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SHAKEY’S PIZZA ASIA VENTURES, INC.ANNUAL REPORT 2017

ABOUT THE COVER

�e �rst time “WOW” was ever used as an expression of surprise was in Scotland in the 1500’s. Maybe some hungry Scotsman was

served the most incredible haggis and, fumbling for words, muttered the �rst thing he could think of: “WOW!”

�e expression spread like wild�re, eventually crossing the Atlantic

and into American lives to describe everything from excitement (“Wow, I’m so ready for dinner!”) to amazement (“Wow, this food is delicious!”) to delight (“Wow, I’m de�nitely coming back to this

restaurant!”)

Today, WOW is so much more than an expression of positive amazement. It has evolved into an action word. To WOW someone means to give them an extraordinary experience, to move them in a

deep and delightful way.

Which is how it is at Shakey's, where WOW is our guiding light and philosophy of service as we purposefully create great times and

lasting memories for all our guests.

From our welcoming door persons to our excellent chefs, attentive waiters, imaginative marketers, brainy accountants and reliable

riders - we live, feel, and breathe the WOW philosophy. It truly is our way of life.

And our goal? Deliver the best dining experience, weather any challenge, build shareholder con�dence, and boost our iconic

brand both today and for many years to come.

TABLE OFCONTENTS

Vision, Mission, and Core Values

2017 at a Glance

Recipe for Success

Letter from the Chairman

President’s Message

Investment Toppings

Financial Highlights

How We WOW

Innovations and Initiatives

Tots. Teens. Titas.

Purpose in Pizza

Corporate Governance

Board of Directors

Senior Management Team

Code of Business Conduct and Ethics

Risk Management

Investor Relations Program

Stock Highlights

Management’s Discussion and Analysis

Statement of Management’s Responsibility for Financial Statements

Independent Auditor’s Report

Consolidated Statements of Financial Position

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Contact Information

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FUN.FAMILY.PIZZA.CHICKEN.PASTA.MILKSHAKE.MOJOS.FUN.FAMILY.PIZZA.CHIZZA.CHICKEN.PASTA.MILKSHAKE.MOJOS.FUN.FAMILY.PIZZA.CHICKEN.PASTA.MILMILKSHAKE.MOJOS.FUN.FAMILY.PIZZA.CHICKEN.PASTA.MILKSHAKE.MOJOS.FUN

FUN.FAMILY.PIZZA.CHICKEN.PASTA.MILKSHAKE.MOJOS.FUN.FAMILY.PIZZA.CHIZA.CHICKEN.PASTA.MILKSHAKE.MOJOS.FUN.FAMILY.PIZZA.CHICKEN.PASTA.MILMILKSHAKE.MOJOS.FUN.FAMILY.PIZZA.CHICKEN.PASTA.MILKSHAKE.MOJOS.FUN

MISSION COREVALUES

VISION

TO OUR GUESTSWe were established to provide great times and great memories to our Guests.

TO OUR EMPLOYEESWe strive to create a nurturing environment for the holistic growth of our employees. We want them to have a sense of accomplishment and pride in service of the Company.

TO OUR SHAREHOLDERSWe are committed to grow the Company in size and in value through achieving industry-leading �nancial returns.

TO OUR BUSINESS PARTNERSWe promise to be fair and professional in business dealings.

TO OUR COMMUNITYWe contribute in community building through job creation and providing for the needs of our Guests.

GUEST CENTRICITYWe always put our Guests at the core of everything we do. We seek to know their needs and wants so that we can consistently exceed their expectations. We also provide them high-quality food products and services at great value for money.

PASSION FOR EXCELLENCEWe are delighted to be able to WOW our Guests. �is concept echoes throughout the entire organization. As one team, we aim for service excellence, working together towards a delightful guest experience.

CRITICAL THINKINGWe prepare our people to exercise good judgment.We are detail-oriented and disciplined in our thought processes.

ENTREPRENEURIAL SPIRITWe are bold, daring, and actively seeking opportunities for the bene�t of the Company.

We desire to be the preferred and dominant Family Casual Dining Restaurant in the Philippines and overseas, serving pizza as our core product.

SHAKEY’S 2017 ANNUAL REPORT04

SHAKEY’S 2017 ANNUAL REPORT 05

NEW RESTAURANTSIN THE PHILIPPINES

24INTERNATIONALSTOREOPENED!1ST

SYSTEM-WIDESALES

5.3MPIZZAS SOLD

7.3BPhp

8.3BPhp

2016 2017

INCREASE14%

ANNIVERSARY OFLISTING ON THEPHILIPPINE STOCKEXCHANGE (PSE)

ST

— the highest ever in a single year!

AT A GLANCE

net income in 2017PHP762M Philippines’

SINGLE-LARGEST BRAND of Chained Full-Service Restaurants

208TOTAL

STORES IN THE PHILIPPINES

14% INCREASEversus recurring net income

Player 216%

Player 312%

Player 47%

Player 55%

Player 63%

Shakey’s 26%

Others 31%

5%

SSSG FOR 2017(SAME-STORE SALES GROWTH)

:

12%

STORE NETWORKGROWTH FOR 2017:

Source: Euromonitor 2017


PIZZA CHICKEN SAL

ADS

PASTA MILKSHAKE

MOJOS

RECIPE FOR SUCCESS

The first Shakey's Pizza Parlor opened in Sacramento, California. Located in a remodeled grocery store, the original Shakey's Pizza restaurant was known as “Ye Public House” for pizza and beer.

1954

1975 2003

1999

The Shakey’s brand for the Philippines and all relevant trademark rights were acquired outright by the Company in perpetuity. This meant no royalty payments and the freedom to execute and "localize" the concept moving forward.

The brand established its own food commissary to provide consistent and quality raw materials to the growing number of Shakey’s stores in the Philippines.

2006

Shakey’s first planted its feet in the Philippines with a store located in Metro Manila offering live music and beer.

The Company began repositioning and re-engineering Shakey’s towards a more family-oriented American fast casual dining experience with FUN, FAMILY, and PIZZAas its core.

1ST

WHAT GOES INTO BUILDING A LEADING PIZZA BUSINESS?


2009

2014

2016

2017

The Company obtained the Shakey’s rights in perpetuity for the Middle East, Asia (excluding Japan and Malaysia), China, Australia, and New Zealand, offering an opportunity to bring the trademark Shakey’s experience to the many Filipinos located outside the Philippines.

PIZZA continues to operate nationwide and maintain market leadership in the pizza full-service and full-service chain restaurant spaces. It opened its 200th store in the Philippines, ending 2017 with a local store count of 208. The Company also moved into its new head office which it called the "Shakey’s WOW Center" – a testament to its strong guest-centric and WOWING culture. It also doubled its commissary’s capacity in preparation for continued growth in demand from company-owned and franchised stores.

Shakey’s reached an important milestone with the opening of its 100th store in the Philippines.

Century Pacific Group, Inc. (CPGI), led by the Po family, alongside the sovereign wealth fund of Singapore, acquired majority control of the Company from the Prieto family. The corporate name "Shakey’s Pizza Asia Ventures, Inc." (PIZZA) was born, and a well-received initial public offering was conducted later in the year.

200TH

100TH

WOW CENTER


LETTER FROM THE CHAIRMAN

We opened our 200th store last August and �nished the year with 208 establishments, opening 24 new stores — the most opened in a year in the Company’s history. Some of these stores were in second or third tier cities such as Iligan, Puerto Princesa, Antique, Gapan, and Palo in Leyte, and we were quite pleased at how warmly we were received in those communities.

�is demonstrates that the Philippine economy is indeed on the ascendancy and that economic development is moving out of the traditional urban centers. If the Philippine economy continues on this trajectory, we think that our Philippine store network can grow to 300 in �ve years or so, with most new branches in provincial areas while still locating some even in crowded metros to improve our delivery service.

Last October, we opened our �rst overseas store in Kuwait to be followed by another one in Dubai this coming Q2. Our international team is setting up the processes to support country franchisee-partners and is developing an interesting pipeline of potential new country franchise partnerships with some exciting announcements that are forthcoming.

We recently moved our corporate o�ces to the WOW Center, giving our team members better-quality o�ce space, more extensive training facilities, and lots of extra room for future expansion. We successfully migrated our in-house commissary to our new Taguig location with more than double the previous capacity.

�e team also launched a number of innovative products such as the Cali Kani Pizza and the Scallop Primo Pizza. �e latter was so warmly received that it was moved from a limited time o�er to a permanent menu item. Continuing with this successful formula of WOWING our guests with products using premium ingredients, the team launched Louisiana Shrimp Pizza just this February, in time for the start of the Lenten season.

On the Shakey’s brand’s long-term health, in a recent Campaign Asia survey undertaken in cooperation with Nielsen, Shakey’s was voted among the top 3 Philippine restaurant brands. It’s an honor to be this loved by the market, especially given that the other two brands in the top 3 have far more stores. No doubt this has to do with Shakey’s aspirational positioning and our long tradition of delivering GREAT TIMES and GREAT MEMORIES. �is motivates the team even more to be passionate stewards and ambassadors of the brand.

�e foregoing achievements translate to a 14% growth in system-wide sales, a 14% growth in recurring net income with industry-leading margins, and a return on equity of 21%.

In the almost two years since Century Paci�c Group, Inc. invested in Shakey’s, the balance sheet continues to

Christopher T. Po

�e year 2017, Shakey’s �rst full year as a publicly listed company, has been a year �lled with important milestones.

All the above were achieved with a fair amount of hustle and hard work. While the country’s middle class continues to grow, discretionary spending and the demand for a�ordable luxuries like casual dining increase. However, competition is intensifying even more. We are �nding that new as well as existing competitors from both within and outside of the pizza category have upped their level with aggressive pricing and promotions, menu innovations, and improved stores. Moreover, we are seeing new types of formats and platforms such as food parks and even food delivery apps challenge incumbents for foot tra�c and share of stomach.

In this environment of keen competition, our strategy is to carry on investing in the brand, investing in the stores, and investing in our people. We believe these are fundamental to better serving our guests. We combine this overarching strategy with plans like opening more stores in virgin markets where there is pent up demand for the brand and where some of our competitors are less likely to open. We will continue to improve our service performance in delivery — a market that is growing but challenging to serve given the formidable tra�c in our

cities. We see opportunities to strengthen our o�erings during certain parts of the day and to create more value-for-money promotions. We will also leverage all our assets — physical and digital — to be more top-of-mind with our guests, as well as understand and build stronger relationships with our loyal patrons. Finally, the team commits to delivering all these plans with superior execution.

Indeed, a lot needs to be done. At the same time, I have a lot of faith in the ability of our Shakey’s team to meet the challenges. �ey love the brand, are passionate about WOWING our guests, and have pizza sauce running through their veins. I am grateful and proud of all the achievements the team has delivered and have no doubt that the milestones will keep coming.

I am also grateful to our franchisee-partners for believing in the Shakey’s story and for being caretakers of our brand, especially in the far-�ung provincial areas of the Philippines; and of course, to our shareholders and the investing public, for the trust and the support.

I would like to also applaud another project — one that I am particularly proud that the team has broken ground on in the area of social responsibility. A�er years of promoting sports, having been an early supporter of volleyball which has become one of the country’s most popular spectator sports, Shakey’s has decided to pivot and support persons with down syndrome. In a project called “#Shakeitup4Downs,” Shakey’s recently partnered with the Down Syndrome Association of the Philippines to employ people with down syndrome to undertake real-life guest engagement activities. We are currently on pilot stage at just a few stores, but the vision would be to scale up this project of inclusion to bring awareness to the issue and make a di�erence in the lives of those who enroll.

As we look forward to a new year ahead of us, I am excited by the opportunities; we are well-aware and prepared to meet the challenges. I would like to personally invite you to come and visit us at one of our stores so you can enjoy the Shakey’s brand of FUN, FAMILY, PIZZA.

Christopher T. PoChairman

February 2018

strengthen. Debt levels from acquisition-related leverage continue to improve due to strong business performance and healthy cash �ows since 2016. As of end 2017, our net interest-bearing debt to earnings before interest, tax, depreciation and amortization ratio is at an undemanding 2.62x, with a net gearing ratio at a manageable 0.93x. Furthermore, the long-term and �xed nature of our debt agreement insulates us from increases in interest rates. Our current position allows us to fund our organic growth plans with reserve capacity in our balance sheet to spare.


We opened our 200th store last August and �nished the year with 208 establishments, opening 24 new stores — the most opened in a year in the Company’s history. Some of these stores were in second or third tier cities such as Iligan, Puerto Princesa, Antique, Gapan, and Palo in Leyte, and we were quite pleased at how warmly we were received in those communities.

�is demonstrates that the Philippine economy is indeed on the ascendancy and that economic development is moving out of the traditional urban centers. If the Philippine economy continues on this trajectory, we think that our Philippine store network can grow to 300 in �ve years or so, with most new branches in provincial areas while still locating some even in crowded metros to improve our delivery service.

Last October, we opened our �rst overseas store in Kuwait to be followed by another one in Dubai this coming Q2. Our international team is setting up the processes to support country franchisee-partners and is developing an interesting pipeline of potential new country franchise partnerships with some exciting announcements that are forthcoming.

We recently moved our corporate o�ces to the WOW Center, giving our team members better-quality o�ce space, more extensive training facilities, and lots of extra room for future expansion. We successfully migrated our in-house commissary to our new Taguig location with more than double the previous capacity.

�e team also launched a number of innovative products such as the Cali Kani Pizza and the Scallop Primo Pizza. �e latter was so warmly received that it was moved from a limited time o�er to a permanent menu item. Continuing with this successful formula of WOWING our guests with products using premium ingredients, the team launched Louisiana Shrimp Pizza just this February, in time for the start of the Lenten season.

On the Shakey’s brand’s long-term health, in a recent Campaign Asia survey undertaken in cooperation with Nielsen, Shakey’s was voted among the top 3 Philippine restaurant brands. It’s an honor to be this loved by the market, especially given that the other two brands in the top 3 have far more stores. No doubt this has to do with Shakey’s aspirational positioning and our long tradition of delivering GREAT TIMES and GREAT MEMORIES. �is motivates the team even more to be passionate stewards and ambassadors of the brand.

�e foregoing achievements translate to a 14% growth in system-wide sales, a 14% growth in recurring net income with industry-leading margins, and a return on equity of 21%.

In the almost two years since Century Paci�c Group, Inc. invested in Shakey’s, the balance sheet continues to

All the above were achieved with a fair amount of hustle and hard work. While the country’s middle class continues to grow, discretionary spending and the demand for a�ordable luxuries like casual dining increase. However, competition is intensifying even more. We are �nding that new as well as existing competitors from both within and outside of the pizza category have upped their level with aggressive pricing and promotions, menu innovations, and improved stores. Moreover, we are seeing new types of formats and platforms such as food parks and even food delivery apps challenge incumbents for foot tra�c and share of stomach.

In this environment of keen competition, our strategy is to carry on investing in the brand, investing in the stores, and investing in our people. We believe these are fundamental to better serving our guests. We combine this overarching strategy with plans like opening more stores in virgin markets where there is pent up demand for the brand and where some of our competitors are less likely to open. We will continue to improve our service performance in delivery — a market that is growing but challenging to serve given the formidable tra�c in our

cities. We see opportunities to strengthen our o�erings during certain parts of the day and to create more value-for-money promotions. We will also leverage all our assets — physical and digital — to be more top-of-mind with our guests, as well as understand and build stronger relationships with our loyal patrons. Finally, the team commits to delivering all these plans with superior execution.

Indeed, a lot needs to be done. At the same time, I have a lot of faith in the ability of our Shakey’s team to meet the challenges. �ey love the brand, are passionate about WOWING our guests, and have pizza sauce running through their veins. I am grateful and proud of all the achievements the team has delivered and have no doubt that the milestones will keep coming.

I am also grateful to our franchisee-partners for believing in the Shakey’s story and for being caretakers of our brand, especially in the far-�ung provincial areas of the Philippines; and of course, to our shareholders and the investing public, for the trust and the support.

I would like to also applaud another project — one that I am particularly proud that the team has broken ground on in the area of social responsibility. A�er years of promoting sports, having been an early supporter of volleyball which has become one of the country’s most popular spectator sports, Shakey’s has decided to pivot and support persons with down syndrome. In a project called “#Shakeitup4Downs,” Shakey’s recently partnered with the Down Syndrome Association of the Philippines to employ people with down syndrome to undertake real-life guest engagement activities. We are currently on pilot stage at just a few stores, but the vision would be to scale up this project of inclusion to bring awareness to the issue and make a di�erence in the lives of those who enroll.

As we look forward to a new year ahead of us, I am excited by the opportunities; we are well-aware and prepared to meet the challenges. I would like to personally invite you to come and visit us at one of our stores so you can enjoy the Shakey’s brand of FUN, FAMILY, PIZZA.

Christopher T. PoChairman

February 2018

strengthen. Debt levels from acquisition-related leverage continue to improve due to strong business performance and healthy cash �ows since 2016. As of end 2017, our net interest-bearing debt to earnings before interest, tax, depreciation and amortization ratio is at an undemanding 2.62x, with a net gearing ratio at a manageable 0.93x. Furthermore, the long-term and �xed nature of our debt agreement insulates us from increases in interest rates. Our current position allows us to fund our organic growth plans with reserve capacity in our balance sheet to spare.

“I have a lot of faith in the ability of our Shakey’s team to meet the challenges. They love the brand, are passionate about WOWING our guests, and have pizza sauce running through their veins.”


PRESIDENT’S MESSAGE

With 2017 being our maiden year as a publicly listed company, we made it our goal to ensure that the Company delivers on its commitments to its new investors.

We believe that the trust and con�dence bestowed onour company and management during the successful initial public o�ering late 2016 can only be sustained and strengthened if we can prove our ability to deliver and execute on promises.

While 2017 was no doubt a year of big adjustments for everyone in the team, we all had a strong sense of mission and desire to show that we could meet and surpass all the challenges the year had in store for us.

In this light, I am now pleased to present you our 2017 results. From my viewpoint, 2017 turned out to be a very good year for our company. Despite the competitive and volatile business environment, we achieved total system-wide sales of PHP8.3 billion, a growth of 14% from the year before. �is was driven by opening a total of 24 net new stores — the highest ever recorded in Shakey’s history — and robust same-storesales growth of 5%.

�ese translated to revenues of PHP7.0 billion, 16% higher than revenues in 2016.

Despite some input cost pressures towards the latter part of the year, pro�t margins remain the healthiest in the industry with gross and earnings before interest, tax, depreciation and amortization margins at 30% and 20% respectively.

In total, we were able to deliver to our shareholders a net income of PHP762 million, posting a growth of 14% versus the recurring core income number last year, and earnings before interest, tax, depreciation and amortization of PHP1.4 billion, a growth of 19%. With o�cial results for 2017 �nally out, I am very proud to say that we have again achieved double-digit growth on both revenues and pro�ts, enabling us to extend our double-digit growth record to an unprecedented fourteen consecutive years.

No company in this industry has ever achieved this kind of feat; and this, I believe, is a testament to the power of the Shakey’s brand, the gallant e�orts and high competence of our management team, and the passion and dedication of every single person working on our stores’ �oors.

OUR 2017 STRATEGIC MINDSET

In 2017, we implemented several game-changing programs and initiatives. �ese were centered around the key priorities of (1) increasing the loyalty of our existing guests, (2) kick-starting our delivery and digital businesses, and (3) further expanding our stores in underpenetrated areas.

�ese three key result areas were identi�ed as the main drivers to achieve not only the year’s revenue and earnings goals but to also give the Company a betterfoundation to deliver future and sustainable growth.

INCREASING GUESTS’ LOYALTY

We released several new products this year with the goal of keeping even our most loyal guests excited to come and try out our new o�erings. One of our biggest hits was the Scallop Primo Pizza – mouth-watering baby scallops on our signature thin crust. Today, this is a permanent item on our menu, a rare feat for the many limited time o�er products that we regularly release.

We also launched di�erent variations of our famous “group meal deals,” continuing to deliver value for our guests, especially those that come in larger group sizes. Again, another big success came very early in the year — January 1, to be precise — when we launched our now famous “2017 MEAL DEAL” – good for ten to twelve people at an a�ordable (and hard to forget) price of PHP2,017.

�e goal here was simple - to make our value proposition superior to that of our competitors in all aspects relevant to the consumer.

�is also included elevating our dining environment in order to strengthen the experience guests receive for their money. �e new store design launched in the middle of 2017 alongside the opening of our 200th store was very much well-received. �e changes revolved around updating the interiors, putting on new crew uniforms, and revising product presentation in order to provide a more modern and youthful feel, while still staying true to the iconic and trademark Shakey’s ambiance.

DELIVERY AND DIGITAL

We took considerable actions to streamline our delivery systems with the goal of laying the foundation for further improving the delivery experience.

More and more, this segment will play a major role in revenue generation, particularly in highly urbanized areas like Metro Manila and Metro Cebu. We will build this on the back of our brand strength and core expertise of creating memorable dining experiences — then take it a step further by bringing these to the doorsteps of our many loyal guests.

Organizational and technological changes were introduced in support of this goal; and with the continuing e�orts of our team, we are now in a much better position to take advantage of the growth potential of this delivery market.

In 2017, we also overhauled and outlined a new digital strategy, fully aware that the digital space is an emergingbattle ground. We re-organized our marketing team and created a new group composed of experienced digital natives that focus on nothing else but these digital initiatives. We foresee this channel to grow exponentially

as more and more people switch to and become more comfortable with the idea of going online and mobile.

�is heightened focus was aimed at improving their e�ectiveness and helping them become the best that they

can be. We are currently upgrading our organizational capabilities to ensure that we can continuously HIRE, TRAIN, and KEEP great people!

�ough we have adjusted to the demands of being a public company, we are also challenged to ensure that we keep our very entrepreneurial way of thinking, maintain a strong sense of ownership in our business, and heighten the sense of urgency that we are most well-known for. Indeed, the quality and speed of our execution remain a benchmark in the industry.

Leadership and people development are areas I strongly believe in, without which medium to

long-term success will be di�cult to attain.

MOVING FORWARD!

Since we were coming o� from a high base in 2017, some may doubt if we can sustain this double-digit growth pace into 2018. �e challenge does not scare our team but, on the contrary, gives us the strength, courage, and excitement to have another chance to WOW!

Undoubtedly, there will be headwinds in terms of input costs and operating expenses as in�ation starts to pick up. Competition also remains with new entrants and existing players continuing to expand as well.

Aware of the ongoing market fragmentation and cost pressures, SUPERIOR EXECUTION of the right plans and strategies is now more important than ever.

We continue to see growth in market consumption, and the macroeconomic forecasts remain positive. �is early into 2018, we have already opened a number of new stores giving us a head start for the year.

Furthermore, our improvements in the area of delivery and digital are expected to allow these parts of our business to gain stronger traction this year.

We will also exert more e�orts to improve e�ciencies and capitalize on our growing scale in order to maintain our healthy pro�tability margins.

�e goals are clear - ensure market leadership, secure above-industry margins, and continue to be an attractive company to work for.

SUPERIOR EXECUTION of all these plans is now crucial!

Over the long term, the focus is on increasing our leadership and organizational capability coupled with our guest-centric philosophy and strong brand heritage.

Yes, we have more to do; but I am con�dent that we are progressing in the right direction.

Finally, I would like to thank you, our shareholders, our guests, our partners, and employees for your continuous engagement and trust. Without your support for our management team, the success we enjoy today and the success we plan to achieve in the future would not be possible.

God bless and mabuhay kayong lahat!

Vicente L. GregorioPresident & CEO

March 2018

EXPANSION OF STORES

We also recently applied organizational changes aimed at perfecting our business and store development systems.

We set up a Franchise and Business Development team, taking from operations the role of �nding and opening new store locations. �is has allowed us this year to open a total of 24 net new stores — again, the highest in Shakey’s history thanks to the dedication and diligence of our people in Business Development.

As of end 2017, our total store network stands at 208 in the Philippines with de�nitely much more to come.

Our foray outside the country also started last year with the opening of our �rst international franchise store. A second one is set to open very soon in Dubai, and we continue to entertain numerous inquiries to bring Shakey’s to various other international markets in our domain.

OUR PEOPLE

Alongside the identi�ed 2017 priorities, we also put more focus on our PEOPLE and the guest-centric philosophy that binds us all together.

Vicente L. Gregorio




























MOVING FORWARD!














March 2018

EXPANSION OF STORES





OUR PEOPLE


“No company in this industry has ever achieved this kind of feat; and this, I believe, is a testament to the power of the Shakey’s brand.”


“ As of end 2017, our total store network stands at 208 in the Philippines with de�nitely much more to come. ”



























MOVING FORWARD!














March 2018

EXPANSION OF STORES





OUR PEOPLE


“The goals are clear — ensure market leadership, secure above-industry margins, and continue to be an attractive company to work for.”


“Over the long term, the focus is on increasing our leadership and organizational capability coupled with our guest-centric philosophy and strong brand heritage.”



























MOVING FORWARD!














March 2018

EXPANSION OF STORES





OUR PEOPLE



SOURCE: ASIA’S TOP 1000 BRANDS SURVEY BY CAMPAIGN ASIAIN PARTNERSHIP WITH NIELSEN

INVESTMENTTOPPINGS

Top RestaurantBrand Overall#3 Brand in

Full-ServiceRestaurants#1

Player 216%

Player 312%

Player 47%

Player 55%

Player 63%

Shakey’s 26%

Others 31%

Market Leadership in Full-Service Restaurants in the Philippines

Latest Euromonitor report states that Shakey’s leads the Philippine chained full-service restaurant industry with 26%

market share as of 2017.

Full-Service Chain- All Formats

2017 data shows that Shakey’s dominates the full-service pizza chain market by sales since 2011 until present

Full-Service Chain- Pizza Alone

Shakey’s 65%

Player 229%

Player 32%

Others 4%

IN THE PHILIPPINES IN 2017


No royalty payments, leading to shorter store payback period and sustainably higher margins versus peers

Ability to receive revenue from licensing fees and royalties from franchisees

Freedom to execute and react faster to market changes

Ability to localize products and adapt to the taste of local markets

What Does BrandOwnership Mean?

Opportunity for expansion into international marketsWith its over 40-year history in the Philippines, Shakey’s is one of the most recognizable

brands in the local food service industry.

Though originally from the U.S., the Company has owned the Shakey’s brand for the Philippines

since 1999.

Shakey’sSuperCardOur very popular paid loyalty card paid upfront and renewed annually.


A FULL AND HEARTY TABLE!

GROUP MEALSMONSTER MEAL DEAL2 Large Thin Crust Pizzas2 Platters of pasta: Classic Spaghetti & Carbonara SupremeParty Pack Chicken ‘n’ Mojos (12 pcs)3 1.5L Coke

For those with a MONSTER appetite!

DESSERTSBANANASPLITClassic dessert with banana and three scoops of ice cream - chocolate, vanilla, and strawberry, drizzled with strawberry syrup. Topped with whipped cream, cherries, and generously sprinkled with chopped peanuts.

PASTACARBONARASUPREMEA rich combination of creamy white sauce with flavorful bacon, ham and button mushrooms topped with grated premium parmesan cheese.

PEPPERONICRRRUNCHSpicy Pepperoni slices covered with crunchy crackling US potato strings.

MANAGER’SCHOICEOur No. 1 flavor, loaded with ham, beef, Italian sausage, green bell pepper and onions.

ANGUSSTEAKHOUSEPremium pizza made from specially blended Angus Beef with roasted onions and sliced mushrooms topped with our crunchy potato strings. A GRAND steak out!

PIZZABASKET OFMOJOSOur iconic thinly sliced potatoes coated with a secret breading and fried to a golden perfection. Get your fill with a basketful of your favorite snack or share them with friends.

STARTERS

SALADTUNA CAESARSALADCrisp lettuce and refreshing cucumber slices served with smooth Shakey's Caesar dressing all generously topped with grated Parmesan cheese and tasty bacon bits.

CHICKENFAMILY PACKComes with 7 pieces of chicken and mojos - the perfect combination alongside your favorite pizza.

SOUPCREAMYMUSHROOMSOUPHome-style soups loaded with flavor and goodness.

The food below is just a sampling of what we offer - visit a Shakey’s restaurant to experience the full breadth of our amazing menu!


OUR 208 STORESIN THE PHILIPPINES

SHAKEY’S EAT MAP!

BY STORE LOCATION

47%NATIONAL CAPITAL

REGION(NCR)

42%LUZON EX-NCR

7%VISAYAS

4%MINDANAO

FREE STANDINGSTORES

43%Typical Store Footprint:

300 - 400 sqm

MALLSTORES

52%Typical Store Footprint:

120 - 250 sqm

BY STORE FORMAT

OTHERS5%

Typical Store Footprint:

120 - 180 sqm

Company-owned 59%

Franchised41%

BY STORE OWNERSHIP


VERTICAL INTEGRATION OF

FOOD COMMISSARYVERTICAL INTEGRATION VIA

FOOD COMMISSARY

The Company has its own commissary for proprietary raw materials, protecting its key supply chain and maintaining consistency and control over quality.

Philippine Food and Drug Administration Registered Company

Accredited with Good Manufacturing Practice Certification by SGS Philippines

Accredited with Hazard Analysis and Critical Control Points (HACCP) by SGS Philippines

Accredited with Halal Certification for Bakery by the Halal Development Institute of the Philippines (HDIP)

Most popular sales channel due to unique family and

friends experience

Aim to “WOW” the guest

Delivery available nationwide

Single delivery hotline number (#77-777)

can be used

Active online and mobile presence with own website

and mobile app (www.shakeyspizza.ph)

Convenient and fast method of sales

Legacy and free-standing stores have function rooms for events such as parties and company gatherings

Dine-in Delivery CarryoutFunctions

MULTIPLE SALES CHANNELS

PROVIDE CONVENIENCE


REVENUES

16%

IN PHP

2016 2017

7,004M6,014M

INDUSTRY-LEADING PROFITABILITY

CHANGE YOY

GROSS PROFIT

IN PHP

12%

2,066M1,850M

2016 2017

30.8%

29.5%

2016

2017

-1.3PPS

MARGINS

EBITDA

19%

2016 2017

1,407M1,186M

IN PHP

19.7%

20.1%

2016

2017

+0.4PPS

MARGINS

NET INCOME

14%

2016 2017

762M669M

IN PHP

11.1%

10.9%

2016

2017

-0.2PPS

MARGINS

FINANCIALHIGHLIGHTS

Note: FY 2016 represents pro forma numbers, adjusted for one-off items.


HEALTHY CASH GENERATION

NET INTEREST-BEARINGDEBT TO EBITDA RATIO

2.62XNET GEARING

RATIO

0.93X

OTHER HIGHLIGHTS

OPERATINGCASH FLOW

IN PHP

2016 2017

934M 972M

CAPITALEXPENDITURE

IN PHP

2016 2017

418M

768M

FREECASH FLOW

IN PHP

2016 2017

516M

204M

TOTAL ASSETS

9,109MPHP

TOTAL LIABILITIES

5,135MPHP

TOTAL EQUITY

3,974MPHP

0.50EARNINGS PER

SHARE

21%RETURN ON

EQUITY

2.60BOOK VALUEPER SHARE

CASHCONVERSION CYCLE

-26-18

DAYS

PHP PHP


WOW is PIZZA in a nutshell.

�e concept of WOW is having guest centricity as a core value. PIZZA embodies this "�ink Guest" spirit not just by thinking like a

guest but also by deciding and acting on their needs and wants - manifesting what it means to be a guest in one’s own store. �is, along with its Passion for Excellence when it comes to service, is

what allows PIZZA to give guests that trademark WOW experience.

HOW WE


WOW GridThe WOW Grid serves as a WOW performance metric that measures how well the WOW Principle is executed. There are four levels of execution on the grid: WOWING, Desired, Basic, and Criminal - each pertaining to how many of the three principle imperatives have been fulfilled. Through this test, the Company is able to objectively measure how each activity, action, and performance metric fares on the WOW scale.

WOWING

Desired

Basic

Criminal

Truly extraordinary! Consistently exceeds all goals.

Above average. Meets goals and sometimes exceeds them.

Nothing special. Often meets most goals.

Totally unacceptable. Failed to meet any goal.

WOW PrincipleThe WOW Principle is the core concept of the WOW culture that is embedded as a mindset in every Shakey’s employee. It is a philosophy, not a policy, in that the organization lives to WOW. What makes something WOW?

Better than BEFORE

Better than OTHERS

Better than EXPECTED

The WOW Principle has three imperatives:

WOW the GuestAt Shakey’s, guests are always at the top of mind. Hence, they are not treated as customers but as friends.

As such, WOW the Guest is the key application of the WOW culture, known by all employees as...

CONSISTENTLY EXCEEDING GUESTS’ EXPECTATIONS. The process of WOWING guests begins all the way from the selecting, hiring, and training of employees. The concept of WOW is introduced to all employees through the Shakey's WOW Culture wheel as early as the onboarding period. Given the importance of providing excellent service, store-based employees undergo further training that teaches them the basics of guest service and ways on how to delight guests by understanding and delivering what they need and want. Since WOWING is a continuous process, guests are provided avenues for their feedback on how the Company can WOW better. Each store has its own Book of WOWING Stories where guests can give their

commendations or suggestions on their dining experience, while out-of-store guests can send over their feedback via e-mail. These reviews are taken very seriously, with the Guest Engagement Department (GED) immediately forwarding this feedback to the concerned employees or departments. The GED also sends WOW Weekly Digests containing numerous positive guest experiences to all company employees to inspire them with stories of how much the Shakey's WOW Culture is able to leave smiles on many faces. These WOWING efforts are also recognized during company-wide events such as "Lunch with the President" and the "Cup of Excellence" where the best stores and best staff, both company-owned and franchised, are rewarded for their commitment to WOW. Lastly, the Shakey's WOW Culture is not only applied in service but also in other areas such as business development and employee work ethic. All together, this is how PIZZA is able to deliver results and keep guests coming back for more.


WOW G

RID

WOW PRINCIPLE

WO

W THE GUEST

WOWCULTURE

THESHAKEY’S

WOW Performance Metric

Application of the WOW Culture

towards Guests

Core Concept of the WOW Culture


GUESTSTHE

SAY IT BEST!

Normally, people who visit Shakey’s are looking for good food; rarely do they visit looking for their runaway son. But that’s exactly what happened late one night at Shakey’s Southwoods, just as Captain Elwood Torres and his team were closing shop. A pair of worried parents were searching for their boy and wondering if he had dropped by the restaurant. Torres invited them in and ordered a search of the immediate area.

“To say the staff were accommodating is an understatement. They let us sit inside to rest and even gave us food and a toy for our daughter. They asked one of the riders to do a quick check of the surrounding area to see if he could spot our boy. When we found our child the next morning, we celebrated in the same Shakey’s, and the staff were so relieved to learn of the good news.”

Shakey’s unceasing dedication to WOW has delighted numerous guests, as evidenced by the many positive testimonies that come our way. Here are a handful of stories that highlight a basic truth: even the simplest acts, in-store and out, can WOW a long way.

THE

OF THE

WOW!TT


It’s not unusual for guests to accidentally leave their phones

But what if you’re serving at Shakey’s NAIA 3 and your guest

of miles away? You accept the

manager Charlie Gonzales did by contacting the guest and making arrangements to reunite the phone with its owner.

Shakey’s employees are known for their excellent in-store service. But greeting guests and waiting on tables isn’t the only

of attention, especially if there’s an emergency. So when a middle-aged lady fainted during a visit to Shakey’s Robinsons Tejero, Red Cabasag and Ruth Ulanimo

assisted the guest and escorted her and her family to the nearest hospital for treatment.

“Nakakatuwang isipin na may mga katulad niyang tao na nagbibigay ng magandang serbisyo ng walang hinihinging kapalit. I salute your delivery boy for giving good deeds to other people and not only to your guests!”

“A text from Charlie to my other number came informing me that my phone is in his custody. He provided me options on how I will get my phone and even genuinely went to LBC should I decide it to be sent through a courier. I hope you could give him and his team the rightful honor and recognition as he models your vision of providing your customers with good times and great memories.”

“We can’t say thank you enough for what your employees did. The restaurant manager even called us the following day to ask how my mom was doing after the accident. It’s the best example of what true customer service should be.”

We’re used to delivering pizza; our riders

sometimes, they like to take things to the next level. Like Rex Sequite, a store delivery rider at Shakey’s Kapitolyo, who decided to help someone by purchasing medicine on her behalf and delivering it to her. It wasn’t his scope of work and she wasn’t a paying guest. But he was in the right place at the right time and chose to follow his guest service instincts.

WOWWOWON

GUEST

SERVICEAT ITS BEST

LONGDISTANC

E

AFFAIR

IF WEDIDWELLPLEASERING

THE BELL!

IF WEDIDWELLPLEASERING

THE BELL!


“Good day! I would like to commend Mr. Vener, RM of Shakey’s Cauayan, Isabela for helping me out in sourcing candidates for our stores in the province. Since last year, he voluntarily sends CVs to me. Just now, he sent CVs for our soon to open store in Solano, Nueva Vizcaya. Truly, his love for the company is evident as he encourages others to join here!”

How do you support a brand you dearly

Cauayan restaurant manager Vener Unite did, by freely helping the Shakey’s Talent Management team scout potential employees for new stores.

Balloon twisting is a big part of Shakey’s in-store birthday parties; our kiddie guests love it. But when store delivery rider Gerlit Sartagoda found himself delivering food to a

out his balloon-twisting skills and turned the celebration into a WOWED-UP impromptu birthday surprise!

“This is to commend your driver Gerlit for we were surprised kanina as we were celebrating my daughter’s birthday bash. We ordered from Shakey’s and upon his arrival, he treated her with balloon hearts and animals. Though napakasimple ng effort, sobrang natuwa ang aking daughter! Kay Shakey’s na lang kami mag-o-order from now on.”

FUN and PIZZA are synonymous with Shakey’s. But did you know that we represent FAMILY too? As one shy young girl discovered by hanging out with the Shakey’s España team, we put a premium on good relationships – going beyond the food and festivities to truly be there for the guest when they need it the most.

“As a girl who is not used to interacting with others right away, it was a complete struggle for me knowing when times get rough, I can hardly count on anyone. Good thing I got the Shakey’s España night crew. It took me a while, but then Shakey’s is no longer just my second home but my family as well. Often times they would ask me how I am and would even encourage me to strive harder. Small talks that they usually do to their guests made a great impact in my life.”

AN

FAMILYA Twist

OF FATE

offor the love SHAKEY’S 2017 ANNUAL REPORT 29

INNOVATIONS ANDINITIATIVESKEEPING THE EXCITEMENT ALIVE

�rough its many years of innovation, Shakey’s has never failed to surprise guests with new products and �avors while staying true to its core value of FUN, FAMILY, and PIZZA.

Among 2017’s most successful new products were new seafood pizza �avors, namely the Cali Kani Pizza and the Scallop Primo Pizza.

New pizza �avors such as these are usually available for a limited time only, but the latter was remarkably in demand and we just had to give it a permanent spot on the menu!

Another unique innovation was our Hickory Quorn Pops, launched as little bite-sized nuggets best served as an appetizer to your favorite pizza.

As its name suggests, these nuggets are not your ordinary breaded chicken. Rather, they are made from “Quorn” which contains a natural dough called Mycoprotein.

Various drinks and desserts were also on the list of new products such as the Pineapple Guyabano Drink, UCC Hot and Iced Co�ee Drinks, Panna Cotta Dessert, and cakes.

Cali Kani Pizza- loaded with kani, peaches, and cucumber with nori strips and �sh roe drizzled with Japanese sesame dressing

Scallop Primo Pizza- packed with mouth-watering baby scallops, crab kani, basil strips, and dashes of parsley and chili �akes

Hickory Quorn Pops- a popular meat-free source of protein, perfect for those watching their diet but still wanting that delicious taste of real meat

UCC Brewed Co�ee and Panna Cotta Dessert


VALUE-FOR-MONEY

Apart from innovations, initiatives were also launched to create greater value for our guests.

At the beginning of 2017, Shakey’s launched the “2017 Meal Deal” promotion containing a set of Shakey’s classics good for a group of eight to ten for only PHP2,017. Additionally, availing this meal deal would qualify guests to avail of a free loyalty SuperCard.

Shakey’s was o� to a good start as the “2017 Meal Deal” was a huge success, signi�cantly contributing to growth and performance in 2017.

Shakey’s holiday-themed “Ber Bundles” were released to kick-start the Christmas season with the arrival of the “-ber” ending months. �ese were meant for groups of �ve to ��een depending on which meal deal was availed, giving guests free upsizes on their favorite chicken and pizza meal deals.

Other holidays were also opportunities for us to celebrate simple joys with our guests and their families. We gave away free Shakey’s pouches for the special women in our lives during Mother’s Day and a protein-rich angus beef steakhouse pizza, on us, as a Father’s Day treat.

In addition to Shakey’s group bundles and holiday o�ers, we continued our program of providing special promotions exclusive to SuperCard holders which include discounts, extended promotion periods, and special bundles.

GROWING AND GOING ONLINE

As early as 2013, Shakey’s already introduced online ordering via website and mobile application - one of

the �rst in the industry to do so.

With the continuing emergence of “digitalization,” there are boundless opportunities to further improve our online platforms and how we conduct our digital business.

As of end 2017, various initiatives have yielded good returns with close to 50% increase in digital

transactions and online sales year-on-year.

Continuous e�orts like these are what keep Shakey’s at the top of the game, and it can be expected that there will be more creative innovations and initiatives in the coming years.

Cali Kani Pizza

Scallop Primo Pizza


TOTS. TEENS. TITAS.

Leading pizza chain Shakey’s is leveraging its appeal to generations of Filipinos to attract a new crop of customers — the always online, tech-savvy millennials. “We continue to evolve and upgrade the brand so that it also becomes relevant to a growing base of millennials,” said Shakey’s president Vicente Gregorio.

Shakey’s opened its �rst store in the Philippines in 1975. It now has 208 stores across the country. �rough the years, its thin crust pizzas and iconic chicken and mojos have been a staple among Filipinos as they celebrate their birthdays as children, go out on dates as teenagers, and hang out as adults.

“�e brand has been able to stay relevant. It has gone through a lot of changes in response to the changing times, and our ability to touch lives has formed the base of our �ercely loyal customers,” said Gregorio.

He said that with the new generation of millennials, Shakey’s is focusing on customer experience.

“We realised that younger generations have a di�erent mindset. �ey won’t just do what older folks do,” he said.

�e key, he said, is to “understand and tailor-�t the brand to meet the expectations of a newer base — even exceed their expectations — so they’d be WOWED”.

How Shakey's captures the hearts of people from all generations.

Gregorio said Shakey’s has been investing in becoming more digitally adept.

“Traditional avenues and channels have to be strengthened by adding new channels where the new market prefers to be engaged with,” he said.

Shakey’s has also been redesigning its stores “to give them a younger feel so that they will not feel dated, but relevant, without alienating our loyal customers.”

“Every channel and every experience with the brand has to be designed and executed in a way that will allow us to become more and more relevant with a younger base,” said Gregorio.

Shakey’s is evolving to more than just a place to hang out, keeping what has worked in years – great

food and music and nice seating – and introducing new features that will allow for special bonding moments among families and friends.

“I want it to become a magical place — a WOWINGplace — whether you’re there to hang out or to bond with family and friends,” said Gregorio.

“What we are really trying to do is to be guest-focused and guest-centric so that our customers will have an awesome time,” he added.

“I want it to become a magical place

— a WOWING place — whether you’re there to

hang out or to bond with family and friends.”


PURPOSEIN PIZZA

Learn and Earn

�e Special Program for Employment of Students (SPES) is a partnership with the Department of Labor and Employment that began in 2015. �e objective is to provide temporary jobs to less fortunate but deserving youths to give them the opportunity to learn and earn. �e bene�ciaries of this program are either enrolled students or out-of-school youths who have the intent of enrolling next semester. In 2017, PIZZA was able to employ 17 participants in di�erent stores during the summer as part of this program.

Summer Smiles �e Special Movers Into Livelihood Empowerment (SMILE) Program started in 2016 with the goal of aiding people with special conditions or disabilities. �e Company o�ers seasonal employment and gives support to develop them as individuals with high con�dence and morale. For the summer of 2017, PIZZA’s recruits included a participant with Global Develop-ment Delay, giving him target tasks like that of a regular employee. Down With �is In February 2018, a memorandum of understanding was signed by PIZZA and the Down Syndrome Association of the Philippines for the pilot stage of the #Shakeitup4Downs Program. �e purpose is to place association members in an environment that will give them a fun learning experience. As of date, two stores have accepted participants and there are plans to expand its scale over the next few months. Reaching Out Shakey’s aims to share Fun, Family, Pizza to everyone every-where. �e Company partnered with First Metro Securities for its "Reach First" charity event. Originally present to provide and serve enjoyable meals, the Shakey’s team WOWED everyone by going above and beyond their call of duty by helping feed 70 children alongside First Metro’s own volun-teers. �e lunch treat of Shakey’s classic pizza and chicken le� the kids wanting more. Providing great food coupled with excellent service, the Company succeeded in bringing smiles to the Chosen Children Village Foundation.


Hope in a Bottle

PIZZA has recently partnered with Friends of Hope, a social enterprise that aims to create sustainable social impact. �e enterprise endeavors to address the classroom shortage in the Philippines through the sale of its popular puri�ed drinking water product called "Hope in a Bottle." All pro�ts coming from this product proceed to the building of public school classrooms, slowly narrowing the classroom de�cit around the country. "Hope in a Bottle" products are available in both company-owned and franchised stores, with PIZZA selling an average of 14,000 bottles per month. �e Company has targeted a more WOWING number - around 21,000 bottles a month given its increasing store network and strong demand during peak seasons. Since the beginning of the partnership early this 2018, PIZZA has sold about 53,000 bottles of Hope as of June. Pro�ts from these bottles are already going to the construction of one classroom in the Archbishop Cinense Elementary School in Pampanga, which will be turned over to the school some time this September. �is is the �rst classroom being built from PIZZA's committed sales volume, and it looks forward to continue contributing to nation building through this partnership. �e Onion Factor

PIZZA has partnered with Bonena, a farmer cooperative located in Nueva Ecija that has been supplying local onions - about one third of the Company's total onion requirements - since 2017. Given PIZZA's aggressive store roll-out, there are plans of increasing the amount of onions the cooperative supplies to accommodate more existing stores and new stores alike. In addition to this, the goods supplied may expand to include other vegetables such as romaine, bell pepper, and tomatoes, among others. �rough these e�orts, the Company hopes to further support Bonena and provide a steady stream of income to its member farmers.

WOW for the Road

�e Shakey's WOW culture is not just applicable within the Company but in other organizations as well. In 2017, PIZZA conducted a two-day Excellent Guest Service Seminar for the National Capital Region's Land Transportation O�ce (LTO-NCR). �e Company was requested by LTO-NCR Regional Director Atty. Clarence Guinto to hold a training session on guest service for their o�ce. A total of 49 LTO employ-ees and 9 district chiefs attended the event and actively participated as PIZZA President Vicente Gregorio, together with the Company's Guest Experience Management Department and Learning and Development Department, shared various behavioral and technical modules. �e seminar received positive feedback and inspired the government participants so much that just a few days a�er the seminar, the LTO decided to commit to completing backlogs. With the success of the event, PIZZA looks forward to spreading its WOW culture to even more organi-zations and inspiring them with its excellent guest service.


BOARD OF DIRECTORS

Executive Committee & Management Committees

Management Teams & Rest of Organization

Elect / Dismiss Ratify / Dismiss

Report

Assists Appoints

Report

Appoints

Ensu

res

com

plia

nce

- Elect- Determine Remuneration Parameters- Supervise and Review

Audit

Report

ReviewReport

- Elect- Determine Remuneration Parameters- Supervise and Review

Audit

The Company recognizes the importance of good governance in creating sustainable value for shareholders in order to achieve long-term success. It believes that good corporate governance, along with the best

CORPORATE GOVERNANCE

SHAREHOLDERS

business practices and value-based decision making, is vital in fulfilling the Company’s multiple economic, moral, legal, and social obligations towards stakeholders.


SHAREHOLDERS

BOARD OF DIRECTORS

Shareholders are encouraged to actively participate by exercising their rights.Such rights include the following among others:

Participating and voting during stockholders’ meetings

Voting and being voted as director or officer of the Company

Inspecting records of all the Company’s business transactions and minutes of any meeting

Exercising the appraisal right on instances stated in Section 81 of the Corporation Code

Receiving dividends declared by the Board of Directors

Sharing in the distribution of the Company’s remaining assets after its dissolution and liquidation

Shareholder rights can be found in the Company’s Manual on Corporate Governance available on the PIZZA website.

The Board of Directors (the Board) is to act in the best interest of the Company and all its shareholders.

The following are some of the roles and responsibilities of the Board. Further details regarding the Board may be found in the Board Charter available on the Company website.

TO SHAREHOLDERS

TO THE COMPANY

Encourage active shareholder participation and minimize costs and administrative impediments to said participation

Be transparent about and fairly promote shareholder rights, and provide processes and procedures for them to follow

Establish corporate disclosure policies and procedures to ensure the comprehensive, accurate, reliable, and timely report of relevant and material information, including non-financial information

Attend and actively participate in all shareholders’ meetings

Have a formal and transparent board nomination and election policy

Oversee the development of and approve business objectives and strategies and monitor their implementation

Approve the selection and assess the performance of Senior Management and other control functions

Ensure an effective performance management framework is in place to certify Management and personnel performance are at par with set standards

Assure the Company has an appropriate internal control system, including a mechanism for managing potential conflicts of interest of the Board, Management, and shareholders

Make certain there is a sound enterprise risk management framework for key business risks

Supervise the proper implementation of and compliance to the Code of Business Conduct and Ethics, including standards for professional and ethical behavior for internal and external dealings

Attend and actively participate in all meetings of the Board and its respective committees


QUALIFICATIONS

�e Board ensures that it has an appropriate mix of competence and expertise. Its members should also remain quali�ed for their positions individually and collectively in order to ful�ll its roles and responsibilities and respond to the needs of the organization based on the evolving business environment and strategic direction.

�e quali�cations of directors, among others, include:

College education or equivalent academic degree

Practical understanding of the businessof the Company

Good standing in the relevant industry, business, or professional organization

Relevant previous business experience

In addition to the above, non-executive directors can only concurrently serve as directors in a maximum of �ve publicly listed companies to ensure he or she can allot su�cient time for Company matters.

TRAINING

�e Company has set guidelines and procedures concerning the orientation program for �rst time directors.

Its directors attended corporate governance seminars conducted by the Institute of Corporate Directors (ICD) in 2016. �e Company has sought the services of the ICD to conduct a series of trainings in August 2018.

SUCCESSION PLAN

�e Board ensures that an e�ective succession planning program for directors and key o�cers are in place. �is is to help secure the continuous growth of the Company.

DIRECTORS INDEPENDENTDIRECTORS

Executive Director Non-Executive Director

CURRENT COMPOSITION

COMPOSITION OF THEBOARD OF DIRECTORS

�e Board of Directors is to have a collective working expertise that is relevant to the Company’s industry or sector.

Majority of the Board should consist of non-executive directors in order to secure objective, independent judgment on corporate a�airs and to substantiate proper checks and balances.

Additionally, at least three or one-third of the Board, whichever is higher, must be independent directors. �is ensures that no director or group of directors can dominate the decision making process, protecting the Company’s interest over the interest of individual shareholders.

A lead independent director is designated should the Chairman of the Board not be independent and is authorized to lead the Board in cases where management has clear con�icts of interest.

9 BOARD MEMBERS

49AVERAGE

AGE

2AVE NO. OF BOARD

SEATS HELD IN PUBLICLY LISTED

COMPANIES


COMMITTEES OF THE BOARD OF DIRECTORS�e Board Committees are to support the e�ective performance of the Board’s functions. �eir purpose, memberships, structures, and responsi-bilities are further discussed in the Committee Charters available on the Company website.

�e Audit Committee is tasked to oversee Senior Management in maintaining an e�ective internal control framework which is able to provide assurance in areas including reporting, monitoring compliance with laws, regulations, and internal policies, and the e�ciency and e�ectiveness of operations.

It ensures that both internal and independent auditors are to have unrestricted access to all records, properties, and personnel to enable them to perform their audit functions independently from one another.

It is composed of at least three non-executive directors, majority of whom, including the Chairman (who should not be Chairman of the Board or of any other committee), should be independent. All must be experienced in the areas of accounting, auditing, and �nance.

�e Audit Committee meets with the Board at least every quarter without the presence of the Chief Executive O�cer or any other member of the management team.

INTERNAL AUDIT

�e Audit Committee has an independent Internal Audit function that provides objective assurance and consulting services, monitoring and guiding the implementation of company policies and bringing a systematic approach to evaluating and improving the e�ectiveness of the Company’s governance, risk management, and control functions.

�e Committee oversees Internal Audit, recommending the approval of the Internal Audit Charter which contains the function’s responsibilities and plans.

It ensures the independence of the Internal Auditor and reviews and monitors Management’s responsiveness to Internal Audit.

�e Audit Committee has a robust process for approving and recommending the appointment, reappointment, removal, and fees of the independent auditor. It should be alerted for any situation that may potentially rise due to con�icts of interest which could impair the independent auditor’s objectivity.

SyCip Gorres Velayo & Co. was re-appointed as the Company’s independent auditor for 2017 during the Annual Stockholders’ Meeting last July 20, 2017, with Maria Pilar B. Hernandez as the engagement partner. It is to assess the Company’s audited �nancial statements and provide its judgment on the compliance of said statements with the Philippine Financial Reporting Standards.

�e Audit Committee met with the Independent Auditor in 2017 without the presence of anyone from the Management team.

In 2017, SyCip Gorres Velayo & Co. was paid PHP2.20 million for their audit services. SyCip Gorres Velayo & Co. is a member �rm of Ernst & Young.

INDEPENDENT AUDITORINDEPENDENTDIRECTORS

Non-Executive Director

CURRENT COMPOSITION

Additionally, the Audit Committee periodically meets with the Chief Audit Executive, whose appointment is recommended by the Committee.

Darel G. Pallesco was appointed as the Company’s Chief Audit Executive and has 8 years of experience in auditing, compliance, and risk management roles in various companies prior to joining PIZZA in 2014.

Internal Audit is to render an annual report on its responsibilities, activities, and performance relative to the audit plans and strategies approved by the Audit Committee.

It is also to provide a statement declaring whether it is compliant with the International Standards for the Professional Practice of Internal Auditing.

Internal Audit assists the Audit Committee to ensure

1AUDIT COMMITTEE

Reliability and integrity of �nancial and operating information

Compliance with policies, plans, procedures, laws, and regulations

Safeguard of assets

Resources are economically and e�ciently used

Results of operations and programs are consistent with established objectives, goals, and plans


�e Board Risk Oversight Committee is to oversee the Company’s enterprise risk management system to ensure its functionality and e�ectiveness. Its responsibility is to supervise Management’s activities in managing credit, market liquidity, and operational, legal, and other risk exposures.

It comprises of at least three members, of whom majority are independent, including the Chairman (who should not be Chairman of the Board or of any other committee). At least one member should be knowledgeable in risk and risk management.

�e Committee should always have clear communication with the Chief Risk O�cer. Manuel T. Del Barrio, the Company’s Chief Financial O�cer, was appointed as Chief Risk O�cer.

�e Corporate Governance Committee is responsible for ensuring the Company’s compliance with corporate governance principles and practices. It periodically reviews the Company’s corporate governance framework to ensure it remains appropriate given material changes in the corporation’s size,complexity, strategy, and business and regulatory environments.

�e Committee is also to function as a Nomination and Remuneration Committee, determining the nomination and election process and establishing a formal and transparent procedure in developing a policy for determining remuneration.

It composes of at least three members, all of whom should be independent, including the Chairman.

�e Related Party Transactions Committee is tasked to review all material related party transactions of the Company. It also informs regulating and supervising authorities relating to the Company’s related party transaction exposures and ensure appropriate disclosures are accomplished.

�e Committee is comprised of at least three non-executive directors, two of whom should be independent, including the Chairman.

2BOARD RISK OVERSIGHT COMMITTEE

3CORPORATE GOVERNANCE COMMITTEE

4RELATED PARTY TRANSACTIONSCOMMITTEE

INDEPENDENTDIRECTORS


CURRENT COMPOSITION



CURRENT COMPOSITION



CURRENT COMPOSITION


CORPORATE SECRETARY COMPLIANCE OFFICER

�e Corporate Secretary is to keep abreast of relevant laws, regulations, governance issuances, industry developments, and operations of the Company and advise the Board on all relevant issues as they arise.

Atty. Maria Rosario L. Ybanez was appointed as the Company’s new Corporate Secretary on May 23, 2018, and has been involved in the practice of corporate, civil, criminal, labor, and intellectual property law since 2001. She is scheduled to attend her training on corporate governance conducted by the ICD in August 2018.

�e Compliance O�cer is responsible for determining and measuring the Company’s adherence with its Manual on Corporate Governance, relevant laws, the Code of Corporate Governance for publicly listed companies, SEC rules and regulations, and all governance issuances of regulatory agencies.

Manuel T. Del Barrio, the Company’s Chief Financial O�cer, was appointed as Compliance O�cer. He is scheduled to attend his training on corporate governance conducted by the ICD in August 2018.

�e Executive Team, along with the rest of the Management team, answers to the Board of Directors and is responsible for the operations and performance of the Company. It concretizes the Company’s objectives and targets by executing its strategies and attaining set targets. �e Team is spearheaded by the Chief Executive O�cer (CEO).

�e positions of CEO and Chairman of the Board are held by separate individuals.�eir roles in the organization are distinguished below:

CHIEF EXECUTIVE OFFICER

Supervise, monitor, and control operational activities and performance

Oversee operational alignment and operating structures

Determine the Company’s strategic direction and implement its short and long-term strategic plans

Oversee operations and all day-to-day management decisions of the Company

Manage the Company’s resources prudently

Serve as the link between internal and external stakeholders and provide stockholders with a balanced and comprehensible assessment of the Company’s performance, position, and prospects

EXECUTIVE TEAM

CHAIRMAN OF THE BOARD

Maintain qualitative and timely lines of communication and information between the Board and Management

Preside Board meetings and ensure its focus on the Company’s overall risk appetite, key governance concerns, and contentious issues that will significantly affect operations

Focus on long-term goals and important strategic moves

Evaluate performance of high-level executives


�e rest of the organization completes the Company and supports its strategies in order to achieve its ever-growing targets. With competent professionals who embody the core values, PIZZA is able to ful�ll its purpose of being the leading and preferred Family Casual Dining Restaurant, serving pizza as its core product. As such, attracting, developing, and retaining talent across the organization is of key importance.

PIZZA sets high standards for itself with its WOW philosophy and performance goal of being better than before, better than others, and better than expected. It is an organization with a culture anchored on guest centricity, unquestioned integrity, passion for excellence, accountability, and entrepreneurial spirit. As such, PIZZA sees the importance of investing in its people.

PIZZA continuously strives to boost the entrepreneurial spirit of its people through its �ink Guest Program. Its rewards philosophy is to “Pay for Performance” and ensure that high performers are recognized and di�erentiated from the rest. �e Company wants its expansion program to spur the career growth of its people, making sure it retains those who share the same passion for excellence and demonstrate grit in order to sustain PIZZA’s edge in the industry.

�e Company’s policies also promote compliance with government regulations on health and safety, while employee welfare policies are designed to help employees achieve work-life balance. It also believes in providing opportunities to people with disabilities and working hand-in-hand with local communities through special recruitment projects.

REST OF ORGANIZATION


FERNAN VICTOR P. LUKBANLead Independent Director

LEO PRIETO, JR.Advisor to the Board

LISA G. CHENG, Independent Director

ENRIQUE A. GOMEZ, JR.Director

CHRISTOPHER T. POChairman

LEONARDO ARTHUR T. PODirector & Treasurer

NOT IN PHOTO:


BOARD OF DIRECTORS

MA. PILAR P. LORENZOAdvisor to the Board

PAULO L. CAMPOS IIIIndependent Director

RICARDO GABRIEL T. POVice Chairman

TEODORO ALEXANDER T. POVice Chairman

VICENTE L. GREGORIODirector, President & CEO



TEODORO ALEXANDER T. PO

BOARD OF DIRECTORS

CHRISTOPHER T. PO Chairman

Christopher T. Po was re-elected as the Company’s Chairman on July 20, 2017. He concurrently serves as the Executive Chairman of Century Pacific Food, Inc. (CNPF) and as a Director of Arthaland Corporation (ALCO), a property developer listed on the PSE. Prior to those roles, he was Managing Director for Guggenheim Partners, a U.S. financial services firm, where he was in charge of the firm’s Hong Kong office. Previously, he was a Management Consultant at McKinsey and Company working with companies in the Asian region. He also worked as the Head of Corporate Planning for JG Summit Holdings, a Philippine-based conglomerate with interests in food, real estate, telecom, airlines, and retail. He graduated summa cum laude from Wharton School and College of Engineering of the University of Pennsylvania with dual degrees in Economics (finance concentration) and applied science (system engineering) in 1991. He holds a Master degree in Business Administration from the Harvard University Graduate School of Business Administration. Mr. Christopher Po is a member of the Board of Trustees of WWF-Philippines as well as the Wharton Penn Alumni Club of the Philippines. He is also the President of the CPG-RSPo Foundation, the socio-civic arm of CNPF.

Vice Chairman

Vice Chairman

RICARDO GABRIEL T. PO

Ricardo Gabriel T. Po was re-elected as the Company’s Vice Chairman on July 20, 2017. He concurrently serves as a Vice Chairman of CNPF and as a Vice Chairman of ALCO. He was the Executive Vice President and Chief Operating Officer of CNPF from 1990 to 2006 and became the Vice Chairman of its Board of Directors in 2006. He graduated magna cum laude from Boston University with a Bachelor of Science degree in Business Management in 1990. He also completed the Executive Program (Owner-President Management Program) at Harvard Business School in 2000.

Teodoro Alexander T. Po was re-elected as the Company’s Vice Chairman on July 20, 2017. He concurrently serves as the Vice Chairman, President, and CEO of CNPF. Since 1990, Mr. Teodoro Po has held various positions in CNPF. He graduated summa cum laude from Boston University with a Bachelor of Science degree in Manufacturing Engineering in 1990. He also completed the Executive Education Program (Owner-President Management Program) at Harvard Business School.

AUDIT COMMITTEE MEMBERBOARD RISK OVERSIGHT COMMITTEE MEMBERRELATED PARTY TRANSACTIONS COMMITTEE MEMBER


Director & Treasurer

Director, President & CEO

Director

LEONARDO ARTHUR T. PO

Leonardo Arthur T. Po was re-elected as the Company’s Director and Treasurer on July 20, 2017. He concurrently serves as the Director and Treasurer of CNPF and as the Director, Executive Vice President, and Treasurer of ALCO. Mr. Leonardo Po graduated magna cum laude from Boston University with a degree in Business Administration and has extensive and solid business development experience in the consumer marketing, finance and operations of fast-moving consumer goods (FMCG), food service, quick-serve restaurants, and real estate development.

VICENTE L. GREGORIO

Vicente L. Gregorio was re-elected as the Company’s Director, President, and CEO on July 20, 2017. He concurrently serves as a member of the Board of the Philippine Franchise Association, Cavallino, Inc., Don Bosco Technical College, Bosconian International Chamber of Commerce, and Plan Master Insurance and Financial Services, Inc. Mr. Vicente Gregorio has been the Company’s President and CEO since March 2013. He has more than thirty years of experience in the food business, previously serving as Operations Director in various food service companies prior to assuming the position of Executive Vice President and Chief Operations Officer of the Company in February 2003. Mr. Vicente Gregorio graduated from Central Colleges of the Philippines with a Bachelor of Science degree in Electrical Engineering and has earned units from the Business Administration Master’s program of the Graduate School of Business at the Ateneo de Manila University.

ENRIQUE A. GOMEZ, JR.

Enrique A. Gomez, Jr. was first elected as the Company’s Director on July 20, 2017. He concurrently serves as a Director of CNPF and as Chairman of IdeaForma Asia Pacific Group, Inc., a management consultancy company. He was President of San Miguel Food and Beverage International, Inc. from 2004 to 2005. From 2001 to 2004, he was President of San Miguel Purefoods Company and Chairman/Director of all food group subsidiaries. He was President of La Tondena Distillers, Inc. (now Ginebra San Miguel, Inc.) from March 2000 to April 2001 and also served as San Miguel Packaging Products President and Chairman of all packaging group subsidiaries from June 1998 to February 2000.

Lead Independent Director

Independent Director

Independent Director

PAULO L. CAMPOS III

Paulo L. Campos III was re-elected as the Company’s Independent Director on July 20, 2017. He concurrently serves as the Co-Founder and Chief Executive Officer of ZALORA Philippines, having founded the company in late 2011. Prior to ZALORA, he was a management consultant with the Boston Consulting Group in Singapore where he worked with companies across the region on issues related to business development, organizational development, investor communications, and strategy. Mr. Paulo Campos holds a Master in Business Administration from Harvard Business School and graduated magna cum laude from Princeton University with a degree from its Woodrow Wilson School of Public and International Affairs. After university, he was employed with Ayala Land, Inc. as a Special Assistant to the President until 2008.

LISA G. CHENG

Lisa Gokongwei-Cheng was first elected as the Company’s Independent Director on July 20, 2017. She concurrently serves as the Founder and President of Summit Media, a leading digital media and outside-of-home company. She is also Head of JG Summit’s Digital Transformation Office. She holds a Masters in Journalism from Columbia University.


FERNAN VICTOR P. LUKBAN

Fernan Victor P. Lukban was re-elected as the Company’s Independent Director on July 20, 2017. He now serves as the Lead Independent Director effective May 23, 2018. He concurrently serves as the Lead Independent Director of CNPF and as a Director of PSE-listed company Central Azucarera de Tarlac, Inc. He is a well-recognized consultant in family business, strategy, entrepreneurship, and governance. Mr. Fernan Lukban holds undergraduate degrees in Engineering (Mechanical and Industrial from De La Salle University, Manila) and graduate degrees in economics (MSc in Industrial Economics from the Center for Research & Communication, now University of Asia & the Pacific) and in business (MBA from IESE Barcelona, Spain). He spent much of his early professional years in academia, helping establish the University of Asia & the Pacific where he currently participates as a consultant, mentor, and guest lecturer. He is a founding fellow of the Institute of Corporate Directors. He also served as an Independent Director of ALCO from 2011 to 2016.

AUDIT COMMITTEE CHAIRPERSON BOARD RISK OVERSIGHT COMMITTEE MEMBERCORPORATE GOVERNANCE COMMITTEE MEMBERRELATED PARTY TRANSACTIONS COMMITTEE MEMBER

Ms. Lisa Gokongwei-Cheng has expressed her intent to step down as Independent Director due to other responsibilities. In this light, Ms. Frances J. Yu has been nominated to assume a seat on PIZZA’s Board of Directors as an Independent Director.

AUDIT COMMITTEE MEMBERCORPORATE GOVERNANCE COMMITTEE CHAIRPERSONRELATED PARTY TRANSACTIONS COMMITTEE CHAIRPERSON

BOARD RISK OVERSIGHT COMMITTEE CHAIRPERSONCORPORATE GOVERNANCE COMMITTEE MEMBER


ADVISORS TO THE BOARD

MA. PILAR P. LORENZO

Ma. Pilar Prieto-Lorenzo is a graduate of Marymount College, New York with a Bachelor of Science degree in Business Administration major in Finance. She served as Vice Chairman of International Family Food Services, Inc. (IFFSI) - now Shakey’s Pizza Asia Ventures, Inc. (PIZZA) - until the sale to Century Pacific Group. She currently serves as Chairman of Panda Development Corporation (Dunkin' Donuts franchisee) and is a Director of Cavallino, Inc. (Racks) and Tencav Corporation (Tenya). She is also a member of the Board of Trustees of The Beacon School.

LEO PRIETO, JR.

Leo Prieto, Jr. graduated from Georgetown University College of Arts and Sciences with a Bachelor of Arts degree in Economics and International Finance in 1971. He was the Chairman of IFFSI until the sale to Century Pacific Group. He is currently the Chairman of Cavallino, Inc. and Tencav Corporation and is a member of the Board ofLLP Enterprises, Inc.


SENIOR MANAGEMENT TEAM

Manuel T. Del Barrio was re-appointed as the Company’s Vice President and Chief Financial Officer on July 20, 2017. He concurrently serves as the Chief Risk Officer, Chief Information Officer, and Compliance Officer of the Company. He was previously the Assistant Vice President for Finance of CNPF and The Pacific Meat Company, Inc. Prior to this, he worked as an Industrial Accounting Manager at Temic Telefunken Semiconductors, Inc. and held accounting positions in Hooven Philippines and Sanara, Inc. He has a Bachelor of Science degree in Business Administration from the University of the East and holds a Master in Business Administration (Regis Program) from the School of Business of the Ateneo de Manila University. He is a Certified Public Accountant and a Certified Management Accountant.

MANUEL T. DEL BARRIOVice President & Chief FinancialOfficer, Chief Risk Officer,Chief Information Officer &Compliance Officer

Jorge Maria Q. Concepcion was re-appointed as the Company’s General Manager on July 20, 2017. He has been General Manager of the Company since his repatriation from the U.S. in 2014. He previously served as the Executive Vice President and General Manager at Gallo Giro (a Mexican restaurant chain in California), Red Ribbon Bakeshop, Inc. (U.S. and the Philippines), and Goldilocks Corporation of California. Before entering the food service retail industry, Mr. Jorge Concepcion started in the branded foods FMCG business where he worked for various Unilever Asia affiliates in the Philippines, Malaysia, and Singapore in different capacities in marketing, sales, corporate planning, and general management. He first repatriated to the Philippines in 1996 with the Conagra joint-venture company Hunt’s-URC. He then subsequently and concurrently headed URC’s Dairy Product Division and Food Service Division before eventually migrating to the U.S. in 2006. He has a Bachelor of Arts (Honors) degree in Mathematics from De La Salle University and has a Master of Science in Industrial Engineering and Operations Research from the University of the Philippines.

JORGE MARIA Q. CONCEPCIONSPAVI General Manager

Carlos S. Robles III has been the Company’s North Business Unit General Manager since 2014. He previously served as Director of Operations of the Company. He was an Operations Manager at McDonald's Philippines, holding various positions such as training consultant, franchise business consultant, and Equipment Department Head prior to this. He has a Bachelor of Arts degree in Economics from the University of the Philippines, Diliman.

CARLOS S.ROBLES IIINorth Business UnitGeneral Manager

Gilbert L. Tolentino has been the Company’s South Business Unit General Manager since 2015. He previously served as head of various Company departments such as Organization Development, Technical Services, Franchise Operations, and Business Development. Before his assignment as South Business Unit General Manager, he was the Operations and Business Development Director of Project Pie. He has been in the food business for thirty years and was the Group Training Manager of the Pancake House Group before joining the Company. He has a Bachelor’s degree in Engineering from the University of the East.

GILBERT L.TOLENTINOSouth Business UnitGeneral Manager


Jennifer V. Lapa was re-appointed as the Company’s Chief Human Resource Officer on July 20, 2017. She has been Chief Human Resource Officer since August 2013. She previously served as the Vice President for Human Resources for The Expressions Company and was President of Enthos, Inc. from 2002 to 2008. She was based in Hong Kong as the Vice President for Human Resources of the greater China business of the San Miguel Brewing Group International, Ltd. from 1995 to 1998. She was Assistant Vice President of Organization and Management Development from 1991 to 1995 and Manager of Compensation Systems and Programs of the San Miguel Beer Group from 1988 to 1991. She is a graduate of St. Theresa's College, Quezon City, obtaining a Bachelor of Arts degree in Foreign Service in 1974. She attended a month-long Executive Program in National University - Stanford, Singapore in 1991. She obtained her Cognate in Organization Development, major in Enterprise Leadership and her Ph.D. in Organization Development from the Southeast Asia Interdisciplinary Institute - School of Organization Development, Antipolo. She was President of the Organization Development Professionals Network, Philippines from 2011 to 2012 and from 2014 to 2016.

JENNIFER V.LAPAChief Human Resource Officer

Alois Brielbeck was re-appointed as the Company’s In-House Commissary General Manager on July 20, 2017. He has been General Manager of the In-House Commissary since October 2005. He moved to the Philippines in February 2000 as the Chief Operating Officer for Culinary Systems Specialists Inc., a company involved in the production of bakery products to both local and export markets. He has held key positions in pastry kitchens in Hong Kong and Tokyo, Japan before moving to the Philippines. Mr. Alois Brielbeck is a fully-qualified Baker with a Baker Master Diploma from the Master School of Lochham in Munich, Germany.

ALOISBRIELBECKIn-House CommissaryGeneral Manager

Jose Arnold T. Alvero has been the Company’s Franchise, Business Development, and Corporate Planning Director since 2017. He previously served as Corporate Franchising and New Channel Development Director of One Food Group (KFC, Tokyo Tokyo, Mister Donut). Prior to that, he was RBU General Manager of Mister Donut and RBU Head and AVP of Red Ribbon Bakeshop, Philippines. He also held various franchising and operations managerial positions at Red Ribbon Bakeshop, Inc. and McDonald’s Philippines. He served as Duty Manager at The Palace Hotel, Beijing and as Guest Services Manager at the Mandarin Oriental, Manila. He graduated cum laude from the University of the Philippines with a Bachelor of Science degree in Hotel and Restaurant Administration and is currently working on his Certified Franchise Executive certification from the International Franchise Association. He is a Trustee of the San Beda University Alumni Association and an Administrator of the Don Luis Go Sy Charitable Foundation, Inc.

JOSE ARNOLD T. ALVEROFranchise, BusinessDevelopment, and CorporatePlanning Director

Marvin Q. Da Silva recently joined as the Company’s Vice President for International Operations in 2018. He previously served as General Manager of Potato Corner’s International Division from 2015 to 2017. Prior to this, he was Associate Director for Business Development and Operations of FPD Asia Property Services, Inc. from 2009 to 2014. He was also a former franchisee of Mister Donut and Greenwich Pizza. He has been in the real estate and food business industries for thirty years. His first job was at Shakey’s Loyola as a Service Crew member, and he became Restaurant Supervisor from 1987 to 1990. He has a Bachelor of Science degree in Psychology from the University of Santo Tomas, and he completed his Master in Business Administration degree from the Ateneo de Manila University Graduate School of Business in 2001.

MARVIN Q.DA SILVAVice President -International Operations

CONDUCT AND ETHICSCODE OF BUSINESS

�e Company’s policies on the following business conduct and ethics a�ecting the directors, senior management, and employees are discussed below:

Conflict of InterestAll employees, irrespective of rank, should always act for the best interest of the Company. All con�ict of interest shall be avoided and prohibited. In the event that such will occur, disclosure must be done to the immediate supervisor or human resources head.

Conduct of Business and Fair DealingsBusiness is dictated by free competition - no monopoly and no price manipulation. Price is dictated by supply and demand. Employees are required to comply with fair trade practices.

Receipt of Gifts from Third PartiesAll employees are prohibited from accepting gi�s based on the no gi� policy of the Company.

Compliance with Laws and RegulationsAll employees, in the conduct of business, are obliged to comply with all relevant laws and regulations.

Respect for Trade Secrets and Use of Non-Public InformationAll employees are required to sign and adhere to a con�dentiality agreement. All employees are prohibited from disclosing or using to their own advantage any non-public information.

Use of Company Funds, Assets, and InformationAll employees are required to act as responsible custodians of all company funds, assets, and information. As such, all are required to protect and preserve company assets.

Employment and Labor Laws and Policies�e Company complies with all existing employment and labor laws and policies.

Disciplinary ActionDisciplinary actions are meted only a�er due process. �e Company has a Code of Conduct that serves as a guide for the employees’ behavior.


Whistle Blower�e Company has a whistle blower policy that provides an avenue for employees to report misconduct of fellow employees, including their superiors, while protecting the employee’s identity and welfare.

Conflict Resolution

�e Company provides a work environment that is conducive to friendly resolution of disagreement. Superiors should promote amicable settlement of con�icts.

Insider Trading�e Company’s insider trading policy states that all managers and up are strictly prohibited from buying or selling PIZZA shares for �ve trading days prior to the release of and up to three trading days a�er the disclosure of reports containing material information.

Notices of said trading blackouts are issued to covered persons by e-mail.

Reporting of Personal TransactionsAll controlling shareholders, directors, and executive o�cers must report any of their dealings in the Company’s shares as well as changes in their bene�cial shareholdings in the Company to the Compliance O�cer.

Said persons are required to report these transactions within three business days from the transaction date, a�er which the Compliance O�cer will promptly disclose according to relevant rules and regulations the buy or sell details to the Philippine Stock Exchange and Securities and Exchange Commission.


RISK MANAGEMENT

RISKS IN SAME-STORE SALES GROWTH

We operate in highly competitive markets. �e Philippine food service industry in general is highly competitive with relatively low barriers to entry. As such, many well-established food service businesses compete directly and indirectly with us. We generally compete with national, regional, and locally-owned full-service and casual dining stores that o�er dine-in, carry-out, delivery, and catering services. �ese segments are highly competitive with respect to, among other things, location, managing and meeting human resources requirements, taste, price, raw materials, food quality and presentation, service, brand awareness and loyalty, and the ambience and condition of each store.

Damage to our reputation and the Shakey’s brand, and negative publicity to our stores, could negatively impact our business.

Any incident that erodes consumer a�nity for our brand could signi�cantly reduce its value and damage our business. We may be adversely a�ected by news reports or other negative publicity regardless of their accuracy regarding food quality issues, public health concerns, illness, safety, injury, customer complaints or litigation, health inspection scores, integrity of ours or our suppliers’ food processing, employee relationships or government or industry �ndings concerning our stores, or stores operated by

stores, both company-owned and franchised, maintaining our existing network of stores (including successfully relocating these stores when necessary), and operating those stores on a pro�table basis. We may not be able to open stores as quickly as planned. In the past, we have experienced delays in opening some stores due to construction delays and delays in obtaining local permits which could happen again in future store openings. Delays or failure in opening stores could materially and adversely a�ect our growth strategy and our business, �nancial condition, and results of operations. In addition, one of our biggest challenges is locating and securing an adequate supply of suitable store sites in our target markets. Competition for those sites is intense among other store and retail operators, and there is no guarantee that a su�cient number of suitable sites will be available in desirable areas or on terms that are acceptable to us in order to achieve our growth plan.

Opening new stores in existing markets may negatively a�ect sales at our existing stores.

�e opening of a new store in or near markets in which we already have stores could adversely a�ect sales at these existing stores. Existing stores could also make it more di�cult to build our guest base for a new store in the same market. Sales cannibalization between stores, which could a�ect our sales growth as we continue to expand our operations, could adversely a�ect our business, �nancial condition, and results of operations.

other food service providers or others across the food industry supply chain. Finally, there has been a marked increase in the use of social media platforms and similar devices, making the availability of information virtually immediate as is its impact.

Our growth is dependent, in part, upon our ability to maintain and enhance the value of our brand, consumers’ connection to our brand, and positive relationships with our franchisees. We believe we have built our reputation on the high quality of our food, service, and sta� as well as on our culture and the ambience in our stores thanks to tried and tested operational systems that cover all aspects of food safety and quality as well as guest service and hospitality.

We must protect, invest, and grow the value of our brand to continue building barriers to entry in this highly competitive industry. Our ability to successfully compete in our markets depends as well on our ability to maintain low-cost operations, allowing us to provide value-for-money options to our guests and further enhance their loyalty via promotions, meal bundles, and loyalty programs, among others.

RISKS IN INCREASING STORE NETWORK

Our growth is highly dependent on our ability to open new stores, maintain our existing store network, and select strategically located sites for our store branches.

One of the key means of achieving our growth strategy will be through opening new

Our ability to open new stores and maintain our existing store network also depends on using our brand strength and proven track record to negotiate new leases or renew existing leases at acceptable or favorable terms.

We also ensure that we have identi�ed, hired, and trained quali�ed employees for each site from the development of the store to construction and to the eventual opening and operational execution.

In particularly competitive markets, managing construction and development costs of stores is key. �ere are instances where unavoidable delays and overruns will occur due to delays by landlords in delivering leased premises to us, unforeseen engineering or environmental problems, trouble securing required government approvals and licenses, inclement weather, natural disasters, and other calamities. In these cases, we manage the overall system growth rate by ensuring we have a number of backup sites and su�cient funds from operations to �nance any incremental costs.

Our primary business strategy does not entail opening new stores that we believe may materially a�ect the sales at our existing stores, a large portion of our stores is still concentrated in the greater Metro Manila area. �ere are still many opportunities to expand beyond the usual �rst-tier cities. Moreover, we may selectively open new stores in or around areas of existing stores operating at or near capacity to e�ectively serve our guests and create a better dining and delivery experience. �is, in the long run, is bene�cial to the brand and to the continued increase in sales.


RISKS IN MAINTAINING PROFITABILITY

Changes in food and supply costs and availability could adversely a�ect our results of operations.

Our food distributors and suppliers may be a�ected by higher costs to produce and transport commodities used in our stores, higher minimum wage and bene�t costs, and other expenses that they pass through to their customers which could result in higher costs for goods and services supplied to us. We may not be able to anticipate and react to changing food costs through our purchasing practices and menu price adjustments in the future. As a result, any increase in the prices charged by suppliers would increase the food costs for our company-owned stores and for our franchise owners and could adversely impact pro�tability.

We rely on key suppliers for certain raw materials and the failure of those suppliers to adhere to and perform contractual obligations may adversely a�ect our business.

We rely on key suppliers for certain raw materials. Any material interruptions in our supply chain, including failure or delays in delivery, such as a material interruption of ingredient supply due to the failure of third-party distributors or suppliers or interruptions in service by common carriers that ship goods within our

distribution channels, may result in signi�cant cost increases and reduce store sales. Our pro�tability and operating margins are dependent, in part, on our ability to anticipate and react to changes in food and beverage costs, particularly the costs of key ingredients such as cheese, chicken, and potatoes. We religiously monitor prices as well as the supply and demand situation of the raw material to ensure we are adequately covered at reasonable prices. We also maintain a network of alternative distributors or suppliers who can provide contingent supply on a timely basis. Moreover, we work closely with key third-party service providers to monitor their adherence to and performance of contractual obligations.

In addition, we may choose to pass along commodity price increases to our guests as long as we continue to provide them value for their money and a high-level dining experience relative to peers at the same price point.

RISKS IN FRANCHISING

Our results of operations and growth strategy depend, in part, on the success of our franchisees, and we are subject to various additional risks associated with our franchise owners.

Franchisees are independent contractors and are not our employees, and we do not exercise control over their day-to-day operations. A portion of our revenues comes from royalties and sales of raw materials and supplies and equipment to our franchisees which we expect to continue in

the future. Accordingly, we are reliant on the performance of our franchise owners in successfully opening and operating their stores and paying royalties to us on a timely basis. If we fail to identify, recruit, and contract with a su�cient number of quali�ed franchise owners, our ability to open new franchised stores and increase our revenues could be materially adversely a�ected.

�e opening of additional franchised stores depends, in part, upon the availability of prospective franchise owners who meet our criteria. We may not be able to identify, recruit, or contract with suitable franchise owners in our target markets on a timely basis or at all. In addition, our franchise owners may not have access to the �nancial or management resources that they need to open the stores contemplated by their agreements with us; or they may elect to cease store development for other reasons. If we are unable to recruit suitable franchise owners or if franchise owners are unable or unwilling to open new stores as planned, our growth may be slower than anticipated which could materially adversely a�ect our ability to increase our revenues, our business, �nancial condition, and results of operations.

We provide training and support to franchisees and oversee the quality of franchised store operations via a network of area business managers whose performance metrics are also tied to the performance of franchisees within their scope.

�e strength of our brand and the industry-leading economics of our stores a�ord us a wide array of interested franchisees. Moreover, many of our franchise owners operate more than one store; so our growth strategy includes tapping the signi�cant number of existing franchise owners who are interested in increasing their own network.

In selecting our franchisees, we ensure that they have the business acumen and �nancial resources necessary to operate successful franchises in their franchise areas in a manner consistent with our standards and requirements and that they will hire and train quali�ed managers and other store personnel. Our franchise agreement also adequately covers situations wherein franchisees do not meet our standards and requirements and any other disputes when they may arise.


INVESTORRELATIONSPROGRAM

COMPANY VISIT 25%

CALL 3% INVESTORCONFERENCE 72%

MANILA29%

KUALALUMPUR

12%

SINGAPORE41%

HONGKONG 9%

LONDON9%

ONE-ON-ONE MEETINGSWITH INVESTORS

ONSHORE AND OFFSHOREINVESTOR CONFERENCES


WHY WE ENGAGE

HOW WE ENGAGE

CONTACT INFORMATION

to build a full and fair valuation of the securities’ price of publicly listed companies under the group in order to reduce cost of capital and create value for shareholders.

to ensure the companies’ continued access to capital markets in order to provide the necessary support for long-term growth.

Giovanna M. VeraHead of Investor [email protected]

facilitating e�ective two-way communication between our companies and the �nancial community.

building con�dence in our companies’ strategic plans and gaining trust in management teams’ ability to execute them.

�e Investor Relations (IR) team is the �nancial market’s main point of contact.

We provide the appropriate information to investors and analysts in a manner that is timely and easy to understand. Said communication program is meant to be clear and consistent, focusing on the key metrics that drive business performance. We also facilitate all required disclosures to the regulatory authorities, primarily the Philippine Stock Exchange and the Securities and Exchange Commission.

As a trusted source of information, we pride ourselves in freeing up C-suite time, allowing them greater �exibility to focus on operating and building the business.

�e primary subject of IR communication is our companies’ ability to create shareholder value.

We focus primarily on conveying managements’ long-term vision and the many interim key milestones necessary to achieve these goals.

�rough this exercise, we hope to build the trust and con�dence of long-term shareholders whose objectives most closely align with that of our companies. Analysts and investors are also a valuable source of feedback on both the IR program and the broader corporate strategy.

We actively engage third parties to comment on the quality of our work and for their views and expectations of our companies.

Building these productive relationships with �nancial market participants provides valuable insights that may help support the companies’ fundamentals. We use this information �ow as an opportunity to obtain new ideas and identify global practices, analyzing them then sharing these with the management team when appropriate.

ACH I EV EMENTAWARDS

2018

SEMESTRAL CONFERENCE CALLSON FINANCIAL RESULTS

AUGUST 15,2017

FIRST HALFEARNINGS CALL

CEO, CFO, GMIR HEAD

DATE PRESENTERSPERIOD (2017)

AWARDED PHILIPPINES’ BEST SMALL CAP COMPANY

BY FINANCE ASIA IN 2018

USE OF CORPORATE WEBSITE

COMMISSARY VISITS

USE OF A GLOSSYANNUAL REPORT

PRESS RELEASES NON-DEAL ROADSHOW

The official corporate website,

is easily accessible across different platforms and devices. It contains all pertinent and updated company information such as press releases, disclosures, financial calendar,and more.

PIZZA produces a glossy annual report containing a comprehensive overview and performance of the Company for the year. Highlights include company milestones, business infographics, feature articles, financial statements, and other useful information to shareholders, potential investors, customers, and the general public.

www.shakeyspizza.ph

WELCOMING ANNUALGENERAL MEETING

Date: July 20, 2017 Venue: Marco Polo Ortigas, Manila

NOMINATED BEST IPO LOCALSMALL INVESTOR PROGRAM

BY THE PSE BELL AWARDS FOR EXCELLENCE IN CORPORATE GOVERNANCE IN 2017


STOCK HIGHLIGHTS

STOCK EXCHANGE

Shakey’s Pizza Asia Ventures, Inc. is listed on the Philippine Stock Exchange (PSE) with “PIZZA” as its ticker symbol. The stock has a minimum board lot of 100 shares and has no foreign ownership restriction. It had its Initial Public Offering (IPO) on December 15, 2016.

STOCK PERFORMANCE (in PHP)

DIVIDEND HISTORY

On May 8, 2017, PIZZA declared regular cash dividends amounting to PHP0.10 per share. The total payout represented 23% of the previous year’s net income.

Prior to this, as a private company, PIZZA paid out quarterly cash dividends to its shareholders. On December 31, 2015, and June 30, 2016, PIZZA’s Board of Directors approved the quarterly and special cash dividend declaration of PHP150.4 million and PHP986.9 million respectively.

19.5%Increase since IPO

17.0%Growth Year-on-Year

17.2B 17.6B

20.6B

MARKETCAPITALIZATION

11.26 11.50

13.46

STOCK PRICE

IPO END 2016 END 2017


ANNUAL STOCKHOLDERS’MEETING

SHARE CAPITALAs of end 2017, PIZZA’s authorized capital was PHP2 billion composed of 2 billion common shares with a PHP1.00 par value. There were 1,531,321,053 listed, issued, and outstanding shares as of the same period.

The Company ended the year with a market capitalization of PHP20,611,581,373.38 based on the PHP13.46 closing price as of December 31, 2017.

SHAREHOLDERS

JUNE

20

INFORMATION DISCLOSURES

PIZZA strictly abides by the requirements set forth by the Philippine Securities and Exchange Commission and the PSE with regards to the disclosure and filing of information. All required information is promptly disclosed to the investing public through the Company’s corporate website and its official page on the PSE online portal as follows:

45,000

PIZZA’s Annual Stockholders’ Meeting is to be held every June 20th beginning 2019.

The meetings in 2017 and 2018 were held on July 20 and August 16 respectively.

Century Pacific Group, Inc. (CPGI)53%

Owner 218%

Owner 36%

Wholly owned by the Philippines’ Po family and majority shareholder of CNPF PM and ALCO PM

Owner 42%

Owner 51%

20%Others

29% PUBLICFLOAT

www.shakeyspizza.ph

http://edge.pse.com.ph/companyInformation/form.do?cmpy_id=664


MANAGEMENT’S DISCUSSIONAND ANALYSISConsolidated Statements ofFinancial Position

PIZZA’s consolidated total assets stood at PHP9.11 billion as of December 31, 2017, a decrease compared to the total assets as of end 2016. �is is primarily attributable to the signi�cant reduction in the Company’s available-for-sale investments. Net property, plant, and equipment registered at PHP1.54 billion with capital expenditures for the year reaching PHP768 million. �is was mainly invested in the building of new stores, an upsized commissary, and the new corporate o�ce.

Total equity increased to PHP3.97 billion from PHP3.36 billion at the end of 2016 driven primarily by the Company’s generated net income during the year. Book value per share (BVPS) increased by 18% to PHP2.60 compared to PHP2.19 as of end 2016.

Meanwhile, total liabilities declined to PHP5.13 billion from PHP6.03 billion following the PHP1.0 billion prepayment of the Company’s acquisition loan. �e loan originally amounted to PHP5.0 billion prior to the Company’s initial public o�ering (IPO) in 2016. �is was lodged into the Company as part of the acquisition strategy of Century Paci�c Group, Inc. (CPGI) and the sovereign wealth fund of Singapore to acquire the in-house commissary and trademark companies holding the rights and trademarks of the Shakey’s brand.

�e Company’s return on equity for the full-year 2017 remained robust at 20.8%. Net debt-to-equity ratio stood at 1.23x as of end 2017. �is is lower versus the 1.70x as of the year before, mainly due to the lower acquisition leverage brought about by the partial loan prepayment made in the early part of January 2017. Considering only interest-bearing liabilities, net gearing ratio is at 0.93x as of end 2017.

Consolidated Statements ofComprehensive Income

System-wide sales, which comprises sales from both company-owned and franchised stores, increased by 14% from PHP7.34 billion to PHP8.34 billion for the full-year 2017. �is was driven by healthy same-store sales growth of 5% and successful store network expansion of 24 net new stores in 2017. Same-store sales refer to sales generated from stores that have operated for at least 15 months and exclude sales from new stores.

Consolidated net revenues, composed of sales from company-owned stores, franchise and royalty fees from franchisees, and revenues from wholly-owned subsidiaries, reached PHP7.00 billion. �is translates to a 16% increase in pro forma revenues of PHP6.01 billion for the twelve months ending December 31, 2016, and 18% from reported revenues of PHP5.95 billion during the same period. Likewise, this brings the Company’s two-year compounded annual revenue growth rate to 16% since 2015.

For the year ending 2017, consolidated cost of sales grew by 19% to PHP4.94 billion from the pro forma amount of PHP4.16 billion in 2016. �is increase was faster than the 16% growth in consolidated net revenues. Cost of sales is mainly composed of raw material and packaging costs, direct labor costs, and store-related costs including rent, utilities, etc. �e accelerated increase in cost of goods was due to elevated commodity prices and raw material costs relative to the previous year.

As a result, consolidated gross pro�t amounted to PHP2.07 billion for the full-year 2017, surging by 12% from the pro forma amount of PHP1.85 billion in 2016. �is yielded a gross pro�t margin of 30% as the Company realized purchasing synergies with its majority shareholder CPGI, executed inventory-buying strategies, and implemented price increases to o�set the impact of higher raw material prices.

Consolidated operating income reached PHP1.16 billion in 2017, rising by 34% from the pro forma amount of PHP865 million in 2016. �e growth is attributed to operational e�ciencies brought about by synergies between the Company and its majority shareholder CPGI such as economies of scale in purchasing common materials, media buying, and logistics costs.

Interest expense of PHP177 million was recorded for the twelve months ending December 31, 2017. �is amount pertains to interest on the PHP3.9 billion remaining of the acquisition loan used to acquire the wholly-owned subsidiaries.

All in all, consolidated net income reached PHP762 million, yielding a net income margin of 11%. �is is a decrease of 3% versus the 2016 pro forma net income of PHP785 million. Considering the recurring �nancials only, consolidated net income for 2017 would present a 14% growth from the PHP669 million recurring pro�ts in 2016. �e Company has sustained a two-year compounded annual net income growth rate of 26% since 2015.

Pro forma �nancials have been adjusted to assume the acquisition of subsidiaries Bakemasters, Inc. (BMI), Shakey’s International Ltd. (SIL), and Golden Gourmet Ltd. (GGL) had taken place on January 1, 2016. Recurring �nancials have been adjusted to exclude the impact of one-o� income and expenses relating to the Company’s corporate restructuring and subsequent IPO in 2016.


System-wide sales, which comprises sales from both company-owned and franchised stores, increased by 14% from PHP7.34 billion to PHP8.34 billion for the full-year 2017. �is was driven by healthy same-store sales growth of 5% and successful store network expansion of 24 net new stores in 2017. Same-store sales refer to sales generated from stores that have operated for at least 15 months and exclude sales from new stores.

Consolidated net revenues, composed of sales from company-owned stores, franchise and royalty fees from franchisees, and revenues from wholly-owned subsidiaries, reached PHP7.00 billion. �is translates to a 16% increase in pro forma revenues of PHP6.01 billion for the twelve months ending December 31, 2016, and 18% from reported revenues of PHP5.95 billion during the same period. Likewise, this brings the Company’s two-year compounded annual revenue growth rate to 16% since 2015.

For the year ending 2017, consolidated cost of sales grew by 19% to PHP4.94 billion from the pro forma amount of PHP4.16 billion in 2016. �is increase was faster than the 16% growth in consolidated net revenues. Cost of sales is mainly composed of raw material and packaging costs, direct labor costs, and store-related costs including rent, utilities, etc. �e accelerated increase in cost of goods was due to elevated commodity prices and raw material costs relative to the previous year.

As a result, consolidated gross pro�t amounted to PHP2.07 billion for the full-year 2017, surging by 12% from the pro forma amount of PHP1.85 billion in 2016. �is yielded a gross pro�t margin of 30% as the Company realized purchasing synergies with its majority shareholder CPGI, executed inventory-buying strategies, and implemented price increases to o�set the impact of higher raw material prices.

Consolidated Statements ofCash Flows

Consolidated net cash provided by operating activities amounted to PHP972 million, higher than the previous year’s PHP934 million. �e increase is primarily attribut-able to the improvement in consolidated net income compared to 2016. Net cash generated by investing activities was PHP322 million, while net cash used by �nancial activities was PHP1.38 billion due to the loan prepayment. �is brought total net cash used for the year to PHP84 million, leading to cash and cash equivalents balance of PHP245 million at year-end 2017.

�e Company maintained a negative cash conversion cycle of 18 days, a contraction compared to the previous year’s 28 days but nonetheless within the reasonable range. �is decline was mainly due to the increase in inventory days to 27. Meanwhile, receivable and payable days stood at 30 days and 75 days respectively.

Consolidated operating income reached PHP1.16 billion in 2017, rising by 34% from the pro forma amount of PHP865 million in 2016. �e growth is attributed to operational e�ciencies brought about by synergies between the Company and its majority shareholder CPGI such as economies of scale in purchasing common materials, media buying, and logistics costs.

Interest expense of PHP177 million was recorded for the twelve months ending December 31, 2017. �is amount pertains to interest on the PHP3.9 billion remaining of the acquisition loan used to acquire the wholly-owned subsidiaries.

All in all, consolidated net income reached PHP762 million, yielding a net income margin of 11%. �is is a decrease of 3% versus the 2016 pro forma net income of PHP785 million. Considering the recurring �nancials only, consolidated net income for 2017 would present a 14% growth from the PHP669 million recurring pro�ts in 2016. �e Company has sustained a two-year compounded annual net income growth rate of 26% since 2015.

Pro forma �nancials have been adjusted to assume the acquisition of subsidiaries Bakemasters, Inc. (BMI), Shakey’s International Ltd. (SIL), and Golden Gourmet Ltd. (GGL) had taken place on January 1, 2016. Recurring �nancials have been adjusted to exclude the impact of one-o� income and expenses relating to the Company’s corporate restructuring and subsequent IPO in 2016.


STATEMENT OF MANAGEMENT’S RESPONSIBILITY FORFINANCIAL STATEMENTS�e Management of Shakey’s Pizza Asia Ventures, Inc. (the “Company”) is responsible for the preparation and fair presentation of the consolidated �nancial statements, including the schedules attached therein, as at December 31, 2017, and 2016, in accordance with the Philippine Financial Reporting Standards, and for such internal control as Management determines is necessary to enable the preparation of consolidated �nancial statements that are free from material misstatement whether due to fraud or error.

In preparing the consolidated �nancial statements, Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

�e Board of Directors is responsible for overseeing the Company’s �nancial reporting process. �e Board reviews and approves the consolidated �nancial statements, including the schedules attached therein, and submits the same to the stockholders or members.

SyCip Gorres Velayo & Co., the independent auditor appointed by the stockholders, has audited the consolidated �nancial statements of the Company in accordance with the Philippine Standards of Auditing and, in its report to the stockholders or members, has expressed its opinion on the fairness of presentation upon completion of such audit.

Christopher T. PoChairman of the Board

Vicente L. GregorioPresident & Chief Executive O�cer

Manuel T. Del BarrioVice President & Chief Financial O�cer

Signed this 10th day of April 2018.

�e Stockholders and the Board of DirectorsShakey’s Pizza Asia Ventures Inc.15Km East Service Road corner Marian Road 2Barangay San Martin de Porres, Parañaque City 1700

Opinion

We have audited the consolidated �nancial statements of Shakey’s Pizza Asia Ventures Inc. and its subsidiaries (the Group), which comprise the consolidated statements of �nancial position as at December 31, 2017 and 2016, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash �ows for each of the three years in the period ended December 31, 2017, and notes to the consolidated �nancial statements, including a summary of signi�cant accounting policies.

In our opinion, the accompanying consolidated �nancial statements present fairly, in all material respects, the consolidated �nancial position of the Group as at December 31, 2017 and 2016, and its consolidated �nancial performance and its consolidated cash �ows for each of the three years in the period ended December 31, 2017 in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements that are relevant to our audit of the consolidated �nancial statements in the Philippines, and we have ful�lled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is su�cient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most signi�cance in our audit of the consolidated �nancial statements of the current period. �ese matters were addressed in the context of our audit of the consolidated �nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have ful�lled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated �nancial statements. �e results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated �nancial statements.

Impairment Assessment of Goodwill and Trademarks

Under PFRS, the Group is required to annually test the amount of goodwill and trademarks for impairment. As at December 31, 2017, the Group’s goodwill, mainly arising from its acquisition of the dough manufacturing business in the Philippines, amounting to P1,078.6 million and trademarks amounting to P4,987.1 million, are considered signi�-cant to the consolidated �nancial statements since these account for 66.6% of the Group’s total assets. In addition, management’s assessment requires signi�cant judgment and is based on assumptions, speci�cally forecasted long-term revenue growth rate, operating expenses, gross margin and discount rate, which are a�ected by expected future market or economic conditions. �e Group’s disclosures about goodwill and trademarks are included in Notes 5 and 6 to the consolidated �nancial statements.

Audit response

We obtained an understanding of the Group’s impairment assessment process and related controls. We involved our internal specialist in evaluating the methodologies and the assumptions used. �ese assumptions include forecasted long-term revenue growth rate, operating expenses, gross margin and discount rate. We compared the key assump-tions used, such as forecasted long-term revenue growth rate, operating expenses and gross margin against the histori-cal performance of the cash generating units (CGU) and other relevant external data. We tested the parameters used in the determination of the discount rate against market data. We also reviewed the Group’s disclosure about those assumptions to which the outcome of the impairment test is most sensitive, speci�cally those that have the most signi�cant e�ect on the determination of the recoverable amount of goodwill and trademarks with inde�nite life.

Other Information Management is responsible for the other information. �e other information comprises the information included in the SEC Form 17-A for the year ended December 31, 2017, but does not include the consolidated �nancial statements and our auditor’s report thereon, which we obtained prior to date of this auditor’s report, and the SEC Form 20 IS (De�nitive Information Statement) and Annual Report for the year ended December 31, 2017 which are expected to be made available to us a�er that date.

Our opinion on the consolidated �nancial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audits of the consolidated �nancial statements, our responsibility is to read the other informa-tion identi�ed above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated �nancial statements or our knowledge obtained in the audits, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated �nancial statements in accor-dance with PFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated �nancial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated �nancial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

�ose charged with governance are responsible for overseeing the Group’s �nancial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated �nancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accor-dance with PSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to in�uence the economic decisions of users taken on the basis of these consolidated �nancial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signi�cant audit �ndings, including any signi�cant de�ciencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical require-ments regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most signi�cance in the audit of the consolidated �nancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest bene�ts of such communication.

�e engagement partner on the audit resulting in this independent auditor’s report is Maria Pilar B. Hernandez.

SYCIP GORRES VELAYO & CO.

Maria Pilar B. HernandezPartnerCPA Certi�cate No. 105007SEC Accreditation No. 1558-A (Group A), April 14, 2016, valid until April 14, 2019Tax Identi�cation No. 214-318-972BIR Accreditation No. 08-001998-116-2016, February 15, 2016, valid until February 14, 2019PTR No. 6621269, January 9, 2018, Makati City

April 10, 2018



Opinion



Basis for Opinion


Key Audit Matters





Audit response













INDEPENDENT AUDITOR’S REPORT







April 10, 2018



Opinion



Basis for Opinion


Key Audit Matters





Audit response



















April 10, 2018



Opinion



Basis for Opinion


Key Audit Matters





Audit response













Identify and assess the risks of material misstatement of the consolidated �nancial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is su�cient and appropriate to provide a basis for our opinion. �e risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the e�ectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signi�cant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated �nancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern







April 10, 2018



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Basis for Opinion


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Audit response



















April 10, 2018

Evaluate the overall presentation, structure and content of the consolidated �nancial statements, including the disclosures, and whether the consolidated �nancial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain su�cient appropriate audit evidence regarding the �nancial information of the entities or business activities within the Group to express an opinion on the consolidated �nancial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.


December 31

ASSETS Current Assets Cash and cash equivalents (Notes 8 and 25) Available-for-sale (AFS) investments (Notes 12, 25 and 26) Trade and other receivables (Notes 9, 16 and 25) Inventories (Note 10) Prepaid expenses and other current assets (Notes 11 and 14)

Total Current Assets

Noncurrent Assets Property and equipment (Note 13) Goodwill (Note 6) Trademarks (Note 6) Deferred input value-added tax Deferred tax assets - net (Note 24) Rental and other noncurrent assets (Notes 12, 14, 25 and 26)

Total Noncurrent Assets

TOTAL ASSETS

L IABIL ITIES AND EQUITY

Current L iabilities Accounts payable and other current liabilities (Notes 15, 16 and 25) Current portion of loans payable (Note 17) Income tax payable

Total Current Liabilities

Noncurrent L iabilities Loans payable - net of current portion (Note 17) Accrued pension costs (Note 22) Accrued rent (Note 27) Dealers' deposits and other noncurrent liabilities

Total Noncurrent Liabilities Total Liabilities

Equity Capital stock (Note 18) Additional paid-in capital (Note 18) Retained earnings (Note 18) Other components of equity (Notes 12 and 22)

Total Equity TOTAL L IABIL ITIES AND EQUITY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

SHAKEY’S PIZZA ASIA VENTURES, INC. AND SUBSIDIARIES(A Subsidiary of Century Pacific Group, Inc.)(Formerly International Family Food Services, Inc.)

2017

244,994,340–

586,496,825362,206,579

61,438,3931,255,136,137

1,538,385,3941,078,606,0204,987,109,602

95,666,17525,100,727

128,843,6147,853,711,532

9,108,847,669

1,005,167,48548,411,68959,139,697

1,112,718,871

3,885,420,46125,134,97976,181,33035,150,922

4,021,887,6925,134,606,563

1,531,321,0531,353,554,7971,095,525,015

(6,159,759)3,974,241,1069,108,847,669

2016

328,531,6511,125,173,721

420,824,917256,285,224

13,309,9562,144,125,469

999,005,9191,078,606,0204,987,109,602

40,257,68329,905,937

105,448,8587,240,334,019

9,384,459,488

864,310,9811,048,365,917

64,438,1431,977,115,041

3,933,241,40634,334,51164,171,06216,520,343

4,048,267,3226,025,382,363

1,531,321,0531,353,554,797

486,513,796(12,312,521)

3,359,077,1259,384,459,488


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31 2017 2016 2015

REVENUES Net sales (Notes 1 6 and 19) P=6,750,949,174 P=5,738,977,478 P=5,075,991,280 Royalty and franchise fees 252,863,907 206,631,050 168,348,361 7,003,813,081 5,945,608,528 5,244,339,641

COSTS OF SALES (Notes 16 and 20) (4,937,716,670) (4,158,600,507) (4,048,378,689)

GROSS INCOME 2,066,096,411 1,787,008,021 1,195,960,952

GENERAL AND ADMINISTRATIVE EXPENSES (Note 21) (905,415,529) (984,652,184) (582,626,599)

INTEREST EXPENSE (Note 17) (177,304,646) (128,490,292) –

OTHER INCOME - Net (Note 23) 38,807,186 262,353,688 45,610,763

INCOME BEFORE INCOME TAX 1,022,183,422 936,219 ,233 658,945,116

PROVISION FOR (BENEFIT FROM) INCOME TAX (Note 24)

Current 258,100,841 184,883,829 179,988,193 Deferred 1,939,257 (7,849,801) (635,481) 260,040,098 177,034,028 179,352,712

NET INCOME 762,143,324 759,185,205 479,592,404

OTHER COMPREHENSIVE INCOME (LOSS) Other comprehensive income (loss) to be reclassi�ed to pro�t

or loss in subsequent periods: Disposal of AFS (Not e 12) (534,464) 2,888,071 2,756,485 Unrealized gain (loss) on changes in fair value of AFS

investments (Note 12) – 534,464 (3,466,255) (534,464) 3,422,535 (709,770) Other comprehensive income (loss) not to be reclassi�ed to

pro�t or loss in subsequent periods (net of tax) - Actuarial gain (loss) on de�ned bene�t obligation (Note 22) 9,553,179 4,878,542 (21,584,101) Tax e�ect (2,865,953) (996,977) 6,475,230 6,687,226 3,881,565 (15,108,871) TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 6,152,762 7,304,100 (15,818,641)

TOTAL COMPREHENSIVE INCOME P=768,296,086 P=766,489,305 P=463,773,763 Basic/Diluted Earnings Per Share (Note 29) P=0.50 P=0.88 P=0.62



CO

NSO

LIDA

TED STA

TEMEN

TS OF C

HA

NG

ES IN EQ

UITY

FO

R THE

YEARS

END

ED D

ECEM

BER 31, 2017, 2016 A

ND

2015

O

ther Com

ponents of Equity

C

apital Stock

Additional

Paid-in C

apital Retained

Earnings

Unrealized

G

ain (Loss) on

Changes in Fair

V

alue of AFS

Investm

ents

Cum

ulative

Actuarial

Loss - N

et of Tax

(Note 18)

(Note 18)

(Note 18)

(Note 12)

(Note 22)

Total

Balances at January 1, 2017

P=1,531,321,053

P=1,353,554,797

P=486,513,796

P=534,464 (P=12,846,985)

P=3,359,077,125

Total comprehensive incom

e –

– 762,143,324

(534,464)

6,687,226

768,296,086

Cash dividends (N

ote 18) –

– (153,132,105)

– –

(153,132,105) Balances at D

ecember 31

, 2017 P=1,531,321,053

P=1,353,554,797

P=1,095,525,015

P=– (P=6,159,759)

P=3,974,241,106

Balances at January 1, 2016 P=768,614,050

P=–

P=829,245,434

(P=2,888,071) (P=16,728,550)

P=1,578,242,863

Proceeds from issuance of capital stock (N

ote 18)

762,707,003

1,353,554,797

– –

– 2,116,261,800

Total com

prehensive income

– –

759,185,205

3,422,535

3,881,565

766,489,305

Cash dividends (N

ote 18) –

– (1,101,916,843)

– –

(1,101,916,843) Balances at D

ecember 31, 2016

P=1,531,321,053

P=1,353,554,797

P=486,513,796

P=534,464 (P=12,846,985)

P=3,359,077,125

Balances at January 1, 2015

P=368,614,050

P= P=900,047,563

(P=2,178,301)

(P=1,619,679) P=1,264,863,633

Issuance of stock dividends (N

ote 18) 400,000,000

–

(400,000,000) –

– –

Total comprehensive incom

e (loss) –

– 479,592,404

(709,770)

(15,108,871) 463,773,763

C

ash dividends (Note 18)

– –

(150,394,533) –

– (150,394,533)

Balances at Decem

ber 31, 2015 P=768,614,050

P=–

P=829,245,434

(P=2,888,071) (P=16,728,550)

P=1,578,242,863

SHA

KEY’S PIZZA A

SIA V

ENTU

RES, INC

. AN

D SU

BSIDIA

RIES(A

Subsidiary of Century Pacific G

roup, Inc.)(Form

erly International Family Food Services, Inc.)


CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31 2017 2016 2015 CASH FLOWS FROM OPERATING

ACTIVITIES Income before income tax P=1,022,183,422 P=936,219,233 P=658,945,116 Adjustments for: Gain on reversal of advances (Note 2 3) – (222,502,148) – Depreciation and amortization

(Notes 13, 20 and 21) 208,930,640 137,985,368 209,946,662 Interest expense 177,304,646 128,490,292 – Movements in: Accrued rent 12,010,268 21,452,132 2,220,035 Accrued pension costs 353,647 (1,642,783) (14,649,237) Accretion income (Notes 14 and 23) (2,731,459) (4,149,485) (2,774,254) Gain on disposal of property and equipment

(Note 23) (1,734,824) (238,591) (418,432) Loss (gain) on disposal of AFS (Note 23) (1,436,223) 4,056,548 2,756,485 Interest income (Note 23) (1,186,755) (3,291,346) (3,878,652) Unrealized foreign exchange gain (Note 2 3) (97,122) (194,819) (71,189) Dividend income – (486,897) (1,160,729) Unrealized loss on change in fair value of

�nancial assets at FPVL – – 3,847,972 Income before working capital changes 1,413,596,240 995,697,504 854,763,777 Decrease (increase) in: Trade and other receivables (165,671,908) 167,663,201 (142,990,519) Inventories (105,921,355) 855,740 16,534,4 08 Prepaid expenses and other current assets (48,128,437) (3,758,892) 251,547 Increase (decrease) in accounts payable and other

current liabilities 140,713,580 (51,211,514) (98,564,246) Net cash generated from operations 1,234,588,120 1,109,246,039 629,994,967 Income taxes paid (263,399,287) (178,442,725) (171,719,361) Interest received 1,186,755 3,291,346 3,878,652 Net cash provided by operating activities 972,375,588 934,094,660 462,154,258

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of: Property and equipment (Note 13) (768,164,192) (417,637,547) (349,503,801) Subsidiaries - net of cash acquired – (6,010,636,947) – AFS inves tments (Note 12) – (1,124,639,257) (469,958,439) Financial assets at FVPL – – (6,553,754) Disposal of AFS investments (Note 1 2) 1,126,609,944 681,365,595 476,782,556 Sale of financial assets at FVPL – 36,084,300 – Increase (decrease) in dealers’ depos its and other

noncurrent liabilities 21,362,038 (25,623,290) 9,340,860 Increase in deferred input value added tax (55,408,492) (8,082,285) (6,142,348) Increase in rental and other deposits (23,394,756) (5,572,608) (11,725,183) Proceeds from disposals of property and equipment 21,588,901 5,264,498 3,202,547 Dividends received – 486,897 1,160,729 Collection of intercompany loans – – 24,138,889 Net cash provided by (used in) investing activities 322,593,443 (6,868,990, 644) (329,257,944) (Forward)



Years Ended December 31 2017 2016 2015 CASH FLOWS FROM FINANCING

ACTIVITIES Payments of: Dividends (Note 18) (P=153,132,105) (P=1,101,916,843) (P=150,394,533) Loan (1,050,000,000) – – Interest (175,813,487) (114,984,533) – Proceeds from: Loan – 4,975,000,000 – Issuance of capital stock (Note1 8) – 2,116,261,800 – Net cash provided by (used in) �nancing activities (1,378,945,592) 5,874,360,424 (150,394,533)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 439,251 194,819 71,189

NET DECREASE IN CASH AND CASH EQUIVALENTS (83,537,312) (60,340,741) (17,427, 030)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (Note 8) 328,531,651 388,872,392 406,299,422

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 8) P=244,994,339 P=328,531,651 P=388,872,392

Disclaimer: �e complete set of the consolidated �nancial statements, including the notes, are covered by the independent auditor’s report and are made available to all shareholders through the de�nitive information statement for the annual stockholders’ meeting on August 16, 2018. �e consolidated �nancial statements should be read in conjunction with the notes. A copy of the full set of the consolidated �nancial statements may be downloaded through the Company’s website (www.shakeyspizza.ph).


CONTACT INFORMATION

SHAKEY’S WOW CENTER (CORPORATE OFFICE)

KM 15 East Service Road corner Marian Road 2Barangay San Martin de PorresParanaque City, Metro ManilaPhilippines 1700Tel: + (632) 867 7677www.shakeyspizza.ph

32A Arturo DriveBagumbayan, Taguig CityPhilippines 1630Tel: + (632) 838 2128

IN-HOUSE COMMISSARY

STOCK TRANSFER AGENT

BDO - Trust and Investments GroupSecurities Services and Corporate Agencies DepartmentBDO Corporate Center15F South Tower, 7899 Makati AvenueMakati City, PhilippinesTel: + (632) 878 [email protected]


Shakey’s WOW CenterKM 15 East Service Road corner Marian Road 2

Barangay San Martin de PorresParanaque City, Metro Manila

Philippines 1700Tel: + (632) 867 7677www.shakeyspizza.ph

SHAKEY’S PIZZA ASIA VENTURES, INC.A Subsidiary of Century Pacific Group, Inc.

Annual Report 2017

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