PRIMARY COMPANY – EMPERADOR INC.

Brief History

Emperador Inc. (EMP) was originally incorporated on November 26, 2001 as Touch
Solutions, Inc. (TSI) with the primary purpose of establishing and operating information
technology services and products. On July 31, 2013, the Securities and Exchange Commission
approved the change in the Company's primary purpose to that of a holding company. On
September 5, 2013, the SEC approved the change in name from TSI to the present one.

The Company is currently a holding company which operates an integrated business of

manufacturing, bottling and distributing distilled spirits and other alcoholic beverages. EMP,
through its subsidiary, Emperador Distiller's Inc., has a product portfolio comprised of its own
brands as well as licensed products, with an international reach to at least 102 countries.

EMP offers an expanded array of liquor products through its acquisition and partnerships with
global manufacturers. These include United Kingdom-based Whyte and Mackay Group, the fifth
largest Scotch whisky manufacturer in the world; Bodegas Fundador S.L.U in Spain, owner of
the iconic brand Fundador; and Domecq Bodega Las Copas, S.L which has an established
presence in North and South America.

Among the Company's brands are Emperador Brandy; Emperador Light; Emperador Deluxe
Spanish Edition; Emperador Solera Brandy; Andy Player Whisky; The BaR; Smirnoff Mule; The
Dalmore Single Highland Malt; Jura Premium Single Malt; Tamnavulin Single Malt Scotch
Whisky; Fettercairn; Whyte & Mackay Blended Scotch Whisky; Valdivar Vodka; Glayva;
Claymore; Cluny; John Barr; Fundador; Terry Centenario; Tres Cepas; and Harveys.
Management Discussion and Analysis

The Group had expanded its geographic footprint both in the Philippines and across the
globe. From the Philippines, it found ground in Spain in early 2013 and February 2014, with the
acquisition of Bodega San Bruno and investment in Bodega Las Copas (“BLC”), respectively.
From Spain, business opportunity knocked in UK so the Group acquired Whyte and Mackay
(“WMG”) in October 2014. The Group returned its sight in Spain with the acquisition of brandy
and sherry business under Bodegas Fundador in March 2016 (a deal inked in November 2015)
and the acquisition of Domecq brandy and wine brand portfolio and related assets in March
2017 (a deal inked in December 2016, and transferred/consolidated to the Group in September
2017). These provided platforms for international expansion and domestic premiumization for
Emperador. Having set the groundworks, Emperador moved on to brand investments in 2017.
Revenues - total revenues reached P42,656 million this year as compared to P41,018 million a
year ago, a modest hike of 4.0% attributed to strong sales from offshore subsidiaries.

Costs and Expenses - total costs and expenses amounted to P34,820 million this year from
P31,582 million a year ago, up 10.2% year-on-year primarily from the Brandy business which,
including intersegment purchases, increased 14.8% year-on-year.

Cost of Goods Sold - costs increased 8.5% primarily due to higher costs in the Brandy segment,
which grew faster than sales, while Scotch Whisky segment’s costs inched 2.2% from a year
ago. Such increase is attributed to high cost of wine, new bottles and packaging for the new and
re/packaged products this year.

Gross Profit - gross profit margins (GPM) on consolidated level remained healthy at 35% in
2017 and 37% in 2016.

Profit before Tax - as a result of the foregoing, profit before tax ebbed 17.0% to P7,835 million
from P9,436 million in 2016.

Tax Expense - tax expense was reduced by 13.7% to P1,503 million from P1,742 million a year
ago due to lower taxable income.

Net Profit – as a result of the foregoing, net profit clipped by 17.7% to P6,332 million from
P7,693 million a year ago.
Performance and Prospects of the Company

Year on year, they have met the challenges of the extremely competitive spirits industry.
They have successfully sustained domination of the Philippine market and made bold moves to
explore global routes through our acquisition of major foreign brands. They have kept a keen
eye on the competition and acted swiftly and decisively to protect and grow the business. But
more importantly, they have stayed true to their commitment to constantly try to do even better,
to seek out new opportunities and not rest on their laurels as they seek to strike a balance
between profitability and market share. Emperador Inc. recorded revenues of PHP42.7 billion in
2017, 4% higher than year-ago revenues, with earnings amounting to PHP6.3 billion. Of this,
their brandy business contributed PHP30.4 billion and our whisky business, PHP12.3 billion.
They have invested considerable amount of resources to bring new exciting products to the
Philippines and the rest of the world. Their premiumization efforts and strategy to grow business
worldwide are underway. They are excited about the prospect of these initiatives. CHAIRMAN’S
MESSAGE ANDREW L. TAN highlight of 2017 was Emperador’s acquisition, through Bodega
Las Copas, of the Domecq brandies and wines. Along with purchase of Fundador in 2016, this
agreement fits perfectly with the company’s strategy to reinforce leadership in the global brandy
category. In the local market, despite stiff competition, they sustained the leadership through
dynamic marketing and reputation for product quality. They have created a brandy-drinking
culture among Filipinos with their flagship Emperador brand. They are now well on way to
replicate this success in the relatively nascent domestic whisky market through wide range of
brands and offers. They expect an evolution brought about by improving Philippine economy
and growing income of the middle class and are in an excellent position to capitalize on this.
Focus, alignment and hard work delivered for them again in 2017. As they move on to 2018 and
beyond they remain truly confident that the vision and commitment that have sustained for
decades will remain beacon for more achievements in the future.

It was based from the message of the top officer:

ANDREW L. TAN

Chairman & CEO

 Board of Directors

Position Name

Chairman Andrew L. Tan

Director Kevin Andrew L. Tan
Director Katherine L. Tan
Director Winston S. Co
Executive Director Kendrick Andrew L. Tan
Lead Independent Director Alejo L. Villanueva, Jr.
Independent Director Enrique M. Soriano III

Management Officers

Position Name

President and Chief Executive Officer Winston S. Co

Treasurer Katherine L. Tan
Chief Finance Officer, Corporate
Information Officer and Compliance Dina D. Inting
Officer
Corporate Secretary Dominic V. Isberto

Assistant Corporate Secretary Rolando D. Siatela

Board of Directors

Dr. Andrew L. Tan has been Director and Chairman of the Board of Emperador, Inc.
since August 28, 2013 and concurrently the Chairman of Emperador Distillers, Inc. Mr. Tan
graduated Magna Cum Laude from the University of the East with BOARD OF DIRECTORS a
degree of Bachelor of Science in Business Administration.
 Mr. Winston S. Co was first elected as Director and President of Emperador, Inc. on 28
August 2013. He has been Director and President of Emperador Distillers, Inc. since 2003 and
currently a Director of Alliance Global Group, Inc., the parent company of Emperador, Inc. Mr.
Co is a Magna Cum Laude graduate of Jose Rizal College with a Bachelor of Science in
Commerce.

Ms. Katherine L. Tan was first elected as Director and Treasurer of Emperador, Inc. on
28 August 2013 and has been Director and Treasurer of Emperador Distillers, Inc. since 2003,
and of Alliance Global Group, Megaworld Corporation, Alliance Global Brands, Inc., Yorkshire
Holdings, Inc., and New Town Land Partners, Inc. Ms. Tan graduated from St. Scholastica’s
College with a degree in Nutrition.

Mr. Kendrick Andrew L. Tan was first elected as Director of Emperador, Inc. on 28
August 2013. He has served as Corporate Secretary and Executive Director of Emperador
Distillers, Inc. since 2007. Mr. Tan graduated from Southern New Hampshire University with a
degree in Bachelor of Science in Accountancy

Mr. Kevin Andrew L. Tan, was elected as Director of Emperador Inc. on 04 October
2017. He is Executive Director of Alliance Global Group, Inc. and Director of Global-Estate
Resorts, Inc. and Empire East Land Holdings, Inc. He holds a degree in Business Administration
major in Management from the University of Asia and the Pacific.

Mr. Alejo L. Villanueva, Jr. was first elected as Independent Director on 28 August
2013. He also took up special studies in the Humanities at Harvard University. He studied
Organizational Behavior at INSEAD in Fontainebleau, France. He taught at the Ateneo
Graduate School of Business, the UST Graduate School, and the Asian Institute of Journalism.

Mr. Enrique M. Soriano III was first elected as Independent Director of the Company on
May 16, 2016. Mr. Soriano holds a B.A. in History from the University of the Philippines, an MBA
from De La Salle University.

IMPACT OF THE BOARD

Significant Employees

While the Company values its workforce, the business of the Company is not highly dependent
on the services of personnel outside of Senior Management
Family Relationships

Chairman Andrew L. Tan is married to Director and Treasurer Katherine L. Tan while their sons,
Kendrick Andrew L. Tan and Kevin Andrew L. Tan, are also Directors. Kendrick is currently
serving as director of Anglo Watsons Glass, Inc. and Executive Director and Corporate
Secretary of EDI. Kevin is currently serving as Director of other listed companies, Alliance
Global Group, Inc., Global-Estate Resorts, Inc. and Empire East Land Holdings, Inc.

Compensation of DIrectors

The Company’s By-Laws stipulates that, except for reasonable per diem, directors, as such, are
entitled to receive only such compensation as may be granted to them upon the
recommendation of the Compensation and Remuneration Committee and subsequent approval
by vote of stockholders representing at least a majority of outstanding capital stock at a regular
or special meeting of stockholders. In no case shall the total yearly compensation of directors,
as such, exceed 10% of the net income before tax of the Corporation for the preceding year.

Employment and Termination of Employment

There are no employment contract between the Company and a named executive officer; and
no compensatory plan or arrangement, including payments to be received from the Company,
with respect to a named executive officer, that results or will result from the resignation,
retirement or any other termination of such executive’s employment with the Company and its
subsidiaries or from a change-in-control of the Company or a change in the named executive
officer’s responsibilities following a change-in-control and amount involved, including all periodic
payments or installments, exceeds P2.5 million. OUTSTANDING WARRANT

INDEPENDENT AUDITORS

Punongbayan&Araullo (“P&A”) is the independent auditors appointed by the

stockholders, has audited the consolidated financial statements ofthe Company in accordance
with Philippine Standards on Auditing, and in their reports to the stockholders, has expressed
their opinion on the faimess of presentation upon completion of such audit.

The lead engagement partner for this year is Mr. Romualdo V. Murcia III who replaces
Ms. Mailene S. Bisnar. The combined fees billed by P&A for the audit of the 2017 and 2016
annual financial statements of the Company and its subsidiaries, excluding out-of-pocket
expenses, totaled P4.5 million and P3.98 million, respectively. The services are those normally
provided in connection with statutory and regulatory filings or engagements.

P&A issued an unqualified opinion on the consolidated financial statements. There are
no disagreements with them on any matter of accounting principles or practices, financial
statement disclosures, and auditing scope or procedure which, if not resolved would have
caused the auditors to make reference thereto in its reports.

REPORT OF INDEPENDENT AUDITOR

We have audited the consolidated financial statements of Emperador Inc. and

Subsidiaries, which comprise the consolidated statements of financial position as at December
31, 2017 and 2016, and the consolidated statements of comprehensive income, consolidated
statements of changes in equity and consolidated statements of cash flows for each of the three
years in the period ended December 31, 2017 and notes to the consolidated financial
statements, including a summary of a significant accounting principles.

In our opinion, the accompanying consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Group as at December 31, 2017 and
2016, and its consolidated financial performance and its consolidated cash flows for each of the
three years in the period ended December 31, 2017, in accordance with Philippine Financial
Reporting Standards (PFRS).

EMPERADOR INC.
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2017 AND 2016
 (AMOUNTS IN PHILIPPINES PESOS)

2017 2016
ASSETS

Current Assets
Cash and cash equivalents P 10,162,413,848 P777,305
Trade and other receivables – net 14,925,799,512 2,466,737
Inventories 3,323,655 3,034,586
Prepaid expenses and other current assets 1,420,495 1,496
Total Current Assets 6,657,579 7,774,943
Noncurrent Assets
Investments in joint ventures 346,290 465,637
Property, plant and equipment – net 4,997,516 5,356,656
Goodwill – net 126,863 126,863
Deferred tax assets – net 673,138 821,094
Other noncurrent assets – net 515,890 616,749
Total Noncurrent Assets 6,659,697 7,386,999
P13,317,276 P15,161,942

LIABILITIES AND EQUITY

Current Liabilities
Notes payable P5,532,340 P7,998,111
Accounts payable and accrued expenses 2,009,854 1,896,452
Income and other taxes payable 109,894 176,093
Current maturities of long-term debt – net of
debt issue costs 114,285 114,286
Total Current Liabilities 7,766,373 10,184,942
Noncurrent Liabilities
Retirement liabilities 536,970 431,978
Long-term debt – net of current maturities
and debt issue costs - 114,285
Total Noncurrent Liabilities 536,970 546,263
Total Liabilities 8,303,343 10,731,205

Equity
Capital Stock 399,063 399,063
 Additional paid-in capital 2,539,454 2,539,454
Equity reserves (396,001) (376,954)
Retained earnings:
Appropriated 2,500,000 2,500,000
Unappropriated 2,641,390 2,039,147
Treasury stock (2,669,973) (2,669,973)
Total Equity 5,013,933 4,430,737
P13,317,276 P15,161,942

EMPERADOR INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Amounts in Philippine Pesos)

2017 2016

42,655,527,544 41,018,101,190
Sales / Revenue

27,585,665,853 25,424,445,626
Cost of Goods Sold

15,069,861,691 15,593,655,564
Gross Profit
 7,234,489,669 6,157,957,015
Operating Expense

7,835,372,022 9,435,698,549
Income/(Loss) Before Tax

1,503,052,461 1,742,331,316
Income Tax Expense

6,332,319,561 7,693,367,233
Net Income/(Loss) After Tax
Net Income/(Loss) Attributable to Parent
6,321,783,945 7,693,367,233
Equity Holder

0.39 0.48
Earnings/(Loss) Per Share (Basic)

0.39 0.48
Earnings/(Loss) Per Share (Diluted)