IBERSOL | Annual Report 2021

ANNUAL REPORT 2021 b) Risk of franchise agreements In restaurants where it operates with international brands, the Group enters into long-term franchise agreements: 20 years for Burger King and 10 years for Pizza Hut, Taco Bell and KFC, which are renewable for another 10 years at the franchise’s option, provided certain obligations have been fulfilled. It has become practical for these contracts to be renewed. However, nothing obliges the franchisees to do so, so the risk of non-renewal may be verified. In these contracts it is normal to contract the payment of an “Initial Fee” at the beginning of each contract and a “Renewall Fee” at the end of the initial period, in addition to a royalty of marketing operations on the sales made. Periodically, development contracts are negotiated which guarantee the right and the obligation to open new restaurants. In case of non-compliance with the opening plans provided for in these contracts, franchisors may terminate their development contracts. The Group has signed development contracts with Taco Bell and KFC (Portugal and Spain) and Burger King (Portugal and Spain). In unusual circumstances, such as the current pandemic crisis, readjustments to the development programs with the dif- ferent brands Taco Bell and KFC were agreed. In the case of Burger King for Portu- gal, an amendment to the contract was being negotiated, but Burger King decided to terminate it (note 36.2). In the franchise agreements of several international brands operated by the subsidi- aries of Ibersol SGPS, S.A. requirements and conditions are foreseen to be fulfilled prior to the disposal of the participation of the subsidiary that operates the contract, issuance of equity instruments and/or change of control in said subsidiaries, as well as the disposal of the business or restaurants owned by those subsidiaries, which include , among others: the prior agreement of the franchisors, information obliga- tions and various transmission procedures, eventual payment of charges or fees, as well as the right of first refusal in favor of the franchisors. Franchise agreements with some international brands provide for the possibility of termination in the event of a change in control of Ibersol SGPS, S.A. without prior agreement from the franchisor. 3.3 ESTIMATED FAIR VALUE The fair value of financial instruments commercialised in active markets (such as publicly negotiated derivatives, securities for negotiation and available for sale) is determined based on the listed market prices on the consolidated statement of fi- nancial position date. The market price used for the Group’s financial assets is the price received by the shareholders in the current market. The market price for finan- cial liabilities is the price to be paid in the current market. 365