,416,313 11,572,279Supplies 3,750,000 7,500,000Security and janitorial 789,376 1,178,249Others 1,636,918 2,146,866

684,869,283 514,080,006P=45,778,920,560 P=40,070,883,195

Others consist of delivery costs, Company’s share in common usage area and insurance.

22. General and Administrative Expenses


2017 2016Personnel expenses:

Salaries, wages and employee benefits P=3,257,364,826 P=2,759,049,741Stock options expense (see Note 27) 209,707,270 221,694,219Pension expense (see Note 26) 159,792,161 135,263,631

Service and management fees (see Note 28) 625,852,030 658,145,528Professional fees 504,752,429 476,346,431Taxes and licenses 480,292,229 480,389,843Depreciation and amortization

(see Notes 11, 12 and 13) 314,921,711 283,668,252Corporate events and research 307,794,106 313,994,989Transportation and travel 245,627,105 228,507,576Subscriptions 130,993,834 98,989,304Repairs and maintenance 101,224,306 114,396,160Rent (see Notes 28 and 29) 96,601,988 249,182,518Donations (see Note 28) 93,291,215 81,800,880Trainings and seminars 87,660,185 124,655,755Contracted services 67,884,933 63,151,479Communication 66,620,525 50,515,949Association dues 49,659,225 48,413,717Supplies 35,013,847 34,917,380Representation and entertainment 32,716,686 23,247,527Electricity and other utilities 25,809,539 21,595,389

(Forward)

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2017 2016Insurance P=12,890,987 P=12,204,873Security and janitorial 8,124,160 8,205,422Provisions (reversals) for impairment loss of:

Inventories (see Note 7) (43,543,322) 53,637,686Receivables (see Note 6) (784,741) 10,217,086

Others 244,038,720 283,340,216P=7,114,305,954 P=6,835,531,551

23. Interest Income (Expense)

The Company’s interest income and expenses consist of the following:

2017 2016Interest income:

Advances to related parties (see Note 28) P=47,461,370 P=33,843,836Cash and cash equivalents (see Note 5) 26,939,234 15,394,827Accretion of interest on refundable deposits and

employees’ car plan receivables(see Note 14) 12,740,225 12,184,517

87,140,829 61,423,180Interest expense:

Long-term debt (see Note 17) (116,034,762) (103,910,430)Due to related parties (see Note 28) (27,371,529) (35,763,729)Accretion of interest on customers’ deposits

(see Note 15) (352,361) (1,026,288)(143,758,652) (140,700,447)(P=56,617,823) (P=79,277,267)

24. Other Income - Net


2017 2016Dividend income (see Note 28) P=2,164,000,000 P=2,471,300,000Management fees (see Note 28) 1,570,311,969 585,341,058Write-off of long-outstanding liabilities 757,014,567 389,579,423Net gain on disposals of:

Investment properties (see Note 13) 231,035,934 –Property, plant and equipment (see Note 11) 25,470,534 2,286,207

Net foreign exchange gain (loss) (see Note 30) (46,343,220) 65,976,868Others 205,420,628 132,271,003

P=4,906,910,412 P=3,646,754,559

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In the normal course of business, the Company accrues liabilities based on management’s bestestimate of costs incurred, particularly in cases when the Company has not yet received final billingsfrom suppliers and vendors. There are also ongoing negotiations and reconciliations with suppliersand vendors on certain liabilities recorded. These balances are continuously reviewed bymanagement and are adjusted based on these reviews, resulting to write-off of certain liabilities asother income.

Others consist mainly of income from charges to truckers and suppliers, insurance claims and salarycharges for borrowed staff.

25. Income Taxes

The provision for current income tax consists of the following:

2017 2016Final taxes on:

Royalty fees P=910,934,190 P=819,022,449Interest income 4,316,941 2,984,270

Capital gains tax 21,929,400 –MCIT 190,633,603 179,132,310

P=1,127,814,134 P=1,001,139,029

The details of the Company’s deferred tax assets and liabilities are as follows:


Cost of stock options P=937,754,762 P=–NOLCO 539,488,164 802,772,207Excess of MCIT over RCIT 513,071,720 451,273,321Pension liability 307,729,335 337,672,499Operating lease payables 250,684,147 229,977,226Provision for bonus 94,289,045 75,498,468Allowance for impairment losses on:

Receivables 62,126,552 62,361,975Inventories 4,874,625 17,937,622

Unrealized foreign exchange loss 38,414,640 17,911,412Provisions 9,150,192 9,150,192Unaccreted discount on:

Refundable deposits 6,355,755 5,322,913Employees’ car plan receivables 3,263,261 2,733,944

Prepaid leases 4,077,786 5,226,938Unamortized:

Past service cost 2,789,642 5,579,283Discount on customers’ liability – 1,304,689

Deferred rent revenue – 2,3102,774,069,626 2,024,724,999

(Forward)

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2017 2016Deferred tax liabilities:

Prepaid rent P=46,768,460 P=60,795,657Unrealized foreign exchange gain 34,101,678 40,978,829Deferred rent expense 11,390,999 10,095,301Deferred compensation expense 4,774,680 3,456,348Operating lease receivables 3,393,000 3,324,325Net unrealized gain on available-for-sale financial assets 1,192,500 459,500

101,621,317 119,109,960P=2,672,448,309 P=1,905,615,039

The net change in net deferred tax assets recognized in additional paid-in capital and othercomprehensive income amounted to P=731.0 million and P=37.8 million, respectively.

As at December 31, 2017, the Company’s NOLCO and excess MCIT over RCIT, which can becarried forward and claimed as deduction against regular taxable income and as tax credit againstRCIT due, respectively, are as follows:

Year Incurred Expiry NOLCO MCIT2015 2018 P=760,525,265 P=143,305,8072016 2019 1,037,768,615 179,132,3102017 2020 – 190,633,603

P=1,798,293,880 P=513,071,720

The movements in NOLCO and MCIT are as follows:

2017 2016NOLCO:

Balance at beginning of year P=2,675,907,355 P=1,638,138,740Utilization (877,613,475) –Additions – 1,037,768,615Balance at end of year P=1,798,293,880 P=2,675,907,355

2017 2016MCIT:

Balance at beginning of year P=451,273,321 P=274,345,181Additions 190,633,603 179,132,310Expired (128,835,204) (2,204,170)Balance at end of year P=513,071,720 P=451,273,321

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The reconciliation between provision for income tax computed using income before income tax at thestatutory tax rate of 30% with the provision for income tax as shown in the parent companystatements of comprehensive income are as follows:

2017 2016Provision for income tax at statutory tax rate of 30% P=2,531,542,376 P=1,688,647,307Tax effects of:

Dividend income (649,200,000) (741,390,000)Effect of different tax rates for royalty fees

and interest income (457,801,073) (411,003,821)Intrinsic value of stock options exercised (310,585,216) (196,451,979)Tax effect of MSOP and ELTIP (147,033,547) –Expired MCIT 128,835,204 2,204,170Effect of different tax rates for capital gains (47,381,381) –Nondeductible expenses 5,875,679 68,764,601

P=1,054,252,042 P=410,770,278

Republic Act (RA) No.10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) wassigned into law on December 19, 2017 and took effect January 1, 2018, making the new tax lawenacted as of the reporting date. Although the TRAIN changes existing tax law and includes severalprovisions that will generally affect businesses on a prospective basis, the management assessed thatthe same will not have any significant impact on the financial statement balances as of the reportingdate.

26. Pension Benefits

The Company has a funded, independently-administered, non-contributory defined benefit retirementplan covering all regular and permanent employees with benefits based on years of service and latestcompensation. The plan provides for a lump sum benefit payment upon retirement.

The funds are administered by a trustee bank. Subject to the specific instructions provided by theCompany in writing, the Company directs the trustee bank to hold, invest and reinvest the funds, andkeep the same invested, in its sole discretion, without distinction between principal and income, butnot limited to, certain government securities and bonds, quoted equity securities, and short-term fixedincome securities.

Under the existing regulatory framework, Republic Act No. 7641, Retirement Pay Law, requires aprovision for retirement pay to qualified private sector employees in the absence of any retirementplan in the entity, provided however that the employee’s retirement benefits under any collectivebargaining and other agreements shall not be less than those provided under the law. The law doesnot require minimum funding of the plan.

The following tables summarize the components of “Pension expense”, included under “Cost of salesand services” and “General and administrative expenses” accounts in the parent company statementsof comprehensive income and “Pension liability” account in the parent company statement offinancial position, which are based on the latest actuarial valuation.

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Changes in pension liability of the Company in 2017 are as follows:


BenefitPlan


PensionLiability

At January 1, 2017 P=2,232,950,397 P=1,107,375,399 P=1,125,574,998Pension expense (see Notes 21 and 22):

Current service cost 166,884,948 – 166,884,948Net interest 115,946,440 57,583,521 58,362,919Transferred out (16,832,224) – (16,832,224)Transferred in 5,211,996 – 5,211,996

271,211,160 57,583,521 213,627,639Benefits paid (59,080,953) (59,080,953) –Remeasurements in other comprehensive

income:Actuarial changes due to experience adjustment 60,075,006 – 60,075,006Actuarial changes arising from changes in financial assumptions (140,987,967) – (140,987,967)Return on plan assets (excluding amount included in net interest) – 42,525,227 (42,525,227)

(80,912,961) 42,525,227 (123,438,188)Contributions – 190,000,000 (190,000,000)At December 31, 2017 P=2,364,167,643 P=1,338,403,194 P=1,025,764,449

Changes in pension liability of the Company in 2016 are as follows:


BenefitPlan


PensionLiability

At January 1, 2016 P=1,987,633,605 P=992,178,937 P=995,454,668Pension expense (see Notes 21 and 22):

Current service cost 151,022,643 – 151,022,643Net interest 99,381,680 49,608,947 49,772,733Transferred in 12,085,007 – 12,085,007Transferred out (6,705,927) – (6,705,927)

255,783,403 49,608,947 206,174,456Benefits paid (60,236,345) (60,236,345) –Remeasurements in other comprehensive

income:Actuarial changes due to experience adjustment 89,249,269 – 89,249,269Actuarial changes arising from changes in financial assumptions (39,479,535) – (39,479,535)Return on plan assets (excluding amount included in net interest) – (42,176,140) 42,176,140

49,769,734 (42,176,140) 91,945,874– 168,000,000 (168,000,000)

At December 31, 2016 P=2,232,950,397 P=1,107,375,399 P=1,125,574,998

The actual return on plan assets amounted to P=100.1 million and P=7.4 million in 2017 and 2016,respectively.

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The following table presents the estimated fair values of the plan assets:

2017 2016Cash and cash equivalents:

Short-term deposits P=316,628,000 P=181,370,000Cash in banks – 5,171,281

Investment in debt securities 50,347,932 156,838,821Investments in Philippine government securities:

Fixed-rate treasury notes 482,292,765 439,313,607Retail treasury bonds 195,831,722 137,830,513

Interest and dividends receivable 12,311,986 12,730,688Investments in quoted equity securities:

Holding firms 136,932,692 128,614,200Banks 79,638,920 42,323,000Property 78,727,340 47,214,840Food and beverage 45,331,000 28,686,350Media 22,930,000 13,327,500Electricity, energy, power & water 15,229,300 21,710,900Retail 10,675,800 –Transportation services 8,967,500 4,539,750Construction and mining 6,309,700 –

Others – 42,222Fund liabilities (see Note 28) (123,751,463) (112,338,273)

P=1,338,403,194 P=1,107,375,399

The plan’s assets and investments consist of the following:

ƒ Investments in debt securities consist of long-term corporate bonds in the property sector, whichbear interest ranging from 5.17%-5.35% maturing from March to May 2024;

ƒ Investments in government securities which consist of retail treasury bonds that bear interestranging from 3.25%-7.38% and have maturities from April 2020 to October 2037 andfixed-rate treasury notes that bear interest ranging from 2.13%-8.5% and have maturities fromMay 2018 to August 2037;

ƒ Investments in shares of stocks listed in the Philippine Stock Exchange; and,

ƒ Other financial assets held by the retirement plan are primarily accrued interest income on cashand cash equivalents, debt instruments and other securities.

The principal assumptions used to determine pension liability are as follows:

December 31,2017

December 31,2016

Discount rate 5.90% 5.20%Salary increase rate 6.00% 6.00%

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The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation as at December 31, 2017 and 2016, assumingall other assumptions were held constant:

Increase (decrease) in the present value of defined benefit obligation based on changes in principalassumptions are as follows:

Increase(Decrease)

in Basis Points 2017 2016Discount rate 50 (P=92,072,131) (P=93,573,131)

(50) 99,171,574 101,045,147Salary increase rate 50 98,591,661 99,763,644

(50) (92,408,556) (93,316,962)

The Company does not perform any asset-liability matching study. The overall investment policyand strategy of the retirement plan is based on the client suitability assessment, as provided by itstrustee bank, in compliance with the Bangko Sentral ng Pilipinas requirements. It does, however,ensure that there will be sufficient assets to pay the retirement benefits as they fall due whileattempting to mitigate the various risks of the plan.

The Company expects to contribute P=388.8 million to the retirement fund in 2018.

The average duration of the defined benefit obligation is 10 years as at December 31, 2017 and 2016.

Shown below is the maturity analysis of the undiscounted benefit payments:

2017 2016Less than 1 year P=594,799,765 P=396,493,370More than 1 year to 5 years 644,006,284 728,067,694More than 5 years to 10 years 1,521,166,552 1,281,513,376More than 10 years to 15 years 1,529,249,784 1,426,632,215More than 15 years to 20 years 1,455,919,417 1,404,408,670More than 20 years 4,106,279,313 3,689,190,279

27. Stock Options Plan

On January 10, 2017 and December 17, 2002, the SEC approved the exemption requested by theCompany on the registration requirements of 31,500,000 and 101,500,000 options, respectively,underlying the Company’s common shares to be issued pursuant to the Company’s SeniorManagement Stock Option and Incentive Plan (the Plan). The Plan covers selected key members ofmanagement of the Company, certain subsidiaries and designated affiliated entities.

The Plan is divided into two programs, namely, the Management Stock Option Program (MSOP) andthe Executive Long-term Incentive Program (ELTIP). The MSOP provides a yearly stock optiongrant program based on company and individual performance while the ELTIP provides stockownership as an incentive to reinforce entrepreneurial and long-term ownership behavior ofparticipants.

MSOP. The MSOP is a yearly stock option grant program open to members of the senior corporatemanagement committee of the Company and members of the management committee, key talents anddesignated consultants of some of the business units.

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Each MSOP cycle refers to the period commencing on the MSOP grant date and ending on the lastday of the MSOP exercise period. Vesting is conditional on the employment of the employee-participants in the Company within the vesting period. The options will vest at the rate of one-thirdof the total options granted on each anniversary of the MSOP grant date until the third anniversary.

The exercise price of the stock options is determined by the Company with reference to the prevailingmarket prices over the three months immediately preceding the date of grant for the 1st to the 7thMSOP cycle. Starting with the 8th MSOP cycle, the exercise price of the option is determined by theCompany with reference to the closing market price as at date of grant.

The options will vest at the rate of one-third of the total options granted from the start of the grantdate on each anniversary date which will start after a year from the grant date. For instance, under the1st MSOP cycle, the Compensation Committee of the Jollibee Group granted 2,385,000 options toeligible participants on July 1, 2004. One-third of the options granted, or 795,000 options, vested andmay be exercised starting July 1, 2005. The exercise period for the 1st MSOP cycle was untilJune 30, 2012. From July 1, 2005 to September 9, 2016, the Compensation Committee granted seriesof MSOP grants under the 2nd to 13th MSOP cycle to eligible participants. Under the most recentgrant (July 3, 2017), the 14th MSOP cycle, the Compensation Committee granted 4,198,500 options.These options are similar to the 1st MSOP cycle.

The stock options under MSOP expire eight years after grant date. The 1st, 2nd, 3rd, 4th, 5th and 6thMSOP cycles expired on June 30, 2012, 2013, 2014, 2015, 2016 and 2017, respectively.

The Company does not pay cash as a form of settlement.

The movements in the number of stock options outstanding under MSOP and related weightedaverage exercise prices (WAEP) for the years ended December 31, 2017 and 2016 follow:

2017 2016Number

of options WAEPNumber

of options WAEPTotal options granted as at beginning of year 42,986,294 P=92.47 40,120,794 P=82.22Options granted during the year 4,198,500 206.20 2,865,500 236.00Total options granted as at end of year 47,184,794 P=102.59 42,986,294 P=92.47

Outstanding at beginning of year 15,256,198 P=159.46 14,868,437 P=133.32Options granted during the year 4,198,500 206.20 2,865,500 236.00Options exercised during the year (2,672,040) 110.35 (2,259,125) 87.40Options forfeited during the year (2,108) 213.28 (218,614) 129.31Outstanding at end of year 16,780,550 P=176.63 15,256,198 P=159.46

Exercisable at end of year 9,688,683 P=151.94 9,141,965 P=128.20

The weighted average share price was P=222.86 and P=227.53 in 2017 and 2016, respectively. Theweighted average remaining contractual life for the stock options outstanding as atDecember 31, 2017 and 2016 is 5.21 years and 5.17 years, respectively.

The fair value of stock options granted in 2017 and 2016 is P=29.88 and P=31.16, respectively. The fairvalue of the share options as at grant date is estimated using the Black-Scholes Option Pricing Model,taking into account, the terms and conditions upon which the options were granted. The option styleused for this plan is the American style because this option plan allows exercise before the expirydate.

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The inputs to the model used for the options granted for each MSOP cycle are as follows:

MSOP Cycle Year of GrantDividend


Risk-freeInterest

Rate

Expected Life of

the Option

Stock Priceon Grant

DateExercise

Price1st 2004 1.72% 36.91% 6.20% 5-7 years P=24.00 P=20.002nd 2005 1.72% 36.91% 6.20% 5-7 years 29.00 27.503rd 2006 1.72% 36.91% 6.20% 5-7 years 35.00 32.324th 2007 1.70% 28.06% 6.41% 3-4 years 52.50 50.775th 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.856th 2009 2.00% 30.37% 5.28% 3-4 years 48.00 45.457th 2010 2.00% 29.72% 5.25% 3-4 years 70.00 57.778th 2011 2.00% 34.53% 4.18% 3-4 years 89.90 89.909th 2012 2.00% 28.72% 3.50% 3-4 years 107.90 107.9010th 2013 2.00% 29.38% 2.68% 3-4 years 145.00 145.0011th 2014 2.00% 24.87% 2.64% 3-4 years 179.80 179.8012th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.0013th 2016 2.00% 17.76% 2.63% 3-4 years 236.00 236.0014th 2017 2.00% 16.70% 3.92% 3-4 years 206.20 206.20

ELTIP. The ELTIP entitlement is given to members of the management committee.

Each ELTIP cycle refers to the period commencing on the ELTIP entitlement date and ending on thelast day of the ELTIP exercise period. Actual grant and vesting is conditional upon achievement ofthe Jollibee Group’s medium to long-term goals and individual targets in a given period, and theemployment of the employee-participants in the Company within the vesting period. If the goals areachieved, the options will be granted. Starting with the 3rd ELTIP cycle, a percentage of the optionsto be granted are based on the percentage of growth in annual earnings per share such that 100%,50% or 25% of the options are granted when percentage of growth in annual earnings per share is12% and above, 10% to less than 12% or 8% to less than 10%, respectively. For the 4th ELTIP cycle,the percentage of the options to be granted and the target percentage of growth in annual earnings pershare have been revised such that 150%, 100% or 50% of the options granted when percentage ofgrowth in annual earnings per share is 15% and above, 12% to less than 15% or 10% to less than12%, respectively.

The exercise price of the stock options for the 1st and 2nd ELTIP cycles is determined by theCompany with reference to the prevailing market prices over the three months immediately precedingthe date of entitlement. Starting with the 3rd ELTIP cycle, the exercise price of the option isdetermined by the Company with reference to the closing market price as at date of the entitlement.

The options will vest at the rate of one-third of the total options granted on each anniversary datewhich will start after the goals were achieved. Under the 1st ELTIP cycle, the CompensationCommittee of the Jollibee Group gave an entitlement of 22,750,000 options to eligible participants.One-third of the options granted, or 7,583,333 options, vested and may be exercised starting July 1,2007 until June 30, 2012. On July 1, 2008, October 19, 2012 and August 25, 2015, entitlement to20,399,999, 24,350,000 and 11,470,000 options were given to eligible participants under the 2nd, 3rdand 4th ELTIP cycles, respectively.

The stock options granted under the 1st and 2nd ELTIP cycles expired on June 30, 2012 and April 30,2017, respectively, while the stock options granted under the 3rd and 4th ELTIP cycles will expire onApril 30, 2020 and 2023, respectively.

The Company does not pay cash as a form of settlement.

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The movements in the number of stock options outstanding under ELTIP and related WAEP for theyears ended December 31, 2017 and 2016 follow:

2017 2016Number

of options WAEPNumber

of options WAEPTotal options granted as at beginning and

end of year 78,969,999 P=74.58 78,969,999 P=74.58

Outstanding at beginning of year 35,118,896 P=122.65 38,344,999 P=117.74Options exercised during the year (7,682,230) 73.69 (2,892,770) 59.59Options forfeited during the year − − (333,333) 105.00Outstanding at end of year 27,436,666 P=135.65 35,118,896 P=122.65

Exercisable at end of year 15,966,666 P=105.00 15,615,420 P=89.60

The weighted average remaining contractual life for the stock options outstanding as atDecember 31, 2017 and 2016 is 3.59 years and 4.00 years, respectively.

The fair value of stock options granted is P=26.13 in 2015. There were no additional stock optiongrants under ELTIP in 2017 and 2016. The fair value of share options as at grant date is estimatedusing the Black-Scholes Option Pricing Model, taking into account, the terms and conditions uponwhich the options were granted. The option style used for this plan is the American style because thisoption plan allows exercise before the maturity date.

The inputs to the model used for the options granted for each ELTIP cycle are as follows:

ELTIP cycleYear

of GrantDividend


Risk-freeInterest Rate

Expected Life of

the Option

Stock Priceon Grant

DateExercise

Price1st 2004 1.72% 36.91% 6.20% 5 years P=24.00 P=20.002nd 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.853rd 2012 2.00% 28.74% 3.60% 3-4 years 105.00 105.004th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.00

The cost of the stock options charged to operations under “General and administrative expenses”account for both MSOP and ELTIP amounted to P=209.7 million and P=221.7 million in 2017 and2016, respectively (see Note 22). The cost of share options for employees of the subsidiariesamounted to P=17.8 million and P=19.6 million in 2017 and 2016, respectively, and was recognized asadditional investments in subsidiaries (see Note 10).

28. Related Party Transactions

Enterprises and individuals that directly, or indirectly through one or more intermediaries, control orare controlled by, or under common control with the Company, including holding companies,subsidiaries and fellow subsidiaries are related parties of the Company. Individuals owning, directlyor indirectly, an interest in the voting power of the Company that give them significant influence overthe enterprise; key management personnel, including directors and officers of the Company; and closemembers of the family of these individuals and companies associated with these individuals alsoconstitute related parties.

In the normal course of business, the Company engages in transactions with its subsidiaries and otherrelated parties.

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The following table provides the summary of transactions that have been entered into with related parties as at and for the years ended December 31, 2017 and 2016:

Volume of TransactionsOutstanding

Receivable (Payable)Category 2017 2016 2017 2016 Terms ConditionsSubsidiariesFresh N’ Famous

Sales P=95,191,557 P=88,171,068 P=12,184,871 P=24,475,402 On demand; Noninterest-bearing Unsecured; No impairmentService fee revenue 969,437,698 202,755,605 408,637,474 20,198,239 On demand; Noninterest-bearing Unsecured; No impairmentRent revenue 29,674,230 33,775,798 383,091 25,060 On demand; Noninterest-bearing Unsecured; No impairmentManagement fee revenue 432,186,807 105,467,524 378,342,241 − On demand; Noninterest-bearing Unsecured; No impairmentDividend income 849,000,000 1,000,000,000 − − − −Purchases 23,101,909 56,660,355 − (386,592) On demand; Noninterest-bearing UnsecuredManagement fee expense 876 3,091,318 − − − −Interest expense 10,793,175 25,744,422 (2,664,329) (2,347,699) Monthly; Fixed and floating interest rates UnsecuredDue to FNF − 200,000,000 (300,000,000) (949,000,000) 3-month to 5-year terms; Fixed and

floating interest ratesUnsecured

Pass-on Charges - Receivables − − − 13,938,811 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Payables − − (662,545) − On demand; Noninterest-bearing Unsecured

ZenithSales 11,876,441 1,103,678 − − − −Service fee revenue 250,482,893 53,156,250 80,588,524 − On demand; Noninterest-bearing Unsecured; No impairmentRent revenue 21,114,381 17,309,570 − − − −Rent revenue - Deferred 27,416,243 − 33,721,718 6,305,475 On demand; Noninterest-bearing Unsecured; No impairmentManagement fee revenue 183,775,308 34,346,712 168,010,246 − On demand; Noninterest-bearing Unsecured; No impairmentInterest income 2,802,740 − 2,242,192 − On demand; Noninterest-bearing Unsecured; No impairmentDividend income 480,000,000 700,000,000 − − − −Purchases 8,953,475,187 7,659,412,216 (560,281,976) (215,560,304) On demand; Noninterest-bearing UnsecuredService fee expense 30,827,916 30,827,916 − − − −Interest expense − 2,761,644 − − − −Due from ZFC 500,000,000 − 500,000,000 − 6 month term; Fixed interest rate Unsecured; No impairmentPass-on Charges - Receivables − − 46,607,544 4,220,440 On demand; Noninterest-bearing Unsecured; No impairment

RRBISales 10,069,436 9,421,203 624,626 547,199 On demand; Noninterest-bearing Unsecured; No impairmentService fee revenue 360,463,720 64,705,909 192,860,018 1,068,234 On demand; Noninterest-bearing Unsecured; No impairmentRent revenue 19,108,075 17,312,712 − − − −Management fee revenue 140,332,190 46,571,060 109,161,584 − On demand; Noninterest-bearing Unsecured; No impairmentPurchases 60,008,691 41,220,553 (9,166,697) (2,769,858) On demand; Noninterest-bearing UnsecuredManagement fee expense − 1,563,552 − (269,168) On demand; Noninterest-bearing UnsecuredPass-on Charges - Receivables − − − 6,100,431 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Payables − − (2,895,654) − On demand; Noninterest-bearing Unsecured

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Receivable (Payable)Category 2017 2016 2017 2016 Terms ConditionsRRBH

Service fee revenue P=25,487 P=− P=24,696 P=− On demand; Noninterest-bearing Unsecured; No impairmentRent revenue − 8,508 − − − −Management fee revenue 333,258 − 326,600 − On demand; Noninterest-bearing Unsecured; No impairment

Dividend income 100,000,000 200,000,000 − − − −Interest expense − 90,411 − − − −Pass-on Charges - Payables 215,578 − (215,578) − On demand; Noninterest-bearing Unsecured

Grandworth Service fee revenue 89,537 − − − − −

Rent revenue 6,444 8,026 − − − −Management fee revenue 1,170,743 − − − − −Dividend income 35,000,000 46,300,000 − − − −Rent xpense 38,550,099 43,382,270 (2,982,783) (2,551,065) On demand; Noninterest-bearing UnsecuredOperating lease payable − − (12,719,871) (11,800,836) On demand; Noninterest-bearing UnsecuredPass-on Charges - Receivables − − 1,805,010 − On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Payables − − (5,363,546) − On demand; Noninterest-bearing Unsecured

FreemontSales 5,443,912,028 4,896,311,728 1,007,184,748 660,781,370 On demand; Noninterest-bearing Unsecured; No impairmentService fee revenue 173,128,560 53,891,718 − − − −Rent revenue 72,380 (122,564) − − − −Management fee revenue 534,557,049 318,527,974 377,115,900 34,427,495 On demand; Noninterest-bearing Unsecured; No impairmentRoyalty fee income 1,093,323,777 955,680,069 − − − −Advertising 364,441,259 318,560,023 2,643,229 2,317,082 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Receivables − − − 129,885,372 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Payables − − (6,079,470) (227,311) On demand; Noninterest-bearing Unsecured

JWSSales − 45,674 − − − −Rent revenue 140,341,951 146,760,622 73,828,766 4,775,607 On demand; Noninterest-bearing Unsecured; No impairmentRent revenue - Deferred (27,187,327) 12,590,822 (22,411,720) − On demand; Noninterest-bearing Unsecured; No impairmentService fee revenue 66,874,292 919,472 74,108,205 − On demand; Noninterest-bearing Unsecured; No impairmentService fee and freight expense 2,614,134,674 2,250,767,825 (280,412,074) (315,205,209) On demand; Noninterest-bearing UnsecuredManagement fee expense 82,315,348 83,455,128 (4,386,174) (3,531,400) On demand; Noninterest-bearing UnsecuredInterest expense 4,794,792 4,734,375 (549,733) (470,167) Monthly; Floating interest rate UnsecuredDue to JWS − − (150,000,000) (150,000,000) 5-year term; Floating interest rate UnsecuredPass-on Charges - Receivables − − 6,990,989 27,963,381 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Payables − − (2,437,934) − On demand; Noninterest-bearing Unsecured

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Receivable (Payable)Category 2017 2016 2017 2016 Terms ConditionsMang Inasal

Sales P=40,385,514 P=46,995,081 P=545,364 P=7,972,642 On demand; Noninterest-bearing Unsecured; No impairmentService fee revenue 359,428,651 43,908,603 157,246,594 2,856,200 On demand; Noninterest-bearing Unsecured; No impairmentRent revenue 4,481,523 4,255,061 − − − −Management fee revenue 213,324,693 60,964,255 174,575,704 − On demand; Noninterest-bearing Unsecured; No impairmentDividend income 700,000,000 525,000,000 − − − −Service fee expense − 3,823 − − − −Interest expense 11,783,562 2,432,877 (6,771,449) − On demand; Noninterest-bearing UnsecuredDue to Mang Inasal 600,000,000 600,000,000 (600,000,000) (200,000,000) 3-month term; Interest-bearing UnsecuredPass-on Charges - Receivables − − − 915,999 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Payables − − − − On demand; Noninterest-bearing Unsecured

PERFISales 669,974 590,203 17,472,532 17,096,486 On demand; Noninterest-bearing Unsecured; No impairmentService fee revenue 36,840,837 13,714,079 34,752,740 16,383,532 On demand; Noninterest-bearing Unsecured; No impairmentRent revenue 4,752,439 2,734,593 179,440 2,643,984 On demand; Noninterest-bearing Unsecured; No impairmentManagement fee revenue 64,631,921 19,463,533 32,468,821 45,836,254 On demand; Noninterest-bearing Unsecured; No impairmentInterest income 44,658,630 33,843,836 25,910,575 − On demand; Noninterest-bearing Unsecured; No impairmentDue from BK 510,000,000 300,000,000 1,418,000,000 908,000,000 3-month to 5-year terms;

Interest-bearingUnsecured; No impairment

Pass-on Charges - Receivables − − 102,298,198 21,918,563 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Payables − − (454,897) − On demand; Noninterest-bearing Unsecured

PERF MOA Pasay, Inc.Service fee revenue 38,302 − 395 − On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Receivables − − 35,284 − On demand; Noninterest-bearing Unsecured; No impairment

PERF Trinoma, Inc.Service fee revenue 77,302 − 622 − On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Receivables − − 9,892 − On demand; Noninterest-bearing Unsecured; No impairment

AdgraphixMarketing collaterals 87,722,836 82,728,961 (35,836,129) (26,408,474) On demand; Noninterest-bearing Unsecured

HFCSales 239,053,599 174,887,775 804,307,197 565,253,598 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Receivables − − 77,468,329 62,772,961 On demand; Noninterest-bearing Unsecured; No impairment

JWPLRoyalty fee income 116,839,545 85,034,565 − − − −Due from JWPL − − 444,564,195 334,075,460 On demand; Noninterest-bearing Unsecured; No impairment

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Receivable (Payable)Category 2017 2016 2017 2016 Terms ConditionsJollibee Vietnam Corporation Ltd.

Sales P=32,151,476 P=23,071,355 P=244,623,785 P=184,391,715 On demand; Noninterest-bearing Unsecured; No impairmentService fee revenue 2,336,250 − 2,336,250 − On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Receivables − − 73,148,386 95,097,226 On demand; Noninterest-bearing Unsecured; No impairment

PT Chowking IndonesiaPass-on Charges - Receivables − – 25,610,401 25,610,401 On demand; Noninterest-bearing Unsecured; No impairment

RRBI USAPass-on Charges - Receivables − − 503,578 497,069 On demand; Noninterest-bearing Unsecured; No impairment

TTCSales − 11,348,654 18,496,831 18,496,831 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Receivables − − 1,718,244 1,453,905 On demand; Noninterest-bearing Unsecured; No impairment

Golden Beeworks Pte. Ltd.Sales 17,199,567 23,078,877 13,926,098 34,518,266 On demand; Noninterest-bearing Unsecured; No impairmentService fee revenue 462,969 3,524 − − − −Pass-on Charges - Receivables − − 5,209,033 3,606,547 On demand; Noninterest-bearing Unsecured; No impairment

Hong Zhuang YuanDue to HZY − − (6,234,899) (7,759,610) On demand; Noninterest-bearing UnsecuredPass-on Charges - Receivables − − 1,471,512 2,095,999 On demand; Noninterest-bearing Unsecured; No impairment

Shanghai Yong He KingPass-on Charges - Receivables − − 25,413,718 23,708,099 On demand; Noninterest-bearing Unsecured; No impairment

Beijing Yong He KingPass-on Charges - Receivables − − 3,399,872 4,715,221 On demand; Noninterest-bearing Unsecured; No impairment

Shenzhen Yong He KingPass-on Charges - Receivables − − 2,703,743 3,163,938 On demand; Noninterest-bearing Unsecured; No impairment

Hangzhou YongtongPass-on Charges - Receivables − − 752,839 1,890,641 On demand; Noninterest-bearing Unsecured; No impairment

Hangzhou Yong He KingPass-on Charges - Receivables − − 942,466 1,724,071 On demand; Noninterest-bearing Unsecured; No impairment

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Receivable (Payable)Category 2017 2016 2017 2016 Terms ConditionsWuhan Yong He King

Pass-on Charges - Receivables P=− P=− P=1,373,568 P=2,769,329 On demand; Noninterest-bearing Unsecured; No impairment

JFCCDue to Jollibee China − − (52,408,390) (49,198,941) On demand; Noninterest-bearing UnsecuredPass-on Charges - Receivables − − 43,790,013 45,241,967 On demand; Noninterest-bearing Unsecured; No impairment

San Pin WangPass-on Charges - Receivables − − − 1,437,568 On demand; Noninterest-bearing Unsecured; No impairment

Hong KongPass-on Charges - Receivables − − − 438,951 On demand; Noninterest-bearing Unsecured; No impairment

SBEMACPass-on Charges - Receivables − − 1,499,768 795,730 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges - Payables − − (2,030,209) − On demand; Noninterest-bearing Unsecured

Centenary Ventures Ltd.Pass-on Charges - Receivables − − − 9,689 On demand; Noninterest-bearing Unsecured; No impairment

Beijing Golden Coffee Cup Food and BeverageManagement Co., Ltd.Pass-on Charges - Receivables − − 700,585 576,092 On demand; Noninterest-bearing Unsecured; No impairment

SuperFoods GroupPass-on Charges - Receivables − − 28,561,918 − On demand; Noninterest-bearing Unsecured; No impairment

Happy Bee Foods Processing (Anhui) Co. Ltd.Pass-on Charges - Receivables − − 1,518,544 1,359,248 On demand; Noninterest-bearing Unsecured; No impairment

Goldstar Food Trade and ServicesPass-on Charges - Receivables − − 2,458,465 − On demand; Noninterest-bearing Unsecured; No impairment

HFC-CanadaRoyalty fee income 22,117,819 − 22,117,819 − On demand; Noninterest-bearing Unsecured; No impairment

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Receivable (Payable)Category 2017 2016 2017 2016 Terms ConditionsAffiliate -Jollibee Group Foundation, Inc.

Sales P=594,804 P=527,622 P=− P=− − −Service fee revenue 417,197 54,514 − 37,666 On demand; Noninterest-bearing Unsecured; No impairmentRent Revenue 427,422 532,253 − − − −Donations 90,802,629 78,695,001 − − − −Pass-on Charges – Receivables − − 2,972,363 1,086,240 On demand; Noninterest-bearing Unsecured; No impairmentPass-on Charges – Payables − − (1,238,595) − On demand; Noninterest-bearing Unsecured

Total related party transactions:Sales P=5,891,104,396 P=5,275,552,918Service fee revenue 2,220,103,695 433,109,674Rent revenue 219,978,845 222,574,579Rent revenue – deferred 228,916 12,590,822Management fee revenue (see Note 24) 1,570,311,969 585,341,058Royalty fee income (see Note 20) 1,232,281,141 1,040,714,634Interest income (see Note 23) 47,461,370 33,843,836Advertising 452,164,095 401,288,984Dividend income (see Note 24) 2,164,000,000 2,471,300,000Purchases (see Note 21) 9,036,585,787 7,757,293,124Service fee and freight expense (see Notes 21 and 22) 2,644,962,590 2,281,599,564Interest expense (see Note 23) 27,371,529 35,763,729Management fee expense 82,316,224 88,109,998Rent expense (see Notes 21, 22 and 29) 38,550,099 43,382,270Donations (see Note 22) 90,802,629 78,695,001Advances to related parties 1,010,000,000 300,000,000Due to related parties 600,000,000 800,000,000

Total related party outstanding balances: Trade receivables from related parties (see Note 6) P=4,896,192,040 P=2,124,321,144 Advances to related parties 2,362,564,195 1,242,075,460

Operating lease receivables (see Note 29) 33,721,718 11,081,082 Trade payables to related parties (see Note 15) (924,429,772) (569,727,247) Due to related parties (1,108,643,289) (1,355,958,551)

Operating lease payables (see Note 29) (35,131,591) (11,800,836)

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Common Transactions with Related PartiesThe Company sells and purchases food items to/from related parties at market prices. Purchaseditems warehoused with related parties are charged for logistics and warehousing costs. Due fromrelated parties are short-term advances made to related parties which are expected to be paid in thesubsequent year. Pass-on charges pertain to advances made by a related party for another. Theseinclude payments for various expenditures incurred on behalf of another party.

Fresh N’ Famous

a. Fresh N’ Famous avails the services of the Company for the plan, design and installation ofequipment in Fresh N’ Famous’ stores.

b. Fresh N’ Famous leases its office space and some store locations from the Company.

c. Fresh N’ Famous pays management fees to the Company for services rendered under an existingManagement Services Agreement, which is renewable annually.

d. On April 10, 2017, April 17, 2017 and November 10, 2017, the Company received cashdividends from Fresh N’ Famous declared on March 31, 2017, April 5, 2017 and October 26,2017, respectively, amounting to P=200.0 million, P=549.0 million and P=100.0 million or P=0.67,P=1.83 and P=0.33 dividends per share, respectively.

On May 6, 2016 and June 6, 2016, the Company received cash dividends from Fresh N’ Famousdeclared on April 6, 2016 payable in two (2) tranches, amounting to P=250.0 million each or P=1.67dividends per share.

On September 29, 2016 and December 9, 2016, the Company received cash dividends from FreshN’ Famous declared on September 29, 2016 and December 2, 2016, respectively, amounting toP=200.0 million and P=300.0 million or P=0.67 and P=1.00 dividends per share, respectively.

e. On April 16, 2012, the Company received advances from Fresh N’ Famous amounting toP=749.0 million. The advances are payable in full on April 16, 2017. The interest rate on theadvances is based on money market placement rates plus a spread of 1%, payable on a monthlybasis. The P=449.0 million of the loan was paid on April 17, 2017 and the P=300.0 millionadvances was extended and payable in full on April 16, 2018.

f. On November 3, 2016, the Company received a short-term cash advances from Fresh N’ Famousamounting to 200.0 million, with fixed interest of 2%. The advances and interest were settled infull on February 2, 2017.

Zenith

a. Zenith pays service fees to the Company for procurement services rendered by the Company’sPurchasing Department.

b. The Company leases out to Zenith the land where the latter’s manufacturing plant was built. In2014, the lease term was extended to end on December 31, 2023. On January 1, 2015, the termsof the agreement were amended to include an escalation clause. Zenith may pre-terminate thelease provided that an advance notice is provided to the Company within the prescribed period asindicated in the agreement.

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The future minimum lease receivables on the lease as at December 31, 2017 and 2016 are asfollows:

2017 2016Within one year P=30,387,656 P=17,364,375After one year but not more than five years 137,523,327 78,584,758More than five years 38,783,205 45,431,755

P=206,694,188 P=141,380,888

c. Zenith pays management fees to the Company for services rendered under an existingManagement Services Agreement, which is renewable annually.

d. On September 29, 2017, the Company provided a six-month loan to Zenith amounting toP=500.0 million. The interest income recognized amounted to P=2.8 million.

e. On May 3, 2017, the Company received cash dividends from Zenith declared on April 26, 2017amounting to P=480.0 million or P=111.63 dividends per share.

On September 29, 2016 and December 9, 2016, the Company received cash dividends fromZenith, declared on September 29, 2016 and December 2, 2016, amounting to P=600.0 million andP=100.00 million or P=139.53 and P=23.26 dividends per share, respectively.

f. The Company pays service fees to Zenith for supply chain and customer and order managementservices, including warehousing and logistics services, under an existing Service Contract.

g. In 2016, the Company received advances from Zenith amounting to P=600.0 million which wasalso paid during the year. The interest expense recognized amounted to P=2.8 million.

RRBI

a. The Company’s Service Engineering Division renders services to Red Ribbon for the repairs andmaintenance of Red Ribbon’s store equipment and facilities.

b. Red Ribbon leases its office space from the Company on an annual basis.

c. Red Ribbon pays management fees to the Company for services rendered under an existingManagement Services Agreement, which is renewable annually.

RRBH

a. RRB Holdings leases its office space from the Company.

b. RRB Holdings avails the services of the Company for business support services.

c. RRB Holdings pays management fees to the Company for services rendered under an existingManagement Services Agreement, which is renewable annually.

d. On November 10, 2017, the Company received cash dividends from RRB Holdings declared onOctober 26, 2017 amounting to P=100.0 million or P=63.17 dividends per share.

On May 10, 2016 and December 16 2016, the Company received cash dividends from RRBHoldings declared on April 29, 2016 and December 2, 2016 amounting to P=150.0 million andP=50.0 million or P=94.76 and P=31.59 dividends per share, respectively.

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e. In 2016, the Company received advances from RRBH amounting to P=150.0 million inApril 29, 2016 which was also paid in May 10, 2016. The interest expense recognized amountedto P=90,411.

Grandworth

a. Grandworth avails the services of the Company for business support services.

b. Grandworth leases its office space from the Company on an annual basis.

c. Grandworth pays management fees to the Company for services rendered under an existingManagement Services Agreement, which is renewable annually.

d. On April 10, 2017, the Company received cash dividends from Grandworth declared onMarch 14, 2017 amounting to P=35.0 million or P=17.50 dividends per share.

On April 11, 2016, the Company received cash dividends from Grandworth declared onMarch 10, 2016 amounting to P=46.3 million or P=23.15 dividends per share.

e. The Company is a lessee under various operating lease agreements with Grandworth. These leaseagreements have terms ranging from 5 to 20 years, which mostly contain renewal options. Thelease agreements include escalation clauses on an annual basis based on prevailing marketconditions.

The future minimum lease payments under the lease arrangements as at December 31, 2017 and2016 are as follows:


P=127,010,791 P=74,202,132

Freemont

a. Freemont operates “Jollibee” stores in certain parts of Luzon, Visayas and Mindanao under aRoyalty and Service Agreement with the Company. As a franchisee, the Company’s sales offood supplies, processed inventories and packaging, store and other supplies to Freemont areaccounted for as part of the Company’s “Net sales” account in the parent company statement ofcomprehensive income. Freemont also pays royalties and advertising fees to the Company basedon certain percentages of Freemont’s net sales as provided in the Royalty and Service Agreement.These transactions are made on similar terms with transactions to unrelated franchisees.

b. Freemont pays service fees to the Company for various services, including repairs andmaintenance services, rendered by the Company’s personnel.

c. Freemont leases office spaces in properties owned by the Company.

d. The Company has a Management Contract (the Contract) with Freemont for the former toprovide managerial services on all aspects of the operations of Freemont’s stores. Managementfees are based on a percentage of Freemont’s net sales as provided for in the Contract.

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JWS

a. JWS leases its office space from the Company on an annual basis.

b. On March 20, 2012, the Company entered into a sub-lease agreement with JWS for the use of theCompany’s leased land and building for a period of five years beginning May 1, 2012 untilApril 30, 2017. In 2017, the sub-lease agreement was amended to reduce the monthly rent andextend the lease term to September 30, 2018. The land and building are used by JWS for itslogistics services. The Company received security deposit amounting to P=29.7 million, whichwill be refunded at the end of the lease term.

The future minimum lease receivables under the lease arrangement as at December 31, 2017 and2016 are as follows:

2017 2016Within one year P=38,502,396 P=36,456,000

c. JWS pays management fees to the Company for services rendered under an existing ManagementServices Agreement, which is renewable annually.

d. The Company has existing one-year contracts with JWS for accounting and human resourceservices, and logistics services relating to inbound and outbound logistics, warehousing, scrapdisposal and other inventory handling services. The contracts are renewable and with service feesdetermined annually.

e. On April 16, 2012, the Company received advances from JWS amounting to P=150.0 million. Theadvances are payable in full on April 16, 2017. The interest rate on the advances is based onprevailing money market placement rates plus spread of 1%, payable on a monthly basis. TheP=150.0 million advances was extended and payable in full on April 17, 2022.

Mang Inasal

a. Mang Inasal avails the services of the Company for the plan, design and installation of equipmentfor Mang Inasal stores.

b. Mang Inasal leases its office space and warehouse from the Company on an annual basis.

c. Mang Inasal pays management fees to the Company for services rendered under an existingManagement Services Agreement, which is renewable annually.

d. On March 24, 2017 and November 10, 2017, the Company received cash dividends declared onMarch 24, 2017 and October 30, 2017, respectively, amounting to P=200.0 million andP=500.0 million or P=80 and P=200 dividends per share, respectively.

On August 17, 2016 and December 8, 2016, the Company received cash dividends amounting toP=400.0 million and P=125.0 million declared on August 8, 2016 and December 2, 2016,respectively.

e. On May 3, 2017, the Company received a one-year cash advances from Mang Inasal amountingto P=300.0 million, with fixed interest rate of 1.5% and payable in full on May 3, 2018.

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On January 31, 2017, the Company received short-term cash advances from Mang Inasalamounting to 300.0 million, with fixed interest rate of 2%. The advances and interest weresettled in full on January 31, 2018.

On November 3, 2016, the Company received short-term cash advances from Mang Inasalamounting to P=200.0 million, with fixed interest rate of 2%. The advances and interest weresettled in full on February 2, 2017

On May 5, 2016, the Company received short-term cash advances from Mang Inasal amountingto P=400.0 million, with fixed interest rate of 2%. The advances and interest were settled in full onJuly 29, 2016.

PERFI

a. The Company’s Service Engineering Division renders services to PERFI for the repairs andmaintenance of PERFI’s store equipment and facilities.

b. PERFI leases its office space and pays rental fees to the Company for the use of meeting roomsand parking spaces.

c. PERFI pays management fees to the Company for services rendered under an existingManagement Services Agreement, which is renewable annually.

d. In 2017, the Company entered into three (3) loan agreements with PERFI. The Company hasextended the first loan in the principal amount of P=130.0 million on April 17, 2017, the secondloan in the principal amount of P=130.0 million on July 14, 2017 and the third loan in the principalamount of P=250.0 million on October 19, 2017. The loans are subject to interest rate of 3%, 1,5%and 2.2%, respectively and are payable on December 17, 2018, July 14, 2018 andApril 19, 2018, respectively.

In 2016, the Company entered into three (3) loan agreements with PERFI, each with a principalamount of P=100.0 million and a stated interest rate of 3% per annum. The Company has extendedits first two P=100.0 million loans on December 15, 2016. The third loan agreement was enteredinto by the Company on December 22, 2016. All loans are payable on March 22, 2017 and wereextended until September 22, 2017. In 2017, the maturity period of the loan agreements wereextended until 2018.

In 2015, the Company extended a five-year loan to PERFI amounting to P=300.0 million for use inthe operations and store expansions of the Burger King business, subject to 5.0% interest rate perannum.

In 2014, the Company entered into four (4) loan agreements with PERFI. The Company hasextended the first loan in the principal amount of P=54.0 million on February 14, 2014, the secondloan in the principal amount of P=54.0 million on May 30, 2014, the third loan in the principalamount of P=100.0 million on September 2, 2014, and the fourth loan in the principal amount ofP=100.0 million on September 26, 2014. All loans are subject to interest at the rate of 5.0% perannum that is to be paid semi-annually. Principal shall be due and paid in lump sum five (5)years after the drawdown date.

JWPLIn 2012, the Company entered into a Royalty Agreement with JWPL. The terms and conditions aresimilar in nature with those discussed in Note 20.

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OthersRelated party transactions and balances for other subsidiaries of the Company are similar in naturewith those discussed above.

Guarantees Provided by the Company to its affiliatesOn various dates in 2017, the Company executed a guaranty agreement for the full performance andpayment of the tenant’s obligations under the contract of lease between:

∂ Golden Plate and Cenae S.r.l.∂ HFC and Maui Marketplace Investments Group Inc.∂ HFC and Sweetwater Associates Limited Partnership∂ HFC and Mira Mesa Shopping Center - West LLC

On March 14, 2017 and August 11, 2017, the Company executed a guaranty agreement for the termloan facility amounting to VND68,000 and US$5.0 million, respectively, issued by StandardChartered Bank VN to Highlands Coffee.

In 2016, the Company provided a guarantee on JWPL’s US$30.0 million loan with BPI. In 2016 and2013, the Company provided a guarantee on JWPL’s US$8.0 million loan andUS$40.0 million, respectively, with MBTC.

Terms and Conditions of Transactions with Related PartiesTransactions with related parties are made at market prices and are normally settled in cash. TheCompany did not make any provision for impairment losses on receivables from related parties in2017 and 2016. An assessment is undertaken at each financial year by evaluating the financialposition of the related party and the market where the related party operates.

Compensation of Key Management Personnel of the CompanyThe compensation and benefits to key management personnel of the Company for the years endedDecember 31, 2017 and 2016 are as follows:

2017 2016Short-term employee benefits P=629,743,208 P=561,000,341Stock options expense (see Notes 22 and 27) 209,707,270 221,694,219Employee car plan benefits 22,731,295 23,067,027Pension expense 32,966,061 34,342,521

P=895,147,834 P=840,104,108

Transactions with the Retirement PlanAs at December 31, 2017 and 2016, the retirement plan assets of the Company include 138,500 and175,110 common shares, respectively, investments in the Company with aggregate fair values ofP=35.0 million and P=34.0 million, respectively.

The Company usually advances the pension benefits of its retiring employees which are reimbursablefrom the retirement fund. The Company’s receivable from its retirement fund from these advancesamounted to P=122.5 million and P=111.3 million as at December 31, 2017 and 2016, respectively(see Notes 6 and 26).

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29. Commitments and Contingencies

Operating Lease Commitments - Company as LessorThe Company entered into commercial property leases on its investment properties and subleasedproperties with third party and related party lessees. Noncancellable periods of the leases range from3 to 20 years, mostly containing renewal options. All leases include a clause to enable upwardrevision of the rental charges on an annual basis based on prevailing market conditions.

The difference of rent income recognized under the straight-line method and the rent received inaccordance with the terms of the lease agreements, amounting to P=33.7 million and P=11.1 million asat December 31, 2017 and 2016, respectively, are presented as “Operating lease receivables” in theparent company statement of financial position. Rent income recognized on a straight-line basisamounted to P=232.5 million and P=245.7 million in 2017 and 2016, respectively.

The future minimum rent receivables for the noncancellable periods of the operating leases follow:


P=266,336,790 P=177,836,888

Operating Lease Commitments - Company as LesseeThe Company has various operating lease commitments for QSR outlets and office spaces with thirdparty and related party lessors. The noncancellable periods of the leases range from 3 to 35 years,mostly containing renewal options. Some of the leases contain escalation clauses. The leasecontracts on certain sales outlets provide for the payment of additional rental based on a certainpercentage of sales of the outlets.

The difference of rent expense recognized under the straight-line method and the rent received due inaccordance with the terms of the lease agreements amounting to P=858.0 million and P=766.6 million asat December 31, 2017 and 2016, respectively, are presented as “Operating lease payables” in theparent company statement of financial position. Rent expense recognized on a straight-line basisamounted to P=1,102.2 million and P=1,040.6 million in 2017 and 2016, respectively (see Notes 21 and22). Total variable rent recognized as expense amounted to P=752.8 million and P=643.9 million in2017 and 2016, respectively (see Notes 21 and 22).

The future minimum rental payables for the noncancellable periods of the operating leases follow:

2017 2016Within one year P=798,632,048 P=658,033,853After one year but not more than five years 2,787,015,689 2,637,091,330More than five years 4,733,281,974 4,876,136,126

P=8,318,929,711 P=8,171,261,309

ContingenciesThe Company is involved in litigations, claims and disputes which are normal to its business. Exceptfor those legal claims provided for in Note 16, management believes that the ultimate liability, if any,with respect to these litigations, claims and disputes will not materially affect the financial positionand performance of the Company.

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30. Financial Risk Management Objectives and Policies

The Company is exposed to a variety of financial risks which result from both its operating andfinancing activities. The Company’s risk management policies focus on actively securing theCompany’s short-term to medium-term cash flows by minimizing the exposure to financial markets.

The Company’s principal financial instruments comprise of cash and cash equivalents, receivables,trade payables and other current liabilities (excluding local and other taxes payable, liabilities togovernment agencies and accrual for gift certificates) and long-term debts. The Company also hasother financial assets and liabilities such as advances to related parties, refundable deposits, AFSfinancial assets, due to related parties, operating lease receivables and operating lease payables.

The Company does not engage in trading financial assets for speculative purposes.

The BOD has overall responsibility for the establishment of the risk management policies to identifyand analyze risks faced by the Company. Risk management policies are reviewed regularly to reflectchanges in the Company’s condition with regard to the risks arising from these financial instruments.

The main risks arising from the use of these financial instruments are foreign currency risk, interestrate risk, credit risk and liquidity risk. The Company’s BOD and management review and approvepolicies for managing each of these risks and they are summarized below.

Foreign Currency RiskThe Company has transactional foreign currency exposures. Such exposures arise from cash and cashequivalents and trade receivables denominated in foreign currencies.

The following table shows the Company’s foreign currency-denominated monetary assets and theirpeso equivalents as at December 31:

2017US$ RMB PhP=

Foreign Currency - Denominated Assets:Cash and cash equivalents $248,930 RMB5,583 P=12,471,736Trade receivables 25,183,200 10,707,384 1,339,215,509

25,432,130 10,712,967 1,351,687,245Foreign Currency - Denominated Liabilities (743,326) − (37,114,267)Foreign Currency-Denominated Assets - net $24,688,804 RMB10,712,967 P=1,314,572,978

2016US$ RMB PhP=

Foreign Currency - Denominated Assets:Cash and cash equivalents $447,670 RMB8,078 P=22,315,991Trade receivables 3,706,630 6,755,220 232,661,019

4,154,300 6,763,298 254,977,010Foreign Currency - Denominated Liabilities (831,759) − (41,355,080)Foreign Currency-Denominated Assets - net $3,322,541 RMB6,763,298 P=213,621,930

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The Company recognized in the parent company statement of comprehensive income included under“Other income” account, net foreign exchange gain (loss) amounting to (P=46.3) million andP=66.0 million for the years ended December 31, 2017 and 2016, respectively (see Note 24). Thisresulted from the movements of the Philippine peso against the US dollar and RMB as shown in thefollowing table:

Peso toUS Dollar RMB

December 31, 2017 P=49.93 P=7.64December 31, 2016 49.72 7.16

Foreign Currency Risk Sensitivity Analysis. The following table demonstrates the sensitivity to areasonably possible change in Philippine peso to US dollar and RMB exchange rates, with all othervariables held constant, of the Company’s cash and cash equivalents and trade receivables to theincome before income tax as at December 31, 2017 and 2016 (due to the changes in the fair value ofmonetary assets).

Appreciation(Depreciation) of PhP=

Effect on Income Before Income TaxPhP= to US$

RatePhP= to RMB

Rate(In thousands)

2017 P=1.50 (P=37,033.2) (P=16,069.5)1.00 (24,688.8) (10.713.0)

(1.50) 37,033.2 16,069.5(1.00) 24,688.8 10,713.0

2016 P=1.50 (P=4,983.8) (P=10.144.9)1.00 (3,322.5) (6,763.3)

(1.50) 4,983.8 10,144.9(1.00) 3,322.5 6,763.3

Interest Rate RiskInterest rate risk arises from the possibility that the fair value or future cash flows of a financialinstrument will fluctuate because of changes in market interest rates.

The Company’s exposure to interest rate risk relates primarily to the Company’s long-term advancesfrom subsidiaries, Fresh N’ Famous and JWS, amounting to P=450.0 million and P=1,099.0 million asat December 31, 2017 and 2016, respectively, as discussed in Note 28, with a current portion ofP=300.0 million and P=1,099.0 million as at December 31, 2017 and 2016, respectively, and long-termdebt amounting to P=8,213.0 million and P=3,275.3 million as at December 31, 2017 and 2016, with acurrent portion of P=261.8 million P=139.4 million as at December 31, 2017 and 2016, respectively,which is discussed in Note 17. Floating rate financial instruments are subject to cash flow interestrate risk.

There is minimal exposure on the other sources of the Company’s interest rate risk. These othersources are from the Company’s cash in bank, short-term deposits, refundable deposits andemployees’ car plan receivables.

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Interest Rate Risk Sensitivity Analysis. The following table demonstrates the sensitivity to areasonably possible change in interest rates, with all other variables held constant, of the Company’sincome before income tax.

Increase (Decrease)in Basis Points

Effect on IncomeBefore Income Tax

2017 100 (P=82,129,712)50 (41,064,856)

(100) 82,129,712(50) 41,064,856

2016 100 (P=32,753,076)50 (16,376,538)

(100) 32,753,076(50) 16,376,538

Fixed rate financial liabilities, although subject to fair value interest rate risk, are not included in thesensitivity analysis since changes in interest rate do not impact interest expense recorded. Theassumed movement in basis points for interest rate sensitivity analysis is based on the currentlyobservable market environment.

Credit RiskCredit risk is the risk that a customer or a counterparty fails to fulfill its contractual obligations to theCompany. This includes risk of non-payment by customers, borrowers and issuers, failed settlementof transactions and default on outstanding contracts.

The Company has a strict credit policy. Its credit transactions are with franchisees that have gonethrough rigorous screening before granting them the franchise and with related parties. The creditterms are very short, while deposits and advance payments are also required before rendering theservices or delivering goods, thus, mitigating the possibility of non-collection. In cases of non-collection, defaults of the debtors are not tolerated; the exposure is contained the moment a defaultoccurs and transactions that will increase the exposure of the Company are discontinued.

Other than its transactions with related parties, the Company has no significant concentration of creditrisk with counterparties since it has short credit terms to franchisees. In addition, the Company’sfranchisee profile is such that no single unrelated franchisee accounts for more than 5% of the totalsystem wide sales of the Company.

The aging analysis of financial assets as at December 31, 2017 and 2016 are as follows:

2017Neither Past

Due nor Past Due but not Impaired (Age in Days)Total Impaired 1-30 31-60 61-120 Over 120 Impaired

Loans and ReceivablesCash and cash equivalents* P=3,229,586,169 P=3,229,586,169 P=– P=– P=– P=– P=–Receivables:

Franchisees and customers 1,869,482,598 1,211,757,276 147,875,231 54,250,911 50,877,451 197,633,221 207,088,508Related parties 4,896,192,040 2,899,372,588 454,069,299 37,514,921 110,462,340 1,394,772,892 –Employee advances 57,393,854 57,393,854 – – – – –Employees’ car plan receivables 159,621,403 159,621,403 – – – – –Interest receivable 1,894,348 1,894,348 – – – – –Others** 173,496,845 122,463,371 – – – 51,033,474 –

Operating lease receivables 33,721,718 33,721,718 – – – – –Advances to related parties 2,362,564,195 2,362,564,195 – – – – –Refundable deposits 585,675,381 585,675,381 – – – – –

13,369,628,551 10,664,050,303 601,944,530 91,765,832 161,339,791 1,643,439,587 207,088,508AFS Financial Assets 28,068,040 28,068,040 – – – – –

P=13,397,696,591 P=10,692,118,343 P=601,944,530 P=91,765,832 P=161,339,791 P=1,643,439,587 P=207,088,508*Excluding cash on hand amounting to P=118.6 million in 2017.

**Excluding receivables from SSS amounting to P=8.6 million in 2017.

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2016Neither Past

Due nor Past Due but not Impaired (Age in Days)Total Impaired 1-30 31-60 61-120 Over 120 Impaired

Loans and ReceivablesCash and cash equivalents* P=3,700,203,431 P=3,700,203,431 P=– P=– P=– P=– P=–Receivables:

Franchisees and customers 1,778,027,120 1,006,519,504 194,301,312 37,552,830 47,522,139 284,258,086 207,873,249Related parties 2,124,321,144 567,449,944 441,375,470 52,107,431 71,456,146 991,932,153 –Employee advances 55,989,614 55,989,614 – – – – –Employees’ car plan receivables 126,566,858 126,566,858 – – – – –Interest receivable 7,884,502 7,884,502 – – – – –Others** 162,829,301 162,829,301 – – – – –

Operating lease receivables 11,081,082 11,081,082 – – – – –Advances to related parties 1,242,075,460 1,242,075,460 – – – – –Refundable deposits P=522,965,030 P=522,965,030 P=– P=– P=– P=– P=–

9,731,943,542 7,403,564,726 635,676,782 89,660,261 118,978,285 1,276,190,239 207,873,249AFS Financial Assets 24,418,040 24,418,040 – – – – –

P=9,756,361,582 P=7,427,982,766 P=635,676,782 P=89,660,261 P=118,978,285 P=1,276,190,239 P=207,873,249*Excluding cash on hand amounting to P=109.4 million in 2016.

**Excluding receivables from SSS amounting to P=5.2 million in 2016.

Credit Quality. The tables below show the credit quality by class of financial assets, based on theCompany’s credit rating system as at December 31, 2017 and 2016.

2017Neither Past Due nor Impaired Past Due

or ImpairedTotal A B CLoans and ReceivablesCash and cash equivalents* P=3,229,586,169 P=3,229,586,169 P=– P=– P=–Receivables: Franchisees and customers 1,869,482,598 1,071,807,895 122,653,373 17,296,008 657,725,322 Related parties 4,896,192,040 2,899,372,588 – – 1,996,819,452 Employee advances 57,393,854 57,393,854 – – – Employees’ car plan receivables 159,621,403 159,621,403 – – – Interest receivable 1,894,348 1,894,348 – – – Others** 173,496,845 122,463,371 – – 51,033,474Operating lease receivables 33,721,718 33,721,718 – – –Advances to related parties 2,362,564,195 2,362,564,195 – – –Refundable deposits 585,675,381 585,675,381 – – –

13,369,628,551 10,524,100,922 122,653,373 17,296,008 2,705,578,248AFS Financial Assets 28,068,040 28,068,040 – – –

P=13,397,696,591 P=10,552,168,962 P=122,653,373 P=17,296,008 P=2,705,578,248

2016Neither Past Due nor Impaired Past Due

or ImpairedTotal A B CLoans and ReceivablesCash and cash equivalents* P=3,700,203,431 P=3,700,203,431 P=– P=– P=–Receivables: Franchisees and customers 1,778,027,120 279,767,902 691,967,489 34,784,113 771,507,616 Related parties 2,124,321,144 567,449,944 – – 1,556,871,200 Employee advances 55,989,614 55,989,614 – – – Employees’ car plan receivables 126,566,858 126,566,858 – – – Interest receivable 7,884,502 7,884,502 – – – Others** 162,829,301 162,829,301 – – –Operating lease receivables 11,081,082 11,081,082 – – –Advances to related parties 1,242,075,460 1,242,075,460 – – –Refundable deposits 522,965,030 522,965,030 – – –

9,731,943,542 6,676,813,124 691,967,489 34,784,113 2,328,378,816AFS Financial Assets 24,418,040 24,418,040 – – –

P=9,756,361,582 P=6,701,231,164 P=691,967,489 P=34,784,113 P=2,328,378,816**Excluding cash on hand amounting to P=118.6 million and P=P=109.4 million in 2017 and 2016, respectively.**Excluding receivables from SSS amounting to P=8.6 million and P=5.2 million in 2017 and 2016, respectively.

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The credit quality of financial assets is managed by the Company using internal credit ratings, asshown below:

A , For counterparty that is not expected by the Company to default in settling its obligations,thus, credit risk exposure is minimal. This counterparty normally includes banks, relatedparties and customers who pay on or before due date.

B , For counterparty with tolerable delays (normally from 1-30 days) in settling itsobligations to the Company. The delays may be due to cut-off differences and/orclarifications on contracts/billings.

C , For counterparty who consistently defaults in settling its obligation and may be oractually referred to legal and/or subjected to cash before delivery (CBD) scheme. Underthis scheme, the customer’s credit line is suspended and all subsequent orders are paid incash before delivery. The CBD status will only be lifted upon full settlement of thereceivables and approval of management. Thereafter, the regular credit term and normalbilling and collection processes will resume.

Credit Risk Exposure and Concentration. The tables below show the maximum exposure to creditrisk of the Company as at December 31, without considering the effects of collaterals and other creditrisk mitigation techniques:

2017

Gross MaximumExposure

(a)

Fair Value andFinancial Effect

of Collateralor Credit

Enhancement(b)

Net Exposure*(a - b)

Financial AssetsLoans and receivables:

Cash and cash equivalents** P=3,229,586,169 P=6,826,223 P=3,222,759,946Receivables:

Trade receivables 6,558,586,130 484,968,715 6,073,617,415Employee advances 57,393,854 − 57,393,854Employees’ car plan receivables 159,621,403 − 159,621,403Interest receivable 1,894,348 − 1,894,348Others*** 173,496,845 − 173,496,845

Operating lease receivables 33,721,718 − 33,721,718Advances to related parties 2,362,564,195 − 2,362,564,195Refundable deposits 585,675,381 − 585,675,381

AFS Financial assets 28,068,040 − 28,068,040P=13,190,608,083 P=491,794,938 P=12,698,813,145

***Financial assets after taking into account insurance on bank deposits for cash and cash equivalents and payables to the samecounterparty for receivables.

***Excluding cash on hand amounting to P=118.6 million in 2017.***Excluding receivables from SSS amounting to P=8.6 million in 2017.

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2016

Gross MaximumExposure

(a)

Fair Value andFinancial Effect

of Collateralor Credit

Enhancement(b)

Net Exposure*(a - b)

Financial AssetsLoans and receivables:

Cash and cash equivalents** P=3,700,203,431 P=7,257,921 P=3,692,945,510Receivables:

Trade receivables 3,694,475,015 35,717,248 3,658,757,767Employee advances 55,989,614 − 55,989,614Employees’ car plan receivables 126,566,858 − 126,566,858Interest receivable 7,884,502 − 7,884,502Others*** 162,829,301 − 162,829,301

Operating lease receivables 11,081,082 − 11,081,082Advances to related parties 1,242,075,460 − 1,242,075,460Refundable deposits 522,965,030 − 522,965,030

AFS Financial assets 24,418,040 − 24,418,040P=9,548,488,333 P=42,975,169 P=9,505,513,164

***Financial assets after taking into account insurance on bank deposits for cash and cash equivalents and payables to the samecounterparty for receivables.

***Excluding cash on hand amounting to P=109.4 million in 2016.***Excluding receivables from SSS amounting to P=5.2 million in 2016.

Liquidity RiskThe Company’s exposure to liquidity risk refers to the risk that its financial liabilities are not servicedon a timely manner and that its working capital requirements and planned capital expenditures are notmet. To manage this exposure and to ensure sufficient liquidity levels, the Company closely monitorsits cash flows to be able to finance its capital expenditures and to pay its obligations as and when theyfall due.

On a weekly basis, the Jollibee Group’s Cash and Banking Team monitors the Company’scollections, expenditures and any excess/deficiency in the working capital requirements by preparingcash position reports that present actual and projected cash flows for the subsequent week. Cashoutflows resulting from major expenditures are planned and properly monitored to ensure availabilityof funds, i.e., pre-terminate short-term deposits if deemed necessary. In addition, the Company hasavailable credit lines with accredited banking institutions. The Company maintains a sufficient levelof cash and cash equivalents to finance the Company’s operations.

No changes were made in the objectives, policies or processes of the Company in 2017 and 2016.

The tables below summarize the maturity profile of the Company’s financial assets and liabilities asat December 31, 2017 and 2016 based on undiscounted contractual payments:

2017Due and

DemandableLess than


5 Years TotalFinancial AssetsCash and cash equivalents P=1,516,835,816 P=1,831,385,480 P=, P=, P= 3,348,221,296Receivables: Franchisees and customers 450,636,814 1,211,757,276 , , 1,662,394,090 Related parties 1,996,819,452 2,899,372,588 , , 4,896,192,040 Employee advances , 57,393,854 , , 57,393,854 Interest receivable , 1,894,348 , , 1,894,348 Employees’ car plan receivables* , 52,333,175 125,398,045 , 177,731,220 Other receivables** 51,033,474 122,463,371 , , 173,496,845(Forward)

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2017Due and

DemandableLess than


5 Years TotalAdvances to related parties* P=, P=1,796,785,929 P=646,291,781 P=, P=2,443,077,710Refundable deposits* 353,144,144 16,922,204 51,312,251 202,530,491 623,909,090Operating lease receivables , 1,558,911 32,162,807 , 33,721,718AFS financial assets , , , 28,068,040 28,068,040

4,368,469,700 7,991,867,136 855,164,884 230,598,531 13,446,100,251

Financial LiabilitiesTrade payables and other current liabilities*** 184,403,781 9,585,878,976 , , 9,770,282,757Due to related parties* 358,643,289 612,777,070 173,338,523 , 1,144,758,882Long-term debt* , 1,345,525,000 7,977,810,000 , 9,323,335,000Operating lease payables , 79,599,349 778,426,193 , 858,025,542

543,047,070 11,623,780,395 8,929,574,716 , 21,096,402,181

Net Financial Assets (Liabilities) P=3,825,422,630 (P=3,631,913,259) (P=8,074,409,832) P=230,598,531 (P=7,650,301,930)***Gross of unamortized discount and including future interest payments.** *Excluding receivables from SSS amounting to P=8.6 million 2017.***Excluding statutory obligations such as accrued local and other taxes, PHIC, SSS, HDMF and NHMFC payables and unearned revenue from gift

certificates amounting to P=1,476.8 million as at December 31, 2017.

2016Due and

DemandableLess than


5 Years TotalFinancial AssetsCash and cash equivalents P=1,263,858,445 P=2,545,702,529 P=, P=, P= 3,809,560,974Receivables: Franchisees and customers 563,634,367 1,006,519,504 , , 1,570,153,871 Related parties 1,556,871,200 567,449,944 , , 2,124,321,144 Employee advances , 55,989,614 , , 55,989,614 Interest receivable , 7,884,502 , , 7,884,502 Employees’ car plan receivables* , 36,721,831 98,958,175 , 135,680,006 Other receivables** , 162,829,301 , , 162,829,301Advances to related parties* , 362,797,260 980,367,241 , 1,343,164,501Refundable deposits* , 16,559,199 134,946,644 417,705,202 569,211,045Operating lease receivables , 4,775,607 2,614,966 3,690,509 11,081,082AFS financial assets , , , 24,418,040 24,418,040

3,384,364,012 4,767,229,291 1,216,887,026 445,813,751 9,814,294,080

Financial LiabilitiesTrade payables and other current liabilities*** 425,360,859 8,228,930,765 , , 8,654,291,624Due to related parties* , 1,361,724,078 , , 1,361,724,078Long-term debt* , 317,083,192 3,408,598,055 , 3,725,681,247Operating lease payables , 69,032,652 214,375,743 483,182,358 766,590,753

425,360,859 9,976,770,687 3,622,973,798 483,182,358 14,508,287,702

Net Financial Assets (Liabilities) P=2,959,003,153 (P=5,209,541,396) (P=2,406,086,772) (P=37,368,607) (P=4,693,993,622)***Gross of unamortized discount and including future interest payments.** *Excluding receivables from SSS amounting to P=5.2 million in 2016.***Excluding statutory obligations such as accrued local and other taxes, PHIC, SSS, HDMF and NHMFC payables and unearned revenue from gift

certificates amounting to P=1,139.4 million as at December 31, 2016.

Capital Management PolicyThe primary objective of the Company’s capital management is to ensure that it maintains a strongcredit rating and healthy capital ratios in order to support its business and maximize shareholdervalue. The Company has sufficient capitalization.

The Company generates cash flows from operations sufficient to finance its organic growth. Itdeclares cash dividends representing about 1/3 of its net income, a ratio that would still leave someadditional cash for future acquisitions. If needed, the Company would borrow money for acquisitionsof new businesses.

The Company’s policy is to limit its liabilities to stockholders’ equity ratio at 60:40.

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As at December 31, 2017 and 2016, the Company’s ratio of liabilities to total equity and ratio of netliabilities to total equity are as follows:

Debt Ratio

2017 2016Total debt (a) P=22,483,034,857 P=16,347,642,429Total equity 39,313,125,453 32,374,590,236Total debt and equity (b) P=61,796,160,310 P=48,722,232,665

Debt ratio (a/b) 36.38% 33.55%

Net Debt Ratio

2017 2016Total debt P=22,483,034,857 P=16,347,642,429Less cash and cash equivalents 3,348,221,296 3,809,560,974Net debt (a) 19,134,813,561 12,538,081,455Total equity 39,313,125,453 32,374,590,236Net debt and equity (b) P=58,447,939,014 P=44,912,671,691

Net debt ratio (a/b) 32.74% 27.92%

31. Fair Value of Financial Assets and Liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at measurement date.

Financial Instruments Whose Carrying Amounts Approximate Fair Value. Management hasdetermined that the carrying amounts of cash and cash equivalents, receivables, current portions ofadvances to related parties, operating lease receivables, trade payables and other current liabilities,and current portions of due to related parties and operating lease payables based on their notionalamounts, reasonably approximate their fair values because of their short-term nature or due to theimmaterial effect of discounting when the present value of future cash flows from these instrumentsare calculated.

AFS Financial Assets. The fair value of investments in quoted shares of stock is based on quotedprices.

Noncurrent portion of Advances to Related Parties, Refundable Deposits, Employees’ Car PlanReceivables, Long-term Debt and Noncurrrent Portion of Due to Related Parties. Management hasdetermined that the estimated fair value of noncurrent portion of advances to related parties,refundable deposits, employees’ car plan receivables, long-term debt and noncurrent portion of due torelated parties are based on the discounted value of future cash flows using the following applicablerates:

2017 2016Noncurrent portion of advances to related parties 2.52%-4.31% 3.60%-3.87%Refundable deposits 2.44%-5.71% 2.45%-5.38%Employees’ car plan receivables 2.50%-4.92% 1.89%-4.74%

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2017 2016Long-term debt 2.56%-4.92% 2.45%-4.74%Noncurrent portion of due to related parties 2.43%-4.92% –

Investment Properties. The fair value of the investment properties are determined by independentappraisers using the market data and cost approach, which considers the local market conditions, theextent, character and utility of the property, sales and holding prices of similar parcels of land and thehighest and best use of the investment properties.

The following tables provide the fair value measurement hierarchy of the Company’s assets andliabilities. Quantitative fair value measurement hierarchy for assets and liabilities as atDecember 31, 2017 and 2016:

2017 Fair Value Measurement Using


QuotedPrices in



Inputs(Level 2)


Inputs(Level 3)

Assets measured at fair valueAFS financial assets (see Note 9) December 31, 2017 P=28,068,040 P=− P=28,068,040 P=–

Assets for which fair values are disclosedRefundable deposits December 31, 2017 583,284,922 – 583,284,922 –Employees’ car plan receivables December 31, 2017 151,034,569 – 151,034,569 –Investment properties (see Note 13) December 31, 2017 2,397,119,730 – 2,397,119,730 –Noncurrent portion of advances to related parties December 31, 2017 2,367,676,223 – 2,367,676,223 –

Liabilities for which fair values are disclosedLong-term debt December 31, 2017 8,385,289,850 – 8,385,289,850 –Noncurrent portion of due to related parties December 31, 2017 273,516,613 – 273,516,613 –

2016 Fair Value Measurement Using


QuotedPrices in



Inputs(Level 2)


Inputs(Level 3)

Assets measured at fair valueAFS financial assets (see Note 9) December 31, 2016 P=24,418,040 P=− P=24,418,040 P=–

Assets for which fair values are disclosedRefundable deposits December 31, 2016 486,711,877 – 486,711,877 –Employees’ car plan receivables December 31, 2016 141,386,176 – 141,386,176 –Investment properties (see Note 13) December 31, 2014 2,482,644,600 – 2,482,644,600 –Noncurrent portion of advances to related parties December 31, 2016 964,971,501 – 964,971,501 –

Liabilities for which fair values are disclosedLong-term debt December 31, 2016 3,369,164,736 – 3,369,164,736 –

There were no transfers from Level 2 fair value measurements in 2017 and 2016.

32. Earnings Per Share

Basic and diluted EPS are computed as follows:

2017 2016Net income in parent company financial statements P=7,384,222,545 P=5,218,054,078Effects of consolidation (275,102,055) 946,681,295(a) Consolidated net income attributable to the

equity holders of the Company P=7,109,120,490 P=6,164,735,373

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*SGVFS028332*

2017 2016

(b) Weighted average number of shares - basic 1,080,488,873 1,072,616,009Weighted average number of shares outstanding

under the stock options plan 32,366,508 38,387,061Weighted average number of shares that would

have been purchased at fair market value (18,180,717) (18,545,923)(c) Adjusted weighted average shares - diluted 1,094,674,664 1,092,457,147

EPS:Basic (a/b) P=6.580 P=5.747Diluted (a/c) 6.494 5.643

Potential common shares for stock options under the 14 th MSOP cycle were not included in thecalculation of the diluted EPS in 2017 because they are antidilutive. Contingently issuable shares forstock options under the 4th ELTIP cycle were not included in the calculation of the diluted EPS in2017 and 2016.


Dividend DeclarationOn April 6, 2018, the BOD approved a regular cash dividend of P=1.14 per share of common stock toall stockholders of record as of April 24, 2018. Consequently, the cash dividend is expected to bepaid out on May 9, 2018. The cash dividend is 14% higher than the P=1.00 regular dividend per sharedeclared on April 5, 2017.

Acquisition of Additional Shares in SmashburgerOn February 13, 2018, the BOD approved the purchase of additional 45% of SJBF LLC (the parentcompany of the entities comprising the Smashburger business), through the Jollibee Group’s wholly-owned subsidiary, Bee Good! Inc. (BGI), pursuant to the mechanism in the agreement withSmashburger Master LLC as previously disclosed. This will increase BGI’s ownership in SJBF LLCto a total of 85%.

34. Note to the Statement of Cash Flows

Changes in Liabilities and Equity Arising from Financing Activities

January 1,2017 Cash flows

Dividendsdeclared

(Note 19)

InterestExpense*(Note 23)

Amortizationof debt

issue cost(Note 17)

Granted stockoptions to

employeesand

subsidiaries**December 31,

2017(in millions)

Dividends payable(Note 15) P=47.7 (P=2,347.2) P=2,355.5 P=– P=– P=– P=56.0

Interest payable (Note 15) 13.1 (142.2) – 143.4 – – 14.3Long-term debt (Note 17) 3,285.0 4,960.0 – – – – 8,245.0Debt issue cost (Note 17) (9.7) (25.5) – – 3.2 – (32.0)Capital stock (Note 18) 1,091.3 10.4 – – – – 1,101.7Additional paid-in capital 5,658.8 852.0 – – – 958.5 7,469.3Total liabilities and equity

on financing activities P=10,086.2 P=3,307.5 P=2,355.5 P=143.4 P=3.2 P=958.5 P=16,854.3*Excluding interest expense from accretion of security deposits amounting to P=0.4 million.**Including deferred tax asset amounting to P=731.0 million.

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Noncash ActivitiesThe principal noncash transaction under investing activities pertain to disposal of property, plant andequipment on account amounting to P=23.6 million in 2017. The related proceeds from disposal ofproperty, plant and equipment includes output VAT amounting to P=6.4 million not yet remitted as ofreporting date.

35. Supplementary Tax Information Required Under Revenue Regulations No. 15-2010

The Bureau of Internal Revenue has issued Revenue Regulations No. 15-2010 which requires certaintax information to be disclosed in the notes to the parent company financial statements. TheCompany presented the required supplementary tax information as a separate schedule attached to itsannual income tax return.

Annex “C-3”

Interim Financial Statements for

the quarter ended March 31, 2018

Annex “D”

Certifications of Nominee as an

Independent Director

Annex “D-1”

Certification and Curriculum Vitae

of Mr. Monico V. Jacob

MONICO V. JACOB PERSONAL INFORMATION Address : 447 Duke St., Greenhills East Mandaluyong City Birthdate : May 6, 1945 Birthplace : Manila Citizenship : Filipino Civil Status : Married Business Address : 7th Floor STI Holdings Center 6764 Ayala Ave. Makati City Telephone No. : [632] 891-3863 Fax No. : [632] 891-3866 E-mail : [email protected] EDUCATIONAL BACKGROUND Post-Graduate : Bachelor of Laws (1971)

Ateneo de Manila University

Bachelors : AB Liberal Arts (1966) Ateneo de Naga University

CURRENT POSITIONS

STI Education Services Group, Inc.** - Vice-Chairman and CEO (2016) Rosehills Memorial Management, Inc. - Chairman (2014) TechZone Philippines, Inc. - Vice-President (2014) Philippine Life Financial Assurance Corp. - Chairman (2013) STI West Negros University - President (2013) GROW Vite, Inc. - President (2013) STI Education Systems Holdings, Inc.* - President (2010) Tantivy Holdings, Inc. - President (2010) Maestro Holdings, Inc. - President (2007) Eximious Holdings, Inc. - President (2006) Global Resource for Outsourced Workers, Inc. - Chairman (2000) Total Consolidated Asset Mgmt., Inc. - Chairman (1999)

DIRECTORSHIPS Jollibee Foods, Inc.* – since 2000 Information and Communications Technology (iAcademy), Inc. – since 2003 De Los Santos – STI College – since 2004 2GO Group, Inc.* - since 2009

Negros Navigation Corp. – since 2009

Asian Terminals, Inc.* – since 2009 Phoenix Petroleum Philippines, Inc.* – since 2010

MegaClinic – since 2013 Philhealthcare, Inc. – since 2013

Lopez Holdings, Inc.* – since 2013 Rockwell Land Corporation* -- since 2016 Philippines First Insurance Co., Inc. – since 2016

PhilPlans First, Inc. – since 2017 AFFILIATIONS Management Association of the Philippines Integrated Bar of the Philippines SEMINARS ATTENDED Corporate Governance Seminar By: Risks, Opportunities, Assessment and Management, Inc. (ROAM) Date: March 18, 2017 * Listed in the Philippine Stock Exchange ** Listed in the Philippine Dealing Exchange Updated 14 March 2018

Annex “D-2”

Certification and Curriculum Vitae

of Mr. Cezar P. Consing

Cezar P. Consing, 58 years old, has been since 2013 President and Chief Executive Officer of Bank of the Philippine Islands (BPI), and a Senior Managing Director of Ayala Corporation, BPI's controlling shareholder. He has served on BPI's board of directors for 16 years (1995 - 2000, 2004 - 2007, 2010 - present), 5 years representing J.P. Morgan & Co., then BPI's second largest shareholder, and 3 years as an independent director. Mr. Consing serves as chairman of BPI's thrift bank, investment bank, UK bank, property and casualty insurance, leasing, and rental subsidiaries, and vice chairman of its foundation; and is also a board director of BPI's life insurance, asset management and micro finance subsidiaries. Mr. Consing is a member of BPI's executive committee, and is chairman of its credit and management committees. Mr. Consing serves as Chairman of the publicly listed National Reinsurance Corporation, President and board director of Bancnet, Inc., and board director of LGU Guarantee Corporation, three industry consortium institutions where BPI is a minority shareholder. Outside his association with BPI, Mr. Consing serves on the boards of four private companies: The Rohatyn Group, Sqreem Technologies, FILGIFTS.com and Endeavor Philippines. He has also served as an independent board director of three public companies: Jollibee Foods Corporation (2010 - present), CIMB Group Holdings (2006 - 2013) and First Gen Corporation (2005 - 2013). He is also a board director of the US-Philippines Society and a trustee of the Manila Golf Club Foundation. Mr. Consing has been a member of the Trilateral Commission since 2014. Mr. Consing first worked for BPI, in corporate planning and corporate banking, from 1980 - 1985. He worked for J.P. Morgan & Co., based in Hong Kong and Singapore, from 1985 - 2004, rising to co-head or head the firm's investment banking business in Asia Pacific from 1997 - 2004, the last five years as President of J.P. Morgan Securities (Asia Pacific) Ltd. As a senior Managing Director of J.P. Morgan, Mr. Consing was a member of the firm's global investment banking management committee and its Asia Pacific management committee. Mr. Consing was a partner at The Rohatyn Group from 2004 - 2013, headed its Hong Kong office and its private investing business in Asia, and was a board director of its real estate, and energy and infrastructure private equity investing subsidiaries. Mr. Consing received an A.B. Economics degree (Accelerated Program), magna cum laude, from De La Salle University, Manila, in 1979. At university, he was a member of the student council, the student newspaper and the varsity track and field team. In recent years, he has served on the advisory committees of the university and its school of economics. Mr. Consing obtained an M.A. in Applied Economics from the University of Michigan, Ann Arbor, in 1980.