CELEBRATING 180 YEARS - Ginebra San Miguel

1 180 YEARSCELEBRATINGGINEBRA SAN Miguel REPORT2014Fa ade of the Distileria Licorea de Ayala, c. 1900sProducer of first Ginebra San Miguel , 1834 to 1924 Damajuana1834 - 1930sSan Miguel CorporationPhilippines largest diversified conglomerateFa ade of La Tonde a, Inc., c. 1950sContinued the tradition of excellence, 1924 to 1987 FrascoOriginal version of Cuatro Cantos, 1930s3rd and 6th Floors, San Miguel Properties Centre7 St. Francis Street, Mandaluyong City1550 Metro Manila, SUBSIDIARY OFSAN Miguel CORPORATIONGINEBRA SAN Miguel Annual ReportCelebrating 180 years1 FINANCIAL HIGHLIGHTSIn Thousands Pesos, Except Per Share Data1 Exclusive of discontinued operations2 Based on the number of shares outstanding at the end of each year FINANCIALHI GHLIGHTSGINEBRA SAN Miguel Annual Report TABLE OFCONTENTSMESSAGE TOSTOCKHOLDERS PORTFOLIO OFBEVERAGES180 YEARS OFGINEBRA SAN MIGUELDISTILLING THE FILIPINO SPIRITA RAY OF HOPE12481014 FINANCIALHIGHLIGHTS BOARD OF DIRECTORS16 CORPORATE GOVERNANCE1722 REPORT OF THE AUDIT COMMITTEE23 FINANCIAL STATEMENTSGINEBRA SAN Miguel Annual ReportCelebrating 180 years3 MESSAGE TO STOCKHOLDERSMESSAGE TOSTOCKHOLDERSG inebra San Miguel Inc.

2 Finally turned the corner in time for our 180th anniversary. Our anniversary was not a mere milestone, but a significant achievement. In 2014, we regained our footing and reported billion in revenues, a 9% increase from the previous year. Income from continuing operations before income tax rose by about billion, to break even this year. With reduced variable costs, gross profit margin rose to 27% the highest in more than five YEARS . Overall, this remarkable recovery is the result of programs we implemented to strengthen both the company s top- and bottomline. Last year, we paid homage to the hardworking Filipino through the thematic campaign, Ganado sa Buhay . It depicted the ordinary Filipino as a hero who presses on despite everyday challenges to give his family a better future.

3 The material was aired on TV and radio, and was supported by on-ground and promotional activities such as Ginumanfest, which is now on its third nationwide installment. These efforts helped the company reassert its position in different parts of the country, especially in North Luzon where we re-established our dominance. In South Luzon, we continued to encroach on the competition s market and are primed to reclaim leadership. Shares in the Visayas, on the other hand, nearly doubled as modest gains were realized in the GMA and Mindanao areas. To mitigate the effects of higher taxes arising from the ad valorem portion of the excise tax, we sought to further improve efficiencies in our operation. We worked to extract higher yield from distillery, driving alcohol costs down 3% from the previous year.

4 Vigilance in monitoring sources of used bottles was also key, allowing us to maintain container cost improved operating results, a net loss of about 766 million was realized due to the recognition of deferred income taxes incurred in 2011 and 2012. Still, our path to recovery is campaign resonated extremely well with consumers, increasing volumes for the Ginebra San Miguel brand by as much as 9%, and thereby pushing total liquor volumes by 4% from prior brand strengthening efforts were also reinforced by our year-long celebration of Ginebra San Miguel s milestone anniversary, which doubled as an effective promotional strategy for our products. Furthermore, our anniversary theme, Kabahagi ng Sambayanang Pilipino , underscored our brand s value as an integral part of the everyday celebrations and social brands also contributed to growth, improving our volumes in key regions.

5 GSM Blue Flavors, a recent addition to the GSM Blue family, was launched via availability and consumption drives mainly in the Eastern part of the Visayas. Vino Kulafu, the country s dominant Chinese Wine brand, meanwhile continued to perform well in Mindanao and other parts of the Visayas. We also worked on enhancing our distribution capability and coverage by entering into partnership with new, roving wholesalers who served to extend our reach nationwide. This year, we are taking bolder steps to outdo, or at the very least, replicate our 2014 performance. We will lay the groundwork to sustaining our volume growth by protecting and further growing our market share, particularly in the gin category. We will also continue to introduce new, exciting brands to meet changing consumer Light will be our main brandy offering.

6 Since introducing it to the market early this year, consumers have rated it highly for its superior taste, aroma and smoothness. We are also introducing innovations to the GSM Blue brand to strengthen its appeal among young expect competition to further intensify as fresh rounds of tax hikes lie on the horizon and trade borders fall with the ASEAN integration. As such, we will be focusing our efforts on aligning more closely with our customers and consumers, focusing our product portfolio and further growing our markets. Related to this, we have also divested our stake in the non-alcoholic beverage business and have transferred this to San Miguel Brewery Inc. This will allow us to concentrate on our core strength liquor. Fellow stockholders, our achievements this year would not have been possible without your support, and we thank you for your continued commitment to our growth.

7 We d also like to thank our Board, for their trust and steady guidance, and our employees, for their unwavering dedication. As we close the book on 2014 and look to the future, it s worth being reminded that our anniversary was not a mere milestone, but a significant achievement. After all, very few companies in the Philippines today can say they have lasted half as long as ours. And while we have always been proud of our brand s heritage and how generations of Filipinos have identified with its credos, we know too that longevity is borne out of an ability to constantly recalibrate, transform, and adapt to the changing markets and the changing times. We believe we have succeeded in doing exactly that these past few YEARS . With one of our more robust YEARS behind us, and with the next phase of our growth strategy already in place, Ginebra San Miguel is back on familiar ground, determined to deliver on the promise of a new start.

8 EDUARDO M. COJUANGCO, & CEOBERNARD D. MARQUEZP residentThe effects of higher excise taxes, shifting consumer preference, and greater competition in the hard liquor market, have all contributed to YEARS of successive operating losses for our company. We have brands with strong market shares in numerous categories, but after a thorough assessment of our business and recent performance, we made a conscious effort to focus on winning back the market of our flagship, Ginebra San Miguel . LIQUORVOLUMESGINEBRASAN MIGUELVOLUMES NET REVENUES UP BYincreasefrom prior yearincreasefrom prior year4%9% Ginebra SAN Miguel Annual Report4 CELEBRATING 180 years5 Ginebra SAN MIGUELA ngelito (250ml)Round (350ml)Frasquito (350ml)Frasco (700ml)* AlcoholicPORTFOLIO OFBEVERAGESPORTFOLIO OF BEVERAGES6 Ginebra SAN Miguel Annual ReportCelebrating 180 years7 PORTFOLIO OF BEVERAGESGRAN MATADOR BRANDY SOLERA Solo (350ml)Long Neck (700ml)Litro (1000ml)GRAN MATADOR LIGHTSolo (350ml)Long Neck (700ml)Litro (1000ml)* AlcoholicANTONOV VODKA (700ml)ANTONOV VODKA MIXED DRINKIce (330ml)DON ENRIQUE MIXKILA (700ml)* BLUESolo (350ml)Long Neck (700ml)Litro (1000ml) BLUE FLAVORSSolo (350ml)Long Neck (700ml)MojitoBrown Coffee* AlcoholicVINO KULAFUC lassic (350ml)Long Neck (700ml)

9 * AlcoholicTONDE A MANILA RUMGold, Silver, Dark(700ml)For Export only* AlcoholicMAGNOLIA HEALTHTEARGB (250ml)Apple, Lemon, and StrawberryMAGNOLIA PUREWATERPET (355ml, 500ml, 1000ml)BERRI (NATURAL FRUIT JUICES)Apple, Dark Grape, Orange, Tomato, Cranberry (1000ml)Apple, Orange, Multi V, Dark Grape,Pink Guava (2400ml)MAGNOLIA FRUIT DRINKRGB (250ml)Grape and OrangePowdered (35g, 400g)Lemonade, Calamansi, Orange-Mango and Valencia Orange Powdered (35g)Apple and LemonMango (400g)For Export only * Non-AlcoholicPREMIUM GIN(750ml)* AlcoholicGINEBRA SAN MIGUELC elebrating 180 years9180 YEARS OF Ginebra SAN MIGUEL8 Ginebra SAN Miguel Annual ReportGinebra San Miguel is the Philippines pioneering San Miguel de Ayala, as it was previously known, was first produced on March 10, 1834 by the Distileria Licorea de Ayala, a distillery located along Echague Street in Quiapo, Manila, owned by compatriots Antonio de Ayala and Domingo Roxas.

10 The brand, already an award winner as early as the late 1900s, was a drink for the wealthy popular among both peninsulares and 1864, Ginebra s popularity had trickled down to the working-class. To suit the palate of the masa, Ginebra San Miguel was made stronger and more flavorful. It became an alternative to the colonial version of moonshine, Vino de its strong alcohol content and soothing flavor, Ginebra San Miguel gained new adherents. By the the turn of the 20th century, the brand became the most sought-after liquor drink by Filipinos and the new colonizers, the Americans. In 1924, Filipino-Chinese businessman Don Carlos Palanca Sr., owner of La Tonde a distillery, acquired the distillery from the Ayalas. Palanca s success was such that he became known as the Alcohol King ; La Tonde a became the country s leading distiller with Ginebra San Miguel as its flagship liquor August 1, 1987, San Miguel Corporation (SMC), the country s largest brewer with interests in food, packaging, and other businesses, acquired La Tonde a Distillery Inc (LTDI) in a bid to expand its beverage business portfolio.