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Chairman's statement

"Thanks to sustained and careful investment over many years, we’ve enjoyed a third successive year of outstanding results."

Dear Shareholder
The 12 months to 31 March 2005 were a third successive year of outstanding financial results. An excellent operating performance combined with favourable currency rates resulted in adjusted earnings of US$1,251 million, an increase of 35%, which translates into an increase of adjusted earnings per share of 33%.

Given this strong performance, the board has proposed a final dividend of 26.0 US cents per share, bringing the full year total to 38.0 US cents per share – an increase of 27% over last year. This dividend is covered 2.6 times by adjusted diluted earnings.

Net cash inflow from our operations totalled US$2,792 million and the balance sheet remains strong with gearing at 26.4%. This follows capital expenditure of US$768 million and a series of corporate transactions including the conversion of US$600 million of convertible bonds which were due in 2006.

Operational highlights
This was not a year of headline-grabbing acquisitions – more a case of incrementally building the business and reinforcing our position as one of the world’s leading brewers.

The star of the year was South Africa where our businesses benefited from the strong currency and an increase in the country’s consumer spending. EBITA increased by 36% in the beer business and 34% in soft drinks. During the year we acquired the minority shareholdings in our Coca-Cola bottling subsidiary, ABI, at a cost of US$597 million. The sale of our 21% stake in Edgars Consolidated Stores Ltd – the Johannesburg-listed retail business – was an opportunity to withdraw from a non-core operation at a good price.

The turnaround at Miller in North America has continued according to plan. Profitability and margins have improved and the business gained overall market share. Miller Lite has been particularly successful and was the country’s fastest-growing beer brand during 2004.

There was further strong growth in Europe where EBITA rose by 26%. Russia again did well; Poland recovered as it adapted to changes in the marketplace; and our business in Romania gained the number two position by acquiring the Aurora brewing company. Results were less good in Italy. However, we’re starting to see an improvement as we implement new systems and processes. During the year, we acquired the minority interests in Birra Peroni for US$205 million.

Our business in Africa continued the momentum of the first half year with further increases in volume. There was strong growth from Tanzania, Mozambique and Angola. Botswana also did well.

We continue to shape our business portfolio in China – the world’s largest beer market. Last year we were disappointed not to succeed in buying the remaining shares in the Harbin brewery. Nevertheless, we made a good profit when we then sold our existing stake. Our Chinese associate, CR Snow (previously CRB), expanded further, acquiring three breweries in Anhui province and the brewing interests of Lion Nathan in the Yangtze River Delta region. It also announced a greenfield brewery investment in Guandong province. CR Snow is now starting to reap the rewards as its businesses become more integrated and prices become firmer.

On 27 May 2005, we announced that we were increasing our stake in the business in India to 99% by acquiring the Shaw Wallace Group’s interest in the brewing operations. We are now India’s second largest brewer, with ten breweries supplying the whole country. In the last year, volumes increased by 12% to 2.4 million hectolitres.

Central America continues to be challenging. Although EBITA has grown, volumes have declined. The market is fiercely competitive in soft drinks and becoming more so in beer – particularly in El Salvador.

Benefiting from our investments
The rapid growth that we’ve just experienced is the result of a long period of investment that started in the mid-1990s when we first expanded aggressively out of Africa.

Our investment in our portfolio of businesses has given us a spread of operations spanning more than 40 countries on four continents and well balanced between established and developing markets. We now sell 148 million hectolitres of lager a year with total beverage sales of 187 million hectolitres. Last year, lager volumes grew organically at 4%, twice the recent historical global industry average growth rate.

The investment in our productive assets has continued with US$576 million spent on maintenance and US$192 million on new capacity. A major project completed in 2004 was the new Pilsner Urquell brewhouse in the Czech Republic which brews our flagship brand for the domestic and international markets. The South African business, meanwhile, has invested over US$600 million over the past decade and plans to invest a further US$800 million in the next five years – about half of it for new production capacity.

Years of investment in our brands is also paying off. We constantly strive to make our local and regional brands more relevant, to innovate in response to consumers’ changing needs, and to keep developing our international premium brands.

Most of all, we’ve benefited from our investment in people. We devote considerable effort to training and developing our employees, building the skills we need for the future, meeting our responsibilities as an employer and making sure our structures and management reflect the societies in which we operate.

The ultimate beneficiaries of these investments are, of course, our shareholders. Since our UK listing in 1999, we’ve achieved a total shareholder return of 164% compared with 12% for the FTSE 100 as a whole (as measured on 31 March 2005).

Corporate social responsibility
The size and influence we enjoy in many of our markets make it imperative that we behave responsibly and improve the lives of the less fortunate. Last year, we invested US$16.9 million, in social programmes. That said, we believe the best way to help society is to succeed as a business – providing products that people enjoy, creating jobs and wealth, contributing taxes and helping others to advance economically.

While our products contribute to people’s quality of life, we also have a responsibility to make sure they are used sensibly. We therefore have a range of education and research programmes in areas such as underage drinking and road safety. Under the title The Responsible Way, we’ve also adopted a new group-wide policy on alcohol together with a code of conduct covering all our commercial communications.

Corporate governance
Last year I set out the changes we intended to make to strengthen the balance ofindependent representation on the board and its committees. These have now been completed and subsequently, Robin Renwick has stepped down from the remuneration committee in order to meet the independence requirements of the Combined Code. As part of the process, we were delighted last August to welcome John Manzoni to the board as a non-executive director. John is now a member of the remuneration committee and the corporate accountability and risk assurance committee. Sadly, Frank Ning has chosen not to stand for re-election to the board at the forthcoming annual general meeting. Frank was instrumental in establishing and growing our interests in China and his contribution to the company is much appreciated.

While aiming for the highest standards of corporate governance, we have to recognise that our shareholders are spread between the US, the UK and South Africa and that these jurisdictions sometimes have differing requirements. Our approach to reconciling these differences is to identify a ‘golden thread’ of corporate governance that guides us in meeting our moral and ethical responsibilities.

Finally, my thanks go to my fellow directors as well as to our excellent staff, to our business partners, to our hard-working distributors, and to you, our shareholders, for all your support. The last three years have seen exceptional rates of earnings growth across the group and whilst we are unlikely to continue to repeat these rates of growth our well balanced mix of businesses and portfolio of strong brands will continue to underpin our growth momentum.

Signature of Meyer Kahn

Meyer Kahn

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Meyer Khan