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ANHEUSER-BUSCH COMPANIES, INC. 47 2007 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	Summary of Significant
	Accounting Policies

ACCOUNTING PRINCIPLES AND POLICIES

This summary of the significant accounting principles and policies of Anheuser-Busch Companies, Inc., and its subsidiaries is provided to assist in evaluating the company’s consolidated financial statements. These principles and policies conform to U.S. generally accepted accounting principles. The company is required to make certain estimates in preparing the financial statements that impact the reported amounts of certain assets, liabilities, revenues and expenses. All estimates are based on the company’s best information at the time and are in conformity with U.S. generally accepted accounting principles. Actual results could differ from the estimates, and any such differences are recognized when incurred.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the company and all its subsidiaries. The company consolidates all majority-owned and controlled subsidiaries, uses the equity method of accounting for investments in which the company is able to exercise significant influence, and uses the cost method for all other equity investments. All significant intercompany transactions are eliminated. Minority interests in the company’s consolidated China subsidiaries are not material.

REVENUE RECOGNITION

The company’s revenue recognition practices comply with Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.” The company recognizes revenue only when legal title transfers or services have been rendered to unaffiliated customers. For malt beverages shipped domestically to independent wholesalers, title transfers on shipment of product from the company’s breweries. For company-owned beer wholesalers, title transfers when products are delivered to retail customers. The company does not recognize any revenue when independent wholesalers sell the company’s products to retail customers. For international beer and packaging operations, title transfers on customer receipt. Entertainment operations recognize revenue when customers actually visit a park location, rather than when advance or season tickets are sold.

TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable are reported at net realizable value. This value includes an allowance for estimated uncollectible receivables, which is charged to the provision for doubtful accounts. Estimated uncollectible receivables are based on the amount and status of past-due accounts, contractual terms of the receivables and the company’s history of uncollectible accounts.

FOREIGN CURRENCY

Financial statements of foreign subsidiaries where the local currency is the functional currency are translated into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates during the period for revenues and expenses. Cumulative translation adjustments associated with net assets are reported in nonowner changes in equity and are not recognized in the income statement until the investment is sold.

Exchange rate gains or losses related to foreign currency transactions are recognized in the income statement as incurred, in the same financial statement caption as the underlying transaction, and are not material for any year shown.

TAXES COLLECTED FROM CUSTOMERS

Taxes collected from customers and remitted to tax authorities are state and federal excise taxes on beer shipments and local and state sales taxes on attendance, food service and merchandise transactions at the company’s theme parks. Excise taxes on beer shipments are shown in a separate line item in the consolidated income statement as reduction of gross sales. Sales taxes collected from customers are recognized as a liability, with the liability subsequently reduced when the taxes are remitted to the tax authority. Entertainment operations collected from customers and remitted to tax authorities total sales taxes of $67.4 million, $62.0 million and $56.4 million, respectively, in 2007, 2006 and 2005.

DELIVERY COSTS

In accordance with EITF 00-10, “Accounting for Shipping and Handling Fees and Costs,” the company reports pass-through freight costs on beer shipped to independent beer wholesalers in cost of sales. Reimbursements of these costs by wholesalers are reported in sales.

Costs incurred by company-owned beer wholesalers to deliver beer to retail customers are included in marketing, distribution and administrative expenses. These costs are considered marketing related because in addition to product delivery, drivers provide substantial marketing and other customer service functions to retailers including product display, shelf space management, distribution of promotional materials, draught line cleaning and product rotation. Delivery costs associated with company-owned beer wholesalers totaled $304.5 million, $274.1 million and $277.5 million, respectively, in 2007, 2006 and 2005.

ANHEUSER-BUSCH COMPANIES, INC. 48 2007 ANNUAL REPORT

ADVERTISING AND PROMOTIONAL COSTS

Advertising production costs are deferred and expensed the first time the advertisement is shown. Advertising media costs are expensed as incurred. Advertising costs are recognized in marketing, distribution and administrative expenses and totaled $782.7 million in 2007, $771.2 million in 2006 and $849.8 million in 2005.

Sales promotion costs are recognized as a reduction of sales when incurred, and totaled $688.6 million in 2007, $675.3 million in 2006 and $716.7 million in 2005.

FINANCIAL DERIVATIVES

Anheuser-Busch uses financial derivatives to mitigate the company’s exposure to volatility in commodity prices, interest rates and foreign currency exchange rates. The company hedges only exposures in the ordinary course of business and company policy prohibits holding or trading derivatives for profit.

The company accounts for its derivatives in accordance with FAS No. 133, “Accounting for Derivative Instruments and Hedging Activity,” which requires all derivatives to be carried on the balance sheet at fair value and meet certain documentary and analytical requirements to qualify for hedge accounting treatment. Hedge accounting creates the potential for an income statement match between the changes in fair values of derivatives and the changes in cost or values of the associated underlying transactions, generally in cost of sales, but also in marketing, distribution and administrative expense. By policy, derivatives held by the company must be designated as hedges of specific exposures at inception, with an expectation that changes in the fair value will essentially offset the change in cost or value for the underlying exposure. Liquidation of derivative positions is required whenever it is subsequently determined that an underlying transaction is not going to occur, with any gains or losses recognized in the income statement on liquidation. Fair values of derivatives are determined from market observation or dealer quotation. Commodities derivatives outstanding at December 31, 2007 all have initial terms of three years or less and the associated underlying transactions are expected to occur within that time frame.

Option premiums paid to counterparties are initially recorded as assets and subsequently adjusted to fair value each period, with the effective portion of the change in fair value reported in nonowner changes in equity until the underlying transaction occurs. Amounts due from counterparties (unrealized hedge gains) or owed to counterparties (unrealized hedge losses) are included in current assets and current liabilities, respectively.

See Note 3 for additional information on underlying hedge categories, notional and fair values of derivatives, types and classifications of derivatives used, and gains and losses from hedging activity.

INCOME TAXES

The provision for income taxes is based on the income and expense amounts reported in the consolidated statement of income. Deferred income taxes are recognized for the effect of temporary differences between financial reporting and tax filing in accordance with the requirements of FAS No. 109, “Accounting for Income Taxes.” See Note 7 for additional information on the company’s provision for income taxes, deferred income tax assets and liabilities and effective tax rate.

In the first quarter of 2007, the company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” Under the Interpretation, realization of an uncertain income tax position must be estimated as “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. Further, the recognition of tax benefits recorded in the financial statements must be based on the amount most likely to be realized assuming a review by tax authorities having all relevant information. The Interpretation also clarified the financial statement classification of tax-related penalties and interest and set forth new disclosures regarding unrecognized tax benefits.

RESEARCH AND DEVELOPMENT COSTS AND START-UP COSTS

Research and development costs and plant start-up costs are expensed as incurred, and are not material for any year presented.

CASH

Cash includes cash in banks, demand deposits and investments in short-term marketable securities with original maturities of 90 days or less.

INVENTORIES

Inventories are valued at the lower of cost or market. The company uses the last-in, first-out method (LIFO) valuation approach to determine cost primarily for domestic production inventories, and uses average cost valuation primarily for international production and retail merchandise inventories. LIFO was used for 63% and 68% of total inventories at December 31, 2007 and 2006, respectively. Had the average cost method been used for all inventories as of December 31, 2007 and 2006, the value of total inventories would have been $183.6 million and $137.9 million higher, respectively. Following are the components of the company’s inventories as of December 31 (in millions).

	2007		2006
Raw materials and supplies	$	365.4	$	385.6
Work in process		109.9		110.8
Finished goods		248.2		198.5
Total inventories	$	723.5	$	694.9

ANHEUSER-BUSCH COMPANIES, INC. 49 2007 ANNUAL REPORT

INTANGIBLE ASSETS

Anheuser-Busch’s intangible assets consist of trademarks, beer distribution rights and goodwill. Trademarks and beer distribution rights meeting criteria for separate recognition as specified by FAS 142, “Goodwill and Other Intangible Assets,” are recognized in distinct asset categories. Trademarks include purchased trademarks, brand names, logos, slogans or other recognizable symbols associated with the company’s products. Trademarks are not amortized due to having indefinite lives. Domestic beer distribution rights are associated with company-owned beer wholesale operations and represent the exclusive legal right to sell the company’s products in defined geographic areas. The carrying values of these rights have indefinite lives and are not amortized, primarily due to the company’s intent to operate its wholesalerships in perpetuity and the lives not being contractually or statutorily limited. International distribution rights relate to operations in the United Kingdom and China and are being amortized over their respective useful lives. The company’s distribution rights in the United Kingdom are contractually limited and expire in 2029. Distribution rights in China are being amortized over seven years, through 2011, based on independent valuation appraisal and normal practice in China. The company analyzes its trademarks and product distribution rights for potential impairment annually, based on projected future cash flows and observation of independent beer wholesaler exchange transactions.

The company recognizes the excess of the cost of acquired businesses over the fair value of the net assets purchased as goodwill. Goodwill related to consolidated businesses is included in intangible assets on the balance sheet while goodwill associated with the company’s equity investments (primarily Grupo Modelo) is included in investments in affiliated companies. Goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually, with ongoing recoverability based on applicable operating unit performance, consideration of significant events or changes in the overall business environment and comparable market transactions. The impairment analysis for consolidated goodwill is performed at the reporting unit level using a two-step process. The first step is a comparison of the fair value of the business, determined using future cash flow analysis and/or comparable market transactions, to its recorded amount on the balance sheet. If the recorded amount exceeds the fair value, the second step quantifies any impairment write-down by comparing the current implied value of goodwill to the recorded goodwill balance. A review of goodwill completed in the fourth quarter of 2007 found no impairment. Goodwill related to equity investments is tested for impairment if events or circumstances indicate the entire investment could be impaired. Recoverability testing for equity investment goodwill is based on a combination of future cash flow analysis and consideration of pertinent business and economic factors. See Note 4 for additional information on changes in the balances of intangible assets.

COMPUTER SYSTEMS DEVELOPMENT COSTS

The company capitalizes computer systems development costs that meet established criteria, and amortizes those costs to expense on a straight-line basis over five years. Computer systems development costs not meeting the proper criteria for capitalization, including systems re-engineering costs, are expensed as incurred.

PLANT AND EQUIPMENT

Fixed assets are carried at original cost less accumulated depreciation, and include expenditures for new facilities and expenditures that increase the useful lives of existing facilities. The cost of routine maintenance, repairs and minor renewals is expensed as incurred. Depreciation expense is recognized using the straight-line method based on the following weighted-average useful lives: buildings, 25 years; production machinery and equipment, 15 years; furniture and fixtures, 10 years; and computer equipment, three years. When fixed assets are retired or sold, the net book value is eliminated and any gain or loss on disposition is recognized in cost of sales for operating assets and administrative expenses for corporate assets. The components of plant and equipment as of December 31 are summarized below (in millions).

	2007			2006
Land	$	301.5		$	297.7
Buildings		5,275.2			5,123.6
Machinery and equipment		13,188.7			12,919.8
Construction in progress		462.1			369.5
Plant and equipment, at cost		19,227.5			18,710.6
Accumulated depreciation		(10,394.0	)		(9,794.5	)
Plant and equipment, net	$	8,833.5		$	8,916.1

VALUATION OF SECURITIES

For investments accounted for under the cost basis, Anheuser-Busch applies FAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” Under FAS 115, the company classifies its investments as “available for sale” and adjusts the carrying values of those securities to fair market value each period. Market valuation gains or losses are deferred in nonowner changes in shareholders equity and are not recognized in the income statement until the investment is sold. The only investment currently accounted for under FAS 115 is an immaterial investment in the common stock of Kirin Brewing Company, Ltd. of Japan. In 2005, deferred market valuations also included noncash changes in the value of convertible debt issued to the company by its strategic partner in China, Tsingtao Brewery. See Note 2 for additional discussion of the company’s investment in Tsingtao.

ISSUANCE OF STOCK BY EQUITY INVESTEES

The company has elected to treat issuances of common stock by equity investees as equity transactions per SEC Staff Accounting Bulletin No. 52, and therefore recognizes no gain or loss when shares are issued.

ANHEUSER-BUSCH COMPANIES, INC. 50 2007 ANNUAL REPORT

2. International Equity Investments

GRUPO MODELO

Anheuser-Busch owns a 35.12% direct interest in Grupo Modelo, S.A.B. de C.V. (Modelo), Mexico’s largest brewer and producer of the Corona brand, and a 23.25% direct interest in Modelo’s operating subsidiary Diblo, S.A. de C.V. (Diblo). The company’s direct investments in Modelo and Diblo give Anheuser-Busch an effective (direct and indirect) 50.2% equity interest in Diblo. Anheuser-Busch holds nine of 19 positions on Modelo’s board of directors (with the Controlling Shareholders Trust holding the other 10 positions) and also has membership on the audit committee. Anheuser-Busch does not have voting or other effective control of either Diblo or Modelo and consequently accounts for its investments using the equity method. The total cost of the company’s investments was $1.6 billion. The carrying values of the Modelo investment were $3.6 billion and $3.4 billion, respectively, at December 31, 2007 and 2006. Included in the carrying amounts of the Modelo investment is goodwill of $540.1 million and $536.6 million, respectively. Changes in goodwill during 2007 and 2006 are primarily due to changes in exchange rates between the U.S. dollar and Mexican peso.

Dividends received from Grupo Modelo in 2007 totaled $403.1 million, compared to $240.0 million and $203.6 million in 2006 and 2005, respectively. Dividends are paid based on a free-cash-flow distribution formula in accordance with the Investment Agreement between the companies and are recorded as a reduction in the carrying value of the company’s investment. Cumulative unremitted earnings of Grupo Modelo totaled $2.1 billion at December 31, 2007.

Summary financial information for Grupo Modelo as of and for the three years ended December 31 is presented in the following table (in millions). The amounts represent 100% of Grupo Modelo’s consolidated operating results and financial position based on U.S. generally accepted accounting principles on a one-month lag basis, and include the impact of Anheuser-Busch’s purchase accounting adjustments.

	2007		2006		2005
Cash and marketable securities	$	1,932.2	$	2,094.0	$	1,640.5
Other current assets	$	1,181.2	$	1,017.6	$	933.3
Noncurrent assets	$	5,143.4	$	4,538.5	$	4,592.8
Current liabilities	$	678.9	$	524.7	$	407.1
Noncurrent liabilities	$	317.7	$	345.9	$	411.3
Net sales	$	5,321.3	$	5,072.1	$	4,399.0
Gross profit	$	2,683.0	$	2,643.9	$	2,315.1
Minority interest	$	3.5	$	1.5	$	1.3
Net income	$	1,276.7	$	1,141.1	$	966.8

TSINGTAO

Since 2003, Anheuser-Busch has participated in a strategic alliance with Tsingtao Brewery Company, Ltd., one of the largest brewers in China and producer of the Tsingtao brand. Through March 2005, the company had invested $211 million in Tsingtao, in the form of a 9.9% equity stake in Tsingtao common shares and two convertible bonds. The 9.9% equity interest was accounted for under the cost method through April 2005, at which time the company converted its bonds into Tsingtao Series H common shares. The bond conversion increased Anheuser-Busch’s economic ownership in Tsingtao from 9.9% to 27%, and its voting stake from 9.9% to 20%. Local government authorities hold the proxy voting rights for the 7% difference between the company’s voting and economic stakes. The increased economic stake allowed Anheuser-Busch to nominate an additional director, giving the company two of 11 board seats and representation on related committees. Because of the increased share and voting ownership and board representation, Anheuser-Busch believes it has the ability to exercise significant influence and therefore began applying the equity method of accounting for Tsingtao in May 2005, on a one-month lag basis. The carrying values of the company’s Tsingtao investment were $276.8 million and $241.9 million, respectively, at December 31, 2007 and 2006. Dividends received from Tsingtao totaled $10.2 million in 2007 and $7.0 million in 2006.

In 2003, the company loaned Tsingtao $15 million for a term of five years at an annual interest rate of 1%. The loan provided Tsingtao with funding to reacquire minority interests in three of its brewery subsidiaries.

3.	Derivatives and Other
	Financial Instruments

DERIVATIVES

Under FAS 133, derivatives qualifying for deferral accounting are classified as fair value, cash flow or foreign currency denominated net investment hedges, depending on the nature of the underlying exposure. The company’s interest rate and foreign currency denominated hedges are either fair value or cash flow hedges, while commodity cost hedges are cash flow hedges. Commodity exposures are short, meaning the company must acquire additional quantities to meet its operating needs, and include aluminum, rice, corn and natural gas. The company’s primary foreign currency exposures result from transactions and investments denominated in Mexican pesos, Chinese yuan, Canadian dollars, British pounds sterling and euros. With the exception of foreign currency denominated capital expenditures, these exposures are long, meaning the company has or generates surplus quantities of these currencies.

ANHEUSER-BUSCH COMPANIES, INC. 51 2007 ANNUAL REPORT

Fair value hedges are accounted for by recognizing the changes in fair values for both the derivative and the underlying hedged exposure in earnings each period. For cash flow hedges, the portion of the derivative gain or loss that is effective in offsetting the change in cost or value of the underlying exposure is deferred in nonowner changes in shareholders equity, and later reclassified into earnings to match the impact of the underlying transaction when it occurs. Net investment hedges are accounted for in the foreign currency translation account in nonowner changes in shareholders equity. Regardless of classification, a hedge that is 100% effective will result in zero net earnings impact while the derivative is outstanding. To the extent that any hedge is not effective at offsetting cost or value changes in the underlying exposure, there could be a net earnings impact. Gains and losses from the ineffective portion of any hedge are recognized in the income statement immediately.

Below are the notional transaction amounts and fair values for the company’s outstanding derivatives at December 31 (in millions, with brackets indicating a deferred loss position). Because the company hedges only with derivatives that have high correlation with the underlying transaction cost or value, changes in derivatives fair values and the underlying cost are expected to largely offset.

	2007					2006
	Notional		Fair			Notional		Fair
	Amount		Value			Amount		Value
Foreign currency
Forwards	$	91.8	$	1.0		$	115.3	$	2.7
Options		282.2		3.7			306.5		4.4
Total foreign currency		374.0		4.7			421.8		7.1
Interest rate
Swaps		100.0		0.1			100.0		(1.3	)
Commodity price
Options		1.5		0.1			—		—
Swaps		31.9		(4.7	)		22.2		(4.1	)
Futures and forwards		68.9		11.1			111.9		8.4
Total commodity price		102.3		6.5			134.1		4.3
Total outstanding derivatives	$	576.3	$	11.3		$	655.9	$	10.1

The following table shows derivatives gains and losses deferred in nonowner changes in shareholders equity as of December 31 (in millions). The amounts shown for 2006 and 2005 were subsequently recognized in earnings as the hedged transactions took place, mostly in the next year. The gains and losses deferred as of December 31, 2007 are generally expected to be recognized in 2008 as the underlying transactions occur. However, the amounts ultimately recognized may differ, favorably or unfavorably, from those shown because some of the company’s derivative positions are not yet settled and therefore remain subject to ongoing market price fluctuations.

	2007			2006			2005
Deferred gains	$	5.6		$	9.2		$	2.6
Deferred losses		(5.4	)		(5.9	)		(6.4	)
Net deferred gains/(losses)	$	0.2		$	3.3		$	(3.8	)

Following are derivative gains and losses recognized in earnings during the years shown (in millions). As noted, effective gains and losses had been deferred over the life of the transaction and recognized simultaneously with the impact of price or value changes in the underlying transactions. Ineffective gains and losses were recognized throughout the year when it was evident they did not precisely offset corresponding price or value changes.

	2007			2006			2005
Effective gains
Cash flow hedges	$	5.7		$	1.5		$	20.1
Fair value hedges		7.6			5.6			0.5
Total effective gains		13.3			7.1			20.6
Effective losses
Cash flow hedges		(18.6	)		(34.0	)		(8.1	)
Fair value hedges		(6.1	)		(24.8	)		(6.0	)
Total effective losses		(24.7	)		(58.8	)		(14.1	)
Net effective gains/(losses)	$	(11.4	)	$	(51.7	)	$	6.5

Net ineffective gains	$	9.2		$	2.2		$	0.2

CONCENTRATION OF CREDIT RISK

The company does not have a material concentration of credit risk.

NONDERIVATIVE FINANCIAL INSTRUMENTS

Nonderivative financial instruments included in the balance sheet are cash, accounts receivable, accounts payable and long-term debt. Accounts receivable include allowances for doubtful accounts of $16.1 million, $17.6 million and $15.3 million at December 31, 2007, 2006 and 2005, respectively. The fair value of long-term debt, estimated based on future cash flows discounted at interest rates currently available to the company for debt with similar maturities and characteristics, was $9.3 billion and $7.7 billion at December 31, 2007 and 2006, respectively.

ANHEUSER-BUSCH COMPANIES, INC. 52 2007 ANNUAL REPORT

4. Intangible Assets

The following table shows the activity in goodwill, beer distribution rights and trademarks during the three years ended December 31 (in millions). International beer distribution rights have a combined gross cost of $57.1 million and a remaining unamortized balance of $35.5 million at December 31, 2007. The company expects amortization expense of approximately $6.0 million per year related to international distribution rights over the next five years.

			Beer
			Distribution
	Trademarks		Rights			Goodwill
Balance at Dec. 31, 2004	$	44.4	$	206.9		$	1,509.2

Domestic beer wholesaler
disposition		—		(5.6	)		—
Disposition of domestic beer
wholesaler equity investment		—		(20.9	)		—
Tsingtao investment		97.9		11.6			—
Harbin purchase accounting
adjustments		—		—			34.3
Amortization of international
distribution rights		—		(4.7	)		—
Foreign currency translation		3.5		(1.7	)		49.0
Balance at Dec. 31, 2005		145.8		185.6			1,592.5

Harbin minority interest buyout		—		—			20.5
Acquisition of Rolling Rock brands		79.3		3.0			—
Acquisition of Grolsch and Tiger
import rights		—		9.2			—
Domestic beer wholesaler equity
investment		—		27.8			—
Disposition of domestic beer
wholesaler equity investment		—		(14.8	)		—
Amortization of international
distribution rights		—		(5.6	)		—
Foreign currency translation		4.6		3.3			1.4
Balance at Dec. 31, 2006		229.7		208.5			1,614.4

Harbin minority interest buyout		—		—			7.3
Acquisition of InBev brands import rights		—		65.9			—
Acquisition of Monster brands
distribution rights		—		5.3			—
Acquisition of U.S. beer
distribution rights		—		59.8			—
Amortization of international beer
distribution rights		—		(5.9	)		—
Foreign currency translation		10.1		1.4			53.0
Balance at Dec. 31, 2007	$	239.8	$	335.0		$	1,674.7

5. Retirement Benefits

ADOPTION OF FAS 158

Effective with its December 31, 2006 financial statements, Anheuser-Busch adopted FAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” FAS 158 focuses primarily on balance sheet reporting for the funded status of benefit plans and requires recognition of benefit liabilities for underfunded plans and benefit assets for overfunded plans, with offsetting impacts to nonowner changes in shareholders equity. Anheuser-Busch was in a net underfunded position for its pension and retiree health care plans and therefore recognized incremental retirement benefit liabilities on adoption. Additionally, the company reclassified its pension liability from other long-term liabilities to retirement benefits on the consolidated balance sheet.

FAS 158 also requires companies to measure benefit plan assets and liabilities as of the balance sheet date for financial reporting purposes, eliminating the current approach of using a measurement date up to 90 days prior to the balance sheet date. The effective date for this change is delayed until year-end 2008. The company currently uses an October 1 measurement date and will adopt a December 31 measurement date in 2008 as required. Adopting the new measurement date will require a one-time adjustment to retained earnings under the transition guidance in FAS 158. None of the changes prescribed by FAS 158 will impact the company’s results of operations or cash flows.

PENSION BENEFITS

The company sponsors pension plans for its employees. Net annual pension expense for single-employer defined benefit plans and total pension expense for the three years ended December 31 are presented in the following table (in millions). Contributions to multiemployer plans in which the company and its subsidiaries participate are determined in accordance with the provisions of negotiated labor contracts, based on employee hours or weeks worked. Pension expense recognized for these plans and for defined contribution plans equals cash contributions made by Anheuser-Busch. Effective November 30, 2006, the chairman of the board, the president and chief executive officer and certain other senior executives retired as executive officers of the company and received lump sum pension payments from the supplemental executive retirement plan. The total of the lump sum payouts represented a portion of the supplemental plan’s projected benefit obligation sufficient enough to constitute a plan settlement per FAS 88, “Employer’s Accounting for Settlements and Curtailments of Defined Benefit Pension Plans.” Because the retirements occurred after the company’s pension measurement date of October 1, and in accordance with FAS 88 settlement accounting, liabilities related to the supplemental plan were remeasured as of December 15, 2006 with the related deferred actuarial losses recognized in the first quarter 2007.

ANHEUSER-BUSCH COMPANIES, INC. 53 2007 ANNUAL REPORT

	2007			2006			2005
Service cost (benefits earned
during the year)	$	97.8		$	102.7		$	94.2
Interest cost on projected benefit
obligation		178.4			170.0			168.3
Assumed return on plan assets		(208.3	)		(198.6	)		(194.9	)
Amortization of prior service cost		20.1			21.9			22.0
Amortization of net actuarial losses		65.2			90.9			66.8
FAS 88 settlement		19.0			—			—
Single-employer defined benefit plans		172.2			186.9			156.4
Multiemployer plans		16.7			16.2			16.2
Defined contribution plans		21.0			20.1			19.1
Total pension expense	$	209.9		$	223.2		$	191.7

The measurement date for the company’s pension accounting is October 1. The key actuarial assumptions used in determining the annual pension expense and funded status for single-employer defined benefit plans for the three years ended December 31 follow.

	2007			2006			2005
Annual expense
Discount rate		6.0	%		5.5	%		6.0	%
Long-term return on plan assets		8.5	%		8.5	%		8.5	%
Rate of compensation growth		4.0	%		4.0	%		4.25	%
Funded status
Discount rate		6.4	%		6.0	%		5.5	%
Rate of compensation growth		4.0	%		4.0	%		4.0	%

For informational purposes, following is a summary of the potential impact on 2007 annual pension expense of a hypothetical 1% change in actuarial assumptions (in millions). Brackets indicate annual pension expense would be reduced. Modification of these assumptions does not impact the company’s pension funding requirements.

				Impact of			Impact of
Assumption	2007 Rate			1% Increase			1% Decrease
Long-term return on assets		8.5	%	$	(26.3	)	$	26.3
Discount rate		6.4	%	$	(47.1	)	$	54.5
Compensation growth rate		4.0	%	$	20.9		$	(18.5	)

Pension assets or liabilities are recognized for the funded status of single-employer pension plans, based on a comparison of the projected benefit obligation (PBO) to plan assets for each plan. The following tables present changes in the PBO, changes in the fair value of plan assets and the combined funded status for all single-employer defined benefit plans for the two years ended December 31 (in millions).

	2007			2006
Beginning projected benefit obligation (PBO)	$	3,125.1		$	3,189.9
Service cost		97.8			102.7
Interest cost		178.4			170.0
Plan amendments		2.1			3.3
Actuarial gain		(79.2	)		(135.0	)
Employee contributions		0.4			0.4
Foreign currency translation		1.2			8.5
Benefits paid		(266.2	)		(214.7	)
Projected benefit obligation (PBO) at Oct. 1	$	3,059.6		$	3,125.1

	2007			2006
Fair value of plan assets, beginning of year	$	2,659.3		$	2,314.7
Actual return on plan assets		373.6			238.2
Employer contributions		99.6			235.9
Employee contributions		0.4			0.4
Foreign currency translation		0.8			5.5
Benefits paid		(266.2	)		(214.7	)
Fair value of plan assets at Oct. 1		2,867.5			2,580.0
Fourth quarter contributions		7.8			79.3
Fair value of plan assets, end of year	$	2,875.3		$	2,659.3
Funded status – PBO in excess of plan assets	$	184.3		$	465.8

The following shows pension assets and liabilities reported on the balance sheet at December 31, 2007 and 2006. The PBO is the actuarial net present value of all benefits related to employee service rendered to date, including assumptions of future annual compensation increases to the extent appropriate. The pension asset is classified as noncurrent on the balance sheet. Of the $253.5 million and $466.8 million total pension liabilities shown for 2007 and 2006, respectively, $9.7 million and $2.8 million are classified as current, with the remainder classified as noncurrent.

ANHEUSER-BUSCH COMPANIES, INC. 54 2007 ANNUAL REPORT

	2007			2006
Plans with assets in excess of PBO (pension asset)
Plan assets	$	785.5		$	117.6
PBO		(716.3	)		(116.6	)
Pension asset recognized	$	69.2		$	1.0

	2007			2006
Plans with PBO in excess of assets (pension liability)
PBO	$	(2,343.3	)	$	(3,008.5	)
Plan assets		2,089.8			2,541.7
Pension liability recognized	$	(253.5	)	$	(466.8	)

Following is information for the two years ended December 31 for certain plans where the accumulated benefit obligation (ABO) for single-employer plans exceeds plan assets (in millions). The ABO is the actuarial present value of benefits for services rendered to date, with no consideration of future compensation increases. The ABO for all plans totaled $2,809.0 million at December 31, 2007 and $2,865.5 million at December 31, 2006.

	2007			2006
Plans with ABO in excess of assets
ABO	$	(632.4	)	$	(2,748.9	)
Plan assets at Oct. 1		527.9			2,541.7
ABO in excess of plan assets	$	(104.5	)	$	(207.2	)

Below are the components of deferred pension costs for the two years ended December 31 (in millions). Deferred pension costs are not recognized in periodic pension expense when incurred, but instead are accrued in nonowner changes in shareholders equity to be amortized into expense in subsequent periods. Unrecognized actuarial losses represent differences in actual versus assumed changes in the PBO and fair value of plan assets over time, primarily due to changes in assumed discount rates. Unrecognized prior service cost is the impact of changes in plan benefits applied retrospectively for employee service previously rendered. Deferring these costs has no impact on annual pension funding requirements. Deferred pension costs are amortized into annual pension expense over the average remaining assumed service period for active employees, which was approximately 10 years at the end of 2007. Actuarial losses and prior service costs expected to be amortized into net periodic pension expense in 2008 are $44 million and $17 million, respectively.

	2007			2006
Prior service cost	$	(95.2	)	$	(112.5	)
Unrecognized actuarial losses		(543.7	)		(872.8	)
Pretax deferred pension costs		(638.9	)		(985.3	)
Deferred income taxes		253.7			391.2
Deferred pension costs – domestic plans		(385.2	)		(594.1	)
Deferred pension costs – equity investments		(10.8	)		(15.7	)
Net pension costs deferred in nonowner changes
in shareholders equity	$	(396.0	)	$	(609.8	)

Following are the changes in the components of pretax pension costs deferred in nonowner changes in shareholders equity during 2007 (in millions).

	2007
Deferred actuarial (gain) arising during the year	$	(244.5	)
Amortization of previously deferred actuarial losses
into net periodic benefits expense		(65.2	)
FAS 88 settlement		(19.0	)
Net (decrease) in deferred actuarial losses		(328.7	)
Deferred prior service cost arising during the year		2.1
Amortization of previously deferred prior service (cost)
into net periodic benefits expense		(20.1	)
Net (decrease) in deferred prior service cost		(18.0	)
Foreign currency translation		0.3
Pretax (decrease) in nonowner changes in shareholders
equity related to deferred pension costs	$	(346.4	)

Prior to the adoption of FAS 158, recognition of an additional minimum pension liability (offset in nonowner changes in shareholders equity) was necessary whenever the ABO exceeded plan assets. Shown in the following table are the components of the company’s minimum pension liability at December 31, 2006, prior to adoption of FAS 158 (in millions).

	2006
Minimum pension liability – domestic plans	$	(695.9	)
Minimum pension liability – equity investments		(15.7	)
Intangible asset – unrecognized prior service costs		108.3
Deferred income taxes		233.3
Deferred pension costs, pre-FAS 158	$	(370.0	)

ANHEUSER-BUSCH COMPANIES, INC. 55 2007 ANNUAL REPORT

The following illustrates the impact on nonowner changes in shareholders equity of the first-time accrual for all deferred pension costs at December 31, 2006 in accordance with FAS 158 (in millions).

	2006
	Before
	FAS 158			FAS 158			Ending
	Adjustments			Adjustments			Balance
Reported in assets
and liabilities
Pension asset	$	519.6		$	(518.6	)	$	1.0
Pension liability	$	(695.9	)	$	229.1		$	(466.8	)
Reported in nonowner
changes in
shareholders equity
Deferred pension costs
(domestic and equity)	$	(711.6	)	$	(289.4	)	$	(1,001.0	)

Intangible asset –
unrecognized prior
service cost		108.3			(108.3	)		—
Deferred income taxes		233.3			157.9			391.2
Net deferred pension costs	$	(370.0	)	$	(239.8	)	$	(609.8	)

PENSION PLAN ASSETS

Required funding for the company’s single-employer defined benefit pension plans is determined in accordance with federal guidelines set forth in the Employee Retirement Income Security Act (ERISA) and the Pension Protection Act (PPA). Funding for the company’s multiemployer and defined contribution plans is based on specific contractual requirements for each plan. The company plans to make required pension contributions for all plans totaling $70 million in 2008. Additional contributions to enhance the funded status of pension plans can be made at the company’s discretion, and discretionary pension funding was provided totaling $85 million in 2007 and $214 million in 2006. Projections indicated that Anheuser-Busch would have been required to contribute these amounts in future years, but the company chose to make the contributions early in order to enhance the funded status of the plans. Following is information regarding the allocation of the company’s pension plan assets as of December 31, 2007 and 2006 and target allocation for 2008.

	Percentage of			Percentage of			Target Asset
	Plan Assets at			Plan Assets at			Allocation for
Asset Category	Dec. 31, 2006			Dec. 31, 2007			2008
Equity securities		70	%		68	%		69	%
Debt securities		26	%		27	%		26	%
Real estate		4	%		5	%		5	%
Total		100	%		100	%		100	%

Asset allocations are intended to achieve a total asset return target over the long term, with an acceptable level of risk in the shorter term. Risk is measured in terms of likely volatility of annual investment returns, pension expense and funding requirements. Expected returns, risk and correlation among asset classes are based on historical data and investment adviser input. The assumed rate of return on pension plan assets is consistent with Anheuser-Busch’s long-term investment return objective, which enables the company to provide competitive and secure employee retirement pension benefits. The company strives to balance expected long-term returns and short-term volatility of pension plan assets. Favorable or unfavorable differences between the assumed and actual returns on plan assets are generally recognized in periodic pension expense over the subsequent five years. The actual annual rate of return on plan assets net of investment manager fees was 14.8%, 10.5% and 13.7% for plan years ended September 30, 2007, 2006 and 2005, respectively.

The company assumes prudent levels of risk to meet overall pension investment goals. Risk levels are managed through formal and written investment guidelines. Portfolio risk is managed by having well-defined, long-term strategic asset allocation targets. The company avoids tactical asset allocation and market timing and has established disciplined rebalancing policies to ensure asset allocations remain close to targets. The company’s asset allocations are designed to provide broad market diversification, which reduces exposure to individual companies, industries and sectors of the market. Pension assets do not include any direct investment in Anheuser-Busch debt or equity securities. The use of derivatives is permitted where appropriate to achieve overall investment policy objectives, such as to hedge exposure to foreign currency denominated stocks or securitize cash in investment portfolios.

RETIREMENT HEALTH CARE AND INSURANCE BENEFITS

The company provides certain health care and life insurance benefits to eligible retired employees. Effective January 1, 2006, employee participants must have at least 10 years of continuous service after reaching age 48 to become eligible for benefits. Employees become eligible for full retiree health care benefits after achieving specific age and total years of service requirements, based on hire date.

Net periodic retirement benefits expense for company retiree health care and life insurance plans was comprised of the following for the three years ended December 31 (in millions).

	2007			2006			2005
Service cost	$	26.8		$	24.3		$	25.6
Interest cost on benefit obligation		45.3			36.9			39.3
Amortization of prior service benefit		(9.8	)		(16.4	)		(11.4	)
Amortization of net actuarial loss		26.1			20.2			14.1
Net periodic retirement health care
and life insurance benefits expense	$	88.4		$	65.0		$	67.6

The following table details the components of the company’s obligation for its single-employer defined benefit retirement health care and life insurance plans as of December 31 (in millions). As of December 31, 2007 and 2006, respectively, $69.6 million and $64.3 million of the company’s obligation was classified as current. Retirement health care and insurance benefits obligations are unfunded; therefore no assets are associated with the plans.

	2007			2006
Benefit obligation, beginning of year	$	791.8		$	654.3
Service cost		26.8			24.3
Interest cost		45.3			36.9
Actuarial loss		29.5			140.2
Plan amendments		0.3			—
Benefits paid		(71.7	)		(68.7	)
Plan participants’ contributions		2.6			2.4
Medicare Part D subsidy		2.6			2.4
Benefit obligation, end of year	$	827.2		$	791.8

ANHEUSER-BUSCH COMPANIES, INC. 56 2007 ANNUAL REPORT

Actuarial gains and losses (primarily due to changes in assumed discount rates and differences in assumed versus actual health care costs) and prior service costs or benefits are deferred on the balance sheet when incurred, for subsequent amortization into annual benefits expense over the remaining service life of participating employees, which was approximately 10 years at December 31, 2007. Shown below are the components of deferred retirement health care and life insurance costs for the two years ended December 31 (in millions). Deferred actuarial losses of $24.0 million and unrecognized prior service benefits of $9.8 million are expected to be amortized into net retirement benefits expense in 2008.

	2007			2006
Deferred actuarial losses	$	(377.4	)	$	(374.0	)
Deferred prior service benefits		78.5			88.6
Net deferred actuarial items		(298.9	)		(285.4	)
Deferred income taxes		118.6			113.2
Net health care and insurance costs deferred
in nonowner changes in shareholders equity	$	(180.3	)	$	(172.2	)

Following are the changes in the components of pretax retirement health care and insurance costs deferred in nonowner changes in shareholders equity during 2007 (in millions).

	2007
Deferred actuarial loss arising during the year	$	29.5
Amortization of previously deferred actuarial losses
into net periodic benefits expense		(26.1	)
Net increase in deferred actuarial losses		3.4
Deferred prior service cost arising during the year		0.3
Amortization of previously deferred prior service credit
into net periodic benefits expense		9.8
Net increase in deferred prior service cost		10.1
Pretax increase in nonowner changes in shareholders
equity related to deferred health care and insurance costs	$	13.5

The key actuarial assumptions used to determine net retirement benefits expense and the benefits obligation for the three years ended December 31 are provided in the following table. For actuarial purposes, the initial health care inflation rate is assumed to decline ratably to the future rate in 2014 and then remain constant thereafter. The measurement date for the company’s retiree health care accounting is December 31.

	2007			2006			2005
Discount rate		6.3	%		5.75	%		5.5	%
Initial health care inflation rate		9.0	%		8.1	%		8.9	%
Future health care inflation rate		5.0	%		5.0	%		5.0	%

For informational purposes, following is a summary of the potential impact on net periodic retirement benefits expense and the end of year benefits obligation of a hypothetical 1% change in the assumed health care inflation rate (in millions). Brackets indicate a reduction in expense or liability.

	1% Increase		1% Decrease
Net periodic retirement benefits expense	$	4.5	$	(4.4	)
Retirement benefits liability	$	50.5	$	(48.0	)

RETIREMENT BENEFITS PAYMENTS

Following are retirement benefits expected to be paid in future years, based on employee data and plan assumptions, as of December 31, 2007 (in millions).

			Health Care
	Pensions		and Insurance
2008	$	172.9	$	69.6
2009	$	188.6	$	72.2
2010	$	203.3	$	73.9
2011	$	220.0	$	75.6
2012	$	242.0	$	76.0
2013-2017	$	1,397.1	$	402.1

EMPLOYEE STOCK PURCHASE AND SAVINGS PLANS

The company sponsors employee stock purchase and savings plans (401(k) plans), which are voluntary defined contribution plans in which most regular employees are eligible for participation. Under the 401(k) plans, the company makes matching cash contributions for up to 6% of employee pretax savings. The company’s matching contribution percentage is established annually based on a formula that considers both consolidated net income and total employee costs. Total 401(k) expense was $58.2 million, $60.7 million and $63.6 million for 2007, 2006 and 2005, respectively.

6. Stock-Based Compensation

STOCK OPTIONS

Under the terms of the company’s stock option plans, officers, certain other employees and nonemployee directors may be granted options to purchase the company’s common stock at a price equal to the closing market price per the New York Stock Exchange Composite Tape on the date the options are granted. The company issues either new shares or treasury shares when options are exercised under employee stock compensation plans. Under the plans for the board of directors, shares are issued exclusively from treasury stock. The company’s stock option plans provide for accelerated exercisability on the occurrence of certain events relating to a change in control, merger, sale of substantially all company assets or complete liquidation of the company. At December 31, 2007, 2006 and 2005, a total of 137 million, 115 million and 121 million shares of common stock were designated for future issuance under existing stock option plans, respectively.

ANHEUSER-BUSCH COMPANIES, INC. 57 2007 ANNUAL REPORT

The company’s stock options ratably vest over a three-year service period commencing immediately following grant of the award, and have a maximum life of 10 years. There are no performance-based vesting requirements associated with stock options. The company’s stock option plans provide for immediate vesting of all unvested options whenever an employee voluntarily leaves the company and has either completed at least 20 years of service or is at least age 60. For employees meeting these criteria, the accelerated vesting policy renders the requisite three-year service condition “nonsubstantive” under FAS No. 123R, “Shared-Based Payment,” and the company therefore fully expenses all options granted to individuals meeting either criterion as of the grant date. The company also identifies stock options granted to employees who do not yet, but will meet the separation-based vesting criteria prior to the end of the three-year vesting cycle, and recognizes expense over the substantive vesting period for that group of options. Stock options granted to employees not meeting the separation-based vesting criteria are expensed ratably over the three-year option vesting period. Due to the requirement to expense nonforfeitable options as of the grant date, the company recognized expense equal to 67%, 60% and 60% of the value related to its 2007, 2006 and 2005 awards, respectively, in the fourth quarter when the options were granted. For financial reporting purposes, stock compensation expense is included in cost of sales and marketing, distribution and administrative expenses, depending on where the recipient’s cash compensation is reported, and is classified as a corporate item for business segments reporting.

Nonemployee directors may elect to receive their annual retainer in shares of Anheuser-Busch common stock instead of cash. If all nonemployee directors eligible to own the company’s common stock elected to receive their 2008 annual retainer in shares, the total number of shares issued would be 21,494, based on the closing price for the company’s common stock at December 31, 2007.

Following is a summary of stock option activity and pricing for the years shown (options in millions).

				Wtd. Avg.				Wtd. Avg.
	Options			Exercise		Options		Exercise
	Outstanding			Price		Exercisable		Price
Balance, Dec. 31, 2004		91.8		$	43.93		64.1	$	40.92
Granted		11.4		$	43.83
Exercised		(5.9	)	$	25.48
Canceled		(0.8	)	$	49.38
Balance, Dec. 31, 2005		96.5		$	45.01		71.5	$	44.06
Granted		9.5		$	46.34
Exercised		(4.9	)	$	27.43
Canceled		(1.1	)	$	48.64
Balance, Dec. 31, 2006		100.0		$	45.97		80.3	$	45.89
Granted		10.1		$	51.86
Exercised		(9.3	)	$	35.71
Canceled		(0.3	)	$	48.52
Balance, Dec. 31, 2007		100.5		$	47.49		81.1	$	47.18

The fair values of options granted during the last three years follow (in millions, except per option).

	2007		2006		2005
Fair value of each option granted	$	10.73	$	9.73	$	8.81
Total number of options granted		10.1		9.5		11.4
Total fair value of options granted	$	108.4	$	92.4	$	100.4

The fair value of stock options granted is estimated on the date of grant using a binomial (lattice method) option-pricing model. The binomial model is used for valuation because it accommodates several inputs in order to take into account multiple option exercise patterns as determined by the company’s actuaries, and essentially computes an overall value based on a weighting of various potential outcomes. The assumptions used in applying the binomial model follow. For illustrative purposes, the expected life, risk-free rate and fair value per option shown are weighted averages derived from historical exercise patterns. The volatility of Anheuser-Busch common stock is estimated by the company’s actuaries based on an analysis of both historical and current market volatilities.

	2007			2006			2005
Expected life of option	6.3 yrs.			6.3 yrs.			5.5 yrs.
Risk-free interest rate		3.6	%		4.6	%		4.4	%
Expected volatility of
Anheuser-Busch stock		22	%		20	%		21	%
Expected dividend yield on
Anheuser-Busch stock		2.5	%		2.5	%		2.5	%

The following tables provide additional information regarding options outstanding and options that were exercisable as of December 31, 2007 (options in millions).

	Options Outstanding					Options Exercisable
Range of			Wtd. Avg.	Wtd. Avg.				Wtd. Avg.	Wtd. Avg.
Exercise			Remaining	Exercise				Remaining	Exercise
Prices	Number		Life	Price		Number		Life	Price
$10-$29		2.5	1 yr		$29.92		2.5	1 yr		$29.92
$30-$39		5.3	1.9 yrs		$37.83		5.3	1.9 yrs		$37.83
$40-$49		55.2	5.4 yrs		$46.52		45.7	4.8 yrs		$46.73
$50-$54		37.5	6.8 yrs		$51.45		27.6	5.7 yrs		$51.29
$10-$54		100.5	5.6 yrs		$47.49		81.1	4.8 yrs		$47.18

Range of		Pretax In-the-Money Value
Exercise		Options	Options
Prices	Number	Outstanding	Exercisable
$10-$29	2.5	$ 56.0	$ 56.0
$30-$39	5.3	75.9	75.9
$40-$49	55.2	363.9	260.9
$50-$54	37.5	28.8	28.8
$10-$54	100.5	$524.6	$421.6

ANHEUSER-BUSCH COMPANIES, INC. 58 2007 ANNUAL REPORT

The following illustrates the impact of stock compensation activity on certain earnings and cash flow amounts for the last three years (in millions, except per share). Unrecognized pretax stock compensation cost as of December 31, 2007 was $100 million, which is expected to be recognized over a weighted average life of approximately 1.5 years.

	2007		2006		2005
Pretax stock compensation expense	$	135.9	$	122.9	$	134.1
After-tax stock compensation expense	$	94.9	$	87.1	$	94.8
Diluted earnings per share impact	$	.13	$	.11	$	.12
Cash proceeds from stock
option exercises	$	282.6	$	121.3	$	135.4
In-the-money value of stock
options exercised	$	148.9	$	97.1	$	122.4
Income tax benefit of stock
options exercised	$	53.8	$	34.3	$	41.6
Income tax benefit in excess of
associated deferred taxes	$	21.3	$	22.6	$	25.9

The income tax benefit the company receives from the exercise of stock options is based on the income realized by optionees upon exercise. For nonqualified stock options, the benefit is recognized as a reduction of current taxes payable and an increase in paid-in-capital with no impact on earnings. For incentive stock options, a tax benefit received that is less than or equal to the hypothetical benefit that would have been received by providing deferred tax assets when the options were expensed is recorded as a reduction of the current tax provision. Any benefit in excess of the hypothetical benefit adjusts paid-in-capital. Because the company’s employee stock options are not traded on an exchange, the fair value disclosed is required to be based on a theoretical option-pricing model. Employees can receive no value nor derive any benefit from holding stock options under these plans without an increase in the market price of Anheuser-Busch stock. Such an increase in stock price benefits all shareholders.

RESTRICTED STOCK

The company awards restricted stock to officers, certain other employees and nonemployee directors. Awards to employees are generally effective in January of each year pursuant to grants approved by the Board of Directors the previous November. Awards to nonemployee directors are granted and are effective in April. Shares of restricted stock either vest ratably over a three-year period (time-based shares), or vest in prespecified percentages at the end of three years based on total BUD shareholder return performance ranked against the S&P 500 companies over that period (performance-based shares). Performance-based restricted shares were granted to members of the company’s Strategy Committee in 2006 and 2007, with all other eligible employees and nonemployee directors receiving time-based shares. In accordance with FAS 123R, compensation expense is recognized over the three-year vesting or performance evaluation period, respectively, based on the grant date fair values. For time-based shares, fair value is equal to the closing market price per the New York Stock Exchange Composite Tape on the effective date of the award. As appropriate under FAS 123R, the fair value of the performance-based shares includes a discount from the grant date market price that reflects the risk of forfeiture due to the performance-based vesting criteria. Following is a summary of restricted stock activity and fair values for the years shown. An additional 236,220 shares of the time-based restricted shares shown below vested in January 2008.

						Time-Based
	Performance-Based			Wtd. Avg.		Restricted			Wtd. Avg.
	Restricted Stock			Fair Value		Stock			Fair Value
Balance, Dec. 31, 2005		—			—		—			—
Granted		168,557			$35.58		409,827			$43.39
Canceled		(53,284	)		$35.58		(17,199	)		$43.39
Balance, Dec. 31, 2006		115,273			$35.38		392,628			$43.39
Granted		127,586			$39.87		341,705			$49.27
Vested		—			—		(131,672	)		$43.39
Canceled		—			—		(11,792	)		$46.52
Balance, Dec. 31, 2007		242,859			$37.83		590,869			$46.73

ADOPTION OF FAS 123R

Prior to 2006, Anheuser-Busch accounted for employee stock compensation in accordance with FAS 123, “Accounting for Stock-Based Compensation,” and elected to recognize no expense related to employee stock compensation, since options were always granted with an exercise price equal to the market price of the company’s stock on the effective date of grant. In December 2004, the Financial Accounting Standards Board issued a revised and renamed Standard regarding stock compensation – FAS 123R. The revised Standard, which was adopted by Anheuser-Busch in the first quarter of 2006, eliminates the disclosure-only election available under FAS 123 and requires recognition of compensation expense for stock options and all other forms of equity compensation, generally based on the fair value of the instruments on the effective date of grant. In order to enhance the comparability of all periods presented and provide the fullest understanding of the impact that expensing stock compensation has on the company’s results, Anheuser-Busch retrospectively applied the new Standard to prior period results.

ANHEUSER-BUSCH COMPANIES, INC. 59 2007 ANNUAL REPORT

Following are amounts pertinent to operations and cash flows for 2005 as they were previously reported and after the retrospective adoption of FAS 123R (in millions, except per share). In connection with the adoption, the company adjusted deferred income taxes (offset in retained earnings) $50.6 million as of December 31, 2006 to eliminate deferred income taxes related to incentive stock options.

	2005
	Including		As
	FAS 123R		Reported
Operating Results
Cost of sales	$	9,606.3	$	9,579.5
Gross profit	$	5,429.4	$	5,456.2
Marketing, distribution and administrative expenses	$	2,837.5	$	2,730.2
Operating income	$	2,486.9	$	2,621.0
Income before income taxes	$	2,057.4	$	2,191.5
Provision for income taxes	$	811.1	$	850.4
Net income	$	1,744.4	$	1,839.2
Basic earnings per share	$	2.24	$	2.37
Diluted earnings per share	$	2.23	$	2.35

Cash Flows
Operating cash flow before the change
in working capital	$	2,651.6	$	2,677.5
Cash provided by operating activities	$	2,701.9	$	2,727.8
Shares issued under stock plans	$	161.4	$	135.5
Cash used for financing activities	$	1,615.8	$	1,641.7

7. Income Taxes

Following are the components of the provision for income taxes for the three years ended December 31 (in millions).

	2007			2006			2005
Current tax provision
Federal	$	853.6		$	789.3		$	712.0
State		150.2			141.1			129.8
Foreign		31.9			15.9			8.4
Total current provision		1,035.7			946.3			850.2
Deferred tax provision/(benefit)
Federal		(54.8	)		(26.1	)		(38.9	)
State		(12.0	)		(10.5	)		(12.7	)
Foreign		0.9			(9.2	)		12.5
Total deferred benefit		(65.9	)		(45.8	)		(39.1	)
Total tax provision	$	969.8		$	900.5		$	811.1

The deferred income tax provision is a noncash expense or benefit resulting from temporary differences between financial reporting and income tax filing in the timing of certain income and expense items, and differences in the bases of assets and liabilities. For Anheuser-Busch, the primary temporary differences relate to depreciation on fixed assets, pension contributions and accrued U.S. taxes on equity income, net of applicable foreign tax credits.

The company’s deferred income tax liabilities and deferred income tax assets as of December 31, 2007 and 2006, are summarized by category in the following table (in millions). Deferred tax liabilities result primarily from income tax deductions being received prior to expense recognition for financial reporting purposes. Deferred tax assets relate primarily to expenses being recognized for financial reporting purposes that are not yet deductible for income tax purposes, and the recognition of underfunded pension liabilities. Deferred income taxes are not provided on undistributed earnings of consolidated foreign subsidiaries that are considered to be permanently reinvested outside the United States. Cumulative foreign earnings considered permanently reinvested totaled $235 million at both December 31, 2007 and 2006.

	2007			2006
Deferred income tax liabilities
Fixed assets	$	1,755.2		$	1,789.1
Accrued net U.S. taxes on equity earnings		241.5			210.6
Accelerated pension contributions		177.4			234.6
Other		251.3			217.4
Total deferred income tax liabilities		2,425.4			2,451.7
Deferred income tax assets
Deferred retirement benefits		591.9			713.8
Stock compensation		315.7			309.3
Spare parts and production supplies		78.9			79.4
Compensation-related obligations		67.2			70.4
Other		169.2			184.7
Valuation allowances		(50.0	)		(47.4	)
Total deferred income tax assets (1)		1,172.9			1,310.2
Net deferred income tax liabilities	$	1,252.5		$	1,141.5

Note 1: Deferred income tax assets of $62.1 million and $53.0 million, respectively, are classified in other current assets at December 31, 2007 and 2006.

Reconciliation between the U.S. federal statutory income tax rate and Anheuser-Busch’s effective income tax rate for the three years ended December 31 is presented below.

	2007		2006		2005
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	3.4		3.7		3.7
Impact of foreign operations	4.4		2.8		0.7
Other items, net	(2.8	)	(2.0	)	—
Effective income tax rate	40.0	%	39.5	%	39.4	%

ANHEUSER-BUSCH COMPANIES, INC. 60 2007 ANNUAL REPORT

Effective January 1, 2007, Anheuser-Busch adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” To comply with the Interpretation, Anheuser-Busch initially reclassified $102.6 million of tax liabilities from current to noncurrent on the balance sheet and also separately recognized $53.1 million of deferred tax assets which had previously been netted against tax liabilities. The company made no adjustments to retained earnings related to adoption. The following table shows the activity related to unrecognized tax benefits during 2007 (in millions). It is anticipated that settlements in foreign tax jurisdictions will reduce gross unrecognized tax benefits by approximately $12.0 million in 2008, with net unrecognized tax benefits remaining unchanged due to the offset of U.S. foreign tax credits. Of the unrecognized tax benefits shown below, $51.5 million would reduce the company’s effective income tax rate if recognized.

	2007
Unrecognized tax benefits, beginning of year	$	96.8
Additions based on current year tax positions		30.9
Additions for prior year tax positions		9.7
Reductions for prior year tax positions		(16.8	)
Settlements with tax authorities		(0.5	)
Lapses in statutes of limitations		(9.0	)
Unrecognized tax benefits, end of year	$	111.1

The company’s policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. Interest is computed on the difference between the company’s uncertain tax benefit positions under FIN 48 and the amount deducted or expected to be deducted in the company’s tax returns. The company had $8.1 million and $7.8 million of accrued interest related to uncertain tax positions at December 31, 2007 and 2006, respectively. Interest expense recognized in 2007 was not material.

The principal jurisdictions for which Anheuser-Busch files income tax returns are U.S. federal and the various city, state, and international locations where the company has operations. The company participates in the IRS Compliance Assurance Process program for the examination of its U.S. federal income tax returns, and examinations are substantially complete through 2006. City and state examinations are substantially complete through 2002. The status of international tax examinations varies by jurisdiction. The company does not anticipate any material adjustments to its financial statements resulting from tax examinations currently in progress.

8. Debt

The company uses SEC shelf registrations for efficiency and flexibility when issuing debt, and currently has registered debt available for issuance as a well-known seasoned issuer. Gains or losses on debt redemptions (either individually or in the aggregate) were not material for any year presented. The company has the ability and intent to refinance its entire debt portfolio on a long-term basis, including a $2 billion committed revolving credit agreement in support of its commercial paper borrowing, and therefore classifies all debt as long-term. Debt at the end of the year consisted of the following for the year shown (in millions).

	2007			2006
U.S. dollar notes due 2008 to 2023,
interest rates from 4.375% to 7.5%	$	4,355.4		$	3,540.7
U.S. dollar debentures due 2009 to 2043,
interest rates from 5.75% to 9.0%		3,150.0			2,900.0
Commercial paper, interest rates of 4.33%
and 5.39%, respectively, at year-end		1,038.2			658.4
Industrial revenue bonds due 2009 to 2047,
interest rates from 4.55% to 7.4%		283.9			269.4
Medium-term notes due 2010, interest rate 5.625%		200.0			200.0
Chinese yuan-denominated bank loans due
2008 to 2011, interest rates from 5.51% to 7.29%		21.9			32.0
Miscellaneous items		111.1			72.4
Unamortized debt discounts		(20.2	)		(19.4	)
Total debt	$	9,140.3		$	7,653.5

The company’s 5.49% fixed rate U.S. dollar notes ($100.0 million notional value) were swapped to a floating LIBOR-based rate when issued. The effective interest rates for this debt were 5.19% in 2007 and 4.98% in 2006, with year-end rates of 4.92% and 5.25%, respectively.

The weighted-average interest rates for commercial paper borrowings during 2007, 2006 and 2005 were 5.16%, 5.00% and 3.31%, respectively. The company has in place a single committed $2.0 billion revolving credit agreement that expires in October 2010 to support the company’s commercial paper program. The agreement is syndicated among 17 banks, has no financial covenants and does not designate a material adverse change as a default event or as an event prohibiting a borrowing. Credit rating triggers in the agreement pertain only to annual fees and the interest rate applicable to any potential borrowing, not to the availability of funds. There have been no borrowings under the agreement for any year shown. Annual fees for the agreement were $1.0 million in both 2007 and 2006 and $1.2 million in 2005. Commercial paper borrowings of up to $2.0 billion are classified as long-term, as they are supported on a long-term basis by the revolving credit agreement. Any commercial paper borrowings in excess of $2.0 billion will be classified as short-term.

ANHEUSER-BUSCH COMPANIES, INC. 61 2007 ANNUAL REPORT

In February 2008, the company entered into a new, $500 million, 364-day revolving credit agreement to provide an additional source of short-term support for its commercial paper program as necessary. The agreement is cancellable by Anheuser-Busch or its bank syndicate without penalty anytime prior to the end of its 364-day term. The company may also extend the term of outstanding borrowings for an additional year.

9. Supplemental Cash Flow Information

Accounts payable include $120 million and $105 million of outstanding checks at December 31, 2007 and 2006, respectively. Supplemental cash flow information for the three years ended December 31 is presented in the following table (in millions).

	2007			2006			2005
Cash paid during the year
Interest, net of interest capitalized	$	454.8		$	433.2		$	436.0
Income taxes	$	936.6		$	920.2		$	814.7
Excise taxes	$	2,298.9		$	2,252.3		$	2,217.3

Change in working capital
(Increase)/Decrease in current assets:
Accounts receivable	$	(85.0	)	$	(38.8	)	$	14.7
Inventories		(28.6	)		(40.4	)		35.8
Other current assets		(17.4	)		(4.6	)		6.9
Increase/(Decrease) in current liabilities:
Accounts payable		38.2			176.8			54.7
Accrued salaries, wages
and benefits		31.5			91.9			(40.5	)
Accrued taxes		(27.7	)		(22.8	)		3.8
Accrued interest		12.2			0.5			(1.5	)
Other current liabilities		3.5			17.1			(2.9	)
Derivatives fair value adjustment		(7.4	)		6.1			(9.8	)
Working capital adjustment for
acquisition/disposition		(1.4	)		3.0			(10.9	)
Impact of FIN 48 adoption		58.6			—			—
Net (increase)/decrease in
working capital	$	(23.5	)	$	188.8		$	50.3

10. Accumulated Nonowner Changes

In Shareholders Equity

The components of accumulated nonowner changes in shareholders equity, net of tax as of December 31 are summarized

below (in millions).

	2007			2006
Foreign currency translation	$	(347.0	)	$	(452.2	)
Deferred hedging gains/(losses)		0.1			2.1
Deferred securities valuation gains		1.0			1.3
Deferred retirement benefits costs (1)		(576.3	)		(782.0	)
Accumulated nonowner changes
in shareholders equity, net of tax	$	(922.2	)	$	(1,230.8	)

Note 1: Includes FAS 158 adoption impact of $412.0 million in 2006.

Deferred income tax liabilities of $0.1 million and $1.2 million have been recognized for deferred hedging gains as of December 31, 2007 and 2006, respectively. Deferred income tax liabilities of $0.6 million and $0.7 million have been provided for deferred securities valuation gains at the end of 2007 and 2006, respectively, while deferred tax assets of $372.3 million and $504.4 million, respectively, have been recognized for deferred benefits costs for the same periods. The majority of foreign currency translation losses relate to equity investments (primarily Grupo Modelo) whose operations are reported in Anheuser-Busch’s financial statements on a net-of-tax basis. See Note 3 for details of hedging gains and losses recognized in earnings which had previously been deferred in nonowner changes in shareholders equity.

ANHEUSER-BUSCH COMPANIES, INC. 62 2007 ANNUAL REPORT

11. Common and Preferred Stock

COMMON STOCK ACTIVITY

Common stock activity for the three years ended December 31 is summarized below (shares in millions).

	2007			2006			2005
Common Stock
Beginning common stock		1,473.7			1,468.6			1,463.0
Shares issued under stock plans		8.8			5.1			5.6
Common stock		1,482.5			1,473.7			1,468.6
Treasury Stock
Beginning treasury stock		(707.6	)		(690.9	)		(678.0	)
Treasury stock acquired		(53.6	)		(16.7	)		(12.9	)
Cumulative treasury stock		(761.2	)		(707.6	)		(690.9	)
Net common stock outstanding		721.3			766.1			777.7

EARNINGS PER SHARE OF COMMON STOCK

Basic earnings per share are computed by dividing net income by the weighted-average number of shares of common stock outstanding for the year. Diluted earnings per share are computed using the weighted-average number of common shares outstanding, plus an adjustment for the dilutive effect of unexercised in-the-money stock options. Reconciliation between basic and diluted weighted-average common shares outstanding for the three years ended December 31 follows (millions of shares). There were no adjustments to net income for any year shown for purposes of calculating earnings per share.

	2007		2006		2005
Basic weighted-average
shares outstanding		746.3		770.6		777.5
Weighted-average stock option shares		10.8		6.4		5.1
Diluted weighted-average
shares outstanding		757.1		777.0		782.6

COMMON STOCK REPURCHASE

The board of directors has previously approved various resolutions authorizing the company to repurchase shares of its common stock. At December 31, 2007, approximately 61 million shares remained available for repurchase under Board authorizations. The most recent authorization, in December 2006, was approval of a multi-year repurchase of 100 million shares. Authorizations do not specify annual minimum or maximum repurchase amounts and do not expire until fully utilized. The company repurchased 53.6 million common shares in 2007, 16.7 million common shares in 2006 and 12.9 million shares in 2005, for $2.7 billion, $745.9 million and $620.4 million, respectively.

PREFERRED STOCK

At December 31, 2007 and 2006, 40 million shares of $1.00 par value preferred stock were authorized and unissued.

12. Contingencies

The company and certain of its subsidiaries are involved in claims and legal proceedings in which monetary damages and other relief is sought. The company is vigorously contesting these claims; however resolution is not expected to occur quickly, and the ultimate outcome cannot presently be predicted. It is the opinion of management that the ultimate resolution of these claims, legal proceedings and other contingencies, either individually or in the aggregate, will not materially affect the company’s financial position, results of operations or liquidity.

13. Business Segments

The company categorizes its operations into four business segments: U.S. beer, international beer, packaging and entertainment. The U.S. beer segment consists of the company’s U.S. beer manufacturing and import operations; company-owned beer wholesale operations; vertically integrated rice, barley and hops operations; and a short-haul transportation business. The international beer segment consists of the company’s overseas beer production and marketing operations, which include company-owned operations in China and the United Kingdom, administration of contract and license brewing arrangements and equity investments. Principal foreign markets for sale of the company’s products are China, the United Kingdom, Canada, Mexico and Ireland. The company attributes foreign sales based on the location of the distributor purchasing the product. The packaging segment is composed of the company’s aluminum beverage can and lid manufacturing, aluminum recycling, label printing and glass manufacturing operations. Cans and lids are produced for both the company’s U.S. beer operations and external customers in the U.S. soft drink industry. The entertainment segment consists of the company’s SeaWorld, Busch Gardens and other adventure park operations.

Following is Anheuser-Busch business segment information for 2007, 2006 and 2005 (in millions). Intersegment sales are fully eliminated in consolidation. No single customer accounted for more than 10% of sales. General corporate expenses, including net interest expense and stock compensation expense, are not allocated to the operating segments. In 2007, the company changed management reporting responsibility for certain administrative and technology support costs from Corporate to the U.S. beer segment. 2006 and 2005 segment results have been updated to conform to this reporting convention. Corporate results for 2005 have been recast for the retrospective adoption of FAS 123R, which had no impact on the company’s four operating segments.

ANHEUSER-BUSCH COMPANIES, INC. 63 2007 ANNUAL REPORT

	U.S.		International						Corporate &
2007	Beer		Beer		Packaging		Entertainment		Eliminations		(1)	Consolidated
Income Statement Information
Gross sales	$	14,158.7		1,351.7		2,632.8		1,272.7		(427.2	)	$	18,988.7
Net sales - intersegment	$	3.2		0.6		931.9		—		(935.7	)	$	—
Net sales - external	$	12,106.1		1,097.5		1,700.9		1,272.7		508.5		$	16,685.7
Depreciation and amortization	$	749.0		49.8		68.9		103.0		25.5		$	996.2
Income before income taxes	$	2,784.0		93.3		175.8		262.7		(893.1	)	$	2,422.7
Equity income, net of tax	$	2.3		660.1		—		—		—		$	662.4
Net income	$	1,728.4		717.9		109.0		162.9		(602.9	)	$	2,115.3
Balance Sheet Information
Total assets	$	8,142.0		5,880.8		772.6		1,548.3		811.3		$	17,155.0
Equity method investments	$	93.9		3,925.6		—		—		—		$	4,019.5
Goodwill	$	21.2		1,343.3		21.9		288.3		—		$	1,674.7
Foreign-located fixed assets	$	4.5		544.4		—		—		—		$	548.9
Capital expenditures	$	554.4		59.2		72.4		169.4		14.6		$	870.0

	U.S.		International						Corporate &
2006	Beer		Beer		Packaging		Entertainment		Eliminations		(1)	Consolidated
Income Statement Information
Gross sales	$	13,394.2		1,235.6		2,562.3		1,178.5		(412.8	)	$	17,957.8
Net sales - intersegment	$	2.8		—		896.4		—		(899.2	)	$	—
Net sales - external	$	11,388.2		998.2		1,665.9		1,178.5		486.3		$	15,717.1
Depreciation and amortization	$	715.1		51.2		76.9		99.0		46.5		$	988.7
Income before income taxes	$	2,709.2		76.7		145.0		232.8		(886.8	)	$	2,276.9
Equity income, net of tax	$	3.4		585.4		—		—		—		$	588.8
Net income	$	1,683.1		633.0		89.9		144.3		(585.1	)	$	1,965.2
Balance Sheet Information
Total assets	$	7,988.3		5,350.6		781.5		1,479.1		777.7		$	16,377.2
Equity method investments	$	67.8		3,604.6		—		—		—		$	3,672.4
Goodwill	$	21.2		1,283.0		21.9		288.3		—		$	1,614.4
Foreign-located fixed assets	$	4.2		517.7		—		—		—		$	521.9
Capital expenditures	$	516.7		36.9		55.9		157.6		45.4		$	812.5

	U.S.		International						Corporate &
2005	Beer		Beer		Packaging		Entertainment		Eliminations		(1)	Consolidated
Income Statement Information
Gross sales	$	13,067.6		1,165.5		2,383.6		1,084.8		(448.0	)	$	17,253.5
Net sales - intersegment	$	2.7		—		871.1		—		(873.8	)	$	—
Net sales - external	$	11,079.8		932.8		1,512.5		1,084.8		425.8		$	15,035.7
Depreciation and amortization	$	706.6		52.1		83.3		93.9		43.1		$	979.0
Income before income taxes	$	2,630.7		86.5		141.5		205.9		(1,007.2	)	$	2,057.4
Equity income, net of tax	$	—		498.1		—		—		—		$	498.1
Net income	$	1,631.0		551.7		87.7		127.7		(653.7	)	$	1,744.4
Balance Sheet Information
Total assets	$	8,019.0		5,049.2		764.4		1,400.8		1,321.6		$	16,555.0
Equity method investments	$	—		3,373.1		—		—		—		$	3,373.1
Goodwill	$	21.2		1,261.1		21.9		288.3		—		$	1,592.5
Foreign-located fixed assets	$	3.7		510.3		—		—		—		$	514.0
Capital expenditures	$	851.7		72.8		55.0		104.2		53.0		$	1,136.7

Note 1: Corporate assets principally include cash, marketable securities, deferred charges and certain fixed assets. Eliminations impact only gross and intersegment sales. External net sales reflect the reporting of pass-through beer delivery costs reimbursed by independent wholesalers of $423.5 million, $370.9 million and $340.1 million in 2007, 2006 and 2005, respectively.

ANHEUSER-BUSCH COMPANIES, INC. 64 2007 ANNUAL REPORT

SUPPLEMENTAL FINANCIAL INFORMATION

Year Ended December 31 (in millions, except per share)	2007			2006			2005			2004			2003
Barrels of Anheuser-Busch beer brands sold worldwide		128.4			125.0			121.9			116.8			111.0
Gross sales	$	18,988.7		$	17,957.8		$	17,253.5		$	17,160.2		$	16,320.2
Excise taxes		(2,303.0	)		(2,240.7	)		(2,217.8	)		(2,226.0	)		(2,173.5	)
Net sales		16,685.7			15,717.1			15,035.7			14,934.2			14,146.7
Cost of sales		(10,836.1	)		(10,165.0	)		(9,606.3	)		(9,020.0	)		(8,485.1	)
Gross profit		5,849.6			5,552.1			5,429.4			5,914.2			5,661.6
Marketing, distribution and administrative expenses		(2,982.1	)		(2,832.5	)		(2,837.5	)		(2,740.5	)		(2,642.7	)
Gain on sale of distribution rights		26.5			—			—			—			—
Litigation settlement		—			—			(105.0	)		—			—
Operating income		2,894.0			2,719.6			2,486.9			3,173.7			3,018.9
Interest expense		(484.4	)		(451.3	)		(454.5	)		(426.9	)		(401.5	)
Interest capitalized		17.4			17.6			19.9			21.9			24.4
Interest income		3.9			1.8			2.4			4.7			1.7
Other income/(expense), net		(8.2	)		(10.8	)		2.7			38.7			0.4
Income before income taxes		2,422.7			2,276.9			2,057.4			2,812.1			2,643.9
Provision for income taxes		(969.8	)		(900.5	)		(811.1	)		(1,097.5	)		(1,026.3	)
Equity income, net of tax		662.4			588.8			498.1			404.1			344.9
Net income	$	2,115.3		$	1,965.2		$	1,744.4		$	2,118.7		$	1,962.5
Basic earnings per share	$	2.83		$	2.55		$	2.24		$	2.65		$	2.38
Diluted earnings per share	$	2.79		$	2.53		$	2.23		$	2.62		$	2.34
Basic weighted-average common shares		746.3			770.6			777.5			798.9			826.2
Diluted weighted-average common shares		757.1			777.0			782.6			808.5			837.0

Selected unaudited quarterly information for 2007 and 2006 (in millions, except per share).

	Net		Gross		Net		Earnings Per Share
Year Ended December 31, 2007	Sales		Profit		Income		Basic		Diluted
First quarter	$	3,858.4	$	1,383.7	$	517.5	$	.68	$	.67
Second quarter		4,515.4		1,657.5		677.0		.90		.88
Third quarter		4,617.7		1,749.2		706.7		.96		.95
Fourth quarter		3,694.2		1,059.2		214.1		.29		.29
Annual	$	16,685.7	$	5,849.6	$	2,115.3	$	2.83	$	2.79

	Net		Gross		Net		Earnings Per Share
Year Ended December 31, 2006	Sales		Profit		Income		Basic		Diluted
First quarter	$	3,755.6	$	1,337.9	$	499.2	$	.64	$	.64
Second quarter		4,256.0		1,595.3		637.8		.83		.82
Third quarter		4,280.7		1,636.1		637.5		.83		.82
Fourth quarter		3,424.8		982.8		190.7		.25		.25
Annual	$	15,717.1	$	5,552.1	$	1,965.2	$	2.55	$	2.53

ANHEUSER-BUSCH COMPANIES, INC. 65 2007 ANNUAL REPORT

SUPPLEMENTAL FINANCIAL INFORMATION

Year Ended December 31 (in millions, except per share)	2007		2006		2005		2004		2003
Total assets	$	17,155.0	$	16,377.2	$	16,555.0	$	16,173.4	$	14,689.5
Debt	$	9,140.3	$	7,653.5	$	7,972.1	$	8,278.6	$	7,285.4
Common dividends paid	$	932.4	$	871.6	$	800.8	$	742.8	$	685.4
Common dividends paid per share	$	1.25	$	1.13	$	1.03	$	.93	$	.83

FIVE-YEAR CUMULATIVE TOTAL RETURN(1)

(12/31/02 - 12/31/07)

(1)	Assumes $100 invested on December 31, 2002 in Anheuser-Busch Companies, Inc. common stock, the S&P 500 Index and the Russell Top 200, with dividends reinvested quarterly.

(2)	The Russell Top 200 Index is comprised of the 200 largest publicly held United States companies based on market capitalization, and includes Anheuser-Busch Companies.

(3)	CAGR: Compound Annual Growth Rate

	2006		2005			2006 vs. 2005
Gross sales	$	17,958	$	17,254	▲	$	704	▲	4.1	%
Net sales	$	15,717	$	15,036	▲	$	681	▲	4.5	%
Income before income taxes	$	2,277	$	2,057	▲	$	220	▲	10.7	%
Equity income, net of tax	$	589	$	498	▲	$	91	▲	18.2	%
Net income	$	1,965	$	1,744	▲	$	221	▲	12.7	%
Diluted earnings per share	$	2.53	$	2.23	▲	$	.30	▲	13.5	%

	2006		2005		Change
U.S.		102.3		101.1	▲	1.2	%
International		22.7		20.8	▲	9.3	%
Worldwide Anheuser-Busch brands		125.0		121.9	▲	2.6	%
Equity partner brands		31.6		26.4	▲	19.7	%
Total brands		156.6		148.3	▲	5.6	%

	2005		2004		Change
U.S.		101.1		103.0	▼	1.8	%
International		20.8		13.8	▲	50.8	%
Worldwide Anheuser-Busch brands		121.9		116.8	▲	4.4	%
Equity partner brands		26.4		19.3	▲	36.6	%
Total brands		148.3		136.1	▲	9.0	%

	2006			2005			Change
Reported operating margin		17.3	%		16.5	%	0.8 pts.
Impact of litigation settlement		—			0.7		(0.7) pts.
Excluding litigation settlement	17.3		%		17.2	%	0.1 pts.

	2005			2004		Change
Reported operating margin		16.5	%	21.3	%	(4.8) pts.
Impact of litigation settlement		0.7		—		0.7 pts.
Excluding litigation settlement	17.2		%	21.3	%	(4.1) pts.

	2007		2006			2007 vs. 2006
Gross sales	$	18,989	$	17,958	▲	$	1,031	▲	5.7	%
Net sales	$	16,686	$	15,717	▲	$	969	▲	6.2	%
Income before income taxes	$	2,423	$	2,277	▲	$	146	▲	6.4	%
Equity income, net of tax	$	662	$	589	▲	$	73	▲	12.5	%
Net income	$	2,115	$	1,965	▲	$	150	▲	7.6	%
Diluted earnings per share	$	2.79	$	2.53	▲	$	.26	▲	10.3	%

	2005		2004			2005 vs. 2004
Gross sales	$	17,254	$	17,160	▲	$	94	▲	0.5	%
Net sales	$	15,036	$	14,934	▲	$	102	▲	0.7	%
Income before income taxes	$	2,057	$	2,812	▼	$	755	▼	26.8	%
Equity income, net of tax	$	498	$	404	▲	$	94	▲	23.3	%
Net income	$	1,744	$	2,119	▼	$	375	▼	17.7	%
Diluted earnings per share	$	2.23	$	2.62	▼	$	.39	▼	14.9	%

	Income Before Income Taxes				Provision For Income Taxes			Equity Income			Net Income			Diluted Earnings Per Share
2007
Reported		$	2,422.7		$	(969.8	)	$	662.4		$	2,115.3		$	2.79
Gain on sale of Spanish theme park			(16.0	)		6.1			—			(9.9	)		(.01	)
Gain on sale of distribution rights			(26.5	)		10.2			—			(16.3	)		(.02	)
Modelo restructuring			—			—			16.0			16.0			.02
Excluding normalization items		$	2,380.2		$	(953.5	)	$	678.4		$	2,105.1		$	2.78

Percentage Change - 2007 vs. 2006
Reported			6.4	%					12.5	%		7.6	%		10.3	%
Excluding normalization items			4.5	%					15.2	%		7.5	%		10.3	%

Percentage Change - 2006 vs. 2005
Reported	10.7	%	18.2	%	12.7	%	13.5	%
Excluding normalization items	6.1	%	18.2	%	8.5	%	9.1	%

Percentage Change - 2005 vs. 2004
Reported	(26.8	)%	23.3	%	(17.7	)%	(14.9	)%
Excluding normalization items	(22.7	)%	29.0	%	(13.4	)%	(10.5	)%

	2008		2009 and 2010		2011 and 2012		2013 and Thereafter		Total
Capital expenditures	$	128	$	82	$	—	$	—	$	210
Operating leases		126		62		37		263		488
Uncertain tax benefits		12		—		—		99		111
Brewing and packaging
materials		509		490		292		228		1,519
Unfunded benefits
payments		140		146		152		402		840
Interest payments		476		871		750		5,216		7,313
Maturities of
long-term debt		305		753		869		7,213		9,140
Royalty arrangements		95		196		204		1,689		2,184
	$	1,791	$	2,600	$	2,304	$	15,110	$	21,805

Changes In Debt
Description	Amount (in millions)			Interest Rate (fixed unless noted)

2007
Increases:

U.S. dollar notes		$	817.2		$500.0 at 5.5%;
					$300.0 at 5.6%;
					$17.2 at 5.54%
U.S. dollar debentures			500.0		6.45%
Commercial paper			379.8	5.16% wtd. avg., floating
Industrial revenue bonds			14.5	5.34% wtd. avg.
Other, net			40.3	Various
Total increases			1,751.8
Decreases:

U.S. dollar debentures			250.0		7.125%
Chinese yuan-denominated notes			10.1	5.74% wtd. avg.
U.S. dollar notes			2.5		5.35%
Other, net			2.4	Various
Total decreases			265.0
Net increase in debt		$	1,486.8
2006
Increases:

U.S. dollar debentures		$	300.0		5.75%
Industrial revenue bonds			17.7	4.98% wtd. avg.
U.S. dollar notes			17.3		5.54%
Other, net			11.3	Various
Total increases			346.3
Decreases:

Commercial paper			444.2	5.00% wtd. avg., floating
U.S. dollar EuroNotes			100.0		4.51%
U.S. dollar notes			52.8		$50.0 at 5.6%;
					$2.8 at 5.35%
Chinese yuan-denominated notes			43.8	5.41% wtd. avg.
Industrial revenue bonds			20.0	6.63% wtd. avg.
Other, net			4.1	Various
Total decreases			664.9
Net decrease in debt		$	318.6

	2007		2006
	High	Low	High	Low
First quarter	$51.75	$47.97	$43.98	$40.42
Second quarter	$54.41	$49.19	$46.96	$41.90
Third quarter	$52.31	$46.95	$49.91	$45.19
Fourth quarter	$53.58	$48.74	$49.38	$46.14

Counterparties rated at least A2 or A	$	30
Counterparties rated A3 and A-	$	15
Counterparties rated below A3 or A-	$	0

	2007		2006
Foreign Currency Risk — Forwards and Options	$	0.6	$	0.7
Interest Rate Risk — Interest Rate Swaps	$	0.4	$	0.3
Commodity Price Risk — Futures, Swaps and Options	$	10.9	$	13.8

Year Ended December 31 (in millions)	2007			2006			2005
Cash Flow from Operating Activities
Net Income	$	2,115.3		$	1,965.2		$	1,744.4
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		996.2			988.7			979.0
Stock compensation expense		135.9			122.9			134.1
Decrease in deferred income taxes		(65.9	)		(45.8	)		(39.1	)
Gain on sale of business		(42.5	)		—			(15.4	)
Undistributed earnings of affiliated companies		(249.1	)		(341.8	)		(288.0	)
Other, net		73.2			(168.6	)		136.6
Operating cash flow before the change in working capital		2,963.1			2,520.6			2,651.6
(Increase)/Decrease in working capital		(23.5	)		188.8			50.3
Cash provided by operating activities		2,939.6			2,709.4			2,701.9
Cash Flow from Investing Activities
Capital expenditures		(870.0	)		(812.5	)		(1,136.7	)
New business acquisitions		(155.7	)		(101.0	)		—
Proceeds from sale of business		41.6			—			48.3
Cash used for investing activities		(984.1	)		(913.5	)		(1,088.4	)
Cash Flow from Financing Activities
Increase in debt		1,708.2			334.8			100.0
Decrease in debt		(265.0	)		(663.3	)		(456.0	)
Dividends paid to shareholders		(932.4	)		(871.6	)		(800.8	)
Acquisition of treasury stock		(2,707.1	)		(745.9	)		(620.4	)
Shares issued under stock plans		304.8			143.5			161.4
Cash used for financing activities		(1,891.5	)		(1,802.5	)		(1,615.8	)
Net increase/(decrease) in cash during the year		64.0			(6.6	)		(2.3	)
Cash, beginning of year		219.2			225.8			228.1
Cash, end of year	$	283.2		$	219.2		$	225.8