Our Dream: Best Beer Company Bringing People Together For a Better World
Anheuser-Busch InBev 2014 Annual Report Anheuser-Busch InBev Annual Report 20141 ABOUT ANHEUSER-BUSCH INBEV
Contents 1 Our Manifesto 2 Letter to Shareholders 6 Strong Strategic Foundation 20 Growth Driven Platforms 36 Dream-People-Culture 42 Bringing People Together For a Better World 49 Financial Report 155 Corporate Governance Statement
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Revenue 33 862 36 297 39 046 39 758 42 927 43 195 45 483 47 063 2014 Normalized EBITDA Contribution by Region* Normalized EBITDA (million USD) Normalized EBITDA 12 109 13 869 15 357 15 525 16 480 17 188 17 943 18 542
EBITDA – 13 685 15 112 15 493 16 590 23 428 – 18 465 2014 reported 1RUPDOL]HGSURƮWIURPRSHUDWLRQV 9 600 11 165 12 607 12 779 13 537 14 203 14 800 15 308
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Share price low (euro) – 33.5 33.9 46.1 – 63.44 – 69.14 2014 reported Year-end share price (euro) – 42.8 47.3 65.7 – 77.26 – 93.86
UHIHUHQFHEDVH Market capitalization (million USD) – 91 097 98 315 138 716 – 171 142 – 183 167 26.4% 9.7% Market capitalization (million euro) – 68 176 75 983 105 209 – 124 097 – 150 867 18.0% UHSRUWHG Europe 1RUWKb$PHULFD 2012 reference base *LYHQWKHWUDQVIRUPDWLRQDOQDWXUHRIWKHGLVSRVDOVZHPDGHGXULQJ WRUHƮQDQFHWKHGHEWLQFXUUHGWRƮQDQFHWKH$QKHXVHU%XVFKWUDQVDFWLRQZHSUHVHQWLQWKLV $QQXDO5HSRUWWKHFRPSDUDWLYH FRQVROLGDWHGYROXPHVDQGUHVXOWVGRZQWRQRUPDOL]HGSURƮWIURPRSHUDWLRQVRQD5HIHUHQFH%DVHWUHDWLQJDOOGLYHVWLWXUHVDVLI $VLD3DFLƮF WKH\KDGFORVHGDVRI-DQXDU\ DQGZLWKFHUWDLQLQWUDJURXSWUDQVDFWLRQVUHSRUWHGLQ*OREDO([SRUWDQG+ROGLQJ&RPSDQLHV 8.5% 2012 reported 27.3% DV5HSRUWHGDGMXVWHGWRUHưHFWWKHHƬHFWVRIUHWURVSHFWLYHDSSOLFDWLRQRQWKHUHYLVHG,$6 (PSOR\HH%HQHƮWV *LYHQWKHWUDQVIRUPDWLRQDOQDWXUHRIWKHWUDQVDFWLRQZLWK*UXSR0RGHORDQGWRIDFLOLWDWHWKHXQGHUVWDQGLQJRI$%b,Q%HYŞVXQGHUO\LQJSHUIRUPDQFH$%b,Q%HYKDV Mexico 2011 XSGDWHGLWVVHJPHQWUHSRUWLQJIRUSXUSRVHVRIRXUUHVXOWVDQQRXQFHPHQWDQGLQWHUQDOUHYLHZE\VHQLRUPDQDJHPHQW7KLVSUHVHQWDWLRQ UHIHUUHGWRDVWKHŠ 5HIHUHQFH%DVHš LQFOXGHVIRUFRPSDUDWLYHSXUSRVHVWKHUHVXOWVRI*UXSR0RGHORDVLIWKHFRPELQDWLRQKDGWDNHQSODFHRQ-XQH)ROORZLQJWKHFRPELQDWLRQWKH /DWLQb$PHULFD *UXSR0RGHORRSHUDWLRQVDUHUHSRUWHGDFFRUGLQJWRWKHLUJHRJUDSKLFDOSUHVHQFHLQWKHIROORZLQJVHJPHQWV WKH0H[LFREHHUDQGSDFNDJLQJEXVLQHVVHVDUHUHSRUWHGLQ North 2.1% 2010 WKHQHZ=RQH0H[LFRWKH6SDQLVKEXVLQHVVLVUHSRUWHGLQWKH(XURSH=RQHDQGWKH([SRUWEXVLQHVVLVUHSRUWHGLQWKH*OREDO([SRUWDQG+ROGLQJ&RPSDQLHVVHJPHQW 8.0% *OREDO([SRUW 7KH5HIHUHQFH%DVHLQFOXGHVPRQWKVRI*UXSR0RGHORRSHUDWLRQVWRIDFLOLWDWHWKHXQGHUVWDQGLQJRI$%b,Q%HYŞVXQGHUO\LQJEXVLQHVV7KHUHIHUHQFHEDVH +ROGLQJ&RPSDQLHV IXUWKHUUHưHFWVWKHFRPELQDWLRQRI:HVWHUQ(XURSHDQG&HQWUDO (DVWHUQ(XURSHLQWRDVLQJOH(XURSH=RQHDQGDQXPEHURILQWUD=RQHPDQDJHPHQWUHSRUWLQJFKDQJHV UHIHUHQFHEDVH ZKLFKWRRNHƬHFWRQ-DQXDU\ /DWLQ$PHULFD6RXWK P. 01
Best Beer Company Bringing People Together For a Better World
We are a company of owners We believe that you have to put everything in that you want to get out.
We strive to be the best, Pursuing our Dream, Investing in people and the world in which we live.
For centuries, we’ve been bringing people together. Through sports, through music, and through culture, Creating moments both everyday and extraordinary Seizing every occasion to serve up more of what people thirst for.
For this reason, we pour ourselves into our work. From farm to brewery to market, Taking pride and ownership in every step. Paving the road for a better tomorrow that we’re proud to be part of. And celebrating the great times that bring us together.
:HDUH$%b,Q%HY Best Beer Company Bringing People Together For a Better World Anheuser-Busch InBev Annual Report 2014 1 LETTER TO SHAREHOLDERS
To Our Shareholders
Building a Company That Will Stand the Test of Time In asking these questions, it became clear that what we are really all about is bringing people together. We have a unique ZDVDQRWKHU\HDURIVROLGƮQDQFLDOSHUIRUPDQFHZLWKVWURQJ opportunity and ability to bring people together, through sports, commercial results in most of our top markets and further music and culture, to enjoy great beers and share memorable H[SDQVLRQRIRXUJOREDOEUDQGV%XWDW$%b,Q%HYZHKDYHQHYHU experiences through our portfolio of well-loved brands, our measured success solely by our quarterly or even our annual JOREDOUHDFKDQGRXUGHGLFDWLRQWRPDNLQJDGLƬHUHQFHLQRXU UHVXOWV:HbDUHGULYHQE\RXUSDVVLRQWRFUHDWHDFRPSDQ\WKDW communities. We also bring together our colleagues around can stand the test of time and create value for our shareholders, WKHbZRUOGLQDVKDUHGHƬRUWWRGHOLYHURQRXU'UHDP not only for the next 10 or 20 years but for the next 100 years. Our mindset is truly long term. Translating Our Dream into Action
,QWKHƮUVW\HDUVVLQFHWKHFRPELQDWLRQRI,QWHUEUHZDQG Consumers today have more information and choices than ever $PEHYZHKDYHEXLOWDVROLGIRXQGDWLRQ:HKDYHFUHDWHGbWKH before, with their behaviors, preferences and tastes constantly world’s leading brewer, through organic growth as well as evolving. Realizing this is the new normal, we have to ensure industry-changing combinations, including with Anheuser-Busch that our brands remain relevant and become part of consumers’ in 2008 and Grupo Modelo in 2013. We have also built the world’s HYHU\GD\OLYHV7RDGGUHVVWKHVHFKDOOHQJHVZHKDYHGHƮQHGD leading beer brands, with strong consumer preference and clear game plan and are activating it throughout our organization. growth potential, and driven net revenue per hectoliter ahead RIbLQưDWLRQWKURXJKVRXQGUHYHQXHPDQDJHPHQWSUDFWLFHVDQG We are using deep consumer insights with the goal of winning SUHPLXPL]DWLRQRIRXUSRUWIROLR7KLVbKDVUHVXOWHGLQVWURQJ DbELJJHUVKDUHRIWKHWRWDODOFRKROEHYHUDJHVSDFHUDWKHUWKDQ JURZWKLQPDUJLQVFDVKưRZDQGWRWDObVKDUHKROGHUUHWXUQV focusing on beer occasions only. To remain successful in the future, we must win the hearts and minds of consumers who are Strong Portfolio World-Class Impact 6NRO%HDWV6HQVHVLQ%UD]LODưDYRUHGKLJKHU$%9OLQHH[WHQVLRQ Preserving the Environment+DYLQJPHWRUH[FHHGHGRXURULJLQDO from Skol that can be mixed with ice. All three innovations were Environmental Goals, we committed ourselves in 2013 to a set of designed to complement the nighttime occasion. We also created even more ambitious goals to be achieved by the end of 2017. These Budweiser Brewmaster Reserve in China, a limited edition brew, goals include further reductions in water usage, greenhouse gas brrands with ana estimattede capped with a distinctive champagne-style cork, for the growing emissions, energy consumption and packaging materials, as well rettail valul e of oveer super-premium channel. And there is more to come. Oculto, a new DVZDWHUVKHGSURWHFWLRQHƬRUWVQHDUNH\IDFLOLWLHVDQGZDWHUULVN WHTXLODưDYRUHGEHHUDVZHOODV0L[[7DLOIRUH[DPSOHDUHERWK UHGXFWLRQLQLWLDWLYHVLQNH\EDUOH\JURZLQJUHJLRQV)RUWKHƮUVW bELLOOO LRQ86'HDFK Consumer impressions driven SODQQHGWRKLWWKH86PDUNHWHDUO\LQ time, we have also set a goal to reduce carbon emissions in logistics E\bRXU),)$:RUOG&XSž operations by using alternative fuels, smart driving tools, more Budweiser activations. Innovation is more than new products. It also includes packaging. HƱFLHQWWUXFNVDQGE\FROODERUDWLQJZLWKRXUVXSSO\FKDLQSDUWQHUV ,QbIRUH[DPSOHZHLQWURGXFHGWZRPDMRUQHZSDFNDJHVLQWKH 86DQHZR]UHFORVHDEOHDOXPLQXPERWWOHLQLWLDOO\IRFXVHGRQ 0DNLQJD'LƬHUHQFHLQ2XU&RPPXQLWLHV. We have continued to %XG/LJKWDQGWKHƮUVWHYHUR]FDQ%RWKSDFNDJHVDUHH[FHHGLQJ contribute to the well-being of our communities around the world. Our global brands, coupled with our international brands, Beck’s, Winning the Digital 2014 FIFA World Cup™ our expectations, and have now been extended to some of our other Our initiatives included providing emergency drinking water to /HƬHDQG+RHJDDUGHQPDNHXSDVWURQJLQWHUQDWLRQDOSUHPLXP 86EUDQGV areas hard hit by disasters, supporting education through a range of portfolio that gives us options in terms of entry into new markets. The 2014 FIFA World Cup™ held in Brazil gave us a marvelous SURJUDPVVXFKDVEXLOGLQJ+RSH6FKRROVLQ&KLQDDQGDFWLYHbYROXQWHHU opportunity to bring people together, and to showcase many Bringing People Together For a Better World HƬRUWVbLQYROYLQJPRUHWKDQbRIRXUFROOHDJXHVJOREDOO\ Our portfolio is rounded out by our local champions, such as of our brands. It proved to be our best World Cup execution to %XGb/LJKWLQWKH86+DUELQLQ&KLQD6NROLQ%UD]LO-XSLOHU date, with digital activations playing a key role. Budweiser was Tapping into our ability to bring people together on a global scale, Our Culture Drives Our Performance LQb%HOJLXPDQG4XLOPHVLQ$UJHQWLQD7KHVHOHDGLQJEUDQGV WKHRƱFLDOEHHURIWKHWRXUQDPHQWDQGRIRXUORFDOFKDPSLRQ WRbZRUNIRUD%HWWHU:RUOGLVDQHVVHQWLDOSDUWRIRXU'UHDP focused on local markets, are the core of our business. brands, with links to soccer, also leveraged our sponsorship to Dream-People-Culture is the platform on which we have and will drive engagement with consumers in their local markets. In a major new initiative launched in 2014, we are founding continue to build our company. Driving Digital Connections members of 7RJHWKHUIRU6DIHU5RDGV 765 , a coalition of 10 leading Our sponsorship gave our entire team an opportunity to raise its global companies across industries that are committed to working We are inspired by our ambitious Dream to be the Best Beer Gone are the days when beer brands could be built through game, with exciting and innovative 360° activations across many FROODERUDWLYHO\WRKHOSLPSURYHURDGVDIHW\7UDƱFFUDVKHVZKLFK Company Bringing People Together For a Better World. To deliver traditional media only. Today’s consumers expect brands to RIRXUPDUNHWV7KHWKHPHŠ5LVHDV2QHšZDVLPSULQWHGRQ are currently the eighth leading cause of death worldwide and the RQRXU'UHDPbZHGHSHQGRQDWDOHQWHGDQGKLJKO\PRWLYDWHGWHDP HQJDJHZLWKWKHPLQDPRUHGLƬHUHQWLDWHGDQGSHUVRQDOVW\OH special Budweiser bottles, and our people lived up to that promise SULPDU\FDXVHRIGHDWKDPRQJś \HDUROGVDUHSURMHFWHGWR of people, underpinned by a culture based on the principles of than ever before. Millennials in particular are searching for by delivering a great consumer experience and connecting PRYHWRWKHƮIWKOHDGLQJFDXVHE\7RVWRSWKLVSURJUHVVLRQ ownership, meritocracy and informality. experiences and involvement in the development of brands, our brands with millions of fans. Whether consumers were and, ultimately, help save lives, TSR members have come together DQGbGLJLWDOLVSOD\LQJDPDMRUUROH FHOHEUDWLQJDWWKH%XGZHLVHU+RWHORQ&RSDFDEDQD%HDFKYRWLQJ ZLWKDIRFXVRQVDIHUURDGVYHKLFOHVDQGV\VWHPV LPSURYHGGULYHU We thank our consumers and customers for their continued IRUWKH0DQRIWKHb0DWFKRQVRFLDOPHGLDFKHHULQJRQWKHLU VDIHW\HGXFDWLRQ DQGWKHDSSOLFDWLRQRIGDWDDQGEHVWSUDFWLFHV OR\DOW\bRXUSHRSOHIRUWKHLUFRPPLWPHQWDQGGHGLFDWLRQDQGRXU Millennials now spend more time on social media than on any national team, or participating in one of our many local programs, VKDUHKROGHUVIRUWKHFRQƮGHQFHWKH\KDYHSODFHGLQXV:HORRN other information channel, which is why we are increasingly we estimate that our Budweiser activations alone generated We also continued our successful activations across our forward to delivering on our commitments — and striving to achieve allocating our marketing resources to digital activation, with RYHUbbELOOLRQFRQVXPHULPSUHVVLRQVOHDGLQJXSWRDQGGXULQJ Better World pillars, bringing together our colleagues, as well our Dream. DbSRVLWLYHLPSDFWRQERWKEUDQGKHDOWKDQGPDUNHWVKDUH2XU the tournament. DVFXVWRPHUVSDUWQHUVLQGXVWU\SHHUVSXEOLFRƱFLDOVQRQ ambition is to be the top consumer goods company in digital governmental organizations and other stakeholders to make connections, and with millions of followers of our brands on We invested heavily behind these campaigns. The insights DbSRVLWLYHLPSDFW social media who interact with our engaging content, we are we gained, and the brand equity we built, will be invaluable ZHOObRQRXUZD\ LQbKHOSLQJWRGULYHIXWXUHWRSOLQHJURZWKZHOOEH\RQGWKH 3URPRWLQJ5HVSRQVLEOH'ULQNLQJ)RXU\HDUVDJRZHZHUHWKHƮUVW 2014 FIFA World Cup™. alcohol beverage company to set aggressive Responsible Drinking 7KHJURXQGEUHDNLQJ%XG/LJKWŠ8S)RU:KDWHYHUšFDPSDLJQ goals, including encouraging parents to talk with their children LVDbJUHDWH[DPSOHRILQQRYDWLYHGLJLWDODFWLYDWLRQDWLWVPRVW Leading through Innovation about underage drinking, promoting the use of designated drivers, Carlos Brito Kees J. Storm HƬHFWLYH7KHFDPSDLJQSRVLWLRQHG%XG/LJKWDVThe Perfect Beer and widely distributing ID-checking materials. We are proud to &KLHI([HFXWLYH2ƱFHU &KDLUPDQRIWKH%RDUG For Whatever Happens — from a ping pong match against Arnold Innovation will continue to play an important role in building have achieved all of our goals on schedule by the end of 2014. In Schwarzenegger to electric football with legendary American RXUbEUDQGVPHHWLQJHYROYLQJFRQVXPHUQHHGVDQGFUHDWLQJ SDUWLFXODUZHZDQWWRDFNQRZOHGJHRXUWHDPŞVHƬRUWVWRSURYLGH IRRWEDOOFRDFK-LPP\-RKQVRQ7KHKLJKSRLQWRIWKHGLJLWDO new consumption occasions in the future. Innovations need to training on responsible alcohol beverage sales to more than activation during summer 2014 was a contest in which Bud Light be bold and, as a result, we are not afraid to fail and learn from bPLOOLRQEDUWHQGHUVZDLWHUVVWRUHFOHUNVDQGRWKHUVZKRVHOO IDQVZHUHLQYLWHGWRVXEPLWWKHLURZQŠ8S)RU:KDWHYHUšYLGHRV RXUbHƬRUWV)DLOXUHLVSDUWDQGSDUFHORIRXUMRXUQH\EXLOGLQJRXU DQGbVHUYHDOFRKROEHYHUDJHVLQRXUPDUNHWVDURXQGWKHZRUOG Almost 2 million consumers viewed digital content related to ability to ultimately deliver game changing innovations. the campaign and we received over 204 000 video auditions, from which we chose 1 000 winners to celebrate with a Bud Light 7KH%XG/LJKW/LPH5LWDVIDPLO\LQWKH86IRUH[DPSOHKDV Responsible alcohol beverage sales training ZHHNHQGLQ&UHVWHG%XWWH&RORUDGRŜUHQDPHG:KDWHYHU86$ created a whole new category of alcohol beverages. The Ritas for the occasion. Thanks to this widely hailed campaign, we appeal to consumers who may not necessarily select beer as believe Bud Light gained share in the premium light category WKHLUbƮUVWFKRLFHRIDOFRKROEHYHUDJHSDUWLFXODUO\ZRPHQDQG LQbWKH86GXULQJWKH\HDU ZHbH[SHFWWKLVZLOODOORZXVWRFDSWXUHŠVKDUHRIWKURDWšIURPWKH hard liquor, cocktail and ready-to-drink categories. The concept We can cite many other examples showing how our brands is scalable, and there will be introductions in other markets are engaging with consumers via digital means — from the where relevant. 6WHOODb$UWRLVYLGHRRI5XIXVWKH:LPEOHGRQKDZNWRWKHOLYH stream of Budweiser’s Made in America music festival, to the Key beverage innovations in 2014 included Cubanisto, a premium Š)ULHQGV$UH:DLWLQJšYLGHRWKDWKLJKOLJKWHGWKHLPSRUWDQFH UXPưDYRUHGEHHUODXQFKHGLQWKH8.)UDQFHDQG%HOJLXP RIbPDNLQJDSODQWRJHWKRPHVDIHO\DIWHUDQLJKWRXW 0L[[7DLOLQ$UJHQWLQDDPDOWEHYHUDJHFRFNWDLO DQG P. 02/03 MixxTail Mojito is a great example of extending our vision beyond beer to be relevant to a wide range of consumer tastes. With Growth Driven Platforms, we’re using consumer insights to develop more occasions for enjoying our brands. The powerful Bud Light Š8S)RU:KDWHYHUšFDPSDLJQ is connecting with more legal drinking age consumers through digital activation. 2 Anheuser-Busch InBev Annual Report 2014 I STRONG STRATEGIC FOUNDATION P. 06/07 Strong Strategic Foundation Inspired by Our Dream, Motivated to At Anheuser-Busch InBev, we share a powerful Dream to be the Best Beer Company Bringing People Together Deliver For a Better World. Across many centuries, continents and cultures, no other beverage has brought people together like beer. As the leading global brewer, with a KLVWRU\VSDQQLQJQHDUO\\HDUVZHDUHFRPPLWWHGWR sustaining and building on that heritage by continually striving to make our Dream a reality. This is what our Dream means to us: Best Beer Company — Attracting and retaining the best people, with a commitment to create the best portfolio RIbEUDQGVIURPRQO\WKHKLJKHVWTXDOLW\LQJUHGLHQWV to delight consumers around the world and deliver EHVWLQFODVVƮQDQFLDOSHUIRUPDQFHDQGSURƮWDELOLW\ Bringing People Together — Connecting consumers with our brands and with each other, providing the basis for sharing experiences with friends old and new, savoring great moments, and exploring life’s possibilities. For a Better World — Recognizing that we must all come together to move society in a positive direction toward responsible drinking, environmental stewardship and community engagement. :HWDNHRZQHUVKLSRIDQGSULGHLQRXUHƬRUWVDVZHFRPH together to deliver on the promise of our Dream. Anheuser-Busch InBev Annual Report 20142 STRONG STRATEGIC FOUNDATION Strong Brand Portfolio (QFRPSDVVLQJPRUHWKDQEUDQGV$%b,Q%HYŞVSRUWIROLRLV To connect our brands with consumers worldwide, we invest the the best in the industry. Our portfolio includes 16 brands with PDMRULW\RIRXUUHVRXUFHVDQGHƬRUWVLQWKRVHZLWKWKHJUHDWHVW HVWLPDWHGUHWDLOVDOHVYDOXHRIRYHUELOOLRQ86'HDFK6L[RIRXU JURZWKDQGSURƮWSRWHQWLDO:HFDOOWKHVHRXU)RFXV%UDQGV brands — Bud Light, Budweiser, Stella Artois, Corona, Skol and • Global Brands — Budweiser, Corona and Stella Artois Brahma — are ranked among the world’s Top 10 most valuable • International BrandsŜ%HFNŞV/HƬHDQG+RHJDDUGHQ beer brands by the 2014 Global BrandZ™ Report. • /RFDO&KDPSLRQV — brands that lead in their respective markets Global Brands International Brands Budweiser Beck’s 7KHŠ.LQJRI%HHUVš%XGZHLVHUZDVLQWURGXFHGE\ The world’s No. 1 German beer, Beck’s is renowned for Adolphus Busch in 1876 and is still brewed with the uncompromising quality. Since 1873, the brand has same care and high-quality, exacting standards. What been dedicated to innovation and independent thought. began as an American original 138 years ago is a global True to its original recipe, Beck’s has been brewed in the brand today. In accordance with its original recipe, same way using four key natural ingredients for more Budweiser is aged over beechwood chips for 21 days than 140 years. The hops used to brew Beck’s today ZKLFKUHVXOWVLQDSHUIHFWO\EDODQFHGưDYRUDQGDFULVS VWLOOFRPHIURPWKH+DOOHUWDXUHJLRQDQGHYHU\ERWWOH clean refreshing taste. of Beck’s is brewed according to the uncompromising German 5HLQKHLWVJHERW 3XULW\/DZ Corona &RURQDLVWKHOHDGLQJEUDQGLQ0H[LFRWKHWKPRVW /HƬH valuable beer brand in the world and the most popular 0DNLQJWKHH[WUDRUGLQDU\MXVWSHUIHFW/HƬHLVWKHEHHU 0H[LFDQEHHUZRUOGZLGH&RURQD([WUDZDVƮUVWEUHZHG WKDWHQULFKHVVSHFLDOPRPHQWV7KHưDYRUIXODQGIXOO LQ DWWKH&HUYHFHU¬D0RGHORLQ0H[LFR&LW\0H[LFR ERGLHGFKDUDFWHURIWKH/HƬHIDPLO\RIEHHUVSURYLGHVD Ten years after its launch, Corona became the best- UHFLSHIRUOLIHŞVEHVWH[SHULHQFHV/HƬHŞVXQLTXHEUHZLQJ selling beer in Mexico, and today continues to stand heritage is now shared and enjoyed by consumers IRUb0H[LFDQSULGHDURXQGWKHZRUOG around the world. Stella Artois Hoegaarden A worldwide icon of quality and sophistication, A unique, authentic Belgian wheat beer with a brewing 6WHOODb$UWRLVKDVDULFKKHULWDJHGDWLQJEDFNWR WUDGLWLRQGDWLQJWR+RHJDDUGHQLVWRWDOO\GLƬHUHQW LQ/HXYHQ%HOJLXP7KLVQHDUO\\HDUOHJDF\RI E\QDWXUHb+RHJDDUGHQKDVDXQLTXHDQGH[WUHPHO\ VRSKLVWLFDWLRQDQGHOHJDQFHLVUHưHFWHGLQLWVLFRQLF FRPSOH[EUHZLQJSURFHVVZKHUHE\WKHEHHULVƮUVWWRS FKDOLFHDQGH[DFWLQJ VWHS3RXULQJ5LWXDO6WHOODb$UWRLV fermented and then refermented within the bottle, LVVWLOOEUHZHGXVLQJWKHƮQHVWQDWXUDOLQJUHGLHQWVLQWKH resulting in a distinctive cloudy-white appearance and time-honored tradition of handcrafted luxury. refreshing taste experience. P. 08/09 Local Champions Bud Light is known for superior drinkability VKDUHDVSLULWRIFRXUDJHVHOIFRQƮGHQFH Chernigivske is the beer that represents DQGUHIUHVKLQJưDYRUPDNLQJLWWKHEHVW and adventure. 8NUDLQLDQQDWLRQDOSULGHDQGDVSLULWRI VHOOLQJEHHULQWKH86DQGWKHOHDGHULQ VWUHQJWKVHOIFRQƮGHQFHUHVSHFWDQG the premium light category. Victoria is an ultra-premium lager and true friendship. one of Mexico’s most popular beers. Michelob UltraRƬHUVWKHSHUIHFWEDODQFH 7KHbEUDQGŞVIDQVDSSUHFLDWHLWVPHGLXP Harbin, from the oldest brewery in North between crisp refreshment and a light, body and slight malt sweetness. China, features a unique blend of Chinese FOHDQSURƮOHWREHHQMR\HGE\WKRVHZKR 9LFWRULDbZDVSURGXFHGIRUWKHƮUVWWLPH Š4LQJGDR'DKXDšKRSDQG(XURSHDQ favor an active, healthy lifestyle. LQbPDNLQJ9LFWRULD0H[LFRŞV aroma hop varieties, for a nuanced aroma ROGHVWbEHHUEUDQG DQGFULVSƮQLVK Skol is the leading beer in Brazil, complementing a lifestyle that is sociable, Modelo EspecialLVDIXOOưDYRUHGSLOVQHU Sedrin, originating in China’s Fujian innovative and always among friends. beer brewed with premium two-row barley province, is enjoyed by groups of friends malt for a slightly sweet, well-balanced who share a common bond of excellence. Brahma was born in Brazil in 1888. The taste with a light hop character and crisp brand embodies the Brazilian sensibility, ƮQLVK%UHZHGVLQFH LWZDVFUHDWHG Cass, the No. 1 beer brand in South Korea, combining a dynamic and industrious WREHDŠPRGHOšEHHUIRUDOORI0H[LFRDQG features a crisp andd refreshing taste and VSLULWZLWKDQHƬRUWOHVVưDLUIRUOLIH stands for pride and authenticity. is brewed usingng a 100% non-pasteurized treatmentt process. Antarctica has a reputation for Klinskoye is noted for its clear taste and unquestionable quality that leads to soft hop bitterness, and holds a leading JUHDWbPRPHQWVLQJRRGFRPSDQ\ position in the Russian beer market. Quilmes is the beer for all who enjoy the Sibirskaya Korona 6LEHULDQ&URZQ KDV “Our Focus Brands bring ưDYRURIJHWWLQJWRJHWKHUŜLQ$UJHQWLQD become a well-known national premium consumers together and beyond. It is the choice of those who brand in Russia, with an image that evokes YDOXHIDPLO\DQGIULHQGVKLS WKRVHZKROLNH the Russian passion for a rich, satisfying around the world.” to have fun and share. beer experience. Jupiler is the most popular beer in Belgium, and is the favorite of those who Anheuser-Busch InBev Annual Report 2014 2 STRONG STRATEGIC FOUNDATION Our Top Markets Our Zones/Markets Volume All Products Market Share Market Position Number of Trading Names Full Year (000 hl) December 2014 December 2014 Beverage Plants Anheuser-Busch InBev, $%b,Q%HY:RUOGZLGH —— 6 $%b,Q%HY $%b,Q%HY%HHU 411 461 — — 1407 $%b,Q%HY1RQEHHU 47 340 — — 13 North America USA 46.4% No. 1 Anheuser-Busch Companies Canada 42.1% No. 1 6 Labatt Breweries of Canada Mexico Mexico 38 800 No. 1 7 Grupo Modelo Latin America North Beer: 68.2% Beer: No. 1 Brazil 308 Ambev Soft Drinks: 18.8% Soft Drinks: No. 2 Latin America South Beer: 78.1%4 Beer: No. 1 Argentina 23 727 &HUYHFHU¬D\0DOWHU¬D4XLOPHV Soft Drinks: 20.8% Soft Drinks: No. 2 Europe Belgium No. 1 4 InBev Belgium Germany1 8.6% No. 2 Anheuser-Busch InBev Deutschland UK2 8 636 16.3% No. 3 3 $QKHXVHU%XVFK,Q%HY8. $VLD3DFLƮF China 71 412 No. 3 Anheuser-Busch InBev China South Korea3 60.4% No. 1 3 Oriental Brewery Company 1. Germany volumes include Switzerland & Austria 4. Includes Corona 8.YROXPHVLQFOXGH,UHODQG 0DUNHWVKDUHEDVHGRQRƬWUDGHGDWD 2%YROXPHVLQFOXGHGIRU PRQWKVDVRIDFTXLVLWLRQRQ$SULO 'RHVQRWLQFOXGH-9V P. 10/11 “Industry volumes in our top 4 markets account for about half the beer sold around the world.” Global Brands International Brands Local Brands Our Billion Dollar Brands Bass, Bud Light, Busch, Michelob, Budweiser, Stella Artois %HFNŞV+RHJDDUGHQ/HƬH Natural light Alexander Keith’s, Bass, Bud Light, Budweiser, Corona, Stella Artois %HFNŞV+RHJDDUGHQ/HƬH Kokanee, Labatt, Lucky, Lakeport, Oland Barrilito, Estrella, Leon, Modelo, Budweiser, Corona, Stella Artois — 0RQWHMR3DFLƮFR7URSLFDO9LFWRULD Antarctica, Bohemia, Brahma, Skol, Budweiser, Corona, Stella Artois %HFNŞV+RHJDDUGHQ/HƬH Guaraná Antarctica, Pepsi10 Andes, Brahma, Norte, Patagonia, Budweiser, Corona, Stella Artois — 4XLOPHV3HSVL108310+2+ Budweiser, Corona, Stella Artois %HFNŞV+RHJDDUGHQ/HƬH %HOOH9XH-XSLOHU9LHX[7HPSV 'LHEHOV)UDQ]LVNDQHU+DDNH%HFN — %HFNŞV+RHJDDUGHQ/HƬH +DVVHUµGHU/µZHQEU£X6SDWHQ*LOGH Bass, Boddingtons, Brahma, Whitbread, Budweiser, Corona, Stella Artois %HFNŞV+RHJDDUGHQ/HƬH Mackeson 'RXEOH'HHU+DUELQ-LQOLQJ-LQORQJTXDQ Budweiser, Corona, Stella Artois %HFNŞV+RHJDDUGHQ/HƬH KK, Sedrin, Shiliang Cass, Cass Light, Cafri, The Premier OB, Budweiser, Corona, Stella Artois %HFNŞV+RHJDDUGHQ/HƬH Aleston 7. Includes 17 mixed beer/soft drinks plants 10. Brewed under license or bottles under exclusive bottling agreement ,QFOXGHVPL[HGEHHUVRIWGULQNVSODQWV VRIWGULQNVSODQWV ,QFOXGHVPL[HGEHHUVRIWGULQNVSODQWV VRIWGULQNVSODQWV Anheuser-Busch InBev Annual Report 2014 2 STRONG STRATEGIC FOUNDATION A World of Opportunities $%b,Q%HYEULQJVSHRSOHWRJHWKHULQWKHZRUOGŞVODUJHVWDQG 2XUEURDGLQWHUQDWLRQDOVFRSHJLYHVXVDFFHVVWRWKHWDOHQWDQG PRVWbSURƮWDEOHEHHUPDUNHWVRSHUDWLQJLQFRXQWULHV H[SHULHQFHRIFROOHDJXHVDFURVVVL[JHRJUDSKLF=RQHV Ŝ ,QGXVWU\YROXPHVLQRXUWRSIRXUPDUNHWVWKH86%UD]LO 1RUWK$PHULFD/DWLQ$PHULFD1RUWK/DWLQ$PHULFD6RXWK 0H[LFRDQG&KLQDDFFRXQWIRUDERXWKDOIWKHEHHUVROGDURXQG 0H[LFR(XURSHDQG$VLD3DFLƮF Ŝ DQGWKHDELOLW\WRVKDUHEHVW WKHJOREH:HKDYHDbEDODQFHGH[SRVXUHWRGHYHORSHGDQG SUDFWLFHVWRGHOLYHURQRXU'UHDP GHYHORSLQJPDUNHWVRƬHULQJRSSRUWXQLWLHVIRUIXWXUHJURZWK North AmerAmericaica MMexicoexico LLatinatin AmerAmericaica North Bud Light, Budweiser, Michelob Corona keeps growing in Mexico, 0RPHQWXPLQ/DWLQ$PHULFD{1RUWK Ultra, the Ritas and high end brands and Bud Light is coming on strong. continues well after the showed good volume performance ),)${:RUOG{&XSTM. in North America. We saw good volume performances from The Corona brand family, continued Exciting FIFA World Cup™ activations %XG/LJKW%XGZHLVHU0LFKHORE8OWUD excellent performance by Bud Light, provided powerful momentum for our the Rita family and our high end brands. DQGDbQHZFDPSDLJQIRU9LFWRULDKHOSHG mainstream and premium brands, not Furthermore, packaging innovations drive growth in Mexico. Bud Light was only during the event but also afterwards. OLNHWKHR]FDQDQGR]UHFORVDEOH our fastest growing brand, especially in In Brazil, despite a challenging consumer DOXPLQXPERWWOHVLPSURYHGRXUEUDQGbPL[ the northern part of the country. We also environment, we gained 30 basis points 7KHKLJKO\VXFFHVVIXOŠ8S)RU:KDWHYHUš focused on rejuvenating Modelo Especial RIbEHHUPDUNHWVKDUHUHDFKLQJ campaign positioned Bud Light as The and launched Modelo Amber as a beer to ZLWKDYROXPHLQFUHDVHRILQWKHb\HDU Perfect Beer For Whatever Happens — FRPSOHPHQWIRRG9LFWRULDEHQHƮWHGIURP Budweiser was a major growth engine, highlighted by a star-studded ad during WKHLQWURGXFWLRQRIbR]FDQVŜPDUNLQJ expanding its position in the international 6XSHU%RZO;/9,,,PRUHWKDQbPLOOLRQ WKHƮUVWWLPHWKDWWKHEUDQGKDVEHHQ beer market in Brazil. Brahma built on followers on social media, and a contest available in cans. We invested in the WKHb),)$:RUOG&XSžZLWKDFDPSDLJQ WKDWUHZDUGHGbb%XG/LJKWIDQVZLWK remodeling of the Modelorama retail emphasizing the brand’s connection an unforgettable experience in Colorado. FKDLQZLWKDPDMRUXSJUDGHRIb with the heart and soul of Brazilian As a result, we believe Bud Light gained franchise stores to make them better football. Among product innovations, share in the premium light category. showcases for our products. Bringing %UDKPDbFDSWXUHGDVWURQJVKDUH Investments in innovation included the PRUHRI$%b,Q%HYŞVSRUWIROLRWR0H[LFRŞV among non-alcohol beers, while Skol pilot of Montejo, our authentic imported consumers, we introduced Stella Artois Beats Extreme and the newly launched Mexican brand, in California, Texas, and Bud Light Lime Lime-A-Rita. Mexico Skol Beats Senses are positioned as great Arizona and New Mexico. The Rita family has done an outstanding job of realizing complements to nightlife. Elsewhere expanded with the launch of Mang-O-Rita, synergies from the Grupo Modelo in the Zone, we see opportunities for Raz-Ber-Rita and Apple-Ahh-Rita and combination and is on track to deliver growth in markets such as the Dominican WKHbŠ)LHVWD)RUHYHUšFDPSDLJQ bELOOLRQ86'LQFRVWV\QHUJLHVE\WKH Republic, where our portfolio includes In Canada, Budweiser maintained its end of 2016. Total volumes rose 1.6% beer, rum, malts and soft drinks, and in 1RbPDUNHWVKDUH%XGZHLVHUŞVKLJK in 2014, and Mexico Zone EBITDA grew Guatemala, where Mexican beers are sold visibility and ties to Canada’s national 21.3% while normalized EBITDA margin at a premium. EBITDA in Latin America passion for hockey were embodied in the expanded by 608 basis points to 47.3%, North rose 6.4% in 2014 with normalized 5HG/LJKWEOLPSWKDWưHZRYHUDQXPEHU driven by volume growth and revenue EBITDA margin declining 216 basis points of cities, promoting hockey games during management initiatives. WRDVUHYHQXHLQFUHDVHG the Olympics. EBITDA in North America decreased 1.2% in 2014 and normalized EBITDA margin was 42.4%, on a volume decrease of 1.3%. P. 12/13 “Our global footprint spans developed DQGbGHYHORSLQJPDUNHWVš Latin America South Europe $VLD3DFLƮF A refreshed Quilmes brand and our Focus Brands hold No. 1 positions Bringing premium brands to China’s MixxTail innovation were highlights in key European markets. LQFUHDVLQJO\DưXHQWFRQVXPHUV in Latin America South. Brand-building innovations, revenue Innovation, premiumization and a )RFXV%UDQGV%XGZHLVHUDQG+DUELQ management and cost discipline helped philosophy of investing to “win where showed a solid volume performance in RƬVHWWRXJKPDFURHFRQRPLFFRQGLWLRQV LWPDWWHUVšKHOSHGRXUWHDPLQ(XURSH China, with another year of double-digit in key markets in Latin America South. contend with challenging macroeconomic growth for Budweiser in particular. We :HbUHSRVLWLRQHGWKH4XLOPHVEUDQGWR conditions. The performance of our Focus FRQWLQXHWREHQHƮWIURPWKHH[SDQGLQJ Š,QVSLUH7UDQVIRUPLQJ(QFRXQWHUVšDQG Brands in Western Europe was consistently buying power and high-end preferences LQWURGXFHGDƬRUGDEOHPXOWLSDFNVOHDGLQJ positive. Several Focus Brands held the among China’s consumers. At the same to a positive acceptance among young 1RbEUDQGSUHIHUHQFHDPRQJDGXOWVRI WLPHZHDUHRSWLPL]LQJWKHHƱFLHQF\ adults. We continued to see positive legal drinking age to 24 in key European of our facilities and processes. Key market share performance in Bolivia PDUNHWV -XSLOHULQ%HOJLXP%XGLQ5XVVLD PDUNHWLQJHƬRUWVDWWKHEHJLQQLQJRI and Chile. Innovations included the DQG&KHUQLJLYVNHLQ8NUDLQH,QWKH8. LQFOXGHGDWHUULƮF&KLQHVH1HZ ODXQFKRI0L[[7DLO0RMLWRE\4XLOPHVLQ 6WHOOD$UWRLVLVWKH1RbSUHIHUUHGEUDQG Year campaign for Budweiser, as the $UJHQWLQDDbNH\HQWU\LQRXUHƬRUWVWR in general, while Budweiser holds the Clydesdales visited China to mark the win share of throat. Returnable bottles 1RbSRVLWLRQ2XUr),)$:RUOG&XSž 2XU*OREDO%UDQGV Budweiser Around the world, people come together to Budweiser’s authentic American values give enjoy the perfectly balanced taste experience the brand a strong appeal in diverse markets that is embodied by Budweiser, the brand that around the world. It is the No. 1 premium represents the American Dream, optimism beer in ChinaIROORZLQJƮYHVWUDLJKW\HDUVRI and celebration. Originally brewed to be the double-digit volume growth, appealing to the ƮUVWWUXO\QDWLRQDOEHHUEUDQGLQWKH86 growing segment of consumers who desire today the appeal of Budweiser resonates in premium beers. more than 80 countries. Globally, Budweiser’s YROXPHJUHZ LQDQGFRQVXPSWLRQ The brand’s strength was symbolized by an RXWVLGHWKH86SURYLGHGPRUHWKDQ amazing 2014 Chinese New Year promotion, of volume, with especially robust growth in LQbZKLFKDWHDPRI&O\GHVGDOHVWUDYHOHGWR &KLQD%UD]LODQGWKH8. &KLQDWRFHOHEUDWHWKH Our aluminum bottle was extended to Fans of Budweiser feel a strong emotional Budweiser. This innovation not only provides attachment to the brand, so they responded DEHWWHUFRQVXPHUH[SHULHQFH FROGHUEHHU enthusiastically to the “Puppy Love” ad that UHFORVDEOHWZLVWRƬFDS EXWWKHYLVXDOO\ UDQGXULQJ6XSHU%RZO;/9,,,7KHDGVKRZVD distinctive packaging — a deep, rich red pair of unlikely friends — a Golden Lab puppy color — is also attracting the attention of a and one of our iconic Clydesdales — who prove new generation of Budweiserer enthusiasts.enthussiastsiasts.s. WREHLQVHSDUDEOH5HưHFWLQJRXUDJJUHVVLYH digital activations, the ad set many viewership UHFRUGVLQFOXGLQJPRVWŠYLUDOš6XSHU%RZO commercial ever, most popular video over a 36-hour period, most liked Facebook post IRUbDEUDQGDQGPRUHWKDQPLOOLRQYLHZV on YouTube. P. 015P. 14/015/15 “Successful FIFA World CupTM activation made Budweiser a world champion brand.” 2 Anheuser-Busch InBev Annual Report 2014 I STRONG STRATEGIC FOUNDATION P. 16/17 “Corona brings its ‘Find Your Beach’ spirit to consumers around the world.” Brands: orona &RURQD([WUDZDVƮUVWEUHZHGLQ DW Protecting our beaches is the mission WKH&HUYHFHU¬D0RGHORLQ0H[LFR&LW\7HQ of Corona SunRise–Save the Beach, an years later, Corona became the best-selling important component of the brand’s global beer in Mexico. Today, Corona is known and platform. Corona has partnered with a enjoyed around the world for its “Find Your leading environmental NGO, Blue Flag, to %HDFKšVSLULW.QRZQIRULWVFRQQHFWLRQZLWK rally communities to advocacy and action, the beach as an exotic place to relax, the encouraging the adoption and restoration of iconic bottle and the lime ritual, the brand local beaches around the world, to preserve is exported to over 100 countries. Corona their pristine nature for future generations. UDQNV1RbLQWKH%UDQG=ž5HSRUWRI the world’s most valuable beer brands and Extending the Corona beachhead to new occupies the No. 1 spot for Latin America. In markets, we have introduced the brand in ZRUOGZLGHYROXPHRI&RURQDURVH Brazil, and welcomed it back into our portfolio H[FOXGLQJWKH86ZLWKFRQWLQXHGVWURQJ in Argentina, Canada and China in 2014. growth in Mexico and rising volume in an Corona continues to be a strong favorite ever-widening range of markets. in Australia, Chile and Western Europe. Going forward, we see further opportunities In Mexico, the FIFA World CupTM provided an to expand the reach of Corona globally, opportunity for the biggest promotional event SDUWLFXODUO\LQWKH$VLD3DFLƮFUHJLRQDQG LQ&RURQDŞVKLVWRU\DVb0H[LFDQIDQVZRQ Latin America. trips to Brazil for the tournament by choosing specially coded bottles. In Mexico, football is one of Corona’s signature platforms and a key means of connecting with consumers, along Corona established beach- with summer activities and music. heads in new markets, such as Brazil, and rejoined the port- The Corona Capital music festival, a summer- folio in Argentina, Canada and time tradition in Mexico City, attracted close China in 2014. WRbIDQVRIPXVLFDQG&RURQDWRKHDU performances by Weezer, Conor Oberst, The Ghost of a Saber Tooth Tiger, and other acts. The Corona brand’s strong connection with Corona SunSets is an exciting series of consumers has been created almost entirely worldwide beach music festivals showcasing through experiential campaigns, based on Corona’s unique ability to connect consumers DVKDUHGDƱQLW\IRUWKHEHDFKPXVLFDQG ZLWKWKHŠVRXQGRIWKHEHDFKš)HDWXULQJ sports. This approach is documented in a the electronic dance music favored by the FRPSUHKHQVLYHEUDQGŠWRRONLWšGHYHORSHGE\ millennial generation, Corona SunSets the Corona team. As we extend the Corona combined great sounds with the drama of EUDQGDURXQGWKHZRUOGWKLVWRRONLWRƬHUVD DbVHWWLQJVXQRQVRPHRIWKHZRUOGŞVPRVW VWHSE\VWHSJXLGHWRHƬHFWLYHO\EXLOGLQJWKH famous beaches. Festival locations in 2014 brand in new markets. We are also learning included Playa del Carmen and Acapulco from the Corona experience to create similar 0H[LFR 7RURQWR,VODQGV &DQDGD ,EL]D toolkits for our other brands, to enhance their 6SDLQ DQG:HVWRQ6XSHU0DUH 8. success and growth potential. Anheuser-Busch InBev Annual Report 20142 OURSTRONG STRATEGIC STRATEGIC PLATFORM FOUNDATION FOR GROWTH Stella Artois is so sophisticated and distinctive, when special gifts — a piano, a video camera that it has its own Pouring Ritual and iconic DQGbPRUHŜZHUHEHVWRZHGXSRQWKHOXFN\ serving chalice. Synonym for Belgian recipients. Promoted via the hashtag brewing tradition, quality and heritage, it JLYHEHDXWLIXOO\WKHVHULHVZDVƮOPHGLQ LVVDYRUHGLQ FRXQWULHVDVDFRPSOHPHQW $UJHQWLQDWKH8.DQGWKH86DQGZDV WRHOHJDQWHYHQWVDQGƮQHGLQLQJ9ROXPH enjoyed online via YouTube by consumers LQFUHDVHGLQZLWKHVSHFLDOO\ across the globe. strong performances in Brazil, Canada and WKH867KHEUDQGLVUDQNHG1RbLQWKH Pairing our tradition of excellence with BrandZ™ Report of the world’s most valuable WKHbGLJLWDOOLIHVW\OHVRIPLOOHQQLDOFRQVXPHUV beer brands. Stella Artois became the ƮUVWEHHUEUDQG WRbDGYHUWLVHRQ,QVWDJUDP. Images of The spirit of perfection embodied in the 6WHOODb$UWRLVZHUHVKRZQLQIHVWLYHVHWWLQJV 6WHOODb$UWRLVH[SHULHQFHZDVKLJKOLJKWHG alongside various delicacies, as part of our during the past year with an ad campaign RYHUDOOŠ*LYH%HDXWLIXOO\šFDPSDLJQ celebrating the World’s Greatest Events. Focusing on such unique events as the Festival Stella Artois Cidre Raspberry was launched in GH&DQQHV, Wimbledon, 7KH2SHQ&KDPSLRQVKLS WKH8.IXUWKHULQJRXUHƬRUWVWRJDLQVKDUH and Abierto Argentino de Polo, the campaign of consumption in new categories. We entered VWUHDPHGOLYHVWRULHVDERXWKHURLFƮJXUHVZKR the cider category in 2011 with the introduction stop at nothing to achieve perfection in their of Stella Artois Cidre. Since then, we have chosen endeavors. expanded the Stella Artois Cidre family WRbWKUHHưDYRUV DSSOHSHDUDQGUDVSEHUU\ A video starring Rufus, the iconic Wimbledon hawkZDVDSRSXODUSDUWRIWKH6WHOODb$UWRLV ŠSHUIHFWLRQLVWšFDPSDLJQ7KHYLGHR highlighting Rufus’ vigilance in protecting Stella Artois Cidre Raspberry is the Wimbledon grounds, was a great example a new addition to our popular of our digital strategy and received almost cider category. bPLOOLRQYLHZVRQ © 2014 Getty Images Anheuser-Busch InBev Annual Report 2014 3 *52:7+'5,9(13/$7)2506 “Understanding when and why consumers JHWbWRJHWKHULVDUHFLSH for growth.” P. 20/21 People get together in different ways, at different WLPHVDQGIRUGLƬHUHQWUHDVRQV7RVKDUHVSHFLDO experiences. To enjoy the pleasures of a great meal. 7RbFKHHURQWKHLUWHDPRUOLVWHQWRWKHLUIDYRULWHEDQG7R Growth unwind after a long day. To open their home to friends and family. We believe our growth depends on understanding what brings people together — and how we can make Driven their occasions even better. To do that, we increasingly seek relevant insights into the population of potential consumers, the preferences of those most likely to favor our brands, the reasons why they get together, Platforms and the experiences they value. Based on these insights, we have created a framework of Growth Driven Platforms, or GDPs, which represent the major occasions for purchasing and consuming RXUbSURGXFWV:HDUHDOLJQLQJRXUPDUNHWLQJVDOHV product development and other brand-building activities with the GDPs to ensure that we provide quality products — and brew good times and great experiences — for all the ways people get together. Anheuser-Busch InBev Annual Report 2014 3 *52:7+'5,9(13/$7)2506 Getting together to share good times — WKHJOREHZHDLPWRFRQQHFWZLWKPLOOHQQLDOV DQG/RVb$QJHOHVDQGIHDWXUHGDUWLVWV WRbUHOD[DQGXQZLQGVWUHQJWKHQH[LVWLQJ VSHFLƮFDOO\WKURXJKXQLTXHH[SHULHQFHVWKDW like Kanye West, Imagine Dragons, Kings IULHQGVKLSVRUPDNHQHZRQHVŜKDVDOZD\V RQO\RXUEUDQGVFDQRƬHUEXLOGLQJRQRXU of Leon, and Iggy Azalea. The 2014 been an important part of beer’s universal PXVLFSODWIRUPVVSRUWVSDUWQHUVKLSVDQG HGLWLRQRIb0DGHbLQ$PHULFD was attended DSSHDO:HZDQW%XGZHLVHUDVZHOODVORFDO brand ambassador programs. E\DOPRVWbSHRSOHLQSHUVRQ FKDPSLRQVVXFKDV%XG/LJKW%UDKPD DQRWKHUbOLVWHQHGWROLYHVWUHDPHG +DUELQ4XLOPHV6NRODQG-XSLOHUWREHWKHUH ,QWKH86WKHBudweiser Made in America FRQFHUWVDQGbbPLOOLRQFRQVXPHUV whenever friends get together. Whether they Music FestivalFRIRXQGHGZLWK-D\= followed the festival on social media. GRVRWROLVWHQWRPXVLFZDWFKDJDPHRUMXVW LVDbKLJKSURƮOHDQQXDOHYHQW0XVLF VKDUHDJUHDWQLJKWRXWRXUEUDQGVKHOSWR parties in 30 cities lead up to the main PDNHVXUHWKH\KDYHDJRRGWLPH$URXQG festival, which was held in Philadelphia P. 22/23 Relaxation & Bonding (OHFWURQLFGDQFHPXVLF ('0 LVWDNLQJ Crested Butte, Colorado, as the location their bags, the guests were treated to three the world by storm — and the Budweiser for Whatever, USARQ6HSWHPEHUś GD\VDQGWZRQLJKWVRI8S)RU:KDWHYHU Storm Electronic Music Festival is China’s to create the ultimate #UpForWhatever activities, epic adventures and 17 musical answer to that trend. The 2014 version of weekend of spontaneous fun. Bud Light DFWVb&UHVWHG%XWWHEDUVUHVWDXUDQWV the Festival was described as the, “biggest LVbIDPRXVIRUWDNLQJRYHUFUXLVHVKLSV and stores were open throughout the ('0SDUW\&KLQDKDVHYHUVHHQš,WRSHQHG branding hotels and providing consumers weekend. with a major launch party in Shanghai. ZKRDUH8S)RU:KDWHYHUZLWKRQFH 0XVLFLDQVDQGDVSLULQJ'-VDFURVV&KLQD in-a-lifetime experiences, and this was In Belgium, the Jupiler House of the Bull were encouraged to compete for spots in The Perfect Beer for Whatever Happens’ VHWWKHVXPPHUIHVWLYDOVFHQHRQƮUH the Festival lineup. During the campaign biggest adventure yet. Crested Butte was In between concerts of both famous SHULRG%XGZHLVHURUJDQL]HGRYHU WUDQVIRUPHGLQWR:KDWHYHU86$DWRZQ DQGXSb bFRPLQJEDQGV-XSLOHUWUHDWHG Made for Music EDM parties nationwide, full of unique and unexpected experiences LWVIDQVWRSDUWLHVZLWKWRS'-V,QWRWDO enabling millions of Chinese consumers IRUWKHb%XG/LJKWIDQVVHOHFWHG -XSLOHUDFWLYDWHGPRUHWKDQIHVWLYDOV WRbH[SHULHQFHWKHPXVLFDQGRXUEUDQG WRbDWWHQGWKHHYHQWRXWRIVRPHb throughout the summer, including several ZKRbKDGFUHDWHGYLGHRVXEPLVVLRQVRQ of the nation’s top seasonal events, which After an exhaustive search that ZZZ8S)RU:KDWHYHUFRP:LWKMXVW PDNHV-XSLOHUWKH1RbEHHUEUDQGRIWKH FULVVFURVVHGWKH86Bud Light chose bKRXUVŞQRWLFHWRJUDEDIULHQGDQGSDFN Belgian festival scene. $VWKHRƱFLDOEHHURIWKH FIFA World Cup™ Trophy, 2014 FIFA World Cup™, was available in over Budweiser was a major bFRXQWULHV,Q presence wherever people 1HZb Rise as One: Bringing People Together through the FIFA World Cup™ 2Q5LRGH-DQHLURŞV programs spanned famous the worlds of sports Copacabana Beach, and entertainment, WKH%XGZHLVHU+RWHO including an epic No event of the past year brought people from every nation Budweiser created WRbYRWHIRUWKH was a premier concert lineup, WRJHWKHUPRUHWKDQWKH),)$:RUOG&XSž1HDUO\bPLOOLRQ VSHFLDOŠ5LVHDV2QHš 0DQbRIbWKHb0DWFK, destination to rooftop pool parties broadcast and digital presented by get together and appearances by SHRSOHDWWHQGHGWKHPDWFKHVLQSHUVRQ$QHVWLPDWHGbELOOLRQ content through Budweiser, or to for exclusive World Cup legends followed their favorite teams via FIFA’s Global Stadium social, strategic media receive tweets :RUOGb&XSUHODWHG DQGbFHOHEULWLHV partnerships. Social IURPb:RUOG&XS HYHQWVb6SHFLDO online and mobile hub. Billions are estimated to have taken part media kept fans in related happenings LQbWKHHYHQWWKURXJK79DQGGLJLWDOPHGLD WRXFKbZLWKWKHDFWLRQ such as concerts. encouraging them What better way to celebrate the global appeal of football, and enrich the world’s enjoyment of the World Cup, than with a great EHHU,QWKDWVSLULW%XGZHLVHUZDVSURXGWREHWKHRIILFLDOEHHU RIWKHWRXUQDPHQWŜDVNLQJELOOLRQVRIIDQVWRŠ5LVHDV2QHš and show their love for the game. For us, the World Cup was an incredible opportunity to bring people together with their favorite teams, with a sport they are passionate about, and with our brands around the globe. The FIFA World Cup™ was a tremendous showcase for Budweiser, as well as other brands in our portfolio that served DVORFDOVSRQVRUVLQVHOHFWHGPDUNHWVVXFKDV%UDKPD %UD]LO +DUELQ &KLQD &RURQD 0H[LFR 4XLOPHV $UJHQWLQD -XSLOHU +DUELQŞVFDPSDLJQLQ %HOJLXPDQGWKH1HWKHUODQGV 6LEHULDQ&URZQ 5XVVLD &DVV China included a special 79FRPPHUFLDOPDGH .RUHD +DVVHUµGHU *HUPDQ\ DQG%HFNŞV ,WDO\ DPRQJ H[FOXVLYHO\IRU+HL/RQJ others. We supported our selected brands with impressive -LDQJSURYLQFHWKH KRPHWRZQRI+DUELQ 360° activations in our markets. Millions of fans took part in Bud Light sponsored LQ/DVb9HJDV beer, along with special programs sponsored by our brands, either by attending events DVHULHVRI:RUOGb&XS These highly edition cans and bottles. in bars and other public places, participating in contests, or viewing parties at popular events 7KHƮUVWGD\RIWKH hundreds of bars contributed to the matches was celebrated following our campaigns on social media. and other on-premise largest viewership DVŠ%OXH'D\šLQKRQRU locations across UDWLQJbHYHUIRUD of the brand’s signature :HHVSHFLDOO\ZDQWWRWKDQNDOO$%b,Q%HYFROOHDJXHVDQG WKH86LQFOXGLQJ FIFA World Cup™ package color. WKH8OWLPDWHWWKHHH 8 WRXUQDPHQWbLQ business partners, who came together in unprecedented ),)$b:RUOGb&XSž)),)$),))$ ::RR WKHb86 numbers to make our participation in the World Cup a success. 9LHZLQJ3DUW\99LHLHZHZZLLQLQJJ 3 From the associates who worked with vendors in Brazilian stadiums to ensure a refreshing fan experience, to those who planned and executed our campaigns around the globe, the $%b,Q%HYWHDPSURYHGWKHPVHOYHVWREHZRUOGFKDPSLRQV Corona brought fans together with the FIFA World Cup™ in DELJZD\bWKURXJKD promotion in which b0H[LFDQ consumers won a free trip to Brazil. The soundtrack accompanying 4XLOPHVFUHDWHGDPRELOH in local bars and other &RURQDŞVb:RUOG&XS bar, known as Bar Movil HYHQWV:HLQVWDOOHGb 79DGVDOVREHFDPH 4XLOPHVHVSHFLDOO\WRTXHQFK QHZZLƮHQDEOHG79VLQ the theme song for the thirst of Argentine bars in Bolivia to make the 0H[LFRŞVbQDWLRQDOWHDP fans visiting Brazil. Back experience of watching a in Argentina, consumers match with friends even enjoyed limited edition cans, more enjoyable. fan fests and celebrations -XSLOHUPDGHD79 campaign as well as the commercial starring the Š%HVWRI%HOJLXPšWURSK\ LQ Belgian National Football the European Sponsorship Team and distributed Association’s Excellence bVSHFLDOO\GHVLJQHG Awards the campaign won VXSSRUWHUưDJVŜD bronze. The Red Devil World promotion so unique that it &XS79FRPPHUFLDOZDVWKH ZDVGXEEHGŠưDJYHUWLVLQJš 4th most viewed YouTube by local media. The Belgian video in Belgium in 2014. Sponsorship Association This was just one of the DZDUGHG-XSLOHUWKH PDQ\$%b,Q%HYFDPSDLJQV Brahma paid tribute $ORQJZLWK5LRGH-DQHLURŞV ƮUVWSUL]HLQWKHŠ%HVW in Europe, which promoted to Brazil’s passion for Maracanã stadium, 6SRQVRULQJ$FWLYDWLRQš VHYHQGLƬHUHQWEUDQGVLQ football with a limited ZKLFKKRVWHGLWVƮUVW IRUWKHŠ:H$UH5HDG\š eight countries. edition beer, Brahma FIFA World Cup™ match Seleção Especial, made in 64 years, Granja with barley sown on Comary is an iconic WKHƮHOGRIWKH*UDQMD symbol of football Comary training center. LQb%UD]LO Anheuser-Busch InBev Annual Report 2014 3 *52:7+'5,9(13/$7)2506 Food & Savor Food has become a passion point for our FRQVXPHUVHVSHFLDOO\DPRQJPLOOHQQLDOVŜ MXVWWKLQNRIDOOWKRVHIRRGLH,QVWDJUDPV&XLVLQH LVWKHQHZ5RFNŝQŞ5ROODQGFKHIVDUHWRGD\ŞV URFNVWDUV,QSDUDOOHOWKHUHLVDUHQHZHGLQWHUHVW in beer as the perfect complement for food. 2IWHQWKHULJKWDFFRPSDQLPHQWIRUDJUHDWGLVK LVQRWbDbJODVVRIZLQHŜEXWDGLVWLQFWLYHDQG sophisticated beer or cider. That’s why we focus RQRƬHULQJDVHOHFWLRQRIVDYRU\DQGVXSHULRU TXDOLW\EUHZVWKDWHQKDQFHWKHưDYRUbRIIRRG EDVHGRFFDVLRQVIURPDQLQIRUPDOPHDODWKRPH WRƮQHGLQLQJ Through our local and international premium EUDQGVDVZHOODVRXUQHZFUDIWSRUWIROLRLQ WKH86ZHDUHXQLTXHO\SRVLWLRQHGWRKHOS PDNHPHDOVPRUHVSHFLDO)RRGIULHQGO\EUDQGV VXFKDVbRXU%HOJLDQWULRŜ6WHOOD$UWRLV/HƬH DQG+RHJDDUGHQŜDUHEHLQJMRLQHGE\QHZHU RƬHULQJVWKDWDUHDOODERXWGLVFRYHU\DQGưDYRU LQFOXGLQJ$OH[DQGHU.HLWKŞV*RRVH,VODQGDQG 6KRFN7RS We are committed to crafting the best beer experience possible. That’s why we have been carefully expanding our portfolio to include more craft beers, so we can deliver the artisanal qualities favored by many beer enthusiasts. In the past year, we added b%DUUHO%UHZLQJ&RRI%HQG2UHJRQDQG Blue Point Brewing Company of Long Island, NY, keeping the passionate brewmasters DQGbWHFKQLTXHVWKDWPDNHWKHVHFUDIWEUHZHUV VRXQLTXH8VLQJWKHVDPHDSSURDFKZHWRRN ZLWKb*RRVH,VODQG%UHZHUVZHZLOOVWULFWO\ maintain their recipes and brewing processes, while allowing more consumers to enjoy these exceptional beers. The Best of BelgiumRQ7XPEOURƬHUVIRRG pairings and suggestions for our premium %HOJLDQEHHUV 6WHOOD$UWRLV+RHJDDUGHQ DQG/HƬH)RRGLHVFDQOHDUQIRUH[DPSOH that Stella Artois marries well with intensely P. 28/29 ưDYRUHG7KDL$VLDQDQG,QGLDQGLVKHVEXWDOVR Stella Artois is sponsoring a full menu of that the brand’s bitterness and light body cut activations in partnership with Food & Wine through cream sauces and semi-soft cheeses. PDJD]LQHLQWKH866SHFLDOOLIHVW\OHHYHQWV 7KHUHIUHVKLQJưDYRURI+RHJDDUGHQZKLFK that celebrate the pairing of the brand with comes in part from real Curaçao orange peel food include the Food & Wine Classic in Aspen, and a hint of coriander, is a good match for and premier programs at the Beaver Creek ZKLWHưHVKHGƮVKDVZHOODVFODVVLF%HOJLDQ Resort, Pebble Beach Resorts and in Los Angeles’ inspired mussels with shoestring fries and most food-conscious neighborhoods. The VDODGV/HƬH%ORQGHZKLFKLVGU\IUXLW\DQG events feature demonstrations by famous lightly spiced, pairs well with both meat chefs, tastings and parties and attract dishes and chocolate desserts. DXGLHQFHVZLWKDQDSSUHFLDWLRQIRUOLIHŞVƮQHU tastes — including Stella Artois. In Paris and Brussels, food trucks sponsored /DXQFKHGLQWKH8.LQStella Artois E\/HƬH help to highlight how well the taste of Cidre Raspberry is the latest addition to our /HƬHSDLUVZLWKƮQHFKHHVHVDQGRWKHUVQDFNV family of premium crafted ciders. Giving /HƬHKDVDOVRUHGHVLJQHGLWVSDFNDJLQJWR consumers an expanded range of beverage showcase recipes right on the cartons, and choices was the inspiration behind the the brand has created content to stimulate creation of Stella Artois Cidre several years conversations about food on many social ago, and the brand has been adding new media platforms. ưDYRUVDQGZLQQLQJQHZIULHQGVHYHUVLQFH Stating that “beer is the new wine,” our In Mexico, Negra Modelo has long been 8.WHDPLVZRUNLQJWRHQFRXUDJHPRUH NQRZQDVŠWKHFUHDPRIEHHUVš:LWKLWVGDUN consumers to discover the possibilities amber color, topped by thick, creamy foam, RIbEHHUDVDQDFFRPSDQLPHQWWRDYDULHW\RI 1HJUDb0RGHORRƬHUVDEDODQFHGưDYRUDQG FXLVLQHVb:HKDYHSDUWQHUHGZLWKD0LFKHOLQ a delicate aroma of dark malt, caramel and starred chef, Kevin Love, to award and hops. Already the top-selling dark beer in acknowledge pubs and restaurants that serve Mexico, Negra Modelo is also being promoted the best gourmet bar food that pairs well by our team as a perfect complement to food. ZLWKbEHHUVOLNH/HƬH Anheuser-Busch InBev Annual Report 2014 3 *52:7+'5,9(13/$7)2506 $WWKHHQGRIDORQJGD\SHRSOHZDQWWR Sundown signals the end of the work Brazil introduced Skol Beats Senses JHWWRJHWKHUZLWKIULHQGVDQGEUHDNRXW day — and the start of good times. in late 2014. Mysterious and full of of the routine; they feel the desire to treat We are sponsoring Corona SunSets attitude, it was specially developed for themselves and have a little fun. We are IHVWLYDOVDWbIDPRXVEHDFKHVDURXQGWKH WKRVHVHHNLQJbQHZH[SHULHQFHVLQWKH KHOSLQJWRVHWWKHULJKWWRQHZLWKUHIUHVKLQJ world to remind consumers to think of night universe. 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Corona SunSets a unique beer-based beverage that is &RURQD6WHOOD$UWRLVDQG%XG/LJKWDUH festivals celebrate the beach lifestyle with intended to be consumed over ice, making among the brands that are well suited to this concerts, illuminated by the setting sun, this innovation even more exceptional VKLIWLQJPRPHQWDVDUHLQQRYDWLRQVVXFK DQGRƬHUDQRSSRUWXQLW\IRUULVLQJ'-VWR DQGbYHUVDWLOH,WVGLVWLQFWLYHERWWOHLV DVbWKH5LWDIDPLO\6WHOODb$UWRLV&LGUHDQG FUHDWHWKHLURZQŠ6RXQGVRIWKH%HDFKš VKDSHGOLNHWKHOHWWHUŠ6šDQGVSRUWV -RKQQ\$SSOHVHHGZKLFKFDQEHVHUYHGRYHU Festival locations in 2014 included Playa a dazzling blue color — which was the LFHPL[ZHOORUKDYHDVZHHWHUWDVWHSURƮOH GHO&DUPHQDQG$FDSXOFR 0H[LFR inspiration for a distinctive launch ad set 7RURQWR,VODQGV &DQDGD ,EL]D 6SDLQ LQDQXQGHUZDWHUQLJKWFOXEb DQG:HVWRQ6XSHU0DUH 8. P. 30/31 4XLOPHVODXQFKHGMixxTail Mojito, a new commercial spot, a man hands out Ritas at a product for consumers who want to add JDUGHQSDUW\LQWKHRƱFHDURXQGWKHSRRO DbUHIUHVKLQJWDVWLQJQHZDOWHUQDWLYHWR DQGHYHQWRDFRXSOHZDWFKLQJ79DWKRPHDOO the mix. MixxTail is ready-to-drink and while singing along with the Lionel Richie tune also perfect for mixing. Argentina was the Š$OO1LJKW/RQJš7KHFDPSDLJQVLJQDOVWKDW ƮUVWPDUNHWWRLQWURGXFHWKHQHZEUDQG \RXFDQDOZD\VVWDUW\RXURZQƮHVWDŜMXVW ,QDGLƬHUHQWLDWHGVWUDWHJ\WKHVDOHVDQG add the Ritas. marketing team positioned the new product away from the traditional beer shelves in Budweiser Brewmaster Reserve was launched stores and supermarkets, and in closer in China during the past year as a unique proximity to aperitifs. MixxTail has been selection for nightlife occasions and to stake highly successful since its launch, and other out a strong position in the super-premium brands around the globe may adopt variants segment. Our brewmaster created a special of this popular concept. dark amber liquid, and Brewmaster Reserve is sold in numbered bottles capped with a “Fiesta Forever” is the theme of a popular distinctive champagne-style cork to highlight campaign for our Ritas family. In the its celebratory nature. Breaking the Routine Anheuser-Busch InBev Annual Report 2014 3 *52:7+'5,9(13/$7)2506 Serving Up a Great Night Out :HKDYHLQWHQVLƮHGRXUHƬRUWVWRVFDOH HYHQWVDOVRIHDWXUHDFR]\ƮUHSLWOLYH expand the brand family to satisfy beer XSRXUEUDQGVŞSUHVHQFHLQEDUVFOXEV PXVLFDQGRƬHUWKHRSSRUWXQLW\WRPDNH ORYHUVŞWKLUVWIRUbYDULHW\ restaurants and other outside venues. DbGRQDWLRQWRWKHORFDOIRRGEDQN :HDUHODXQFKLQJQHZSURGXFWVMXVWIRU 6RPHbEDUVDQGUHVWDXUDQWVLQWKH those special occasions and to build strong Budweiser Brew House, now open in 86KDYHinteractive beer tap handles connections with our brands. At the same %DOOSDUN9LOODJHLQ6W/RXLV0LVVRXULLV for Bud Light and Budweiser, which WLPHZHDUHUDPSLQJXSWKHFROODERUDWLRQ the ideal place to enjoy a Cardinals game ưDVKOLJKWVDQGGLVSOD\PHVVDJHVZKHQ between our brand and sales teams and or other events while sampling beer from the local team scores. As a top sports ZLWKbRXUFXVWRPHUVWREULQJDQHZG\QDPLF one of 200 taps. sponsor, we saw an opportunity to WRWKHRQWUDGH deliver a unique experience for fans, and Pretzels and beer are a favorite partnered with Sprint and Mesh Systems Consumers can start the weekend on combination, so why not create a WRFUHDWHWKHKDQGOHV8VLQJZLUHOHVVDQG the right note on Fire Pit Fridays, held special beer that captures that taste cloud technology, the handles connect weekly at the Biergarten adjacent to H[SHULHQFH":HGLGMXVWWKDWGXULQJWKH thousands of on-premise locations to our Fort Collins, Colorado brewery. The past year, with the launch of limited WKHbRQƮHOGDFWLRQDWVWDGLXPVDFURVV Biergarten, just opened in late 2014, HGLWLRQ6KRFNb7RSb7ZLVWHGb3UHW]HOb:KHDW the country. Eventually, we will broaden provides an opportunity for guests of 6KRFNb7RSKDVEHHQRQHRIRXUPRVW WKHbSURJUDPWRPRUHORFDWLRQVDQGD legal drinking age to sample our products successful brand introductions, and this wider range of sports. and learn about the craft of beer from is a great example of how we continue to our ambassadors and brewers. The Friday P. 32/33 To enhance the out-of-home experience IRUbFRQVXPHUVLQ%UD]LOZHGHYHORSHGD concept known as “Nosso Bar” 3RUWXJXHVH IRUŠ2XU%DUš 7KLVLVHVVHQWLDOO\DQ attractive model bar with improved facilities and amenities, designed to inspire bar RZQHUVWRRƬHUDQXSJUDGHGHQYLURQPHQW that is conducive to the enjoyment of our brands. We have franchised the model to selected bar owners and now have more WKDQb1RVVR%DUORFDWLRQV CubanistoLVDQRWKHUưDYRUHGEHHUGHVLJQHG WREHHQMR\HGRQŠELJQLJKWVRXWš,QWURGXFHG LQWKH8.)UDQFHDQG%HOJLXP&XEDQLVWR LVbDUXPưDYRUHGSUHPLXPEHHUZLWKDIUHVK taste of citrus, orange zest, lime and an aroma of caramelized cane sugar. Special events at bars and secret consumer experiences that can only be unlocked through social media support the spirit of Cubanisto. Anheuser-Busch InBev Annual Report 2014 3 *52:7+'5,9(13/$7)2506 2SHQLQJXS\RXUKRPHWRIULHQGVDQGIDPLO\ (DFKbFUDWHLQFOXGHGEUDQGHGSLOVQHU consumers to experiment and create their ZKHWKHUWRHQMR\DJDPHFHOHEUDWHKROLGD\V glasses and an 18-pack of Budweiser own Mix-A-Rita combinations. RUVSHFLDOHYHQWVRUMXVWJHWWRJHWKHU bottles featuring classic labels from LQIRUPDOO\LVWKHXOWLPDWHLQKRVSLWDOLW\:H WKHODVW%XGZHLVHUODEHOEHIRUH To increase the enjoyment of beer at DUHODXQFKLQJQHZSURGXFWVDQGSDFNDJLQJ 3URKLELWLRQ ƮUVW%XGZHLVHUODEHO home, several of our brands are available to serve the needs of consumers who want DIWHU3URKLELWLRQ DQG PDUNLQJ on the Draftmark Tap System. Draftmark WRFRPHKRPHWRDJUHDWH[SHULHQFH7RKHOS WKHEUDQGŞVWKDQQLYHUVDU\ :HDOVR LVDKLJKHQGDƬRUGDEOHKRPHV\VWHP GULYHSXUFKDVHVRIRXUEUDQGVIRULQKRPH encouraged consumers to share their FXUUHQWO\VROGLQ86VWDWHVZKLFKDOORZV FRQVXPSWLRQZHDUHFUHDWLQJLQQRYDWLYH Budweiser images with the hashtag beer enthusiasts to get a great draught PXOWLSDFNVH\HFDWFKLQJGLVSOD\V +ROLGD\%XGV beer right from the refrigerator. The variety DQGbEHWWHUFRROHUVIRUWKHUHWDLOFKDQQHO of draught beers currently includes A new Mix-A-Rita 18-pack was introduced %XGZHLVHU6KRFNb7RSb%HOJLDQb:KLWH Making the holiday season more festive, in 2014 to encourage consumers to bring Goose Island India Pale Ale, Goose Island we created Budweiser limited edition home the distinctively refreshing taste +RQNHUŞV$OHDQG0LFKHORE$PEHU%RFN holiday cratesIRUWKH86PDUNHW RIbRXU5LWDIDPLO\7KHFRQYHQLHQWPL[HG with more brands and markets to be 7KHbKDQGPDGHZRRGHQFUDWHVZHUHH[DFW SDFNIHDWXUHVIRXUSRSXODUưDYRUV introduced over time. replicas of the ones stacked atop the Bud Light Lime Lime-A-Rita, Straw-Ber-Rita, famous Budweiser Clydesdale hitch. Raz-Ber-Rita and Mang-O-Rita to enable P. 34/35 Jupiler Cold Grip Ribbed Cans, introduced Our innovative aluminum bottle is perfect in Belgium during the past year, have been for enjoying a really cold beer at home. popular with consumers and retailers. The 1RZbDYDLODEOHZLWK%XG/LJKW%XGZHLVHU cans mimic the feel of a ribbed beer glass, to 6KRFNb7RSDQGRWKHUEUDQGVDOXPLQXPERWWOHV bring home the sensation of enjoying a cold get colder faster and stay colder longer, beer in your favorite bar. ZKLOHDOVRIHDWXULQJUHFORVDEOHWZLVWRƬ caps. And the festive, brightly colored In Germany, we introduced the Beck’s Cool packaging livens up any in-home celebration. PackVSHFLƮFDOO\IRUSHRSOHFHOHEUDWLQJ together at home. This convenient 8-pack of bFOERWWOHVLVKHOSLQJWRGUDZWKHDWWHQWLRQ oof consumers to the Beck’s brand and is helpihelping to grow volume. Bringing Home the Best Anheuser-Busch InBev Annual Report 20144 DREAM-3(23/(-CULTURE “Delivering on our Dream takes talented and motivated people, inspired by a culture of ownership.” P. 36/37 Since the combination of Interbrew and Ambev a decade ago, our accomplishments have been built on DbVROLGSODWIRUPZHFDOO'UHDP3HRSOH&XOWXUH. This has been a unique strength of the company and will continue to guide our performance and progress for the future. The essence of our culture is embodied LQb*XLGLQJb3ULQFLSOHVZKLFKDOORZXVWRSHUIRUP consistently and to work together toward one shared Dream Dream around the world. People Culture Anheuser-Busch InBev Annual Report 2014 4 DREAM-3(23/(-CULTURE Our Dream 1 Our shared Dream energizes everyone to work LQWKHVDPH{GLUHFWLRQWREH WKH{%HVW{%HHU&RPSDQ\ %ULQJLQJ3HRSOH7RJHWKHU )RUD%HWWHU:RUOG. For us, everything begins with our shared Dream. Our Dream has evolved with the realization that Bringing People Together is central to who we are and what we do. We are inspired by our Dream to build one RIbWKHOHDGLQJJOREDOFRQVXPHUJRRGV companies, and to improve the world around us by promoting responsible drinking, environmental stewardship DQGbLQYROYHPHQWLQRXUFRPPXQLWLHV “Our 10 Guiding Principles OHDGbWKHZD\WRRQH VKDUHGb'UHDPDURXQGWKHZRUOGš P. 38/39 2 3 Our greatest strength is :HUHFUXLWGHYHORSDQG our people. Great people retain people who can be grow at the pace of their better than ourselves. talent and are rewarded :H{ZLOOEHMXGJHGE\WKH accordingly. quality of our teams. Our People (YHU\GD\$%b,Q%HYŞVSHRSOHZRUNWR ,QbZHKLUHGWUDLQHHVIURP in all Zones to identify those with high transform our Dream into reality. 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DVb/RQGRQ%XVLQHVV6FKRRODQG,(6(LQ WRbEHbUHFRJQL]HGDFURVVWKHFRPSDQ\ (XURSHDQG&(,%6LQ+RQJ.RQJ,Q We hire people with the potential to we selected 21 MBAs for the program Excellence ProgramsŜ:HKDYHVSHFLƮF be better than we are, ensure that our from a pool of 642 applicants. programs to help employees acquire leaders engage them fully, and challenge and hone the skills to achieve excellence them to perform at their best. At the same $%b,Q%HY8QLYHUVLW\ — Each of our LQbDUHDVVXFKDV%UHZHU\2SHUDWLRQV time, we invest heavily in attracting the JHRJUDSKLF=RQHVRƬHUVOLYHRURQOLQH Marketing, Sales, People, Finance, Corporate best people, developing their potential, SURJUDPVWKURXJK$%b,Q%HY8QLYHUVLW\ $ƬDLUVDQG,QIRUPDWLRQ %XVLQHVV6HUYLFHV and enriching their opportunities through with a curriculum focused on leadership, a range of programs and initiatives. method and functional learning. An Engagement — We measure and enhance important aspect of the ‘method track’ employee engagement, which is essential :HKDYHFRQWLQXHGWRUHƮQHDQGHQKDQFH is the awarding of white, green and black to our success. All employees participate our talent recruitment, learning and belts. In the past year, we awarded 123 in an annual cycle of communication and development initiatives to build a pipeline ŠJUHHQEHOWVšDQGVHYHQŠEODFNEHOWVšWR feedback to ensure that they understand our of talent, meet the changing needs of a employees, a record number. goals and are fully engaged in meeting them. growing business, and cultivate the next We measure engagement through annual generation of leaders. Marketing Initiative — An important surveys, and raising engagement scores is a initiative of the past year involved a key responsibility for all managers. Global Management Trainee (GMT) VWHSSHGXSHƬRUWWRUHFUXLWWUDLQDQG Program — Our GMT Program continues develop team members with strong Rewarding Performance — We apply to attract top students from leading marketing capabilities. We have added to cutting edge processes to measure and universities around the world. GMTs the marketing components of both the assess performance. Our compensation SDUWLFLSDWHLQDGHPDQGLQJbPRQWKSDLG GMT and MBA programs, with a goal of is structured on the basis of stretched training program combining classroom devoting a large portion of the classroom but achievable targets. We believe that a VWXG\DQGŠLQWKHƮHOGšMREVEHIRUHJRLQJ ZRUNWRPDUNHWLQJ$%b,Q%HY8QLYHUVLW\ bonus is a reward for great performance, RQWRIXOOWLPHSRVLWLRQVZLWK$%b,Q%HY is creating a robust marketing track. not an entitlement, and this system is The GMT program helps us build a highly Additionally, we are in the process of intended to attract people who relish a TXDOLƮHGZHOOURXQGHGWHDPWKDWLV assessing the abilities of current leaders challenging, merit-based environment. HQJDJHGZLWKRXUFXOWXUHIURP'D\b Anheuser-Busch InBev Annual Report 2014 4 DREAM-3(23/(-CULTURE Our Culture 4 5 6 :HDUHQHYHUFRPSOHWHO\ The consumer is the Boss. :HDUHDFRPSDQ\RI VDWLVƬHGZLWKRXUUHVXOWV :HVHUYHRXUFRQVXPHUV owners. Owners take results which are the fuel of our E\RƪHULQJEUDQG personally. company. Focus and zero- experiences that play a complacency guarantee meaningful role in their lasting competitive lives, and always in advantage. D{UHVSRQVLEOHZD\ A culture based on strong values unites understand their roles in meeting those initiatives across the company, and our people. We are proud to have a culture targets. Incentive programs give senior uniformly adopting best practices that that does not tolerate satisfaction or leaders and other top performers the SURPRWHHƱFLHQF\DQGSURGXFWLYLW\ complacency, that celebrates a sense of opportunity to reinvest their bonus in our ownership and personal responsibility, shares, with a company match. But our Our leaders are expected to set a strong and that constantly challenges our people ownership culture goes beyond owning personal example for the company. They to do things better. shares — it is about owning responsibility must deliver results, live up to their for our commitments to consumers, for commitments and inspire their teams to Putting the consumer at the center of the creation of shareholder value, and for do the same. Leaders never take the easy all we do is a key element of our culture. delivering on our Dream. way out, nor do things in a manner that To do that, we focus on delivering great places their own interests above those of brands, making products of impeccable We also believe in keeping it simple: with the company, consumers, shareholders, quality, and providing a superior decisions based on clear, agreed-upon employees and community. experience in a responsible way. We approaches and common sense. That respect the heritage of the brewer’s craft, means constantly rooting out complexity, while using the latest technologies and and streamlining processes that get in the media to connect with consumers. way of decision-making and execution. In our culture, team members think Cost discipline is a key element of our and act like owners: they take results culture. We aim to convert “non-working SHUVRQDOO\ DUHDFFRXQWDEOHIRUWKHLU PRQH\šLQWRŠZRUNLQJPRQH\šŜUHGXFLQJ DFWLRQV PDNHGHFLVLRQVLQWKHORQJWHUP expenditures for ancillary items while EHVWLQWHUHVWVRIWKHEXVLQHVV DQGH[HFXWH investing in brands, marketing, sales with focus, excellence and integrity. This HƬRUWVWUDGHSURJUDPVDQGRWKHUIDFWRUV ownership mentality is reinforced by that drive top-line and bottom-line growth. setting stretched but achievable targets, This entails continually challenging and and ensuring that all team members controlling costs, learning from successful P. 40/41 7 8 9 :HEHOLHYHFRPPRQVHQVH :HPDQDJHRXUFRVWV Leadership by personal and simplicity are usually tightly, to free up resources example is at the core of our better guidelines than that will support FXOWXUH:HGRZKDWZHVD\ unnecessary sophistication VXVWDLQDEOHDQGSURƬWDEOH and complexity. top line growth. There are no shortcuts on the path toward to the annual performance evaluations and in compliance with all applicable our Dream. The safety of our people, the RIbLQGLYLGXDOHPSOR\HHVGHSDUWPHQWV UHJXODWLRQV7KHb%RDUGbRIb'LUHFWRUVDQG quality of our products, and the uniqueness facilities, regions and Zones. Safety senior leadership team have established of our consumer experience can never be requirements are also embedded in each and continually maintain a strong ethical compromised. Achieving great results is of our excellence programs. FOLPDWHVXSSRUWHGE\DQHƬHFWLYHV\VWHP our goal, but how we achieve those results of internal controls, monitoring, risk is just as important. Distribution Process Optimization — A assessment, auditing, and training. For keystone of our supply operations has example, our Code of Business Conduct Staying Safe — The most important WUDGLWLRQDOO\EHHQDV\VWHPFDOOHG9R\DJHU was updated this year to reinforce our thing we can do for team members and 3ODQW2SWLPL]DWLRQ 932 ZKLFKDLPVWR commitment to ethics, integrity and a their families is to ensure a safe working standardize processes to ensure that all Better World. Sections such as “Anti- environment. This was a year of great RIbRXUIDFLOLWLHVRSHUDWHLQWKHVDIHVWPRVW 7UXVWšDQGŠ$QWL&RUUXSWLRQšZHUH progress in the area of safety, with 47% HƬHFWLYHPDQQHU:HDUHQRZDSSO\LQJD amended to make the Code even more fewer lost-time injuries, including in similar approach to our second tier logistics consistent with our high standards in contractor operations. This includes a operations through the Distribution these areas, and new topics in “Environment, VLJQLƮFDQWUHGXFWLRQLQLQMXULHV 3URFHVV2SWLPL]DWLRQ '32 SURJUDP +HDOWKDQG6DIHW\šŠ+XPDQ5LJKWVšDQGDQG in our Mexico Operations. In addition, to extend the benefits of safety and Š5HVSRQVLEOH'ULQNLQJšZHUHDGGHG7REHDGGHG7REH ZHKDG IDFLOLWLHVH[SHULHQFLQJQR HƱFLHQF\WRRXUGLVWULEXWLRQSDUWQHUV clear: we treat our integrityy and reputreputation ORVWWLPHLQMXULHVLQWKHSDVW\HDU8VLQJ as key assetsets that mumustt be prepreserveds at a rewards system based on annual safety Corporate Governance and Compliance — DOObWLPHVV targets, our global excellence programs We conduct business around the globe and auditing systems link safety according to the highest ethical, corporate performance and program implementation governance and transparency standards, 10 :HQHYHUWDNHVKRUWFXWV Integrity, hard work, quality and responsibility are key to building our company. Anheuser-Busch InBev Annual Report 2014 5 %5,1*,1*3(23/(72*(7+(5)25$ %(77(5:25/' “Playing a positive role in the world — with passion, creativity and commitment.” P. 42/43 $%b,Q%HYŞVUROHDVDVWURQJDQGJURZLQJJOREDO enterprise gives us the opportunity, as well as the responsibility, to improve the world in which we live and work. Because we brew products and deliver experiences that bring people together, ZHDOVRDUHLQbDXQLTXHSRVLWLRQWRXQLWHPDQ\ GLƬHUHQWSDUWLHVŜHPSOR\HHVFRQVXPHUVSDUWQHUV DQGVXSSOLHUVSXEOLFRƱFLDOV1*2VDFDGHPLFV DQGbRWKHUVŜLQWKLVHƬRUW Our focus on building a Better World is based on three pillars: promoting Responsible Drinking, protecting and preserving the Environment, and making a GLƬHUHQFHLQWKH&RPPXQLWLHVZKHUHZHOLYHDQG ZRUN,QWKHSDVW\HDUZHPDGHVLJQLƮFDQWSURJUHVV in each of these areas. We are honored that our HƬRUWVKDYHEHHQLQGHSHQGHQWO\UHFRJQL]HGZLWKD ranking among the leaders in social responsibility on FortunePDJD]LQHŞVŠ:RUOGŞV0RVW$GPLUHGšEHYHUDJH companies’ list. Bringing People Together For a Better World Anheuser-Busch InBev Annual Report 2014 5 %5,1*,1*3(23/(72*(7+(5)25$ %(77(5:25/' Promoting Responsible Drinking As the world’s leading brewer, we are Our responsible drinking initiatives bring committed to encouraging the responsible together the passion, commitment and enjoyment of our products by adults of legal FUHDWLYLW\RI$%b,Q%HYŞVHPSOR\HHVDURXQGWKH drinking age. In each of our markets, we world, as is clear from the following examples. sponsor programs to promote responsible drinking, prevent alcohol abuse, deter Budweiser created a sensation with its underage drinking and highlight the dangers )ULHQGVb$UHb:DLWLQJ video/ad, which aired of drink driving. LQWKH867KHVSRWIRFXVHVRQDPDQZKR decides to stay at a friend’s house after a ,QZHZHUHWKHƮUVWDOFRKROEHYHUDJH night out, so he can get home safely the company to establish a series of aggressive next day to his best friend — a loyal Golden Global Responsible Drinking Goals to drive Retriever. Seen both on social media and on measurable, meaningful progress. We are 79GXULQJWKH0DMRU/HDJXH%DVHEDOOSRVW proud to have come together with distributors, VHDVRQWKHDGUHFHLYHGbPLOOLRQYLHZV parents, community groups, retailers, law enforcement and many others, to achieve, Working together with the Lyft ridesharing and in many cases exceed, our goals by the service and featuring the world-famous target date of year-end 2014: Clydesdales, Budweiser sponsored an app RƬHULQJIUHHULGHVGXULQJWKHKROLGD\VWR Achieved Goal ensure that party-goers made it home safe and sound. Reach at least 100 million adults with programs developed by subject matter experts that help parents talk with their In Canada, our team created a custom-built children about underage drinking. smartphone app to collect responsible serving Provide ID-checking materials and other educational information to at least half- and selling pledges, and also partnered with a-million bars, clubs, restaurants and grocery stores to help them prevent sales training organizations in each province to to minors. HQVXUHDEURDGEDVHGVHUYHUWUDLQLQJHƬRUW Provide training on responsible alcohol beverage sales to at least 1 million bartenders, waiters, grocery store clerks, True Love Needs a Designated Driver is a mini- and others who serve and sell alcohol. movie created by our China team, starring Reach at least half-a-billion legal-age basketball great Yao Ming and popular consumers to increase awareness of the DFWRU/X Brazilian football teams were engaged during Partnering with the Beer Chamber, Mexico’s the FIFA World Cup™ to display responsible beer trade organization, we extended the drinking messages on their fan pages and FHOHEUDWLRQRI*OREDO%H HU 5HVSRQVLEOH during matches. We have donated a total of Day to the entire industry. This is a great bEUHDWKDO\]HUVVLQFHLQFLWLHVVXFK H[DPSOHbRIEULQJLQJSHRSOHWRJHWKHUIRU DV6¢R3DXOR5LRGH-DQHLURDQG%UDV¬OLD DbFRPPRQJRDODVPRUHWKDQb $QGbZHKDYHFRQWLQXHGRXU5HVSRQVLEOH YROXQWHHUVIURP0H[LFRŞVEHHULQGXVWU\ PRUH Youth Program, partnering with NGOs in WKDQKDOIRIZKRPZHUHRXUWHDPPHPEHUV 5LRGH-DQHLURDQG6¢R3DXORWRGLVFRXUDJH FDOOHGRQbSRLQWVRIFRQVXPSWLRQZLWK consumption by minors in lower income responsible drinking messages. communities by raising awareness among young people, mothers and storekeepers. $4XLOPHVVSRQVRUHGFRPPHUFLDOConductor DesignadoUHDFKHGDOPRVW bPLOOLRQSHRSOH LQb$UJHQWLQDYLD79 3UHVHUYLQJ2XU Environment You can’t brew beer without natural • Reduce global water usage to a ingredients. Preserving our land, water leading-edge 3.2 hl of water per hl of and other scarce resources is both the SURGXFWLRQ HTXLYDOHQWWRDERXW right thing to do and a commitment to 2O\PSLFVL]HGVZLPPLQJSRROV the quality of our brands now and for • Reduce global greenhouse gas WKHIXWXUH:HVWULYHWREHDVHƱFLHQWDV emissions per hl of production by 10%, SRVVLEOHLQRXUXVHRIQDWXUDOUHVRXUFHV LQFOXGLQJDUHGXFWLRQSHUKOLQ&KLQD we invest in projects and technologies to • Reduce global energy usage per hl of conserve water and energy and reduce production by 10%. ZDVWH DQGZHZRUNWRUDLVHDZDUHQHVVRI • Reduce packaging materials by environmental issues among employees, bWRQV consumers and the general public. • Reach a 70% global average of eco- +DYLQJPHWRUH[FHHGHGRXURULJLQDO friendly cooler purchases annually. environmental goals by 2012, we • Reduce greenhouse gas emissions challenged ourselves to aim for an even LQORJLVWLFVRSHUDWLRQVE\SHUKO more ambitious set of objectives, and to VROGbFRPSDUHGWRRXUEDVHOLQH H[SDQGWKHVFRSHRIRXUHƬRUWVWRRXU DUHFHQWO\DGGHGQHZJRDO global supply chain. To achieve our water-related goals, we $%b,Q%HYŞVenvironmental goals to be have adopted a comprehensive water achieved by 2017 include the following: strategy that involves rigorous water risk assessment, in-plant water conservation, • Reduce water risks and improve water agricultural water stewardship and management in 100% of our key barley community watershed protection. For growing regions, in partnership with example, water risk assessment is being local stakeholders. incorporated into our systems and • Engage in watershed protection SURFHVVHVLQFOXGLQJRXU932IUDPHZRUN measures at 100% of our facilities Water conservation at our facilities has led located in key areas in Argentina, to a reduction in water use to 3.23 hl/hl in Bolivia, Brazil, China, Mexico, Peru 2014. In our key barley regions in China, DQGbWKH86LQSDUWQHUVKLSZLWKORFDO 0H[LFRDQGWKH86ZHDUHDFWLYDWLQJD stakeholders. series of initiatives such as the adoption of water-saving technologies, reliance on P. 46/47 data to drive optimal, traditional breeding Protecting vulnerable watersheds and production methods by a European of more drought-resistant seed varieties, LQYROYHVMRLQWHƬRUWVZLWKORFDO 8QLRQbDJHQF\ and supporting key water infrastructure governments, communities and NGOs in investments. countries like Argentina, Bolivia, Brazil, In Belgium, we are now using canal &KLQD0H[LFR3HUXDQGWKH86)RU barges to transport empty returnable Our SmartBarley program is sowing the example, we are working in Cochabamba, ERWWOHVEHWZHHQRXU/HXYHQDQG-XSLOOH seeds of greater productivity and a better Bolivia, to improve the local water breweries via river rather than in less IXWXUHIRURXUIDUPHUSDUWQHUV8VLQJELJ supply, reuse treated water from our HQHUJ\HƱFLHQWWUXFNV data, farmers are able to compare their operations for agriculture, and repair performance against that of growers ORFDOLQIUDVWUXFWXUH$QGLQ-DJXDUL¹QD :HKDYHFRQYHUWHGRXUHQWLUH+RXVWRQ operating under similar conditions around Brazil, we have partnered with the local 7H[DVEDVHGWUXFNLQJưHHWWRcompressed the world. This can lead to better practices municipality, the Brazilian Agricultural natural gas-powered engines in a move such as crop variation, rotations and 5HVHDUFK&RUSRUDWLRQ (0%5$3$ expected to reduce CO2 emissions management — resulting in improvements DQGbWKHSURPLQHQW1*27KH1DWXUH E\bWRQVSHU\HDU DGMXVWLQJIRU in barley quality and supply, farm level Conservancy to recover and conserve the FRQVXPSWLRQUDWHV 7KLVPDUNVRXUƮUVW performance and conservation activities. water basin supplying greater São Paulo. FRQYHUVLRQRIDQHQWLUHưHHWLQWKH86 :HZRUNZLWKVRPHbEDUOH\JURZHUV worldwide. For example, we are improving ,QDGGLWLRQWRRXUHƬRUWVWRGHOLYHURQ Our Latin America South team marked irrigation practices for barley in China’s RXUbHQYLURQPHQWDOJRDOVZHVWULYHWR Energy Save Day by reaching out Gansu province, working with local make a positive impact on the planet on WRbbEDUVDQGRWKHUSRLQWVRI educational institutions and government :RUOGb(QYLURQPHQW'D\DQGHYHU\GD\ consumption to highlight the importance authorities. Also, conservation agriculture through a wide range of local initiatives. of energy conservation, and to show demonstration projects to enhance KRZbZHFDQKHOSE\SURYLGLQJHQHUJ\ VRLObKHDOWKDQGPRLVWXUHUHWHQWLRQDUH We are proud that Chernigivske, our HƱFLHQWFRROHUV being launched in Mexico’s Bajio and ORFDObFKDPSLRQEUDQGLQ8NUDLQHZDV Altiplano regions. named the World’s First Eco Beer, based Alternative energy sources such as solar on an assessment of its ingredients power and biomass are now in use in several breweries in China. Anheuser-Busch InBev Annual Report 2014 5 %5,1*,1*3(23/(72*(7+(5)25$ %(77(5:25/' We aim to have a positive impact on the carried him to a reunion with his mom. IRUZDUGWREXLOGLQJPRUH+RSH6FKRROVDV communities in which we live and work. 7KHDGGUHZPRUHWKDQ bPLOOLRQYLHZVRQ our presence in China grows. Each year, we provide hands-on support YouTube, and a year-long social media to build schools and improve public campaign with the hashtag #Salute To celebrate International Volunteer Day, SODFHV:HRƬHUƮQDQFLDODQGYROXQWHHU encouraged consumers to honor the RXU9ROXQWDULRV0RGHORRUJDQL]DWLRQZDV VXSSRUWWRQRQSURƮWRUJDQL]DWLRQV$QG 86bPLOLWDU\ involved in more than 200 initiatives across we help the victims of natural disasters 0H[LFR9ROXQWHHUVFRXOGVLJQXSWRZRUN through donations of drinking water and 8VLQJRXUIDFLOLWLHVWRSURGXFHcanned with the Mexican Red Cross, or another other assistance. We also make a positive drinking water for areas impacted by RIbWKH1*2VSDUWLFLSDWLQJDFURVV contribution to our communities through natural disasters is one of the important the country, to assist with community the jobs we create, the wages we pay, ways we apply our resources to help development, environmental, educational the tax revenues we generate, and the FRPPXQLWLHVLQQHHGbPLOOLRQFDQVRI and humanitarian causes. More than VLJQLƮFDQWLQYHVWPHQWVZHPDNHLQORFDO emergency drinking water have been bYROXQWHHUVSDUWLFLSDWHGLQWKLV operations. GLVWULEXWHGLQWKH86VLQFH XQLTXHHƬRUWWKLV\HDU 2QHFRPPXQLW\ŞVHƬRUWVWRKRQRUD We have continued to support Hope Schools We also contribute to economic returning veteran were the subject in communities adjacent to our breweries opportunities in the communities and of Š$b+HURŞVb:HOFRPHš a Budweiser LQ&KLQD+RSH6FKRROVLPSURYHDFFHVV countries in which we operate. Wages commercial that aired during Super Bowl to education for children in remote, DQGbVDODULHVSDLGLQWRWDOHG ;/9,,,7KHDGFHOHEUDWHGWKHZHOFRPH economically challenged regions. To DSSUR[LPDWHO\bELOOLRQ86'&DSLWDO given by the town of Winter Park, GDWHFRQWULEXWLRQVE\$%b,Q%HYDQGRXU expenditures around the world totaled Florida, to Lt. Chuck Nadd, who served in colleagues have enabled the construction bELOOLRQ86'DVLQYHVWPHQWVLQ $IJKDQLVWDQDVD%ODFN+DZNKHOLFRSWHU RI+RSH6FKRROV:HDOVRVXSSRUWHG RXUbIDFLOLWLHVGLVWULEXWLRQQHWZRUNDQG SLORWDQGRSHUDWLRQVRƱFHUIRUWKH$UP\ the building of temporary classrooms in systems generated jobs and local When Lt. Nadd arrived back home in HDUWKTXDNHDƲLFWHG0LQ&RXQW\*DQVX economic growth. Excise and income -DQXDU\KHZDVVXUSULVHGWRƮQGWKH Province, and multi-media classrooms taxes, which help to support government entire town assembled to give him an old- LQWKH+RSH6FKRRORI (QJDJLQJLQ2XU Communities P. 48/49 Financial Report Contents 50 Management Report 67 Statement of the Board of Directors 68 Independent Auditors’ Report 71 Consolidated Financial Statements 148 Information to our Shareholders 150 Excerpt from the AB InBev NV Separate (Non-Consolidated) Financial Statements Prepared in Accordance with Belgian GAAP 152 Glossary Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Management Report Anheuser-Busch InBev is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with American Depositary Receipts on the New York Stock Exchange (NYSE: BUD). It is the leading global brewer and one of the world’s top five consumer products companies. Beer, the original social network, has been bringing people together for thousands of years and the company’s portfolio of well over ƵƳƳ beer brands continues to forge strong connections with consumers. This includes global brands Budweiser®, Corona® and Stella Artois®; international brands Beck’s®, Leffe® and Hoegaarden®; and local champions Bud Light®, Skol®, Brahma®, Antarctica®, Quilmes®, Victoria®, Modelo Especial®, Michelob Ultra®, Harbin®, Sedrin®, Klinskoye®, Sibirskaya Korona®, Chernigivske®, Cass® and Jupiler®. Anheuser-Busch InBev’s dedication to heritage and Tuality originates from the Den Hoorn brewery in Leuven, Belgium dating back to ƴƶƹƹ and the pioneering spirit of the Anheuser Co brewery, with origins in St. Louis, USA since ƴƻƸƵ. *eographically diversified with a balanced exposure to developed and developing markets, Anheuser Busch InBev leverages the collective strengths of its approximately ƴƸƸ ƳƳƳ employees based in ƵƸ countries worldwide. In ƵƳƴƷ, ABbInBev reali]ed Ʒƺ.ƴbbillion US dollar revenue. The company strives to be the Best Beer Company Bringing 3eople Together )or a Better :orld. )or more information, please visit: www.ab-inbev.com. The following management report should be read in conjunction with Anheuser-Busch InBev’s audited consolidated financial statements. In the rest of this document we refer to Anheuser-Busch InBev as ŠABbInBevš or Šthe companyš. ORIENTAL BREWERY ACQUISITION 2n ƴ April ƵƳƴƷ, ABbInBev, KKR and Affinity announced that ABbInBev successfully completed the acTuisition of 2riental Brewery (Š2Bš), the leading brewer in South Korea. The acTuisition returns 2B to the ABbInBev portfolio, after ABbInBev sold the company in July ƵƳƳƼ, following the combination of InBev and Anheuser-Busch, in support of the company’s deleveraging commitment. 2nce 2B has been fully re-integrated into ABbInBev, the company expects to drive premium growth by maximi]ing the combined portfolios of leading beer brands and to achieve improved efficiencies through best-practice sharing. ABbInBev also plans to leverage its global platform to export OB brands more widely. The enterprise value for the transaction was Ƹ.ƻ billion USD, and as a result of an agreement entered into with KKR and Affinity in ƵƳƳƼ, ABbInBev also received approximately ƶƵƳmbUS dollar in cash at closing from this transaction, subject to closing adjustments according to the terms of the transaction. OB estimates that its EBITDA (not prepared on the same basis as ABbInBev EBITDA) in ƵƳƴƶ was approximately ƸƵƼ billion KR: or approximately ƸƳƳmbUS dollar at exchange rates at the date of the announcement. P. 50 /51 Selected financial figures To facilitate the understanding of ABbInBev’s underlying performance, the comments in this management report, unless otherwise indicated, are based on organic and normali]ed numbers. ŠOrganicš means the financials are analy]ed eliminating the impact of changes in currencies on translation of foreign operations, and scopes. Scopes represent the impact of acquisitions and divestitures, the start-up or termination of activities or the transfer of activities between segments, curtailment gains and losses and year-over-year changes in accounting estimates and other assumptions that management does not consider part of the underlying performance of the business. *iven the transformational nature of the transaction with *rupo Modelo that closed on Ʒ June ƵƳƴƶ, and to facilitate the understanding of ABbInBev’s underlying performance, ABbInBev is presenting in this management report the ƵƳƴƶ consolidated volumes and results up to Normali]ed EBIT on a ƵƳƴƶ Reference base and as such these financials are included in the organic growth calculation. The ƵƳƴƶ Reference base includes, for comparative purposes, the results of the *rupo Modelo business as if the combination had taken place on Ʒ June ƵƳƴƵ. Accordingly, the ƵƳƴƶ Reference base presented below includes ƴƵ months of the *rupo Modelo combination. The ƵƳƴƶ Reference base also reflects updates to the ƵƳƴƶ segment reporting for purposes of results announcement and internal review by senior management to reflect changes in the =one presentation of ABbInBev that were effective ƴ January ƵƳƴƷ. The changes include the combination of ABbInBev’s :estern Europe and Central Eastern Europe =ones into a single Europe =one, the transfer of responsibility from *lobal Export and Holding Companies to the Europe Zone of the company’s Spanish operations and the export of Corona to a number of European countries, and the transfer of management responsibility for Cuba to the Zone Latin America North. :henever used in this report, the term Šnormali]edš refers to performance measures (EBITDA, EBIT, 3rofit, E3S, effective tax rate) before non-recurring items. Non-recurring items are either income or expenses which do not occur regularly as part of the normal activities of the company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the company due to their size or nature. Normalized measures are additional measures used by management, and should not replace the measures determined in accordance with I)RS as an indicator of the company’s performance, but rather should be used in conjunction with the most directly comparable I)RS measures. The tables below set out the components of ABbInBev’s operating income and operating expenses, as well as the key cash flow figures. ƵƳƴƶ ƵƳƴƶ 5HIHUHQFH 0LOOLRQ86GROODU ƵƳƴƷ 5HSRUWHG EDVH Revenueƴ ƷƺƳƹƶ ƴƳƳ ƷƶƴƼƸ ƴƳƳ ƷƸƷƻƶ ƴƳƳ Cost of sales (ƴƻ ƺƸƹ) ƷƳ (ƴƺ ƸƼƷ) Ʒƴ (ƴƻ ƸƸƸ) Ʒƴ *URVVSURƮW ƵƻƶƳƺ ƹƳ ƵƸƹƳƴ ƸƼ ƵƹƼƵƻ ƸƼ Distribution expenses (Ʒ ƸƸƻ) ƴƳ (Ʒ Ƴƹƴ) Ƽ (Ʒ Ƶƻƹ) Ƽ Sales and marketing expenses (ƺ Ƴƶƹ) ƴƸ (Ƹ ƼƸƻ) ƴƷ (ƹ ƶƶƻ) ƴƷ Administrative expenses (Ƶ ƺƼƴ) ƹ (Ƶ ƸƶƼ) ƹ (Ƶ ƺƹƹ) ƹ Other operating income(expenses) ƴ ƶƻƹ ƶ ƴ ƴƹƳ ƶ ƴ ƵƹƵ ƶ 1RUPDOL]HGSURƮWIURPRSHUDWLRQV 1RUPDOL]HG(%,7 ƴƸƶƳƻ ƶƶ ƴƷƵƳƶ ƶƶ ƴƷƻƳƳ ƶƶ Non-recurring items (ƴƼƺ) ś ƹ ƵƷƳ ƴƷ 3URƮWIURPRSHUDWLRQV (%,7 ƴƸƴƴƴ ƶƵ ƵƳƷƷƶ Ʒƺ 'HSUHFLDWLRQDPRUWL]DWLRQDQGLPSDLUPHQW ƶƶƸƷ ƺ ƵƼƻƸ ƺ ƶƴƺƼ ƺ 1RUPDOL]HG(%,7'$ ƴƻƸƷƵ ƶƼ ƴƺƴƻƻ ƷƳ ƴƺƼƷƶ ƶƼ (%,7'$ ƴƻƷƹƸ ƶƼ ƵƶƷƵƻ ƸƷ 1RUPDOL]HGSURƮWDWWULEXWDEOHWRHTXLW\KROGHUVRI$%b,Q%HY ƻƻƹƸ ƴƼ ƺƼƶƹ ƴƻ 3URƮWDWWULEXWDEOHWRHTXLW\KROGHUVRI$%b,Q%HY ƼƵƴƹ ƵƳ ƴƷƶƼƷ ƶƶ ƴ Turnover less excise taxes. In many jurisdictions, excise taxes make up a large proportion of the cost of beer charged to the company’s customers. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ 2SHUDWLQJDFWLYLWLHV 3roƮt ƴƴ ƶƳƵ ƴƹ Ƹƴƻ Revaluation of initial investment in *rupo Modelo ś (ƹ ƷƴƸ) Interest, taxes and non-cash items included in proƮt ƺ ƳƵƼ ƺ ƴƶƸ &DVKưRZIURPRSHUDWLQJDFWLYLWLHVEHIRUHFKDQJHVLQZRUNLQJFDSLWDODQGXVHRISURYLVLRQV ƴƻƶƶƴ ƴƺƵƶƻ Change in working capital ƻƴƸ ƻƹƹ 3ension contributions and use of provisions (ƷƸƻ) (ƹƸƶ) Interest and taxes (paid)received (Ʒ ƸƺƷ) (Ʒ ƴƼƶ) Dividends received ƶƳ ƹƳƹ &DVKưRZIURPRSHUDWLQJDFWLYLWLHV ƴƷƴƷƷ ƴƶƻƹƷ Investing activities Net capex (Ʒ ƴƵƵ) (ƶ ƹƴƵ) Acquisition and sale of subsidiaries, net of cash acquireddisposed of (ƹ ƺƳƳ) (ƴƺ ƶƼƺ) 3roceeds from the sale of(investments in) short-term debt securities (ƴƻƺ) ƹ ƺƳƺ Net of tax proceeds from the sale of assets held for sale (ƹƸ) Ʒ ƳƳƵ Other (ƺƻ) ƴƼ &DVKưRZIURPLQYHVWLQJDFWLYLWLHV ƴƴƴƸƵ ƴƳƵƻƴ Financing activities Dividends paid (ƺ ƷƳƳ) (ƹ ƵƸƶ) Net (payments on)proceeds from borrowings ƶ ƵƵƶ Ʒ ƷƸƻ Net proceeds from the issue of share capital ƻƶ ƺƶ Cash received for deferred shares instrument ś ƴ ƸƳƳ Other (including net Ʈnance cost other than interest) ƵƶƼ Ƹƹƶ &DVKưRZIURPƮQDQFLQJDFWLYLWLHV ƶƻƸƸ ƶƷƴ 1HWLQFUHDVH GHFUHDVH LQFDVKDQGFDVKHTXLYDOHQWV ƻƹƶ ƶƼƵƷ Financial Performance The tables in this management report provide the segment information per zone for the period ended ƶƴ December ƵƳƴƷ and ƵƳƴƶ in the format up to Normalized EBIT level that is used by management to monitor performance. To facilitate the understanding of ABbInBev’s underlying performance the company is presenting in this management report the ƵƳƴƶ consolidated volumes and results up to Normalized EBIT on a ƵƳƴƶ Reference base and as such these financials are included in the organic growth calculation. The profit, cash flows and balance sheet are presented as reported in ƵƳƴƶ. Both from an accounting and managerial perspective, ABbInBev is organized along seven business segments, which includes the *lobal Export and Holding business as the seventh segment. Upon the combination with *rupo Modelo, the *rupo Modelo businesses are reported according to their geographical presence in the following segments: the Mexico beer and packaging businesses are reported in the new Zone Mexico, the Spanish business is reported in the Zone Europe and the Export business is reported in the *lobal Export and Holding Companies segment. OBbbusiness is reported in the Zone Asia 3acific as from ƴ April ƵƳƴƷ as a scope. P. 52 /53 The tables below provide a summary of the performance of ABbInBev (in million US dollar, except volumes in thousand hectoliters) and the related comments are based on organic numbers. ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF $%b,1%(9:25/':,'( EDVH 6FRSHƴ WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes (thousand hectoliters) ƷƷƸ ƺƻƹ ƴƳ ƸƵƵ ś Ƶ ƷƼƷ ƷƸƻ ƻƳƴ Ƴ.ƹ Revenue ƷƸ Ʒƻƶ ƴ ƵƵƶ (Ƶ ƶƳƺ) Ƶ ƹƹƷ Ʒƺ Ƴƹƶ Ƹ.Ƽ Cost of sales (ƴƻ ƸƸƸ) (ƷƻƳ) ƻƵƳ (ƸƷƴ) (ƴƻ ƺƸƹ) (Ƶ.Ƽ) *ross proƮt Ƶƹ ƼƵƻ ƺƷƶ (ƴ Ʒƻƺ) Ƶ ƴƵƶ Ƶƻ ƶƳƺ ƺ.Ƽ Distribution expenses (Ʒ Ƶƻƹ) (ƴƸƸ) Ƶƺƺ (ƶƼƷ) (Ʒ ƸƸƻ) (Ƽ.ƴ) Sales and marketing expenses (ƹ ƶƶƻ) (ƵƻƸ) ƵƻƸ (ƹƼƼ) (ƺ Ƴƶƹ) (ƴƴ.Ƴ) Administrative expenses (Ƶ ƺƹƹ) (ƺƷ) ƴƳƻ (ƸƼ) (Ƶ ƺƼƴ) (Ƶ.ƴ) Other operating income(expenses) ƴ ƵƹƵ ƴƺƺ (ƹƸ) ƴƶ ƴ ƶƻƹ ƴ.ƴ Normalized EBIT ƴƷ ƻƳƳ ƷƳƹ (ƻƻƵ) ƼƻƷ ƴƸ ƶƳƻ ƹ.ƺ Normalized EBITDA ƴƺ ƼƷƶ ƷƹƼ (ƴ ƳƶƼ) ƴ ƴƹƼ ƴƻ ƸƷƵ ƹ.ƹ Normalized EBITDA margin ƶƼ.Ʒ ƶƼ.Ʒ ƵƸbps In ƵƳƴƷ ABbInBev delivered normalized EBITDA growth of ƹ.ƹ, while its normalized EBITDA margin increased ƵƸ bps, reaching ƶƼ.Ʒ. Consolidated volumes increased Ƴ.ƹ, with own beer volumes increasing Ƴ.Ƹ and non-beer volumes increasing ƴ.ƶ. )ocus Brands volumes grew by Ƶ.Ƶ during ƵƳƴƷ. On the same basis, the company’s three *lobal Brands, Budweiser, Corona and Stella Artois, grew by Ƹ.Ʒ. )ocus brands are those with the greatest growth potential within each relevant consumer segment and to which ABbInBev directs the majority of its marketing resources. Consolidated revenue grew Ƹ.Ƽ to Ʒƺ ƳƹƶmbUS dollar, with revenue per hectoliter increasing Ƹ.ƶ. On a constant geographic basis (i.e.beliminating the impact of faster growth in countries with lower revenue per hectoliter), revenue per hectoliter increased Ƹ.ƺ. Consolidated Cost of Sales (CoS) increased Ƶ.Ƽ, or Ƶ.Ʒ on a per hectoliter basis. On a constant geographic basis, CoS per hectoliter increased ƶ.Ƽ. Volumes The table below summarizes the volume evolution per zone and the related comments are based on organic numbers. Volumes include not only brands that ABbInBev owns or licenses, but also third party brands that the company brews as a subcontractor and third party products that it sells through ABbInBev’s distribution network, particularly in Europe. Volumes sold by the *lobal Export business are shown separately. Effective ƴ April ƵƳƴƷ, ABbInBev discontinued the reporting of volumes sold to Constellation Brands under the temporary supply agreement (TSA), since these volumes do not form part of the underlying performance of its business. The second, third and fourth quarter ƵƳƴƶ Reference base volumes related to the TSA have therefore been treated as a negative scope. ƵƳƴƶ Reference Organic Organic 7KRXVDQGKHFWROLWHUV EDVH 6FRSH JURZWK ƵƳƴƷ JURZWK North America ƴƵƵ ƴƴƹ ƹƷƵ (ƴ ƹƳƻ) ƴƵƴ ƴƸƳ (ƴ.ƶ) Mexico ƶƻ ƴƻƸ ś ƹƴƸ ƶƻ ƻƳƳ ƴ.ƹ Latin America North ƴƵƳ ƷƵƺ ƶƼ Ʒ ƼƸƵ ƴƵƸ Ʒƴƻ Ʒ.ƴ Latin America South ƶƹ Ƽƴƻ ś (Ƽƴ) ƶƹ ƻƵƹ (Ƴ.Ƶ) Europe Ʒƺ ƳƶƳ ƹƳ (Ƶ ƻƴƵ) ƷƷ Ƶƺƻ (ƹ.Ƴ) Asia 3aciƮc ƹƸ ƺƻƺ ƴƸ ƹƳƵ ƴ ƴƷƳ ƻƵ ƸƵƼ ƴ.ƺ *lobal Export and Holding Companies ƴƸ ƶƵƶ (Ƹ ƻƵƴ) ƵƼƺ Ƽ ƻƳƳ ƶ.ƴ $%b,Q%HY:RUOGZLGH ƷƷƸƺƻƹ ƴƳƸƵƵ ƵƷƼƷ ƷƸƻƻƳƴ Ƴƹ 1RUWK$PHULFD total volumes decreased ƴ.ƶ. The company estimates that its shipment volumes in the United States declined by ƴ.Ƹ and its sales-to-retailers adjusted for the number of selling days declined by ƴ.ƺ during ƵƳƴƷ compared to ƵƳƴƶ. On the same basis, the company estimates that United States industry sales-to-retailers adjusted for the number of selling days declined by Ƴ.ƹ compared to an estimated decline of ƴ.ƻ during ƵƳƴƶ. The company estimates that its market share was down by approximatey ƸƳ bps during ƵƳƴƷ compared to ƵƳƴƶ, largely due to Budweiser. ƴ See *lossary Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT In Canada, beer volumes decreased by Ƴ.ƺ during ƵƳƴƷ compared to the same period last year, mainly driven by very cold weather during the first quarter ƵƳƴƷ, partly offset by a better industry performance in the fourth quarter ƵƳƴƷ. Mexico total volumes increased ƴ.ƹ. The company estimates that the Mexican beer industry volumes grew by Ƶ.ƹ, driven primarily by a stronger economy. The company estimates that it lost some market share during ƵƳƴƷ, driven by regional mix. Industry growth was weaker in the Central region, where the company has a high market share, while growth was much stronger in the North, where the company has a lower, but growing market share, based on estimates. The company’s )ocus Brands in Mexico grew by Ƹ.ƹ, with the Corona family continuing to perform well, despite supply shortages during the first half of the year, and Bud Light and Victoria volumes also increasing in ƵƳƴƷ compared to the same period last year. /DWLQ$PHULFD1RUWK volumes increased Ʒ.ƴ, with beer volumes and soft drinks growing Ʒ.ƺ and Ƶ.ƶ, respectively. In Brazil, beer volumes increased by Ʒ.ƺ and soft drinks increased ƴ.Ʒ. The company estimates that beer industry volumes grew by approximately Ʒ.ƶ during ƵƳƴƷ, benefiting from a strong summer and the )I)A :orld Cup. The company estimates that its year-over-year market share increased by approximately ƶƳ bps to ƹƻ.Ƶ. 3remium brands continued to outperform the rest of the company’s portfolio, due to a strong performance bybBudweiser. The consumer environment in Brazil continues to be challenging, and the company’s pack price, returnable package and innovation strategies remain major business priorities. /DWLQ$PHULFD6RXWK total volumes decreased Ƴ.Ƶ, with beer volumes flat and non-beer volumes decreasing by Ƴ.ƹ. Beer volumes in Argentina decreased ƴ.ƺ during ƵƳƴƷ, with some market share loss, based on the company’s estimates, due to competitive pressure. (XURSH own beer volumes declined ƹ.ƴ, while total volumes declined ƹ.Ƴ, mainly driven by a weak beer industry in Ukraine and Russia, as well as high promotional pressure in *ermany. Volume decreases in Europe were partially offset by )I)A :orld Cup activations in Belgium, *ermany and the United Kingdom. Own beer volumes were flat in Belgium, declined by ƶ.Ʒ in *ermany and grew by ƴ.Ƹ in the United Kingdom. Asia Pacific volumes grew by ƴ.ƺ. In China, the company estimates that industry volumes declined by approximately Ʒ, while the company’s volumes increased by ƴ.ƹ. The )ocus Brands Budweiser, Harbin and Sedrin, which represent nearly ƺƶ of the company’s portfolio, grew by ƺ.ƻ during ƵƳƴƷ. The company estimates that, on an organic basis, it gained approximately ƼƳ bps market share in ƵƳƴƷ, reaching ƴƸ.Ƽ. Operating Activities by Zone The tables below provide a summary of the performance of each geographical zone (in million US dollar, except volumes in thousand hectoliters) and the related comments are based on organic numbers. ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF $%b,1%(9:25/':,'( EDVH 6FRSH WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes ƷƷƸ ƺƻƹ ƴƳ ƸƵƵ ś Ƶ ƷƼƷ ƷƸƻ ƻƳƴ Ƴ.ƹ Revenue ƷƸ Ʒƻƶ ƴ ƵƵƶ (Ƶ ƶƳƺ) Ƶ ƹƹƷ Ʒƺ Ƴƹƶ Ƹ.Ƽ Cost of sales (ƴƻ ƸƸƸ) (ƷƻƳ) ƻƵƳ (ƸƷƴ) (ƴƻ ƺƸƹ) (Ƶ.Ƽ) *ross proƮt Ƶƹ ƼƵƻ ƺƷƶ (ƴ Ʒƻƺ) Ƶ ƴƵƶ Ƶƻ ƶƳƺ ƺ.Ƽ Distribution expenses (Ʒ Ƶƻƹ) (ƴƸƸ) Ƶƺƺ (ƶƼƷ) (Ʒ ƸƸƻ) (Ƽ.ƴ) Sales and marketing expenses (ƹ ƶƶƻ) (ƵƻƸ) ƵƻƸ (ƹƼƼ) (ƺ Ƴƶƹ) (ƴƴ.Ƴ) Administrative expenses (Ƶ ƺƹƹ) (ƺƷ) ƴƳƻ (ƸƼ) (Ƶ ƺƼƴ) (Ƶ.ƴ) Other operating income(expenses) ƴ ƵƹƵ ƴƺƺ (ƹƸ) ƴƶ ƴ ƶƻƹ ƴ.ƴ Normalized EBIT ƴƷ ƻƳƳ ƷƳƹ (ƻƻƵ) ƼƻƷ ƴƸ ƶƳƻ ƹ.ƺ Normalized EBITDA ƴƺ ƼƷƶ ƷƹƼ (ƴ ƳƶƼ) ƴ ƴƹƼ ƴƻ ƸƷƵ ƹ.ƹ Normalized EBITDA margin ƶƼ.Ʒ ƶƼ.Ʒ ƵƸ bps P. 54 /55 ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF NORTH AMERICA EDVH 6FRSH WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes ƴƵƵ ƴƴƹ ƹƷƵ ś (ƴ ƹƳƻ) ƴƵƴ ƴƸƳ (ƴ.ƶ) Revenue ƴƹ ƳƵƶ ƴƸƼ (ƴƵƶ) ƶƸ ƴƹ ƳƼƶ Ƴ.Ƶ Cost of sales (ƹ ƸƴƼ) (ƶƸ) Ƶƻ ƴƶƸ (ƹ ƶƼƴ) Ƶ.ƴ *ross proƮt Ƽ ƸƳƷ ƴƵƶ (ƼƸ) ƴƺƳ Ƽ ƺƳƵ ƴ.ƻ Distribution expenses (ƴ ƵƶƸ) (Ƹƻ) ƵƵ (Ƹƶ) (ƴ ƶƵƷ) (Ʒ.ƴ) Sales and marketing expenses (ƴ ƼƳƻ) (Ƶƺ) ƴƹ (Ƶƴƺ) (Ƶ ƴƶƹ) (ƴƴ.Ƶ) Administrative expenses (ƷƼƺ) (Ƽ) Ʒ Ƶƻ (Ʒƺƶ) Ƹ.ƹ Other operating income(expenses) ƹƺ ƵƴƵ (ƴ) ƵƳ ƵƼƼ ƶƸ.ƻ Normalized EBIT Ƹ ƼƶƵ ƵƷƵ (Ƹƶ) (ƸƵ) ƹ Ƴƹƻ (Ƴ.Ƽ) Normalized EBITDA ƹ ƺƵƻ ƵƶƵ (Ƹƺ) (ƻƵ) ƹ ƻƵƳ (ƴ.Ƶ) Normalized EBITDA margin ƷƵ.Ƴ ƷƵ.Ʒ (ƹƳ) bps ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF MEXICO EDVH 6FRSH WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes ƶƻ ƴƻƸ ś ś ƹƴƸ ƶƻ ƻƳƳ ƴ.ƹ Revenue Ʒ ƹƹƼ (ƴƹƹ) (ƴƷƳ) ƵƸƹ Ʒ ƹƴƼ Ƹ.ƺ Cost of sales (ƴ ƸƺƳ) ƼƸ ƷƵ ƸƼ (ƴ ƶƺƷ) Ʒ.Ƴ *ross proƮt ƶ ƳƼƼ (ƺƴ) (Ƽƻ) ƶƴƸ ƶ ƵƷƸ ƴƳ.Ʒ Distribution expenses (ƷƷƶ) ƴƸ ƴƷ (ƶƼ) (ƷƸƶ) (Ƽ.Ƴ) Sales and marketing expenses (ƻƷƷ) ƴƹ ƵƷ (Ʒ) (ƻƳƻ) (Ƴ.Ƹ) Administrative expenses (ƷƸƸ) (ƺ) ƴƶ ƴƻ (ƷƶƳ) Ʒ.Ƴ Other operating income(expenses) ƵƳƳ (Ƶƺ) (ƺ) ƺƵ Ƶƶƺ Ʒƴ.ƹ Normalized EBIT ƴ ƸƸƺ (ƺƷ) (ƸƷ) ƶƹƵ ƴ ƺƼƴ ƵƷ.Ʒ Normalized EBITDA ƴ ƼƷƳ (ƻƵ) (ƹƹ) ƶƼƸ Ƶ ƴƻƹ Ƶƴ.ƶ Normalized EBITDA margin Ʒƴ.Ƹ Ʒƺ.ƶ ƹƳƻ bps ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF LATIN AMERICA NORTH EDVH 6FRSH WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes ƴƵƳ ƷƵƺ ƶƼ ś Ʒ ƼƸƵ ƴƵƸ Ʒƴƻ Ʒ.ƴ Revenue ƴƴ ƳƴƳ Ƹ (ƼƷƻ) ƴ ƵƳƴ ƴƴ ƵƹƼ ƴƳ.Ƽ Cost of sales (ƶ Ƹƺƹ) (Ƶ) ƶƳƹ (Ʒƹƻ) (ƶ ƺƷƴ) (ƴƶ.ƴ) *ross proƮt ƺ ƷƶƷ ƶ (ƹƷƴ) ƺƶƶ ƺ ƸƵƻ Ƽ.Ƽ Distribution expenses (ƴ ƶƸƴ) ś ƴƴƼ (ƴƺƵ) (ƴ ƷƳƷ) (ƴƵ.ƺ) Sales and marketing expenses (ƴ ƴƷƺ) ś ƴƳƷ (ƵƳƼ) (ƴ ƵƸƶ) (ƴƻ.Ƶ) Administrative expenses (ƸƼƴ) ś ƷƼ (ƶƼ) (Ƹƻƴ) (ƹ.Ƹ) Other operating income(expenses) ƻƳƺ ś (ƹƴ) (Ƹƺ) ƹƻƼ (ƺ.ƴ) Normalized EBIT Ƹ ƴƸƴ Ƶ (Ʒƶƴ) ƵƸƹ Ʒ ƼƺƼ Ƹ.Ƴ Normalized EBITDA Ƹ ƻƸƻ Ƶ (ƷƼƷ) ƶƺƹ Ƹ ƺƷƵ ƹ.Ʒ Normalized EBITDA margin Ƹƶ.Ƶ Ƹƴ.Ƴ (Ƶƴƹ) bps ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF LATIN AMERICA SOUTH EDVH 6FRSH WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes ƶƹ Ƽƴƻ ś ś (Ƽƴ) ƶƹ ƻƵƹ (Ƴ.Ƶ) Revenue ƶ ƵƹƼ ś (ƻƼƶ) Ƹƻƹ Ƶ Ƽƹƴ ƴƺ.Ƽ Cost of sales (ƴ ƴƻƸ) ś ƶƵƵ (Ƶƴƻ) (ƴ Ƴƻƴ) (ƴƻ.Ʒ) *ross proƮt Ƶ ƳƻƷ ś (Ƹƺƴ) ƶƹƻ ƴ ƻƻƴ ƴƺ.ƹ Distribution expenses (ƶƳƼ) ś ƴƳƷ (ƻƸ) (ƵƼƳ) (Ƶƺ.Ƹ) Sales and marketing expenses (ƶƷƹ) ś ƼƵ (ƹƴ) (ƶƴƸ) (ƴƺ.ƻ) Administrative expenses (ƴƴƵ) ś ƶƴ (ƵƷ) (ƴƳƹ) (Ƶƴ.ƹ) Other operating income(expenses) (Ƹ) ś (Ƶ) ƴƶ Ƹ ś Normalized EBIT ƴ ƶƴƴ ś (ƶƷƹ) ƵƴƳ ƴ ƴƺƸ ƴƹ.Ƴ Normalized EBITDA ƴ ƷƼƴ ś (ƶƼƷ) ƵƸƹ ƴ ƶƸƵ ƴƺ.ƴ Normalized EBITDA margin ƷƸ.ƹ ƷƸ.ƹ (ƶƳ) bps Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF EUROPE EDVH 6FRSH WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes Ʒƺ ƳƶƳ ƹƳ ś (Ƶ ƻƴƵ) ƷƷ Ƶƺƻ (ƹ.Ƴ) Revenue Ƹ ƳƵƴ ƹ (ƴƹƹ) ƶ Ʒ ƻƹƸ Ƴ.ƴ Cost of sales (Ƶ ƵƺƵ) (Ƹ) Ƽƻ ƼƼ (Ƶ Ƴƻƴ) Ʒ.ƶ *ross proƮt Ƶ ƺƷƼ ƴ (ƹƻ) ƴƳƵ Ƶ ƺƻƷ ƶ.ƺ Distribution expenses (ƸƳƶ) (ƴ) ƴƹ ƴƳ (Ʒƺƺ) Ƶ.Ƴ Sales and marketing expenses (ƴ Ƴƹƹ) (ƺ) ƷƼ (Ʒƶ) (ƴ Ƴƹƺ) (Ʒ.Ƴ) Administrative expenses (ƶƹƷ) Ƹ ƴƶ (ƴƹ) (ƶƹƵ) (Ʒ.Ʒ) Other operating income(expenses) ƶƵ ś ś (Ʒ) Ƶƻ (ƴƵ.ƺ) Normalized EBIT ƻƷƼ (Ƶ) ƴƳ ƷƼ ƼƳƹ Ƹ.ƻ Normalized EBITDA ƴ ƶƷƴ (ƴ) (ƴƻ) Ƶƴ ƴ ƶƷƶ ƴ.Ƹ Normalized EBITDA margin Ƶƹ.ƺ Ƶƺ.ƹ ƶƼ bps ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF ASIA PACIFIC EDVH 6FRSH WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes ƹƸ ƺƻƺ ƴƸ ƹƳƵ ś ƴ ƴƷƳ ƻƵ ƸƵƼ ƴ.ƺ Revenue ƶ ƶƸƷ ƴ ƵƼƼ (ƻ) ƶƼƹ Ƹ ƳƷƳ ƴƴ.ƻ Cost of sales (ƴ ƻƻƸ) (Ƹƹƻ) Ƹ (ƴƳƶ) (Ƶ ƸƸƵ) (Ƹ.Ƹ) *ross proƮt ƴ ƷƹƼ ƺƶƳ (ƶ) ƵƼƶ Ƶ ƷƻƼ ƴƼ.Ƽ Distribution expenses (ƶƳƵ) (ƴƴƴ) ƴ (ƵƵ) (ƷƶƷ) (ƺ.Ƶ) Sales and marketing expenses (ƻƶƶ) (ƵƺƸ) Ƶ (ƴƵƴ) (ƴ ƵƵƺ) (ƴƷ.Ƹ) Administrative expenses (ƶƴƺ) (ƸƼ) ƴ (ƵƸ) (ƷƳƳ) (ƺ.Ƽ) Other operating income(expenses) ƴƳƼ ƴ ś (ƵƳ) ƼƳ (ƴƻ.ƺ) Normalized EBIT ƴƵƺ Ƶƻƹ ś ƴƳƷ Ƹƴƺ ƻƵ.Ƶ Normalized EBITDA ƸƷƹ ƶƹƹ (ƴ) ƴƸƹ ƴ Ƴƹƺ Ƶƻ.Ƹ Normalized EBITDA margin ƴƹ.ƶ Ƶƴ.Ƶ ƵƷƷ bps ƵƳƴƶ 5HIHUHQFH &XUUHQF\ 2UJDQLF 2UJDQLF GLOBAL EXPORT AND HOLDING COMPANIES EDVH 6FRSH WUDQVODWLRQ JURZWK ƵƳƴƷ JURZWK Volumes ƴƸ ƶƵƶ (Ƹ ƻƵƴ) ś ƵƼƺ Ƽ ƻƳƳ ƶ.ƴ Revenue Ƶ ƴƶƻ (ƺƼ) (ƵƼ) ƴƻƹ Ƶ Ƶƴƹ Ƽ.ƴ Cost of sales (ƴ ƸƷƼ) ƶƹ ƴƼ (ƷƷ) (ƴ Ƹƶƻ) (Ƶ.Ƽ) *ross proƮt ƸƻƼ (Ʒƶ) (ƴƳ) ƴƷƵ ƹƺƻ Ƶƹ.Ƴ Distribution expenses (ƴƷƶ) ƴ ś (ƶƷ) (ƴƺƸ) (Ƶƶ.ƺ) Sales and marketing expenses (ƴƼƷ) Ƽ (Ƶ) (Ʒƶ) (ƵƶƳ) (Ƶƶ.ƴ) Administrative expenses (ƷƶƳ) (Ƹ) (ƶ) (Ƶ) (ƷƷƳ) (Ƴ.Ʒ) Other operating income(expenses) ƸƵ (Ƽ) ƹ (ƴƳ) ƶƼ (ƵƳ.ƴ) Normalized EBIT (ƴƵƹ) (Ʒƻ) (Ƽ) ƸƷ (ƴƵƻ) ƶƵ.Ƽ Normalized EBITDA ƷƳ (Ʒƻ) (ƻ) Ʒƻ ƶƶ ś Revenue Consolidated revenue grew Ƹ.Ƽ to Ʒƺ ƳƹƶmbUS dollar, with revenue per hectoliter growth of Ƹ.ƶ and Ƹ.ƺ on a constant geographic basis (i.e.beliminating the impact of faster growth in countries with lower revenue per hectoliter), driven by revenue management initiatives and brand mix improvements from the company’s premiumization strategies. Cost of Sales Cost of Sales (CoS) increased Ƶ.Ƽ or Ƶ.Ʒ on a per hectoliter basis, driven primarily by higher depreciation and packaging costs in Brazil, as well as additional bottle costs in Mexico related to higher than expected demand for Corona globally, partly mitigated by procurement savings and efficiency gains. On a constant geographic basis, CoS per hectoliter increased ƶ.Ƽ. P. 56 /57 Operating Expenses Total operating expenses increased Ƽ.Ʒ in ƵƳƴƷ: ť 'LVWULEXWLRQH[SHQVHV increased Ƽ.ƴ in ƵƳƴƷ, mainly driven by increases in freight rates in the U.S., increased own distribution in Brazil, which is more than offset by the increase in net revenues, the growth of the company’s premium brands in Brazil, increased expenses in Mexico and higher fuel costs and wage increases for unionized workers in Latin America South. ť 6DOHVDQGPDUNHWLQJH[SHQVHV increased ƴƴ.Ƴ in ƵƳƴƷ, with increased support for the company’s brands, innovations and sales activations in most Zones. The increased investments include the )I)A :orld Cup activations, particularly in Latin America North and South, Mexico and Europe, as well as investments behind proven trade marketing programs and the new Light summer campaign in the U.S. ť $GPLQLVWUDWLYHH[SHQVHV increased by Ƶ.ƴ. ť 2WKHURSHUDWLQJLQFRPH was ƴ ƶƻƹmbUS dollar in ƵƳƴƷ compared to ƴ ƵƹƵmbUS dollar in ƵƳƴƶ, mainly due to income from government grants and a one-time positive accounting adjustment of ƵƵƶmbUS dollar, following an actuarial reassessment of future liabilities under the company’s post-retirement healthcare benefit plans in the US. This adjustment has been reported as a scope change in other operating income, and therefore excluded from organic growth. Normalized profit from operations before depreciation and amortization (Normalized EBITDA) Normalized EBITDA increased ƶ.ƶ in nominal terms and increased ƹ.ƹ organically to ƴƻ ƸƷƵmbUS dollar, with an EBITDA margin of ƶƼ.Ʒ, an organic growth of ƵƸ bps. ť North America EBITDA decreased ƴ.Ƶ to ƹ ƻƵƳmbUS dollar, with a margin contraction of ƹƳ bps to ƷƵ.Ʒ, as a result of increased investment behind the long term growth of the company’s brands, and higher distribution expenses due to increased freight rates. ť Mexico EBITDA grew by Ƶƴ.ƶ to Ƶ ƴƻƹmbUS dollar, with an EBITDA margin enhancement of ƹƳƻ bps to Ʒƺ.ƶ, driven by the strong revenue performance, partly offset by incremental packaging costs related to higher than expected demand for Corona globally. ť Latin America North EBITDA rose ƹ.Ʒ to Ƹ ƺƷƵmbUS dollar, with margin contraction of Ƶƴƹ bps to Ƹƴ.Ƴ, driven by a strong volume and top line performance, partially offset by an increase in sales marketing investments to support the )I)A :orld Cup activations. The increase in distribution expenses was mainly due to an expansion in the company’s own distribution, which is more than offset by the increase in net revenues, and the growth of the company’s premium brands. ť Latin America South EBITDA grew ƴƺ.ƴ to ƴ ƶƸƵmbUS dollar, with margin contraction of ƶƳ bps to ƷƸ.ƹ, driven by revenue growth partially offset by high cost inflation. ť Europe EBITDA increased ƴ.Ƹ to ƴ ƶƷƶmbUS dollar with margin growth of ƶƼ bps to Ƶƺ.ƹ, due to the )I)A :orld Cup activations, partially offset by a weak beer industry in Ukraine and Russia. ť Asia 3acific EBITDA grew Ƶƻ.Ƹ to ƴ ƳƹƺmbUS dollar with margin growth of ƵƷƷ bps to Ƶƴ.Ƶ. This result was driven by strong top-line growth and good cost management, partly offset by higher cost of sales and distribution expenses related to brand mix. ť *lobal Export and Holding Companies reported EBITDA of ƶƶmbUS dollar in ƵƳƴƷ (ƵƳƴƶ: ƷƳmbUS dollar). Reconciliation between Normalized EBITDA and profit attributable to equity holders Normalized EBITDA and EBIT are measures utilized by ABbInBev to demonstrate the company’s underlying performance. Normalized EBITDA is calculated excluding the following effects from profit attributable to equity holders of ABbInBev: (i) Non controlling interest, (ii) Income tax expense, (iii) Share of results of associates, (iv) Net finance cost, (v) Non-recurring net finance cost, (vi) Non-recurring items above EBIT (including non-recurring impairment) and (vii) Depreciation, amortization and impairment. Normalized EBITDA and EBIT are not accounting measures under I)RS accounting and should not be considered as an alternative to 3rofit attributable to equity holders as a measure of operational performance or as an alternative to cash flow as a measure of liquidity. Normalized EBITDA and EBIT do not have a standard calculation method and ABbInBev’s definition of normalized EBITDA and EBIT may not be comparable to that of other companies. 0LOOLRQ86GROODU 1RWHV ƵƳƴƷ ƵƳƴƶ 5HSRUWHG 3URƮWDWWULEXWDEOHWRHTXLW\KROGHUVRI$%b,Q%HY ƼƵƴƹ ƴƷƶƼƷ Non-controlling interest Ƶ Ƴƻƹ Ƶ ƴƵƷ 3URƮW ƴƴƶƳƵ ƴƹƸƴƻ Income tax expense ƴƵ Ƶ ƷƼƼ Ƶ Ƴƴƹ Share of result of associates (Ƽ) (ƵƼƷ) Non-recurring net Ʈnance cost ƴƴ (ƸƳƼ) (Ƶƻƶ) Net Ʈnance cost ƴƴ ƴ ƻƵƻ Ƶ Ʒƻƹ Non-recurring items above EBIT (including non-recurring impairment) ƻ ƴƼƺ (ƹ ƵƷƳ) 1RUPDOL]HG(%,7 ƴƸƶƳƻ ƴƷƵƳƶ Depreciation, amortization and impairment ƶ ƵƶƷ Ƶ ƼƻƸ 1RUPDOL]HG(%,7'$ ƴƻƸƷƵ ƴƺƴƻƻ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Non-recurring items are either income or expenses which do not occur regularly as part of the normal activities of the company. They are presented separately because they are important for the understanding of the underlying sustainable performance of the company due to their size or nature. Details on the nature of the non-recurring items are disclosed in Note ƻ Non-recurring items. Impact of foreign currencies )oreign currency exchange rates have a significant impact on ABbInBev’s financial statements. The following table sets forth the percentage of its revenue realized by currency for the years ended ƶƴ December ƵƳƴƷ and ƵƳƴƶ: ƵƳƴƶ ƵƳƴƷ 5HIHUHQFHEDVH US dollar ƶƵ.Ʒ ƶƶ.Ƹ Brazilian real ƵƵ.ƴ ƵƵ.Ƹ Mexican peso ƴƴ.Ƽ ƴƵ.Ƶ Chinese yuan ƻ.Ƶ ƺ.ƶ Euro ƹ.ƹ ƹ.Ƹ Canadian dollar Ʒ.Ƶ Ʒ.ƶ Argentinean peso ƶ.ƹ Ʒ.ƶ South Korean won Ƶ.Ʒ ś Russian ruble ƴ.ƺ Ƶ.ƶ Other ƹ.Ƽ ƺ.ƴ The following table sets forth the percentage of its normalized EBITDA realized by currency for the periods ended ƶƴ December ƵƳƴƷ and ƵƳƴƶ: ƵƳƴƶ ƵƳƴƷ 5HIHUHQFHEDVH US dollar ƶƶ.Ƴ ƶƶ.ƹ Brazilian real ƵƼ.Ƹ ƶƴ.ƻ Mexican peso ƴƶ.ƹ ƴƵ.Ƶ Canadian dollar Ʒ.ƶ Ʒ.ƻ Argentinean peso Ʒ.ƴ Ʒ.Ƽ Chinese yuan ƶ.Ƽ ƶ.Ƴ Euro ƶ.Ƶ ƶ.Ƶ South Korean won Ƶ.Ƴ ś Russian ruble Ƴ.Ƹ Ƴ.ƻ Other Ƹ.Ƽ Ƹ.ƺ In ƵƳƴƷ, the fluctuation of the foreign currency rates had a negative translation impact of (Ƶ ƶƳƺ)mbUS dollar on ABbInBev’s revenue (ƵƳƴƶ: negative impact of (ƴ ƶƺƶ)mbUS dollar), of (ƴ ƳƶƼ)mbUS dollar on its normalized EBITDA (ƵƳƴƶ: negative impact of (ƺƸƶ)mbUS dollar) and of (ƻƻƵ)mbUS dollar on its normalized EBIT (ƵƳƴƶ: negative impact of (ƹƻƵ)mbUS dollar). ABbInBev’s profit (after tax) has been negatively affected by the fluctuation of foreign currencies for (ƸƶƷ)mbUS dollar (ƵƳƴƶ: negative impact of (ƶƻƼ)mbUS dollar), while the negative translation impact on its E3S base (profit attributable to equity holders of ABbInBev) was (ƶƴƹ)mbUS dollar or (Ƴ.ƴƼ) US dollar per share (ƵƳƴƶ: negative impact of (ƴƹƺ)mbUS dollar or (Ƴ.ƴƳ) US dollar per share). The impact of the fluctuation of the foreign currencies on ABbInBev’s net debt amounted to (ƷƷƺ)mbUS dollar (decrease of net debt) in ƵƳƴƷ, as compared to an impact of ƹƳƹmbUS dollar (increase of net debt) in ƵƳƴƶ. The impact of the fluctuation of the foreign currencies on the equity attributable to the equity holders of ABbInBev amounted to (Ʒ ƶƺƷ)mbUS dollar (decrease of equity), as compared to an impact of (ƶ ƴƳƼ)mbUS dollar (decrease of equity) in ƵƳƴƶ on a reported basis. P. 58 /59 Profit Normalized profit attributable to equity holders of ABbInBev was ƻ ƻƹƸmbUS dollar (normalized E3S Ƹ.Ʒƶ US dollar) in ƵƳƴƷ, compared to ƺ ƼƶƹmbUSbdollar (normalized E3S Ʒ.Ƽƴ US dollar) in ƵƳƴƶ - see Note Ƶƴ Changes in equity and earnings per share for more details. 3rofit attributable to equity holders of ABbInBev for ƵƳƴƷ was Ƽ ƵƴƹmbUSbdollar, compared to ƴƷ ƶƼƷmbUSbdollar for ƵƳƴƶ and includes the following impacts: ť Net finance costs (excluding non-recurring net finance items): ƴ ƻƵƻmbUSbdollar in ƵƳƴƷ compared to Ƶ ƷƻƹmbUSbdollar in ƵƳƴƶ. This decrease was driven by lower interest expenses, currency gains reported in other financial results, and a positive mark-to-market adjustment of ƺƴƴmbUSbdollar in ƵƳƴƷ linked to the hedging of the company’s share-based payment programs, compared to ƷƸƹmbUSbdollar gains in ƵƳƴƶ. ť Non-recurring net finance income/(cost): ƸƳƼmbUSbdollar in ƵƳƴƷ compared to ƵƻƶmbUSbdollar in ƵƳƴƶ. Non-recurring net finance income in ƵƳƴƷ relates to mark-to market adjustments on derivative instruments entered into to hedge the deferred share instrument issued in a transaction related to the combination with *rupo Modelo. The deferred share instrument had been hedged at an average price of approximately ƹƻ euro per share. Non-recurring net finance costs in ƵƳƴƶ also includes (ƴƳƴ)mbUSbdollar commitment and utilization fees incurred for the ƵƳƴƵ )acility agreement entered into to fund the *rupo Modelo combination. ť Share of result of associates: ƼmbUSbdollar in ƵƳƴƷ compared to ƵƼƷmbUSbdollar in ƵƳƴƶ. In ƵƳƴƶ, the share of results of associates reflects the company’s equity investment in *rupo Modelo. The results of *rupo Modelo have been fully consolidated since the combination between *rupo Modelo and the company on Ʒ June ƵƳƴƶ. ť Income tax expense: Ƶ ƷƼƼmbUSbdollar with an effective tax rate of ƴƻ.ƴ for ƵƳƴƷ compares with Ƶ ƳƴƹmbUSbdollar with an effective tax rate of ƴƴ.ƴ in ƵƳƴƶ. The increase in the effective tax rate mainly results from the ƵƳƴƶ non-taxable, exceptional gain related to the fair value adjustment on the initial investment held in *rupo Modelo, changes in country profit mix, including the impact resulting from the combination with *rupo Modelo and the OB acquisition. Excluding the effect of non-recurring items, the normalized effective tax rate was ƴƻ.ƻ in ƵƳƴƷ versus ƴƹ.ƹ in ƵƳƴƶ. ť Profit attributable to non-controlling interest: Ƶ ƳƻƹmbUSbdollar in ƵƳƴƷ, a decrease from Ƶ ƴƵƷmbUSbdollar in ƵƳƴƶ, with improved operating performance in Ambev being offset by currency translation effects. /LTXLGLW\3RVLWLRQDQG&DSLWDO5HVRXUFHV Cash Flows 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Cash ưow from operating activities ƴƷ ƴƷƷ ƴƶ ƻƹƷ Cash ưow from investing activities (ƴƴ ƴƸƵ) (ƴƳ Ƶƻƴ) Cash ưow from Ʈnancing activities (ƶ ƻƸƸ) ƶƷƴ 1HWLQFUHDVH GHFUHDVH LQFDVKDQGFDVKHTXLYDOHQWV ƻƹƶ ƶƼƵƷ &DVKIORZVIURPRSHUDWLQJDFWLYLWLHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ 3roƮt ƴƴ ƶƳƵ ƴƹ Ƹƴƻ Revaluation of initial investment in *rupo Modelo ś (ƹ ƷƴƸ) Interest, taxes and non-cash items included in proƮt ƺ ƳƵƼ ƺ ƴƶƸ &DVKưRZIURPRSHUDWLQJDFWLYLWLHVEHIRUHFKDQJHVLQZRUNLQJFDSLWDODQGXVHRISURYLVLRQV ƴƻƶƶƴ ƴƺƵƶƻ Change in working capital ƻƴƸ ƻƹƹ 3ension contributions and use of provisions (ƷƸƻ) (ƹƸƶ) Interest and taxes (paid)received (Ʒ ƸƺƷ) (Ʒ ƴƼƶ) Dividends received ƶƳ ƹƳƹ &DVKưRZIURPRSHUDWLQJDFWLYLWLHV ƴƷƴƷƷ ƴƶƻƹƷ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ABbInBev’s cash flow from operating activities reached ƴƷ ƴƷƷmbUSbdollar in ƵƳƴƷ compared to ƴƶ ƻƹƷmbUSbdollar in ƵƳƴƶ, mainly explained by the higher profit following the combination with *rupo Modelo, as well as strong working capital management. These increases were partly offset by an increase in interests and taxes paid, and a reduction in dividends received due to the consolidation of the results of *rupo Modelo following the combination in June ƵƳƴƶ. &DVKIORZIURPLQYHVWLQJDFWLYLWLHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Net capex (Ʒ ƴƵƵ) (ƶ ƹƴƵ) Acquisition and sale of subsidiaries, net of cash acquireddisposed of (ƹ ƺƳƳ) (ƴƺ ƶƼƺ) 3roceeds from the sale of(investments in) short-term debt securities (ƴƻƺ) ƹ ƺƳƺ Net of tax proceeds from the sale of assets held for sale (ƹƸ) Ʒ ƳƳƵ Other (ƺƻ) ƴƼ &DVKưRZIURPLQYHVWLQJDFWLYLWLHV ƴƴƴƸƵ ƴƳƵƻƴ Net cash used in investing activities was ƴƴ ƴƸƵmbUSbdollar in ƵƳƴƷ as compared to ƴƳ ƵƻƴmbUSbdollar in ƵƳƴƶ. The evolution of the cash used in investing activities in ƵƳƴƷ mainly reflects the acquisition of OB. See also Note ƹ Acquisitions and disposals of subsidiaries. In ƵƳƴƶ, the cash outflow from investing activities includes the combination with *rupo Modelo, offset by the proceeds from the sale of the 3iedras Negras brewery to Constellation Brands and the perpetual rights to the *rupo Modelo brands distributed in the US by Crown Imports. ABbInBev’s net capital expenditures amounted to Ʒ ƴƵƵmbUSbdollar in ƵƳƴƷ and ƶ ƹƴƵmbUSbdollar in ƵƳƴƶ. Out of the total capital expenditures of ƵƳƴƷ approximately ƸƳ was used to improve the company’s production facilities while ƷƳ was used for logistics and commercial investments. Approximately ƴƳ was used for improving administrative capabilities and purchase of hardware and software. &DVKIORZIURPILQDQFLQJDFWLYLWLHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Dividends paid (ƺ ƷƳƳ) (ƹ ƵƸƶ) Net (payments on)proceeds from borrowings ƶ ƵƵƶ Ʒ ƷƸƻ Net proceeds from the issue of share capital ƻƶ ƺƶ Cash received for deferred shares instrument ś ƴ ƸƳƳ Other (including net Ʈnance (cost)income other than interest) ƵƶƼ Ƹƹƶ &DVKưRZIURPƮQDQFLQJDFWLYLWLHV ƶƻƸƸ ƶƷƴ The cash outflow from ABbInBev’s financing activities amounted to ƶ ƻƸƸmbUSbdollar in ƵƳƴƷ, as compared to a cash inflow of ƶƷƴmbUSbdollar in ƵƳƴƶ. The cash flow from financing activities in ƵƳƴƷ reflects the funding of the acquisition of OB and higher dividends paid. In ƵƳƴƶ, cash inflow from financing activities reflects the funding of the combination with *rupo Modelo and the cash proceeds from the deferred share instruments issued in a transaction related to the combination with *rupo Modelo. ABbInBev’s cash, cash equivalents and short-term investments in debt securities less bank overdrafts as of ƶƴ December ƵƳƴƷ amounted to ƻbƹƴƺmbUSbdollar. As of ƶƴ December ƵƳƴƷ, the company had total liquidity of ƴƹ ƹƴƺmbUSbdollar, which consisted of ƻ.Ƴ billion US dollar available under committed long-term credit facilities and ƻ ƹƴƺmbUSbdollar of cash, cash equivalents and short-term investments in debt securities less bank overdrafts. Although the company may borrow such amounts to meet its liquidity needs, the company principally relies on cash flows from operating activities to fund the company’s continuing operations. Capital resources and equity ABbInBev’s net debt increased to ƷƵ ƴƶƸmbUSbdollar as at ƶƴ December ƵƳƴƷ, from ƶƻ ƻƶƴmbUSbdollar as at ƶƴ December ƵƳƴƶ. Net debt is defined as non-current and current interest-bearing loans and borrowings and bank overdrafts minus debt securities and cash. Net debt is a financial performance indicator that is used by ABbInBev’s management to highlight changes in the company’s overall liquidity position. The company believes that net debt is meaningful for investors as it is one of the primary measures ABbInBev’s management uses when evaluating its progress towards deleveraging. Apart from operating results net of capital expenditures, the net debt is mainly impacted by the acquisition of OB (Ƹ.Ƹ billion US dollar), dividend payments to shareholders of ABbInBev and Ambev (ƺ.Ʒ billion US dollar) the payment of interests and taxes (Ʒ.ƹbbillion US dollar) and the impact of changes in foreign exchange rates (ƷƷƺmbUSbdollar decrease of net debt). Net debt to normalized EBITDA for the ƴƵ month period ending ƶƴ December ƵƳƴƷ was essentially flat at Ƶ.Ƶƺx, on a reported basis. P. 60 /61 Consolidated equity attributable to equity holders of ABbInBev as at ƶƴ December ƵƳƴƷ was ƷƼ ƼƺƵmbUSbdollar, compared to ƸƳ ƶƹƸmbUSbdollar as at ƶƴ December ƵƳƴƶ. The combined effect of the weakening of mainly the closing rates of the euro, the Brazilian real, the Argentinean peso, the Mexican peso, the pound sterling, the Russian ruble and the Chinese yuan resulted in a foreign exchange translation adjustment of (Ʒ ƶƺƷ)mbUSbdollar. )urther details on equity movements can be found in the consolidated statement of changes in equity. )urther details on interest-bearing loans and borrowings, repayment schedules and liquidity risk, are disclosed in Note ƵƵ Interest-bearing loans and borrowings and Note Ƶƺ Risks arising from financial instruments. 5HVHDUFKDQG'HYHORSPHQW *iven its focus on innovation, ABbInBev places a high value on research and development. In ƵƳƴƷ ABbInBev spent ƵƴƺmbUSbdollar in research and development (ƵƳƴƶ: ƴƻƸmbUSbdollar). 3art of this was spent in the area of market research, but the majority is related to innovation in the areas of process optimization and product development. Research and development in process optimization is primarily aimed at capacity increase (plant debottlenecking and addressing volume issues, while minimizing capital expenditure), quality improvement and cost management. Newly developed processes, materials and/or equipment are documented in best practices and shared across business zones. Current projects range from malting to bottling of finished products. Research and development in product innovation covers liquid, packaging and draft innovation. 3roduct innovation consists of breakthrough innovation, incremental innovation and renovation (that is, implementation of existing technology). The main goal for the innovation process is to provide consumers with better products and experiences. This implies launching new liquid, new packaging and new draught products that deliver better performance both for the consumer and in terms of financial results, by increasing ABbInBev’s competitiveness in the relevant markets. :ith consumers comparing products and experiences offered across very different drink categories and the offering of beverages increasing, ABbInBev’s research and development efforts also require an understanding of the strengths and weaknesses of other drink categories, spotting opportunities for beer and developing consumer solutions (products) that better address consumer need and deliver better experience. This requires understanding consumer emotions and expectations. Sensory experience, premiumization, convenience, sustainability and design are all central to ABbInBev’s research and development efforts. Knowledge management and learning is also an integral part of research and development. ABbInBev seeks to continuously increase its knowledge through collaborations with universities and other industries. ABbInBev’s research and development team is briefed annually on the company’s and the business zones’ priorities and approves concepts which are subsequently prioritized for development. Launch time, depending on complexity and prioritization, usually falls within the next calendar year. The *lobal Innovation and Technology Center (Š*ITeCš), located in Leuven, accommodates the 3ackaging, 3roduct, 3rocess Development teams and facilities such as Labs, Experimental Brewery and the European Central Lab, which also includes Sensory Analysis. In addition to *ITeC, ABbInBev also has 3roduct, 3ackaging and 3rocess development teams located in each of the six ABbInBev geographic regions focusing on the short-term needs of such regions. 5LVNVDQG8QFHUWDLQWLHV Under the explicit understanding that this is not an exhaustive list, ABbInBev’s major risk factors and uncertainties are listed below. There may be additional risks which ABbInBev is unaware of. There may also be risks ABbInBev now believes to be immaterial, but which could turn out to have a material adverse effect. Moreover, if and to the extent that any of the risks described below materialize, they may occur in combination with other risks which would compound the adverse effect of such risks. The sequence in which the risk factors are presented below is not indicative of their likelihood of occurrence or of the potential magnitude of their financial consequence. Risks relating to ABb,Q%HYDQGWKHEHHUDQGEHYHUDJHLQGXVWU\ ABbInBev relies on the reputation of its brands and its success depends on its ability to maintain and enhance the image and reputation of its existing products and to develop a favorable image and reputation for new products. An event, or series of events, that materially damages the reputation of one or more of ABbInBev’s brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business. )urther, any restrictions on the permissible advertising style, media and messages used may constrain ABbInBev’s brand building potential and thus reduce the value of its brands and related revenues. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ABbInBev may not be able to protect its current and future brands and products and defend its intellectual property rights, including trademarks, patents, domain names, trade secrets and know-how, which could have a material adverse effect on its business, results of operations, cash flows or financial condition, and in particular, on ABbInBev’s ability to develop its business. Certain of ABbInBev’s operations depend on independent distributors’ or wholesalers’ efforts to sell ABbInBev’s products and there can be no assurance that such distributors will not give priority to ABbInBev’s competitors. )urther, any inability of ABbInBev to replace unproductive or inefficient distributors or any limitations imposed on ABbInBev to purchase or own any interest in distributors or wholesalers as a result of contractual restrictions, regulatory changes, changes in legislation or the interpretations of legislation by regulators or courts could adversely impact ABbInBev’s business, results of operations and financial condition. Changes in the availability or price of raw materials, commodities, energy and water could have an adverse effect on ABbInBev’s results of operations to the extent that ABbInBev fails to adequately manage the risks inherent in such volatility, including if ABbInBev’s hedging and derivative arrangements do not effectively or completely hedge changes in commodity prices. ABbInBev relies on key third parties, including key suppliers, for a range of raw materials for beer, alcoholic beverages and soft drinks, and for packaging material. The termination of or material change to arrangements with certain key suppliers or the failure of a key supplier to meet its contractual obligations could have a material impact on ABbInBev’s production, distribution and sale of beer, alcoholic beverages and soft drinks and have a material adverse effect on ABbInBev’s business, results of operations, cash flows or financial condition. In addition, a number of key brand names are both licensed to third-party brewers and used by companies over which ABbInBev does not have control. Although ABbInBev monitors brewing quality to ensure its high standards, to the extent that one of these key brand names or joint ventures, investments in companies in which ABbInBev does not own a controlling interest and ABbInBev’s licensees are subject to negative publicity, it could have a material adverse effect on ABbInBev’s business, results of operations, cash flows or financial condition. Competition in its various markets and increased purchasing power of players in ABbInBev’s distribution channels could cause ABbInBev to reduce pricing, increase capital investment, increase marketing and other expenditures, prevent ABbInBev from increasing prices to recover higher cost and thereby cause ABbInBev to reduce margins or lose market share. Any dilution of ABbInBev’s brands as a result of competitive trends could also lead to a significant erosion of ABbInBev’s profitability. Any of the foregoing could have a material adverse effect on ABbInBev’s business, financial condition and results of operations. Also, innovation faces inherent risks, and the new products ABbInBev introduces may not be successful, while competitors may be able to respond quicker to the emerging trends, such as the increasing consumer preference for Šcraft beersš produced by smaller microbreweries. The continued consolidation of retailers in markets in which ABbInBev operates could result in reduced profitability for the beer industry as a whole and indirectly adversely affect ABbInBev’s financial results. ABbInBev could incur significant costs as a result of compliance with, and/or violations of or liabilities under, various regulations that govern ABbInBev’s operations or the operations of its licensed third parties. Also, public concern about beer, alcoholic beverages and soft drink consumption and any resulting restrictions may cause the social acceptability of beer, alcoholic beverages and soft drinks to decline significantly and consumption trends to shift away from these products, which would have a material adverse effect on ABbInBev’s business, financial condition and results of operations. ABbInBev’s operations are subject to environmental regulations, which could expose it to significant compliance costs and litigation relating to environmental issues. Antitrust and competition laws and changes in such laws or in the interpretation and enforcement thereof, as well as being subject to regulatory scrutiny, could affect ABbInBev’s business or the businesses of its subsidiaries. In recent years, there has been increased public and political attention directed at the alcoholic beverage and food and soft drinks industries, as a result of health care concerns related to the harmful use of alcohol (including drunk driving and excessive, abusive and underage drinking) and to health concerns such as diabetes and obesity related to the overconsumption of food and soft drinks. Negative publicity regarding ABbInBev’s products and brands, publication of studies indicating a significant risk in using ABbInBev’s products or changes in consumer perceptions in relation to ABbInBev’s products generally could adversely affect the sale and consumption of ABbInBev’s products and could harm its business, results of operations, cash flows or financial condition. Demand for ABbInBev’s products may be adversely affected by changes in consumer preferences and tastes. Consumer preferences and tastes can change in unpredictable ways. )ailure by ABbInBev to anticipate or respond adequately to changes in consumer preferences and tastes or to developments in new forms of media and marketing could adversely impact ABbInBev’s business, results of operations and financial condition. P. 62 /63 The beer and beverage industry may be subject to adverse changes in taxation, which makes up a large proportion of the cost of beer charged to consumers in many jurisdictions. Increases in excise and other indirect taxes applicable to ABbInBev’s products tend to adversely affect ABbInBev’s revenue or margins, both by reducing overall consumption and by encouraging consumers to switch to other categories of beverages. Minimum pricing is another form of fiscal regulation that can affect ABbInBev’s profitability. )urthermore, ABbInBev may be subject to increased taxation on its operations by national, local or foreign authorities, to higher corporate income tax rates or to new or modified taxation regulations and requirements, such as the Base Erosion 3rofit Shifting project being conducted by the Organization for Economic Co-operation and Development. An increase in beer excise taxes or other taxes could adversely affect the financial results of ABbInBev as well as its results of operations. Seasonal consumption cycles and adverse weather conditions in the markets in which ABbInBev operates may result in fluctuations in demand for ABbInBev’s products and therefore may have an adverse impact on ABbInBev’s business, results of operations and financial condition. Climate change, or legal, regulatory or market measures to address climate change, could have a long-term, material adverse impact on ABbInBev’s business and results of operations. )urther, water scarcity or poor water quality may affect ABbInBev by increasing production costs and capacity constraints, which could adversely affect ABbInBev’s business and results of operations. Additionally, ABbInBev’s inability to meet its compliance obligations under EU emissions trading regulations may also have an adverse impact on ABbInBev’s business and results of operations. A substantial portion of ABbInBev’s operations are carried out in emerging European, Asian and Latin American markets. ABbInBev’s operations and equity investments in these markets are subject to the customary risks of operating in developing countries, which include, amongst others, political insurrection, external interference, changes in government policy, political and economic changes, changes in the relations between the countries, actions of governmental authorities affecting trade and foreign investment, regulations on repatriation of funds, interpretation and application of local laws and regulations, enforceability of intellectual property and contract rights, local labor conditions and regulations, potential political and economic uncertainty, application of exchange controls, nationalization or expropriation, crime and lack of law enforcement as well as financial risks, which include risk of liquidity, inflation, devaluation, price volatility, currency convertibility and country default. Such emerging market risks could adversely impact ABbInBev’s business, results of operations and financial condition. Economic and political events in Argentina may adversely affect the company’s Argentinean operations. The political instability, fluctuations in the economy, governmental actions concerning the economy of Argentina, the devaluation of the Argentine peso, inflation and deteriorating macroeconomic conditions in Argentina could indeed have, and may continue to have, a material adverse effect on ABbInBev’s Latin America South operations, their financial condition and their results. If the economic or political situation in Argentina deteriorates, ABbInBev Latin America South operations may be subject to additional restrictions under new Argentinean foreign exchange, export repatriation or expropriation regimes that could adversely affect ABbInBev’s liquidity and operations, and its ability to access funds from Argentina. 3olitical events in Ukraine and related sanctions adopted by the European Union and the United States targeting Russia and Crimea may adversely affect ABbInBev’s operations in Ukraine, Russia and elsewhere in the region. ABbInBev owns and operates beer production facilities in Ukraine and Russia. Continued political instability, civil strife, deteriorating macroeconomic conditions, the devaluation of the Russian ruble, the devaluation of the Ukrainian hryvnia and actual or threatened military action in the region could have a material adverse effect on ABbInBev’s operations in the region and on the results of operations of ABbInBev’s Europe segment, and may result in impairment charges on goodwill or other intangiblebassets. If any of ABbInBev’s products is defective or found to contain contaminants, ABbInBev may be subject to product recalls or other liabilities. Although ABbInBev maintains insurance policies against certain product liability (but not product recall) risks, it may not be able to enforce its rights in respect of these policies and any amounts it recovers may not be sufficient to offset any damage it may suffer, which could adversely impact its business, reputation, prospects, results of operations and financial condition. ABbInBev may not be able to obtain the necessary funding for its future capital or refinancing needs and may face financial risks due to its level of debt and uncertain market conditions. ABbInBev may be required to raise additional funds for ABbInBev’s future capital needs or refinance its current indebtedness through public or private financing, strategic relationships or other arrangements and there can be no assurance that the funding, if needed, will be available on attractive terms, or at all. ABbInBev has incurred substantial indebtedness by entering into several senior credit facilities and accessing the bond markets from time to time based on its financial needs. The portion of ABbInBev’s consolidated balance sheet represented by debt will remain significantly higher as compared to its historical position. ABbInBev’s increased level of debt could have significant adverse consequences on ABbInBev, including (i) increasing its vulnerability to general adverse economic and industry conditions, (ii) limiting its flexibility in planning for, or reacting to, changes in its business and the industry in which ABbInBev operates; (iii) impairing its ability to obtain additional financing in the future, (iv) requiring ABbInBev to issue additional equity (potentially under unfavorable market conditions), and (v) placing ABbInBev at a competitive disadvantage compared to its competitors that have less debt. ABbInBev’s ability to repay and renegotiate its outstanding indebtedness will be dependent upon market conditions. Unfavorable conditions, including recent significant price volatility and liquidity disruptions in the global credit markets, as well as downward pressure on credit capacity for certain issuers without regard to those issuers’ underlying financial strength, could increase costs beyond what is currently anticipated. Such costs could have a material adverse impact on ABbInBev’s cash flows, results of operations or both. )urther, ABbInBev may restrict the amount of dividends it will pay as a result of ABbInBev’s level of debt and its strategy to give priority to deleveraging. Also, a credit rating downgrade could have a material adverse effect on ABbInBev’s ability to finance its ongoing operations or to refinance its existing indebtedness. In addition, a failure of ABbInBev to refinance all or a substantial Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT amount of its debt obligations when they become due, or more generally a failure to raise additional equity capital or debt financing or to realize proceeds from asset sales when needed, would have a material adverse effect on its financial condition and results of operations. ABbInBev’s results could be negatively affected by increasing interest rates. Although ABbInBev enters into interest rate swap agreements to manage its interest rate risk and also enters into cross-currency interest rate swap agreements to manage both its foreign currency risk and interest-rate risk on interest-bearing financial liabilities, there can be no assurance that such instruments will be successful in reducing the risks inherent in exposures to interest rate fluctuations. ABbInBev’s results of operations are affected by fluctuations in exchange rates. Any change in exchange rates between ABbInBev’s operating companies’ functional currencies and the US dollar will affect its consolidated income statement and balance sheet when the results of those operating companies are translated into US dollar for reporting purposes as translational exposures are not hedged. Also, there can be no assurance that the policies in place to manage commodity price and transactional foreign currency risks to protect ABbInBev’s exposure will be able to successfully hedge against the effects of such foreign exchange exposure, especially over the long-term. )urther, the use of financial instruments to mitigate currency risk and any other efforts taken to better match the effective currencies of ABbInBev’s liabilities to its cash flows could result in increased costs. ABbInBev’s shares currently trade on Euronext Brussels in euros and its American Depositary Shares trade on the New York Stock Exchange in US dollars. )luctuations in the exchange rate between the U.S. dollar and the euro may result in temporary differences between the value of its American Depositary Shares and the value of its ordinary shares, which may result in heavy trading by investors seeking to exploit such differences. The ability of ABbInBev’s subsidiaries to distribute cash upstream may be subject to various conditions and limitations. The inability to obtain sufficient cash flows from its domestic and foreign subsidiaries and affiliated companies could adversely impact ABbInBev’s ability to pay dividends and otherwise negatively impact its business, results of operations and financial condition. )ailure to generate significant cost savings and margin improvement through initiatives for improving operational efficiencies could adversely affect ABbInBev’s profitability and ABbInBev’s ability to achieve its financial goals. ABbInBev may not be able to successfully carry out further acquisitions and business integrations or restructuring. ABbInBev cannot make further acquisitions unless it can identify suitable candidates and agree on terms with them. ABbInBev may not be able to successfully complete such transactions. In addition, such transactions may involve the assumption of certain liabilities, which may have a potential impact on ABbInBev’s financial risk profile. )urther, the price ABbInBev may pay in any future acquisition may prove to be too high as a result of various factors. The combination with *rupo Modelo has exposed ABbInBev to risks related to significant costs and potential difficulties in the integration of *rupo Modelo into ABbInBev’s existing operations and the extraction of synergies from the transaction. Although the anticipated business growth opportunities, cost savings, increased profits, synergies and other benefits contemplated by the Modelo combination are significant, there can be no assurance that the Modelo combination will realize these benefits in the time expected or at all. Any failures, material delays or unexpected costs of the integration process could therefore have a material adverse effect on ABbInBev’s business, results of operations and financialbcondition. ABbInBev reached a settlement with the U.S. Department of Justice in relation to the combination with *rupo Modelo, which included a three- year transition services agreement to ensure the smooth transition of the operation of the 3iedras Negras brewery as well as certain distribution guarantees for Constellation Brands, Inc. in the fifty states of the United States, the District of Columbia and *uam. ABbInBev’s compliance with its obligations under the settlement agreement is monitored by the U.S. Department of Justice and the Monitoring Trustee appointed by them. :ere ABbInBev to fail to fulfill its obligations under the settlement, whether intentionally or inadvertently, ABbInBev could be subject to monetary fines. If the business of ABbInBev does not develop as expected, impairment charges on goodwill or other intangible assets may be incurred in the future which could be significant and which could have an adverse effect on ABbInBev’s results of operations and financial condition. Although ABbInBev’s operations in Cuba are quantitatively immaterial, its overall business reputation may suffer or it may face additional regulatory scrutiny as a result of its activities in Cuba based on Cuba’s identification as a state sponsor of terrorism and target of US economic and trade sanctions. If investors decide to liquidate or otherwise divest their investments in companies that have operations of any magnitude in Cuba, the market in and value of ABbInBev’s securities could be adversely impacted. In addition, US legislation known as the ŠHelms-Burton Actš authorizes private lawsuits for damages against anyone who traffics in property confiscated without compensation by the *overnment of Cuba from persons who at the time were, or have since become, nationals of the United States. Although this section of the Helms-Burton Act is currently suspended, claims accrue notwithstanding the suspension and may be asserted if the suspension is discontinued. ABbInBev has received notice of a claim purporting to be made under the Helms-Burton Act. ABbInBev is currently unable to express a view as to the validity of such claims, or as to the standing of the claimants to pursue them. P. 64 /65 ABbInBev may not be able to recruit or retain key personnel and successfully manage them, which could disrupt ABbInBev’s business and have an unfavorable material effect on ABbInBev’s financial position, its income from operations and its competitive position. )urther, ABbInBev may be exposed to labor strikes, disputes and work stoppages or slowdown, within its operations or those of its suppliers, or an interruption or shortage of raw materials for any other reason that could lead to a negative impact on ABbInBev’s costs, earnings, financial condition, production level and ability to operate its business. ABbInBev’s production may also be affected by work stoppages or slowdowns that affect its suppliers, distributors and retail delivery/logistics providers as a result of disputes under existing collective labor agreements with labor unions, in connection with negotiations of new collective labor agreements, as a result of supplier financial distress or for other reasons. A work stoppage or slowdown at ABbInBev’s facilities could interrupt the transport of raw materials from its suppliers or the transport of its products to its customers. Such disruptions could put a strain on ABbInBev’s relationships with suppliers and clients and may have lasting effects on its business even after the disputes with its labor force have been resolved, including as a result of negative publicity. ABbInBev relies on information technology systems to process, transmit, and store electronic information. Although ABbInBev takes various actions to minimize potential technology disruptions, such disruptions could impact ABbInBev’s business. )or example, if outside parties gained access to ABbInBev’s confidential data or strategic information and appropriated such information or made such information public, this could harm ABbInBev’s reputation or its competitive advantage. More generally, technology disruptions could have a material adverse effect on ABbInBev’s business, results of operations, cash flows or financial condition. ABbInBev’s business and operating results could be negatively impacted by social, technical, natural, physical or other disasters. ABbInBev maintains insurance policies to cover various risks and also uses self-insurance in certain areas. Should an uninsured loss (self-insured risks) or a loss in excess of insured limits occur, this could adversely impact ABbInBev’s business, results of operations and financial condition. ABbInBev is exposed to the risk of a global recession or a recession in one or more of its key markets, and to credit and capital market volatility and economic financial crisis, which could result in lower revenue and reduced profit, as beer consumption in many of the jurisdictions in which ABbInBev operates is closely linked to general economic conditions and changes in disposable income. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on ABbInBev’s ability to access capital, on its business, results of operations and financial condition, and on the market price of its shares and American Depositary Shares. ABbInBev operates its business and markets its products in certain countries that are less developed, have less stability in legal systems and financial markets, and are potentially more corrupt business environments than Europe and the United States, and therefore present greater political, economic and operational risks. Although ABbInBev is committed to conducting business in a legal and ethical manner in compliance with local and international statutory requirements and standards applicable to its business, there is a risk that the employees or representatives of ABbInBev’s subsidiaries, affiliates, associates, joint ventures/operations or other business interests may take actions that violate applicable laws and regulations that generally prohibit the making of improper payments to foreign government officials for the purpose of obtaining or keeping business, including laws relating to the ƴƼƼƺ OECD Convention on Combating Bribery of )oreign 3ublic Officials in International Business Transactions such as the U.S. )oreign Corrupt 3ractices Act and the U.K. Bribery Act. The audit report included in ABbInBev’s annual report is prepared by an auditor who is not inspected by the US 3ublic Company Accounting Oversight Board (3CAOB). This lack of 3CAOB inspections in Belgium prevents the 3CAOB from regularly evaluating audits and quality control procedures of any auditors operating in Belgium, including ABbInBev’s auditors. As a result, US and other investors may be deprived of the benefits of 3CAOB inspections. ABbInBev is now, and may in the future be, a party to legal proceedings and claims, including collective suits (class actions), and significant damages may be asserted against it. *iven the inherent uncertainty of litigation, it is possible that ABbInBev might incur liabilities as a consequence of the proceedings and claims brought against it, including those that are not currently believed by it to be reasonably possible, which could have a material adverse effect on ABbInBev’s business, results of operations, cash flows or financial position. Important contingencies are disclosed in Note ƶƵ Contingencies of the consolidated financial statements. Risks Arising from Financial Instruments Note Ƶƺ of the ƵƳƴƷ consolidated financial statements on Risks arising from financial instruments contains detailed information on the company’s exposures to financial risks and its risk management policies. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT (YHQWVDIWHUWKH%DODQFH6KHHW'DWH 3lease refer to Note ƶƵ Events after the balance sheet date of the consolidated financial statements. &RUSRUDWH*RYHUQDQFH )or information with respect to Corporate *overnance, please refer to the Corporate *overnance section, which forms an integral part of ABbInBev’s annual report. P. 66 /67 Statement of the Board of Directors The Board of Directors of ABbInBev SA/NV certifies, on behalf and for the account of the company, that, to their knowledge, (a) the financial statements which have been prepared in accordance with International )inancial Reporting Standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the entities included in the consolidation as a whole and (b) the management report includes a fair review of the development and performance of the business and the position of the company and the entities included in the consolidation as a whole, together with a description of the principal risks and uncertainties they face. Anheuser- Busch lnBev An nuai Re port 2014 6/ FINANCIAL REPORT lndependent Auditors' Report pwc STATUTORY AUDITOR'S REPORT TO THE GENERAL SHAREHOLDERS' MEETING ON THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED 31DECEMBER2014 ln accordance with the legal requirements, we report to you on the performance of our mandate of statu tory auditor. This report includes our opinion on the consolidated fina ncial statements, as well as the required additional statements. The consolidated financial statements comprise the consolidated statement of financial position as at 31 December 2014, the consolidated incarne tatement, the consolidated statement of comprehensive incarne, consolidated statement of changes in equity and the con olidated ca h flow statement for the year 2014 then ended, and notes, comprising a summary of ignificant accounting policies and other explanatory informatfon. Report on the consolidated financial statements - Unqualified opinion We have audited the consolidated financial statements of Anheu er-Busch Inbev NV/SA ethe Company") and its subsidiaries (jointly uthe group"), preparnd in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. The total of the consolidated statement of financial po ition amounts to USD i42.550 million and the consolidated income statement shows a profit for the year 2014 of USD 11.302 million. Board ofdirectol's' responsibilityfor the pl'eparation of the consolidatedfinancial statements The Company' board of directors is responsible for the preparation and fair presentation of these consolidated financial tatements in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium, and for sucb internai contrai as the board of directors determines, is necessary to enable the preparation of consolidated financial tatements that are free from material misstatement, whether due to fraud or error. tatutory auditor's responsibility Our responsibility is to express an opinion on these con olidated financial statements based on our audit. We conducted ou r audit in accordance with International Standards on Auditing (ISAs). Tbose standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whetber the consolidated financial statements are free from material misstatement. PwC Bedrijfsrevisoren cuba, burger/ijke vennootschap met handelsvorm - PwC Reviseurs d'Enh·epr·ises scrl, société civile à forme commerciale - Financial Assurance Services Maatschappe/ijke zetel/Siège social: Woluwe Garden, Woluwedal 18, B-1932 Si11t-Steue11s-Woluwe T: +32 (0)2 710 4211, F: +32 (0)2 710 4299, www.pwc.com B1Wj1VA BE 0429.soz.944/ RPR Brussel- RPM Bruxelles/ fNG BE43 3101 38JJ 9501 - BIC BBRUBEBB / RBS BE89 7205 4043 3185- BIC AB ABEBR P. 68 /69 pwc An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the statutory auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the statutory auditor considers internal control relevant to the group's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of directors, as well as evaluating the overall presentation of the consolidated financial statements. We have obtained from the board of directors and the company's officials the explanations and information necessary for perlorming our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Unqualified Opinion In our opinion, the consolidated financial statements give a true and fair view of the group's net equity and consolidated financial position as at 31 December 2014 and of its consolidated financial perlormance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. 6 Anheuser-Busch InBev Annual Report 2014 I FINANCIAL REPORT pwc Report on other legal and regulatory requirements The board of directors is responsible for the preparation and the content of the management report on the consolidated financial statements. In the context of our mandate and in accordance with the Belgian standard which is complementary to the International Standards on Auditing (ISAs) as applicable in Belgium, our responsibility is to verify, in all material respects, compliance with certain legal and regulatory requirements. On this basis, we provide the following additional statement which does not impact our opinion on the consolidated financial statements: • The management report on the consolidated financial statements includes the information required by law, is consistent with the consolidated financial statements and does not present any material inconsistencies with the information that we became aware of during the performance of our mandate. Sint-Stevens-Woluwe, 25 February 2015 The Statutory Auditor PwC Bedrijfsrevisoren BCVBA Represented by Yves Vandenplas Bedrijfsrevisor P. 70 /71 Consolidated Financial Statements Consolidated Income Statement )RUWKH\HDUHQGHGƶƴ'HFHPEHU 0LOOLRQ86GROODUH[FHSWHDUQLQJVSHUVKDUHVLQ86GROODU 1RWHV ƵƳƴƷ ƵƳƴƶ 5HYHQXH ƷƺƳƹƶ ƷƶƴƼƸ Cost of sales (ƴƻ ƺƸƹ) (ƴƺ ƸƼƷ) *URVVSURƮW ƵƻƶƳƺ ƵƸƹƳƴ Distribution expenses (Ʒ ƸƸƻ) (Ʒ Ƴƹƴ) Sales and marketing expenses (ƺ Ƴƶƹ) (Ƹ ƼƸƻ) Administrative expenses (Ƶ ƺƼƴ) (Ƶ ƸƶƼ) Other operating income/(expenses) ƺ ƴ ƶƻƹ ƴ ƴƹƳ 3URƮWIURPRSHUDWLRQVEHIRUHQRQUHFXUULQJLWHPV ƴƸƶƳƻ ƴƷƵƳƶ Restructuring (including impairment losses) ƻ (Ƶƺƺ) (ƴƴƻ) Business and asset disposal (including impairment losses) ƻ ƴƸƺ ƶƳ Acquisition costs business combinations ƻ (ƺƺ) (ƻƵ) )air value adjustments ƻ ś ƹ ƷƴƳ 3URƮWIURPRSHUDWLRQV ƴƸƴƴƴ ƵƳƷƷƶ )inance cost ƴƴ (Ƶ ƺƼƺ) (ƶ ƳƷƺ) )inance income ƴƴ ƼƹƼ Ƹƹƴ Non-recurring net Ʈnance cost ƻ ƸƳƼ Ƶƻƶ 1HWƮQDQFHFRVW ƴƶƴƼ ƵƵƳƶ Share of result of associates Ƽ ƵƼƷ 3URƮWEHIRUHWD[ ƴƶƻƳƴ ƴƻƸƶƷ Income tax expense ƴƵ (Ƶ ƷƼƼ) (Ƶ Ƴƴƹ) 3URƮW ƴƴƶƳƵ ƴƹƸƴƻ Attributable to: Equity holders of ABbInBev Ƽ Ƶƴƹ ƴƷ ƶƼƷ Non-controlling interest Ƶ Ƴƻƹ Ƶ ƴƵƷ Basic earnings per share Ƶƴ Ƹ.ƹƷ ƻ.ƼƳ Diluted earnings per share Ƶƴ Ƹ.ƸƷ ƻ.ƺƵ Basic earnings per share before non-recurring itemsƴ Ƶƴ Ƹ.Ʒƶ Ʒ.Ƽƴ Diluted earnings per share before non-recurring itemsƴ Ƶƴ Ƹ.ƶƵ Ʒ.ƻƴ The accompanying notes are an integral part of these consolidated Ʈnancial statements. ƴBasic earnings per share and diluted earnings per share before non-recurring items are not deƮned metrics in I)RS. Refer to Note Ƶƴ Changes in equity and earnings per share for more details. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT &RQVROLGDWHG6WDWHPHQWRI&RPSUHKHQVLYH,QFRPH )RUWKH\HDUHQGHGƶƴ'HFHPEHU 0LOOLRQ86GROODU ƵƳƴƷƵƳƴƶ 3URƮW ƴƴƶƳƵ ƴƹƸƴƻ 2WKHUFRPSUHKHQVLYHLQFRPH ,WHPVWKDWZLOOQRWEHUHFODVVLƮHGWRSURƮWRUORVV Re-measurements of post-employment beneƮts (ƷƼƴ) ƸƳƶ (ƷƼƴ) ƸƳƶ 2WKHUFRPSUHKHQVLYHLQFRPH ,WHPVWKDWPD\EHUHFODVVLƮHGVXEVHTXHQWO\WRSURƮWRUORVV Translation reserves (gains/(losses)) Exchange diƬerences on translation of foreign operations (Ʒ ƺƼƶ) (ƶ ƸƳƳ) EƬective portion of changes in fair value of net investment hedges ƶƶ (ƹƹ) Cash ưow hedges Recognized in equity ƶƴƷ ƸƺƼ Removed from equity and included in proƮt or loss (ƴƼƳ) (ƶƹ) Share of other comprehensive results of associates ś (ƹƺ) (Ʒ ƹƶƹ) (ƶ ƳƼƳ) 2WKHUFRPSUHKHQVLYHLQFRPHQHWRIWD[ ƸƴƵƺ ƵƸƻƺ 7RWDOFRPSUHKHQVLYHLQFRPH ƹƴƺƸ ƴƶƼƶƴ Attributable to: Equity holders of ABbInBev Ʒ ƷƹƸ ƴƵ ƵƻƸ Non-controlling interest ƴ ƺƴƳ ƴ ƹƷƹ The accompanying notes are an integral part of these consolidated Ʈnancial statements. P. 72 /73 Consolidated Statement of Financial Position As at 0LOOLRQ86GROODU 1RWHVƵƳƴƷƵƳƴƶ Assets 1RQFXUUHQWDVVHWV 3roperty, plant and equipment ƴƶ ƵƳ Ƶƹƶ ƵƳ ƻƻƼ *oodwill ƴƷ ƺƳ ƺƸƻ ƹƼ ƼƵƺ Intangible assets ƴƸ ƵƼ ƼƵƶ ƵƼ ƶƶƻ Investments in associates ƴƴƳ ƴƻƺ Investment securities ƴƹ ƴƴƻ ƴƼƶ Deferred tax assets ƴƺ ƴ ƳƸƻ ƴ ƴƻƳ Employee beneƮts Ƶƶ ƴƳ ƴƳ Trade and other receivables ƴƼ ƴ ƺƹƼ ƴ ƵƸƵ ƴƵƷƳƳƼ ƴƵƵƼƺƹ Current assets Investment securities ƴƹ ƶƳƴ ƴƵƶ Inventories ƴƻ Ƶ ƼƺƷ Ƶ ƼƸƳ Income tax receivable ƶƸƼ ƶƶƵ Trade and other receivables ƴƼ ƹ ƷƷƼ Ƹ ƶƹƵ Cash and cash equivalents ƵƳ ƻ ƶƸƺ Ƽ ƻƶƼ Assets held for sale ƴƳƴ ƻƷ ƴƻƸƷƴ ƴƻƹƼƳ 7RWDODVVHWV ƴƷƵƸƸƳ ƴƷƴƹƹƹ (TXLW\DQG/LDELOLWLHV (TXLW\ Issued capital Ƶƴ ƴ ƺƶƹ ƴ ƺƶƸ Share premium ƴƺ ƹƵƳ ƴƺ ƹƳƻ Reserves (Ʒ ƸƸƻ) ƴƻ Retained earnings ƶƸ ƴƺƷ ƶƴ ƳƳƷ (TXLW\DWWULEXWDEOHWRHTXLW\KROGHUVRI$%b,Q%HY ƷƼƼƺƵ ƸƳƶƹƸ 1RQFRQWUROOLQJLQWHUHVW Ʒ ƵƻƸ Ʒ ƼƷƶ ƸƷƵƸƺ ƸƸƶƳƻ 1RQFXUUHQWOLDELOLWLHV Interest-bearing loans and borrowings ƵƵ Ʒƶ ƹƶƳ Ʒƴ ƵƺƷ Employee beneƮts Ƶƶ ƶ ƳƸƳ Ƶ ƻƹƵ Deferred tax liabilities ƴƺ ƴƵ ƺƳƴ ƴƵ ƻƷƴ Trade and other payables Ƶƹ ƴ ƳƺƳ ƶ ƵƵƵ 3rovisions ƵƸ ƹƶƷ ƸƶƵ ƹƴƳƻƸ ƹƳƺƶƴ &XUUHQWOLDELOLWLHV Bank overdrafts ƵƳ Ʒƴ ƹ Interest-bearing loans and borrowings ƵƵ ƺ ƷƸƴ ƺ ƻƷƹ Income tax payable ƹƵƼ ƴ ƴƳƸ Trade and other payables Ƶƹ ƴƻ ƼƵƵ ƴƹ ƷƺƷ 3rovisions ƵƸ ƴƹƸ ƴƼƹ ƵƺƵƳƻ ƵƸƹƵƺ 7RWDOHTXLW\DQGOLDELOLWLHV ƴƷƵƸƸƳ ƴƷƴƹƹƹ The accompanying notes are an integral part of these consolidated Ʈnancial statements. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT &RQVROLGDWHG6WDWHPHQWRI&KDQJHVLQ(TXLW\ 6KDUH EDVHG ,VVXHG 6KDUH 7UHDVXU\ SD\PHQW 0LOOLRQ86GROODU FDSLWDO SUHPLXP VKDUHV reserves $VSHUƴ-DQXDU\ƵƳƴƶ ƴƺƶƷ ƴƺƸƺƷ ƴƳƳƳ ƹƼƶ 3URƮW ś ś ś ś 2WKHUFRPSUHKHQVLYHLQFRPH ([FKDQJHGLƬHUHQFHVRQWUDQVODWLRQRIIRUHLJQRSHUDWLRQV JDLQV ORVVHV ś ś ś ś &DVKưRZKHGJHV ś ś ś ś 5HPHDVXUHPHQWVRISRVWHPSOR\PHQWEHQHƮWV ś ś ś ś 6KDUHRIRWKHUFRPSUHKHQVLYHUHVXOWVRIDVVRFLDWHV ś ś ś ś 7RWDOFRPSUHKHQVLYHLQFRPH ś ś ś ś 6KDUHVLVVXHG ƴ ƶƷ ś ś 'LYLGHQGV ś ś ś ś 7UHDVXU\VKDUHV ś ś ƴƵƹ ś 6KDUHEDVHGSD\PHQWV ś ś ś ƴƼƵ 6FRSHDQGRWKHUFKDQJHV ś ś ś ś $VSHUƶƴ'HFHPEHUƵƳƴƶ ƴƺƶƸ ƴƺƹƳƻ ƻƺƷ ƻƻƸ 6KDUH EDVHG ,VVXHG 6KDUH 7UHDVXU\ SD\PHQW 0LOOLRQ86GROODU FDSLWDO SUHPLXP VKDUHV reserves $VSHUƴ-DQXDU\ƵƳƴƷ ƴƺƶƸ ƴƺƹƳƻ ƻƺƷ ƻƻƸ 3URƮW ś ś ś ś 2WKHUFRPSUHKHQVLYHLQFRPH ś ś ś ś ([FKDQJHGLƬHUHQFHVRQWUDQVODWLRQRIIRUHLJQRSHUDWLRQV JDLQV ORVVHV ś ś ś ś &DVKưRZKHGJHV ś ś ś ś 5HPHDVXUHPHQWVRISRVWHPSOR\PHQWEHQHƮWV ś ś ś ś 7RWDOFRPSUHKHQVLYHLQFRPH ś ś ś ś 6KDUHVLVVXHG ƴ ƴƵ ś ś 'LYLGHQGV ś ś ś ś 7UHDVXU\VKDUHV ś ś ƸƸ ś 6KDUHEDVHGSD\PHQWV ś ś ś ƴƼƸ 6FRSHDQGRWKHUFKDQJHV ś ś ś ś $VSHUƶƴ'HFHPEHUƵƳƴƷ ƴƺƶƹ ƴƺƹƵƳ ƻƴƼ ƴƳƻƳ The accompanying notes are an integral part of these consolidated Ʈnancial statements. ƴAs Reported, adjusted to reưect the eƬects of retrospective application on the revised IAS ƴƼ (PSOR\HH%HQHƮWV (see Note ƶ 6XPPDU\RIVLJQLƮFDQWDFFRXQWLQJSROLFLHV). P. 74 /75 $WWULEXWDEOHWRHTXLW\KROGHUVRI$%b,Q%HYƴ 5HPHDVXUHPHQWV RISRVW 'HIHUUHG 1RQ 7UDQVODWLRQ +HGJLQJ HPSOR\PHQW VKDUH 5HWDLQHG FRQWUROOLQJ 7RWDO UHVHUYHV UHVHUYHV EHQHƮWV LQVWUXPHQW HDUQLQJV 7RWDO LQWHUHVW HTXLW\ ƵƴƷƺ ƺƼ ƴƷƶƷ ś ƵƴƸƴƼ ƷƴƴƸƷ ƷƵƼƼ ƷƸƷƸƶ ś ś ś ś ƴƷƶƼƷ ƴƷƶƼƷ ƵƴƵƷ ƴƹƸƴƻ ƶƳƷƵ ś ś ś ś ƶƳƷƵ ƸƵƷ ƶƸƹƹ ś ƸƶƷ ś ś ś ƸƶƷ Ƽ ƸƷƶ ś ś Ʒƹƹ ś ś Ʒƹƹ ƶƺ ƸƳƶ ƹƺ śśśś ƹƺ ś ƹƺ ƶƴƳƼ ƸƶƷ Ʒƹƹ ś ƴƷƶƼƷ ƴƵƵƻƸ ƴƹƷƹ ƴƶƼƶƴ ś ś ś ƴƸƳƳ ś ƴƸƶƸ ś ƴƸƶƸ ś ś ś ƴƻ Ʒƺƻƻ ƷƻƳƹ ƴƳƴƼ ƸƻƵƸ ś ś ś ś ś ƴƵƹ ś ƴƵƹ ś ś ś ś ś ƴƼƵ Ƶƶ ƵƴƸ ś ś ś ś ƴƵƴ ƴƵƴ ƹ ƴƵƺ ƼƹƵ ƷƸƸ Ƽƹƻ ƴƷƻƵ ƶƴƳƳƷ ƸƳƶƹƸ ƷƼƷƶ ƸƸƶƳƻ $WWULEXWDEOHWRHTXLW\KROGHUVRI$%b,Q%HY 5HPHDVXUHPHQWV RISRVW 'HIHUUHG 1RQ 7UDQVODWLRQ +HGJLQJ HPSOR\PHQW VKDUH 5HWDLQHG FRQWUROOLQJ 7RWDO UHVHUYHV UHVHUYHV EHQHƮWV LQVWUXPHQW HDUQLQJV 7RWDO LQWHUHVW HTXLW\ ƼƹƵ ƷƸƸ Ƽƹƻ ƴƷƻƵ ƶƴƳƳƷ ƸƳƶƹƸ ƷƼƷƶ ƸƸƶƳƻ ś ś ś ś ƼƵƴƹ ƼƵƴƹ ƵƳƻƹ ƴƴƶƳƵ ś ś ś ś ś ś ś ś ƷƶƺƷ ś ś ś ś ƷƶƺƷ ƶƻƹ ƷƺƹƳ ś ƴƳƵ ś ś ś ƴƳƵ ƵƵ ƴƵƷ ś ś ƷƺƼ ś ś ƷƺƼ ƴƵ ƷƼƴ ƷƶƺƷ ƴƳƵ ƷƺƼ ś ƼƵƴƹ ƷƷƹƸ ƴƺƴƳ ƹƴƺƸ ś ś ś ś ś ƴƶ ś ƴƶ ś ś ś ƺƸ ƸƵƷƷ ƸƶƴƼ ƵƵƼƹ ƺƹƴƸ ś ś ś ś ś ƸƸ ś ƸƸ ś ś ś ś ś ƴƼƸ ƴƻ Ƶƴƶ ś ś ś ś ƴƼƻ ƴƼƻ ƼƳ ƴƳƻ Ƹƶƶƹ ƸƸƺ ƴƷƷƺ ƴƷƳƺ ƶƸƴƺƷ ƷƼƼƺƵ ƷƵƻƸ ƸƷƵƸƺ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT &RQVROLGDWHG&DVK)ORZ6WDWHPHQW )RUWKH\HDUHQGHGƶƴ'HFHPEHU 0LOOLRQ86GROODU 1RWHV ƵƳƴƷ ƵƳƴƶ 2SHUDWLQJ$FWLYLWLHV 3roƮt ƴƴ ƶƳƵ ƴƹ Ƹƴƻ Depreciation, amortization and impairment ƴƳ ƶ ƶƸƶ Ƶ ƼƻƸ Impairment losses on receivables, inventories and other assets ƴƳƻ Ƽƴ Additions/(reversals) in provisions and employee beneƮts (ƻƸ) ƴƳƼ Net Ʈnance cost ƴƴ ƴ ƶƴƼ Ƶ ƵƳƶ Loss/(gain) on sale of property, plant and equipment and intangible assets Ʒ (ƵƸ) Loss/(gain) on sale of subsidiaries, associates and assets held for sale (ƵƴƼ) (ƻƸ) Revaluation of initial investment in *rupo Modelo ƹ ś (ƹ ƷƴƸ) Equity-settled share-based payment expense ƵƷ ƵƷƼ ƵƷƳ Income tax expense ƴƵ Ƶ ƷƼƼ Ƶ Ƴƴƹ Other non-cash items included in the proƮt (ƴƼƳ) (ƴƳƸ) Share of result of associates (Ƽ) (ƵƼƷ) &DVKưRZIURPRSHUDWLQJDFWLYLWLHVEHIRUHFKDQJHVLQZRUNLQJFDSLWDO ƴƻƶƶƴ ƴƺƵƶƻ DQGXVHRISURYLVLRQV Decrease/(increase) in trade and other receivables (ƶƺƴ) (ƵƸ) Decrease/(increase) in inventories (ƶƸƷ) (ƴƵƼ) Increase/(decrease) in trade and other payables ƴ ƸƷƳ ƴ ƳƵƳ 3ension contributions and use of provisions (ƷƸƻ) (ƹƸƶ) &DVKJHQHUDWHGIURPRSHUDWLRQV ƴƻƹƻƻ ƴƺƷƸƴ Interest paid (Ƶ Ʒƺƹ) (Ƶ ƵƴƷ) Interest received Ƶƺƶ ƵƼƺ Dividends received ƶƳ ƹƳƹ Income tax paid (Ƶ ƶƺƴ) (Ƶ Ƶƺƹ) &DVKưRZIURPRSHUDWLQJDFWLYLWLHV ƴƷƴƷƷ ƴƶƻƹƷ Investing Activities 3roceeds from sale of property, plant and equipment and of intangible assets Ƶƺƶ ƵƸƺ Sale of subsidiaries, net of cash disposed of ƹ ƷƵƹ ƷƵ Acquisition of subsidiaries, net of cash acquired ƹ (ƺ ƴƵƹ) (ƴƺ ƷƶƼ) 3urchase of non-controlling interest Ƶƴ (ƼƵ) (ƼƼ) Acquisition of property, plant and equipment and of intangible assets ƴƶ/ƴƸ (Ʒ ƶƼƸ) (ƶ ƻƹƼ) Net of tax proceeds from the sale of assets held for sale (ƹƸ) Ʒ ƳƳƵ Net proceeds from sale/(acquisition) of investment in short-term debt securities ƴƹ (ƴƻƺ) ƹ ƺƳƺ Net proceeds from sale/(acquisition) of other assets ƴƸ (ƴƶ) Net repayments/(payments) of loans granted (ƴ) ƴƶƴ &DVKưRZIURPLQYHVWLQJDFWLYLWLHV ƴƴƴƸƵ ƴƳƵƻƴ Financing Activities Net proceeds from the issue of share capital Ƶƴ ƻƶ ƺƶ 3roceeds from borrowings ƴƻ ƶƻƵ ƵƵ ƷƹƷ 3ayments on borrowings (ƴƸ ƴƸƼ) (ƴƻ ƳƳƹ) Cash received for deferred shares instrument ś ƴ ƸƳƳ Cash net Ʈnance (cost)/income other than interests ƵƶƼ Ƹƹƶ Dividends paid (ƺ ƷƳƳ) (ƹ ƵƸƶ) &DVKưRZIURPƮQDQFLQJDFWLYLWLHV ƶƻƸƸ ƶƷƴ 1HWLQFUHDVH GHFUHDVH LQFDVKDQGFDVKHTXLYDOHQWV ƻƹƶ ƶƼƵƷ Cash and cash equivalents less bank overdrafts at beginning of year Ƽ ƻƶƶ ƺ ƳƸƴ EƬect of exchange rate ưuctuations (ƹƸƷ) (ƴ ƴƷƵ) &DVKDQGFDVKHTXLYDOHQWVOHVVEDQNRYHUGUDIWVDWHQGRISHULRG ƵƳ ƻƶƴƹ Ƽƻƶƶ The accompanying notes are an integral part of these consolidated Ʈnancial statements. P. 76 /77 1RWHVWRWKH&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV ƴ Corporate information Ƶ Statement of compliance ƶ Summary of significant accounting policies Ʒ Use of estimates and judgments Ƹ Segment reporting ƹ Acquisitions and disposals of subsidiaries ƺ Other operating income/(expenses) ƻ Non-recurring items Ƽ 3ayroll and related benefits ƴƳ Additional information on operating expenses by nature ƴƴ )inance cost and income ƴƵ Income taxes ƴƶ 3roperty, plant and equipment ƴƷ *oodwill ƴƸ Intangible assets ƴƹ Investment securities ƴƺ Deferred tax assets and liabilities ƴƻ Inventories ƴƼ Trade and other receivables ƵƳ Cash and cash equivalents Ƶƴ Changes in equity and earnings per share ƵƵ Interest-bearing loans and borrowings Ƶƶ Employee benefits ƵƷ Share-based payments ƵƸ 3rovisions Ƶƹ Trade and other payables Ƶƺ Risks arising from financial instruments Ƶƻ Operating leases ƵƼ Collateral and contractual commitments for the acquisition of property, plant and equipment, loans to customers and other ƶƳ Contingencies ƶƴ Related parties ƶƵ Events after the balance sheet date ƶƶ ABbInBev companies Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƴ&RUSRUDWH,QIRUPDWLRQ Anheuser-Busch InBev is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with American Depositary Receipts on the New York Stock Exchange (NYSE: BUD). It is the leading global brewer and one of the world’s top five consumer products companies. Beer, the original social network, has been bringing people together for thousands of years and the company’s portfolio of well over ƵƳƳ beer brands continues to forge strong connections with consumers. This includes global brands Budweiser®, Corona® and Stella Artois®; international brands Beck’s®, Leffe® and Hoegaarden®; and local champions Bud Light®, Skol®, Brahma®, Antarctica®, Quilmes®, Victoria®, Modelo Especial®, Michelob Ultra®, Harbin®, Sedrin®, Klinskoye®, Sibirskaya Korona®, Chernigivske®, Cass® and Jupiler®. Anheuser-Busch InBev’s dedication to heritage and quality originates from the Den Hoorn brewery in Leuven, Belgium dating back to ƴƶƹƹ and the pioneering spirit of the Anheuser Co brewery, with origins in St. Louis, USA since ƴƻƸƵ. *eographically diversified with a balanced exposure to developed and developing markets, Anheuser Busch InBev leverages the collective strengths of approximately ƴƸƸ ƳƳƳ employees based in ƵƸ countries worldwide. In ƵƳƴƷ, ABbInBev realized Ʒƺ.ƴbbillion US dollar revenue. The company strives to be the Best Beer Bringing 3eople Together )or a Better :orld. The consolidated financial statements of the company for the year ended ƶƴ December ƵƳƴƷ comprise the company and its subsidiaries (together referred to as ŠABbInBevš or the Šcompanyš) and the company’s interest in associates and jointly controlled entities. The financial statements were authorized for issue by the Board of Directors on ƵƸ )ebruary ƵƳƴƸ. Ƶ6WDWHPHQWRI&RPSOLDQFH The consolidated financial statements are prepared in accordance with International )inancial Reporting Standards as issued by the International Accounting Standards Board (ŠIASBš) and in conformity with I)RS as adopted by the European Union up to ƶƴ December ƵƳƴƷ (collectively ŠI)RSš). ABbInBev did not early apply any new I)RS requirements that were not yet effective in ƵƳƴƷ and did not apply any European carve-outs from I)RS. ƶ6XPPDU\RI6LJQLILFDQW$FFRXQWLQJ3ROLFLHV The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements by the company and its subsidiaries. $ %DVLVRISUHSDUDWLRQDQGPHDVXUHPHQW Depending on the applicable I)RS requirements, the measurement basis used in preparing the financial statements is cost, net realizable value, fair value or recoverable amount. :henever I)RS provides an option between cost and another measurement basis (e.g. systematic re-measurement), the cost approach is applied. % )XQFWLRQDODQGSUHVHQWDWLRQFXUUHQF\ Unless otherwise specified, all financial information included in these financial statements have been stated in US dollar and has been rounded to the nearest million. The functional currency of the parent company is the euro. & 8VHRIHVWLPDWHVDQGMXGJPHQWV The preparation of financial statements in conformity with I)RS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. P. 78 /79 ' 3ULQFLSOHVRIFRQVROLGDWLRQ Subsidiaries are those entities controlled by ABbInBev. ABbInBev controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, potential voting rights are taken into account. Control is presumed to exist where ABbInBev owns, directly or indirectly, more than one half of the voting rights (which does not always equate to economic ownership), unless it can be demonstrated that such ownership does not constitute control. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Total comprehensive income of subsidiaries is attributed to the owners of the company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Associates are undertakings in which ABbInBev has significant influence over the financial and operating policies, but which it does not control. This is generally evidenced by ownership of between ƵƳ and ƸƳ of the voting rights. A joint venture is an arrangement in which ABbInBev has joint control, whereby ABbInBev has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Associates and joint ventures are accounted for by the equity method of accounting, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. :hen ABbInBev’s share of losses exceeds the carrying amount of the associate or joint venture, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that ABbInBev has incurred legal or constructive obligations on behalf of the associate or joint venture. Joint operations arise when ABbInBev has rights to the assets and obligations to the liabilities of a joint arrangement. ABbInBev accounts for its share of the assets, liabilities, revenues and expenses as from the moment joint operation commences until the date that joint operation ceases. The financial statements of the company’s subsidiaries, joint ventures, joint operations and associates are prepared for the same reporting year as the parent company, using consistent accounting policies. In exceptional cases when the financial statements of a subsidiary, joint venture, joint operation or associate are prepared as of a different date from that of ABbInBev (e.g. Modelo prior to the ABbInBev and *rupo Modelo combination), adjustments are made for the effects of significant transactions or events that occur between that date and the date of ABbInBev’s financial statements. In such cases, the difference between the end of the reporting period of these subsidiaries, joint ventures, joint operations or associates from ABbInBev’s reporting period is no more than three months. All intercompany transactions, balances and unrealized gains and losses on transactions between group companies have been eliminated. Unrealized gains arising from transactions with joint ventures, joint operations and associates are eliminated to the extent of ABbInBev’s interest in the entity. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. A listing of the company’s most important subsidiaries, joint ventures, joint operations and associates is set out in Note ƶƶ $%b,Q%HYFRPSDQLHV. ( 6XPPDU\RIFKDQJHVLQDFFRXQWLQJSROLFLHV A number of new standards, amendment to standards and new interpretations became mandatory for the first time for the financial year beginning ƴ January ƵƳƴƷ, and have not been listed in these consolidated financial statements because of either their non-applicability to or their immateriality to ABbInBev’s consolidated financial statements. ) )RUHLJQFXUUHQFLHV )RUHLJQFXUUHQF\WUDQVDFWLRQV )oreign currency transactions are accounted for at exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the balance sheet date rate. *ains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to US dollar at foreign exchange rates ruling at the dates the fair value was determined. 7UDQVODWLRQRIWKHUHVXOWVDQGILQDQFLDOSRVLWLRQRIIRUHLJQRSHUDWLRQV Assets and liabilities of foreign operations are translated to US dollar at foreign exchange rates prevailing at the balance sheet date. Income statements of foreign operations, excluding foreign entities in hyperinflationary economies, are translated to US dollar at exchange rates for the year approximating the foreign exchange rates prevailing at the dates of the transactions. The components of shareholders’ equity are translated at historical rates. Exchange differences arising from the translation of shareholders’ equity to US dollar at period-end exchange rates are taken to other comprehensive income (translation reserves). In hyperinflationary economies, re-measurement of the local currency denominated non-monetary assets, liabilities, income statement accounts as well as equity accounts is made by applying a general price index. These re-measured accounts are used for conversion into US dollar at the closing exchange rate. ABbInBev did not operate in hyperinflationary economies in ƵƳƴƶ and ƵƳƴƷ. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ([FKDQJHUDWHV The most important exchange rates that have been used in preparing the financial statements are: Closing rate Average rate ƴ86GROODUHTXDOV ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ Argentinean peso ƻ.ƸƸƵƳƶƷ ƹ.ƸƴƻƳƵƺ ƻ.ƴƴƼƵƹƸ Ƹ.ƷƷƹƸƻƸ Brazilian real Ƶ.ƹƸƹƴƼƺ Ƶ.ƶƷƵƹƳƷ Ƶ.ƶƷƻƺƹƳ Ƶ.ƴƸƺƷƴƼ Canadian dollar ƴ.ƴƸƻƶƳƸ ƴ.ƳƹƶƻƴƳ ƴ.ƳƼƼƳƴƴ ƴ.ƳƶƳƳƷƳ Chinese yuan ƹ.ƵƳƹƻƼƸ ƹ.ƳƸƷƳƷƶ ƹ.ƴƹƸƺƼƶ ƹ.ƴƸƸƳƴƷ Euro Ƴ.ƻƵƶƹƸƸ Ƴ.ƺƵƸƴƴƴ Ƴ.ƺƷƺƹƼƸ Ƴ.ƺƸƸƷƻƸ South Korean won ƴ ƳƼƳ.Ƽƶ ś ƴ ƳƷƸ.ƺƶ ś Mexican peso ƴƷ.ƺƴƻƴƴƵ ƴƶ.ƳƻƷƶƼƷ ƴƶ.ƵƵƷƷƴƴ ƴƵ.ƻƶƹƴƸƼ 3ound sterling Ƴ.ƹƷƴƸƷƷ Ƴ.ƹƳƷƸƵƸ Ƴ.ƹƳƸƸƴƸ Ƴ.ƹƷƳƷƳƼ Russian ruble Ƹƹ.ƵƸƹƺƷƷ ƶƵ.ƺƵƼƳƳƳ ƶƹ.ƺƷƴƺƹƼ ƶƴ.ƻƸƼƸƵƻ Ukrainian hryvnia ƴƸ.ƺƹƻƸƹƳ ƺ.ƼƼƶƳƵƵ ƴƴ.ƷƵƹƳƳƹ ƺ.ƼƼƶƳƵƺ * ,QWDQJLEOHDVVHWV 5HVHDUFKDQGGHYHORSPHQW Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in the income statement as an expense as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized if the product or process is technically and commercially feasible, future economic benefits are probable and the company has sufficient resources to complete development. The expenditure capitalized includes the cost of materials, direct labor and an appropriate proportion of overheads. Other development expenditure is recognized in the income statement as an expense as incurred. Capitalized development expenditure is stated at cost less accumulated amortization (see below) and impairment losses (refer accounting policy 3). Amortization related to research and development intangible assets is included within the cost of sales if production related and in sales and marketing if related to commercial activities. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets. 6XSSO\DQGGLVWULEXWLRQULJKWV A supply right is the right for ABbInBev to supply a customer and the commitment by the customer to purchase from ABbInBev. A distribution right is the right to sell specified products in a certain territory. Acquired customer relationships in a business combination are initially recognized at fair value as supply rights, to the extent that they arise from contractual rights. If the I)RS recognition criteria are not met, these relationships are subsumed under goodwill. Acquired distribution rights are measured initially at cost or fair value when obtained through a business combination. Amortization related to supply and distribution rights is included within sales and marketing expenses. Brands If part of the consideration paid in a business combination relates to trademarks, trade names, formulas, recipes or technological expertise these intangible assets are considered as a group of complementary assets that is referred to as a brand for which one fair value is determined. Expenditure on internally generated brands is expensed as incurred. 6RIWZDUH 3urchased software is measured at cost less accumulated amortization. Expenditure on internally developed software is capitalized when the expenditure qualifies as development activities; otherwise, it is recognized in the income statement when incurred. Amortization related to software is included in cost of sales, distribution expenses, sales and marketing expenses or administrative expenses based on the activity the software supports. 2WKHULQWDQJLEOHDVVHWV Other intangible assets, acquired by the company, are recognized at cost less accumulated amortization and impairment losses. Other intangible assets also include multi-year sponsorship rights acquired by the company. These are initially recognized at the present value of the future payments and subsequently measured at cost less accumulated amortization and impairment losses. P. 80 /81 6XEVHTXHQWH[SHQGLWXUH Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are expensed as incurred. Amortization Intangible assets with a finite life are amortized using the straight-line method over their estimated useful lives. Licenses, brewing, supply and distribution rights are amortized over the period in which the rights exist. Brands are considered to have an indefinite life unless plans exist to discontinue the brand. Discontinuance of a brand can be either through sale or termination of marketing support. :hen ABbInBev purchases distribution rights for its own products the life of these rights is considered indefinite, unless the company has a plan to discontinue the related brand or distribution. Software and capitalized development cost related to technology are amortized over ƶ to Ƹ years. Brands are deemed intangible assets with indefinite useful lives and, therefore, are not amortized but tested for impairment on an annual basis (refer accounting policy 3). Gains and losses on sale Net gains on sale of intangible assets are presented in the income statement as other operating income. Net losses on sale are included as other operating expenses. Net gains and losses are recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs can be estimated reliably, and there is no continuing managerial involvement with the intangible assets. + %XVLQHVVFRPELQDWLRQV The company applies the purchase method of accounting to account for acquisitions of businesses. The cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred and equity instruments issued. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date. The excess of the cost of the acquisition over the company’s interest in the fair value of the identifiable net assets acquired is recorded as goodwill. The allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions requiring management judgment. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of ABbInBev’s previously held interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss. , *RRGZLOO *oodwill is determined as the excess of the consideration paid over ABbInBev’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiary, jointly controlled entity or associate recognized at the date of acquisition. All business combinations are accounted for by applying the purchase method. In conformity with I)RS ƶ Business Combinations, goodwill is stated at cost and not amortized but tested for impairment on an annual basis and whenever there is an indicator that the cash generating unit to which goodwill has been allocated, may be impaired (refer accounting policy 3). *oodwill is expressed in the currency of the subsidiary or jointly controlled entity to which it relates and is translated to US dollar using the year- end exchange rate. In respect of associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. If ABbInBev’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized exceeds the cost of the business combination such excess is recognized immediately in the income statement as required by I)RS ƶ Business Combinations. Expenditure on internally generated goodwill is expensed as incurred. - 3URSHUW\SODQWDQGHTXLSPHQW 3roperty, plant and equipment is measured at cost less accumulated depreciation and impairment losses (refer accounting policy 3). Cost includes the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management (e.g. nonrefundable tax and transport cost). The cost of a self constructed asset is determined using the same principles as for an acquired asset. The depreciation methods, residual value, as well as the useful lives are reassessed and adjusted if appropriate, annually. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT 6XEVHTXHQWH[SHQGLWXUH The company recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the company and the cost of the item can be measured reliably. All other costs are expensed as incurred. 'HSUHFLDWLRQ The depreciable amount is the cost of an asset less its residual value. Residual values, if not insignificant, are reassessed annually. Depreciation is calculated from the date the asset is available for use, using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are defined in terms of the asset’s expected utility to the company and can vary from one geographical area to another. On average the estimated useful lives are as follows: Industrial buildings ś other real estate properties ƵƳ - ƶƶ years 3roduction plant and equipment: 3roduction equipment ƴƳ - ƴƸ years Storage, packaging and handling equipment Ƹ - ƺ years Returnable packaging: Kegs Ƶ - ƴƳ years Crates Ƶ - ƴƳ years Bottles Ƶ - Ƹ years 3oint of sale furniture and equipment Ƹ years Vehicles Ƹ years Information processing equipment ƶ - Ƹ years :here parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Land is not depreciated as it is deemed to have an indefinite life. Gains and losses on sale Net gains on sale of items of property, plant and equipment are presented in the income statement as other operating income. Net losses on sale are presented as other operating expenses. Net gains and losses are recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs can be estimated reliably, and there is no continuing managerial involvement with the property, plant and equipment. . $FFRXQWLQJIRUOHDVHV Leases of property, plant and equipment where the company assumes substantially all the risks and rewards of ownership are classified as finance leases. )inance leases are recognized as assets and liabilities (interest-bearing loans and borrowings) at amounts equal to the lower of the fair value of the leased property and the present value of the minimum lease payments at inception of the lease. Amortization and impairment testing for depreciable leased assets is the same as for depreciable assets that are owned (refer accounting policies J and 3). Lease payments are apportioned between the outstanding liability and finance charges so as to achieve a constant periodic rate of interest on the remaining balance of the liability. Leases of assets under which all the risks and rewards of ownership are substantially retained by the lessor are classified as operating leases. 3ayments made under operating leases are charged to the income statement on a straight-line basis over the term of the lease. :hen an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place. / ,QYHVWPHQWV All investments are accounted for at trade date. ,QYHVWPHQWVLQHTXLW\VHFXULWLHV Investments in equity securities are undertakings in which ABbInBev does not have significant influence or control. This is generally evidenced by ownership of less than ƵƳ of the voting rights. Such investments are designated as available-for-sale financial assets which are at initial recognition measured at fair value unless the fair value cannot be reliably determined in which case they are measured at cost. Subsequent changes in fair value, except those related to impairment losses which are recognized in the income statement, are recognized directly in other comprehensive income. On disposal of an investment, the cumulative gain or loss previously recognized directly in other comprehensive income is recognized in profit or loss. P. 82 /83 ,QYHVWPHQWVLQGHEWVHFXULWLHV Investments in debt securities classified as trading or as being available-for-sale are carried at fair value, with any resulting gain or loss respectively recognized in the income statement or directly in other comprehensive income. )air value of these investments is determined as the quoted bid price at the balance sheet date. Impairment charges and foreign exchange gains and losses are recognized in the income statement. Investments in debt securities classified as held to maturity are measured at amortized cost. In general, investments in debt securities with maturities of more than three months when acquired and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. 2WKHULQYHVWPHQWV Other investments held by the company are classified as available-for-sale and are carried at fair value, with any resulting gain or loss recognized directly in other comprehensive income. Impairment charges are recognized in the income statement. 0 ,QYHQWRULHV Inventories are valued at the lower of cost and net realizable value. Cost includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. The weighted average method is used in assigning the cost of inventories. The cost of finished products and work in progress comprises raw materials, other production materials, direct labor, other direct cost and an allocation of fixed and variable overhead based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated completion and selling costs. Inventories are written down on a case-by-case basis if the anticipated net realizable value declines below the carrying amount of the inventories. The calculation of the net realizable value takes into consideration specific characteristics of each inventory category, such as expiration date, remaining shelf life, slow-moving indicators, amongst others. 1 7UDGHDQGRWKHUUHFHLYDEOHV Trade and other receivables are carried at amortized cost less impairment losses. An estimate is made for doubtful receivables based on a review of all outstanding amounts at the balance sheet date. An allowance for impairment of trade and other receivables is established if the collection of a receivable becomes doubtful. Such receivable becomes doubtful when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset’s carrying amount and the present value of the estimated future cash flows. An impairment loss is recognized in the income statement, as are subsequent recoveries of previous impairments. 2 &DVKDQGFDVKHTXLYDOHQWV Cash and cash equivalents include all cash balances and short-term highly liquid investments with a maturity of three months or less from the date of acquisition that are readily convertible into cash. They are stated at face value, which approximates their fair value. )or the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts. 3 ,PSDLUPHQW The carrying amounts of financial assets, property, plant and equipment, goodwill and intangible assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. In addition, goodwill, intangible assets that are not yet available for use and intangibles with an indefinite useful life are tested for impairment annually at the business unit level (that is one level below a reporting segment). An impairment loss is recognized whenever the carrying amount of an asset or the related cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement. &DOFXODWLRQRIUHFRYHUDEOHDPRXQW The recoverable amount of the company’s investments in unquoted debt securities is calculated as the present value of expected future cash flows, discounted at the debt securities’ original effective interest rate. )or equity investments classified as available for sale and quoted debt securities the recoverable amount is their fair value. The recoverable amount of other assets is determined as the higher of their fair value less costs to sell and value in use. )or an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The recoverable amount of the cash generating units to which the goodwill and the intangible assets with indefinite useful life belong is based on discounted future cash flows using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. 5HYHUVDORILPSDLUPHQWORVVHV Non-financial assets other than goodwill and equity investments classified as held for sale that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. 4 6KDUHFDSLWDO 5HSXUFKDVHRIVKDUHFDSLWDO :hen ABbInBev buys back its own shares, the amount of the consideration paid, including directly attributable costs, is recognized as a deduction from equity under treasury shares. Dividends Dividends are recognized in the consolidated financial statements on the date that the dividends are declared unless minimum statutory dividends are required by local legislation or the bylaws of the company’s subsidiaries. In such instances, statutory minimum dividends are recognized as a liability. 6KDUHLVVXDQFHFRVWV Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 5 3URYLVLRQV 3rovisions are recognized when (i) the company has a present legal or constructive obligation as a result of past events, (ii) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and (iii) a reliable estimate of the amount of the obligation can be made. 3rovisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Restructuring A provision for restructuring is recognized when the company has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly. Costs relating to the ongoing activities of the company are not provided for. The provision includes the benefit commitments in connection with early retirement and redundancy schemes. Onerous contracts A provision for onerous contracts is recognized when the expected benefits to be derived by the company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. Such provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. 'LVSXWHVDQGOLWLJDWLRQV A provision for disputes and litigation is recognized when it is more likely than not that the company will be required to make future payments as a result of past events, such items may include but are not limited to, several claims, suits and actions both initiated by third parties and initiated by ABbInBev relating to antitrust laws, violations of distribution and license agreements, environmental matters, employment related disputes, claims from tax authorities, and alcohol industry litigation matters. 6 (PSOR\HHEHQHILWV 3RVWHPSOR\PHQWEHQHILWV 3ost-employment benefits include pensions, post-employment life insurance and post-employment medical benefits. The company operates a number of defined benefit and defined contribution plans throughout the world, the assets of which are generally held in separate trustee-managed funds. The pension plans are generally funded by payments from employees and the company, and, for defined benefit plans taking account of the recommendations of independent actuaries. ABbInBev maintains funded and unfunded pension plans. D 'HILQHGFRQWULEXWLRQSODQV Contributions to defined contribution plans are recognized as an expense in the income statement when incurred. A defined contribution plan is a pension plan under which ABbInBev pays fixed contributions into a fund. ABbInBev has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. E 'HILQHGEHQHILWSODQV A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. )or defined benefit plans, the pension expenses are assessed separately for each plan using the projected unit credit method. The projected unit credit method considers each period of service as giving rise to an additional unit of benefit entitlement. Under this method, the cost of providing pensions is charged to the income statement so as to spread the regular cost over the service lives of employees in accordance with the advice of qualified actuaries who carry out a full valuation of the plans at least every three years. The amounts charged to the income statement include current service cost, net interest cost (income), past service costs and the effect of any curtailments or settlements. 3ast service costs are recognized at the earlier of when the amendment / curtailment occurs or when the company recognizes related restructuring or termination costs. The pension obligations recognized in the balance sheet are measured at the present value of the estimated future cash outflows using interest rates based on high quality corporate bond yields, which have terms to maturity approximating the terms of the related P. 84 /85 liability, less the fair value of any plan assets. Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets (excluding net interest) are recognized in full in the period in which they occur in the statement of comprehensive income. Re-measurements are not reclassified to profit or loss in subsequent periods. :here the calculated amount of a defined benefit liability is negative (an asset), ABbInBev recognizes such pension asset to the extent that economic benefits are available to ABbInBev either from refunds or reductions in future contributions. 2WKHU3RVW(PSOR\PHQW2EOLJDWLRQV Some ABbInBev companies provide post-employment medical benefits to their retirees. The entitlement to these benefits is usually based on the employee remaining in service up to retirement age. The expected costs of these benefits are accrued over the period of employment, using an accounting methodology similar to that for defined benefit pension plans. 7HUPLQDWLRQEHQHILWV Termination benefits are recognized as an expense at the earlier when the company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date and when the company recognizes costs for a restructuring. Termination benefits for voluntary redundancies are recognized if the company has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. Bonuses Bonuses received by company employees and management are based on pre-defined company and individual target achievement. The estimated amount of the bonus is recognized as an expense in the period the bonus is earned. To the extent that bonuses are settled in shares of the company, they are accounted for as share-based payments. 7 6KDUHEDVHGSD\PHQWV Different share and share option programs allow company senior management and members of the board to acquire shares of the company and some of its affiliates. The fair value of the share options is estimated at grant date, using an option pricing model that is most appropriate for the respective option. Based on the expected number of options that will vest, the fair value of the options granted is expensed over the vesting period. :hen the options are exercised, equity is increased by the amount of the proceeds received. 8 ,QWHUHVWEHDULQJORDQVDQGERUURZLQJV Interest-bearing loans and borrowings are recognized initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortized cost with any difference between the initial amount and the maturity amount being recognized in the income statement (in accretion expense) over the expected life of the instrument on an effective interest rate basis. 9 7UDGHDQG2WKHU3D\DEOHV Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. : ,QFRPH7D[ Income tax on the profit for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case the tax effect is also recognized directly in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted, at the balance sheet date, and any adjustment to tax payable in respect of previous years. In accordance with IAS ƴƵ Income Taxes deferred taxes are provided using the so-called balance sheet liability method. This means that, for all taxable and deductible differences between the tax bases of assets and liabilities and their carrying amounts in the balance sheet a deferred tax liability or asset is recognized. Under this method a provision for deferred taxes is also made for differences between the fair values of assets and liabilities acquired in a business combination and their tax base. IAS ƴƵ prescribes that no deferred taxes are recognized i) on initial recognition of goodwill, ii) at the initial recognition of assets or liabilities in a transaction that is not a business combination and affects neither accounting nor taxable profit and iii) on differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using currently or substantively enacted tax rates. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously. The company recognizes deferred tax assets, including assets arising from losses carried forward, to the extent that future probable taxable profit will be available against which the deferred tax asset can be utilized. A deferred tax asset is reduced to the extent that it is no longer probable that the related tax benefit will be realized. Tax claims are recorded within provisions on the balance sheet (refer accounting policy R). Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ; ,QFRPHUHFRJQLWLRQ Income is recognized when it is probable that the economic benefits associated with the transaction will flow to the company and the income can be measured reliably. Goods sold In relation to the sale of beverages and packaging, revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, and no significant uncertainties remain regarding recovery of the consideration due, associated costs or the possible return of goods, and there is no continuing management involvement with the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts, volume rebates, discounts for cash payments and excise taxes. 5HQWDODQGUR\DOW\LQFRPH Rental income is recognized under other operating income on a straight-line basis over the term of the lease. Royalties arising from the use by others of the company’s resources are recognized in other operating income on an accrual basis in accordance with the substance of the relevant agreement. Government grants A government grant is recognized in the balance sheet initially as deferred income when there is reasonable assurance that it will be received and that the company will comply with the conditions attached to it. *rants that compensate the company for expenses incurred are recognized as other operating income on a systematic basis in the same periods in which the expenses are incurred. *rants that compensate the company for the acquisition of an asset are presented by deducting them from the acquisition cost of the related asset in accordance with IAS ƵƳ Accounting for Government Grants and Disclosure of Government Assistance. Finance income )inance income comprises interest received or receivable on funds invested, dividend income, foreign exchange gains, losses on currency hedging instruments offsetting currency gains, gains on hedging instruments that are not part of a hedge accounting relationship, gains on financial assets classified as trading as well as any gains from hedge ineffectiveness (refer accounting policy Z). Interest income is recognized as it accrues (taking into account the effective yield on the asset) unless collectability is in doubt. Dividend income Dividend income is recognized in the income statement on the date that the dividend is declared. < ([SHQVHV Finance costs )inance costs comprise interest payable on borrowings, calculated using the effective interest rate method, foreign exchange losses, gains on currency hedging instruments offsetting currency losses, results on interest rate hedging instruments, losses on hedging instruments that are not part of a hedge accounting relationship, losses on financial assets classified as trading, impairment losses on available- for-sale financial assets as well as any losses from hedge ineffectiveness (refer accounting policy Z). All interest costs incurred in connection with borrowings or financial transactions are expensed as incurred as part of finance costs. Any difference between the initial amount and the maturity amount of interest bearing loans and borrowings, such as transaction costs and fair value adjustments, are recognized in the income statement (in accretion expense) over the expected life of the instrument on an effective interest rate basis (refer accounting policy U). The interest expense component of finance lease payments is also recognized in the income statement using the effective interest rate method. 5HVHDUFKDQGGHYHORSPHQWDGYHUWLVLQJDQGSURPRWLRQDOFRVWVDQGV\VWHPVGHYHORSPHQWFRVWV Research, advertising and promotional costs are expensed in the year in which these costs are incurred. Development costs and systems development costs are expensed in the year in which these costs are incurred if they do not meet the criteria for capitalization (refer accounting policy *). 3XUFKDVLQJUHFHLYLQJDQGZDUHKRXVLQJFRVWV 3urchasing and receiving costs are included in the cost of sales, as well as the costs of storing and moving raw materials and packaging materials. The costs of storing finished products at the brewery as well as costs incurred for subsequent storage in distribution centers are included within distribution expenses. = 'HULYDWLYHILQDQFLDOLQVWUXPHQWV ABbInBev uses derivative financial instruments to mitigate the transactional impact of foreign currencies, interest rates, equity prices and commodity prices on the company’s performance. ABbInBev’s financial risk management policy prohibits the use of derivative financial instruments for trading purposes and the company does therefore not hold or issue any such instruments for such purposes. Derivative financial instruments that are economic hedges but that do not meet the strict IAS ƶƼ Financial Instruments: Recognition and Measurement hedge accounting rules, however, are accounted for as financial assets or liabilities at fair value through profit or loss. P. 86 /87 Derivative financial instruments are recognized initially at fair value. )air value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of derivative financial instruments is either the quoted market price or is calculated using pricing models taking into account current market rates. These pricing models also take into account the current creditworthiness of the counterparties. Subsequent to initial recognition, derivative financial instruments are re-measured to their fair value at balance sheet date. Depending on whether cash flow or net investment hedge accounting is applied or not, any gain or loss is either recognized directly in other comprehensive income or in the income statement. Cash flow, fair value or net investment hedge accounting is applied to all hedges that qualify for hedge accounting when the required hedge documentation is in place and when the hedge relation is determined to be effective. &DVKIORZKHGJHDFFRXQWLQJ :hen a derivative financial instrument hedges the variability in cash flows of a recognized asset or liability, the foreign currency risk of a firm commitment or a highly probable forecasted transaction, the effective part of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (hedging reserves). :hen the firm commitment in foreign currency or the forecasted transaction results in the recognition of a non-financial asset or a non-financial liability, the cumulative gain or loss is removed from other comprehensive income and included in the initial measurement of the asset or liability. :hen the hedge relates to financial assets or liabilities, the cumulative gain or loss on the hedging instrument is reclassified from other comprehensive income into the income statement in the same period during which the hedged risk affects the income statement (e.g. when the variable interest expense is recognized). The ineffective part of any gain or loss is recognized immediately in the income statement. :hen a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss (at that point) remains in equity and is reclassified in accordance with the above policy when the hedged transaction occurs. If the hedged transaction is no longer probable, the cumulative gain or loss recognized in other comprehensive income is reclassified into the income statement immediately. )DLUYDOXHKHGJHDFFRXQWLQJ :hen a derivative financial instrument hedges the variability in fair value of a recognized asset or liability, any resulting gain or loss on the hedging instrument is recognized in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in the income statement. 1HWLQYHVWPHQWKHGJHDFFRXQWLQJ :hen a foreign currency liability hedges a net investment in a foreign operation, exchange differences arising on the translation of the liability to the functional currency are recognized directly in other comprehensive income (translation reserves). :hen a derivative financial instrument hedges a net investment in a foreign operation, the portion of the gain or the loss on the hedging instrument that is determined to be an effective hedge is recognized directly in other comprehensive income (translation reserves), while the ineffective portion is reported in the income statement. Investments in equity instruments or derivatives linked to and to be settled by delivery of an equity instrument are stated at cost when such equity instrument does not have a quoted market price in an active market and for which other methods of reasonably estimating fair value are clearly inappropriate or unworkable. 2IIVHWWLQJGHULYDWLYHDVVHWVZLWKGHULYDWLYHOLDELOLWLHV A derivative asset and a derivative liability shall be offset and the net amount presented in the statement of financial position when, and only when, the company has a currently legally enforceable right to set off the recognized amounts; and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. $$ 6HJPHQWUHSRUWLQJ Operating segments are components of the company’s business activities about which separate financial information is available that is evaluated regularly by management. ABbInBev’s operating segment reporting format is geographical because the company’s risks and rates of return are affected predominantly by the fact that ABbInBev operates in different geographical areas. The company’s management structure and internal reporting system to the Board of Directors is set up accordingly. A geographical segment is a distinguishable component of the company that is engaged in providing products or services within a particular economic environment, which is subject to risks and returns that are different from those of other segments. In accordance with I)RS ƻ Operating segments ABbInBev’s reportable geographical segments were determined as North America, Mexico, Latin America North, Latin America South, Europe, Asia 3acific and *lobal Export and Holding Companies. The company’s assets are predominantly located in the same geographical areas as its customers. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated assets comprise interest bearing loans granted, investment securities, deferred tax assets, income taxes receivable, cash and cash equivalent and derivative assets. Unallocated liabilities comprise equity and non-controlling interest, interest bearing loans, deferred tax liabilities, bank overdrafts, income taxes payable and derivative liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. %% 1RQUHFXUULQJLWHPV Non-recurring items are those that in management’s judgment need to be disclosed by virtue of their size or incidence. Such items are disclosed on the face of the consolidated income statement or separately disclosed in the notes to the financial statements. Transactions which may give rise to non-recurring items are principally restructuring activities, impairments, gains or losses on disposal of investments and the effect of the accelerated repayment of certain debt facilities. && GLVFRQWLQXHGRSHUDWLRQVDQGQRQFXUUHQWDVVHWVKHOGIRUVDOH A discontinued operation is a component of the company that either has been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operations and is part of a single coordinated plan to dispose of or is a subsidiary acquired exclusively with a view to resale. ABbInBev classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use if all of the conditions of I)RS Ƹ are met. A disposal group is defined as a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred. Immediately before classification as held for sale, the company measures the carrying amount of the asset (or all the assets and liabilities in the disposal group) in accordance with applicable I)RS. Then, on initial classification as held for sale, non-current assets and disposal groups are recognized at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale are included in profit or loss. The same applies to gains and losses on subsequent re-measurement. Non-current assets classified as held for sale are no longer depreciated or amortized. '' 5HFHQWO\LVVXHG,)56 To the extent that new I)RS requirements are expected to be applicable in the future, they have been summarized hereafter. )or the year ended ƶƴ December ƵƳƴƷ they have not been applied in preparing these consolidated financial statements. IFRS 9 Financial Instruments: I)RS Ƽ Financial Instruments is the standard issued as part of a wider project to replace IAS ƶƼ. I)RS Ƽ introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held; defines a new expected-loss impairment model that will require more timely recognition of expected credit losses; and introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new hedge accounting model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities. I)RS Ƽ also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. I)RS Ƽ will be effective for annual periods beginning on or after ƴ January ƵƳƴƻ. Early application is permitted. IFRS 15 Revenue from Contracts with Customers: The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. I)RS ƴƸ is effective for an entity’s first annual I)RS financial statements for periods beginning on or after ƴ January ƵƳƴƺ. Early application is permitted. 2WKHUVWDQGDUGVLQWHUSUHWDWLRQVDQGDPHQGPHQWVWRVWDQGDUGV A number of other amendments to standards are effective for annual periods beginning after ƴ January ƵƳƴƷ, and have not been listed above because of either their non-applicability to or their immateriality to ABbInBev’s consolidated financial statements. P. 88 /89 Ʒ8VHRIEstimates and Judgments The preparation of financial statements in conformity with I)RS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Although each of its significant accounting policies reflects judgments, assessments or estimates, ABbInBev believes that the following accounting policies reflect the most critical judgments, estimates and assumptions that are important to its business operations and the understanding of its results: business combinations, intangible assets, goodwill, impairment, provisions, share-based payments, employee benefits and accounting for current and deferred tax. The fair values of acquired identifiable intangibles are based on an assessment of future cash flows. Impairment analyses of goodwill and indefinite-lived intangible assets are performed annually and whenever a triggering event has occurred, in order to determine whether the carrying value exceeds the recoverable amount. These calculations are based on estimates of future cash flows. The company uses its judgment to select a variety of methods including the discounted cash flow method and option valuation models and makes assumptions about the fair value of financial instruments that are mainly based on market conditions existing at each balance sheet date. Actuarial assumptions are established to anticipate future events and are used in calculating pension and other long-term employee benefit expense and liability. These factors include assumptions with respect to interest rates, rates of increase in health care costs, rates of future compensation increases, turnover rates, and life expectancy. The company is subject to income tax in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain. Some subsidiaries within the group are involved in tax audits and local enquiries usually in relation to prior years. Investigations and negotiations with local tax authorities are ongoing in various jurisdictions at the balance sheet date and, by their nature, these can take considerable time to conclude. In assessing the amount of any income tax provisions to be recognized in the financial statements, estimation is made of the expected successful settlement of these matters. Estimates of interest and penalties on tax liabilities are also recorded. :here the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period such determination is made. Judgments made by management in the application of I)RS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are further discussed in the relevant notes hereafter. In preparing these consolidated financial statements, the significant judgments made by management in applying the company’s accounting policies and the key sources of estimating uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended ƶƴ December ƵƳƴƶ, except as for the valuation of the individual assets acquired and liabilities assumed as part of the allocation of the OB purchase price. The company is in the process of finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed in compliance with I)RS ƶ. )ollowing the acquisition of OB, ABbInBev is fully consolidating OB in the ABbInBev audited financial statements as of ƴ April ƵƳƴƷ. Detail is provided in Note ƹ ś Acquisitions and disposals of Subsidiaries of these audited consolidated financial statements. )urthermore, effective ƴ January ƵƳƴƷ, the company ceased the proportional consolidation of certain operations it has in Canada and started to apply equity reporting as of that date without a material impact on ABbInBev’s consolidated financial statements. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Ƹ6HJPHQW5HSRUWLQJ Segment information is presented by geographical segments, consistent with the information that is available and evaluated regularly by the chief operating decision maker. ABbInBev operates its business through seven business segments. Regional and operating company management is responsible for managing performance, underlying risks, and effectiveness of operations. Internally, ABbInBev’s management uses performance indicators such as normalized profit from operations (normalized EBIT) and normalized EBITDA as measures of segment performance and to make decisions regarding allocation of resources. These measures are reconciled to segment profit in the tables presented (figures may not add up due to rounding). *iven the transformational nature of the transaction with *rupo Modelo that closed on Ʒ June ƵƳƴƶ, and to facilitate the understanding of ABbInBev’s underlying performance, ABbInBev has updated its ƵƳƴƶ segment reporting for purposes of result announcement and internal review by senior management. This presentation (referred to as the ŠƵƳƴƶ Reference baseš) includes, for comparative purposes, the results of the *rupo Modelo business as if the combination had taken place on Ʒ June ƵƳƴƵ. Accordingly, the ƵƳƴƶ Reference base presented below includes ƴƵ months of the *rupo Modelo combination. The ƵƳƴƶ Reference base further reflects updates to the ƵƳƴƶ segment reporting for purposes of result announcement and internal review by senior management to reflect changes in the Zone presentation of ABbInBev that were effective ƴ January ƵƳƴƷ. The changes include the combination of ABbInBev’s :estern Europe and Central Eastern Europe Zones into a single Europe Zone, the transfer of responsibility from *lobal Export and Holding Companies to the Europe Zone of the company’s Spanish operations and the export of Corona to a number of European countries, and the transfer of management responsibility for Cuba to the Zone Latin America North. The *rupo Modelo operations are reported according to their geographical presence in the following segments: the Mexico beer and packaging businesses are reported in the Zone Mexico, the Export business is reported in the *lobal Export and Holding Companies segment and the sale of Modelo brands by ABbInBev affiliates are reported in the respective Zones where these affiliates operate. The Oriental Brewery (ŠOBš) business is reported in the Zone Asia 3acific as from ƴ April ƵƳƴƷ. P. 90 /91 [This page is left blank intentionally] Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT All figures in the tables below are stated in million US dollar, except volume (million hls), Normalized EBITDA margin (in ) and full time equivalents ()TE in units). SEGMENT REPORTING ƵƳƴƶ5()(5(1&(%$6( ś NONAUDITED 1RUWK$PHULFD 0H[LFR /DWLQ$PHULFD1RUWK ƵƳƴƶ ƵƳƴƶ ƵƳƴƶ 5HIHUHQFH 5HIHUHQFH 5HIHUHQFH ƵƳƴƷ EDVH ƵƳƴƷ EDVH ƵƳƴƷ EDVH 9ROXPH ƴƵƴ ƴƵƵ ƶƼ ƶƻ ƴƵƸ ƴƵƳ 5HYHQXH ƴƹƳƼƶ ƴƹƳƵƶ ƷƹƴƼ ƷƹƹƼ ƴƴƵƹƼ ƴƴƳƴƳ &RVWRIVDOHV ƹƶƼƴ ƹƸƴƼ ƴƶƺƷ ƴƸƺƳ ƶƺƷƴ ƶƸƺƹ 'LVWULEXWLRQH[SHQVHV ƴƶƵƷ ƴƵƶƸ ƷƸƶ ƷƷƶ ƴƷƳƷ ƴƶƸƴ 6DOHVDQGPDUNHWLQJH[SHQVHV Ƶƴƶƹ ƴƼƳƻ ƻƳƻ ƻƷƷ ƴƵƸƶ ƴƴƷƺ $GPLQLVWUDWLYHH[SHQVHV Ʒƺƶ ƷƼƺ ƷƶƳ ƷƸƸ Ƹƻƴ ƸƼƴ 2WKHURSHUDWLQJLQFRPH H[SHQVHV ƵƼƼ ƹƺ Ƶƶƺ ƵƳƳ ƹƻƼ ƻƳƺ 1RUPDOL]HGSURƮWIURPRSHUDWLRQV (%,7 ƹƳƹƻ ƸƼƶƵ ƴƺƼƴ ƴƸƸƺ ƷƼƺƼ ƸƴƸƴ 'HSUHFLDWLRQDPRUWL]DWLRQDQGLPSDLUPHQW ƺƸƵ ƺƼƹ ƶƼƸ ƶƻƶ ƺƹƶ ƺƳƺ 1RUPDOL]HG(%,7'$ ƹƻƵƳ ƹƺƵƻ Ƶƴƻƹ ƴƼƷƳ ƸƺƷƵ ƸƻƸƻ 1RUPDOL]HG(%,7'$PDUJLQ ƷƵƷ ƷƵƳ Ʒƺƶ ƷƴƸ ƸƴƳ ƸƶƵ SEGMENT REPORTING ƵƳƴƶ5(3257(' 1RUWK$PHULFD 0H[LFR /DWLQ$PHULFD1RUWK ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ 9ROXPH ƴƵƴ ƴƵƵ ƶƼ ƵƵ ƴƵƸ ƴƵƳ 5HYHQXH ƴƹƳƼƶ ƴƹƳƵƶ ƷƹƴƼ ƵƺƹƼ ƴƴƵƹƼ ƴƴƳƴƳ &RVWRIVDOHV ƹƶƼƴ ƹƸƴƼ ƴƶƺƷ ƻƹƼ ƶƺƷƴ ƶƸƺƹ 'LVWULEXWLRQH[SHQVHV ƴƶƵƷ ƴƵƶƸ ƷƸƶ ƵƶƵ ƴƷƳƷ ƴƶƸƴ 6DOHVDQGPDUNHWLQJH[SHQVHV Ƶƴƶƹ ƴƼƳƻ ƻƳƻ ƷƻƷ ƴƵƸƶ ƴƴƷƺ $GPLQLVWUDWLYHH[SHQVHV Ʒƺƶ ƷƼƺ ƷƶƳ ƵƶƷ Ƹƻƴ ƸƼƵ 2WKHURSHUDWLQJLQFRPH H[SHQVHV ƵƼƼ ƹƺ Ƶƶƺ ƴƳƷ ƹƻƼ ƻƳƺ 1RUPDOL]HGSURƮWIURPRSHUDWLRQV (%,7 ƹƳƹƻ ƸƼƶƵ ƴƺƼƴ ƴƳƸƷ ƷƼƺƼ ƸƴƸƴ 1RQUHFXUULQJLWHPV UHIHU1RWHƻ Ƹ Ƹ ƴƳƸ ƸƷ Ƶƴ ƹ 3URƮWIURPRSHUDWLRQV (%,7 ƹƳƹƶ ƸƼƵƺ ƴƹƻƸ ƴƳƳƳ ƷƼƸƺ ƸƴƷƸ 1HWƮQDQFH FRVW LQFRPH ƷƳƶ ƷƼƷ ƴƶƺƴ ƴƳƸƼ ƷƴƷ Ʒƴƻ 6KDUHRIUHVXOWRIDVVRFLDWHV ƹ Ƶƺƻ Ƶ ƴƴ Ƹ Ƹ 3URƮW ORVV EHIRUHWD[ Ƹƹƹƹ ƸƺƴƳ ƶƴƵ Ʒƺ ƷƸƷƻ ƷƺƶƵ ,QFRPHWD[H[SHQVH ƴƷƳƵ ƴƵƴƹ ƶƹƵ ƴƴƵ ƶƹƳ ƶƼƺ 3URƮW ORVV ƷƵƹƷ ƷƷƼƸ ƷƼ ƴƸƼ Ʒƴƻƻ ƷƶƶƸ 1RUPDOL]HG(%,7'$ ƹƻƵƳ ƹƺƵƻ Ƶƴƻƹ ƴƵƻƴ ƸƺƷƵ ƸƻƸƻ 1RQUHFXUULQJLWHPV LQFOXGLQJLPSDLUPHQW Ƹ Ƹ ƴƳƸ ƸƷ Ƶƴ ƹ 'HSUHFLDWLRQDPRUWL]DWLRQDQGLPSDLUPHQW ƺƸƵ ƺƼƹ ƶƼƸ ƵƵƹ ƺƹƷ ƺƳƺ 1HWƮQDQFH FRVW LQFRPH ƷƳƶ ƷƼƷ ƴƶƺƴ ƴƳƸƼ ƷƴƷ Ʒƴƻ 6KDUHRIUHVXOWVRIDVVRFLDWHV ƹ Ƶƺƻ Ƶ ƴƴ Ƹ Ƹ ,QFRPHWD[H[SHQVH ƴƷƳƵ ƴƵƴƹ ƶƹƵ ƴƴƵ ƶƹƳ ƶƼƺ 3URƮW ORVV ƷƵƹƷ ƷƷƼƸ ƷƼ ƴƸƼ Ʒƴƻƻ ƷƶƶƸ 1RUPDOL]HG(%,7'$PDUJLQ ƷƵƷ ƷƵƳ Ʒƺƶ Ʒƹƶ ƸƴƳ ƸƶƵ 6HJPHQWDVVHWV ƹƶƼƵƴ ƹƷƹƶƼ ƵƻƼƴƻ ƶƳƵƸƼ ƴƹƸƶƻ ƴƺƸƷƴ ,QWHUVHJPHQWHOLPLQDWLRQ 1RQVHJPHQWHGDVVHWV 7RWDODVVHWV 6HJPHQWOLDELOLWLHV ƹƶƵƴ ƹƹƼƳ ƸƸƴƶ ƶƹƸƶ ƹƺƺƻ Ƹƺƻƶ ,QWHUVHJPHQWHOLPLQDWLRQ 1RQVHJPHQWHGLWHPV 7RWDOHTXLW\DQGOLDELOLWLHV *URVVFDSH[ ƸƷƵ Ƹƻƻ ƷƶƼ ƵƳƵ ƴƷƹƷ ƴƷƴƸ $GGLWLRQWR UHYHUVDORI SURYLVLRQV ƼƳ ƻ ƴƹ ƴ ƴƶƼ ƴƻƻ )7( ƴƸƶƷƻ ƴƹƻƸƵ ƶƳƼƵƺ ƶƷƵƳƶ ƶƻƶƻƴ ƶƻƶƶƻ P. 92 /93 *OREDO([SRUWDQG (ƬHFWRI /DWLQ$PHULFD6RXWK (XURSH $VLD3DFLƮF +ROGLQJ&RPSDQLHV DFTXLVLWLRQ &RQVROLGDWHG ƵƳƴƶ ƵƳƴƶ ƵƳƴƶ ƵƳƴƶ ƵƳƴƶ 5HIHUHQFH 5HIHUHQFH 5HIHUHQFH 5HIHUHQFH %ULGJHWR ƵƳƴƶ ƵƳƴƷ EDVH ƵƳƴƷ EDVH ƵƳƴƷ EDVH ƵƳƴƷ EDVH ƵƳƴƷ UHSRUWHG ƵƳƴƷ 5HSRUWHG ƶƺ ƶƺ ƷƷ Ʒƺ ƻƶ ƹƹ ƴƳ ƴƸ ƵƳ ƷƸƼ ƷƵƹ ƵƼƹƴ ƶƵƹƼ ƷƻƹƸ ƸƳƵƴ ƸƳƷƳ ƶƶƸƷ ƵƵƴƹ Ƶƴƶƻ ƵƵƻƻ ƷƺƳƹƶƷƶƴƼƸ ƴƳƻƴ ƴƴƻƸ ƵƳƻƴ ƵƵƺƵ ƵƸƸƵ ƴƻƻƸ ƴƸƶƻ ƴƸƷƼ Ƽƹƴ ƴƻƺƸƹ ƴƺƸƼƷ ƵƼƳ ƶƳƼ Ʒƺƺ ƸƳƶ ƷƶƷ ƶƳƵ ƴƺƸ ƴƷƶ ƵƵƸ ƷƸƸƻ ƷƳƹƴ ƶƴƸ ƶƷƹ ƴƳƹƺ ƴƳƹƹ ƴƵƵƺ ƻƶƶ ƵƶƳ ƴƼƷ ƶƻƳ ƺƳƶƹ ƸƼƸƻ ƴƳƹ ƴƴƵ ƶƹƵ ƶƹƷ ƷƳƳ ƶƴƺ ƷƷƳ ƷƶƳ ƵƵƺ ƵƺƼƴ ƵƸƶƼ Ƹ Ƹ Ƶƻ ƶƵ ƼƳ ƴƳƼ ƶƼ ƸƵ ƴƳƵ ƴƶƻƹ ƴƴƹƳ ƴƴƺƸ ƴƶƴƴ ƼƳƹ ƻƷƼ Ƹƴƺ ƴƵƺ ƴƵƻ ƴƵƹ ƸƼƻ ƴƸƶƳƻ ƴƷƵƳƶ ƴƺƺ ƴƻƳ Ʒƶƺ ƷƼƵ ƸƸƳ ƷƴƼ ƴƹƴ ƴƹƹ ƴƸƻ ƶƵƶƷ ƵƼƻƸ ƴƶƸƵ ƴƷƼƴ ƴƶƷƶ ƴƶƷƴ ƴƳƹƺ ƸƷƹ ƶƶ ƷƳ ƺƸƸ ƴƻƸƷƵ ƴƺƴƻƻ ƷƸƹ ƷƸƹ Ƶƺƹ Ƶƹƺ ƵƴƵ ƴƹƶ ƶƼƷ ƶƼƻ *OREDO([SRUWDQG (ƬHFWRI /DWLQ$PHULFD6RXWK (XURSH $VLD3DFLƮF +ROGLQJ&RPSDQLHV DFTXLVLWLRQ &RQVROLGDWHG ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ ƶƺ ƶƺ ƷƷ Ʒƹ ƻƶ ƹƹ ƴƳ ƴƵ ƷƸƼ ƷƵƹ ƵƼƹƴ ƶƵƹƼ ƷƻƹƸ ƷƼƶƵ ƸƳƷƳ ƶƶƸƷ ƵƵƴƹ ƴƻƶƼ ƷƺƳƹƶ ƷƶƴƼƸ ƴƳƻƴ ƴƴƻƸ ƵƳƻƴ ƵƵƶƻ ƵƸƸƵ ƴƻƻƸ ƴƸƶƻ ƴƶƵƶ ƴƻƺƸƹ ƴƺƸƼƷ ƵƼƳ ƶƳƼ Ʒƺƺ ƷƼƺ ƷƶƷ ƶƳƵ ƴƺƸ ƴƶƸ ƷƸƸƻ ƷƳƹƴ ƶƴƸ ƶƷƹ ƴƳƹƺ ƴƳƷƼ ƴƵƵƺ ƻƶƶ ƵƶƳ ƴƼƴ ƺƳƶƹ ƸƼƸƻ ƴƳƹ ƴƴƵ ƶƹƵ ƶƸƼ ƷƳƳ ƶƴƺ ƷƷƳ ƷƵƼ ƵƺƼƴ ƵƸƶƼ Ƹ Ƹ Ƶƻ ƶƳ ƼƳ ƴƳƼ ƶƼ Ʒƻ ƴƶƻƹ ƴƴƹƳ ƴƴƺƸ ƴƶƴƴ ƼƳƹ ƻƴƼ Ƹƴƺ ƴƵƺ ƴƵƻ ƴƼƴ ƴƸƶƳƻ ƴƷƵƳƶ ƴƵ Ƹ ƴƶƵ ƶƺ ƻƸ Ƶƹ ƴƹƸ ƹƶƺƵ ƴƼƺ ƹƵƷƳ ƴƴƹƶ ƴƶƳƹ ƺƺƷ ƺƻƵ ƷƶƵ ƴƳƴ ƶƺ ƹƴƻƴ ƴƸƴƴƴ ƵƳƷƷƶ ƵƶƳ ƶƴƺ ƺƳƷ ƹƺƵ ƵƷ ƻ ƴƻƵƹ ƺƷƼ ƴƶƴƼ ƵƵƳƶ ś ś ś ś ś ś ś ś Ƽ ƵƼƷ Ƽƶƶ ƼƻƼ ƺƳ ƴƴƴ ƷƳƻ ƴƳƼ ƴƻƹƷ ƹƼƶƳ ƴƶƻƳƴ ƴƻƸƶƷ ƶƴƴ ƷƸƺ ƺƴ ƶƺ ƴƷƵ Ƹƶ ƴƷƻ ƴƻƴ ƵƷƼƼ ƵƳƴƹ ƹƵƵ ƸƶƵ ƴ ƴƷƻ Ƶƹƹ Ƹƹ ƵƳƴƵ ƺƴƴƵ ƴƴƶƳƵ ƴƹƸƴƻ ƴƶƸƵ ƴƷƼƴ ƴƶƷƶ ƴƶƴƴ ƴƳƹƺ ƸƷƹ ƶƶ ƵƸ ƴƻƸƷƵ ƴƺƴƻƻ ƴƵ Ƹ ƴƶƵ ƶƺ ƻƸ Ƶƹ ƴƹƸ ƹƶƺƵ ƴƼƺ ƹƵƷƳ ƴƺƺ ƴƻƳ Ʒƶƺ ƷƼƴ ƸƸƳ ƷƴƼ ƴƹƴ ƴƹƸ ƶƵƶƷ ƵƼƻƸ ƵƶƳ ƶƴƺ ƺƳƷ ƹƺƵ ƵƷ ƻ ƴƻƵƹ ƺƷƼ ƴƶƴƼ ƵƵƳƶ ś ś ś ś ś ś ś ś Ƽ ƵƼƷ ƶƴƴ ƷƸƺ ƺƴ ƶƺ ƴƷƵ Ƹƶ ƴƷƻ ƴƻƴ ƵƷƼƼ ƵƳƴƹ ƹƵƵ ƸƶƵ ƴ ƴƷƻ Ƶƹƹ Ƹƹ ƵƳƴƵ ƺƴƴƵ ƴƴƶƳƵ ƴƹƸƴƻ ƷƸƹ ƷƸƹ Ƶƺƹ Ƶƹƹ ƵƴƵ ƴƹƶ ś ś ƶƼƷ ƶƼƻ ƶƸƳƻ ƶƷƻƶ ƺƵƴƳ ƻƶƸƼ ƴƶƼƵƴ ƹƵƷƹ ƸƺƵƻ ƷƵƷƵ ƴƶƼƺƷƶ ƴƶƷƺƹƼ ƻƶƶƻ Ƹƴƺƴ ƴƴƴƷƸƴƵƳƹƻ ƴƷƵƸƸƳƴƷƴƹƹƹ ƴƷƹƸ ƴƵƵƻ ƷƻƷƵ ƷƻƴƵ ƷƳƴƻ ƵƼƼƹ ƵƼƸƻ ƶƴƶƶ ƶƴƻƼƷ ƵƻƵƼƶ ƻƶƶƻ Ƹƴƺƴ ƴƴƻƼƼƷƴƴƻƸƷƷ ƴƷƵƸƸƳƴƷƴƹƹƹ ƶƻƸ ƵƼƼ ƷƷƸ ƷƶƷ Ƽƻƺ ƻƴƺ ƻƳ ƻƷ ƷƶƷƵ ƶƻƶƼ ƺ ƴ ƴƸ ƶƴ ƶƷ ƴƴ Ƶ ƴƼ ƶƳƳ ƵƴƼ ƴƳƻƺƵ ƴƳƷƻƵ ƴƶƻƹƸ ƴƸƳƼƹ ƷƵƺƵƺ ƶƺƹƻƳ ƴƼƴƳ ƴƼƶƹ ƴƸƷƳƵƼ ƴƸƷƸƻƺ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Net revenue from the beer business amounted to Ʒƶ ƴƴƹmbUSbdollar while the net revenue from the non-beer business (soft drinks and other business) accounted for ƶ ƼƷƺmbUSbdollar. Net revenue from external customers attributable to ABbInBev’s country of domicile (Belgium) and non-current assets located in the country of domicile represented ƻƼƹmbUSbdollar and ƴ ƴƺƹmbUSbdollar, respectively. ƹ$FTXLVLWLRQVDQGDisposals of Subsidiaries The table below summarizes the impact of acquisitions on the Statement of financial position and cash flows of ABbInBev for ƶƴ December ƵƳƴƷ and ƵƳƴƶ: ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ 0LOOLRQ86GROODU $FTXLVLWLRQV $FTXLVLWLRQV 'LVSRVDOV 'LVSRVDOV 1RQFXUUHQWDVVHWV 3roperty, plant and equipment ƼƷƺ Ʒ ƻƴƻ ś ś Intangible assets ƴ ƵƸƸ Ƹ Ƴƹƻ ś ś Investment in subsidiaries ś ƷƷ ś ś Investment in associates ś ƺƸ ś ś Investment securities ś ƴƼ ś ś Trade and other receivables Ʒƺ ƹƸ ś ś Deferred tax assets Ƹƹ ƴƷ ś ś Current assets Inventories ƴƴƶ ƹƳƸ ś ś Income tax receivable ś ƴ ś ś Trade and other receivables ƶƵƶ ƹƺƹ ś ś Cash and cash equivalents ƵƸƺ Ƶ ƹƺƷ ś ś Assets held for sale ś Ƹ ƶƻƸ (ƶƹƸ) ś 1RQFRQWUROOLQJLQWHUHVW ś ƴƴ ś ś 1RQFXUUHQWOLDELOLWLHV Interest-bearing loans and borrowings (Ƹƴƶ) ś ś ś Trade and other payables (ƴƻƺ) (Ƹƹƹ) ś ś Employee beneƮts (ƶƴ) (ƵƸƹ) ś ś 3rovisions ś (Ƶƴ) ś ś Deferred tax liabilities (ƶƳƹ) (ƴ ƴƸƺ) ś ś &XUUHQWOLDELOLWLHV Bank overdraft (ƶ) ś ś ś Interest-bearing loans and borrowings (Ƽƹ) (ƹƻ) ś ś Income tax payable (ƴƳƺ) (ƴ ƸƳƵ) ś ś Trade and other payables (ƻƸƶ) (ƴ ƵƸƻ) ś ś 3rovisions ś (ƴƺ) ś ś 1HWLGHQWLƮDEOHDVVHWVDQGOLDELOLWLHV ƼƳƵ ƴƷƸƻƻ ƶƹƸ ś *oodwill on acquisitions Ƹ ƶƳƺ ƴƼ Ƽƻƻ ś ś Loss/(gain) on disposal ś ś (ƴƼƹ) (ƷƵ) Acquisition-date fair value of the previously held equity interest ś (ƴƵ ƼƷƹ) ś ś Shareholdings increases ś (ƴƴ) ś ś Consideration to be paid ś (ƴ ƸƳƼ) ƸƵ ś Net cash paid on prior years acquisitions ƴ ƳƵƴ ƶ ś ś &RQVLGHUDWLRQSDLG UHFHLYHG VDWLVƮHGLQFDVK ƺƵƵƹ ƵƳƴƴƶ ƸƳƼ ƷƵ Cash (acquired)/ disposed of (ƵƸƷ) (Ƶ ƹƺƷ) ƵƷ ś 1HWFDVKRXWưRZ LQưRZ ƹƼƺƹ ƴƺƷƶƼ ƷƻƸ ƷƵ P. 94 /95 ƵƳƴƷ$FTXLVLWLRQV The following transactions took place in ƵƳƴƷ: 2ULHQWDO%UHZHU\DFTXLVLWLRQ On ƴ April ƵƳƴƷ, ABbInBev completed the acquisition of OB, the leading brewer in South Korea. The acquisition returned OB to the ABbInBev portfolio, after ABbInBev sold the company in July ƵƳƳƼ, following the combination of InBev and Anheuser-Busch, in support of the company’s deleveraging commitment. The enterprise value for the transaction was Ƹ.ƻ billion US dollar, and as a result of an agreement entered into in ƵƳƳƼ, ABbInBev also received approximately ƶƵƳmbUSbdollar in cash at closing from this transaction, subject to closing adjustments according to the terms of the transaction. ABbInBev financed the transactions with the issuance of bonds during the first half of ƵƳƴƷ. Transaction costs for the combination approximated Ƴ.ƴ billion US dollar and were reported as incurred in the non-recurring expenses in ƵƳƴƷ. The company is in the process of finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed in compliance with I)RS ƶ. The provisional allocation of the purchase price included in the balance sheet and detailed in the table below is based on the current best estimates of ABbInBev’s management with input from independent third parties. The completion of the purchase price allocation may result in further adjustment to the carrying value of OB’s recorded assets and liabilities and the determination of any residual amount that will be allocated to goodwill. The following table presents the provisional allocation of purchase price to the OB business: %HIRUH3XUFKDVH 3XUFKDVH3ULFH $IWHU3XUFKDVH Million US dollar Price Allocation Allocation Price Allocation 1RQFXUUHQWDVVHWV 3roperty, plant and equipment ƺƵƼ Ƹ ƺƶƷ *oodwill ƴ ƴƵƻ (ƴ ƴƵƻ) ś Intangible assets ƶƴƶ ƺƼƺ ƴ ƴƴƳ Trade and other receivables Ʒƺ ś Ʒƺ Current assets Inventories ƼƸ ś ƼƸ Trade and other receivables ƵƺƵ (Ƶ) ƵƺƳ Cash and cash equivalent ƵƷƸ ś ƵƷƸ 1RQFXUUHQWOLDELOLWLHV Interest-bearing loans and borrowings (ƷƼƼ) ś (ƷƼƼ) Employee beneƮts (Ƶƺ) (Ʒ) (ƶƴ) Deferred tax liabilities (ƼƵ) (ƴƼƵ) (ƵƻƷ) &XUUHQWOLDELOLWLHV Interest-bearing loans and borrowings (ƺ) ś (ƺ) Income tax payable (ƼƷ) ś (ƼƷ) Trade and other payables (ƸƵƶ) (ƴƹƸ) (ƹƻƻ) 1HWLGHQWLƮHGDVVHWVDQGOLDELOLWLHV ƴƸƻƺ ƹƻƼ ƻƼƻ *oodwill on acquisition Ʒ ƵƼƻ 1HWDVVHWVDFTXLUHG ƸƴƼƹ Consideration paid (enterprise value minus net debt) Ƹ ƸƴƼ Cash received as part of the operation (ƶƵƶ) 1HWFRQVLGHUDWLRQSDLGVDWLVƮHGLQFDVK ƸƴƼƹ Cash and cash equivalent acquired (ƵƷƸ) 1HWFDVKRXWưRZ ƷƼƸƴ The transaction resulted in Ʒ.ƶ billion US dollar of goodwill provisionally allocated primarily to the South Korean business. The factors that contributed to the recognition of goodwill include the acquisition of an assembled workforce and expected improved efficiencies through best- practice sharing. *oodwill also arises due to the recognition of deferred tax liabilities in relation to the preliminary fair value adjustments on acquired intangible assets. None of the goodwill recognized is deductible for tax purposes. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT The valuation of the property, plant and equipment, intangible assets, employee benefits and other assets and liabilities are based on the current best estimates of ABbInBev’s management, with input from independent third parties. The majority of the intangible asset valuation relates to brands with indefinite life. The valuation of the brands with indefinite life is based on a series of factors, including the brand history, the operating plan and the countries in which the brands are sold. The intangibles with an indefinite life mainly include the Cass brand family and have been fair valued for a total amount of ƴ.ƴ billion US dollar. A deferred tax liability has been accrued on most fair value adjustments considering a tax rate of ƵƷ.Ƶ. As of ƴ April ƵƳƴƷ, the completion date of the transaction, OB contributed ƴ ƴƷƵmbUSbdollar to the revenue and ƵƳƹmbUSbdollar to the profit of ABbInBev. If the acquisition date had been ƴ January ƵƳƴƷ it is estimated that ABbInBev’s unaudited combined revenue, profit from operations and profit would have been higher by ƶƴƻmbUSbdollar, ƼƼmbUSbdollar, and ƺƳmbUSbdollar, respectively. The unaudited combined results do not include any anticipated cost savings or other effects of the planned integration of OB. Accordingly, such amounts are not necessarily indicative of the results if the combination had occurred on ƴ January ƵƳƴƷ or that may result in the future. 2WKHUƵƳƴƷ$FTXLVLWLRQV In ƵƳƴƷ, ABbInBev completed the acquisition of the Siping *insber Draft Beer Co., Ltd. (Š*insberš), which owns the *insber brand, as well as it completed a transaction to acquire three breweries in China. The aggregate purchase price of such acquisitions was approximately ƻƹƻmbUSbdollar. The acquired business had an immaterial impact on profit in ƵƳƴƷ. The company is in the process of finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed in compliance with I)RS ƶ. During ƵƳƴƷ, ABbInBev also acquired the Blue 3oint brewery (Long Island), ƴƳ Barrel Brewing in the northwest of the United States and two wholesalers in Kentucky and Oregon.The acquired businesses had an immaterial impact on profit in ƵƳƴƷ. The company is in the process of finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed in compliance with I)RS ƶ. During ƵƳƴƷ, ABbInBev purchased ƴ ƳƷƹmbUSbdollar *rupo Modelo’s shares through the Trust established on Ʒ June ƵƳƴƶ, to accept further tender of shares by *rupo Modelo shareholders over a period of up to ƵƸ months. By ƶƴ December ƵƳƴƷ, ABbInBev owned approximately ƼƼ of *rupo Modelo’s outstanding shares. During ƵƳƴƷ, ABbInBev paid ƴmbUSbdollar to former Anheuser-Busch shareholders (ƶmbUSbdollar in ƵƳƴƶ). Additionally, ƶmbUSbdollar were remitted to U.S. states through an escheatment process, whereby the states become the owner of unclaimed amounts after a period of time specified by the state law. By ƶƴ December ƵƳƴƷ, ƷmbUSbdollar consideration remains payable to former Anheuser-Busch shareholders whom did not yet claim the proceeds. This payable is recognized as a deferred consideration on acquisitions. ƵƳƴƶ$FTXLVLWLRQV The following transactions took place in ƵƳƴƶ: &RPELQDWLRQZLWK*UXSR0RGHOR On Ʒ June ƵƳƴƶ, ABbInBev completed the combination with *rupo Modelo pursuant to the Transaction agreement between ABbInBev and *rupo Modelo S.A.B de CV announced on ƵƼ June ƵƳƴƵ. The combination was completed through a series of steps that simplified *rupo Modelo’s corporate structure, followed by an all-cash tender offer by ABbInBev for all outstanding *rupo Modelo shares that it did not own at that time for Ƽ.ƴƸ US dollar per share, in a transaction valued at ƵƳ.ƴ billion US dollar. By Ʒ June ƵƳƴƶ and following the settlement of the tender offer ABbInBev owned approximately ƼƸ of *rupo Modelo’s outstanding shares. On Ʒ June ƵƳƴƶ, ABbInBev established and funded a Trust that will accept further tender of shares by *rupo Modelo shareholders at a price of Ƽ.ƴƸ US dollar per share over a period of up to ƵƸ months, during which time *rupo Modelo will continue to be quoted on the Mexican stock exchange. As of ƶƴ December ƵƳƴƷ, ABbInBev owned approximately ƼƼ of *rupo Modelo’s outstanding shares and Ƴ.Ƹ billion US dollar is deposited with the Trust and are reported in these audited financial statements as restricted cash. ABbInBev recognized a liability for the *rupo Modelo shares it did not acquire by ƶƴbDecember ƵƳƴƷ (see also Note ƵƳ Cash and cash equivalents and Note Ƶƹ Trade and other payables). The transaction resulted in ƴƼ.ƹ billion US dollar of goodwill allocated primarily to the Mexico business. The majority of the intangible asset valuation related to brands with indefinite life. These mainly include the Corona brand family, the Modelo brand family and the Victoria brand family and have been fair valued for a total amount of Ʒ.Ƹ billion US dollar. A deferred tax liability has been accrued on most fair value adjustments considering a tax rate of ƶƳ. P. 96 /97 On ƺ June ƵƳƴƶ, in a transaction related to the combination of ABbInBev and *rupo Modelo, *rupo Modelo completed the sale of its US business to Constellation Brands, Inc. (ŠConstellationš). The transaction included the sale of *rupo Modelo’s ƸƳ stake in Crown Imports for a total consideration of ƴ.ƻƷƸ billion US dollar and the sale of the *rupo Modelo’s 3iedras Negras brewery and perpetual rights to *rupo Modelo’s brands distributed by Crown in the US for Ƶ.Ƽ billion US dollar, subject to a post-closing adjustment estimated at ƸƸƻmbUSbdollar and collected in ƵƳƴƷ. These assets were recognized as assets held for sale at their after tax net realizable value in the opening balance sheet. ABbInBev and Constellation have established a three-year transition services agreement to ensure the smooth transition of the operations of the 3iedras Negras brewery. A temporary supply agreement has also been negotiated as part of the acquisition agreements whereby Constellation can purchase for an initial three-year term inventory from ABbInBev under a specified pricing while the 3iedras Negras brewery business acquires the necessary capacity to fulfill ƴƳƳ percent of the US demand. As part of the opening balance sheet ABbInBev recognized a liability for prepaid discounts related to the temporary supply agreement. The prepaid discount will be amortized in the consolidated income statement in line with volumes sold to Constellation. 2WKHUƵƳƴƶ$FTXLVLWLRQV On Ƶƺ April ƵƳƴƶ, ABbInBev completed a transaction to acquire four breweries in China with a total capacity of approximately Ƽ million hectoliters. The aggregated purchase price was approximately ƷƶƼmbUSbdollar. During ƵƳƴƶ, Ambev acquired different distributors in Brazil for a total consideration of ƷƺmbUSbdollar and Ƴ.ƼƵ additional stake in Cervecer¬a Nacional Dominicana S.A. (ŠCNDš) for a total consideration of ƵƵmbUSbdollar, as part of the ƵƳƴƵ transaction in which Ambev acquired a controlling interest in CND. During ƵƳƴƶ, ABbInBev paid ƶmbUSbdollar to former Anheuser-Busch shareholders (ƴƷmbUSbdollar in ƵƳƴƵ). By ƶƴ December ƵƳƴƶ, ƻmbUSbdollar consideration remained payable to former Anheuser-Busch shareholders whom did not yet claim the proceeds. This payable was recognized as a deferred consideration on acquisitions. ƵƳƴƷ'LVSRVDOV During ƵƳƴƷ, ABbInBev collected ƴƼƺmbUSbdollar proceeds from prior years’ sale of the Central European operations to CVC Capital 3artners. During ƵƳƴƷ, ABbInBev sold its investment in the company Comercio y Distribuci²n Modelo (ŠExtraš) and ABbInBev completed the sale of its glass production plant and other assets located in 3iedras Negras, Coahuila, Mexico, to affiliates of Constellation Brands Inc. The result of such sales was recorded as a non-recurring item ś see note ƻ Non-recurring items. ƵƳƴƶ'LVSRVDOV During ƵƳƴƶ, ABbInBev collected ƷƵmbUSbdollar proceeds from prior years’ sale of the Central European operations to CVC Capital 3artners. ƺ2WKHU2SHUDWLQJ,QFRPH H[SHQVHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ *overnment grants ƹƼƺ ƹƴƷ License income ƴƵƶ ƴƵƸ Net (additions to)/reversals of provisions (ƴƳ) (ƶƴ) Net gain on disposal of property, plant and equipment, intangible assets and assets held for sale Ƹ ƶƵ Net rental and other operating income Ƹƺƶ ƷƵƳ ƴƶƻƺ ƴƴƹƳ Research expenses as incurred Ƶƴƺ ƴƻƸ The government grants relate primarily to fiscal incentives given by certain Brazilian states and Chinese provinces, based on the company’s operations and developments in those regions. Net rental and other operating income increased from ƷƵƳmbUSbdollar in ƵƳƴƶ to ƸƺƶmbUSbdollar in ƵƳƴƷ. This increase results mainly from a one-time positive accounting adjustment of ƵƵƶmbUSbdollar, following an actuarial reassessment of future liabilities under the company’s post- retirement healthcare benefit plans in the US. In ƵƳƴƷ, the company expensed ƵƴƺmbUSbdollar in research, compared to ƴƻƸmbUSbdollar in ƵƳƴƶ. 3art of this was expensed in the area of market research, but the majority is related to innovation in the areas of process optimization especially as it pertains to capacity, new product developments and packaging initiatives. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƻ1RQ5HFXUULQJ,WHPV IAS ƴ Presentation of financial statements requires material items of income and expense to be disclosed separately. Non-recurring items are items, which in management’s judgment, need to be disclosed by virtue of their size or incidence in order for the user to obtain a proper understanding of the financial information. The company considers these items to be of significance in nature, and accordingly, management has excluded these from their segment measure of performance as noted in Note Ƹ Segment Reporting. The non-recurring items included in the income statement are as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Restructuring (including impairment losses) (Ƶƺƺ) (ƴƴƻ) )air value adjustments ś ƹ ƷƴƳ Acquisition costs business combinations (ƺƺ) (ƻƵ) Business and asset disposal (including impairment losses) ƴƸƺ ƶƳ ,PSDFWRQSURƮWIURPRSHUDWLRQV ƴƼƺ ƹƵƷƳ Non-recurring net Ʈnance cost ƸƳƼ Ƶƻƶ Non-recurring taxes ƵƸ (ƺƳ) Non-recurring non-controlling interest ƴƷ Ƹ 1HWLPSDFWRQSURƮWDWWULEXWDEOHWRHTXLW\KROGHUVRI$%b,Q%HY ƶƸƴƹƷƸƻ The non-recurring restructuring charges for ƵƳƴƷ total (Ƶƺƺ)mbUSbdollar. These charges relate mainly to the integration of *rupo Modelo, organizational alignments in Asia 3acific and Europe and the closure of the Angarsk and 3erm breweries in Russia. These changes aim to eliminate overlap or duplicated processes, taking into account the right match of employee profiles with the new organizational requirements. These one- time expenses, as a result of the series of decisions, provide the company with a lower cost base in addition to a stronger focus on ABbInBev’s core activities, quicker decision making and improvements to efficiency, service and quality. Acquisition costs of business combinations amount to (ƺƺ)mbUSbdollar by the end of December ƵƳƴƷ primarily relating to cost incurred for the acquisition of OB that closed on ƴ April ƵƳƴƷ ś see also Note ƹ Acquisitions and disposals of subsidiaries. The business and asset disposals (including impairment losses) resulted in a net gain of ƴƸƺmbUSbdollar as per ƶƴ December ƵƳƴƷ mainly attributable to the additional proceeds from the sale of the Central European operations to CVC Capital 3artners and the disposal of Extra and the glass production plant located in 3iedras Negras, Coahuila, Mexico ś see also Note ƹ Acquisitions and disposals of subsidiaries. The non-recurring restructuring charges for the period ended ƶƴ December ƵƳƴƶ total (ƴƴƻ)mbUSbdollar. These charges primarily relate to the integration of *rupo Modelo, the integration of Cervecer¬a Nacional Dominicana S.A. and to organizational alignments in China, Europe, NorthbAmerica and Latin America South. )air value adjustments recognized in ƵƳƴƶ for a total of ƹ ƷƴƳmbUSbdollar, mainly relate to ƹ ƷƴƸmbUSbdollar non-recurring, non-cash impact of revaluing the initial investment held in *rupo Modelo and the recycling to the consolidated income statement of amounts related to the investment, previously recognized in the consolidated statement of comprehensive income in line with I)RS ƶ. Acquisition costs of business combinations amount to (ƻƵ)mbUSbdollar by the end of December ƵƳƴƶ relating to cost incurred for the combination with *rupo Modelo and the acquisition of four breweries in China on Ƶƺ April ƵƳƴƶ ś see also Note ƹ Acquisitions and disposals of subsidiaries. ƶƳmbUSbdollar business and asset disposal (including impairment losses) as per ƶƴ December ƵƳƴƶ results mainly from additional proceeds from the sale of the Central European operations to CVC Capital 3artners. The company also incurred non-recurring finance income of ƸƳƼmbUSbdollar for the period ended ƶƴ December ƵƳƴƷ (ƶƴ December ƵƳƴƶ: Ƶƻƶm USbdollar) - see Note ƴƴ Finance cost and income. All the above amounts are before income taxes. The non-recurring items as of ƶƴ December ƵƳƴƷ decreased income taxes by ƵƸmbUSbdollar (ƶƴbDecember ƵƳƴƶ: (ƺƳ)mbUSbdollar increase of income taxes). Non-controlling interest on the non-recurring items amounts to ƴƷmbUSbdollar for the period ended ƶƴ December ƵƳƴƷ (ƶƴ December ƵƳƴƶ: Ƹm USbdollar). P. 98 /99 Ƽ3D\UROODQG5HODWHG%HQHILWV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ :ages and salaries (ƶ ƻƷƷ) (Ʒ ƴƶƺ) Social security contributions (ƹƹƶ) (ƺƵƵ) Other personnel cost (ƹƻƵ) (ƻƳƺ) 3ension expense for deƮned beneƮt plans ƵƳƹ (ƴƷƴ) Share-based payment expense (ƵƸƴ) (ƵƷƶ) Contributions to deƮned contribution plans (ƴƷƸ) (ƴƴƺ) ƸƶƺƼ ƹƴƹƺ Number of full time equivalents ()TE) ƴƸƷ ƳƵƼ ƴƸƷ Ƹƻƺ The number of full time equivalents can be split as follows: ƵƳƴƷ ƵƳƴƶ ABbInBev NV (parent company) ƴƻƸ ƴƻƷ Other subsidiaries ƴƸƶ ƻƷƷ ƴƸƵ ƷƷƴ 3roportionally consolidated entities ś ƴ ƼƹƵ ƴƸƷƳƵƼ ƴƸƷƸƻƺ Effective ƴ January ƵƳƴƷ, the company discontinued the proportional consolidation of certain operations ś see also Note Ʒ Use of estimates DQGbMXGJPHQWV. Note Ƹ Segment reporting contains the split of the )TE by geographical segment. ƴƳ$GGLWLRQDO,QIRUPDWLRQRQ2SHUDWLQJ([SHQVHVE\1DWXUH Depreciation, amortization and impairment charges are included in the following line items of the ƵƳƴƷ income statement: 'HSUHFLDWLRQDQG $PRUWL]DWLRQDQG LPSDLUPHQWRISURSHUW\ LPSDLUPHQWRI ,PSDLUPHQW 0LOOLRQ86GROODU SODQWDQGHTXLSPHQW LQWDQJLEOHDVVHWV RIJRRGZLOO Cost of sales Ƶ ƵƸƻ ƴƵ ś Distribution expenses ƴƵƺ ƴ ś Sales and marketing expenses ƵƼƵ ƴƻƼ ś Administrative expenses ƴƺƳ ƴƻƳ ś Other operating expenses ś Ƹ ś Non-recurring items ƴƴƼ ś ś ƵƼƹƺ ƶƻƻ ś Depreciation, amortization and impairment charges were included in the following line items of the ƵƳƴƶ income statement: 'HSUHFLDWLRQDQG $PRUWL]DWLRQDQG LPSDLUPHQWRISURSHUW\ LPSDLUPHQWRI ,PSDLUPHQW 0LOOLRQ86GROODU SODQWDQGHTXLSPHQW LQWDQJLEOHDVVHWV RIJRRGZLOO Cost of sales Ƶ ƴƵƶ ƴƳ ś Distribution expenses ƴƴƺ ƴ ś Sales and marketing expenses ƵƸƶ ƴƼƷ ś Administrative expenses ƴƷƹ ƴƶƵ ś Other operating expenses Ƶ ƺ ś Non-recurring items ś ś ś ƵƹƷƴ ƶƷƷ ś The depreciation, amortization and impairment of property, plant and equipment included a full-cost reallocation of ƷmbUSbdollar in ƵƳƴƷ from the aggregate depreciation, amortization and impairment expense to cost of goods sold. In ƵƳƴƶ this reallocation was ƷmbUSbdollar. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƴƴ)LQDQFH&RVWDQG,QFRPH 5HFRJQL]HGLQSURILWRUORVV Finance costs 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Interest expense (Ƶ ƳƳƻ) (Ƶ ƳƷƶ) Capitalization of borrowing costs ƶƼ ƶƻ Net interest on net deƮned beneƮt liabilities (ƴƵƷ) (ƴƸƹ) Accretion expense (ƶƹƷ) (ƶƹƳ) Net foreign exchange losses (net of the eƬect of foreign exchange derivative instruments) ś (ƵƼƸ) Tax on Ʈnancial transactions (ƶƹ) (Ʒƺ) Other Ʈnancial costs, including bank fees (ƶƳƷ) (ƴƻƷ) ƵƺƼƺ ƶƳƷƺ Non-recurring Ʈnance income ś (ƴƳƴ) ƵƺƼƺ ƶƴƷƻ )inance costs, excluding non-recurring items, decreased by ƵƸƳmbUSbdollar from prior year mainly driven by lower net foreign exchange losses. Borrowing costs capitalized relate to the capitalization of interest expenses directly attributable to the acquisition and construction of qualifying assets mainly in Brazil and China. Interests were capitalized at a borrowing rate ranging from ƹ to ƻ. )ollowing the acquisition of the remaining stake in *rupo Modelo, ABbInBev recognized a non-recurring expense of ƴƳƴmbUSbdollar in ƵƳƴƶ mainly composed of utilization fees and accelerated accretion expenses related to the ƵƳƴƵ )acilities Agreement. The accelerated accretion resulted from the repayment and termination of the ƵƳƴƵ )acilities Agreement in June ƵƳƴƶ. Interest expense is presented net of the effect of interest rate derivative instruments hedging ABbInBev’s interest rate risk ś see also Note Ƶƺ Risks arising from financial instruments. Finance income 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Interest income ƶƶƸ Ƶƻƹ Net foreign exchange gains (net of the eƬect of foreign exchange derivative instruments) ƶƴƼ ś Net gains on hedging instruments that are not part of a hedge accounting relationship ƵƺƸ ƴƻƹ Other Ʈnancial income ƷƳ ƻƼ ƼƹƼƸƹƴ Non-recurring Ʈnance income ƸƳƼ ƶƻƷ ƴƷƺƻ ƼƷƸ )inance income, excluding non-recurring items, increased mainly due to net foreign exchange gains on US dollar cash held in Mexico and the mark-to-market result on certain derivatives related to the hedging of share-based payment programs which reached net gains of ƺƴƴmbUSbdollar in ƵƳƴƷ (ƵƳƴƶ: ƷƸƹmbUSbdollar income). This result was partially offset by costs of currency hedges. See also Note Ƶƺ Risks arising from financial instruments. Non-recurring net finance income was ƸƳƼmbUSbdollar resulting from mark-to market adjustments on derivative instruments entered into to hedge the deferred share instrument issued in a transaction related to the combination with *rupo Modelo (ƵƳƴƶ: ƶƻƷmbUSbdollar income). By ƶƴbDecember ƵƳƴƷ, ƴƳƳ of the deferred share instrument had been hedged at an average price of approximately ƹƻ euro per share. See also NotebƵƴ Changes in equity and earnings per share. No interest income was recognized on impaired financial assets. P. 100 /101 The interest income stems from the following financial assets: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Cash and cash equivalents ƵƵƺ ƵƳƼ Investment debt securities held for trading ƶƶ Ƶƴ Loans to customers ƴ Ƶ Other loans and receivables ƺƷ ƸƷ ƶƶƸ Ƶƻƹ The interest income on other loans and receivables includes the interest accrued on cash deposits given as guarantees for certain legal proceedings pending resolution. )or further information on instruments hedging ABbInBev’s foreign exchange risk see Note Ƶƺ Risks arising from financial instruments. ƴƵ,QFRPH7D[HV Income taxes recognized in the income statement can be detailed as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ &XUUHQWWD[H[SHQVH Current year (Ƶ ƶƶƵ) (Ƶ ƴƶƳ) (Underprovided)/overprovided in prior years ƴƻ ƴƶƵ ƵƶƴƷ ƴƼƼƻ 'HIHUUHGWD[ H[SHQVH LQFRPH Origination and reversal of temporary diƬerences (ƵƼƶ) (ƴƺƷ) (Utilization)/recognition of deferred tax assets on tax losses Ƽƹ ƴƸƶ Recognition of previously unrecognized tax losses ƴƵ ƶ ƴƻƸ ƴƻ 7RWDOLQFRPHWD[H[SHQVHLQWKHLQFRPHVWDWHPHQW ƵƷƼƼ ƵƳƴƹ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT The reconciliation of the effective tax rate with the aggregated weighted nominal tax rate can be summarized as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶƴ 3roƮt before tax ƴƶ ƻƳƴ ƴƻ ƸƶƷ Deduct share of result of associates Ƽ ƵƼƷ 3URƮWEHIRUHWD[DQGEHIRUHVKDUHRIUHVXOWRIDVVRFLDWHV ƴƶƺƼƵ ƴƻƵƷƳ $GMXVWPHQWVRQWD[DEOHEDVLV One-time events related to the *rupo Modelo combination ś (ƹ Ƹƺƺ) )oreign source income (ƸƵƶ) (ƹƺƼ) *overnment incentives (ƺƳƴ) (ƹƶƻ) Taxable intercompany dividends ƶƶƴ ƴƶƸ Expenses not deductible for tax purposes ƴ ƴƻƹ ƻƳƴ Other non-taxable income (ƸƶƳ) (ƹƷƼ) ƴƶƸƸƸ ƴƳƹƶƶ $JJUHJDWHGZHLJKWHGQRPLQDOWD[UDWH ƶƴƹ ƶƶƶ Tax at aggregated weighted nominal tax rate (Ʒ Ƶƻƻ) (ƶ ƸƷƸ) $GMXVWPHQWVRQWD[H[SHQVH Utilization of tax losses not previously recognized Ƽƶ ƴƹ Recognition of deferred taxes assets on previous years’ tax losses ƴƵ ƶ :rite-down of deferred tax assets on tax losses and current year losses for which no deferred tax asset is recognized (ƴƸƴ) (ƺƷ) (Underprovided)/overprovided in prior years ƴƻ ƴƶƵ Deductions from interest on equity Ƽƺƴ ƹƴƳ Deductions from goodwill ƴƴƶ ƵƹƷ Other tax deductions ƴ ƳƳƹ ƺƷƹ Change in tax rate Ʒƹ ƴƴƹ :ithholding taxes (Ʒƶƹ) (ƷƵƸ) Other tax adjustments ƴƴƺ ƴƷƴ ƵƷƼƼ ƵƳƴƹ (ƬHFWLYHWD[UDWH ƴƻƴ ƴƴƴ The total income tax expense amounts to Ƶ ƷƼƼmbUSbdollar in ƵƳƴƷ compared to Ƶ ƳƴƹmbUSbdollar in ƵƳƴƶ. The effective tax rate increased from ƴƴ.ƴ to ƴƻ.ƴ from ƵƳƴƶ to ƵƳƴƷ, mainly resulting from the ƵƳƴƶ non-taxable, exceptional gain related to the fair value adjustment on the initial investment held in *rupo Modelo, changes in country profit mix, including the impact resulting from the combination with *rupo Modelo and the OB acquisition. The Company benefits from tax exempted income and tax credits which are expected to continue in the future, except for the one-time benefit realized in ƵƳƴƶ relating to *rupo Modelo, and the tax deductible goodwill in Brazil which will expire in ƵƳƴƺ. The Company does not benefit from significantly low tax rates in any particular jurisdiction. The normalized effective tax rate in ƵƳƴƷ is ƴƻ.ƻ (ƵƳƴƶ: ƴƹ.ƹ). Normalized effective tax rate is not an accounting measure under I)RS accounting and should not be considered as an alternative to the effective tax rate. Normalized effective tax rate method does not have a standard calculation method and ABbInBev’s definition of normalized effective rate may not be comparable to other companies. Income taxes were directly recognized in other comprehensive income as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ ,QFRPHWD[ ORVVHV JDLQV Re-measurements of post-employment beneƮts ƶƳƻ (ƵƻƼ) Cash ưow hedges (ƶƷ) (ƴƵ) Net investment hedges Ƹƻ ƻ ƴ Reclassified to conform to the ƵƳƴƷ presentation. P. 102 /103 ƴƶ3URSHUW\3ODQWDQG(TXLSPHQW ƵƳƴƷ ƵƳƴƶ Land and Plant and Fixtures Under 0LOOLRQ86GROODU EXLOGLQJV HTXLSPHQW DQGƮWWLQJV FRQVWUXFWLRQ 7RWDO 7RWDO $FTXLVLWLRQFRVW %DODQFHDWHQGRISUHYLRXV\HDU ƼƼƹƻ ƵƵƷƴƷ ƶƹƹƳ ƵƳƹƸ ƶƻƴƳƺ ƶƶƴƳƻ EƬect of movements in foreign exchange (ƻƵƴ) (Ƶ ƴƷƶ) (Ʒƺƺ) (ƴƺƼ) (ƶ ƹƵƳ) (ƴ ƶƸƼ) Acquisitions ƵƵƵ ƴ ƴƹƴ ƶƶƼ Ƶ Ƴƻƻ ƶ ƻƴƳ ƶ ƸƵƶ Acquisitions through business combinations ƸƶƵ ƶƹƶ ƵƸ ƶƳ ƼƸƳ Ʒ ƻƴƻ Disposals (ƴƵƶ) (ƺƹƴ) (Ƶƻƺ) (ƴƺ) (ƴ ƴƻƻ) (ƴ ƹƼƺ) Disposals through the sale of subsidiaries (ƴƳƻ) (ƴƸƶ) (ƴƸƻ) ś (ƷƴƼ) ś Transfer (to)/from other asset categories and other movementsƴ ƶƴƻ ƴ ƸƻƼ Ƶƶƹ (Ƶ ƵƼƼ) (ƴƸƹ) (Ƶƻƹ) %DODQFHDWHQGRIWKHSHULRG ƼƼƻƻ ƵƵƷƺƴ ƶƶƶƻ ƴƹƻƻ ƶƺƷƻƸ ƶƻƴƳƺ 'HSUHFLDWLRQDQGLPSDLUPHQWORVVHV %DODQFHDWHQGRISUHYLRXV\HDU ƵƻƵƷ ƴƴƼƷƺ ƵƷƷƷ ƶ ƴƺƵƴƻ ƴƹƹƷƺ EƬect of movements in foreign exchange ƶƳƸ ƴ Ƶƺƻ ƶƵƺ Ƹ ƴ ƼƴƸ ƸƷƼ Disposals ƶƷ ƹƶƴ ƵƸƶ ś Ƽƴƻ ƴ ƷƺƳ Disposals through the sale of subsidiaries Ʒ ƵƵ Ƽƶ ś ƴƴƼ ś Depreciation (ƶƺƹ) (Ƶ Ƴƴƻ) (ƷƴƷ) ś (Ƶ ƻƳƻ) (Ƶ Ƹƹƺ) Impairment losses (Ƹƻ) (ƼƵ) (ƴ) (ƴƵ) (ƴƹƶ) (ƺƳ) Transfer to/(from) other asset categories and other movementsƴ ƻƻ (ƴƴƶ) ƷƳ ƴ ƴƹ Ʒƺ %DODQFHDWHQGRIWKHSHULRG ƵƻƵƹ ƴƵƵƷƳ ƵƴƷƺ Ƽ ƴƺƵƵƵ ƴƺƵƴƻ &DUU\LQJDPRXQW DWƶƴ'HFHPEHUƵƳƴƶ ƺƴƷƷ ƴƳƷƹƺ ƴƵƴƹ ƵƳƹƵ ƵƳƻƻƼ ƵƳƻƻƼ DWƶƴ'HFHPEHUƵƳƴƷ ƺƴƹƵ ƴƳƵƶƴ ƴƴƼƴ ƴƹƺƼ ƵƳƵƹƶ ś The carrying amount of property, plant and equipment subject to restrictions on title amounts to ƶƺmbUSbdollar. Contractual commitments to purchase property, plant and equipment amounted to ƹƷƺmbUSbdollar as at ƶƴ December ƵƳƴƷ compared to ƸƼƴm USbdollar as at ƶƴ December ƵƳƴƶ. The increase results from projects mainly in North America and Mexico. Leased Assets The company leases land and buildings as well as equipment under a number of finance lease agreements. The carrying amount as at ƶƴbDecember ƵƳƴƷ of leased land and buildings was ƴƸƴmbUSbdollar (ƶƴ December ƵƳƴƶ: ƴƸƸmbUSbdollar). ƴ The transfer (to)/from other asset categories and other movements mainly relates to transfers from assets under construction to their respective asset categories, to contributions of assets to pension plans and to the separate presentation in the balance sheet of property, plant and equipment held for sale in accordance with I)RS Ƹ Non-current assets held for sale and discontinued operations. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƴƷ*RRGZLOO 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ $FTXLVLWLRQFRVW %DODQFHDWHQGRISUHYLRXV\HDU ƹƼƼƶƶ Ƹƴƺƺƶ EƬect of movements in foreign exchange (Ʒ ƷƳƶ) (ƴ ƺƼƼ) 3urchases of non-controlling interest (Ƹ) (ƵƼ) Disposals through the sale of subsidiaries (ƹƳ) ś Acquisitions through business combinations Ƹ ƶƳƳ ƴƼ Ƽƻƻ %DODQFHDWHQGRI\HDU ƺƳƺƹƸ ƹƼƼƶƶ ,PSDLUPHQWORVVHV %DODQFHDWHQGRISUHYLRXV\HDU ƺ ƺ Impairment losses ś ś %DODQFHDWHQGRI\HDU ƺ ƺ &DUU\LQJDPRXQW DWƶƴ'HFHPEHUƵƳƴƶ ƹƼƼƵƺ ƹƼƼƵƺ DWƶƴ'HFHPEHUƵƳƴƷ ƺƳƺƸƻ ś *oodwill increased from ƹƼ ƼƵƺmbUSbdollar per end of December ƵƳƴƶ to ƺƳ ƺƸƻmbUSbdollar per end of December ƵƳƴƷ. Current year acquisitions through business combinations primarily reflect the OB acquisition in South Korea and the acquisition of *insber and three breweries in China ś see note ƹ Acquisitions and disposals. Disposals through the sale of subsidiaries relate to the sale of the glass production plant in Mexico - see note ƹ Acquisitions and disposals. In ƵƳƴƶ, the combination with *rupo Modelo resulted in the recognition of goodwill of ƴƼ ƸƼƵmbUSbdollar and the acquisition of four breweries in China, different distributors in Brazil and a wholesaler in United States resulted in the recognition of ƶƻƳmbUSbdollar goodwill. The carrying amount of goodwill was allocated to the different business unit levels as follows: Million US dollar %XVLQHVVXQLW ƵƳƴƷ ƵƳƴƶ USA ƶƵ ƺƴƻ ƶƵ ƹƸƷ Mexico ƴƺ ƴƳƳ ƴƼ ƴƺƴ Brazil ƹ ƺƹƷ ƺ ƹƹƼ South Korea Ʒ Ƴƶƴ ś China ƶ Ƴƶƴ Ƶ ƶƴƺ Canada ƴ ƺƻƹ ƴ ƼƷƸ *ermany/Italy/Switzerland/Austria ƴ ƶƸƵ ƴ ƸƶƸ Dominican Republic ƴ ƳƷƳ ƴ Ƴƶƺ Argentina and other Hispanic Latin America countries ƴ Ƴƶƴ ƴ ƴƻƴ *lobal Export/Spain/Czech Republic ƹƺƼ ƺƶƴ UK/Ireland Ƹƻƻ ƹƵƷ Russia/Ukraine ƸƷƺ ƼƹƳ Belgium/Netherlands/)rance/Luxemburg Ƽƴ ƴƳƶ ƺƳƺƸƻ ƹƼƼƵƺ ABbInBev completed its annual impairment test for goodwill and concluded, based on the assumptions described below, that no impairment charge was warranted. The company cannot predict whether an event that triggers impairment will occur, when it will occur or how it will affect the asset values reported. ABbInBev believes that all of its estimates are reasonable: they are consistent with the internal reporting and reflect management’s best estimates. However, inherent uncertainties exist that management may not be able to control. During its valuation, the company ran sensitivity analysis for key assumptions including the weighted average cost of capital and the terminal growth rate, in particular for the valuations of the US, Brazil and Mexico, countries that show the highest goodwill, as well as for Russia and Ukraine due to continued political instability and deteriorating macroeconomic conditions. :hile a change in the estimates used could have a material impact on the calculation of the fair values and trigger an impairment charge, the company, based on the sensitivity analysis performed is not aware of any reasonably possible change in a key assumption used that would cause a business unit’s carrying amount to materially exceed its recoverable amount. P. 104 /105 *oodwill impairment testing relies on a number of critical judgments, estimates and assumptions. *oodwill, which accounted for approximately ƸƳ of ABbInBev’s total assets as at ƶƴ December ƵƳƴƷ, is tested for impairment at the business unit level (that is one level below the reporting segments). The business unit level is the lowest level at which goodwill is monitored for internal management purposes. :henever a business combination occurs, goodwill is allocated as from the acquisition date, to each of ABbInBev’s business units that are expected to benefit from the synergies of the combination. ABbInBev impairment testing methodology is in accordance with IAS ƶƹ, in which a fair-value-less-cost-to-sell and value in use approaches are taken into consideration. This consists in applying a discounted free cash flow approach based on acquisition valuation models for its major business units and the business units showing a high invested capital to EBITDA multiple, and valuation multiples for its other business units. The key judgments, estimates and assumptions used in the discounted free cash flow calculations are generally as follows: ť The first year of the model is based on management’s best estimate of the free cash flow outlook for the current year; ť In the second to fourth years of the model, free cash flows are based on ABbInBev’s strategic plan as approved by key management. ABbInBev’s strategic plan is prepared per country and is based on external sources in respect of macro-economic assumptions, industry, inflation and foreign exchange rates, past experience and identified initiatives in terms of market share, revenue, variable and fixed cost, capital expenditure and working capital assumptions; ť )or the subsequent six years of the model, data from the strategic plan is extrapolated generally using simplified assumptions such as constant volumes and variable cost per hectoliter and fixed cost linked to inflation, as obtained from external sources; ť Cash flows after the first ten-year period are extrapolated generally using expected annual long-term consumer price indices (C3I), based on external sources, in order to calculate the terminal value, considering sensitivities on this metric. )or the three main cash generating units, the terminal growth rate applied ranged between Ƴ.Ƴ and Ƶ.Ƴ for the US; Ƴ.Ƴ and ƶ.Ƶ for Brazil and Ƴ.Ƴ and Ƶ.Ƹ for Mexico; ť 3rojections are made in the functional currency of the business unit and discounted at the unit’s weighted average cost of capital (:ACC), considering sensitivities on this metric. The :ACC ranged primarily between ƹ and ƵƵ in US dollar nominal terms for goodwill impairment testing conducted for ƵƳƴƷ. )or the three main cash generating units, the :ACC applied in US dollar nominal terms ranged between ƹ and ƻ for the US, Ƽ and ƴƴ for Brazil, and ƻ and ƴƳ for Mexico. ť Cost to sell is assumed to reach Ƶ of the entity value based on historical precedents. The above calculations are corroborated by valuation multiples, quoted share prices for publicly-traded subsidiaries or other available fair value indicators (i.e. recent market transactions from peers). Although ABbInBev believes that its judgments, assumptions and estimates are appropriate, actual results may differ from these estimates under different assumptions or market or macro-economic conditions. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƴƸ,QWDQJLEOH$VVHWV ƵƳƴƷ ƵƳƴƶ Commercial 0LOOLRQ86GROODU %UDQGV LQWDQJLEOHV 6RIWZDUH 2WKHU 7RWDO 7RWDO $FTXLVLWLRQFRVW %DODQFHDWHQGRISUHYLRXV\HDU ƵƹƷƼƴ ƵƺƻƵ ƴƶƷƳ Ƹƴƻ ƶƴƴƶƴ ƵƸƻƹƻ EƬect of movements in foreign exchange (ƹƸƹ) (ƴƺƵ) (ƴƹƸ) (ƶƶ) (ƴ ƳƵƹ) (ƵƷƳ) Acquisitions through business combinations ƴ ƴƺƳ Ʒƹ Ƹ ƶƸ ƴ ƵƸƹ Ƹ Ƴƹƻ Acquisitions and expenditures Ƹ ƵƼƻ ƴƸƸ ƺƷ ƸƶƵ ƸƷƶ Disposals through the sales of subsidiaries ś (ƻ) (ƴ) (ƴ) (ƴƳ) ś Disposals (ƴ) (ƶƴ) ś (Ƹ) (ƶƺ) (Ƶƻƹ) Transfer (to)/from other asset categories and other movements Ƶƹ (ƺƻ) ƼƵ (ƹ) ƶƷ ƴƺƻ %DODQFHDWHQGRISHULRG ƵƺƳƶƸ Ƶƻƶƻ ƴƷƵƸ ƸƻƵ ƶƴƻƻƳ ƶƴƴƶƴ $PRUWL]DWLRQDQGLPSDLUPHQWORVVHV %DODQFHDWHQGRISUHYLRXV\HDU ś ƻƶƳ ƼƳƵ ƹƴ ƴƺƼƶ ƴƷƼƺ EƬect of movements in foreign exchange ś ƺƸ ƴƴƸ Ʒ ƴƼƷ ƴƹ Amortization ś (ƴƼƷ) (ƴƺƺ) (ƴƶ) (ƶƻƷ) (ƶƶƷ) Impairment losses ś ś ś (Ʒ) (Ʒ) (ƴƳ) Disposals through the sales of subsidiaries ś ś ƴ ś ƴ ś Disposals ś Ƶƹ ś ƶ ƵƼ ƸƵ Transfer to/(from) other asset categories and other movements ś (Ƽ) ƻ ƴ ś (ƵƳ) %DODQFHDWHQGRISHULRG ś ƼƶƵ ƼƸƸ ƺƳ ƴƼƸƺ ƴƺƼƶ &DUU\LQJYDOXH DWƶƴ'HFHPEHUƵƳƴƶ ƵƹƷƼƴ ƴƼƸƵ Ʒƶƻ ƷƸƺ ƵƼƶƶƻ ƵƼƶƶƻ DWƶƴ'HFHPEHUƵƳƴƷ ƵƺƳƶƸ ƴƼƳƹ ƷƺƳ ƸƴƵ ƵƼƼƵƶ ś Current year acquisitions through business combinations primarily reflect the OB acquisition which resulted in the recognition of brands with an indefinite life of ƴ ƴƳƷmbUSbdollar and other intangible assets. ABbInBev is the owner of some of the world’s most valuable brands in the beer industry. As a result, brands and certain distribution rights are expected to generate positive cash flows for as long as the company owns the brands and distribution rights. *iven ABbInBev’s more than ƹƳƳ-year history, brands and certain distribution rights have been assigned indefinite lives. Acquisitions and expenditures of commercial intangibles mainly represent supply and distribution rights, exclusive multi-year sponsorship rights and other commercial intangibles. Intangible assets with indefinite useful lives are comprised primarily of brands and certain distribution rights that ABbInBev purchases for its own products, and are tested for impairment during the fourth quarter of the year or whenever a triggering event has occurred. As of ƶƴbDecemberbƵƳƴƷ, the carrying amount of the intangible assets amounted to ƵƼ ƼƵƶmbUSbdollar (ƶƴ December ƵƳƴƶ: ƵƼ ƶƶƻmbUSbdollar) of which Ƶƻ ƴƸƼm USbdollar was assigned an indefinite useful life (ƶƴ December ƵƳƴƶ: Ƶƺ ƸƼƶmbUSbdollar) and ƴ ƺƹƷmbUSbdollar a finite life (ƶƴ December ƵƳƴƶ: ƴ ƺƷƸmbUSbdollar). P. 106 /107 The carrying amount of intangible assets with indefinite useful lives was allocated to the different countries as follows: Million US dollar &RXQWU\ ƵƳƴƷ ƵƳƴƶ USA Ƶƴ Ʒƹƻ Ƶƴ ƷƴƷ Mexico Ʒ ƳƼƴ Ʒ ƹƳƻ South Korea ƴ ƳƶƸ ś China Ʒƴƺ ƶƶƳ Dominican Republic ƶƻƹ ƶƼƼ 3araguay ƴƻƹ ƴƻƺ Bolivia ƴƺƴ ƴƺƴ Argentina ƴƹƼ ƵƵƳ UK ƴƳƺ ƴƴƴ Uruguay Ʒƴ Ʒƺ Canada ƶƸ ƶƻ Chile Ƶƴ ƵƷ *ermany ƴƺ ƴƼ Russia ƴƸ ƵƸ ƵƻƴƸƼ ƵƺƸƼƶ Intangible assets with indefinite useful lives have been tested for impairment using the same methodology and assumptions as disclosed in NotebƴƷ Goodwill. Based on the assumptions described in that note, ABbInBev concluded that no impairment charge is warranted. :hile a change in the estimates used could have a material impact on the calculation of the fair values and trigger an impairment charge, the company is not aware of any reasonable possible change in a key assumption used that would cause a business unit’s carrying amount to exceed its recoverable amount. ƴƹ,QYHVWPHQW6HFXULWLHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ 1RQFXUUHQWLQYHVWPHQWV Investments in unquoted companies ś available for sale Ƽƺ ƴƺƳ Debt securities held to maturity Ƶƴ Ƶƶ ƴƴƻƴƼƶ Current investments Debt securities held for trading ƶƳƴ ƴƵƶ ƶƳƴƴƵƶ As of ƶƴ December ƵƳƴƷ, current debt securities of ƶƳƴmbUSbdollar mainly represented investments in Brazilian real denominated government debt securities. The company’s investments in such short-term debt securities are primarily to facilitate liquidity and for capital preservation. The securities available for sale consist mainly of investments in unquoted companies and are measured at cost as their fair value cannot be reliably determined. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƴƺ'HIHUUHG7D[$VVHWVDQG/LDELOLWLHV The amount of deferred tax assets and liabilities by type of temporary difference can be detailed as follows: ƵƳƴƷ Million US dollar $VVHWV /LDELOLWLHV 1HW 3roperty, plant and equipment ƷƸƺ (Ƶ ƺƹƸ) (Ƶ ƶƳƻ) Intangible assets ƵƹƷ (Ƽ ƻƼƴ) (Ƽ ƹƵƺ) *oodwill ƵƼ (ƴƶ) ƴƹ Inventories ƴƷƳ (ƴƳƵ) ƶƻ Investment in associates ś (ƻƶƺ) (ƻƶƺ) Trade and other receivables Ƹƴ (Ƽƻ) (Ʒƺ) Interest-bearing loans and borrowings ƴƹƶ (ƸƻƸ) (ƷƵƵ) Employee beneƮts ƻƼƼ (Ƹƴ) ƻƷƻ 3rovisions ƶƹƻ (ƷƳ) ƶƵƻ Derivatives ƸƳ (ƹ) ƷƷ Other items ƸƻƸ (ƹƸƴ) (ƹƹ) Loss carry forwards ƶƼƳ ś ƶƼƳ *URVVGHIHUUHGWD[DVVHWV OLDELOLWLHV ƶƶƼƹ ƴƸƳƶƼ ƴƴƹƷƶ 1HWWLQJE\WD[DEOHHQWLW\ Ƶƶƶƻ Ƶƶƶƻ ś 1HWGHIHUUHGWD[DVVHWV OLDELOLWLHV ƴƳƸƻ ƴƵƺƳƴ ƴƴƹƷƶ ƵƳƴƶ Million US dollar $VVHWV /LDELOLWLHV 1HW 3roperty, plant and equipment ƷƼƳ (Ƶ ƻƺƼ) (Ƶ ƶƻƼ) Intangible assets ƵƶƷ (Ƽ ƻƴƵ) (Ƽ Ƹƺƻ) *oodwill ƶƺ (ƴƻ) ƴƼ Inventories ƴƳƴ (Ƽƴ) ƴƳ Investment in associates ś (ƴ ƵƻƳ) (ƴ ƵƻƳ) Trade and other receivables ƻƴ (Ʒƺ) ƶƷ Interest-bearing loans and borrowings ƼƳ (Ƹƴƺ) (ƷƵƺ) Employee beneƮts ƻƻƸ (ƶƸ) ƻƸƳ 3rovisions Ƶƻƹ (ƵƷ) ƵƹƵ Derivatives Ƹƺ (ƴƳ) Ʒƺ Other items ƴ ƳƹƳ (ƹƹƶ) ƶƼƺ Loss carry forwards ƶƼƷ ś ƶƼƷ *URVVGHIHUUHGWD[DVVHWV OLDELOLWLHV ƶƺƴƸ ƴƸƶƺƹ ƴƴƹƹƴ 1HWWLQJE\WD[DEOHHQWLW\ ƵƸƶƸ ƵƸƶƸ ś 1HWGHIHUUHGWD[DVVHWV OLDELOLWLHV ƴƴƻƳ ƴƵƻƷƴ ƴƴƹƹƴ The change in net deferred taxes recorded in the consolidated statement of financial position can be detailed as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ %DODQFHDWƴ-DQXDU\ ƴƴƹƹƴ ƴƳƶƹƴ Recognized in proƮt or loss (ƴƷƺ) (ƴƻ) Recognized in other comprehensive income ƶƳƻ (ƵƼƶ) Acquisitions through business combinations (ƵƸƳ) (ƴ ƴƷƶ) Other movements and eƬect of changes in foreign exchange rates ƴƳƺ ƴƸƷ %DODQFHDWƶƴ'HFHPEHU ƴƴƹƷƶ ƴƴƹƹƴ Most of the temporary differences are related to the fair value adjustment on intangible assets with indefinite useful lives and property, plant and equipment acquired in a business combination. The realization of such temporary differences is unlikely to revert within ƴƵ months. P. 108 /109 On ƶƴ December ƵƳƴƷ, a deferred tax liability of ƵƻƶmbUSbdollar (ƵƳƴƶ: ƷƴmbUSbdollar) relating to investment in subsidiaries has not been recognized because management believes that this liability will not be incurred in the foreseeable future. Tax losses carried forward and deductible temporary differences on which no deferred tax asset is recognized amount to Ƶ ƶƼƺmbUSbdollar (ƵƳƴƶ: ƵbƵƻƵmbUSbdollar). ƴ ƳƵƶmbUSbdollar of these tax losses and deductible temporary differences do not have an expiration date, ƻƹmbUSbdollar, ƻƺmbUSbdollar and ƼƷmbUSbdollar expire within respectively ƴ, Ƶ and ƶ years, while ƴ ƴƳƺmbUSbdollar have an expiration date of more than ƶ years. Deferred tax assets have not been recognized on these items because it is not probable that future taxable profits will be available against which these tax losses and deductible temporary differences can be utilized and the company has no tax planning strategy currently in place to utilize these tax losses and deductible temporary differences. ƴƻ,QYHQWRULHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ 3repayments ƻƹ ƺƻ Raw materials and consumables ƴ ƺƵƶ ƴ ƺƴƺ :ork in progress ƶƴƸ ƶƵƹ )inished goods ƺƼƸ ƺƹƴ *oods purchased for resale ƸƸ ƹƻ ƵƼƺƷ ƵƼƸƳ ,QYHQWRULHVRWKHUWKDQZRUNLQSURJUHVV Inventories stated at net realizable value ƴƳƺ ƵƼ Carrying amount of inventories subject to collateral ś ś The cost of inventories recognized as an expense in ƵƳƴƷ amounts to ƴƻ ƺƸƹmbUSbdollar, included in cost of sales (ƵƳƴƶ: ƴƺ ƸƼƷmbUSbdollar). Impairment losses on inventories recognized in ƵƳƴƷ amount to ƺƳmbUSbdollar (ƵƳƴƶ: ƸƼmbUSbdollar). ƴƼ7UDGHDQG2WKHU5HFHLYDEOHV 1RQFXUUHQWWUDGHDQGRWKHUUHFHLYDEOHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Cash deposits for guarantees ƵƵƼ ƵƷƳ Loans to customers ƷƳ ƹƸ Deferred collection on disposals Ƶƹ ƶƺ Tax receivable, other than income tax ƴƹƺ ƴƼƻ Derivatives ƸƳƺ ƴƵƳ Trade and other receivables ƻƳƳ ƸƼƵ ƴƺƹƼ ƴƵƸƵ )or the nature of cash deposits for guarantees see Note ƵƼ Collateral and contractual commitments for the acquisition of property, plant and equipment, loans to customers and other. &XUUHQWWUDGHDQGRWKHUUHFHLYDEOHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Trade receivables and accrued income ƶ ƶƹƶ Ƶ ƼƶƸ Interest receivable ƹƶ ƶƻ Tax receivable, other than income tax ƸƳƸ ƷƵƼ Derivatives ƴ ƺƶƺ ƹƳƺ Loans to customers ƸƵ ƸƳ 3repaid expenses ƸƸƷ ƹƴƹ Other receivables ƴƺƸ ƹƻƺ ƹƷƷƼ ƸƶƹƵ The fair value of trade and other receivables, excluding derivatives, equals their carrying amounts as the impact of discounting is not significant. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT The ageing of the current trade receivables and accrued income, interest receivable, other receivables and current and non current loans to customers can be detailed as follows for ƵƳƴƷ and ƵƳƴƶ respectively: 2IZKLFKQRWLPSDLUHGDVRIWKHUHSRUWLQJGDWHDQGSDVWGXH 2IZKLFK QHLWKHU 1HWFDUU\LQJ LPSDLUHGQRU DPRXQWDVRI SDVWGXHRQ ƶƴ'HFHPEHU WKHUHSRUWLQJ /HVVWKDQ %HWZHHQƶƳ %HWZHHQƹƳ 0RUHWKDQ ƵƳƴƷ GDWH ƶƳGD\V DQGƸƼGD\V DQGƻƼGD\V ƼƳGD\V Trade receivables and accrued income ƶ ƶƹƶ ƶ ƴƹƷ ƴƸƵ Ƶƻ ƴƼ ś Loans to customers ƼƵ ƻƼ ƴ ƴ ƴ ś Interest receivable ƹƶ ƹƶ ś ś ś ś Other receivables ƴƺƸ ƴƺƸ ś ś ś ś ƶƹƼƷ ƶƷƼƵ ƴƸƶ ƵƼ ƵƳ ś 2IZKLFKQRWLPSDLUHGDVRIWKHUHSRUWLQJGDWHDQGSDVWGXH 2IZKLFK QHLWKHU 1HWFDUU\LQJ LPSDLUHGQRU DPRXQWDVRI SDVWGXHRQ ƶƴ'HFHPEHU WKHUHSRUWLQJ /HVVWKDQ %HWZHHQƶƳ %HWZHHQƹƳ 0RUHWKDQ ƵƳƴƶ GDWH ƶƳGD\V DQGƸƼGD\V DQGƻƼGD\V ƼƳGD\V Trade receivables and accrued income Ƶ ƼƶƸ Ƶ ƺƶƻ ƴƶƼ ƵƷ ƴƴ Ƶƶ Loans to customers ƴƴƸ ƴƳƸ ś ƴ ƴ ƻ Interest receivable ƶƻ ƶƻ ś ś ś ś Other receivables ƹƻƺ ƹƻƺ ś ś ś ś ƶƺƺƸ ƶƸƹƻ ƴƶƼ ƵƸ ƴƵ ƶƴ In accordance with I)RS ƺ Financial Instruments: Disclosures, the above analysis of the age of financial assets that are past due as at the reporting date but not impaired also includes the non-current part of loans to customers. 3ast due amounts were not impaired when collection is still considered likely, for instance because the amounts can be recovered from the tax authorities or ABbInBev has sufficient collateral. Impairment losses on trade and other receivables recognized in ƵƳƴƷ amount to ƶƼmbUSbdollar (ƵƳƴƶ: ƻƸmbUSbdollar). ABbInBev’s exposure to credit, currency and interest rate risks is disclosed in Note Ƶƺ Risks arising from financial instruments. ƵƳ&DVKDQG&DVK(TXLYDOHQWV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Short-term bank deposits Ƹ ƻƳƷ ƺ ƴƳƼ US Treasury Bills ƻƳƳ ś Cash and bank accounts ƴ ƺƸƶ Ƶ ƺƶƳ &DVKDQGFDVKHTXLYDOHQWV ƻƶƸƺ ƼƻƶƼ %DQNRYHUGUDIWV Ʒƴ ƹ ƻƶƴƹ Ƽƻƶƶ The cash outstanding per ƶƴ December ƵƳƴƷ includes restricted cash for an amount of ƷƹƵmbUSbdollar. This restricted cash includes ƷƸƻm USbdollar deposited with a Trust established and funded on Ʒ June ƵƳƴƶ, following the closing of the ABbInBev and *rupo Modelo combination. The Trust will accept further tender of shares by *rupo Modelo shareholders at a price of Ƽ.ƴƸ US dollar per share over a period of up to ƵƸ months. ABbInBev set up a liability for the *rupo Modelo shares it did not acquire by ƶƴ December ƵƳƴƷ ś see also Note Ƶƹ Trade and other payables. The restricted cash also includes ƷmbUSbdollar for the outstanding consideration payable to former Anheuser-Busch shareholders who did not yet claim the proceeds from the ƵƳƳƻ Anheuser-Busch combination (the related payable is recognized as a deferred consideration on acquisition). P. 110 /111 Ƶƴ&KDQJHVLQ(TXLW\DQG(DUQLQJVSHU6KDUH 6WDWHPHQWRIFDSLWDO The tables below summarize the changes in issued capital and treasury shares during the year: ,VVXHGFDSLWDO ,VVXHGFDSLWDO 0LOOLRQVKDUHV 0LOOLRQ86GROODU At the end of the previous year ƴ ƹƳƻ ƴ ƺƶƸ Changes during the year ś ƴ ƴƹƳƻ ƴƺƶƹ 7UHDVXU\VKDUHV 5HVXOWRQWKHXVH RIWUHDVXU\VKDUHV 7UHDVXU\VKDUHV 0LOOLRQVKDUHV 0LOOLRQ86GROODU 0LOOLRQ86GROODU At the end of the previous year ƴ.ƹ (Ƽƺ) (ƺƺƺ) Changes during the year (Ƴ.ƺ) ƶƷ Ƶƴ ƳƼ ƹƶ ƺƸƹ As at ƶƴ December ƵƳƴƷ, the total issued capital of ƴ ƺƶƹmbUSbdollar is represented by ƴ ƹƳƻ ƵƷƵ ƴƸƹ shares without face value, of which ƷƹƵbƼƶƵbƶƺƶ registered shares, and ƴ ƴƷƸ ƶƳƼ ƺƻƶ dematerialized shares. As of the A*M of ƶƳ April ƵƳƴƷ, all outstanding subscription rights have been converted into options on existing shares further to the approval of the shareholders. Therefore, there are no outstanding subscription rights. The total of authorized, un-issued capital amounts to ƷƸmbUSbdollar (ƶƺm euro). The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. In respect of the company’s shares that are held by ABbInBev, rights are suspended. The shareholders’ structure based on the notifications made to the company pursuant to the Belgian Law of ƳƵ May ƵƳƳƺ on the disclosure of significant shareholdings in listed companies is included in the Corporate Governance section of ABbInBev’s annual report. &KDQJHVLQRZQHUVKLSLQWHUHVWV In compliance with I)RS ƴƳ, the acquisition of additional shares in a subsidiary is accounted for as an equity transaction with owners. During ƵƳƴƷ, ABbInBev purchased non-controlling interests in subsidiaries for a total consideration of ƻƻmbUSbdollar. As the related subsidiaries were already fully consolidated, the purchases did not impact ABbInBev’s profit, but reduced the non controlling interests and thus impacted the profit attributable to equity holders of ABbInBev. 5HSRUWDFFRUGLQJWRDUWLFOHƹƵƷRIWKHEHOJLDQFRPSDQLHVFRGHSXUFKDVHRIRZQVKDUHV During the year ƵƳƴƷ, ABbInBev did not purchase any of its shares. During ƵƳƴƷ, the company proceeded with the following sale transactions: ť ƶƷ ƼƳƶ shares were sold to members of the Ambev senior management who were transferred to ABbInBev. The sale occurred according to a share exchange program at a price reduced with ƴƹ.ƹƹ compared to the market price, in order to encourage management mobility; ť ƵƵƻ ƵƳƳ shares were granted to executives of the group according to the company’s executive remuneration policy; ť )inally, Ʒƺƶ ƼƶƳ shares were sold, as a result of the exercise of options granted to employees of the group. At the end of the period, the group owned ƻƻƵ ƵƶƳ own shares of which ƶƸƹ ƶƶƹ were held directly by ABbInBev. The par value of the shares is Ƴ.ƺƺ euro. As a consequence, the shares that were sold during the year ƵƳƴƷ represent ƹƻƼ ƳƵƴ US dollar (ƸƹƺbƸƴƸbeuro) of the subscribed capital and the shares that the company still owned at the end of ƵƳƴƷ represent ƻƵƷ ƺƸƼ USbdollar (ƹƺƼ ƶƴƺ euro) of the subscribed capital. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Dividends On ƶƳ October ƵƳƴƷ, an interim dividend of ƴ.ƳƳ euro per share or approximately ƴ ƹƶƹm euro was approved by the Board of Directors. This interim dividend was paid out ƴƷ November ƵƳƴƷ. On ƵƸ )ebruary ƵƳƴƸ, in addition to the interim dividend paid on ƴƷ November ƵƳƴƷ, a dividend of Ƶ.ƳƳbeuro per share or approximately ƶ ƵƺƼm euro was proposed by the Board of Directors, reflecting a total dividend payment for ƵƳƴƷ fiscal year of ƶ.ƳƳ euro per share or approximately Ʒ ƼƴƸm euro. In accordance with IAS ƴƳ Events after the balance sheet date, the )ebruary ƵƳƴƸ dividend has not been recorded in the ƵƳƴƷ financial statements. On ƶƳ October ƵƳƴƶ, an interim dividend of Ƴ.ƹƳ euro per share or approximately Ƽƹƶm euro was approved by the Board of Directors. This dividend was paid out on ƴƻ November ƵƳƴƶ. On ƶƳ April ƵƳƴƷ, in addition to the interim dividend paid on ƴƻ November ƵƳƴƶ, a dividend of ƴ.ƷƸ euro per share or approximately Ƶ ƶƵƵm euro was approved at the shareholders meeting, reflecting a total dividend payment for ƵƳƴƶ fiscal year of Ƶ.ƳƸbeuro per share or approximately ƶ ƵƻƸm euro. This dividend was paid out on ƻ May ƵƳƴƷ. On ƵƷ April ƵƳƴƶ, a dividend of ƴ.ƺƳ euro per share or approximately Ƶ ƺƵƸm euro was approved at the shareholders meeting. This dividend was paid out on Ƶ May ƵƳƴƶ. Translation reserves The translation reserves comprise all foreign currency exchange differences arising from the translation of the financial statements of foreign operations. The translation reserves also comprise the portion of the gain or loss on the foreign currency liabilities and on the derivative financial instruments determined to be effective net investment hedges in conformity with IAS ƶƼ Financial Instruments: Recognition and Measurement hedge accounting rules. Hedging reserves The hedging reserves comprise the effective portion of the cumulative net change in the fair value of cash flow hedges to the extent the hedged risk has not yet impacted profit or loss ś see also Note Ƶƺ Risks arising from financial instruments. 7UDQVIHUVIURPVXEVLGLDULHV The amount of dividends payable to ABbInBev by its operating subsidiaries is subject to, among other restrictions, general limitations imposed by the corporate laws, capital transfer restrictions and exchange control restrictions of the respective jurisdictions where those subsidiaries are organized and operate. Capital transfer restrictions are also common in certain emerging market countries, and may affect ABbInBev’s flexibility in implementing a capital structure it believes to be efficient. Dividends paid to ABbInBev by certain of its subsidiaries are also subject to withholding taxes. :ithholding tax, if applicable, generally does not exceed ƴƳ. 'HIHUUHGVKDUHLQVWUXPHQW In a transaction related to the combination with *rupo Modelo, select *rupo Modelo shareholders committed, upon tender of their *rupo Modelo shares, to acquire Ƶƶ Ƴƺƹ ƼƵƶ ABbInBev shares to be delivered within Ƹ years for consideration of approximately ƴ.Ƹ billion US dollar. The consideration was paid on Ƹ June ƵƳƴƶ. 3ending the delivery of the ABbInBev shares, ABbInBev will pay a coupon on each undelivered ABbInBev share, so that the Deferred Share Instrument holders are compensated on an after tax basis, for dividends they would have received had the ABbInBev shares been delivered to them prior to the record date for such dividend. The deferred share instrument is classified as an equity instrument, in line with IAS ƶƵ, as the number of shares and consideration received are fixed. The coupon to compensate for the dividend equivalent is reported through equity. On ƴƷ November ƵƳƴƷ, the company paid a coupon of ƴ.ƳƳ euro per share or approximately ƶƴmbUSbdollar. On ƶƳ April ƵƳƴƷ, the company paid a coupon of ƴ.ƷƸ euro per share or approximately ƷƷmbUSbdollar. ABbInBev included the weighted average number of shares promised via the deferred share instruments as of Ƹ June ƵƳƴƶ in the calculation of the basic and diluted earnings per shares. 6WRFNOHQGLQJ In order to fulfil ABbInBev’s commitments under various outstanding stock option plans, ABbInBev entered into stock lending arrangements for up to ƴƶ million of its own ordinary shares. ABbInBev shall pay any dividend equivalent, after tax in respect of the loaned securities. This payment will be reported through equity as dividend. As of ƶƴ December ƵƳƴƷ, ƴƳ million loaned securities were used to fulfil stock option plan commitments. P. 112 /113 (DUQLQJVSHUVKDUH The calculation of basic earnings per share is based on the profit attributable to equity holders of ABbInBev of Ƽ ƵƴƹmbUSbdollar (ƵƳƴƶ: ƴƷ ƶƼƷm USbdollar) and a weighted average number of ordinary shares (including deferred share instruments and stock lending) outstanding during the year, calculated as follows: 0LOOLRQVKDUHV ƵƳƴƷ ƵƳƴƶ Issued ordinary shares at ƴ January, net of treasury shares ƴ ƹƳƺ ƴ ƹƳƵ EƬect of shares issued and share buyback programs ś Ƶ EƬect of stock lending Ʒ ś EƬect of undelivered shares under the deferred share instrument Ƶƶ ƴƶ :HLJKWHGDYHUDJHQXPEHURIRUGLQDU\VKDUHVDWƶƴ'HFHPEHU ƴƹƶƷƴƹƴƺ The calculation of diluted earnings per share is based on the profit attributable to equity holders of ABbInBev of Ƽ ƵƴƹmbUSbdollar (ƵƳƴƶ: ƴƷ ƶƼƷm USbdollar) and a weighted average number of ordinary shares (diluted) outstanding (including deferred share instruments and stock lending) during the year, calculated as follows: 0LOOLRQVKDUHV ƵƳƴƷ ƵƳƴƶ :eighted average number of ordinary shares at ƶƴ December ƴ ƹƳƺ ƴ ƹƳƷ EƬect of stock lending Ʒ ś EƬect of undelivered shares under the deferred share instrument Ƶƶ ƴƶ EƬect of share options, warrants and restricted stock units ƶƴ ƶƶ :HLJKWHGDYHUDJHQXPEHURIRUGLQDU\VKDUHV GLOXWHG DWƶƴ'HFHPEHU ƴƹƹƸ ƴƹƸƳ The calculation of earnings per share before non-recurring items is based on the profit after tax and before non-recurring items, attributable to equity holders of ABbInBev. A reconciliation of profit before non-recurring items, attributable to equity holders of ABbInBev to profit attributable to equity holders of ABbInBev is calculated as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ 3roƮt before non-recurring items, attributable to equity holders of ABbInBev ƻ ƻƹƸ ƺ Ƽƶƹ Non-recurring items, after taxes, attributable to equity holders of ABbInBev (refer Note ƻ) (ƴƸƻ) ƹ ƴƺƸ Non-recurring Ʈnance cost, after taxes, attributable to equity holders of ABbInBev (refer Note ƻ) ƸƳƼ Ƶƻƶ 3URƮWDWWULEXWDEOHWRHTXLW\KROGHUVRI$%b,Q%HY ƼƵƴƹ ƴƷƶƼƷ The table below sets out the E3S calculation: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ 3roƮt attributable to equity holders of ABbInBev Ƽ Ƶƴƹ ƴƷ ƶƼƷ :eighted average number of ordinary shares ƴ ƹƶƷ ƴ ƹƴƺ %DVLF(36 ƸƹƷ ƻƼƳ 3roƮt before non-recurring items, attributable to equity holders of ABbInBev ƻ ƻƹƸ ƺ Ƽƶƹ :eighted average number of ordinary shares ƴ ƹƶƷ ƴ ƹƴƺ (36EHIRUHQRQUHFXUULQJLWHPV ƸƷƶ ƷƼƴ 3roƮt attributable to equity holders of ABbInBev Ƽ Ƶƴƹ ƴƷ ƶƼƷ :eighted average number of ordinary shares (diluted) ƴ ƹƹƸ ƴ ƹƸƳ 'LOXWHG(36 ƸƸƷ ƻƺƵ 3roƮt before non-recurring items, attributable to equity holders of ABbInBev ƻ ƻƹƸ ƺ Ƽƶƹ :eighted average number of ordinary shares (diluted) ƴ ƹƹƸ ƴ ƹƸƳ 'LOXWHG(36EHIRUHQRQUHFXUULQJLWHPV ƸƶƵ Ʒƻƴ The average market value of the company’s shares for purposes of calculating the dilutive effect of share options and restricted stock units was based on quoted market prices for the period that the options and restricted stock units were outstanding. ƻ.Ƹm share options were anti-dilutive and not included in the calculation of the dilutive effect as at ƶƴ December ƵƳƴƷ. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƵƵ,QWHUHVW%HDULQJ/RDQVDQG%RUURZLQJV This note provides information about the company’s interest-bearing loans and borrowings. )or more information about the company’s exposure to interest rate and foreign currency risk, refer to Note Ƶƺ Risks arising from financial instruments. 1RQFXUUHQWOLDELOLWLHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Secured bank loans ƴƹƼ ƴƼƵ Unsecured bank loans ƵƹƳ ƶƷƼ Unsecured bond issues Ʒƶ ƳƴƷ ƷƳ ƸƵƹ Unsecured other loans Ƹƺ ƺƸ )inance lease liabilities ƴƶƳ ƴƶƵ ƷƶƹƶƳ ƷƴƵƺƷ &XUUHQWOLDELOLWLHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Secured bank loans ƴƴƺ ƼƷ Commercial papers Ƶ Ƶƴƴ Ƶ ƳƹƸ Unsecured bank loans ƸƹƳ ƶƷƸ Unsecured bond issues Ʒ ƸƶƸ Ƹ ƶƵƺ Unsecured other loans ƵƸ ƴƵ )inance lease liabilities ƶ ƶ ƺƷƸƴ ƺƻƷƹ The current and non-current interest-bearing loans and borrowings amount to Ƹƴ.ƴ billion US dollar as of ƶƴ December ƵƳƴƷ, compared to ƷƼ.ƴbbillion US dollar as of ƶƴ December ƵƳƴƶ. In connection with the announcement of the acquisition of OB, on Ƶƺ January ƵƳƴƷ, Anheuser-Busch InBev )inance Inc., a subsidiary of ABbInBev, issued Ƹ.ƵƸ billion US dollar aggregated principal amount of bonds, consisting of ƴ.Ƶ billion US dollar aggregated principal amount of fixed rate notes due ƵƳƴƺ, Ƴ.ƶ billion US dollar aggregated principal amount of floating rate notes due ƵƳƴƺ, ƴ.ƵƸ billion US dollar aggregated principal amount of fixed rate notes due ƵƳƴƼ, Ƴ.ƵƸ billion US dollar aggregated principal amount of floating rate notes due ƵƳƴƼ, ƴ.Ʒ billion US dollar aggregated principal amount of fixed rate notes due ƵƳƵƷ and Ƴ.ƻƸ billion US dollar aggregated principal amount of fixed rate notes due ƵƳƷƷ. The fixed rate notes bear interest at an annual rate of ƴ.ƴƵƸ for the ƵƳƴƺ notes, Ƶ.ƴƸƳ for the ƵƳƴƼ notes, ƶ.ƺƳƳ for the ƵƳƵƷ notes and Ʒ.ƹƵƸ for the ƵƳƷƷ notes. The floating rate notes bear interest at an annual rate of ƴƼ basis points above three-month LIBOR for the ƵƳƴƺ floating rate notes and ƷƳ basis points above three-month LIBOR for the ƵƳƴƼ floating rate notes. In addition to the above, on ƶƳ March ƵƳƴƷ, ABbInBev issued Ƶ.Ƹ billion euro aggregate principal amount of notes, consisting of ƻƸƳm euro aggregate principal amount of floating rate notes due ƵƳƴƻ bearing interest at an annual rate of ƶƻ basis points above three-month EURIBOR; ƹƸƳm euro aggregate principal amount of fixed rate notes due ƵƳƵƴ bearing interest at an annual rate of ƴ.ƼƸ and ƴ.Ƴ billion euro aggregate principal amount of fixed rate notes due ƵƳƵƹ bearing interest at an annual rate of Ƶ.ƺƳ. The use of the proceeds of such issuance was for general corporate purposes. As of ƶƴ December ƵƳƴƷ, there are no amounts drawn under the ƻ.Ƴ billion US dollar ƵƳƴƳ Senior )acilities. Commercial papers amount to Ƶ.Ƶ billion US dollar as of ƶƴ December ƵƳƴƷ and include programs in US dollar and euro with a total authorized issuance up to ƶ.Ƴ billion US dollar and ƴ.Ƴ billion euro, respectively. ABbInBev is in compliance with all its debt covenants as of ƶƴ December ƵƳƴƷ. The ƵƳƴƳ Senior )acilities do not include restrictive financial covenants. P. 114 /115 7HUPVDQGGHEWUHSD\PHQW VFKHGXOHDWƶƴGHFHPEHUƵƳƴƷ 0RUHWKDQ 0LOOLRQ86GROODU 7RWDO ƴ\HDURUOHVV ƴƵ\HDUV Ƶƶ\HDUV ƶƸ\HDUV Ƹ\HDUV Secured bank loans Ƶƻƹ ƴƴƺ ƺƵ Ƶƻ Ʒƴ Ƶƻ Commercial papers Ƶ Ƶƴƴ Ƶ Ƶƴƴ ś ś ś ś Unsecured bank loans ƻƵƳ ƸƹƳ ƴƶƻ ƹƶ ƸƼ ś Unsecured bond issues Ʒƺ ƸƷƼ Ʒ ƸƶƸ Ƶ ƶƻƶ ƹ ƹƻƵ ƴƳ ƵƷƳ Ƶƶ ƺƳƼ Unsecured other loans ƻƵ ƵƸ ƴƷ ƴƳ ƴƶ ƵƳ )inance lease liabilities ƴƶƶ ƶ Ʒ Ʒ ƴƷ ƴƳƻ ƸƴƳƻƴ ƺƷƸƴ Ƶƹƴƴ ƹƺƻƺ ƴƳƶƹƺ ƵƶƻƹƸ 7HUPVDQGGHEWUHSD\PHQW VFKHGXOHDWƶƴGHFHPEHUƵƳƴƶ 0RUHWKDQ 0LOOLRQ86GROODU 7RWDO ƴ\HDURUOHVV ƴƵ\HDUV Ƶƶ\HDUV ƶƸ\HDUV Ƹ\HDUV Secured bank loans Ƶƻƹ ƼƷ ƻƴ Ʒƹ ƶƳ ƶƸ Commercial papers Ƶ ƳƹƸ Ƶ ƳƹƸ ś ś ś ś Unsecured bank loans ƹƼƷ ƶƷƸ ƴƺƳ ƴƷƵ ƶƺ ś Unsecured bond issues ƷƸ ƻƸƶ Ƹ ƶƵƺ Ʒ Ƹƻƺ Ƶ ƷƹƸ ƻ ƹƺƺ ƵƷ ƺƼƺ Unsecured other loans ƻƺ ƴƵ ƵƵ ƴƸ ƴƳ Ƶƻ )inance lease liabilities ƴƶƸ ƶ ƶ Ʒ ƺ ƴƴƻ ƷƼƴƵƳ ƺƻƷƹ Ʒƻƹƶ ƵƹƺƵ ƻƺƹƴ ƵƷƼƺƻ )LQDQFHOHDVHOLDELOLWLHV ƵƳƴƷ ƵƳƴƷ ƵƳƴƷ ƵƳƴƶ ƵƳƴƶ ƵƳƴƶ 0LOOLRQ86GROODU 3D\PHQWV ,QWHUHVWV 3ULQFLSDO 3D\PHQWV ,QWHUHVWV 3ULQFLSDO Less than one year ƴƷ ƴƴ ƶ ƴƷ ƴƴ ƶ Between one and two years ƴƶ ƴƳ ƶ ƴƷ ƴƴ ƶ Between two and three years ƴƷ ƴƳ Ʒ ƴƶ ƴƳ ƶ Between three and Ʈve years ƶƶ ƴƼ ƴƷ Ƶƻ ƵƳ ƻ More than Ƹ years ƴƹƻ ƸƼ ƴƳƼ ƴƻƹ ƹƻ ƴƴƻ ƵƷƵ ƴƳƼ ƴƶƶ ƵƸƸ ƴƵƳ ƴƶƸ Net debt is defined as non-current and current interest-bearing loans and borrowings and bank overdrafts minus debt securities and cash. Net debt is a financial performance indicator that is used by ABbInBev’s management to highlight changes in the company’s overall liquidity position. The company believes that net debt is meaningful for investors as it is one of the primary measures ABbInBev’s management uses when evaluating its progress towards deleveraging. ABbInBev’s net debt increased to ƷƵ.ƴ billion US dollar as of ƶƴ December ƵƳƴƷ, from ƶƻ.ƻ billion US dollar as of ƶƴ December ƵƳƴƶ. Apart from operating results net of capital expenditures, the net debt is mainly impacted by the OB acquisition (Ƹ.Ƹ billion US dollar), dividend payments to shareholders of ABbInBev and Ambev (ƺ.Ʒ billion US dollar), the payment of interests and taxes (Ʒ.ƹbbillion US dollar) and the impact of changes in foreign exchange rates (ƷƷƺmbUSbdollar decrease of net debt). ś See also note ƹ ś Acquisitions and disposals of subsidiaries. The following table provides a reconciliation of ABbInBev’s net debt as of the dates indicated: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Non-current interest-bearing loans and borrowings Ʒƶ ƹƶƳ Ʒƴ ƵƺƷ Current interest-bearing loans and borrowings ƺ ƷƸƴ ƺ ƻƷƹ ƸƴƳƻƴ ƷƼƴƵƳ Bank overdrafts Ʒƴ ƹ Cash and cash equivalents (ƻ ƶƸƺ) (Ƽ ƻƶƼ) Interest bearing loans granted (included within Trade and other receivables) (ƶƳƻ) (ƶƴƳ) Debt securities (included within Investment securities) (ƶƵƵ) (ƴƷƹ) 1HWGHEW ƷƵƴƶƸ ƶƻƻƶƴ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Ƶƶ(PSOR\HH%HQHILWV ABbInBev sponsors various post-employment benefit plans worldwide. These include pension plans, both defined contribution plans, and defined benefit plans, and other post-employment benefits. In accordance with IAS ƴƼ Employee Benefits post-employment benefit plans are classified as either defined contribution plans or defined benefit plans. 'HILQHGFRQWULEXWLRQSODQV )or defined contribution plans, ABbInBev pays contributions to publicly or privately administered pension funds or insurance contracts. Once the contributions have been paid, the group has no further payment obligation. The regular contribution expenses constitute an expense for the year in which they are due. )or ƵƳƴƷ, contributions paid into defined contribution plans for the company amounted to ƴƷƸmbUSbdollar compared to ƴƴƺmbUSbdollar for ƵƳƴƶ. 'HILQHGEHQHILWSODQV During ƵƳƴƷ, the company contributed to ƹƶ defined benefit plans, of which ƷƼ are retirement plans and ƴƷ are medical cost plans. Most plans provide benefits related to pay and years of service. The Belgian, Brazilian, Dominican Republic, Dutch, Canadian, South Korean, Mexican, UK and US plans are partially funded. :hen plan assets are funded, the assets are held in legally separate funds set up in accordance with applicable legal requirements and common practice in each country. The medical cost plans in Canada, US, and Brazil provide medical benefits to employees and their families after retirement. Many of the defined benefit plans are closed to new entrants. The present value of funded obligations includes a ƵƴƳmbUSbdollar liability related to two medical plans in Brazil, for which the benefits are provided through the )unda¦¢o Antonio Helena Zerrenner (Š)AHZš). The )AHZ is a legally distinct entity which provides medical, dental, educational and social assistance to current and retired employees of Ambev. On ƶƴ December ƵƳƴƷ, the actuarial liabilities related to the benefits provided by the )AHZ are fully offset by an equivalent amount of assets existing in the fund. The net liability recognized in the balance sheet is nil. The employee benefit net liability amounts to ƶ ƳƶƼmbUSbdollar as of ƶƴ December ƵƳƴƷ compared to Ƶ ƻƸƵmbUSbdollar as of ƶƴ December ƵƳƴƶ. In ƵƳƴƷ, the fair value of the plan assets value decreased by ƹƳƶmbUSbdollar and the defined benefit obligations decreased by ƷƻƻmbUSbdollar. The increase in the employee benefit net liability is mainly driven by unfavorable changes in discount rates (mainly in the Eurozone, Mexico, US, UK and Canada) and mortality assumptions in the US, partially offset by positive asset returns and gains on plan amendments of post-retirement pensions and healthcare benefits in the US. The company’s net liability for post-employment and long-term employee benefit plans comprises the following at ƶƴ December: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ 3resent value of funded obligations (ƺ ƺƺƹ) (ƺ ƼƶƼ) )air value of plan assets Ƹ ƺƺƶ ƹ ƶƺƹ 3UHVHQWYDOXHRIQHWREOLJDWLRQVIRUIXQGHGSODQV ƵƳƳƶ ƴƸƹƶ 3resent value of unfunded obligations (ƻƳƼ) (ƴ ƴƶƷ) 3UHVHQWYDOXHRIQHWREOLJDWLRQV ƵƻƴƵ ƵƹƼƺ Unrecognized asset (ƴƺƴ) (ƴƶƺ) 1HWOLDELOLW\ ƵƼƻƶ ƵƻƶƷ Other long term employee beneƮts (Ƹƺ) (ƴƻ) 7RWDOHPSOR\HHEHQHƮWV ƶƳƶƼ ƵƻƸƵ (PSOR\HHEHQHƮWVDPRXQWVLQWKHEDODQFHVKHHW Liabilities (ƶ ƳƷƼ) (Ƶ ƻƹƵ) Assets ƴƳ ƴƳ 1HWOLDELOLW\ ƶƳƶƼ ƵƻƸƵ P. 116 /117 The changes in the present value of the defined benefit obligations are as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ 'HƮQHGEHQHƮWREOLJDWLRQDWƴ-DQXDU\ ƼƳƺƶ ƼƳƸƸ Current service costs (ƺƷ) (ƴƳƸ) Interest cost (Ʒƶƻ) (ƷƵƻ) 3ast service gain/(cost) ƶƶƷ ƹƶ (Losses)/gains on curtailments ś ƻƻ Settlements ƴƺƹ ś BeneƮts paid ƻƼƹ ƷƼƻ Contribution by plan participants (Ʒ) (Ʒ) Acquisition through business combination (ƺƻ) (ƼƷƵ) Actuarial gains/(losses) ś demographic assumptions (ƵƴƳ) (ƴƴƳ) Actuarial gains/(losses) ś Ʈnancial assumptions (ƼƹƵ) ƺƵƼ Experience adjustments (ƷƳ) ƶƶ Exchange diƬerences ƷƷƸ ƴƹƳ Transfers and other movements ƷƷƶ ś 'HƮQHGEHQHƮWREOLJDWLRQDWƶƴ'HFHPEHU ƻƸƻƸ ƼƳƺƶ Transfers and other movements refer to the fact that, effective ƴ January ƵƳƴƷ, the company discontinued the proportional consolidation of certain operations ś see also Note Ʒ 8VHRIHVWLPDWHVDQGMXGJPHQWV. As at the last valuation date, the present value of the defined benefit obligation was comprised of approximately Ƶ.ƶ billion US dollar relating to active employees, ƴ.Ƹ billion US dollar relating to deferred members and Ʒ.ƻ billion US dollar relating to members in retirement. The changes in the fair value of plan assets are as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ )DLUYDOXHRISODQDVVHWVDWƴ-DQXDU\ ƹƶƺƹ ƸƺƳƷ Interest income ƶƵƻ ƵƼƼ Administration costs (ƵƷ) (Ƶƶ) Return on plan assets exceeding interest income Ʒƴƻ ƴƸƼ Contributions by ABbInBev ƶƵƹ ƶƵƷ Contributions by plan participants Ʒ Ʒ BeneƮts paid net of administration costs (ƻƼƹ) (ƷƼƻ) Acquisition through business combination Ƹƴ ƹƼƷ Assets distributed on settlements (ƻƵ) ś Exchange diƬerences (ƶƶƻ) (ƴƷƴ) Transfers and other movements (ƶƼƵ) (ƴƷƹ) )DLUYDOXHRISODQDVVHWVDWƶƴ'HFHPEHU Ƹƺƺƶ ƹƶƺƹ Actual return on plans assets amounted to a gain of ƺƷƹmbUSbdollar in ƵƳƴƷ compared to a gain of ƷƸƻmbUSbdollar in ƵƳƴƶ. The increase is mainly driven by higher market returns particularly in Brazil, US and UK. The acquisition through business combinations in ƵƳƴƷ stems from the OB combination. Transfers and other movements refer to the fact that, effective ƴ January ƵƳƴƷ, the company discontinued the proportional consolidation of certain operations ś see also Note Ʒ 8VHRIHVWLPDWHVDQGMXGJPHQWV. The changes in the asset ceiling are as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ ,UUHFRYHUDEOHVXUSOXVLPSDFWDWƴ-DQXDU\ ƴƶƹ ƶƳƺ Interest expense (ƴƵ) (Ƶƺ) Change in asset ceiling excluding amounts included in interest expense (ƵƵ) ƴƼƺ ,UUHFRYHUDEOHVXUSOXVLPSDFWDWƶƴ'HFHPEHU ƴƺƴ ƴƶƹ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT The expense recognized in the income statement with regard to defined benefit plans can be detailed as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Current service costs (ƺƷ) (ƴƳƸ) Administration costs (ƵƷ) (Ƶƶ) 3ast service cost ƶƶƷ ƹƶ (Losses)/gains on settlements or curtailments ƼƷ ƻƻ 3URƮWIURPRSHUDWLRQV ƶƶƳ Ƶƶ )inance cost (ƴƵƷ) (ƴƸƹ) 7RWDOHPSOR\HHEHQHƮWH[SHQVH ƵƳƹ ƴƶƵ The employee benefit expense is included in the following line items of the income statement: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Cost of sales (ƴ) (Ƹƹ) Distribution expenses (Ƽ) (ƶ) Sales and marketing expenses (ƴƷ) (ƻ) Administrative expenses (ƵƷ) Ƽ Other operating (expense)/income ƵƻƷ Ƶ Non-recurring items ƻƸ ƻƳ )inance Cost (ƴƴƸ) (ƴƸƹ) ƵƳƹ ƴƶƵ During ƵƳƴƷ, the company implemented certain post-retirement pension and healthcare benefits, mainly in the US. :eighted average assumptions used in computing the benefit obligations at the balance sheet date are as follows: ƵƳƴƷ 8QLWHG6WDWHV &DQDGD 0H[LFR %UD]LO 8QLWHG.LQJGRP $%b,Q%HY Discount rate Ʒ.ƴ Ʒ.ƴ ƹ.Ƹ ƴƳ.ƻ ƶ.ƻ Ʒ.Ʒ 3rice inưation ś Ƶ.Ƴ ƶ.Ƹ Ʒ.Ƹ ƶ.Ƴ Ƶ.ƺ )uture salary increases Ƶ.Ƴ ƴ.Ƴ Ʒ.ƺ Ƹ.ƻ ś ƶ.ƹ )uture pension increases ś ś ƶ.Ƹ ś Ƶ.ƻ Ƶ.ƺ Medical cost trend rate ƹ.Ƽ-Ƹ.Ƴ Ʒ.Ƹ ś ƻ.Ƶ ś ƺ.ƺ-Ƹ.ƻ Life expectation for a ƹƸ year old male ƻƸ ƻƹ ƻƵ ƻƸ ƻƺ ƻƸ Life expectation for a ƹƸ year old female ƻƻ ƻƼ ƻƸ ƻƻ ƻƼ ƻƻ ƵƳƴƶ 8QLWHG6WDWHV &DQDGD 0H[LFR %UD]LO 8QLWHG.LQJGRP $%b,Q%HY Discount rate Ʒ.Ƽ Ʒ.Ƽ ƺ.ƻ ƴƴ.ƶ Ʒ.ƹ Ƹ.Ʒ 3rice inưation ś Ƶ.Ƴ ƶ.Ƹ Ʒ.Ƹ ƶ.Ʒ Ƶ.ƺ )uture salary increases Ƶ.Ƴ ƴ.ƶ Ʒ.ƺ ƺ.ƺ ƶ.Ʒ ƶ.ƶ )uture pension increases ś ś ƶ.Ƹ ś ƶ.ƴ Ƶ.ƺ Medical cost trend rate ƻ.ƴ-Ƹ.Ƴ Ʒ.Ƶ-Ʒ.Ƹ ś ƻ.Ƶ ś ƺ.ƹ-Ƹ.ƻ Life expectation for a ƹƸ year old male ƻƶ ƻƸ ƻƶ ƻƸ ƻƺ ƻƷ Life expectation for a ƹƸ year old female ƻƸ ƻƺ ƻƶ ƻƻ ƻƼ ƻƺ Through its defined benefit pension plans and post-employment medical plans, the company is exposed to a number of risks, the most significant are detailed below: $VVHWYRODWLOLW\ The plan liabilities are calculated using a discount rate set with reference to high quality corporate yields; if plan assets underperform this yield, the company’s net defined benefit obligation may increase. Most of the company’s funded plans hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. As the plans mature, the company P. 118 /119 usually reduces the level of investment risk by investing more in assets that better match the liabilities. However, the company believes that due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of the company’s long-term strategy to manage the plans efficiently. &KDQJHVLQERQG\LHOGV A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings. ,QIODWLRQULVN Some of the company’s pension obligations, mainly in the UK, are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the plan’s assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation could potentially increase the company’s net benefit obligation. /LIHH[SHFWDQF\ The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities. In case of funded plans, the company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension schemes. :ithin this framework, the company’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency. The company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligation. The company has not changed the processes used to manage its risks from previous periods. The weighted average duration of the defined benefit obligation is ƴƷ.ƶ years (ƵƳƴƶ: ƴƶ.Ƽ years). The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is: ƵƳƴƷ &KDQJHLQ ,QFUHDVHLQ 'HFUHDVHLQ 0LOOLRQ86GROODU DVVXPSWLRQ DVVXPSWLRQ DVVXPSWLRQ Discount rate Ƴ.ƸƳ (ƸƸƹ) ƹƴƶ )uture salary increase Ƴ.ƸƳ Ƶƻ (Ƶƹ) Medical cost trend rate ƴ.ƳƳ ƷƼ (Ʒƶ) Longevity One year ƵƴƷ (ƵƳƺ) The above are purely hypothetical changes in individual assumptions holding all other assumptions constant: economic conditions and changes therein will often affect multiple assumptions at the same time and the effects of changes in key assumptions are not linear. Therefore, the above information is not necessarily a reasonable representation of future results. The fair value of plan assets at ƶƴ December consists of the following: ƵƳƴƷ ƵƳƴƶ 4XRWHG 8QTXRWHG 7RWDO 4XRWHG 8QTXRWHG 7RWDO *overnment bonds ƵƼ ś ƵƼ Ƶƺ ś Ƶƺ Corporate bonds Ƶƹ ś Ƶƹ Ƶƺ ś Ƶƺ Equity instruments ƶƹ ś ƶƹ ƷƳ ś ƷƳ 3roperty ś ƶ ƶ ś ƶ ƶ Insurance contracts and others Ƹ ƴ ƹ ƶ ś ƶ Ƽƹ Ʒ ƴƳƳ Ƽƺ ƶ ƴƳƳ ABbInBev expects to contribute approximately ƵƸƳmbUSbdollar for its funded defined benefit plans and ƹƻmbUSbdollar in benefit payments to its unfunded defined benefit plans and post-retirement medical plans in ƵƳƴƸ. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƵƷ6KDUH%DVHG3D\PHQWVƴ Different share and share option programs allow company senior management and members of the Board of Directors to receive or acquire shares of ABbInBev or Ambev. ABbInBev has three primary share-based compensation plans, the share-based compensation plan (ŠShare-Based Compensation 3lanš), established in ƵƳƳƹ and amended as from ƵƳƴƳ, the long-term incentive warrant plan (ŠLTI :arrant 3lanš), established in ƴƼƼƼ and replaced by a long-term incentive stock option plan for directors (ŠLTI Stock Option 3lan Directorsš) in ƵƳƴƷ, and the long-term incentive stock-option plan for executives (ŠLTI Stock Option 3lan Executivesš), established in ƵƳƳƼ. )or all option plans, the fair value of share-based payment compensation is estimated at grant date, using a binomial Hull model, modified to reflect the I)RS Ƶ Share based Payment requirement that assumptions about forfeiture before the end of the vesting period cannot impact the fair value of the option. Share-based payment transactions resulted in a total expense of ƵƸƴmbUSbdollar for the year ƵƳƴƷ (including the variable compensation expense settled in shares), as compared to ƵƷƶmbUSbdollar for the year ƵƳƴƶ. $%b,Q%HYVKDUHEDVHGSD\PHQWSURJUDPV 6KDUH%DVHG&RPSHQVDWLRQ3ODQ As from ƴ January ƵƳƴƳ, the structure of the Share-Based Compensation 3lan for certain executives, including the executive board of management and other senior management in the general headquarters, has been modified. )rom ƴ January ƵƳƴƴ, the new plan structure applies to all other senior management. Under this plan, the executive board of management and other senior employees will receive their bonus in cash but have the choice to invest some or all of the value of their bonus in ABbInBev shares with a five-year vesting period, referred to as bonus shares. Such voluntary investment leads to a ƴƳ discount to the market price of the shares. The company will also match such voluntary investment by granting three matching shares for each bonus share voluntarily invested in, up to a limited total percentage of each participant’s bonus. The percentage of the variable compensation that is entitled to get matching shares varies depending on the position of the executive. The matching is based on the gross amount of the variable compensation invested. The discount shares and matching shares are granted in the form of restricted stock units which have a five-year vesting period. Additionally, the holders of the restricted stock units may be entitled to receive from ABbInBev additional restricted stock units equal to the dividends declared since the restricted stock units were granted. During ƵƳƴƷ, ABbInBev issued Ƴ.Ƽm of matching restricted stock units in relation to the ƵƳƴƶ bonus granted to company employees and management. These matching restricted stock units are valued at the share price of the day of grant, representing a fair value of approximately ƼƳmbUSbdollar, and cliff vest after five years. During ƵƳƴƶ, ABbInBev issued Ƴ.ƻm of matching restricted stock units according to the Share-Based Compensation 3lan, with an estimated fair value of approximately ƺƻmbUSbdollar, in relation to the ƵƳƴƵ bonus. /7,:DUUDQW3ODQUHSODFHGE\/7,6WRFN2SWLRQ3ODQIRU'LUHFWRUV Before ƵƳƴƷ, the company issued regularly warrants, or rights to subscribe for newly issued shares under the LTI :arrant 3lan for the benefit of directors and, until ƵƳƳƹ, for the benefit of members of the executive board of management and other senior employees. Each LTI warrant gave its holder the right to subscribe for one newly issued share. The exercise price of LTI warrants is equal to the average price of the company’s shares on the regulated market of Euronext Brussels during the ƶƳ days preceding their issue date. LTI warrants granted in the years prior to ƵƳƳƺ (except for ƵƳƳƶ) have a duration of ten years; LTI warrants granted as from ƵƳƳƺ (and in ƵƳƳƶ) have a duration of five years. LTI warrants are subject to a vesting period ranging from one to three years. )orfeiture of a warrant occurs in certain circumstances when the holder leaves our employment. At the annual shareholders meeting of ƶƳ April ƵƳƴƷ, all outstanding LTI warrants under the company’s LTI :arrant 3lan were converted into LTI stock options, i.e. the right to purchase existing ordinary shares of Anheuser-Busch InBev SA/NV instead of the right to subscribe to newly issued shares. All other terms and conditions of the existing grants under the LTI :arrant 3lan remain unchanged. Since ƵƳƳƺ, members of the executive board of management and other employees are no longer eligible to receive warrants under the LTI :arrant 3lan, but instead receive a portion of their compensation in the form of shares and options granted under the Share-Based Compensation 3lan and the LTI Stock Option 3lan Executives. Since ƵƳƴƷ, directors are no longer eligible to receive warrants under the LTI :arrant 3lan. Instead, on ƶƳ April ƵƳƴƷ, the annual shareholders meeting decided to replace the LTI :arrant 3lan by a LTI Stock Option plan for directors. As a result, grants for directors now consist of LTI stock options instead of LTI warrants (i.e. the right to purchase existing shares instead of the right to subscribe to newly issued shares). *rants are made annually at our shareholders meeting on a discretionary basis upon recommendation of the Remuneration Committee. The LTI stock options have an exercise price that is set equal to the market price at the time of the granting, a maximum lifetime of ƴƳ years and an exercise period that starts after Ƹ years. The LTI stock options cliff vest after Ƹ years. Unvested options are subject to specific forfeiture provisions in the event that the directorship is not renewed upon the expiry of its term or is terminated in the course of its term, both due to a breach of duty by the director. ABbInBev granted Ƴ.Ƶm stock options to members of the board of directors during ƵƳƴƷ representing a fair value of approximately ƷmbUSbdollar. During ƵƳƴƶ, Ƴ.Ƶm warrants with a fair value of approximately ƶmbUSbdollar were granted under this plan. ƴ Amounts have been converted to US dollar at the average rate of the period. P. 120 /121 /7,6WRFN2SWLRQ3ODQ([HFXWLYHV As from ƴ July ƵƳƳƼ, senior employees are eligible for an annual long-term incentive to be paid out in LTI stock options (or, in future, similar share- based instruments), depending on management’s assessment of the employee’s performance and future potential. In December ƵƳƴƷ ABbInBev issued Ʒ.Ʒm LTI stock options with an estimated fair value of ƴƳƴmbUSbdollar, whereby ƴ.ƶm options relate to American Depositary Shares (ADSs) and ƶ.ƴm options to ABbInBev shares. In December ƵƳƴƶ ABbInBev issued Ʒ.ƴm LTI stock options with an estimated fair value of ƼƶmbUSbdollar, whereby ƴ.Ƶm options relate to American Depositary Shares (ADSs) and Ƶ.Ƽm options to ABbInBev shares. 2WKHU*UDQWV As from ƵƳƴƳ ABbInBev has in place three specific long-term restricted stock unit programs. One program allows for the offer of restricted stock units to certain employees in certain specific circumstances, whereby grants are made at the discretion of the CEO, e.g. to compensate for assignments of expatriates in countries with difficult living conditions. The restricted stock units vest after five years and in case of termination of service before the vesting date, special forfeiture rules apply. In ƵƳƴƷ, Ƴ.ƴm restricted stock units with an estimated fair value of ƵmbUSbdollar were granted under this program to a selected number of employees. In ƵƳƴƶ, Ƴ.Ʒm restricted stock units with an estimated fair value of ƶƹmbUSbdollar were granted under this program. A second program allows for the exceptional offer of restricted stock units to certain employees at the discretion of the Remuneration Committee of ABbInBev as a long-term retention incentive for key employees of the company. Employees eligible to receive a grant under this program receive two series of restricted stock units, the first half of the restricted stock units vesting after five years, the second half after ten years. In case of termination of service before the vesting date, special forfeiture rules apply. In December ƵƳƴƷ Ƴ.Ƶm restricted stock units with an estimated fair value of ƵƴmbUSbdollar were granted under this program to a selected number of employees. In December ƵƳƴƶ Ƴ.Ʒm restricted stock units with an estimated fair value of ƶƷmbUSbdollar were granted under this program. A third program allows certain employees to purchase company shares at a discount aimed as a long-term retention incentive for (i) high- potential employees of the company, who are at a mid-manager level (Š3eople bet share purchase programš) or (ii) for newly hired employees. The voluntary investment in company shares leads to the grant of ƶ matching shares for each share invested. The discount and matching shares are granted in the form of restricted stock units which vest after Ƹ years. In case of termination before the vesting date, special forfeiture rules apply. In ƵƳƴƷ, employees purchased shares under this program for the equivalent of Ƴ.ƸmbUSbdollar (ƵƳƴƶ: equivalent of Ƴ.ƸmbUSbdollar). In order to maintain consistency of benefits granted to executives and to encourage international mobility of executives, an options exchange program has been executed whereby unvested options are exchanged against restricted shares that remain locked-up until ƶƴ December ƵƳƵƶ. In ƵƳƴƷ, Ƴ.Ƹm unvested options were exchanged against Ƴ.Ƹm restricted shares. In ƵƳƴƶ, Ƴ.ƹm unvested options were exchanged against Ƴ.Ƹm restricted shares. As a variant to this program, the Remuneration Committee has also approved the early release of the vesting conditions of Ƴ.Ƹm unvested options. The shares that result from the exercise of the options must remain locked-up until ƶƴ December ƵƳƵƶ. As the vesting period for these stock options was changed, an accelerated expense was recorded as a result of the modification. )urthermore, certain options granted have been modified whereby the dividend protected feature of these options have been cancelled and compensated by the issuance of new additional options. In ƵƳƴƷ Ƴ.ƴm new options were issued, representing the economic value of the dividend protection feature (ƵƳƴƶ: Ƴ.ƹm new options). As there was no change between the fair value of the original award immediately before the modification and the fair value of the modified award immediately after the modification, no additional expense was recorded as a result of the modification. )or further information on share-based payment grants of previous years, please refer to Note ƵƷ Share-based payments of the ƵƳƴƶ consolidated financial statements. The weighted average fair value of the options and assumptions used in applying the ABbInBev option pricing model for the ƵƳƴƷ grants of awards described above are as follows: $PRXQWVLQ86GROODUXQOHVVRWKHUZLVHLQGLFDWHGƴ ƵƳƴƷ ƵƳƴƶ ƵƳƴƵ )air value of options and warrants granted ƵƳ.ƺƳ Ƶƴ.ƺƷ ƴƼ.Ƹƺ Share price ƴƴƶ.ƵƼ ƴƳƶ.Ƴƹ ƻƹ.ƻƺ Exercise price ƴƴƶ.ƵƼ ƴƳƶ.ƳƸ ƻƹ.ƻƶ Expected volatility ƵƷ ƵƷ ƵƸ Expected dividends ƶ.ƳƳ Ƶ.ƼƵ Ƶ.ƸƳ Risk-free interest rate ƴ.Ƶƶ Ƶ.Ƴƹ ƴ.ƺƶ Expected volatility is based on historical volatility calculated using Ƶ Ƹƶƴ days of historical data. In the determination of the expected volatility, ABbInBev is excluding the volatility measured during the period ƴƸ July ƵƳƳƻ until ƶƳ April ƵƳƳƼ, in view of the extreme market conditions experienced during that period. The binomial Hull model assumes that all employees would immediately exercise their options if the ABbInBev share price is Ƶ.Ƹ times above the exercise price. As a result, no single expected option life applies. ƴ Amounts have been converted to US dollar at the closing rate of the respective period. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT The total number of outstanding ABbInBev options and warrants developed as follows: 0LOOLRQRSWLRQVDQGZDUUDQWV ƵƳƴƷ ƵƳƴƶ ƵƳƴƵ Options and warrants outstanding at ƴ January ƸƵ.Ƹ Ƹƶ.ƶ ƸƷ.Ʒ Options and warrants issued during the year Ʒ.Ƹ Ʒ.ƻ Ʒ.Ƹ Options and warrants exercised during the year (ƴƳ.Ƴ) (Ʒ.Ƶ) (ƶ.ƶ) Options and warrants forfeited during the year (ƴ.Ʒ) (ƴ.Ʒ) (Ƶ.ƶ) 2SWLRQVDQGZDUUDQWVRXWVWDQGLQJDWWKHHQGRI'HFHPEHU ƷƸƹ ƸƵƸ Ƹƶƶ The range of exercise prices of the outstanding options and warrants is between ƴƳ.ƶƵ euro (ƴƵ.Ƹƶ US dollar) and Ƽƹ.ƶƹ euro (ƴƴƹ.ƼƼ US dollar) while the weighted average remaining contractual life is ƺ.ƶƷ years. Of the ƷƸ.ƹm outstanding options and warrants ƴƳ.ƻm are vested at ƶƴ December ƵƳƴƷ. The weighted average exercise price of the ABbInBev options and warrants is as follows: Amounts in US dollarƴ ƵƳƴƷ ƵƳƴƶ ƵƳƴƵ Options and warrants outstanding at ƴ January ƷƸ.ƶƻ ƶƻ.ƶƴ ƶƵ.Ƽƻ *ranted during the year ƴƴƶ.ƵƼ ƴƳƶ.ƳƸ ƻƺ.ƼƷ Exercised during the year ƵƷ.ƷƳ Ʒƴ.Ƴƺ ƶƴ.ƻƸ )orfeited during the year ƷƸ.ƺƸ ƷƸ.ƴƻ ƶƵ.ƻƵ Outstanding at the end of December Ƹƴ.ƶƸ ƷƸ.ƶƻ ƶƻ.ƶƴ Exercisable at the end of December ƶƹ.Ƶƴ Ƹƺ.Ƶƻ ƷƳ.ƹƸ )or share options and warrants exercised during ƵƳƴƷ, the weighted average share price at the date of exercise was ƻƶ.ƸƷ euro (ƴƳƴ.ƷƵ US dollar). The total number of outstanding ABbInBev restricted stock units developed as follows: 0LOOLRQUHVWULFWHGVWRFNXQLWV ƵƳƴƷ ƵƳƴƶ ƵƳƴƵ Restricted stock units outstanding at ƴ January Ʒ.ƺ ƶ.ƶ Ƶ.ƶ Restricted stock units issued during the year ƴ.ƶ ƴ.ƹ ƴ.ƴ Restricted stock units exercised during the year ś ś ś Restricted stock units forfeited during the year (Ƴ.Ƶ) (Ƴ.Ƶ) (Ƴ.ƴ) 5HVWULFWHGVWRFNXQLWVRXWVWDQGLQJDWWKHHQGRI'HFHPEHU ƸƻƷƺƶƶ $PEHYVKDUHEDVHGSD\PHQWSURJUDPV Since ƵƳƳƸ, Ambev has had a plan which is substantially similar to the Share-based compensation plan under which bonuses granted to company employees and management are partially settled in shares. Under the Share-based compensation plan as modified as of ƵƳƴƳ Ambev issued in March ƵƳƴƷ, Ƹ.Ƶm restricted stock units with an estimated fair value of ƶƻmbUSbdollar. In March ƵƳƴƶ, Ambev issued Ʒ.ƶm restricted stock units with an estimated fair value of ƶƸmbUSbdollar. As from ƵƳƴƳ, senior employees are eligible for an annual long-term incentive to be paid out in Ambev LTI stock options (or, in future, similar share- based instruments), depending on management’s assessment of the employee’s performance and future potential. In ƵƳƴƷ, Ambev granted ƴƹ.ƻm LTI stock options with an estimated fair value of ƶƺmbUSbdollar. In ƵƳƴƶ, Ambev granted ƴƵ.ƻm LTI stock options with an estimated fair value of ƶƹmbUSbdollar. In order to encourage the mobility of managers, the features of certain Ambev options granted in previous years have been modified whereby the dividend protection of these options was cancelled and replaced by the issuance of Ƴ.Ƶm options in ƵƳƴƷ representing the economic value of the dividend protection feature. In ƵƳƴƶ, Ƴ.Ƶm options were issued representing the economic value of the dividend protection feature. Since there was no change between the fair value of the original award before the modification and the fair value of the modified award after the modification, no additional expense was recorded as a result of this modification. ƴ Amounts have been converted to US dollar at the closing rate of the respective period. P. 122 /123 The weighted fair value of the options and assumptions used in applying a binomial option pricing model for the ƵƳƴƷ Ambev grants are as follows: $PRXQWVLQ86GROODUXQOHVVRWKHUZLVHLQGLFDWHGƴ ƵƳƴƷ ƵƳƴƶ ƵƳƴƵƵ )air value of options granted ƴ.Ƽƹ Ƶ.ƹƴ Ƶ.ƺƶ Share price ƹ.ƳƳ ƺ.ƶƳ ƻ.ƶƷ Exercise price ƹ.ƳƳ ƺ.ƶƳ ƻ.ƶƷ Expected volatility ƶƵ ƶƶ ƶƶ Expected dividends Ƴ.ƳƳ - Ƹ.ƳƳ Ƴ.ƳƳ - Ƹ.ƳƳ Ƴ.ƳƳ - Ƹ.ƳƳ Risk-free interest rate Ƶ .ƵƳ - ƴƵ.ƷƳƶ ƴ.ƼƳ ś ƴƵ.ƹƳƶ Ƶ.ƴƳ - ƴƴ.ƵƳƶ The total number of outstanding Ambev options developed as follows: 0LOOLRQRSWLRQV ƵƳƴƷ ƵƳƴƶ ƵƳƴƵƵ Options outstanding at ƴ January ƴƷƺ.ƺ ƴƷƶ.Ƽ ƴƷƺ.ƻ Options issued during the year ƴƺ.Ƴ ƴƶ.ƴ ƴƸ.Ƹ Options exercised during the year (ƶƷ.ƻ) (ƺ.Ƶ) (ƴƵ.Ƹ) Options forfeited during the year (ƶ.ƻ) (Ƶ.ƴ) (ƹ.Ƽ) 2SWLRQVRXWVWDQGLQJDWWKHHQGRI'HFHPEHU ƴƵƹƴ ƴƷƺƺ ƴƷƶƼ )ollowing the decision of the *eneral Meeting of Shareholders of ƶƳ July ƵƳƴƶ effective on ƴƴ November ƵƳƴƶ, each common share issued by Ambev was split into Ƹ shares, without any modification to the amount of the capital stock of Ambev. As a consequence of the split of the Ambev shares with a factor Ƹ, the exercise price and the number of options were adjusted with the intention of preserving the rights of the existing option holders. The range of exercise prices of the outstanding options is between ƴ.Ƴƹ Brazilian real (Ƴ.ƷƳ US dollar) and ƴƼ.ƴƷ Brazilian real (ƺ.Ƶƴ US dollar) while the weighted average remaining contractual life is ƹ.ƻƺ years. Of the ƴƵƹ.ƴm outstanding options ƶƸ.Ƽm options are vested at ƶƴ December ƵƳƴƷ. The weighted average exercise price of the Ambev options is as follows: Amounts in US dollarƴ ƵƳƴƷ ƵƳƴƶ ƵƳƴƵƵ Options outstanding at ƴ January Ƶ.ƹƼ ƶ.ƸƷ ƶ.ƴƻ *ranted during the year ƹ.Ƴƶ ƺ.Ƶƺ ƻ.ƶƼ Exercised during the year ƴ.ƷƸ ƴ.ƴƸ ƴ.ƶƻ )orfeited during the year Ʒ.ƵƸ ƶ.Ʒƹ ƴ.ƶƺ Outstanding at the end of December ƶ.ƺƼ Ƶ.ƹƼ ƶ.ƸƷ Exercisable at the end of December ƴ.ƴƴ ƴ.ƷƵ ƴ.ƻƸ )or share options exercised during ƵƳƴƷ, the weighted average share price at the date of exercise was ƴƹ.ƴƵ Brazilian real (ƹ.Ƴƺ US dollar). The total number of outstanding Ambev restricted stock units developed as follows: 0LOOLRQUHVWULFWHGVWRFNXQLWV ƵƳƴƷ ƵƳƴƶ ƵƳƴƵƵ Restricted stock units outstanding at ƴ January ƴƸ.ƹ ƴƴ.Ƹ ƻ.Ƴ Restricted stock units issued during the year Ƹ.Ƶ Ʒ.ƶ Ƹ.Ƴ Restricted stock units exercised during the year (Ƶ.ƶ) ś ś Restricted stock units forfeited during the year (ƴ.Ƴ) (Ƴ.Ƶ) (ƴ.Ƹ) 5HVWULFWHGVWRFNXQLWVRXWVWDQGLQJDWWKHHQGRI'HFHPEHU ƴƺƸ ƴƸƹ ƴƴƸ ƴ Amounts have been converted to US dollar at the closing rate of the respective period. Ƶ Amounts have been adjusted for the Ambev share split of ƴƴ November ƵƳƴƶ. ƶ The weighted average risk-free interest rates refer to granted ADRs and stock options respectively. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT During ƵƳƴƷ, a limited number of Ambev shareholders who are part of the senior management of ABbInBev were given the opportunity to exchange Ambev shares against a total of Ƴ.ƹm ABbInBev shares (Ƴ.ƴm ABbInBev shares in ƵƳƴƶ) at a discount of ƴƹ.ƺ provided that they stay in service for another five years. The fair value of this transaction amounts to approximately ƴƵmbUSbdollar (Ƶ.ƵmbUSbdollar in ƵƳƴƶ) and is expensed over the five years’ service period. The fair values of the Ambev and ABbInBev shares were determined based on the market price. ƵƸ3URYLVLRQV 0LOOLRQ86GROODU 5HVWUXFWXULQJ 'LVSXWHV 2WKHU 7RWDO %DODQFHDWƴ-DQXDU\ƵƳƴƷ ƴƺƺ ƸƶƸ ƴƹ ƺƵƻ EƬect of changes in foreign exchange rates (ƴƳ) (ƷƳ) (Ƶ) (ƸƵ) 3rovisions made ƹƸ ƶƵƺ ƴ ƶƼƶ 3rovisions used (Ƹƹ) (ƴƶƳ) (ƴ) (ƴƻƺ) 3rovisions reversed (ƴƴ) (ƺƼ) (ƶ) (Ƽƶ) Other movements ƴ ƴƳ (ƴ) ƴƳ %DODQFHDWƶƴ'HFHPEHUƵƳƴƷ ƴƹƹ ƹƵƶ ƴƳ ƺƼƼ The restructuring provisions are primarily explained by the organizational alignments - see also Note ƻ Non-recurring items. 3rovisions for disputes mainly relate to various disputed direct and indirect taxes and to claims from former employees. The provisions are expected to be settled within the following time windows: 0LOOLRQ86GROODU 7RWDO ƴ\HDU ƴƵ\HDUV ƵƸ\HDUV !Ƹ\HDUV Restructuring Reorganization ƴƹƹ ƹƳ ƴƳ ƻƶ ƴƶ 'LVSXWHV Income and indirect taxes ƶƸƹ Ʒƶ ƵƷƺ Ƹƶ ƴƶ Labor ƻƶ ƵƸ ƴƼ ƶƹ ƶ Commercial Ʒƺ Ƶƹ ƴƷ Ʒ ƶ Other disputes ƴƶƺ Ƽ ƼƸ ƶƵ ƴ ƹƵƶ ƴƳƶ ƶƺƸ ƴƵƸ ƵƳ 2WKHUFRQWLQJHQFLHV Onerous contracts ƴ ś ś ƴ ś *uarantees given ƶ ś ƴ Ƶ ś Other contingencies ƹ Ƶ ƴ ƶ ś ƴƳ Ƶ Ƶ ƹ ś 7RWDOSURYLVLRQV ƺƼƼ ƴƹƸ ƶƻƺ ƵƴƷ ƶƶ Since ƴ January ƵƳƳƸ ABbInBev is subject to the greenhouse gas emission allowance trading scheme in force in the European Union. Acquired emission allowances are recognized at cost as intangible assets. To the extent that it is expected that the number of allowances needed to settle the COƵ emissions exceeds the number of emission allowances owned, a provision is recognized. Such provision is measured at the estimated amount of the expenditure required to settle the obligation. At ƶƴ December ƵƳƴƷ, the emission allowances owned fully covered the expected COƵ emissions. As such no provision needed to be recognized. Ƶƹ7UDGHDQG2WKHU3D\DEOHV 1RQFXUUHQWWUDGHDQGRWKHUSD\DEOHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Indirect taxes payable ƵƶƳ ƶƹƼ Trade payables ƶƳƸ ƶƻƴ Cash guarantees ƴƴ ƴƵ Deferred consideration on acquisitions ƴƶƻ ƴ ƻƳƴ Derivatives ƹƷ ƴƸƼ Other payables ƶƵƵ ƸƳƳ ƴƳƺƳ ƶƵƵƵ P. 124 /125 &XUUHQWWUDGHDQGRWKHUSD\DEOHV 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Trade payables and accrued expenses ƴƳ Ƽƴƶ Ƽ ƻƶƷ 3ayroll and social security payables ƴ ƳƶƳ ƴ ƴƺƶ Indirect taxes payable ƴ ƻƷƼ ƴ ƹƻƼ Interest payable ƻƸƳ ƻƻƻ Consigned packaging ƺƴƸ ƹƻƵ Cash guarantees ƹƷ ƺƴ Derivatives ƴ Ƴƴƶ ƹƶƳ Dividends payable Ƹƴƻ ƶƻƷ Deferred income Ƹƶ ƶƻ Deferred consideration on acquisitions ƴ ƹƷƳ ƻƹƴ Other payables Ƶƺƺ ƵƵƷ ƴƻƼƵƵ ƴƹƷƺƷ Deferred consideration on acquisitions is mainly comprised of ƴ.Ƶ billion US dollar for the put option included in the shareholders’ agreement between Ambev and E. Le²n Jimenes S.A. (ŠELJš), which may result in Ambev acquiring additional Class B shares of Cervecer¬a Nacional Dominicana S.A. (ŠCNDš). The put option granted to ELJ is exercisable as of the first year following the transaction. The valuation of this option is based on the EBITDA of the consolidated operations in Dominican Republic. The deferred consideration on acquisitions is also comprised of Ƴ.Ƹ billion US dollar liability for the *rupo Modelo shares the company did not acquire by ƶƴ December ƵƳƴƷ. On ƶ June ƵƳƴƶ, ABbInBev established and funded a Trust to accept further tender of shares by *rupo Modelo shareholders at a price of Ƽ.ƴƸ US dollar per share over a period of up to ƵƸ months. Derivatives mainly reflect the mark-to-market of interest rate swaps, of forward exchange contracts and of commodity forward contracts entered into to hedge the company’s operational exposure (See also Note Ƶƺ Risks arising from financial instruments of the ƶƴ December ƵƳƴƷ consolidated financial statements). Ƶƺ5LVNV$ULVLQJIURP)LQDQFLDO,QVWUXPHQWV ABbInBev’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest risk, commodity risk and equity risk), credit risk and liquidity risk. The company analyses each of these risks individually as well as on an interconnected basis, and defines strategies to manage the economic impact on the company’s performance in line with its financial risk management policy. Some of the company’s risk management strategies include the usage of derivatives. The main derivative instruments used are foreign currency rate agreements, exchange traded foreign currency futures and options, interest rate swaps and forwards, cross currency interest rate swaps (ŠCCIRSš), exchange traded interest rate futures, commodity swaps, exchange traded commodity futures and equity swaps. ABbInBev’s policy prohibits the use of derivatives in the context of speculative trading. The following table provides an overview of the derivative financial instruments outstanding at year-end by maturity bucket. The amounts included in this table are the notional amounts. ƵƳƴƷƵƳƴƶ 0LOOLRQ86GROODU ƴ\HDU ƴśƵ\HDUV Ƶśƶ\HDUV ƶśƸ\HDUV !Ƹ\HDUV ƴ\HDU ƴśƵ\HDUV Ƶśƶ\HDUV ƶśƸ\HDUV !Ƹ\HDUV )RUHLJQFXUUHQF\ )orward exchange contracts ƺ ƸƸƷ Ʒƺ ś ś ś ƺ ƸƶƳ Ʒ ś ś ś )oreign currency futures ƴ ƻƵƵ ś ś ś ś ƼƵƺ ś ś ś ś Other foreign currency derivatives ś ś ś ś ś ƷƴƸ ś ś ś ś Interest rate Interest rate swaps ƶƸƳ ś ƴƴƶ Ƶ ƵƸƳ ƺƻƺ ƴƴ ƻƳƳ ƶƸƳ ś ƴƵƻ ś Cross currency interest rate swaps ƴ ƳƵƶ ś ƴ ƺƻƼ Ƶ ƶƺƶ ƴ ƴƼƺ ƹƻƶ ƴ ƳƼƹ ś Ƶ ƻƷƴ ƻƵƺ Interest rate futures ś ƴƶƼ ƴƴƶ ƴƸƴ ś ś ƴƶƺ ƴƶ ś ś Commodities Aluminum swaps ƴ ƷƵƵ Ʒƻ ś ś ś ƴ ƶƻƶ ƶƵƺ ś ś ś Other commodity derivatives ƴ ƶƺƷ ƴƼƷ ś ś ś ƼƼƵ ƵƼƶ ś ś ś (TXLW\ Equity derivatives Ʒ ƻƸƷ ƻƶƻ ś ś ś Ʒ ƼƷƺ ƺƴƹ ś ś ś Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT $ )RUHLJQFXUUHQF\ULVN ABbInBev incurs foreign currency risk on borrowings, investments, (forecasted) sales, (forecasted) purchases, royalties, dividends, licenses, management fees and interest expense/income whenever they are denominated in a currency other than the functional currency of the subsidiary. The main derivative financial instruments used to manage foreign currency risk are foreign currency rate agreements, exchange traded foreign currency futures and cross currency interest rate swaps. )RUHLJQH[FKDQJHULVNRQRSHUDWLQJDFWLYLWLHV As far as foreign currency risk on firm commitments and forecasted transactions is concerned, ABbInBev’s policy is to hedge operational transactions which are reasonably expected to occur (e.g. cost of goods sold and selling, general administrative expenses) within the forecast period determined in the financial risk management policy. Operational transactions that are certain are hedged without any limitation in time. Non-operational transactions (such as acquisitions and disposals of subsidiaries) are hedged as soon as they are certain. The table below provides an indication of the company’s main net foreign currency positions as regards firm commitments and forecasted transactions for the most important currency pairs. The open positions are the result of the application of ABbInBev’s risk management policy. 3ositive amounts indicate that the company is long (net future cash inflows) in the first currency of the currency pair while negative amounts indicate that the company is short (net future cash outflows) in the first currency of the currency pair. The second currency of the currency pairs listed is the functional currency of the related subsidiary. ƶƴ'HFHPEHUƵƳƴƷ ƶƴ'HFHPEHUƵƳƴƶ 7RWDO 7RWDO 2SHQ 7RWDO 7RWDO 2SHQ 0LOOLRQ86GROODU H[SRVXUH KHGJHV SRVLWLRQ H[SRVXUH KHGJHVƴSRVLWLRQ Euro/Brazilian real (ƹƷ) ƹƷ ś (ƶƻ) ƶƻ ś Euro/Canadian dollar (Ƹƴ) Ƹƴ ś (ƶƼ) ƶƼ ś Euro/Czech koruna (ƶ) (Ƽ) (ƴƵ) (ƶ) (ƴƳ) (ƴƶ) Euro/Hungarian forint (Ʒ) (ƴƶ) (ƴƺ) (Ʒ) (ƴƷ) (ƴƻ) Euro/Mexican peso (ƴƳƷ) ƴƳƷ ś ƴƶƻ (ƴƶƻ) ś Euro/3ound sterling (ƼƷ) ƵƵƸ ƴƶƴ (ƴƹƴ) ƵƸƼ Ƽƻ Euro/Russian ruble (ƴƳƵ) ƴƵƺ ƵƸ (Ƽƺ) Ƽƺ ś Euro/Ukrainian hryvnia (ƺƵ) ś (ƺƵ) (ƼƷ) ƹƻ (Ƶƹ) Euro/US dollar ś ƴƵƺ ƴƵƺ ś ś ś 3ound sterling/Euro (ƷƼ) ƴƴ (ƶƻ) (Ƹƶ) ƶƶ (ƵƳ) US dollar/Argentinean peso (ƶƷƸ) ƶƷƸ ś (ƵƻƵ) ƵƻƵ ś US dollar/Bolivian boliviano (ƺƵ) ƺƵ ś (ƸƵ) ƸƵ ś US dollar/Brazilian real (ƴ ƶƻƼ) ƴ ƶƻƼ ś (ƴ ƹƻƳ) ƴ ƹƻƳ ś US dollar/Canadian dollar (Ƶƺƴ) Ƶƺƴ ś (ƴƻƷ) ƴƻƷ ś US dollar/Chilean peso (ƴƷƳ) ƴƷƳ ś (ƹƻ) ƹƻ ś US dollar/Euro (ƴƷƸ) ƴƵƳ (ƵƸ) ƴƳƴ (ƴƷƺ) (Ʒƹ) US dollar/Mexican peso (ƴ ƴƻƵ) Ƹ ƺƼƸ Ʒ ƹƴƶ (ƹƼƷ) Ƹ ƶƴƹ Ʒ ƹƵƵ US dollar/3araguayan guarani (ƻƷ) ƻƷ ś (Ʒƻ) Ʒƻ ś US dollar/3eruvian nuevo sol (Ʒƹ) Ʒƹ ś (Ƹƺ) Ƹƺ ś US dollar/3ound sterling (ƵƸ) ƴƷ (ƴƴ) (ƶƴ) Ƶƺ (Ʒ) US dollar/Russian ruble (ƴƶƸ) ƻƴ (ƸƷ) (ƺƸ) ƴƵƴ Ʒƹ US dollar/Ukrainian hryvnia (ƷƷ) ś (ƷƷ) (ƶƸ) ƺƳ ƶƸ US dollar/Uruguayan peso (ƶƺ) ƶƺ ś (ƵƼ) ƵƼ ś The US dollar/Mexican peso open long position is mainly related to US dollar cash held in Mexico. )urther analysis on the impact of open currency exposures is performed in the Currency Sensitivity Analysis below. In conformity with IAS ƶƼ hedge accounting rules, these hedges of firm commitments and highly probable forecasted transactions denominated in foreign currency are designated as cash flow hedges. )RUHLJQH[FKDQJHULVNRQLQWUDJURXSORDQV In ƵƳƴƵ, ƵƳƴƶ and ƵƳƴƷ, a series of foreign exchange derivatives were contracted to hedge the foreign currency risk from intercompany loans transacted between group entities with different functional currencies. As of ƶƴ December ƵƳƴƷ, intercompany loans with Russia were hedged against US dollar for an amount of ƶ ƶƳƳm Russian ruble (Ƹ ƼƳƳm Russian ruble in ƵƳƴƶ). ƴ ReclassiƮed to conform to the ƵƳƴƷ presentation. P. 126 /127 )RUHLJQH[FKDQJHULVNRQQHWLQYHVWPHQWVLQIRUHLJQRSHUDWLRQV ABbInBev enters into hedging activities to mitigate exposures related to its investments in foreign operations. These strategies are designated as net investment hedges and include both derivative and non-derivative financial instruments. As of ƶƴ December ƵƳƴƷ, designated derivative and non-derivative financial instruments in a net investment hedge relationship amount to ƺ ƳƴƵmbUSbdollar equivalent (ƺ ƻƹƹmbUSbdollar in ƵƳƴƶ) in Holding companies and approximately Ƶ ƻƻƼmbUSbdollar equivalent (Ƶ ƸƳƳmbUSbdollar in ƵƳƴƶ) at Ambev level. Those derivatives and non-derivatives are used to hedge foreign operations with functional currencies mainly denominated in Argentinean peso, Brazilian real, Bolivian boliviano, Canadian dollar, Chilean peso, Dominican peso, euro, Mexican peso, pound sterling, South Korean won and US dollar. )RUHLJQH[FKDQJHULVNRQIRUHLJQFXUUHQF\GHQRPLQDWHGGHEW It is ABbInBev’s policy to have the debt in the subsidiaries as much as possible in the functional currency of the subsidiary. To the extent this is not the case, hedging is put in place unless the cost to hedge outweighs the benefits. Interest rate decisions and currency mix of debt and cash are decided on a global basis and take into consideration the holistic risk management approach. A description of the foreign currency risk hedging related to the debt instruments issued in a currency other than the functional currency of the subsidiary is further detailed in the Interest Rate Risk section below. &XUUHQF\VHQVLWLYLW\DQDO\VLV Currency transactional risk Most of ABbInBev’s non-derivative monetary financial instruments are either denominated in the functional currency of the subsidiary or are converted into the functional currency through the use of derivatives. However, the company can have open positions in certain countries for which hedging can be limited as the illiquidity of the local foreign exchange market prevents the company from hedging at a reasonable cost. The transactional foreign currency risk mainly arises from open positions in Czech koruna, Hungarian forint, Mexican peso, pound sterling, Russian ruble and Ukrainian hryvnia against the US dollar and the euro. ABbInBev estimated the reasonably possible change of exchange rate, on the basis of the average volatility on the open currency pairs, as follows: ƵƳƴƷ &ORVLQJUDWH 3RVVLEOH 9RODWLOLW\ ƶƴ'HFHPEHUƵƳƴƷ FORVLQJUDWHƴ RIUDWHVLQ 3ound sterling/Euro ƴ.Ƶƻ ƴ.Ƶƴ ś ƴ.ƶƹ Ƹ.ƺƹ Euro/Czech koruna Ƶƺ.ƺƶ Ƶƺ.ƴƴ ś Ƶƻ.ƶƹ Ƶ.Ƶƹ Euro/Hungarian forint ƶƴƸ.Ƹƹ ƵƼƷ.ƴƻ ś ƶƶƹ.Ƽƶ ƹ.ƺƺ Euro/Russian ruble ƹƻ.ƶƳ ƷƼ.ƴƴ ś ƻƺ.Ƹ Ƶƻ.ƴƳ Euro/Ukrainian hryvnia ƴƼ.ƴƷ ƴƶ.ƹƴ ś ƵƷ.ƹƻ Ƶƻ.ƼƳ US dollar/Euro Ƴ.ƻƵ Ƴ.ƺƺ ś Ƴ.ƻƺ ƹ.ƴƷ US dollar/Mexican peso ƴƷ.ƺƵ ƴƶ.ƹƼ ś ƴƸ.ƺƸ ƺ.ƳƳ US dollar/3ound sterling Ƴ.ƹƷ Ƴ.ƹƴ ś Ƴ.ƹƻ Ƹ.ƸƼ US dollar/Russian ruble Ƹƹ.Ƶƹ Ʒƴ.Ƶƺ ś ƺƴ.ƵƸ Ƶƹ.ƹƸ US dollar/Ukrainian hryvnia ƴƸ.ƺƺ ƴƴ.Ƶƺ ś ƵƳ.Ƶƺ Ƶƻ.ƸƷ ƵƳƴƶ 3RVVLEOH &ORVLQJUDWH 3RVVLEOH 9RODWLOLW\ ƶƴ'HFHPEHUƵƳƴƶ FORVLQJUDWHƵ RIUDWHVLQ 3ound sterling/Euro ƴ.ƵƳ ƴ.ƴƵ ś ƴ.Ƶƻ ƹ.Ƽƹ Euro/Czech koruna Ƶƺ.Ʒƶ ƵƸ.ƹƺ ś ƵƼ.ƴƻ ƹ.ƶƼ Euro/Hungarian forint ƵƼƺ.ƳƳ ƵƺƷ.Ʒƹ ś ƶƴƼ.ƸƷ ƺ.ƸƼ Euro/Ukrainian hryvnia ƴƴ.ƳƵ ƴƳ.ƴƻ ś ƴƴ.ƻƺ ƺ.ƹƷ US dollar/Euro Ƴ.ƺƶ Ƴ.ƹƺ ś Ƴ.ƺƻ ƺ.ƳƼ US dollar/Mexican peso ƴƶ.Ƴƻ ƴƴ.ƹƺ ś ƴƷ.Ƹ ƴƳ.ƻƳ US dollar/Russian ruble ƶƵ.ƺƶ ƶƳ.ƵƼ ś ƶƸ.ƴƺ ƺ.ƷƸ US dollar/Ukrainian hryvnia ƺ.ƼƼ ƺ.ƺƻ ś ƻ.Ƶƴ Ƶ.ƺƵ ƴ Sensitivity analysis is assessed based on the yearly volatility using daily observable market data during ƵƸƳ days at ƶƴ December ƵƳƴƷ. Ƶ Sensitivity analysis is assessed based on the yearly volatility using daily observable market data during ƵƸƳ days at ƶƴ December ƵƳƴƶ. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Had the Czech koruna, the Hungarian forint, the Mexican peso, the pound sterling, the Russian ruble and the Ukrainian hryvnia weakened/ strengthened during ƵƳƴƷ by the above estimated changes against the euro or the US dollar, with all other variables held constant, the ƵƳƴƷ impact on consolidated profit before taxes would have been approximately ƴƳƶmbUSbdollar (ƴƼmbUSbdollar in ƵƳƴƶ) higher/lower. Additionally, the ABbInBev sensitivity analysisƴ to the foreign exchange rates on its total derivatives positions as of ƶƴ December ƵƳƴƷ, shows a positive/negative pre-tax impact on equity reserves of ƷƷƹmbUSbdollar (ƷƵƺmbUSbdollar in ƵƳƴƶ). 1HWIRUHLJQH[FKDQJHUHVXOWV )oreign exchange results recognized on unhedged and hedged exposures and from the related hedging derivative instruments can be summarized per type of hedging relationship as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ )air value hedges - hedging instruments ś (Ƶ) Cash ưow hedges - hedged items (ƹƳ) Ƶ Cash ưow hedges - hedging instruments (reclassiƮed from equity) Ƹƶ (ƴ) Economic hedges - hedged items not part of a hedge accounting relationship ś (ƴƵƵ) Economic hedges - hedging instruments not part of a hedge accounting relationship ƴƴ ƴƵƸ Other results - not hedged ƶƴƸ (ƵƼƺ) ƶƴƼ ƵƼƸ %,QWHUHVWUDWHULVN The company applies a dynamic interest rate hedging approach whereby the target mix between fixed and floating rate debt is reviewed periodically. The purpose of ABbInBev’s policy is to achieve an optimal balance between cost of funding and volatility of financial results, while taking into account market conditions as well as ABbInBev’s overall business strategy. )DLUYDOXHKHGJH Pound sterling bond hedges (foreign currency risk + interest rate risk on borrowings in pound sterling) In June ƵƳƳƼ, the company issued a pound sterling bond for an equivalent of ƺƸƳm pound sterling. This bond bears interest at ƹ.ƸƳ with maturity in June ƵƳƴƺ. The company entered into several pound sterling fixed/euro floating cross currency interest rate swaps to manage and reduce the impact of changes in the pound sterling exchange rate and interest rate on this bond. These derivative instruments have been designated in a fair value hedge accounting relationship. US dollar fixed rate bond hedges (interest rate risk on borrowings in US dollar) In May ƵƳƳƼ, the company issued a series of fixed rate notes in an aggregate principal amount of ƴ.Ƴ billion US dollar. These bond bears interest at ƹ.ƻƺƸ with maturity in November ƵƳƴƼ. In March ƵƳƴƳ, the company issued a series of fixed rate notes in an aggregate principal amount of ƴ.Ƴ billion US dollar. These bond bears interest at Ƹ.ƳƳ with maturity in April ƵƳƵƳ. The company entered into several US dollar fixed/floating interest rate swaps to manage and reduce the impact of changes in the US dollar interest rates on the fair value of these bonds. These derivative instruments have been designated in a fair value hedge accounting relationship. Ambev bond hedges (interest rate risk on borrowings in Brazilian real) In July ƵƳƳƺ Ambev issued a Brazilian real bond (ŠBond ƴƺš), which bears interest at Ƽ.Ƹ and is repayable semi-annually with final maturity date in July ƵƳƴƺ. Ambev entered into a fixed/floating interest rate swap to hedge the interest rate risk on such bond. These derivative instruments have been designated in a fair value hedge accounting relationship. US dollar fixed rate bond hedges (interest rate risk on borrowings in US dollar) In January ƵƳƴƷ, the company issued a series of fixed rate notes in an aggregate principal amount of ƴ.ƵƸ billion US dollar. This bond bears interest at Ƶ.ƴƸ with maturity in )ebruary ƵƳƴƼ. ƴ Sensitivity analysis is assessed based on the yearly volatility using daily observable market data during ƵƸƳ days at ƶƴ December ƵƳƴƷ. P. 128 /129 The company entered into several US dollar fixed/floating interest rate swaps to manage and reduce the impact of changes in the US dollar interest rates on this bond. These derivative instruments have been designated in a fair value hedge accounting relationship. &DVKIORZKHGJH Floating interest rate risk on borrowings in US Dollar )ollowing the refinancing and the repayment of the ƵƳƳƻ and ƵƳƴƳ senior facilities the interest rate swaps that were designated for the hedge of the financing of the Anheuser-Busch acquisition became freestanding given the repayment of part of these senior facilities. In order to offset the interest rate risk, the freestanding derivatives were unwound via additional offsetting trades. As of ƶƴ December ƵƳƴƷ and ƵƳƴƶ, there are no remaining open positions covering the interest exposure on the outstanding balance drawn under the ƵƳƴƳ senior facilities and the remaining interest rate swaps matured during the course of ƵƳƴƷ. Canadian dollar bond hedges (foreign currency risk + interest rate risk on borrowings in Canadian dollar) In January ƵƳƴƶ, the company issued a series of notes in an aggregated principal amount of ƴ.Ƶ billion Canadian dollar. These bonds bear interest at Ƶ.ƶƺƸ with maturity in January ƵƳƴƻ and ƶ.ƶƺƸ with maturity in January ƵƳƵƶ. The company entered into several Canadian dollar fixed/euro floating cross currency interest rate swaps to manage and reduce the impact of changes in the Canadian dollar exchange rate and interest rate on these bonds. These derivative instruments have been designated in a cash flow hedge accounting relationship. Pound sterling bond hedges ( foreign currency risk + interest rate risk on borrowings in pound sterling) In September ƵƳƴƶ, the company issued a pound sterling bond for an equivalent of ƸƳƳm pound sterling. This bond bears interest at Ʒ.ƳƳ per year with maturity in September ƵƳƵƸ. The company entered into several pound sterling fixed/euro floating cross currency interest rate swaps to manage and reduce the impact of changes in the pound sterling exchange rate and interest rate on this bond. These derivative instruments have been designated in a cash flow hedge accounting relationship. (FRQRPLFKHGJH Swiss franc bond hedges (foreign currency risk + interest rate risk on borrowings in Swiss franc) In May ƵƳƳƼ, the company issued a Swiss franc bond for an equivalent of ƹƳƳm Swiss franc. This bond matured in June ƵƳƴƷ. The company entered into a Swiss franc fixed/euro floating cross currency interest rate swap to manage and reduce the impact of changes in the Swiss franc exchange rate and interest rate on this bond. This derivative instrument was designated in a fair value hedge accounting relationship in ƵƳƳƼ. During ƵƳƴƳ, although this derivative continues to be considered an economic hedge, hedge accounting designation was discontinued. As of ƶƴ December ƵƳƴƷ, there were no remaining balance and open positions related to Swiss franc bond. Marketable debt security hedges (interest rate risk on Brazilian real) During ƵƳƴƷ, Ambev invested in highly liquid Brazilian real denominated government debt securities. Those fixed-rate instruments are included in the held for trading category. The company also entered into interest rate future contacts in order to offset the Brazilian real interest rate exposure of such government bonds. Since both instruments are measured at fair value with changes recorded into profit or loss, no hedge accounting designation was needed. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ,QWHUHVWUDWHVHQVLWLYLW\DQDO\VLV In respect of interest-bearing financial liabilities, the table below indicates their effective interest rates at balance sheet date as well as the split per currency in which the debt is denominated. ƶƴ'HFHPEHUƵƳƴƷ %HIRUHKHGJLQJ $IWHUKHGJLQJ ,QWHUHVWEHDULQJƮQDQFLDOOLDELOLWLHV (ƬHFWLYH (ƬHFWLYH Million US dollar interest rate Amount interest rate Amount Floating rate Brazilian real ƺ.ƵƷ Ʒƶƻ ƻ.ƺƷ ƹƹƻ Euro Ƴ.ƶƹ ƴ ƶƵƻ Ƶ.ƺƳ Ƶ ƻƷƷ Russian ruble ś ś ƻ.Ƽƹ ƼƷ US dollar Ƴ.Ƽƻ ƺƷƸ Ƶ.ƹƵ ƶ ƸƶƼ Other ƴƴ.ƴƵ Ƶƹ ƴƴ.ƴƵ Ƶƹ ƵƸƶƺ ƺƴƺƴ Fixed rate Argentinean peso Ƶƶ.ƹƼ ƶƺ Ƶƶ.ƹƼ ƶƺ Brazilian real ƺ.ƼƼ ƸƼƸ ƺ.Ƽƹ ƷƸƺ Canadian dollar ƶ.ƴƷ ƴ ƸƷƻ ƶ.ƵƵ ƴ ƴƹƴ Dominican peso ƴƳ.ƶƻ Ƶƶ ƴƳ.ƶƻ Ƶƶ Euro ƶ.ƳƵ ƴƳ ƵƷƹ Ƶ.ƼƳ ƴƵ ƻƵƵ 3ound sterling ƹ.ƺƴ Ƶ ƻƴƹ Ƽ.ƶƷ ƻƻƻ South Korean won ś ś Ƶ.Ƶƹ ƸƳƳ US dollar Ʒ.ƳƵ ƶƶ ƶƴƵ Ʒ.ƴƶ Ƶƻ ƳƸƸ Other ƺ.ƴƻ ƻ ƺ.ƴƻ ƻ ƷƻƸƻƸ ƷƶƼƸƴ ƶƴ'HFHPEHUƵƳƴƶ %HIRUHKHGJLQJ $IWHUKHGJLQJ ,QWHUHVWEHDULQJƮQDQFLDOOLDELOLWLHV (ƬHFWLYH (ƬHFWLYH Million US dollar interest rate Amount interest rate Amount Floating rate Brazilian real ƺ.ƴƺ ƸƶƸ ƻ.ƴƹ ƻƹƵ Canadian dollar Ƴ.Ƽƻ ƹ Ƴ.Ƽƻ ƹ Dominican peso ƻ.Ƴƺ ƴƵ ƻ.Ƴƺ ƴƵ Euro Ʒ.ƷƳ ƹƼ Ƹ.ƺƳ Ƶ ƷƳƹ Russian ruble ś ś ƹ.ƴƳ ƴƻƷ US dollar Ƴ.ƻƴ ƴ ƵƵƼ Ƴ.ƺƺ ƻƼƼ ƴƻƸƴ ƷƶƹƼ Fixed rate Brazilian real ƺ.Ƽƶ ƹƴƴ ƺ.ƸƸ ƷƼƵ Canadian dollar ƶ.ƴƷ ƴ ƹƻƵ ƶ.ƵƵ ƴ Ƶƹƶ Chinese yuan ƺ.ƴƴ ƺ ƺ.ƴƴ ƺ Dominican peso ƴƶ.ƳƳ ƵƳ ƴƶ.ƳƳ ƵƳ Euro ƶ.ƹƴ ƴƳ ƳƸƸ ƶ.ƸƼ ƴƳ ƼƵƻ 3ound sterling Ƹ.ƹƼ ƶ Ƴƶƴ Ƽ.ƺƸ ƻƼƳ Swiss franc Ʒ.Ƹƴ ƹƺƶ ś ś US dollar Ʒ.Ƶƴ ƶƴ ƴƼƸ Ʒ.ƴƻ ƶƴ ƴƸƹ ƷƺƵƺƷ ƷƷƺƸƹ At ƶƴ December ƵƳƴƷ, the total carrying amount of the floating and fixed rate interest-bearing financial liabilities before hedging listed above includes bank overdrafts of ƷƴmbUSbdollar. P. 130 /131 As disclosed in the above table, ƺ ƴƺƴmbUSbdollar or ƴƷ.Ƴƶ of the company’s interest bearing financial liabilities bear a variable interest rate. The company estimated that the reasonably possible change of the market interest rates applicable to its floating rate debt after hedging is as follows: ƵƳƴƷ ,QWHUHVWUDWH 3RVVLEOH 9RODWLOLW\ ƶƴ'HFHPEHUƵƳƴƷƴ interest rateƵ RIUDWHVLQ Brazilian real ƴƴ.ƴƴ ƴƳ.ƵƸ - ƴƴ.Ƽƺ ƺ.ƺƵ Euro Ƴ.Ƴƻ Ƴ.ƳƷ - Ƴ.ƴƴ Ʒƶ.ƺƷ Russian ruble Ƶƶ.ƺƺ ƴƴ.Ƽƶ - ƶƸ.ƹƴ ƷƼ.ƺƼ US dollar Ƴ.Ƶƹ Ƴ.Ƶƶ - Ƴ.Ƶƻ Ƽ.ƴƹ ƵƳƴƶ ,QWHUHVWUDWH 3RVVLEOH 9RODWLOLW\ ƶƴ'HFHPEHUƵƳƴƶƴ interest rateƵ RIUDWHVLQ Brazilian real Ƽ.ƷƷ ƻ.ƴƺśƴƳ.ƺ ƴƶ.Ʒƴ Canadian dollar ƴ.Ƶƻ ƴ.Ƶƺśƴ.Ƶƻ Ƴ.ƹƳ Dominican peso ƹ.ƵƸ ƶ.ƹƴśƻ.ƻƼ ƷƵ.ƴƹ Euro Ƴ.ƵƼ Ƴ.ƵƷśƳ.ƶƶ ƴƹ.ƳƵ Russian ruble ƺ.ƴƸ ƹ.ƹƻśƺ.ƹƵ ƹ.ƹƴ US dollar Ƴ.ƵƸ Ƴ.ƵƶśƳ.Ƶƹ ƺ.ƵƼ :hen ABbInBev applies the reasonably possible increase/decrease in the market interest rates mentioned above on its floating rate debt at ƶƴbDecember ƵƳƴƷ, with all other variables held constant, ƵƳƴƷ interest expense would have been ƴƼmbUSbdollar higher/lower (ƵƳƴƶ: ƴƶmbUSbdollar). This effect would be more than offset by ƺƳmbUSbdollar higher/lower interest income on ABbInBev’s interest bearing financial assets (ƵƳƴƶ: ƻƵm USbdollar). ,QWHUHVWH[SHQVH Interest expense recognized on unhedged and hedged financial liabilities and the net interest expense from the related hedging derivative instruments can be summarized per type of hedging relationship as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ )inancial liabilities measured at amortized cost ś not hedged (Ƶ Ƶƶƹ) (Ƶ Ƴƹƹ) )air value hedges ś hedged items (Ƽƺ) (ƴƳƹ) )air value hedges ś hedging instruments ƷƵ Ƶƴ Cash ưow hedges ś hedged items (ƶƸ) ś Cash ưow hedges ś hedging instruments (reclassiƮed from equity) ƴƳ (Ƹ) Net investment hedges - hedging instruments (interest component) ƴƼƵ ƼƷ Economic hedges - hedged items not part of a hedge accounting relationship (Ƽ) (ƵƷ) Economic hedges - hedging instruments not part of a hedge accounting relationship ƴƵƸ Ʒƶ ƵƳƳƻ ƵƳƷƶ &&RPPRGLW\SULFHULVN The commodity markets have experienced and are expected to continue to experience price fluctuations. ABbInBev therefore uses both fixed price purchasing contracts and commodity derivatives to minimize exposure to commodity price volatility. The company has important exposures to the following commodities: aluminum, barley, coal, corn grits, corn syrup, corrugated board, fuel oil, glass, hops, labels, malt, natural gas, orange juice, rice, steel and wheat. As of ƶƴ December ƵƳƴƷ, the company has the following commodity derivatives outstanding (in notional amounts): aluminum swaps for ƴ ƷƺƳmbUSbdollar (ƵƳƴƶ: ƴ ƺƴƳmbUSbdollar), natural gas and energy derivatives for ƶƶƳmbUSbdollar (ƵƳƴƶ: ƶƶƳmbUSbdollar), exchange traded sugar futures for ƻƶmbUSbdollar (ƵƳƴƶ: ƴƷƺmbUSbdollar), corn swaps for ƵƻƸmbUSbdollar (ƵƳƴƶ: ƶƶƵmbUSbdollar), exchange traded wheat futures for ƹƷƻmbUSbdollar (ƵƳƴƶ: ƶƼƳmbUSbdollar), rice swaps for ƺƹmbUSbdollar (ƵƳƴƶ: ƺƳmbUSbdollar) and plastic derivatives for ƴƷƹm USbdollar (ƵƳƴƶ: ƴƹmbUSbdollar). These hedges are designated in a cash flow hedge accounting relationship. ƴ Applicable ƶ-month InterBank OƬered Rates as of ƶƴ December ƵƳƴƷ and as of ƶƴ December ƵƳƴƶ. Ƶ Sensitivity analysis is assessed based on the yearly volatility using daily observable market data during ƵƸƳ days at ƶƴ December ƵƳƴƷ and at December ƵƳƴƶ. )or the Brazilian real ưoating rate debt, the estimated market interest rate is composed of the InterBank Deposit CertiƮcate (ŝCDI’) and the Long-Term Interest Rate (ŝTJL3’). :ith regard to other market interest rates, the company’s analysis is based on the ƶ-month InterBank OƬered Rates applicable for the currencies concerned (e.g. EURIBOR ƶM, LIBOR ƶM). Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT &RPPRGLW\SULFHVHQVLWLYLW\DQDO\VLV The impact of changes in the commodity prices for ABbInBev’s derivative exposures would have caused an immaterial impact on ƵƳƴƷ profits as most of the company’s commodity derivatives are designated in a hedge accounting relationship. The table below shows the estimated impact that changes in the price of the commodities, for which ABbInBev held material derivative exposures at ƶƴ December ƵƳƴƷ, would have on the equity reserves. ƵƳƴƷ 3UHWD[LPSDFWRQHTXLW\ 0LOOLRQ86GROODU 9RODWLOLW\RISULFHVLQƴ Prices increase Prices decrease Aluminum ƴƸ.ƻƴ ƴƼƺ (ƴƼƺ) Sugar Ƶƹ.ƺƷ Ƹƶ (Ƹƶ) :heat Ƶƹ.Ƹƺ Ƹƺ (Ƹƺ) Energy ƵƵ.Ʒƻ ƹƺ (ƹƺ) Rice ƴƹ.ƺƵ ƴƶ (ƴƶ) Corn ƵƵ.ƶƳ ƸƼ (ƸƼ) ƵƳƴƶ 3UHWD[LPSDFWRQHTXLW\ 0LOOLRQ86GROODU 9RODWLOLW\RISULFHVLQƵ Prices increase Prices decrease Aluminum ƴƹ.ƻƼ ƵƷƷ (ƵƷƷ) Sugar ƴƻ.Ƶƶ Ƶƺ (Ƶƺ) :heat ƴƼ.ƺƶ ƴ (ƴ) Energy ƴƶ.ƺƺ Ʒƹ (Ʒƹ) Rice ƴƻ.ƴƼ ƴƴ (ƴƴ) Corn ƶƺ.ƺƵ Ƽƶ (Ƽƶ) '(TXLW\SULFHULVN ABbInBev entered into a series of derivative contracts to hedge the risk arising from the different share-based payment programs. The purpose of these derivatives is mainly to effectively hedge the risk that a price increase in the ABbInBev shares will negatively impact future cash flows related to the share-based payments. )urthermore, ABbInBev entered into a series of derivative contracts to hedge the deferred share instrument related to the Modelo combination (see also Note ƴƴ Finance cost and income and Note Ƶƴ Changes in equity and earnings per share). Most of these derivative instruments could not qualify for hedge accounting therefore they have not been designated in any hedging relationships. As of ƶƴ December ƵƳƴƷ, an exposure for an equivalent of Ƹƹ.ƺm of ABbInBev shares was hedged, resulting in a total gain of ƴ ƵƵƳmbUSbdollar recognized in the profit or loss account for the period, of which ƺƴƴmbUSbdollar related to the company’s share-based payment programs and ƸƳƼmbUSbdollar related to the Modelo transaction (see also Note ƴƴ Finance cost and income). During ƵƳƴƵ, ƵƳƴƶ and ƵƳƴƷ, ABbInBev reset with counterparties certain derivative contracts to market price. This resulted in a cash inflow of ƹƺƸmbUSbdollar, ƸƴƸmbUSbdollar and ƴƸƸmbUSbdollar in ƵƳƴƵ, ƵƳƴƶ and ƵƳƴƷ, respectively, and a decrease of counterparty risk. (TXLW\SULFHVHQVLWLYLW\DQDO\VLV The sensitivity analysis on the share-based payments hedging program, calculated based on a ƴƻ.ƵƼ (ƵƳƴƶ: Ƶƶ.Ʒƺ) reasonable possible volatilityƴ of the ABbInBev share price and with all the other variables held constant, would show ƴ ƴƻƶmbUSbdollar positive/negative impact on the ƵƳƴƷ profit before tax (ƵƳƴƶ: ƴ ƵƺƵmbUSbdollar). (&UHGLWULVN Credit risk encompasses all forms of counterparty exposure, i.e. where counterparties may default on their obligations to ABbInBev in relation to lending, hedging, settlement and other financial activities. The company has a credit policy in place and the exposure to counterparty credit risk is monitored. ƴ Sensitivity analysis is assessed based on the yearly volatility using daily observable market data during ƵƸƳ days at ƶƴ December ƵƳƴƷ. Ƶ Sensitivity analysis is assessed based on the yearly volatility using daily observable market data during ƵƸƳ days at ƶƴ December ƵƳƴƶ. P. 132 /133 ABbInBev mitigates its exposure to counterparty credit risk through minimum counterparty credit guidelines, diversification of counterparties, working within agreed counterparty limits and through setting limits on the maturity of financial assets. The company has furthermore master netting agreements with all of the financial institutions that are counterparties to the over the counter (OTC) derivative financial instruments. These agreements allow for the net settlement of assets and liabilities arising from different transactions with the same counterparty. Based on these factors, ABbInBev considers the risk of counterparty default per ƶƴ December ƵƳƴƷ to be limited. ABbInBev has established minimum counterparty credit ratings and enters into transactions only with financial institutions of investment grade. The company monitors counterparty credit exposures closely and reviews any downgrade in credit rating immediately. To mitigate pre- settlement risk, minimum counterparty credit standards become more stringent as the duration of the derivative financial instruments increases. To minimize the concentration of counterparty credit risk, the company enters into derivative transactions with different financial institutions. ([SRVXUHWRFUHGLWULVN The carrying amount of financial assets represents the maximum credit exposure of the company. The carrying amount is presented net of the impairment losses recognized. The maximum exposure to credit risk at the reporting date was: ƵƳƴƷ ƵƳƴƶ 1HWFDUU\LQJ1HWFDUU\LQJ 0LOOLRQ86GROODU *URVV ,PSDLUPHQW DPRXQW *URVV ,PSDLUPHQW DPRXQW Debt securities held for trading ƶƳƴ ś ƶƳƴ ƴƵƶ ś ƴƵƶ Available for sale ƴƳƻ (ƴƴ) Ƽƺ ƴƻƶ (ƴƶ) ƴƺƳ Held to maturity Ƶƴ ś Ƶƴ Ƶƶ ś Ƶƶ Trade receivables ƶ Ʒƻƻ (ƵƹƳ) ƶ ƵƵƻ ƶ ƳƸƵ (ƵƷƼ) Ƶ ƻƳƶ Cash deposits for guarantees ƵƵƼ ś ƵƵƼ ƵƷƳ ś ƵƷƳ Loans to customers ƴƵƴ (ƶƳ) Ƽƴ ƴƼƻ (ƻƷ) ƴƴƷ Other receivables Ƶ Ƶƻƴ (ƴƵƻ) Ƶ ƴƸƶ Ƶ ƻƻƸ (ƴƹƵ) Ƶ ƺƵƶ Derivatives Ƶ ƵƷƷ ś Ƶ ƵƷƷ ƺƵƺ ś ƺƵƺ Cash and cash equivalents ƻ ƶƸƺ ś ƻ ƶƸƺ Ƽ ƻƶƼ ś Ƽ ƻƶƼ ƴƺƴƸƳ ƷƵƼ ƴƹƺƵƴ ƴƺƵƺƳ ƸƳƻ ƴƹƺƹƵ There was no significant concentration of credit risks with any single counterparty per ƶƴ December ƵƳƴƷ and no single customer represented more than ƴƳ of the total revenue of the group in ƵƳƴƷ. ,PSDLUPHQWORVVHV The allowance for impairment recognized during the period per classes of financial assets was as follows: ƵƳƴƷ $YDLODEOHIRU 7UDGH /RDQVWR 2WKHU &DVKDQGFDVK 0LOOLRQ86GROODU VDOH UHFHLYDEOHV FXVWRPHUV UHFHLYDEOHV HTXLYDOHQWV 7RWDO Balance at ƴ January (ƴƶ) (ƵƷƼ) (ƻƷ) (ƴƹƵ) ś (ƸƳƻ) Impairment losses (ƴ) (ƶƺ) (ƴ) ś ś (ƶƼ) Derecognition Ƶ Ƶƻ ƶƻ ƴƸ ś ƻƶ Currency translation and other ƴ (Ƶ) ƴƺ ƴƼ ś ƶƸ %DODQFHDWƶƴ'HFHPEHU ƴƴ ƵƹƳ ƶƳ ƴƵƻ ś ƷƵƼ ƵƳƴƶ $YDLODEOHIRU 7UDGH /RDQVWR 2WKHU &DVKDQGFDVK 0LOOLRQ86GROODU VDOH UHFHLYDEOHV FXVWRPHUV UHFHLYDEOHV HTXLYDOHQWV 7RWDO Balance at ƴ January (Ʒƻ) (ƵƷƹ) (ƴƳƳ) (ƴƶƷ) ś (ƸƵƻ) Impairment losses (ƹƼ) (Ƹƶ) ś (ƴ) ś (ƴƵƶ) Derecognition ƴƳƷ Ʒƴ ƴƼ Ƶ ś ƵƳƷ Currency translation ś Ƽ (ƶ) (ƵƼ) ś (Ƶƶ) %DODQFHDWƶƴ'HFHPEHU ƴƶ ƵƷƼ ƻƷ ƴƹƵ ś ƸƳƻ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT )/LTXLGLW\ULVN ABbInBev’s primary sources of cash flow have historically been cash flows from operating activities, the issuance of debt, bank borrowings and the issuance of equity securities. ABbInBev’s material cash requirements have included the following: ť Debt service; ť Capital expenditures; ť Investments in companies; ť Increases in ownership of ABbInBev’s subsidiaries or companies in which it holds equity investments; ť Share buyback programs; and ť 3ayments of dividends and interest on shareholders’ equity. The company believes that cash flows from operating activities, available cash and cash equivalent and short term investments, along with the derivative instruments and access to borrowing facilities, will be sufficient to fund capital expenditures, financial instrument liabilities and dividend payments going forward. It is the intention of the company to continue to reduce its financial indebtedness through a combination of strong operating cash flow generation and continued refinancing. The following are the nominal contractual maturities of non-derivative financial liabilities including interest payments and derivative financial assets and liabilities: ƵƳƴƷ &DUU\LQJ &RQWUDFWXDO /HVVWKDQ 0RUHWKDQ Million US dollar amountƴ FDVKưRZV ƴ\HDU ƴśƵ\HDUV Ƶśƶ\HDUV ƶśƸ\HDUV Ƹ\HDUV 1RQGHULYDWLYHƮQDQFLDOOLDELOLWLHV Secured bank loans (Ƶƻƹ) (ƶƴƶ) (ƴƵƷ) (ƻƵ) (ƶƵ) (Ʒƹ) (ƵƼ) Commercial papers (Ƶ Ƶƴƴ) (Ƶ ƵƴƷ) (Ƶ ƵƴƷ) ś ś ś ś Unsecured bank loans (ƻƵƳ) (ƻƻƼ) (ƸƼƳ) (ƴƹƻ) (ƹƼ) (ƹƵ) ś Unsecured bond issues (Ʒƺ ƸƷƼ) (ƹƹ ƻƸƴ) (Ƹ ƺƴƸ) (Ʒ ƵƴƵ) (ƻ ƶƶƼ) (ƴƶ ƴƸƷ) (ƶƸ Ʒƶƴ) Unsecured other loans (ƻƵ) (ƴƺƸ) (ƶƸ) (Ƶƴ) (ƴƻ) (ƵƵ) (ƺƼ) )inance lease liabilities (ƴƶƶ) (ƵƷƷ) (ƴƷ) (ƴƷ) (ƴƷ) (ƶƷ) (ƴƹƻ) Bank overdraft (Ʒƴ) (Ʒƴ) (Ʒƴ) ś ś ś ś Trade and other payables (ƴƻ ƼƳƼ) (ƴƼ ƴƸƴ) (ƴƺ ƼƳƻ) (ƶƸƹ) (ƵƴƸ) (ƴƹƶ) (ƸƳƼ) ƺƳƳƶƴ ƻƼƻƺƻ ƵƹƹƷƴ ƷƻƸƶ ƻƹƻƺ ƴƶƷƻƴ ƶƹƵƴƹ 'HULYDWLYHƮQDQFLDODVVHWV OLDELOLWLHV Interest rate derivatives ƶƶ ƶƶ Ʒƺ Ƶƴ (ƴƴ) (ƵƷ) ś )oreign exchange derivatives (Ƶƺƺ) (Ƶƻƴ) (Ƶƻƴ) ś ś ś ś Cross currency interest rate swaps ƶƴƼ ƶƻƷ ƻƶ Ʒƴ ƴƳƶ ƴƴƹ Ʒƴ Commodity derivatives (ƴƹƹ) (ƴƹƼ) (ƴƺƴ) Ƶ ś ś ś Equity derivatives ƴ ƵƸƻ ƴ ƵƷƹ ƴ ƳƵƻ Ƶƴƻ ś ś ś ƴƴƹƺ ƴƵƴƶ ƺƳƹ ƵƻƵ ƼƵ ƼƵ Ʒƴ Of which: directly related to cash ưow hedges (ƷƸ) (Ʒƺ) (Ʒƹ) Ƶ Ʒƴ (Ʒƶ) (ƴ) ƴŠCarrying amountš refers to net book value as recognized in the balance sheet at each reporting date. P. 134 /135 ƵƳƴƶ &DUU\LQJ &RQWUDFWXDO /HVVWKDQ 0RUHWKDQ Million US dollar amountƴ FDVKưRZV ƴ\HDU ƴśƵ\HDUV Ƶśƶ\HDUV ƶśƸ\HDUV Ƹ\HDUV 1RQGHULYDWLYHƮQDQFLDOOLDELOLWLHV Secured bank loans (Ƶƻƹ) (ƶƴƵ) (ƴƳƷ) (ƻƹ) (ƸƳ) (ƶƷ) (ƶƻ) Commercial papers (Ƶ ƳƹƸ) (Ƶ Ƴƹƹ) (Ƶ Ƴƹƹ) ś ś ś ś Unsecured bank loans (ƹƼƷ) (ƺƺƷ) (ƶƺƷ) (ƵƳƹ) (ƴƸƹ) (ƶƻ) ś Unsecured bond issues (ƷƸ ƻƸƶ) (ƹƸ ƵƴƸ) (ƹ ƸƼƳ) (ƹ ƶƼƴ) (Ʒ ƴƶƻ) (ƴƴ ƺƸƻ) (ƶƹ ƶƶƻ) Unsecured other loans (ƻƺ) (ƴƹƳ) (ƵƳ) (Ƶƺ) (ƴƼ) (ƴƹ) (ƺƻ) )inance lease liabilities (ƴƶƸ) (ƵƸƹ) (ƴƷ) (ƴƶ) (ƴƷ) (Ƶƻ) (ƴƻƺ) Bank overdraft (ƹ) (ƹ) (ƹ) ś ś ś ś Trade and other payables (ƴƻ ƻƼƴ) (ƴƼ ƴƵƴ) (ƴƸ ƻƷƴ) (ƴ ƻƳƹ) (Ƶƺƴ) (ƵƹƳ) (ƼƷƶ) ƹƻƳƴƺ ƻƺƼƴƳ ƵƸƳƴƸ ƻƸƵƼ ƷƹƷƻ ƴƵƴƶƷ ƶƺƸƻƷ 'HULYDWLYHƮQDQFLDODVVHWV OLDELOLWLHV Interest rate derivatives (ƶƹ) (ƶƹ) (ƶƳ) ƴ ś (ƺ) ś )oreign exchange derivatives (ƹƷ) (ƺƷ) (ƺƷ) ś ś ś ś Cross currency interest rate swaps (ƹƴ) ƺƹ ƴƸ Ʒ ƶ ƴƳ ƷƷ Commodity derivatives (ƴƷƼ) (ƴƷƺ) (ƴƸƷ) ƺ ś ś ś Equity derivatives ƵƷƻ ƵƷƻ ƵƴƳ ƶƻ ś ś ś ƹƵ ƹƺ ƶƶ ƸƳ ƶ ƶ ƷƷ Of which: directly related to cash ưow hedges (ƹƹ) Ƶƹ (ƹƴ) Ʒ ƺ ƶƵ ƷƷ *&DSLWDO0DQDJHPHQW ABbInBev is continuously optimizing its capital structure targeting to maximize shareholder value while keeping the desired financial flexibility to execute the strategic projects. ABbInBev’s capital structure policy and framework aims to optimize shareholder value through cash flow distribution to the company from its subsidiaries, while maintaining an investment-grade rating and minimizing investments with returns below ABbInBev’s weighted average cost of capital. Besides the statutory minimum equity funding requirements that apply to the company’s subsidiaries in the different countries, ABbInBev is not subject to any externally imposed capital requirements. :hen analyzing ABbInBev’s capital structure the company uses the same debt/equity classifications as applied in the company’s I)RS reporting. +)DLUYDOXH )air value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In conformity with IAS ƶƼ all derivatives are recognized at fair value in the balance sheet. The fair value of derivative financial instruments is either the quoted market price or is calculated using pricing models taking into account current market rates. The fair value of these instruments generally reflects the estimated amount that ABbInBev would receive on the settlement of favorable contracts or be required to pay to terminate unfavorable contracts at the balance sheet date, and thereby takes into account any unrealized gains or losses on open contracts. ƴŠCarrying amountš refers to net book value as recognized in the balance sheet at each reporting date. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT The following table summarizes for each type of derivative the fair values recognized as assets or liabilities in the balance sheet: $VVHWV /LDELOLWLHV 1HW MLOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ ƵƳƴƷ ƵƳƴƶ )RUHLJQFXUUHQF\ )orward exchange contracts ƷƵƳ ƵƳƳ (ƹƸƵ) (ƶƵƵ) (ƵƶƵ) (ƴƵƵ) )oreign currency futures ƺƵ ƶƹ (ƴƴƺ) (ƵƼ) (ƷƸ) ƺ Other foreign currency derivatives ś Ƹƴ ś ś ś Ƹƴ Interest rate Interest rate swaps Ʒƴ ƶƼ (ƻ) (ƺƸ) ƶƶ (ƶƹ) Cross currency interest rate swaps ƶƺƼ ƴƳƳ (ƹƳ) (ƴƹƴ) ƶƴƼ (ƹƴ) Commodities Aluminum swaps ƴƺ ƴƴ (Ƹƶ) (ƴƳƳ) (ƶƹ) (ƻƼ) Sugar futures Ƶ ƴ (Ƶƺ) (ƵƵ) (ƵƸ) (Ƶƴ) :heat futures Ʒƺ ƴƷ (ƴƹ) (ƴƼ) ƶƴ (Ƹ) Other commodity derivatives ƻ Ƶƺ (ƴƷƷ) (ƹƴ) (ƴƶƹ) (ƶƷ) (TXLW\ Equity derivatives ƴ ƵƸƻ ƵƷƻ ś ś ƴ ƵƸƻ ƵƷƻ ƵƵƷƷ ƺƵƺ ƴƳƺƺ ƺƻƼ ƴƴƹƺ ƹƵ The following table summarizes the carrying amounts of the fixed rate interest-bearing financial liabilities and their fair value. The fair value was assessed using common discounted cash-flow method based on market conditions existing at the balance sheet date. Therefore, the fair value of the fixed interest-bearing liabilities is within level Ƶ of the fair value hierarchy as set forth by I)RS ƴƶ ś Fair value measurement. )loating rate interest- bearing financial liabilities and all trade and other receivables and payables, including derivatives financial instruments, have been excluded from the analysis as their carrying amounts are a reasonable approximation of their fair values: ,QWHUHVWEHDULQJƮQDQFLDOOLDELOLWLHV ƵƳƴƷ ƵƳƴƷ ƵƳƴƶ ƵƳƴƶ MLOOLRQ86GROODU &DUU\LQJDPRXQWƴ )DLUYDOXH &DUU\LQJDPRXQWƴ Fair value Fixed rate Argentinean peso (ƶƺ) (ƶƺ) ś ś Brazilian real (ƸƼƸ) (ƸƼƴ) (ƹƴƴ) (ƹƵƷ) Canadian dollar (ƴ ƸƷƻ) (ƴ ƸƻƳ) (ƴ ƹƻƵ) (ƴ ƹƻƸ) Dominican peso (Ƶƶ) (Ƶƶ) (ƵƳ) (ƵƳ) Euro (ƴƳ ƵƷƹ) (ƴƴ ƶƺƶ) (ƴƳ ƳƸƸ) (ƴƳ Ƹƺƺ) 3ound sterling (Ƶ ƻƴƹ) (ƶ ƸƶƷ) (ƶ Ƴƶƴ) (ƶ ƹƴƸ) Swiss franc ś ś (ƹƺƶ) (ƹƻƺ) US dollar (ƶƶ ƶƴƵ) (ƶƺ ƹƷƹ) (ƶƴ ƴƼƸ) (ƶƸ ƳƵƻ) Other (ƻ) (ƻ) (ƺ) (ƺ) ƷƻƸƻƸ ƸƷƺƼƵ ƷƺƵƺƷ ƸƵƵƷƶ As required by I)RS ƴƶ Fair value measurement, the following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels ƴ to ƶ based on the degree to which the fair value is observable. ť Level ƴ fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. ť Level Ƶ fair value measurements are those derived from inputs other than quoted prices included within Level ƴ that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). ť Level ƶ fair value measurements are those derived from valuation techniques for which the lowest level of input that is significant to the fair value measurement is unobservable. ƴŠCarrying amountš refers to net book value as recognized in the balance sheet at each reporting date. P. 136 /137 4XRWHG 2EVHUYDEOH 8QREVHUYDEOH )DLUYDOXHKLHUDUFK\ƵƳƴƷ XQDGMXVWHG PDUNHW PDUNHW 0LOOLRQ86GROODU SULFHVOHYHOƴ LQSXWVOHYHOƵ LQSXWVOHYHOƶ Financial Assets Held for trading (non-derivatives) ƶƳƴ ś ś Derivatives at fair value through proƮt and loss ƶƺ ƴ ƶƸƵ ś Derivatives in a cash ưow hedge relationship ƴƴ ƶƹƼ ś Derivatives in a fair value hedge relationship ś ƴƷƳ ś Derivatives in a net investment hedge relationship ƶƷ ƶƳƴ ś ƶƻƶƵƴƹƵś )LQDQFLDO/LDELOLWLHV Deferred consideration on acquisitions at fair value ś ś ƴ Ƶƹƻ Derivatives at fair value through proƮt and loss ƹƸ ƷƸƼ ś Derivatives in a cash ưow hedge relationship ƻƼ ƶƶƹ ś Derivatives in a fair value hedge relationship ś ƴƻ ś Derivatives in a net investment hedge relationship ƴƼ Ƽƴ ś ƴƺƶƼƳƷƴƵƹƻ 4XRWHG 2EVHUYDEOH 8QREVHUYDEOH )DLUYDOXHKLHUDUFK\ƵƳƴƶ XQDGMXVWHG PDUNHW PDUNHW 0LOOLRQ86GROODU SULFHVOHYHOƴ LQSXWVOHYHOƵ LQSXWVOHYHOƶ Financial Assets Held for trading (non-derivatives) ƴƵƶ ś ś Derivatives at fair value through proƮt and loss Ƶƺ ƷƴƵ ś Derivatives in a cash ưow hedge relationship ƴƳƳ ƴƴƼ ś Derivatives in a fair value hedge relationship ś ƵƸ ś Derivatives in a net investment hedge relationship ś ƷƷ ś ƵƸƳƹƳƳś )LQDQFLDO/LDELOLWLHV Deferred consideration on acquisitions at fair value ś ś ƴ ƴƴƴ Derivatives at fair value through proƮt and loss ƴƹ ƶƼƵ ś Derivatives in a cash ưow hedge relationship ƹƼ Ƶƴƹ ś Derivatives in a fair value hedge relationship ś ƹƻ ś Derivatives in a net investment hedge relationship ƴƶ ƴƸ ś ƼƻƹƼƴƴƴƴƴ Derivative instruments The fair value of exchange traded derivatives (e.g. exchange traded foreign currency futures) is determined by reference to the official prices published by the respective exchanges (e.g. the New York Board of Trade). The fair value of over-the-counter derivatives is determined by commonly used valuation techniques. These are based on market inputs from reliable financial information providers. 1RQGHULYDWLYHILQDQFLDOOLDELOLWLHV As part of the shareholders agreement between Ambev and E. Le²n Jimenes S.A., following the acquisition of Cervecer¬a Nacional Dominicana S.A. (ŠCNDš), a put and call option is in place which may result in Ambev acquiring additional shares in CND. As of ƶƴ December ƵƳƴƷ, the put option was valued ƴ ƵƶƼmbUSbdollar (ƵƳƴƶ: ƴ ƳƺƹmbUSbdollar) and recognized as a deferred consideration on acquisitions at fair value in Šlevel ƶš category above. The variance is mainly explained by accretion and foreign exchange expenses as well as fair value losses. No value was allocated to the call option. The fair value of such deferred consideration is calculated based on commonly-used valuation techniques (i.e. net present value of future principal and interest cash flows discounted at market rate). These are based on market inputs from reliable financial information providers. As the put option may be exercised in the short-term, a portion of the liability is presented as a current liability. )air values determined by reference to prices provided by reliable financial information providers are periodically checked for consistency against other pricing sources. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ,2IIVHWWLQJILQDQFLDODVVHWV ILQDQFLDOOLDELOLWLHV The following financial assets and liabilities are subject to offsetting, enforceable master netting agreements and similar agreements: ƵƳƴƷ $PRXQWVRƬVHW $PRXQWVQRWRƬVHW Net &DVK Gross Net collateral *URVV DPRXQWV DPRXQWV )LQDQFLDO SOHGJHG 0LOOLRQ86GROODU DPRXQWV RƬVHW SUHVHQWHG LQVWUXPHQWV UHFHLYHG Derivative assets Ƶ ƵƷƷ ś Ƶ ƵƷƷ (ƼƵƵ) (ƵƼƶ) ƴ ƳƵƼ Derivative liabilities (ƴ Ƴƺƺ) ś (ƴ Ƴƺƺ) ƼƵƵ ƴƼ (ƴƶƹ) ƵƳƴƶ $PRXQWVRƬVHW $PRXQWVQRWRƬVHW Net &DVK Gross Net collateral *URVV DPRXQWV DPRXQWV )LQDQFLDO SOHGJHG 0LOOLRQ86GROODU DPRXQWV RƬVHW SUHVHQWHG LQVWUXPHQWV UHFHLYHG Derivative assets ƺƵƺ ś ƺƵƺ (ƹƳƴ) ś ƴƵƹ Derivative liabilities (ƺƻƼ) ś (ƺƻƼ) ƹƳƴ Ƶƴ (ƴƹƺ) )or the financial assets and liabilities subject to enforceable master netting agreements or similar agreements above, each agreement between the company and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such election, financial assets and liabilities will be settled on a gross basis, however, each party to the master net agreement will have the option to settle all such amounts on a net basis in the event of default of the other part. Ƶƻ2SHUDWLQJ/HDVHV Non-cancelable operating leases are payable and receivable as follows: ƵƳƴƷ 3XEOHDVHV 2WKHURSHUDWLRQDOOHDVHV 1HWOHDVH 0LOOLRQ86GROODU /HVVHH 6XEOHDVH /HVVHH 6XEOHDVH /HVVRU REOLJDWLRQV Less than one year (ƴƵƴ) ƻƶ (ƴƳƺ) ƶƹ ƶ (ƴƳƹ) Between one and two years (ƴƴƻ) ƺƼ (ƻƼ) Ƶƻ Ƶ (Ƽƻ) Between two and three years (ƴƴƸ) ƺƸ (ƺƳ) ƵƷ ƶ (ƻƶ) Between three and Ʈve years (ƵƴƷ) ƴƷƳ (ƼƳ) ƶƷ Ʒ (ƴƵƹ) More than Ʈve years (ƺƳƷ) ƴƻƹ (ƴƴƻ) Ƶƴ ƴƸ (ƹƳƳ) ƴƵƺƵ Ƹƹƶ ƷƺƷ ƴƷƶ Ƶƺ ƴƳƴƶ ƵƳƴƶ 3XEOHDVHV 2WKHURSHUDWLRQDOOHDVHV 1HWOHDVH 0LOOLRQ86GROODU /HVVHH 6XEOHDVH /HVVHH 6XEOHDVH /HVVRU REOLJDWLRQV Less than one year (ƴƵƴ) ƼƷ (ƴƸƵ) ƷƳ ƶ (ƴƶƹ) Between one and two years (ƴƴƺ) ƼƳ (ƴƴƹ) ƶƴ ƶ (ƴƳƼ) Between two and three years (ƴƴƶ) ƻƸ (ƻƹ) Ƶƺ ƶ (ƻƷ) Between three and Ʈve years (ƵƳƼ) ƴƸƻ (ƴƵƶ) ƶƻ ƹ (ƴƶƳ) More than Ʈve years (ƻƵƹ) ƵƴƳ (ƴƹƷ) ƵƵ ƺ (ƺƸƴ) ƴƶƻƹ ƹƶƺ ƹƷƴ ƴƸƻ ƵƵ ƴƵƴƳ )ollowing the sale of Dutch and Belgian pub real estate to Cofinimmo in October ƵƳƳƺ, ABbInBev entered into lease agreements of Ƶƺ years. These operating leases maturing in November ƵƳƶƷ represent an undiscounted obligation of ƴ ƵƺƵmbUSbdollar. The pubs leased from Cofinimmo are subleased for an average outstanding period of ƹ to ƻ years and represent an undiscounted right to receive ƸƹƶmbUSbdollar. These leases are subject to renewal after their expiration date. The impact of such renewal is not reported in the table above. )urthermore, the company leases a number of warehouses, factory facilities and other commercial buildings under operating leases. The leases typically run for an initial period of five to ten years, with an option to renew the lease after that date. This represents an undiscounted obligation of ƷƺƷmbUSbdollar. Lease payments are increased annually to reflect market rentals. None of the leases include contingent rentals. Also in this category ABbInBev has sublet some of the leased properties, representing an undiscounted right of ƴƷƶmbUSbdollar. P. 138 /139 At ƶƴ December ƵƳƴƷ, ƵƺƹmbUSbdollar was recognized as an expense in the income statement in respect of operating leases as lessee (ƵƳƴƶ: ƵƸƸmbUSbdollar), while ƴƷƻmbUSbdollar was recognized as income in the income statement in respect of subleases (ƵƳƴƶ: ƴƷƴmbUSbdollar). The company also leases out part of its own property under operating leases. At ƶƴ December ƵƳƴƷ, ƵƶmbUSbdollar was recognized as income in the income statement in respect of operating leases as lessor (ƵƳƴƶ: ƺmbUSbdollar). ƵƼ&ROODWHUDODQGContractual Commitments for the Acquisition of PURSHUW\Plant and ETXLSPHQW /oans to Customers and other 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Collateral given for own liabilities ƹƷƴ ƸƸƼ Collateral and Ʈnancial guarantees received for own receivables and loans to customers ƴƼƶ Ƹƺ Contractual commitments to purchase property, plant and equipment ƹƷƺ ƸƼƴ Contractual commitments to acquire loans to customers ƴƶ Ƶƹ Other commitments ƴ ƻƳƴ ƴ ƳƵƴ The collateral given for own liabilities of ƹƷƴmbUSbdollar at ƶƴ December ƵƳƴƷ contains ƴƼƻmbUSbdollar cash guarantees. Such cash deposits are a customary feature associated with litigations in Brazil: in accordance with Brazilian laws and regulations a company may or must (depending on the circumstances) place a deposit with a bank designated by the court or provide other security such as collateral on property, plant and equipment. :ith regard to judicial cases, ABbInBev has made the appropriate provisions in accordance with IAS ƶƺ Provisions, Contingent Liabilities and Contingent Assets ś see also Note ƵƸ Provisions. In the company’s balance sheet the cash guarantees are presented as part of other receivablesbś see Note ƴƼ Trade and other receivables. The remaining part of collateral given for own liabilities (ƷƷƶmbUSbdollar) contains collateral on ABbInBev’s property in favor of the excise tax authorities, the amount of which is determined by the level of the monthly excise taxes due, inventory levels and transportation risk, and collateral on its property, plant and equipment with regard to outstanding loans. To the extent that ABbInBev would not respect its obligations under the related outstanding contracts or would lose the pending judicial cases, the collateralized assets would be used to settle ABbInBev’s obligations. To keep ABbInBev’s credit risk with regard to receivables and loans to customers as low as possible collateral and other credit enhancements were obtained for a total amount of ƴƼƶmbUSbdollar at ƶƴ December ƵƳƴƷ. Collateral is held on both real estate and debt securities while financial guarantees are obtained from banks and other third parties. ABbInBev has entered into commitments to purchase property, plant and equipment for an amount of ƹƷƺmbUSbdollar at ƶƴ December ƵƳƴƷ. In a limited number of countries ABbInBev has committed itself to acquire loans to customers from banks at their notional amount if the customers do not respect their reimbursement commitments towards the banks. The total outstanding amount of such loans is ƴƶmbUSbdollar at ƶƴbDecember ƵƳƴƷ. Other commitments amount to ƴ ƻƳƴmbUSbdollar at ƶƴ December ƵƳƴƷ and mainly cover guarantees given to pension funds, rental and other guarantees. As at ƶƴ December ƵƳƴƷ, the following M A related commitments existed with respect to the combination with *rupo Modelo: ť In a transaction related to the combination of ABbInBev and *rupo Modelo select *rupo Modelo shareholders committed, upon tender of their *rupo Modelo shares, to acquire Ƶƶ Ƴƺƹ ƼƵƶ ABbInBev shares to be delivered within Ƹ years for consideration of approximately ƴ.Ƹbbillion USbdollar. The consideration was paid on Ƹ June ƵƳƴƶ. 3ending the delivery of the ABbInBev shares, ABbInBev will pay a coupon on each undelivered ABbInBev share, so that the Deferred Share Instrument holders are compensated on an after tax basis, for dividends they would have received had the ABbInBev shares been delivered to them prior to the record date for such dividend. ť On ƺ June ƵƳƴƶ, in a transaction related to the combination of ABbInBev and *rupo Modelo, ABbInBev and Constellation have entered into a three-year transition services agreement by virtue of which *rupo Modelo or its affiliates will provide certain transition services to Constellation to ensure a smooth operational transition of the 3iedras Negras brewery. ABbInBev and Constellation have also entered into a temporary supply agreement for an initial three-year term, whereby Constellation can purchase inventory from *rupo Modelo or its affiliates under a specified pricing until the 3iedras Negras brewery business acquires the necessary capacity to fulfill ƴƳƳ percent of the US demand. In order to fulfil ABbInBev’s commitments under various outstanding stock option plans, ABbInBev entered into stock lending arrangements for up to ƴƶ million of its own ordinary shares. ABbInBev shall pay any dividend equivalent, after tax in respect of the loaned securities. This payment will be reported through equity as dividend. As of ƶƴ December ƵƳƴƷ, ƴƳ million loaned securities were used to fulfil stock option plan commitments. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƶƳ&RQWLQJHQFLHVƴ The company has contingencies for which, in the opinion of management and its legal counsel, the risk of loss is possible but not probable and therefore no provisions have been recorded. Due to their nature, such legal proceedings and tax matters involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions, and as a consequence ABbInBev management cannot at this stage estimate the likely timing of resolution of these matters. The most significant contingencies are discussed below. $PEHYWD[PDWWHUV As of ƶƴ December ƵƳƴƷ, ABbInBev’s material tax proceedings related to Ambev and its subsidiaries. Estimates of amounts of possible loss are as follows: 0LOOLRQ86GROODU ƶƴ'HFHPEHUƵƳƴƷ ƶƴ'HFHPEHUƵƳƴƶ Income tax and social contribution Ʒ ƻƺƷ Ʒ ƶƸƵ Value-added and excise taxes Ƶ ƴƵƺ ƴ ƹƵƸ Other taxes ƴƴƸ ƴƸƸ ƺƴƴƹ ƹƴƶƵ The most significant tax proceedings of Ambev are discussed below. ,QFRPHWD[DQGVRFLDOFRQWULEXWLRQ During the first quarter ƵƳƳƸ, certain subsidiaries of Ambev received a number of assessments from Brazilian federal tax authorities relating to profits of its foreign subsidiaries. In December ƵƳƳƻ, the Administrative Court decided on one of the tax assessments relating to earnings of Ambev’s foreign subsidiaries. This decision was partially favorable to Ambev, and in connection with the remaining part, Ambev filed an appeal to the Upper House of the Administrative Court and is awaiting its decision. :ith respect to another tax assessment relating to foreign profits, the Administrative Court rendered a decision favorable to Ambev in September ƵƳƴƴ. In December ƵƳƴƶ, Ambev received another tax assessment related to profits of its foreign subsidiaries. As of ƶƴ December ƵƳƴƷ, Ambev management estimates the exposure of approximately Ʒ.Ƶ billion Brazilian real (ƴ.ƹ billion US dollar) as a possible risk, and accordingly has not recorded a provision for such amount, and approximately ƶƸm Brazilian real (ƴƶmbUSbdollar) as a probable loss. In December ƵƳƴƴ, Ambev received a tax assessment related to the goodwill amortization resulting from the Inbev Holding Brasil S.A. merger with Ambev. In November ƵƳƴƷ the Lower Administrative Court concluded the judgment and now Ambev awaits the publication of the decision. As this decision was partly favorable, Ambev will present an appeal to the Upper Administrative Court after such publication. Ambev management estimates the amount of possible losses in relation to this assessment to be approximately Ʒ.ƶ billion Brazilian real (ƴ.ƹ billion US dollar) as of ƶƴbDecember ƵƳƴƷ. Ambev has not recorded any provision in connection therewith. In the event Ambev would be required to pay these amounts, Anheuser-Busch InBev SA/NV will reimburse Ambev the amount proportional to the benefit received by Anheuser-Busch InBev SA/NV pursuant to the merger protocol, as well as the respective costs. In October ƵƳƴƶ, Ambev also received a tax assessment related to the goodwill amortization resulting from the merger of QUINSA S.A. into Ambev. Ambev filed a defense in November ƵƳƴƶ. In December ƵƳƴƷ, Ambev filed an appeal against the unfavorable first level administrative decision published in November ƵƳƴƷ. Ambev management estimates the amount of possible losses in relation to this assessment to be approximately ƴ.Ƶbbillion Brazilian real (Ƴ.Ƹ billion US dollar) as of ƶƴ December ƵƳƴƷ. Ambev has not recorded any provision in connection therewith. Ambev and certain of its subsidiaries received a number of assessments from Brazilian federal tax authorities relating to the consumption of income tax losses in relation to company mergers. After a decision by the CAR) and a related appeal presented by the tax authorities on one of those assessments, Ambev management estimates the total exposures of possible losses in relation to these assessments to be approximately of ƷƴƼm Brazilian real (ƴƸƻmbUSbdollar) as of ƶƴ December ƵƳƴƷ. In December ƵƳƴƷ, Ambev received a tax assessment from the Brazilian )ederal Tax Authorities related to the disallowance of alleged non- deductible expenses and the deduction of certain losses mainly associated to financial investments and loans. The defense was presented on ƵƺbJanuary ƵƳƴƸ. Ambev management estimates the amount of possible losses in relation to this assessment to be approximately ƴ.Ƶ billion Brazilian real (Ƴ.Ƹ billion US dollar) as of ƶƴ December ƵƳƴƷ. Ambev has not recorded any provision in connection therewith. ICMSYDOXHDGGHGWD[LSLH[FLVHWD[DQGWD[HVRQQHWVDOHV In Brazil, goods manufactured within the Manaus )ree Trade Zone intended for consumption elsewhere in Brazil are exempt from I3I excise tax. Ambev’s subsidiaries have been registering I3I excise tax presumed credits upon the acquisition of exempted inputs manufactured therein. Since ƵƳƳƼ, Ambev has been receiving a number of tax assessments from the Brazilian )ederal Tax Authorities relating to the disallowance ƴ Amounts have been converted to US dollar at the closing rate of the respective period. P. 140 /141 of such presumed credits and other I3I credits, which are under discussion. Ambev management estimates the possible losses related to these assessments to be approximately Ƽƴƺm Brazilian real (ƶƷƸmbUSbdollar) as of ƶƴ December ƵƳƴƷ. Ambev has not recorded any provision in connection therewith. In ƵƳƴƷ, Ambev received tax assessments from the Brazilian )ederal Tax Authorities relating to I3I excise tax, supposedly due over remittances of manufactured goods to other related factories, for which the decision from the Upper House of the Administrative Court is still pending. Ambev management estimates the possible losses related to these assessments to be approximately ƸƴƳm Brazilian real (ƴƼƵmbUSbdollar) as of ƶƴbDecember ƵƳƴƷ. Ambev has not recorded any provision in connection therewith. In ƺ January ƵƳƴƸ, Ambev received a new tax assessment related to this issue in the amount of Ƹƹƻm Brazilian real (ƵƴƷmbUSbdollar), also considered a possible loss. Ambev is currently challenging tax assessments from the States of S¢o 3aulo, Rio de Janeiro and Minas *erais, which question the legality of tax credits arising from existing tax incentives received by Ambev in other States. In August ƵƳƴƷ, Ambev received other tax assessments related to the same issue. Ambev management estimates the possible losses related to these assessments to be approximately ƴ.Ƴ billion Brazilian real (ƶƼƳmbUSbdollar) as of ƶƴ December ƵƳƴƷ. Ambev has not recorded any provision in connection therewith. Ambev is currently party to legal proceedings with the State of Rio de Janeiro where it is challenging such State’s attempt to assess ICMS with respect to unconditional discounts granted by Ambev from January ƴƼƼƹ to )ebruary ƴƼƼƻ. These proceedings are currently before the Superior Court of Justice and the Brazilian Supreme Court. In November ƵƳƴƶ, Ambev received a similar tax assessments issued by the State of 3ar . Ambev management estimates the total exposure in relation to the matter to be approximately ƻƵƳm Brazilian real (ƶƳƼmbUSbdollar) as of ƶƴbDecemberbƵƳƴƷ, of which ƺƳƷm Brazilian real (ƵƹƸmbUSbdollar) are considered as possible losses, and accordingly Ambev has not recorded a provision for such amount, and approximately ƴƴƹm Brazilian real (ƷƷmbUSbdollar) as a probable loss. 2WKHUWD[PDWWHUV During ƵƳƴƷ, Anheuser-Busch InBev :orldwide Inc. received a net proposed tax assessment from the United States federal tax authorities (IRS) of Ƴ.ƶ billion US dollar predominantly involving certain inter-company transactions, related to tax returns for the years ƵƳƳƻ and ƵƳƳƼ. Anheuser- Busch InBev :orldwide Inc. has filed protests with the IRS and intends to vigorously defend its position. Warrants Certain holders of warrants issued by Ambev in ƴƼƼƹ for exercise in ƵƳƳƶ proposed lawsuits to subscribe correspondent shares for an amount lower than Ambev considers as established upon the warrant issuance. In case Ambev loses the totality of these lawsuits, the issuance of ƴƺƵ,ƻƶƴ,ƸƺƸ shares would be necessary. Ambev would receive in consideration funds that are materially lower than the current market value. This could result in a dilution of about ƴ to all Ambev shareholders. )urthermore, the holders of these warrants are claiming that they should receive the dividends relative to these shares since ƵƳƳƶ, approximately ƸƺƵm Brazilian real (ƵƴƸmbUSbdollar) in addition to legal fees. Ambev disputes these claims and intends to continue to vigorously defend its case. Antitrust matters On ƵƵ July ƵƳƳƼ, CADE, the Brazilian antitrust authority issued its ruling in Administrative 3roceeding No. ƳƻƳƴƵ.ƳƳƶƻƳƸ/ƵƳƳƷ-ƴ. This proceeding was initiated in ƵƳƳƷ as a result of a complaint filed by Schincariol (a South American brewery and beverage maker based in Brazil) and had, as its main purpose, the investigation of Ambev’s conduct in the market, in particular its customer loyalty program known as ŠT³ Contigo,š which is similar to airline frequent flyer and other mileage programs. During its investigation, the Secretariat of Economic Law of the Ministry of Justice (ŠSDEš) concluded that the program should be considered anticompetitive unless certain adjustments were made. These adjustments had already been substantially incorporated into the then-current version of the 3rogram. The SDE opinion did not threaten any fines and recommended that the other accusations be dismissed. After the SDE opinion was issued, the proceeding was sent to CADE, which issued a ruling that, among other things, imposed a fine in the amount of ƶƸƶm Brazilian real (ƴƶƶmbUSbdollar). Ambev believes that CADE’s decision was without merit and thus has challenged it before the federal courts, which have ordered the suspension of the fine and other parts of the decision upon its posting of a guarantee. Ambev has already rendered a court bond (letter of credit) for this purpose. According to the opinion of Ambev’s management, a loss is possible (but not probable), and therefore Ambev has not established a provision in its financial statements. This possible loss is expected to be limited to the aforementioned fine (which reached ƸƵƷm Brazilian Real (ƴƼƺmbUSbdollar) as of ƶƴ December ƵƳƴƷ, reflecting adjustment for inflation and accrued interests and additional legal fees in connection with this matter. Ambev is also involved in other administrative proceedings before CADE and SDE, relating to the investigation of certain conduct, none of which the company believes contravenes applicable competition rules and regulations. In August ƵƳƴƴ, the *erman )ederal Cartel Office (Bundeskartellamt) launched an investigation against several breweries and retailers in *ermany in connection with an allegation of anticompetitive vertical price maintenance by breweries vis--vis their trading partners in *ermany. Depending on the outcome of the investigation, the company may face fines. The company is taking the appropriate steps in the pending proceedings but has not recorded any provisions for any potential fines at this point in time, as ABbInBev management does not know whether the company will eventually face any such fines and, in any event, cannot at this stage reliably estimate the appropriate amount. In addition, the company cannot at this stage estimate the likely timing of the resolution of this matter. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT On ƴƵ December ƵƳƴƷ, claimants in Canada brought a lawsuit against the Liquor Control Board of Ontario, Brewers Retail Inc. (The Beer Store) and the owners of Brewers Retail Inc. (Molson Coors Canada, Sleeman Breweries Ltd. and Labatt Breweries of Canada L3). The lawsuit, brought pursuant to the Ontario Class 3roceedings Act in the Ontario Superior Court of Justice, seeks, among other things: a declaration that the defendants conspired and agreed with each other to allocate sales, territories, customers or markets for the supply of beer sold in Ontario since June ƴ, ƵƳƳƳ, and a declaration that the owners of Brewers Retail Inc. conspired and agreed to fix, increase and/or maintain prices charged to Ontario licensees (on-trade) for beer and the fees charged by The Beer Store to other competitive brewers who wished to sell their products through The Beer Store. The claimants are seeking damages not exceeding ƴ.Ʒ billion Canadian dollar (ƴ.Ƶ billion US dollar) and punitive, exemplary and aggravated damages of Ƹ million Canadian dollar. The company believes that there are strong defenses and, accordingly, has not recorded any provision in connection therewith. ƵƳƳƼ'LVSRVLWLRQVSHQVLRQOLWLJDWLRQ On ƴ December ƵƳƳƼ, ABbInBev and several of its related companies were sued in )ederal Court in the Eastern District of Missouri in a lawsuit styled Richard ). Angevine v. ABbInBev, et al. The plaintiff sought to represent a class of certain employees of Busch Entertainment Corporation, which was divested on ƴ December ƵƳƳƼ, and the four Metal Container Corporation plants which were divested on ƴ October ƵƳƳƼ. He also sought to represent certain employees of any other subsidiary of Anheuser-Busch Companies, Inc. (ABC) which were divested on ƴ OctoberbƵƳƳƼ. The lawsuit contained claims that the class was entitled to enhanced retirement benefits under sections Ʒ.ƶ and ƴƼ.ƴƴ(f) of the Anheuser-Busch Companies’ Salaried Employees’ 3ension 3lan (the Š3lanš). Specifically, plaintiff alleged that the divestitures resulted in his Šinvoluntarily terminationš from ŠABC and its operating division and subsidiariesš within three years after the ƴƻ November ƵƳƳƻ ABC/InBev merger, which allegedly triggered the enhanced benefits under the 3lan. The lawsuit claimed that by failing to provide the class members with these enhanced benefits, ABbInBev, et al. breached their fiduciary duties under ERISA. The complaint sought punitive damages and attorneys’ fees. On ƴƹ July ƵƳƴƳ, the Court ruled that the claims for breach of fiduciary duty and punitive damages were not proper. The Court also found that Angevine did not exhaust his administrative remedies, which he must first do before filing a lawsuit. Angevine filed an appeal of this ruling with the Eighth Circuit Court of Appeals. On ƵƵ July ƵƳƴƴ, the Court of Appeals affirmed the decision of the lower court. No further appeals were filed. On ƴƸ September ƵƳƴƳ, ABbInBev and several of its related companies were sued in )ederal Court for the Southern District of Ohio in a lawsuit entitled Rusby Adams et al. v. ABbInBev et al. This lawsuit was filed by four employees of Metal Container Corporation’s facilities (ŠMCCš) in Columbus, Ohio, *ainesville, )lorida, and )t. Atkinson, :isconsin that were divested on ƴ October ƵƳƳƼ. Similar to the Angevine lawsuit, these plaintiffs seek to represent a class of participants of the Anheuser-Busch Companies’ Inc. Salaried Employees’ 3ension 3lan (the Š3lanš) who had been employed by subsidiaries of Anheuser-Busch Companies, Inc. that had been divested during the period of ƴƻ November ƵƳƳƻ and ƴƺ November ƵƳƴƴ. The plaintiffs also allege claims similar to the Angevine lawsuit: (ƴ) that they are entitled to benefits under section ƴƼ.ƴƴ(f) of the 3lan; and (Ƶ) that the denial of benefits was a breach of fiduciary duty. ABbInBev believed that it had defenses to these claims, and filed a motion to dismiss. On ƵƸ April ƵƳƴƴ, the Court dismissed the breach of fiduciary duty claims, and the only remaining claim is for benefits under section ƴƼ.ƴƴ(f). On Ƶƻ March ƵƳƴƵ, the Court certified that the case could proceed as a class action comprised of former employees of the divested MCC operations. On Ƽ January ƵƳƴƶ, the Court granted ABbInBev’s motion for Judgment on the Administrative Record. The plaintiffs appealed this decision on Ƹ )ebruary ƵƳƴƶ. On ƴƴ July ƵƳƴƷ, the Court of Appeals for the ƹth Circuit reversed the lower court and remanded the case for judgment against ABbInBev. On ƴƹ September ƵƳƴƷ, ABbInBev’s Motion for Rehearing En Banc was denied. A )inal Order and Judgment was then entered by the District Court on ƵƷ December ƵƳƴƷ, which ordered the 3lan to provide the enhanced pension benefit under Section ƴƼ.ƴƴ(f) to members of the certified class. The company believes that the total amount of the enhanced pension benefit is approximately ƻmbUSbdollar. 3laintiffs are in the process of preparing their attorneys’ fee application. On ƴƳ January ƵƳƴƵ, a class action complaint asserting claims very similar to those asserted in the Angevine lawsuit was filed in )ederal Court for the Eastern District of Missouri, styled Nancy Anderson et al. v. Anheuser-Busch Companies 3ension 3lan et al. Unlike the Angevine case, however, the plaintiff in this matter alleges complete exhaustion of all administrative remedies. The company filed a motion to dismiss on Ƽ October ƵƳƴƵ. This was still pending when the Court allowed the complaint to be amended on ƴƼ November ƵƳƴƵ to name four new plaintiffs. ABbInBev filed a motion to dismiss on ƴƺ December ƵƳƴƵ. :hile this motion was pending, on ƴƴ March ƵƳƴƶ the Court consolidated the case with the Knowlton case (see below) which had been transferred from California to Missouri. On ƴƳ October ƵƳƴƵ, another class action complaint was filed against Anheuser-Busch Companies, LLC, Anheuser-Busch Companies 3ension 3lan, Anheuser-Busch Companies 3ension 3lan Appeals Committee and the Anheuser-Busch Companies 3ension 3lans Administrative Committee by Brian Knowlton, an employee of the divested Busch Entertainment Corporation (ŠBECš). This complaint, filed in )ederal Court in the Southern District of California, was amended on ƴƵ October ƵƳƴƵ. Like the other lawsuits, it claims that the employees of any divested assets were entitled to enhanced retirement benefits under section ƴƼ.ƴƴ(f) of the 3lan. However, it specifically excludes the divested Metal Container Corporation facilities that have been included in the Adams class action. On ƹ November ƵƳƴƵ, the plaintiffs filed a motion asking the court to move the Anderson case to California to join it with the Knowlton case for discovery. The company filed a motion to dismiss/motion to transfer the case to Missouri on ƴƵ November ƵƳƴƵ, which was granted on ƶƳ January ƵƳƴƶ. As outlined above, on ƴƴ March ƵƳƴƶ, the Knowlton case was then consolidated in Missouri with the Anderson case. On ƴƼ April ƵƳƴƶ a consolidated complaint was filed, and a Motion to Dismiss was filed by the company on ƴƳ May ƵƳƴƶ. On ƶƳ October ƵƳƴƶ, the court dismissed the breach of fiduciary claims, and an answer was filed on ƴƶ November ƵƳƴƶ. On ƴƼ November ƵƳƴƶ, plaintiffs amended one count of the consolidated complaint. On ƴƹ May ƵƳƴƷ, the Court granted class certification. The class consists of divested BEC employees. On ƴƳ November ƵƳƴƷ, 3laintiffs filed a Motion for Judgment on the 3leadings based on the decision by the Sixth Circuit Court of Appeals in the Adams case. P. 142 /143 ƶƴ5HODWHG3DUWLHV 7UDQVDFWLRQVZLWKGLUHFWRUVDQGExecutive Board Management MHPEHUV .(<0$1$*(0(173(56211(/ In addition to short-term employee benefits (primarily salaries) ABbInBev’s executive board management members are entitled to post- employment benefits. More particular, members of the executive board management participate in the pension plan of their respective countrybś see also Note Ƶƶ Employee Benefits. )inally, key management personnel are eligible for the company’s share option; restricted stock and/or share swap program (refer Note ƵƷ Share-based Payments). Total directors and executive board management compensation included in the income statement can be detailed as follows: ƵƳƴƷ ƵƳƴƶ ([HFXWLYHERDUG ([HFXWLYHERDUG Million US dollar Directors management Directors management Short-term employee beneƮts Ƶ Ƶƴ Ƶ ƵƵ 3ost-employment beneƮts ś Ƶ ś Ƶ Other long-term employee beneƮts ś ƴ ś ś Share-based payments ƶ ƺƶ ƶ ƹƹ Ƹ Ƽƺ Ƹ ƼƳ Directors’ compensation consists mainly of directors’ fees. During ƵƳƴƷ, ABbInBev acquired, through a subsidiary of *rupo Modelo, information technology and infrastructure services for a consideration of approximately ƼmbUSbdollar from a company in which one of the company’s Board Member had significant influence as of ƶƴ December ƵƳƴƷ. ABbInBev also sold real estate from a non-consolidated, non-profit affiliate of *rupo Modelo to one of its Board Members for a consideration of approximately ƵƻmbUSbdollar, a price corresponding to the average of two independent external valuation reports. :ith the exception of the abovementioned transactions, key management personnel were not engaged in any transactions with ABbInBev and did not have any significant outstanding balances with the company. -RLQWO\FRQWUROOHGHQWLWLHV Significant interests in joint ventures include two entities in Brazil, two in China, one in Mexico and one in UK. None of these joint ventures are material to the company. Aggregate amounts of ABbInBev’s interest are as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ Non-current assets Ƶ ƴƳƴ Current assets Ʒ Ƹƺ Non-current liabilities ś ƹƺ Current liabilities Ƹ ƴƴƸ Result from operations ƹ ƵƷ 3roƮt attributable to equity holders of ABbInBev ƶ ƴƴ Effective ƴ January ƵƳƴƷ, the company discontinued the proportional consolidation of certain operations. ś see also Note Ʒ Use of estimates DQGbMXGJPHQWV. 7UDQVDFWLRQVZLWKDVVRFLDWHV ABbInBev’s transactions with associates were as follows: 0LOOLRQ86GROODU ƵƳƴƷ ƵƳƴƶ *ross proƮt (ƼƵ) ƶƴ Current assets Ƶ ƹ Current liabilities ƴƴ ƶƵ 7UDQVDFWLRQVZLWKSHQVLRQSODQV ABbInBev’s transactions with pension plans mainly comprise ƴƵmbUSbdollar other income from pension plans in US and ƸmbUSbdollar other income from pension plans in Brazil. 7UDQVDFWLRQVZLWKJRYHUQPHQWUHODWHGHQWLWLHV ABbInBev has no material transactions with government-related entities. Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ƶƵ(YHQWVDIWHUWKH%DODQFH6KHHW'DWH 6KDUHEX\EDFNSURJUDP The Board of Directors has approved a share buyback program for an amount of one billion US dollar, which will be conducted during the course of ƵƳƴƸ. The company’s current intention is to use the shares acquired to fulfil its various share delivery commitments under the stock ownership plan. The program will be executed under the powers granted at the *eneral Meeting of Shareholders on ƶƳ April ƵƳƴƷ. $%b,Q%HY,QGLDQRSHUDWLRQV In )ebruary ƵƳƴƸ, ABbInBev announced the entry into an agreement with RJ Corp Limited under which ABbInBev will exit the Indian joint venture with RJ Corp Limited and staff and operations of the joint venture will be moved to Crown Beers India 3rivate Limited, a wholly-owned subsidiary of ABbInBev. Later in )ebruary ƵƳƴƸ, ABbInBev exited the Indian joint venture. )ollowing a transition period into mid-ƵƳƴƸ, ABbInBev will operate independently in India via Crown Beers India 3rivate Limited. P. 144 /145 ƶƶ$%b,Q%HY&RPSDQLHV Listed below are the most important ABbInBev companies. A complete list of the company’s investments is available at ABbInBev NV, Brouwerijpleinbƴ, B-ƶƳƳƳ Leuven, Belgium. The total number of companies consolidated (fully, proportional and equity method) is ƷƶƼ. /LVWRIPRVWLPSRUWDQWIXOO\FRQVROLGDWHGFRPSDQLHV RIHFRQRPLF interest as at 1DPHDQGUHJLVWHUHGRƱFHRIIXOO\FRQVROLGDWHGFRPSDQLHV ƶƴ'HFHPEHUƵƳƴƷ Argentina CERVECERIA Y MALTERIA QUILMES SAICA y * - Charcas ƸƴƹƳ - Buenos Aires ƹƴ.ƻƷ Belgium ABbInBev NV ś *rote Markt ƴ - ƴƳƳƳ - Brussel Consolidating Company BRASSERIE DE L’ABBAYE DE LE))E S.A. - 3lace de l’Abbaye ƴ - ƸƸƳƳ - Dinant Ƽƻ.ƸƷ BROU:ERIJ VAN HOE*AARDEN N.V. - Stoopkensstraat Ʒƹ - ƶƶƵƳ - Hoegaarden ƴƳƳ.ƳƳ COBRE: N.V. - Brouwerijplein ƴ - ƶƳƳƳ - Leuven ƴƳƳ.ƳƳ INBEV BEL*IUM N.V. - Industrielaan Ƶƴ - ƴƳƺƳ - Brussel ƴƳƳ.ƳƳ Bolivia CERVECERIA BOLIVIANA NACIONAL S.A. - Av. Montes ƷƳƳ and Chuquisaca Street - La 3az ƹƴ.ƻƷ Brazil CIA DE BEBIDAS DAS AMERICAS - AMBEV BRASIL - Rua Dr. Renato 3aes de Barros, ƴƳƴƺ, Ʒr Andar (parte), cj. ƷƷ e ƷƵ - Itaim Bibi, Sao 3aulo ƹƴ.ƻƷ Canada LABATT BRE:IN* COM3ANY LIMITED - ƵƳƺ Queen’s Quay :est, Suite ƵƼƼ - MƸJ ƴAƺ - Toronto ƹƴ.ƻƷ &KLOH CERVECERIA CHILE S.A. - Av. 3residente Eduardo )rei Montalva ƼƹƳƳ - Quilicura ƹƴ.ƻƷ &KLQD ANHEUSER-BUSCH INBEV (:UHAN) BRE:IN* COM3ANY LIMITED - Shangshou, Qin Duan Kou, Hanyang Area, :uhan, Hubei 3rovince Ƽƺ.Ƴƹ ANHEUSER-BUSCH INBEV HARBIN BRE:ERY COM3ANY LIMITED - ƵƳ Youfang Street - ;iangfang District - Harbin, Heilongjiang 3rovince ƴƳƳ.ƳƳ ANHEUSER-BUSCH INBEV (ZHOUSHAN) BRE:ERY Co., Ltd. - No.ƴ Linggang Yi Road, Linggang industrial area, Dinghai District - Zhou Shan ƴƳƳ.ƳƳ INBEV BAISHA (HUNAN) BRE:ERY CO LTD - No. ƶƳƷ Shao Shan Zhong Lu - Changsha ƴƳƳ.ƳƳ INBEV DOUBLE DEER *ROU3 CO LTD - ƷƴƼ :u Tian Street - :enzhou ƸƸ.ƳƳ INBEV JINLON*QUAN (HUBEI) BRE:ERY CO LTD - ƻƼ Chang Ning Street - Jingmen ƹƳ.ƳƳ INBEV JINLON*QUAN (;IAO*AN) BRE:ERY CO LTD - No. ƴƼƻ Chengzhan Street - ;iaogan ƹƳ.ƳƳ INBEV KK (NIN*BO) BRE:ERY CO LTD - Jinjiang Zhen, ƶƴƸƳƳƳ - Ningbo ƴƳƳ.ƳƳ INBEV SEDRIN BRE:ERY Co, Ltd - No.Ƶ factory ;ialin Cun, Chen ;iang district, 3uTian City, )ujian 3rovince ƴƳƳ.ƳƳ ANHEUSER-BUSCH INBEV (TAIZHOU) BRE:ERY CO., LTD. - ƴƸƼ, Qi ;ia Dong Road - Cheng *uan, Tiantai County ƴƳƳ.ƳƳ ANHEUSER-BUSCH INBEV (NIN*BO) BRE:ERY CO., LTD. - JinJiang Zhen,- ƶƴƸƳƳƳ - Ningbo, Zhejiang 3rovince ƴƳƳ.ƳƳ ANHEUSER-BUSCH INBEV (NANJIN*) BRE:ERY CO., LTD.- Qi Li Qiao, Jiang 3u district, -ƵƴƴƻƳƳ- Nanjing ƴƳƳ.ƳƳ Siping *insber Draft Beer Co Ltd-;ianMaQuan area,TieDong district,Shi3ing city, JiLin province,Hebei, China ƴƳƳ.ƳƳ JIAN*SHU BI* BOSS CO.,LTD. No. ƹƹƹ Zhaoxia road, High technical develop District, Nantong city ƴƳƳ.ƳƳ YANCHEN* BI* BOSS CO.,LTD. :est Shou of South huan road, *ongyeyuan district, Dazhong town, Dafeng city ƴƳƳ.ƳƳ SUZHOU BI* BOSS CO.,LTD. No. ƴƵ East Jiaotong Road, Lili town, :ujiang District, Suzhou city ƴƳƳ.ƳƳ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT RIHFRQRPLF interest as at 1DPHDQGUHJLVWHUHGRƱFHRIIXOO\FRQVROLGDWHGFRPSDQLHV ƶƴ'HFHPEHUƵƳƴƷ &]HFK5HSXEOLF 3ivovar Samson a.s. - V parku ƵƶƵƹ/ƴƻ, Chodov, ƴƷƻ ƳƳ 3raha Ʒ, Ëesk republika ƴƳƳ.ƳƳ 'RPLQLFDQ5HSXEOLF CND - Cervecer¬a Nacional Dominicana, Autopista ƶƳ de Mayo, Distrito Nacional, RD ƶƷ.Ƴƴ Ecuador COM3AIA CERVECERA AMBEV ECUADOR S.A. - Km ƴƷ.Ƹ Via a Daule S/N y Av. Las Iguanas, *uayaquil ƹƴ.ƻƷ France AB - INBEV )RANCE S.A.S. ƶƻ All¨e Vauban ƸƼƴƴƳ La Madeleine ƴƳƳ.ƳƳ *HUPDQ\ BRAUEREI BECK *mbH CO. K* - Am Deich ƴƻ/ƴƼ - ƵƻƴƼƼ - Bremen ƴƳƳ.ƳƳ BRAUEREI DIEBELS *mbH CO.K* - Brauerei-Diebels-Strasse ƴ - Ʒƺƹƹƴ - Issum ƴƳƳ.ƳƳ BRAUER*ILDE HANNOVER A* - Hildesheimer Strasse ƴƶƵ - ƶƳƴƺƶ - Hannover ƴƳƳ.ƳƳ HAAKE-BECK BRAUEREI *mbH Co. K* - Am Deich ƴƻ/ƴƼ - ƵƻƴƼƼ - Bremen ƼƼ.Ƽƹ HASSERDER BRAUEREI *mbH - Auerhahnring ƴ - ƶƻƻƸƸ - :ernigerode ƴƳƳ.ƳƳ ANHEUSER-BUSCH INBEV *ERMANY HOLDIN* *mbH - Am Deich ƴƻ/ƴƼ - ƵƻƴƼƼ - Bremen ƴƳƳ.ƳƳ S3ATEN - )RANZISKANER - BRU *mbH - Marsstrasse Ʒƹ Ʒƻ - ƻƳƶƶƸ - M»nchen ƴƳƳ.ƳƳ *UDQG'XFK\RI/X[HPERXUJ BRASSERIE DE LU;EMBOUR* MOUSEL - DIEKIRCH - ƴ, Rue de la Brasserie - L-ƼƵƴƷ - Diekirch ƼƸ.ƻƵ India CRO:N BEERS INDIA LIMITED - ƻ-Ƶ-ƹƻƷ/A, ROAD NO. ƴƵ - BANJARA HILLS, HYDERABAD ƸƳƳƳƶƷ - ANDHRA 3RADESH ƴƳƳ.ƳƳ 6RXWK.RUHD ORIENTAL BRE:ERY CO., LTD - ƴƸƴ, Hyeondogongdan-ro, Seowon-gu Cheongju-si, Chungcheongbuk-do, South Korea ƴƳƳ.ƳƳ Mexico *RU3O MODELO, S.A.B. DE C.V. ś JAVIER BARROS SIERRA ƸƸƸ 3ISO ƶ ZEDEC ED 3LAZA SANTA )E DISTRITO )EDERAL C.3. ƳƴƵƴƳ Ƽƻ.ƻƺ 3DUDJXD\ CERVECERIA 3ARA*UAYA S.A. ś Ruta Villeta KMƶƳ - Ypan¨ ƹƴ.ƻƷ Peru COM3ANIA CERVECERA AMBEV 3ERU SAC - Av Los Laureles Mza a lote Ʒ (Mirador ƴƵ Carretera R. 3riale) Lima - Luringancho ƹƴ.ƻƷ Russia OAO SUN INBEV - Ƶƻ Moscovskaya Street, Moscow region - ƴƷƴƹƳƳ - Klin ƼƼ.ƼƸ 7KH1HWKHUODQGV INBEV NEDERLAND N.V. - Ceresstraat ƴ - Ʒƻƴƴ CA - Breda ƴƳƳ.ƳƳ INTERBRE: INTERNATIONAL B.V. - Ceresstraat ƴ - Ʒƻƴƴ CA - Breda ƴƳƳ.ƳƳ 8NUDLQH 3JSC SUN InBev Ukraine - ƶƳV )izkultury St - ƳƶƹƻƳ - Kyiv Ƽƻ.ƵƼ US ANHEUSER-BUSCH COM3ANIES, LLC. - One Busch 3lace - St. Louis, MO ƹƶƴƴƻ ƴƳƳ.ƳƳ ANHEUSER-BUSCH INTERNATIONAL, INC. - One Busch 3lace - St. Louis, MO ƹƶƴƴƻ ƴƳƳ.ƳƳ ANHEUSER-BUSCH 3ACKA*IN* *ROU3, INC. - One Busch 3lace - St. Louis, MO ƹƶƴƴƻ ƴƳƳ.ƳƳ P. 146 /147 RIHFRQRPLF interest as at 1DPHDQGUHJLVWHUHGRƱFHRIIXOO\FRQVROLGDWHGFRPSDQLHV ƶƴ'HFHPEHUƵƳƴƷ 8QLWHG.LQJGRP BASS BEERS :ORLD:IDE LIMITED - 3orter Tun House, ƸƳƳ Capability *reen - LUƴ ƶLS - Luton ƴƳƳ.ƳƳ INBEV UK LTD - 3orter Tun House, ƸƳƳ Capability *reen - LUƴ ƶLS - Luton ƴƳƳ.ƳƳ 8UXJXD\ CERVECERIA Y MALTERIA 3AYSSANDU S.A. - Rambla Baltasar Brum, ƵƼƶƶ - ƴƴƻƳƳ - 3ayssandu ƹƴ.ƻƷ 9LHWQDP ANHEUSER-BUSCH INBEV VIETNAM BRE:ERY COM3ANY LIMITED/No.Ƶ VSI3 II-A, Street no. Ƶƻ, Vietnam - Singapore II-A Industrial 3ark, Tan Uyen District, Binh Duong 3rovince, Vietnam ƴƳƳ.ƳƳ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT Information to our Shareholders (DUQLQJVGLYLGHQGVVKDUHDQGVKDUHSULFH ƵƳƴƷ ƵƳƴƶ ƵƳƴƵ ƵƳƴƴ ƵƳƴƳ Cash ưow from operating activities (US dollar per share) ƻ.ƹƹ ƻ.Ƹƶ ƻ.ƵƼ ƺ.ƻƶ ƹ.ƵƵ Normalized earnings per share (US dollar per share) Ƹ.Ʒƶ Ʒ.Ƽƴ Ʒ.ƸƳ Ʒ.ƳƷ ƶ.ƴƺ Dividend (euro per share) ƶ.ƳƳ Ƶ.ƳƸ ƴ.ƺƳ ƴ.ƵƳ Ƴ.ƻƳ Share price high (euro per share) ƼƷ.ƻƼ ƺƼ.ƹƳ ƺƴ.ƳƸ Ʒƺ.ƶƸ Ʒƹ.ƶƶ Share price low (euro per share) ƹƼ.ƴƷ ƹƶ.ƷƷ Ʒƹ.ƴƳ ƶƶ.ƻƸ ƶƶ.ƸƳ Year-end share price (euro per share) Ƽƶ.ƻƹ ƺƺ.Ƶƹ ƹƸ.ƺƷ Ʒƺ.ƶƴ ƷƵ.ƻƳ :eighted average number of ordinary shares (million shares) ƴ ƹƶƷ ƴ ƹƴƺ ƴ ƹƳƳ ƴ ƸƼƸ ƴ ƸƼƵ Diluted weighted average number of ordinary shares (million shares) ƴ ƹƹƸ ƴ ƹƸƳ ƴ ƹƵƻ ƴ ƹƴƷ ƴ ƹƴƴ Volume of shares traded (million shares) ƶƼƺ ƷƵƶ Ʒƻƹ ƹƸƵ Ƹƻƻ P. 148 /149 Information on the Auditors’ Assignments and Related Fees ABbInBev’s Statutory auditor is 3ricewaterhouseCoopers Bedrijfsrevisoren cvba, represented by Yves Vandenplas, engagement partner. Base fees for auditing the annual financial statements of ABbInBev and its subsidiaries are determined by the general meeting of shareholders after review and approval by the company’s Audit Committee and Board of Directors. )ees for ƵƳƴƷ in relation to services provided by 3ricewaterhouseCoopers Bedrijfsrevisoren amounted to Ƶ ƸƸƴk US dollar (ƵƳƴƶ: ƶ ƺƷƶk US dollar), which was composed of audit services for the annual financial statements of ƴ ƺƻƹk US dollar (ƵƳƴƶ: ƴ ƻƹƷk US dollar), tax services of ƴƺƴk US dollar (ƵƳƴƶ: ƴ ƶƻƹk US dollar), audit related services of ƶƼƺk US dollar (ƵƳƴƶ: ƷƳƺk US dollar) and other services of ƴƼƺk US dollar (ƵƳƴƶ: ƻƹk US dollar). Audit related services mainly relate to services incurred in connection with rights and bonds issuance, interim dividends, responsible drinking certification and capital increases. Tax services mainly relate to services incurred in connection with expat services and other services mainly relate to services incurred in connection with Better :orld initiatives, all of which have been pre-approved by the company’s Audit Committee. )ees for ƵƳƴƷ in relation to services provided by other offices in the 3ricewaterhouseCoopers network amounted to ƴƺ ƼƶƸk US dollar (ƵƳƴƶ: ƴƻ ƳƳƹk US dollar), which was composed of audit services for the annual financial statements of ƴƵ ƼƴƵk US dollar (ƵƳƴƶ: ƴƴ ƻƳƷk US dollar), tax services of ƶ ƺƸƷk US dollar (ƵƳƴƶ: Ƹ ƴƸƷk US dollar), audit related services of ƴƹƺk US dollar (ƵƳƴƶ: ƴ ƳƶƳk US dollar) and other services of ƴ ƴƳƵk USbdollar (ƵƳƴƶ: ƴƻk US dollar). Financial Calendar 3ublication of ƵƳƴƷ results Ƶƹ )ebruary ƵƳƴƸ Annual report ƵƳƴƷ available on www.ab-inbev.com Ƶƹ )ebruary ƵƳƴƸ *eneral shareholders meeting ƵƼ April ƵƳƴƸ Dividend: ex-coupon date Ʒ May ƵƳƴƸ 3ublication of first quarter results ƹ May ƵƳƴƸ 3ublication of half year results ƶƳ July ƵƳƴƸ 3ublication of third quarter results ƶƳ October ƵƳƴƸ Investor Relations Contact Media Investors Marianne Amssoms *raham Staley Tel: ƴ-ƵƴƵ-Ƹƺƶ-ƼƵƻƴ Tel: ƴ-ƵƴƵ-Ƹƺƶ-ƷƶƹƸ E-mail: [email protected] E-mail: [email protected] Karen Couck Heiko Vulsieck Tel: ƴ-ƵƴƵ-Ƹƺƶ-ƼƵƻƶ Tel: ƶƵ-ƴƹ-Ƶƺ-ƹƻ-ƻƻ E-mail: [email protected] E-mail: [email protected] Kathleen Van Boxelaer Christina Caspersen Tel: ƶƵ-ƴƹ-Ƶƺ-ƹƻ-Ƶƶ Tel: ƴ-ƵƴƵ-Ƹƺƶ-Ʒƶƺƹ E-mail: [email protected] E-mail: [email protected] Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT ([FHUSWIURPWKH$%b,Q%HY196HSDUDWH 1RQ&RQVROLGDWHG )LQDQFLDO6WDWHPHQWV 3UHSDUHGLQ$FFRUGDQFHZLWK%HOJLDQ*$$3 The following information is extracted from the separate Belgian *AA3 financial statements of ABbInBev NV. These separate financial statements, together with the management report of the Board of Directors to the general assembly of shareholders as well as the auditors’ report, will be filed with the National Bank of Belgium within the legally foreseen time limits. These documents are also available on request from: ABbInBev NV, Brouwerijplein ƴ, ƶƳƳƳ Leuven. It should be noted that only the consolidated financial statements as set forth above present a true and fair view of the financial position and performance of the ABbInBev group. Since ABbInBev NV is essentially a holding company, which recognizes its investments at cost in its non-consolidated financial statements, these separate financial statements present no more than a limited view of the financial position of ABbInBev NV. )or this reason, the Board of Directors deemed it appropriate to publish only an abbreviated version of the non-consolidated balance sheet and income statement prepared in accordance with Belgian *AA3 as at and for the year ended ƶƴ December ƵƳƴƷ. The statutory auditor’s report is unqualified and certifies that the non-consolidated financial statements of ABbInBev NV prepared in accordance with Belgian *AA3 for the year ended ƶƴ December ƵƳƴƷ give a true and fair view of the financial position and results of ABbInBev NV in accordance with all legal and regulatory dispositions. P. 150 /151 $EEUHYLDWHG1RQ&RQVROLGDWHG%DODQFH6KHHW 0LOOLRQHXUR ƵƳƴƷ ƵƳƴƶ Assets 1RQFXUUHQWDVVHWV Intangible assets ƴƼƸ ƴƼƺ 3roperty, plant and equipment ƻƺ ƴƳƷ )inancial assets ƸƸ ƻƳƸ ƸƳ Ƶƹƻ ƸƹƳƻƺ ƸƳƸƹƼ &XUUHQWDVVHWV ƴƳƼƳƸ ƴƳƷƴƳ Total assets ƹƹƼƼƵ ƹƳƼƺƼ (TXLW\DQGOLDELOLWLHV (TXLW\ Issued capital ƴ ƵƶƼ ƴ Ƶƶƻ Share premium ƴƶ ƴƻƹ ƴƶ ƴƺƻ Legal reserve ƴƵƷ ƴƵƷ Reserves not available for distribution ƵƺƼ ƶƻ Reserves available for distribution ƵƷƵ Ʒƻƶ 3roƮt carried forward ƵƳ ƼƷƴ ƵƷ ƳƻƷ ƶƹƳƴƴ ƶƼƴƷƸ 3URYLVLRQVDQGGHIHUUHGWD[HV ƶƵƸ ƴƹƹ 1RQFXUUHQWOLDELOLWLHV ƵƳƵƷƵ ƴƵƼƵƸ &XUUHQWOLDELOLWLHV ƴƳƷƴƷ ƻƺƷƶ 7RWDOHTXLW\DQGOLDELOLWLHV ƹƹƼƼƵ ƹƳƼƺƼ $EEUHYLDWHG1RQ&RQVROLGDWHG,QFRPH6WDWHPHQW 0LOOLRQHXUR ƵƳƴƷ ƵƳƴƶ Operating income ƻƸƳ ƻƳƹ Operating expenses (ƹƶƷ) (ƷƺƷ) 2SHUDWLQJUHVXOW Ƶƴƹ ƶƶƵ )inancial result Ƶ Ƴƻƹ ƴ Ʒƴƺ Impairment Ʈnancial assets (ƹƵƻ) ś 5HVXOWIRUWKH\HDUDYDLODEOHIRUDSSURSULDWLRQ ƴƹƺƷ ƴƺƷƼ Anheuser-Busch InBev Annual Report 2014 6 FINANCIAL REPORT *ORVVDU\ $JJUHJDWHGZHLJKWHGQRPLQDOWD[UDWH 0DUNHWLQJH[SHQVHV The aggregated weighted nominal tax rate is based on the statutory Include all costs relating to the support and promotion of the brands. corporate income tax rates applicable in the various countries. They include among others operating costs (payroll, office costs, etc.) of the marketing department, advertising costs (agency costs, media costs, etc.), sponsoring and events, and surveys and market research. 'LOXWHGHSV 3rofit attributable to equity holders of ABbInBev divided by the fully diluted weighted average number of ordinary shares. 1HWFDSH[ Acquisitions of property, plant and equipment and of intangible assets, minus proceeds from sale. 'LOXWHGZHLJKWHGDYHUDJHQXPEHURIRUGLQDU\VKDUHV :eighted average number of ordinary shares, adjusted by the effect of share options on issue. 1HWGHEW Non-current and current interest-bearing loans and borrowings and bank overdrafts, minus debt securities and cash. EBIT 3rofit from operations. 1RQUHFXUULQJLWHPV Items of income or expense which do not occur regularly as part of the EBITDA normal activities of the company. 3rofit from operations plus depreciation, amortization and impairment. Normalized The term Šnormalizedš refers to performance measures (EBITDA, EPS EBIT, 3rofit, E3S, effective tax rate) before non-recurring items. 3rofit attributable to equity holders of ABb InBev divided by the Non-recurring items are items of income or expense which do not weighted average number of ordinary shares. occur regularly as part of the normal activities of the company and which warrant separate disclosure because they are important for the understanding of the underlying results of the company due to their size or nature. ABbInBev believes that the communication and ,QYHVWHGFDSLWDO explanation of normalized measures is essential for readers of its Includes property, plant and equipment, goodwill and intangible financial statements to understand fully the sustainable performance assets, investments in associates and equity securities, working of the company. Normalized measures are additional measures used capital, provisions, employee benefits and deferred taxes. by management and should not replace the measures determined in accordance with I)RS as an indicator of the company’s performance. P. 152 /153 Normalized diluted EPS 6DOHVH[SHQVHV Diluted E3S adjusted for non-recurring items. Include all costs relating to the selling of the products. They include among others the operating costs (payroll, office costs, etc.) of the sales department and the sales force. Normalized EBIT 3rofit from operations adjusted for non-recurring items. 6FRSH )inancials are analyzed eliminating the impact of changes in currencies Normalized EBITDA on translation of foreign operations, and scopes. A scope represents 3rofit from operations adjusted for non-recurring items, plus the impact of acquisitions and divestitures, the start-up or termination depreciation, amortization and impairment. of activities or the transfer of activities between segments, curtailment gains and losses and year-over-year changes in accounting estimates and other assumptions that management does not consider as part of the underlying performance of the business. Normalized effective tax rate Effective tax rate adjusted for non-recurring items. :HLJKWHGDYHUDJHQXPEHURIRUGLQDU\VKDUHV Number of shares outstanding at the beginning of the period, adjusted Normalized EPS by the number of shares cancelled, repurchased or issued during the E3S adjusted for non-recurring items. period multiplied by a time-weighing factor. 1RUPDOL]HGSURILW :RUNLQJFDSLWDO 3rofit adjusted for non-recurring items. Includes inventories, trade and other receivables and trade and other payables, both current and non-current. 1RUPDOL]HGSURILWIURPRSHUDWLRQV 3rofit from operations adjusted for non-recurring items. 3D\RXWUDWLR *ross dividend per share multiplied by the estimated number of ordinary shares outstanding at the dividend record date, divided by normalized profit attributable to equity holders of ABbInBev. 5HPHDVXUHPHQWVRISRVWHPSOR\HHEHQHILWV Comprised of actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets (excluding net interest). Revenue *ross revenue less excise taxes and discounts. [This page is left blank intentionally] P. 154/155 Corporate Governance Statement Contents 156 Introduction 158 The Board of Directors &KLHI([HFXWLYH2ƱFHUDQG Executive Board of Management 161 Internal Control and Risk Management Systems 163 Shareholders Structure 165 Items to be Disclosed Pursuant to Article 34 of the Belgian Royal Decree of 14 November 2007 169 Remuneration Report Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT ƴ,QWURGXFWLRQ ƴƴ7KHƵƳƳƼ%HOJLDQ&RGHRQ&RUSRUDWH*RYHUQDQFH The corporate governance practices of Anheuser-Busch InBev are reflected in its Corporate Governance Charter, which is available on www.ab-inbev.com/Corporate-governance. The Charter is regularly updated. As a company incorporated under Belgian law and listed on Euronext Brussels, Anheuser-Busch InBev adheres to the principles and provisions of the Belgian Corporate Governance Code, published in March ƵƳƳƼ (www.corporategovernancecommittee.be). However, in order to reflect Anheuser-Busch InBev’s specific shareholding structure and the global nature of its operations, the Board of directors has adopted certain rules which depart from the Belgian Corporate Governance Code. In summary, these rules are the following: 3ULQFLSOHƸƶƴ $SSHQGL[' RIWKH&RGH ŠWKH%RDUGVKRXOGVHWXSDQRPLQDWLRQFRPPLWWHHFRPSRVHGRIDPDMRULW\RILQGHSHQGHQW QRQH[HFXWLYHGLUHFWRUVš The Board of directors appoints the chairman and members of the Nomination Committee from among the directors, including at least one member from among the independent directors. As the committee is composed exclusively of non-executive directors who are independent of management and free from any business relationship that could materially interfere with the exercise of their independent judgment, the Board considers that the composition of this committee achieves the Code’s aim. 3ULQFLSOHƺƺRIWKH&RGH Š1RQH[HFXWLYHGLUHFWRUVVKRXOGQRWEHHQWLWOHGWRSHUIRUPDQFHUHODWHGUHPXQHUDWLRQVXFKDVERQXVHV VWRFNUHODWHGORQJWHUPLQFHQWLYHVFKHPHVIULQJHEHQHILWVRUSHQVLRQEHQHILWVš The remuneration of the Board members is composed of a fixed fee and a fixed number of stock-options, which makes it simple, transparent and easy for shareholders to understand. The company’s long-term incentive option plan deviates from the Belgian Code on Corporate Governance as it provides for share-based payments to non-executive directors. The Board is of the opinion that the company’s share-based incentive compensation is in line with compensation practices of directors at peer companies globally. The successful strategy and sustainable development of the company over the past ƴƳ years demonstrates that the compensation of directors, which includes a fixed number of stock-options, does ensure that the independence of the Board members in their role of guidance and control of the company is preserved, and that the directors’ interests remain fully aligned with the long-term interests of the shareholders. In particular, the extension of the vesting period of the options from ƶbtobƸ years which is applicable as of ƵƳƴƷ should foster a sustainable and long-term commitment to pursue the company’s best interests. It should also be noted that options may only be granted upon the recommendation of the Remuneration Committee. Any such recommendation must be subsequently approved by the Board and then by the shareholders in a general meeting. 3ULQFLSOHƺƴƶRIWKH&RGH Š6FKHPHVXQGHUZKLFKH[HFXWLYHPDQDJHUVDUHUHPXQHUDWHGLQVKDUHVVKDUHRSWLRQVRUDQ\RWKHUULJKWVWR DFTXLUHVKDUHVVKRXOGEHVXEMHFWWRSULRUVKDUHKROGHUDSSURYDOE\ZD\RIDUHVROXWLRQDWWKHJHQHUDOVKDUHKROGHUVPHHWLQJ7KHDSSURYDO VKRXOGUHODWHWRWKHVFKHPHLWVHOIDQGQRWWRWKHJUDQWRIVKDUHEDVHGEHQHILWVXQGHUWKHVFKHPHWRLQGLYLGXDOVš In order to maintain consistency of benefits granted to executives and to encourage international mobility of executives, an Options Exchange Program was approved by the annual shareholders meeting of ƵƺbAprilbƵƳƴƳ. Under the Exchange Program unvested options can be exchanged against restricted shares. Since the options that could be exchanged under the program have vested on ƴbJanuarybƵƳƴƷ, the program has been extended to certain options that will vest on ƴbJanuarybƵƳƴƼ. As a variant to this program, the Board has also approved the early release of the vesting conditions of certain unvested options, provided that the shares that result from the exercise of the options remain locked-up until ƶƴbDecemberbƵƳƵƶ. These variations to the original Exchange program were not submitted to the prior approval of the shareholders’ meeting, as the Board is of the opinion that they remain fully consistent with the original program and were necessary to enable the strategic relocation of the executives without delay. ƴƵ1HZ ƴƶ6SHFLILF&RUSRUDWH*RYHUQDQFHLQLWLDWLYHV ƴƶƴ)RVWHULQJHWKLFDOFRQGXFW The Board of directors of Anheuser-Busch InBev encourages management to promote, adhere to and maintain the highest standards of ethical behavior and transparency. Therefore, ethical rules have been established and are reinforced by Anheuser-Busch InBev’s internal codes and policies. This fosters responsible business conduct by all employees. Anheuser-Busch InBev’s Code of Business Conduct sets out the ethical standards to which all employees are expected to adhere. It requires employees to comply with all laws, to disclose any relevant conflicts of interests, to act at all times in the best interests of the company and to conduct all their dealings in an honest and ethical manner. The Code of Business Conduct also covers the confidentiality of information, limits P. 156 /157 on the acceptance of gifts or entertainment, and the appropriate use of the company’s property. The Code of Business Conduct is supplemented by the Global Anti-Corruption Policy, which defines employees’ responsibilities and expected behavior. It states clearly that Anheuser-Busch InBev’s employees are strictly prohibited from, either directly or indirectly, offering, promising, authorizing or giving anything of value to any individual with the aim of obtaining or retaining business or influencing business or governmental decision-making in connection with Anheuser-Busch InBev’s commercial activities. In line with this commitment to integrity, Anheuser-Busch InBev has implemented a whistle-blowing system by means of a Compliance Helpline that provides employees with simple and secure ways to confidentially and, if so desired, anonymously, report activities in violation of the Code of Business Conduct based on a clear policy and applicable legislation. ƴƶƵ'HPRQVWUDWLQJ$QKHXVHU%XVFK,Q%HYŞVFRPPLWPHQWWRVKDUHKROGHUFRPPXQLFDWLRQ Anheuser-Busch InBev is committed to creating value for its shareholders. The company encourages its shareholders to take an active interest in the company. In support of this objective, it provides quality information, in a timely fashion, through a variety of communication tools. These include annual reports, half-yearly reports, quarterly statements, the Global Citizenship Report, financial results announcements, briefings, and a section that is dedicated to investors on the Anheuser-Busch InBev website. Anheuser-Busch InBev recognizes that a commitment to disclosure builds trust and confidence with shareholders and the public in general. The company adopted a Disclosure Manual to demonstrate its commitment to best practices in transparency. This manual is designed to ensure that there is full, consistent and timely disclosure of company activities. ƴƶƶ8SKROGLQJVKDUHKROGHUULJKWV Prior to the annual shareholders’ meeting, shareholders are invited to submit any questions they have for the Chairman or the CEO for discussion during the meeting. The agenda for the shareholders’ meeting and all related documents are also posted on the Anheuser-Busch InBev website at least ƶƳ days in advance of any shareholders’ meeting. Shareholders have the right to vote on various resolutions related to company matters. If they are unable to attend a meeting, they can submit their votes by mail or appoint a proxy. Minutes of the meetings and results of the votes are posted on the Anheuser-Busch InBev website immediately after the meeting. ƴƶƷ3UHYHQWLQJWKHDEXVHRILQVLGHLQIRUPDWLRQ The company’s Code of Dealing is applicable to all members of the Board of directors of the company and to all employees. The Code of Dealing aims to prevent the abuse of inside information, especially in periods leading up to an announcement of financial results or leading up to price-sensitive events or decisions. The Code of Dealing prohibits dealing in any shares during a closed period, i.e., a period of ƴƸ days preceding any results announcement of the company. In addition, before dealing in any shares of the company, the members of the Board of directors of the company and the members of its Executive Board of Management must obtain clearance from a Clearance Committee and report back to the committee once the transaction has taken place. Compliance with the Code of Dealing is reinforced and monitored through the company’s Compliance Program. In accordance with the Belgian regulation on the prevention of market abuse, the company establishes lists of insiders. In addition, pursuant to the same regulation, members of the Executive Board of Management and of the Board of directors notify all their trades to the Belgian Financial Services and Markets Authority, which publishes these notifications on its website. ƴƶƸ&RUSRUDWH6RFLDO5HVSRQVLELOLW\ Anheuser-Busch InBev’s dream is to be the %HVW%HHU&RPSDQ\%ULQJLQJ3HRSOH7RJHWKHU)RUD%HWWHU:RUOG. In pursuing this dream, the company strives to strike a balance between generating great business results and managing its environmental and social responsibilities. Sustainability is central to the company’s culture and embedded in the way the company does business. Since ƵƳƳƸ, Anheuser-Busch InBev has published its annual Global Citizenship Report that outlines its targets and progress made in the followingbareas: ť responsible drinking; ť environment; and ť community. The Global Citizenship Report is available on the Anheuser-Busch InBev website, www.ab-inbev.com/social-responsibility/global-citizenship- report, which is a section of the website specifically dedicated to the company’s initiatives and achievements related to corporate social responsibility. Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT Ƶ7KH%RDUGRI'LUHFWRUV Ƶƴ6WUXFWXUHDQGFRPSRVLWLRQ The Board of directors currently consists of ƴƷ members, all of whom are non-executives. The roles and responsibilities of the Board, its composition, structure and organization are described in detail in Anheuser-Busch InBev’s Corporate Governance Charter. This Corporate Governance Charter includes the criteria that directors must satisfy to qualify as independent directors. Directors are appointed for a maximum term of four years, which is renewable. The upper age limit for directors is ƺƳ, although exceptions can be made in special circumstances. The Nomination Committee identifies persons qualified to become Board members and recommends director candidates for nomination by the Board and appointment by the shareholders’ meeting. According to the Belgian Companies Code, as amended by the Law of ƵƻbJulybƵƳƴƴ on gender diversity on the Board, at least one third of the directors will have to be women as of ƴbJanuarybƵƳƴƼ. :hen recommending a candidate for appointment as member of the Board, the Nomination Committee will conduct the search and propose nominations based on merit against objective criteria with due regard for the benefits of diversity on the board, including background, experience, skill sets and gender. Anheuser-Busch InBev will continue its efforts towards fostering gender diversity on its Board in the coming years. At the annual shareholders’ meeting held on ƶƳbAprilbƵƳƴƷ, the mandate of Mr. Kees Storm, Chairman of the Board, and Mr. Mark :inkelman was renewed for a term of ƴ year. The mandates of Mr. Alexandre Van Damme, Mr. Gr¨goire de Spoelberch, Mr. Marcel Herrmann Telles and Mr.bCarlos Alberto Sicupira were renewed for a term of Ʒ years. In addition, Mr. Paulo Lemann was appointed as successor for Mr. Jorge Paulo Lemann for a term of Ʒ years and Mr. Alexandre Behring was appointed as successor for Mr. Roberto Thompson for a term of Ʒ years. Mr. Elio Leoni Sceti was appointed as a new additional independent director for a term of Ʒ years. Finally, further to the completion of the combination with Grupo Modelo S.A.B. de CV on ƷbJunebƵƳƴƶ, Mrs. Maria Asuncion Aramburuzabala and Mr. Valentin Diez Morodo were appointed as non-executive, non- independent directors, for a term of Ʒ years. The mandates of Mr. Kees Storm, Chairman of the Board, Mr. Olivier Goudet, Chairman of the Audit Committee, Mr. Paul Cornet de :ays Ruart, Mr.bSt¨fan Descheemaeker and Mr. Mark :inkelman will come to an end immediately after the annual shareholders’ meeting to be held on ƵƼ AprilbƵƳƴƸ. Their mandates are renewable. The proposal of the Board to the shareholders regarding the renewal of these directors, the appointment of any successor or any new additional director will be based on a recommendation of the Nomination Committee and disclosed in the convening notice for the annual shareholders’ meeting to be held on ƵƼbAprilbƵƳƴƸ. The composition of Anheuser-Busch InBev’s Board of directors is currently as follows: 1DPH 'DWHRIELUWK )XQFWLRQ 7HUPVWDUWHG 7HUPH[SLUHV 1DWLRQDOLW\ Maria Asuncion Aramburuzabala rƴƼƹƶ, Non Executive, Non-Independent ƵƳƴƷ ƵƳƴƻ Mexican director Alexandre Behring rƴƼƹƺ, Non-Executive director, nominated by ƵƳƴƷ ƵƳƴƻ Brazilian the holders of class B Stichting InBev certificates Paul Cornet de :ays Ruart rƴƼƹƻ, Non-Executive director, nominated by ƵƳƴƴ ƵƳƴƸ Belgian the holders of class A Stichting InBev certificates St¨fan Descheemaeker rƴƼƹƳ, Non-Executive director, nominated by ƵƳƳƻ ƵƳƴƸ Belgian the holders of class A Stichting InBev certificates Gr¨goire de Spoelberch rƴƼƹƹ, Non-Executive director, nominated by ƵƳƳƺ ƵƳƴƻ Belgian the holders of class A Stichting InBev certificates Valentin Diez Morodo rƴƼƷƳ, Non-Executive, Non-Independent ƵƳƴƷ ƵƳƴƻ Mexican director Olivier Goudet rƴƼƹƷ, Non-Executive Independent director ƵƳƴƴ ƵƳƴƸ French Paulo Lemann rƴƼƹƻ, Non-Executive director, nominated by ƵƳƴƷ ƵƳƴƻ Brazilian the holders of class B Stichting InBev certificates Elio Leoni Sceti rƴƼƹƹ, Non-Executive Independent director ƵƳƴƷ ƵƳƴƻ Italian Carlos Alberto da Veiga Sicupira rƴƼƷƻ, Non-Executive director, nominated by ƵƳƳƷ ƵƳƴƻ Brazilian the holders of class B Stichting InBev certificates P. 158 /159 1DPH 'DWHRIELUWK )XQFWLRQ 7HUPVWDUWHG 7HUPH[SLUHV 1DWLRQDOLW\ Kees Storm rƴƼƷƵ, Non-Executive Independent director ƵƳƳƵ ƵƳƴƸ Dutch Marcel Herrmann Telles rƴƼƸƳ, Non-Executive director, nominated by ƵƳƴƷ ƵƳƴƻ Brazilian the holders of class B Stichting InBev certificates Alexandre Van Damme rƴƼƹƵ, Non-Executive director, nominated by ƴƼƼƵ ƵƳƴƻ Belgian the holders of class A Stichting InBev certificates Mark :inkelman rƴƼƷƹ, Non-Executive Independent director ƵƳƳƷ ƵƳƴƸ Dutch ƵƵ)XQFWLRQLQJ In ƵƳƴƷ, the Board held nine regular meetings and three extraordinary telephonic meetings. Several of the regular meetings were held in the geographical Zones in which the company has operations. On these occasions, the Board was provided with a comprehensive briefing of the relevant geographical Zone and market. These briefings included an overview of performance, key challenges facing the market and the steps being taken to address the challenges. Several of these visits also provided the Board members with the opportunity to meet with employees, trainees, customers and other stakeholders. Major Board agenda items in ƵƳƴƷ included the long-range plan; achievement of targets; sales figures and brand health; reporting and budget; consolidated results; strategic direction; culture and people, including management succession planning; new and ongoing investment; capital market transactions; external growth and acquisitions; corporate social responsibility and sustainability as well as discussions on governance and Board succession planning. The average attendance rate at Board meetings in ƵƳƴƷbwasbƼƷ. In ƵƳƴƷ, the Board has been assisted by four Committees: the Audit Committee, the Finance Committee, the Remuneration Committee and the Nomination Committee. The composition of the four Committees is currently as follows: $XGLW 1RPLQDWLRQ )LQDQFH 5HPXQHUDWLRQ &RPPLWWHH &RPPLWWHH &RPPLWWHH &RPPLWWHH Maria Asuncion Aramburuzabala Alex Behring Member Paul Cornet de :ays Ruart St¨fan Descheemaeker Member Gr¨goire de Spoelberch Member Valentin Diez Olivier Goudet &KDLUPDQ Member Paulo Lemann Member Elio Leoni Sceti Member Carlos Alberto da Veiga Sicupira Member Kees Storm Member Member Marcel Herrmann Telles &KDLUPDQ &KDLUPDQ Alexandre Van Damme Member &KDLUPDQ Mark :inkelman Member Member $XGLW&RPPLWWHH In accordance with the requirements of the Belgian Companies Code, the Audit Committee is composed exclusively of non-executive Board members and at least one of its members, i.e. Mr. Olivier Goudet, qualifies as an independent director within the meaning of article ƸƵƹter of the Belgian Companies Code. Mr. Goudet holds a degree in engineering from l’Ecole Centrale de Paris and graduated from the ESSEC Business School in Paris with a major in finance. He has extensive experience in accounting and audit which he has obtained, among others, as Executive Vice President and Chief Financial Officer of Mars, Incorporated. Each member of the Audit Committee also qualifies as an independent director under Rule ƴƳA of the US Securities Exchange Act of ƴƼƶƷ, asbamended. In ƵƳƴƷ, the Audit Committee met ten times. During its meetings, the Committee reviewed the financial statements of the company, the annual report, half-yearly and quarterly statements, as well as related results announcements. The Committee also considered issues arising from internal audits conducted by the group’s Internal Audit department and the implementation of the company’s Compliance Program. The group’s Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT obligations under Sarbanes Oxley, the review of the independence of the external auditor and a quarterly status of significant litigation were some of the other important topics on the agenda of the Committee. The members of the Committee attended all meetings. )LQDQFH&RPPLWWHH The Finance Committee met four times in ƵƳƴƷ. Committee discussions included treasury updates and overall risk management strategy including but not limited to risks related to commodities, interest rates, currencies and liquidity, hedging policies, the debt profile and capital structure of the group, pensions, dividends and the disclosure policy of the company. The members of the Committee attended all meetings. 1RPLQDWLRQ&RPPLWWHH The Nomination Committee’s principal role is to guide the Board succession process. The Committee identifies persons qualified to become Board members and recommends director candidates for nomination by the Board and appointment by the shareholders’ meeting. The Committee met four times in ƵƳƴƷ and discussions included the nomination of directors for appointment or renewal by the annual shareholders’ meeting, management targets, the evaluation of the Board and its committees, the global management trainee program and succession planning for key executive functions. The members of the Committee attended all meetings. 5HPXQHUDWLRQ&RPPLWWHH In accordance with the requirements of the Belgian Companies Code, the Remuneration Committee is composed exclusively of non-executive Board members and a majority of its members, i.e. Mr. Olivier Goudet and Mr. Elio Leoni Sceti, qualify as independent directors within the meaning of article ƸƵƹter of the Belgian Companies Code. The Remuneration Committee’s principal role is to guide the Board with respect to all its decisions relating to the remuneration policies for the Board, the CEO and the Executive Board of Management and on individual remuneration packages of directors, the CEO and members of the Executive Board of Management. The Committee met four times in ƵƳƴƷ and discussions included achievement of targets, Executive and Board compensation, Executive shares and options schemes, Long Term Incentive grants to directors and special incentives. The members of the Committee attended all meetings. Ƶƶ(YDOXDWLRQRIWKH%RDUGDQGLWVFRPPLWWHHV Annually the Board and its committees perform an evaluation of their performance, at the initiative of the Chairman of the Board with respect to the performance of the Board as a whole and at the initiative of the Chairman of each respective committee with respect to the performance of the Board committees. The evaluation constitutes a separate agenda item for a physical meeting of the Board or its committee. Attendance of all directors is required during such meeting and discussions take place in executive session in the absence of management. A third party may act as facilitator. During such meeting, each director is requested to comment on and evaluate the following topics: ť effectiveness of Board and committee operations (e.g. checking that important issues are suitably prepared and discussed, time available for discussion of important policy matters, checking availability and adequacy of pre-read, etc.); ť the qualifications and responsibilities of individual directors (e.g. actual contribution of each director, the director’s presence at the meetings and his/her involvement in discussions, impact of changes to the director’s other relevant commitments outside the company). ť effectiveness of oversight of management and interaction with management; ť composition and size of the Board and committees. Evaluation will at least take into account the following criteria: ! director independence: an affirmative determination as to the independence will be made in accordance with the independence criteria published in the Corporate Governance Charter. ! other commitments of directors: the outside Board commitments of each director enhance experience and perspective of directors, but will be reviewed on a case-by-case basis to ensure that each director can devote proper attention to the fulfillment of his oversight responsibilities. ! disqualifying circumstances: certain circumstances may constitute a disqualification for membership on the Board (e.g. Board membership of a major supplier, customer or competitor of the company, membership of a federal or regional government). Circumstances will be evaluated on a case-by-case basis to ensure that directors are not conflicted. ! skills and previous contributions: the company expects that all directors prepare for, attend and participate actively and constructively in all meetings; exercise their business judgment in good faith; focus their efforts on ensuring that the company’s business is conducted so as to further the interests of the shareholders; and become and remain well informed about the company, business and economic trends that affect the company and about the principles and practices of sound Corporate Governance. Following review and discussion of the responses, the Chairman of the Board or the Chairman of the respective committee may table proposals to enhance the performance or effectiveness of the functioning of the Board or of the respective committee. Advice can be requested from a third- party expert. P. 160 /161 The evaluation of the Audit Committee is performed at least once a year and is achieved by means of a written process, each member of the committee being requested to comment and provide a numerical rating on a number of questions included in a written questionnaire. Questions in the questionnaire address the composition of the committee, the understanding of the business and its risks, the oversight of financial reporting processes, including internal controls and the oversight of the internal and external audit functions. For significant questions that have obtained a low score on the proposed efficiency scale, an action plan is discussed during a meeting of the committee. The analysis of the questionnaire and the agreed action plan are subsequently presented to the entire Board. ƵƷ&HUWDLQWUDQVDFWLRQVDQGRWKHUFRQWUDFWXDOUHODWLRQVKLSV There are no transactions or other contractual relationships to be reported between the company and its Board members that gave rise to conflicting interests as defined in the Belgian Companies code. The company is prohibited from making loans to directors, whether for the purpose of exercising options or for any other purpose. ƶ&KLHI([HFXWLYH2IILFHUDQG([HFXWLYH%RDUGRI0DQDJHPHQW The Chief Executive Officer (CEO) is entrusted by the Board with responsibility for the day-to-day management of the company. The CEO has direct operational responsibility for the entire company. The CEO leads an Executive Board of Management (EBM) which comprises eight global functional heads and six Zone presidents including the Chief Executive Officer of Ambev (Bernardo Pinto Paiva), who reports to the Board of directors of Ambev. As of ƴbJanuarybƵƳƴƸ, Jo¢o Castro Neves, Zone President Latin America North and CEO of Ambev, has been appointed Zone President North America. He has been succeeded by Bernardo Pinto Paiva, AB InBev’s Chief Sales Officer. Luiz Fernando Edmond, Zone President North America, has moved to a global role, becoming AB InBev’s Chief Sales Officer. Our Executive Board of Management currently consists of the following members: 1DPH )XQFWLRQ Carlos Brito Chief Executive OƱcer Felipe Dutra Chief Financial and Technology OƱcer Claudio Braz Ferro Chief Supply OƱcer Miguel Patricio Chief Marketing OƱcer Sabine Chalmers Chief Legal and Corporate AƬairs OƱcer Claudio Garcia Chief People OƱcer Luiz Fernando Edmond Chief Sales OƱcer Tony Milikin Chief Procurement OƱcer Jo Van Biesbroeck Chief Strategy OƱcer Michel Doukeris Zone President Asia PaciƮc Stuart MacFarlane Zone President Europe Ricardo Tadeu Zone President Mexico Marcio Froes Zone President Latin America South Jo¢o Castro Neves Zone President North America Bernardo Pinto Paiva Zone President Latin America North Ʒ,QWHUQDO&RQWURODQG5LVN0DQDJHPHQW6\VWHPV The Board of directors and the Executive Board of Management are responsible for establishing and maintaining adequate internal controls and risk management systems. Internal control is the process designed to provide reasonable assurance regarding achievement of objectives related to effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. Risk management is the process designed to identify potential events that may affect the company and to manage risks to be within its risk appetite. :ithout prejudice to the responsibilities of the Board as a whole, the Audit Committee oversees financial and business risk management and discusses the process by which management assesses and manages the company’s exposure to those risks and the steps taken to monitor and control such exposure. The company’s major risk factors and uncertainties are described in the Risks and Uncertainties section of the Management report in AB InBev’s annual report. The company has established and operates its internal control and risk management systems based on guidelines issued by the Committee of Sponsoring Organizations of the Treadway Commission (ŠCOSOš). The internal control system is based upon COSO’s Internal Controlś Integrated Framework of ƵƳƴƶ and its risk management system is based on COSO’s Enterprise Risk Management Framework of ƵƳƳƷ. Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT )LQDQFLDOUHSRUWLQJ The Executive Board of Management is responsible for establishing and maintaining adequate internal controls over financial reporting. The company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards. Internal controls over financial reporting include those written policies and procedures that: ť pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; ť provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards; ť provide reasonable assurance that receipts and expenditures of the company are being made only in accordance with authorization of management and directors of the company; and ť provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. Internal control over financial reporting includes the assessment of the relevant risks, the identification and monitoring of key controls and actions taken to correct deficiencies as identified. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Executive Board of Management assessed the effectiveness of the company’s internal control over financial reporting as of ƶƴ DecemberbƵƳƴƷ. As indicated above, management based this assessment on criteria for effective internal control over financial reporting described in Š,QWHUQDO &RQWUROŜ,QWHJUDWHG)UDPHZRUNš issued by COSO in May ƵƳƴƶ. The assessment included an evaluation of the design of the company’s internal control over financial reporting and testing of its operational effectiveness. Based on this assessment, the Executive Board of Management determined that, as of ƶƴbDecemberbƵƳƴƷ, the company maintained effective internal control over financial reporting. The Board of directors and the Audit Committee reviewed the Executive Board of Management’s assessment. The review related among other things to ensuring that there are no significant deficiencies or material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information, and to the existence of any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. In addition, as a result of the listing of Anheuser-Busch InBev on the New York Stock Exchange, the company must adhere to Section ƷƳƷ of the U.S. Sarbanes-Oxley Act of ƵƳƳƵ. As a consequence, the company is required to provide on a yearly basis a management report on the effectiveness of the company’s internal control over financial reporting, as described in the Section and the rules implementing such act. Management’s report and the Statutory Auditor’s related opinion regarding the company’s relevant financial year, will be included in the company’s Annual Report on Form ƵƳ-F for such year, which is required to be filed with the U.S. Securities and Exchange Commission. ,QWHUQDO$XGLW The company has a professional and independent internal audit department. The appointment of the Head of internal audit is reviewed by the Audit Committee. The Audit Committee reviews internal audit’s risk assessment and annual audit plan and regularly receives internal audit reports for review and discussion. Internal control deficiencies identified by internal audit are communicated in a timely manner to management and periodic follow-up is performed to ensure corrective action has been taken. &RPSOLDQFH Anheuser-Busch InBev has a Compliance Program which fosters a culture of ethics, integrity and lawful behavior in the company. This program is based upon the Code of Business Conduct and the Anti-Corruption Policy, which are available on the company’s website and intranet. The Compliance Program further ensures compliance with applicable laws and regulations and the obtaining of an annual certification by management of compliance with the Code of Business Conduct. A set of internal controls has been implemented and is periodically assessed at the Global and Local Compliance Committees, the Audit Committee and within the framework of internal audit. The Global Compliance Committee, chaired by the Chief Legal & Corporate Affairs Officer, assesses regulatory and ethical compliance risks for the company from a global perspective and provides strategic direction for the activities of the compliance function. On a bi-monthly basis, the Global Compliance Committee reviews the operation of the Compliance Program and follows-up on the results of the reports submitted through the company’s Compliance Helpline (whistle-blowing platform). In addition to the Global Compliance Committee, each Zone has its own Local Compliance Committee, which addresses local compliance matters. P. 162 /163 The Audit Committee reviews the operation of the Compliance Program and the results of any compliance reviews or reports submitted through the company’s global Compliance Helpline. On a regular basis, the Audit Committee also reviews the significant legal, compliance and regulatory matters that may have a material effect on the financial statements or the company’s business, including material notices to or inquiries received from governmental agencies. Reinforcing the company’s firm commitment to a culture of compliance, a dedicated Compliance team has been created. The Compliance Program is ranked in the ƵƳƴƷ Transparency International report, 7UDQVSDUHQF\LQ&RUSRUDWH5HSRUWLQJ (www.transparency.org), which evaluates the transparency of corporate reporting by the world’s ƴƵƷ largest publicly listed companies. The report assesses the disclosure practices of companies a.o. with respect to their anti-corruption programs. Ƹ6KDUHKROGHUV6WUXFWXUH Ƹƴ6KDUHKROGHUVŞVWUXFWXUH The following table shows the shareholders’ structure on the date specified below based on the notifications made to the company and to the Belgian Financial Services and Markets Authority (ŠFSMAš) by the shareholders specified below according to article ƹ of the Belgian law of ƵbMaybƵƳƳƺ on the notification of significant shareholdings and according to article ƺƷ of the Belgian law of ƴbAprilbƵƳƳƺ on public take-over bids or based on information included in public filings with the US Securities and Exchange Commission. The first ten entities mentioned in the table act in concert and hold ƻƶƻ,ƼƳƵ,ƳƼƵ ordinary shares of the company, representing ƸƵ.ƴƹ of the voting rights as of ƶƴbDecemberbƵƳƴƷ. 6KDUHKROGHU 1XPEHURIVKDUHV 3HUFHQWDJHRIYRWLQJULJKWV 'DWHODVWQRWLƮFDWLRQ ƴ. Stichting Anheuser-Busch InBev, stichting administratiekantoor under Dutch law ƹƹƶ,ƳƺƷ,ƻƶƴ Ʒƴ.Ƶƶ ƶƴbDecemberbƵƳƴƷ Ƶ. Eug ¨nie Patri S¨bastien (EPS) SA under Luxembourg law, aƱliated to Stichting Anheuser-Busch InBev that it jointly controls with BRC Srl under Luxembourg law ƴƳƳ,ƳƳƳ Ƴ.Ƴƴ ƶƴbDecemberbƵƳƴƷ ƶ. EPS Participations Srl under Luxembourg law, aƱliated to EPS, its parent company ƴƵƻ,Ʒƶƺ,ƴƷƴ ƺ.ƼƼ ƶƴbDecemberbƵƳƴƷ Ʒ. Rayvax Soci¨t¨ d’Investissements SA under Belgian law ƴƳ Ƴ.Ƴƴ ƶƴbDecemberbƵƳƴƷ Ƹ. S ¨bastien Holding SA under Belgian law, aƱliated to Rayvax Soci¨t¨ d’Investissements, its parent company ƷƻƷ,ƺƼƷ Ƴ.Ƴƶ ƶƴbDecemberbƵƳƴƷ ƹ. BRC Srl under Luxembourg law, aƱliated to Stichting Anheuser-Busch InBev that it jointly controls with EPS SA under Luxembourg law ƶƷ,ƶƵƵ,Ƶƶƹ Ƶ.ƴƶ ƶƴbDecemberbƵƳƴƷ ƺ. Stichting Fonds InBev ś Baillet Latour Ƴ Ƴ.ƳƳ ƶƴbDecemberbƵƳƴƷ ƻ. Fonds InBev ś Baillet Latour sprl with a social purpose under Belgian law aƱliated to Stichting Fonds InBev-Baillet Latour under Dutch law, that controls it Ƹ,ƷƻƸ,ƷƴƸ Ƴ.ƶƷ ƶƴbDecemberbƵƳƴƷ Ƽ. Fonds Verhelst sprl with a social purpose Ƴ Ƴ.ƳƳ ƶƴbDecemberbƵƳƴƷ ƴƳ. Fonds Voorzitter Verhelst sprl with a social purpose under Belgian law aƱliated to Fonds Verhelst sprl with a social purpose under Belgian law, that controls it ƹ,ƼƼƺ,ƹƹƸ Ƴ.Ʒƶ ƶƴbDecemberbƵƳƴƷ ƴƴ. Anheuser-Busch InBev SA/NV under Belgian law ƶƸƹ,ƶƶƹ Ƴ.ƳƵ ƶƴbDecemberbƵƳƴƷ ƴƵ. Brandbrew SA under Luxembourg law, aƱliated to Anheuser-Busch InBev SA/NV that controls it ƸƵƸ,ƻƼƷ Ƴ.Ƴƶ ƶƴbDecemberbƵƳƴƷ ƴƶ. Capital Research & Management Cy, California, USA Ʒƺ,ƻƵƻ,ƷƵƻ Ƶ.Ƽƻ ƶbFebruarybƵƳƴƴ ƴƷ. Janus Capital Management LLC, Colorado, USA Ʒƹ,ƻƺƵ,ƻƹƺ Ƶ.ƼƵ ƵƶbMarchbƵƳƴƳ ƴƸ. Fidelity Management & Research LLC, Massachusetts, USA Ʒƻ,Ƹƹƴ,ƻƺƶ ƶ.Ƴƶ ƴƹbSeptemberbƵƳƳƼ ƴƹ. BlackRock, Inc., New York, USA undisclosed ƶ.ƳƳ ƵƸbFebruarybƵƳƴƷ Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT The following chart shows the structure of the controlling shareholders of Anheuser-Busch InBev SA/NV acting in concert (situation as at ƶƴbDecember ƵƳƴƷ). Stichting St MH Telles Venerina 99.86% 0.14% Sta Maria JP Lemann CA Sicupira Isabel 99.9800% 100% 99.5% Santa Alfta Inpar VOF Carolina T Holding Netherlands Netherlands 100% 100% 99.992% Inpar MCMT Investment Fund Holding Santa Heloisa Netherlands Bahamas 99.992% 100% Santa Paciencia Santa Erika Bahamas Bahamas 19.9273% 24.7280% 55.344% S-BR Global Bahamas 82.28% BR Global Bahamas 100% BRC-Global Luxembourg 100% EPS Rayvax BRC Luxembourg Luxembourg 100% 100% 50.0% 2.13% 50.0% Public Free Stichting AK EPS 0.01% Sébastien Fonds InBev Fonds VZ Float Netherlands Participations Holding Baillet Latour Verhelst 47.80% 41.23% 7.99% 0.03% 0.34% 0.43% ABInBev Belgium ƴ. Shareholders’ structure as at ƶƴbDecemberbƵƳƴƷ based on information provided to Anheuser-Busch InBev by those shareholders who are compelled to disclose their shareholdings pursuant to the Belgian law of ƵbMaybƵƳƳƺ on the notiƮcation of signiƮcant shareholdings, article ƺƷ of the Belgian law of ƴbAprilbƵƳƳƺ on public take-over bids and the Articles of Association of the Company or based on information included in public Ʈlings with the US Securities and Exchange Commission. Ƶ. A Shareholders Agreement between EPS, EPS Participations, BRC and Stichting Anheuser-Busch InBev provides for equal voting and control rights of BRC and EPS over Stichting Anheuser-Busch InBev and, indirectly, over Anheuser-Busch InBev shares held by it. ƶ. The Stichting Anheuser-Busch InBev, BRC, EPS, EPS Participations, Rayvax, S¨bastien Holding, Fonds InBev Baillet Latour and Fonds Voorzitter Verhelst act in concert. Ʒ. Anheuser-Busch InBev and its subsidiary, Brandbrew, together hold Ƴ.ƳƸ of the company’s shares as at ƶƴbDecemberbƵƳƴƷ. ƸƵ6KDUHKROGHUVŞDUUDQJHPHQWV In connection with the combination of Interbrew with Ambev, BRC, EPS, Rayvax Soci¨t¨ d’investissements SA (ŠRayvaxš) and the Stichting Anheuser-Busch InBev (ŠStichtingš) entered into a shareholders’ agreement on ƵbMarchbƵƳƳƷ which provides for BRC and EPS to hold their interests in Anheuser-Busch InBev through the Stichting (except for approximately ƴƵƻ million shares that are held directly or indirectly by EPS and except for approximately ƶƷ million shares that are held by BRC as of ƶƴbDecemberbƵƳƴƷ). The shareholders agreement was amended and restated on ƼbSeptemberbƵƳƳƼ. On ƴƻbDecemberbƵƳƴƶ, EPS contributed its shares in Anheuser-Busch InBev and its certificates in Stichting Anheuser-Busch InBev to EPS Participations Srl (ŠEPS Participationsš), under Luxemburg law, with the exception of ƴƳƳ,ƳƳƳ Anheuser-Busch InBev shares. Subsequently, EPS Participations joined the concert constituted by EPS, Rayvax, BRC and the Stichting and adhered to the shareholders’ agreement. On ƴƻbDecemberbƵƳƴƷ, the Stichting, BRC, EPS, EPS Participations and Rayvax entered into a new shareholders’ agreement that replaced the previous shareholders’ agreement of ƵƳƳƼ. On ƴƹbJanuarybƵƳƴƸ, EPS transferred one Anheuser-Busch InBev share to P. 164 /165 the Stichting for certification by the latter, so that on ƴƹbJanuarybƵƳƴƸ, the Stichting held ƹƹƶ,ƳƺƷ,ƻƶƵ Anheuser-Busch InBev shares and EPS held ƼƼ,ƼƼƼ Anheuser-Busch InBev shares. The shareholders’ agreement addresses, among other things, certain matters relating to the governance and management of the Stichting and Anheuser-Busch InBev as well as (i) the transfer of the Stichting certificates and (ii) the decertification and re-certification process of the Anheuser-Busch InBev shares and the circumstances in which the Anheuser-Busch InBev shares held by the Stichting may be de-certified and/ or pledged at the request of BRC, EPS or EPS Participations. As of ƴƹbJanuarybƵƳƴƸ, BRC held ƶƶƴ,Ƹƶƺ,Ʒƴƹ class B Stichting certificates (indirectly representing ƶƶƴ,Ƹƶƺ,Ʒƴƹ shares), EPS held ƴ class A Stichting certificate (indirectly representing ƴ share) and EPS Participations held ƶƶƴ,Ƹƶƺ,ƷƴƸ class A Stichting certificates (indirectly representing ƶƶƴ,Ƹƶƺ,ƷƴƸ shares). Pursuant to the terms of the shareholders’ agreement, BRC and EPS jointly and equally exercise control over the Stichting and the Anheuser-BuschbInBev shares held by it. Among other things, BRC and EPS have agreed that the Stichting will be managed by an eight member Board of directors and that each of BRC and EPS will have the right to appoint four directors to the Stichting Board. At least seven of the eight Stichting directors must be present or represented in order to constitute a quorum, and any action to be taken by the Stichting Board will, subject to certain qualified majority conditions, require the approval of a majority of the directors present or represented, including at least two directors appointed by BRC and two directors appointed by EPS. Subject to certain exceptions, all decisions of the Stichting with respect to the Anheuser-Busch InBev shares it holds, including how its Anheuser-Busch InBev shares will be voted at all shareholders’ meetings of Anheuser-Busch InBev will be made by the Stichting Board. The shareholders’ agreement requires the Stichting Board to meet prior to each shareholders’ meeting of Anheuser-Busch InBev to determine how the shares held by the Stichting will be voted. The shareholders’ agreement provides for restrictions on the ability of BRC and EPS Participations to transfer their Stichting certificates (and consequently the Anheuser-Busch InBev shares held by the Stichting). In addition, the shareholders’ agreement also requires EPS, EPS Participations, BRC and Rayvax, as well as any other potential holder of certificates issued by the Stichting, to vote their Anheuser-Busch InBev shares in the same manner as the Anheuser-Busch InBev shares held by the Stichting. The abovementioned persons are also required to use their best efforts so that their permitted transferees under the shareholders’ agreement, whose shares are not held through the Stichting and who have decided to attend a shareholders’ meeting of Anheuser-Busch InBev, vote their Anheuser-Busch InBev shares in the same manner as the Anheuser-Busch InBev shares held by the Stichting and to effect any free transfers of their Anheuser-Busch InBev shares in an orderly manner of disposal that does not disrupt the market for the Anheuser-Busch InBev shares and in accordance with any conditions established by Anheuser-Busch InBev to ensure such orderly disposal. In addition, under the shareholders’ agreement, EPS, EPS Participations and BRC agree not to acquire any shares of capital stock of Ambev, subject to limited exceptions. Pursuant to the shareholders’ agreement, the Stichting Board proposes to Anheuser-Busch InBev’s shareholders’ meeting for approval the nomination of eight directors, among which each of BRC and EPS have the right to nominate four directors. In addition, the Stichting Board proposes the nomination of three to six directors to Anheuser-Busch InBev’s board who are independent of Anheuser-Busch InBev’s shareholders. The shareholders’ agreement will remain in effect for an initial term until ƵƺbAugustbƵƳƵƷ. Thereafter, it will be automatically renewed for successive terms of ƴƳ years each unless, not later than two years prior to the expiration of the initial or any successive ƴƳ-year term, either party notifies the other of its intention to terminate the shareholders’ agreement. In addition, the Stichting has entered into a voting agreement with Fonds InBev Baillet Latour SPRL with social purpose and Fonds Voorzitter Verhelst BVBA with social purpose. This agreement provides for consultations between the three bodies before any shareholders’ meeting to decide how they will exercise the voting rights attached to the shares. This agreement will expire on ƴƹbOctoberbƵƳƴƹ, but is renewable. ƹ,WHPVWREHGLVFORVHGSXUVXDQWWRDUWLFOHƶƷRIWKH%HOJLDQ5R\DO'HFUHHRIƴƷb1RYHPEHUbƵƳƳƺ According to article ƶƷ of the Belgian Royal Decree of ƴƷbNovemberbƵƳƳƺ, Anheuser-Busch InBev hereby discloses the following items: ƹƴ&DSLWDOVWUXFWXUHDQGDXWKRUL]DWLRQVJUDQWHGWRWKH%RDUG The share capital of the company is represented by ordinary shares. Anheuser-Busch InBev may increase or decrease its share capital with the specific approval of a shareholders’ meeting. The shareholders may also authorize the Board of directors to increase the share capital. Such authorization must be limited in time and amount. In either case, the shareholders’ approval or authorization must satisfy the quorum and majority requirements applicable to amendments to the articles of association. On ƶƳbAprilbƵƳƴƷ, the shareholders authorized the Board of directors to increase the share capital of Anheuser-Busch InBev to an amount not to exceed ƶ% of the total number of shares issued and outstanding on ƶƳbAprilbƵƳƴƷ (i.e. ƴ,ƹƳƻ,ƵƷƵ,ƴƸƹ). This authorization has been Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT granted for a period of Ƹ years. It can be used for several purposes, including when sound management of the company’s business would call for a restructuring, an acquisition of shares or assets in one or more companies, or generally, an increase in Anheuser-Busch InBev’s equity. Anheuser-Busch InBev’s Board of directors has been authorized by the shareholders’ meeting to acquire, on or outside the stock exchange, Anheuser-Busch InBev shares up to maximum ƵƳ% of the issued shares for a unitary price which will not be lower than ƴ Euro and not higher than ƵƳ% above the highest closing price in the last ƵƳ trading days preceding the transaction. This authorization is valid for Ƹ years from ƶƳbAprilbƵƳƴƷ. ƹƵ7UDQVIHURIVKDUHVDQGVKDUHKROGHUVŞDUUDQJHPHQWV Each share entitles the holder to one vote. The articles of association of the company do not contain any restriction on the transfer of the shares. Please refer to the sections above on the Shareholders’ structure and arrangements. ƹƶ6LJQLILFDQWDJUHHPHQWVRUVHFXULWLHVWKDWPD\EHLPSDFWHGE\DFKDQJHRIFRQWURORQWKHFRPSDQ\ ƴ. :DUUDQWVXQGHUWKHORQJWHUPLQFHQWLYHSODQ Until ƵƳƴƶ, Anheuser-Busch InBev has issued, on a regular basis, warrants/subscription rights under its long-term incentive plan for the benefit of its Board members and, until ƵƳƳƺ, for the benefit of the members of its Executive Board of Management and other senior employees (the ŠLTIš). Pursuant to the terms and conditions of the LTI, in the event of a modification, as a result of a public bid or otherwise, of the (direct or indirect) control (as defined under Belgian law) exercised over Anheuser-Busch InBev, the holders of warrants shall have the right to exercise them within one month of the date of change of control, irrespective of exercise periods/ limitations provided by the plan. Subscription rights not exercised within such time period shall again be fully governed by the normal exercise periods/limitations provided by the plan. On ƶƳbAprilbƵƳƴƷ, the annual shareholders meeting decided that all the outstanding LTI warrants were automatically converted into LTI stock options, i.e. the right to purchase existing shares instead of the right to subscribe to newly-issued shares, with effect on ƴbMaybƵƳƴƷ. Accordingly, all subscription rights outstanding on ƴbMaybƵƳƴƷ have become without object, with effect on the same date. The terms and conditions of the replacement LTI stock options are identical to those of the subscription rights, including regarding the exercise price and the exercise conditions and periods, except to the extent strictly needed to take into account that existing shares instead of new shares will be delivered. Currently in aggregate, there are ƴ.ƳƼ million LTI stock options outstanding under the plan, entitling holders to purchase the same number of existing ordinary shares of Anheuser-Busch InBev. Ƶ. 86'ƴƶƳƳƳƳƳƳƳƳƳ6HQLRU)DFLOLWLHV$JUHHPHQW In accordance with Article ƸƸƹ of the Belgian Companies Code, the shareholders meeting of Anheuser-Busch InBev approved on ƵƺbAprilbƵƳƴƳ, (i) Clause ƴƺ (0DQGDWRU\3UHSD\PHQW) of the USD ƴƶ,ƳƳƳ,ƳƳƳ,ƳƳƳ Senior Facilities Agreement dated ƵƹbFebruarybƵƳƴƳ entered into by the company and Anheuser-Busch InBev :orldwide Inc. as original borrowers, the original guarantors and original lenders listed therein, Bank of America Securities Limited, Banco Santander, S.A., Barclays Capital, Deutsche Bank AG, London Branch, Fortis Bank SA/NV, ING Bank NV, Intesa Sanpaolo S.P.A., J.P. Morgan PLC, Mizuho Corporate Bank, Ltd, The Royal Bank of Scotland PLC, Soci¨t¨ G¨n¨rale Corporate and Investment Banking, and The Bank of Tokyo-Mitsubishi UFJ, LTD. as mandated lead arrangers and bookrunners and Fortis Bank SA/NV as agent and issuing bank (as amended and/or amended and restated from time to time) (the ŠƵƳƴƳ Senior Facilities Agreementš) and (ii) any other provision of the ƵƳƴƳ Senior Facilities Agreement granting rights to third parties which could affect the company’s assets or could impose an obligation on the Company where in each case the exercise of those rights is dependent on the launch of a public take-over bid over the shares of the company or on a ŠChange of Controlš (as defined in the ƵƳƴƳ Senior Facilities Agreement). Pursuant to the ƵƳƴƳ Senior Facilities Agreement (a) Š&KDQJHRI&RQWUROš means ŠDQ\SHUVRQRUJURXSRISHUVRQVDFWLQJLQFRQFHUW LQ HDFKFDVHRWKHUWKDQ6WLFKWLQJ,Q%HYRUDQ\H[LVWLQJGLUHFWRULQGLUHFWFHUWLILFDWHKROGHURUFHUWLILFDWHKROGHUVRI6WLFKWLQJ,Q%HYRUDQ\SHUVRQRUJURXSRI SHUVRQVDFWLQJLQFRQFHUWZLWKDQ\VXFKSHUVRQV JDLQLQJ&RQWURORIWKHFRPSDQ\š, (b) ŠDFWLQJLQFRQFHUWš means ŠDJURXSRISHUVRQVZKRSXUVXDQWWRDQ DJUHHPHQWRUXQGHUVWDQGLQJ ZKHWKHUIRUPDORULQIRUPDO DFWLYHO\FRRSHUDWHWKURXJKWKHDFTXLVLWLRQGLUHFWO\RULQGLUHFWO\RIVKDUHVLQWKHFRPSDQ\E\ DQ\RIWKHPHLWKHUGLUHFWO\RULQGLUHFWO\WRREWDLQ&RQWURORIWKHFRPSDQ\š and (c) Š&RQWUROš means, in respect of the company, the ŠGLUHFWRULQGLUHFW RZQHUVKLSRIPRUHWKDQƸƳSHUFHQWRIWKHVKDUHFDSLWDORUVLPLODUULJKWVRIRZQHUVKLSRIWKHFRPSDQ\RUWKHSRZHUWRGLUHFWWKHPDQDJHPHQWDQGWKHSROLFLHV RIWKHFRPSDQ\ZKHWKHUWKURXJKWKHRZQHUVKLSRIVKDUHFDSLWDOFRQWUDFWRURWKHUZLVHš . Clause ƴƺ of the ƵƳƴƳ Senior Facilities Agreement grants, in essence, to any lender under the ƵƳƴƳ Senior Facilities Agreement, upon a Change of Control over the company, the right (i) not to fund any loan or letter of credit (other than a rollover loan meeting certain conditions) and (ii)b(by not less than ƶƳ days written notice) to cancel its undrawn commitments and require repayment of its participations in the loans or letters of credit, together with accrued interest thereon, and all other amounts owed to such lender under the ƵƳƴƳ Senior Facilities Agreement (and certain related documents). As of ƶƴbDecemberbƵƳƴƷ, out of the USD ƴƶ,ƳƳƳ,ƳƳƳ,ƳƳƳ, USD Ƴ billion remains outstanding under the ƵƳƴƳ Senior Facilities Agreement. ƶ. (0713URJUDPPH In accordance with article ƸƸƹ of the Belgian Companies Code, the shareholders’ meeting of Anheuser-Busch InBev approved on ƵƷbAprilbƵƳƴƶ (i) Condition ƺ.Ƹ. of the Terms & Conditions (Redemption at the Option of the Noteholders (Change of Control Put)) of the ƴƸ,ƳƳƳ,ƳƳƳ,ƳƳƳ Euro updated Euro Medium Term Note Programme dated ƴƹbMaybƵƳƴƵ of Anheuser-Busch InBev SA/NV and Brandbrew SA (the ŠIssuersš) and Deutsche Bank AG, London Branch, acting as Arranger, which may be applicable in the case of Notes issued under the Programme (the ŠEMTN Programmeš), (ii) any other provision in the EMTN Programme granting rights to third parties which could affect the company’s assets or could impose an obligation on the company where in each case the exercise of those rights is dependent on P. 166 /167 the occurrence of a ŠChange of Controlš (as defined in the Terms & Conditions of the EMTN Programme). Pursuant to the EMTN Programme, (a)bŠ&KDQJHRI&RQWUROš means Š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š, (b)bŠDFWLQJLQFRQFHUWš means ŠDJURXSRISHUVRQVZKRSXUVXDQWWRDQDJUHHPHQWRUXQGHUVWDQGLQJ ZKHWKHUIRUPDORULQIRUPDO DFWLYHO\FRRSHUDWHWKURXJKWKHDFTXLVLWLRQGLUHFWO\RULQGLUHFWO\RIVKDUHVLQWKHFRPSDQ\E\DQ\RIWKHPHLWKHUGLUHFWO\RULQGLUHFWO\WRREWDLQ&RQWURORIWKH FRPSDQ\š, and (c) Š&RQWUROš means the ŠGLUHFWRULQGLUHFWRZQHUVKLSRIPRUHWKDQƸƳSHUFHQWRIWKHVKDUHFDSLWDORUVLPLODUULJKWVRIRZQHUVKLSRIWKH FRPSDQ\RUWKHSRZHUWRGLUHFWWKHPDQDJHPHQWDQGWKHSROLFLHVRIWKHFRPSDQ\ZKHWKHUWKURXJKWKHRZQHUVKLSRIVKDUHFDSLWDOFRQWUDFWRURWKHUZLVHš. If a Change of Control Put is specified in the applicable Final Terms of the concerned notes, Condition ƺ.Ƹ. of the Terms & Conditions of the EMTN Programme grants, to any holder of such notes, in essence, the right to request the redemption of his notes at the redemption amount specified in the Final Terms of the notes, together, if appropriate, with interest accrued, upon the occurrence of a Change of Control and a related downgrade of the notes to sub-investment grade. The change of control provision above is included in the Final Terms of: ť the ƺƸƳ,ƳƳƳ,ƳƳƳbEurobƺ.ƶƺƸ% Notes due ƵƳƴƶ (5HGHHPHGRQƶƳb-DQXDU\bƵƳƴƶ), the ƹƳƳ,ƳƳƳ,ƳƳƳbEurobƻ.ƹƵƸ% Notes due ƵƳƴƺ and the GBPbƸƸƳ,ƳƳƳ,ƳƳƳ Ƽ.ƺƸ% Notes due ƵƳƵƷ, each issued by the company in January ƵƳƳƼ; ť the ƺƸƳ,ƳƳƳ,ƳƳƳbEurobƹ.Ƹƺ% Notes due ƵƳƴƷ, issued by the company in February ƵƳƳƼ (5HGHHPHGRQƵƺb)HEUXDU\bƵƳƴƷ); ť the ƸƳ,ƳƳƳ,ƳƳƳ Euro FRN Notes that bear an interest at a floating rate of ƶ month EURIBOR plus ƶ.ƼƳ%, issued by the company in AprilbƵƳƳƼ (5HGHHPHGRQƼb$SULObƵƳƴƷ); ť the CHF ƹƳƳ,ƳƳƳ,ƳƳƳ Ʒ.ƸƳ% Notes due ƵƳƴƷ 5HGHHPHGRQƴƴb-XQHbƵƳƴƷ , issued by Brandbrew SA in June ƵƳƳƼ (with a guarantee by thebcompany); ť the ƵƸƳ,ƳƳƳ,ƳƳƳbEurobƸ.ƺƸ% Notes due ƵƳƴƸ and the GBP ƺƸƳ,ƳƳƳ,ƳƳƳ ƹ.ƸƳ% Notes due ƵƳƴƺ, each issued by the company in June ƵƳƳƼ; and ť the ƺƸƳ,ƳƳƳ,ƳƳƳbEurobƷ% Notes due ƵƳƴƻ, issued by the company in April ƵƳƴƳ. The series of Notes referred to in the above paragraph were issued pursuant to the ƴƳ,ƳƳƳ,ƳƳƳ,ƳƳƳ Euro initial Euro Medium Term Note Programme dated ƴƹbJanuarybƵƳƳƼ or the ƴƸ,ƳƳƳ,ƳƳƳ,ƳƳƳ Euro updated Euro Medium Term Note Programme dated ƵƷbFebruarybƵƳƴƳ (as applicable). The relevant change of control provisions contained in the Final Terms of such series of Notes were submitted to, and approved by, the shareholders meetings of Anheuser-Busch InBev held on ƵƻbAprilbƵƳƳƼbandbƵƺbAprilbƵƳƴƳ, respectively. There is no change of control clause included in the Final Terms of any series of Notes issued pursuant to the EMTN Programme by the company and/or Brandbrew SA after April ƵƳƴƳ. As a result of the update of the EMTN Programme on ƵƵbAugustbƵƳƴƶ the Terms & Conditions of the updated EMTN Programme no longer provide for a Redemption at the option of the Noteholders (Change of Control Put). Ʒ. 86'ROODU1RWHV In accordance with article ƸƸƹ of the Belgian Companies Code, the shareholders meeting of Anheuser-Busch InBev approved on ƵƹbAprilbƵƳƴƴ (i) the Change of Control Clause of the USD ƶ,ƵƸƳ,ƳƳƳ,ƳƳƳ Notes issued on ƵƼbandbƵƹbMarchbƵƳƴƳ, consisting of USD ƴ,ƳƳƳ,ƳƳƳ,ƳƳƳ Ƶ.ƸƳ% Notes due ƵƳƴƶ, USD ƺƸƳ,ƳƳƳ,ƳƳƳ ƶ.ƹƵƸ% Notes due ƵƳƴƸ, USD ƴ,ƳƳƳ,ƳƳƳ,ƳƳƳ Ƹ.ƳƳ% Notes due ƵƳƵƳ and USD ƸƳƳ,ƳƳƳ,ƳƳƳ Floating Rate Notes due ƵƳƴƶ (the Š8QUHJLVWHUHG1RWHVLVVXHGLQ0DUFKƵƳƴƳš), (ii) the Change of Control Clause of the USD ƶ,ƵƸƳ,ƳƳƳ,ƳƳƳ Registered Notes issued in September ƵƳƴƳ, consisting of USD ƴ,ƳƳƳ,ƳƳƳ,ƳƳƳ Ƶ.ƸƳ% Notes due ƵƳƴƶ (Redeemed on ƵƹbMarchbƵƳƴƶ), USD ƺƸƳ,ƳƳƳ,ƳƳƳ ƶ.ƹƵƸ% Notes due ƵƳƴƸ, USD ƴ,ƳƳƳ,ƳƳƳ,ƳƳƳ Ƹ.ƳƳ% Notes due ƵƳƵƳ and USD ƸƳƳ,ƳƳƳ,ƳƳƳ Floating Rate Notes due ƵƳƴƶ (5HGHHPHGRQƵƹb0DUFKbƵƳƴƶ) and offered in exchange for corresponding amounts of the corresponding Unregistered Notes issued in March ƵƳƴƳ, in accordance with a US Form F-Ʒ Registration Statement pursuant to an exchange offer launched by Anheuser-Busch InBev :orldwide Inc. in the U.S. on ƸbAugustbƵƳƴƳ and expired on ƵbSeptemberbƵƳƴƳ (the Š5HJLVWHUHG1RWHVLVVXHGLQ6HSWHPEHU ƵƳƴƳš), (iii) the Change of Control Clause of the USD ƻ,ƳƳƳ,ƳƳƳ,ƳƳƳ Registered Notes issued in March ƵƳƴƴ, consisting of USD ƴ,ƵƸƳ,ƳƳƳ,ƳƳƳ ƺ.ƵƳ% Notes due ƵƳƴƷ (5HGHHPHGRQƵƳb-XQHbƵƳƴƴ), USD Ƶ,ƸƳƳ,ƳƳƳ,ƳƳƳ ƺ.ƺƸ% Notes due ƵƳƴƼ and USD ƴ,ƵƸƳ,ƳƳƳ,ƳƳƳ ƻ.ƵƳ% Notes due ƵƳƶƼ, USD ƴ,ƸƸƳ,ƳƳƳ,ƳƳƳ Ƹ.ƶƺƸ% Notes due ƵƳƴƷ (5HGHHPHGRQƴƸb1RYHPEHUbƵƳƴƷ), USD ƴ,ƳƳƳ,ƳƳƳ,ƳƳƳ ƹ.ƻƺƸ% Notes due ƵƳƴƼ and USD ƷƸƳ,ƳƳƳ,ƳƳƳ ƻ.ƳƳ% Notes due ƵƳƶƼ and offered in exchange for corresponding amounts of the corresponding Unregistered Notes issued in January ƵƳƳƼ and of the corresponding Unregistered Notes issued in May ƵƳƳƼ, in accordance with a US Form F-Ʒ Registration Statement pursuant to an exchange offer launched by Anheuser-Busch InBev :orldwide Inc. in the U.S. on ƴƴbFebruarybƵƳƴƴ and expired on ƴƷbMarchbƵƳƴƴ (the Š5HJLVWHUHG1RWHVLVVXHGLQ0DUFKƵƳƴƴš), whereby each of the Unregistered Notes issued in March ƵƳƴƳ, the Registered Notes issued in September ƵƳƴƳ and the Registered Notes issued in March ƵƳƴƴ were issued by Anheuser-Busch InBev :orldwide Inc. with an unconditional and irrevocable guarantee as to payment of principal and interest from Anheuser-Busch InBev SA/NV, and (iv) any other provision applicable to the Unregistered Notes issued in March ƵƳƴƳ, the Registered Notes issued in September ƵƳƴƳ and the Registered Notes issued in March ƵƳƴƴ granting rights to third parties which could affect the company’s assets or could impose an obligation on the company where in each case the exercise of those rights is dependent on the launch of a public take-over bid over the shares of the company or on a ŠChange of Controlš (as defined in the Offering Memorandum with respect to the Unregistered Notes, as the case may be, and in the Registration Statement with Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT respect to the Registered Notes). Pursuant to the Offering Memorandum and Registration Statement (a) Š&KDQJHRI&RQWUROš means Š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š, (b) Š$FWLQJLQFRQFHUWš means ŠDJURXSRI SHUVRQVZKRSXUVXDQWWRDQDJUHHPHQWRUXQGHUVWDQGLQJ ZKHWKHUIRUPDORULQIRUPDO DFWLYHO\FRRSHUDWHWKURXJKWKHDFTXLVLWLRQGLUHFWO\RULQGLUHFWO\ RIVKDUHVLQWKHFRPSDQ\E\DQ\RIWKHPHLWKHUGLUHFWO\RULQGLUHFWO\WRREWDLQ&RQWURORIWKHFRPSDQ\š, and (c) Š&RQWUROšmeans theŠGLUHFWRULQGLUHFW RZQHUVKLSRIPRUHWKDQƸƳSHUFHQWRIWKHVKDUHFDSLWDORUVLPLODUULJKWVRIRZQHUVKLSRIWKHFRPSDQ\RUWKHSRZHUWRGLUHFWWKHPDQDJHPHQWDQGWKHSROLFLHV RIWKHFRPSDQ\ZKHWKHUWKURXJKWKHRZQHUVKLSRIVKDUHFDSLWDOFRQWUDFWRURWKHUZLVHš. The Change of Control clause grants to any Noteholder, in essence, the right to request the redemption of his Notes at a repurchase price in cash of ƴƳƴ% of their principal amount (plus interest accrued) upon the occurrence of a Change of Control and a related downgrade in the Notes to sub-investment grade. A similar change of control provision was approved by the shareholders’ meeting of Anheuser-Busch InBev on ƵƻbAprilbƵƳƳƼ with respect to: ť the USD Ƹ,ƳƳƳ,ƳƳƳ,ƳƳƳ Notes, consisting of USD ƴ,ƵƸƳ,ƳƳƳ,ƳƳƳ ƺ.ƵƳ% Notes due ƵƳƴƷ (([FKDQJHGIRU5HJLVWHUHG1RWHVLQDQH[FKDQJHRIIHU WKDWFORVHGRQƴƷb0DUFKbƵƳƴƴDQGUHGHHPHGRQƵƳb-XQHbƵƳƴƴ), USD Ƶ,ƸƳƳ,ƳƳƳ,ƳƳƳ ƺ.ƺƸ% Notes due ƵƳƴƼ and USD ƴ,ƵƸƳ,ƳƳƳ,ƳƳƳ ƻ.ƵƳ% Notes due ƵƳƶƼ, each issued in January ƵƳƳƼ by Anheuser-Busch InBev :orldwide Inc. with an unconditional and irrevocable guarantee as to payment of principal and interest from Anheuser-Busch InBev SA/NV (the Š8QUHJLVWHUHG1RWHVLVVXHGLQ-DQXDU\ƵƳƳƼš). A similar change of control provision was approved by the shareholders’ meeting of Anheuser-Busch InBev on ƵƺbAprilbƵƳƴƳ with respect to: ť the USD ƶ,ƳƳƳ,ƳƳƳ,ƳƳƳ Notes issued in May ƵƳƳƼ, consisting of USD ƴ,ƸƸƳ,ƳƳƳ,ƳƳƳ Ƹ.ƶƺƸ% Notes due ƵƳƴƷ (([FKDQJHGIRU5HJLVWHUHG 1RWHVLQDQH[FKDQJHRIIHUWKDWFORVHGRQƴƷb0DUFKbƵƳƴƴDQGUHGHHPHGRQƴƸb1RYHPEHUbƵƳƴƷ), USD ƴ,ƳƳƳ,ƳƳƳ,ƳƳƳ ƹ.ƻƺƸ% Notes due ƵƳƴƼ and USDbƷƸƳ,ƳƳƳ,ƳƳƳ ƻ.ƳƳ% Notes due ƵƳƶƼ (the Š8QUHJLVWHUHG1RWHVLVVXHGLQ0D\ƵƳƳƼš) each issued by Anheuser-Busch InBev :orldwide Inc. with an unconditional and irrevocable guarantee as to payment of principal and interest from Anheuser-Busch InBev SA/NV. ť the USD Ƹ,ƸƳƳ,ƳƳƳ,ƳƳƳ Notes issued in October ƵƳƳƼ, consisting of USD ƴ,ƸƳƳ,ƳƳƳ,ƳƳƳ ƶ.ƳƳ% Notes due ƵƳƴƵ (([FKDQJHGIRU5HJLVWHUHG 1RWHVLQDQH[FKDQJHRIIHUWKDWFORVHGRQƳƸb)HEUXDU\bƵƳƴƳDQGUHGHHPHGRQƴƸb2FWREHUbƵƳƴƵ), USD ƴ,ƵƸƳ,ƳƳƳ,ƳƳƳ Ʒ.ƴƵƸ% Notes due ƵƳƴƸ, USDbƵ,ƵƸƳ,ƳƳƳ,ƳƳƳ Ƹ.ƶƺƸ% Notes due ƵƳƵƳ and USD ƸƳƳ,ƳƳƳ,ƳƳƳ ƹ.ƶƺƸ% Notes due ƵƳƷƳ (the Š8QUHJLVWHUHG1RWHVLVVXHGLQ2FWREHUbƵƳƳƼš) each issued by Anheuser-Busch InBev :orldwide Inc. with an unconditional and irrevocable guarantee as to payment of principal and interest from Anheuser-Busch InBev SA/NV. ť the USD Ƹ,ƸƳƳ,ƳƳƳ,ƳƳƳ Registered Notes issued in February ƵƳƴƳ, consisting of USD ƴ,ƸƳƳ,ƳƳƳ,ƳƳƳ ƶ% Notes due ƵƳƴƵ (5HGHHPHGRQ ƴƸb2FWREHUbƵƳƴƵ), USD ƴ,ƵƸƳ,ƳƳƳ,ƳƳƳ Ʒ.ƴƵƸ% Notes due ƵƳƴƸ, USD Ƶ,ƵƸƳ,ƳƳƳ,ƳƳƳ Ƹ.ƶƺƸ% Notes due ƵƳƵƳ and USD ƸƳƳ,ƳƳƳ,ƳƳƳ ƹ.ƶƺƸb% Notes due ƵƳƷƳ and offered in exchange for corresponding amounts of the corresponding Unregistered Notes issued in October ƵƳƳƼ, in accordance with a US Form F-Ʒ Registration Statement pursuant to an exchange offer launched by Anheuser-Busch InBev :orldwide Inc. in the US on ƻbJanuarybƵƳƴƳ and expired on ƸbFebruarybƵƳƴƳ (the Š5HJLVWHUHG1RWHVLVVXHGLQ)HEUXDU\ƵƳƴƳš) each issued by Anheuser-Busch InBev :orldwide Inc. with an unconditional and irrevocable guarantee as to payment of principal and interest from Anheuser-Busch InBev SA/NV. Ƹ. 1RWHVLVVXHGXQGHU$QKHXVHU%XVFK,Q%HYŞV6KHOI5HJLVWUDWLRQ6WDWHPHQWILOHGRQ)RUP)ƶ In accordance with article ƸƸƹ of the Belgian Companies Code, the shareholders’ meeting of Anheuser-Busch InBev has approved on ƵƹbAprilbƵƳƴƴ (i) the Change of Control Clause of the Brazilian real (ŠBRLš) ƺƸƳ,ƳƳƳ,ƳƳƳ Ƽ.ƺƸƳ% Registered Notes due ƵƳƴƸ issued on ƴƺbNovemberbƵƳƴƳ by Anheuser-Busch InBev :orldwide Inc. under Anheuser-Busch InBev’s Shelf Registration Statement filed on Form F-ƶbonbƵƴbSeptemberbƵƳƴƳ (with an unconditional and irrevocable guarantee as to payment of principal and interest from Anheuser-Busch InBev SA/NV) and (ii) any other provision applicable to the Registered Notes granting rights to third parties which could affect the company’s assets or could impose an obligation on the company where in each case the exercise of those rights is dependent on the launch of a public take-over bid over the shares of the company or on a ŠChange of Controlš (as defined in the Prospectus Supplement dated ƼbNovemberbƵƳƴƳ to the Prospectus dated ƵƴbSeptemberbƵƳƴƳ). Pursuant to the Prospectus Supplement (a) Š&KDQJHRI&RQWUROš means Š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š, (b) Š$FWLQJLQFRQFHUWš meansŠDJURXSRISHUVRQVZKRSXUVXDQWWRDQDJUHHPHQWRUXQGHUVWDQGLQJ ZKHWKHU IRUPDORULQIRUPDO DFWLYHO\FRRSHUDWHWKURXJKWKHDFTXLVLWLRQGLUHFWO\RULQGLUHFWO\RIVKDUHVLQWKHFRPSDQ\E\DQ\RIWKHPHLWKHUGLUHFWO\RULQGLUHFWO\WR REWDLQ&RQWURORIWKHFRPSDQ\š, and (c) Š&RQWUROš means the ŠGLUHFWRULQGLUHFWRZQHUVKLSRIPRUHWKDQƸƳSHUFHQWRIWKHVKDUHFDSLWDORUVLPLODUULJKWV RIRZQHUVKLSRIWKHFRPSDQ\RUWKHSRZHUWRGLUHFWWKHPDQDJHPHQWDQGWKHSROLFLHVRIWKHFRPSDQ\ZKHWKHUWKURXJKWKHRZQHUVKLSRIVKDUHFDSLWDO FRQWUDFWRURWKHUZLVHš. The Change of Control clause grants to any Noteholder, in essence, the right to request the redemption of his Notes at a repurchase price in cash of ƴƳƴ% of their principal amount (plus interest accrued) upon the occurrence of a Change of Control and a related downgrade in the Notes to sub-investment grade. P. 168 /169 For the sake of completeness, there is no Change of Control Clause applicable to Notes issued under Anheuser-Busch InBev’s Shelf Registration Statement filed on Form F-ƶ (with an unconditional and irrevocable guarantee as to payment of principal and interest from Anheuser-Busch InBev SA/NV) as from January ƵƳƴƴ. ƹ. &$''ROODU1RWHVLVVXHGYLDD&DQDGLDQ3ULYDWH3ODFHPHQW In accordance with Article ƸƸƹ of the Belgian Companies Code, the shareholders’ meeting of Anheuser-Busch InBev approved on ƵƹbAprilbƵƳƴƴ (i) the Change of Control Clause of the CAD ƹƳƳ,ƳƳƳ,ƳƳƳ ƶ.ƹƸ% Notes due ƵƳƴƹ issued on ƳƻbDecemberbƵƳƴƳ via a Canadian Private Placement by Anheuser-Busch InBev :orldwide Inc. (with an unconditional and irrevocable guarantee as to payment of principal and interest from Anheuser-Busch InBev SA/NV) and (ii) any other provision applicable to the Notes granting rights to third parties which could affect the company’s assets or could impose an obligation on the company where in each case the exercise of those rights is dependent on the launch of a public take-over bid over the shares of the company or on a ŠChange of Controlš (as defined in the Offering Memorandum dated ƳƻbDecemberbƵƳƴƳ). Pursuant to the Offering Memorandum (a)bŠ&KDQJHRI&RQWUROš means Š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š, (b) Š$FWLQJLQFRQFHUWš means ŠDJURXSRISHUVRQVZKRSXUVXDQWWRDQDJUHHPHQWRUXQGHUVWDQGLQJ ZKHWKHUIRUPDORULQIRUPDO DFWLYHO\FRRSHUDWHWKURXJKWKHDFTXLVLWLRQGLUHFWO\RULQGLUHFWO\RIVKDUHVLQWKHFRPSDQ\E\DQ\RIWKHPHLWKHUGLUHFWO\RULQGLUHFWO\WRREWDLQ&RQWURORIWKH FRPSDQ\š, and (c) Š&RQWUROš means the ŠGLUHFWRULQGLUHFWRZQHUVKLSRIPRUHWKDQƸƳSHUFHQWRIWKHVKDUHFDSLWDORUVLPLODUULJKWVRIRZQHUVKLSRIWKH FRPSDQ\RUWKHSRZHUWRGLUHFWWKHPDQDJHPHQWDQGWKHSROLFLHVRIWKHFRPSDQ\ZKHWKHUWKURXJKWKHRZQHUVKLSRIVKDUHFDSLWDOFRQWUDFWRURWKHUZLVHš. The Change of Control clause grants to any Noteholder, in essence, the right to request the redemption of his Notes at a repurchase price in cash of ƴƳƴ% of their principal amount (plus interest accrued) upon the occurrence of a Change of Control and a related downgrade in the Notes to sub-investment grade. ƺ. Anheuser-Busch InBev’s soft drinks business consists of both own production and agreements with PepsiCo related to bottling and distribution arrangements between various Anheuser-Busch InBev subsidiaries and PepsiCo. Ambev, which is a subsidiary of Anheuser-Busch InBev, is one of PepsiCo’s largest bottlers in the world. Major brands that are distributed under these agreements are Pepsi, ƺUP and Gatorade. Ambev has long-term agreements with PepsiCo whereby Ambev was granted the exclusive right to bottle, sell and distribute certain brands of PepsiCo’s portfolio of CSDs in Brazil. The agreements will expire on ƶƴbDecemberbƵƳƴƺ and are automatically extended for additional ten- year terms, unless terminated prior to the expiration date by written notice by either party at least two years prior to the expiration of their term or on account of other events, such as a change of control or insolvency of, or failure to comply with material terms or meet material commitments by, the relevant AB InBev subsidiary. ƺ5HPXQHUDWLRQ5HSRUW This report was approved by the Remuneration Committee during its meeting of ƵƷbFebruarybƵƳƴƸ. ƺƴ5HPXQHUDWLRQRIGLUHFWRUV ƺƴƴ$SSURYDO3URFHGXUH The Remuneration Committee recommends the level of remuneration for directors, including the Chairman of the Board. These recommendations are subject to approval by the Board and, subsequently, by the shareholders at the annual general meeting. The Remuneration Committee benchmarks directors’ compensation against peer companies. In addition, the Board sets and revises, from time to time, the rules and level of compensation for directors carrying out a special mandate or sitting on one or more of the Board committees and the rules for reimbursement of directors’ business-related out-of-pocket expenses. The Remuneration Committee consists of three members appointed by the Board, all of whom are non-executive directors. Currently, the Chairman of the Committee is a representative of the controlling shareholders and the two other members meet the requirements of independence as established in our Corporate Governance Charter and by the Belgian Companies Code. The CEO and the Chief People Officer are invited to the meetings of the Committee. The Remuneration Committee’s principal role is to guide the Board with respect to all its decisions relating to the remuneration policies for the Board, the CEO and the Executive Board of Management and on their individual remuneration packages. The Committee ensures that the CEO and members of the Executive Board of Management are incentivized to achieve, and are compensated for, exceptional performance. The Committee also ensures the maintenance and continuous improvement of the company’s compensation policy which will be based on meritocracy and a sense of ownership with a view to aligning the interests of its employees with the interests of all shareholders. The Committee meets four times a year and more often if required and is convoked by its Chairman or at the request of at least Ƶ of its members. The Committee holds the majority of its physical meetings in Belgium. Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT The composition, functioning and specific responsibilities of the Remuneration Committee are set forth in the terms of reference of the Committee, which are part of our Corporate Governance Charter. ƺƴƵ5HPXQHUDWLRQSROLF\DSSOLHGLQƵƳƴƷ Remuneration is linked to the time committed to the Board and its various committees. The base annual fee amounted to ƺƸ,ƳƳƳ Euro in ƵƳƴƷ based on attendance at ten Board meetings. The fee is supplemented with an amount of ƴ,ƸƳƳ Euro for each additional physical Board or committee meeting. The Chairman’s fee is double that of other directors. The Chairman of the Audit Committee is entitled to a fee which is ƶƳ% higher than the fee of the other directors. Before ƵƳƴƷ, Board members were granted a limited, pre-determined number of warrants under the company’s ƴƼƼƼ long-term incentive warrant plan (ŠLTI :arrant Planš). The number of warrants granted annually amounted to ƴƸ,ƳƳƳbsincebƵƳƳƼ. The Chairman was granted twice this amount and the Chairman of the Audit Committee received ƵƳ,ƳƳƳ warrants. Each LTI warrant gives its holder the right to subscribe for one newly issued share. Shares subscribed for upon the exercise of LTI warrants are ordinary Anheuser-Busch InBev SA/NV shares. Holders of such shares have the same rights as any other shareholder. The exercise price of LTI warrants is equal to the average price of our shares on Euronext Brussels during the ƶƳ days preceding their issue date. LTI warrants granted in the years prior to ƵƳƳƺ (except for ƵƳƳƶ) have a duration of ƴƳ years. From ƵƳƳƺ onwards (and in ƵƳƳƶ) LTI warrants have a duration of Ƹ years. LTI warrants are subject to a vesting period ranging from one to three years. Forfeiture of a warrant occurs in certain circumstances when the mandate of the holder is terminated. At the annual shareholders’ meeting of ƶƳbAprilbƵƳƴƷ, all outstanding LTI warrants have been converted into LTI stock options, i.e. the right to purchase existing shares instead of the right to subscribe to newly issued shares. All other terms and conditions of the outstanding LTI warrants remain unchanged. The shareholders’ meeting of ƶƳbAprilbƵƳƴƷ has also decided to replace the LTI :arrant Plan by a long-term incentive stock option plan for directors and confirmed that all LTI grants to directors will be in the form of stock options on existing shares with the following features: ť an exercise price that is set equal to the market price of the share at the time of granting; ť a maximum lifetime of ƴƳ years and an exercise period that starts after Ƹ years; and ť the LTI stock options cliff vest after Ƹ years. Unvested options are subject to specific forfeiture provisions in the event that the directorship is not renewed upon the expiry of its term or is terminated in the course of its term, both due to a breach of duty by the director. In line with this decision, the shareholders’ meeting of ƶƳbAprilbƵƳƴƷ granted each Board member ƴƸ,ƳƳƳ LTI stock options. The Chairman of the Board was granted ƶƳ,ƳƳƳ LTI stock options and the Chairman of the Audit Committee was granted ƵƳ,ƳƳƳ LTI stock options. The LTI stock options have an exercise price of ƻƳ,ƻƶ Euro per share which is the closing price of the Anheuser-Busch InBev share on the day preceding the grant date, i.e. on ƵƼbAprilbƵƳƴƷ. The LTI stock options have a lifetime of ƴƳ years and cliff vest after Ƹ years, i.e. on ƶƳbAprilbƵƳƴƼ. The company’s long-term incentive plan deviates from the Belgian Code on Corporate Governance as it provides for share-based payments to non-executive directors. The Board is of the opinion that the company’s share-based incentive compensation is in line with compensation practices of directors at peer companies. The successful strategy and sustainable development of the company over the past ƴƳ years demonstrates that the compensation of directors, which includes a fixed number of stock options, does ensure that the independence of the Board members in their role of guidance and control of the company is preserved, and that the directors’ interests remain fully aligned with the long-term interests of the shareholders. In particular, the extension of the vesting period of the options from ƶbtobƸ years which is applicable as of ƵƳƴƷ should foster a sustainable and long-term commitment to shareholder value creation. In accordance with article ƸƸƷ of the Belgian Companies Code, any grant made under the company’s long-term incentive plan is submitted to the shareholders’ meeting for prior approval. The company is prohibited from making loans to directors and members of the Executive Board of Management, whether for the purpose of exercising options or for any other purpose (except for routine advances for business related expenses in accordance with the company’s rules for reimbursement of expenses). The company does not provide pensions, medical benefits or other benefit programs to directors. P. 170 /171 ƺƴƶ5HPXQHUDWLRQLQƵƳƴƷ Individual director remuneration is presented in the table below. All amounts presented are gross amounts expressed in Euro before deduction of withholding tax. 1XPEHURI $QQXDOIHH )HHVIRU 1XPEHURI/7, %RDUGPHHWLQJV IRU%RDUG &RPPLWWHH VWRFNRSWLRQV DWWHQGHG PHHWLQJV PHHWLQJV 7RWDOIHH JUDQWHG ƴ Maria Asuncion Aramburuzabala (DVRIƶƳ$SULOƵƳƴƷ)(Ƶ) ƺ ƸƳ,ƳƳƳ Ƴ ƸƳ,ƳƳƳ Ƴ Alexandre Behring (DVRIƶƳ$SULOƵƳƴƷ) ƻ ƸƳ,ƳƳƳ Ʒ,ƸƳƳ ƸƷ,ƸƳƳ Ƴ Paul Cornet de :ays Ruart ƴƴ ƺƸ,ƳƳƳ Ƴ ƺƸ,ƳƳƳ ƴƸ,ƳƳƳ St¨fan Descheemaeker ƴƵ ƺƸ,ƳƳƳ ƹ,ƳƳƳ ƻƴ,ƳƳƳ ƴƸ,ƳƳƳ Gr¨goire de Spoelberch ƴƴ ƺƸ,ƳƳƳ ƹ,ƳƳƳ ƻƴ,ƳƳƳ ƴƸ,ƳƳƳ Valentin Diez (DVRIƶƳ$SULOƵƳƴƷ)(Ƶ) ƹ ƸƳ,ƳƳƳ Ƴ ƸƳ,ƳƳƳ Ƴ Olivier Goudet ƴƵ Ƽƺ,ƸƳƳ ƶƹ,ƳƳƳ ƴƶƶ,ƸƳƳ ƵƳ,ƳƳƳ Jorge Paulo Lemann (XQWLOƶƳ$SULOƵƳƴƷ) Ʒ ƵƸ,ƳƳƳ ƴ,ƸƳƳ Ƶƹ,ƸƳƳ ƴƸ,ƳƳƳ Paulo Lemann (DVRIƶƳ$SULOƵƳƴƷ) ƻ ƸƳ,ƳƳƳ Ʒ,ƸƳƳ ƸƷ,ƸƳƳ Ƴ Roberto Moses Thompson Motta (XQWLOƶƳ$SULOƵƳƴƷ) Ʒ ƵƸ,ƳƳƳ ƴ,ƸƳƳ Ƶƹ,ƸƳƳ ƴƸ,ƳƳƳ Elio Leoni Sceti (DVRIƶƳ$SULOƵƳƴƷ)(Ƶ) ƺ ƸƳ,ƳƳƳ Ʒ,ƸƳƳ ƸƷ,ƸƳƳ Ƴ Carlos Alberto da Veiga Sicupira ƴƴ ƺƸ,ƳƳƳ ƹ,ƳƳƳ ƻƴ,ƳƳƳ ƴƸ,ƳƳƳ Kees J. Storm ƴƴ ƴƸƳ,ƳƳƳ Ƶƴ,ƳƳƳ ƴƺƴ,ƳƳƳ ƶƳ,ƳƳƳ Marcel Herrmann Telles ƴƵ ƺƸ,ƳƳƳ ƵƷ,ƳƳƳ ƼƼ,ƳƳƳ ƴƸ,ƳƳƳ Alexandre Van Damme ƴƵ ƺƸ,ƳƳƳ ƴƻ,ƳƳƳ Ƽƶ,ƳƳƳ ƴƸ,ƳƳƳ Mark :inkelman ƴƴ ƺƸ,ƳƳƳ ƵƵ,ƸƳƳ Ƽƺ,ƸƳƳ ƴƸ,ƳƳƳ $OOGLUHFWRUVDVDJURXS ƴƳƺƵƸƳƳ ƴƸƹƳƳƳ ƴƵƵƻƸƳƳ ƴƻƸƳƳƳ (ƴ) LTI stock options were granted on ƶƳbAprilbƵƳƴƷ. They have an exercise price of ƻƳ.ƻƶ Euro per share, have a term of ƴƳ years and cliƬ vest after Ƹ years. (Ƶ) In ƵƳƴƷ Mrs Aramburuzabala, Mr Diez and Mr Sceti each also earned Ƶƻ,ƴƵƸ ż for attending the Board meetings in January, February and April ƵƳƴƷ in an advisory and non-voting capacity, but already contributing their experience and knowledge to the deliberations of the Board. ƺƴƷ2SWLRQVRZQHGE\GLUHFWRUV The table below sets forth, for each of our current directors, the number of LTI stock options they owned as of ƶƴbDecemberbƵƳƴƷ (ƴ) (Ƶ): /7,ƵƵ /7,Ƶƴ /7,ƵƳ /7,ƴƼ /7,ƴƻ /7,ƴƺ /7,ƴƺ ƶ /7,ƴƷ /7,ƴƶ ƶƳ$SULO ƵƷ$SULO ƵƸ$SULO Ƶƹ$SULO Ƶƺ$SULO Ƶƻ$SULO Ƶƻ$SULO ƵƸ$SULO Ƶƹ$SULO *UDQWGDWH ƵƳƴƷ ƵƳƴƶ ƵƳƴƵ ƵƳƴƴ ƵƳƴƳ ƵƳƳƼ ƵƳƳƼ ƵƳƳƹ ƵƳƳƸ ƵƼ$SULO Ƶƶ$SULO ƵƷ$SULO ƵƸ$SULO Ƶƹ$SULO Ƶƺ$SULO Ƶƺ$SULO ƵƷ$SULO ƵƸ$SULO ([SLU\GDWH ƵƳƵƷ ƵƳƴƻ ƵƳƴƺ ƵƳƴƹ ƵƳƴƸ ƵƳƴƷ ƵƳƴƷ ƵƳƴƹ ƵƳƴƸ Maria Asuncion Aramburuzabala Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Alex Behring Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Paul Cornet de :ays Ruart ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ St¨fan Descheemaeker ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ Ƴ Ƴ Ƴ Ƴ Ƴ Gr¨goire de Spoelberch ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ Ƴ Ƴ Ƴ Ƴ Ƴ Valentin Diez Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Olivier Goudet ƵƳ,ƳƳƳ ƵƳ,ƳƳƳ ƴƸ,ƳƳƳ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Paulo Lemann Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Elio Leoni Sceti Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Ƴ Carlos Sicupira ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ Ƴ Ƴ ƻ,ƵƹƼ Ƽ,ƶƹƷ Kees Storm ƶƳ,ƳƳƳ ƶƳ,ƳƳƳ ƵƳ,ƳƳƳ ƵƳ,ƳƳƳ Ƴ Ƴ Ƴ ƻ,ƵƹƼ Ƴ Marcel Telles ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ Ƴ Ƴ ƻ,ƵƹƼ Ƽ,ƶƹƷ Alexandre Van Damme ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ Ƴ Ƴ Ƴ ƻ,ƵƹƼ Ƴ Mark :inkelman ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ ƴƸ,ƳƳƳ Ƴ Ƴ ƻ,ƵƹƼ Ƽ,ƶƹƷ 6WULNHSULFH (XUR ƻƳƻƶ ƺƹƵƳ ƸƷƺƴ ƷƳƼƵ ƶƺƸƴ ƵƴƺƵ ƵƴƺƵ ƶƻƺƳ ƵƺƳƻ (ƴ) At the annual shareholders’ meeting of ƶƳbAprilbƵƳƴƷ, all outstanding LTI warrants were converted into LTI stock options, i.e. the right to purchase existing ordinary shares instead of the right to subscribe to newly issued shares. All other terms and conditions of the outstanding LTI warrants remained unchanged. (Ƶ) In February ƵƳƴƷ, St¨fan Descheemaeker exercised Ƹ,ƳƳƳ options of the LTI ƴƻ Series. In April ƵƳƴƷ, Carlos Sicupira, Marcel Telles and Mark :inkelman exercised their options of the LTI ƴƺ Series that expired on ƵƺbAprilbƵƳƴƷ. In September ƵƳƴƷ, Kees Storm exercised ƵƳ,ƳƳƳ options of the LTI ƴƻ Series and Ƽ,ƶƹƷ options of the LTI ƴƶ Series. In November ƵƳƴƷ, Gregoire de Spoelberch exercised ƴƸ,ƳƳƳ options of the LTI ƴƻ Series. In December ƵƳƴƷ, Alexandre Van Damme exercised ƴƸ,ƳƳƳ options of the LTI ƴƻ Series and Ƽ,ƶƹƷ options of the LTI ƴƶ Series. (ƶ) These warrants were granted to compensate for LTI warrants that were granted before November ƵƳƳƻ and not adjusted to take into account the eƬects of Anheuser-Busch InBev’s December ƵƳƳƻ Rights OƬering. The LTI terms and conditions provide that, in the event that a corporate change which has been decided upon by the company and has an impact on its capital has an unfavourable eƬect on the exercise price of the LTI warrants, their exercise price and/or the number of shares to which they give right will be adjusted to protect the interests of their holders. Anheuser-Busch InBev’s rights oƬering in December ƵƳƳƻ constituted such a corporate change and triggered an adjustment. Pursuant to the LTI terms and conditions, it was determined that the most appropriate manner to account for the impact of the Rights OƬering on the unexercised warrants was to apply the Šratio methodš as set out in the NYSE Euronext ŠLiƬe’s Harmonised Corporate Action Policyš. However, this adjustment was not applied to warrants owned by persons that were directors at the time the warrants were granted. In order to compensate such persons, an additional ƼƻƷ,ƵƳƶ LTI warrants were granted under the LTI warrants grant on ƵƻbAprilbƵƳƳƼ, as authorized by the ƵƳƳƼ annual shareholders’ meeting. ƵƳƹ,ƷƷƼ LTI warrants out of these ƼƻƷ,ƵƳƶ LTI warrants were granted to the current directors of Anheuser-Busch InBev. Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT ƺƵ5HPXQHUDWLRQRI([HFXWLYH%RDUGRI0DQDJHPHQW ƺƵƴ3URFHGXUHIRUGHYHORSLQJWKHUHPXQHUDWLRQSROLF\DQGGHWHUPLQLQJWKHLQGLYLGXDOUHPXQHUDWLRQ The compensation and reward programs for the Executive Board of Management are overseen by the Remuneration Committee which is exclusively composed of non-executive directors. It submits to the Board for approval recommendations on the compensation of the CEO and, upon recommendation of the CEO, of the Executive Board of Management. The Nomination Committee approves the company and individual annual targets and the Remuneration Committee approves the target achievement and corresponding annual and long term incentives of members of the Executive Board of Management. The remuneration policy and hence any schemes falling within its scope which grant shares or rights to acquire shares, are submitted to the shareholders’ meeting for approval. The composition, functioning and specific responsibilities of the Remuneration Committee and of the Nomination Committee are set forth in the terms of reference of the respective Committee, which are part of our Corporate Governance Charter. ƺƵƵ5HPXQHUDWLRQSROLF\ Our compensation system is designed to support our high-performance culture and the creation of long-term sustainable value for our shareholders. The goal of the system is to reward executives with market-leading compensation, which is conditional upon both the overall success of the company and individual performance. It ensures alignment with shareholders’ interests by strongly encouraging executive ownership of shares in the company and enables to attract and retain the industry’s best talent at global levels. Base salaries are aligned to mid-market levels. Additional short- and long-term incentives are linked to challenging short- and long-term performance targets and the investment of part or all of any variable compensation earned in company shares is encouraged. :ith effect from ƵƳƴƳ and as a result of the combination with Anheuser-Busch Companies, Inc., some modifications have been made to the annual incentive scheme, in order to bring together the incentive plans of Anheuser-Busch and InBev. No significant change has been made to the above remuneration policy since the end of the reported financial year. The Board may revise the level of remuneration and approve a revised remuneration policy upon recommendation of the Remuneration Committee. At the time of publication of this report, no changes to the remuneration policies for executives are planned. ƺƵƶ&RPSRQHQWVRIH[HFXWLYHUHPXQHUDWLRQ Executive remuneration generally consists of (a) a fixed base salary, (b) variable performance-related compensation, (c) long-term incentive stock options, (d) retirement plan contributions and (e) other components. All amounts shown below are gross amounts before deduction of withholding taxes and social security. D%DVH6DODU\ In order to ensure alignment with market practice, executives’ base salaries are reviewed overall against benchmarks on an annual basis. These benchmarks are collected by internationally recognized compensation consultants, in relevant industries and geographies. For benchmarking, a custom sample of Fast Moving Consumer Goods peer companies (Peer Group) is used when available. The Peer Group consists a.o. of Apple, Coca Cola Enterprises, Procter and Gamble, Pepsico International and Unilever. If Peer Group data are not available for a given level in certain geographies, Fortune ƴƳƳ companies’ data are used. Executives’ base salaries are intended to be aligned to mid-market levels for the appropriate market. Mid-market means that for a similar job in the market, ƸƳ% of companies in that market pay more and ƸƳ% of companies pay less. Executives’ total compensation is intended to be ƴƳ% above the ƶrd quartile. In ƵƳƴƷ, based on his employment contract, the CEO earned a fixed salary of ƴ.ƵƵ million Euro (USD ƴ.ƹƷ million), while the other members of the Executive Board of Management earned an aggregate base salary of ƺ.ƺƺ million Euro (USD ƴƳ.ƷƸ million). E9DULDEOHSHUIRUPDQFHUHODWHGFRPSHQVDWLRQś6KDUHEDVHGFRPSHQVDWLRQSODQ Variable performance-related compensation is key to the company’s compensation system and is aimed at rewarding executives’ short- and long-term performance of the organization. The target variable compensation is expressed as a percentage of the Market Reference Salary applicable to the executive. The on-target bonus percentage theoretically amounts to maximum ƵƳƳ% of the Market Reference Salary for members of the Executive Board of Management and ƶƳƳ% for the CEO. The effective pay-out of variable compensation is directly correlated with performance, i.e. linked to the achievement of total company business unit and individual targets, all of which are based on performance metrics. P. 172 /173 Total company and business unit targets are based on four key performance metrics which focus on top-line growth, profitability and value creation. For ƵƳƴƷbandbƵƳƴƸ these four key performance metrics are: ť market share, ť total revenue growth, ť EBITDA and ť cash flow. Below a hurdle of achievement for total company and business unit targets, no variable compensation is earned. In addition, the final individual bonus pay-out percentage also depends on each executive’s personal achievement of their individual performance targets. Individual performance targets of the CEO and the Executive Board of Management may consist of financial and non-financial targets such as sustainability and other elements of corporate social responsibility as well as compliance/ethics related targets. Typical performance measures in this area can relate to employee engagement, talent pipeline, better world goals, compliance dashboards etc that are also important for the sustainability of the financial performance. Targets achievement is assessed by the Remuneration Committee on the basis of accounting and financial data. For ƵƳƴƷ, based on the company’s target achievement during the year ƵƳƴƷ and the executives’ individual target achievement, the total variable compensation for the Executive Board of Management, including the CEO, effectively amounted to approximately ƹƸ% of their ƵƳƴƷ base salary. Executives receive their variable compensation in cashƴ but are encouraged to invest some or all of its value in company shares to be held for a Ƹ-year period (the ŠVoluntary Sharesš). Such voluntary investment leads to a ƴƳ% discount and a company shares match of ƶ matching shares for each share voluntarily invested (the ŠMatching Sharesš) up to a limited total percentage of each executive’s variable compensation. The percentage of the variable compensation that can be invested in voluntary shares is ƹƳ% for the CEO and for members of the Executive Board of Management. Voluntary Shares are: ť existing ordinary shares; ť entitled to dividends paid as from the date of grant; ť subject to a lock-up period of five years; and ť granted at market price. The discount is at discretion of the Board. Currently, the discount is ƴƳ% which is delivered as restricted stock units, subject to specific restrictions or forfeiture provisions in case of termination of service. Both the Matching Shares and the discounted shares are delivered in the form of restricted stock units (RSU) and vest after five years. In case of termination of service before the vesting date, special forfeiture rules apply. No performance conditions apply to the vesting of the restricted stock units. However, restricted stock units will only be granted under the double condition that the executive: ť has earned a variable compensation, which is subject to the successful achievement of total company, business unit and individual performance targets (performance condition); and ť has agreed to reinvest all or part of his/her variable compensation in company shares that are locked for a Ƹ-year period (ownership condition). The variable compensation is usually paid annually in arrears after the publication of the full year results of Anheuser-Busch InBev. Exceptionally, the variable compensation may be paid out semi-annually at the discretion of the Board based on the achievement of semi-annual targets. In such case, the first half of the variable compensation is paid immediately after publication of the half year results and the second half of the variable compensation is paid after publication of the full year results of Anheuser-Busch InBev. In ƵƳƳƼ, in order to align the organization against the delivery of specific targets following the combination with Anheuser-Busch, the Board decided to apply semi-annual targets which resulted in a semi-annual payment of ƸƳ% of the annual incentive, respectively in August ƵƳƳƼ and in March ƵƳƴƳ. Since ƵƳƴƳ, variable compensation has been paid annually in arrears in or around March each year. In accordance with the authorization granted in the company’s bylaws, as amended by the shareholders’ meeting of ƵƹbAprilbƵƳƴƴ, the variable compensation system partly deviates from article ƸƵƳter of the Belgian Companies Code, as it allows: ƴ. for the variable remuneration to be paid out based on the achievement of annual targets without staggering its grant or payment over a ƶ-year period. However, executives are encouraged to invest some or all of their variable compensation in company shares which are blocked for Ƹbyears (the ŠVoluntary Sharesš). Such voluntary investment also leads to a grant of Matching Shares in the form of restricted stock units which only vest after Ƹ years, ensuring sustainable long-term performance. Ƶ. for the Voluntary Shares granted under the share based compensation plan to vest at their grant, instead of applying a vesting period of minimum ƶ years. Nonetheless, as indicated above, the Voluntary Shares remain blocked for Ƹ years. On the other hand, any Matching Shares that are granted, will only vest after Ƹ years. ƴ Depending on local regulations, the cash element in the variable compensation may be replaced by options which are linked to an index or a fund of listed European blue chip companies. Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT 9DULDEOHFRPSHQVDWLRQIRUSHUIRUPDQFHLQƵƳƴƶś3DLGLQ0DUFKƵƳƴƷ For the full year ƵƳƴƶ, the CEO earned variable compensation of ƶ.ƵƼ million Euro (USD Ʒ.ƶƹ million). The other members of the Executive Board of Management earned aggregate variable compensation of ƴƴ.ƷƷ million Euro (USD ƴƸ.ƴƸ million). The amount of variable compensation was based on the company’s performance during the year ƵƳƴƶ and the executives’ individual target achievement. The following table sets forth information regarding the number of our shares voluntarily acquired and Matching Shares granted in March ƵƳƴƷ (variable compensation awarded for performance in ƵƳƴƶ) to our CEO and the other members of our Executive Board of Management under the Share-based compensation plan. The Matching Shares were granted in the form of restricted stock units and vest after five years, on ƺbMarchbƵƳƴƼ. 1DPH 9ROXQWDU\6KDUHVDFTXLUHG 0DWFKLQJ6KDUHVJUDQWHG Carlos Brito ś CEO ƵƳ,ƺƵƴ ƻƻ,ƼƴƳ Sabine Chalmers ƶ,ƴƻƶ ƵƷ,ƻƵƵ Felipe Dutra ƺ,ƳƴƸ ƶƳ,ƴƳƳ Miguel Patricio ƶ,ƶƹƵ ƵƵ,ƹƵƵ Claudio Braz Ferro Ƹ,ƷƹƸ ƵƷ,ƶƼƵ Tony Milikin Ƶ,ƴƺƺ ƴƸ,ƵƴƸ Claudio Garcia ƶ,ƴƴƹ ƵƵ,ƹƼƷ Jo Van Biesbroeck ƴ,ƵƶƼ Ƹ,ƵƹƷ Luiz Fernando Edmond ƶ,ƸƶƷ ƴƷ,ƹƶƵ Stuart Mc Farlane ƴ,ƴƳƻ Ʒ,ƺƳƻ Marcio Froes (ƴ) Ƴ Ƴ Jo¢o Castro Neves (ƴ) Ƴ Ƴ Bernardo Pinto Paiva ƶ,ƺƺƸ ƴƸ,Ƹƹƹ Michel Doukeris Ƽ,ƺƶƼ ƷƵ,ƶƳƷ Ricardo Tadeu Ƹ,ƶƼƷ ƶƻ,ƵƵƼ (ƴ) Jo ¢o Castro Neves, Zone President Latin America North until ƶƴbDecemberbƵƳƴƷ, reported to the Board of Directors of Ambev until that date. He and Marcio Froes, Zone President Latin America South, participated in ƵƳƴƷ in the incentive plans of Ambev S.A. that are disclosed separately by Ambev. 9DULDEOHFRPSHQVDWLRQIRUSHUIRUPDQFHLQƵƳƴƷś7REHSDLGLQ0DUFKƵƳƴƸ For the full year ƵƳƴƷ, the CEO earned variable compensation of ƴ.ƳƳ million Euro (USD ƴ.ƶƷ million). The other members of the Executive Board of Management earned aggregate variable compensation of Ʒ.ƻƹ million Euro (USD ƹ.Ƹƶ million). The amount of variable compensation is based on the company’s performance during the year ƵƳƴƷ and the executives’ individual target achievement. The variable compensation will be paid in or around March ƵƳƴƸ. F/RQJWHUPLQFHQWLYHVWRFNRSWLRQV Since ƴbJulybƵƳƳƼ, members of our senior management may be eligible for an annual long-term incentive paid out in stock options (or similar share related instrument), depending on management’s assessment of the beneficiary’s performance and future potential. Long-term incentive stock options have the following features: ť an exercise price that is set equal to the market price of the share at the time of grant; ť a maximum lifetime of ƴƳ years and an exercise period that starts after Ƹ years; ť upon exercise, each option entitles the option holder to purchase one share; ť the options cliff vest after Ƹ years. In the case of termination of service before the vesting date, special forfeiture rules will apply. The following table sets forth information regarding the number of options granted in ƵƳƴƷ to the CEO and the other members of the Executive Board of Management. The options were granted on ƳƴbDecemberbƵƳƴƷ, have an exercise price of ƼƷ.Ʒƹ Euro and become exercisable after fivebyears. 1DPH /RQJ7HUP,QFHQWLYHVWRFNRSWLRQVJUDQWHG Carlos Brito ś CEO ƴƹƺ,ƹƶƷ Sabine Chalmers ƷƷ,ƸƴƳ Felipe Dutra ƻƳ,ƴƴƼ Miguel Patricio ƹƷ,ƳƼƸ Claudio Braz Ferro ƶƸ,ƹƳƻ Tony Milikin ƵƵ,ƵƸƸ Claudio Garcia ƶƴ,ƴƸƺ Jo Van Biesbroeck ƶƸ,ƹƳƻ P. 174 /175 1DPH /RQJ7HUP,QFHQWLYHVWRFNRSWLRQVJUDQWHG Marci Froes (ƴ) Ƴ Jo¢o Castro Neves (ƴ) Ƴ Luiz Fernando Edmond ƻƳ,ƴƴƼ Bernardo Pinto Paiva Ƹƶ,ƷƴƵ Stuart Mc Farlane ƶƸ,ƹƳƻ Michel Doukeris ƹƹ,ƺƹƹ Ricardo Tadeu ƶƶ,ƶƻƶ (ƴ) Jo¢o Castro Neves, Zone President Latin America North until ƶƴbDecemberbƵƳƴƷ, reported to the Board of Directors of Ambev until that date. He and Marcio Froes, Zone President Latin America South, participated in ƵƳƴƷ in the incentive plans of Ambev S.A. that are disclosed separately by Ambev. G/RQJWHUPUHVWULFWHGVWRFNXQLWSURJUDPV Since ƵƳƴƳ, Anheuser-Busch InBev has in place three specific long-term restricted stock unitbprograms: ƴ. A program allowing for the offer of restricted stock units to certain members of our senior management in certain specific circumstances. Such hardship grants are made at the discretion of the CEO, e.g. to compensate for assignments of expatriates in certain limited countries. The characteristics of the restricted stock units are identical to the characteristics of the Matching Shares that are granted as part of the Share- based compensation plan (see ƺ.Ƶ.ƶ.b). The restricted stock units vest after five years and in case of termination of service before the vesting date, special forfeiture rules apply. In ƵƳƴƷ, Ƶƶ,Ƴƶƻ restricted stock units were granted under the program to our senior management. No restricted stock units were granted under the program to a member of the Executive Board of Management. Ƶ. A program allowing for the exceptional offer of restricted stock units to certain members of senior management at the discretion of the Remuneration Committee of Anheuser-Busch InBev as a long-term retention incentive for key managers of the company. Members of senior management eligible to receive a grant under the program receive Ƶ series of restricted stock units. The first half of the restricted stock units vest after five years. The second half of the restricted stock units vest after ƴƳ years. In case of termination of service before the vesting date, special forfeiture rules apply. In ƵƳƴƷ, ƴƻƴ,ƵƹƷ restricted stock units were granted under the program to our management. No restricted stock units were granted under the program to a member of the Executive Board of Management. ƶ. A program allowing certain employees to purchase company shares at a discount aimed as a long-term retention incentive for (i) high- potential employees of the company, who are at a mid-manager level (ŠPeople bet share purchase programš) or (ii) for newly hired employees. The voluntary investment in company shares leads to the grant of ƶ matching shares for each share invested. The discount and matching shares are granted in the form of restricted stock units which vest after Ƹ years. In case of termination before the vesting date, special forfeiture rules apply. In ƵƳƴƷ, our employees purchased Ƹ,Ƴƹƶ shares under the program. No member of the Executive Board of Management participated in thebprogram. H([FKDQJHRIVKDUHRZQHUVKLSSURJUDP From time to time certain members of Ambev’s senior management are transferred to Anheuser-Busch InBev and vice-versa. In order to encourage management mobility and ensure that the interests of these managers are fully aligned with Anheuser-Busch InBev’s interests, the Board has approved a program that aims at facilitating the exchange by these managers of their Ambev shares into Anheuser-Busch InBev shares. Under the program, the Ambev shares can be exchanged into Anheuser-Busch InBev shares based on the average share price of both the Ambev and the Anheuser-Busch InBev shares on the date the exchange is requested. A discount of ƴƹ.ƹƹ% is granted in exchange for a Ƹ year lock-up period for the shares and provided that the manager remains in service during this period. The discounted shares are forfeited in case of termination of service before the end of the Ƹ year lock-up period. Under the program, Joao Castro Neves, member of the Executive Board of Management, has exchanged Ƶ.ƶ million Ambev shares for a total of Ƴ.ƴƸbmillion Anheuser-Busch InBev shares in ƵƳƴƷ. Other members of our senior management have exchanged ƺ.ƴƳ million Ambev shares for a total of Ƴ.Ʒƺ million Anheuser-Busch InBev shares (Ƴ.ƴƶ million in ƵƳƴƶ, Ƴ.ƴƴ million in ƵƳƴƵ, Ƴ.ƵƷ million in ƵƳƴƴ). Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT I3URJUDPVIRUPDLQWDLQLQJFRQVLVWHQF\RIEHQHILWVJUDQWHGDQGIRUHQFRXUDJLQJJOREDOPRELOLW\RIH[HFXWLYHV The shareholders’ meeting of ƵƺbAprilbƵƳƴƳ has approved two programs which are aimed at maintaining consistency of benefits granted to executives and at encouraging the international mobility of executives while complying with all legal and tax obligations: ƴ. The Exchange program: under this program the vesting and transferability restrictions of the Series A options granted under the NovemberbƵƳƳƻ Exceptional Option Grant and of the options granted under the April ƵƳƳƼ Exceptional Option Grant, could be released e.g.bfor executives who moved to the United States. These executives were then offered the possibility to exchange their options for ordinary Anheuser-Busch InBev shares that remain locked-up until ƶƴbDecemberbƵƳƴƻ (Ƹ years longer than the original lock-up period). Since the Series A options granted under the November ƵƳƳƻ Exceptional Option Grant and the options granted under the April ƵƳƳƼ Exceptional Option Grant have vested on ƴbJanuarybƵƳƴƷ, the Exchange program is no longer relevant for these options. Instead, the Exchange program has now become applicable to the Series B options granted under the November ƵƳƳƻ Exceptional Option Grant. Under the extended program, executives who are relocated e.g. to the United States, can be offered the possibility to exchange their Series B options for ordinary Anheuser-Busch shares that remain locked-up until ƶƴbDecemberbƵƳƵƶ (Ƹ years longer than the original lock-up period). In ƵƳƴƷ, members of our senior management have exchanged approximately Ƴ.ƸƷ million Series B options granted under the November ƵƳƳƻ Exceptional Option Grant for approximately Ƴ.ƷƼ million shares. The exchanges were based on the fair market value of the share on the day of the exchange. As a variant to this program, the Board also approved the recommendation of the Remuneration Committee to allow the early release of the vesting conditions of the Series B options granted under the November ƵƳƳƻ Exceptional Option Grant to Joao Castro Neves, who has been appointed Zone President North America as of ƴbJanuarybƵƳƴƸ. In accordance with this approval, Joao Castro Neves exercised Ƴ.ƸƷ million options. The shares that result from the exercise of the options will remain blocked until ƶƴbDecemberbƵƳƵƶ. In deviation from Principle ƺ.ƴƶ of the ƵƳƳƼ Belgian Code on Corporate Governance, these variations to the original Exchange program were not submitted to the prior approval of the shareholders’ meeting, as the Board is of the opinion that they remain fully consistent with the original program and were necessary to enable the strategic relocation of the executives without delay. Ƶ. The Dividend waiver program: where applicable, the dividend protection feature of the outstanding options owned by executives who move to the United States is being cancelled. In order to compensate for the economic loss which results from this cancellation, a number of new options is granted to these executives with a value equal to this economic loss. The new options have a strike price equal to the share price on the day preceding the grant date of the options. All other terms and conditions, in particular with respect to vesting, exercise limitations and forfeiture rules of the new options are identical to the outstanding options for which the dividend protection feature is cancelled. As a consequence, the grant of these new options does not result in the grant of any additional economic benefit to the executives concerned. In ƵƳƴƷ, under this program : ť On ƴƸbJanuarybƵƳƴƷ, Ƴ.ƳƵ million new options were granted to our senior management and have a strike price of ƺƸ.ƵƼ Euro, i.e. the closing share price on ƴƷbJanuarybƵƳƴƷ. ť On ƴƵbJunebƵƳƴƷ, Ƴ.Ƴƴ million new options were granted to our senior management and have a strike price of ƻƶ.ƵƼ Euro, i.e. the closing share price on ƴƴbJunebƵƳƴƷ. ť On ƴbDecemberbƵƳƴƷ, Ƴ.ƳƳƵ million new options were granted to our senior management and have a strike price of ƼƷ.Ʒƹ Euro, i.e. the closing share price on ƵƻbNovemberbƵƳƴƷ. J3HQVLRQVFKHPHV Our executives participate in Anheuser-Busch InBev’s pension schemes in either the US, Belgium or their home country. These schemes are in line with predominant market practices in the respective geographic environments. They may be defined benefit plans or defined contribution plans. The CEO participates in a defined contribution plan. The annual contribution that is paid to his plan amounted to approximately USD Ƴ.ƵƷ million in ƵƳƴƷ. The contributions for the other members of the Executive Board of Management amounted to approximately USD Ƴ.Ƽƹ million in ƵƳƴƷ. K2WKHUEHQHILWV Executives are also entitled to life and medical insurance and perquisites and other benefits that are competitive with market practices. In addition to life and medical insurance, the CEO enjoys a schooling allowance in accordance with local market practice for a limited period of time. ƺƵƷ0DLQFRQWUDFWXDOWHUPVDQGFRQGLWLRQVRIHPSOR\PHQWRIPHPEHUVRIWKH([HFXWLYH%RDUGRI0DQDJHPHQW The terms and conditions of employment of the members of the Executive Board of Management are included in individual employment agreements. Executives are also required to comply with the company’s policies and codes such as the Code of Business Conduct and Code of Dealing and are subject to exclusivity, confidentiality and non-compete obligations. P. 176 /177 The agreement typically provides that the executive’s eligibility for payment of variable compensation is determined exclusively on the basis of the achievement of corporate and individual targets to be set by the company. The specific conditions and modalities of the variable compensation are fixed separately by the company and approved by the Remuneration Committee. Termination arrangements are in line with legal requirements and/or jurisprudential practice. The termination arrangements for the Executive Board of Management provide for a termination indemnity of ƴƵ months of remuneration including variable compensation in case of termination without cause. The variable compensation for purposes of the termination indemnity shall be calculated as the average of the variable compensation paid to the executive for the last two years of employment prior to the year of termination. In addition, if the company decides to impose upon the executive a non-compete restriction of ƴƵ months, the executive shall be entitled to receive an additional indemnity of sixbmonths. During the year ƵƳƴƷ, Francisco S, former Zone President Latin America South, left the company. He was granted a termination indemnity that corresponds to ƴƵ months of base salary and an amount corresponding to the average of the variable compensation paid for the last two years. Carlos Brito was appointed to serve as the CEO starting as of ƴbMarchbƵƳƳƹ. In the event of termination of his employment other than on the grounds of serious cause, the CEO is entitled to a termination indemnity of ƴƵ months of remuneration including variable compensation as described above. There is no Šclaw-backš provision in case of misstated financial statements. ƺƵƸ2SWLRQVRZQHGE\PHPEHUVRIWKH([HFXWLYH%RDUGRI0DQDJHPHQW The tables below set forth the number of Matching options owned by the members of our Executive Board of Management as of ƶƴbDecemberbƵƳƴƷ under the Share-based compensation plan that was applicable untilbƵƳƴƳ(ƴ). 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV ƵƳƴƳ ƵƳƳƼ ƵƳƳƼ ƵƳƳƻ ƵƳƳƺ ƵƳƳƹ *UDQWGDWH Ƹ0DUFKƵƳƴƳ ƴƷ$XJXVWƵƳƳƼ ƹ0DUFKƵƳƳƼ ƶ0DUFKƵƳƳƻ Ƶ$SULOƵƳƳƺ Ƶƺ$SULOƵƳƳƹ ([SLU\GDWH Ʒ0DUFKƵƳƵƳ ƴƶ$XJXVWƵƳƴƼ Ƹ0DUFKƵƳƴƼ Ƶ0DUFKƵƳƴƻ ƴ$SULOƵƳƴƺ Ƶƹ$SULOƵƳƴƹ (%0 ƶ ƴƸƵƼƹ ƴƶƹƼƺƶƷ ƻƳƺƹƸ Ƹƶƶƻƴƹ ƵƶƹƸƵ Ƴ 6WULNHSULFH (XUR ƶƹƸƵ ƵƺƳƹ ƵƳƷƼ ƶƷƶƷ ƶƶƸƼ ƵƷƺƻ 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV 0DWFKLQJRSWLRQV ƵƳƳƼ'LYLGHQG ƵƳƳƼ'LYLGHQG ƵƳƳƻ'LYLGHQG ƵƳƳƻ'LYLGHQG ƵƳƳƺś'LYLGHQG ƵƳƳƹś'LYLGHQG :DLYHUƴƶ Ƶ :DLYHUƴƶ Ƴ :DLYHUƴƶ Ƴ :DLYHUƳƼ Ƴ :DLYHUƳƼ Ƴ :DLYHUƳƼ Ƴ *UDQWGDWH ƴƸ0D\ƵƳƴƶ ƴƸ0D\ƵƳƴƶ ƴƸ0D\ƵƳƴƶ ƴ'HFHPEHUƵƳƳƼ ƴ'HFHPEHUƵƳƳƼ ƴ'HFHPEHUƵƳƳƼ ([SLU\GDWH ƴƶ$XJXVWƵƳƴƼ Ƹ0DUFKƵƳƴƼ Ƶ0DUFKƵƳƴƻ Ƶ0DUFKƵƳƴƻ ƴ$SULOƵƳƴƺ Ƶƹ$SULOƵƳƴƹ (%0 ƶ ƶƺƴƶƴ ƺƷƻƹƼ ƷƼƷƹƻ ƵƹƸƶƼƶ ƴƷƹƷƴ Ƴ 6WULNHSULFH (XUR ƺƸƻƵ ƺƸƻƵ ƺƸƻƵ ƶƶƵƷ ƶƶƵƷ ƶƶƵƷ (ƴ) Matching options have the following features: a. an exercise price that is set equal to the market price of the share at the time of grant; b. a maximum life of ƴƳ years and an exercise period that starts after Ʈve years, subject to Ʈnancial performance conditions to be met at the end of the second, third or fourth year following the grant; c. upon exercise, each option entitles the option holder to subscribe one share; d. speciƮc restrictions or forfeiture provisions apply in case of termination of service. (Ƶ) Options granted under the Dividend waiver program (see ƺ.Ƶ.ƶ.f) (ƶ) The following options were exercised in ƵƳƴƷ : a. In August ƵƳƴƷ : i. Stuart MacFarlane exercised ƶƹ,ƹƹƷ Matching options August ƵƳƳƼ with a strike price of Ƶƺ.Ƴƹ Euro; b. In September ƵƳƴƷ : i. Claudio Garcia exercised ƻƵ,ƼƸƼ Matching options ƵƳƳƺ with a strike price of ƶƶ.ƸƼ Euro and Ƹƴ,ƶƸƶ Matching options ƵƳƳƺ Dividend :aiver ƳƼ with a strike price of ƶƶ.ƵƷ Euro; c. In December ƵƳƴƷ : i. Sabine Chalmers exercised ƹƻ,ƺƶƷ Matching options August ƵƳƳƼ with a strike price of Ƶƺ.Ƴƹ Euro. Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT The table below sets forth the number of LTI stock options owned by the members of our Executive Board of Management as of ƶƴbDecemberbƵƳƴƷ under the ƵƳƳƼ Long term incentive stock option plan (see ƺ.Ƶ.ƶ.c). /7,RSWLRQV /7,RSWLRQV /7,RSWLRQV /7,RSWLRQV /7,RSWLRQV /7,RSWLRQV *UDQWGDWH ƴƻ'HFHPEHUƵƳƳƼ ƶƳ1RYHPEHUƵƳƴƳ ƶƳ1RYHPEHUƵƳƴƴ ƶƳ1RYHPEHUƵƳƴƵ ƳƵ'HFHPEHUƵƳƴƶ Ƴƴ'HFHPEHUƵƳƴƷ ([SLU\GDWH ƴƺ'HFHPEHUƵƳƴƼ ƵƼ1RYHPEHUƵƳƵƳ ƵƼ1RYHPEHUƵƳƵƴ ƵƼ1RYHPEHUƵƳƵƵ Ƴƴ'HFHPEHUƵƳƵƶ ƶƳ1RYHPEHUƵƳƵƷ (%0 ƹƸƷƼƶƼ ƻƸƳƹƼƶ ƼƳƷƻƳƳ ƴƴƷƸƷƼƷ ƼƳƶƴƴƳ ƺƸƳƵƺƷ 6WULNHSULFH (XUR ƶƸƼƳ ƷƵƷƴ ƷƷƳƳ ƹƹƸƹ ƺƸƴƸ ƼƷƷƹ a. The following options were exercised in December ƵƳƴƷ : i. Joao Castro Neves exercised Ƹƶ,ƵƼƺ LTI options of ƴƻbDecemberbƵƳƳƼ with a strike price of ƶƸ.ƼƳ Euro. The table below sets forth the number of options granted under the November ƵƳƳƻ Exceptional Option Grant owned by the members of our Executive Board of Management as of ƶƴbDecemberbƵƳƴƷ(ƴ). 1RYHPEHUƵƳƳƻ 1RYHPEHUƵƳƳƻ 1RYHPEHUƵƳƳƻ 1RYHPEHUƵƳƳƻ 1RYHPEHUƵƳƳƻ 1RYHPEHUƵƳƳƻ ([FHSWLRQDO*UDQW ([FHSWLRQDO*UDQW ([FHSWLRQDO*UDQW ([FHSWLRQDO*UDQW ([FHSWLRQDO*UDQW ([FHSWLRQDO*UDQW RSWLRQV6HULHV$ś RSWLRQV6HULHV%ś RSWLRQV6HULHV%ś RSWLRQV6HULHV%ś RSWLRQV6HULHV$ RSWLRQV6HULHV% 'LYLGHQG:DLYHUƳƼ 'LYLGHQG:DLYHUƳƼ 'LYLGHQG:DLYHUƴƴ 'LYLGHQG:DLYHUƴƶ *UDQWGDWH ƵƸ1RYHPEHUƵƳƳƻ ƵƸ1RYHPEHUƵƳƳƻ ƴ'HFHPEHUƵƳƳƼ ƴ'HFHPEHUƵƳƳƼ ƴƴ-XO\ƵƳƴƴ ƶƴ0D\ƵƳƴƶ ([SLU\GDWH ƵƷ1RYHPEHUƵƳƴƻ ƵƷ1RYHPEHUƵƳƵƶ ƵƷ1RYHPEHUƵƳƴƻ ƵƷ1RYHPEHUƵƳƵƶ ƵƷ1RYHPEHUƵƳƵƶ ƵƷ1RYHPEHUƵƳƵƶ (%0 Ƶ ƶ ƶƹƴƷƻƷ ƷƹƵƹƼƼƹ Ƴ ƴƻƶƷƳƷƼ ƵƷƶƼƳƴ ƵƻƹƼƺƺ 6WULNHSULFH (XUR ƴƳƶƵ ƴƳƶƵ ƶƶƵƷ ƶƶƵƷ ƷƳƶƸ ƺƸƻƵ (%0 ƸƷƵƵƵƹ ƼƳƶƺƴƳ Ƶƴƶƴƹƻ ƸƺƵƶƸƺ Ƴ Ƴ 6WULNHSULFH (XUR ƴƳƸƳ ƴƳƸƳ ƶƶƵƷ ƶƶƵƷ (ƴ) The Series A stock options have a duration of ƴƳ years as from granting and vest on ƴbJanuarybƵƳƴƷ. The Series B stock options have a duration of ƴƸ years as from granting and vest on ƴbJanuarybƵƳƴƼ. The exercise of the stock options is subject, among other things, to the condition that the company meets a performance test. This performance test, which was met, required the net debt/EBITDA, as deƮned (adjusted for exceptional items) ratio to fall below Ƶ.ƸbbeforebƶƴbDecemberbƵƳƴƶ. SpeciƮc forfeiture rules apply in the case of termination of employment. (Ƶ) Under the Exchange program (see ƺ.Ƶ.ƶ.f) Joao Castro Neves exercised ƸƷƵ,ƵƵƹ Series B options in ƵƳƴƷ with a strike price of ƴƳ.ƶƵ Euro. The shares that result from the exercise must remain blocked until ƶƴbDecemberbƵƳƵƶ. (ƶ) The following options were exercised in ƵƳƴƷ : a. In January ƵƳƴƷ: i. Sabine Chalmers exercised ƴƻƳ,ƺƷƵbNovemberbƵƳƳƻ Exceptional Grant options Series A with a strike price of ƴƳ.ƸƳ Euro; b. In February ƵƳƴƷ: i. Sabine Chalmers exercised ƴƷƵ,ƴƴƵbNovemberbƵƳƳƻ Exceptional Grant options Series A ś Dividend :aiver ƳƼ with a strike price of ƶƶ.ƵƷ Euro; c. In September ƵƳƴƷ : i. Sabine Chalmers exercised ƴƻƳ,ƺƷƵbNovemberbƵƳƳƻ Exceptional Grant options Series A with a strike price of ƴƳ.ƸƳ Euro; ii. Ricardo Tadeu exercised ƴƻƳ,ƺƷƵbNovemberbƵƳƳƻ Exceptional Grant options Series A with a strike price of ƴƳ.ƶƵ Euro; d. In December ƵƳƴƷ: i. Joao Castro Neves exercised ƸƷƵ,ƵƵƹbNovemberbƵƳƳƻ Exceptional Grant options Series A with a strike price of ƴƳ.ƶƵ Euro. P. 178 /179 Contacts Registered Office /DWLQb$PHULFD6RXWK RUSSIA Asia Pacific Sun InBev Anheuser-Busch InBev Cervecería y Malteria Quilmes CHINA Ul. Krylatskaya, ƴƺ Grand’Place ƴ Av. ƴƵ de Octubre y Anheuser-Busch InBev China Business Park ƴƳƳƳ Brussels Gran Canaria ƵƹF, Raff les Off ice Building ŝKrylatsky Hills,’ Belgium (BƴƻƺƻAAB) Quilmes Ƶƹƻ ;i Zang Zhong Rd Building A Provincia de Buenos Aires Shanghai, PRC, ƵƳƳƳƳƴ ƴƵƴƹƴƷ Moscow Global Headquarters Argentina Tel:bƻƹ Ƶƴ ƹƴƺƳ ƸƻƸƻ Russia Tel: ƸƷ ƴƴ ƷƶƷƼ ƴƺƳƳ Fax:bƻƹ Ƶƴ ƹƴƺƳ ƸƼƼƻ Anheuser-Busch InBev Tel: ƺ ƷƼƸ ƼƹƳ Ƶƶ ƹƳ Brouwerijplein ƴ Fax: ƸƷ ƴƴ ƷƶƷƼ ƴƻƸƻ Fax: ƺ ƷƼƸ ƼƹƳ Ƶƶ ƹƵ INDIA ƶƳƳƳ Leuven Europe Anheuser-Busch InBev India Belgium SPAIN Office Ʒƹƴ, Regus Tel ƶƵ ƴƹ Ƶƺ ƹƴƴƴ BELGIUM AB InBev Spain Level Ʒ, Augusta Point Fax: ƶƵ ƴƹ ƸƳ ƹƴƴƴ InBev Belgium Poligono Industrial Miralcampo Golf Course Road, Sector Ƹƶ Brouwerijplein ƴ Calle Aluminio ƴƵ Gurgaon ƴƵƵƳƳƵ, India Functional Management ƶƳƳƳ Leuven ƴƼƵƳƳ Azuqueca de Henares Office Belgium Guadalajara, Spain PACIFIC REGION Anheuser-Busch InBev Tel: ƶƵ ƴƹ Ƶƺ ƹƴƴƴ Tel: ƶƷ ƼƷƼƵƹƷƷƵƹ Anheuser-Busch InBev ƵƸƳ Park Avenue Fax: ƶƵ ƴƹ ƸƳ ƹƴƴƴ Fax: ƶƷ ƼƷƼƵƹƵƶƼƸ International New York, New York ƴƳƴƺƺ Level ƴ FRANCE THE NETHERLANDS United States ƴƹƸ Fitzroy St InBev France InBev Nederland Tel: ƴ ƵƴƵ Ƹƺƶ ƻƻƳƳ St Kilda ƶƴƻƵ Immeuble Crystal Ceresstraat ƴ Victoria, Australia North America ƶƻ Place Vauban Postbus ƶƵƴƵ ZAC Euralille Romarin ƷƻƳƳ CA Breda SINGAPORE CANADA ƸƼƺƺƺ La Madeleine, France Netherlands InBev Market Development Labatt Breweries of Canada Tel: ƶƶ ƶ ƵƳƷƻ ƶƳƶƳ Tel: ƶƴ ƺƹ ƸƵƸ ƵƷƵƷ Asia Pacific ƵƳƺ Queen’s Quay :est Fax: ƶƶ ƶ ƵƳƷƻ ƶƵƷƳ Fax: ƶƴ ƺƹ ƸƵƸ ƵƸƳƸ Representative Office Suite ƵƼƼ ƷƳƻ North Bridge Road P.O. Box ƴƶƶ GERMANY UKRAINE Ƴƶ-ƳƵ MƸJ ƴAƺ Anheuser-Busch InBev SUN InBev Ukraine Lubritrade Building Toronto, Ontario Deutschland ƶƳ V Fizkultury Str. Singapore ƴƻƻƺƵƸ Canada Am Deich ƴƻ/ƴƼ Kiev ƳƶƹƻƳ Tel: ƹƸ ƹƺƶƻ ƴƺƷƵ Tel: ƴ Ʒƴƹ ƶƹƴ ƸƳƸƳ ƵƻƴƼƼ Bremen Ukraine Fax: ƹƸ ƹƺƶƺ ƸƼƺƸ Fax: ƴ Ʒƴƹ ƶƹƴ ƸƵƳƳ Germany Tel: ƶƻƳ ƷƷ ƵƳƴ ƷƳƳƳ Tel: ƷƼ ƷƵƴ ƸƳƼƷƳ Fax: ƶƻƳ ƷƷ ƷƼƳ ƷƳƳƼ SOUTH KOREA USA Fax: ƷƼ ƷƵƴ ƸƳƼƷ ƹƹƺ Oriental Brewery Company Anheuser-Busch Cos. Inc. 81,7('b.,1*'20 ,5(/$1' ƴƳFL, Fine tower One Busch Place ITALY AB InBev UK ƻƵƹ-ƵƷ, Yeoksam-dong, St. Louis, Missouri ƹƶƴƴƻ InBev Italia Porter Tun House Gangnam-gu United States Piazza Francesco Buffoni ƶ ƸƳƳ Capability Green Seoul, South Korea, ƴƶƸ-ƼƶƸ Tel: ƴ ƶƴƷ Ƹƺƺ ƵƳƳƳ ƵƴƳƴƶ Gallarate (VA) LUƴ ƶLS Luton Tel: ƻƵ-Ƶ-ƵƴƷƼ-ƸƳƳƳ Fax: ƴ ƶƴƷ Ƹƺƺ ƵƼƳƳ Italy UnitedbKingdom Fax: ƻƵ-Ƶ-ƵƴƷƼ-ƸƶƹƳ Tel: ƶƼ Ƴƶƶƴ ƵƹƻƷƴƷ Tel: ƷƷ ƴƸƻƵ ƶƼ ƴƴƹƹ /DWLQb$PHULFD1RUWK Fax: ƶƼ Ƴƶƶƴ ƵƹƻƸƳƸ Fax: ƷƷ ƴƸƻƵ ƶƼ ƺƶƼƺ VIETNAM Companhia de Bebidas Anheuser-Busch InBev Vietnam LUXEMBOURG Mexico das Américas – AmBev ƴƵA Floor, Empress Tower Brasserie de Luxembourg Corporate Park Grupo Modelo ƴƶƻ-ƴƷƵ Hai Ba Trung, District ƴ Mousel-Diekirch Rua Dr. Renato Paes Cerrada de Palomas ƵƵ Ho Chi Minh City, Vietnam Rue de la Brasserie ƴ de Barros ƴƳƴƺ, piso Ƹ ƼƵƴƷ Diekirch Ʒth floor Colonia Reforma Social Luxembourg ƳƷƸƶƳ-ƳƳƴ S¢o Paulo CP ƴƴƹƸƳ Mexico Tel: ƶƸƵ ƻƳ Ƶƴƶƴ-ƴ Brazil Tel:bƸƵ ƸƸ ƸƴƺƷƼƳƳƳ Fax: ƶƸƵ ƻƳ ƶƼƵƶ Tel: ƸƸ ƴƴ ƵƴƵƵ ƴƵƳƳ Fax: ƸƸ ƴƴ ƵƴƵƵ ƴƸƹƶ Anheuser-Busch InBev Annual Report 2014 7 CORPORATE GOVERNANCE STATEMENT Registered Trademarks The following brands are registered trademarks of Responsible Editor Anheuser-Busch InBev SA/NV or one of its affiliated companies: Marianne Amssoms Global Brands: Project Lead Budweiser, Stella Artois and Corona Karen Couck International Brands: Translation Supervision Beck’s, Leffe and Hoegaarden Natacha Schepkens and Kathleen Van Boxelaer Local Brands: ƴƳ Barrel, Aleston, Alexander Keith’s, Andes, Antarctica, Bagbier, Barrilito, Special thanks to our proofreaders and all Bass, Beck’s Blue, Becker, Belle-Vue, Belgian Beer Caf¨, Best Beer Company our Anheuser-Busch InBev colleagues who Bringing People Together For a Better :orld, Blue Point, Boddingtons, have made this annual report a reality. Bohemia, Brahma, Brahma Ƴ,Ƴ%, Brahma Sele¦¢o Especial, Bud ƹƹ, Bud Light, Bud Light Lime Lime-A-Rita, Bud Light Lime Straw-Ber-Rita, Bud Light Original English version written by Lime Mang-O-Rita, Bud Light Lime Raz-Ber-Rita, Bud Light Lime Apple- Edward Nebb Ahh-Rita,Bud Light Platinum, Bud NA, Budweiser Brewmaster Reserve, Budweiser Magnum, Budweiser Supreme, Busch, Busch Light, Cafri, Cass, Design and Production Chernigivske, Corona Extra, Corona Light, Cubanisto, Diebels, Diebels Addison Dimix, Diekirch, Double Deer, Draftmark, Estrella, Franziskaner, Gilde, Ginsber, Global Be(er) Responsible Day, Goose Island, Goose Island India Pale Print Ale, Goose Island Honker’s Ale, Guaran Antarctica, Haake-Beck, Harbin, Kirkwood Printing Hasserµder, Hertog Jan, Hoegaarden Ros¨e Ƴ.Ƴ, Hoegaarden Ƴ.Ƴ, Jinling, Jinlongquan, Johnny Appleseed, Julius, Jupiler, Jupiler Blue, Jupiler Tauro, KK, Klinskoye, Kokanee, Labatt, Lakeport, Land Shark Lager, Leffe Nectar, Leffe Royale, Leon, Liberty, Lµwenbr£u, Lucky, Mackeson, Michelob, Michelob Amberbock, Michelob Ultra, Mixx Tail Mojito, Modelo, Modelo Especial, Modelo Amber, Montejo, Natty Daddy, Natural Light, Negra Modelo, Norte, OB Golden Lager, Oculto, Oland, Original, Pace°a, Pacifico, Patagonia, Patricia, Pilsen, Pilsen Soul, Presidente, Quilmes, Rogan, Sedrin, Shiliang, Shock Top, Shock Top Twisted Pretzel :heat, Sibirskaya Korona, Skol, Skol Beats Senses, Skol Beats Extreme, Smartbarley, Spaten, Stella Artois Cidre, The coated papers of the Annual Report Stella Artois Cidre Pear, Stella Artois Cidre Raspberry, T, Tolstiak, Tropical, are printed on ƶƳ% postconsumer Vieux Temps, Victoria, :hitbread, Yantar. recycled paper. The uncoated pages of the Annual Report are printed on The following brand is a registered trademark: ƴƳƳ% postconsumer recycled paper. ť PerfectDraft: co-owned with Koninklijke Philips N.V. U kan dit rapport in het Nederlands raadplegen op onze website: The following brands are registered brands under license: www.ab-inbev.com ť Pepsi, HƵoh, Triple Kola are registered trademarks of Pepsico, Incorporated. ť ƺUP is a registered trademark licensed by Seven Up International. Vous pouvez consulter ce rapport en fran¦ais sur notre site web: www.ab-inbev.com Anheuser-Busch InBev NV/SA Brouwerijplein ƴ ƶƳƳƳ Leuven - Belgium Tel: ƶƵ ƴƹ Ƶƺ ƹƴ ƴƴ Fax: ƶƵ ƴƹ ƸƳ ƹƴ ƴƴ Register of Companies Ƴ.Ʒƴƺ.ƷƼƺ.ƴƳƹ Together for Safer Roads 765 LVDFRDOLWLRQ 765ŞVRWKHUIRXQGLQJPHPEHUVDUH$,*$7 7 IRUPHGLQWKHSDVW\HDULQDQHƬRUWWREURDGHQ &KHYURQ(ULFVVRQ)DFHERRN,%0L+HDUW0HGLD RXUIRFXVWRURDGVDIHW\JHQHUDOO\ŜDQGWRKHOS 3HSVL&RDQG:DOPDUW765LVDGYLVHGE\DQ SUHYHQWWKHQHDUO\WUDƱFDFFLGHQW ([SHUW3DQHORIHPLQHQWOHDGHUVLQURDGVDIHW\ IDWDOLWLHVWKDWRFFXUHDFKGD\765ZDVODXQFKHG 7KHSDUWQHUVKDYHDJUHHGWRSRROWKHLUFROOHFWLYH ZLWKDKLJKYLVLELOLW\HYHQWDWWKH8QLWHG1DWLRQV H[SHUWLVHGDWDGULYHQLQVLJKWVWHFKQRORJ\ LQ1RYHPEHUDQGLQYROYHVDJURXSRI DQGbQHWZRUNVWRLGHQWLI\DQGVFDOHLQGXVWU\EHVW OHDGLQJJOREDOEXVLQHVVHVWKDWKDYHFRPPLWWHG SUDFWLFHVDQGUDLVHDZDUHQHVVRIWKLVPDMRU WRZRUNLQJWRJHWKHUWRKHOSUHGXFHWKHQXPEHU JOREDOKHDOWKLVVXH RIGHDWKVDQGLQMXULHVGXHWRURDGWUDƱF DFFLGHQWV&KDLUHGE\$%b,Q%HY&(2&DUORV%ULWR Design by Addison Addison by Design www.addison.com ab-inbev.com