EX-99.6 5 exhibit996abinbev1h2016fin.htm AB INBEV FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015 Exhibit


Exhibit 99.6
 
hyreport2016finalimage1.jpg






 Unaudited Interim Report
for the six-month period ended
30 June 2016



Index
 
 
 
 
1.
Unaudited condensed consolidated interim financial statements
3

1.1.
Unaudited condensed consolidated interim income statement
3

1.2.
Unaudited condensed consolidated interim statement of comprehensive income
4

1.3.
Unaudited condensed consolidated interim statement of financial position
5

1.4.
Unaudited condensed consolidated interim statement of changes in equity
6

1.5.
Unaudited condensed consolidated interim statement of cash flows
7

1.6.
Notes to the unaudited condensed consolidated interim financial statements
8



2



1.
Unaudited condensed consolidated interim financial statements
 
1.1.
Unaudited condensed consolidated interim income statement
 
For the six-month period ended 30 June
Million US dollar, except earnings per shares in US dollar
 
Notes

 
2016

 
2015

 
Revenue
 
 
 
20 206 

 
21 505 

Cost of sales
 
 
 
(8 002) 

 
(8 662) 

Gross profit
 
 
 
12 204 

 
12 843 

Distribution expenses
 
 
 
(1 964) 

 
(2 125) 

Sales and marketing expenses
 
 
 
(3 568) 

 
(3 343) 

Administrative expenses
 
 
 
(1 179) 

 
(1 263) 

Other operating income/(expenses)
 
 
 
422

 
483

Restructuring
 
7

 
(62
)
 
(55
)
Business and asset disposal
 
7

 
2

 
147

Acquisition costs business combinations
 
7

 
(79
)
 
(4
)
Judicial settlement
 
7

 
—

 
(77
)
Profit from operations
 
 
 
5 775 

 
6 606 

Finance cost
 
8

 
(4 918) 

 
(1 235) 

Finance income
 
8

 
805

 
1 107 
 

Net finance income/(cost)
 
 
 
(4 113) 

 
(128
)
Share of result of associates
 
 
 
3

 
8

Profit before tax
 
 
 
1 664 

 
6 486 

Income tax expense
 
9

 
(835
)
 
(1 125) 

Profit
 
 
 
829

 
5 361 

Attributable to:
 
 
 
 
 
 
Equity holders of AB InBev
 
 
 
285

 
4 610 

Non-controlling interest
 
 
 
544

 
751

Basic earnings per share
 
14

 
0.17

 
2.81

Diluted earnings per share
 
14

 
0.17

 
2.76

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.


3



1.2.
Unaudited condensed consolidated interim statement of comprehensive income
 
For the six-month period ended 30 June
Million US dollar
 
Notes

 
2016

 
2015

Profit
 
 
 
829

 
5 361 

Other comprehensive income: Items that will not be reclassified to profit or loss:
 
 
 
 
 
 
Re-measurements of post-employment benefits
 
 
 
1

 
1

 
 
 
 
1

 
1

Other comprehensive income: Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
Exchange differences on translation of foreign operations
 
 
 
(528
)
 
(1 807) 

Foreign exchange contracts recognized in equity in relation to the SABMiller proposed combination
 
18

 
(4 185) 

 
—

Effective portion of changes in fair value of net investment hedges
 
 
 
128

 
(106
)
Cash flow hedges recognized in equity
 
 
 
(165
)
 
(125
)
Cash flow hedges reclassified from equity to profit or loss
 
 
 
(15
)
 
(36
)
 
 
 
 
(4 765) 

 
(2 074) 

Other comprehensive income, net of tax
 
 
 
(4 764) 

 
(2 073) 

 
 
 
 
 
 
 
Total comprehensive income
 
 
 
(3 935) 

 
3 288 

 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Equity holders of AB InBev
 
 
 
(4 651) 

 
2 862 

Non-controlling interest
 
 
 
716

 
426

 
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
 

4



1.3.
Unaudited condensed consolidated interim statement of financial position
 
As at
Million US dollar
 
Notes

 
30 June 2016 

 
31 December 2015

ASSETS
 
 
 
 
 
 
Non-current assets
 
 
 
 
 
 
Property, plant and equipment
 
10

 
19 309 

 
18 952 

Goodwill
 
11

 
65 210 

 
65 061 

Intangible assets
 
12

 
29 634 

 
29 677 

Investments in associates and joint ventures
 
 
 
286

 
212

Investment securities
 
 
 
49

 
48

Deferred tax assets
 
 
 
1 201 

 
1 181 

Employee benefits
 
 
 
5

 
2

Derivatives
 
18

 
213

 
295

Trade and other receivables
 
 
 
789

 
913

 
 
 
 
116 696 

 
116 341 

Current assets
 
 
 
 
 
 
Investment securities
 
13

 
55 982 

 
55

Inventories
 
 
 
3 282 

 
2 862 

Income tax receivables
 
 
 
994

 
687

Derivatives
 
18

 
1 544 

 
3 268 

Trade and other receivables
 
 
 
6 534 

 
4 451 

Cash and cash equivalents
 
13

 
6 050 

 
6 923 

Assets held for sale
 
 
 
47

 
48

 
 
 
 
74 433 
 

 
18 294 
 

Total assets
 
 
 
191 129 

 
134 635 

 
 
 
 
 
 
 
EQUITY AND LIABILITIES
 
 
 
 
 
 
Equity
 
 
 
 
 
 
Issued capital
 
14

 
1 736 

 
1 736 

Share premium
 
 
 
17 620 

 
17 620 

Reserves
 
 
 
(18 053) 

 
(13 168) 

Retained earnings
 
 
 
32 587 

 
35 949 

Equity attributable to equity holders of AB InBev
 
 
 
33 890 

 
42 137 

 
 
 
 
 
 
 
Non-controlling interests
 
 
 
3 847 

 
3 582 

 
 
 
 
37 737 

 
45 719 

Non-current liabilities
 
 
 
 
 
 
Interest-bearing loans and borrowings
 
15

 
101 045 

 
43 541 

Employee benefits
 
 
 
2 678 

 
2 725 

Deferred tax liabilities
 
 
 
11 890 

 
11 961 

Derivatives
 
18

 
338

 
315

Trade and other payables
 
17

 
1 389 

 
1 241 

Provisions
 
 
 
705

 
677

 
 
 
 
118 045 

 
60 460 

Current liabilities
 
 
 
 
 
 
Bank overdrafts
 
13

 
55

 
13

Interest-bearing loans and borrowings
 
15

 
7 586 

 
5 912 

Income tax payables
 
 
 
430

 
669

Derivatives
 
18

 
9 547 

 
3 980 

Trade and other payables
 
17

 
17 601 

 
17 662 

Provisions
 
 
 
128

 
220

 
 
 
 
35 347 
 

 
28 456 
 

Total equity and liabilities
 
 
 
191 129 

 
134 635 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

5


1.4.
Unaudited condensed consolidated interim statement of changes in equity

 
 
 
Attributable to equity holders of AB InBev
 
 
 
 
Million US dollar
 
Issued 
capital
 
Share
premium
 
Treasury
shares
 
Share-
based
payment
reserves
 
Translation
reserves
 
Hedging
reserves
 
Post-
employment
benefits
 
Deferred
share
instrument
 
Retained
earnings
 
Total
 
Non-
controlling
interest

 
Total 
equity 

As per 1 January 2015
 
1 736

 
17 620

 
(819
)
 
1 080

 
(5 336)

 
557

 
(1 447)

 
1 407

 
35 174

 
49 972

 
4 285

 
54 257 

Profit
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
4 610

 
4 610

 
751

 
5 361 

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exchange differences on translation of foreign operations (gains/(losses))
 
—

 
—

 
—

 
—

 
(1 564)

 
—

 
—

 
—

 
—

 
(1 564)

 
(349
)
 
(1 913) 

Cash flow hedges
 
—

 
—

 
—

 
—

 
—

 
(184
)
 
—

 
—

 
—

 
(184
)
 
23

 
(161
)
Re-measurements of post-employment benefits
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1

 
1

Total comprehensive income
 
—

 
—

 
—

 
—

 
(1 564)

 
(184
)
 
—

 
—

 
4 610

 
2 862

 
426

 
3 288 

Dividends
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(62
)
 
(4 329)

 
(4 391)

 
(692
)
 
(5 083) 

Treasury shares
 
—

 
—

 
(987
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(987
)
 
—

 
(987
)
Share-based payments
 
—

 
—

 
—

 
81

 
—

 
—

 
—

 
—

 
—

 
81

 
9

 
90

Scope and other changes
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(36
)
 
(36
)
 
(86
)
 
(122
)
As per 30 June 2015
 
1 736

 
17 620

 
(1 806)

 
1 161

 
(6 900)

 
373

 
(1 447)

 
1 345

 
35 419

 
47 501

 
3 942

 
51 443 

 
 
Attributable to equity holders of AB InBev
 
 
 
 
Million US dollar
 
Issued capital
 
Share
premium
 
Treasury
shares
 
Share-
based
payment
reserves
 
Translation
reserves
 
Hedging
reserves
 
Post-
employment
benefits
 
Deferred
share
instrument
 
Retained
earnings
 
Total
 
Non-
controlling
interest

 
Total
equity

As per 1 January 2016
 
1 736

 
17 620

 
(1 626)

 
1 264

 
(11 493)

 
(1 217)

 
(1 400)

 
1 304

 
35 949

 
42 137

 
3 582

 
45 719

Profit
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
285

 
285

 
544

 
829

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exchange differences on translation of foreign operations (gains/(losses))
 
—

 
—

 
—

 
—

 
(693
)
 
—

 
—

 
—

 
—

 
(693
)
 
293

 
(400
)
Foreign exchange contracts recognized in equity in relation to the SABMiller proposed combination
 
—

 
—

 
—

 
—

 
—

 
(4 185)

 
—

 
—

 
—

 
(4 185)

 
—

 
(4 185)

Cash flow hedges
 
—

 
—

 
—

 
—

 
—

 
(59
)
 
—

 
—

 
—

 
(59
)
 
(121
)
 
(180
)
Re-measurements of post-employment benefits
 
—

 
—

 
—

 
—

 
—

 
—

 
1

 
—

 
—

 
1

 
—

 
1

Total comprehensive income
 
—

 
—

 
—

 
—

 
(693
)
 
(4 244)

 
1

 
—

 
285

 
(4 651)

 
716

 
(3 935)

Dividends
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(51
)
 
(3 596)

 
(3 647)

 
(489
)
 
(4 136)

Treasury shares
 
—

 
—

 
27

 
—

 
—

 
—

 
—

 
—

 
—

 
27

 
—

 
27

Share-based payments
 
—

 
—

 
—

 
75

 
—

 
—

 
—

 
—

 
—

 
75

 
(1
)
 
74

Scope and other changes
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(51
)
 
(51
)
 
39

 
(12
)
As per 30 June 2016
 
1 736

 
17 620

 
(1 599)

 
1 339

 
(12 186)

 
(5 461)

 
(1 399)

 
1 253

 
32 587

 
33 890

 
3 847

 
37 737

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

6


1.5. Unaudited condensed consolidated interim statement of cash flows
 
For the six-month period ended 30 June
Million US dollar
 
Notes

 
2016

 
20151

OPERATING ACTIVITIES
 
 
 
 
 
 
Profit
 
 
 
829

 
5 361 

Depreciation, amortization and impairment
 
 
 
1 559 

 
1 527 

Impairment losses on receivables, inventories and other assets
 
 
 
46

 
42

Additions/(reversals) in provisions and employee benefits
 
 
 
121

 
173

Net finance cost/(income)
 
8

 
4 113 

 
128

Loss/(gain) on sale of property, plant and equipment and intangible assets
 
 
 
(21
)
 
(1
)
Loss/(gain) on sale of subsidiaries, associates and assets held for sale
 
 
 
(4
)
 
(146
)
Equity-settled share-based payment expense
 
16

 
110

 
106

Income tax expense
 
9

 
835

 
1 125 

Other non-cash items included in the profit
 
 
 
(192
)
 
(117
)
Share of result of associates and joint ventures
 
 
 
(3
)
 
(8
)
Cash flow from operating activities before changes in working capital and use of provisions
 
 
 
7 393 

 
8 190 

Decrease/(increase) in trade and other receivables
 
 
 
(359
)
 
(273
)
Decrease/(increase) in inventories
 
 
 
(330
)
 
(322
)
Increase/(decrease) in trade and other payables
 
17

 
(984
)
 
(370
)
Pension contributions and use of provisions
 
 
 
(265
)
 
(194
)
Cash generated from operations
 
 
 
5 455 

 
7 031 

 
 
 
 
 
 
 
Interest paid
 
 
 
(1 078) 

 
(1 060) 

Interest received
 
 
 
244

 
156

Dividends received
 
 
 
6

 
19

Income tax paid
 
 
 
(2 174) 

 
(1 432) 

CASH FLOW FROM OPERATING ACTIVITIES
 
 
 
2 453 

 
4 714 

 
 
 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
 
 
Proceeds from sale of property, plant and equipment and of intangible assets
 
 
 
109

 
66

Sale of subsidiaries, net of cash disposed of
 
6

 
20

 
1

Acquisition of subsidiaries, net of cash acquired
 
6

 
(1 055) 

 
(221
)
Acquisition of property, plant and equipment and of intangible assets
 
10/12

 
(1 528) 

 
(1 675) 

Net of tax proceeds from the sale of assets held for sale
 
 
 
58

 
228

Net proceeds from sale/(acquisition) of investment in short-term debt securities
 
13

 
(55 905) 

 
(71
)
Net proceeds from sale/(acquisition) of other assets
 
 
 
—

 
(45
)
Net repayments/(payments) of loans granted
 
 
 
2

 
(46
)
CASH FLOW FROM INVESTING ACTIVITIES
 
 
 
(58 299) 

 
(1 763) 

 
 
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
 
 
Purchase of non-controlling interest
 
14

 
(10
)
 
(181
)
Net proceeds from the issue of share capital
 
14

 
—

 
3

Proceeds from borrowings
 
 
 
65 257 

 
9 645 

Payments on borrowings
 
 
 
(6 456) 

 
(8 138) 

Cash net finance (cost)/income other than interests
 
 
 
85

 
(196
)
Share buyback
 
 
 
—

 
(1 000) 

Dividends paid
 
 
 
(3 929) 

 
(4 556) 

CASH FLOW FROM FINANCING ACTIVITIES
 
 
 
54 947 

 
(4 423) 

 
 
 
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
 
 
 
(899
)
 
(1 472) 

 
 
 
 
 
 
 
Cash and cash equivalents less bank overdrafts at beginning of year
 
 
 
6 910 

 
8 316 

Effect of exchange rate fluctuations
 
 
 
(16
)
 
(453
)
 
 
 
 
 
 
 
Cash and cash equivalents less bank overdrafts at end of period
 
13

 
5 995 

 
6 391 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
________________________________________
1 Reclassified to conform to the 2016 presentation.

7



1.6.
Notes to the unaudited condensed consolidated interim financial statements
 
 
 
Corporate information
1

 
Statement of compliance
2

 
Summary of significant accounting policies
3

 
Use of estimates and judgments
4

 
Segment reporting
5

 
Acquisitions and disposals of subsidiaries
6

 
Exceptional items
7

 
Finance cost and income
8

 
Income taxes
9

 
Property, plant and equipment
10

 
Goodwill
11

 
Intangible assets
12

 
Cash and cash equivalents and investments in short-term debt securities
13

 
Changes in equity and earnings per share
14

 
Interest-bearing loans and borrowings
15

 
Share-based payments
16

 
Trade and other payables
17

 
Risks arising from financial instruments
18

 
Collateral and contractual commitments for the acquisition of property, plant and equipment, loans to customers and other
19

 
Contingencies
20

 
Related parties
21

 
Supplemental guarantor financial information
22

 
Events after the balance sheet date
23



8


1.  CORPORATE INFORMATION
Anheuser-Busch InBev is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with a secondary listing on the Mexico (MEXBOL: ABI) and South Africa (JSE: ANB) stock exchanges and with American Depositary Receipts on the New York Stock Exchange (NYSE: BUD). It is the leading global brewer and one of the world’s top five consumer products companies. Beer, the original social network, has been bringing people together for thousands of years and the company’s portfolio of well over 200 beer brands continues to forge strong connections with consumers. This includes global brands Budweiser®, Corona® and Stella Artois®; international brands Beck’s®, Leffe® and Hoegaarden®; and local champions Bud Light®, Skol®, Brahma®, Antarctica®, Quilmes®, Victoria®, Modelo Especial®, Michelob Ultra®, Harbin®, Sedrin®, Klinskoye® Sibirskaya Korona®, Chernigivske®, Cass® and Jupiler®. Anheuser-Busch InBev’s dedication to quality goes back to a brewing tradition of more than 600 years and the Den Hoorn brewery in Leuven, Belgium, as well as the pioneering spirit of the Anheuser & Co brewery, with origins in St. Louis, USA since 1852. Geographically diversified with a balanced exposure to developed and developing markets, Anheuser Busch InBev leverages the collective strengths of more than 150 000 employees based in 26 countries worldwide. In 2015, AB InBev realized 43.6 billion US dollar revenue. The company strives to be the Best Beer Company Bringing People Together For a Better World.
The unaudited condensed consolidated interim financial statements of the company for the six-month period ended 30 June 2016 comprise the company and its subsidiaries (together referred to as “AB InBev” or the “company”) and the company’s interest in associates and joint ventures and operations. The condensed consolidated interim financial statements as of 30 June 2016 and for the six-month periods ended 30 June 2016 and 30 June 2015 are unaudited; however, in the opinion of the company, the interim data include all adjustments, consisting of only normally recurring adjustments, necessary for a fair statement of the results for the interim period.
The unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on 28 July 2016.
2.  STATEMENT OF COMPLIANCE
The unaudited condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as issued by the International Accounting Standard Board (IASB) and as adopted by the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the company as at and for the year ended 31 December 2015. AB InBev did not early apply any new IFRS requirements that were not yet effective in 2016 and did not apply any European carve-outs from IFRS.
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied are consistent with those applied in the annual consolidated financial statements ended 31 December 2015, except as described below.
(A)    SUMMARY OF CHANGES IN ACCOUNTING POLICIES
A number of new standards, amendment to standards and new interpretations became mandatory for the first time for the financial year beginning 1 January 2016, and have not been listed in these unaudited condensed consolidated interim financial statements because of either their non-applicability to or their immateriality to AB InBev’s consolidated financial statements.
(B)    FOREIGN CURRENCIES
FUNCTIONAL AND PRESENTATION CURRENCY
Unless otherwise specified, all information included in these unaudited condensed consolidated interim financial statements has been stated in US dollar, which is the AB InBev presentation currency. As from 2009, following the combination with Anheuser-Bush, the company changed the presentation currency of the consolidated financial statements from the euro to the US dollar to provide greater alignment of the presentation currency with AB InBev’s most significant operating currency and underlying financial performance. The functional currency of the parent company is the euro.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are accounted for at exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the balance sheet date rate. Gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to US dollar at foreign exchange rates ruling at the dates the fair value was determined.

9


TRANSLATION OF THE RESULTS AND FINANCIAL POSITION OF FOREIGN OPERATIONS
Assets and liabilities of foreign operations are translated to US dollar at foreign exchange rates prevailing at the balance sheet date. Income statements of foreign operations, excluding foreign entities in hyperinflationary economies, are translated to US dollar at exchange rates for the year approximating the foreign exchange rates prevailing at the dates of the transactions. The components of shareholders’ equity are translated at historical rates. Exchange differences arising from the translation of shareholders’ equity to US dollar at period-end exchange rates are taken to other comprehensive income (translation reserves).
In hyperinflationary economies, re-measurement of the local currency denominated non-monetary assets, liabilities, income statement accounts as well as equity accounts is made by applying a general price index. These re-measured accounts are used for conversion into US dollar at the closing exchange rate. AB InBev did not operate in hyperinflationary economies in 2015 and in the six-month period ended 30 June 2016.
EXCHANGE RATES
The most important exchange rates that have been used in preparing the financial statements are:
 
 
 
Closing rate
 
Average rate
1 US dollar equals:
 
30 June 2016       
 
31 December 2015    
 
30 June 2016       
 
30 June 2015      
Argentinean peso
 
14.920060

 
13.004955

 
14.127933

 
8.742260

Brazilian real
 
3.209806

 
3.904803

 
3.750743

 
2.971548

Canadian dollar
 
1.295622

 
1.388446

 
1.319418

 
1.233027

Chinese yuan
 
6.643401

 
6.485535

 
6.520308

 
6.217463

Euro
 
0.900739

 
0.918527

 
0.897703

 
0.891833

South Korean won
 
1 151.84 

 
1 176.09  

 
1 179.64 

 
1 096.97

Mexican peso
 
18.911169

 
17.206357

 
17.780874

 
15.065764

Pound sterling
 
0.744461

 
0.674152

 
0.693730

 
0.656221

Russian ruble
 
64.255885

 
72.881615

 
69.686616

 
56.645896

Ukrainian hryvnia
 
24.854143

 
24.000600

 
25.548652

 
21.447057

(C)    RECENTLY ISSUED IFRS
IFRS WITH EFFECTIVE APPLICATION FOR ANNUAL PERIODS AFTER 1ST JANUARY 2016:
To the extent that new IFRS requirements are expected to be applicable in the future, they have been listed hereafter. For the six-month period ended 30 June 2016, they have not been applied in preparing these unaudited condensed consolidated interim financial statements.
The following standards, amendments and interpretations have been issued recently, but are not yet effective:
IFRS 9 Financial Instruments (effective from annual periods beginning on or after 1 January 2018, not yet endorsed by the European Union) is the standard issued as part of a wider project to replace IAS 39. IFRS 9 introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held; defines a new expected-loss impairment model that will require more timely recognition of expected credit losses; and introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new hedge accounting model represents a significant overhaul of hedge accounting that aligns the accounting treatment with risk management activities. IFRS 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value.
IFRS 15 Revenue from Contracts with Customers (effective from annual periods beginning on or after 1 January 2018, not yet endorsed by the European Union). The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.
IFRS 16 Leases (effective from annual periods beginning on or after 1 January 2019, not yet endorsed by the European Union replaces the existing lease accounting requirements and represents a significant change in the accounting and reporting of leases that were previously classified as operating leases, with more assets and liabilities to be reported on the balance sheet and a different recognition of lease costs.
Other Standards, Interpretations and Amendments to Standards: a number of other amendments to standards are effective for annual periods beginning after 1 January 2016, and have not been listed above because of either their non-applicability to or their immateriality to AB InBev’s consolidated financial statements.
The impact for the application of those Standards and amendments is currently being assessed.

10


4.  USE OF ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Although each of its significant accounting policies reflects judgments, assessments or estimates, AB InBev believes that the following accounting policies reflect the most critical judgments, estimates and assumptions that are important to its business operations and the understanding of its results: business combinations, intangible assets, goodwill, impairment, provisions, share-based payments, employee benefits and accounting for current and deferred tax.
The fair values of acquired identifiable intangibles are based on an assessment of future cash flows. Impairment analyses of goodwill and indefinite-lived intangible assets are performed annually and whenever a triggering event has occurred, in order to determine whether the carrying value exceeds the recoverable amount. These calculations are based on estimates of future cash flows.
The company uses its judgment to select a variety of methods including the discounted cash flow method and option valuation models and makes assumptions about the fair value of financial instruments that are mainly based on market conditions existing at each balance sheet date.
Actuarial assumptions are established to anticipate future events and are used in calculating pension and other long-term employee benefit expense and liability. These factors include assumptions with respect to interest rates, rates of increase in health care costs, rates of future compensation increases, turnover rates, and life expectancy.
The company is subject to income tax in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain. Some subsidiaries within the group are involved in tax audits and local enquiries usually in relation to prior years. Investigations and negotiations with local tax authorities are ongoing in various jurisdictions at the balance sheet date and, by their nature, these can take considerable time to conclude. In assessing the amount of any income tax provisions to be recognized in the financial statements, estimation is made of the expected successful settlement of these matters. Estimates of interest and penalties on tax liabilities are also recorded. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period such determination is made.
Judgments made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are further discussed in the relevant notes hereafter.
In preparing these unaudited condensed consolidated interim financial statements, the significant judgments made by management in applying the company’s accounting policies and the key sources of estimating uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2015.


11


5.    SEGMENT REPORTING
Segment information is presented by geographical segments, consistent with the information that is available and evaluated regularly by the chief operating decision maker. AB InBev operates through seven business segments. Regional and operating company management is responsible for managing performance, underlying risks, and effectiveness of operations. Internally, AB InBev’s management uses performance indicators such as normalized profit from operations (normalized EBIT) and normalized EBITDA as measures of segment performance and to make decisions regarding allocation of resources.
All figures in the tables below are stated in million US dollar, except volume (million hls) and Normalized EBITDA margin (in %). The information presented is for the six-month period ended 30 June, except for segment assets (non-current) comparatives at 31 December 2015.
 
  
 
North America
 
Mexico
 
Latin America 
North
 
Latin America 
South
 
Europe
 
Asia Pacific
 
Global Export 
and Holding 
Companies
 
Consolidated
 
 
2016

 
2015

 
2016

 
2015

 
2016

 
2015

 
2016

 
2015

 
2016

 
2015

 
2016

 
2015

 
2016

 
2015

 
2016

 
2015

Volume
 
58

 
58

 
22

 
20

 
56

 
59

 
15

 
18

 
21

 
21

 
45

 
45

 
3

 
3

 
220

 
224

Revenue
 
7 795 

 
7 719 

 
1 847 

 
1 948 

 
3 709 

 
4 484 

 
1 276 

 
1 614 

 
1 896 

 
1 922 

 
2 784 

 
2 822 

 
900

 
997

 
20 206 

 
21 505 

Normalized EBITDA
 
3 116 

 
3 038 

 
871

 
986

 
1 735 

 
2 170 

 
580

 
681

 
465

 
499

 
825

 
762

 
(118
)
 
(15
)
 
7 474 

 
8 123 

Normalized EBITDA margin %
 
40.0
%
 
39.4
%
 
47.2
%
 
50.6
%
 
46.7
%
 
48.4
%
 
45.3
%
 
42.2
%
 
24.5
%
 
26.0
%
 
29.6
%
 
27.0
%
 
—

 
—

 
37.0
%
 
37.8
%
Depreciation, amortization and impairment
 
(393
)
 
(368
)
 
(159
)
 
(173
)
 
(344
)
 
(360
)
 
(94
)
 
(94
)
 
(165
)
 
(164
)
 
(312
)
 
(296
)
 
(92
)
 
(72
)
 
(1 559) 

 
(1 527) 

Normalized profit from operations (EBIT)
 
2 723 

 
2 670 

 
712

 
813

 
1 391 

 
1 811 

 
486

 
587

 
300

 
335

 
512

 
465

 
(209
)
 
(86
)
 
5 915 

 
6 595 

Exceptional items (refer to Note 7)
 
(11
)
 
138

 
(4
)
 
(21
)
 
(3
)
 
(77
)
 
(3
)
 
(5
)
 
(18
)
 
(8
)
 
(24
)
 
(8
)
 
(77
)
 
(7
)
 
(139
)
 
11

Profit from operations (EBIT)
 
2 712 

 
2 808 

 
708

 
792

 
1 388 

 
1 734 

 
483

 
582

 
282

 
327

 
488

 
457

 
(286
)
 
(93
)
 
5 775 

 
6 606 

Net finance income/(cost)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4 113) 

 
(128
)
Share of results of associates and joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3

 
8

Income tax expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(835
)
 
(1 125) 

Profit/(loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
829

 
5 361 

Segment assets (non-current)
 
62 382 

 
61 870 

 
19 597 

 
21 615 

 
13 177 

 
11 357 

 
2 431 

 
2 435 

 
4 497 

 
4 316 

 
12 610 

 
12 761 

 
2 003 

 
1 987 

 
116 696 

 
116 341 

Gross capex
 
 
366

 
302

 
190

 
99

 
302

 
489

 
158

 
161

 
171

 
164

 
247

 
382

 
58

 
81

 
1 492 
 

 
1 677 
 


12


6.   ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES
The table below summarizes the impact of acquisitions on the Statement of financial position and cash flows of AB InBev for 30 June 2016 and 2015:
Million US dollar
 
 
2016  
Acquisitions  

 
2015  
Acquisitions  

 
 
2016  
Disposals  

 
2015  
Disposals  

Non-current assets
 
 
 
 
 
 
 
 
Property, plant and equipment
 
169

 
15

 
(13
)
 
(20
)
Intangible assets
 
545

 
29

 
(6
)
 
—

Investments in associates
 
62

 
—

 
—

 
—

Employee benefits
 
3

 
—

 
—

 
—

Deferred tax assets
 
1

 
—

 
—

 
—

 
Current assets
 
 
 
 
 
 
 
 
Inventories
 
22

 
5

 
(1
)
 
—

Trade and other receivables
 
21

 
5

 
—

 
—

Cash and cash equivalents
 
19

 
—

 
—

 
—

 
Minority interests
 
(15
)
 
—

 
—

 
—

 
Non-current liabilities
 
 
 
 
 
 
 
 
Interest-bearing loans and borrowings
 
(9
)
 
(1
)
 
—

 
—

Trade and other payables
 
(46
)
 
—

 
—

 
—

Employee benefits
 
(1
)
 
—

 
—

 
—

Provisions
 
—

 
—

 
—

 
(2
)
 
Current liabilities
 
 
 
 
 
 
 
 
Interest-bearing loans and borrowings
 
(3
)
 
(2
)
 
—

 
—

Trade and other payables
 
(35
)
 
4

 
—

 
—

Net identifiable assets and liabilities
 
733

 
55

 
(20
)
 
(22
)
 
Goodwill on acquisitions
 
313

 
63

 
6

 
—

Loss/(gain) on disposal
 
—

 
—

 
(1
)
 
(8
)
 
Prior year payments
 
(143
)
 
—

 
—

 
—

Consideration to be paid
 
(91
)
 
—

 
(5
)
 
—

Net cash paid on prior years acquisitions / (received) on prior years disposals
 
 
31

 
103

 
—

 
—

Consideration paid/(received), satisfied in cash
 
843

 
221

 
(20
)
 
(30
)
 
Cash (acquired)/ disposed of
 
 
(18
)
 
—

 
—

 
—

Net cash outflow/(inflow)
 
825

 
221

 
(20
)
 
(30
)
ACQUISITIONS AND DISPOSALS
During the first six months of 2016, AB InBev completed the acquisition of the Canadian rights to a range of primarily spirit-based beers and ciders from Mark Anthony Group. In a separate transaction, Mark Anthony Group agreed to sell certain non-U.S. and non-Canadian trademark rights and other intellectual property to one of the company’s subsidiaries. The aggregate purchase price of such acquisitions was approximately 413m US dollar. Mark Anthony Group retains full ownership of its U.S. business, as well as the Canadian wine, spirits and beer import and distribution business.
During the first six months 2015, AB InBev purchased 103m US dollar Grupo Modelo’s shares through the Trust established on 4 June 2013 to accept further tender of shares by Grupo Modelo shareholders over a period of up to 25 months.
The company undertook a series of additional acquisitions and disposals during the first six months of 2015 and 2016, with no significant impact in the company’s condensed consolidated interim income statement.


13


7.   EXCEPTIONAL ITEMS
IAS 1 Presentation of financial statements requires material items of income and expense to be disclosed separately. Exceptional items are items, which in management’s judgment need to be disclosed by virtue of their size or incidence in order for the user to obtain a proper understanding of the financial information. The company considers these items to be of significance in nature, and accordingly, management has excluded these from their segment measure of performance as noted in Note 5 Segment Reporting.
The exceptional items included in the income statement are as follows:
 
For the six-month period ended 30 June
Million US dollar
 
2016

 
2015

Restructuring
 
(62
)
 
(55
)
Acquisition costs business combinations
 
(79
)
 
(4
)
Business and asset disposal
 
2

 
147

Judicial settlement
 
—

 
(77
)
Impact on profit from operations
 
(139
)
 
11

The exceptional restructuring charges for the six-month period ended 30 June 2016 total (62)m US dollar. These charges primarily relate to organizational alignments in Asia Pacific, Europe and North America. These changes aim to eliminate overlap or duplicated processes, taking into account the right match of employee profiles with the new organizational requirements. These one-time expenses, as a result of the series of decisions, provide the company with a lower cost base in addition to a stronger focus on AB InBev’s core activities, quicker decision-making and improvements to efficiency, service and quality.
Acquisition costs of business combinations amount to (79)m US dollar by the end of June 2016, primarily related to costs incurred in relation to the proposed combination with SABMiller.
The exceptional restructuring charges for the six-month period ended 30 June 2015 total (55)m US dollar. These charges primarily relate to the integration of Grupo Modelo and to organizational alignments in Europe and North America.
Business and asset disposals resulted in a net gain of 147m US dollar as per 30 June 2015. This gain consists primarily of compensation for the termination of agreements with Crown Imports for the distribution of Grupo Modelo products through some of the company’s wholly-owned distributors in the US, and with Monster, for the distribution of its brands in the US.
The company also incurred exceptional finance cost of (2 168)m US dollar for the six-month period ended 30 June 2016 (30 June 2015: 335m US dollar income) - see Note 8 Finance cost and income.
All the above amounts are before income taxes. The exceptional items as of 30 June 2016 decreased income taxes by 18m US dollar (30 June 2015: 45m US dollar increase of income taxes).
Non-controlling interest on the exceptional items amounts to 2m US dollar for the six-month period ended 30 June 2016 (30 June 2015: 31m US dollar).
8.   FINANCE COST AND INCOME
FINANCE COSTS
 
For the six-month period ended 30 June
Million US dollar
 
2016

 
2015

Interest expense
 
(1 812) 

 
(947
)
Capitalization of borrowing costs
 
9

 
12

Net interest on net defined benefit liabilities
 
(59
)
 
(60
)
Accretion expense
 
(263
)
 
(149
)
Net foreign exchange losses (net of the effect of foreign exchange derivative instruments)
 
(119
)
 
—

Tax on financial transactions
 
(24
)
 
(25
)
Other financial costs, including bank fees
 
(43
)
 
(66
)
 
 
(2 311) 

 
(1 235) 

Exceptional finance costs
 
(2 607) 

 
—

 
 
(4 918) 

 
(1 235) 

Finance costs, excluding exceptional items, increased by 1 076 million US dollar from prior year driven by higher interest expense, mainly as a result of the issuance of bonds in January and March 2016 in connection with the pre-funding of the proposed combination with SABMiller, as well as net foreign exchange losses and higher accretion expenses.

14


Borrowing costs capitalized relate to the capitalization of interest expenses directly attributable to the acquisition and construction of qualifying assets mainly in Brazil and China. Interests are capitalized at a borrowing rate ranging from 4% to 8%.
In the light of the announced proposed combination with SABMiller, AB InBev recognized exceptional expenses of 2 607 million US dollar, of which:
–
2 365m US dollar negative mark-to-market adjustments as a result of derivative foreign exchange forward contracts entered into with respect to 46 billion pound sterling purchase price, for which a portion of the hedges could not qualify for hedge accounting – see also Note 18 Risks arising from financial instruments; and
–
242m US dollar related to accelerated accretion expenses associated to the 2015 Senior Facilities Agreement, as well as commitment fees and other fees. The accelerated accretion follows the cancellation of 42.5 and 12.5 billion US dollar commitments available under the 2015 Senior Facilities Agreement in January and April 2016, respectively. Commitment fees accrue and are payable periodically on any undrawn but available funds under these facilities – see also Note 15 Interest-bearing loans and borrowings.
Interest expense is presented net of the effect of interest rate derivative instruments hedging AB InBev’s interest rate risk – see also Note 27 Risks arising from financial instruments of the 31 December 2015 consolidated financial statements.
FINANCE INCOME
 
For the six-month period ended 30 June
Million US dollar
 
2016

 
2015

Interest income
 
256

 
175

Net foreign exchange gains (net of the effect of foreign exchange derivative instruments)
 
—

 
184

Net gains on hedging instruments that are not part of a hedge accounting relationship
 
90

 
407

Other financial income
 
20

 
6

 
 
366

 
772

Exceptional finance income
 
439

 
335

 
 
805

 
1 107  

Finance income, excluding exceptional items, decreased mainly due to lower mark-to-market gains on certain derivatives related to the hedging of share-based payment programs which reached net gains of 306m US dollar during the first six months of 2016 (30 June 2015: 618m US dollar income). Interest income for the six-month period ended 30 June 2016 is positively impacted by the income on the excess liquidity following the issuance of bonds in the first quarter of 2016 that were mainly invested in US Treasury Bills pending the closing of the SABMiller acquisition.
Exceptional net finance income for the six-month period ended 30 June 2016 includes:
–
146m US dollar resulting from mark-to-market adjustments on derivative instruments entered into to hedge the deferred share instrument issued in a transaction related to the combination with Grupo Modelo (30 June 2015: 335m US dollar income). By 30 June 2016, 100% of the deferred share instrument had been hedged at an average price of approximately 68 euro per share. See also Note 14 Changes in equity and earnings per share;
–
166m US dollar positive mark-to-market adjustments as a results of derivatives entered into in order to convert the 13.25 billion euro bond issuance on 29 March 2016, into US dollar – see also Note 15 Interest-bearing loans and borrowings;
–
127m US dollar exceptional finance income resulting from mark-to-market adjustments on derivative instruments entered into to hedge the shares to be issued in relation to the proposed combination with SABMiller – see also Note 18 Risks arising from financial instruments.
No interest income was recognized on impaired financial assets.


15


9.  INCOME TAXES
Income taxes recognized in the income statement can be detailed as follows:
 
For the six-month period ended 30 June
Million US dollar
 
2016

 
2015

 
Current tax expense
 
 
 
 
Current year
 
(950
)
 
(1 636) 

Deferred tax (expense)/income
 
115

 
511

Total income tax expense in the income statement
 
(835
)
 
(1 125) 

 
The reconciliation of the effective tax rate with the aggregated weighted nominal tax rate can be summarized as follows:
 
For the six-month period ended 30 June
Million US dollar
 
2016

 
2015

 
Profit before tax
 
1 664

 
6 486

Deduct share of result of associates and joint ventures
 
3

 
8

Profit before tax and before share of result of associates and joint ventures
 
1 661

 
6 478

 
Adjustments on taxable basis
 
 
 
 
Foreign source income
 
(428
)
 
(475
)
Government incentives
 
(362
)
 
(386
)
Taxable intercompany dividends
 
459

 
61

Expenses not deductible for tax purposes
 
2 544

 
601

Other non-taxable income
 
(137
)
 
(243
)
 
 
3 737

 
6 036

 
Aggregated weighted nominal tax rate
 
30.4
%
 
30.5
%
 
Tax at aggregated weighted nominal tax rate
 
(1 136)

 
(1 838)

 
Adjustments on tax expense
 
 
 
 
Utilization of tax losses not previously recognized
 
10

 
12

Recognition of deferred taxes assets on previous years’ tax losses
 
11

 
19

Write-down of deferred tax assets on tax losses and current year losses for which no deferred tax asset is recognized
 
(244
)
 
(196
)
(Underprovided)/overprovided in prior years
 
(35
)
 
47

Deductions from interest on equity
 
351

 
417

Deductions from goodwill
 
30

 
35

Other tax deductions
 
301

 
593

Change in tax rate
 
—

 
18

Withholding taxes
 
(139
)
 
(189
)
Other tax adjustments
 
16

 
(43
)
 
 
(835
)
 
(1 125)

 
Effective tax rate
 
50.2
%
 
17.4
%
The total income tax expense for the six-month period ended 30 June 2016 amounts to 835m US dollar compared to 1 125m US dollar for the same period 2015. The effective tax rate increase from 17.4% for the six-month period ended 30 June 2015 to 50.2% for the six-month period ended 30 June 2016, mainly resulting from the non-deductible negative mark-to-market adjustment related to the hedging of the purchase price of the proposed combination with SABMiller that could not qualify for hedge accounting. Please refer to Note 18 Risks arising from financial instruments and Note 7 Exceptional items for details on the aforementioned derivatives.
The Company benefits from tax exempted income and tax credits which are expected to continue in the future, except for the tax deductibility of existing goodwill in Brazil, which will expire in 2017. The Company does not have significant benefits coming from low tax rates in any particular jurisdiction.

16


10.
PROPERTY, PLANT AND EQUIPMENT
 
 
30 June 2016
 
31 December
2015

Million US dollar
 
Land
and
buildings

 
Plant and
equipment

 
Fixtures
and
fittings

 
Under
construction

 
Total

 
Total

Acquisition cost
 
 
 
 
 
 
 
 
 
 
 
 
Balance at end of previous year
 
9 239

 
20 975

 
3 182

 
1 933

 
35 329

 
37 485

Effect of movements in foreign exchange
 
227

 
627

 
128

 
9

 
991

 
(5 047)

Acquisitions
 
93

 
504

 
146

 
660

 
1 403

 
4 276

Acquisitions through business combinations
 
74

 
78

 
17

 
—

 
169

 
121

Disposals
 
(65
)
 
(283
)
 
(172
)
 
—

 
(521
)
 
(1 206)

Disposals through the sale of subsidiaries
 
(12
)
 
(1
)
 
—

 
—

 
(13
)
 
(184
)
Transfer (to)/from other asset categories and other movements1
 
158

 
516

 
148

 
(880
)
 
(58
)
 
(116
)
Balance at end of the period
 
9 714

 
22 415

 
3 449

 
1 722

 
37 301

 
35 329

Depreciation and impairment losses
 
 
 
 
 
 
 
 
 
 
 
 
Balance at end of previous year
 
(2 745)

 
(11 613)

 
(2 019)

 
—

 
(16 377)

 
(17 222)

Effect of movements in foreign exchange
 
(112
)
 
(450
)
 
(101
)
 
—

 
(664
)
 
2 386

Disposals
 
42

 
232

 
134

 
—

 
408

 
1 011

Disposals through the sale of subsidiaries
 
—

 
—

 
—

 
—

 
—

 
133

Depreciation
 
(182
)
 
(958
)
 
(209
)
 
—

 
(1 350)

 
(2 670)

Impairment losses
 
—

 
(14
)
 
—

 
—

 
(15
)
 
(48
)
Transfer to/(from) other asset categories and other movements1
 
4

 
—

 
2

 
—

 
6

 
33

Balance at end of the period
 
(2 994)

 
(12 802)

 
(2 194)

 
—

 
(17 991)

 
(16 377)

Carrying amount
 
 
 
 
 
 
 
 
 
 
 
 
at 31 December 2015
 
6 494

 
9 362

 
1 163

 
1 933

 
18 952

 
18 952

at 30 June 2016
 
6 720

 
9 613

 
1 255

 
1 722

 
19 309

 
—

The carrying amount of property, plant and equipment subject to restrictions on title amounts to 22m US dollar.
Contractual commitments to purchase property, plant and equipment amounted to 954m US dollar as at 30 June 2016 compared to 750m US dollar as at 31 December 2015. The increase results from projects mainly in North America, Asia Pacific and Latin America North.
AB InBev’s net capital expenditures amounted to 1 419m US dollar in the first half of 2016 and 1 609m US dollar the first half of 2015. Out of the total 2016 capital expenditures approximately 49% was used to improve the company’s production facilities while 36% was used for logistics and commercial investments and 15% was used for improving administrative capabilities and purchase of hardware and software.
LEASED ASSETS
The company leases land and buildings as well as equipment under a number of finance lease agreements. The carrying amount as at 30 June 2016 of leased land and buildings was 139m US dollar (31 December 2015: 141m US dollar).








________________________________________
1 The transfer (to)/from other asset categories and other movements mainly relates to transfers from assets under construction to their respective asset categories, to contributions of assets to pension plans and to the separate presentation in the balance sheet of property, plant and equipment held for sale in accordance with IFRS 5 Non-current assets held for sale and discontinued operations.

17


11.
GOODWILL
Million US dollar
 
 
30 June 2016

 
31 December 2015

Acquisition cost
 
 
 
 
Balance at end of previous year
 
65 099

 
70 765

Effect of movements in foreign exchange
 
(159
)
 
(5 956)

Purchases of non-controlling interest
 
—

 
2

Disposals through the sale of subsidiaries
 
(6
)
 
—

Acquisitions through business combinations
 
313

 
288

Balance at end of the period
 
65 247

 
65 099

Impairment losses
 
 
 
 
Balance at end of previous year
 
(38
)
 
(7
)
Impairment losses
 
—

 
(38
)
Effect of movements in foreign exchange and other movements
 
1

 
7

Balance at end of the period
 
(37
)
 
(38
)
Carrying amount
 
 
 
 
at 31 December 2015
 
65 061

 
65 061

at 30 June 2016
 
65 210

 
—

AB InBev’s annual goodwill impairment testing is performed during the fourth quarter of the year, or whenever a triggering event has occurred.

12.
INTANGIBLE ASSETS
 
 
 
30 June 2016
 
31 December 2015

Million US dollar
 
Brands

 
Commercial
intangibles

 
Software

 
Other

 
Total

 
Total

 
Acquisition cost
 
 
 
 
 
 
 
 
 
 
 
 
Balance at end of previous year
 
27 426

 
2 227

 
1 399

 
667

 
31 719

 
31 880

Effect of movements in foreign exchange
 
(309
)
 
38

 
18

 
(4
)
 
(257
)
 
(1 267)

Acquisitions through business combinations
 
359

 
171

 
—

 
15

 
545

 
270

Acquisitions and expenditures
 
9

 
17

 
29

 
55

 
110

 
1 018

Disposals through the sales of subsidiaries
 
—

 
—

 
—

 
—

 
—

 
(20
)
Disposals
 
(5
)
 
(9
)
 
(2
)
 
(6
)
 
(20
)
 
(108
)
Transfer (to)/from other asset categories and other movements
 
(26
)
 
(222
)
 
131

 
(59
)
 
(176
)
 
(54
)
Balance at end of period
 
27 455

 
2 222

 
1 575

 
668

 
31 920

 
31 719

Amortization and impairment losses
 
 
 
 
 
 
 
 
 
 
 
 
Balance at end of previous year
 
(32
)
 
(954
)
 
(987
)
 
(69
)
 
(2 042)

 
(1 957)

Effect of movements in foreign exchange
 
—

 
(28
)
 
(16
)
 
(2
)
 
(46
)
 
238

Amortization
 
—

 
(89
)
 
(98
)
 
(21
)
 
(208
)
 
(368
)
Impairment losses
 
—

 
—

 
—

 
—

 
—

 
(32
)
Disposals through the sales of subsidiaries
 
—

 
—

 
—

 
—

 
—

 
2

Disposals
 
—

 
7

 
2

 
2

 
10

 
77

Transfer to/(from) other asset categories and other movements
 
—

 
—

 
—

 
—

 
—

 
(2
)
Balance at end of period
 
(32
)
 
(1 064)

 
(1 099)

 
(90
)
 
(2 286)

 
(2 042)

Carrying value
at 31 December 2015
 
27 394

 
1 273

 
412

 
598

 
29 677

 
29 677

at 30 June 2016
 
27 423

 
1 158

 
476

 
577

 
29 634

 
—

AB InBev is the owner of some of the world’s most valuable brands in the beer industry. As a result, brands and certain distribution rights are expected to generate positive cash flows for as long as the company owns the brands and distribution rights. Given AB InBev’s more than 600-year history, brands and certain distribution rights have been assigned indefinite lives.
Acquisitions and expenditures of commercial intangibles mainly represent supply and distribution rights, exclusive multi-year sponsorship rights and other commercial intangibles.
Intangible assets with indefinite useful lives are comprised primarily of brands and certain distribution rights that AB InBev purchases for its own products, and are tested for impairment during the fourth quarter of the year or whenever a triggering event has occurred.

18


13.
CASH AND CASH EQUIVALENTS AND INVESTMENTS IN SHORT-TERM DEBT SECURITIES
CASH AND CASH EQUIVALENTS
 
Million US dollar
 
 
30 June 2016

 
31 December 2015  

 
Short-term bank deposits
 
3 193

 
4 462

Cash and bank accounts
 
2 857

 
2 461

Cash and cash equivalents
 
6 050

 
6 923

 
Bank overdrafts
 
(55
)
 
(13
)
 
 
5 995

 
6 910

 
INVESTMENTS IN SHORT-TERM DEBT SECURITIES
 
 
 
Million US dollar
 
 
30 June 2016

 
31 December 2015  

 
Current investments
 
 
 
 
US Treasury Bills
 
55 900

 
—

Debt securities held for trading
 
82

 
55

 
 
55 982

 
55

AB InBev raised a series of bonds in the first quarter of 2016 to support the proposed combination with SABMiller. The excess liquidity resulting from these bonds was mainly invested in US Treasury Bills pending the closing of the combination.
The cash outstanding per 30 June 2016 includes restricted cash for an amount of 2m US dollar. This restricted cash relates to outstanding consideration payable to former Anheuser-Busch shareholders who did not yet claim the proceeds from the 2008 combination.

14.
CHANGES IN EQUITY AND EARNINGS PER SHARE
STATEMENT OF CAPITAL
The tables below summarize the changes in issued capital and treasury shares during the first six months of 2016:
 
 
 
Issued capital
 
 
ISSUED CAPITAL
 
Million shares
 
Million US dollar
 
 
 
At the end of the previous year
 
1 608

 
1 736

 
 
Changes during the period
 
—

 
—

 
 
 
 
1 608

 
1 736

 
 
 
 
Treasury shares
 
Result on the use of
treasury shares

TREASURY SHARES
 
Million shares
 
Million US dollar
 
Million US dollar

 
At the end of the previous year
 
1.9

 
(202
)
 
(1 424)

Changes during the period
 
(1.4
)
 
153

 
(126
)
 
 
0.5

 
(49
)
 
(1 550)

As at 30 June 2016, the total issued capital of 1 736m US dollar is represented by 1 608 242 156 shares without face value, of which 462 691 365 registered shares, and 1 145 550 791 dematerialized shares.
The total of authorized, un-issued capital amounts to 41m US dollar (37m euro).
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. In respect of the company’s shares that are held by AB InBev, rights are suspended.
The shareholders’ structure based on the notifications made to the company pursuant to the Belgian Law of 02 May 2007 on the disclosure of significant shareholdings in listed companies is included in the Corporate Governance section of AB InBev’s annual report.

19


CHANGES IN OWNERSHIP INTERESTS
In compliance with IFRS 10, the acquisition of additional shares in a subsidiary is accounted for as an equity transaction with owners.
During the first six months of 2016, AB InBev purchased non-controlling interests in subsidiaries for a total consideration of 10m US dollar. As the related subsidiaries were already fully consolidated, the purchases did not impact AB InBev’s profit, but reduced the non-controlling interests and thus impacted the profit attributable to equity holders of AB InBev.
DIVIDENDS
On 29 October 2015, an interim dividend of 1.60 euro per share or approximately 2 570m euro was approved by the Board of Directors. This interim dividend was paid out on 16 November 2015. On 27 April 2016, in addition to the interim dividend paid on 16 November 2015, a dividend of 2.00 euro per share or approximately 3 206m euro was approved at the shareholders meeting, reflecting a total dividend payment for 2015 fiscal year of 3.60 euro per share or approximately 5 776m euro. The dividend was paid out on 3 May 2016.
On 30 October 2014, an interim dividend of 1.00 euro per share or approximately 1 636m euro was approved by the Board of Directors. This interim dividend was paid out 14 November 2014. On 29 April 2015 a dividend of 2.00 euro per share or approximately 3 276m euro was approved at the shareholders meeting, reflecting a total dividend payment for 2014 fiscal year of 3.00 euro per share or approximately 4 912m euro. This dividend was paid out on 6 May 2015.
TRANSFERS FROM SUBSIDIARIES 
The amount of dividends payable to AB InBev by its operating subsidiaries is subject to, among other restrictions, general limitations imposed by the corporate laws, capital transfer restrictions and exchange control restrictions of the respective jurisdictions where those subsidiaries are organized and operate. Capital transfer restrictions are also common in certain emerging market countries, and may affect AB InBev’s flexibility in implementing a capital structure it believes to be efficient. Dividends paid to AB InBev by certain of its subsidiaries are also subject to withholding taxes. Withholding tax, if applicable, generally does not exceed 15%.
DEFERRED SHARE INSTRUMENT
In a transaction related to the combination with Grupo Modelo, select Grupo Modelo shareholders committed, upon tender of their Grupo Modelo shares, to acquire 23 076 923 AB InBev shares to be delivered within 5 years for a consideration of approximately 1.5 billion US dollar. The consideration was paid on 5 June 2013. Pending the delivery of the AB InBev shares, AB InBev will pay a coupon on each undelivered AB InBev share, so that the Deferred Share Instrument holders are compensated on an after tax basis, for dividends they would have received had the AB InBev shares been delivered to them prior to the record date for such dividend.
The deferred share instrument is classified as an equity instrument, in line with IAS 32, as the number of shares and consideration received are fixed. The coupon to compensate for the dividend equivalent is reported through equity. On 3 May 2016, the company paid a coupon of 2.00 euro per share or approximately 51m US dollar. On 6 May 2015 the company paid a coupon of 2.00 euro per share or approximately 62m US dollar.
STOCK LENDING
In order to fulfil AB InBev’s commitments under various outstanding stock option plans, AB InBev entered into stock lending arrangements for up to 15 million of its own ordinary shares. AB InBev shall pay any dividend equivalent, after tax in respect of the loaned securities. This payment will be reported through equity as dividend.
As of 30 June 2016, 12 million loaned securities were used to fulfil stock option plan commitments.
EARNINGS PER SHARE
The calculation of basic earnings per share for the six-month period ended 30 June 2016 is based on the profit attributable to equity holders of AB InBev of 285m US dollar (30 June 2015: 4 610m US dollar) and a weighted average number of ordinary shares outstanding (including deferred share instruments and stock lending) per end of the period, calculated as follows:
 
Million shares
 
2016

 
2015

Issued ordinary shares at 1 January, net of treasury shares
 
1 606

 
1 607

Effect of shares issued and share buyback programs
 
1

 
(2
)
Effect of stock lending
 
11

 
12

Effect of undelivered shares under the deferred share instrument
 
23

 
23

Weighted average number of ordinary shares at 30 June
 
1 641

 
1 640


20


The calculation of diluted earnings per share for the six-month period ended 30 June 2016 is based on the profit attributable to equity holders of AB InBev of 285m US dollar (30 June 2015: 4 610m US dollar) and a weighted average number of ordinary shares (diluted) outstanding (including deferred share instruments and stock lending) per end of the period, calculated as follows:
Million shares
 
2016

 
2015

Weighted average number of ordinary shares at 30 June
 
1 641

 
1 640

Effect of share options, warrants and restricted stock units
 
32

 
31

Weighted average number of ordinary shares (diluted) at 30 June
 
1 673

 
1 671

The calculation of earnings per share before exceptional items is based on the profit after tax and before exceptional items, attributable to equity holders of AB InBev. A reconciliation of profit before exceptional items, attributable to equity holders of AB InBev to profit attributable to equity holders of AB InBev is calculated as follows:
For the six-month period ended 30 June
Million US dollar
 
2016

 
2015

Profit before exceptional items, attributable to equity holders of AB InBev
 
2 571

 
4 278

Exceptional items, after taxes, attributable to equity holders of AB InBev (refer to Note 7)
 
(119
)
 
(3
)
Exceptional finance income/(cost), after taxes, attributable to equity holders of AB InBev (refer to Note 7)
 
(2 168)

 
335

Profit attributable to equity holders of AB InBev
 
285

 
4 610

The table below sets out the EPS calculation:
For the six-month period ended 30 June
Million US dollar
 
2016

 
2015

Profit attributable to equity holders of AB InBev
 
285

 
4 610

Weighted average number of ordinary shares
 
1 641

 
1 640

Basic EPS
 
0.17

 
2.81

Profit before exceptional items, attributable to equity holders of AB InBev
 
2 571

 
4 278

Weighted average number of ordinary shares
 
1 641

 
1 640

EPS before exceptional items
 
1.57

 
2.61

Profit attributable to equity holders of AB InBev
 
285

 
4 610

Weighted average number of ordinary shares (diluted)
 
1 673

 
1 671

Diluted EPS
 
0.17

 
2.76

Profit before exceptional items, attributable to equity holders of AB InBev
 
2 571

 
4 278

Weighted average number of ordinary shares (diluted)
 
1 673

 
1 671

Diluted EPS before exceptional items
 
1.54

 
2.56

The average market value of the company’s shares for purposes of calculating the dilutive effect of share options and restricted stock units was based on quoted market prices for the period that the options and restricted stock units were outstanding. 5m share options were anti-dilutive and not included in the calculation of the dilutive effect as at 30 June 2016.

15.
INTEREST-BEARING LOANS AND BORROWINGS
This note provides information about the company’s interest-bearing loans and borrowings. For more information about the company’s exposure to interest rate and foreign exposure currency risk - refer to Note 18 Risks arising from financial instruments.
NON-CURRENT LIABILITIES
Million US dollar
 
30 June 2016

 
31 December 2015

Secured bank loans
 
189

 
175

Unsecured bank loans
 
190

 
89

Unsecured bond issues
 
100 511

 
43 112

Unsecured other loans
 
35

 
43

Finance lease liabilities
 
120

 
122

 
 
101 045

 
43 541

 
 
 
 
 
CURRENT LIABILITIES
Million US dollar
 
30 June 2016

 
31 December 2015

Secured bank loans
 
300

 
102

Commercial papers
 
2 109

 
2 087

Unsecured bank loans
 
417

 
1 380

Unsecured bond issues
 
4 747

 
2 330

Unsecured other loans
 
10

 
9

Finance lease liabilities
 
3

 
4

 
 
7 586

 
5 912


21


The current and non-current interest-bearing loans and borrowings amount to 108.6 billion US dollar as of 30 June 2016, compared to 49.5 billion US dollar as of 31 December 2015.
Commercial papers amount to 2.1 billion US dollar as of 30 June 2016 and include programs in US dollar and euro with a total authorized issuance up to 3.0 billion US dollar and 1.0 billion euro, respectively.
During the first six months of 2016, AB InBev completed the issuance of the following series of bonds:
 
Issue date
 
Aggregate
principal amount
(in millions)
 
Currency
 
Interest rate
 
Maturity date
25 January 2016
 
4 000
 
US dollar
 
1.900%
 
1 February 2019
25 January 2016
 
7 500
 
US dollar
 
2.650%
 
1 February 2021
25 January 2016
 
6 000
 
US dollar
 
3.300%
 
1 February 2023
25 January 2016
 
11 000
 
US dollar
 
3.650%
 
1 February 2026
25 January 2016
 
6 000
 
US dollar
 
4.700%
 
1 February 2036
25 January 2016
 
11 000
 
US dollar
 
4.900%
 
1 February 2046
25 January 2016
 
500
 
US dollar
 
3M LIBOR + 126 bps
 
1 February 2021
29 January 2016
 
1 470
 
US dollar
 
4.915%
 
29 January 2046
29 March 2016
 
1 750
 
Euro
 
0.625%
 
17 March 2020
29 March 2016
 
2 000
 
Euro
 
0.875%
 
17 March 2022
29 March 2016
 
2 500
 
Euro
 
1.500%
 
17 March 2025
29 March 2016
 
3 000
 
Euro
 
2.000%
 
17 March 2028
29 March 2016
 
2 750
 
Euro
 
2.750%
 
17 March 2036
29 March 2016
 
1 250
 
Euro
 
3M EURIBOR + 75 bps
 
17 March 2020
Substantially all of the net proceeds of the offering will be used to fund a portion of the purchase price for the combination with SABMiller and related transactions. The excess liquidity resulting from these bonds was mainly invested in US Treasury Bills pending the closing of the proposed combination. The remainder of the net proceeds will be used for general corporate purposes.
The 2019 fixed rate US dollar Notes, the 2020 fixed and floating rate euro Notes, the 2021 fixed and floating rate US dollar Notes, the 2022 fixed rate euro Notes, the 2023 fixed rate US dollar Notes, the 2025 fixed rate euro Notes and the 2026 fixed rate US dollar Notes will be subject to a special mandatory redemption at a redemption price equal to 101% of the initial price of such notes, plus accrued and unpaid interest to, but not including the special mandatory redemption date if the combination is not consummated on or prior to 11 November 2016 (which date is extendable at the option of the Issuer to 11 May 2017) or if, prior to such date, AB InBev announces the withdrawal or lapse of the combination and that it is no longer pursuing the combination.
In connection with the proposed combination with SABMiller, AB InBev entered into a 75.0 billion US dollar Committed Senior Acquisition Facilities agreement dated 28 October 2015 to fund the cash consideration of the transaction. The new financing consists of a 10.0 billion US dollar Disposal Bridge Facility, a 15.0 billion US dollar Cash/DCM Bridge Facility A, a 15.0 billion US dollar Cash/DCM Bridge Facility B, a 25.0 billion US dollar Term Facility A, and a 10.0 billion US dollar Term Facility B, (“2015 Senior Facilities Agreement”).
On 27 January 2016, AB InBev announced that it had cancelled 42.5 billion US dollar of the 75.0 billion US dollar Committed Senior Acquisition Facilities. Upon receipt of the net proceeds of the January 46 billion US dollar offering, the company was required to cancel the Bridge to Cash / DCM Facilities A & B totaling 30 billion US dollar. Additionally, the company chose to make a voluntary cancellation of 12.5 billion US dollar of the Term Facility A as permitted under the terms of the Committed Senior Acquisition Facilities. On 4 April 2016, AB InBev announced that it had chosen to make an additional voluntary cancellation of the remaining 12.5 billion US dollar of the Term Facility A.
A summation of the Facilities and related cancellations is presented below:
 
 
 
 
 
 
 
 
 
 
 
 
 
Facility
 
Term        
 
   Applicable      
  Margin (bps)      
 
    Original    
    Amount    
    (Million    
    US dollar)    
 
January 2016
Cancellation
(Million
US dollar)
 
    April 2016    
  Cancellation    
    (Million    
    US dollar)    
 
    Current    
    Amount    
    (Million    
    US dollar)    
Term Facility A
 
3 Years
 
LIBOR + 110
 
25 000
 
(12 500)
 
(12 500)
 
-
Term Facility B
 
5 Years
 
LIBOR + 125
 
10 000
 
-
 
-
 
10 000
Disposal Bridge Facility
 
1 Year
 
LIBOR + 100
 
10 000
 
-
 
-
 
10 000
Bridge to Cash / DCM Facility A
 
1 Year
 
LIBOR + 100
 
15 000
 
(15 000)
 
-
 
-
Bridge to Cash / DCM Facility B
 
2 Years
 
LIBOR + 100
 
15 000
 
(15 000)
 
-
 
-
 
 
 
 
 
 
75 000
 
(42 500)
 
(12 500)
 
20 000
It is intended that net proceeds from the announced sale of both SABMiller’s interests in MillerCoors and the global Miller brand, SABMiller’s interest in China Resources Snow Breweries and part of SABMiller’s European business, will be used to pay down and cancel the Disposals Bridge Facility in due course.

22


The facilities bear interest rate calculated as LIBOR for a period equal to the length of the interest period plus an applicable margin. The margins on each facility will be determined based on ratings assigned by rating agencies to AB InBev long-term debt. For the Disposal Bridge Facility the margin ranges between 0.85% per annum and 1.30% per annum. For Term Facility B, the margin ranges between 1.00% per annum and 1.45% per annum.
All proceeds from the drawdown under the 2015 Senior Facilities Agreement must be applied, directly or indirectly, towards the acquisition of SABMiller, refinancing of existing indebtedness of SABMiller or any costs in connection therewith. As of 30 June 2016, all facilities remain undrawn. Each facility is available to be drawn until 28 October 2016, subject to an extension up to 28 April 2017 at AB InBev’s option. The maximum tenor for Term Facility B is determined by reference to the date of the 2015 Senior Facilities Agreement and will not be affected by an extension of the availability period. Customary commitment fees are payable on any undrawn but available funds under the 2015 Senior Facilities Agreement. These fees are recorded as exceptional finance cost.
AB InBev is in compliance with all its debt covenants as of 30 June 2016. The 2010 Senior Facilities and the 2015 Senior Facilities Agreement do not include restrictive financial covenants.
 
TERMS AND DEBT REPAYMENT
SCHEDULE AT 30 JUNE 2016
Million US dollar
 
Total

 
1 year or
less

 
1-2 years
 
2-3 years
 
3-5 years
 
More than 5
years

Secured bank loans
 
489

 
300

 
82

 
25

 
22

 
60

Commercial papers
 
2 109

 
2 109

 
—

 
—

 
—

 
—

Unsecured bank loans
 
607

 
417

 
141

 
49

 
—

 
—

Unsecured bond issues
 
105 258

 
4 747

 
5 863

 
8 966

 
18 570

 
67 112

Unsecured other loans
 
45

 
10

 
11

 
6

 
4

 
14

Finance lease liabilities
 
123

 
3

 
6

 
5

 
14

 
95

 
 
108 631

 
7 586

 
6 103

 
9 051

 
18 610

 
67 281

TERMS AND DEBT REPAYMENT
SCHEDULE AT 31 DECEMBER 2015
Million US dollar
 
Total

 
1 year or
less

 
1-2 years
 
2-3 years
 
3-5 years
 
More than 5
years

Secured bank loans
 
277

 
102

 
72

 
20

 
28

 
55

Commercial papers
 
2 087

 
2 087

 
—

 
—

 
—

 
—

Unsecured bank loans
 
1 469

 
1 380

 
84

 
—

 
5

 
—

Unsecured bond issues
 
45 442

 
2 330

 
6 415

 
4 613

 
10 163

 
21 921

Unsecured other loans
 
52

 
9

 
10

 
8

 
9

 
16

Finance lease liabilities
 
126

 
4

 
4

 
5

 
15

 
98

 
 
49 453

 
5 912

 
6 585

 
4 646

 
10 220

 
22 090

Net debt is defined as non-current and current interest-bearing loans and borrowings and bank overdrafts minus debt securities and cash. Net debt is a financial performance indicator that is used by AB InBev’s management to highlight changes in the company’s overall liquidity position. The company believes that net debt is meaningful for investors as it is one of the primary measures AB InBev’s management uses when evaluating its progress towards deleveraging.
AB InBev’s net debt increased to 44.9 billion US dollar as of 30 June 2016, from 42.2 billion US dollar as of 31 December 2015. Apart from operating results net of capital expenditures, the net debt is mainly impacted by dividend payments to shareholders of AB InBev and Ambev (3.9 billion US dollar), the payment of interests and taxes (3.0 billion US dollar) and the impact of changes in foreign exchange rates (0.7 billion US dollar increase of net debt).
The following table provides a reconciliation of AB InBev’s net debt as of the dates indicated:
Million US dollar
 
30 June 2016    

 
31 December 2015

Non-current interest-bearing loans and borrowings
 
101 045

 
43 541

Current interest-bearing loans and borrowings
 
7 586

 
5 912

 
 
108 631

 
49 453

Bank overdrafts
 
55

 
13

Cash and cash equivalents
 
(6 050)

 
(6 923)

Interest bearing loans granted and other deposits (included within Trade and other receivables)
 
(1 777)

 
(286
)
Debt securities (included within Investment securities)
 
(56 003)

 
(72
)
Net debt
 
44 856

 
42 185



23


16.
SHARE-BASED PAYMENTS1
Different share and share option programs allow company senior management and members of the board of directors to receive or acquire shares of AB InBev or Ambev. For all option plans, the fair value of share-based payment compensation is estimated at grant date, using a binomial Hull model, modified to reflect the IFRS 2 Share-based Payment requirement that assumptions about forfeiture before the end of the vesting period cannot impact the fair value of the option.
Share-based payment transactions resulted in a total expense of 113m US dollar for the six-month period ended 30 June 2016, as compared to 108m US dollar for the six-month period ended 30 June 2015.
AB INBEV SHARE-BASED COMPENSATION PROGRAMS
Share-Based Compensation Plan
During 2016, AB InBev issued 0.7m of matching restricted stock units in relation to bonus granted to company employees and management. These matching restricted stock units are valued at the share price at the day of grant representing a fair value of approximately 84m US dollar and cliff vest after five years.
LTI Stock Option Plan for Directors
AB InBev granted 0.2m stock options to members of the board of directors during 2016 representing a fair value of approximately 5m US dollar.
Other Grants
AB InBev has in place three specific long-term incentive programs.
One program allows for the offer of restricted stock units to certain employees in certain specific circumstances, whereby grants are made at the discretion of the CEO, e.g. to compensate for assignments of expatriates in countries with difficult living conditions. The restricted stock units vest after five years and in case of termination of service before the vesting date, special forfeiture rules apply. In 2016, 0.1m restricted stock units with an estimated fair value of 0.4m US dollar were granted under this program to a selected number of employees.
A second program allows for the exceptional offer of restricted stock units to certain employees at the discretion of the Remuneration Committee of AB InBev as a long-term retention incentive for key employees of the company. Employees eligible to receive a grant under this program receive two series of restricted stock units, the first half of the restricted stock units vesting after five years, the second half after ten years. In case of termination of service before the vesting date, special forfeiture rules apply. In 2016, no restricted stock units were granted under this program.
A third program allows certain employees to purchase company shares at a discount aimed as a long-term retention incentive for (i) high-potential employees of the company, who are at a mid-manager level (“People bet share purchase program”) or (ii) for newly hired employees. The voluntary investment in company shares leads to the grant of an amount of matching stock options which vest after 5 years. In case of termination before the vesting date, special forfeiture rules apply. In 2016, employees purchased 0.1m shares under this program for the equivalent of 0.5m US dollar.
In order to maintain consistency of benefits granted to executives and to encourage international mobility of executives, an options exchange program can be executed whereby unvested options are exchanged against restricted shares that remain locked-up until 5 years after the end of the initial vesting period. In 2015 and 2016, no unvested options were exchanged against restricted shares. As a variant to this program, the Remuneration Committee has approved the early release of the vesting conditions of 0.2m unvested options. The shares that result from the exercise of the options must remain locked-up until 31 December 2023. The Remuneration Committee has also approved the early release of vesting conditions of 0.1m unvested options and 0.1m unvested restricted stock units. The shares that result from the exercise of the options or the accelerated vesting of restricted stock units must remain locked-up until the end of the initial vesting period.
As the vesting period for these stock options and restricted stock units was changed, an accelerated expense of 0.7m US dollar was recorded as a result of the modification.
AMBEV SHARE-BASED COMPENSATION PROGRAMS
Since 2005, Ambev has had a plan which is substantially similar to the Share-based compensation plan under which bonuses granted to company employees and management are partially settled in shares. Under the Share-based compensation plan, Ambev issued 4.9m restricted stock units in 2016 with an estimated fair value of 24.9m US dollar.
________________________________________
1 
Amounts have been converted to US dollar at the average rate of the period.

24


17.
TRADE AND OTHER PAYABLES
NON-CURRENT TRADE AND OTHER PAYABLES
 
Million US dollar
 
30 June 2016

 
31 December 2015

Indirect taxes payable
 
172

 
186

Trade payables
 
529

 
484

Deferred consideration on acquisitions
 
559

 
329

Other payables
 
129

 
242

 
 
1 389

 
1 241

CURRENT TRADE AND OTHER PAYABLES
 
Million US dollar
 
30 June 2016

 
31 December 2015

Trade payables and accrued expenses
 
10 898

 
11 616

Payroll and social security payables
 
756

 
924

Indirect taxes payable
 
1 662

 
1 610

Interest payable
 
1 603

 
817

Consigned packaging
 
738

 
680

Dividends payable
 
483

 
239

Deferred income
 
26

 
49

Deferred consideration on acquisitions
 
1 232

 
1 474

Other payables
 
203

 
253

 
 
17 601

 
17 662

Deferred consideration on acquisitions is mainly comprised of 1.5 billion US dollar for the put option included in the 2012 shareholders’ agreement between Ambev and E. León Jimenes S.A. (“ELJ”), which may result in Ambev acquiring additional Class B shares of Cervecería Nacional Dominicana S.A. (“CND”). The put option granted to ELJ is exercisable since 2013. The valuation of this option is based on the EBITDA of the consolidated operations in Dominican Republic.

18.
RISKS ARISING FROM FINANCIAL INSTRUMENTS
AB InBev’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest risk, commodity risk and equity risk), credit risk and liquidity risk. The company analyses each of these risks individually as well as on an interconnected basis, and defines strategies to manage the economic impact on the company’s performance in line with its financial risk management policy.
Some of the company’s risk management strategies include the usage of derivatives. The main derivative instruments used are foreign currency rate agreements, exchange traded foreign currency futures and options, interest rate swaps and forwards, cross currency interest rate swaps (“CCIRS”), exchange traded interest rate futures, commodity swaps, exchange traded commodity futures and equity swaps. AB InBev’s policy prohibits the use of derivatives in the context of speculative trading. Other than the disclosures below, there were no other material changes to Note 27 Risks arising from financial instruments of the 31 December 2015 consolidated financial statements.

25


The following table provides an overview of the derivative financial instruments outstanding at 30 June 2016 by maturity bucket. The amounts included in this table are the notional amounts.
 
 
 
30 June 2016
 
31 December 2015
Million US dollar
 
< 1
  year

 
1-2
  years

 
2-3
  years

 
3-5
  years

 
> 5
  years

 
< 1
  year

 
1-2
  years

 
2-3
  years

 
3-5
  years

 
> 5
  years

Foreign currency
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward exchange contracts SABMiller proposed combination
 
70 297

 
—

 
—

 
—

 
—

 
68 860

 
—

 
—

 
—

 
—

Other forward exchange contracts
 
12 602

 
42

 
—

 
—

 
—

 
10 481

 
—

 
508

 
803

 
—

Foreign currency futures
 
608

 
—

 
—

 
—

 
—

 
1 568

 
100

 
—

 
—

 
—

Interest rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
—

 
93

 
1 250

 
1 784

 
90

 
—

 
77

 
—

 
3 000

 
74

Cross currency interest rate swaps
 
1 636

 
780

 
1 839

 
—

 
1 592

 
—

 
1 604

 
777

 
1 803

 
1 560

Interest rate futures
 
16

 
—

 
—

 
125

 
—

 
—

 
13

 
—

 
109

 
—

Other interest rate derivatives
 
—

 
—

 
—

 
—

 
565

 
—

 
—

 
—

 
—

 
565

Commodities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aluminum swaps
 
1 461

 
4

 
—

 
—

 
—

 
1 509

 
172

 
—

 
—

 
—

Other commodity derivatives
 
1 122

 
108

 
—

 
—

 
—

 
1 227

 
82

 
—

 
—

 
—

Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity derivatives
 
8 477

 
1 466

 
—

 
—

 
—

 
5 985

 
—

 
—

 
—

 
—



FOREIGN EXCHANGE RISK ON THE PROPOSED COMBINATION WITH SABMILLER
Following the proposed combination with SABMiller, AB InBev entered into derivative foreign exchange forward contracts with respect to 46 billion pound sterling of the purchase price, to hedge against exposure changes in the US dollar exchange rate for the cash component of the purchase consideration in pound sterling. The 46 billion pound sterling has been hedged at an average rate of 1.5276 US dollar per pound sterling. Although these derivatives are considered to be economic hedges, only a portion of such derivatives could qualify for hedge accounting under IFRS rules, as AB InBev NV, the acquiring company, has a euro functional currency.
Since inception of the derivative contracts in 2015, 9.0 billion US dollar negative mark-to-market adjustment related to such hedging were recognized cumulatively over 2015 and 2016, of which 5.9 billion US dollar through equity and 3.1 billion US dollar in the income statement.
The mark-to-market of the financial instruments that qualify for a hedge relationship will be reported in equity, whereas the mark-to-market of the financial instruments that do not qualify for hedge accounting will be reported in the profit and loss account until the closing of the transaction.
As of 30 June 2016, financial instrument for approximately 45.0 billion US dollar equivalent qualified for hedge accounting and a mark-to-market of 4 186m US dollar loss was reported in equity in 2016 and financial instruments for approximately 25.3 billion US dollar did not qualify for hedge accounting and a mark-to-market of 2 365m US dollar loss was reported as an exceptional finance cost in the profit and loss account in 2016 - see Note 8 Finance cost and income.
EQUITY PRICE RISK
AB InBev entered into a series of derivative contracts to hedge the risk arising from the different share-based payment programs. The purpose of these derivatives is mainly to effectively hedge the risk that a price increase in the AB InBev shares will negatively impact future cash flows related to the share-based payments. Furthermore, AB InBev entered into a series of derivative contracts to hedge the deferred share instrument related to the Modelo combination (see also Note 8 Finance cost and income and Note 14 Changes in equity and earnings per share) and some share-based payments in connection with the combination with SABMiller. Most of these derivative instruments could not qualify for hedge accounting therefore they have not been designated in any hedging relationships.
As of 30 June 2016, an exposure for an equivalent of 82.3m of AB InBev shares was hedged, resulting in a total gain of 579m US dollar recognized in the profit and loss account for the period, of which 306m US dollar related to the company’s share-based payment programs, 146m US dollar and 127m US dollar related to the Modelo and SABMiller transactions, respectively.
Between 2012 and 2016, AB InBev reset with counterparties certain derivative contracts to market price. This resulted in a cash inflow of 1.3 billion US dollar between 2012 and 2015 and 1.9 billion US dollar in 2016 and, accordingly, a decrease of counterparty risk.

26


LIQUIDITY RISK
The following are the contractual maturities of non-derivative financial liabilities including interest payments and derivative financial assets and liabilities
 
 
30 June 2016
Million US dollar
 
Carrying
amount1

 
Contractual
cash flows

 
Less than
1 year

 
1-2 years

 
2-3 years

 
3-5 years

 
More than
5 years

Non-derivative financial liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured bank loans
 
(489
)
 
(556
)
 
(315
)
 
(92
)
 
(33
)
 
(32
)
 
(84
)
Commercial papers
 
(2 109)

 
(2 110)

 
(2 110)

 
—

 
—

 
—

 
—

Unsecured bank loans
 
(607
)
 
(760
)
 
(478
)
 
(230
)
 
(52
)
 
—

 
—

Unsecured bond issues
 
(105 258)

 
(156 095)

 
(6 985)

 
(9 599)

 
(12 588)

 
(24 547)

 
(102 376)

Unsecured other loans
 
(45
)
 
(136
)
 
(18
)
 
(19
)
 
(14
)
 
(11
)
 
(74
)
Finance lease liabilities
 
(123
)
 
(210
)
 
(13
)
 
(14
)
 
(13
)
 
(32
)
 
(138
)
Bank overdraft
 
(55
)
 
(55
)
 
(55
)
 
—

 
—

 
—

 
—

Trade and other payables
 
(18 919)

 
(19 306)

 
(17 535)

 
(528
)
 
(181
)
 
(470
)
 
(592
)
 
 
(127 605)

 
(179 228)

 
(27 509)

 
(10 482)

 
(12 881)

 
(25 092)

 
(103 264)

Derivative financial assets/(liabilities)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
 
(84
)
 
(83
)
 
23

 
13

 
16

 
9

 
(144
)
Foreign exchange derivatives
 
(9 004)

 
(9 074)

 
(9 074)

 
—

 
—

 
—

 
—

Cross currency interest rate swaps
 
(80
)
 
(81
)
 
34

 
(55
)
 
(88
)
 
11

 
17

Commodity derivatives
 
11

 
5

 
5

 
—

 
—

 
—

 
—

Equity derivatives
 
1 029

 
982

 
891

 
91

 
—

 
—

 
—

 
 
(8 128)

 
(8 251)

 
(8 121)

 
49

 
(72
)
 
20

 
(127
)
Of which: directly related to cash flow hedges
 
(6 170)

 
(6 395)

 
(6 274)

 
(88
)
 
4

 
7

 
(44
)

 
 
31 December 2015
Million US dollar
 
Carrying
amount1

 
Contractual
cash flows

 
Less than
1 year

 
1-2 years

 
2-3 years

 
3-5 years

 
More than
5 years

Non-derivative financial liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured bank loans
 
(277
)
 
(340
)
 
(115
)
 
(81
)
 
(27
)
 
(39
)
 
(78
)
Commercial papers
 
(2 087)

 
(2 089)

 
(2 089)

 
—

 
—

 
—

 
—

Unsecured bank loans
 
(1 469)

 
(1 740)

 
(1 446)

 
(216
)
 
(56
)
 
(22
)
 
—

Unsecured bond issues
 
(45 442)

 
(63 694)

 
(3 434)

 
(8 036)

 
(6 209)

 
(12 546)

 
(33 469)

Unsecured other loans
 
(52
)
 
(114
)
 
(15
)
 
(16
)
 
(14
)
 
(15
)
 
(54
)
Finance lease liabilities
 
(126
)
 
(218
)
 
(13
)
 
(14
)
 
(14
)
 
(32
)
 
(145
)
Bank overdraft
 
(13
)
 
(13
)
 
(13
)
 
—

 
—

 
—

 
—

Trade and other payables
 
(18 816)

 
(19 082)

 
(17 616)

 
(454
)
 
(184
)
 
(392
)
 
(436
)
 
 
(68 282)

 
(87 290)

 
(24 741)

 
(8 817)

 
(6 504)

 
(13 046)

 
(34 182)

Derivative financial assets/(liabilities)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
 
(99
)
 
(100
)
 
18

 
(8
)
 
(15
)
 
(13
)
 
(82
)
Foreign exchange derivatives
 
(3 022)

 
(3 088)

 
(3 072)

 
2

 
(12
)
 
(6
)
 
—

Cross currency interest rate swaps
 
167

 
175

 
57

 
182

 
(73
)
 
(81
)
 
90

Commodity derivatives
 
(246
)
 
(247
)
 
(250
)
 
3

 
—

 
—

 
—

Equity derivatives
 
2 468

 
2 469

 
2 469

 
—

 
—

 
—

 
—

 
 
(732
)
 
(791
)
 
(778
)
 
179

 
(100
)
 
(100
)
 
8

Of which: directly related to cash flow hedges
 
(1 187)

 
(1 269)

 
(1 238)

 
45

 
(105
)
 
13

 
16










________________________________________
1 
“Carrying amount” refers to net book value as recognized in the balance sheet at each reporting date.

27


FAIR VALUE
The following table summarizes for each type of derivative the fair values recognized as assets or liabilities in the balance sheet:
 
 
Assets
 
Liabilities
 
Net
Million US dollar
 
30 June
2016

 
31 December
2015

 
30 June
2016

 
31 December
2015

 
30 June
2016

 
31 December
2015

Foreign currency
 
 
 
 
 
 
 
 
 
 
 
 
Forward exchange contracts
 
449

 
574

 
(9 446)

 
(3 625)

 
(8 997)

 
(3 051)

Foreign currency futures
 
19

 
94

 
(26
)
 
(65
)
 
(7
)
 
29

Interest rate
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
64

 
—

 
(5
)
 
(19
)
 
59

 
(19
)
Cross currency interest rate swaps
 
89

 
307

 
(169
)
 
(140
)
 
(80
)
 
167

Other interest rate derivatives
 
—

 
—

 
(143
)
 
(80
)
 
(143
)
 
(80
)
Commodities
 
 
 
 
 
 
 
 
 
 
 
 
Aluminum swaps
 
37

 
28

 
(46
)
 
(211
)
 
(9
)
 
(183
)
Sugar futures
 
28

 
7

 
—

 
(11
)
 
28

 
(4
)
Wheat futures
 
18

 
62

 
(9
)
 
(24
)
 
9

 
38

Other commodity derivatives
 
21

 
5

 
(38
)
 
(102
)
 
(17
)
 
(97
)
Equity
 
 
 
 
 
 
 
 
 
 
 
 
Equity derivatives
 
1 032

 
2 486

 
(3
)
 
(18
)
 
1 029

 
2 468

 
 
1 757

 
3 563

 
(9 885)

 
(4 295)

 
(8 128)

 
(732
)
Of which:
 
 
 
 
 
 
 
 
 
 
 
 
Non-current
 
213

 
295

 
(338
)
 
(315
)
 
(125
)
 
(20
)
Current
 
1 544

 
3 268

 
(9 547)

 
(3 980)

 
(8 003)

 
(712
)
As required by IFRS 13 Fair value measurement, the following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

•
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
•
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•
Level 3 fair value measurements are those derived from valuation techniques for which the lowest level of input that is significant to the fair value measurement is unobservable.
Fair value hierarchy 30 June 2016
Million US dollar
 
Quoted (unadjusted)
prices - level 1

 
    Observable market
inputs - level 2

 
    Unobservable market
inputs - level 3

Financial Assets
 
 
 
 
 
 
Held for trading (non-derivatives)
 
55 982

 
—

 
—

Derivatives at fair value through profit and loss
 
3

 
913

 
—

Derivatives in a cash flow hedge relationship
 
51

 
495

 
—

Derivatives in a fair value hedge relationship
 
—

 
83

 
—

Derivatives in a net investment hedge relationship
 
—

 
212

 
—

 
 
56 036

 
1 703

 
—

Financial Liabilities
 
 
 
 
 
 
Deferred consideration on acquisitions at fair value
 
—

 
—

 
1 638

Derivatives at fair value through profit and loss
 
1

 
2 973

 
—

Derivatives in a cash flow hedge relationship
 
38

 
6 678

 
—

Derivatives in a fair value hedge relationship
 
—

 
169

 
—

Derivatives in a net investment hedge relationship
 
—

 
26

 
—

 
 
39

 
9 846

 
1 638


28


Fair value hierarchy 31 December 2015
Million US dollar
 
Quoted (unadjusted)
prices - level 1

 
    Observable market
inputs - level 2

 
    Unobservable market
inputs - level 3

Financial Assets
 
 
 
 
 
 
Held for trading (non-derivatives)
 
55

 
—

 
—

Derivatives at fair value through profit and loss
 
41

 
2 712

 
—

Derivatives in a cash flow hedge relationship
 
47

 
404

 
—

Derivatives in a fair value hedge relationship
 
—

 
180

 
—

Derivatives in a net investment hedge relationship
 
16

 
163

 
—

 
 
159

 
3 459

 
—

Financial Liabilities
 
 
 
 
 
 
Deferred consideration on acquisitions at fair value
 
—

 
—

 
1 449

Derivatives at fair value through profit and loss
 
36

 
1 819

 
—

Derivatives in a cash flow hedge relationship
 
35

 
1 603

 
—

Derivatives in a fair value hedge relationship
 
—

 
117

 
—

Derivatives in a net investment hedge relationship
 
19

 
666

 
—

 
 
90

 
4 205

 
1 449

DERIVATIVE INSTRUMENTS
The fair value of exchange traded derivatives (e.g. exchange traded foreign currency futures) is determined by reference to the official prices published by the respective exchanges (e.g. the New York Board of Trade). The fair value of over-the-counter derivatives is determined by commonly used valuation techniques. These are based on market inputs from reliable financial information providers.
NON-DERIVATIVE FINANCIAL ASSETS
Following the issuance of bonds in January and March 2016, the company invested 55.9 billion US dollar in US Treasury Bills pending the closing of the SABMiller proposed combination. These US Treasury Bills are reported as held for trading financial assets.
NON-DERIVATIVE FINANCIAL LIABILITIES
As part of the 2012 shareholders agreement between Ambev and E. León Jimenes S.A., following the acquisition of Cervecería Nacional Dominicana S.A. (“CND”), a put and call option is in place which may result in Ambev acquiring additional shares in CND. As of 30 June 2016, the put option was valued 1 491m US dollar (31 December 2015: 1 424m US dollar) and recognized as a deferred consideration on acquisitions at fair value in “level 3” category above. No value was allocated to the call option. The fair value of such deferred consideration is calculated based on commonly-used valuation techniques (i.e. net present value of future principal and interest cash flows discounted at market rate). These are based on market inputs from reliable financial information providers. As the put option may be exercised in the short-term, a portion of the liability is presented as a current liability.
Fair values determined by reference to prices provided by reliable financial information providers are periodically checked for consistency against other pricing sources.

OFFSETTING FINANCIAL ASSETS & FINANCIAL LIABILITIES
The following financial assets and liabilities are subject to offsetting, enforceable master netting agreements and similar agreements:
 
 
 
 
 
 
30 June 2016
Million US dollar
Gross
amount
Net amount
recognized in the
statement of
financial position1
Other offsetting
agreements2
Total net amount

 
 
 
 
 
Derivative assets
1 758
1 758
(1 929)
(171
)
Derivative liabilities
(9 885)
(9 885)
3 202
(6 683)

 
 
 
31 December 2015
Million US dollar
Gross
amount
Net amount
recognized in the
statement of
financial position1
Other offsetting
agreements2
Total net amount

 
 
 
 
 
Derivative assets
3 563
3 563
(4 633)
(1 070)

Derivative liabilities
(4 295)
(4 295)
3 475
(820
)
________________________________________
1 
Net amount recognized in the statement of financial position after taking into account offsetting agreements that meet the offsetting criteria as per IFRS rules
2 
Other offsetting agreements include collateral and other guarantee instruments, as well as offsetting agreements that do not meet the offsetting criteria as per IFRS rules

29


19.
COLLATERAL AND CONTRACTUAL COMMITMENTS FOR THE ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT, LOANS TO CUSTOMERS AND OTHER
Major change in collateral and contractual commitments to purchase property, plant and equipment, loans to customers and other during the six-month period ended 30 June 2016 compared to 31 December 2015 relates to additional collateral given on derivative positions amounting to 1.5 billion US dollar during the six-month period ended 30 June 2016.
 
20.
CONTINGENCIES1
The company has contingencies for which, in the opinion of management and its legal counsel, the risk of loss is possible but not probable and therefore no provisions have been recorded. Due to their nature, such legal proceedings and tax matters involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions, and as a consequence AB InBev management cannot at this stage estimate the likely timing of resolution of these matters. The most significant contingencies are discussed below.
AMBEV TAX MATTERS
As of 30 June 2016, AB InBev’s material tax proceedings related to Ambev and its subsidiaries. Estimates of amounts of possible loss are as follows:
 
Million US dollar
 
30 June 2016

 
31 December 2015

Income tax and social contribution
 
6 291

 
4 189

Value-added and excise taxes
 
3 597

 
2 658

Other taxes
 
433

 
220

 
 
10 321

 
7 067

The most significant tax proceedings of Ambev are discussed below.
INCOME TAX AND SOCIAL CONTRIBUTION
During 2005, certain subsidiaries of Ambev received a number of assessments from Brazilian federal tax authorities relating to profits of its foreign subsidiaries. In December 2008, the Administrative Court decided on one of the tax assessments relating to earnings of Ambev’s foreign subsidiaries. This decision was partially favorable to Ambev, and in connection with the remaining part, Ambev filed an appeal to the Upper House of the Administrative Court and is awaiting its decision. With respect to another tax assessment relating to foreign profits, the Administrative Court rendered a decision favorable to Ambev in September 2011. In December 2013, Ambev received another tax assessment related to profits of its foreign subsidiaries. As of 30 June 2016, Ambev management estimates the exposure of approximately 4.7 billion Brazilian real (1.5 billion US dollar) as a possible risk, and accordingly has not recorded a provision for such amount, and approximately 40 million Brazilian real (12m US dollar) as a probable loss.
In December 2011, Ambev received a tax assessment related to the goodwill amortization resulting from the Inbev Holding Brasil S.A. merger with Ambev. In November 2014 the Lower Administrative Court concluded the judgment. The decision was partly favorable, Ambev was notified in August 2015 and presented an appeal to the Upper Administrative Court. Ambev has not yet received a judgment on that appeal. In June 2016, Ambev received a new tax assessment charging the remaining value of the goodwill amortization and will file a defense at the legal term. Ambev has not recorded any provisions for this matter, and management estimates possible losses in relation to this assessment to be approximately 7.4 billion Brazilian real (2.3 billion US dollar) as of 30 June 2016. In the event we are required to pay these amounts, the company will reimburse the amount proportional to the benefit received by the company pursuant to the merger protocol, as well as the related costs.

In October 2013, Ambev also received a tax assessment related to the goodwill amortization resulting from the merger of Beverage Associates Holding Limited (“BAH”) into Ambev. Ambev filed a defense in November 2013. In December 2014, Ambev filed an appeal against the unfavorable first level administrative decision published in November 2014. Ambev management estimates the amount of possible losses in relation to this assessment to be approximately 1.4 billion Brazilian real (0.4 billion US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection therewith.

________________________________________
1 
Amounts have been converted to US dollar at the closing rate of the respective period.

30


Ambev and certain of its subsidiaries received a number of assessments from Brazilian federal tax authorities relating to the offset of tax loss carry forward arising in the context of business combinations. In February 2016, the Upper House of the Administrative Tax Court concluded the judgment of two tax assessments on this matter. In both cases the decision was unfavorable. Ambev filed a judicial proceeding and awaits for the judgement. Ambev management estimates the total exposures of possible losses in relation to these assessments to be approximately 0.5 billion Brazilian real (0.2 billion US dollar) as of 30 June 2016.
In December 2014, Ambev received a tax assessment from the Brazilian Federal Tax Authorities related to the disallowance of alleged non-deductible expenses and the deduction of certain losses mainly associated to financial investments and loans. The defense was presented on 28 January 2015. In July 2016, Ambev was notified of the unfavorable first level administrative decision and will file an appeal to the Upper Administrative Court at the legal term. Ambev management estimates the amount of possible losses in relation to this assessment to be approximately 1.4 billion Brazilian real (0.4 billion US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection therewith.
In December 2015, Ambev also received a new tax assessment related to the same matter. Ambev management estimates the amount of possible losses in relation to this assessment to be approximately 0.4 billion Brazilian real (0.1 billion US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection with this assessment.
During 2014 and the first quarter of 2015, Ambev received tax assessments from the Brazilian Federal Tax Authorities related to the disallowance of deductions associated with alleged unproven taxes paid abroad, for which the decision from the Upper House of the Administrative Court is still pending. Ambev management estimates the possible losses related to these assessments to be approximately 2.5 billion Brazilian real (0.8 billion US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection therewith.
ICMS VALUE ADDED TAX, IPI EXCISE TAX AND TAXES ON NET SALES
In Brazil, goods manufactured within the Manaus Free Trade Zone intended for remittance elsewhere in Brazil are exempt from IPI excise tax. Ambev’s subsidiaries have been registering IPI excise tax presumed credits upon the acquisition of exempted inputs manufactured therein. Since 2009, Ambev has been receiving a number of tax assessments from the Brazilian Federal Tax Authorities relating to the disallowance of such presumed credits and other IPI credits, which are under discussion before the Brazilian Supreme Court. Ambev management estimates the possible losses related to these assessments to be approximately 2.0 billion Brazilian real (0.6 billion US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection therewith.
In 2014 and 2015, Ambev received tax assessments from the Brazilian Federal Tax Authorities relating to IPI excise tax, supposedly due over remittances of manufactured goods to other related factories, for which the decision from the Upper House of the Administrative Court is still pending. Ambev management estimates the possible losses related to these assessments to be approximately 1.4 billion Brazilian real (0.4 billion US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection therewith.
Ambev is currently challenging tax assessments from the States of São Paulo, Rio de Janeiro, Minas Gerais and other States, which question the legality of tax credits arising from existing tax incentives received by Ambev in other States. Ambev management estimates the possible losses related to these assessments to be approximately 1.7 billion Brazilian real (0.5 billion US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection therewith.
Ambev has been party to legal proceedings with the State of Rio de Janeiro where it is challenging such State’s attempt to assess ICMS with respect to unconditional discounts granted by Ambev from January 1996 to February 1998. In 2015, these proceedings were before the Superior Court of Justice and the Brazilian Supreme Court. In 2013, 2014 and 2015, Ambev received similar tax assessments issued by the States of Pará and Piauí relating to the same issue, which are currently under discussion. In October 2015 and January 2016, Ambev paid the amounts related to the State of Rio de Janeiro’s incentive tax program under which the discounts were granted, in the total amount of approximately 271 million Brazilian real (84m US dollar). After the above mentioned payments, Ambev management estimates the possible losses involved in these proceedings to be approximately 514 million Brazilian real (160m US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection therewith.
Over the years, Ambev has received tax assessments relating to ICMS differences that some States consider due in the tax substitution system, in cases where the price of the products sold by the factory reaches levels above the price table basis established by such States. Ambev is currently challenging those charges before Courts. Ambev management estimates the possible losses related to this issue to be approximately 1.1 billion Brazilian real (0.3 billion US dollar) as of 30 June 2016. Ambev has not recorded any provision in connection therewith.

SOCIAL CONTRIBUTIONS
In December 2015, Ambev received a tax assessment issued by the Brazilian federal tax authorities, relating to amounts allegedly due under Integration Program / Social Security Financing Levy (PIS/COFINS) over bonus products granted to its customers in the first quarter of 2011. In March and June 2016, Ambev received new assessments related to the same issue, so that the total amount considered as possible loss was increased to 0.9 billion Brazilian real (0.3 billion US dollar) as of 30 June 2016. Ambev filed defenses against these assessments and currently awaits judgment by the Administrative Court. No related provision has been made.

31


OTHER TAX MATTERS
During 2014, Anheuser-Busch InBev Worldwide Inc. received a net proposed tax assessment from the United States federal tax authorities (IRS) of 0.3 billion US dollar predominantly involving certain inter-company transactions, related to tax returns for the years 2008 and 2009. In November 2015, the IRS issued an additional proposed tax assessment of 0.1 billion US dollar for tax years 2010 and 2011. Anheuser-Busch InBev Worldwide Inc. has filed protests with the IRS for the 2008 to 2011 tax years and intends to vigorously defend its position.
In February 2015, the European Commission opened an in-depth state aid investigation into the Belgian excess profit ruling system. On 11 January 2016, the European Commission adopted a negative decision finding that the Belgian excess profit ruling system constitutes an aid scheme incompatible with the internal market and ordering Belgium to recover the incompatible aid from a number of aid beneficiaries. The Belgian authorities must now determine which companies have benefitted from the system and the precise amounts of incompatible aid to be recovered from each company. AB InBev has a Belgian excess profit ruling, but Belgium has not yet formally required any recovery. In addition, the European Commission decision was appealed to the European Union’s General Court by Belgium on 22 March 2016 and by AB InBev on 12 July 2016. The appeals do not suspend the recovery process, and AB InBev cannot at this stage estimate the outcome of such legal proceedings. Based on the estimated exposure related to the excess profit ruling applicable to AB InBev, the different elements referred to above, as well as the possibility that taxes paid abroad and non-recognised tax loss carryforwards could eventually partly or fully offset amounts subject to recovery, if any, AB InBev has not recorded any provisions in connection therewith as of 30 June 2016
WARRANTS
Certain holders of warrants issued by Ambev in 1996 for exercise in 2003 proposed lawsuits to subscribe correspondent shares for an amount lower than Ambev considers as established upon the warrant issuance. In case Ambev loses the totality of these lawsuits, the issuance of 172,831,574 shares would be necessary. Ambev would receive in consideration funds that are materially lower than the current market value. This could result in a dilution of about 1% to all Ambev shareholders. Furthermore, the holders of these warrants are claiming that they should receive the dividends relative to these shares since 2003, approximately 690 million Brazilian real (215m US dollar) in addition to legal fees. Ambev disputes these claims and intends to continue to vigorously defend its case.
ANTITRUST MATTERS
In August 2011, the German Federal Cartel Office (Bundeskartellamt) launched an investigation against several breweries and retailers in Germany in connection with an allegation of anticompetitive vertical price maintenance by breweries vis-à-vis their trading partners in Germany. On 18 June 2015, the Bundeskartellamt announced that it partially concluded these proceedings and issued fines. Due to AB InBev’s cooperation with the Bundeskartellamt, AB InBev received immunity from fines. Although the investigation of the Bundeskartellamt is partially continuing, AB InBev has reason to believe that it will not receive a fine and that it will have full immunity from fines at the end of the proceedings.
On 12 December 2014, a lawsuit was commenced in the Ontario Superior Court of Justice against the Liquor Control Board of Ontario, Brewers Retail Inc. (known as The Beer Store or “TBS”) and the owners of Brewers Retail Inc. (Molson Coors Canada, Sleeman Breweries Ltd. and Labatt Breweries of Canada LP). The lawsuit was brought in Canada pursuant to the Ontario Class Proceedings Act, and sought, among other things: (i) to obtain a declaration that the defendants conspired with each other to allocate markets for the supply of beer sold in Ontario since 1 June 2000; (ii) to obtain a declaration that Brewers Retail Inc. and the owners of Brewers Retail Inc. conspired to fix, increase and/or maintain prices charged to Ontario licensees (on-trade) for beer and the fees charged by TBS to other competitive brewers who wished to sell their products through TBS and (iii) damages for unjust enrichment. As part of this third allegation, the plaintiffs allege illegal trade practices by the owners of Brewers Retail Inc. They are seeking damages not exceeding 1.4 billion Canadian dollar (1.1 billion US dollar), as well as, punitive, exemplary and aggravated damages of 5 million Canadian dollar (4m US dollar) and changes/repeals of the affected legislation. Ambev has not recorded any provision in connection therewith.
On 30 June 2016, the European Commission announced an investigation into alleged abuse of a dominant position by AB InBev through certain practices aimed at restricting trade from other EU countries to Belgium. The fact that an investigation has been initiated does not mean that the European Commission has concluded that there is an infringement. AB InBev is fully cooperating with the investigation. It is not possible to indicate how long the investigation will take or what the outcome will be and no provision has been made in connection therewith. There is no connection between this investigation and the proposed combination with SABMiller.
2009 DISPOSITIONS PENSION LITIGATION
On 1 December 2009, AB InBev and several of its related companies were sued in Federal Court in the Eastern District of Missouri in a lawsuit styled Richard F. Angevine v. AB InBev, et al. The plaintiff sought to represent a class of certain employees of Busch Entertainment Corporation, which was divested on 1 December 2009, and the four Metal Container Corporation plants which were divested on 1 October 2009. He also sought to represent certain employees of any other subsidiary of Anheuser-Busch Companies, Inc. (ABC) which were divested on 1 October 2009. The lawsuit contained claims that the class was entitled to enhanced retirement benefits under sections 4.3 and 19.11(f) of the Anheuser-Busch Companies’ Salaried Employees’ Pension Plan (the “Plan”). Specifically, plaintiff alleged that the divestitures resulted in his “involuntary termination” from “ABC and its operating division and subsidiaries” within three years after the 18 November 2008 ABC/InBev merger, which allegedly triggered the enhanced benefits under the Plan. The lawsuit claimed that by failing to provide the class members with these enhanced benefits, AB InBev, et al. breached their fiduciary duties under ERISA. The complaint sought punitive damages and attorneys’ fees. On 16 July 2010, the Court ruled that the claims for breach of fiduciary duty and punitive damages were not proper. The Court also found that Angevine

32


did not exhaust his administrative remedies, which was required before filing a lawsuit. Angevine filed an appeal of this ruling with the Eighth Circuit Court of Appeals. On 22 July 2011, the Court of Appeals affirmed the decision of the lower court. No further appeals were filed.
On 15 September 2010, AB InBev and several of its related companies were sued in Federal Court for the Southern District of Ohio in a lawsuit entitled Rusby Adams et al. v. AB InBev et al. This lawsuit was filed by four employees of Metal Container Corporation’s facilities (“MCC”) in Columbus, Ohio, Gainesville, Florida, and Ft. Atkinson, Wisconsin that were divested on 1 October 2009. Similar to the Angevine lawsuit, these plaintiffs sought to represent a class of participants of the Anheuser-Busch Companies’ Inc. Salaried Employees’ Pension Plan (the “Plan”) who had been employed by subsidiaries of Anheuser-Busch Companies, Inc. that had been divested during the period of 18 November 2008 and 17 November 2011. The plaintiffs also alleged claims similar to the Angevine lawsuit: (1) that they were entitled to benefits under section 19.11(f) of the Plan; and (2) that the denial of benefits was a breach of fiduciary duty. AB InBev believed that it had defenses to these claims, and filed a motion to dismiss. On 25 April 2011, the Court dismissed the breach of fiduciary duty claims, and the only remaining claim was for benefits under section 19.11(f). On 28 March 2012, the Court certified that the case could proceed as a class action comprised of former employees of the divested MCC operations. On 9 January 2013, the Court granted AB InBev’s motion for Judgment on the Administrative Record. The plaintiffs appealed this decision on 5 February 2013. On 11 July 2014, the Court of Appeals for the 6th Circuit reversed the lower court and remanded the case for judgment against AB InBev. On 16 September 2014, AB InBev’s Motion for Rehearing En Banc was denied. A Final Order and Judgment was then entered by the District Court on 24 December 2014, which ordered the Plan to provide the enhanced pension benefit under Section 19.11(f) to members of the certified class. The company believes that the total amount of the enhanced pension benefit is approximately 7.7 million US dollar. Plaintiffs’ counsel has received approximately 0.8 million US dollar in legal fees.
On 10 January 2012, a class action complaint asserting claims very similar to those asserted in the Angevine lawsuit was filed in Federal Court for the Eastern District of Missouri, styled Nancy Anderson et al. v. Anheuser-Busch Companies Pension Plan et al. Unlike the Angevine case, however, the plaintiff in this matter alleges complete exhaustion of all administrative remedies. The company filed a motion to dismiss on 9 October 2012. This was still pending when the Court allowed the complaint to be amended on 19 November 2012 to name four new plaintiffs. AB InBev filed a motion to dismiss on 17 December 2012. While this motion was pending, on 11 March 2013 the Court consolidated the case with the Knowlton case (see below) which had been transferred from California to Missouri.
On 10 October 2012, another class action complaint was filed against Anheuser-Busch Companies, LLC, Anheuser-Busch Companies Pension Plan, Anheuser-Busch Companies Pension Plan Appeals Committee and the Anheuser-Busch Companies Pension Plans Administrative Committee by Brian Knowlton, an employee of the divested Busch Entertainment Corporation (“BEC”). This complaint, filed in Federal Court in the Southern District of California, was amended on 12 October 2012. Like the other lawsuits, it claims that the employees of any divested assets were entitled to enhanced retirement benefits under section 19.11(f) of the Plan. However, it specifically excludes the divested Metal Container Corporation facilities that have been included in the Adams class action. On 6 November 2012, the plaintiffs filed a motion asking the court to move the Anderson case to California to join it with the Knowlton case for discovery. The company filed a motion to dismiss/motion to transfer the case to Missouri on 12 November 2012, which was granted on 30 January 2013. As outlined above, on 11 March 2013, the Knowlton case was then consolidated in Missouri with the Anderson case. On 19 April 2013 a consolidated complaint was filed, and a Motion to Dismiss was filed by the company on 10 May 2013. On 30 October 2013, the court dismissed the breach of fiduciary claims, and an answer was filed on 13 November 2013. On 19 November 2013, plaintiffs amended one count of the consolidated complaint. On 16 May 2014, the Court granted class certification. The class consists of divested BEC employees. On 10 November 2014, Plaintiffs filed a Motion for Judgment on the Pleadings based on the decision by the Sixth Circuit Court of Appeals in the Adams case. On 8 July 2015, the Court issued an order of partial judgment on the pleadings, holding that the employees of BEC were entitled to enhanced retirement benefits under the Plan. The 8 July 2015 order, however, was not a final, appealable order. On 21 August 2015, the company filed a motion seeking entry of a final, appealable order, as well as a stay pending appeal, both of which were granted on 9 October 2015. The company subsequently appealed. That appeal remains pending. The company believes that the total amount of the enhanced pension benefit at issue in this case is approximately 66 million US dollar.

21.
RELATED PARTIES
There are no material changes to the company’s related party transactions during the first six months of 2016, compared to 2015.

22.
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
The following guarantor financial information is presented to comply with U.S. SEC disclosure requirements of Rule 3-10 of Regulation S-X.
The issuances or exchanges of securities described below are related to securities issued by Anheuser-Busch Worldwide Inc. (prior to 2013) and Anheuser-Busch InBev Finance Inc. (from 2013 onwards), and in each case fully and unconditionally guaranteed by AB InBev SA/NV (the “Parent Guarantor”). Each such security is also jointly and severally guaranteed by Anheuser-Busch Companies, LLC, BrandBrew S.A., Brandbev S.à r.l. and Cobrew NV/SA (the “Other Subsidiary Guarantors”), and in respect of debt issued from 2013 onwards, by Anheuser-Busch Worldwide Inc.. In December 2012 the guarantee structure of securities listed previously issued by Anheuser-Busch Worldwide Inc. was amended to accede Anheuser-Busch InBev Finance Inc. as a subsidiary guarantor of such securities. The following notes issued by Anheuser-Busch Worldwide Inc. and Anheuser-Busch Finance Inc. and registered with the SEC were outstanding as of 30 June 2016:

33


•
On 13 October 2009, Anheuser-Busch InBev Worldwide Inc. issued 2.25 billion US dollar principal amount of 5.375% unsecured notes due 2020, which were exchanged for publicly registered notes on 8 February 2010.
•
On 24 March 2010, Anheuser-Busch Worldwide Inc. issued 1.0 billion US dollar principal amount of 5.0% due 2020, which were exchanged for publicly registered notes on 5 August 2010.
•
On 24 January 2011, AB InBev Worldwide Inc. issued 0.5 billion US dollar aggregate principal amount of fixed rate notes due 2021. The notes bear interest at an annual rate of 4.375% and will mature on 15 February 2021. The issuance closed on 27 January 2011.
•
On 11 February 2011, Anheuser-Busch InBev Worldwide Inc. announced that it had filed a Registration Statement on Form F-4 with the United States Securities and Exchange Commission (“SEC”) seeking to undertake an exchange offer of (i) 2.5 billion US dollar principal amount of 7.75 % notes due 2019, (ii) 1.25 billion US dollar principal amount of 8.2 % notes due 2039 (collectively the “January Notes”) and (iii) 1.0 billion US dollar principal amount of 6.875 % notes due 2019 and (iv) 0.45 billion US dollar principal amount of 8.0 % notes due 2039 (collectively the “May Notes”) . Anheuser-Busch InBev Worldwide would offer to exchange unregistered notes which have been privately issued under Rule 144A for freely tradable notes registered under the Securities Act of 1933 with otherwise substantially the same terms and conditions. The exchange offer closed on 14 March 2011.
•
On 16 July 2012, Anheuser-Busch InBev Worldwide Inc., issued 2.0 billion US dollar aggregate principal amount of fixed rate notes due 2017, 3.0 billion US dollar aggregate principal amount of fixed rate notes due 2022 and 1.0 billion US dollar aggregate principal amount of fixed rate notes due 2042. The notes will bear interest at an annual rate of 1.375% for the 2017 notes, 2.500% for the 2022 notes and 3.750% for the 2042 notes.
•
On 17 January 2013, Anheuser-Busch InBev Finance Inc. issued 1.0 billion US dollar aggregated principal amount of fixed rate notes due 2018, 1.25 billion US dollar aggregated principal amount of fixed rate notes due 2023 and 0.75 billion US dollar aggregated principal amount of fixed rate notes due 2043. The notes will bear interest at an annual rate of 1.250% for the 2018 notes, 2.625% for the 2023 notes and 4.000% for the 2043 notes.
•
On 27 January 2014, Anheuser-Busch InBev Finance Inc., issued 5.25 billion US dollar aggregate principal amount of bonds, consisting of 1.2 billion US dollar aggregate principal amount of fixed rate notes due 2017; 300m US dollar aggregate principal amount of floating rate notes due 2017; 1.25 billion US dollar aggregate principal amount of fixed rate notes due 2019; 250m US dollar aggregate principal amount of floating rate notes due 2019; 1.4 billion US dollar aggregate principal amount of fixed rate notes due 2024; and 850m US dollar aggregate principal amount of fixed rate notes due 2044. The fixed rate notes will bear interest at an annual rate of 1.125% for the 2017 notes; 2.150% for the 2019 notes; 3.700% for the 2024 notes; and 4.625% for the 2044 notes. The floating rate notes will bear interest at an annual rate of 19.00 basis points above three-month LIBOR for the 2017 floating rate notes and 40.00 basis points above three-month LIBOR for the 2019 floating rate notes.
•
On 23 July 2015, Anheuser-Busch InBev Finance Inc., issued 565 million US dollar aggregated principal amount of fixed rate notes due 2045. The notes will bear interest at an annual rate of 4.60%.
•
On 25 January 2016, Anheuser-Busch InBev Finance Inc., issued 46.0 billion US dollar aggregate principal amount of bonds, consisting of 4.0 billion US dollar aggregate principal amount of fixed rate notes due 2019; 7.5 billion US dollar aggregate principal amount of fixed rate notes due 2021; 6.0 billion US dollar aggregate principal amount of fixed rate notes due 2023; 11.0 billion US dollar aggregate principal amount of fixed rate notes due 2026; 6.0 billion US dollar aggregate principal amount of fixed rate notes due 2036; 11.0 billion US dollar aggregate principal amount of fixed rate notes due 2046; and 500m US dollar aggregate principal amount of floating rate notes due 2021. The fixed rate notes will bear interest at an annual rate of 1.900% for the 2019 notes; 2.650% for the 2021 notes; 3.300% for the 2023 notes; 3.650% for the 2026 notes; 4.700% for the 2036 notes and 4.900% for the 2046 notes. The 2021 floating rate notes will bear interest at an annual rate of 126.00 basis points above three-month LIBOR.
•
On 29 January 2016, Anheuser-Busch InBev Finance Inc., issued 1.47 billion US dollar aggregated principal amount of fixed rate notes due 2046. The notes will bear interest at an annual rate of 4.915%.
The following condensed consolidating financial information presents the Condensed Consolidating Statement of Financial Position as of 30 June 2016 and 31 December 2015, the Condensed Consolidating Income Statements and Condensed Consolidating Statements of Cash Flows for the six-month period ended 30 June 2016 and 2015 of (a) AB InBev SA/NV, (b) Anheuser-Busch Worldwide Inc. (the Issuer prior to 2013, and guarantor of notes issued by Anheuser-Busch InBev Finance Inc.), (c) Anheuser-Busch InBev Finance Inc. (the Issuer from 2013 onwards, and guarantor of notes issued by Anheuser-Busch Worldwide Inc.), (d) the Other Subsidiary Guarantors, (e) the non-guarantor subsidiaries, (f) elimination entries necessary to consolidate the Parent with the issuer, the guarantor subsidiaries and the non-guarantor subsidiaries; and (g) the Company on a consolidated basis. Investments in consolidated subsidiaries are presented under the equity method of accounting. Separate financial statements and other disclosures with respect to the guarantor subsidiaries have not been provided as management believes the following information is sufficient, as the guarantor subsidiaries are 100% owned by the Parent and all guarantees are full and unconditional. Except as disclosed in Note 14 Changes in Equity and Earnings per Share, there are no restrictions on the Company’s ability to obtain funds from any of its direct or indirect wholly-owned subsidiaries through dividends, loans or advances.

34



CONDENSED CONSOLIDATED INCOME STATEMENT
 
For the six-month period ended 30 June
2016
Million US dollar
 
AB InBev
NV/SA
 
AB InBev
Worldwide
Inc
 
AB InBev
Finance
Inc
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Revenue
 
205

 
—

 
—

 
7 034

 
13 898

 
(931
)
 
20 206

Cost of sales
 
(130
)
 
—

 
—

 
(2 924)

 
(5 879)

 
931

 
(8 002)

Gross profit
 
75

 
—

 
—

 
4 110

 
8 019

 
—

 
12 204

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution expenses
 
(11
)
 
—

 
—

 
-477

 
(1 476)

 
—

 
(1 964)

Sales and marketing expenses
 
(105
)
 
—

 
—

 
(1 156)

 
(2 307)

 
—

 
(3 568)

Administrative expenses
 
(103
)
 
—

 
—

 
(191
)
 
(885
)
 
—

 
(1 179)

Other operating income/(expenses)
 
345

 
313

 
—

 
(610
)
 
234

 
—

 
283

Profit from operations
 
201

 
313

 
—

 
1 676

 
3 585

 
—

 
5 775

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net finance cost
 
(1 045)

 
(637
)
 
14

 
(3 353)

 
908

 
—

 
(4 113)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share of result of associates
 
—

 
—

 
—

 
—

 
3

 
—

 
3

Profit before tax
 
(844
)
 
(324
)
 
14

 
(1 677)

 
4 496

 
—

 
1 664

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
(3
)
 
158

 
10

 
(657
)
 
(344
)
 
—

 
(835
)
Profit
 
(847
)
 
(166
)
 
24

 
(2 334)

 
4 152

 
—

 
829

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from subsidiaries
 
1 131

 
716

 
—

 
2 472

 
153

 
(4 472)

 
—

Profit
 
285

 
550

 
24

 
138

 
4 305

 
(4 472)

 
829

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity holders of AB InBev
 
285

 
550

 
24

 
138

 
3 760

 
(4 472)

 
285

Non-controlling interest
 
—

 
—

 
—

 
—

 
544

 
—

 
544

 
For the six-month period ended 30 June
2015
Million US dollar
 
AB InBev
NV/SA
 
AB InBev
Worldwide
Inc
 
AB InBev
Finance
Inc
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Revenue
 
—

 
—

 
—

 
6 976

 
15 292

 
(763
)
 
21 505

Cost of sales
 
(1
)
 
—

 
—

 
(3 096)

 
(6 328)

 
763

 
(8 662)

Gross profit
 
(1
)
 
—

 
—

 
3 880

 
8 964

 
—

 
12 843

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution expenses
 
—

 
—

 
—

 
(495
)
 
(1 630)

 
—

 
(2 125)

Sales and marketing expenses
 
(62
)
 
—

 
—

 
(956
)
 
(2 325)

 
—

 
(3 343)

Administrative expenses
 
(130
)
 
—

 
—

 
(139
)
 
(994
)
 
—

 
(1 263)

Other operating income/(expenses)
 
355

 
346

 
—

 
(484
)
 
277

 
—

 
494

Profit from operations
 
162

 
346

 
—

 
1 806

 
4 292

 
—

 
6 606

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net finance cost
 
(327
)
 
(1 106)

 
(3
)
 
1 897

 
(589
)
 
—

 
(128
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share of result of associates
 
—

 
—

 
—

 
1

 
7

 
—

 
8

Profit before tax
 
(165
)
 
(760
)
 
(3
)
 
3 704

 
3 710

 
—

 
6 486

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
(2
)
 
326

 
1

 
(613
)
 
(837
)
 
—

 
(1 125)

Profit
 
(167
)
 
(434
)
 
(2
)
 
3 091

 
2 873

 
—

 
5 361

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from subsidiaries
 
4 777

 
860

 
—

 
560

 
592

 
(6 789)

 
—

Profit
 
4 610

 
426

 
(2
)
 
3 651

 
3 465

 
(6 789)

 
5 361

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity holders of AB InBev
 
4 610

 
426

 
(2
)
 
3 651

 
2 714

 
(6 789)

 
4 610

Non-controlling interest
 
—

 
—

 
—

 
—

 
751

 
—

 
751



35


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
As at 30 June 2016
Million US dollar
 
AB
InBev
NV/SA
 
AB InBev
Worldwide
Inc
 
AB InBev
Finance
Inc
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-current assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment
 
59

 
—

 
—

 
4 858

 
14 392

 
—

 
19 309

Goodwill
 
—

 
—

 
—

 
32 919

 
32 291

 
—

 
65 210

Intangible assets
 
288

 
—

 
—

 
22 048

 
7 298

 
—

 
29 634

Investments in subsidiaries
 
77 432

 
56 896

 
—

 
56 968

 
26 963

 
(218 259)

 
—

Investments in associates and joint ventures
 
—

 
—

 
—

 
31

 
255

 
—

 
286

Deferred tax assets
 
—

 
539

 
—

 
—

 
1 201

 
(539
)
 
1 201

Derivatives
 
—

 
—

 
—

 
207

 
6

 
—

 
213

Other non-current assets
 
5 966

 
13 745

 
55 292

 
41 778

 
19 989

 
(135 927)

 
843

 
 
83 745

 
71 180

 
55 292

 
158 809

 
102 395

 
(354 725)

 
116 696

Current assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities
 
45 675

 
—

 
—

 
10 225

 
82

 
—

 
55 982

Inventories
 
—

 
—

 
—

 
662

 
2 620

 
—

 
3 282

Derivatives
 
—

 
—

 
—

 
1 443

 
101

 
—

 
1 544

Trade and other receivables
 
6 365

 
1 472

 
2 340

 
17 578

 
29 556

 
(50 777)

 
6 534

Cash and cash equivalents
 
12

 
225

 
567

 
11 580

 
6 825

 
(13 159)

 
6 050

Other current assets
 
—

 
270

 
—

 
(247
)
 
1 018

 
—

 
1 041

 
 
52 052

 
1 967

 
2 907

 
41 241

 
40 202

 
(63 936)

 
74 433

Total assets
 
135 797

 
73 147

 
58 199

 
200 050

 
142 597

 
(418 661)

 
191 129

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY AND LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity attributable to equity holders of AB InBev
 
33 890

 
35 130

 
550

 
134 729

 
47 850

 
(218 259)

 
33 890

Minority interest
 
—

 
—

 
—

 
—

 
3 847

 
—

 
3 847

 
 
33 890

 
35 130

 
550

 
134 729

 
51 697

 
(218 259)

 
37 737

Non-current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing loans and borrowings
 
84 520

 
35 720

 
55 257

 
10 410

 
51 047

 
(135 909)

 
101 045

Employee benefits
 
5

 
—

 
—

 
1 359

 
1 314

 
—

 
2 678

Deferred tax liabilities
 
—

 
—

 
17

 
10 062

 
2 350

 
(539
)
 
11 890

Derivatives
 
—

 
—

 
—

 
333

 
5

 
—

 
338

Other non-current liabilities
 
129

 
—

 
—

 
751

 
1 232

 
(18
)
 
2 094

 
 
84 654

 
35 720

 
55 274

 
22 915

 
55 948

 
(136 466)

 
118 045

Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing loans and borrowings
 
13 197

 
1 810

 
1 499

 
19 380

 
19 796

 
(48 096)

 
7 586

Income tax payable
 
—

 
—

 
—

 
6

 
424

 
—

 
430

Derivatives
 
—

 
—

 
—

 
9 167

 
380

 
—

 
9 547

Trade and other payables
 
1 812

 
487

 
876

 
3 395

 
13 712

 
(2 681)

 
17 601

Other current liabilities
 
2 244

 
—

 
—

 
10 458

 
640

 
(13 159)

 
183

 
 
17 253

 
2 297

 
2 375

 
42 406

 
34 952

 
(63 936)

 
35 347

Total equity and liabilities
 
135 797

 
73 147

 
58 199

 
200 050

 
142 597

 
(418 661)

 
191 129



36


As at 31 December 2015
Million US dollar1
 
AB InBev
NV/SA

 
AB InBev
Worldwide
Inc

 
AB InBev
Finance Inc

 
Subsidiary
Guarantors

 
Non-
Guarantors

 
Eliminations

 
Total

ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-current assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment
 
80

 
—

 
—

 
4 895

 
13 977

 
—

 
18 952

Goodwill
 
—

 
—

 
—

 
32 831

 
32 230

 
—

 
65 061

Intangible assets
 
259

 
—

 
—

 
21 983

 
7 435

 
—

 
29 677

Investments in subsidiaries
 
75 275

 
56 214

 
—

 
44 555

 
21 778

 
(197 822)

 
—

Investments in associates and joint ventures
 
—

 
—

 
—

 
31

 
181

 
—

 
212

Deferred tax assets
 
—

 
456

 
—

 
—

 
1 181

 
(456
)
 
1 181

Derivatives
 
—

 
—

 
—

 
282

 
13

 
—

 
295

Other non-current assets
 
6 712

 
13 745

 
9 680

 
38 273

 
19 888

 
(87 335)

 
963

 
 
82 326

 
70 415

 
9 680

 
142 850

 
96 683

 
(285 613)

 
116 341

Current assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities
 
—

 
—

 
—

 
—

 
55

 
—

 
55

Inventories
 
—

 
—

 
—

 
581

 
2 281

 
—

 
2 862

Derivatives
 
—

 
—

 
—

 
2 878

 
390

 
—

 
3 268

Trade and other receivables
 
5 388

 
574

 
1 087

 
14 157

 
10 780

 
(27 535)

 
4 451

Cash and cash equivalents
 
38

 
739

 
525

 
10 042

 
9 015

 
(13 436)

 
6 923

Other current assets
 
—

 
526

 
—

 
(433
)
 
642

 
—

 
735

 
 
5 426

 
1 839

 
1 612

 
27 225

 
23 163

 
(40 971)

 
18 294

Total assets
 
87 752

 
72 254

 
11 292

 
170 075

 
119 846

 
(326 584)

 
134 635

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EQUITY AND LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity attributable to equity holders of AB InBev
 
42 137

 
34 401

 
526

 
116 127

 
46 770

 
(197 824)

 
42 137

Minority interest
 
—

 
—

 
—

 
—

 
3 582

 
—

 
3 582

 
 
42 137

 
34 401

 
526

 
116 127

 
50 352

 
(197 824)

 
45 719

Non-current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing loans and borrowings
 
34 187

 
33 626

 
9 621

 
11 947

 
41 476

 
(87 316)

 
43 541

Employee benefits
 
5

 
—

 
—

 
1 404

 
1 316

 
—

 
2 725

Deferred tax liabilities
 
—

 
—

 
12

 
10 014

 
2 391

 
(456
)
 
11 961

Derivatives
 
—

 
—

 
—

 
278

 
37

 
—

 
315

Other non-current liabilities
 
149

 
—

 
—

 
672

 
1 115

 
(18
)
 
1 918

 
 
34 341

 
33 626

 
9 633

 
24 315

 
46 335

 
(87 790)

 
60 460

Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing loans and borrowings
 
8 164

 
3 830

 
1 000

 
12 468

 
6 106

 
(25 656)

 
5 912

Income tax payable
 
—

 
—

 
15

 
2

 
652

 
—

 
669

Derivatives
 
—

 
—

 
—

 
2 780

 
1 200

 
—

 
3 980

Trade and other payables
 
1 136

 
397

 
118

 
3 229

 
14 660

 
(1 878)

 
17 662

Other current liabilities
 
1 974

 
—

 
—

 
11 154

 
541

 
(13 436)

 
233

 
 
11 274

 
4 227

 
1 133

 
29 633

 
23 159

 
(40 970)

 
28 456

Total equity and liabilities
 
87 752

 
72 254

 
11 292

 
170 075

 
119 846

 
(326 584)

 
134 635










________________________________________
1 Reclassified to conform to the 2016 presentation

37



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
 
For the six-month period ended 30 June
2016
Million US dollar
 
AB InBev
NV/SA
 
AB InBev
Worldwide
Inc
 
AB InBev
Finance
Inc
 
Subsidiary
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
OPERATING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit
 
285

 
752

 
24

 
138

 
4 103

 
(4 472)

 
829

Depreciation, amortization and impairment
 
46

 
—

 
—

 
365

 
1 148

 
—

 
1 559

Net finance cost
 
1 045

 
637

 
(14
)
 
3 353

 
(908
)
 
—

 
4 113

Income tax expense
 
3

 
(360
)
 
(10
)
 
657

 
545

 
—

 
835

Investment income
 
(1 131)

 
(716
)
 
—

 
(2 472)

 
(153
)
 
4 472

 
—

Other items
 
29

 
—

 
—

 
146

 
(118
)
 
—

 
57

Cash flow from operating activities before changes in working capital and use of provisions
 
276

 
313

 
—

 
2 187

 
4 617

 
—

 
7 393

Working capital and provisions
 
(320
)
 
637

 
—

 
(776
)
 
(1 484)

 
5

 
(1 938)

Cash generated from operations
 
(44
)
 
950

 
—

 
1 411

 
3 133

 
5

 
5 455

Interest paid, net
 
(291
)
 
(586
)
 
42

 
614

 
(608
)
 
(5
)
 
(834
)
Dividends received
 
6 154

 
—

 
—

 
2

 
4

 
(6 154)

 
6

Income tax paid
 
(3
)
 
—

 
—

 
(314
)
 
(1 857)

 
—

 
(2 174)

CASH FLOW FROM OPERATING ACTIVITIES
 
5 816

 
364

 
42

 
1 713

 
672

 
(6 154)

 
2 453

INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition and sale of subsidiaries, net of cash acquired/disposed of
 
(94
)
 
—

 
—

 
(196
)
 
(745
)
 
—

 
(1 035)

Acquisition of property, plant and equipment and of intangible assets
 
(66
)
 
—

 
—

 
(297
)
 
(1 165)

 
—

 
(1 528)

Net of tax proceeds from the sale of assets held for sale
 
—

 
—

 
—

 
—

 
58

 
—

 
58

Net proceeds/(acquisition) of other assets
 
1

 
—

 
—

 
6

 
102

 
—

 
109

Net proceeds from sale/(acquisition) of investment in short-term debt securities
 
(45 675)

 
—

 
—

 
(10 225)

 
(5
)
 
—

 
(55 905)

Net repayments/(payments) of loans granted
 
(11 609)

 
(900
)
 
(46 052)

 
(926
)
 
(8 587)

 
68 076

 
2

CASH FLOW FROM INVESTING ACTIVITIES
 
(57 443)

 
(900
)
 
(46 052)

 
(11 638)

 
(10 342)

 
68 076

 
(58 299)

FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intra-group capital reimbursements
 
(2
)
 
—

 
—

 
2

 
—

 
—

 
—

Proceeds from borrowings
 
56 582

 
2 805

 
47 055

 
14 394

 
15 941

 
(71 520)

 
65 257

Payments on borrowings
 
(952
)
 
(2 719)

 
(1 000)

 
(987
)
 
(4 121)

 
3 323

 
(6 456)

Other financing activities
 
171

 
(65
)
 
(3
)
 
(1 612)

 
1 584

 
—

 
75

Dividends paid
 
(3 665)

 
—

 
—

 
1

 
(6 419)

 
6 154

 
(3 929)

CASH FLOW FROM FINANCING ACTIVITIES
 
52 134

 
21

 
46 052

 
11 798

 
6 985

 
(62 043)

 
54 947

Net increase/(decrease) in cash and cash equivalents
 
507

 
(515
)
 
42

 
1 873

 
(2 685)

 
(121
)
 
(899
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents less bank overdrafts at beginning of year
 
(1 833)

 
739

 
525

 
(1 100)

 
8 579

 
—

 
6 910

Effect of exchange rate fluctuations
 
(894
)
 
1

 
—

 
358

 
398

 
121

 
(16
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents less bank overdrafts at end of year
 
(2 220)

 
225

 
567

 
1 131

 
6 292

 
—

 
5 995


38


For the six-month period ended 30 June 20151
Million US dollar
 
AB InBev
NV/SA

 
AB InBev
Worldwide
Inc

 
AB InBev
Finance
Inc

 
Subsidiary
Guarantors

 
Non-Guarantors

 
Eliminations

 
Total

OPERATING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit
 
4 610

 
426

 
(2
)
 
3 651

 
3,465

 
(6 789)

 
5 361

Depreciation, amortization and impairment
 
35

 
—

 
—

 
338

 
1 154

 
—

 
1 527

Net finance cost
 
327

 
1 106

 
3

 
(1 897)

 
589

 
—

 
128

Income tax expense
 
2

 
(326
)
 
(1
)
 
613

 
837

 
—

 
1 125

Investment income
 
(4 777)

 
(860
)
 
—

 
(560
)
 
(592
)
 
6 789

 
—

Other items
 
23

 
—

 
—

 
(36
)
 
62

 
—

 
49

Cash flow from operating activities before changes in working capital and use of provisions
 
220

 
346

 
—

 
2 109

 
5 515

 
—

 
8 190

Working capital and provisions
 
(403
)
 
662

 
—

 
(596
)
 
(757
)
 
(65
)
 
(1 159)

Cash generated from operations
 
(183
)
 
1 008

 
—

 
1 513

 
4 758

 
(65
)
 
7 031

Interest paid, net
 
(246
)
 
(1 131)

 
24

 
1 010

 
(539
)
 
(22
)
 
(904
)
Dividends received
 
846

 
—

 
—

 
15

 
5

 
(847
)
 
19

Income tax paid
 
(2
)
 
—

 
—

 
(341
)
 
(1 089)

 
—

 
(1 432)

CASH FLOW FROM OPERATING ACTIVITIES
 
415

 
(123
)
 
24

 
2 197

 
3 135

 
(934
)
 
4 714

INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition and sale of subsidiaries, net of cash acquired/disposed of
 
—

 
—

 
—

 
(39
)
 
(181
)
 
—

 
(220
)
Acquisition of property, plant and equipment and of intangible assets
 
(39
)
 
—

 
—

 
(257
)
 
(1 379)

 
—

 
(1 675)

Net of tax proceeds from the sale of assets held for sale
 
—

 
—

 
—

 
211

 
17

 
—

 
228

Net proceeds/(acquisition) of other assets
 
—

 
—

 
—

 
11

 
10

 
—

 
21

Net proceeds from sale/(acquisition) of investment in short-term debt securities
 
—

 
—

 
—

 
—

 
(71
)
 
—

 
(71
)
Net repayments/(payments) of loans granted
 
(578
)
 
—

 
—

 
3 715

 
(5 874)

 
2 691

 
(46
)
CASH FLOW FROM INVESTING ACTIVITIES
 
(617
)
 
—

 
—

 
3 641

 
(7 478)

 
2 691

 
(1 763)

FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intra-group capital reimbursements
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Proceeds from borrowings
 
6 428

 
4 229

 
—

 
919

 
7 482

 
(9 413)

 
9 645

Payments on borrowings
 
(1 884)

 
(4 359)

 
—

 
(5 220)

 
(3 466)

 
6 791

 
(8 138)

Share buyback
 
(1 000)

 
—

 
—

 
—

 
—

 
—

 
(1 000)

Other financing activities
 
(25
)
 
—

 
—

 
(60
)
 
(289
)
 
—

 
(374
)
Dividends paid
 
(3 695)

 
—

 
—

 
—

 
(1 708)

 
847

 
(4 556)

CASH FLOW FROM FINANCING ACTIVITIES
 
(176
)
 
(130
)
 
—

 
(4 361)

 
2 019

 
(1 775)

 
(4 423)

Net increase/(decrease) in cash and cash equivalents
 
(378
)
 
(253
)
 
24

 
1 477

 
(2 324)

 
(18
)
 
(1 472)

Cash and cash equivalents less bank overdrafts at beginning of year
 
502

 
(240
)
 
460

 
(5 789)

 
13 383

 
—

 
8 316

Effect of exchange rate fluctuations
 
(172
)
 
—

 
1

 
(97
)
 
(203
)
 
18

 
(453
)
Cash and cash equivalents less bank overdrafts at end of year
 
(48
)
 
(493
)
 
485

 
(4 409)

 
10 856

 
—

 
6 391
















 ________________________________________
1 Reclassified to conform to the 2016 presentation

39


23.
EVENTS AFTER THE BALANCE SHEET DATE
APPROVAL OF PROPOSED COMBINATION WITH SABMILLER BY THE UNITED STATES DEPARTMENT OF JUSTICE
On 20 July 2016, AB InBev announced that it had entered into a consent decree with the United States Department of Justice, which clears the way for U.S. approval of its proposed combination with SABMiller plc.
As part of the consent decree and consistent with AB InBev’s approach to proactively address potential regulatory concerns, the company agreed to divest SABMiller’s U.S. interest in MillerCoors to Molson Coors. This divestiture, which was previously announced between AB InBev and Molson Coors, is conditional upon the successful closing of the proposed combination of AB InBev with SABMiller.
The terms of the consent decree formalize prior commitments made by the company’s U.S. entity Anheuser-Busch (“AB”) including:
–
AB will not acquire a distributor if doing so would result in more than 10% of its annual volume being distributed through wholly-owned distributorships in the U.S.;
–
AB will not terminate any wholesalers as a result of the combination with SABMiller.
In addition, certain aspects of the company’s U.S. sales programs and policies will be reviewed and modified to conform to the consent decree.
REVISED AND FINAL OFFER FOR SABMILLER
On 26 July 2016, AB InBev announced revised and final terms of its offer to acquire the entire issued and to be issued share capital of SABMiller.
Pursuant to the revised and final terms, each SABMiller shareholder will now be entitled to receive 45.00 pounds sterling in cash for each SABMiller share. The revised Cash Consideration represents:
–
An increase of 1.00 pounds sterling per SABMiller share over the 44.00 pounds sterling Cash Consideration set out in the 11 November 2015 announcement;
–
A premium of approximately 53% to SABMiller’s closing share price of 29.34 pounds sterling on 14 September 2015 (being the last business day prior to renewed speculation of an approach from AB InBev);
–
A premium of approximately 39% to SABMiller’s three month volume weighted average share price of 32.31 pounds sterling to 14 September 2015.

Pursuant to the revised and final terms of the Partial Share Alternative, SABMiller shareholders will now be entitled to elect to receive 4.6588 pounds sterling in cash and 0.483969 Restricted Shares for each SABMiller share.
The revised Partial Share Alternative represents, as of 25 July 2016:
–
A premium of approximately 74% to SABMiller’s closing share price of 29.34 pounds sterling on 14 September 2015 (being the last business day prior to renewed speculation of an approach from AB InBev);
–
A premium of approximately 58% to SABMiller’s three-month volume weighted average share price of 32.31 pounds sterling to 14 September 2015.

CLEARANCE IN CHINA FOR PROPOSED COMBINATION WITH SABMILLER, SATISFACTION OF ALL PRE-CONDITIONS TO THE PROPOSED COMBINATION AND SABMILLER BOARD RECOMMENDATION OF THE PROPOSED COMBINATION
On 29 July 2016, AB InBev announced the conditional approval of China’s Ministry of Commerce of the company’s proposed combination with SABMiller.
To achieve the Ministry of Commerce’s conditional approval and consistent with its approach to proactively addressing potential regulatory concerns, as previously announced, AB InBev agreed to sell SABMiller’s 49% stake in China Resources Snow Breweries Ltd. to China Resources Beer (Holdings) Co. Ltd, which currently owns 51% of China Resources Snow Breweries Ltd. This divestment is conditional on the successful closing of the combination of AB InBev with SABMiller.
Following previously announced clearances in the EU, South Africa and the United States, all of the pre-conditions to the proposed combination have now been satisfied.
Thereafter, on 29 July 2016, SABMiller announced that its board intended to recommend the revised and final terms of the proposed combination announced by AB InBev on 26 July 2016 detailed above.
In the remaining jurisdictions where regulatory clearance is still pending, the company will continue to engage proactively with the relevant authorities to address their concerns in order to obtain the necessary clearances as quickly as possible. The company continues to focus on working closely with SABMiller to take the necessary steps in preparation for completing the combination as quickly as practicable and expect the transaction to complete in 2016.


40