Becle, S.A.B. De C.V
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[Translation for informational purposes only] ANNUAL REPORT PREPARED IN ACCORDANCE WITH THE GENERAL PROVISIONS APPLICABLE TO ISSUERS OF SECURITIES AND OTHER PARTICIPANTS OF EXCHANGE MARKETS, ISSUED BY THE NATIONAL BANKING AND SECURITIES COMMISSION OF MEXICO, FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020.1 BECLE, S.A.B. DE C.V. Guillermo González Camarena No.800-4, Col. Zedec Santa Fe, Ciudad de México, 01210 TICKER SYMBOL: “CUERVO” Securities Representing the Capital Stock of the Issuer Characteristics Stock Exchange in which our Shares are registered Single Series Shares of Common Stock Bolsa Mexicana de Valores, S.A.B. de C.V. (Mexican Stock Exchange) The securities of the Issuer are registered in the National Securities Registry (Registro Nacional de Valores). Registration in the National Securities Registry (Registro Nacional de Valores) does not imply certification on the soundness of the securities or the solvency of the Issuer, or the accuracy or veracity of the information contained in this Annual Report, and it does not validate the acts that, in its case, would have been performed in contravention of the applicable law. 1 Legal disclaimer: This document is an English translation of a Spanish-language document and is provided for information purposes only. In the event of any discrepancy, the text of the original Spanish-language document shall prevail. The Spanish-language document is available on www.ircuervo.com - 1 - [[5669690v.3]] [Translation for informational purposes only] TABLE OF CONTENTS 1) OVERVIEW [ * ] A) GLOSSARY OF TERMS AND DEFINITIONS [ * ] B) SUMMARY OF FINANCIAL INFORMATION [ * ] C) RISK FACTORS [ * ] D) OTHER SECURITIES [ * ] E) SIGNIFICANT CHANGES TO THE RIGHTS OF SECURITIES REGISTERED IN THE RNV [ * ] F) PUBLIC INFORMATION [ * ] 2) THE ISSUER [ * ] A) OVERVIEW [ * ] B) BUSINESS DESCRIPTION [ * ] i) Our Company [ * ] ii) Distribution Channels [ * ] iii) Intellectual Property and Other Contracts [ * ] iv) Main Clients [ * ] v) Regulation Permits and Environmental Matters [ * ] vi) Organizational Structure and Employees [ * ] vii) Environmental Performance [ * ] viii) Industry [ * ] ix) Corporate Structure [ * ] x) Main Assets [ * ] xi) Litigation [ * ] xii) Description of Our Capital Stock and Corporate By-laws [ * ] xiii) Dividends and Dividend Policy [ * ] 3) FINANCIAL INFORMATION [ * ] A) SELECTED FINANCIAL INFORMATION [ * ] B) FINANCIAL INFORMATION BY BUSINESS LINE, GEOGRAPHIC ZONE AND EXPORT SALES [ * ] C) INDEBTEDNESS [ * ] - 2 - [[5669690v.3]] [Translation for informational purposes only] D) MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS [ * ] i) Results of Operations [ * ] ii) Liquidity and Capital Sources [ * ] iii) Internal Control [ * ] E) CRITICAL ACCOUNTING POLICIES [ * ] 4) MANAGEMENT [ * ] A) INDEPENDENT AUDITORS [ * ] B) RELATED PARTY TRANSACTIONS [ * ] C) MANAGEMENT [ * ] D) DESCRIPTION OF OUR CAPITAL STOCK AND CORPORATE BY-LAWS [ * ] 5) CAPITAL MARKETS [ * ] A) SHAREHOLDER STRUCTURE [ * ] B) SHARE PERFORMANCE IN THE MEXICAN SECURITIES MARKET [ * ] C) MARKET MAKER [ * ] 6) RESPONSIBLE PERSONS [ * ] EXHIBITS Audited consolidated financial statements as of December 31, 2020 and 2019, prepared by PricewaterhouseCoopers, S.C.; and as of December 31, 2018 prepared by KPMG Cárdenas Dosal, S.C. Exhibit 1 Statement of the independent auditor Exhibit 2 Report of the Audit and Corporate Practices Committee for fiscal year 2020, and report of the statutory auditor of the Issuer for fiscal years 2020, 2019 and 2018 Exhibit 3 This Report contains information on the industry, the demographic conditions, the market conditions (including forecasts in that respect) and the competition, which derives in part from internal studies and research, public information , and industry publications. The statements of the Company are based on information that comes from independent sources which the Company considers reliable and statistics commonly used in Mexico, including, among others, The International Wine and Spirits Research. Typically, government and industry publications specify that the information included in such publications comes from sources that are considered reliable, but that there is no guarantee that such information is accurate and complete. Although the Company does not have reasons to think that this type of information is inaccurate in any material sense, it has not verified such information in an independent manner and, therefore, cannot guarantee that it is correct, accurate and complete. Likewise, the most updated information published - 3 - [[5669690v.3]] [Translation for informational purposes only] by The International Wine and Spirits Research to the date of this Report is as of December 31, 2019, which is duly specified throughout that document. 1) OVERVIEW A) GLOSSARY OF TERMS AND DEFINITIONS Unless defined otherwise in this Report, terms with initial capital letters used in this Report that are listed below will have the following meanings, which will be equally applicable in singular or plural form: Terms Definitions “2025 Notes” USD 500 million 3.750% senior notes due 2025 issued by the Company on May 13, 2015. “Agave” or “Blue Agave” Blue Agave Tequilana Weber. “Annual Report”, “Report” or “Document” Annual Report filed in accordance with the General Provisions Applicable to Issuers of Securities and to Other Participants in the Mexican Securities Market, for the fiscal year ended December 31, 2019. “Appellation of Origin” Declaratoria General de Protección a la Denominación de Origen “Tequila” (General Declaration of Protection to the Appellation of Origin “Tequila”). “Applicable Law” Laws, regulations, decrees, circular letters, and other legal regulations of a federal, state and/or municipal nature that are in force in Mexico. “Audited Financial Statements” or “Financial Statements” Audited consolidated financial statements as of December 31, 2020 and 2019, audited by PricewaterhouseCoopers, S.C., and as of December 31, 2018, audited by KPMG Cárdenas Dosal, S.C. “Australian Dollar” or “AUD” Legal tender in Australia. “Becle,” “Company,” “Group,” “Issuer,” “Jose Cuervo,” “our,” Becle, S.A.B. de C.V. and its subsidiaries, unless otherwise “us,” or “we” defined in this Annual Report. “BMV” Bolsa Mexicana de Valores, S.A.B. de C.V. (Mexican Stock Exchange). “British Pound” or “Pound Sterling” Legal tender in the United Kingdom. “Bushmills” The “Old Bushmills” Distillery Company Limited. “Bushmills Acquisition” Acquisition by JC Overseas, Ltd., a subsidiary of Casa Cuervo, S.A. de C.V., of the entire capital stock of Bushmills for an amount of USD 718.7 million (MXN 10,665.0 million). “Business Day” Any day that is not a Saturday, or Sunday and in which credit institutions in Mexico and New York are open to the public, according to the calendar published by the CNBV for such purpose. “CAGR” Compound Annual Growth Rate; calculation: (Last year/First year) Exponential (1/n) - 1 where “n” is the difference of years. “Canadian Dollar” or “CAN” Legal tender in Canada. “CETES” Certificados de la Tesorería de la Federación (Federal Treasury Certificates). “CNBV” Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission). “CNBV Regulations” Disposiciones de carácter general aplicables a las emisoras y a otros participantes del Mercado de Valores (General provisions applicable to issuers of securities and other participants of exchange markets), issued by the CNBV; according to their - 4 - [[5669690v.3]] [Translation for informational purposes only] modification from time to time. The Sole Circular Letter of Issuers. “CNIT” Cámara Nacional de la Industria Tequilera (National Chamber of the Tequila Industry). “COFECE” Comisión Federal de Competencia Económica (Mexican Antitrust Commission). “CRT” Consejo Regulador del Tequila (Tequila Regulatory Council). “Day” With uppercase or with lowercase, calendar day. “Diageo” Diageo plc, and its affiliates. “Dollar”, U.S. Dollar or “USD” Legal tender in the United States of America. “Don Julio” Tequila Don Julio, S.A. de C.V. or the business related to Tequila Don Julio, S.A. de C.V., unless otherwise defined in this Annual Report. “EBITDA” Net income plus depreciation and amortization, income tax expense, interest expense, less interest income, plus foreign exchange loss (gain), net, less gain on sale of joint venture, less equity method in joint venture profit on sales and plus loss in joint venture. This metric is not defined by IFRS, which should not be deemed as a substitute for operating income shown in the Financial Statements, nor as an alternative to cash flow from operating activities. “ERP” The Company’s own Enterprise Resource Planning system. “EURO” or “EU” Legal tender in the majority of countries that comprise the European Union. “GDP” Gross Domestic Product. “i2i” Island2island Beverage Co. “IFRS” International Financial Reporting Standards issued by the International Accounting Standards Board. S.D. Indeval, S.A. de C.V., an authorized securities depositary “Indeval” institution. “Initial Public Offering” The primary initial public offering for subscription and payment of 548,105,954 Shares (including 71,492,081 shares subject to overallotment options) that the Company carried out on February 8, 2017. “IWSR” The International Wine and Spirits Research, the leading source of data and analysis on the global beverage alcohol market. “Maestro Tequilero” Maestro Tequilero, S.A. de C.V., unless otherwise defined in this Annual Report. “Mexican Peso.” “$” or