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Bud APAC - Prospectus PDF
Bud APAC - Prospectus PDF
If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
GLOBAL OFFERING
Number of Offer Shares under : 1,626,526,000 Shares (subject to the
the Global Offering Over-allotment Option)
Number of Hong Kong Offer Shares : 81,327,000 Shares (subject to
reallocation)
Number of International Offer Shares : 1,545,199,000 Shares (subject to
reallocation and the Over-allotment
Option)
Maximum Offer Price : HKD47.00 per Offer Share plus
brokerage of 1.0%, SFC transaction
levy of 0.0027% and Stock
Exchange trading fee of 0.005%
(payable in full on application in
Hong Kong dollars and subject
to refund)
Nominal value : USD0.00001 per Share
Stock Code : 1876
Joint Sponsors
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited
take no responsibility for the contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim
any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in “Appendix VI – Documents Delivered to the Registrar of
Companies and Available for Inspection,” has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures
Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents
referred to above.
The Offer Price is expected to be determined by agreement between the Joint Representatives (for themselves and on behalf of the
Underwriters) and the Company on the Price Determination Date, which is expected to be on or about Friday, 12 July 2019 and, in any event,
not later than Monday, 15 July 2019. The Offer Price will not be more than HKD47.00 per Offer Share and is expected to be not less than
HKD40.00 per Offer Share, unless otherwise announced.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure subscribers for, the
Hong Kong Offer Shares, are subject to termination by the Joint Representatives (for themselves and on behalf of the Underwriters) if certain events
shall occur prior to 8:00 a.m. on the Listing Date. Such grounds are set out in the section headed “Underwriting” in this prospectus.
The Offer Shares have not been and will not be registered under the US Securities Act or any state securities law in the US and may not be
offered, sold, pledged or transferred within the US, except that Offer Shares may be offered, sold or delivered (a) in the US solely to qualified
institutional buyers in reliance on Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the
US Securities Act or (b) outside the US in offshore transactions in reliance on Regulation S.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus,
including the risk factors set out in “Risk Factors.” The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting
Agreement are subject to termination by the Joint Representatives (on behalf of the Underwriters) if certain grounds arise prior to 8:00 a.m. on
the Listing Date. Such grounds are set out in “Underwriting.”
5 July 2019
EXPECTED TIMETABLE(1)
–i–
EXPECTED TIMETABLE(1)
Notes:
(1) All dates and times refer to Hong Kong dates and times.
(2) You will not be permitted to submit your application under the White Form eIPO service through the
designated website at www.eipo.com.hk after 11:30 a.m. on the last day for submitting applications.
If you have already submitted your application and obtained a payment reference number from the
designated website prior to 11:30 a.m., you will be permitted to continue the application process (by
completing payment of the application monies) until 12:00 noon on the last day for submitting
applications, when the application lists close.
(3) If there is a “black” rainstorm warning signal or a tropical cyclone warning signal number 8 or above in
force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, 11 July 2019, the
application lists will not open and close on that day. See “How to Apply for Hong Kong Offer Shares.”
(4) The Share certificates will only become valid at 8:00 a.m. on the Listing Date, which is expected to be
Friday, 19 July 2019, provided that the Global Offering has become unconditional in all respects at or
before that time. Investors who trade Shares on the basis of publicly available allocation details or prior
to the receipt of the Share certificates or prior to the Share certificates becoming valid do so entirely at
their own risk.
(5) e-Refund payment instructions/refund cheques will be issued in respect of wholly or partially
unsuccessful applications and in respect of successful applications if the Offer Price is less than the
price payable on application.
For details of the structure of the Global Offering, including its conditions, and the
procedures for applications for Hong Kong Offer Shares, see “Structure of the Global
Offering” and “How to Apply for Hong Kong Offer Shares,” respectively.
– ii –
CONTENTS
You should rely only on the information contained in this prospectus and the
Application Forms to make your investment decision. The Hong Kong Public
Offering is made solely on the basis of the information contained and the
representations made in this prospectus. Neither the Company nor any of the
Relevant Persons (as defined in this prospectus) has authorized anyone to provide
you with any information or to make any representation that is different from what
is contained in this prospectus. Any information or representation not made in this
prospectus must not be relied on by you as having been authorized by the Company
or any of the Relevant Persons.
Page
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Waivers from Strict Compliance with the Listing Rules and Exemptions
from Strict Compliance with the Companies (WUMP) Ordinance and
the SFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
– iii –
CONTENTS
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
– iv –
SUMMARY
We are Budweiser Brewing Company APAC Limited, part of the AB InBev Group.
We are the largest beer company in Asia Pacific by retail sales value in 2018, according
to GlobalData. We are also one of the most profitable Asia-based beer companies in
terms of Normalized EBITDA in 2018. We produce, import, market, distribute and sell a
portfolio of more than 50 beer brands, which we own or have licensed, including
Budweiser, Stella Artois and Corona, our global brands, along with our multi-country
brands and local brands, such as Hoegaarden, Cass, Great Northern, Harbin and
Victoria Bitter.
• the number one position by beer value in China, and the number one position
in the fast growing premium and super premium categories collectively by beer
value and beer volume in 2018;
• the number one position by beer value and by beer volume in Australia in 2018;
• the number one position by beer value and by beer volume in South Korea in
2018;
• a top three position by beer value and by beer volume in India, and the number
one position in the fast growing premium and super premium categories
collectively by beer value and beer volume in 2018; and
• a top three position in the premium and super premium beer categories
collectively by beer value and by beer volume in Vietnam in 2018.
We develop our markets using a market maturity model. This allows us to capture
opportunities from different beer markets across different levels of maturity. Our platform
presents a unique and diversified balance between high growth and margin expansion in
our low and middle maturity beer markets, such as China, India and Vietnam, as well as
the stability, substantial cash generation and profitability of our business in high maturity
beer markets, such as Australia and South Korea. For each level of maturity, we are able
to identify gaps by measuring performance of various KPIs against growth potential and
proactively take advantage of expansion opportunities. In terms of segmenting our
business, we operate through two geographic regions: Asia Pacific East (primarily
Australia, Japan and South Korea) and Asia Pacific West (China, India, Vietnam and
exports elsewhere in Asia Pacific), which are our two reportable segments for financial
reporting purposes.
–1–
SUMMARY
We have achieved growth in revenue and profitability in recent periods. In 2017 and
2018, our revenue was USD7,790 million and USD8,459 million, respectively,
representing organic growth of 6.1%. Our revenue per hectoliter saw organic growth of
3.9% from 2017 to 2018, mainly driven by the increasing shift in our portfolio towards
premium categories. In 2017 and 2018, our Normalized EBITDA was USD2,479 million
and USD2,792 million, respectively, representing organic growth of 12.0%. Our net profit
for 2017 and 2018 was USD1,077 million and USD1,409 million, respectively.
For the three months ended 31 March 2018 and 2019, our revenue was USD2,032
million and USD1,993 million, respectively, which, after excluding the effects of currency
translation, represents organic growth of 4.5%. Our revenue per hectoliter saw organic
growth of 5.9% over the same periods, driven by our revenue management initiatives
and brand mix, as we continued to implement our premiumization strategies. For the
three months ended 31 March 2018 and 2019, our Normalized EBITDA was USD687
million and USD730 million, respectively, representing organic growth of 13.4%. Our net
profit for the three months ended 31 March 2018 and 2019 was USD346 million and
USD351 million, respectively.
Our brands are the foundation and cornerstone of our relationship with consumers.
On the basis of quality and price, we differentiate our beer into three categories of
Premium and Super Premium brands, Core and Core+ brands and Value brands.
Macroeconomic factors in Asia Pacific, such as growth in disposable income and
urbanization, are leading a shift in consumer preferences toward more premium beer
categories and higher priced beers. With a significant portion of our revenue contributed
by our Premium and Super Premium category brands, we are well positioned to capture
the premiumization and trading-up trends across Asia Pacific and particularly in China.
–2–
SUMMARY
The chart below illustrates our three categories of beer as well as our key brands,
including those we license from AB InBev, within each category.
Other
countries
Super
Premium
Premium
Core+
Core
Value
OUR OPERATIONS
We produce the majority of the beer we sell in our breweries. As of 31 March 2019,
our operations comprised 62 breweries located across our principal markets. In addition,
we have licenses to import more than 25 AB InBev brands for sale in Asia Pacific on an
exclusive basis, such as Stella Artois from Belgium, Corona from Mexico, Beck’s from
Germany and other American and European brands.
Quality control is at the core of our business. We monitor the quality of every
beverage we produce at each step of the production process, including by online
real-time system monitoring and conducting extensive testing, to ensure that every
beverage meets our Group-wide standards of quality.
In determining our pricing strategy, we take into account a variety of factors, such
as the supply of and demand for our products, anticipated market trends, costs of raw
materials and packaging materials, product costs, product categories, the distribution
channel through which we are selling, retail prices of our competitors’ products,
spending patterns of target consumers, historical sales data and the expected profit
margins for us and our distributors. We review and adjust our product prices periodically
based on these factors and other general market conditions. Generally, we set
recommended nationwide retail prices for our products, which are subject to adjustments
reflecting the local competitive environment.
–3–
SUMMARY
OUR CUSTOMERS
Our customers include distributors, large retailers and certain other customers. We
have cultivated a large B2B network where customers, such as distributors, place orders
directly with us (and then on-sell them), in addition to our growing B2C network, where
we engage with consumers directly. Our sales force organization of more than 10,000
employees and our distributors are our gateway to our consumers. The products we
brew are sold to approximately 6,000 distributors across Asia Pacific.
OUR PEOPLE
Our greatest strength is our people. We dream big, and our culture of ownership
drives us to achieve results. The culture of sharing best practices across our platform
and between geographies is a key advantage of our geographic footprint and a core
value that drives our operational excellence. We share the “Dream-People-Culture”
principles together with our controlling shareholder, AB InBev. These principles are the
foundation of our success and underpin our relentless efforts to continuously improve
our performance. They inspire our more than 31,000 colleagues across the region to
brew the highest quality products for our consumers and build a company to thrive for the
next 100 years and beyond.
Our dream is to Bring People Together for a Better World. In all we do, we strive to
ensure that we produce the highest-quality products, provide the best consumer
experience and maximize shareholder value by building the strongest competitive and
financial position. Through our reach, resources and energy, we aim to address the
needs of our communities through:
• Business ethics – our leaders set the tone for our company – we never take
shortcuts – Integrity, hard work, quality and responsibility are essential to our
growth.
–4–
SUMMARY
STRENGTHS
By combining scale, resources and energy with the needs of the communities we
serve, we believe that our past success and our ability to capitalize on future growth
opportunities are attributable to our following competitive strengths:
• Regional champion with a pan-Asian platform that covers the full spectrum of
beer markets
STRATEGY
To achieve our objectives and strengthen our leading positions, we intend to pursue
a comprehensive strategy focused on the following themes:
• Driving top line growth through our four main commercial strategies
–5–
SUMMARY
RISK FACTORS
Our business is subject to numerous risks and there are risks relating to an
investment in the Shares. As different investors may have different interpretations and
criteria when determining the significance of a risk, you should read “Risk Factors” in its
entirety before you decide to invest in the Shares.
• Our business and results of operations are affected by changes in regional and
global economic conditions and certain risks common to the beer industry.
–6–
SUMMARY
The reasons for, and benefits of, the Listing of a minority stake in the Group include:
(a) creating value for Shareholders by offering the opportunity to directly participate in
one of the most attractive beer markets globally and exposure to the largest regional
brewer with a strong track record of growth and industry-leading profitability, (b) greater
flexibility for us to pursue regional M&A in Asia Pacific, (c) creating a leading regional
FMCG company with a local identity and local stakeholders and an agile and adaptive
organization with more localized decision making, and (d) enhancing our ability to attract
and retain local talent.
Delineation of Business
In order to limit future competition between our Group and the AB InBev Group, the
AB InBev Group and our Group have entered into the Deed of Non-competition, which
provides that the AB InBev Group will not, except through our Group, carry on, engage
in or make any investment in businesses relating to the manufacture, import, sale and/or
distribution of beer (both alcohol and non-alcohol), cider and alcohol malt-based
beverages within Asia Pacific, subject to certain limited exceptions, and our Group will
not, except through the AB InBev Group, engage in or make any investment in
businesses relating to the manufacture, import, sale and/or distribution of beer (both
alcohol and non-alcohol), cider and alcohol malt-based beverages outside the APAC
Territories, subject to certain limited exceptions.
Both the AB InBev Group and our Group have agreed to refer to each other
investment opportunities with respect to the other party’s territories in accordance with
certain agreed procedures.
More than 40% of our net revenue is derived from brands, such as Budweiser, Stella
Artois and Corona, that we import from AB InBev for sale or that we brew and sell under
licenses from AB InBev. We require AB InBev to continue to export these products to us
and to provide us with the rights to brew and sell these brands, which are core to our
business. In order to maintain the rights to import, produce and sell these brands, we
have entered into long-term licenses with AB InBev on arm’s-length terms.
–7–
SUMMARY
The key terms of the agreements above that constitute Non-exempt Continuing
Connected Transactions are summarized in the table below.
Deposits in the cash pooling 5 years Deposit interest rates 2019:USD2.45 billion
arrangements of the AB offered by the Pooling 2020:USD2.45 billion
InBev Group Agent 2021:USD2.75 billion
2022:USD3 billion
2023:USD3 billion
–8–
SUMMARY
Operating Data:
Volumes (thousand
hectoliters) 101,986 N/A 104,266 N/A 24,296 N/A 23,986 N/A
Gross Profit 4,339 55.7% 4,667 55.2% 1,096 53.9% 1,083 54.3%
Selling, general and
administrative expenses (2,767) (35.5)% (2,799) (33.1)% (633) (31.1)% (586) (29.4)%
Other operating
income/(expenses) 163 2.1% 163 1.9% 42 2.1% 29 1.5%
Profit from operations 1,638 21.0% 1,966 23.2% 496 24.4% 510 25.6%
Net finance cost (104) (1.3)% (113) (1.4)% (40) (2.0)% (20) (1.0)%
Share of results of
associates 8 0.1% 17 0.3% 1 0.0% 2 0.1%
Profit before tax 1,542 19.8% 1,870 22.1% 457 22.5% 492 24.7%
Income tax expense (465) (6.0)% (461) (5.4)% (111) (5.5)% (141) (7.1)%
Profit of the period 1,077 13.8% 1,409 16.7% 346 17.0% 351 17.6%
Non-IFRS Financial
Measures:
Normalized EBITDA(1) 2,479 31.8% 2,792 33.0% 687 33.8% 730 36.6%
(1) See “– Non-IFRS Financial Measures – Normalized EBITDA” below for a reconciliation of Normalized
EBITDA to profit of the period.
–9–
SUMMARY
Volumes
Organic Organic
Thousand hectoliters 2017 Scope (1) growth (1) 2018 growth%
Organic Organic
Thousand hectoliters 1Q2018 Scope (1) growth (1) 1Q2019 growth%
Revenue
Note:
(1) The term “organic” means the financials are analyzed eliminating the impact of changes in currencies
on translation of foreign operations and scopes. “Scopes” represent the impact of acquisitions and
divestitures, the start-up or termination of activities or the transfer of activities between segments,
curtailment gains and losses and year-over-year changes in accounting estimates and other
assumptions that management does not consider part of the underlying performance of the business.
See “Financial Information – Selected Financial Figures.”
– 10 –
SUMMARY
Normalized EBITDA
– 11 –
SUMMARY
The following table reconciles our Normalized EBITDA to the most directly
comparable financial measure calculated and presented in accordance with IFRS, which
is profit of the period, for the periods indicated:
Profit attributable
to equity holders
of the Company 1,079 1,408 346 351
Non-controlling
interest (2) 1 – –
Profit of the period 1,077 1,409 346 351
Income tax expense 493 477 123 142
Share of results of
associates(1) (8) (17) (1) (2)
Net finance cost
(including non-
recurring finance
cost) 104 113 40 20
Non-recurring
income tax benefit (28) (16) (12) (1)
Non-recurring items
above EBIT
(including non-
recurring costs)(2) 97 65 9 16
(1) Share of results of associates consists of the results of our investment in Zhujiang for the periods
indicated. As we do not exercise control over Zhujiang or its day-to-day operation, our
management does not consider the performance of Zhujiang to be indicative of our underlying
business performance, which is the selling of beer and other operational businesses, rather than
investment in beer companies.
(2) Non-recurring items above EBIT (including non-recurring costs) consists of certain non-recurring
restructuring costs (USD66 million and USD61 million) and acquisition and integration costs
(USD31 million and USD4 million) for the years ended 31 December 2017 and 2018,
respectively, as detailed under “Financial Information – Review of Historical Results of
Operations – Year Ended 31 December 2018 Compared to Year Ended 31 December 2017 –
Non-recurring Items,” which our management does not consider to be items that drive our
underlying business performance.
– 12 –
SUMMARY
Non-recurring items above EBIT (including non-recurring costs) consists of certain restructuring
costs (USD9 million and USD1 million) and costs associated with initial public offering (nil and
USD15 million) for the three months ended 31 March 2018 and 2019, respectively, as detailed
under “Financial Information – Review of Historical Results of Operations – Three Months Ended
31 March 2019 (“1Q2019”) Compared to Three Months Ended 31 March 2018 (“1Q2018”) –
Non-recurring Items,” which our management does not consider to be items that drive our
underlying business performance.
As at 31 December As at 31 March
USD millions 2017 2018 2019
As at 31 March 2019 and 31 December 2018, our balance sheet included USD13.2
billion of goodwill, representing approximately 51% of our total assets, and USD4.4
billion of other intangible assets, representing approximately 17% of our total assets.
Any impairment of goodwill or other intangible assets would adversely affect our
financial condition and results of operations.
We consider our net current liabilities position mainly a result of our business model
and the way we choose to finance our business. The net current liability position is
predominately due to our level of trade payables, which is common in the FMCG sector.
We finance working capital through trade creditors, on what we believe to be generally
favorable credit terms, whereas our inventory and receivables cycles are shorter. During
the Track Record Period, surplus cash generated from operations was extracted from
the Group via transfer into the physical cash pool with AB InBev or dividend payments.
Given our strong operating cash inflow, financial performance and available cash
resources, we believe that our net current liabilities position does not indicate any issues
with our liquidity position.
Net increase/(decrease) in
cash and cash equivalents 660 12 (201) (99)
– 13 –
SUMMARY
Contingencies
We are currently subject to an ongoing tax audit in Australia, the focus of which is
in relation to the tax treatment of the funding of a legacy acquisition by SAB, for which a
reduction of AUD360 million (USD256 million) has been made against deferred tax
assets in our financial statements. For further information, see Note 29 to the
Accountant’s Report set out in Appendix I.
See “Appendix II – Unaudited Pro Forma Financial Information” for further details.
USE OF PROCEEDS
The Company will use the entire net proceeds from the Global Offering to satisfy
loans due to AB InBev’s subsidiaries to complete the Reorganization. For further details,
see “Future Plans and Use of Proceeds.”
LISTING EXPENSES
DIVIDEND POLICY
The value, timing and frequency of future dividend payments will be at the
discretion of our Board of Directors, subject to applicable laws and shareholders’
approval. Our Board of Directors may also decide for the payment of an interim dividend
from time to time. The payment of dividends will depend on a number of factors our
Board deems relevant, taking into account the organic and inorganic investment
opportunities.
RECENT DEVELOPMENTS
As far as the Directors are aware, there have not been any material changes in our
operations, nor in the general economic and market conditions in the regions or the
industries in which we operate, that materially and adversely affected our business
operations or financial condition since 31 March 2019 and up to the date of this
prospectus.
– 14 –
SUMMARY
Record Period. Completion of the transaction took place on 30 May 2019. See “Waivers
from Strict Compliance with the Listing Rules and Exemptions from Strict Compliance
with the Companies (WUMP) Ordinance and the SFO – Post Track Record Period
Acquisition” for additional details.
Under the terms of the Share Issuance Agreement, the entire net proceeds from
any exercise of the Over-allotment Option will be used to repay our obligations to APAC
HoldCo 2 under the Shareholder Loan. To the extent the Over-allotment Option is not
exercised in full, at the end of the Over-allotment Option exercise period, we will issue
the same number of Shares to APAC HoldCo 2 as would have been issued had the
remainder of the Over-allotment Option been exercised in full in exchange for the
cancellation of all remaining principal amount of the Shareholder Loan. See “History,
Development and Reorganization – 9. Payment of Net Proceeds from the Global
Offering and any exercise of the Over-Allotment Option to APAC HoldCo 2, and the
termination of the Shareholder Loan” for a detailed description.
– 15 –
SUMMARY
The following table sets out the shareholding structure of the Company: (a) as at the
Listing Date; (b) as at the end of Over-allotment Option exercise period, assuming the
Over-allotment Option is not exercised at all; and (c) as at the end of Over-allotment
Option exercise period, assuming the Over-allotment Option is exercised in full.
(1) Assuming the Over-allotment Option is not exercised at all, under the Share Issuance Agreement, the
Company will issue the same number of Shares to APAC HoldCo 2 as would have been issued had the
Over-allotment Option been exercised in full in exchange for the cancellation of all remaining principal
amount of the Shareholder Loan.
(2) Assuming the Over-allotment Option is exercised in full, the Shareholder Loan will be repaid in full from
the net proceeds received therefrom and so no new Shares will be issued to APAC HoldCo 2 under the
Share Issuance Agreement at all.
The Company has applied to the Stock Exchange and the SFC, and has been
granted, a waiver under the Listing Rules and a certificate of exemption under the
Companies (Winding Up and Miscellaneous Provisions) Ordinance respectively such
that the Company can present a shorter trading record period in this prospectus covering
financial information (as well as the relevant business and operational data) for only the
two most recent financial years immediately preceding the issue of this prospectus being
the two years ended 31 December 2017 and 2018.
This waiver and exemption was granted on the basis that AB InBev’s business
combination with SAB in October 2016 constituted exceptional circumstances such that:
(1) our 2016 financial information would not have been a meaningful or useful
comparison to the two most recent financial years immediately preceding the issue of
this prospectus; (2) the non-disclosure of the 2016 financial information would not be
prejudicial to the interests of the investing public; and (3) the preparation of the 2016
financial information would have been unduly burdensome.
The Company is applying for Listing using the market capitalization/revenue test
under Rule 8.05(3) of the Listing Rules. In light of AB InBev’s combination with SAB in
2016, the Company is not able to satisfy the management continuity for at least the three
preceding financial years, but it has complied with Rule 8.05A(1) and (2) of the Listing
Rules. See “Waivers from Strict Compliance with the Listing Rules and Exemptions from
Strict Compliance with the Companies (WUMP) Ordinance and the SFO – Shorter
Trading Record period – Satisfaction of the Market Capitalization/Revenue Test.”
– 16 –
SUMMARY
We have applied to the Stock Exchange, and have been granted, a waiver such that
the minimum public float may be any of the following depending on the extent to which
the Over-allotment Option is exercised:
(a) if the Over-allotment Option is exercised in full, 17.25% of the total enlarged
share capital of the Company;
(i) as increased by the new Shares to be issued upon any partial exercise of
the Over-allotment Option; and
(ii) then decreased by the issuance of the same number of new Shares to
APAC HoldCo 2 as would have been issued had the remainder of the
Over-allotment Option been exercised in full in exchange for the
cancellation of all remaining principal amount of the Shareholder Loan
(see “History, Development and Reorganization – 9. Payment of Net
Proceeds from the Global Offering and any exercise of the Over-allotment
Option to APAC HoldCo 2, and the termination of the Shareholder Loan”);
and
(c) if the over-allotment option is not exercised, 15.00% of the total enlarged share
capital of the Company.
See “Waivers from Strict Compliance with the Listing Rules and Exemptions from
Strict Compliance with the Companies (WUMP) Ordinance and the SFO” for a
description of all waivers.
– 17 –
OVERVIEW OF THE GLOBAL OFFERING
See “Underwriting” and “Structure of the Global Offering” for further details.
– 18 –
RESPONSIBILITY STATEMENT AND FORWARD-LOOKING STATEMENTS
This prospectus, for which the Directors collectively and individually accept full
responsibility, includes particulars given in compliance with the Companies (Winding Up
and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market
Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the Listing Rules for the
purpose of giving information to the public with regard to the Group.
The Directors, having made all reasonable enquiries, confirm that to the best of
their knowledge and belief the information contained in this prospectus is accurate and
complete in all material respects and not misleading or deceptive, and there are no other
matters the omission of which would make any statement herein or this prospectus
misleading.
The Company has issued this prospectus solely in connection with the Hong Kong
Public Offering and the Hong Kong Offer Shares. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities other than the Hong Kong
Offer Shares offered by this prospectus pursuant to the Hong Kong Public Offering.
This prospectus may not be used for the purpose of, and does not constitute, an
offer or invitation in any other jurisdiction or in any other circumstances.
No action has been taken to permit a public offering of the Offer Shares in any
jurisdiction other than Hong Kong and no action has been taken to permit the distribution
of this prospectus in any jurisdiction other than Hong Kong. The distribution of this
prospectus and the offering and sale of the Offer Shares in other jurisdictions are subject
to restrictions and may not be made except as permitted under the applicable securities
laws of such jurisdictions pursuant to registration with or authorization by the relevant
securities regulatory authorities or an exemption therefrom.
You should only rely on the information contained in this prospectus and the
Application Forms to make your investment decision.
Neither the Company nor any of the Relevant Persons has authorized anyone to
provide you with any information or to make any representation that is different from what
is contained in this prospectus.
FORWARD-LOOKING STATEMENTS
There are statements in this prospectus, such as statements that include the words
or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,”
“anticipate,” “estimate,” “project,” “may,” “might,” “could,” “believe,” “expect,” “plan,”
“potential,” “we aim,” “our goal,” “our vision,” “we intend” or similar expressions that are
forward-looking statements. These statements are subject to certain risks and
uncertainties. Actual results may differ materially from those suggested by these
statements due to, among others, the risks or uncertainties listed below.
– 19 –
RESPONSIBILITY STATEMENT AND FORWARD-LOOKING STATEMENTS
• financial risks, such as interest rate risk, foreign exchange rate risk,
commodity risk, asset price risk, equity market risk, counterparty risk,
sovereign risk, liquidity risk, inflation or deflation;
• continued geopolitical instability, which may result in, among other things,
economic and political sanctions and currency exchange rate volatility, and
which may have a substantial impact on the economies of one or more of our
key markets;
• our ability to obtain the necessary funding for our future capital or refinancing
needs;
– 20 –
RESPONSIBILITY STATEMENT AND FORWARD-LOOKING STATEMENTS
• general political, economic, legal and social conditions in our principal markets
and other Asia Pacific markets in which we operate;
• regulatory changes affecting, among other things, the brewing industry, food
and beverage industry, accounting standards and taxes pertaining to Asia
Pacific and for the industries and markets in which we operate;
• other statements included in this prospectus that are not historical; and
– 21 –
RISK FACTORS
The market price of the Shares could fall significantly due to any of these
events or risks (or such additional risks) and you may lose your investment.
The order in which the following risks are presented does not necessarily
reflect the likelihood of their occurrence or the relative magnitude of their potential
material adverse effect on our business, financial condition and results of
operations.
These factors are contingencies that may or may not occur and we are not in
a position to express a view on the likelihood of any such contingency occurring.
The information given is as of the Latest Practicable Date unless otherwise stated,
will not be updated after the date of this prospectus and is subject to the cautionary
statements in “Responsibility Statement and Forward-looking Statements.”
Our business and results of operations are affected by changes in regional and
global economic conditions and certain risks common to the beer industry.
Our business is affected by the global economy and the typically more volatile
economics of emerging markets. Any adverse economic developments in Asia Pacific,
whether as a result of a global recession or a recession in one or more of our key markets
(including Asia Pacific generally), credit and capital markets volatility, an economic or
financial crisis, or otherwise, could result in reduced consumption or sales prices of our
products, which in turn could result in lower revenue and reduced profit. Our financial
condition and results of operations, as well as our future prospects, would likely be
hindered by an economic downturn in any of our key markets or Asia Pacific generally.
Consumption of beer and other alcohol and non-alcohol beverages in many of the
jurisdictions in which we operate is closely linked to general economic conditions, with
levels of consumption tending to rise during periods of rising per capita income and fall
during periods of declining per capita income. Additionally, per capita consumption is
inversely related to the sale price of our products.
Besides moving in concert with changes in per capita income, beer and other
alcohol and non-alcohol beverage consumption also increases or decreases in
accordance with changes in disposable income. Any decrease in disposable income
resulting from an increase in inflation, income taxes, the cost of living, unemployment
levels, political or economic instability or other factors would likely adversely affect the
demand for beer. Moreover, because a substantial portion of our brand portfolio consists
of premium and core beers, our volumes and revenue may be impacted to a greater
degree than those of some of our competitors, as some consumers may choose to
purchase value brands rather than premium or core brands.
– 22 –
RISK FACTORS
Examples of regulations our Asia Pacific operations are subject to that may be more
cumbersome and restrictive than those in other jurisdictions include regulation of
brewery licenses and product label approval at the state-level in some parts of India and
Foreign Investment Review Board (“FIRB”) approval requirements and imposed
conditions in Australia. See “Taxation and Regulatory Overview” set out in Appendix III.
In certain countries where we operate, labor unions have strong membership and legal
protections. See “– We are exposed to labor strikes and disputes that could lead to a
negative impact on our costs and production level” below.
Our business also faces risks from the political climate in the countries in which we
operate. For example, while the PRC economy has been transitioning from a planned
economy to a more market-oriented economy, the PRC government continues to play a
significant role in regulating industries by imposing industrial policies. Changes in public
or political sentiment towards foreign business operations in the PRC could result in the
PRC government taking any manner of actions, up to and including seizing or
nationalizing certain businesses or assets. See “– Risks Relating to Doing Business in
the PRC and Other Countries in which We Operate – As a significant portion of our
operations are conducted in the PRC, any adverse change in the PRC’s political,
economic or social condition may have a material adverse effect on us” below.
– 23 –
RISK FACTORS
We compete with both global and regional brewers and other drinks companies,
and our products compete with other beverages. Brewers, as well as other players in the
beverage industry, compete mainly on the basis of brand image, price, quality,
distribution networks and customer service.
Consolidation has significantly increased the capital base and geographic reach of
our competitors in some of the markets in which we operate, and competition is expected
to increase further as the trend towards consolidation among companies in the beverage
industry continues. Consolidation activity has also increased along our distribution
channels – in the case of both on-trade points of sale, such as pub companies, and
off-trade retailers, such as supermarkets. Such consolidation could increase the
purchasing power of players in our distribution channels. For more information, see “–
We depend to a large extent on independent distributors over which we have no control
to sell our products to consumers. In addition, we may be adversely impacted by the
consolidation of retailers” below.
Consumers also may begin to prefer the products of competitors or may generally
reduce their demand for products across our product categories.
– 24 –
RISK FACTORS
Innovation presents inherent risks, and the new products we introduce may not be
successful, while competitors may be able to respond more quickly than we can to
emerging trends, such as the increasing consumer preference for “craft beers” produced
by microbreweries. In recent years, many industries have seen disruption from non-
traditional producers and distributors, in many cases, from digital-only competitors. Our
business could be negatively affected if we are unable to anticipate changing consumer
preference for such platforms.
Additionally, the absence of level playing fields in some Asia Pacific markets and
the lack of transparency, or even certain unfair or illegal practices, such as tax evasion
and corruption, may skew the competitive environment in favor of our competitors with
material adverse effects on our profitability or ability to operate.
We rely on the reputation of our brands, including brands licensed from AB InBev,
and our marketing efforts may be restricted by regulations.
Our success depends on our ability to maintain and enhance the image and
reputation of our existing products and to develop a favorable image and reputation for
new products. The image and reputation of our products may be affected in the future
and concerns about product quality, even when unfounded, could tarnish the image and
reputation of our products. An event, or series of events, that materially damages the
reputation of one or more of our brands could have an adverse effect on the value of that
brand and subsequent revenues from that brand or business. Restoring the image and
reputation of our products may be costly and may not be possible.
A substantial portion of our revenue is derived from globally available brands that
we brew or import and sell under license from AB InBev. As such, the reputation and
strength of these brands in our regions may be influenced by AB InBev’s global
marketing campaigns and product innovations, and are therefore out of our control.
Furthermore, adverse events with respect to these brands outside of our regions could
negatively influence the perception of these brands within our regions.
– 25 –
RISK FACTORS
Despite the precautions we take, in the event that any failure to comply with
accepted food safety and regulatory standards (such as a contamination or a defect)
does occur in the future, it may lead to business interruptions, product recalls or liability,
each of which could have an adverse effect on our business, reputation, prospects,
financial condition and results of operations.
Although we maintain insurance against certain product liability (but not product
recall) risks, we may not be able to enforce our rights in respect of these policies, and,
in the event that contamination or a defect occurs, any amounts that we recover under
our policies may not be sufficient to offset any damage we may suffer, which could
adversely impact our business, results of operations and financial condition.
The pan-Asian reach of our operations exposes us to risks associated with doing
business on a multinational basis, including changes in tariffs. The Office of the United
States Trade Representative has enacted tariffs on certain imports into the US from
China.
– 26 –
RISK FACTORS
Additionally, the US federal government continues to signal that it may alter trade
agreements and terms between China and the US, including limiting trade with China,
imposing additional tariffs on imports from China and potentially imposing other
restrictions on exports from China to the US. Any changes in US trade policy could
trigger retaliatory actions by affected countries, resulting in “trade wars” or in trading
partners limiting their trade with the US.
These developments, or the perception that any of them could occur, may have a
material adverse effect on global economic conditions and the stability of global financial
markets, and may significantly reduce global trade, which in turn could have a material
adverse effect on our business in one or more of our key markets or in Asia Pacific
generally.
While only a small portion of our raw materials are sourced from the US, and we are
able to source comparable alternatives within Asia Pacific and from other parts of the
world, the imposition of tariffs on agricultural products, raw materials or other items
imported from the US and other parts of the world could require us to increase prices to
our customers or, if unable to do so, result in lowering our gross margin on products sold.
Although we present our combined results in US dollars, in 2017, 2018 and the
three months ended 31 March 2019, we derived all of our revenue from operating
companies that have non-US dollar functional currencies (in most cases, in the local
currency of the respective operating company). Consequently, any change in exchange
rates between our operating companies’ functional currencies and the US dollar will
affect our combined income statement and balance sheet when the results of those
operating companies are translated into US dollars for our reporting purposes, as we
cannot hedge against translational exposures.
Significant changes in the value of foreign currencies relative to the US dollar could
adversely affect the amounts we record for our assets, liabilities, revenues and
expenses, and could have a negative effect on our results of operations and profitability
and, in turn, the trading price of our Shares. See “Financial Information – Significant
Factors Affecting Our Results of Operations and Financial Condition – Foreign
Currency” for further details on the impact of currency translation effects on our results
of operations.
– 27 –
RISK FACTORS
The supply and price of raw materials and commodities used for the production of
our products can be affected by a number of factors beyond our control, including the
level of crop production around the world, export demand, quality and availability of
supply, speculative movements in the raw materials or commodities markets, currency
fluctuations, governmental regulations and legislation affecting agriculture, trade
agreements among producing and consuming nations, adverse weather conditions,
natural disasters, economic factors affecting growth decisions, political developments,
various plant diseases and pests.
To the extent we fail to adequately manage the risks inherent in such volatility,
including if our hedging and derivative arrangements do not effectively or completely
hedge against changes in commodity prices or currency exchange rates, our results of
operations may be adversely impacted.
– 28 –
RISK FACTORS
The production and distribution of our products require material amounts of energy,
including the consumption of oil-based products, natural gas, biomass, coal and
electricity. Energy prices have been subject to significant price volatility in the recent
past and may be again in the future. High energy prices over an extended period of time,
as well as changes in energy taxation and regulation in certain geographies, may result
in a negative effect on operating income and could potentially challenge our profitability
in certain markets. There is no guarantee that we will be able to pass along increased
energy costs to our customers in every case.
The production of our products also requires large amounts of water, including
water consumption in the agricultural supply chain. Changes in precipitation patterns
and the frequency of extreme weather events may affect our water supply and, as a
result, our physical operations.
Water may also be subject to price increases in certain areas and changes in water
taxation and regulation in certain geographies may result in a negative effect on
operating income, which could potentially challenge our profitability in certain markets.
There is no guarantee that we will be able to pass along increased water costs to our
customers in every case. See “– Climate change or other environmental concerns, or
legal, regulatory or market measures to address climate change or other environmental
concerns, may negatively affect our business or operations, including the availability of
key production inputs” below for further information on the potential impact on our
business and results of operations.
A substantial portion of our revenue is derived from brands that we import from AB
InBev for sale or that we brew or import and sell under license from AB InBev, and we
require AB InBev to continue to export these products to us and to provide us with the
rights to brew and sell these brands, which are core to our business. In order to maintain
the rights to import, produce and sell these brands, we have entered into long-term
commercial agreements with AB InBev on arm’s-length terms. See “Connected
Transactions” for further information. If AB InBev breaches the terms of such
agreements, if such agreements are terminated or are not renewed, or if the agreements
are renewed on terms that are less favorable to us, it may be more difficult for us to
conduct our business profitably or it may otherwise have a material adverse effect on our
business, results of operations and financial condition.
AB InBev is responsible for protecting many of the intellectual property rights of the
brands we sell under license from them and that we import for sale in our regions. AB
InBev may make decisions with respect to the production of those products which
negatively impact our business based on the overall impact on its global operations,
such as discontinuing a product that performs well in our regions but not in AB InBev’s
other regions.
– 29 –
RISK FACTORS
Events outside of our control and our regions that take place in one or more of AB
InBev’s global regions could affect the delivery of supplies and services to us under the
global contracts in which we participate. Moreover, given AB InBev’s status as our
controlling shareholder and its ongoing involvement in many aspects of our business, we
may be judged based on AB InBev’s actions and performance even though outside of our
control.
Further, given AB InBev’s global business and multiple listings in Belgium, Mexico,
South Africa and New York, AB InBev and its executives are exposed to the risk of
litigation (including class actions) associated with AB InBev’s business, operations and
affairs. Such litigation may adversely affect us given AB InBev’s ongoing involvement in
our business and some of AB InBev’s executives are also directors and/or senior
management of our Group and may result in negative public perception of our Company.
Negative public perception of our Company, our directors and senior management, or
AB InBev could adversely impact the reputation of our brands and, in turn, our revenues
derived from those brands. Negative publicity relating to AB InBev could in turn damage
our reputation to the extent there is negative public perception of AB InBev resulting from
such events. See “Relationship with AB InBev” for further information.
AB InBev is not subject to any obligation to maintain its ownership interest in us and,
following the expiration of a lock-up period following the completion of the Global
Offering, may elect to sell all or a substantial portion of or otherwise reduce its ownership
interest in us. For more information, see “Underwriting – Underwriting Arrangements and
Expenses.” If AB InBev sells all or a substantial portion of its ownership interest in us, it
may be less inclined to renew agreements with us or to enter into renewals on terms that
are as beneficial to us. Such actions could have an adverse effect on our business,
financial condition and results of operations.
In addition, we and our subsidiaries are party to certain agreements that may
contain change of control or other restrictive provisions that our contractual
counterparties may try to interpret as being triggered upon a significant reduction by AB
InBev of its ownership interests in us. Some of those contracts may be material and, to
the extent they may contain any such restrictive provisions, our counterparties may seek
to enforce certain contractual remedies that may curtail material contractual rights and
benefits that we have.
– 30 –
RISK FACTORS
We may not be able to obtain the necessary funding for our future capital or
refinancing needs and may face financial risks due to our incurrence of debt,
uncertain market conditions and, if applicable, our future credit ratings.
We may be required to raise additional funds for our future capital needs or to
refinance our current indebtedness and future indebtedness through public or private
financing, strategic relationships or other arrangements. There can be no assurance that
the funding, if needed, will be available or provided on attractive terms.
In addition, our future credit ratings may impact our ability to raise debt financing in
a cost-effective manner. Ratings agencies may downgrade our future credit ratings
below their currently expected levels. Moreover, as a majority-owned subsidiary of AB
InBev following the completion of the Global Offering, our future credit ratings may be
effectively capped by certain ratings agencies at an equal or lesser level than AB
InBev’s.
The terms and availability of any refinancing of our indebtedness and our ability to
repay will depend upon market conditions. An inability to refinance all or a substantial
amount of our debt obligations when they become due, or more generally a failure to
raise additional equity capital or debt financing or to realize proceeds from asset sales
when needed, would have a material adverse effect on our financial condition and results
of operations.
From time to time, AB InBev has, on our behalf, invested in certain financial
instruments to mitigate currency risk, and we or AB InBev on our behalf may in the future
invest in such financial instruments. These transactions and any other efforts taken to
better match the effective currencies of our liabilities to our cash flows could result in
increased costs.
– 31 –
RISK FACTORS
Although most of our debt bears interest at fixed rates, we have incurred, or expect
to incur, a portion of our debt at variable interest rates, which will expose us to changes
in such interest rates. We may in the future enter into interest rate swap agreements to
manage our interest rate risk, and also enter into cross-currency interest rate swap
agreements to manage both our foreign currency risk and interest-rate risk on interest-
bearing financial liabilities. There can be no assurance that such instruments will be
successful in reducing the risks inherent in exposures to interest rate fluctuations. See
Note 3 to the Accountant’s Report set out in Appendix I for further details on our
approach to foreign currency risk and interest rate risk.
We record net current liabilities due to our business model and the way we choose
to finance our business.
We had net current liabilities of USD1,838 million, USD1,908 million and USD1,555
million as at 31 December 2017 and 2018 and 31 March 2019, respectively. The net
current liability position is predominately due to our level of trade payables, which is
common in the FMCG sector. We finance working capital through trade creditors, on
what we believe to be generally favorable credit terms, whereas our inventory and
receivables cycles are shorter. During the Track Record Period, surplus cash generated
from operations was extracted from the Group via transfer into the physical cash pool
with AB InBev or dividend payments. We expect to continue to deploy surplus cash in an
efficient manner for the foreseeable future, and therefore we may continue to record a
net current liability position at future reporting dates in the ordinary course of business.
We primarily sell beer and do so under key brands. To the extent we or AB InBev,
including with respect to brands we license from them, are subject to negative publicity,
and the negative publicity causes our consumers and customers to change their
purchasing patterns, it could have a material adverse effect on our business, results of
operations, cash flows or financial condition.
Moreover, in recent years, there has been increased public and political attention
directed at the alcohol beverage and food and soft drinks industries, including in some of
the countries in which we operate. This attention is the result of a rising health and
well-being trend that is reshaping the entire food and drinks industry and of fiscal
concerns as health costs become an increasingly important component of public
finances in some markets. In the long term, this trend represents a risk for our business
if it results in the social acceptance of our products being diminished in one or more of
the countries in which we operate.
The policy framework shaping the regulatory space for our products in the countries
in which we operate has evolved, and will continue to evolve, and the expectations of our
stakeholders will continue to increase. We welcome the opportunity to reduce the
harmful use of alcohol. We may nevertheless be criticized and experience an increase in
the number of publications and studies debating our efforts to reduce the harmful
consumption of alcohol, as advocates try to shape the public discussions.
– 32 –
RISK FACTORS
We may also be subject to laws and regulations aimed at reducing the affordability
or availability of beer in some of our markets. Although public health concerns over
harmful consumption of alcohol are frequently cited as the rationale for governments to
increase beer taxation, fiscal needs or the lobbying of other alcohol categories are often
also drivers.
We may not be able to protect our intellectual property rights, and our ability to
compete effectively may be harmed if our intellectual property rights are infringed
by third parties.
Our future success depends significantly on our ability to protect our current and
future brands and products and to defend our intellectual property rights, including
trademarks, patents, registered designs and domain names. We have been granted
numerous trademark registrations and patents covering our brands and products and
have filed, and expect to continue to file, trademark and patent applications seeking to
protect newly developed brands and products.
We cannot be sure that trademark and patent registrations will be issued with
respect to any of our applications. There is also a risk that we could, by omission, fail to
renew a trademark or patent on a timely basis or that our competitors will challenge,
invalidate or circumvent any existing or future trademarks and patents issued to us.
Moreover, some of the developing countries in which we operate offer less effective
intellectual property protection than is available in more developed countries. AB InBev
is responsible for protecting certain intellectual property rights with respect to the brands
we license from them. If we or AB InBev are unable to protect our proprietary rights
against infringement or misappropriation, it could have a material adverse effect on our
business, results of operations, cash flows or financial condition and, in particular, on our
ability to develop our business.
We rely on third parties, including suppliers and logistics providers, for a range of
raw materials and the termination or modification of the arrangements with such
third parties could negatively affect our business.
We rely on third party suppliers for a range of raw materials, such as malted barley,
hops, yeast, water, and for packaging material, such as glass, aluminum bottles,
aluminum or steel cans and kegs, PET bottles, labels, plastic crates, metal and plastic
closures, folding cartons, cardboard products and plastic films. We also rely on third
parties for our transportation requirements and to brew beer on our behalf in India
following our quality standards.
– 33 –
RISK FACTORS
For certain packaging supplies and raw materials, we rely on a small number of
suppliers. The loss of or temporary discontinuity of supply from any of these suppliers
without sufficient time to develop an alternative source could cause us to spend
increased amounts on such supplies in the future. If these suppliers became unable to
continue to meet our requirements, and we are unable to develop alternative sources of
supply, our operations and financial results could be adversely affected.
We also rely on third party contractors for our transportation and logistics
requirements, including the delivery of raw materials to our breweries and the transport
of products to customers and consumers. In the event their services are disrupted or
terminated for whatever reason, and we do not engage suitable replacements on
commercially acceptable terms or in a timely manner, the delivery of raw materials to our
breweries and the transport of our products to customers and consumers may be
delayed, which may lead to a material adverse effect on our business, reputation, results
of operations and prospects.
We will need to identify suitable acquisition targets and agree on the terms with
them if we are to make future acquisitions, and there is a risk that we will not be able to
identify suitable targets and/or agree on such terms. Our size, contractual limitations to
which we are subject and our position in certain markets in which we operate may make
it harder to obtain regulatory approval for future transactions in those markets. If
appropriate opportunities do become available, we may seek to acquire or invest in other
businesses; however, any future acquisition may pose regulatory, antitrust and other
risks.
– 34 –
RISK FACTORS
assumption of certain actual or potential, known or unknown liabilities, which may have
a potential impact on our financial risk profile. These risks and limitations may limit our
ability to implement our business strategy and our ability to achieve or maintain future
business growth.
– 35 –
RISK FACTORS
Impairment may result from, among other things, deterioration in our overall
performance or a specific asset’s performance, adverse market conditions, adverse
changes in applicable laws and regulations and a variety of other factors. The amount of
any impairment must be expensed immediately as a charge to our income statement.
Non-financial assets other than goodwill that suffer an impairment are reviewed for
possible reversal of the impairment at each reporting date.
To a large extent, we are organized as a holding company and our operations are
carried out through subsidiaries. Our subsidiaries’ and affiliated companies’ ability to
upstream or distribute cash (to be used, among other things, to meet our financial
obligations) through dividends, intercompany advances, management fees and other
payments is, to a large extent, dependent on the availability of cash flows at the level of
such subsidiaries and affiliated companies and may be restricted by applicable laws and
accounting principles.
In addition, some of our subsidiaries are subject to laws restricting their ability to
pay dividends or the amount of dividends they may pay. If we are not able to obtain
sufficient cash flows from our subsidiaries and affiliated companies, this could adversely
impact our ability to pay dividends, and otherwise negatively impact our business,
results of operations and financial condition. See “Financial Information – Liquidity and
Capital Resources – Transfers from Subsidiaries” for further information in this respect.
PRC laws require dividends to be paid out of net profit calculated according to PRC
accounting principles, which, in many aspects, differ from the generally accepted
accounting principles in other jurisdictions, including IFRS. Foreign-invested
enterprises, such as our subsidiaries in the PRC, are also required to set aside part of
their net profits as statutory reserves, which are not available for distribution as cash
dividends.
In addition, such dividends are also subject to PRC withholding tax. If our PRC
subsidiaries incur any debts or losses, such indebtedness or loss may impair its ability
to pay dividends or other distributions to us. As a result, our ability to pay dividends and
other distributions to Shareholders and to meet our financial obligations will be
restricted.
– 36 –
RISK FACTORS
The historical financial information we have included in this prospectus has been
derived from AB InBev’s consolidated financial statements and accounting records and
does not necessarily reflect what our financial position, results of operations and cash
flows would have been had we been a separate, stand-alone entity during the periods
presented. AB InBev did not account for us, and we were not operated, as a single
stand-alone company for the periods presented.
Actual costs that may have been incurred if we had been a stand-alone company
would depend on a number of factors, including the chosen organizational structure,
what functions were outsourced or performed by employees and strategic decisions
made in areas such as information technology and infrastructure. In addition, the
historical information may not be indicative of what our results of operations, financial
position and cash flows will be in the future.
The completion of the Global Offering will also require significant amounts of our
management’s time and effort, which may divert management’s attention from operating
and growing our business. We may be unable to achieve some or all of the benefits that
we expect to achieve as an independent company within the timeframe we expect. We
may be more susceptible to market fluctuations and have less leverage with suppliers
and distributors, and we may be impacted by other adverse events once we operate as
an independent company.
We will also be responsible for the additional costs associated with being a publicly
traded company, including costs related to corporate governance, regulatory
compliance, investor and public relations and public reporting. The resources necessary
to meet our obligations as an independent publicly traded company could be greater
than we currently anticipate.
We cannot assure you that our operating results will continue at a similar level when
we are a publicly traded company. As a result of the foregoing, our business, financial
condition, results of operations and prospects could be materially and adversely
affected.
If we are unable to achieve and maintain effective internal controls, our results of
operations, cash flows and financial condition could be materially adversely
affected.
While our financial results will continue to be included within the consolidated
results of AB InBev following the completion of the Global Offering, we were not
previously directly subject to the reporting and other requirements of a publicly listed
company. As a majority owned subsidiary of AB InBev following the completion of the
Global Offering, our activities will remain subject to the requirements of the US Sarbanes
Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”), which requires, among other
things, that we maintain effective internal controls over financial reporting.
– 37 –
RISK FACTORS
To comply with these requirements, we may in the future need to upgrade our
systems, including information technology, and implement additional financial and
management controls, reporting systems and procedures. We expect to incur additional
annual expenses related to these steps, and those expenses may be significant.
There is a growing concern that carbon dioxide and other greenhouse gases in the
atmosphere may have an adverse impact on global temperatures, weather and
precipitation patterns and the frequency and severity of extreme weather and natural
disasters. In the event that such climate change has a negative effect on agricultural
productivity, we may be subject to decreased quality, decreased availability or less
favorable pricing for certain agricultural commodities necessary for our products, such
as barley and hops.
Climate change may also subject us to water scarcity and quality risks due to the
large amounts of water required to produce our products, including water consumed in
the agricultural supply chain. In the event that climate change leads to droughts or water
over-exploitation or has a negative effect on water availability or quality, the price of
water may increase in certain areas and certain jurisdictions may enact unfavorable
changes to applicable water-related taxes and regulations. Such measures, if adopted,
could lead to increased regulatory pressures, production costs or capacity constraints.
In addition, public expectations for reductions in greenhouse gas emissions could result
in increased energy, transportation and raw material costs and may require us to make
additional investments in facilities and equipment due to increased regulatory pressures.
As a result, the effects of climate change could have a long-term, material adverse
impact on our business and results of operations.
– 38 –
RISK FACTORS
A substantial portion of our revenue is derived from beer sold under brands that are
also produced and sold in countries around the world outside Asia Pacific. We cannot
assure you that distributors will not source our products from unauthorized importers if
such products are available at a lower price. The import of these brands into our regions
by unauthorized third parties (known as parallel imports) in significant amounts could
negatively impact our volumes as well as the reputation of our products as such
importers may not take the proper steps to maintain the quality of such products.
Furthermore, counterfeiting of products may occur from time to time in certain of our
markets. Accordingly, there can be no assurance that we would be able to promptly
detect and prevent the presence of counterfeited products in the markets in which we
operate. Such counterfeited products may have serious quality and consumer safety
issues, which consumers may associate with our brands. Failure to promptly detect and
prevent the presence of counterfeited products in the markets in which we operate could
have an adverse impact on our brands and reputation.
Conflicts of interest may arise between AB InBev and us in various situations due to
AB InBev’s status as our parent company and interests that may differ from ours. For
example, we have entered into various framework agreements with AB InBev governing
the transactions between us and AB InBev, which include, but are not limited to, the
import of and manufacturing of certain of our brands from AB InBev, and business
support (such as global marketing and procurement) and administrative services. See
the section “Connected Transactions” for further details of these agreements.
AB InBev may use its influence over us to prevent us from bringing a legal claim
against AB InBev in the event of a contractual breach, notwithstanding our contractual
rights under agreements we have entered into or may enter into with AB InBev from time
to time. As a result, our business, financial condition and results of operations could be
materially and adversely affected. See “Relationship with AB InBev” for further details on
our relationship with AB InBev.
As of the date of this prospectus, certain of our Directors and/or our senior
management are employees of AB InBev and/or hold shares in AB InBev, including as
part of the remuneration they receive from AB InBev. Following the Global Offering,
given the size of AB InBev’s shareholding in the Company, certain officers or other
employees of AB InBev will continue to be Directors of our Company. Since the interests
of AB InBev and the Company are not necessarily always the same or wholly aligned,
such dual mandates and other relationships with AB InBev or its subsidiaries or related
parties may in the future result in conflicts of interest.
– 39 –
RISK FACTORS
hygiene, environmental protection and fire workplace safety. In some cases, these
approvals, licenses and permits are subject to examinations or verifications by relevant
authorities or are valid only for a fixed period of time subject to renewal and
accreditation. See “Taxation and Regulatory Overview” set out in Appendix III.
Our business is highly regulated in many of the countries in which we operate. The
regulations adopted by the authorities in these countries govern many parts of our
operations, including brewing, marketing and advertising (in particular to ensure our
advertising is directed to individuals of legal drinking age), consumer promotions and
rebates, environmental protection, workplace safety, transportation, distributor
relationships, retail execution, sales and data privacy. We may be subject to claims that
we have not complied with existing laws and regulations, which could result in fines and
penalties or loss of our operating licenses, which may have a material adverse impact on
our ability to operate our businesses in these markets.
We are also routinely subject to new or modified laws and regulations with which we
must comply in order to avoid claims, fines and other penalties, which could adversely
impact our business, results of operations and financial condition. Breach of any of these
laws or regulations can lead to significant fines and/or damage to our reputation, as well
as significantly restrict our ability to deliver on our productivity and growth plans.
We may also be subject to laws and regulations aimed at reducing the availability of
beer and other alcohol beverage products in some of our markets to address alcohol
abuse and other social issues. See “– Negative publicity, perceived health risks, failure
to provide safe working environments and associated government regulation may harm
our business.” There can be no assurance that we will not incur material costs or
liabilities in connection with compliance with applicable regulatory requirements, or that
such regulation will not interfere with our business.
For further detail regarding regulations affecting our business, see “Taxation and
Regulatory Overview” set out in Appendix III.
– 40 –
RISK FACTORS
Proposals to increase excise or other indirect taxes may result from the current
economic climate and may also be influenced by changes in political sentiment, fiscal
needs or public perceptions regarding the consumption of beer and other alcohol
beverages. To the extent changes to excise and other indirect duties in the countries in
which we operate increase the total burden of indirect taxation on our products, our
results of operations in those countries could be adversely affected.
In addition to excise and other indirect duties, we are subject to income and other
taxes in the countries in which we operate. There can be no assurance that our
operations will not become subject to increased taxation by local, national or foreign
authorities or that we and our subsidiaries will not become subject to higher corporate
income tax rates or to new or modified taxation regulations and requirements.
We may also be subject to tax audits or other related matters. We are currently
subject to an ongoing tax audit in Australia, the focus of which is in relation to the tax
treatment of the funding of a legacy acquisition by SAB, for which a reduction of AUD360
million (USD256 million) has been made against deferred tax assets in our financial
statements. For further information, see Note 29 to the Accountant’s Report set out in
Appendix I.
We are exposed to antitrust and competition laws in certain jurisdictions and the
risk of changes in such laws or in the interpretation and enforcement of existing
antitrust and competition laws.
There can be no assurance that the introduction of new competition laws in the
jurisdictions in which we or AB InBev operate, the interpretation of existing antitrust or
competition laws, the enforcement of existing antitrust or competition laws by competent
authorities or civil antitrust litigation by private parties, or any agreements with
competent antitrust or competition authorities, against us or our subsidiaries will not
affect our business or the businesses of our subsidiaries in the future or have a financial
impact. We are currently subject to an ongoing investigation by the Competition
Commission of India. For more information please see “Business – Legal and Arbitration
Proceedings and Compliance Matters.”
– 41 –
RISK FACTORS
We operate our business and market our products in certain markets that, as a
result of political and economic instability, a lack of well-developed legal systems and
potentially corrupt business environments, present us with political, economic and
operational risks. Although we are committed to conducting business in a legal and
ethical manner in compliance with local and international statutory requirements and
standards applicable to our business, there is a risk that employees or representatives
of our subsidiaries, affiliates, associates, joint ventures or other business interests may
take actions that violate applicable laws and regulations that generally prohibit the
making of improper payments to foreign government officials for the purpose of obtaining
or keeping business.
Such actions could expose us to potential liability and the costs associated with
investigating potential misconduct. In addition, any press coverage associated with
misconduct under these laws and regulations, even if unwarranted or baseless, could
damage our reputation and sales. As a majority owned subsidiary of AB InBev following
the completion of the Global Offering, our activities will remain subject to certain
stringent anti-corruption laws from jurisdictions outside our regions in which AB InBev
operates, such as the US Foreign Corrupt Practices Act and economic and trade
sanctions enforced by the Office of Foreign Assets Control of the US Department of the
Treasury, even if we would not otherwise be subject to such laws.
We are exposed to the risk of litigation, claims and disputes, which may cause us
to pay significant damage awards and incur other costs.
We are now and may in the future be party to legal proceedings, claims and
disputes, and significant damages may be asserted against us. See “Business – Legal
and Arbitration Proceedings and Compliance Matters” and Note 29 to the Accountant’s
Report set out in Appendix I for a description of certain material contingencies, which we
believe are reasonably possible (but not probable) to be realized. Given the inherent
uncertainty of litigation, it is possible that we might incur liabilities as a consequence of
the proceedings and claims brought against us, including those that are not currently
believed by us to be reasonably possible.
– 42 –
RISK FACTORS
Moreover, companies in the alcohol beverage industry including our Company are,
from time to time, exposed to collective suits (class actions) or other litigation relating to
alcohol advertising, alcohol abuse problems or health consequences from the excessive
consumption of beer and other alcohol beverages. If any of these types of litigation were
to result in fines, damages or reputational damage to us or our brands, this could have
a material adverse effect on our business, results of operations, cash flows or financial
position. See “Business – Legal and Arbitration Proceedings and Compliance Matters.”
In order to develop, support and market our products, we must hire and retain
skilled employees with particular expertise. The implementation of our strategic
business plans could be undermined by a failure to recruit or retain key personnel or the
unexpected loss of senior employees, including in acquired companies.
Our success will depend on the contributions of our senior management team and
key employees. These individuals have the ability to successfully execute our business
strategy and many of them have extensive experience working in the beer industry in
many jurisdictions. We may not be able to locate suitable or qualified replacements for
such personnel and may incur additional expenses to recruit and train new personnel,
which could severely disrupt our business and growth.
We are exposed to labor strikes and disputes that could lead to a negative impact
on our costs and production level.
Our success depends on maintaining good relations with our workforce. In several
of our operations, a majority of our workforce is unionized. For instance, a majority of the
hourly employees at our breweries in several key countries in different geographies are
represented by unions.
– 43 –
RISK FACTORS
collective labor agreements, as a result of supplier financial distress or for other reasons.
A strike, work stoppage or slowdown within our operations or those of our suppliers (for
whatever reason) could have a material adverse effect on our earnings, financial
condition and ability to operate our business.
Information technology failures, including those that affect the privacy and
security of sensitive customer and business information, could damage our
reputation and we could suffer a loss of revenue, incur substantial additional
costs and become subject to litigation and regulatory scrutiny.
If we do not allocate and effectively manage the resources necessary to build and
sustain the proper technology infrastructure, we could be subject to transaction errors,
processing inefficiencies, loss of customers, operations disruptions, or the loss of or
damage to intellectual property through a security breach. As with all information
technology systems, our system could also be penetrated by outside parties intent on
extracting information, corrupting information or disrupting business processes.
We take various actions with the aim of minimizing potential technology disruptions,
such as investing in intrusion detection solutions, proceeding with internal and external
security assessments, building and implementing business continuity plans and
reviewing risk management processes. These protections may be compromised as a
result of third party security breaches, burglaries, cyberattack, errors by employees or
employees of third party vendors, of contractors, misappropriation of data by employees,
vendors or unaffiliated third parties, or other irregularities that may result in persons
obtaining unauthorized access to company data or otherwise disrupting our business.
For example, if outside parties gained access to confidential data or strategic
information and appropriated such information or made such information public, this
could harm our reputation or our competitive advantage, or could expose us or our
– 44 –
RISK FACTORS
Our business and operating results could be negatively impacted by natural, social,
technical or physical risks such as a widespread health emergency (or concerns over the
possibility of such an emergency), earthquakes, typhoons, flooding, fire, water scarcity,
power loss, loss of water supply, telecommunications and information technology
system failures, cyberattacks, political instability, military conflict and uncertainties
arising from terrorist attacks, including a global economic slowdown, the economic
consequences of any military action and associated political instability.
As a significant portion of our operations are conducted in the PRC, any adverse
change in the PRC’s political, economic or social condition may have a material
adverse effect on us.
The economy of the PRC differs from the economies of most developed countries
in many respects, including but not limited to:
• structure;
• level of development;
• growth rate;
• allocation of resources.
In recent years, the PRC government implemented a series of laws, regulations and
policies, which imposed stricter standards with respect to, among other things, quality
and safety control, and supervision and inspection of enterprises operating in our
industry.
– 45 –
RISK FACTORS
The PRC economy has been transitioning from a planned economy to a more
market-oriented economy. The PRC government has implemented economic reform
measures, emphasizing responsiveness to market forces in the development of the PRC
economy. However, the PRC government continues to play a significant role in
regulating the development of industries. Furthermore, despite the implementation of
such reforms, changes in the PRC’s political and social condition, laws, regulations,
policies and diplomatic relationships with other countries could have an adverse effect
on our business, results of operations and financial condition.
The PRC legal system is in the process of continuous development and has
inherent uncertainties that could limit the legal protections available to us in
respect of our operations.
The PRC legal system is based on written statutes and interpretations by the
Supreme People’s Court, and prior court decisions can only be cited as reference. Since
1979, the PRC government has promulgated laws and regulations in relation to
economic matters such as foreign investment, corporate organization and governance,
commerce, taxation and trade with a view to developing a comprehensive system of
commercial law.
In addition, the PRC is geographically large and divided into various provinces and
municipalities and as such, different laws, rules, regulations and policies apply in
different provincial levels and may have different and varying applications and
interpretations in different parts of the PRC. Legislation or regulations, particularly for
local application, may be enacted without sufficient prior notice or announcement to the
public. Accordingly, we may not be aware of the existence of new legislation or
regulations.
There is at present no integrated system in the PRC from which information can be
obtained in respect of legal actions, arbitrations or administrative actions. Even if an
individual court-by-court search were performed, each court may refuse to make the
documentation that it holds for on-going cases available for inspection. Accordingly,
there is a risk that entities in the PRC acquired by us may be subject to proceedings that
have not been disclosed.
Our operations in the PRC are governed by PRC laws and regulations, pursuant to
which we are required to maintain various approvals, licenses and permits in order to
operate our business in the PRC. Complying with these laws and regulations may
require substantial expenditures, and any non-compliance may expose us to liability and
could have a material adverse effect on our business, results of operations and financial
condition. In case of any non-compliance, we may have to incur significant expenses and
divert substantial time and resources to resolving any deficiencies. The non-compliant
facility may be required to temporarily close until it satisfies all legal and regulatory
requirements. We may also experience negative publicity arising from such deficiencies.
– 46 –
RISK FACTORS
Moreover, the PRC’s legal system is based in part on government policies and
internal rules (some of which are not published on a timely basis or at all) that may have
a retroactive effect. As a result, we may not be aware of a violation of these policies and
rules until sometime after the violation. Any failure to comply with applicable rules and
regulations, including environmental regulations, may result in fines, restrictions on
activities, administrative or criminal liability to us or our employees, or, in extreme cases,
suspension or revocation of business licenses. There may be uncertainties regarding
the interpretation and application of new laws, rules and regulations. For example, we
may have to resort to administrative and court proceedings to enforce the legal
protections that we have either by law or contract.
We may be treated as a “resident enterprise” for PRC tax purposes under the EIT
Law and be subject to PRC taxation on our worldwide income, which could result
in unfavorable tax consequences to us and our non-PRC Shareholders.
Our company is registered under the laws of the Cayman Islands, but a substantial
portion of our operations are in the PRC. Under the EIT Law and the EIT Rules, an
enterprise incorporated in a foreign country or region may be classified as either a
“non-resident enterprise” or a “resident enterprise.” If an enterprise incorporated in a
foreign country or region has its “de facto management bodies” located within the PRC,
such enterprise will be considered a PRC tax resident enterprise and will generally be
subject to the enterprise income tax of 25% on its worldwide income. See “Taxation and
Regulatory Overview” set out in Appendix III.
In addition, under the EIT Law and the EIT Rules, to the extent dividends from
earnings derived since 1 January 2008 are sourced within the PRC, PRC income tax at
the rate of 10% (or a lower rate pursuant to an applicable tax treaty or arrangements with
China and other countries or areas) may be required to be withheld from dividends on the
Shares payable by us to investors that are “non-resident enterprises” so long as such
“non-resident enterprise” investors do not have an establishment or place of business in
the PRC or if, despite the existence of such establishment or place of business in the
PRC, the relevant income is not effectively connected with such establishment or place
of business in the PRC. Furthermore, any gains realized on the transfer of the Shares by
such “non-resident enterprise” investors would be subject to PRC income tax at a rate of
10% if such gains were deemed income derived from sources within the PRC.
– 47 –
RISK FACTORS
Our subsidiaries’ and affiliated companies’ ability to upstream or distribute cash (to
be used, among other things, to meet our financial obligations) through dividends,
intercompany advances, management fees and other payments is, to a large extent,
dependent on the availability of cash flows at the level of such subsidiaries and affiliated
companies and may be restricted by applicable laws and accounting principles.
If we are required under the EIT Law to withhold PRC income tax on our dividends
payable to foreign holders of the Shares that are “non-resident enterprises” or if our
Shareholders are required to pay PRC income tax on the transfer of Shares under PRC
tax laws, the value of an investment in the Shares may be materially and adversely
affected. It is unclear whether, if we are considered a PRC “resident enterprise,” holders
of the Shares may be able to claim the benefit of income tax treaties or agreements
entered into between the PRC and other countries or areas.
Under the current foreign exchange regulations of the PRC, payments of current
account items, including profit distributions, interest payments and goods trade-and
service-related foreign exchange transactions, can be made in foreign currencies
without prior approval from the SAFE by complying with certain procedural
requirements. However, approvals from the SAFE as well as other appropriate
authorities are required for payments in Renminbi (“RMB”) to be converted into foreign
currencies and remitted from the PRC to pay for capital account items, such as the
repayment of loans denominated in foreign currencies.
Any failure on our part to fully comply with all existing or future regulatory
requirements promulgated by the PRC government with regard to currency conversion
or remittance could materially and adversely affect our business, results of operations
and financial condition, and the ability of our subsidiaries in the PRC to participate in AB
InBev’s centralized cash pooling arrangements.
Moreover, there may be restrictions on our ability to receive payments from the
PRC in foreign currencies for contracts entered into between customers in the PRC and
our entities outside of the PRC. Existing PRC foreign exchange regulations impose
restrictions on the conversion of RMB into foreign currency for remittance out of the
PRC. Accordingly, we may in the future experience significant delays in receiving
payments from our contractual counterparties if there are cross-border payment
arrangements.
– 48 –
RISK FACTORS
The M&A Rules and certain other PRC regulations establish complex procedures
for some acquisitions of Chinese companies by foreign investors like us, which
could make it more difficult for us to pursue growth through acquisitions in China.
Moreover, the Anti-Monopoly Law requires that the MOFCOM shall be notified in
advance of any concentration of undertaking if certain thresholds are triggered. In
addition, implementation of Security Review System for Mergers and Acquisitions of
Domestic Enterprises by Foreign Investors issued by the MOFCOM that became
effective in September 2011 specify that mergers and acquisitions by foreign investors
that raise “national defense and security” concerns and mergers and acquisitions
through which foreign investors may acquire de facto control over domestic enterprises
that raise “national security” concerns are subject to strict review by the MOFCOM, and
the rules prohibit any activities attempting to bypass a security review, including by
structuring the transaction through a proxy or contractual control arrangement.
Our Company and our offshore subsidiaries are regarded as foreign investors in the
context of the M&A Rules. In the future, we may grow our business by acquiring
complementary businesses. Complying with these regulations and other relevant rules
could be time consuming, and any required approval processes, including obtaining
approval from the MOFCOM or its local counterparts, may delay or inhibit our ability to
complete such transactions, which could affect our ability to expand our business or
maintain our market share.
Escalations in tensions with North Korea could have an adverse effect on us and
our South Korean subsidiary.
Relations between South Korea and North Korea have been tense throughout
South Korea’s modern history. The level of tension between the two Koreas been volatile
and may increase abruptly as a result of current and future events. In particular, there
have been heightened security concerns in recent years stemming from North Korea’s
– 49 –
RISK FACTORS
nuclear weapon and ballistic missile programs as well as its actions against South
Korea. North Korea’s economy also faces severe challenges, which may further
aggravate social and political pressures within North Korea.
Although bilateral summit meetings were held between South Korea and North
Korea in 2018 and between the US and North Korea in 2018 and 2019, there can be no
assurance that the level of tensions affecting the South Korean peninsula will not
escalate in the future. Any increase in tensions, which may occur, for example, if North
Korea experiences a leadership crisis, high-level contacts between South Korea or the
US and North Korea break down or further military hostilities occur, this could have a
material adverse effect on the South Korean economy and on our business, financial
condition and results of operations, both within the South Korean market and across our
Asia Pacific operations.
The South Korean government may impose certain restrictions under emergency
circumstances.
Under the Foreign Exchange Transaction Act of Korea, if the South Korean
government determines that certain emergency circumstances, including sudden
fluctuations in interest rates or exchange rates, extreme difficulty in stabilizing the
balance of payments or substantial disturbance in the South Korean financial and capital
markets, are likely to occur, it may impose any necessary restriction such as requiring
South Korean or foreign investors to obtain prior approval from the Minister of Strategy
and Economy of Korea for the acquisition of South Korean securities or for the
repatriation of interest, dividends or sales proceeds arising from South Korean securities
or from disposition of such securities or other transactions involving foreign exchange.
Prior to the Global Offering, there has been no public market for the Shares and an
active or liquid market for the Shares may never develop or be sustained after the Global
Offering. The Offer Price may differ significantly from the market price for the Shares
following the Global Offering. Listing and quotation does not guarantee that a trading
market for the Shares will develop or, if a market does develop, the liquidity of that
market.
The trading price and trading volume of the Shares may be subject to significant
volatility in responses to various factors, including, but not limited to:
– 50 –
RISK FACTORS
• additions to or departures of, our executive officers and other members of our
senior management;
• changes in global financial and credit markets and global economies and
general market conditions, such as interest or foreign exchange rates as well
as stock and commodity valuations and volatility.
As a result of these market fluctuations, the price of the Shares may decline
significantly, and you may lose a significant value on your investment.
The interests of AB InBev, our controlling shareholder, may conflict with the
interests of our other Shareholders.
On the Listing Date, AB InBev will indirectly control approximately 84.48% of our
Shares and therefore has control over us. For further information on these matters, see
“Relationship with AB InBev” and “Connected Transactions.”
AB InBev is able to elect the majority of the members of our Board of Directors and
will generally be able to determine the outcome of most other actions requiring
Shareholder approval, including dividend distributions, issuances of new Shares and
amendments to constitutional documents. The interests and time horizons of AB InBev
may differ from those of other Shareholders. AB InBev’s concentration of voting power
could deprive other Shareholders of an opportunity to receive a premium for their Shares
as part of a sale of our Company and could affect the market price of our Shares.
As a result of its influence on our business, AB InBev could prevent us from making
certain decisions or taking certain actions that would protect the interests of our other
Shareholders. For example, this concentration of ownership may delay or prevent a
change of control of the Group, even in the event that this change of control may benefit
other Shareholders generally.
Similarly, AB InBev could prevent us from taking certain actions that would dilute its
percentage interest in our Shares, even if such actions would generally be beneficial to
us and/or to other Shareholders. These and other factors related to AB InBev’s holding
of a significant interest in our Shares may reduce the liquidity of our Shares and their
attractiveness to investors.
– 51 –
RISK FACTORS
As a general matter, we cannot guarantee that we will pay dividends in the future.
The payment of dividends will depend on factors such as our business outlook, cash flow
requirements and financial performance, the state of the market and the general
economic climate and other factors, including tax and other regulatory considerations.
Should the Offer Price be higher than the net tangible book value per share,
subject to pricing, you may experience an immediate dilution in the book value of
the Shares you purchased in the Global Offering and may experience further
dilution if we issue additional Shares in the future.
The Offer Price of the Shares may be higher than the net tangible book value per
Share immediately prior to the Global Offering. Therefore, you and other purchasers of
the Shares in the Global Offering may experience an immediate dilution to a pro forma
net tangible liabilities value of HKD(1.14) per Share, based on the maximum Offer Price
of HKD47.00.
In order to expand our business, we may consider offering and issuing additional
Shares in the future. You and other purchasers of the Shares may experience further
dilution in the net tangible book value per Share if we issue additional Shares at a price
lower than the net tangible book value per Share at the time of their issue.
If Shares are issued to APAC HoldCo 2 under the Share Issuance Agreement, then
there will be a dilutive effect on the ownership percentage of public Shareholders. For
example, as at the Listing Date, public Shareholders will hold approximately 15.35% of
the Company’s issued Share capital, whereas following the issuance of Shares to APAC
HoldCo 2 under the Share Issuance Agreement and assuming the Over-allotment Option
is not exercised at all, public Shareholders would hold approximately 15.00% of the
Company’s issued Share capital. For further details regarding the issuance of Shares
under the Share Issuance Agreement, see “History, Development and Reorganization –
9. Payment of Net Proceeds from the Global Offering and from any exercise of the
Over-allotment Option to APAC HoldCo 2, and the termination of the Shareholder Loan.”
The sale of a substantial number of the Shares in the public market could
materially and adversely affect the prevailing market price of the Shares.
– 52 –
RISK FACTORS
You should read the entire prospectus and we strongly caution you not to place
any reliance on any information contained in press articles, other media and/or
research analyst reports regarding us, our business, our industry and the Global
Offering.
There has been, prior to the publication of this prospectus, and there may be
subsequent to the date of this prospectus but prior to the completion of the Global
Offering, press, media and/or research analyst coverage regarding us, our business, our
industry and the Global Offering.
You should rely solely upon the information contained in this prospectus in making
your investment decisions regarding the Shares and we do not accept any responsibility
for the accuracy or completeness of the information contained in such press articles,
other media and/or research analyst reports nor the fairness or the appropriateness of
any forecasts, views or opinions expressed by the press, other media and/or research
analyst regarding the Shares, the Global Offering, our business, our industry or us.
In addition, prior to the date of this filing, AB InBev published its financial and
operating results, including results for its Asia Pacific reporting segment, for its fiscal
quarter ended 31 March 2019. There are significant differences between the financial
results of AB InBev’s Asia Pacific reporting segment and our combined financial
information. The differences primarily relate to the financial impact of connected
transactions between the Group and AB InBev that are not separately included in AB
InBev’s segments because historically they were fully eliminated from AB InBev’s results
as transactions between wholly-owned entities. These costs have been reflected in the
financial information of the Group as they reflect underlying transactions of the Group.
The costs are principally comprised of charges for imported products, royalties for local
manufacturing and charges for services provided by AB InBev. See “Connected
Transactions” for details of continuing connected transactions following the Listing.
Therefore, you should rely only on the financial information contained in this prospectus
in evaluating our financial and operating performance.
We cannot guarantee the accuracy of certain facts and statistics contained in this
prospectus.
Certain facts and statistics in this prospectus have been derived from various
official government and other publications generally believed to be reliable. We believe
that the sources of such information are appropriate sources for such information and
have taken reasonable care in extracting and reproducing such information. We have no
reason to believe that such information is false or misleading in any material respect or
that any fact has been omitted that would render such information false or misleading in
any material respect.
– 53 –
RISK FACTORS
Such information has not been independently verified by us or any of the Joint
Global Coordinators, Joint Sponsors, the Underwriters or any of our or their respective
directors, officers or representatives or any other person involved in this Global Offering
and no representation is given as to its accuracy. Due to possibly flawed or ineffective
collection methods or discrepancies between published information and market
practice, the facts and statistics in this prospectus may be inaccurate or may not be
comparable to facts and statistics compiled on the same basis or with the same degree
of accuracy (as the case may be) in other jurisdictions. As a result, you should not unduly
rely upon the facts and statistics contained in this prospectus.
– 54 –
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
Executive Directors
Jan Eli B. Craps (Jan Craps) No. 432, Lane 418 Belgian
(楊克) Jin Xiu Dong Road, citizen
Shanghai,
China
Non-executive Directors
Independent Non-executive
Directors
– 55 –
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 56 –
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 57 –
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
Societe Generale
34/F Three Pacific Place
1 Queen’s Road East
Hong Kong
As to US laws:
Sullivan & Cromwell (Hong Kong) LLP
28th Floor
Nine Queen’s Road
Central
Hong Kong
As to PRC laws:
Fangda Partners
24/F, HKRI Centre Two, HKRI Taikoo Hui
288 Shi Men Yi Road, Shanghai
200041, PRC
– 58 –
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
As to Australian laws:
Gilbert + Tobin
Level 22, 101 Collins St
Melbourne, VIC 3000
Australia
As to PRC laws:
King & Wood Mallesons
17th Floor, One ICC
Shanghai International Commerce Center
999 Middle Huai Hai Road, Shanghai
200031, PRC
– 59 –
CORPORATE INFORMATION
– 60 –
CORPORATE INFORMATION
– 61 –
HISTORY, DEVELOPMENT AND REORGANIZATION
HISTORY
We have a long history in Asia Pacific. In Australia, our history can be traced back
to the 19th century, when we first established Cascade Brewery in Tasmania, Australia,
a site where we continue to brew and sell beers today. Our oldest beer brand in China is
Harbin, which dates back to 1900 when it was first brewed in Harbin, China. Our roots in
South Korea date back to 1952, when we first brewed beer at Oriental Brewery.
Over the years, as AB InBev has grown through its major combinations,
acquisitions and divestitures, we have acquired breweries and brands that are
embedded in local culture.
Year Event
1900 Harbin Brewery, China’s oldest beer brand, was founded in Harbin,
China.
1998 Entry into South Korea: Interbrew entered into a joint venture with
the Doosan Group in South Korea to operate the Oriental Brewery.
2003 Entry into India: SAB entered into a joint venture with Shaw Wallace
Breweries in India.
2004 Interbrew and Ambev closed their merger transaction, creating InBev.
2006 Entry into Vietnam: SAB entered Vietnam for the first time with its
joint venture with Vinamilk.
– 62 –
HISTORY, DEVELOPMENT AND REORGANIZATION
Year Event
2011 Entry into Australia: SAB acquired the Foster’s Group, a leading
Australian brewer, along with Foster’s Group’s subsidiary, Carlton &
United Breweries.
2014 AB InBev reacquired its 100% stake in Oriental Brewery, which it had
previously sold in 2009.
Our Shareholders
In October 2016, AB InBev completed its combination with SAB in a transaction that
valued SAB’s entire issued and to be issued share capital at approximately GBP79
billion. As part of the transaction, we added Victoria Bitter, Carlton Draught, Carlton Dry
and Pure Blonde to our portfolio of brands in Australia, and Haywards 5000 and
Knockout to our portfolio of brands in India. In connection with this transaction, AB InBev
also completed the sale of SAB’s 49% stake in China Resources Snow Breweries
Limited to China Resources Beer (Holdings) Co. Ltd. for USD1.6 billion on 11 October
2016. See “Waivers from Strict Compliance with the Listing Rules and Exemptions from
Strict Compliance with the Companies (WUMP) Ordinance and the SFO – Shorter
Trading Record Period” for additional details regarding AB InBev’s combination with
SAB.
– 63 –
OUR REORGANIZATION
Corporate Chart Immediately before the Reorganization
In preparation for the Global Offering and in order to streamline our corporate structure, the following Reorganization is being
undertaken. The Reorganization will be completed shortly before the completion of the Global Offering. The following chart sets forth the
simplified shareholder structure of the businesses and/or entities comprising our Group within the AB InBev Group prior to the
commencement of Reorganization.
Anheuser-Busch
InBev SA
(Belgium)
Mexbrew InBev
Ambrew S.A.R.L
Investment S.A.R.L Belgium SA
(Luxembourg)
(Luxembourg) 67.62% (Belgium)
32.38%
Anheuser-Busch 32.47%
Europe Ltd
(UK) ABI Netherland
Holding B.V.
(NL)
13.56% 53.97%
99%3
SAB Australia
Beverage Holdings AB InBev AB InBev Global
ABI Southern Anheuser-Busch
LLP Investment Holding Business Services
Holding Ltd InBev Asia B.V.
(UK) Company Limited India Holdings B.V.
(UK) (NL)
(UK) (NL)
SAB 55.85%
SKOL Global
– 64 –
Beverage Investments Interbrew
Pty Limited Anheuser-Busch SAB Beer SKOL Beer SABMiller Business Services
ALE Finance International B.V.
(AUS) North American Manufacturing Manufacturing India Holdings Private Limited
Services Limited (NL)
Holding Corporation Company Limited Company Limited Limited (India)
(UK)
(US) (Vietnam) (India) (Mauritius) 44.15%
Foster’s
25%2 Group Pty Ltd ~36.5% Anheuser-Busch Anheuser-Busch InBev
(AUS) ABI Australia Oriental AB InBev Sedrin Anheuser Busch
InBev Japan Vietnam Brewery
Financing Pty Ltd AB InBev America Brewery, Co., Ltd. Holding B.V. InBev China Pte Ltd
Kabushiki Kaisha Company Limited
(AUS) Holdings Limited (Korea) (NL) (Singapore)
(Japan) (Vietnam)
(UK)
Foster’s Brewing
Australia Keytop
Group Pty Ltd China
Entities Investments Ltd
(AUS) AB InBev Australia AB InBev Subs
Anheuser-Busch (BVI)
Investment Investments Holdings
Holding II B.V.
Holdings Limited Company 2 Limited
(NL)
FBG (UK) (UK)
Finance Pty Ltd 86.65%1 China
(AUS) Budweiser InterBrew China
ABI Australia Crown Beers Subs
Hong Kong Holding Holding Limited
Investment Ltd India Private Limited ~63% (HK)
Company Limited
(UK) (India)
(HK) Public
~0.5%
China Horsinvest
China
Subs Holding Co Limited 0.87%
Subs
Anheuser Busch (HK)
InBev India Limited
(India)
China
Subs
99.13%
Anheuser-Busch
Hong Kong Beer InBev (China)
Holding Company Co. Ltd.
HISTORY, DEVELOPMENT AND REORGANIZATION
Harbin Brewery
Limited (China)
Group Limited
(HK)
(HK)
The following chart sets forth the simplified shareholder structure of the businesses and/or entities comprising our Group immediately
upon completion of the Reorganization, the Capitalization Issue and the Global Offering.
Anheuser-Busch
InBev S.A.
(Belgium)
ABI UK
Holding 2 Limited
(UK)
AB InBev
Investment Holding
Company Limited
(UK)
AB InBev America
Holdings Limited
(UK)
Interbrew
International
y1 B.V. (NL)
AB InBev America
Holding (APAC)
Limited
(UK)
x1 z1
Budweiser
Brewing Company
APAC Limited
(Cayman)
– 65 –
Australia SABMiller Anheuser-Busch
Business AB InBev Sedrin Keytop India Holdings Vietnam InBev Japan Korea
Holding B.V. Investments Ltd India Business Limited Kabushiki Kaisha
Business Business
(NL) (BVI) (Mauritius) (Japan)
~36.5%
~0.5%
China China Public
Business Business ~63%
Anheuser Busch
InBev India
Limited (India)
Anheuser Busch AB InBev Investments
InBev China Pte Ltd Holdings Company 2
(Singapore) Limited (UK)
Budweiser Hong
China Harbin Brewery
Kong Holding
Business Group Limited
Company Limited
(HK)
(HK)
China
Business
China
Business
HISTORY, DEVELOPMENT AND REORGANIZATION
1 These percentages have not been determined as at the Latest Practicable Date but will in aggregate sum to 100% and depend on the Offer Price and
reorganization steps that will take place after pricing but before the Listing Date.
2 Percentages are as at the Listing Date.
Details of the principal entities of the Company are set out in “Appendix I – Accountant’s Report.”
HISTORY, DEVELOPMENT AND REORGANIZATION
The following companies were incorporated in order to establish the Company and
its direct and indirect holding companies:
(a) the Company was incorporated in the Cayman Islands on 10 April 2019 and
became a wholly-owned subsidiary of APAC HoldCo 2 on 22 May 2019;
(b) APAC HoldCo 1 was incorporated in England and Wales on 10 May 2019 as a
wholly-owned subsidiary of Interbrew International B.V.; and
(c) APAC HoldCo 2 was incorporated in England and Wales on 10 May 2019 as a
wholly-owned subsidiary of APAC HoldCo 1.
Upon completion of the Reorganization, the Capitalization Issue and the Global
Offering, the shareholders of the Company will be APAC HoldCo 2, the Trustee and the
public shareholders who subscribe for Offer Shares in the Global Offering.
In order to fund in part the transactions detailed in the steps below, AB InBev
Investment Holding Company Limited, a member of the AB InBev Group outside of the
Group, will enter into a Shareholder Loan with the Company, enabling the Company to
fund the transfer of certain companies from the AB InBev Group into the Group at fair
market value, as detailed below. The Shareholder Loan will be entered into on normal
commercial terms or better for the Company and will not be secured by the Group’s
assets. The Shareholder Loan will be repaid or cancelled as part of the Reorganization
(see “– 9. Payment of Net Proceeds from the Global Offering and from any exercise of
the Over-allotment Option to APAC HoldCo 2, and the termination of the Shareholder
Loan”).
(c) ABI Australia Holding (UK) Limited (“Aus HoldCo”) was incorporated in
England and Wales as a wholly-owned subsidiary of ABI UK Holding 2 Limited
on 18 April 2019. Aus HoldCo was formed solely for the purpose of becoming
the holding company for the Group’s businesses in Australia and will become
a subsidiary of the Company as part of the Reorganization.
– 66 –
HISTORY, DEVELOPMENT AND REORGANIZATION
On 6 June 2019 and 13 June 2019, the Vietnamese business transfers were
effected through a series of transfers amongst wholly-owned subsidiaries of AB InBev.
Upon completion of such transfers, Anheuser-Busch InBev Vietnam Brewery Company
Limited and Anheuser-Busch InBev Asia B.V. (“ABI Asia BV”) and their respective
subsidiaries which hold the Vietnamese businesses became wholly-owned subsidiaries
of the Company, and as a result, became part of the Group.
In connection with the transfer of the Vietnamese businesses, AB InBev and the
Company have received approval from the Vietnamese Department of Planning and
Investment.
On 6 June 2019, 12 June 2019, 14 June 2019 and 17 June 2019, the transfer of the
Indian businesses to ABI Asia BV was effected through a series of transfers amongst
wholly-owned subsidiaries of AB InBev. Upon completion of such transfers, Crown Beers
India Private Limited, Anheuser-Busch InBev India Limited, SABMiller India Holdings
Limited, Anheuser-Busch South Asia Holding Company Limited and AB InBev Global
Business Services India Holding B.V. and their respective subsidiaries which hold the
Indian businesses became indirect subsidiaries of ABI Asia BV, and as a result, became
part of the Group.
Shortly before the Listing Date, two members of our Group, Keytop
Investments Ltd. (“Keytop”), a private limited company incorporated under the laws
of the British Virgin Islands, and AB InBev Sedrin Holdings B.V. (“Sedrin
Holdings”), a company incorporated under the laws of the Netherlands, will be
transferred to China HoldCo in exchange for equity via a series of share transfers
amongst wholly-owned, indirect subsidiaries of AB InBev. Upon completion of such
transfers, Keytop, Sedrin Holdings and all of their respective subsidiaries will be
subsidiaries of China HoldCo, and as a result, become part of the Group.
Shortly before the Listing Date, Anheuser Busch InBev China Pte. Ltd., an
entity organized under the laws of Singapore and a holding company for many
members of our Group in China, will be transferred to China HoldCo via a series of
share transfers in exchange for equity amongst wholly-owned, indirect subsidiaries
of AB InBev. Upon completion of such transfers, Anheuser Busch InBev China Pte.
Ltd. and all of its subsidiaries will become subsidiaries of China HoldCo, and as a
result, become part of the Group.
Shortly before the Listing Date, two members of our Group, Budweiser Hong
Kong Holding Company, Limited (“Bud HK”), a private limited company
incorporated under the laws of Hong Kong, and Harbin Brewery Group Limited
(“Harbin Group”), a company incorporated under the laws of Hong Kong, will be
transferred indirectly to China HoldCo via a series of share transfers amongst
wholly-owned, indirect subsidiaries of AB InBev. Bud HK will both, as result of such
transfers, become a wholly-owned direct subsidiary of AB InBev Investments
Holdings Company 2 Limited, which will in turn be wholly-owned by China HoldCo.
Harbin Group will become a wholly-owned direct subsidiary of China HoldCo.
– 67 –
HISTORY, DEVELOPMENT AND REORGANIZATION
Accordingly, upon the completion of such transfers, Bud HK, Harbin Group and all
of their respective subsidiaries will become indirect subsidiaries of China HoldCo,
and as a result, become part of the Group.
The PRC Legal Adviser is of the opinion that the M&A Rules are not applicable
to the Global Offering and no prior approval from PRC government departments is
required.
Shortly before the Listing Date, the South Korean business transfers will be
effected by (1) the transfer by AB InBev’s wholly-owned indirect subsidiary of 100% of
their interest in Oriental Brewery Co., Ltd. (“Oriental Brewery”), a company
incorporated under the laws of South Korea, to Korea HoldCo at fair market value and (2)
the transfer of a previously existing intercompany loan receivable from AB InBev’s
wholly-owned indirect subsidiary Mexbrew Investment SARL to Korea HoldCo in
exchange for the Korea Debt Receivable Loan due from the Company to Mexbrew
Investment SARL.
Upon completion of these transfers, (a) Oriental Brewery and its subsidiaries which
hold the South Korean businesses will become wholly-owned subsidiaries of Korea
HoldCo, and as a result, become part of the Group and (b) the Korea Debt Receivable
Loan will be left as an outstanding amount owed by the Company to Mexbrew Investment
SARL. The Korea Debt Receivable Loan will be repaid from the net proceeds from the
Global Offering (see “– 9. Payment of Net Proceeds from the Global Offering and from
any exercise of the Over-allotment Option to APAC HoldCo 2, and the termination of the
Shareholder Loan”).
Shortly before the Listing Date, the Australian business transfers will be effected
through a series of transfers of equity and intercompany debt amongst wholly-owned
subsidiaries of AB InBev at fair market value. Upon completion of such transfers, (a) AB
InBev Finance SA Limited, Foster’s Brewing Group Pty Ltd and all their respective
subsidiaries which hold the Australian businesses will become indirect subsidiaries of
the Company, and as a result, become part of the Group and (b) the borrowers and
lenders of the intercompany debt relating to the Australian business will be within the
Group.
– 68 –
HISTORY, DEVELOPMENT AND REORGANIZATION
The Treasurer has broad powers to block or make divestment orders in relation to
certain foreign investment proposals where the Treasurer considers the proposal to be
contrary to Australia’s national interest. The Reorganization of the Australia businesses
involves acquisitions of interests by foreign persons (as defined in the FATA) of certain
Australian entities valued above the monetary thresholds under the FATA.
Accordingly, these actions are required to be notified to FIRB or fall within the
Treasurer’s blocking and divestment powers, notwithstanding that all the entities
involved are subsidiaries of AB InBev. AB InBev lodged an application with FIRB in
respect of such actions and a no objection letter was issued by FIRB on 13 May 2019.
In connection with the foregoing transactions, we are also seeking to amend certain
licenses held by entities in the Australian business to reflect the new structure.
9. Payment of Net Proceeds from the Global Offering and from any exercise of
the Over-allotment Option to APAC HoldCo 2, and the termination of the
Shareholder Loan
Following completion of the Global Offering, the Company will use the entire net
proceeds from the Global Offering to satisfy (1) in full, its obligations under the Korea
Debt Receivable Loan and (2) in part, its obligations to AB InBev Investment Holding
Company Limited under the Shareholder Loan. The Company will make an
announcement following such payment. It is anticipated that such announcement will be
made on the Listing Date.
Accordingly, following completion of the Global Offering and prior to any exercise of
the Over-allotment Option, (1) the Korea Debt Receivable Loan will have been repaid in
full, and (2) the amount of the Shareholder Loan that will remain outstanding will equal
the net proceeds that would be received by the Company if the Over-allotment Option
was exercised in full. AB InBev Investment Holding Company Limited shall contribute its
outstanding Shareholder Loan receivable to APAC HoldCo 2.
In connection with the Shareholder Loan, on 2 July 2019, the Company, AB InBev
Investment Holding Company Limited and APAC HoldCo 2 entered into the Share
Issuance Agreement under which the parties agreed to the mechanism described below
for the repayment or cancellation of the Shareholder Loan.
• Upon any exercise of the Over-allotment Option, the entire net proceeds will
be used immediately to repay our obligations to APAC HoldCo 2 under the
Shareholder Loan. As a result, if the Over-allotment Option is exercised in full,
the entirety of the Shareholder Loan will be repaid in full and the Shareholder
Loan will be terminated.
• To the extent the Over-allotment Option is not exercised in full, at the end of
the Over-allotment Option exercise period, the Company will issue the same
number of shares to APAC HoldCo 2 as would have been issued had the
remainder of the Over-allotment Option been exercised in full in exchange for
the cancellation of all remaining principal amount of the Shareholder Loan.
See also “Waivers from Strict Compliance with the Listing Rules and
Exemptions from Strict Compliance with the Companies (WUMP) Ordinance
and the SFO – Public Float Requirements.”
– 69 –
HISTORY, DEVELOPMENT AND REORGANIZATION
• At the end of the Over-allotment Option exercise period (which is 30 days after
the last day for lodging applications under the Hong Kong Public Offering),
whether or not the Over-allotment Option is exercised in part or in full:
• the Shareholder Loan will be repaid in full and will be terminated and no
intercompany indebtedness will remain in place between any member of
the Group and the AB InBev Group other than under commercial
arrangements in the ordinary and usual course of business of our Group
and pursuant to Cash Pooling Arrangements (see “Connected
Transactions – Cash Pooling Arrangements in place between the AB
InBev Group and the Group”).
• Rule 10.08 of the Listing Rules provides that no further shares or securities
convertible into equity securities of a listed issuer (whether or not of a class
already listed) may be issued or form the subject of any agreement to such an
issue within six months from the date on which securities of a listed issuer first
commence dealing on the Stock Exchange. An exception to this rule is the
issue of shares or securities pursuant to an agreement entered into before the
commencement of dealing, the material terms of which have been disclosed in
the listing document issued in connection with the initial public offering (Rule
10.08(4) of the Listing Rules). The issuance of Shares under the Share
Issuance Agreement falls within this exception.
The following table sets out the shareholding structure of the Company: (a) as at the
Listing Date; (b) as at the end of Over-allotment Option exercise period, assuming the
Over-allotment Option is not exercised at all; and (c) as at the end of Over-allotment
Option exercise period, assuming the Over-allotment Option is exercised in full.
(1) Assuming the Over-allotment Option is not exercised at all, under the Share Issuance Agreement, the
Company will issue the same number of Shares to APAC HoldCo 2 as would have been issued had the
Over-allotment Option been exercised in full in exchange for the cancellation of all remaining principal
amount of the Shareholder Loan.
(2) Assuming the Over-allotment Option is exercised in full, the Shareholder Loan will be repaid in full from
the net proceeds received therefrom and so no new Shares will be issued to APAC HoldCo 2 under the
Share Issuance Agreement at all.
– 70 –
INDUSTRY OVERVIEW
While we have taken all reasonable care to ensure that the relevant official
facts and statistics are accurately reproduced from these sources, such facts and
statistics have not been independently verified by us or the Relevant Persons.
Although we have no reason to believe that such information is false or misleading
in any material respect, or that any fact has been omitted that would render such
information false or misleading in any material respect, we make no representation
as to the accuracy or completeness of such information, which may not be
consistent with other information available. Accordingly, you should not place
undue reliance on such information or statistics.
GlobalData was formed in 2016 following the consolidation of several data and
analytics providers. GlobalData has a team of industry consultants, market research
analysts, technology analysts and economists globally. It conducts industry research
among other services. GlobalData covers the Asia Pacific market from its offices in
Singapore and Hong Kong. Its industry coverage in Asia Pacific includes all alcohol and
non-alcohol beverage categories and brands across various key markets.
We have included certain information from the GlobalData Report in this prospectus
because we believe this information facilitates an understanding of the Asia Pacific beer
market for prospective investors. The GlobalData Report includes information on the
Asia Pacific beer market, with additional information on our principal markets within the
region, such as China, Australia, South Korea, India and Vietnam, as well as other
economic data, which have been quoted in this prospectus. GlobalData’s independent
research consists of both primary and secondary research obtained from various
sources in the Asia Pacific beer industry. Primary research involved in-depth interviews
with leading industry participants and industry experts in China. Secondary research
involved reviewing company reports, independent research reports and data based on
GlobalData’s own research database. Projected data were obtained from historical data
analysis plotted against macroeconomic data with reference to specific industry-related
factors. On this basis, our Directors are satisfied that the disclosure of future projections
– 71 –
INDUSTRY OVERVIEW
and industry data in this section is not biased or misleading. We believe that the sources
of this information are appropriate sources for the information, and we have taken
reasonable care in extracting and reproducing this information. We have no reason to
believe that this information is false or misleading in any material respect of that any fact
has been omitted that would render such information false or misleading in any material
respect. Our Directors confirm, after taking reasonable care, that there is no material
adverse change in the overall market information since the date of the GlobalData
Report that would materially qualify, contradict or have an adverse impact on such
information.
Except as otherwise noted, all of the data and forecasts contained in this section
have been derived from the GlobalData Report, various official government publications
and other publications.
In compiling and preparing the research, GlobalData assumed that the economies
of the relevant countries are likely to maintain steady growth in the next five years (the
“forecast period”), the social, economic and political environment in the relevant
markets is likely to remain stable in the forecast period, and market drivers such as
consumers’ rising purchasing power, consumers’ upgrading consumption and other key
drivers are likely to drive the Asia Pacific beer market during the forecast period. In
addition, according to GlobalData, the bases and assumptions used for the preparation
of the report mainly include the following:
• Asia Pacific region (or the “region”) is defined as China, Australia, South Korea,
India, Vietnam, Hong Kong, Taiwan, Japan, New Zealand, Indonesia, Malaysia,
Singapore, the Philippines, Thailand, Myanmar, Cambodia, Laos and Sri Lanka for
computation of Asia Pacific beer market size. Asia Pacific macroeconomic
indicators are for the entire region as stated by International Monetary Fund (“IMF”)
• “Principal markets” are defined as the key markets in Asia Pacific that the
Company operates in, namely China, Australia, South Korea, India and Vietnam
• “Rest of Southeast Asia” (or the “SE Asia region”) is defined as Indonesia,
Malaysia, Brunei Darussalam, Singapore, the Philippines, Thailand, Myanmar,
Cambodia and Laos
• “Price categories” of beer defined in this report are based on an index value
assigned by GlobalData, based on retail pricing of beer. The methodology assumes
the retail (off-premise) price of the leading brand in the most popular pack type as
the standard (assigned 100 on the index), with all other brands indexed against this
brand/pack type. Brands with an index of 115 to 150 are classified in the premium
category, brands with an index in excess of 150 are classified in the super
premium category, brands with an index of below 90 are classified in the value or
discount category and brands with an index of 90 to 114 are classified in the
mainstream category
• RSP (“Retail Selling Price”) is defined as the price of products sold to the end
users for consumption
• Value market size and shares are based on average off-premise RSP sales
– 72 –
INDUSTRY OVERVIEW
• In calculating market share, sales of trademark brands are allocated to the licensed
distributor of respective brands in the stated years
We operate in Asia Pacific, with products primarily catering to the beer markets
across various countries. We have a broad portfolio of over 50 brands and are well
positioned to capture the beer consumption trends, including premiumization and trading
up, across Asia Pacific. The following section provides an overview of the beer industry
in the region, with a focus on our principal markets of operation, which are China,
Australia, South Korea, India and Vietnam.
Asia Pacific is the largest beer consumption region by volume and value and one of
the fastest growing beer consumption regions globally as of 2018. It accounted for 37%
of the global beer consumption volume in 2018 and is also expected to contribute 47%
to the incremental growth in beer consumption volumes globally from 2018 to 2023.
The following charts illustrate the current share of global volumes and incremental
global beer volume growth over the forecast five years, represented by the Asia Pacific
beer market.
Others
24.9% China accounts 52.9%
for 25% of global
volume 71
47.1%
Source: GlobalData
– 73 –
INDUSTRY OVERVIEW
Within Asia Pacific, beer comprises the largest volume share among alcohol drinks
(“share of throat”), and its share is expected to remain relatively stable over 2018 to
2023. Beer consumption in Asia Pacific is also underpinned by highly favorable
macroeconomic and demographic factors relative to other regions in the world. With a
total population of 4.2 billion, Asia Pacific accounted for approximately 57% of the global
population in 2018. The region is also expected to contribute around 46% to global
population growth over 2018 to 2023. This large consumer base in Asia Pacific is
relatively young, increasingly residing in urban centers and has growing spending
power.
In addition to the large population base, urbanization is also driving the growth of
consumption in Asia Pacific. As an illustration, according to the National Bureau of
Statistics for China, China’s urban population has grown at a CAGR of 2.6% over 2013
to 2018, adding around 100 million to the urban population over the period. Urban
population growth also outpaced the overall population growth, which grew at a CAGR of
0.5% over the same period. Average per capita disposable income for China’s urban
population is estimated to be approximately three times higher than that of China’s rural
population as of 2018. This indicates a considerable potential for consumption growth,
including for beer.
The aggregate PCC for beer in Asia Pacific is also significantly low (around 20 liters
in 2018) compared to global benchmark markets (such as the US at 71 liters, Brazil at 60
liters and Mexico at 74 liters in 2018). This is illustrated in the following chart that maps
the various regional beer markets by PCC and GDP per capita. The current low beer
PCC level in Asia Pacific indicates significant growth headroom for beer markets in the
region.
PCC vs. GDP per capita for Asia Pacific beer markets
80
Mexico
(74 liters)
70 US
Australia (18) (71 liters)
Beer per capita consumption
Laos (4)
20
Taiwan (5)
Myanmar (4)
10 India (27)
Sri Lanka (1) Malaysia (2)
Indonesia (2)
0
0 2 4 6 8 10 12 20 30 40 50 60 70 80
Market size in volume (mm HL) Principal markets GDP per capita (US$’000)
Source: GlobalData for beer market volumes, IMF for GDP and population data
– 74 –
INDUSTRY OVERVIEW
Premiumization and trading-up are structural trends in beer across Asia Pacific.
While the premium and super premium beer categories are relatively underdeveloped in
Asia Pacific relative to other markets globally, they are anticipated to grow significantly
faster than the overall beer market in the region. The following charts illustrate the
historical evolution of the beer market by price category in Asia Pacific over 2013 to 2018
and the anticipated evolution over 2018 to 2023, by volume and value, illustrating the
regional premiumization trend in beer.
61 CAGR CAGR
81 61 (2013-2018) (2018-2023)
640
160
Premium &
168 7.9% 5.6%
128 super premium
87
0
252
260
18 CAGR CAGR
199 (2013-2018) (2018-2023)
169
208
114
52
76 Premium &
11.3% 8.4%
44 super premium
0
Source: GlobalData
– 75 –
INDUSTRY OVERVIEW
The following sections provide an overview of the beer industry in our principal
markets of operation.
China’s beer market is the largest globally. GlobalData estimates the total beer
market volume in China to be 488 million HL in 2018. However, included in this total is an
estimation of unreported volumes by a large number of smaller scale regional brewers.
According to the National Bureau of Statistics for China, the total beer market volume
was 381 million HL in 2018 (reflecting the national production volume of brewers above
a designated size), and we believe this is a more appropriate indication of the beer
market size and our addressable market. China accounted for a 25% share of global
beer volumes. China is also the largest beer market in the region by volume and value,
accounting for an approximately 66% and 41% volume and value share, respectively, in
2018. Despite its large aggregate size, beer consumption in China continues to remain
relatively low on a PCC basis, at 35 liters per capita in 2018, indicating a significant
potential for growth in beer consumption (compared to other benchmark markets such as
the US, Brazil and Mexico, which are at 71 liters, 60 liters and 74 liters, respectively).
Return to growth – Following declining volumes over 2013 to 2018, the beer
market in China is expected to return to growth over the forecast period of 2018 to 2023
driven by multiple macroeconomic and industry specific factors. Key macro drivers
include a recovery in overall economic growth, a reduction in sales taxes (from 17% in
2017 to 13% in 2019) and growth from lesser developed inland regions. Additionally, the
beer industry as a whole is shifting its focus from gaining market share through higher
volumes to providing consumers with better quality products across a broader portfolio
range. This has resulted in an overall increase in the level of potential volume and value
growth and a shift in the beer category as a whole, with an increased focus and ability to
generate value from premiumization. Consumption of other alcohol drinks such as spirits
is also slowing due to a reduction in corporate entertaining and gifting in the Chinese
business culture.
Within the overall Chinese beer market, the premium and super premium
categories have emerged as growth engines, both historically (over 2013 to 2018) and in
the forecast period (over 2018 to 2023), outperforming overall beer market growth. The
premium and super premium categories have also been more resilient to the recent
moderation in economic growth as consumers seek out products that offer more in terms
of flavor, strength and variety. The premiumization trend in beer is also significantly more
pronounced in China versus the other principal markets that we operate in with the price
of super premium beer in China nearly 11.6 times that of value beer, compared to a
difference of 6.1 times in India and 1.6 times in Australia in 2018.
The premiumization momentum in the Chinese beer market can be seen as the
share of the premium and super premium categories increased from 10.9% in 2013 to
16.4% by volume in 2018 with this trend expected to continue. Despite the recent strong
growth, the share of the premium and super premium categories remains significantly
lower than that of key benchmark developed/mature beer markets (versus 42.1% for the
US) implying significant headroom for growth for the premium and super premium
categories as the economy continues to develop.
– 76 –
INDUSTRY OVERVIEW
The following charts show the key statistics of the beer market size in China
according to the GlobalData Report.
Beer
Wine
71.7%
3.7%
2013 2018 2023E 2013 2018 2023E
4.9% 8.5
%
102.0 62.7
6.4% 80.3
0%
59.0 12. 41.8
23.7
Source: GlobalData
In addition to premiumization, growth drivers and trends in the Chinese beer market
include:
While lager continues to be the leading style in the Chinese beer market, new styles
and types of beers are gaining popularity, including draft and ice beers, flavored beers,
and speciality beers such as wheat beers and dark beers. Such new consumption trends
are largely led by evolving consumer tastes, drinking habits and preferences and
increasing urbanization and growing household spending, resulting in consumer
openness to a wider variety of beer types and an ability and willingness to pay more for
niche brews such as craft beers.
– 77 –
INDUSTRY OVERVIEW
Craft beer has been gaining popularity in China. The category has largely been
focused around Beijing, Nanjing and Shanghai; however, it is increasingly popular with
younger consumers and is penetrating new markets in second tier cities such as
Hangzhou, Wuhan and Xi’an. In 2017, we acquired Boxing Cat, a major craft brewer
established in 2008 in Shanghai, and we are actively promoting our Goose Island brand
in upscale metropolitan outlets. Moreover, we opened a craft brewery in Wuhan
producing the Boxing Cat, Kaiba and Goose Island brands.
The overall routes to market for various products in China are undergoing changes
on account of growth in modern trade, increase in on-premise beer consumption and
growth in e-commerce. On-premise consumption offers a significantly higher average
selling price (“ASP”) and resulting profitability, which is expected to increase overall
industry profitability along with the broader premiumization trend. The on-premise
channel is also highly relevant in the distribution and sale of premium and super premium
beers.
China represents a large, diverse collection of regions with differing beer market
characteristics. This has resulted in slightly varied beer market growth and
premiumization opportunities as relatively less wealthy regions (such as the West) move
up the GDP per capita curve to similar levels as more developed regions (such as the
South).
– 78 –
INDUSTRY OVERVIEW
Beer brand preferences in China also vary by geography. While Snow and Tsingtao
are large national brands, other brands such as Yanjing have a strong concentration in
certain regions, such as the North (in Beijing and Inner Mongolia) and South (in
Guangxi). While international brands such as Budweiser (licensed to us under a long
term licensing agreement from our parent company, AB InBev) and Carlsberg are
gaining popularity in the market, regional brands continue to remain relevant, with
notable examples being our Harbin and Sedrin brands (strong positions in the North and
South, respectively). Budweiser has a strong nationwide presence but is particularly
strong in the South, East and Southeast.
The beer market in China has transitioned from being highly fragmented to
relatively consolidated, with the top five brewers (CR Snow Breweries, Tsingtao, our
Company, Yanjing and Carlsberg) accounting for 70.4% of the total beer market by
volume in 2018. This consolidation has been achieved primarily through acquisitions of
smaller local breweries, with regional brands sometimes being displaced by larger
national brands.
Source: GlobalData
According to GlobalData, we are also well positioned in the premium and super
premium categories with a combined 46.6% market share by volume in 2018, having
registered over 6% market share gain since 2013 with a portfolio of iconic brands such
as Budweiser, Stella Artois, Corona and Hoegaarden. We believe that our leading
portfolio of brands will favorably position us to continue to capture the higher growth
potential in these categories.
– 79 –
INDUSTRY OVERVIEW
Tsingtao
14.4%
Source: GlobalData
According to GlobalData, we are the only brewer among the top five in the premium
and super premium categories to have increased our share by volume substantially over
2013 to 2018. Budweiser (licensed to us) is the leading brand in China in the premium
and super premium categories by volume. The super premium category is mostly made
up of imported brands as well as local specialties and the nascent craft category. Corona
(licensed to us), Heineken, Carlsberg and Blue Girl are the leading brands in the super
premium category.
With the growth in more premium beers in China, distribution capabilities that have
access to relevant points of sale have become a critical success factor for brewers.
Brewers that target the premium and super premium categories in particular need a
well-established distribution and sales force to ensure connectivity with the right
consumers through the right channels. The on-premise channel, which has a higher
growth rate than the off-premise channel in terms of value from 2013 to 2018, is also
highly relevant for premium beers, as the majority of premium and super premium beers
are consumed on-premise. The off-premise channel, which has historically catered to
distribution of value and mainstream beer categories, is also expected to grow over 2018
to 2023 driven mainly by increasing premium and super premium beer volumes.
Beer distribution through e-commerce continues to grow, with many brewers having
their own online shops on Tmall (part of Alibaba) and JD.com. Smaller retail outlets,
restaurants and also consumers increasingly leverage B2B e-commerce.
– 80 –
INDUSTRY OVERVIEW
The following charts show the on-premise and off-premise consumption by volume
in China across price categories, for the periods specified.
5.3%
8.2% 83.5
64.5 3.3%
0.4%
43.5
15.5 15.8 18.5
(3.4%) (3.1%)
0.6%
(0.7%)
271.7
208.7
232.6 240.1
175.6 169.4
Source: GlobalData
The beer market in China has historically been a high volume market, with lesser
focus on value growth. The industry has been characterized by multiple regional
operators, with relatively older and inefficient production infrastructure and limited
product innovation. Challenges in transport connectivity in parts of China, especially
away from the large city centers, are responsible for the large numbers of breweries
needed to achieve national distribution coverage, also resulting in high operating costs.
While the premium and super premium beer categories are becoming popular, greater
competition is also expected in these categories following the merger of CR Beer and
Heineken.
Companies that have a wide range of global and local brands, particularly in the
more premium categories, well invested and efficient manufacturing facilities and
established route to market capabilities that are suited to distribution and execution of
premium and super premium beers should be well positioned to capture sustained
volume and value growth in the Chinese beer industry. Overall, the market is expected
to return to moderate volume growth in the future taking into account that the PCC level
for beer remains relatively low and favorable demographic and macroeconomic
development is expected to continue.
– 81 –
INDUSTRY OVERVIEW
The beer industry volumes over the period from 2013 to 2018 have been relatively
flat, however the premium and super premium beer categories have continued to show
robust growth, driving overall industry volume and value growth over the historical 2013
to 2018 period and also the forecast 2018 to 2023 period.
The following charts show the key statistics of the beer market size in Australia.
0.1% 0.2%
Spirits 1.2%
17.5 17.6 17.8 3.6%
12.1% 16.1
15.1
12.7
Total alcohol drinks volume (By volume, mm HL) (By value, USD bn)
27mm HL
3.3% 4.6%
4.7% 9.0
8.4 7.1%
7.1 7.2
5.7 5.1
Source: GlobalData
The key growth drivers and trends in the Australian beer market include:
Consumers are increasingly shifting to higher priced premium and super premium
beers. This is evidenced by the higher growth rates in the premium and super premium
beer categories by volume and value from 2013 to 2018, while the overall market
remains flat. This shift to premium is also expected to drive overall value growth in the
beer market over the 2018 to 2023 forecast period.
– 82 –
INDUSTRY OVERVIEW
Consumer tastes continued to shift towards locally produced beer from craft
breweries. These craft beers are considered artisanal products, perceived to be “hand
crafted” using the best ingredients available locally. This shift towards craft beer is also
part of the broader premiumization trend in the beer market. According to GlobalData,
we are well placed to participate in the craft beer category with our Yak Ales craft beer
brand, and also through the acquisition of leading craft brewers 4 Pines and Pirate Life.
Ciders continue to remain a popular category and are expected to grow at a 5.1% volume
CAGR over 2018 to 2023 with the Company holding the number one market position by
value in 2018 with a strong portfolio of brands including, Strongbow, Bulmers, Pure
Blonde Cider and Mercury.
Flavored beer consumption is on the rise, with the category appealing largely to
younger and first time beer consumers. In addition to flavored beers, consumers also
prefer other types of beer such as ales and wheat beers, with our brand Hoegaarden
driving the growth in wheat beer consumption.
Source: GlobalData
– 83 –
INDUSTRY OVERVIEW
Our Company and Lion Nathan (owned by Kirin) represent a significant majority of
the beer market in Australia, with a combined market share of over 80% in 2018, both by
volume and value. The Australian beer market is relatively consolidated between our
Company and Lion Nathan with a structured modern trade, efficient route to market and
strong retailer relationships providing sources of relative competitive advantage for us.
Australia is a large, stable and highly profitable beer market, with high beer PCC.
The overall trend in beer consumption has been shifting towards moderation and
responsible drinking, where consumers prefer beers with lower alcohol content.
Consumers, including young consumers, also increasingly prefer easy drinking beers,
more premium beers and craft beers.
Companies that can cater to these consumer preferences are well positioned to
succeed in the market. This can be demonstrated through the considerable growth of our
Great Northern brand. Companies that have the ability to innovate and provide
consumers with products such as low- and no-alcohol alternatives should also enjoy a
competitive advantage. Iconic global brands (such as Budweiser and Corona), craft beer
and cider portfolios will remain essential to capturing future growth in the more premium
categories. Relationships with and the ability to leverage the modern trade retailers for
consumer insights will also add to a company’s competitiveness.
South Korea’s beer market shares some similar attributes with that in Australia, in
terms of level of maturity. It is also characterized by strong GDP per capita, two large
industry players in the beer market and high profitability, with a high value per hectoliter
of beer consumed.
– 84 –
INDUSTRY OVERVIEW
The following charts show the key statistics of the beer market size in South Korea.
Beer vs. other alcohol Overall beer market size in South Korea
drinks in South Korea
(2018, by volume)
(0.6%) 2.0%
22.1 3.7%
20.5 20.0 1.3%
17.4
13.6 14.5
Spirits
42.6%
Beer 2013 2018 2023E 2013 2018 2023E
56.1%
1.5 1.9
Source: GlobalData
The key growth drivers and trends in the South Korean beer market include:
The beer market in South Korea is witnessing a strong premiumization trend, with
consumers increasingly preferring premium and super premium beers in a market that
was historically a mainstream beer category market, primarily as a result of steady GDP
growth and higher levels of disposable income.
Imported beer brands are accounting for an increasing share of the overall beer
consumption in South Korea as consumers seek a wider variety that is not offered by the
conventional domestic beer brands.
The craft beer category in South Korea is currently small but high growth, with a
volume CAGR of 25.8% over 2013 to 2018, as consumers increasingly seek premium
offerings and are willing to pay higher prices for beer.
– 85 –
INDUSTRY OVERVIEW
1
No presence in beer
Total volume (2018): 20mm HL
Source: GlobalData
We were the significant market leader in the beer market in 2018, both in terms of
volume and value, strengthening our position since 2013 with Hite Brewery the second
largest player on both measures. Other brewers in the market include Lotte Chilsung,
Heineken and Asahi. Our market share has continued to remain stable, and even
marginally grew over 2013 to 2018 by volume, on the back of the strength of our brands,
such as Cass. Brands such as Budweiser (licensed to us) also grew significantly over the
past five years, growing market share in the premium category. Other players such as
Heineken that cater to the premium category have also grown over the past three to four
years but remain small on a market share basis.
The South Korea beer market is gradually shifting from domestically produced
brands to imported brands with some of the domestic brands in the mainstream category
losing share to imports. The distribution of beer is also undertaken only by distributors.
Companies that have brands with strong equity, such as Cass (owned by us), and
those that are well positioned in the growing premium beer categories should remain
competitive. Strong relationships with distributors also remain essential for brewers to
have visibility over points of sale and consumer preferences.
India is one of the largest and fastest growing beer consumption markets in the
region, with a young population and growing middle class. While India has historically
been mainly a spirits consumption market, beer has emerged as a growing alcohol drink
category in recent years. The Indian beer market is currently underdeveloped compared
to regional and global benchmarks, with a beer PCC of only 2 liters. The low PCC
indicates significant headroom for growth in beer consumption versus other alcohol
drinks.
– 86 –
INDUSTRY OVERVIEW
The value and mainstream categories have been popular historically, with
consumer preference for beers with higher alcohol content by volume (“strong beers”).
While the premium and super premium categories currently remain relatively
underdeveloped, they have grown at a robust volume CAGR of 24.6% over 2013 to 2018,
with this high growth forecast to continue with a projected volume CAGR of 12.9% over
2018 to 2023.
The following charts show the key statistics of the beer market size in India.
Spirits Beer
52.1%
2013 2018 2023E 2013 2018 2023E
47.0%
0.8 0.4
Source: GlobalData
The key growth drivers and trends in the Indian beer market include:
There is a growing preference for premium beers, especially among urban, middle
class consumers that are increasingly influenced by western culture. Additional demand
momentum from the opening of pubs, bars and microbreweries is also driving demand
for premium beers. International brands such as Budweiser (licensed to us) are gaining
popularity. Consumers are also beginning to shift from traditionally popular beer styles,
such as lagers, to more innovative and differentiated beers.
– 87 –
INDUSTRY OVERVIEW
The following charts provide an overview of the beer competitive landscape in India.
Source: GlobalData
United Breweries (“UB”) has historically been the market leader in the Indian beer
market by volume and value, through their brand Kingfisher, followed by the Company
and Carlsberg.
We are well positioned within the Indian beer market with a top two market share
position coupled with a brand portfolio that is well positioned to capture the higher growth
premium categories going forward. Companies such as Carlsberg are also becoming
more competitive and gaining market share driven by brands such as Tuborg. Heineken
is a large shareholder of UB, and UB brews the flagship Heineken brand domestically.
Premium beer brand Bira 91 (B9 Beverages) has shown strong growth in the premium
category. Budweiser (licensed to us) was the leading brand in the premium and super
premium categories by volume and value in 2018.
India remains a relatively complex market, with a state level regulated alcohol
drinks industry. Recent changes in regulations around advertising and sale of alcohol
drinks in proximity of state highways is a consideration.
Companies that will be able to differentiate themselves based on brand equity and
image, product offering range and ability to connect with the growing middle class should
enjoy a strong competitive advantage. As alcohol taxation and distribution is state
specific, companies with manufacturing facilities across multiple states are also
positioned favorably. Overall, the market will benefit from favorable demographic and
macroeconomic forecasts and is expected to grow significantly given its currently low
PCC level.
– 88 –
INDUSTRY OVERVIEW
Vietnam has been one of the largest and fastest growing beer markets in the region
with a volume and value growth rate of 6.6% and 8.9%, respectively, over 2013 to 2018.
Consumers have a strong preference for beer among other alcohol drinks, with beer
capturing a nearly 95% share of throat by volume among alcohol drinks in 2018. Despite
the relatively high PCC level of 50 liters, the beer market in Vietnam is expected to
continue growing at a CAGR of 3.9% by volume and 9.0% by value over 2018 to 2023.
According to GlobalData, favorable demographics (young, growing population,
urbanization) and macroeconomic factors are expected to continue to support robust
growth in beer consumption.
The following charts show the key statistics of the beer market size in Vietnam.
Beer
2013 2018 2023E 2013 2018 2023E
94.4%
Source: GlobalData
The key growth drivers and trends in the Vietnamese beer market include:
The premium beer categories are growing on the back of economic development,
growth in household spending and also evolving consumer preferences.
– 89 –
INDUSTRY OVERVIEW
Carlsberg
40.1%
2013 2018
Company ranked #8
7.5%
overall by volume. SABECO 38.7% 40.1%
However, current
HABECO portfolio of Company
Heineken 20.0% 31.2%
12.1%
largely in the premium HABECO 17.0% 12.1%
and super premium Carlsberg 8.6% 7.5%
categories, where it is
Heineken
31.2% #2 by value
Sapporo 0.8% 2.2%
Total of top five 85.1% 93.1%
Total volume (2018): 47mm HL
Source: GlobalData
Two brewers, Saigon Alcohol Beer and Beverages Corporation (“SABECO”) and
Heineken (through Vietnam Brewery), represent a significant majority of the Vietnamese
beer market on a combined basis. Hanoi Beer Alcohol and Beverage Corporation
(“HABECO”) is the other large player. Beer market volumes in Vietnam largely comprise
beers from the mainstream category, however the premium and super premium
categories have grown, and are forecast to continue to grow, at a faster rate than the
overall beer market.
The Company has a growing position in the overall beer market with an overall
market share of less than 1% by volume in 2018. Currently, we operate largely in the
premium and super premium categories ranking second by sales value share in 2018.
With further integration of the legacy SAB portfolio (Zorok brand in the mainstream
category) with our global premium portfolio, we believe that we are well positioned to
capture future growth and market share in the market.
Companies that are able to access the right distribution channels enjoy a significant
competitive advantage. Having a portfolio of brands across a broad price spectrum will
also be essential to ensure coverage of a wide (urban and rural) consumer base in the
country, ensuring longer term competitive success in the market.
Rest of Southeast Asia also comprises attractive beer markets with a large and
growing population and also consumption levels. The Company’s current markets of
operation in Rest of Southeast Asia include Indonesia, Malaysia, Singapore, Brunei
Darussalam, Philippines, Thailand, Myanmar, Cambodia and Laos.
– 90 –
INDUSTRY OVERVIEW
The beer markets in the SE Asia region are generally comprised of large regional
brewers that have a strong market share in specific countries. The premium and super
premium categories comprise a relatively small but growing share of the overall beer
market, with growth in these categories driven largely from an increasing number of
urban consumers, presenting a significant growth opportunity for the Company.
The main raw materials used in our beer production are malted barley, hops, yeast
and water and our key commodities primarily include malted barley and aluminum. The
supply and prices of our raw materials can be affected by a number of factors beyond our
control including, but not limited to, crop yield, regulation, market demand and political
environment. We source certain of our raw materials from suppliers through AB InBev’s
procurement services with the remainder sourced directly from other third party
suppliers. Our pricing strategy takes into account a variety of factors (for more
information see “Business – Branding and Marketing”), one component of which is the
costs of raw materials and packaging materials. In general, we seek to pass on increases
in cost of raw materials to our customers if such increases affect our business operations
and profit margin in the long term.
To minimize our exposure to commodity price volatility in the short term, we use
both fixed-price purchasing contracts and commodity derivatives when practicable.
Whilst prices do fluctuate, our hedging policy provides visibility on potential impacts in
the future which provides the Company the opportunity to offset (partially or fully) the
impact as necessary.
We manage the risk of price fluctuations and improve malted barley landed prices
through diversifying price fluctuation risks by splitting the time windows of purchases,
and using the global footprint of AB InBev and the Company’s product experience to
assist local suppliers in identifying and delivering potential areas of cost reduction.
Global aluminum prices increased in early 2018. We consider that it was due to
supply issues in Brazil and Australia and also as a result of US sanctions. Prices have
since declined in January 2019.
The following charts provide a summary of price indices of some of our key raw
materials.
1.0 50 500
0.0 0 0
Jan-17 Jul-17 Dec-17 Jul-18 Dec-18 Jan-17 Jul-17 Dec-17 Jul-18 Dec-18 Jan-17 Jul-17 Dec-17 Jul-18 Dec-18
Source: Bloomberg
In general the Company expects the price of malted barley and aluminum to remain
relatively stable in 2019 with some potential uptrend risk due to supply and demand
dynamics.
– 91 –
BUSINESS
OVERVIEW
We are Budweiser Brewing Company APAC Limited, part of the AB InBev Group.
Our greatest strength is our people. We dream big, and our culture of ownership drives
us to achieve results. Our Pan-Asian platform comprises more than 31,000 colleagues,
62 breweries and 73 distribution centers located throughout Asia Pacific as of 31 March
2019.
We are the largest beer company by retail sales value based in Asia Pacific, the
largest beer consumption region by volume and value and one of the fastest growing
beer consumption regions globally as of 2018, which is poised for further growth (4.8%
CAGR by beer value over the next five years according to GlobalData). We are also one
of the most profitable Asia-based beer companies in terms of Normalized EBITDA in
2018. Our business presents a unique and diversified combination of leadership in highly
profitable markets, and a solid and growing presence in high growth and margin
expansion markets. We hold leading positions across our principal markets in Asia
Pacific.
• the number one position by beer value in China, and the number one position
in the fast growing premium and super premium categories collectively by beer
value and beer volume in 2018;
• the number one position by beer value and by beer volume in Australia in 2018;
• the number one position by beer value and by beer volume in South Korea in
2018;
• a top three position by beer value and by beer volume in India, and the number
one position in the fast growing premium and super premium categories
collectively by beer value and beer volume in 2018; and
• a top three position in the fast growing premium and super premium categories
collectively by beer value and by beer volume in Vietnam in 2018.
Our brands are loved by consumers, and we strive to provide innovative products to
fulfill new consumption occasions. Our portfolio combines globally iconic brands such as
Budweiser, Stella Artois and Corona, which are three of the top five most valuable beer
brands in the world according to BrandZ 2018, and local brands that are recognized in
their native markets such as Harbin in China, Victoria Bitter and Great Northern in
Australia and Cass in South Korea.
Our local brands have been part of the heritage of the local communities collectively
for over 100 years of history in Asia Pacific. Examples of our history in Asia Pacific
include: Harbin Brewery, originally established in China in 1900; Carlton & United
Breweries, originally established in Australia in 1907; and Oriental Brewery, originally
established in South Korea in 1952.
– 92 –
BUSINESS
We connect with our customers through a number of routes to market. Our sales
force organization of more than 10,000 employees and our distributors are our gateway
to our consumers. Our extensive network allows us to capture consumer insights and
develop effective contact strategies for each geography and product category.
With a significant portion of our revenue contributed by our Premium and Super
Premium category brands, we are well positioned to capture the premiumization and
trading-up trends across Asia Pacific and particularly in China. According to GlobalData,
the premium and super premium beer categories in Asia Pacific increased at a sales
volume CAGR of 7.9% from 2013 to 2018. We believe our portfolio of premium brands
and our specialized sales force and route to market capabilities enable us to maintain
leadership in these attractive categories.
We have achieved growth in revenue and profitability in recent periods. In 2017 and
2018, our revenue was USD7,790 million and USD8,459 million, respectively,
representing organic growth of 6.1%. Our revenue per hectoliter saw organic growth of
3.9% from 2017 to 2018, mainly driven by the increasing shift in our portfolio towards
premium categories. In 2017 and 2018, our Normalized EBITDA was USD2,479 million
and USD2,792 million, respectively, representing organic growth of 12.0%. Our net profit
for 2017 and 2018 was USD1,077 million and USD1,409 million, respectively.
For the three months ended 31 March 2018 and 2019, our revenue was USD2,032
million and USD1,993 million, respectively, which, after excluding the effects of currency
translation, represents organic growth of 4.5%. Our revenue per hectoliter saw organic
growth of 5.9% over the same periods, driven by our revenue management initiatives
and brand mix, as we continued to implement our premiumization strategies. For the
three months ended 31 March 2018 and 2019, our Normalized EBITDA was USD687
million and USD730 million, respectively, representing organic growth of 13.4%. Our net
profit for the three months ended 31 March 2018 and 2019 was USD346 million and
USD351 million, respectively.
– 93 –
BUSINESS
STRENGTHS
At the heart of our dynamic global growth is a simple belief that nothing should come
between incredibly talented people and an accelerated career. Our people are curious,
bold and resilient; we see challenges as opportunities and thrive under pressure. We are
a company of owners, empowered to lead real change, deliver results and grow at the
pace of our talent. We share a culture of recruiting world-class talents who are better
than ourselves, always looking for ways to improve our results and growing our business
in the right way.
By combining scale, resources and energy with the needs of the communities we
serve, we believe that our past success and our ability to capitalize on future growth
opportunities are attributable to our following competitive strengths:
Regional champion with a pan-Asian platform that covers the full spectrum of beer
markets
According to GlobalData, we are the largest brewery group in Asia Pacific in terms
of retail sales in 2018. We are a pan-Asian brewer, with a platform strategically
positioned to serve this region, which has the largest adult population in the world along
with favorable macroeconomic factors that are driving growth in consumption, including
that of beer.
• the number one position by beer value in China, and the number one position
in the fast-growing premium and super premium categories collectively by
beer value and beer volume in 2018;
• the number one position by beer value and by beer volume in both South Korea
and Australia, two of the most profitable beer markets in Asia Pacific, in 2018;
• a top three position by beer value and by beer volume in India, and the number
one position in the fast growing premium and super premium categories
collectively by beer value and beer volume in 2018; and
• a top three position in the premium and super premium beer categories
collectively by beer value and by beer volume in Vietnam in 2018.
– 94 –
BUSINESS
Our pan-Asian platform includes beer markets across different levels of maturity.
For example, we categorize India and Vietnam as low maturity beer markets, China as
a middle maturity beer market, and South Korea and Australia as high maturity beer
markets.
Our platform presents a unique and diversified balance between the high growth
and margin expansion prospects of our business in low and middle maturity beer
markets and the stability and profitability of our business in high maturity beer markets.
We are able to generate substantial cash flows from beer markets and categories where
we are leaders, which we are able to deploy in line with our capital allocation priorities
wherever it is most needed to drive growth. In addition, the diversity of our business
creates a natural hedge against economic and seasonal volatility in local markets.
We gather and analyze measurements from each of our markets, such as affluence,
abstinence from alcohol and per capita consumption of alcohol, to produce our market
maturity model, which we use as a tool to understand how beer markets evolve.
The chart below illustrates our market maturity model and the positioning of some
of our markets in Asia Pacific.
• we replicated our high end company model, which we developed in China, in all of
our principal markets and Japan. The high end company is a business unit made up
of a portfolio of global, specialty and craft brands;
– 95 –
BUSINESS
• we leveraged our experience in high maturity beer markets and application of our
high end company operating model to successfully grow our premium brands in
South Korea, which, according to GlobalData has historically been a mainstream
beer category driven market;
• lessons we learned from the health and wellness and beer for women trends in
Australia are being used as a benchmark for adult female consumer marketing in
China and other middle maturity beer markets;
• we positioned our brands in Australia and South Korea based on our deep
understanding of consumers’ changing preferences towards craft and
microbrewery beer:
• owing to our experience in high maturity beer markets, we recognized early the
emerging trend for craft beer in China. We believe that as a result of our acquisition
of Boxing Cat Brewery in 2017 and our establishment of a state-of-the-art brewery
for craft beer in Wuhan in 2018 ahead of this trend, we were able to further
strengthen our position in the Premium beer category in China.
We have a broad portfolio of more than 50 brands, which we own or have licensed,
each with their own clearly defined identity and characteristics. Below are some
examples:
Global brands
• Budweiser: The most valuable beer brand globally according to BrandZ, which is
known to be first brewed in 1876
– 96 –
BUSINESS
• Stella Artois: Among the top five most valuable beer brands globally according to
BrandZ 2018. Branded with a heritage that “dated back as early as 1366” and is
“served in a chalice following an exacting nine-step pouring ritual”
• Corona: Among the top five most valuable beer brands globally according to
BrandZ 2018. Best selling Mexican beer globally, according to GlobalData. It is a
Super Premium category beer which is branded to be “born outside in the sun” with
every Corona being “an invitation to come outside and unwind”
Multi-country brands
• Hoegaarden: A Belgian beer brand with a brewing tradition dating back to 1445
Local brands
• Great Northern: Australian easy drinking brand with strong positioning around
outdoor lifestyles established in 2010
• Harbin: The fourth most valuable beer brand globally according to Brand Finance
2019. It is a brand in China that associates with young adults by connecting with
their passion for sports, fashion and street culture
• Victoria Bitter: First established in 1854 and is being promoted as brewed with “a
unique combination of ingredients, including Australian pale malt, the own special
yeast of Victoria Brewery and ‘Pride of Ringwood’ hops grown in Victoria and
Tasmania, Australia.”
On the basis of quality and price, we differentiate our beer into three categories of
Premium and Super Premium brands, Core and Core+ brands, and Value brands.
Each brand in our portfolio serves a unique purpose with a specific market
targeting, segmentation of products offered under the brand to appeal to different
consumer groups and price point strategies. Each brand is part of a broader plan to
create organic revenue growth by meeting consumer demand for different types of beer,
which we refer to as “category expansion.”
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The chart below illustrates how we diversify our product offerings to meet evolving
consumer preferences and examples of different beer categories, including classic, easy
drinking, flavored beer, wheat and ales.
By price
PREMIUMIZATION
N
We have implemented tailored KPIs to increase our market share within this
category. We developed our Harbin and Harbin family brands (Harbin Ice, Harbin
Crystal, Harbin King of Wheat) in China, Great Northern in Australia, Cass in South
Korea and Beck’s Ice in India and Vietnam to specifically target the easy drinking
category.
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With our number one position in the premium and super premium beer categories
by beer volume in Asia Pacific in 2018 (according to GlobalData), and a significant
proportion of our revenues being attributable to our Premium and Super Premium
category in 2018, we are benefiting from this trend. Premium and Super Premium
category brands also made a meaningful contribution to our margin expansion over the
Track Record Period.
The chart below illustrates our three categories of beer as well as our key
brands, including those we license from AB InBev, within each category.
Other
countries
Super
Premium
Premium
Core+
Core
Value
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Budweiser Supreme
Glass bottle
Based on our consumer insights and our unique capability to deliver innovative
products to our consumers, we are able to fulfill and cultivate new occasions for the
consumption of our products. As beer markets evolve, we see beer occasions evolve
too, moving from primarily male-dominated socializing to more in-home, mixed gender
occasions and consumption with meals.
We believe our innovative products are drivers for creating and developing new
occasions for drinking beer and ultimately attracting more consumers towards beer. We
have a framework that (i) identifies opportunities for new beer drinking occasions and (ii)
develops that occasion by implementing tailored marketing, distribution and product
development.
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Our product innovation also extends to our packaging including different sizes and
cap designs of our aluminum bottles. Below is a summary of how our Budweiser bottle
packaging has evolved in China in the last 20+ years.
1995 2019
We continually look for new ways to get closer to and connect better with our
consumers and to offer brand experiences that play a meaningful role in their lives:
• We center campaigns around great beer moments that enrich people’s lives by
locally activating AB InBev’s sponsorship (through Budweiser) of the 2018
FIFA World Cup RussiaTM, sponsorship of local sporting events such as
Harbin for NBA China and Carlton Draught (a brand established in 1864) for
the Australian Football League, and marketing campaigns with local themes
such as Budweiser Chinese New Year; and
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We believe the following traits of our routes to market provide us with a competitive
advantage:
Together with our sales team and our customers, we believe we provide the right
product to consumers at the right place and the right time.
We hold leadership positions in China, Australia and South Korea, three important
beer markets in Asia Pacific, and we believe our long-term commitment to local
stakeholders in these key markets will enable us to further grow our business in a
positive way.
China
China is the largest beer market worldwide by volume and is an important market for
us. According to GlobalData, from 2013 to 2018, the premium and super premium
categories in China collectively saw a value CAGR of 12.0%. In China, premium and
super premium category retail sales per hectoliter in 2018 was over five times that of
mainstream or lower price category beer according to GlobalData.
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We believe the following factors have contributed to and will drive our future growth
in China:
• Our familiarity of beer markets in China also reinforces our ability to maximize
the return on our investments and emboldens us to continue investing in
growth opportunities.
We believe that our efforts in growing the premium and super premium categories
in China, as defined by GlobalData, benefit the Chinese beer industry as a whole. By
leading consumer movement towards premium and super premium beer, we help in
protecting and expanding beer’s relevance in the “share of throat” as the beer market in
China continues to mature.
To ensure the sustainability of our business in the Chinese beer market, we look to
establish long-term relationships with our local distributors in China and invest in
strengthening those relationships. We focus on building sustainable long-term
partnerships by entering into arrangements that are mutually beneficial to us and our
partners. In addition, we provide distributors with additional support, such as training on
inventory and cash management, succession planning and an enterprise resource
planning (“ERP”) system tailored for distributors.
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BUSINESS
Australia
The high level of beer market maturity in Australia allows us to cultivate various
beer occasions. Our partnership with distributors allows us to provide a unique,
refreshing beer experience to consumers by installing Carlton Draught beer tanks at
certain on-trade establishments, and also allows us to explore new adjacencies such as
pre-mix cocktails and no-alcohol beer.
In Australia, we sell a significant portion of our products through two key retailers,
and we maintain a long-standing and mutually beneficial relationship with both of these
retailers.
South Korea
We are the market leader in South Korea in terms of volumes, with approximately
2.8 times the size of the second largest peer, according to GlobalData. We are also
number one in the premium category by both volume and value, as of 2018. Cass has
been the most consumed beer brand in South Korea for the past eight years, according
to GlobalData. Cass has gained over 19% market share by volume over the past ten
years according to GlobalData. Our Icheon brewery has a long standing heritage in
South Korea.
As the beer market in South Korea approached higher maturity, and demand for
imported beer increased, we have succeeded in positioning and building our global and
multi-country brands such as Budweiser, Stella Artois and Hoegaarden to capture
multiple category expansion opportunities in the country.
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BUSINESS
The culture of sharing best practices across our platform and between geographies
is a core value that drives our operational excellence. We have standardized methods to
promote excellence in our management and operational processes. Areas in which we
have created and utilize these standardized methods include brewing, supply, logistics,
marketing, sales, people, finance and information technology. These standardized
methods seek to ensure consistency and predictability across our Asia Pacific platform.
In addition to delivering results through operational excellence and strict financial
discipline, we believe our corporate culture is characterized by our
“Dream-People-Culture” principles.
Operational efficiency has been, and will remain, a long-term focus across our
business. Avoiding unnecessary costs in order to free up resources to further invest in
our brands and route to market capabilities is a core competency within our culture. We
aim to be efficient with our overhead expenses in order to spend more effectively to grow
our company.
• Voyager Plant Optimization (“VPO”): VPO aims to bring greater efficiency and
standardization to our brewing operations while at the same time improving
quality, safety and the environment, and to generate cost savings. Changing
behaviors to achieve greater efficiencies is at the core of this program, and
comprehensive training modules have been established to assist our
employees with the implementation of VPO in their daily routines. Our
breweries in Asia Pacific comprise 80% of the top 20 VPO sustainability
breweries among our peers worldwide.
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We further optimize our efficiencies and reduce our carbon footprint through
localized production of certain imported brands. Our cost to import products is usually
higher than the cost of local production and has a negative impact on our carbon
footprint. Therefore, we have localized production of certain brands in the past while
maintaining or exceeding global quality standards of these products based on our
stringent internal review processes. Going forward we will continue to evaluate localized
production opportunities to optimize our investment, drive cost efficiencies and reduce
our carbon footprint in line with our sustainability agenda, subject to the consent of AB
InBev.
We focus not only on volumes and operating performance, but also on the
disciplined management of our working capital and cash flow generation. Our objective
is to maximize returns to our shareholders, while at the same time reinvesting in our
business consistent with our growth strategy and maintaining an adequate level of
liquidity to accommodate the seasonality of our business and uncertain financial market
conditions.
Our senior management comprises industry leaders with regional expertise, with an
average of more than 17 years of professional experience in the beer industry and a
deep understanding of the development and transformation of the industry. Our senior
management team has worked for AB InBev in Asia Pacific since May 2017, which
provides stability to our business with leadership that allows us to act decisively to
address changing consumer preferences and industry trends. Many of the senior
management team have worked in multiple markets within Asia Pacific and around the
world.
Our policies and incentives are designed to create a company of owners with
specific personal KPIs aligned with delivering meaningful results and an incentive
structure designed to promote actions with long-term benefits rather than short-term
effect. Competencies of our senior management team are evidenced through the
following:
• Organic growth: our senior management team has a proven track record of
leading our Company towards organic revenue growth and building strong
brands that connect and create enduring bonds with our consumers. The level
of our operational excellence and financial discipline is among the highest
within the AB InBev Group, and is a testament to our senior management
team’s strong execution capabilities.
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BUSINESS
Our controlling shareholder, AB InBev, is the world’s largest brewer by volume and
by value and a publicly traded company (Euronext: ABI), with secondary listings on the
Mexico (MEXBOL: ANB) and South Africa (JSE: ANH) stock exchanges and with
American Depositary Receipts listed on the New York Stock Exchange (NYSE: BUD).
On the Listing Date, AB InBev will have an interest in 84.48% of the Shares in issue
and will continue to maintain a significant interest in our Company. We expect to benefit
from AB InBev’s global reach and relationship as our strategic partner. Our
arrangements with AB InBev are a proven structure that are inspired by the
arrangements between AB InBev and Ambev, a majority-owned and controlled
subsidiary of AB InBev since 2004.
There are mutual benefits from our relationships with AB InBev. AB InBev has a
significant interest in our success through its ownership of a substantial majority of our
equity and also receives payments from us under contractual arrangements with us. We
benefit from our ability to license many of our leading brands from AB InBev along with
the ability to leverage AB InBev’s scale through our participation in certain global
arrangements with AB InBev, including global marketing and procurement services.
Moreover, both we and AB InBev are able to share best practices in order to support
mutual success and growth.
• Import and transfer pricing arrangements for brands such as Stella Artois,
Corona and Franziskaner;
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• We created the high end company model in Asia Pacific, which AB InBev has
now established in 22 markets across the broader AB InBev Group.
• Certain initiatives in the front end of digitalization, such as new retail and digital
marketing, were developed, implemented and tested in Asia Pacific prior to
their roll-out in AB InBev’s other global markets.
Each of our arrangements with AB InBev was and in the future will be negotiated on
an arm’s-length basis.
STRATEGY
Driving top line growth through our four main commercial strategies
We see the high end company model as a key tool to maintaining our leading
position in the Premium and Super Premium category. We created the high end
company in Asia Pacific through building a specialized sales organization and
specific routes to market for the Premium and Super Premium brands such as
Budweiser, Stella Artois, Corona, Goose Island and Hoegaarden.
We also have built our own portfolio of craft beer brands in Asia Pacific such as
Boxing Cat (in China), Hand & Malt (in South Korea) and Yak Ales (in Australia) and
are managing them in the high end company to leverage its specialized capabilities
specific to growing this category. Among our initiatives to grow the high end
company is the Draught Excellence Program, which aims to offer a premium
draught experience to our consumers.
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• Differentiating the Core: we see significant potential to grow our brands in our Core
and Core+ category. In China specifically, we plan to use brands such as Harbin
and various localized marketing initiatives to increase our share of the easy drinking
category. We believe our Core and Core+ brands address the fast-growing
mainstream category in lower maturity beer markets such as Vietnam and India,
according to GlobalData. For high maturity beer markets, Cass in South Korea and
Great Northern in Australia are important Core brands for us. We believe we have
the products and marketing capability to appeal to a broad range of consumers to
achieve growth in these areas.
We have also grown our brands in the Core+ category through variants of our
Harbin brand family. Over the years, we added variants such as Harbin Wheat and
Harbin Crystal to our portfolio to target a broader customer base in China. We also
target young adult consumers by efforts through a marketing campaign around
e-sports and collaboration with NBA China.
• Growth via adjacencies: We will continue to create and identify new products by
leveraging our core assets and resources to address evolving consumer needs.
Expanding our perspective to adjacent categories such as near-beer, wine, spirits
and other beverages that play in the beer occasion allows us to build future engines
of top line growth, while delivering financial returns.
We already have a strong track record of growth in these markets. In India, we grew
Budweiser by approximately 20 times by value and approximately 13 times by
volume over the last 10 years, and Budweiser is now the number one beer brand in
the premium and super premium categories by both volume and by value in 2018,
according to GlobalData.
In Vietnam, where we are the number one brand in the super premium beer
category by volume and by value in 2018, we grew Budweiser by over four times by
value over the past five years, according to GlobalData.
We collect and analyze data across our pan-Asian operations to drive innovations
throughout our business.
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BUSINESS
Digital People Transformation: Our greatest strength is our people, and we aim to
recruit world-class talents who are better than ourselves. To reinforce this core principle
and to bolster our people pipeline, we seek to use technology to transform our talent
attraction efforts. One of our initiatives is to use Artificial Intelligence (“AI”) assisted
on-demand video interview software for early-stage evaluations. The software measures
and evaluates candidates based on personal factors such as facial expressions,
language patterns, emotions, voice inflection and word choices. Implementing this
software in our hiring process resulted in not only elimination of human biases in
selection, but also reduction of time and resources spent on initial screening interviews.
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BUSINESS
We strive to create lasting value for our business partners and stakeholders by
utilizing our scale, resources and people to address the needs of our communities.
With operations across Asia Pacific and our broad portfolio of brands, we have an
ability to develop and strengthen our connections with our consumers through
consumers having a positive impression of our Company and our brands. We are
committed to acting as a positive force in addressing the needs of, and improving lives
in, our communities, and also because we believe consumers’ association of our
Company and our brands with their community is a positive factor in their buying
decisions.
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In China, we installed solar panels on the roof of our Putian brewery, and we
aim to complete installation of solar panels and wind power generators at 16
breweries in China by the end of 2020.
In 2018, our SPR-Mysuru brewery in India became the site of our first
renewable electricity-driven brewery in Asia. All of our Budweiser production
at our SPR-Mysuru brewery is powered through renewable electricity. We
have also installed solar power infrastructure in the community surrounding
our SPR-Mysuru brewery, including solar-powered street lights, solar-
powered drinking water units and solar-powered electric rickshaws as a
sustainably powered mode of transportation.
We have also been active in leveraging the impact of our brands in partnership
with independent organizations to inspire and empower consumers to create a
Better World. For example, in 2017, Corona partnered with the marine
organization, Parley for the Oceans, and committed to protecting 100 islands
from marine plastic pollution by 2020 in six key regions including Australia.
The initiative has engaged consumers in volunteer clean-ups and online
sign-ups. In 2018, Corona partnered with Earth Day Network to hold the
#SAVETHEBEACH event at Juhu Beach in Mumbai, India. Consumers
participated in the event to clean up plastic and debris.
With our strong brand portfolio, we believe we are bringing people together in
ways that few others can. By building common ground, strengthening human
connections and helping our consumers share meaningful experiences, we
believe our brands will remain relevant and become and remain market
leaders.
• ZBB: continue to monitor and minimize overhead costs and maintain a lean
organization with target to achieve long-term cost increases below inflation;
• VPO: use technology to identify gaps and areas of further optimization. Seek
appropriate relocation or repurposing of capacity, and leveraging our scale for
greater efficiencies;
• business shared services centers: continue to share new processes and best
practices from centers of excellence within the region;
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BUSINESS
• maintain positive cash flow generation from working capital through sustained
discipline in payment terms and smart management of inventory; and
• continue to share best practices across all functions, leverage our relationship
with AB InBev and benchmark our performance against other leading
companies.
We believe highly qualified, motivated and committed employees are critical to our
long-term success. We will continue to uphold our standards of recruiting and retaining
outstanding talents and providing them opportunities to grow at their own pace, which is
often an accelerated career path. We have specific talent programs for undergraduate
and graduate hires with dedicated resources in Asia Pacific and globally to grow the
future leaders of our Company.
In addition, we believe that through our compensation model, which is based both
on variable pay and stock ownership, we have created financial incentives for high
performance and results. Of note, we offer rewards through various programs such as
deferred cash compensation and long-term incentives through either restricted stock
units or options.
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BUSINESS
We are a pan-Asian brewer, with sales into 39 territories, including key markets
across Asia Pacific. We produce, import, market, distribute and sell a portfolio of more
than 50 beer brands. We also produce, market, distribute and sell other non-beer
beverages. The following map illustrates the geographical distribution of our operations
as of 31 March 2019:
Taiwan
Our brands are the foundation and the cornerstone of our relationships with
consumers. We invest in our brands to meet the desires and expectations of consumers
and to develop leading brand positions in the markets we serve. On the basis of quality
and price, we differentiate our beer into three categories: Premium and Super Premium
brands, Core and Core+ brands and Value brands. Our brands are positioned across
each of these categories.
We sell some of our beer brands in multiple countries whereas we sell others in a
few countries or a single country. For information on the license agreements we have in
place with AB InBev in respect of some of our key brands, see “Connected
Transactions.” Below is an overview of some of our popular beer brands:
• Australia: Great Northern, Carlton Draught, Victoria Bitter, Pure Blonde, Yak
Ales
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We also produce and sell near-beer and adjacent beverages, such as Lexington Hill
cocktails and ciders in Australia. In certain markets, we also distribute products of other
brewers under licenses, such as Sapporo and Guinness in China.
We consider China, Australia, South Korea, India and Vietnam to be our principal
markets. Our pan-Asian platform includes beer markets across different levels of
maturity. We employ a data-driven market maturity model as a framework to classify our
beer markets against a maturity level and per capita consumption of beer. This
framework helps us to understand the current status of the beer industry in a given
market and its expected evolution, as we believe that beer categories evolve as beer
markets mature, which allows us to capture opportunities from different beer markets
across different levels of maturity.
Based on the model, we classify the beer markets in which we operate as either low,
middle or high maturity. In terms of segmenting our business, we operate through two
geographic regions: Asia Pacific East (primarily Australia, Japan and South Korea) and
Asia Pacific West (China, India, Vietnam and exports elsewhere in Asia Pacific), which
are our two reportable segments for financial reporting purposes.
We have found that the growth opportunity for beer differs with each level of beer
market maturity. We use the model to develop our portfolio and commercial capabilities
with a forward-looking mindset in order to anticipate market dynamics, set specific
priorities and optimize our portfolio of brands.
For each level of maturity, we are able to identify gaps by measuring performance
of various KPIs against growth potential and proactively take advantage of expansion
opportunities. By combining a deep understanding of different markets with analysis of
changing consumer habits and trends, we can define the optimal portfolio for any market
to drive long-term growth and profitability.
The tables below set out our revenue and total volumes broken down by segment
for the periods shown:
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2017 2018
(1) (1)
Segment Revenue Revenue Revenue Revenue
(USD million) (% of total) (USD million) (% of total)
2017 2018
(2) (2)
Segment Volumes Volumes Volumes Volumes
(thousand (thousand
hectoliters) (% of total) hectoliters) (% of total)
Notes:
(1) Revenue is turnover less excise taxes and discounts. In many jurisdictions, excise taxes make up
a large proportion of the cost of beer charged to our customers (see “Financial Information –
Significant Factors Affecting Our Results of Operations and Financial Condition – Excise
Taxes”).
(2) Reported volumes. Our reported volumes include both beer and non-beer volumes. In addition,
volumes include not only brands that we own or license, but also third party products that we sell
through our distribution network.
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OUR OPERATIONS
The basic brewing process for most beers is straightforward, but significant
know-how is involved in quality and process control. The most important stages are
brewing and fermentation, followed by maturation, filtering and packaging. Malted barley
(malt) is the primary ingredient in the brewing process, although other grains such as
unmalted barley or wheat are sometimes added to produce different beer styles.
The first step in the brewing process is milling grains, then mixing the milled grain
with warm water and then gradually heating it in large tuns to dissolve the starch. The
spent grains are filtered out and the liquid (now called “wort”) is boiled. Hops are added
at this point to give a special bitter taste and aroma to the beer. The wort is boiled to
sterilize and concentrate it, and extract the desired flavor and bitterness from the hops.
The hopped wort is cooled and saturated with air, or oxygen, essential for the growth of
the yeast in the next stage.
Yeast turns the sugar in the wort into alcohol and carbon dioxide. This process of
alpha fermentation takes three to six days. Different types of beer are made using
different strains of yeast, processes and wort compositions.
During the maturation process, the liquid clarifies as yeast and other particles
settle. Further filtering gives the beer more clarity. Maturation varies by type of beer and
can take up to three weeks, and then the beer is ready for packaging in kegs, cans or
bottles.
Quality control is at the core of our business. We maintain a rigorous quality control
program to ensure that we produce high quality products on a consistent basis, which
comply with all applicable legal requirements. We have quality control personnel at each
of our breweries as well as at the management level. We monitor the quality of every
beverage we produce at each step of the production process, including by online
real-time system monitoring and conducting extensive testing, to ensure that every
beverage meets our Group-wide standards of quality.
During the Track Record Period and up to the Latest Practicable Date, (i) we were
not subject to any material negative findings, fines or other penalties from government
authorities regarding product quality or safety, (ii) we were not required to undertake any
material mandatory product recalls, and (iii) we did not have any material product liability
exposure.
Breweries
We produce the majority of the beers we sell in our breweries. For certain beers that
we sell, rather than produce the beer, we import the beer for sale in our markets. We also
engage third parties to brew beer on our behalf in India following our quality standards.
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As at As at
31 December 31 March
Country 2018 2019
Number Number
China (1) 35 33
Australia (2) 7 7
South Korea 3 5
India (3) 15 15
Vietnam 2 2
Total (4) 62 62
Notes:
(1) China includes breweries which the Group has full or majority ownership of.
The table below sets out the number, volumes and capacity of our breweries by
segment as at 31 December 2018 and 31 March 2019.
Volumes Capacity
(thousand (thousand
As at 31 December 2018 Number hectoliters) (2) hectoliters)
Volumes Capacity
(thousand (thousand
As at 31 March 2019 Number hectoliters) (2) hectoliters) (3)
Notes:
(1) The Asia Pacific West segment, which includes China, includes breweries which the Group has
full or majority ownership of. The Asia Pacific West segment also includes contract breweries in
India.
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(2) Reported volumes. Our reported volumes include both beer and non-beer volumes. In addition,
volumes include not only brands that we own or license, but also third party products that we sell
through our distribution network.
(3) 2019 annual capacity. Our capacity varies throughout periods because of seasonality and other
factors.
In addition to our breweries, we also have one malt plant located in South Korea.
Capacity Expansion
Third-party production
Imported beers
We have licenses to import more than 25 AB InBev brands for sale in Asia Pacific
on an exclusive basis, such as Stella Artois from Belgium, Corona from Mexico, Beck’s
from Germany and other American and European brands, as well as Budweiser from the
US into select markets where we do not brew it locally, such as South Korea and Hong
Kong.
The main raw materials used in our beer production are malted barley, hops, yeast
and water. In addition, we require extensive use of packaging materials such as glass,
aluminum bottles, aluminum or steel cans and kegs, aluminum can stock, PET bottles,
labels, plastic crates, metal and plastic closures, folding cartons, cardboard products
and plastic films.
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purchase these raw materials through the open market and through contracts with
suppliers. We believe that the production capacity of our suppliers is adequate to meet
our production needs and that alternate suppliers are available. During the Track Record
Period, we did not experience any material disruptions, shortages, disputes or delays in
relation to the supply of our raw materials.
Most of our raw materials are commodities, the prices of which generally fluctuate
with market conditions. The prices of our other raw materials and packaging materials
generally fluctuate as a result of various factors, including supply and demand, our
bargaining power with suppliers, logistics and processing costs, government regulations
and policies and tax. During the Track Record Period, fluctuation of market prices of our
raw materials did not materially impact our costs of raw materials. Further, in general, we
seek to pass on increases in cost of raw materials to our customers if such increases
affect our business operations and profit margin. For more information, see “Financial
Information – Significant Factors Affecting Our Results of Operations and Financial
Condition – Raw Materials and Transport Prices.”
In 2017, 2018 and the three months ended 31 March 2019, purchases from our five
largest suppliers accounted for approximately 10%, 9% and 8% of our total purchase
cost, respectively. During the Track Record Period, our five largest suppliers included
raw material, packaging material and service suppliers located in Australia, China and
South Korea. We believe that we have good relationships with our major suppliers. To
the best of our knowledge, as of the Latest Practicable Date, with the exception of AB
InBev, all of our material suppliers were independent third parties and none of our
suppliers were controlled by employees of the Company.
Our logistics organization is composed of (i) a first tier, which comprises all inbound
flows of raw materials and packaging materials into the breweries and all outbound flows
from the plants into the second drop point in the chain (for example, to distributors), and
(ii) a second tier, which comprises all distribution flows from the second drop point into
the customer delivery tier (for example, retailers).
We use third party contractors for our transportation requirements, including the
delivery of raw materials to our breweries and the transport of products to customers and
consumers.
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As at As at
31 December 31 March
Country 2018 2019
Number Number
China 18 17
Australia 13 13
South Korea 28 28
India 10 10
Vietnam 2 2
Other 3 3
Total 74 73
CUSTOMERS
Our customers include distributors, large retailers and certain other customers. We
have cultivated a large B2B network where customers, such as distributors, place orders
directly with us (and then on-sell them), in addition to our growing B2C network where we
engage with consumers directly.
In 2017, 2018 and the three months ended 31 March 2019, revenue from our five
largest customers accounted for approximately 16%, 14% and 14% of our total revenue,
respectively. Our five largest customers are large retailers and a distributor located in
Australia.
None of our Directors, their associates or any other Shareholder which (to the
knowledge of the Directors) owns more than 5% of the Company’s share capital as at the
Latest Practicable Date had any interest in any of our five largest customers.
Distribution of Products
The distribution of beer and other beverages varies from country to country. The
nature of distribution reflects consumption patterns and market structure, geographical
density of consumers, local regulation, scale considerations, market share, expected
added-value and capital returns, and the existence of third party distributors. Distributors
play an important role in distributing a significant proportion of beer and other beverages
either because of historical market practice (for example, in China) or for structural
reasons (for example, in South Korea where there are legal constraints on who can
distribute beer locally). Our methods of distribution are in line with industry norms in each
country where we distribute our products.
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We generally distribute our products through (i) third party distribution networks, in
which delivery to points of sale occurs through independent distributors, or (ii) our own
distribution, in which we deliver to points of sale directly. We have policies in place that
seek to ensure that our distributors are independent third parties and that none of our
Directors, officers and employees have an interest in our distributors. The distribution
channels used will vary from country to country, and are generally as follows:
• China: We predominantly sell to distributors in China, with less than 10% of our
total volume being sold through a combination of direct sales (such as
supermarkets, convenience store chains, and hotel and restaurant chains)
and e-commerce channels;
• India: Our distribution channels vary according to the different local state
regulations in India. For example, in government-controlled states, we
generally sell to government-owned distributors, and in open market states,
we generally sell to independent privately-owned distributors and retailers.
There may also be states that are a hybrid of government-controlled and open
market, in which case we will sell to a combination of government-owned
distributors and privately-owned distributors and retailers; and
In the Track Record Period, we have maintained stable relationships with the large
majority of our distributors and did not experience any material changes in the number
of our distributors. Generally, distributors do not have the right to return products to us
once they have purchased them, except in exceptional circumstances, such as product
defects. We have established customer complaints policies and procedures.
The principal terms of the distribution agreements vary from country to country and
there may also be differences between regions within a country. In certain countries,
such as China, our framework contracts may contain targets that set out the minimum
volume for the applicable distributor to purchase. Under such framework contracts, we
have the right to terminate the contract with a distributor if such distributor fails to meet
the specified purchase target, which allows us to terminate arrangements with
non-performing distributors who are unable to fulfill such purchase target.
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BUSINESS
LICENSING
We have long-term licensing agreements with the AB InBev Group, under which we
have licenses to manufacture or to import for sale within Asia Pacific on an exclusive
basis more than 25 brands owned by AB InBev, including Budweiser, Corona, Stella
Artois, Beck’s, Hoegaarden, Leffe and Goose Island. The sale of AB InBev products
manufactured or imported by us contributes significantly to our revenue, representing
over 40% of our net revenue in 2018 and the three months ended 31 March 2019. We pay
royalties determined by reference to net sales generated from the sale of locally
manufactured products to AB InBev under the licenses to manufacture, and we pay
import prices determined by reference to the production cost plus a markup under the
licenses to import.
In certain markets, we distribute third party brands, such as Sapporo and Guinness
in China, in order to increase the breadth of our product offering in the Premium and
Super Premium category.
We believe our brands are the foundation and cornerstone of our relationship with
consumers and the key to our long-term success, and we invest in our brands
accordingly. We seek to create sustainable competitive advantages by meeting
consumer desires and developing leading brand positions in all of our markets. Through
our marketing function, we seek to keep our brands relevant for consumers and also
create marketing campaigns targeting specific brands or countries.
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BUSINESS
We continually assess consumer needs and values with a view to identifying the key
characteristics of consumers in each beer category of Premium and Super Premium,
Core and Core+ or Value. This allows us to position our existing brands or to introduce
new brands in order to address the characteristics of each category.
For example, we focus our growth strategy for each of our brands based on a
portfolio approach, which depends on the occasion in which our products are consumed
(e.g., relaxing at home with friends or socializing in a bar or at a restaurant). Our portfolio
of brands will vary by market, but each leverages our pan-Asian platform and initiatives,
incorporating the whole organization from supply, to operations, to sales and marketing,
and then bringing our teams together to deliver end-to-end integrated consumer
experiences.
With respect to brands we brew or import under license from AB InBev, AB InBev
sets certain parameters for the marketing of such brands, with which we are
contractually obligated to comply. We tailor our marketing efforts to our specific regions
and consumers, operating within these parameters. While we participate in discussions
with AB InBev with respect to these parameters and believe we benefit from the creation
of global brand identities, AB InBev has ultimate decision-making authority in respect of
such marketing.
Furthermore, AB InBev from time to time enters into agreements with respect to and
conducts global marketing campaigns, such as Budweiser’s sponsorship of the 2018
FIFA World Cup Russia TM and upcoming 2022 FIFA World Cup Qatar TM, which we
believe are growth drivers for our business. Under our agreements with AB InBev, we are
required to participate in these global campaigns and to pay our proportionate share of
the sponsorship fees.
We seek to provide media advertising, point of sale advertising and sales promotion
programs to promote our brands. Where relevant, we complement national brand
strategies with central marketing focused on delivering relevant programming
addressing local interests and opportunities.
In determining our pricing strategies, we take into account a variety of factors, such
as the supply of and demand for our products, anticipated market trends, costs of raw
materials and packaging materials, product costs, product categories, the distribution
channel through which we are selling, retail prices of our competitors’ products,
spending patterns of target consumers, historical sales data and the expected profit
margins for us and our distributors. We review and adjust our product prices periodically
based on these factors and other general market conditions. Generally, we set
recommended nationwide retail prices for our products, which are subject to adjustments
reflecting the local competitive environment. For more information, see “Customers –
Distribution of Products” above and “Financial Information – Significant Factors
Affecting Our Results of Operations and Financial Condition – Economic Conditions and
Pricing.”
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BUSINESS
Intellectual Property
A substantial portion of our revenue is derived from brands that we sell under
license from AB InBev. Accordingly, the trademarks of some of our brands are registered
by the Group while others are registered by AB InBev. For further information, see
“Connected Transactions” and “Statutory and General Information – B. Further
Information about the Business – 2. Intellectual Property” set out in Appendix V.
During the Track Record Period and up to the Latest Practicable Date, we did not
experience any disputes relating to or infringement of our intellectual property rights
having a material adverse effect on our business.
Given our focus on innovation, we place a high value on R&D priorities. Our main
goal in innovation is for us to be able to continually provide consumers with attractive and
desirable products and experiences. This includes launching new liquids, new
packaging and new dispensing systems, as well as updating and enhancing existing
products and packages.
Our R&D efforts require an understanding of the strengths and weaknesses of other
beverage categories, spotting opportunities for beer and developing products that
address consumer preferences. Sensory experience, premiumization, convenience,
sustainability and design are all central to our R&D efforts. During 2018 and the three
months ended 31 March 2019, our total spend on R&D (which includes innovation) was
approximately USD29 million and USD5 million, respectively.
Our R&D team mainly comprises professionals with R&D experience in the beer or
other relevant industries. Our R&D team is regularly briefed on our priorities and certain
concepts and technologies are prioritized for development. The R&D team invests in
both short-and long-term strategic projects for future growth, with the launch time
depending on complexity and prioritization. In addition to our central Asia Pacific R&D
team, we also have locally-based and locally-focused R&D teams.
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BUSINESS
Our Asia Pacific Zone Innovation and Technology Center (“ZITEC”) was
established in 2011 in Wuhan, China. We have continuously invested in the ZITEC since
its establishment, totaling more than USD100 million since 2011. The ZITEC includes a
research pilot brewery, a package lab, a central lab, our regional R&D office and training
centers. We have short-term and long-term strategic cooperation agreements with the
China National Research Institute of Food and Fermentation Industries and top
universities to ensure we are making preparations in anticipation of our future growth. In
addition, the ZITEC works closely with AB InBev’s Global Innovation Technology Center,
based in Belgium, which plays a leading role on all large and complex innovation projects
and initiatives that apply globally to the AB InBev Group and our Group. See “Connected
Transactions” for further information.
Information Systems
ENVIRONMENT
Laws and regulations may also limit noise levels and the disposal of waste, as well
as impose waste treatment and disposal requirements. Some of the jurisdictions in
which we operate have laws and regulations that require polluters or site owners or
occupants to clean up contamination. In 2018 and the three months ended 31 March
2019, we did not incur material costs in connection with compliance with environmental
laws and regulations or any remediation efforts and we expect such costs to remain at
similar levels.
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BUSINESS
We are subject to various safety laws and regulations in the countries in which we
operate. As of the Latest Practicable Date, we had complied with applicable laws and
regulations on occupational health and work safety in all material respects. In an effort
to ensure the safety of our employees, we have operational procedures and safety
standards for our production process, including fire safety, warehouse safety,
work-related injuries, electricity safety and emergency and evacuation procedures. We
provide our employees with occupational safety education and training to enhance their
awareness of safety issues.
We also carry out equipment maintenance on a regular basis to ensure their smooth
and safe operation. During the Track Record Period, we did not record any accidents that
had a material impact on our business or operations. As of the Latest Practicable Date,
no material claim had been brought against us as a result of an accident in the course of
our operations.
As of the Latest Practicable Date, certain PRC subsidiaries of the Company did not
hold required pollutant discharge permits because the relevant governmental authorities
have temporarily suspended the issuance of such permits to beer companies.
INSURANCE
We believe our insurance coverage is adequate and in line with industry standards.
Our dream is to Bring People Together for a Better World. In all we do, we strive to
ensure that we produce the highest-quality products, provide the best consumer
experience and maximize shareholder value by building the strongest competitive and
financial position.
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BUSINESS
Through our reach, resources and energy, we are addressing the needs of our
communities through:
• Business ethics.
We depend on natural resources to brew our beers and strive to use resources
responsibly and preserve them for the future. That is why we factor sustainability into
how we do business, including how we source water, energy and raw materials. We
develop innovative programs across our supply chain to improve our sustainability
performance with our business partners. To improve lives in the communities we are part
of, we also support the farmers and small retailers in our value chain to help them be
more productive. To facilitate progress, our sustainability and procurement activities are
combined under a single function led by a member of our senior leadership team.
We value our relationships with our small business partners and recognize the
challenges many face in sustaining and growing their operations, such as limited
business skills and the need for affordable financial services and infrastructure. As their
business partner, we believe we can help them address these barriers to unlock their
entrepreneurial potential and enable us to grow together.
SmartBarley
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BUSINESS
Watershed Protection
In Mongolia, our South Korea team has been working together with NGOs on the
Cass Forest of Hope program to help prevent desertification. In 2018 in South Korea, we
held the inaugural 60 Seconds Water Film Festival to raise awareness of the importance
of water through UCC (user created content) videos.
Renewable energy
In China, we installed solar panels on the roof of our Putian brewery, which is one
of our largest in China. We aim to complete installation of solar panels and wind power
generators at 16 breweries in China by the end of 2020.
In 2018, our SPR-Mysuru brewery in India became the site of our first renewable
electricity-driven brewery in Asia. All of our Budweiser production at our SPR-Mysuru
brewery is powered through renewable electricity. We have also installed solar power
infrastructure in the community surrounding our SPR-Mysuru brewery, including
solar-powered street lights, solar-powered drinking water units and solar-powered
electric rickshaws as a sustainably powered mode of transportation.
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BUSINESS
Recycling
We are driving and protecting the circular economy of our industry by increasing the
amount of reused or recycled materials in our packaging and recovering more
post-consumer waste. We aim to work with partners, suppliers and retailers across our
value chain in this effort. Packaging, such as returnable glass bottles, is an important
component of this effort, and increasing recycling, recovery and reuse also helps avoid
loss of value. In Australia, we have discontinued the use of plastic six-pack rings,
replacing them with recyclable paperboard packaging material.
We want every experience with beer to be a positive one. We believe that the
harmful use of alcohol is bad for consumers, society and our business. Our goals for
smart drinking (“Smart Drinking Goals”) aim to contribute to the World Health
Organization’s target of reducing the harmful use of alcohol by at least 10% in every
country by 2025 and the United Nations Sustainable Development Goal of strengthening
the prevention of harmful use of alcohol globally.
Smart Drinking
Our current Smart Drinking Goals are intended to serve as a laboratory to identify
and test replicable programs, implement them in partnership with others and ensure they
are independently and transparently evaluated. Our goals are also designed to be
collaborative and evolving. Working in partnership with public health bodies, civil society
and governments, we aim to implement evidence-based approaches, uncover new ways
to reduce the harmful use of alcohol, and act upon them. Our intent is not only to use the
knowledge generated by this work to improve our own efforts and business practices, but
also to share what we learn with others.
• City Pilot: reduce the harmful use of alcohol by at least 10% in our pilot city by
the end of 2020 and implement best practices across our markets by the end
of 2025;
• Alcohol Health Literacy: place a guidance label on all of our beer products in
all of our markets by the end of 2020 and increase alcohol health literacy by the
end of 2025.
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BUSINESS
Our City Pilot initiative is the cornerstone of our efforts to identify, test and
independently and rigorously measure and evaluate replicable evidence-based
interventions that are implemented in partnership with others, to reduce harmful use of
alcohol. The City Pilot serves as a laboratory for identifying evidence-based initiatives
worth scaling. The City Pilot is Jiangshan, China. Local knowledge and leadership are
critical to the City Pilot approach. A regional Steering Committee was formed with local
community members, including government, universities, NGOs and other
community-based organizations. We began implementing the intervention programs in
2017, and we are working together with the Jiangshan city government towards our
shared goal of reducing the harmful use of alcohol by at least 10% by the end of 2020.
Our Social Norms initiative is not just about spending a specified amount, but
rather spending with impact, which requires the development and implementation of
campaigns and programs grounded in social norms and social marketing theory. We
have partnered with experts in this field to gather and consolidate the latest social
marketing knowledge and best practices and apply them to the promotion of smart
drinking.
We hold annual Global Beer Responsible Day activities across all of our Asia
Pacific operations, with thousands of our employees participating by communicating
with our customers and consumers to promote responsible drinking.
In South Korea, we launched the Family Talk with Stage Play program to provide
parents with effective inter-generational communication tools regarding underage
drinking through entertaining and educational storytelling methods. In partnership with
the Korea Road Traffic Authority, we have held No Drink & Drive campaigns for new
drivers receiving their driver’s licenses at driver’s license centers.
Through our No- and Low-Alcohol Beer (“NABLAB”) initiative, we are offering
consumers more choice, which we believe can be an important way to help reduce
harmful use of alcohol. Our ambition is for existing drinkers to integrate no-alcohol beers
and beer with 3.5% ABV or lower into their current drink choices, reducing their total
alcohol intake. To make this ambition a reality, we are investing to make our no-and
low-alcohol products an available and appealing choice for current consumers of
beverage alcohol. As of 31 December 2018, NABLAB already accounts for
approximately 25% of our Australian beer sales and is continuing to grow in popularity.
In 2018, we launched Carton Zero in Australia to capitalize on this trend. We have
applied the same robust sales tracking tools to our NABLAB to identify opportunities for
growth and help us get closer to achieving our volume goal.
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BUSINESS
Our Alcohol Health Literacy initiative exemplifies our belief in helping consumers
understand why and how alcohol should be consumed within limits. We are collaborating
with partners to identify and implement evidence-based means of increasing alcohol
literacy among consumers. Our Australian business has been at the forefront of our
efforts to improve alcohol literacy. CUB has voluntarily included pregnancy warnings on
its packaging since 2013.
We invest in innovative programs to improve road safety and reduce injuries and
fatalities from traffic collisions. This work is aligned with UN Sustainable Development
Goal 3 (Good Health and Well-Being).
Safe roads are also a high priority for governments and advocacy groups, and we
are strengthening the impact of our efforts through partnerships. These include our
leadership in Together for Safer Roads (“TSR”), a private-sector coalition focused on
improving road safety by facilitating innovation in safer fleets, data collection and
modern management.
In China, we are in the fifth year of our TSR program in Shanghai. We partnered with
the Shanghai city government and Tongji University to implement a program focusing on
traffic accident hot-spot roadway segment analysis and improvement as well as a
behavior-based commercial driver safety analysis education program. We have
completed the remediation of six accident-prone road sections to date, resulting in a
decrease in traffic accidents of 50% to 70% and a greater than 50% reduction in
casualties. Hazardous driving behaviors, such as using a cellphone while driving and
drowsy driving, were shown to be reduced by more than 30%.
As a major user of roads across Asia Pacific, we are committed to delivering safer
roads for all, and we fully support the United Nation’s objective of reducing road traffic
collisions in the world by 50% by 2020. In April 2019, we held the Asia Road Safety
Conference in Shanghai, in partnership with officials from UNITAR, CADA and
international academics.
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BUSINESS
Business ethics
Our leaders set the tone for our company. We expect them to deliver results and to
inspire our colleagues through passion for brewing and a sense of ownership. Most
importantly, we never take shortcuts. Integrity, hard work, quality and responsibility are
essential to our growth.
Human Rights
Respect for human rights is a core tenet of our business ethos. Our Global Human
Rights Policy sets out the standards and expectations we hold for promoting human
rights, and we have developed policies to address harassment and discrimination, as
well as diversity and inclusion. We also work with our suppliers to ensure that our
approach to human rights extends to our supply chain. Through continued engagement
with stakeholders, we are committed to continuously enhancing our approach to
respecting human rights.
Volunteering is one of the best ways to bring people together for a better world. In
communities around Asia Pacific, both large and small, our people are passionate about
empowering communities. We encourage these efforts through regional and local
volunteering initiatives that are often also open to our families, friends, partners and
consumers.
We do our business in our local communities and are committed to giving back to
our local communities. We have committed that in each city where we planned to build
a brewery to donate for the establishment of a Hope School. We have helped to build
various Hope Schools in China, with the teachers trained through the AB InBev
University. In Harbin City in China, we donated to the establishment of three robot
classrooms in three separate schools to help school children develop knowledge of
artificial intelligence and robotics technology.
In 2018, we launched our ongoing Save the Beach campaign in Mumbai, India.
Through strategic partnerships, we worked with senior leadership to clean pollution from
Juhu Beach, bring awareness to marine environmental issues and install a plastic
recycling kiosk and dustbins.
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BUSINESS
Our PRC Legal Adviser is of the view that after submitting the application for
building ownership certificates in accordance with applicable PRC laws and regulations
and the requirements of relevant authorities, there is no material legal impediment for us
to obtain such certificates, and we will have the right to occupy, use, transfer, lease,
mortgage or otherwise dispose of such buildings in accordance with applicable PRC
laws and regulations once we obtain the relevant building ownership certificates.
As at the Latest Practicable Date, 173 buildings with a gross floor area of
approximately 986,397 square meters and representing 40.0% of the gross floor area of
the buildings that we owned in China were pending completion acceptance procedures
while we had obtained the relevant land use right certificates, construction land use
permits, construction project planning permits and construction permits for the
construction of such buildings, which are used for manufacturing and operational
purposes.
We are carrying out and will carry out the completion acceptance procedures
according to the progress of the relevant projects. We expect to complete the relevant
completion acceptance procedures and obtain the building ownership certificates for
such buildings within two years after the Listing.
As advised by our PRC Legal Adviser, we may face the risks of (i) paying a fine up
to 4% of the construction costs of such properties for using such properties without going
through the inspection and acceptance procedures upon completion of the construction,
(ii) an additional fine up to RMB300,000 for failure to complete the fire prevention
facilities inspection and acceptance procedures, and (iii) an additional fine of up to
RMB1,000,000 for failure to complete the environment protection facilities inspection
and acceptance procedures. We may also be subject to a recertification order or
cessation of business operation until we finish the required inspection and acceptance
procedures for these properties.
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BUSINESS
Our PRC Legal Adviser is of the view that, after we duly complete and pass all the
relevant completion acceptance procedures and submit the application for building
ownership certificates in accordance with applicable PRC laws and regulations and the
requirements of relevant authorities, there will be no material legal impediment for us to
obtain the building ownership certificates for such buildings.
As of the Latest Practicable Date, we had not received any government notice,
warning or penalty nor had we experienced any material ownership dispute on such
buildings. We believe such property title defects will not adversely and materially affect
our business and results of operations given our rectification plans and that the
likelihood that we would be required to discontinue the use of all these buildings on the
basis of the title defects such that it would result in a material adverse effect on our
operations will be remote.
(a) As at the Latest Practicable Date, 50 buildings with a gross floor area of
approximately 100,199 square meters and representing 3.8% of the gross floor area of
the buildings that we owned in China were pending planning or construction permits for
construction projects and such buildings had not yet completed the completion
acceptance procedures, while they have been put in use. We use such buildings for
manufacturing and operational purposes. We expect to continue using such buildings
while we are actively exploring potential rectifying measures.
As advised by our PRC Legal Adviser, we may face the risks of (i) being required to
rectify the violations of the zone planning or relevant regulations and paying a fine in the
amount of 5% to 10% of the construction costs of such buildings; (ii) if such rectification
is not feasible, demolishing or turning over such buildings, as well as paying a fine of up
to 10% of the construction costs of such buildings, (iii) paying a fine up to 2% of the
construction costs for construction works without the permit for the commencement of
the construction project; and (iv) using a property without going through the inspection
and acceptance procedures upon completion of the construction as described under the
paragraph “– Pending completion acceptance procedures” above.
Our PRC Legal Adviser is of the view that we do not have the right to transfer, lease,
mortgage or otherwise dispose of these 50 buildings in accordance with applicable PRC
laws and regulations.
As of the Latest Practicable Date, we had not received any government notice,
warning or penalty nor had we experienced any material ownership dispute on such
buildings. We believe such property title defects will not adversely and materially affect
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BUSINESS
our business and results of operations given our rectification plans and that (i) the gross
floor area of such buildings that were used for manufacturing and operational purposes
only accounted for 3.8% of the gross floor area of the buildings we owned in China, which
we consider as immaterial; and (ii) the likelihood that we would be required to
discontinue the use of these buildings on the basis of the title defects such that it would
result in a material adverse effect on our operations will be remote.
(b) As at the Latest Practicable Date, one building with a gross floor area of
approximately 10,886 square meters and representing 0.5% of the gross floor area of the
building that we owned in China was pending planning or construction permits and such
building had not yet completed the completion acceptance procedures. We used to use
such building for warehousing purposes but since the relevant subsidiary is now in
liquidation, we have ceased to use this building for any operational purpose.
As advised by our PRC Legal Adviser, we may face the risks of (i) being required to
rectify the violations to the zoning planning or relevant regulations and paying a fine in
the amount of 5% to 10% of the construction cost of this building; (ii) if such rectification
is not feasible, demolishing turning over the building, as well as paying a fine of up to
10% of the construction cost of the buildings; (iii) paying a fine up to 2% of the
construction costs for construction works without the permit for the commencement of
the construction project, and (iv) using a property without going through the inspection
and acceptance procedures upon completion of the construction as described under the
paragraph “– Pending completion acceptance procedures” above.
We will properly deal with this building during the liquidation process, without
causing any material costs or outstanding liabilities. As of the Latest Practicable Date,
we were not subject to any investigation from the local government authority for the
construction of this building. Our legal advisors are of the view that we do not have the
right to transfer, lease, mortgage or otherwise dispose of such building in accordance
with applicable PRC laws and regulations.
As of the Latest Practicable Date, we leased six material properties in the PRC, five
of which have not completed the registration and filing procedures with relevant land and
administrative bureaus. According to our PRC Legal Adviser, the lack of registration and
filings will not render these leases invalid, and we may be subject to an aggregate fine
up to RMB50,000, which, according to our view, will not adversely and materially affect
our business and results of operations.
EMPLOYEES
We focus on attracting and retaining the best talent. Our approach is to enhance our
people’s skills and potential through education and training, competitive compensation
and a culture of ownership that rewards people for taking responsibility and producing
results. Our ownership culture unites our people, providing the necessary energy,
commitment and alignment needed to pursue our Dream to Bring People Together for a
Better World.
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BUSINESS
The tables below set out the number of full-time employees at the end of each
period broken down by geographic location and by function.
As of 31 December As of 31 March
2017 2018 2019
Notes:
As of 31 December As of 31 March
2017 2018 2019
To support our culture that recognizes and values results, we offer our employees
competitive salaries benchmarked to fixed mid-market local salaries, combined with
variable incentive schemes based on individual performance and performance of the
business entity in which they work. Senior employees above a certain level are eligible
to participate in certain share-based incentive plans. See “Statutory and General
Information – D. Share Award Schemes” set out in Appendix V.
Labor Unions
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BUSINESS
Our future operating performance may be affected by risks relating to our business.
Some of these risks are specific to us while others relate to economic conditions and the
general industry and markets in which we operate. See “Risk Factors” for further
discussion.
The Board of Directors and the senior management are responsible for establishing
and maintaining adequate risk management and internal control systems. Risk
management is the process designed to identify potential events that may affect the
Company and to manage risks to be within its risk appetite. Internal control is the process
designed to provide reasonable assurance regarding achievement of objectives related
to effectiveness and efficiency of operations, reliability of financial reporting and
compliance with applicable laws and regulations. Our internal controls include our MICS
(Minimum Internal Control Standards), consisting of a number of internal controls
designed for Sarbanes-Oxley Act compliance.
During the Track Record Period and up to the Latest Practicable Date, there were
no material breaches or violations of laws or regulations applicable to us which are
expected to have a material adverse effect on our business, financial condition or results
of operations.
We are currently subject to an ongoing tax audit in Australia, the focus of which is
in relation to the tax treatment of the funding of a legacy acquisition by SAB, for which a
reduction of AUD360 million (USD256 million) has been made against deferred tax
assets in our financial statements. For further information, see Note 29 to the
Accountant’s Report set out in Appendix I.
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BUSINESS
The conduct under investigation came to our attention as part of the business
integration process between SABI and AB InBev’s already-owned Indian subsidiary,
Crown Beers India Private Limited, and following fresh engagement by new senior
management of SABI with the market, and were subsequently escalated to AB InBev’s
global compliance team. None of the responsible employees are with AB InBev India
today.
We believe that these enhanced internal control measures are adequate and
effective to prevent recurrences of breaches of this nature.
Under Indian law, the maximum potential penalty that may be imposed on us by the
CCI is 10% of the relevant average turnover (i.e., turnover attributable to the products in
question) for the last three preceding financial years, or up to three times the relevant
profit for each year of continuance of the contravention, whichever is higher.
However, based on the advice we have received, we believe the likelihood of any
financial penalty is low and, if any penalty is imposed, its quantum would be lower than
the maximum potential penalty. Accordingly, no provision has been made in our financial
statements nor does the Company believe that such ongoing investigation will have any
material adverse impact to our operations or business in India.
We are currently subject to a demand by the Indian tax authority for an alleged tax
liability in relation to a legacy acquisition by SAB. In 2006, SAB acquired Foster’s India
business and certain Foster’s trademarks and other intellectual property. In 2011, the
Indian tax authority issued a demand notice for an alleged capital gains tax liability in
relation to this transaction. The Company is challenging the tax demand on a number of
grounds. The total amount of the potential liability is USD55 million, which has been fully
provided for in the Group’s financial statements.
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FINANCIAL INFORMATION
You should read the following discussion and analysis in conjunction with our
combined financial information as at and for the years ended 31 December 2017
and 2018 and the three months ended 31 March 2019, including the notes thereto,
in the Accountant’s Report set out in Appendix I. Our audited combined financial
information has been prepared in accordance with IFRS. Historical results are not
indicative of future performance.
BASIS OF PREPARATION
This section, and the Accountant’s Report set out in Appendix I on which this
section is based, has been prepared on the following basis.
The Group historically did not exist as a separate legal and reporting group and no
separate financial statements were historically prepared. Accordingly, for purposes of
evaluating the historical financial results of the Group and the preparation for the Global
Offering, combined financial information of the Asia Pacific region for the years ended 31
December 2017 and 2018 and for the three months ended 31 March 2019 was prepared
and is presented in the Accountant’s Report set out in Appendix I.
• Cash and cash equivalents – Historically, certain cash and cash equivalents
were managed as part of a global treasury management function by AB InBev.
The Group did not exercise operational control over the cash and cash
equivalents in the physical cash pool with AB InBev entities. The balances
generated from the Asia Pacific business that were physically pooled into AB
InBev Group entities that are outside the Group are therefore not considered
cash and cash equivalents of the Group and are not included in the combined
financial information.
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FINANCIAL INFORMATION
Assets which are legally part of the Group but will not be part of the Group following
the Reorganization are presented as assets held for sale in other current assets (USD21
million at 31 December 2018 and 31 March 2019), as these are not managed by the
Group. See also Note 18 to the Accountant’s Report set out in Appendix I.
AB InBev historically recharged costs shared with other AB InBev businesses to the
legal entities comprising the Group and were recorded as such in the combined financial
information.
The combined financial information does not necessarily reflect what our financial
position, results of operations and cash flows would have been had we been a separate,
stand-alone entity during the periods presented. Actual costs that may have been
incurred if we had been a stand-alone company would depend on a number of factors,
including the chosen organizational structure, what functions were outsourced or
performed by employees and strategic decisions made in areas such as information
technology and infrastructure.
In addition, the historical information may not be indicative of what our results of
operations, financial position and cash flows will be in the future. For example, following
the Reorganization and completion of the Global Offering, changes will occur in our cost
structure, debt financing and interest expense, funding and operations, including
changes in our tax structure and increased costs associated with operating as a public,
stand-alone company.
Our results of operations have been, and are expected to continue to be, principally
affected by the following factors, certain of which are beyond our control.
– 141 –
FINANCIAL INFORMATION
Non-recurring restructuring charges in 2017, 2018 and the three months ended 31
March 2019 primarily related to organizational alignments in Asia Pacific and the
combination of AB InBev and SAB. These changes aimed to eliminate overlapping
organizations or duplicated processes, taking into account the right match of employee
profiles with the new organizational requirements. These one-time expenses provided
us with a lower cost base in addition to a stronger focus on core activities, quicker
decision-making and improvements to efficiency, service and quality. See “History,
Development and Reorganization” for further information relating to our organizational
alignments in Asia Pacific and the combination of AB InBev and SAB.
Consumer Preferences
– 142 –
FINANCIAL INFORMATION
The results of our operations are substantially affected by our ability to build on our
strong family of brands by relaunching or reinvigorating our existing owned and licensed
brands in current markets, launching our existing owned and licensed brands in new
markets and introducing brand extensions and packaging alternatives for our existing
owned and licensed brands, as well as our ability to both acquire and develop innovative
local products to respond to changing consumer preferences. Strong, well-recognized
brands that attract and retain consumers, for which consumers are willing to pay a
premium, are critical to our efforts to maintain and increase market share and benefit
from high margins. See “Business – Principal Activities and Products” for further
information regarding our brands.
Distribution Arrangements
The principal terms of our distribution agreements vary from country to country
within the Asia Pacific region. There may also be differences between regions within a
country. In certain countries, such as China, our framework contracts may contain
targets that set out the minimum volume for the applicable distributor to purchase. Our
contract terms with distributors have varying durations depending on the relevant market
and may be terminated in certain limited circumstances, including failure to meet targets
set out in the agreements.
The main raw materials used in our beer and other alcohol malt beverage
production are malted barley, hops, yeast and water. In addition to these inputs into our
products, delivery of our products to consumers requires extensive use of packaging
materials, such as glass and aluminum bottles, aluminum or steel cans and kegs, PET
bottles, labels, plastic crates, metal and plastic closures, folding cartons, cardboard
products and plastic films.
– 143 –
FINANCIAL INFORMATION
Excise Taxes
Taxation on our beer in the countries in which we operate comprises different taxes
specific to each jurisdiction, such as excise and other indirect taxes. In many
jurisdictions where we operate, excise taxes make up a large proportion of the cost of
beer charged to customers. Increases in excise and other indirect taxes applicable to our
products either on an absolute basis or relative to the levels applicable to other
beverages tend to adversely affect our revenue or margins, both by reducing overall
consumption and by encouraging consumers to switch to lower-taxed categories of
beverages. These increases also adversely affect the affordability of our products and
our ability to raise prices.
Governmental Regulations
• Global and national alcohol policy reviews and the implementation of policies
aimed at preventing the harmful effects of alcohol misuse (including, among
others, relating to underage drinking, drunk driving, drinking while pregnant
and excessive or abusive drinking);
• Advertising restrictions, which affect, among other things, the media channels
employed, the content of advertising campaigns for our products and the times
and places where our products can be advertised, including, in some
instances, sporting events;
Please refer to “Taxation and Regulatory Overview” set out in Appendix III for a
fuller description of the key laws and regulations to which our operations are subject.
– 144 –
FINANCIAL INFORMATION
Foreign Currency
Our financial statements presentation and reporting currency is the US dollar. All of
our operating companies have functional currencies (that is, in most cases, the local
currency of the respective operating company) other than our reporting currency.
Consequently, foreign currency exchange rates have a significant impact on our
combined financial information.
Any change in the exchange rates between our operating companies’ functional
currencies and our reporting currency affects our combined income statements and
combined statements of financial position when the results of those operating
companies are translated into the reporting currency for reporting purposes as
translational exposures are not hedged.
For further details regarding the currencies in which our revenue is realized and the
effect of foreign currency fluctuations on our results of operations, see Note 3 to the
Accountant’s Report set out in Appendix I.
Our more critical accounting policies and significant estimates, assumptions and
judgments are described below. See Note 2 and Note 4 to the Accountant’s Report set
out in Appendix I for further details on our accounting policies, judgments and estimates.
– 145 –
FINANCIAL INFORMATION
The fair value less costs to sell valuation requires judgment around the selection of
comparable market participants and their sales multiples. The value-in-use calculations
primarily use cash flow projections. There are a number of assumptions and estimates
involved for the preparation of cash flow projections and the estimated terminal value.
Key assumptions include the expected growth in revenues and operating margin, growth
rates and selection of discount rates, to reflect the risks involved and the terminal growth
rate.
Our management has prepared the financial projections reflecting actual and prior
year performance and market development expectations. Judgment is required to
determine key assumptions adopted in the cash flow projections, and changes to key
assumptions can significantly affect these cash flow projections and therefore the results
of the impairment reviews.
Please refer to Note 13 and Note 14 to the Accountant’s Report set out in Appendix
I for further information on the goodwill and indefinite life intangible assets exposure and
estimates applied.
Intangible assets with indefinite useful lives are comprised primarily of acquired
brands. Our experience has indicated that our brands are expected to generate positive
cash flows for as long as we own the brands. We have legal rights to the brands we own,
which can be enforced for an indefinite period. Therefore, our owned brands have been
assigned indefinite lives as opposed to finite lives.
This determination is supported by the following factors: (i) our owned brands are
national brands that are primarily distributed within one country; (ii) our owned brands
have an established history – some brands have been in existence for over 100 years
with established existence in their respective markets; (iii) the historical brand cash
flows indicate that the established brands are profitable; and (iv) we have exclusive right
of ownership to our owned brands and the ability to legally renew the rights to these
brands at minimal cost.
Please refer to Note 14 to the Accountant’s Report set out in Appendix I for further
information on indefinite life intangible assets.
– 146 –
FINANCIAL INFORMATION
Contingencies
We disclose material contingent liabilities unless the possibility of any loss arising
is considered remote and material contingent assets where the inflow of economic
benefits is probable.
A provision is recorded for a loss contingency when it is probable that a future event
will confirm that a liability has been incurred at the date of the financial statements and
the amount of the loss can be reasonably estimated. By their nature, contingencies will
only be resolved when one or more future events occur or fail to occur, and typically
those events will occur over a number of years in the future.
We are currently subject to an ongoing tax audit in Australia, the focus of which is
in relation to the tax treatment of the funding of a legacy acquisition by SAB, for which a
reduction of AUD360 million (USD256 million) has been made against deferred tax
assets in our financial statements. In considering the adequacy of the provision,
significant judgment has been applied. We consider the amount of the provision, which
has been recognized through the reduction in our deferred tax assets, appropriate to the
level of risk based on the advice we have received. For further information, see Note 29
to the Accountant’s Report set out in Appendix I.
Some of our subsidiaries are involved in tax audits and local inquiries, usually in
relation to prior years. Investigations and negotiations with local tax authorities are
ongoing in various jurisdictions at the date of the statement of financial position 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.
SEGMENTATION
We operate our business through two geographic regions: Asia Pacific East
(primarily Australia, Japan and South Korea) and Asia Pacific West (China, India,
Vietnam and exports elsewhere in Asia Pacific), which are our two reportable segments
for financial reporting purposes. Our regional and operating management are
responsible for managing performance, underlying risks and effectiveness of
operations. Our management uses performance indicators such as Normalized EBITDA
as measures of segment performance and to make decisions regarding allocation of
resources.
– 147 –
FINANCIAL INFORMATION
The term “organic” means the financials are analyzed eliminating the impact of
changes in currencies on translation of foreign operations and scopes. “Scopes”
represent the impact of acquisitions and divestitures, the start-up or termination of
activities or the transfer of activities between segments, curtailment gains and losses
and year-over-year changes in accounting estimates and other assumptions that
management does not consider part of the underlying performance of the business.
The term “normalized” refers to performance measures (EBITDA and EBIT) before
non-recurring items. Therefore, profit from operations before non-recurring items may
also be referred to as Normalized EBIT. Non-recurring items are either income or
expenses which do not occur regularly as part of our normal activities. Please refer to
Note 3.2 to the Accountant’s Report set out in Appendix I for details of the items
excluded. They are presented separately because they are important for the
understanding of our underlying sustainable performance due to their size or nature.
Normalized measures are additional measures used by management and should not
replace the measures determined in accordance with IFRS as an indicator of our
performance, but rather should be used in conjunction with the most directly comparable
IFRS measures.
Except where otherwise stated, the commentary from revenue to profit from
operations before non-recurring items in “– Review of Historical Results of Operations”
below is based on organic growth figures and refers to the comparison of 1Q2019 results
to 1Q2018 results and 2018 results to 2017 results. The percentage change reflects the
improvement (or worsening) of results for the period compared to the prior period.
The table below sets out our combined statement of income and statement of
comprehensive income for the periods indicated:
– 148 –
FINANCIAL INFORMATION
Profit from operations 1,638 21.0% 1,966 23.2% 496 24.4% 510 25.6%
Finance cost (77) (1.0)% (111) (1.4)% (38) (1.9)% (23) (1.2)%
Non-recurring finance
costs (46) (0.5)% (27) (0.3)% (9) (0.4)% (6) (0.3)%
Finance income 19 0.2% 25 0.3% 7 0.3% 9 0.5%
Net finance cost (104) (1.3)% (113) (1.4)% (40) (2.0)% (20) (1.0)%
Share of results of
associates 8 0.1% 17 0.3% 1 0.0% 2 0.1%
Profit before tax 1,542 19.8% 1,870 22.1% 457 22.5% 492 24.7%
Income tax expense (465) (6.0)% (461) (5.4)% (111) (5.5)% (141) (7.1)%
Profit of the period 1,077 13.8% 1,409 16.7% 346 17.0% 351 17.6%
Other comprehensive
income: items that
will not be
reclassified to profit
or loss:
Re-measurements of
post-employment
benefits (5) (0.1)% (4) (0.0)% 1 0.0% – NM
Other comprehensive
income: items that
may be reclassified
subsequently to
profit or loss:
Exchange differences
on translation of
foreign operations 1,709 21.9% (1,197) (14.2)% 19 1.0% 49 2.5%
Gains on cash flow
hedges 15 0.2% – NM – NM – NM
– 149 –
FINANCIAL INFORMATION
(1) For a discussion of how we use Normalized EBITDA and its limitations, and a table showing the
calculation of our Normalized EBITDA for the periods shown, see “– Normalized EBITDA” below.
Volumes
Our volumes include all liquids that we sell, including both beer and non-beer
volumes.
Revenue
Revenue refers to turnover less excise taxes and discounts. See “– Significant
Factors Affecting Our Results of Operations and Financial Condition – Excise Taxes” for
further discussion of excise taxes.
Cost of Sales
Cost of sales refers to costs primarily relating to the production of our finished
goods, including raw and packaging materials, utilities and payroll cost, depreciation
charges of our breweries, equipment and returnable packaging, royalties and cost of the
imported brands.
Operating Expenses
Operating expenses equal the sum of our distribution expenses, sales and
marketing expenses, administrative expenses and other operating income and
expenses (net). Our operating expenses do not include non-recurring charges, which
are reported separately.
– 150 –
FINANCIAL INFORMATION
Distribution Expenses
In our third party distribution networks, our distribution expenses are generally
limited to expenses incurred in delivering our products to relevant independent
distributors, where applicable. The costs of storing finished products at our breweries as
well as costs incurred for subsequent storage in distribution centers are included within
distribution expenses. In our own distribution networks, we sell our products to points of
sale directly and incur additional freight costs in transporting those products between our
breweries and such points of sale. In most of our own distribution networks, we use third
party transporters and incur costs through payments to these transporters. Such costs
are included in our distribution expenses.
Sales expenses include all costs relating to the selling of our products. They include
among others the operating costs of our sales department and sales force, such as
payroll and office costs.
Marketing expenses include all of our costs relating to the support and promotion of
our brands. They include among others operating costs of our marketing department,
such as payroll and office costs, advertising costs, including agency costs and media
costs, sponsoring and events, and surveys and market research.
Administrative Expenses
The tables below in this section present our results of operations on an organic
basis and the related comments are based on organic numbers. For more information,
see “– Selected Financial Figures” above.
Three Months Ended 31 March 2019 (“1Q2019”) Compared to Three Months Ended
31 March 2018 (“1Q2018”)
Volumes
The table below summarizes the volume evolution per operating segment.
– 151 –
FINANCIAL INFORMATION
Our Super Premium portfolio grew volumes by double digits from 1Q2018 to
1Q2019, with particularly strong performances of Corona, Franziskaner and
Hoegaarden. In the Core+ category, we launched Harbin Crystal, an easy drinking lager
that encourages our younger legal drinking age consumers to trade up by activating key
cultural passion points. Our e-commerce business also continues to increase relevance
with continued double digit volume growth.
On the same basis, volumes in Australia decreased by low single digits, due to the
later timing of the Easter holiday as well as a softer industry performance amidst
declining consumer confidence. Category mix shift to easy drinking and premium
products continues with our Great Northern franchise, as well as our craft portfolio of 4
Pines and Pirate Life delivering double digits volume growth. Corona saw continued
volume growth underpinned by stronger brand health metrics.
Revenue
Our revenue increased by 4.5% and increased by 5.9% on a per hectoliter basis
from 1Q2018 to 1Q2019, driven by our revenue management initiatives and brand mix,
as we continued to implement our premiumization strategies. Our revenue for 1Q2019
was partly impacted by the developments in volumes discussed above.
Cost of sales
Our cost of sales increased by 3.6%, or 5.0% on a per hectoliter basis, from 1Q2018
to 1Q2019, primarily driven by an increase in commodity prices, partially offset by
efficiency gains. Our cost of sales for 1Q2019 was partly impacted by the developments
in volumes discussed above.
– 152 –
FINANCIAL INFORMATION
Operating expenses
SG&A
Our SG&A decreased by 1.4% in 1Q2019 compared to our SG&A for 1Q2018. Year
over year increases of sales and marketing expenses were more than offset in 1Q2019
by reduced administrative cost as a result of efficiencies and the timing of services
charged by AB InBev subsidiaries.
Other operating
income/(expense) 42 – (2) (11) 29 (26.5)%
Our other operating income decreased 26.5% in 1Q2019 compared to our other
operating income in 1Q2018.
– 153 –
FINANCIAL INFORMATION
Our profit from operations increased by USD14 million or 2.8% on a reported basis
from 1Q2018 to 1Q2019.
Normalized EBITDA
The following table reflects changes in our Normalized EBITDA for 1Q2018 as
compared to 1Q2019:
Three Three
months months
ended ended
31 March 31 March
2018 2019 Change
(USD millions) (%)
(unaudited)
(1) Share of results of associates consists of the results of our investment in Zhujiang for the periods
indicated. As we do not exercise control over Zhujiang or its day-to-day operation, our
management does not consider the performance of Zhujiang to be indicative of our underlying
business performance, which is the selling of beer and other operational businesses, rather than
investment in beer companies.
(2) Non-recurring items above EBIT (including non-recurring costs) consists of certain restructuring
costs (USD9 million and USD1 million) and costs associated with initial public offering (nil and
USD15 million) for the three months ended 31 March 2018 and 2019, respectively, as detailed
below under “– Non-recurring Items,” which our management does not consider to be items that
drive our underlying business performance.
– 154 –
FINANCIAL INFORMATION
For a discussion of how we use Normalized EBITDA and its limitations, see “– Year
Ended 31 December 2018 Compared to Year Ended 31 December 2017 – Normalized
EBITDA” below.
Depreciation
Depreciation and amortization expenses are included in the following line items of
the 1Q2018 and 1Q2019 combined income statement:
Non-recurring items
– 155 –
FINANCIAL INFORMATION
The table below sets forth the components of non-recurring items and their overall
impact on our profit from operations for 1Q2018 and 1Q2019:
Three Three
months months
ended ended
31 March 31 March
2018 2019
(USD millions)
(unaudited)
Our net finance cost for 1Q2019 was USD20 million, as compared to USD40 million
for 1Q2018, representing a decrease of USD20 million.
The decrease in net finance cost items was driven primarily by a decrease in foreign
exchange losses and other finance cost.
Our share of results of associates for 1Q2019 was USD2 million as compared to
USD1 million for 1Q2018.
Our total income tax expense for 1Q2019 amounted to USD141 million, with an
effective tax rate of 28.8%, as compared to an income tax expense of USD111 million
and an effective tax rate of 24.3% for 1Q2018. Our normalized effective tax rate,
excluding the impact of non-recurring items and taxes on non-recurring items, was
27.7% in 1Q2019 as compared to 25.9% in 1Q2018. The normalized effective tax rate in
1Q2019 was negatively impacted by withholding taxes accrued on planned dividend
distributions.
We did not have any profit attributable to non-controlling interests in 1Q2019 and
1Q2018.
Profit attributable to our equity holders for 1Q2019 was USD351 million compared
to USD346 million for 1Q2018.
– 156 –
FINANCIAL INFORMATION
Volumes
The table below summarizes the volume evolution per operating segment.
Total volumes increased 2.1% from 2017 to 2018. In China, our Super Premium
brands continued to grow significantly, supported by a strong overall performance of our
e-commerce business. Budweiser also grew by mid-single digits in China supported by
premiumization efforts, which expanded beyond the music platform into fashion and
broader lifestyle activations. In addition, we increased our sales volume of Corona in
China.
Revenue
Our revenue increased by 6.1% and increased by 3.9% on a per hectoliter basis
from 2017 to 2018, driven by our revenue management initiatives and brand mix, as we
continued to implement our premiumization strategies. Our revenue for 2018 was partly
impacted by the developments in volumes discussed above.
Cost of sales
Our cost of sales increased by 7.2%, or 4.9% on a per hectoliter basis, from 2017
to 2018, primarily driven by an increase in commodity prices, partially offset by efficiency
gains. Our cost of sales for 2018 was partly impacted by the developments in volumes
discussed above.
– 157 –
FINANCIAL INFORMATION
Operating expenses
Operating
expenses (2,604) (45) (53) 66 (2,636) 2.5%
SG&A
Our SG&A decreased by 2.5% in 2018 compared to our SG&A for 2017. The three
components of SG&A, being distribution expenses, sales and marketing expenses and
administrative expenses, also remained broadly stable from 2017 to 2018.
Other operating
income/
(expense) 163 1 4 (5) 163 (3.1)%
Our other operating income decreased by 3.1% in 2018 compared to our other
operating income in 2017.
Our profit from operations increased by USD328 million or 20% on a reported basis
from 2017 to 2018.
– 158 –
FINANCIAL INFORMATION
Normalized EBITDA
The following table reflects changes in our Normalized EBITDA for 2017 as
compared to 2018:
(1) Share of results of associates consists of the results of our investment in Zhujiang for the periods
indicated. As we do not exercise control over Zhujiang or its day-to-day operation, our
management does not consider the performance of Zhujiang to be indicative of our underlying
business performance, which is the selling of beer and other operational businesses, rather than
investment in beer companies.
(2) Non-recurring items above EBIT (including non-recurring costs) consists of certain non-recurring
restructuring costs (USD66 million and USD61 million) and acquisition and integration costs
(USD31 million and USD4 million) for the years ended 31 December 2017 and 2018,
respectively, as detailed below under “– Non-recurring items,” which our management does not
consider to be items that drive our underlying business performance.
– 159 –
FINANCIAL INFORMATION
Non-recurring items are either income or expenses which do not occur regularly as
part of our normal activities. They are presented separately because they are important
for understanding our underlying sustainable performance due to their size or nature.
Transactions which may give rise to non-recurring items are principally restructuring and
integration activities, impairments, gains or losses on disposal of businesses, and the
effect of the accelerated repayment of debt facilities and bonds. Normalized EBITDA is
a key component of the measures that are provided to senior management on a monthly
basis at the group level, the business unit level and lower levels. We believe Normalized
EBITDA is useful to investors for the following reasons.
– 160 –
FINANCIAL INFORMATION
We further believe that Normalized EBITDA and measures derived from it, are
frequently used by securities analysts, investors and other interested parties in their
evaluation of us and in comparison to other companies, many of which present an
EBITDA performance measure when reporting their results.
• Normalized EBITDA does not reflect the impact of financing costs on our
operating performance;
• Normalized EBITDA does not reflect depreciation and amortization, but the
assets being depreciated and amortized will often have to be replaced in the
future;
• Normalized EBITDA does not reflect the impact of charges for existing capital
assets or their replacements;
Depreciation
Depreciation and amortization expenses are included in the following line items of
the 2017 and 2018 combined income statement:
– 161 –
FINANCIAL INFORMATION
Non-recurring items
The table below sets forth the components of non-recurring items and their overall
impact on our profit from operations for 2017 and 2018:
Our net finance cost for 2018 was USD113 million, as compared to USD104 million
for 2017, representing a cost increase of USD9 million.
The increase in net finance cost was driven primarily by having a full year of interest
payments in 2018 on certain unsecured bonds issued in 2017 partially offset by a
decrease in non-recurring finance costs and higher finance income in 2018 as compared
to 2017.
Our share of results of associates for 2018 was USD17 million as compared to
USD8 million for 2017.
Our total income tax expense for 2018 amounted to USD461 million, with an
effective tax rate of 24.9%, as compared to an income tax expense of USD465 million
and an effective tax rate of 30.3% for 2017. Our normalized effective tax rate, excluding
the impact of non-recurring items and taxes on non-recurring items, was 24.6% in 2018
as compared to 29.4% in 2017.
– 162 –
FINANCIAL INFORMATION
Profit attributable to our equity holders for 2018 was USD1,408 million compared to
USD1,079 million for 2017.
For the year ended 31 December 2018 as compared to the year ended 31
December 2017 and the three months ended 31 March 2019 as compared to the three
months ended 31 March 2018:
• Our reported profit of the year was positively affected by a USD22 million
translation impact for 2018 and negatively affected by a USD27 million
translation impact for the three months ended 31 March 2019, in each case, as
a result of the fluctuation of foreign exchange rates.
See Notes 3.1(a) to the Accountant’s Report set out in Appendix I for details of the
above sensitivity analyses, a fuller quantitative and qualitative discussion on the foreign
currency risks to which we are subject and our policies with respect to managing those
risks.
– 163 –
FINANCIAL INFORMATION
Goodwill
Intangible assets
As at 31 March 2019, we had deferred tax assets of USD223 million and deferred
tax liabilities of USD875 million. As at 31 December 2018, we had deferred tax assets of
USD222 million and deferred tax liabilities of USD865 million. As at 31 December 2017,
we had deferred tax assets of USD217 million and deferred tax liabilities of USD851
million.
The table below sets out an ageing analysis of our current trade receivables and
accrued income, loans to customers, and other receivables, based on the due date:
(USD millions)
As at 31 December 2017
Not past due
or past due Past due
less than more than
90 days 90 days
– 164 –
FINANCIAL INFORMATION
As at 31 December 2018
Not past due
or past due Past due
less than more than
90 days 90 days
As at 31 March 2019
Not past due
or past due Past due
less than more than
90 days 90 days
We have a credit policy in place, which monitors and mitigates our exposure to
credit risk through minimum credit guidelines, customer diversification, working within
agreed limits and through setting limits on the maturity of financial assets. Based on
these factors, we consider the risk of default to be limited. Our management considers
that there was no significant concentration of credit risk with any single customer at 31
March 2019. There have been no material changes in counterparty credit risk
subsequent to 31 March 2019, and trade receivables have been received in line with
management’s expectations. Impairment losses on trade receivables of USD8 million
were recognized in 2017. No impairment losses on trade and other receivables were
recorded in 2018 and impairment losses of USD2 million were recognized in 1Q2019.
Our trade receivables are due on average less than 90 days from the date of invoicing.
In accordance with our policy, we recognize a loss allowance for any receivable overdue
for more than 90 days. As of 31 May 2019, over 75% of our trade receivables as of 31
March 2019 have been settled.
Inventories
The table below sets out a breakdown of our inventories as at the dates indicated:
As at
As at 31 December 31 March
2017 2018 2019
(USD millions)
– 165 –
FINANCIAL INFORMATION
The table below sets out a breakdown of our current trade and other payables as at
the dates indicated:
As at
As at 31 December 31 March
2017 2018 2019
(USD millions)
We use suppliers for a range of products and services. We aim to efficiently manage
our payables by reviewing standard terms and conditions on payments and resolving,
where appropriate, the terms of payment within 120 days upon receipt of invoice.
Amounts due as at 31 March 2019 have been settled in accordance with relevant
contractual arrangements.
Interest-bearing liabilities
– 166 –
FINANCIAL INFORMATION
General
Our primary sources of cash flow have historically been cash flows from operating
activities, the issuance of debt and bank borrowings. Our material cash requirements
have included the following:
• Debt service;
• Capital expenditures;
During the Track Record Period and as at the Latest Practicable Date, we are and
have been in compliance with all material covenants in our financings, and we did not
have any material default in payment of payables for trade payables, interest-bearing
liabilities or other financing obligations. For further details regarding our total current and
non-current liabilities, please refer to Note 3 and Note 21 of the Accountant’s Report set
out in Appendix I.
The table below sets out, as at the dates indicated, a breakdown of our current
assets and current liabilities:
As at As at
As at 31 December 31 March 31 May
2017 2018 2019 2019
(USD millions)
(unaudited)
Current assets
Inventories 492 533 497 533
Trade and other
receivables 1,019 830 1,062 1,033
Derivatives 7 12 9 12
Cash and cash equivalents 1,803 1,749 1,679 1,676
Other current assets 59 23 26 29
– 167 –
FINANCIAL INFORMATION
As at As at
As at 31 December 31 March 31 May
2017 2018 2019 2019
(USD millions)
(unaudited)
Current liabilities
Bank overdrafts 47 45 63 64
Interest-bearing loans and
borrowings 58 82 124 159
Trade and other payables 4,920 4,741 4,385 4,775
Derivatives – 1 1 1
Provisions 95 85 80 79
Other current liabilities 98 101 175 122
We consider our net current liabilities position mainly a result of our business model
and the way we choose to finance our business. The net current liability position is
predominately due to our level of trade payables, which is common in the FMCG sector.
We finance working capital through trade creditors, on what we believe to be generally
favorable credit terms, whereas our inventory and receivables cycles are shorter. During
the Track Record Period, surplus cash generated from operations was extracted from
the Group via transfer into the physical cash pool with AB InBev or dividend payments.
Given our strong operating cash inflow, financial performance and available cash
resources, we believe that our net current liabilities position does not indicate any issues
with our liquidity position.
The table below sets out our cash position as at the dates indicated.
As at As at As at As at
31 December 31 December 31 March 31 May
2017 2018 2019 2019
(USD millions)
(unaudited)
Short-term bank
deposits 175 35 83 11
Cash and bank
accounts 1,380 933 1,005 1,026
Cash pool with AB
InBev 248 781 591 639
– 168 –
FINANCIAL INFORMATION
Cash Flow
The following table sets out our cash flows for the years ended 31 December 2017
and 2018 and the three months ended 31 March 2018 and 2019:
Net increase/(decrease) in
cash and cash
equivalents 660 12 (201) (99)
Our cash flows from operating activities for the three months ended 31 March 2018
and 2019 and the years ended 31 December 2017 and 2018 were as follows:
– 169 –
FINANCIAL INFORMATION
Change in working
capital(2) 184 67 (242) (543)
Change in pension
contributions and use of
provisions (91) (46) (32) (28)
Interest and taxes paid (415) (424) (46) (66)
Dividends received 17 8 – –
Notes:
(1) Non-cash items included in profit of the period include: depreciation, amortization and
impairments, including impairment losses on receivables, inventories and other assets; additions
and reversals in provisions and employee benefits; losses and gains on sales of property, plant
and equipment, intangible assets and assets held for sale; equity share-based payment
expenses; share of results of associates; net finance cost; income tax expense and other
non-cash items included in profit.
(2) For purposes of the table above, our working capital includes inventories, trade and other
receivables and trade and other payables, both current and non-current.
Our primary source of cash flow for our ongoing activities and operations is our cash
flow from operating activities. For extraordinary transactions, we may, from time to time,
also rely on cash flows from other sources. See “– Cash Flow used in Investing Activities”
and “– Cash Flow from/(used in) Financing Activities” below.
Cash flow from operating activities in 1Q2019 decreased USD285 million, or 76.0%,
from USD375 million in 1Q2018 to USD90 million in 1Q2019, mainly explained by
movement in working capital. Cash flow from operating activities in 2018 increased by
USD260 million, or 12%, from USD2,105 million in 2017 to USD2,365 million in 2018,
mainly explained by the performance of our business described above. Please refer to
the Accountant’s Report set out in Appendix I for a more comprehensive overview of our
cash flow from operating activities.
We devote substantial efforts to the efficient use of our working capital, especially
those elements of working capital that we perceive as “core” (including trade
receivables, inventories and trade payables). The initiatives to improve our working
capital include the implementation of policies on collection of receivables and inventory
management, such as optimizing our inventory levels per stock taking unit, improving the
batch sizes in our production process and optimizing the duration of overhauls. Similarly,
we aim to efficiently manage our payables by reviewing our standard terms and
conditions on payments and resolving, where appropriate, the terms of payment within
120 days upon receipt of invoice.
– 170 –
FINANCIAL INFORMATION
Our cash flows used in investing activities for the years ended 31 December 2017
and 2018 and the three months ended 31 March 2018 and 2019 were as follows:
Note:
(1) Net capital expenditure consists of acquisitions of property, plant and equipment and intangible
assets, minus proceeds from sale.
Cash flow used in investing activities was USD79 million in 1Q2019 as compared to
USD98 million cash flow used in investing activities in 1Q2018 mainly as a result of lower
investments in subsidiaries year over year. Cash flow used in investing activities was
USD581 million in 2018 as compared to USD543 million cash flow used in investing
activities in 2017 as higher net capital expenditures were partially offset by lower net
cash used in the acquisition of subsidiaries and of investment in associates, net of cash
acquired. In 2017, we acquired an additional 4.37% equity interest in Zhujiang
(increasing our investment from 25.62% to 29.99%) for a purchase price of USD232
million.
– 171 –
FINANCIAL INFORMATION
Our cash flows from/(used in) financing activities for the years ended 31 December
2017 and 2018 and the three months ended 31 March 2018 and 2019 were as follows:
Repayment of contributed
capital (1,982) (750) (158) (116)
Repayment of loans with
AB InBev to be
capitalized upon Listing (247) (545) 18 (7)
Dividends paid(1) (16) (394) (322) (15)
Net proceeds
from/(repayments of)
borrowings 1,449 (3) (6) 44
Payment of lease liabilities (36) (44) (11) (13)
Purchase of non-controlling
interest (55) – – –
Cash net finance
(cost)/income other than
interests (15) (36) 1 (3)
Note:
(1) Dividends paid in 2017 consisted of USD14 million paid to AB InBev and USD2 million paid to
third parties. Dividends paid in 2018 consisted of USD391 million paid to AB InBev and USD3
million paid to third parties. Dividends paid in 1Q2018 consisted of USD322 million paid to AB
InBev. Dividends paid in 1Q2019 consisted of USD15 million paid to AB InBev.
For more information on the financing activities related to long-term debt, see
“– Indebtedness.” Please also refer to Note 21 of the Accountant’s Report set out in
Appendix I.
– 172 –
FINANCIAL INFORMATION
The Directors are of the opinion that, taking into consideration the financial
resources presently available to us, including internally generated funds, available
banking facilities and cash pooling arrangements in place with AB InBev, the application
of net proceeds of the Global Offering and the completion of the Reorganization, we have
sufficient working capital for our requirements for at least 12 months commencing from
the date of this prospectus.
CONTINGENT LIABILITIES
We are subject to various contingencies with respect to tax, labor, distributors and
other claims. 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. To the extent that we believe these
contingencies will probably be realized, a provision has been recorded in our statement
of financial position.
To the extent that we believe that the realization of a contingency is possible (but
not probable) and is above certain materiality thresholds, we have disclosed those items
in Note 29 to the Accountant’s Report set out in Appendix I and, as at 31 March 2019 and
the Latest Practicable Date, we did not have any material contingent liabilities other than
those disclosed therein, as summarized below.
We are currently subject to an ongoing tax audit in Australia, the focus on which is
in relation to tax treatment of the funding of a legacy acquisition by SAB.
– 173 –
FINANCIAL INFORMATION
INDEBTEDNESS
During the Track Record Period and as at 31 March 2019 and 31 May 2019, we had
indebtedness primarily in the form of unsecured bond issues and loans from AB InBev
which will be capitalized upon Listing as well as interest-bearing loans from banks. The
table below sets out a breakdown of our overall indebtedness as at the dates indicated:
As at As at
As at 31 December 31 March 31 May
2017 2018 2019 2019
(USD millions)
(unaudited)
Current indebtedness
Bank overdrafts 47 45 63 64
Secured bank loans 2 6 2 5
Unsecured bank loans and
other loans 10 37 86 113
Lease liabilities 46 39 36 41
Non-current indebtedness
Unsecured bank loans and
other loans 37 – – –
Unsecured bond issues 2,072 1,872 1,884 1,834
Loans with AB InBev to be
capitalized upon Listing 1,018 473 466 450
Lease liabilities 58 96 103 127
The table below sets out a maturity profile of our overall indebtedness as at the
dates indicated:
As at As at
As at 31 December 31 March 31 May
2017 2018 2019 2019
(USD millions)
(unaudited)
Indebtedness payable
within:
Less than one year 105 127 187 223
One to two years 92 516 543 521
Two to five years 1,619 1,054 995 1,027
Five or more years 1,474 871 915 863
For more information on the Group’s interest-bearing loans and borrowings, see
Note 21 to the Accountant’s Report set out in Appendix I.
– 174 –
FINANCIAL INFORMATION
Aggregate
principal
amount
Issue Date (in millions) Currency Interest rate Maturity date
The terms and conditions of the notes referred to above contain customary events
of default. The notes do not include any restrictive financial covenants.
Indebtedness Statement
As at 31 May 2019, being the latest practicable date for the purpose of the
indebtedness statement:
• the total balance of our interest-bearing liabilities on demand or due within one
year was USD223 million, which includes lease liabilities of USD41 million;
• the total balance of our interest-bearing liabilities due after one year was
USD2,411 million, which includes lease liabilities of USD127 million;
Since 31 May 2019, there has been no material adverse change to our
indebtedness.
– 175 –
FINANCIAL INFORMATION
During the Track Record Period, we had certain transactions with related parties,
including the following:
Our Directors believe that each of the related party transactions as set out above
was conducted in the ordinary course of business at arm’s length. See Note 30 to the
Accountant’s Report set out in Appendix I and “Connected Transactions” for further
details.
CAPITAL EXPENDITURES
Our capital expenditures are primarily funded through cash from operating activities
and are for breweries, logistics, administrative capabilities improvements, hardware and
software. The following table sets out a breakdown of our capital expenditures during the
Track Record Period:
– 176 –
FINANCIAL INFORMATION
Out of our total capital expenditures for 2017, approximately 59% was used to
improve our breweries and facilities, 32% was used for logistics and commercial
investments and the remaining 9% was used for improving administrative capabilities
and purchase of hardware and software.
Out of our total capital expenditures for 2018, approximately 45% was used to
improve our breweries and facilities, 47% was used for logistics and commercial
investments and the remaining 8% was used for improving administrative capabilities
and purchase of hardware and software.
Out of our total capital expenditures for 1Q2019, approximately 26% was used to
improve our breweries and facilities, 67% was used for logistics and commercial
investments and the remaining 7% was used for improving administrative capabilities
and purchase of hardware and software.
COMMITMENTS
Contractual Obligations
The table below sets out our future minimum payments under non-cancellable
commitments as at the dates indicated:
Later than
one year
Not but not
later than later than Later than
As at 31 March 2019 one year five years five years Total
(USD millions)
– 177 –
FINANCIAL INFORMATION
Later than
one year
Not but not
later than later than Later than
As at 31 December 2018 one year five years five years Total
(USD millions)
The table below sets out our key financial ratio as at the dates indicated:
As at
As at 31 December 31 March
2017 2018 2019
Note:
(1) Net debt to Normalized EBITDA represents net debt divided by a twelve-month rolling
Normalized EBITDA. The net debt to Normalized EBITDA calculation as at 31 March 2019
includes the Normalized EBITDA for the last nine months ended 31 December 2018 and the
Normalized EBITDA for the three months ended 31 March 2019, resulting in twelve-month rolling
Normalized EBITDA of USD2,835 million as at 31 March 2019. Net debt is defined as non-current
and current interest-bearing loans and borrowings and bank overdrafts minus debt securities and
cash and cash equivalents. For a reconciliation of net debt see Note 3.2 to the Accountant’s
Report set out in Appendix I.
Net debt to Normalized EBITDA decreased from 0.6 times as at 31 December 2017
to 0.3 times as at 31 December 2018 and 31 March 2019 primarily as a result of the
strong performance of our operations and reduction in net debt.
As far as the Directors are aware, there have not been any material changes in our
operations, nor in the general economic and market conditions in the regions or the
industries in which we operate, that materially and adversely affected our business
operations or financial condition since 31 March 2019 and up to the date of this
prospectus.
– 178 –
FINANCIAL INFORMATION
Our financial risk management policy prohibits the use of derivative financial
instruments for trading purposes, and we therefore do not hold or issue any such
instruments for such purposes.
It is our policy to have the debt in our subsidiaries as much as possible linked to the
functional currency of the subsidiary. To the extent this is not the case, hedging is put in
place unless the cost to hedge outweighs the benefits. Interest rate decisions and
currency mix of debt and cash are decided on a combined basis and take into
consideration the holistic risk management approach.
For more information, see Note 3 to the Accountant’s Report set out in Appendix I.
– 179 –
FINANCIAL INFORMATION
DIVIDEND POLICY
The value, timing and frequency of future dividend payments will be at the
discretion of our Board of Directors, subject to applicable laws and shareholders’
approval. Our Board of Directors may also decide for the payment of an interim dividend
from time to time. The payment of dividends will depend on a number of factors our
Board deems relevant, taking into account the organic and inorganic investment
opportunities.
DISTRIBUTABLE RESERVES
As at 31 March 2019, the Company did not have any distributable reserves, as it
was incorporated after that date.
LISTING EXPENSES
We confirm that, as at the Latest Practicable Date, we were not aware of any
circumstances that would give rise to a disclosure requirement under Rules 13.13 to
Rules 13.19 of the Listing Rules.
The Directors confirm that, having performed reasonable due diligence on the
Group, there has been no material adverse change in our financial or trading position or
prospects since 31 March 2019 and up to the date of this prospectus.
– 180 –
SHARE CAPITAL
SHARE CAPITAL
The following is a description of the authorized share capital and the issued and to
be issued share capital of the Company:
Nominal Value
(USD)
Authorized share capital as at the Latest Practicable Date
13,000,000,000 Shares of USD0.00001 each 130,000
Issued and to be issued, fully paid or credited as fully paid (assuming the Over-allotment
Option is not exercised at all)
7,534,413,000 Shares in issue as at the date of this 75,344.13
prospectus
1,420,587,000 Shares to be issued to APAC HoldCo 2 in 14,205.87
connection with the transfer of the South
Korea business into the Group in the
Reorganization shortly before Listing
18,000,000 Shares to be issued as part of the 180
Capitalization Issue to the Trustee
1,626,526,000 Shares to be issued pursuant to the Global 16,265.26
Offering
243,978,000 Shares to be issued to APAC HoldCo 2 under 2,439.78
the Share Issuance Agreement
Issued and to be issued, fully paid or credited as fully paid (assuming the Over-allotment
Option is exercised in full)
7,534,413,000 Shares in issue as at the date of this 75,344.13
prospectus
1,420,587,000 Shares to be issued to APAC HoldCo 2 in 14,205.87
connection with the transfer of the South
Korea business into the Group in the
Reorganization shortly before Listing
18,000,000 Shares to be issued as part of the 180
Capitalization Issue to the Trustee
1,626,526,000 Shares to be issued pursuant to the Global 16,265.26
Offering
243,978,000 Shares to be issued pursuant to the exercise of 2,439.78
the Over-allotment Option
– 181 –
SHARE CAPITAL
ASSUMPTIONS
The above table assumes that the Global Offering becomes unconditional and
Shares are issued pursuant to the Capitalization Issue and the Global Offering. It does
not take into account any Shares which may be issued pursuant to any exercise of any
option to be granted under the Share Award Schemes or issued or repurchased by the
Company pursuant to the general mandates granted to the Directors to issue or
repurchase Shares as described below.
RANKING
The Offer Shares are ordinary shares in the share capital of the Company and will
rank equally in all respects with all the Shares in issue or to be issued as set out in the
above table, and will qualify for all dividends and other distributions declared, made or
paid by the Company following the completion of the Global Offering.
CAPITALIZATION ISSUE
For the purpose of providing for future awards under the Share Award Schemes, the
Shareholders have passed a written resolution on 2 July 2019 to authorize the Directors
to capitalize the sum of USD180 standing to the credit of the share premium account of
the Company to allot and issue 18,000,000 Shares to the Trustee. Such issue will be
completed at the same time of the completion of the Global Offering. The Shares to be
allotted and issued pursuant to this resolution shall rank pari passu with all existing
Shares.
We have adopted the Discretional Restrictions Stock Units Plan, the Share-Based
Compensation Plan, the People Bet Plan and the Discretionary Long-Team Incentive
Plan. See “Statutory and General Information – D. Share Award Schemes” set out in
Appendix V.
– 182 –
SUBSTANTIAL SHAREHOLDERS
So far as is known to any Director or the Chief Executive Officer as at the Latest
Practicable Date, immediately following the completion of the Capitalization Issue and
the Global Offering (without considering any Shares which may be issued pursuant to
any exercise of any option under the Share Award Schemes), each of the following
persons (other than a Director or the Chief Executive Officer) will have an interest and/or
short position (as applicable) in the Shares or underlying Shares which would fall to be
disclosed to the Company and the Stock Exchange under the provisions of Divisions 2
and 3 of Part XV of the SFO, or will be, directly or indirectly, interested in 10% or more
of the Shares, once the Shares are listed on the Stock Exchange:
– 183 –
SUBSTANTIAL SHAREHOLDERS
17. ABI SAB Group Holding Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
Limited(1) corporation
18. ABI UK Holding 2 Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
Limited(1) corporation
19. ABI UK Holding 1 Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
Limited(1) corporation
20. AB InBev UK Finance Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
Company Limited(1) corporation
21. Anheuser-Busch Europe Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
Ltd(1) corporation
22. Ambrew S.à.R.L.(1) Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
corporation
23. AB InBev Nederland Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
Holding B.V.(1) corporation
24. Interbrew International Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
B.V.(1) corporation
25. AB InBev Investment Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
Holding Company corporation
Limited(1)
26. AB InBev(1)(2)(a)(b)(c)(3) Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
corporation
27. Stichting Anheuser- Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
Busch InBev (the corporation
“Stichting”)(2)(a)(b)(c)
28. EPS Participations Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
S.à.R.L. (“EPS corporation
Participations”)(2)(a)(c)
29. Eugénie Patri Sébastien Interest of a controlled 9,198,978,000 84.83 8,955,000,000 82.58
(EPS) S.A. (“EPS”) corporation
(2)(a)(c)
– 184 –
SUBSTANTIAL SHAREHOLDERS
Notes:
AB InBev owns 100% of the issued share capital of Ambrew S.à.r.l, which is incorporated under the
laws of Luxembourg, which owns 100% of the issued share capital of Anheuser-Busch Europe Ltd.,
which is incorporated under the laws of the UK. Anheuser-Busch Europe Ltd. owns 100% of the issued
share capital of AB InBev UK Finance Company Limited, which is incorporated under the laws of the
UK.
AB InBev and Ambrew S.à.r.l. owns 99.99% and 0.01%, respectively, of the issued and outstanding
equity interests in InBev Belgium BVBA, an entity organized under the laws of Belgium. AB InBev and
InBev Belgium BVBA own, respectively, 67.62% and 32.38% of the issued and outstanding equity
interests in AB InBev Nederland Holding B.V., an entity organized under the laws of the Netherlands.
AB InBev, AB InBev UK Finance Company Limited, InBev Belgium BVBA and AB InBev Nederland
Holding B.V. own, respectively, 26.51%, 9.33%, 4.46% and 59.70% of the issued share capital in ABI
UK Holding 1 Limited, which is incorporated under the laws of the UK. ABI UK Holding 1 Limited
indirectly owns 100% of the issued share capital of InBev International Inc., a Delaware corporation,
through a chain of wholly-owned subsidiaries (i.e. ABI UK Holding 2 Limited, ABI SAB Group Holding
Limited, AB InBev Holdings Limited and ABI Southern Holdings Limited, which are all incorporated
under the laws of the UK).
InBev International Inc. and ABI Southern Holdings Limited own, respectively, 80% and 20% of the
issued share capital of Anheuser-Busch North American Holding Corporation, a Delaware corporation.
Anheuser-Busch North American Holding Corporation indirectly owns 100% of the issued share capital
of Anheuser-Busch Companies, LLC, a Delaware limited liability company, through a chain of
wholly-owned subsidiaries (i.e. Anheuser-Busch InBev USA, LLC and Anheuser-Busch Worldwide,
Inc., which are both incorporated under the laws of Delaware).
ABI Southern Holdings Limited, Anheuser-Busch Worldwide, Inc. and Anheuser-Busch Companies,
LLC own, in the aggregate, 100% of the issued share capital in Anheuser-Busch Americas Holdings
LLC, which is incorporated under the laws of Delaware. Its share capital held by ABI Southern Holdings
Limited, Anheuser-Busch Worldwide, Inc. and Anheuser-Busch Companies, LLC represent, in each
case respectively, approximately 21.65%, approximately 27.5%, and approximately 50.85% of the total
voting power of all classes of issued and outstanding membership interests entitled to vote and
approximately 24.29%, approximately 36.5%, and approximately 39.21% of the total value of all issued
and outstanding classes of the membership interests of Anheuser-Busch Americas Holdings LLC.
Anheuser-Busch Americas Holdings LLC indirectly owns 100% of the issued share capital of AB InBev
America Holdings (APAC) Limited, which is incorporated under the laws of Hong Kong, through a chain
of wholly-owned subsidiaries (i.e. Anheuser-Busch International, Inc., Anheuser-Busch Latin Inc.,
Anheuser-Busch Worldwide Investments, Inc. and Anheuser-Busch America Investments, LLC, which
are all incorporated under the laws of Delaware, and AB InBev America Holdings Limited, which is
incorporated under the laws of the UK).
The issued share capital of AB InBev Brewing Company Holdings (APAC) Limited, an entity organized
under the laws of the UK, is held by AB InBev America Holdings (APAC) Limited, AB InBev Investment
Holding Company Limited, and Interbrew International B.V. and which represent collectively 100% of
the total voting power of all classes of issued and outstanding equity interests in AB InBev Brewing
Company Holdings (APAC) Limited. These relative ownership percentages held by these entities have
not been determined as at the Latest Practicable Date but will be 100% in aggregate and depend on the
Offer Price and reorganization steps that will take place after pricing but before the Listing Date. AB
InBev Brewing Company Holdings (APAC) Limited owns 100% of the issued and outstanding equity
interests in AB InBev Brewing Company (APAC) Limited, an entity organized under the laws of the UK.
AB InBev Brewing Company (APAC) Limited owned 100% of the issued share capital of the Company
as at the Latest Practicable Date.
Therefore, each of the entities in this note which are also disclosed in the table above are deemed to
be interested in the Shares held by AB InBev Brewing Company (APAC) Limited.
BRC, EPS and EPS Participations are companies incorporated under Luxembourg law. As per
the latest transparency declarations made to AB InBev on 13 March 2019 pursuant to the Belgian
law of 2 May 2007 on the notification of significant shareholdings, such entities hold respectively
39,962,901, 99,999 and 131,898,152 ordinary shares of AB InBev, representing respectively
1.98%, 0.00% and 6.53% of the voting rights attached to AB InBev’s outstanding shares,
respectively.
– 185 –
SUBSTANTIAL SHAREHOLDERS
The Stichting is a stichting incorporated under Dutch law. As per the latest transparency
declarations made to AB InBev on 13 March 2019 pursuant to the Belgian law of 2 May 2007, it
holds 663,074,832 ordinary shares of AB InBev, representing 32.84% of the voting rights
attached to AB InBev’s outstanding shares (excluding the 59,862,607 treasury shares held by AB
InBev and its subsidiaries Brandbrew S.A., Brandbev S.à.R.L. and Mexbrew S.à.R.L.).
According to a shareholders’ agreement entered into among the Stichting, EPS, EPS
Participations S.à R.L., BRC and Rayvax Société d’Investissements SA (“Rayvax”) (a company
incorporated under Belgian law, which as per the latest transparency declarations made to AB
InBev on 13 March 2019 pursuant to the Belgian law of 2 May 2007, held 24,158 ordinary shares
of AB InBev) (the “2016 Shareholders’ Agreement”), BRC and EPS/EPS Participations jointly
and equally exercise control over the Stichting and the shares held by the Stichting. Pursuant to
the 2016 Shareholders’ Agreement, the Stichting’s board of directors will propose to AB InBev’s
shareholders’ meeting nine candidates for appointment as AB InBev’s directors, among which
each of, on the one hand, BRC and, on the other hand, EPS and EPS Participations will have the
right to nominate four candidates, and one candidate will be nominated by the Stichting’s board
of directors.
The 2016 Shareholders’ Agreement also requires EPS, EPS Participations, BRC and Rayvax, as
well as any other holder of certificates issued by the Stichting, to vote their AB InBev shares in the
same manner as the shares held by the Stichting.
The Stichting also entered into a voting agreement with Fonds Baillet Latour SPRL and Fonds
Voorzitter Verhelst (which are companies with a social purpose incorporated under Belgian law).
As per the latest transparency declarations made to AB InBev on 13 March 2019 pursuant to the
Belgian law of 2 May 2007, such entities hold 5,485,415 and 6,997,665 ordinary shares of AB
InBev, representing 0.27% and 0.35% of the voting rights attached to AB InBev’s outstanding
shares, respectively (the “Fonds Voting Agreement”).
Under the Fonds Voting Agreement, consensus is required for all items that are submitted to the
approval of any of shareholders’ meetings of AB InBev. If the parties fail to reach a consensus,
each of Fonds Baillet Latour SPRL and Fonds Voorzitter Verhelst will vote their AB InBev shares
in the same manner as the Stichting.
Accordingly, Stichting controls the voting rights attached to the shares of AB InBev held by Fonds
Baillet Latour SPRL and Fonds Voorzitter Verhelst.
(c) Total number of voting rights controlled by the Stichting and related parties
Accordingly and taking into account the ordinary shares of AB InBev held by Fonds Baillet Latour
SPRL and Fonds Voorzitter Verhelst, EPS, EPS Participations, BRC and the Stichting control in
aggregate 41.97% of the voting rights attached to AB InBev’s outstanding shares and are
deemed to be interested in the Shares AB InBev is interested in.
(3) BRC is controlled indirectly by Jorge Paulo Lemann, Carlos Alberto da Veiga Sicupira and Marcel
Herrmann Telles and directly by S-BR Global, that in its turn directly holds a 83.64% interest and
indirectly holds a 16.36% interest in BRC through BR Global, a wholly-owned subsidiary of S-BR
Global.
Marcel Herrmann Telles indirectly owns a 24.728% interest in S-BR Global through a chain of
wholly-owned subsidiaries (i.e. Santa Maria Isabel CV, Alfta T Holding, MCMT Holdings and Santa
Paciencia). Carlos Alberto Sicupira indirectly owns a 19.927% interest in in S-BR Global through a
chain of wholly-owned subsidiaries (i.e. Santa Carolina, Beta Holding Ltd., CCHHS Holding Ltd. and
Santa Heloisa). Jorge Paulo Lemann indirectly owns a 55.345% interest in S-BR Global through a chain
of wholly-owned subsidiaries (i.e. Inpar VOF, Stichting Enable, Inpar Investment Fund and Santa
Erika). Jorge Paulo Lemann also holds a 0.01% interest in AB InBev through its wholly owned
subsidiary Olia 2 AG.
As per the latest transparency declaration made to AB InBev on 13 March 2019 pursuant to the Belgian
law of 2 May 2007, the ultimate control of BRC is jointly owned by Marcel Herrmann Telles, Carlos
Alberto Sicupira and Jorge Paulo Lemann. In spite of such disclosure, Marcel Herrmann Telles and
Carlos Alberto Sicupira do not have an interest to be disclosed under the provisions of Divisions 2 and
3 of Part XV of the SFO.
– 186 –
RELATIONSHIP WITH AB INBEV
As at the Latest Practicable Date, AB InBev was indirectly interested in 100% of the
shares in the Company.
Our Directors are satisfied that our Group is able to operate independently from the
AB InBev Group following the completion of the Global Offering for the following
reasons.
There is clear and adequate delineation between the business of the Group and the
AB InBev Group as we have different geographical and market focuses.
During the Track Record Period, our Group operated in Asia Pacific as an
independent operational arm within the AB InBev Group. Our Group primarily focuses on
production, import, distribution and sale within Asia Pacific, whereas the AB InBev
Group primarily focuses its production, export, distribution and sale outside of Asia
Pacific. Most of the AB InBev Group’s exports of its product into Asia Pacific were made
through our Group under licenses to import granted to our Group.
We have entered into the Deed of Non-competition with AB InBev which safeguards
the independence of the respective businesses of the Group and the AB InBev Group.
Under the Deed of Non-competition, AB InBev agreed that, except for the AB InBev
Excluded Business, with effect from the Listing Date, it will not engage in businesses
relating to the manufacture, import, sale and/or distribution of beer (both alcohol and
non-alcohol), cider and alcohol malt-based beverages in the APAC Territories and will
also cause its subsidiaries (other than our Group) not to engage in such businesses in
the APAC Territories, except for limited exceptions.
– 187 –
RELATIONSHIP WITH AB INBEV
The APAC Territories include: (1) Australia; (2) Bangladesh; (3) Bhutan; (4) Brunei
Darussalam; (5) Burma (Myanmar); (6) Cambodia; (7) China (including Hong Kong,
Macau and Taiwan); (8) Cook Islands; (9) Federated States of Micronesia; (10) Fiji; (11)
India; (12) Indonesia; (13) Japan; (14) Kiribati; (15) Laos; (16) Malaysia; (17) Maldives;
(18) Marshall Islands; (19) Mongolia; (20) Nauru; (21) Nepal; (22) New Caledonia; (23)
New Zealand; (24) Niue; (25) Palau; (26) Papua New Guinea; (27) Philippines; (28)
Republic of Korea (South Korea); (29) Samoa; (30) Singapore; (31) Solomon Islands;
(32) Sri Lanka; (33) Thailand; (34) Timor Leste (35) Tonga; (36) Tuvalu; (37) Vanuatu;
(38) Vietnam; and (39) Wallis and Futuna.
Under the Deed of Non-competition, we have also agreed that, except for the Group
Excluded Business, with effect from the Listing Date, we will not engage in businesses
relating to the manufacture, import, sale and/or distribution of beer (both alcohol and
non-alcohol), cider and other alcohol malt-based beverages outside of the APAC
Territories and will also cause its subsidiaries (other than our Group) not to engage in
such businesses outside of the APAC Territories, except for limited exceptions.
Subject to the terms of the Deed of Non-competition, the AB InBev Group will be
permitted to operate the AB InBev Excluded Business, being:
(a) any projects developed by the global research and development and
incubation platforms of the AB InBev Group (including, but not limited to, ZX
Ventures, GITEC, ZITEC and Z-Tech) before or after the Listing Date; and
(b) certain pre-existing licensing and distribution arrangements for beer (both
alcohol and non-alcohol), cider and alcohol malt-based beverages in the
APAC Territories that had been entered into by members of the AB InBev
Group with third parties before the Listing Date, provided that any profits
derived directly by such member of the AB InBev Group from the relevant third
party under such arrangements will be transferred to the Group as part of the
Reorganization with effect from the Listing Date.
Subject to the terms of the Deed of Non-competition, the Company will be permitted
to operate the Group Excluded Business, being:
(a) certain pre-existing licensing and distribution arrangements for beer (both
alcohol and non-alcohol), cider and alcohol malt-based beverages in the
Non-APAC Territories that had been entered into by members of the Group
with third parties before the Listing Date; and
– 188 –
RELATIONSHIP WITH AB INBEV
Management independence
Our Directors
Our Board is comprised of seven Directors as set out below. Only three of the
Directors will have overlapping roles in the Group and the AB InBev Group following the
completion of the Global Offering.
Senior Management
None of our senior management responsible for our daily operations will have any
roles within the AB InBev Group upon Listing, other than Mr. Jan Craps who will retain
the title of Zone President Asia Pacific.
Certain members of our senior management, namely Mr. Frederico Freire, Mr. Ben
Verhaert, Mr. Bruno Cosentino, Mr. Goran Duric, Mr. Keith Davies and Mr. Jan Clysner,
hold their senior management roles in the Group under secondment agreements with AB
InBev Group. However, each of these senior managers reports directly to Mr. Jan Craps
(our Chief Executive Officer) and will act in the interests of the Group (including in
relation to any connected transactions between AB InBev Group and the Group). All their
remuneration and expenses will be borne by the Group, including any discretionary
incentives which will be ultimately determined by the Group according to the
performance of both the relevant senior manager and the Group. Under these
secondment agreements, the Group has the right to terminate the assignment of the
relevant senior manager with the Group upon notice to AB InBev Group and the relevant
senior manager. However, AB InBev Group can only terminate the relevant secondment
agreement or the underlying employment agreement of the senior manager with the prior
consent of the Group. See “Directors and Senior Management” for further information.
Taking into account the composition of our Board and senior management, our
Directors believe that the Company and AB InBev have management teams that will
function independently of each other.
– 189 –
RELATIONSHIP WITH AB INBEV
Operational independence
During the Track Record Period, our Group conducted certain transactions with the
AB InBev Group on a recurring basis which are expected to continue after the Listing and
will constitute continuing connected transactions of the Company under the Listing
Rules. Such continuing connected transactions include:
(a) the long term licenses granted to us, with limited termination provisions, to
import and/or produce, sell, distribute, advertise and promote products under
brands owned by the AB InBev Group; and
(b) participation in the AB InBev Group’s cash pooling and provision of strategic,
procurement and administrative services between our Group and the AB InBev
Group.
Such continuing connected transactions are entered into in the ordinary and usual
course of our business and conducted on normal commercial terms, and the terms
(including the pricing policies) of such transactions are on an arm’s length basis.
Our Directors believe that such continuing connected transactions do not indicate
any undue reliance of our Group on the AB InBev Group and are beneficial to the
Company and our Shareholders as a whole. Details of each of the continuing connected
transactions are set out in the section headed “Connected Transactions.”
Independent operation
(a) we have our own independent management, production, sales and marketing,
procurement, quality control, research and development teams; and
(b) the office facilities, breweries, distribution centers, product safety testing and
research and development facilities of the AB InBev Group and our Group are
clearly delineated and separately located.
We do not lease any property from the AB InBev Group. We either own our own
breweries and distribution centers or lease them from landlords who are independent
third parties and are not connected to the AB InBev Group.
We operate our own breweries and source new distributors, manage existing
distributors, and negotiate and structure distribution contracts with distributors
independently from the AB InBev Group. Given the territory-specific nature of our
distributors, we have established relationships with our distributors in our major markets
independently from the AB InBev Group’s distributors. We are able to devise our own
Asia Pacific territory-specific marketing strategy, execute product launch initiatives and
analyze market and business trends within the APAC Territories.
– 190 –
RELATIONSHIP WITH AB INBEV
Financial independence
(a) no material amount will be due to the AB InBev Group from our Group, except
for the Shareholder Loan which will be repaid in full prior to or at the end of the
Over-allotment Option exercise period (see “History, Development and
Reorganization – Our Reorganization” for a detailed description of such
shareholder indebtedness) and those incurred in the ordinary and usual
course of business of our Group (see “Connected Transactions” for details of
continuing connected transactions); and
(b) except for the parent guarantees given by AB InBev for our Australian dollar
bonds (with a total principal amount of AUD1,950 million as at 31 December
2018) which will mature over the period from 2022 to 2027 entered into on
normal commercial terms with no security granted over the assets of the Group
and therefore a fully exempt continuing connected transaction, no other
material guarantee will be provided by the AB InBev Group.
Certain subsidiaries of the Group participate in the AB InBev Group’s cash pooling
arrangements under which they may make deposits or draw overdrafts. The Group
participates in such cash pooling arrangements independently based on its own
financing needs. Details of the cash pooling arrangements are set out in the section
headed “Connected Transactions – Cash Pooling Arrangements.”
Our Directors believe that we are capable of obtaining financing from independent
third parties without reliance on the AB InBev Group given the Group’s strong financial
position, steady cash flow generation and level of liquid assets following the Listing as
well as its ability to raise funds on a standalone basis. Based on the above, our Directors
believe that we do not have any financial dependence on the AB InBev Group.
Administrative Independence
All essential administrative functions will be carried out by the Group’s own legal,
finance and treasury, human resources and administration teams but the AB InBev
Group will provide to the Group certain strategic and administrative services at our
discretion, for example, in relation to legal and corporate affairs (including media and
communications support), finance (including treasury, accounting and taxation), human
resources (including training programs support), IT support, executive management
support and group audit support and other general administrative support. See the
section headed “Connected Transactions” for more details.
As AB InBev will consolidate the financial results of the Group as its subsidiary, the
Directors believe that this would serve to align the implementation of the corporate
governance charter of the Group with that of the AB InBev Group and would better
facilitate the administrative functions of the two groups as a whole in a cost efficient
manner. The Group always has the discretion to engage an independent third party
supplier under such arrangements.
– 191 –
RELATIONSHIP WITH AB INBEV
The Directors believe that the commercial interest of our Group and the AB InBev
Group are strongly aligned for the following reasons:
• AB InBev will receive more royalties and import fees if our business grows – as
the AB InBev Group receives royalties and import fees under the licenses to
manufacture and import AB InBev products, the AB InBev Group has a strong
and direct incentive to ensure the success of our Group.
• AB InBev must cooperate with our Group in Asia Pacific – the Group is the AB
InBev Group’s primary means of generating revenue from beer (both alcohol
and non-alcohol), cider, and other alcohol malt based beverages in the APAC
Territories due to the Deed of Non-competition.
• The AB InBev Group relies on our Group for local expertise and relationship
with distributors – the Group has considerable local expertise of working in
Asia Pacific and has established strong relationship with key stakeholders,
including suppliers, distributors, regulators and consumers, which is crucial to
the successful execution of the Asia Pacific business operations. Without the
experience and relationships built up by our Group, we believe that the AB
InBev Group would face significant difficulties replicating the role and function
of the Group.
DEED OF NON-COMPETITION
We and AB InBev have entered into a Deed of Non-competition in each other’s favor
in order to limit possible future competition between us.
Under the Deed of Non-competition, AB InBev undertakes that it will not, and will
use its reasonable endeavors to procure that members of the AB InBev Group will not,
except through our Group, solely or jointly or through representation of any person or
company, carry on, engage in or make any investment in businesses relating to the
manufacture, import, sale and/or distribution of beer (both alcohol and non-alcohol),
cider and alcohol malt-based beverages within the APAC Territories (“APAC
Business”), subject to certain limited exceptions.
– 192 –
RELATIONSHIP WITH AB INBEV
These exceptions in the Deed of Non-competition provide that the AB InBev Group
will not be prevented from:
(a) holding and/or being interested in, directly or indirectly, any shares or other
securities or interest in the Company or any other member of the Group;
(b) operating the AB InBev Excluded Business, provided that to the extent that (i)
AB InBev (or any member of the AB InBev Group) applies any project from its
global research and development and incubation platform to any APAC
Business, and (ii) such application is expected to derive revenue in excess of
USD20 million on an annual basis, then AB InBev will (or will procure the
relevant member of the AB InBev Group to) discuss in good faith with the
Company with a view to allowing the Company the opportunity to participate in
such application of the AB InBev Excluded Business to the reasonable
satisfaction of the parties;
(c) having any interest, equity or otherwise, in any company, entity or firm that is
acquired by the AB InBev Group after the Listing and which is engaged in the
APAC Business (“AB InBev Acquired Business”), provided that:
(i) at the time of acquisition of the AB InBev Acquired Business, such APAC
Business contributed to:
(A) less than 10% of the total revenues of the AB InBev Acquired
Business (as calculated based on the most recent annual financial
statements of the AB InBev Acquired Business); or
(B) 10% or more but less than 50% of the total revenues of the AB InBev
Acquired Business (as calculated based on the most recent annual
financial statements of the AB InBev Acquired Business) and AB
InBev had, after the completion of the acquisition of the AB InBev
Acquired Business, discussed in good faith with the Company in
relation to the Company’s potential economic participation in the
APAC Business of the AB InBev Acquired Business to the
reasonable satisfaction of the parties; or
(ii) the consideration for the acquisition of the AB InBev Acquired Business
was less than USD100 million; or
Under the Deed of Non-competition, we, on the other hand, undertake that we will
not, and will use our reasonable endeavors to procure that members of the Group will
not, except through the AB InBev Group, solely or jointly or through representation of any
person or company carry on, engage in or make any investment in the businesses
relating to the manufacture, import, sale and/or distribution of beer (both alcohol and
non-alcohol), cider and alcohol malt-based beverages within the territories which are not
APAC Territories (“Non-APAC Business”), subject to certain limited exceptions.
– 193 –
RELATIONSHIP WITH AB INBEV
These exceptions in the Deed of Non-competition provide that our Group will not be
prevented from:
(a) holding and/or being interested in, directly or indirectly, any shares or other
securities or interest in the AB InBev or any other member of the AB InBev
Group (excluding members of the Group);
(b) operating the Group Excluded Business, provided that to the extent that a
Group Excluded Business (in aggregate) derives revenue for the Group of an
amount in excess of USD20 million on an annual basis, we will, or will procure
the relevant member of the Group to, discuss in good faith with AB InBev with
a view to allowing AB InBev the opportunity to participate in such Group
Excluded Business to the reasonable satisfaction of both parties;
(c) having any interest, equity or otherwise, in any company, entity or firm that is
acquired by us after the Listing and which is engaged in the Non-APAC
Business (“Group Acquired Business”), provided that,
(i) at the time of acquisition of the Group Acquired Business, such Non-
APAC Business contributed to:
(A) less than 10% of the total revenues of the Group Acquired Business
(as calculated based on the most recent annual financial statements
of the Group Acquired Business); or
(B) 10% or more but less than 50% of the total revenues of the Group
Acquired Business (as calculated based on the most recent annual
financial statements of the Group Acquired Business) and the
Company had, after the completion of the acquisition of the Group
Acquired Business, discussed in good faith with AB InBev in relation
to AB InBev’s potential economic participation in the Non-APAC
Business of the Group Acquired Business to the reasonable
satisfaction of the parties; or
(ii) the consideration for the acquisition of the Group Acquired Business was
less than USD100 million; or
Investment opportunities
– 194 –
RELATIONSHIP WITH AB INBEV
The AB InBev Group will be free to pursue its interest in the investment opportunity
if we decline to participate in the investment opportunity or fail to respond within
15 business days of receipt of the relevant notice.
This procedure will not apply to an opportunity if (i) the APAC Business contributed
to less than 50% of the total revenues of the company, entity or firm to be acquired as
calculated based on its most recent annual financial statements; or (ii) the consideration
for the company, entity or firm to be acquired is less than USD100 million.
This procedure will not apply to an opportunity if (i) the Non-APAC Business
contributed to less than 50% of the total revenues of the company, entity or firm to be
acquired as calculated based on its most recent annual financial statements; or (ii) the
consideration for the company, entity or firm to be acquired is less than USD100 million.
The Deed of Non-competition will terminate on the earliest of the date on which:
(a) the AB InBev Group ceases to be, directly or indirectly, interested in more than
50% of the Shares in the Company;
(b) any other Shareholder of the Company (other than the AB InBev Group)
together with any parties acting in concert (as defined in the Takeovers Code)
with such Shareholder hold, directly or indirectly, 30% or more of the Shares in
the Company; or
(c) the Shares cease to be listed and traded on the Stock Exchange.
Our assessment of, or decision in relation to, any investment opportunity or any
good faith discussion under the Deed of Non-competition will be determined by our
Executive Director(s) and Independent Non-executive Directors who do not have any
ongoing role with the AB InBev Group or any material interest in the relevant matter.
AB InBev will, upon request, provide, and use its reasonable endeavors to procure
members of the AB InBev Group to provide, all information necessary for annual review
by our Independent Non-executive Directors and will allow, and procure members of the
– 195 –
RELATIONSHIP WITH AB INBEV
(a) as part of our preparation for the Listing, we have adopted our Articles of
Association to comply with the Listing Rules. In particular, our Articles of
Association provide that, other than certain matters permitted under note 1 to
Appendix 3 of the Listing Rules, a Director shall not vote on any resolution
approving any contract or arrangement or any other proposal in which such
Director or any of his/her close associates has a material interest nor shall
such Director be counted in the quorum present at the meeting;
(b) a Director with material interests shall make full disclosure in respect of
matters that conflict or potentially conflict with our interest and absent
himself/herself from the Board meetings on matters in which such Director or
his associates has a material interest, unless the attendance or participation of
such Director at such meeting of the Board is specifically requested by a
majority of the Independent Non-executive Directors;
(c) we are committed that our Board should include a balanced composition of
Executive Directors and Independent Non-executive Directors. Our
Independent Non-executive Directors represent at least one third of the
composition of our Board which is in compliance with the Corporate
Governance Code of the Listing Rules and they are professionals in different
industries. We believe that our Independent Non-executive Directors will
provide a balance of view and independent judgment in the decision making
process of our Board and they will be able to provide an impartial, external
opinion to protect the interests of our public Shareholders. For further details
of our Independent Non-executive Directors, see “Directors and Senior
Management – Directors – Independent Non-executive Directors”;
(d) we have appointed Somerley Capital Limited as our compliance adviser, which
will provide advice and guidance to us in respect of compliance with the
applicable laws and the Listing Rules including various requirements relating
to directors’ duties and corporate governance;
– 196 –
RELATIONSHIP WITH AB INBEV
(e) our Independent Non-executive Directors will review, on an annual basis, the
compliance with the Deed of Non-competition by the AB InBev Group and we
will disclose decisions on matters reviewed by our Independent Non-executive
Directors relating to the compliance with and the enforcement of the Deed of
Non-competition in our annual report; and
(f) the AB InBev Group undertakes to provide all information requested by our
Group which is necessary for the annual review by our Independent Non-
executive Directors on the AB InBev Group’s compliance with the Deed of
Non-competition.
Save as disclosed in this section and the interests of certain of our Directors in the
shares in AB InBev and Ambev as set out in “Appendix V – C. Further Information about
the Directors – 1. Interests of the Directors and Chief Executive Officer,” AB InBev and
our Directors confirm that they do not have any interest in a business which competes
with or is likely to compete with our business, whether directly or indirectly, or would
otherwise require disclosure under Rule 8.10 of the Listing Rules.
– 197 –
CONNECTED TRANSACTIONS
OVERVIEW
Prior to the Listing Date, the Group entered into certain transactions with the AB
InBev Group. Upon the Listing Date, AB InBev will remain as the Company’s Controlling
Shareholder, and members of the AB InBev Group will become our connected persons.
The following material continuing connected transactions between the Group and
the AB InBev Group will continue after the Listing Date (the “Non-exempt Continuing
Connected Transactions”):
(1) Licenses granted to the Group to import, sell, distribute, advertise and
promote AB InBev Products for sale in the APAC Territories: The AB
InBev Group will grant the Group:
(a) exclusive licenses to import for sale, sell and distribute; and
products offered for sale under brands that are owned or acquired by or
licensed to the AB InBev Group (“AB InBev Products”) in Asia Pacific
(“Licenses to Import”) pursuant to which the Group will import the relevant AB
InBev Products at the import price from the AB InBev Group for sale in the
APAC Territories on an exclusive basis.
The Licenses to Import will include on the Listing Date, among others, licenses
to import Corona, Beck’s, Stella Artois and other US and European brands into
the APAC Territories and Budweiser in South Korea, Hong Kong and Japan.
(a) exclusive licenses to manufacture for sale, sell and distribute; and
The Licenses to Manufacture will include on the Listing Date, among others,
licenses to manufacture Budweiser and Hoegaarden in various countries in
the APAC Territories.
(3) Deposits made by the Group in AB InBev’s cash pool accounts: Prior to
the Listing Date, the Group participated in the AB InBev Group’s cash pooling
arrangements and will continue to do so for an initial term of five years after the
Listing Date, renewable for successive five year terms, subject to re-
compliance with the Listing Rules.
(4) Strategic services provided by the AB InBev Group to the Group: The AB
InBev Group will provide certain strategic advice and support services to
members of the Group (“Strategic Services”).
– 198 –
CONNECTED TRANSACTIONS
(5) Procurement services provided by the AB InBev Group to the Group: The
Group has a standard process of procurement of services and products (such
as raw materials) which includes sourcing directly from independent third
parties or sourcing from other suppliers through the AB InBev Group’s global
procurement office. Following the Listing Date, the AB InBev Group will
continue to provide procurement services to the Group (“Procurement
Services”).
Except for the monetary cap requirement, the announcement and independent
shareholders’ approval requirements for which waivers are sought, and have been
granted, the Company will comply with the relevant requirements under Chapter 14A of
the Listing Rules.
Relevant
No. Nature of Transactions Listing Rules Waiver sought
– 199 –
CONNECTED TRANSACTIONS
Relevant
No. Nature of Transactions Listing Rules Waiver sought
Exempt from the circular and independent shareholders’ approval requirements but subject
to the announcement, reporting, and annual review requirements
4. Strategic services provided by the AB 14A.35 Waiver from strict
InBev Group to the Group compliance with
announcement
requirement
5. Procurement services provided by the 14A.35 Waiver from strict
AB InBev Group to the Group compliance with
announcement
requirement
6. Administrative services provided by the 14A.35 Waiver from strict
AB InBev Group to the Group compliance with
announcement
requirement
Exempt from the announcement, circular, shareholders’ approval, reporting and annual
review requirements
7. Budweiser trademark license agreement 14A.76 Fully exempted de
minimis transactions
8. Licenses granted to the AB InBev Group 14A.76 Fully exempted de
to import, sell, distribute, advertise minimis transactions
and promote the Group’s products for
sale outside of the APAC Territories
9. Licenses granted to the AB InBev Group 14A.76 Fully exempted de
to manufacture, sell, distribute, minimis transactions
advertise and promote the Group’s
products for sale outside of the APAC
Territories
10. Strategic services provided by the Group 14A.76 Fully exempted de
to the AB InBev Group minimis transactions
11. Procurement services provided by the 14A.76 Fully exempted de
Group to the AB InBev Group minimis transactions
12. Administrative services provided by the 14A.76 Fully exempted de
Group to the AB InBev Group minimis transactions
13. Cost reimbursements to the AB InBev 14A.90 Fully exempted
Group financial assistance
14. Cost reimbursements to the Group 14A.76 Fully exempted de
minimis transactions
15. Loans and guarantees provided by the 14A.90 Fully exempted
AB InBev Group to the Group financial assistance
(including with respect to overdrafts
under the AB InBev Group’s cash pool
accounts)
– 200 –
CONNECTED TRANSACTIONS
On 2 July 2019, the Company and AB InBev entered into the Importation
Framework Agreement effective on the Listing Date for a 25 year term, pursuant to which
AB InBev will agree to procure members of the AB InBev Group to grant, subject to
limited exceptions, the relevant Group members: (i) exclusive licenses to import for sale,
sell and distribute and (ii) non-exclusive licenses to advertise and promote AB InBev
Products in the APAC Territories.
The licenses granted will be subject, in particular, to (i) the terms of agreements
between the AB InBev Group and third parties existing as of the date of the Importation
Framework Agreement and (ii) any limitations in the licenses granted to the AB InBev
Group.
The respective Group member and AB InBev Group member shall enter into
subsidiary agreements which will set out more specific terms and conditions based on
the principles and terms of the Importation Framework Agreement. The subsidiary
agreements will set out, among other terms, the licensee and licensor, license scope,
territory, duration, import price, delivery and title transfer terms, payment and credit
terms, and other license terms.
– 201 –
CONNECTED TRANSACTIONS
The import price (being the AB InBev Product’s cost per unit of volume
imported into the APAC Territories) will be determined among the respective parties
from time to time on an arm’s length basis.
The import price for each product will be agreed by AB InBev and the Company
based on (a) production cost of the imported product and (b) a mark-up, covering (i)
an allocation of certain indirect costs (including logistics cost, overhead cost,
depreciation, amortization and other costs as AB InBev and the Company may
deem relevant), (ii) distribution royalty component determined using the pricing
policies set out for royalty under the Licenses to Manufacture (see below), (iii) an
exporter margin set by reference to a transfer pricing benchmark report, or by
reference to a historical import agreement entered into between AB InBev and a
third party considering such other factors as AB InBev and the Company may deem
relevant in the end-market.
If AB InBev and the Company agree prior to the Listing Date that any
existing import price continues to be on an arm’s length basis, on normal
commercial terms and is fair and reasonable to the Company under an existing
agreement, then such import price will continue in effect for the remaining term
of such contract subject to the terms of the Importation Framework Agreement.
– 202 –
CONNECTED TRANSACTIONS
On 2 July 2019, the Company and AB InBev entered into the Production Framework
Agreement effective on the Listing Date for a 25 year term, pursuant to which AB InBev
will agree to procure members of the AB InBev Group to grant, subject to limited
exceptions, the relevant Group members: (i) exclusive licenses to manufacture AB InBev
Products in consumer-ready form for sale in the APAC Territories, and sell and distribute
AB InBev Products in the APAC Territories and (ii) non-exclusive licenses to advertise
and promote AB InBev Products in the APAC Territories.
The licenses granted will be subject, in particular, to (i) the terms of agreements
between the AB InBev Group and third parties existing as of the date of the Production
Framework Agreement, and (ii) any limitations in the licenses granted to the AB InBev
Group.
The respective Group member and AB InBev Group member shall enter into
subsidiary agreements which will set out more specific terms and conditions based on
the principles and terms of the Production Framework Agreement. The subsidiary
agreements will set out, among other terms, the licensee and licensor, license scope,
territory, duration, royalty, payment and credit terms, quality control, and other license
terms.
The license royalty will be determined among the respective parties from time
to time on an arm’s length basis.
– 203 –
CONNECTED TRANSACTIONS
The Company and AB InBev will periodically (and in any event not less than
once every five years) retain an accounting or tax advisor to produce a benchmark
transfer pricing report on global pricing and royalties in the applicable product
markets to determine the appropriate market rate royalty bands for products
positioned in each relevant market (e.g., Super Premium, Premium, Core+, Core
and Value) with respect to the royalty under the Licenses to Manufacture.
The royalty will be assessed as a percentage of net sales. AB InBev and the
Company will agree the royalty to each AB InBev Product based on the benchmark
transfer pricing report with reference to (a) the positioning of the relevant AB InBev
Product in the end-market, (b) comparable royalties charged by the AB InBev Group
to current or recently former third-parties, (c) the duration such product has been
present in the relevant market and the product introduction strategy, and (d) such
other factors as AB InBev and the Company may deem relevant.
If AB InBev and the Company agree prior to the Listing Date that any
existing royalty continues to be on an arm’s length basis, on normal
commercial terms and is fair and reasonable to the Company under an existing
agreement, then such royalty will continue in effect for the remaining term of
such contract subject to the terms of the Production Framework Agreement.
Reasons for and benefits of the Licenses to Import and the Licenses to
Manufacture
– 204 –
CONNECTED TRANSACTIONS
While the Group will pay more import price and royalty as AB InBev Products’
sales volume increases, such increase of payment to the AB InBev Group will be
driven by the sale of AB InBev Products in the APAC Territories through the efforts
of the Group rather than other factors within AB InBev’s control.
Under the requirements of the Listing Rules, the agreement for continuing
connected transactions must not exceed three years except in special
circumstances where the nature of the transactions requires them to be of a longer
period. The Directors believe that the 25 year term arrangement of the Licenses to
Import and the Licenses to Manufacture (the “Licenses”) is appropriate and
necessary on the basis of the following:
• given the importance of the Licenses, it is crucial for the Group to secure
stable access to AB InBev Products for as long a term as it can negotiate
in order to generate associated revenue and cash flows from such sales;
• the 25 year term is in line with general practice of the industry and
comparable contractual arrangements by fast-moving consumer goods
(“FMCG”) companies. Based on research conducted by the Joint
Sponsors, it is not uncommon that multinational FMCG companies have
similar long-term licensing arrangements and some of the term of such
arrangements could be as long as over 40 years.
Implications under the Listing Rules for Licenses to Import and Licenses to
Manufacture
As the highest applicable percentage ratio (as set out in Rule 14.07 of the
Listing Rules) with respect to each of the Licenses to Import and the Licenses to
Manufacture is, on an annual basis, expected to be more than 5%, such
transactions are considered to be non-exempt continuing connected transactions
subject to reporting, annual review, announcement and independent shareholders’
approval requirements under Chapter 14A of the Listing Rules.
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As such, the Company has applied to the Stock Exchange, and the Stock
Exchange has granted the Company, a waiver pursuant to Rule 14A.105 of the
Listing Rules from strict compliance with the announcement and (in respect of the
Licenses to Import) independent shareholders’ approval requirements under Rule
14A.35 and 14A.36 of the Listing Rules in respect of the Licenses.
Under Rule 14A.53 of the Listing Rules, the listed issuer must set an annual
cap for the continuing connected transactions. The Directors believe that is
impracticable and extremely difficult to set annual caps for the Licenses. Therefore,
the Company applied to the Stock Exchange for, and the Stock Exchange has
granted to the Company, a waiver under Rule 14A.105 of the Listing Rules from
strict compliance with the annual cap requirements on the basis, and (where
applicable) conditional on, the following and allowed us not to set annual caps for
transactions contemplated under the Licenses within their terms, being 25 years:
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• The report will determine the appropriate market rate royalty bands
for products positioned in each relevant market with respect to the
royalty under the Licenses to Manufacture to ensure that its pricing
policies remain on an arm’s length basis.
• Full disclosure. This prospectus will clearly disclose the key terms
including pricing policies of the Licenses. The Company will disclose in its
annual reports the aggregate fees paid under each of the Licenses to
Import and Licenses to Manufacture.
• Joint Sponsors’ view. In light of the nature of the transactions under the
Licenses, the pricing principles and the impracticality of setting definitive
caps over an extended term of the licensing agreements, as well as the
market precedents, the Joint Sponsors concur with the view of the
Directors that the absence of annual caps is fair and reasonable to the
Company and its shareholders as a whole and would allow more flexibility
to the Company especially considering future business development and
business expansion.
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3. Cash Pooling Arrangements in place between the AB InBev Group and the
Group
The Group participates in the AB InBev Group’s cash pooling arrangements (the
“Cash Pooling Arrangements”), under which funds from different participants are
consolidated into the AB InBev Group’s cash pool accounts with the London branch of
J.P. Morgan Chase Bank N.A. (the “Pooling Agent”). Participants may make deposits or
draw overdrafts from the cash pool (which also allows participants access to an overdraft
facility) and Group members and AB InBev Group members are treated the same under
the arrangements. The intention of the Cash Pooling Arrangements is to enhance
efficiency in the deployment of funds between participants and leverage the collective
bargaining power of the combined group regarding terms for deposits and overdrafts.
The Pooling Agent offers the services under the Cash Pooling Arrangements as part of
its usual and ordinary course of business.
The Group intends to continue to participate in the AB InBev Group’s physical and
notional Cash Pooling Arrangements at its discretion for an initial term of five years after
the Listing Date, renewable for successive five year terms, subject to re-compliance with
the Listing Rules. There is no immediate plan to set up the Group’s own cash pool
following listing.
There are two forms of cash pooling in place: physical and notional. The physical
Cash Pooling Arrangement consolidates cash from the physical pool participants’ bank
accounts on a regular basis into a centralized cash pool account. The notional Cash
Pooling Arrangement notionally consolidates the cash balance from the notional cash
pool participants’ own bank accounts and does not transfer the bank balance to a
centralized cash pool account.
In Australia, the relevant members of the Group participate in the physical cash pool
through a centralized bank account of Cobrew NV/SA, a wholly-owned subsidiary of AB
InBev, opened with the Pooling Agent. The arrangement is effectively one that:
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Under the notional Cash Pooling Arrangements, the deposits and overdrafts from
the bank accounts are held with the Pooling Agent under the name of the cash pooling
participants from the Group. There is therefore no lending or borrowing relationship
between the Group and members of the AB InBev Group, although each participant is
jointly and severally liable to the Pooling Agent for other participants’ obligations as
described below.
Certain members of the Group, for example in Japan, also currently receive current
account services to a much smaller extent from Cobrew NV/SA, with whom they may
make deposits or draw overdrafts. Following the Listing Date, such services will be part
of, and be subject to the same terms and conditions of, the Cash Pooling Arrangements.
No entities of the Group from India, Vietnam and South Korea currently participate
in the Cash Pooling Arrangements as such arrangements are not permitted in their
respective jurisdictions, but they may participate in the future if laws of the relevant
jurisdiction permit participation in the Cash Pooling Arrangements.
Listing Rules implications for the deposits made by the Group in AB InBev Group’s
cash pool accounts
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• Favorable interest rates: Given the size of the AB InBev Group’s cash pool
(including the Group’s cash pool), the Group is likely to receive more favorable
terms for deposits and overdrafts by remaining in the AB InBev Group’s cash pool
than it would by setting up a separate Group cash pool or by having separate bank
accounts for Group members where some have deposits and others have
overdrafts or loans.
• Better use of short term cash surpluses: Where the Group has short term cash
surpluses, the Cash Pooling Arrangements allow the Group to receive interests on
them, thereby contributing to shareholder value.
• Efficiency and ease of withdrawal: Under the Cash Pooling Arrangements, the
Company can withdraw from the cash pool at any time during business hours in
immediately available funds, up to the maximum overdraft amount, allowing the
Group to have access to liquidity faster than from other banks or financial
institutions. In the future, as the Company’s business grows, the Company and AB
InBev will consider increasing the maximum overdraft amount to reflect the growing
size of the Company’s operations, offering additional liquidity for the Group.
• Better understanding and familiarity with business needs: As the Group has
been part of the AB InBev Group’s Cash Pooling Arrangements, the AB InBev
Group is familiar with the capital structure, business operations, capital
requirements and cash flow model of the Group, enabling it to be in a better position
to anticipate the Group’s funding needs. In addition, access to the AB InBev
Group’s cash pool also enables the Company to make better use of the financial
advice (including treasury advice) services under the Strategic Services
Framework Agreement which the Group will receive from the AB InBev Group by
having the same terms and relationship with the Pooling Agent in respect of cash
pooling.
• Reduction of counterparty risk: Given the notional cash pool accounts are held
with the Pooling Agent, the counterparty risk is lower than accounts held with local
or regional banks in the APAC Territories. In respect of physical cash pooling,
although there is no separate credit rating of Cobrew NV/SA, the Group will have
access to Cobrew NV/SA’s annual financial statements filed with, and publicly
available via the website of, the National Bank of Belgium to monitor any
counterparty risk. The Group has also put in place internal control measures as
described below to manage counterparty risk, including management and
monitoring of the Cash Pooling Arrangements by the Group’s experienced treasury
team; however, as is the case with bank deposits, it is not possible to completely
eliminate the risk of failing to fully receive the funds deposited with accounts
headed by Cobrew NV/SA, as disclosed in “Risk Factors – Risks Relating to Our
Business – We are subject to risks from our participation in certain cash pooling
arrangements with the AB InBev Group.”
• Additional option for liquidity: The Group may continue to deposit with or lend
from banks or financial institutions and it is at its sole discretion to deposit or lend
from the AB InBev Group’s cash pool exclusively (or at all) under the Cash Pooling
Arrangements. The Cash Pooling Arrangements provide a more efficient
alternative for the Group to source liquidity for its future business development,
including acquisitions, and encourage other banks and financial institutions to
provide more competitive terms to the Group.
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• Term: Given the significance of the existing Cash Pooling Arrangements with the
AB InBev Group, the Company will enter into a cash pooling agreement for a term
of five years effective on the Listing Date, which is renewable automatically for
successive terms of five years. When the cash pooling agreement is renewed upon
the expiry of the initial or successive five year term, the Company will be required
to comply with all the applicable reporting, announcement and independent
shareholders’ approval requirements under Chapter 14A of the Listing Rules at that
time in respect of the renewal subject to any waivers which may be granted by the
Stock Exchange from strict compliance with any of the applicable requirements.
• The Company’s sole discretion to use cash pooling: While the Cash Pooling
Arrangements have an initial term of five years, it does not create any binding
obligation or commitment on the part of the Group to participate in such
arrangements. As such, the Company could, at its own discretion, reduce the scale
of its participation or cease to participate at any time during the term. The AB InBev
Group has no right under the Cash Pooling Arrangements to require the Group to
make deposits or withdrawals in its accounts. Accordingly, the five year term for the
arrangements aims to provide a readily available framework for the Group, should
it choose to do so, to access the liquidity provided through the Cash Pooling
Arrangements.
• Joint and several liability for notional Cash Pooling Arrangements: Under the
notional Cash Pooling Arrangements, each participant is jointly and severally liable
to the Pooling Agent for other participants’ obligations under the cash pooling
agreements entered into with the Pooling Agent. However, the joint and several
liability of each participant is capped to the extent of its individual credit balance in
its pooled account under the terms of the cash pooling agreements entered into with
the Pooling Agent (rather than due to the parent guarantee provided by AB InBev as
described below) and the Pooling Agent is only allowed to seize funds from the
pooled accounts (and not participants’ other accounts).
• Several liability for physical Cash Pooling Arrangements: Under the physical
Cash Pooling Arrangements, each participant is severally (but not jointly) liable to
Cobrew NV/SA and therefore each participant is only liable to the extent of the
amount it has withdrawn from Cobrew NV/SA, and the maximum risk exposure of
each participant is the amount it deposited with Cobrew NV/SA.
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• Change of Pooling Agent: AB InBev will from time to time review the risk profile of
the Pooling Agent and the interest rates provided by the Pooling Agent to ensure
that the counterparty risk remains appropriate and the interest rates are
competitive. If a change of Pooling Agent results in a material change in the terms
of the Cash Pooling Arrangements, the Company will re-comply with the
requirements of Chapter 14A of the Listing Rules.
As the deposits made by the Group in the AB InBev Group’s cash pool accounts are
expected to continue on a recurring and continuing basis and are fully disclosed in this
prospectus, the Company considers that strict compliance with the announcement and
independent shareholders’ approval requirements would be impractical, unduly
burdensome and would impose unnecessary administrative cost upon the Company.
As such, the Company has applied to the Stock Exchange for, and the Stock
Exchange has granted the Company, a waiver pursuant to Rule 14A.105 of the Listing
Rules from strict compliance with the announcement and independent shareholders’
approval requirements under Rule 14A.35 and 14A.36 of the Listing Rules in respect of
the Cash Pooling Arrangements.
Based on the following reasons and grounds, the Company considers that the
five-year term for the Cash Pooling Arrangements is appropriate and necessary:
• given the benefits of the Cash Pooling Arrangements as set out above, it is
necessary for the Group to secure a stable long-term arrangement of cash
pooling services so that it has a readily available avenue to access funds and
liquidity;
• as the Cash Pooling Arrangements are part of the AB InBev Group’s modus
operandi from an operational point of view, the five year term allows continuity
of the existing arrangements and provides certainty, comfort and protection to
Group, and reduces the administrative burden of re-appointing a cash pooling
service provider annually or every three years;
• the five year term provides long term certainty allowing the Group to plan its
funding requirements for capital expenditure and merger and acquisition
activities over the longer period. If the Cash Pooling Arrangements were to be
renewed frequently, the uncertainty of sources of funds may hinder the
Group’s ability to plan efficiently in the longer term, thereby disrupting its
business;
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• when the Group requires funding, for example to construct a new brewery or
invest in equipment or facilities, it could draw overdrafts from the cash pool
which could remain over a longer period rather than negotiate individual loans
with third party financial institutions, which would divert management time and
resources from concentrating on the underlying business;
• the Group has over 500 bank accounts held with different banks across the
APAC Territories. Subject to local regulations of such jurisdiction, excess cash
from the relevant accounts are consolidated into 11 bank accounts which
participate in the Cash Pooling Arrangements, allowing the Group to benefit
from the interest rates negotiated by AB InBev centrally;
• the long term nature of the arrangements provides comfort that the Group
would not be required to spend unnecessary time, costs and resources to set
up alternative cash pooling arrangements or negotiate the terms of short term
deposits with various banks, which would be administratively burdensome;
• the interest rates for individual accounts within the Group would unlikely be as
attractive as the rates provided to the Group on a consolidated basis through
the Cash Pooling Arrangements; and
• the five year term is in line with normal business practice in an international
spin off context and is consistent with normal industry practice. Based on the
research conducted by the Joint Sponsors, there are multinational groups
which put in place similar cash pooling arrangements with perpetual term.
Pricing policy
In respect of the notional cash pool, the deposit interest rates offered by the Pooling
Agent will be the base rate of the Pooling Agent for overnight cash positions. Such base
rate will be calculated by reference to (i) the prevailing overnight market rates and (ii) the
competitive rates driven by the Pooling Agent’s ability to deploy cash in daily currency
markets.
In respect of the physical cash pool, the deposit interest rates offered by Cobrew
NV/SA will be set with reference to the deposit interest rates offered by the Pooling Agent
or by other third party financial institution providing cash pooling services to Cobrew
NV/SA.
The terms of the deposits offered to the Group by the Pooling Agent or Cobrew
NV/SA in respect of the notional and physical cash pool will at all times reflect the terms
offered by the Pooling Agent or by other third party financial institution to the AB InBev
Group for deposits (without any additional charges) and will be on arm’s length basis.
In respect of the notional cash pool, the interest rates offered on overdrafts by the
Pooling Agent will be set with reference to the base rate of the Pooling Agent for
overnight cash positions. Such base rate will be calculated by reference to: (i) the
prevailing overnight market rates and (ii) the competitive rates driven by the Pooling
Agent’s ability to deploy cash in daily currency markets.
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In respect of the physical cash pool, the interest rates offered on overdrafts by
Cobrew NV/SA in respect of the physical cash pool will be set with reference to the
interest rates offered on overdrafts by the Pooling Agent or by other third party financial
institution providing cash pooling services to Cobrew NV/SA.
The terms of the overdrafts offered to the Group by the Pooling Agent or Cobrew
NV/SA in respect of the notional and physical cash pool shall at all times reflect the terms
offered by the Pooling Agent or by other third party financial institution to the AB InBev
Group for overdrafts (without any additional charges) and will be on arm’s length basis.
Overdrafts made from the cash pool do not require the Group to pledge any security
over its assets.
Cobrew NV/SA charges all cash pool participants a service fee for participation in
its physical cash pooling arrangements based on a cost plus basis. Based on unaudited
internal treasury data currently available, the fee charged to the Group for the year 2017
was approximately EUR40,000, respectively. Such cash pooling service fee is charged
on normal commercial terms and will constitute a fully de minimis exempted transaction
under Rule 14A.76 of the Listing Rules.
Net balance
The Group has traditionally been a net contributor to the cash pool by way of
deposits. In return, the Company receives interest on those deposits. In particular:
(a) the Group has had a net balance throughout the years ended 31 December
2017 and 2018 and the three months ended 31 March 2019;
(b) as at 31 December 2017 and 2018 and 31 March 2019, the net balance in the
Group’s cash pool accounts was approximately USD198 million, USD906
million and USD699 million, respectively 1; and
(c) during the year ended 31 December 2018 and the three months ended 31
March 2019, the ranges of daily net balance in cash pool accounts of the
Group’s Australian entities and Hong Kong entities (including those placed
from the PRC entities via the Hong Kong entities) were between approximately
USD141 million and USD965 million and USD645 million and USD1,048
million, respectively.
1 As at 31 December 2017, the deposits placed in the notional cash pool were approximately USD248
million (offset by overdrafts of USD45 million) and the overdrawn amount in the physical cash pool was
approximately USD5 million. As at 31 December 2018, the deposits placed in the notional and physical
cash pools were approximately USD781 million (offset by overdrafts of USD45 million) and
approximately USD170 million, respectively. As at 31 March 2019, the deposits placed in the notional
and physical cash pools were approximately USD591 million (offset by overdrafts of USD45 million)
and approximately USD153 million, respectively. For the purposes of the historical financial information
of the Group, during the Track Record Period and subsequently thereafter until immediately prior to the
Listing, amounts in the physical cash pool are included within AB InBev capital which reflects the net
funding position between the Group and AB InBev. After the Listing, balances in the physical cash pool
will create a receivable or payable between the relevant Group member and AB InBev Group member.
Please refer to notes 1.2 and 2.27 in “Appendix I – Accountant’s Report”.
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The highest daily deposits amounts and highest daily overdraft amounts in the year
ended 31 December 2018 and the three months ended 31 March 2019 (reached on
different dates) of the Group’s Australian entities and Hong Kong entities (including
those placed from the PRC entities via the Hong Kong entities) were approximately as
follows:
Three
Year ended months ended
31 December 31 March
2018 2019
During the year ended 31 December 2018 and the three months ended 31 March
2019, the ranges of deposits placed by the Australian entities and Hong Kong entities
(including those placed from the PRC entities via the Hong Kong entities) within the
Group were approximately as follows:
Lowest amount of
deposits placed USD4 million USD169 million USD238 million USD581 million
Highest amount of
deposits placed USD289 million USD365 million USD793 million USD781 million
Caps
The Company will set the following maximum daily caps on the amount of deposits
(including interest accrued thereon) in the Cash Pooling Arrangements during the five
year term:
Maximum daily
amount of USD2.45 USD2.45 USD2.75 USD3.00 USD3.00
deposits billion billion billion billion billion
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The maximum daily caps have been determined after considering the historical
transaction amounts, the anticipated interest on deposits and the following factors which
are expected to increase the amount of deposits after the Listing Date:
• Excess cash from Australia: The amount of deposits from the Australian
entities increased over the course of 2018. The Company expects its
Australian business to continue to generate revenue and cash flow growth in
2019 and in the future with excess cash that can be deposited in the cash pool;
• Increase in PRC cash pooling limit: The Company plans to move the
Group’s PRC cash pooling arrangements during 2019 to the Shanghai Free
Trade Zone, where it will be allowed to deposit 100%, rather than the current
50%, of the equity of the Group’s PRC entities that participate in the intra-
Group cross-border cash pooling arrangements, and therefore would benefit
from additional funds being allowed to be deposited in the cash pool; and
• Buffer: A reasonable buffer of around 7% to ensure that the cap will allow the
Group to benefit from the Cash Pooling Arrangements as much as its capital
allocation requires.
As the entire net proceeds from the Global Offering will be used immediately to
repay the Shareholder Loan (as further described in “History, Development and
Reorganization – Our Reorganization”), the amount of deposits in the Cash Pooling
Arrangements will not be increased as a result of the Global Offering. As such, the
Company did not consider the net proceeds from the Global Offering when determining
the maximum daily caps.
Listing Rules implications for overdrafts provided by the AB InBev Group’s cash
pool accounts to the Group
As the overdrafts drawn by the Group provided by the AB InBev Group’s cash pool
accounts to Group will be conducted on normal commercial terms or better and the
relevant overdrafts will not be secured by the assets of the Group, such overdrafts will be
exempt from all reporting, announcement, annual review and independent shareholders’
approval requirements pursuant to Rule 14A.90 of the Listing Rules.
The AB InBev Group and the Group will put in place the following internal control
measures:
• Experienced staff – both the AB InBev Group and the Group will continue to
have experienced treasury staff overseeing and monitoring the operation of
the cash pool.
• Independent quotes – the Group’s treasury team will review quotes from
independent financial institutions for similar deposit services on a regular
basis to ensure the rates provided by the Pooling Agent are on normal
commercial terms or better.
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• Automatic alerts – the Company will set up an alert system when the total
deposits reach 80%, 90% and 95% of the cap.
• Close monitoring – the Group’s treasury team will closely monitor the Cash
Pooling Arrangements and check the maximum daily balances on a regular
basis to ensure the relevant amounts will not exceed the cap.
• Annual inspection – the Group’s auditors will review and confirm the
transactions under the Cash Pooling Arrangements have been entered into in
accordance with the cash pooling agreement and the cap has not been
exceeded. AB InBev will facilitate any annual inspection by the Company,
including inspection of all information and records required by the Company’s
auditors to report on the relevant transactions.
On 2 July 2019, the Company and AB InBev entered into the Strategic Services
Framework Agreement effective on the Listing Date for a 10 year term, pursuant to which
AB InBev will agree to procure members of the AB InBev Group to provide strategic
advice and support services in relation to (1) management support, (2) marketing, (3)
supply, (4) human resources, (5) finance, (6) legal and corporate affairs, and (7)
innovation and R&D, to members of the Group.
The respective Group member and AB InBev Group member shall enter into
subsidiary agreements which will set out more specific terms and conditions based on
the principles and terms of the Strategic Services Framework Agreement. The
subsidiary agreements will set out, among other terms, the service provider and
recipient, duration, price, payment terms and other service terms.
The Strategic Services Framework Agreement will have a term of 10 years effective
on the Listing Date.
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The payment terms will be determined among the respective parties from time to
time on an arm’s length basis.
Costs incurred by the AB InBev Group to deliver the strategic services (except for
certain innovation and R&D services) will be centralized and mapped onto cost and
functional centers, which will be on-charged to the service recipients. Where services
directly benefit a particular service recipient, the costs will be directly charged to such
service recipient. Where services benefit a number of service recipients (some of which
are subsidiaries of the Group and others are other subsidiaries of AB InBev), the costs
will be allocated based on specific direct cost drivers, or indirect allocation keys, which
reasonably reflect the service recipients’ economic benefit from such services. AB InBev
and the Company will agree the direct and indirect allocation keys intended to reflect the
benefit received by each subsidiary of the Company from such strategic service.
For technical value engineering projects provided under innovation and R&D
services, the fee charged will be calculated based on a percentage of savings generated
by the technological innovations made available to the service recipient. The initial fee in
2019 will be based on 50% of savings generated by such technological innovations.
The mark-up or fee payable may be reviewed periodically and adjusted, including
retrospectively, to the extent an adjustment is necessary to ensure that the payments are
on an arm’s length basis as mutually agreed by the parties.
The following strategic services will be provided, including, among others, the
provision of global advisory services, implementation of policies, guidelines, and best
practices, provision of training relating to:
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(4) Human resources – implementation of global people policies and cycle; advice
on talent recruitment; learning and development initiatives; leadership
cultivation.
(6) Legal and corporate affairs – global consultancy on legal and compliance
matters; protection of global brands; global communications and media
relations.
(7) Innovation and R&D – implementation of global innovation and technology and
R&D activities including technical value engineering projects and commercial
consumer driven and brand driven innovation projects.
Generally, invoices will be issued on a monthly basis which must be paid within 20
days following the month of invoice, but the parties may agree different payment
arrangements depending on the specific circumstances of each subsidiary agreement.
During the Track Record Period, the transaction amounts for the Strategic Services
provided to the Group and Administrative Services provided to the Group (as described
below) were recorded on a combined basis. The historical figures of the Strategic
Services and Administrative Services provided to the Group are USD21 million, USD37
million and USD9 million for the years ended 31 December 2017 and 2018 and the three
months ended 31 March 2019, respectively.
The annual caps have been calculated on the basis of the historical transaction
amounts and the anticipated services and estimated fees that will be provided in the
coming years. The service fees increased from 2017 to 2018 as a result of certain
service fees being charged back to the Group from the AB InBev Group whereas
previously the cost of providing such services would have been borne by the AB InBev
Group. It is anticipated that following the Listing, the cost of all Strategic Services and
Administrative Services provided to the Group would be borne by the Group rather than
the AB InBev Group.
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At the end of 2021, the Company will re-comply with the reporting, announcement
and independent shareholders’ approval requirements under Chapter 14A of the Listing
Rules, where and if applicable, including the requirements for the setting of new
monetary annual caps for the maximum aggregate fees payable for the Strategic
Services for an additional three year period.
On 2 July 2019, the Company and AB InBev entered into the Procurement Services
Framework Agreement effective on the Listing Date for a 10 year term, pursuant to which
AB InBev will agree to procure members of the AB InBev Group to provide procurement
services to members of the Group.
The respective Group and AB InBev Group member shall enter into subsidiary
agreements which will set out more specific terms and conditions based on the principles
and terms of the Procurement Services Framework Agreement. The subsidiary
agreements will set out, among other terms, the service provider and recipient, duration,
price, payment terms and other service terms.
The payment terms will be determined among the respective parties from time to
time on an arm’s length basis.
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The fee charged to provide the procurement services will be calculated based on a
percentage of realized and demonstrated annual cost savings capped by a percentage
of the service recipient’s direct and indirect annual spend for products and services in
respect of which the service recipient receives procurement services. Realized and
demonstrated annual cost savings is composed of variable industrial cost savings,
indirect savings (cost savings or increase, cost avoidance, value creation), and variable
logistic costs savings.
The initial fee in 2019 will be based on 50% of realized and demonstrated annual
cost savings capped by 6% of the service recipient’s annual strategic spend categories.
The split of cost savings and the cap may be reviewed periodically and adjusted,
including retrospectively, to the extent necessary to ensure the payments are on an
arm’s length basis as mutually agreed by the parties.
Generally, invoices will be issued three times per year which must be paid within 20
days following the month of invoice, but the parties may agree different payment
arrangements depending on the specific circumstances of each subsidiary agreement.
The historical figures of the Procurement Services provided to the Group for the
relevant period are USD69 million, USD60 million and USD(1) million1 for the years
ended 31 December 2017 and 2018 and the three months ended 31 March 2019,
respectively.
The annual caps of the Procurement Services to be provided for each of the three
years ending 31 December 2019, 2020 and 2021 are USD83 million, USD88 million and
USD93 million, respectively.
The annual caps have been calculated on the basis of the historical transaction
amounts and the anticipated procurement services to be provided and estimated future
cost savings and strategic spend categories based on currently available information to
the Company. As the procurement fee is calculated as a percentage of realized and
demonstrated annual cost savings and the maximum cap is based on a percentage of the
service recipient’s annual strategic spend categories, it is difficult to anticipate the
estimated fee, and as such, the Company has included a reasonable buffer of 20% in the
annual caps.
1 The amount incurred by the Group for 1Q2019 was negative as a result of a credit note issued by the
AB InBev Group in 1Q2019 resulting from the true-up of the originally estimated transaction amount in
2018.
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At the end of 2021, the Company will re-comply with the reporting, announcement
and independent shareholders’ approval requirements under Chapter 14A of the Listing
Rules, where and if applicable, including the requirements for the setting of new
monetary annual caps for the maximum aggregate fees payable for the Procurement
Services for an additional three year period.
Reasons for and benefits of the Strategic Services and Procurement Services
Prior to the Listing Date, the AB InBev Group has been providing Strategic Services
and Procurement Services to the Group. Such arrangements are part of the AB InBev
Group’s modus operandi from an operational point of view and the transactions are
entered into by the Group in the ordinary and usual course of business based on the
Company’s business needs in order to carry out and support the Company’s business
activities. The Company is able to select freely among connected persons or
independent third parties to provide such services.
The Strategic Services provided to the Group allow the Group to benefit from AB
InBev’s global industry experience and knowledge to enhance the effectiveness of
regional management in all areas of activities, as well as allowing AB InBev to support its
brands licensed to the Group under the Licenses by providing global management
support, legal and corporate affairs, human resources, finance services, marketing,
sales and supply services to Group that are aligned with the global brand and strategy of
AB InBev. For example,
The Procurement Services provided to the Group allow the Group to remain
competitive by leveraging the economies of scale and bargaining power of the AB InBev
Group to source products (such as raw materials) and services required for the
Company’s operations from third parties at a lower cost than if the Group had sourced
such products and services on its own or through an independent third party
procurement agent. This is also an efficient way to facilitate maintaining the quality of AB
InBev Products manufactured by the Group consistent and aligned with the quality of
those manufactured globally by the AB InBev Group.
10 year term arrangement for the Strategic Services and the Procurement Services
Under the requirements of the Listing Rules, the agreement for continuing
connected transactions must not exceed three years except in special circumstances
where the nature of the transactions requires them to be of a longer period. The Directors
believe that the 10 year term arrangement of the Strategic Services and the Procurement
Services is appropriate and necessary on the basis of the following:
• the 10 year term provides certainty, stability and protection to the Group that it
can continue to leverage the AB InBev Group’s global industry knowledge and
experience in the form of the Strategic Services provided to the Group to
develop the APAC Territories markets, enabling the Group to plan and invest
over the longer term more effectively;
– 222 –
CONNECTED TRANSACTIONS
• given the expected cost savings that would result from the Procurement
Services provided to the Group, it is crucial for the Group to secure as long a
term as it can negotiate;
• given that the Company will enter into the Licenses to Manufacture with a term
of 25 years to manufacture AB InBev Products locally within the APAC
Territories, it is necessary that the Company also enters into a long term
procurement agreement to ensure that it has ready access to suppliers (such
as raw material suppliers) procured by the AB InBev Group to ensure
consistent quality of AB InBev Products;
• given the AB InBev Group’s global presence and industry experience and
knowledge, it would be beneficial for the development of the Group’s business
to secure as long a term for the Strategic Services and the Procurement
Services as it can negotiate; and
• the 10 year term is not uncommon in a spin off context and is consistent with
normal industry practice; based on research conducted by the Joint Sponsors,
with respect to international companies with subsidiaries that are separately
listed, it is relatively common to have long term arrangements for the provision
of parent companies’ services to, or shared services with, the listed
subsidiaries. While the term varies, it is not unusual that such term is 10 years
or more.
On 2 July 2019, the Company and AB InBev entered into the General Services
Framework Agreement effective on the Listing Date for a three year term, pursuant to
which AB InBev will agree to procure members of the AB InBev Group to provide IT
services, outsourcing services and other administrative services, to members of the
Group.
The respective Group and AB InBev Group member shall enter into subsidiary
agreements which will set out more specific terms and conditions based on the principles
and terms of the General Services Framework Agreement. The subsidiary agreements
will set out, among other terms, the service provider and recipient, duration, price,
payment terms and other service terms.
– 223 –
CONNECTED TRANSACTIONS
Any subsidiary agreement under the General Services Framework Agreement may
be terminated if (a) there is a material breach of the agreement, (b) there is non-payment
of amounts owed thereunder, subject to a grace period, or (c) upon the parties’ mutual
written consent.
The payment terms will be determined among the respective parties from time to
time on an arm’s length basis in accordance to the pricing policy for strategic services as
described under “4. Strategic Services provided by the AB InBev Group to the Group”
above.
The AB InBev Group will provide the Group with IT services, including development,
implementation and rollout of IT tools and technology and information and business
systems; coaching; service desk, IT asset management and cybersecurity services,
outsourcing services and other administrative services.
Generally, invoices will be issued on a monthly basis which must be paid within 20
days following the month of invoice, but the parties may agree different payment
arrangements depending on the specific circumstances of each subsidiary agreement.
See “Strategic Services provided by the AB InBev Group to the Group – Historical
transaction amounts and annual caps” above.
As the highest applicable percentage ratio (as set out in Rule 14.07 of the Listing
Rules) with respect to (1) the Strategic Services, (2) the Procurement Services, and (3)
the Administrative Services (collectively, the “Services”), on an aggregated and annual
basis, is expected to be more than 0.1% but less than 5%, such transactions are
considered to be partially exempt continuing connected transactions subject to
reporting, annual review and announcement requirements under Chapter 14A of the
Listing Rules.
Waiver from strict compliance with announcement requirement for the Services
As the Services are expected to continue on a recurring and continuing basis and
has been fully disclosed in the prospectus and will be disclosed in the annual reports of
the Company on an on-going basis, the Company considers that strict compliance with
the announcement requirement would be impractical, unduly burdensome and would
impose unnecessary administrative cost upon the Company. As such, the Company has
applied to the Stock Exchange, and the Stock Exchange has granted the Company a
waiver pursuant to Rule 14A.105 of the Listing Rules from strict compliance with the
announcement requirement under Rule 14A.35 of the Listing Rules in respect of the
Services.
– 224 –
CONNECTED TRANSACTIONS
(1) the Group will comply with and monitor compliance on an on-going basis with
the Transfer Pricing Guidelines for Multinational Enterprises and Tax
Administrations published by the Organisation for Economic Co-operation and
Development when entering into the relevant continuing connected
transactions;
(2) the finance department of the Company will review the transaction amounts of
relevant continuing connected transactions and conduct analysis of the data at
least quarterly to manage the connected transactions;
(4) the Independent Non-executive directors and auditors will conduct annual
review of the Non-exempt Continuing Connected Transactions and provide
annual confirmations (as applicable) in accordance with the Listing Rules that
the Non-exempt Continuing Connected Transactions are conducted in
accordance with the terms of the relevant agreements, on normal commercial
terms and in accordance with the pricing policy and do not exceed the
proposed applicable annual caps;
(5) the Company will formulate internal guidelines according to the Listing Rules,
which provide approval procedures for connected transactions including:
(b) the Company will seek additional approvals in advance for continuing
connected transactions exceeding the proposed annual caps (if
applicable); and
(6) in relation to the Licenses to Manufacture, the Company and AB InBev will
periodically (and in any event not less than once every five years) retain an
accounting or tax advisor to produce a benchmark transfer pricing report on
global pricing and royalties to determine the appropriate market rate royalty
bands for products positioned in each relevant market with respect to the
royalty under the Licenses to Manufacture to ensure that the pricing policy is
on arm’s length basis.
– 225 –
CONNECTED TRANSACTIONS
The Group has granted the AB InBev Group exclusive licenses to import for sale,
sell and distribute, and non-exclusive licenses to advertise and promote, the Group’s
products outside of Asia Pacific pursuant to which the AB InBev Group will import the
relevant products from the Group for sale outside of Asia Pacific, on substantially the
same terms as the Licenses to Import granted to the Group as described above.
The Group has also granted the AB InBev Group exclusive licenses to manufacture
in consumer-ready form for sale outside of the APAC Territories, sell and distribute, and
non-exclusive licenses to advertise and promote the Group’s products outside of the
APAC Territories pursuant to which the AB InBev Group will manufacture the relevant
products outside of the APAC Territories for sale, on substantially the same terms as the
Licenses to Manufacture granted to the Group as described above.
As the transactions under the licenses granted to the AB InBev Group described
above will be conducted in the ordinary and usual course of business and on normal
commercial terms, and each of the applicable percentage ratios (other than the profits
ratio) for such transactions under each license calculated in accordance with Rule 14.07
of the Listing Rules is expected to be below 0.1% on an annual basis, such transactions
under each license fall within the de minimis threshold as stipulated under Rule
14A.76(1) of the Listing Rules and are fully exempt from the reporting, annual review,
announcement and independent shareholders’ approval requirements.
The Group may provide certain strategic advice and support services in relation to
(1) management support, (2) marketing, (3) supply, (4) human resources, (5) finance, (6)
legal and corporate affairs, and (7) innovation and R&D to the AB InBev Group from time
to time, on substantially the same terms as the Strategic Services provided to the Group
as described above.
– 226 –
CONNECTED TRANSACTIONS
The Group may provide IT, outsourcing and other administrative services to the AB
InBev Group, on substantially the same terms as the Administrative Services provided to
the Group as described above.
As the services provided by the Group described above will be conducted in the
ordinary and usual course of business and on normal commercial terms, and each of the
applicable percentage ratios (other than the profits ratio) for such transactions on an
aggregated basis calculated in accordance with Rule 14.07 of the Listing Rules is
expected to be below 0.1% on an annual basis, such transactions fall within the de
minimis threshold as stipulated under Rule 14A.76(1) of the Listing Rules and are fully
exempt from the reporting, annual review, announcement and independent
shareholders’ approval requirements.
AB InBev may settle payments to third parties, and the Company will reimburse AB
InBev (with mark-up where applicable to reflect any cost of advancing payments) for
global marketing cost, IT cost, personnel secondment cost and other costs (not
constituting services or procurement services provided to the Group) incurred by the AB
InBev Group for the Group.
As the cost reimbursements to the AB InBev Group described above, being a form
of financial assistance (as defined in the Listing Rules), are conducted on normal
commercial terms and are not secured by assets of the Group, they are fully exempt
under Rule 14A.90 of the Listing Rules.
The AB InBev Group will reimburse the Company (with mark-up where applicable to
reflect any cost of advancing payments) for marketing cost, IT cost, personnel
secondment cost and other costs (not constituting services or procurement services
provided to the AB InBev Group) incurred by the Group for the AB InBev Group.
– 227 –
CONNECTED TRANSACTIONS
The AB InBev Group provided loans and guarantees to the Group (including
overdrafts under the AB InBev Group’s cash pool accounts) prior to the Listing Date and
expects to continue to provide loans and guarantees to the Group after the Listing Date.
As such transactions, being a form of financial assistance (as defined in the Listing
Rules), are conducted on normal commercial terms and are not secured by assets of the
Group, they are fully exempt under Rule 14A.90 of the Listing Rules.
DIRECTORS’ CONFIRMATION
The Directors (including the Independent Non-executive Directors) are of the view
that:
(2) the proposed annual caps (where applicable) for the Non-exempt Continuing
Connected Transactions are fair and reasonable and in the interests of our
Shareholders as a whole; and
(3) the duration of each of the (1) Licenses to Import, (2) Licenses to Manufacture,
(3) Strategic Services, (4) Procurement Services, and (5) Cash Pooling
Arrangements is normal business practice for agreements of their types, and
the purpose of the agreements is to provide stability and certainty to the
Group’s business and that therefore the duration is fair and reasonable and in
the interests of our Shareholders as a whole.
Based on the documentation and data provided by us and participation in the due
diligence and discussion with us, the Joint Sponsors are of the view that:
(2) the proposed annual caps (where applicable) for the Non-exempt Continuing
Connected Transactions as described above are fair and reasonable and in
the interests of our Shareholders as a whole; and
(3) the duration of each of the (1) Licenses to Import, (2) Licenses to Manufacture,
(3) Strategic Services, (4) Procurement Services, and (5) Cash Pooling
Arrangements is normal business practice for agreements of their types, as
comparable contractual arrangements have similar long-term arrangements.
– 228 –
CONNECTED TRANSACTIONS
In forming a view on the above matters, the Joint Sponsors have considered,
among others, the historical terms and arrangements, the basis of the historical amounts
and their importance to the business and operations of the Company, the nature and
coverage of the licenses, the nature and coverage of the services, the rationale and
basis for determining the pricing policies or mechanism, measures to review and adjust
the pricing policies on a regular basis, the duration for similar arrangements for other
companies, and the internal controls and measures to monitor the Non-exempt
Continuing Connected Transactions.
– 229 –
DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS
Date of Date of
Appointment Joining the Principal
Name Age Position as Director Group Responsibilities
Jan Craps (楊克) 41 Executive 8 May 2019 October 2016 Responsible for the
Director and formulation of the
Chief Executive strategic direction of
Officer the Group and the
day-to-day
management of the
Group
Renrong Wang 52 Executive 10 April 2019 November Participating in the
(Frank) (王仁荣) Director, 2003 formulation of the
General business plans,
Counsel and strategic and major
Joint Company decisions and the
Secretary legal and compliance
matters of the Group
and company
secretarial matters
Carlos Brito 59 Chair of the 9 May 2019 9 May 2019 Responsible for the high
Board of level oversight of the
Directors and a management and
Non-executive operations of the
Director Group
Felipe Dutra 53 Non-executive 9 May 2019 9 May 2019 Responsible for the high
Director level oversight of the
management and
operations of the
Group
Martin Cubbon 61 Independent 2 July 2019 9 May 2019 Responsible for
Non-executive addressing conflicts
Director and giving strategic
advice and guidance
on the business and
operations of the
Group
Mun Tak Marjorie 67 Independent 2 July 2019 9 May 2019 Responsible for
Yang (楊敏德) Non-executive addressing conflicts
Director and giving strategic
advice and guidance
on the business and
operations of the
Group
Katherine King- 62 Independent Non- 2 July 2019 9 May 2019 Responsible for
suen Tsang executive addressing conflicts
(曾璟璇) Director and giving strategic
advice and guidance
on the business and
operations of the
Group
– 230 –
DIRECTORS AND SENIOR MANAGEMENT
Executive Directors
Mr. Jan Craps (楊克), aged 41, was appointed as an Executive Director on 8 May
2019 and the Chief Executive Officer of the Group on 9 May 2019. Mr. Craps is presently
the Chief Executive Officer and President of AB InBev APAC, which covers the
Company’s operations in China (including Hong Kong, Macau and Taiwan), East Asia,
South Asia, South East Asia, Australia and New Zealand, a role which he has held since
January 2019. He is also the Executive Chair of Carlton & United Breweries since
January 2019.
Mr. Craps joined AB InBev in May 2002. Prior to joining AB InBev, Mr. Craps was a
fellow with McKinsey & Company, Belgium. He acquired a range of international
experiences in a number of senior marketing, sales and logistics executive positions in
France and Belgium. In February 2011, he relocated to Canada where he was appointed
the Regional Vice President of Quebec and then the Vice President of Sales of Canada
for Labatt Breweries in October 2011. Mr. Craps became the President and Chief
Executive Officer of Labatt Breweries of Canada in November 2014. In October 2016, he
joined the Group as the Zone President of APAC South and was appointed CEO of
Carlton & United Breweries based in Melbourne, Australia.
Mr. Renrong Wang (Frank) (王仁荣), aged 52, was appointed as an Executive
Director on 10 April 2019, and as the General Counsel and a Joint Company Secretary
of the Group on 9 May 2019.
Mr. Wang has solid experience in M&A, legal affairs, compliance, communications
and external affairs. Mr. Wang joined the Group in November 2003 as a Legal Director
of China and has been serving in the Group and the beer industry for 16 years. From
January 2005 to December 2016, Mr. Wang acted as the Vice President of Legal and
Corporate Affairs of the Group, responsible for all BUs in Asia. In January 2017,
corresponding to AB InBev’s global structure strategy, Mr. Wang was appointed the Vice
President of Legal and Corporate Affairs of APAC North. In January 2019, with the
combination of APAC North and APAC South, he was appointed the Vice President of
Legal and Corporate Affairs of the Group, responsible for all BUs of the Group. Mr. Wang
has been serving as an independent director of Shanghai Fudan Forward S&T Co., Ltd.
(上海復旦復華科技股份有限公司) (listed on The Shanghai Stock Exchange with the stock
code of 600624) since October 2014 and a director of Guangzhou Zhujiang Brewery Co.,
Ltd. (廣州珠江啤酒股份有限公司) (listed on Shenzhen Stock Exchange with the stock
code of 002461, an associate of the Company) since September 2005. Mr. Wang also
holds directorships in several Chinese subsidiaries of the Company.
– 231 –
DIRECTORS AND SENIOR MANAGEMENT
Non-executive Directors
Mr. Carlos Brito, aged 59, was appointed as the Chair of the Board of Directors and
a Non-executive Director on 9 May 2019. Currently, Mr. Brito is the Chief Executive
Officer of AB InBev and the Co-Chair of the board of directors and a director of Ambev.
Mr. Brito joined Ambev in November 1989, where he held roles in finance,
operations and sales, before being appointed as the Chief Executive Officer of AB InBev
in December 2005. He has been an Advisory Council Member of the Stanford Graduate
School of Business since May 2017 and has served on the Advisory Board of the
Tsinghua University School of Economics and Management since October 2014.
Mr. Felipe Dutra, aged 53, was appointed as a Non-executive Director on 9 May
2019. Currently, Mr. Dutra is the Chief Financial and Technology Officer of AB InBev and
a director of Ambev.
Mr. Dutra joined Ambev in August 1990. At Ambev, he held various positions in
Treasury and Finance. Mr. Dutra was appointed as Ambev’s Chief Financial Officer in
January 1999 and Chief Financial Officer of AB InBev in January 2005. In January 2014,
Mr. Dutra became AB InBev’s Chief Financial and Technology Officer. He has also been
serving as a director of Ambev since 2005 and a member of the advisory board of
Cervecería Modelo de México, S. de R.L. de C.V. since January 2013.
Mr. Cubbon is a director of John Swire & Sons Limited with specific responsibility for
“non-core” investment since July 2018, and a non-executive director of Swire Pacific
Limited (太古股份有限公司), the shares of which are listed on the Stock Exchange (stock
codes: 0019 and 0087) since November 2018. He is also the director of James Finlay
Limited since July 2018.
Mr. Cubbon was a director of Swire Pacific Limited from September 1998 to
September 2017, a director of the following companies the shares of which are listed on
the Stock Exchange: Swire Properties Limited (太古地產有限公司) (stock code: 1972)
from March 2000 to September 2017, Cathay Pacific Airways Limited (國泰航空有限公司)
(stock code: 0293) from September 1998 to May 2009 and from January 2015 to
September 2017, and a director of Hong Kong Aircraft Engineering Company Limited (香
港飛機工程有限公司) (previous stock code: 0044; delisted now) from August 2006 to May
2009. Mr. Cubbon was Group Finance Director of Swire Pacific Limited from September
1998 to March 2009, the Chief Executive of Swire Properties Limited from June 2009 to
December 2014, and Corporate Development and Finance Director of Swire Pacific
Limited from January 2015 to September 2017.
Mr. Cubbon obtained a Bachelor’s Degree of Arts (Honors) in Economics from the
University of Liverpool in Liverpool, the UK in July 1980. He was a member of the
Institute of Chartered Accountants in England and Wales.
– 232 –
DIRECTORS AND SENIOR MANAGEMENT
Ms. Mun Tak Marjorie Yang (楊敏德), aged 67, was appointed as an Independent
Non-executive Director on 2 July 2019.
Ms. Yang has been the chairman of Esquel Group since April 1995, a Chairman of
the Seoul International Business Advisory Council since November 2018, the appointed
representative of Hong Kong to the APEC Business Advisory Council since December
2017, a member of Chief Executive’s Council of Advisers on Innovation and Strategic
Development since March 2018, and the Co-chairman of the advisory board of Computer
Science and Artificial Intelligence Lab at the Massachusetts Institute of Technology
since March 2015. She has also been the Chairperson of the Steering Committee of
Coolthink@JC created and funded by The Hong Kong Jockey Club Charities Trust since
April 2016. Ms. Yang also sits on the advisory boards at the Harvard University and the
Tsinghua University School of Economics and Management (清華大學經濟管理學院)
since August 2012 and October 2003, respectively.
Ms. Yang was a director of The Hongkong and Shanghai Banking Corporation
Limited (香港上海滙豐銀行有限公司), a subsidiary of HSBC Holdings plc (滙豐控股有限公
司) (listed on the Stock Exchange with the stock code of 0005), from July 2003 to April
2019 and Swire Pacific Limited (listed on the Stock Exchange with the stock codes of
0019 and 0087) from October 2002 to May 2017.
Ms. Tsang was the Chairperson of Greater China of Standard Chartered Bank from
August 2009 to August 2014. She is the founder of Max Giant Capital, a group of asset
management companies with a focus on China. She has been an independent non-
executive director of Genesis Emerging Markets Fund Limited, shares of which are listed
on the London Stock Exchange with the stock code of GSS, since July 2017 and China
CITIC Bank International Limited since December 2016, respectively. She also serves
as a member of the Advisory Council for China of the City of London since October 2010
and is a board member of Shanghai Jiao Tong University since June 2011. She
previously served as an independent non-executive director of Gap Inc. (listed on the
New York Stock Exchange with the stock code of GPS) from August 2010 to May 2018,
an independent non-executive director of Baoshan Iron & Steel Co., Ltd. (寶山鋼鐵股份
有限公司) (listed on the Shanghai Stock Exchange with the stock code of 600019) from
May 2006 to April 2012, a member of the World Economic Forum’s Global Agenda
Council on China from 2009-2012 and a member of Sotheby’s Asia Advisory Board from
November 2011 to October 2014.
– 233 –
DIRECTORS AND SENIOR MANAGEMENT
SENIOR MANAGEMENT
Date of
Appointment Date of
Position(s) in Roles and of the Current Joining
Name Age the Group Responsibilities Position the Group
Jan Craps (楊 41 Executive Director Responsible for the 8 May 2019 for October
克) and Chief formulation of the Executive 2016
Executive Officer strategic direction and Director
the day-to-day 9 May 2019
management of the for Chief
Group Executive
Officer
Hongsun Qian 53 Vice President of Responsible for the 1 January 2019 March 2007
(Linda) (錢紅 People people management
孫) of the Group
Yanjun Cheng 59 Vice President of Responsible for the 1 January 2019 June 1996
(YJ) (程衍俊) Supply and supply chain
Logistics management of the
Group
Goran Duric 46 Vice President of Responsible for the 1 January 2019 April 2016
Logistics logistics management
of the Group
Keith Davies 38 Vice President of Responsible for the IT- 1 January 2019 January
Solutions related matters of the 2017
Group
Guilherme 35 Chief Financial Responsible for the 1 January 2019 May 2016
Castellan Officer financial operation,
financing and
investment activities of
the Group
– 234 –
DIRECTORS AND SENIOR MANAGEMENT
Date of
Appointment Date of
Position(s) in Roles and of the Current Joining
Name Age the Group Responsibilities Position the Group
Qi Che (Matt) 45 Vice President of Responsible for brand 1 January 2019 May 2006
(車祁) Marketing strategy and
marketing efforts for
all of the brands within
the portfolio of the
Group
Zhen Zhou 39 Vice President of Responsible for 1 January 2019 June 2008
(Luke) (周臻) Strategy, PMO strategies-making for
and Analytics the organic growth of
the Group, strategic
project management
and data analytics
Ben Verhaert 42 BU President of Responsible for the 1 May 2017 May 2017
South Asia formulation of the
strategic direction and
the day-to-day
management of BU
South Asia of the
Group
– 235 –
DIRECTORS AND SENIOR MANAGEMENT
Date of
Appointment Date of
Position(s) in Roles and of the Current Joining
Name Age the Group Responsibilities Position the Group
For the details of the biography of Mr. Jan Craps (楊克) and Mr. Renrong Wang
(Frank) (王仁荣), see “– Directors – Executive Directors” above.
Ms. Hongsun Qian (Linda) (錢紅孫), aged 53, was appointed as the Vice President
of People of the Group on 1 January 2019.
– 236 –
DIRECTORS AND SENIOR MANAGEMENT
Mr. Yanjun Cheng (YJ) (程衍俊), aged 59, was appointed as the Vice President of
Supply and Logistics of the Group on 1 January 2019.
Mr. Cheng joined AB InBev in June 1996 as a St. Louis Corporate Staff Brewmaster.
After that, he held several positions in certain Chinese subsidiaries of the Group from
June 1997 to April 2005. In May 2005, Mr. Cheng was appointed as the Chief Executive
Officer of Harbin Brewery Group Limited, and then, in April 2007, was appointed as the
Chief Production and Technology Officer of Anheuser-Busch Co., China. From January
2009 to December 2016, Mr. Cheng acted as the Vice President of Supply and Logistics,
responsible for BU China, BU East Asia and BU Southeast Asia. From January 2017 to
December 2018, he served as the Vice President of Supply and Logistics of APAC North.
Mr. Cheng has over 37 years of experience in the beer industry with a solid and
successful track record in both multinational companies in APAC and state-owned
enterprises in China. Prior to joining the Group, he held the position of, among other
things, the vice chairman of the board of directors of Tsingtao Brewery Company Limited
(青島啤酒股份有限公司) (listed on the Stock Exchange with the stock code of 0168 and on
the Shanghai Stock Exchange with the stock code of 600600).
Mr. Goran Duric, aged 46, was appointed as the Vice President of Logistics of the
Group on 1 January 2019.
Mr. Duric has solid experience in sales and supply chain as well as finance. Mr.
Duric joined AB InBev in May 2005 and he held several positions in the AB InBev Group
in Serbia in Sales and Logistics until November 2009. From November 2009 to April
2014, Mr. Duric successively held positions of the Director of PPM and the Director of
Logistics of Zone Central and Eastern Europe of AB InBev. From April 2014 to April
2016, Mr. Duric successively served as the Director of PPM Supply and the Director of
Logistics of AB InBev. From April 2016 to December 2018, he served as the Vice
President of Logistics of APAC North.
Mr. Duric obtained a Bachelor’s Degree in Traffic Engineering from the University of
Novi Sad in Novi Sad, Serbia in November 2000.
Mr. Keith Davies, aged 38, was appointed as the Vice President of Solutions of the
Group on 1 January 2019.
Mr. Davies joined AB InBev in October 2006 as a National Budgeting and Business
Performance Manager for BU Canada and BU US. From January 2009 to December
2011, Mr. Davies held positions of “The Beer Store” Channel Manager and the National
Revenue Manager in BU Canada of AB InBev before moving to the Solutions function in
January of 2012. Within the Solutions function, Mr. Davies had been the Director of
Solutions PPM for Zone North America of AB InBev from January 2012 to December
2013, and the Global Director of Business Transformation of AB InBev from January
2014 to December 2016. In January 2017, corresponding to AB InBev’s global structure
strategy, Mr. Davies was appointed as the Vice President of Solutions of APAC North.
– 237 –
DIRECTORS AND SENIOR MANAGEMENT
Mr. Davies has 13 years of experience in the beer industry with solid experience in
finance, sales, shared services and technology. Before joining AB InBev, Mr. Davies was
a Products Operation Group Analyst with Accenture Inc., based in Toronto, Canada from
June 2004 to September 2006.
Mr. Guilherme Castellan, aged 35, was appointed as the Chief Financial Officer of
the Group on 1 January 2019.
Before joining AB InBev in July 2013, Mr. Castellan worked in the banking industry
for several years, holding positions in different investment banks from December 2004 to
July 2013 across different functions and in different geographical areas (New York, US
and Sao Paulo, Brazil). In December 2004, Mr. Castellan joined JPMorgan Chase in Sao
Paulo, Brazil in the Investment Banking Coverage Group. He moved to New York, US in
May 2005, where he worked in the Latin America M&A team of JPMorgan Chase, and
after that, in the Commodities Sales and Trading desk thereof. In August 2007, Mr.
Castellan moved to Lehman Brothers Inc., where he served until September 2008,
joining the Energy desk as a Vice President, and at Barclays Capital Energy Inc. after
that. In July 2010, Mr. Castellan returned to JPMorgan where he stayed until July 2013.
Mr. Castellan joined AB InBev in July 2013 as a Director in the Global Treasury
team. From April 2015 to May 2016, Mr. Castellan served as the Treasury Director for
Ambev in Sao Paulo, Brazil. In May 2016, he joined the Group as a Director of M&A and
Corporate Strategy. In May 2017, he became the Vice President of Finance of APAC
North. He was appointed as the Chief Financial Officer on 1 January 2019. Mr. Castellan
has been serving as a director of Guangzhou Zhujiang Brewery Co., Ltd. (listed on
Shenzhen Stock Exchange with stock code of 002461, an associate of the Company)
since November 2018.
Mr. Qi Che (Matt) (車祁), aged 45, was appointed as the Vice President of
Marketing of the Group on 1 January 2019.
Mr. Che has more than 20 years of experience in marketing and sales. After joining
the Group in May 2006, Mr. Che held various positions in trade marketing and marketing
in certain Chinese subsidiaries of the Group. In April 2010, he was appointed as the
Brand Director of the Harbin Family, where he led the development of effective market
strategies in increasing the popularity and influence of the brands of the Company
through sponsorship of the FIFA World Cup and the NBA. From December 2014 to
March 2016, he was the Brand Director of Budweiser in China and from April 2016 to
December 2017, he held successively the positions of the Senior Marketing Director and
the Vice President of Marketing for Budweiser in APAC North. From January 2018 to
December 2018, he held the position of the Vice President of Marketing in APAC North.
Mr. Che obtained a Bachelor’s Degree in Arts from the University of Birmingham, in
Birmingham, UK, in September 2001 and a Master’s Degree in Science (Marketing) from
the University of Birmingham, in Birmingham, UK, in December 2002.
– 238 –
DIRECTORS AND SENIOR MANAGEMENT
Mr. Jan Clysner, aged 47, was appointed as the Vice President of Procurement
and Sustainability of the Group on 1 January 2019.
Mr. Clysner has over 16 years of experience in the beer industry. He joined AB
InBev in December 2002 and held several roles in Sourcing and Procurement until
December 2007. In January 2008, Mr. Clysner was appointed as the Procurement
Project Director of AB InBev. Then he successively served at several roles in AB InBev,
including the Procurement Director of Indirects of Western Europe, the Head of
Procurement of Zone Western Europe and the Vice President of Global Logistics
Sourcing from January 2010 to December 2016. In January 2017, he was appointed as
the Vice President of Procurement and Sustainability of APAC South.
For the details of the biography of Mr. Renrong Wang (Frank) (王仁荣), see “–
Directors – Executive Directors” above.
Mr. Frederico Freire, aged 47, was appointed as the BU President of China of the
Group on 15 January 2018.
Mr. Freire has 23 years of experience in the beer industry since he joined AB InBev
in June 1996 as a Logistics and Procurement Manager. From January 1998 to 2009, Mr.
Freire successively served in different positions and entities in Sales Operations
Management, including the National Sales Operations Director in AB InBev
headquarters, as well as the Regional Sales Director for Northeast region in Brazil. In
July 2009, he moved back to AB InBev headquarters as the Project Director for Latin
America North zone. In February 2010, Mr. Freire joined the Group as the Sales Support
and Operations Director for China. In December 2010, he was appointed as the Vice
President of Expansion and Integration in China, leading organic and inorganic growth
initiatives. From November 2014 to December 2017, he served as the BU President of
South Korea of the Group.
Mr. Zhen Zhou (Luke) (周臻), aged 39, was appointed as the Vice President of
Strategy, PMO and Analytics of the Group on 1 January 2019.
Mr. Zhou has 11 years of experience in the beer industry with a deep knowledge of
shopper insight, sales strategy, sales management, business analytics and cooperate
strategy. Mr. Zhou joined the Group in June 2008 as an Associate Director of PPM of BU
Central and East China. From February 2010 to June 2013, Mr. Zhou successively acted
as the China Pricing Director, the Director of Sales Project, the Director of National
Retail Business and the General Manager of Guangdong/Hainan of BU China. In July
2013, Mr. Zhou was appointed as the BU President of South China. In November 2016,
he was appointed as the BU Vice President of China. From February 2018 to December
2018, Mr. Zhou acted in double roles as the Vice President of Commercial of BU China
and the BU President of South China.
– 239 –
DIRECTORS AND SENIOR MANAGEMENT
Mr. Ben Verhaert, aged 42, was appointed as the BU President of South Asia of the
Group on 1 May 2017.
Mr. Verhaert has 17 years’ experience in beer industry with a solid track record in
sales, logistics and country and business unit management. He worked with AB InBev as
the Sales Representative and Logistics Manager of S.A. Interbrew Belgium from
December 2001 to June 2005. After that, Mr. Verhaert successively held the positions of
Distribution Manager, Depot and Field Sales Manager, and Group Account Manager of
InBev until October 2009. He also served as the Country Head of Luxembourg of AB
InBev from November 2009 to February 2011, and the Sales Director of Off Trade of
Belgium of AB InBev from March 2011 to October 2014. Then, Mr. Verhaert acted as the
BU President of South Europe (covering France, Italy and Spain) from November 2014
to May 2017. Mr. Verhaert joined the Group in May 2017 as the BU President of South
Asia. Mr. Verhaert has also been serving as the Chair of the board of directors of
Anheuser-Busch InBev India Limited (formerly known as SABMiller India Limited) since
May 2017.
Mr. Bruno Cosentino, aged 45, was appointed the BU President of East Asia of the
Group on 1 January 2018.
Mr. Cosentino joined AB InBev in March 1997. Since then, he has more than 21
years of experience in the beer industry with solid experience in marketing and sales
having been exposed to different challenges in different cultures and beer segments.
From January 2009 to December 2012, Mr. Cosentino was the Marketing Director of Soft
Drinks of AB InBev. He also held the position of the Marketing Director of Brahma and
Antarctica of AB InBev from January 2012 to July 2014. Mr. Cosentino joined the Group
in August 2014 as the Vice President of High End Brands of BU China. After that, Mr.
Cosentino was appointed as the Vice President of Marketing of APAC North in May
2016, and in January 2018, he was appointed as the BU President of East Asia. Mr.
Cosentino also holds the position of Chair and President of Oriental Brewery Co., Ltd.,
a member of the Group, since January 2018.
Mr. Cosentino obtained a Bachelor’s Degree in Business from the Santa Catarina
State University in Florianópolis, Brazil in July 1997.
Mr. Chia-hung Hsu (John) (徐嘉宏), aged 48, was appointed as the BU President
of Southeast Asia of the Group on 1 January 2019.
Mr. Hsu joined the Group as BU President of North China in November 2010. Before
his current position, he served as the Vice President of High End of China of the Group
from April 2016 to December 2018.
Mr. Hsu obtained a Bachelor of Arts from the National Chengchi University (國立政
治大學) in Taiwan in June 1995, and a MBA Degree from Washington University in St.
Louis, US in December 2009.
– 240 –
DIRECTORS AND SENIOR MANAGEMENT
Mr. Peter Filipovic, aged 46, was appointed as the BU President of Australia and
New Zealand of the Group on 1 January 2019.
Mr. Filipovic joined AB InBev in January 1997 as a Taxation Advisor. Since then, Mr.
Filipovic successively held several tax and finance related positions within the AB InBev
Group, including but not limited to the Taxation Advisor, Taxation Manager and Finance
Integration Team Leader in Australia from January 1997 to October 2006. He also
served as the Taxation Director of Foster’s Group from September 2006 to October
2008. From September 2008 to November 2011, Mr. Filipovic acted as the Commercial
Finance Director and from November 2011 to November 2016 as a Sales Director of
Australia for Carlton & United Breweries. Prior to his current position, he held the
position of the BU President of Australia of the Group from November 2016 to December
2018.
The business address of the members of the senior management is Flat/RM 1823,
18/F, Soundwill Plaza II – Mid Town, 1-29 Tang Lung Street, Causeway Bay, Hong Kong.
Mr. Renrong Wang (Frank) (王仁荣) is our Joint Company Secretary and also a
member of the Board of Directors and the senior management. For the details of the
biography of Mr. Wang, see “– Directors – Executive Directors” above.
Ms. Chan Wai Ling (陳蕙玲), was appointed as our Joint Company Secretary on 9
May 2019.
– 241 –
DIRECTORS AND SENIOR MANAGEMENT
CORPORATE GOVERNANCE
BOARD COMMITTEES
The Board of Directors has established the audit committee, the remuneration
committee and the nomination committee.
Audit Committee
The Company has established the Audit Committee in compliance with Rule 3.21 of
the Listing Rules and the Corporate Governance Code as set out in Appendix 14 to the
Listing Rules. The primary duties of the Audit Committee are to oversee the financial
reporting system and internal control procedures of the Company, review the financial
information of the Company and consider issues relating to the external auditors and
their appointment.
The Audit Committee consists of three Directors. The members of the Audit
Committee are:
Felipe Dutra
Remuneration Committee
Carlos Brito
– 242 –
DIRECTORS AND SENIOR MANAGEMENT
Nomination Committee
The Company has established the Nomination Committee of the Board of Directors
as recommended by the Corporate Governance Code as set out in Appendix 14 to the
Listing Rules. The primary duties of the Nomination Committee are to review the
structure, size and composition of the Board of Directors, assess the independence of
the Independent Non-executive Directors and make recommendations to the Board of
Directors on the appointment and re-appointment of Directors and succession planning
for Directors.
Martin Cubbon
For 2017 and 2018 and the three months ended 31 March 2019, the aggregate
amount of the fees, salaries, housing allowances, other allowances, benefits in kind
(including contributions to pension schemes) and bonuses paid/payable by the Group to
the Directors were approximately USD1.9 million, USD5.0 million and USD0.9 million,
respectively.
For 2017 and 2018 and the three months ended 31 March 2019, two of the five
highest paid individuals were Directors. The aggregate amount of the fees, salaries,
housing allowances, other allowances, benefits in kind (including contributions to
pension schemes) and bonuses paid/payable by the Group to the three remaining
highest paid individuals were approximately USD3.3 million, USD6.0 million and USD1.2
million, respectively.
During the Track Record Period, no remuneration was paid to the Directors or the
five highest paid individuals as an inducement to join or upon joining the Group. No
compensation was paid to, or receivable by, the Directors or past directors of the
Company or the five highest paid individuals for the loss of office as director of any
member of the Group or of any other office in connection with the management of the
affairs of any member of the Group. None of the Directors had waived any remuneration
and/or emoluments during the Track Record Period.
Information on the letters of appointment entered into between the Company and
the Directors is set out in “Appendix V – Statutory and General Information.”
– 243 –
DIRECTORS AND SENIOR MANAGEMENT
COMPLIANCE ADVISER
The Company has appointed Somerley Capital Limited as its compliance adviser
pursuant to Rule 3A.19 of the Listing Rules to provide advisory services to the Company.
In compliance with Rule 3A.23 of the Listing Rules, the Company must consult with, and
if necessary, seek advice from, the compliance adviser on a timely basis in the following
circumstances:
(c) where the Company proposes to use the proceeds of the Global Offering in a
manner different from that detailed in this prospectus or where the Group’s
business activities, developments or results of operation deviate from any
forecast, estimate or other information in this prospectus; and
(d) where the Stock Exchange makes an inquiry regarding unusual movements in
the price or trading volume of the Shares, the possible development of a false
market in the Shares or any other matters.
The term of the appointment of the compliance adviser will commence on the Listing
Date and will end on the date on which the Company distributes its annual report in
respect of its financial results for the first full financial year commencing after the Listing
Date.
– 244 –
FUTURE PLANS AND USE OF PROCEEDS
FUTURE PLANS
See “Business – Strategy” for a detailed description of our future plans and
strategies.
USE OF PROCEEDS
The net proceeds from the Global Offering that the Company will receive, after
deducting the underwriting commissions, the discretionary incentive fee (assuming the
full payment of the discretionary incentive fee and no exercise of the Over-allotment
Option at all) and the estimated expenses in relation to the Global Offering payable by
the Company, will be:
The entire net proceeds from the Global Offering (assuming an Offer Price of
HKD43.50, being the mid-point of the Offer Price Range), representing the Hong Kong
dollar equivalent of approximately USD8,860.9 million, will be used immediately to repay
loans due to AB InBev subsidiaries to complete the Reorganization. Specifically, the
entire net proceeds will be used to repay: (1) first, in full, our obligations to Mexbrew
Investment SARL under the Korea Debt Receivable Loan and (2) second, in part, our
obligations to AB InBev Investment Holding Company Limited under the Shareholder
Loan. See “History, Development and Reorganization – Our Reorganization” for a
detailed description of such shareholder indebtedness.
If the Offer Price is set at the high end of the indicative Offer Price Range, being
HKD47.00 per Offer Share, the net proceeds to the Company from the Global Offering
will increase to the Hong Kong dollar equivalent of approximately USD9,578.3 million. In
such case, the amount payable under the Shareholder Loan will also be higher by
approximately USD717.4 million.
If the Offer Price is set at the low end of the indicative Offer Price Range, being
HKD40.00 per Offer Share, the net proceeds to the Company from the Global Offering
will decrease to the Hong Kong dollar equivalent of approximately USD8,143.4 million.
In such case, the amount payable under the Shareholder Loan will also be lower by
approximately USD717.4 million.
Following completion of the Global Offering and prior to any exercise of the
Over-allotment Option, the amount of the Shareholder Loan that will remain outstanding
will equal the net proceeds that would be received by the Company if the Over-allotment
Option were exercised in full. AB InBev Investment Holding Company Limited will
contribute this outstanding Shareholder Loan receivable to APAC HoldCo 2.
– 245 –
FUTURE PLANS AND USE OF PROCEEDS
Any additional proceeds received from the exercise of the Over-allotment Option
will be used immediately to repay our obligations to APAC HoldCo 2 under the
Shareholder Loan.
To the extent the Over-allotment Option is not exercised in full, at the end of the
Over-allotment Option exercise period, the Company will issue the same number of
shares to APAC HoldCo 2 as would have been issued had the remainder of the
Over-allotment Option been exercised in full in exchange for the cancellation of all
remaining principal amount of the Shareholder Loan. As a result of the foregoing,
following the end of the Over-allotment Option exercise period, (which is 30 days after
the last day for lodging applications under the Hong Kong Public Offering), and whether
or not the Over-allotment Option is exercised in part or in full:
• the Shareholder Loan will be repaid in full and will be terminated and no
intercompany indebtedness will remain in place between any member of the
Group and the AB InBev Group other than under commercial arrangements in
the ordinary and usual course of business of our Group and pursuant to Cash
Pooling Arrangements (see “Connected Transactions – Cash Pooling
Arrangements in place between the AB InBev Group and the Group”).
– 246 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
In preparation of the Global Offering, we have sought the following waivers from
strict compliance with the relevant provisions of the Listing Rules and the following
exemptions from strict compliance with the Companies (WUMP) Ordinance and the
SFO:
Rules 4.04(1) and 4.04(3)(a) of the Listing Rules respectively provide that the
accountant’s report for a new applicant must include:
(a) the results of the issuer (or if the issuer is a holding company, the consolidated
results of the issuer and its subsidiaries) in respect of each of the three
financial years immediately preceding the issue of the prospectus or such
shorter period as may be acceptable to the Stock Exchange; and
(b) the statement of financial position of the issuer (and if the issuer is a holding
company, the consolidated statement of financial position of the issuer and its
subsidiaries) as at the end of each of the three financial years to which the
latest audited financial statements of the issuer have been made up.
Section 342(1) and the Third Schedule of the Companies (WUMP) Ordinance
provide that a prospectus shall include:
(a) a statement as to the gross trading income or sales turnover of the issuer (as
may be appropriate) during each of the three financial years immediately
preceding the issue of the prospectus including an explanation of the method
used for the computation of such income or turnover, and a reasonable
break-down between the more important trading activities (paragraph 27 of
Part I of the Third Schedule); and
(b) a report prepared by the issuer’s auditor with respect to profits and losses and
assets and liabilities of the issuer in respect of each of the three financial years
immediately preceding the issue of the prospectus (paragraph 31 of Part II of
the Third Schedule).
Section 342A(1) of the Companies (WUMP) Ordinance provides that the SFC may
issue, subject to such conditions (if any) the SFC thinks fit, a certificate of exemption
from compliance with the relevant requirements under the Companies (WUMP)
Ordinance, if, having regard to the circumstances, the SFC considers that the exemption
will not prejudice the interests of the investing public and compliance with any or all of
such requirements would be irrelevant or unduly burdensome, or otherwise unnecessary
and inappropriate.
We have applied to the Stock Exchange and the SFC, and have been granted (1) a
waiver from strict compliance with Rules 4.04(1) and 4.04(3)(a) of the Listing Rules and
(2) a certificate of exemption under section 342A(1) of the Companies (WUMP)
Ordinance, respectively, such that we can present a shorter trading record period in this
prospectus covering financial information (as well as the relevant business and
operational data) for only the two most recent financial years immediately preceding the
issue of this prospectus.
– 247 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
This waiver and exemption was granted on the basis that AB InBev’s business
combination with SAB in October 2016 constituted exceptional circumstances for the
Group. See “History, Development and Reorganization – Major Acquisitions, Disposals
and Mergers” for details of AB InBev’s combination with SAB.
(a) Expanded geographies and scale: Prior to the combination with SAB, our
business principally constituted our businesses in China and South Korea,
with small expansion markets in India and Vietnam, along with a distribution-
only model in other countries. Following the combination, the scale of our
business increased significantly such that our business following the
combination is not directly comparable to our business for the year ended 31
December 2016.
(b) Expanded brand portfolio: The combination with SAB also expanded our
brand portfolio. In particular, we added Victoria Bitter, Carlton Draught,
Carlton Dry and Pure Blonde to our portfolio of brands in Australia, and
Haywards 5000 and Knockout to our portfolio of brands in India.
(c) Operational changes: The combination with SAB gave rise to operational
changes to our business, namely:
– 248 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
In light of the above transformational changes to our business in 2016, the waiver
and exemption was granted on the following grounds:
(a) the Group’s financial information for the year ended 31 December 2016 would
not have been a meaningful or useful comparison to the two most recent
financial years immediately preceding the issue of this prospectus (i.e. the two
years ended 31 December 2017 and 2018);
(b) the financial information of the Group for the two years ended 31 December
2017 and 31 December 2018 would provide potential investors with adequate
and up-to-date information to form a view of the Group, and the non-disclosure
of the financial information of the Group for the year ended 31 December 2016
would not be prejudicial to the interests of the investing public; and
(c) the preparation of the financial information of the Group for the year ended 31
December 2016 would have been unduly burdensome as this would have
involved preparing standalone financial information for SAB’s Asia Pacific
business. This would have involved substantial practical difficulties for us and
required a substantial amount of time, costs and resources because (i) SAB
operated a global business which used different accounting systems and
applied different accounting standards to our systems and policies and would
have therefore required us to access SAB’s historical financial systems and
apply adjustments, and (ii) SAB’s financial year-end was not coterminous with
our business and as such, in order to prepare the financial information, we
would have had to reconcile the different year ends.
Rule 8.05(3) of the Listing Rules requires that a new applicant relying on the market
capitalization/revenue test must satisfy each of the following, unless waived by the Stock
Exchange under Rule 8.05A of the Listing Rules:
(b) management continuity for at least the three preceding financial years;
(c) ownership continuity and control for at least the most recent audited financial
year;
(e) revenue of at least HKD500,000,000 for the most recent audited financial year.
Rule 8.05A of the Listing Rules provides that in the case of market
capitalization/revenue test, the Exchange will accept a shorter trading record period
under substantially the same management as required under Rule 8.05(3)(a) and (b) if
the new applicant is able to demonstrate to the satisfaction of the Exchange the
following:
(a) the directors and management of the new applicant have sufficient and
satisfactory experience of at least three years in the line of business and
industry of the new applicant. Details of such experience must be disclosed in
the listing document of the new applicant; and
(b) management continuity for the most recent audited financial year.
– 249 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
In light of AB InBev’s combination with SAB in 2016, we are not able to satisfy the
management requirement under Rule 8.05(3)(b) of the Listing Rules but we have
complied with Rule 8.05A(1) and (2) of the Listing Rules on the grounds that:
(b) Management continuity for the most recent audited financial year: There
has been no change in the majority of the board of directors and senior
management of the Group at least for the year ended 31 December 2018 and
up to the Latest Practicable Date.
(c) Ownership continuity and control for the most recent audited financial
year: There has been no change in the Group’s controlling shareholder for the
year ended 31 December 2018 and up to the Latest Practicable Date.
(e) Adequate revenue: The Company’s total revenue for the year ended 31
December 2018 amounted to approximately USD8,459 million, which is far
more than the HKD500 million threshold as required under Rule 8.05(3) of the
Listing Rules.
We have entered into, and are expected to continue, certain transactions with the
AB InBev Group that will constitute continuing connected transactions under Chapter
14A of the Listing Rules after the Listing. We have applied to the Stock Exchange for,
and have been granted, a waiver from strict compliance with certain requirements of
Chapter 14A of the Listing Rules. Details of such transactions, together with the relevant
waivers granted are set out in “Connected Transactions.”
We have applied for, and the SFC has granted, a certificate of exemption pursuant
to Section 342A(1) of the Companies (WUMP) Ordinance from strict compliance with the
requirements of paragraph 6 of Part I of the Third Schedule to the Companies (WUMP)
Ordinance, in respect of the disclosure of the residential address of Mr. Carlos Brito (our
Non-executive Director and Chair) and Mr. Felipe Dutra (our Non-executive Director), on
the basis that such disclosure would be inappropriate and would create unnecessary
risks to the personal safety of Mr. Brito and Mr. Dutra.
Mr. Brito and Mr. Dutra are the chief executive officer and chief financial and
technology officer of AB InBev, which is the world’s largest brewer by revenue and one
of the world’s top five fast-moving consumer goods companies. AB InBev sells a number
of iconic brands around the world (including Budweiser and Stella Artois). As the chief
executive officer and chief financial and technology officer of AB InBev, respectively,
Mr. Brito and Mr. Dutra inevitably attract public attention. Both Mr. Brito and Mr. Dutra
– 250 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
also have a high profile in the beer industry. Mr. Brito has appeared on interviews on
Bloomberg and CNBC, and Mr. Dutra has won a number of awards as CFO. Accordingly,
the disclosure of such information may expose Mr. Brito and Mr. Dutra and their families
to personal safety risks. As such, the business address of Mr. Brito and Mr. Dutra is
disclosed in place of their residential address in this prospectus.
Rules 4.04(2) and 4.04(4) of the Listing Rules require an issuer to include an
accountants’ report in the prospectus of the income statements and balance sheets of
any business or subsidiary acquired, agreed to be acquired or proposed to be acquired
since the date which the latest audited accounts of the issuer have been made up in
respect of each of the three financial years immediately preceding the issue of the
prospectus.
Under guidance letter HKEx-GL32-12 issued by the Stock Exchange, the Stock
Exchange may consider granting waiver of the requirements under Rules 4.04(2) and
4.04(4) of the Listing Rules on a case-by-case basis. Having regard to all relevant facts
and circumstances, the Stock Exchange will ordinarily grant a waiver in relation to
acquisitions of a business or subsidiary subject to the following conditions: (a) the
percentage ratios (as defined under Rule 14.04(9) of the Listing Rules) of the acquired
or to be acquired business or subsidiary are all less than 5% by reference to the most
recent financial year of the applicant’s trading record period; (b) the historical financial
information of the acquired or to be acquired business or subsidiary is not available or
would be unduly burdensome to obtain or prepare; and (c) the listing document should
include at least the information that would be required for a disclosable transaction under
Chapter 14 of the Listing Rules on each acquisition.
The Directors believe that the terms of the Blue Girl Transaction are fair and
reasonable and in the interests of the shareholders of the Company as a whole. To the
best of our Director’s knowledge, information and belief, having made all reasonable
inquiry, Jebsen HK, Blue Girl and its ultimate beneficial owners are third parties
independent of us and our connected persons.
– 251 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
Completion of the Blue Girl Transaction took place on 30 May 2019. We expect Blue
Girl will strengthen our product offerings in, and further expand our reach in, the China
market.
We have applied to the Stock Exchange, and have been granted, a waiver from
strict compliance with Rules 4.04(2) and 4.04(4) in relation to the Blue Girl Transaction
on the following grounds:
(a) all of the applicable percentage ratios for the Blue Girl Transaction are are less
than 5% by reference to the most recent financial year of our Track Record
Period (being the year ended 31 December 2018);
(b) it would be impracticable and duly burdensome for us to prepare the financial
information in respect of Blue Girl given it does not yet have, or will only have
for a short period of time prior to Listing, access to the relevant books and
records for the purposes of conducting an audit; and
(c) the waiver would not prejudice the interests of the investing public as the Blue
Girl Transaction will not result in any material change to our financial position
since the end of our Track Record Period.
We do not expect to use any of the proceeds from the Global Offering to fund the
Blue Girl Transaction.
Rule 8.08(1)(a) of the Listing Rules require that there shall be an open market in the
securities for which listing is sought and a sufficient public float of an issuer’s listed
securities shall be maintained. This normally means that at least 25% of the issuer’s total
issued share capital must at all times be held by public.
– 252 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
We have applied to the Stock Exchange, and have been granted a waiver such that
the minimum public float may be any of the following depending on the extent to which
the Over-allotment Option is exercised:
(a) if the Over-allotment Option is exercised in full, 17.25% of the total enlarged
share capital of the Company;
(i) as increased by the new Shares to be issued upon any partial exercise of
the Over-allotment Option; and
(ii) then decreased by the issuance of the same number of new Shares to
APAC HoldCo 2 as would have been issued had the remainder of the
Over-allotment Option been exercised in full in exchange for the
cancellation of all remaining principal amount of the Shareholder Loan
(see “History, Development and Reorganization – 9. Payment of Net
Proceeds from the Global Offering and any exercise of the Over-allotment
Option to APAC HoldCo 2, and the termination of the Shareholder Loan”)
(c) if the over-allotment option is not exercised, 15.00% of the total enlarged share
capital of the Company.
This waiver was granted on the basis that (a) our market capitalization is expected
to be well over HK$10 billion at the time of Listing, (b) there will be an open market for the
Shares upon completion of the Global Offering, (c) there will be sufficient shares offered
in Hong Kong in the Global Offering and (d) disclosure will be made regarding the lower
prescribed public float in this prospectus and we will confirm the sufficiency of public
float in our annual reports after Listing.
AB InBev
– 253 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
2007) are required to disclose their holdings (alone or in concert with other
persons or entities) upon their holdings directly or indirectly reaching or
crossing a transparency threshold upwards or downwards (i.e. 5% of total
voting rights and subsequent disclosure thresholds at intervals of 5%, e.g.
10%, 15%, 20% and so on). In addition, AB InBev’s bylaws provide for
additional thresholds at 3% and 7.5% of the voting rights. These notification
must as a rule be made within four trading days of the event giving rise to the
notification and will be published on AB InBev’s website.
Ambev
(a) Disclosure to the listed company: Under Article 11, CVM Instruction 358, all
directors must disclose to the company information regarding their ownership
and trading of securities issued in the listed company. However, the
information provided by the directors will be publicly available only as
aggregated with the position of all the board of directors. There are no
minimum thresholds and therefore any transaction by a director must be
disclosed. Disclosure to the listed company is required within five days after
the completion of each transaction and the listed company is then required to
send such information to the Brazilian Securities and Exchange Commission
(“CVM”) within 10 days after the end of the calendar month.
AB InBev and Ambev also have American Depositary Receipts listed on the New
York Stock Exchange. By reason of such listing, directors of the Company are required
to disclose the aggregate number of shares owned of the Company in its 20-F annual
report filing as of the most recent practicable date. However, an exemption to this
disclosure requirement applies if (i) the share ownership is less than 1% of the relevant
class of shares and (ii) the share ownership had not previously been disclosed. If this
exemption applies, then the 20-F annual report disclosure only requires the inclusion of
an asterisk and an explanatory footnote explaining that the relevant individual holds less
than 1% of the class of shares. Disclosure is made through a Form 20-F which is filed
with the United States Securities and Exchange Commission once a year.
– 254 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
We have applied for, and the SFC has granted, the Non-executive Directors a
partial exemption from strict compliance with Part XV of the SFO (other than Divisions 5,
11 and 12) of the SFO in respect of the duty to disclose interests in AB InBev and Ambev
as “associated corporations” (as defined in the SFO) of the Company. This partial
exemption has been granted on the condition that:
(b) the “associated corporations” whose interests are exempted from being
reported are limited to AB InBev and Ambev (not any listed company);
(c) we and the Non-executive Directors of the Company must file with the Stock
Exchange all disclosure of interests made publicly in respect of interests in AB
InBev and Ambev respectively as soon as practicable on the basis that the
Stock Exchange will publish these disclosures in the same way as those it
receives from other listed corporations pursuant to Part XV. These disclosures
must be in English or accompanied with an English translation;
(d) we must report to the SFC when there is any material change in any way of the
information which we or AB InBev has provided to the SFC, including material
changes to the disclosure requirements in Belgium or Brazil or any material
change to the facts set out in our submissions to the SFC; and
(e) the exemption is given in the particular circumstances of this case and should
not be regarded as a precedent for other applications.
We have applied for, and the Stock Exchange has granted us, a waiver from strict
compliance with require the requirement to disclose the disclosure of interests
information in respect of the Non-executive Directors’ interests in AB InBev and Ambev
in this prospectus under Practice Note 5 and paragraphs 41(4) and 45 of Appendix 1A of
the Listing Rules and in the annual and interim reports of the Company under Paragraph
13 of Appendix 16 of the Listing Rules.
– 255 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
Our Group will be headquartered in and have its principal place of business in Hong
Kong. Our Executive Directors and the senior management team are based across Asia
Pacific, supported by a functional office based in Shanghai. We will have two Executive
Directors immediately following the Listing. One of our Executive Directors will ordinarily
reside and be based in Hong Kong, but the other Executive Director will reside and be
based in the PRC where a substantial portion of our operations are located. The entire
senior management team who are responsible for the management of the Group’s
operations reside and are based across Asia Pacific. Accordingly, we do not have, and
for the foreseeable future will not have, sufficient management presence in Hong Kong
for the purpose of satisfying the management presence requirement under Rule 8.12 of
the Listing Rules.
We have applied to the Stock Exchange for, and the Stock Exchange has granted,
a waiver from strict compliance with the requirement for management presence in Hong
Kong under Rule 8.12 of the Listing Rules, subject to us adopting the following
arrangements to maintain regular communications with the Stock Exchange:
(a) we have appointed Mr. Renrong Wang (Frank), our Executive Director, Joint
Company Secretary and General Counsel, and Ms. Chan Wai Ling, our Joint
Company Secretary, as its authorized representatives who will act as the our
principal channel of communication with the Stock Exchange. Mr. Renrong
Wang (Frank) is expected to ordinarily reside and be based in Hong Kong. As
and when the Stock Exchange wishes to contact the Directors on any matters,
each of these authorized representatives will have the means to contact all of
the Directors promptly at all times;
(b) we have provided the Stock Exchange with the contact details of each Director
(including their respective mobile phone number, office phone number, fax
number and e-mail address) to facilitate communication with the Stock
Exchange;
(c) each Director who is not ordinarily resident in Hong Kong possesses or is able
to apply for valid travel documents to visit Hong Kong and is able to meet with
the Stock Exchange within a reasonable period; and
Rules 8.17 and 3.28 of the Listing Rules require an issuer to appoint a company
secretary who, by virtue of his/her academic or professional qualifications or relevant
experience, is, in the opinion of the Stock Exchange, capable of discharging the
functions of company secretary. The Stock Exchange considers the following academic
or professional qualifications to be acceptable: (a) a member of The Hong Kong Institute
of Chartered Secretaries, (b) a solicitor or barrister (as defined in the Legal Practitioners
Ordinance) or (c) a certified public accountant (as defined in the Professional
Accountants Ordinance).
– 256 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
We have appointed Mr. Renrong Wang (Frank) and Ms. Chan Wai Ling as Joint
Company Secretaries. Ms. Chan, being a Chartered Secretary and Fellow of The Hong
Kong Institute of Chartered Secretaries, satisfies the requirements under Rule 3.28 of
the Listing Rules. Notwithstanding, Mr. Wang’s professional knowledge and experience,
including a Master’s Degree in Law and a PhD in Law as well as over 20 years of
experience as in-house legal counsel, he does not possess the specific qualifications
required under Rule 3.28 of the Listing Rules.
We have applied for, and the Stock Exchange has granted, a waiver from strict
compliance with the requirements of Rules 8.17 and 3.28 of the Listing Rules, subject to
us adopting the following arrangements:
(a) Ms. Chan will work closely with Mr. Wang to jointly discharge the duties and
responsibilities as the joint company secretaries of the Company and to assist
Mr. Wang to acquire the relevant experience as required under the Listing
Rules for an initial period of three years from the date of the Listing;
(b) we will ensure that Mr. Wang continues to have access to the relevant training
and support in relation to the Listing Rules and the duties required of a
company secretary of an issuer listed on the Stock Exchange. Furthermore,
both Mr. Wang and Ms. Chan will seek advice from our Hong Kong legal and
other professional advisers as and when required. Mr. Wang also undertakes
to take no less than 15 hours of relevant professional training in each financial
year of the Company; and
(c) at the end of the three year period, the qualifications and experience of Mr.
Wang and the need for on-going assistance of Ms. Chan will be further
evaluated by us.
We have applied for, and the Stock Exchange and the SFC have respectively
granted, (1) a waiver from strict compliance with the requirements of paragraph 26 of
Part A of Appendix 1 to the Listing Rules and (2) a certificate of exemption from strict
compliance with paragraph 11 of the Third Schedule of the Companies (WUMP)
Ordinance, in each case in respect of disclosing the particulars of any alterations in the
capital of any member of the Group within the two years immediately preceding the issue
of this prospectus. This waiver and certificate of exemption were granted on the following
grounds:
(a) following the Reorganization, the Group will be made up of over 180
subsidiaries, across 17 different jurisdictions, of which the Company and 25
major subsidiaries that are listed as “principal entities comprising the Listing
Business” in note 1.1 to “Appendix I – Accountant’s Report” in this prospectus
contributed to approximately 97% to the Group’s total revenue for the year
ended 31 December 2018. For further details, see “Appendix I – Accountant’s
Report”; and
– 257 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
(b) hence, the remaining subsidiaries in the Group are insignificant to the overall
results of the Group. It would be unduly burdensome on the Company if it was
required to comply strictly with the requirements of paragraph 26 of Part A of
Appendix 1 to the Listing Rules and paragraph 11 of the Third Schedule of the
Companies (WUMP) Ordinance as the Company would have to incur
additional costs and devote additional resources in compiling and verifying the
relevant information for such disclosure, which would not be material or
meaningful to investors. Further, non-disclosure of such information will not
prejudice the interests of the investing public.
Particulars of the changes in the share capital of the Company and the major
subsidiaries have been disclosed in the section headed “Appendix V – Statutory and
General Information – Further Information about the Company – 4. Subsidiaries”.
CLAWBACK MECHANISM
We have applied to the Stock Exchange for, and the Stock Exchange has granted
to us, a waiver from strict compliance with paragraph 4.2 of Practice Note 18 of the
Listing Rules such that, provided the initial allocation of Shares under the Hong Kong
Public Offering shall not be less than 5% of the Global Offering, in the event of
over-subscription, the Joint Representatives, after consultation with us, shall apply a
clawback mechanism following the closing of the application lists on the following basis:
• if the number of the Offer Shares validly applied for under the Hong Kong
Public Offering represents 15 times or more but less than 50 times of the
number of the Offer Shares initially available for subscription under the Hong
Kong Public Offering, then the number of Offer Shares to be reallocated to the
Hong Kong Public Offering from the International Offering will be increased, so
that the total number of Offer Shares available under the Hong Kong Public
Offering will be 130,123,000 Shares, representing approximately 8% of the
Offer Shares initially available under the Global Offering;
• if the number of the Offer Shares validly applied for under the Hong Kong
Public Offering represents 50 times or more but less than 100 times of the
number of the Offer Shares initially available for subscription under the Hong
Kong Public Offering, then the number of Offer Shares to be reallocated to the
Hong Kong Public Offering from the International Offering will be increased, so
that the total number of the Offer Shares available under the Hong Kong Public
Offering will be 146,388,000 Shares, representing approximately 9% of the
Offer Shares initially available under the Global Offering; and
– 258 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
AND EXEMPTIONS FROM STRICT COMPLIANCE WITH THE
COMPANIES (WUMP) ORDINANCE AND THE SFO
• if the number of the Offer Shares validly applied for under the Hong Kong
Public Offering represents 100 times or more of the number of the Offer Shares
initially available for subscription under the Hong Kong Public Offering, then
the number of Offer Shares to be reallocated to the Hong Kong Public Offering
from the International Offering will be increased, so that the total number of the
Offer Shares available under the Hong Kong Public Offering will be
162,653,000 Shares, representing approximately 10% of the Offer Shares
initially available under the Global Offering.
In each case, the additional Offer Shares reallocated to the Hong Kong Public
Offering will be allocated between pool A and pool B and the number of Offer Shares
allocated to the International Offering will be correspondingly reduced in such manner as
the Joint Representatives deem appropriate. In addition, the Joint Representatives may
allocate Offer Shares from the International Offering to the Hong Kong Public Offering to
satisfy valid applications under the Hong Kong Public Offering.
– 259 –
UNDERWRITING
UNDERWRITING
The Global Offering comprises the Hong Kong Public Offering of initially 81,327,000
Hong Kong Offer Shares and the International Offering of initially 1,545,199,000
International Offer Shares, subject to reallocation on the basis as described in “Structure
of the Global Offering” in each case as well as to the Over-allotment Option (in the case
of the International Offering). This prospectus is published solely in connection with the
Hong Kong Public Offering. The Hong Kong Public Offering is severally underwritten by
the Hong Kong Underwriters on a conditional basis. The International Offering is
expected to be fully underwritten by the International Underwriters.
The Hong Kong Underwriting Agreement was entered into on 4 July 2019. Pursuant
to the Hong Kong Underwriting Agreement, the Company is offering the Hong Kong Offer
Shares for subscription by the public in Hong Kong on the terms and conditions set out
in this prospectus, the Application Forms and the Hong Kong Underwriting Agreement at
the Offer Price.
Subject to (a) the Listing Committee granting approval for the listing of, and
permission to deal in, the Shares in issue and to be issued pursuant to the Global
Offering on the Main Board of the Stock Exchange and such approval not having been
withdrawn and (b) certain other conditions set out in the Hong Kong Underwriting
Agreement, the Hong Kong Underwriters have agreed severally but not jointly to procure
subscribers for, or themselves to subscribe for, their respective applicable proportions of
the Hong Kong Offer Shares being offered which are not taken up under the Hong Kong
Public Offering on the terms and conditions set out in this prospectus, the Application
Forms and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on, among other things, the
International Underwriting Agreement having been executed and becoming
unconditional and not having been terminated in accordance with its terms.
– 260 –
UNDERWRITING
If at any time prior to 8:00 a.m. on the day that trading in the Shares commences on
the Stock Exchange:
(c) any event or series of events in the nature of force majeure (including,
without limitation, acts of government, labour disputes, strikes, lock-outs,
fire, explosion, earthquake, flooding, tsunami, civil commotion, riots,
public disorder, acts of war, acts of terrorism (whether or not
responsibility has been claimed), acts of God, accident or interruption in
transportation, destruction of power plant, outbreak of diseases or
epidemics including, but not limited to, SARS, swine or avian flu, H5N1,
H1N1, H1N7, H7N9, Ebola virus, Middle East respiratory syndrome
(MERS) and such related/mutated forms, economic sanction, to the
extent affecting any Relevant Jurisdiction; or
– 261 –
UNDERWRITING
(i) any change or development involving a prospective change which has the
effect of materialisation of any of the risks set out in the section headed
“Risk Factors” in the Prospectus; or
(l) any petition being presented or any order being made for the winding-up
or liquidation of any Group Company, or any Group Company (except for
voluntary winding up) making any composition or arrangement with its
creditors or entering into a scheme of arrangement or any resolution
being passed for the winding-up of any Group Company or a provisional
liquidator, receiver or manager being appointed over all or part of the
assets or undertaking of any Group Company or anything analogous
thereto occurs in respect of any Group Company; or
(m) a prohibition on the Company for whatever reason from allotting, issuing
or selling the Shares (including the Over-allotment Option Shares (as
defined in the Hong Kong Underwriting Agreement)) pursuant to the
terms of the Global Offering; or
(o) that any statement contained in the Hong Kong Offering Documents (as
defined in the Hong Kong Underwriting Agreement) was or has become
untrue, inaccurate, incomplete in any material respect or misleading in
any respect or any forecasts, estimate, expressions of opinion, intention
or expectation expressed in the Hong Kong Offering Documents are not
fair and honest and made on reasonable grounds or, where appropriate,
based on reasonable assumptions, when taken as a whole; or
– 262 –
UNDERWRITING
(p) any non-compliance of the Prospectus (or any other documents used in
connection with the contemplated subscription and sale of the Offer
Shares) or any aspect of the Global Offering with the Listing Rules or any
other applicable Law unless a waiver or an exemption has been granted
by the Stock Exchange and/or the SFC; or
(q) any matter has arisen or has been discovered which would, had it arisen
or been discovered immediately before the date of the Prospectus, not
having been disclosed in the Offering Documents, constitutes an
omission therefrom in any material respect;
(2) there has come to the notice of the Joint Representatives (for themselves and
on behalf of the Joint Global Coordinators, the Joint Bookrunners and Hong
Kong Underwriters):
(a) either (i) there has been a material breach of any of the undertakings or
provisions of either the Hong Kong Underwriting Agreement or the
International Underwriting Agreement by the Company or (ii) any of the
warranties given by the Company in the Hong Kong Underwriting
Agreement or the International Underwriting Agreement, as applicable, is
(or would when repeated be) untrue or incorrect in any respect; or
(b) any event, act or omission which gives or is likely to give rise to any
liability of the Company under Clause 9 of the Hong Kong Underwriting
Agreement (indemnity) and which liability has a Material Adverse Effect
(as defined in the Hong Kong Underwriting Agreement); or
(c) any Expert named in the Prospectus (other than the Joint Sponsors) has
withdrawn its respective consent to the issue of the Prospectus and the
inclusion of its reports, letters or opinions and references to its name
included in the form and context in which it respectively appears; or
(e) the Company has withdrawn the Prospectus (and/or any other documents
issued or used in connection with the Global Offering) or the Global
Offering,
then, the Joint Representatives may (for themselves and on behalf of the Joint
Global Coordinators, the Joint Bookrunners and the Hong Kong Underwriters), after
consultation with the Company, in their discretion and upon giving prior notice in
writing to the Company, terminate the Hong Kong Underwriting Agreement with
immediate effect.
– 263 –
UNDERWRITING
Pursuant to Rule 10.08 of the Listing Rules, the Company has undertaken to the
Stock Exchange that it will not exercise its power to issue any further Shares, or
securities convertible into Shares (whether or not of a class already listed) or enter into
any agreement to such an issue within six months from the Listing Date (whether or not
such issue of Shares or securities will be completed within six months from the Listing
Date), except (a) pursuant to the Global Offering or (b) under any of the circumstances
provided under Rule 10.08 of the Listing Rules.
Pursuant to Rule 10.07 of the Listing Rules, AB InBev and AB InBev Brewing
Company (APAC) Limited, being the immediate and ultimate Controlling Shareholders of
the Company, have undertaken to the Stock Exchange and the Company that it will not
and will procure that the relevant registered holder(s) will not:
(i) in the period commencing on the date by reference to which disclosure of their
holding of Shares is made in this prospectus and ending on the date which is
six months from the Listing Date, dispose of, nor enter into any agreement to
dispose of or otherwise create any options, rights, interests or encumbrances
in respect of, any of the Shares (including Shares to be issued pursuant to the
Share Issuance Agreement) in respect of which they are shown by this
prospectus to be the beneficial owner; and
(ii) in the period of six months commencing on the date on which the period
referred to in paragraph (i) above expires, dispose of, nor enter into any
agreement to dispose of or otherwise create any options, rights, interests or
encumbrances in respect of, any of the Shares referred to in paragraph
(i) above if, immediately following such disposal or upon the exercise or
enforcement of such options, rights, interests or encumbrances, they would
cease to be a controlling shareholder of the Company,
Pursuant to Note 3 to Rule 10.07(2) of the Listing Rules, AB InBev and AB InBev
Brewing Company (APAC) Limited, being the immediate and ultimate Controlling
Shareholders of the Company, have undertaken to the Stock Exchange and the
Company that, within the period commencing on the date by reference to which
disclosure of their holding of Shares is made in this prospectus and ending on the date
which is 12 months from the Listing Date, they will and will procure that the relevant
registered holder(s) will:
(1) when they pledge or charge any Shares referred to in paragraph (7) above
beneficially owned by them in favor of an authorized institution (as defined in
the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) pursuant to
Note 2 to Rule 10.07(2) of the Listing Rules, immediately inform the Company
of such pledge or charge together with the number of Shares so pledged or
charged; and
(2) when they receive indications, either verbal or written, from the pledgee or
chargee of any Shares referred to in paragraph (7) above that any of the
pledged or charged Shares will be disposed of, immediately inform the
Company of such indications.
– 264 –
UNDERWRITING
Pursuant to the Hong Kong Underwriting Agreement, the Company has undertaken
to each of the Joint Global Coordinators, the Joint Sponsors, Joint Representatives, the
Joint Bookrunners and the Hong Kong Underwriters that except pursuant to the
Reorganisation, the Capitalisation Issue and the Global Offering (including pursuant to
the exercise of the Over-allotment Option and pursuant to the Share Issuance
Agreement to the extent that the Over-allotment Option is not exercised in full) and the
Share Award Schemes, at any time after the date of this Agreement up to and including
the date falling six months after the Listing Date (the “First Six Month Period”), it will
not, unless in compliance with the requirements of the Listing Rules or having obtained
a waiver from strict compliance with the relevant requirement of the Listing Rules from
the Stock Exchange:
(i) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or
agree to allot, issue or sell, assign, mortgage, charge, pledge, assign,
hypothecate, lend, grant or sell any option, warrant, contract or right to
subscribe for or purchase, grant or purchase any option, warrant, contract or
right to allot, issue or sell, or otherwise transfer or dispose of, or agree to
transfer or dispose of, either directly or indirectly, conditionally or
unconditionally, or repurchase, any legal or beneficial interest in the share
capital or any other equity securities of the Company, as applicable, or any
interest in any of the foregoing (including, without limitation, any securities
convertible into or exchangeable or exercisable for or that represents the right
to receive, or any warrants or other rights to purchase any share capital or
other equity securities of the Company, as applicable), or deposit any share
capital or other equity securities of the Company, as applicable, with a
depositary in connection with the issue of depositary receipts; or
(ii) enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership (legal or beneficial) of
the Shares or any other equity securities of the Company, or any interest in any
of the foregoing (including, without limitation, any securities convertible into or
exchangeable or exercisable for or that represent the right to receive, or any
warrants or other rights to purchase, any Shares); or
(iii) enter into any transaction with the same economic effect as any transaction
described in (i) or (ii) above; or
(iv) offer to or agree to do any of the foregoing or announce any intention to effect
any transaction described in (i), (ii) or (iii) above,
– 265 –
UNDERWRITING
Save for their respective obligations under the Hong Kong Underwriting Agreement,
as at the Latest Practicable Date, none of the Hong Kong Underwriters was interested,
legally or beneficially, directly or indirectly, in any Shares or any securities of any
member of the Group or had any right or option (whether legally enforceable or not) to
subscribe for or purchase, or to nominate persons to subscribe for or purchase, any
Shares or any securities of any member of the Group.
Following the completion of the Global Offering, the Hong Kong Underwriters and
their affiliated companies may hold a certain portion of the Shares as a result of fulfilling
their respective obligations under the Hong Kong Underwriting Agreement and/or the
International Underwriting Agreement.
Indemnity
The Company has agreed to indemnify the Hong Kong Underwriters for certain
losses which they may suffer or incur, including losses arising from their performance of
their obligations under the Hong Kong Underwriting Agreement and any breach by them
of the Hong Kong Underwriting Agreement.
International Offering
In connection with the International Offering, the Company expects to enter into the
International Underwriting Agreement with the International Underwriters on the Price
Determination Date. Under the International Underwriting Agreement and subject to the
Over-allotment Option, it is expected that the International Underwriters would, subject
to certain conditions set out therein, agree severally but not jointly to procure subscribers
for, or themselves to subscribe for, their respective applicable proportions of the
International Offer Shares initially being offered pursuant to the International Offering. It
is expected that the International Underwriting Agreement may be terminated on similar
grounds to the Hong Kong Underwriting Agreement. Potential investors should note that
in the event that the International Underwriting Agreement is not entered into or
terminated, the Global Offering will not proceed. See “Structure of the Global Offering –
The International Offering.”
Over-allotment Option
– 266 –
UNDERWRITING
For any unsubscribed Hong Kong Offer Shares reallocated to the International
Offering, the underwriting commission will not be paid to the Hong Kong Underwriters but
will instead be paid, at the rate applicable to the International Offering, to the relevant
International Underwriters.
The aggregate underwriting commissions and fees together with the Stock
Exchange listing fees, the SFC transaction levy and the Stock Exchange trading fee,
legal and other professional fees and printing and all other expenses relating to the
Global Offering are estimated to be approximately HKD1,664.4 million (assuming an
Offer Price of HKD43.50 per Offer Share (which is the mid-point of the Offer Price
Range) and the full payment of the discretionary incentive fee and the exercise of the
Over-allotment Option in full) and will be paid by the Company.
The underwriters of the Hong Kong Public Offering and the International Offering
(together, the “Syndicate Members”) and their affiliates may each individually
undertake a variety of activities (as further described below) which do not form part of the
underwriting or stabilizing process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of
commercial and investment banking, brokerage, funds management, trading, hedging,
investing and other activities for their own account and for the account of others. In the
ordinary course of their various business activities, the Syndicate Members and their
respective affiliates may purchase, sell or hold a broad array of investments and actively
trade securities, derivatives, loans, commodities, currencies, credit default swaps and
other financial instruments for their own account and for the accounts of their customers.
Such investment and trading activities may involve or relate to assets, securities and/or
instruments of the Company and/or persons and entities with relationships with the
Company and may also include swaps and other financial instruments entered into for
hedging purposes in connection with the Group’s loans and other debt.
– 267 –
UNDERWRITING
In relation to the Shares, the activities of the Syndicate Members and their affiliates
could include acting as agent for buyers and sellers of the Shares, entering into
transactions with those buyers and sellers in a principal capacity, including as a lender
to initial purchasers of the Shares (which financing may be secured by the Shares) in the
Global Offering, proprietary trading in the Shares, and entering into over the counter or
listed derivative transactions or listed or unlisted securities transactions (including
issuing securities such as derivative warrants listed on a stock exchange) which have as
their underlying assets, assets including the Shares. Such transactions may be carried
out as bilateral agreements or trades with selected counterparties. Those activities may
require hedging activity by those entities involving, directly or indirectly, the buying and
selling of the Shares, which may have a negative impact on the trading price of the
Shares. All such activities could occur in Hong Kong and elsewhere in the world and may
result in the Syndicate Members and their affiliates holding long and/or short positions in
the Shares, in baskets of securities or indices including the Shares, in units of funds that
may purchase the Shares, or in derivatives related to any of the foregoing.
All such activities may occur both during and after the end of the stabilizing period
described in “Structure of the Global Offering.” Such activities may affect the market
price or value of the Shares, the liquidity or trading volume in the Shares and the volatility
of the price of the Shares, and the extent to which this occurs from day to day cannot be
estimated.
It should be noted that when engaging in any of these activities, the Syndicate
Members will be subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilizing Manager or any person
acting for it) must not, in connection with the distribution of the Offer Shares,
effect any transactions (including issuing or entering into any option or other
derivative transactions relating to the Offer Shares), whether in the open
market or otherwise, with a view to stabilizing or maintaining the market price
of any of the Offer Shares at levels other than those which might otherwise
prevail in the open market; and
(b) the Syndicate Members must comply with all applicable laws and regulations,
including the market misconduct provisions of the SFO, including the
provisions prohibiting insider dealing, false trading, price rigging and stock
market manipulation.
Certain of the Syndicate Members or their respective affiliates have provided from
time to time, and expect to provide in the future, investment banking and other services
to the Company and each of its affiliates for which such Syndicate Members or their
respective affiliates have received or will receive customary fees and commissions.
– 268 –
STRUCTURE OF THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as
part of the Global Offering. 1,626,526,000 Offer Shares will initially be made available
under the Global Offering comprising:
(a) the Hong Kong Public Offering of initially 81,327,000 Shares (subject to
reallocation) in Hong Kong as described in “– The Hong Kong Public Offering”
below; and
(i) apply for Hong Kong Offer Shares under the Hong Kong Public Offering; or
(ii) apply for or indicate an interest for International Offer Shares under the
International Offering,
The Offer Shares will represent approximately 15.35% of the total Shares in issue
immediately following the completion of the Global Offering, assuming the Over-
allotment Option is not exercised. If the Over-allotment Option is exercised in full, the
Offer Shares will represent approximately 17.25% of the total enlarged share capital of
the Company.
The listing of the Shares on the Stock Exchange is sponsored by the Joint
Sponsors. The Joint Sponsors have made an application on behalf of the Company to
the Listing Committee of the Stock Exchange for the listing of, and permission to deal in,
the Shares in issue and to be issued as mentioned in this prospectus.
The Company is initially offering 81,327,000 Shares for subscription by the public in
Hong Kong at the Offer Price, representing approximately 5% of the total number of Offer
Shares initially available under the Global Offering. The number of Offer Shares initially
offered under the Hong Kong Public Offering, subject to any reallocation of Offer Shares
between the International Offering and the Hong Kong Public Offering, will represent
approximately 0.77% of the total Shares in issue immediately following the completion of
the Global Offering (assuming the Over-allotment Option is not exercised).
– 269 –
STRUCTURE OF THE GLOBAL OFFERING
The Hong Kong Public Offering is open to members of the public in Hong Kong as
well as to institutional and professional investors. Professional investors generally
include brokers, dealers, companies (including fund managers) whose ordinary
business involves dealing in shares and other securities and corporate entities that
regularly invest in shares and other securities.
Completion of the Hong Kong Public Offering is subject to the conditions set out in
“– Conditions of the Global Offering” below.
Allocation
Allocation of Offer Shares to investors under the Hong Kong Public Offering will be
based solely on the level of valid applications received under the Hong Kong Public
Offering. The basis of allocation may vary, depending on the number of Hong Kong Offer
Shares validly applied for by applicants. Such allocation could, where appropriate,
consist of balloting, which could mean that some applicants may receive a higher
allocation than others who have applied for the same number of Hong Kong Offer
Shares, and those applicants who are not successful in the ballot may not receive any
Hong Kong Offer Shares.
For allocation purposes only, the total number of Hong Kong Offer Shares available
under the Hong Kong Public Offering (after taking into account any reallocation referred
to below) will be divided equally (to the nearest board lot) into two pools: pool A and pool
B. The Hong Kong Offer Shares in pool A will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate subscription
price of HKD5 million (excluding the brokerage, the SFC transaction levy and the Stock
Exchange trading fee payable) or less. The Hong Kong Offer Shares in pool B will be
allocated on an equitable basis to applicants who have applied for Hong Kong Offer
Shares with an aggregate subscription price of more than HKD5 million (excluding the
brokerage, the SFC transaction levy and the Stock Exchange trading fee payable) and
up to the total value in pool B.
Investors should be aware that applications in pool A and applications in pool B may
receive different allocation ratios. If any Hong Kong Offer Shares in one (but not both) of
the pools are unsubscribed, such unsubscribed Hong Kong Offer Shares will be
transferred to the other pool to satisfy demand in that other pool and be allocated
accordingly. For the purpose of the immediately preceding paragraph only, the
“subscription price” for Hong Kong Offer Shares means the price payable on application
therefor (without regard to the Offer Price as finally determined). Applicants can only
receive an allocation of Hong Kong Offer Shares from either pool A or pool B and not
from both pools. Multiple or suspected multiple applications under the Hong Kong Public
Offering and any application for more than 40,663,500 Hong Kong Offer Shares (being
50% of the 81,327,000 Hong Kong Offer Shares initially available under the Hong Kong
Public Offering) is liable to be rejected.
Reallocation
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation. Paragraph 4.2 of Practice Note 18 of the
Listing Rules requires a clawback mechanism to be put in place which would have the
effect of increasing the number of Offer Shares under the Hong Kong Public Offering to
a certain percentage of the total number of Offer Shares offered under the Global
Offering if certain prescribed total demand levels are reached.
– 270 –
STRUCTURE OF THE GLOBAL OFFERING
We have applied for, and the Hong Kong Stock Exchange has granted to us, a
waiver from strict compliance with paragraph 4.2 of Practice Note 18 of the Listing Rules
to the effect as further described below (the “Mandatory Reallocation”):
(i) 81,327,000 Offer Shares are initially available in the Hong Kong Public
Offering, representing approximately 5% of the Offer Shares initially available
under the Global Offering;
in the event that the International Offer Shares are fully subscribed or oversubscribed,
(ii) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 15 times or more but less than 50 times the number of the
Offer Shares initially available for subscription under the Hong Kong Public
Offering, then Offer Shares will be reallocated to the Hong Kong Public
Offering from the International Offering, so that the total number of Offer
Shares available under the Hong Kong Public Offering will be 130,123,000
Offer Shares, representing approximately 8% of the Offer Shares initially
available under the Global Offering;
(iii) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 50 times or more but less than 100 times the number of the
Offer Shares initially available for subscription under the Hong Kong Public
Offering, then Offer Shares will be reallocated to the Hong Kong Public
Offering from the International Offering, so that the total number of Offer
Shares available under the Hong Kong Public Offering will be 146,388,000
Offer Shares, representing approximately 9% of the Offer Shares initially
available under the Global Offering; and
(iv) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 100 times or more than the number of the Offer Shares
initially available for subscription under the Hong Kong Public Offering, then
Offer Shares will be reallocated to the Hong Kong Public Offering from the
International Offering, so that the total number of Offer Shares available under
the Hong Kong Public Offering will be 162,653,000 Offer Shares, representing
approximately 10% of the Offer Shares initially available under the Global
Offering.
The Offer Shares to be offered in the Hong Kong Public Offering and the
International Offering may, in certain circumstances, be reallocated as between these
offerings at the discretion of the Joint Representatives (for themselves and on behalf of
the Underwriters) and the Joint Sponsors. Subject to the foregoing paragraph, the Joint
Representatives and the Joint Sponsors may in their discretion reallocate Offer Shares
from the International Offering to the Hong Kong Public Offering to satisfy valid
applications under the Hong Kong Public Offering. In addition, if the Hong Kong Public
Offering is not fully subscribed for, the Joint Representatives and the Joint Sponsors
have the authority to reallocate all or any unsubscribed Hong Kong Offer Shares to the
International Offering, in such proportions as the Joint Representatives and the Joint
Sponsors deem appropriate.
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STRUCTURE OF THE GLOBAL OFFERING
International Offer Shares are undersubscribed and the Hong Kong Offer Shares are
fully subscribed or oversubscribed irrespective of the number of times; or (ii) the
International Offer Shares are fully subscribed or oversubscribed and the Hong Kong
Offer Shares are fully subscribed or oversubscribed as to less than 15 times of the
number of Hong Kong Offer Shares initially available under the Hong Kong Public
Offering provided that the Offer Price would be set at HKD40.00 (low-end of the
indicative Office Price), up to 81,327,000 Offer Shares may be reallocated to the Hong
Kong Public Offering from the International Offering, so that the total number of the Offer
Shares available under the Hong Kong Public Offer will be increased to 162,653,000
Offer Shares, representing approximately 10% of the number of the Offer Shares initially
available under the Global Offering (before any exercise of the Over-allotment Option).
Applications
Each applicant under the Hong Kong Public Offering will be required to give an
undertaking and confirmation in the application submitted by him/her/it that he/she/it and
any person(s) for whose benefit he/she/it is making the application has not applied for or
taken up, or indicated an interest for, and will not apply for or take up, or indicate an
interest for, any International Offer Shares under the International Offering. Such
applicant’s application is liable to be rejected if such undertaking and/or confirmation
is/are breached and/or untrue (as the case may be) or if he/she/it has been or will be
placed or allocated International Offer Shares under the International Offering.
Applicants under the Hong Kong Public Offering are required to pay, on application,
the Maximum Offer Price of HKD47.00 per Offer Share in addition to the brokerage, the
SFC transaction levy and the Stock Exchange trading fee payable on each Offer Share.
If the Offer Price, as finally determined in the manner described in “– Pricing and
Allocation” below, is less than the Maximum Offer Price of HKD47.00 per Offer Share,
appropriate refund payments (including the brokerage, the SFC transaction levy and the
Stock Exchange trading fee attributable to the surplus application monies) will be made
to successful applicants, without interest. Further details are set out in “How to Apply for
Hong Kong Offer Shares.”
Allocation
The International Offering will include selective marketing of Offer Shares to QIBs
in the US as well as institutional and professional investors and other investors
anticipated to have a sizeable demand for such Offer Shares in Hong Kong and other
jurisdictions outside the US in reliance on Regulation S. Professional investors generally
include brokers, dealers, companies (including fund managers) whose ordinary
business involves dealing in shares and other securities and corporate entities that
– 272 –
STRUCTURE OF THE GLOBAL OFFERING
regularly invest in shares and other securities. Allocation of Offer Shares pursuant to the
International Offering will be effected in accordance with the “book-building” process
described in “– Pricing and Allocation” below and based on a number of factors, including
the level and timing of demand, the total size of the relevant investor’s invested assets
or equity assets in the relevant sector and whether or not it is expected that the relevant
investor is likely to buy further Shares and/or hold or sell its Shares after the Listing.
Such allocation is intended to result in a distribution of the Shares on a basis which would
lead to the establishment of a solid professional and institutional shareholder base to the
benefit of the Group and the Shareholders as a whole.
The Joint Representatives (on behalf of the Underwriters) may require any investor
who has been offered Offer Shares under the International Offering and who has made
an application under the Hong Kong Public Offering to provide sufficient information to
the Joint Representatives so as to allow it to identify the relevant applications under the
Hong Kong Public Offering and to ensure that they are excluded from any allocation of
Offer Shares under the Hong Kong Public Offering.
Reallocation
The total number of Offer Shares to be issued pursuant to the International Offering
may change as a result of the clawback arrangement described in “– The Hong Kong
Public Offering – Reallocation” above, the exercise of the Over-allotment Option in
whole or in part and/or any reallocation of unsubscribed Offer Shares originally included
in the Hong Kong Public Offering.
OVER-ALLOTMENT OPTION
In connection with the Global Offering, the Company is expected to grant the
Over-allotment Option to the International Underwriters, exercisable by the Joint
Representatives (on behalf of the International Underwriters).
Pursuant to the Over-allotment Option, the International Underwriters will have the
right, exercisable by the Joint Representatives (on behalf of the International
Underwriters) at any time from the date of the International Underwriting Agreement until
30 days after the last day for lodging applications under the Hong Kong Public Offering,
to require the Company to issue up to an aggregate of 243,978,000 additional Offer
Shares, representing not more than approximately 15% of the total number of Offer
Shares initially available under the Global Offering, at the Offer Price under the
International Offering to, among other things, cover over-allocations in the International
Offering, if any.
STABILIZATION
– 273 –
STRUCTURE OF THE GLOBAL OFFERING
In connection with the Global Offering, the Stabilizing Manager (or any person
acting for it), on behalf of the Underwriters, may over-allocate or effect transactions with
a view to stabilizing or supporting the market price of the Shares at a level higher than
that which might otherwise prevail for a limited period after the Listing Date. However,
there is no obligation on the Stabilizing Manager (or any person acting for it) to conduct
any such stabilizing action. Such stabilizing action, if taken, (a) will be conducted at the
absolute discretion of the Stabilizing Manager (or any person acting for it) and in what
the Stabilizing Manager reasonably regards as the best interest of the Company, (b) may
be discontinued at any time and (c) is required to be brought to an end within 30 days of
the last day for lodging applications under the Hong Kong Public Offering.
Stabilization action permitted in Hong Kong pursuant to the Securities and Futures
(Price Stabilizing) Rules of the SFO includes (a) over-allocating for the purpose of
preventing or minimizing any reduction in the market price of the Shares, (b) selling or
agreeing to sell the Shares so as to establish a short position in them for the purpose of
preventing or minimizing any reduction in the market price of the Shares, (c) purchasing,
or agreeing to purchase, the Shares pursuant to the Over-allotment Option in order to
close out any position established under paragraph (a) or (b) above, (d) purchasing, or
agreeing to purchase, any of the Shares for the sole purpose of preventing or minimizing
any reduction in the market price of the Shares, (e) selling or agreeing to sell any Shares
in order to liquidate any position established as a result of those purchases and (f)
offering or attempting to do anything as described in paragraph (b), (c), (d) or (e) above.
Specifically, prospective applicants for and investors in the Offer Shares should
note that:
(a) the Stabilizing Manager (or any person acting for it) may, in connection with
the stabilizing action, maintain a long position in the Shares;
(b) there is no certainty as to the extent to which and the time or period for which
the Stabilizing Manager (or any person acting for it) will maintain such a long
position;
(c) liquidation of any such long position by the Stabilizing Manager (or any person
acting for it) and selling in the open market may have an adverse impact on the
market price of the Shares;
(d) no stabilizing action can be taken to support the price of the Shares for longer
than the stabilization period, which will begin on the Listing Date, and is
expected to expire on Saturday, 10 August 2019, being the 30th day after the
last day for lodging applications under the Hong Kong Public Offering. After
this date, when no further stabilizing action may be taken, demand for the
Shares, and therefore the price of the Shares, could fall;
(e) the price of the Shares cannot be assured to stay at or above the Offer Price
by the taking of any stabilizing action; and
(f) stabilizing bids or transactions effected in the course of the stabilizing action
may be made at any price at or below the Offer Price and can, therefore, be
done at a price below the price paid by applicants for, or investors in, the Offer
Shares.
The Company will ensure that an announcement in compliance with the Securities
and Futures (Price Stabilizing) Rules of the SFO will be made within seven days of the
expiration of the stabilization period.
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STRUCTURE OF THE GLOBAL OFFERING
Over-Allocation
Following any over-allocation of Shares in connection with the Global Offering, the
Stabilizing Manager (or any person acting for it) may cover such over-allocations by,
among other methods, exercising the Over-allotment Option in full or in part, by using
Shares purchased by the Stabilizing Manager (or any person acting for it) in the
secondary market at prices that do not exceed the Offer Price or a combination of these
means.
If the Stock Borrowing Agreement with AB InBev Brewing Company (APAC) Limited
is entered into, the borrowing of Shares will only be effected by the Stabilizing Manager
(or any person acting for it) for the settlement of over-allocations in the International
Offering and such borrowing arrangement is not subject to the restrictions of Rule
10.07(1)(a) of the Listing Rules, provided that the requirements set out in Rule 10.07(3)
of the Listing Rules, being that the Stock Borrowing Agreement will be for the sole
purpose of covering any short position prior to the exercise of the Over-allotment Option
in connection with the International Offering, are complied with.
Pricing for the Offer Shares for the purpose of the various offerings under the Global
Offering will be fixed on the Price Determination Date, which is expected to be on or
about Friday, 12 July 2019 and, in any event, no later than Monday, 15 July 2019, by
agreement between the Joint Representatives (for themselves and on behalf of the
Underwriters) and the Company, and the number of Offer Shares to be allocated under
the various offerings will be determined shortly thereafter.
The Offer Price will not be more than HKD47.00 per Offer Share and is expected to
be not less than HKD40.00 per Offer Share, unless otherwise announced, as further
explained below. Applicants under the Hong Kong Public Offering must pay, on
application, the Maximum Offer Price of HKD47.00 per Offer Share plus brokerage of
1.0%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%. If the
Offer Price is less than HKD47.00 per Offer Share, appropriate refund payments
(including the brokerage, SFC transaction levy and the Hong Kong Stock Exchange
trading fee attributable to the surplus applicable monies, without any interest) will be
made to successful applications. Prospective investors should be aware that the
Offer Price to be determined on the Price Determination Date may be, but is not
expected to be, lower than the Minimum Offer Price stated in this prospectus.
If, for any reason, our Company and the Joint Representatives (for themselves and
on behalf of the Underwriters) are unable to reach agreement on the Offer Price on or
before Monday, 15 July 2019, the Global Offering will not proceed and will lapse.
– 275 –
STRUCTURE OF THE GLOBAL OFFERING
The Joint Representatives (on behalf of the Underwriters) may, where they deem
appropriate, based on the level of interest expressed by prospective investors during the
book-building process in respect of the International Offering, and with the consent of the
Company, reduce the number of Offer Shares offered and/or the Offer Price Range
below that stated in this prospectus at any time on or prior to the morning of the last day
for lodging applications under the Hong Kong Public Offering. In such a case, the
Company will, as soon as practicable following the decision to make such reduction, and
in any event not later than the morning of the last day for lodging applications under the
Hong Kong Public Offering, cause to be published in the South China Morning Post (in
English) and the Hong Kong Economic Times (in Chinese) and on the websites of the
Company and the Stock Exchange at www.budweiserapac.com and
www.hkexnews.hk, respectively, notices of the reduction. Upon the issue of such a
notice, the revised number of Offer Shares and/or the Offer Price Range will be final and
conclusive and the Offer Price, if agreed upon by the Joint Representatives (on behalf of
the Underwriters) and the Company, will be fixed within such revised Offer Price Range.
Before submitting applications for the Hong Kong Offer Shares, applicants should
have regard to the possibility that any announcement of a reduction in the number of
Offer Shares and/or the Offer Price Range may not be made until the last day for lodging
applications under the Hong Kong Public Offering. Such notice will also include
confirmation or revision, as appropriate, of the working capital statement and the Global
Offering statistics as currently set out in this prospectus, and any other financial
information which may change as a result of any such reduction. In the absence of any
such notice so published, the number of Offer Shares will not be reduced and/or the Offer
Price, if agreed upon by the Joint Representatives (on behalf of the Underwriters) and
the Company, will under no circumstances be set outside the Offer Price Range as
stated in this prospectus.
Final Offer Price, the level of indications of interest in the International Offering, the
level of applications in the Hong Kong Public Offering, the basis of allocations of the
Hong Kong Offer Shares and the results of allocations in the Hong Kong Public Offering
are expected to be made available through a variety of channels in the manner described
in “How to Apply for Hong Kong Offer Shares – Publication of Results.”
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms and conditions of the Hong Kong Underwriting Agreement and is subject
to, among other things, the Joint Representatives (on behalf of the Underwriters) and the
Company agreeing on the Offer Price.
– 276 –
STRUCTURE OF THE GLOBAL OFFERING
(a) the Listing Committee granting approval for the listing of, and permission to
deal in, the Shares in issue and to be issued pursuant to the Global Offering on
the Main Board of the Stock Exchange and such approval not subsequently
having been withdrawn or revoked prior to the Listing Date;
(b) the Offer Price having been agreed between the Joint Representatives (on
behalf of the Underwriters) and the Company;
(d) the obligations of the Hong Kong Underwriters under the Hong Kong
Underwriting Agreement and the obligations of the International Underwriters
under the International Underwriting Agreement becoming and remaining
unconditional and not having been terminated in accordance with the terms of
the respective agreements,
in each case on or before the dates and times specified in the respective Underwriting
Agreements (unless and to the extent such conditions are validly waived on or before
such dates and times) and, in any event, not later than the date which is 30 days after the
date of this prospectus.
If, for any reason, the Offer Price is not agreed between the Joint Representatives
(on behalf of the Underwriters), the Company on or before Monday, 15 July 2019, the
Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, the other offering becoming
unconditional and not having been terminated in accordance with its terms.
If the above conditions are not fulfilled or waived prior to the dates and times
specified, the Global Offering will lapse and the Stock Exchange will be notified
immediately. Notice of the lapse of the Hong Kong Public Offering will be published by
the Company in the South China Morning Post (in English) and the Hong Kong Economic
Times (in Chinese) and on the websites of the Company and the Stock Exchange at
www.budweiserapac.com and www.hkexnews.hk, respectively, on the next day
following such lapse. In such a situation, all application monies will be returned, without
interest, on the terms set out in “How to Apply for Hong Kong Offer Shares – Refund of
Application Monies.” In the meantime, all application monies will be held in separate
bank account(s) with the receiving banks or other bank(s) in Hong Kong licensed under
the Banking Ordinance (Chapter 155 of the Laws of Hong Kong).
Share certificates for the Offer Shares will only become valid at 8:00 a.m. on Friday,
19 July 2019, provided that the Global Offering has become unconditional in all respects
at or before that time.
Assuming that the Hong Kong Public Offering becomes unconditional at or before
8:00 a.m. in Hong Kong on Friday, 19 July 2019, it is expected that dealings in the Shares
on the Stock Exchange will commence at 9:00 a.m. on Friday, 19 July 2019.
The Shares will be traded in board lots of 100 Shares each and the stock code of the
Shares will be 1876.
– 277 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
1. How to Apply
If you apply for Hong Kong Offer Shares, then you may not apply for or indicate an
interest for International Offer Shares.
None of you or your joint applicant(s) may make more than one application, except
where you are a nominee and provide the required information in your application.
The Company, the Joint Representatives, the White Form eIPO Service Provider
and their respective agents may reject or accept any application, in full or in part, for any
reason at their discretion.
You can apply for Hong Kong Offer Shares on a WHITE or YELLOW Application
Form if you or any person(s) for whose benefit you are applying:
• are outside the US and are not a US person (as defined in Regulation S); and
If you apply for Hong Kong Offer Shares online through the White Form eIPO
service, in addition to the above you must also:
If you are a firm, the application must be in the individual members’ names. If you
are a body corporate, the Application Form must be signed by a duly authorized officer,
who must state his representative capacity, and stamped with your corporation’s chop.
– 278 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
The number of joint applicants may not exceed four and they may not apply by
means of the White Form eIPO service for the Hong Kong Offer Shares.
Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer
Shares if:
• you are a director or chief executive of the Company and/or any of the
Company’s subsidiaries;
• you are a connected person of the Company or a person who will become a
connected person of the Company immediately upon the completion of the
Global Offering; or
• you have been allocated or have applied for any International Offer Shares or
otherwise participate in the International Offering.
For Hong Kong Offer Shares to be issued in your own name, use a WHITE
Application Form or apply online through the White Form eIPO service at
www.eipo.com.hk.
For Hong Kong Offer Shares to be issued in the name of HKSCC Nominees and
deposited directly into CCASS to be credited to your or a designated CCASS
Participant’s stock account, use a YELLOW Application Form or electronically instruct
HKSCC via CCASS to cause HKSCC Nominees to apply for you.
You can collect a WHITE Application Form and a prospectus during normal
business hours from 9:00 a.m. on Friday, 5 July 2019 until 12:00 noon on Thursday, 11
July 2019 from:
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HOW TO APPLY FOR HONG KONG OFFER SHARES
(b) any of the following branches of the receiving banks for the Hong Kong Public
Offering:
– 280 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
You can collect a YELLOW Application Form and a prospectus during normal
business hours from 9:00 a.m. on Friday, 5 July 2019 until 12:00 noon on Thursday, 11
July 2019 from:
• the Depository Counter of HKSCC at 1/F, One & Two Exchange Square, 8
Connaught Place, Central, Hong Kong; or
• your stockbroker.
– 281 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
The application lists will be open from 11:45 a.m. to 12:00 noon on Thursday, 11
July 2019, the last day for applications, or such later time as described in “– Effect of Bad
Weather on the Opening and Closing of the Application Lists” below.
(a) undertake to execute all relevant documents and instruct and authorize the
Company and/or the Joint Representatives (or its agents or nominees), as
agents of the Company, to execute any documents for you and to do on your
behalf all things necessary to register any Hong Kong Offer Shares allocated
to you in your name or in the name of HKSCC Nominees as required by the
Articles of Association;
(b) agree to comply with the Memorandum and Articles of Association of the
Company, the Companies (Winding Up and Miscellaneous Provisions)
Ordinance and Cayman Companies Law;
(c) confirm that you have read the terms and conditions and application
procedures set out in this prospectus and in the Application Form and agree to
be bound by them;
(d) confirm that you have received and read this prospectus and have relied only
on the information and representations in this prospectus in making your
application and will not rely on any other information or representations,
except those in any supplement to this prospectus;
(e) confirm that you are aware of the restrictions on the Global Offering set out in
this prospectus;
(f) agree that none of the Company, the Relevant Persons and the White Form
eIPO Service Provider is or will be liable for any information and
representations not in this prospectus (and any supplement to this
prospectus);
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HOW TO APPLY FOR HONG KONG OFFER SHARES
(g) undertake and confirm that you or the person(s) for whose benefit you have
made the application have not applied for or taken up, or indicated an interest
for, and will not apply for or take up, or indicate an interest for, any
International Offer Shares nor participated in the International Offering;
(h) agree to disclose to the Company, the Hong Kong Share Registrar, the
receiving banks and the Relevant Persons any personal data which any of
them may require about you and the person(s) for whose benefit you have
made the application;
(i) if the laws of any place outside Hong Kong apply to your application, agree and
warrant that you have complied with all such laws and neither the Company
nor the Relevant Persons will breach any laws outside Hong Kong as a result
of the acceptance of your offer to purchase, or any action arising from your
rights and obligations under the terms and conditions in this prospectus and
the Application Form;
(j) agree that once your application has been accepted, you may not rescind it
because of an innocent misrepresentation;
(k) agree that your application will be governed by the laws of Hong Kong;
(l) represent, warrant and undertake that (i) you understand that the Hong Kong
Offer Shares have not been and will not be registered under the US Securities
Act and (ii) you and any person for whose benefit you are applying for the Hong
Kong Offer Shares are outside the United States and are not a US person (as
defined in Regulation S) or are a person described in paragraph (h)(3) of Rule
902 of Regulation S;
(m) warrant that the information you have provided is true and accurate;
(n) agree to accept the Hong Kong Offer Shares applied for or any lesser number
allocated to you under the application;
(o) authorize (i) the Company to place your name(s) or the name of HKSCC
Nominees on the register of members of the Company as the holder(s) of any
Hong Kong Offer Shares allocated to you and such other registers as required
under the Memorandum and Articles of Association and (ii) the Company
and/or its agents to send any Share certificate(s) and/or any e-Refund
payment instructions and/or any refund cheque(s) to you or the first-named
applicant for joint applications by ordinary post at your own risk to the address
stated on the application, unless you have fulfilled the criteria mentioned in
“– Personal Collection” below to collect the Share certificate(s) and/or refund
cheque(s) in person;
(p) declare and represent that this is the only application made and the only
application intended by you to be made to benefit you or the person for whose
benefit you are applying;
(q) understand that the Company, the Directors and the Joint Representatives will
rely on your declarations and representations in deciding whether or not to
allocate any of the Hong Kong Offer Shares to you and that you may be
prosecuted for making a false declaration;
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HOW TO APPLY FOR HONG KONG OFFER SHARES
(r) (if the application is made for your own benefit) warrant that no other
application has been or will be made for your benefit on a WHITE or YELLOW
Application Form or by giving electronic application instructions to HKSCC
or through the White Form eIPO service or by any one as your agent or by any
other person; and
(s) (if you are making the application as an agent for the benefit of another person)
warrant that (i) no other application has been or will be made by you as agent
for or for the benefit of that person or by that person or by any other person as
agent for that person on a WHITE or YELLOW Application Form or by giving
electronic application instructions to HKSCC and (ii) you have due
authority to sign the Application Form or give electronic application
instructions on behalf of that other person as its agent.
General
Individuals who meet the criteria in “– Who Can Apply” above may apply through the
White Form eIPO service for the Offer Shares to be allocated and registered in their own
names through the designated website at www.eipo.com.hk.
Detailed instructions for application through the White Form eIPO service are set
out on the designated website. If you do not follow the instructions, your application may
be rejected and may not be submitted to the Company. If you apply through the
designated website, you authorize the White Form eIPO Service Provider to apply on
the terms and conditions in this prospectus, as supplemented and amended by the terms
and conditions of the White Form eIPO Service Provider.
Time for Submitting Applications under the White Form eIPO Service
You may submit your application through the White Form eIPO service through the
designated website at www.eipo.com.hk (24 hours daily, except on the last day for
applications) from 9:00 a.m. on Friday, 5 July 2019 until 11:30 a.m. on Thursday, 11 July
2019 and the latest time for completing full payment of application monies in respect of
such applications will be 12:00 noon on Thursday, 11 July 2019, the last day for
applications, or such later time as described in “– Effect of Bad Weather on the Opening
and Closing of the Application Lists” below.
No Multiple Applications
If you apply by means of the White Form eIPO service, once you complete payment
in respect of any electronic application instruction given by you or for your benefit
through the White Form eIPO service to make an application for Hong Kong Offer
Shares, an actual application will be deemed to have been made. For the avoidance of
doubt, giving an electronic application instruction under the White Form eIPO
service more than once and obtaining different application reference numbers without
effecting full payment in respect of a particular reference number will not constitute an
actual application.
Only one application may be made for the benefit of any person. If you are
suspected of submitting more than one application through the White Form eIPO
service or by any other means, all of your applications are liable to be rejected.
– 284 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
For the avoidance of doubt, the Company and all other parties involved in the
preparation of this prospectus acknowledge that each applicant who gives or causes to
give electronic application instructions is a person who may be entitled to
compensation under Section 40 of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance).
Environmental Protection
The obvious advantage of the White Form eIPO is to save the use of paper via the
self-serviced and electronic application process. Computershare Hong Kong Investor
Services Limited, the designated White Form eIPO Service Provider, will contribute
HK$2 for each “Budweiser Brewing Company APAC Limited” White Form eIPO
application submitted via the website www.eipo.com.hk to support the funding of
“Dongjiang River Source Tree Planting” project initiated by “Friends of the Earth (HK).”
General
CCASS Participants may give electronic application instructions to apply for the
Hong Kong Offer Shares and to arrange payment of the money due on application and
payment of refunds under their participant agreements with HKSCC and the General
Rules of CCASS and the CCASS Operational Procedures.
If you are a CCASS Investor Participant, you may give these electronic
application instructions through the CCASS Phone System by calling +852 2979 7888
or through the CCASS Internet System (https://ip.ccass.com) (using the procedures in
HKSCC’ s “An Operating Guide for Investor Participants” in effect from time to time).
HKSCC can also input electronic application instructions for you if you go to:
If you are not a CCASS Investor Participant, you may instruct your broker or
custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to
give electronic application instructions via CCASS terminals to apply for the Hong
Kong Offer Shares on your behalf.
– 285 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
Where you have given electronic application instructions to apply for the Hong
Kong Offer Shares and a WHITE Application Form is signed by HKSCC Nominees on
your behalf:
(a) HKSCC Nominees will only be acting as a nominee for you and is not liable for
any breach of the terms and conditions of the WHITE Application Form or this
prospectus; and
• agree that the Hong Kong Offer Shares to be allocated shall be registered
in the name of HKSCC Nominees and deposited directly into CCASS for
the credit of the CCASS Participant’s stock account on your behalf or your
CCASS Investor Participant’s stock account;
• agree to accept the Hong Kong Offer Shares applied for or any lesser
number allocated;
• undertake and confirm that you have not applied for or taken up, or
indicated an interest for, and will not apply for or take up, or indicate an
interest for, any International Offer Shares nor participated in the
International Offering;
• (if the electronic application instructions are given for your benefit)
declare that only one set of electronic application instructions has
been given for your benefit;
• (if you are an agent for another person) declare that you have only given
one set of electronic application instructions for the other person’s
benefit and are duly authorized to give those instructions as its agent;
• confirm that you understand that the Company, the Directors and the
Joint Representatives will rely on your declarations and representations
in deciding whether or not to allocate any of the Hong Kong Offer Shares
to you and that you may be prosecuted for making a false declaration;
• confirm that you have read the terms and conditions and application
procedures set out in this prospectus and agree to be bound by them;
• confirm that you have received and read a copy of this prospectus and
have relied only on the information and representations in this prospectus
in causing the application to be made and will not rely on any other
information or representations, except those in any supplement to this
prospectus;
– 286 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
• agree that neither the Company nor the Relevant Persons is or will be
liable for any information and representations not in this prospectus (and
any supplement to this prospectus);
• agree to disclose to the Company, the Hong Kong Share Registrar, the
receiving banks and the Relevant Persons any personal data which they
may require about you;
• agree (without prejudice to any other rights which you may have) that
once HKSCC Nominees’ application has been accepted, it cannot be
rescinded for innocent misrepresentation;
• agree with the Company, for itself and for the benefit of each Shareholder
(and so that the Company will be deemed by its acceptance in whole or in
part of the application by HKSCC Nominees to have agreed, for the
Company and on behalf of each Shareholder, with each CCASS
Participant giving electronic application instructions) to observe and
comply with the Memorandum and Articles of Association of the
Company, the Companies (Winding Up and Miscellaneous Provisions)
Ordinance and Cayman Companies Law; and
– 287 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
You may give or cause your broker or custodian who is a CCASS Clearing
Participant or a CCASS Custodian Participant to give electronic application
instructions for a minimum of 100 Hong Kong Offer Shares. Instructions for more than
100 Hong Kong Offer Shares must be in one of the numbers set out in the table in the
Application Forms. No application for any other number of Hong Kong Offer Shares will
be considered and any such application is liable to be rejected.
Note:
(1) The times in this subsection are subject to change as HKSCC may determine from time to time
with prior notification to CCASS Clearing/Custodian Participants and/or CCASS Investor
Participants.
– 288 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
The latest time for inputting your electronic application instructions will be 12:00
noon on Thursday, 11 July 2019, the last day for applications, or such later time as
described in “– Effect of Bad Weather on the Opening and Closing of the Application
Lists” below.
No Multiple Applications
If you are suspected of having made multiple applications or if more than one
application is made for your benefit, the number of Hong Kong Offer Shares applied for
by HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer
Shares for which you have given such instructions and/or for which such instructions
have been given for your benefit. Any electronic application instructions to make an
application for the Hong Kong Offer Shares given by you or for your benefit to HKSCC
will be deemed to be an actual application for the purposes of considering whether
multiple applications have been made.
For the avoidance of doubt, the Company and all other parties involved in the
preparation of this prospectus acknowledge that each CCASS Participant who gives or
causes to give electronic application instructions is a person who may be entitled to
compensation under Section 40 of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance. (as applied by Section 342E of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance).
Personal Data
The section of the Application Form headed “Personal Data” applies to any
personal data held by the Company, the Hong Kong Share Registrar, the receiving
banks and the Relevant Persons about you in the same way as it applies to personal data
about applicants other than HKSCC Nominees.
The application for Hong Kong Offer Shares by giving electronic application
instructions to HKSCC is only a facility provided to CCASS Participants. Similarly, the
application for Hong Kong Offer Shares through the White Form eIPO service is only a
facility provided by the White Form eIPO Service Provider to public investors. Such
facilities are subject to capacity limitations and potential service interruptions and you
are advised not to wait until the last day for applications to make your electronic
application. The Company, the Relevant Persons and the White Form eIPO Service
Provider take no responsibility for such applications and provide no assurance that any
CCASS Participant or person applying through the White Form eIPO service will be
allocated any Hong Kong Offer Shares.
To ensure that CCASS Investor Participants can give their electronic application
instructions, they are advised not to wait until the last minute to input their instructions
to the systems. In the event that CCASS Investor Participants have problems connecting
to the CCASS Phone System or the CCASS Internet System for submission of their
electronic application instructions, they should either (a) submit a WHITE or
YELLOW Application Form or (b) go to HKSCC’s Customer Service Centre to complete
an input request form for electronic application instructions before 12:00 noon on
Thursday, 11 July, 2019, the last day for applications, or such later time as described in
“– Effect of Bad Weather on the Opening and Closing of the Application Lists” below.
– 289 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
Multiple applications for the Hong Kong Offer Shares are not allowed except by
nominees. If you are a nominee, in the box on the Application Form marked “For
nominees”, you must include:
• an account number; or
for each beneficial owner or, in the case of joint beneficial owners, for each joint
beneficial owner. If you do not include this information, the application will be treated as
being made for your benefit.
All of your applications will be rejected if more than one application on a WHITE or
YELLOW Application Form or by giving electronic application instructions to HKSCC
or through the White Form eIPO service is made for your benefit (including the part of
the application made by HKSCC Nominees acting on electronic application
instructions).
then the application will be treated as being made for your benefit.
“Unlisted company” means a company with no equity securities listed on the Stock
Exchange.
• hold more than half of the issued share capital of the company (not counting
any part of it which carries no right to participate beyond a specified amount in
a distribution of either profits or capital).
The Maximum Offer Price is HKD47.00 per Offer Share. You must also pay
brokerage of 1.0%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of
0.005%.
You must pay the Maximum Offer Price, together with brokerage, SFC transaction
levy and Stock Exchange trading fee, in full upon application for Hong Kong Offer Shares
under the terms and conditions set out in the Application Forms.
The Application Forms have tables showing the exact amount payable for the
numbers of Offer Shares that may be applied for.
– 290 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
For further details on the Offer Price, see “Structure of the Global Offering – Pricing
and Allocation.”
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, 11
July 2019. Instead, they will open between 11:45 a.m. and 12:00 noon on the next
business day which does not have either of those warnings in force in Hong Kong at any
time between 9:00 a.m. and 12:00 noon.
If the application lists do not open and close on Thursday, 11 July 2019 or if there
is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning
signal in force in Hong Kong that may affect the dates mentioned in “– Expected
Timetable,” an announcement will be made.
D. PUBLICATION OF RESULTS
The Company expects to announce the Offer Price, the level of indications of
interest in the International Offering, the level of applications in the Hong Kong Public
Offering and the basis of allocations of the Hong Kong Offer Shares on Thursday, 18 July
2019 in the South China Morning Post (in English) and the Hong Kong Economic Times
(in Chinese) and on the websites of the Company at www.budweiserapac.com and the
Stock Exchange at www.hkexnews.hk.
The results of allocations and the Hong Kong identity card/passport/Hong Kong
business registration numbers of successful applicants under the Hong Kong Public
Offering will be available at the times and dates and in the manner set out below:
– 291 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
• from the allocation results telephone enquiry line by calling +852 2862 8669
between 9:00 a.m. and 10:00 p.m. from Thursday, 18 July 2019 to Sunday,
21 July 2019; and
• in the special allocation results booklets which will be available for inspection
during the opening hours of the individual receiving bank branches referred to
above from Thursday, 18 July 2019 to Saturday, 20 July 2019.
If the Company accepts your offer to purchase (in whole or in part), which it may do
by announcing the basis of allocations and/or making available the results of allocations
publicly, there will be a binding contract under which you will be required to purchase the
Hong Kong Offer Shares if the conditions of the Global Offering are satisfied and the
Global Offering is not otherwise terminated. Further details are set out in “Structure of
the Global Offering.”
You will not be entitled to exercise any remedy of rescission for innocent
misrepresentation at any time after acceptance of your application. This does not affect
any other right you may have.
You should note the following situations in which the Hong Kong Offer Shares will
not be allocated to you:
Your application or the application made by HKSCC Nominees on your behalf may
only be revoked on or before Sunday, 4 August 2019 in the following circumstances:
(i) if a person responsible for this prospectus under Section 40 of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section
342E of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance) gives a public notice under that section on or before the fifth day
after the time of the opening of the application lists (excluding any day which
is a Saturday, Sunday or public holiday in Hong Kong) which excludes or limits
that person’s responsibility for this prospectus; or
(ii) if any supplement to this prospectus is issued, in which case applicants who
have already submitted an application will be notified that they are required to
confirm their applications. If applicants have been so notified but have not
confirmed their applications in accordance with the procedure to be notified, all
unconfirmed applications will be deemed revoked.
– 292 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
If your application or the application made by HKSCC Nominees on your behalf has
been accepted, it cannot be revoked. For this purpose, acceptance of applications which
are not rejected will be constituted by notification in the press of the results of allocation,
and where such basis of allocation is subject to certain conditions or provides for
allocation by ballot, such acceptance will be subject to the satisfaction of such conditions
or results of the ballot, respectively.
(b) If the Company or its agents exercise their discretion to reject your
application:
The Company, the Joint Representatives, the White Form eIPO Service Provider
and their respective agents or nominees have full discretion to reject or accept any
application, or to accept only part of any application, without giving any reasons.
The allocation of Hong Kong Offer Shares will be void if the Listing Committee does
not grant permission to list the Shares either:
• within three weeks from the closing date of the applications lists; or
• within a longer period of up to six weeks if the Listing Committee notifies the
Company of that longer period within three weeks of the closing date of the
application lists.
(d) If:
• you or the person for whose benefit you apply for, have applied for or taken up,
or indicated an interest for, or have been or will be placed or allocated
(including conditionally and/or provisionally) Hong Kong Offer Shares and
International Offer Shares;
• your payment is not made correctly or the cheque or banker’s cashier order
paid by you is dishonored upon its first presentation;
• you apply for more than 50% of the Hong Kong Offer Shares initially available
under the Hong Kong Public Offering;
– 293 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
Any refund of your application monies will be made on or before Thursday, 18 July
2019.
You will receive one Share certificate for all Hong Kong Offer Shares allocated to
you under the Hong Kong Public Offering (except pursuant to applications made on
YELLOW Application Forms or by electronic application instructions to HKSCC via
CCASS where the Share certificates will be deposited into CCASS as described below).
(a) Share certificate(s) for all the Hong Kong Offer Shares allocated to you (for
applicants on YELLOW Application Forms, Share certificate(s) for the Hong
Kong Offer Shares allocated to you will be deposited into CCASS as described
below); and
(b) refund cheque(s) crossed “Account Payee Only” in favor of the applicant (or, in
the case of joint applicants, the first-named applicant) for (i) all or the surplus
application monies for the Hong Kong Offer Shares, wholly or partially
unsuccessfully applied for and/or (ii) the difference between the Offer Price
and the Maximum Offer Price paid on application in the event that the Offer
Price is less than the Maximum Offer Price paid on application (including
brokerage of 1.0%, SFC transaction levy of 0.0027% and Stock Exchange
trading fee of 0.005% but without interest).
Part of the Hong Kong identity card number/passport number provided by you or the
first-named applicant (if you are joint applicants) may be printed on your refund cheque,
if any. Your banker may require verification of your Hong Kong identity card
number/passport number before encashment of your refund cheque. Inaccurate
completion of your Hong Kong identity card number/passport number may invalidate or
delay encashment of your refund cheque.
– 294 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
Share certificates will only become valid at 8:00 a.m. on Friday, 19 July 2019,
provided that the Global Offering has become unconditional in all respects at or before
that time. Investors who trade Share on the basis of publicly available allocation details
or prior to the receipt of the Share certificates or prior to the Share certificates becoming
valid do so entirely at their own risk.
Personal Collection
• If you apply for 1,000,000 Hong Kong Offer Shares or more on a WHITE
Application Form and have provided all information required by your
Application Form, you may collect your refund cheque(s) and/or Share
certificate(s) (where applicable) from the Hong Kong Share Registrar,
Computershare Hong Kong Investor Services Limited, at Shops 1712-1716,
17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, from
9:00 a.m. to 1:00 p.m. on Thursday, 18 July 2019, or any other place or date
notified by the Company in the newspapers.
• If you are an individual who is eligible for personal collection, you must not
authorize any other person to collect for you. If you are a corporate applicant
who is eligible for personal collection, your authorized representative must
provide a letter of authorization from your corporation stamped with your
corporation’s chop. Both individuals and authorized representatives must
produce, at the time of collection, evidence of identity acceptable to the Hong
Kong Share Registrar.
• If you apply for less than 1,000,000 Hong Kong Offer Shares on a WHITE
Application Form, your refund cheque(s) and/or Share certificate(s) (where
applicable) will be sent to the address specified in your Application Form on or
before Thursday, 18 July 2019 by ordinary post and at your own risk.
• If you apply for 1,000,000 Hong Kong Offer Shares or more and have provided
all information required by your Application Form, please follow the same
instructions as described above. If you have applied for less than 1,000,000
Hong Kong Offer Shares, your refund cheque(s) will be sent to the address
specified in the Application Form on or before Thursday, 18 July 2019 by
ordinary post and at your own risk.
– 295 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
• If you apply for 1,000,000 Hong Kong Offer Shares or more through the White
Form eIPO service and your application is wholly or partially successful, you
may collect your Share certificate(s) (where applicable) in person from the
Hong Kong Share Registrar, Computershare Hong Kong Investor Services
Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East,
Wan Chai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Thursday, 18 July 2019,
or any other place or date notified by the Company in the newspapers as the
date of dispatch or collection of Share certificates.
• If you do not personally collect your Share certificate(s) within the time
specified for collection, they will be sent to the address specified in your
application instructions by ordinary post and at your own risk.
• If you apply for less than 1,000,000 Hong Kong Offer Shares through the
White Form eIPO service, your Share certificate(s) (where applicable) will be
sent to the address specified in your application instructions on or before
Thursday, 18 July 2019 by ordinary post and at your own risk.
• If you apply and pay the application monies from a single bank account, any
refund monies will be dispatched to that bank account in the form of e-Refund
payment instructions. If you apply and pay the application monies from
multiple bank accounts, any refund monies will be dispatched to the address
specified in your application instructions in the form of refund cheque(s) by
ordinary post and at your own risk.
– 296 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
• For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will
not be treated as an applicant. Instead, each CCASS Participant who gives
electronic application instructions or each person for whose benefit
instructions are given will be treated as an applicant.
• If you have applied as a CCASS Investor Participant, you can also check the
number of Hong Kong Offer Shares allocated to you and the amount of refund
monies (if any) payable to you via the CCASS Phone System and the CCASS
Internet System (under the procedures contained in HKSCC’s “An Operating
Guide for Investor Participants” in effect from time to time) on Thursday, 18
July 2019. Immediately following the credit of the Hong Kong Offer Shares to
your stock account and the credit of the refund monies to your bank account,
HKSCC will also make available to you an activity statement showing the
number of Hong Kong Offer Shares credited to your CCASS Investor
Participant stock account and the amount of refund monies (if any) credited to
your designated bank account.
• Refund of your application monies (if any) in respect of wholly and partially
unsuccessful applications and/or difference between the Offer Price and the
Maximum Offer Price per Offer Share initially paid on application (including
brokerage, SFC transaction levy and Stock Exchange trading fee but without
interest) will be credited to your designated bank account or the designated
bank account of your broker or custodian on Thursday, 18 July 2019.
– 297 –
HOW TO APPLY FOR HONG KONG OFFER SHARES
If the Stock Exchange grants the listing of, and permission to deal in, the Shares
and the Company complies with the stock admission requirements of HKSCC, the
Shares will be accepted as eligible securities by HKSCC for deposit, clearance and
settlement in CCASS with effect from the date of commencement of dealings in the
Shares on the Stock Exchange or any other date HKSCC chooses. Settlement of
transactions between Exchange Participants (as defined in the Listing Rules) is required
to take place in CCASS on the second business day after any trading day.
All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time.
Investors should seek the advice of their stockbroker or other professional adviser
for details of the settlement arrangements as such arrangements may affect their rights
and interests.
All necessary arrangements have been made to enable the Shares to be admitted
into CCASS.
– 298 –
APPENDIX I ACCOUNTANT’S REPORT
The following is the text of a report set out on pages I-1 to I-3, received from the
Company’s reporting accountant, PricewaterhouseCoopers, Certified Public
Accountants, Hong Kong, for the purpose of incorporation in this prospectus. It is
prepared and addressed to the directors of the Company and to the Joint Sponsors
pursuant to the requirements of HKSIR 200 Accountants’ Reports on Historical Financial
Information in Investment Circulars issued by the Hong Kong Institute of Certified Public
Accountants.
Introduction
The directors of the Company are responsible for the preparation of Historical
Financial Information that gives a true and fair view in accordance with the basis of
presentation and preparation set out in Notes 1.2 and 2.1 to the Historical Financial
Information, and for such internal control as the directors determine is necessary to
enable the preparation of Historical Financial Information that is free from material
misstatement, whether due to fraud or error.
Our work involved performing procedures to obtain evidence about the amounts
and disclosures in the Historical Financial Information. The procedures selected depend
on the reporting accountant’s judgement, including the assessment of risks of material
misstatement of the Historical Financial Information, whether due to fraud or error. In
making those risk assessments, the reporting accountant considers internal control
relevant to the entity’s preparation of Historical Financial Information that gives a true
and fair view in accordance with the basis of presentation and preparation set out in
Notes 1.2 and 2.1 to the Historical Financial Information in order to design procedures
that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. Our work also included
evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall
presentation of the Historical Financial Information.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the
accountant’s report, a true and fair view of the combined financial position of the Group
as at 31 December 2017 and 2018 and 31 March 2019 and of its combined financial
performance and its combined cash flows for the Track Record Period in accordance
with the basis of presentation and preparation set out in Notes 1.2 and 2.1 to the
Historical Financial Information.
We have reviewed the stub period comparative financial information of the Group,
which comprises the combined income statement, the combined statement of
comprehensive income, the combined statement of changes in equity and the combined
statement of cash flows for the three months ended 31 March 2018 and other
explanatory information (the “Stub Period Comparative Financial Information”). The
directors of the Company are responsible for the preparation and presentation of the
Stub Period Comparative Financial Information in accordance with the basis of
presentation and preparation set out in Notes 1.2 and 2.1 to the Historical Financial
Information. Our responsibility is to express a conclusion on the Stub Period
Comparative Financial Information based on our review. We conducted our review in
accordance with International Standard on Review Engagements 2410, Review of
Interim Financial Information Performed by the Independent Auditor of the Entity issued
by the International Auditing and Assurance Standards Board (“IAASB”). A review
consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International
Standards on Auditing and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion. Based on our review, nothing has come
to our attention that causes us to believe that the Stub Period Comparative Financial
Information, for the purposes of the accountant’s report, is not prepared, in all material
respects, in accordance with the basis of presentation and preparation set out in Notes
1.2 and 2.1 to the Historical Financial Information.
– I-2 –
APPENDIX I ACCOUNTANT’S REPORT
Report on matters under the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the Companies
(Winding Up and Miscellaneous Provisions) Ordinance
Adjustments
Dividends
No statutory financial statements have been prepared for the Company since its
date of incorporation.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 5 July 2019
– I-3 –
APPENDIX I ACCOUNTANT’S REPORT
The accompanying notes are an integral part of the combined financial information.
– I-4 –
APPENDIX I ACCOUNTANT’S REPORT
For the
For the year ended three months ended
31 December 31 March
2017 2018 2018 2019
US$’million US$’million US$’million US$’million
(Unaudited)
Other comprehensive
income/(loss), net of tax 1,719 (1,201) 20 49
The accompanying notes are an integral part of the combined financial information.
– I-5 –
APPENDIX I ACCOUNTANT’S REPORT
As of
As of 31 December 31 March
2017 2018 2019
Notes US$’million US$’million US$’million
ASSETS
Non-current assets
Property, plant and equipment 12 4,665 4,371 4,322
Goodwill 13 13,968 13,154 13,187
Intangible assets 14 4,943 4,405 4,410
Investment in associates 15 368 404 409
Deferred tax assets 16 217 222 223
Trade and other receivables 18 73 55 53
Other non-current assets 6 3 2
Current assets
Inventories 17 492 533 497
Trade and other receivables 18 1,019 830 1,062
Derivatives 7 12 9
Cash and cash equivalents 19 1,803 1,749 1,679
Other current assets 18 59 23 26
Non-current liabilities
Interest-bearing loans and borrowings 21 2,167 1,968 1,987
Loans with AB InBev to be capitalized
upon Listing 21 1,018 473 466
Deferred tax liabilities 16 851 865 875
Trade and other payables 25 142 189 193
Derivatives 8 ⳮ –
Provisions 24 227 201 205
Other non-current liabilities 62 47 50
Current liabilities
Bank overdrafts 19 47 45 63
Interest-bearing loans and borrowings 21 58 82 124
Trade and other payables 25 4,920 4,741 4,385
Derivatives ⳮ 1 1
Provisions 24 95 85 80
Other current liabilities 98 101 175
The accompanying notes are an integral part of the combined financial information.
– I-6 –
APPENDIX I ACCOUNTANT’S REPORT
Total comprehensive
income/(loss) ⳮ 1,079 1,719 2,798 (2) 2,796
Share-based payments 35 ⳮ ⳮ 35 ⳮ 35
Dividends paid (14) ⳮ ⳮ (14) (2) (16)
Movement in contribution (1,763) ⳮ ⳮ (1,763) ⳮ (1,763)
Purchase of non-controlling
interests – ⳮ ⳮ – 13 13
Total comprehensive
income/(loss) ⳮ 1,408 (1,201) 207 1 208
Share-based payments 18 ⳮ ⳮ 18 ⳮ 18
Dividends paid (391) ⳮ ⳮ (391) (3) (394)
Movement in contribution (798) ⳮ ⳮ (798) ⳮ (798)
Purchase of non-controlling
interests – ⳮ ⳮ – 2 2
– I-7 –
APPENDIX I ACCOUNTANT’S REPORT
(Unaudited)
1 January 2018 15,748 1,651 509 17,908 19 17,927
Profit for the period – 346 – 346 – 346
Other comprehensive
income
Exchange losses on
translation of foreign
operations losses – – 19 19 – 19
Other – – 1 1 – 1
Total comprehensive
income – 346 20 366 – 366
Share-based payments 7 – – 7 – 7
Dividends paid (322) – – (322) – (322)
Movement in contribution (96) – – (96) – (96)
Purchase of non-controlling
interests – – – – 1 1
Total comprehensive
income – 351 49 400 – 400
Share-based payments 3 – – 3 – 3
Dividends paid (15) – – (15) – (15)
Movement in contribution (76) – – (76) – (76)
Purchase of non-controlling
interests – – – – – –
The accompanying notes are an integral part of the combined financial information.
(1) Included within AB InBev capital are legal statutory reserves in the People’s Republic of China (“PRC”)
of 85m US dollar as of 1 January 2017, 117m US dollar as of 31 December 2017, 137m US dollar as of
31 December 2018 and 137m US dollar as of 31 March 2019. Under the relevant PRC laws and
regulations, PRC companies are required to allocate 10% of the company’s net profit to a fund, until
such a fund reaches 50% of the companies registered capital. The statutory reserve fund can be
utilized upon approval by the relevant authorities, to offset against accumulated losses or increase
registered capital of the company, provided that such fund is maintained at a minimum of 25% of the
companies registered capital.
– I-8 –
APPENDIX I ACCOUNTANT’S REPORT
Cash flow from operating activities before changes in working capital and
use of provisions 2,410 2,760 695 727
INVESTING ACTIVITIES
Acquisition of property, plant and equipment and intangible assets (626) (680) (89) (79)
Proceeds from sale of property, plant and equipment and intangible assets 290 131 20 5
Acquisition of subsidiaries, net of cash acquired 26 (48) (32) (29) (5)
Acquisition of investment in an associate 15 (232) ⳮ – –
Proceeds from sale of other current assets 73 ⳮ – –
CASH FLOW USED IN INVESTING ACTIVITIES (543) (581) (98) (79)
FINANCING ACTIVITIES
Repayment of contributed capital (1,982) (750) (158) (116)
Proceeds from/(repayment of) loans with AB InBev to be capitalized upon
Listing 21 (247) (545) 18 (7)
Dividends paid to AB InBev (14) (391) (322) (15)
Dividends paid to non-controlling interest holders (2) (3) – –
Proceeds from borrowings 1,619 52 – 61
Repayments of borrowings (170) (55) (6) (17)
Payment of lease liabilities (36) (44) (11) (13)
Purchase of non-controlling interest (55) – – –
Cash net finance (cost)/income other than interest (15) (36) 1 (3)
CASH FLOW USED IN FINANCING ACTIVITIES (902) (1,772) (478) (110)
The accompanying notes are an integral part of the combined financial information.
– I-9 –
APPENDIX I ACCOUNTANT’S REPORT
The Listing business comprises the Asia Pacific operations (the “Listing Business” or the “Group”) of
Anheuser-Busch InBev SA/NV (referred to as “AB InBev”). The operating companies are principally engaged
in the brewing and distribution of beer in the Asia Pacific region.
The ultimate parent company of the Listing Business is AB InBev, which is a publicly traded company
(Euronext: ABI) based in Leuven, Belgium, with secondary listings on the Mexico (MEXBOL: ANB) and South
Africa (JSE: ANH) stock exchanges and with American Depositary Receipts on the New York Stock Exchange
(NYSE: BUD).
The principal entities comprising the Listing Business are set out below:
Issued and
fully paid
share capital/ Principal
registered capital activities
Country of Date of (million, except Effective interest held and place
Name incorporation incorporation for shares) by AB InBev as of of operation Notes
Date
31 December 31 March of this
2017 2018 2019 report
Foster’s Group Australia 19 April 1965 2,060,326,422 100% 100% 100% 100% Holding (i)
Pty Ltd shares company
Australia
CUB Pty Ltd Australia 8 May 1907 9,650,956 100% 100% 100% 100% Operating (i)
Class A shares and company
4,742,673,540 Australia
Ordinary shares
FBG Finance Australia 20 October 21,400,005 shares 100% 100% 100% 100% Financing (i)
Pty Ltd 1995 company
Australia
FBG Treasury Australia 19 October – 100% 100% 100% 100% Financing (i)
(Aust.) Pty 1987 company
Ltd Australia
Anheuser- PRC 26 April 2005 CNY50/ 100% 100% 100% 100% Operating (v)
Busch InBev CNY50 company
(China) Sales PRC
Co., Ltd.
Anheuser- PRC 26 January CNY978/USD117 97.06% 97.06% 97.06% 97.06% Operating (v)
Busch InBev 1995 company
(Wuhan) PRC
Brewery
Co., Ltd.
Anheuser- PRC 9 March 2007 CNY1,105/USD160 100% 100% 100% 100% Operating (v)
Busch InBev company
(Foshan) PRC
Brewery
Co., Ltd.
– I-10 –
APPENDIX I ACCOUNTANT’S REPORT
Issued and
fully paid
share capital/ Principal
registered capital activities
Country of Date of (million, except Effective interest held and place
Name incorporation incorporation for shares) by AB InBev as of of operation Notes
Date
31 December 31 March of this
2017 2018 2019 report
Anheuser- PRC 9 October CNY1,001/ 100% 100% 100% 100% Operating (v)
Busch InBev 1995 CNY1,001 company
Harbin PRC
Brewery
Co., Ltd.
Anheuser- PRC 13 November CNY760/ 100% 100% 100% 100% Operating (v), (vii)
Busch InBev 2002 CNY930 company
(Tangshan) PRC
Brewery Co.,
Ltd.
Anheuser- PRC 5 February CNY210/ 100% 100% 100% 100% Operating (v)
Busch InBev 2002 CNY410 company
Sedrin PRC
Brewery Co.,
Ltd.
Anheuser- PRC 13 December CNY282/USD43 100% 100% 100% 100% Operating (v)
Busch InBev 2010 company
Sedrin PRC
(Zhangzhou)
Brewery Co.,
Ltd.
Anheuser- PRC 5 July 2004 CNY227/ 100% 100% 100% 100% Operating (v)
Busch InBev CNY227 company
(Taizhou) PRC
Brewery Co.,
Ltd.
Anheuser- PRC 29 August CNY248/USD35 100% 100% 100% 100% Operating (v)
Busch InBev 1994 company
Sedrin PRC
(Nanchang)
Brewery Co.,
Ltd.
Siping Ginsber PRC 17 November N/A 100% 100% 100% 100% Operating (viii)
Draft Beer 2011 company
Co., Ltd. PRC
Anheuser- PRC 24 August CNY200/ 100% 100% 100% 100% Operating (v)
Busch InBev 2011 CNY200 company
(Nantong) PRC
Brewery Co.,
Ltd.
– I-11 –
APPENDIX I ACCOUNTANT’S REPORT
Issued and
fully paid
share capital/ Principal
registered capital activities
Country of Date of (million, except Effective interest held and place
Name incorporation incorporation for shares) by AB InBev as of of operation Notes
Date
31 December 31 March of this
2017 2018 2019 report
Anheuser- PRC 23 July 2010 CNY230/ 100% 100% 100% 100% Operating (v)
Busch InBev CNY230 company
(Sichuan) PRC
Brewery Co.,
Ltd.
Anheuser- PRC 11 May 2011 CNY168/ 100% 100% 100% 100% Operating (v)
Busch InBev CNY302 company
(Henan) PRC
Brewery Co.,
Ltd.
InBev PRC 20 December CNY498/USD60 60% 60% 60% 60% Operating (vi)
Jinlongquan 1995 company
(Hubei) PRC
Brewery Co.,
Ltd.
Anheuser- PRC 30 December CNY200/ 100% 100% 100% 100% Operating (v)
Busch InBev 2011 CNY200 company
(Suqian) PRC
Brewery Co.,
Ltd.
Anheuser- PRC 15 November CNY235/ 100% 100% 100% 100% Operating (v), (vii)
Busch InBev 2012 CNY235 company
(Baoding) PRC
Brewery
Co., Ltd.
Anheuser- PRC 8 October N/A 100% 100% 100% 100% Operating (viii)
Busch InBev 2006 company
(Shanghai) PRC
Sales Co.,
Ltd.
Crown Beers India 22 January INR5,846 100% 100% 100% 100% Operating (iii), (vii)
India Private 2007 company
Limited India
Anheuser- India 18 November INR4,086 99.60% 99.60% 99.60% 99.60% Holding (iv)
Busch InBev 1988 company
India Limited India
Oriental South Korea 22 May 1952 KRW20,000 100% 100% 100% 100% Operating (ii)
Brewery Co., company
Ltd. South
Korea
– I-12 –
APPENDIX I ACCOUNTANT’S REPORT
Issued and
fully paid
share capital/ Principal
registered capital activities
Country of Date of (million, except Effective interest held and place
Name incorporation incorporation for shares) by AB InBev as of of operation Notes
Date
31 December 31 March of this
2017 2018 2019 report
Anheuser- Vietnam 29 June 2012 USD118 100% 100% 100% 100% Operating (ii)
Busch InBev company
Vietnam Vietnam
Brewery
Company
Limited
Notes:
ii. The statutory financial statements for the years ended 31 December 2017 and 2018 were audited
by affiliates of Deloitte Touche Tohmatsu.
iii. The statutory financial statements for the year ended 31 December 2017 were audited by
affiliates of Deloitte Touche Tohmatsu.
iv. The statutory financial statements for the year ended 31 March 2017 were audited by affiliates of
KPMG. The audited financial statements for the year ended 31 March 2018 were audited by
affiliates of Deloitte Touche Tohmatsu. The audited financial statements for the year ended 31
March 2019 have not been issued.
v. The statutory financial statements for the years ended 31 December 2017 and 2018 were audited
by Ruihua Certified Public Accountants.
vi. The statutory financial statements for the years ended 31 December 2017 and 2018 were audited
by Hubei Jinheng Certified Public Accountants Company Limited.
vii. The audited financial statements for the year ended 31 December 2018 have not been issued.
viii. These entities are branches of Anheuser-Busch InBev (China) Sales Co., Ltd. No stand-alone
statutory financial statements have been issued.
ix. The English names of certain subsidiaries referred herein represent the Directors’ best effort at
translating the Chinese names of the companies as no English names have been registered.
The combined financial information comprises the combined income statements, the combined
statements of comprehensive income, the combined statements of changes in equity and the combined
statements of cash flows for the years ended 31 December 2017 and 2018 and for the three months ended
31 March 2018 and 2019, and the combined statements of financial position of the Listing Business as of 31
December 2017 and 2018 and as of 31 March 2019. The Listing Business was under the common control and
management of AB InBev and has been managed as a single business by AB InBev throughout the years
ended 31 December 2017 and 2018 and the three months ended 31 March 2018 and 2019.
The Listing Business represents the business of the Asia Pacific region of AB InBev, and includes the
assets, liabilities, revenue, expenses and cash flows attributable to all entities in the region which are
primarily in Australia, China, Japan, South Korea, India and Vietnam, and relevant operations of AB InBev
entities outside of Asia Pacific with operations in the Asia Pacific region or with subsidiaries within the region
and that are part of the Listing Business.
– I-13 –
APPENDIX I ACCOUNTANT’S REPORT
Assets held for sale that are to be disposed of prior to the Listing and legally part of the Group during
the Track Record Period but that are not part of the Listing Business, are presented as assets held for sale
in other current assets for a value of 21m US dollar for each of the years/period as of 31 December 2017 and
2018 and 31 March 2019, as these are not managed by the Listing Business – see also Note 18.
The net assets and results of the Listing Business were combined using the existing book values from
AB InBev’s perspective.
Transactions and balances previously reported as part of the continuing operations of the Asia Pacific
business have been directly attributed to the Group and reflect the following:
• Cash and cash equivalents – Historically, certain cash and cash equivalents were managed as
part of a global treasury management function by AB InBev. The Group did not exercise
operational control over the cash and cash equivalents in the physical cash pool with AB InBev
entities. The balances generated from the Asia Pacific business that were physically pooled into
AB InBev Group entities that are outside the Listing Business are therefore not considered cash
and cash equivalents of the Group and are not included as such in the combined financial
information. For the purposes of the historical financial information of the Group during the Track
Record Period and subsequent thereafter until immediately prior to the Listing, amounts in the
physical cash pool are included within AB InBev capital which reflects the net funding position
between the Group and AB InBev. After the Listing, balances in the physical cash pool will create
a receivable or payable between the Group and the AB InBev group counterparty.
• Hedging activities – Historically, certain hedging instruments were managed as part of a global
treasury management function by AB InBev. For the purposes of the combined financial
information, the net hedging income of 36m US dollar in 2017, 15m US dollar in 2018, 3m US
dollar for the three months ended 31 March 2018 and 2m US dollar for the three months ended
31 March 2019 relating to the Asia Pacific region has been allocated to the Listing Business
reflecting relevant historical allocations of the Group’s share of AB InBev hedging gains and
losses.
AB InBev historically recharged costs shared with other AB InBev businesses to the legal entities
comprising the Group and were recorded as such in the combined financial information (refer to Note 30).
As further explained in Note 3(e), and in line with many other Fast Moving Consumer Goods (“FMCG”)
companies, the Group intentionally maintains a net current liabilities position as part of its business model
despite strong operating cash flows. Therefore, the Group’s net current liabilities position is not indicative of
any going concern issues, and the combined financial information has been prepared on a going concern
basis.
Budweiser Brewing Company APAC Limited (the “Holding Company”) (Note 35) will become the
holding company of the Listing Business via a reorganization, which is conditional on completion of the Global
Offering. The reorganization is expected to be accounted for as a recapitalization of a single business upon
completion.
– I-14 –
APPENDIX I ACCOUNTANT’S REPORT
The Listing Business has not historically formed a separate legal group and will need to undergo a
reorganization to transfer ownership of the entities comprising the Listing Business to the Company. AB
InBev will provide funds to the Company through intercompany loan contributions to enable it to complete the
reorganization. The reorganization steps include the transfer of:
• the China, South Korea, Japan, Vietnam and India operations at fair market value;
• the Australian operations together with intercompany debt at fair market value, as a result, the
borrowers and lenders of the debt will be within the Group.
The Company will use the net proceeds from the Global Offering to repay intercompany loans from AB
InBev.
The principal accounting policies applied in the preparation of the Historical Financial Information are
set out below. These policies have been consistently applied to all the years/periods presented, unless
otherwise stated.
The financial information has been prepared in accordance with International Financial Reporting
Standards (“IFRSs”) issued by the International Accounting Standards Board (the “IASB”) and the IFRS
Interpretations Committee (“IFRIC”) interpretations applicable to companies reporting under IFRS for periods
beginning on 1 January 2019. The financial information has been prepared under the historical cost
convention unless otherwise stated. The Group adopted IFRS 9 Financial Instruments, IFRS 15 Revenue
from Contracts with Customers, IFRS 16 Leases and IFRIC 23 Uncertainty over Income Tax Treatments
effective on 1 January 2017. The adoption of these standards did not have a material impact on the Group.
The accounting policies set out in this note have been applied consistently to all years/periods
presented.
The preparation of the financial information in conformity with IFRSs requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying the
Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the combined financial information, are disclosed in Note 4.
To the extent that new IFRS requirements are expected to be applicable in the future, they have been
listed hereafter. They have not been applied in preparing these combined financial statements.
The following are standards and amendments to existing standards that have been published and are
relevant and mandatory for the Group’s accounting periods beginning after 1 January 2020, but have not
been early adopted by the Group.
– I-15 –
APPENDIX I ACCOUNTANT’S REPORT
Unless otherwise specified, all financial information has been presented in US dollar and has been
rounded to the nearest million (presentation currency). The financial information of all reporting units included
in the combined financial information are measured using the currency of the primary environment in which
the reporting unit operates (functional currency).
Subsidiaries are those entities controlled by the Group. The Group controls an entity when it is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. In assessing control, potential voting rights are taken into account.
Control is presumed to exist where the Group owns, directly or indirectly, more than one half of the voting
rights (which does not always equate to economic ownership), unless it can be demonstrated that such
ownership does not constitute control. The financial information of subsidiaries are included in the combined
financial information from the date that control commences until the date that control ceases. Total
comprehensive income of subsidiaries is attributed to the owners of the Group and to the non-controlling
interests even if this results in the non-controlling interests having a deficit balance.
Associates are undertakings in which the Group has significant influence over the financial and
operating policies, but which it does not control. This is generally evidenced by ownership of between 20%
and 50% of the voting rights. Associates are accounted for by the equity method of accounting, from the date
that significant influence or joint control commences until the date that significant influence or joint control
ceases. When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount
is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has
incurred legal or constructive obligations on behalf of the associate.
The financial information of the Group’s subsidiaries are prepared for the same reporting year as the
parent company, using consistent accounting policies. When the financial information of the associates is
prepared as of a different date from that of the Group, adjustments are made for the effects of significant
transactions or events that occur between that date and the date of the Group’s financial information. In such
cases, the difference between the end of the reporting period of these subsidiaries and associates from the
Group’s reporting period is no more than three months.
Transactions with non-controlling interests are treated as transactions with equity owners. For
purchases from non-controlling interests, the difference between any consideration paid and the relevant
share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on
disposals to non-controlling interests are also recorded in equity where there is no loss of control.
All intercompany transactions, balances and unrealized gains and losses on transactions between
group companies have been eliminated. Unrealized gains arising from transactions with associates are
eliminated to the extent of the Group’s interest in the entity. Unrealized losses are eliminated in the same way
as unrealized gains, but only to the extent that there is no evidence of impairment.
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
date of the statement of financial position 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 combined income statements. 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.
– I-16 –
APPENDIX I ACCOUNTANT’S REPORT
Assets and liabilities of foreign operations are translated to US dollar at foreign exchange rates
prevailing at the date of the statement of financial position. Income statements of foreign operations are
translated to US dollar at exchange rates for the year/period approximating the foreign exchange rates
prevailing at the dates of the transactions. The components of owners’ equity are translated at historical
rates. Exchange differences arising from the translation of owners’ equity to US dollar at year-
end/period-end exchange rates are taken to other comprehensive income (translation reserves).
2.5.1 Brands
If part of the consideration paid in a business combination relates to trademarks, trade names,
formulas, recipes or technological expertise these intangible assets are considered as a group of
complementary assets that is referred to as a brand for which one fair value is determined. Expenditure
on internally generated brands is expensed as incurred.
A supply right is the right for the Group to supply a customer and the commitment by the customer
to purchase from the Group. A distribution right is the right to sell specified products in a certain
territory. Acquired distribution rights are measured initially at cost or fair value when obtained through
a business combination. Amortization related to supply and distribution rights is included within sales
and marketing expenses.
2.5.3 Software
Leasehold land represents payments to third parties to acquire short-term interests in property in
China. These payments are stated at cost and are amortized over the useful life of the lease which
includes the renewal period if the lease can be renewed by the Group without significant cost.
Other intangible assets acquired by the Group are recognized at cost less accumulated
amortization and impairment losses. These are initially recognized at the present value of the future
payments and subsequently measured at cost less accumulated amortization and impairment losses.
Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the
future economic benefits embodied in the specific asset to which it relates. All other expenditures are
expensed as incurred.
2.5.7 Amortization
Intangible assets with a finite life are amortized using the straight-line method over their
estimated useful lives. Commercial intangibles, which comprise licenses, brewing, supply and
distribution rights and other intangible assets, are amortized over the year/period in which the rights
exist. Brands are considered to have an indefinite life unless plans exist to discontinue the brand.
Discontinuance of a brand can be either through sale or termination of marketing support. When the
Group purchases distribution rights for its own products the life of these rights is considered indefinite,
unless the Group has a plan to discontinue the related brand or distribution.
– I-17 –
APPENDIX I ACCOUNTANT’S REPORT
On average, the amortization periods of intangible assets with finite useful lives are as follows:
Brands are deemed intangible assets with indefinite useful lives and, therefore, are not amortized
but tested for impairment on an annual basis (refer to accounting policy 2.13).
Net gains on sale of intangible assets are presented in the combined income statements as other
operating income. Net losses on sale are included as other operating expenses. Net gains and losses
are recognized in the combined income statements when the significant risks and rewards of ownership
have been transferred to the buyer, recovery of the consideration is probable, the associated costs can
be estimated reliably, and there is no continuing managerial involvement with the intangible assets.
The Group applies the acquisition method of accounting to account for acquisitions of businesses. The
cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets
given, liabilities incurred and equity instruments issued. Identifiable assets, liabilities and contingent liabilities
acquired or assumed are measured separately at their fair value as of the acquisition date. The excess of the
cost of the acquisition over the Group’s interest in the fair value of the identifiable net assets acquired is
recorded as goodwill.
The allocation of fair values to the identifiable assets acquired and liabilities assumed is based on
various assumptions requiring management judgment.
If the business combination is achieved in stages, the acquisition date carrying value of the Group’s
previously held interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses
arising from such re-measurement are recognized in profit or loss.
2.7 Goodwill
Goodwill is determined as the excess of the consideration paid over the Group’s interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiary, jointly controlled
entity or associate recognized at the date of acquisition. All business combinations are accounted for by
applying the purchase method.
Goodwill is stated at cost and not amortized but tested for impairment on an annual basis and whenever
there is an indicator that the cash-generating unit to which goodwill has been allocated, may be impaired
(refer to accounting policy 2.13). Goodwill is expressed in the currency of the subsidiary or jointly controlled
entity to which it relates and is translated to US dollars using the year-end/period-end exchange rate. In
respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in
associates.
If the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
recognized exceeds the cost of the business combination such excess is recognized immediately in the
combined income statements.
Property, plant and equipment is measured at cost less accumulated depreciation and impairment
losses (refer to accounting policy 2.13). Cost includes the purchase price and any costs directly attributable
to bringing the asset to the location and condition necessary for it to be capable of operating in the manner
intended by management (e.g. non-refundable tax and transport cost). The cost of a self-constructed asset
is determined using the same principles as for an acquired asset. The depreciation methods, residual value,
as well as the useful lives are reassessed and adjusted if appropriate, annually.
– I-18 –
APPENDIX I ACCOUNTANT’S REPORT
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets
are capitalized as part of the cost of such assets.
Subsequent expenditure
The Group recognizes in the carrying amount of an item of property, plant and equipment the cost
of replacing part of such an item when that cost is incurred if it is probable that the future economic
benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably.
All other costs are expensed as incurred.
Depreciation
The depreciable amount is the cost of an asset less its residual value. Residual values, if not
insignificant, are reassessed annually. Depreciation is calculated from the date the asset is available
for use, using the straight-line method over the estimated useful lives of the assets.
The estimated useful lives are defined in terms of the asset’s expected utility to the Group and
can vary from one geographical area to another. On average the estimated useful lives are as follows:
Where parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items of property, plant and equipment.
Net gains on sale of items of property, plant and equipment are presented in the combined
income statements as other operating income. Net losses on sale are presented as other operating
expenses. Net gains and losses are recognized in the combined income statements when the
significant risks and rewards of ownership have been transferred to the buyer, recovery of the
consideration is probable, the associated costs can be estimated reliably, and there is no continuing
managerial involvement with the property, plant and equipment.
The Group assesses whether a contract is or contains a lease at inception of a contract. The
Group recognizes a right-of-use asset and a corresponding lease liability with respect to all lease
agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term
of 12 months or less) and leases of low value assets. For these leases, the Group recognizes the lease
payments as an operating expense on a straight-line basis over the term of the lease, and payments for
these leases are presented in the combined statements of cash flows from operating activities.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted by using the interest rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental borrowing rate specific to the country,
term and currency of the contract. In addition, the Group considers its recent debt issuances as well as
publicly available data for instruments with similar characteristics when calculating the incremental
borrowing rates.
– I-19 –
APPENDIX I ACCOUNTANT’S REPORT
Lease payments include fixed payments, less any lease incentives, variable lease payments that
depend on an index or a rate known at the commencement date, and purchase options or extension
option payments if the Group is reasonably certain to exercise these options. Variable lease payments
that do not depend on an index or rate are not included in the measurement of the lease liability and
right-of-use asset and are recognized as an expense in the combined income statements in the
year/period in which the event or condition that triggers those payments occurs.
A lease liability is remeasured upon a change in the lease term, changes in an index or rate used
to determine the lease payments or reassessment of exercise of a purchase option. The corresponding
adjustment is made to the related right-of-use asset.
The right-of-use assets comprise the initial measurement of the corresponding lease liability,
lease payments made at or before the commencement date and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment losses. The right-of-use
assets are depreciated starting at the commencement date over the shorter period of useful life of the
underlying asset and lease term.
The lease liability is presented in the ‘Interest-bearing loans and borrowings’ line and the
right-of-use assets are presented in the ‘Property, plant and equipment’ line in the combined
statements of financial position. In addition, the principal portion of the lease payments is presented
within financial activities and the interest component is presented within operating activities in the
combined statements of cash flows.
Leases where the Group transfers substantially all the risks and rewards of ownership to the
lessee are classified as finance leases. Leases of assets under which all the risks and rewards of
ownership are substantially retained by the Group are classified as operating leases. Rental income is
recognized in the combined income statements within other operating income on a straight-line basis
over the term of the lease.
2.10 Inventories
Inventories are valued at the lower of cost and net realizable value. Cost includes expenditure incurred
in acquiring the inventories and bringing them to their existing location and condition. The weighted average
method is used in assigning the cost of inventories.
The cost of finished products and work in progress comprises raw materials, other production
materials, direct labor, other direct cost and an allocation of fixed and variable overhead based on normal
operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less
the estimated completion and selling costs.
Inventories are written down on a case-by-case basis if the anticipated net realizable value declines
below the carrying amount of the inventories. The calculation of the net realizable value takes into
consideration specific characteristics of each inventory category, such as expiration date, remaining shelf
life, slow-moving indicators, amongst others.
Trade and other receivables are carried at amortized cost less impairment losses. An estimate of
impairment losses for doubtful receivables is made based on a review of all outstanding amounts at the date
of the combined statements of financial position.
Cash and cash equivalents include all cash balances and short-term highly liquid investments with a
maturity of three months or less from the date of acquisition that are readily convertible into cash. They are
stated at face value, which approximates their fair value. In the combined statements of cash flows, cash and
cash equivalents are presented net of bank overdrafts.
Cash and cash equivalents include cash balances in a notional cash pool managed by AB InBev as part
of a centralized treasury management system. Since the Group has legal rights to these balances they are
included in the Group’s cash and cash equivalents.
– I-20 –
APPENDIX I ACCOUNTANT’S REPORT
The carrying amounts of property, plant and equipment, goodwill and intangible assets are reviewed at
each date of the combined statements of financial position to determine whether there is any indication of
impairment. If there is an indicator of impairment, the asset’s recoverable amount is estimated. In addition,
goodwill, intangible assets that are not yet available for use and intangibles with an indefinite useful life are
tested for impairment annually at the cash-generating unit level, being the level at which the assets generate
largely independent cash inflows and are monitored for internal management purposes. Each country is
managed as a single business unit and has a significant amount of vertical integration through multi product
production facilities and integrated logistics, sales and marketing functions. Based on this, the cash-
generating unit is a country or for smaller businesses a group of countries managed as a group. An
impairment loss is recognized whenever the carrying amount of an asset or the related cash-generating unit
exceeds its recoverable amount. Impairment losses are recognized in the combined income statements.
The recoverable amount of non-financial assets is determined as the higher of their fair value less
costs to sell and value in use. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset belongs. The
recoverable amount of the cash-generating units to which the goodwill and the intangible assets with
indefinite useful life belong is based on discounted future cash flows using a discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. These
calculations are corroborated by valuation multiples, quoted share prices for publicly traded
subsidiaries or other available fair value indicators.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible
reversal of the impairment at each reporting date. An impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortization, if no impairment loss had been recognized.
2.14 Provisions
Provisions are recognized when (i) the Group has a present legal or constructive obligation as a result
of past events, (ii) it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation, and (iii) a reliable estimate of the amount of the obligation can be made. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.
(a) Restructuring
A provision for restructuring is recognized when the Group has approved a detailed and formal
restructuring plan, and the restructuring has either commenced or has been announced publicly. Costs
relating to the ongoing activities of the Group are not provided for. The provision includes the benefit
commitments in connection with early retirement and redundancy schemes.
A provision for disputes and litigation is recognized when it is more likely than not that the Group
will be required to make future payments as a result of past events, such items may include but are not
limited to claims, lawsuits and actions relating to antitrust laws, violations of distribution and license
agreements, environmental matters, employment related disputes, claims from tax authorities, and
alcohol industry litigation matters.
– I-21 –
APPENDIX I ACCOUNTANT’S REPORT
Post-employment benefits
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically
defined benefit plans define an amount of pension benefit that an employee will receive on
retirement, usually dependent on one or more factors such as age, years of service and
compensation. For defined benefit plans, the pension expenses are assessed separately for
each plan using the projected unit credit method. The projected unit credit method considers
each period of service as giving rise to an additional unit of benefit entitlement. Under this
method, the cost of providing pensions is charged to the combined income statements so as to
spread the regular cost over the service lives of employees in accordance with the advice of
qualified actuaries who carry out a full valuation of the plans at least every three years. The
amounts charged to the combined income statements include current service cost, net interest
cost (income), past service costs and the effect of any curtailments or settlements. Past service
costs are recognized at the earlier of when the amendment/curtailment occurs or when the Group
recognizes related restructuring or termination costs. The pension obligations recognized in the
combined statements of financial position are measured at the present value of the estimated
future cash outflows using interest rates based on high quality corporate bond yields, which have
terms to maturity approximating the terms of the related liability, less the fair value of any plan
assets. Re-measurements, comprising of actuarial gains and losses, the effect of the asset
ceiling (excluding net interest) and the return on plan assets (excluding net interest) are
recognized in full in the year/period in which they occur in the combined statements of
comprehensive income. Re-measurements are not reclassified to profit or loss in subsequent
years/periods.
Where the calculated amount of a defined benefit liability is negative (an asset), the Group
recognizes such pension asset to the extent that economic benefits are available to the Group
either from refunds or reductions in future contributions.
Some group companies provide post-employment medical benefits to their retirees. The
entitlement to these benefits is usually based on the employee remaining in service up to retirement
age. The expected costs of these benefits are accrued over the period of employment, using an
accounting methodology similar to that for defined benefit pension plans.
Termination benefits
Termination benefits are recognized as an expense at the earlier of when the Group is
demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to
terminate employment before the normal retirement date and when the Group recognizes costs for a
restructuring. Termination benefits for voluntary redundancies are recognized if the Group has made
an offer encouraging voluntary redundancy and when the Group can no longer withdraw the offer of
termination, which is the earlier of either when the employee accepts the offer or when a legal,
regulatory or contractual requirement or restriction on the Group’s ability to withdraw the offer takes
effect.
– I-22 –
APPENDIX I ACCOUNTANT’S REPORT
Bonuses
Bonuses received by Group employees and management are based on pre-defined Group and
individual target achievement. The estimated amount of the bonus is recognized as an expense in the
year/period the bonus is earned. To the extent that bonuses are settled in shares of the Group, they are
accounted for as share-based payments.
The share-based compensation plans relate to shares of AB InBev as historically the Group did not
have its own share capital.
The Group’s key personnel have historically participated in AB InBev’s share-based incentive plans.
The combined financial information includes allocations of the cost recorded at AB InBev based on the
number of the Group’s employees participating in each scheme. The historical cost allocations may not be
indicative of the future expenses that will be incurred through incentive schemes that will be established for
the Group’s key personnel following the Listing.
Different share and share option programs allow the Group’s senior management and members of the
board to acquire shares of AB InBev and some of its affiliates. The fair value of the share options is estimated
at grant date, using an option pricing model that is most appropriate for the respective option. Based on the
expected number of options that will vest, the fair value of the options granted is expensed over the vesting
period. When the options are exercised, equity is increased by the amount of the proceeds received.
Equity-settled share-based payment transactions with parties other than employees are measured at
the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in
which case they are measured at the fair value of the equity instruments granted, measured at the date the
Group obtains the goods or the counterparty renders the service.
Interest-bearing loans and borrowings are recognized initially at fair value, less attributable transaction
costs. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortized cost
with any difference between the initial amount and the maturity amount being recognized in the combined
income statements (in accretion expense) over the expected life of the instrument on an effective interest rate
basis.
Trade and other payables are recognized initially at fair value and subsequently measured at amortized
cost using the effective interest method.
Income tax on the profit for the year/period comprises current and deferred tax. Income tax is
recognized in the combined income statements except to the extent that it relates to items recognized directly
in equity, in which case the tax effect is also recognized directly in equity.
Current tax is the expected tax payable on the taxable income for the year/period, using tax rates
enacted, or substantively enacted, at the date of the statements of financial position, and any adjustment to
tax payable in respect of previous years/periods.
Deferred taxes are provided using the balance sheet liability method. This means that, for all taxable
and deductible differences between the tax bases of assets and liabilities and their carrying amounts in the
combined statements of financial position a deferred tax liability or asset is recognized. Under this method a
provision for deferred taxes is also made for differences between the fair values of assets and liabilities
acquired in a business combination and their tax base. IAS 12 prescribes that no deferred taxes are
recognized (i) on initial recognition of goodwill, (ii) at the initial recognition of assets or liabilities in a
transaction that is not a business combination and affects neither accounting nor taxable profit, and (iii) on
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future and to the extent that the Group is able to control the timing of the reversal. The amount
of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount
of assets and liabilities, using currently or substantively enacted tax rates.
– I-23 –
APPENDIX I ACCOUNTANT’S REPORT
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net
basis, or to realize the assets and settle the liabilities simultaneously.
The Group recognizes deferred tax assets, including assets arising from losses carried forward, to the
extent that future probable taxable profit will be available against which the deferred tax asset can be utilized.
A deferred tax asset is reduced to the extent that it is no longer probable that the related tax benefit will be
realized.
Tax claims are recorded within provisions in the combined statements of financial position (refer to
accounting policy 2.14).
Revenue is measured based on the consideration to which the Group expects to be entitled in a
contract with a customer and excludes amounts collected on behalf of third parties. The Group
recognizes revenue when performance obligations are satisfied, meaning when the Group transfers
control of a product to a customer.
As a result, all of the Group’s revenue is recognized at a point of time. Revenue from the sale of
goods is measured at the amount that reflects the best estimate of the consideration expected to be
received in exchange for those goods. Contracts can include significant variable elements, such as
discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses and
penalties. Such trade incentives are treated as variable consideration. If the consideration includes a
variable amount, the Group estimates the amount of consideration to which it will be entitled in
exchange for transferring the promised goods or services to the customer. Variable consideration is
only included in the transaction price if it is highly probable that the amount of revenue recognized
would not be subject to significant future reversals when the uncertainty is resolved.
The Group recognizes the sales-based or usage-based royalties in other operating income in the
combined income statements when the later of the following events occurs: (a) the customer’s
subsequent sales or usage; and (b) the performance obligation to which some or all of the sales-based
or usage-based royalty has been allocated has been satisfied (or partially satisfied).
Finance income comprises interest received or receivable on funds invested, dividend income,
foreign exchange gains, losses on currency hedging instruments offsetting currency gains, gains on
hedging instruments and gains on financial assets measured at FVPL.
Dividend income from financial investments is recognized in the combined income statements on
the date that the dividend is declared.
– I-24 –
APPENDIX I ACCOUNTANT’S REPORT
A government grant is recognized in the combined statements of financial position initially as deferred
income when there is reasonable assurance that it will be received and that the Group will comply with the
conditions attached to it. Grants that compensate the Group for expenses incurred are recognized as other
operating income in the combined income statements on a systematic basis in the same periods in which the
expenses are incurred. Grants that compensate the Group for the acquisition of an asset are presented by
deducting them from the acquisition cost of the related asset.
Finance costs comprise interest payable on borrowings, calculated using the effective interest rate
method, foreign exchange losses, gains on currency hedging instruments offsetting currency losses, results
on interest rate hedging instruments, losses on hedging instruments that are not part of a hedge accounting
relationship, losses on financial assets classified as trading, impairment losses on financial assets as well as
any losses from hedge ineffectiveness (refer to accounting policy 2.25).
All interest costs incurred in connection with borrowings or financial transactions are expensed as
incurred as part of finance costs in the combined income statements. Any difference between the initial
amount and the maturity amount of interest-bearing loans and borrowings, such as transaction costs and fair
value adjustments, are recognized in the combined income statements (in accretion expense) over the
expected life of the instrument on an effective interest rate basis (refer to accounting policy 2.17). The interest
expense component of lease payments is also recognized in the combined income statements using the
effective interest rate method in accretion expense.
2.23 Research, advertising, and promotional costs and systems development costs
Research, advertising, and promotional costs are expensed in the year/period in which these costs are
incurred. Systems development costs are expensed in the year/period in which these costs are incurred if
they do not meet the criteria for capitalization (refer to accounting policy 2.5).
Purchasing and receiving costs are included in the cost of sales in the combined income statements,
as well as the costs of storing and moving raw materials and packaging materials. The costs of storing
finished products at the brewery as well as costs incurred for subsequent storage in distribution centers are
included within distribution expenses in the combined income statements.
The Group uses derivative financial instruments to mitigate the transactional impact of foreign
currencies, interest rates, and commodity prices on the Group’s performance. The Group’s financial risk
management policy prohibits the use of derivative financial instruments for trading purposes and the Group
does therefore not hold or issue any such instruments for such purposes.
Except for certain trade receivables, the Group initially measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
Debt financial instruments are subsequently measured at amortized cost. The classification is
based on two criteria: the Group’s business model for managing the assets; and whether the
instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the
principal amount outstanding (the “SPPI criterion”).
• Debt instruments at amortized cost, comprise investments in debt securities where the
contractual cash flows are solely payments of principal and interest and the Group’s
business model is to collect contractual cash flows. Interest income, foreign exchange
gains and losses and any impairment charges for such instruments are recognized in profit
or loss.
– I-25 –
APPENDIX I ACCOUNTANT’S REPORT
• Financial assets and liabilities at FVPL, comprise derivative instruments which the Group
had not irrevocably elected, at initial recognition or transition, to classify at FVOCI. This
category also includes debt instruments for which the cash flow characteristics fail the
SPPI criterion or are not held with a business model objective to either collect contractual
cash flows, or both collect contractual cash flows and sell.
For other financial assets, the expected credit loss (“ECL”) is based on the 12-month ECL. The
12-month ECL is the portion of lifetime ECLs that results from default events on a financial instrument
that are possible within 12 months after the reporting date. However, when there has been a significant
increase in credit risk since origination, the allowance will be based on the lifetime ECL.
Hedge accounting
The Group designates certain derivatives as hedging instruments to hedge the variability in cash
flows associated with highly probable forecast transactions arising from changes in foreign exchange
rates, interest rates and commodity prices.
At the inception of the hedging relationships, the Group documents the risk management
objective and strategy for undertaking the hedge. Hedge effectiveness is measured at the inception of
the hedge relationship and through periodic prospective effectiveness assessments to ensure that an
economic relationship exists between hedged item and hedging instrument.
For the different types of hedges in place, the Group generally enters into hedge relationships
where the critical terms of the hedging instrument match exactly the terms of the hedged item.
Therefore typically the hedge ratio is 1:1. The Group performs a qualitative assessment of
effectiveness. In circumstances where the terms of the hedged item no longer exactly match the critical
terms of the hedging instrument, the Group uses a hypothetical derivative method to assess
effectiveness. Possible sources of ineffectiveness are changes in the timing of the forecasted
transaction, changes in the quantity of the hedged item or changes in the credit risk of either parties to
the derivative contract.
Cash flow hedge accounting is applied when a derivative hedges the variability in cash flows of
a highly probable forecasted transaction, foreign currency risk of a firm commitment or a recognized
asset or liability (such as variable interest rate instrument).
When the hedged forecasted transaction or firm commitment subsequently results in the
recognition of a non-financial item, the amount accumulated in the hedging reserves is included directly
in the initial carrying amount of the non-financial item when it is recognized.
For all other hedged transactions, the amount accumulated in the hedging reserves is
reclassified to profit or loss in the same year/period during which the hedged item affects profit or loss
(e.g. when the variable interest expense is recognized).
When a hedging instrument or hedge relationship is terminated but the hedged transaction is still
expected to occur, the cumulative gain or loss (at that point) remains in equity and is reclassified to
profit or loss when the hedged transaction occurs. If the hedged transaction is no longer expected to
occur, the cumulative gain or loss recognized in the combined statements of comprehensive income is
reclassified to profit or loss immediately.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the combined
statements of financial position when, and only when, the Group has a currently legally enforceable
right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and
settle the liability simultaneously.
– I-26 –
APPENDIX I ACCOUNTANT’S REPORT
AB InBev utilizes a central approach for funding of its operations, therefore all balances to/from AB
InBev that have operational nature or have characteristics of debt are presented as loans with AB InBev to be
capitalized upon Listing in the combined statements of financial position. All remaining balances are treated
as capital.
The Group operated and was managed as part of AB InBev during the years/periods presented. AB
InBev capital reflects the net funding position between the Group and AB InBev. AB InBev capital comprises
the contributed capital in the Group, movements in physical cash pooling net of repayment, results of
operations and other comprehensive income reserves (including translation reserves and hedging reserves).
Operating segments are components of the Group’s business activities about which separate financial
information is available that is evaluated regularly by senior management.
The Group has two operating segments: Asia Pacific East (primarily Australia, Japan and South Korea)
and Asia Pacific West (China, India, Vietnam and exports elsewhere in Asia Pacific). The Group’s operating
segment reporting format is geographical because the Group’s risks and rates of return are affected
predominantly by the fact that the Group operates in different geographical areas. The Group’s management
structure and internal reporting system to the Board of Directors is set up accordingly. Additionally,
management assessed additional factors such as management’s views on the optimal number of reporting
segments, as well as management’s view on the optimal balance between practical and more granular
information.
Non-recurring items are those that in management’s judgment need to be disclosed separately by
virtue of their size or incidence. Such items are disclosed in the combined income statements or separately
disclosed in the notes to the Historical Financial Information. Transactions which may give rise to non-
recurring items are principally restructuring and integration activities, impairments, gains or losses on
disposal of businesses, the effect of the accelerated repayment of debt facilities and bonds.
For the purposes of the preparation of the combined income statements, management has included
within non-recurring items the finance cost of loans with other AB InBev entities as these loans are to be
capitalized upon the Listing, and the finance costs will not occur post Listing.
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, cash
flow interest risk and commodity risk), credit risk and liquidity risk. The Group analyzes each of these risks
individually as well as on a combined basis, and defines strategies to manage the economic impact on the
Group’s performance in line with its financial risk management policy. The main derivative instruments used
are foreign exchange forward contracts, cross currency interest rate swaps and exchange traded commodity
futures. The derivatives are part of cash flow hedge relationship.
The Group is subject to foreign currency risk when contracts are denominated in a currency other
than the functional currency of the entity. This includes borrowings, sales, (forecasted) purchases,
royalties, dividends, licenses, management fees and interest expense/income. The Group’s foreign
currency risk is primarily related to Euro and US dollar purchases.
The Group may hedge operating transactions which are reasonably expected to occur (e.g.
cost of goods sold and selling, general & administrative expenses) within the forecast period
determined in the financial risk management policy. Operating transactions that are considered
certain to occur are hedged without any time limits.
– I-27 –
APPENDIX I ACCOUNTANT’S REPORT
It is the Group’s policy to have the debt in the subsidiaries as much as possible linked to the
functional currency of the subsidiary. To the extent this is not the case, hedging is put in place
unless the cost to hedge outweighs the benefits. Interest rate decisions and currency mix of debt
and cash are decided on a combined basis and take into consideration the holistic risk
management approach.
Had the Australian dollar, Chinese yuan, South Korean won weakened/strengthened
against the Euro or US dollar on average of 5% for the Chinese yuan and 7.5% on other
currencies, with all other variables held constant, the impact on combined profit before tax would
have been approximately higher or lower by 14m US dollar in 2017, 3m US dollar in 2018, 7m US
dollar for the three months ended 31 March 2018 and 17m US dollar for the three months ended
31 March 2019.
The commodity markets have experienced and are expected to continue to experience price
fluctuations. The Group therefore uses both fixed price purchasing contracts and commodity
derivatives to minimize exposure to commodity price volatility. The Group has exposures to the
following commodities: aluminum, barley, coal, corn, corrugated board, diesel, fuel oil, glass, hops,
labels, malt, natural gas, plastics, rice, steel and wheat. As of 31 December 2017, 31 December 2018
and 31 March 2019, the Group has commodity derivatives outstanding for corn. The impact of changes
in the commodity prices for the Group’s derivative exposures would have caused an immaterial impact
on the Group’s profit in 2017 and 2018, and for the three months ended 31 March 2018 and 2019 as
most of the Group’s commodity derivatives are designated in a hedge relationship.
Credit risk encompasses all forms of counterparty exposure, i.e. where counterparties may
default on their obligations to the Group in relation to lending, hedging, settlement and other financial
activities. The Group has a credit policy in place and the exposure to counterparty credit risk is
monitored.
The Group mitigates its exposure through a variety of mechanisms. It has established minimum
counterparty credit ratings and enters into transactions only with financial institutions of investment
grade rating. The Group monitors counterparty credit exposures closely and reviews any external
downgrade in credit rating immediately. To mitigate pre-settlement risk, counterparty minimum credit
standards become more stringent with increases in the duration of the derivatives. To minimize the
concentration of counterparty credit risk, the Group enters into derivative transactions with different
financial institutions.
The carrying amount of financial assets represents the maximum credit exposure of the
Group. The carrying amount is presented net of the impairment losses recognized. There was no
significant concentration of credit risks with any single counterparty as of 31 December 2017,
31 December 2018 and 31 March 2019 and no single customer represented more than 10% of the
Group’s total revenue in 2017 and 2018 and for the three months ended 31 March 2018 and 2019.
– I-28 –
APPENDIX I ACCOUNTANT’S REPORT
Historically, the Group’s primary sources of cash flow have been cash flows from operating
activities, the issuance of debt, bank borrowings and AB InBev capital. The Group’s material cash
requirements have included the following:
• Capital expenditures;
• Investments in companies;
The Group had net current liabilities of 1,838m US dollar, 1,908m US dollar and 1,555m US dollar
as of 31 December 2017 and 2018 and 31 March 2019, respectively, which management considers is
a positive aspect of the Group’s working capital management and an inherent part of the Group’s
business model. Substantial effort is devoted to the efficient use of working capital, resulting in an
ability to secure favorable credit terms with suppliers that are longer than the inventory and receivables
cycles. The Group is also highly cash generative, with cash flows from operating activities of 2,105m
US dollar, 2,365m US dollar, 375m US dollar and 93m US dollar for the years ended 31 December 2017
and 2018 and for the three months ended 31 March 2018 and 2019, respectively. During the Track
Record Period, surplus cash generated from operations was extracted from the Group via transfer into
the physical cash pool with AB InBev or dividend payments.
The Group believes that cash flows from operating activities, available cash and cash
equivalents as well as access to borrowing facilities, will be sufficient to fund capital expenditures, debt
servicing, dividend payments and other cash requirements going forward.
The following are the nominal contractual maturities of financial liabilities including interest
payments and derivative financial assets and liabilities:
As of 31 December 2017
Carrying Contractual Less than More than
amount cash flows 1 year 1-2 years 2-3 years 3-5 years 5 years
US$’million US$’million US$’million US$’million US$’million US$’million US$’million
Non-derivative
financial
liabilities
Secured bank loans 2 2 2 – – – –
Unsecured bank
loans and other
loans 47 48 10 38 – – –
Unsecured bond
issues 2,072 2,520 75 76 623 776 970
Loans with AB InBev
to be capitalized
upon Listing* 1,018 1,224 21 21 21 486 675
Lease liabilities 104 122 42 24 16 21 19
Bank overdrafts 47 47 47 – – – –
Trade and other
payables 5,062 5,062 4,920 135 – 7 –
Derivative financial
assets/(liabilities) (1) – 7 (7) – – –
– I-29 –
APPENDIX I ACCOUNTANT’S REPORT
As of 31 December 2018
Carrying Contractual Less than More than
amount cash flows 1 year 1-2 years 2-3 years 3-5 years 5 years
US$’million US$’million US$’million US$’million US$’million US$’million US$’million
Non-derivative
financial
liabilities
Secured bank loans 6 6 6 – – – –
Unsecured bank
loans and other
loans 37 37 37 – – – –
Unsecured bond
issues 1,872 2,210 68 565 51 680 846
Loans with AB InBev
to be capitalized
upon Listing* 473 562 5 5 5 483 64
Lease liabilities 135 154 40 30 22 26 36
Bank overdrafts 45 45 45 – – – –
Trade and other
payables 4,930 4,930 4,741 25 29 124 11
Derivative financial
assets/(liabilities) 11 11 11 – – – –
As of 31 March 2019
Carrying Contractual Less than More than
amount cash flows 1 year 1-2 years 2-3 years 3-5 years 5 years
US$’million US$’million US$’million US$’million US$’million US$’million US$’million
Non-derivative
financial
liabilities
Secured bank loans 2 2 2 – – – –
Unsecured bank
loans and other
loans 86 86 86 – – – –
Unsecured bond
issues 1,884 2,190 68 559 52 675 836
Loans with AB InBev
to be capitalised
upon Listing* 466 531 5 5 400 57 64
Lease liabilities 139 159 42 33 22 27 35
Bank overdrafts 63 63 63 – – – –
Trade and other
payables 4,578 4,578 4,385 8 36 137 12
Derivative financial
assets/(liabilities) 8 8 8 – – – –
* Loans with AB InBev to be capitalized upon Listing are presented in the combined
statements of financial position and the table above based on their contractual repayment
profile. These loans with AB InBev will be capitalized prior to or upon the Listing as part of
the reorganization – see also Note 1.2.
– I-30 –
APPENDIX I ACCOUNTANT’S REPORT
The Group continuously optimizes its capital structure to maximize shareholder value while keeping the
financial flexibility to execute the strategic projects. The Group’s capital structure policy and framework aims
to optimize shareholder value through cash flow distribution to the Group from its subsidiaries, while
maintaining an investment-grade rating and minimizing investments with returns below the Group’s weighted
average cost of capital.
Net debt is defined as non-current and current interest-bearing loans and borrowings and bank
overdrafts (including loans with AB InBev to be capitalized upon Listing) minus debt securities and cash and
cash equivalents. Net debt is a financial performance indicator that is used by the Group’s management to
highlight changes in the Group’s overall liquidity position. The Group believes that net debt is meaningful for
investors as it is one of the primary measures the Group’s management uses when evaluating its progress
towards deleveraging.
The Group’s net debt was 1,487m US dollar as of 31 December 2017, 819m US dollar as of 31
December 2018 and 961m US dollar as of 31 March 2019. Apart from operating results net of capital
expenditures, the net debt is impacted by foreign exchange rates (123m US dollar decrease in net debt in
2018 and 7m US dollar increase in net debt as of 31 March 2019).
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
– I-31 –
APPENDIX I ACCOUNTANT’S REPORT
Normalized EBITDA is calculated by excluding the following effects from profit attributable to equity
holders of the Company: (i) non-controlling interest; (ii) income tax expense; (iii) share of results of
associates; (iv) net finance cost; (v) non-recurring net finance cost; (vi) non-recurring items above EBIT
(including non-recurring costs); and (vii) depreciation, amortization and impairment.
The net debt to Normalized EBITDA ratio is calculated as net debt divided by a twelve-month rolling
Normalized EBITDA. Net debt is defined as non-current and current interest-bearing loans and borrowings
(including loans with AB InBev to be capitalized upon Listing) and bank overdrafts minus debt securities and
cash and cash equivalents.
As of 31 December 2017, 31 December 2018 and 31 March 2019, the ratios were as follows:
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
(1) The net debt to Normalized EBITDA calculation as at 31 March 2019 includes the Normalized
EBITDA for the last nine months ended 31 December 2018 and the Normalized EBITDA for the
three months ended 31 March 2019, resulting in a twelve-month rolling Normalized EBITDA of
2,835m US dollar as at 31 March 2019.
– I-32 –
APPENDIX I ACCOUNTANT’S REPORT
The gearing ratio of net debt to total combined equity and net debt was as follows:
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
A number of the Group’s accounting policies and notes require fair value measurement for both
financial and non-financial items.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When measuring fair value, the Group
uses observable market data as far as possible. Fair values are categorized into different levels in a fair value
hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
• Level 2: inputs are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: fair value measurements incorporate significant inputs that are based on unobservable
market data.
If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value
hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value
hierarchy as the lowest level input that is significant to the entire measurement.
The Group applies fair value measurement to the instruments listed below.
Derivatives
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.
The fair value of non-derivative financial liabilities is generally determined using unobservable
inputs and therefore fall into level 3. In these circumstances, the valuation technique used is discounted
cash flow, whereby the projected cash flows are discounted using a risk adjusted rate.
The carrying amounts of the floating and fixed rate interest-bearing financial liabilities, including
lease liabilities and Loans with AB InBev to be capitalized upon Listing, and all trade and other
receivables and payables, including derivatives financial instruments as recognized in the combined
statements of financial position are a reasonable approximation of the fair values.
The Group had the following financial assets and liabilities quoted at fair value:
– I-33 –
APPENDIX I ACCOUNTANT’S REPORT
The preparation of financial information 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 year/period in which the estimate is revised if the revision affects only that
year/period or in the year/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, the
Group 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.
Goodwill impairment testing relies on a number of critical judgments, estimates and assumptions.
Goodwill, which accounted for approximately 51% of the Group’s total assets as of 31 December 2018 and as
of 31 March 2019, is tested for impairment at the cash-generating unit level. The Group tests at least annually
whether goodwill and indefinite life intangible assets have suffered any impairment by calculating the
recoverable amount of the cash-generating unit and comparing this to its carrying value.
The Group’s impairment testing methodology is in accordance with IAS 36, in which fair-value-less-
cost-to-sell and value in use approaches are taken into consideration. This consists of applying a discounted
free cash flow approach based on acquisition valuation models for the cash-generating units showing a high
invested capital to EBITDA multiple, and valuation multiples for the other cash-generating units.
The fair value less costs to sell valuation requires judgement around the selection of comparable
market participants and their sales multiples. The value in use calculations primarily use cash flow
projections. There are a number of assumptions and estimates involved for the preparation of cash flow
projections and the estimated terminal value. Key assumptions include the expected growth in revenues and
operating margin, growth rates and selection of discount rates, to reflect the risks involved and the terminal
growth rate.
Management prepared the financial projections reflecting actual and prior year/period performance and
market development expectations. Judgement is required to determine key assumptions adopted in the cash
flow projections and changes to key assumptions can significantly affect these cash flow projections and
therefore the results of the impairment reviews.
Refer to Notes 13 and 14 for further information on the goodwill and indefinite life intangible assets
exposure and estimates applied.
– I-34 –
APPENDIX I ACCOUNTANT’S REPORT
Intangible assets with indefinite useful lives are primarily brands acquired through business
combinations. Management has determined that brands have indefinite useful lives as these consist of
nationally or internationally prominent brands which have existed for several decades or longer and which are
well established in their markets. These markets have been stable or growing. The Group has legal rights to
the brands which can be enforced for an indefinite period.
Refer to Note 14 Intangible assets for further information on indefinite life intangible assets.
Contingencies
The preparation of the Group’s financial statements requires management to make estimates and
assumptions regarding contingencies, which affect the valuation of assets and liabilities at the date of the
financial information and the revenue and expenses during the reported period.
The Group discloses material contingent liabilities unless the possibility of any loss arising is
considered remote, and material contingent assets where the inflow of economic benefits is probable.
A provision is recorded for a loss contingency when it is probable that a future event will confirm that a
liability has been incurred at the date of the financial information, and the amount of the loss can be
reasonably estimated. By their nature, contingencies will only be resolved when one or more future events
occur or fail to occur, and typically those events will occur over a number of years in the future.
There are some tax contingencies for which the ultimate tax determination is uncertain – refer to Note
29 Contingencies. The tax liabilities recognized are based on management’s assessment of the likely
outcome.
The Group is subject to income tax in numerous jurisdictions. Significant judgment is required in
determining the Group provision for income tax.
Some subsidiaries within the Group are involved in tax audits and local enquiries usually in relation to
prior years/periods. Investigations and negotiations with local tax authorities are ongoing in various
jurisdictions at the date of the combined statements of financial position 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
Historical Financial Information, 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 year/period such
determination is made.
Refer to Notes 11, 16 and 29 for further information on income tax including exposures and estimates
applied.
– I-35 –
APPENDIX I ACCOUNTANT’S REPORT
5. Segment information
Segment information is presented by geographical segments, consistent with the information that is
available and evaluated regularly by the chief operating decision maker.
The Group operates its business through two geographic regions: Asia Pacific East (primarily Australia,
Japan and South Korea) and Asia Pacific West (China, India, Vietnam and exports elsewhere in Asia Pacific),
which are the Group’s two reportable segments for financial reporting purposes. Regional and operating
Group management is responsible for managing performance, underlying risks and effectiveness of
operations. Management uses performance indicators such as 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 (thousand hectoliter) and
Normalized EBITDA margin (in %).
Asia Pacific
East West Total
31 December 31 December 31 December
2017 2018 2017 2018 2017 2018
– I-36 –
APPENDIX I ACCOUNTANT’S REPORT
Asia Pacific
East West Total
31 March 31 March 31 March
2018 2019 2018 2019 2018 2019
(Unaudited) (Unaudited) (Unaudited)
Notes:
(a) The government grants relate primarily to incentives given by certain Chinese provinces, based
on the Group’s operations and developments in those regions.
(b) Included in the net gain on disposal of property, plant and equipment and intangible assets, are
net gains of 30m US dollar and 7m US dollar from the sale of properties for the years ended 31
December 2017 and 2018, respectively, and a nil impact in US dollar from the sale of properties
for the three months ended 31 March 2018 and 2019.
– I-37 –
APPENDIX I ACCOUNTANT’S REPORT
7. Non-recurring items
The non-recurring items included in the combined income statements are as follows:
The non-recurring restructuring charges primarily relate to organizational alignments and the
reorganization following a major business combination in 2016. These changes aim to eliminate overlapping
organizations 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
Group with a lower cost base in addition to a stronger focus on the Group’s core activities, quicker
decision-making and improvements to efficiency, service and quality.
The Group incurred costs associated with the initial public offering of 15m US dollar reported as
non-recurring items and costs to be capitalized associated with the initial public offering of 3m US dollar for
the three months ended 31 March 2019.
The Group incurred non-recurring net finance costs of 46m US dollar for 2017, 27m US dollar for 2018,
9m US dollar for the three months ended 31 March 2018 and 6m US dollars for the three months ended 31
March 2019.
– I-38 –
APPENDIX I ACCOUNTANT’S REPORT
Of the five individuals with the highest emoluments, two individuals were directors for the years ended
31 December 2017 and 2018 and the three months ended 31 March 2018 and 2019. Their emoluments are
disclosed in Note 33. The aggregate of the emoluments in respect of the other three individuals with the
highest emoluments for the years ended 31 December 2017 and 2018 and the three months ended 31 March
2018 and 2019 are as follows:
The emoluments of the three individuals for the years ended 31 December 2017 and 2018 with the
highest emoluments are within the following bands:
The emoluments of the three individuals for the three months ended 31 March 2018 and 2019 with the
highest emoluments are within the following bands:
– I-39 –
APPENDIX I ACCOUNTANT’S REPORT
Auditors’ remuneration:
– Audit services (2,000) (2,000) (340) (233)
– Non-audit services (1,000) (1,000) (169) (167)
Listing fees – – – (14,956)
The finance costs included in the combined income statements are as follows:
As part of the AB InBev global treasury management function, the Group has loans with AB InBev
Group entities, which are outside the Group. The related loan receivables held by AB InBev subsidiaries
outside the Group will be legally assigned to the Group prior to or upon the Listing, thereby offsetting these
borrowings going forward. For the purpose of the combined financial information, the liabilities related to the
loans with AB InBev entities were presented as borrowings during the Track Record Period and will be
capitalized prior to or upon the Listing. The interest charges related to these borrowings were reported as
non-recurring finance costs in the combined income statements on the basis that these will be capitalized.
– I-40 –
APPENDIX I ACCOUNTANT’S REPORT
Interest income 19 24 7 7
Other financial income ⳮ 1 – 2
Finance income 19 25 7 9
Interest income 19 24 7 7
– I-41 –
APPENDIX I ACCOUNTANT’S REPORT
The reconciliation of the effective tax rate with the aggregated weighted nominal tax rate is summarized
as follows:
The Group’s income tax expense included 4m US dollar and nil US dollar in respect of Hong Kong
profits tax in the year ended 31 December 2018 and for the three months ended 31 March 2019.
The normalized effective tax rate for the years ended 31 December 2017 and 2018 are as follows:
29.4% and 24.6%, whereas the normalized effective tax rate for three months ended 31 March 2018 and 2019
are as follows: 25.9% and 27.7%. Normalized effective tax rate is the effective tax rate adjusted for
non-recurring items. Normalized effective tax rate is not an accounting measure under IFRS accounting and
should not be considered as an alternative to the effective tax rate. Normalized effective tax rate method does
not have a standard calculation method and the Group’s definition of normalized effective tax rate may not be
comparable to other companies.
– I-42 –
APPENDIX I ACCOUNTANT’S REPORT
Property, plant and equipment comprises owned and leased assets, as follows:
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
As of 31 December 2017
Plant and
equipment,
Land and fixtures and Under
buildings fittings construction Total
US$’million US$’million US$’million US$’million
Acquisition cost
Balance as of 1 January 2017 1,967 4,099 456 6,522
Effect of movements in
foreign exchange 157 309 26 492
Acquisitions 152 373 61 586
Acquisitions through
business combinations ⳮ 9 1 10
Disposals (235) (433) (2) (670)
Transfer from/(to) other asset
categories and other
movements 120 114 (37) 197
Balance as of 31 December
2017 2,161 4,471 505 7,137
Balance as of 31 December
2017 (467) (2,107) ⳮ (2,574)
Carrying amount as of
31 December 2017 1,694 2,364 505 4,563
– I-43 –
APPENDIX I ACCOUNTANT’S REPORT
As of 31 December 2018
Plant and
equipment,
Land and fixtures and Under
Buildings fittings construction Total
US$’million US$’million US$’million US$’million
Acquisition cost
Balance as of 1 January 2018 2,161 4,471 505 7,137
Effect of movements in
foreign exchange (123) (272) (26) (421)
Acquisitions 66 455 123 644
Acquisitions through
business combinations ⳮ 1 ⳮ 1
Disposals (30) (178) ⳮ (208)
Transfer from/(to) other asset
categories and other
movements 49 167 (69) 147
Balance as of 31 December
2018 2,123 4,644 533 7,300
Depreciation and
impairment losses
Balance as of 1 January 2018 (467) (2,107) ⳮ (2,574)
Effect of movements in
foreign exchange 28 128 ⳮ 156
Depreciation (107) (550) ⳮ (657)
Disposals ⳮ 128 ⳮ 128
Transfer (from)/to other asset
categories and other
movements (34) (80) ⳮ (114)
Balance as of 31 December
2018 (580) (2,481) ⳮ (3,061)
Carrying amount as of
31 December 2018 1,543 2,163 533 4,239
– I-44 –
APPENDIX I ACCOUNTANT’S REPORT
As as of 31 March 2019
Plant and
equipment,
Land and fixtures and Under
Buildings fittings construction Total
US$’million US$’million US$’million US$’million
Acquisition cost
Balance as of 1 January 2019 2,123 4,644 533 7,300
Effect of movements in
foreign exchange 29 81 6 116
Acquisitions 25 51 – 76
Disposals – (21) – (21)
Transfer from/(to) other asset
categories and other
movements 1 73 (76) (2)
Depreciation and
impairment losses
Balance as of 1 January 2019 (580) (2,481) – (3,061)
Effect of movements in
foreign exchange (13) (51) – (64)
Depreciation (33) (145) – (178)
Disposals – 16 – 16
Transfer (from)/to other asset
categories and other
movements – 3 – 3
Carrying amount as of
31 March 2019 1,552 2,170 463 4,185
As of 31 December 2018 and as of 31 March 2019, there is no property, plant and equipment subject
to restrictions on title, other than described in Note 28.
Out of the total 2018 capital expenditures approximately 45% was used to improve the Group’s
breweries and production facilities while 47% was used for logistics and commercial investments and 8% was
used for improving administrative capabilities and purchase of hardware and software.
Out of the total 31 March 2019 capital expenditures, approximately 26% was used to improve the
Group’s breweries and production facilities while 67% was used for logistics and commercial investments and
7% was used for improving administrative capabilities and purchase of hardware and software.
– I-45 –
APPENDIX I ACCOUNTANT’S REPORT
Right-of-use Assets
The Group leases land, warehouses, factory facilities, other commercial buildings and equipment. The
carrying amount of assets under leases was 102m US dollar, 132m US dollar and 137m US dollar as of 31
December 2017, 31 December 2018 and 31 March 2019, respectively.
Property, plant and equipment leased by the Group (right-of-use assets) is detailed as follows:
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
Additions to right-of-use assets were 51m US dollar, 81m US dollar and 17m US dollar for 31 December
2017, 31 December 2018 and 31 March 2019, respectively. The expense related to short-term leases and
variable lease payments that are not included in the measurement of the lease liabilities is not significant.
Depreciation is included in the following line items in the combined income statements:
For the
For the year ended three months ended
31 December 31 March
2017 2018 2018 2019
US$’million US$’million US$’million US$’million
(Unaudited)
13. Goodwill
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
– I-46 –
APPENDIX I ACCOUNTANT’S REPORT
As of
As of 31 December 31 March
Cash-generating unit 2017 2018 2019
US$’million US$’million US$’million
The Group completed its annual impairment test for goodwill in the fourth quarter of 2018 and
concluded that no impairment charge was warranted. The results of the impairment tests indicate that the
excess of the recoverable amounts over the carrying amounts for each cash generating unit was not less than
30%. The Group cannot predict whether an event that triggers impairment will occur, when it will occur or how
it will affect the value of the asset reported.
The Group believes that all of its estimates are reasonable: they are consistent with the Group’s internal
reporting and reflect management’s best estimates. However, inherent uncertainties exist that management
may not be able to control. During its valuation, the Group ran sensitivity analysis for key assumptions
including the weighted average cost of capital (“WACC”) and the terminal growth rate. For the main
cash-generating units where a value in use model has been used for impairment assessment, WACC
generally approximates 7% and the terminal growth rate is equal to the GDP growth rate. While a change in
the estimates used could have a material impact on the calculation of the fair values and trigger an impairment
charge, the Group, based on the sensitivity analysis performed is not aware of any reasonably possible
change in a key assumption used that would cause a cash-generating unit’s carrying amount to exceed its
recoverable amount.
The Group’s impairment testing methodology is in accordance with IAS 36, in which fair-value-less-
cost-to-sell and value in use approaches are taken into consideration. This consists of applying a discounted
free cash flow approach based on acquisition valuation models for its major business units and the business
units showing a high invested capital to EBITDA multiple, and valuation multiples for its other business units.
The value in use discounted cash flow is based on a 10 year cash flow model. The key judgments,
estimates and assumptions used in the value in use discounted free cash flow calculations are generally as
follows:
• In the first three years of the model, free cash flows are based on the Group’s strategic plan as
approved by key management. The Group’s strategic plan is prepared per cash-generating unit
and is based on external sources in respect of macro-economic assumptions, industry, inflation
and foreign exchange rates, past experience and identified initiatives in terms of market share,
revenue, variable and fixed cost, capital expenditure and working capital assumptions;
• For the subsequent seven years of the model, data from the strategic plan is extrapolated
generally using simplified assumptions such as macro-economic and industry assumptions,
variable cost per hectoliter and fixed cost linked to inflation, as obtained from external sources;
• Cash flows after the first ten-year period are extrapolated generally using expected annual
long-term GDP growth rates, based on external sources, in order to calculate the terminal value,
considering sensitivities on this metric; and
• Projections are discounted at the unit’s weighted average cost of capital. Calculations are
corroborated by valuation multiples, quoted share prices for publicly-traded subsidiaries or other
available fair value indicators (i.e. recent market transactions from peers).
The Group uses a 10 year rather than a five year model as this accords with the Group’s long term
planning and business acquisition valuation methodology.
Although the Group believes that its judgments, assumptions and estimates are appropriate, actual
results may differ from these estimates under different assumptions or market or macro-economic conditions.
– I-47 –
APPENDIX I ACCOUNTANT’S REPORT
As of 31 December 2017
Land use
Commercial rights and
Brands intangibles Software other Total
US$’million US$’million US$’million US$’million US$’million
Acquisition cost
Balance as of beginning of the
year 3,861 104 207 437 4,609
Effect of movements in foreign
exchange 355 6 16 27 404
Acquisitions through business
combinations 242 ⳮ ⳮ ⳮ 242
Acquisitions and expenditures ⳮ ⳮ 26 5 31
Disposals (33) ⳮ (3) (24) (60)
Transfer (to)/from other asset
categories and other
movements (1) (23) ⳮ 1 (17) (39)
Carrying value as of
31 December 2017 4,402 51 121 369 4,943
– I-48 –
APPENDIX I ACCOUNTANT’S REPORT
As of 31 December 2018
Land use
Commercial rights and
Brands intangibles Software other Total
US$’million US$’million US$’million US$’million US$’million
Acquisition cost
Balance as of beginning of the
year 4,402 110 247 428 5,187
Effect of movements in foreign
exchange (342) (6) (16) (22) (386)
Acquisitions through business
combinations 17 ⳮ ⳮ ⳮ 17
Acquisitions and expenditures 1 ⳮ 18 12 31
Disposals ⳮ ⳮ – (14) (14)
Transfer (to)/from other asset
categories and other
movements (1) (156) ⴑ 25 (18) (149)
Carrying value as of
31 December 2018 3,922 40 116 327 4,405
– I-49 –
APPENDIX I ACCOUNTANT’S REPORT
As of 31 March 2019
Land use
Commercial rights and
Brands intangibles Software other Total
US$’million US$’million US$’million US$’million US$’million
Acquisition cost
Balance as of beginning of the
period 3,922 104 274 386 4,686
Effect of movements in foreign
exchange 4 2 8 9 23
Acquisitions and expenditures – – 1 2 3
Transfer (to)/from other asset
categories and other
movements (1) – 1 2 (1) 2
Carrying value as of
31 March 2019 3,926 40 110 334 4,410
(1) The transfer (to)/from other asset categories and other movements mainly relates to transfers
between account categories and measurement period adjustments.
Included in intangible assets are 4,402m US dollar, 3,922m US dollar and 3,926m US dollar of assets
with an indefinite useful life and 541m US dollar, 483m US dollar and 484m US dollar with a finite life as of 31
December 2017, 31 December 2018 and 31 March 2019, respectively. Land use rights amounted to 322m US
dollar, 275m US dollar and 283m US dollar as of 31 December 2017, 31 December 2018 and 31 March 2019,
respectively.
Intangible assets with indefinite useful lives are comprised primarily of brands and certain distribution
rights that the Group purchase for its own products, and are tested for impairment during the fourth quarter
of the year or whenever a triggering event has occurred.
– I-50 –
APPENDIX I ACCOUNTANT’S REPORT
The carrying amount of intangible assets with indefinite useful lives by country is as follows:
As of
As of 31 December 31 March
Country 2017 2018 2019
US$’million US$’million US$’million
Intangible assets with indefinite useful lives have been tested for impairment using the same
methodology and assumptions as disclosed in Note 13 Goodwill. Based on the assumptions described in that
note, the Group concluded that no impairment charge is warranted. While a change in the estimates used
could have a material impact on the calculation of the fair values and trigger an impairment charge, the Group
is not aware of any reasonably possible change in a key assumption used that would cause a cash-generating
unit’s carrying amount to exceed its recoverable amount.
Amortization is included in the following line items in the combined income statements:
For the
For the year ended three months ended
31 December 31 March
2017 2018 2018 2019
US$’million US$’million US$’million US$’million
(Unaudited)
Cost of sales 5 9 5 2
Sales and marketing expenses 4 4 1 1
Administrative expenses 44 45 12 11
Amortization 53 58 18 14
The Group has an investment in associates, Guangzhou Zhujiang Brewery Joint-Stock Co., Ltd.
(“Zhujiang”), incorporated in the PRC.
% of economic interest as of
31 December 31 December 31 March
% of economic interest as of 2017 2018 2019
In February 2017, the Group acquired additional equity interest of 4.37% (from 25.62% to 29.99%) in
Zhujiang for a purchase price of 232m US dollar. The Group received a dividend of 3m US dollar and 5m US
dollar from Zhujiang during the years ended 31 December 2017 and 2018 respectively. No dividends were
received by the Group during the three months ended 31 March 2018 and 2019.
The Group recognized the results of the investment in associates of 8m US dollar for the year ended 31
December 2017, 17m US dollar for the year ended 31 December 2018, 1m US dollar for the three months
ended 31 March 2018 and 2m US dollar for the three months ended 31 March 2019.
– I-51 –
APPENDIX I ACCOUNTANT’S REPORT
The amount of deferred tax assets and liabilities by type of temporary difference are as follows:
As of 31 December 2017
Assets Liabilities Net
US$’million US$’million US$’million
As of 31 December 2018
Assets Liabilities Net
US$’million US$’million US$’million
As of 31 March 2019
Assets Liabilities Net
US$’million US$’million US$’million
– I-52 –
APPENDIX I ACCOUNTANT’S REPORT
The change in net deferred taxes recorded in the combined statements of financial position are as
follows:
Most of the temporary differences are related to the fair value adjustments on intangible assets with
indefinite useful lives acquired through business combinations. The realization of such temporary differences
is unlikely to occur within 12 months.
Tax losses carried forward and deductible temporary differences on which no deferred tax asset is
recognized amounted to 771m US dollar in 2017 and 612m US dollar in 2018. As of 31 December 2018, 34m
US dollar of these tax losses and deductible temporary differences do not have an expiration date, 28m US
dollar, 37m US dollar and 97m US dollar expire within one, two and three years respectively, while 416m US
dollar have an expiration date of more than three years. Deferred tax assets have not been recognized on
these items because it is not probable that future taxable profits will be available against which these tax
losses and deductible temporary differences can be utilized, and the Group has no tax planning strategy
currently in place to utilize these tax losses and deductible temporary differences.
As of 31 March 2019, tax losses carried forward and deductible temporary differences on which no
deferred tax asset is recognized amounted to 556m US dollars. 34m US dollar of these tax losses and
deductible temporary differences do not have an expiration date, 27m US dollar, 36m US dollar and 86m US
dollar expire within one, two and three years respectively, while 373m US dollar have an expiration date of
more than three years. Deferred tax assets have not been recognized on these items because it is not
probable that future taxable profits will be available against which these tax losses and deductible temporary
differences can be utilized and the Group has no tax planning strategy currently in place to utilize these tax
losses and deductible temporary differences.
17. Inventories
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
The cost of inventories recognized as an expense in cost of sales amounted to 3,451m US dollar and
3,792m US dollar at 31 December 2017 and 2018, respectively, and 936m US dollar and 910m US dollar for
the three months ended 31 March 2018 and 2019, respectively.
– I-53 –
APPENDIX I ACCOUNTANT’S REPORT
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
For the nature of cash deposits for guarantees see Note 28 Collateral and contractual commitments for
the acquisition of property, plant and equipment, loans to customers and other.
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
The carrying amount of trade and other receivables is a good approximation of their fair value as the
impact of discounting is not significant.
Trade receivables and Receivables with AB InBev are due on average less than 90 days from the date
of invoicing.
As of 31 December 2017, 31 December 2018 and 31 March 2019, the ageing analysis of trade
receivables and receivables with AB InBev, based on due date, is as follows:
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
– I-54 –
APPENDIX I ACCOUNTANT’S REPORT
The Group’s exposure to credit, currency and interest rate risks is disclosed in Note 3.1.
Other current assets are primarily comprised of assets to be disposed of prior to the Listing of 21m US
dollar for each of the periods as of 31 December 2017, 31 December 2018 and 31 March 2019.
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
The cash in the cash pool with AB InBev was managed as part of a global treasury management
function by AB InBev. The Group has legal ownership over the balances that were notionally cash pooled and
these balances are therefore considered cash and cash equivalents of the Group. The Group does not have
restricted cash.
AB InBev utilizes a central approach for funding of its operations, therefore all balances to/from AB
InBev that have operational nature or have characteristics of debt are presented as loans from AB InBev in
the combined financial information. All remaining balances are treated as capital.
This note provides information about the Group’s interest-bearing loans and borrowings. For more
information about the Group’s exposure to interest rate and foreign exposure currency risk – refer to Note 3.1.
As of
As of 31 December 31 March
NON-CURRENT LIABILITIES 2017 2018 2019
US$’million US$’million US$’million
– I-55 –
APPENDIX I ACCOUNTANT’S REPORT
As of
As of 31 December 31 March
CURRENT LIABILITIES 2017 2018 2019
US$’million US$’million US$’million
The current and non-current interest-bearing loans and borrowings amounted to 3,243m US dollar as
of 31 December 2017, 2,523m US dollar as of 31 December 2018 and 2,577m US dollar as of 31 March 2019.
The Group has loans with AB InBev Group entities outside the Group of 1,018m US dollar as of 31
December 2017, 473m US dollar as of 31 December 2018 and 466m US dollar as of 31 March 2019. The
related loan receivables held by AB InBev subsidiaries outside the Group will be transferred to the Group prior
to or upon the Listing, thereby eliminating these borrowings going forward.
During 2017, the Group completed the issuance of the following series of bonds:
Aggregate
principal
amount
Issue Date (in millions) Currency Interest rate Maturity date
The Group was in compliance with all its debt covenants as of 31 December 2017, 31 December 2018
and 31 March 2019.
The amounts in the table below include both the principal amount of the lease liabilities and estimated
interest payments.
As of
As of 31 December 31 March
LEASE LIABILITIES 2017 2018 2019
US$’million US$’million US$’million
– I-56 –
APPENDIX I ACCOUNTANT’S REPORT
The table below details changes in the Group’s liabilities arising from financing activities, including both
cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were,
or future cash flows will be classified in the Group’s combined statements of cash flows from financing
activities.
Short-term
debt and
Long-term current portion
debt, net of of long-term
current portion debt Total
US$’million US$’million US$’million
Short-term
debt and
Long-term current portion
debt, net of of long-term
current portion debt Total
US$’million US$’million US$’million
– I-57 –
APPENDIX I ACCOUNTANT’S REPORT
Short-term
debt and
Long-term current portion
debt, net of of long-term
current portion debt Total
US$’million US$’million US$’million
(unaudited) (unaudited) (unaudited)
Short-term
debt and
Long-term current portion
debt, net of of long-term
current portion debt Total
US$’million US$’million US$’million
The Group sponsors various post-employment benefit plans. These include pension plans, both
defined contribution plans, and defined benefit plans, and other post-employment benefits. In accordance
with IAS 19 Employee Benefits post-employment benefit plans are classified as either defined contribution
plans or defined benefit plans.
For defined contribution plans, the Group pays contributions to publicly or privately administered
pension funds or insurance contracts. Once the contributions have been paid, the Group has no further
payment obligation. The regular contributions constitute an expense for the year/period in which they are due.
Contributions paid into defined contribution plans for the Group amounted to 12m US dollar and 10m in 2017
and 2018 and 3m US dollar and 5m US dollar for the three months ended 31 March 2018 and 2019.
– I-58 –
APPENDIX I ACCOUNTANT’S REPORT
The Group contributed to defined benefit plans for Australia and South Korea. The plans are partially
funded. When plans are funded, the assets are held in legally separate funds set up in accordance with
applicable legal requirements and common practice in each country.
The employee benefit net liability amounted to 32m US dollar as of 31 December 2017, 23m US dollar
as of 31 December 2018 and 26m US dollar as of 31 March 2019.
The expense recognized in the combined income statements with regards to defined benefit plans
amounted to 14m US dollar for the year ended 31 December 2017, 13m US dollar for the year ended 31
December 2018 and 4m US dollar for each of the three months ended 31 March 2018 and 2019.
The employee entitlements amounted to 19m US dollar as of 31 December 2017, 16m US dollar as of
31 December 2018 and 16m US dollar as of 31 March 2019. These employee entitlements relate primarily to
annual leave and long service leave.
The share-based compensation plans relate to shares of AB InBev as historically the Group did not
have its own share capital.
Different share and share option programs allow the Group’s senior management to receive or acquire
shares of AB InBev. AB InBev has different share-based compensation plans. Further details on the
share-based compensation plans are disclosed in AB InBev’s 2017 and 2018 Annual Report.
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.
All of the Group shared-based payment plans are equity-settled.
An expense for the grant date fair value of the award is recognized over the vesting period in the
combined income statements with a corresponding credit in equity.
Share-based payment transactions resulted in a total expense of 35m US dollar in 2017, as compared
to 18m US dollar in 2018. Share-based payment transactions resulted in a total expense of 7m US dollar for
the three months ended 31 March 2018, as compared to 3m US dollar for three months ended 31 March 2019.
24. Provisions
Balance as of 31 December
2017 63 229 30 322
– I-59 –
APPENDIX I ACCOUNTANT’S REPORT
Balance as of 31 December
2018 51 214 21 286
The restructuring provisions are primarily explained by the organizational alignments – see also Note
7 Non-recurring items. Provisions for disputes mainly relate to various disputed direct and indirect taxes and
claims from former employees.
The provisions are expected to be settled within the following time windows for 31 December 2018:
Restructuring 51 14 ⳮ 37 ⳮ
Income and indirect
taxes 92 53 4 ⳮ 35
Labor 43 ⳮ 7 30 6
Other disputes 79 3 ⳮ 76 ⳮ
Other provisions 21 15 1 5 ⳮ
Total provisions 286 85 12 148 41
– I-60 –
APPENDIX I ACCOUNTANT’S REPORT
The provisions are expected to be settled within the following time windows for 31 March 2019:
Restructuring 48 11 – 37 –
Income and indirect
taxes 99 53 8 2 36
Labor 39 – 3 30 6
Other disputes 79 2 – 77 –
Other provisions 20 14 1 5 –
Total provisions 285 80 12 151 42
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
* Consigned packaging represents deposits paid by the Group’s customers for use of the Group’s
returnable packaging which are assets controlled by the Group.
– I-61 –
APPENDIX I ACCOUNTANT’S REPORT
The Group pays the outstanding balances to the creditors according to the credit terms. Trade payables
and Payables to AB InBev are on average due within 120 days from the invoice date. As of 31 December
2017, 31 December 2018 and 31 March 2019, trade payables and payables to AB InBev were 2,750m US
dollar, 2,691m US dollar and 2,312m US dollar, respectively.
The Group incurred costs associated with the initial public offering of 15m US dollar reported as
non-recurring items and costs associated with the initial public offering to be capitalized of 3m US dollar for
the three months ended 31 March 2019. These costs are funded by AB InBev and reported as payables to AB
InBev. These will be reimbursed by the Group upon Listing.
The table below summarizes the impact of acquisitions on the combined statements of financial
position and combined statements of cash flows of the Group for 31 December 2017 and 2018. There were
no acquisitions or disposals of subsidiaries for the three months ended 31 March 2019.
31 December 31 December
2017 2018
Acquisitions Acquisitions
US$’million US$’million
Non-current assets
Property, plant and equipment 10 1
Intangible assets 242 17
Other non-current assets 1 ⳮ
Current assets
Inventories 2 –
Trade and other receivables 8 –
Non-current liabilities
Deferred tax liabilities (47) (7)
Current liabilities
Trade and other payables (11) (1)
Consideration paid 48 32
The Group undertook a series of acquisitions during 2017 and 2018, with no significant impact to the
Group’s combined financial information. In 2017, the Group acquired Boxing Cat Brewery in the PRC. In the
same year, the Group acquired the Australian craft breweries 4 Pines and Pirate Life. During 2018, the Group
acquired BoozeBud, an online retailer in Australia and the Hand & Malt Brewing Co., a craft brewery in South
Korea.
On 18 December 2018, the Group entered into an acquisition agreement with Jebsen Beverage
Company Limited among others, to acquire 65% of the registered capital of Jebsen Beverage (China)
Company Limited which is principally engaged in the marketing, distribution, sale and commercialization of
the Blue Girl and other brands of beer and other malt-based beverages in Mainland China (excluding Hong
Kong, Macau and Taiwan). Completion of the Blue Girl transaction took place on 30 May 2019.
The net cash paid on prior year acquisitions was 29m US dollar for the three months ended 31 March
2018 and 5m US dollar for the three months ended 31 March 2019. There were no disposals in 2017 and
2018.
– I-62 –
APPENDIX I ACCOUNTANT’S REPORT
Set out below is an overview of financial assets held by the Group as of each year/period:
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
Set out below is an overview of financial liabilities held by the Group as of each year/period:
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
28. Collateral and contractual commitments for the acquisition of property, plant and equipment,
loans to customers and other
As of 31 December As of 31 March
2017 2018 2018 2019
US$’million US$’million US$’million US$’million
(Unaudited)
– I-63 –
APPENDIX I ACCOUNTANT’S REPORT
The collateral given for own liabilities of 136m US dollar as of 31 December 2018 and 134m US dollars
as of 31 March 2019 includes South Korea’s collateral on property in favor of the excise tax authorities. The
Group has entered into commitments to purchase property, plant and equipment for an amount of 132m US
dollar as of 31 December 2018 and 154m US dollar as of 31 March 2019. Other commitments amount to 14m
US dollar as of 31 December 2018 and 17m US dollar as of 31 March 2019 and mainly cover guarantees given
to pension funds, rental and other guarantees.
29. Contingencies
With the exception of the matters below, the Group 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 the Group’s management cannot at this stage estimate the
likely timing of resolution of these matters. The most significant contingencies are discussed below.
SAB Australia (an Australian subsidiary that will be transferred to the Group as part of the
reorganization) is subject to a yet to be concluded large business income tax audit (LBA) by the
Commissioner of Taxation (Commissioner) of SAB Australia’s 2012 to 2014 income years. The focus of the
Commissioner in the LBA is on the tax treatment of the funding of SAB Australia’s 10.5 billion AUD dollar (7.5
billion US dollar) acquisition of the Foster’s Group in December 2011 (Foster’s acquisition). The
Commissioner is investigating the availability to SAB Australia of income tax deductions on the funding
(totaling approximately 1.9 billion AUD dollar (1.3 billion US dollar) over the period of the LBA) and whether
additional withholding tax (approximately 55m AUD dollar (39 m US dollar) over the period of the LBA) ought
to have been paid.
This may also have implications for subsequent tax periods. Over the period 2015 to 31 March 2019,
additional income tax deductions of approximately 3.2 billion AUD dollar (2.3 billion US dollar) were claimed
in relation to similar funding arrangements.
To date, the Commissioner has not issued any taxation assessments in relation to the matters the
subject of the LBA. The Commissioner continues to gather information and documents concerning the
Foster’s acquisition and to formulate his technical positions. SAB Australia obtained external advice at the
time of the Foster’s acquisition and SAB Australia have obtained additional external advice throughout the
course of the LBA. A reduction of 360m AUD dollar (256m US dollar) has been made against deferred tax
assets for risks relating to all years to date (not just the LBA years under review) to provide for the risk
associated with matters that are the subject of the LBA. The Group considers the amount of these provisions
appropriate having regard to the level of risk.
Should the Commissioner issue tax assessments in relation to the LBA (or subsequent periods), the
entire amounts of the assessments (including any penalties and interest) would become due and payable
shortly thereafter. However, as a concession in this type of circumstance, generally, if a taxpayer decided to
object to the taxation assessments (as SAB Australia would highly likely do in this case), the Commissioner
would only seek to recover 50% of any amounts assessed at that time. A “true up” of the assessed amounts
(involving either a refund of some or all of the 50% payment plus interest by the Commissioner to the taxpayer
or a payment of some or all of the balance of the assessments plus interest by the taxpayer to the
Commissioner) would occur once the dispute between the taxpayer and the Commissioner was finally
resolved (either through court or another dispute resolution process), and in accordance with the final
outcome of the relevant dispute resolution process. SAB Australia intends to continue to vigorously defend
the tax positions taken.
– I-64 –
APPENDIX I ACCOUNTANT’S REPORT
Transactions with directors and executive board management members (key management personnel)
In addition to short-term employee benefits (primarily salaries) the Group’s management members are
entitled to post-employment benefits. In particular, members of management participate in the pension plan
of their respective country – see also Note 22 Employee Benefits. Finally, key management personnel are
eligible for AB InBev share option; restricted stock and/or share swap program (refer Note 23 Share-based
Payments). Total management compensation included in the combined income statements are as follows:
For the
For the year ended three months ended
31 December 31 March
2017 2018 2018 2019
US$’thousand US$’thousand US$’thousand US$’thousand
(Unaudited)
Short-term employee
benefits 6,691 16,156 4,039 3,107
Post-employment benefits 118 153 38 80
Share-based payments 3,932 5,613 1,403 1,358
For the
For the year ended three months ended
31 December 31 March
2017 2018 2018 2019
US$’million US$’million US$’million US$’million
(Unaudited)
– I-65 –
APPENDIX I ACCOUNTANT’S REPORT
As of
As of 31 December 31 March
2017 2018 2019
US$’million US$’million US$’million
The Group incurred costs associated with the initial public offering of 15m US dollar reported as
non-recurring items and costs associated with the initial public offering to be capitalized of 3m US dollar for
the three months ended 31 March 2019. These costs are funded by AB InBev and reported as payables to AB
InBev. These will be reimbursed by the Group upon Listing.
Significant interest in an associate is shown in Note 15 Investment in associates. The Group did not
have transactions with associate during the periods ended 31 December 2017, 31 December 2018 and 31
March 2019, except for the dividend distribution from an associate to the Group as described in Note 15.
As disclosed in Note 26, the Group completed its acquisition of 65% of the registered capital of Jebsen
Beverage (China) Company Limited on 30 May 2019.
No earnings per share information is presented as its inclusion, for the purpose of this report, is not
considered meaningful due to the preparation of the results for each of the years/periods ended 31 December
2017 and 2018 and for the three months ended 31 March 2018 and 2019 on a combined basis.
33. Benefits and interests of directors (disclosures required by section 383 of the Hong Kong
Companies Ordinance (Cap. 622), Companies (Disclosure of Information about Benefits of
Directors) Regulation (Cap. 622G) and Hong Kong Listing Rules)
Directors’ emoluments disclosed pursuant to section 383(1) of the Hong Kong Companies Ordinance
and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation are as follows:
Remuneration was paid to one director and the managing director during the Track Record Period as
set out below:
Executive
Directors
Jan Craps – 822 24 – 846 12 858
Renrong Wang – 527 – 7 534 478 1,012
– I-66 –
APPENDIX I ACCOUNTANT’S REPORT
Executive
Directors
Jan Craps – 827 1,526 – 2,353 712 3,065
Renrong Wang – 666 658 8 1,332 567 1,899
Executive
Directors
Jan Craps – 270 32 – 302 201 503
Renrong Wang – 131 81 13 225 148 373
Executive
Directors
Jan Craps – 207 382 – 589 178 767
Renrong Wang – 167 165 2 334 142 476
During the years ended 31 December 2017 and 2018 and the three months ended 31 March 2018 and
2019, no retirement benefits were paid to or receivable by any directors in respect of their other services in
connection with the management of the affairs of the Group.
No payment was made to directors as compensation for early termination of the appointment during the
years ended 31 December 2017 and 2018 and the three months ended 31 March 2018 and 2019.
No payment was made to third parties for making available directors’ services during the years ended
31 December 2017 and 2018 and the three months ended 31 March 2018 and 2019.
– I-67 –
APPENDIX I ACCOUNTANT’S REPORT
e. Information about loans, quasi-loans and other dealings in favor of directors, their controlled
bodies corporate by and connected entities with such directors
There are no other loans, quasi-loans and other dealings in favor of directors, their controlled bodies
corporate by and connected entities with such directors during the years ended 31 December 2017 and 2018,
and the three months ended 31 March 2018 and 2019.
34. Dividends
Dividends during each of the years ended 31 December 2017 and 2018 and three months ended 31
March 2018 and 2019 represented dividends declared by the companies comprising the Group to the then
equity holders of the companies for each of the years ended 31 December 2017 and 2018 and three months
ended 31 March 2018 and 2019, after elimination of intra-group dividends. The rates for dividend and the
number of shares ranking for dividends are not presented as such information is not considered meaningful
for the purpose of this report.
Subsequent to 31 March 2019, dividends of 370m US dollar and 550m US dollar were declared by
certain Group companies to the then equity holders of the companies on 28 May 2019 and 7 June 2019,
respectively.
Budweiser Brewing Company APAC Limited was incorporated in the Cayman Islands on 10 April 2019
as an exempted company with limited liability under the laws of the Cayman Islands. The address of the
Company’s registered office is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111,
Cayman Islands.
No audited financial statements have been prepared by the Company or any of the
entities that comprise the Group in respect of any period subsequent to 31 March 2019
and up to the date of this report. Save as disclosed elsewhere in this report, no dividend
or distribution has been declared or made by the Company or any of the companies that
comprise the Group in respect of any period subsequent to 31 March 2019.
– I-68 –
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following information does not form part of the Accountant’s Report prepared
by PricewaterhouseCoopers, Certified Public Accountants, the reporting accountant of
the Company, as set forth in Appendix I to the prospectus, and is included herein for
information only. The unaudited pro forma financial information should be read in
conjunction with the section entitled “Financial Information” in this prospectus and the
“Accountant’s Report” set forth in Appendix I to this prospectus.
The following unaudited pro forma statement of adjusted net tangible liabilities of
the Group prepared in accordance with Rule 4.29 of the Listing Rules and on the basis
set out below is for illustrative purposes only, and is set out herein to illustrate the effect
of the Global Offering on the net tangible liabilities of the Group attributable to the
owners of the Company as of 31 March 2019 as if the Global Offering had taken place on
31 March 2019.
This unaudited pro forma statement of adjusted net tangible liabilities has been
prepared for illustrative purposes only and because of its hypothetical nature, it may not
give a true picture of the combined net tangible assets or liabilities of the Group as of 31
March 2019 or at any future dates following the Global Offering.
Unaudited
Audited pro forma
combined combined
net tangible net tangible
liabilities of liabilities
Net tangible the Group Estimated attributable to
assets attributable Adjustments net proceeds Distribution the owners of Unaudited pro forma
attributable to owners arising from the to members the Company adjusted net tangible
to owners of as of 31 March from the Global of AB InBev as of 31 March liabilities per Share
the Company 2019 Reorganization Offering Group 2019 (Note 8)
(Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) (Note 7)
US$’million US$’million US$’million US$’million US$’million US$’million US$ HK$
Based on an
Offer Price of
HK$40.00 per
share – (341) (1,208) 8,158 (8,158) (1,549) ($0.15) ($1.14)
Based on an
Offer Price of
HK$47.00 per
share – (341) (1,208) 9,593 (9,593) (1,549) ($0.15) ($1.14)
Notes:
(1) The Company was incorporated on 10 April 2019 with a share capital of US$0.01 representing 1
ordinary share of US$0.01.
(2) The audited combined net tangible liabilities of the Group attributable to the owners of the Company as
of 31 March 2019 is extracted from the Accountant’s Report set out in Appendix I to this prospectus, and
is based on the audited combined net assets of the Group as of 31 March 2019 of US$17,275 million
adjusted for intangible assets including goodwill as of 31 March 2019 of US$17,597 million and
non-controlling interests of US$19 million.
– II-1 –
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
(3) The adjustments arising from the Reorganization are set out in the table below:
Total (1,208)
(i) US$466 million of related loan receivables held by AB InBev subsidiaries outside the Group will
be legally assigned to the Group prior to or upon the Listing, thereby offsetting the Loans with AB
InBev reported in the Accountant’s Report.
(ii) The adjustment represents the sale of assets held for sale as part of the restructuring
transactions. The assets held for sale will be disposed of prior to the Listing and the gross
proceeds from the disposal to the AB InBev Group will be distributed to AB InBev.
(iii) As a result of the Reorganization plan described in the prospectus, the Company will pay
approximately US$103 million in taxes related to the transfer of assets.
(iv) As part of the Reorganization, the Group expects to make aggregate payments of between
US$1.45 billion and US$1.65 billion to AB InBev. For the purposes of this Unaudited Pro Forma
Financial Information, we have assumed US$1.55 billion (being the midpoint of the expected
repayments of loans and dividends to AB InBev) will be distributed, of which US$920 million will
be distributed prior to the Listing in the form of dividends from certain Group companies to their
current shareholders, and the remainder will be made upon Listing as a partial repayment of the
Shareholder Loan (see Note 5 below).
(4) The estimated net proceeds from the Global Offering are based on 1,626,526,000 Offer Shares and the
indicative Offer Price of HK$40.00 per Share and HK$47.00 per Share, being the low and high end of
the indicative Offer Price range, after deduction of the underwriting fees and other related expenses
(excluding approximately US$15 million which were already recognized in the combined income
statements as of 31 March 2019). For the purpose of this Unaudited Pro forma Financial Information,
we assume that no Over-allotment Option is exercised.
(5) As described in the History, Development and Reorganization section of the Prospectus, a member of
the AB InBev Group will enter into a Shareholder Loan with the Company to fund the Reorganization
transactions described in the Prospectus. Following completion of the Global Offering, the Company
will use the entire net proceeds from the Global Offering to settle the Reorganization transactions by
fully repaying the Korea Debt Receivable Loan and the outstanding balance of the Shareholder Loan.
(6) The unaudited pro forma net tangible liabilities per Share is based on the adjustments referred to above
and on the basis that 10,599,526,000 Shares were in issue assuming that the Global Offering has been
completed on 31 March 2019. However, this does not take into account of any options to be granted
under the Share Award Schemes, or any Shares which may be allotted and issued or repurchased by
the Company pursuant to the general mandates granted to the Directors to allot and issue or
repurchase Shares as described in the section headed “Share Capital”. For the purpose of this
Unaudited Pro Forma Financial Information, we assume that no Over-allotment Option is exercised.
(7) In connection with the preparation of this unaudited pro forma statement of adjusted net tangible
liabilities, the translation of United States dollars into Hong Kong dollars has been made at a rate of
US$1.00 to HK$7.8152.
(8) No adjustment has been made to the unaudited pro forma adjusted net tangible liabilities per Share to
reflect any trading result or other transaction of the Group entered into subsequent to 31 March 2019.
– II-2 –
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Financial Information has been compiled by the directors
to illustrate the impact of the proposed initial public offering on the Group’s financial
position as at 31 March 2019 as if the proposed initial public offering had taken place at
31 March 2019. As part of this process, information about the Group’s financial position
has been extracted by the directors from the Group’s financial information for the period
ended 31 March 2019, on which an accountant’s report has been published.
The directors are responsible for compiling the Unaudited Pro Forma Financial
Information in accordance with paragraph 4.29 of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with
reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for
Inclusion in Investment Circulars (“AG 7”) issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”).
We have complied with the independence and other ethical requirements of the
Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on
fundamental principles of integrity, objectivity, professional competence and due care,
confidentiality and professional behaviour.
Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA
and accordingly maintains a comprehensive system of quality control including
documented policies and procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
For purposes of this engagement, we are not responsible for updating or reissuing
any reports or opinions on any historical financial information used in compiling the
Unaudited Pro Forma Financial Information, nor have we, in the course of this
engagement, performed an audit or review of the financial information used in compiling
the Unaudited Pro Forma Financial Information.
• The related pro forma adjustments give appropriate effect to those criteria; and
• The unaudited pro forma financial information reflects the proper application of
those adjustments to the unadjusted financial information.
The engagement also involves evaluating the overall presentation of the unaudited
pro forma financial information.
– II-4 –
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
Our work has not been carried out in accordance with auditing standards or other
standards and practices generally accepted in the United States of America or auditing
standards of the Public Company Accounting Oversight Board (United States) and
accordingly should not be relied upon as if it had been carried out in accordance with
those standards and practices.
Opinion
In our opinion:
(a) the Unaudited Pro Forma Financial Information has been properly compiled by
the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma
Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing
Rules.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 5 July 2019
– II-5 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
A. TAXATION
The following summary of certain Hong Kong and Cayman Islands tax
consequences of the purchase, ownership and disposition of the Shares is based upon
the laws, regulations, rulings and decisions now in effect, all of which are subject to
change (possibly with retroactive effect). The summary does not purport to be a
comprehensive description of all the tax considerations that may be relevant to a
decision to purchase, own or dispose of the Shares and does not purport to apply to all
categories of prospective investors, some of whom may be subject to special rules, and
is not intended to be and should not be taken to constitute legal or tax advice.
Prospective investors should consult their own tax advisers concerning the
application of Hong Kong and Cayman Islands tax laws to their particular situation as
well as any consequences of the purchase, ownership and disposition of the Shares
arising under the laws of any other taxing jurisdiction. Neither the Company nor any of
the Relevant Persons assumes any responsibility for any tax consequences or liabilities
that may arise from the subscription for, holding or disposal of the Shares.
The taxation of the Company and that of the Shareholders is described below.
Where Hong Kong and Cayman Islands tax laws are discussed, these are merely an
outline of the implications of such laws. Such laws and regulations may be interpreted
differently. It should not be assumed that the relevant tax authorities or the Hong Kong
and Cayman Islands courts will accept or agree with the explanations or conclusions that
are set out below.
Investors should note that the following statements are based on advice received
by the Company regarding taxation laws, regulations and practice in force as at the
Latest Practicable Date, which may be subject to change.
Profits Tax
The Company will be subject to Hong Kong profits tax in respect of profits
arising in or derived from Hong Kong at the current rate of 16.5%, unless such
profits are chargeable under the half-rate of 8.25% that may apply for the first HKD2
million of assessable profits for years of assessment beginning on or after 1 April
2018. Dividend income derived by the Company from its subsidiaries will be
excluded from Hong Kong profits tax.
Tax on Dividends
– III-1 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Profits Tax
Hong Kong profits tax will not be payable by any Shareholders (other than
Shareholders carrying on a trade, profession or business in Hong Kong and holding
the Shares for trading purposes) on any capital gains made on the sale or other
disposal of the Shares. Trading gains from the sale of Shares by persons carrying
on a trade, profession or business in Hong Kong where such gains are derived from
or arise in Hong Kong from such trade, profession or business will be chargeable to
Hong Kong income tax rates of 16.5% on corporations and 15.0% on individuals,
unless such gains are chargeable under the respective half-rates of 8.25% and
7.5% that may apply for the first HKD2 million of assessable profits for years of
assessment beginning on or after 1 April 2018. Gains from sales of Shares effected
on the Stock Exchange will be considered by the Hong Kong Inland Revenue
Department to be derived from or arise in Hong Kong. Shareholders should take
advice from their own professional advisers as to their particular tax position.
Stamp Duty
Hong Kong stamp duty will be charged on the sale and purchase of Shares at
the current rate of 0.2% of the consideration for, or (if greater) the value of, the
Shares being sold or purchased, whether or not the sale or purchase is on or off the
Stock Exchange. The Shareholder selling the Shares and the purchaser will each
be liable for one-half of the amount of Hong Kong stamp duty payable upon such
transfer. In addition, a fixed duty of HKD5 is currently payable on any instrument of
transfer of Shares.
Estate Duty
Hong Kong estate duty was abolished effective from 11 February 2006. No
Hong Kong estate duty is payable by Shareholders in relation to the Shares owned
by them upon death.
Pursuant to section 6 of the Tax Concessions Law (2011 Revision) of the Cayman
Islands, the Company has obtained an undertaking from the Governor-in-Cabinet:
(a) that no law which is enacted in the Cayman Islands imposing any tax to be
levied on profits, income, gains or appreciation shall apply to the Company or
its operations; and
(b) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax
shall not be payable on or in respect of the shares, debentures or other
obligations of the Company.
The undertaking for the Company is for a period of twenty years from 12 April 2019.
– III-2 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Stamp Duty
Exchange Control
B. REGULATORY OVERVIEW
The following is a brief summary of the laws and regulations in the PRC, Australia
and South Korea that currently may materially affect the Group and its operations. The
principal objective of this summary is to provide potential investors with an overview of
the key laws and regulations applicable to the Group.
This summary does not purport to be a comprehensive description of all the laws
and regulations applicable to the business and operations of the Group and/or which
may be important to potential investors. Investors should note that the following
summary is based on the laws and regulations in force as at the Latest Practicable Date,
which may be subject to change.
THE PRC
According to the PRC Food Safety Law, as amended (the “Food Safety Law”),
adopted by Standing Committee of the National People’s Congress (the “NPCSC”)
and the Food Production Licensing Measures, no entity or individual may
manufacture food products without obtaining a food production license.
The Food and Drug Administration Authorities (the State Administration for
Market Regulation, collectively, with its predecessor authorities, the “SAMR”) are
responsible for the centralized administration of food production licenses, and its
local counterparts are responsible for the administration of production license for
food within their own jurisdictions and the imposition of penalties for violations of
the relevant regulatory requirements.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
The Food Safety Law, as amended, and the Regulations for the
Implementation of the Food Safety Law of the PRC, as amended (the
“Implementation Rules on the Food Safety Law”), impose general and specific
legal requirements with respect to foods, food additives, food related products and
other specific food products. Licenses are required not only for food production but
also for other food related operations. In general, whoever intends to engage in
food production, food distribution and catering services must obtain a license under
the Food Safety Law. A production license is also required to produce packaging
materials that come in direct contact with food and certain other “high-risk”
food-related products pursuant to state oversight of the production of industrial
products.
In addition, the Food Safety Law also extends its regulatory scope to food
storage and transportation as well as stipulates new requirements in respect of food
catering service providers. Pursuant to the Food Safety Law, containers, tools and
facilities used for food storage, transportation and loading/unloading must (i) be
safe and harmless, (ii) be kept clean to prevent any food from contamination and (iii)
meet any special requirements (in respect of temperature, humidity, etc.)
necessary for maintaining food safety. Food must be stored and transported
separately from any poisonous or hazardous materials. Food producers are
required to establish and implement certain control standards on food
transportation and delivery. In addition, the Food Safety Law mandates that an
online food trader must register its real name on the platform and clearly set forth
the trader’s responsibilities and the platform provider’s examination duties.
Under the Food Safety Law and its Implementation Rules, food producers and
business operators are required to establish and implement an employee health
examination system and health record system. Persons suffering from the diseases
that impede food safety must not engage in work in contact with ready-to-eat food.
Personnel of food producers and business operators must undergo an annual
health check and may undertake duties only upon obtaining health certificates.
Under the Food Safety Law and its Implementation Rules, food producers are
required to examine the relevant licenses and eligibility certification documents of
their suppliers when purchasing food ingredients, food additives and food-related
products. If the relevant eligibility certification documents are unavailable, these
items must be inspected by the purchaser in accordance with food safety
standards. These items may not be procured or used if they do not meet the food
safety standards. Food production enterprises are required to establish a record
system for the inspection of these items, and record information, including the
names, specifications, quantities, production date or batch number, shelf life and
purchase date, names, address and contact information of suppliers, and dates of
purchase of these items.
Food production enterprises are also required to establish a record system for
the inspection of foods exiting the factory, check the inspection certificate and
safety status of foods exiting the factory, and record information, including the
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
In accordance with the food recall system under the Food Safety Law and its
Implementation Rules, if a food producer or seller finds that food it has produced or
sold does not comply with relevant food safety standards, it must immediately
cease the production or sale of the food and notify the relevant producers, sellers
and consumers, recall the foods where necessary, and report the relevant
information to the local branch of the CFDA at or above the county level. If the food
producer or seller fails to recall the unsafe foods or cease production or sale of such
unsafe foods, the local branch of the CFDA (and SAMR) may order them to recall
the foods or cease the relevant business operation. A food producer or seller must
record the name, trademark, specifications, production date, production batches,
quantity and other information concerning the unsafe product that is recalled and
disposed of and keep such records for at least two years.
In accordance with the Product Quality Law of the PRC, as amended (the
“Product Quality Law”), producers are liable for the quality of the products they
produce. Where anyone produces or sells products that do not comply with the
relevant national or industrial standards and requirements safeguarding the health
and safety of persons and property, the relevant authority will order such person to
suspend production and/or sales, confiscate the products, impose a fine up to three
times of the value of the products, confiscate illegal gains (if any) as well as revoke
the business license of the producer in severe cases.
Responsibilities and obligations of sellers for the products include: (i) to adopt
a check-for-acceptance system for stock replenishment to examine the quality
certificates and other identifications of such stock; (ii) to take measures in
maintaining good quality of the products for sale; (iii) not to sell defective or
deteriorated products or products which have been publicly ordered to cease sales;
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
(iv) to sell products with labels that comply with the Product Quality Law; (v) not to
forge or falsely use product quality marks, such as authentication marks; and (vi)
not to mix impurities or imitations into the products, substitute a fake product for a
genuine one or a defective product for a high-quality one, or pass off a defective
product as a qualified one in the sale of products.
Manufacturers and sellers of defective products in the PRC may incur liability
for losses and injury caused by such products. Under the General Principles of the
Civil Laws of the PRC, as amended, the General Rules of the Civil Law of the PRC
and the Tort Liability Law of the PRC, the manufacturer or retailer of defective
products which cause damage to any property or personal injury shall assume civil
liability pursuant to the law, including but not limited to compensation.
The Food Safety Law has specific provisions regarding the internal
management of food operation business enterprises.
Local licenses for the distribution of alcohol commodities may be required. For
example, pursuant to the Administrative Measures of Shanghai Municipality for
Production and Sales of Alcohol Commodities adopted by the Standing Committee
of Shanghai People’s Congress, local enterprises that engage in alcohol
wholesaling must apply to the municipal wine monopoly bureau for an Alcohol
Wholesale License, while local enterprises who engage in alcohol retailing must
apply to the district (county) wine administrative department for an Alcohol Retail
License.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
Pursuant to the Foreign Trade Law of the PRC, as amended (the “Foreign
Trade Law”), promulgated by the National People’s Congress of the PRC (the
“NPC”) as well as the Measures for the Record-Filing and Registration of Foreign
Trade Operators, as amended, promulgated by the MOFCOM, foreign trade
operators engaged in the import and export of goods must register with the authority
responsible for foreign trade under the State Council or its authorized agencies,
unless the laws, regulations and authority responsible for foreign trade under the
State Council do not so require. Foreign trade operators that have not filed for
registration as required will be declined the to process the declaration, examination
and clearance for import and export of goods by the PRC Customs authority.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
(f) The Law on Import and Export Commodity Inspection and Relevant
Implementation Regulations
According to the Law of the PRC on Import and Export Commodity Inspection,
as amended, promulgated by the NPC and its Implementation Regulations, as
amended, promulgated by the former State Bureau of Import and Export
Commodities Inspection and by the State Council, specified imported and exported
commodities must be inspected by a qualified inspection institution.
On 15 March 2019, the NPC approved the Foreign Investment Law, which will
take effect on 1 January 2020 and replace three existing laws on foreign
investments in China, namely, the PRC Equity Joint Venture Law, the PRC
Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law. The
Foreign Investment Law embodies an expected PRC regulatory trend to rationalize
its foreign investment regulatory regime in line with prevailing international practice
and legislative efforts to unify the corporate legal requirements for both foreign and
domestic invested enterprises in China. The Foreign Investment Law establishes
the basic framework for the access to, and the promotion, protection and
administration of, foreign investments in view of investment protection and fair
competition.
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The main business activities of our Group conducted in the PRC fall into the
permitted industry.
The Decision to Amend Four Laws including the Law of the PRC on Wholly
Foreign-Owned Enterprises issued by the NPCSC (the “Decision”) amended
certain provisions of the Law on Sino-foreign Equity Joint Venture, the Law on
Sino-foreign Cooperative Joint Venture, the Law on Wholly Foreign-owned
Enterprise and the Law on Protection of Taiwanese Investment in Mainland China.
Following the Decision, the MOFCOM published the Interim Measures for Filing
Administration of the Establishment and Change of Foreign-invested Enterprises
(the “Interim Measures”). The MOFCOM and the NDRC further jointly issued a
circular to further clarify the Decision.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
during their operation, such as capital increases, changes of business scope, etc.
will be no longer subject to MOFCOM’s prior approval; instead, they only need to file
such establishment or changes after completing the AIC registration), except for
those foreign-invested enterprises that fall within the “negative list” (i.e., industrial
sectors that cannot benefit from the new filing-based regulatory regime, which
includes industrial sectors under the “prohibited category,” “restricted category”
and those within the “encouraged category” that are subject to shareholding and/or
senior management requirements) under the Catalog.
The Trademark Law of the PRC, as amended (the “Trademark Law”), and the
Implementing Regulations of the Trademark Law of the PRC, as amended, provide
the basic legal framework for the regulation of trademarks in the PRC, covering
registered trademarks, including commodity trademarks, service trademarks,
collective marks and certificate marks. Registered trademarks are protected under
the Trademark Law and related rules and regulations. Trademarks are registered
with the Trademark Office of the National Intellectual Property Administration.
Where registration is sought for a trademark that is identical or similar to another
trademark that has already been registered or given preliminary examination and
approved for use on the same or similar commodities or services, the application for
registration of such trademark may be rejected. Trademark registrations are
effective for a renewable ten-year period, unless otherwise revoked.
Patents in the PRC are mainly protected under the Patent Law of the PRC, as
amended (the “Patent Law”), passed by the NPCSC, and its Implementation Rules,
as amended. An inventor or a designer may apply for the grant of an invention
patent, a utility patent or a design patent. According to the Patent Law, the right to
apply for a patent (a patent application) and the right of registered patent can be
transferred upon completion of registration with the authority. The patent right
duration is 20 years for invention and 10 years for utility and design, counted from
the date of filing.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
The principal law governing foreign currency exchange in the PRC is the
Regulations of the PRC on Foreign Exchange Administration, as amended (the “Forex
Regulations”). According to the Forex Regulations currently in effect, international
payments in foreign currencies and transfers of foreign currencies under current
account, such as payments of dividends or interests, shall not be restricted. Foreign
currency transactions under the capital account, such as direct investment and capital
contributions, are still subject to restrictions and require approvals from, or registration
with, the SAFE and other relevant PRC governmental authorities.
Such capital shall not be directly or indirectly used for the payment beyond the
business scope of the enterprise or as prohibited by laws and regulations. Unless
otherwise permitted by laws or regulations, the domestic enterprise shall not, directly or
indirectly, use such capital for investment in securities or other investment than
principal-guaranteed products issued by banks; nor may any such capital be used for
granting loans to non-connected enterprises (unless it is permitted by the business
scope) or the construction or purchase of real estate that is not for self-use (except for
real estate enterprises).
Under PRC laws and regulations, PRC companies, including WFOEs and
EJVs, may distribute dividends only out of their accumulated profits, if any,
determined in accordance with PRC accounting principles. In addition, PRC
companies, including domestic companies, WFOEs and EJVs, are required to set
aside each year at least 10% of their after-tax profits based on PRC accounting
principles to their statutory general reserves funds until the cumulative amount of
such reserve funds reach 50% of their registered capital. These reserves are not
distributable as cash dividends. EJVs may elect to set aside separate funds for
employee welfare, bonuses and development, and WFOEs may elect to set aside
funds for employee welfare and bonuses, at the discretion of such PRC companies
and as stipulated in their articles of association. Such reserves or funds are not
distributable as dividends.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
When the lawful rights and interests of an operator are damaged by the acts of
unfair competition, it may institute proceedings in a people’s court. In comparison,
where an operator commits unfair competition in contravention of the provisions of
the Anti-Unfair Competition Law and causes damage to another operator, it will be
responsible for compensating for the damages. Where the losses suffered by the
injured operator are difficult to calculate, the amount of damages will be the profit
gained by the infringer through the infringing act. If an operator seriously infringes
a trade secret in bad faith, the amount of compensation the operator will undertake
will be up to not more than five times the amount of such damages. The infringer will
also bear all reasonable costs paid by the injured operator to prevent the
infringement.
Pursuant to the Pricing Law of the PRC (the “Price Law”), the operators must,
in determining prices, abide by the principles of fairness, being in conformity with
law, honesty and credibility. Production and management costs and market supply
and demand factors must be the fundamental basis for the determination of prices
by operators.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
– III-13 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
After the construction project has been completed, the constructing unit must
apply to the department responsible for environmental protection that originally
examined and approved the environmental impact statement, environmental
impact report or environmental impact registration form relating to the said
construction project, for examination and acceptance of the environmental
protection facilities used in the construction project. Facilities for the prevention and
treatment of environmental pollution required to be constructed together with a
construction project based on the environmental impact assessment must be
designed, constructed and put into use simultaneously with the main project.
The PRC Water Law, as amended, provides that the direct usage of water from
natural sources such as rivers, lakes or underground water is subject to a water
usage permit system. The usage of such water is conditional upon the application
and grant of a Water Intake Permit from the relevant water administration
authorities and payment of the relevant water resource fees.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
Pursuant to the Law of the PRC on Special Equipment Safety and the
Regulations on Safety Supervision of Special Equipment, as amended, special
equipment user entities must, within 30 days before or after the equipment is put
into use, go through registration with authorities in charge of special equipment
safety and obtain use registration certificates. Registration marks must be
displayed at prominent positions of special equipment. Special equipment user
entities must conduct day-to-day maintenance and regular self-inspection and keep
records thereof. In addition, special equipment user entities must, in accordance
with safety technical specifications and one month prior to expiry of inspection
validity, make a request for regular inspection to the special equipment inspection
institution.
The Fire Prevention Law of the PRC, as amended, provides that the fire
prevention units of public security departments are responsible for the
implementation of laws and regulations to monitor and administer fire prevention
affairs. The Fire Prevention Law provides that the fire prevention design or
construction of a construction project must conform to the national fire prevention
technical standards. For a construction project that needs fire prevention design
under the national fire protection technical standards for project construction, the
construction entity must submit the fire prevention design documents to the fire
prevention department of the public security authority for approval or filing (as the
case may be). No construction permit will be given for a construction project for
which the fire prevention design has not been approved or has been considered
unqualified after examination, nor shall the construction entity commence such
construction project.
The fire and rescue departments at the corresponding levels are responsible
for implementation of such laws and regulations. Under the new fire protection
design review and final inspection system for construction projects, for a
construction project that needs fire prevention design, the construction entity must
submit the fire prevention design documents to Ministry of Housing and
– III-15 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
In addition, wages may not be lower than local standards on minimum wages
and must be paid to the employees timely. According to the Labor Law of the PRC,
as amended, enterprises and institutions must establish and perfect a system of
work place safety and sanitation, strictly abide by national rules and standards on
work place safety and sanitation and educate employees on work place safety and
sanitation. Work place safety and sanitation facilities must comply with national
standards. The enterprises and institutions must provide employees with a safe
work place and sanitation conditions that are in compliance with national standards
and relevant labor protection regulations.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
The Law of the PRC on Enterprise Income Tax, as amended (the “EIT Law”),
and its Implementation Regulations (the “EIT Rules”) classify enterprises as
resident enterprises and non-resident enterprises. PRC resident enterprises
typically pay an enterprise income tax at the rate of 25%. An enterprise
incorporated outside the PRC with its “de facto management bodies” located within
the PRC is considered a “resident enterprise,” meaning that it will be treated in a
manner similar to a PRC domestic enterprise for enterprise income tax purposes.
The Implementation Rules of the EIT Law define de facto management body as a
managing body that in practice exercises “substantial and overall management and
control over the production and operations, personnel, accounting and properties”
of the enterprise. Circular 82 provides further elaborations on that.
Pursuant to the EIT Law and the EIT Rules, non-resident enterprises that do
not have an establishment or place of business in China, or which have such
establishment or place of business but the relevant income is not effectively
connected with the establishment or place of business in China, would typically pay
an enterprise income tax of 10% for their income sourced from inside China. Such
income includes dividends and gains from China.
Pursuant to the the applicable tax treaties signed between China and the other
countries/regions where non-resident enterprises are tax residents, these
non-resident enterprises could be subject to a lower enterprise income tax rate
(generally 5% if provided for in the tax treaties) on dividends from China. However,
these non-resident enterprises need to meet the conditions specified in (1) the
applicable tax treaties and (2) Notice of the State Administration of Taxation
(“SAT”) on Issues Relating to the Implementation of Dividend Clauses in Tax
Treaties (“Circular 81”). They also need to pass the beneficial ownership test in
Announcement of the SAT on Issues Relating to “Beneficial Owner” in Tax Treaties
(“Circular 9”) and list several factors to consider including without limitation,
whether the applicant for the tax treaty benefits is obligated to pay more than 50%
of its income in twelve months to residents in a third country.
– III-17 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
transfers. Under Circular 7, the PRC tax authorities are entitled to reclassify the
nature of an indirect transfer of PRC taxable assets by a non-resident enterprise if
there is no reasonable commercial purpose for the non-resident enterprise to
dispose equity interest in an overseas holding company which directly or indirectly
holds such PRC taxable assets. Under such circumstances, the PRC tax authorities
could disregard the existence of such intermedia overseas holding company and
consider the transaction to be the non-resident enterprise’s direct transfer of PRC
taxable assets subject to EIT Law and the EIT Rules. Circular 7 provides relevant
factors to consider when assessing what constitutes reasonable commercial
purpose.
– 80% or more of the equity interest of both the transferor and the
transferee are directly or indirectly held by the same party.
Where more than 50% (not including 50%) of the value of the overseas
enterprise is directly or indirectly derived from immovable properties located in
China, the shareholding relationship shall be 100%.
(2) The current indirect transfer would not result in a reduction of the CIT
burden with respect to gains arising from subsequent indirect transfers;
and
(3) The deal consideration of the transfer is entirely settled in the form of
equity (not including the equity of listed enterprises) of the transferee or
its subsidiaries.
Also, the Circular on the Source of Deduction of Income Tax for Non-resident
Enterprises as amended (“Tax Circular 37”), which further clarifies the practice and
procedure of withholding EIT from or payment of EIT by a non-resident enterprise in
such circumstances and defines how the capital gain of a non-resident enterprise
should be calculated.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
The Interim Regulations of the PRC on Value-added Tax, as amended and the
Implementation Rules for the Interim Regulations of the PRC on Value-added Tax,
as amended provide that all enterprises and individuals that engage in the sale of
goods, the provision of processing, repair and replacement services and the import
of goods within the territory of the PRC must pay value-added tax (“VAT”). Standard
VAT rates for general VAT payers are 17%, 13%, 11% and 6%, respectively,
depending on the nature of the goods and services before 1 May 2018. From 1 May
2018, Notice of the Ministry of Finance and the State Administration of Taxation on
the Adjustment to VAT Rates (“Tax Circular 32”) reduced the applicable VAT rates
for general VAT taxpayers to 16%, 10% and 6%, respectively. Announcement on
Policies for Deepening the VAT Reform (“Tax Circular 39”) effectuates on 1 April
2019 further reduced the applicable VAT rates for general VAT taxpayers to 13%,
9% and 6%, respectively.
– III-19 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
AUSTRALIA
Foreign investment proposals that meet certain specified thresholds are called
“Significant Actions”. Some Significant Actions must be notified to the Treasurer,
where failure to notify is an offence under the Australian FI Laws. Other Significant
Actions do not have to be notified, however doing so and obtaining a statement
results in the Treasurer not having the power to prohibit the investment.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
If FIRB approval for the acquisition of an interest is required, but not obtained,
the Treasurer, amongst other things, may:
• prohibit or defer the payment of any sums due in respect of the acquired
interest.
2. Liquor Laws
Each jurisdiction has its own application processes and requirements for liquor
licenses. In summary, in order to acquire any form of liquor license:
– III-21 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
We must hold the appropriate licenses in order to produce liquor in each state
and territory in Australia. A loss of such licenses, or the imposition of onerous
conditions in respect of them, could materially affect our operations in Australia.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
These standards are enforced by the Australian states and territories and, in
New Zealand, by the Ministry for Primary Industries.
In addition to the labelling requirements set out in the Food Standards Code,
the Commerce (Trade Descriptions) Act 1905 and the Commerce (Trade
Descriptions) Regulation 2016 set out which goods or classes of goods require
labelling when being imported into Australia, what label is required and where the
label must be applied.
• include the name of the country where the goods were made or produced;
– III-23 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Food Standards Australia New Zealand coordinates and monitors food recalls
in Australia and the Minister for Primary Industries monitors them in New Zealand.
However, Food Standards Australia New Zealand does not have enforcement
powers and cannot order or force a recall. These powers rest with each state or
territory jurisdiction.
4. Competition Laws
(a) Overview
Legislation
The Competition and Consumer Act 2010 (Cth) (the “CCA”) is the key
statute governing competition law and consumer protection across Australia.
– III-24 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Regulators
One of the main sections of the CCA is the Australian Consumer Law (the
“ACL”), Australia’s uniform consumer protection legislation. The ACL applies to
business conduct, including communications by businesses in trade or commerce.
It is unlawful for a business to:
• engage in conduct that is liable to mislead the public as to the nature, the
manufacturing process, the characteristics, the suitability for their
purpose or the quantity of any goods or services; or
We must comply with the CCA and in particular the ACL when conducting our
business to ensure no adverse action is taken against us by the ACCC.
– III-25 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
5. Customs Requirements
(a) Overview
Customs requirements include (but are not limited to) permits, duties and tax,
licenses, labelling requirements, fees, and quarantine.
Imports
Exports
– III-26 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Planning controls
Planning approvals
Under the various state and territory planning laws, many land uses and
developments will need to obtain planning approvals. Approvals are most
often granted by the local council, and for some larger projects, approvals can
be granted by the state government or independent planning bodies. The
planning approvals can be very detailed and include conditions that regulate,
among other matters, the built form, hours of operations, environmental
impacts and payment of development contributions.
Environmental laws
– III-27 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Environmental licenses
A typical license for a brewing company may include conditions for the
management of waste, discharges to air and water, pollution of waters, dust
control and noise control. These conditions will depend on the activities and
impact on the environment of the premises. For example, a condition for dust
control may apply in suburban premises, but not to regional premises where
dust will not have an adverse impact on the surrounding environment. We must
maintain the relevant environmental licenses in order to continue
manufacturing our products.
(c) Contamination
(a) Overview
The following is a brief summary of the work health and safety (the “WHS”),
employment and industrial relations laws and regulations which apply in Australia.
The Australian operations of the Company must comply with these various laws.
Each state and territory in Australia has extensive legislation dealing with
WHS issues. That legislation is consistent across all states except Victoria and
Western Australia. In Victoria and Western Australia, earlier occupational health
and safety laws still apply, although the basic principles of the legislation in these
states are similar.
– III-28 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
The model WHS laws impose various duties on persons conducting a business
or undertaking, officers, workers and other persons who visit the workplace.
Significant penalties, including prison sentences, can apply for breach of those
duties and it is important that employers and officers are aware of their obligations
and take the necessary steps to comply with those obligations.
• the Occupational Health and Safety Act 2004 (Vic) (the “VIC OHS Act”);
and
• the Occupational Health and Safety Regulations 2017 (Vic) (the “VIC
OHS Regs”).
The VIC OHS Act sets out the legal responsibilities and duties of employers
and employees in Victoria in respect of reducing WHS risks in the workplace, while
the VIC OHS Regs set out the applicable processes required to satisfy these
obligations (for example, requirements for training for high risk work and licenses
for certain activities).
Federal legislation
• the Fair Work Act 2009 (Cth) (the “FW Act”); and
The FW Act and the FW Regs operate on a federal level across all states
and territories.
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APPENDIX III TAXATION AND REGULATORY OVERVIEW
Common law
Modern Awards
Enterprise Agreements
– III-30 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
8. Real Property
Each state and territory has its own public register of land title for Torrens title land.
Generally, the register comprises titles and dealings (such as a lease, transfer,
easement, etc.), together with various prescribed instruments and records which the
regulations require to be kept. In most jurisdictions, the types of dealings and
instruments recorded by the various public registers are substantially similar, although
there are many procedural differences.
Leases/tenancies in Australia
Lease terms and conditions in Australia are subject to market conditions and
practice and there are also terms implied by legislation and common law. In
particular, there is a large body of retail tenancy legislation which has developed
over the last 25 years to protect retail tenants. Generally the parties cannot contract
out of such retail legislation. However, the leasing of commercial and industrial
property is less regulated.
The leasing practice differs in the various states and territories in relation to
registration. Generally speaking, short term leases to tenants in possession do not
need to be registered to grant an indefeasible leasehold title to the tenant. In all
jurisdictions (except Victoria), registration of a lease (other than a short term lease)
is required to obtain indefeasible leasehold title. In Victoria, a lease to a tenant who
is in possession grants an indefeasible leasehold title to the tenant regardless of the
term. As a result, leases are rarely registered in Victoria.
9. Intellectual Property
In Australia, intellectual property rights are protected by federal legislation and the
common law. Australia is also a signatory to the World Trade Organization Agreement on
Trade-related aspects of Intellectual Property Rights (TRIPS) which sets minimum
standards for intellectual property protection and enforcement.
– III-31 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
The Trade Marks Act 1995 (Cth) enables any owner to register a mark or sign
used in connection with their goods or services. Trade marks can be obtained for
names, logos, aspects of packaging, shapes, colors, sounds and scents.
The owner of a registered trade mark has the exclusive right to use, and
authorize others to use, the trade mark for 10 years. Trade marks can then be
renewed for potentially indefinite periods of 10 years.
Unregistered trademarks are protected by the tort of passing off and the
misleading and deceptive conduct provisions of the Competition and Consumer Act
2010 (Cth) (the “CCA”).
Trade mark rights can be enforced in Courts. Remedies available to the rights’
owners include declarations, injunctions, damages (including additional/punitive
damages) or an account of profits.
(b) Patents
– III-32 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
(c) Copyright
The Copyright Act 1968 (Cth) (the “Copyright Act”) protects all original literary
works, dramatic works, musical works, artistic works, sound recordings and films
broadcast or published by an Australian or first published in Australia.
Under the Copyright Act, copyright protection is automatic and does not
require registration. Literary, dramatic, musical and artistic works are protected for
the life of the author plus 70 years. If the works are published after the death of the
author, they are protected for 70 years after first publication. As of early 2019, works
by unknown authors are protected for 70 years from first publication, or 70 years
from creation if they have not been made public.
(d) Designs
The Designs Act 2003 (Cth) (the “Designs Act”) enables the owner of a “new
and distinctive” design to apply for the exclusive right to use or authorize the use of
the design through a registration system.
“New and distinctive” essentially means that a design must look different to the
eye when compared with other products available on the market and that it must not
be publicly disclosed or advertised before an application is filed, except at an
internationally recognized industry exhibition.
The Designs Act protects the visual appearance (not the function) of the
design for up to 10 years.
Australia is also a party to the Paris Convention, which can be relied upon
when applying for design registration overseas. Under this Convention, the filing
date of an Australian design application can usually be used to establish priority for
corresponding design applications made overseas if done within six months of filing
the Australian application.
Designs can be registered relatively quickly, because they are not examined
before they are granted, only a formalities check is carried out by IP Australia.
However, to enforce a design, it must be examined and certified. The design
applicant, or any third party, may request examination of the design.
There is no unregistered design right in Australia and designs that should have
been registered under the Designs Act will be denied copyright protection. The
Australian courts have held that only very limited protection of designs is available
under our equivalent of unfair competition laws.
– III-33 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Business names are not intellectual property, and they do not grant they
holders any exclusive rights to use that particular name. ASIC does not carry out
any checks as to whether a particular business name is identical with, or
deceptively similar to, registered or pending trade marks in Australia.
10. Anti-Bribery/Corruption
The key federal and state legislative provisions prohibiting bribery and
corruption are as follows.
Section 70.2 of the Criminal Code contains the offence of bribing a foreign
public official. A person (including a company) commits an offence if:
Under the offence, it is not necessary for either the bribe to have been
actually given or any business advantage to have resulted.
– III-34 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Each state and territory has offences for private commercial bribery. For
example, in New South Wales, Part 4A of the Crimes Act 1900 (the “NSW”)
prohibits the corrupt giving, receipt, or solicitation of a benefit as an
inducement or reward for an act or omission in relation to a business. In
Victoria, a person commits an offence if they corruptly give or offer an agent an
inducement or reward for doing or not doing something in relation to the affairs
of the agent’s principal.
The Australian Federal Policy has the primary law enforcement responsibility
in the bribery and corruption of federal or foreign public officials. State and territory
police, and specific state-based corruption commissions, deal with the bribery and
corruption of state/territory public officials and in private business. Independent
prosecutorial agencies, such as the Commonwealth Director of Public
Prosecutions, are chiefly responsible for prosecuting bribery and corruption
offences.
(c) Penalties
There are significant criminal penalties for bribery offences under federal and
state legislation, which generally include monetary fines and/or prison sentences.
– III-35 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
• Maximum corporate penalties for the same offence are the greater of:
11. Taxation
The following taxes are applicable to the subsidiaries of the Company that are
Australian resident companies or which have a permanent establishment in Australia.
Companies that are tax resident in Australia are subject to Australian income
tax on their worldwide income. Companies that do not reside in Australia are
generally subject to Australian income tax only on income sourced in Australia.
However, a company that is a tax resident of a country that has a tax treaty with
Australia should generally only be taxed on income attributable to a permanent
establishment of that company in Australia.
The Australian corporate income tax rate is presently 30% (that is, for the
2019-20 income year) for companies that have an aggregated turnover (which
includes the turnover of connected and affiliated entities) of greater than AUD50m.
Tax losses incurred by a company may be carried forward and used to offset
future year income, subject to the company satisfying a number of integrity rules,
including a continuity of ownership test or a business continuity test.
As with other types of taxpayers, the net capital gains derived by a company
form part of that company’s assessable income. The corporate tax rate is applied to
the company’s taxable (or net) income.
– III-36 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
A company’s net capital gains must be determined with reference to the CGT
provisions. The CGT provisions apply to gains and losses arising from designated
CGT events, which include disposals of assets, creating contractual rights, granting
leases and certain events arising in the context of the tax consolidation regime.
• include GST in the price they charge for their goods and services; and
• be entitled to claim credits for the GST included in the price of the goods
and services that they acquire for their business, but there may be
restrictions for acquisitions that relate to the making of input taxed
supplies, for example financial services.
Companies within a 90% owned group can elect to form a GST group, in which
case, transactions between the GST group members are ignored and the
representative member is responsible for filing the group’s GST returns and
meeting other compliance obligations.
The current excise rate for beer (as at 1 July 2019) ranges from approximately
AUD3 per liter of alcohol (for beer not exceeding 3% by volume of alcohol produced
for non-commercial purposes using commercial facilities or equipment) to
approximately AUD50 per liter of alcohol (for Beer exceeding 3.5% by volume of
– III-37 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Excise legislation also imposes licensing and other controls upon the
manufacture, storage and movement of excisable alcohol products.
As indicated in Appendix III, 5(a), customs duties apply to certain imports into
Australia, subject to any free trade agreements.
FBT is currently charged at a flat rate of 47% after adjusting the taxable value
of the fringe benefits for GST.
– III-38 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Payroll tax is a tax paid on wages (and deemed wages) paid or payable by an
employer to its employees (and certain contractors) when those wages exceed a
specified threshold amount. Payroll taxes in Australia are levied by each state and
territory. The rates of payroll tax levied varies between each state and territory up
to a current maximum rate in the Australian Capital Territory of 6.85%.
– III-39 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
SOUTH KOREA
As a general matter, our South Korean subsidiary is subject to rules and regulations
applicable to corporations established under the South Korean Commercial Code. Our
South Korean subsidiary’s business operations are also regulated by a number of other
South Korean laws and regulations, including in particular those described below.
In order for our South Korean subsidiary to engage in the business of manufacturing
and distributing liquor products in South Korea, our South Korean subsidiary is required
to obtain a liquor license from its district tax office under the Liquor Tax Act (the “LTA”),
which regulates issuance, revocation and withdrawal of such liquor licenses. The
National Tax Service (the “NTS”) and regional and district tax offices enforces the LTA
primarily based on the Guidelines of the NTS issued under the LTA (the “NTS
Guidelines”) which sets forth detailed guidelines on the rules under the LTA. In
particular, NTS is authorized to revoke or suspend our South Korean subsidiary’s liquor
license, restrict the volume of our South Korean subsidiary’s liquor products which may
be distributed in the market, deny our South Korean subsidiary’s corporate tax deduction
or impose an administrative fine of up to KRW20 million if our South Korean subsidiary
is found to have violated LTA or NTS Guidelines. Moreover, if any employee or officer of
our South Korean subsidiary is found to have participated in an action in violation of LTA,
such employee or officer may be subject to a criminal sanction under the Punishment of
Tax Offenses Act, in which case our South Korean subsidiary may also become
vicariously liable for such violation.
The Food Sanitation Act (the “FSA”) generally regulates the business of
manufacturing, selling and importing of food products in South Korea. As liquor products
are classified as food products for the purpose of the FSA, our South Korean subsidiary
is subject to the FSA, which requires our South Korean subsidiary to file a business
report, which identifies certain general information of its business such as the name of
the company and head office address, and a report of any material change to such
information, with the Ministry of Food and Drug Safety (the “MFDS”).
In connection with its marketing and advertisement activities, our South Korean
subsidiary is prohibited from, among others, excessively glamorizing consumption of
liquor products, broadcasting songs designed to promote the sale of its liquor products
and advertising liquor products with alcohol percentage of 17 degree or higher through
television commercials under the National Health Protection Act (the “NHPA”), which is
regulated and enforced by the Ministry of Health and Welfare.
Our South Korean subsidiary is subject to the following laws and regulations in
connection with its production of liquor products which are enforced and regulated
by the Food Safety Policy Bureau of the MFDS:
• the FSA, which regulates sanitation of, among others, food, food
additives and containers, packaging, labelling and advertisements of
such products;
• the Special Act on Imported Food Safety Control, which regulates safety
and quality of imported food products including those relating to
requirements to be complied with importation, sale, clearance and
distribution of such products; and
– III-40 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
• the Framework Act on Food Safety, which provides for the authorities of
different governmental bodies for supervising and regulating food safety.
Our South Korean subsidiary’s distribution and sale of liquor products are
mainly regulated by the NTS Guidelines as follows:
• Our South Korean subsidiary is restricted under the NTS Guidelines from
engaging in certain activities which would disrupt the liquor trading
market such as, among others, provision of rewards or incentives for
supply of liquor products, manipulation of tax or sales receipts to promote
liquor product sales and provision of gifts or rewards in the value of
certain threshold or unauthorized free drinks to consumers;
• Under the NTS Guidelines, our South Korean subsidiary is required to (i)
specify on the label of its liquor products certain information such as their
serial number, volume and production date, (ii) report to the NTS of the
factory price of its liquor products, (iii) report to the NTS of any change to
the factory price of any of its liquor products which was previously
reported to the NTS and (iv) comply with certain requirements in respect
of its liquor manufacturing facilities and containers;
• Our South Korean subsidiary is prohibited under the NTS Guidelines from
selling its liquor products through internet or telemarketing; and
The Foreign Investment Promotion Law of South Korea (the “FIPL”) primarily
regulates a foreigner’s direct investment in South Korean companies. A foreign investor
must report such acquisition of shares in advance to, and receive an acknowledgment
thereof from, a foreign exchange bank as designated by the Ministry of Trade, Industry
and Energy (the “MOTIE”), or the South Korea Trade Investment Promotion Agency, if
such foreign investor (i) acquires 10% or more of the voting share capital of a South
Korean company (whether listed or unlisted) or (ii) participates in the management of a
South Korean company (which is generally evidenced by the appointment of one or more
directors of the company), even though its ownership ratio is less than 10%. Subsequent
acquisition is subject to the same filing requirement as the initial acquisition. A South
Korean corporation into which a foreign investor makes direct investment must be
registered as a foreign invested enterprise with MOTIE or the South Korea Trade
Investment Promotion Agency.
– III-41 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Under the Labor Standards Act of Korea (the “LSA”), a basic framework to govern
employee related matters, an employer is required to compensate employees for
overtime, night-time and days off at the rate of 150% of the employee’s hourly ordinary
wage. Under the LSA, an employee is entitled to 15 days of paid annual leave (subject
to the minimum attendance requirement). An employee who has been employed for
more than three consecutive years is entitled to one additional day of paid annual leave
every two years up to a maximum of 25 days. An employer must compensate the
employees for any and/or all unused annual leave at the rate of 100% of the ordinary
wage unless such employer takes certain measures to promote employees to use their
annual leave.
– III-42 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
As a relief from double taxation, the South Korean tax law allows certain
exclusions from taxable income, so called Dividend Received Deduction (the
“DRD”), in connection with dividends received by a South Korean parent company
(not limited to qualified holding companies under the Monopoly Regulation and Fair
Trade Act of South Korea) from its South Korean subsidiaries. The exclusion rates
vary depending on the South Korean parent company’s ownership ratio in the South
Korean subsidiary distributing the dividends. If the South Korean parent company
owns 100% interest in its subsidiary, the entire amount of dividends received by the
South Korean parent company will be excluded from the taxable income of the
South Korean parent company. Please note, however, that the amount of DRD
would be reduced in accordance with the formula prescribed in the South Korean
tax law, if the South Korean parent company has certain borrowings.
The South Korean tax law introduced the consolidated tax return regime
towards the end of 2008. Under the consolidated tax return regime, effective for
fiscal years beginning on or after 1 January 2010, a holding company in South
Korea is allowed to elect to file its tax return on a consolidated basis with its South
Korean subsidiaries. Only those South Korean subsidiaries which are wholly
(100%) owned are eligible for the consolidated tax return election. Being an internal
transaction, distribution of dividends by such South Korean subsidiaries to the
holding company would not be recognized as income on the consolidated tax
return.
Interest, dividends, royalty, capital gains and other income paid to a foreign
corporation by a South Korean corporation require taxes to be withheld by the
South Korean corporation. Withholding tax reports are required to be filed on
monthly basis by the 10th day of the month following the month in which the income
is paid. Interest (except for interest exempt under the South Korean tax law) and
dividend paid to a foreign corporation are generally subject to 22% withholding tax
(including local income tax), unless exempt or reduced under an applicable tax
treaty. When a foreign corporate investor without a permanent establishment in
South Korea earns income by way of selling or otherwise disposing of securities
issued by a South Korean corporation, the buyer must withhold 11% (including local
income tax) of the sales proceeds or 22% (including local income tax) of capital
gains, whichever is lower, unless exempt under an applicable tax treaty.
– III-43 –
APPENDIX III TAXATION AND REGULATORY OVERVIEW
Special tax measures are provided for in the Tax Incentives and Limitation Law
for certain fiscal policy purposes. They include provisions for nontaxable income,
tax credit, income deductions, tax exemptions, and tax refunds for public
corporations, small enterprises, defense industries and overseas businesses. For
example, interest paid on foreign currency denominated bonds issued by a South
Korean corporation to a foreign company, subject to certain other conditions, is
exempt from South Korean withholding tax.
– III-44 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
Set out below is a summary of certain provisions of the Memorandum and Articles
of Association of the Company and of certain aspects of Cayman company law.
1. MEMORANDUM OF ASSOCIATION
(a) The Memorandum states, inter alia, that the liability of members of the Company is
limited to the amount, if any, for the time being unpaid on the shares respectively
held by them and that the objects for which the Company is established are
unrestricted (including acting as an investment company), and that the Company
shall have and be capable of exercising all the functions of a natural person of full
capacity irrespective of any question of corporate benefit, as provided in section
27(2) of the Cayman Companies Law and in view of the fact that the Company is an
exempted company that the Company will not trade in the Cayman Islands with any
person, firm or corporation except in furtherance of the business of the Company
carried on outside the Cayman Islands.
(b) The Company may by special resolution alter its Memorandum with respect to any
objects, powers or other matters specified therein.
2. ARTICLES OF ASSOCIATION
The Articles were conditionally adopted on 2 July 2019 with effect from the Listing
Date. The following is a summary of certain provisions of the Articles:
(a) Shares
Classes of shares
Subject to the Cayman Companies Law, if at any time the share capital of the
Company is divided into different classes of shares, all or any of the special rights
attached to the shares or any class of shares may (unless otherwise provided for by
the terms of issue of that class) be varied, modified or abrogated either with the
consent in writing of the holders of not less than three-fourths in nominal value of
the issued shares of that class or with the sanction of a special resolution passed at
a separate general meeting of the holders of the shares of that class. To every such
separate general meeting the provisions of the Articles relating to general meetings
will mutatis mutandis apply, but so that the necessary quorum (other than at an
adjourned meeting) shall be two persons holding or representing by proxy not less
– IV-1 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
than one-third in nominal value of the issued shares of that class and at any
adjourned meeting two holders present in person or by proxy (whatever the number
of shares held by them) shall be a quorum. Every holder of shares of the class shall
be entitled to one vote for every such share held by him.
Any special rights conferred upon the holders of any shares or class of shares
shall not, unless otherwise expressly provided in the rights attaching to the terms of
issue of such shares, be deemed to be varied by the creation or issue of further
shares ranking pari passu therewith.
Alteration of capital
• consolidate all or any of its capital into shares of larger amount than its
existing shares;
• divide its shares into several classes and attach to such shares any
preferential, deferred, qualified or special rights, privileges, conditions or
restrictions as the Company in general meeting or as the directors may
determine;
• subdivide its shares or any of them into shares of smaller amount than is
fixed by the Memorandum; or
• cancel any shares which, at the date of passing of the resolution, have not
been taken and diminish the amount of its capital by the amount of the
shares so cancelled.
The Company may reduce its share capital or any capital redemption reserve
or other undistributable reserve in any way by special resolution.
Transfer of shares
Notwithstanding the foregoing, for so long as any shares are listed on the
Stock Exchange, titles to such listed shares may be evidenced and transferred in
accordance with the laws applicable to and the rules and regulations of the Stock
Exchange that are or shall be applicable to such listed shares. The register of
members in respect of its listed shares (whether the principal register or a branch
register) may be kept by recording the particulars required by Section 40 of the
Cayman Companies Law in a form otherwise than legible if such recording
otherwise complies with the laws applicable to and the rules and regulations of the
Stock Exchange that are or shall be applicable to such listed shares.
– IV-2 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The board may, in its absolute discretion, at any time transfer any share upon
the principal register to any branch register or any share on any branch register to
the principal register or any other branch register.
The board may decline to recognize any instrument of transfer unless a fee
(not exceeding the maximum sum as the Stock Exchange may determine to be
payable) determined by the Directors is paid to the Company, the instrument of
transfer is properly stamped (if applicable), it is in respect of only one class of share
and is lodged at the relevant registration office or registered office or such other
place at which the principal register is kept accompanied by the relevant share
certificate(s) and such other evidence as the board may reasonably require to show
the right of the transferor to make the transfer (and if the instrument of transfer is
executed by some other person on his behalf, the authority of that person so to do).
Subject to the above, fully paid shares are free from any restriction on transfer
and free of all liens in favor of the Company.
The Company is empowered by the Cayman Companies Law and the Articles
to purchase its own shares subject to certain restrictions and the board may only
exercise this power on behalf of the Company subject to any applicable
requirements imposed from time to time by the Stock Exchange.
The board may accept the surrender for no consideration of any fully paid
share.
– IV-3 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The board may from time to time make such calls upon the members in respect
of any monies unpaid on the shares held by them respectively (whether on account
of the nominal value of the shares or by way of premium). A call may be made
payable either in one lump sum or by installments. If the sum payable in respect of
any call or instalment is not paid on or before the day appointed for payment
thereof, the person or persons from whom the sum is due shall pay interest on the
same at such rate not exceeding twenty per cent. (20%) per annum as the board
may agree to accept from the day appointed for the payment thereof to the time of
actual payment, but the board may waive payment of such interest wholly or in part.
The board may, if it thinks fit, receive from any member willing to advance the same,
either in money or money’s worth, all or any part of the monies uncalled and unpaid
or installments payable upon any shares held by him, and upon all or any of the
monies so advanced the Company may pay interest at such rate (if any) as the
board may decide.
If a member fails to pay any call on the day appointed for payment thereof, the
board may serve not less than fourteen (14) clear days’ notice on him requiring
payment of so much of the call as is unpaid, together with any interest which may
have accrued and which may still accrue up to the date of actual payment and
stating that, in the event of non-payment at or before the time appointed, the shares
in respect of which the call was made will be liable to be forfeited.
If the requirements of any such notice are not complied with, any share in
respect of which the notice has been given may at any time thereafter, before the
payment required by the notice has been made, be forfeited by a resolution of the
board to that effect. Such forfeiture will include all dividends and bonuses declared
in respect of the forfeited share and not actually paid before the forfeiture.
(b) Directors
At each annual general meeting, one third of the Directors for the time being
(or if their number is not a multiple of three, then the number nearest to but not less
than one third) shall retire from office by rotation provided that every Director shall
be subject to retirement at an annual general meeting at least once every three
years. The Directors to retire by rotation shall include any Director who wishes to
retire and not offer himself for re-election. Any further Directors so to retire shall be
those who have been longest in office since their last re-election or appointment but
as between persons who became or were last re-elected Directors on the same day
those to retire will (unless they otherwise agree among themselves) be determined
by lot.
Neither a Director nor an alternate Director is required to hold any shares in the
Company by way of qualification. Further, there are no provisions in the Articles
relating to retirement of Directors upon reaching any age limit.
– IV-4 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The Directors have the power to appoint any person as a Director either to fill
a casual vacancy on the board or as an addition to the existing board. Any Director
appointed to fill a casual vacancy shall hold office until the first general meeting of
members after his appointment and be subject to re-election at such meeting and
any Director appointed as an addition to the existing board shall hold office only
until the next following annual general meeting of the Company and shall then be
eligible for re-election.
• without special leave, he is absent from meetings of the board for six (6)
consecutive months, and the board resolves that his office is vacated;
The board may appoint one or more of its body to be managing director, joint
managing director, or deputy managing director or to hold any other employment or
executive office with the Company for such period and upon such terms as the
board may determine and the board may revoke or terminate any of such
appointments. The board may delegate any of its powers, authorities and
discretions to committees consisting of such Director or Directors and other
persons as the board thinks fit, and it may from time to time revoke such delegation
or revoke the appointment of and discharge any such committees either wholly or in
part, and either as to persons or purposes, but every committee so formed must, in
the exercise of the powers, authorities and discretions so delegated, conform to any
regulations that may from time to time be imposed upon it by the board.
– IV-5 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
Subject to the provisions of the Cayman Companies Law and the Articles and,
where applicable, the rules of the Stock Exchange and without prejudice to any
special rights or restrictions for the time being attached to any shares or any class
of shares, all unissued shares in the Company are at the disposal of the board,
which may offer, allot, grant options over or otherwise dispose of them to such
persons, at such times, for such consideration and on such terms and conditions as
it in its absolute discretion thinks fit, but so that no shares shall be issued at a
discount to their nominal value.
Neither the Company nor the board is obliged, when making or granting any
allotment of, offer of, option over or disposal of shares, to make, or make available,
any such allotment, offer, option or shares to members or others with registered
addresses in any particular territory or territories being a territory or territories
where, in the absence of a registration statement or other special formalities, this
would or might, in the opinion of the board, be unlawful or impracticable. Members
affected as a result of the foregoing sentence shall not be, or be deemed to be, a
separate class of members for any purpose whatsoever.
There are no specific provisions in the Articles relating to the disposal of the
assets of the Company or any of its subsidiaries. The Directors may, however,
exercise all powers and do all acts and things which may be exercised or done or
approved by the Company and which are not required by the Articles or the Cayman
Companies Law to be exercised or done by the Company in general meeting.
Borrowing powers
The board may exercise all the powers of the Company to raise or borrow
money, to mortgage or charge all or any part of the undertaking, property and
assets and uncalled capital of the Company and, subject to the Cayman Companies
Law, to issue debentures, bonds and other securities of the Company, whether
outright or as collateral security for any debt, liability or obligation of the Company
or of any third party.
Remuneration
– IV-6 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
Any Director who, by request, goes or resides abroad for any purpose of the
Company or who performs services which in the opinion of the board go beyond the
ordinary duties of a Director may be paid such extra remuneration as the board may
determine and such extra remuneration shall be in addition to or in substitution for
any ordinary remuneration as a Director. An Executive Director appointed to be a
managing director, joint managing director, deputy managing director or other
executive officer shall receive such remuneration and such other benefits and
allowances as the board may from time to time decide. Such remuneration may be
either in addition to or in lieu of his remuneration as a Director.
The board may establish or concur or join with other companies (being
subsidiary companies of the Company or companies with which it is associated in
business) in establishing and making contributions out of the Company’s monies to
any schemes or funds for providing pensions, sickness or compassionate
allowances, life assurance or other benefits for employees (which expression as
used in this and the following paragraph shall include any Director or past Director
who may hold or have held any executive office or any office of profit with the
Company or any of its subsidiaries) and ex-employees of the Company and their
dependents or any class or classes of such persons.
The board may pay, enter into agreements to pay or make grants of revocable
or irrevocable, and either subject or not subject to any terms or conditions, pensions
or other benefits to employees and ex-employees and their dependents, or to any
of such persons, including pensions or benefits additional to those, if any, to which
such employees or ex-employees or their dependents are or may become entitled
under any such scheme or fund as is mentioned in the previous paragraph. Any
such pension or benefit may, as the board considers desirable, be granted to an
employee either before and in anticipation of, or upon or at any time after, his actual
retirement.
The board may resolve to capitalize all or any part of any amount for the time
being standing to the credit of any reserve or fund (including a share premium
account and the profit and loss account) whether or not the same is available for
distribution by applying such sum in paying up unissued shares to be allotted to (i)
employees (including directors) of the Company and/or its affiliates (meaning any
individual, corporation, partnership, association, joint-stock company, trust,
unincorporated association or other entity (other than the Company) that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is under
common control with, the Company) upon exercise or vesting of any options or
awards granted under any share incentive scheme or employee benefit scheme or
other arrangement which relates to such persons that has been adopted or
approved by the members in general meeting, or (ii) any trustee of any trust to
whom shares are to be allotted and issued by the Company in connection with the
operation of any share incentive scheme or employee benefit scheme or other
arrangement which relates to such persons that has been adopted or approved by
the members in general meeting.
Pursuant to the Articles, payments to any Director or past Director of any sum
by way of compensation for loss of office or as consideration for or in connection
with his retirement from office (not being a payment to which the Director is
contractually entitled) must be approved by the Company in general meeting.
– IV-7 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The Company must not make any loan, directly or indirectly, to a Director or his
close associate(s) if and to the extent it would be prohibited by the Companies
Ordinance (Chapter 622 of the laws of Hong Kong) as if the Company were a
company incorporated in Hong Kong.
A Director may hold any other office or place of profit with the Company
(except that of the auditor of the Company) in conjunction with his office of Director
for such period and upon such terms as the board may determine, and may be paid
such extra remuneration therefor in addition to any remuneration provided for by or
pursuant to the Articles. A Director may be or become a director or other officer of,
or otherwise interested in, any company promoted by the Company or any other
company in which the Company may be interested, and shall not be liable to
account to the Company or the members for any remuneration, profits or other
benefits received by him as a director, officer or member of, or from his interest in,
such other company. The board may also cause the voting power conferred by the
shares in any other company held or owned by the Company to be exercised in such
manner in all respects as it thinks fit, including the exercise thereof in favor of any
resolution appointing the Directors or any of them to be directors or officers of such
other company, or voting or providing for the payment of remuneration to the
directors or officers of such other company.
A Director shall not vote (nor be counted in the quorum) on any resolution of
the board approving any contract or arrangement or other proposal in which he or
any of his close associates is materially interested, but this prohibition does not
apply to any of the following matters, namely:
– IV-8 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The board may meet for the dispatch of business, adjourn and otherwise regulate
its meetings as it considers appropriate. Questions arising at any meeting shall be
determined by a majority of votes. In the case of an equality of votes, the chair of the
meeting shall have an additional or casting vote.
Under the Cayman Companies Law, a copy of any special resolution must be
forwarded to the Registrar of Companies in the Cayman Islands within fifteen (15)
days of being passed.
– IV-9 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
Subject to any special rights or restrictions as to voting for the time being
attached to any shares, at any general meeting on a poll every member present in
person or by proxy or, in the case of a member being a corporation, by its duly
authorized representative shall have one vote for every fully paid share of which he
is the holder but so that no amount paid up or credited as paid up on a share in
advance of calls or installments is treated for the foregoing purposes as paid up on
the share. A member entitled to more than one vote need not use all his votes or
cast all the votes he uses in the same way.
Where the Company has any knowledge that any shareholder is, under the
rules of the Stock Exchange, required to abstain from voting on any particular
resolution of the Company or restricted to voting only for or only against any
particular resolution of the Company, any votes cast by or on behalf of such
shareholder in contravention of such requirement or restriction shall not be
counted.
– IV-10 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The Company must hold an annual general meeting of the Company every
year within a period of not more than fifteen (15) months after the holding of the last
preceding annual general meeting or a period of not more than eighteen (18)
months from the date of adoption of the Articles, unless a longer period would not
infringe the rules of the Stock Exchange.
• the consideration and adoption of the accounts and balance sheet and
the reports of the directors and the auditors;
– IV-11 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The quorum for a general meeting shall be two members present in person (or,
in the case of a member being a corporation, by its duly authorized representative)
or by proxy and entitled to vote. In respect of a separate class meeting (other than
an adjourned meeting) convened to sanction the modification of class rights the
necessary quorum shall be two persons holding or representing by proxy not less
than one-third in nominal value of the issued shares of that class.
Proxies
Any member of the Company entitled to attend and vote at a meeting of the
Company is entitled to appoint another person as his proxy to attend and vote
instead of him. A member who is the holder of two or more shares may appoint more
than one proxy to represent him and vote on his behalf at a general meeting of the
Company or at a class meeting. A proxy need not be a member of the Company and
is entitled to exercise the same powers on behalf of a member who is an individual
and for whom he acts as proxy as such member could exercise. In addition, a proxy
is entitled to exercise the same powers on behalf of a member which is a
corporation and for which he acts as proxy as such member could exercise as if it
were an individual member. Votes may be given either personally (or, in the case of
a member being a corporation, by its duly authorized representative) or by proxy.
The board shall cause true accounts to be kept of the sums of money received and
expended by the Company, and the matters in respect of which such receipt and
expenditure take place, and of the property, assets, credits and liabilities of the
Company and of all other matters required by the Cayman Companies Law or necessary
to give a true and fair view of the Company’s affairs and to explain its transactions.
The accounting records must be kept at the registered office or at such other place
or places as the board decides and shall always be open to inspection by any Director.
No member (other than a Director) shall have any right to inspect any accounting record
or book or document of the Company except as conferred by law or authorized by the
board or the Company in general meeting. However, an exempted company must make
available at its registered office in electronic form or any other medium, copies of its
books of account or parts thereof as may be required of it upon service of an order or
notice by the Tax Information Authority pursuant to the Tax Information Authority Law of
the Cayman Islands.
– IV-12 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
A copy of every balance sheet and profit and loss account (including every
document required by law to be annexed thereto) which is to be laid before the Company
at its general meeting, together with a printed copy of the Directors’ report and a copy of
the auditors’ report, shall not less than twenty-one (21) days before the date of the
meeting and at the same time as the notice of annual general meeting be sent to every
person entitled to receive notices of general meetings of the Company under the
provisions of the Articles; however, subject to compliance with all applicable laws,
including the rules of the Stock Exchange, the Company may send to such persons
summarized financial statements derived from the Company’s annual accounts and the
directors’ report instead provided that any such person may by notice in writing served
on the Company, demand that the Company sends to him, in addition to summarized
financial statements, a complete printed copy of the Company’s annual financial
statement and the directors’ report thereon.
The Company in general meeting may declare dividends in any currency to be paid
to the members but no dividend shall be declared in excess of the amount recommended
by the board.
The Articles provide dividends may be declared and paid out of the profits of the
Company, realized or unrealized, or from any reserve set aside from profits which the
directors determine is no longer needed. With the sanction of an ordinary resolution
dividends may also be declared and paid out of share premium account or any other fund
or account which can be authorized for this purpose in accordance with the Cayman
Companies Law.
Except in so far as the rights attaching to, or the terms of issue of, any share may
otherwise provide, (i) all dividends shall be declared and paid according to the amounts
paid up on the shares in respect whereof the dividend is paid but no amount paid up on
a share in advance of calls shall for this purpose be treated as paid up on the share and
(ii) all dividends shall be apportioned and paid pro rata according to the amount paid up
on the shares during any portion or portions of the period in respect of which the dividend
is paid. The Directors may deduct from any dividend or other monies payable to any
member or in respect of any shares all sums of money (if any) presently payable by him
to the Company on account of calls or otherwise.
– IV-13 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
Whenever the board or the Company in general meeting has resolved that a
dividend be paid or declared on the share capital of the Company, the board may further
resolve either (a) that such dividend be satisfied wholly or in part in the form of an
allotment of shares credited as fully paid up, provided that the shareholders entitled
thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of
such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect
to receive an allotment of shares credited as fully paid up in lieu of the whole or such part
of the dividend as the board may think fit.
The Company may also upon the recommendation of the board by an ordinary
resolution resolve in respect of any one particular dividend of the Company that it may be
satisfied wholly in the form of an allotment of shares credited as fully paid up without
offering any right to shareholders to elect to receive such dividend in cash in lieu of such
allotment.
Any dividend, interest or other sum payable in cash to the holder of shares may be
paid by cheque or warrant sent through the post addressed to the holder at his registered
address, or in the case of joint holders, addressed to the holder whose name stands first
in the register of the Company in respect of the shares at his address as appearing in the
register or addressed to such person and at such addresses as the holder or joint holders
may in writing direct. Every such cheque or warrant shall, unless the holder or joint
holders otherwise direct, be made payable to the order of the holder or, in the case of
joint holders, to the order of the holder whose name stands first on the register in respect
of such shares, and shall be sent at his or their risk and payment of the cheque or warrant
by the bank on which it is drawn shall constitute a good discharge to the Company. Any
one of two or more joint holders may give effectual receipts for any dividends or other
moneys payable or property distributable in respect of the shares held by such joint
holders.
Whenever the board or the Company in general meeting has resolved that a
dividend be paid or declared the board may further resolve that such dividend be
satisfied wholly or in part by the distribution of specific assets of any kind.
All dividends or bonuses unclaimed for one year after having been declared may be
invested or otherwise made use of by the board for the benefit of the Company until
claimed and the Company shall not be constituted a trustee in respect thereof. All
dividends or bonuses unclaimed for six years after having been declared may be
forfeited by the board and shall revert to the Company.
Pursuant to the Articles, the register and branch register of members shall be open
to inspection for at least two (2) hours during business hours by members without
charge, or by any other person upon a maximum payment of HKD2.50 or such lesser
sum specified by the board, at the registered office or such other place at which the
register is kept in accordance with the Cayman Companies Law or, upon a maximum
payment of HKD1.00 or such lesser sum specified by the board, at the office where the
branch register of members is kept, unless the register is closed in accordance with the
Articles.
– IV-14 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
• if the Company is wound up and the assets available for distribution amongst
the members of the Company shall be more than sufficient to repay the whole
of the capital paid up at the commencement of the winding up, the excess shall
be distributed pari passu amongst such members in proportion to the amount
paid up on the shares held by them respectively; and
• if the Company is wound up and the assets available for distribution amongst
the members as such shall be insufficient to repay the whole of the paid-up
capital, such assets shall be distributed so that, as nearly as may be, the
losses shall be borne by the members in proportion to the capital paid up, or
which ought to have been paid up, at the commencement of the winding up on
the shares held by them respectively.
If the Company is wound up (whether the liquidation is voluntary or by the court) the
liquidator may, with the authority of a special resolution and any other sanction required
by the Cayman Companies Law divide among the members in specie or kind the whole
or any part of the assets of the Company whether the assets shall consist of property of
one kind or shall consist of properties of different kinds and the liquidator may, for such
purpose, set such value as he deems fair upon any one or more class or classes of
property to be divided as aforesaid and may determine how such division shall be carried
out as between the members or different classes of members. The liquidator may, with
the like authority, vest any part of the assets in trustees upon such trusts for the benefit
of members as the liquidator, with the like authority, shall think fit, but so that no
contributory shall be compelled to accept any shares or other property in respect of
which there is a liability.
The Articles provide that to the extent that it is not prohibited by and is in compliance
with the Cayman Companies Law, if warrants to subscribe for shares have been issued
by the Company and the Company does any act or engages in any transaction which
would result in the subscription price of such warrants being reduced below the par value
of a share, a subscription rights reserve shall be established and applied in paying up the
difference between the subscription price and the par value of a share on any exercise
of the warrants.
– IV-15 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The Cayman Companies Law provides that where a company issues shares at a
premium, whether for cash or otherwise, a sum equal to the aggregate amount of the
value of the premiums on those shares shall be transferred to an account, to be called
the “share premium account.” At the option of a company, these provisions may not
apply to premiums on shares of that company allotted pursuant to any arrangement in
consideration of the acquisition or cancellation of shares in any other company and
issued at a premium.
The Cayman Companies Law provides that the share premium account may be
applied by the company subject to the provisions, if any, of its memorandum and articles
of association in (a) paying distributions or dividends to members; (b) paying up
unissued shares of the company to be issued to members as fully paid bonus shares; (c)
the redemption and repurchase of shares (subject to the provisions of section 37 of the
Cayman Companies Law); (d) writing-off the preliminary expenses of the company; and
(e) writing-off the expenses of, or the commission paid or discount allowed on, any issue
of shares or debentures of the company.
The Cayman Companies Law provides that, subject to confirmation by the Grand
Court of the Cayman Islands (the “Court”), a company limited by shares or a company
limited by guarantee and having a share capital may, if so authorized by its articles of
association, by special resolution reduce its share capital in any way.
– IV-16 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
A company is not prohibited from purchasing and may purchase its own warrants
subject to and in accordance with the terms and conditions of the relevant warrant
instrument or certificate. There is no requirement under Cayman Islands law that a
company’s memorandum or articles of association contain a specific provision enabling
such purchases and the directors of a company may rely upon the general power
contained in its memorandum of association to buy and sell and deal in personal property
of all kinds.
Under Cayman Islands law, a subsidiary may hold shares in its holding company
and, in certain circumstances, may acquire such shares.
The Cayman Companies Law permits, subject to a solvency test and the provisions,
if any, of the company’s memorandum and articles of association, the payment of
dividends and distributions out of the share premium account. With the exception of the
foregoing, there are no statutory provisions relating to the payment of dividends. Based
upon English case law, which is regarded as persuasive in the Cayman Islands,
dividends may be paid only out of profits.
– IV-17 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
The Courts ordinarily would be expected to follow English case law precedents
which permit a minority shareholder to commence a representative action against or
derivative actions in the name of the company to challenge (a) an act which is ultra vires
the company or illegal, (b) an act which constitutes a fraud against the minority and the
wrongdoers are themselves in control of the company, and (c) an irregularity in the
passing of a resolution which requires a qualified (or special) majority.
In the case of a company (not being a bank) having a share capital divided into
shares, the Court may, on the application of members holding not less than one fifth of
the shares of the company in issue, appoint an inspector to examine into the affairs of the
company and to report thereon in such manner as the Court shall direct.
Any shareholder of a company may petition the Court which may make a winding up
order if the Court is of the opinion that it is just and equitable that the company should be
wound up or, as an alternative to a winding up order, (a) an order regulating the conduct
of the company’s affairs in the future, (b) an order requiring the company to refrain from
doing or continuing an act complained of by the shareholder petitioner or to do an act
which the shareholder petitioner has complained it has omitted to do, (c) an order
authorizing civil proceedings to be brought in the name and on behalf of the company by
the shareholder petitioner on such terms as the Court may direct, or (d) an order
providing for the purchase of the shares of any shareholders of the company by other
shareholders or by the company itself and, in the case of a purchase by the company
itself, a reduction of the company’s capital accordingly.
A company must cause proper books of account to be kept with respect to (i) all
sums of money received and expended by the company and the matters in respect of
which the receipt and expenditure takes place; (ii) all sales and purchases of goods by
the company; and (iii) the assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such
books as are necessary to give a true and fair view of the state of the company’s affairs
and to explain its transactions.
– IV-18 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
(j) Taxation
Pursuant to the Tax Concessions Law of the Cayman Islands, the Company has
obtained an undertaking:
(1) that no law which is enacted in the Cayman Islands imposing any tax to be
levied on profits, income, gains or appreciation shall apply to the Company or
its operations; and
(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax
shall not be payable on or in respect of the shares, debentures or other
obligations of the Company.
The undertaking for the Company is for a period of twenty years from 12 April 2019.
Members of the Company have no general right under the Cayman Companies Law
to inspect or obtain copies of the register of members or corporate records of the
Company. They will, however, have such rights as may be set out in the Company’s
Articles.
– IV-19 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
An exempted company may maintain its principal register of members and any
branch registers at such locations, whether within or without the Cayman Islands, as the
directors may, from time to time, think fit. A branch register must be kept in the same
manner in which a principal register is by the Cayman Companies Law required or
permitted to be kept. The company shall cause to be kept at the place where the
company’s principal register is kept a duplicate of any branch register duly entered up
from time to time.
(q) Winding up
A company may be wound up (a) compulsorily by order of the Court, (b) voluntarily,
or (c) under the supervision of the Court.
– IV-20 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
order regulating the conduct of the company’s affairs in the future, making an order
authorizing civil proceedings to be brought in the name and on behalf of the company by
the petitioner on such terms as the Court may direct, or making an order providing for the
purchase of the shares of any of the members of the company by other members or by
the company itself.
As soon as the affairs of the company are fully wound up, the liquidator must make
a report and an account of the winding up, showing how the winding up has been
conducted and how the property of the company has been disposed of, and thereupon
call a general meeting of the company for the purposes of laying before it the account
and giving an explanation thereof. This final general meeting must be called by at least
21 days’ notice to each contributory in any manner authorized by the company’s articles
of association and published in the Gazette.
(r) Reconstructions
(s) Take-overs
Where an offer is made by a company for the shares of another company and, within
four (4) months of the offer, the holders of not less than ninety percent (90%) of the
shares which are the subject of the offer accept, the offeror may at any time within two
(2) months after the expiration of the said four (4) months, by notice in the prescribed
manner require the dissenting shareholders to transfer their shares on the terms of the
offer. A dissenting shareholder may apply to the Court within one (1) month of the notice
objecting to the transfer. The burden is on the dissenting shareholder to show that the
Court should exercise its discretion, which it will be unlikely to do unless there is
– IV-21 –
APPENDIX IV SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANIES LAW
evidence of fraud or bad faith or collusion as between the offeror and the holders of the
shares who have accepted the offer as a means of unfairly forcing out minority
shareholders.
(t) Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of
association may provide for indemnification of officers and directors, except to the extent
any such provision may be held by the Court to be contrary to public policy (e.g., for
purporting to provide indemnification against the consequences of committing a crime).
4. GENERAL
Conyers Dill & Pearman, the Company’s special legal counsel on Cayman Islands
law, have sent to the Company a letter of advice summarizing certain aspects of Cayman
Islands company law. This letter, together with a copy of the Cayman Companies Law,
is available for inspection as referred to in the paragraph headed “Documents available
for inspection” in Appendix VI to this prospectus. Any person wishing to have a detailed
summary of Cayman Islands company law or advice on the differences between it and
the laws of any jurisdiction with which he is more familiar is recommended to seek
independent legal advice.
– IV-22 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
1. Incorporation
The Company was incorporated in the Cayman Islands under the Cayman
Companies Law as an exempted company with limited liability on 10 April 2019 under the
name “Budweiser Brewing Company APAC Limited 百威亞太控股有限公司.”
The Company has established a place of business in Hong Kong at Flat/RM 1823,
18/F Soundwill Plaza II - Mid Town, 1-29 Tang Lung Street, Causeway Bay, Hong Kong.
The Company was registered as a non-Hong Kong company in Hong Kong under Part 16
of the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and the
Companies (Non-Hong Kong Companies) Regulation (Chapter 622J of the Laws of Hong
Kong) on 8 May 2019, with Renrong Wang (Frank) (王仁荣) of Flat/RM 1823, 18/F
Soundwill Plaza II - Mid Town, 1-29 Tang Lung Street, Causeway Bay, Hong Kong and
Chan Wai Ling (陳蕙玲) of Level 54, Hopewell Centre, 183 Queen’s Road East, Hong
Kong appointed as the Hong Kong authorized representatives of the Company on
17 April 2019 for acceptance of the service of process and any notices required to be
served on the Company in Hong Kong.
As the Company was incorporated in the Cayman Islands, its operations are subject
to Cayman Islands law and to its constitution which comprises the Memorandum and
Articles of Association. A summary of the Memorandum and Articles of Association of
the Company and the Cayman Companies Law is set out in “Appendix IV – Summary of
the Constitution of the Company and Cayman Islands Companies Law.”
As at the date of incorporation of the Company, the authorized share capital of the
Company was USD50,000 divided into 5,000,000 shares with a par value of USD0.01
each.
The following alterations in the issued and paid-up share capital of the Company
have taken place since its date of incorporation up to the date of this prospectus:
(b) On 3 July 2019, the issued share capital of the Company increased through the
issue of 7,534,412,000 new Shares to APAC HoldCo 2 in exchange for the
transfer of the China business into the Group. See “History, Development and
Reorganization – 5. Transfer of the China Business into the Group”.
– V-1 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
On 2 July 2019, resolutions of the Company were passed by the then Shareholders
pursuant to which, among other things:
(a) the Company conditionally approved and adopted the Articles of Association
with effect from the Listing Date;
(b) conditional upon the satisfaction (or, if applicable, waiver) of the conditions set
out in “Structure of the Global Offering – Conditions of the Global Offering” and
pursuant to the terms set out therein:
(ii) the Global Offering was approved and the Directors were authorized to
allot and issue the Shares pursuant to the Global Offering;
(iii) the Listing was approved and the Directors were authorized to implement
the Listing;
(iv) subject to the “lock-up” provisions under Rule 10.08 of the Listing Rules,
a general unconditional mandate was granted to the Directors to allot,
issue and deal with the Shares or securities convertible into Shares or
options, warrants or similar rights to subscribe for the Shares or such
convertible securities and to make or grant offers, agreements or options
which would or might require the exercise of such powers, provided that
the aggregate number of Shares allotted or agreed to be allotted by the
Directors other than pursuant to a (i) rights issue, (ii) any scrip dividend
scheme or similar arrangement providing for the allotment of the Shares
in lieu of the whole or part of a dividend on the Shares or (iii) a specific
authority granted by the Shareholders in general meeting, shall not
exceed the aggregate of:
(A) 20% of the total number Shares in issue immediately following the
completion of the Capitalization Issue and the Global Offering; and
such mandate to remain in effect during the period from the passing of the
resolution until the earliest of (I) the conclusion of the next annual general
meeting of the Company, (II) the end of the period within which the
Company is required by the Articles of Association or any applicable laws
to hold its next annual general meeting and (III) the date on which the
mandate is varied or revoked by an ordinary resolution of the
shareholders of the Company in general meeting (the “Applicable
Period”);
– V-2 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
(vi) the Share Award Schemes, the details of which are set out in “Appendix
V – Statutory and General Information – D. Share Award Schemes”, were
approved and the Directors were authorized to implement the Share
Award Schemes; and
(vii) any and all actions of the Company, or of any Director or officer or
representative of the Company, taken in connection with the
Reorganization or the preparation for the Listing prior to the date of the
resolutions were ratified, confirmed, approved and adopted in all
respects.
4. Subsidiaries
Details of the material subsidiaries of the Company are set out as the principal
entities comprising the Listing Business in “Appendix I – Accountant’s Report.”
The following subsidiaries of the Company were incorporated within two years
immediately preceding the date of this prospectus:
Place of Date of
Name of Subsidiary Incorporation Incorporation
– V-3 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Place of Date of
Name of Subsidiary Incorporation Incorporation
Details of the changes in the share capital of the Company’s material subsidiaries
which are listed as the principal entities comprising the Listing Business in “Appendix I
– Accountant’s Report” during the two years immediately preceding the date of this
prospectus are set out below:
(c) On 4 December 2018, the issued share capital of Oriental Brewery, Co., Ltd
decreased by KRW 2,011,000,000 to KRW 20,000,000,000 and the difference
between the amounts was received by Interbrew International B.V. after which
Interbrew International B.V. held 20,000,000 shares of Oriental Brewery, Co.,
Ltd, representing 100% interest in its issued share capital;
(e) Between the Latest Practicable Date and the date of this prospectus, the
issued share capital of China HoldCo may increase through the issue of new
shares in exchange for the transfer of the China business into the Group via a
series of share transfers amongst wholly-owned, indirect subsidiaries of AB
InBev. See “History, Development and Reorganization – 5. Transfer of the
China Business into the Group”.
Save as set out above and in “Appendix I – Accountant’s Report,” there has been no
alteration in the share capital of the material subsidiaries of the Company within two
years immediately preceding the date of this prospectus.
– V-4 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
So far as is known to any Director or the Chief Executive Officer, as at the Latest
Practicable Date, the following persons are directly or indirectly interested in 10% or
more of the issued voting shares of the following subsidiaries of the Company:
Number of
Shares held or Approximate
Name of Subsidiary Name of Shareholder interested in Percentage
(%)
Blue Girl Beer Brand Company Jebsen and Company 9,999 50%
Limited Limited
This section sets out information required by the Stock Exchange to be included in
this prospectus concerning the repurchase by the Company of its own securities.
The Listing Rules permit companies with a primary listing on the Stock
Exchange to repurchase their own securities on the Stock Exchange subject to
certain restrictions, the more important of which are summarized below:
– V-5 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
A listed company may not make any repurchase of shares after inside
information has come to its knowledge until the information has been made
publicly available. In particular, during the period of one month immediately
preceding the earlier of (1) the date of the board meeting (as such date is first
notified to the Stock Exchange in accordance with the Listing Rules) for the
approval of a listed company’s results for any year, half-year, quarterly or any
other interim period (whether or not required under the Listing Rules) and (2)
the deadline for publication of an announcement of a listed company’s results
for any year or half-year under the Listing Rules, or quarterly or any other
interim period (whether or not required under the Listing Rules), the listed
company may not repurchase its shares on the Stock Exchange other than in
exceptional circumstances. In addition, the Stock Exchange may prohibit a
repurchase of shares on the Stock Exchange if a listed company has breached
the Listing Rules.
– V-6 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
The Directors believe that the ability to repurchase Shares is in the interests of
the Company and the Shareholders. Repurchases may, depending on the
circumstances, result in an increase in the net assets and/or earnings per Share.
The Directors have sought the grant of a general mandate to repurchase Shares to
give the Company the flexibility to do so if and when appropriate. The number of
Shares to be repurchased on any occasion and the price and other terms upon
which the same are repurchased will be decided by the Directors at the relevant
time having regard to the circumstances then pertaining.
In repurchasing Shares, the Company may only apply funds legally available
for such purpose in accordance with the Memorandum and Articles of Association,
the Listing Rules and the applicable laws and regulations of the Cayman Islands.
(d) General
(i) the conclusion of the next annual general meeting of the Company; or
(ii) the end of the period within which the Company is required by the Articles
of Association or any applicable law to hold its next annual general
meeting; or
– V-7 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
None of the Directors nor, to the best of their knowledge having made all
reasonable enquiries, any of their close associates currently intends to sell any
Shares to the Company.
The Directors have undertaken to the Stock Exchange that they will exercise
the power of the Company to make any repurchases of Shares pursuant to the
repurchase mandate in accordance with the Listing Rules and the applicable laws
and regulations in the Cayman Islands.
Any repurchase of Shares that results in the number of Shares held by the
public being reduced may require a further waiver from the Stock Exchange in
relation to the Listing Rules requirements regarding the public float of the Company.
It is believed that a waiver of this provision would not normally be given other than
in exceptional circumstances.
No core connected person of the Company has notified the Company that he
or she has a present intention to sell Shares to the Company, or has undertaken not
to do so, if the repurchase mandate is exercised.
The Group has entered into the following contracts (not being contracts entered into
in the ordinary course of business) within the two years immediately preceding the date
of this prospectus that are or may be material:
– V-8 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
2. Intellectual Property
As at the Latest Practicable Date, the following intellectual property rights are
material to the Group’s business:
(a) Trademarks
(i) As at the Latest Practicable Date, the Group had registered the following
trademarks which are material to its business:
Place of Registration
No. Trademark Class Registered Owner Registration Number Expiry Date
– V-9 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
(ii) As at the Latest Practicable Date, the Group had been granted the
non-exclusive right to use the following trademarks which are material to
its business:
Place of Registration
No. Trademark Class Registered Owner Registration Number Expiry Date
(iii) As at the date of this prospectus, the Group had been granted the
non-exclusive right to use the following trademarks which are material to
its business of which the registration was being applied:
Place of Application Application
No. Trademark Class Applicant Registration Number Date
– V-10 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
(c) Patents
As at the Latest Practicable Date, the Group did not have any patent which are
material to its business.
As at the Latest Practicable Date, the interests and/or short positions (as
applicable) of the Directors and the Chief Executive Officer in the Shares and
debentures of the Company and any interests and/or short positions (as applicable) in
shares or debentures of any of the Company’s associated corporations (within the
meaning of Part XV of the SFO) which:
(1) will have to be notified to the Company and the Stock Exchange pursuant to
Divisions 7 and 8 of Part XV of the SFO (including interests and/or short
positions (as applicable) which they are taken or deemed to have under such
provisions of the SFO),
(2) will be required, pursuant to Section 352 of the SFO, to be entered in the
register referred to therein or
(3) will be required, pursuant to the Model Code for Securities Transactions by
Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, to be
notified to the Company and the Stock Exchange, in each case once the
Shares are listed on the Stock Exchange, will be as follows:
Notes:
1. The 1,119,885 shares of AB InBev that Mr. Jan Craps was interested in include 11,421 ordinary
shares, 1,008,939 shares that may be issued upon the exercise of options, and 99,525 RSUs.
– V-11 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
2. The 144,535 shares of AB InBev that Mr. Renrong Wang (Frank) was interested in include 18,338
ordinary shares, 86,556 shares that may be issued upon the exercise of options, and 39,641
RSUs
Note:
1. The 890,453 shares of Ambev that Mr. Jan Craps was interested in include 136,970 common
shares, 544,120 shares that may be issued upon the exercise of options, and 209,363 RSUs.
We have applied for, and the SFC has granted the Non-executive Directors a
partial exemption from strict compliance with Part XV (other than Divisions 5, 11
and 12) of the SFO in respect of the duty to disclose interests in AB InBev and
Amber as “associated corporations” (as defined in the SFO) of the Company. See
“Waivers from Strict Compliance with the Listing Rules and Exemptions from Strict
Compliance with the Companies (WUMP) Ordinance and the SFO”.
– V-12 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Each of the Directors has entered into a letter of appointment in relation to his/her
role as a director of the Company for a period of three years since the Listing Date, which
is subject to termination by the Director or the Company in accordance with the terms of
the letter of appointment (as the case may be), the requirements of the Listing Rules and
the provisions relating to the retirement and rotation of the Directors under the Articles
of Association.
Pursuant to the terms of the letters of appointment entered into between each
Director (on the one part) and the Company (on the other part), (a) the Executive
Directors and the Non-executive Directors are not entitled to receive any director’s fees;
(b) the annual retainer payable by the Company to each Independent Non-executive
Director is USD75,000; (c) each of the Independent Non-executive Directors will also be
eligible, at the discretion of the Company, to receive certain RSUs pursuant to the Share
Award Schemes of the Company, subject to the rules of the Share Award Schemes and
applicable law; (d) an Independent Non-executive Director will receive from the
Company an additional fee of USD18,750 for being the chair of the Audit Committee; and
(e) an Independent Non-executive Director will receive from the Company meeting fees
for attending meetings of the Board committees.
Each Director is entitled to be indemnified by the Company (to the extent permitted
under the Articles of Association and applicable laws) and to be reimbursed by the
Company for all necessary and reasonable out-of-pocket expenses properly incurred in
connection with the performance and discharge of his/her duties under his/her letter of
appointment.
Save as disclosed above, none of the Directors have entered into any service
contracts as a director with any member of the Group (excluding contracts expiring or
determinable by the employer within one year without payment of compensation (other
than statutory compensation)).
3. Directors’ Remuneration
For details of the Directors’ remuneration, see “Directors and Senior Management
– Remuneration of the Directors and of the Five Highest Paid Individuals.”
Save in connection with the Underwriting Agreements and the bond issuance by
FBG Finance Pty Ltd in 2017 as mentioned above, no commissions, discounts,
brokerages or other special terms have been granted by the Group to any person
(including the Directors and experts referred to in “Other Information – Qualifications and
Consents of Experts” below) in connection with the issue or sale of any capital or security
of the Company or any member of the Group within the two years immediately preceding
the date of this prospectus.
– V-13 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
5. Personal Guarantees
6. Disclaimers
(a) Save as disclosed in this prospectus, none of the Directors nor any of the
experts referred to in “Other Information – Qualifications and Consents of
Experts” below has any direct or indirect interest in the promotion of, or in any
assets which have been, within the two years immediately preceding the date
of this prospectus, acquired or disposed of by, or leased to, any member of the
Group, or are proposed to be acquired or disposed of by, or leased to, any
member of the Group.
(b) Save in connection with the Underwriting Agreements and as disclosed in the
prospectus, none of the Directors nor any of the experts referred to in “Other
Information – Qualifications and Consents of Experts” below, is materially
interested in any contract or arrangement subsisting at the date of this
prospectus which is significant in relation to the business of the Group.
(c) None of the Directors has any existing or proposed service contracts with any
member of the Group (excluding contracts expiring or determinable by the
employer within one year without payment of compensation (other than
statutory compensation)).
(e) Save as disclosed in this prospectus, no cash, securities or other benefit has
been paid, allotted or given within the two years preceding the date of this
prospectus to any promoter of the Company nor is any such cash, securities or
benefit intended to be paid, allotted or given on the basis of the Global Offering
or related transactions as mentioned.
– V-14 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
We believe that a business is only as good as its people. Our success is driven
by the fact that our employees see themselves as owners and stakeholders of our
business. For this reason, we are strong advocates for awarding employees. One
way we do this is to provide employees with the opportunity to become true owners
of the business by acquiring Shares and therefore aligning their interests with those
of the Company.
(i) the Discretionary Restricted Stock Units Plan (the “RSU Plan”);
The Board of Directors shall be responsible for the administration of the Share
Award Schemes. The Board of Directors may delegate part or all powers under the
Share Award Schemes to the Remuneration Committee. In the case of a delegation
of powers, the Board of Directors may retain full authority to exercise all the rights
and obligations of the Remuneration Committee under the Share Award Schemes
at any time whatsoever, or to delegate them to another committee constituted by
the Board of Directors.
The Board of Directors may appoint a Trustee to assist with the administration
and vesting of the RSUs and Options to be granted pursuant to the Share Award
Schemes. The Company may, to the extent permitted by the Cayman Companies
Law: (a) allot and issue Shares to the Trustee which will be used to satisfy the RSUs
upon vesting and the Options upon exercise; and/or (b) direct and procure the
Trustee to make on-market purchases of Shares to satisfy the RSUs upon vesting
and the Options upon exercise. The Board of Directors shall, to the extent permitted
by applicable laws, provide sufficient funds to the Trustee by whatever means as
the Board of Directors may in its absolute discretion determine to enable the
Trustee to satisfy its obligations in connection with the administration and vesting of
RSUs and exercise of Options under the Share Award Schemes.
– V-15 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Subject to the terms of the Share Award Schemes, the total number of Shares
which may be issued upon exercise of all Options and vesting of all RSUs to be
granted under the Share Award Schemes and any other schemes must not in
aggregate exceed 10% of the Shares in issue on the Listing Date, i.e.
1,059,952,600 Shares.
Each of the Share Award Schemes shall take effect subject to: (i) the passing
of the resolution by the Shareholders to approve and adopt the Share Award
Schemes and to authorize the Board of Directors to grant RSUs and Options
pursuant to the Share Award Schemes and to allot and issue or otherwise deal with
the Shares in connection with the Share Award Schemes; (ii) the Listing Committee
of the Stock Exchange granting the listing of, and permission to deal in, the Shares
in connection with the Share Award Schemes; and (iii) the commencement of
trading of the Shares on the Main Board of the Stock Exchange (the “Conditions”).
The following is a summary of the principal terms of the RSU Plan conditionally
approved and adopted by the Shareholders. The terms of the RSU Plan are not subject
to the provisions of Chapter 17 of the Listing Rules as the RSU Plan does not involve the
grant of options by the Company to subscribe for new Shares.
The Board of Directors may, at its discretion, grant RSUs pursuant to the RSU
Plan to any employee and/or director of the Group who the Board of Directors
considers, in its absolute discretion, have contributed or will contribute to the Group
(the “RSU Plan Participants”).
Subject to the Conditions being satisfied, the RSU Plan shall be valid and
effective for a period of ten years commencing on the date of its conditional
adoption by the Shareholders and expiring on the tenth anniversary thereof or such
earlier date as it is terminated in accordance with the RSU Plan, after which period
no further RSUs may be granted, but in all other aspects the terms of the RSU Plan
shall remain in full force and effect in respect of RSUs which are granted during the
term of the RSU Plan and which remain unvested immediately prior to the
termination of the RSU Plan.
An offer of the grant of RSUs (an “RSU Offer”) shall be made to a RSU
Plan Participant by an RSU offer letter (an “RSU Offer Letter”) requiring the
RSU Plan Participant to undertake to hold the RSU on the terms on which it is
to be granted (which shall include the vesting date and performance conditions
that must be satisfied before an RSU will vest in whole or in part) and to be
bound by the terms of the RSU Plan and any other terms and conditions as
contained in the RSU Offer Letter.
– V-16 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
An RSU Offer is accepted by the RSU Plan Participant when the RSU
Plan Participant returns the completed acceptance form to the Company
before the expiry of the period specified in the RSU Offer Letter. A RSU Plan
Participant who fails to return the completed Acceptance Form before the
expiry of the confirmation period will be deemed to have refused the RSU Offer
and the RSUs.
No offer of RSU shall be made to, nor shall any RSU Offer be capable of
acceptance by, any RSU Plan Participant at a time when the RSU Plan
Participant would or might be prohibited from dealing in the Shares by the
Listing Rules or any other applicable laws, regulations or rules (including the
Code of Dealing of the Company).
i. the date of meeting of the Board of Directors (as such date is first
notified to the Stock Exchange in accordance with the Listing Rules)
for the approval of the Company’s results for any year, half-year,
quarterly or any other interim period (whether or not required under
the Listing Rules); and
– V-17 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
At any time during the term of the RSU Plan, the maximum aggregate number
of Shares with respect to which RSUs may be granted pursuant to the RSU Plan
shall be the “RSU Plan Mandate Limit,” calculated in accordance with the following
formula:
Where:
A = 10% of the Shares in issue on the date the Company was listed or
10% of the Shares in issue as at the date of approval of the renewed
limit (the “RSU New Approval Date”);
Shares in respect of RSUs which have lapsed in accordance with the terms of
the RSU Plan (or awards that have lapsed under any other Share Award Schemes)
will not be counted for the purposes of determining the maximum aggregate number
of Shares in respect of which RSUs may be granted pursuant to RSU Plan.
Shares in respect of which RSUs are granted pursuant to the RSU Plan
(including those outstanding, lapsed or vested RSU) prior to the RSU New Approval
Date will not be counted for the purpose of determining the maximum aggregate
number of Shares in respect of which the RSUs may be granted following the RSU
New Approval Date under the limit as renewed.
If the Company proposes to grant RSUs during the period between one annual
general meeting and the subsequent annual general meeting of the Company which
may be satisfied by the Company allotting and issuing new Shares upon the vesting
of the RSUs, the Company shall, at the annual general meeting of the Company,
propose for the Shareholders to consider and, if thought fit, approve an ordinary
resolution granting a mandate specifying:
– V-18 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
ii. that the Board of Directors has the power to allot, issue and deal with
Shares in respect of which RSUs are granted during the Applicable
Period as and when the RSUs vest.
The mandate referred to above shall remain in effect during the period from the
passing of the ordinary resolution granting the mandate until the earliest of:
ii. the end of the period within which the Company is required by any
applicable laws or by the bye-laws of the Company to hold the next annual
general meeting of the Company; and
The RSUs are subject to a vesting period running from the grant date to the
vesting date as described in the RSU Offer Letter. On or shortly after the vesting
date, the Company will deliver (or procure the Trustee to deliver) the relevant
number of Shares to the RSU Plan Participant, subject to the terms and conditions
of the RSU Plan, the RSU Offer Letter and the Acceptance Form; provided,
however, that in the case of any RSU Plan Participant that is a US taxpayer, the
relevant number of Shares will be delivered to the RSU Plan Participant no later
than the fifteenth day of the third month following the end of the taxable year of the
Company in which the vesting date occurs, unless otherwise determined by the
Board of Directors and expressly set forth in the applicable RSU Offer Letter.
Notwithstanding the foregoing, but in all events subject to the proviso above,
if the Company, the Trustee or any RSU Plan Participant would or might be
prohibited by the Listing Rules or by any other applicable laws, regulations or rules
(including the Code of Dealing of the Company) from dealing in the Shares, the date
on which the relevant Shares under the RSUs will be transferred to the RSU Plan
Participant shall occur as soon as possible after the date when such dealing is
permitted.
– V-19 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
The Shares underlying any dividend equivalent granted in the form of RSUs
may be held by the Trustee on trust and delivered to the RSU Plan Participant upon
vesting.
The RSUs shall be personal to the RSU Plan Participant and shall not be
assignable or transferable and the RSU Plan Participant shall not in any way sell,
transfer, charge, mortgage, encumber or create any interest in favor of any third
party over or in relation to the RSUs, provided that, subject to the lapse provisions
in the terms of the RSU Plan, the RSUs may be transferred by will or by the laws of
testacy and distribution.
The Shares to be delivered to the holders of RSUs upon vesting of RSUs will
rank pari passu with existing ordinary Shares of the Company with all rights and
benefits generally attached to such Shares. Unless agreed otherwise between the
RSU Plan Participant and the Company, the Shares delivered upon vesting of RSUs
are not subject to any transfer restrictions under the rules of the RSU Plan.
If prior to the vesting date, any of the following events take place:
the Board of Directors shall have the sole discretion to determine whether any
RSUs shall be accelerated and the date and terms of any acceleration. Any
RSUs which are not accelerated at the discretion of the Board of Directors
shall lapse immediately.
– V-20 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Subject to the terms and conditions of the RSU Plan, the RSUs shall lapse
automatically and become null and void (to the extent not already vested) on the
earliest of:
(i) the failure to achieve performance conditions that must be satisfied by the
RSU Plan Participant before an RSU will vest in whole or in part;
(ii) the occurrence of conduct the RSU Plan Participant is responsible for that
contributes to a material adverse decision being made against the
Company or a company in the Group or a material breach of the Code of
Business Conduct of the Group before the RSU Vesting Date;
(iii) dismissal for serious cause of the RSU Plan Participant before the RSU
Vesting Date; and
(i) in the case of: (a) termination of employment other than resulting from a
resignation or a dismissal for serious cause before the Cumulated Age of
70; and (b) termination of employment other than resulting from a
dismissal for serious cause between the Cumulated Age of 70 and 79,
certain portion of RSUs may remain in full force and effect and the
remaining RSUs will automatically lapse and become null and void;
– V-21 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
allocation of profits or liquidation, which has an unfavorable effect on the RSUs, the
number of RSUs and/or the number of Shares to which the RSUs give rights will be
adjusted for the purpose of safeguarding the interests of the holders of RSUs, in the
manner determined at the sole discretion of the Board of Directors, subject to any
required action by the Shareholders’ meeting. The terms of such adjustment will be
communicated to the RSU Plan Participants in due time.
The Board of Directors may unilaterally modify at any time the practical and/or
accessory modalities of the terms and conditions of the RSU Plan. It may also
unilaterally modify the terms and conditions at any time, including but not limited to
when such modifications are required to comply with any change in legislation, so
long as such modifications comply with the requirements of the Cayman Companies
Law and the Listing Rules, to the extent applicable. The Board of Directors may
amend any performance or vesting conditions that apply to the RSUs if there is an
event that causes it to consider that the performance or vesting conditions should
be amended.
Upon termination of the RSU Plan, any assets held by the Trustee for the
purposes of the RSU Plan shall be sold and the proceeds, together with any cash
held by the Trustee under the RSU Plan, remitted to the Company, as settlor of the
trust, for its absolute benefit provided that the Trustee shall not be permitted to sell
the assets held on trust by it to the extent that it would result in it holding insufficient
assets to satisfy the Shares underlying any unvested RSUs.
(n) General
Details of the RSU Plan, including particulars and movements of the RSUs
granted during each financial year of the Company, and our employee costs arising
from the grant of the RSUs will be disclosed in our annual report.
– V-22 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
The following is a summary of the principal terms of the SBC Plan conditionally
approved and adopted by the Shareholders. The terms of the SBC Plan are not subject
to the provisions of Chapter 17 of the Listing Rules as the SBC Plan does not involve the
grant of options by the Company to subscribe for new Shares.
The Board of Directors may, in its absolute discretion, send offer letters to the
employees and directors of the Group to enable them to make an election between
receiving their bonuses (if any) in the form of cash, Shares or a mixture of cash and
Shares, as granted under the SBC Plan. Eligible employees who are entitled to a
bonus under the SBC Plan become SBC Plan Participants (the “SBC Plan
Participants”).
(i) Eligible employees have the possibility to receive all or part of their
bonuses under the SBC Plan (the “Bonus”) in the form of locked-up
Shares (the “Voluntary Shares”) instead of cash.
The SBC Plan Participants have the choice between the following
three bonus alternatives:
ii. the mixed bonus alternative where the bonus under the SBC
Plan is paid partially in Voluntary Shares and partially in cash
(the “Mixed Bonus”) – the percentage of the Bonus paid in
Voluntary Shares is fixed and set out in the offer letter; or
iii. the shares bonus alternative where the Bonus is paid entirely in
Voluntary Shares (the “Shares Bonus”).
(ii) The SBC Plan Participants who opt for the Mixed Bonus or the Shares
Bonus will purchase the Shares at a 10% discount. The discount is paid in
the form of RSUs, rounded down to the nearest Share.
(iii) As an additional reward, the SBC Plan Participants who opt for the Mixed
Bonus or the Shares Bonus will receive from the Company additional
“matching” RSUs, rounded down to the nearest Share.
– V-23 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
The offer or grant of RSUs (as applicable), and any acceptance by a SBC
Plan Participant shall be subject to the same restrictions set out under “2. The
RSU Plan – (c) Grant of RSUs – (iii) Restrictions on Time of Offer” above.
At any time during the term of the SBC Plan, the maximum aggregate number
of Shares with respect to which RSUs may be granted shall be calculated in the
same way as under the RSU Plan, set out under “2. The RSU Plan – (d) Maximum
number of Shares available” above.
ii. allot and issue fully paid Shares to the Trustee to satisfy the purchase of
Voluntary Shares by the SBC Plan Participants. The price of the Shares
shall be with reference to the closing price of the Shares as stated in the
daily quotations sheets issued by the Stock Exchange on grant date
specified in the SBC Offer Letter (or any other date determined by the
Company). The number of Voluntary Shares to be allocated to the SBC
Plan Participant will be determined by the purchase amount (as
contributed by the SBC Plan Participant) divided by the price of the
Shares, rounded down to the nearest number of Shares or board lot of
Shares, as determined by the Company.
– V-24 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
The RSUs are subject to a vesting period as detailed in the SBC Offer Letter.
Upon expiry of the vesting period, the Company shall deliver (or procure the Trustee
to deliver) the relevant number of Shares underlying the RSUs granted to the SBC
Plan Participants within a reasonable period subject to the terms and conditions of
the SBC Plan. In the case of SBC Plan Participants that is a US taxpayer as defined
in the SBC Plan, the relevant number of Shares underlying the RSUs will be
delivered to such SBC Plan Participants no later than the fifteenth day of the third
month following the end of the taxable year of the Company in which the expiry of
the vesting period occurs, unless otherwise determined by the Board of Directors
and expressly set out in the SBC Offer Letter.
The Voluntary Shares are subject to a lock-up period as detailed in the SBC
Offer Letter. Upon expiry of the lock-up period, the Company will deliver (or procure
the Trustee to deliver) all of the Voluntary Shares to the SBC Plan Participants,
subject to the terms of the SBC Plan.
The Company may appoint the Trustee to hold the Voluntary Shares and the
Shares underlying the RSUs on trust for the SBC Plan Participants during the
lock-up of the Voluntary Shares and the vesting of the RSUs, as applicable.
The Shares underlying any dividend equivalent granted in the form of RSUs
may be held by the Trustee on trust for the SBC Plan Participants and shall be
delivered to the SBC Plan Participants upon vesting.
The Shares to be delivered to a SBC Plan Participant upon vesting of the RSUs
and expiry of the lock-up of the Voluntary Shares (as applicable) shall rank pari
passu with existing ordinary Shares of the Company with all rights and benefits
generally attached to such Shares.
– V-25 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
(i) Transferability
(i) RSUs
The transferability of the RSUs to be offered and granted under the SBC
Plan is the same as that of the RSUs to be offered and granted under the RSU
Plan. Please refer to “2. The RSU Plan – (g) Transferability of the RSUs”
above.
During the lock-up period, the Voluntary Shares shall not be assignable or
transferrable and the SBC Plan Participants shall not in any way sell, transfer,
charge, mortgage, encumber or create any interest in favor of any third party
over or in relation to the Voluntary Shares, save that the Voluntary Shares may
be transferred by will or by laws of testacy or distribution and shall become
freely transferrable and the transfer restrictions on Voluntary Shares in this
paragraph (i) shall cease to apply on the date of the end of employment of an
SCB Plan Participant at any time and for any reason (including that resulting
from resignation or a dismissal for serious cause as defined under the SBC
Plan) or on the date of death of an SCB Plan Participant.
(iii) Shares upon vesting and the expiry of the lock-up period of the Voluntary
Shares
Unless agreed otherwise between the SBC Plan Participant and the
Company, the Shares delivered upon vesting of the RSUs and the expiry of the
lock-up period are not subject to any transfer restrictions under the rules of the
SBC Plan.
If prior to the vesting date of any RSUs under the SBC Plan, any of the
following events under “2. The RSU Plan – (i) Change of Control” above takes
place, the Board of Directors shall have sole discretion to determine whether any
RSUs shall be accelerated and the date and terms of any acceleration. Any RSUs
which are not accelerated at the discretion of the Board of Directors shall lapse
immediately.
Subject to the terms and conditions of the SBC Plan, the RSUs will lapse
automatically and become null and void (to the extent not already vested) on the
earliest of:
(i) the failure to comply with the Voluntary Shares’ transfer restrictions
referred to in “3. The SBC Plan – (i) Transferability – (ii) Voluntary Shares”
above;
(ii) the failure to achieve performance conditions that must be satisfied by the
SBC Plan Participant before an RSU will vest in whole or in part;
(iii) the occurrence of conduct the SBC Plan Participant is responsible for that
contributes to a material adverse decision being made against the
Company or a company in the Group or a material breach of the Code of
Business Conduct of the Group before the vesting date;
– V-26 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
(iv) dismissal for serious cause of the SBC Plan Participant before the vesting
date; and
In the event of certain changes to the capital structure of the Company as set
out under “2. The RSU Plan – (k) Changes to Capital Structure” above, the number
of RSUs and/or the number of Shares to which the RSUs give rights will be adjusted
for the purpose of safeguarding the interests of the holders of RSUs, in the manner
determined at the sole discretion of the Board of Directors, subject to any required
action by the Shareholders’ Meeting of the Company.
The modification rules of the SBC Plan are the same with that of the RSU Plan.
Please refer to “2. The RSU Plan – (l) Modification to the RSU Plan” above.
– V-27 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Upon termination of the SBC Plan, any assets held by the Trustee for the
purposes of the SBC Plan shall be sold and the proceeds, together with any cash
held by the Trustee under the SBC Plan, remitted to the Company, as settlor of the
trust, for its absolute benefit provided that the Trustee shall not be permitted to sell
the assets held on trust by it to the extent that it would result in it holding insufficient
assets to satisfy any Voluntary Shares or the Shares underlying any unvested
RSUs.
(o) General
Details of the SBC Plan, including particulars and movements of the Shares in
connection with the SBC Plan and the RSUs granted during each financial year of
the Company, and our employee costs arising from such grants will be disclosed in
our annual report.
4. The PB Plan
Locked-up Shares (“Purchased Shares”) and RSUs under the PB Plan may
be offered to such eligible employees as the Board of Directors shall select in its
sole discretion.
Subject to the Conditions being satisfied, the PB Plan shall be valid and
effective from the date of its adoption to its tenth anniversary or such earlier date as
the PB Plan is terminated in accordance with the terms and conditions of the PB
Plan.
– V-28 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
At any time during the term of the PB Plan, the maximum aggregate number of
Shares with respect to which RSUs may be granted shall be calculated in the same
way as that of the RSU Plan set out under “2. The RSU Plan – (d) Maximum number
of Shares available” above.
The RSUs are subject to a vesting period as described in the PB Plan Offer
Letter. Within a reasonable period after the vesting date, the Company will deliver
(or procure the Trustee to deliver) the relevant number of Shares to the PB Plan
Participant in accordance with and subject to the terms and conditions of the PB
Plan, the PB Plan Offer Letter and the PB Plan Acceptance Form.
The Purchased Shares are subject to a lock-up period as set out in the PB Plan
Offer Letter. Within a reasonable period after the expiry of the lock-up period of the
Purchased Shares, the Company will deliver (or procure the Trustee to deliver) all
of the Purchased Shares to the PB Plan Participant, subject to the terms and
conditions of the PB Plan, the PB Plan Offer Letter and PB Plan Acceptance Form.
– V-29 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
(i) the expiry of the lock-up period of the Purchased Shares (or termination
of the PB Plan Participant’s employment or engagement, whichever is
earlier) in relation to the Purchased Shares;
(iii) the vesting of the RSUs granted in the form of dividend equivalents (as
described in “4. The PB Plan – (f) Rights Attached to the RSUs and the
Purchased Shares” below)
shall be rounded down to the nearest board lot of Shares (after withholding any
income or taxes and/or social security payments that are required to be withheld
under any applicable law, rule or regulation).
The rights attached to the RSUs and the Purchased Shares Rights are the
same with that of the SBC Plan. Please refer to “3. The SBC Plan – (g) Rights
Attached to RSUs and the Voluntary Shares” above.
(h) Transferability
(i) RSUs
(iii) Shares upon vesting of the RSUs and the expiry of the lock-up period of
the Purchased Shares
– V-30 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
If prior to the vesting date of any RSUs under the PB Plan, any of the events
under “2. The RSU Plan – (i) Change of Control” takes place, the Board of Directors
shall have the sole discretion to determine whether any RSUs shall be accelerated
and the date and terms of any acceleration. Any RSUs which are not accelerated at
the discretion of the Board of Directors shall lapse immediately.
Subject to the terms and conditions of the PB Plan, the RSUs will lapse
automatically and become null and void (to the extent not already vested) on the
earliest of:
(i) the failure to comply with the Purchased Shares’ transfer restrictions
referred to in “4. The PB Plan – (h) Transferability – (ii) Purchased
Shares” above;
(ii) the failure to achieve performance conditions that must be satisfied by the
PB Plan Participant before an RSU will vest in whole or in part;
(iii) the occurrence of conduct the PB Plan Participant is responsible for that
contributes to a material adverse decision being made against the
Company or a company in the Group or a material breach of the Code of
Business Conduct of the Group before the vesting date;
(iv) dismissal for serious cause of the PB Plan Participant before the vesting
date; and
(v) resignation before the Cumulated Age of 70 or dismissal other than for
serious cause.
– V-31 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
In the event of changes to the capital structure of the Company as set out
under “2. The RSU Plan – (k) Changes to Capital Structure” above, the number of
RSUs and/or the number of Shares to which the RSUs give rights will be adjusted
for the purpose of safeguarding the interests of the holders of the RSUs, as
determined at the sole discretion of the Board of Directors, subject to any required
action by the Shareholders’ Meeting of the Company. The terms of such adjustment
will be communicated to the PB Plan Participants in due time.
The modification rules of the PB Plan are the same with that of the RSU Plan.
Please refer to “2. The RSU Plan – (l) Modification to the RSU Plan” above.
The termination rules of the PB Plan are the same with that of the SBC Plan.
Please refer to “3. The SBC Plan – (n) Termination of the SBC Plan” above.
(n) General
The following is a summary of the principal terms of the LTI Plan conditionally
approved and adopted by the Shareholders. The terms of the LTI Plan are subject to the
requirements under Chapter 17 of the Listing Rules.
(a) Participants of the LTI Plan (the “LTIP Participants”) and basis for
determining eligibility of the Participants
Options under the LTI Plan may be offered to such eligible employees and
directors of the Group as the Remuneration Committee shall select in its sole
discretion, on and subject to the terms of the LTI Plan and the Listing Rules.
Subject to the Conditions being satisfied, the LTI Plan shall be valid and
effective from the date of its adoption to its tenth anniversary, or such earlier date
as the LTI Plan is terminated in accordance with the terms and conditions of the LTI
Plan (the “LTIP Term”).
– V-32 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
An offer of the grant of an option (an “Option”) in connection with the LTI
Plan (an “LTIP Offer”) shall be made to a participant by an offer letter (an “LTIP
Offer Letter”), informing the participant that he/she is an eligible employee
and indicating the number of shares being offered by the Company and the
price per Option that the eligible employee must pay for the exercise of his/her
Options (the “Exercise Price”).
Failure to complete and submit the LTIP Acceptance Form within the offer
period will be deemed to constitute a refusal by the eligible employee of all
Options offered to him/her. The acceptance of the Options shall always be
subject to applicable laws, regulations and the Listing Rules.
The making of an LTIP Offer shall be subject to the same time restrictions
set out under “2. The RSU Plan – (c) Grant of RSUs – (iii) Restrictions on Time
of Offer” above.
– V-33 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Subject to the terms and conditions of the LTI Plan, the maximum number of
Shares issued and to be issued upon the exercise of the Options granted to each
LTIP Participant pursuant to the LTI Plan (including both exercised and outstanding
Options) in any 12-month period shall not (when aggregated with any Shares
underlying the options granted during such period pursuant to any other share
option schemes of the Company) exceed 1% of the Shares in issue for the time
being.
Where any further grant of Options to a LTIP Participant would result in the
Shares issued and to be issued upon the exercise of all Options granted and to be
granted to such person (including exercised, lapsed and outstanding Options) in
the 12-month period up to and including the date of such further grant (when
aggregated with any Shares underlying the options granted during such period
pursuant to any other share option schemes of the Company) representing in
aggregate over 1% of the Shares in issue, such further grant must be separately
approved by Shareholders in general meeting with such Participant and his/her
associates abstaining from voting. The Company must send a circular to the
Shareholders disclosing the identity of the LTIP Participant in question, the number
and terms of the Options to be granted (and Options previously granted to such
LTIP Participant) and such other information required under the Listing Rules.
The Exercise Price of the Options is specified in the LTIP Offer Letter. The
Exercise Price shall be determined by the Board of Directors in its absolute
discretion but in any event shall not be less than the highest of:
(i) the closing price of the Shares as stated in the daily quotations sheets
issued by the Stock Exchange on the LTIP Offer Date;
(ii) the average closing price of the Shares as stated in the daily quotations
sheets issued by the Stock Exchange for the five business days
immediately preceding the LTIP Offer Date; and
– V-34 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
and, for the purposes of sub-section (ii) above, where the Shares have been listed
on the Stock Exchange for less than five Business Days, the issue price of the
Shares in the listing of the Company shall be used as the closing price of the Shares
for any Business Day falling within the period before the listing of the Shares on the
Stock Exchange.
– V-35 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Subject to the terms and conditions of the LTI Plan, the Options will lapse
automatically and become null and void (to the extent not already exercised) on the
earliest of:
(i) the failure to achieve performance conditions that must be satisfied by the
LTIP Participant before an Option is capable to be exercised; and
(ii) the occurrence of conduct the LTIP Participant is responsible for that
contributes to a material adverse decision being made against the
Company or a company in the Group or a material breach of the Code of
Business Conduct of the Group before the exercise of the Options.
(i) in the case of dismissal other than for serious cause, all Options which are
not exercisable according to the rule set out in “5. The LTI Plan – (f)
Exercise of Options – (i) Exercise Period” above on the date of the end of
employment will automatically lapse and become null and void. All
Options which on the date of the end of employment are exercisable
according to the same rule may be exercised but only during a 180-day
period starting on the day that employment has ended.
(ii) in the case of resignation or dismissal for serious cause, all Options which
are not exercisable according to the rule set out in “5. The LTI Plan – (f)
Exercise of Options – (i) Exercise Period” above on the date of the end of
employment will automatically lapse and become null and void. All
Options which on the date of the end of employment are exercisable
according to the same rule may be exercised but only during a 90-day
period starting on the day that employment has ended.
(iii) in the case of resignation or dismissal other than for serious cause
between the Cumulated Age of 70 and 79, where all Options are not
exercisable according to the rule set out in “5. The LTI Plan – (f) Exercise
of Options – (i) Exercise Period” above on the date of the end of
employment, certain portion of Options may remain in full force and
effect. All Options which on the date of the end of employment are
exercisable according to the same rule may be exercised until the end of
the Exercise Period. In the case of dismissal for serious cause between
Cumulated Age of 70 and 79, all Options which are not exercisable
according to the same rule on the date of the end of employment will
automatically lapse and become null and void. All Options which on the
date of the end of employment are exercisable according to the same rule
may be exercised but only during a 90-day period starting on the day that
employment has ended.
– V-36 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
(iv) in the case of resignation or dismissal other than for serious cause at or
after a Cumulated Age of 80, all Options which are not exercisable
according to the rule set out in “5. The LTI Plan – (f) Exercise of Options
– (i) Exercise Period” above on the date of the end of employment will
remain exercisable. All Options which on the date of the end of
employment are exercisable according to the same rule may be exercised
until the end of the Exercise Period. In the case of dismissal for serious
cause at or after a cumulated age of 80, all Options which are not
exercisable according to the same rule on the date of the end of
employment will automatically lapse and become null and void. All
Options which on the date of the end of employment are exercisable
according to the same rule may be exercised but only during a 90-day
period starting on the day that employment has ended.
The Board of Directors may at any time cancel Options previously granted but
not yet exercised and may, at its discretion, make a grant of new Options to the
same LTIP Participant.
At any time during the Term, the maximum aggregate number of Shares with
respect to which Options may be granted pursuant to the LTIP shall be “LTIP
Mandate Limit,” calculated in accordance with the following formula:
where:
A = 10% of the Shares in issue on the date the Company was listed or
10% of the Shares in issue as at the date of approval of the renewed
limit (the “LTIP New Approval Date”);
– V-37 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Shares in respect of which Options are granted under the LTI Plan or other
Share Award Schemes will not be counted for the purpose of determining the
maximum aggregate number of Shares in respect of which the Option may be
granted following the LTIP New Approval Date. The Company may grant Options
beyond the LTIP Mandate Limit to LTIP Participants if Shareholders’ approval has
been obtained in respect of specific LTIP Participants following the Company
sending a circular to Shareholders containing information required by the Listing
Rules.
Notwithstanding the foregoing, the Company may grant Options beyond the
LTIP Mandate Limit to LTIP Participants if:
(i) separate Shareholders’ approval has been obtained for granting Options
beyond the LTIP Mandate Limit to Participants specifically identified by
the Company before such Shareholders’ approval is sought; and
The maximum number of Shares issued and to be issued upon the exercise of
the Options granted to each LTIP Participant pursuant to the LTI Plan in any
12-month period shall not exceed 1% of the Shares in issue for the time being,
unless separately approved by Shareholders in a general meeting (in which the
LTIP Participant and his/her associates abstain from voting), preceded by a circular
containing details of the proposed grant of Options and other information required
by the Listing Rules.
At any time, the maximum number of Shares which may be issued upon the
exercise of all outstanding Options shall not exceed 30% of the Shares in issue from
time to time.
The Shares to be purchased upon exercise of the Options under the LTI Plan
will rank pari passu with existing ordinary Shares of the Company with all rights and
benefits generally attached to such Shares.
– V-38 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
No dividends will be paid on the Options. No LTIP Participant shall enjoy any
of the rights of a Shareholder by virtue of the grant of an Option pursuant to the LTI
Plan, unless and until the Shares underlying the Option are actually issued or
transferred to the LTIP Participant pursuant to the exercise of such Option.
(n) Transferability
Options are personal to each LTIP Participant and shall not be assignable or
transferable, and the LTIP Participant shall not in any way sell, transfer, charge,
mortgage, encumber or create any interest in favor of any third party over or in
relation to the Options. The terms and conditions of the LTI Plan shall bind
executors, administrators, legal personal representatives, heirs, successors and
permitted assigns and transferees of the LTIP Participant.
In the event of changes to the capital structure of the Company as set out
under “2. The RSU Plan - (k) Changes to Capital Structure” above, the Exercise
Price and/or the number of Options and/or the number of Shares to which the
Options give rights will be adjusted for the purpose of safeguarding the interests of
the holders of Options at the sole discretion of the Board of Directors, subject to
Shareholders’ approval. The terms of such adjustment will be communicated to the
LTIP Participants in due time.
The Board of Directors may unilaterally modify the terms and conditions of the
LTI Plan and practical/accessory modalities thereof, including to comply with any
change in legislation so long as such modifications comply with the requirements of
the Cayman Companies Law and the Listing Rules. Those specific provisions of the
LTI Plan which relate to the matters set out in Rule 17.03 of the Listing Rules cannot
be altered to the advantage of Participants and changes to the authority of the
Board of Directors in relation to any alteration of the terms of the LTI Plan shall not
be made, in either case, without the prior approval of Shareholders in general
meeting.
Any alterations to the terms and conditions of the LTI Plan which are of a
material nature or any changes to the terms of the Options granted must be
approved by the Shareholders in general meeting, except where the alterations or
changes take effect automatically under the existing terms of the LTI Plan. The
Board of Directors’ determination as to whether any proposed alteration to the
terms and conditions of the LTI Plan is material shall be conclusive.
The LTI Plan so altered must comply with Chapter 17 of the Listing Rules.
– V-39 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
Upon termination of the LTI Plan, any assets held by the Trustee for the
purposes of the LTI Plan shall be sold and the proceeds, together with any cash
held by the Trustee under the Plan, remitted to the Company, as settlor of the trust,
for its absolute benefit, provided that the Trustee shall not be permitted to sell the
assets held on trust by it to the extent that it would result in it holding insufficient
assets to satisfy the Shares underlying any unvested Options.
(r) General
Details of the LTI Plan, including particulars and movements of the Options
granted during each financial year of the Company, and our employee costs arising
from the grant of the Options will be disclosed in our annual report.
To encourage its and its subsidiaries’ employees to help with its deleveraging
efforts, AB InBev have granted, and will grant, from time to time, a series of long term
incentives (stock options or RSUs connected to the shares of AB InBev) to its
executives, including the senior management of the Company, that have their vesting
subject to, among other things, the fulfilment of certain financial indicators of AB InBev
at the end of each year after the grants. Specific forfeiture rules relating to these AB
InBev option grants apply in case of employment termination. The grants are approved
by the Remuneration Committee of the Board and confirmed by the annual general
shareholders’ meeting of AB InBev each year.
E. OTHER INFORMATION
1. Estate Duty
The Directors have been advised that no material liability for estate duty is likely to
fall on the Group in Hong Kong and the Cayman Islands.
The Joint Sponsors will receive an aggregate fee of USD1 million for acting as the
sponsors for the Listing.
3. Registration Procedures
The principal register of members of the Company will be maintained in the Cayman
Islands by Conyers Trust Company (Cayman) Limited and a Hong Kong branch register
of members of the Company will be maintained in Hong Kong by the Hong Kong Share
Registrar. Save where the Directors otherwise agree, all transfers and other documents
of title to Shares must be lodged for registration with, and registered by, the Company’s
branch share register in Hong Kong and may not be lodged in the Cayman Islands.
4. Preliminary Expenses
– V-40 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
5. Promoter
The Company has no promoter for the purpose of the Listing Rules. Within the two
years immediately preceding the date of this prospectus, no cash, securities or other
benefits have been paid, allotted or given to the promoters in connection with the
Capitalization Issue and the Global Offering or the related transactions described in this
prospectus.
The qualifications of the experts which have given opinions or advice which are
contained in, or referred to in, this prospectus are as follows:
J.P. Morgan Securities Licensed under the SFO to conduct Type 1 (dealing
(Far East) Limited in securities), Type 4 (advising on securities) and
Type 6 (advising on corporate finance) regulated
activities
Morgan Stanley Asia Licensed under the SFO to conduct Type 1 (dealing
Limited in securities), Type 4 (advising on securities), Type
5 (advising on futures contracts), Type 6 (advising
on corporate finance) and Type 9 (asset
management) regulated activities
Each of the experts named above has given and has not withdrawn its written
consent to the issue of this prospectus with the inclusion of its report and/or letter and/or
opinion and/or references to its name included herein in the form and context in which
they respectively appear.
(ii) has any right or option (whether legally enforceable or not) to subscribe for or
to nominate persons to subscribe for securities in any member of the Group
save in connection with the Underwriting Agreements.
– V-41 –
APPENDIX V STATUTORY AND GENERAL INFORMATION
7. Binding Effect
This prospectus shall have the effect, if an application is made in pursuance hereof,
of rendering all persons concerned bound by all of the provisions (other than the penal
provisions) of Sections 44A and 44B of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance so far as applicable.
8. Bilingual Prospectus
The English language and Chinese language versions of this prospectus are being
published separately, in reliance upon the exemption provided in Section 4 of the
Companies Ordinance (Exemption of Companies and Prospectuses from Compliance
with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).
9. Miscellaneous
(a) Save as disclosed in this prospectus, within the two years preceding the date
of this prospectus, no share or loan capital of the Company or any of its
subsidiaries has been issued or has been agreed to be issued fully or partly
paid either for cash or for a consideration other than cash.
(b) Save as disclosed in this prospectus, no share or loan capital of the Company
or any of its subsidiaries is under option or is agreed conditionally or
unconditionally to be put under option.
(d) None of the equity and debt securities of the Company is listed or dealt in on
any stock exchange (other than the Stock Exchange) nor is any listing or
permission to deal being or proposed to be sought.
(f) There is no arrangement under which future dividends are waived or agreed to
be waived.
(g) The English text of this prospectus and the Application Forms shall prevail
over their respective Chinese text.
(h) There has not been any interruption in the business of the Group which may
have or has had a significant effect on the financial position of the Group in the
12 months preceding the date of this prospectus.
– V-42 –
APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE FOR INSPECTION
The documents attached to the copy of this prospectus delivered to the Registrar of
Companies in Hong Kong for registration were:
(a) a copy of each of the WHITE, YELLOW and GREEN Application Forms;
Copies of the following documents will be available for inspection at the offices of
Freshfields Bruckhaus Deringer at 55th Floor, One Island East, Taikoo Place, Quarry
Bay, Hong Kong, during normal business hours up to and including the date which is 14
days from the date of this prospectus:
(b) the Accountant’s Report and the report on the unaudited pro forma financial
information issued by PricewaterhouseCoopers, the texts of which are set out
in “Appendix I – Accountant’s Report” and “Appendix II – Unaudited Pro Forma
Financial Information,” respectively;
(c) the audited combined financial statements of the Group for the years ended 31
December 2017 and 2018 and for the three months ended 31 March 2019;
(d) the letter from Conyers Dill & Pearman, the Company’s Cayman Islands legal
adviser, summarizing the Memorandum and Articles of Association of the
Company and certain aspects of Cayman Companies Law referred to in
“Appendix IV – Summary of the Constitution of the Company and Cayman
Islands Companies Law”;
(e) the legal opinion from Fangda Partners, the Company’s PRC Legal Adviser, in
respect of certain aspects of the Company;
(f) the legal opinion from KIM & CHANG, the Company’s South Korean legal
adviser, in respect of certain aspects of the Company;
(g) the legal opinion from Gilbert + Tobin, the Company’s Australian legal adviser,
in respect of certain aspects of the Company;
– VI-1 –
APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE FOR INSPECTION
– VI-2 –
APPENDIX VII DEFINITIONS AND GLOSSARY
In this prospectus, unless the context otherwise requires, the following expressions
shall have the following meanings.
“AB InBev Excluded Business” (a) any projects developed by the global research and
development and incubation platforms of the AB
InBev Group (including, but not limited to, ZX
Ventures, GITEC, ZITEC and Z-Tech) before or after
the Listing Date; and (b) certain pre-existing licensing
and distribution arrangements for beer (both alcohol
and non-alcohol), cider and other alcohol malt-based
beverages in the APAC Territories that had been
entered into by members of the AB InBev Group with
third parties before the Listing Date, provided that
any profits derived directly by such member of the AB
InBev Group from the relevant third party under such
arrangements will be transferred to the Group with
effect from the Listing Date
“AB InBev Group” AB InBev and its subsidiaries (excluding the Group)
“AB InBev Products” products offered for sale under brands that are owned
or acquired by or licensed to the AB InBev Group
– VII-1 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“APAC Territories” (1) Australia; (2) Bangladesh; (3) Bhutan; (4) Brunei
Darussalam; (5) Burma (Myanmar); (6) Cambodia;
(7) China (including Hong Kong, Macau and Taiwan);
(8) Cook Islands; (9) Federated States of Micronesia;
(10) Fiji; (11) India; (12) Indonesia; (13) Japan; (14)
Kiribati; (15) Laos; (16) Malaysia; (17) Maldives; (18)
Marshall Islands; (19) Mongolia; (20) Nauru; (21)
Nepal; (22) New Caledonia; (23) New Zealand; (24)
Niue; (25) Palau; (26) Papua New Guinea; (27)
Philippines; (28) Republic of Korea (South Korea);
(29) Samoa; (30) Singapore; (31) Solomon Islands;
(32) Sri Lanka; (33) Thailand; (34) Timor Leste (35)
Tonga; (36) Tuvalu; (37) Vanuatu; (38) Vietnam; and
(39) Wallis and Futuna
– VII-2 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Asia Pacific East” one of the Group’s two operating and reporting
segments, comprising primarily Australia, Japan and
South Korea
“Asia Pacific West” one of the Group’s two operating and reporting
segments, comprising China, India, Vietnam and
exports elsewhere in Asia Pacific
“Capitalization Issue” the issue of Shares on the Listing Date by way of the
capitalization of certain sums standing to the credit of
the share premium account of the Company to the
Trustee for the purpose of satisfying the RSUs and/or
Options to be issued under the Share Award Scheme,
details of which are set out in the section headed
“Appendix V – Statutory and General Information – A.
Further Information About the Company – 3. Written
Resolutions of Shareholders Passed on 2 July 2019”
in this prospectus
– VII-3 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Controlling Shareholders” has the meaning given to it in the Listing Rules and,
unless the context requires otherwise, refers to AB
InBev, and/or the AB InBev Intermediate Holding
Companies
– VII-4 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Foster’s Group” Foster’s Group Pty Ltd, an entity formed under the
laws of Australia, prior to its acquisition by SAB
“Global Offering” the Hong Kong Public Offering and the International
Offering
“Group,” “we,” “our” or “us” The Company and its subsidiaries, including where
the context otherwise requires, any companies that
will become our subsidiaries as part of the
Reorganization and the businesses carried on by
them or their predecessors (as the case may be)
“HKD “or “Hong Kong dollars” Hong Kong dollars, the lawful currency of Hong Kong
– VII-5 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Hong Kong Offer Shares” the 81,327,000 Shares initially being offered by the
Company pursuant to the Hong Kong Public Offering
(subject to reallocation as described in “Structure of
the Global Offering”)
“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares to the public
in Hong Kong for subscription at the Offer Price, on
and subject to the terms and conditions set out in this
prospectus and the Application Forms, as further
described in “Structure of the Global Offering”
“Hong Kong Share Registrar” Computershare Hong Kong Investor Services Limited
“independent third party” any party who is not connected (within the meaning of
the Listing Rules) with the Company, so far as the
Directors are aware after having made reasonable
enquiries
– VII-6 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“International Offering” the offer of the International Offer Shares (a) in the
US solely to QIBs pursuant to an exemption from, or
in a transaction not subject to, the registration
requirements of the US Securities Act or (b) outside
the US in offshore transactions in reliance on
Regulation S, at the Offer Price, in each case on and
subject to the terms and conditions of the
International Underwriting Agreement, as further
described in “Structure of the Global Offering”
“Joint Global Coordinators” J.P. Morgan Securities (Asia Pacific) Limited, Morgan
Stanley Asia Limited, Merrill Lynch (Asia Pacific)
Limited and Deutsche Bank AG, Hong Kong Branch
– VII-7 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Joint Lead Managers” J.P. Morgan Securities (Asia Pacific) Limited (in
relation to Hong Kong Public Offering only), J.P.
Morgan Securities plc (in relation to International
Offering only), Morgan Stanley Asia Limited (in
relation to Hong Kong Public Offering only), Morgan
Stanley & Co. International plc (in relation to
International Offering only), Merrill Lynch (Asia
Pacific) Limited, Deutsche Bank AG, Hong Kong
Branch, BNP Paribas Securities (Asia) Limited, China
International Capital Corporation Hong Kong
Securities Limited, Citigroup Global Markets Asia
Limited (in relation to Hong Kong Public Offering
only), Citigroup Global Markets Limited (in relation to
International Offering only), The Hongkong and
Shanghai Banking Corporation Limited, Banco
Santander, S.A. (in relation to International Offering
only), BOCI Asia Limited, Coöperatieve Rabobank
U.A. (in relation to International Offering only), ICBC
International Securities Limited, ING Bank N.V.,
Mizuho Securities Asia Limited, MUFG Securities
EMEA plc (in relation to International Offering only),
SMBC Nikko Capital Markets Limited (in relation to
International Offering only) and Societe Generale
“Korea Debt Receivable Loan” the loan note due from the Company to Mexbrew
Investment SARL, see “History, Development and
Reorganization”
“Latest Practicable Date” 27 June 2019, being the latest practicable date for the
purpose of ascertaining certain information contained
in this prospectus prior to its publication
– VII-8 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Maximum Offer Price” HKD47.00 per Offer Share, being the maximum
subscription price in the Offer Price Range
“Minimum Offer Price” HKD40.00 per Offer Share, being the minimum
subscription price in the Offer Price Range
– VII-9 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Offer Price” the final offer price per Offer Share (exclusive of
brokerage of 1.0%, SFC transaction levy of 0.0027%
and Stock Exchange trading fee of 0.005%) of not
more than HKD47.00 and expected to be not less
than HKD40.00, such price to be determined by
agreement between the Joint Representatives (on
behalf of the Underwriters) and the Company on or
before the Price Determination Date
“Offer Shares” the Hong Kong Offer Shares and the International
Offer Shares, together with, where relevant, any
additional Shares which may be issued by the
Company pursuant to any exercise of the Over-
allotment Option
“Oriental Brewery” Oriental Brewery Co., Ltd., an entity formed under the
laws of Korea
“PRC” or “China” the People’s Republic of China, but for the purposes
of this prospectus only, except where the context
requires, references in this prospectus to PRC or
China exclude Hong Kong, Macau and Taiwan
– VII-10 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“principal markets” the key markets in Asia Pacific that the Company
operates in, namely China, Australia, South Korea,
India and Vietnam
– VII-11 –
APPENDIX VII DEFINITIONS AND GLOSSARY
– VII-12 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Share Award Schemes” the Discretionary Restricted Stock Units Plan, the
Share-Based Compensation Plan, the People Bet
Plan, and the Discretionary Long-Term Incentive
Plan of the Company approved by the Board and by
the Shareholders on 2 July 2019 for the grant of,
among others, RSUs and Options to eligible
participants, a summary of the principal terms of
which is set forth in the section headed “Appendix V –
Statutory an General Information – D. Share Award
Schemes”
“Smart Drinking Goals” the smart drinking goals of the Company, which
include City Pilot, Social Norms, NABLAB and
Alcohol Health Literacy
– VII-13 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“Track Record Period” the two financial years ended 31 December 2018 and
the three months ended 31 March 2019
“US” or “United States” the United States of America, its territories and
possessions, any state of the United States and the
District of Columbia
“US Securities Act” the United States Securities Act of 1933, as amended
“White Form eIPO” the application for Hong Kong Offer Shares to be
issued in the applicant’s own name by submitting
applications online through the designated website of
White Form eIPO at www.eipo.com.hk
“White Form eIPO Service Computershare Hong Kong Investor Services Limited
Provider”
– VII-14 –
APPENDIX VII DEFINITIONS AND GLOSSARY
In this prospectus, unless the context otherwise requires, the terms “associate”,
“close associate”, “connected person”, “core connected person”, “connected
transaction”, “subsidiary” and “substantial shareholder” shall have the meanings
given to such terms in the Listing Rules, unless the context otherwise requires.
Certain amounts and percentage figures included in this prospectus have been
subject to rounding adjustments. Accordingly, figures shown as totals in certain tables
may not be an arithmetic aggregation of the figures preceding them.
“B2B” business-to-business
“B2C” business-to-consumer
“HL” hectoliter
– VII-15 –
APPENDIX VII DEFINITIONS AND GLOSSARY
“PCC” or “Per Capita beer per capita consumption in terms of liters per
Consumption” year, which is based on total beer industry volume per
unit of total population
“POCs” points-of-connection
“Retail Selling Price or RSP” the price of products sold to the end users for
consumption
– VII-16 –