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FUTUREANNUAL REPORT2014

BUILDING THE

BUILDING THE FUTURELETTER FROM THE CHAIRMAN

2014 milestones

For another 125 years together

2014 results

2014 awards

Working principles

Governing bodies

Transparency and good governance

8

10

12

13

14

16

18

22

22

24

28

30

31

32

33

4

34

26

20

6

36

37WE CONTRIBUTETO ECONOMIC GROWTH

WE SUPPORTOUR CUSTOMERS AND OUR SUPPLIERS

Our contribution

Common goals

24 Our value chain

WE AREMAHOU SAN MIGUEL

WE FOCUSON CUSTOMERS

Customers

SuppliersOur products

To listen is to learn

Innovations

Experiences

Campaigns

01 02 03 04

CONTENTS

ANNEXES

Our main value

Trained professionals

Safety and welfare

40

42

43

46

48

52

53

54

55

62

64

72

50

56

44

38

58

WE PROTECTOUR ENVIRONMENT

WE LOOKAHEAD

Our environmental initiatives in 2014

We optimize resources and reduce waste and emissions

WE STRENGTHENOUR COMMITMENT

WE DRIVEOUR PROFESSIONALS

Corporate volunteering

Responsible in our day to day

Sustainability

Mahou San Miguel Foundation

Our roadmap

Annual Report Outline

GRI Content Index

Financial Report

05 06 07 08

CONTENTS

BUILDING THEAt Mahou San Miguel we often ask ourselves what the secret is to being able to celebrate our 125th anniversary with the youthful spirit that defines our company. We have no secret recipes, but if I had to highlight one single thing, I would say that all of us who form part of Mahou San Miguel are always looking ahead, we think about the future without forgetting our roots; we enjoy our work and we take advantage of every opportunity we have to learn. All of this, however, without losing sight of the responsible and committed way of working and the firm values that have brought us here, and which have remained unchanged since the company’s foundation back in 1890.

We have seen major successes, but also major challenges throughout these 125 years. We have raised our glasses for the good times, and learned how to transform problems into opportunities. Our track record confirms what we have always believed in: a job well done in the end will always be reflected in good results. With this spirit, we have managed to lead our country’s brewing sector and to produce the national beer most widely consumed internationally.

Our snapshot of Mahou San Miguel in 2014 makes us feel proud, but above all enthusiastic about the challenges we face ahead. With a total production of 13.1 million hectoliters, our turnover reached 1.153 billion euros, with an operating profit of 168 million, and annual investments of 66 million euros as the result of our commitment to the company’s future development and growth.

Mahou San Miguel’s contribution to the economy through our activity last year, rose to more than 1.3 billion euros. However, more importantly than figures, what guides our efforts and helps us to continue building the future are the values that the company was born with and which our shareholders have kept alive generation after generation: openness, integrity, trust, collaboration, commitment, excellence and a true service vocation.

This is something known and shared by the great travel companions we have found along the way: suppliers, distributors and customers who have subscribed to our way of doing business and who, like us, firmly believe in long-term relationships based on mutual support and trust. A solid network of partners and collaborators, united by the desire to improve every day. The more than 34 million euros we have allocated to supporting the on-trade sector this year are the best evidence of how much we believe in this sector and of our firm decision to stand by its side especially during hard times.

In the short term, we are looking at a fascinating scenario in which we start to appreciate clear signs of recovery in consumption, opening up a world of possibilities beyond our borders as a source of innovation and learning. The acquisition of 100% of Arian Breweries & Distilleries Ltd., now Mahou India, the agreement with San Miguel Brewing to boost San Miguel as a global iconic brand, and our investment on the American continent, with entry into the Chilean distributor Magia Products and the Founders brewery, one of the leaders in the craft segment. This confirms our goal of making our international activity one of the main growth levers for our company.

WE KNOW WHERE TO HEAD, WHO WITH, AND HOW: RESPONSIBLY AND SUSTAINABLY

LETTER FROM THE CHAIRMAN

4MAHOU SAN MIGUEL | 2014 ANNUAL REPORT

BUILDING THEBUILDING THEFUTURE

We are proud to represent the Spanish beverage industry in more than 60 countries where we are already present and being able to enrich our know-how with the best that we can find in each new market. And the fact is, we consider every international operation as a source of learning, which is enormously useful for our operations in the national market too. So, for example, we see our entry into Founders as a source of innovation and transformation for Mahou San Miguel, coming from a market like the US, which is a consumption trend-setter, and in a segment like craft beers, which is already the largest growing segment in the US, leading a phenomenon that could spread to many other countries.

Our maverick nature leads us to continually set ourselves new challenges. Our new Strategic Plan for 2014–2017 will channel our efforts to become the reference of independent brewing company leading the category in the Spanish market with top quality iconic brands, with a solid international footprint and whose commitment towards the generation of sustainable value continues to influence its team, community and shareholders.

The challenge has remained the same for the last 125 years: to make our brands part of the best moments in our consumers’ day. And to do this we have the most valuable asset a company can have: more than 2,600 professionals. They are the true architects of our success and we owe it to them. In 2014 we have wanted to further enhance their talent with a total of 50,000 hours of training mentoring and career development projects for their professional growth. All of this, added to our health and safety, equality and work/life balance plans have led us to being chosen for the second consecutive year, as the best place to work in Spain within our segment.

We know where we are headed, who with, and how: responsibly and sustainably. For us, there are no alternative routes in this regard. We have considerably reduced our emissions and water and power consumption, with the objective of becoming by 2020 the brewery with the smallest environmental footprint. In the social context, the Mahou San Miguel Foundation, which is barely one year old, is working at full steam to contribute to the development, integration and well-being of people, through programs such as “Creating On-Trade Opportunities”, which allow us to train and offer employment to young persons with a disability or at risk of social exclusion. And, above all else, we know where we come from: a history in which a passion for beer, enthusiasm, hard work and innovation converged 125 years ago on Amaniel street in Madrid to make us what we are today, an independent family brewing firm that looks to tomorrow with the conviction that with solid foundations and a great team it is possible to build the best of futures.

For another 125 years, together.

JAVIER LÓPEZ DEL HIERROCHAIRMAN OF MAHOU SAN MIGUEL

5LETTER FROM THE CHAIRMAN

01We are a 100% Spanish family-owned company, with a history that goes back 125 years and whose turnover in 2014 surpassed 1.153 billion euros, with operating profit of 168 million. But the more than 2,600 professionals who work at Mahou San Miguel like to think that we are defined by much more than this.

Just as beer takes its time to ferment, we are not the kind who like to rush. We are not impatient, but we are inquiring: we are open to new experiences which make us grow. This is why in the year 2000 we bought San Miguel, in 2004, the Canary Islands’ Reina and in 2007, Cervezas Alhambra.

We like to explore and to learn by diversifying our business. Since 2011 we have been present in the mineral water sector, through incorporation into our product catalogue of the iconic brand that is Solán de Cabras. In this way, we have

added two mineral water springs with their respective bottling plants, to our seven breweries in Spain. Since 2012, we have another brewery in Rajasthan (India).

We make 35.5% of the beer that is produced in Spain. We have 40 national brands of beer and 53 product varieties, among which we would highlight the emblematic Mahou Cinco Estrellas, San Miguel Especial or Alhambra Reserva 1925; we also have pioneering products in their category such as San Miguel 0.0% and San Miguel ECO, together with a choice of international beers.

Innovation and tradition go hand in hand in our company. Technology helps us to improve our efficiency to respond to consumers’ rising expectations, but this does not make us overlook tradition. On the contrary. At Mahou San Miguel, state of the art is at the service of our defining essence: mastery of the beer-making craft.

WE AREMAHOU SAN MIGUEL


1.153 BILLION IN TURNOVER AND AN OPERATING PROFIT OF 168 MILLION EUROS

3%IN 2014 WE GREW TO

Our leadership position in Spain drives us forward to new markets: we produce more than 75% of the Spanish beer that is consumed worldwide and are present in more than 60 countries. Our international activity represents 14% of our business volume. In 2014 we established our first international subsidiary after buying 100% of the Indian company Arian Breweries & Distilleries Ltd., now Mahou India. We are convinced that international experiences are a great source of inspiration and learning. And this is precisely what we are achieving through our entry with a 30% stake into the North American Founders, one of the fastest growing companies in the US in the craft beer segment.

We are a committed company and we apply the criteria of responsibility across all areas of our business. We understand that Corporate Responsibility must begin with our own professionals and that we must also extend it to the relationships we establish with our customers and suppliers. We believe that compliance with the United Nations Global Compact, which we adhered to in 2009, guarantees an appropriate framework for implementing a sustainable management capable of adding value to our team, community and stakeholders, as something that forms part of our business approach.

WE ARE NOT IMPATIENT, BUT WE ARE INQUIRING:WE ARE OPEN TO NEW EXPERIENCES WHICH MAKE US GROW

7WE ARE MAHOU SAN MIGUEL | 01


8 4053

2BREWERIES WATER SPRINGS

7 IN SPAIN

+2,600

2014 MILESTONES

IN INDIA1

& BOTTLING PLANTS

We seek out the best talent and generate employment:

PROFESSIONALS

NEW EMPLOYEES117

in our segment (MERCO)

Acquisition of 100% of Arian Breweries & Distilleries Ltd., now Mahou India, the company’s first international subsidiary

San Miguel BLU

Casimiro Mahou

San Miguel Clara

NEW LAUNCHES IN 2014

3

®

PRODUCT VARIETIES

TRADEMARKS

MILLION EUROS IN INDUSTRIAL INVESTMENTS24

3%GROWTH MARKET

IN TURNOVER Growth across all channels, especially independent on-trade

WE PROMOTETHE CULTURE OF BEER

SHARE LEADER IN SPAIN WITH

yy visits to our breweries

yy Purchase of the Duque del Infantado Palace (a future space for promotion of beer culture and leisure)

BEST PLACE TO WORK

35.5%

+26,000


25

43%

COMPARED TO 2013

MILLION EUROS IN INVESTMENTS

PRESENTIN

EVERY 10ON TRADE ESTABLISHMENTS IN SPAIN

+37%

TO REACTIVATE THE ON TRADE SECTOR

6OF

VOLUNTEERS

COMMITTED

REDUCTION IN POWER CONSUMPTION(since the year 2000)

WE ARE THE SPANISH BREWER WITH LOWEST WATER CONSUMPTION

MILLION EUROS FOR THE SUPPORT OF SPORTS, ART AND CULTURE

OUR PRODUCT AT THE SERVICE OF SOCIAL CAUSES

WE INCREASED OUR VOLUNTEERING EFFORTS

WASTE RECOVERY

+700 4,600

99.5%

34.4

ACTIVITY IS GROWING AND REPRESENTS OF OUR BUSINESS VOLUME

OURINTERNATIONAL

BRAND SPAIN

ENTRY INTOFOUNDERS,

AMBASSADORS IN

ONE OF THE FASTEST GROWING BREWERIES IN THE CRAFT SEGMENT IN THE US

+60

14%

75%OF THE SPANISH BEER CONSUMED WORLDWIDE IS PRODUCED BY MAHOU SAN MIGUEL

COUNTRIES ON ALL FIVE CONTINENTS

9

&

EUROPEAMERICA

AFRICAASIA

OCEANIA

Mahou Cinco Estrellas arrives in the UK. Launch ads on the famous London cabs.

BENEFICIARIES

20072000 20041993

192619191890

It is impossible to summarize a 125-year history in just a handful of images. This timeline is just a brief outline of a history that would not have been possible without the effort, hard work and enthusiasm of several generations of magnificent professionals. A history which began with the dream of Casimiro Mahou, a man ahead of his time who was able to transmit his passion for business to his family in whom he instilled values such as commitment, perseverance and love for a job well done. Values, which 125 years later, continue to guide and inspire all those of us who form part of Mahou San Miguel.

FOR ANOTHER 125 YEARS TOGETHER

ACQUISITION OF CERVEZAS ANAGA AND ITS CANARY ISLANDS’ BRAND REINA

FOUNDATION OF HIJOS DE CASIMIRO MAHOU AND ITS FIRST BREWERY

INAUGURATION OF THE ALOVERA CENTRE WITH THE LARGEST PRODUCTION IN EUROPE

MONTEPÍO MAHOU FOUNDATION FOR THE BENEFIT OF THE COMPANY’S PROFESSIONALS

ACQUISITION OF SAN MIGUEL. THUS, MAHOU SAN MIGUEL IS BORN

2011 2013 20142007

1961 1969195619261919CONSTRUCTION OF THE 2ND MAHOU BREWERY ON THE PASEO IMPERIAL IN MADRID

INCORPORATION OF CERVEZAS ALHAMBRA

ESTABLISHMENT OF THE FIRST SUBSIDIARY OUTSIDE OF SPAIN IN INDIA

CONSTRUCTION OF THE FIRST MALT HOUSE FOUNDATION OF

SAN MIGUEL IN SPAIN WITH ITS FIRST BREWERY IN LLEIDA

LAUNCH OF MAHOU CINCO ESTRELLAS

WITH THE ADDITION OF SOLÁN DE CABRAS, MAHOU SAN MIGUEL DIVERSIFIES ITS BUSINESS

CREATION OF THE MAHOU SAN MIGUEL FOUNDATION


2014 has marked a turning point: where we expected stabilization, there has been growth. Therefore we have exceeded our forecasts with a 3% increase in revenue. Our unconditional support for the independent on-trade sector, a very active policy to lead development of this category in Spain and the decisive boost of our international business have been key for achieving these results.

It has also been a year of sizeable investments to continue to grow. Thus, we acquired 100% of Arian Breweries & Distilleries, in India, which has involved creating the first Mahou San Miguel subsidiary outside of our borders. We have also acquired a 30% stake in the North American craft brewery Founders and of 33.5% in our Chilean distributor Magia Products. Acquisition of the Mallorca distributors Montycarrera and of the Duque del Infantado Palace in Madrid to create a future space devoted to beer culture and leisure, are further examples of our shareholder’s commitment to the company’s future and sustainable growth.

2014 RESULTS

Thus, at the end of 2014, Mahou San Miguel consolidated its leadership in the national market with a production share of 35.5%. With a total of 13.066 billion hectoliters produced, a quantity which includes beer brewed both inside and outside of Spain, we remain the Spanish company whose beer is most widely consumed worldwide.

Our business turnover exceeded 1.153 billion euros. Our international sales also grew to reach 75 million euros.

This year our investments reached 66 million euros and, conscious of the fact that our main asset is our professionals, we increased the sum assigned to remuneration and employee benefits by 5% more compared to 2013, surpassing 200 million euros.

We have continued to foster the growth and sustainability of our business by improving our industrial and corporate facilities, allocating 24 million euros to this effect. Our support of the traditional on-trade sector has materialized in investments worth 34.4 million euros, 37% more than in 2013.

A YEAR OF RECOVERY2014 2013 CHANGE

TURNOVER (millions of euros) 1,153 1,118 +3.1%

OPERATING PROFIT 168 165 +1.8%

INVESTMENTS 66 101 -35%

TOTAL VOLUME (thousands of hectolitres) 13,066 12,921 +1.1%

2014 HAS MARKED A TURNING POINT:WHERE WE EXPECTED STABILISATION, THERE HAS BEEN GROWTH

12


2014 RESULTS 2014 AWARDS

Every award received in 2014 is acknowledgement for the work of a great team and an injection of renovated strength and enthusiasm. Our thanks to all the institutions which have rewarded our work.

SOME OF OUR AWARDS• GRANADA GOLD AWARD

GRANADA CITY HALL For the company’s commitment and contribution to society and to the city’s economy.

• M FOR MALAGA MALAGA PROVINCIAL COUNCIL For the company’s economic contribution to and social support for this Andalusian province.

• BUYING DIAMOND FROM THE AERCE ASSOCIATION SPANISH ASSOCIATION OF BUYING PROFESSIONALS For excellence in our company’s buying processes.

• MBEST PLACE TO WORK IN SPAIN IN ITS SEGMENT MERCO - BUSINESS MONITOR OF CORPORATE REPUTATION For policies that develop, motivate and reward professionals.

• HEALTHY COMPANY AWARD BORRMART PUBLISHING HOUSE For occupational risk prevention policies in all our workplaces.

• CEGOS AWARDS CEGOS SPAIN AND TEAMS & TALENT For the programme “Alovera: a factory of leaders”, fostering corporate values.

• 2014 BEST ADVERTISER’S AWARD ADVERTISEMENTS MAGAZINE For the authenticity and innovation of publicity actions.

• TELEFÓNICA ABILITY AWARDS TELEFÓNICA For the company’s policies for the integration and development of persons with a disability.

• BEST SPANISH PRODUCT IN 2014 FACYR - FEDERATION OF CHEFS AND PASTRY CHEFS For quality and mastery in brewing the beers made by the company.

TO BE AN INDEPENDENT BREWER RECOGNISED FOR TO MAKE OUR

BRANDS FORM PART OF THE BEST MOMENTS IN OUR CONSUMERS’ DAY

PROFESSIONALS BUSINESS ETHIC ENVIRONMENT

yy Leading the category in the Spanish market

yy Having a solid international footprint

yy Offering reference brands to our customers and consumers

yy Brewing and marketing top quality products

yy Being committed to the generation of sustainable value for our team, community and shareholders

We understand leadership as a major responsibility. We know that from our position we can and should generate changes that help to improve our society. That is why, we conceive Corporate Responsibility as an integral part of our business vision.

Our commitment begins at home. In 2014, we have offered training and development plans, health and safety and occupational risk prevention plans, equality and work-life balance programs along with numerous employee benefits.

To have a declaration of principles is not enough for us. We believe ethics must respond to procedures based on transparency which favour our country’s economic and social development through our commitment to our customers and suppliers.

Our business is directly linked to the Earth, which gives us the raw materials we use to make our beers. Managing natural resources in a responsible manner is an irrevocable principle tied to our own future as a company.

VISIONMISSION

COMMITMENTS

WORKING PRINCIPLES


We have a strategic plan based on four lines of action: professionals, business ethics, the environment, and society. We want to drive change towards a more sustainable environment and to be a reference in this field for our sector.

OPENNNESS

SOCIETY

SERVICE VOCATION

TRUST

COLLABORATION

INTEGRITY

EXCELLENCE

COMMITMENT

We are a non-conformist organisation, open to new ideas, which fosters debate. We proactively consider how to improve and acknowledge that we can learn inside and outside of our environment.

We have always been strongly committed to all the communities where we are present. In 2014, our professionals have once more strengthened their participation in social volunteering activities. Also, since 2013, the Mahou San Miguel Foundation channels the company’s social actions with activities related to integration and education in values.

In our work we seek to exceed our customers’ and consumers’ expectations, while respecting the company’s quality and profitability parameters.

We believe in everyone in the company, in their capacity and will to develop our business, fostering relationships based on respect, transparency and mutual understanding.

We work as a team with a global vision, making use of the talent in our company. We share challenges and achievements.

We work to surpass our goals, ensuring the utmost quality in everything we do, rigorously fulfilling procedures and paying attention to detail.

We work to surpass our goals, ensuring the utmost quality in everything we do, rigorously fulfilling procedures and paying attention to detail.

We are involved enthusiastically and responsibly in the growth of the business, taking established targets on board. We foster the personal and professional growth of our teams.

VALUES

WE ARE MAHOU SAN MIGUEL | 01


Our long term vision is supported by a governing structure that promotes speed in decision making and our shareholders’ commitment to sustainable development and innovation. The composition and mission of Mahou San Miguel’s governing bodies take the helm and preserve the core values of our family business, as they have been doing for the last 125 years.

Our Board of Directors has the following structure:

HONORARY PRESIDENT Ms Virginia Mahou de Vilches

CHAIRMAN Mr Javier López del Hierro 1

FIRST VICE-PRESIDENT Mr Alfredo Mahou Herráiz

SECOND VICE-PRESIDENT Mr Óscar Fernández de Pinedo Robredo 2

BOARD MEMBERS Mr Eduardo Petrossi Valdés 3

Mr José A. Herráiz Mahou

DIRECTORS Ms Ana Francisca Gervás Hierro 4

Ms Fátima Mahou Herráiz

Ms Germina Christelle Eva Gervás 5

Mr José A. Togores Mahou

Ms María Mercedes Calvo Caminero 6

Ms Paloma de la Torre Fernández

SECRETARY (non director) Ms Beatriz Martínez-Falero

VICE-SECRETARY (non director) Mr Juan Bravo Casado

1 Representing Inversiones Múltiples, S.L.U.2 Representing Mosquililla, S.L.U.3 Representing Tamarinver, S.L.U.4 Representing I.P.L International, Ltd.5 Representing Sociedad Gala de Inversiones, S.L.6 Representing Altinver, S.A.U.

BOARD OF DIRECTORSOUR GOVERNING STRUCTURE REFLECTS OUR SHAREHOLDERS COMMITMENT TO SUSTAINABLE DEVELOPMENT AND INNOVATION

GOVERNING BODIES

16


The Executive Board of Mahou San Miguel actively takes part in the company’s decisions and strategies, laying down the major lines of business management.

The management team have decision-making power in the different areas of the business with a view to promoting efficient management.

(*) Directors who are members of the Executive Committee.

The Executive Committee is led by the Director General and integrates our company’s main business units and corporate departments. It is responsible for supervising and adopting decisions related to the business in all matters not reserved to the Governing Bodies (Executive Board, Board of Directors and General Shareholders’ Meeting).

PRESIDENT Mr José A. Herráiz Mahou

VICE PRESIDENT Mr Javier López del Hierro

DIRECTOR Mr Alfredo Mahou Herráiz

DIRECTOR Mr Eduardo Petrossi Valdés

DIRECTOR Mr José A. Togores Mahou

DIRECTOR Mr Óscar Fernández de Pinedo

SECRETARY (non director) Ms Beatriz Martínez-Falero

DIRECTOR GENERAL* Mr Alberto Rodríguez-Toquero

MANAGING DIRECTOR UNIDAD DE NEGOCIO ESPAÑA* Mr Peio Arbeloa

MANAGING DIRECTOR OF THE SPAIN BUSINESS UNIT* Mr Jonathan Stordy

MANAGING DIRECTOR OF THE WATER AND SOFT DRINKS BUSINESS UNIT* Mr Jesús Núñez

MANAGING DIRECTOR OF THE LOGISTICS BUSINESS UNIT* Mr Miguel Ángel Miguel

MANAGING DIRECTOR OF FINANCE, STRATEGY AND NEW BUSINESS* Mr Mariano Navarro

MANAGING DIRECTOR OF MARKETING* Mr César Hernández

MANAGING DIRECTOR OF OPERATIONS* Mr José Luis Rodríguez

MANAGING DIRECTOR OF PEOPLE AND ORGANISATION* Mr Jesús Domingo

DIRECTOR OF THE LEGAL AREA Ms Beatriz Martínez-Falero

DIRECTOR OF INTERNAL AUDITING Mr Ángel Etreros

DIRECTOR OF QUALITY AND R&D Mr Juan del Olmo

DIRECTOR OF COMMUNICATION AND INSTITUTIONAL RELATIONS Ms Patricia Leiva

EXECUTIVE BOARD MANAGEMENT TEAM


In the area of ethics, our committees and codes of conduct guarantee responsible management, prevent conflicts of interest and channel communications from both professionals and shareholders to the governing bodies.

This committee is made up of General Management and of the People and Organisation, Legal and Internal Audit departments. It disseminates and applies our ethical principles to all of our activities. It also drives and coordinates policies aimed at preventing irregular conduct. All of the company’s professionals have various channels for communicating to this Committee any information related to compliance with our Code of Conduct.

ETHICS COMMITTEE

Following the precautionary principle that every enterprise must have, this committee was created in 2011 and is responsible for coordinating and developing our corporate policies. It designs occupational risk prevention systems by establishing the relevant rules, and identifies risks associated with our reputation or misconduct, implementing measures to avoid them.

PREVENTION AND COMPLIANCE COMMITTEE

CODE OF CONDUCTThe code of conduct lays down the values and principles that our behavior is ruled by in our relationships with groups of interest, local communities and society in general. In 2014, in a cross-cutting manner, the different departments have reviewed and updated the former version of this document, originally published in 2010. The result is an expression of Mahou San Miguel’s policy of zero tolerance to illicit or unethical behaviors that might arise in our company. It is addressed to each and every professional, all of whom have received training in our code of conduct throughout the year.

CHANNELS 2014 %

ETHICS COMMITTEE 5 19.2%

MAIL 1 3.8%

E-MAIL 16 61.6%

SUPERVISOR 3 11.6%

TELEPHONE 1 3.8%

TOTAL 26 100%In 2014, we have worked on updating the company’s first level and cross-cutting risks maps. We use these to reflect the influence of the economic context on our management and to forecast possible future scenarios. Risk evolution due to commercial factors has become a key factor in our new map.

RISKS MAP

TRANSPARENCY AND GOOD GOVERNANCE


THE NEW VERSION OF THE CODE OF CONDUCT REFLECTS OURPURSUIT FOR TRANSPARENCY IN OUR DAY TO DAY

19

SUPPLIERS’ CODE OF CONDUCTWe believe that application and fulfilment of our Code of Conduct should not just be limited to our company but rather likewise extend to our groups of interest. For this reason, in 2014 we created the Suppliers’ Code of Conduct, which plays a very important role when it comes to two specific steps in the contracting process.

We have incorporated ethical principles into our buying policy:

yy Transparency and non-discrimination. All suppliers are given the possibility of collaborating with Mahou San Miguel in a framework that is professional, honest and open.

yy We make sure that there is strict compliance with current legislation, particularly with regard to occupational risk prevention, quality, food safety and the environment.

yy We promote a policy of stable long-term relations based on quality, transparency, continual improvement, mutual benefit, innovation and development.

yy We make sure that companies supplying goods and services to us operate within a context of demonstrated Corporate Social Responsibility and business ethic.

Our contracts stipulate clauses related to ethical compliance. They refer, especially, to equality and non-discrimination, Corporate Social Responsibility, Human Rights, the eradication of forced labour, coercion and child labour, and respect for the environment.

Our suppliers must be committed to the United Nations Global Compact.

1 2

02WE CONTRIBUTE

Beer is a very important beverage for the Spanish economy, contributing 1.4% to the country’s GDP. Our sector in 2014 created more than 257,000 jobs —80% in the on trade sector— and provides the State with almost 3.5 billion euros in the form of taxes.

Without losing sight of the macroeconomic dimensions, at Mahou San Miguel we also pay special attention to other types of numbers and percentages: such as the almost 1,000 families of farmers we use for our supplies of malt and hops, or that 40% of the revenue of an on-trade establishment can depend exclusively on beer consumption, or the more than 10,000 people employed as of today by the 1,119 distributors we work with.

It is not surprising that many experts find beer consumption to be an additional economic indicator, which signals improved economic prospects when it grows.

TO ECONOMIC GROWTH


21WE CONTRIBUTE TO ECONOMIC GROWTH | 02

OUR DISTRIBUTORS PROVIDE EMPLOYMENT TO

PEOPLE10,000

1.301IN 2014 WE CONTRIBUTED

TO THE SPANISH ECONOMY

BILLION EUROS

MILLION EUROS

MILLION EUROS

MILLION EUROS

204

790

307

EMPLOYEES

COMPANIES

ADMINISTRATION

WE CONTRIBUTE The beer sector plays a very important role in the Spanish agri-food context. Of the 450,000 tonnes of malt the sector uses in Spain, Mahou San Miguel uses approximately 145,000 tonnes. Our commitment translates into buying the highest possible quantity of raw materials from local suppliers, importing only that proportion which they cannot deliver in order to cover our demand. 99% of the malt and about 60% of the hops we use are nationally produced. Also, 95% of all our suppliers are Spanish. This data means that our raw materials provide employment to almost 1,000 families.

In today’s scenario, Mahou San Miguel has continued to invest in production facilities to make them more efficient and competitive.

Our industrial investments, which reached 24 million euros in 2014, have made our production facilities pioneering in obtaining certifications such as ISO 9001, in relation to quality; OHSAS 18001, in occupational health and safety management; ISO 14001, in relation to the environment; and ISO 22000 and FSSC 22000, in relation to food safety.

TO INDUSTRIAL DEVELOPMENT…

TO AGRICULTURAL GROWTH…

Consisting of the leading companies in the sector, it also forms part of the Spanish Food and Drink Industry Federation (FIAB). As members of this association, we promote campaigns aimed at responsible consumption. In 2014, we would highlight the following:

BEER RUNNERSThis movement encourages us to lead an active life by organising weekly races in various cities.

THEY RELY ON YOU FOR NOURISHMENT. IF YOU’RE BREASTFEEDING, DRINK NON-ALCOHOLICGenerates awareness among women about the incompatibility of drinking beer while breastfeeding and presents non-alcoholic beer as an alternative during this stage.

ASSOCIATION OF BREWERS OF SPAIN

MAHOU SAN MIGUEL | 2014 ANNUAL REPORT

We join our effort and vision to the interests and concerns of various associations.

COMMON GOALS

WE CONTRIBUTE Tourism is the greatest driver of our country’s economy. Beer is the favourite drink for 90% of the more than 60 million tourists who visited Spain in 2014. With the opening of Mahoudrid in the Adolfo Suárez airport of Madrid-Barajas, we have become the doorway into our country’s gastronomic and cultural offer. Most tourists who visit us come from the UK, where 50% of the international sales of Mahou San Miguel are generated and which therefore, we know well.

In 2014, we have worked with the Community of Madrid to increase our region’s visibility in London, and increase our attractiveness as a tourist destination.

To be a Brand Spain means to bring the best of our Spanish lifestyle and beer culture to the more than 60 countries where we are present.

But we know that most of the work takes place inside the doors. That is why in 2014 we bought the Duque del Infantado Palace, an 18th century building in the heart of Madrid, and future headquarters of the Mahou San Miguel space intended to promote beer culture and leisure.

Mahou San Miguel supports numerous initiatives which, in addition to representing a unique opportunity of leisure and enjoyment for their consumers, also represent a valuable source of wealth, values and international promotion for our country.

From Solán de Cabras’s support for fashion, to Mahou’s support for football or Alhambra’s support for art, including the new spaces for music created by San Miguel or its commitment to be closer to the World Basketball Cup held here in Spain, in 2014 we spent more than 25 million euros on the promotion of sport, art and culture in our country. In total we support 14 different sports disciplines and a total of 20 different sports clubs.

TO SPORT, ART AND CULTURE…

TO BRAND SPAIN…

TO TOURISM GROWTH…

We form part of:

OTHER INSTITUTIONS



OUR VALUE CHAIN

SUPPLIERS

TRAINING FOR EMPLOYMENT THROUGH THE MAHOU SAN MIGUEL FOUNDATION

CSR CLAUSES IN ALL MAIN CONTRACTS FOR RAW MATERIALS

SUPPLIERSNATIONAL

ELECTRICITY FROM RENEWABLE SOURCES

WATER CONSUMPTION(Since the year 2000)

REDUCTION IN

FOR THE SUPPORT OF SPORTS, ART AND CULTURE

MILLION EUROS

OF COSTS ALLOCATED TO PURCHASING GOODS AND SERVICES

PROJECTS IN 2014

INDUSTRIAL INVESTMENT

BENEFICIARIES OF CORPORATE VOLUNTEERING

6,000

95%

100%

38%

+25

164

4,60075%

SUPPLIES

BREWING AND BOTTLING

SOCIETY


WE ARE PRESENT IN

UNIQUE MOMENTS OF OUR CONSUMERS’ DAY EVERY DAY

REDUCTION IN

OF THE FINISHED PRODUCTTRACEABILITY

SUSTAINABLE MOBILITY PLAN: WE SAVE

MILLION KILOMETRES ON OUR ROUTES(Since 2010)

TO SUPPORT THE ON-TRADE SECTOR

MILLION EUROS

WE DISTRIBUTE

PEOPLE VISITED OUR PRODUCTION FACILITIES IN 2014

MILLION CRATES OF BEER EVERY WEEK

POINTS OF SALE(ON TRADE AND OFF TRADE)

OUR CO2 EMISSIONS(Since 2000)

100%

+26,000

+1

1

6,000,000

+200,000

43%

+34

CUSTOMERS

LOGISTICS

FOLLOWERS ON SOCIAL MEDIA

CONSUMERS

1,500,000

13,000,000

25

CONSUMER

03WE FOCUS

At Mahou San Miguel focusing on the consumer in everything we do is far from just a statement. For us it means to ask, chat, inform, reply, know, observe, learn, respect, imagine, propose, accompany, share, connect, and without a doubt, to listen to those who give real meaning to our work.

We have been with our consumers for more than one hundred years. And even so, they never cease to surprise us, as we learn and evolve together. We know that every consumer has a unique combination of tastes, needs and motivations, and for this reason we work to deliver a range of products capable of covering any type of occasion: 40 brands and 53 varieties mean that we are now present in six million daily contacts with Spanish consumers.

The challenge we face is the same as 125 years ago: to make Mahou products form part of the best moments in our consumers’ day. Except that now it is even more exciting as we have their permission to transform moments of consumption into genuine experiences and that is what we are doing, through gastronomy, art, sports, or music.

The limit is our imagination, because this journey has only just begun…

ON CUSTOMERS


EVERY CONSUMER HAS A UNIQUE COMBINATIONOF TASTES, NEEDS AND MOTIVATIONS

OUR

4053THAT WE ARE NOW PRESENT IN

6SPANISH CONSUMERS

WE FOCUS ON CUSTOMERS | 03

VARIETIESMEAN

BRANDS AND

MILLION DAILY CONTACTS WITH


BRANDSBRANDSBRANDS

OUR PRODUCTS

TO SHARE

TO CHILL

ICONIC

29WE FOCUS ON CUSTOMERS | 03

INTERNATIONAL

BLU DESAN MIGUEL

CASIMIRO MAHOU

SAN MIGUELCLARA

FOR SPECIAL MOMENTS

FOR WELLBEING

LAUNCHES

29


TO LISTEN IS TO LEARN

Quality is one of our consumers’ foremost demands. Because of this, every phase of our production process, from buying the raw material through to labelling our products, is subject to strict internal and external controls.

Our vocation of service towards our consumer makes us proactive when it comes to learning how their needs and expectations evolve. That is why in 2014 we carried out 105 market surveys.

We foster transparency and keep communication flowing through our 24 hour service customer care lines and online forms. In 2014, a total of 9,478 consultations were attended by phone and online.Our company is particularly active on social media, where we foster dialogue and interaction with our followers: 1,354,451 on Facebook; 147,352 on Twitter and 8,869 on Instagram.

Our facilities organize tours for visitors to learn the natural brewing process of our beers: in 2014 we had the pleasure of receiving 26,307 people.

SOCIAL MEDIA

1,354,451

147,352

8,869

30

FOLLOWERS

FOLLOWERS

FOLLOWERS


INNOVATIONS

As part of our support for the World Basketball Cup, San Miguel 0.0% launched a special edition with 7 different designs: a generic one of brothers Marc and Pau Gasol and another one for each of the cup’s hosts: Madrid, Barcelona, Sevilla, Granada, Bilbao and Las Palmas de Gran Canaria.

San Miguel Clara—a combination of San Miguel Especial with just the right proportion of lemonade—has become the beer-drinkers’ shandy in can format, which has been exceptionally well received in the market.

The Casimiro Mahou Special Beers Collection is our particular homage to the man who inspired his widow and children to create our company 125 years ago. Consisting of four unique varieties: Amaniel, Maravillas, Marcenado, and Jacometrezo, they have targeted the on trade sector, specialised establishments and gourmet stores. A perfect excuse that offers consumers the possibility of trying out new types of beer through a beer tasting experience paired with high cuisine and fostering the culture of beer.

Towards the end of 2014 we launched the first exclusive edition of Mahou’s popular 20cl bottle. The iconic “botijo” can be enjoyed in 300 bars in Madrid. An emotional nod to our lifelong followers.

SAN MIGUEL 0.0% FIBA 2014 WORLD BASKETBALL CUP LIMITED EDITION

SAN MIGUEL CLARA

CASIMIRO MAHOU

BOTIJO

Directed at a youthful urban public, this beer was renovated in 2014 with a more sophisticated beer and notes of vodka.

BLU DE SAN MIGUEL


EXPERIENCES

This unique experience acquainted consumers through new technologies with the very special bond between Madrid and the Mahou Cinco Estrellas brand. An interactive journey through more than a century full of life, secrets, curiosities and with an unforgettable flavour.

This space became a meeting point for Madrid in the summertime. Situated in the Santa Bárbara Palace, it combined an interesting space for leisure, gastronomy and culture.

This initiative was born to enhance general public knowledge about the Specialities segment. Consumers can simply and intuitively browse through a dedicated space online to discover pairings, inspiring recipes and places to enjoy different types of beer. We have also developed live experiences such as tastings in on-trade and off-trade establishments.

sensacionesliquidas.es

MANZANA MAHOU 330º

MADRID TASTES LIKE A MAHOU

LIQUID SENSATIONS

32


CAMPAIGNS

Through the #soymuydeMahou campaign (“I’m very much a Mahou person) the brand witnessed and starred in the experiences shared by fifteen celebrity Mahou drinkers. The campaign resulted in more than 1,700,000 viewings on Youtube, more than 22,000 tweets and more than 16,000 new fans.

This was the San Miguel 0.0% brand’s commitment towards the FIBA 2014 World Basketball Cup. As if it were the Olympic torch, 1,000 people became relay runners bouncing a basketball over more than 5,000 kilometres across Spain.

The Clandestine meetings of the Alhambra Reserva 1925 brand continued to surprise with their originality through the #Artepordescubrir campaign (Art to be discovered), positioning Alhambra as a premium brand for special occasions.

The reference beer in the Canary Islands wanted to strengthen its bond with young people. Reina (queen or rule) expressed its support for young people’s spirit under the #noficial (notofficial) motif “for those who decide to rule their own worlds”.

This summer tour offered more than 40 events for relaxation and enjoyment with the best music and the coolest beer. More than 12,000 tastings and 520 actions on summer terrace and beach bars proved the great welcome received by this tour.

Through “Live Dreaming”, an audiovisual piece directed by designer Amaya Arzuaga, the premium mineral water brand invited consumers to share their dreams on the Internet.

San Miguel’s window on musical content put labels and genres to one side to support quality with capital letters. Both established and emerging, national and international artists came together for this project.

MAHOU CINCO ESTRELLAS 0.0 CITIZENS TOUR

SAN MIGUEL FRESCA SUMMER TOUR

ALHAMBRA REINA

SOLÁN DE CABRAS

CITIZENS OF A PLACE CALLED WORLD

0434


WE SUPPORTOUR CUSTOMERS AND OUR SUPPLIERS

In Spain alone, there are 16 million consumption experiences of all types per day, and our brands are present in no less than 6 million of those moments. Behind this figure there is a lot to be said for our capacity as a company that serves bars and restaurants to make them the preferred meeting points for a large number of people. We also invest a major share of our resources to this: in 2014, we have spent more than 34.4 million euros on actions aimed at reactivating the on-trade sector.

We know that when consumers choose a venue, 43% of them will choose based on the brand of beer served there, and that the vast majority are happy to enter when they know they’ll find Mahou San Miguel products behind the bar. The same happens with the off-trade channel, which we also work with closely: consumers look for our

products on the shelves and base their buying decisions on the certainty that they’ll enjoy a unique flavour of utmost quality.To guarantee this quality, a key element are the more than 6,000 suppliers whom we have worked with in 2014—95% of which are Spanish—and therefore we like to make sure that we establish long term mutually beneficial relationships with them. Undoubtedly, their support and trust throughout these years has also contributed to building the quality products that make us a preferred choice.

There are still another 57% of consumers who will choose a venue for other reasons aside from the brand of beer. We’re clear about how we need to work with them. It’s been a while now since bars, restaurants and shops ceased to be mere destinations of our products to become venues of

35WE SUPPORT OUR CUSTOMERS AND OUR SUPPLIERS | 04

WE ARE PRESENT IN

POINTS OF SALE

experience for our consumers. To become involved in the world of beer through tastings, enjoying the best draught beers, learning to pair beer and food, enjoying football matches with customised products, discovering popular tapas-tasting routes or combining music, fashion and art while savouring Mahou San Miguel products are just a few of our now customary proposals at the more than 200,000 points of sale where we are present.

+200,000


With the seal of Mahou Cinco Estrellas, we have granted quality recognitions to the pubs that stand out for their experience and prestige when it comes to offering consumers the perfectly pulled beer. Almost 200 establishments throughout Spain have already received it.

Our commitment to the category of our beers has led us to create proposals that allow consumers to be able to distinguish whether a beer is red stout, wheat beer, stout, lager or extra. Present both online and through the Off-trade and On-trade channels, during 2014 more than 140 venues held product tastings under this programme.

In 2014 we have made an enormous effort to transmit sports sponsorship to the point of sale. In this line, we have carried out various promotional actions linked with Real Madrid C.F., Atlético de Madrid, Athletic Club de Bilbao, F.C. Málaga, Real Valladolid C.F., Granada C.F. and the Spanish National Basketball Team across more than 4,500 establishments.

More than 2,000 on-trade establishments have taken part in our 2014 Tapa Routes, plus another 140 which took part in the Tapa Fairs. Approximately 120,000 people visited these fairs generating consumptions

of half a million. Mahou San Miguel also took part in the Mercado de Sabores (Flavours Market), a date with Madrid’s cuisine which took over from the traditional Tapas Fair and brought together over four days a wide range of restaurateurs with different profiles in the Crystal Gallery of the Cibeles Palace.

We are involved in the training of on-trade professionals by offering financial and logistical support to nine top schools in this sector. We also collaborate with more than a dozen national and foreign on-trade associations.

Distribution companies are a key partner for Mahou San Miguel: they are our direct link with our customers of the on-trade channel, and are fundamental in conveying to them our commitment towards the sector. We currently work with 1,119

MASTERY PROGRAMMELIQUID SENSATIONS

SPONSORSHIP AT THE POINT OF SALE

CUISINE

WITH THE ON-TRADE ESTABLISHEMENTS

DISTRIBUTORS

CUSTOMERS

distributors throughout the country, some of whom we have been working with for more than half a century. They form part of one of the most widespread and consolidated distribution networks in Spain, employing more than 10,000 professionals who make it possible for us to reach our customers with more than one million crates of beer per week.

37WE SUPPORT OUR CUSTOMERS AND OUR SUPPLIERS | 04

SUPPLIERS

IN 2014 WE HAVE VERIFIED AND VALIDATED

300SUPPLIERS

The Supplier’s Portal is a new direct communication channel that allows us to exchange information, manage offers, orders, budgets, etc., with our more than 6,000 suppliers. It is also an open window for new contact with companies aligned with our buying policy. Furthermore, it serves as an element that generates awareness of the importance of corporate social responsibility: through this tool we require that our suppliers —who must register with this application—declare what their level of commitment is and state what types of responsible actions they carry out to generate value for society.

SUPPLIER’S PORTAL

37

We have included our suppliers in our responsible management of the supply chain. This is fundamental for a company like ours in which 75% of our costs are for the purchase of goods and service, mostly from national suppliers. Through this, in addition to fostering employment in our country, we are also supporting the good work of our local partners and the quality of their products.

From the moment we start to collaborate with them, our suppliers take on a series of very specific commitments on fundamental issues such as respect for the environment, health and safety, sustainable mobility and equality among all workers. To guarantee that our high expectations are met, there are periodic audits. In 2014 we have verified and validated 300 suppliers.

99%AND

60%

WE USE ARE CULTIVATED IN SPAIN

OF MALT

OF HOPS

05WE DRIVEOUR PROFESSIONALS

38

Our professionals are the pillar and motor of our company. Their capacity for work, enthusiasm, motivation and commitment have placed us for yet another year at the forefront of the Spanish brewing sector. We owe everything to them, so we continue to invest in and create programs and measures that guarantee their growth, welfare and safety. In 2014 we implemented our third work climate survey “Say It” with good results: 90% of our professionals consider that Mahou San Miguel offers them a good job in which they can develop; 77% feel motivated by their job and 83% perceive that the company cares about their physical and mental wellbeing. However this survey has also detected areas in which we can continue to improve.

For Mahou San Miguel, managing the talent of its professionals involves discovering the potential they can develop in our company and enhancing it, making them the true leaders when it comes to directing

their career. To this end, in 2014 we have invested 900,000 euros in training with more than 50,000 hours of learning through personalized courses adapted to the needs and interests of each professional. Internal mobility within the company is also an interesting factor which opens a wide range of opportunities for growth; in fact, many of our internal management positions are covered with internal talent.

Aware of the importance of having a work-life balance when it comes to ensuring our professionals’ welfare, we are working on innovating measures tailored to facilitate compatibility between these two aspects. We have been the first company in the sector to obtain the Family Responsible Company seal and the only one to have received the Equality in the Company distinction awarded by the Ministry of Health, Social Services and Equality. Our occupational risk prevention and health and safety programs encompass a wider


39

WE HAVE BEEN THE FIRST COMPANY IN THE SECTOR TO OBTAIN THE FAMILY RESPONSIBLE COMPANY SEAL

WE DRIVE OUR PROFESSIONALS | 05

range of aspects than those involved in the day to day job—healthy eating, sports, stress management, etc.—reflecting the company’s commitment to its employees, which dates back 125 years.

At Mahou San Miguel we no longer have a Human Resources department. We call it “People and Organisation”. Because words matter. And people come first in our organisation.

Family Responsible

CompanyEquality in

the Company

IN 2014 WE HAVE ALLOCATED

900,000EUROS TO TRAINING COURSES OR

50,000HOURS OF LEARNING


yy Medical service in every workplace.

yy Full medical check-up.

yy Health workshop and other sports activities.

yy Workstation ergonomics for pregnant employees.

yy Flexible working hours.

yy Childcare vouchers.

yy Holidays above the legally stipulated minimum.

yy Organisation of summer camps for employees’ children.

yy Extension of the short-time working day up to a child’s 10 years of age.

yy Economic assistance for professionals with a disability.

yy Economic assistance for professionals with a relative with a disability.

yy Pensions plan.

yy Insurance policies.

yy Loans and advances.

yy Restaurant vouchers / food and transport assistance (collective routes and parking).

yy Student aid.

yy Aid for school materials.

EMPLOYEE BENEFITS

2,603

40

INDEFINITEMEN

WOMEN TEMPORARY

A TEAM OF

IN SPAIN

TYPE OF CONTRACTBY GENDER

ABROAD

NEW HIRES IN 2014

OUR STAFF INCLUDESWITH A DISABILITY

PEOPLE

2,503

96.6%82%

18%

100

3.4%

117 55

OUR MAIN VALUE

PROFESSIONALS

41WE DRIVE OUR PROFESSIONALS | 05

In 2014 we have laid down the bases for continuing to make progress along with our professionals through the opinions they have shared with us as part of our third work climate survey “Say it”. Thanks to this tool, they themselves have detected opportunities for improvement and have become involved in cross-cutting action plans. We feel particularly proud of the results obtained: 90% consider that Mahou San Miguel offers them a good place to work where they can develop, 77% feel motivated by their day to day job and 75% would not accept an offer with similar conditions from a different company.

In the last 10 years we have managed to triple the number of women in our company, in spite of it being a traditionally male sector with a low level of rotation. To achieve this priority objective, we have been the first company in the beer sector to put into place equality plans including a total of 57 measures.

We are convinced that having a work-life balance improves productivity, reduces absenteeism and above all, improves the work climate, people’s motivation and their involvement. For this reason, most of our company benefits are aimed at this area precisely (flexibility, short work-day, more holidays, summer camps, etc.). In 2014 we have implemented two initiatives which have been very well accepted by our professionals:

19:30 PROJECTThis initiative aims to inculcate a change in mentality in our way of working to have more rational working hours, achieve greater efficiency and improve family and work life reconciliation. We want to help our professionals to gain efficiency and support them with online time management courses, on adequate use of their smartphones and email addresses, and on techniques for efficient meetings. All of which is aimed to avoid professional interference in their personal life after 19:30 hours.

“DAYS WITHOUT SCHOOL”We help working parents to have peace of mind on days when there is no school by organising cultural initiatives and activities for their children.

WORK CLIMATE SURVEY

EQUALITY, A PRIORITY OBJECTIVE

WORK-LIFE BALANCE

90%OFFERS THEM A GOOD JOB IN WHICH THEY CAN DEVELOP

OF OUR PROFESSIONALS CONSIDER THAT MAHOU SAN MIGUEL


Through our corporate university “e.studia”, we offer courses tailored to each professional profile through a combination of different learning methodologies.

In 2014 we have invested 900,000 euros in training policies, representing 50,000 hours of our professionals spent on courses and in workshops. Plus, more than half of the vacancies in our company are covered through application of our Internal Mobility policy.

At the same time, we have “Succession and Career Plans” which identify the professionals with the greatest potential and prepare them to be the future leaders of the company. Last year, one of every four positions of responsibility were occupied by employees who are included on this program. 56% of our staff are regularly assessed for their performance.

“We grow” is a program aimed at facilitating a first working experience for young people. In 2014 we launched the second edition, and 12 talented young professionals joined our team, further to last year’s previous 12. The selection was particularly tough, especially considering that we received more than 2,700 applications.

TRAINING

TRAINED PROFESSIONALS

43WE DRIVE OUR PROFESSIONALS | 05

We foster initiatives to promote a healthy lifestyle in relation to food, sport and eliminating stress. We have health workshops and medical check-ups to monitor our employees’ state of health.

Also, in 2014 we organised a new edition of the “Zero Risk” campaign aimed to extend the prevention strategy to 100% of the workforce in our production facilities. Under the slogan “If you’re only looking out for yourself, you’re at risk” we launched a campaign to reduce occupational accidents to a minimum and promote the best practices to decrease hazards and foster the concept of team working in relation to health and safety.

OCCUPATIONAL RISKS AND PREVENTIONFor the first time, and coinciding with World Day for Safety and Health at Work, all our centres stopped working for 30 minutes to hold a training session on occupational risks and their prevention. Through this, we have managed to reduce our accident rate by 25%. These improvements place us below the average for the sector and encourage us to continue working along these lines.

SAFETY AND WELFARE

LA LLAMADA ES PARA

TI.EL RIESGO ES PARA TODOS.

USA EL MÓVIL SÓLO EN ÁREAS DE DESCANSO Y ZONAS EXTERNAS SEGURAS.

WE HAVE REDUCED OUR ACCIDENT RATE BY

25%

43

06WE PROTECTOUR ENVIRONMENT

Society is increasingly aware of the need to protect our environment. Companies, as part of it, share this concern and are increasingly aware that reducing our environmental impact must be an essential part of our business strategy.

At Mahou San Miguel we are committed in this area and have incorporated this dimension into every sphere of our activity. Our target is to be the company with the smallest environmental footprint in the Food and Beverage sector by 2020. To achieve this, we have laid down a plan improving our environmental indicators, optimising resources and reducing the waste we generate. The more than 3.5 million euros invested in this area in 2014 are evidence of our effort and vocation for the long term.

Since 2001, we have an Environmental Management System certified to the ISO 14001 standard and the EMAS Regulation that helps us to identify, evaluate and control the various environmental aspects in all phases of our production process.

We also work to maintain effective communication with our main interest groups, through environmental outreach, awareness and training actions. Among others, we present our Environmental Declaration every year and publish our Annual Report, for transparency of our indicators.


IN 2014 WE HAVE ALLOCATED

3.5TO ENVIRONMENTAL PROTECTION

MILLION EUROS

OUR ENVIRONMENTAL MANAGEMENT SYSTEMCOMPLIES WITH THE ISO 14001 STANDARD AND EMAS REGULATION

45WE PROTECT OUR ENVIRONMENT | 06


OUR ENVIRONMENTAL INITIATIVES IN 2014

Thanks to our strong commitment to the environment, we have been able to grow by 42% since the year 2000 while dropping our annual water consumption per litre produced by 38%, consuming 43% less energy, reducing our emissions by 43% also and recycling 99.5% of our waste, giving it a new use following the production process.

Our commitment to responsible water management led us to join The CEO Water Mandate in 2014. This United Nations public-private initiative is designed to help companies develop, implement, and divulge policies that guarantee the sustainability of water resources.

It measures six areas of improvement in affiliated companies and our level of compliance has increased from 70% in 2013 to 73% in 2014.

In 2014 we reached an agreement with the company CHEP, a world reference in pallet and container pooling systems, to reduce to a maximum our generation of packaging waste and minimise CO2 emissions.

This is a pioneering plan which tries to avoid emission into the atmosphere of 1,300 tonnes per year of CO2, equivalent to the quantity of greenhouse gases a forest area of more than 180 hectares is capable of absorbing in one year.

THE CEO WATER MANDATE

CHEP AGREEMENT

1. DIRECT OPERATIONS 0.99

2. SUPPLY CHAIN AND WATERSHED MANAGEMENT 0.48

3. COLLECTIVE ACTION 0.53

4. PUBLIC POLICY 0.75

5. COMMUNITY ENGAGEMENT 0.63

6. TRANSPARENCY 1

Maximum score: 1


A step further in neutralising our CO2 emissions derived from the use of pallets in the supply chain has been our acquisition of carbon credits from The Carbon Neutral Company.

In this way we have been able to minimise the environmental impact of our activity by preventing the deforestation of 35,000 hectares.

We continue to make progress with our Sustainable Mobility Plan to improve efficiency in the delivery of our orders and by reducing our CO2 emissions. Since its creation in 2010, we have managed to save one million kilometres on travel, fulfilling our 48-hour delivery target, using efficient routes and reducing CO2 per Hl by 47%.

The cross-cutting nature of this Plan leads to us offering our professionals environmental training, teaching courses on environmentally-friendly driving which help them to make savings when they use their own vehicles too. We have also established specific mobility plans for our different interest groups: logistics operators, dealers and suppliers.

THE CARBON NEUTRAL COMPANY

SUSTAINABLE MOBILITY PLANSINCE 2010 WE HAVE MANAGED TO SAVE

+1IN TRAVEL

MILLION KILOMETRES

WE CONTRIBUTED TO PREVENTING THE DEFORESTATION OF

35,000HECTARES OF AMAZON FOREST

47


WE OPTIMISE RESOURCES AND REDUCE WASTE AND EMISSIONS

WATERIn the sector, we are one of the companies that consumes the least water per litre of packaged product and which is achieving the greatest savings year on year. Reduction in water consumption is one of our main targets and our efforts are consistent with this challenge.

In 2014 we consumed a total of 5,044,368 m3 to prepare our products, representing 3% less than in 2013.

WATER CONSUMED BY SOURCE 2014

TOTAL COLLECTION OF WATER BY SOURCE (m3/tn) 3.61

MUNICIPAL ORIGIN 68.6%

WELL WATER 26.6%

SURFACE WATERS 4.7%

48

WE REPLACE CONVENTIONAL LIGHTING WITH LEDS IN ALL OUR INSTALLATIONS

ENERGY100% of the electricity we consume in all our production facilities comes from renewable sources, by virtue of an agreement we have in place with Endesa since 2012. In 2014 our total energy consumption has been 1,261,444 GJ, 2.5% less compared to 2013.

IN 2014 WE HAVESAVED

3%COMPAREDTO 2013

OF WATER


WE OPTIMISE RESOURCES AND REDUCE WASTE AND EMISSIONS

MATERIAL AND WASTE EMISSIONS EMISSIONSIn addition to the raw materials used to make our products, we also require materials for our packaging. In 2009, we decided to create a Working Group on environmentally-friendly design involving different company departments: logistics services, finance, strategy and new business, marketing and operations, which is executing actions aimed at making environmental improvements. The goal is to reduce the quantity and weight of the elements which make up the packaging for our reference brands. In this way, we have managed to save almost 4,000 tonnes of material which would otherwise have ended up as packaging waste.

Currently our packaging recycling ratio stands at about 40.44%.

In 2014, we have managed to reduce our GHG emissions by 3.25%. The use of renewable energy sources since 2012 represents a major step in this regard, and we will continue to work on reducing our environmental impact even further.

RECYCLED CONTAINERS AND PACKAGING 2014

GLASS 66.6%

CARD 81.6%

PLASTIC 56.6%

METAL 84.5%

TOTAL WEIGHT OF WASTE* (IN TONNES) 2014

BY PRODUCTS USED FOR ANIMAL FEED 210,842

NON HAZARDOUS WASTE TO RECYCLING 33,197

WASTE TO LANDFILL 722

HAZARDOUS WASTE 65

* Generated by destination

TOTAL GREENHOUSE GAS EMISSIONS (BY WEIGHT)

CO2 NOX

Tn Kg/Tn Tn Kg/Tn

2014 47,876 34.25 38 0.03

2013 49,488 35.68 51 0.04

IN 2014, WE HAVEMANAGED TO REDUCE OUR GAS EMISSIONS BY3.25%

07At Mahou San Miguel corporate responsibility is fully incorporated into our management, because it has been present in our way of doing things since day one. Our sense of corporate responsibility is born from the profound conviction shared by all of us who form part of this company, helping enormously for it to flow through every department.

Yet, however natural it may be for us to base our management on commitment, in this sphere we are particularly ambitious and demanding. This is why our way of understanding corporate social responsibility extends beyond our own activity—in which we have implemented strict codes of conduct—and transcends to our relationships with suppliers, partners and customers, who must also be aligned with the United Nations Global Compact which Mahou San Miguel subscribed to in 2009.

With a participation that does not cease to increase every year, our workforce contributes to this commitment to their job through activities of corporate volunteering. On some occasions, these initiatives respond to needs detected by our own professionals in their immediate environment, so that they themselves have proposed to the company actions to be implemented. Their capacity to take the initiative, with enthusiasm and dedication are a further example that the human and professional standards of our team have always been balanced.

One year ago our shareholders also decide to take a step forward in their commitment to society, by creating the Mahou San Miguel Foundation to channel the social action that has always characterized the company. Just one year down the line, the Mahou San Miguel Foundation is already offering specific responses to specific needs in the

WE STRENGTHENOUR COMMITMENT


51

area of social and workplace integration and education in values, through both in-house and external programs.

The Foundation developed nine programs in 2014, with the collaboration of 56 social organizations, reaching 107 direct beneficiaries with training and employment programs.

There is still a lot to be done. We know that a better future for everyone depends on the responsible decisions we make today.

THE FOUNDATION HAS DIRECTLY BENEFITTED

EMPLOYMENT AND TRAINING PROGRAMMES

PEOPLE THROUGH107

FUTURE SUSTAINABILITY WILL DEPENDON THE RESPONSIBLE DECISIONS WE MAKE TODAY

WE STRENGTHEN OUR COMMITMENT | 07


OUR PROFESSIONALS DRIVE OUR CORPORATE SOCIAL RESPONSIBILITY

Our team and their families also experience corporate responsibility through corporate volunteering. In 2014, 18% of our professionals collaborated in 40 social activities. A total of 2,000 hours of dedication in which 12 workplaces took part and which have benefitted 4,600 people: 206% more than in 2013.

Collective effort, physical activity and a social purpose. This year, more than 200 Mahou San Miguel professionals put their running shoes on to jog for cancer, in favour of women, in the Heart race… up to a total of 19 encounters throughout Spain.

From recycling workshops, to cleaning beaches and rivers, including tree planting and even the creation of urban vegetable garden allotments. 210 professionals of Mahou San Miguel dedicated 700 hours of volunteering to preserve our ecosystems.

In collaboration with the Red Cross and on the occasion of the company’s Christmas campaign, 2,600 company professionals took part in this action intended to bring joy to children at risk of social exclusion.

In 2014 we have all worked intensely to increase our donation to food banks throughout all of Spain. We exceeded our goal: through our “Kilos of Aid” program, we collected 201,600 kg of food and basic necessities, 20,000 kg more than last year.

We firmly believe in sport as a means of integration for people with a disability. And that is the goal of this initiative: a total of 219 volunteers from our company dedicated more than 600 hours in 2014 to promote basketball as an inclusive sport.

CHARITY RACES

ENVIRONMENTAL VOLUNTEERINGTOY COLLECTION

FOOD BANK

+QBASKET FOR EVERYONE

CORPORATE VOLUNTEERING

53WE STRENGTHEN OUR COMMITMENT | 07

Making the concept of responsibility part of our day to day business activity is easier when our suppliers, customers and distributors share our commitment.

We make sure that the companies we work with are aligned with our principles and values. This is why we ask them to respect the 10 principles of the United Nations Global Compact and our Code of Ethics. In 2014 we analyzed and validated a total of 300 suppliers.

We support our customers through various charity initiatives. One example is Grupo Día which, together with the FEB (Spanish Basketball Federation), organized a charity campaign to collect 2,014 kg of food per store. We also took part in the Movement against Food Waste promoted by the Association of Large Consumption Companies (AECOC).

We have introduced corporate responsibility criteria in the quality surveys of our audits on partners in the UK, Italy and Germany. At the same time, we have responded to customer audits designed to assess our level of commitment.

Under the “Charity Drops” initiative, our brand’s iconic bottle became pink in support of women on the International Breast Cancer Day. Through its presence in the off-trade channel we helped to generate awareness of this disease among consumers.

Thanks to this action by Solán de Cabras, more than 180 hours of psychological attention over the phone were obtained for patients and their families through the Spanish Cancer Association.

Plus a limited edition was distributed during the “March Against Cancer” race and a special pink glass bottle was created which could be bought online with 10% of sales allocated to research.

Through this program, co-funded by the European Social Fund, we supported the creation and promotion of environmental jobs in the tourism sector of the Canary Islands. Mahou San Miguel took care of training and advising 100 suppliers from this community to improve the sustainability criteria of their companies, which together represent 1,250,000 euros of purchase invoices from our company.

CHARITY BASKETS

CORPORATE RESPONSIBILITY QUESTIONNAIRES

ENTREPRENEURSHIP PROJECT FOR ENVIRONMENTALLY FRIENDLY TOURISM IN THE CANARY ISLANDS

RESPONSIBLE IN OUR DAY TO DAY

SUPPLIER’S PORTAL

SOLÁN DE CABRAS PINK BOTTLE


SUSTAINABILITY

We are convinced that any responsible environmental initiative, however local it may be, has a global repercussion.

We have joined this campaign promoted by the Ministry of Agriculture, Food and Environment, intended to make these establishments speak out for the conservation of our coasts, by communicating this message of responsibility to our customers.

We have replaced the plastic bags we used in numerous areas and activities of our company with paper bags with PEFC certification.

In addition to belonging to The CEO Water Mandate, we take advantage of World Water Day to generate awareness among our professionals about the importance of preserving this element as the basis for sustainable development.

ENVIRONMENTAL BEACH BARS

PAPER BAGS PRODUCT LIFE CYCLE ANALYSIS

COMMITMENT TO WATER

54

In cooperation with the Alcalá de Henares University we have drawn up a general report which has produced a specific tool to carry out this analysis on all of our products. Our objective for 2015 is to have analyzed 100% of our formats.

This movement organized by the WWF aims to draw attention to the small gestures which can generate major changes. We joined this initiative by switching off the lights of all our offices, production facilities and billboards.

EARTH HOUR

55WE STRENGTHEN OUR COMMITMENT | 07

Our Foundation is an expression of the vocation for service that has always defined Mahou San Miguel. Through it we give continuity to and drive forward the social action projects that our company has been carrying out since it was established 125 years ago. We want to be the Foundation for opportunities. Whereas life is challenge for everyone, for some groups this challenge is even greater: people with a disability, or at risk of social exclusion will find that Fundación Mahou San Miguel is an approachable institution which listens to their needs and responds with very specific projects. In fact, we are already working on initiatives which favour training, employment and entrepreneurship, and on activities which foster education in social values among young people.

To do this, we are creating strategic alliances with social organizations which share our commitment, effort and enthusiasm for changing our society and offering new opportunities to the people who most need them. In 2014 we have developed a total of nine programs in collaboration with 56 social organizations.

This year we have launched the program “We Create Opportunities in the On-Trade Sector”, an innovative project of the Mahou San Miguel Foundation in collaboration with social agencies and the leading catering schools in Madrid. We are convinced that the on-trade sector can offer huge opportunities to groups the Foundation wishes to support in particular: youths at risk of exclusion and people with a disability. The innovative We Create On-Trade Opportunities initiative has benefited 75 young people who have obtained an official qualification and a wide program of complementary training.

We are working on this initiative with the Spanish Olympic Committee aimed at transmitting to teenagers the values of the Olympics: equality, respect and the urge to excel.

Current legislation does not allow people with an intellectual disability to access formal higher education beyond 18 years of age. This initiative, in collaboration with the Carmen Pardo-Valcarce Foundation, intends to fill this gap with an innovative educational project.

KLIQUERS

WE CREATE OPPORTUNITIES

WE ARE ALL OLYMPIC

CAMPVS

MAHOU SAN MIGUEL FOUNDATION

This program complements the education teenagers receive in the classroom and at home and which we promote together with the “Lo que de verdad importa” (What Really Matters) Foundation. The target is for youths aged 13 to 18, parents and teachers to work on aspects such as emotional intelligence, empathy, assertion, or strategies against bullying. In 2014, Kliquers reached 4,000 young people in Madrid, Barcelona, Málaga and Valencia through a series of working days part live and part documentary.

08At Mahou San Miguel we like to look to the future knowing that perseverance, learning and a long-term approach are always a guarantee.

That is what we have done these last few years: to take a leap and travel abroad, not taking for granted the successes of today and continuing to work on innovative products and projects to respond to the needs of a consumer who increasingly demands new experiences.

In 2014 we have worked on detecting our company’s future business opportunities to foresee possible scenarios, establishing the main challenges and lines of action and reflecting all of this in our plans for the future.

Our Strategic Plan 2014–2017 lays down our most roadmap for the near future. In it, our mission encompasses the rest of our company’s objectives: we want to

make our brands form part of the best moment of the day for our consumers. We will continue to generate sustainable value alongside our customers, distributors and suppliers, and make our goals a reality, without question, working always with our sight on the long term.

WE LOOKAHEAD


Mahou San Miguel wants to be an independent brewing company renowned for:

yy Leading the category in the Spanish market.

yy Having a solid international footprint.

yy Offering reference brands to our consumers and customers.

yy Brewing and marketing top quality products.

yy Being committed to the generation of sustainable value for our team, community and shareholders.

57WE LOOK AHEAD | 08

OUR VISION

OUR LONG-TERM COMMITMENT MEANS WEWORK WITH OUR SIGHTS ON

10YEARS DOWN THE LINE

EVERY DECISION WE MAKE FOCUSES ON THE CONSUMER


OUR ROADMAP

WITH OUR CONSUMERS

WITH OUR CUSTOMERS, DEALERS AND DISTRIBUTORS

HOW TO GET THERE

yy Working to make sure that our brands remain their favorites.

yy Offering new beer, water and soft drinks experiences.

yy Helping them to discover the world of beer through new formats, products and innovative projects.

yy Continuing to focus on awareness through responsible consumption campaigns.

yy Innovating to add value to their business.

yy Developing a new culture based on the best practices in the sector.

yy Segmenting to make us more flexible and closer.

yy Supporting customers through actions adapted to their needs and specific training.

yy Transferring sponsorship with actions to the point of sale to attract new consumers.

yy Revaluing the category on all channels.

yy Helping the on-trade business to make their establishments experience centres.

58


HOW TO GET THERE

yy Continuing to support the best suppliers, with a special focus on Spanish suppliers.

yy Facilitating a more efficient and transparent relationship through the Supplier’s Portal.

yy Driving the integration of Corporate Responsibility throughout the entire value chain, including suppliers, customers, dealers and distributors.

WITH OUR SUPPLIERS

59

yy Driving the development of our workforce as our greatest strength for the future.

yy Remaining committed to stable, quality employment incorporating talent from both within and outside our borders.

yy Maximising the efficiency of our resources by backing new technologies.

yy Continuing to create programs to develop internal talent and enhance career plans.

yy Supporting young talent through initiatives such as the “Crecemos” (We Grow) Program.

yy Focusing on occupational health and safety so that our “Zero Risk” initiative becomes a reality in all of our workplaces.

yy Boosting the corporate volunteering program involving our professionals and their families in environmental, social and sports activities, to help communities develope integration and support.

WITH OUR PROFESSIONALS


yy Focusing on our key markets, such as the UK, Guinea, Italy, Germany, India and the US.

yy Exploring international opportunities along with partners who can bring us their knowledge of the local market and consumer.

yy Cooperating with San Miguel Brewing International to position San Miguel jointly as a major global brand.

yy Promoting our iconic brands in new markets.

yy Ensuring our international business remains a growth driver in coming years, with the objective that by 2018 it represents 20% of the overall business.

yy Reinforcing the unique appeal of Solán de Cabras linked to a premium and healthy lifestyle.

yy Growing on all channels and with different formats.

yy Driving the international presence of Solán de Cabras as a Premium Water with great potential for expansion.

yy Promoting new lines of business linked to logistics and distribution.

INTERNATIONAL

DIVERSIFICATION

OUR ROADMAP

HOW TO GET THERE


yy Growing while protecting our environment with a plan aligned with the millennium goals, leading us to be the brewer with the smallest environmental footprint in Spain.

yy Recycling 100% of our waste.

yy Continuing to use green energy and reducing our consumption levels.

yy Reducing our CO2 emissions by 7%.

yy Using labels and card from sustainable forests on 100% of our reference brands.

yy Involving our customers and distributors in environmental awareness actions and training 100% of our professionals in this.

ENVIRONMENT AND EFFICIENCY

HOW TO GET THERE


ANNUAL REPORT OUTLINE

Mahou San Miguel

Spain

2014

Yearly

C/ Titán, 15, Madrid

[email protected].: +34 91 526 91 00www.mahou-sanmiguel.com

COMPANY

PLACE

PERIOD COVERED

REGULARITY

REGISTERED ADDRESS

FOR MORE INFORMATION

63ANNEXES ANNUAL REPORT OUTLINE

We are presenting our Annual Report for the sixth consecutive year to reflect and share all the information related to our economic, social and environmental activity in the period 2014.

Every year we prepare the document based on the Global Reporting Initiative (GRI) G3.1 Guide, a project that involves all areas of the company, which take charge of defining the content and collecting the data through different measurement techniques with the aim of responding to the indicators required in order declare ourselves level A.

This report aims to be an open and transparent communication instrument for all of our interest groups.

yy Consumersyy Collaboratorsyy Off Trade Customersyy On Trade Customersyy Distributors and dealersyy Suppliersyy Government and Public Administrationyy Sectorial and business associationsyy Mediayy Universities, Business Schools and

Training Centresyy NGOs and associations


GRI CONTENT INDEX

64

INDICATOR DESCRIPTION STATUS PAGES NOTES

1. STRATEGY & ANALYSIS

1.1 Statement from the most senior decision-maker of the organization. 4, 5

1.2 Description of key impacts, risks, and opportunities. 12, 14, 16–18, 34, 38, 39, 44, 50, 51, 56–61

2. ORGANIZATIONAL PROFILE

2.1 Name of the organization. 62

2.2 Primary brands, products, and/or services. 6, 7, 28, 29

2.3 Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures. 7, 8

2.4 Location of organization’s headquarters. 62

2.5 Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

8

2.6 Nature of ownership and legal form. 6

2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries). 9

2.8 Scale of the reporting organization. 8, 12, 24, 25

2.9 Significant changes during the reporting period regarding size, structure, or ownership. 7, 12

2.10 Awards received in the reporting period. 13

3. REPORT PARAMETERS

3.1 Reporting period (e.g., fiscal/calendar year) for information provided. 01.01.14 – 31.12.2014

3.2 Date of most recent previous report (if any). 2013

3.3 Reporting cycle (annual, biennial, etc.). 62

3.4 Contact point for questions regarding the report or its contents. 62

3.5 Process for defining report content.

Process coordinated by the Department of Institutional Relations, Communication and

Corporate Responsibility

3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). See GRI Boundary Protocol for further guidance.

The report only covers our activity in Spain. Organizations and partners joining in 2014 in India,

the US and Chile are not included in the report.

3.7 State any specific limitations on the scope or boundary of the report (see completeness principle for explanation of scope). The only limitations are described in 3.6.

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations.

The report only covers Mahou San Miguel group companies: Mahou, San Miguel,

Cervezas Anaga, Grupo Alhambra, Solán de Cabras, MSM Grupo Comercializador.

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report. Explain any decisions not to apply, or to substantially diverge from, the GRI Indicator Protocols.

We have followed guideline G3.1 - Global Reporting Initiative.

3.10 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g., mergers/acquisitions, change of base years/periods, nature of business, measurement methods).

Specified in the indicator.

FullyPartiallyUnanswered

65ANNEXES GRI CONTENT INDEX


3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report. No significant changes.

3.12 Table identifying the location of the Standard Disclosures in the report. http://www.mahou-sanmiguel.com/es-es/documentos/indice-contenidos-gri-2014.pdf

3.13 Policy and current practice with regard to seeking external assurance for the report. The Report has not been verified by external sources.

4. GOVERNANCE, COMMITMENTS, AND ENGAGEMENT

4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight.

16–18

4.2 Indicate whether the Chair of the highest governance body is also an executive officer. 16, 17

4.3 For organizations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members.

16, 17

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body. 18

4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance).

The compensation for board members, together with other rights and duties, are stipulated in

corporate governance mechanisms.

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided. 18

4.7 Process for determining the composition, qualifications, and expertise of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity.

The procedures for forming the highest

governance body are stipulated in corporate governance mechanisms.

4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.

14, 15

4.9 Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.

18

4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance. 16–19

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organization. 18

4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses. 7, 22, 23, 38, 39, 44, 45,

46, 47, 50, 52, 53, 54, 55

4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organizations in which the organization: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond routine membership dues; or * Views membership as strategic.

22, 23

4.14 List of stakeholder groups engaged by the organization. 63

4.15 Basis for identification and selection of stakeholders with whom to engage. The Corporate Social Responsibility Strategic Plan, implemented in 2012.

4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group. 8, 30, 37, 63

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting.

56–61The list of key topics arising from stakeholder

engagement processes is included in the Mahou San Miguel route map.



MANAGEMENT APPROACH

ECONOMIC

Economic performance 6, 20

Market presence 20–23, 37

Indirect economic impacts 20, 50, 51

ENVIRONMENTAL

Materials 14, 44, 49, 57, 61

Energy 44, 47, 48, 57, 61

Water 44, 46, 48, 54, 57, 61

Biodiversity 44, 61

Emissions, effluents and waste 44, 47, 49, 57, 61

Products and services 19, 44, 46–49, 57, 61

Compliance GRI Table of contents

Transport 44, 47, 54, 57, 61

Overall 44, 57, 61

LABOR

Employment 38, 39, 41, 57, 59

Labor/management relations 38, 39, 59

Occupational health and safety 38, 39, 43, 59

Training and education 38, 39, 42, 59

Diversity and equal opportunity 38, 39, 41, 59

Equal remuneration for women and men GRI Table of contents

HUMAN RIGHTS

Investment and procurement practices 7, 19, 24, 37

Non-discrimination 7, 41

Freedom of association and collective bargaining 7

Child labor 7, 19, 37

Prevention of forced and compulsory labor 7, 19, 37

Security practices 7, 19

Indigenous rights

Assessment 7, 19

Remediation 7, 19

SOCIETY

Local communities 15

Corruption 18

Public policy 18

Anti-competitive behavior 18

Compliance 18

PRODUCT RESPONSIBILITY

Customer health and safety 30

Product and service labelling 30

Marketing communications 30

Customer privacy 30

Compliance 30



ECONOMIC

EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

12, 20, 21, 65–69

EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change. 44

EC3 Coverage of the organization’s defined benefit plan obligations. 38–40

EC4 Significant financial assistance received from government. No significant government financial assistance was received in 2014

EC5 Range of ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation. Included in the collective agreement.

EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation. 19, 22, 24, 34, 37

EC7 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation. The Group’s activity is located in Spain.

All senior managers are hired locally.

EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement. 9, 50–53, 55

EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts. 9, 20–25

ENVIRONMENTAL

EN1 Materials used by weight or volume.

Raw Material | 208.273 tAncillary M | 11.254 tPackaging | 217.106 t

EN2 Percentage of materials used that are recycled input materials. 49In total, 59.56% of our containers and packaging

are made from recycled input material.

EN3 Direct energy consumption by primary energy source.

Total 847.303 GJ | 0,61 GJ/tGas Natural 92.75%

Gasoil 3.01%Biogas 4.24%

EN4 Indirect energy consumption by primary source. Total 414.141 GJ | 0.30 GJ/t100% renewable

EN5 Energy saved due to conservation and efficiency improvements.

In 2014, we replaced conventional lighting sources with LED lights and optimized fluid

consumption. -20,948 GJ | -0.02GJ/Tn.

EN6 Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives. We are currently conducting feasibility studies

on the use of renewable energies.

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. 47

EN8 Total water withdrawal by source. 48

EN9 Water sources significantly affected by withdrawal of water.

None of our water sources exceed 5% of the capacity of such sources, and as such are not

significantly affected.

EN10 Percentage and total volume of water recycled and reused.

Total discharge of waste water:3,538,622 m3 | 2.53 m3/t*

Recycling 0%

* m3 of reused water per ton of product

EN11 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

Local land: 824,893 m2 / Protected land: 1.22%. Beteta water bottling plant lies in a SCI

and SPA areas (ES4230014).

EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

No significant impact detected.

EN13 Habitats protected or restored.

The Beteta bottling plant is currently operative and no significant impacts have been identified

that would justify an intervention.



EN14 Strategies, current actions, and future plans for managing impacts on biodiversity. See above. Generally speaking, Mahou San Miguel adheres to the Global Compact.

EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.

No nesting areas of species listed in the ICUN Red List have been found in the area around the plant. The plant species Atropa Baetica does not grow in the area around the plant.

EN16 Total direct and indirect greenhouse gas emissions by weight. 49

EN17 Other relevant indirect greenhouse gas emissions by weight. 47

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. 47–49

EN19 Emissions of ozone-depleting substances by weight. 0,002 t

EN20 NOx, SOx, and other significant air emissions by type and weight. 49

EN21 Total water discharge by quality and destination.

3,538,622 m3, in other words, 1.8 m3/t*

* m3 of waste water per tone of product

EN22 Total weight of waste by type and disposal method.

By-products intended for animal feed 210,842 t | 150.86 kg/t*

Non-hazardous waste for recycling33,198 t | 23.75 kg/t*

Hazardous waste65 t | 0.05 kg/t*

Non-hazardous waste for landfill 772 t | 0.52 kg/t*

* refers to kg of waste per ton of product

EN23 Total number and volume of significant spills. No significant spills occurred in 2014.

EN24 Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

A total of 133.7 t were transported in 2013 and 65.2 t in 2014.

EN25 Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organization’s discharges of water and runoff.

No significant discharge occurred in 2014.

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. 46–49

We reduced packaging by 346.41 t in 2013, and by 5.70 t in 2014.

EN27 Percentage of products sold and their packaging materials that are reclaimed by category. 9, 49

EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations. No fines or non-monetary sanctions

were imposed in 2014.

EN29 Significant environmental impacts of transporting products and other goods and materials used for the organization’s operations, and transporting members of the workforce. 47, 54

Own fleet emissions 2,395 tCO2 | 1.71 kg/t*Distribution emissions

174,343 tCO2 | 146.25 kg/t*

*refers to kg of CO2 per ton of product

EN30 Total environmental protection expenditures and investments by type. 44Environmental expenditure | €5,749 mEnvironmental investment | €3,487 m

SOCIAL: LABOR PRACTICES AND DECENT WORK

LA1 Total workforce by employment type, employment contract, and region, broken down by gender.

40

Type of contract:Indefinite employees: 2,417 / Fixed-term: 86

Type of employment:Full time: 2,435 / Part time: 68

Employees by region:Central region: 1,672 / South 397 / North west

135 / North east 253 / Canary Islands 41 / International 100

By gender:Men 2,057 / Women 446



LA2 Total number and rate of new employee hires and employee turnover by age group, gender, and region.

Employees by age:Under 25: 10 / 25-35: 410 / 36-45: 769 /

46-60: 1203 / Over 60: 111Voluntary turnover: 0%.

Total 2014 by region (Men/Women:Andalusia:3 (2/1)

Castilla la Mancha: 8 (6/2)Castilla and León: 2 (2/0)

Catalonia: 17 (8/9)Galicia: 1 (1/0)Italy: 26 (14/12)

East coast: 1 (0/1)Madrid: 59 (15/44)TOTAL: 117 (48/69)

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations. 40

Part time employees receive the same benefits.

LA4 Percentage of employees covered by collective bargaining agreements. All (100%) employees are covered by a collective agreement.

LA5 Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements. Included in the collective agreement.

LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs.

The total workforce is represented by the management-worker health

and safety committees.

LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region and by gender. 43

LA8 Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases.

43

LA9 Health and safety topics covered in formal agreements with trade unions.

Health and Safety Committees that, as required by law, deal with workforce health and safety

issues. Nearly 100% of the workforce take part in these health and safety programs.

LA10 Average hours of training per year per employee by gender, and by employee category.

42

Hours of training in all categories (according to agreement): Senior management: 11,146 /

Middle management: 25,996.5 / Technical and Administrative staff: 9,545.5 /

Skilled staff: 8,322.1

LA11 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.

42

LA12 Percentage of employees receiving regular performance and career development reviews, by gender. 42

Regular performance reviews: 44% of workforce in 2013 and 56% in 2014

(1,065 men and 363 women).

LA13 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity.

16, 17, 40, 41

LA14 Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation.

There is no difference in remuneration between men and women in equivalent jobs, except

for reasons of length of employment.

LA15 Return to work and retention rates after parental leave, by gender.

93 maternity or paternity leaves (31 women and 62 men).

All returned to their jobs over the following 12 months.

SOCIAL: HUMAN RIGHTS

HR1 Percentage and total number of significant investment agreements and contracts that include clauses incorporating human rights concerns, or that have undergone human rights screening.

19, 24, 37Mahou San Miguel is fully committed

to the Global Compact, and is a member of the executive committee.

HR2 Percentage of significant suppliers, contractors and other business partners that have undergone human rights screening, and actions taken. 37

No human rights violations have been detected in any of the audits performed.

HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

No specific training in human rights is organised



HR4 Total number of incidents of discrimination and corrective actions taken. There have been no recorded incidents of discrimination.

HR5 Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and actions taken to support these rights.

The entire workforce is covered by the collective agreement.

HR6 Operations and significant suppliers identified as having significant risk for incidents of child labor, and measures taken to contribute to the effective abolition of child labor.

None. The company adheres to the Global Compact.

HR7 Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labor.

None. Our activity is mainly national, where

we have implemented policies and procedure that exceed legal requirements.

HR8 Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations.

The HR and health and safety team receive training each year and attend talks on aspects

of CSR and are involved in activities.

HR9 Total number of incidents of violations involving rights of indigenous people and actions taken. Mahou San Miguel does not operate

in regions inhabited by indigenous people.

HR10 Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments. None of our operations were subject

to human rights reviews in 2014.

HR11 Number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms. None.

SOCIAL: SOCIETY

SO1 Percentage of operations with implemented local community engagement, impact assessments, and development programs.

The Mahou San Miguel Foundation is the channel for the company’s social engagement, and implements programs

focused on integration and teaching values.

SO2 Percentage and total number of business units analyzed for risks related to corruption. None of the company’s business units were

analyzed for risks relating to corruption in 2014.

SO3 Percentage of employees trained in organization’s anti-corruption policies and procedures. All CODI members received

anti-corruption training.

SO4 Actions taken in response to incidents of corruption.

No incidents of corruption have occurred. The company has a code of conduct and

a Prevention and Compliance Committee. Anticorruption policies are currently being

drawn up in accordance with new legislation, and procedures are being revised.

SO5 Public policy positions and participation in public policy development and lobbying. Included in the company’s Code of Ethics,

and explained to the workforce.

SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country. The company makes no such contributions.

SO7 Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes. None.

SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations. None.

SO9 Operations with significant potential or actual negative impacts on local communities. No operation with any significant negative

impact have occurred.

SO10 Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities.

No such measures have been implemented, as no significant negative impact

(ongoing or potential) on local communities has been identified.

SOCIAL: PRODUCT RESPONSIBILITY

PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.

30, 54

PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

No such incidents have occurred.



PR3 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.

100% of the company’s products subject to information requirements comply with such

requirements and with current labeling laws.

PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes. No such incidents have occurred.

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. 30

PR6 Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship. Global Compact; Club de la Excelencia;

Cerveceros de España; Autocontrol; AECOC; FIAB.

PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.

No such incidents have occurred.

PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. No such incidents have occurred.

PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services. No fines have been imposed.


CONSOLIDATED ANNUAL ACCOUNTS FOR THE PERIOD ENDED AT 31 DECEMBER 2014 AND MANAGEMENT REPORT

Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Note 3).In the event of a discrepancy, the Spanish-language version prevails.

72

MAHOU, S.A. AND SUBSIDIARY COMPANIES

FINANCIAL REPORT

73ANNEXES FINANCIAL REPORT

MAHOU, S.A. AND SUBSIDIARY COMPANIESCONSOLIDATED BALANCE SHEET FOR THE PERIODS ENDED AT 31 DECEMBER 2014 AND 21 DECEMBER 2013

Notes 1 to 23 described in the accompanying report form an integral part of the balance sheet at 31 December 2014 and 2013.


EUROS

ASSETS NOTE 2014 2013

NON-CURRENT ASSETS 873,735,211 860,753,302

INTANGIBLE FIXED ASSETS 7 185,543,625 174,690,733

Patents, licences, trademarks and similar 23,333,064 24,632,523

Computer software 4,806,709 4,396,571

Goodwill 157,373,876 145,619,871

Other intangible assets 29,976 41,768

PROPERTY, PLANT AND EqUIPMENT 8 428,594,872 439,976,882

Land and buildings 219,393,977 202,389,147

Technical installations, machinery and other 194,754,454 215,920,674

Fixed assets under construction 14,446,441 21,667,061

INVESTMENT PROPERTY 9 36,562,800 25,973,727

Land and buildings 36,562,800 25,973,727

INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 6 43,661,983 41,768,305

Holdings in companies consolidated using the equity method 43,661,983 41,768,305

NON-CURRENT FINANCIAL INVESTMENTS 11.1 95,753,305 111,346,307

Equity instruments 31,184 96,000

Loans to third parties 94,504,899 110,200,138

Other financial assets 1,217,222 1,050,169

DEFERRED TAX ASSETS 17.7 83,618,626 66,997,348

CURRENT ASSETS 497,472,938 456,610,255

INVENTORIES 62,324,220 75,743,046

Goods for resale 3,704,088 2,790,932

Raw materials and other supplies 28,255,119 35,785,013

Work in progress 4,598,293 5,677,506

Finished goods 25,766,720 31,489,595

TRADE AND OTHER RECEIVABLES 188,959,753 182,965,360

Trade receivables from sales and services 172,119,516 158,117,462

Other receivables 13,216,583 7,589,094

Personnel 1,813,848 2,075,672

Current tax assets 17.1 111,958 –

Public entities, other 17.1 1,697,848 15,183,132

CURRENT FINANCIAL INVESTMENTS 11.2 39,927,153 28,013,766

Loans to companies 23,949,285 27,331,179

Derivatives 12 4,083,585 –

Debt securities 368,444 562,017

Other financial assets 11,525,839 120,570

PREPAYMENTS ON CURRENT ASSETS 29,935,172 31,373,655

CASH AND CASH EqUIVALENTS 176,326,640 138,514,428

Cash 76,326,640 67,036,841

Cash equivalents 100,000,000 71,477,587

TOTAL ASSETS 1,371,208,149 1,317,363,557


Notes 1 to 23 described in the accompanying report form an integral part of the balance sheet at 31 December 2014 and 2013.

MAHOU, S.A. AND SUBSIDIARY COMPANIESCONSOLIDATED BALANCE SHEET FOR THE PERIODS ENDEDAT 31 DECEMBER 2014 AND 31 DECEMBER 2013

EUROS

LIABILITIES NOTE 2014 2013

TOTAL EQUITY 1,061,760,763 966,755,018

EqUITY ASSIGNED TO THE PARENT COMPANY 1,060,068,322 966,755,018

CAPITAL AND RESERVES 13 1,052,841,014 958,405,594

Capital 14,028,253 14,028,253

Reserves 859,759,975 595,005,119

Legal and statutory reserves 13.1 2,805,651 2,805,651

Revaluation reserve Law 16/2012 13.3 21,532,668 21,532,668

Other reserves 13.2/ 13.4/13.5 835,421,656 570,666,800

Consolidated reserves of subsidiaries 13 12,280,988 214,035,249

Reserves for companies consolidated using the equity method 13 30,748,976 21,683,804

Interim dividend (30,017,195) –

Profit (loss) for the period 166,040,017 113,890,316

VALUATION ADJUSTMENTS 2,389,486 (269,214)

Hedging transactions 2,813,986 (32,067)

Translation differences (424,500) (237,147)

GRANTS AND BEqUESTS RECEIVED 14 4,837,822 8,381,491

EXTERNAL STAKEHOLDERS 13.6 1,692,441 –

NON-CURRENT LIABILITIES 98,545,990 158,154,091

NON-CURRENT PROVISIONS 15 30,672,296 66,025,470

Other provisions 30,672,296 66,025,470

NON-CURRENT PAYABLES 16.1 53,149,720 54,916,245

Other financial liabilities 53,149,720 54,916,245

DEFERRED TAX LIABILITIES 17.8 14,654,182 37,142,512

NON-CURRENT ACCRUALS 69,792 69,864

CURRENT LIABILITIES 210,901,396 192,454,448

CURRENT PAYABLES 63,605 554,170

Derivatives 12 63,605 45,810

Other financial liabilities – 508,360

TRADE AND OTHER PAYABLES 210,837,791 191,107,314

Suppliers 127,821,364 123,793,228

Other payables 22,367,718 15,278,338

Personnel 19,893,549 13,079,230

Current tax liabilities 17.1 650,470 43,538

Public entities, other 17.1 40,104,690 38,912,980

CURRENT ACCRUALS – 792,964

TOTAL EQUITY AND LIABILITIES 1,371,208,149 1,317,363,557



MAHOU, S.A. AND SUBSIDIARY COMPANIESCONSOLIDATED INCOME STATEMENT FOR THE PERIODS ENDED AT 31 DECEMBER 2014 AND 31 DECEMBER 2013

Notes 1 to 23 described in the accompanying report form an integral part of the income statements at 31 December 2014 and 2013.

EUROS

NOTE 2014 2013

CONTINUING OPERATIONS

REVENUE 18.1 1,153,465,245 1,117,963,853

CHANGES IN INVENTORIES (6,802,088) –

SUPPLIES (379,927,437) (382,356,902)

Merchandise used 18.2 (27,652,091) (16,077,419)

Raw materials and other consumables used 18.2 (309,772,874) (326,487,212)

Subcontracted work (42,502,472) (39,792,271)

OTHER OPERATING INCOME 10,234,952 5,145,824

PERSONNEL EXPENSES (204,264,995) (193,828,975)

Salaries and wages (154,071,082) (145,377,914)

Employee benefits 18.3 (50,193,913) (48,451,061)

OTHER OPERATING EXPENSES (326,037,239) (293,971,299)

External Services (306,479,403) (285,314,719)

Taxes (11,609,133) (5,477,336)

Losses, impairment and changes in trade provisions (8,204,108) (3,722,817)

Other operating expenses 255,405 543,573

AMORTISATION AND DEPRECIATION 7/8/9 (81,659,006) (88,984,852)

NON-FINANCIAL AND OTHER CAPITAL GRANTS 14 1,762,891 3,953,025

IMPAIRMENT AND GAINS/(LOSSES) ON DISPOSAL OF FIXED ASSETS 1,343,413 (2,895,283)

Impairment and losses 497,419 (3,027,451)

Gains/(losses) on disposal and other 8/9 845,994 132,168

RESULTS FROM OPERATING ACTIVITIES 168,115,736 165,025,391

FINANCE INCOME 18.4 3,270,889 2,598,206

Marketable securities and other financial instruments 3,270,889 2,598,206

Finance expenses 18.4 (1,371,369) (1,765,233)

Other (1,371,369) (1,765,233)

EXCHANGE GAINS/(LOSSES) 13,750 (1,588,696)

NET FINANCE INCOME/(EXPENSE) 1,913,270 (755,723)

Profit from holdings in Companies consolidated using the Equity Method 6 2,184,882 2,378,624

PROFIT/(LOSS) BEFORE INCOME TAX 172,213,888 166,648,292

Income tax expense 17.5 (6,021,641) (52,757,976)

PROFIT/(LOSS) FROM CONTINUING OPERATIONS 166,192,247 113,890,316

CONSOLIDATED PROFIT/(LOSS) FOR THE PERIOD 166,192,247 113,890,316

Profit/(loss) assigned to the parent company 166,040,017 113,890,316

Profit/(loss) assigned to external stakeholders 13.6 (152,230) –



MAHOU, S.A. AND SUBSIDIARY COMPANIESCONSOLIDATED CASH FLOW STATEMENT FOR THE PERIODS ENDEDAT 31 DECEMBER 2014 AND 31 DECEMBER 2013

Notes 1 to 23 described in the accompanying report form an integral part of the cash flow statements at 31 December 2014 and 2013.

EUROS

NOTE 2014 2013STATEMENT OF CASH FLOWS FROM OPERATING ACTIVITIES (I) 194,924,508 163,093,937

PROFIT/(LOSS) FOR THE PERIOD BEFORE TAX 172,213,888 166,648,292

ADJUSTMENTS FOR: 87,434,600 90,761,710

Amortisation and depreciations 7/8/9 81,659,006 88,984,852

Valuation allowances for impairment losses on fixed assets (497,419) –

Valuation allowances for impairment losses on commercial transactions 8,204,108 3,722,817

Change in provisions 15.1 4,527,368 481,748

Grants recognised in the income statement 14 (1,514,317) (3,700,089)

Proceeds from disposals of fixed assets (845,994) 2,895,283

Finance income 18.4 (3,270,889) (2,598,206)

Finance expenses 18.4 1,357,619 3,353,929

Profits from companies consolidated using the equity method 6 (2,184,882) (2,378,624)

CHANGES IN OPERATING ASSETS AND LIABILITIES 18,491,795 (34,121,818)

Inventories 16,742,669 (10,689,297)

Trade and other receivables (4,413,206) 11,443,442

Other current assets 1,555,304 (11,988,657)

Trade and other payables 5,400,064 (21,686,893)

Prepayments and accruals (793,036) (1,200,413)

OTHER CASH FLOWS FROM OPERATING ACTIVITIES (83,215,775) (60,194,247)

Interest paid (1,357,619) (2,146,573)

Dividends received 2,110,521 1,641,115

Interest received 3,555,161 2,036,189

Income tax received (paid) (47,287,434) (55,287,390)

Other amounts received (paid) (40,236,404) (6,437,588)

CASH FLOWS FROM INVESTING ACTIVITIES (II) (84,464,866) (93,416,888)

PAYMENTS FOR INVESTMENTS (101,244,784) (101,959,005)

Group companies and associates (35,674,726) –

Intangible assets 7 (2,842,742) (2,955,266)

Property, plant and equipment 8 (54,417,521) (98,742,408)

Investment property (8,309,795) (191,331)

Other financial assets – (70,000)

PROCEEDS FROM SALES OF INVESTMENTS 16,779,918 8,542,117

Property, plant and equipment 7,819,091 3,571,970

Investment property 721,776 2,005,152

Other financial assets 8,239,051 2,964,995

CASH FLOWS FROM FINANCING ACTIVITIES (III) (78,464,059) (20,367,184)

PROCEEDS FROM AND PAYMENTS FOR FINANCIAL LIABILITY INSTRUMENTS (3,257,681) (5,195,196)

Issue: other payables (3,257,681) (5,195,196)

DIVIDENDS AND INTEREST ON OTHER EqUITY INSTRUMENTS PAID (75,206,378) (15,171,988)

Dividends (75,206,378) (15,171,988)

EFFECT OF EXCHANGE RATE FLUCTUATIONS (IV) (187,353) 2,061

NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III+IV) 31,808,230 49,311,926

Cash and cash equivalents at beginning of period 138,514,428 89,202,502

Cash or cash equivalents from the merger 6,003,982 –

Cash or cash equivalents at end of period 176,326,640 138,514,428



MAHOU, S.A. AND SUBSIDIARY COMPANIESCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIODS ENDED AT 31 DECEMBER 2014 AND 31 DECEMBER 2013

Notes 1 to 23 described in the accompanying report form an integral part of the statement of changes in equity at 31 December 2014 and 2013.

A) STATEMENT OF RECOGNISED INCOME AND EXPENSES EUROS

NOTE PERIOD 2014 PERIOD 2013

PROFIT/(LOSS) FOR THE PERIOD (I) 166,040,017 113,890,316

INCOME AND EXPENSE RECOGNISED DIRECTLY IN EqUITY (II) 1,033,208 11,966,427

Grants, donations and bequests received (1,780,778) 11,998,494

Cash flow hedges 4,019,980 (45,810)

Tax effect 17.4 (1,205,994) 13,743

AMOUNTS TRANSFERRED TO THE INCOME STATEMENT (III) (1,730,824) (3,983,970)

Grants, donations and bequests received (1,762,891) (3,953,025)

Cash flow hedges 45,810 (44,207)

Tax effect 17.4 (13,743) 13,262

TOTAL RECOGNISED INCOME AND EXPENSE (I+II+III) 165,342,401 121,872,773

B) STATEMENT OF TOTAL CHANGES IN EQUITYEUROS

CAPITALPARENT

COMPANY RESERVES

CONSOLIDATED RESERVES

INTERIM DIVIDEND

PROFIT/ (LOSS) FOR THE

PERIOD

TRANSLATION DIFFERENCES

VALUATION ADJUSTMENTS

GRANTS DONATIONS RECEIVED

PARENT COMPANY

EQUITY

EXTERNAL STAKE-

HOLDERSTOTAL

BALANCE AT END OF PERIOD 2013 14,028,253 474,922,658 193,011,580 – 132,465,067 (239,208) 30,945 336,022 814,555,317 – 814,555,317

Total recognised income and expense – – – – 113,890,316 – (63,012) 8,045,469 121,872,773 – 121,872,773

Transactions with equity holders or owners

Distribution of profit/(loss) – 98,549,793 18,743,286 – (132,465,067) – – – (15,171,988) – (15,171,988)

Other Transactions

Balance Sheet Revaluation Law 16/2012

21,532,668 23,351,782 – – – – – 44,884,450 – 44,884,450

Other Adjustments in Equity – – 612,405 – – 2,061 – – 614,466 – 614,466

ADJUSTED BALANCE AT END 2013 14,028,253 595,005,119 235,719,053 – 113,890,316 (237,147) (32,067) 8,381,491 966,755,018 – 966,755,018

Total recognised income and expense – – – – 166,040,017 – 2,846,053 (3,543,669) 165,342,401 1,692,441 167,034,842

Transactions with equity holders or owners

Distribution of profit/(loss) – 33,025,819 35,675,314 – (113,890,316) – – – (45,189,183) – (45,189,183)

Interim dividend – – – (30,017,195) – – – – (30,017,195) – (30,017,195)

Other Adjustments in Equity

Merger effect – 231,729,037 (228,364,403) – – (187,353) – – 3,177,281 – 3,177,281

END BALANCE FOR THE PERIOD 2014 14,028,253 859,759,975 43,029,964 (30,017,195) 166,040,017 (424,500) 2,813,986 4,837,822 1,060,068,322 1,692,441 1,061,760,763



Mahou, S.A. and its subsidiary companies (hereinafter, Mahou San Miguel) make up a consolidated group of companies whose principal activity is the production and sale of beer. This activity is carried out mainly in Spain from its factories in Alovera, Lleida, Malaga, Burgos, Tenerife, Cordoba and Granada, and internationally in India, among other countries.

In the period 2014, Mahou San Miguel has carried out a company restructuring project which has involved a spin-off through a non-monetary contribution of the assets and liabilities comprising the production activity branch in favour of the newly created Mahou Fábrica de Cervezas, S.L.

2.1 SUBSIDIARIES

The consolidation has been made by applying the global integration method to all subsidiary companies, which are those in which the Parent Company exerts or can exert control, whether directly or indirectly, understanding control to mean the power to direct a company’s financial and operating policies to obtain

MAHOU, S.A. AND SUBSIDIARY COMPANIES

1. ACTIVITY

2. GROUP COMPANIES

and San Miguel Fábricas de Cervezas S.L., along with the merger of the companies San Miguel Fábricas de Cervezas and Malta, S.A.U., Grupo Alhambra Alimentaria, S.A., Cervezas Alhambra, S.L.U. and MSM Grupo Comercializador, S.A.U., as described in Note 22 of this report.

The Group’s Parent Company is Mahou, SA, which was founded in Madrid on 30 December 1957. The corporate purpose of the parent company, according to its articles of association is the commercialization of beer. Its registered address is C/ Titán 15 in Madrid and its consolidated and individual annual accounts are filed with the Companies Register of Madrid.

economic profit from its activities. This circumstance is evidenced, in general but not exclusively, by direct or indirect ownership of 50% or more of the company’s voting rights.

The subsidiaries included within the scope of consolidation are:

CONSOLIDATED REPORT FOR THE PERIOD ENDED AT 31 DECEMBER 2014

% EFFECTIVESTAKE

EUROSINVESTMENT VALUE

ADDRESS DIRECT INDIRECT DIRECT INDIRECT ACTIVITY

Mahou Fábrica de Cervezas, S.L.U. (*) Madrid 100.00 – 55,049,890 – Beer production

San Miguel Fábricas de Cervezas S.L.U. (*) Barcelona 100.00 – 42,843,273 – Beer production

Cervecera Independiente, S.A. (-) Madrid 100.00 – 6,013,493 – Beer distribution

Reina Fábrica de Cervezas, S.A.U. (*) Tenerife 100.00 – 31,269,780 – Beer production

TAISA Logistics 1960, S.A.U. (*) Madrid 100.00 – 1,878,551 – Transport service

Spain´s Best Beers Inc. (-) U.S.A. 100.00 – 7,811,585 – Beer distribution

Alhambra Distribuidora Meridional, S.L.U. (*) Granada 100.00 – 7,281,250 – Beverage Distribution

Penibética de Cervezas y Bebidas, S.L.U. (*) Córdoba 100.00 – 4,537,361 – Beer production

Alhambra Fábrica de Cervezas, S.L.U. (*) Granada 100.00 – 7,000,000 – Beer production

Aguas Solán de Cabras, S.A.U. (*) Cuenca 100.00 – 151,795,073 – Mineral water bottling

Distribución Balear Almacenaje y Logística, S.A. (*) Palma de Mallorca 69.98 – 3,530,088 – Beverage distribution

Arian Breweries & Distilleries Private Limited (-) India 98.89 1.11 46,904,824 634,722 Beer production

(*) Audited by Deloitte (-) Not obliged to audit


Below, we set out the changes made to the scope of the consolidation:

AcquisitionsOn 20 April 2014, a 50% share was acquired to reach 100% ownership of the Indian brewery Mahou India Private Limited (formerly Arian Breweries & Distilleries Private Limited) in the amount of 24,808,139 euros. Therefore, the consolidation method has changed in 2014, from the equity method in 2013 to the full consolidation method in the period 2014.

Also, on 7 July 2014, the capital increase of the company Mahou India Private Limited (formerly Arian Breweries & Distilleries Private Limited) was subscribed in full in the amount 6,236,498 euros.On 13 May 2014, an acquisition of 69.98% was made in the company Distribución Balear Almacenaje y Logística, S.A. in the amount of 3,530,088 euros.

Spin-offsOn 23 July 2014, the Sole Shareholder of San Miguel Fábricas de Cerveza y Malta, S.A.U. approved the spin-off of this company’s production activity in favour of a newly created beneficiary company, San Miguel Fábricas de Cervezas, S.L.U. This spin-off involved transferring in block part of the company’s assets used for production from the facilities in Lérida, Málaga and Burgos, excluding the land on which the factories are located and their corresponding buildings. The shares in the new company were fully subscribed by San Miguel Fábricas de Cerveza y Malta, S.A.U., which therefore became its Sole Shareholder.

On 23 July 2014, the Extraordinary General Meeting of Shareholders of the company Mahou, S.A. approved the spin-off of the assets and liabilities of Mahou, S.A. related to the production activity carried out at its facilities in Alovera, excluding the land on which the factories are located and their corresponding buildings, in favour of a newly created beneficiary company, Mahou Fábrica de Cervezas, S.L.U. The shares in the new company were fully subscribed by Mahou, S.A., which therefore became its Sole Shareholder.

By virtue of the approvals mentioned above, San Miguel Fábricas de Cerveza, S.L.U. and Mahou Fábrica de Cervezas, S.L.U. were constituted on 11 September 2014, with registered addresses in Barcelona and Madrid, respectively.

MergersThe Extraordinary General Meetings of the companies

Mahou, S.A., San Miguel Fábricas de Cerveza y Malta, S.A.U., Grupo Alhambra Alimentaria, S.A., MSM Grupo Comercializador, S.A.U and the Sole Shareholder of Cervezas Alhambra, S.L.U. all of which were held on 23 July 2014, each approved, respectively, to merge the latter through acquisition by the former. This merger implies the transfer in block of the assets of the merged companies to the acquiring company and the dissolution without liquidation of the acquired companies, leading therefore to the expiry of same. The merger was executed through a public deed certified by a notary on 11 September 2014.

Following this restructuring of the organization, the subsidiary companies had their names changed to the following:

yy Reina Fábrica de Cervezas, S.A.U. (formerly Cervezas Anaga, S.A.)yy TAISA Logistics 1960, S.A.U.

(formerly Transportes Agro Industriales, S.A.U.)yy Alhambra Fábrica de Cervezas, S.L.U.

(formerly Andaluza de Cervezas y Bebidas, S.L.)

The financial period of the parent company and its subsidiaries relates to the calendar year, excluding that of the company Mahou India Private Limited (formerly Arian Breweries & Distilleries Private Limited), whose financial period ends at 31 March.

2.2 ASSOCIATES

Associates are recognised using the equity method. These are companies which exert a significant influence on their own management, understood as meaning the power to intervene in the financial policy and operating decisions, while not having control of the company or even joint control.

The equity method involves incorporating in the consolidated balance sheet line item “Long-term investments in Mahou San Miguel and associates - Investments in companies consolidated using the equity method” the value of the assets and goodwill where applicable, corresponding to the holding in the associate. The net result obtained in each period corresponding to the holding in these companies is reflected on the consolidated income statement as “Share in the profit (loss) of companies consolidated using the equity method”.

The companies included within the scope of consolidation which are consolidated using the equity method are the following:


% effective stake

EUROSINVESTMENT VALUE

ADDRESS DIRECT INDIRECT DIRECT INDIRECT ACTIVITY

Intermalta, S,A, Navarra 46,90 – 5,638,697 – Malt production

S,A,E, Fomento del Lúpulo León 27,93 – 831,703 – Hop production

Exportaciones e Importaciones de Líquidos RCR, S,A, Chile 33,51 – 1,100,000 – Distribution of beer

On 13 November 2014, the company acquired a 33.51% share in the company Exportaciones e Importaciones de Líquidos RCR, S.A. through

subscription of a capital increase of 504 shares for an amount of 1,100,000 euros.

3.1 APPLICABLE FINANCIAL REPORTING REGULATORY FRAMEWORK

These consolidated annual accounts have been prepared by the Directors in accordance with the financial reporting regulatory framework applicable to the Group, which is established in:

yy The Commercial Code and other commercial legislation.yy The Rules for Preparing the Consolidated Annual

Accounts approved by Royal Decree 1159/2010 and the General Accounting Plan approved by Royal Decree 1514/2007.yy The mandatory rules established by the Institute

of Accounts and Account Auditing developing the General Accounting Plan and its complementary regulations.yy All other applicable Spanish accounting

legislation.

3.2 FAIR PRESENTATION

The consolidated annual accounts have been obtained from the accounting records of the Parent Company and its subsidiaries and are presented in accordance with the applicable regulatory framework for financial reporting and in particular, with the accounting principles and criteria set out therein so as to offer a true and fair presentation of the equity, financial situation, cash flows and results of Mahou San Miguel.

These consolidated annual accounts, prepared by the Parent Company’s Board of Directors at its meeting on 24 March 2015, will be submitted, along with those of the subsidiaries, to approval by the respective Ordinary General Meeting of Shareholders and Members and it is believed that they will be approved without any changes. The consolidated annual accounts for the period 2013 were approved by the General Shareholders Meeting of the Parent Company held on 8 May 2014 and were filed with the Madrid Companies Register.

3. BASIS OF PRESENTATION OF THE ANNUAL ACCOUNTS

The figures contained in the documents that comprise these consolidated annual accounts, the balance sheet, income statement, statement of changes in equity, consolidated cash flow statement, and this consolidated report, are expressed in euros

3.3 NON-MANDATORY ACCOUNTING PRINCIPLES APPLIED

No non-mandatory accounting principles have been applied. Additionally, the Parent Company Directors have prepared these consolidated annual accounts taking into consideration all of the applicable mandatory accounting rules and principles which have a significant effect on these annual accounts. There is no mandatory accounting principle that has not been applied.

3.4 CRITICAL ISSUES REGARDING THE MEASUREMENT AND ESTIMATION OF UNCERTAINTIES

In preparing the annual accounts, estimates have been made by the Directors of the Parent Company to assess some of the assets, liabilities, income, expenses and obligations reported herein. Basically, these estimates refer to:

yy The measurement of potential losses due to the impairment of certain assets.yy The useful life of intangible assets and property,

plant and equipment.yy The market value of determined financial

instruments.yy The calculation of provisions.yy The recoverability of deferred tax assets.

Although these estimations have been made on the basis of the best information available at the close of the period 2014, it is possible that events which may take place in the future require them to be modified (upwards or downwards) in future periods, which if necessary would be carried out prospectively.


requirements demonstrating that there is sufficient liquidity to distribute dividends was as follows:

1. Statement of the financial position on the assets side of the Company’s provisional balance sheet at 30 September 2014:

2. The availability of cash and banks will be maintained in the region of 214,047,000 euros at 5 December 2014, depending on the last payments and collections.

The distribution of profit for the year 2013 is reflected in the Statement of Changes in Equity.

3.5 COMPARATIVE INFORMATION

The information contained in this report referring to the year 2013 is presented entirely for comparative purposes with information for the period 2014.

4. DISTRIBUTION OF PROFIT OF THE PARENT COMPANY

The proposal to distribute the Parent Company’s profit for the period as prepared by its Directors and which will be submitted to the General Shareholders Meeting for approval is as follows:

During the period 2014, distribution of an interim dividend in the Parent Company was approved in the amount of 30,017,195 euros.

The provisional accounting statement prepared on 30 September 2014 in accordance with the legal

The main recognition and measurement standards used by Mahou San Miguel in the preparation of its consolidated annual accounts for 2014, in line with those established in the General Accounting Plan and other current regulations, have been as follows:

5.1 CONSOLIDATION PRINCIPLES APPLIED

A. Transactions between companies included in the scope of consolidation In the consolidation process, balances, transactions and results between fully consolidated companies have been eliminated. Profits from transactions between Mahou San Miguel companies and associates have been eliminated in the percentage stake held by Mahou San Miguel in same.

B. Standardisation of items The accounting principles and procedures used by the Mahou San Miguel companies have been standardised so as to present the consolidated

5. RECOGNITION AND MEASUREMENT STANDARDS

EUROS

BASIS OF DISTRIBUTION:

Profit and loss (profit) 114,380,718

DISTRIBUTION OF PROFIT:

Dividends 30,017,195

Voluntary reserves 84,363,523

EUROS

CASH AND BANKS 108,609,495

INVERSIONES FINANCIERAS TEMPORALES 100,958,513

NET CASH SITUATION 209,568,008

financial statements on the basis of a standardised measurement.

C. Conversion of foreign currency financial statements The financial statements of investees whose functional currency is different from the presentation currency, which is the euro, have been converted using the following procedures:

y� The assets and liabilities on their balance sheets have been converted at the exchange rate on the date of the corresponding balance sheet.y� Income and expenses for each profit and loss item is converted at the accumulated average exchange rate for the period in which they were incurred.

D. All exchange rate differences arising as a result of the above, will be recognised as a separate component of equity, under the heading “Exchange rate differences”.


5.2 GOODWILL AND BUSINESS COMBINATIONS

Acquisition by the parent company of control in a subsidiary constitutes a business combination to which the acquisition method will apply. In later consolidations, elimination of the investment-equity of subsidiaries will be carried out as a general rule on the basis of the values resulting from applying the acquisition method described below on the control date.

Business combinations are accounted for using the acquisition method to which effect the acquisition date is determined and the cost of the combination calculated, registering the identifiable assets acquired and liabilities assumed at their fair value on said date.

Goodwill or the negative difference of the combination is determined by the difference between the registered fair values of the assets acquired and liabilities assumed and the cost of the combination, all in reference to the acquisition date.

The cost of the combination is determined through aggregation of:

yy The fair values on the acquisition date of the assets transferred, liabilities incurred or assumed, and equity instruments issued.yy The fair value of any contingent consideration that

depends on future events or the fulfilment of pre-established conditions.

The cost of the combination does not include expenses related to the issuance of equity instruments or financial liabilities delivered in exchange for the acquired assets.

Nor does it include any fees paid to legal advisors or other professionals who have been involved in the combination, nor of course does any expense internally generated in relation to these concepts. These amounts are directly charged to the income statement.

If the business combination is carried out in stages, as in the case of Mahou India Private Limited (formerly Arian Breweries & Distilleries Private Limited) (see Note 2.1) in such a way that prior to the acquisition date (date of taking control) there was a previous investment, the goodwill or negative difference will be obtained from the difference between:

yy The cost of the business combination plus the fair value on the acquisition date of any previous holding of the acquiring company in the acquired company, andyy The value of the identifiable assets acquired less

the liabilities assumed, determined as indicated above.

Any profit or loss arising as a result of measuring the fair value of the previous holding in the acquired company on the date on which a controlling stake is obtained, will be recognised in the income statement. If the investment in this acquired company were to have been measured previously at its fair value, any valuation adjustments pending assignation to the profit or loss for the period will be transferred to the income statement. At the same time, it is assumed that the cost of the business combination is the best reference to estimate the fair value on the acquisition date of any previous stake.

Goodwill arising from the acquisition of companies with a functional currency other than the euro will be valued in the functional currency of the acquired company, making the conversion to euros at the exchange rate valid on the balance sheet date.

Goodwill is not amortised and is valued subsequently at its cost less any impairment losses. Valuation adjustments for impairment recognised in Goodwill are not reversed in subsequent periods.

In the exceptional case of a negative difference arising in the combination, it will be recognised in the income statement as income.

If after the closing date of the period in which the combination occurs the necessary measurement processes cannot be concluded to apply the acquisition method described above, then this accounting entry will be considered provisional, and said provisional values may be adjusted within the necessary period for obtaining the required information, which in no case shall exceed one year. The effects of adjustments made in this period will be retroactively accounted for by modifying the comparative information if necessary.

Subsequent changes in the fair value of the contingent consideration will be adjusted against results, unless said consideration has been classified as equity, in which case subsequent changes in its fair value will not be recognised.

5.3 INTANGIBLE FIXED ASSETS

As a general rule, intangible fixed assets are initially recognised at their acquisition cost. Subsequently they are measured at cost less any corresponding accumulated amortisation and, where appropriate, any impairment losses sustained. These assets are amortised over their useful life.

This heading includes amounts paid for access to the property or for the right to use computer software and programmes. Mahou San Miguel only capitalises the external costs related to development projects for new applications, charging the internal costs incurred for same to expenses.


The maintenance costs of these applications are directly charged to expenses in the year in which they are incurred.

Computer software has been recorded at its acquisition cost and is amortised on a straight-line basis over a period of three years.

Brands are registered for the costs incurred to acquire them from third parties, either directly or as a result of a business combination. They are amortised on a straight-line basis over a period of 10 and 20 years.

This heading also includes CO2 emission rights (see Note 5.14).

5.4 PROPERTY, PLANT AND EQUIPMENT

Elements of property, plant and equipment have been recorded at their acquisition cost or production cost, although for accounting purposes on 1 January 2013, the value of all elements of the property, plant and equipment of Mahou San Miguel existing on said date has been updated within the scope of Law 16/2012, of 27 December (see Note 8). The value of the assets also includes the effect of revaluations within the scope of Laws 74/1980, 9/1983 and Royal Decree/Law 7/1996.

Subsequently, this initial valuation is corrected for the corresponding accumulated depreciation and, where appropriate, for impairment losses sustained by the assets. Net gains or increases in value resulting from revaluations are amortised over the tax periods in the remaining useful lives of the revalued assets.

Upkeep and maintenance expenses for the various elements of property, plant and equipment are included in the income statement for the year in which they are incurred. However, amounts invested in improvements that contribute to increasing capacity or efficiency or to lengthening the useful lives of assets are recorded as an increased cost of same.

The annual amount allocated to depreciation is calculated following the straight-line method depending on the estimated useful life of the various assets. The declining balance method by coefficients is applied to machinery as it is more appropriate given the characteristics and use made of same.

The coefficients Mahou San Miguel applies by group of elements are as follows:

Elements included under the heading “Fixed assets under construction” are kept there until put into operation, at which point they are moved to the corresponding line item according to the nature of the investment and the start of depreciation thereof.

“Other fixed assets” includes returnable packaging, at both Mahou San Miguel warehouses, and returned to customers and distributors. According to current regulations, companies dedicated to the sale of beer, must charge a deposit for the delivery of their packaging. This deposit is returned as and when the containers are returned. Deposits received pending return to clients and distributors are recorded under “Long-term debts - Other financial liabilities” under liabilities on the consolidated balance sheet.

Impairment in the value of intangible assets, property, plant and equipment and investment propertiesAt the end of each period for intangible fixed assets with an indefinite useful life and on condition that there are signs of a loss in value for the rest of the fixed assets, Mahou San Miguel estimates using the so-called impairment test the possible existence of losses in value which reduce the recoverable value of said assets to an amount lower than their book value.

The recoverable amount is determined as the higher of the fair value less sales costs, and its value in use. Mahou San Miguel generally uses discounted cash flow methods to determine said value. Calculations of discounted cash flows are based on the Parent Company’s 5-year projections and a perpetual income. The flows consider past experience and represent the Parent Company’s best estimate of future market developments.

In the periods 2014 and 2013 no impairment losses have been recorded.

5.5 INVESTMENT PROPERTY

The investment property heading of the consolidated balance sheet lays down the values of land and buildings maintained either for exploitation in the form of rental, or for obtaining capital gains upon their sale as a consequence of future increases in their respective market prices.

These assets are valued pursuant to the criteria described in Note 5.4 regarding property, plant and equipment.

5.6 LEASES

Leases are classified as financial leases as long as their conditions establish that the lessee receives transfer of a substantial part of the risks and benefits inherent to ownership of the asset according to the lease agreement. All other leases are classified as operating leases.

% COEFFICIENT

STRAIGHT LINE METHOD:

Buildings 2 – 5

Technical installations and machinery 4 – 15

Other installations 10 – 30

Other fixed assets 16 – 25

DECLINING BALANCE METHOD:

Machinery 25 – 30


5.6.1 FINANCIAL LEASESFor financial leasing operations in which Mahou San Miguel acts as the lessee, the cost of the leased assets is presented on the balance sheet according to the nature of the good under the contract and, simultaneously, a liability is recorded in the same amount. Said amount will be the lower between the fair value of the leased good and the actual value at the start of the lease of the minimum amounts agreed, including the purchase right, when there is no reasonable doubt as to exercise of same. The calculation will not include contingent rents, the cost of services and taxes chargeable by the lessor. The total financial burden of the contract is recorded in the income statement for the period in which it is incurred, applying the effective interest rate method. Contingent rents are recognised as an expense in the period in which they are incurred.

Assets recorded under this type of operation are depreciated following similar criteria to those applied to overall property, plant and equipment depending on their nature.

At 31 December 2014, Mahou San Miguel had no financial leases.

5.6.2 OPERATING LEASESIncome and expenses arising from operating lease agreements are charged to the income statement in the period in which they are incurred.

5.7 FINANCIAL INSTRUMENTS

5.7.1 1FINANCIAL ASSETSThe main financial assets held by Mahou San Miguel are loans and receivables corresponding to financial assets arising from the sale of goods or the provision of services for the company’s trade operations, or those which, not having a commercial origin, are not equity instruments or derivatives, collection of which is in a fixed or determinable amount and which are not traded on an active market.

yy Initial measurement Financial assets are initially recognised at the fair value of the consideration paid plus directly attributable transaction costs.

yy Subsequent measurement Loans and receivables are measured at their amortised cost.

At least at year-end, Mahou San Miguel performs an impairment test for the financial assets that are not recorded at fair value. It is understood that there is objective evidence of impairment when the recoverable amount of the financial asset is less than its book value. When this happens, this impairment loss is recorded in the income statement.

In particular, and with regard to valuation corrections in relation to trade debtors and other receivables, the criteria used by Mahou San Miguel to calculate the corresponding valuation corrections where applicable, is based on a specific analysis depending on the track record and characteristics of the debtors in question.

Mahou San Miguel derecognises financial assets when they mature or when the rights over the corresponding financial asset’s cash flows and its risks have been substantially transferred.

Mahou San Miguel does not engage in asset discounting, factoring or securitisation transactions.

5.7.2 FINANCIAL LIABILITIESFinancial liabilities are the debts and accounts payable of Mahou San Miguel which have arisen through the purchase of goods and services for the company’s trade operations, or those that, not having a commercial origin, cannot be considered derivative financial instruments.

Debts and accounts payable are initially measured at the fair value of the consideration received, adjusted for directly attributable transaction costs. Subsequently, these liabilities are valued at their amortised cost.

Mahou San Miguel writes off financial liabilities when the obligations they have generated cease to exist.

5.7.3 EQUITY INSTRUMENTS An equity instrument represents a residual interest in the assets of Mahou San Miguel, after deducting all its liabilities.

The equity instruments issued by the Company are recorded in equity for the amount received, net of issuance costs.

5.7.4 HEDGING INSTRUMENTSMahou San Miguel uses derivative financial instruments to cover the risks to which its future cash flows are exposed. Fundamentally, these risks are exchange rate variations. In the context of these transactions, Mahou San Miguel contracts hedging instruments.

For these financial instruments to be classified as hedge accounting, they are initially designated as such noting the hedging relationship. At the same time, Mahou San Miguel verifies initially and regularly throughout its life (at least at the end of each accounting period) verifies that the hedging relationship is effective, i.e. that it is foreseeable in future that changes in the hedged item’s cash flow (attributable to the hedged risk) will be almost fully compensated by the hedging instrument and that, retrospectively, the hedge results will have swung within a range of variation of 80 to 125% in relation to the hedged item’s result.


The part of the gain or loss of the hedging instrument determined to be the effective hedge is recognised transiently in equity, being assigned to the profit and loss account in the same period as the hedge object affects the result, unless the hedge corresponds to a transaction envisaged to end in the recognition of a non-financial asset or liability, in which case the amounts recorded in equity will be included in the cost of the asset or liability upon acquisition or assumption thereof.

Hedge accounting is discontinued when the hedging instrument matures or is sold, terminated or exercised, or when it ceases to fulfil the criteria for hedge accounting. At that point, any accumulated profit or loss corresponding to the hedging instrument which has been recorded in equity is maintained in equity until the envisaged operation takes place. When the envisaged operation that is the object of the hedge is not expected take place, then the net accumulated profit or loss recognised in equity is transferred to the net profit or loss for the period.

5.8 INVENTORIES

Inventories are valued at the lower of acquisition cost, production cost or net realisable value. Commercial discounts, reductions obtained, other similar items and interest incorporated to nominal debt are deducted when determining the acquisition cost. The production cost includes the cost of direct materials and, where applicable, the cost of direct labour and production overheads.

The net realisable value represents the estimation of the sale price less all estimated costs to complete production and costs incurred in the marketing, sales and distribution processes.

In assigning value to its inventories Mahou San Miguel uses the weighted average cost method.

Mahou San Miguel makes the relevant valuation corrections, recognising them as an expense in the income statement when the net realisable value of inventories is lower than their acquisition cost (or production cost).

At the end of the period 2014, it has not been considered necessary to record any impairment.

5.9 FOREIGN CURRENCY TRANSACTIONS

Operations in a currency other than the euro are recorded in the accounts for their exchange value in euros, using the official exchanges rates valid on the dates the transactions are made. Exchange rate differences are recorded in the income statement the moment they occur. At year-end accounts receivable and payable in foreign currency are measured at

the exchange rate valid at that moment, recording exchange gains or losses in the profit and loss account for the period.

5.10 PROFIT TAX

Expenses or income from profit tax comprises the part related to expenses or income for current tax and the part corresponding to expenses or income for deferred tax.

Current tax is the amount Mahou San Miguel must pay as a consequence of profit tax settlements in relation to a financial period. Deductions and other tax benefits in the tax payable, excluding withholdings and payments on account, along with tax losses of previous periods which can be offset and applied effectively in this one, give rise to a lower amount of current tax.

Expenses or income for deferred tax corresponds to the recognition and cancellation of deferred tax assets and liabilities. These include temporary differences identified as those amounts considered payable or recoverable resulting from the differences between the book amounts of the assets and liabilities and their tax value, along with negative taxable bases pending compensation and credits for tax deductions not fiscally applied. Said amounts are recorded by applying to the temporary difference corresponding credit the tax rate at which it is expected that they will be recovered or settled.

Deferred tax liabilities are recognised for all taxable temporary differences, excluding those resulting from the initial recognition of goodwill or of other assets and liabilities in a transaction which does not affect the tax result or the accounting result and which is not a business combination.

Deferred tax assets are only recognised to the extent it is considered likely that future tax earnings will be available with which to make them effective.

At the same time, on a consolidated level the differences that may exist between the consolidated value of an investee and its tax base are also considered. In general, these differences arise from the accumulated results generated from the date of acquisition of the investee, tax deductions associated to the investment and the conversion difference, in the case of investees with a functional currency other than the euro. Deferred tax assets and liabilities arising from these differences are recognised unless, in the case of taxable differences, the investor can control the moment of reversion of the difference, and in the case of deductible differences, if it is expected that said difference will be reversed in a foreseeable future and it is likely that the company will have future tax earnings in a sufficient amount.

Deferred tax assets and liabilities arising from transactions directly charged or paid to equity


accounts are also recorded with a counterpart in equity.

At the end of each accounting period recorded deferred tax assets are reconsidered, making the relevant corrections to same insofar as there may be any doubts as to their recovery in future. At the same time, at year-end deferred tax assets not recorded on the balance sheet are assessed and recognised insofar as their recovery is likely with future taxable profits.

Since 1 January 2010 Mahou San Miguel files consolidated tax returns. The parent company of Mahou San Miguel fiscal is Mahou, S.A. and the subsidiaries are Reina Fábrica de Cervezas, S.A.U., Taisa Logistics 1960, S.A.U., Cervecera Independiente, S.A., Alhambra Distribuidora Meridional, S.L., Alhambra Fábrica de Cervezas, S.L.U., Penibética de Cervezas y Bebidas, S.L.U., and Aguas de Solán de Cabras, S.A.U. In this period, Mahou San Miguel Fábrica de Cervezas, S.L.U and San Miguel Fábricas de Cervezas, S.L.U have joined the tax Group.

5.11 INCOME AND EXPENSES

Income and expenses are recognised on an accruals basis, i.e., when the real flow of goods and services they represent occurs, irrespective of the moment when the financial or monetary flow resulting from them occurs. Said income is measured as the fair value of the consideration received, after deducting discounts and taxes.

Sales income is recognised the moment the buyer has been transferred the significant benefits and risks of ownership of the sold good, without maintaining current management over such good, or retaining effective control thereof.

In relation to income from the provision of services, it is recognised taking into consideration the degree of execution of the provision on the balance sheet date, on condition that the result of the transaction can be reliably estimated.

Interest received from financial assets is recognised using the effective interest rate method and dividends are recognised when the shareholder’s right to receive them is declared. In any case, interest and dividends from financial assets accrued following the time of acquisition are recognised as income in the profit and loss account.

5.12 PROVISIONS AND CONTINGENCIES

In preparing the consolidated annual accounts, the Parent Company’s directors distinguish between:

A. Provisions: scredit balances which cover current obligations derived from past events, whose

cancellation is likely to give rise to an outflow of resources, but which are indeterminate in relation to their amount and/or the time of their cancellation.

B. Contingent liabilities: Contingent liabilities: potential obligations arising as a consequence of past events, whose future materialisation is conditional on one or more future events occurring irrespective of the intentions of Mahou San Miguel.

The consolidated annual accounts reflect all provisions in relation to which it is considered likely that the obligation will have to be met. Contingent liabilities are not recognised in the annual accounts, but are reported in the notes of the annual report, insofar as they are not considered remote.

Provisions are measured at the current value of the best possible estimate of the amount required to cancel or transfer the obligation, taking into account the information available concerning the event and its consequences, and recording any adjustments arising from updating said provisions as a financial expense as and when accrued.

5.13 ASSETS OF AN ENVIRONMENTAL NATURE

Environmental assets are considered to be those goods used constantly in the activity of Mahou San Miguel’s business, whose main purpose is to minimise environmental impact and to protect and improve the environment, including the reduction or elimination of future pollution.

In this regard, investments related to environmental activities are measured at their acquisition cost and are activated as a higher cost of the fixed assets in the period in which they are incurred following the criteria described in section 5.4 of this same Note.

Expenses related to environmental protection and improvement are charged to results in the period in which they are incurred, irrespective of the moment when the associated monetary or financial flow derived from them occurs.

Provisions relating to likely or certain responsibilities or obligations pending for an indeterminate amount of an environmental nature and not covered by subscribed insurance policies are constituted the moment the responsibility arises.

5.14 CO2 EMISSION RIGHTS

CO2 emission rights granted by public authorities to consolidated companies free of charge by virtue of international environmental agreements enshrined in the Kyoto Protocol, have been measured at the market


price on the date on which they were granted and are recorded under the heading “Other intangible assets” on the consolidated balance sheet at 31 December 2014. On said date, the consolidated balance sheet includes under the heading “Grants and bequests received” the value of the rights pending consumption. In the income statement for the period 2014, consumption of emission rights is reflected as an expense in the period under the heading “Other operating costs”. The corresponding deferred income is recorded under the heading “Allocation of grants relating to non-financial assets and others”.

5.15 PENSION COMMITMENTS AND OTHER LIABILITIES TOWARDS PERSONNEL

Mahou San Miguel has several commitments towards its personnel in force in relation to pensions and similar obligations, the most relevant being as follows:

1. In August 2001, Mahou, S.A. reached an agreement with its employees’ representatives to create an employment pension plan, to which all employees active at 1 January 2001 are entitled. This defined contribution plan covers the following contingencies:

A. Ordinary or early retirement.B. Similar situation to retirement.C. Permanent disability, severe disability.D. Decease.

In accordance with current regulations, the pension plan was externalised through an agreement with Banco Bilbao Vizcaya Argentaria, S.A. This Pensions Plan is financed as follows:

A. Annual contributions made by the Parent Company, recorded in the line item “Personnel expenses - pensions and commitments towards personnel” on the consolidated income statement.

B. Payments assumed by the Parent Company to cover the initial deficit for recognised past services, which according to the actuarial study amounted to 14,777,000 euros. To cover this obligation a rebalancing plan was established, with a 10-year duration, the total cost of which was charged to the results of previous periods, recording a liability for amounts pending payment which was included under “Provisions for commitments towards personnel”. At 31 December 2014 this amount has been fully paid; consequently, there is no provision for this item in the attached consolidated balance sheet.

2. For Parent Company personnel who retired before the aforementioned Pension Plan came into force,

the Company signed two policies to cover the early retirement and retirement benefits, committed with this group. In the period 2014, the Parent Company has estimated that there will be no contingencies or responsibilities.

3. Additionally, for the group of senior executives and directors of Mahou, S.A., there are defined contribution commitments which have been externalised through collective insurance policies contracted with B.B.V.A. Seguros.

4. Mahou, S.A. has transferred to a new plan the pension commitments and other liabilities towards personnel for the group belonging to the company Mahou Fábrica de Cervezas, S.L.U.

5. In 2004, San Miguel S.A. signed an agreement which established a pension plan of similar characteristics to that of the parent company for the workforce of San Miguel Fábricas de Cerveza y Malta S.A., a company which has been liquidated through the merger (see Note 22). In 2005 this pension plan was externalised through an agreement with Banco Bilbao Vizcaya Argentaria, S.A. The annual contribution made has been recorded in the line item “Personnel expenses - Pensions and commitments towards personnel” on the consolidated income statement for the period. As a consequence of the restructuring in the year, the following changes have been made:

5.1. The merged company has transferred the same pension commitments and other liabilities towards personnel for the group belonging to the spun-off company San Miguel Fábrica de Cervezas, S.L.U.

5.2. Mahou S.A. has assumed commitments towards the workforce incorporated into the Parent Company from the company San Miguel Fábricas de Cerveza y Malta S.A.

6. In the period 2004 an agreement was signed with the employees of Taisa Logistics 1960, S.A.U., to create a defined contribution pension plan of similar characteristics to those existing in the rest of companies of Mahou San Miguel. This plan did not recognise past services and is externalised through a collective employees’ pension insurance. The cost of the premium for the period 2014 has been recorded under the heading “Personnel expense - Pensions and commitments towards personnel”.

7. At 31 December 2014, Alhambra Distribuidora Meridional, S.L.U., Alhambra Fábrica de Cervezas, S.L.U. and Penibética de Cervezas y Bebidas, S.L. maintained their commitments to their active personnel which could be provisioned as stipulated in their Collective Agreement. Said obligations covered with these funds are itemised as follows:


A. Active personnel: length of service bonus. Coverage for these commitments have been externalised, through an insurance policy signed with Mapfre Vida, S.A.

B. Other concepts: : This essentially refers to bonuses for death of spouse, orphans, etc. Calculations have also been made by the corresponding companies applying actuarial criteria.

8. The subsidiary Aguas de Solán de Cabras, S.A. held certain obligations with the employees of the Los Villares (Jaén) workplace consisting of a retirement bonus. According to the Collective Agreements in force until 2014, the Company was required to pay workers of this group the aforementioned bonus, based on compliance with different circumstances. This commitment was externalised by signing an insurance policy contracted with Allianz Popular Vida, Cía. de Seguros y Reaseguros S.A.

With the signing of the new Collective Agreement in the period 2014, the obligation to pay the retirement bonus has been extinguished, and the company is pending recovery of the contributions made to the aforementioned insurance policy. At the same time, an Employers’ Social Provision Scheme has been created with a defined annual contribution and an extraordinary initial contribution.

The cost of the annual premium is recorded under “Personnel expenses - pension and other commitments towards employees” on the consolidated income statement.

9. The commitments assumed by Mahou San Miguel to cover the contingencies of employee decease and disability while in active employment, are covered by insurance policies.

10. According to current legislation, Mahou San Miguel is obliged to indemnify employees whose employment relations are terminated under certain conditions. Therefore, compensation for dismissals that can be reasonably quantified is recorded as an expense in the period in which the decision regarding dismissal is made.

11. It is the policy of Mahou San Miguel to offer certain employees the possibility of taking early retirement before they reach pensionable age, taking on commitments both in terms of salaries as well as other social security contributions from the time of early retirement to the date of their actual retirement (see Note 15).

5.16 GRANTS, DONATIONS AND BEQUESTS

To account for grants, donations and bequests received, Mahou San Miguel uses the following criteria:

A. Non-refundable capital grants, donations and bequests: These are measured at the fair value of the amount or asset received, depending on whether they are monetary or not, and are allocated to income in proportion to the amount allocated for depreciation for the subsidised assets in the period or, where appropriate, on disposal of the asset or on the recognition of an impairment loss, except in the case of grants received from shareholders or owners, which are recognised directly in capital and reserves and do not give rise to the recognition of any income.

B. Operating subsidies: SThese are credited to income at the time they are granted unless their purpose is to finance operating deficits for future years, in which case they are charged in those years. If granted to finance specific expenses, the allocation will be made as and when the financed expenses accrue.

5.17 RELATED PARTY TRANSACTIONSS

Mahou San Miguel carries out all of its related party transactions at a fair market price. Additionally, transfer prices are appropriately supported and, accordingly, the Parent Company’s Directors do not consider that there are any significant risks that could give rise to material liabilities in the future in this regard.

5.18 CURRENT AND NON-CURRENT DISTINCTION

Current assets are considered to be those related to the normal operating cycle which in general is considered to be one year, and also those other assets whose maturity, disposal or realisation is expected to take place in the short term as of the end date of the period, financial assets held for trading, excluding financial derivatives whose settlement period exceeds one year, and other equivalent liquid assets. Assets which do not fulfil these requirements are classified as non-current.

Similarly, current liabilities are those related to the normal operating cycle, financial liabilities held for trading, excluding financial derivatives whose settlement period exceeds one year, and in general all obligations whose expiry or extinction will occur in the short-term. Otherwise, they are classified as non-current.


The change in this heading between the periods 2014 and 2013 has been as follows:

6. HOLDINGS CONSOLIDATED USING THE EQUITY METHOD

PERIOD 2014

EUROS

COMPANY Balance at 31-12-13

Change in scope (Notes 2.1 and 2.2)

2014 Results

Distribution of dividends

Other adjustments

Balance at 31-12-14

Intermalta, S.A. 35,202,984 – 2,190,062 (2,110,521) 6,758,145 42,040,670

S.A.E. Fomento del Lúpulo 526,493 – (5,180) – – 521,313

Arian Breweries Distilleries Ltd 6,038,828 (6,038,828) – – – –

Exportaciones e Importaciones de Líquidos RCR, S.A – 1,100,00 – – – 1,100,000

TOTAL 41,768,305 (4,938,828) 2,184,882 (2,110,521) 6,758,144 43,661,983

PERIOD 2013

EUROS

COMPANY Balance at 31-12-12

2013 Results

Distribution of dividends

Other adjustments

Balance at 31-12-13

Intermalta, S.A. 33,321,368 3,523,006 (1,641,115) (275) 35,202,984

S.A.E. Fomento del Lúpulo 522,278 4,215 – – 526,493

Arian Breweries Destilleries Ltd. 8,394,756 (1,148,597) – (1,207,331) 6,038,828

TOTAL 42,238,402 2,378,624 (1,641,115) (1,207,606) 41,768,305

In the periods 2014 and 2013 there have been the following movements:

7. INTANGIBLE FIXED ASSETS

PERIOD 2014

EUROS

Balance at 31-12-13

Inclusion in the scope Additions Deletions Balance at

31-12-14

BRANDS 38,026,830 1,238,582 12,735 – 39,278,147

GAS EMISSION RIGHTS 41,768 – 236,782 (248,574) 29,976

COMPUTER SOFTWARE 39,177,071 410,767 2,830,007 (89,319) 42,328,526

GOODWILL 145,619,871 11,754,005 – – 157,373,876

TOTAL COST 222,865,540 13,403,354 3,079,524 (337,893) 239,010,525

BRANDS (13,394,307) – (2,550,776) – (15,945,083)

COMPUTER SOFTWARE (34,780,500) (271,587) (2,556,671) 86,941 (37,521,817)

TOTAL DEPRECIATION (48,174,807) (271,587) (5,107,447) 86,941 (53,466,900)

NET TOTAL 174,690,733 13,131,767 (2,027,923) (250,952) 185,543,625


PERIOD 2013

EUROS

Balance at 31-12-12 Additions Deletions Balance at

31-12-13

BRANDS 38,026,830 – – 38,026,830

GAS EMISSION RIGHTS 125,952 168,752 (252,936) 41,768

COMPUTER SOFTWARE 36,221,805 2,955,266 – 39,177,071

GOODWILL 145,619,871 – – 145,619,871

TOTAL COST 219,994,458 3,124,018 (252,936) 222,865,540

BRANDS (10,844,016) (2,550,291) – (13,394,307)

COMPUTER SOFTWARE (32,540,990) (2,239,510) – (34,780,500)

TOTAL DEPRECIATION (43,385,006) (4,789,801) – (48,174,807)

NET TOTAL 176,609,452 (1,665,783) (252,936) 174,690,733

Goodwill at 31 December 2014 and 2013 corresponds to the following cash generating units:

EUROS

GOODWILL 2014 2013

Beer 77,233,096 65,479,091

Water 80,140,780 80,140,780

157,373,876 145,619,871

In 2014, Mahou San Miguel has recognised goodwill in the amount of 11,754,005 euros, from acquisition of the company Mahou India Private Limited (formerly Arian Breweries & Distilleries Private Limited).

Mahou San Miguel carries out an annual impairment test on goodwill. The recoverable amount is the higher

of the fair value less sales costs, and its value in use. Mahou San Miguel generally uses discounted cash flow methods to determine said value. Calculations of discounted cash flows are based on the Parent Company’s 5-year projections and a perpetual income. The flows consider past experience and represent the Parent Company’s best estimate of future market developments.

Computer software includes development of the IT systems plan each company has drawn up in the last periods.

At year-end 2014 and 2013 Mahou San Miguel had elements of fully amortised intangible fixed assets which remained in use, in the amounts of 33,832,878 and 31,804,970 euros, respectively.


8. PROPERTY, PLANT AND EQUIPMENT

Movements in this item of the consolidated balance sheet for the periods 2014 and 2013, and the most significant information under this heading are as follows:

PERIOD 2014

EUROS

Balance at 31-12-13

Inclusion in the scope Additions Deletions Transfers

(Note 9)Balance at 31-12-14

LAND AND BUILDINGS 292,528,375 13,765,132 9,939,595 (5,130,509) 1,098,565 312,201,158

TECHNICAL INSTALLATIONS AND MACHINERY 707,855,455 4,787,968 10,949,609 (144,007,688) 18,463,663 598,049,007

OTHER INSTALLATIONS 122,226,459 1,027,061 13,235,956 (12,918,952) 4,330 123,574,854

OTHER FIXED ASSETS 148,843,610 1,633,299 7,678,130 (11,924,190) 199,380 146,430,229

FIXED ASSETS UNDER CONSTRUCTION 21,667,061 101,779 12,614,231 – (19,936,630) 14,446,441

TOTAL COST 1,293,120,960 21,315,239 54,417,521 (173,981,339) (170,692) 1,194,701,689

LAND AND BUILDINGS (90,139,228) (693,740) (7,052,002) 5,026,957 47,832 (92,807,181)

TECHNICAL INSTALLATIONS AND MACHINERY (575,394,550) (1,206,412) (33,636,328) 144,448,149 – (465,789,141)

OTHER INSTALLATIONS (76,351,959) (824,899) (20,079,794) 6,972,251 – (90,284,401)

OTHER FIXED ASSETS (110,760,922) (1,396,609) (15,628,826) 10,560,263 – (117,226,094)

TOTAL DEPRECIATION (852,646,659) (4,121,660) (76,396,950) 167,010,620 47,832 (766,106,817)

OTHER FIXED ASSETS (497,419) – – 497,419 – –

TOTAL IMPAIRMENT (497,419) – – 497,419 – –

NET TOTAL 439,976,882 17,193,579 (21,979,429) (6,473,300) (122,860) 428,594,872

PERIOD 2013

EUROS

Balance at 31-12-12

Balance update Additions Deletions Transfers

(Note 9) Balance at31-12-13

LAND AND BUILDINGS 221,081,869 26,123,073 39,200,786 (514,710) 6,637,357 292,528,375

TECHNICAL INSTALLATIONS AND MACHINERY 675,199,964 17,084,165 6,593,436 (1,488,666) 10,466,556 707,855,455

OTHER INSTALLATIONS 265,771,302 65,841 19,438,432 (157,406,474) (5,642,642) 122,226,459

OTHER FIXED ASSETS 135,744,886 21,029 14,487,620 (7,151,236) 5,741,311 148,843,610

FIXED ASSETS UNDER CONSTRUCTION 13,217,509 – 19,022,134 – (10,572,582) 21,667,061

TOTAL COST 1,311,015,530 43,294,108 98,742,408 (166,561,086) 6,630,000 1,293,120,960

LAND AND BUILDINGS (82,879,688) – (6,260,182) 14,814 (1,014,172) (90,139,228)

TECHNICAL INSTALLATIONS AND MACHINERY (541,672,666) – (35,002,955) 1,285,174 (4,103) (575,394,550)

OTHER INSTALLATIONS (213,909,063) – (23,780,214) 156,012,679 5,324,639 (76,351,959)

OTHER FIXED ASSETS (92,123,093) – (19,002,192) 5,684,899 (5,320,536) (110,760,922)

TOTAL DEPRECIATION (930,584,510) – (84,045,543) 162,997,566 (1,014,172) (852,646,659)

LAND AND BUILDINGS (337,324) – – 337,324 – –

OTHER FIXED ASSETS (1,567,074) – – 1,069,655 – (497,419)

TOTAL IMPAIRMENT (1,904,398) – – 1,406,979 – (497,419)

NET TOTAL 378,526,622 43,294,108 14,696,865 (2,156,541) 5,615,828 439,976,882


The increases in the period correspond fundamentally to investments made in the factories’ installations and machinery; investments to replace the packaging pool which are included as “Other fixed assets” and investments in customer installations, included as “Other installations”.

The gross value of the investments subject to declining balance amortisation at 31 December 2014 amounts to 226,959,233 euros. In 2013, it was 221,555,816 euros.

Declining balance amortisation and accumulated amortisation at 31 December 2014 amounted to 12,676,558 euros and 190,676,895 euros, respectively. In the period 2013, it amounted to 12,116,482 euros and 183,785,213 euros, respectively.

Mahou San Miguel owns property whose separate net book value for land and buildings at year-end 2014 and 2013, is as follows:

At year-end 2014 and 2013 Mahou San Miguel had fully amortised property, plant and equipment which remain in use, broken down as follows:

It is Mahou San Miguel policy to contract all the insurance policies deemed necessary to cover the potential risks that might affects elements of property, plant and equipment. At 31 December 2014, the Directors of the Parent Company estimate that the insurance coverage is sufficient.

The cost value and net amount of investments under Royal Decree Law 7/96, in the period 2014, amount to 24,446,221 and 9,029,862 euros, respectively. In 2013 they totalled 29,620,025 euros and 9,350,428 euros respectively. The effect of updating the provision for amortisation in the period 2014 has been 320,564 euros. In 2013, the effect of updating the provision for amortisation was 366,675 euros.

DESCRIPTIONEUROS

INCREASE IN VALUE

DEPRECIATION IN THE PERIOD

ACCUMULATEDDEPRECIATION

NET VALUE

LAND AND BUILDINGS 26,102,591 (1,871,208) (3,945,474) 22,157,117

TECHNICAL INSTALLATIONS AND MACHINERY 17,037,286 (3,959,048) (9,705,221) 7,332,065

OTHER INSTALLATIONS 65,841 (13,835) (38,035) 27,806

OTHER FIXED ASSETS 20,974 (5,686) (20,760) 214

TOTAL 43,226,692 (5,849,777) (13,709,490) 29,517,202

EUROS

DESCRIPTION 2014 2013

BOOK VALUE BOOK VALUE

Buildings 20,784,509 23,870,935

Other goods 418,280,452 519,609,328

439,064,961 543,480,263

EUROS

PROPERTY 2014 2013

Land 98,921,874 98,710,163

Buildings 122,760,203 103,678,984

221,682,077 202,389,147

Net increases in value resulting from revaluations are amortised since 1 January 2013 and over the tax periods in the remaining useful lives of the revalued

assets. For this reason, there has been an increase in amortisations in 2014 in the amount of 5,849,777 euros (7,906,695 in 2013).

As stated in Note 5.4, the Company revalued elements of its property, plant and equipment (with accounting effects as of 1 January 2013) within the framework of Law 16/2012, of 27 December, which adopted various tax measures aimed at consolidating public finances and boosting economic activity. The accounts affected by the revaluation within the framework of the aforesaid Law and its effect at 31 December 2014 are shown below:


Movements in this balance sheet heading during 2014 and 2013 have been as follows:

9. INVESTMENT PROPERTY

PERIOD 2014

EUROS

Balance at 31-12-13

Inclusion in the scope Additions Deletions Transfers


LAND AND BUILDINGS 26,397,167 3,500,755 8,309,795 (808,467) 170,692 37,569,942

TOTAL COST 26,397,167 3,500,755 8,309,795 (808,467) 170,692 37,569,942

BUILDINGS (273,440) (201,808) (154,609) 86,691 (47,832) (590,998)

TOTAL DEPRECIATION (273,440) (201,808) (154,609) 86,691 (47,832) (590,998)

LAND AND BUILDINGS (150,000) (266,144) – – – (416,144)

TOTAL IMPAIRMENT (150,000) (266,144) – – – (416,144)

NET TOTAL 25,973,727 3,032,803 8,155,186 (721,776) 122,860 36,562,800

EJERCICIO 2013

EUROS

Balance at 31-12-12

Balance update Additions Deletions Transfers


LAND AND BUILDINGS 36,771,059 3,953,154 191,331 (7,888,377) (6,630,000) 26,397,167

TOTAL COST 36,771,059 3,953,154 191,331 (7,888,377) (6,630,000) 26,397,167

BUILDINGS (1,210,617) – (149,508) 72,513 1,014,172 (273,440)

TOTAL DEPRECIATION (1,210,617) – (149,508) 72,513 1,014,172 (273,440)

LAND AND BUILDINGS (1,650,000) – – 1,500,000 – (150,000)

TOTAL IMPAIRMENT (1,650,000) – – 1,500,000 – (150,000)

NET TOTAL 33,910,442 3,953,154 41,823 (6,315,864) (5,615,828) 25,973,727

This heading includes land and buildings whose cost is expected to be recovered through sale or rental.

In 2014, Companies of the Group have not derecognised any investment properties.

At year end, Group Companies have no purchase commitments or revenue from rentals of such properties.

The separate value of buildings and land at year-end 2014 is as follows:

There are no fully depreciated property investments at year-end.

The gross value of elements of property, plant and equipment within the framework of Law 16/2012, of 27 December 2014, amounts to 3,926,057 euros. In 2013, it was 3,953,154 euros. Amortisation for the period and accumulated amortisation at 31 December 2014 amounted to 3,947 euros and 7,894 euros, respectively. In 2013, amortisation for the period was 1,546 euros.

EUROS

PROPERTY 2014 2013

LAND 28,406,187 20,189,384

BUILDINGS 5,868,513 5,784,343

34,274,700 25,973,727


At the end of periods 2014 and 2013, Mahou San Miguel had contracted with lessors, the following minimum lease instalments, in accordance with contracts in force, without taking into account ordinary running costs, future increases in the CPI, or future updates of contractually agreed income:

10. LEASES

OPERATING LEASES MINIMUM INSTALMENTS

EUROS

2014 2013

VALUE NOMINAL VALUE NOMINAL

Less than one year 9,917,602 9,504,916

Between one and five years 39,670,408 26,992,540

49,588,010 36,497,456

Mahou San Miguel’s most significant operating leases correspond to the warehouse leases in Leganés and Alovera, along with stock facilities-legal depositories in Antequera, Lleida Park, Alovera and Burgos. In 2013, Mahou San Miguel leased its central offices located on calle Titán in Madrid.

Mahou San Miguel also has various operating lease agreements signed for certain machinery and transport elements. The amount for such leases in the period 2014 totalled 6,007,695 euros. In 2013 it totalled 10,100,592 euros. Said expense is considered to be recurring given that the various lease agreements are renewed on expiry as they are necessary for the running of each company.

11.1 NON-CURRENT FINANCIAL INVESTMENTS

The balance of accounts under the heading “Non-current financial investments” at year-end 2014 and 2013 is as follows:

11. FINANCIAL INVESTMENTS (NON-CURRENT AND CURRENT)

PERIOD 2014

EUROS

Other Credits, derivatives and others Total

LOANS AND RECEIVABLES – 95,722,121 95,722,121

EqUITY INSTRUMENTS 31,184 – 31,184

31,184 95,722,121 95,753,305

PERIOD 2013

EUROS

Other Credits, derivatives and others Total

LOANS AND RECEIVABLES – 111,250,307 111,250,307

EqUITY INSTRUMENTS 96,000 – 96,000

96,000 111,250,307 111,346,307

The breakdown by maturity of the items forming part of “Loans and receivables” is as follows:

EUROS

2016 2017 2018 2019 and following Total

LOANS AND RECEIVABLES 23,949,285 23,949,285 23,949,285 23,874,266 95,722,121

23,949,285 23,949,285 23,949,285 23,874,266 95,722,121


EUROS

2014 2013

LOANS AND RECEIVABLES 23,949,285 27,331,179

DERIVATIVES 4,083,585 –

DEBT SECURITIES 368,444 562,017

OTHER 11,525,839 120,570

39,927,153 28,013,766

11.2 CURRENT FINANCIAL INVESTMENTS

The balance of accounts under the heading “Current financial investments” at year-end 2014 and 2013 is as follows:

The “Other” heading includes the constitution of a deposit for the bid to purchase an economic production unit, in the amount of 11,500,000 euros.

11.3 INFORMATION ON THE NATURE AND LEVEL OF RISK OF FINANCIAL INSTRUMENTS

The Financial Division is entrusted with managing the company’s financial risks, and has established the necessary mechanisms for controlling exposure to changes in relevant risks within the parameters approved by the Board, through appropriate risk identification, measurement and management. Thereby guaranteeing that the goals of the strategic plan are achieved, with volatility controlled in accordance with the following premises:

A. Credit risky� There will be no significant concentration of risk with third parties.y� Demanding certain and sufficient guarantees to cover credit risks with third parties.

y� Making provisions for credit risk with third parties in the likelihood of any default risk.

B. Liquidity risky� Maintaining cash and equivalent liquid assets in financial entities with a high credit rating.y� Maintaining and preserving cash flows appropriate for the level of operations.y� Keeping a low debt profile proportional to the volume of operations and EBITDA.y� Placing cash and bank surpluses following criteria of maximum safety, solvency and guarantee.

C. Market risky� Insuring exposure to interest rate risk in accordance with the market’s evolution at all times.y� Insuring exposure to exchange rate risk in accordance with currency evolution at all times, with the priority currency of any transaction being the euro.

Additionally, the Buying Department together with the Financial Department will control exposure to risk through volatility of commodity prices in accordance with the market’s evolution at all times.

At 31 December 2014, Mahou San Miguel has recorded a provision for credit risk with customers and commercial operations in the amount of 62,181,402 euros (82,749,658 euros in 2013). In the period, the provision has been allocated a net sum of 8,204,108 euros. (3,722,817 euros were charged in 2013). In the period, write-offs have been reversed with their corresponding provisions in the amount of 32,455,836 euros.

Mahou San Miguel uses derivative financial instruments to cover the risks to which its future cash flows are exposed. In the context of such operations, Mahou San Miguel has contracted certain hedging instruments.

The fair value of the hedging instruments is broken down as follows:

12. DERIVATIVE FINANCIAL INSTRUMENTS

PERIOD 2014

FAIR VALUE (EUROS)

CLASSIFICATION TYPE AMOUNT CONTRACTED(EUROS)

EXPIRY(*)

ASSET LIABILITY

EXCHANGE RATE FORWARDS USD PURCHASE 104,000,000 2015 4,083,585 –

EXCHANGE RATE FORWARDS GBP SALE 1,550,000 2015 – 63,605

4,083,585 63,605

(*) Expiry of the hedging instrument coincides with the period in which the cash flows affecting the profit and loss account are expected to occur.


PERIOD 2013

FAIR VALUE (EUROS)

CLASSIFICATION TYPE AMOUNT CONTRACTED(EUROS)

EXPIRY(*)

ASSET LIABILITY

EXCHANGE RATE HEDGING USD PURCHASE 185,126 2014 – 3,904

EXCHANGE RATE HEDGING JPY PURCHASE 1,078,388 2014 – 41,906

– 45,810

(*) Expiry of the hedging instrument coincides with the period in which the cash flows affecting the profit and loss account are expected to occur.

The breakdown of Reserves is as follows:

At the end of the period 2014 the Parent Company’s share capital amounted to 14,028,253 euros, represented by 2,334,152 shares of 6.01 euros par value each, fully subscribed and disbursed, distributed in two series with letters A and B.

At the end of the period 2014, the Shareholders of the Parent Company were the following:

13. EQUITY AND CAPITAL AND RESERVES

NO. OFSHARES

PERCENTAGE OF HOLDING

Las Tejoneras, S.A. 1,167,076 50.00

Sdad. Gala de Inversiones, S.L. 633,800 27.15

I.P.L. Gala Internacional, S.L. 529,576 22.69

OTHER SHAREHOLDERS 3,700 0.16

2,334,152 100.00

THOUSANDS OF EUROS

2014 2013

LEGAL RESERVE 2,805,651 2,805,651

REVALUATION RESERVE LAW 16/2012 21,532,668 21,532,668

VOLUNTARY RESERVES 835,421,656 570,666,800

PARENT COMPANY TOTAL RESERVES 859,759,975 595,005,119

RESERVES OF CONSOLIDATED SUBSIDIARIES 12,280,988 214,035,249

RESERVES IN COMPANIES CONSOLIDATED BY THE EqUITY METHOD 30,748,976 21,683,804

TOTAL CONSOLIDATED RESERVES 43,029,964 235,719,053

TOTAL RESERVES 902,789,939 830,724,172

13.1 LEGAL RESERVE

Pursuant to the Consolidated Text of the Capital Companies Law, companies must transfer 10% of profit for each year to the legal reserve until it reaches

at least 20% of the share capital. The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased share capital amount. Except as mentioned above, and until the legal reserve exceeds 20% of the share capital, this reserve can only be used to offset losses on condition that there are no other sufficient and available reserves for this purpose.

At year-end 2014 this reserve was fully constituted in the Parent Company.

13.2 CAPITAL REDEMPTION RESERVE FUND

According to that established in Article 335 of the Capital Companies Law, this reserve totalling 7,006,915 euros will only be available under the same restrictions as those for the reduction of share capital.

13.3 REVALUATION RESERVE

The gain resulting from the revaluation of property, plant and equipment carried out by the Parent Company on 1 January 2013, within the framework of Law 16/2012, of 27 December, adopting various tax measures intended to consolidate public finances and to boost economic activity (see Note 8) was credited to the line item “Revaluation reserve” in the amount of 21,532,668 euros, net of the corresponding tax rate (5%) (1,133,295 euros).

As of the date on which the Tax Authority has verified and accepted the balance of this account, or the three-year statute of limitations for said verification has expired, this balance may be allocated, without accruing any taxes, to eliminating prior year losses and to increasing the share capital. As of 1 January 2023 (ten years as of the date of the balance sheet reflecting the revaluation operations), the balance of this item may be allocated to unrestricted reserves, although they may only be subject to distribution once the revalued assets have been fully amortised, transferred or derecognised from the books.


If the balance for this line item were to be disposed of in any way other than that contemplated by Law 16/2012, said balance would be subject to taxation.

13.4 MERGER RESERVE

This reserve originated from the merger through acquisition of the companies San Miguel Fábricas de Cerveza y Malta, S.A.U., Grupo Alhambra Alimentaria, S.A., Cervezas Alhambra, S.A.U., and MSM Grupo Comercializador, S.A. by Mahou, S.A. during the period 2014 (see Note 23).

13.5 OTHER RESERVES

The reserves under this heading are all unrestricted reserves.

13.6 EXTERNAL STAKEHOLDERS

As a result of acquiring 69.98% of the company Distribución Balear Almacenaje y Logística, S.A., carried out in the period 2014 (see note 2.1), the participation corresponding to the external stakeholders has been recognised in the amount of 1,692,441 euros under the external stakeholders heading of the balance sheet. The result assigned to external stakeholders amounts to 152,230 euros.

This section records non-refundable capital grants received and gas emission allowances.

The most relevant information in relation to this item is as follows:

14. GRANTS

PERIOD 2014

EUROS

Amountgranted

Balance at 31-12-13 Increases Application/

DecreasesBalance at 31-12-14

INSTITUTO DIVERSIFICACIÓN Y AHORRO DE ENERGíA (INSTITUTE FOR ENERGY DIVERSIFICATION AND SAVING)

11,829,742 8,191,020 – (3,483,381) 4,707,639

CANARY ISLANDS DEPARTMENT OF ECONOMY 1,014,648 55,949 – (378) 55,571

CASTILLA - LA MANCHA REGIONAL GOVERNMENT 188,775 38,614 – (38,614) –

DEPARTMENT OF INNOVATION, SCIENCE AND BUSINESS (ANDALUSIAN REGIONAL GOVERNMENT)

112,243 54,140 – (9,504) 44,636

GAS EMISSION RIGHTS 759,257 41,768 236,782 (248,574) 29,976

13,904,665 8,381,491 236,782 (3,780,451) 4,837,822

PERIOD 2013

EUROS

Amountgranted

Balance at 31-12-13 Increases Application/

DecreasesBalance at 31-12-14

INSTITUTO DIVERSIFICACIÓN Y AHORRO DE ENERGíA (INSTITUTE FOR ENERGY DIVERSIFICATION AND SAVING)

11,829,742 – 11,829,742 (3,638,722) 8,191,020

CANARY ISLANDS DEPARTMENT OF ECONOMY 1,014,648 56,328 – (379) 55,949

CASTILLA - LA MANCHA REGIONAL GOVERNMENT 188,775 90,098 – (51,484) 38,614

DEPARTMENT OF INNOVATION, SCIENCE AND BUSINESS (ANDALUSIAN REGIONAL GOVERNMENT)

112,243 63,644 – (9,504) 54,140

GAS EMISSION RIGHTS 1,263,528 125,952 168,752 (252,936) 41,768

14,408,936 336,022 11,998,494 (3,953,025) 8,381,491


The purpose of the grant awarded in 2013 by the Institute for Energy Diversification and Saving is to support financing of investment in energy conservation and efficiency projects.

The purpose of the grants awarded by the Andalusian Development Institute and the Andalusian regional government are to partially fund the acquisition of a packaging line.

The purpose of the grants awarded by the Canary Islands Department of Economy and Department of Industry and Commerce is to partially fund the construction of the factory that Mahou San Miguel owns in Tenerife.

At 31 December 2014 there is no breach of any of the commitments associated to the granting of these subsidies.

15.1 PROVISIONS

The detail of provisions in the balance sheet at year-end 2014 and 2013, and the main movements recorded therein during the year are as follows:

15. PROVISIONS AND CONTINGENCIES

PERIOD 2013

EUROS

Balance at 31-12-12

Endowments reversals Applications Balance at

31-12-13

PENSION PROVISIONS 31,972,670 - (5,823,096) 26,149,574

RISKS AND RESPONSIBILITIES 40,008,640 481,748 (614,492) 39,875,896

TOTAL 71,981,310 481,748 (6,437,588) 66,025,470

PERIOD 2014

EUROS

Balance at 31-12-13

Inclusion in the scope

Endowments reversals Applications

Balance at31-12-14

PENSION PROVISIONS 26,149,574 355,862 – (7,707,950) 18,797,486

RISKS AND RESPONSIBILITIES 39,875,896 – 4,527,368 (32,528,454) 11,874,810

TOTAL 66,025,470 355,862 4,527,368 (40,236,404) 30,672,296

15.1.1 COMMITMENTS TO PERSONNEL

The companies of Mahou San Miguel have contracted different commitments with their employees in relation to Retirement Plans and voluntary redundancy.

Of the amount recognised in “Pension provisions”, 18,797,486 euros are to face the global commitments to Mahou San Miguel personnel to cover future early retirements, having made payments in the period of 7,707,950 euros.

15.1.2 RISKS AND RESPONSIBILITIES

“Provisions for risks and responsibilities”, include provisions to deal with likely or certain contingencies, in relation to the resolution of inspection actions appealed by Mahou San Miguel. These provisions have been constituted following conservative valuation criteria.

As a result of the update of the aforementioned provision balances with the latest information available, there have been increases totalling 4,527,368 million euros. In 2014, payments have been made in the amount of 32,528,454 euros (see Note 17).

15.2 THIRD PARTY GUARANTEES AND OTHER CONTINGENT LIABILITIES

Guarantees received in the period 2014 by Mahou San Miguel from dealers and other debtors to guarantee the positive outcome of commercial operations amount to 451,701,673 euros, versus 453,222,270 euros in 2013.

Guarantees received from banks in the periods 2014 and 2013 in favour of Mahou San Miguel suppliers, to guarantee the good running of machinery bought from said third parties amount to 7,710,699 euros and 4,798,419 euros, respectively.


The guarantees given by Mahou San Miguel to third parties during 2014, primarily before Economic and Administrative Courts because of appeals filed against inspections totalled 18,696,851 euros and no

negative effect on the Company’s assets is expected that would not be covered by provisions. In 2013, they totalled 34,211,297 euros.

16.1 NON-CURRENT FINANCIAL LIABILITIES

The balance of accounts under the heading “Non-current liabilities” at year-end 2014 and 2013 is as follows:

The “Liabilities and payables” heading includes loans granted by the Centre for Technological and Industrial Development to fund projects related to food health. These loans do not have a fixed interest rate and are paid off as and when certain previously established conditions are met.

The amounts billed to customers as a packaging deposits are included under the heading “Long-term deposits”. In so far as the these amounts have remained stable since the beginning of trade

16. DEBTS (NON-CURRENT AND CURRENT)

EUROS

2014 2013

LOANS AND PAYABLES 4,543,209 5,133,165

LONG-TERM DEPOSITS AND GUARANTEES 48,606,511 49,783,080

53,149,720 54,916,245

relations with said customers and until their eventual finalisation and the corresponding settlement of the balances, the amount of these deposits is classified as long term.

16.2 CURRENT FINANCIAL LIABILITIES

The balance of accounts under the heading “Current liabilities” at year-end 2014 and 2013 is as follows:

PERIOD 2014

EUROS

Derivatives Total

LOANS AND PAYABLES 63,605 63,605

63,605 63,605

PERIOD 2013

EUROS

Derivatives Other Total

LOANS AND PAYABLES 45,810 508,360 554,170

45,810 508,360 554,170

Since 1 January 2010, Mahou, S.A. is at the head of the tax consolidation Group, which at the end of the period comprises the following companies: Reina Fábrica de Cervezas, S.A., Taisa Logistics 1960 S.A., Cervecera Independiente, S.A., Alhambra Distribuidora Meridional, S.L., Alhambra Fábrica de Cervezas, S.L., Penibética de Cervezas y Bebidas, S.L., Aguas de Solán de Cabras, S.A, San Miguel Fábricas de Cervezas, S.L. and Mahou Fábrica de Cervezas, S.L. These last two companies have joined the Group in 2014 as they are two newly established companies.

Since 1 January 2009, the companies of Mahou San Miguel apply the special scheme for group companies in the application of Value-Added Tax, excluding San Miguel Fábricas de Cervezas y Malta, S.L. and Mahou

17. PUBLIC ADMINISTRATIONS AND TAXATION

Fábrica de Cervezas y Malta, S.L. which have joined in this period and Reina Fábrica de Cervezas, S.A. which does not form part of the VAT group.

During 2014 and due to the company restructuring mentioned in Note 1, San Miguel Fábricas de Cervezas y Malta, S.A., Cervezas Alhambra, S.L., Grupo Alhambra Alimentaria, S.A. and MSM Grupo Comercializador, S.A. have ceased to form part of the group for tax consolidation and VAT effects.

Finally we would mention that in 2014, Mahou, S.A. has acquired a shareholding in the company Distribución Balear Almacenaje y Logística, S.A., but that the latter does not form part of the tax consolidation group or the VAT group.


17.1 CURRENT BALANCES WITH PUBLIC ENTITIES

The composition of current balances with Public Entities is as follows:

PERIOD 2014

EUROS

BALANCEDEBIT

BALANCE CREDIT

H.P. (TAX AUTHORITY) VAT RECEIVABLE 1,652,405 –

H.P. (TAX AUTHORITY) IGIC RECEIVABLE 43,365 127,395

H.P. (TAX AUTHORITY) FOR TAX RETURNS 111,957 –

VALUE ADDED TAX – 11,380,911

INCOME TAX (IRPF) – 4,029,849

CORPORATION TAX – 650,470

EXCISE TAX – 21,115,864

SOCIAL SECURITY AGENCIES 2,079 3,089,012

OTHER CONCEPTS – 361,659

1,809,806 40,755,160

PERIOD 2013

EUROS

BALANCEDEBIT

BALANCE CREDIT

H.P. (TAX AUTHORITY) VAT RECEIVABLE 3,053,453 –

H.P. (TAX AUTHORITY) IGIC RECEIVABLE 193,813 –

VALUE ADDED TAX – 10,598,308

INCOME TAX (IRPF) – 4,351,440

CORPORATION TAX – 43,538

EXCISE TAX – 21,057,662

SOCIAL SECURITY AGENCIES – 2,905,570

IDAE GRANT 11,829,742 –

OTHER CONCEPTS 106,124 –

15,183,132 38,956,518

17.2 DISTRIBUTION OF THE CORPORATION TAX EXPENSE AMONG GROUP COMPANIES

EUROS

2014 2013

PARENT COMPANY 50,727,353 38,895,188

SUBSIDIARIES

Mahou, Fábrica de Cervezas, S.L. 2,784,953 –

Reina Fábrica de Cerveza, S.A. 482,564 420,329

Cervecera Independiente, S.A. (124,854) 514

Taisa Logistics 1960, S.A 850,289 515,708

Distribución Balear Almacenaje y Logística, S.A. 467,922 –

Alhambra Distribuidora Meridional, S.L. 240,036 138,082

San Miguel, Fábricas de Cervezas, S.L. 2,615,852 –

Penibética de Cervezas y Bebidas, S.L. (66,787) 27,770

Alhambra Fábrica de Cervezas, S.L. 180,036 85,517

Aguas de Solán de Cabras, S.A. (7,618,974) (764,923)

San Miguel, Fábricas de Cerveza y Malta, S.A. – 13,175,680

Cervezas Alhambra, S.L. – 915,798

Grupo Alhambra Alimentaria – 189,192

MSM Grupo Comercializador, S.A. – (433,329)

CONSOLIDATION ADJUSTMENTS (44,516,749) (407,550)

6,021,641 52,757,976

This consolidation adjustment corresponds mainly to the revaluation of certain assets which have seen their tax values change as a result of the company

restructuring, therefore generating the corresponding deferred tax.


17.3 RECONCILIATION OF ACCOUNTING PROFIT AND TAXABLE INCOME

The reconciliation between accounting profit and the taxable income for Corporation Tax in the periods 2014 and 2013 is as follows:

PERIOD 2014

EUROS

INCREASES DECREASES TOTAL

ACCOUNTING PROFIT BEFORE TAX 172,213,888

PERMANENT DIFFERENCES 27,430,001 (2,627,745) 24,802,256

TEMPORARY DIFFERENCES:

Originating in the period: 32,658,096

Pensions 3,754,724

Fixed assets 26,887,048 (9,675)

Provisions 2,026,000

Other

ORIGINATING IN PRIOR YEARS: (23,075,642)

Pensions (883,237)

Provisions 850,000 (31,803,574)

Fixed assets 10,224,437 (223,745)

Other 19,654 (1,259,177)

TAXABLE INCOME 206,598,598

OFFSET OF TAX LOSS CARRY FORWARDS (25,208,197)

PERIOD 2013

EUROS

INCREASES DECREASES TOTAL

ACCOUNTING PROFIT BEFORE TAX – – 166,648,292

PERMANENT DIFFERENCES 26,726,096 (16,172,036) 10,554,060


Originating in the period:

Pensions 3,483,323 – 3,483,323

Fixed assets 31,672,096 – 31,672,096

Risk Provisions 4,785,630 – 4,785,630

Impairment of financial investments 721,383 – 721,383

Other – (345,624) (345,624)

ORIGINATING IN PRIOR YEARS:

Pensions – (923,199) (923,199)

Risk Provisions – (13,690,284) (13,690,284)

Fixed assets 8,379,376 (7,162,200) 1,217,176

Other 1,608,561 (1,261,283) 347,278

TAXABLE INCOME – – 204,470,131

OFFSET OF TAX LOSS CARRY FORWARDS (9,286,688)


17.4 TAXES RECOGNISED IN EQUITY

The detail of taxes recognised directly in Equity is as follows:

PERIOD 2014

EUROS

Balance Initial Increases Decreases Total

FOR DEFERRED TAX LIABILITIES:

Originating in prior years:

Valuation of other financial assets (13,743) 1,205,994 13,743 1,205,994

TOTAL TAX RECOGNISED DIRECTLY IN EQUITY (13,743) 1,205,994 13,743 1,205,994

PERIOD 2013

EUROS

Balance Initial Increases Decreases Total

FOR DEFERRED TAX LIABILITIES:

Originating in prior years:

Valuation of other financial assets (13,262) (13,743) 13,262 (13,743)

TOTAL TAX RECOGNISED DIRECTLY IN EQUITY (13,262) (13,743) 13,262 (13,743)

17.5 RECONCILIATION BETWEEN ACCOUNTING PROFIT AND THE CORPORATION TAX EXPENSE

The reconciliation between accounting profit and the Corporation Tax expense in the periods 2014 and 2013 is as follows:

PERIOD 2014

2013


quota at 30% 51,664,166

Impact of permanent differences 7,440,678

Deductions:

Deductions for reinvestment: (10,270)

Deductions for double taxation (1,409,356)

Other deductions generated during the year (5,490,290)

Adjustment of prior year Corporation Tax, regularisation of the Corporation Tax rate and activation of deferred fixed assets (*)

(46,173,287)

TOTAL CORPORATION TAX EXPENSE 6,021,641

(*) The adjustment to regularise the corporation tax includes adaptation of the balance of deferred taxes to the new corporation tax rate of 25% which will come into effect on 1 January 2016 and the activation of the deferred tax for the higher value of the assets.

PERIOD 2013

2013


quota at 30% 49,994,488

Impact of permanent differences 3,166,218

Deductions:

Deductions for reinvestment: (30,020)

Deductions for double taxation (582,335)

Other deductions generated during the year (4,321,338)

Adjustment of prior year Corporation Tax, regularisation of the Corporation Tax rate and activation of deferred fixed assets (**)

4,530,963

TOTAL CORPORATION TAX EXPENSE 52,757,976

(**) The prior year adjustment corresponds to the consideration as permanent differences of certain differences which were considered temporary differences in the previous year.

The Other Deductions heading recognises among other deductions those corresponding to sponsorship of events of special interest.

The tax effect has been calculated by the difference between the current tax rate and the rate modified by tax legislation in the period 2014. In this regard Law 27/2014, of 27 November, on Corporation Tax

establishes, among other aspects, a reduction in the tax rate of 28% and 25% for the tax periods beginning as of 1 January 2015 and 2016, respectively. For this reason, in the period 2014 the Company has proceeded to re-estimate the amount of deferred taxes taking into account the period in which the reversal will predictably occur.


17.6 BREAKDOWN OF THE CORPORATION TAX EXPENSE

The breakdown of the Corporation Tax expense is as follows:

EUROS

2014 2013

CURRENT TAX:

For continuing operations 47,498,321 50,178,080

DEFERRED TAX:

For continuing operations (39,820,142) (1,951,067)

ADJUSTMENT OF PRIOR YEAR CORPORATION TAX

Deferred tax from continuing operations (1,975,942) 4,252,105

Current tax from continuing operations 319,404 278,858

TOTAL CORPORATION TAX EXPENSE 6,021,641 52,757,976

17.7 RECOGNISED DEFERRED TAX ASSETS

The detail of the balance for this item at year-end 2014 and 2013 is as follows:

EUROS

2014 2013


Pensions 10,537,425 10,762,977

Fixed assets 46,987,275 9,501,629

Provisions for risks and responsibilities 9,661,641 21,078,882

Impairment of assets 612,014 6,146,222

Other 887,778 428,151

Tax losses 7,628,351 11,886,293

Tax credit carry forwards and other 7,304,140 7,193,194

DEFERRED TAX ASSETS TOTAL 83,618,624 66,997,348

The abovementioned deferred tax assets have been recorded on the consolidated balance sheet as the Parent Company Directors have considered that

according to the best estimate of the Company’s future results, it is likely that said assets will be recovered.


At 31 December 2014 the companies of the Group have tax losses pending compensation in the amount of 30,513,403 euros, according to the following breakdown:

EUROS

PERIOD OF ORIGIN Mahou, S,A, Aguas de Solán

de Cabras, S.A.Reina Fábrica

de Cerveza, S.A.Distribución

Balear A.L., S.A. TOTAL

1997 – 1,123,858 – – 1,123,858

1998 – 537,208 – – 537,208

1999 – 292,006 – – 292,006

2000 – 1,082,602 – – 1,082,602

2001 1,000,000 3,640,331 – – 4,640,331

2002 8,387 2,125,387 – – 2,133,774

2003 857,609 367,661 768,801 – 1,994,071

2004 3,498 57,759 2,246,876 – 2,308,133

2005 4,993 39,738 – – 44,731

2006 444,558 103,709 – – 548,267

2007 4,607 57,442 – – 62,049

2008 – 5,101,594 – – 5,101,594

2009 – 4,027,305 – – 4,027,305

2010 – 3,815,395 – – 3,815,395

2011 – – – 2,396,940 2,396,940

2012 – – – 130,597 130,597

2013 – – – 274,542 274,542

TOTAL 2,323,652 22,371,995 3,015,677 2,802,079 30,513,403

At the same time, as a result of the merger through acquisition of its subsidiary San Miguel, Fábricas de Cerveza y Malta, S.A. which took place in 2014, the Parent Company has registered tax credits for accredited deductions pending recovery in the amount of 7,304,140 euros respectively, itemised as follows:

The differences between the assets recognised at the start and end of the period include the regularisation adjustment to adapt deferred taxes to the new corporation tax rate of 25% which will come into effect on 1 January 2016.

The differences between the liabilities recognised at the start and end of the period include the regularisation adjustment to adapt deferred taxes to the new corporation tax rate of 25% which will come into effect on 1 January 2016, along with the tax impacts resulting from the company restructuring described in Note 1.

YEAR OF ORIGIN

AMOUNT IN EUROS

LIMIT DATEOF APPLICATION

2005 912,561 2020

2006 1,157,675 2021

2007 358,965 2022

2008 2,435,525 2023

2009 2,439,414 2024

7,304,140

17.8 DEFERRED TAX LIABILITIES

The detail of the balance for this item at year-end 2014 and 2013 is as follows:

EUROS

2014 2013

ASSETS SUBJECT TO REINVESTMENT 916,815 871,823

FIXED ASSETS 5,371,977 28,166,822

GOODWILL 4,677,863 8,076,261

OTHER 3,687,528 27,606

DEFERRED TAX LIABILITIES TOTAL 14,654,182 37,142,512


17.9 PERIODS PENDING VERIFICATION AND INSPECTION

In relation to the Parent Company, in March 2013 we were notified of the start of a Corporation Tax inspection for the periods 2008 to 2011 also inspecting Value Added Tax, Income Tax withholdings and payments on account, Returns on Capital or Property Investments, Withholding Tax on Non-Residents for the periods 2009 to 2012 and of the Annual Return on Transactions for the periods 2010 to 2012. The Corporation Tax inspections for the periods 2010 and 2011 encompassed the consolidated tax Group headed in those periods by Mahou S.A which was constituted on 1 January 2010 and in relation to the VAT inspections they encompass the VAT Group existing since 1 January 2009 also headed by Mahou, S.A.

With regards to Corporation Tax for the periods 2009 to 2012, on 24 June 2014 Mahou, S.A. signed statement of disagreement and appeal which resulted in a debt to be paid for the periods 2008 and 2009 of 12,276 thousand euros (quota 10,027 thousand euros, late payment interest 2,249 thousand euros) and for the periods 2010 and 2011 of 4,952 thousand euros (quota 4,503 thousand euros, late payment interest 449 thousand euros).

In relation to Value Added Tax, on 24 June 2014 Mahou, S.A. signed a statement of disagreement which resulted in a debt to be paid of 11,846 thousand euros (quota 10,141 thousand euros; late payment interest 1,705 mil euros).

And finally in terms of Income Tax for the periods 2009 to 2012, on 25 July 2014 a statement of disagreement was signed which resulted in a debt to be paid of 1,282 thousand euros (1,097 thousand euros of quota and 185 thousand euros of late payment interest).

On 28 August 2014, Mahou, S.A. pursued these statements of disagreement in the form of an economic-administrative appeal to the Central Economic-Administrative Court for each of the items referred to above.

All other taxes included in the inspection were signed with a declaration of conformity and no contingency whatsoever.

Continuing with the Parent Company and in relation to San Miguel Fábricas de Cervezas y Malta, S.A. (a company absorbed by Mahou, S.A.), in February 2013 it received notification of the start of an inspection in relation to Corporation Tax for the periods 2008 and 2009, Returns on Capital and Property Investments, Withholding Tax on Non-Residents, and Annual Return on Transactions and Declaration of EC Deliveries and Purchases of Goods for the period 2009 and Income Tax Withholdings and Payments on Account for the periods 2009 to 2012. Corporation Tax inspection activities in relation to the

periods 2008 and 2009 encompass the consolidated tax group headed in those periods by San Miguel Fábricas de Cerveza y Malta, S.A. which expired on 1 January 2010.

On 2 June 2014, San Miguel Fábricas de Cervezas y Malta, S.A. signed a statement of disagreement with the Corporation Tax for the periods 2008-09 in the amount of 1,851 thousand euros (quota 1,478 thousand euros; late payment interest 325 thousand euros plus a surcharge of 47 thousand euros).

On 20 August 2014, San Miguel Fábricas de Cerveza y Malta, S.A. filed an economic-administrative appeal with the Central Economic-Administrative Court.

All other taxes included in the inspection communicated to San Miguel Fábricas de Cervezas y Malta, S.A. were signed in conformity without any contingency whatsoever except for the one relating to Personal Income Tax for the periods 2009 to 2012 which resulted in a declaration of conformity in the amount of 307 thousand euros (including interest) plus a penalty of 76 thousand euros. Both these items have been paid on 20 August and 3 October 2014, respectively.

All signed declarations of disagreement which are currently in the process of an economic-administrative appeal through the Central Economic-Administrative Court have been settled by Mahou S.A. and the former San Miguel Fábricas de Cervezas y Malta, S.A. on 5 September 2014. Notwithstanding, as previously mentioned, because the companies disagree with these settlements and do not share the criteria applied by the Administration the company has proceeded to file the corresponding economic-administrative appeals with the Central Economic-Administrative Court.

In relation to Excise Tax and continuing with San Miguel Fábricas de Cervezas y Malta, S.A. (a company absorbed by Mahou, S.A.) on 4 February 2010 an inspection began in relation to the Alcohol Excise Tax for the period 2007, initiating on 30 September 2010 an appeal with a statement of disagreement in the amount of approximately 4.3 million euros. On 24 January 2011, the Company filed an economic-administrative appeal before the Central Economic-Administrative Courts.

Likewise, on 6 September 2010, inspection activities on the Excise Tax for Alcohol were initiated for the period 2008, and on 21 October 2010 a legal process contesting approximately 3.8 million euros was signed. On 31 January 2011, the Company filed an economic-administrative appeal before the Central Economic-Administrative Courts.

On 4 December 2013 and in relation to appeals made to the Economic-Administrative Court regarding the aforementioned Excise Tax for the periods 2007 and 2008, the ruling confirming the amounts appealed


17.10 OTHER INFORMATION

In 2014, as described in note 1, the Parent Company of Mahou San Miguel carried out a merger transaction through acquisition of the companies San Miguel Fábricas de Cervezas y Malta, S.A.U., Grupo Alhambra Alimentaria, S.A., Cervezas Alhambra, S.L.U. and MSM Grupo Comercializador, S.A.U., and spin-offs through the non-monetary contribution of the assets and liabilities comprising the production branch of the activity in favour of the newly constituted companies Mahou Fábrica de Cervezas, S.L and San Miguel Fábricas de Cervezas, S.L. This restructuring process availed itself of the special regime contemplated in Chapter VII of Heading VII of Law 27/2014, of 27 November, regarding Corporation Tax.

As set out in article 86 of Law 27/2014 of 27 November on Corporation Tax, the company includes in its financial statements the information required by the aforementioned precept.

A. Assets that can be amortised and whose ownership has been transferred to the equity of the spun-off companies and to the equity of the parent company through the merger, were acquired by the transferring companies in 1925 and 31 December 2013.

B. The balance sheets of the transferring companies at 31 December 2013 are the last balance sheets approved prior to the spin-off and merger in each case.

was communicated. On 12 February 2014 the Company appealed the decision of the Economic-Administrative Court for 2007 and 2008 before the National High Court.

On the date of presentation of these accounts, we have received notification of the ruling of the National High Court in favour of the plaintiff, overruling the aforementioned declarations of disagreement, although pending the possibility of an appeal to the Supreme Court within the period of said financial year.

At the same time, and also in relation to the absorbed company San Miguel Fábricas de Cervezas y Malta, S.A. on 12 May 2014 an inspection began in relation to the Excise Tax on Alcohol and Beer for the period 2011 to 2012.

As of today, the above inspection has not yet concluded.

With regards to Alhambra Fábrica de Cervezas, S.L, in December 2013 inspections of Excise Tax for the periods 2009 to 2011 began. In September 2014, these inspections concluded with no contingency and the relevant declarations of conformity were signed.

Likewise, in December 2014 the subsidiary Reina Fábrica de Cervezas, S.A. was informed of the start of an inspection of excise tax for the period between September 2010 and December 2013. At the time of preparing the annual accounts, this inspection has not concluded but no significant contingency is expected to result from said inspection.

Finally, in relation to Balneario y Aguas de Solán de Cabras, S.L.U. (company absorbed by the subsidiary Aguas de Solan de Cabra, S.A.) in the period ending on 31 January 2007, the tax authorities concluded an inspection of Corporation Tax declarations filed for the periods comprised between 1999 and 2002 and those related to all other corresponding taxes for the period comprised between 1 January 2000 and 31 December 2002, instigating statements for a total amount of 3,588,169 euros, which include penalties and interest and increasing the tax losses pending compensation in the amount of 2,127,184 euros.

On 20 December 2013 the Supreme Court ruling was received in relation to the contentious-administrative proceedings claim concerning VAT for the period 2000-2002. This ruling confirmed the settlement agreement of the Tax Authority concerning VAT which totalled 317,369 euros although it upholds the Company’s claim in relation to the penalty imposed in the amount of 133,665 euros.

With regards to the statements referring to Corporation Tax for the periods 1999 to 2002, on 2 April 2014 we were notified that the appeal filed against the National High Court ruling of 25 January 2010 which partially upheld the company’s claim was not admitted. Said execution agreement determined

a new debt amounting to 2,322,364 euros and increasing the tax loss pending compensation for the period 2002 by 430,946 euros.

Both the VAT settlement for the period 2000 to 2002 and the Corporation Tax settlement for 1999 to 2002 have been settled and paid in this period 2014.

In the opinion of the Directors of the Parent Company and its advisors, it is considered that the final outcome will not produce any contingency that has not been considered within the provisions.

In general, and as a consequence of the aforementioned inspections that are being carried out at the time of preparing these financial statements, the financial periods that are open for a tax inspection for the various companies that make up Mahou San Miguel are:

PERIOD

CORPORATION TAX 2010 a 2013

INCOME TAX (I.R.P.F.) 2011 a 2014

VAT 2011 a 2014

IGIC 2011 a 2014

EXCISE TAX 2010 a 2014


C. The net book value of the goods referred to in section a) at which they were recorded by the transferring companies at the time of the merger.

D. The tax benefits enjoyed by the transferring companies in relation to which the spun-off companies and the Parent Company must fulfil the established requirements.

18.1 REVENUE

Practically all sales have taken place on Spanish territory.

18.2 SUPPLIES

The balance of the line items “Merchandise used” and “Raw materials and other consumables used” for the periods 2014 and 2013 present the following composition:

18.3 SOCIAL CONTRIBUTIONS

The balance of the account “Social contributions” in the years 2014 and 2013 has the following composition:

Details of purchases made by Mahou San Miguel in the periods 2014 and 2013 based on origin are as follows:

18. INCOME AND EXPENSES

EUROS

2014 2013

CONSUMPTION OF GOODS

Purchasing 28,565,247 16,270,530

Changes in inventories (913,156) (193,111)

27,652,091 16,077,419

CONSUMPTION OF RAW MATERIALS AND OTHER CONSUMABLES

Purchasing 302,242,980 336,983,398

Changes in inventories 7,529,894 (6,406,198)

309,772,874 330,577,200

EUROS

2014 2013

SOCIAL CONTRIBUTIONS:

Company Social Security 32,690,234 31,024,159

Pension and commitments to employees 4,473,551 7,799,459

Other social contributions 13,030,128 9,627,443

50,193,913 48,451,061

EUROS

2014 2013

NATIONAL 273,277,878 291,820,082

EC 55,097,079 58,835,477

IMPORTS 2,433,270 2,598,369

330,808,227 353,253,928

18.4 FINANCE INCOME AND EXPENSES

Almost all finance income and expenses, excluding dividends, are calculated using the effective interest rate method.

18.5 RELATED-PARTY TRANSACTIONS

Details of transactions with related parties for the years 2014 and 2013 are as follows:

EUROS

2014 2013

SALES 105,781,839 361,616,983

PURCHASING 64,506,119 416,723,649

SALES OF ASSETS 508,060 17,060,082


There are no advances or loans granted to members of the Board of Directors. Likewise, no obligation has been assumed on their account at year end.

18.7 SITUATIONS OF CONFLICT OF INTEREST OF THE MEMBERS OF THE BOARD OF DIRECTORS

By virtue of that established in paragraph 3 of article 229 of the Capital Companies Law, at year end 2014 neither the members of the Board of Directors of the Parent Company nor the persons linked to same as defined in the Capital Companies Law have reported to the other members of the Board of Directors any situation of direct or indirect conflict of interest with the interests of the Group.

19. ENVIRONMENTAL INFORMATION

In line with its environmental policy, Mahou San Miguel has been carrying out various activities and projects in relation to this field.

Throughout the periods 2014 and 2013 Mahou San Miguel has incurred in expenses of an environmental nature, in the amount of 2,726,476 euros and 4,013,257 euros, respectively.

At the same time, in recent years investments have been made in Mahou’s industrial zones in Alovera

to improve waste water treatment and in 2013 hazardous waste management was completed, including treatment of bagasse, further comprising regular analytical control of the pollution parameters of discharges and emissions into the atmosphere.

In relation to potential contingencies that might arise in relation to matters of an environmental nature, Mahou San Miguel considers that these are sufficiently covered by the general liability insurance policies contracted, and by the provisions for liabilities.

20. OTHER INFORMATION

20.1 PERSONNEL

The average number of employees of Mahou San Miguel, by professional category, is as follows:

2014 2013

TECHNICAL, COMMERCIAL AND ADMINISTRATIVE PERSONNEL 1,317 1,161

PRODUCTION PERSONNEL 1,350 1,344

2,667 2,505

18.6 REMUNERATION FOR THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT

In the periods 2014 and 2013, the members of the Board of Directors and Senior Management of the Parent Company received a total of 3,258,848 euros and 3,142,800 euros, respectively, in relation to all concepts. There are no members of Senior Management who are not also directors.

In the periods 2014 and 2013, the number of directors was 12: 6 directors were legal persons (represented by 3 men and 3 women) and 6 directors were natural persons, 3 men and 3 women. In the period 2012, the number of directors was 12: 6 legal persons (represented by 3 men and 3 women) and 6 natural persons, 3 men and 3 women.

The number of people on the payroll at 31 December 2014 and 2013 amounted to 2,664 and 2,485 respectively, with the following distribution by gender:

2014 2013

MEN 2,204 2,076

WOMEN 460 409

2,664 2,485

The average number of people employed by Mahou San Miguel in 2014 with a major or minor disability of more than or equal to 33% totalled 55 (50 in 2013).

20.2 AUDIT FEES

In the periods 2014 and 2013, the audit fees and fees for other services rendered by the auditor of the consolidated and individual annual accounts of Mahou San Miguel, Deloitte, S.L., and by companies belonging to the Deloitte network, have been the following:

EUROS

2014 2013

AUDIT SERVICES 409,432 366,318

OTHER SERVICES 340,753 123,754

SERVICES RELATED TO AUDITING 426,432 372,318

OTHER SERVICES 323,753 117,754

TOTAL PROFESSIONAL SERVICES 750,185 490,072


20.3 INFORMATION CONCERNING POSTPONEMENTS OF PAYMENTS MADE TO SUPPLIERS

Below is the detail of the information required by Additional Provision Three of Law 15/2010, of 5 July:

The details set out in the table above concerning payments to suppliers relate to those who by nature are trade creditors for liabilities with suppliers of goods and services, such that they include data related to the line items “suppliers” and “trade payables” under the current liabilities heading of the balance sheet. Therefore they do not include payments to suppliers of fixed assets or intra-group operations.

The maximum legal period for payment applicable to the Group in 2014 according to Law 3/2004, of 29 December, establishing measures to fight against late payment in commercial transactions, and pursuant to the modifications introduced by Law 15/2010, is 30 days in the event that no date or period of payment is established in the contract. If a period has been established, this must not exceed 60 calendar days in any case. In 2013 the maximum period was 60 days. The criteria applied to calculate said period until payment, is counting as of the date of receipt in the case of goods and

2014 2013

Amount % Amount %

PAYMENTS MADE:

WITHIN THE MAXIMUM LEGAL PERIOD: 748,649,139 100% 778,037,630 100%

TOTAL PAYMENTS IN THE PERIOD 748,649,139 100% 778,037,630 100%

AVERAGE PAYMENT PERIOD (DAYS) 63 65

as of the date of execution and acceptance where the provision of services is concerned.

The Group applies the policy of paying its suppliers within the maximum period of 60 days, although it has established a fixed date per month as the payment date, which can occasionally produce slight increases in said period.

Mahou San Miguel had long-term contracts with suppliers of logistics services and packaging with payment conditions of 90 days, which in the period 2014 have all been adapted to the aforementioned law. The total amount of the payments made to these suppliers in the periods 2014 and 2013 have been zero and 35,124,458 euros respectively.

At 31 December 2014, the Company did not have any balances that exceeded the maximum legal period in relation to the above contracts with the aforementioned suppliers. These balances at 31 December 2013 amounted to 4,906,516 euros.

21. SEGMENT INFORMATION

Mahou San Miguel identifies its operating segments on the basis of internal reports concerning the components of Mahou San Miguel which serve as a basis for regular revision, discussion and evaluation by the Board of Directors, which is the maximum authority in the decision-making process with the power to allocate resources to the segments and to assess their performance.

Accordingly, Mahou San Miguel considers that it operates primarily in the soft drinks segment, developing complementary lines of business in relation thereto. The other segments in which Mahou San Miguel operates are not significant.

Almost all sales of Mahou San Miguel have taken place on Spanish territory. For its part, there is no client who has been invoiced more than 10 per cent of the business revenue.

22. BUSINESS COMBINATIONS

22.1 SPIN-OFF OF THE PRODUCTION BRANCH OF ACTIVITY OF THE ALOVERA FACTORY

The company Mahou Fábrica de Cervezas, S.L (Sole Shareholder Company) was constituted on

11 September 2014 as a result of the company restructuring project carried out by Mahou, S.A., the Parent Company of Mahou San Miguel. This constitution took place following the spin-off of the assets and liabilities of Mahou, S.A. related to the


production activity carried out at the facilities in Alovera with these operations being carried out by the new company, for accounting purposes as of 1 January 2014.

The planned spin-off operation has involved spinning off part of the assets of the Company related to the production activity carried out at the Alovera facilities, excluding the land on which the factory is built and respective buildings, which have been assigned by virtue of a lease agreement (the “Economic Unit”), the component assets of which are identified below, and the block transfer of the spun-off corporate assets, in favour of the newly created company MAHOU FÁBRICA DE CERVEZAS, S.L. (Sole Shareholder Company).

As a consequence of this spin-off MAHOU FÁBRICA DE CERVEZAS, S.L. has acquired, on the basis of universal succession, the Economic Unit of the Company.

Cost of the spin-offThe fair value of the consideration transferred in the spin-off has amounted to 55,049,890 euros, this amount corresponding to the share capital of MAHOU FÁBRICA DE CERVEZAS, S.L. of FORTY MILLION EUROS (40,000,000 euros), belonging to 4,000 shares, equal, cumulative and indivisible with a par value of TEN THOUSAND (10,000 euros) each one, numbered from 1 to 4,000, both inclusive, and a share premium of FIFTEEN MILLION AND FORTY NINE THOUSAND EIGHT HUNDRED AND NINETY EUROS (15,049,890 euros).

All shares resulting from the constitution of MAHOU FÁBRICA DE CERVEZAS, S.L. have been fully subscribed by Mahou, S.A. as consideration for the contribution of the assets and liabilities listed below.

Pursuant to the terms of article 74.2 of the Law on Structural Modifications it is not appropriate to swap or distribute the shares of MAHOU FÁBRICA DE CERVEZAS, S.L. in favour of the shareholders of Mahou, S.A. so as a consequence of the spin-off, the shareholder structure of Mahou, S.A. has remained unaltered.

EUROS

INTANGIBLE FIXED ASSETS

Other intangible fixed assets (1) 29,826

PROPERTY, PLANT AND EQUIPMENT

Technical installations 21,400,931

Machinery 22,034,610

Furniture 85,512

Information technology equipment 5,587

Fixed assets under construction 13,219,579

DEFERRED TAX ASSETS (2) 2,609,473

INVENTORIES 1,624,546

GRANTS AND BEQUESTS RECEIVED (29,826)

NON-CURRENT PROVISIONS (4,063,181)

DEFERRED TAX LIABILITIES (3) (1,867,147)

TOTAL FAIR VALUE OF SPUN-OFF ASSETS 55,049,890

(1) Intangible fixed assets include recognition of the fair value of CO2 gas emission rights.

(2) Deferred tax assets correspond to the tax effect of the commitments acquired with personnel in the amount of 1,218,954 euros and those from adjustments made to fixed assets in the amount of 1,390,519 euros.

(3) Deferred tax liabilities correspond to the tax effect of freedom to depreciate fixed assets in the amount of 1,867,147 euros.

Goodwill arising from the spin-offThis combination has not given rise to any goodwill.

Impact of the spin-off on the resultsIncome and results attributable to the spun-off company as of 1 January 2014 until year-end, correspond to the total income and results obtained in said period.

Assets acquired and liabilities assumed on the spin-off datePursuant to article 74.1 of the Law on Structural Modifications, the value of the assets and liabilities transferred effective 1 January 2014, amounts to 55,049,890 euros, broken down as follows:


22.1.1 BASES OF THE SPIN-OFF PROJECTThe fundamental aspects of the spin-off are set out in the Spin-Off Project approved by the General Shareholders Meeting on 23 July 2014, and are the following:

22.1.1.1 DETERMINATION AND ALLOCATION OF THE SHARES OF THE NEWLY CREATE BENEFICIARY COMPANYAs a result of the planned spin-off transaction, the Newly Created Beneficiary Company will be constituted with a share capital of FORTY MILLION EUROS (40,000,000 euros), by means of the creation of 4,000 shares, equal, cumulative and indivisible with a par value of TEN THOUSAND EUROS (10,000 euros) each one, numbered from 1 to 4,000, both inclusive, and a share premium of FIFTEEN MILLION AND FORTY NINE THOUSAND EIGHT HUNDRED AND NINETY EUROS (15,049,890 euros).

Pursuant to the terms of article 74.2 of the Law on Structural Modifications, it is not appropriate to swap or distribute the shares of the Newly Created Beneficiary Company in favour of the Company’s shareholders. As a result of the spin-off, the Company’s shareholder structure will remain unaltered.

Shares resulting from the constitution of the Newly Created Beneficiary Company will be fully subscribed by the Company as consideration for the contribution of the assets and liabilities listed in Annex 1 of the present Spin-off Project.

The par value of said shares together with the share premium, corresponds to the real value of

the spun-off assets and will be fully disbursed through the contribution that will be made of the Economic Unit to the Newly Created Beneficiary Company as a consequence of the spin-off.

22.1.1.2 DATE AS OF WHICH THE SPIN-OFF WILL BE EFFECTIVE FOR ACCOUNTING PURPOSES IN COMPLIANCE WITH THE TERMS OF THE GENERAL ACCOUNTING PLANIn compliance with the terms of article 31.7 of the Law on Structural Modifications and the General Accounting Plan, it is hereby declared that the transactions carried out by the Company, for accounting purposes shall be understood to have been made by the Newly Created Beneficiary Company as of 1 January 2014.

22.1.1.3 BALANCE SHEET OF THE SPIN-OFF AND DATE OF THE COMPANY ACCOUNTS USED TO ESTABLISH THE CONDITIONS OF THE TRANSACTIONPursuant to the terms of article 31.10 of the Law on Structural Modifications, it is hereby declared that the Company accounts taken for the purposes of establishing the conditions of the spin-off are those which ended at 31 December 2013. Insofar as said accounts were closed within the six months prior to the date of the present Spin-off Project, the balance sheet contained in the accounts ended at 31 December 2013 constitute the transaction spin-off balance sheet (the “Spin-off balance sheet”).

Pursuant to the terms of article 37 of the Law on Structural Modifications, the Spin-off Balance Sheet has been verified by the Company’s accounts auditor, namely, Deloitte, S.L., as this falls within items for compulsory verification in the financial statements.

EUROS

ASSETS 01-01-2014

NON-CURRENT ASSETS 59,385,499

INTANGIBLE FIXED ASSETS 29,826

Computer software –

Other intangible fixed assets 29,826

PROPERTY, PLANT AND EqUIPMENT 56,746,220

Technical installations, machinery and other fixed assets 43,526,640


DEFERRED TAX ASSETS 2,609,453

CURRENT ASSETS 1,624,545


Raw materials and other procurements 1,624,545

TOTAL ASSETS 61,010,044

EUROS

LIABILITIES 01-01-2014

EQUITY 55,079,716

CAPITAL AND RESERVES 55,049,890

Capital 40,000,000

Share premium 15,049,890

Reserves –

GRANTS AND BEqUESTS RECEIVED 29,826

NON CURRENT LIABILITIES 5,930,328

LONG-TERM PROVISIONS 4,063,181

DEFERRED TAX LIABILITIES

1,867,147

TOTAL EQUITY AND LIABILITIES 61,010,044


22.1.1.4 TAX SYSTEMPursuant to the terms of article 96 of the Consolidated Text of the Law on Corporation Tax approved by Royal Legislative Decree 4/2004, of 5 March, it is declared that the spin-off has availed itself of the special tax system contemplated in Chapter VIII of Heading VII and of additional provision two of said consolidated text, and therefore the relevant communication has been made to the Tax Authority in good time and in the appropriate manner, in compliance with the terms set out in said consolidated text and its developing regulations, if so agreed by the Company’s general meeting.

22.2 SPIN-OFF OF THE BRANCH OF ACTIVITY OF THE FACTORIES IN LéRIDA, BURGOS AND MÁLAGA

The company San Miguel Fábricas de Cervezas, S.L (Sole Shareholder Company) was constituted on 11 September 2014 as a consequence of the company restructuring project carried out by Mahou, S.A., as the parent company of Mahou San Miguel. Said constitution has been made on the basis of the spin-off of the assets and liabilities of San Miguel Fábricas de Cerveza y Malta, S.A. related to the production activity carried out at the facilities in Lleida, Burgos and Málaga with these operations being carried out by the new company for accounting purposes since 1 January 2014.

The planned spin-off operation has involved spinning off part of the Company’s assets, consisting of the production activity carried out at the facilities in Lleida, Burgos, and Málaga, excluding the land on which the factory is built and their respective buildings, which have been assigned by virtue of a lease agreement (the “Economic Unit”), the component assets of which are identified below, and the block transfer of the spun-off corporate assets, in favour of the newly created company SAN MIGUEL FÁBRICAS DE CERVEZAS, S.L. (Sole Shareholder Company).

As a consequence of this spin-off, SAN MIGUEL FÁBRICAS DE CERVEZAS, S.L. has acquired, through universal succession, the Economic Unit of the Company.

Cost of the spin-offThe fair value of the consideration transferred in the spin-off has amounted to 42,843,273 euros, this amount corresponding to the share capital of SAN MIGUEL FÁBRICAS DE CERVEZAS, S.L. of THIRTY MILLION EUROS (30,000,000 euros), belonging to 3,000 shares, equal, cumulative and indivisible with a par value of TEN THOUSAND EUROS (10,000 euros) each one, numbered from 1 to 3,000, both inclusive, and a share premium of TWELVE MILLION EIGHT HUNDRED AND FORTY THREE THOUSAND TWO HUNDRED AND SEVENTY THREE EUROS (12,843,273 euros).

All shares resulting from the constitution of SAN MIGUEL FÁBRICAS DE CERVEZAS, S.L. have been fully subscribed by San Miguel Fábricas de Cerveza y Malta, S.A. as consideration for the contribution of the assets and liabilities listed below.

Pursuant to the terms of article 74.2 of the Law on Structural Modifications, it is not appropriate to swap or distribute the shares of SAN MIGUEL FÁBRICAS DE CERVEZAS, S.L. in favour of the shareholders of San Miguel Fábricas de Cerveza y Malta, S.A.

Assets acquired and liabilities assumed on the spin-off datePursuant to the terms of article 74.1 of the Law on Structural Modifications, the value of the assets and liabilities transferred effective 1 January 2014, amounts to 55,049,890 euros, broken down as follows:

EUROS


Other intangible fixed assets (1) 11,942

PROPERTY, PLANT AND EQUIPMENT

Technical installations 36,931,440

Machinery 16,523,989

Tooling 2,287

Furniture 95,592

Information technology equipment 7,173


DEFERRED TAX ASSETS (2) 4,930,818


GRANTS AND BEQUESTS RECEIVED

Grants and emission rights (6,185,403)

Deferred tax liabilities from grants (2,017,559)

NON-CURRENT PROVISIONS (10,231,292)

DEFERRED TAX LIABILITIES (3) (2,565,505)

TOTAL FAIR VALUE OF SPUN-OFF ASSETS 42,843,273

(1) Intangible fixed assets include recognition of the fair value of CO2 gas emission rights.

(2) Deferred tax assets correspond to the tax effect of the commitments acquired with personnel in the amount of 3,069,388 euros and those from adjustments made to fixed assets in the amount of 1,861,430 euros.

(3) Deferred tax liabilities correspond to the tax effect of freedom to depreciate fixed assets in the amount of 2,565,505 euros.

Goodwill arising from the spin-offThis combination has not given rise to any goodwill.

Impact of the spin-off on the resultsIncome and results attributable to the spun-off company as of 1 January 2014 until year-end, correspond to the total income and results obtained in said period.


22.2.1 BASES OF THE SPIN-OFF PROJECTThe fundamental aspects of the spin-off are set out in the Spin-Off Project approved by the General Shareholders Meeting on 23 July 2014, and are the following:

22.2.1.1 DETERMINATION AND ALLOCATION OF THE SHARES OF THE NEWLY CREATE BENEFICIARY COMPANYAs a result of the planned spin-off operation, the Newly Created Beneficiary Company will be constituted with a share capital of THIRTY MILLION EUROS (30,000,000 euros), by means of the creation of 3,000 shares, equal, cumulative and indivisible with a par value of TEN THOUSAND EUROS (10,000 euros) each one, numbered from 1 to 3,000, both inclusive, and a share premium of TWELVE MILLION EIGHT HUNDRED AND FORTY THREE THOUSAND TWO HUNDRED AND SEVENTY THREE EUROS (12,843,273 euros).

Pursuant to the terms of article 74.2 of the Law on Structural Modifications, it is not appropriate to swap or distribute the shares of the Newly Created Beneficiary Company in favour of the Company’s shareholders. As a result of the spin-off, the Company’s shareholder structure will remain unaltered.

Shares resulting from the constitution of the Newly Created Beneficiary Company will be fully subscribed by the Company as consideration for the contribution of the assets and liabilities listed in Annex 1 of the present Spin-off Project.

The par value of said shares together with the share premium, corresponds to the real value of

the spun-off assets and will be fully disbursed through the contribution that will be made of the Economic Unit to the Newly Created Beneficiary Company as a consequence of the spin-off.

22.2.1.2 DATE AS OF WHICH THE SPIN-OFF WILL BE EFFECTIVE FOR ACCOUNTING PURPOSES IN COMPLIANCE WITH THE TERMS OF THE GENERAL ACCOUNTING PLANIn compliance with the terms of article 31.7 of the Law on Structural Modifications and the General Accounting Plan, it is hereby declared that the transactions carried out by the Company, for accounting purposes shall be understood to have been made on behalf of the Newly Created Beneficiary Company as of 1 January 2014.

22.2.1.3 BALANCE SHEET OF THE SPIN-OFF AND DATE OF THE COMPANY ACCOUNTS USED TO ESTABLISH THE CONDITIONS OF THE TRANSACTIONPursuant to the terms of article 31.10 of the Law on Structural Modifications, it is hereby declared that the Company accounts taken for the purposes of establishing the conditions of the spin-off are those which ended at 31 December 2013. Insofar as said accounts were closed within the six months prior to the date of the present Spin-off Project, the balance sheet contained in the accounts ended at 31 December 2013 constitute the transaction spin-off balance sheet (the “Spin-off balance sheet”).

Pursuant to the terms of article 37 of the Law on Structural Modifications, the Spin-off Balance Sheet has been verified by the Company’s accounts auditor, namely, Deloitte, S.L., as this falls within items for compulsory verification in the financial statements.

EUROS

ASSETS 01-01-2014


INTANGIBLE ASSETS 11,942

Other intangible assets 11,942


Technical installations, machinery and other 53,560,480





Raw materials and other supplies 1,716,445


EUROS


EQUITY 49,028,676


Capital 30,000,000


DONATIONS AND BEqUESTS RECEIVED 6,173,461

NON-CURRENT LIABILITIES 14,814,356

NON-CURRENT PROVISIONS 10,231,292

DEFERRED TAX LIABILITIES 4,583,064



22.2.1.4 TAX SYSTEMPursuant to the terms of article 96 of the Consolidated Text of the Law on Corporation Tax approved by Royal Legislative Decree 4/2004, of 5 March, it is declared that the spin-off has availed itself of the special tax system contemplated in Chapter VIII of Heading VII and of additional provision two of said consolidated text, and therefore the relevant communication has been made to the Tax Authority in good time and in the appropriate manner, in compliance with the terms set out in said consolidated text and its developing regulations, if so agreed by the Company’s general meeting.

22.3 MERGER BY ACQUISITION

MAHOU, S.A. (the “Acquiring Company”) and SAN MIGUEL FÁBRICAS DE CERVEZA Y MALTA, S.A. (Sole Shareholder Company), GRUPO ALHAMBRA ALIMENTARIA, S.A., CERVEZAS ALHAMBRA, S.L. (Sole Shareholder Company), and MSM GRUPO COMERCIALIZADOR, S.A. (Sole Shareholder Company) (the “Acquired Companies”), have approved the operation of merger by acquisition on 23 July 2014 and have formalised the operation in a public deed issued on 11 September 2014. The planned operation of the merger by acquisition will imply integration of the Acquired Companies into the Acquiring Company, through transmission in block of the assets of the former to the benefit of the latter, and their expiry without liquidation.

Immediately prior to the execution of the merger transaction San Miguel Fábricas de Cerveza y Malta, S.A. (Sole Shareholder Company) spun-off part of its activity related to the production activity in favour of a newly created beneficiary, San Miguel Fábricas de Cerveza, S.L.

Because this is a merger in which the Acquired Companies were fully owned, either directly or indirectly, by the Acquiring Company, it was not appropriate for the Acquiring Company to carry out an increase in capital, in compliance with the provisions of article 49 of the Law on Structural Modifications, and consequently the share swap procedure will not apply.

EUROS


Other intangible fixed assets 1,670,051

PROPERTY, PLANT AND EqUIPMENT

Land and buildings 29,510,885

Technical installations, machinery and other intangible fixed assets 12,944,998

Fixed assets under construction 112,937

NON-CURRENT FINANCIAL INVESTMENTS 49,884,242

INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 124,973,524



TRADE DEBTORS AND OTHER RECEIVABLES 63,671,692

CURRENT FINANCIAL INVESTMENTS 14,510,497

PREPAYMENTS FOR CURRENT ASSETS 3,163,992

CASH AND BANKS 926,181

LONG-TERM PROVISIONS (16,502,562)

NON-CURRENT LIABILITIES (22,903,569)

DEFERRED TAX LIABILITIES (1,676,034)

CURRENT ACCRUALS (69,864)

CURRENT LIABILITIES (1,570,890)

TRADE AND OTHER PAYABLES (62,227,468)

TOTAL FAIR VALUE OF THE MERGED ASSETS 253,975,863

EUROS


Patents and trademarks 3,648,125

PROPERTY, PLANT AND EqUIPMENT


GOODWILL 65,479,091


DEFERRED TAX LIABILITIES (5,597,100)

TOTAL FAIR VALUE OF RECORDED ASSETS 149,591,298

Assets and liabilities of the merged companies

Assets and liabilities recorded as a result of the merger


Merger reserveThis merger operation has generated a merger reserve in the amount of 56,244,132 euros.

22.3.1 BASES OF THE MERGER PROJECTThe fundamental aspects of this merger by acquisition are set out in the Merger Project approved by the General Shareholders Meeting on 23 July 2014, and are the following:

22.3.1.1. MERGER PROCEDUREThe planned merger will take place through acquisition by the Acquiring Company of the Acquired Companies, with the ensuing dissolution without liquidation of the latter and the assignment of their full assets to the Acquiring Company through universal succession.

Because this is a merger in which the Acquired Companies are fully owned, either directly or indirectly, by the Acquiring Company, it is not appropriate for the Acquiring Company to carry out an increase in capital, in compliance with the provisions of article 49 of the Law on Structural Modifications, and consequently the share swap procedure will not apply.

22.3.1.2 EFFECT OF THE MERGER, IF APPLICABLE, ON INDUSTRY CONTRIBUTIONS OR FRINGE BENEFITS IN THE ACQUIRED COMPANIESPursuant to the provisions of article 31.3 of the Law on Structural Modifications, it is hereby declared that there are no contributions from industry or fringe benefits in the Acquired Companies, and that therefore no compensation needs to be made for the aforementioned items.

22.3.1.3 SPECIAL RIGHTS OR SECURITIES NOT REPRESENTING CAPITALPursuant to the terms of article 31.4 of the Law on Structural Modifications, it is hereby declared that there are no special rights or holders of securities other than those which represent the share capital and that, consequently, no right or option of any class whatsoever will be granted in the Acquiring Company.

22.3.1.4 DATE AS OF WHICH THE MERGER WILL BE EFFECTIVE FOR ACCOUNTING PURPOSES IN COMPLIANCE WITH THE PROVISIONS OF THE GENERAL ACCOUNTING PLANIn compliance with the terms of article 31.7 of the Law on Structural Modifications and the General Accounting Plan, it is hereby declared that the transactions carried out by the Acquired Companies, for accounting purposes, shall be understood to have been made by the Acquiring Company as of 1 January 2014.

22.3.1.5 POSSIBLE CONSEQUENCES OF THE MERGER ON EMPLOYMENT, AND ITS POTENTIAL GENDER IMPACT ON THE GOVERNING BODIES INCLUDING ITS INFLUENCE, IF APPLICABLE, ON THE SOCIAL RESPONSIBILITY OF THE ACQUIRED COMPANIESIn compliance with the terms of article 31.11 of the Law on Structural Modifications, it is hereby declared that the planned merger would involve transferring all employees of the Acquired Companies to the Acquiring Company, pursuant to the company succession system regulated in article 44 of the Statute of Workers Rights. Consequently, the Acquiring Company will be subrogated in the employment and Social Security rights and obligations of the Acquired Companies, where applicable, including pension commitments, in the terms provided in the specific regulations concerning same, and in general, in as many obligations concerning complementary social protection as the latter may have acquired.

Irrespective of the above, it is not contemplated that any other legal, economic or social consequences will be generated other than those described nor that any other type of measure will be adopted that would affect the working conditions of employees as a result of the merger transaction.

At the same time, it is declared that the planned merger transaction will have no gender impact on the governing bodies nor will it affect the social responsibility of the companies involved in the merger.

22.3.1.6 MERGER BALANCE SHEETS The balance sheets of the Acquiring Company and the Acquired Companies contained in the annual accounts ended at 31 December 2013, will be considered to be the merger balance sheets, having been created within the six months prior to the date of the present Merger Project (each one, the “Merger Balance Sheet”, and jointly, the “Merger Balance Sheets”).

Pursuant to the terms of article 37 of the Law on Structural Modifications, the Merger Balance Sheets of the Acquiring Company, SAN MIGUEL FÁBRICAS DE CERVEZA Y MALTA, S.A. (Sole Shareholder Company), CERVEZAS ALHAMBRA, S.L. (Sole Shareholder Company) and MSM GRUPO COMERCIALIZADOR, S.A. (Sole Shareholder Company), have been verified by the accounts auditor of said companies, namely, Deloitte, S.L., as they fall within items for mandatory verification in the annual accounts. (See Note 22.3.3).


EUROS

ASSETS 2013


NON-CURRENT INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 21,963,186

Equity instruments 21,963,186

DEFERRED TAX ASSETS 139,473

CURRENT ASSETS 132,526

TRADE AND OTHER RECEIVABLES 362

Other receivables 267

Public entities, other 95

CURRENT INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 132,164

Loans to companies 132,164

CASH AND CASH EqUIVALENTS –

Cash –

Cash equivalents –


EUROS

LIABILITIES 2013

EQUITY 14,802,667


Capital 9,954,519


Reserves (933,668)

Legal and statutory reserves 418,973

Other reserves (1,352,641)

Prior year profit/(loss) (553,858)

Profit/(loss) for the period 97,442

CURRENT LIABILITIES 7,432,518

GROUP COMPANIES AND ASSOCIATES, CURRENT 7,432,276

TRADE AND OTHER PAYABLES 242

Suppliers 78

Public entities, other 164


GRUPO ALHAMBRA ALIMENTARIA, S.A.BALANCE SHEET FOR THE PERIOD ENDED AT 31 DECEMBER 2013


EUROS

ASSETS 2013


INTANGIBLE ASSETS 77,060

Patents, Licences, Trademarks and similar rights 19,220

Computer software 57,840



Technical installations, machinery, and other items 1,418,488





Loans to third parties 15,558,035

Other financial assets 30,773




Goods for resale 4,590,177

Raw materials and other supplies 315,619

TRADE AND OTHER RECEIVABLES 14,372,454

Trade receivables for sales and services 13,663,242

Other receivables 644,607

Personnel 46,714

Current tax assets –

Public entities, other 17,891

CURRENT INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 9,930,038

Loans to group companies 9,930,038


Loans to companies 3,952,586


PREPAYMENTS FOR CURRENT ASSETS 59,179

CASH AND CASH EqUIVALENTS 8,255

Cash 8,255


EUROS

LIABILITIES 2013

EQUITY 64,461,990


Capital 5,730,093


Reserves 42,581,981

Legal and statutory reserves 1,146,019

Revaluation reserve Law 16/2012 1,617,963

Other reserves 39,817,999

Profit/(loss) for the period 2,502,069



NON-CURRENT PAYABLES 2,429,002

Other financial liabilities 2,429,002

DEFERRED TAX LIABILITIES 61,393


GROUP COMPANIES AND ASSOCIATES, CURRENT 888,328

TRADE AND OTHER PAYABLES 5,615,785

Suppliers 1,985,854

Other payables 588,627

Personnel 162,659

Public entities, other

2,878,645


CERVEZAS ALHAMBRA, S.L. (SOLE SHAREHOLDER COMPANY)BALANCE SHEET FOR THE PERIOD ENDED AT 31 DECEMBER 2013


EUROS

ASSETS 2013


TANGIBLE ASSETS 5,413,621

Technical installations, machinery and other fixed assets 5,413,621

NON-CURRENT FINANCIAL INVESTMENTS –

Loans to third parties –

DEFERRED TAX ASSETS 85,250


INVENTORIES 758,812

Goods for resale 351,024

Raw materials and other procurements 407,788

TRADE DEBTORS AND OTHER RECEIVABLES 1,821,162


Sundry debtors 105,163

Personnel 10,200

Other credits with Public Administrations 40,730

CURRENT INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 114,003

Loans to companies 114,003



SHORT-TERM ACCRUALS –


EUROS

LIABILITIES 2013

EQUITY (845,105)

SHAREHOLDERS’ EqUITY (845,105)

Capital 60,120

Reserves 63,977

Legal and statutory reserves 6,398

Other reserves 57,579

Prior year profit/loss (4,429,702)

Other shareholder contributions 4,450,000

Profit/loss for the year (989,500)

NON CURRENT LIABILITIES 959,220

NON-CURRENT LIABILITIES –

Other financial liabilities –




CURRENT LIABILITIES WITH GROUP COMPANIES AND ASSOCIATES 6,746,963

TRADE CREDITORS AND OTHER PAYABLES 1,730,800

Suppliers 1,220,370

Sundry creditors 444,338

Personnel 22,801

Other debts with Public Administrations 43,291


MSM GRUPO COMERCIALIZADOR, S.A. (SOLE SHAREHOLDER COMPANY)BALANCE SHEET FOR THE PERIOD ENDED AT 31 DECEMBER 2013


EUROS

ASSETS 01-01-2014


INTANGIBLE ASSETS 1,592,990

Computer software 1,592,990

Other intangible assets –



Technical installations, machinery and other items 6,112,890










Goods for resale 917,145

Raw materials and other supplies 11,233,779

Work in progress 2,620,925

Finished goods 11,269,877

TRADE AND OTHER RECEIVABLES 47,477,714


Trade receivables from group companies and associates –

Other receivables 3,325,315

Personnel 293,965

Public entities, other 13,962,842

CURRENT INVESTMENTS IN GROUP COMPANIES AND ASSOCIATES 27,267,361




PREPAYMENTS FOR CURRENT ASSETS 3,104,813

CASH AND CASH EqUIVALENTS 917,926

Cash 452,528

Cash equivalents 465,398


EUROS


EQUITY 295,890,276


Capital –

Share premium –

Reserves 266,835,531

Legal and statutory reserves 5,489,954

Revaluation reserve Law 16/2012 15,218,564

Other reserves 246,127,013

Profit/(loss) for the period 29,086,812

VALUATION ADJUSTMENTS (32,067)

Hedging transactions (32,067)

GRANTS AND BEqUESTS RECEIVED –



NON-CURRENT PAYABLES 20,474,567

Other financial liabilities 20,474,567


NON-CURRENT ACCRUALS 69,864


CURRENT PAYABLES 45,810

Derivatives 45,810

GROUP COMPANIES AND ASSOCIATES, CURRENT 8,212,670

TRADE AND OTHER PAYABLES 54,880,641

Suppliers 38,764,569

Other payables 2,645,774

Personnel 3,414,804

Public entities, other 10,055,494

Current accruals –


SAN MIGUEL, FÁBRICAS DE CERVEZA Y MALTA, S.A. (SOLE SHARHEOLDER COMPANY)BALANCE SHEET AT 1 JANUARY 2014, AFTER SPINNING OFF THE PRODUCTION ACTIVITY


22.3.1.7 TAX SYSTEMPursuant to the terms of article 96 of the Consolidated Text of the Law on Corporation Tax approved by Royal Legislative Decree 4/2004, of 5 March, it is declared that the present merger will avail itself of the special tax system contemplated in Chapter VIII of Heading VII and additional provision two of said consolidated text, and therefore the relevant communication will be made to the Tax Authority in good time and in the appropriate manner, in compliance with the terms set out in said consolidated text and its developing regulations, if so agreed by the general meetings of shareholders and/or members and/or the sole

23. EVENTS AFTER THE BALANCE SHEET DATE

On 11 December 2014, the Group reached an agreement with the US Company Founders Brewing Company for acquisition of a 30% stake in its subsidiary, Canal Street Brewing Co L.L.C. The amount corresponding to the investment has not been recognised in the Company’s financial statements at 31 December 2014 as it will not become effective

until 10 February 2015, once certain prior conditions have been met. The amount finally paid has totalled 102 million US dollars.

There have been no other events after the balance sheet date that would have significant effects on the Company’s annual accounts for the period 2014.

THE BOARD OF DIRECTORSMadrid, 24 March 2015

shareholders/members of the Acquiring Company and the Acquiring Companies.

22.4 NEW INCLUSIONS IN THE SCOPE OF CONSOLIDATION

The inclusion of Mahou India Private Limited (formerly Arian Breweries & Distilleries Private Limited) and Distribución Balear Almacenaje y Logística S.A. in the consolidated financial statements have entailed on the date of first consolidation the following impacts, after making the various allocations of the acquisition price:

The investment corresponding to Mahou India Private Limited (formerly Arian Breweries & Distilleries Private Limited) does not include the capital increase carried out in the period 2014. The impact on the profit and loss account since the acquisition date is not significant.

DESCRIPTION DISBAL ARIAN TOTAL

Individual assets and liabilities 180,077 19,776,448 19,956,525

Goodwill – 11,754,004 11,754,004

Intangible fixed assets 1,238,582 – 1,238,582

Gains on property, plant and equipment 5,132,733 – 5,132,733

Deferred tax liabilities (1,506,892) – (1,506,892)

Reserves consolidated using the equity method – 9,821,358 9,821,358

Fair Value 5,044,500 41,351,810 46,396,310

External stakeholders (1,514,412) – (1,514,412)

Investment of Mahou, S.A, (*) (3,530,088) (41,351,810) (44,881,898)


MAHOU, S.A. AND SUBSIDIARY COMPANIESMANAGEMENT REPORT FOR THE PERIOD ENDED AT 31 DECEMBER 2014

COMPANY EVOLUTION IN 2014 AND FORECAST FOR 2015

RESEARCH AND DEVELOPMENT ACTIVITIES

OWN SHARES

Mahou San Miguel’s results are marked by an overall improvement in the behaviour of the Spanish economy, which has exceeded initial expectations, mainly thanks to the thrust of internal demand and improvement in consumer sentiment.

As a result of its search for optimisation and efficiency, Mahou San Miguel has carried out a company restructuring process, explained in Note 22, which will clearly help to improve internal operations, adapting to our continuously changing surroundings and ensuring a swifter growth in future.

The Company has continued to focus on value as opposed to volume managing to increase revenue by 3.2%, to 1.153 billion euros versus the 1.118 billion in 2013, additionally as part of its inorganic growth strategy it has incorporated other businesses both national and from abroad.

Production costs have accompanied the economic recovery, mainly due to the improved prices for raw materials and other production materials, thanks to appropriate planning and purchasing management.

The described context, together with the decisions made by the Company have allowed the Operating Profit to increase by 1.9% reaching the sum of 168 million euros. In spite of the fact that in 2014 payments for Corporation Tax in the region of 48

Maintaining our policy of support for research and development, the Group has continued to make

At 31 December 2014, the Group does not have own shares.

million euros have been made due to changes in regulations and in the recognition of assets and liabilities associated to the company restructuring, the Corporation Tax expense has declined significantly as explained in Note 17.

With regards to the industrial activity, we have continued with our improvement plans through sizeable investments in all our factories and our distribution system, to ensure in coming years levels of productivity that will underpin the Group’s competitiveness.

In 2014, we have continued to strengthen our commitment to quality and environmental protection, and we have made investments in fixed assets mainly intended to improve the facilities and our production machinery.

As at 31 December 2014, we have 2,664 people on our payroll.

In the period 2015, and in spite of uncertainty on a national and international scale, we believe that the economic forecasts are positive, especially for Spain. This added to the strength of our brands, allows us to hope for improved results in that year.

The main risks our Company faces, are the risks inherent to the business activity.

significant efforts to improve its industrial processes and to create new products.


AVERAGE PERIOD OF PAYMENT TO SUPPLIERS

EVENTS AFTER THE BALANCE SHEET DATE

FINANCIAL RISK MANAGEMENT

ENVIRONMENTAL INFORMATION

USE OF FINANCIAL INSTRUMENTS

Mahou San Miguel has a policy of complying with the maximum payment period established by law, and in cases where through historical agreements this period is longer, it has been gradually adapted

There have been no events after the balance sheet date that could affect the annual accounts and management report excluding that mentioned in Note 23.

The Financial Division is entrusted with managing the company’s financial risks, and has established the necessary mechanisms for controlling exposure to changes in relevant risks within the parameters approved by the Board, through appropriate risk identification, measurement and management. Thereby guaranteeing that the goals of the strategic plan are achieved, with volatility controlled in accordance with the following premises:

A. Credit risk There will be no significant concentration of risk with third parties. Demanding certain and sufficient guarantees to cover credit risks with third parties. Making provisions for credit risk with third parties in the likelihood of any default risk.

B. Liquidity risk Maintaining cash and equivalent liquid assets in financial entities with a high credit rating.

Note 19 of the report described the Group’s main activities in relation to the environment.

Mahou San Miguel has contracted exchange rate insurance to cover exclusively the risks to which its future cash flows are exposed.

to comply with the aforesaid legislation. Additionally, measures are being taken to reduce the periods of administrative procedures, enhancing the use of electronic and technological means.

We would like to note, as in previous years, our gratitude for the excellent job done by the Company’s entire team and the efforts made to reach the objectives achieved.

THE BOARD OF DIRECTORSMadrid, 24 March 2015

Maintaining and preserving cash flows appropriate for the level of operations. Keeping a low debt profile proportional to the volume of operations and EBITDA. Placing cash and bank surpluses following criteria of maximum safety, solvency and guarantee.

C. Market risk Insuring exposure to interest rate risk in accordance with the market’s evolution at all times. Insuring exposure to exchange rate risk in accordance with currency evolution at all times, with the priority currency of any transaction being the euro.

Additionally, the Buying Department together with the Financial Department will control exposure to risk through volatility of commodity prices in accordance with the market’s evolution at all times.


CONSOLIDATED FINANCIALSTATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 AND DIRECTORS’ REPORT, TOGETHER WITH INDEPENDENT AUDITOR’S REPORT

Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Note 3). In the event of a discrepancy, the Spanish-language version prevails.

MAHOU, S.A. AND SUBSIDIARIES

ANNUAL REPORT 2014 BUILDING THE FUTURE

C/ Titán, 1528045, Madrid, Spain+34 915 269 100www.mahou-sanmiguel.com

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