(formerly Pancake House, Inc.) 2259 Chino

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(formerly Pancake House, Inc.) 2259 Chino
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BUT HAS NOT YET BECOME
EFFECTIVE. THESE SECURITIES MAY NOT BE SOLD NOR OFFERS TO BUY THE SAME BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR BE CONSIDERED A SOLICITATION OF AN OFFER TO BUY.
(formerly Pancake House, Inc.)
2259 Chino Roces Avenue Extension (Pasong Tamo Extension)
Makati City, Metro Manila, Philippines
Telephone Number (632) 784 9000
PROSPECTUS
relating to the Offer of
Up to 300,136,430 Common Shares
by way of a Follow On Offering
at an Offer Price of Up to P29.50 per Share
THE OFFER SHARES ARE TO BE LISTED AND TRADED ON THE
MAIN BOARD OF THE PHILIPPINE STOCK EXCHANGE, INC.
Bookrunner, Issue Manager
and Lead Underwriter
PRELIMINARY PROSPECTUS
September 10, 2014
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE AND SHOULD BE REPORTED
IMMEDIATELY TO THE SECURITIES AND EXCHANGE COMMISSION.
i
The Company’s mission is
TO BUILD LOVED BRANDS.
Its vision is
TO BE THE MOST LOVED GLOBAL FILIPINO COMPANY.
ii
MAX’S GROUP, INC.
(formerly Pancake House, Inc.)
Pancake House Center
2259 Chino Roces Avenue Extension
(Pasong Tamo Extension)
Makati City, Metro Manila
Philippines
Telephone Number (632) 784-9000
Website www.maxschicken.com and www.pancakehouse.com.ph
This Prospectus relates to the offer and sale by Max’s Group, Inc., a corporation
organized under Philippine law (the “Company” or the “Issuer”) of up to (a) 34,106,416
new common shares out of the unissued capital stock of the Company (“New Shares”);
(b) 204,638,468 common shares, to be offered and sold by certain wholly-owned
subsidiaries of the Company (“Group Shares”); and (c) 61,391,546 common shares, to be
offered and sold by certain shareholders of the Company (“Secondary Shares”) in a
public offer of shares (the “Offer,” and all of the shares being sold under the Offer being
collectively referred to as the “Offer Shares”). The Group Shares will be offered and sold
by the following wholly-owned subsidiaries of the Company: The Real American
Doughnut Company, Inc., Max’s Bakeshop, Inc., Max’s Kitchen, Inc., No Bia, Inc.,
Chickens R’ Us, Inc., Square Top, Inc., MGOC Holdings, Inc., Trota Gimenez Realty
Corporation, RooM Ventures Corp. and Max’s Express Restaurants, Inc. (the “Selling
Subsidiaries”). The Secondary Shares will be offered and sold by the following
shareholders of the Company: Trofi Ventures Corp., WERCO Holdings Corp., Ruby
Investment Consolidated Holdings, Inc., WR Ventures Asia, Inc., and FSS Realty
Corporation (the “Selling Shareholders”). The Secondary Shares include 27,285,130
common shares to be offered by the Selling Shareholders to cover over-allotments (the
“Over-Allotment Shares”). Each Offer Share has a par value of P1.00 per share. The
New Shares will be listed on the Philippine Stock Exchange, Inc. (the “PSE”). The Group
Shares and the Secondary Shares are listed and traded on the PSE.
The Offer Shares shall be offered at a price of up P29.50 per Offer Share (the “Offer
Price”) in the manner provided in this Prospectus. See “Plan of Distribution.” The Offer
Price was determined through a book-building process, as well as discussions between
the Company and the Issue Manager and Lead Underwriter. The Company, the Selling
Subsidiaries and the Selling Shareholders expect to raise up to an aggregate amount of
P4.60 billion from the Offer.
Pursuant to its amended articles of incorporation, the Company has an authorized
capital stock of P1,400,000,000 consisting of 1,400,000,000 common shares with a par
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value of P1.00 per share, out of which 1,058,913,0241 common shares are issued and
outstanding as at the date of this Prospectus. A total of up to 1,093,019,440 common
shares will be outstanding after the Offer. The Offer Shares comprise up to 27.46% of
the outstanding common shares after the Offer [and up to 33.85% of the outstanding
common shares, net of up to 271,253,678 common shares held by the Selling Subsidiaries
after the Offer.]
[All of the Company’s issued shares are listed on the Main Board of the PSE.] Prior to
September 4, 2014, the Company’s shares were traded on the PSE under the trading
symbol “PCKH.” On August 22, 2014, the SEC approved the amendment of the articles
of incorporation of the Company to change its name to Max’s Group, Inc., and on
September 4, 2014, the PSE approved the change in the ticker symbol of the Company
to “MAXS.” On Listing Date, the Offer Shares will be traded under the trading symbol
“MAXS.”
On February 24, 2014, certain Max’s Entities (the Selling Subsidiaries) acquired a total of
approximately 89.95% of the outstanding stock of the Company. On June 30, 2014, the
Company’s Board of Directors approved the integration of the Max’s Entities into the
Company and the MGOC Shareholders conveyed to the Company all of their shares, rights
and interests in and to the Max’s Entities in consideration for the issuance by the Company
of the Exchange Shares to the MGOC Shareholders (the “Integration”). Pursuant to such
transaction, the Max’s Entities became wholly-owned Subsidiaries of the Company. See
“Background of the Offer” for further discussion.
The Integration creates the country’s leading chained full service restaurant group with an
aggregate market share of 28.3%% in terms of value sales for 2013. The Integration also
resulted in a much larger combined entity in terms of revenues and store network. On a proforma basis, the Company registered P4.58 billion of consolidated revenues for the six month
period ending June 30, 2014, with the Max’s Entities contributing P2.78 billion (gross of
intercompany sales of P30.3 million) and the Pancake House Group contributing P1.83
billion. Revenues (on a pro-forma consolidated basis) for the full year ended December 31,
2013 totaled P9.22 billion, of which P5.47 billion was contributed by the Max’s Entities and
P3.75 billion was contributed by the Pancake House Group. While the Pancake House Group
registered a net loss of P36.6 million for the first half of 2014 primarily due to additional
provisions for impairment for past due accounts, EBITDA was positive at P65.9 million,
signaling the robustness of operating cash flows. With the Max’s Entities contributing P75.5
million of net income for the six month period ended June 30, 2014, the Company registered
a pro-forma consolidated net income of P38.9 million. For the full year ended December 31,
2013, the Company’s pro-forma consolidated net income stood at P260.8 million of which
P181.5 million was from the Max’s Entities. (For the avoidance of doubt, references to the
“Pancake House Group” shall mean those business units and subsidiaries of the Company
prior to the Integration and references to the “Max’s Entities” shall mean the business units
and entities conveyed by the MGOC Shareholders to the Company in the Integration.)
1
Inclusive of Exchange Shares to be issued to the MGOC Shareholders on Exchange Date
iv
Total assets of the Group on a pro-forma consolidated basis was at P9.3 billion as at June 30,
2014 and P8.7 billion as at December 31, 2013. The Selling Subsidiaries, all of which are
Max’s Entities, obtained a long-term loan from the Bank of the Philippine Islands to finance
their acquisition of the shares in the Company. As at June 30, 2014, the outstanding balance
of such loan was at approximately P4.27 billion. The proceeds from the sale of the Group
Shares – approximately P3.00 billion – which will accrue to the Selling Subsidiaries are
intended to be used for the repayment of such loan. Although proceeds from the Group Shares
will accrue to the Selling Subsidiaries, the benefit from such proceeds will redound to the
Company since the Selling Subsidiaries are wholly-owned subsidiaries of the Company. In
particular, the repayment of the Selling Subsidiaries debt to the extent of the proceeds from
the sale of the Group Shares would reduce the Company’s consolidated liabilities by the same
amount. The Company’s shareholders’ equity as at June 30, 2014 on a consolidated proforma basis amounted to P1.04 billion. The Offer is expected to increase the Company’s
shareholders’ equity by up to P3.5 billion, with the capital infusion coming from the sale of
the New Shares and reduction in the consolidated debt of the Company arising from the
proceeds from the sale of the Group Shares in the Offer. For a more detailed discussion on
the use of proceeds from the Offer, please refer to the discussion under “Capitalization—
Max’s Entities and the Selling Subsidiaries” on page [63] of this Prospectus.
The total proceeds to be raised from the sale of the Offer Shares will be up to
approximately P4,600,000,000, out of which up to P500,000,000 will accrue directly to
the Company from the sale of New Shares, and up to P3,000,000,000 will accrue to the
Selling Subsidiaries. The amount of up to P1,100,000,000 will accrue directly to the
Selling Shareholders. The estimated net proceeds from the sale of the New Shares in
the amount of up to P[*] (after deducting estimated fees and expenses of approximately
P[*]) will be used by the Company to finance capital expenditures for the expansion of
the stores and commissaries, pay working capital and for other general corporate
purposes. The proceeds to be received by the Selling Subsidiaries from the sale of the
Group Shares shall be used to repay a portion of the debt of the Selling Subsidiaries, as
discussed above. The sale of the Group Shares will significantly reduce cross holdings
of the Company’s shares insofar as the Group Shares are part of the Exchange Shares
issued by the Company when it acquired the Selling Subsidiaries as wholly owned
subsidiaries in the Integration. For a more detailed discussion on the use of proceeds
from the Offer, please refer to the discussion under “Use of Proceeds” on page [30] of this
Prospectus.
The Issue Manager, Lead Underwriter and Underwriters to the Offer will receive a
transaction fee equal to 250 basis points of the gross proceeds from the sale of the Offer
Shares. These are inclusive of the amounts to be paid to the other participating
underwriters and selling agents and the amounts to be paid to the PSE Trading
Participants, where applicable. For a more detailed discussion on the underwriters’
fees, please refer to the discussion under “Plan of Distribution” on page [32] of this
Prospectus.
v
Each holder of common shares will be entitled to such dividends as may be declared by
the Company, including the approval by the stockholders holding at least two-thirds of
the Company’s total issued and outstanding capital stock for any stock dividend
declared. Batas Pambansa Blg. 68, otherwise known as “The Corporation Code of the
Philippines” has defined outstanding capital stock as the total shares of stock issued to
subscribers or stockholders, whether such shares are fully paid or not, except for
treasury shares. Dividends may be declared only from the Company’s unrestricted
retained earnings. The Company has no approved dividend policy. Unless restricted by
the terms and conditions of its loan obligations or other covenant, or any amount is
determined and approved by its Board of Directors to be appropriated for capital and
other working requirements or the undertaking of any major project or transaction, the
Company will comply with the requirements for the declaration of dividends under law
and regulations. The Board of Directors may adopt or modify a dividend policy
depending upon the Company’s plans and/or any terms of its financing facilities entered
into to fund its current and future projects and operations. The Company can give no
assurance that it will pay any dividends in the future. Please refer to the discussion
under “Dividends and Dividend Policy” on page [29] of the Prospectus.
Up to 54,570,260 Offer Shares (or 20% of the Offer Shares, net of Over-Allotment
Shares) are being offered to all of the PSE Trading Participants. Up to 218,281,040
Offer Shares (or 80% of the Offer Shares, net of the Over-Allotment Shares) are being
offered by the Lead Underwriter to Qualified Institutional Buyers and to the general
public. Prior to the closing of the Offer, any Offer Shares not taken up by the PSE
Trading Participants shall be distributed by the Lead Underwriter to their clients or to
the general public. The Lead Underwriter firmly underwrites any shares left
unsubscribed after the Offer. For a more detailed discussion of the underwriting
commitment of the Lead Underwriter, please refer to the discussion under “Plan of
Distribution” on page [32] of the Prospectus.
All of the Offer Shares have identical rights and privileges. The Offer Shares may be
owned by any person or entity regardless of citizenship or nationality, subject to the
nationality limits under Philippine law, if applicable. The Philippine Constitution and
related statutes set forth restrictions on foreign ownership for companies engaged in
certain activities. The Company currently does not directly own land in the Philippines.
However, its Subsidiaries Trota Gimenez Realty Corporation, The Real American
Doughnut Company, Inc., Max’s Kitchen, Inc. MGOC Holdings, Inc. and RooM Ventures
Corp. currently own land in the Philippines. The ownership of these subsidiaries are
accordingly subject to limits of ownership by foreign nationals to 40%. As operator of
restaurants in the Philippines, the Company and its subsidiaries are subject to the
requirements of ownership under the Retail Trade Liberalization Act and its
implementing rules.
Please refer to the discussion under “Philippine Foreign
Investments, Exchange Controls and Foreign Ownership Controls” on page [117] of the
Prospectus.
vi
Before making an investment decision, investors should carefully consider the risks
associated with an investment in the Offer Shares. These risks include: (i) risks relating
to the Philippines, consisting of risks relating to the Philippine economy, foreign
exchange, political instability, occurrence of natural disasters and occurrence of power
outages directly affecting restaurant operations; (ii) risks relating to the Group’s
business, consisting of risks relating to competition, raw material sourcing, food quality,
credit and paying capacity of franchisees, strategy for domestic and international
growth, labor, controlling shareholders, management, joint ventures and partners, and
third party leases; (iii) risks relating to integration, particularly the integration of the
Max’s Entities with the Company; (iv) risks relating to the Offer and the Offer Shares,
consisting of risks relating to suitability of investment, market conditions and dividend
declaration; (v) risks relating to the presentation of information in this Prospectus,
consisting of risks associate with the pro-forma financial information and information
derived from unofficial publications. Please refer to the discussion under “Investment
Considerations and Risk Factors” on page [38] of this Prospectus, which, while not
intended to be an exhaustive enumeration of all risks, must be considered in connection
with a purchase of the Offer Shares.
No dealer, salesman, or any other person has been authorized to give any information or
to make any representation not contained in this Prospectus. If given or made, any such
information or representation must not be relied upon as having been authorized by
the Company, the Issue Manager or any of the Underwriters. The distribution of this
Prospectus and the offer and sale of the Shares may, in certain jurisdictions, be
restricted by law. The Company, the Issue Manager and the Underwriters require
persons into whose possession this Prospectus comes, to inform themselves of and
observe all such restrictions. This Prospectus does not constitute an offer of any
securities, or any offer to sell, or a solicitation of any offer to buy any securities of the
Company in any jurisdiction, to or from any person to whom it is unlawful to make such
offer in such jurisdiction.
Unless otherwise stated, the information contained in this Prospectus has been supplied
by the Company. To the best of its knowledge and belief, the Company (which has taken
all reasonable care to ensure that such is the case) confirms that the information
contained in this Prospectus is correct, and that there is no material statement or
omission of fact which would make any statement in this Prospectus misleading in
any material respect. The Company hereby accepts full and sole responsibility for the
accuracy of the information contained in this Prospectus. The Company and the
Underwriters have exercised due diligence in ascertaining that all material
representations contained in the Prospectus, its amendments and supplements, are true
and correct, and that no material information was omitted which was necessary in order
to make the statements contained in the aforementioned documents not misleading, but
do not make any representation, express or implied, as to the accuracy or completeness
of the materials contained herein. The Issue Manager and the Underwriters, having
made all reasonable enquiries, confirm that this document contains all information with
respect to the Company, the Underwriters, and the Shares which is material in the
context of the issue and offering of the Shares, that the information contained herein is
true and accurate in all material respects and is not misleading, that the opinions and
vii
intentions expressed herein are honestly held and have been reached after considering
all relevant circumstances and are based on reasonable assumptions, that there are no
other facts, the omission of which would, in the context of the issue and offering of the
Shares, make this document as a whole or any of such information of such information
or the expression of any such opinions or intentions misleading in any material respect
and that all reasonable enquiries have been made by the Company to verify the accuracy
of such information. The Company accepts responsibility accordingly.
Unless otherwise indicated, all information in this [Preliminary] Prospectus is as at
[September 10, 2014]. Neither the delivery of this Prospectus nor any sale made
pursuant to this Prospectus shall, under any circumstances, create any implication that
the information contained herein is correct as at any date subsequent to the date hereof
or that there has been no change in the affairs of the Company and its Subsidiaries since
such date. Market data and certain industry forecasts used throughout this Prospectus
were obtained from internal surveys, market research, publicly available information
and industry publications. Industry publications generally state that the information
contained therein has been obtained from sources believed to be reliable, but that the
accuracy and completeness of such information is not guaranteed. Similarly, internal
surveys, industry forecasts and market research, while believed to be reliable, have
not been independently verified, and none of the Company, the Issue Manager and the
Underwriters make any representation as to the accuracy of such information. Each
person contemplating an investment in the Shares should make his own investigation
and analysis of the creditworthiness of the Company and his own determination of the
suitability of any such investment. The risk disclosure herein does not purport to
disclose all the risks and other significant aspects of investing in the Shares. A person
contemplating an investment in the Shares should seek professional advice if he or she
is uncertain of, or has not understood any aspect of the securities to invest in or the
nature of risks involved in trading of securities, especially those high-risk securities.
Investing in the Shares involves a higher degree of risk compared to debt
instruments. For a discussion of certain factors to be considered in respect of an
investment in the Shares, please refer to the discussion under “Investment Considerations
and Risk Factors” on page [38] of the Prospectus.
An application to list the New Shares and Secondary Shares has been filed with the PSE
but has not yet been approved. The PSE assumes no responsibility for the correctness
of any statements made or opinions expressed in this Prospectus. The PSE makes no
representation as to its completeness and expressly disclaims any liability whatsoever
for any loss arising from reliance on the entire or any part of this Prospectus. The
offering of the Offer Shares is subject to the approval of the Board of Directors of the
PSE. Such approval for issuance is permissive only and does not constitute a
recommendation or endorsement of the Offer by the PSE.
Under the SRC and its amended implementing rules, securities, such as the Shares, are
not permitted to be sold or offered for sale or distribution within the Philippines unless a
registration statement covering such securities is rendered effective by the SEC, or said
securities are exempt from registration under Section 9 of the Securities Regulation Code
viii
or are sold pursuant to an exempt transaction under Section 10 of the Securities
Regulation Code. For this purpose, the Company has filed a registration statement in
respect of the Offer Shares with the SEC.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET
BEEN DECLARED EFFECTIVE. NO OFFER TO BUY THE SECURITIES CAN BE
ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE ACCEPTED OR
RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE,
AND ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT
OBLIGATION OF COMMITMENT OF ANY KIND, AT ANY TIME PRIOR TO NOTICE OF
ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE DATE. AN INDICATION OF
INTEREST IN RESPONSE HERETO INVOLVES NO OBLIGATION OR COMMITMENT
OF ANY KIND. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICATION OF AN OFFER TO BUY.
MAX’S GROUP, INC.
By:
ROBERT F. TROTA
President and Chief Executive Officer
REPUBLIC OF THE PHILIPPINES)
CITY OF •
) S.S.
Before me, a notary public in and for the city named above, personally appeared ROBERT F.
TROTA, with Passport No. ____________ issued at _____________ on _______________, who
was identified by me through competent evidence of identity to be the same person who
presented the foregoing instrument and signed the instrument in my presence, and who took
an oath before me as to such instrument.
Witness my hand and seal this ___day of _______ 2014 at Makati City.
Doc No. ________:
Book No. ________:
Page No. ________:
Series of 2014
ix
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS.................................................................................... 1
GLOSSARY OF TERMS ........................................................................................................... 3
SUMMARY INFORMATION .................................................................................................... 7
THE OFFER ............................................................................................................................ 21
TERMS AND CONDITIONS OF THE OFFER ................................................................................ 21
DESCRIPTION OF SECURITIES ................................................................................................. 26
USE OF PROCEEDS ................................................................................................................. 29
PLAN OF DISTRIBUTION......................................................................................................... 31
DETERMINATION OF OFFER PRICE.......................................................................................... 35
INVESTMENT CONSIDERATIONS AND RISK FACTORS ................................................ 37
THE COMPANY ...................................................................................................................... 49
OVERVIEW OF THE BUSINESS .................................................................................................. 49
COMPETITIVE STRENGTHS ...................................................................................................... 50
STRATEGIES ............................................................................................................................. 62
HISTORY .................................................................................................................................. 70
PRINCIPAL BRANDS AND PRODUCTS ....................................................................................... 73
INTERNATIONAL OPERATIONS................................................................................................. 91
FRANCHISING OPERATIONS..................................................................................................... 94
FUNCTIONAL STRATEGIES ....................................................................................................... 95
NEW VENTURE: MERANTI .................................................................................................... 102
GOVERNANCE ..................................................................................................................... 105
CORPORATE GOVERNANCE & POLICIES ................................................................................ 105
THE BOARD OF DIRECTORS ................................................................................................... 105
MANAGEMENT ....................................................................................................................... 115
SIGNIFICANT EMPLOYEES ..................................................................................................... 115
FAMILY RELATIONS ............................................................................................................... 115
INVOLVEMENT IN LEGAL PROCEEDINGS ............................................................................... 116
COMPENSATION ..................................................................................................................... 117
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS............................. 118
CAPITALIZATION .............................................................................................................. 120
THE SELLING SHAREHOLDERS ..................................................................................... 122
OWNERSHIP ....................................................................................................................... 123
DILUTION .............................................................................................................................. 124
MANAGEMENT’S DISCUSSION AND ANALYSIS .......................................................... 127
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION ................................. 127
OTHER RELEVANT INFORMATION ................................................................................. 153
REGULATORY MATTERS ........................................................................................................ 153
RELATED PARTY TRANSACTIONS .......................................................................................... 164
LEGAL PROCEEDINGS ............................................................................................................ 164
INDEPENDENT AUDITORS AND COUNSEL .............................................................................. 165
TAXATION .............................................................................................................................. 166
THE PHILIPPINE STOCK MARKET ......................................................................................... 177
FINANCIAL INFORMATION .............................................................................................. 187
Forward Looking Statements
This Prospectus contains forward-looking statements that are, by their nature, subject to
significant risks and uncertainties. These forward-looking statements include, without
limitation, statements relating to:

Generally, the Group’s and particularly, the Company’s-
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business and investment strategy;
capital expenditure plans;
future growth;
dividend policy;
financial condition and results of operations (including without limitation,
future operations and performance, both operational and financial);
business prospects and business opportunities;

The anticipated availability of bank and other forms of financing; and

The industry outlook as a whole.
The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “seek,” “plan,” “may,” “will,”
“would,” “could” and similar expressions, as they relate to the Company, are intended to
identify a number of these forward-looking statements. These forward-looking statements
are subject to risks, uncertainties and assumptions, some of which are beyond the control of
the Company, the Selling Subsidiaries or the Selling Shareholders. In addition, these
forward-looking statements reflect current views of the Company, the Selling Subsidiaries or
the Selling Shareholders with respect to future events and are not a guarantee of future
performance. Actual results may differ materially from information contained in the forwardlooking statements as a result of a number of factors, including:

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General economic, political and other conditions in the Philippines;
Actual growth in demand for the brands and products of the Company and its
Subsidiaries;
Management’s expectations and estimates concerning its future financial
performance;
Growth and expansion plans;
Technological changes which may affect the supply and distribution chains of
the Company’s operations;
Effects of competition including the introduction or entry of new brands and
concepts in the retail and food industry;
Future impact of accounting standards;
Level of indebtedness of the Company;
Other liquidity and capital resources requirements;
Size and growth of the Company’s customer base;
Inflation in the Philippines and any devaluation of the Peso;
Existing and future governmental regulation; and
1

The risk factors discussed in this Prospectus as well as other factors beyond
the Company’s control.
The forward-looking statements in this Prospectus, whether as a result of new information,
future events or otherwise, are not intended to be updated or otherwise revised, unless
material within the purview of the Securities Regulation Code and other applicable laws, the
mandate of which is to enforce investor protection. Because of these risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed in this Prospectus
might not occur in the way that the same are expected to occur, or at all. Investors should
not place undue reliance on any forward-looking information.
2
Glossary of Terms
As used in this Prospectus, the following terms shall have the meanings ascribed to them:
Applicant
a qualified purchaser of the Offer Shares
Application
the form of the application to subscribe to Offer Shares to be duly
accomplished and executed by the Applicant
Aureos Group
Southeast Asia Fund, L.L.C and Aureos Malaysia Fund, L.L.C.,
collectively
Banking Day
any day of the week other than a Saturday, Sunday or holiday when
banks are not required, or are authorized by law, to close for business
in Metro Manila
BIR
the Bureau of Internal Revenue of the Philippines or its successor
agency/ies
Board or Board of
Directors
the duly constituted Board of Directors of the Company and its elected
directors
BSP
Bangko Sentral ng Pilipinas or its successor agency/ies
Company
Max’s Group, Inc. (formerly Pancake House, Inc.)
Director
a duly elected director of the Company
DENR
Department of Environment and Natural Resources of the Philippines
or its successor agency/ies
DTI
the Department of Trade and Industry of the Philippines or its successor
agency/ies
Euromonitor2
Euromonitor International Ltd., a privately owned, London-based
market intelligence firm, providing market research, business
intelligence reports, and data to industry
Exchange Date
[*], otherwise being the date on which the Company issued the
Exchange Shares to the MGOC Shareholders in consideration for the
conveyance by the MGOC Shareholders of all of their respective
interests in the Max’s Entities
“Information on this Prospectus on the Philippine Food Service market is from independent market
research carried out by Euromonitor and should not be relied upon in making, or refraining from
making, any investment decision.”
2
3
Exchange Shares
540,491,344 common shares issued to the MGOC Shareholders on
Exchange Date
Group
the Company and its Subsidiaries
Group Shares
Up to 204,638,468 common shares held by the Selling Subsidiaries
which will be sold and form part of the Offer
HACCP
Hazard Analysis at Critical Control Points (HACCP) or the sciencebased system that identifies, evaluates, and controls hazards for food
safety at critical points; good manufacturing practices; and other
requirements of regulations
Issuer
Max’s Group, Inc.
Jamba Juice Philippines
Fresh Healthy Juice Boosters, Inc.
Krispy Kreme
Philippines
The Real American Doughnut Company, Inc.
Listing Date
[*]
Max’s Entity
any of the following:
Max’s Kitchen, Inc.
Chickens R Us, Inc.
Max’s Express Restaurants, Inc.
Max’s Makati, Inc.
Max’s (Ermita), Inc.
Max’s Circle, Inc.
Max’s SM Marikina, Inc.
Max’s Baclaran, Inc.
Max’s Food Services, Inc.
Max’s Bakeshop, Inc.
Square Top, Inc.
No Bia, Inc.
Max’s Franchising, Inc.
The Real American Doughnut Company, Inc.
Fresh Healthy Juice Boosters, Inc.
RooM Ventures Corp,
Trota Gimenez Realty Corporation
MGOC Holdings, Inc.
Ad Circles, Inc.
Alphamax Group Limited
MGOC Shareholders
the registered shareholders of the Max’s Entities prior to the Exchange
Date as they appear in the records of the Company as disclosed to the
SEC and the PSE
MPO
Rule on Minimum Public Ownership
4
New Shares
Up to 34,106,416 common shares to be issued out of the unissued
authorized capital stock of the Company which will be sold in the Offer
Nielsen
a global information and measurement company, that provides market
research, insights & data about what people watch, listen to and buy
NMIS
National Meat Inspection Service
Offer Price
Up to P29.50 per Offer Share
Offer Shares
Up to 300,136,430 common shares of the Company, being the sum of the
New Shares, the Group Shares and the Secondary Shares
Over-Allotment Shares
Up to 27,285,130 Offer Shares
PCD Nominee
PCD Nominee Corporation
PDTC
Philippine Depository & Trust Corporation
PFA
Philippine Franchise Association
PFRS
Philippine Financial Reporting Standards
Philippine National
has the meaning ascribed to the term under the section “Philippine
Foreign Investments, Exchange Controls, and Foreign Ownership”
PRA
Philippine Retailers’ Association
PSE or the Exchange
the Philippine Stock Exchange, Inc.
PSE Rules
the relevant rules of the PSE
PSE Trading
Participant
a trading participant of the PSE
Receiving and Paying
Agent
[*]
Registry of Shareholders
an electronic register of shareholders of the Company
Related Party
a party who has the ability, directly or indirectly, to control the other
party or exercise significant influence over the other party in making
financial and operating decisions; parties are also considered to be
related if they are subject to common control or common significant
influence
QIB
qualified buyers within the meaning of Section 10.1(1) of the SRC
SCCP
Securities Clearing Corporation of the Philippines
5
SEC
Philippine Securities and Exchange Commission
Secondary Shares
Up to 61,391,546 shares which are owned and being sold by the Selling
Shareholders, including up to 27,285,130 Over-Allotment Shares
Securities Regulation
Code or SRC
Republic Act No. 8799, as amended, and its implementing rules and
regulations
Selling Agent
an active trading participant of the PSE authorized to sell the Offer
Shares
Selling Shareholder
any of the following:
Trofi Ventures Corp.
WERCO Holdings Corp.
Ruby Investment Consolidated Holdings, Inc.
WR Ventures Asia, Inc.
FSS Realty Corporation
Selling Subsidiary
any of the following:
Max’s Kitchen, Inc.
Chickens R Us, Inc.
Max’s Express Restaurants, Inc.
Max’s Bakeshop, Inc.
Square Top, Inc.
No Bia, Inc.
The Real American Doughnut Company, Inc.
RooM Ventures Corp.
Trota Gimenez Realty Corporation
MGOC Holdings, Inc.
Settlement Date
[*]
Subsidiary
a subsidiary of the Company
Tax Code
National Internal Revenue Code of 1997 and its implementing rules
TNS
formerly known as Taylon Nelson Sofres and a part of Kantar Group,
one of the world’s biggest market research companies doing research for
global market information and business analysis and provides market
research insight across all industry and business sectors
Underwriting
Agreement
the underwriting agreement entered into by the Company, the Selling
Subsidiaries and the Selling Shareholders, BPI Capital and the other
Underwriters for the Offer
VAT
Value added tax in the Philippines
6
SUMMARY INFORMATION
The following summary is qualified in its entirety by the more detailed information and
consolidated financial statements and notes thereto appearing elsewhere in this Prospectus.
Because it is a summary, it does not contain all of the information that a prospective
purchaser should consider before investing. Prospective investors should read the entire
Prospectus carefully, including the section entitled “Risk Factors and Other Considerations”
and the consolidated financial statements and the related notes to those statements included
in this Prospectus.
The Company
The Company anchors its history on two well-established and multi-awarded heritage food
brands in the Philippines: Max’s and Pancake House.
Max’s started its operations in Scout Tuason, Quezon City in 1945 and since then, has been
popularly and consistently serving traditional Filipino comfort food using originallydeveloped recipes. Popularly known for its core product, Max’s fried chicken, it has expanded
its operations outside the Philippines since 1982 when it opened its first outlet in the USA.
Pancake House started its business in 1970 when it opened its first branch in Magallanes,
introducing freshly-made pancakes and waffles suited to the Filipino taste. It also entered
the international market in 2007 when it first located in Kuala Lumpur, Malaysia.
While the Company is also known for offering its other local food brands Yellow Cab, Maple,
Dencio’s, Kabisera ng Dencio’s, Teriyaki Boy, Sizzlin’ Steak and Le Coeur de France, it also
operates in the Philippines international food brands Krispy Kreme, Jamba Juice and The
Chicken Rice Shop under exclusive license arrangements in the Philippines.
The Company was listed on the PSE on December 15, 2000. Formerly known as Pancake
House, Inc., it was acquired by certain Max’s Entities (the Selling Subsidiaries) on February
24, 2014. It subsequently changed its corporate name to Max’s Group, Inc. on August 22,
2014 following the Integration of the Max’s businesses into the Company on June 30, 2014.
The Integration resulted in making the Company the country’s leading group in the chained
full service restaurant sector. It is currently controlled and managed by the MGOC
Shareholders.
As the country’s leader in the chained full service restaurant class, the Company’s brands
have been the top-of-mind choice of Filipino consumers when dining out. The Company is the
market leader in the Philippine chained full service restaurant dining industry with the
aggregated market share of Max’s Restaurant, Pancake House, Teriyaki Boy and Dencio’s of
28.3% in terms of value sales for 2013. In its country report as at November 2013,
Euromonitor states that among the chained full service restaurant players, Max’s Restaurant
is first in rank with a 14.4% market share and Pancake House has a market share of 8.4%.
The Company’s pizza brand, Yellow Cab, enjoys 21.8% market share and ranks second in the
chained pizza fast food category as of 2013. Krispy Kreme, an international franchise brand,
was successfully introduced and gained nationwide popularity. The reliable and iconic brands
7
of the Company have been afforded by the market a clear “share of mind” which translates
to customer loyalty and cements the Company’s leadership position.
Competitive Strengths
The Company’s extensive network of restaurants and outlets allows it to reach existing and
potential customers across the Philippines and in places overseas where there is a large
concentration of Filipinos, strengthening the ties the market has to the Company’s various
brands. The Company believes that as of June 30, 2014, the Group has the largest network
of casual dining outlets in the country, with an aggregate nationwide network of 498 outlets,
with 324 outlets located in Metro Manila, 117 outlets in Northern and Southern Luzon, 29
outlets in the Visayas, and 28 outlets in Mindanao. Internationally, the Company has 27
outlets situated in the United States, Middle East, Canada and Malaysia. Max’s Restaurant
has opened 3 outlets in the United Arab Emirates since November 2010 and is positioned to
open 12 more outlets in the United Arab Emirates, Qatar, Saudi Arabia, Kuwait, Oman, and
Bahrain. The Company’s ten-year development schedule for Yellow Cab includes opening a
minimum of 15 new outlets in the Kingdom of Saudi Arabia. Yellow Cab and Teriyaki Boy
outlets are also plan to be open in Hawaii. Diagram 1 and its accompanying tables on the
following page show the concentration and number of stores of the Group in the Philippines
and elsewhere.
The Company’s stores are situated in strategic locations primarily in urban areas where there
is high foot traffic and a steady flow of consumers. These are presented in different store
formats such as stand-alone stores, in-line stores, mall outlets, drive-thru stores and kiosks,
enabling the Company to capture the diverse needs and preferences of the market. The
Company also has the ability to cater to diverse customer preferences, tastes, and market
segments with the capability to offer products and services adapted to the Philippines as well
as the international markets.
Supplementing the Company’s extensive store network are its delivery services, curbside
orders facility and online ordering system, which are expected to enhance the Company’s
broad market reach and capture a wider consumer base. These services provide customers
with added convenience and increased accessibility to the Company’s brands and products.
Sales through delivery have increased by 19% from 2012 to 2013 and sales through online
orders have increased by 21% from 2012 to 2013. The Company’s online ordering system,
which currently services Max’s, Krispy Kreme and Yellow Cab, allows for the receipt of orders
within and outside the Philippines for delivery of food and beverage products. The Company
expects to provide online ordering for its other brands. The Company’s online ordering system
allows it to take advantage of the increasing internet connectivity of consumers and the rising
internet penetration rate in the Philippines, leading to a broader market reach and wider
consumer base.
Maintenance of quality and operational excellence are paramount in and built into the
Company’s corporate culture. The Company’s robust quality management system for the
front-of-the-house includes constant monitoring through mystery guest shopper checking,
direct surveys, review of customer service practices and other inspections. The Company also
maintains a process for quality system assessment and internal and third-party audits.
8
With the popularity of social media, the Company receives regular feedback and comments
through its social media pages and brand websites that allow the Company to ensure that
customer concerns are properly and quickly addressed.
9
Diagram 1. Concentration and Location of Stores of the Group
10
The Company also regularly holds training sessions and seminars for all its employees and
franchisees on customer service, food safety and handling, and store management to ensure
that the level of operational excellence and quality that the Company is known for continues
to be upheld. These practices and consciousness manifest themselves in the various awards,
accreditations and certifications received by the various brands.
The Table of Awards Received by the Group According to Brand (Table 1) below shows the
major awards received by the Group.
Table 1. Table of Awards Received by the Group According to Brand
Year
Award
Issuing Agency/
Organization
Coverage
Recipient/Brand Awardee
-
Hall of Fame-Outstanding
Filipino Franchise- Food
Category
PFA
National
Max’s Restaurant
-
Hall of Fame-Outstanding
Filipino Franchise- Food
Category
PFA
National
Pancake House
2009
Most Promising
Franchisee
DTI/PFA
National
Max’s Restaurant
Best Local Franchise
DTI/PFA
National
Max’s Restaurant
Fastest Growing
Franchise
DTI/PFA
National
Max’s Restaurant
Best in Franchising
Support
DTI/PFA
National
Max’s Restaurant
Best Homegrown
Franchise
Entrepreneur
Magazine
National
Max’s Restaurant
Store Experience Award
Krispy Kreme
International
International
Krispy Kreme
Relationship Marketing
Award
Krispy Kreme
International
International
Krispy Kreme
Product Innovation Award
Krispy Kreme
International
International
Krispy Kreme
Marketing Excellence
Award
Krispy Kreme
International
International
Krispy Kreme
Humanitarian Award
Krispy Kreme
International
International
Krispy Kreme
2010
11
2011
2012
Franchisee of the Year
Krispy Kreme
International
International
Krispy Kreme
Merit for Communication
Management Division,
Social Media
Philippine Quill
Award
National
Krispy Kreme
Hospitality/Service
Excellence
Krispy Kreme
International
International
Krispy Kreme
Product Innovation
Krispy Kreme
International
International
Krispy Kreme
Marketing Excellence
Krispy Kreme
International
International
Krispy Kreme
Development Excellence
Krispy Kreme
International
International
Krispy Kreme
Store Design
Krispy Kreme
International
International
Krispy Kreme
Product Excellence
Krispy Kreme
International
International
Krispy Kreme
Franchisee of the Year
Krispy Kreme
International
International
Krispy Kreme
Outstanding Filipino
Retailers, Foreign Brand
Retailer, Food Category
DTI/PRA
National
Krispy Kreme
Operations Excellence
Krispy Kreme
International
International
Krispy Kreme
Relationship Marketing
Krispy Kreme
International
International
Krispy Kreme
Development Excellence
Krispy Kreme
International
International
Krispy Kreme
Product Excellence
Krispy Kreme
International
International
Krispy Kreme
Hospitality/Service
Excellence
Krispy Kreme
International
International
Krispy Kreme
Marketing Excellence
Krispy Kreme
International
International
Krispy Kreme
International Master
Franchisee of the Year
(Food: Large Category)
DTI/PFA
National
Krispy Kreme
Outstanding Filipino
Retailer’s Finalist,
Foreign Brand Retailer,
Food Retailer, Large
Category
DTI/PRA
National
Krispy Kreme
12
Most Trusted Family
Restaurant
Reader’s Digest
Asia
National
Max’s Restaurant
Best Fried Chicken in
New Jersey
Inside Jersey
Magazine
International
Max’s Restaurant
Tastiest Fried Chicken
Post City Magazine
International
Max’s Restaurant
2011-2012
Outstanding Filipino Food
Retailer – Food, Large
Category
DTI/PRA
National
Max’s Restaurant
2013
Most Trusted Family
Restaurant
Reader’s Digest
Asia
National
Max’s Restaurant
The President’s Award
PFA
National Level
Max’s Restaurant
Best Filipino Fried
Chicken
LA Weekly
International
Max’s Restaurant
1st Place in Filipino FoodPeople’s Choice Award
Star Advertiser
Hawaii’s Best
International
Max’s Restaurant
Community Building
Krispy Kreme
International
International
Krispy Kreme
Relationship Marketing
Krispy Kreme
International
International
Krispy Kreme
Hospitality/Service
Excellence
Krispy Kreme
International
International
Krispy Kreme
Development Excellence
Krispy Kreme
International
International
Krispy Kreme
Franchisee of the Year
Krispy Kreme
International
International
Krispy Kreme
World Barista Champion
Krispy Kreme
International
International
Krispy Kreme
2009 –
2013
Best Ethnic Restaurant
for 5 consecutive years
Honolulu
Advertisers’ Ilima
Awards
International
Max’s Restaurant
2010-2013
One of the Best Filipino
Restaurants
Honolulu
Magazine’s Hale
Aina Awards
International
Max’s Restaurant
2013-2014
1st Place in Filipino FoodPeople’s Choice Award
Star Advertiser
Hawaii’s Best
International
Max’s Restaurant
2014
Most Promising Retailer
Ayala Malls
Merchant Awards
National
Krispy Kreme
13
Operating Subsidiaries
The Company generally operates each brand through its Subsidiaries, except for Pancake
House, Maple and Dencio’s which the Company directly operates. Diagram 2 below identifies
the Company and its Subsidiaries and the brands that they respectively operate.
Cognizant of the issues on subsidiarization, the Company continues to review its corporate
and organization structures to streamline operations and achieve synergies and maximize
operating efficiencies.
14
15
Financial Information
On June 30, 2014, the Max’s Entities were integrated into the Company in consideration for
its issuance of the Exchange Shares resulting in its ownership of 100% of the Max’s Entities.
The pro-forma financial information provides investors with information on the impact of the
transaction showing how this transaction might have affected the historical financial
statements of the Company if the transaction had been consummated at an earlier time. The
following tables present the summary of pro-forma financial information of the Company and
should be read in conjunction with the pro-forma financial statements, the annual audited
consolidated financial statements and the unaudited interim condensed consolidated
financial statements contained in this Prospectus and the section entitled “Management’s
Analysis and Discussion of Financial Condition and Results of Operations."
The information below is not necessarily indicative of the results of future operations or
financial condition of the Company.
For the avoidance of doubt, references to the “Pancake House Group” shall mean those
business units that had been in the Company prior to the Integration, references to the
“Max’s Entities” shall mean the business units conveyed by the MGOC Shareholders to the
Company in the Integration.
16
Summary of Pro-forma Consolidated Statements of Income
For the six months ended June 30, 2014
In P Mn
REVENUES
COST OF SALES
AND SERVICES
GROSS PROFIT
GENERAL AND
ADMINISTRATIVE
EXPENSES
PROVISION FOR
IMPAIRMENT
LOSS
OTHER
OPERATING
INCOME
(CHARGES)
FINANCE
INCOME (COSTS)
INCOME (LOSS)
BEFORE INCOME
TAX
PROVISION FOR
(BENEFIT FROM)
INCOME TAX
NET INCOME
(LOSS)
NET INCOME
(LOSS)
ATTRIBUTABLE
TO
Equity holders of
the Parent
Company
Noncontrolling
interest
Pancake
House
Group
Share
Swap and
Eliminating
Entries
Max’s
Entities
For the year ended December 31, 2013
Pancake
House
Group
Pro-forma
Amounts
Share Swap
and
Eliminating
Entries
Max’s
Entities
Pro-forma
Amounts
1,832.8
2,777.1
(30.3)
4,579.6
3,751.6
5,468.4
–
9,220.0
(1,545.8)
(2,115.2)
30.3
(3,630.7)
(3,067.2)
(4,185.8)
–
(7,253.0)
287.0
661.9
–
948.9
684.4
1,282.6
–
1,967.0
(273.7)
(507.1)
–
(780.8)
(568.0)
(1,022.1)
–
(1,590.1)
(106.5)
(0.1)
–
(106.6)
–
–
–
–
45.2
42.9
–
88.1
88.9
43.9
–
132.8
(16.0)
(91.0)
–
(107.0)
(62.6)
(18.8)
–
(81.4)
(64.0)
106.6
–
42.6
142.7
285.6
–
428.3
(27.4)
31.0
–
3.7
63.3
104.2
–
167.5
(36.6)
75.6
–
38.9
79.3
181.5
–
260.8
(28.7)
75.6
–
46.8
105.6
181.5
–
287.1
(7.9)
–
–
(7.9)
(26.3)
–
–
(26.3)
(36.6)
75.6
–
38.9
79.3
181.5
–
260.8
17
Summary Pro-forma Consolidated Statements of Financial Position
As at June 30, 2014
In ₱ Mn
Total Current
Assets
Total
Noncurrent
Assets
Total Assets
Total Current
Liabilities
Total
Noncurrent
Liabilities
Total
Liabilities
Capital stock
Additional
paid-in capital
Notes for
conversion to
equity
Retained
earnings
Other
comprehensive
income (loss)
Shares held by
subsidiaries
Noncontrolling
interests
Total
Liabilities and
Shareholders'
Equity
Pancake
House
Group
As at December 31, 2013
Max’s
Entities
Share Swap
and
Eliminating
Entries
Pro-forma
Amounts
Pancake
House
Group
Max’s
Entities
Share Swap
and
Eliminating
Entries
Pro-forma
Amounts
894.6
1,146.9
(30.9)
2,010.6
951.1
1,150.6
–
2,101.7
2,103.3
11,062.4
(5,919.2)
7,246.5
2,018.8
1,377.7
3,250.2
6,646.7
2,997.9
12,209.3
(5,950.1)
9,257.1
2,969.9
2,528.3
3,250.2
8,748.4
1,886.1
2,292.5
–
4,178.6
1,821.8
1,415.4
–
3,237.2
112.4
3,931.0
–
4,043.4
122.7
309.4
–
432.1
1,998.5
6,223.5
–
8,222.0
1,944.5
1,724.8
–
3,669.3
259.2
502.5
(232.2)
529.5
237.8
465.9
(195.7)
508.0
287.7
20.5
3,763.0
4,071.2
176.7
20.5
3,763.0
3,960.2
–
–
–
–
120.4
–
–
120.4
373.0
142.0
(66.5)
448.5
401.7
345.7
(345.7)
401.7
(13.4)
5,320.8
(5,320.6)
(13.2)
(12.1)
(28.6)
28.6
(12.1)
906.5
5,985.8
(1,856.3)
5,036.0
924.5
803.5
3,250.2
4,978.2
–
–
(4,093.8)
(4,093.8)
–
–
–
–
92.9
–
–
92.9
100.9
–
–
100.9
999.4
5,985.8
(5,950.1)
1,035.1
1025.4
803.5
3,250.2
5,079.1
2,997.9
12,209.3
(5,950.1)
9,257.1
2,969.9
2,528.3
3,250.2
8,748.4
18
Summary Consolidated Cash Flow Statements
For the six months ended
June 30, 2014
495.4
(107.4)
(84.8)
0.4
–
For the year ended
December 31, 2013
992.0
(82.6)
(212.9)
1.2
(69.1)
303.6
628.6
(4,839.7)
4,439.1
(777.9)
222.8
NET INCREASE (DECREASE) IN CASH
CASH AT BEGINNING OF PERIOD
(97.0)
746.8
73.5
673.3
CASH AT END OF PERIOD
649.8
746.8
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash generated from operations
Income taxes paid
Dividends paid
Interest paid
Interest received
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
19
Summary of the Offer
The Company is offering for sale to the public up to 34,106,416 New Shares, to be issued out
of the unissued capital stock of the Company; up to 204,638,468 Group Shares, to be sold by
the Selling Subsidiaries; and up to 61,391,546 Secondary Shares (inclusive of the OverAllotment Shares), to be sold by the Selling Shareholders.
Since the Selling Subsidiaries are wholly-owned subsidiaries of the Company, and proceeds
from the sale of the Group Shares held by them will be applied to pay debt, the result will
be a direct reduction in the debt level of the Company on a consolidated basis. Hence,
although the sale of the Group Shares is a sale of issued and outstanding secondary shares,
the net effect of the Offer will, insofar as the proceeds of the Group Shares are concerned,
effectively be equivalent to a sale by the Company of new primary shares for a reduction in
debt inasmuch as its proceeds directly redound in full to the benefit of the Company.
Use of Proceeds
The net proceeds from the Offer is estimated to be P4,449,300,000 after deducting
expenses related to the Offer. Said expenses are as follows:
Underwriting and selling fees for the Offer Shares
SEC registration, filing and research fees
PSE listing and processing fees
Taxes
Estimated professional fees
Marketing, distribution, and other expenses
TOTAL
Offer Size
Total Expenses as a % of Offer Size
P
P
P
P
P
P
[115,000,000]
[3,400,000]
[1,100,000]
[1,200,000 ]
[10,000,000]
[20,000,000]
[150,700,000]
4,600,000,000
[3.20%]
The net proceeds from the sale of the New Shares will be used to finance capital
expenditures relating to the expansion of stores and commissaries, working capital, and
other general corporate purposes. The net proceeds from the sale of the Group Shares
to be received by the Selling Subsidiaries will be used to repay a portion of the debt
incurred by them to fund their acquisition of a controlling interest in the Company.
A detailed discussion on the proceeds of the Offer appears on the “Use of Proceeds” of this
Prospectus.
20
THE OFFER
The following does not purport to be a complete listing of all the rights, obligations, and
privileges attaching to or arising from the Offer Shares. Some rights, obligations, or privileges
may be further limited or restricted by other documents and subject to final documentation.
Prospective investors are enjoined to perform their own independent investigation and
analysis of the Company and the Offer Shares. Each prospective investor must rely on its
own appraisal of the Company and the Offer Shares and its own independent verification of
the information contained herein and any other investigation it may deem appropriate for the
purpose of determining whether to invest in the Offer Shares and must not rely solely on any
statement or the significance, adequacy, or accuracy of any information contained herein. The
information and data contained herein are not a substitute for the prospective investor’s
independent evaluation and analysis.
Terms and Conditions of the Offer
Issue Size
Up to P4.60 billion
Offer Shares
Up to 300,136,430 common shares. The Offer Shares
have a par value of P1.00 per share and enjoy equal
ranks, preference and priority with the existing issued
and outstanding common shares of the Company.
New Shares
The Company is offering for subscription up to
34,106,416 New Shares to be issued out of the existing
authorized capital stock of the Company
Group Shares
The Company has caused the offer for sale of up to
204,638,468 Group Shares which are currently held by
the Selling Subsidiaries.
Secondary Shares
Offer Price
The Selling Shareholders are offering for sale the
Secondary Shares consisting of, in the aggregate, up to
61,391,546 common shares out of the issued and
outstanding capital stock of the Company, inclusive of up
to 27,285,130 issued shares to cover over-allotments
The Offer Shares are being offered at a price of up to
P29.50 per Offer Share. The Offer Price will be
determined based on a book-building process and
discussions between the Company and the Issue
Manager and Lead Underwriter.
21
Offer Period
The Offer Period shall commence at 9:00 a.m. of [*] 2014
and shall end at 12:00 p.m. of [*] 2014. The Company
and the Issue Manager reserve the right to extend or
terminate the Offer Period at any time subject to
prevailing market conditions and the approval by the
SEC and the PSE.
The duration of the Offer Period shall be [*] Banking
Days, unless sooner terminated or extended by the
Company and the Issue Managers. Thus, if for any
reason, any day of the Offer Period is a non-Banking
Day, the Offer Period shall automatically be extended to
the next Banking Day.
Terms and Manner of
Payment
The Offer Shares must be paid for in full in Philippine
pesos upon submission of the duly completed and signed
Application, signature card and the requisite
attachments.
Payment for the Offer Shares shall be made either by: (i)
a personal or corporate check drawn against an account
with a BSP authorized bank at any of its branches
located in Metro Manila; or (ii) a manager’s or cashier’s
check issued by an authorized bank.
All checks should be made payable to “[MAX’S OFFER]”
crossed “Payee’s Account Only,” and dated the same date
as the Application.
The Applications and the related payments will be
received at any of the offices of the Underwriters and
Selling Agents.
Eligible Applicant and
Restrictions on Ownership
The Offer Shares may be subscribed to and/or purchased
by any natural person of legal age residing in the
Philippines regardless of nationality, or any corporation,
association, partnership, trust account, fund or entity
residing in and organized under the laws of the
Philippines and/or licensed to do business in the
Philippines, regardless of nationality, subject to the
Company’s right to reject an application or reduce the
number of Offer Shares applied for subscription or
purchase if the same will cause the Company to be in
breach of any Philippine ownership requirements under
relevant Philippine laws. However, because certain
Subsidiaries of the Company own land in the
Philippines, the Philippine Constitution and related
statutes limit foreign ownership in said Subsidiaries to a
maximum of 40% of its outstanding capital stock entitled
to vote, and the Company owns more than 60% of the
22
outstanding capital stock entitled to vote of such
Subsidiaries, then the Company must be a Philippine
National in order for the Subsidiaries to comply with the
restrictions on foreign ownership.
Accordingly, the Company cannot allow the issuance or
the transfer of Offer Shares to persons other than
Philippine Nationals and cannot record transfers in the
books of the Company if such issuance or transfer would
result in the Company ceasing to be a Philippine
National for purposes of complying with the restrictions
on foreign ownership.
Minimum Subscription
The Offer Shares may be subscribed at a minimum of 200
Offer Shares and, thereafter, in multiples of 50 Offer
Shares. No application for multiples of any other
number of Offer Shares shall be considered.
Application
The application forms to subscribe to the Offer Shares
may be obtained from any Underwriter or Selling Agent.
All Applications shall be evidenced by the form
prescribed, duly executed in each case by an authorized
signatory of the Applicant and accompanied by:
(a) One (1) completed signature card;
(b) The corresponding payment for the Offer Shares
covered by the Application; and
(c) Photocopy of 2 valid identification cards for each
signatory, one of which should be a government
issued identification card.
Applications must be received by the [Receiving Bank]
not later than 12:00 p.m. of [*] 2014. Applications
received thereafter or without the required documents
will be rejected
Other Documentary
Requirements for Corporate
Applicants
If the Applicant is a corporation, partnership or trust
account, the Application must be accompanied by the
following documents:
(a) A duly executed signature card authenticated by
the corporate secretary of the Applicant;
(b) A certified true copy of the Applicant’s latest
articles of incorporation or articles of partnership
and by-laws (due certification of the documents
shall be made by the corporate secretary);
(c) A certified true copy of the Applicant’s Certificate
of Registration as issued by the SEC (due
certification of the document shall be made by the
23
corporate secretary); and
(d) A certificate issued by the corporate secretary of
the Applicant and executed under oath that sets
forth:
(i) The resolution of the Applicant’s board of
directors authorizing the purchase of the
Offer Shares subject of the Application and
designating signatories for the purpose; and
(ii) The specimen signatures of such designated
signatories.
Requirements for NonResident Individual or
Foreign Corporate and
Institutional Applicants
In addition to the requirements for corporate Applicants,
non-resident individuals or foreign corporate and
institutional Applicants are required to submit together
with the Application, a representation and warranty
stating that their investing in the Offer Shares as
applied for will not violate the laws and rules in the
jurisdiction(s) where they operate and that they are
allowed to acquire or invest in the Offer Shares.
Right to Accept, Reject and
Scale Down Applications
The actual number of Offer Shares subject of the
Application shall be subject to confirmation by the Issue
Manager and the approval of the Company. The
Company and the Issue Manager reserve the right to
accept, reject or scale down the number and amount of
Offer Shares covered by the Application. The Company
and the Issue Manager have the right to reallocate
available Offer Shares in the event that the Offer Shares
are insufficient to satisfy the total applications received.
The Offer Shares will be allocated in such manner as the
Company and the Issue Manager may, in their sole
discretion, deem appropriate, subject to the distribution
guidelines of the PSE. Applications received after the
expiration of the Offer Period or any extension thereof or
Applications with incomplete requirements shall be
rejected. Applications where checks are dishonored upon
first presentation and Applications that do not comply
with the terms of the Offer shall be rejected. Any
payment received pursuant to the Application does not
mean approval or acceptance by the Company of the
Application. Notwithstanding the acceptance of any
Application, the actual subscription of the Offer Shares
by the Applicant will be effected only upon the Listing of
all of the Offer Shares on the PSE.
Refunds
In the event that the number of Offer Shares to be
received by an Applicant, as confirmed by the Issue
24
Manager, is less than the number covered by its
Application, or if an Application is rejected by the
Company, the Company shall refund, without interest,
by way of a check payable to the Applicant (or in case of
joint Applicants to the first named Applicant) and
crossed “Payee’s Account Only within 5 Banking Days
from the end of the Offer Period, all or a portion of the
payment corresponding to the number of Offer Shares
wholly or partially rejected.
Such refund check shall be made available for pick-up at
the Receiving Bank’s offices 5 days after the end of the
Offer Period. Refund checks that remain unclaimed
after 30 days from the date such checks are made
available for pick-up shall be mailed at the Applicant’s
risk to the address indicated in the Application.
Registration and Lodgment of
Common Shares with the
PDTC
All shares are required to be lodged with the PDTC. The
Applicant must provide the required information in the
space provided in the Application to effect the lodgment.
The Offer Shares will be lodged with the PDTC at least
2 trading days prior to the Listing Date.
The Applicant may request for the uplifting of their
shares and to receive stock certificates evidencing their
investment in the Offer Shares through the Applicant’s
broker after the Listing Date. Any expense to be
incurred by such issuance of certificates shall be borne
by the Applicant.
Issuance and Transfer Taxes
All fees of the Stock Transfer Agent, documentary stamp
or other taxes, and other expenses that may be incurred
in connection with the sale of the Offer Shares and the
lodgment of the shares, shall be for the account of the
Company. The stock transaction tax payable on the sale
by the Selling Shareholders of the Secondary Shares
shall be for the account of the Selling Shareholders.
Restriction on the Issuance
and Disposal of Shares
The Company, the Selling Subsidiaries, and the Selling
Shareholders have respectively agreed not to issue (other
than the New Shares) or sell shares (other than the
Group Shares and the Secondary Shares) in the
Company for a period of 180 days from Listing Date.
Registration of Foreign
Investments
The BSP requires that investments in shares of stock
funded by inward remittance of foreign currency be
registered with the BSP if the foreign exchange needed
to service capital repatriation or dividend remittance
will be sourced from the banking system.
The
registration with the BSP of all foreign investments in
25
the Offer Shares will be the responsibility of the foreign
investors.
See section on “Philippine Foreign
Investments, Exchange Controls,
Ownership,” on page [117].
and
Foreign
Listing and Trading
All of the Offer Shares will be listed on the Philippine
Stock Exchange (the “PSE”) under the symbol “MAXS”.
Refer to “Description of Securities” on page [27].
Timetable
The schedule of the Offer is as follows:
Notice of Final Offer
Price to the SEC and
the PSE
[October 31, 2014]
Start of Offer Period
[November 4, 2014]
Deadline for
Submission of Firm
Commitment for
Trading Participants
[November 6, 2014]
Deadline for
Submission of
Applications for
Trading Participants,
and the General Public
[November 10, 2014]
End of Offer Period
[November 10, 2014]
Date of Lodgment of
Shares with PDTC
[November 12, 2014]
Listing Date and
Commencement of
Trading of New Shares
[November 17, 2014]
Description of Securities
The following general information relating to the Company’s capital stock does not purport
to be a complete listing of all the features, rights, obligations, or privileges of the Shares, and
is qualified in its entirety by reference to applicable provisions of the Company’s amended
articles of incorporation and amended by-laws. Some rights, obligations, or privileges may be
further limited or restricted by other documents.
26
Features of the Offer Shares
Voting Rights
Each common share entitles the holder to one (1) vote, and enjoys full dividend rights. In the
event of liquidation or dissolution of the Company, holders are entitled to receive their
proportionate share of all assets available for distribution, after the settlement of the
Company’s liabilities.
At each meeting of the stockholders, every stockholder entitled to vote on a particular
question or matter involved shall be entitled to vote for each share of stock standing in his
name in the books of the Company at the time of the closing of the stock and transfer books
for such meeting.
In the election of Directors, each stockholder is entitled to such number of votes as is
equivalent to the product of the number of common shares owned by said stockholder
multiplied by the number of Directors to be elected. The stockholder may cumulate his votes
in favor of one (1) or more nominees as he may see fit. A Director may also be removed by
the vote of stockholders representing at least 2/3 of the outstanding voting shares.
Pre-emptive Rights
Under the Company’s Articles of Incorporation, pre-emptive rights are denied as to all
issuances or dispositions of the Company’s common shares.
Treasury Shares
The Company does not hold any treasury shares. However, pursuant to PFRS, the common
shares in the Company held by the Max’s Entities (which include the Selling Subsidiaries),
which are wholly-owned subsidiaries of the Company, are, for accounting purposes, classified
as treasury shares in the reporting of the consolidated financial statements of the Company.
Prior to the Offer, the Max’s Entities (that include the Selling Subsidiaries) collectively own
540,491,344 shares in the Company. After the Selling Subsidiaries sell the Group Shares
under the Offer, the Max’s Entities will collectively own [*] shares in the Company. For a
more detailed discussion on the use of proceeds from the Offer, please refer to the discussion
under “Capitalization—Max’s Entities and the Selling Subsidiaries” on page [63] of this
Prospectus.
Subject to the authorization of the Company’s Board of Directors, the Company may acquire
its own common shares, provided that, it has unrestricted retained earnings to pay for the
common shares to be acquired or purchased and only for a legitimate corporate purpose(s).
The common shares repurchased by the Company shall become treasury shares that may
again be disposed of at a reasonable price as may be fixed by the Board of Directors. These
treasury shares have neither voting rights nor dividend rights as long as they remain
treasury shares.
Dividends
27
The Company is authorized to distribute dividends, subject to the existence of unrestricted
retained earnings, in cash, properties of the Company, shares of stock and/or securities of
other companies belonging to the Company. Dividends paid in the form of cash are subject
to approval of the Company’s Board of Directors. Dividends in the form of property are
subject to approval of the Company’s Board of Directors and the SEC. Dividends paid in the
form of additional shares are subject to the approval of the Company’s Board of Directors and
stockholders owning at least 2/3 of the issued and outstanding capital stock of the Company.
Holders of outstanding common shares as at a dividend record date will be entitled to full
dividends declared without regard to any subsequent transfer of such shares.
The Company has not adopted a specific dividend policy specifying a minimum dividend rate
based on its net earnings for any given year. The Company has declared the following
dividends for the past 5 years:
Payment
Date
Amount Total Dividends
Retained
Per Share
Earnings as of
(in P)
(in P)
Year
Type
Date of
Declaration
Record Date
2014
Stock
Jun 10, 2014
Aug 22, 2014
Sept 18, 2014 Dec 31, 2013
2013
Cash
Jun 28, 2013
Jul 12, 2013
Jul 31, 2013
Dec 31, 2012
0.1897
45,109,797.81
Cash
Feb 22, 2013
Mar 11, 2013
Mar 29, 2013
Jun 30, 2012
0.1007
23,946,002.32
2012
Cash
May 31, 2012
Jun 15, 2012
Jun 29, 2012
Dec 31, 2011
0.1469
34,932,152.34
2011
Cash
Dec 8, 2011
Dec 23, 2011
Dec 29, 2011
Jun 30, 2011
0.0512
12,175,127.30
Cash
May 27, 2011
Jun 15, 2011
Jun 30, 2010
Dec 31, 2010
0.0907
21,568,048.00
259,210,840.00
Other Securities
On 20 January 2014, the Company issued 21,415,385 common shares to the Aureos Group
based on the underlying convertible bonds issued under the Supplemental Investment
Agreement entered into by the Company with the Aureos Group dated 7 October 2009. The
shares were issued at a price of P6.50 per share. These shares were part of the shares that
were acquired by the Selling Subsidiaries on February 24, 2014.
Transfer of Common Shares
All transfer of legal title to the common shares must be evidenced by a transfer document in
a form acceptable to the Company, and must be registered in the share register of the
Company. The law does not require the transfer of the common shares to be effected through
the PSE. However, off-exchange sales will subject the transferor to a capital gains tax that
is significantly greater than the stock transfer tax applicable to sales effected through the
PSE. All sales of common stock on the PSE must be effected through a licensed stockbroker
in the Philippines. No share of stock against which the Company holds unpaid claims, like
unpaid subscriptions due and payable shall be transferrable in the books of the Company. In
case of delinquent shares, no stock certificate, either physical or electronic, shall be issued to
28
a shareholder until the full amount of his/her subscription together with interest and
expenses, if any, is due and has been paid.
Stock and Transfer Agent
The Company’s stock and transfer book is maintained at the principal office of the Company’s
stock and transfer agent, Stock Transfer Services, Inc. with office at the 34/F, Unit D, Rufino
Pacific Tower, 6784 Ayala Avenue, Makati City.
Changes in Control
There is no existing provision in the Amended Articles of Incorporation and Amended ByLaws of the Company which may cause any delay, deferment or in any manner prevent a
change in control of the Company.
Governing Law
The Offer Shares will be issued pursuant to the laws of the Philippines.
Use of Proceeds
The Company intends to use the proceeds it receives from the New Shares and Group Shares
as follows:
Application of Proceeds
Estimated Amounts (P)
Estimated Timing
By the Company (from New Shares)
Capital expenditures for store and
commissary expansion
400,000,000
Working capital
100,000,000
By the Selling Subsidiaries (from Group
Shares)
Repayment of debt incurred in
connection with the acquisition of a
controlling interest in the Company
Offer-related costs
Estimated net proceeds
Immediate
3,000,000,000
[150,700,000]
[3,349,300,000]
The proposed use of proceeds described above represents a best estimate of the use of the net
proceeds of the Offer based on current plans and expenditures. The actual amount and timing
of disbursement of the net proceeds from the Offer for the uses stated above will depend on
29
various factors which include, among others, changing market conditions or new information
regarding the cost or feasibility of the plans. Cost estimates, particularly for capital
expenditures for store expansion, may change as plans are developed, and actual costs may
be different from budgeted costs. To the extent that the net proceeds from the Offer are not
immediately applied to the above purposes, the Company will invest the net proceeds in
interest-bearing short-term demand deposits and/or money market instruments, and/or
repay existing debt. Aside from underwriting and selling fees, the Underwriters will not
receive any of the net proceeds from the Offer.
Based on the Offer Price of up to P29.50 per Offer Share, the total proceeds from the Offer,
the estimated total expenses for the Offer and the estimated net proceeds from the Offer will
be:
Total Proceeds from the Offer
Expenses
Underwriting and selling fees for the Offer Shares
SEC registration, filing and research fees
PSE listing and processing fees
Taxes
Estimated professional fees
Marketing, distribution and other expenses
Total Expenses related to the Offer
Net Proceeds from the Offer
Estimated Amount in P
4,600,000,000
115,000,000
3,400,000
1,100,000
1,200,000
10,000,000
50,000,000
150,700,000
4,449,300,000
In the event of any material deviation or adjustment in the planned use of proceeds, the
Company shall inform its shareholders, the SEC and the PSE in writing at least 30 days
before such deviation or adjustment is implemented. Any material or substantial
adjustments to the use of proceeds, as indicated above, will be approved by the Company’s
Board of Directors and disclosed to the SEC and the PSE. In addition, the Company shall
submit via the PSE EDGE Disclosure System the following disclosures to ensure
transparency in the use of proceeds:
(i)
any disbursements made in connection with the planned use of proceeds from the
Offer;
(ii)
quarterly progress report on the application of the proceeds from the Offer on or before
the first 15 days of the following quarter; the quarterly progress report should be
certified by the Company’s Chief Financial Officer or Treasurer and external auditor;
(iii)
annual summary of the application of the proceeds on or before January 31 of the
following year; the annual summary report should be certified by the Company’s Chief
Financial Officer or Treasurer and external auditor;
(iv)
approval by the Company’s Board of Directors of any reallocation on the planned use
of proceeds, or of any change in the work program; the disbursement or
30
implementation of such reallocation must be disclosed by the Company at least thirty
(30) days prior to the actual disbursement or implementation; and
(v)
a comprehensive report on the progress of its business plans on or before the first
fifteen (15) days of the following quarter.
The quarterly and annual reports required in items (ii) and (iii) above must include a detailed
explanation of any material variances between the actual disbursements and the planned
use of proceeds in the work program or the Prospectus, if any. The detailed explanation must
also state that the Company’s Board of Directors has given its approval as required in item
(iv) above.
The Company shall submit an external auditor’s certification on the accuracy of the
information reported by the Company to the PSE in the Company’s quarterly and annual
reports as required in items (ii) and (iii) above.
Plan of Distribution
The Company plans to offer the Shares through the Underwriters. BPI Capital
Corporation has been appointed by the Company to act as Bookrunner and Issue
Manager for the Offer. The Trading Participants, who are member-brokers of the PSE,
shall act as Selling Agents for the Offer, pursuant to the PSE’s rules and regulations.
Additional parties may be appointed as co-managers for the Offer.
Distribution and Underwriting
The Underwriters have agreed to distribute and sell the Offer Shares at the Issue Price,
pursuant to an Underwriting Agreement. Subject to the fulfillment of the conditions provided
in the Underwriting Agreement, the Underwriters have committed to underwrite the entire
Offer on a firm basis.
The Underwriting Agreement may be terminated in certain circumstances prior to payment
being made to the Company of the net proceeds of the Offer Shares.
The underwriting and selling fees to be paid by the Company in relation to the Offer shall be
equivalent to []% of the gross proceeds of the Offer. This shall be inclusive of fees to be paid
to the Underwriters and sub-underwriters, if any, and commissions to be paid to the Trading
Participants of the PSE.
The Underwriters are duly licensed by the SEC to engage in the underwriting or distribution
of the Offer Shares. The Underwriters may, from time to time, engage in transactions with
and perform services in the ordinary course of its business for the Company or any of its
subsidiaries.
The Underwriters have no direct relations with the Company in terms of ownership by either
of their respective major stockholder/s, and have no right to designate or nominate any
member of the Board of Directors of the Company.
31
There are no arrangements with any Underwriter to put back to the Company or any
Subsidiary or Selling Shareholder any of the Offer Shares.
Each of the Underwriters have conducted their respective due diligence review of the
Company and have, by the exercise of reasonable care is not aware of an untrue
statement of a material fact or omission of a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not misleading.
BPI Capital Corporation, the Issue Manager and Lead Underwriter for the Offer, is a whollyowned subsidiary of Bank of the Philippine Islands. BPI Capital Corporation is a licensed
investment house authorized to engage in the corporate finance and securities distribution
business. It began operations in December 1994. Bank of the Philippine Islands has
extended the loan to the Selling Subsidiaries to finance their acquisition of 89.95% of the
Company which was completed on February 24, 2014. This loan is to be reduced from
payments from the net proceeds of the Offer. (Please see “Use of Proceeds” on page [30] of
this Prospectus. The engagement of BPI Capital will be pursuant to an underwriting
agreement with other underwriters at arms-length terms.
Sale and Distribution
Pursuant to the rules of the PSE, the Company will make available up to 54,570,260 Offer
Shares comprising 20% of such number of Offer Shares less the Over-Allotment Shares, for
distribution to PSE Trading Participants. The total number of Offer Shares allocated to the
135 PSE Trading Participants will be distributed following the procedures indicated in the
implementing guidelines for the Offer Shares to be distributed by the PSE.
PSE Trading Participants who take up the Offer Shares shall be entitled to a selling fee of
[] of the Offer Shares taken up and purchased by the relevant trading participant. The
selling fee, less a withholding tax of 10%, will be paid to the PSE Trading Participants within
ten (10) banking days after the Listing Date.
The PSE Trading Participants may be allowed to subscribe for their dealer accounts provided
that, if they opt to sell the Offer Shares to the clients during the Offer Period, it must be at a
price not higher than the Offer Price per share. Likewise, the trading participants are
prohibited from selling the Offer Shares during the period after the Offer Period and prior to
the Listing Date.
The balance of the Offer Shares allocated but not taken up by the PSE Trading Participants
will be distributed by the Underwriters to their clients or to the general public.
Prior to the close of the Offer Period, any Offer Shares not taken up by the Trading
Participants shall be distributed by the Underwriters directly to their clients and the general
public. All Offer Shares not taken up by the Trading Participants, general public and the
[Underwriters’] clients shall be purchased by the Underwriters pursuant to the terms and
conditions of the Underwriting Agreement.
32
Term of Appointment
The engagement of the Underwriters shall subsist so long as the SEC Permit to Sell remains
valid, unless otherwise terminated pursuant to the Underwriting Agreement.
Manner of Distribution
The Underwriters shall, at their discretion, determine the manner by which proposals for
subscriptions to, and issuances of, the Offer Shares shall be solicited, with the sale of the
Offer Shares to be effected only through the Underwriters. The Underwriters may appoint
other entities, including trading participants, to sell on their behalf.
No shares are designated to be sold to specific persons.
Offer Period
The Offer Period shall commence at 9:00 a.m. on [November 4, 2014] and end at 12:00 p.m.
on [November 10, 2014], or such other date as may be mutually agreed between the Company
and the Underwriters.
Application to Purchase
All applications to purchase the Offer Shares shall be evidenced by a duly completed and
signed Application, together with two fully executed signature cards authenticated by the
Corporate Secretary with respect to corporate and institutional investors, and shall be
accompanied by the payment in full of the corresponding purchase price of the Offer Shares
applied for, by check or by the appropriate payment instruction, and the required documents
which must be submitted to the Underwriters.
Corporate and institutional purchasers must also submit a copy of SEC-certified or corporate
secretary-certified true copy of the SEC Certificate of Registration, Articles of Incorporation
and By-laws, or such other relevant organizational or charter documents, and the original or
Corporate Secretary-certified true copy of the duly notarized certificate confirming the
resolution of the board of directors and/or committees or bodies authorizing the purchase of
the Offer Shares and designating the authorized signatory/ies therefor. Individual Applicants
must also submit a photocopy of any one of the following identification cards (“ID”):
passport/driver's license, company ID, SSS/GSIS ID and/or Senior Citizen's ID or such other
ID and documents as may be required by or acceptable to the Registrar and Depository.
The Underwriters shall be responsible for accepting or rejecting any application or scaling
down the amount of Offer Shares applied for. The application, once accepted, shall constitute
the duly executed purchase agreement covering the amount of Offer Shares so accepted and
shall be valid and binding on the Company and the Applicant.
33
Minimum Purchase
A minimum purchase of 200 shares shall be considered for acceptance. Purchases in excess
of the minimum shall be in multiples of 50 shares.
Refunds
In the event an application is rejected or the amount of Offer Shares applied for is scaled
down, the Underwriters, upon receipt of such rejected and/or scaled down applications, shall
notify the Applicant concerned that his application has been rejected or the amount of Offer
Shares applied for is scaled down, and refund the amount paid by the Applicant with no
interest thereon. With respect to an Applicant whose application was rejected, refund shall
be made by the Underwriters by making the [check] payment of the Applicant concerned
available for his retrieval. With respect to an Applicant whose application has been scaled
down, refund shall be made by the issuance by the concerned Underwriter of its own [check]
payable to the order of the Applicant and [crossed “Payees' Account Only”] corresponding to
the amount in excess of the accepted application. All [checks] shall be made available for pick
up by the Applicants concerned at the office of the Underwriter to whom the rejected or scaled
down application was submitted within five Banking Days after the last day of the Offer
Period. The Company shall not be liable in any manner to the Applicant for any [check]
payment corresponding to any rejected or scaled-down application which is not returned by
the relevant Underwriter; in which case, the relevant Underwriter shall be responsible
directly to the Applicant for the return of the [check] or otherwise the refund of the payment.
Registry of Shareholders
The New Shares will be issued in scripless form through the electronic book-entry system of
STSI as stock transfer agent for the Offer, and lodged with PDTC as Depository Agent on
Listing Date through PSE Trading Participants nominated by the Applicants. Applicants
shall indicate in the proper space provided for in the Application Form the name of the PSE
Trading Participant under whose name their Offer Shares will be registered.
Legal title to the Offer Shares will be shown in the Registry of Shareholders which shall be
maintained by the Stock Transfer Agent. See “Philippine Stock Market – Amended Rule on
Lodgment of Securities” on page [125].
Expenses
All out-of-pocket expenses, including but not limited to, registration fees payable to the SEC,
fees payable to the Underwriters for the sale of the Offer Shares, as well as printing,
publication, communication and signing expenses incurred by the Underwriters in the
negotiation and execution of the transaction will be for the Company's account irrespective
of whether the Offer is completed. Such expenses are to be reimbursed upon presentation of
a composite statement of account. See “Use of Proceeds” on page [30] for details of expenses.
Any stock transaction tax and fees payable to the Underwriters payable on the sale of the
Group Shares and the Secondary Shares to be sold by the Selling Subsidiaries and Selling
Shareholders shall be for their respective accounts.
34
Selling Restrictions
No securities, except of a class exempt under Section 9 of the SRC or unless sold in any
transaction exempt under Section 10 thereof, shall be sold or distributed by any person within
the Philippines, unless such securities shall have been registered with the Philippine SEC
on Form 12-1 and the registration statement has been declared effective by the Philippine
SEC.
Determination of Offer Price
The Offer Price has been set at up to P29.50 per Offer Share. The Offer Price was determined
through a book-building process and discussions between the Company and the
Underwriters. Investors should not rely on the historical market price of the common shares
on the PSE as an indicator of the value of the Offer Shares.
The factors considered in determining the Offer Price are, among others, the Company’s
ability to generate earnings and cash flow, its short and long-term prospects, the level of
demand from institutional investors, overall market conditions at the time of launch and the
market price of listed comparable companies. The Offer Price may not have any correlation
to the actual book value of the Offer Shares.
Background of the Offer
Prior to February 24, 2014, the Company had an authorized capital stock of P400,000,000
consisting of 400,000,000 common shares with a par value of P1.00 per share, out of which
259,210,840 shares were issued and outstanding. The Company was then 82.12% owned by
the Martin Lorenzo Group and the remaining 17.88% was owned by other stockholders.
On February 24, 2014, ten of the twenty Max’s Entities (the Selling Shareholders) acquired
233,160,200 shares or 89.95% of the Company through a private sale of shares held by the
former owners of the Company that was completed through a public tender offer.
On July 31, 2014, the SEC approved an increase in the authorized capital stock of the
company to P1,400,000,000 consisting of 1,400,000,000 common shares with a par value of
P1.00 per share. The increase in capital stock was supported by a declaration by the Company
of a 100% stock dividend out of its unrestricted retained earnings to all the Company’s
stockholders.
On August 8, 2014, the SEC approved setting the Record Date for the Company’s 100% stock
dividend to August 22, 2014. The Settlement Date for the dividend declaration was on
September 18, 2014. As a result of the stock dividend declaration, the shares held by the
Selling Shareholders who acquired 233,160,200 shares in the Company on February 24, 2014
increased to 466,320,400 shares.
The up to 204,638,468 Group Shares that will be offered and sold under the Offer will come
from the 466,320,400 shares held by the 10 Max’s Entities (the Selling Shareholders).
35
On June 30, 2014, the Integration was undertaken whereby the Company and the MGOC
Shareholders agreed to a share-for-share swap, pursuant to which the Company agreed to
issue the 540,491,344 Exchange Shares to the MGOC Shareholders in exchange for 100% of
the MGOC Shareholders’ ownership interests in the Max’s Entities at a notional exchange
value of P7.50 per share. On [*], 2014, the SEC approved and confirmed the valuation for the
share swap and the issuance of the Exchange Shares.
The up to 61,391,546 Secondary Shares that will be offered and sold under the Offer will
come from the 540,491,344 shares held by some of the MGOC Shareholders (the Selling
Shareholders).
36
INVESTMENT CONSIDERATIONS AND RISK FACTORS
An investment in the Offer Shares involves a certain degree of risk. The price of securities
can and does fluctuate, and any individual security may experience upward or downward
movements, and may even become valueless. There is an inherent risk that losses may be
incurred rather than profit made as a result of buying and selling securities. Past
performance is not indicative of future performance and there may be a large difference
between the buying price and selling price of these securities. Investors deal with a range
of investments, each of which may carry different levels of risk. Investors should carefully
consider all the information contained in this Prospectus, including the risk factors described
below, before deciding to invest in the Offer Shares.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company adopts what it considers conservative financial and
operational controls and policies to manage its business risks. The Company’s actual
results may differ significantly from the results discussed in the forward-looking
statements. See section “Forward- Looking Statements” of this Prospectus. Factors that
might cause such differences, thereby making the offering speculative or risky, may be
summarized into those that pertain to the business and operations of the Company,
in particular, and those that pertain to the over-all political, economic, and business
environment, in general. These risk factors and the manner by which these risks shall
be managed are presented below.
Investors should carefully consider all the information contained in this Prospectus
including the risk factors described below, before deciding to invest in the Offer Shares.
The Company's business, financial condition and results of operations could be
materially adversely affected by any of these risk factors.
The risk disclosure does not purport to disclose all the risks and other significant aspects
of investing in these securities. An investor should undertake independent research and
study on the trading of securities before commencing any trading activity. An investor
should seek professional advice regarding any aspect of the securities to invest in or
the nature of risks involved in the trading of securities especially high risk securities.
Investors may request information on the securities and Issuer thereof from the SEC
which are available to the public.
Risks Relating to the Philippines
Risks related to the Philippine economy
The Company’s business performance is directly linked to the purchasing power of the
Filipino consumer. Substantially all of the Company’s operating revenues are derived
from its restaurant operations in the Philippines. A downturn in the Philippine economy
will reduce the purchasing power of Filipino consumers and their corresponding ability
to spend on products and services such as those offered by the Company. Demand for the
Company’s products are directly related to the strength of the Philippine economy
37
(including overall growth and remittance levels), the overall levels of business activity in
the Philippines, the overall employment levels in the Philippines and the amount of
remittances received from overseas Filipino workers. Historically, the Philippines has
periodically experienced economic downturns. For example, the general slowdown of the
global economy in 2008 and 2009 had a negative effect on the Philippine economy. While
the Philippines has recently experienced a period of growth and domestic consumption
has increased, there can be no assurance that this can be maintained.
With the Philippines expecting a steady growth, and consumption still comprising a
steady percentage of the gross domestic product of the Philippines, coupled with the
Company’s thrust to expand its international operations to enable it to derive a
significant part of revenues offshore, the Company hopes to achieve sustainable growth
in its operations and revenues.
Risks related to foreign exchange
The appreciation of the U.S. dollar to the Peso may materially affect the results of the
Group’s operations, particularly for its foreign franchised brands. The cost of imported
raw materials required for the production of Krispy Kreme and Jamba Juice products
account for approximately 41% of the respective raw material costs of The Real American
Doughnut Company, Inc. and Fresh Healthy Juice Boosters, Inc.
To mitigate the risks posed by a decline in the value of the Peso against the U.S. dollar
(and other relevant currencies) that could lead to an increase in operating costs, the
Group has adopted different purchasing strategies consisting of forward purchasing of
raw materials and stockpiling to account for seasonality and volatility in cost of raw
materials.
The Group is also expanding and expects to increase its revenues from international
operations.
Risks relating to political instability
Any political instability or acts of terrorism in the Philippines may adversely affect the
Company. The Philippines has from time to time experienced political and military
instability and acts of terrorism. In the last few years, there has been political instability in
the Philippines, including impeachment proceedings against two former presidents and the
chief justice of the Supreme Court of the Philippines, and public and military protests arising
from alleged misconduct by previous administrations. A petition for impeachment against
President Benigno Simeon Aquino III has recently been initiated by some party-list
lawmakers. There is no indication, however, whether such action will succeed.
There is also no guarantee that acts of election-related violence will not occur in the future
and such events could negatively impact the Philippine economy.
As the Group predominantly operates in the Philippines, an unstable political environment
could negatively affect the general economic conditions and operating environment in the
Philippines, which could have a material adverse effect on the Company’s business, financial
38
condition and results of operations. In any event, the impact of any such political occurrence
is usually localized and may affect the Group’s operations in the locality only.
Territorial and other disputes with China and a number of Southeast Asian countries may
disrupt the Philippine economy and business environment.
The Philippines, China and several Southeast Asian nations have been engaged in a series
of long standing territorial disputes over certain islands in the West Philippine Sea, also
known as the South China Sea. Despite efforts to reach a compromise, a dispute arose
between the Philippines and China over a group of small islands and reefs known as the
Scarborough Shoal. In April and May 2012, the Philippines and China accused one another
of deploying vessels to the shoal in an attempt to take control of the area, and both sides
unilaterally imposed fishing bans at the shoal during the late spring and summer of 2012.
These actions threatened to disrupt trade and other ties between the two countries, including
a temporary ban by China on Philippine banana imports, as well as a temporary suspension
of tours to the Philippines by Chinese travel agencies. Since July 2012, Chinese vessels have
reportedly turned away Philippine fishing boats attempting to enter the shoal, and the
Philippines has continued to protest China’s presence there. In January 2013, the Philippines
sent notice to the Chinese embassy in Manila that it intended to seek international
arbitration to resolve the dispute under the United Nations Convention on the Law of the
Sea. China has rejected and returned the notice sent by the Philippines requesting arbitral
proceedings. Chinese vessels have also recently confronted Philippine vessels in the area,
and the Chinese government has warned the Philippines against what it calls provocative
actions. Recent talks between the Government of the Philippines and the United States of
America about increased American military presence in the country, particularly through
possible American forays into and use of Philippine military installations, may further
increase tensions.
In early March 2013, several hundred armed Filipino-Muslim followers of Sultan Jamalul
Kiram III, the self-proclaimed Sultan of Sulu from the south of the Philippines, illegally
entered Lahad Datu, Sabah, Malaysia in a bid to enforce the Sultan of Sulu’s historical claim
on the territory. As a result of the illegal entry, these followers engaged in a three-week
standoff with the Malaysian armed forces, resulting in casualties on both sides. Clashes
between the Malaysian authorities and followers of the Sultan of Sulu have killed at least 98
Filipino-Muslims and 10 Malaysian policemen army since March 1, 2013. In addition, about
4,000 Filipino-Muslims working in Sabah have reportedly returned to the southern
Philippines.
On May 9, 2013, a Philippine Coast Guard ship opened fire on a Taiwanese fisherman’s vessel
in a disputed exclusive economic zone between Taiwan and the Philippines, killing a 65-year
old Taiwanese fisherman. Although the Philippine government maintained that the loss of
life was unintended, Taiwan imposed economic sanctions on the Philippines in the aftermath
of the incident. Taiwan eventually lifted the sanctions in August 2013 after a formal apology
was issued by the Government of the Philippines. However, the incident has raised tensions
between the two countries in recent months.
Should territorial disputes between the Philippines and other countries in the region
continue or escalate further, the Philippines and its economy may be disrupted and the
Company’s operations could be adversely affected as a result. In particular, further disputes
39
between the Philippines and other countries may lead to reciprocal trade restrictions on the
other’s imports or suspension of visa-free access and/or OF permits. Any impact from these
disputes in countries in which the Company has operations could materially and adversely
affect the Company’s business, financial condition and results of operations.
Risks related to occurrence of natural disasters and fortuitous events that cause a disruption
in supplies needed by the Company
The Philippines experiences a number of major natural catastrophes in recent years
including typhoons, floods, volcanic eruptions, earthquakes, mudslides, and droughts. While
these factors are not within the Company’s control, these could potentially have a significant
impact on the Company’s restaurants and operations. There can be no assurance that such
natural catastrophes will not materially disrupt the Company’s operations, particularly in
areas where such occurrences directly affect its restaurants located therein. Such natural
catastrophes may disrupt actual restaurant operations during the occurrence of such disaster
and even after, its ability to source raw materials and ingredients, deliver its services and
impair the economic conditions in the affected areas. There can be no assurance that the
Company is fully capable to deal with such natural catastrophes and that the insurance
coverage it currently maintains will fully compensate it for all the damages and economic
losses resulting from these catastrophes.
In November 2013, typhoon Yolanda (international name “Haiyan”) extensively damaged and
claimed thousands of lives in Central Philippines. One of the Max’s Restaurants in Tacloban
was damaged and operations were affected, resulting in the closure of the store. The branch
re-opened on August 21, 2014.
In July 16, 2014, typhoon Glenda (international name “Rammasun”) caused damage to
chicken farms located in Southern Luzon resulting in the constriction of chicken supply and
a 6-7% increase in the price of poultry. The Company did not experience any shortage of
chicken supply but there is no assurance that any similar occurrence in the future will have
the same negligible effect on the Company’s operations.
Typhoons and natural calamities brought about by weather conditions continue to have a
significant effect on the economics in the region which has led to, among other things, an
increase in inflation, a decrease in the pace of economic growth and/or a reduction in
consumer spending, all of which have an adverse effect on the Company’s results of
operations, particularly in the affected areas.
While the Company obtains insurance to cover certain business risks, it cannot assure
prospective investors that the insurance coverage the Company maintains will adequately
compensate it for all damages and economic losses resulting from natural catastrophes,
including possible business interruptions.
Risks relating to occurrence of power outages directly affecting restaurant operations
40
The Philippines has also experienced power outages from generation shortages and
transmission problems. These types of events may materially disrupt and adversely affect
the Company’s business and operations. The Company, however, is prepared to address any
power outages by supplying, or locating in areas where there is supply or provision of, backup power so as not to unduly hamper restaurant operations.
Risks Relating to the Group’s Business
Risks relating to competition
The Group operates in a highly competitive environment where formats and variety of
offerings of larger chains and specialized concepts of smaller independent operators, or
even convenience stores, may directly impact the demand for the Group’s products. The
Group’s multi-brand platform, however, enables the Company to offer more products at
various price points, thereby mitigating the effect of any decline in demand.
The Company's ability to compete depends on its ability to continue to maintain product
quality and consistency, to capitalize on its heritage of institutional brands, continue to
improve its existing product offerings, to develop and roll-out new products and product
line extensions, to modernize, refresh and refurbish older restaurant facilities, to
effectively respond to consumer preferences, to manage the complexity of restaurant
operations as well as the impact of competitors’ actions, and to maintain customer’s
perception of the quality, consistency and value of its products (particularly where
average product pricing is higher than that of the competition).
To the extent that the Group’s existing or future competitors offer items that are better
priced or more appealing to consumer tastes, increase the number of restaurants they
operate in one of the Group’s key markets, re-make their restaurant portfolio to better
enhance the restaurant experience or have more effective advertising and marketing
programs than the Group does, this product and price competition could adversely affect
the Group’s revenues and those of the Group’s franchisees. If the Group is unable to
maintain competitive position, it could experience downward pressure on prices, lower
demand for its products, reduced margins, the inability to take advantage of new
business opportunities and the loss of market share, which would have an adverse effect
on the business, results of operations and financial condition of the Company.
There are significant barriers to entry to a full service restaurant chain. However, new
competitors are emerging more quickly as the Philippine economy and consumption
continue to grow. New companies, including operators that are outside the traditional
restaurant industry, have started to enter the Company’s key markets and target its
customer base. Recently, the deli sections and in-store cafes of a number of major grocery
store chains, convenience stores and casual dining outlets have increased competition for
prepared food purchases. Such competitors may have, among other things, lower
operating costs, better locations, better facilities, better management, better products,
more effective marketing and more efficient operations.
Although the Philippines has recently experienced periods of economic growth, domestic
41
and international economic conditions may change and adversely affect the casual dining
market. Under challenging economic conditions, these competitive advantages resulting
from greater financial resources and economies of scale may intensify, thereby
permitting the Group’s competitors to gain additional market share. If the Group is
unable to maintain its competitive position, it could experience downward pressure on
prices, lower demand for its products, reduced margins and revenue from operations and
payments from franchises, the inability to take advantage of new business opportunities
and the loss of market share, all of which would have an adverse effect on the business,
results of operations and financial condition of the Company.
Risks relating to raw material sourcing
Any supply disruptions, price increases, or quality or safety problems could adversely
affect the Group’s operations and profitability.
The Company’s business requires a number of raw materials and other ingredients that
are sourced from third-party suppliers. Accordingly, shortages in the supply of these raw
materials and ingredients in the future may be experienced due to unforeseen events
including, but not limited to, global supply and demand conditions, weather and adverse
climate conditions, customs and import duties and government regulations. If any
supplier is unwilling or unable to provide high quality raw materials or ingredients in
prescribed quantities and at acceptable prices, the Company may be unable to find
alternative suppliers that will provide the Group with raw materials or ingredients at
suitable terms in a timely manner, or at all. This could result in delays in the delivery of
raw materials or ingredients to the commissaries and may ultimately lead to product or
menu stock-outs in the Group’s restaurants and stores.
Furthermore, the Group is vulnerable to increases in the prices of raw materials and
ingredients, the prices of which are determined principally by market forces and the
Group’s bargaining power against its suppliers. Prices of raw materials and ingredients
may fluctuate as a result of inflation or adverse climate conditions in the future. If the
prices of raw materials or ingredients increase in the future and the Group cannot pass
on such increases to its customers, it may not be able to maintain its current profit
margins and this could adversely affect the Company’s profitability.
There is also a risk that raw materials or ingredients that have been supplied may be
sub-standard or may be contaminated. Should the Group experience any quality or safety
problems in relation to the supply of raw materials or ingredients, its product quality
may be adversely affected, brand reputations may become tarnished, stores may be
compelled to close, or the Group may be subject to liability claims. Even though the
Group may bring claims against the relevant supplier for damages in such event, the
Company cannot make assurances whether such claims would provide judgment
favorable to the Group, which may in turn, materially and adversely affect the
Company’s competitive position, reputation, and business results.
To hedge against price increases and to guarantee the sufficiency and quality of the raw
materials supply, the Group sources its raw materials through and maintains long-term
contracts with reputable suppliers with quality certifications. It has also entered into
strategic partnerships with select third parties to ensure delivery of materials and
42
supplies within agreed price ranges and quality specifications. These suppliers and
strategic partners have consistently shown reliability in terms of quality and supply as
the Group’s longtime suppliers. The Group also maintains a list of alternative raw
material sources in the event that its current suppliers may not be able to provide the
quantity and quality required by the Company.
Risks relating to food quality
Any failure to maintain effective quality control of the commissaries and the Group’s
stores could have a material adverse effect on the Company’s financial condition and
results of operation.
The quality of the Group’s food and service is critical to the success of the Group’s
business. Maintaining consistent food and service quality depends significantly on the
Group’s personnel and their adherence to stringent quality control policies and
guidelines. Accordingly, the Group requires its franchisees and its franchisees’ personnel
to undergo training in food handling and safety. In addition to third-party and in-house
inspections of the commissaries and the stores, quality assurance testing is likewise
regularly conducted.
Risks relating to credit and paying capacity of franchisees
As the Group expands its franchise operations, it may face risks of collection from
franchisees who do not comply with or timely remit payment for franchise obligations.
Any delay in collections may affect the Group’s cash position.
The Group has collection and compliance measures in place to monitor and collect
receivables from franchisees. It has also established a system that will allow the
Company or the relevant Subsidiary to take over operations of franchisees in order to
protect its cash flows and preserve brand quality.
Risks relating to strategy for domestic and international growth
There is no assurance that the expansion plans of the Company for its domestic and
international operations could be achieved. The Company’s expansion plans and
timelines are dependent on third party actions that can cause delays or restrict the
opening of stores and/or completion of plans. These third parties include lessors,
contractors, suppliers and regulatory agencies.
Risks relating to labor
Any change in law and regulations, including the issuance of new wage orders and
granting increased benefits to labor, as well as the occurrence of any labor unrest may
result in disruptions in operations and financially affect the Group’s operations,
revenues and prospects.
The Company has historically kept harmonious working relations with its employees
and labor groups. The Company has not experienced any work disruption arising from
43
labor issues, and the Group generally considers its labor relations to be good. The Group
manages the risks posed by any change in law, regulation or labor dispute by adopting
policies that ensure a healthy working environment for its employees that comply with
law and regulations.
Risks relating to controlling shareholders
The Company is effectively controlled by the MGOC Shareholders consisting of the Trota,
Fuentebella and Rodgers Families and their interests may differ from the interests of
the other shareholders. Members of these families also serve on the board of directors
and act as executive officers of the Company. Accordingly, the management, policies and
business of the Company are effectively controlled by these three families through their
ability to control actions that require majority shareholder approval and through their
representatives on the Board. Together, these three families will continue to own,
directly and indirectly, a controlling interest in the Company after the Offer. This
concentration of voting power may discourage or prevent a change in control or other
business combinations.
No member of these three families is in the food business other than through the
Company. No family member is involved in any ancillary or supply business with the
Company. The Company has a Manual of Corporate Governance that provides for the
conduct of its business, including related party transactions, on a transparent and an
arm’s length basis.
Risks related to management
The Company’s businesses and operations are substantially dependent on key
executives. The Group has relied and continues to rely significantly on the continued
individual and collective contributions of its senior management team. If any of the
Group’s senior management are unable or unwilling to continue in their present
positions, or if they join a competitor or form a competing business, the Company may
not be able to replace them easily, and its business, financial condition, results of
operations and prospects could be materially and adversely affected.
To mitigate the risk of departing key managers, the Company has identified members of
management who will be able to assume and take on the role and additional
responsibilities arising from such departure.
Risks relating to joint ventures and partnerships
The Company has entered into joint ventures for the operation of certain stores of
Pancake House, Yellow Cab, Teriyaki Boy, Dencio’s and The Chicken Rice Shop, and
may enter into similar agreements for the operation of its other brands in the future.
Issues may arise among partners and joint ventures entered into by the Company which
may result in disruption in the business and operations.
Cooperation among the joint venture partners on business decisions is crucial to the
sound operation and financial success of these joint venture companies. Although the
Company has experienced certain disagreements with its joint venture partners in
44
Teriyaki Boy Group, Inc. under the Company’s previous management, the MGOC
Shareholders and the management team believe that the Company’s current
relationship with its partner, Mr. Bryan Tiu, has been constructive. Mr. Tiu has been
actively participating in the Company’s endeavors to reposition Teriyaki Boy and revive
the brand.
The Company values good relations with its various joint venture partners.
The
Company also hopes to mitigate any risk associated with joint ventures by maintaining
open lines of communication with its partners.
Risks related to third party leases
The Group operates most of its branches in areas which are being leased from third
parties. Most building leases for spaces in malls and similar developments are not
covered by long-term lease contracts. There is no assurance that these leases will be
renewed at expiry.
In order to maintain possession over the leased premises for continued store operations,
the Group maintains good relations with third party lessors and continues to improve its
brand roster to allow the Group to avail itself of favorable lease terms.
Risks Relating to Integration
The Company continues to assess and will adopt the appropriate corporate structure for the
Company and its Subsidiaries in accordance and consistent with a plan of integration to
achieve operating and cost efficiencies for the Group. The plan of integration includes
consolidating certain Subsidiaries. Integration plans as well as centralizing certain support
operations such as finance and accounting, human resources, supply chain, marketing,
project design and engineering, legal, procurement and information and technology units are
already being implemented. However, the Company recognizes that integrating the varying
systems and required processes for the operation of different brands and formats targeting
different customer demands may not be possible and certain assumed benefits may not
materialize.
Moreover, there can be no assurances that the Company’s accounting systems,
documentation processes and other internal controls that were in place prior to the
acquisition by certain Max’s Entities of a controlling interest in the Company were sufficient
to ensure accurate general record keeping and substantiate proper financial reporting.
Deficiencies in the processes that were in place at the Company prior to such acquisition may
result in discrepancies between the accounting treatments of various items in the Company’s
financial statements prepared prior to the acquisition as compared to if the same financial
statements were prepared using the Company’s systems today or if a different auditor had
audited the financial statements prior to the said acquisition.
In addition, there may be differences in judgments and estimates between previous and
current management with respect to certain items in the financials on the basis of which the
Company’s auditors rendered an opinion on the financial statements and there can be no
assurance that any differences in such judgments and estimates would not be material, or
45
would not result in material adjustments to Company’s financial information for 2013 or
earlier.
Risks Relating to the Offer and the Offer Shares
Risk on suitability of investment
The Offer Shares may not be a suitable investment for all investors. Each prospective
investor in the Offer Shares must determine the suitability of that investment in light of its
own circumstances. In particular, each prospective investor should:
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have sufficient knowledge and experience to make a meaningful evaluation of the
Company and its businesses, the merits and risks of investing in the Offer Shares and
the information contained in this Prospectus;
have access to, and knowledge of, appropriate analytical tools to evaluate, in the
context of its particular financial situation, an investment in the Offer Shares and the
impact the Offer Shares will have on its overall investment portfolio;
have sufficient financial resources and liquidity to bear all the risks of an investment
in the Offer Shares, including where the currency for purchasing and receiving
dividends on the Offer Shares is different from the potential investor’s currency;
understand and be familiar with the behavior of any relevant financial markets; and
be able to evaluate (either alone or with the help of a financial advisor) possible
scenarios for economic, interest rate and other factors that may affect its investment
in the Offer Shares and its ability to bear the applicable risks.
Risks relating to market conditions
The market price of the Common Shares may be volatile, which could cause the value of
investments in the Company to decline.
The market price of securities can and does fluctuate, and it is impossible to predict
whether the price of the Common Shares will rise or fall or even lose all of its value. The
market price of Common Shares could be affected by several factors, including:
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
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general market, political and economic conditions;
changes in earnings estimates and recommendations by financial analysts;
changes in market valuations of listed shares in general and other retail shares in
particular;
the market value of the assets of the Company;
changes to Government policy, legislation or regulations; and
general operational and business risks.
In addition, many of the risks described elsewhere in this Prospectus could materially and
adversely affect the market price of the Common Shares.
46
In part as a result of the global economic downturn, the global equity markets have
experienced price and volume volatility that has affected the share prices of many companies.
Share prices for many companies have experienced wide fluctuations that have often been
unrelated to the operating performance of those companies. Fluctuations such as these may
adversely affect the market price of the Common Shares.
Future sales of common shares in the public market could adversely affect the prevailing
market price of the common shares and shareholders may experience dilution in their
holdings.
In order to finance the expansion of the Company’s business and operations, the Board will
consider the funding options available to them at the time, which may include the sale of
additional Common Shares from the treasury or the issuance of new common shares. If
additional funds are raised through the sale or issuance of new equity or equity-linked
securities by the Company other than on a pro rata basis to existing shareholders, the
percentage ownership of the shareholders may be reduced, shareholders may experience
subsequent dilution and/or such securities may have rights, preferences and privileges senior
to those of the Offer Shares. Further, the market price of the common shares could decline
as a result of future sales of substantial amounts of common shares in the public market or
the issuance of new Common Shares, or the perception that such sales, transfers or issuances
may occur. This could also materially and adversely affect the prevailing market price of the
common shares or the Company’s ability to raise capital in the future at a time and at a price
it deems appropriate.
Risks relating to dividend declaration
There is no assurance that the Company can or will declare dividends on the Common Shares
in the future. Future dividends, if any, will be at the discretion of the Board and will depend
upon the Company’s future results of operations and general financial condition, capital
requirements, its ability to receive dividends and other distributions and payments from its
subsidiaries, foreign exchange rates, legal, regulatory and contractual restrictions, loan
obligations and loan covenants, including loan obligations and loan covenants of its
subsidiaries, and other factors the Board may deem relevant. Refer to “Dividend Policy” on
page [29] for further discussion on the Company’s dividend policy.
Risks Relating to the Presentation of Information in This Prospectus
Risks associated with pro forma financial information and management accounts
The Company has included, examined and reviewed pro forma consolidated financial
information elsewhere in this Prospectus because it believes that such information is
important to an investor’s understanding of the Company’s expected presentation of its
results of operations after the consolidation of the Max’s Entities into the Company. The
pro forma consolidated results of operations included herein are necessarily based on
certain assumptions, including those identified in the notes to the pro forma consolidated
financial statements, and such information is not necessarily indicative of the operating
results that would have been achieved had the consolidation been completed prior to
such periods, nor is it indicative of future operating results, and should not be relied
47
upon as being so indicative. Certain information presented in this Prospectus is derived
from internal statistics or unaudited management accounts that have not been reviewed
or audited by external parties. The information from these accounts is also necessarily
based on certain assumptions and extrapolation of internally generated data. Such
accounts may be subject to revision when audit processes are implemented as part of the
Company’s preparation of its financial statements. The Company’s pro forma statements
should also be read in conjunction with the historical performance of the Max’s Entities
and the Company, as well as information on the Company’s track record, management
experience, and market shares – all of which can be found in other parts of this
Prospectus.
Risks associated with information derived from unofficial publications
Certain information in this Prospectus relating to the Philippines and the industry in
which the Company competes, including statistics relating to market size, is derived
from various Government and private publications. This Prospectus also contains
industry information based on publicly available third-party sources. Industry
publications generally state that the information they contain has been obtained from
sources believed to be reliable but that the accuracy and completeness of that
information is not guaranteed. Similarly, industry forecasts and market research,
including those contained or extracted herein, have not been independently verified by
the Company and may not be accurate, complete, up-to-date or consistent with other
information compiled within or outside the Philippines. Prospective investors are
cautioned accordingly.
48
THE COMPANY
Overview of the Business
In the year 2014, the Company underwent a change in control and significant expansion of
its business and operations. After the completion of a tender offer to acquire the shares of
the public shareholders and the disposition by Pancake House Holdings, Inc. and the Aureos
Group of their respective interests in the Company on February 24, 2014, the MGOC
Shareholders beneficially took control of approximately 89.95% of the Company and
subsequently integrated all of their interest in the Max’s Entities into the Company. With
the combination of all 14 brands under its portfolio, the Company secured its position as the
leader in the casual dining full-service restaurant industry in the Philippines.
Since its incorporation in March 2000, the Company’s operating history can be characterized
by a successful track record of developing, acquiring, managing and franchising restaurants
under numerous well-known brands:
ACQUIRED PANCAKE HOUSE
LAUNCHED SIZZLIN' STEAK ACQUIRED DENCIO'S
LAUNCHED KABISERA NG DENCIO'S
ACQUIRED YELLOW CAB
INTEGRATION OF MAX'S RESTAURANT, KRISPY KREME, JAMBA JUICE AND MAX'S CORNER BAKERY
ACQUIRED SINGKIT
Mar‐00 Jun‐04 Oct‐05 May‐06 Jun‐07 Feb‐08 May‐08 Apr‐11 Sep‐11 Dec‐12 Jul‐14
JOINT VENTURE FOR TERIYAKI BOY
ACQUIRED LE COEUR DE FRANCE
JOINT VENTURE FOR THE CHICKEN RICE SHOP
LAUNCHED MAPLE
The Company’s leading brands, Max’s Restaurant, Pancake House and Yellow Cab, remain
at the forefront of the business. The Company’s operation of global brands Krispy Kreme
and Jamba Juice in the Philippines also allowed these brands to gain a strong foothold in the
Philippines and even benchmark themselves internationally in terms of product quality and
development. Teriyaki Boy and Dencio’s continue to enjoy a high level awareness and
specialty brands Maple, Sizzlin’ Steak and Le Coeur De France have gained ground over their
years of operation and still exhibit a considerable potential for growth. All together, the
49
brands complement one another and command growing loyalty among their respective niches
in the casual dining market.
Competitive Strengths

Market dominance anchored on strong brand recognition and solid brand equity in the
growing casual dining space
-
Market leadership
The Company is the market leader in the Philippine chained full service restaurant dining
industry with the aggregated market share of Max’s Restaurant, Pancake House, Teriyaki
Boy and Dencio’s of 28.3% in terms of value sales for 2013. In its country report as at
November 2013, Euromonitor states that among the chained full service restaurant players,
Max’s Restaurant is first in rank with a 14.4% market share and Pancake House has a
market share of 8.4%. The Company’s pizza brand, Yellow Cab, enjoys 21.8% market share
and ranks second in the chained pizza fast food category as of 2013.
Over the course of their long history, the Company’s reliable and iconic brands have captured
a substantial portion of the target consumer’s “share of mind” which translates to customer
loyalty, further cementing the Company’s leadership position. Nielsen’s Project Food Trips
20133 report showed that Max’s Restaurant registered a brand equity score of 4.9 in 2013,
above the Philippine norm of 2.5. The survey measured brand equity based on the favorite
brand, recommended brand, willingness to pay a premium and willingness to exert effort to
go to a brand’s location.
According to the Euromonitor 2013 Report, “Max’s, Inc. is one of the biggest players in fullservice restaurants with its brand Max’s leading other full-service restaurant operators.
Meanwhile, international brand Krispy Kreme banks on Filipinos’ sweet tooth, and is among
the fastest-growing brands in bakery products fast food.”
-
Strong brand recognition and solid brand equity
The Company’s brands enjoy strong brand recognition and unparalleled brand equity in their
respective categories, which puts the Company in a position of clear market dominance.
Among its brands, the Company considers Max’s Restaurant, Pancake House, Yellow Cab
and Krispy Kreme as its leading brands. The generational appeal of Max’s Restaurant and
Pancake House has made each of them institutions in the restaurant industry.
Data is based on research conducted by Nielsen from November 14 – December 1, 2013 among 300
males/females aged 16-60 years old from ABCD households who have patronized any food outlet selling
ready-to-eat or cooked food for meals or snacks for dine-in, take-out, drive-thru, or delivery in the past
3 months, and are either the purchase decision maker or the payor of purchase.
3
50
Having been in operation for more than seven decades, Max’s Restaurant is a household
name that appeals to every age bracket, social class and customer group. Not many local
restaurant brands have the longevity of Max’s Restaurant, giving it brand dominance that is
difficult to undermine. It also continues to enjoy a strong and continuing customer
acceptance, giving the brand a heritage that is both reassuring and familiar. The name Max’s
is almost synonymous to fried chicken in the Philippines.
Pancake House continues to be the Philippines’ dominant pancake and waffle brand for over
four decades. Pancake House has maintained its strong brand recall that translates to the
continued steady demand and market share for its products. The brand has been consistently
equated with “comfort food” through the enduring appeal of its bestsellers, pancakes, waffles,
pan chicken, tacos and spaghetti, which are well complemented by newer favorites that are
aligned with its promise of always “Bringing Home Goodness”. The Company continuously
makes the brand relevant by introducing new items in the menu which adds to the variety
that its customers look forward to, and eventually become their new favorites.
Max’s Restaurant and Pancake House have received multiple awards from various industry
organizations. Please see table of awards on page [12] of this Prospectus.
Yellow Cab quickly rose in popularity as a pizza brand and is a name that is highly relatable
for both national and international markets. It remains to be one of the Company’s key
brands and has a very strong association with its brand cues--the checkers, the color yellow,
Vespa bikes used for delivery and its industrial-look pizza box. It is in a unique position to
grow its market share.
Krispy Kreme is one of the top foreign food brands in the bakery products fastfood category
that has achieved a nationwide appeal. The Krispy Kreme brand has several unique elements
that have helped create a special bond with its customers. The doughnuts, the signature
product of the brand, which are made from a secret recipe, have a one of a kind taste that
generations of loyal customers have grown to love.
Jamba Juice is the Company’s answer to a growing health and wellness trend, addressing
new consumer preferences and taste.
Teriyaki Boy and Dencio’s both continue to possess strong brand recall, having pioneered in
the concepts of affordable Japanese dining and Filipino restobars, respectively.
-
Growing casual dining space
The Company’s dominance places it in a prime position to take advantage of the strong
economic fundamentals that continue to serve as a solid foundation for growth within the
casual dining space. As the industry leader, Max’s Group is well positioned to take advantage
of the growing Filipino population and the rising income levels of Filipino households. By
2018, 66% of households will have incomes above USD 5,0004, signaling stronger purchasing
power and increased discretionary spending. In 2013, 4.2% of household expenditure was
directed to the hotel and restaurant industry; an increase from 4.1% in 2012. Also for the
4
Estimates by the Bank of the Philippine Islands
51
hotel and restaurant industry, first quarter 2014 expenditure was higher by 6.3% compared
to the same period in 20135. Remittances from overseas Filipino workers (OFWs) are
escalating steadily, with a total of USD 33.0 billion projected to flow into the country in 20186.
Domestic consumption will be further driven by the booming business process outsourcing
(BPO) industry, which is forecast to be worth around USD 25.0 billion by 20167. The
Company’s leadership position in the casual dining industry allows it to anchor its expansion
on trends that not only suggest economic progression for the country as a whole, but also
signal tremendous opportunities for players in the casual dining space.

Breadth of brands, extensive network and varied store formats
The Company’s dominant position in the market is owed to its wide portfolio of brands,
extensive store network and ability to present itself through varied store formats.
The following are the brands held and operated by the Company and its various Subsidiaries:
5
Household expenditure data sourced from the National Statistics Association of the Philippines
Estimates by the Bank of the Philippine Islands
7
Estimates by the Business Processing Association of the Philippines
6
52
Brand
Operating Entity/ies
Max’s Restaurant
Max’s Kitchen, Inc.
Max’s Makati, Inc.
Max’s Baclaran, Inc.
Max’s (Ermita), Inc.
Chickens R’ Us, Inc.
Max’s Express Restaurants, Inc.
AD Circles, Inc.
Max’s Circles, Inc.
Max’s SM Marikina, Inc.
Max’s Franchising, Inc.
Square Top, Inc.
Max’s Corner Bakery
Max’s Bakeshop, Inc.
Krispy Kreme
The Real American Doughnut Company, Inc.
Jamba Juice
Fresh and Healthy Juice Boosters, Inc.
Pancake House
Max’s Group, Inc. (formerly Pancake House, Inc.)
PCK MTBI, Inc.
Always Happy Greenhills, Inc.
PCKH-AMC, Inc.
PCKH-MB, Inc.
Always Happy BGC, Inc.
PCK Palawan, Inc.
Yellow Cab
Yellow Cab Food Corporation
YCPI Pizza Ventures, Inc.
Teriyaki Boy
Teriyaki Boy Group, Inc.
TBGI Marilao, Inc.
TBGI Trinoma, Inc.
TBoy-MS, Inc.
PCK Palawan, Inc.
Dencio’s
Max’s Group, Inc. (formerly Pancake House, Inc.)
53
Kabisera ng Dencio’s
Max’s Group, Inc. (formerly Pancake House, Inc.)
Le Coeur de France
Boulangerie Francaise, Inc.
Maple
Max’s Group, Inc. (formerly Pancake House, Inc.)
Sizzlin’ Steak
Teriyaki Boy Group, Inc.
Singkit
88 Just Asian, Inc.
The Chicken Rice Shop
CRP Philippines, Inc.
The breadth of the Company’s brand portfolio of food offerings span a diverse range of
cuisines from Filipino fare, American staples, pizza and popular Japanese meals, to baked
goods, doughnuts, coffee, and healthy smoothies.
The Company’s long history of operating and managing outlets and brands in the Philippines
has given it in-depth knowledge of the local market and its target consumers. The Company’s
current portfolio satisfies a broad range of consumer preferences, tastes, and market
segments: Max’s Restaurant for family-oriented Filipino cuisine; Pancake House for all-day
dining with American-influenced cuisine; Yellow Cab for New York-style premium pizzas;
Dencio’s for Filipino restobar and Kabisera for premium Filipino dining; Teriyaki Boy for
Japanese favorites; Sizzlin’ Steak for affordable rice meals; Maple for all-day premium dinein with a western influence; Max’s Corner Bakery for grab and go baked goods and Le Coeur
de France for freshly baked breads; and the entry of well-known foreign brands Krispy
Kreme, the world famous melt-in-your-mouth doughnut brand, and Jamba Juice for healthy
beverages with a California vibe.
The Company populates a significant portion of malls and other retail developments. The
Company’s brands can be found in majority of shopping malls and commercial areas in the
country and as at June 30, 2014, its 283 outlets take up a total of approximately 44,000
square meters of leasable space. The Company believes that its brands are considered as
“anchor brands” of leading mall and retail developers in the Philippines. Correspondingly,
its portfolio of brands catering to different consumer tastes and market demographics has
allowed it to become a preferred tenant of mall and retail developers and generally enjoy
priority in site location with the ability to influence consumer traffic in malls and other retail
areas.
The Company also locates its outlets in high-traffic commercial (non-mall) hubs in key sites
all over the country, with approximately 215 outlets occupying approximately 53,000 square
meters of operating space. The Company’s stores are generally situated in strategic locations
primarily in urban areas where there is high foot traffic and a steady flow of consumers. Its
portfolio of brands enables the Group to set up outlets in major metropolitan cities as well as
provincial growth cities, tailor-fitted depending on market demand, preferences, and
potential, and locate in non-traditional sites like transport terminals, schools and hospitals.
The growth in the Company’s store network and revenues is also a testament to the quality
of management and operations and the continued relevance of the Company’s brands.
54
As the country experiences a significant increase in retail space available for casual dining
in various development projects, the Company intends to continue locating its outlets in
various proposed mall developments, as well as expand the presence of the various brands’
outlets in newer commercial retail areas such as BPO developments.
The Company has an extensive domestic store network in the Philippines with a foothold in
the international market, exhibiting the extent of its market leadership in the local casual
dining category. Currently having a total of more than 525 outlets, with 324 outlets located
in Metro Manila, 117 outlets in Northern and Southern Luzon, 29 outlets in the Visayas, and
28 outlets in Mindanao, and 27 outlets outside the Philippines, the Company business is in
a position to capitalize on its vast reach to existing and potential customers worldwide.
The following table shows the number of stores operated under each of the Company’s brands
in the Philippines and abroad as at June 30, 2014:
Brand
Philippines
Max’s Restaurant
Krispy Kreme
Jamba Juice
Pancake
Maple
Yellow Cab
Teriyaki Boy
Le Coeur De France
The Chicken Rice Shop
Dencios
Sizzlin Steak
Total
International
Total
141
49
11
108
3
104
35
14
2
15
16
15
6
156
49
11
114
3
110
35
14
2
15
16
498
27
525
6
Well-attuned to the market trends and consumer preferences, the Company believes that it
has the ability to identify potential cities and locations for eventual expansion within and
outside Metro Manila. In 2013 up to June 30, 2014, there are 47 net additions to the Group’s
store network, 45 of which are located domestically and 2 in international markets.
The Company currently has 27 international outlets in the United States, Middle East,
Canada and Malaysia.
The Company has successfully established Max’s Restaurant outlets overseas in places where
there is a large concentration of Filipinos, strengthening the ties the market has to the
Company’s various brands. Two Max’s Restaurant outlets were added to its international
55
store network in Las Vegas in November 2013 and in Alberta, Canada in June 2014. Pancake
House has also opened 6 outlets in Malaysia and an outlet is soon to open in Brunei.
With Yellow Cab appealing to the mainstream market where the demand for pizza is largest,
it has opened 6 outlets in Qatar and its ten-year development schedule includes opening a
minimum of 15 new outlets in the Kingdom of Saudi Arabia. Yellow Cab and Teriyaki Boy
outlets are plan to be open in Hawaii.
The Company has the ability to present its outlets in different store formats such as standalone stores, in-line stores, mall outlets, drive thru, kiosks and 24-hour service outlets,
enabling it to capture the diverse needs and preferences of the market. The Company’s
flexibility to offer different store formats enables it to address varying market needs and
requirements and tap onto demands created by new industry and country trends. For
instance, to accommodate the growing business process outsourcing industry in the
Philippines, some branches of Yellow Cab are open for 24 hours; a number of Max’s
Restaurant branches have function rooms for social gatherings as well as business
conferences, and Krispy Kreme outlets vary from stand-alone stores with drive thru, to kiosks
in shopping malls
The Company has the flexibility to offer various store formats and to adjust its occupancy
potential depending on the mall design, capacity and market concept. Its different store
formats has allowed the Company to adapt to market demographics, site location, and size of
leasable area, with store areas ranging from 50 sq.m. to 300 sq.m. In 2013, the Company
opened 36 stores in key retail areas in the country. It has opened 11 stores in 2014, with
approximately 39 more outlets planned as net additions to the Company’s store network for
the remainder of the year.
Such flexibilities have allowed the Company to become a preferred tenant of mall and retail
developers, and be granted priority in terms of site selection. The same flexibilities also
allow it to be present in non-traditional locations like transport terminals, schools and
hospitals. The growth in the Company’s store network and revenues is also a testament to
the quality of management and operations and the continued relevance of the Company’s
brands.

Operational excellence, quality consciousness and innovation
Underpinning years of market dominance, the Company prides itself with having a long
history of providing quality food and service to the Philippine market, leading its brands to
become synonymous with good food, quality service, and a clean and inviting store
environment.
As the Company considers food quality and consistency essential to its operations, it requires
that adequate operating systems and practices are observed from source to store, through the
control of commissary operations, regular training of employees and franchisees, and
observing robust monitoring systems.
56
Substantially all of the Group’s supply requirements for company-owned and franchised
stores are being serviced by Company-owned and controlled commissaries, ensuring the
quality and consistency of the Group’s products. Operating these commissaries and
warehouses are Subsidiaries No Bia and STI, and both have been awarded various citations
and certifications.
No Bia and STI primarily supply to the 141 outlets of Max’s Restaurant and 68 combined
stores of Teriyaki Boy, Dencio’s, Kabisera, Sizzlin’ Steak and The Chicken Rice Shop located
throughout the Philippines. Both commissaries are situated within Metro Manila.
The No Bia and STI commissaries are governed by the NMIS with yearly evaluation and
accreditation. NMIS is responsible for implementing policies and procedures and rules
relative to production of raw materials local and imported, through the various stages of
handling, inspection, processing, storage and preservation of meat products. Both
commissaries received an “AAA” accreditation as well as passed the “Current Good
Manufacturing Practices” audit from the said agency. NMIS inspects the commissaries
policies and procedures including layout and infrastructure, and meat handling and
processing procedures. To ensure compliance to NMIS standards, the agency’s officers
regularly visit in the commissaries to monitor the operations of the commissaries. Aside from
the NMIS certification, No Bia and STI are HACCP certified in the production of ready to fry
whole chicken while STI is HACCP certified for the processing of Lechon Kawali and Pork
Pata. Accreditation is issued by Certification International, Phils. Inc., an affiliate of the
British company Certification International U.K. Ltd. HACCP certification is based on the
international code of practice and general principles of food hygiene, thus, ensuring the safety
and suitability of food for consumption. All accreditations are handled directly by the
commissaries.
Strong emphasis on quality of food and service benchmarked against international best
practices has been echoed throughout the Company over the years. The Company believes
that this has translated to a steady growth for the Company.
In addition to obtaining requisite local government permits and licenses including sanitary
permits, certificates of water potability, fire safety inspection permits, occupancy permits,
building permits, locational clearances and business permits, LLDA clearances, import
licenses, permits to operate from the DENR and licenses to operate from the DOLE, No Bia
and STI have been granted various accreditations, awards and citations.
57
The following are the accreditations, licenses, awards and citations received and/or obtained
by the commissaries:
Accrediting Agency/ Awarding-Giving Body
Accreditations, Licenses, Awards and Citations Received
For No Bia:
National Meat Inspection Services (NMIS)
Good Manufacturing Practices (GMP) Certificate
Certificate of Accreditation as Meat Processing Plant – “AAA”
Category
Hazard Analysis and Critical Control Point Certificate (HACCP)
for ready to fry whole chicken
Search for the Best Meat Processing Plant 2009 - Regional
Winner for “AA” Category
Search for the Best Meat Processing Plant 2009 - National
Winner for “AA” Category
Food and Drug Authority (FDA)
License to Operate as a Food Manufacturer for Multi-Products
and Exporter
Department of Agriculture
License Renewal for Minimum Access Volume Quota
Halal Development Institute of the Philippines
Halal Certificate for Distribution and Warehousing of Max’s
Banana Ketchup
Halal Certificate for the MIASCOR processing area
Bureau of Fisheries and Aquatic Resources
Importer of Fresh, Chilled, and Frozen Fish and
Fishery/Aquatic Products
Bureau of Animal Industry
Permit to Transport Fully-Processed Meat Products to FMDfree areas and FMD buffer zones
For STI:
National Meat Inspection Service (NMIS)
Good Manufacturing Practices (GMP) Certificate
Certificate of Accreditation as Meat Processing Plant – “AAA”
Category
HACCP – Processing of Ready to Fry Fresh Chicken Certificate
HACCP Certification for processing of Lechon Kawali
HACCP Certification for processing of Pork Pata
Accreditation as Importer – Meat Processor
58
Food and Drug Administration (FDA)
License to operate as Food Manufacturer of Multi Products
Certificate of Current Good Manufacturing Practice
Bureau of Fisheries and Aquatic Resources
Importer of Fresh, Chilled, and Frozen Fish and
Fishery/Aquatic Products
Bureau of Animal Industry
Permit to Transport Fully-Processed Meat Products to FMDfree areas and FMD buffer zones
Halal Development Institute of the Philippines
Halal Certificate for Distribution and Warehousing of Max’s
Banana Ketchup
National Meat Inspection Service with the
support of the Inter-Agency Committee on Meat
Establishment Amenities and Technology of
the Department of Health, Department of
Environment and Natural Resources and the
Department of Interior and Local Government
Regional Winner (NCR), Search for the Best Meat
Establishment “AA” Meat Processing Plant, 2006
National Winner (NCR), Search for the Best Meat
Establishment “AA” Meat Processing Plant, 2006
Regional Winner (NCR), Search for the Best Meat
Establishment “AAA” Meat Processing Plant, 2008
National Finalist (NCR), Search for the Best Meat
Establishment “AAA” Meat Processing Plant, 2008
Regional Winner (NCR), Search for the Best Meat
Establishment “AAA” Meat Processing Plant, 2009
National Finalist (NCR), Search for the Best Meat
Establishment “AAA” Meat Processing Plant, 2009
Aside from maintaining quality of its products through excellence in commissary operations,
the Company also observes high standards to achieve operational excellence for store service
and quality and a consistent front-of-the-house service platform for all brands. Initiated and
currently practiced for Max’s Restaurant, quality system assessment and internal and third
party audits will be implemented throughout the Group’s brands. These assessment and
audit processes are based on strict criteria which include sales improvement, adherence to
methods, quality assurance standards, customer engagement, consistency in quality, speed
of service, sanitation and hygiene, and condition of the stores.
To uphold the level of product and service quality, the Company also has a robust monitoring
system based on customer feedback. The Company monitors observance to standards through
mystery guest shoppers, direct surveys, customer service forms, and social media such as
Facebook and Twitter. The Company likewise monitors its social media pages and brand
websites, especially the comments sections and ensures that customer concerns are properly
and quickly addressed.
Maintenance of quality and operational excellence has been ingrained in the Company’s
corporate culture and is practiced by all employees, from servers and store managers, to
59
senior executives and principals. It gives emphasis on training and regularly holds training
sessions and seminars for all its employees and franchisees on customer service, food safety
and handling, and store management, making certain that its employees and franchisees
uphold the level of operational excellence and quality that the Company is known for.
Employees are trained, depending on their responsibilities, on customer service, food safety
and handling, and store management and operations. The Company’s training programs
facilitate the proper observance of Company and industry regulations, adherence to the
Company’s quality and service levels, and dissemination of the Company’s vision and growth
plans.
The Group places much emphasis on training to achieve operational excellence and Krispy
Kreme International has consistently recognized the Philippine operations for its excellence
in hospitality/service, product quality, marketing, and operations and as such has requested
assistance in providing training and support for 7 international markets.
The Group’s management has a high degree of consciousness for innovation and improvement
and accordingly spearheads various innovative programs in order to improve quality and
efficiency of operations and achieve product excellence. Exhibiting management’s conscious
thrust for innovation, Krispy Kreme Philippines initiated a strategic alliance with Hershey’s
for the development of new flavors and products for the Krispy Kreme brand in the
Philippines. It is this local initiative that was taken up by Krispy Kreme International and
was promoted globally. Throughout the Group, management continues to launch initiatives
including constant updating of methods to maintain and improve on the delivery of product
quality and service standards, production efficiencies and processes, brand image and store
ambiance. The Company believes it is the thrust to remain relevant that has allowed the
Group to seize opportunities, anticipate and overcome challenges, and be able to adapt to
changing customer preferences.

Ability to achieve economies of scale
In addition to maintaining consistent quality for its food products, the Company’s
commissaries also allow the Company to procure raw materials for the various outlets to
achieve economies of scale. Centralized purchasing across brands allows the Company to
exercise additional bargaining power with its suppliers and negotiate for better terms or
better quality of raw materials.
As to the engagement of third-party logistics providers for the delivery of food ingredients
and products to its outlets, the Company is able to leverage its position through negotiations
and the execution of long-term contracts with third-party logistics providers to service a set
number of the Company’s outlets in a given coverage area.
Centralized business functions, directly-owned and operated/controlled commissaries, and
long-standing relationships with suppliers and service providers have allowed the Company
to successfully manage its business and operate its stores amid a wide and extensive domestic
and international network, lower costs and improve working capital cycles through improved
supply terms.
60
The Company is also able to leverage on its wide-range of brands and outlets in negotiating
and obtaining satisfactory terms for its lease agreements with mall operators and third
parties.

Strong management with principal shareholder support
The business of the Group is characterized by strong support from its principal shareholders
who are involved in management and operations, providing the Company with a wealth of
experience and high degree of accountability. The Group’s shareholders represent the second
and third generations of the founding families who are now continuing the entrepreneurial
tradition of managing and growing the Max’s Entities. Their focus on operations and
business development has driven continuous growth and expansion of the Max’s Entities and
the steady rise in revenues.
Complemented by a strong professional management team in functional areas including but
not limited to finance, marketing, information technology, human resources, supply chain,
quality assurance and business development, the Company is able to pursue and execute its
growth strategy.

Corporate culture of employee growth and loyalty
The Company believes that its corporate culture fosters and encourages human capital
development and learning through in-house training programs and succession planning.
Employees are encouraged to rise from the ranks and eventually hold key management
positions. As at the date of this Prospectus, 51% of the Company’s store managers are
homegrown and have been in the Company for 4 years on average. Store managers are also
encouraged to guide the career paths of their directly-managed employees, which the
Company believes increases employee satisfaction and loyalty. Company-wide training
programs are undertaken by employees throughout the organization, resulting to high
standards of service and product quality directed towards the growth of the business.
The Company strongly believes that employee satisfaction and loyalty eventually translates
to excellent service which leads to greater customer loyalty.
61

Proven ability to expand in national and international markets
The Company attributes its constant expansion over the years to:

the Group’s possessing the requisite systems, processes, structures, management,
personnel and culture to meet targets and improve its brand equity;

the Group being a direct producer and manufacturer of its products which places it in
a position to be fully aware of customer demand and exercise prudence and good sense
in undertaking expansions;

management’s ability to design brand development criteria for new markets owing to
decades of direct operating experience; and

possessing a good understanding of the regulatory, social and political environments
in which the Group operates and their implications on the growth strategies.
The Group has established collaborative alliances with various suppliers, contractors and
designers that has allowed it to implement expansion plans within reasonable execution
cycles and manage costs.
Strategies
The Company aspires to be the most-loved, top-of-mind restaurant group in the Philippines,
providing a memorable dining experience to Filipinos and other markets domestically and
overseas by leveraging its operational and management excellence and high standards of
product and service quality. The Company intends to achieve this through the following:

Grow existing brands to keep market leadership
In view of expected growth in consumer spending in Metro Manila and in other key cities,
the Company intends to intensify its efforts to grow the brands and maintain its market
leadership.
-
Focus on leading brands
The Company will focus on its leading brands Max’s Restaurant and Pancake House, and
increase the dominance of Krispy Kreme and Yellow Cab in their respective categories. By
leveraging on the strength of these brands, the objective of the Company is to increase store
network of these brands, introduce new formats and expand their product offerings to ensure
the brands’ continued relevance and customer acceptance.
-
Invigorate Dencio’s, Teriyaki Boy and Sizzlin’ Steak
Building on the strength of the brands Dencio’s and Teriyaki Boy which continue to enjoy a
strong brand recall, and the novelty introduced by Sizzlin’ Steak, the Company plans to
62
reposition these brands and allow them to recapture the market categories which these
brands pioneered.
-
Selectively expand niche brands
In order to preserve the loyalty of the customers for niche brands Maple, Jamba Juice,
Kabisera and Le Coeur de France, the Company will harness the potential of these brands
by selectively expanding in choice locations and markets.
-
Increase revenues by expanding international operations
The Company shall actively pursue new and underserved target markets, expanding the
Company’s consumer base, particularly in the global space. Recognizing the immediate
potential of the following brands to go global, the Company will be expanding Max’s
Restaurant, Pancake House, Yellow Cab and Teriyaki Boy into the international market.
As at June 30, 2014, Max’s Restaurants has 12 stores in North America and 3 stores in the
Middle East; Pancake House has 6 stores in Malaysia; Yellow Cab currently has 6 stores in
Qatar and its ten-year development schedule includes opening a minimum of 15 new outlets
in the Kingdom of Saudi Arabia; Yellow Cab and Teriyaki Boy outlets are planned to be
opened in Hawaii. The Company sees Asia Pacific (excluding Philippines) and the Middle
East as key growth markets with their high concentration of overseas Filipino workers.

Complete the Integration and realize operating efficiencies of the larger combined group
-
Complete the Integration
On 24 February 2014, the Max’s Group completed the acquisition of Pancake House and its
portfolio of brands. The combination of the Max’s Group and Pancake House Group created
the country’s leading chained casual dining group with aggregate revenues of P9.22 billion
for the year ended December 31, 2013 and P4.58 billion for the six-month period ended June
30, 2014 (on a pro-forma basis).
Having brought together two of the country’s largest and successful heritage brands that
share a long history of brand recognition and innovation, customer loyalty, and proven track
records for expansion, the combined business knowledge, expertise and best practices
observed by the management of the Company and its Subsidiaries will be applied to the entire
Group.
The Company continues to assess and will adopt the appropriate corporate structure for the
Company and its Subsidiaries in accordance and consistent with its plan of Integration to
achieve operating and cost efficiencies for the Group. The plan of Integration includes
consolidating certain Subsidiaries. Integration plans are currently being implemented.
63
-
Realize operating efficiencies of the larger combined group
The Company shall continue to apply best market practices to its entire portfolio of brands
and take advantage of operational synergies.
Given a larger combined entity, the Company is in the process of effectively centralizing its
backroom operations and shared service departments, such as finance and accounting,
human resources, supply chain, marketing, project design and engineering, legal,
procurement and information and technology units, which the Company believes shall result
to cost savings and increased efficiency across the entire organization. Furthermore, the
Company shall continue consolidating the commissaries for efficiency, standardization, and
maintenance of product quality. As at June 30, 2014, the Company has a total of 4
commissaries serving its different brands and plans to consolidate these into 3 commissaries
by the end of 2015. Aside from production efficiencies resulting from the commissary
consolidation, steps are being undertaken to centralize procurement of raw materials and
ingredients across all commissaries. Centralized procurement shall provide the Company
with further bargaining power with its suppliers, allowing the Company to negotiate for more
favorable commercial terms or better quality of raw materials and ingredients.
As an integral component of adopting operational synergies, the Company shall continue to
develop its strong unified service culture and leadership team and drive a performance-based
management in an aligned organization.
64

Pursue diverse revenue channels
-
Additional accessibility to the consumer
The Company intends to intensify its distribution platform consisting of its delivery service,
curbside ordering facility, and online delivery systems for wider reach and to the customer.
Augmenting the Company’s physical stores are its delivery services currently being employed
by Max’s Restaurant, Pancake House, Teriyaki Boy, Yellow Cab and Krispy Kreme. Yellow
Cab, in particular, has a single central number and 24-hour delivery, allowing its customers
access to its products any time of the day. Max’s Restaurant’s online ordering system allows
for the receipt of orders within and outside the Philippines for delivery of food and beverage
products to loved ones in the Philippines. The Company plans to adopt a similar online
ordering system for most of its brands by 2015, taking advantage of the increasing internet
connectivity of consumers and the rising internet penetration rate in the Philippines,
ultimately expanding the Company’s market reach.
The Company shall also continue to expand its existing store network through Companyowned outlets and franchises, providing the market with increased accessibility and
convenience.
-
Centers to support dine-in store network
Supplementing the Company’s extensive dine-in store network are multiple revenue centers
such as delivery services, curbside ordering facility and online ordering system. These
services provide customers with added convenience and increased accessibility to the
Company’s brands and products.
As at June 30, 2014, 5 of the Company’s brands, namely Max’s Restaurant, Pancake House,
Yellow Cab, Krispy Kreme and Teriyaki Boy, have embarked on aggressive delivery services,
including a 24-hour delivery service for areas near the vicinity of certain Yellow Cab outlets.
Combined sales through delivery have increased by 19% from 2012 to 2013.
65
The Company’s online ordering system allows for the receipt of orders within and outside the
Philippines for delivery of food and beverage products within the Philippines. This online
ordering initiative has been in place for the Max’s Restaurant, Krispy Kreme and Yellow Cab
brands. Combined sales through online orders have increased by 21% from 2012 to 2013. The
Company’s online ordering system allows it to take advantage of the increasing internet
connectivity of consumers and the rising internet penetration rate in the Philippines, leading
to a broader market reach and wider consumer base.
The following table shows the recorded sales growth from delivery services of these brands
from 2012 to 2013:
Brand
Max’s Restaurant
Krispy Kreme
Pancake
Yellow Cab
Teriyaki Boy
-
Percentage Growth
16%
389%
438%
17%
100%
Expanding into new product lines and store formats
The Company is planning to strategically develop its current brand offerings by, among
others, the introduction of new product lines or new formats. New product lines or formats
will enable the Company to cater to different market needs and preferences. Similar to the
introduction of my Pancake products, the Company intends to introduce new products in its
outlets, especially in its overseas branches, to maintain interest in the Company with its
innovative products and to always pique the interests of its target market. The Company
also plans to tap other distribution channels for these new products.
By offering different store formats, the Company is able to adapt to market preferences and
available store location and space. The Company plans to continue to roll-out outlets in
different store formats, providing the market with better access to the Company’s stores and
products and added convenience.
Further, to distinguish itself from other concepts of the same restaurant class, Max’s
Restaurant will continue to enhance its systems and operations for its other revenue centers
to address the growing demand from bulk-orders, catering and functions and events, as well
as provide for additional delivery hubs and take-out counters.
-
Cater to institutional clients
Aside from its branch network, the Company intends to develop itself as a branded
concessionaire.
Accordingly, it shall aggressively pursue opportunities to cater to
institutional clients in addition to its current clientele which include airlines, a hotel and
66
resort operator and other retailers. This will allow the Company to tap new markets for the
Company’s products and diversify the Company’s sources of income.
The following table shows the amount of institutional sales from 4 of the Company’s brands
and the respective contribution to the Group’s total revenues for the periods presented (on a
pro-forma basis):
For the six months ended
June 30, 2014
For the year ended
December 31, 2013
Max's Restaurant
Max's Corner Bakery
Krispy Kreme
Le Coeur de France
Total
37.2
18.6
47.6
10.6
113.9
30.1
45.6
33.8
21.0
130.5
Max's Restaurant
Max's Corner Bakery
Krispy Kreme
Le Coeur de France
0.8%
0.4%
1.0%
0.2%
0.3%
0.5%
0.4%
0.2%
Total
2.5%
1.4%
In P Mn
-
New projects to complement the business
The Company’s Subsidiary, RooM Ventures Corp. is currently pursuing the development of
Meranti, a hotel project adjacent to the heritage store of Max’s Restaurant in Scout Tuason,
Quezon City.
The project was initially conceptualized to offer the quality and value that the Max’s brand
is known to provide. It is intended to leverage on, as well as complement, the Group’s service
capabilities, and hopes to also achieve the status of a brand that delivers on value and offers
quality for its price. Given the Company’s expertise in the service industry, the development
is aimed to target the same market that the Company’s food market serves.
In conceptualizing this hotel, the world-class Filipino architectural firm of Architecture
Budji+Royal Design has been commissioned to plan the project and in partnership with
Tangible, a Singaporean firm, the hotel’s brand identity and full brand architecture strategy
for the hotel was created. The hotel will be targeting the domestic and foreign tourists,
business travelers and locals who indulge in “staycations.” The hotel will have a total of
approximately 60 rooms and will be equipped with recreational facilities at the start of
commercial operations in 2015.
67

Continue to evaluate business expansion opportunities including brand acquisitions and
franchise expansion
The Company shall continue to evaluate opportunities to enhance its current portfolio and
continue to develop its current brand offerings for strategic expansion.
Other brands, both foreign and local, may be added to its current portfolio based on market
trends, readiness and acceptability of the target market, market potential and forecasted
growth, as well as fit of the target brand into the Company’s current offerings and corporate
culture.
The Company shall likewise evaluate and consider brands targeting the middle to upper
market segments, addressing the market’s demand for premium products and in line with
the rising incomes of the middle class. Drawing from its experience with Maple, an all-day
American inspired premium dining full-service restaurant which opened in 2013 and
currently has 4 branches in upscale-market areas such as the San Antonio Plaza Arcade,
Shangri-La Mall, Commerce Center at Filinvest Corporate City and Ayala Terraces Cebu.
New brands, whether these are local brands that are available for acquisition by the
Company, foreign brands that are being offered for franchising, or brands that may be created
by the Company, will allow the Company to reach out to new or underserved markets,
reinvigorate and reinforce interest and loyalty to the Company, and enable the Company to
capture a larger portion of the consumer’s “share of wallet”. By introducing new brands to
the market, the Company shall rely on the capabilities and expertise of its management team
and key executives.
With a now larger network of store outlets and a more diverse set of brands, the Company
has more to offer the market in terms of products and dining experiences. The Company plans
to take advantage of the breadth of its portfolio by actively expanding into locations with
adequate target market size and possess a certain level of readiness and acceptability of the
Company’s brands and product offerings. The Company shall track and monitor the growth
and development of shopping malls and other commercial retail areas throughout the country
and overseas where there is a sizeable market for the Company’s products and plans to open
outlets at the same rate as mall growth. With the Company’s extensive and attractive brand
portfolio, the Company is optimistic that it can secure key store locations in upcoming mall
and retail developments.
The Company shall continue to expand its franchise model. Out of the planned outlets in
2014 and 2015, the Company targets approximately 20 and 33 stores, respectively, to be
established and managed by franchisees. To ensure that franchisees maintain the same
standards of quality of the Company, regular inspections, both announced and unannounced,
shall be conducted by the Company’s quality control teams. Trainings and seminars shall be
conducted for the employees of these franchises and the franchise holders themselves. The
further development of its franchise model allows the Company to expand in a faster pace
and in more far-flung areas, increasing the visibility and accessibility of its brands both
domestically and overseas.
68
Through the years, the Group has been joining franchise conventions and expos to introduce
its brands to potential franchisees. Given the Group’s success in franchising, current
franchisees are expanding to other sites. Franchise partners have also successfully referred
other franchisees to the network. In the recent PFA Expo held from July 16 – 20, 2014, in
which the Company participated, the Company experienced a 300% growth in franchise
applications across the brands Max’s Restaurants, Pancake House, Yellow Cab, Teriyaki Boy
and Dencio’s, signaling the tremendous appeal of these brands. The Company shall utilize
its franchise network, in particular, to boost its presence especially in provincial areas.

Continue to attract, develop and retain key talent across all levels
The Company, having grown in employee size and job complexity, is formalizing various
human resource and personnel systems in the effort to attract, retain, grow and engage its
employees. Performance and potential are key factors that will be considered in developing
and in moving talents up, along and across the business units. Jobs will be regularly and
systematically reviewed and evaluated to ensure equitability and competitiveness of
compensation. Rewards systems will continue to be performance-based and aligned with the
Company’s philosophy and values.
69
History
The Company traces its history to a well-established record of restaurant operations
characterized by comfort food and good service.
As early as 1945, the first bar and café called Max’s started operations in Scout Tuason,
Quezon City to cater to the American soldiers stationed along the nearby South Market
Street (later on renamed Alejandro Roces Avenue). It served food familiar to the soldiers,
among them steaks and fried chicken, using recipes developed by Ruby S. Trota. In early
1950, the restaurant operations were formally incorporated as and into Q.C. Max’s, Inc., with
Mr. and Mrs. Maximo F. Gimenez, Mr. and Mrs. Claro J. Trota, and Mrs. Felipa Sanvictores
as founders. Over time, various restaurant outlets located itself within the Philippines,
operating under the different Max’s Entities.
In 1970, Pancake House opened its first restaurant in Magallanes to introduce freshly made
pancakes and waffles in varied flavors to a predominantly rice-based consuming market. In
1974, Sta. Rosa Food Services Corporation (“SRFSC”) was incorporated to handle the
management and operation of Pancake House.
In 1978, following the successful launch of the first franchised outlet in Greenhills, San Juan,
more Pancake House outlets – both company-owned and franchised – opened in strategic
sites. Operations expanded steadily, requiring the setting up of a central commissary to
support the logistical and operational needs of the growing number of restaurants. In early
2000, all of Pancake House’s operating assets were acquired by the Company, and in
December 2000, the Company was listed on the Philippine Stock Exchange.
The Company’s restaurants did not limit themselves to the Philippine setting. In 1982, Max’s
opened its first outlet outside the Philippines in San Francisco, California, USA. In 1984,
Max’s Los Angeles opened. To date, there are a total of 12 Max’s Restaurant outlets in North
America.
In 2007, Pancake House marked its entry into the international market with its first location
in Kuala Lumpur, Malaysia. A second Pancake House outlet was opened in Kota Kinabalu,
Malaysia in 2008.
The Company grew its stable of brands with its acquisition and development of Dencio’s in
2004 and entered into a joint venture with Mr. Bryan Tiu for the operation of Teriyaki Boy
in 2005. It acquired Singkit in 2006. It launched Sizzlin’ Steak in 2007 and acquired Le
Coeur de France in February 2008. It entered into a joint venture for the introduction of The
Chicken Rice Shop in April 2011. A few months later, or on September 2011, it acquired
Yellow Cab. Maple was launched in December 2012.
In the year 2014, the Company underwent a change in control and significant expansion of
its business and operations. After the completion of a tender offer to acquire the shares of
the public shareholders and the disposition by Pancake House Holdings, Inc. and the Aureos
Group of their respective interests in the Company on February 24, 2014, the MGOC
Shareholders beneficially took control of approximately 89.95% of the Company and
subsequently integrated all of their interest in the Max’s Entities into the Company.
70
The combination of the Max’s Group and Pancake House created the country’s leading
chained full service restaurant group. It brought together two of the Philippines’ largest and
historically successful heritage brands that share a long history of brand recognition and
innovation, customer loyalty, and proven track records for expansion.
71
72
Principal Brands and Products
The Company, by itself or through its subsidiaries, owns and has the right to operate and
market 11 brands, and the license to operate foreign brands Krispy Kreme, Jamba Juice and
The Chicken Rice Shop in the Philippines. The Company’s dominant position in the market
is owed to its wide portfolio of brands, extensive store network and ability to present itself
through varied store formats.
The breadth of the Company’s brand portfolio of food offerings span a diverse range of
cuisines from Filipino fare, American staples, pizza and popular Japanese meals, to baked
goods, doughnuts, coffee, and healthy smoothies.
The Company’s current portfolio satisfies a broad range of consumer preferences, tastes, and
market segments, with:
Its local brands-










Max’s Restaurant for family-oriented Filipino cuisine
Pancake House for all-day dining with an American-influenced cuisine
Yellow Cab for New York-style premium pizzas
Dencio’s for Filipino restobar
Kabisera ng Dencio’s for premium Filipino dining
Teriyaki Boy for affordable Japanese favorites
Sizzlin’ Steak for affordable rice meals
Maple for all-day premium dine-in with a western influence
Max’s Corner Bakery for grab and go baked goods
Le Coeur de France for freshly baked breads, and
Singkit for Chinese take-out food
Its foreign brands-


Krispy Kreme for the world famous melt-in-your-mouth doughnuts,
Jamba Juice for healthy beverages with a California vibe, and
The Chicken Rice Shop.
The following discussion shows the profile, growth history and extent of operation, and
contribution to revenue of the Company by each of the brands:
73
Max’s Restaurant
The House that Fried Chicken Built
Max’s Restaurant is the Company’s flagship brand. The rich heritage and trusted brand of
Max’s Restaurant comes from a proven track record in delivering world class food with the
best quality of customer service. With almost 70 years of experience, the brand’s popularity
is evidenced by Max’s Restaurants’ clear dominance of its market segment. Based on
Euromonitor’s report, it ranks no. 1 with a market share of 14.4% in the chained full service
restaurant category.
Max’s is a brand driven by passion and excellence. It is a Filipino tradition passed down from
generation to generation, serving excellent food and creating the best customer experience
which has enabled it to continue to grow. It is a restaurant that bears witness to the Filipinos’
love of food, family and celebrations. It started as a family-oriented destination but has
evolved and adapted to the changing Filipino lifestyle and dining behavior.
Max’s Restaurant has different store formats and flexibility of menu which enables it to cater
to different customer appetites, preferences and paying capacity. It has consistently
sustained its market relevance by keeping its commitment to food quality and service and
value-for-money proposition in an ever-changing consumer landscape and remains to be a
trusted brand.
Max’s core product, the fried chicken, comes from a secret recipe that has been passed on
through generations. Its crispy skin and delicious, tender meat allow the diners to consume
it all the way to the bone, prompting the adoption of the brand’s official tagline, “Sarap to the
bones.” The name Max’s is almost synonymous to fried chicken in the Philippines. In
addition, Max’s Restaurant counts among its bestsellers classic Filipino favorites like karekare, crispy pata, pancit canton and lumpia.
Max’s Restaurant enjoys an 18 million customer count for 2013. To the Company, this
demonstrates brand popularity and customer loyalty.
According to Euromonitor, “The long-standing presence of Max’s Restaurant in the
Philippines makes it among the most-loved of full-service restaurants in the country. Known
for its sarap-to-the-bones fried chicken served with sweet potato fries, the chain has become
a family dining tradition to middle-income Filipinos who crave the familiar home-cooked food
in its restaurants.” It has grown to 141 branches nationwide, mainly concentrated in Metro
Manila and urban centers outside Metro Manila.
Max’s Restaurant has had international presence for over 30 years. Its 15 branches overseas,
including the 12 in North America (US and Canada) and 3 in the Middle East, continue to
serve the discriminating Filipino community abroad in a very competitive casual dining
environment. Robust and well-managed, Max’s Restaurant has shown its resilience during
the downturn in the global economy. The Company continues to generate interest from
international strategic partners for Max’s Restaurant to locate in key markets abroad.
74
The Company plans to grow Max’s Restaurant through a combination of same store sales
growth and multi-format expansion, growing at pace with the rapid retail development of
growing urban and community areas in major cities and in the provinces.
Max’s Restaurant expects its Philippine store count to reach 146 by the end of 2014. The
Company will continue to expand its footprint and tap underserved markets domestically.
The following table shows how Max’s Restaurant has grown its store network in the last 3
years:
No. of outlets
As at Jun 30
As at Dec 31
2014
2013
2012
2011
Company-owned (local)
76
74
73
68
Franchised (local)
65
63
61
56
International
15
14
13
11
Total
156
151
147
135
For six months ended June 30, 2014 and the year ended December 31, 2013, Max’s
Restaurants contributed ₱2.07 billion and ₱3.99 billion to the Company’s total revenues, or
43.2%, and 42.2%, respectively.
The following Subsidiaries of the Company operate Max’s Restaurants in the Philippines—
Max’s Kitchen, Inc., Max’s Makati, Inc., Max’s Baclaran, Inc., Max’s (Ermita), Inc., Chickens
R’ Us, Inc., Max’s Express Restaurants, Inc., Max’s Circle, Inc., Max’s SM Marikina, Inc.,
Max’s Food Services, Inc. The local franchising operations are housed in Max’s Franchising,
Inc.
The Company is evaluating plans to consolidate the entities that operate Max’s
Restaurants while continuing to run streamlined operations under common management.
Max’s Restaurant, whether through the Max’s Entities operating the stores, or through the
franchisees, is also a recipient of various awards from different agencies and award-giving
bodies:
ISSUING AGENCY/
ORGANIZATION
COVERAGE
Hall of Fame-Outstanding Filipino
Franchise- Food Category
PFA
National
2013
Most Trusted Family Restaurant
Readers’ Digest Asia
National
2013
The President’s Award
PFA
National
YEAR
AWARD
75
2012
Most Trusted Family Restaurant
Readers’ Digest Asia
National
20112012
Outstanding Filipino Retailer
DTI & PRA
National (Food, Large
Category)
2010
Best Homegrown Franchise
Entrepreneur Magazine,
Summit Media, Inc.
National
2009
Best Local Franchise
Entrepreneur Magazine,
Summit Media, Inc.
National
2009
Most Promising Franchise
Entrepreneur Magazine,
Summit Media, Inc.
National
2009
Fastest Growing Franchise
Entrepreneur Magazine,
Summit Media, Inc.
National
2009
Best in Franchising Support
Entrepreneur Magazine,
Summit Media, Inc.
National
Max’s Restaurant franchisees have also been recipients of various awards and citations
issued by Philippine Franchise Association (PFA).
ISSUING AGENCY/
ORGANIZATION
COVERAGE
RECIPIENT
Regional Franchisee of
the Year (National
Capital Region)
PFA
National
Felie Go
Regional Franchisee of
the Year (South Luzon
Region)
PFA
2010
Regional Franchisee of
the year (National Capital
Region)
PFA
Regional
(Food
Category)
Carmelita Abalos
(Franchisee, Max’s Shaw
Blvd)
2010
Regional franchisee of
the year (South Luzon
Region)
PFA
Regional
(Food
Category)
Felie Go
2009
Franchisee of the Year
PFA
National
Cecille Phua Pee
2009
Regional Franchisee of
the Year (North Luzon
Region)
PFA
Regional
Cecille Phua Pee
YEAR
AWARD
2013
2013
(Franchisee, Batangas
Group)
Regional
Felie Go
(Franchisee, Batangas
Group)
(Franchisee, Batangas
Group)
76
The following charts show the growth of Max’s Restaurant over the last 3 fiscal years
(Amounts in P millions):
Max's Restaurant
2013
2012
2011
Systemwide sales
4,844.9
4,579.5
4,200.6
Company owned sales
3,233.2
3,120.7
2,914.4
Max's Restaurant
2013
2012
2011
Net Income
162.6
103.9
131.3
EBITDA
414.2
313.4
340.4
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Pancake House
Bringing Home Goodness
The first Pancake House restaurant opened in Magallanes in 1970 and since then, Pancake
House established itself as a reputable Philippine food brand by introducing freshly made
pancakes and waffles in varied flavors to a predominantly rice-based consuming market.
Eight years later, it successful launched its first franchised outlet in Greenhills, San Juan,
and thereafter, more Pancake House outlets – both company-owned and franchised – opened
in strategic sites. Over the years, Pancake House continued to grow and set up companyowned and franchised restaurants throughout the country. The brand became strongly
associated with delicious comfort food, warm personalized service, and a homey atmosphere
for diners. The company expanded its operations steadily, requiring the setting up of a
central commissary to support the logistical and operational needs of the growing number of
restaurants.
The brand has been consistently equated with “comfort food” through the enduring appeal of
its bestsellers, pancakes, waffles, pan chicken, tacos and spaghetti, which are constantly
complemented by newer favorites that are aligned with its promise of always “Bringing Home
Goodness”. The Company continuously makes the brand relevant by introducing new items
in the menu which adds to the variety that its customers look forward to, and eventually
become their new favorites.
Based on Company-commissioned research conducted by TNS in 2013 entitled
“Understanding the Casual Dining Industry,” Pancake House is considered as “Best in
Pancakes.”
Commencing in 2014, the Company has initiated programs that will give the brand a new
look, update the store design and improve the customer experience. It continues to reinforce
its image as a brand that remains fresh and evolving with the continuously changing tastes
and preferences of the consumers while capitalizing on the all-day dining appeal of Pancake
House.
As one of the Group’s flagship brands, Pancake House continues to serve a growing market
of loyal customers through its 108 stores strategically located nationwide, and 6 outlets in
Malaysia.
78
The following table shows how Pancake House has grown its store network in the last 3
years:
No. of outlets
As at Jun 30
As at Dec 31
2014
2013
2012
2011
Company-owned
(local)
37
36
35
29
Franchised (local)
60
59
52
47
International
6
6
6
Joint Venture
11
11
11
12
114
112
103
88
Total
The Company intends to increase the Pancake House store network to 120 outlets by the
end of 2014.
For the six months ended June 30, 2014 and the year ended December 31, 2013, Pancake
House contributed ₱539.1 million, ₱1.07 billion, to the Company’s total revenues, or 11.26%
and 11.37% respectively.
The Pancake House brand and its store and franchise operations are held directly by the
Company.
The following charts show the growth of Pancake House over the last 3 fiscal years (Amounts
in P millions):
Pancake House
2013
2012
2011
Systemwide sales
1,347.6
1,187.1
1,137.3
Company owned sales
751.7
617.1
576.6
79
Pancake House
2013
2012
2011
Net Income
32.7
65.6
67.4
EBITDA
190.4
204.2
184.9
Yellow Cab
Great Times. Great Pizza.
Yellow Cab is a key brand in the pizza category which the Company believes has the biggest
growth opportunity, both domestically and internationally. On account of the brand’s very
strong association with its brand cues--the checkers, the color yellow, Vespa bikes used for
delivery and its industrial-look pizza box--it is in a unique position to grow its market share.
Yellow Cab primarily serves New York-style premium pizza in a fast casual dining setting.
Its popular products include New York’s Finest pizza, Dear Darla pizza, Charlie Chan
Chicken Pasta, “hot wings,” “baked potato wedges” and ice cream. With its large portion sizes
and premium pricing, Yellow Cab mainly targets groups in the mid-market and uppermarkets customer segments. To address the growing need of quick, personal sized meals,
Yellow Cab introduced the My Size Folded Pizzas with unique variants.
Targeting the millenials, the segment of the population with an increasing purchasing power,
the brand continuously innovates premium products to entice and excite customers to
frequent Yellow Cab stores.
Yellow Cab was first established in 2001 with its first store located in Makati Ave. In 2002,
the first local franchise store opened in Tomas Morato and had its first international
franchisee in 2007. As at June 30, 2014, Yellow Cab has a total of 110 nationwide and
international outlets.
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The following table shows how Yellow Cab has grown its store network in the last 3 years:
No. of outlets
As at Jun 30
As at Dec 31
2014
2013
2012
2011
Company-owned
(local)
87
85
82
73
Franchised (local)
15
15
17
17
International
6
6
Joint Venture
2
2
2
110
108
101
Total
90
In addition to the Company’s plans to further expand the presence of Yellow Cab in the
domestic market, the Company also believes in the universal appeal of the brand and its
ability to penetrate the overseas market. Its ten-year development schedule includes the
establishment of 15 stores in the Kingdom of Saudi Arabia.
Yellow Cab has also established various touch points to increase accessibility of its products
for its customers. It employs a single hotline, online and mobile app delivery services, and
also offers 24-hour delivery.
For the six months ended June 30, 2014 and the year ended December 31, 2013, Yellow Cab
contributed ₱924.3 million and ₱1.85 billion to the Company’s total revenues, or 19.30% and
19.55% respectively.
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The following charts show the growth of Yellow Cab over the last 3 fiscal years (Amounts in
P millions):
Yellow Cab
2013
2012
2011
Systemwide sales
1,987.4
1,766.6
1,668.4
Company owned sales
1,720.1
1,525.6
502.3
Note: For the year 2011, systemwide sales are for the full-year period while Companyowned sales are for the months after August 2011 when the Company acquired Yellow Cab
Yellow Cab
2013
2012
2011
Net Income
122.8
97.7
35.2
EBITDA
262.8
209.5
79.1
Note: For the year 2011, EBITDA and Net Income are for the months after August 2011
when the Company acquired Yellow Cab
Krispy Kreme
Hot, Melt-In-Your-Mouth Original Glazed® Doughnuts
Krispy Kreme Philippines holds the exclusive license to operate Krispy Kreme in the
Philippines. Krispy Kreme is an international retailer of premium-quality sweet treats,
including its hot melt-in-your-mouth Original Glazed® doughnut. Headquartered in WinstonSalem, North Carolina, USA, the brand has offered the highest-quality doughnuts and greattasting coffee since it was founded in 1937. Today, Krispy Kreme can be found in over 855
shops around the world. Currently, Krispy Kreme can be found in 24 countries, including the
United States, Australia, Bahrain, Canada, Dominican Republic, India, Indonesia, Japan,
Kuwait, Lebanon, Malaysia, Mexico, the Philippines, Puerto Rico, the Republic of Korea,
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Russia, Qatar, the Kingdom of Saudi Arabia, Singapore, Taiwan, Thailand, Turkey, the
United Arab Emirates, and the United Kingdom. The Group’s association with Krispy Kreme
dates back to 2006.
The Krispy Kreme brand has several unique elements that have helped create a special bond
with its customers. The doughnuts, the signature product of the brand, which are made from
a secret recipe, have a one of a kind taste that generations of loyal customers have grown to
love.
In order to enhance the appeal of the brand across all customer segments and generate
continued excitement for the brand’s products, initiatives have been taken by Krispy Kreme
Philippines to spearhead growth, including prompting the strategic alliance with Hershey’s
for the development of new flavors and products for the Krispy Kreme brand in the
Philippines. It is this local initiative that was taken up by Krispy Kreme International and
was promoted globally. Krispy Kreme Philippines also claimed a “firsts” for itself when its
branch in Greenhills being hailed as the First Drive thru in Asia when it opened in 2007.
Krispy Kreme International has consistently recognized the Philippine operations for its
excellence in hospitality/service, product quality, marketing, and operations and as such has
requested assistance in providing training and support for 7 international markets.
Krispy Kreme has achieved a nationwide appeal and has been able to penetrate the market
outside Metro Manila to become a nationwide brand. The Company makes a conscious effort
to cause Krispy Kreme Philippines to operate the brand and offer products in a manner that
will make them become part of a lifestyle.
There are currently 52 Krispy Kreme outlets across the Philippines, indicating the popularity
of the brand in the country.
No. of outlets
As at Jun 30
As at Dec 31
2014
2013
2012
2011
Metro Manila
37
32
31
25
Luzon (outside Metro
Manila)
4
7
3
2
Visayas
3
3
3
2
Mindanao
5
5
2
Total
49
47
39
29
In July 2014, the 50th Krispy Kreme store was opened in the Ortigas area. Two more stores
were opened in August 2014, one in NAIA 3 and the other in the vicinity of the UST Campus.
Krispy Kreme Philippines has received several international and local recognitions including
83
the following:
Year
Award
Issuing Agency/Organization
Coverage
2010
Store Experience Award
Krispy Kreme International
International
Relationship Marketing
Award
Krispy Kreme International
International
Product Innovation
Award
Krispy Kreme International
International
Marketing Excellence
Award
Krispy Kreme International
International
Humanitarian Award
Krispy Kreme International
International
Franchisee of the Year
Krispy Kreme International
International
Merit for Communication
Management Division,
Social Media
Philippine Quill Award
National
Hospitality/Service
Excellence
Krispy Kreme International
International
Product Innovation
Krispy Kreme International
International
Marketing Excellence
Krispy Kreme International
International
Development Excellence
Krispy Kreme International
International
Store Design
Krispy Kreme International
International
Product Excellence
Krispy Kreme International
International
Franchisee of the Year
Krispy Kreme International
International
Outstanding Filipino
Retailers, Foreign Brand
Retailer, Food Category
Department of Trade &
Industry/PRA
National
Operations Excellence
Krispy Kreme International
International
Relationship Marketing
Krispy Kreme International
International
Development Excellence
Krispy Kreme International
International
Product Excellence
Krispy Kreme International
International
Hospitality/Service
Excellence
Krispy Kreme International
International
Marketing Excellence
Krispy Kreme International
International
International Master
Franchisee of the Year
(Food: Large Category)
Department of Trade &
Industry/PFA
National
2011
2012
84
2013
2014
Outstanding Filipino
Retailer’s Finalist,
Foreign Brand Retailer,
Food Retailer , Large
Category
Department of Trade &
Industry/PRA
National
Community Building
Krispy Kreme International
International
Relationship Marketing
Krispy Kreme International
International
Hospitality/Service
Excellence
Krispy Kreme International
International
Development Excellence
Krispy Kreme International
International
Franchisee of the Year
Krispy Kreme International
International
World Barista Champion
Krispy Kreme International
International
Most Promising Retailer
Ayala Malls Merchant Awards
National
The Global Brand Tracker by Tangible in 2013 accounts Krispy Kreme a healthy net
promoter score (NPS) of 42 versus local competition.
For the six months ended June 30, 2014 and the year ended December 31, 2013, Krispy
Kreme Philippines contributed ₱609.0 million and ₱ 1.18 billion to the Company’s total sales,
or 12.72% and 12.50%, respectively.
The following charts show the growth of Krispy Kreme over the last 3 fiscal years (Amounts
in P millions):
Krispy Kreme
2013
2012
2011
Systemwide sales
1,181.8
970.2
749.7
(Note: All Krispy Kreme stores in the Philippines are company-owned stores)
85
Krispy Kreme
Net Income
60.6
38.3
17.4
2013
2012
2011
EBITDA
164.9
132.6
90.7
Jamba Juice
Better-for-You
Fresh Healthy Juice Boosters, Inc. holds the license to operate Jamba Juice in the
Philippines. Founded in California, USA, back in the 1990s, Jamba Juice is the leading
healthy active lifestyle brand with over 800 stores worldwide.
The brand continues to target a growing market that values an active and healthy lifestyle.
The Company believes that Jamba Juice is well positioned to capitalize on the growing trend
toward health and wellness.
Jamba Juice Philippines most popular product is its wide selection of all-natural, whole-fruit
“better-for-you” beverages. It offers whole-fruit smoothies, freshly squeezed fruit juices,
“fruit-and-veggie” smoothies, steel cut organic oatmeal, fruit parfait and baked goods.
Jamba Juice Philippines opened its first store in 2011 and had grown to 11 stores as at June
30, 2014. The table below shows the growth of Jamba Juice’s store network over the last 3
years:
No. of outlets
As at Jun 30
As at Dec 31
2014
2013
2012
2011
Metro Manila
11
9
6
2
Total
11
9
6
2
For the six months ended June 30, 2014 and the year ended December 31, 2013, Jamba Juice
Philippines contributed ₱88.8 million and ₱ 151.7 million to the Company’s total revenues,
or 1.85% and 1.60%, respectively.
86
As at August 2014, Jamba Juice has 12 stores and will continue to expand its operations into
other key areas using newer formats. These include kiosks and mobile stores called the
“Fender Blender,” a 40-foot trailer that produces Jamba Juice smoothies, providing its
customers with a unique retail experience.
Teriyaki Boy
We Bring Japan to Your Dining Experience.TM
The Company owns 70% of Teriyaki Boy Group, Inc. (“TBGI”), whose brand Teriyaki Boy
remains number one in Japanese casual food service in terms of number of stores. A Usage
Attitude Image (UAI) study conducted by an independent research agency reported that
Teriyaki Boy’s recall as a Japanese restaurant among the 18-36 ABC Manila segment is at a
high of 93%. Teriyaki Boy remains popular for its family-oriented restaurants offering a
wide variety of affordable, Japanese food.
TBGI is in the process of implementing an aggressive rebranding campaign which aims to
bring back the authenticity of an affordable Japanese dining experience. This involves an
enhancement of its menu and updating of its logo and interiors, thus communicating the
brand’s thrust of keeping pace with its young and discriminating market.
Consistent with these efforts, TBGI has also tapped a Japanese chef to create exciting new
dishes and maintain high levels of quality in ingredients and cooking procedures. Improved
products are also being introduced to increase the brand’s value proposition which is expected
to translate to a higher transaction count. In July, 2014, Teriyaki Boy launched its Teriyaki
Bowls promo systemwide, and, is being rolled out to all Teriyaki Boy stores in the 2nd half of
2014. Additional promos “Make-Your-Own-Bento” and the “₱99 Ramen” are also being
introduced.
The original founder, Mr. Bryan Tiu, has been active in working with the Group in helping
revitalize the brand and increase its value proposition of affordable Japanese dining. Mr.
Tiu also holds 30% of TBGI.
Teriyaki Boy stores are targeted toward locations that assure market sustainability, and a
periodic assessment of existing store locations is done by the Company.
87
The following table shows how Teriyaki Boy has maintained its store network in the last 3
years:
No. of outlets
As at Jun 30
As at Dec 31
2014
2013
2012
2011
Company-owned
(local)
21
20
18
20
Franchised (local)
10
11
11
9
Joint Venture
4
6
6
5
Total
35
37
35
34
TBGI is expecting total store count to reach 40 by the end of 2014.
For the six months ended June 30, 2014 and the year ended December 31, 2013, Teriyaki Boy
contributed ₱195.4 million and ₱ 421.4 million to the Company’s total revenues, or 4.08% and
4.46%, respectively.
The following table shows the relationship and extent of ownership of TBGI in its several
joint venture companies that operate as Teriyaki Boy franchisees:
Date Established/ Start of
Operations
Location
Incorporated in 11/06
Started operations in 07/06
Petron Marilao
Incorporated in 03/07
Started operations in 05/07
Trinoma
Incorporated in 11/07
Started operations in 12/07
Cash & Carry
Incorporated in 06/12
Started operations in 07/04
Wilcon, Visayas
Ave.
Started operations in 07/12
Robinsons
Palawan
Percentage
Ownership
Operating Joint Venture Co.
60%
40%
TBGI-Marilao, Inc.
Teriyaki Boy Group, Inc.
IFS Realty Managers, Inc.
60%
40%
TBGI-Trinoma, Inc.
Teriyaki Boy Group, Inc.
Azenith Holdings, Inc.
50%
50%
TBOY-MS, Inc.
Teriyaki Boy Group, Inc.
Makati Supermarket Corp.
60%
40%
PCK-Palawan, Inc.
Pancake House, Inc.
Calanoc & Sons Dev. Corp.
88
Max’s Corner Bakery
Made with Love. Always.
Max’s Corner Bakery was started by Ruby Trota in the early 1960s in Sucat, Paranaque.
Famous for its caramel bars, the bakery started with dinner rolls which were known to
perfectly complement Max's Fried Chicken, and provided the occasion cakes for all the special
events hosted in Max’s Restaurants, from baptisms to birthdays to graduations and
weddings.
The brand expanded by offering new products such as ensaymada, food-for-the-gods, and jelly
rolls from its own designed bakery counter. From just being a supplier of Max’s Restaurants,
it has become its own standalone brand with its own line of retail products with a growing
contribution to Group revenues. Today, Max’s Corner Bakery offers “grab-and-go” bread,
pastries, and cakes.
It is currently located within the Max’s Restaurant outlets. Max’s Corner Bakery also caters
to both retail and institutional clients like Philippine Airlines and major food establishments
in the country. Plans are underway for Max’s Corner Bakery to locate in supermarkets and
other retail establishments.
For the six months ended June 30, 2014 and the year ended December 31, 2013, Max’s Corner
Bakery contributed ₱162.4million and ₱338.2million to the Company’s total revenues, or
3.39% and 3.58%, respectively.
Maple
Maple was conceptualized and introduced by the Company to seize new opportunities in a
growing affluent dining market.
With a wide array of choices that build on flavors found in the coastal towns of America,
Maple brings the best of elevated American comfort food to the tables of four branches. These
are located in Makati, Alabang, Ortigas and Cebu.
Maple is characterized by its warm interiors, big servings and premium food offerings.
Sizzlin’ Steak
Sizzlin’ Steak is a homegrown brand operated by TBGI. It offers high quality beef, special
sauces, and a hot-plate system, served within an environment that puts a premium on
product quality and service speed.
As at June 30, 2014, Sizzlin’ Steak is operated in 16 outlets in the National Capital Region,
two of which are covered by joint venture arrangements with third parties. After piloting a
89
new format for an existing store proved successful, some stores are being reformatted to
undertake more of the same type of operations with a new menu design.
For the six months ended June 30, 2014 and the year ended December 31, 2013, Sizzlin’ Steak
contributed ₱67.9million and ₱134.0 million to the Company’s total revenues, or 1.42% for
both periods.
Dencio’s
Kung Sisig, Dapat Dencio’s
The Company acquired Dencio’s in 2004. Having popularized the restobar concept, it has
evolved into a Filipino favorite popular among families, balikbayans and professionals
alike. Its appeal is based on its signature Filipino dishes like sisig, complemented by a
variety of drinks in a relaxed ambiance that distinguish its restaurants as a choice
destination. The Company aims to have a Dencio’s restaurant in key cities nationwide, and
plans to open 2 to 3 new restaurants every year for the next 5 years.
The Company has initiated the revitalization of Dencio’s with the participation of its original
founder, Mr. Dennis Nakpil.
The Company owns and operates one joint venture company, DFSI-One Nakpil, Inc. to hold
its investment in an outlet located at Harbour Square at the Cultural Center of the
Philippines Complex, which started operations in April 2005. The other 14 outlets of the
Company are franchised.
For the six months ended June 30, 2014 and the year ended December 31, 2013, Dencio’s,
together with Kabisera ng Dencio’s contributed ₱61.2million and ₱132.8million to the
Company’s total revenues, or 1.28% and 1.41%, respectively.
Kabisera ng Dencio’s
In May 2008, the Company established an upscale arm “Kabisera ng Dencio’s” to build on the
Dencio’s brand, offering premium-quality Filipino cuisine to the high-end market. Kabisera
has since grown into its own identity as a go-to dining establishment, providing a premium
Filipino dining experience, a place where foreigners and young professionals enjoy unwinding
over drinks and exceptional Filipino food. Kabisera ng Dencio’s is located in Bonifacio High
Street, Bonifacio Global City in the City of Taguig, Metro Manila.
Consistent with the aspiration of the shareholders and management, the Company plans
to expand the operations of Kabisera ng Dencio’s to showcase the best of authentic Filipino
cuisine in an upscale, contemporary format.
90
Le Coeur de France
Café.
Restaurant.
Boulangerie.
In February 2008, the Company acquired Boulangerie Francaise, Inc., which owns and
operates Le Coeur de France. With a name that means “The Heart of France,” Le Coeur de
France is a French-inspired coffee shop, restaurant, and boulangerie that offers assorted
artisan breads baked fresh daily.
Its menu also consists of soups, pasta, gourmet
sandwiches, and pastries. It also supplies baked products to other institutions on a wholesale
basis.
As at June 30, 2014, Le Coeur de France has 14 stores, all of which are company-owned. Le
Coeur de France contributed revenues of ₱52.9million and ₱106.7million, for the six months
ended June 30, 2014 and the year ended December 31, 2013 respectively. Institutional sales
accounted for ₱10.6million and ₱21.0million of said revenue contributions for the respective
periods.
The Company’s plans for Le Coeur de France include repositioning the brand and
rationalizing its store network to target key strategic communities.
The Chicken Rice Shop
The Chicken Rice Shop is a chain of HALAL quick service restaurants that originated from
Malaysia, with over 50 stores across Malaysia and Singapore. Through CRP Philippines, a
joint venture entity, the Company brought the brand to the Philippines in 2011. It introduced
specialty Asian chicken cooking styles, including Hainanese, roast, soy, and braised chicken.
Starting off with a single outlet in 2011, it introduced its products to the market with the
opening of 4 more outlets in 2012. It scaled-down operations in 2013 leaving only 2 outlets
open. Due to operating losses, the Company plans to close all outlets within the year.
International Operations
The Company hopes to continue to grow its operations in the global arena by entering key
international markets and capitalizing on its Filipino stronghold. The Company currently
has 27 international outlets in the United States, Middle East, Canada and Malaysia.
For the six months ended June 30, 2014 and the year ended December 31, 2013, international
operations contributed ₱6.22 million and ₱27.8 million or 0.13% and 0.29% to the Company’s
total pro-forma revenues respectively. The net income/(loss) contribution of the international
operations were (₱0.57)million and ₱4.9million or (1.5%) and 1.9% of total pro-forma net
income of the Company for the six months ended June 30, 2014 and the year ended December
31, 2013.
The Company has successfully established Max’s Restaurant outlets overseas in places where
there is a large concentration of Filipinos, strengthening the ties the market has to the
91
Company’s various brands. Two Max’s Restaurant outlets were added to its international
store network. Pancake House has also opened 6 outlets in Malaysia and an outlet is soon to
open in Brunei.
With Yellow Cab appealing to the mainstream market where the market for pizza is largest,
it has opened 6 outlets in Qatar and its ten-year development schedule includes opening a
minimum of 15 new outlets in the Kingdom of Saudi Arabia. Yellow Cab and Teriyaki Boy
outlets are also plan to be open in Hawaii.
The following table shows the number of stores operated under each of the Company’s brands
outside of the Philippines as at June 30, 2014:
Brand
Number of Stores
Max’s Restaurant
Pancake
Yellow Cab
15
6
6
Total
27
Supply Chain Management
Commissary Operations
The Company owns and operates 4 commissaries and 2 warehouses that service substantially
all of the Company’s supply requirements in the Philippines across its brands.
No Bia and STI primarily supply to the 141 outlets of Max’s Restaurant and 68 combined
branches of Teriyaki Boy, Dencio’s, Kabisera ng Dencio’s, Sizzlin’ Steak and The Chicken
Rice Shop located throughout the Philippines. Both commissaries are situated within Metro
Manila.
The No Bia and STI commissaries are governed by the NMIS with yearly evaluation and
accreditation. NMIS is responsible to implement policies and procedures and rules relative
to production of raw materials local and imported, through the various stages of handling,
inspection, processing, storage and preservation of such products. Both commissaries
received an “AAA” accreditation as well as passed the “Current Good Manufacturing
Practices” audit from the said agency. NMIS inspects the commissaries policies and
procedures including layout and infrastructure and meat handling and processing
procedures. To ensure compliance to NMIS standards, the agency’s officers are stationed in
the commissaries regularly and monitor the operations of the commissaries. Aside from the
NMIS certification, No Bia and STI commissaries also have HACCP certified products (Max’s
Chicken and Max’s Crispy Pata). Accreditation is issued by Certification International, Phils.
Inc., an affiliate of the British company Certification International U.K. Ltd. HACCP
certification is based on the international code of practice and general principles of food
92
hygiene, thus, ensuring the safety and suitability of food for consumption. All accreditations
are handled directly by the commissaries.
As at the date of this Prospectus, No Bia has a total of 227 regular and contractual employees
and STI has a total of 150 regular and contractual employees.
Outlets order through a centralized online ordering system which is connected to the
commissaries. Supplies are delivered to the outlets using a combination of Company-owned
delivery trucks and third party logistics providers. Each commissary has its own procurement
office that deals directly with suppliers for delivery of raw materials and ingredients.
Contract negotiations are centrally handled by the Company’s corporate procurement
department.
Aside from supplying the different brands requirements, No Bia also has institutional
accounts where desserts, pre-packed meals and pre-cut raw materials are supplied.
The No Bia and STI commissaries also supply food to hotel and resort operations.
Krispy Kreme’s support commissary is located in Metro Manila and is responsible for the
delivery and processing of materials needed by the brand. It uses a similar ordering and
logistics system as the other commissaries and has 52 regular and contractual employees.
Accreditation is done by the operations manager and contract negotiations are handled by
the Company’s corporate procurement department.
Lapanday Test Kitchen, on the other hand, supplies to all the branches of Pancake House,
Le Coeur de France, and Maple. As at June 30, 2014, it has a total of 85 regular and
contractual employees. Lapanday currently holds a license to operate issued by the FDA.
Yellow Cab has toll manufacturers supplying its raw and processed materials.
Procurement
The Company has a centralized corporate procurement department in charge of contract
negotiations with existing and potential suppliers. The corporate procurement department
covers all of the negotiations and purchasing requirement of the Company’s brands and
outlets in the Philippines, with the exception of Krispy Kreme Philippines and Jamba Juice
Philippines. The Company’s commissaries deal directly with suppliers for periodic supply
and purchase decisions.
The Company has been consolidating suppliers for standard products and materials in its
outlets realizing synergies from the combination of the Max’s Group and the Pancake House
Group. In addition, strategic plans are drawn up with suppliers to support the buying process
at the corporate procurement level both at the domestic and international level.
Logistics
For the delivery of supplies to its nationwide outlets, the Company utilizes Company-owned
delivery trucks as well as third party logistics providers. The Company maintains contracts
93
with third party logistics providers and encourages them to coordinate with the Company’s
commissaries for efficiencies in the delivery of supplies.
For cost savings and delivery efficiency, the Company plans to organize its logistics providers
to deliver food items and ingredients to outlets located within a certain vicinity, regardless
of restaurant brand. In this way, trips to a particular area are reduced and trucks are fully
utilized.
Outsourcing Partnerships
The Company will continue to focus on outsourcing activities in the value chain where
savings on cost and increase efficiency are seen. Some of the services covered are transport,
warehousing and inventory control as well as, management of supplier deliveries.
The Company shall continue to evaluate its existing commissaries to uncover potential
synergies among the different brands, including but not limited to purchasing, delivery,
warehousing and operations.
Franchising Operations
The Company considers its franchisees as business partners integral to the Company’s
success and main contributors to the growth of its brands. The Company recognizes the value
of local area expertise and taps its franchisees in order to be closer to the customers.
Franchising operations of Max’s Restaurants in the Philippines are held in the Company’s
subsidiary, Max’s Franchising, Inc.
Pancake House franchising operations in the Philippines are held directly in the Company.
Teriyaki Boy Group, Inc. holds the domestic franchising operations of Teriyaki Boy. Yellow
Cab Food Corporation is the franchisor for Yellow Cab in the Philippines.
The table below sets forth the number of franchised stores for each of the Company’s brands
as at June 30, 2014 and for the last 3 years:
Brand
Max’s Restaurants
Pancake House
Yellow Cab
Teriyaki Boy
Dencio’s
Sizzlin’ Steak
As of
June 30
2014
65
60
15
10
14
2
2013
As of
December 31
2012
2011
63
59
21
11
14
2
61
52
17
11
14
3
56
47
17
9
17
2
94
The Company continues to expand its franchised store network especially in key cities outside
Metro Manila, where growth potential is tremendous. The Company does not maintain a
specific ratio of franchised stores to company owned stores but makes a determination for
each location on a case to case basis.
In the recent PFA Expo held from July 16 – 20, 2014, in which the Company participated,
the Company experienced a 300% growth in franchise applications across the brands Max’s
Restaurants, Pancake House, Yellow Cab, Teriyaki Boy and Dencio’s, signaling the
tremendous appeal of these brands.
Functional Strategies
Finance, Accounting and Shared Services
Following the integration of the Max’s Entities with the Company, the Company continues
to enhance its systems to centralize its finance and accounting division. While each business
unit currently employs its own accounting systems, the central accounting division
consolidates the information and processes the financial reports for use of management and
regular external reporting requirements. The Company also continues to streamline its
finance and accounting processes as it moves towards full integration of its business units.
Research and Development
The Company relies on research and development for continuous product and process
innovation which the Company considers a priority in order to stay relevant in the fast
changing industry landscape.
The table below sets forth the amounts that the Company has allocated and spent on research
and development as at June 30, 2014 and for the last 3 years:
As at June 30
2014
As at December 31
2013
2012
2011
4.052
0.09%
9.026
0.10%
13.027
0.22%
9.797
0.12%
In P millions
% of revenues
(Figures indicated for all periods are combined amounts for the Pancake House Group
and the Max’s Entities)
The Company envisions synergies in its research and development processes as it moves
towards full integration of its business units.
95
Advertising and Marketing
The Company communicates to its customers through advertising and marketing efforts. In
addition to regular marketing activities, the Company launches special marketing campaigns
to introduce new products and sustain customer interest in mainstay offerings.
As a bigger organization, the Company has begun to experience the benefits of the corporate
integration of the Company with the Max’s Entities. The Company is able to negotiate better
terms for print, radio and TV advertising with its third party service providers and also
expects to better implement bundling strategies, using the stronger brands to promote the
emerging brands.
The table below sets forth the amounts that the Company has spent for sales and marketing
as at June 30, 2014 and for the last 3 years:
As at June 30
2014
As at December 31
2013
2012
2011
161.08
3.48%
400.46
4.34%
147.72
2.46%
289.73
3.51%
In P millions
% to revenue
(Figures indicated for all periods are combined amounts for the Pancake House Group
and the Max’s Entities)
Store Operations
The Company believes operations to be a crucial function and the foundation of the
Company’s staying power. Store operations are varied across the brands but are all founded
on the principle of excellence, efficiency, and customer-centricity. Company-owned and
franchised stores adhere to high standards of quality and are periodically reviewed for
compliance.
Delivery System
The Company utilizes delivery as a key customer touch point and as a means of promoting
increased accessibility for all its brands.
Business Development
At the forefront of the Company’s growth strategy is business development. The Company
continues to evaluate strategic acquisitions of other brands to add to its portfolio while
aggressively expanding the footprint and rationalizing its current portfolio of brands.
The Company is able to leverage on its assortment of brands to secure highly coveted sites
and is able to gain priority in very competitive areas. With long standing relationships with
residential and commercial real estate developers, the Company is able to locate in prime
spots in malls and residential communities.
96
The Company’s business development team constantly scans the domestic and international
landscape to take advantage of emerging opportunities. Understanding its target market, the
Company is able to address different market needs through its wide brand selection and
various store formats. The Company believes in right-sizing its stores to the size of the
market and intimate knowledge of the domestic and international terrain allows the
Company to implement its targeted strategy.
The Company also undertakes business development efforts in bringing international brands
to the Philippines, as in the case of Jamba Juice, Krispy Kreme and The Chicken Rice Shop.
With its proven and outstanding track record of operational excellence, the Company hopes
to continue to be a preferred partner of international brand operators.
The Company constantly evaluates the balance between developing brands organically and
acquiring additional names for the portfolio. The Company considers the brands from a
holistic perspective and evaluates how each complements the overall group strategy.
The table below sets forth the amounts that the Company has spent for business development
as at June 30, 2014 and for the last 3 years:
As at June 30
2014
As at December 31
2013
2012
2011
4.793
0.10%
8.021
0.09%
6.346
0.11%
6.321
0.08%
In P millions
% to revenue
(Figures indicated for all periods are combined amounts for the Pancake House Group
and the Max’s Entities)
Human Resources
As at June 30, 2014, the Group employs a total of 5,491 personnel, of which 81% are storebased. Permanent employees generally include senior management, administrative and
corporate office staff and store staff. The Company also hires temporary staff, including staff
on short-term contracts as well as those on part-time and hourly-rated employment,
particularly during peak periods. Majority of the stores operate an average of 14 hours a day
and seven days a week, for which the Company has, on the average, two shifts of staff at each
store and shift managers/supervisors. Shift managers are selected from a pool of promising
and talented store employees.
The following table sets forth the total employees of the Group by function as at June 30,
2014:
97
Consolidated Headcount as at June 30, 2014
Operations
Function
Head Office
Executive and Managerial
Officers and Supervisors
Rank and File
Subtotal
135
63
240
438
Stores
Executive and Managerial
Officers and Supervisors
Rank and File
Subtotal
50
818
3,569
4,437
Commissaries
Executive and Managerial
Officers and Supervisors
Rank and File
Subtotal
17
30
370
417
Others
Executive and Managerial
Officers and Supervisors
Rank and File
Subtotal
34
42
123
199
Total
% of Store Based Personnel
No. of Employees
5,491
81%
The Company anticipates hiring additional employees within the next 12 months in line with
the expansion plans, and subject to the changing needs of the business.
Some of the rank and file employees are members of unions. As at June 30, 2014, there are
three unions, namely Max’s Makati, Inc. Labor Union with 169 members, Max’s Kitchen, Inc.
Labor Union with 122 members, and Square Top, Inc. Labor Union with 29 members. The
unions have separate Collective Bargaining Agreements (CBA) with duration of 5 years. The
current CBAs are effective for the period up to December 31, 2017. The Company has not
experienced any labor dispute with the unions. The Company has maintained a healthy
relationship with the union groups and continues to experience industrial peace.
The Company believes that it is in compliance, in all material respects, with all minimum
compensation and benefit standards as well as applicable labor and employment regulations.
Staff recruitment and training
Recruitment is done through the Human Resources Department at the corporate offices. In
2013, the Company began regionalized hiring, bringing down the hiring process up to
98
contract signing to several sites (Makati, Quezon City, Cavite, Taytay, Ortigas) to expedite
onboarding of local talent.
The Company continuously explores and utilizes other staffing sourcing options to expand
the talent pool. These options are mostly in partnership with local universities, the
Department of Labor and Employment (DOLE) and Technical Education and Skills
Development Authority (TESDA). In 2012, the Company started active participation in
DOLE’s Special Program for Employment of Students (SPES), a program mandated under
Republic Act No. 9547 otherwise known as "An Act To Help Poor But Deserving Students
Pursue Their Education By Encouraging Their Employment During Summer and/or
Christmas Vacations.” Also in 2012, the Company partnered with DOLE for its Apprentice
Program (also called KasH or Kasanayan at Hanapbuhay Program) which aims to provide a
bridging mechanism for new entrants to the labor force by helping them acquire basic skills
and work experience required by employers when hiring new employees. The Group was able
to provide more than 250 apprenticeships for the first semester of 2014 alone. Meanwhile,
its active partnership with 40 universities support more than 500 practicum students
annually through on-the-job training programs.
The Company believes that employee training and development is a critical factor in ensuring
management and technical personnel meet its growth plans. Employees receive basic
training upon hiring and are subsequently given opportunities to attend further training
programs, such as managerial and leadership, sales, system and technical trainings
programs. Training programs are conducted both through classroom sessions and online
channels (eLearning). Resources are particularly put into the training of the store operations
teams and store personnel to increase skill levels, ensuring the consistent application of the
Company’s internal policies and procedures to maintain brand integrity and instill key
corporate values.
Krispy Kreme Philippines has been continuously training managers of international stores
on production, processing shift and retail management. Krispy Kreme team members are
being sent to international stores as trainers and opening team members. The most recent
was for the opening of India and Singapore stores. Previously, Krispy Kreme Philippines
conducted training for Singapore, Malaysia, Indonesia, and Thailand stores.
Jamba Juice has two internationally certified training stores- Alabang Town Center and SM
North The Block. Just recently, Jamba Juice Philippines hosted trainees from the Middle
East in preparation for their store opening.
Employee Compensation and Benefits
The Company believes its compensation policy is competitive with industry standards in the
Philippines. Salaries and benefits are reviewed periodically and adjusted to retain current
employees and attract new employees. Performance is reviewed at least once a year and
employees are rewarded based on the attainment of defined objectives. It provides medical
and insurance benefits to its employees. The Group maintains a number of retirement plans.
99
Information Technology
The Company maintains an Information Technology (IT) Department to service operations
and supports the business strategy through development, implementation and management
of its technological resources.
The department is supporting two Enterprise Resource Planning systems used to manage
internal and external resources of the organization. These include the physical assets,
financial resources and materials. Standard disaster recovery systems and procedures are
in place and applications and systems are properly backed up.
In order to facilitate the web ordering system being implemented by the Group to enable the
stores with a user-friendly interface to capture orders for Commissary and External
suppliers, the Company has invested in systems.
The table below sets forth the amounts that the Company has spent for information
technology-related matters as at June 30, 2014 and for the last 3 years:
As at June 30
2014
As at December 31
2013
2012
2011
20.69
0.45%
36.71
0.40%
22.97
0.38%
28.87
0.35%
In P millions
% to revenues
(Figures indicated for all periods are combined amounts for the Pancake House Group
and the Max’s Entities)
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Properties
Certain Subsidiaries own real property.
Trota Gimenez Realty Corporation owns two parcels of land which are used for the operations
of Max’s Restaurant outlets in Baclaran and Ermita:
Location
Lot Area
Branch Name
(in sqm)
Orosa St., Ermita, Manila
868.00
Max's Ermita Orosa
Baclaran, Paranaque City
990.20
Max's Baclaran
The Real American Doughnut Company, Inc. owns 4 parcels of land with a total area of 894
square meters in Barrio Kapitolyo, Pasig City. Max’s Kitchen, Inc. also owns a 2,555 square
meter parcel of land at Nuvali, Sta. Rosa, Laguna. MGOC Holdings, Inc. also owns a piece
of land with an area of 1,086 square meters in Bonifacio Global City, Taguig. These parcels
of land are being held for future use.
RooM Ventures Corp. owns a 675 square meter parcel of land in Roces Avenue, Quezon City
on which Meranti, the Company’s specialty hotel project, is being developed.
Aside from those described above, the Company conducts substantially all of its operations
on land and/or buildings that are leased from third parties.
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New Venture: Meranti
The Company’s Subsidiary, RooM Ventures Corp., is currently pursuing the development of
Meranti, a hotel project adjacent to the heritage store of Max’s Restaurant in Scout Tuason,
Quezon City.
The project was conceptualized to offer the quality and value that the Max’s brand is known
to provide. It is intended to leverage on as well as complement the Group’s service
capabilities. The Company aims to establish Meranti as a brand that delivers quality
experience and excellent service.
This first hotel project is currently being constructed on the 675 sq.m. parcel of land owned
by RooM Ventures Corp. and is located adjacent to the heritage store of Max’s Restaurant in
Scout Tuason, Quezon City.
In conceptualizing this hotel, the well-known Filipino architectural firm Architecture
Budji+Royal Design has been commissioned to plan the project and in partnership with
Tangible, a Singaporean firm, the hotel’s brand identity and full brand architecture strategy
for the hotel was created. The hotel will be targeting the domestic and foreign tourists,
business travelers and locals who indulge in “staycations.” The hotel will have a total of
approximately 60 rooms and will be equipped with recreational facilities. It expects to start
commercial operations in 2015.
Meranti is a registered trademark of RooM Ventures Corp.
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Competition
The restaurant industry in the Philippines and other areas where the Group has
international operations is intensely competitive. The Group competes mainly with other
well-established local and international casual dining restaurants as well as chains such as
the Bistro Group which operates Friday's and Italianni's (including Fish & Co., Flapjacks,
Bulgogi Brothers, Watami, Modern Shanghai and others); Global Restaurant Concepts, Inc.
which operates California Pizza Kitchen, P.F. Chang’s, IHOP, Gyu-Kaku; the LJC Group
which operates Abe's and others; Conti’s; Aristocrat; Savory; Sumo Sam; Gerry’s Grill; Tokyo
Tokyo; Pepper Lunch and Kenny Rogers Roasters which are principal direct competitors. The
Group also competes in certain market segments with local and international brands (such
as Jollibee, McDonald’s and KFC). In the pizza category, Yellow Cab also competes with
Greenwich, Shakey's Pizza and Pizza Hut. In the specialty food category Jamba Juice
competes with Big Chill. In the bakery products fastfood category, Krispy Kreme competes
with Starbucks and J. Co Donuts & Coffee while Le Coeur de France competes with The
French Baker and Café France.
The Group competes with both regional and local casual dining and fast casual service
restaurants on the basis of product choice, quality, affordability, service, and location and the
nature and condition of the restaurant facility. The Group operates in Metro Manila and
various other cities in Luzon, Visayas and Mindanao. In addition, the Group operates twelve
restaurants in North America (USA and Canada), nine restaurants in the Middle East (UAE
and Qatar) and six restaurants in Malaysia. For the Group’s store locations, please see
Diagram 1 on page [9] of this Prospectus.
According to Euromonitor, “The vibrant economic performance in the Philippines has brought
a dose of optimism, and facilitated the establishment of shopping centres, which have
provided high potential sites for Max’s and Krispy Kreme outlet expansions.”
The recent improvements in the Philippine economy as well as the growth of businesses such
as business process outsourcing, a younger and growing consumer sector have created
consumer trends that have increasingly favored dining out on a more frequent basis. With
the affinity of the Filipino for featuring food in family and other group celebrations, the
Company believes that it is well placed to benefit from these developments.
The Company believes that both its historical successes, its strong brands and its operational
strategies allow it to compete effectively and maintain its leadership in the casual dining
market. The Company also believes that the following factors support it ability to compete:
its extensive network of 525 restaurants, diverse revenue channels, operational excellence,
quality consciousness and innovation, ability to achieve economies of scale, strong principal
shareholder involvement in management, corporate culture of employee growth and loyalty
and proven ability to expand.
In addition to competing for customers, the Group also competes for franchisees,
management personnel and employees. Competitors may be able to offer greater resources
to their franchisees (for example, in terms of training and franchise support), as well as better
salaries, compensation and benefits to their management personnel and employees, all of
which may enable them to attract and retain franchisees and employees better than the
Company can. The market for retail real estate is also highly competitive. The Company
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believes that, based on its size advantage and their greater financial resources, it has a
relatively better ability to negotiate more favorable ground lease terms than its competitors
particularly for desirable locations. As a result, the Company believes that it will be able to
obtain new leases for new restaurants or renew existing leases on comparatively favorable
terms.
104
GOVERNANCE
Corporate Governance & Policies
The Company recognizes the importance of corporate governance in enhancing the
stakeholders’ interests and maintaining relationships for the Group. Accordingly, the Board
of Directors and management have committed themselves to the principles of good corporate
governance.
The principles for corporate governance of the Group are contained in the Company’s articles
of incorporation and by-laws, as amended to date, and its Manual of Corporate Governance
in compliance with SEC Memorandum Circular No. 6, Series of 2009, a copy of which was
submitted to the SEC in the same year. In compliance with SEC Memorandum Circular No.
09, Series of 2014, the Company submitted its amended Manual of Corporate Governance to
the SEC on June 10, 2014.
The Board of Directors
The Company’s Board of Directors consists of nine (9) directors, of which two (2) are
independent directors. The present Board was elected on February 24, 2014 following the
completion of the acquisition by the Max’s Entities of a controlling interest in the Company
and was re-elected on June 10, 2014 at the Annual Stockholders Meeting of the Company.
The directors will hold office until their successors have been duly elected and qualified. On
May 12, 2014, at a meeting of the Board, the directors also elected Ms. Erlinda T. Fuentebella
as Chairman Emeritus to serve as senior advisor to the Company.
The Board is responsible for the overall management and supervision of the Company. The
Board establishes the overall goals, strategies and policies of the Company in particular and
of the Group in general. The Board strives to regularly monitor the effectiveness of
management’s decisions and the execution of the Company’s strategies.
There is a mix of executive, non-executive and independent directors on the Board. Senior
management executives attend Board meetings on a regular basis even though they are not
members of the Board.
The table and discussion below sets forth the particulars on the Company’s Board of Directors
and its executive officers:
105
Name
Age
Nationality
Position
Sharon T. Fuentebella
48
Filipino
Chairperson
Robert F. Trota
47
Filipino
President and Chief Executive
Officer
Carolyn T. Salud
50
Filipino
Director
Dave T. Fuentebella
47
Filipino
Director & Chief Finance Officer
Cristina T. Garcia
49
Filipino
Director, Treasurer
Jim T. Fuentebella
46
Filipino
Director
William E. Rodgers
52
American
Director
Antonio Jose U. Periquet
53
Filipino
Independent Director
Christopher P. Tanco
51
American
Independent Director
Gemma M. Santos
52
Filipino
Corporate Secretary
Rebecca R. Arago
42
Filipino
Compliance Officer
SHARON T. FUENTEBELLA, Chairperson
Sharon T, Fuentebella, age 48, Filipino, currently sits as President of The Real American
Doughnut Company, Inc., Fresh Healthy Juice Boosters, Inc., MGOC Holdings Corp. and
Trota, Gimenez Realty Corp. She holds the Directorship and acts as Chairperson to most of
Max’s corporations and its affiliates namely: Max’s Ermita, Inc., Chicken’s R Us, Inc., Max’s
Food Services, Inc., Max’s Baclaran, Inc., Max’s Makati, Inc., Max’s Kitchen, Inc., Max’s
Circle, Inc., Max’s SM Marikina, Inc. and other affiliates such as, Ad Circles, Inc., No Bia,
Inc., Square Top, Inc., Room Ventures, Corp., Max’s Express Restaurants, Inc., and Max’s
Bakeshop, Inc. Ms. Fuentebella holds a Bachelor of Science degree in Business Management
from the De La Salle University and has completed training seminars/programs for
managing family-owned companies conducted by the Asian Institute of Management (AIM)
and managing growing companies from Stanford University.
ROBERT F. TROTA, President and Chief Executive Officer
Robert F. Trota, age 47, Filipino, currently serves as President of No Bia, Inc. He is also on
the Board of Directors for most of the Max’s Entities. He is currently the Vice Consul for the
Consulate General of Ireland. Moreover, Mr. Trota served as Chairman of the PFA from June
2009 to 2013. Mr. Trota holds a Bachelor of Science degree in Business Management from
the De La Salle University and has completed training seminars/programs for effective
106
management and family-owned company governance and management conducted by the
Asian Institute of Management (AIM).
DAVE T. FUENTEBELLA, Director and Chief Finance Officer
Dave T. Fuentebella, age 47, Filipino, is a banking professional, having held various positions
in BPI Capital, Citibank, Standard Chartered Bank, and Credit Agricole since 2001. He has
been the Director and Head of Global Transaction Banking in Deutsche Bank since 2012. He
previously served as Director in Max’s Makati, Inc., Max’s Kitchen, Inc., Max’s Sta. Mesa,
Inc. and Square Top, Inc. Mr. Fuentebella holds a Bachelor of Arts degree in Economics and
Political Science from the University of California, Berkeley and completed his Master’s
Degree in Business in the Asian Institute of Management (AIM).
CRISTINA T. GARCIA, Director and Treasurer
Cristina T. Garcia, age 49, Filipino, is currently the Resident Agent and Director for Finance
of Global Max Services Ltd. – ROHQ. She likewise holds the Directorship and Treasurer
positions in various companies namely: Max’s Ermita, Inc., Max’s Food Services, Inc.,
Chicken’s R Us, Inc., Max’s Baclaran, Inc., Max’s Circle, Inc., Max’s Express Restaurants,
Inc., No Bia, Inc., Trofi Ventures Corp., Trofi Holdings Corp., Trofi Boosters Corp., Max’s SM
Marikina, Inc., Room Ventures Corp., Max’s Bakeshop, Inc., Max’s Franchising, Inc., Max’s
Makati, Inc., Max’s Kitchen, Inc., The Real American Doughnut Company, Inc., Fresh
Healthy Juice Boosters, Inc., MGOC Holdings, Inc., Ad Circles, Inc., Square Top, Inc. and
Trota, Gimenez Realty Corp. Ms. Garcia holds a Bachelor of Science degree in Business
Management from the Ateneo de Manila University (1986).
CAROLYN T. SALUD, Director
Carolyn T. Salud, age 50, Filipino, holds the Directorship and President position of Max’s
corporations namely: Max’s Ermita, Inc., Chicken’s R Us, Inc., Max’s Food Services, Inc.,
Max’s Baclaran, Inc., Max’s Makati, Inc., Max’s Kitchen, Inc., Max’s Circle, Inc., Max’s SM
Marikina, Inc. and other affiliates such as, Ad Circles, Inc., No Bia, Inc., Square Top, Inc.,
Room Ventures, Corp., Max’s Express Restaurants, Inc., and Max’s Bakeshop, Inc. She
likewise serves as Chairperson of Fresh Healthy Juice Boosters, Inc., The Real American
Doughnut Company, Inc., Trofi Boosters Corp., Trofi Holdings, Corp., Trofi Ventures, Corp.,
Trota, Gimenez Realty Corp. and MGOC Holdings, Corp. Ms. Salud holds a Bachelor of
Science degree in Business Administration from Assumption College.
JIM T. FUENTEBELLA, Director
Jim T. Fuentebella, age 46, Filipino, is currently a Director and the Vice President for
Marketing of Max’s Group of Companies, The Real American Doughnut Company, Inc., Fresh
Healthy Juice Boosters, Inc., MGOC Holdings, Inc., Trota, Gimenez Realty Corp , Ad Circles,
Inc., Square Top, Inc. NO Bia, Inc. and Room Ventures, Corp. Mr. Fuentebella holds a
Bachelor of Arts degree in Graphic Design with a minor in Business Administration from the
Academy of Art, University of San Francisco and has completed training seminars/programs
for effective management and family-owned company governance and management
conducted by the Asian Institute of Management (AIM).
107
WILLIAM E. RODGERS, Director
William E. Rodgers, age 52, American, is the President of MG Rodgers Phil. Inc. He is a
Director for eMax’s LLC, Alpha Max Group LTD, Ad Circles, Inc., Max’s Franchising, Inc.,
Room Ventures Corp., and Trota Gimenez Realty Corp. Mr. Rodgers holds a Master’s Degree
in Economic Development from Columbia University and has completed training
seminars/programs for family-owned company governance and management conducted by
the Asian Institute of Management (AIM).
ANTONIO JOSE U. PERIQUET, JR., Independent Director
Antonio Jose U. Periquet, Jr. age 53, Filipino, served as the Managing Director and Head of
Research and Country Strategist at Deutsche Bank AG, Research Division. Mr. Periquet
served with Deutsche Morgan Grenfell, Asia Equity (UK) Limited, Peregrine Securities (UK)
Ltd., San Miguel Corporation and Center for Research and Communication. He has been the
Chairman of Pacific Main Holdings Inc. since 1999, Campden Hill Group since 2012 and
Regis Financial Advisers since 2012. He served as the Chairman of Deutsche Regis Partners
from 1999 to August 2010. He has been an Independent Director of DMCI Holdings, Inc. since
August 24, 2010 and Ayala Corp. since September 2010. He serves as a Trustee of Lyceum of
the Philippines University. He has been an Independent Director of BPI Capital Corporation
since 2010, Philippine Seven Corp. since 2010 and BPI Family Bank since 2012. He serves
as an Independent Director of Philippine Coastal Storage & Pipeline Corp., and Clark
Pipeline & Depot Co, Inc. He serves as a Director of Capstone Technologies Inc., and The
Straits Wine Company Inc. He has been an Independent Director at Bank of the Philippine
Islands since April 19, 2012. Mr. Periquet serves as Independent Director of ABS-CBN
Holdings Corporation. He has been a Member of Advisory Board at ABS-CBN Corporation
since June 16, 2011 and also has been its Member of Advisory Board since June 16, 2011. He
is a Member of the Global Advisory Council, Darden School of Business, and University of
Virginia. He served as an Independent Director of Active Alliance, Incorporated until April
2008. He served as a Director of Bloomberry Resorts Corporation until April 2008 and
Development Bank of the Philippines from 2010 to April 25, 2012. He is an accomplished
Fund Manager. The Fund Managers Association of the Philippines recognized him as the
Best Strategist for seven consecutive years, from 2003 to 2010, and Best Analyst in 2009 and
2010. He was also adjudged the Best Analyst in 2004 by Asiamoney. Mr. Periquet has a
Bachelor of Arts degree in Economics from Ateneo de Manila University in 1982, M Sc in
Development Economics degree from the Oxford University in 1988 and MBA degree from
the University of Virginia in 1990.
CHRISTOPHER P. TANCO, Independent Director
Christopher P. Tanco, age 51, American, has been Head of International and Executive Vice
President at 7-Eleven, Inc. since March 2012. Mr. Tanco served as the Senior Vice President
of International at 7-Eleven, Inc. from November 2009 to February 2012. Mr. Tanco leads the
international team and oversees international licensing and global expansion for 7-Eleven.
Previously, he served as the Chief Franchise Officer of Yum! Brands from February 2007 to
November 2009. With nearly 20 years of experience, he served in various International,
Operations and Franchising leadership roles. He began his career as an Area Manager and
later, a Regional Vice President for Pizza Hut. In 1998, Mr. Tanco was promoted to General
108
Manager of the Franchise Development team for South America and later promoted to Vice
President of Global Restaurant Excellence for Yum!.Brands. Mr. Tanco holds a Bachelor’s
Degree from Ateneo de Manila University and a Master’s Degree in Business from the
University of Virginia Darden School of Business.
GEMMA M. SANTOS, Corporate Secretary
Gemma M. Santos, age 52, Filipino, has been Corporate Secretary of the Company since
February 24, 2014. Ms. Santos is a director of the Philippine Associated Smelting & Refining
Corporation (PASAR) and also serves as Corporate Secretary of various Philippine
corporations, including publicly-listed corporations Vista Land & Lifescapes, Inc. and Roxas
Holdings, Inc. She is a practicing corporate lawyer and a Senior Partner in Picazo Buyco Tan
Fider & Santos Law Offices. She was admitted to the Philippine Bar in 1986. She graduated
from the University of the Philippines with the degree of Bachelor of Laws in 1985, and with
the degree of Bachelor of Arts, major in History, in 1981.
REBECCA R. ARAGO, Chief Compliance Officer and Corporate Information Officer
Rebecca R. Arago, age 42, Filipino, serves as the Chief Finance Officer of the Max's Group of
Companies (MGOC), a position she has held since 2008. Prior to joining MGOC, Ms. Arago
served as Assistant Vice-President for Finance of Ubix Corporation, Comptroller of
Philippine Seven Corporation, Accounting Manager of Shoemart Inc., Chief Accountant of
Puerto Azul Beach & Country Club, and Senior Auditor of SyCip, Gorres, Velayo & Co. She
was elected President of the Association of CPAs in Commerce and Industry (ACPACI), the
primary sectoral organization of certified public accountants in the commerce and industry
sector of the Philippine Institute of Certified Public Accountants (PICPA), in 2012. Ms. Arago
obtained her Bachelor of Accountancy from the Polytechnic University of the Philippines and
is a Certified Public Accountant.
Other than their interests as shareholders, the directors are free from any relationship that
may interfere with their judgment as directors.
Criteria for Independence for Independent Directors
The Board assesses the independence of each director and of each individual nominated for
election to the Board as an independent director. As part of this analysis, the Board must
review and conclude whether each nominee for independent director satisfies the
requirements of the rules of the SEC, the by-laws and the Manual of Corporate Governance.
Under the Manual of Corporate Governance, independent directors (i) are not directors or
officers or substantial stockholders of the Company or its related companies or any of its
substantial shareholders (other than as independent directors of any of the foregoing); (ii) are
not relatives of any director, officer or substantial shareholder of the Company, or any of its
related companies or any of its substantial shareholders; (iii) are not acting as nominees or
representatives of a substantial shareholder of the Company, or any of its related companies
or any of its substantial shareholders; (iv) have not been employed in any executive capacity
by the Company, or any of its related companies or by any of its substantial shareholders
within the last 2 years; (v) are not retained as professional advisers by the Company, any of
its related companies or any of its substantial shareholders within the last 2 years, either
109
personally or through their firms; (vi) have not engaged and do not engage in any transaction
with the Company or with any of its related companies or with any of its substantial
shareholders, whether by themselves or with other persons or through a firm of which they
are partners or companies of which they are directors or substantial shareholders, other than
transactions which are conducted at arms-length and are immaterial; and (vii) do not own
more than 2% of the shares of the Company and/or its related companies or any of its
substantial shareholders. Mr. Periquet and Mr. Tanco do not possess any of the
disqualifications enumerated under Section II (5) of the Code of Corporate Governance and
Section II (D) of SEC Memorandum Circular No. 16, Series of 2002.
Board Performance
The Board regularly meets to review the performance of the Company and its subsidiaries,
approve any pertinent plans, budgets, and financial statements, set guidelines for
management, and discuss any various matters requiring Board attention and approval. Any
member of the Board may ask management to give special reports and analysis on certain
issues.
From February 24, 2014 to July 31, 2014, the Board had a total of 8 meetings. The following
table summarizes the attendance of the directors at the meetings held by the Board for said
period:
Position
Name
Total No.
of Board
Meetings
No. of
Meetings
Attended
Percentage
of
Attendance
Attendance
at Annual
Stockolders’
Meeting
Chairperson
Sharon T. Fuentebella
8
8
100
Y
President & Chief
Executive Officer
Robert F. Trota
8
8
100
Y
Director and Chief
Finance Officer
Dave T. Fuentebella
8
8
100
Y
Director and Treasurer
Cristina T. Garcia
8
8
100
Y
Director
Carolyn T. Salud
8
8
100
Y
Director
Jim T. Fuentebella
8
7
88
Y
Director
William E. Rodgers
8
8
100
Y
Independent Director
Antonio Jose U. Periquet
8
6
75
Y
Independent Director
Christopher P. Tanco
8
6
75
Y
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Compensation of Directors
Each director receives a per diem amounting to P75,000 for every regular board meeting
attended. There are no other arrangements for remuneration either by way of payments for
committee participation or consulting contracts with the directors.
Board Committees
Board committees have been established to address any issues requiring the specialized
attention and study of the Board.
Executive Committee
An Executive Committee has been constituted by the Board consisting of five (5) directors
who are authorized to act on any matter requiring the attention and approval by the Board
in between meetings of the Board. The following directors are the members of the Executive
Committee:
Sharon T. Fuentebella
Chairperson
Robert F. Trota
Member
Antonio Jose U. Periquet
Member
Cristina T. Garcia
Member
Jim T. Fuentebella
Member
Audit and Risk Committee
The Audit and Risk Committee reviews the financial reports and risks, examines internal
control systems, oversees the audit process as well as the company’s compliance with laws,
and evaluates the company’s business conduct. The committee also oversees the formulation
and establishment of an enterprise-wide risk management system, including the review,
analysis and recommendation of policies, frameworks, strategies and systems to be used by
the company to manage risks, threats and liabilities. The following directors are the
members of the Audit and Risk Committee:
Antonio Jose U. Periquet
Chairperson
Cristina T. Garcia
Member
Dave T. Fuentebella
Member
Carolyn T. Salud
Alternate Member
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Compensation Committee
The Compensation Committee reviews any recommendations on incentive schemes and
compensations of management and employees. The following directors are the members of
the Compensation Committee:
Antonio Jose U. Periquet
Chairperson
Carolyn T. Salud
Member
Sharon T. Fuentebella
Member
Nominations Committee
The Nominations Committee reviews and evaluates the qualifications of all persons
nominated to the Board and other appointments that require Board approval, and assess the
effectiveness of the Board’s processes and procedures in the election or replacement of
directors. The following directors are the members of the Nominations Committee:
William E. Rodgers
Chairperson
Jim T. Fuentebella
Member
Christopher P. Tanco
Member
Proxy Validation Committee
A Proxy Validation is constituted by the Board prior to the conduct of any meeting of
stockholders to ensure the validation of proxies and authorities issued for the conduct of
business at such meeting.
Audit Matters
Internal Audit
The Internal Audit Division is responsible for providing independent and objective assurance
and consulting services to the Group in general and the Company in particular through the
Audit Committee. The main function of the division is to evaluate the adequacy,
effectiveness, and efficiency of the Group’s internal control system and to recommend
necessary control measures for its improvement. It likewise establishes an effective followup system to monitor the implementation of recommended controls.
The division is composed of people with varied specializations, majority of which are certified
public accountants. It also has internal auditors.
112
The division conducts regular audits of the Group based on an annual audit plan. Special
audit projects are also undertaken as the need arises.
The Internal Audit Division also works closely with the Investor Relations and Corporate
Planning Group in preparing responses to the Corporate Governance Scorecard for publicly
listed companies from 2008 to 2012. Beginning 2012, the division also works closely with the
Group’s Risk Management Officer.
Audit Committee Report for 2013
The Audit Committee, in fulfillment of its oversight responsibilities, represents and assists
the Board by looking at the:





Reasonableness of the Company’s financial statements and efficiency of the financial
reporting process;
Proper management of business risks and reliability of the internal control environment;
Independence and on of internal audit functions and processes;
Qualifications, independence, and fees of the Company’s external auditors with regard to
the annual review of the Company’s financial statements; and
Max’s Group’s compliance with legal and regulatory requirements.
The roles and responsibilities of the Audit Committee are embodied in an Audit Committee
Charter that is approved by the Board of Directors.
To comply with the Audit Committee Charter, the Audit Committee confirms that:





The Chairman of the Audit Committee is an independent director;
Quarterly meetings held and attended by the Chairman and members of the
Committee;
The Committee reviewed and approved the internal audit scope and plans, as well as
the manpower resources and competencies necessary to carry out the audit plan;
The Committee reviewed and discussed the reports of the internal auditors, including
the necessary corrective actions, with concerned management and internal auditors;
The Committee reviewed and discussed the audited annual financial statements of
the Max’s Group and its Subsidiaries with the management, internal auditors, and
external auditors taking into consideration that:
o Management is responsible for the Max’s Group’s financial statements and the
related statements of financial condition and results of operations, and;
o SGV & Co., the Company’s independent auditors as at December 31, 2013, was
responsible for expressing an opinion on the conformity of the Company’s audited
consolidated financial statements with the Philippine Financial Reporting
Standards and International Financial Reporting Standards as appropriate.
Compliance Officer
The Company has appointed a Compliance Officer who is tasked to ensure the Group’s
observance of corporate governance best practices and provide recommendations to the Board
for continuous improvement towards full compliance and adoption of global best practices.
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The Compliance Officer also issues an annual certification on the compliance of the Board
with the Company’s Corporate Governance Manual. The Company submitted to the SEC a
certification of the Board’s compliance with the Company’s Corporate Governance Manual
last January 22, 2013.
Risk Management
The Board of Directors and management are mindful of the potential impact of various risks
to the Group’s ability to deliver quality content across multiple platforms and consequently,
as a result of its operations, value to shareholders. The Company’s corporate strategy
formulation and business decision-making processes always take into account potential risks
and the steps and costs necessary to minimize, if not eliminate, such risks. As part of its
stewardship responsibility and commitment to deliver optimum value to its stakeholders, the
Company ensures that it has the proper control systems in place, and to the extent possible,
adopted global best practices, to identify, assess, analyze and mitigate market, operating,
financial, regulatory, community, reputational, and other risks.
Disclosures and Financial Reporting
The Company’s financial statements and those of its Subsidiaries comply with Philippine
Financial Reporting Standards.
The annual consolidated financial statements provide information on the financial condition
and results of operations of the businesses of the Company and its Subsidiaries. These
financial statements include detailed information on the total assets, total liabilities and
shareholders’ equity, revenues, costs and expenses, income before tax, net income
attributable to shareholders of the Company and minority interest and earnings per share.
Business segment information is likewise provided for major business categories and includes
information such as revenues, net income, assets and liabilities, capital expenditures and
depreciation and amortization expenses, and EBITDA.
Dealings in Securities
The Company requires all members of the Board of Directors and principal officers to report
any purchase, sale or change in their shareholdings of the Company common shares within
five trading days, in compliance with the PSE’s requirement for such disclosure.
Shareholder and Investor Relations
The Company fully respects shareholder rights and complies with regulatory and legal
requirements that enforce and ensure that such rights are respected. These requirements
include due and proper notification for general meetings and provision of adequate,
transparent and timely information due shareholders.
As a publicly listed corporation, the Company is subject to reporting requirements prescribed
by regulatory authorities, including the SEC and the PSE, among others. The Company is
114
compliant in submitting timely structured and non-structured reports and disclosure filing
required by the SEC and the PSE.
To complement these disclosures, the Investor Relations Group also holds regular analyst
and press briefings coincident with its quarterly and annual report submissions that further
explain, elaborate on and contextualize the Company’s operating performance and financial
condition and results. The Chief Finance Officer, Treasurer, and Compliance Officer are
always present at these investor, analyst and press briefings to address any questions that
may be raised concerning the Company’s operating and financial results.
In addition, the Chief Finance Officer, Treasurer and Compliance Officer attend various
conferences throughout the year for more intimate and detailed discussions about the Group’s
businesses, operating and financial results, business prospects and long-term plans.
Inquiries from institutional and individual investors received by regular or electronic mail
are also duly acknowledged and addressed in a timely and transparent manner.
The Company maintains an investor relations website that contains information on the
history and businesses of the company, its Board of Directors and senior management
executives, financial information and reports and disclosures filed with the SEC and the PSE,
share price performance and dividend history, and investor relations contact information,
which website may accessed on [http://www.pancakehouse.com.ph/investor/index.html.]
Management
The Company’s executive officers and management team cooperate with its Board by
preparing appropriate information and documents concerning the Company’s business
operations, financial condition and results of operations for its review.
Significant Employees
No single person is expected to contribute more significantly than others do to the business
since the Company considers the collective efforts of all its employees as instrumental to the
overall success of the Company’s performance. Other than standard employment contracts,
there are no arrangements with non-executive employees that will assure the continued stay
of these employees with the Company.
Family Relations
Mr. Robert F. Trota, Ms. Cristina T. Garcia and Ms. Carolyn T. Salud are siblings. Ms.
Sharon T. Fuentebella, Mr. Dave T. Fuentebella and Mr. Jim T. Fuentebella are siblings and
children of Ms. Erlinda T. Fuentebella. The Trota siblings and the Fuentebella siblings are
cousins. Mr. William Rodgers is the cousin of Ms. Erlinda Fuentebella. There are no other
family relationships known to the Company other than the ones disclosed.
115
Involvement in Legal Proceedings
To the best of the Company’s knowledge, there has been no occurrence during the past 5
years up to the date of filing of this Prospectus of any of the following events that are material
to an evaluation of the ability or integrity of any director, any nominee or election as director,
executive officer, underwriter or controlling person of the Company:

Any bankruptcy petition filed by or against any business of which such person was
an executive officer either at the time of the bankruptcy or within two years (2)
prior to that time;

Any conviction by final judgment, including the nature of the offense, in a criminal
proceeding, domestic or foreign, or being subject to a pending criminal proceeding,
domestic or foreign, excluding traffic violations and other minor offenses;

Being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, domestic or foreign,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities, commodities or banking
activities; and

Being found by a domestic or foreign court of competent jurisdiction (in a civil
action), the Commission or comparable foreign body, or a domestic or foreign
Exchange or other organized trading market or self-regulatory organization,
to have violated a securities or commodities law or regulation, and the
judgment has not been reversed, suspended, or vacated.
116
Compensation
The following table summarizes the compensation of the President and key management
personnel of the Company and its Subsidiaries for the six-month period ended June 30, 2014,
and for the years ended December 31, 2013, 2012 and 2011:
Name and Principal Position
Period
Aggregate
Compensation
(PhP)
Other
Annual
Bonus
Compe
nsation
Executive Officers
6 mos
ended
Sharon T. Fuentebella, Chairperson
June 30,
Robert F. Trota, President and CEO
2014
Cristina T. Garcia, Treasurer
Carolyn T Salud, Director
Dave T. Fuentebella, Director
Jim T. Fuentebella, Director
William E. Rodgers, Director
Rebecca R. Arago, Compliance Officer
Bernadette M. Lee, Chief Operating Officer, Pancake House
Roy Marvin E. Quejada, Chief Operating Officer, Yellow Cab
Maila Joy D. Mangubat, Chief Operating Officer, Teriyaki Boy
Clara R. Sumajit, Human Resources & Devt. Director
Maria Margarita S. Pablo, Supply Chain Director
Victoria C. Alejandrino, Commissary Head
Rowena B. Caingat, Projects & Maintenance, Director
Ruby R. Bautista, Marketing Director
NA
N
A
Martin P. Lorenzo, Chairman & CEO*
Cecile D. Macaalay, Chief Finance Officer**
All Executive Officers as a Group
Executive Officers
Martin P. Lorenzo, Chairman & CEO
Cecile D. Macaalay, Chief Finance Officer
Bernadette M. Lee, Chief Operating Officer, Pancake House
Roy Marvin E. Quejada, Chief Operating Officer, Yellow Cab
Maila Joy D. Mangubat, Chief Operating Officer, Teriyaki Boy
Clara R. Sumajit, Human Resources & Devt. Director
Maria Margarita S. Pablo, Supply Chain Director
Victoria C. Alejandrino, Commissary Head
Rowena B. Caingat, Projects & Maintenance, Director
Ruby R. Bautista, Marketing Director
All Executive Officers as a Group
₱20,643,080
12 mos
ended
Dec 31,
2013
NA
N
A
₱18,809,270
117
Name and Principal Position
Executive Officers
Martin P. Lorenzo, Chairman & CEO
Cecile D. Macaalay, Chief Finance Officer
Bernadette M. Lee, Chief Operating Officer, Pancake House
Roy Marvin E. Quejada, Chief Operating Officer, Yellow Cab
Clara R. Sumajit, Human Resources &Devt. Director
Olivia J. Vega – Head, Materials Management-Non-Food
Judy E. Gabriel, Head, Materials Management-Food
Victoria C. Alejandrino, Commissary Head
Rowena B. Caingat, Projects & Maintenance, Director
Ruby R. Bautista, Marketing Director
Period
Aggregate
Compensation
(PhP)
12 mos
ended
Dec 31,
2012
All Executive Officers as a Group
Executive Officers
Martin P. Lorenzo, Chairman & CEO
Cecile D. Macaalay, Chief Finance Officer
Bernadette M. Lee, Chief Operating Officer, Pancake House
Roy Marvin E. Quejada, Chief Operating Officer, Yellow Cab
Clara R. Sumajit, Human Resources &Devt. Director
Olivia J. Vega – Head, Materials Management-Non-Food
Judy E. Gabriel, Head, Materials Management-Food
Victoria C. Alejandrino, Commissary Head
Other
Annual
Bonus
Compe
nsation
NA
N
A
₱13,157,637
12 mos
ended
Dec 31,
2011
All Executive Officers as a Group
NA
N
A
₱11,147,750
*- resigned effective February 24, 2014
**- resigned effective April 15, 2014
Standard and Other Arrangements
As at the date of this Prospectus, the Company has no existing arrangements with members
of the Board of Directors, executive officers and employees.
Employment Contracts and Change in Control Arrangements
There are no special employment contracts between the Company and its executive officers.
Furthermore, there are no special retirement plans for executives. There is also no
arrangement for compensation to be received from the Company.
118
Warrants and Options Outstanding
There are no outstanding warrants or option held by directors and officers nor are there any
adjustments in the exercise price of said warrants or options.
119
CAPITALIZATION
Capital Stock
As at the date of this Prospectus, the Company has an authorized capital stock of
P1,400,000,000 consisting of 1,400,000,000 common shares, each with a par value of P1.00
per share.
As at the date of this Prospectus, 518,421,680 common shares are issued and outstanding.
This does not include the 540,491,344 Exchange Shares that will be issued to the MGOC
Shareholders in exchange and payment for the acquisition by the Company of all of the
shares, rights and interest of the MGOC Shareholders in and to the Max’s Entities. Pursuant
to such transaction, the Max’s Entities became Subsidiaries of the Company. [The Company
has applied with the SEC for the confirmation of the valuation of the consideration for the
issuance of the Exchange Shares to the MGOC Shareholders. The application is currently
pending.]
A total of 466,320,384 common shares of the issued and outstanding capital stock of the
Company are held by the following Max’s Entities: Max’s Kitchen, Inc., Chicken’s R Us, Inc.,
Max’s Express Restaurants, Inc., Square Top, Inc., No Bia, Inc., Max’s Bakeshop, Inc., The
Real American Doughnut Company, Inc., Room Ventures Corp., Trota Gimenez Realty Corp.
and MGOC Holdings, Inc., all of which are currently already Subsidiaries of the Company.
Max’s Entities and the Selling Subsidiaries
The number of shares held by the Max’s Entities (including the Selling Subsidiaries), the
number of Group Shares being offered for sale by the Selling Subsidiaries pursuant to the
Offer, and the number of shares held by the Max’s Entities (including the Selling
Subsidiaries) after the Offer are as follows:
Max’s Entity
Shares Held
Prior to the
Offer
Group Shares
Offered
Shares Held
After the Offer
Max’s Kitchen, Inc.
Chicken’s R Us, Inc.
Max’s Express Restaurants, Inc.
Square Top, Inc.
No Bia, Inc.
Max’s Bakeshop, Inc.
The Real American Doughnut Company, Inc.
Room Ventures Corp.
Trota Gimenez Realty Corp.
MGOC Holdings, Inc.
120
The following table sets out the Company’s capitalization as at June 30, 2014, and as adjusted
to reflect (i) any material changes to the Company’s capitalization since end of the reported
period and (ii) the sale of up to 238,744,884 New Shares and Group Shares, comprising of
34,106,416 New Shares and 204,638,468 Group Shares at the Offer Price of up to P29.50 per
share.
In P Mn
Indebtedness
Current Liabilities
Noncurrent Liabilities
Total Liabilities
Capital Stock/Paid-in surplus
Retained Earnings
Accumulated other comprehensive income
(loss)
Shares held by Subsidiaries
Noncontrolling interests
Total Equity
Pro-forma as at
June 30, 2014
Effect of the Offer
Pro-forma Post-Offer
4,178.6
4,043.4
8,222.0
[●]
[●]
[●]
[●]
[●]
[●]
4,600.7
448.5
[●]
[●]
[●]
[●]
(13.2)
(4,093.8)
92.9
1,035.1
[●]
[●]
[●]
[●]
[●]
[●]
[●]
[●]
121
THE SELLING SHAREHOLDERS
The Selling Shareholders, the number of Secondary Shares being offered for sale by them in
the Offer, and the number of shares they will hold after the Offer are as follows:
Selling
Shareholder
Trofi Ventures
Corp.
Common
Shares to
be sold
Secondary
% of
Secondary pursuant to
the OverShares held outstanding Shares to
allotment
before the
before the
be sold in
Option
Offer
Offer
the Offer
[●]
[●]
[●]
[●]
No exercise of Overallotment Option
Full exercise of Overallotment Option
Common
Shares
held after
%
the Offer
[●]
[●]
Common
Shares held
after the
%
Offer
[●] [●]
WERCO
Holdings,
Corp.
[●]
[●]
[●]
[●]
[●]
[●]
[●] [●]
Ruby
Investment
Consolidated
Holdings, Inc.
[●]
[●]
[●]
[●]
[●]
[●]
[●] [●]
WR Ventures
Asia, Inc.
[●]
[●]
[●]
[●]
[●]
[●]
[●] [●]
FSS Realty
Corporation
[●]
[●]
[●]
[●]
[●]
[●]
[●] [●]
122
OWNERSHIP
Except as stated herein, the Company has not knowledge of any person who, as of record
date, was indirectly or directly the beneficial owner of more than 5% of the Company’s
outstanding shares of common shares or who has voting power or investment power with
respect to shares comprising more than 5% of the outstanding common shares. There are no
persons holding more than 5% of the Company’s common shares that are under any voting
trust or similar agreement.
Security Ownership of Certain Record and Beneficial Stockholders
The following are the top 20 stockholders of the Company as at June 30, 2014:
Shareholder Name
Nationality
Shares held
% to Total
The Real American Doughnut Company, Inc.
Filipino
66,701,391
25.73%
Max's Bakeshop, Inc.
Filipino
51,854,500
20.00%
Max's Kitchen, Inc.
Filipino
35,059,400
13.53%
No Bia, Inc.
Filipino
28,134,000
10.85%
Chickens R' Us, Inc.
Filipino
23,009,800
8.88%
PCD Nominee Corp. (Filipino)
Filipino
22,631,890
8.73%
Square Top, Inc.
Filipino
13,156,400
5.08%
MGOC Holdings, Inc.
Filipino
7,389,300
2.85%
Trota Gimenez Realty Corporation
Filipino
6,933,500
2.67%
RooM Ventures Corp.
Filipino
679,700
0.26%
Joanne Que Lim
Filipino
500,000
0.19%
Walter Que Lim
Filipino
500,000
0.19%
Wilson Lim and/or Judy Que Lim
Filipino
500,000
0.19%
Winston Que Lim
Filipino
500,000
0.19%
Wilson Jessee Q/. Lim Jr.
Filipino
500,000
0.19%
Jacqueline Q. Lim Ong
Filipino
500,000
0.19%
Max's Express Restaurants, Inc.
Filipino
241,700
0.09%
PCD Nominee Corp. (Non-Filipino)
Foreign
77,001
0.03%
Consuelo Tan
Filipino
30,000
0.01%
Mel Macaraig
Filipino
30,000
0.01%
123
Security Ownership of Directors and Management
The following table shows the security ownership of directors and management in the
common shares of the Company as at June 30, 2014.
Name
Amount and Nature of
Beneficial Ownership
Citizenship
No. of Shares
% Ownership
Direct
Indirect
Robert F. Trota
1
26,620,196
Filipino
26,620,197
10.27%
Carolyn T.Salud
1
26,306,710
Filipino
26,306,711
10.15%
Cristina T. Garcia
1
26,306,710
Filipino
26,306,711
10.15%
Jim T. Fuentebella
1
3,176,864
Filipino
3,176,865
1.23%
Dave T. Fuentebella
1
9,178,079
Filipino
9,178,080
3.54%
Sharon T. Fuentebella
1
14,764,221
Filipino
14,764,222
5.70%
William E. Rodgers
1
2,760,929
2,760,930
1.06%
Antonio U. Periquet
1
-
Filipino
1
0.00%
Christopher P. Tanco
1
-
American
1
0.00%
American
Dilution
The net book value attributable to the holders of the Company’s common shares, based on
the Company’s pro forma financial statements as at [] 2014, was [], or [] per common share.
The book value attributable to the Company’s common shareholders represents the amount
of the Company’s total equity attributable to equity holders of the Company. The Company’s
book value per share is computed by dividing the book value attributable to the Company’s
common shareholders by the equivalent number of common shares outstanding. Without
taking into account any other changes in such book value after [] 2014 other than the sale
of [] Offer Shares at the Offer Price of P[] per Offer Share and after deduction of the
underwriting discounts and commissions and estimated offering expenses of the Offer
payable by the Company, the Company’s net book value as at listing would [increase] to [],
or [] per common share. This represents an immediate [increase] in net book value of [] per
common share to existing shareholders, and an immediate dilution of [] per common share
to purchasers of Offer Shares at the Offer Price of P[] per Offer Share.
Dilution in pro forma book value per share to investors of the Offer Shares represents the
difference between the Offer Price and the pro forma book value per share immediately
following the completion of the Offer. The pro forma book value per share immediately
following the completion of the Offer represents the book value per share as at [] 2014, after
giving effect to the Offer.
124
The following table illustrates dilution on a per share basis based on an Offer of [] Offer
Shares at an Offer Price of up to P[] per Offer Share:
Offer Price per Offer Share ..................................................................................................
Book value per common share as at [] 2014 ......................................................................
Difference in Offer Price per Offer Share and book value per Offer Share as at [] 2014 ....
Pro forma book value per common share immediately following completion of the Offer.....
Dilution in pro forma book value per common share to investors of the Offer Shares ...............
[]
[]
[]
[]
[]
The following table sets forth the shareholdings and percentage of common shares
outstanding of existing and new shareholders of the Company immediately after completion
of an Offer of [] Offer Shares:
125
Existing
shareholders
.........................................................................................................
New
investors
.........................................................................................................
Total
.........................................................................................................
Common Shares
Number
[]
%
[%]
[]
[%]
[]
100.0%
Investors may incur immediate and substantial dilution in value as a result of purchasing
Offer Shares.
The issue price of the common shares in the Offer may be substantially higher than the net
tangible book value of net assets per share of the Company’s outstanding Common Shares.
Therefore, purchasers of Offer Shares may experience immediate and substantial dilution
and the Company’s existing shareholders may experience a material increase in the net
tangible book value of net assets per share of the Common Shares they own.
Matters Affecting Liquidity and Capital Expenditure
As regards internal and external sources of liquidity, funding will be sourced from internally
generated cash flows, and also from borrowings or available credit facilities from other
local and international commercial banks.
There is no material commitment for capital expenditures other than those performed in the
ordinary course of trade or business.
There is no significant element of income not arising from continuing operations.
There have not been any seasonal aspects that had a material effect on the financial
condition or results of the Company’s operations.
126
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Overview
On February 24, 2014, certain Max’s Entities (the Selling Subsidiaries) acquired a total of
approximately 89.95% of the outstanding stock of the Company. On June 30, 2014, the
Company’s Board of Directors approved the integration of the Max’s Entities into the
Company and the MGOC Shareholders conveyed to the Company all of their shares, rights
and interests in and to the Max’s Entities in consideration for the issuance by the Company
of the Exchange Shares to the MGOC Shareholders (the “Integration”). Pursuant to such
transaction, the Max’s Entities became Subsidiaries of the Company.
For the avoidance of doubt, references to the “Pancake House Group” shall mean those
business units that had been in the Company prior to the Integration and references to the
“Max’s Entities” shall mean the business units conveyed by the MGOC Shareholders to the
Company in the Integration.
The financial information hereinafter presented comprise of the following (i) the pro-forma
combined financial information of the Pancake House Group and the Max’s Entities as at and
for the periods ended December 31, 2013 and June 30, 2014 illustrating the impact of the
Integration had such Integration occurred as at the beginning of the periods presented, (ii)
financial information on the Pancake House Group as at and for the periods ended December
31, 2013, 2012 and 2011 and June 30, 2014 and June 30, 2013 without taking into the account
the impact of the Integration, and (iii) the pro-forma financial information of the Max’s
Entities presented as a group and taking into account the combined balances of each of the
Max’s Entities as at and for the periods ended December 31, 2013 and June 30, 2014.
PRO-FORMA CONSOLIDATED FINANCIAL INFORMATION
The following tables present the combined balances of the Pancake House Group and the
Max’s Entities as at the periods presented, taking into account the appropriate eliminating
entries. The following information is meant to be read in conjunction with the pro-forma
consolidated financial statements of the Company that form part of Financial Information on
page [130] of this Prospectus.
127
Pro-forma Consolidated Income Statements
In ₱Mn
REVENUES
COST OF SALES
AND SERVICES
GROSS PROFIT
GENERAL AND
ADMINISTRATIVE
EXPENSES
PROVISION FOR
IMPAIRMENT
LOSS
OTHER
OPERATING
INCOME
(CHARGES)
FINANCE
INCOME (COSTS)
INCOME (LOSS)
BEFORE INCOME
TAX
PROVISION FOR
(BENEFIT FROM)
INCOME TAX
NET INCOME
(LOSS)
NET INCOME
(LOSS)
ATTRIBUTABLE
TO
Equity holders of
the Parent
Company
Noncontrolling
interest
For the six months ended June 30, 2014
For the year ended December 31, 2013
Pancak
e
House
Group
Pancake
House
Group
Share Swap
and
Eliminating
Entries
Max’s
Entities
Proforma
Amounts
Share Swap
and
Eliminating
Entries
Max’s
Entities
Pro-forma
Amounts
1,832.8
(1,545.
8)
2,777.1
(30.3)
4,579.6
3,751.6
5,468.4
–
9,220.0
(2,115.2)
30.3
(3,630.7)
(3,067.2)
(4,185.8)
–
(7,253.0)
287.0
661.9
–
948.9
684.4
1,282.6
–
1,967.0
(273.7)
(507.1)
–
(780.8)
(568.0)
(1,022.1)
–
(1,590.1)
(106.5)
(0.1)
–
(106.6)
–
–
–
–
45.2
42.9
–
88.1
88.9
43.9
–
132.8
(16.0)
(91.0)
–
(107.0)
(62.6)
(18.8)
–
(81.4)
(64.0)
106.6
–
42.6
142.5
285.7
–
428.3
(27.4)
31.0
–
3.7
63.3
104.2
–
167.5
(36.6)
75.5
–
38.9
79.3
181.5
–
260.8
(28.7)
75.5
–
46.8
105.6
181.5
–
287.1
(7.9)
–
–
(7.9)
(26.3)
–
–
(26.3)
(36.6)
75.5
–
38.9
79.3
181.5
–
260.8
128
Pro-forma Consolidated Statements of Financial Position
As at June 30, 2014
In ₱Mn
Total Current
Assets
Total
Noncurrent
Assets
Total Assets
Total Current
Liabilities
Total
Noncurrent
Liabilities
Total Liabilities
Capital stock
Additional paidin capital
Notes for
conversion to
equity
Retained
earnings
Other
comprehensive
income (loss)
Shares held by
subsidiaries
Noncontrolling
interests
Total
Liabilities and
Shareholders'
Equity
Pancake
House
Group
Max’s
Entities
As at December 31, 2013
Share Swap
and
Eliminating
Entries
Proforma
Amounts
Pancake
House
Group
Max’s
Entities
Share Swap
and
Eliminating
Entries
Proforma
Amounts
894.6
1,146.9
(30.9)
2,010.6
951.1
1,150.6
–
2,101.7
2,103.3
11,062.4
(5,919.2)
7,246.5
2,018.8
1,377.7
3,250.2
6,646.7
2,997.9
12,209.3
(5,950.1)
9,257.1
2,969.9
2,528.3
3,250.2
8,748.4
1,886.1
2,292.5
–
4,178.6
1,821.8
1,415.4
–
3,237.2
112.4
3,931.0
–
4,043.4
122.7
309.4
–
432.1
1,998.5
6,223.5
–
8,222.0
1,944.5
1,724.8
–
3,669.3
259.2
502.5
(232.2)
529.5
237.8
465.9
(195.7)
508.0
287.7
20.5
3,763.0
4,071.2
176.7
20.5
3,763.0
3,960.2
–
–
–
–
120.4
–
–
120.4
373.0
142.0
(66.5)
448.5
401.7
345.7
(345.7)
401.7
(13.4)
5,320.8
(5,320.6)
(13.2)
(12.1)
(28.6)
28.6
(12.1)
906.5
5,985.8
(1,856.3)
5,036.0
924.5
803.5
3,250.2
4,978.2
–
–
(4,093.8)
(4,093.8)
–
–
–
–
92.9
–
–
92.9
100.9
–
–
100.9
999.4
5,985.8
(5,950.1)
1,035.1
1025.4
803.5
3,250.2
5,079.1
2,997.9
12,209.3
(5,950.1)
9,257.1
2,969.9
2,528.3
3,250.2
8,748.4
129
Pro-forma Consolidated Cash Flow Statements
In ₱Mn
For the six months ended
June 30, 2014
495.4
(107.4)
(84.8)
0.4
For the year ended
December 31, 2013
992.0
(82.6)
(212.9)
1.2
–
(69.1)
303.6
628.6
(4,839.7)
(777.9)
Net cash provided by financing activities
4,439.1
222.8
NET INCREASE (DECREASE) IN CASH
(97.0)
73.5
CASH AT BEGINNING OF PERIOD
746.8
673.3
CASH AT END OF PERIOD
649.8
746.8
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash generated from operations
Income taxes paid
Dividends paid
Interest paid
Interest received
Net cash provided by operating activities
Net cash used in investing activities
130
DESCRIPTION OF KEY ITEMS
For the Pancake House Group and the Max’s Entities
Systemwide Sales
Systemwide Sales pertains to sales from company-owned, joint venture and franchised
stores.
Revenues
Revenues consist of sales from company-owned and joint venture stores (Store Sales),
commissary sales to franchisees and third-parties (Commissary Sales), and Franchise
Income.
Store Sales refers to items bought in the restaurant including delivery and are recognized
when the related orders are served.
Commissary Sales pertains to goods sold to franchisees and external parties and are
recognized upon delivery of orders.
Franchise Income is derived from fees charged for the use of continuing rights granted in
accordance with the franchise agreement, or other services provided during the period of the
franchise agreement.
Cost of Sales
Cost of Sales pertains to cost of materials, direct labor and overhead directly attributable to
the generation of sales.
General and Administrative Expenses
General and administrative expenses are generally recognized when the services are used or
the expenses arise.
Sales and Marketing Expenses
Sales and marketing expenses, which represent advertising and other selling costs, are
generally expensed as incurred.
Finance Costs
Finance costs consist of interest and other costs that an entity incurs in connection with the
borrowing of funds and are generally expensed in the period they are incurred. Certain
finance costs that are directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period of time to get ready for its intended use
or sale are capitalized as part of the cost of the respective assets.
131
Other Income
Dividend Income is recognized when the right to receive payment is established.
Service Income are recognized when the related services are rendered.
Rental Income is recognized on a straight-line basis.
Interest Income is recognized as the interest accrues using the effective interest rate
method.
Others include delivery income, income from sale of marketing collaterals to franchisees,
gains on sale of assets and all other income not directly related to the normal course of
business.
Provision for Income Tax
Provision for income tax for the current period and prior periods are measured at the amount
expected to be paid to taxation authorities. The income tax rates and income tax laws used
to compute the amount are those that have been enacted at the balance sheet date.
132
THE PANCAKE HOUSE GROUP
The Pancake House Group operates the trade names “Pancake House”, “Maple”, “Yellow
Cab”, “Dencio’s”, “Kabisera ng Dencio’s”, ”Teriyaki Boy”, “Sizzlin’ Steak”, “Singkit”, “Le Coeur
de France”, and “The Chicken Rice Shop.” The following table sets out the systemwide sales, store sales, commissary sales, franchise
income, gross profit, and number of stores for 9 of the 10 brands in the Pancake House Group
for the periods indicated. As at June 30, 2014, there are no stores for the “Singkit” brand.
The amounts presented exclude eliminations of intercompany transactions.
As at and for the year ended
December 31,
In ₱ Mn
except for
Number of stores
As at and for the six months ended
June 30,
2013
2012
2011
2014
2013
Pancake House (including Maple)
Systemwide sales
1,347.6
Store sales
751.7
Commissary Sales
251.3
Franchise income
64.5
Gross profit
254.9
Number of stores
115
1,187.1
617.1
216.3
69.0
235.8
104
1,137.3
576.6
209.4
60.1
217.8
88
694.8
378.2
122.1
29.7
110.7
117
664.6
372.4
100.5
32.4
134.0
113
Yellow Cab
Systemwide sales
Store sales
Commissary Sales
Franchise income
Gross profit
Number of stores
1,766.6
1,525.6
82.6
14.1
281.0
101
1,668.4
502.3
33.7
4.8
85.0
90
1,007.3
859.4
56.3
8.5
145.0
110
897.7
833.4
56.4
11.2
155.4
105
1,987.4
1,720.1
107.7
19.4
345.9
108
133
Dencio's and Kabisera ng Dencio’s
Systemwide sales
276.4
Store sales
42.0
Commissary Sales
73.2
Franchise income
24.9
Gross profit
31.7
Number of stores
15
311.3
46.6
92.6
23.5
37.4
15
367.8
72.7
87.4
23.1
43.2
18
141.2
17.5
34.1
9.5
17.1
15
149.9
21.6
34.1
9.7
15.1
14
507.7
349.0
69.9
17.8
65.3
533.0
363.9
83.1
25.4
87.2
559.3
392.6
74.8
19.8
104.3
233.3
165.2
40.3
7.4
6.5
257.4
175.8
33.1
8.8
37.8
37
35
34
35
34
146.1
118.7
2.8
16
156.8
131.6
11.8
18
166.4
152.8
(3.3)
18
66.4
54.2
12.1
16
75.2
60.9
8.0
17
Teriyaki Boy
Systemwide sales
Store sales
Commissary Sales
Franchise income
Gross profit
Number of stores
Sizzlin' Steak
Systemwide sales
Store sales
Commissary Sales
Franchise income
Gross profit
Number of stores
134
Le Coeur de France
Systemwide sales
Store sales
Commissary
Sales
Franchise income
Gross profit
Number of stores
85.7
85.7
103.3
103.3
127.3
127.3
52.9
52.9
41.5
41.5
-
-
-
-
-
(7.2)
(6.3)
7.2
0.2
(0.3)
13
11
13
14
11
36.0
43.5
13.7
7.7
19.6
36.0
43.5
13.7
7.7
19.6
-
-
-
-
-
(27.0)
(15.3)
(3.0)
(5.2)
(8.1)
2
5
1
2
4
The Chicken Rice Shop
Systemwide sales
Store sales
Commissary
Sales
Franchise income
Gross profit
Number of stores
135
The following table summarizes the Pancake House Group’s total systemwide sales, revenues
and number of stores for the periods ended and as at December 31, 2013, December 2012 and
December 2011 as well as for the interim periods ended June 30, 2014 and 2013.
As at and for the
six months ended
June 30,
As at and for the year ended
December 31,
In ₱ Mn
except for
Number of stores
2013
2012
2011
2014
2013
Systemwide sales
4,387
4,102
4,040
2,204
2,106
Total Revenues
3,752
3,431
2,342
1,833
1,815
Store sales
3,103
2,832
1,841
1,547
1,525
Commissary Sales
504
467
395
230
226
Franchise income
145
132
106
56
64
Number of stores
306
289
262
309
292
136
RESULTS OF OPERATIONS
The following table sets forth summary results of operations for the Pancake House Group for the periods indicated.
In ₱ Mn
2013
REVENUES
Store Sales
Commissary Sales
Franchise Income
Total Revenues
COSTS AND EXPENSES
Cost of Sales*9
Cost of Labor*
Operating Exp.*
Sales & Marketing Exp.**10
Administrative Exp.**
Total Costs and Expenses
INCOME (LOSS) FROM OPERATIONS
OTHER INCOME (CHARGES)
INCOME (LOSS) BEF. INCOME TAX
BENEFIT FROM (PROV. FOR)
INCOME TAX
NET INCOME(LOSS)
ATTRIBUTABLE TO:
Equity Holders of Parent
Minority Interest
Total
EBITDA ATTRIBUTABLE TO:
Equity Holders of Parent
Minority Interest
TOTAL EBITDA
For the year ended December 31,
%
2012
%
2011
%
For the six months ended June 30,
20148
%
2013
%
3,103.2
503.5
144.9
3,751.6
82.7%
13.4%
3.9%
100.0%
2,831.6
467.1
132.0
3,430.7
82.5%
13.6%
3.8%
100.0%
1,840.5
394.7
106.5
2,341.7
78.6%
16.9%
4.5%
100.0%
1,547.3
229.7
55.8
1,832.8
84.4%
12.6%
3.0%
100.0%
1,525.2
225.5
64.2
1,815.0
84.0%
12.4%
3.5%
100.0%
1,381.3
527.7
1,158.3
131.4
436.8
3,635.5
116.1
26.3
142.5
38.3%
14.6%
32.1%
3.5%
11.6%
96.9%
3.1%
0.7%
3.8%
1,223.1
493.9
1,082.7
62.9
399.3
3,261.9
168.8
41.7
210.5
37.1%
15.0%
32.8%
1.8%
11.6%
95.1%
4.9%
1.2%
6.1%
852.8
351.3
689.1
28.2
255.4
2,176.8
164.9
(17.6)
147.3
38.2%
15.7%
30.8%
1.2%
10.9%
93.0%
7.0%
-0.8%
6.3%
675.3
267.4
603.2
66.4
313.8
1,926.1
(93.3)
29.3
(64.0)
38.0%
15.0%
33.9%
3.6%
17.1%
105.1%
-5.1%
1.6%
-3.5%
661.9
257.3
552.3
51.7
198.5
1,721.7
93.4
16.0
109.2
37.8%
14.7%
31.5%
2.8%
10.9%
94.9%
5.1%
0.9%
6.0%
(63.3)
79.3
-1.7%
2.1%
(60.9)
149.6
-1.8%
4.4%
(46.8)
100.5
-2.0%
4.3%
27.4
(36.6)
1.5%
-2.0%
(27.3)
81.9
-1.5%
4.5%
105.7
(26.4)
79.3
2.8%
(0.7%)
2.1%
151.4
(1.8)
149.6
4.4%
(0.1%)
4.4%
91.2
9.3
100.5
3.9%
0.4%
4.3%
(28.7)
(7.9)
(36.6)
(1.6%)
(0.4%)
(2.0%)
82.1
(0.2)
81.9
4.5%
0.0%
4.5%
436.4
12.7
11.6%
0.3%
444.4
21.8
13.0%
0.6%
300.9
39.0
12.8%
1.7%
65.9
(3.5)
3.6%
(0.2%)
243.1
7.0
13.4%
0.4%
449.1
12.0%
466.2
13.6%
340.0
14.5%
62.4
3.4%
250.1
13.8%
8
Re-stated
* Cost of Sales, Cost of Labor and Operating Expenses Ratios are computed as a % of Store Sales and Commissary Sales
10
** Sales and Marketing Expenses and Administrative Expenses Ratios are computed as a % of Total Revenues
9
137
Six months ended June 30, 2014 and June 30, 2013
Revenues
Pancake House Group’s consolidated revenues reached P1.83 billion, 1.0% higher compared
to the P1.82 billion posted in the first half of 2013. Store sales increased 1.0% to P1.55 billion
as at June 30, 2014 from P1.53 billion as at June 30, 2013 owing to a wider store network
and a larger customer base. Commissary sales rose 2.0% to P229.7 million mainly driven by
higher revenues of franchisees. Franchise income declined 13.0% to P55.8 million
attributable to less franchise store openings in the first half of 2014.
Yellow Cab and Pancake House anchored the Pancake House Group’s revenue momentum,
with total revenues of these brands improving by 3% and 5.0% to P924.3 million and P583.6
million, respectively. This momentum is expected to be sustained as most of the new store
openings across all the brands in the Pancake House Group are planned in the second half of
2014.
Cost of Sales
Combined store and commissary cost of sales for first half 2014 rose by 2.0% to P675.3 million,
versus P661.9 million in the same period of the previous year. This is attributed to higher
cost of raw materials, labor and packaging.
Cost of labor for the six months ended June 30, 2014 amounted to P267.4 million, 4% higher
than the P257.3 million reported for the six months ended June 30, 2013. The increase is
primarily attributed to new stores opened in the second half of 2013.
Operating Expenses
General and administrative expenses increased 58% to P313.8 million for the first six months
of 2014 against P198.5 million for the same period in the previous year on the back of
additional provisions for impairment of P106.5 million for past due accounts.
Selling and marketing expenses grew 28% to P 66.4 million in June 30, 2014 as opposed to
P51.7 million in the same period of the previous year, due to intensified advertising activities
aimed at broadening product awareness in the market.
Other Income (Charges)
Net other income, amounting to P29.2 million, came in 86% higher for the first half of 2014
compared to P15.7 million in first half of 2013. The increase in net other income is due to an
increase in delivery income coupled with lower interest expense in the first half of 2014.
Provision for Income Tax
For the period ended June 30, 2014, income tax benefit amounted to P27.4 million while the
first half of 2013 had income tax expense of P27.3 million.
138
Net Income
The Pancake House Group reported a consolidated net loss of P36.6 million for the period
ended June 30, 2014 compared to consolidated net income of P81.9 million for the same period
in 2013. The reduction in net income can be largely attributed to the increased provisions for
impairment recorded in the first half of 2014 related to past due accounts.
EBITDA
Consolidated EBITDA declined to P65.9 million for the six months of 2014, from P250.1
million in the same period last year. The decline is largely due to the increased provisions for
impairment recorded in the first half of 2014 related to past due accounts.
Twelve months ended December 31, 2013 vs December 31, 2012
Revenues
Pancake House Group’s consolidated revenues increased by 9.4% to P3.75 billion during the
year ended December 31, 2013 versus P3.43 billion in 2012. Store Sales increased by 9.6% to
P3.10 billion in 2013 from P2.83 billion in 2012. Commissary sales increased by 7.8% to
P503.5 million in 2013 from P467.1 million in 2012. Franchise income (continuing royalty
and franchise fees) rose by 9.7%, to P144.9 million in 2013 as compared to P132.0 million in
2012.
The strong topline growth was largely attributed to its two flagship brands namely, Pancake
House and Yellow Cab. Pancake House’s revenues reached P1.20 billion in 2013 resulting in
a double digit growth of 13.4% as compared to 2012 revenue of P1.06 billion. On the other
hand, Yellow Cab continued to be a dominant player in the chained pizza fastfood category
with revenues of P1.85 billion or a 14.0% growth in 2013 versus 2012 revenue of P1.62 billion
as a result of robust operations.
Cost of Sales
The ratio of cost of sales to combined restaurant and commissary sales increased from 37.1%
in 2012 to 38.3% in 2013. The higher ratio is due to increased prices of raw materials, paper
costs and other packaging materials.
The ratio of cost of labor to combined restaurant and commissary sales improved to 14.6% in
2013 from 15.0% in 2012. The improvement is due to the impact of the rationalization of
commissary operations.
Operating Expenses
Operating expenses, as a percentage of combined restaurant and commissary sales, improved
to 32.1% in 2013 vs 32.8% in 2012 as management continues to implement programs to
streamline costs.
Consolidated sales and marketing expenses significantly increased to P131.4 million in 2013
from P62.9 million in 2012 due to numerous brand revitalization programs to continuously
139
defend the brands from aggressive competitors especially for Teriyaki Boy and Sizzlin’ Steak.
Marketing and ad campaigns for the other brands included loyalty programs, billboard
communication and other forms of advertising.
Administrative expenses came in at P436.8 million in 2013 versus P399.3 million in 2012,
maintaining a ratio of 11.6% to total revenues.
Other Income (Charges)
Net other income of P26.3 million in 2013 is lower compared to net other income of P41.7
million in 2012. The decrease was attributable to the decline in the service income related to
the culinary school operations.
Provision for Income Tax
For the twelve months ended December 31, 2013, provision for income tax was P63.3 million,
an increase of 3.9% compared to P60.9 million reported in 2012.
Net Income and EBITDA
Pancake House Group’s profitability declined as it posted a net income ratio of 2.1% or P79.3
million in 2013 compared to P149.6 million or 4.4% in 2012
EBITDA declined to P449.1 million in 2013 or 12.0% of total revenues compared to P466.2
million or 13.6% of total revenues in 2012.
The decline was attributable mainly to the intensified marketing campaigns and brand
revitalization programs, both of which are expected to benefit the group in the succeeding
years.
Twelve months ended December 31, 2012 vs December 31, 2011
Revenues
Pancake House Group’s revenues significantly increased by 46.5% to P3.43 billion in 2012
from P2.34 billion in 2011. Store Sales increased by 53.8% to P2.83 billion in 2012 from P1.84
billion in 2011. Commissary sales increased by 18.3% to P467.1 million in 2012 from P394.7
million in 2011. Franchise income rose by 23.9%to P132.0 million in 2012 as compared to
P106.5million in 2011.
The increase in the group’s revenues is mainly due to the full year consolidation of the Yellow
Cab business which the Company acquired in August 2011.
Cost of Sales
The ratio of cost of sales to combined restaurant and commissary sales improved to 37.1% in
2012 from 38.2% in 2011. The cost improvement is due to enhanced supply chain efficiency
and economies of scale across all raw material requirements of the stores.
140
The ratio of cost of labor to combined restaurant and commissary sales improved to 15.0% in
2012 from 15.7% in 2011.
Operating Expenses
Operating expenses, as a percentage of combined restaurant and commissary sales, went up
to 32.8% in 2012 from 30.8% in 2011.
Sales and marketing expenses in 2012 amounted to P62.9 million, significantly higher than
2011’s P28.2 million due to full consolidation of Yellow Cab’s costs and more active marketing
campaigns in 2012.
The ratio of administrative expenses to total revenues increased from 10.9% in 2011 to 11.6%
in 2012 due to increasing costs of occupancy and utilities.
Other Income (Charges)
Net other income in 2012 amounted to P41.7 million while 2011 posted net other charges of
P17.6 million. Net other income in 2012 included the recognition of service income related to
the culinary school operations.
Provision for Income Tax
For the periods ended December 31, 2012 and December 31, 2011, provision for income tax
was at P60.9 million and P46.8 million, respectively.
Net Income and EBITDA
Pancake House Group’s profitability ratio improved to 4.4% in 2012 with net income of P149.6
million from 4.3% in 2011 with net income of P100.5 million.
EBITDA remained strong in 2012 at P466.2 million with a margin of 13.6%.
141
SELECT BALANCE SHEET ITEMS
The table below sets forth the outstanding amounts of select balance sheet items of the
Pancake House Group as at the dates presented:
In P Mn
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Total Equity
Current Ratio
Solvency Ratio
Debt-to-Equity Ratio
As at June 30,
2014
894.6
2,997.9
1,884.5
1,998.5
999.4
0.47
1.50
2.00
As at December 31,
2013
2012
951.1
2,969.9
1,821.8
1,944.5
1,025.4
0.52
1.53
1.90
955.4
2,889.5
946.0
1,864.2
1,025.3
1.01
1.55
1.81
2011
931.3
2,688.6
884.7
1,777.0
911.6
1.05
1.51
1.91
Current Assets
Current assets consist of cash, trade and other receivables, inventories, prepaid expenses
and other current assets.
Noncurrent Assets
Noncurrent assets consist mainly of goodwill related to the Company’s acquisition of Yellow
Cab, trademarks and other intellectual property rights, property and equipment, security
deposits on lease contracts and other noncurrent assets.
Current Liabilities
Current Liabilities consist mainly of trade payables and short-term loans payable used to
finance working capital requirements.
Noncurrent Liabilities
Noncurrent Liabilities consist mainly of retirement benefit obligations related to the
Pancake House Group’s employees.
Liquidity and Solvency
In 2013, the Pancake House Group re-classified certain long term liabilities to current
status as these obligations were subsequently settled in March 2014 and refinanced by a
short-term loan for working capital purposes. The re-classification of these liabilities caused
current ratio to go down in 2013 while solvency ratios remain healthy.
142
LIQUIDITY AND CAPITAL RESOURCES
The Pancake House Group’s primary sources of liquidity are cash generated from operations
and financing activities. The table below sets forth the Pancake House Group’s cash flow
information for the periods indicated:
In ₱ Mn
For the six months ended
June 30, 2014
For the year ended
December 31, 2013
For the year ended
December 31, 2012
157.1
356.2
393.3
(222.8)
(299.8)
(367.8)
35.0
(87.2)
(60.8)
(30.6)
(30.8)
(35.3)
341.7
372.5
407.8
311.1
341.7
372.5
Cash from operating
activities
Cash used in investing
activities
Cash from (used in)
financing activities
Net decrease in cash and
cash equivalents
Cash and cash equivalents
as at beginning of period
Cash and cash
equivalents as at end of
period
CAPITAL EXPENDITURES
Below is a table showing of Pancake House Group’s programmed spending for the periods
ended June 30, 2014, December 31, 2013 and December 31, 2012
For the six months ended
June 30, 2014
For the year ended
December 31, 2013
For the year ended
December 31, 2012
Leasehold Improvements
37.5
119.3
98.5
Store and Kitchen Equipment
24.7
90.0
89.9
Furniture and Fixtures
5.9
26.0
34.4
Transportation Equipment
2.0
15.3
14.3
-
8.7
2.6
70.1
259.3
239.7
In ₱ Mn
Construction in Progress
Total
143
DEBT OBLIGATIONS AND COMMITMENTS
The following table shows Pancake House Group’s principal debt obligations and
commitments as at the indicated periods:
In ₱ Mn
Loans payable
Trade and other payables
Income tax payable
Retirement benefit obligations
Total
As at
June 30, 2014
As at
December 31, 2013
As at
December 31, 2012
1,129.5
737.2
14.0
76.0
1,956.7
1,090.4
695.4
28.1
63.0
1,876.9
1,093.8
610.4
26.4
61.0
1,791.6
OFF-BALANCE SHEET ARRANGEMENTS
For periods as at December 31, 2011, December 31, 2012, December 31, 2013 and June 30,
2014, the Pancake House Group did not have any off-balance sheet arrangements.
KEY FINANCIAL AND OPERATING INDICATORS
The following are the key financial and operating indicators used by Pancake House Group
for the periods indicated:
Current Ratio
Debt-to Equity Ratio
EBITDA Margin
Profitability Ratio
As at
June 30, 2014
As at
December 31, 2013
As at
December 31, 2012
0.47
2.00
2.0%
(2.0%)
0.52
1.90
12.0%
2.1%
1.01
1.80
13.0%
4.4%
144
THE MAX’S ENTITIES
The Max’s Entities operate the trade names “Max’s Restaurant”, “Krispy Kreme”, “Jamba
Juice” and “Max’s Corner Bakery”.
Max’s started its operations in Scout Tuason, Quezon City in 1945 and since then, has been
popularly and consistently serving traditional Filipino comfort food using originallydeveloped recipes. Popularly known for its core product, Max’s fried chicken, it has expanded
its operations outside the Philippines since 1982 when it opened its first outlet in South San
Francisco, California, USA. It also operates in the Philippines international food brands
Krispy Kreme and Jamba Juice under exclusive license arrangements.
Max’s Restaurant is operated by several Max’s Entities all of which are Subsidiaries. The
financial information presented for Max’s Restaurants are pro-forma combined information
of all such Subsidiaries.
Krispy Kreme is operated by The Real American Doughnut Company, Inc, a Subsidiary.
Jamba Juice is operated by Fresh Healthy Juice Boosters, Inc., a Subsidiary.
Max’s Corner Bakery is operated by Max’s Bakeshop, Inc., a Subsidiary.
The following table sets out the systemwide sales, revenues, store sales, franchise income,
EBITDA, EBITDA margin and number of stores for the 4 brands of the Max’s Entities as at
and for the years ended December 31, 2013 and as at and for the six months ended June 30,
2014:
As at and for the six months ended
As at and for the year ended
June 30, 2014
December 31, 2013
In ₱ Mn
Max's Restaurant (Pro-forma)
Systemwide sales
Revenues
Store Sales
Commissary Sales
Franchise Income
Advertising income
EBITDA
EBITDA Margin
Number of stores
Krispy Kreme
Revenues
EBITDA
EBITDA Margin
Number of stores
2,527.9
2,068.8
1,700.0
260.1
69.3
39.4
275.8
13.3%
156
4,844.9
3,987.7
3,283.6
460.3
139.3
104.5
414.2
10.4%
151
609.0
60.2
9.9%
49
1,181.8
164.9
13.9%
47
As at and for the six months ended
June 30, 2014
As at and for the year ended
December 31, 2013
Jamba Juice
Revenues
EBITDA
EBITDA Margin
Number of stores
88.8
(3.6)
(4.0%)
11
151.7
(31.1)
(20.5%)
9
Max's Corner Bakery
Revenues
EBITDA
EBITDA Margin
162.4
5.4
3.4%
338.2
19.5
5.8%
The following table sets forth the breakdown of the Max’s Entities total revenues from its
key strategic business units for the periods ended and as at December 31, 2013 and interim
financial statements for the period ended and as at June 30, 2014:
The figures presented below exclude adjustments for intercompany transactions.
In ₱ Mn
Max’s Restaurant
Krispy Kreme
Jamba Juice
Max’s Corner Bakery
Others
Total Revenues
For the six months ended
June 30,
% to total
2014
2,068.8
609.0
88.8
162.4
10.6
2,939.5
70.4%
20.7%
3.0%
5.5%
0.4%
100.0%
For the year ended
December 31,
% to total
2013
3,987.7
1,181.8
151.6
338.2
19.1
5,678.4
70.2%
20.8%
2.7%
6.0%
0.3%
100.0%
146
RESULTS OF OPERATIONS
The figures presented are pro-forma combined information of all Max’s Entities.
In ₱ Mn
REVENUES
COST OF SALES AND SERVICES
GROSS PROFIT
GENERAL AND ADMINISTRATIVE
EXPENSES
OTHER OPERATING INCOME (CHARGES)
FINANCE INCOME (COSTS)
INCOME BEFORE INCOME TAX
For the six months
ended
For the year ended
June 30, 2014
December 31, 2013
2,777.1
(2,115.2)
661.9
5,468.4
(4,185.8)
1,282.6
(507.2)
(1,021.8)
42.9
(91.0)
106.6
43.7
(18.8)
285.7
PROVISION FOR INCOME TAX
31.0
104.2
NET INCOME
75.5
181.5
NET INCOME ATTRIBUTABLE TO
Equity holders of the Parent Company
Noncontrolling interest
75.5
–
181.5
–
75.5
181.5
For the twelve months ended December 31, 2013 and six months ended June 30, 2014
Revenues
Revenues of the Max’s Entities (gross of adjustments for intercompany transactions) totaled
P5.7 billion and P2.9 billion for the periods ended December 31, 2013 and June 30, 2014.
Topline growth was primarily anchored on the strength of Max’s Entities key business units,
notably Max’s Restaurants and Krispy Kreme. Other developmental brands include
international healthy food and drink stop Jamba Juice as well as Max’s Corner Bakery. With
an expanding global store footprint, Max’s Entities now operates 216 outlets as at June 30,
2014.
Max’s Restaurant was the largest revenue contributor, posting P3.99 billion and P2.07
billion, accounting for 70.2% and 70.4% of total revenues for the respective periods. As at
June 30, 2014, Max’s Restaurants operates locally and overseas with a store network of 156
branches.
Krispy Kreme reasserts its brand leadership in the local doughnut and coffee space, posting
revenues of P1.2 billion in 2013 and P609.0 million for the first half of 2014, equivalent to
20.8% and 20.7% of total revenues respectively. As at June 30, 2014, Krispy Kreme had 49
branches situated in key growth areas nationwide.
147
Jamba Juice recorded revenues of P151.6 million in 2013 and P88.8 million for the first half
of 2014, constituting 2.7% and 3.0% of total revenues for the respective periods. Jamba Juice
started operations in the Philippines in 2011 and has grown into a favorite destination for
better-for-you food and beverages. As at June 30, 2014, Jamba Juice has rolled out 11 stores
situated in strategic locations in the country.
Max’s Corner Bakery registered revenues of P338.2 million in 2013 and P162.4 million for
the first half of 2014, corresponding to 6.0% and 5.5% of total revenues for the respective
periods. As at June 30, 2014, Max’s Corner Bakery is present in Max’s Restaurant stores.
Cost of Sales
Cost of sales was at P4.19 billion in 2013 and P2.12 billion in the first half of 2014,
translating to a cost to sales ratio of 76.5% and 76.2% for the respective periods. In the first
half of 2014, Krispy Kreme wrote-off certain spoiled inventory items arising from delayed
store openings.
Max’s Entities continue to implement cost management initiatives through operational
efficiencies to mitigate effects of price escalations.
General and Administrative Expenses
General and administrative expenses hit P1.02 billion in 2013 and P507.2 million for the
first half of 2014, resulting to a GAE ratio of 18.7% and 18.3% in the respective periods.
Other Income (Charges)
Net other income amounted to P24.9 million as at December 31, 2013 while net other charges
were at P48.1 million as at June 30, 2014. The increase in other charges is attributable to
interest expenses related to the term loan secured by certain Max’s Entities (the Selling
Subsidiaries) to finance the acquisition of 89.95% of the Company in February 2014. As at
June 30, 2014, the interest expenses related to the term loan amounted to P74.9 million.
Provision for Income Tax
For the periods ended December 31, 2013 and June 30, 2014, provision for income tax was
at P104.2 million and P31.0 million, respectively.
EBITDA and Net Income
The Max’s Entities reported a pro-forma combined net income of P181.5 million and P75.5
million as at December 31, 2013 and June 30, 2014, translating to net income margins of
3.3% and 2.7% for the respective periods. The decline in net income margin is attributable
to interest costs related to the acquisition loan.
Pro-forma EBITDA of the Max’s Entities stood at P577.6 million, translating to an EBITDA
margin of 10.6% for the full year 2013. For the period ended June 30, 2014, pro-forma
EBITDA came in at P345.0 million, corresponding to an EBITDA margin of 12.4%. The
improvement in EBITDA margin is driven largely by the strong performance of Max’s
148
Restaurants and Jamba Juice Stores.
Description of Selected Balance Sheet Items
In ₱ Mn
ASSETS
Current Assets
Cash
Trade and other receivables
Inventories
Due from related parties
Prepayments and other current assets
June 30, 2014
December 31, 2013
338.7
261.8
219.2
200.3
127.0
405.2
256.6
296.3
61.2
131.4
1,147.0
1,150.7
24.4
1,115.4
2.2
79.6
180.9
9,444.9
–
215.0
23.3
1,003.7
78.6
72.7
3.1
4.4
1.3
190.6
Total Noncurrent Assets
11,062.4
1,377.7
Total Assets
12,209.4
2,528.4
880.2
1,248.4
164.0
826.6
555.0
33.9
Total Current Liabilities
Noncurrent Liabilities
Loans payable - net of current portion
Net retirement liability
Other noncurrent liabilities
2,292.6
1,415.5
3,893.0
26.6
11.4
155.3
137.5
16.6
Total Noncurrent Liabilities
3,931.0
309.4
Total Liabilities
6,223.6
1,724.9
Total Current Assets
Noncurrent Assets
Intangible assets
Property and equipment
Investment properties
Net deferred tax assets
Net retirement assets
AFS investment
HTM investments
Other noncurrent assets
LIABILITIES AND EQUITY
Current Liabilities
Trade and other payables
Borrowings
Income tax payable
149
In ₱ Mn
Equity
Capital stock
Additional paid-in capital
Notes for conversion to equity
Retained earnings
Other comprehensive income (loss)
Shares held by subsidiaries
Noncontrolling interests
Total Liabilities and Shareholders' Equity
June 30, 2014
December 31, 2013
502.5
20.5
–
142.0
5,320.8
465.9
20.5
–
345.7
(28.6)
5,985.8
–
–
803.5
–
–
5,985.8
803.5
12,209.4
2,528.4
Current Assets
Current assets consist of cash, trade and other receivables, inventories and other current
assets. Total current assets as at December 31, 2013 and June 30, 2014 amounted to P1.15
billion and P1.18 billion, respectively.
Noncurrent Assets
As at June 30, 2014, total noncurrent assets amounted to P11.0 billion which is comprised
mainly of the shares in the Company held by certain Max’s Entities (the Selling
Subsidiaries) recorded at market value of P9.44 billion.
Total Liabilities
Total liabilities consist of trade and other payables, income taxes payable, mortgage
payables, bank debt and others. As at December 31, 2013 and June 30, 2014, total liabilities
totaled P1.72 billion and P6.22 billion, respectively. Loans payable includes the acquisition
loan obtained by certain Max’s Entities (the Selling Subsidiaries) in the amount of P4.27
billion.
Retained Earnings
As at December 31, 2013, retained earnings was at P345.7 million. In the first half of 2014,
Max’s Entities declared dividends amounting to P280.5 million, bringing retained earnings
to P135.0 million as at June 30, 2014.
150
CAPITAL EXPENDITURES
Below is a table showing the Max’s Entities’ programmed spending on capital expenditures
for the periods ended December 31, 2013 and June 30, 2014:
In ₱ Mn
Max’s Restaurant
Store Expansion
Commissary Equipment
Total
For the six months ended
June 30, 2014
90.3
9.9
100.2
For the year ended
December 31, 2013
132.8
21.7
154.5
In ₱ Mn
For the six months ended
June 30, 2014
52.7
18.0
1.9
72.6
For the year ended
December 31, 2013
109.4
34.3
3.6
147.3
Krispy Kreme
Jamba Juice
Max’s Corner Bakery
Total
Capital expenditure outlays are primarily for store network expansion and investments in
commissary equipment. These also include costs related to store renovations and
maintenance of existing outlets.
DEBT OBLIGATIONS AND COMMITMENTS
The following table shows the Max’s Entities principal debt obligations and commitments
as at the indicated periods:
In ₱ Mn
Loans payable
Trade and other payables
Income tax payable
Retirement liabilities
Total
As at June 30, 2014
5,141.4
880.2
13.1
26.6
6,061.3
As at December 31, 2013
710.3
826.6
33.9
137.5
1,708.3
Loans payable includes the acquisition loan obtained by certain Max’s Entities (the Selling
Subsidiaries) in the amount of P4.27 billion. Other components of loans payable are working
capital facilities obtained by each of the Max’s Entities.
OFF-BALANCE SHEET ARRANGEMENTS
As at December 31, 2013 and June 30, 2014, the Max’s Entities did not have any offbalance sheet arrangements.
151
KEY FINANCIAL INDICATORS
The following are the key financial measures used by Max’s Entities for the periods
indicated:
In ₱ Mn
Current Ratio
Debt-to Equity Ratio
Profitability Ratio
EBITDA Margin
As at June 30,
2014
0.55
9.78*
2.7%
12.4%
As at December 31, 2013
0.81
2.15
3.3%
10.6%
*excludes the mark to market gain on the remeasurement of the shares in the Company held by the Selling
Subsidiaries
152
OTHER RELEVANT INFORMATION
Regulatory Matters
Various laws and regulations in the Philippines impact the business of the Company.
The Consumer Act
The Consumer Act (R.A. No. 7394) establishes quality and safety standards with respect to
the composition, contents, packaging and advertisement of food products. Furthermore, it
regulates the following: (1) consumer product quality and safety; (2) the production, sale,
distribution and advertisement of food, drugs, cosmetics and devices as well as substances
hazardous to the consumer’s health and safety; (3) fair, honest consumer transactions and
consumer protection against deceptive, unfair and unconscionable sales acts or practices; (4)
practices relative to the use of weights and measures; (5) consumer product and safety
warranties; (6) compulsory labeling and fair packaging; (7) liabilities for defective products
and services; (8) consumer protection against misleading advertisements and fraudulent
promotion practices; and (9) consumer credit transactions. Under the Consumer Act, the
manufacture, importation, exportation, sale, offering for sale, distribution, and transfer of
food products that do not conform to applicable consumer product quality or safety standards
is prohibited.
The implementing agencies tasked to enforce the Act are the Department of Health, the
Department of Agriculture, and the DTI. The Department of Health, in particular, regulates
the production, sale, distribution, and advertisement of food to protect the health of
consumers.
Violation of the Consumer Act shall warrant administrative penalties and/or imprisonment
of not less than one year but not more than five years, or a fine of not less than P5,000.00
but not more than P10,000.00 or both, at the discretion of the court. Should the offense be
committed by a juridical person, the chairman of the board of directors, the president,
general manager, or the partners and/or the persons directly responsible therefor shall be
penalized.
The Company is compliant with the Consumer Act, and it has no pending case in relation to
the Consumer Act.
The Food Safety Act
The Food Safety Act (R.A. No. 10611) seeks to strengthen the food safety regulatory system
in the country by principally delineating the mandates and responsibilities of the
government agencies. The National Dairy Authority, National Meat Inspection Service, and
Bureau of Fisheries and Aquatic Resources under the Department of Agriculture (DA) are
the government agencies responsible for the development and enforcement of food safety
standards and regulations in the primary production and post-harvest stages for milk,
meats, and fish, respectively, while the FDA under the DOH is responsible for the safety of
processed and pre-packaged foods. The Food Safety Act created the Food Safety Regulation
153
Coordinating Board to monitor and coordinate the performance and implementation of the
mandates of the government agencies under the law.
Under the Food Safety Act, food business operators or those who undertake to carry out any
of the stages of the food supply chain are held principally responsible in ensuring that their
products satisfy the requirements of the law and that control systems are in place to prevent,
eliminate, or reduce risks to consumers.
For the enforcement of the Food Safety Act, the food safety regulatory agencies are
authorized to perform regular inspection of food business operators taking into consideration
the compliance with mandatory safety standards; implementation of the Hazard Analysis
at Critical Control Points (HACCP) or the science-based system that identifies, evaluates,
and controls hazards for food safety at critical points; good manufacturing practices; and
other requirements of regulations. It is prohibited to refuse access to pertinent records or
entry of inspection officers of the food safety regulatory agencies. It is likewise prohibited,
among others, to produce, handle, or manufacture for sale, offer for sale, distribute in
commerce, or import any food or food product, which is banned or is not in conformity with
applicable quality or safety standard is also prohibited. The commission of any of the
prohibited acts under the Food Safety Act can result in imprisonment and/or a fine.
Environmental Laws
Philippine Environmental Impact Statement System
It has been declared as the policy of the State to attain and maintain a rational and orderly
balance between socio-economic growth and environmental protection. Hence, the
Philippine Environmental Impact Statement System has been established.
Development projects that are classified by law as environmentally critical or projects within
statutorily defined environmentally critical areas are required to obtain an Environmental
Compliance Certificate (“ECC”) prior to commencement. Through its regional offices or
through the Environmental Management Bureau (“EMB”), the DENR determines whether
a project is environmentally critical or located in an environmentally critical area. As a
prerequisite for the issuance of an ECC, an environmentally critical project is required to
submit an Environmental Impact Statement (“EIS”) to the EMB while a project in an
environmentally critical area is generally required to submit an Initial Environmental
Examination (“IEE”) to the proper DENR regional office, without prejudice to the power of
the DENR to require a more detailed EIS.
The EIS refers to both the document and the environmental impact assessment of a project,
including a discussion of direct and indirect consequences to human welfare and ecology as
well as environmental integrity. The IEE refers to the document and the study describing
the environmental impact, including mitigation and enhancement measures, for projects in
environmentally critical areas.
While the terms and conditions of an EIS or an IEE may vary from project to project, at a
minimum, they contain all relevant information regarding the environmental effects of a
project. The entire process of organization, administration and assessment of the effects of
any project on the quality of the physical, biological and socio-economic environment as well
154
as the design of appropriate preventive, mitigating and enhancement measures is known as
the EIS system. The EIS system successfully culminates in the issuance of an ECC. The
ECC is a government certification that (i) the proposed project or undertaking will not cause
a significant negative environmental impact; (ii) that the proponent has complied with all
the requirements of the EIS system and; (iii) that the proponent is committed to implement
its approved environmental management plan in the EIS or, if an IEE was required, that it
will comply with the mitigation measures suggested therein. The ECC contains specific
measures and conditions that the project proponent must undertake before and during the
operation of a project, and in some cases, during the abandonment phase of the project to
mitigate identified environmental impact.
Project proponents that prepare an EIS are required to establish an Environmental
Guarantee Fund (“EGF”) when the ECC is issued to projects determined by the DENR to
pose significant public risks to life, health, property and the environment. The EGF is
intended to answer for damages caused by such projects as well as any rehabilitation and
restoration measures. Project proponents that prepare an EIS are mandated to include a
commitment to establish an Environmental Monitoring Fund (“EMF”) when an ECC is
eventually issued. The EMF shall be used to support activities of a multi-partite monitoring
team that will be organized to monitor compliance with the ECC and applicable laws, rules
and regulations.
In certain instances, the EMB may determine and issue a certification that a certain project
is not covered by the EIS System and an ECC is not required. Consequently, a Certificate of
Non-Coverage (“CNC”) may be issued in lieu of an ECC.
The Ecological Solid Waste Management Act of 2000
Republic Act No. 9003 provides for the proper management of solid waste which includes
discarded commercial waste and non-hazardous institutional and industrial waste. The said
law prohibits, among others, the transporting and dumping of collected solid wastes in areas
other than prescribed centers and facilities. The National Solid Waste Management
Commission, together with other government agencies and the different local government
units, are responsible for the implementation and enforcement of the said law.
The Code on Sanitation of the Philippines
Presidential Decree No. 856 provides for sanitary and structural requirements in connection
with the operation of certain establishments such as food establishments which include such
places where food or drinks are manufactured, processed, stored, sold or served. Under P.D.
856, which is implemented by the DOH, food establishments are required to secure sanitary
permits prior to operation which shall be renewable on a yearly basis.
DENR Rules on Disposition of Hazardous Waste
A DENR identification number is required to dispose of hazardous waste. In the absence of
an identification number, a fine ranging from P600.00 to P4,000.00 may be assessed. The
155
DENR identification number is a one-time permit unless there is a change in the hazardous
wastes produced.
Authority to Construct and Permit to Operate a Stationary Source of Air Pollution
All stationary sources of air pollution that have the potential to emit 100 tons per year or
more of any regulated pollutant, or when required under the ECC, must secure an authority
to construct and permit to operate from the EMB prior to commencement of construction or
operation.
The authority to construct is a one-time permit while the permit to operate must be renewed
yearly.
Laguna Lake Development Authority Clearance
R.A. No. 4850, as amended, created the Laguna Lake Development Authority (“LLDA”) in
order to promote and accelerate the balanced growth of the Laguna de Bay Region, with due
regard for environmental management and control, preservation and preservation of the
quality of human life and ecological systems, and the prevention of undue ecological
disturbances, deterioration and pollution.
The LLDA is an attached agency of the DENR mandated to manage and protect the
environmentally critical Laguna de Bay Region. It is empowered to pass upon and approve
or disapprove all plans, programs, and projects proposed by local government offices or
agencies within the region, public corporations, and private persons or enterprises where
such plans, programs, and projects are related to the development of the region.
The LLDA issues a clearance (an “LLDA Clearance”) upon submission of an application and
the supporting financial documents. An administrative fine is imposed on establishments
operating, developing, or constructing within the Laguna de Bay Region without the
necessary LLDA Clearance. Any proposed, ongoing, or completed expansion inconsistent
with a previously issued LLDA Clearance must be covered by a new LLDA Clearance.
Discharge Permit
LLDA Board Resolution No. 33, series of 1996 requires all development projects,
installations, and activities that discharge liquid waste or regulated effluents into and pose
a threat to the environment of the Laguna de Bay Region, to obtain a Discharge Permit from
the LLDA. The Discharge Permit authorizes the owner or operator to discharge wastewater,
provided the permit specifies the quantity and quality of effluent that the facility is allowed
to discharge into a particular body of water in compliance with schedule and monitoring
requirements.
The following activities, projects, or installations are exempt from securing the Discharge
Permit:
156
a. Single residential buildings and similar human occupancy structures that have twelve
cubic meters per day or less in total domestic sewage generation;
b. Dry industrial establishment that generates twelve cubic meters or less of total domestic
sewage per day or with maximum of 212 workers and with septic tanks; and
c. Industrial or commercial establishment interconnected to central wastewater or sewage
treatment plant or facility.
If the LLDA finds upon inspection that an activity, project, or installation is exempt from
securing a Discharge Permit, it issues a letter acknowledging the exemption with a proviso
that the exemption is without prejudice to subjecting the activity to regular monitoring.
The Company is reviewing the requirements for full compliance and is coordinating with the
relevant regulatory authorities therefor.
The Labor Code and Related Laws
The Philippine Labor Code and other statutory enactments provide the minimum benefits
that employers must grant to their employees, which include certain social security benefits,
such as benefits mandated by the Social Security Act of 1997 (R.A. No. 8282), the National
Health Insurance Act of 1995 (R.A. No. 7875), as amended, and the Home Development
Fund Law of 2009 (R.A. No. 9679).
Under the Social Security Act of 1997, social security coverage is compulsory for all
employees under 60 years of age. An employer is obligated to deduct and withhold from each
employee's monthly salary, wage, compensation or earnings, the employee's contribution,
and the employer, for its part, makes a counterpart contribution for the employee, and
remits both amounts to the Social Security System (“SSS”). This enables the employees to
claim their pension, death benefits, permanent disability benefits, funeral benefits, sickness
benefits and maternity-leave benefits. The Social Security Act of 1997imposes penal
sanctions if an employer fails to remit the contributions to the SSS. For corporate employers,
the penalty is imposed on its president and members of the board of directors.
The National Health Insurance Act, created the National Health Insurance Program
(“NHIP”) to provide health insurance coverage and ensure affordable and accessible health
care services to all Filipino citizens. Under the law, all members of the SSS are automatically
members of the NHIP. The Philippine Health Insurance Corporation (“PhilHealth”)
administers the NHIP, and an employer is required to deduct and withhold the contributions
from the employee’s salary, wage or earnings, make a counterpart contribution for the
employee, and remit both amounts to PhilHealth. The NHIP will then subsidize personal
health services required by the employee subject to certain terms and conditions under the
law. The National Health Insurance Act likewise imposes penal sanctions if an employer
does not remit the contributions to PhilHealth. For corporate employers, the penalty is
imposed on its president and members of the board of directors.
The Home Development Fund Law (R.A. No. 9679) or the Pag-IBIG Fund Law, created the
Home Development Mutual Fund ("HDMF"), a national savings program as well as a fund
to provide for affordable shelter financing to Filipino workers. Coverage under the HDMF is
157
compulsory for all SSS members and their employers. Under the law, an employer must
deduct and withhold 2% of the employee's monthly compensation, up to a maximum of
P5,000.00, and likewise make a counterpart contribution of 2% of the employee's monthly
compensation, and remit the contributions to the HDMF. The Pag-IBIG Fund Law also
imposes penal sanctions if the employer does not remit the contributions to the HDMF.
The Philippine Labor Code provides that, in the absence of a retirement plan provided by
their employers, private-sector employees who have reached 60 years of age or more, but not
beyond 65 years of age, the compulsory retirement age for private-sector employees without
a retirement plan, and who have rendered at least five years of service in an establishment,
may retire and receive a minimum retirement pay equivalent to one-half month's salary for
every year of service, with a fraction of at least six months being considered as one whole
year. For the purpose of computing the retirement pay, "one-half month's salary" shall
include all of the following: fifteen days salary based on the latest salary rate; in addition,
one-twelfth of the thirteenth month pay and the cash equivalent of five days of service
incentive leave pay. Other benefits may be included in the computation of the retirement
pay upon agreement of the employer and the employee or if provided in a collective
bargaining agreement.
The Company believes it is in compliance in all material respects with the various rules and
regulations governing workers’ compensation, workplace safety, labor standards, labor
relations and social security,
Intellectual Property Code
Under the Intellectual Property Code of the Philippines, the rights to a trademark are
acquired through the registration with the Bureau of Trademarks of the Intellectual
Property Office, which is the principal government agency involved in the registration of
brand names, trademarks, patents and other registrable intellectual property materials.
Upon registration, the Intellectual Property Office shall issue a certificate of registration to
the owner of the mark, which shall confer the right to prevent all third parties not having
the owner’s consent from using in the course of trade identical or similar signs or containers
for goods or services which are identical or similar to those in respect of which the mark is
registered. The said certificate of registration shall also serve as prima facie evidence of the
validity of registration and the registrant’s ownership of the mark.
A certificate of registration shall remain in force for an initial period of ten (10) years, and
may be renewed for periods of ten (10) years at its expiration.
158
Trademark
Country
Registration
/Application No.
Registration
/Application
Date
Class
Status
Max’s Restaurant & Logo
Phils.
48593
July 18, 1990
43
Registered
The Bakeshop-Max’s
Phils.
4-2008-002547
November 24,
2008
30, 43
Registered
Max’s Express
Phils.
4-2009001429
April 27, 2009
29, 43
Registered
Max’s Spring Chicken
Phils.
4-2009-001430
April 27, 2009
29, 43
Registered
Sarap to the Bones
Phils.
4-2009-001431
April 27, 2009
29, 43
Registered
Max’s Masarap
Phils.
4-2009-001432
April 27, 2009
29, 43
Registered
The House that Fried Chicken
Built
Phils.
4-2009-001370
July 9, 2009
29, 43
Registered
Maximo’s
Phils.
4-2009-001368
July 9, 2009
29, 43
Registered
Caramel Bar-Max’s
Phils.
4-2009-001372
September 17,
2009
30, 35
Registered
Max’s Corner Bakery
Phils.
4-2009-001369
September 17,
2009
30, 35
Registered
Max’s Fried Chicken
Phils.
4-2009-001373
November 26,
2009
29
Registered
Caramel Bar
Phils.
4-2009-007823
November 4,
2010
30, 35
Registered
Combonations
Phils.
4-2011-008979
November 10,
2011
43
Registered
Max’s Banana Sauce Label
Phils.
4-2011-000943
July 14, 2011
30
Registered
Max’s Banana Sauce
Phils.
4-2011-000946
May 19, 2011
30
Registered
Max’s Banana Ketchup Label
Phils.
4-2011-000944
July 14, 2011
30
Registered
Max’s Banana Ketchup
Phils.
4-2011-000945
May 19, 2011
30
Registered
Curbside
Phils.
4-2012-005015
August 2, 2012
43
Registered
4Sharing
Phils.
4-2012-005016
August 2, 2012
43
Registered
4SharingMeals
Phils.
4-201200005017
February 28,
2013
43
Registered
FourSharing
Phils.
4-201200005019
February 7,
2013
43
Registered
Max’s 4 Sharing Meals Logo
Phils.
4-201200005018
February 28,
2013
43
Registered
FourSharing Meals
Phils.
4-201200005020
February 28,
2013
43
Registered
159
Made with Love, Always
Phils.
4-201200013522
June 27, 2013
43
Registered
Max’s Express
Phils.
4-201300000053
August 1, 2013
43
Registered
Meranti
Phils.
4-201300010104
December 19,
2013
43
Room
Ventures
Corp.
4-201300010105
November 14,
2013
43
Room
Ventures
Corp.
Meranti Hotel
Pancake House
Orange
Philippines
4-2010-501543
Gurts Frozen Yogurt and
Device
Philippines
4-2010-000044
Pancake House
International & Device
Philippines
4-2009-500700
Pancake House
International & Device
Philippines
Pancake House
International & Device
June 30, 2011
43
Registered
30
Registered
June 11, 2010
43
Registered
4-2009-500701
June 11, 2010
43
Registered
Malaysia
07008978
May 12, 2007
43
Pending
Pancake House
International & Device
Malaysia
07008979
May 12, 2007
43
Pending
Pancake House
International & Device
Singapore
T07/11494D
May 24, 2007
43
Registered
Pancake House
International & Device
China
6089053
June 4, 2007
43
Pending
Pancake House
International & Device
China
6089054
June 4, 2007
43
Pending
Pancake House
International & Device
Thailand
Bor. 39144
August 9, 2007
43
Registered
Pancake House
International & Device
Thailand
Bor. 39145
August 9, 2007
43
Registered
Pan Chicken
Philippines
4-2001-001913
May 26, 2006
29
Registered
“We’re more than just
great pancakes”
Philippines
4-2003-004128
July 23, 2005
43
Registered
Pancake House Since
Philippines
4-2000-015012
August 28, 2004
42
Registered
June 11, 2010
160
1974 and Device
Pancake House and
Device
Philippines
4-1996-114538
August 28, 2004
42
Registered
STATE 88
Philippines
4-2013-004751
August 01, 2013
43
Registered
STATE 88 Wings Wedges More
Philippines
4-2013-501572
June 26, 2013
43
Pending
DE LUCA
Philippines
4-2013-004752
April 24, 2013
43
Pending
CroPops
Philippines
4-2013-503602
December 05,
2013
30
Pending
Pancake House International &
Device
India
2467367
January 28, 2013
43
Pending
Pancake House International &
Device
UAE
188355
March 13, 2013
43
Pending
Pancake House International &
Device
Brunei
TM No. 43,811
January 23, 2013
Pancake House International &
Device
Kuwait
137252
February 10
2013
43
Pending
Pugad Dencio’s Logo
Philippines
4-2008-009599
March 2, 2009
43
closed
Kabisera ng Dencio’s and
Logo
Philippines
4-2008-500187
November 3,
2008
43
Registered
Dencio’s Logo
Philippines
4-2004-001829
January 8, 2007
42
Registered
Teriyaki Boy & Design
USA
85353197
June 22, 2011
43
closed
Teriyaki Boy & Device
(Colour)
Philippines
4-2008-008223
April 13, 2009
43
Registered
Teriyaki Boy & Device
(Square)
Vietnam
128777
July 17, 2007
43
Registered
Teriyaki Boy & Device
(Rectangle)
Vietnam
128778
July 17, 2007
43
Registered
Japanese Characters
Philippines
4-2006-500020
May 28, 2007
43
Registered
Teriyaki Boy Tabemashou
Let’s Eat (Graphic Logo)
Philippines
4-2006-500018
March 26, 2007
43
Registered
Japanese Characters
(Fat Boy)
Philippines
4-2006-500016
February 26,
2007
43
Registered
Pending
Dencio’s
Teriyaki Boy
161
Teriyaki Boy Tabemashou
Let’s Eat (Text Logo)
Philippines
4-2006-500017
February 26,
2007
43
Registered
Teriyaki Boy Logo
Philippines
4-2006-500021
February 26,
2007
43
Registered
Teriyaki Boy Logo
Philippines
4-2006-500022
February 26,
2007
43
Registered
Teriyaki Boy and Device
with Chinese & Japanese
Characters
Philippines
4-2001-006508
November 10,
2005
43
Registered
Teriyaki Boy Logo
Philippines
4-2001-006509
November 10,
2005
43
Registered
Teriyaki Boy & Device
Philippines
4-2001-006510
November 10,
2005
43
Registered
Teriyaki Bouzu
USA
85672747
July 10, 2012
43
closed
The Sizzlin’ Pepper Steak &
Device
Philippines
4-2010-501069
July 23, 2010
43
closed
The Sizzlin’ Pepper Steak &
Japanese Character within
a Rectangular Device
Philippines
4-2008-000194
December 24,
2009
43
Registered
Cow’s Head Device
Philippines
4-2008-000195
February 9, 2009
43
Registered
Philippines
4-2008-012108
May 25, 2009
43,30,&
Registered
29
Le Coeur de France
Boulangerie Restaurant
Logo
Philippines
4-2008-012109
April 13, 2009
43,30,&
Registered
29
Le Coeur de France &
Device
Philippines
4-2008-002323
May 19, 2008
29 & 30 Registered
The Great New York Take Out
Philippines
4-2006-500347
July 21,2008
29
Registered
The Great New York Take
Out
Philippines
4-2006-500348
May 19, 2008
43
Registered
Singkit
Philippines
4-2006-500343
November 5,
2007
29
Registered
Sizzlin’ Pepper Steak
Le Coeur de France
Le Coeur de France
Boulangerie Restaurant
Logo
Singkit
162
Singkit
Philippines
4-2006-500344
November 5,
2007
43
closed
Singkit Device
Philippines
4-2006-500345
November 5,
2007
29
Registered
Singkit Device
Philippines
4-2006-500346
November 5,
2007
29
closed
Chinito
Philippines
4-2006-500349
November 5,
2007
29
closed
Chinito
Philippines
4-2006-500350
November 5,
2007
43
closed
Chinito Device
Philippines
4-2006-500351
November 5,
2007
29
closed
Chinito Device
Philippines
4-2006-500352
November 5,
2007
43
closed
Chinito Size
Philippines
4-2006-500353
November 5,
2007
29
closed
Chinito Size
Philippines
4-2006-500354
November 5,
2007
43
closed
Singkit& Device
Philippines
4-1991-077555
March 20, 2005
42
My Size
Philippines
4-2011-500031
6-Jun-11
29,30
Dear Darla Pizza
Philippines
2011-500031
13-Jan-11
30
Registered
Yellow Cab Pizza Co. & Device
Kuwait
87190
14-Jun-10
43
Registered
Yellow Cab Pizza Co. & Device
Qatar
37159
11-Aug-09
42
Registered
New York's Finest
Philippines
2007-500336
13-Apr-09
30
Registered
Yellow Cab Pizza Co. & Device
Thailand
SM37729
31-Mar-08
43
Registered
Tribeca Mushroom
Philippines
2007-500337
26-Apr-07
30
Registered
Corona Chicken Salsa
Philippines
2007-500338
26-Apr-07
30
Registered
Charlie Chan Chicken Pasta
Philippines
2007-500339
26-Apr-07
30
Registered
Yellow Cab Pizza Co. & Device
Malaysia
06-023499
21-Dec-06
43
Registered
Yellow Cab Pizza Co. & Device
Philippines
2001-007301
21-May-04
42
Registered
Yellow Cab Pizza Co. & Device
Singapore
T0526899E
29-Dec-05
43
Registered
Yellow Cab Pizza Co. & Device
Bahrain
45454
12-Sep-05
43
Registered
Yellow Cab Pizza Co. & Device
Hong Kong
300471294
8-May-05
43
Registered
Registered
Yellow Cab
Pending
163
Yellow Cab Pizza Co. & Device
USA
2990872
06-Sep-05
43
Registered
Yellow Cab Pizza Co. & Device
China
50314
14-July-2009
43
Registered
Yellow Cab Pizza Co. & Device
India
14562
30-May-2006
42
Registered
Yellow Cab Pizza Co. & Device
Indonesia
IDM000169155
15-July-2008
43
Registered
Yellow Cab Pizza Co. & Device
Canada
TMA809,934
24-Oct-2011
43
Registered
Yellow Cab Pizza Co. & Device
Saudi
Arabia
1386/29
20-Nov-2012
43
Registered
Yellow Cab Pizza Co. & Device
UAE
17837
23-Aug-2012
43
Pending
Yellow Cab Pizza Co & Device
Vietnam
4-2013-03389
23-Feb-2013
43
Pending
Yellow Cab Pizza Co & Device
Turkey
2013/13247
13-Feb-2013
43
Pending
Yellow Cab Pizza Co. & Device
Brunei
43,809
23-Jan-2013
42
Pending
Yellow Cab Pizza Co. & Device
Thailand
SM37729
31-Mar-2008
43
Registered
Maple & Device
Philippines
42012500719
October 25,
2012
43
Registered
Maple
Philippines
42012502438
September 18,
2012
43
Registered
Maple
Related Party Transactions
WERCO Holdings, Corp. is a lessor of the properties where the Max’s Restaurant outlet in
Sucat, Paranaque and the STI commissary operate. Rental and other lease terms are at
market rates and are negotiated and agreed upon by the parties at arm’s length.
Legal Proceedings
In 2009 certain members and officers of the Group became parties to a proceeding filed by K2
Asia Ventures, Ben C. Broocks, and James G. J. Crow ("Plaintiffs") before the courts of North
Carolina involving the Development Agreement between the Max's Group and the Krispy Kreme
Doughnut Corp. of North Carolina.
The Plaintiffs claim that the Max's Group wrongfully excluded them from the exclusive
Development Agreement for the Philippines and demand payment of damages, lost profits, and
lost opportunities. On August 20, 2014, the Company received advice that Plaintiffs' claim had
164
been dismissed by both the trial and appellate courts (by unanimous vote of the appellate judges)
on the ground that the courts of North Carolina have no personal jurisdiction over the defendants.
While there can be no assurance that the above dismissal will not be reconsidered and the cases
will be ultimately resolved in the Group's favor or in an expeditious manner, the Company
believes that none of the above cases, individually or collectively, would have any adverse
effect on the Company's financial performance to a material extent.
Tax Assessments
The Company and members of the Group are in receipt of certain assessments and Letters of
Authority ("LOA") from the Bureau of Internal Revenue ("BIR") and certain Local Government
Units ("LGU"), pursuant to which the BIR and/or LGU have sought to investigate certain tax
periods and/or asserted certain tax liabilities against the Company or a Group entity or have
sought to examine certain books, records, and accounts that relate to transactions in the ordinary
course of business. Pursuant to its policies of addressing such actions, the Company has engaged
tax advisors and counsel in relation to these matters.
The Company believes that its liability under such assessments will be reduced upon the
submission of requisite documents to the tax authorities in the course of resolving these
assessments. However, there can be no assurance that the Company or any member of the Group
will be successful in resolving any final assessments issued against it in an expeditious and
favorable manner. In any event, the Company believes that these assessments, individually or
collectively, should not adversely affect the Company's financial performance to a material
extent.
Apart from the foregoing, there are no other legal proceedings involving the Company or any
Subsidiaries that the Company considers material to its business, finances or prospects.
Independent Auditors and Counsel
Legal Matters
All legal opinion/matters in connection with the issuance of the Offer Shares which are
subject of this Offer shall be passed upon by Romulo Mabanta Sayoc & Delos Angeles
(“Romulo”) for the Issue Manager, the Lead Underwriter and the Underwriters, and Picazo
Buyco Tan Fider & Santos (“Picazo”) for the Company. Romulo and Picazo do not have any
direct or indirect interest in the Company. Romulo may, from time to time be engaged by
the Company to advise in its transactions and perform legal services on the same basis that
Romulo provides such services to its other clients.
Independent Auditors
The financial statements of the Company as at and for the years ended December 31, 2013,
2012 and 2011 appearing in this Prospectus have been audited by SyCip Gorres Velayo &
165
Co., independent auditors, as set forth in their report thereon appearing elsewhere herein.
The pro-forma combined financial statements of the Company as at and for the six-month
period ended June 30, 2014 and as at and for the year ended December 31, 2013 appearing
in this Prospectus have been reviewed by Reyes Tacandong & Co, independent auditors, as
set forth in their report appearing elsewhere herein.
The aggregate fees billed by the independent auditors is shown below (with comparative
figures for 2013):
SyCip Gorres Velayo & Co.
Reyes Tacandong & Co.
(for the review of the proforma combined financial
statements)
2011
2012
2013
2.6Mn
2.7Mn
2.6Mn
-
-
-
2014
4.0Mn
Change in Independent Auditors
As a result of the change in control of the Company pursuant to the acquisition by certain
of the Max’s Entities of approximately 89.95% of the Company in a tender offer of shares
that was completed in February 24, 2014, the stockholders of the Company elected Reyes
Tacandong & Co. as the Company’s independent auditor at the annual stockholders meeting
held on June 10, 2014.
There has been no disagreement with SyCip Gorres Velayo & Co., former independent
auditor of the Company on any matter of accounting principles.
Taxation
The following is a general description of certain Philippine tax aspects of the investment
in the Shares. This discussion is based upon laws, regulations, rulings, income tax
treaties, administrative practices, and judicial decisions in effect at the date of this
Prospectus and is subject to any changes occurring after such date. Subsequent
legislative, judicial, or administrative changes or interpretations may be retroactive and
could affect the tax consequences to the prospective investor.
The tax treatment of a prospective investor may vary depending on such investor’s
particular situation and certain investors may be subject to special rules not discussed
below. This summary does not purport to be a comprehensive description of all the tax
considerations that may be relevant to a decision to invest in the Shares and does not
purport to deal with the tax consequences applicable to all categories of investors, some
of which (such as dealers in securities) may be subject to special taxes.
166
This discussion does not provide information regarding the tax aspects of acquiring,
owning, holding, or disposing of the Shares under applicable tax laws of other applicable
jurisdictions and the specific Philippine tax consequence in light of particular situations
of acquiring, owning, holding, and disposing of the Shares in such other jurisdictions.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF
LOCAL AND NATIONAL TAX LAWS.
As used in this section, the term “resident alien” refers to an individual whose residence is
within the Philippines and who is not a citizen of the Philippines; a “non-resident alien” is
an individual whose residence is not within the Philippines and who is not a citizen of the
Philippines. A non-resident alien who is actually within the Philippines for an aggregate
period of more than 180 days during any calendar year is considered a “non-resident alien
doing business in the Philippines.” A non-resident alien who is actually within the
Philippines for an aggregate period of 180 days or less during any calendar year is
considered a “non-resident alien not doing business in the Philippines.” A “resident foreign
corporation” is a non-Philippine corporation engaged in trade or business within the
Philippines; and a “non-resident foreign corporation” is a non-Philippine corporation not
engaged in trade or business within the Philippines. The term “dividends” under this section
refers to cash or property dividends. “Tax Code” means the Philippine National Internal
Revenue of 1997, as amended.
Taxes on Dividends on the Shares
Individual Philippine citizens and resident aliens are subject to a final tax on dividends
derived from the common shares at the rate of 10%, which tax shall be withheld by the
Company.
Non-resident alien individuals engaged in trade or business in the Philippines are subject
to a final withholding tax on dividends derived from the common shares at the rate of 20%
on the gross amount thereof, subject to applicable preferential tax rates under tax treaties
in force between the Philippines and the country of domicile or residence of such nonresident alien individual. A non-resident alien individual not engaged in trade or business
in the Philippines is subject to a final withholding tax on dividends derived from the
common shares at the rate of 25% of the gross amount, subject to applicable
preferential tax rates under tax treaties in force between the Philippines and the country of
domicile or residence of such non-resident alien individual.
The term “non-resident holder” means a holder of the common shares:
•
who is an individual who is neither a citizen nor a resident of the Philippines or an
entity which is a foreign corporation not engaged in trade or business in the
Philippines; and
•
should a tax treaty be applicable, whose ownership of the common shares is not
effectively connected with a fixed base or a permanent establishment in the
167
Philippines.
Dividends derived by domestic corporations (i.e. corporations created or organized in the
Philippines or under its laws) and resident foreign corporations from the common shares
shall not be subject to tax.
Dividends received from a domestic corporation by a non-resident foreign corporation are
generally subject to final withholding tax at the rate of 30%, subject to applicable
preferential tax rates under tax treaties in force between the Philippines and the country of
domicile of such non-resident foreign corporation. The 30% rate for dividends paid to nonresident foreign corporations with countries of domicile having no tax treaty with the
Philippines may be reduced to a special 15% rate if:
•
the country in which the non-resident foreign corporation is domiciled imposes no
taxes on foreign sourced dividends; or
•
the country in which the non-resident foreign corporation is domiciled allows a credit
against the tax due from the non-resident foreign corporation for taxes deemed to
have been paid in the Philippines equivalent to 15%.
The BIR has prescribed, through an administrative issuance, procedures for the availment
of tax treaty relief. The application for tax treaty relief has to be filed with the BIR by the
non-resident holder of the common shares (or its duly authorized representative) prior to
the first taxable event, or prior to the first and only time the income tax payor is required to
withhold the tax thereon or should have withheld taxes thereon had the transaction been
subject to tax. The “first taxable event” has been construed by the BIR as “payment of the
dividend.” Failure to file the application for tax treaty relief with the BIR prior to the first
taxable event may disqualify the said application. A corporation may withhold taxes at a
reduced rate on dividends paid to a non-resident holder of the common shares if such nonresident holder submits to the domestic corporation proof of the filing of the tax treaty relief
application with the BIR prior to the payment of dividends. However, on August 9,
2013, the Philippine Supreme Court in Deutsche Bank AG Manila Branch v. CIR, G.R. No.
188550, ruled that the period of application for the availment of tax treaty relief should not
operate to divest entitlement to the relief as it would constitute a violation of the duty
required by good faith in complying with a tax treaty. At most, the application for a tax
treaty relief to be filed with the BIR should merely operate to confirm the entitlement of the
taxpayer to such relief.
The requirements for a tax treaty relief application in respect of dividends are set out in the
applicable tax treaty and BIR Form No. 0901-D. These include proof of tax residence in the
country that is a party to the tax treaty. Proof of residence consists of a consularized
certification from the tax authority of the country of residence of the non-resident holder
of Common Shares which states that the non-resident holder is a tax resident of such
country under the applicable tax treaty. If the non-resident holder of common shares is a
juridical entity, authenticated certified true copies of its articles of incorporation or
association issued by the proper government authority should also be submitted to the BIR
in addition to the certification of its residence from the tax authority of its country of
residence.
168
If tax at the regular rate is withheld by the Company instead of the reduced rates applicable
under a treaty, the non-resident holder of the common shares may file a claim for refund
from the BIR. However, because the refund process in the Philippines requires the filing of
an administrative claim and the submission of supporting information, and may also involve
the filing of a judicial appeal, it may be impractical to pursue obtaining such a refund.
Moreover, in view of the requirement of the BIR that an application for tax treaty relief be
filed prior to the first taxable event as previously stated, the non-resident holder of common
shares may not be able to successfully pursue a claim for refund if such an application is not
filed before such deadline.
Stock dividends distributed pro rata to any holder of shares are not subject to Philippine
income tax. However, the sale, exchange or disposition of shares received as share dividends
by the holder is subject to either capital gains tax and documentary stamp tax or stock
transaction tax.
Tax Treaties
The following table lists some of the countries with which the Philippines has tax treaties
and the tax rates currently applicable to non-resident holders who are residents of those
countries:
Country
Canada
France
Germany
Japan
Singapore
United Kingdom
United States
Dividends
2511
1512
1513
1514
2515
2516
2517
Capital Gains Tax Due on Disposition of Common
Shares Outside the PSE
Exempt8
Exempt8
5/109
Exempt8
Exempt8
Exempt10
Exempt8
In order for an exemption under a tax treaty to be recognized, an application for tax treaty
relief on capital gains tax on the sale of shares must be filed by the income recipient before
15% if the recipient company controls at least 10% of the voting power of the company paying the dividends.
10% if the recipient company (excluding a partnership) holds directly at least 10% of the voting shares of the company paying
the dividends.
13 10% if the recipient company (excluding a partnership) owns directly at least 25% of the capital of the company paying the
dividends.
14 10% if the recipient company holds directly at least 10% of either the voting shares of the company paying the dividends or
of the total shares issued by that company during the period of six months immediately preceding the date of payment of the
dividends.
15 15% if during the part of the paying company’s taxable year which precedes the date of payment of dividends and during the
whole of its prior taxable year at least 15% of the outstanding shares of the voting shares of the paying company were owned
by the recipient company.
16 15% if the recipient company is a company which controls directly or indirectly at least 10% of the voting power of the
company paying the dividends.
17 20% if during the part of the paying corporation’s taxable year which precedes the date of payment of dividends and during
the whole of its prior taxable year, at least 10% of the outstanding shares of the voting shares of the paying corporation were
owned by the recipient corporation. Notwithstanding the rates provided under the Republic of the Philippines-United States
Treaty, residents of the United States may avail of the 15% withholding tax rate under the tax-sparing clause of the Tax Code
provided certain conditions are met.
11
12
169
the deadline for the filing of the documentary stamp tax return, which is the fifth day from
the end of the month when the document transferring ownership was executed.
The requirements for a tax treaty relief application in respect of capital gains tax on the sale
of shares are set out in the applicable tax treaty and BIR Form No. 0901-C. These include
proof of residence in the country that is a party to the tax treaty. Proof of residence
consists of a consularized certification from the tax authority of the country of residence of
the seller of shares which provides that the seller is a resident of such country under the
applicable tax treaty. If the seller is a juridical entity, authenticated certified true copies of
its articles of incorporation or association issued by the proper government authority should
also be submitted to the BIR in addition to the certification of its residence from the tax
authority of its country of residence.
Sale, Exchange or Disposition of Shares
Capital gains tax, if sale was made outside the PSE
Net capital gains realized by a resident or non-resident other than a dealer in securities
during each taxable year from the sale, exchange or disposition of shares outside the
facilities of the PSE, unless an applicable treaty exempts such gains from tax or provides for
preferential rates, are subject to tax as follows: 5.0% on gains not exceeding P100,000 and
10.0% on gains over P100,000. An application for tax treaty relief must be filed (and
approved) by the Philippine tax authorities to obtain an exemption under a tax treaty.
The transfer of shares shall not be recorded in the books of the Company unless the BIR
certifies that the capital gains and documentary stamp taxes relating to the sale or transfer
have been paid or, where applicable, tax treaty relief has been confirmed by the
International Tax Affairs Division of the BIR in respect of the capital gains tax or other
conditions have been met.
Taxes on transfer of shares listed and traded at the PSE
A sale or other disposition of shares through the facilities of the PSE by a resident or a nonresident holder, other than a dealer in securities, is subject to a stock transaction tax at the
rate of 0.5% of the gross selling price or gross value in money of the shares sold or otherwise
disposed, unless an applicable treaty exempts such sale from said tax. This tax is required
to be collected by and paid to the Government by the selling stockbroker on behalf of his
client. The stock transaction tax is classified as a percentage tax in lieu of a capital gains
tax. Under certain tax treaties, the exemptions from capital gains tax discussed herein may
not be applicable to stock transaction tax. In addition, value added tax of 12.0% is imposed
8 Capital gains are taxable only in the country where the seller is a resident, provided the shares are not those of a corporation,
the assets of which consist principally of real property situated in the Philippines, in which case the sale is subject to Philippine
taxes.
9 Under the tax treaty between the Philippines and Germany, capital gains from the alienation of shares of a Philippine
corporation may be taxed in the Philippines irrespective of the nature of the assets of the Philippine corporation. Tax rates are
5% on the net capital gains realized during the taxable year not in excess of =P100,000 and 10% on the net capital gains
realized during the taxable year in excess of =P100,000.
10 Under the tax treaty between the Philippines and the United Kingdom, capital gains on the sale of the shares of
Philippine corporations are subject to tax only in the country where the seller is a resident, irrespective of the nature of the
assets of the Philippine corporation.
170
on the commission earned by the PSE-registered broker, and is generally passed on to the
client.
On November 7, 2012, the BIR issued Revenue Regulations No. 16-2012 which provides that
the sale, barter, transfer, and/or assignment of shares of listed companies that fail to meet
the MPO requirement after December 31, 2012 will be subject to capital gains tax and
documentary stamp tax. It also requires publicly listed companies to submit public
ownership reports to the BIR within 15 days after the end of each quarter.
On December 31, 2012, the PSE started to impose a trading suspension for a period of not
more than six months, on shares of a listed company who has not complied with the Rule on
MPO which requires listed companies to maintain a minimum percentage of listed
securities held by the public at ten percent of the listed companies’ issued and outstanding
shares at all times. Companies, which do not comply with the MPO after the lapse of the
trading suspension, shall be automatically delisted.
The sale of such listed company’s shares during the trading suspension may be effected only
outside the trading system of the PSE and shall be subject to capital gains tax and
documentary stamp tax. Furthermore, if the fair market value of the shares of stock sold is
greater than the consideration or the selling price, the amount by which the fair market
value of the shares exceeds the selling price shall be deemed a gift that is subject to donor’s
tax under Section 100 of the Tax Code.
Documentary Stamp Taxes on Shares
The original issue of shares is subject to documentary stamp tax of P1.00 on each P200 par
value, or fraction thereof, of the shares issued. On the other hand, the transfer of shares is
subject to a documentary stamp tax at a rate of P0.75 on each P200, or fractional part
thereof, of the par value of the common shares. The documentary stamp tax is imposed on
the person making, signing, issuing, accepting or transferring the document and is thus
payable either by the vendor or the purchaser of the common shares. However, the sale,
barter or exchange of common shares listed and traded through the PSE are exempt from
documentary stamp tax.
Estate and Gift Taxes
The transfer of the common shares upon the death of a registered holder to his heirs by way
of succession, whether such an individual was a citizen of the Philippines or an alien,
regardless of residence, will be subject to Philippine estate tax at progressive rates ranging
from 5% to 20% if the net estate is over P200,000.
The transfer of shares by gift or donation to a stranger (i.e. a person who is not a brother,
sister, spouse, ancestor, lineal descendant or relative by consanguinity within the fourth
degree of relationship) will be subject to a donor ’s tax at a flat rate of 30.0%. Gifts
or donations to non-strangers, however, will be subject to progressive rates ranging from
2.0% to 15.0%, if the net gifts during the calendar year exceed P100,000.00; otherwise, such
transfer will not be subject to donor ’s tax. Corporate registered holders are also liable for
Philippine donor ’s tax on such transfers, but the rate of tax with respect to net gifts made
by corporate registered holders is always at a flat rate of 30.0%.
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Estate and gift taxes will not be collected in respect of intangible personal property, such as
shares, (1) if the deceased at the time of death, or the donor at the time of donation, was a
citizen and resident of a foreign country which at the time of his death or donation did not
impose a transfer tax of any character in respect of intangible personal property of citizens
of the Philippines not residing in that foreign country, or (2) if the laws of the foreign country
of which the deceased or the donor was a citizen and resident at the time of his death or
donation allow a similar exemption from transfer or death taxes of every character or
description in respect of intangible personal property owned by citizens of the Philippines
not residing in that foreign country.
Corporate Income Tax
As a general rule, a domestic corporation is subject to corporate income tax of 30.0% on its
taxable income (refers to the pertinent items of gross income specified in the National
Internal Revenue Code of 1997, as amended (the “Tax Code”) less the deductions and/or
personal and additional exemptions, if any, authorized for such types of income by the Tax
Code or other special laws) from all sources within or without the Philippines. The exception,
among others, would be (i) gross interest income from Philippine currency bank deposits and
yields from deposit substitutes, trust funds and similar arrangements, and royalties, which
are subject to a final withholding tax rate of 20.0% of the gross amount of such income; (ii)
interest income from a depository bank under the expanded foreign currency deposit system
which is subject to a final 7.5% tax on the gross amount of such income.
Further, in computing the corporate income tax, effective July 6, 2008, companies are given
a choice to claim itemized deductions or the optional standard deduction (“OSD”), with the
former being presumed unless specific election of OSD is signified in the tax return.
The OSD election is irrevocable for the taxable year for which the tax return is made. The
OSD is equivalent to an amount not exceeding 40.0% of the company’s gross income. For
this purpose, “Gross Income” means all income derived from whatever source, including, but
not limited to, compensation for service, gross income derived from the conduct of trade or
business or exercise of profession, gains derived from dealings in property, interests, rent,
royalties, dividends, annuities, prizes and winnings.
A minimum corporate income tax (“MCIT”) of 2.0% of gross income would likewise be
applicable to the Issuer, beginning on the fourth taxable year from commencement of
business operations, whenever the MCIT is greater that the ordinary corporate income tax.
For this purpose, “Gross Income” means gross sales less sales returns, discounts and
allowances and cost of goods sold. Passive income, such as interest on bank deposits and
royalties subject to final withholding tax, shall not form part of gross income for purposes of
MCIT.
Nevertheless, any excess of the MCIT over the ordinary corporate income tax may be carried
forward and credited against the latter for the three immediately succeeding taxable years.
Further, subject to certain conditions, the MCIT may be suspended with respect to a
corporation which suffers losses on account of a prolonged labor dispute, or because of force
majeure, or because of legitimate business reverses.
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173
Philippine Foreign Investments, Exchange Controls, and Foreign Ownership
The Retail Trade Liberalization Act
Republic Act No. 1180, or the Retail Trade Nationalization Law, prohibits any person who
is not a citizen of the Philippines, and associations, partnerships or corporations not wholly
owned by citizens of the Philippines, from engaging directly or indirectly in the retail trade
business. Under this law, a corporation needs to be 100% owned by citizens of the Philippines
in order to engage in retail business in the Philippines.
Republic Act No. 1180 was subsequently superseded by Republic Act No. 8762, or the Retail
Trade Liberalization Act, which defined retail trade as any act, occupation or calling of
habitually selling directly to the general public any merchandise, commodity or good for
consumption.
Under the Retail Trade Liberalization Act, foreign-owned partnerships, associations or
corporations formed and organized under the laws of the Philippines may, upon registration
with the Philippine SEC and the DTI (“DTI”), or in the case of foreign-owned single
proprietorships, with the DTI, engage or invest in the retail trade business, under the
following categories:
Category A
Enterprises with paid-up capital that is less than the equivalent of
US$2,500,000 in Pesos shall be reserved exclusively for Filipino citizens
and corporations wholly-owned by Filipino citizens.
Category B
Enterprises with a minimum paid-up capital that is equivalent to
US$2,500,000 in Pesos, but is less than US$7,500,000, may be whollyowned by foreigners except for the first two years after the effectively of
the Retail Trade Liberalization Act (wherein foreign participation was
limited to not more than 60% of total equity).
Category C
Enterprises with a paid-up capital that is equivalent to or more than
US$7,500,000 in Pesos may be wholly owned by foreigners, provided that
in no case shall the investments for establishing a store in Categories B
and C be less than the equivalent of US$830,000 in Pesos.
Category D
Enterprises specializing in high-end or luxury products with a paid-up
capital that is equivalent to US$250,000 in Pesos per store may be
wholly owned by foreigners.
Any foreign investor may be allowed to invest in existing retail stores. However, the
investment must comply with the paid-up capitalization requirements enumerated above.
Furthermore, foreign investors whom are also retailers and invest in existing retail stores
are required to be pre-qualified with the Board of Investments before they can buy shares.
No foreign retailer is allowed to engage in retail trade in the Philippines unless all the
following qualifications are met:
174
(1)
A minimum of US$200 million net worth in its parent corporation for
Categories B and C, and US$50 million net worth in its parent corporation for
Category D;
(2)
Five retail branches or franchises in operation anywhere around the world
unless such retailers has at least one store capitalized at a minimum of US$25
million;
(3)
Five-year track record in retailing; and
(4)
Only nationals from, or judicial entities formed or incorporated in, countries
which allow the entry of Filipino retailers shall be allowed to engage in retail
trade in the Philippines.
The implementing rules of Republic Act No. 8762 define a foreign retailer as an individual
who is not a Filipino citizen, or a corporation, partnership, association, or entity that is not
wholly-owned by Filipinos, engaged in retail trade. The DTI is authorized to pre-qualify all
foreign retailers before they are allowed to conduct business in the Philippines.
Foreign Investments Act of 1991
Republic Act No. 7042, or the Foreign Investments Act of 1991 (“FIA”) liberalized the entry
of foreign investment into the Philippines. Under the FIA, in domestic market enterprises,
foreigners may own as much as 100% equity except in areas specified in the Foreign
Investment Negative List. The Foreign Investment Negative List enumerates industries
and activities which have foreign ownership limitations under the FIA and other existing
laws.
For the purpose of complying with nationality laws, the term “Philippine National” is
defined under the FIA as any of the following:
(1)
A citizen of the Philippines;
(2)
A domestic partnership or association wholly-owned by citizens of the
Philippines;
(3)
A corporation organized under the laws of the Philippines of which at least
60% of the capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines;
(4)
A corporation organized abroad and registered as doing business in the
Philippines under the Corporation Code, of which 100% of the capital stock
outstanding and entitled to vote is wholly owned by Filipinos; or
(5)
A trustee of funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine National and at least 60% of the
fund will accrue to the benefit of Philippine Nationals.
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For as long as the percentage of Filipino ownership of the capital stock of the corporation is
at least 60% of the total shares outstanding and voting, the corporation shall be considered
as a 100% Filipino-owned corporation.
A corporation with more than 40% foreign equity may be allowed to lease land for a period
of 25 years, renewable for another 25 years. In connection with the ownership of private
land, however, the Philippine Constitution states that no private land shall be transferred
or conveyed except to citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines at least 60% of whose capital is owned by such citizens.
BSP Regulations
Under current BSP regulations, an investment in listed Philippine securities must be
registered with the BSP if the foreign exchange needed to service capital repatriation and
dividend or interest remittance will be purchased from the Philippine banking system. The
application for registration may be made directly with the BSP or through an investor’s
designated custodian bank. A custodian bank may be a commercial bank or an offshore
banking unit registered with the BSP to act as such and appointed by the investor to register
the investment, hold shares for the investor and represent the investor in all necessary
actions in connection with such investor’s investments in the Philippines. Under relevant
BSP regulations, applications for registration must be accompanied by: (i) purchase invoice,
subscription agreement and proof of listing on the PSE (either or both); (ii) credit advice or
bank certificate showing the amount of foreign currency remitted and its conversion to
Pesos; and (iii) transfer instructions from the stock broker or dealer, as the case may be.
Upon registration of the investment, proceeds of divestments or dividends of registered
investments are repatriable or remittable immediately and in full through the Philippine
banking system, net of applicable tax, without need of BSP approval. Capital repatriation of
investments in listed securities is permitted upon presentation of the BSP registration
document and the broker’s sales invoice, at the exchange rate prevailing at the time of
purchase of the foreign exchange from the banking system. Remittance of dividends is
permitted upon presentation of: (i) the BSP registration document; (ii) the cash dividends
notice from the PSE and the Philippine Central Depository printout of cash dividend
payment or computation of interest earned; (iii) copy of secretary’s sworn statement on the
board resolution covering the dividend declaration; and (iv) detailed computation of the
amount applied for in the format prescribed by the BSP. Pending reinvestment or
repatriation, divestment proceeds, as well as dividends of registered investments, may be
lodged temporarily in interest-bearing deposit accounts. Interest earned thereon, net of
taxes, may also be remitted in full. Remittance of divestment proceeds or dividends of
registered investments may be reinvested in the Philippines if the investments are
registered with the BSP or the investor’s custodian bank.
The foregoing is subject to the power of the BSP, through the Monetary Board, with the
approval of the President of the Philippines, to suspend temporarily or restrict the
availability of foreign exchange, require licensing of foreign exchange transactions or require
delivery of foreign exchange to the BSP or its designee during an exchange crisis, when an
exchange crisis is imminent, or in times of national emergency. The registration with the
BSP of all foreign investments in any Shares received in exchange for Offer Shares shall be
the responsibility of the foreign investor.
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The Philippine Stock Market
The information presented in this section has been extracted from publicly available
document which have not been prepared or independently verified by the Company, the
Underwriters or any of their respective subsidiaries, affiliates or advisors in connection with
re-issuance of the Offer Shares.
Brief History
The Philippines initially had two stock exchanges, the Manila Stock Exchange, which was
organized in 1927, and the Makati Stock Exchange, which began operations in 1963. Each
exchange was self- regulating, governed by its respective Board of Governors elected annually
by its members.
Several steps initiated by the Government have resulted in the unification of the two bourses
into the PSE. The PSE was incorporated in 1992 by officers of both the Makati and the Manila
Stock Exchanges. In March 1994, the licenses of the two exchanges were revoked. While the
PSE maintains two trading floors, one in Makati City and the other in Pasig City, these floors
are linked by an automated trading system, which integrates all bids, and ask quotations
from the bourses.
In June 1998, the Philippine SEC granted the “Self-Regulatory Organization” status to the
PSE, allowing it to impose rules as well as implement penalties on erring trading participants
and listed companies. On August 8, 2001, the PSE completed its demutualization, converting
from a non-stock member- governed institution into a stock corporation in compliance with
the requirements of the Philippine Securities Regulation Code. The PSE has an authorized
capital stock of 97.8 million shares, of which, of which 30.7 million shares are subscribed and
fully paid up. Each of the 184 member-brokers was granted 50,000 common shares of the new
PSE at a par value of P1.00 per share. In addition, a trading right evidenced by a “Trading
Participant Certificate” was immediately conferred on each member broker allowing the use
of the PSE’s trading facilities. As a result of the demutualization, the composition of the PSE
Board of Governors was changed, requiring the inclusion of seven brokers and eight nonbrokers, one of whom is the President.
On December 15, 2003, the PSE listed its shares by way of introduction at its own bourse as
part of a series of reforms aimed at strengthening the Philippine securities industry.
Classified into financial, industrial, holding firms, property, services, and mining and oil
sectors, companies are listed either on the PSE‘s Main Board or the Small, Medium and
Emerging Board. Previously, the PSE allowed listing on the First Board, Second Board or the
Small, Medium and Enterprises Board. As a result of the issuance by the PSE of
Memorandum No. CN-No. 2013-0023 dated June 6, 2013, revisions to the PSE Listing Rules
were made. Among such changes are the removal of the Second Board listing and the
requirement that lock-up rules be embodied in the articles of the incorporation of the issuer.
Each index represents the numerical average of the prices of component shares. The PSE has
an index, referred to as the PHISIX, which as at the date thereof reflects the price movements
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of selected shares listed on the PSE, based on traded prices of shares from the various sectors.
The PSE shifted from full market capitalization to free float market capitalization effective
April 3, 2006, simultaneous with the migration to the free float index and the renaming of
the PHISIX to PSEi. The PSEi is composed of shares of 30 selected companies listed on the
PSE.
With the increasing calls for good corporate governance, the PSE has adopted an online daily
disclosure system to improve the transparency of listed companies and to protect the
investing public.
The table below sets out movements in the composite index as at the last business day of each
calendar year from 1995 to 2013, and the most recent month end in 2014, and shows the
number of listed companies, market capitalization, and value of shares traded for the same
period:
1995
2,594.2
Aggregate Market
Combined Value
Capitalization
of Turnover
(in Pbillions)
(in Pbillions)
205
1,545.7
379.0
1996
3,170.6
216
2,121.1
668.8
1997
1,869.2
221
1,251.3
586.2
1998
1,968.8
222
1,373.7
408.7
1999
2,142.9
225
1,936.5
781.0
2000
1,494.5
229
2,576.5
357.7
2001
1,168.1
231
2,141.4
159.6
2002
1,018.4
234
2,083.2
159.7
2003
1,442.4
236
2,973.8
145.4
2004
1,822.8
235
4,766.3
206.6
2005
2,096.0
237
5,948.4
383.5
2006
2,982.5
239
7,173.2,
572.6
2007
3,621.6
244
7,977.6
1,338.3
2008
1,872.9
246
4,069.2
763.9
2009
3,052.7
248
6,029.1
994.2
2010
4,201.1
253
8,866.1
1,207.4
2011
4,372.0
253
8,697.0
1,422.6
2012
5,812.7
268
10,850.0
1,420.0
2013
5,889.8
257
11,931.3
2,456.2
Year
Composite Index Number of Listed
at Closing Companies
Source: PSE
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Trading
The PSE is a double auction market. Buyers and sellers are each represented by
stockbrokers. To trade, bid or ask prices are posted on the PSE’s electronic trading system.
A buy (or sell) order that matches the lowest asked (or highest bid) price is automatically
executed. Buy and sell orders received by one broker at the same price are crossed at the
PSE at the indicated price. Transactions are generally invoiced through a confirmation slip
sent to customers on the trade date (or the following trading day). Payment of purchases of
listed securities must be made by the buyer on or before the third trading day (the
settlement date) after the trade.
Wholesale trading on the PSE starts at 9:30 a.m. and ends at 3:30 p.m., with trading recess
from 12:00 nn to 1:30 p.m. There is also a provision for ten-minute extensions during which
transactions may be conducted, provided that they are executed at the last traded price and
are only for the purpose of completing unfinished orders. The PSE may effect changes to
the hours and schedule of a trading day, as the circumstance warrants. Trading days are
Monday to Friday, except legal and special holidays, days when the BSP is closed for
various reasons, and such other days as may otherwise be declared by the SEC or the PSE,
through its President or other duly authorized representative, to be a non-trading day.
Minimum trading lots range from five (5) to 1,000,000 shares depending on the price range
and nature of the security traded. Odd-sized lots are traded by brokers on a board
specifically designed for odd lot trading.
To maintain stability in the stock market, daily price swings are monitored and regulated.
Under current PSE regulations, when the price of a listed security moves up by 50.00% or
down by 50.00% in one day (based on the previous closing price or last posted bid price,
whichever is higher), the price of that security is automatically frozen by the PSE, unless
there is an official statement from the company or a government agency justifying such
price fluctuation, in which case the affected security can still be traded but only at the
frozen price. If the issuer fails to submit such explanation, a trading halt is imposed by the
PSE on the listed security the following day. Resumption of trading shall be allowed only
when the disclosure of the company is disseminated, subject again to the trading ban.
Non-Resident Transactions
When the purchase/sale of Philippine shares of stock involves a non-resident, whether the
transaction is effected in the domestic or foreign market, it shall be the responsibility of the
securities dealer/broker to register the transaction with the BSP. The local securities
dealer/broker shall file with the BSP, within three business days from the transaction date,
an application in the prescribed registration form. After compliance with other required
undertakings, the BSP shall issue a Certificate of Registration. Under BSP rules, all
registered foreign investments in Philippine securities including profits and dividends, net
of taxes and charges, may be repatriated.
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Scripless Trading
In 1995, the PDTC (formerly the Philippine Central Depository, Inc.), was organized to
establish a central depository in the Philippines and introduce scripless or book-entry
trading in the Philippines. On December 16, 1996, the PDTC was granted a provisional
license by the Philippine SEC to act as a central securities depository.
All listed securities at the PSE have been converted into book-entry settlement in the
PDTC. The depository service of the PDTC provides the infrastructure for lodgment
(deposit) and upliftment (withdrawal) of securities, pledge of securities, securities
lending and borrowing and corporate actions including shareholders’ meetings, dividend
declarations and rights offerings. The PDTC also provides depository and settlement
services for non-PSE trades of listed equity securities. For transactions on the PSE, the
security element of the trade will be settled through the book-entry system, while the cash
element will be settled through the current settlement banks.
In order to benefit from the book-entry system, securities must be immobilized into the
PDTC system through a process called lodgment. Lodgment is the process by which
shareholders transfer legal title (but not beneficial title) over their shares of stock in favor
of the PCD Nominee Corporation (“PCD Nominee”), a corporation wholly-owned by the
PDTC, whose sole purpose is to act as nominee and legal title holder of all shares of stock
lodged in the PDTC. “Immobilization” is the process by which the warrant or share
certificates of lodging holders are canceled by the transfer agent and the corresponding
transfer of beneficial ownership of the immobilized shares in the account of the PCD
Nominee through the PDTC participant will be recorded in the issuing corporation’s
registry. This trust arrangement between the participants and PDTC through the PCD
Nominee is established by and explained in the PDTC Rules and Operating Procedures
approved by the Philippine SEC. No consideration is paid for the transfer of legal title to
the PCD Nominee. Once lodged, transfers of beneficial title of the securities are
accomplished via book-entry settlement.
Under the current PDTC system, only participants (e.g. brokers and custodians) will be
recognized by the PDTC as the beneficial owners of the lodged equity securities. Thus, each
beneficial owner of shares, through his participant, will be the beneficial owner to the
extent of the number of shares held by such participant in the records of the PCD Nominee.
All lodgments, trades and uplifts on these shares will have to be coursed through a
participant. Ownership and transfers of beneficial interests in the shares will be reflected,
with respect to the participant’s aggregate holdings, in the PDTC system, and with respect
to each beneficial owner’s holdings, in the records of the participants. Beneficial owners are
thus advised that in order to exercise their rights as beneficial owners of the lodged shares,
they must rely on their participant-brokers and/or participant custodians.
Any beneficial owner of shares who wishes to trade his interests in the shares must course
the trade through a participant. The participant can execute PSE trades and non-PSE
trades of lodged equity securities through the PDTC system. All matched transactions in
the PSE trading system will be fed through the SCCP, and into the PDTC system. Once it
is determined on the settlement date (T+3) that there are adequate securities in the
securities settlement account of the participant-seller and adequate cleared funds in the
settlement bank account of the participant-buyer, the PSE trades are automatically settled
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in the SCCP Central Clearing and Central Settlement system, in accordance with the SCCP
and PDTC Rules and Operating Procedures. Once settled, the beneficial ownership of the
securities is transferred from the participant-seller to the participant-buyer without the
physical transfer of stock certificates covering the traded securities.
If a shareholder wishes to withdraw his stockholdings from the PDTC system, the PDTC
has a procedure of upliftment under which PCD Nominee will transfer back to the
shareholder the legal title to the shares lodged.
The uplifting shareholder shall follow the Rules and Operating Procedures of the PDTC for
the upliftment of the shares lodged under the name of the PCD Nominee. The transfer
agent shall prepare and send a Registry Confirmation Advice to the PDTC covering the new
number of shares lodged under the PCD Nominee. The expenses for upliftment are for the
account of the uplifting shareholder.
The difference between the depository and the registry would be on the recording of
ownership of the shares in the issuing corporations’ books. In the depository set-up, shares
are simply immobilized, wherein customers’ certificates are canceled and a confirmation
advice is issued in the name of PCD Nominee to confirm new balances of the shares lodged
with the PDTC. Transfers among/between broker and/or custodian accounts, as the case
may be, will only be made within the book-entry system of the PDTC. However, as far as
the issuing corporation is concerned, the underlying certificates are in the PCD Nominee’s
name. In the registry set-up, settlement and recording of ownership of traded securities
will already be directly made in the corresponding issuing company’s transfer agents’ books
or system. Likewise, recording will already be at the beneficiary level (whether it be a client
or a registered custodian holding securities for its clients), thereby removing from the
broker its current “de facto” custodianship role.
The option if whether a listed security should be “housed” in the depository or registry is at
the issuer‘s discretion. The migration from the depository to the registry model aims to
eliminate the legal and operational risk brought about by a depository infrastructure.
Likewise, the migration is expected to strengthen measures to protect
public
investors/shareholders and decrease transaction costs resulting from additional layers
in the settlement process. At present, the depository model is the most widely used and
recognized system, being utilized by nearly all jurisdictions around the world.
In light of the CCCS, custodians holding Philippine listed equity securities now have the
following options:
a. Stay with the depositary for all its securities, whereby the PDTC acts as their implied
“Custodian”. For shares under the PDTC, custodians are direct PDTC account
holders with the shares still recorded in the PCD Nominee‘s name as far as the
corporation/transfer agent is concerned. For shares under the registry, the custodian
appears to be a “client” under “PCD”, such that shares are recognized or recorded
with PCD as the master/controlling account; or
b. Be a system participant of the SCCP wherein the CCCS would offer to the custodians
the interface to both the depositary and registry systems. In this option, for shares
under the PDTC, custodians will still have the option to maintain their own accounts
181
in the PDTC or have an omnibus account together with the broker accounts in the
PDTC as shares are accounted for or segregated per accountholder in the CCCS. This
simplifies the custodian‘s interface into a single connectivity for both the depositary
and the registry systems. For shares under the registry system, the custodian will
have its own master account, having control over its own account. In the registry
scenario, the custodian is already recognized as the beneficial holder of the securities
on behalf of its clients. The custodian effectively is given a direct relationship with
the issuing company wherein it receives the annual reports, dividends, the other
communications and information directly. Prospectively, when the custodian is
accredited as an indirect clearing member of the SCCP, straight-through processing
of trades or settlement can already be done directly with the custodian or with its
client.
Amended Rule on Lodgement
On June 24, 2009, the PSE apprised all listed companies and market participants through
Memorandum No. 2009-0320 that, beginning July 1, 2009, as a condition for the listing and
trading of the securities of an applicant company, the applicant company shall electronically
lodge its registered securities with the PDTC or any other entity duly authorized by the
SEC, without any jumbo or mother certificate in compliance with the requirements of
Section 43 of the Securities Regulation Code. In compliance with the foregoing
requirement, actual listing and trading of securities on the scheduled listing date shall
take effect only after submission by the applicant company of the documentary
requirements stated in Article III Part A of the Revised Listing Rules.
Further, the PSE apprised all listed companies and market participants on May 21, 2010,
through Memorandum No. 2010-0246, that the Amended Rule on Lodgment of Securities
under Section 16 of Article III, Part A of the Revised Listing Rules of the Exchange shall
apply to all securities that are lodged with the PDTC or any other entity duly authorized
by the SEC.
For listing applications, the amended rule on lodgment of securities is applicable to:
a. The offer shares/securities of the applicant company in the case of an initial public
offering;
b. The shares/securities that are lodged with the PDTC, or any other entity duly
authorized by the Commission in the case of a listing by way of introduction;
c. New securities to be offered and applied for listing by an existing listed
company; and
d. Additional listing of securities of an existing listed company.
Pursuant to the said amendment, the PDTC issued an implementing procedure in support
thereof to wit:
For new companies to be listed at the PSE as at July 1, 2009 the usual procedure will be
observed but the Transfer Agent on the companies shall no longer issue a certificate to
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PCD Nominee Corp but shall issue a Registry Confirmation Advice, which shall be the
basis for the PDTC to credit the holdings of the Depository Participants on listing date.
On the other hand, for existing listed companies, the PDTC shall wait for the advice of the
Transfer Agents that it is ready to accept surrender of PCNC jumbo certificates and upon
such advice the PDTC shall surrender all PCNC jumbo certificates to the Transfer Agents
for cancellation. The Transfer Agents shall issue a Registry Confirmation Advice to PCNC
evidencing the total number of shares registered in the name of PCNC in the Issuer‘s
registry as at confirmation date.
Settlement
The Securities Clearing Corporation of the Philippines (“SCCP”) is a wholly owned
subsidiary of the PSE, and was organized primarily as a clearance and settlement agency
for SCCP-eligible trades executed through the facilities of the PSE. SCCP received its
permanent license to operate on January 17, 2002. It is responsible for:



Synchronizing the settlement of funds and the transfer of securities through
Delivery versus Payment clearing and settlement of transactions of Clearing
Members, who are also Trading Participants of the PSE;
Guaranteeing the settlement of trades in the event of a Trading Participant’s default
through the implementation of its Fails Management System and administration of
the Clearing and trade Guaranty Fund; and
Performance of Risk Management and Monitoring to ensure final and irrevocable
settlement.
SCCP settles PSE trades on a 3-day rolling settlement environment, which means that
settlement of trades takes place three (3) Business Days after transaction date (T+3). The
deadline for settlement of trades is 12:00 noon of T+3. Securities sold should be in scripless
form and lodged under the PDTCs book entry system. Each Trading Participant maintains
a Cash Settlement Account with one of the four existing Settlement Banks of SCCP which
are BDO Unibank, Inc., Rizal Commercial Banking Corporation, Metropolitan Bank &
Trust Company and Deutsche Bank AG (Manila Branch). Payment for securities bought
should be in good, cleared funds and should be final and irrevocable. Settlement is presently
on a broker level.
SCCP implemented the CCCS last May 29, 2006. CCCS employs multilateral netting
whereby the system automatically offsets “buy” and “sell” transactions on a per issue and
a per flag basis to arrive at a net receipt or a net delivery security position for each
Clearing Member. All cash debits and credits are also netted into a single net cash position
for each Clearing Member. Notation of the original PSE trade contracts occurs, and SCCP
stands between the original trading parties and becomes the Central Counterparty to each
PSE-Eligible trade cleared through it.
Issuance of Certificated Shares
On or after the listing or re-issuance of the shares on the PSE, any beneficial owner of the
shares may apply to the PDTC through his broker or custodian-participant for a withdrawal
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from the book-entry system and return to the conventional paper-based settlement. If a
stockholder wishes to withdraw his stockholdings from the PDTC System, the PDTC has a
procedure of upliftment under which PCD Nominee will transfer back to the stockholder
the legal title to the shares lodged. The uplifting shareholder shall follow the Rules and
Operating Procedures of the PDTC for the upliftment of shares lodged under the name of
PCD Nominee. The transfer agent shall prepare and send a Registry Confirmation Advice
to the PDTC covering the new number of shares lodged under PCD Nominee. The expenses
for upliftment are for the account of the uplifting shareholder.
Upon the issuance of certificated shares in the name of the person applying for upliftment,
such shares shall be deemed to be withdrawn from the PDTC book-entry settlement system.
Such shares cannot be traded on the PSE without lodging them once again in the
depository, in accordance with existing PSE and PDTC rules that were approved by the
SEC. Pending completion of the upliftment process, the beneficial interest in the shares
covered by the application for upliftment is frozen and no trading and book-entry settlement
will be permitted until certificated shares shall have been issued by the relevant company‘s
transfer agent.
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PARTIES TO THE OFFER
The Company
Max’s Group, Inc.
Pancake House Center
2259 Chino Roces Avenue Extension
(Pasong Tamo Extension)
Makati City, Metro Manila, Philippines
Telephone Number (632) 784 9000
The Selling Subsidiaries
The Real American Doughnut Co., Inc.
Max’s Bakeshop, Inc.
Max’s Kitchen, Inc.
No Bia, Inc.
Chickens R’ Us, Inc.
Square Top, Inc.
MGOC Holdings, Inc.
Trota Gimenez Realty Corp.
Room Ventures, Corp.
Max’s Express Restaurants, Inc.
The Selling Shareholders
Trofi Ventures Corp.
WERCO Holdings Corp.
Ruby Investment Consolidated Holdings, Inc.
WR Ventures Asia, Inc.
FSS Realty Corporation
Bookrunner, Issue Manager and
Lead Underwriter
BPI Capital Corporation
Underwriters
[*]
Stock Transfer Agent
Stock Transfer Services, Inc.
8/F BPI Building
Ayala Avenue corner Paseo de Roxas
Makati City
34/F, Unit D
Rufino Pacific Tower
6784, Ayala Avenue
Makati City
Depository Bank
[*]
Counsel to the Issuer
Picazo Buyco Tan Fider & Santos
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18/F Liberty Center
104 H.V. Dela Costa Street
Salcedo Village
Makati City
Counsel to the Underwriters
Romulo Mabanta Buenaventura Sayoc & delos
Angeles
21/F PhilamLife Tower
8767 Paseo de Roxas
Makati City
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FINANCIAL INFORMATION
Please refer to the attached:



Audited Consolidated Financial Statements as at and for the years
ended December 31, 2013, 2012 and 2011
Unaudited Consolidated Financial Statements as at June 30, 2014 and
for the six months ended June 30, 2014 and 2013
Pro-forma Consolidated Financial Information as at and for the periods
ended June 30, 2014 and December 31, 2013
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