estados auditados 2011 cnd

8/12/2019 Estados Auditados 2011 CND

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Cervecera NacionalDominicana, S. A.(Parent Company only)(A Subsidiary of E. Len Jimenes, S. A.)Independent Auditors Report and Financial

StatementsDecember 31, 2011

(A free translation from the original prepared in Spanish)


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To the Shareholders and theBoard of Directors ofCervecera Nacional Dominicana, S. A.Pgina 2

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position ofCervecera Nacional Dominicana, S. A. (Parent Company only) as of December 31, 2011, and its financialperformance and cash flows for the year then ended in accordance with accounting principles generallyaccepted in the Dominican Republic.

Other Matter

The accompanying financial statements are not intended to present the financial position and results ofoperations and cash flows in accordance with generally accepted accounting principles in countries and

jurisdictions other than Dominican Republic. Accordingly the accompanying balance sheet and relatedstatements of income, changes in equity and cash flows and their utilization are not designed for those

who are not informed about Dominican Republic accounting principles, procedures and practices.

March 12, 2012


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The accompanying notes are an integral part of these financial statements.

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Cervecera Nacional Dominicana, S. A.

(Parent Company only)(A subsidiary of E. Len Jimenes, S. A.)

Balance Sheet

Note 2011 2010

Assets

Current assets

Cash and cash equivalents 3 and 24 1,471,797,644RD$ 2,579,884,919RD$

Accounts receivable-trade, net 24 2,105,706,898 2,080,061,896

Other accounts receivable 4 and 24 244,785,756 272,325,618

Inventories 5 1,004,435,365 986,172,218

Non current assets held for sale 7 67,253,600 223,354,318

Prepaid expenses, including prepaid income

tax for RD$375,781,407 (RD$549,245,399 in 2010) 632,998,318 707,438,971

Total current assets 5,526,977,581 6,849,237,940

Non current assetsPrepaid income tax 27,205,946 268,970,309

Deferred income tax 19 96,446,547 -

Investment in Parent Company and subsidiaries 6 13,516,347,273 13,516,347,373.00

Property, plant, and equipment - net 7 8,088,883,381 8,868,569,504

Other assets 8 69,774,625 147,279,761

27,325,635,353RD$ 29,650,404,887RD$

Liabilities and Equity

Current liabilities

Short-term debt 9 and 24 1,976,278,400RD$ RD$ -

Current portion of long term debt 10 and 24 1,630,450,784 268,800,000

Leasing obligations short term 11 and 24 18,936,794 15,379,555

Accounts payable 12 1,048,821,827 1,020,456,111

Dividends payable 4,166,512 4,181,710Other current liabilities 13 and 24 1,953,133,872 2,184,093,836

Total current liabilities 6,631,788,189 3,492,911,212

Non current liabilities

Long-term debt 10 and 24 7,646,605,660 13,926,684,520

Leasing obligations long term 11 and 24 354,913,171 342,791,000

Deferred income tax 19 - 41,150,646

Employee benefits payable 14 139,578,129 113,246,437

Total liabilities 14,772,885,149 17,916,783,815

Equity

Common stock, RD$115 per value

authorized 17,391,305 shares; issued and

outstanding 14,916,011 shares 1,715,341,265 1,715,341,265

Legal reserves 20 171,534,126 171,534,126

Revaluation surplus 1,682,476,005 1,971,363,910

Retained earnings 8,983,398,808 7,875,381,771

Total Equity 12,552,750,204 11,733,621,072

27,325,635,353RD$ 29,650,404,887RD$

At December 31


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Statement of Income

Note 2011 2010

Net sales 16,692,543,939RD$ 17,037,788,455RD$Cost of goods sold (9,364,658,312) (9,464,857,672)

Gross profit 7,327,885,627 7,572,930,783

Marketing expenses 15 (2,211,969,308) (2,263,480,877)General and administrative expenses 16 (1,623,974,166) (2,160,262,077)

(3,835,943,474) (4,423,742,954)

3,491,942,153 3,149,187,829Other income (expenses), net

Dividend income 660,000,000 660,000,000Other income 17 135,238,256 117,741,518Foreign exchange loss (190,353,920) (178,951,090)Interest expense, net (1,612,101,098) (1,772,503,561)Other expenses 18 (217,924,633) (174,512,170)

(1,225,141,395) (1,348,225,303)Income before income tax 2,266,800,758 1,800,962,526

Income tax 19Current (461,933,871) (319,100,995)Credit for tax withheld on dividends paid 400,091,914 315,514,966Deferred 95,262,118 261,412,637Other (2,269,420) 11,021,761

31,150,741 268,848,369Net income for the year 2,297,951,499RD$ 2,069,810,895RD$

Year Ended December 31


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Statement of Changes in Equity

Common Legal Revaluation Retained Total

Shares Reserves Surplus Earnings Equity

Note RD$ RD$ RD$ RD$ RD$

Balances as of December 31, 2009 1,715,341,265 171,534,126 2,151,735,168 6,887,259,482 10,925,870,041

Dividends declared 25 - - - (1,262,059,864) (1,262,059,864)

Net income 2010 - - - 2,069,810,895 2,069,810,895

Change in revaluation surplus

relating to depreciation, net of tax - - (180,349,867) 180,349,867 -

Other (21,391) 21,391 -


Dividends declared 25 - - - (1,446,115,353) (1,446,115,353)

Net income 2011 - - - 2,297,951,499 2,297,951,499

Change in revaluation surplus

relating to depreciation, net of tax - - (161,882,677) 161,882,677 -

Disposals of revalued assets - - (70,723,660) 94,298,214 23,574,554

Impairment of revalued property, plant

and equipment, net of tax - - (56,281,568) - (56,281,568)



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Statement of Cash Flows

2011 2010

Cash flows from operating activitiesNet income 2,297,951,499RD 2,069,810,895RDAdjustments to reconcile net income to net

cash provided by operating activitiesDividends received net of dividends paid (660,000,000) (660,000,000)Depreciation 1,140,312,218 1,209,672,688Foreign exchange loss on borrowings 194,868,437 174,804,306Amortizacin 230,354,137 220,680,871Impairment of non current assets held for sale 69,422,933 -

Loss (Income) on withdraw and sale of property, plant andequipment (PPE) (29,983,152) (2,082,554)

Employee benefits 26,331,692 13,813,087Deferred income tax (95,262,118) (261,412,637)Changes in current assets and liabilities

Accounts receivable-trade (35,445,002) (216,710,759)Other accounts receivable 27,539,862 (51,057,111)Inventories (18,263,147) (83,396,653)Prepaid expenses (517,234,966) (582,169,487)Prepaid income tax 241,764,363 436,603,186Accounts payable 28,365,716 168,132,629Other current liabilities (230,959,964) 85,692,629Total adjustments 371,811,009 452,570,195

Net cash generated by operating activities 2,669,762,508 2,522,381,090

Cash flows from investing activitiesPurchases of PPE (635,587,705) (477,257,528)Proceeds from sale of PPE 326,380,460 27,058,262Other assets 38,772,173 (12,643,122)Purchase of subsidiaries - (1,122,379,598)

Net cash used in investing activities (270,435,072) (1,585,221,986)

Cash flows from financing activitiesProceeds from borrowings 4,574,668,000 2,270,772,299Repayments of borrowings (7,699,588,716) (2,425,276,692)Dividends paid to company's shareholders (386,076,008) (286,230,283)Payments of leasing obligations (15,727,868) (14,170,308)Proceeds from leasing obligations 19,309,881 -

Net cash used in financing activities (3,507,414,711) (454,904,984)

(Decrease) increase net in cash and cash equivalents (1,108,087,275) 482,254,120Cash and cash equivalents at beginning of year 2,579,884,919 2,097,630,799

Cash and cash equivalents at end of year 1,471,797,644RD$ 2,579,884,919RD$



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Statement of Cash Flows

2011 2010

Non-cash flow transactions

Impairment of revalued property, plant and equipment, netof tax 56,281,568RD$ -RD$

Asset reclasification 21,435,698 -Asset received from client 9,800,000 -



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(Parent Company only)(A subsidiary of E. Len Jimenes, S. A.)Notes to the Financial Statements

December 31, 2011

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1. The Entity

Cervecera Nacional Dominicana, S. A. (the Company) is a subsidiary of E. Len Jimenes, S. A.,with its main office at 30 de Mayo Highway km 6 , Santo Domingo. The Company isincorporated under the laws of the Dominican Republic; its main business is brewing anddistributing beers and malts.

The Company headcount as of December 31, 2011 was 3,698 (3,820 in 2010).

These financial statements were approved for issuance by management of the Company onMarch 12, 2012.

2. Basis for Preparation and Presentation of Financial Statements in Accordance withGenerally Accepted Accounting Principles in the Dominican Republic

The General Law of Commercial Societies and Individual Enterprises of Limited Responsibility establishes that companiesoperations have to be booked following generally accepted nationaland international accounting principles and standards, as set by local regulation. TheSuperintendence of Securities of the Dominican Republic (SIV) issued the instruction C-SIV-2011-09-MV on July 5th, 2011 requiring issuers and participants in the securities market to usethe Spanish translation of the International Financial Reporting Standards (IFRS) as theaccounting standards applicable to the Dominican Republic as from January 1st, 2013,establishing a transition period that will commence January 1, 2012. The company is listed onthe SIV and, therefore, is subject to the regulations of the SIV.

In the context of this resolution, the financial statements have been prepared in accordance withgenerally accepted accounting principles in the Dominican Republic under the historical costconvention, as modified by the revaluation of property, plant and equipment. These financialstatements have been prepared for statutory purposes. The Company also prepares consolidatedfinancial statements that are available at the Company. A summary of significant accountingpolicies used is presented below:

Use of EstimatesThe preparation of the financial statements in accordance with generally accepted accountingprinciples in the Dominican Republic requires the use of estimates and assumptions that affectthe reported carrying values of assets and liabilities and the disclosure of contingent assets andliabilities as well as the amounts of income and expense disclosed on the financial statements.These estimates are based on historical experience and various others factors that are believed to

be reasonable under the circumstances. Actual results may differ from these estimates.

Accounting Records, Currency and Transactions in Foreign CurrencyThe Company maintains its accounting records and prepares its financial statements inDominican pesos (RD$). In accordance with local regulations, foreign currency transactions areconducted in the domestic banking market or in the official market in certain cases.


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December 31, 2011

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Transactions in foreign currency are recognized at the prevailing rate at the date of thetransaction. Exchange gains or losses resulting from the payment or collection of foreigncurrency transactions and from the translation into RD$ of assets and liabilities denominated inforeign currency are recognized on the results of the year, as appropriate.

Accounts Receivable, TradeAccounts receivable are recorded at the invoice price less allowances, if applicable, for doubtfulaccounts.

The allowance for doubtful accounts is calculated based on the experience and any unusualcircumstances, which may affect customersability to meet their obligations. The allowance is

recorded on a monthly basis and adjusted at year end based on a detailed analysis of the accountsreceivable portfolio.

Investment in Parent Company and SubsidiariesInvestments in shares of parent company and subsidiaries are carried at cost.

InventoriesInventories are stated at the lower of cost and net realizable value. Cost of finished goods, work inprogress, raw materials and spare parts is determined using standard cost adjusted to weightedaverage cost at the end of each month. New bottles are carried at purchase cost and when they areused they are charged to production cost. Used bottles are recorded at their replacement cost. Anallowance for obsolescence is recorded for slow-moving, damaged or obsolete raw materials, spareparts and supplies. The Company considers both inventory usage and aging when setting aside the

allowance for obsolescence.

Financial Assets and Financial InstrumentsFinancial assets available-for-sale are initially recorded at cost. The Company's policy withrespect to the investment in the parent company is to record it at cost and disclose such amountas a non current asset.

The carrying amount of cash, time deposits, current accounts receivable and payable, accountsreceivable and payable to related companies, and other accounts receivable are stated at valuesthat approximate fair value due to their short- term nature.

Property, Plant and EquipmentLand, buildings and equipment purchased up to January 1, 2006 were recorded at values basedon valuations by external independent appraisers at that date. The effect of this revaluation, net

of deferred income tax was recorded in the Revaluation Surplus account included in equity.

Assets purchased or built after January 1, 2006 was recorded at historical cost.


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December 31, 2011

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Major expansions, renewals and other significant improvements are capitalized when they areincurred. Maintenance and repairs, which do not improve or extend the useful lives of the assets,are charged to current expenses when they are incurred. When assets are sold or otherwisedisposed of, the cost and related accumulated depreciation are removed from the accounts andany gain or loss is reflected in operations.

Depreciation is calculated using the straight-line method to allocate their cost or revaluedamounts to their residual values over their useful lives. For newly acquired items, depreciationcalculation begins one month after the item is put into service. The useful lives used for thecalculation of depreciation are:

Buildings and facilities 15-40 yearsImprovements 30 yearsMachinery and equipment 8-15 yearsFurniture and other 3-15 years

The difference between depreciation based on the revalued carrying amount of the asset anddepreciation based on the assets original cost is transferred from revaluation surplus to retainedearnings.

Impairment of AssetsThe carrying amounts of the Companys assets are reviewed at each balance sheet date todetermine any indication of impairment. If there is an indication of impairment, the assets are

written down to their recoverable amount.

An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverableamount. Impairment losses are recognized in the statement of income, unless the asset has beenrevalued. In those cases the impairment is recorded against the Revaluation Surplus.

Non-Current Assets Held for SaleNon-current assets are classified as assets held for sale when their carrying amount is to berecovered principally through a sale transaction and a sale is considered highly probably. Theyare stated at the lower of carrying amount and fair value less costs to sell.

LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by thelessor are classified as operating leases. Payments made under operating leases (net of anyincentives received from the lessor) are charged to the income statement on a straight-line basis

over the period of the lease.

Leases where a significant portion of the risks and rewards of ownership are transferred to theCompany are classified as finance leases, and are capitalized at the leases commencement at thelower of the fair value of the leased property and the present value of the minimum leasepayments.


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December 31, 2011

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Each lease payment is allocated between the liability and financial charges. The correspondingrental obligations, net of finance charges, are included in other long-term payables, net of theshort term portion. The interest element of the finance cost is charged to the income statement.The property, plant and equipment acquired under finance leases are depreciated using thestraight-line method.

Debt-Related Deferred CostsCost incurred in relation to the issuance of notes and term borrowings are recorded as other assetsand amortized using the straight line method over the life of the obligation.

Provisions

Provisions for legal claims are recognized when the Company has a present legal or constructiveobligation as a result of past events, it is probable that an outflow of resources will be required tosettle the obligation; and the amount has been reliably estimated.

Income TaxesThe current income tax charge is recorded based on managements estimates. Deferred incometax is recognized for the expected future tax consequences of temporary timing differences

between the financial statements carrying amounts and their respective income tax carryingamounts. The Company records deferred income tax using the liability method. Under thismethod, deferred income tax is adjusted to the current tax rate. Reserves on deferred income taxassets are recorded based on managements estimates.

The Company is required to withhold income taxes on dividends paid. The amount withheld isrecorded as an asset and a reduction in income tax payable and is credited to income tax expense.

The provision for income taxes includes current tax payable, the net effect of the deferred tax assetsand liabilities, and the credit for tax withheld on dividends.

Pension BenefitsThe Company has a defined benefit pension plan for some employees. Plan obligations andcontributions are determined on an actuarial basis using a number of assumptions. The Companyamortizes actuarial gains and losses over the employees expected average remaining working lives.The cost of past service is recognized immediately in the statement of income, unless the change inthe pension plan is subject to the employees remaining in the company for a specific period of timeuntil the benefits become irrevocable. In this case the past service cost is amortized using thestraight-line method over the remaining period. The pension plan obligations are shown as part ofthe non current account Employee Benefits Payable.

Additionally, the Company makes contributions to a defined contribution pension plan, inaccordance with the requirements of the Social Security Law No.87-01 dated 9 May 2001 ofDominican Social Security System. This system operates under a scheme of individualcapitalization accounts and consists of contributions to be made by the employer and employees.These contributions are managed by pension fund administrators (AFP). The contributions made

by the Company are recognized as expenses as incurred. When the employees reach retirement,they receive from the AFP the balance of their account plus the financial return.


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December 31, 2011

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4. Other Accounts Receivable

A summary of other accounts receivable, net of allowance for doubtful accounts is as follows:

Note 2011 2010

Related companies 23 99,974,437RD$ 87,889,016RD$

Advances to suppliers 39,481,615 82,400,389

Officers and employees 36,135,133 26,187,659

Claims receivable 5,966,954 29,655,359

Other, net 63,227,617 46,193,195244,785,756RD$ 272,325,618RD$

5. Inventories

A summary of inventories is as follows:

2011 2010

Finished goods 271,800,832RD$ 274,079,231RD$

Work in progress 101,941,995 123,354,322

Raw materials 458,920,915 403,278,086Spare parts and supplies 232,904,233 263,446,386

1,065,567,975 1,064,158,025

Less: Allowance for obsolete, or slow

moving raw materials and spare parts (61,132,610) (77,985,807)

1,004,435,365RD$ 986,172,218RD$


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December 31, 2011

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6. Investment in Parent Company and Subsidiaries

A summary of investments in parent company and subsidiaries at December 31 is shown below:

Note 2011 2010

Investment in parent company E. Len

Jimenes, S. A., 13,200 class C shares

at acquisition costs, with annual dividend

of 10% on per value of the shares issued 12,391,020,000RD$ 12,391,020,000RD$

Investment in subsidiary - InternationalBrewery Limited (100% interest held),

310,221 shares, per value US$100 10 1,122,379,598 1,122,379,598

Investment in subsidiary - Presidente USA

(100% interest held) 2,947,675 2,947,775

Total investments in parent company and

subsidiaries 13,516,347,273RD$ 13,516,347,373RD$


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(Parent Company only)(A subsidiary of E. Len Jimenes, S. A.)Notes to the Financial StatementsDecember 31, 2011

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7. Property, Plant and Equipment

A summary of property, plant, and equipment is as follows:

Land Improvements BuildingsMachinery and

E ui ment

Furnitures and

FixturesFinancial Leases

Construction in

Pro ressTota

RD$ RD$ RD$ RD$ RD$ RD$ RD$ RD$

At December 31, 2011

Opening balance 1,787,428,870 402,649,928 2,489,695,240 7,524,401,731 4,377,886,915 379,942,784 434,735,331 17,396,7

Additions - - - - - - 635,587,705 635,5

Disposals (266,519,240) (8,874,661) (4,714,968) (63,513,174) (165,074,568) - - (508,6

Transfers 289,422 7,960,137 63,978,624 457,513,851 437,674,310 20,652,110 (988,068,454)

Reclassification - - 21,435,698 - - - 21,4

Ending balance 1,521,199,052 401,735,404 2,548,958,896 7,939,838,106 4,650,486,657 400,594,894 82,254,582 17,545,0

Accumulated depreciation

Opening balance - (145,358,458) (1,177,569,762) (4,384,771,326) (2,810,494,113) (9,977,636) - (8,528,1

Depreciation charge - (17,566,004) (107,490,216) (530,986,321) (475,745,025) (8,524,652) - (1,140,3

Disposals - 666,533 2,993,368 51,714,248 156,925,154 - - 212,2

Ending balance - (162,257,929) (1,282,066,610) (4,864,043,399) (3,129,313,984) (18,502,288) - (9,456,1

Net book balance 1,521,199,052 239,477,475 1,266,892,286 3,075,794,707 1,521,172,673 382,092,606 82,254,582 8,088,8

At December 31, 2010

Opening balance 1,491,442,385 409,899,928 2,484,137,116 8,121,733,761 4,305,413,723 379,942,784 407,146,576 17,599,7

Additions 477,257,528 477,2

Disposals (295,497) (7,250,000) (3,211,298) (1,619,182) (60,133,020) - - (72,5

Transfers 296,281,982 - 8,769,422 12,011,157 132,606,212 - (449,668,773)

Other (a) - - - (607,724,005) - - - (607,7

Ending balance 1,787,428,870 402,649,928 2,489,695,240 7,524,401,731 4,377,886,915 379,942,784 434,735,331 17,396,7

Accumulated depreciation

Opening balance - (126,648,666) (1,060,834,949) (4,224,949,809) (2,335,972,632) (1,995,527) - (7,750,4

Depreciation charge - (18,709,792) (119,529,356) (545,796,647) (517,654,784) (7,982,109) - (1,209,6

Disposals - - 2,794,543 1,605,443 43,133,303 - - 47,5

Other (a) - - - 384,369,687 - - - 384,3

Ending balance - (145,358,458) (1,177,569,762) (4,384,771,326) (2,810,494,113) (9,977,636) - (8,528,1

Net book balance 1,787,428,870 257,291,470 1,312,125,478 3,139,630,405 1,567,392,802 369,965,148 434,735,331 8,868,5


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December 31, 2011

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Bank borrowings are secured on a portion of land (Note 11. e).

(a) Non-current assets held for sale

The balance of the account amounting to RD$67.3 million at December 31, 2011 (2010-RD$223.3 million) corresponds mainly to the fair value estimate less selling costs of theBohemia Brewery plant. This plant was put up for sale in late 2010. Despite an actionplan in place to complete a transaction, no sale was finalized; therefore, based on anassessments conducted with the support of specialists, the Company recognized animpairment loss of RD$144.5 million out of which RD$69.4 million were recorded againstcurrent year income and RD$56.3 million against revaluation surplus. The Company is

committed to identifying a buyer for this asset so as to complete its disposition in the nearterm.

8. Other Assets

A summary of other assets is as follows:

2011 2010

Deferred costs related to borrowings, 26,182,215RD$ 66,175,644RD$net of accumulated amortization

Prepaid advertising 22,758,852 56,934,938Other 20,833,558 24,169,179

69,774,625RD$ 147,279,761RD$

9.

Short-Term Debt

A summary of short-term debt is as follows:

2011 2010

Term borrowing, variable interest rate 3.46%per annum, reviewable on monthly basis, 897,518,400RD$ RD$ -due April 30, 2012

Term borrowing, variable interest rate 3.45%

per annum, reviewable on monthly basis,due May 4, 2012 698,760,000 -

Borrowing from related party without maturityvariable interest rate from 10.5% -to 11.5% reviewable on monthly basis 380,000,000

1,976,278,400RD$ -RD$


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December 31, 2011

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The proceed from the short term debt were used, together with funds from operating activities, torepay 71% of the 144 A peso linked notes outstanding.

10. Long-Term Debt

A summary of long-term debt is as follows:

2011 2010

Dominican pesos linked Senior Note

16% coupon, due 2012 (a) 1,563,250,784RD$ 5,409,739,500RD$Senior Note for US$86,313,000, 8%

coupon, due 2014 (a) 3,350,670,660 3,240,190,020

Senior NoteVariable coupon from 8.36% to 11.17%(2010: 7.59% and 8.36%), due 2013 (b) 2,050,000,000 4,050,000,000

Senior Note variable and fixed couponfrom 9.94% to 13%, due 2016 (c) 1,056,620,000 -

Senior Note for US$23,250,000, 5.5% coupon,due 2015 (d) 902,565,000 872,805,000

Senior Note, 12% coupon, due 2015 (d) 286,750,000 286,750,000

Secured Term borrowing, coupon from 9.54% to12.09% (2010: 8.34% and 9.54%) annual,due 2012 (e) 67,200,000 336,000,000

Total debt payable 9,277,056,444 14,195,484,520Less: Current portion 1,630,450,784 268,800,000Long-term portion 7,646,605,660RD$ 13,926,684,520RD$

The maturity of loan- term debt after December 31, 2012 is as follows:

2013 2,050,000,000RD$2014 3,350,670,660

2015 1,189,315,0002016 1,056,620,0007,646,605,660RD$


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December 31, 2011

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Proceeds from this issuance and from the Companysoperations were used to repurchasenotes amounting to US$118,688,000 during 2008. The balance of these notes amounts toUS$86,313,000.

c) On March 23rd, 2011 the Board of Directors approved the issuance of 5 years Corporate Bondsin the Dominican Republic. On April 8th. 2011 both the SIV and the National SecuritiesCouncil approved the issuance for RD$6,750,000,000 in corporate notes, represented by675,000 certificates at RD$10,000 each distributed in 6 tranches (series A through K). Ofthese notes, tranches III (F series) and IV (G and H series) with a total value ofRD$2,000,000,000 have been offered and RD$1,056,200,000 placed in the market. Thesenotes are payable at maturity and yield 13% fixed rate for series F and G and a floating rate of

9.94% for the H series. The proceeds from this issuance and funds from the Companysoperations provided funds for the repurchase of Notes described in subsection b).

In RD$

Issuance date July 11, 2011Initial amount 1,056,620,000RD$Balance as of December 31, 2011 1,056,620,000RD$Interest rates

Bonds F & G series (RD$855.7Million) Fixed 13%

Bonds H serie (RD$200.9Million) Floating 9.94%Maturity July 11, 2016

d)

On May 27, 2010 the Ordinary Shareholders meeting of the Company approved the issuanceof 5 years Corporate Bonds in the Dominican Republic. On September 8, 2010, both the SIVand the National Securities Council approved the issuance of corporate notes accounting toUS$23,250,000, represented by 23,250 certificates at US$1,000 each, equivalent toRD$872,805,000 and RD$286,750,000 represented by 28,675 certificates at RD$10,000each. These notes are payable at maturity and yield 5.5% fixed rate for series A and B notes,and for series C, 12%. Proceeds from this issuance were used for the investment in shares ofthe subsidiary International Brewing Ltd.

e) In January 2007, the Company received a secured term borrowing from Citibank, N.A.,Dominican Republic Branch acting as collateral agent, Banco Popular Dominicano, Banco deReservas de la Repblica Dominicana and Banco BHD amounting to RD$1,494,000,000. This

borrowing has a quarterly updated rate based on the 90-days time deposits rate, as publishedby the Central Bank, with a 20% legal reserve adjustment plus a 250bps spread. Both parties

agreed on a fixed 12% rate through July 2008, while during 2011 the rate was between 9.54%and 8.34% (2010: 8.34% and 9.54%). This loan is payable in 20 equal quarterly installments.The balance of this borrowing was RD$67,200,000 at December 31, 2011 (2010:RD$336,000,000). The debt is guaranteed with a first lien on some of the Companys land.

The Companys debts are fully an unconditionally guaranteed by their subsidiaries PresidenteUSA, Inc., and International Brewing Ltd.


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Debt-related deferred costsThe Company incurred in certain costs in connection with the notes and borrowings describedabove. The movement in the debt-related deferred cost is as follows:

December 31, Additions Amortization December 31,

2010 2011 2011 2011

RD$ RD$ RD$ RD$

Local and foreign notes 61,693,644 22,312,517 (36,853,534) 47,152,627

Guaranteed term borrowing 4,482,000 (4,482,000) -

Bridge borrowing and / or lines ofcredit - 11,116,070 (11,116,070) -

66,175,644 33,428,587 (52,451,604) 47,152,627

December 31, Additions Amortization December 31,

2010 2011 2011 2011

RD$ RD$ RD$ RD$

Local and foreign note 94,072,140 - (32,378,496) 61,693,644

Guaranteed term loan 8,964,000 - (4,482,000) 4,482,000

Bilateral Term loan 2,013,600 - (2,013,600) -105,049,740 - (38,874,096) 66,175,644

The prepayments described in subsections a) and b) resulted in anticipated amortizations forRD$8,975,140 and a premium on the par value of the Notes amounting to RD$250,420,436. Theanticipated amortization and the premium are included in the statement of income as part of theFinancial Expenses, Net. The long term outstanding balance is shown in the Balance Sheet asOther Assets and the short term outstanding balance as Anticipated Net Financial Expenses.

Debt covenantsThe Companys credit facilities contain a number of covenants including but not limited to thefollowing:

- Use of loan proceeds as determined by the agreement- Limits on capital expenditures and restrictions on purchase, sale, transfers and other

disposition of property, plant and equipment

- Limitations on financial indebtedness- Restrictions on dividends, including a limit in the amount of payable dividend,- Financial covenants, as follows: maximum leverage ratio, interest coverage ratio and

minimum net worth to be at least 100% of net worth at closing date 2006- Limits on creating or assuming liens on property.


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11. Financial Leases

A summary of financial leases is as follows:

2011 2010

Long term leasing obligationUS$9,630,344 (2010:US$9,541,038), interest rateprime + spread de 2.75% in US$ 373,849,965RD$ 358,170,555RD$

Less: Current portion 18,936,794 15,379,555Long-term portion 354,913,171RD$ 342,791,000RD$

The company signed a leasing agreement for its Santiago distribution center. The total leaseamounts to US$ 10,050,502 with an interest rate of prime plus a spread of 2.75% (reviewed every90 days). The contract calls for 120 equal monthly installments of US$ 80,917 (including principaland interest) starting August 2009. During 2011 the Company made an addendum of the contractto include leasehold improvements made by the owner. This resulted in an increase of US$6,780in the lease payments without modifying the remaining contract clauses. Payments in arrears aresubject to interest at a 2% monthly rate.

The maturity of financial lease obligations after December 31, 2012 is as follows:

2013 20,104,772RD$2014 21,344,7912015 22,661,291

2016 24,058,9892017 25,542,8952018 forward 241,200,433

354,913,171RD$

12. Accounts Payable

A summary of accounts payable is as follows:

Note 2011 2010

Account payable trade

Local 747,253,461RD$ 724,013,505RD$

Foreign 117,297,727 89,653,113

864,551,188 813,666,618

Related companies 23 62,581,177 80,359,411

Other accounts payable 121,689,462 126,430,0821,048,821,827RD$ 1,020,456,111RD$


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13. Other Current Liabilities

A summary of other current liabilities is as follows:

2011 2010

Accumulated taxes

Consumption excise tax 891,847,099RD$ 884,023,414RD$

Value added tax 362,292,974 339,054,650

Dividends withholding tax 139,818,198 105,198,702

Income tax withheld and other 67,726,564 68,794,0971,461,684,835 1,397,070,863

Interest payable 254,872,659 437,481,719

Bonus and others 66,160,388 256,792,126

Advertising 20,393,706 25,003,437

Others 150,022,284 67,745,6911,953,133,872RD$ 2,184,093,836RD$

14. Employee Benefits Payable

A summary of employee benefits payable is as follows:

2011 2010

Pension plan RD$ 127,976,908 RD$ 101,587,765

Pension funds administrators 7,503,030 7,560,481

Other 4,098,191 4,098,191139,578,129RD$ 113,246,437RD$

Pension Plan

The Company has a retirement pension plan for certain executives and employees. The planparticipants were originally the employees with 10 or more years of service and 45 years of age orolder as of May 31, 2003.

Effective at December 31, 2011 and in accordance with a resolution of the Board of Directors ofSeptember 22, 2011, employees with 10 or more years of service but with less than 45 years of ageas of May 31, 2003, were included in the plan. The effect of this change was an increase in laborliabilities of RD$169,233,350 that will be amortized over an 8-years period.


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The following table summarizes the plan status (according to the latest actuarial report), togetherwith the related amounts recognized in the accompanying financial statements:

2011 2010

Projected benefit obligation (1,322,981,904)RD$ (1,026,077,068RD$Plan assets at fair market value 973,461,170 1,051,868,251Past service cost 169,233,350 -Prior years unrecognized income (loss) 52,310,476 (127,378,948)

Total liabilities RD$ (127,976,908) RD$ (101,587,765

The assumptions used in the actuarial calculations to determine contributions and expenses of theplan were as follows:

2011 2010

Expected rate of return on plan assets 10.0 % 11.0 %Discount rate 10.5 % 11.5 %Salary increase projection 6.5 % 7.5 %

Charges (credits) to the Companys results related to retirement pensions and return on assets aresummarized below:

2011 2010

Liability opening balance (101,587,765)RD$ (85,924,655)RD$

Net annual cost (28,170,562) (15,570,015)

Adjustments to the plan 1,781,419 (93,095)

Liability ending balance (127,976,908)RD$ (101,587,765)RD$


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15. Marketing Expenses

A summary of marketing expenses is as follows:

2011 2010

Promotion RD$ 762,412,591 RD$ 843,487,739

Advertising 471,696,800 436,684,321

Salaries 175,699,025 171,896,391

Depreciation 165,339,528 195,572,051

Promotional activities 148,055,175 128,740,395

Trade shows - events 87,641,191 72,609,947

Employee benefits 84,606,670 86,486,267Advertising agency fees 61,322,952 59,703,376

Bonus 53,989,572 67,349,167

Technical services - 18,124,663

Royalties 18,044,422 15,806,192

Other 183,161,382 167,020,368

2,211,969,308RD$ 2,263,480,877RD$

16. General and Administrative Expenses

A summary of general and administrative expenses is as follows:

2011 2010Salaries 321,172,831RD$ 231,626,013RD$

Employee benefits 246,621,378 198,491,196

Consultant fees 172,878,128 426,102,156

Public relations 172,211,642 152,562,001

Company insurance 140,485,845 130,243,419

Technical services 105,664,064 485,268,193

Bonus 97,121,355 212,960,833

Depreciation 77,351,094 80,811,903

Donations 66,245,000 64,080,179

Communication and electricity 59,038,239 56,052,232

Repair and maintenance 50,104,384 26,108,678

Car expenses 39,558,648 37,965,977

Other 75,521,558 57,989,2971,623,974,166RD$ 2,160,262,077RD$


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17. Other Income

A summary of other income is as follows:

2011 2010

Sundry sales (glass and CO2) 60,882,074RD$ 65,037,103RD$Gains in sales of property, plant and equipment 29,983,152 22,479,314Reimbursement from insurance claims 6,903,552 2,399,574Tax refund 6,757,293 -

Warehouse rental payments 4,357,695 5,066,668Other 26,354,490 22,758,859

135,238,256RD$ 117,741,518RD$

18. Other Expenses

A summary of other expenses is as follows:

2011 2010

Impairment of assets held for sale 69,422,933RD$ -RD$Losses on claims to suppliers 60,755,595 23,283,870

Value added tax on free goods to customers 59,240,143 -Sundry taxes 13,254,275 13,668,777Losses on disposals of fixed assets - 13,289,453Tax compensation on Christmas bonus - 96,059,805Others 15,251,687 28,210,265

217,924,633RD$ 174,512,170RD$

19. Income Taxes

Law 139-11 enacted on June 24, 2011 imposed an increase to 29% (2010: 25%) for a two yearperiod in the corporate income tax rate.

Section V of the Tax Code establishes a 1% annual tax applicable on the carrying value of assets net

of depreciation, amortization and allowances for doubtful accounts. Investments in shares,prepaid taxes, and revaluation of fixed assets, rural lands and agricultural related constructionsare excluded from these calculations. The resulting tax is a minimum tax or alternative to theincome tax. Taxpayers are required to pay the higher of both taxes annually.


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The reconciliation of the tax provision per statutory rate to the tax expense per the statement ofincome is as follows:

Amount Income Tax Amount Income TaxRD$ Rate RD$ Rate

Tax provision at statutory rate onincome before income tax 657,372,220 29.0% 450,240,632 25.0%

Permanent differencesIndexacin de activos no monetarios (15,448,584) -0.7% (9,455,109) -0.5%Dividendos ganados (191,400,000) -8.4% (165,000,000) -9.2%

Law benefits Pro-Industria (66,239,822) -2.9% (23,336,844) -1.3%Other (a) 134,234,081 5.9% 50,256,750 2.8% (138,854,325) -6.1% (147,535,203) -8.2%

Temporary differences

Depreciation of f ixed assets revaluation 62,594,636 2.8% 60,123,752 3.3%

Depreciation in excess (66,465,637) -2.9% (48,068,383) -2.7%

Provision for vacation and bonus (1,549,140) -0.1% 3,310,543 0.2%

Reserve for inventories (4,807,667) -0.2% (1,603,241) -0.1%

Provision for pension plan 7,652,851 0.3% 3,915,778 0.2%

Other (a) (54,009,067) -2.4% (1,282,883) -0.1%

(56,584,024) -2.5% 16,395,566 0.9%Income tax per statement of income 461,933,871 20.4% 319,100,995 17.7%

2011 2010

(a)

Includes the net effect of non-taxable income and non-tax deductible items.

Deferred income taxes are broken down as follows:

Balance as of Effect in income Effect Balance as of

2010 statement in revaluation 2011

Reserve for inventories RD$ 19,496,452 RD$ (1,767,995) RD$ - RD$ 17,728,457

Reserve for doubtful accounts 1,702,091 4,022,565 - 5,724,656

Foreign exchange (573,275) 573,275 - -

Provision for pension plan 13,827,105 6,597,286 - 20,424,391

Provision for vacation 17,006,903 1,171,965 - 18,178,868

Fixed assets category 1, 2 y 3 564,511,381 30,704,130 - 595,215,511

Revaluation of fixed assets (1) (657,121,303) 53,960,892 42,335,075 (560,825,336)(41,150,646)RD$ 95,262,118RD$ 42,335,075RD$ 96,446,547RD$

(1) The effect of deferred income tax on the revaluation of fixed assets is disclosed as a decreaseof the revaluation surplus of fixed assets in equity.


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20. Equity

Legal ReservePursuant to the Companies Act, annual allocations of at least 5% of net income are required to beset aside to the legal reserve, until its balance equals 10% of the outstanding capital. This reserveis not available for dividend distribution. As of December 31, 2011 and 2010, the legal reservereached the required minimum level.

Revaluation Surplus of Fixed AssetsIn accordance with article 45 of the Companies Act, the revaluation surplus will be part of equityand cannot be distributed as dividends until the revalued asset is disposed of. Retained earnings

as of December 31, 2011 includes RD$1,572,755,119 (2010: RD$1,356,911,548) related todepreciation recorded in connection to revaluation surplus and that amount cannot be distributedas dividends.

EquityOn August 31, 2010, the shareholders changed the Companysbylaws in order to comply with thechanges introduced by the Companies Act. Pursuant to these changes the Company thatpreviously was a Compaa por Acciones (Company by shares)became a Sociedad Annima(Corporation)and increased the authorized capital to RD$1,715,341,265, divided into 14,916,011common shares with a par value of RD$115.00 each. As of December 10, 2011, 14,916,011 shareshad been issued and paid.

21. Commitments and Contingencies

Royalty Agreements

a) The company signed technical assistance agreements and obtained exclusive rights (shared-advertising included) from Bavaria St Pauli Brauerei AG to manufacture and sell Lowenbrau,a malt extract. The Company recorded expenses related to this contract amounting toRD$15,261,837 during the year ended at December 31, 2011 (2010: RD$14,460,224).

b) During 2010 the Company signed a 10 year trademark contract (shared-advertising included)with Royal Unibrew, for manufacturing and selling Vitamalt in the Dominican Republic. TheCompany pays a royalty calculated based on 7% of net sales. The Company recorded expensesrelated to this contract amounting to RD$2,782,585 during the year ended December 31, 2011(2010: RD$1,345,968).


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23. Related Party Transactions

A summary of transactions and balances with related parties is as follows:

2011 2010Related parties transactions

ForeignMarketing services RD$ 138,259,931 RD$ 124,072,858Technical services billed 27,253,912 4,963,003

LocalesTechnical services received 4,507,999 398,718,195Technical services billed 11,691,894 2,881,379Purchase of packing materials 424,668,384 516,924,210Purchase of finished goods 105,386,869 115,645,090Transportation services 126,914,949 175,881,210Purchase of fixed assets - 31,218,979Sale of goods 16,235,924 31,681,461Dividends income 660,000,000 660,000,000Dividends declared 1,208,030,611 1,054,277,548Contributions to charity 55,000,000 56,000,000Interest received 20,361,667 -interest paid 19,280,975 15,033,810

BalanceBank accounts 260,808,642 312,094,147Time deposits - 401,019,250Borrowings 380,000,000 -Accounts receivable 99,974,437 87,889,016

The following is a summary of significant related party transactions included in the statement ofincome for each year:

a) The Company had a share services agreement with Empresas Leon Jimenes, S. A. (EMLJ), anaffiliated company, by which EMLJ provided managerial, administrative and airtransportation services. Under the agreement, which ended in September 2010, the Company

paid a monthly charge for the actual cost of service plus 3%. The expense amount recordedduring 2010 for this concept was RD$1,684,868.

b) The Company has an agreement with Editorial Padilla, C. por A., an entity controlled bycommon shareholders, for the supply some product labels and other printing services relatedto packaging materials. The agreement is renewable and may be terminated at the option ofany of both parties with 90 days written notice. The purchases under this contract amountedto RD$424,668,384 during 2011 (2010: RD$516,924,210).


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c) The Company has an agreement with Transporte Comercial Julio Batista, S. A., an entitycontrolled by common shareholders, which provides the Company with certain transportationservices. The expense amount recorded for this concept was RD$126,914,949 during 2011(2010: RD$175,881,210).

d) The Company has a 3 years agreement ending in 2014 with La Aurora, S. A. (LASA), an entitycontrolled by common shareholders, to distribute and sell cigars in the Dominican Republic.The Company has an obligation to purchase a minimum volume each calendar year at a priceestablished by LASA that can be modified with a 30-day notice. LASA is the responsible ofadvertising and promotion in the Dominican Republic. Purchases under this contractamounted to RD$105,386,869 during 2011 (2010: RD$ RD$115,645,090).

e) Banco Len, S. A., an entity controlled by common shareholders, provides the Company withbanking services, including payroll services and payments to suppliers, competing with otherbanks that provide similar services.

24. Balances in Foreign Currency

A summary of balances in foreign currency at December 31 is as follows:

US$ RD$ US$ RD$

Assets

Cash 2,262,395 87,826,169 1,060,790 39,822,057

Time deposits 4,594,791 178,369,776 11,712,765 439,697,183Account receivables 5,399,784 209,619,615 5,137,138 192,848,147

Other account receivable 662,011 25,699,253 115,713 4,343,868

12,918,981 501,514,813 18,026,405 676,711,256

Liabilities

Short - term debt 41,120,000 1,596,278,400 - -

Leas ing obligation short term 487,810 18,936,794 409,684 15,379,555

Accounts payable 8,843,507 343,304,959 5,765,338 216,430,789

Long-term debt 109,563,000 4,253,235,660 109,563,000 4,112,995,020

Long term leasing obligations 9,142,534 354,913,171 9,131,353 342,791,000

Other current liabilities 3,876,444 150,483,570 3,307,484 124,162,933

173,033,295 6,717,152,554 128,176,859 4,811,759,297

Net position (160,114,314) (6,215,637,741) (110,150,454) (4,135,048,041)

2011 2010


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EUR RD$ EUR RD$

Assets

Cash 567,627 28,443,802 643,020 32,298,886

Other account receivables 253 12,677 1,279,164 64,252,418

567,880 28,456,479 1,922,184 96,551,303

Liabilities

Accounts payable 588,633 29,496,402 423,425 21,268,642Net position (20,753) (1,039,923) 1,498,759 75,282,662

2011 2010

Foreign currency balances were translated into RD$ at the exchange rates prevailing at year endas follows: US$1: RD$38.82 and EUR1:RD$50.11 at December 31, 2011 (2010: US$1:RD$37.54;EUR1:RD$50.23).

25. Dividends

The Companys shareholders meeting declared dividends amounting to RD$1,446,115,353 during2011 (2010-RD$1,262,059,864). Net dividends paid in cash amounted to RD$386,076,008during 2011 (2010-RD$286,230,283) and RD$ 660,000,000 were compensated against accountsreceivable balances in 2011 y 2010.

estados auditados 2011 cnd

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