THE STRENGTH OF OUR COMMITMENT€¦ · And on this path, the 3,529 people who make up this Company have continued to be the essence of our project and have been at the centre of all

THE STRENGTH OF OUR COMMITMENT2019 ANNUAL REPORT

CONTENTS

LETTER FROM THE CHAIRMAN

01

A COMPANY MOVING FORWARD

02

WE ARE COMMITTED

03

SHARING VALUE

This document was prepared in accordance with the requirements set forth in Law 11/2018, of 28 December, which transposes to Spanish Law Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information.

p. 4 p. 6 p. 30 p. 48

04

CLOSE TO CONSUMERS

05

OUR TEAM: OUR PRIORITY

Profile of the Annual Report

p. 90

Content index according to requirements of Law 11/2018 regarding non-financial information and diversity

p. 91

External verification

p. 94

Balance sheet and consolidated accounts

p. 99

p. 56 p. 74

As I write this letter, our country is experiencing a health emergency due to coronavirus COVID-19 which has, as it has everyone else, left me feeling shaken. Although the purpose of this report is to talk about 2019, I cannot overlook these difficult moments we are living through and fail to say how proud I am of how all Mahou San Miguel employees, with their courage and commitment, are contributing to making our Company play an active role in containing this disease. This situation is going to teach us some important things, and I am sure that our society will come out of this experience stronger than before. From where I sit, I would like to recognise all of the healthcare workers and professionals who, with their dedication, are helping life go on in this situation, and to thank all the off-trade establishments and their teams for their work to ensure supply to the general public. Likewise, I want to express my support to all sectors, particularly the on-trade one, very closely linked to our business, that are being directly affected by this crisis and which will have to work very hard to overcome the challenges of the future when this is all over. If I have to look back and take stock of 2019, I can say without a doubt that it was a very positive year for Mahou San Miguel. We posted excellent results that have enabled us to strengthen our leadership in the Spanish brewing sector. At the same time, it was a very important year for fulfilling our 2018-2020 Strategic Plan, with progress in all the lines we had identified as priority, at a steady pace and with the confidence that we were doing a good job. And on this path, the 3,529 people who make up this Company have continued to be the essence of our project and have been at the centre of all our decisions. A great team whose strength, commitment,

dedication and enthusiasm constitute our true competitive advantage. It is a diverse and talented team whose members we guarantee an environment that promotes their well-being and whose development, equal opportunities and work-life balance we try to ensure through multiple initiatives. All of this has enabled us to again be considered one of the 20 best companies to work for in our country according to the Merco Talento Ranking. Thanks to this team, we continued growing in 2019. Our sales volume reached 19.3 million hectolitres, and our turnover 1,400.4 million euros. Our investment of 109.9 million euros, which enabled us to consolidate our market position inside and outside of our borders, was a determining factor in this. Our commitment to the promotion of beer culture and innovation, understood as an element that cuts across our entire Company, was evident in 2019. In addition to giving an important boost to collaborative innovation projects, promoting internal talent and intra-entrepreneurship, and innovating constantly in our processes, we launched various products to the market that have demonstrated our capacity to premiumise our brands, creating new experiences around them. Mahou Cinco Estrellas Session IPA (in collaboration with Founders), San Miguel Magna, Alhambra Baltic Porter, Alhambra Especial Radler, Alhambra Barrica de Ron Granadino, Solán de Cabras Antiox and Solán de Cabras con Gas are just some examples of ones we are very proud of. Additionally, we continued innovating with craft propositions in partnership with our partners at Nómada Brewing, with the range of 100% organic raw beers, and we relaunched La Mezquita, a beer we revived for Cordoba consumers, highlighting our commitment to generating wealth in the local communities where we operate.

THE STRENGTH OF OUR COMMITMENT

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In 2019, we reached an important agreement with the Belgian multinational beer company AB InBev to market prestigious brands like Corona, Stella Artois, Budweiser, Leffer and Franziskaner, adding them to our portfolio in January 2020. A great milestone, without question, that will allow us to strengthen our position in Spain and satisfy the growing demand for high-quality premium beers. At international level, new operations such as the expansion of our stake in Avery Brewing to 70% and the acquisition of 90% of Founders Brewing, in both cases making us majority shareholders, were key in continuing to advance in a market as strategic for us as the U.S., and to get a little closer to making our vision of becoming a leader in the Craft and Premium segment nationally and internationally. In addition, we advanced significantly in our Digital Transformation to successfully address the technological and cultural evolution that has so much to offer us by defining a methodology for managing and prioritising nearly 120 initiatives that are going to help us in this endeavour. For its part, the launch of Solana, our online sales channel, made us the first major brewer in Spain with a comprehensive e-Commerce platform. Very much linked to this new way of working that we are promoting through digitisation is the implementation of a new Excellence System in our organisation. In 2019, we advanced significantly in this direction, ensuring training of leaders and their teams and receiving recognition from the “Kaizen Lean Awards” as an example of good practices, an accomplishment that encourages us to continue advancing in this model under which 265 teams and 70% of our workforce is already working. And, of course, over the course of last year, we continued advancing in Sustainability,

having already fulfilled many of the most important commitments we proposed in “Somos 2020”, our Strategic Framework in this field, to realise our dream of being an active leader in this area in the Consumer Goods sector. Thus, we took important steps and involved our employees in defining new initiatives and extending our commitment to our suppliers, customers and distributors, fellow travellers in the development and continuity of our business. Our commitment to society is also reflected in our contribution to the country’s economy, which totalled 1,454 million euros in 2019, all in order to continue creating value and supporting social, cultural and economic development in the places where we operate. Through the Mahou San Miguel Foundation, moreover, we continued promoting job placement of youth at risk for social exclusion in the on-trade channel in collaboration with our customers. We have already achieved an average rate of job placement of 100% in the Dual Vocational Training programme and 85% in the Vocational Skills Certificate programme. We also promote volunteer activities and projects that benefit society, in which over 700 employees and their families participated, with initiatives aimed at enhancing the development of their surrounding areas and communities. Our Company wants to play an active role in improving society and, as reflected in this Report, is taking all the steps to make a contribution based on the strength of its commitment.

José Antonio Mahou HerráizChairman

We want to play an active role in improving society and we are taking all the steps we can to do so.

”“

01



We are an independent, 100% Spanish family-owned business made up of a team of 3,529 professionals. We lead the brewing sector in Spain and have a solid international footprint, with a presence in over 70 countries.

Our history goes back over 130 years and, since Mahou’s founding in 1890, we have not stopped growing and diversifying our business with acquisitions like San Miguel, in 2000; the Canary Islands Reina brand, in 2004; Cervezas Alhambra, in 2007; Solán de Cabras, in 2011; and, since 2014, through our promotion of the craft segment. We are currently majority shareholders of the craft brewer Nómada Brewing in Spain and of Founders Brewing and Avery Brewing in the United States. Furthermore, our focus on being local led us to become a shareholder of the La Salve brewery in Bilbao in 2015, and our commitment to premiumisation prompted the acquisition of 70% of the Brutus brand in 2019.

As a result, we have an extensive portfolio comprising Spanish beers, such as Mahou Cinco Estrellas, San Miguel Especial and Alhambra Reserva 1925; pioneering products in their category, such as San Miguel 0,0, San

Miguel ECO and Mahou Barrica; and a varied range of international beers that has been strengthened thanks to the marketing agreement reached with the Belgian multinational group AB InBev in late 2019, under which we have been selling Corona, Budweiser, Stella Artois, Franziskaner and Leffe since January 2020. This partnership will enable us to strengthen our leadership in Spain and even better satisfy the growing demand for high-quality premium beers.

We have 11 breweries — eight in Spain, one in India, and two in the United States — and four natural mineral water springs with their associated bottling plants.

We have a production share in our country of 32%, with a presence at over 200,000 points of sale, and we sell 70% of the Spanish beer consumed in the world, with the United Kingdom, United States, Chile and Italy being our principal markets.

In 2019, we reached an agreement with AB InBev to sell Corona, Budweiser, Stella Artois, Franziskaner and Leffe in our country. This partnership will enable us to strengthen our leadership in Spain and even better satisfy the demand for premium beers.

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100%

13,56%

1,11%

31,28%

70%

CORPORATE STRUCTUREBelow we detail the structure of Mahou S.A. and its subsidiaries:

Intermalta S.A. Voldistribucion,S.L.U.

AlhambraDistribuidora

Meridional, S.L.U.

La Salve Bilbao, S.L.

La SalveComercializadora, S.L.

Basque ExperienceGastro, S.L.U.

Cermadis, S.L.

DistribuciónBalear

Almacenajey Logística, S.A.

DistribuciónBebidas Murcia,

S.L.U.

DistribucionesChamartín, S.A.

GovadisaDistribuciones de

Bebidas, S.A.

VoldistribuciónCoruña, S.L.

DistribucionesGalivesa, S.L.

DistribucionesCaravesa, S.L.

CerveceraIndependiente,

S.A.U.

CervezasMahou, S.L.U.

CervezasSan Miguel, S.L.U.

CervezasAlhambra, S.L.U.

Penibética deCervezas y Bebidas,

S.L.U.

CervezasReina 2000, S.A.U.

Taisa Logistics1960, S.A.U.

Aguas de Solande Cabras, S.A.U.

Los Rechazos,S.L.U.

Fuente Azul Compañía de Aguas, S.l.

Aguas del Valle de la Orotava, S.L.

Nirgua Solar, S.L.U.

Estilosmas, S.L.U.

EspaciosExperiencias

Cerveceras, S.L.U.

EspaciosCervecera, S.L.U.

La Cervecista,S.L.U.

Madrid BeerExperiences,

S.L.U.

Barcelona BeerExperiences,

S.L.U.

Calidalia, S.A.

Mahou IndiaPrivate Limited

MahouAndina S.p.A

Spain´S Best Beers, Inc.

(d.b.a. Mahou Us)

MahouImports, LLC

Canal StreetBrewing

Company, LLC (d.b.a.Founders)

Avery BrewingCompany

Nómada BrewingCO., S.L.

Gold Lemon, S.L.

Breweries Water Distribution La Salve Spaces Lifestyle International Brewing TAISA Others

100%

75% 100%

100%

25%

42,93%

100%

33,34% 100% 100%

98,89%

100%

100%40,26%

70,46%

100%

100%

100%

69,979%

59,40%

75,15%

98,82%

100% 100%

100% 100%

100% 51%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

2%

THE TEAM THAT DIFFERENTIATES US

We place people at the centre of our strategy and when taking our decisions, which, undoubtedly, is the best guide for sustainably developing our business.

We are a unique Company thanks to the 3,529 professionals who make up this great team and who are distributed among our main office in Madrid, our offices in Barcelona, our eight breweries in Spain (Bilbao, Burgos, Córdoba, Granada, Guadalajara, Lleida, Málaga and Tenerife) and in India (Bhiwadi, Rajasthan), the United States (Michigan and Colorado), four water springs (Cuenca, Jaén and Tenerife), 15 sales offices spread over in 11 Spanish autonomous communities, and three international offices in Portugal, United Kingdom and Italy.

We are an attractive company to work for, and our team is full of talent. Diversity is also an essential line of action for Mahou San Miguel and, thus, we develop and participate in awareness-raising activities like Ability Week and support our employees through the Plan Familia to support them if they have a family member with a disability.

Since our beginnings, innovation has been part of who we are and, today, is our main source of growth. We understand this to mean not only the development and launch of new products but also comprehensively, with the focus on constant improvement of our processes and facilities to make them even more sustainable.

In 2019, launched 10 products, which were very well received by consumers, and led the transformation of the beer purchasing experience through our specialised store, La Cervecista, which has passed the one-year mark and received over 60,000 people. We also opened our Brew&Hub in Cordoba, a pioneering space designed to enable craft brewers from all over the world to create their propositions and exchange ideas.

In addition, we continued driving initiatives that promote innovation inside and outside the Company. We foster inter-

WE LEAD THE WAY WITH INNOVATION

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our consumers. In Madrid, we opened Wahou! by Mahou, our store with lifestyle items, and dove head first into the world of e-Commerce with the launch of our first online Solana store, which, in addition to beer, offers experiences like tastings, plant visits, concerts, etc.

Innovation was also the chosen path for making our packaging more and more sustainable and responsive to a circular economy model. An ambitious goal in which Mahou San Miguel has already made significant progress, particularly with the emblematic Solán de Cabras brand, as the bottles for all products now contain 50% recycled PET, exceeding the regulatory standards of the European Union.

entrepreneurship between our professionals with programmes like “Emprendemos”, which allows our teams to submit their best ideas for the business, and celebrated the first Industrial Hackathon, a project based on a decentralised and collaborative innovation model aimed at university students to promote the young talent that will contribute to the transformation of Spanish industry. Furthermore, our BarLab innovation platform evolved into “BarLab Challenge Horeca” and focused on startups offering products and solutions that help improve the experience of customers in on-trade establishments.

In 2019, we also created new sales channels with the aim of being closer to

SUSTAINABILITY AS A GUIDE

Sustainability is integrated into every Mahou San Miguel initiative and represents a mainstay of its strategy, which gathered steam through our “Somos 2020” Sustainability Framework. This ambitious plan, to which we have already dedicated over 23 million euros and which aims to make us an active leader in Sustainability in the Consumer Goods sector, has been advancing steadily, since its kick-off in 2018, towards fulfilment of each of the 20 commitments that make it up.

We firmly believe that sustainability has to be an element that cuts across the entire organisation and one that positively impacts all areas and serves as an engine for growth for the Company in the long run.

MATERIALITY ANALYSIS This report aims to serve as a useful consultation tool for all stakeholders and society in general in terms of the good governance, environmental, social and economic aspects which, in collaboration with them, we have deemed relevant.

Mahou San Miguel Stakeholders

• Employees • Suppliers • Consumers • Distributors and dealers • On-trade customers • Off-trade customers • Government and Public Administration • Sectoral and business associations • News media • Third sector • Universities, business schools and training

centres

To identify the key aspects for the company and conduct the Materiality Analysis, we used the 2020 Strategic Framework for Sustainability as a reference. This is a plan created collectively and transversally, in which over 100 company professionals from different areas participated, as well as customers, suppliers, experts and other Mahou San Miguel stakeholders. Moreover, in 2019, the exercise was updated to include the perspective of one of our key stakeholders, the consumer, through a survey of 1,000 people all over Spain.

+100 EMPLOYEESPARTICIPATING

5 MONTHS

49 WITH STAKEHOLDERSINTERVIEWS

11 WITH EXPERTSSESSIONS

SURVEYSONLINE+1.000

New Strategic Framework for Sustainability:

• To align ourselves with the company strategy

• To adapt to consumers’ new demands

• To anticipate the market

Thus, we have defined the most important components for the company and the groups with which it works and organised them along three axes: TALENT, COMMITMENT AND INNOVATION.

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• Energy and CO2

• Water and natural resources

• Eco-design and sustainable packaging

• Consumer well-being• Labelling and

nutritional composition

• Moderate consumption• Purchasing and local

employment• Support to the

distributor and on-trade sector

• Product quality and brand value

• Sustainable mobility• Promotion of education

and youth employment• Social commitment

• Corporate culture• Talent, diversity,

flexibility and work-life balance

• Employee safety, health and well-being

• Good company to work for

• Digital transformation

• Ethics, Compliance and Corporate Governance

Rel

evan

ce f

or o

ur s

take

hold

ers

Relevance for Mahou San Miguel

Low

Low

Med

ium

Medium

Hig

h

Talent, diversity, flexibility

and work-life balance

Employee safety, health and well-being

High

The aim of “Somos 2020” is to achieve a solid business model based on sustainability, innovation and people. We firmly believe that sustainability must be an element that cuts across the entire organisation and one that positively impacts all areas and serves as an engine for growth for the Company in the long run.

Social commitment

Promotion of education and youth employment

Labelling and nutritional composition

Corporate culture

Good company to work for

Moderate consumption

Energy and CO2

Digital transformation

Consumer well-being

Water and natural resources

Eco-design and sustainable packaging

Sustainable mobility

Support to the distributor and on-trade sector

Product quality and brand value

Ethics, Compliance and Corporate Governance

Purchasing and local employment

MAHOU SAN MIGUEL 2019 MATERIALITY MATRIX

WE AREINNOVATION

WE ARECOMMITMENT

WE ARETALENT

RESULTS FOR THE MAIN INDICATORS

€5.8m€2.9m (2018)

INVESTMENT

1,153,09% (2018)

% SAVINGS IN WATER

4,021,22% (2018)

% SAVINGS IN ENERGY

0(2018 y 2019)

WASTE

ECONOMIC AND BUSINESS 2018 2019

Turnover €1,298.6m €1,400.4m

Main investments €119.8m €109.9m

Sales volume 18.3 million hectolitres* 19.3 million hectolitres

Leadership share in Spain 34% 32.37%

Support to the on-trade sector €73.3m €76.4m

Acquisitions 75.15% of Aguas del Valle de la Orotova

70% of Avery Brewing Company L.L.C.70.46% of Gold Lemon, S.L.100% of Distribuciones Chamartín, S.A. and Govadisa Distribuciones de Bebidas, S.A.51% of Voldistribución Coruña, S.L.U.

Percentage of the production of Spanish beer consumed in the world corresponding to Mahou San Miguel

70% 70%

International presence of Solán de Cabras

35 countries 35 countries

Company MERCO Ranking 15th place, being the beverage company with the best reputation in Spain

13th place, being the beverage company with the best reputation in Spain

Investment in innovation €25.4m €31.5m

ENVIRONMENT

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Nearly thirty policies focused on establishing ethical and transparent processes in four major blocks: Business, Corporate Responsibility, Corporate Governance and Risks.

To date, no complaints of human rights violations have been received.

Workforce 3,529 people

3,177 people (in 2018)

New hires173

230 (in 2018)

Communities in which we create employment11 communities

11 communities (in 2018)

Investment in training €2.5m

€2.15m (in 2018)

Merco Talento 17º position

15º position (in 2018)

Dialogue with employees“Dilo” morale and commitment survey.

The conclusions of this study are taken into account for the purpose of evolving, growing and improving

by integrating the concerns of all employees in order to face challenges.

ISO9001, FSSC, ISO 22000 certifications. PRG-Q01_02 Complaint Management Procedure.

Our goal is to continue passing the audits we are subject to with flying colours.

TRANSPARENCY AND CORPORATE GOVERNANCE

CONTRIBUTION TO SOCIETY

ATTRACTION AND RETENTION OF TALENT

QUALITY OF OUR PRODUCTS

€1,366.8mContribution

to the Spanish economy

€1,454.1m

93%Spanish suppliers 93%

3,852hours

Hours dedicated to

volunteer work

4,126 hours

€11m

Sustainability projects

€12.6

€2,9m

Investment in social action €2.9

20192018

We have a risk control and management function that ensures that the main risks Mahou San Miguel faces are adequately identified, managed and disclosed. This function is exercised by the Auditing and Internal Control Division under the direct supervision of the Company’s Executive Committee based on the reference framework of internationally accepted best practices (COSO and Good Governance Code) and according to the following guiding principles:

CONTROL ENVIRONMENT To create a body of standards, processes and structures that will serve as the basis for exercising internal control, in accordance with the standards of conduct expected of companies and the organisation’s ethical values.

RISK ASSESSMENT• To identify and assess the different types

of risks associated with Mahou San Miguel’s operations, organising these into four major blocks: Strategic, Operational, Financial, and Regulatory.

• To involve all company managers in adequate identification, management and quantification of all major risks, as well as to require them to use this information in decision-making.

CONTROL ACTIVITIESTo establish the necessary measures to mitigate the impact of the identified risks, if they were to materialise, by identifying and implementing controls (preventive, detective, corrective, automatic, and/or manual), as well as the necessary contingency plans for achieving the objectives.

INFORMATION AND COMMUNICATION• To provide relevant and high-quality

information about risk control and management, along with the corresponding controls and contingency plans.

• To promote knowledge within the company of internal control and management of risks.

• To communicate to external interest groups the key aspects that affect the functioning of the control system.

OVERSIGHT ACTIVITIES To ensure the proper functioning of the risk control and management systems through continuous or periodic evaluations to determine whether they are functioning properly, communicating the recommended improvement measures to the responsible parties for implementation.

To ensure that the risk control and management system reasonably mitigates risks within the framework of the defined policy.

RISK CONTROL AND MANAGEMENT

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IDENTIFICATION OF POTENTIAL SIGNIFICANT RISKS

Strategic

Change-management, corporate culture and talent developmentLack of agility in adapting to change and failure to promote diversity. Difficulty in attracting, hiring and retaining qualified resources for optimal fulfilment of the organisation’s objectives.Failure to establish an environment that supports the integrity, ethical values and competence of the company’s employees through the management philosophy and operating style, allocation of authority and responsibility, and organisation and development of people.Failure of management to maintain appropriate labour relations in terms of work-life balance.

Chapter 5:Our team: our priority

Brand value Loss of leadership position or inability to maintain the competitive position of our brands in the market. Establishment of marketing policies or brand strategies that lack consistency or long-term vision.

Chapter 2: We are committed

Chapter 3:Sharing value

Development of products and experiences Lack of assessment, from the beginning, of the environmental and societal impact of our products and of the experiences we generate around our brands.Maintaining the same packaging and materials without incorporating possible more sustainable options such as R-PET, recycled glass, returnable containers, sustainable cardboard, etc.

Chapter 3:Sharing value

Anticipation of new forms of sustainable mobilityFailure to effectively apply sustainable mobility concepts in cities with respect to distribution, sales and employee movements.

Chapter 2:We are committed

Consumption of our productsImmoderate habits of consumption of the products.


Operative

Efficiency in the use of natural resourcesInefficient management of natural resource consumption.Absence of sustainable innovation projects with raw materials suppliers, production centres and environments.


Price and supplies of raw materials, containers and packagingAbsence of a business plan for purchasing and/or supply of raw materials to support the financial and operational goals of the company. Lack of supply and inability to find substitute resources. Large and persistent price fluctuations resulting in significant cost overruns.

Chapter 4:Close to consumers

Customers, distributors and suppliers Absence of measures and tools for adding value to the businesses of our customers, suppliers and distributors.


Employee safety, health and well-being Inability to create and maintain a culture oriented towards employee health and safety.Lack of spaces that contribute to the well-being and happiness of the team.

Chapter 2: We are committed


IT systemsThis includes the risks related to technological infrastructure and to effective management of information, computer networks and communications. It also encompasses those related to the technological security of the systems, particularly the risk of cyberattacks to IT systems, which could potentially affect the confidentiality, integrity and availability of critical information.

Chapter 5:Our team: our priority

Regulatory

Regulatory complianceViolation of tax, labour, business and consumption, industrial and intellectual property regulations as well as other laws, particularly those of a criminal nature.

Chapter 1:A company moving forward

Corporate GovernanceLack of adequate ethical codes that establish formal conduct standards in the operation of the business according to the laws in force.

Chapter 1:A company moving forward

Product quality and labellingFailure to identify and prevent legal risks related to non-compliance with governmental and international requirements for product quality and safety.


Financial The financial risks are described in the consolidated Annual Accounts. Annual Accounts

A YEAR OF GROWTH

2019 was a very challenging year and, at the same time, a very positive one in that the results were with us, strengthening our leadership. Our turnover grew by 7.8%, reaching 1,400 million euros, and we increased our sales volume with respect to the previous year, breaking our record with 19.3 million hectolitres.

OUR INVESTMENT TOTALLED

AND WAS DEDICATED MAINLY TO UPDATING AND IMPROVING OUR PRODUCTION CENTRES, PRODUCT INNOVATION, PREMIUMISATION OF OUR BRANDS AND PROMOTING BEER CULTURE.

109,9 MILLION EUROS

MAIN RESULTS 2018 2019 18 VS 19

Turnover (millions of euros)

1,298.6 1,400.4 7.8%

Pre-tax profit (millions of euros)

170.4 192.2 12.8%

Operating result (millions of euros)

164.7 188 14.1%

Main investments (millions of euros)

119.8 109.9 -9%

Sales volume (millions of hectolitres)

18.3 19.3 5%

Number of employees (No.) 3,177 3,529 11%

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TAX CONTRIBUTION

Mahou San Miguel gives priority attention to compliance with its obligation to pay the taxes that, in accordance with the applicable rules, are due in each territory.

on profits in the 2018 financial year, as well as income tax withholdings for the 2019 financial year.

It includes the detail of the profits obtained country by country, understood as the pre-tax profit, as indicated in the Consolidated Report.

The tax contribution with respect to the tax on profits the company paid per country in the 2019 financial year totalled 56,633,018 euros.

Below is a breakdown of this tax contribution, considering the total amount of payments made in each country for the tax

CountryProfits (Pre-tax profits)*

Tax on profits withholdings in 2019

Tax on profits withholdings in 2018

Total tax on profits paid

Spain 198,512,519 50,651,565 5,848,255 56,499,820

Portugal 242,709 47,526 0 47,526

Italy 437,9 0 0 0

United Kingdom 11,859 0 2,376 2,376

Chile -257,985 5,556 0 5,556

United States 1,336,779 55,351 22.,389 77,74

India (7,224,641) 0 0 0

TOTAL (Euros) 193,059,140 50,759,998 5,873,020 56,633,018

The information on public subsidies is provided in Note 14 “Subsidies” of the Consolidated Annual Report for 2019.

*The difference with respect to the consolidated pre-tax profit corresponds to the affiliate entities that consolidate using the equity method.

OUR EFFORTS PAY OFF

MERCO TALENTO 2019 Mahou San Miguel is ranked in the TOP 20 of best companies to work for in Spain and maintains its position in the TOP 5 of companies most valued by their own employees. DIGITAL TALENT AWARDSOur Contigo portal received this award that recognises our company’s strategy for developing a comprehensive platform that enables us to listen to and respond to the needs of our employees.

2019 KAIZEN LEAN AWARDSMahou San Miguel was recognised as an example of good practices in the implementation of its Excellence System. A major reward for the effort, tenacity and work carried out by our teams.

LEAN&GREEN AWARDWe received the Lean&Green award thanks to our CO2 emission reduction plan.

OCARE AWARDS Our “Plan Semilla” for involving

employees in the implementation of sustainability actions received the

TALENT

COMMITMENT

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award as the best comprehensive CSR communication plan.

CASTILE-LA MANCHA EDUCATION DAY AWARD The Regional Government of Castile-La Mancha recognised Solán de Cabras on for its contribution to improving the Dual Vocational Training system and vocation skills development for students.

PROMARCA INNOVATION AWARD The Mahou San Miguel Foundation received this award in the Employment category for its programme “Creamos Oportunidades en Hostelería”.

BUSINESS SUCCESS AWARDS IN CASTILE-LA MANCHA Mahou San Miguel received the Job Creation and Economic News award in Castile-La Mancha.

LEED GOLDOur corporate headquarters in Madrid obtained this certification thanks to its progress in sustainability, as 100% of the electricity consumed now comes from renewable sources and it has achieved energy savings of 45%. Thus, it has become the first company in the Spanish brewing sector to obtain this important recognition.

BARCELONA BEER FESTIVALWe received a total of six awards in the fourth edition of the most important international craft beer competition in Southern Europe with our beers Mahou Cinco Estrellas, La Salve Export and La Salve Lager Auténtica, Alhambra Baltic Porter, Founders (for its Curmudgeon and Tank Bender products and its iconic Breakfast Stout), and Nómada Brewing (for its Hanani, Revontulet, La Manchurita, Imperial Stout, Gianduja, Lum and Passiflora products).

MONDE SELECTION This award, which we received for two of our beers, Mahou Maestra Wheat and the

Alhambra Numeradas range, analyses, evaluates and recognises, through its exclusive emblems, the quality of a large number of consumer products from all over the world.

WORLD BEER AWARDS Maestra Dunkel, Mahou Cinco Estrellas and Maestra Doble Lúpulo took the gold medal, while Mahou Barrica Bourbon and Mahou Barrica Original took the silver. INTERNATIONAL TASTE & QUALITY INSTITUTE (ITQI) This institution recognised Solán de Cabras and Mahou Maestra Dunkel with three stars. Mahou Barrica Bourbon, Mahou 0,0 Tostada, Mahou Cinco Estrellas, Maestra Doble Lúpulo received two stars, while Mahou Barrica Original earned one.

INNOVATION AND BRANDS

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WORLD BEER CHALLENGE Our Salve Txirene won the gold medal in the American-Style Pale Ale category and Mahou Maestra Dunkel in the European Style-Dark category.

BERLIN INTERNATIONAL BEER COMPETITIONMahou Maestra Doble Lúpulo won a double gold medal in the German-Style Heller Bock/Maibock category. In addition, Mahou Maestra Dunkel and Mahou Barrica Original won gold medals and Mahou Cinco Estrellas a silver.

BEST AWARDS “Numeradas” from Cervezas Alhambra was recognised with a gold medal in the packaging design category.

LONDON BEER COMPETITION Our Mahou Cinco Estrellas beer received the silver medal in the Pale Bitter European Beer category.

CRAFT BEER AWARDS Mahou Maestra Dunkel and Mahou Barrica Bourbon received the gold medal in 8 Bock and II.Barrel Aged Beer categories, respectively. Maestra Doble Lúpulo and Barrica Original received the silver medal.

CZECH REPUBLIC INTERNATIONAL BEER FESTIVAL Mahou Cinco Estrellas beer received the silver medal in the Premium Pale Lager category.

MAHOU: THE MOST-AWARDED SPANISH FAMILY OF BEERSIn 2019, our iconic brand was awarded 45 medals in nine countries, making it one of the most internationally recognised beer brands. In this way, Mahou is becoming the most-awarded Spanish beer family in the world.

GOVERNANCE BODIES

BOARD MEMBER POSITION

Chairman Mr José Antonio Mahou Herráiz

First Vice Chairman Mr Gerardo Fernández Calvo1

Second Vice Chairman Mr José A. Togores Mahou

CEO Mr Eduardo Alfredo Petrossi 2

Member

Mr Alfredo Mahou Herráiz

Ms Alicia Mahou Parra

Ms Ana Francisca Gervás3

Ms Fátima Mahou Herráiz

Ms Germina C. Eva Gervás4

Ms Mª del Carmen Mahou de la Torre

Ms Mercedes Calvo Caminero5

Mr Pablo Usandizaga Usandizaga6

Secretary (non-board member) Ms Beatriz Martínez-Falero García

Vice Secretary (non-board member) Mr Juan Ruiz de Velasco Martínez-Ercilla

1 Representing Mosquililla, S.L.U.

2 Representing Tamarinver, S.L.U.3 Representing IPL Gala Internacional, S.L.

4 Representing Sociedad Gala de Inversiones, S.L.U.5 Representing Altinver, S.A.U.6 Representing Inversiones Múltiples, S.L.U.

MAHOU BOARD OF DIRECTORSComposition of the Board of Directors of Mahou San Miguel.

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EXECUTIVE BOARDThe company’s Executive Board, supported by the management team, has the role of implementing the business management decisions. It has the following members:

Chief executive officer Mr Alberto Rodríguez-Toquero

Managing Director of the Spain Business Unit Mr Peio Arbeloa

Managing Director of the International Business Unit Mr Erik d’Auchamp

Managing Director of the Water Business Unit Mr Jesús Núñez

General Manager of the Logistics Services Business Unit Mr Miguel Ángel Miguel

Managing Director of the Own Distribution Business Unit Mr Javier Guerrero

Managing Director of the New Business and Quality, R&D+i Business Unit Environment Mr Benet Fité

Managing Director of Finance and Strategy Mr Mariano Navarro

Managing Director of Marketing Mr César Hernández

Managing Director of Operations Mr José Luis Rodríguez

Managing Director of People and Organisation Mr Jesús Domingo

Director of the Legal Area Ms Beatriz Martínez-Falero

Director of Internal Auditing and Control Mr Antonio Jiménez

Director of Corporate Communication, Institutional Relations and Sustainability Ms Patricia Leiva

Director of Property Assets Ms Paloma Boceta

1 Representing Tamarinver, S.L.U.2 Representing Mosquililla, S.L.U.

3 Representing Inversiones Múltiples, S.L.U.

MANAGEMENT TEAMIts role is to manage the daily operations of Mahou San Miguel:

BOARD MEMBER POSITION

Chairman Mr Eduardo Alfredo Petrossi1

Vice Chairman Mr Alfredo Mahou Herráiz

Member

Ms Carmen Mahou de la Torre

Mr Gerardo Fernández Calvo2

Mr José A. Togores Mahou

Mr Pablo Usandizaga Usandizaga3

WHAT DRIVES US

WE PROMOTE INNOVATION• We seek out and apply the best practices

in the market.• We innovate in processes and in all the

ways of reaching the end consumer. • We learn from our mistakes.

WE BELIEVE IN PEOPLE• People are the engine of the company

(customers, suppliers and employees). • People are much more than just a

resource. • Decisions are taken in the context of their

impact on people and their environment, not just based on profits.

WE AIM FOR EXCELLENCE• We anticipate changes in the market

quickly and with agility.• We are self-critical and non-conformists.• We seek new ways of doing things that

enable us to improve continuously.

To share excellence with others in all the things we do—brands, products, experiences and services—by participating in the best moments of their daily life.

and craft segments by leading the development of Spanish brands

• Generating shared value for our team, customers, partners, community and shareholders.

And we make this possible by:

• Placing the consumer and people at the centre of our decisions.

• Using technology and information as a competitive advantage

• Working on continuous improvement and with efficiency.

We achieved our status as a sustainable company and a leader in the Consumer Goods sector by:

• Building innovative and top-quality brands, products, experiences and services.

• Leading the categories of natural and authentic beverages in which we compete in the Spanish market.

• Being an important player internationally in the premium

WE ENJOY DOING THINGS WELL• We are a great team that passionately

enjoys its work. • We are proud of working at Mahou

San Miguel.• We have an unwavering focus on quality.• We don’t look for shortcuts.

WE CREATE SUSTAINABLE BUSINESSES AND ENVIRONMENTS• We look after the business as if it were

our own. • We take prudent decisions that consider

long-term results. • We anticipate and satisfy the needs of

consumers by creating more sustainable and differentiating products, services and experiences.

OUR VALUES

OUR MISSION

OUR VISION

To enjoy doing things well and passing this ethos down from one generation to the next.

OUR PURPOSE

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CORPORATE POLICIESAt Mahou San Miguel, we clearly understand our duty to put into practice the values and principles we have cultivated. To do so, we have established a series of corporate policies with which compliance is mandatory and which mark the fundamental conduct guidelines for everyone who is part of the Company. They were developed entirely by the various departments responsible for them, and their updating was approved by the Board of Directors on 16 March 2016.

RISKS• Risk Control and Management Policy• Customer Risk Policy• Prevention, Health, and Well-being Policy• Investment and Divestment Policy• Criminal Risk Prevention Policy• Financial Risk Policy• Reputational Risk Prevention Policy• Tax Risk Prevention Policy• Anti-corruption Policy• Insurance Policy

BUSINESS• Sales Policy• Purchasing Policy• Operations Policy• Marketing Policy• Product Innovation Policy

CORPORATE RESPONSIBILITY• People and Organisation Policy• Corporate Social Responsibility Policy• Quality and Food Safety Policy• Environmental Policy• Responsible Spending Policy

CORPORATE GOVERNANCE• Mission, Vision and Values• Code of Conduct• Organisation and Corporate • Coordination Policy• Corporate Communication Policy• Sponsorship Policy• Policy on Dividends and Treasury Stock• Information to Shareholders Policy

TRANSPARENCY AND GOOD GOVERNANCE

CODE OF CONDUCT

This establishes the guidelines, values and principles that are to govern the conduct of the people in our organisation in their internal and external relationships, both in terms of professional activity and with stakeholders and society in general.

It also expresses the principles of not employing minors, freedom of association and the right to collective bargaining, explicit rejection of forced or coerced labour, among others. A commitment shared by all Mahou San Miguel employees, as well as by our suppliers and customers.

SUPPLIER CODE OF CONDUCT

We ensure that companies providing goods and services pursue their activities within the context of proven corporate social responsibility and business ethics. For this reason, we not only have a General Purchasing Policy but also a Supplier Code of Conduct. The General Purchasing Policy establishes, among others, the following basic principles:

• Ensure transparency and non-discrimination by establishing a series of honest and open professional standards.

• Promote strict compliance with contract terms, laws in force, and applicable standards and procedures, particularly with respect to human rights, labour matters, occupational risk prevention, quality, food safety, and the environment.

• Promote stable business relationships based on the highest quality standards, transparency, continuous improvement and mutual benefit, whilst pursuing activities aimed at innovation and development.

Conducting ourselves with respect, honesty and integrity is an essential part of our corporate culture. We clearly understand our objectives in this sense and, to achieve them, we have formulated nearly thirty policies aimed at establishing a series of ethical and transparent processes, all framed in four major blocks: Business, Corporate Responsibility, Corporate Governance and Risks.

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ETHICS AND COMPLIANCE COMMITTEE

We have an Ethics and Compliance Committee with the following responsibilities, among others:

• Develop and disseminate the content of the Irregularities Prevention and Regulatory Compliance Programme.

• Control and oversee compliance with the General Policies, implementing rules, and especially, the law.

• Identify company activities with a potential for criminal conduct.

• Act as a whistleblowing channel, lead internal investigations and propose the application of disciplinary penalties.

• Set up a system of integration and correlation between the Criminal and Reputational Risks Map of Mahou San Miguel and the controls and measures adopted to mitigate them.

CRIME PREVENTION PLAN

The Mahou San Miguel Board in 2018 approved the Crime Prevention Plan, which takes its place alongside the General Policies that fight corruption, bribery, and money laundering, among other matters. Additionally, we have a whistleblower channel through which any violation of the General Policies or other internal rules can be reported to the Ethics Committee.

WE ARE PART OF THE EXECUTIVE COMMITTEE OF THE SPANISH NETWORK FOR THE UNITED NATIONS GLOBAL COMPACT:

And we are committed to:

• Sustainable management of natural resources.

• Equal opportunity and non-discrimination.

• Defence of human rights. • Fighting business corruption.

All of these matters are reflected in our General Policies and Code of Conduct (which is published on our website and intranet), and any violation can be reported through the whistleblower channel operated by the Ethics and Compliance Committee. Any incident reported is analysed and the corresponding investigation is opened. To date, no complaints of human rights violations have been received.

Likewise, Mahou San Miguel is subject to European regulations based on compliance with the fundamental conventions of the International Labour Organisation referring to, among other issues, non-violation of human rights and respect for freedom of association and the right to collective bargaining.

02

WE ARE COMMITTED

For over 130 years, our mission as a company has been to add value to the communities where we operate by contributing to their economic, social and cultural development, and by guaranteeing maximum respect for our surroundings.

In 2019, we contributed a total 1,454.1 million euros of to the Spanish economy, 6% more than in 2018. Of this, 271 million corresponded to our employees, 858 million to purchases from suppliers, and 325.3 million to the Government.

As for our tax contribution to the State, this totalled 331.5 million euros, of which 108.7 million corresponded to direct taxes and 222.8 million to the payment of indirect taxes.

Mahou San Miguel continues to create jobs in 11 Spanish autonomous communities and supports the local business community through its commitment to proximity and sustainability, as demonstrated by the fact that 93% of our suppliers are Spanish.

Support for the local economy, establishment of sustainable policies across the entire value chain, and promotion of initiatives aimed at improving people’s well-being and quality of life are priorities for Mahou San Miguel. For that reason, we incorporate them into all working areas through our Corporate Social Responsibility Policy and Code of Conduct.

million euros received in subsidies

1,1

contributed to the Spanish economy

1.454,1 MILLION EUROS

contributed to the State in taxes331,5 MILLION

EUROS

93%DOMESTIC SUPPLIERS

autonomous communities11JOB

CREATION IN

WE CONTRIBUTE TO THE ECONOMIC GROWTH OF OUR COUNTRY

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WE COLLABORATE WITH SOCIETY AND THE ENVIRONMENT

In 2019, we established partnerships with a variety of organisations to join forces and contribute the development of society and conservation of the environment. Thus, in 2019 we donated 2.9 million euros to different non-profit organisations.

Additionally, we collaborate on an ongoing basis with the institutions with which we work actively in different fields:

• AECOC • Aneabe • ANFABRA• Spanish Association of Advertisers • Autocontrol • Beer Brewers of Spain • Sustainability Excellence Club • Spanish Exporters and Investors Club • Ecoembes • Ecovidrio • FIAB • Business Forum for Madrid • ICIL Foundation • IESE • San Telmo Business School • Promarca • Spanish Network for the United

Nations Spanish Global Compact • The Brewers of Europe

WE PROMOTE MOMENTS FOR ENJOYMENT AND CONNECTIONWe create, for our consumers, environments of enjoyment and connection linked to our brands in the areas of gastronomy and culture. This commitment is reflected by the 66.1 million euros dedicated by Mahou San Miguel in 2019 to this.

WE PROMOTE THE SPANISH ON-TRADE SECTOR AND ITS GASTRONOMYWe have always made an effort to place value on the high quality of the on-trade sector in our country. Along these lines, we worked closely with our on-trade customers and, last year, dedicated 76.4 million euros to supporting their businesses through diverse initiatives, many of them aimed at promoting Spanish gastronomy, a worldwide referent of high quality.

Under this premise, in 2019, we collaborated with organisations such as Hostelería España, Euro-Toques and the Michelin Guide. Moreover, we joined the board of the Basque Culinary Center, an academic institution that is an international pioneer in the gastronomy world. This collaboration is in addition to

the agreement signed this year with the association Women in Gastronomy (MEG in its Spanish acronym), for the purpose of raising the visibility and recognising the work of women in the sector.

Likewise, we were present at numerous events like Madrid Fusión and Gourmet Salon Madrid and, with our brands, we held our own “can’t miss” events for lovers of good food and beer, for example, “Mahou Madrid Urban Food Festival” with Mahou, “Sala Magna” with San Miguel and “Momentos Alhambra”, with Alhambra.

In 2019, we hosted around 50 initiatives in cities all over Spain to support gastronomy at the same time as we maintained agreements with 13 associations related to promoting gastronomy.

to promote gastronomy and culture

66,1OVER

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WE PROMOTE SPORT AND WELL-BEING Mahou San Miguel has a strong commitment to sport and promoting a healthy lifestyle. To fulfil this, we encourage responsible consumption of our products and participate in the promotion and creation of sporting events in different disciplines like football, basketball, yoga and running, at both the professional and amateur level. San Miguel, for its part, contributed new experiences in the winter sports category, and both this brand and Mahou continued to be connected to the youth target through eSports.

In 2019, we sponsored a total of 18 First and Second Division football clubs, and we continue collaborating with the Granada Basketball Club Foundation, which promotes the practice and development of this sport in the province.

Solán de Cabras, for its part, again collaborated with the Spanish Cancer Association (AECC) through the projects “Gotas de Solidaridad 2019” (Drops of Solidarity) and “Mesas Rosas” (Pink Tables), the latter coinciding with World Breast Cancer Awareness Day. And for another year, our water brand was present at the Women’s Race, which held its 16th edition in 2019.

WE SUPPORT CULTURE AND MUSIC We have a historic commitment to supporting music and culture. Proof of that is that, in 2019, we dedicated nearly 66.1 million euros to promoting activities related to these worlds. This allowed us to offer the public a wide variety of leisure activities as well as to support the talent of emerging and well-known artists from different disciplines.

With San Miguel initiatives like “Festival IN”, or “San Miguel On Air” and our presence at important festivals like Mad Cool, with Mahou, and dCode, with Alhambra, we offered consumers the best live music in different cities around the country.

For another year, we participated in Oktoberfest, popularly known as “the beer party”, which was held in Madrid and allowed attendees to toast with craft propositions from Founders Brewing and Nómada Brewing.

And, of course, we also support art. For the fourth consecutive year, ARCOmadrid hosted the Cervezas Alhambra Prize for Emerging Art, an award that invites emerging Spanish artists to create original works based on the spirit of the brand.

Additionally, we continued collaborating with important cultural institutions like the Prado and the Guggenheim museums, and we are sponsors of the Atapuerca Foundation, a Burgos-based organisation we have been actively collaborating with for over 15 years.

NATURAL RESOURCES

1. We will reduce our carbon footprint by 10%.

2. We will consume 100% green energy in all our work centres and promote energy self-generation projects.

3. We will reduce water consumption by 10% by 2025 and develop programmes to protect water resources in the environments where we operate.

PACKAGING AND MATERIALS

4. 100% of our packaging and promotional materials will be designed using sustainability criteria: recycled, recyclable and reduced grammage.

5. We will promote the reuse of materials until our containers contain at least 50% recycled PET, 70% recycled glass and 100% sustainable cardboard.

HEALTH AND WELL-BEING

6. We will launch new products especially focused on the health and well-being of our consumers.

7. 80% of our employees will participate in Company-sponsored programmes to promote health, happiness and emotional well-being.

“SOMOS”/WE ARE MORE SUSTAINABLE

“Somos 2020” (We Are 2020) establishes 20 concrete commitments that are supported by three lines of action: the development of more sustainable and differentiating products, services and experiences, as part of “Somos Innovación” (We Are Innovation); the creation of partnerships that favour people’s quality of life, grouped under “Somos Compromiso” (We Are Commitment); and the support of our collaborators through new ways of working, under the area of “Somos Talento” (We Are Talent). Each of them is aligned with one

or more UN Sustainable Development Goals (SDG).

Of the commitments assumed, more than half have already been fulfilled with a degree of 100%

execution, and we continue towards make progress to fulfil the rest. Some

business milestones that have already been realised are the reuse of materials to achieve the goal of having our packaging contain at least 50% recycled PET, 70% recycled glass and 100% sustainable cardboard, and 80% of our employees participating in Company-sponsored health, happiness and emotional well-being programmes.

Also noteworthy are the initiatives aimed at promoting employment among groups at risk for exclusion, by training over 1,100 unemployed young people, in

collaboration with our Foundation, and the environmental partnerships for the protection of biodiversity and prevention of forest fires that we have established. In addition, 25% of our employees are already

Our firm commitment to sustainability, evident in all of the Company’s business areas and in our relationship with our collaborators, materialised in 2018 within the “Somos 2020” Sustainability Strategic Framework, a three-year plan that has 20 goals and to which we have dedicated over 23 million euros, to make ourselves an active leader in sustainability in the Consumer Goods sector.

WE AREINNOVATION

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MARKETING AND RESPONSIBLE CONSUMPTION

8. We will continue to promote responsible consumption of our products.

9. We will promote a sustainable value chain by preferentially purchasing from local suppliers and by accompanying our customers in adopting sustainability practices in their businesses.

SUSTAINABLE MOBILITY

10. Our company vehicle fleet in the Spanish market will be 100% sustainable within five years.

11. We will support our distributors in their efforts to progressively incorporate sustainable vehicles.

COMMUNITY

12. We will prioritise employment of people from groups at risk for exclusion by providing training in the on-trade sector to over 1,100 unemployed youth through the Mahou San Miguel Foundation.

13. Our brands will promote initiatives that support people’s social development and well-being.

14. We will promote environmental alliances to protect biodiversity and fire prevention in the areas where we operate.

COLLABORATION

15. We will create spaces in our workplaces for promoting a culture of collaboration, and we will establish digital tools that facilitate teamwork and transversal management.

16. We will hold co-creation workshops with all our key partners so that together we can address the challenges of sustainability across the entire value chain.

DIVERSITY

17. We will offer opportunities for young talent by ensuring that over 5% of new hires correspond to recent graduates.

18. We will commit ourselves in all our recruiting processes, whenever there are candidates of both genders, to pursuing equality when hiring talent.

FLEXIBILITY

19. We will support the goal of having 25% of company employees, when their positions allow it, work remotely by providing them with tools for working flexibly.

20. We will promote internal mobility programmes so that 35% of our vacancies are filled with internal talent.

able to telecommute on a regular basis, and the internal mobility programme has been very well received, with 35% of vacancies covered with internal talent. We have working groups responsible for

monitoring each initiative that track their progress closely. All the projects under this plan have concrete indicators associated with them that enable us to evaluate and make any needed adjustments.

OUR

COMMITMENTSWE ARECOMMITMENT

WE ARETALENT

MODERATE CONSUMPTION

I enjoy the moments our products bring us. “I savour our products with other people, taking time to discover their nuances and enjoy the moment”.

I choose 0,0 and non-alcoholic beer options if I’m going to drive or take part in risky activities. “I analyse the consumption moment in which I find myself and select non-alcoholic options from the portfolio when necessary”.

I inspire through my example and attitude towards moderate consumption in daily life.“I am an ambassador and represent the company and our brands before our customers and partners, always moderating my consumption. So I’m personally responsible and select the right product for every occasion”.

I lead an active life and consume alcohol in moderation as a way of taking care of myself. “I inform myself about the alcohol content of each product and consume the recommended amounts, spacing my drinks out over time.

I extend this commitment to moderate consumption to the people around me. “I make these principles of moderate beer consumption known to the people I work with (team, customers, distributors and suppliers), as well as to my family and social group, in order to set an example”.

At Mahou San Miguel, we encourage an active lifestyle and promote responsible enjoyment of our products. To do so, each year we launch initiatives aimed at raising awareness and educating the consumer about the need for responsible consumption of our products, and we take part in the campaigns on this subject by Brewers of Spain.

To realise our commitment in this area, which we reflect in our Strategic Framework for Sustainability, “Somos 2020”, our employees, customers, distributors and consumers are our best ambassadors, transmitting moderate consumption principles in their daily work and through their example as part of their personal responsibility. These are the principles we share:

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WE WILL PROMOTE EMPLOYABILITYWith the aim of improving the employability of youth at risk for social exclusion, the Mahou San Miguel Foundation promotes training projects for job placement and carries out volunteer actions with our employees that offer a professional future to the groups we work with. To this end, in 2019, we dedicated 2.4 million euros to the activities of our Foundation.

PROMOTING YOUTH EMPLOYMENT GARNERS RECOGNITIONFor another year, the ceremony to award the 3rd Youth Employment Promotion Award, organised by the Mahou San Miguel Foundation, was held with the aim of raising the visibility of high-impact initiatives in the creation and promotion of youth employment.

Accenture, the Once Foundation, Dynamis Consultores, the Capacis Foundation, the Juan Soñador Foundation and the La Kalle Cultural Association were honoured in this edition, which included a new category for startups and social entrepreneurship. In its three editions, over 200 initiatives oriented towards innovation in the area of youth employability have been presented.

WE CREATED MORE OPPORTUNITIES IN THE ON-TRADE SECTORIn 2019, we held the 5th anniversary of the “Creamos Oportunidades en Hostelería” (We Create Opportunities in the On-trade Sector) programme, an initiative that promotes employment training projects aimed at youth at risk of social exclusion in Barcelona, Bilbao, Burgos, Granada and Madrid.

Since its beginning, 788 young people have participated in at least one of the four modes of this programme: Dual Vocational Training in Restaurant Work, Vocational Skills Certificate, Certificate of Basic Restaurant and Bar Operations, Talent Scholarships to support talent in continuing training and the Centre for Employment Opportunities.

The “Creamos Oportunidades” programme promotes, as a key modality for young people to gain access to the labour market, dual training with both theoretical and practical aspects. In this way, the students combine their classwork with training in real workplaces, in this case SMEs, that currently generate 66% of jobs in Spain.

The results endorse the success of this social initiative, as 85% of the young people have been placed in jobs, 17% of which are pursuing advanced studies after finishing the course, for which they have the help of Talent Scholarships. We also have an Employment Opportunities Centre that enables former students to receive training and access job opportunities.

MENTORING TO SHARE KNOWLEDGEMahou San Miguel employees put their talent and knowledge at the service of society through professional volunteer activities that the Mahou San Miguel Foundation has been organising in collaboration with the Spanish Coaching School for over three years.

In 2019, the Mentoring programme had 70 mentors, both employees and retirees, who accompanied the young participants in “Creamos Oportunidades en Hostelería”, from the start of the programme and over the course of their internships, on their path towards job placement. After successfully implementing the initiative in Madrid and Burgos, in 2019, Barcelona was added. These professionals also participated in the additional training the young students receive by teaching master classes on job skills and subjects of interest based on their extensive knowledge.

At Mahou San Miguel, we have great social awareness, and we are firmly committed to sustainability and environmental protection. We hold regular events at which the employees help take care of natural spaces and assist the most vulnerable groups in their communities.

The volunteer programme is driven, to a great extent, by our employees, who choose the social causes and local projects to collaborate with, supported and advised by the Mahou San Miguel Foundation itself.

“CONTIGO SUMAMOS” IS BORNIn 2019, we started a new initiative called “Contigo Sumamos” (We All Add Up), which consists of offering our employees the possibility of supporting the projects of a variety of non-profit organisations through a monthly donation of one euro that is deducted directly from their paychecks. For each euro donated, the Foundation makes a matching donation, doubling the amount raised.

This year, the first, we raised a total of 13,500 euros thanks to the contributions of 660 employees and the collaboration of the Foundation. The participants voted to donate all of the funds raised to the Shuma Association, an organisation that provides surgical treatment to children with disabilities in Turkana (Northern Kenya).

FIRST VOLUNTEER MEETINGIn order to share information about the initiatives implemented at our work centres and to come up with new ideas and ways of working, last year we held the First Volunteer Meeting, which was attended by 60 Mahou San Miguel employees involved in the Company’s social activities.

ENVIRONMENTAL ACTION DAY IN BURGOSOur colleagues at the Burgos Production Facility took part in an environmental action day organised by our Foundation, in which 180 trees of different species were planted on Cerro de Fuente del Rey.

ENVIRONMENTAL VOLUNTEERISM IN BETETAIn the framework of the Company’s collaboration with the regional government of Castile-La Mancha for restoration of the riparian forest on the banks of the Tobar lagoon, for another year, our Solán de Cabras employees joined the environmental volunteerism day in the area surrounding the Beteta spring. The day was used to restore the vegetation in the area by planting seedlings of native trees and shrubs.

PROFESSIONALS WITH SOCIAL AND ENVIRONMENTAL AWARENESS

This year, the over 700 Mahou San Miguel volunteers dedicated 4,126 hours to 44 actions carried out in collaboration with 25 social entities. They also raised more than 42,679 euros for social causes.

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WE COLLECTED RUBBISH IN NATURAL SPACESCoinciding with Sustainability Month, celebrated in June, and with the help of our Foundation, we organised environmental action days as part of the “1m2 por la naturaleza” initiative within the Libera Project. The action served to collect rubbish in different natural spaces and organise workshops and talks focused on concepts like the circular economy and recycling.

CONSERVATION OF NATURAL SPACESOur commitment to preserving the environment extends to many points of the country, where we carry out conservation work in natural spaces. The clean-up and reforestation tasks carried out in areas like the Sierra de Huétor Natural Park (Granada), Cerro Puente del Rey (Burgos) and other areas in the regions of Malaga, Cordoba, Cuenca, Guadalajara and Madrid are examples of this. All of this had a very positive effect, as over 5,000 kilos of rubbish was removed and around 275 trees and shrubs planted.

SOLIDARITY STREET MARKETS In 2019, through the Mahou San Miguel Foundation, we organised solidarity street markets in Malaga, Burgos, Lleida, Cordoba, Granada, Beteta (Cuenca), Jaen, Madrid and Tenerife. The funds raised were donated to organisations with a variety of social aims: the fight against cancer (AFANOC in Lleida and AECC in Cuenca), integration of people with disabilities (Funlabor and Down in Malaga), and improvement of the quality of life of people with autism spectrum disorders (Autismo Burgos, Canary Islands Autism Spectrum Disorder Association).

COLLABORATION WITH CHARITY CANTEENS The Company also does social work in charity canteens. Our volunteers in Madrid regularly participate in canteens, such as the ones organised by the Order of Malta and the Robin Hood restaurant run by the Peace Messengers charity. In addition to this, we also participate in other types of activities, such as drives to collect food, school supplies and toys, which we do at our work centres on certain days of the year.

WE MINIMISED OUR ENVIRONMENTAL IMPACT

sustainable programmes in which we involve our employees in improving our efficiency, and that of our collaborators, thereby integrating the circular economy across entire chain.

All company centres are certified under the ISO 14001.2015 standard as well as the European EMAS Regulation. Under this regulation, assessment of direct and indirect impacts (natural resource consumption, discharges, waste, air emissions, even noise) is conducted to ensure compliance at all times with the limits established by municipal ordinances. Light pollution is also assessed — even though it is not considered significant, as our centres are located in urban settings and industrial parks — and, additionally, the conventional lamps have been replaced by focused LED lighting. Moreover, potential environmental risks are assessed and response procedures established.

Since 2000, we have reduced our impact on the environment by over 50% through responsible use of natural resources (water and energy) and by reducing our emissions, at the same time as our production rose by 62.4%.

Along these lines, we collaborated with different international organisations, such as the Spanish Network for the UN Global Compact and WWF, in promoting initiatives that help protect the environment. Additionally, we develop

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With our employees and their families, we also launched volunteer environmental actions to improve the areas around the places where we operate.

Likewise, in the framework of renewal of our agreement with WWF, we continued collaborating in projects focused on reducing our carbon footprint, in addition to others related to farming of raw materials and sustainable packaging. All of this is in line with the commitments we have adopted in our “Somos 2020” framework.

OTHER INITIATIVES: Plan SemillaWith the aim of continuing to involve our employees in defining sustainable actions, in 2019, we launched a new edition of the “Plan Semilla” initiative, which boasts more than 30 teams trained, 210 employees involved and 127 challenges received, of which 76 were approved and 43 executed.

Impact minimisation targets are set annually, with adequate budget resources allocated for their control, monitoring and reduction. We also extend this system to suppliers and distributors by sharing specific indicators like the carbon footprint.

CLIMATE CHANGEIncluded in the Spanish carbon footprint register, greenhouse effect reduction targets are set and reflected in our Strategic Framework for Sustainability.

BIODIVERSITYIn 2019, Mahou San Miguel, in collaboration with WWF, an organisation that has been working for over 50 years on nature conservation, launched an awareness-raising campaign on prevention of forest fires. The aim was to promote responsible conduct through a series of tips on how to effectively protect and maintain forests and wilderness areas.

Our commitment to caring for the environment is present in every decision we make, and we work each day to reduce our environmental footprint. Our concern for the environment made us among the 15 most sustainable companies in 2019, and the number one brewer, according to the Merco Corporate Responsibility and Governance ranking.

Our sun umbrellas continue to reduce pollutionWe continued combating pollution in our cities with sustainable sun umbrellas for terrace seating areas at on-trade establishments, having already distributed 56% of our total supply. Developed using nanotechnology to purify the air and reduce the high levels of harmful substances in the air, to date we have installed more than 17,400 sun umbrellas at neighbourhood bars and restaurants, which provides a benefit similar to that of a forest with 32,000 trees. This initiative received the Actualidad Económica Award as one of the 100 best ideas of the year.

100% recyclable terracesIn 2019, we started another pioneering programme in Spain with the launch to the market of 100% recyclable outdoor

furniture for terrace seating areas, made with up to 20% recycled materials, which were enjoyed by 60% of our customers. Likewise, we recycled old terrace furniture and donated to NGOs the elements that, while still usable, had to be removed for image reasons. Specifically, over the course of last year, we donated nearly 3,200 units of tables and chairs to a total of 23 organisations in Madrid, Cantabria and Andalusia. Eco alternatives for our vehicles Within the Strategic Framework for Sustainability, we have set the goal of driving our own 100% sustainable fleet within five years. In 2018, we launched various projects in this line, such as the acquisition of eighteen 100% electric vehicles for our sales force working in the downtown core of Madrid.

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Along these lines, our logistics operator, Taisa Logistics also joined us in this challenge and renewed its fleet with the acquisition of four trucks that run on liquefied natural gas. It also managed to reduce the number of kilometres its vehicles are driven and, as a result, emissions, thanks to more efficient routes.

In addition, we extended this commitment to our external collaborators, supporting them economically in the renewal of their fleets with more sustainable gas or electric options.

We improved energy efficiencyIn 2019, Mahou San Miguel reached a collaboration agreement with Verallia, the leading European manufacturer of glass containers for the food and beverage sector, with the aim of increasing the energy efficiency of their production processes. Specifically, the Burgos-based project takes advantage of the residual energy generated in glass-melting to utilise it in the beer-brewing process in place of natural gas, reducing consumption of the latter by more than 60%, which, in turn, represents a 60% reduction in CO2 emissions to the atmosphere. Verallia, for its part, reduced the temperature of the residual energy generated in the glass-melting process by 40%.

The initiative is one of 101 examples of business actions for the climate that were presented at the United Nations Conference on Climate Change held in Madrid.

Objective: second lifeAlthough we have been working with materials that can be given a second life, with “Somos 2020”, we increased

our commitment and set a series of very ambitious objectives: switch to plastic bottles that contain at least 50% recycled PET, glass bottles with 70% recycled glass and packs with 100% sustainable cardboard.

Restoration of the “Baños de la Reina” baths at Solán de CabrasThis historic space, located at our Solán de Cabras spring (Cuenca), which owes its name to the fact that the court of King Fernando VII stayed there so that his wife, María Josefa Amalia de Sajonia, could benefit from the healing properties of the water, was renovated in 2019. This was done within the framework of Mahou San Miguel’s firm commitment to preservation and conservation of the landscape and environment where it operates. Thanks to this restoration work, the building has been added to the Inventory of Architectural Heritage with Historical and Artistic Value.

NOX

T KG/T

2019 47 0.030

2018 35 0.023

CO2 EMISSIONSFrom transport of our products

TN KG/T*

2019 61.678 16.76

2018 62,281 15.18

* per tonne transported

ENVIRONMENTAL INDICATORS

ENERGY

EMISSIONSOur greenhouse gas emissions are falling and, since the year 2000, have declined by 25.9%. In 2019 alone, we successfully reduced our CO2 emissions by 2.54% through expanded use of sustainable vehicles in both the distribution of our products and in the sales fleet, as well as other measures implemented in our breweries, such as vapour recovery and the use of STP coolants to prevent the emission of ozone-reducing substances.

Our goal is to decrease our carbon footprint by 10% in 2020 through energy efficiency, the use of renewable sources and a sustainable mobility plan.

In 2019, continued to reduce our energy consumption (-4.02%) by implementing projects

like solar energy. The electrical power consumed by our company is from 100% renewable sources.

We continuously conduct environmental impact assessments of our Company’s operations through our Life Cycle Analysis Programme for products and processes in order to manage resources efficiently.

WATER SUPPLY 2019According to local limits

M3 (2019) 5,344,127

WATERWater is the main raw material we use to produce our products, and thus it has a prominent role in the company’s environmental policies.

In 2019, we successfully reduced our unit consumption of water by 1.15%, for a total decrease of 43.6% since 2000, at the same time as our production rose by 62.4%.

WATER CONSUMPTION BY SOURCE 2019

Total water withdrawal by source (m3/tn) 3.41

Municipal origin 68.6%

From wells 26.7%

From surface waters 4.7%

CO2

(Total emissions, direct and indirect, of greenhouse gases by weight)

T KG/T

2019 45,214 28.83

2018 46,654 30.54

CO2

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2019 DIRECT POWER CONSUMPTIONBreakdown by primary sources 810,833 GJ – 0.53 GJ/tn

Gas Natural 87,63%

Biogás 9,70%

Gasoil 2,61%

Propano 0,06%

MATERIALS USED 2019(in tonnes)

Raw materials (malt, hops, adjuncts) 218,413.7

Packaging 176,616.8

Additional materials (additives, chemical products) 12,556.2

CONTAINERS AND PACKAGINGrecovered at the end of their useful life 2019

Metal 85,40%

Cardboard 80,00%

Glass 72,20%

Plastic 75,80%

TOTAL WEIGHT OF WASTES GENERATEDBy end destination 2019 (in tonnes)

By-products to animal feed 219,999

Non-hazardous waste to recycling 37,4

Hazardous waste 83

Waste to landfill 1,087

2019 INDIRECT POWER CONSUMPTIONBreakdown by primary sources 413,474 GJ – 0.27 GJ/tn

Renewable 100%

RECOVERY AND REUSEWe have a team fully dedicated to eco-design projects that are enabling us to progressively reduce the weight of our containers and rationalise the packaging we use. Thanks to these measures, in 2019 we were able to withdraw 268.5 tonnes of material from the market, achieving a container and packaging reusability rate of 38.7%, with the remaining 61.3% using recycled material.

Furthermore, reuse and recovery of the waste we generate are a priority for us. Our efforts in this area have enabled us to achieve a Zero Waste rate.

Our offices and production centres are also committed to recycling, and we have provided containers to collect the packaging waste generated by our employees during the workday.

Our activities have no significant impacts on biodiversity or on the areas around our breweries and water springs. Nonetheless, we apply the precautionary

principle and have an environmental liability policy with a limit of 15 million euros per accident and annual aggregate loss.

to initiatives and projects that enabled us to minimise our environmental impact and continue improving our indicators.

11,82IN 2019, WE DEDICATED

MILLION EUROS

ONGOING DIALOGUEWe keep local stakeholders, with whom we engage in an ongoing dialogue to achieve synergies, very much in mind in all our activities. To do so, we use various channels, such as satisfaction surveys at our production centres, one-to-one meetings with different local institutions, and ongoing contact via telephone and e-mail.

03

SHARINGVALUE

At Mahou San Miguel, we fulfil our external and internal commitments honestly, seeking mutual benefit in all of our relationships.

OUR SUPPLIERS, DISTRIBUTORS AND CUSTOMERS ARE KEY PARTNERS IN SATISFYING THE NEEDS OF THE MARKET, AND THEIR ROLE IS FUNDAMENTAL IN OUR BUSINESS ACTIVITIES.

Our best brand ambassadors, their outstanding work, day by day, allows our brands to occupy leading positions in the market and to be part of our consumers’ best life moments.

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WE RELY ON LOCAL SUPPLIERSIn 2019, we worked with 3,454 suppliers, 93% of them Spanish, and we spent 858 million euros on the procurement of goods and services, 6% more than the previous year. Likewise, 96% of the raw material we use to brew all of our beers are supplied by local producers.

93% SPANISH

858 MILLION EUROS FOR PROCUREMENT OF GOODS AND SERVICES

3.454 SUPPLIERS

We are aware that our sustainability requirements are high, nonetheless, the challenges we have to face as a society necessitate the involvement of all actors, regardless of their activity or size. So, we have a firm commitment to extending sustainability to the entire supply chain and guaranteeing that our suppliers share our ethical principles and criteria for doing things well. To this end, we have proprietary tools, like the Supplier Code of Conduct and the Supplier Portal. Our Purchasing Policy, in addition to adhering to the principles established in the United Nations Global Compact, ensures that our collaborators pursue their activities within the framework of proven corporate social responsibility and business ethics, thereby promoting responsible purchasing.

At Mahou San Miguel, we have diverse tools for monitoring our suppliers’ compliance. The most important of these are Quality Agreements, materials specifications, facility audits, studies and implementation of improvement actions, monitoring of supplier behaviour and an annual supplier evaluation.

To reinforce the objective of accompanying our suppliers in adopting more sustainable practices, in 2019, we created reference guides, such as the Sustainable Events Manual, in collaboration with the events-organising agencies, with the goal of together laying the groundwork for 100% sustainable events.

WE MANAGE OUR VALUE CHAIN SUSTAINABLY

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Additionally, we have developed a Sustainable Agriculture Manual, prepared with the help over 70 farmers and their cooperatives, in which we express our commitment to sustainability in farming. This project to support farmers grew out of the intention to extend the scope of same and work hand in hand with our main raw materials suppliers to promote and share good practices among farmers.

Likewise, we prepared the Sustainable Point-of-Sale Advertising Manual, a guide to help all Mahou San Miguel employees and collaborators responsible for the design, purchasing or supply process for this type of material apply sustainability criteria in their decisions. This is a commitment that we adopted as a Company within the “Somos 2020” Strategic Framework for Sustainability.

In 2019, we conducted 22 audits at the production centres of the suppliers of packaging materials and raw materials with satisfactory results. In addition, 25 Quality agreements were signed with suppliers of packaging materials and six with raw materials suppliers.

AVANZAMOS JUNTOSIn 2019, we celebrated the Fifth anniversary of “Avanzamos Juntos” (Moving Forward Together), a project developed in collaboration with the Spanish Network for the UN Global Compact. The programme,

which started with a pilot project in Madrid, has continued spreading and reaching more cities and suppliers. Over these four years, 375 employees of 245 companies have participated in it.

In the framework of this project, in 2019, we presented the Guide to Good Practices: The SDGs in the Mahou San Miguel Value Chain, which covers many of the actions our suppliers and distributors have undertaken in their companies in these years to contribute to achieving the U.N. Sustainable Development Goals (SDG).

All the companies that provide services to Mahou San Miguel meet the Company’s requirements in the area of Corporate Social Responsibility and, after participating in Avanzamos Juntos, a large percentage of them have incorporated new sustainability mechanisms in their businesses and committed themselves to the United Nations Principles, elements that improve their competitive position in the market.

We have a variety of tools for ensuring good conduct by our suppliers, such as Quality Agreements, facility audits, studies and implementation of improvement and monitoring actions for supplier conduct.

WE CONTRIBUTE TO DEVELOPING THE BUSINESSES OF OUR ON-TRADE CUSTOMERS

In its over 130 years of history, our Company has always focused its efforts on meeting the needs of its customers by offering a complete portfolio. In addition to being the leaders in the brewing sector, Mahou San Miguel is a family business, so it shares many values with its customers. Closeness and trust are two key aspects for a successful, long-term relationship with them.

For this reason, each year we reaffirm our unwavering commitment to supporting the on-trade sector, which we make concrete through various agreements that allow us to continue contributing to their development.

to continuing to strengthen our commitment to the on-trade sector, which has translated into different projects aimed at generating value in their establishments.

76,4 MILLIONEUROS

IN 2019, WE DEDICATED

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RENTABILIBARThe number of customers in Rentabilibar, our online platform aimed at the on-trade sector, has again grown, increasing its activity by 41% and reaching 47,000 users. Our tool, which offers training courses, content, promotions and tips for enhancing the business, includes new sections with higher-value services for bar and restaurant operators that revolve around sustainability, digitisation and new business models.

Similarly, thanks to Rentabilibar and the agreement reached by Mahou San Miguel with Linkers, a leading human resources consultancy, and Hosteleo, the number one employment platform in the on-trade sector, our customers can receive personalised advice and exclusive job offers.

WE COLLABORATE IN FINANCING THE ON-TRADE SECTORMahou San Miguel signed a collaboration agreement with BBVA that allows on-trade customers to access advantageous financing conditions, as well as a wide range of specific services to strengthen their businesses. Through these types of partnerships, our Company has set the goal of channelling more than 50% of its investment into loans in order to help support the growth and advancement of independent bars and restaurants.

LA VOZ DEL CLIENTE Through our “La Voz del Cliente” (Voice of the Customer) initiative, we have continued promoting the model of active-listening to bar and restaurant operators and strengthening the programme with new channels and methodologies that allow us to learn their satisfaction level in more areas by placing the focus on offering custom solutions.

04

CLOSE TO CONSUMERS

BREW&HUB: LEADING THE WAY IN THE CRAFT INDUSTRYIn 2019, we attended the official opening of this collaborative and pioneering space in our country, a milestone that demonstrates our firm commitment to promoting the craft world. The facilities of our Brew&Hub, located next to the Mahou San Miguel brewery in Cordoba, entailed an investment of over 11 million euros to equip it with the latest technology, with the aim of contributing to the development of this segment internationally. In this regard, in its first year of operation, the Brew&Hub brewed 19 different types of beer for countries such as Spain, Portugal, the United Kingdom, Sweden and Greece.

500,000 hlCAPACITY FOR EXPANSION

50,000 hl INITIAL PRODUCTION CAPACITY

11INVESTMENT MILLION EUROS

WE PROMOTE INNOVATION

Promoting beer culture and driving innovation is one of our responsibilities as leaders of the brewing sector in our country. Our consumers’ preferences are evolving, and we have to continue on this path of offering them more novel and differentiating options. So, we work every day to launch products that demonstrate our capacity to innovate and premiumise our brands by creating new experiences around them.

6,7 % OF OUR NET SALES CAME

31,5 MILLION EUROS

19 % MORE THAN THE PREVIOUS YEAR.

In 2019,

from innovation, an area to which we dedicated

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NEW LAUNCHES

Innovation is a distinctive feature of Mahou San Miguel, both in the way we approach consumers and when it comes to understanding their needs. It is, at the same time, a fundamental lever in our 2020 Strategic Plan. We have an Innovation Policy that enables us to anticipate market needs and trends by offering new propositions adapted to the demands of an increasingly selective and sophisticated consumer.

In the beer category, we launched six new products to the market: Mahou Cinco Estrellas Session IPA, created in collaboration with our partners Founders Brewing; Alhambra Especial Radler, Alhambra Baltic Porter, Alhambra Barrica de Ron Granadino and San Miguel Magna. Likewise, together with Nómada Brewing, the Spanish craft brewer we collaborate with, we introduced Raw

Tzatziki and Raw Carrot, a range of 100% organic beers. In addition, we relaunched La Mezquita, a historic product of Cervezas Alhambra using the 1920 local recipe and intended exclusively for the Cordoba market, as a sign of our commitment and connection to the city.

Furthermore, our Solán de Cabras water brand achieved one of its most important milestones in recent years by launching Solán de Cabras Con Gas, a sparkling version of the product, to the market. With this new product, our iconic brand showed its desire to transform the category by offering differentiating and high-quality propositions. Likewise, the brand expanded its range of functional beverages with Solán de Cabras Antiox, made with white tea, peach and orange.

The evolution of our portfolio in 2019 is a clear example of how we have been able to identify growth opportunities and of our capacity to innovate, iconise and premiumise our brands, creating new consumption experiences, while continuing to develop our business in a sustainable manner.

MAHOU BARRICA Mahou Barrica reprised its “Reventando las reglas” (Breaking the Rules) communication campaign as a tribute to the young people who inspired the creation of this campaign with their rule-breaking attitude and new ways of relating to each other.

MAHOU CINCO ESTRELLAS“Esta es mi familia, ¿cuál es la tuya?” (This is my family, tell me about yours?) With this campaign, our brand for the first time presented its range of beers, all great-tasting, accessible, inclusive and a meeting point for many people through the experiences they propose.

MAHOU 0,0 TOSTADA“Un sabor que desmonta prejuicios” (A taste that dismantles prejudices) was a creative concept chosen by the brand with an advertising spot aimed at demonstrating that a non-alcoholic beer could surprise people with its great taste, dismantling some of the prejudices and clichés that exist in society.

MAHOU MAESTRA For its part, Mahou Maestra and Mahou Dunkel were featured in an advertising spot that emphasised the nuances of the two beers under the concept of “De Maestros cerveceros para Maestros cerveceros” (From master brewers for master brewers).

WE COMMUNICATE MUCH MORE THAN OTHER BRANDS

Unsaborque desmonta prejuicios

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SECOND CAMPAIGN OF THE ALHAMBRA RANGE Cervezas Alhambra again promoted the visibility of its entire range with the “¿Qué quieres sentir?” (What do you want to feel?) campaign, a tagline the Granada brand used to invite us to turn off, for an instant, our feelings and disconnect from all the things we do automatically, without thinking.

“4X”A unique audiovisual project led by film director Juan Carlos Fresnadillo and starring Tamar Novas, this is an audiovisual experience in two steps that tries to make us reflect on the culture of immediacy and the importance of savouring every moment.

SOLÁN DE CABRASOur most iconic water brand launched the “Llénate de bienestar” (Fill up with well-being) communication campaign with nature as its protagonist, inviting people to discover the benefits of drinking this water. In addition, it launched the documentary “La emoción of bienestar” (The sensation of well-being), a piece in which the protagonists, three AECC patients, describe what they have lived through and their cancer-related experiences and emphasise the need to feel good emotionally.

TIENES DERECHO A UNA MAGNAThe launch of San Miguel Magna was accompanied by the “Tienes derecho a una MAGNA” (You have the right to a MAGNA) communication campaign consisting of a bill of rights for restless beer-lovers: “you have the right to take a vacation from your vacation, to study something other than business administration, and to not have to justify yourself” were some of the rights included on the “Magna Carta”.

SAN MIGUEL MANILA “Y a ti, ¿A dónde te lleva una IPL?” (And you? Where does an IPL take you?) was the tagline of San Miguel Manila that reflects its singularity: a unique beer that opens the door to an extraordinary and exotic world and leaves no one indifferent thanks to its taste and IPL beer style.

FIRST SAN MIGUEL MEGABRAND CAMPAIGNFor the first time, Cervezas San Miguel presented its wide range of great beers thanks to

a megabrand campaign aimed at awakening the adventurous beer-lover we all have inside us and to unveil its updated brand image. EL BAR MÁS GRANDE DEL MUNDO, UN HOMENAJE A LA AFICIÓN DEL ATHLETIC San Miguel wanted to pay tribute to the Atlético de Madrid football club and its fans with the creation of the “Bar Más Grande del Mundo” (Biggest bar in the world). This initiative was accompanied by a local campaign that celebrated the historic relationship between the red and white club, its fans and our beer brand.

BRANDS THAT CROSS BORDERS

Throughout 2019, our brands launched different initiatives oriented towards increasing their connection with international consumers, making the most of their origins and beer credentials.

Along these lines, Mahou developed the “Desde 1890, el auténtico sabor de España” (Since 1890, the authentic taste of Spain) project, implemented the initiative “Get a Taste” initiative in the United States, and released over 50,000 units of its special-edition bottle “Mahou Madrid Metro” in Chile, Portugal, Mexico and the Dominican Republic.

Alhambra, for its part, presented the Special Edition of Alhambra Reserva 1925 in Milan and Lisbon, where it was the official sponsor of ARCOLisboa and participated in the Lisbon Beer Week festival. It was also present at the London Wine Fair, collaborated with SquareMeal, the leading community of food critics in the United Kingdom, and organised the “Alhambra Afternoon” events in London, New York, Milan, Lisbon and Miami.

Both Mahou and Alhambra have become ambassadors of our country thanks to their presence in the Little Spain Market in New York, a space opened by renowned chef José Andrés with multiple Spanish-themed restaurants, bars and stores.

Casa San Miguel Ibiza, on the other hand, hosted 300 consumers, influencers and distributors from all over Europe. Additionally, San Miguel was named the official beer at Somerset House, a terrace next to the Thames which has become the second most-visited space in London after Buckingham Palace. In France, we repeated “La Cave a Miguel”, a road trip through six cities with stops in trendy establishments.

In this regard, Solán de Cabras stood out for its brand activation in Japan with its special-edition pink bottle, the launch of Solán de Cabras “ROSA FUERTE” (PINK STRENGTH) in Guinea, initiatives with the Real Madrid football club in Hong Kong, entry into Hema China (with 180 physical and online stores) and activations in Union Coop and ACE in Dubai.

To all this, we must add the participation of Nómada Brewing in London Craft Beer Rising, and our larger presence in events in India, such as the Indspirits Awards, Zomaland, Byoh Feast 2019, Horn Ok Please Food Truck Feast, Woven Dreams of Assam Fashion Show, Indusfood 2019, India Runway Week 2019 and Asian Designer Week 2019.

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WE LISTEN TO OUR CONSUMERSProviding unique moments to our consumers is a priority for us, as is opening up communication channels with them that enable us to find out their needs and motivations to ensure that our products and brands continue to be their favourites.

We are in constant contact with our consumers and make them participants in our initiatives through various channels, such as our Consumer Service Department

and a variety of profiles on social media which allow us to engage in a fluid and personal dialogue with them.

In 2019, we had more than 23,358 contacts with our consumers through our Consumer Service Department: Corporate website and our brand websites (17,343 contacts), by telephone (5,645 contacts) and social media like Facebook and Twitter (370 contacts).

WE PROMOTE BEER CULTURE AND THE EXPERIENCES AROUND IT

Promoting a passion for beer is a priority for us and, so, we continue to create innovative spaces that contribute to developing the sector, exploring the tastes and buying habits of the most committed beer-lovers and designing unique consumption experiences.

LA CERVECISTA CELEBRATES ITS ONE-YEAR ANNIVERSARYIn 2019, we celebrated the first anniversary of La Cervecista, our store in Madrid specialising in beer, which offers a totally new and different buying experience. Over 60,000 people have passed through the space, demonstrating its warm reception among the most enthusiastic beer-lovers. All the consumers who visited the store accessed a catalogue of over 500 beers and experienced, first hand, The Compass, our tool for describing each one based on nine simple parameters, which enables customers to identify the ones that best fit their tastes and preferences.

WE OPENED THE DOORS OF WAHOU BY MAHOU!, OUR LIFESTYLE STOREOur Mahou brand has had a physical store, located in Madrid on Calle Augusto Figueroa, since 2019, making us the first beer company with a space like this in Spain. At Wahou by Mahou!, consumers can find lifestyle accessories like baseball caps, T-shirts, sweatshirts, among other items, all printed with brand referents. The space also has a corner dedicated to our collaborations with recognised brands like Victoria, The Cool Cactus, Marrón y Negro and Jimmy Lion.

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EL SAINETE ENTERS A NEW ERA IN THE HEART OF MADRIDThe biggest gastronomic space dedicated to craft beer in the capital, El Sainete, has moved to a new location on Calle Ponzano, in the heart of the Chamberí district, one of the most traditional of Madrid and the epicentre of restaurant activity in recent years. In this new era, it will continue promoting beer culture through a unique concept based on the fusion of craft beer and gourmet cuisine.

WE PROMOTE DIGITISATION WITH A NEW E-COMMERCE PLATFORM: SOLANAWe have taken another step in our digital transformation process with the launch of Solana, our online sales channel, and we have become the first major beer company in Spain to have a comprehensive e-Commerce platform that enables consumers to access 100% of our beverage portfolio and a large selection of the best-selling lifestyle products.

Since its launch, the website has amassed 150,000 users, and adds

At Mahou San Miguel, we try to always be on the cutting edge of the sector by offering our customers and consumers innovative and differentiating propositions that offer them added value. In this sense, conducting research using new techniques and tools contributes valuable knowledge that allows us to evolve in how we relate to all of them.

new functionality every day, such as the sale of experiences (tastings and food pairings), a beverage recommendation tool and custom packs.

VIBRA MAHOUOur commitment to music led us to celebrate, for another year, “Vibra Mahou” (Mahou Vibrates), a Mahou Cinco Estrellas platform in which the consumer is the protagonist. The initiative, which encompasses various tours and festivals all over Spain, features consolidated artists and the most interesting new groups on the music scene. GRANADA DISTRITO SONORO BY ALHAMBRAThe Cervezas Alhambra musical initiative, for another year, filled the most emblematic plazas in the centre of Granada with free concerts of all musical styles.

MOMENTOS ALHAMBRA EN EL ESCENARIOThe brand held its series of free acoustic concerts in a variety of mythical spots in Madrid. Attendees were able to enjoy the best Spanish and international artists of Jazz, American Music, Spanish Folk, Indie and Pop.

CELEBRATING IN MALAGAMahou San Miguel renewed its agreement with the Malaga City Hall making it an official sponsor of the Malaga Feria for the next four years, once again reaffirming its commitment to the city, where it has been present for over a half century.

ARCOMADRIDOur Alhambra brand participated for another year in the ARCO contemporary art fair as part of its commitment to promoting artistic talent. In addition, it awarded the 3rd Cervezas Alhambra Emerging Art Prize to Elena Alonso for her sculpture S13, R19, Z26, a work with three elements based on chess pieces.

SOLÁN DE CABRAS SUPPORTS EMERGING TALENT IN PHOTOGRAPHYFor the third consecutive year, our water brand has joined PHotoEspaña in search of the best Spanish photographic talent by holding a contest linked to nature.

WE DANCE TO THE BEST MUSIC AND BELIEVE IN CULTURE

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WE ENJOY SPORTS

MAHOU URBAN FOOTBALL This proposition, which unites gastronomy, football, music and beer, held its second edition in Madrid with a variety of activities, such as workshops, 3x3 tournaments, lectures and concerts.

APRÈS-SKI EXPERIENCES WITH SAN MIGUELOur brand launched après-ski experiences for lovers of snow and skiing at some of the major ski resorts in our country, combining mountain cuisine, beer and music.

IMPORTANT PRESENCE IN E-SPORTSMahou and San Miguel, a pioneer in the brewing sector in entering this world of electronic sports, solidified its respective collaborations with the Movistar Riders and Team Herectis clubs to continue being part of the leisure moments of young people.

FOOD PAIRING WITH OUR BEERS

MAHOU URBAN FOOD FESTIVALThe second edition of the Mahou Urban Food Festival offered programming focused on gastronomy, urban music, activities and beer. The concerts, a mixture of urban and electronic music, featured artists of the calibre of Bejo, Kaydy Cain and Mygal.

OKTOBERFEST IN MADRID For the sixth year in a row, we participated in Oktoberfest, popularly known as “the beer party”, which was held in Madrid and allowed the over 25,000 attendees to raise their glasses with craft propositions from Founders Brewing and Nómada Brewing, accompanied by typical German dishes.

GRANADA DE TAPASIn 2019, the ninth edition of the “Granada de Tapas” gastronomic contest, organised by Cervezas Alhambra in collaboration with

the City Hall of Granada and the Granada Provincial Federation of Dining and Tourism Establishments, was held. This is an event that aims to support bars and restaurants in the province and showcase their gastronomic quality.

OUR BRANDS

Offering the best beer quality, innovating and surprising consumers with new propositions for 130 years.

Mahou Cinco Estrellas Session IPA

A new beer borne of the collaboration with the master brewers at Mahou and Founders Brewing, who united their passion to create a new intense flavour with just the right touch of bitterness, designed to appeal to all tastes.

NEW PRODUCT

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Born in Manila in 1890, this is a brand with a strong adventurous spirit that has made it the most international of our beers, with a presence in more than 40 countries. Restless, innovative and in search of new horizons, San Miguel is and always will be a point of reference for the Spanish brewing sector.

Magna de San Miguel

A beer creation formulated to satisfy the most demanding everyday tastes, with more intense flavour, body and nuances. It’s the contemporary interpretation of the day-to-day world of San Miguel’s master brewers seeking to adapt to the new panorama of lager beers.

NEW PRODUCT

Alhambra Baltic Porter

Alhambra de Ron Granadino

Alhambra Especial Radler

This proposition is our master brewers’ reinterpretation of the traditional Baltic Porter recipes. A refined and unique beer created to allow everyone to appreciate the beauty that can be achieved with dedication and time.

This is a beer aged in oak barrels that formerly contained rum made in Granada. Inspired by Granada’s historic flavours and by the sugar cane fields, it’s the result of a painstaking ageing process.

A refreshing beer with natural lemon juice and notes of cardamom that make it a unique proposition that opens the door to the premium evolution of the Radler world.

NEW PRODUCTS

Born in Granada and with 95 years of history, Alhambra is a brand with a deep personality that inspires and awakens our senses to fully enjoy its entire range in a leisurely fashion, inviting us to savour and discover everything it has to offer us.

A leading North American brand in the international craft beer market. It offers genuine alternatives with strong personality.

ARTESANA

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The rebirth of a local Bilbao brand, with plenty to offer the national market.

Made in our microbrewery in Alovera, its craft varieties fuse tradition and innovation with the aim of achieving flavours that excite consumers.

A beer that originated in the Canary Islands, aimed at the youth market of the archipelago.

Raw Tzatziki and Raw Carrot

These peculiar beers recover a process that mainly comes from Northern Europe. They are tangy propositions that, in addition to their unusual brewing process, include a combination of vegetables adapted to each recipe to enhance their properties, complexity and fresh, mineral character.

NEW PRODUCTS

INTERNATIONAL

Our portfolio includes some of the most prestigious beers on the international scene. An offer that complements our Spanish varieties and creates an extensive range of alternatives for different moments of enjoyment.

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Solán de Cabras Antiox Solán de Cabras Gas

With this launch, our brand expanded its range of waters with functional benefits made up of Solán de Cabras Repair and Solán de Cabras Defence. This new variety is made with white tea, peach and orange and offers consumers a new way to hydrate themselves with a flavour bonus and functional benefits.

One of the most eagerly awaited milestones for the brand. With an unexpectedly crisp bubble and a perfect, balanced composition, it rewards the consumer with a refreshing, pleasant sensation in the mouth.

NEW PRODUCT

MINERAL WATERS

The mineral water sector is growing steadily. Besides our iconic Solán de Cabras brand, our Company has Sierra Natura and Sierras de Jaén, and we have expanded our portfolio with new waters like Fonteide in the Canary Islands.

05

OUR TEAM:OUR PRIORITY

Our team is one of the indisputable hallmarks of Mahou San Miguel, one that has made us the leading company in the sector.

Because of this, and to continue attracting top talent to our Company, in 2019 we launched our new human resources initiative “Sed de Avanzar” (Thirst for Advancement), which was designed to offer differentiating value to future Mahou San Miguel professionals based on the principles that make us unique and centred on all aspects of the employee’s experience: from hiring and onboarding processes to training, and including professional development.

WE HAVE THE BEST TALENT

Our leadership model, culture and values place people at the centre of our business. In an environment that fosters the well-being and development of our team, work-life balance is promoted and equal opportunities are guaranteed. All of this makes us one of the 20 most appealing companies to work for in Spain, thanks to the attraction and retention of talent, according to Merco Talento 2019.

SEDDE AVANZAR

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In 2019, we solidified our corporate culture model based on five behaviours linked to our values and leadership model. Over 90% of our professionals have already been trained on this model.

OUR CULTURE “IS YOU”

To achieve this, it is essential to have agents to lead the change, to be precursors and help establish this culture we want. To this end, in 2019, we launched the first edition

of Evokus (agents of cultural evolution) with 34 people who will promote it through their example across the entire organisation.

I participate actively to add value for clients and consumers.

I collaborate with others every day, taking responsibility and considering the impact of my actions on the company and on society.

I strike a balance between being productive and enjoying my time.

I make decisions in an agile way, contributing to the company’s future.

I say what I think respectfully, and I do what I say.

5 Behaviours of Mahou San Miguel

Culture

At Mahou San Miguel, we want our professionals to grow to assume new challenges in the Company. Thus, 89 of them were promoted last year to positions of greater responsibility. Similarly, in 2019, the fifth edition of an ambitious training programme was held for the profiles with the greatest potential, with 46 new participants, including four professionals from international work centres for the first time.

We also promote the internal mobility of our employees, at a rate of 44%, and international development, so that they can have a personal and professional experience abroad, which adds value to their careers in the Company.

According to a recent study conducted for all the Mahou San Miguel companies, if we consider the staff hired in the last six years as a reference, the salary gap between employees with equivalent responsibility levels and positions is positive for women (-6.28%), demonstrating the Company’s commitment to equality and the application of its principles in hiring. This is a commitment that aims to gradually reduce the overall salary gap between men and women, which is currently 9.60%. This is mainly due to the fact that the male workforce has greater seniority in the Company and a stronger presence in the different professional categories and levels.

Mahou San Miguel provides its team with multiple social benefits:

• Medical service at all work centres• Full medical check-ups• Health workshop, sports activities and

mindfulness• Ergonomic workstations• Flexible working hours• Telecommuting• Shorter workday in July and August • Shorter workday until children reach 12

years of age• More holiday than legally required• Day-care vouchers.• “Días sin Cole” programme to cover

school holidays and assistance in paying for summer camp for employees’ children

• Pension plans

A TEAM THAT CONTINUES TO GROW

Our team continued to grow in 2019, and we continued to bring talent into our Company, as evidenced by our 173 new hires (52% women and 48% men). 95% of our team have a permanent contract, and the entire staff benefits from a policy that ensures an appropriate remuneration system, as established in the different collective bargaining agreements and the Management System.

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• Life and accident insurance• Driver’s license revocation insurance for

the sales force• Loans and advances• Meal subsidies• Subsidised public and private

transportation (car-pooling and parking)• Financial aid for education• Direct grants for school supplies for

children• Economic assistance for a wide range of

disability, dependence and incapacitation situations

• Longer leaves of absence than legally required

• Discounts on company products• Possibility of obtaining, through our

Flexible Remuneration Plan, the following products:

• Day care vouchers• Public transportation passes

• Vehicle leasing• Private medical insurance• Training

REMUNERATION OF THE BOARD OF DIRECTORS During the 2019 financial year, the members of the Board of Directors received a total of 3,982 thousand euros.

The Company has 12 board members: six legal persons (represented by three men and three women) and six physical persons (three men and three women).

No advances or loans have been granted to members of the Board of Directors. Nor did any obligations assumed on the behalf of the board members exist at the close of the financial year.

173 NEW HIRES(52% women and 48% men)

95 % OF OUR TEAM HAS A PERMANENT CONTRACT

OUR WORKFORCE IN FIGURES

3,529 EMPLOYEES

BY AGE

UNDER 20 0

21-30 259

31-40 900

41-50 981

51-60 947

OVER 60 442808 WOMEN 2,721 MEN

95%

3,351178

WITH PERMANENT CONTRACTS

75 WOMEN103 MEN

734 WOMEN2.617 MEN

permanent contracts

non-permanent contracts

BY CONTRACT TYPE BY PROFESSIONAL CATEGORY

682 EXECUTIVES AND MIDDLE MANAGERS

1,568 TECHNICAL, ADMINISTRATIVE AND SALES STAFF

1,279 WORKERS

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100% OF EMPLOYEES ARE COVERED BY A COLLECTIVE BARGAINING AGREEMENT

At Mahou San Miguel, we have nine company collective bargaining agreements, resulting from the application of sectoral agreements to the rest of the employees. Collective bargaining agreements cover 100% of the employees subject to Spanish labour laws.

3,222 SPAIN

159 USA 109 INDIA 28 CHILE 5 ITALY 4 UNITED KINGDOM 2 PORTUGAL

NUMBER OF EMPLOYEES PER COUNTRYOur headquarters is located in Spain, and we have two subsidiaries

47 700

4,96%

EMPLEADOS CON DISCAPACIDAD

PEOPLE LEFT THE COMPANY 2019

ABSENTEEISM RATE

3 WOMEN 189 WOMEN

44 MEN511 MEN

2 with permanent contracts and 1 with non-permanent contracts


(all with permanent contracts)

680 permanent and 2 non-permanent

1.470 permanent and 98 non-permanent

1.202 permanent and 77 non-permanent


BY PROFESSIONAL CATEGORY AND CONTRACT TYPE

682 EXECUTIVES AND MIDDLE MANAGERS

1,568 TECHNICAL, ADMINISTRATIVE AND SALES STAFF

1,279 WORKERS

TRAINING FOR INNOVATION, ENTREPRENEURSHIP AND LEADERSHIP OF THE FUTURE

Training represents a fundamental lever for developing our team and is, at the same time, a source of motivation and personal growth, and it opens the way for innovation, one of the transversal and essential axes of Mahou San Miguel. We understand that without it, there can be no progress or growth.

We have been adjusting our way of working to address the challenges of the context and the needs of our professionals, whose profiles evolve with the development of new skills, such as intra-entrepreneurship and the capacity to innovate in collaborative environments.

In 2019, we invested nearly 2.42 million euros in training programmes aimed at attracting, retaining and developing talent. In total, 3,082 employees participated, for a total of nearly 180,500 accumulated training hours.

EXCELLENCE SYSTEMTraining has already been provided to 50% of our staff to establish a new work culture in the company that prioritises effectiveness

and agility. People, their leadership capacity, communication between the different areas and better follow-up of actions constitute the essential keys of the Excellence System, the new model we are rolling out on a scaled basis in our organisation. DIGITAL READINESSThis programme is aimed at the more than 150 employees of Mahou San Miguel who take part in or lead transformation and digitisation projects in our Company, with the aim of making them participants and drivers of this process. It consists of 24 hours of in-person training in which the participants work on different key technological and methodological capacities: Agile, Experience Design, Big Data & Analytics, IoT, IA and Voz, RPA, among others.

BEER CULTUREThe Beer Culture area has trained more than 60 people on our sales team on Cicerone, a program that teaches future beer sommeliers.

“EMPRENDEMOS”In 2019, we launched the new intra-entrepreneurship programme “Emprendemos” (We are entrepreneurs), which seeks to promote internal talent, new ways of working and the entrepreneurial spirit of the team. We received a total of 77 innovative and disruptive proposals, of which we selected five and 25 people for the pre-incubation phase.

LEADERSHIP PROGRAMMESIn 2019, we launched six leadership programmes among our professionals with a total of over 150 participants. Likewise, we implemented The Leadership Circle methodology among our executives. This is an instrument that makes it possible to measure the effectiveness of leadership to align it with our behaviours and Leadership Model.

180,404 HOURS OF TRAINING

3,082 EMPLOYEES BENEFITTED

2,429,399 EUROSin training programmes

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WE PAY TRIBUTE TO OUR “OLD-TIMERS”...

… AND WE ARE COMMITTED TO THE YOUNG

At Mahou San Miguel, employees have a long-term career, and in 2019, as we do every year, we paid tribute to those that have been with us for over 30 years, thanking them for their commitment,

hard work and dedication. More than 500 professionals have enjoyed this tribute since 2017 and, at the moment we have 102 “old-timers” on our team.

Our Company has a firm commitment to job creation among young people. Because of this, of the 173 new hires in 2019, 4% were under 30 years of age.

Thanks to the Plan Impulsa for recent college graduates, we gave 26 young people the opportunity for their first professional experience. They were joined by another 34

people who came on board through other scholarship programmes.

Furthermore, in 2019, we held the first Industrial Hackathon, a project based on a model of decentralised and collaborative innovation aimed at promoting young talent that will contribute to the transformation of Spanish industry in the future.

EQUALITY, DIVERSITY AND INCLUSIVENESS

Mahou San Miguel has been committed to equality and diversity for many years. With the Equal Opportunity Plan, created in 2009, and following our People and Organisation Policy, we set an objective of increasing the percentage of women on staff, a commitment we continue pursuing today.

In 2019, 52% of the Company’s new hires were women. Likewise, the female presence in the executive team, which is 23% women, has increased significantly.

We have been pioneers in our sector in the area of equality. In fact, in 2010, we were the first company to receive the Equality in Companies Emblem from the Spanish Ministry of Equality and to develop specific plans to address the issue in two of our companies: Mahou and Solán de Cabras.

In 2019, our Company continued to advance in this area by placing special emphasis on measures that promote equal treatment and opportunities among men and women. As a result, both Mahou and Solán de Cabras have renewed their respective Equality Plans, placing the emphasis on our goal of serving as an example to other companies and, thereby, promoting elimination of the gender gap.

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Our commitment to equality is also reflected in our participation in initiatives like Closingap, a cluster created in 2017 with eight other large companies, aimed at analysing the opportunity cost, for society and the economy, of failing to harness female talent. In this context, our Company promoted a study on the Opportunity Cost of the Gender Gap in Leisure for the purpose of identifying and eliminating the barriers that prevent women from realising their full potential in society. Likewise, within Mahou San Miguel’s Sustainability Strategic Framework, “Somos 2020”, one of the cornerstones last year was promotion of diversity and inclusion. In this regard, we showed our firm commitment to fair and impartial treatment of people, without biases associated with gender, nationality, race, religion, age, sexual orientation, disability or family responsibilities. We want all of our professionals to feel valued and respected by promoting an equal-opportunity workplace. For us, diversity and equality also mean accepting and promoting different ways of thinking and the set of traits that make each person different and, therefore, unique. We share a challenge and a dream, and we contribute to our Company’s project with the best of each professional.

In this sense, in the framework of our commitment to diverse talent

and people with disabilities, we promote awareness-raising and training actions. One highlight is the celebration of Diversidad Ability Week, in close collaboration with the ADECCO Foundation, with activities oriented towards encouraging inclusive workplaces.

Moreover, we have a mandatory Code of Conduct for our entire team for the purpose of preventing harassment and ensuring equality and non-discrimination. This document complements our Corporate Social Responsibility Policy.

Una iniciativa de: Con la colaboración de:

1

Una iniciativa de: Con la colaboración de:

WE PROMOTE PHYSICAL AND EMOTIONAL WELL-BEING

Our Prevention, Health and Well-being Policy, pioneering in Spain, places us below the average in the sector for accident frequency.

We invest constantly in our facilities to ensure the highest safety standards, which we accompany with employee training on occupational risk prevention.

We do not have any occupational disease declared as such at Mahou San Miguel.

In 2019, at all of our work centres, we continued the “Quiérete Mucho” (Be Good to Yourself) initiative, the purpose of which is to raise awareness of the risks employees are exposed to in their jobs by promoting and improving the culture of prevention of everyone in the Company. Among the actions, the road safety and efficient driving campaigns, which are aimed at avoiding the risk of accidents while driving for or to/from work and the campaign to control psychosocial risks, are noteworthy.

Likewise, in 2019, the “Cuidarme” (Taking Care of Myself) programme, aimed at improving people’s health, became consolidated, with 23% of our staff involved in at least one of its multiple initiatives. Currently, 30% of our people

have committed to a health improvement challenge and achieved their objectives.

Among the activities held last year within this programme, the healthy Gymkana stands out. This consisted of spending an afternoon together playing a team sport near our headquarters in Madrid. The event served to demonstrate leadership, strategic and creative capacity. In addition, more than 100 professionals from our Company got together on the Paseo de la Castellana boulevard in Madrid to run in the 20th edition of the popular Carrera de las Empresas for a day of physical exercise, health, fun and camaraderie.

Likewise, in 2019, the Happiness area was consolidated to continue promoting the emotional well-being of our team with initiatives like monthly onsite breakfasts at our headquarters in Madrid with interesting speakers on the subjects of happiness and well-being. Inspiring and motivational talks with experts and mindfulness session are also held. All because at Mahou San Miguel,

we want to promote positive emotions

in our employees that help them live happier lives. To do so, we also offer

them a Happiness Skills Questionnaire

(CHEF), a tool which has been used by 1,070

people.

NO. OF ACCIDENTS 2018 2019

With lost work time 38 47

Without lost work time 55 49

ABSENTEEISM (HOURS)

Accidents 11,853

Common illness 185,207

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WE FACILITATE WORK-LIFE BALANCEAt Mahou San Miguel, we have comfortable and motivating spaces that foster collaborative work, and we encourage balancing work and family life and disconnecting from the job, with the aim of improving our employees’ quality of life. All of this in a healthy, egalitarian and stimulating working environment that allows our team to do its work under optimal conditions of work-life balance. In this sense, the flexible work initiative, thanks to which 50% of employees with jobs that allow it telecommute regularly, has met its target one year ahead of schedule.

Since 2019, our team has had another social benefit: summer working hours during the months of July and August.

Our engagement in the area of work-life balance has allowed us to attain the Excellence level in the Family-friendly Company certification (EFR in Spanish), which the Másfamilia Foundation grants, making us the first beer and water company to achieve this.

We have also instituted the “Workday Limit” process to comply with the requirements of the new law governing this.

WE LISTEN ACTIVELY TO OUR EMPLOYEES

We have always had one priority: to listen and accompany our employees in their development. As a result, we are a team that works in an increasingly collaborative and transversal way. Thus, during 2019, we implemented a series of projects to review the organisational structure and distribution of responsibilities in the corporate areas and business units, as well as a dynamic of gradual change in work spaces that promotes adequate

planning of tasks and delegation of responsibilities, encouraging team work.Our Chairman’s Commission continued visiting our work centres and exchanging views and improvement ideas with the teams to continue advancing.

In addition, we have multiple tools for dialogue, such as “Conversamos” (Let’s Talk), a system for managing objectives and development based on listening and creating an atmosphere conducive to expressing opinions and expectations, and “Dilo” (Say It), the morale and commitment survey. At the end of the year, a new version was launched, with 70% participation and a two-point improvement in the global indicator with respect to 2018.

The “Contigo” (With You) digital platform aimed at employees, for its part, continues to optimise its functionality to provide the necessary information for doing our daily work, in addition to providing guidance on safety, health and prevention.

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WE ARE ADVANCING TOWARDS A MORE DIGITAL CULTUREDigitisation continues to be key in the work culture we are establishing. Accordingly, we continue promoting the development of digital skills and cultures of our team to prepare them for the challenges of the future.

To this end, in 2019, the Digital Transformation Office advanced and defined the management and prioritisation of the portfolio of initiatives in this area, with 120 projects reviewed by the close of 2019, in alignment with the Corporate Culture Plan “Cultura eres tú” (Culture Is You). Likewise, a Digital Awareness Plan was launched aimed at employees, with inspirational sessions for different groups and a variety of campaigns designed to align the team with the new digital paradigm, convey the importance of digitisation to them and reduce any possible resistance to the change.

In addition, we worked on minimising cybersecurity risks from three lines of action: perimeter security, device protection and monitoring of the IT environment to identify anomalous behaviours.

To avoid external intrusion through typical means such as e-mail or downloads from Internet websites, we continuously monitor the anti-spam filters, cloud-based proxy and browsing control. Furthermore, we test files, links and downloads from the web in a

safe environment (sandbox) before making them accessible to users. Additionally, we protect our employees’ devices by means of endpoint software that prevents the execution of malware that could be introduced through an uncontrolled channel (pen drive, etc.), as we consider this critical for the Company’s information security and business continuity.

As attempted attacks are becoming increasingly diverse and are not always controllable by the usual means described above, we work proactively on monitoring communications on our network and correlating information from various sources to find patterns that deviate from habitual behaviours in our operations and day-to-day actions. When something unusual is detected, we work to identify the cause and limit access to the rest of the network if deemed necessary.

PROFILE OF THE ANNUAL REPORT

Through this Annual Report, the eleventh consecutive one prepared by Mahou San Miguel, we would like to share our corporate, social, environmental and financial performance during the 2019 financial year with all our stakeholders and society as a whole. In this way, we once again demonstrate our commitment to transparency, value creation and fluid communication.

This document was prepared in accordance with the requirements established in Law 11/2018, of 28 December, which transposes to Spanish Law Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information.

This report constitutes the Non-financial Information Statement and is part of the Management Report.

The information contained herein is compiled and presented in accordance with the principles of transparency, clarity, comparability and accuracy of Mahou San Miguel.

Company: Mahou San Miguel

Country: Spain

Period covered: 2019

Frequency: Yearly

Registered company address: C/ Titán, 15 Madrid.

HIGHLIGHT - For more information:

E-mail:[email protected]

Telephone:91 526 91 00

Website:www.mahou-sanmiguel.com

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AREA CONTENT PAGE NO. / CHAPTER

GLOBAL

Business model

Brief description of the company’s business model, to include:1. Its business environment, 2. Its organisation and structure, 3. The markets in which it operates, 4. Its objectives and strategies, 5. The main factors and trends that might affect its future performance.

8, 9, 10, 11, 12, 16, 17 (Chapter 1: A company moving forward) GRI 102.1 to 102.7

Policies

A description of the policies the company applies with respect to these matters, to include:

1. Due diligence procedures applied for the identification, prevention and mitigation of significant risks and impacts,

2. Verification and control procedures, including the measures adopted.

16, 17, 28, 29 (Chapter 1: A company moving forward)GRI 103 Management approaches in each area within the Economic, Environmental and Social dimensions

Results of the policies

A description of the policies the group applies with respect to these matters, to include:

1. Due diligence procedures applied for the identification, prevention and mitigation of significant risks and impacts,

2. Verification and control procedures, including the measures adopted.

16, 17, 20, 21, 22, 23 (Chapter 1: A company moving forward)GRI 102-12

Results for the main indicators

Key non-financial indicators that are pertinent to the specific business activity and meet the comparability, materiality, relevance and accuracy criteria.

14, 15 (Chapter 1: A company moving forward) General or specific GRI standards for the Economic, Environmental and Social dimensions which are reported in the following blocks

ENVIRONMENTAL MATTERS

Environment in general

1. Detailed information about the current and foreseeable results of the company’s activities on the environment and, if applicable, health and safety, assessment or environmental certification procedures.

2. The resources allocated for prevention of environmental risks.3. The application of the precautionary principle, the provisions and

guarantees in place for environmental risks.

42, 43, 44, 45, 46, 47 (Chapter 2: We are committed)GRI 103 Management approaches in each area within the Environmental dimension

Pollution

1. Measures to prevent, reduce or remediate carbon emissions that seriously affect the environment.

2. Taking into account any type of specific atmospheric pollution of an activity, including noise and light pollution.

43, 44, 45, 46, 47 (Chapter 2: We are committed)GRI 103 Management approaches to Emissions/biodiversity

Circular economy and waste prevention and management

Wastes: Measures for prevention, recycling, reuse and other forms of waste recovery and disposal.

46, 47 (Chapter 2: We are committed)GRI 103 Management approaches to Effluents and Waste

Sustainable use of resources

Water consumption and water supply in accordance with local limits. 46 (Chapter 2: We are committed)

Consumption of raw materials and measures adopted to improve the efficiency of their usage

46, 47 (Chapter 2: We are committed)GRI 303-1

Consumption, direct and indirect, of energy, measures taken to improve energy efficiency and the use of renewable energies

46, 47 (Chapter 2: We are committed)GRI 103 Management approach to environment, 301.-1, 302-

Climate change

The major elements of the greenhouse gas emissions generated as a result of the company’s activities, including the use of the goods and services it produces

42, 43, 44, 45 (Chapter 2: We are committed)GRI 103 Management approach to emissions, 305.-1, 305-2

The measures adopted to adapt to the consequences of climate change.

42, 43, 44, 45 (Chapter 2: We are committed)GRI 103 Management approach to emissions

The medium- and long-term reduction targets established voluntarily for reducing greenhouse gas emissions and the measures implemented for that purpose.

45 (Chapter 2: We are committed)GRI 103 Management approach to emissions

Protection of biodiversity

Measures taken to preserve or restore biodiversity. 26, 27 (Chapter 2: We are committed)GRI 103

Impacts caused by activities or operations in protected areas. 46, 47 (Chapter 2: We are committed)GRI 304-2

CONTENT INDEX ACCORDING TO REQUIREMENTS OF LAW 11/2018 REGARDING NON-FINANCIAL INFORMATION AND DIVERSITY


SOCIAL AND STAFF-RELATED MATTERS

Employment

Total number and distribution of employees by gender, age, country and professional classification.

80, 81 (Chapter 5: Our team: our priority)GRI 103 Management approach to employment,102-8, 405-1

Total number and distribution of employment contract types. 80, 81 (Chapter 5: Our team: our priority)GRI 102-8

Annual rate of permanent, temporary and part-time contracts by gender, age and professional classification.

78, 79 (Chapter 5: Our team: our priority)GRI 102-8, 405-1

Number of dismissals by gender, age, and professional classification. 81 (Chapter 5: Our team: our priority)GRI 401-1

The average remunerations and their evolution disaggregated by gender, age, and professional classification or equal value. Information not broken down

Salary gap, remuneration paid for equal work or the average salary in the company.78, 79 (Chapter 5: Our team: our priority)GRI 103 Management approach to Diversity and equal opportunity

The average remuneration of directors and executives, including variable remuneration, allowances and payouts, contributions to long-term savings schemes and any other earnings disaggregated by gender.

79, 80, 81 (Chapter 5: Our team: our priority)GRI 103 Management approach to Diversity and equal opportunity

Work organisation

Work schedule organisation.88 (Chapter 5: Our team: our priority)GRI 103 Management approach to employment

Number of hours lost due to absenteeism.

82, 83, 84, 85, 86 (Chapter 5: Our team: our priority)GRI 103 Management approach to employment

Measures aimed at facilitating work-life balance and encouraging co-responsible use of these measures by both parents.

87 (Chapter 5: Our team: our priority)GRI 103 Management approach to employment

Health and safety

Health and safety conditions on the job. 86 (Chapter 5: Our team: our priority)GRI 103 Management approach to health

Work accidents, particularly their frequency and severity. 86 (Chapter 5: Our team: our priority)GRI 403-2, 403-3

Occupational diseases, disaggregated by gender. 86 (Chapter 5: Our team: our priority)GRI 403-2, 403

Social relationships

Organisation of social dialogue, including procedures for informing and consulting staff and negotiating with them.

88 (Chapter 5: Our team: our priority)GRI 103 Management approach to labor/management relations

Percentage of employees covered by collective bargaining agreements by country. 76 (Chapter 5: Our team: our priority)GRI 102-41

The balance of collective bargaining agreements, particularly in the field of health and safety at work.

76 (Chapter 5: Our team: our priority)GRI 403-1

Training

Policies implemented for training activities.

82, 83, 84 (Chapter 5: Our team: our priority)GRI 103 Management approach to training and education

Total number of training hours by professional categories. 82 (Chapter 5: Our team: our priority)GRI 404-1

Equality

Measures adopted to promote equal treatment and opportunities for men and women.

84, 85 (Capítulo 5: Nuestro equipo: nuestra prioridad)

Equality plans (Section III of Organic Law 3/2007, of March 22, for effective equality of women and men), measures adopted to promote employment, protocols to address sexual and gender-based harassment, integration, and universal accessibility for people with disabilities. 84, 85 (Chapter 5: Our team: our priority)

GRI 103 Management approach to diversity and equal opportunity

Policy for prevention of any type of discrimination and, where appropriate, diversity management.

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HUMAN RIGHTS

Application of due diligence procedures in the area of human rights.28, 29 (Chapter 1: A company moving forward)GRI 103 Management approach to human rights and non-discrimination

Prevention of risks of human rights violations and, where appropriate, measures to mitigate, manage and remedy any abuses committed.

28, 29 (Chapter 1: A company moving forward)GRI 102-16, 102-17

Complaints about cases of violation of human rights. 15 (Chapter 1: A company moving forward)GRI 406-1

Promotion and compliance with the fundamental conventions of the International Labour Organization related to respect for freedom of association and the right to collective bargaining.

28, 29 (Chapter 1: A company moving forward)GRI 407-1

Elimination of discrimination in employment and occupation. 28, 29 (Chapter 1: A company moving forward)GRI 406-1

Elimination of forced or compulsory labour. 28, 29 (Chapter 1: A company moving forward)GRI 409-1

Effective abolition of child labour. 28, 29 (Chapter 1: A company moving forward)GRI 408-1

CORRUPTION AND BRIBERY

Measures adopted to prevent corruption and bribery.29 (Chapter 1: A company moving forward)GRI 103 Management approach to non-discrimination, 102-16

Anti-money laundering measures. 29 (Chapter 1: A company moving forward)

Contributions to foundations and non-profit entities. 33 (Chapter 1: A company moving forward)GRI 413-1

INFORMATION ABOUT THE COMPANY

Commitments of the company to sustainable development

Impact of the company’s activities on employment and local development.

32, 36, 39 (Chapter 2: We are committed)62, 63 (Chapter 4: Close to consumers)GRI 103 Management approach to local communities and indirect economic impacts, 203-1, 413-1

Impact of the company’s activities on local populations and on the territory.

32, 34 (Chapter 2: We are committed)60, 62, 76 (Chapter 4: We promote innovation)GRI 203-1, 413-1

Relationships maintained with representatives of local communities and the modalities of dialogue with these.

47 (Chapter 2: We are committed)GRI 102-43

Association or sponsorship actions.

33 (Chapter 2: We are committed)62, 66, 67 (Chapter 4: Close to consumers)GRI 102-12, 102-13

Subcontractors and suppliers

* Inclusion in the social, gender equality and environmental matters in the purchasing policy; * Consideration of social and environmental responsibility in relationships with suppliers and subcontractors;

51, 53, 54 (Chapter 4: Close to consumers)GRI 102-9, 103 Management approach to procurement, 204-1

Oversight systems and audits, and their results.

28 (Chapter 1: A company moving forward)47 (Chapter 2: We are committed)51, 52, 53 (Chapter 3: Sharingvalue)GRI 103 Management approach to procurement

ConsumersConsumer health and safety measures.

17 (Chapter 1: A company moving forward) 36, 37 Chapter 2: We are committed)GRI 103 Management approach to customer health and safety, marketing and labelling, and customer privacy

Complaint systems, complaints received and their resolution. 63 (Chapter 4: Close to consumers)GRI 103, 417-2

Tax information

Profits earned by country.19 (Chapter 1: A company moving forward)GRI 103 – Management report on economic performance

Taxes paid on income. 19 ( (Chapter 1: A company moving forward)GRI 201-4

Public subsidies received. 18, 19 (Chapter 2: We are committed)GRI 201-4

EXTERNAL VERIFICATION

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Mahou, S.A. y sociedades dependientes Informe de verificación independiente

PricewaterhouseCoopers Auditores, S.L., Torre PwC, Pº de la Castellana 259 B, 28046 Madrid, España Tel.: +34 915 684 400 / +34 902 021 111, Fax: +34 915 685 400, www.pwc.es 1 R. M. Madrid, hoja 87.250-1, folio 75, tomo 9.267, libro 8.054, sección 3ª Inscrita en el R.O.A.C. con el número S0242 - CIF: B-79 031290

Informe de verificación independiente

A los accionistas de Mahou, S.A.: De acuerdo al artículo 49 del Código de Comercio hemos realizado la verificación, con el alcance de seguridad limitada, del Estado de Información No Financiera Consolidado adjunto (en adelante EINF) correspondiente al ejercicio finalizado el 31 de diciembre de 2019, de Mahou, S.A. (Sociedad dominante) y sociedades dependientes (en adelante Mahou San Miguel) que forma parte del Informe de Gestión Consolidado de Mahou San Miguel. El contenido del EINF incluye información adicional a la requerida por la normativa mercantil vigente en materia de información no financiera que no ha sido objeto de nuestro trabajo de verificación. En este sentido, nuestro trabajo se ha limitado exclusivamente a la verificación de la información identificada en la tabla “Índice de contenidos según requerimientos de la Ley 11/2018 en materia de información no financiera y diversidad” incluida en el EINF adjunto. Responsabilidad de los administradores de la Sociedad dominante La formulación del EINF incluido en el Informe de Gestión Consolidado de Mahou San Miguel, así como el contenido del mismo, es responsabilidad de los administradores de Mahou, S.A. El EINF se ha preparado de acuerdo con los contenidos recogidos en la normativa mercantil vigente y siguiendo los criterios de los Sustainability Reporting Standards de Global Reporting Initiative (estándares GRI) seleccionados, así como aquellos otros criterios descritos de acuerdo a lo mencionado para cada materia en la tabla “Índice de contenidos según requerimientos de la Ley 11/2018 en materia de información no financiera y diversidad” del citado Estado. Esta responsabilidad incluye asimismo el diseño, la implantación y el mantenimiento del control interno que se considere necesario para permitir que el EINF esté libre de incorrección material, debida a fraude o error. Los administradores de Mahou, S.A. son también responsables de definir, implantar, adaptar y mantener los sistemas de gestión de los que se obtiene la información necesaria para la preparación del EINF. Nuestra independencia y control de calidad Hemos cumplido con los requerimientos de independencia y demás requerimientos de ética del Código de Ética para Profesionales de la Contabilidad emitido por el Consejo de Normas Internacionales de Ética para Profesionales de la Contabilidad (IESBA, por sus siglas en inglés) que está basado en los principios fundamentales de integridad, objetividad, competencia y diligencia profesionales, confidencialidad y comportamiento profesional. Nuestra firma aplica la Norma Internacional de Control de Calidad 1 (NICC 1) y mantiene, en consecuencia, un sistema global de control de calidad que incluye políticas y procedimientos documentados relativos al cumplimiento de requerimientos de ética, normas profesionales y disposiciones legales y reglamentarias aplicables.

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2

El equipo de trabajo ha estado formado por profesionales expertos en revisiones de Información no Financiera y, específicamente, en información de desempeño económico, social y medioambiental. Nuestra responsabilidad Nuestra responsabilidad es expresar nuestras conclusiones en un informe de verificación independiente de seguridad limitada basándonos en el trabajo. Hemos llevado a cabo nuestro trabajo de acuerdo con los requisitos establecidos en la Norma Internacional de Encargos de Aseguramiento 3000 Revisada en vigor, “Encargos de Aseguramiento distintos de la Auditoría y de la Revisión de Información Financiera Histórica” (NIEA 3000 Revisada) emitida por el Consejo de Normas Internacionales de Auditoría y Aseguramiento (IAASB) de la Federación Internacional de Contadores (IFAC) y con la Guía de Actuación sobre encargos de verificación del Estado de Información No Financiera emitida por el Instituto de Censores Jurados de Cuentas de España. En un trabajo de seguridad limitada los procedimientos llevados a cabo varían en naturaleza y momento de realización, y tienen una menor extensión, que los realizados en un trabajo de seguridad razonable y, por lo tanto, la seguridad proporcionada es también menor. Nuestro trabajo ha consistido en la formulación de preguntas a la Dirección, así como a las diversas unidades de Mahou San Miguel que han participado en la elaboración del EINF, en la revisión de los procesos para recopilar y validar la información presentada en el EINF y en la aplicación de ciertos procedimientos analíticos y pruebas de revisión por muestreo que se describen a continuación: • Reuniones con el personal de Mahou San Miguel para conocer el modelo de negocio, las

políticas y los enfoques de gestión aplicados, los principales riesgos relacionados con esas cuestiones y obtener la información necesaria para la revisión externa.

• Análisis del alcance, relevancia e integridad de los contenidos incluidos en el EINF del ejercicio 2019 en función del análisis de materialidad realizado por Mahou San Miguel y descrito en el apartado 1. Una compañía que avanza, considerando los contenidos requeridos en la normativa mercantil en vigor.

• Análisis de los procesos para recopilar y validar los datos presentados en el EINF del ejercicio 2019.

• Revisión de la información relativa a los riesgos, las políticas y los enfoques de gestión

aplicados en relación a los aspectos materiales presentados en el EINF del ejercicio 2019. • Comprobación, mediante pruebas, en base a la selección de una muestra, de la información

relativa a los contenidos incluidos en el EINF del ejercicio 2019 y su adecuada compilación a partir de los datos suministrados por las fuentes de información.

• Obtención de una carta de manifestaciones de los administradores y la Dirección de la

Sociedad dominante. Fundamento de la conclusión con salvedades El EINF adjunto no desglosa la información relativa a los contenidos establecidos por el artículo 49.6 del Código de Comercio relacionada con las remuneraciones medias y su evolución desagregados por sexo, edad y clasificación profesional o igual valor, así como la brecha salarial asociada a las mencionadas remuneraciones medias.

3

El EINF adjunto no desglosa la información relativa a los contenidos establecidos por el artículo 49.6 del Código de Comercio relacionada con la remuneración media de los consejeros y directivos, incluyendo la retribución variable, dietas, indemnizaciones, el pago a los sistemas de previsión de ahorro a largo plazo y cualquier otra percepción desagregada por sexo. Conclusión con salvedades Basándonos en los procedimientos realizados y en las evidencias que hemos obtenido, excepto por los efectos de las cuestiones descritas en el “Fundamento de la conclusión con salvedades”, no se ha puesto de manifiesto aspecto adicional alguno que nos haga creer que el EINF de Mahou San Miguel correspondiente al ejercicio anual finalizado el 31 de diciembre de 2019 no ha sido preparado, en todos sus aspectos significativos, de acuerdo con los contenidos recogidos en la normativa mercantil vigente y siguiendo los criterios de los estándares GRI seleccionados, así como aquellos otros criterios descritos de acuerdo a lo mencionado para cada materia en la tabla “Índice de contenidos según requerimientos de la Ley 11/2018 en materia de información no financiera y diversidad” del citado Estado. Uso y distribución Este informe ha sido preparado en respuesta al requerimiento establecido en la normativa mercantil vigente en España, por lo que podría no ser adecuado para otros propósitos y jurisdicciones. PricewaterhouseCoopers Auditores, S.L.

Esteban Cobo Vallés 25 de junio de 2020

Este informe se corresponde con el sello distintivo nº 01/20/07578 emitido por el Instituto de Censores Jurados de Cuentas de España

BALANCE SHEET AND CONSOLIDATED

ACCOUNTS

MAHOU, S.A.AND SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED31 DECEMBER 2019 AND MANAGEMENT REPORT

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ASSETS NOTE 2019 2018

NON-CURRENT ASSETS 1,148,584 1,071,200

Intangible assets 7 151,763 141,509

Patents, licenses, trademarks and similar 13,984 15,128

Computer software 12,688 10,993

Goodwill 124,321 114,376

Other intangible assets 770 1,012

Property, plant and equipment 8 555,191 536,760

Land and buildings 243,044 244,347

Plant, machinery and other PPE 295,093 266,462

Fixed assets under construction 17,054 25,951

Investment property 9 27,656 36,082

Land and buildings 27,656 36,082

Investments in group companies and associates 118,504 130,233

Interests in companies consolidated under equity method 6 118,504 130,233

Long-term financial investments 11.1 212,427 148,350

Equity instruments 2,155 2,098

Loans to third parties 140,840 144,863

Other financial assets 69,432 1,389

Deferred tax assets 17.7 83,043 78,266

CURRENT ASSETS 847,959 755,122

Inventories 92,789 71,601

Sales 11,116 4,145

Raw materials and other consumables used 39,032 30,282

Work in progress 11,448 10,827

Finished goods 31,193 26,347

Debtors and other receivables 206,823 190,659

Trade receivables for sales and services rendered 196,263 179,281

Sundry receivables 3,340 4,179

Staff 2,503 2,491

Current tax assets 17.1 1,378 281

Other receivables from public administrations 17.1 3,339 4,427

Short-term investments in group companies and associates 171 160

Loans to equity method companies 171 160

Short-term financial investments 11.2 63,322 255,507

Loans to third parties 29,457 32,530

Derivatives 12 - 15

Deposits, short-term investments 33,260 222,477

Other financial assets 605 485

Short term accruals 18,802 18,597

Cash and cash equivalents 466,052 218,598

Cash at bank and in hand 386,982 142,755

Other cash equivalents 79,070 75,843

TOTAL ASSETS 1,996,543 1,826,322

MAHOU, S.A. AND SUBSIDIARIESConsolidate balance sheet for the year ended 31 December 2019

The accompanying notes 1 to 23 are an integral part of the balance sheet at 31 December 2019.

Thousands of euros

EQUITY AND LIABILITIES NOTE 2019 2018

TOTAL EQUITY 1,496,023 1,431,450

EQUITY ATTRIBUTED TO THE PARENT COMPANY 1,472,926 1,418,617

Shareholders’ equity 13 1,452,585 1,405,528

Share capital 14,028 14,028

Reserves 1,350,541 1,281,640

Legal and statutory reserve 13.1 2,806 2,806

Revaluation reserve Law 16/2012 13.3 21,533 21,533

Capitalisation reserve 13.6 42,564 34,390

Other reserves 13.2/13.4/ 13.5 1,283,638 1,222,911

Consolidated reserves of subsidiaries 13 25,028 15,739

Reserves in companies consolidated under the equity method 13 14,917 20,452

Interim dividend 4 (84,029) (50,021)

Profit/(loss) for the year 132,100 123,690

Value change adjustments 18,353 11,159

Hedging transactions (153) 11

Translation differences 18,506 11,148

Grants and legacies received 14 1,988 1,930

Minority interests 13.7 23,097 12,833

NON-CURRENT LIABILITIES 169,288 127,784

Long-term provisions 15.1 84,822 46,052

Other provisions 84,822 46,052

Long-term payables 16.1 78,199 74,246

Debts with credit institutions 16.3 18,821 16,014

Finance lease creditors 204 -

Other financial liabilities 59,174 58,232

Deferred tax liabilities 17.8 6,267 7,466

Accruals and deferred income - 20

CURRENT LIABILITIES 331,232 267,088

Current payables 16.2 3,376 2,450

Debts with credit institutions 16.3 2,835 2,450


Derivatives 12 203 -

Other financial liabilities 221 -

Trade and other payables 326,167 264,123

Suppliers 193,435 166,774

Sundry payables 32,558 26,129

Staff 20,261 20,428

Current tax liabilities 17.1 14,752 5,825

Other payables to public administrations 17.1 65,161 44,967

Short term accruals 1,689 515

TOTAL EQUITY AND LIABILITIES 1,996,543 1,826,322

Thousands of euros

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CONTINUING OPERATIONS NOTE 2019 2018

REVENUE 18.1 1,400,448 1,298,628

Difference between opening and closing inventories 5,105 124

Raw materials and other consumables (398,072) (360,253)

Consumption of goods purchased for resale 18.2 (43,093) (32,530)

Consumption of raw materials and other materials 18.2 (354,979) (327,551)

Impairment of merchandise, raw mat. and other supplies - (172)

Other operating income 14,629 13,336

Personnel expenses (270,983) (245,915)

Wages, salaries and similar (204,772) (185,150)

Staff welfare charges 18.3 (66,211) (60,765)

Other Operating Charges (539,094) (446,573)

External Services (512,804) (435,093)

Taxes (14,999) (2,221)

Loss, impairment and changes in trade provisions 11.3 (10,338) (6,527)

Other income and expenses (953) (2,732)

Fixed asset depreciation 7/8/9 (107,555) (95,640)

Grants related to non-financial non-current assets and other grants 14 879 1,522

Impairment and profit/(loss) on fixed asset disposals 82,594 (579)

Impairment and losses 7/9 (17,983) (166)

Gains/(losses) on disposals and other 8/9 100,577 (413)

OPERATING RESULTS 187,951 164,650

Financial income 18.4 6,619 9,025

Marketable securities and other in third parties 6,619 9,025

Financial expenses 18.4 (1,671) (3,418)

Payable to third parties (1,671) (3,418)

Exchange-rate differences 171 2,593

Impairment losses and income from disposal of financial instruments (14) -

Impairment and losses (14) -

FINANCIAL RESULT 5,105 8,200

Share of results of equity-consolidated companies 6 (854) (2,431)

PROFIT/(LOSS) BEFORE TAX 192,202 170,419

Corporate income tax 17.5 / 17.6 (59,695) (46,001)

PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 132,507 124,418

CONSOLIDATED PROFIT FOR THE YEAR 132,507 124,418

Profit/(loss) attributed to Parent Company 132,100 123,690

Profit/(loss) attributed to minority interests 13.7 407 728

MAHOU, S.A. AND SUBSIDIARIESConsolidated income statement for the year ended 31 December 2019

The accompanying notes 1 to 23 are an integral part of the Income Statement at 31 December 2019.

Thousands of euros

B) TOTAL STATEMENT OF CHANGES IN EQUITY

A) STATEMENT OF RECOGNISED INCOME AND EXPENSES

Share capital

Parent Company Reserves

Consolidated reserves

Interim dividend

Profit/(loss) for the year

Translation Differences

Adjustments due to

changes in value

Grants, donations

and legacies received

Equity of the Parent Company

Socios externos Total

Opening balance 2018 14,028 1,195,984 38,738 (40,007) 127,659 (465) (4,115) 2,567 1,334,389 2,631 1,337,020

Total recognised income and expenses

- - - - 123,690 - 4,126 (637) 127,180 728 127,908

Operations with shareholders Allocation of profit - 85,656 1,996 40,007 (127,659) - - - - - -

Interim dividend - - - (50,021) - - - - (50,021) - (50,021)

Other Equity adjustments - - (4,543) - - 11,613 - - 7,069 (15) 7,054

Changes in the scope of consolidation

- - - - - - - - - 9,489 9,489

2018 year end balance 14,028 1,281,640 36,191 (50,021) 123,690 11,148 11 1,930 1,418,617 12,833 1,431,450

Total recognised income and expenses

- - - - 132,100 - (164) 58 131,994 407 132,401

Operations with shareholders Allocation of profit - 68,901 4,768 50,021 (123,690) - - - - - -

Interim dividend - - - (84,029) - - - - (84,029) - (84,029)

Other Equity adjustments - - (1,014) - - 7,358 - - 6,344 (2) 6,342

Changes in the scope of consolidation

- - - - - - - - - 9,859 9,859

2019 year end balance 14,028 1,350,541 39,945 (84,029) 132,100 18,506 (153) 1,988 1,472,926 23,097 1,496,023

NOTE 2019 2018

RESULTS OF THE INCOME STATEMENT (I) 132,100 123,690

INCOME AND EXPENSES ALLOCATED DIRECTLY TO EQUITY (II) 593 660 Grants, donations and legacies received 808 681

On cash flow hedges (203) 15

Tax effect (cash flow hedges) 17.4 50 (4)

Tax effect (grants) 17.4 (62) (32)

TRANSFERS TO THE INCOME STATEMENT (III) (699) 2,830 Grants, donations and legacies received (879) (1,522)On cash flow hedges (15) 5,488 Tax effect (cash flow hedges) 17.4 4 (1,372)Tax effect (grants) 17.4 191 236

TOTAL RECOGNISED INCOME AND EXPENSES (I+II+III) 131,994 127,180

Thousands of euros

MAHOU, S.A. AND SUBSIDIARIES Consolidated statement of changes in equity for the year ended 31 December 2019

The accompanying notes 1 to 23 are an integral part of the Statement of Changes in Equity at 31 December 2019.

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NOTE 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES (I) 221,247 276,398

Profit for the year before tax 192,202 170,418 Adjustments to profit/(loss): 83,537 118,608

Fixed asset amortisation/depreciation 7/8/9 107,555 95,640 Impairment adjustments to property, plant and equipment 7,052 - Impairment adjustments to property, plant and equipment 7,831 166 Impairment adjustments due to business transactions 3,100 - Impairment adjustments due to business transactions 10,338 6,527 Impairment adjustments to inventories - 172 Impairment adjustments to property, plant and equipment 14 - Change in provisions 15.1 52,640 19,837 Release of grants 14 (321) (970)Profit/(loss) of fixed asset write-offs and disposals (100,577) 413 Financial income 18.4 (6,620) (9,026)Financial expenses 18.4 1,671 3,418 Results of companies carried by equity method 6 854 2,431

Changes in working capital 4,759 19,268 Inventories (14,801) 5,240 Debtors and other receivables (23,893) 3,253 Other current assets 20 (1,300)Creditors and other payables 43,453 12,075 Current liabilities (20) -

Other cash flows from operating activities (59,251) (31,896)Interest paid (1,671) (637)Dividends collected 18.5 4,967 3,470 Interest collected 7,662 7,988 Corporate income tax income/(expense) (56,341) (36,968)Other collections (payments) 15.1 (13,868) (5,749)

CASH FLOWS FROM INVESTMENT ACTIVITIES (II) 118,427 (315,137)

Amounts paid on investments (126,349) (318,277)Group companies and associates (16,466) (40,751)Intangible assets 7 (8,470) (8,600)Property, plant and equipment 8 (98,822) (111,150)Investment property 9 (2,591) - Financial assets - (9,402)Other financial assets - (148,374)

Receipts from divestments 244,776 3,140 Intangible assets 7 6 5 Property, plant and equipment 8 2,092 2,512 Investment property 9 42,657 416 Financial assets 7,692 - Other financial assets 192,329 207

CASH FLOWS FROM FINANCIAL ACTIVITIES (III) (98,151) (49,229)

Receipts and payments on equity instruments 249 142 Issue of equity instruments - 13 Grants, donations and legacies received 249 129

Collections and payments on financial liability instruments (14,371) 650 Other debt issue 766 2,290 Return and amortisation of debts with credit institutions (15,137) (1,640)

- Payment of dividends and remuneration of other equity instruments (84,029) (50,021)Dividends 4 (84,029) (50,021)

EFFECT OF EXCHANGE RATE FLUCTUATIONS (IV) 146 1,069

NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III+IV) 241,669 (86,899)

Cash and cash equivalents at beginning of year 218,598 303,126

Cash and cash equivalents from the inclusion in the scope of consolidation 5,785 2,371

Cash and cash equivalents at year end 466,052 218,598

MAHOU, S.A. AND SUBSIDIARIESConsolidated Statement of Cash Flows for the year ended 31 December 2019

Thousands of euros

The accompanying notes 1 to 23 are an integral part of the Cash Flow Statement in Equity at 31 December 2019

MAHOU, S.A.AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 AND MANAGEMENT REPORT

Mahou, S.A. and subsidiaries (hereinafter, Mahou San Miguel) form a consolidated group of companies engaged primarily in the production and sale of beer. This activity is carried out mainly in Spain from its plants in Alovera, Lleida, Málaga, Burgos, Tenerife, Córdoba and Granada and, internationally, in India and the United States, among other countries.

The Parent Company is Mahou, S.A., which was incorporated in Madrid on 30 December 1957. The corporate purpose of the Parent Company, per its bylaws, is the sale of beer. Its registered office is at Calle Titán No. 15 in Madrid and it files its consolidated annual and individual accounts with the Commercial Registry of Madrid.

1. ACTIVITY

2. CORPORATE GROUP

2.1 SUBSIDIARIES

The consolidation was carried out by applying the full consolidation method to all the subsidiaries, which are companies over which the Parent Company exercises or can exercise control, directly or indirectly, with this understood to mean the power to govern the financial and operating

policies of a company to obtain economic benefits from its activities. This is evidenced in general, but not solely, through direct or indirect ownership of 50% or more of the company’s voting rights.

The subsidiaries included in the scope of consolidation at 31 December 2019 are the following:

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SUBSIDIARIES 2019 % EFFECTIVE OWNERSHIP INVESTMENT VALUE

LOCATION DIRECT INDIRECT DIRECT INDIRECT ACTIVITY

Cervezas Mahou, S.L.U. (*) Madrid 100 - 55,050 - Beer Brewing

Cervezas San Miguel,S.L.U. (*) Malaga 100 - 42,843 - Beer Brewing

Cervecera Independiente, S.A. (-) Madrid 100 - 6,013 - Beer Distribution

Cervezas Reina 2000, S.A.U. (*) Tenerife 100 - 31,270 - Beer Brewing

TAISA Logistics 1960, S.A.U. (*) Madrid 100 - 1,879 - Transport Services

Spain’s Best Beers Inc (-) U.S.A. 100 - 302,932 - Beer Distribution

Penibética de Cervezas y Bebidas, S.L.U. (*) Córdoba 100 - 4,537 - Beer Brewing

Cervezas Alhambra, S.L.U. (*) Granada 100 - 7,000 - Beer Brewing

Aguas Solán de Cabras, S.A.U. (*) Cuenca 100 - 151,795 - Mineral Water Bottling

Mahou India Private Limited (*) India 98.89 1.11 78,466 989 Beer Brewing

La Salve Comercializadora, S.L. (*) Bilbao 75 10.73 2,100 75 Beer Distribution

Mahou Andina, S.p.A. (*) Chile 100 - 3,176 - Beverage Distribution

Gold Lemon, S.L. (-) Madrid 70.46 - 1,482 - Marketing of beverages

Estilosmas, S.L.U. (-) Madrid 100 - 450 - Marketing of merchandising

Los Rechazos, S.L. (-) Tenerife 100 - 18,400 - Holding Company

Aguas del Valle de la Orotava, S.L. (^) Tenerife - 75.15 - 14,514 Mineral Water Bottling

Nirgua Solar, S.L.U. (^) Tenerife - 75.15 - 5,743 Photovoltaic Power Generation

Fuente Azul Compañía de Aguas, S.L. (^) Tenerife - 59.4 - 459 Mineral Water

Distribution

Voldistribución, S.L.U. (-) Madrid 100 - 24,462 - Holding Company

Distribución Balear Almacenaje y Logística, S.A. (*)

Palma de Mallorca - 69.98 - 3,530 Beverage Distribution

Alhambra Distribuidora Meridional, S.L.U. (*) Granada - 100 - 2,774 Beer Distribution

Cermadis, S.L.U. (*) Valencia - 100 - 4,609 Beverage Distribution

Distribución Bebidas Murcia, S.L. (*) Murcia - 98.82 - 1,050 Beverage Distribution

Distribuciones Chamartín, S.A.U. (*) Madrid - 100 - 3,100 Beverage Distribution

Govadisa Distribuciones de Bebidas, S.A.U. (*) Madrid - 100 - 2,100 Beverage Distribution

Voldistribución Coruña, S.L. (*) Coruña - 51 - 6,170 Beverage Distribution

Espacios Experiencias Cerveceras, S.L.U. (-) Madrid 100 - 1,500 - Holding Company

Espacios Cervecera, S.L.U. (-) Madrid - 100 - 2,086 Catering and Events

La Cervecista, S.L.U. (-) Madrid - 100 - 500 Restaurants and On-trade

Madrid Beer Experiences, S.L.U.(-) Valencia - 100 - 500 Catering and Events

Barcelona Beer Experiences, S.L.U. (-) Murcia - 100 - 500 Catering and Events

Basque Experience Gastro, S.L. (-) Bilbao - 85.73 - 171 Catering and Events

Avery Brewing Co, LLC and subsidiaries (^) USA - 70 - 24,709 Beer Brewing

Thousands of Euros

The changes in 2019 are shown below:

Voldistribución, S.L.U.On 15 January 2019, Voldistribución, S.L.U. was incorporated with share capital of 5,000 thousand euros and a share premium of 8,500 thousand euros, with the shares fully subscribed and paid up by Mahou S.A.

On 15 March 2019, the Sole Shareholder of Voldistribución S.L.U. approved a capital increase in the amount of 6,000 thousand euros and a share premium of 4,962 thousand euros, with the shares fully subscribed and paid up by Mahou S.A. through a non-cash capital contribution of its shares in Cermadis S.L.U., Alhambra Distribuidora, Meridional

(*) Audited by PwC (-) No audit required (^) Audited by other firms

S.L.U., Distribución Bebidas Murcia S.L. and Distribución Balear Almacenaje y Logística S.A.

Estilosmas, S.L.U.On 5 February 2019, the company Estilomas S.L.U. was incorporated with share capital of 450 thousand euros, with the shares fully subscribed and paid up by its founding partner, Mahou, S.A.

Espacios Experiencias Cerveceras, S.L.U.On 5 February 2019, the company Espacios Experiencias Cervecera S.L.U. was incorporated with 1,500 thousand euros, with its shares fully subscribed and paid up by its founding partner, Mahou, S.A.

La Cervecista, S.L.U.On 12 March 2019, the company Cervecista, S.L.U. was incorporated with 500 thousand euros, with its shares fully subscribed and paid up by its founding partner, Espacios Experiencias Cerveceras, S.L.U.

Barcelona Beer Experiences, S.L.U.On 12 March 2019, the company Barcelona Beer Experiences, S.L.U. was incorporated with share capital of 500 thousand euros, with the shares fully subscribed and paid up by its founding partner, Espacios Experiencias Cerveceras, S.L.U.

Madrid Beer Experiences S.L.U.On 12 March 2019, the company Madrid Beer Experiences, S.L.U. was incorporated with 500 thousand euros, with its shares fully subscribed and paid up by its founding partner, Espacios Experiencias Cerveceras, S.L.U.

Espacios Cervecera S.L.U.On 26 March 2019, the company Cervecera Independiente, S.A.U. signed a purchase-sale agreement with Espacios Experiencias Cerveceras, S.L.U. for shares in Espacios Cervecera, S.L.U. by which all the company’s shares were transferred to the latter company for 2,086 thousand euros.

Avery Brewing Company L.L.C.On 29 March 2019, Spain´s Best Beers Inc. signed a purchase-sale agreement by

which it agreed to pay 11,934 thousand euros in exchange for 30% of the shares in the company Avery Brewing L.L.C., which had been controlled up to that date by other partners (see Note 22).

As a result of this operation, Spain´s Best Beers Inc. holds 70% of the share capital of Avery Brewing Company L.L.C., making Avery a subsidiary for the purposes of the consolidated financial statements of Mahou S.A. and subsidiaries.

Mahou India Private LimitedOn 29 March 2019, the General Shareholders’ Meeting of Mahou India Private Limited approved a capital increase in the amount of 3,846 thousand euros, with the shares fully subscribed and paid up by Mahou S.A and Cervecera Independiente S.A.U., according to their respective ownership percentages. As a result of this operation, the two companies have maintained their respective ownership percentages.

Distribuciones Chamartín, S.A.On 8 April 2019, Voldistribución, S.L.U. signed a purchase-sale agreement for shares in the company Distribuciones Chamartín, S.A. in the amount of 3,100 thousand euros, acquiring all the shares of this company (see Note 22).

Govadisa Distribuciones de Bebidas, S.A.On 8 April 2019, Voldistribución, S.L.U. signed a purchase-sale agreement for shares of the company Govadisa Distribuciones de Bebidas, S.A. in the amount of 2,100 thousand euros, acquiring all the shares in this company (see Note 22).

Gold Lemon, S.L.On 28 June 2019, Mahou S.A. acquired 40.74% of the shares of the company Gold Lemon, S.L. for 425 thousand euros. Likewise, on the same date, Mahou S.A. fully subscribed and paid up a capital increase in the amount of 580 thousand euros, with a share premium of 478 thousand euros, equivalent to 29.72% of the total shares of Gold Lemon, S.L. As a result of these operations, Mahou S.A. holds 70.46% of

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the shares of this company (see Note 22).

Voldistribución Coruña, S.L.On 5 July 2019, Voldistribución, S.L.U. signed a purchase-sale agreement for shares in the company Viños Caravesa, S.L. in the amount of 6,170 thousand euros, acquiring 51% of the shares of this company (see Note 22).

On this same date, the Universal Extraordinary General Shareholders’ Meeting agreed to change the corporate name of Viños Caravesa, S.L. to Voldistribución Coruña, S.L.

Distribución Bebidas Murcia, S.L.On 27 December 2019, the Extraordinary General Shareholders’ Meeting of Distribución Bebidas Murcia S.L. approved a capital increase in the amount of 1,000 thousand euros, which was fully subscribed and paid up by Voldistribución S.L.U. As a result of this operation Voldistribución S.L.U. has increased its ownership percentage to 98.82%.

The subsidiaries included in the scope of consolidation at 2018 year end were the following:



Cervezas Mahou, S.L.U. (*) Madrid 100.00 - 55,050 - Beer Brewing

Cervezas San Miguel,S.L.U. (*) Málaga 100.00 - 42,843 - Beer Brewing

Cervecera Independiente, S.A. (-) Madrid 100.00 - 6,013 - Beer Distribution

Cervezas Reina 2000, S.A.U. (*) Tenerife 100.00 - 31,270 - Beer Brewing

TAISA Logistics 1960, S.A.U. (*) Madrid 100.00 - 1,879 - Transport Services

Spain’s Best Beers Inc (-) U.S.A. 100.00 - 302,932 - Beer Distribution

Alhambra Distribuidora Meridional, S.L.U. (*) Granada 100.00 - 5,281 - Beverage Distribution

Penibética de Cervezas y Bebidas, S.L.U. (*) Córdoba 100.00 - 4,537 - Beer Brewing

Cervezas Alhambra, S.L.U. (*) Granada 100.00 - 7,000 - Beer Brewing

Aguas Solán de Cabras, S.A.U. (*) Cuenca 100.00 - 151,795 - Mineral Water Bottling

Distribución Balear Almacenaje y Logística, S.A. (*)

Palma de Mallorca 69.98 - 3,530 - Beverage Distribution

Mahou India private limited (*) India 98.89 1.11 74,663 946 Beer Brewing

La Salve Comercializadora, S.L. (*) Bilbao 75.00 10.73 2,100 300 Beer Distribution

Mahou Andina, S.p.A. (*) Chile 100.00 - 3,176 - Beer Distribution

Cermadis, S.L.U. (*) Valencia 100.00 - 4,609 - Beer Distribution

Espacios Cervecera, S.L. (-) Madrid - 100.00 - 4,300 Catering and Events

Distribución Bebidas Murcia, S.L. (*) Murcia 80.00 - 50 - Beverage Distribution

Basque Experience Gastro, S.L. (-) Bilbao - 85.73 - 171 Catering and Events

Los Rechazos, S.L. (-) Tenerife 100.00 - 18,400 - Holding Company

Aguas del Valle de la Orotava, S.L. (^) Tenerife - 75.15 - 14,514 Mineral Water Bottling

Nirgua Solar, S.L.U. (-) Tenerife - 75.15 - 5,743 Photovoltaic Power Generation

Fuente Azul Compañía de Aguas, S.L. (-) Tenerife - 59.40 - 459 Mineral Water Distribution

Voldistribución, S.L.U.. (-) Madrid 100.00 - 13,500 - Inactive

Thousands of euros

(*) Audited by PwC (-) No audit required (^) Audited by other firms


Spain’s Best Beers Inc. On 16 May 2018, Mahou S.A approved a capital increase in its investee in the amount of 155,056 thousand euros, of which 30,156 thousand euros corresponded to loan capitalisation and 124,900 thousand euros to a cash investment.

On 20 November 2018, a cash capital contribution in the amount of 59,782 thousand euros was approved.

Alhambra Distribuidora Meridional, S.L.U.On 28 December 2018, Alhambra Distribuidora Meridional, S.L.U. refunded the shareholder investment received in previous years in the amount of 2,000 thousand euros to its Parent Company, Mahou S.A

Cermadis, S.L.U. On 22 February 2018, Mahou S.A. concluded a purchase agreement by which it agreed to pay 1,300 thousand euros in exchange for a 26% interest previously held by minority shareholders.

On 9 October 2018, Mahou, S.A. subscribed and paid up a capital increase in Cermadis, S.L.U. in the amount of 2,480 thousand euros, maintaining its existing 100% ownership.

Espacios Cervecera, S.L.On 17 December 2018, Cervecera Independiente, S.A. approved a capital increase of its investee in the amount of 4,000 thousand euros, maintaining the same ownership percentage it held at the end of 2017.

Mahou India Private LimitedOn 23 April 2018, Mahou, S.A. and Cervecera Independiente, S.A.U. increased their equity investment in this company in the amount of 10,156 thousand euros and 114 thousand euros, respectively.

In both transactions, the ownership percentages held by Mahou, S.A. and Cervecera Independiente, S.A.U. at 2017 year end were maintained.

Distribución Bebidas Murcia, S.L.On 28 February 2018, a capital increase was approved in the amount of 12 thousand euros, with the shares 100% subscribed by a minority interest. As a result of this transaction, Mahou S.A.’s ownership was diluted to 80%.

Los Rechazos, S.L.On 6 March 2018, Mahou, S.A subscribed a purchase agreement for 100% ownership of Los Rechazos, S.L. in the amount of 18,400 thousand euros. This agreement is subject to conditions precedent. These conditions having been met, the agreement was finalised on 5 June 2018.

As a result of this transaction, Mahou, S.A., in turn, came to hold an indirect interest in Fuente Azul Compañía de Aguas, S.L., Aguas del Valle de la Orotava, S.L. and Nirgua Solar, S.L.U.

Voldistribución, S.L.U.On 19 December 2018, Voldistribución, S.L.U. was incorporated with share capital of 5,000 thousand euros and a share premium of 8,500 thousand euros, with the shares fully subscribed and paid up by Mahou S.A.

This corporate action was not recorded in the Commercial Registry of Madrid until 15 January 2019.

2.2 ASSOCIATES

Associates are accounted for using the equity method. These are companies in which significant influence is exercised over their management, which is understood to mean the power to intervene in the investee company’s financial and operating policy decisions, but without this reaching the level of control or even joint control.

The equity method consists of including on the “Non-current investments in group companies and associates - Investments accounted for using the equity method” line of the balance sheet the value of the net assets and any goodwill corresponding to the percentage of ownership of the investee company. The net profit or

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loss for each year corresponding to the percentage of ownership of these companies is reflected in the consolidated income statements under “Share of profit of companies accounted for using the equity method”. The greater value of the net assets and underlying goodwill is reduced in subsequent years with a


On 3 April 2019, Spain’s Best Beers, Inc. acquired a 1.28% interest in the share capital of Canal Street Brewing Co, LLC through a cash disbursement

The changes in 2018 were the following:

On 14 March 2018, Spain’s Best Beers, Inc. acquired a 40% interest in the share capital of Avery Brewing Co., L.L.C. through a cash disbursement of 12,774 thousand euros.

charge to consolidated income as the corresponding asset items are depreciated, become impaired or are derecognised or disposed of to third parties.

The companies included in the scope of consolidation using the equity method for 2019 are the following:

of 3,613 thousand euros to a minority shareholder.

The companies included in the scope of consolidation using the equity method in 2018 are the following:

2.3 CHANGES IN THE SCOPE OF CONSOLIDATION

The main changes in the scope of consolidation are discussed in Notes 2.1 and 2.2.



Intermalta, S.A. Navarre 33.34 13.56 5,639 6,613 Malt Production

La Salve Bilbao, S.L. Bilbao 42.90 - 846 - Holding Company

Nomada Brewing Company, S.L. Barcelona 40.00 - 75 - Beer Brewing

Canal Street Brewing Co., L.L.C. USA - 31.28% - 83,798 Beer Brewing

Thousands of euros

Thousands of euros



Intermalta, S.A. Navarre 33.34 13.56 5,639 6,613 Malt Production

La Salve Bilbao, S.L. Bilbao 42.90 - 846 - Holding Company

Nomada Brewing Company, S.L. Barcelona 40.00 - 75 - Beer Brewing

Canal Street Brewing Co., L.L.C. USA - 30.00 - 80,185 Beer Brewing

Avery Brewing Co, LLC and

subsidiariesUSA - 40.00 - 12,774 Beer Brewing

3.1 APPLICABLE REGULATORY FRAMEWORK FOR FINANCIAL REPORTING

These consolidated financial statements were prepared by the Board of Directors in accordance with the financial reporting regulatory framework applicable to Mahou San Miguel, which is established in:

- The Spanish Commercial Code and other Spanish corporate legislation.

- The Rules for Preparation of Consolidated Financial Statements approved by Royal Decree 1159/2010 and the Spanish National Chart of Accounts approved by Royal Decree 1514/2007.

- The mandatory rules approved by the Spanish Accounting and Audit Institute in order to implement Spanish National Chart of Accounts and the relevant secondary legislation.

- All other applicable Spanish accounting legislation.

- Royal Decree 602/2016, of 2 December, amending the Spanish National Chart of Accounts, approved by Royal Decree 1514/2007, of 16 November.

3.2 FAIR PRESENTATION

The consolidated financial statements, which were obtained from the accounting records of the Parent Company and of its investee companies, are presented in accordance with the applicable financial reporting regulatory framework and, in particular, with the accounting principles and criteria contained therein and, accordingly, present a true and fair view of the equity, financial position, results and cash flows of Mahou San Miguel.

These consolidated financial statements, prepared by the Board of Directors of the Parent Company at its meeting of 26 March 2020, as well as those of the investee companies, will be submitted for approval at the respective Annual General Meetings of Shareholders and Partners, with the expectation of approval without changes. The consolidated financial statements for 2018 were approved at the Annual General Meeting of the Parent Company of 23 May 2019 and filed with the Commercial Registry of Madrid.

The figures contained in the documents comprising these consolidated financial statements (consolidated balance sheet, consolidated income statement, consolidated statement of changes in equity, consolidated statement of cash flows, and this annual report) are expressed in thousands of euros.

3.3 ACCOUNTING PRINCIPLES APPLIED

The Directors of the Parent Company prepared these consolidated financial statements taking into consideration all obligatory accounting principles and standards that have a significant effect on these consolidated financial statements. All mandatory accounting principles have been applied.

3.4 CRITICAL VALUATION ISSUES AND ESTIMATES OF UNCERTAINTY

In preparing the attached consolidated financial statements, estimates made by the directors of the Parent Company were used to value certain assets, liabilities, income, expenses and obligations reported herein. These estimates refer basically to the following:

- The appraisal of possible impairment losses on certain assets.

3. THE MANDATORY RULES APPROVED BY THE SPANISH ACCOUNTING

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- The useful life of intangible assets, property, plant and equipment, and investment property.

- The fair value of certain financial instruments.

- The calculation of provisions.

- The recoverability of deferred tax assets.

- The estimate of the term of leases.

Although these estimates were made based on the best information available at 2019 year end, future events may make it necessary to change these estimates (upwards or downwards) in coming years. Changes in accounting estimates would be applied prospectively.

The proposed allocation of the profit of the Parent Company for the year prepared by its directors, which will be submitted for approval at the Annual General Meeting, is as follows:

In 2019, the distribution of an interim dividend in the amount of 84,029 thousand euros was approved at the Parent.

The provisional accounting statement used as the basis for the distribution

3.5 COMPARISON OF THE INFORMATION

The information contained in this consolidated report referring to the year 2018 is presented solely for comparison purposes with the information for 2019.

3.6 MATERIALITY

It should be noted that in preparing these consolidated financial statements, the Group omitted any information or details which, not requiring disclosure due to their qualitative importance, were considered immaterial in accordance with the concept of materiality defined in the applicable conceptual framework.

of the interim dividend, based on the closing date of 31 October 2019, in accordance with the legal requirements evidencing the existence of sufficient liquidity for the distribution of dividends, was as follows:

Position of the financial accounts as reflected on the assets side of the Company’s provisional balance sheet at 31 October 2019:

- Cash at bank and in hand 203,061 thousand euros

- Temporary financial investments 93,286 thousand euros

- NET CASH POSITION 296,347 thousand euros

The profit allocation for 2018 is reflected in the consolidated statement of changes in equity.

4. PROFIT ALLOCATION OF THE PARENT

Thousands of euros

Available for distribution:

Profits and losses (profit) 118,846

Allocation of profit:

To dividends 84,029

To voluntary reserves 27,434

To capitalisation of reserves 7,383

The main accounting policies used by Mahou San Miguel in preparing its consolidated financial statements for 2019, in accordance with those established in the Spanish Chart of Accounts and other regulations in force, were the following:

5.1 BASIS OF CONSOLIDATION

a. Transactions between consolidated companies

The balances and transaction between fully consolidated companies, and the gains or losses on these transactions, were eliminated on consolidation. The results of operations between group companies and associates were eliminated in proportion to Mahou San Miguel’s percentage of ownership of the latter.

b. Uniformity of items The accounting principles and

procedures used by the Mahou San Miguel companies were unified in order to present the consolidated financial statements on a uniform basis.

c. Translation of financial statements in foreign currency

The financial statements of investee companies with a functional currency other than the presentation currency, the euro, have been translated to euros as follows:

- The assets and liabilities on their balance sheets are translated at the exchange rates in effect at the balance sheet date.

- The income and expense items of each of the income statement are translated at the cumulative average for the period in which they arose.

- The net asset items, including the profit or loss for the year, are translated at the historical exchange rate.

All the resulting exchange rate differences are recognised as a separate component of equity under “Translation differences”.

5.2 GOODWILL AND BUSINESS COMBINATIONS

The acquisition by the Parent Company of control over a subsidiary constitutes a business combination, to which the acquisition method is applied. In subsequent consolidations, the equity investment of the subsidiaries is generally eliminated based on the values resulting from applying the acquisition method described below at the date control is obtained.

Business combinations are accounted for by applying the acquisition method. For this purpose, the acquisition date is determined and the cost of the combination is calculated, and the identifiable assets acquired and the liabilities assumed are valued at their acquisition-date fair values.

The goodwill or negative goodwill of the combination is determined as the difference between the fair values of the assets acquired and liabilities assumed that are recognised and the cost of the combination, all referring to the acquisition date.

The cost of the combination is determined by the sum of:

- Fair values on the acquisition date of the assets assigned, the liabilities incurred or assumed, and the equity instruments issued.

- The fair value of any contingent consideration dependent on future events or compliance with predetermined conditions.

Expenses related to the issuance of equity instruments or financial liabilities handed over in exchange for the assets acquired are not part of the cost of the combination.

5. RECORDING AND VALUATION STANDARDS

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Similarly, the cost of the combination does not include the fees paid to legal advisers or other professionals involved in the combination or the expenses generated internally in this regard. These amounts are charged directly to the income statement.

If the business combination is carried out in stages, such that before the acquisition date (date of taking control), a prior investment existed, the goodwill or negative goodwill is obtained from the difference between:

- The cost of the business combination plus the fair value at the acquisition date of any equity interest held previously by the acquirer in the acquiree, and,

- The value of the identifiable assets acquired, less that of the liabilities assumed, determined in accordance with the abovementioned method.

Any gain or loss resulting from the revaluation of the previously held equity interest in the acquiree at its acquisition-date fair value is recognised in the consolidated income statement. If the investment in this investee had previously been valued at fair value, any valuation adjustments not yet recognised in profit or loss for the year will be transferred to the consolidated income statement. Additionally, it is assumed that the cost of the business combination is the best reference for estimating the fair value at the date of acquisition of any previously held equity interest.

Goodwill arising in the acquisition of companies with a functional currency other than the euro is carried in the functional currency of the acquiree and translated to euros at the exchange rate in effect at the balance sheet date.

Goodwill is amortised and subsequently valued at cost less accumulated amortisation and, where applicable, the accumulated amount of the valuation adjustments recognised for impairment. Since 1 January 2016, in accordance with the applicable regulations, the useful life of goodwill is established at

ten years and is amortised on a straight-line basis.

Furthermore, the Group analyses, at least once a year, whether any indications of impairment of the aforementioned cash-generating units exist and, if so, they are tested for impairment according to the methodology described below and, where appropriate, the corresponding valuation adjustment is recognised.

Valuation adjustments due to impairment recognised in goodwill cannot be reversed in subsequent years.

In the exceptional circumstance that negative goodwill arises in the combination, this is recognised as income in the consolidated income statement.

If the initial accounting for a business combination is incomplete at the end date of the year in which the combination occurs, the acquirer shall report provisional amounts in its financial statements for the items for which the accounting is incomplete. The provisional amounts may be adjusted in the period required to obtain the necessary information, however, this may in no case exceed one year. The effects of the adjustments made in this period are accounted for on a retroactive basis, modifying the comparative information if necessary.

Subsequent changes in the fair value of the contingent consideration are adjusted against results, unless such consideration has been classified as equity, in which case the subsequent changes in their fair value are not recognised.

If, subsequent to gaining control, there are transactions for the purchase or sale of shares of a subsidiary without loss of control, the effects of such transactions are recorded in equity and the amount of goodwill on consolidation does not change.

5.3 INTANGIBLE ASSETS

As a general rule, intangible assets are initially carried at their acquisition price. They are subsequently valued at

cost less accumulated amortisation and, if appropriate, any impairment losses. These assets are amortised based on their useful life. When the useful life of these assets cannot be estimated reliably, they are amortised over a period of ten years.

Intangible assets include the amounts paid for title to or for the right to use computer applications and software. Mahou San Miguel only capitalises external costs related to projects for the development of new applications, whereas in-house costs incurred in this regard are charged to expense.

Software maintenance costs are charged directly as expenses in the year in which they occur.

Computer software is recognised at its acquisition cost and is amortised on a straight-line basis over three years.

Trademarks are recognised at the costs incurred in acquiring them from third parties, either through direct purchase or as the result of a business combination. They are amortised on a straight-line basis over 10 years.

The amortisation rates applied in 2019 and 2018 are as follows:

5.4 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment items were recorded at their acquisition or production cost, although, with accounting effects as from 1 January 2013, the value of certain property, plant and equipment elements of Mahou San Miguel existing on that date were subject to revaluations pursuant to Law 16/2012, of 27 December (see Note

8). The effect of the asset revaluations made pursuant to Laws 74/1980, 9/1983, and R.D. Law 7/1996 was also included in the value of the assets.

This initial valuation is subsequently adjusted for any accumulated depreciation and, where appropriate, any impairment losses. The revaluation surpluses or net increases in value resulting from revaluations are depreciated over the tax periods in the remaining useful lives of the revalued assets.

Upkeep and maintenance of the different property, plant and equipment items are recognised in the income statement for the year in which they are incurred. However, the costs of improvements leading to increased capacity or efficiency or to a lengthening of the useful lives of the assets are capitalised.

The annual provision for depreciation is calculated using the straight-line method based on the estimated useful lives of the assets. The diminishing-balance depreciation method is used for machinery because it is best suited to the characteristics and purpose of machinery.

The following table shows the depreciation rates applied in 2019 and 2018:

The items included under “Property, plant and equipment under construction” continue to be recognised in this account until they come into operation, at which point they are transferred to the appropriate account

% Rate

Patents, licenses and trademarks 5-10

Goodwill 10

Computer software 33

Other property, plant and equipment 5

% Rate

Sistema lineal:

Construcciones 2 – 3

Instalaciones técnicas 4 – 20

Otras instalaciones 10 – 33

Otro inmovilizado 15 – 30

Sistema degresivo:

Maquinaria 30

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based on the nature of the asset in question, and depreciation commences.

“Other property, plant and equipment” includes the returnable containers at the Mahou San Miguel warehouses and those delivered to customers and distributors. In accordance with the regulations in force, companies that engage in the sale of beer must charge a deposit for the containers and crates they deliver. This deposit is refunded as these containers are returned. The deposits received and not yet refunded to customers and distributors are recognised under “Non-current payables - Other financial liabilities” on the liability side of the consolidated balance sheet.

Impairment of intangible assets, property, plant and equipment and investment property

At each year end, for intangible assets with indefinite useful lives, as well as for property, plant and equipment and investment property, or whenever there are indications of impairment for other assets, Mahou San Miguel tests the tangible and intangible assets for impairment (“impairment test”) to determine whether the recoverable amount of the assets has been reduced to below their book value.

The recoverable amount is the higher of fair value less selling costs and value in use. Mahou San Miguel generally uses discounted cash flow methods to determine this value. The main assumptions of discounted cash flow are detailed in Note 7. The flows take into account past experience and represent the Parent’s best estimate of future market performance.

In 2019, a net impairment loss of 17,983 thousand euros (170 thousand euros in 2018) was recognised.

5.5 INVESTMENT PROPERTY

“Investment property” on the consolidated balance sheet reflects the value of the land, buildings and other

structures held to earn rentals or for capital appreciation.

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

For accounting purposes, since 1 January 2013, practically all of the Company’s existing investment properties at that date were subject to revaluation pursuant to Law 16/2012, of 27 December (see Note 9).

5.6 LEASES

Leases are classified as finance leases when the terms and conditions of same substantially transfer the associated risks and rewards inherent to ownership of the leased asset to the lessee. Other leases are classified as operating leases.

5.6.1 FINANCE LEASESLeases are classified as finance leases when their terms and conditions substantially transfer the associated risks and rewards inherent to ownership of the leased asset to the lessee. Other leases are classified as operating leases.

In these finance lease operations in which the Company acts as the lessee, the cost of the leased assets is represented on the balance sheet according to the nature of the leased asset and, simultaneously, a liability in the same amount. This amount will be the lower of the fair value of the leased asset and the present value, at the inception of the lease, of the agreed minimum lease payments, including the price of the purchase option, when it is reasonably certain that it will be exercised. The minimum lease payments will not include contingent rent, costs of services and taxes to be paid by and reimbursed to the lessor. The total finance charges arising under the lease are allocated to the profit and loss account for the year in which they are incurred using the effective interest method. Contingent rents are recognised as expenses for the period in which they are incurred.

Assets recognised in these types of transactions are amortised, according to their nature, using similar criteria to those applied to owned tangible assets.

5.6.2 OPERATING LEASESThe revenue and expenditures related to operating lease agreements are recognised in the income statement in the year in which they are accrued.

5.7 FINANCIAL INSTRUMENTS

5.7.1 FINANCIAL ASSETSLoans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments which are not quoted in an active market. They are included in current assets, except for assets with maturities longer than 12 months from the balance sheet date that are classified as non-current assets. Loans and receivables are included in “Loans to third parties”, “Trade and other receivables”, “Term deposits, short-term investments” and “Other financial assets” on the balance sheet.

These financial assets are initially carried at fair value, including any directly attributable transaction costs, and subsequently valued at amortised cost. Accrued interest is recognised at the effective interest rate, which is the discount rate that brings the instrument’s carrying amount into line with all estimated cash flows to maturity. Nonetheless, trade receivables with a maturity of no more than one year are carried, both initially and subsequently, at their face value, provided that the effect of not discounting the cash flows is not significant.

At year end, at least, value adjustments are made to account for impairment when there is objective evidence that all receivable amounts will not be collected.

The amount of the impairment loss is the difference between the asset’s

carrying amount and the present value of estimated future cash flows, discounted at the interest rate in effect at the time of the initial recognition. Value adjustments and their reversals, where applicable, are recognised in the income statement.

Held-to-maturity investmentsHeld-to-maturity financial assets are securities representing debt with fixed or determinable payments and fixed maturities that are negotiated in an active market and which the Company management has the effective intention and capacity to hold to maturity. If the Company were to sell a material portion of its held-to-maturity financial assets, the entire category would be reclassified as available for sale. These financial assets are included in non-current assets, except for those maturing more than 12 months after the balance sheet date that are classified as current assets.

The valuation criteria for these investments are the same as for loans and receivables.

5.7.2 FINANCIAL LIABILITIESDebts and payablesThis category includes both trade and non-trade payables. These liabilities are classified as current liabilities, unless the Company has an unconditional right to defer repayment for at least 12 months from the balance sheet date.

These liabilities are initially recognised at fair value, adjusted for directly attributable transaction costs, and subsequently valued at amortised cost using the effective interest rate method. This effective interest is the discount rate that brings the instrument’s carrying value into line with the expected future flow of payments to the maturity date of the liability.

Nonetheless, trade payables with maturities of less than one year without a contractual interest rate are carried at their face value at both initial and subsequent valuation, provided that the

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effect of not discounting flows is not significant.

Should any existing debt be renegotiated, no substantial modification of the financial liability is deemed to exist when the lender is the same as the party that granted the initial loan and the present value of cash flows, including net commissions, does not differ by more than 10% of the present value of the cash flows pending payment with respect to the original liability calculated using the same method.

5.7.3 DERIVATIVESMahou San Miguel uses derivative financial instruments to hedge the risks to which its future cash flows are exposed. These risks mainly arise from changes in exchange rates. Within the framework of these transactions, Mahou San Miguel arranges certain financial hedging instruments, which are recognised at fair value.

Financial derivatives are valued, both initially and subsequently, at fair value. The method for recognising the resulting gains or losses depends on whether the derivative was designated as a hedging instrument or not, and, if so, on the hedging type. The Company designates certain derivatives as:

Fair value hedgesChanges in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the income statement along with any changes in the fair value of the hedged asset or liability attributable to the hedged risk.

Cash flow hedgesThe effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges are transitionally recognised in equity. This portion is transferred to the income statement in years in which the forecast hedged transaction affects results, unless the hedge corresponds to a forecast transaction that leads to recognition of a non-financial asset or liability, in which case the amounts

reflected in equity include the cost of the asset at the time it is acquired or of the liability at the time it is assumed.

The gain or loss relative to the ineffective portion is recognised immediately in the income statement.

5.8 INVENTORIES

Inventories are valued at the lower of purchase price, production cost and net realisable value. Trade discounts, rebates and other similar items and interest included in the face value of the related payables are deducted in determining the acquisition price.

Production cost includes the costs of direct materials, direct labour and production overheads.

Net realisable value represents the estimated selling price less the total estimated costs of completion and the costs to be incurred in marketing, selling and distribution.

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

Mahou San Miguel recognises the appropriate valuation adjustments as expenses in the consolidated income statement when the net realisable value of the inventories is lower than acquisition price (or production cost).

Greenhouse gas emission allowancesSince 1 January 2016, greenhouse gas emission allowances granted to the Company by public bodies for no consideration under the international environmental accords embodied in the Kyoto Protocol are no longer reclassified as intangible assets but rather as inventories. Allowances held for sale were already recognised in this way.

Allowances granted or acquired for consumption in the production process

are recognised at their acquisition price.

In the case of allowances received free of charge or acquired at a price substantially below their market value, income is recognised directly in consolidated equity at the beginning of the calendar year to which they correspond, and the related amount is recognised in consolidated income statement at the same rate as the emission expenses associated with the allowances received free of charge.

Mahou San Miguel recognises the appropriate valuation adjustments as an expense in the consolidated income statement when the recoverable amount of these allowances is lower than their carrying amount.

At 31 December 2019, the consolidated balance sheet included the value of the as-yet unused greenhouse gas emission allowances under the heading “Grants, donations and legacies received”. The consumption of emission allowances in 2019 and 2018 is reflected in the consolidated income statement as a period expense under the heading “Other operating expenses”. Recognition of the corresponding deferred income is included under the heading “Grants related to non-financial non-current assets and other grants”.

5.9 FOREIGN CURRENCY TRANSACTIONS

Transactions in currencies other than the euro are recognised at their equivalent euro value by applying the exchange rates prevailing at the date of the transaction. Exchange differences are recognised in the income statement at the time they arise. At year end the accounts payable and receivable denominated in foreign currency are translated to euros at the exchange rates prevailing at that date, and the exchange differences are recognised in the income statement for the year.

5.10 TAX ON PROFITS

The expense or income related to the tax on profits includes the portion relating to the expense or income related to the current tax and the portion corresponding to the deferred tax expense or income.

The current tax is the amount payable by Mahou San Miguel as a result of income tax settlements for a given year. Tax credits and other tax benefits, excluding tax withholdings and pre-payments, as well as tax loss carryforwards from prior years effectively offset in the current year, reduce the current income tax expense.

The deferred tax expense or income corresponds to the recognition and derecognition of deferred tax assets and liabilities. These include temporary differences valued at the amount expected to be payable or recoverable derived on differences between the carrying amounts of the assets and liabilities and their tax base, as well as tax loss and tax credit carryforwards. These amounts are valued at the tax rates that are expected to apply in the period when the asset is realised or the liability settled.

Deferred tax liabilities are recognised in respect of all taxable temporary differences, except those arising on the initial recognition of goodwill or other assets and liabilities in a transaction that has no effect on the tax or accounting results and is not a business combination.

Deferred tax assets are only recognised to the extent that it is deemed probable that there will be future taxable profits against which the deferred tax assets can be utilised.

Likewise, at consolidated level, any differences between the consolidated value of an investment in an investee company and its tax base are taken into account. In general, such differences arise from the undistributed profits generated since the date of acquisition of the investee company, from tax

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credits associated with the investment and, in the case of investee companies with a functional currency other than the euro, from translation differences. The deferred tax assets and liabilities arising from these differences are recognised, except in the case of taxable differences, when the investor is able to control the time of reversal of the difference and, in the case of deductible differences, if that difference is expected to reverse in the foreseeable future and it is probable that the company will have future tax gains for a sufficient amount.

Deferred tax assets and liabilities arising from transactions charged or credited directly to equity are also recognised in consolidated equity.

The deferred tax assets recognised are reassessed at the end of each reporting period, and the appropriate adjustments are made to the extent that there are doubts as to their future recoverability. Deferred tax assets not recognised on the consolidated balance sheet are also reviewed at each year end in order to recognise the extent to which it is likely that they will be offset by future taxable profits.

Mahou San Miguel, since 1 January 2010, has filed consolidated tax returns. The head of the tax group is Mahou, S.A., and the subsidiaries are Cervezas Reina 2000, S.A.U., Taisa Logistics 1960, S.A.U., Cervecera Independiente, S.A.U., Alhambra Distribuidora Meridional, S.L.U., Cervezas Alhambra, S.L.U., Penibética de Cervezas y Bebidas, S.L.U., Aguas de Solán de Cabras, S.A.U., Cervezas Mahou, S.L.U., Cervezas San Miguel, S.L.U., Espacios Cervecera, S.L.U. and Distribución Bebidas Murcia, S.L. In the 2019 financial year, Cermadis, S.L.U., Voldistribución, S.L.U., Los Rechazos, S.L., Aguas del Valle de la Orotava, S.L., Nirgua Solar, S.L.U, Espacios Experiencias Cerveceras, S.L.U., La Cervecista, S.L.U., Madrid Beer Experiences, S.L.U., Barcelona Beer Experiences, S.L.U. and Estilosmas, S.L.U. were added to the tax group.

5.11 REVENUE RECOGNITION

Revenue is measured at the fair value of the consideration receivable in exchange for the goods delivered and services rendered in the course of Mahou San Miguel´s ordinary activities, less returns, rebates, discounts and value added tax.

Mahou San Miguel recognises revenue when the amount can be measured reliably, the future economic benefits of the transaction are likely to flow to the Company, and the specific conditions for each of its activities are met, as detailed below. It is not considered that the amount of revenue can be measured reliably until all of the contingencies associated with the sale have been resolved. The Company’s estimates are based on historical results, taking into account customer type, transaction type and the specific terms of each agreement.

a) Sale of goods Sales of goods are recognised when

the products have been delivered to the customer, the customer has complete discretion over the distribution channel, and no outstanding obligation exists that could affect acceptance of the products.

b) Rendering of services Revenues from services are

recognised taking into account the stage of completion of the service at the balance sheet date, provided that the transaction can be reliably estimated. If circumstances arise that alter the initial estimates of ordinary income or costs, such estimates are revised. Revisions may result in increases or decreases of the estimated income or costs, and they are reflected in income statement in the period in which the circumstances giving rise to those revisions are known by management.

c) Interest income Interest income is recognised using

the effective interest rate method.

When an account receivable is impaired, Mahou San Miguel reduces the carrying amount to its recoverable amount, discounting estimated future cash flows at the instrument’s original effective interest rate, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the effective interest rate method.

5.12 PROVISIONS AND CONTINGENCIES

In preparing the consolidated financial statements, the Parent Company’s directors made a distinction between:

a. Provisions: credit balances that cover present obligations arising from past events, when settlement is likely to result in an outflow of resources that are uncertain in terms of their amount and/or timing.

b. Contingent liabilities: possible obligations arising from past events whose future existence will be confirmed only by the occurrence or non-occurrence of one or more future events beyond the control of Mahou San Miguel.

The consolidated financial statements include all provisions with respect to which it is considered likely that the obligation will have to be settled. Contingent liabilities are not recognised in the consolidated financial statements but rather are disclosed in the notes of the consolidated annual report, unless they are considered to be remote.

Provisions are stated at the present value of the best possible estimate of the amount required to settle or transfer the obligation, taking into account the available information on the event and its consequences, and recognising the adjustments that arise from restatement of these provisions as a financial expense as they are accrued.

5.13 ENVIRONMENTAL ASSETS AND LIABILITIES

Environmental assets are assets used on a lasting basis in Mahou San Miguel’s operations for which the main purpose is minimisation of environmental impact and protection and improvement the environment, including reduction or elimination of future pollution.

In this regard, investments related to environmental activities are valued at cost and capitalised as an addition to fixed assets in the year in which they are incurred, in accordance with the methods described in section 5.4 of this Note.

The expenses incurred in protecting and improving the environment are recognised in the income statement in the year they are incurred, regardless of when the resulting monetary or financial flow arises.

The provisions relative to probable or certain liabilities, or outstanding environmental obligations of undetermined amount not covered by insurance policies are recognised when the liability arises.

5.14 PENSION OBLIGATIONS AND OTHER EMPLOYEE BENEFIT OBLIGATIONS

Mahou San Miguel has various pension and similar obligations to its employees, the most significant of which are as follows:

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

a. Normal or early retirement of the participant.

b. Situation similar to retirement.

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c. Permanent disability and comprehensive disability.

d. Death of participant.

In accordance with the regulations in force, the pension plan was externalised through an agreement with Banco Bilbao Vizcaya Argentaria, S.A. This pension plan is funded through annual contributions by the Parent Company, which are recognised in “Employee benefit costs – Pensions and obligations to employees” on the consolidated income statement.

2. The Parent subscribed two policies to cover the pre-retirement and supplementary pension payment obligations to employees of the Parent who had retired before the entry into force of the abovementioned pension plan. In 2019 the Parent Company considered that no contingencies or liabilities would occur.

3. Additionally, for managers and executives of Mahou, S.A., defined contribution obligations exist that have been externalised through group insurance policies contracted with B.B.V.A. Insurance.

4. In 2014 Mahou, S.A. transferred the same pension and other employee benefit obligations to a new plan for the employees of Fábrica de Cervezas, S.L.U. (now Cervezas Mahou, S.L.U.).

5. In 2004, San Miguel, S.A. signed an agreement by which a pension plan was established with similar characteristics to that of the parent company for the employees of San Miguel Fábricas de Cerveza and Malta S.A., a company that was liquidated due to the merger in 2014. In 2005 this pension plan was externalised through an agreement with Banco Bilbao Vizcaya Argentaria, S.A. The annual contribution was recognised under “Employee benefit costs - Pensions and obligations to employees” in

the consolidated income statement for the year. The following changes arose as a consequence of the corporate restructuring in the reporting period:

5.1. In 2014 the merged company transferred the same pension and other employee benefit obligations to the employees of the spun-off company San Miguel Fábricas de Cervezas S.L.U. (now Cervezas San Miguel, S.L.U.).

5.2. The obligations to the employees of San Miguel Fábricas de Cerveza y Malta S.A. who joined the Parent were assumed by Mahou S.A.

6. In 2004 an agreement was entered into with the employees of Taisa Logistics 1960, S.A.U. to create a defined contribution pension plan, the characteristics of which are similar to those of the other Mahou San Miguel companies. This plan does not cover past services and was externalised through a group employee welfare insurance policy. The cost of the premium in 2018 was recognised under “Employee benefit costs - Pensions and obligations to employees”.

7. At 31 December 2019 Alhambra Distribuidora Meridional, S.L.U., Cervezas Alhambra, S.L.U. and Penibética de Cervezas y Bebidas, S.L. had obligations to active employees that may be provisioned, as stipulated in the Collective Labour Agreement. The obligations covered by these provisions are as follows:

a. Active employees: bonus for length of service. Coverage of these obligations has been externalised through an insurance policy taken out with Mapfre Vida, S.A.

b. Other items: These are mainly supplementary benefits for death of a spouse, death of both

parents, etc. The calculations were also performed by the related companies by applying actuarial criteria.

8. The subsidiary Aguas de Solán de Cabras, S.A. had certain obligations to the employees assigned to the Los Villares (Jaén) work centre consisting of a retirement bonus. Pursuant to the collective labour agreements in force until 2014, the Company was obliged to pay the aforementioned bonus to the employees in the aforementioned group, provided that certain conditions were met. This obligation was externalised through an insurance policy taken out with Allianz Vida Mahou San Miguel.

As a result of the new collective labour agreement signed in 2014, the obligation consisting of a retirement bonus ceased to exist, and the contributions made to the aforementioned insurance policy were recouped by the Company in 2015. In addition, a Business Social Welfare Plan was created with a defined annual contribution and an initial extraordinary contribution.

The cost of the annual premium is recognised in “Employee benefit costs - Pensions and obligations to employees” in the consolidated income statement for the year.

9. The subsidiary Distribuidora Balear Almacenaje y Logística, S.A. is governed by the Balearic Island collective labour agreement for the commercial sector and, therefore, employees who retire over the age of 60 and with over 10 years’ service in the company have a right to a bonus for termination of the employment relationship that ranges between 6 and 12 months, depending on the employee’s age on retirement.

10. The obligations assumed by Mahou San Miguel to cover benefits for death or disability of employees while they are still working are covered by insurance policies.

11. Mahou San Miguel offers some of its employees the possibility of retiring before reaching retirement age, for which it assumes certain obligation, in terms of both salaries and other employee benefits, from the date of their pre-retirement to the date of actual retirement (see Note 15).

5.15 TERMINATION BENEFITS

Under current legislation, Mahou San Miguel is required to pay termination benefits to employees terminated under certain conditions. Therefore, termination benefits that can be reasonably quantified are recognised as an expense in the year in which the decision to terminate the employment relationship is taken. The accompanying consolidated financial statements do not include any provision in this regard, as no situations of this nature are expected to arise.

5.16 GRANTS, DONATIONS AND LEGACIES RECEIVED

In accounting for grants, donations and legacies received, Mahou San Miguel follows the criteria listed below:

a. Non-reimbursable capital grants, donations and legacies: They are carried at the fair value of the amount or asset granted, on the basis of whether they are monetary or not, and are recognised in the income statement in proportion to the amortisation charged in the period on the subsidised assets or, if appropriate, when there is a disposal or value adjustment for impairment, except for those grants received from shareholders or owners that are recognised directly in shareholders’ funds and do not constitute any income.

b. Operating grants: Grants related to income are credited to income when granted, unless their purpose is to finance losses from operations in future years, in which case they are allocated to income in those years. If grants are received to finance specific

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expenses, they are allocated to income as the related expenses are incurred.

5.17 RELATED PARTY TRANSACTIONS

Mahou San Miguel carries out all its transactions with related companies at fair market value. Additionally, the transfer prices are adequately supported, and therefore the Parent’s directors consider that there are no material risks in this regard that might give rise to significant liabilities in the future.

5.18 PARTIDAS CORRIENTES Y NO CORRIENTES

These are assets associated with the normal operating cycle, which in general

The changes in this section in 2019 and 2018 were the following:

is considered to be one year; other assets which are expected to mature, be disposed of or be realised within twelve months from the end of the reporting period; financial assets held for trading, except for financial derivatives that will be settled in a period exceeding one year; and cash and cash equivalents. Assets that do not meet these requirements are classified as non-current.

Likewise, current liabilities are those related to the Company’s usual operating cycle, financial liabilities held for trading (except financial derivatives maturing in more than one year) and, in general, all liabilities maturing or falling due in the short term. Otherwise, they are classified as non-current.

6. INTERESTS IN COMPANIES CONSOLIDATED UNDER EQUITY METHOD

2019

COMPANY BALANCE AT31-12-18

CHANGES IN SCOPE OF

CONSOLIDATION(NOTES 2.1, 2.2

AND 2.3

2019 RESULT

DIVIDENDS PAID

CONSOLIDATION ADJUSTMENT

(A)TRANSLATION ADJUSTMENT

OTHER ADJUSTMENTS

BALANCE AT 31-12-19

Intermalta, S.A. 43,096 - 4,041 (3,282) - - - 43,855

La Salve Bilbao, S.L. 474 - - - (25) - 31 480

Nomada Brewing Company, S.L. (12) - (5) - - - - (17)

Avery Brewing Company, LLC and subsidiaries 11,249 (11,249) - - - - - -

Canal Street Brewing Company, LLC 75,426 3,613 3,097 (1,685) (7,962) 1,779 (82) 74,186

130,233 (7,636) 7,133 (4,967) (7,987) 1,779 (51) 118,504

Thousands of euros

The changes in 2019 and 2018 were as follows:

2018

COMPANY BALANCE AT31-12-17

CHANGES IN SCOPE OF

CONSOLIDATION(NOTES 2.1, 2.2

AND 2.3

2018 RESULT

DIVIDENDS PAID

CONSOLIDATION ADJUSTMENT

(A)TRANSLATION ADJUSTMENT

OTHER ADJUSTMENTS

BALANCE AT 31-12-18

Intermalta, S.A. 42,228 - 3,213 (2,345) - - - 43,096

La Salve Bilbao, S.L. 460 - - - (25) - 39 474

Nomada Brewing Company, S.L. (5) - (7) - - - - (12)

Avery Brewing Company, LLC and subsidiaries

- 12,774 (1,302) - (613) 390 - 11,249

Canal Street Brewing Company, LLC

76,378 - 4,059 (1,125) (7,756) 4,029 (159) 75,426

119,061 12,774 5,963 (3,470) (8,394) 4,419 (120) 130,233

Thousands of euros

(a) Includes primarily the amortisation of underlying goodwill.

7. INTANGIBLE ASSETS

2019

BALANCE AT 31-12-18 INCREASES DECREASES TRANSFERS

INCLUSION IN SCOPE OF

CONSOLIDATION

TRANSLATION ADJUSTMENT

BALANCE AT 31-12-19

Trademarks 36,966 155 - - 43 1 37,165

Computer software 65,611 8,315 (7) - 353 3 74,275

Goodwill 162,734 - (7,052) 7,403 29,553 - 192,638

Other intangible assets 3,713 - (110) - - - 3,603

Total cost 269,024 8,740 (7,169) 7,403 29,949 4 307,681

Trademarks (21,838) (1,336) - - (7) - (23,181)

Computer software (54,618) (6,634) 1 - (334) (2) (61,587)

Goodwill (48,358) (19,308) - - (651) - (63,317)

Other intangible assets (2,701) (157) 25 - - - (2,833)

Total amortisation (127,515) (27,435) 26 - (992) (2) (155,918)

TOTAL NET 141,509 (18,965) (7,413) 7,403 28,957 2 151,763

Thousands of euros

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Goodwill at 31 December 2019 and 2018 corresponds to the following cash-generating units:

The increase in goodwill is explained mainly by the Distribution cash-generating unit. Specifically, as a result of the purchase-sale of the companies

Govadisa Distribuciones de Bebidas, S.A., Distribuciones Chamartín, S.A. and the acquisition of 51% of the shares of Voldistribución Coruña, S.L. (see Note 2.1).

Mahou San Miguel tests goodwill for impairment on an annual basis. The recoverable value is the higher of fair value, less selling costs, and value in use. The Company generally uses discounted cash flow methods to determine this value. The flows take into account past experience and represent management’s best estimate of future market performance.

In 2019 the key assumptions used for discounted cash flows of units with material good will were as follows:

2018



CONSOLIDATION


BALANCE AT 31-12-18

Trademarks 36,905 - (1) 37 25 - 36,966

Computer software 58,568 6,297 (3) 549 202 (2) 65,611

Goodwill 160,656 2,031 - - 47 - 162,734

Other intangible assets 3,442 272 (2) - 1 - 3,713

Total cost 259,571 8,600 (6) 586 275 (2) 269,024

Trademarks (20,500) (1,318) - - (20) - (21,838)

Computer software (48,706) (5,722) 1 - (190) (1) (54,618)

Goodwill (32,114) (16,217) - - (27) - (48,358)

Other intangible assets (2,593) (108) - - - - (2,701)

Total amortisation (103,913) (23,365) 1 - (237) (1) (127,515)

TOTAL NET 155,658 (14,765) (5) 586 38 (3) 141,509

Thousands of euros

Thousands of euros

GOODWILL

CARRYING AMOUNT 2019 2018

Beer 53,993 54,063

Water 55,059 56,450

Distribution 15,269 3,863

124,321 114,376

CGU

2019 WATER BEER DISTRIBUTOR

Project period (years) 5 10 5

Growth rate in perpetuity 2.2% 2.4%-8.5% 2.2%

Key variable CAPEX CAPEX CAPEX

Discount rate 4.9% 5.9% - 14.2% 4.73%

To calculate the discount rate, the Mahou San Miguel directors used a generally accepted method based on the average weighted cost of capital of listed companies with similar asset portfolios

Computer software includes the development of the IT systems plan carried out by each company in recent years.

The changes in this section of the consolidated balance sheet in 2019 and 2018, as well as the most significant

At the end of 2019 and 2018, Mahou San Miguel had fully amortised intangible assets that were still in use totalling 70,250 and 63,109 thousand euros respectively.

information affecting this heading, were as follows:

CGU

2018 WATER BEER DISTRIBUTOR

Project period (years) 5 10 5

Growth rate in perpetuity 1.7% 2.1%-6% 1.7%

Key variable CAPEX CAPEX CAPEX

Discount rate 5.2% 6.1%-14.2% 5.1%

2019



CONSOLIDATION


BALANCE AT 31-12-19

Land and buildings 370,264 5,224 - (8,246) 18,327 347 385,916

Plant and machinery 762,086 22,814 (474) 19,781 15,726 274 820,207

Other fixtures 188,808 39,276 (1,947) 1,938 696 9 228,780

Other property, plant and equipment 181,189 16,357 (6,008) 1,128 2,080 - 194,746

Fixed assets under construction 25,951 15,151 (54) (23,992) 1 (3) 17,054

Total Cost 1,528,298 98,822 (8,483) (9,391) 36,830 627 1,646,703

Land and buildings (125,758) (7,949) - 3,003 (2,483) (37) (133,224)

Plant and machinery (609,491) (33,591) 242 (1,216) (6,510) (99) (650,665)

Other fixtures (116,485) (25,870) 293 1 (418) (5) (142,484)

Other property, plant and equipment (139,517) (12,337) 4,552 - (1,670) 3 (148,969)

Total depreciation (991,251) (79,747) 5,087 1,788 (11,081) (138) (1,075,342)

Land and buildings (159) (2,588) 159 - (7,092) 32 (9,648)

Other property, plant and equipment (128) (5,412) 10 - (1,059) 67 (6,522)

Total impairment losses (287) (8,000) 169 - (8,151) 99 (16,170)

TOTAL NET 536,760 11,075 (3,227) (7,603) 17,598 588 555,191

Thousands of euros

8. PROPERTY, PLANT AND EQUIPMENT

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The increases in 2019 and 2018 correspond primarily to investments made in plant and machinery in factories, investments in fixtures at customers (recognised under “Other fixtures”) and replacement investments in the container depot included under “Other property, plant and equipment”. Also, these increases correspond to new additions to the scope of consolidation in 2019.

In 2019 Mahou San Miguel derecognised items of property, plant and equipment with a carrying amount of 3,396 thousand euros, obtaining a net loss of 1,304 thousand euros recognised under “Impairment losses on disposals of non-current assets - Gains or losses on disposals and other” in the accompanying consolidated income statement for 2019 (394 thousand euros in 2018).

The gross value of the investments depreciated using the diminishing-balance method at 31 December 2019 was 290,484 thousand euros. In 2018 it was 203,698 thousand euros.

The diminishing-balance depreciation charge for the year at 31 December 2019 amounted to 12,075 thousand euros and 254,254 thousand euros, respectively. In 2018 these amounted

to 11,746 thousand euros and 241,886 thousand euros, respectively.

The breakdown of the net carrying amount of the buildings and land relating to the properties owned by Mahou San Miguel at the end of 2019 and 2018 is as follows:

The breakdown of Mahou San Miguel’s fully depreciated items of property, plant and equipment still in use at the end of 2019 and 2018 is as follows:

2018



CONSOLIDATION


BALANCE AT 31-12-18

Land and buildings 346,797 3,098 (513) 1,434 19,581 (133) 370,264

Plant and machinery 684,052 33,009 (1,324) 14,438 32,200 (289) 762,086

Other fixtures 153,917 35,157 (1,608) 47 1,310 (15) 188,808

Other property, plant and equipment 167,578 16,634 (4,173) 171 988 (9) 181,189

Fixed assets under construction 17,702 23,252 - (16,676) 1,693 (20) 25,951

Total Cost 1,370,046 111,150 (7,618) (586) 55,772 (466) 1,528,298

Land and buildings (114,577) (7,526) 387 - (4,063) 21 (125,758)

Plant and machinery (565,316) (30,517) 937 - (14,683) 88 (609,491)

Other fixtures (92,859) (22,656) 35 - (1,009) 4 (116,485)

Other property, plant and equipment (130,534) (11,522) 3,353 - (820) 6 (139,517)

Total depreciation (903,286) (72,221) 4,712 - (20,575) 119 (991,251)

Total impairment losses - (128) - - (159) - (287)

TOTAL NET 466,760 38,801 (2,906) (586) 35,038 (347) 536,760

Thousands of euros

Thousands of euros

PROPERTY

2019 2018

Land 108,577 109,721

Buildings 135,738 134,785

244,315 244,506

Thousands of euros

VALOR CONTABLE

DESCRIPTION 2019 2018

Buildings 34,439 33,310Other assets 689,276 617,664

723,715 650,974

It is Mahou San Miguel’s policy to contract insurance policies where deemed necessary to cover possible risks to property, plant and equipment. At 31 December 2019, the Parent Company’s directors consider that there is sufficient insurance cover.

In 2019 the net cost and carrying amount of the investments revalued pursuant to Royal Decree Law 7/96 amounted to 24,339 and 8,043 thousand euros, respectively. In 2018

The changes in “Investment property” on the consolidated balance sheet in 2019 and 2018 were as follows:

they amounted to 21,688 and 5,541 thousand euros, respectively. The effect of the revaluation on the depreciation charge in 2019 was 149 thousand euros. In 2018, the effect of the revaluation on the depreciation charge was 172 thousand euros.

As indicated in Note 5.4, Mahou San Miguel revalued its property, plant and equipment pursuant to Law 16/2012, with its effect at 31 December 2019 being as follows:

DESCRIPTION INCREASE IN VALUE

DEPRECIATION CHARGE

ACCUMULATED DEPRECIATION CARRYING

Land and buildings 25,975 (1,304) (9,761) 16,214

Plant and machinery 17,011 (296) (16,436) 575

Other fixtures 69 (2) (67) 2

Other property, plant and equipment 17 - (17) -

TOTAL 43,072 (1,332) (26,281) 16,791

Thousands of euros

9. INVESTMENT PROPERTY

2019

BALANCE AT 31-12-18 INCREASES DECREASES TRANSFERS BALANCE AT

31-12-19

Land and buildings 38,273 27,547 (32,702) 1,989 35,107

Total cost 38,273 27,547 (32,702) 1,989 35,107

Buildings (1,393) (373) 2 (1,789) (3,553)

Total amortisation (1,393) (373) 2 (1,789) (3,553)

Land and buildings (798) (3,100) - - (3,898)

Total impairment losses (798) (3,100) - - (3,898)

TOTAL NET 36,082 24,074 (32,700) 200 27,656

Thousands of euros

2019

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In 2019, the increases are due mainly to fitting out certain property investments of the dominant Company. “Investment property” includes the land and buildings whose cost is expected to be recovered through the sale or lease thereof.

In 2019, the Company disposed of property investment elements for a net book value of 32,700 thousand euros (455 thousand euros at 31 December 2018). The profit on the sale of these investments is posted in the section “Impairment and gains or losses on disposals of non-current assets” in the profit and loss account for the 2019 financial year attached (loss of 18 thousand euros at 31 December 2018). This result is explained mainly by the sale of several investments as a consequence of a real-estate transaction carried out by the Company over the course of the year.

At year end, Mahou San Miguel companies did not have any purchase commitments and did not receive any rental income from investment properties.

The breakdown of the value of the buildings and land at 2019 year end is as follows:

At 2019 and 2018 year end, there were no fully depreciated investment properties.

The carrying amount in 2019 of the revalued investments pursuant to Royal Decree Law 7/96 amounted to 7 thousand euros. The carrying amount in 2018 of the revalued investments pursuant to Royal Decree Law 7/96 amounted to 2,651 thousand euros.

In 2019 and 2018 the gross value of the items of property, plant and equipment revalued pursuant to Law 16/2012, of 27 December, amounted to 18 and 3,864 thousand euros, respectively. The depreciation charge for the year and accumulated depreciation at 31 December 2019 amounted to 1 and 4 thousand euros, respectively. The depreciation charge for the year and accumulated depreciation at 31 December 2018 amounted to 1 and 4 thousand euros, respectively.

At the end of each reporting period for the investment properties, Mahou San Miguel uses valuations requested from third parties to determine the existence of impairment losses that reduce the value of the assets to below their carrying value.

2018

BALANCE AT 31-12-17 INCREASES DECREASES


CONSOLIDATIONBALANCE AT

31-12-18

Land and buildings 25,500 254 (499) 13,018 38,273

Total cost 25,500 254 (499) 13,018 38,273

Buildings (359) (54) 43 (1.023) (1,393)

Total amortisation (359) (54) 43 (1.023) (1,393)

Land and buildings (771) (49) 22 - (798)

Total impairment losses (771) (49) 22 - (798)

TOTAL NET 24,370 151 (434) 11,995 36,082

Thousands of euros

Thousands of euros

INMUEBLES

2019 2018

Terrenos 22.535 21.632

Construcciones 5.121 14.450

27.656 36.082

10.1 MAHOU SAN MIGUEL AS A LESSEE

At the end of 2019 and 2018, Mahou San Miguel had the following minimum lease payments contracted with lessors, based on the leases currently in force, without taking into account the charging of common expenses, future increases in the CPI or future contractual lease payment reviews:

The most significant operating leases held by Mahou San Miguel correspond to the lease of the warehouses in Leganés and Alovera, and to the just-in-time and bonded warehouses in Antequera, Alovera and Burgos.

Mahou San Miguel also held several operating leases, mainly for certain machinery items and buildings. In 2019 and 2018 these leases amounted to

13,671 and 11,549 thousand euros, respectively.

10.2 MAHOU SAN MIGUEL AS A LESSOR

At the end of 2019 and 2018, Mahou San Miguel had contracted to receive the following minimum lease payments, based on the leases currently in force, without taking into account the charging of common expenses, future increases in the CPI or future contractual lease payment reviews:

As a lessor, the most significant operating leases held by Mahou San Miguel correspond to the lease of various floors and garages of the building at Calle Titán 15, Madrid, where its head office is located.

10. LEASES

Thousands of euros

FACE VALUE

OPERATING LEASESMINIMUM INSTALMENTS

2019 2018

Within one year 6,354 6,545

Between one and five years 25,418 25,938

31,772 32,483

Thousands of euros

VALOR NOMINAL

OPERATING LEASES MINIMUM INSTALMENTS

2019 2018

Within one year 1,606 1,451

Between one and five years 6,423 5,821

8,029 7,272

2019 2018

Equity instruments 2,155 2,098

Loans and receivables 118,699 120,237

Prepayments and accrued income 22,141 24,626

Other financial assets 69,432 1,389

212,427 148,350

Thousands of euros

The breakdown of "Long-term financial investments" at the end of 2019 and 2018 is as follows:

11.1 LONG-TERM FINANCIAL INVESTMENTS

11. FINANCIAL INVESTMENTS (LONG-AND SHORT-TERM)

2019

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The section “Other financial assets” mainly contains the amount receivable from the sale of a series of property investments (see Note 9).

11.2 SHORT-TERM FINANCIAL INVESTMENTS

The breakdown of "Short-term financial investments" at the end of 2019 and 2018 is as follows:

The line “Deposits - Short-term investments” at 31 December 2019 includes fixed-rate and market-rate

The breakdown, by maturity, of "Loans to third parties" comprising "Long-term investments" for years 2019 and 2018 is as follows:

investments, while at the close of 2018, it was mainly composed of short-term deposits in foreign currency.

11.3 INFORMATION ON THE NATURE AND LEVEL OF RISK OF FINANCIAL INSTRUMENTS

Financial risk management is delegated to the Finance Department of the Parent Company, Mahou, S.A., which has established the mechanisms required to control exposure to fluctuations in the significant risks, within the parameters approved by the Board of Directors, by appropriately identifying, measuring and managing the risks and ensuring achievement of the targets in the strategic plan, controlling volatility on the basis of the following premises:

a) Credit risk• No significant concentration of

risk with third parties will exist.

2019

2021 2022 20232024 AND

SUBSEQUENT YEARS

TOTAL

Loans and receivables 22,749 29,550 29,445 29,955 118,699

Prepayments and accrued income 11,508 6,515 3,334 784 22,141

Other financial assets 67,736 - - 1,696 69,432

108,993 36,065 32,779 32,435 210,272

2018

2020 2021 20222023 AND

SUBSEQUENT YEARS

TOTAL

Loans and receivables 30,105 30,100 29,898 30,134 120,237

Prepayments and accrued income 13,263 7,578 2,994 791 24,626

43,368 37,678 32,892 30,925 144,863

Thousands of euros

Thousands of euros

2019 2018

Loans and receivables 29,457 32,530

Derivatives - 15

Deposits - short-term investments

33,260 222,477

Other financial assets 605 485

63,322 255,507

Thousands of euros

• Requiring sufficient collateral to cover credit risks with third parties.

• Recognising allowances for credit risk with third parties in relation to the probability of default.

b) Liquidity risk• Holding cash and cash

equivalents in financial institutions with high credit ratings.

• Holding and maintaining levels of cash appropriate to the level of operations.

• Maintaining a low level of indebtedness in proportion to the volume of operations and EBITDA.

• Placing cash surpluses in accordance with the criteria of utmost security, solvency and assurance.

c) Market risk• Hedging exposure to interest

rate risk on the basis of market performance at all times.

• Hedging exposure to exchange risk according to the performance of currencies at all times, with the euro being the priority currency for any transaction.

Additionally, the Procurement Department, together with the Finance Department, will control exposure to market risk in relation to the volatility of commodity prices on the basis of market performance at all times.

At 31 December 2019, Mahou San Miguel had recognised a provision for customer credit and commercial transaction risk in the amount of 58,899 thousand euros (62,074 thousand euros in 2018). In 2019 a provision in the amount of 10,338 thousand euros (6,527 thousand in 2018) was recognised.

12. DERIVATIVE FINANCIAL INSTRUMENTS

Mahou San Miguel uses derivative financial instruments to hedge the risks to which its future cash flows are exposed. Within the framework of these operations, Mahou San Miguel has

contracted certain financial hedging instruments.

The breakdown of the fair value of these hedging instruments is as follows:

2019

CLASSIFICATION TYPE AMOUNT

CONTRACTED IN CURRENCY

MATURITY DATE(*)

FAIR VALUE

ASSETS LIABILITIES

Exchange rate hedge GBP sale 5,000 2020 - 203

- 203

Thousands of euros

(*) The hedging instrument expires in the year in which the cash flows affecting the income statement will foreseeably occur.

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At 2019 year end, the share capital of the Parent Company amounted to 14,028 thousand euros, represented by 2,334,152 fully subscribed and paid up shares of 6.01 euros par value each, issued in two series called A and B,

The breakdown of “Reserves” is as follows:

which carry the same rights and obligations.

At the end of 2019, the shareholders of the Parent Company were the following:

2018

CLASSIFICATION TYPE AMOUNT

CONTRACTED IN CURRENCY

MATURITY DATE(*)

FAIR VALUE

ASSETS LIABILITIES

Exchange rate hedge GBP sale 5,290 2019 15 -

15 -

Thousands of euros

(*) The hedging instrument expires in the year in which the cash flows affecting the income statement will foreseeably occur.

13. EQUITY AND SHAREHOLDERS´EQUITY

NO. OF SHARES % INTEREST

Las Tejoneras, S.L. 1,167,076. 50.00

Sdad. Gala de Inversiones, S.L. 633,800 27.15

I.P.L. GALA INTERNACIONAL, S.L. 529,576 22.69

Other Shareholders 3,700 0.16

2,334,152 100

2019 2018

Legal reserve 2,806 2,806

Revaluation Reserve Law 16/2012 21,533 21,533

Reserve for retired capital 7,007 7,007

Merger reserves (56,244) (56,244)

Capitalisation reserve 42,564 34,390

Voluntary reserves 1,329,601 1,268,874

Restricted voluntary reserves 3,274 3,274

Total reserves of the Parent Company 1,350,541 1,281,640

Reserves of subsidiaries 25,028 15,739

Reserves in companies consolidated under the equity method 14,917 20,452

Total consolidated reserves 39,945 36,191

Total Reserves 1,390,486 1,317,831

Thousands of euros

13.1 LEGAL RESERVE

Under the Consolidated Spanish Limited Liability Companies Law, the Company must transfer 10% of net profit for each year to the legal reserve until the balance of this reserve reaches at least 20% of the share capital. The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased share capital amount. Except for the foregoing purpose, and provided it does not exceed 20% of the share capital, this reserve may only be used to offset losses when there are no sufficient other reserves available for this purpose.

At the end of 2019 and 2018, the balance of this reserve had reached the legally required minimum at the Parent Company.

13.2 RESERVE FOR RETIRED CAPITAL

In accordance with Article 335 of the Spanish Limited Liability Companies Law, this reserve of 7,007 thousand euros may only be used if the same requirements as those for the reduction of share capital are met.

13.3 REVALUATION RESERVE

The surplus resulting from the revaluation of property plant and equipment by the Parent Company at 1 January 2013, pursuant to Law 16/2012, of 27 December, adopting various tax measures aimed at consolidating public finances and promoting economic activity (see Notes 8 and 9), was credited to “Revaluation Reserve” for 21,533 thousand euros, net of the related tax (5%) (1,133 thousand euros).

From the date on which the tax authorities have reviewed and approved the balance of this account, or once the three-year period for review has expired, this balance can be used, free of tax, to offset accounting losses and to increase share capital. From 1 January 2023 (after ten years have passed from

the date of the balance sheet in which the revaluations were recognised), the balance of the “Revaluation Reserve” may be allocated to “Unrestricted Reserves”, although it may only be distributed when the revalued assets have been fully depreciated, transferred or derecognised.

If this balance were used in a manner other than that provided for in Law 16/2012, it would be subject to tax.

13.4 OTHER RESERVES - RESERVE FOR GOODWILL

Until the year ended 31 December 2015 and in accordance with the Spanish Limited Liability Companies Law, when distributing the profit for each year, an appropriation of at least 5% of the goodwill recognised on the asset side of the balance sheet had to be made to a restricted reserve for that goodwill. If a company did not report a profit or the amount was insufficient, unrestricted reserves were used for this purpose

In accordance with amendments to the Spanish Limited Liability Companies Law, approved by Spanish Audit Law 22/2015, of 20 July, as from the years starting at 1 January 2016, the Company will discontinue contributions to this reserve for goodwill. Its amount must be reclassified to voluntary reserves and will be available starting that year in the amount that exceeds the goodwill recognised on the assets side of the balance sheet. The amount reclassified to voluntary reserves in 2016 amounted to EUR 3,274 thousand euros. At 31 December 2019 and 2018, the reserve was unavailable for distribution.

13.5 MERGER RESERVES

These reserves originate in the merger by absorption by Mahou, S.A., in 2014, of San Miguel Fábricas de Cerveza y Malta, S.A.U., Grupo Alhambra Alimentaria, S.A., Cervezas Alhambra, S.A.U., and Mahou MSM Comercializador, S.A.

2019

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13.6 CAPITALISATION RESERVES

In 2019 and 2018, the Parent recognised a capitalisation reserve for the purpose of reducing the tax base by 10% of the amount of the increase in its equity, as permitted under Article 25 of Law 27/2014 on Corporate Income Tax.

This increase in equity must be maintained for five years from the end of the tax period to which the reduction corresponds, unless the organisation incurs accounting losses.

The amount recognised in 2019 in capitalisation reserves amounted to 42,564 thousand euros. This reserve will be unavailable for distribution during the five-year period.

13.7 MINORITY INTERESTS

The changes in 2019 and 2018 of items of Mahou San Miguel minority interests were as follows:

2019

BALANCE AT 31-12-18


CONSOLIDATION

SHARE OF PROFIT OR LOSS

FOR THE YEAROTHER CHANGES BALANCE AT

31-12-19

Distribución Balear Almacenaje y Logística, S.A. 3,007 - 339 (2) 3,344

La Salve Comercializadora, S.L. 455 - (144) - 311

Basque Experience Gastro, S.L.U. (27) - 1 - (26)

Distribución Bebidas Murcia, S.L. (96) - (6) 102 -

Aguas del valle de la Orotava, S.L. 8,566 - 1,127 112 9,805

Nirgua Solar, S.L.U. 367 - 164 (112) 419

Fuente Azul Compañía de Aguas, S.L. 561 - 46 - 607

Gold Lemon, S.L. - 238 (33) - 205

Voldistribución Coruña, S.L. - 2,850 (232) - 2,618

Avery Brewing Company - 6,669 (855) - 5,814

12,833 9,757 407 100 23,097

2018

BALANCE AT 31-12-17


CONSOLIDATION

SHARE OF PROFIT OR LOSS

FOR THE YEAROTHER CHANGES BALANCE AT

31-12-18

Distribución Balear Almacenaje y Logística, S.A. 2,600 - 422 (15) 3,007

La Salve Comercializadora, S.L. 534 - (79) - 455

Cermadis, S.L.U. (503) - - 503 -

Basque Experience Gastro, S.L.U. - - (27) - (27)

Distribución Bebidas Murcia, S.L. - 13 (109) - (96)

Aguas del valle de la Orotava, S.L. - 8,191 375 - 8,566

Nirgua Solar, S.L.U. - 261 106 - 367

Fuente Azul Compañía de Aguas, S.L. - 521 40 - 561

2,631 8,986 728 488 12,833

Thousands of euros

Thousands of euros

“Grants” includes non-refundable capital grants received and gas emission allowances.

The grant provided in 2013 by the Institute for Energy Diversification and Saving (IDAE) is intended to support the financing of investment projects in energy saving and efficiency.

The most salient information in this section of the consolidated balance sheet is as follows:

At 31 December 2019 and 2018, all obligations associated with these grants received by Mahou San Miguel were being met.

14. GRANTS

2019

AMOUNT AMOUNT

GRANTEDBALANCE AT

31-12-18 ADDITION APPLICATION /DECREASE

BALANCE AT 31-12-19

Institute for Energy Diversification and Saving 12,312 2,515 - (731) 1,784

Junta Castilla y León 90 56 - (16) 40

Plan 2I - Innovation and investment 53 53 (4) 49

Lehiatu Berria Programme 196 196 (15) 181

Gas emission allowances - 1 559 (113) 447

Total 12,651 2,572 808 (879) 2,501

Tax effect - (642) (62) 191 (513)

Total Grants 12,651 1,930 746 (688) 1,988

2018

AMOUNT AMOUNT

GRANTEDBALANCE AT

31-12-17 ADDITION APPLICATION /DECREASE

BALANCE AT 31-12-18

Institute for Energy Diversification and Saving 12,312 3,304 129 (918) 2,515

Junta Castilla y León 90 82 - (26) 56

Gas emission allowances - 27 552 (578) 1

Total 12,402 3,413 681 (1,522) 2,572

Tax effect - (846) (32) 236 (642)

Total Grants 12,402 2,567 649 (1,286) 1,930

Thousands of euros

Thousands of euros

2019

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15.1 PROVISIONS

The breakdown of the provisions on the consolidated balance sheet at the end

15.1.1 EMPLOYEE BENEFIT OBLIGATIONSThe Mahou San Miguel companies have acquired various obligations to their employees.

The balance of “Employee benefit obligations”, in the amount of 10,294 thousand euros (12,067 thousand euros at 31 December 2018), is to meet the overall obligations to employees, which include covering early retirement pension obligations (see note 5.14).

15.1.2 CONTINGENCIES AND CHARGES“Provisions for contingencies and charges” includes mainly provisions to meet probable or certain contingencies in relation to tax assessments that are being appealed by Mahou San Miguel, as well as other

of 2019 and 2018, as well as the main changes recorded during the year, are as follows:

contingencies related to the business. A provision was recorded for the expense recognised for these provisions in the external services section. These provisions were recognised in accordance with the accounting principle of prudence in valuation. The balances of the provisions recognised in prior years were adjusted based on the most recent available information (see Note 5.12).

15.2 GUARANTEE COMMITMENTS TO THIRD PARTIES AND OTHER CONTINGENT LIABILITIES

In 2019, the guarantees received from licensees and other debtors as security for Mahou San Miguel’s commercial operations

15. PROVISIONS AND CONTINGENCIES

2019

BALANCE AT 31-12-18 ALLOCATIONS APPLICATIONS REVERSALS TRANSLATION

ADJUSTMENTBALANCE AT

31-12-19

Employee benefit obligations 12,067 3,333 (4,705) (400) (1) 10,294

Contingencies and charges 33,985 49,859 (9,163) (144) (9) 74,528

Total 46,052 53,192 (13,868) (544) (10) 84,822

2018

BALANCE AT 31-12-17 ALLOCATIONS APPLICATIONS REVERSALS TRANSLATION

ADJUSTMENTBALANCE AT

31-12-18

Employee benefit obligations 6,706 8,169 (2,600) (200) (8) 12,067

Contingencies and charges 19,978 17,258 (3,149) (90) (12) 33,985

Total 26,684 25,427 (5,749) (290) (20) 46,052

Thousands of euros

Thousands of euros

amounted to 288,687 thousand euros (272,349 thousand euros in 2018).

The guarantees received from banking institutions in 2019 and 2018 by Mahou San Miguel suppliers as security for the proper functioning of machinery purchased from third parties amounted to 4,007 thousand euros (2,262 thousand euros in 2018).

16.1 NON-CURRENT FINANCIAL LIABILITIES

The breakdown of "Non-current payables" at the end of 2019 and 2018 is as follows:

“Debts and payables” includes loans granted by the Centre for Industrial and Technological Development to finance projects related to nutritional health. No interest rate was set for these loans and they are repaid to the extent that certain pre-established conditions are met.

“Long-term guarantees” includes the amounts billed to customers for container deposits. To the extent that the amount of this income remains the same from the beginning of the commercial relationships with customers until the eventual settlement of the balances, the deposit amounts are classified as non-current.

The guarantees provided by Mahou San Miguel to third parties, mainly to the Economic-Administrative Tribunals for the tax assessments under appeal, amounted to 9,329 thousand euros (9,329 thousand euros in 2018), and no losses are expected to arise for Mahou San Miguel for which provisions have not been recognised.

16. NON-CURRENT AND CURRENT LIABILITIES

2019 2018

Debts and payables 4,029 4,576

Long-term guarantees 55,145 53,656

Debts with financial institutions (Note 16.3)

18,821 16,014

Finance lease creditors

204 -

78,199 74,246

Thousands of euros

16.2 CURRENT FINANCIAL LIABILITIES

The breakdown of "Short-term payables" at the end of 2019 and 2018 is as follows:

16.3 DEBTS WITH FINANCIAL INSTITUTIONS

The breakdown of this section, both in its current and non-current portions, is as follows:

For the majority of the financial debts, the fair values are not materially

2019 2018

Debts with financial institutions (Note 16.3)

2,835 2,450

Debts and payables 221 -

Derivatives 203 -


3,376 2,450

Thousands of euros

2019 2018

Debts with financial institutions s/t

2,835 2,450

Debts with financial institutions l/t

18,821 16,014

21,656 18,464

Thousands of euros

2019

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different from their carrying amounts, given that the interest rates for these debts are close to current market rates or the debts are short-term in nature.

Mahou San Miguel, since 1 January 2010, has filed consolidated tax returns. The head of the tax group is Mahou, S.A., and the subsidiaries are Cervezas Reina 2000, S.A.U., Taisa Logistics 1960, S.A.U., Cervecera Independiente, S.A.U., Alhambra Distribuidora Meridional, S.L.U., Cervezas Alhambra, S.L.U., Penibética de Cervezas y Bebidas, S.L.U., Aguas de Solán de Cabras, S.A.U., Cervezas Mahou, S.L.U., Cervezas San Miguel, S.L.U., Espacios Cervecera, S.L.U. and Distribución Bebidas Murcia, S.L. In the 2019 financial year, Cermadis, S.L.U., Voldistribución, S.L.U., Los Rechazos, S.L., Aguas del Valle de la Orotava, S.L., Nirgua Solar, S.L.U, Espacios Experiencias Cerveceras, S.L.U., La Cervecista, S.L.U., Madrid Beer Experiences, S.L.U., Barcelona Beer Experiences, S.L.U. and

Variable interest loans accrue interest at a reference interest rate plus a differential agreed upon with the corresponding financial institutions under normal market conditions.

Loans with financial institutions are subscribed in euros and dollars.

The maturity schedule for the principle of the debt with financial institutions is as follows:

Estilosmas, S.L.U. were added to the tax group.

Additionally, the following Mahou San Miguel companies are under the special regime of the group of Value Added Tax companies: Mahou, S.A., Cervezas Mahou, S.L.U., Cervezas San Miguel, S.L.U., Cervezas Alhambra S.L.U., Penibética de Cervezas, S.L.U., Taisa Logistics 1960, S.A.U. Aguas de Solán de Cabras, S.A.U., Cervecera Independiente, S.A.U, Alhambra Distribuidora Meridional, S.L.U. and Cermadis, S.L.U., the latter having been added in 2019.

17.1 CURRENT TAX RECEIVABLES AND PAYABLES

The breakdown of current balances with public authorities is as follows:

At 31 December 2019, Aguas del Valle de la Orotava, S.L. has a series of mortgage loans for buildings and property.

17. PUBLIC AUTHORITIES AND TAX SITUATION

2019

2020 2021 2022 2023 2024 and subsequent years TOTAL

Aguas del Valle de la Orotava, S.L. 1,497 1,157 1,112 847 4,817 9,430

Fuente Azul Compañía de Aguas, S.L. 141 115 46 - - 302

Nirgua Solar, S.L. 725 669 692 717 3,576 6,379

Avery Brewing Company L.L.C. 277 272 280 288 4,223 5,350

Voldistribución Coruña, S.L. 195 - - - - 195

Total 2,835 2,213 2,130 1,852 12,626 21,656

Thousands of euros

2019

BALANCE PAYABLE

BALANCE RECEIVABLE

VAT 2,630 28,634

Canary Islands General Tax (IGIC) 668 379

Tax refunds 1,378 -

Personal Income Tax - 6,874

Corporate Income Tax 14,752

Special Taxes - 25,263

Accrued social security taxes - 3,926

Other items 41 85

TOTAL 4,717 79,913

2018

BALANCE PAYABLE

BALANCE RECEIVABLE

VAT 2,762 12,429

Canary Islands General Tax (IGIC) 197 5

Tax refunds 281 -

Personal Income Tax - 4,478

Corporate Income Tax - 5,825

Special Taxes - 24,131

Accrued social security taxes - 3,768

Other items 1,468 156

TOTAL 4,708 50,792

Thousands of euros

Thousands of euros

2019

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17.2 BREAKDOWN OF THE CORPORATE INCOME TAX EXPENSE OF MAHOU SAN MIGUEL

2019 2018

Parent Company 57,281 45,452

Subsidiaries:

Cervezas Mahou, S.L.U. 3,625 1,000

Cervezas Reina 2000, S.A.U. (238) (897)

Cervecera Independiente, S.A. (410) (409)

Taisa Logistics 1960, S.A.U. 884 678

Distribución Balear Almacenaje y Logística, S.A. 328 409

Alhambra Distribuidora Meridional, S.L.U. 263 262

Cervezas San Miguel, S.L.U. 1,385 1,223

Penibética de Cervezas y Bebidas, S.L.U. 148 50

Distribución Bebidas Murcia, S.L.U. (163) (182)

Cervezas Alhambra, S.L.U. 115 148

Aguas de Solán de Cabras, S.A.U. (1,312) (550)

Spain’s Best Beers Inc. - 15

Mahou Andina, S.p.A. - (768)

Espacios Cervecera, S.L.U. (144) (524)

La Salve Comercializadora, S.L. (202) (222)

Cermadis, S.L.U. (77) (146)

Basque Experience Gastro, S.L. 1 (39)

Los Rechazos, S.L. (6) (10)

Aguas del valle de la Orotava, S.L. (1,317) 505

Nirgua Solar, S.L.U. 30 36

Voldistribución, S.L.U. (45) -

Espacios Experiencias Cerveceras, S.L.U. (73) -

La Cervecista, S.L.U. (76) -

Madrid Beer Experiences, S.L.U. (14) -

Barcelona Beer Experiences, S.L.U. (8) -

Estilosmas, S.L.U. (74) -

Gold Lemon, S.L. (73) -

Voldistribución Coruña, S.L. (171) -

Distribuciones Galivesa, S.L.U. (32) -

Distribuciones Caravesa, S.L.U. 128 -

Govadisa Distribuciones de Bebidas, S.A. 51 -

Distribuciones Chamartín, S.A. 47 -

Consolidation Adjustments (158) (35)

59,695 46,001

Thousands of euros

17.3 RECONCILIATION OF ACCOUNTING PROFIT TO TAXABLE PROFIT

The reconciliation of the accounting profit and the corporate tax base in 2019 and 2018 is as follows:

2019

INCREASES DECREASES TOTAL

Pre-tax accounting profit 192,202Permanent differences 23,699

Fines and penalties 115 - Donations 2.917 - Exemption to eliminate double taxation - (3,282) Capitalisation reserve - (7,541) Consolidation adjustments 25,527 - Eps revenue - (267) Goodwill 6,159 - Others 85 (14)

Temporary differences 52,806 Arising in the year: 62,263

Pensions 4,077 Provisions 58,333 Others (147)

Arising in prior years: (9,457) Pensions (908) Provisions (3,382) Fixed assets 2,316 (5,449) Merger asset revaluation depreciation 411 (4,393) Others 2,002 (54)

Tax base 101,942 (25,437) 268,707

OFFSET OF RECOGNISED TAX LOSSES (1,273)

2018


Pre-tax accounting profit 170,419Permanent differences

Fines and penalties 755 - 755Donations 3,470 - 3,470

Capitalisation reserve - (8,296) (8,296)Exemption for double taxation - (3,744) (3,744)Canary Islands investment reserve - (800) (800)Goodwill 5,865 - 5,865

Consolidation adjustments 7,093 - 7,093Others 388 (14) 374

Temporary differences Arising in the year:

Pensions 4,041 - 4,041 Provisions 16,142 - 16,142 Fixed assets 5 - 5

Arising in prior years: Pensions - (1,250) (1,250) Provisions - (1,407) (1,407) Fixed assets 2,908 (10,115) (7,207) Others 1,998 (55) 1,943

Tax base 187,403

OFFSET OF RECOGNISED TAX LOSSES (150)

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2019

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17.4 TAX RECOGNISED IN EQUITY

2019


Deferred tax liabilities:Arising in the year

Grants, donations and legacies received (62) 191 129

Revaluation of other financial assets - 50 50Arising in prior years:

Revaluation of other financial assets - 4 4

TOTAL TAX RECOGNISED DIRECTLY IN EQUITY (62) 245 183

2018


Deferred tax liabilities:Arising in the year

Grants, donations and legacies received (32) 236 204

Revaluation of other financial assets (4) - (4)Arising in prior years:

Revaluation of other financial assets (1,474) 102 (1,372)

TOTAL TAX RECOGNISED DIRECTLY IN EQUITY (1,510) 339 (1,172)

Thousands of euros

Thousands of euros

17.5 RECONCILIATION BETWEEN ACCOUNTING PROFIT AND CORPORATE INCOME TAX EXPENSE

The reconciliation between accounting profit and corporate income tax expense in 2019 and 2018 is as follows:

The breakdown of the tax recognised directly in equity is as follows:

2019

Pre-tax accounting profit 192,202

Tax charge at 25% 48,051

Effect of permanent differences 5,925

Differences due to tax rate (*) (29)

Deductions (2,275)

Offset of tax losses (56)

Adjustments to prior year corporate income tax (174)

Other adjustments (-) 8,253

TOTAL CORPORATE INCOME TAX EXPENSE 59,695

Thousands of euros

(*) Corresponds to those generated by La Salve Comercializadora, S.L and Basque Experience Gastro, S.L. for maintaining their activity in the Basque Country.

(-) This second mainly contains the accounting impact of the unwinding of an unrecoverable deferred asset.

Among other deductions, the Deductions item reflects those corresponding

to sponsorship of events of special interest.

2018

Pre-tax accounting profit 170,419Tax charge at 25% 42,605Effect of permanent differences 1,179Differences due to tax rate (*) (25)Deductions (2,937)Adjustments to prior year corporate income tax (227)Other adjustments (-) 5,406

Total corporate income tax expense 46,001

Thousands of euros

17.6 BREAKDOWN OF TOTAL INCOME TAX EXPENSE

17.7 DEFERRED TAX ASSETS RECOGNISED

The breakdown of the corporate income tax expense is as follows:

The breakdown of the balance of this heading at the end of 2019 and 2018 is as follows:

2019 2018

Current tax: From continuing operations 67,177 46,851

Deductions (2,275) (2,937)

Differences due to tax rate (8) 299

Offset of tax losses (56) -Deferred tax:

From continuing operations (13,202) (3,067)

Differences due to tax rate - (324)

Offset of tax losses (263) -Prior year’s and other income tax adjustments

Deferred tax for continuing operations 7,910 (134)Current tax for continuing operations 169 (93)

Other adjustments 243 5,406

Total corporate income tax expense 59,695 46,001

Thousands of euros

2019 2018

Temporary differences:Pensions 13,664 12,845Fixed assets 27,331 37,848

Provisions for contingencies and liability 26,236 12,337Deductions pending and other 7,456 7,433Tax loss carryforwards 6,638 6,177

Others 1,718 1,626

Total deferred tax assets 83,043 78,266

Thousands of euros

2019

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The deferred tax assets indicated above were recognised on the consolidated balance sheet because the Parent Company’s directors considered that, based on their best estimate of the Group’s future earnings, it is probable that these assets will be recovered.

Of the total of tax losses in the amount of 27,004 thousand euros, 90 million euros are not recognised, with 72 thousand corresponding to Los Rechazos, S.L. and 18 thousand euros to Nomada Brewing Company, S.L.

Likewise, as a result of the merger by absorption of its subsidiary San Miguel, Fábricas de Cerveza y Malta, S.A. in 2014, the Parent Company has unused tax assets totalling 7,304 thousand euros, according to the following breakdown:

At 31 December 2019, the Mahou San Miguel companies had tax loss carryforwards totalling 27,004 thousand euros (25,055 thousand in 2018), according to the following breakdown:

YEAR INCURRED

Aguas de Solan de Cabras,

S.A.U.

Cervezas Reina 2000, S.A.U.

Distribución Balear A.L,

S.A.

La Salve Comercializadora,

S.L.Cermadis,

S.L.U.

Basque Experience

Gastro, S.L.U.

Los Rechazos,

S.L.Rest of

Companies TOTAL

2001 1,753 - - - - - - - 1,753

2002 2,556 - - - - - - - 2,556

2003 368 - - - - - - - 368

2004 58 1,170 - - - - - - 1,228

2005 40 - - - - - - - 40

2006 104 - - - - - - - 104

2007 57 - - - - - - - 57

2008 5,102 - - - - - - - 5,102

2009 4,027 - - - - - 202(*) - 4,229

2010 3,815 - - - - - - - 3,815

2011 - - - - - - - - -

2012 - - - - - - - - -

2013 - - 51 - - - 76(*) - 127

2014 - - - - - - - 45 45

2015 - - - 269 1,933 - - 180 2,382

2016 - - - 123 370 - 9(*) 418 920

2017 - - - 475 371 - 1(*) 331 1,178

2018 - - - 521 278 141 41 524 1,505

2019 - - - 763 - - - 832 1,595

TOTAL 17,880 1,170 51 2,151 2,952 141 329 2,330 27,004

Thousands of euros

(*) Note that these tax loss carryforwards are not recognised on the consolidated balance sheet.

Thousands of euros

YEAR ARISING AMOUNT

2005 913

2006 1,158

2007 359

2008 2,435

2009 2,439

7,304

17.8 DEFERRED TAX LIABILITIES

The breakdown of the balance of this heading at the end of 2019 and 2018 is as follows:

17.9 YEARS OPEN TO INSPECTION

In March 2013, the Parent was notified of the commencement of tax audits of corporate income tax from 2008 to 2011, Value Added Tax, personal income tax withholdings and prepayments of employees and professionals, withholdings on income from movable capital and real estate and for non-resident income tax withholdings from 2009 to 2012, and also of the annual statement of transactions from 2010 to 2012. The tax audit of the corporate income tax for 2010 and 2011 encompassed the consolidated tax group headed in those years by Mahou S.A., formed on 1 January 2010, and the tax audit of VAT encompassed the VAT group formed on 1 January 2009, also headed by Mahou, S.A.

In 2014 the aforementioned tax audits were concluded and the assessments were signed on a contested basis for each of the items open for review.

With regard to the tax assessments signed on a contested basis relating to the corporate income tax (2008 to 2011) and the personal income tax (2009 to 2012), which were settled in full in 2014 and appealed in the same year to the Central Economic-Administrative Tribunal (TEAC), on 25 May 2018 and 16 July 2018, respectively, a ruling unfavourable to the interests of the company was handed down. In respect thereof, the

company not being in agreement with same or sharing the criteria applied by the Tribunal, a proceeding was filed to pursue the corresponding economic-administrative claims before the National Appellate Court, on 17 July and 18 September 2018, respectively. At the date of preparation of this annual report, no ruling had been handed down in relation to these claims.

With regard to the tax assessments signed on a contested basis relating to VAT (years 2009 to 2012), also settled in full in 2014 and appealed before the Central Economic-Administrative Tribunal, in July 2015 the company received notification of a ruling by the Tribunal against the company's appeal. In November 2015 the company filed an administrative appeal before the National Appellate Court, which on 4 September 2017 ruled in favour of the company. On 13 October 2017 the state attorney filed a preliminary notice of appeal with the Supreme Court. Ultimately, the state attorney’s failure to appear at the appeal resulted in return of the case to the National Appellate Court for enforcement of the ruling. On 14 September 2018, the Technical Office of the Tax Authority has repaid to the company, with the corresponding interest on arrears, the amounts originally paid to the authority in this respect.

As regards San Miguel Fábricas de Cervezas y Malta, S.A. (company absorbed by Mahou, S.A., as indicated in Note 1), in 2013 it was notified of the commencement of tax audits of the corporate income tax for 2008 and 2009, withholdings on income from movable capital and on real estate, non-resident income tax withholdings, the annual statement of transactions and declaration of intra-Community supplies and acquisitions of goods for 2009, and of personal income tax withholdings on account of earned and professional income from 2009 to 2012. The income tax audits for 2008 and 2009 encompassed the consolidated tax group, headed in those years by San Miguel Fábricas de Cerveza y Malta, S.A., which was dissolved on 1 January 2010.

2019 2018

Fixed assets 2,161 2,793

Goodwill 1,844 2,004

Others 2,262 2,669

TOTAL DEFERRED TAX LIABILITIES 6,267 7,466

Thousands of euros

2019

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The tax assessments signed on a contested basis relating to the corporate income tax (2008 and 2009) were settled in full by San Miguel Fábricas de Cerveza y Malta, S.A. in 2014 and appealed in the same year at the TEAC. On 8 March 2018 a ruling against the interests of the company was received. In this regard, on 4 May 2018, the Company filed a claim before the National Appellate Court. When these financial statements were prepared, no ruling had been handed down.

The tax audit initiated in 2014 of excise taxes on alcohol and beer for the periods 2011 to 2012 of the absorbed company San Miguel Fabricas de Cervezas y Malta, S.A. was concluded in April 2015 with the signing on a contested basis of the tax assessment. The Company settled the amount arising from the tax assessment in full in May 2015, having filed an economic-administrative appeal at the Central Economic Administrative Tribunal (TEAC). An unfavourable ruling for the interests of the Company was received. In respect thereof, the company not being in agreement with same or sharing the criteria applied by the Tribunal, in 2019 it filed an economic-administrative claim to the National Appellate Court. At the close of these accounts, no ruling had been handed down.

On July 10 2019, the Tax and Customs Control office of the Spanish tax authorities (AEAT) notified the company of the opening of review procedures relative to the Tax on Alcohol and Alcoholic Beverages and Tax on Beer for the 2016 financial year. When these accounts were prepared, both actions were in-progress.

On 17 March 2017 corporate income tax audits commenced of the Company and subsidiaries of Tax Group 612/09 and of VAT Group 513/08, whose head is Mahou, S.A., for the years 2012 to 2015, as well as of VAT for the years 2013 to 2015. Likewise, tax audits commenced of the Company regarding withholdings and payments on account of earned income, income from movable capital and on real estate, non-resident income tax withholdings,

annual statement of transactions and declaration of intra-community supplies and acquisitions for the years 2013 to 2015. On 6 September 2018, uncontested tax assessments, with no contingencies of any kind, were signed regarding withholdings and payments on account of earned income, income from movable capital and on real estate, non-resident income tax withholdings, annual statement of transactions and declaration of intra-community supplies and acquisitions for the years 2013 to 2015. As regards the assessments relating to the corporate income tax and those relating to VAT, which were carried out on the head of Tax Group 612/09 and VAT Group 513/08, which is Mahou S.A., two assessments were signed on a contested basis. In 2019, economic-administrative claims were filed with the TEAC in relation to both proceedings, which, when these accounts were prepared, were pending resolution.

The Parent's directors and advisers consider that the final outcome of these proceedings will not give rise to any contingencies for which provisions have not been recognised on the accompanying consolidated balance sheet at 31 December 2019.

In general, the years open for tax inspection for the various societies that form Mahou San Miguel are the following:

17.10 CODE OF GOOD TAX PRACTICES

Mahou, S.A. is adhered to the Code of Good Tax Practices promoted by the Large Companies Forum and the Spanish State Tax Agency, and complies with the provisions thereof.

FINANCIAL YEAR

Corporate Income Tax 2016 to 2018

IRPF 2016 to 2019

VAT 2016 to 2019

IGIC 2016 to 2019

Special Taxes 2016 to 2019

18.1 REVENUE

Substantially all sales were made in Spanish territory, while our international business represented 4% of total sales in 2019 (4% of the total in 2018).

18.2 PROCUREMENTS

The breakdown of “Cost of goods held for resale sold" and “Cost of raw

The breakdown of purchases made by Mahou San Miguel in 2019 and 2018, by origin, is as follows:

Similarly, revenue may be analysed by business unit as follows:

materials and other consumables used" in 2019 and 2018 is as follows:

18. INCOME AND EXPENSES

UNIT 2019 2018

Beer 87.44 87.56

Water 7.63 7.43

Logistics services 4.93 5.01

100 100

%

2019 2018

Cost of goods held for resale sold:

Purchases 50,064 31.925

Difference between opening and closing inventories (6,971) 605

43,093 32,530

Cost of raw materials and other consumables used:

Purchases 363,265 323.868

Difference between opening and closing inventories (8,286) 3,683

354,979 327,551

Thousands of euros

2019 2018

Spain 383,058 332,064

EU Countries 23,792 22,374

Imports 6,479 1,355

413,329 355,793

Thousands of euros

2019

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18.4 FINANCE COSTS AND FINANCE INCOME

Substantially all the Group’s finance income and finance costs, with the exception of dividends, are calculated using the effective interest method.

18.6 COMPENSATION PAID TO THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT

In 2019 and 2018, the Parent Company’s Board of Directors and senior executives received total remuneration of 3,982 thousand and 3,900 thousand euros, respectively. All the senior executives are also members of the Board of Directors.

In 2019 and 2018, the company had 12 directors: six legal-entity directors (represented by three men and three women) and six natural-person directors (three men and three women).

No advances or loans have been granted to members of the Board of Directors. Likewise, no obligations assumed on the

18.5 RELATED PARTY TRANSACTIONS

The breakdown of the transactions with related parties in 2019 and 2018 is as follows:

behalf of the board members existed at year end.

Mahou, S.A., the Parent of Mahou San Miguel, contracted a third-party civil liability insurance policy to cover the directors of the Mahou San Miguel companies for damage caused by acts or omissions. The total premium paid in connection with this policy in 2019 amounted to 34 thousand euros (37 thousand at 31 December 2018).

18.7 INFORMATION REGARDING SITUATIONS OF CONFLICT OF INTEREST INVOLVING THE DIRECTORS

Pursuant to Article 229, paragraph 3, of the Spanish Limited Liability Companies

18.3 EMPLOYEE BENEFIT COSTS

The breakdown of “Employee benefit costs” in 2019 and 2018 is as follows:

EMPLOYEE BENEFIT EXPENSES 2019 2018

Employers social security costs 43,458 39,359

Pension plan contribution 9,068 8,903

Other employee benefit costs 13,685 12,503

66,211 60,765

Thousands of euros

ASSOCIATED COMPANIES 2019 2018

Dividends received 4,967 3,470Provision of services - 23Purchases 47,819 (45,116)Services received (148) (177)Royalty expenses (119) (111)Financial income 431 -

Thousands of euros

Law, at the end of 2019 neither the members of the Board of Directors of the Parent nor persons related to them as defined in the Spanish Limited Liability Companies Law had notified

Mahou San Miguel, in line with its environmental policy, has been undertaking various actions and projects related to management in this area.

Over the course of the 2019 and 2018 reporting periods, Mahou San Miguel incurred environmental costs totalling 2,478 thousand and 2,217 thousand euros, respectively.

20.1 EMPLOYEES

The average number of employees at Mahou San Miguel, by professional category, was as follows:

At 31 December 2019 and 2018, the Group had 3,529 and 3,177 employees, respectively, the breakdown by gender being as follows:

the other members of the Board of Directors of any direct or indirect conflict with the interests of Mahou San Miguel.

With respect to any possible environmental contingencies that might arise, Mahou San Miguel considers that these are sufficiently covered by the third-party civil liability insurance policies and by the provisions recognised relating to liability.

The average number of employees at the Group with a disability equal to or greater than 33% in 2019 and 2018 was as follows:

20.2 FEES PAID TO AUDITORS

In 2019, the fees for financial audit and other services provided by the auditor of the Mahou San Miguel's consolidated and separate financial statements, PricewaterhouseCoopers Auditores, S.L., and by firms in the PwC network, were as follows:

19. INFORMATION ON THE ENVIRONMENT

20. OTHER INFORMATION

2019 2018

Executives and middle managers

601 528

Line, administrative and retail personnel

1,538 1,529

Manual workers 1,333 1,093

3,472 3,150

2019 2018

Men 2,721 2,473

Women 808 704

3,529 3,177

2019 2018

Executives and middle managers

3 4

Line, administrative and retail personnel

13 10

Manual workers 31 30

47 44

2019

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In 2019, fees for services rendered by other auditors amounted to 55 thousand euros.

The figures shown in the table above in relation to payments to suppliers correspond to suppliers that by nature are trade creditors for the supply of goods and services and, therefore, they include the figures relating to “Trade and Other Payables” under “Current Liabilities” on the accompanying consolidated balance sheet.

“Average period of payment to suppliers” expresses the payment time or delay in payment of trade payables. This “Average period of payment to suppliers” is calculated as a quotient in which the numerator is the sum of the ratio of transactions paid multiplied by the total amount of payments, plus the ratio of outstanding payment transactions multiplied by the total amount of outstanding payments, and

20.3 DISCLOSURES ON THE AVERAGE PERIOD OF PAYMENT TO SUPPLIERS.

The information required by Additional Provision 3 is set out below: “Disclosure requirement” of Law 15/2010, of 5 July:

the denominator is the sum of the total amount of payments made, plus outstanding payments

The ratio of paid transactions is calculated as the quotient in which the numerator is the sum of the products corresponding to the amounts paid multiplied by the number of days until payment (difference between the calendar days elapsed from the end of the maximum legal period of payment to effective payment of the transaction), and the denominator is the total amount paid.

Likewise, the ratio of outstanding payment transactions corresponds to the quotient in which the numerator is the sum of the products corresponding to the outstanding payments, multiplied by the number of days during which payment

2019 2018

Audit services 392 349

Audit services of the PwC network 32 32

Other services 32 15

Audit-related services 456 396

Other services 401 105

Total professional services 857 501

Thousands of euros

31/12/2019 31/12/2018

Average period of payment to suppliers 56 59

Ratio transactions paid 59 61

Ratio transactions pending payment 39 40

AMOUNT 2019

AMOUNT 2018

Total payments made 882,502 810,054

Total payments pending 132,690 101,988

Thousands of euros

Thousands of euros

is outstanding (difference between the calendar days elapsed from the end of the maximum legal period of payment to the closing date of the consolidated financial statements or annual accounts, as applicable), and the denominator is the total outstanding payment amount.

The maximum period of payment applicable to the Parent in 2019 was 30 days under Law 11/2013, of 26 July, (unless the requirements established therein, which enable the aforementioned maximum period of payment to be extended to 60 days, are satisfied).

Mahou San Miguel identifies its operating segments on the basis of internal reports on the components of Mahou San Miguel, which are reviewed, discussed and assessed regularly by the Board of Directors as the authority ultimately responsible for taking

decisions and for allocating funds to the segments and evaluating their performance.

The breakdown of Mahou San Miguel’s financial information by operating segment in 2019 is as follows:

21. SEGMENT REPORTING

2019

BEER AND OTHER WATER LOGISTICS

SERVICESCONSOLIDATION

ADJUSTMENTSGRUPO

MSM

Revenue 1,532,650 106,889 69,074 (308,165) 1,400,448

Consumables and changes in inventories (606,206) (34,764) (56,771) 304,774 (392,967)

Other operating income 22,423 870 151 (8,815) 14,629

Personnel expenses (255,254) (13,795) (3,482) 1,548 (270,983)

Other operating expenses, amortisations and others (492242) (60,415) (5,429) (5,090) (563,176)

Operating profit 201,371 (1,215) 3,543 (15,748) 187,951

Financial result (18,517) (182) 15 23,789 5,105

Results of companies accounted for using the equity method - - - (854) (854)

Pre-tax profit 182,854 (1,397) 3,558 7,187 192,202

Tax on profits (61,446) 2,604 (884) 31 (59,695)

Consolidated profit for the year 121,408 1,207 2,674 7,218 132,507

Result attributed to the Parent Company 121,408 1,207 2,674 6,811 132,100

Profit attributed to Minority Interests - - - 407 407

Thousands of euros

2019

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CHANGES TO CONSOLIDATION SCOPE

In 2019, the inclusion of Voldistribución Coruña, S.L. and subsidiaries, Distribuciones Chamartín, S.A., Govadisa Distribuciones de

Bebidas, S.A., Gold Lemon, S.L. and Avery Brewing Company in the consolidated financial statements gave rise, upon first-time consolidation, to the following impacts, after having carried out the different purchase price allocations:

The breakdown of Mahou San Miguel’s financial information by operating segment during 2018 is as follows:

22. BUSINESS COMBINATION

2018

BEER AND OTHER WATER LOGISTICS

SERVICESCONSOLIDATION

ADJUSTMENTSGRUPO

MSM

Revenue 1,405,093 96,433 65,090 (267,988) 1,298,628

Consumables and changes in inventories (542,303) (30,959) (53,563) 266,696 (360,129)

Other operating income 20,908 917 323 (8,812) 13,336

Personnel expenses (230,905) (11,613) (3,423) 26 (245,915)

Other operating expenses, amortisations and others (490,076) (53,948) (5,747) 8,501 (541,270)

Operating profit 162,717 830 2,680 (1,577) 164,650

Financial result 6,249 968 31 952 8,200

Results of companies accounted for using the equity method - - - (2,431) (2,431)

Pre-tax profit 168,966 1,798 2,711 (3,056) 170,419

Tax on profits (45,373) 19 (678) 31 (46,001)

Consolidated profit for the year 123,593 1,817 2,033 (3,025) 124,418

Result attributed to the Parent Company 123,593 1,817 2,033 (3,753) 123,690

Profit attributed to Minority Interests - - - 728 728

Thousands of euros

Voldistribución Coruña and subsidiaries

Distribuciones Chamartín, S.A.

Govadisa Distribuciones,

S.A.Gold Lemon,

S.L.Avery Brewing Company and

subsidiariesTOTAL

Fixed assets 6,277 343 27 18 15,907 22,572

Other non-current assets 15 342 83 3 255 698

Net deferred tax assets 240 20 - 328 - 588

Current assets 6,837 1,888 2,697 407 4,324 16,153

Non-current liabilities (106) (30) (6) - (5,205) (5,347)

Current liabilities (7,920) (1,360) (2,055) (60) (3,386) (14,781)

Separate net assets and liabilities

5,343 1,203 746 696 11,895 19,883

Fair value 2,966 1,139 651 569 8,711 14,036

Parent investment 6,170 3,100 2,100 1,482 24,709 37,561

Goodwill 3,204 1,961 1,449 913 15,998 23,525

Minority interests 2,850 - - 238 6,669 9,757

Thousands of euros

Additionally, in relation to Los Rechazos, S.L. and subsidiaries, in 2019 goodwill in the amount of 7,403 million euros was recognised over a period of one year from its acquisition and inclusion in the global scope of consolidation as a result of new

information having been obtained regarding facts and circumstances that existed on the date of acquisition. Total goodwill recognised for this company amounted to 7,754 thousand euros at 31 December 2019, compared to 351 thousand euros the previous year.

On 14 January 2020, Mahou S.A., through its subsidiary Spain’s Best Beers Inc., acquired 58.72% of the shares of the company Canal Street Brewing Co., L.L.C., attaining an ownership percentage of 90%.

Since December 2019, COVID-19, a new strain of the Coronavirus, has spread from China to other countries, including Spain. This event significantly affects economic activity in Spain and worldwide and, as a result, the Company’s operations and financial

results. The extent to which Coronavirus will impact our results will depend on future developments that cannot be reliably predicted, including the actions to contain, treat and mitigate the impact of the disease on the economies of the affected countries, among others.

Apart from this, from year end to the date of preparation of these consolidated financial statements of Mahou San Miguel, there have been no subsequent events that could have a significant effect on them.

23. SUBSEQUENT EVENTS

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57COMPANY PERFORMANCE IN 2019 AND OUTLOOK FOR 2020In 2019, Mahou, S.A. and its subsidiaries have continued the positive trend started in 2014, supported by the diversification projects undertaken by the Company and by the sound performance of the Spanish economy, which grew by 2%, driving consumption and thereby contributing to the positive results of the beer and water business in Spain.

The robust health of our brands, promoted by innovation, premiumisation and generation of new experiences around our products, made it possible for our revenue to grow by 7.8% compared to 2018, to 1,400 million euros from 1,299 million euros in 2017.

Internationally, we continued to diversify our geographic risk, gaining value in the majority of countries where we are present,

which enabled us to offset negative trends in certain developing markets affected by instabilities inherent to those regions.

Additionally, the procurement management strategy and the efficiency projects undertaken by the Company have led to significant savings, which have contributed to improving our margins.

All of this with the goal of leading development of the brewing sector, which has made it possible for us to start growing again in terms of profit before tax (12.8%).

The Company continued to implement its investment plan at our ten breweries and four water bottling plans, both in Spain and abroad. Likewise, it undertook important logistics optimisation projects that are making us more efficient, productive, sustainable and, therefore, more competitive.

MAHOU, S.A.AND SUBSIDIARIESMANAGEMENT REPORT FOR THE YEAR ENDED 31 DECEMBER 2019

Our business success would not be possible without our most important asset: a great team of people who breathe life into our products. Accordingly, at 31 December 2019, we surpassed 3,500 employees, consolidating our commitment to stable, quality employment, to which we contribute year after year with new hires, adding value to the Spanish economy.

We want to be even closer to our customers, and thus our diversification strategy has led us to continue increasing our weight in our shared distribution and in our craft and international business through the acquisition of a majority interest in Avery Brewing Co., L.L.C. and subsidiaries. In addition, we are aware of consumers’ growing interest in local and craft beer, which fits in perfectly with our philosophy of innovation and product quality. In 2019, the minority interest in the American brewer Canal Street Brewing Co. was increased, continuing with the promotion of the craft segment and our international presence.

In 2020, we will continue following consumption trends, and we will have to be agile and disruptive to respond to market demands. We will also continue to promote any and all initiatives aimed at contributing to developing our business in collaboration with our customers in the off-trade and on-trade sectors, especially initiatives related to innovation, premiumisation and creating a consumption and purchasing experience that adds value, thereby fulfilling our commitment to sustainability and adapting to the local reality. To do so, we will invest heavily in the market with a long-term vision and, therefore, do not expect to see an improvement over this year’s results.

The main risks facing the Company are those inherent to its activity.

RESEARCH AND DEVELOPMENT ACTIVITIESIn continuance of its policy of prioritising research and development,

the Company continues to make significant efforts to improve its industrial processes and launch new products.

OWN ACTIONSAt 31 December 2019, the Company held no treasury shares.

FINANCIAL RISK MANAGEMENTManagement of financial risk is coordinated by the Finance Department of Mahou, S.A., which has established the necessary mechanisms to control exposure to interest rate and exchange rate fluctuations, as well as credit and liquidity risks.

INFORMATION ON THE ENVIRONMENTThe Company, in line with its environmental policy, has been undertaking various actions and projects related to management in this area.

With respect to any possible environmental contingencies that might arise, Mahou San Miguel considers that these are sufficiently covered by the third-party civil liability insurance policies and by the provisions recognised relating to liability.

AVERAGE PERIOD OF PAYMENT TO SUPPLIERSThe average period of payment to suppliers is 56 days. Mahou, S.A. has a policy of observing the maximum period of payment established by law and has been adapting this policy to the cases where it exceeds those periods due to historic agreements. Furthermore, measures are being taken to reduce administrative processing times and strengthen electronic and technological payment methods.

NON-FINANCIAL INFORMATION STATEMENTThe non-financial information statement is presented in a separate report, which can be found at the following URL: www.mahou-sanmiguel.com.

SUBSEQUENT EVENTSAt the date of preparation of these consolidated accounts, Mahou San

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Miguel intends to increase its stake in Founders until a controlling interest is obtained.

Since December 2019, COVID-19, a new strain of the Coronavirus, has spread from China to other countries, including Spain. This event significantly affects economic activity in Spain and worldwide and, as a result, the Company’s operations and financial results. The extent to which Coronavirus will impact our results will depend on future developments that cannot be reliably predicted, including the actions to contain, treat and mitigate the impact of the disease on the economies of the affected countries, among others.

Apart from this, from year end to the date of preparation of these consolidated financial statements of Mahou San Miguel, there have been no subsequent events that could have a significant effect on them.

As in previous years, we wish to express our appreciation for the excellent work done by the Company’s entire team and for their contributions to achieving all we have accomplished this year.

BOARD OF DIRECTORS

Madrid, 26 March 2020

AUDIT REPORT

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PricewaterhouseCoopers Auditores, S.L., Torre PwC, Pº de la Castellana 259 B, 28046 Madrid, España Tel.: +34 915 684 400 / +34 902 021 111, Fax: +34 915 685 400, www.pwc.es 1 R. M. Madrid, hoja 87.250-1, folio 75, tomo 9.267, libro 8.054, sección 3ª Inscrita en el R.O.A.C. con el número S0242 - CIF: B-79 031290

Informe de auditoría de cuentas anuales consolidadas emitido por un auditor independiente

A los accionistas de Mahou, S.A.: Opinión Hemos auditado las cuentas anuales consolidadas de Mahou, S.A. (la Sociedad dominante) y sus sociedades dependientes, (Mahou San Miguel o el Grupo), que comprenden el balance a 31 de diciembre de 2019, la cuenta de pérdidas y ganancias, el estado de cambios en el patrimonio neto, el estado de flujos de efectivo y la memoria, todos ellos consolidados, correspondientes al ejercicio terminado en dicha fecha. En nuestra opinión, las cuentas anuales consolidadas adjuntas expresan, en todos los aspectos significativos, la imagen fiel del patrimonio y de la situación financiera del Grupo a 31 de diciembre de 2019, así como de sus resultados y flujos de efectivo, todos ellos consolidados, correspondientes al ejercicio terminado en dicha fecha, de conformidad con el marco normativo de información financiera que resulta de aplicación (que se identifica en la nota 3 de la memoria consolidada) y, en particular, con los principios y criterios contables contenidos en el mismo. Fundamento de la opinión Hemos llevado a cabo nuestra auditoría de conformidad con la normativa reguladora de la actividad de auditoría de cuentas vigente en España. Nuestras responsabilidades de acuerdo con dichas normas se describen más adelante en la sección Responsabilidades del auditor en relación con la auditoría de las cuentas anuales consolidadas de nuestro informe. Somos independientes del Grupo de conformidad con los requerimientos de ética, incluidos los de independencia, que son aplicables a nuestra auditoría de las cuentas anuales consolidadas en España según lo exigido por la normativa reguladora de la actividad de auditoría de cuentas. En este sentido, no hemos prestado servicios distintos a los de la auditoría de cuentas ni han concurrido situaciones o circunstancias que, de acuerdo con lo establecido en la citada normativa reguladora, hayan afectado a la necesaria independencia de modo que se haya visto comprometida. Consideramos que la evidencia de auditoría que hemos obtenido proporciona una base suficiente y adecuada para nuestra opinión. Aspectos más relevantes de la auditoría Los aspectos más relevantes de la auditoría son aquellos que, según nuestro juicio profesional, han sido considerados como los riesgos de incorrección material más significativos en nuestra auditoría de las cuentas anuales consolidadas del periodo actual. Estos riesgos han sido tratados en el contexto de nuestra auditoría de las cuentas anuales consolidadas en su conjunto, y en la formación de nuestra opinión sobre éstas, y no expresamos una opinión por separado sobre esos riesgos.

Mahou, S.A. y sociedades dependientes

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Aspectos más relevantes de la auditoría Modo en el que se han tratado en la auditoría Reconocimiento de ingresos Tal y como se indica en la Nota 5.11 de la memoria consolidada adjunta, Mahou San Miguel reconoce los ingresos por venta de bienes y prestación de servicios cuando el importe se puede valorar con fiabilidad, es probable que los beneficios económicos futuros vayan a fluir a Mahou San Miguel y se cumplen las condiciones específicas para cada una de las actividades. Las ventas de bienes se reconocen cuando se han entregado y no existe ninguna obligación pendiente de cumplirse que pueda afectar a la aceptación de los mismos. Los ingresos por prestación de servicios se reconocen considerando el grado de realización de la prestación a la fecha del balance consolidado, siempre y cuando el resultado de la transacción pueda ser estimado con fiabilidad. Nos centramos en el área de reconocimiento de ingresos debido a la relevancia que esta tiene en las cuentas anuales consolidadas de Mahou San Miguel.

Hemos evaluado la adecuada aplicación de la política de reconocimiento de ingresos, así como el diseño e implementación y la eficacia operativa de los controles relevantes que soportan los ingresos. Adicionalmente, hemos obtenido confirmación de una muestra de facturas del ejercicio para una selección de clientes y hemos comprobado, también para una muestra, el correcto registro del ingreso del ejercicio y el corte de operaciones. Asimismo, hemos analizado una muestra de asientos contables y otros ajustes realizados para la preparación de las cuentas anuales consolidadas, seleccionados según determinadas características. El resultado de nuestros procedimientos es consistente con el registro contable aplicado por Mahou San Miguel y la información incluida en las cuentas anuales consolidadas relativa a esta área.

Recuperación del fondo de comercio Mahou San Miguel tiene registrados 124.321 miles de euros a 31 de diciembre de 2019 en concepto de fondo de comercio. Tal y como se indica en las Notas 5.2 y 7 de la memoria consolidada adjunta, Mahou San Miguel lleva a cabo la evaluación, al menos anualmente, de las posibles correcciones valorativas por deterioro. La metodología llevada a cabo consiste en comparar el valor en libros con el importe recuperable, entendiendo éste como el mayor importe entre su valor razonable menos los costes de venta y su valor en uso, para lo cual Mahou San Miguel utiliza métodos de descuento de flujos de efectivo para determinar dicho valor. La valoración de los fondos de comercio requiere la aplicación de juicios y estimaciones significativas por parte de la dirección de Mahou San Miguel, tanto en la determinación del método de valoración como en la consideración de las hipótesis clave establecidas.

Nuestros procedimientos de auditoría han incluido, entre otros, la revisión del proceso implantado por Mahou San Miguel para la evaluación del potencial deterioro en el fondo de comercio. Hemos evaluado la metodología de valoración de descuento de flujos de efectivo utilizada, revisado las proyecciones, contrastado las hipótesis significativas y analizado las áreas de juicio críticas. Para este análisis nos hemos apoyado en expertos en valoraciones de nuestra firma, que han evaluado tanto las tasas de descuento como las tasas de crecimiento para el cálculo del valor actual de los flujos, para aquellos casos que hemos considerado necesarios.

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Aspectos más relevantes de la auditoría Modo en el que se han tratado en la auditoría Desviaciones en estas variables y estimaciones de la dirección pueden determinar variaciones importantes en los cálculos realizados y, por tanto, en el análisis de recuperación del fondo de comercio. Este hecho motiva que esta área sea de atención significativa para nuestra auditoría.

Como resultado de las pruebas y análisis realizados, consideramos que las conclusiones de Mahou San Miguel sobre el deterioro a reconocer y la información revelada en las cuentas anuales consolidadas adjuntas, están adecuadamente soportadas y son coherentes con la información disponible.

Otra información: Informe de gestión consolidado La otra información comprende exclusivamente el informe de gestión consolidado del ejercicio 2019, cuya formulación es responsabilidad de los administradores de la Sociedad dominante y no forma parte integrante de las cuentas anuales consolidadas. Nuestra opinión de auditoría sobre las cuentas anuales consolidadas no cubre el informe de gestión consolidado. Nuestra responsabilidad sobre la información contenida en el informe de gestión consolidado se encuentra definida en la normativa reguladora de la actividad de auditoría de cuentas, que establece dos niveles diferenciados sobre la misma: a) Un nivel específico que resulta de aplicación al estado de la información no financiera, que

consiste en comprobar únicamente que la citada información se ha facilitado en el informe de gestión consolidado, o en su caso, que se ha incorporado en éste la referencia correspondiente al informe separado sobre la información no financiera en la forma prevista en la normativa, y en caso contrario, a informar sobre ello.

b) Un nivel general aplicable al resto de la información incluida en el informe de gestión

consolidado, que consiste en evaluar e informar sobre la concordancia de la citada información con las cuentas anuales consolidadas, a partir del conocimiento de Mahou San Miguel obtenido en la realización de la auditoría de las citadas cuentas y sin incluir información distinta de la obtenida como evidencia durante la misma, así como evaluar e informar de si el contenido y presentación de esta parte del informe de gestión consolidado son conformes a la normativa que resulta de aplicación. Si, basándonos en el trabajo que hemos realizado, concluimos que existen incorrecciones materiales, estamos obligados a informar de ello.

Sobre la base del trabajo realizado, según lo descrito anteriormente, hemos comprobado que la información no financiera mencionada en el apartado a) anterior se presenta en el informe separado “Estado de la información no financiera” de Mahou San Miguel al cual se incluye referencia en el informe de gestión consolidado, y que el resto de la información que contiene el informe de gestión consolidado concuerda con la de las cuentas anuales consolidadas del ejercicio 2019 y su contenido y presentación son conformes a la normativa que resulta de aplicación. Responsabilidad de los administradores de la Sociedad dominante en relación con las cuentas anuales consolidadas Los administradores de la Sociedad dominante son responsables de formular las cuentas anuales consolidadas adjuntas, de forma que expresen la imagen fiel del patrimonio, de la situación financiera y de los resultados consolidados del Grupo, de conformidad con el marco normativo de información financiera aplicable al Grupo en España, y del control interno que consideren necesario para permitir la preparación de cuentas anuales consolidadas libres de incorrección material, debida a fraude o error.


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En la preparación de las cuentas anuales consolidadas, los administradores de la Sociedad dominante son responsables de la valoración de la capacidad del Grupo para continuar como empresa en funcionamiento, revelando, según corresponda, las cuestiones relacionadas con empresa en funcionamiento y utilizando el principio contable de empresa en funcionamiento excepto si los citados administradores tienen intención de liquidar el Grupo o de cesar sus operaciones, o bien no exista otra alternativa realista. Responsabilidades del auditor en relación con la auditoría de las cuentas anuales consolidadas Nuestros objetivos son obtener una seguridad razonable de que las cuentas anuales consolidadas en su conjunto están libres de incorrección material, debida a fraude o error, y emitir un informe de auditoría que contiene nuestra opinión. Seguridad razonable es un alto grado de seguridad, pero no garantiza que una auditoría realizada de conformidad con la normativa reguladora de la actividad de auditoría de cuentas vigente en España siempre detecte una incorrección material cuando existe. Las incorrecciones pueden deberse a fraude o error y se consideran materiales si, individualmente o de forma agregada, puede preverse razonablemente que influyan en las decisiones económicas que los usuarios toman basándose en las cuentas anuales consolidadas. Como parte de una auditoría de conformidad con la normativa reguladora de la actividad de auditoría de cuentas vigente en España, aplicamos nuestro juicio profesional y mantenemos una actitud de escepticismo profesional durante toda la auditoría. También: ● Identificamos y valoramos los riesgos de incorrección material en las cuentas anuales

consolidadas, debida a fraude o error, diseñamos y aplicamos procedimientos de auditoría para responder a dichos riesgos y obtenemos evidencia de auditoría suficiente y adecuada para proporcionar una base para nuestra opinión. El riesgo de no detectar una incorrección material debida a fraude es más elevado que en el caso de una incorrección material debida a error, ya que el fraude puede implicar colusión, falsificación, omisiones deliberadas, manifestaciones intencionadamente erróneas, o la elusión del control interno.

● Obtenemos conocimiento del control interno relevante para la auditoría con el fin de diseñar

procedimientos de auditoría que sean adecuados en función de las circunstancias, y no con la finalidad de expresar una opinión sobre la eficacia del control interno del Grupo.

● Evaluamos si las políticas contables aplicadas son adecuadas y la razonabilidad de las

estimaciones contables y la correspondiente información revelada por los administradores de la Sociedad dominante.

● Concluimos sobre si es adecuada la utilización, por los administradores de la Sociedad

dominante, del principio contable de empresa en funcionamiento y basándonos en la evidencia de auditoría obtenida, concluimos sobre si existe o no una incertidumbre material relacionada con hechos o con condiciones que pueden generar dudas significativas sobre la capacidad del Grupo para continuar como empresa en funcionamiento. Si concluimos que existe una incertidumbre material, se requiere que llamemos la atención en nuestro informe de auditoría sobre la correspondiente información revelada en las cuentas anuales consolidadas o, si dichas revelaciones no son adecuadas, que expresemos una opinión modificada. Nuestras conclusiones se basan en la evidencia de auditoría obtenida hasta la fecha de nuestro informe de auditoría. Sin embargo, los hechos o condiciones futuros pueden ser la causa de que el Grupo deje de ser una empresa en funcionamiento.

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● Evaluamos la presentación global, la estructura y el contenido de las cuentas anuales consolidadas, incluida la información revelada, y si las cuentas anuales consolidadas representan las transacciones y hechos subyacentes de un modo que logran expresar la imagen fiel.

● Obtenemos evidencia suficiente y adecuada en relación con la información financiera de las

entidades o actividades empresariales dentro del Grupo para expresar una opinión sobre las cuentas anuales consolidadas. Somos responsables de la dirección, supervisión y realización de la auditoría del Grupo. Somos los únicos responsables de nuestra opinión de auditoría.

Nos comunicamos con los administradores de la Sociedad dominante en relación con, entre otras cuestiones, el alcance y el momento de realización de la auditoría planificados y los hallazgos significativos de la auditoría, así como cualquier deficiencia significativa del control interno que identificamos en el transcurso de la auditoría. Entre los riesgos significativos que han sido objeto de comunicación a los administradores de la Sociedad dominante, determinamos los que han sido de la mayor significatividad en la auditoría de las cuentas anuales consolidadas del periodo actual y que son, en consecuencia, los riesgos considerados más significativos. Describimos esos riesgos en nuestro informe de auditoría salvo que las disposiciones legales o reglamentarias prohíban revelar públicamente la cuestión. PricewaterhouseCoopers Auditores, S.L. (S0242)

Álvaro Moral Atienza (21428) 7 de abril de 2020

Este informe se corresponde con el sello distintivo nº 01/20/06564 emitido por el Instituto de Censores Jurados de Cuentas de España

Calle Titán, 15 | 28045, Madrid. España | 915 269 100www.mahou-sanmiguel.com

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THE STRENGTH OF OUR COMMITMENT€¦ · And on this path, the 3,529 people who make up this Company have continued to be the essence of our project and have been at the centre of all