Financial Results
for the Six Months Ended June 30, 2016 — Consolidated(Based on Japanese GAAP)
August 3, 2016

Company name

Sapporo Holdings Limited

Security code
Listings
URL

2501
Tokyo Stock Exchange (First Section); Sapporo Securities Exchange
http://www.sapporoholdings.jp/english/

Representative
Contact

Tsutomu Kamijo, President, Representative Director and Group CEO
Toshihiko Umezato, Director of the Corporate Communications Department

Telephone
Scheduled dates:+81-3-5423-7407

Filing of quarterly financial reportAugust 10, 2016

Commencement of dividend payments-

Supplementary information to the quarterly earnings results

Available

Quarterly earnings results briefing heldYes(mainly targeted at institutional
investors and analysts)

1. Consolidated Financial Results for the Six Months Ended June 30, 2016
(January 1 – June 30, 2016)(Amounts in million yen rounded down to the nearest million yen)

<Note>On July 1, 2016, the Company carried out a share consolidation at a ratio of 1 share for 5
shares of the Company’s common stock. Accordingly, values for the items noted below
have been recalculated on the assumption that the share consolidation took place at the
beginning of the previous fiscal year.
・Net income per share・Diluted net income per share
・Number of shares issued at end of period (treasury stock included)
・Number of shares held in treasury at end of period

・Average number of outstanding shares during the period
In addition, the following forecast per-share values for the fiscal year ending December 31,
2016 take into account the share consolidation.
・Dividend per share
・Net income per share1(1) Operating Results(Percentage figures represent year-over-year changes)
Net sales

Operating income

Ordinary income

million yen%

million yen

248,959

1.3

3,048

-

2,620

-

465

(60.0)

245,884

2.5(1,291)-(1,469)

-

1,164

-

Six months ended
June 30, 2016
Six months ended
June 30, 2015%

million yen

Net income%

million yen

Note: Accumulated other comprehensive income
Six months ended June 30, 2016

(9,728) million yen

Six months ended June 30, 2015

5,627 million yen

Net income per
share

Diluted net income
per share

Yen

Yen

Six months ended
June 30, 2016

5.98

-

Six months ended
June 30, 2015

14.95

-

(2) Financial Position
Total assets

Net assets

Shareholders’equity ratio

million yen

million yen%

June 30, 2016

594,879

151,320

24.6

December 31, 2015

620,388

163,82225.5

Note: Shareholders’ equity
June 30, 2016:
146,193 million yen
December 31, 2015: 157,928 million yen

2. Dividends
Dividend per share
Record date or
periodEnd Q1End Q2End Q3Year-end

Full year

Yen

yen

yen

Yen

yen

Year ended
December 31, 2015

—

0.00

—

Year ending
December 31, 2016

—

0.00

—

Year ending
December 31, 2016
(forecast)

—

7.00

7.00

35.00

35.00

Note: No changes were made to dividend forecasts in the six months ended June 30, 2016.

2%

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2016
(January 1 – December 31, 2016)(Percentage figures represent year-over-year changes)
Net income
Net income
Net sales

Operating income

Ordinary income

attributable toper shareowners of the parent

Year ending
December 31,
2016

million yen%

million yen%

million yen%

million yen

565,400

5.9

21,10051.3

20,20052.9

10,500Note: Changes were made to earnings forecasts in the six months ended June 30, 2016: None

4. Other*For details, see "2. Other Information" on page 11.
(1) Changes in significant subsidiaries during the six months ended June 30, 2016: None
(2) Simplified accounting: Yes*Use of simplified accounting methods and/or accounting methods specific to quarterly consolidated
financial statements(3) Changes in accounting policy, changes in accounting estimates, and retrospective
restatement
1) Changes in accordance with amendments to accounting standards etc.: Yes
2) Changes other than 1) above: Yes
3) Changes in accounting estimates: Yes
4) Retrospective restatement: None
Note: For details, see (2) Changes in accounting policy, changes in accounting estimates,
and retrospective restatement, in section “2. Other Information” on page 11 in theaccompanying material.
(4) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):June 30, 2016:
78,794,298 shares
December 31, 2015: 78,794,298 shares
2) Number of shares held in treasury at end of period:
891,933 shares
June 30, 2016:
December 31, 2015: 890,305 shares
3) Average number of outstanding shares during the period:
Six months ended June 30, 2016:

77,903,021 shares

Six months ended June 30, 2015:

77,922,167 shares

3

%

yen

71.9

134.78

*Quarterly review status
The quarterly financial results are not subject to quarterly reviews pursuant to the Financial
Instruments and Exchange Act. The quarterly review of the quarterly financial results
herein had not been completed as of the date of this document.
Appropriate Use of Earnings Forecasts and Other Important Information
This document contains projections and other forward-looking statements based on
information available to the Company as of the date of this document. Actual results may
differ from those expressed or implied by forward-looking statements due to various factors.

4

1. Analysis of Operating Results(1) Consolidated Financial Results for the Six Months ended June 30, 2016
In the first half of 2016 (January 1 – June 30, 2016), the Japanese economy stagnated, in part reflecting theimpact of slowdowns in overseas economies, especially in the emerging Asian economies. Personal
consumption and income levels in Japan have also lost momentum, casting clouds over the second-halfoutlook.
Despite the lackluster economic environment, the SAPPORO Group posted a year-on-year increase insales. The key growth drivers included (1) year-on-year growth in shipments of beer and beer-type beverages
at the Japanese Alcoholic Beverage business, (2) the contribution from an International Business subsidiarythat was consolidated in February 2015, and (3) the contribution from the soymilk business acquired by the
Food & Soft Drinks business in October 2015.
First-half Group profits also improved from a year ago, as (1) shipments of beer and beer-type beverages in
the Japanese Alcoholic Beverage business increased, (2) the Real Estate business maintained highoccupancy rates at its rental properties and therefore increased rental income, and (3) cost reductions andoperating efficiency improvements were seen in all business segments.
As a result of the above factors, in the first half of 2016 the SAPPORO Group posted consolidated sales of¥248.9 billion (up ¥3.0 billion or 1% year over year), operating income of ¥3.0 billion (compared with a ¥1.2
billion loss a year earlier), an ordinary income of ¥2.6 billion (compared with a ¥1.4 billion loss a year earlier),and net income attributable to owners of the parent of ¥ 0.4 billion (down ¥0.6 billion or 60% year over year).
Seasonal Factors
The Group’s operating results exhibit substantial seasonal variation in demand for the products andservices offered by the Japanese Alcoholic Beverages, International Business, Food & Soft Drinks, andRestaurants businesses. As a result, sales in the first quarter, which affect the first half results, tend to belower than sales in the other three quarters.

Japanese Alcoholic Beverages
We estimate that total domestic demand for beer and beer-type beverages in the first half of 2016 fell 2%
from the level seen in the first half of 2015.
Amid such market conditions, the Japanese Alcoholic Beverage business continued its efforts to realize
management’s vision of “Seek to be No.1 by accumulating one-of-a-kind products” and achieve further
growth by constantly providing customers with a unique value proposal and by investing aggressively in thebeer business during 2016, which has been designated as the “first year of a new period of growth in the beerbusiness.”
The Japanese Alcoholic Beverage business’ efforts in the first half produced a 6% year-on-year increase in5

beer shipments in Japan, led by strong sales of canned versions of Sapporo Draft Beer Black Label andYebisu Beer. In the happoshu category, shipments of Goku Zero slipped below the previous year’s level, but
continued strong sales of Mugi to Hop The gold and the successful release of Mugi to Hop Platinum Clear
bolstered sales of our new-genre beer beverages. Overall, first-half shipments of our beer and beer-type
beverages products increased 1% year on year.
In the RTD* category, the high-value-added collaboration products Sapporo Otoko Ume Sour and the
Nectar Sour, as well as Kireto Lemon Sour, all continued to sell well and achieved year-on-year sales growth.
In the wine category, strengthened marketing of domestic and imported fine wines*2 led to higher sales ofPenfolds, an imported wine from Treasury Wine Estates, champagne from Taittinger, and our Grande Polaire
series of domestic wines. However, overall net sales of our imported and domestic wines were about thesame as in the first half of fiscal 2015.
Our spirits business saw its sales rise above the previous year’s first-half result, led by strong sales of
products from major overseas brands, such as Bacardi and Dewars.
Our Japanese liquor business also achieved sales growth during the first half, led by continued strong salesof Imo Shochu Kokuimo, Japan’s No. 1 selling*3 blended imo shochu, and a favorable response to the newly
introduced Kokuimo Red.
Overall, the Japanese Alcoholic Beverages business posted first-half sales of ¥125.7 billion, up ¥4.0 billion
or 3% year on year. The segment posted first-half operating income of ¥1.4 billion, marking a rebound froman operating loss of ¥0.6 billion a year earlier.
*1) RTD, or ready-to-drink, beverages are already-mixed, low-alcohol content cocktail-like beverages that can be consumed as isimmediately after opening.
*2) Fine wines are wines priced in the mid- to high-price range (¥1,500 and higher per bottle).
*3) Based on Intage SRI market research on combined blended imo shochu sales in the supermarket, convenience store, anddirect sales channels from January 2013 to December 2015.

International BusinessIn the North American beer market in the first half of 2016, we estimate that total demand for beer in the
United States increased year on year, with the main driver being demand for imported beers. In Canada,
demand appears to have been on par with the first half of 2015. In Asia, demand appears to be staying on thegrowth track formed by growing populations and relatively stable economic growth.
In this environment, our International Business continued aggressive marketing activities targeting thepremium beer markets in North America and Southeast Asia, the two regions where the business is focusing
its marketing efforts. In addition, we expanded our sales channel in the US fruit juice market.
Our Canadian subsidiary SLEEMAN BREWERIES continued to invest in the marketing of its core premium
brands. As a result, its overall beer sales volume (excluding Sapporo brand beer) held level with the previous
year’s first-half result. In the U.S. market, where Sapporo USA continues its effort to expand its core target

6customer markets from Japanese Americans to the wider Asian-American and general population market
segments, first-half shipments of Sapporo brand beers were down 1% year on year. At our U.S. soft drinks
business, Silver Springs Citrus and Country Pure Foods opened up new sales channels, but sales fell below
the previous year’s first-half result owing to stiffer competition from rival drink makers.
In Southeast Asia, the new versions of Sapporo Premium Beer in bottles and cans introduced in the
Vietnam market in November 2015 continued to sell well, driving overall sales volumes in Vietnam above thelevel achieved a year earlier. In Singapore, we achieved growth in sales volume, thanks to cooperative efforts
with our local subsidiary to expand sales channels to that country's household and commercial markets.
Elsewhere in the region, we increased beer sales volumes in South Korea by leveraging our local partner's
sales network to strengthen sales to both the household and commercial markets. In Oceania, continued
efforts to strengthen sales via licensing agreements with local brewing partners produced a year-on-year gain
in beer sales volumes.
As a result of the efforts noted above, the International Business’s shipments of Sapporo brand products inoverseas markets during the first half of 2016 were 3% higher than the volume recorded in the first half of2015.
However, due to adverse currency-translation effects, International Business’s first-half sales totaled ¥31.6
billion, down ¥3.1 billion or 9% year on year. The segment’s operating loss came to ¥0.3 billion, comparedwith a loss of ¥0.7 billion in the first half of fiscal 2015.

Food & Soft Drinks
We estimate that overall demand for soft drinks in Japan increased 3% year on year in the first half of 2016,
with sales boosted by favorable weather conditions.
In this market environment, the Food & Soft Drinks business increased its efforts to develop new brands
while continuing efforts to strengthen and nurture its core brands.
In the domestic soft drinks business, Kireto Lemon brand put up solid numbers in the first half of 2016. We
continue to challenge new product areas, as indicated by our recent introduction of Açaí-based drinks fromSAMBAZON, the United States No. 1 Açaí brand*1, and our takeover of the Maca no Genki brand from Meiji
Co., Ltd. In addition, our domestic soft drinks business strengthened its Nippon Oolong brand of oolong tea
made from domestic tea leaves only by launching Organic Nippon Oolong. Meanwhile, sales of coffee drinks
fell slightly in the first half, as we held off on the launch of new products, and overall shipments by thedomestic soft drinks business were on par with the first half of 2015.
Lemon-based food product sales expanded 7% year on year, supported in part by higher selling prices
following the September 2015 price increase for Pokka Lemon 100 brand products.
In the instant soup category, we strengthened the lineup of our Jikkuri Kotokoto Kongari Pan series andintroduced two new brands—Spice World and Karaou. Nonetheless, first-half sales of instant soups slipped
2% year on year.

7

Following up on our start of sales of soy milk drinks in October 2015, in April we strengthened our
SOYAFARM Oishisa Sukkiri lineup of soy milk drinks by launching two new products—Zunda and Ōmugi
Wakaba.
At the domestic restaurants business, the Café de Crié coffee shop achieved a year-on-year increase inchainwide sales as a new seasonal menu contributed to steady sales and customer traffic at pre-existing
stores and overall chain size was expanded by the opening of new outlets.
The overseas soft drinks business carried out Chinese new year’s sales campaigns in Singapore andneighboring countries as part of its effort to further penetrate the Southeast Asian market with its POKKA
brand products, especially its tea drinks and non-chilled fruit juice beverages, both of which have alreadysecured top market shares in Singapore*2.
Overall, the Food & Soft Drinks business recorded sales of ¥64.9 billion in the first half, up ¥1.0 billion or 2%
year on year. The first-half operating loss came to ¥0.8 billion, less than the ¥1.4 billion loss posted a year
earlier.
*1) Based on SPINS LLC's Category Overview Report 2014/10/05–2015/10/04 FRUITS JUICES (NON-ORANGE), RF
FUNCTIONAL JUICES & BEVERAGES, FROZEN FRUITS & VEGETABLES*2) Based on data from Nielsen Singapore Market Track March 2016 (Copyright 2016, The Nielsen Company)

Restaurants
Japan’s restaurant market stayed on the recovery track in the first half of 2016 despite grappling with adifficult operating environment complicated by rising labor costs and food material procurement prices.
In this environment, the Restaurants business continued to pursue the fulfillment of its philosophy of“Enhancing the Joy of Living” through constant efforts to deliver safe and sound food and service tocustomers while also striving to create restaurants that “deliver 100% satisfaction to customers.”
In Japan, we opened seven new restaurants, with chain expansion focused on moves into newgeographical areas and new store formats. Noteworthy openings included two April openings—a core brand
Ginza Lion pub/restaurant in Hakata, and a Garden Terrace Lion outlet inside the Asahiyama Zoo in
Asahikawa. The latter is our first outlet located inside a zoo. Also, in June we opened CRAFT BEER
KOYOEN, a new format shop in Nagoya. Looking ahead, the Restaurant business should get a boost fromthe reopening of two large flagship stores that have been shut down for an extended period of time due tobuilding redevelopment projects. It also plans to continue expanding the number of outlets.
Also, from June, the Restaurant business’s list of consolidated subsidiaries includes Marushinkawamura
Inc., an operator of 18 restaurants, including the Kushiro and Sapporo Ginrin chains, located primarily in
Sapporo. Meanwhile, three unprofitable outlets were closed in the first half of 2016, bringing the number ofoutlets operating as of end-June 2016 to 200.
The Restaurant business also has 14 shops operating in Singapore as of end-June. In addition to opening
the first Tonkichi Ginza Shokudo outlet in November 2015, we continue to create a chain of locally popular8

restaurants in Singapore that are spreading the reputation of our Ginza Lion brand to the world.
Overall, in the first half of 2016 the Restaurants business posted sales of ¥12.6 billion, down ¥0.1 billion or
1% year on year, and an operating loss of ¥0.0 billion , compared with a loss of ¥0.2 billion in the first half of2015.

Real Estate
Japan’s real estate industry continued to benefit from solid demand in the Greater Tokyo office leasing
market, which has helped to keep vacancy rates at low levels and sustain a moderate recovery in rent levels.
In this environment, our real estate leasing business was able to maintain high occupancy rates at its
properties in the Tokyo Metropolitan area, including Yebisu Garden Place Tower, the business’ core source of
earnings. In addition, the high occupancy rates provided a solid platform for more assertive efforts to increase
rents of existing tenants.
The real estate leasing business also continued to enhance the value of its Yebisu Garden Place
commercial complex through its unceasing efforts to strengthen the property’s brand appeal and raise
convenience levels as a landmark of the stylish and sophisticated Ebisu area. In the complex’s commercial
area, renovation work on the restaurant floor at the top of the Yebisu Garden Place Tower began in May, witha renewal opening planned for this autumn. Our other core property in the Ebisu area, the new Ebisu First
Square, which opened in October 2014, has won high praise from tenants as a highly competitive officebuilding with superior safety features, comfort levels, and environmental performance. The property has
maintained full occupancy since opening and is contributing significantly to the segment's strong earnings
growth thus far in fiscal 2016.
At the real estate development business, construction of the GINZA PLACE, a redeveloped commercial
complex located at the busy Ginza 4-chome intersection, was completed on schedule in June, and we are
now preparing for its grand opening in September. We aim to make this complex a center for the
dissemination of various information from Tokyo’s world-famous Ginza to the world and envision it becoming
a “landmark that gives birth to the Ginza of tomorrow”.
As a result of the efforts outlined above, the Real Estate business posted first-half sales of ¥10.9 billion, up¥1.0 billion or 11% year on year, and operating income of ¥5.1 billion, a year-on-year increase of ¥1.4 billion
or 38%.

9

(2) Review of Consolidated Financial Condition
Consolidated Financial Condition
Consolidated assets as of the end of the first half on June 30, 2016, totaled ¥594.8 billion, a ¥25.5 billion
decrease from the end of the previous fiscal year (December 31, 2015). The decline is mainly attributable todecreases in trade notes and accounts receivable and in investment securities, which more than offset anincrease in merchandise and finished products.
Consolidated liabilities totaled ¥443.5 billion, a ¥13.0 billion reduction from December 31, 2015, primarily
owing to decreases in short-term bank loans, income taxes payable, and liquor taxes payable, which
combined outweighed an increase in current portion of bonds.
Consolidated net assets totaled ¥151.3 billion, ¥12.5 billion less than on December 31, 2015. The
contraction in net assets primarily reflects decreases in unrealized holding gain on securities and in foreign
currency translation adjustments.
Consolidated Cash Flows
Consolidated cash flows for the six months ended June 30, 2016, were as follows.
Operating activities provided net cash of ¥14.8 billion. Cash flow positives, such as a ¥16.1 billion
decrease in notes and accounts receivable, depreciation and amortization of ¥10.9 billion, and an ¥8.5 billion
increase in other current liabilities strongly outweighed the cash flow negatives, which mainly consisted of a
¥12.1 billion decrease in liquor taxes payable, ¥8.0 billion in income taxes paid, and a ¥4.0 billion increase ininventories.
Investing activities used net cash of ¥14.0 billion. Net cash inflows were generated by proceeds from salesof property, plant and equipment (¥0.2 billion), while the major outflows were for purchases of property, plantand equipment (¥8.7 billion), payments for transfer of business (¥1.5 billion), and purchases of intangibles(¥1.2 billion).
Financing activities provided net cash of ¥1.3 billion. Major inflows included ¥13.2 billion from long-termbank loans and ¥9.9 billion from the issuance of bonds. Major outflows were ¥19.6 billion in the repayment oflong-term bank loans and ¥2.7 billion for cash dividends paid.
As a result of the above cash flows, cash and cash equivalents as of June 30, 2016, totaled ¥12.3 billion.

(3) Consolidated Earnings Forecast
The consolidated earnings forecast for the full fiscal year ending December 31, 2016 is unchanged from theforecast announced by the Company on February 10, 2016.

10

2. Other Information(1) Changes in significant subsidiaries during the six months ended June 30, 2016
Not applicable(2) Application of accounting methods specific to the preparation of quarterly consolidated
financial statements(Calculation of tax liabilities)
The Company calculates tax liabilities by producing a reasonable estimate of the effective tax rate after
applying tax-effect accounting to income before taxes for the fiscal year, which encompasses the Six months
ended June 30, 2016, and then multiplying income (loss) before income taxes by this estimated effective tax
rate.

(3) Changes in accounting policies, changes in accounting estimates, and retrospective
restatements(Changes in accounting policies)
The following changes to accounting policies were applied from the first quarter of fiscal year 2016:
Accounting Standard for Business Combinations (Accounting Standards Board of Japan - ASBJ - Statement
No. 21 of September 13, 2013); Accounting Standard for Consolidated Financial Statements (ASBJ
Statement No. 22 of September 13, 2013); and Accounting Standard for Business Divestitures (ASBJ
Statement No. 7 of September 13, 2013). Accordingly, in cases where the parent company continues to havecontrol, differences arising from changes in the Company’s ownership interests in subsidiaries are now
recorded in capital surplus, and acquisition expenses for business combinations are now treated as expenses
in the consolidated financial statements for the year in which they arise. Regarding business combinations
that take place on or after the beginning of the first quarter of fiscal year 2016, any change to the allocation of
the acquisition cost arising from confirmation of the provisional accounting treatment must now be reflected in
the consolidated financial statements for the quarter in which the business combination occurred. In addition,
the presentation of the net income category has been revised and minority interests has been changed to
non-controlling interests. Consolidated financial statements for the first-half of the previous fiscal year and forthe entire previous fiscal year have been restated in order to reflect this change in presentation.
In the first-half consolidated statements of cash flows, cash flows related to the purchase or sales ofsubsidiaries’ shares not resulting in change in scope of consolidation are included in “Cash flows fromfinancing activities”. Cash flows related to expenses incurred in the purchase of subsidiaries’ shares resulting
in change in scope of consolidation as well as cash flows related to expenses incurred in connection with thepurchase or sales of subsidiaries’ shares not resulting in change in scope of consolidation are included in“Cash flows from operating activities”.
Application of the newly adopted accounting standards noted at the outset of this section has been
implemented from the start of the first quarter of fiscal year 2016, in accordance with the transitional

11

provisions in Article 58-2(4) of the Accounting Standard for Business Combinations, Article 44-5(4) of the
Accounting Standard for Consolidated Financial Statements, and Article 57-4(4) of the Accounting Standard
for Business Divestitures.
These changes in accounting policy had no effect on the quarterly operating income, ordinary income, andincome before income taxes reported for the first-half of fiscal 2016.

(Changes to accounting policies difficult to distinguish from changes in accounting estimates)
The SAPPORO Group has in the past applied the declining-balance method for depreciation of property,
plant and equipment (however, the straight-line method was applied to property, plant and equipment of the
Hokkaido Brewery, rental properties acquired since January 1988, Yebisu Garden Place, Sapporo Factory,buildings (excluding fixtures and equipment) acquired since April 1, 1998, Kyushu Hita Brewery, the Gunma
Brewery’s Japanese liquor manufacturing equipment, and Nasu Brewery). However, from fiscal year 2016 allproperty, plant and equipment will be depreciated using the straight-line method.
Group companies Sapporo Breweries Ltd. and POKKA SAPPORO Food & Beverage Ltd. have carriedout aggressive capital investments on the assumption that growth in total demand would deliver early returns
on those investments. However, in recognition of the maturation of our markets and operating environment,
we are now prioritizing stable supply from existing facilities. In the current fiscal year, we plan to invest in new
manufacturing facilities and the renewal of existing facilities to secure additional stable supplies of coreproducts. In preparation for the drafting of the next long-term plan to be implemented from January 2017, wehave examined the current state of usage of the Group’s property, plant, and equipment and plans for future
capital investments. This examination indicates that we will be able to maintain stable utilization of suchdomestic property, plant and equipment, which in turn has led to the decision that using the straight-line
method to evenly distribute the acquisition cost of these assets over their useful lives will lead to more
appropriate calculations of profit and loss in each reporting period.
The change from the declining-balance method to the straight-line method of depreciation reduced
depreciation expense by ¥851 million, had a ¥784 million positive impact on operating income, and added¥790 million to ordinary income and to income before income taxes in the first-half of fiscal 2016.

(4) Additional information(Board Benefit Trust (BBT) for directors, group operating officers of the Company, and some directors of
the Company’s subsidiaries)
Following the approval of shareholders of a resolution at the 92nd Ordinary General Meeting of Shareholders,the Company on May 31, 2016, introduced a new stock-based compensation system (Board Benefit Trust, or
BBT) (hereinafter referred to as the “System”), for directors, group operating officers of the Company, andsome of the directors of the Company’s subsidiaries (excluding outside directors, hereinafter referred to as
the “Group Target Officers”). The new System is designed to increase Group Target Officers’ awareness of12their contributions to improving the performance of the Company over the longer term and to enhancing
corporate value.
1. Overview of System
The Company shall grant points to the Group Target Officers according to their respective positions andperformance achievements. The BBT will then provide the Company’s shares to Group Target Officers
who meet certain conditions in proportion to the points granted to them. In principle, Group Target
Officers will receive the Company’s shares when they retire. The shares to be awarded to Group Target
Officers, including shares for future allocation, shall be purchased using money contributed by theCompany at the time of the System’s establishment, and shall be managed separately as Trust property.
2. Company shares remaining in the Trust
Upon the introduction of the System during the second quarter of the current fiscal year, Trust & Custody
Services Bank, Ltd. (Trust Account E) has acquired shares 754,600 shares of the Company. The bookvalue (excluding incidental costs) of the Company shares now held by the Trust are accounted for astreasury stock in the net assets section of the Company’s balance sheet. As of the end of the second
quarter of fiscal 2016, the book value and total number of treasury shares held by the Trust are,respectively, ¥445 million and 754,600 shares.
With an effective date of July 1, 2016, the Company implemented a consolidation of shares at a ratioof 1 share for each 5 shares of the Company’s common shares. Following this share consolidation, thenumber of shares held by the Trust totaled 150,920.

13

3. Consolidated Financial Statements(1) Consolidated Balance Sheets(millions of yen)

AssetsI Current assets
1 Cash and cash equivalents
2 Notes and accounts receivable - trade
3 Merchandise and finished products
4 Raw materials and supplies
5 Other
6 Allowance for doubtful receivables
Total current assets
II Fixed assets
1 Property, plant and equipment(1) Buildings and structures
Accumulated depreciation
Buildings and structures, net(2) Machinery and vehicles
Accumulated depreciation
Machinery and vehicles, net(3) Land(4) Construction in progress(5) Other
Accumulated depreciation
Other, net
Total property, plant and equipment
2 Intangible assets(1) Goodwill(2) Other
Total intangible assets
3 Investments and other assets(1) Investment securities(2) Long-term loans receivable(3) Other(4) Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets

14

December 31, 2015

June 30, 2016

AmountAmount10,43092,33524,912
13,722
15,028(64)
156,364

12,47474,802
28,825
12,286
16,836(48)
145,176

383,087(213,567)
169,519
227,534(183,165)
44,368105,121
6,637
33,985(22,589)
11,395
337,042

387,131(215,423)
171,708
224,177(181,915)
42,261
105,334
3,347
32,357(21,054)
11,302333,955

30,235
10,74340,97828,868
10,28339,151

61,848
9,016
16,372(1,234)86,002
464,023
620,388

53,1238,802
15,885(1,216)
76,595449,702594,879

Liabilities
I Current liabilities
1 Notes and accounts payable - trade
2 Short-term bank loans
3 Commercial Paper
4 Current portion of bonds
5 Liquor taxes payable
6 Income taxes payable
7 Accrued bonuses
8 Deposits received
9 Other
Total current liabilities
II Long-term liabilities
1 Bonds
2 Long-term bank loans
3 Net defined benefit liability
4 Dealers' deposits for guarantees
5 Other
Total long-term liabilities
Total liabilities
Net Assets
I Shareholders' equity
1 Common stock
2 Capital surplus
3 Retained earnings
4 Treasury stock, at cost
Total shareholders' equity
II Accumulated other comprehensive income
1 Unrealized holding gain on securities
2 Deferred hedge gains
3 Foreign currency translation adjustments
4 Remeasurements of defined benefit plans
Total accumulated other comprehensive income
III Non-controlling Interests
Total net assets
Total liabilities and net assets

15

December 31, 2015

June 30, 2016

AmountAmount36,77265,822
17,00010,00033,903
6,114
2,219
8,824
52,986
233,643

37,87859,82915,00020,00021,642
1,845
1,795
8,544
55,660222,197

50,00091,9197,636
32,83340,533
222,921456,565

50,22893,7306,946
33,13737,317221,361443,558

53,88645,91335,189(1,595)
133,394

53,88646,08932,895(1,776)
131,096

23,926(11)(1,255)
1,874
24,533
5,894
163,822620,388

18,293(29)(4,919)1,752
15,097
5,127
151,320594,879

(2) Consolidated Statements of Income

I Net sales
II Cost of sales
Gross profit
III Selling, general and administrative expenses
1 Sales incentives and commissions
2 Advertising and promotion expenses
3 Salaries
4 Provision for bonuses
5 Retirement benefit expenses
6 Other
Total selling, general and administrative expenses
Operating income (loss)
IV Non-operating income
1 Interest income
2 Dividend income
3 Equity in income of affiliates
4 Gain on valuation of derivatives
5 Other
Total non-operating income
V Non-operating expenses
1 Interest expense
2 Foreign exchange losses
3 Other
Total non-operating expenses
Ordinary income (loss)
VI Extraordinary gains
1 Gain on sales of property, plant and equipment
2 Gain on sales of investment securities
3 Gain on sales of consolidated subsidiaries
4 Subsidy income
Total extraordinary gains
VII Extraordinary losses
1 Loss on disposal of property, plant and equipment
2 Loss on sales of property, plant and equipment
3 Impairment loss
4 Loss on devaluation of investment securities
5 Compensation expenses
Total extraordinary losses
Income before income taxes
Income taxes
Net income
Loss attributable to Non-controlling interests
Net income attributable to owners of the parent
Net income
Other comprehensive income
Unrealized holding gain on securities
Deferred hedge gains (losses)
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests

16

Six months ended June30, 2015
Amount245,884
164,323
81,560(millions of yen)Six months ended
June 30, 2016
Amount248,959
163,238
85,721

16,29812,041
15,848918
1,366
36,37882,852(1,291)

17,646
10,682
15,781
1,040
402
37,12082,672
3,048

107
777
35
59
586
1,567

122
716
8
42
398
1,287

1,153
193
397
1,745
(1,469)

1,059
412
244
1,715
2,620

7,377
27
72
322
7,801

22
5

550
1
1,595
163
140
2,450
3,880
2,822
1,058
(106)
1,164

564
5
108
22
224
925
1,722
1,266
456
(9)
465

1,058

456

4,537
(12)
(526)
570
4,568
5,627

(5,634)(4)(4,423)(121)(10,184)(9,728)5,458
168(8,971)

27(757)

(3) Consolidated Statements of Cash FlowsSix months ended
June 30, 2015
Amount(millions of yen)Six months ended
June 30, 2016
AmountI Cash flows from operating activities
1 Income before income taxes and minority interests
2 Depreciation and amortization
3 Loss on impairment of property, plant and equipment
4 Goodwill amortization
5 Increase (decrease) in net defined benefit liability
6 Increase (decrease) in allowance for doubtful receivables
7 Interest and dividend income
8 Interest expense
9 (Gain) loss on sales of fixed assets
10 (Gain) loss on sales and disposal of fixed assets
11 (Gain) loss on sales of investment securities
12 (Gain) loss on revaluation of investment securities
13 (Increase) decrease in notes and accounts receivable - trade
14 (Increase) decrease in inventories
15 Increase (decrease) in notes and accounts payable - trade
16 Increase (decrease) in accrued consumption taxes
17 Increase (decrease) in liquor taxes payable
19 Increase (decrease) in other current liabilities
20 Other
Sub total
21 Interest and dividends received
22 Interest paid
23 Income taxes paid
24 Income taxes refundable
Net cash provided by (used in) operating activities
II Cash flows from investing activities
1 Purchases of property, plant and equipment
2 Proceeds from sales of property, plant and equipment
3 Purchases of intangibles
4 Payments for purchases of investment securities
5 Proceeds from sale and redemption of investment securities
6 Purchase of affiliates securities
7 Proceeds from sales of affiliate's securities
8 Purchase of subsidiaries' shares
resulting in change in scope of consolidation
9 Collection of sales of subsidiaries' share for prior periods
10 Payments for transfer of business
11 OtherNet cash provided by (used in) investing activities
III Cash flows from financing activities
1 Net increase (decrease) in short-term bank loans
2 Increase (decrease) in commercial paper
3 Proceeds from long-term bank loans
4 Repayment of long-term bank loans
5 Proceeds from issuance of bonds
6 Cash dividends paid
7 Cash dividends paid to minority shareholders
8 Repayment of finance lease obligations
9 Proceeds from minority shareholders
10 Purchase of treasury stock
11 Proceeds from sale of treasury stock
Net cash provided by (used in) financing activities(1,897)
1,136

(660)
26
(1,558)(1,960)(14,058)

3,124(15,000)
14,266(14,811)(2,724)(14)(1,532)
1,738
(11)
0
(14,963)3,882(2,000)13,266(19,617)9,960(2,725)(10)(1,446)
(451)
447
1,305

IV Effect of exchange rate changes on cash and cash equivalents

(97)

(126)

V Net increase (decrease) in cash and cash equivalents

758

1,942

9,748
10,506

10,39912,342

VI Cash and cash equivalents at beginning of period
Ⅶ Cash and cash equivalents at end of period

17

3,880
11,832
1,595
2,014
411
(95)
(885)
1,153
(7,377)
552
(27)
163
16,200(6,356)
1,335(5,845)(12,136)7,326
33
13,774987(1,209)(2,054)
3,185
14,683

1,722
10,945
108
1,943
(902)
(32)
(838)
1,060
(22)
569
(5)
22
16,141(4,057)
1,645(3,121)(12,163)
8,564
1,376
22,958938(1,069)(8,023)18
14,823(12,621)17,060
(895)
(600)
347
(1,384)
1,794(8,766)294(1,279)
(6)
6
(154)
-

(3900)
3,232

(4) Notes on the Going-concern Assumption
Not applicable(5) Segment Information
Ⅰ Six months ended June 30, 2015 (January 1, 2015 – June 30, 2015)
1. Sales, income, and loss by reportable segment(millions of yen)
Reportable segments
Japanese
Alcoholic
Beverages

International Food&
Restaurants
Soft Drinks

Real
Estate

Total

Other *1

Total

Amounts
reported on
Adjustments thestatements
of income *2

Net sales(1) Operating revenues

121,674

34,76363,917

12,831

9,826

243,012

2,871

1,337

54

130

1

1,230

2,754

9,316

123,01234,81764,047

12,832

11,056

245,767

12,187

(602)

(741)

(1,458)

(207)

3,751

742

(0)

(2) Intra-group sales and transfers
Total
Segment income (loss)

245,884
12,070257,955741-

245,884(12,070)(12,070)

245,884(2,033)(1,291)-

Notes:(1) "Other" comprises businesses, such as logistics businesses, that are not included in reportable segments.
(2) Segment income and losses are adjusted based on operating income reported on the quarterly consolidated statements of income for the corresponding period.

2. Reconciliation and main components of differences between income and loss of reportable segments and figures on the statement of income(information on differences)(millions of yen)Segment income (loss)

AmountTotal for reportable segments
Total other losses
Unallocated corporate costs
Intra-segment sales
Operating income on the statement ofincome742(0)(2,007)(26)(1,291)(Significant impairment losses on fixed assets)
In the “Japanese Alcoholic Beverages” business, the book value of the buildings and land has been revalued and lowered to the expected sales price, following thedecision to sell off some welfare facilities. As a result, an impairment loss of 1,394 million yen has been recognized in the second quarter of the financial year 2015.
In the “Food & Soft Drinks” business, the profitability has declined following the review of the production system and thus the recovery of investment is expected tobe difficult. Consequently, the book value of the buildings and of machinery and equipment has been revalued and lowered to the recoverable amount.
Accordingly, 114 million yen impairment loss has been accounted for in the second quarter of 2015.

(Significant changes in the amount of goodwill)In the “International Business” segment, the shares of Country Pure Foods, Inc. has been acquired as at February 24, 2015, and thereby it has been made as theCompany’s consolidated subsidiary. As a result of the consolidation, the amount of goodwill increased by 5,924 million yen in the first quarter of the current
consolidated financial year.The amount of goodwill was calculated on a tentative basis.
In the second quarter of 2015, a provisional accounting has been made, however, the amount of goodwill has been revised by 3,855 million yen.
(Material Gain on negative goodwill)
Not Applicable18

Ⅱ

Six months ended June 30, 2016 (January 1, 2016 – June 30, 2016)

1. Sales, income, and loss by reportable segment(millions of yen)
Reportable segments
Japanese
Alcoholic
Beverages

International Food&
Restaurants
Soft Drinks

Real
Estate

Total

Other *1

Total

Amounts
reported on
Adjustments thestatements
of income *2

Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)

125,755

31,60864,991

12,65010,905245,911

3,048

1,271

52

129

0

1,248

2,702

9,425

127,027

31,66065,12012,65012,153248,613

12,474

1,474

(390)

(802)

(51)

5,184

5,415

(72)

248,959
12,127
261,087
5,342-

248,959(12,127)(12,127)

248,959(2,293)

3,048-

Notes:(1) "Other" comprises businesses, such as logistics businesses, that are not included in reportable segments.
(2) Segment income and losses are adjusted based on operating income reported on the quarterly consolidated statements of income for the corresponding period.

2. Reconciliation and main components of differences between income and loss of reportable segments and figures on the statement of income (information ondifferences)(millions of yen)Segment income (loss)
Total for reportable segments
Total other losses
Unallocated corporate costs
Intra-segment sales
Operating losses on the statement of income

Amount5,415(72)(2,275)(18)
3,048

3. Changes in Reportable Segment, etc.
(Change to depreciation method)
As described in “Changes in accounting policies,” the depreciation method for property, plant and equipment has been changed with effect from the first quarter offiscal year 2016.
This change increases the second quarter segment profit of the Japanese Alcoholic Beverages business by 433 million and the Real Estate business by ¥78 million
over the profit that would have been recorded under the previous method. The change also has a positive effect on earnings of other segments, reducing second
quarter losses by ¥159 million at the Food and Soft Drinks business, ¥84 million at the Restaurants business, and ¥2 million at the Others segment. The change
also reduces Adjustments by ¥26 million.

4. Impairment Loss on Fixed Assets or Goodwill by Reportable Segment(Significant impairment losses on fixed assets)
At the Japanese Alcoholic Beverages business, the book value of certain machinery and equipment has been lowered to the expected recoverable amountfollowing a revision to the business’ production network that lowered the profitability outlook for the business and made full recovery of related investments unlikely.
As a result, an impairment loss of ¥55 million has been recognized on the accounts for the first half of fiscal 2016. In the Food & Soft Drinks business, profitability
declines at certain restaurants operated by the business make the recovery of investment in those outlets unlikely. Accordingly, the book value of the buildings andrelated equipment has been lowered to the expected recoverable amount. As a result, an impairment loss of ¥52 million has been recognized on the accounts forthe first half of fiscal 2016.
(Significant changes in the amount of goodwill)
Not Applicable(Material Gain on negative goodwill)
Not Applicable19

(6)Notes on Significant Changes in the Amount of Shareholder's Equity
Not applicable(7)Subsequent Events(Share Consolidation and change to the number of shares constituting one share unit)
The Company’s Board of Directors at its meeting on February 10, 2016, decided resolved to submit a proposal for the consolidation of shares and achange in the number of shares constituting one share unit to the 92nd Ordinary General Meeting of Shareholders to be held on March 30, 2016. This
proposal was approved by shareholders and took effect on July 1, 2016.
1. Purpose of the share consolidation and change in number of shares constituting one share unit
Japanese stock exchanges have announced the Action Plan for Consolidating Trading Units with the aim of unifying the trading units for the common
stock of all domestic companies listed on Japanese stock exchanges to 100 shares.
As a company listed on the Tokyo Stock Exchange and the Sapporo Stock Exchange, the Company shall respect this intention, decided to change its
trading share unit from 1,000 shares to 100 units. In conjunction with that move, the Company decided to consolidate its common stock at the ratio of 1
share for each 5 shares in order to enhance investment opportunities for individual investors and achieve an appropriate investment unit based on
consideration of changes in stock prices in the medium to long term.
2. Details of the share consolidationa) Type of shares subject to consolidation: Common sharesb) Method and ratio of the consolidation:
Consolidation to be executed on July 1, 2016, at a ratio of 1 share for each 5 shares owned by shareholders of record in the latest shareholder register
as of the close of the last day of June 2016.
c) Share reduction resulting from the consolidation
Total number of outstanding shares before consolidation (as of the last day of June 2016) 393,971,493 shares
Share decrease due to consolidation 315,177,195 shares
Shares outstanding after consolidation 78,794,298 shares
3. Treatment when there is less than one share
If the share consolidation results in fractional shares of less than one share, such shares shall be subject to a bulk sale in accordance with theprovisions of the Companies Act, or the Company shall purchase them as treasury stock. The proceeds of the said sale, etc. shall be distributed to thetarget shareholders in proportion to their respective shareholdings.
4. Details of the change in number of shares constituting one share unit
As of July 1, 2016, the number of the Company’s shares that constitute one trading unit was changed from 1,000 to 100.
5. Impact on per-share information
The impact on per-share information is presented in the relevant section.

20