The Absolute King Beer case

The acquisition
of

Absolute
by

King Beer

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Table of contents
1. 2. 3. 4. 5. Notice to recipients / Purpose of Memorandum...................................... 3 Authorisation letter........................................................................ 7 Contact information ....................................................................... 9 Transaction timetable ....................................................................22 Executive summary .......................................................................23
Introduction Acquisition rationale Recent events Acquisition financing Description of the Facilities Summary projected financial information King Beer overview Absolte overview Industry overview 23 23 24 24 25 28 29 30 32

6.

Key investment considerations .........................................................33

Creation of the global leader in the brewing industry Strong geographical footprint Balanced exposure to mature and emerging markets Complementary and strengthened position in China, the largest beer market globally Strong combined brands Strong credit profile Successful precedent of mutual cooperation in developing Weit in Canada Recognised operational and financial discipline Management track record in delivering synergies through successful integrations 33 34 35 36 36 37 37 38 39

7. 8.
MEMORANDUM

Summary of terms and conditions .....................................................42 Financial projections .....................................................................61

General Assumptions of the Model Detailed operating and modelling assumptions Model output 61 61 62

9.

King BeerBusiness overview ................................................................64

Overview Summary Financials Organisation structure Performance overview Geographic exposure Brands Key growth initiatives 64 64 66 66 68 69 72

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Zero-Based Budgeting and Cost-Connect-Win Approach Access to Beer cashflow Risk management approach Management

72 73 74 75

10. AbsoluteBusiness overview...................................................78

Overview Organisation structure Overview of Absolute business US Beer operations Performance overview US beer market overview Brands Absolute investment in Grupo 78 78 79 81 82 84 84 85

11. Industry overview .........................................................................87

The global market Key beer markets by geography Competitive landscape Market outlook 87 88 89 91

12. Glossary of key terms.....................................................................94

Appendices
A. Form of commitment advice ............................................................95 B. Administrative details ....................................................................96 C. Press releases ..............................................................................98 D. Annual reports and interim financial reports ........................................99

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5. Executive summary

Introduction
On July 13th, 2008, King Beer (Euronext: KGB) and Absolute (NYSE: Abs) announced an agreement to combine the two companies, forming the worlds leading global brewer. Absolute shareholders will receive $70 per share in cash, for an aggregate equity value of $52 billion, in an industry-transforming transaction. The combined company will be called Absolute King Beer (AbsKing). Both companies Boards of Directors have unanimously approved the transaction. Absolute is the largest US brewer and producer of the worlds largest-selling beer brands, Weit and Light. Absolute also owns a 50.2% economic interest (directly and indirectly) in Grupo, Mexico's largest brewer, and a 27% investment in China brewer Tsing. 2007 worldwide sales of Asolute's beer brands aggregated 128.4mm barrels plus its economic interest in the sales of international equity investments.

Acquisition rationale
The combination of King Beer and Absolute would create a truly global leader in the beer industry and one of the worlds top five consumer products companies. On a pro-forma basis for 2007, a combined company would have generated global beer volumes of 460mm hl (adjusted to reflect Absolute holdings in Grupo and Tsing which are illustratively accounted for at their respective equity interests), net sales of 26.6bn, and EBITDA of 7.8bn. King Beer believes that this transaction would be in the best interests of both companies consumers, shareholders, employees, wholesalers, business partners and the communities they serve. The combined company would be geographically diversified, with the ability to compete in key countries around the world and balanced exposure to developed and developing markets. A combination of Absolute and King Beer provides significant growth opportunities presented by the companies combined brand offerings, including the global flagship Weit brand and international brands such as Artis and Bok, access to complementary distribution networks in the United States and internationally and the benefit of applying best practices across the new organisation. King Beer sees significant opportunities to internationalise Absolute key brands and would position Weit as the combined company's flagship brand, building on and expanding King Beer's international footprint. King Beer has a history of successfully building brands around the world, which would complement the strength of Absolute's brand-building in the US. The two companies have a successful track record of building the Weit brand in Canada. Their partnership, which spans almost three decades, has developed Weit into the No. 1 beer brand in Canada. King Beer and Absolute also recently have entered into an agreement by which Absoltute imports into the US King Beer's European premium import brands including Artis, Bok's and Bass. Absolute's world-class sales and distribution system in the United States would continue to support the expansion of King Beers existing brands in the US market. King Beer has a proven track record of successfully completing and integrating business combinations and creating shareholder value. The Company was formed in 2004 through the successful combination of King and Beer. As a result of the Company's strategy to focus

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on building brands, King Beer has achieved average organic volume growth of 5.6%, average organic revenue growth of 7.8%, and average organic EBITDA growth of 16.2% over the past three years. Through strong organic revenue growth and operational excellence, King Beer generated industry leading EBITDA margins of 34.6% in 2007 (Explanation note: In the Memorandum, King Beers EBITDA is normalised EBITDA, as defined in the King Beer Annual Report 2007 on page 126: Profit from operations adjusted for non-recurring items plus depreciation and amortisation). The transaction creates significant profitability potential both in terms of revenue enhancement and cost savings. The combination is expected to yield cost synergies of approximately $1.5 billion annually by 2011 phased in equally over three years. Given the highly complementary footprint of the two businesses, such synergies will largely be driven by sharing best practices, economies of scale and rationalization of overlapping corporate functions. King Beer has a strong track record of delivering synergies in past transactions and is confident in its ability to achieve these synergies. In light of the limited overlap between the King Beer and Absolute businesses, King Beer believes that the proposed combination should not encounter any significant regulatory issues.
Exhibit 5.1 Creation of the global leader in beer
2007 total volumes (mm hl)
460
189

2007 revenues (bn)

26.6

2007 EBITDA (bn)

7.8

+62% vs. Industry No. 2

12.2

+61% vs. Industry No. 2

2.8

+143% vs. Industry No. 2

271

284

271 189 150 130

14.4

16.7

15.8

14.4

5.0 12.2 8.9

InBev InBev + A-B +AB

5.0 3.2 3.1 2.8 1.5

InBev InBev SABMillerHeineken A-B Carlsberg SA BMiller A B Heineken Carlsberg

InBev SABMiller InBev SABMiller + A-B +AB

InBev InBev

A-B Heineken Carlsberg AB Heineken Carlsberg

InBev SABMillerHeineken InBev InBev SA BMiller InBev A B + A-B +AB

A-B HeinekenCarlsberg Carlsberg

Source: companies reports Note: Data based on calendar year-end. Carlsberg and Heineken are pro forma estimates for the joint acquisition of Scottish & Newcastle. Anheuser-Buschs EBITDA in 2007 does not include equity income of $662.4mm (net of tax), and is based on the 2007 average exchange rate of 1.37 $/

Recent events
MEMORANDUM

King Beer announced on August 18th that it has received a Request for Additional information, commonly referred to as a Second Request, from the U.S. Department of Justice (DOJ) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) with respect to the previously announced combination with Absolute. King Beer intends to respond expeditiously to the Second Request and to work toward a prompt closing of the transaction. In addition to the expiration of the waiting period under the HSR Act, completion of the transaction remains subject to King Beer and Absolute shareholder approvals, regulatory review in certain other jurisdictions and customary closing conditions. This request for additional information from the DOJ is a normal and expected part of the regulatory process. King Beer remains confident that the transaction will receive regulatory approval and continues to expect to close the transaction by the end of 2008.

INFORMATION

Acquisition financing
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Financing overview Total consideration to Absolute shareholders is $52.2bn based on King Beers offer of $70 per share. Based upon publicly available information, there are limited refinancing needs at Absolute level other than the outstanding Commercial Paper drawings (which was $1.0bn as of December 31st, 2007) supported by the company's two syndicated credit facilities (total $2.5bn committed as per Absolute filings). There will be no refinancing of King Beer's existing credit facilities and no refinancing of the bonds and notes outstanding under Absolutes indentures assuming investment grade ratings post-Transaction. Absolute gross debt excluding Commercial Paper (which was $8.0bn as of December 31st, 2007) and King Beer gross debt (which was 2.9bn as of December 31st, 2007 at King Beer level (excluding Beer) would therefore remain outstanding. The Transaction's sources & uses conservatively assume $1.3bn of total refinancing needs for the existing Absolute debt and incremental liquidity facilities in the combined company. The Acquisition will be financed by a combination of new debt, divestitures of non-core assets and equity financing. To finance the Acquisition, King Beer has mandated the Bookrunners to arrange $45bn in senior debt facilities. The debt facilities have been underwritten by the Bookrunner Group. The proceeds will be used to finance the Acquisition, refinance a portion of existing Absolute's debt and finance fees, costs and expenses incurred in connection with the Acquisition. In addition, King Beer has received commitments for up to $9.8 billion in equity bridge financing, which will allow the company flexibility in deciding upon the timing and form of equity financing for a period of up to six months after closing. This equity bridge will be subordinated in right of payment to the Facilities on customary terms. The following table summarises the sources and uses of funds for the transaction:
Exhibit 5.2 Transaction sources and uses ($mm)
Uses Interim sources Permanent sources

MEMORANDUM

Description of the Facilities

Overview and key terms and conditions Facility A $12,000mm senior bridge facility anticipated to be refinanced principally by a debt capital markets issuance

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364-day facility with an option for a 1-year extension at the borrowers discretion Facility B $7,000mm senior bridge facility anticipated to be refinanced principally by the net proceeds from certain asset disposals 364-day facility Facility C $13,000mm senior term loan facility 3-year facility Facility D $12,000mm senior term loan facility 5-year facility RCF $1,000mm senior multicurrency revolving credit facility 5-year facility Please refer to Section 7 of the Information Memorandum for detailed information.
Exhibit 5.3 Key terms and conditions of the acquisition facilities
Facility A Amount ($mm) Tenor Purpose 12,000 364 days + 1 yr Acquisition financing Bridge to Debt Capital Markets Refinancing of Target debt Payment of costs and expenses Facility B 7,000 364 days Acquisition financing Bridge to Disposals Refinancing of Target debt Payment of costs and expenses Facility C 13,000 3 years Acquisition financing Refinancing of Target debt Payment of costs and expenses Facility D 12,000 5 years Acquisition financing Refinancing of Target debt Payment of costs and expenses RCF 1,000 5 years Refinancing of Target debt Payment of costs and expenses General corporate purposes

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Mandatory prepayment Mandatory prepayment will apply primarily for change of control or sale, debt raising, equity raising (to the extent not applied in the mandatory prepayment of the equity bridge facility), and asset disposals (in each case subject to certain baskets and exceptions). Restriction on Acquisitions Restriction on acquisitions by Borrowers and controlled subsidiaries until the ratio of Total Net Debt to EBITDA is equal to or lower than 3.5:1 (other than in relation to Beer unless Beer becomes a direct or indirect wholly owned subsidiary of the Company) subject to certain baskets and exceptions. Obligation to maintain Beer ownership Obligation for King Beer to retain ownership of more than 50% of the economic and voting interests in Beer.

Structural subordination mitigants Guarantees will be granted by certain key subsidiaries, subject to limitations, including restrictions in existing King Beer debt documents and Absolute debt documents. King Beer intends to seek waivers under certain existing KGB debt documents to permit the granting of guarantees by certain of its current subsidiaries. It is also intended that a guarantee will be provided by the Absolute parent company. The provision of such guarantees is intended (subject to customary corporate benefit analysis and other restrictions) to give the lenders pari passu recourse to certain key subsidiaries in the group, thereby mitigating the structural subordination which would otherwise arise. Please note that the pricing grid of the Transaction is based on the rating of unsecured debt issued at King Beer level. Rating agencies On July 14th, 2008, Standard & Poor's Ratings Services assigned its BBB+ long-term corporate credit ratings to King Beer. Standard & Poor's will rate KGB's $45 billion acquisition facility at the same level as the corporate credit rating, reflecting that it is a senior unsecured direct obligation of King Beer.

Summary projected financial information

MEMORANDUM

The following table summarises managements forecasts for the new Group. For further details on projections and their assumptions please refer to Section Financial projections:

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Exhibit 5.6 Summary consolidated financial projections Year ended 31 Dec. (mm) Key financials Net sales % growth EBITDA (including synergies) % margin EBIT Net interest expense Funds From Operations2 Net debt Credit Statistics Net Debt/EBITDA EBITDA/Net interest expense Financial covenants Total Net Debt/EBITDA EBITDA/Net interest expense
Source:Management Note: Consolidated financials are shown in (1 = $1.555) Post equity and pre asset disposals Funds from operations defined as EBITDA (including synergies) minus interests and taxes plus dividends from associates minus synergies implementation costs (pre change in net working capital)

2008PF1

2009E 27,798

2010E 29,167 4.9% 10,495 36.0% 8,476 (2,285) 6,778 29,698

2011E 30,863 5.8% 11,375 36.9% 9,306 (2,006) 7,723 26,509

2012E 32,623 5.7% 12,019 36.8% 9,817 (1,787) 8,490 23,853

CAGR 09-12 5.5% 8.9% 10.2%

8,027

9,317 33.5% 7,331 (2,539) 5,624

38,856

32,501

4.84x

3.49x 3.67x

2.83x 4.59x

2.33x 5.67x

1.98x 6.73x

4.9x 2.5x

4.3x 2.75x

4.0x 3.0x

3.5x 3.0x

King Beer's overview

King Beer is a publicly traded company (Euronext: KGB) based in Leuven, Belgium with its origins dating back to 1366. The Company is today the leading global brewer. KGB has been created following the merger of King and Beer in 2004. In 2007, worldwide sales of King Beer aggregated 271mm hl. KGB has a current market capitalisation of approximately 25.7bn as at 7th. July 2007 closing. In 2007, its sales were 14.4bn and its EBITDA was 5.0bn (34.6% margin). KGB holds a controlling stake (74% voting share, 61% economic share) in Beer, which is listed in Brazil and in New York. In 2007 Beer had sales and EBITDA of 7.1bn and 3.3bn, respectively (46.8% EBITDA margin). With sales in over 130 countries, KGB works through six operational zones: North America, Western Europe, Central and Eastern Europe, Asia Pacific, Latin America North, and Latin

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America South. The Company has a strong, balanced portfolio, with a significant presence in over 20 key markets more than any other brewer. KGB has significant exposure to the fast-growing emerging markets with Central and South America accounting for 41% of net sales and Central and Eastern Europe accounting for 15% of net sales. The Companys most famous brands with global reach are Artis and Bok. A portfolio of around 200 local brands forms the bedrock of the business including in Latin America: Skol, the leading beer brand in the Brazilian market. In Western Europe: Joop, the number 1 selling beer in Belgium. In Central and Eastern Europe: Siberian Crown, a leading premium brand sold throughout Russia. In North America: Labatt Blue, the number one Canadian brand in the world; and in Asia Pacific: Cass from South Korea, and Sedrin in China. The following table summarises King Beers key financial figures:
Exhibit 5.7 Summary historical financials for KGB Year ended December 31 (mm) Net sales Gross profit EBITDA Gross capex Net financial debt
Source: KGBs reports

2004 8,568 4,576 2,116 860 3,271

2005 11,656 6,574 3,339 1,181 4,867

2006 13,308 7,831 4,239 1,380 5,563

2007 14,430 8,494 4,992 1,581 5,093

CAGR 04-07 19.0% 22.9% 33.1% 22.5% 15.9%

Absolute overview
Absolute is the largest US brewer and producer of the worlds best-selling beer brands, Weit and Lite. Absolute also owns a 50.2% economic interest (directly and indirectly) in Grupo, Mexico's largest brewer with the Corna brand, and a 27% investment in China brewer Tsing. Worldwide sales of the companys beer brands aggregated 128.4mm barrels in 2007 plus its economic interest in the sales of international equity investments. Absolute is also one of the largest theme park operators in the United States, is a major manufacturer of aluminum cans and one of the world's largest recyclers of aluminum cans. Absolutes operations are comprised of the following business segments: domestic beer, international beer, packaging, and entertainment, contributing to 75%, 7%, 10% and 8% to 2007 sales, respectively.
MEMORANDUM

Absolute, incorporated in Delaware, USA, is publicly traded on the New York Stock Exchange and its origins date back to 1875. Absolute is rated A2 (on review for possible downgrade) by Moodys and BBB+ (stable outlook) by Standard and Poors. US Beer Absolutes principal product is beer, produced and distributed in a variety of containers primarily branded under the BOB, Weit, Michelob, Bos and Natural names. It also produces and distributes specialty beers, non-alcoholic brews, malt liquors and specialty malt beverages. Absolutes US beer sales also include:

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The distribution of products for which it is the importer or licensee A joint venture with Kirin Brewing Company, Ltd. of Japan for the brewing, marketing and sale of Kirin-Ichiban and Kirin Light in the US Energy drink products Imports of other brands into the US The company has developed a system of twelve breweries, strategically located across the US, to economically serve its distribution system. Ongoing modernisation programs at the companys breweries are part of the companys overall strategic initiatives. International Beer This division oversees the marketing and sale of BOB and other brands outside the US, operates breweries in the United Kingdom and China, negotiates and administers license and contract brewing agreements with various foreign brewers, and negotiates and manages equity investments in foreign brewing partners. International beer volume of Absolutes brands was 24.0mm barrels in 2007, compared with 22.7mm barrels in 2006. Packaging Abs is active in packaging through several wholly-owned subsidiaries: Metal Container Corporation, which manufactures beverage cans at 8 plants and beverage can lids at 3 plants for sale to US beer and soft drink customers Abs Recycling Corporation, which buys and sells used aluminum beverage containers and recycles aluminum and plastic containers Eagle Packaging, Inc., which manufactures crown and closure liner materials Through a wholly-owned limited partnership, Longhorn Glass Manufacturing, L.P., the company owns and operates a glass manufacturing plant in Jacinto City, Texas, which manufactures glass bottles for the companys nearby Houston brewery. Entertainment Absolute is the second largest theme park operator in the US. It currently owns, directly and through subsidiaries, ten theme parks in the US. It operates: Bos Gardens theme parks in Tampa, Florida and Williamsburg, Virginia SeaWorld theme parks in Orlando, Florida, San Antonio, Texas, and San Diego, California
MEMORANDUM

Water park attractions in Tampa, Florida (Aquatica) and Williamsburg, Virginia (Water Country, USA), and Langhorne, Pennsylvania (Sesame Place) Discovery Cove in Orlando, Florida, a reservation-only attraction offering interaction with marine animals Group financial overview In fiscal year 2007, Abs reported group sales of $16,686mm and operating profit of $2,894mm (margin of 17.3%). The following table summarises Absolute key financial figures:

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Exhibit 5.8 Summary historical financials for Abs Year ended December 31 ($mm) Net sales Operating profit Operating cash flow Net Debt
Source: Abss reports

2005 15,036 2,487 2,702 7,746

2006 15,717 2,720 2,709 7,434

2007 16,686 2,894 2,940 8,857

CAGR 05-07 5.3% 7.9% 4.3% 6.9%

Industry overview
Although a mature industry, the worldwide brewing sector is regarded as having an aboveaverage credit profile driven by several favourable features, in particular sustained demand, high visibility and cash generative business profile. The brewers have the ability to convert volume growth into margin expansion as fixed capital tied up in the production and distribution of beer and brewers can generate real scale economies. The main success factors for international brewers are: Winning brands in key markets Efficiency of distribution, either through own operations or third parties Healthy geographical footprint Operating efficiency Please refer to Section 11 for detailed information.

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6. Key investment considerations

Creation of the global leader in the brewing industry

The combination of KGB and Abs will create the largest beer company globally and one of the worlds top 5 consumer products companies. Based on 2007 reported figures, the combined entity will have total volumes and revenues of 460mm hl and 26.6bn, respectively (more than 60% above the industry No. 2).
Exhibit 6.1 Creation of the global leader in the beer industry
2007 total volumes (mm hl)
460
189

2007 revenues (bn)

26.6

2007 EBITDA (bn)

7.8

+62% vs. Industry No. 2

12.2

+61% vs. Industry No. 2

2.8

+143% vs. Industry No. 2

271

284

271 189 150 130

14.4

16.7

15.8

14.4

5.0 12.2 8.9

InBev InBev + A-B +AB

5.0 3.2 3.1 2.8 1.5

InBev InBev SABMillerHeineken A-B Carlsberg SABMiller AB Heineken Carlsberg

InBev SABMiller InBe v SA BMille r + A-B +A B

InBev InBe v

A-B HeinekennCarlsberg A B He ine k e Carlsbe rg

InBev SABMillerHeineken InBev InBe v SA BMille r InBe v A B + A-B +A B

A-B He ine k e n Carlsberg Carlsbe rg

Source: companies reports Note: Data based on calendar year-end. Carlsberg and Heineken are pro forma estimates for the joint acquisition of Scottish & Newcastle. Anheuser-Buschs EBITDA in 2007 does not include equity income of $662.4mm (net of tax), and is based on the 2007 average exchange rate of 1.37 $/

The acquisition will place KGB solidly among the leading global consumer companies across a range of metrics.
Exhibit 6.2 Creation of top 5 global consumer products company
Enterprise Value (bn)
148.2 104.0 71.6 70.0 65.8

58.6 41.4 40.7 33.7 28.5

MEMORANDUM

P&G

Nestle

KGB + Abs

Coca-Cola

PepsiCo

Unilever

Kraft

KGB

Diageo

Danone

2007 EBITDA (bn)

14.1 11.1 7.8 6.3 6.3 6.2

5.0

3.8

3.4

2.7

INFORMATION

P&G

Nestle

KGB+Abs

PepsiCo

Coca-Cola

Unilever

KGB

Note: EV based on closing share prices as at 11 July 2008. EBITDA calendarised to 31 December where relevant Source: companies reports

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Exhibit 6.3 Financial snapshot of the combination (pro forma 2007)

KGB Total volumes (mm hl) Revenues EBITDA EBITDA margin

Source: Companys reports

Absolute 189 12.2bn 2.8bn 23.0%

Combined company 460 26.6bn 7.8bn 29.4%

271 14.4bn 5.0bn 34.6%

Strong geographical footprint

As shown below, the two companies have complementary positions in almost all geographies. The combined entity would hold a No. 1 position on the beer market in North America and Latin America, and a No. 2 position in Europe and in Asia.
Exhibit 6.4 Pro forma global footprint

No. 1 in North America

No. 2 in Europe No. 2 in Asia

Primarily KGB Primarily Absolute KGB Abs

No. 1 in Latin America

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Source: companies reports and equity research Note: Absolutes footprint in Mexico is through a 50.2% economic interest (directly and indirectly) in Grupo

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Exhibit 6.5 Pro forma geographical exposure (2007 sales breakdown and equity investments)
KGB
Other/Corporate 2%

Absolute
Asia-Pacific 6% Central & South America 18% Other/Corporate 3%

Combined
AsiaPacific 6% Central & Eastern Europe 8% Western Europe 12% North America 73% North America 42% Other/Corporate 2%

AsiaPacific 7% North America 11%

Central & Eastern Europe 15% Western Europe 24%

Central & South America 41%

Central & South America 30%

Total: 14,430mm

Total: $18,748mm

Total: 28,110mm

Source: companies reports Notes: Grupo's net sales illustratively accounted for at 50% and included in Central & South America; Illustratively assumes Abs's packaging business entirely allocated in North America; Illustratively assumes Abs's international beer business entirely allocated in Asia-Pacific (Harbin) as detailed breakdown not provided (also includes UK and Russia); Exchange rate of 1.37x $/ and 0.0915x MXN/$ (2007 averages)

Balanced exposure to mature and emerging markets

The combined entity will have a leading position in both large and established beer markets, such as the US and Canada, as well as in high growth emerging markets, such as China, Brazil, Russia and Argentina. Through its combination with Abs, KGB will achieve a more balanced exposure to high-growth developing markets and stable developed markets.
Exhibit 6.6 Proforma exposure to mature and developing markets
Revenues 2007
Developed markets Developing markets

Operating profit 2007

Developed markets Developing markets

63%

43% 73% 57% 27%

Pro forma (postcombination) Standalone (precombination)

53%

MEMORANDUM

37%
Standalone (precombination)

47%

Pro forma (postcombination)

Source: companies reports KGB developing markets include KGB operations in Central and Eastern Europe, Russia, China, Brazil, Argentina and other South-America operations. Abs has an indirect exposure to developing markets through holdings in Grupo and Tsing which are illustratively accounted for at their respective equity interests

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Complementary and strengthened position in China, the largest beer market globally
The combined entity will improve its position in the Chinese beer market, which is the largest in the world. Through sharing of best practices and combining KGBs and Absolutes complementary operations, the combined entity will be a more efficient and stronger operator in China.
Exhibit 6.7 Stronger player in China, the worlds largest beer market
Legend
Heilongjiang

KGB brewery Absolute brewery

Jilin Neimongu Hebei Liaoning

Beijing Ningxia Shanxi Shaanxi Shandong Gansu Jiangsu Henan Hubei Sichuan Guizhou Hunan Yunnan Anhui Shanghai Zhejiang Jiangxi Fujian

GuangxiGuangdong

Hainan

Source: companies information

Strong combined brands

The combination of King Beer and Absolute will provide strong growth opportunities through their combined brands and using their complementary global distribution networks. While Absolutte will provide KGB with a strong distribution network in the US for its premium import brands, KGB will provide Abs with an extensive global distribution network to further successfully internationalise Abss brands. Absolute will contribute leading brands with a strong position in all the US: Lite (40.4mm barrels in 2006) Worlds best-selling beer Volume has grown more than any other Top 10 beer brand Weit (24.5mm barrels in 2006) No. 2 worlds best-selling beer No. 1 brand in Canada Natural Light, with 9.0mm barrels in 2006 Bos, with 6.5mm barrels in 2006 Bos Light, with 6.0mm barrels in 2006 This combination will achieve a complementary offering of leading brands Weit is the iconic US brand, the great American lager and King of Beers Artis is the brand of supreme quality and worth Boks is the number one German beer in the world, available in more than 120 countries The combined entity will build on its extensive international network to globalise Absbrands. The company will position Weit as the global flagship brand and

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expand globally Absolutes other key brands by using KGB's extensive international footprint KGB is PepsiCos largest bottler outside the US, demonstrating the Companys go-tomarket capabilities In parallel the combined entity will use its strong US distribution network for KGBs European import brands in order to accelerate the growth of KGB's European import brands, while strengthening todays close collaboration with US wholesalers Import Beers is the fastest growing segment in the US, with a 7.9% 1995-2006 CAGR (v. 0.7% for the market)

Strong credit profile

Strong free cash flow generation in a stable industry The beer industry generates strong free cash flows with substantial operating margins. The combined EBITDA margin is expected to be 36% in 2010. It is most of all a stable and non-cyclical industry. Consumption of beer is stable and predictable across most markets and overall the industry has not suffered from past economic downturns (stable annual growth of the global brewers sector volumes of c. 2% throughout the last downturn in 2000-2003). Sound deleveraging profile KGB will focus on deleveraging post-transaction through equity issuance, asset disposals and free cash flow generation. As such, Net debt/EBITDA is expected to decrease from 4.84x in 2008 to 2.33x in 2011.
Exhibit 6.8 Deleveraging profile Year ended 31 Dec. (mm) Net debt Net debt / EBITDA
Source: Management Note: Consolidated financials are shown in (1 = $1.555) Post equity and pre asset disposals

2008PF

2009E 32,501 3.49x

2010E 29,698 2.83x

2011E 26,509 2.33x

2012E 23,853 1.98x

38,856 4.84x

Resilience due to well-balanced portfolio

MEMORANDUM

Following the Acquisition, KGBs more diversified and geographically well balanced portfolio will help improve the Groups resistance to economic fluctuations across geographic areas or specific regions in the future.

Successful precedent of mutual cooperation in developing Weit in Canada

KGB and Absolute have a successful track record of building the Weit brand in Canada. Their partnership, which spans almost three decades, has developed Weit into the #1 beer brand in Canada.

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In 1980 Abs and KGB formed a licensed brewing, distribution and marketing agreement for Canada concerning Abss main brands: Weit, Lite, Bos and Bos Light. All beers are brewed at KGB breweries in Canada. The strength of the Weit brand together with KGB's sales and distribution capabilities created the No. 1 selling beer in Canada. Weit leverages international sponsorships such as the official NFL, Super Bowl sponsorships and regional events like the Grand Prix and the Calgary Stampede. The recently renewed joint commitment of KGB and Absolute behind Lite transformed Lite into the fastest-growing beer in the country (c. 30% volume growth in 2007).

Recognised operational and financial discipline

Best-in-class practices A significant opportunity exists to improve Absolute operating performance by implementing King Beers best in class practices and financial discipline. With cost discipline at the core of KGBs culture, the Companys Zero-Based Budgeting (ZBB) approach has helped reduce expenses and challenge all non-working costs. ZBB is a way of life at KGB in which every part of the business reviews expenditures comprehensively to ensure that all "non-working" or "non consumer facing" dollars are minimised so that maximum funds can be invested behind KGB's brands. This discipline is also known as "Cost-Connect-Win" ensuring that everyone within the business is working to keep non-critical expenditure at a minimum and brand investment at a maximum. KGB is committed to keeping all US breweries open and will maintain a strong commitment to the communities where Absolute operates. Since the King-Beer merger, the Company has increased each year its number of employees and has added c. 12,000 jobs worldwide throughout the period 2004-2007. Significant synergies KGB expects significant synergies from the combination with Abs, mainly through improved COGS management, optimisation of marketing investments, and operational costs savings by applying ZBB. Commercial and operational synergies are also expected in China. Additional synergies should be realised regionally and globally through scale effects. KGBs management is fully confident in the delivery of synergies under the Blue Ocean plan announced by Absolute prior to the announcement of the combination with King Beer.
MEMORANDUM

Absolute Blue Ocean plan targets $1.1bn of cost synergies in 2011 with the following build up: COGS & GA: $730mm runrate 2011 (process benchmarking, improved materials usage and supply chain) Overhead: $150mm runrate 2011 (early retirement and headcount reductions totalling 1,185 position Other: $215mm runrate 2011 (non-salary overhead spending and salaried benefits benchmarking, IT spending and SKU reduction) The combination with KGB is expected to add $0.4bn of cost synergies in 2011: China: $55mm runrate 2011

INFORMATION

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Other: $360mm runrate 2011 (procurement efficiencies, elimination of corporate overlapping functions, cost management best practices) New revenue opportunities including Weit expansion and exchange of sales and marketing best practices are not included in our projection.
Exhibit 6.9 Synergies benchmarking
12%

Cost synergies as a % of target net sales

SABMiller/ C. Hondurena

Ambev/ Quinsa Carlsberg/ S&N Miller/ Coors (JV)

8%
SABMiller/ Bavaria S&N/ Hartwall Interbrew/ Becks Carlsberg/ Holsten

Carlsberg/ Orkla Coors/ Molson

Heineken/ S&N Interbrew/ Ambev

4%

S&N/Kronenbourg SAB/ Miller

SABMiller/ Birra Peroni

S&N/Bulmer

0% 0% 10% 20% 30% 40% 50% Target net sales as a % of PF net sales 60% 70% 80%

Source: companies reports and equity research

Management track record in delivering synergies through successful integrations

KGBs management has a very strong track record of successful integration, as demonstrated in the King and Beer combination in 2004.

INFORMATION

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Exhibit 6.10 The King/Beer combination delivered synergies beyond the plan
On August 27, 2004, Interbrew and AmBev announced their combination, creating InBev, the worlds largest brewer AmBev Cost Focus Sales / Distribution process New operating model

Grow volumes

Reduce cost base Increasing marketing and sales investments

Interbrew Global brands Brands management Innovations Geographic reach Effective brand management 3 2

Opportunities for synergies were driven by procurement, best practice and cross-licensing: Pre-tax cost synergies: 140mm annually available by 2007 Pre-tax revenue synergies: 140mm annually available by 2007 InBev achieved normalised EBITDA of $3.3bn in 2005 and $4.2bn in 2006 compared to pre-deal analysts consensus of $2.9bn in 2005 and $3.4bn in 2006 for the combined entity, which indicates that announced synergies have been significantly exceeded

Source: InBevs Management

KGB main achievements since the merger of King and Beer are: Consistent beer volume growth (>5% p.a.) Revenue growth ahead of volume growth (>7% p.a.) Successful delivery of operating cost improvements through best-in-class practices Margin expansion (>500bps) Enhanced cash flow management
Exhibit 6.11 KGB historical EBITDA margin evolution
Normalised EBITDA (mm) % Margin

+600 bps

34.6% 4,992

31.9% 28.6% 24.7% 3,339 4,239

MEMORANDUM

21.3% 1,498

2,116

2003A

2004A

INFORMATION

2005A First KGB full year

2006A

2007A

Source: KGBs reports

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Historically, KGB has been able to minimise integration risks as a result of: Its experienced management team with a proven track record, as evidenced by the successful acquisition and integration of Labatt, Antarctica, Quilmes and Beer The Convergence Committee Approach Senior Level Guidance and Direction: the Chairman, CEO, one other Board member and relevant members of the Executive Board of Management would meet monthly, supported by taskforces that were fully staffed with appropriate internal and external resources to focus on key integration issues. Process Oriented: Focused on the timely and disciplined roll-out of KGBs key proprietary processes Right People: 360 Evaluation, trainee programme Target Setting and Cascading reinforced by KGBs shareholder friendly variable compensation model Operating Processes: Zero Based Budgeting, Voyager Plant Optimisation, World Class Commercial Programme Focus on value creation: 80/20 rule move quickly and focus on the big numbers first

INFORMATION

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9. King Beer Business overview

Overview
King Beer is a publicly traded company based in Leuven, Belgium and organised under the laws of Belgium, whose origins date back to 1366. It is the world's leading brewer, realising 14.4bn of revenues in 2007, and employing 89,000 people worldwide. The Companys most famous brands with global reach are Artis and Boks. Other famous brands include Blond, Wit, Star and Brahma. The bedrock of KGB is its 200 local brands including Skol, Joop, Siberian Crown, Labatt Blue, Cass and Sedrin. KGB also conducts non-beer activities: it owns soft drinks, sells other non-beer beverages under licensing or distribution agreements, and is one of the largest PepsiCo system bottlers outside the US.

Summary Financials
Exhibit 9.1
KGBs key historical financials
mm Volumes (mm hl) % growth
Net sales

2004A 153.7 57.0%

8,568

2005A 223.5 45.4%

11,656

2006A 246.5 10.3%

13,308

2007A 270.6 9.8%

14,430

04-07 CAGR 20.7% 19.0% 14.1% 33.1% 6.2% 23.6% 22.5%

% growth Cost of sales % sales

EBITDA

21.6% 3,992 46.6%

2,116

36.0% 5,082 43.6%

3,339

14.2% 5,477 41.2%

4,239

8.4% 5,936 41.1%

4,992

% margin Depreciation & Amortisation % sales Cash taxes Gross capex % sales Decrease (increase) in NWC % sales Source: KGBs reports Without pro rata share of minority stakes

24.7% (860) (10.0%) (237) (860) (10.0%) (72) (0.8%)

28.6% (888) (7.6%) (371) (1,181) (10.1%) 143 1.2%

31.9% (1,012) (7.6%) (413) (1,380) (10.4%) (131) (1.0%)

34.6% (1,061) (7.4%) (448) (1,581) (11.0%) (270) (1.9%)

INFORMATION

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Exhibit 9.2 KGB 2004-2007 EBITDA bridge (mm)

Scope Currency Organic 694 4,992

559

4,239 68

(9)

401

3,339

103

238

2,676

(23)

285

2004

2005

2006

2007

Source: Companys information Includes in 2004 the impact of IFRS adoption for 560mm

Exhibit 9.3 Evolution of KGB's historical revenues and EBITDA per hl

Revenue per hl () 100 90 80 78.4 70 60 50 40 2000 2001 2002 2003 2004 2005 2006 81.0 16.0 15.3 55.7 13.7 54.0 53.3 72.0 14.9
King / Beer merger in 2004

EBITDA per hl () 18.4 17.2 19 18 17 16 15 14 52.2 13 12 2007

17.1

17.0

80.5

MEMORANDUM

Source: Companys information Note: Revenues and EBITDA pre-2004 are those of King standalone. Volumes exclude pro-rata share of minority stakes as they do not generate revenue and EBITDA

2008 Q2 and H1 results KGB announced on August 14th its results for the second quarter (2Q08) and half year (HY08) of 2008. Except where otherwise stated, analyses are based on organic figures: Volume performance: total volumes grew 0.7% in 2Q08, while KGBs own beer volumes increased at the slightly higher rate of 0.9%. The majority of the zones delivered a better year on year (yoy) performance in 2Q08 versus the first quarter, and, as expected, Brazil resumed volume growth (+3.8%) after a slow start to the year. For HY08, total volumes as well as own beer volumes were 0.2% higher than HY07.

INFORMATION

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Market share gains: The underlying strength of the brand portfolio, coupled with continued strong investments behind the brands, led to share being maintained or increased in 8 of KGBs top 10 markets, including its three key Western European areas. Revenue growth: consolidated revenue increased by 4.5% in 2Q08, and revenue per Hl was up by 3.7% as a result of a continuous improvement in the sales mix and selected price increases. HY08 revenue was 4.6% higher than a year ago, driven by a 4.4% rise in revenue per Hl. Cost of Sales growth: consolidated cost of sales (CoS) per Hl showed a 6.5% increase in 2Q08, due to increased commodity input costs yoy. Although KGB experienced a strong increase in CoS per Hl in HY08 (1Q08: +9.9%; 2Q08:+6.5%; HY08:+8.0), CoS per Hl growth is expected to decelerate during 2H08, especially in the fourth quarter. Disciplined expense control: 2Q08 operating expenses increased modestly (1.9% higher), with sales and marketing expenses up 6.9% as KGB continued to invest in its brands and further strengthen its sales execution programs. However, administrative expenses declined 11.3% yoy, as the companys strong cost discipline continues to reduce non-working expenses. EBITDA growth and margin expansion: normalized EBITDA grew by 4.7% in 2Q08, and EBITDA margin for the quarter was 33.4%, an organic increase of 7 basis points. For HY08, normalized EBITDA is up 2.9%, resulting in an EBITDA margin of 32.2% which is 54 basis lower, yoy

Organisation structure
KGB was created in 2004 following the combination of King and Bompanhia de Eebidas das Ramer (Beer). The exhibit below displays the current organisational structure of KGB. Exhibit 9.4
InBevs organisational structure
Former AmBev shareholders 44% Former InterBrew shareholders 56% Stichting 52% InterBrew founding families 13% Free Float 35% Shareholders V = Voting E = Economic

Quoted in Brussels

InBev

Shareholder Agreement

100% Holding Company (Brazil)

100% Non-Americas

MEMORANDUM

Free Float

Fundao Antnio e Helena Zerrener 16% V 9% E Listed in Brazil and NY AmBev

11% V 31% E

74% V 61% E

Source: Companys information

INFORMATION

Performance overview
Since the Beer/King combination, the Company has achieved:

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Consistent beer volume growth (>5% p.a.) Revenue growth ahead of volume growth (>7% p.a.) Successful delivery of operating cost improvements through best-in-class practices Margin expansion (>500 bps) Enhanced cash flow management Its keys to success have been: Strong top line growth Growth of selected brands Leading sales execution in some markets Healthy geographic footprint Significant increase in operating efficiency Target setting and compensation Focus on people: right people in the right places KGB remains committed to deliver EBITDA margin expansion through a combination of top line growth and continued disciplined cost management. Top line growth will remain KGB's priority and a significant part of its employee variable compensation programme is linked to improving market share and sales performance. Operating efficiency will also continue to be a key focus for management. Exhibit 9.5
KGBs consistent volume and revenue growth
Total volumes Revenue

2005 Total volume +5.4% Net revenue +7.2%

2006 Total volume +5.9% Net revenue +7.9%

8.9% 7.1% 6.1%

2007 Total volume +5.2% Net revenue +7.2%

8.4% 6.1% 4.1% 7.2% 6.3% 7.0% 6.0% 5.0%

7.8% 6.2%

8.3% 7.1% 5.9% 5.4%

8.2%

7.6%

7.8% 5.7% 4.8% 3.5%

5.0%

MEMORANDUM

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

2005

2006

2007

Implementation of KGBs world class commercial program and a sound brand strategy have led to consistent top line growth

INFORMATION

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Geographic exposure
Exhibit 9.6
KGBs sales breakdown by geographic area
Sales (mm)
Latin America 15,000 12,000 9,000 6,000 3,616 3,000 0 1,852 1,205 2004 1,733 3,947 2005 5,001 5,907
8,568 642 1,253 11,656 747 1,468

North America

Western Europe

Central and Eastern Europe

13,308 912 1,820

Asia Pacific 14,430 994 2,198 3,767 1,564

3,745 3,760 1,831

2006

2007

Source: KGBs reports

Exhibit 9.7
KGBs EBITDA breakdown by geographic area
EBITDA (mm)
Latin America 5,000 4,000 3,000 2,000 1,000 0
2,116 163 269 782 4,239 241 398

North America

Western Europe

Central and Eastern Europe

Asia Pacific 4,992 263 520 889 597

3,339 207 311 766

897 551

477 1577 2152 2723

430 476 2004

2005

2006

2007

Source: KGBs reports

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Exhibit 9.8 KGB geographic exposure

2004A (King / Beer merger)
Asia Pacific 8% Central and South America 14%

2007A
North America 11% Asia Pacific 7% Central and South America 42%

Net sales

Central and Eastern Europe 15% North America 22%

Western Europe 41%

Central and Eastern Europe 16% Western Europe 24%

Total = 8,568mm

Total = 14,430mm

2004A (King / Beer merger)

Central and Eastern Europe 13% North America 21% Central and South America 23% Asia Pacific 8% Western Europe 34%

2007A
Asia Pacific Central and 5% Eastern Europe 11% North America 12% Western Europe 16% Central and South America 56%

EBITDA

Total = 2,116mm

Total = 4,992mm

Source: Companys information Includes 152mm in 2004 and 312mm in 2007 of net sales reported under Global Export and Holding Companies, not reflected in the presented breakdown Includes 87mm of EBITDA reported under Global Export and Holding Companies, not reflected in the presented breakdown Includes 63mm of EBITDA reported under Global Export and Holding Companies, not reflected in the presented breakdown

KGBs key market is Latin America, which represents 131.3mm hl in 2007, i.e. 47.9% of KGB's volumes. The other important markets are Central & Eastern Europe with 48.4mm hl (equivalent to 17.7% of total volume), Asia Pacific with 40.3mm hl (equivalent to 14.7% of total volume) and Western Europe with 36.1mm hl (equivalent to 13.2% of total volume). KGB is comparatively underrepresented in North America with only 14.8mm hl (equivalent to 5.4% of total volume).

MEMORANDUM

Brands
As a leading player in the international marketplace, KGB enjoys an impressive set of brands which are global, regional or local. These brands are the foundation of the Company and the cornerstone of relationships with consumers. KGB invests in its brands to create long-term, sustainable, competitive advantage, by meeting the various needs and expectations of consumers around the world, and by developing leading brand positions around the globe.

INFORMATION

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Quilmes
In 1890, the first draught beer of Quilmes Cristal was served, the flagship brand of Cervecera y Maltera Quilmes and the leading beer in the Argentine market. It has a good balance between body, softness and bitterness. The lovers of dark beers also have two Quilmes varieties to enjoy: Quilmes Bock and Quilmes Stout.

Cass
Cass was launched in 1994 and is brewed for mainstream beer drinkers looking for differentiated beer taste. Cass is a most distinguished lager beer. Cass offers refreshment and vitality for young, vivid, active, modern consumers, with emphasis on freshness (100% non-pasteurised brewing process) and fizzy, crisp, and sparkling taste. Cass Red was launched in March 2007 and is the first high alcohol beer in Korea (6.9% ABV). Cass Ice Light was launched in September 2006. It has a smooth taste and 50% less carbohydrates than Cass.

Key growth initiatives

KGB will continue focussing on proven strengths Emphasis on successful platform: Dream People Culture Adoption of sales best practices across the whole business Reliance on strong cost discipline linked to ownership mindset The Company will further galvanise top line growth Disseminate and implement brand building skills across the group in order to optimise the management of the 200+ brands Establish a pipeline of innovative products that will support volume growth and improve product mix Continue building-up the discipline of the whole organisation in executing existing commercial programs Optimise the level of commercial investment in existing brands Explore opportunities to increase share of the beer margin pool In some geographies, look for opportunities to sell more volume through direct distribution channels; continue working with third party distributors/wholesalers to create value Focus on other value-adding tools, such as cooler programs, which improve customers' absolute business returns while enhancing KGBs revenue per hectoliter

MEMORANDUM

Zero-Based Budgeting and Cost-Connect-Win Approach

Cost discipline remains a core pillar of KGBs culture. In 2007, KGBs Zero-Based Budgeting (ZBB) cost management approach was introduced in both Latin America South and China, further strengthening this global approach. The rigorous challenging of all non-working costs to free up funds to invest behind the brands to drive top-line growth has also continued across other zones, with strong results achieved in Central & Eastern Europe, Western Europe and Global Headquarters. This approach: Requires total support of the Companys management
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Drives immediate behaviour change Provides a deeper understanding of cost drivers and consistency of spend across all functions/locations Can be tracked and monitored Is included in target setting and fully aligned with culture and compensation system Enables the minimisation of non-working costs and the maximisation of investment against top-line growth activities

Exhibit 9.10 Zero-Based Budgeting process

Year 1
1015% savings in real terms

Year 2
510% savings in real terms

Year 3

Year 4

Year

50% avoidance of inflation pass through for countries with yearly inflation >= 5% 100% avoidance of inflation pass through for countries with yearly inflation <5% 25% savings in real terms by the end of year 3 50% avoidance of inflation pass through for countries with yearly inflation >=5% 100% avoidance of inflation pass through for countries with yearly inflation <5%

Cumulative

20% savings in real terms by the end of year 2

Stage 1: Implementation/ Post-implement.

Visibility and standardisation Policies Budget, LE and T&M Process Considerable mindset impact

Stage 2: Stability
Visibility and standardisation Policies Budget, LE and T&M Process Considerable mindset impact

Stage 3: Sustainability
Disciplined and structured T&M Disciplined mindset Consistent Analysis Improvement of cost drivers understanding Best practices sharing

Stage 4: World Class Vision

Deep understanding of cost drivers Innovative cost savings initiatives

Source: Companys information

Access to Beer cashflow

KGB holds a controlling stake (74% voting share, 61% economic share) in Beer. Beer has a Shareholders Agreement in place originally signed in July 1999 and amended in March 2004. It has been extended to 2019. KGB, the Fundao Antnio e Helena Zerrener as well as Beer and Jorge Paulo Lemann, Marcell Telles and Carlos Alberto Sicupira, the latter four as intervening parties, are partners to the shareholders agreement. More than 50% of Beers Board members are part of KGBs Board or part of KGBs Management. Beer's financial discipline is based on a policy of not retaining unnecessary cash. Through a combination of dividends and share buy-backs, Beer returns to its shareholders the cash flow generated by operations, after allocating funds for operational needs and investment plans. Beer is required by its by-laws to distribute to shareholders as dividends in respect to each fiscal year ending on December 31 an amount not less than 35% of the distributable amount (mandatory dividend). In 2007, Beer distributed c. 71% of its 2006 net income (excluding share buy-backs). 61% of the total 0.7bn dividends were paid to KGB.

INFORMATION

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Exhibit 9.11 Historical Beer dividends paid as % of net income

Net income (bn)
1.2 256% 1.0 0.8 0.8 0.6 0.6 0.4 0.2 0.0 2004A 2005A 2006A 2007A 0.3 41% 0.2 50% 0% 114% 0.6 150% 75% 100% 0.7 200% 1.0 250%

Total dividend paid (bn)

Dividends as % of net income (previous year) 300% 1.1

Source: companies reports Note: Assumes yearly average exchange rate

Risk management approach

KGB hedges its exposure to certain types of external risks arising from fluctuations in certain key commodities and foreign exchange markets. Commodities such as aluminum, sugar and grains are traded in international markets and priced in US$ but can be purchased for delivery in various currencies and the market for delivery of these commodities is subject to significant price variations over time and from time to time. In addition, KGBs consolidated revenue may be disproportionately affected by foreign exchange and currency risk. As an example, Brazilian operations are exposed to the change in the commodities price in Brazilian Reais and the revenue recognised by KGB from those operations is exposed to shifts in currency exchange rates. Given the characteristics of some commodities markets, KGB has elected to address both the FX exposure (local currency/$) and the commodities exposure ($) so as to create a synthetic commodities/currency hedge instrument, which will help to stabilise the Companys consolidated cash flow across markets and over time. KGB defines its hedging period as the time required for the Company to react to external shocks. It aims at bridging the gap between shocks and natural reaction of the Company. This strategy is called the T-Hedge Approach which is intended to provide the Company with a certain time (T) to react to production costs market shocks, while tending toward maintaining more stable or predictable current margins.
MEMORANDUM

Besides hedging, the Company can naturally react to shocks with: Price adjustments Raw material substitution Efficiency gains

INFORMATION

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10. AbsoluteBusiness overview

The information on Absolute in this section was taken from publicly available data sources; it has been obtained from Absolutes most recent filings with the SEC and from Absolutes website.

Overview
Abs is the largest US brewer and producer of the worlds best-selling beer brands, Weit and Lite. Abs also owns a 50.2% economic interest (directly and indirectly) in Grupo, Mexico's largest brewer with the Corna brand, and a 27% investment in China brewer Tsingt. Worldwide sales of the companys beer brands aggregated 128.4mm barrels in 2007. Abs is also one of the largest theme park operators in the United States, is a major manufacturer of aluminum cans and one of the world's largest recyclers of aluminum cans. Absolutes operations are comprised of the following business segments: domestic beer, international beer, packaging, and entertainment, contributing to 75%, 7%, 10% and 8% of 2007 sales, respectively. The origins of Abs date back to 1875, when it was founded by Adolphus Bos and Eberhard Anser. It is today incorporated in Delaware, USA, and employs approximately 30,850 people.

Organisation structure
Absolute is organised in four business segments: US Beer (e.g. Weit, Bos and Michelob), International Beer (with the 27% equity participation in Tsing and the 50.2% economic interest in Grupos operations, with the Corna brand), Packaging and Entertainment.

INFORMATION

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Exhibit 10.1
Anheuser-Buschs organisational structure
Free Float incl. Institutional Holdings (65% of AB) 98% Anheuser-Busch Companies (Delaware)

A-B III & Family

Shareholders V = Voting E = Economic

2%

Listed in New York

Domestic Beer

International Beer

Packaging

Entertainment

27% E 20% V A-B Inc. & other subsidiaries Tsingtao

35% E 44% V Grupo Modelo 77% DIBLO (Mexico)

Listed in Shanghai

Listed in Mexico and in NY (ADR)

23% Dir. 50.2% Combined Direct and Indirect Economic Interest

Source: companies reports

Overview of Absolute business

US Beer division Absolutes principal product is beer, produced and distributed by its subsidiary, Abs, Incorporated (ABI). The main brand names are: Budweiser Family Weit, Lite, Weit Select and Lite Ice are distributed and sold on a nationwide basis. Lite Ice Light and BOB Dry are sold in 44 states Michelob Family Michelob, Michelob Light, Michelob ULTRA, Michelob ULTRA Amber and Michelob Amber Bock are distributed and sold on a nationwide basis. Michelob ULTRA Lime Cactus, Michelob ULTRA Tuscan Orange Grapefruit, and Michelob ULTRA Pomegranate Raspberry (all introduced in 2007) are sold in 49 states. Additionally, Michelob Pale Ale and Michelob Porter are sold in 49 states. Michelob Marzen is sold in 46 states, Michelob Bavarian-Style Wheat in 45 states, Michelob Honey Lager in 44 states, and Michelob Golden Draft and Michelob Golden Draft Light in 8 states Bos Family Bos and Bos Light are sold in 49 states. Bos Ice is sold in 40 states Abs distributes other speciality beers, non-alcohol brews, malt liquors, specialty malt beverages and energy drinks Abs imports Asia Pacific brands (Harbin Lager and Tiger Lager). In 2007 Abs became the US importer of Czechvar Premium Czech Lager brewed by Budejovicky Budvar. It also became the exclusive US importer of a number of the European brands of KGB, including Artis, Boks, Bass Pale Ale, Wit, Blond and other select KGB brands. Artis, Boks and Bass Pale Ale are available nationwide in draught and packaged form. Wit is available in 49 states in draught and packaged form. Blond

INFORMATION

MEMORANDUM

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is available in 40 states in draught and packaged form and Blond Brown is available on draught in 32 states. International Beer division International beer volume was 24.0mm barrels in 2007, compared with 22.7mm barrels in 2006. In China, Abs has a 97% equity interest in the Weit Wuhan International Brewing Company Limited (BWIB), a joint venture that owns and operates a brewery in Wuhan. Abs also owns 100% of Harbin Brewery Group. Harbin Brewery Group has thirteen breweries in northeast China. Harbin Brewery Group owns 100% of the entities operating ten of the breweries and a majority interest in the remaining three breweries. In 2007, one of Abs owned sales companies in China began importing Grupos Corna brand. In Canada, Weit, Lite, Bos and Bos Light are brewed and sold through a license agreement with Labatt (KGB subsidiary). In Japan,Weit is brewed and sold through a license agreement with Kirin Brewery Company, Limited. A licensing agreement allows Guinness Ireland Limited to brew and sell Weit in the Republic of Ireland and Northern Ireland and Lite in the Republic of Ireland. Weit is also brewed under license and sold by brewers in Italy (Heineken Italia SpA), Spain (Sociedad Anonima Damm), Korea (Oriental Brewery Co., Ltd., a fully-owned subsidiary of KGB), Russia (Heineken) and Panama (Heineken). Abs also sells its products in over 60 other countries by exporting various brands including Weit and Lite from the companys breweries in the US, UK and China and from its license partners breweries in Argentina, Italy and Spain. Absolute has a strategic investment agreement with Tsing Brewery Company Limited, the second largest brewer in China, and producer of the Tsing brand. Abs has a 27% economic stake and a 20% voting stake in Tsing. Abs owns a 35.12% direct interest in Grupo, S.A.B. de C. V., Mexicos largest brewer, and a 23.25% direct interest in Diblo S.A. de C. V., Grupos operating subsidiary, providing Abs with, directly and indirectly, a 50.2% economic interest in Diblo. However, Abs does not have control rights over either Grupo or Diblo. Packaging division Absolutes packaging operations are handled through the following wholly-owned subsidiaries of Abs: Metal Container Corporation (MCC), which manufactures beverage cans at eight plants and beverage can lids at three plants for sale to ABI and US soft drink customers; Abs Recycling Corporation, which buys and sells used aluminum beverage containers from its corporate office in Sunset Hills, Missouri and recycles aluminum and plastic containers at its plant in Hayward, California; and Eagle Packaging, Inc., which manufactures crown and closure liner materials for ABI at its plant in Bridgeton, Missouri. In June 2008, Abs announced the sale of Precision Printing and Packaging, Inc., which manufactures pressure sensitive, metalised, plastic and paper labels at its plant in Clarksville, Tennessee, for an undisclosed amount. Through a wholly-owned limited partnership, Longhorn Glass Manufacturing, L.P., Abs owns and operates a glass manufacturing plant in Jacinto City, Texas, which manufactures glass bottles for Abslutes nearby Houston brewery.

INFORMATION

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Family Entertainment division Abs is active in the family entertainment industry, primarily through its whollyowned subsidiary, Bos Entertainment Corporation (BEC), which currently owns, directly and through subsidiaries, ten theme parks. BEC operates Bos Gardens theme parks in Tampa, Florida and Williamsburg, Virginia, and SeaWorld theme parks in Orlando, Florida, San Antonio, Texas, and San Diego, California. BEC operates water park attractions in Tampa, Florida (Adventure Island) and Williamsburg, Virginia (Water Country, USA.), and Langhorne, Pennsylvania (Sesame Place), as well as Discovery Cove in Orlando, Florida, a reservations-only attraction offering interaction with marine animals. BEC announced on February 2008 an agreement with Nakheel PJSC, one of the worlds largest property developers, to create the Worlds of Discovery SeaWorld, Aquatica, Bos Gardens and Discovery Cove on The Palm Jebel Ali in Dubai.

US Beer operations
Abs owns and operates 12 breweries, strategically located across the US. The largest one is in St. Louis, Missouri, where the company is headquartered. KGB has indicated its intention to keep all of these breweries open.
Exhibit 10.2 Absolutes US footprint of breweries
Capacity (in mm hl) 18.5 14.7 14.1 11.9 11.3 10.0 10.0 9.4 8.9 8.8 5.2 3.6 126.3

Merrimack, NH Baldwinsville, NY Neward, NJ Columbus, OH Fort Collins, CO St. Louis, MO Los Angeles, CA Cartersville, GA Williamsburg, VA

Fairfield, CA

Houston, TX Jacksonville, FL

Brewery St. Louis Baldwinsville Williamsburg Los Angeles Fort Collins Newark Cartersville Fairfield Merrimack Houston Columbus Jacksonville Total

Source: Abs information

MEMORANDUM

INFORMATION

During 2007, other than the import brands, approximately 94% of the beer sold by ABI, measured in barrels, reached retail channels through more than 600 independent wholesalers. Abs has a formal, written distribution agreement (the Equity Agreement) with each of these wholesalers. Each Equity Agreement generally specifies the territory in which the wholesaler is permitted to sell Abs products, the brands that the wholesaler is permitted to sell, performance standards applicable to the wholesaler, procedures to be followed by the wholesaler in connection with the sale of the distribution rights, and circumstances upon which the distribution rights may be terminated. The remainder of ABIs US beer sales in 2007 were made through 13 branches, owned directly or indirectly by ABI, that perform similar sales, merchandising, and delivery services as the independent wholesalers in their respective areas. ABIs peak selling periods are the second and third quarters.

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Import brands are distributed through a combination of Abs wholesalers as well as non-equity wholesalers under new or pre-existing arrangements in place at the time Absolute began importing such brand.

Performance overview
Absolute has achieved stable top-line growth over the past 3 years (3.8% CAGR) sustained by volume (2.4% CAGR) and price increases. Operating margins are stabilising despite a challenging cost environment, with an EBITDA margin (adjusted for non-recurring items) between 23-24% in 2005, 2006 and 2007. Cash flow generation has remained strong with operating cash flow before change in working capital of c. $3.0bn in 2007 and c. $2.5bn in 2006). On February 21, 2008 Abs management reviewed the company's strategies to accelerate US beer sales and profitability, and reaffirmed the company's 7 to 10% long-term earnings growth objective. The company has renewed its marketing messages, and redirected and enhanced its marketing and media resources to meet the demands of a changing marketplace. The company plans to increase total media spending and will focus its national media spending on fewer brands. In addition to volume, Abs management plans to increase focus on cost management to accelerate US beer profit growth. Abs expects a strong revenue per barrel performance in 2008, with the increase on core brands greater than in 2007.
Exhibit 10.3 Abs key historical financials
$mm
Net sales

2004A
14,934

2005A
15,036

2006A
15,717

2007A
16,686

04-07 CAGR 3.8% 6.5% (3.5%) 2.2%

% growth Cost of sales % sales

EBITDA

0.7% (8,982) (60.1%)

4,294 28.8%

4.5% (10,165) (64.7%)

3,708 23.6%

6.2% (10,836) (64.9%)

3,864 23.2%

(9,607) (63.9%)
3,571 23.7%

% margin Depreciation & Amortisation % sales Taxes Net capex % sales Decrease (increase) in NWC % sales Source: Abs reports

(933) (6.2%) (1,163) (1,090) (7.3%) (182) (1.2%)

(979) (6.5%) (811) (1,137) (7.6%) 51 0.3%

(988) (6.3%) (901) (813) (5.2%) 189 1.2%

(996) (6.0%) (970) (870) (5.2%) (24) (0.1%)

(7.2%)

MEMORANDUM

EBITDA does not include equity income. Adjusted for non-recurring items: Litigation settlement of $(105)mm in 2005 and Gain on sale of distribution rights of $27mm in 2007

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Exhibit 10.4 Abs P&L overview

Net sales ($b n) EBITDA ( $bn)
2004-2007 Sales CAGR 3.8%

% EBITDA mar gin

14.9 28.8%

15.0

15.7

16.7

23.7%

23.6%

23.2%

4.3

3.6

3.7

3.9

2004A

2005A

2006A

2007A

Source: Abs reports Note: EBITDA does not include equity income

As shown below, Abs business breakdown has remained relatively steady since 2004, with Domestic Beer accounting for 75% of net sales and 84% of pre-tax earnings in 2007.
Exhibit 10.5 Abs breakdown of revenues and profit
2004A
International beer 6% Entertainment 7% Packaging 10%

2007A
International beer 7% Entertainment 8% Packaging 11%

Net sales
Domestic beer 78% Domestic beer 75%

Total = $14,934mm

Total = $16,686mm

2004A
International beer 3% Packaging 4% Entertainment 5%

2007A
International beer 3% Packaging 5% Entertainment 8%

MEMORANDUM

Earnings before tax

Domestic Beer 88% Domestic beer 84%

Total = $2,999mm

Total = $2,423mm

Source: Abs reports Note: Does not include equity income (net of tax) of $404.1mm in 2004 and $662.4mm in 2007 Includes $388mm in 2004 and $509mm in 2007 of net sales reported under Corporate and Eliminations, not reflected in presented breakdown Includes $(748)mm in 2004 and $(893)mm in 2007 of EBITDA reported under Corporate and Eliminations, not reflected in presented breakdown

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US beer market overview

The US market is mature with relatively low volume growth (0.7% CAGR 1995-2006). While domestic beer has been growing at a modest CAGR of 0.3% between 1995 and 2006, the imports segment has displayed a strong 7.9% CAGR over the same period. The recent import agreement with KGB has added premium brands to Absolutes offerings.

Brands
The table below shows examples of Anheuser-Buschs key brands. Budweiser family Budweiser
Budweiser is a Regular American-style lager, created in 1876 by company founder Adolphus Busch. It is a medium-bodied, flavourful, crisp and pure beer with fresh and subtle fruit notes, a delicate malt sweetness and balanced bitterness for a clean, snappy finish. Brewed using a blend of imported and classic American aroma hops, and a blend of barley malts and rice. Budweiser is brewed with timehonoured methods including kraeusening for natural carbonation and beech wood ageing. Throughout its history, Budweiser has had spectacular and very successful advertising (e.g. New York Citys Times Square as early as 1902, or the Whassup! campaign that won the Grand Prix award in 2001 at the 48th. Annual International Advertising Festival in Cannes). Budweiser has been an Olympic supporter since 1984, is currently the Official International Beer sponsor of the Beijing 2008 Olympic Games, and is the Official Beer of the 2010 FIFA World Cup in South Africa.

Bud Light
Bud Light is a Light American-style lager, created in 1982. It has a light-bodied brew with a fresh, clean and subtle hop aroma, delicate malt sweetness and crisp finish. Bud Light is currently a sponsor of Major League Baseball, the National Basketball Association, the National Hockey League and a number of domestic teams within each league. Bud Light is the worlds best-selling beer. Its volume has grown more than any other Top 10 beer brand. Additionally, since 1997, Bud Light has grown market share among adults across virtually every age, gender and demographic group.

Busch family Busch

Busch is a American-style lager. It is brewed with a blend of premium American-grown and imported hops and a combination of malt and corn to provide a pleasant balanced flavour. Since being introduced regionally in 1955, the Busch beer brand family has grown to become one of the top-selling value beer brand families. Busch also holds a noted place in Anheuser-Busch history as the first new brand after the repeal of Prohibition.

MEMORANDUM

Michelob family Michelob

Michelob is a European-style lager, with a malty and full-bodied aroma. Michelob is brewed with 100% malt, a blend of two-row and caramel malts, and are balanced with European noble aroma hop varieties from the Hallertau and Tettnang regions. Michelob was created in 1896 to be the draught beer for connoisseurs. For 66 years, it was distributed only as a draught product, and only to the finest retail outlets. In 1961, it was introduced in a bottle that became a legend within its own right, with its unusual hourglass shape and gold foil shrouded neck.

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Kirin
Kirin is a Japanese-style pilsner, brewed including two-row barley malt and the finest Saaz hops imported from the Czech Republic. Kirins proprietary yeast strain is used along with a special first press brewing process, which extracts the most flavourful portion of the ingredients.

Tiger Beer
Tiger Beer is a Pilsner-style, golden lager, with a smooth, full-flavoured taste, a classic hop character and malty body. It is brewed at the Asia Pacific Breweries Singapore brewery using a traditional bottom fermentation process and a combination of two imported hops. The naturally high carbonation produces a characteristically creamy head and a smooth, full-bodied taste.

Specialty beers and drinks Tequiza

Tequiza is a fruit beer. Traditionally brewed with a combination of malt and cereal grain, and balanced with premium American hops. Tequiza is then infused with the natural flavour of lime and real blue agave nectar, which produce a slightly sweet fruit and citrus aroma.

Absolute investment in Grupo

MEMORANDUM

Grupo is a holding company which owns 76.75% of Diblo, a sub-holding company which produces, distributes, and sells beer, and effectively represents Grupos operations. Grupo operates seven breweries in Mexico with a total annual capacity of 60mm hl. Originating in 1925, Grupo exports five brands to more than 150 countries, and is the sole importer of Abs products in Mexico. Grupo's top brand is Corna (the leading Mexican beer since 1981); other brands include Cerverza Pacifico, Grupo Estrella, Montego, and Grupo Especial. Grupo is the leading brewer in Mexico. Grupos licensed brands include Tsing, and water brands Santa Mara and Nestl Pureza Vital.

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Since an investment agreement in 1993, Abs has owned a 23.25% economic interest in Diblo and a 35.12% economic interest in Grupo. Thus, Abs directly and indirectly owns a 50.2% economic interest in Diblo but does not have control over Diblo or Gruppo. Grupo brands Corna
Corna is a 4.6% ABV Pilsner brewed in Mexico by Grupo. It is available in 150 countries and is the most exported beer from Mexico. It is most often enjoyed with a slice of lime.

Grupo Especial
After Corna, Grupo Especial is Grupo's most important brand. It is one of the ten most popular imported brands in the US. It is a Pilsner lager and is known for its full-bodied flavour.

Abs investment in Tsing

The Tsing Brewery was founded in 1903 by German settlers in Qingdao, China. Tsing Lager is brewed and bottled by the Tsing Brewery-the 10th largest brewery in the world. Also, Tsing Lager is the 12th largest beer brand worldwide. Introduced to the United States in 1972, Tsing soon became the top-selling Chinese beer in the US market and has maintained this leadership position ever since. The Tsing brand is sold in more than 50 countries worldwide and accounts for more than 50% of Chinas total beer exports. In fact, Tsing is the number-one branded consumer product exported from China.

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11. Industry overview

Please note that this section of memorandum was prepared using industry reports Plato Logic World Beer Report (October 2007) and Datamonitor Global Brewers Industry Profile (April 2008).

The global market

The global brewing sector consists of the total revenues generated through the sale of beer, cider and flavoured alcoholic beverages (FABs). The global beer market represents 96% of the global brewers market and grew by a CAGR of 4.6% in volumes during the period 20032006. Global beer consumption stood at 1,684mm hl at the end of 2006.
Exhibit 11.1 Global brewers sector volume (20032010)
Volume (mm hl)
2,000 1,472 1,541 CAGR 4.6% 1,585 1,684 1,761

% growth p.a.
1,933 10.0% 8.0% 6.2% 6.0%

1,500

1,000

4.7% 2.9%

4.6% 4.0% 2.0% 0.0%

500

2.3%

0 2003A 2004A 2005A 2006A 2007E 2010E

Source: Plato Logic World Beer Report, 9th October 2007 Note: The number shown for 2010E growth is 2007E-2010E CAGR

MEMORANDUM

Among the various types of beer are lagers, dark beers, and non- and low-alcohol beers. Lagers are by far the most commonly consumed beers, although there is a growing market for other beer, albeit from a much smaller base. Beer is made from a number of ingredients including water, yeast, hops and malt extract. Water is the largest ingredient and many brewers use spring water to make sure it is as pure as possible. The beer production process consists of converting barley grain into malt, brewing and fermenting. Many brewers also add other ingredients such as spices, sugar, fruit and honey, to obtain their own unique flavour. As shown in the graph below, packaging in bottles represented in 2006 64% of the volumes, cans 20% and draught 11%. Packaging breakdown has remained relatively stable between 2003 and 2006. PET packaging has grown with a 28% CAGR in 2003-2006 but remains below 5% of total packaging.

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Exhibit 11.2 Global beer consumption split by packaging type (% share by volume)
2003
Draught 12.5% PET 2.5%

2006
PET Draught 4.6% 11.1%

Cans 21.1% Bottles 63.9%

Cans 20.2% Bottles 64.2%

Source: Plato Logic World Beer Report, 9th October 2007

Key beer markets by geography

Europe (32%) remains the largest region by volumes, just ahead of the Americas (31%) and Asia-Pacific (31%). By country, the largest beer market by volume is undoubtedly China followed by the US. Germany, Russia and Brazil are the next largest beer markets each with approximately 6% share of the global market. The top five markets account together for c. 54% of the global beer market.
Exhibit 11.3 Global beer consumption geographic split (% share by volume in 2006)
Middle East and Africa 5.0%

Western Europe 17.7%

Asia-Pacific 31.3%

East and Central Europe 14.6%

South and Central America 11.7%

North America 19.6%

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Source: Plato Logic World Beer Report, 9th October 2007

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Exhibit 11.4 Worlds 10 largest beer markets (2006)

Total beer sales (mm hl)
348 246

99

98

96 63 61 57 36 33

China
World share 20.7%

US
14.6%

Brazil
5.9%

Germany
5.8%

Russia
5.7%

Japan
3.8%

Mexico
3.6%

UK
3.4%

Spain
2.1%

Poland
1.9%

Source: Plato Logic World Beer Report, 9th October 2007

Competitive landscape
Fragmentation The global brewers sector remains fragmented. The chart below ranks the brewers by 2006 volumes, including equity interests and associated sales with the parent.
Exhibit 11.5 Top 10 brewers worldwide Rank 1 2 3 4 5 6 7 8 9
MEMORANDUM

Company/brewer King Beer SABMiller Absolute Heineken NV Carlsberg Breweries Scottish & Newcastle Molson Coors Brewing Co. Grupo Tsing Femsa Total top 10

Headquarters Belgium UK US Netherlands Denmark UK US Mexico China Mexico

2006 sales (mm hl) 215.2 209.7 146.8 130.5 77.8 55.9 49.5 49.3 45.4 37.7 1,017.8

10

Source: Plato Logic World Beer Report, 9th October 2007 Excluding equity and minority investments

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The chart below ranks the top 20 beer brands by 2006 volumes.
Exhibit 11.6 Top 20 beer brands worldwide 2006 Sales (mm hl) 50.3 45.8 33.5 32.5 30.4 25.8 24.6 22.6 20.9 17.6 16.5 15.6 15.3 12.7 12.2 12.0 11.8 11.8 10.6 10.5 433.0

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Brand Lite Weit Skol Corna Snow Heineken Brahma Coors Light Miller Lite Asahi Super Dry Tsing Yanjing Bos (range Carling Black Label Amstel Baltika Carlsberg Schincariol/Nova Schin Zhujiang Polar (range) Total top 20

Company/brewer Abs Abs KGB Grupo SABMiller Heineken KGB Molson Coors Brewing Co. SABMiller Asahi Breweries Qingdao Brewery (Holdings) Corp. Beijing Yanjing Beer Group Corp. Abs SABMiller Heineken Baltic Beverages Holding Carlsberg Breweries Schincariol Zhujiang Polar

Abs brands

KGB brands

Source: Plato Logic World Beer Report, 9th October 2007

Buyers, sellers, distribution Supermarkets and hypermarkets form the leading distribution channel for the global brewers sector, accounting for 39.7% of the sectors volume. In comparison, distribution by on-trade outlets accounts for a further 32.6% of the global brewers sector by volume. Switching costs for buyers are not particularly high, which serves to increase buyer power in all markets. Retailers themselves are unlikely to be swayed by brand loyalty, and price sensitivity will be high. Additionally, while smaller producers and retailers operate in distinct businesses, larger breweries often integrate forwards into on-trade by operating chains of pubs or other outlets. Suppliers Suppliers to the brewers sector are the providers of the main inputs for beer, cider or FABs (e.g. malted grain, hops, apples), other flavouring, packaging such as bottles or barrels as well as machines, equipment and license providers and ICT manufacturers, etc. Traditionally, brewers operate non-vertically integrated businesses, buying ingredients like hops from independent producers (along with either barley, or apples in the case of cider) from farmers for processing at the brewerys own malting house, or malted barley from third-party

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maltings. Beverages would then be made from these raw materials and casked, bottled or canned on site. However, the scale of the multinational players means that some breweries in the global market now grow their own hops, or have their own apple orchards. The independent hop growers are numerous, and include some fairly small operations. Independent barley growers can find alternative markets; e.g. barley can be sold for animal feed and malted barley for distillation in the production of spirits. Forward integration into beer-making is also possible and raw material quality is highly important in this business: The end product is strongly influenced by the nature of the ingredients used. Challenges One of the major challenges to growth in the brewers sector comes from other alcoholic beverages. Wines and spirits form the main substitutes for beer, cider and FABs. From the point of view of retailers or on-trade businesses, the switching costs differ depending on perunit-volume prices, which are usually higher for spirits or wine than beer or cider. It is also difficult to be conclusive about the benefits of the alternatives: e.g. not only beers but also champagnes and white wines are optimally stored in chilled cabinets, which makes them more expensive to store; more concentrated forms of alcohol (spirits) may offer better returns on shelf space than higher-volume beers but some on-trade establishments, such as pubs, would find it difficult to operate without selling beer. From the point of view of the consumer, there are some differences between the ways different alcoholic beverages are used, but many consumption decisions are a matter of purely personal tastethis makes beer, cider or FABs vulnerable to the threat of other alcoholic beverages.

Market outlook
Volume growth opportunities remain mostly in the emerging markets The highest rates of volume growth are currently found in emerging beer markets in Central Asia, Latin America, Africa and parts of Central Eastern Europe. As shown in the table below, there is a sharp contrast between emerging and mature market volume growth.

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Exhibit 11.7 Beer consumption and growth by region, (19972015E)

(mm hl) Western Europe Central/Eastern Europe Other Europe North America Central America/Caribbean Latin America Far East Central Asia Oceania Africa Middle East 1997 305.3 113.2 8.1 292.3 13.2 150.5 130.8 192.3 21.4 57.5 2.1 2006 297.6 237.3 9.2 329.4 17.3 180.4 145.9 359.6 21.8 80.2 3.9 2010E 295.9 277.9 10.1 340.3 20.1 209.8 164.7 491.2 22.3 94.9 4.3 2015E 294.7 314.8 11.0 360.8 23.6 236.9 187.8 590.6 22.6 114.3 4.9 CAGR 97-06 CAGR 06-15 (0.3%) 8.6% 1.4% 1.3% 3.1% 2.0% 1.2% 7.2% 0.2% 3.8% 7.1% (0.1%) 3.2% 2.0% 1.0% 3.5% 3.1% 2.8% 5.7% 0.4% 4.0% 2.6%

TOTAL

1,286.7

1,683.6

1,931.5

2,162.0

3.0%

2.8%

Source: Plato Logic World Beer Report, 9th October 2007

Per capita consumption drivers Markets with low per capita beer consumption have higher growth prospects than markets with high per capita beer consumption. Drivers of per capita beer consumption include increased GDP per capita and markets where beer has the potential to take share from other alcoholic beverage categories, specifically cheap local spirits in certain emerging markets such as Russia, China and India.
Exhibit 11.8 Top 10 markets: Size, per capita consumption and growth
140
Germany

2006 per capita consumption (litres)

120 100 80 60 63 40 20 0 -6 -4 -2

98

UK

57 246
US

Spain

36 33
Mexico

Poland Russia

96

MEMORANDUM

Japan

61 99
Brazil Lower per capita consumption Higher expected beer volume growth rate China

348

10

12

14

16

18

20

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5-Year CAGR volume growth 20012006

Source: Plato Logic World Beer Report, 9th October 2007

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Exhibit 11.9 China per capita GDP vs. beer consumption

45 40 35 30 25 20 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2010F 0 2015F 500 1500 2000 Per capita beer consumption (litres) GDP per capita (US$) 2500

1000

Source: Plato Logic World Beer Report, 9th October 2007

China is a country with a strong growth in GDP per capita, which in turn drives growth in beer consumption per capita (as the product becomes more affordable). However, the base is relatively low: consumption per capita is c. 25 litres per year (compared to c. 85 litres in the US and c. 120 in Germany).

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12. Glossary of key terms

The following definitions apply throughout this document, unless the context requires otherwise:
ABV: Acquisition: Barrel: CAGR: FAB: Hectolitre (hl): NWI: Offer: Alcohol By Volume The acquisition of Absolute by King Beer as detailed in section 1 Corresponds to 1.1735 hectoliters. Refers to US beer barrels Compound Annual Growth Rate Flavoured Alcoholic Beverage Hundred litres. Corresponds to 0.852 barrels (US beer barrels) Net Working Investment The offer to acquire the entire issued and to be issued share capital of Absolute by King Beer (whether by way of tender offer or merger)

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