##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended: December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 for the transition period from  to
 Commission file number: 1-14278
 QUILMES INDUSTRIAL (QUINSA), SOCIÉTÉ ANONYME
 Grand-Duchy of Luxembourg   84, Grand Rue
L-1660 Luxembourg
Grand-Duchy of Luxembourg
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of each class:
    
    Name of each exchange on which registered:American Depositary Shares,
representing Class B shares
    
    New York Stock Exchange,
Luxembourg Stock Exchange
 Securities registered or to be registered pursuant to Section 12(g) of the Act: None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
  Class A shares, without par value
    
    
    631,772,693Class B shares, without par value
    
    
    48,768,241
  o þ
  o þ
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filerþ
  þ o
  o þ




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##### 



TABLE OF CONTENTS
 PageFINANCIAL INFORMATION
    
    
    2FORWARD  LOOKING STATEMENTS
    
    
    3TERMS AND CONVENTIONS
    
    
    1MARKET SHARE INFORMATION
    
    
    5ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    5ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    5ITEM 3. KEY INFORMATION
    
    
    5ITEM 4. INFORMATION ON THE COMPANY
    
    
    20ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    61ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    80ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    90ITEM 8. FINANCIAL INFORMATION
    
    
    93ITEM 9. THE OFFER AND LISTING
    
    
    93ITEM 10. ADDITIONAL INFORMATION
    
    
    96ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    
    
    108ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    111ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES
    
    
    111ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    111ITEM 15. CONTROLS AND PROCEDURES
    
    
    111ITEM 16. [RESERVED]
    
    
    112ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    112ITEM 16B. CODE OF ETHICS
    
    
    112ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    112ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTES
    
    
    112ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE COMPANY
    
    
    112ITEM 17. FINANCIAL STATEMENTS
    
    
    113ITEM 18. FINANCIAL STATEMENTS
    
    
    113ITEM 19. EXHIBITS
    
    
    113SIGNATURES
    
    
    114EX-1.1: ARTICLES OF INCORPORATIONEX-4.10: 2005 LETTER AGREEMENT BETWEEN QUINSA, BAC AND AMBEVEX-4.11: 2006 LETTER AGREEMENT BETWEEN QUINSA, BAC AND AMBEVEX-8.1: LIST OF SUBSIDIARIESEX-12.1: CERTIFICATIONEX-12.2: CERTIFICATIONEX-13.1: CERTIFICATIONEX-15.1: CONSENT OF A.C. NIELSENEX-15.2: CONSENT OF A.C. NIELSEN CHILEEX-15.3: CONSENT OF CCR/IRIEX-15.4: CONSENT OF A.C. NIELSEN URUGUAYEX-15.5: CONSENT OF CIES INTERNACIONAL
  i




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TERMS AND CONVENTIONS
   AmBev
 BAC
 Baesa
 CBN
 CBNSC
 CCBA
 CCBP
 CERVEPAR
 CMQ
 CT
 CTq
 Cympay
 Eco
 Edisa
 Enalbo
 1




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##### Table of Contents



EUSA
 FNC
 FPV
 InBev
 Incesa
 La Luisiana
 Linthal
 Malsaf
 Mosa
 Paresa
 QI(B) QIB
 Salus
  
 FINANCIAL INFORMATION
 Consolidated Financial Statements
 IFRS Lux GAAP U.S. GAAP Consolidated Financial Statements
 2




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FORWARD-LOOKING STATEMENTS
  
    
    our corporate strategy;
    
    our expectations regarding our future performance, revenues, income,
earnings per share, capital expenditures, dividends, liquidity and
capital structure;
    
    our development of new products;
    
    the demand for beer, soft drinks and water;
    
    the supply and availability of barley and malt;
    
    trends affecting our financial condition or results of operations;
    
    our future performance;
    
    our dividend policy;
 3




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
    
    possible future repurchases of our stock;
    
    the relationship between BAC and AmBev, our two largest shareholders;
    
    the reaction of local regulators to BACs decision to sell its
remaining shares in the Company to AmBev, and the potential effects
of their reaction on the Companys future financial performance;
    
    the future impact of competition and regulation;
    
    political and economic conditions in the countries in which we or our
affiliates operate or may operate in the future;
    
    any statements preceded by, followed by or that include the words
believes, expects, predicts, anticipates, intends,
estimates, should, may or similar expressions; and
    
    other statements contained or incorporated by reference in this annual
report regarding matters that are not historical facts.
  
    
    uncertainties relating to political and economic conditions in Argentina
and the other countries of Latin America where we conduct our business;
    
    the rate of inflation and exchange rate risks, particularly, increases
in the exchange rate of the Argentine peso or of the local currencies of
other countries in which we operate, against the U.S. dollar;
    
    restrictions on the ability to exchange local currencies in the markets
where we do business into hard currencies;
    
    the adoption of a restrictive currency transfer policy in the countries
where we conduct our business;
    
    the nature and extent of future competition in our principal markets; and
    
    the factors discussed below under Risk Factors
beginning on page 7.
   4




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##### Table of Contents



MARKET SHARE INFORMATION
 Nielsen Argentina Nielsen Chile CIES A.C. Nielsen
 PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A. SELECTED FINANCIAL DATA
 IFRS Lux GAAP U.S. GAAP
  5




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##### Table of Contents



2004
    
    2005IFRS
    
    IFRS(in
US$ millions except forper share information and Other Data)Income Statement Data:Gross sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    803.0
    
    
    
    1,001.0Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37.8
    )
    
    
    (46.7
    )Net sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    765.2
    
    
    
    954.3Cost of sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (352.5
    )
    
    
    (406.2
    )Gross profit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412.7
    
    
    
    548.1Selling and marketing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180.4
    )
    
    
    (217.2
    )Administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49.8
    )
    
    
    (54.8
    )Other operating income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13.4
    )
    
    
    (2.0
    )Operating profit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169.1
    
    
    
    274.1Other incomeInterest and financial expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30.5
    )
    
    
    (40.7
    )Share of profits of associates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Income (loss) before income taxes, minority
interest and extraordinary items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138.6
    
    
    
    233.5Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33.2
    )
    
    
    (71.9
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105.4
    
    
    
    161.6Profit attributable to equity holders of the
Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81.7
    
    
    
    131.4Equity attributable to minority interest (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.7
    
    
    
    30.2Net income per Class A share (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.072
    
    
    
    0.119Net income per Class B share (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.627
    
    
    
    1.171Net income (loss) per ADS (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.254
    
    
    
    2.342Dividends per Class A share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0157
    
    
    
    0.0353Dividends per Class B share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1570
    
    
    
    0.3529Dividends per ADS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.314
    
    
    
    0.706
 2001
    
    2002
    
    2003
    
    2004
    
    2005U.S. GAAP:Net income (loss)
    
    
    (96.4
    )
    
    
    (121.5
    )
    
    
    120.9
    
    
    
    99.9
    
    
    
    139.6Basic and diluted net income (loss) per ADS(3)
    
    
    (3.39
    )
    
    
    (2.38
    )
    
    
    1.96
    
    
    
    1.80
    
    
    
    2.48Basic and diluted net income (loss) per Class A
common share (Class A share)(3)
    
    
    (0.09
    )
    
    
    (0.11
    )
    
    
    0.09
    
    
    
    0.08
    
    
    
    0.13Basic and diluted net income (loss) per Class B
common share(Class B share) (3)
    
    
    (1.70
    )
    
    
    (1.19
    )
    
    
    0.98
    
    
    
    0.90
    
    
    
    1.24
 2004
    
    2005IFRS
    
    IFRSBalance Sheet Data:Cash and banks and short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120.2
    
    
    
    159.5Total current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287.0
    
    
    
    362.4Total non-current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,025.5
    
    
    
    1,056.7Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,312.5
    
    
    
    1,419.1Short-term loans(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106.8
    
    
    
    96.8Long-term loans(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260.1
    
    
    
    296.0Total liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    735.8
    
    
    
    856.4Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129.8
    
    
    
    72.0Share capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41.7
    
    
    
    34.7Shareholders equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    576.7
    
    
    
    562.7
 2001
    
    2002
    
    2003
    
    2004
    
    2005U.S. GAAP:Shareholders equity
    
    
    295.1
    
    
    
    175.1
    
    
    
    381.5
    
    
    
    340.7
    
    
    
    321.1
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2004
    
    2005Other Data:Total brewing capacity (hectoliters in thousands)
    
    
    
    23,200
    
    
    
    24,440Total beer volume sold (hectoliters in thousands)
    
    
    
    15,376
    
    
    
    16,465Total soft drink capacity (hectoliters in thousands)
    
    
    
    17,300
    
    
    
    17,500Total soft drink and water volume sold (hectoliters
in thousands)
    
    
    
    6,769
    
    
    
    8,532Number of employees
    
    
    
    6,351
    
    
    
    6,649Number of Class A shares (in millions)
    
    
    
    637.1
    
    
    
    631.8Number of Class B shares (in millions)
    
    
    
    70.8
    
    
    
    48.8
 
 1)
    
    Pursuant to the Companys adoption of IFRS, profit for the years 2004 and 2005 are
shown in full. In other words, the distinction between the portion of the years profit
attributable to each of the equity holders of the Company and minority interest is made
separately. Because the percentage of our indirect ownership varies among our various
consolidated subsidiaries, the calculation of the minority interest during any period is a
function of the minority ownership in QI(B), our principal subsidiary (15% until July
2003, 12.4% until July 2005, and 7.05% since then). It is also a function, to a lesser
extent, of the income of each of the operating subsidiaries and the percentage of each
such subsidiarys capital stock owned by minority shareholders during such period. QI(B)s
holdings in its operating subsidiaries range from 99.70% to 100% for the most significant
Argentine subsidiary and Chilean subsidiary, respectively, to as low as 57.97% in Colosas
S.A., a Paraguayan subsidiary.2)
    
    Earnings per share under IFRS (for both 2004 and 2005) are calculated on a basic and
diluted basis, by dividing the profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year, excluding ordinary
shares purchased by the Company and held as treasury shares. See Notes 15 and 26 to our
Consolidated Financial Statements.3)
    
    Under U.S. GAAP, we have presented basic and diluted earnings per share in conformity
with SFAS No. 128 (Earnings per Share) and SEC Staff Accounting Bulletin No. 98 (SAB
No. 98) for all periods. In June 2001, our shareholders approved a capital restructuring
by which (i) the then outstanding number of ordinary shares (68,400,000) were split
ten-for-one and renamed Class A shares and (ii) the then outstanding number of preferred
shares (39,750,089) were converted into ordinary shares on a one for one basis and renamed
Class B shares. As a result, Class B shares have dividends and liquidation rights equal to
ten times the rights of Class A shares. Therefore, we are required to use the two-class
method to report earnings per share for the years ended December 31, 2002, 2003, 2004 and
2005. The two-class method is an earnings allocation formula that determines earnings per
share for each class of common stock according to dividends declared and participation
rights in undistributed earnings. Outstanding shares during the prior periods were
retroactively restated for the stock split mentioned above. Each ADS represents two Class
B shares.4)
    
    Short-term loans represent our current loans and short-term portion of long-term
debt. Long-term loans include the non-current portion of long-term debt due to banks and
notes payable. See Note 18 to our Consolidated Financial Statements for details. B. EXCHANGE RATES
  C. CAPITALIZATION AND INDEBTEDNESS
  D. REASONS FOR THE OFFER AND USE OF PROCEEDS
  E. RISK FACTORS
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Risk Factors Related to the Argentine Economy
 Recent political and economic instability in Argentina has hindered commercial and financial
activities.
   
    
    suspending payments of principal and interest on Argentinas sovereign debt;
    
    abolishing the prior Argentine law that provided for Argentine peso/U.S. dollar parity
and granting the executive branch of government the power to set the exchange rates
between the peso and foreign currencies and to issue foreign exchange regulations;
    
    converting certain U.S. dollar-denominated loans from financial institutions into
peso-denominated debts (pesification) at a one-to-one exchange rate plus an adjustment
for variations in consumer prices (Coeficiente de Estabilización de Referenciaor
Reference Stabilization Index, CER) or in salaries (Coeficiente de Variación Salarial or
Salary Valuation Index,"CVS) and converting U.S. dollar denominated bank deposits into
peso-denominated bank deposits at an exchange rate of P$1.40 per US$1.00, as adjusted by
CER;
    
    converting most U.S. dollar-denominated obligations with non-financial institutions
into peso-denominated obligations, at a one-to-one exchange ratio, plus an adjustment by
CER or CVS, as appropriate, and an equitable adjustment, in certain cases;
    
    restructuring bank deposits and continuing strict restrictions on bank withdrawals and
transfers of funds abroad that were implemented by predecessor administrations;
    
    with limited exceptions, requiring that all foreign currency earned from exports be
deposited into Argentine financial institutions; and
    
    amending the charter of Argentinas Central Bank to permit it to print currency in
excess of the amount of the foreign reserves that it holds, make short-term advances to
the federal government and provide financial assistance to financial institutions that
have liquidity constraints or solvency problems
   8




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Argentinas recent insolvency and default on its public debt resulted in material adverse effects
on our business, financial condition and results of operations as well as the ability of private
companies, including Quinsa, to obtain debt or equity financing.
      9




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The devaluation of the peso creates greater uncertainties as to Argentinas economic future.
    Recent economic and political instability has placed the Argentine financial system at risk.
  10




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corralito
 corralito
   
   Substantial inflation has occurred and may escalate, which would undermine prospects for
economic recovery in Argentina
 11




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WPI
  Risk Factors Related to the Effect on Quinsa of the Economic Situation in Argentina
 Central Bank restrictions on the transfer of funds outside of Argentina could prevent us from
receiving sufficient funds from our Argentine subsidiaries and inhibit the distribution of
dividends and payments on our external debt
    
    
    The prepaid amount may not exceed the present value of the debt. Alternatively, funds
in an amount equal to the prepayment must be disbursed under new financing that does not
exceed the present value of the debt, as long as such funds are exchanged for Argentine
currency on the Argentine foreign exchange markets. In either case, present value is
calculated using a discount rate equal to the rate implied in U.S. currency future
transactions (180 days) carried out in regulated local markets.
    
    If a prepayment is made less than one year in advance of the scheduled payment date,
the amount prepaid can be the face value of the indebtedness.
    
    The terms and conditions of any prepayment made as part of a restructuring may not
result in an increase in the present value (calculated as described above) of outstanding
indebtedness.
  12




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The devaluation of the Argentine peso and the macroeconomic conditions in Argentina have had, and
may continue to have, a material adverse effect on our results of operations
   Risk Factors Relating to Other Countries in Which We Operate
 Latin American economic fluctuations affect our results of operations.
 13




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Recent social and political unrest in Bolivia could affect our results of operations.
  Our subsidiaries have been affected by currency devaluations and exchange rate fluctuations.
   Risk Factors Relating to Quinsa
 Our ability to pay dividends and to service our debt obligations depends primarily upon our receipt
of sufficient funds from our principal subsidiary .
  14




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We face competition that threatens our market share.
  ® ®
 Our business currently is controlled by two principal shareholders; therefore our other
shareholders have little or no influence over shareholder decisions, including the election of
directors
 BAC AmBev InBev
 15




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BAC has agreed to sell all of its Quinsa shares to AmBev and if AmBev acquires sole control over
Quinsa, AmBev may choose to make material changes in the manner in which Quinsas business and
operations are currently conducted
   The current shareholders agreement governing BACs and AmBevs joint control over Quinsa could
materially and adversely disrupt the business affairs of Quinsa and its subsidiaries .
   16




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We periodically negotiate labor contracts and salaries with trade unions. A break-down in
negotiations could result in work stoppages.
  We purchase significant quantities of commodities and raw materials, the prices of which fluctuate
widely .
    We depend to a certain extent on adequate supplies of electricity and natural gas for beer
production. Following the Argentine economic crisis of 2002, the possibility of gas and electricity
shortages in Argentina has increased.
 17




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Our alliance with AmBev and our business could be affected by non-compliance of, legal challenges
to, or changes in, the conditions set forth by the Argentine antitrust authorities in approving
this alliance or by any other possible future antitrust litigation.
     18




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The completion of the sale by BAC of its remaining shares to AmBev could be prevented by materially
adverse decisions of the Argentine antitrust authorities and such an event could adversely affect
our business.
  opinión consultiva
    19




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ITEM 4. INFORMATION ON THE COMPANY
 HISTORY AND DEVELOPMENT
 Luxembourg
  Recent Events
 Debt Restructuring
   Stock Repurchases, Dividends, and Changes to our Fiscal Year
   20




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
    
    In March 2005, we received a substantial dividend payment from QI(B), which was
recorded as a profit in the stand-alone financial statements. This profit allowed us to
pay the proposed dividend for 2004 and to complete the remainder of our repurchase program
announced on March 25, 2004. It also allowed us to acquire further shares under the program announced on
October 13, 2005.
    
    On June 24, 2005, our shareholders voted to shorten our fiscal year. As a result of the
vote our fiscal year ended on April 30, 2005. On July 15, 2005, our shareholders also
voted for the next
 21




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fiscal year to begin on May 1, 2005 and end on December 31, 2005. In
effect, what would have been fiscal year 2005 was divided into two rump years: the first
began on January 1, 2005 and ended on April 30, 2005, while the second began on May 1,
2005 and ended on December 31, 2005. By virtue of this decision, future annual general
meetings are again to be held on the first business day following the fourth Thursday of
June at 10:00 a.m.
   Relationship with AmBev
 Original Alliance with AmBev  General
 southern
cone markets.
     Exchange Rights in the Original Alliance
  22




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Corporate Governance Under the Alliance
 50%
  Approval of our Original Alliance by the Argentine Antitrust Authorities; Action by CCU
  
 1.
    
    to an independent, experienced, financially sound, third party with no current
beer production in Argentinai.
    
    the Bieckert and Palermo brands and recipes;
ii. the license for production of the Imperial brand;iii
    
    at the option of the purchaser, the Norte brand. If an agreement cannot be
reached on price, an internationally recognized investment bank appointed by Quinsa and
AmBev shall establish the price; andiv
    
    the brewery located in Luján, Buenos Aires, that produced the Brahma brand and now
produces Brahma, Palermo and Bieckert; and2.
    
    to a third party, not related to the purchaser of the assets described above and
also not currently producing beer in Argentina, our malt production facility adjacent to
the former Bieckert brewery located in Llavallol, Buenos Aires. Alternatively, AmBev and
Quinsa can agree to allow such third party to operate the facility for 10 years; and
  1.
    
    allow the purchaser access to Quinsas distribution network for a period of 7 years;2.
    
    refrain from forcing or inducing their clients to purchase products other than beer from
them; and
 23




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3.
    
    at the option of the purchaser. AmBev and Quinsa must commit to produce the Bieckert,
Palermo and Imperial brands of beer for the purchaser for a period of two years.
 ,
 Settlement with Heineken Concerning the Original Alliance.
   Repurchase
of QIB Shares
  24




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Interbrew Transaction
   Transfer of Control to AmBev
  25




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26




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Consolidation of Our Bolivian Subsidiaries
  Merger of EDISACoroplasCMQ
  Merger of La LuisianaSalusFNC
   Merger of CCBPCervepar
  Fábrica Paraguaya de Vidrios S.A. (FPV), Cervecería Paraguaya S.A. (Cervepar) and Colosas
  27




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Quinsas PepsiCo license agreement in Argentina
  Capital Expenditures
  BUSINESS OVERVIEW
 Overview
   Our alliance with AmBev
     28




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Centralization of management
   Consolidation of our beer and soft drink operations
 SKUs
  Beer Operations
  29




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##### Table of Contents



Points of Sale
 Terms of Sale
 Indirect Sales
  Beer Sales Through Independent Distributors
 Argentina
    
    Bolivia
    
    Chile
    
    Paraguay
    
    UruguayPercentage of
Total Beer Sales
    
    
    77
    %
    
    
    98
    %
    
    
    17
    %
    
    
    52
    %
    
    
    64
    %Number of
Distributors(1)
    
    
    209
    
    
    
    549
    
    
    
    1
    
    
    
    82
    
    
    
    21
 
 (1)
    
    Total for Bolivia includes agencies (exclusive and non-exclusive) and distributors.  30




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##### Table of Contents



Direct Sales
 Sales Force SKUs
 Distribution
  Future Growth in the Southern Cone Markets
 Per Capita Beer Consumption for 2004
 Country
    
    Liters per capita - 2004Spain
    
    88USA
    
    79Canada
    
    69Venezuela
    
    57Mexico
    
    53Brazil
    
    47Paraguay
    
    27Argentina
    
    34Chile
    
    27Uruguay
    
    14Peru
    
    24Bolivia
    
    21
  31




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##### Table of Contents



Per Capita Beer Consumption for 2005
 Country
    
    Liters per Capita- 2005Paraguay
    
    
    38,6Argentina
    
    
    36,8Chile
    
    
    29,8Uruguay
    
    
    21,2Bolivia
    
    
    25,6
   
    
    leadership position in the southern cone markets;
    
    strong and diversified product portfolio;
    
    marketing and distribution capabilities;
    
    significant market share position; and
    
    technologically advanced breweries.
 Soft Drink and Water Operations
 â â ® â â â â â â â â â â â â â â â
 Perrier Vittel
 BEER OPERATIONS BY COUNTRY
 Argentina
  32




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##### Table of Contents



Hectoliters in Thousands2003
    
    
    12,9562004
    
    
    13,3372005
    
    
    13,910
    Sales
     33




---



##### Table of Contents



2003
    
    2004
    
    2005Sales volume (hectoliters in thousands)
    
    
    9,921.0
    
    
    
    10,396
    
    
    
    10,996Market share
    
    
    80.0
    %
    
    
    79.1
    %
    
    
    78.6
    %Net sales (in US$ millions)
    
    
    
    
    
    
    335.7
    
    
    
    401.9
  Geographic Coverage and Brands
  
    
    greater Buenos Aires;
    
    the Atlantic region (comprising the main cities on the coast in the province of Buenos Aires);
    
    the Northeast region (comprising the provinces of Chaco, Formosa, Corrientes and Misiones);
    
    the Litoral region (comprising the provinces of Santa Fé and Entre Ríos);
    
    the Northwest region (comprising the provinces of La Rioja, Tucumán, Salta, Jujuy, Santiago
del Estero and Catamarca);
    
    the Central region (comprising the provinces of Córdoba and San Luis);
    
    the Western region (comprising the provinces of Mendoza and San Juan);
 34




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##### Table of Contents




    
    the Southern region (comprising the rest of the Buenos Aires province, and the province of La
Pampa); and
    
    Patagonia (comprising the provinces of Neuquén, Rio Negro, Chubut and Tierra del Fuego).
         Brewing Capacity
   35




---



##### Table of Contents



Installed Capacity (hectolitersLocation of brewery
    
    in millions)
    
    Areas suppliedQuilmes (2)
    
    
    5.7
    
    
    Greater Buenos Aires, Atlantic, Central and Southern Regions.Zárate (1)
    
    
    4.4
    
    
    All the regions in Argentina.Corrientes (2)
    
    
    1.7
    
    
    Northeast, Northwest Regions.Mendoza (2)
    
    
    2.3
    
    
    Western and Southern RegionsTucumán (bottling facility)
    
    
    1.2
    
    
    Northwest RegionLuján (3)
    
    
    2.9
    
    
    All the regions in Argentina with the exception of Northeast.
 
 (1)
    
    The Zarate brewery is the only one that produces cans that are sold throughout Argentina.(2)
    
    Produces bulk beer to supply our Tucumán bottling facility for final processing and bottling.(3)
    
    Contributed by AmBev as part of our strategic relationship. We have been in charge of
operations at this brewery since March 2003. The approval of our transaction with AmBev by the
Argentine regulators was conditioned, in part, on the sale of this brewery. We are currently in the
process of selling this brewery, together with the brands that we must dispose of. Malting operations.
  Distribution
   36




---



##### Table of Contents



Bolivia
     37




---



##### Table of Contents



Beer Consumption in Bolivia
 Hectoliters in Thousands2003
    
    
    1,8872004
    
    
    2,1982005
    
    
    2,365
 
 Sales
    Quinsas Domestic Beer Sales Volume, Market Share and Net Sales in Bolivia
 2003
    
    2004
    
    2005Sales volume (hectoliters in thousands) (1)
    
    
    1,826
    
    
    
    2,129
    
    
    
    2,299Market share
    
    
    97.3
    %
    
    
    97.0
    %
    
    
    97.4
    %Net sales (in US$ millions)
    
    
    
    
    
    
    108.0
    
    
    
    125.7
 
 (1)
    
    Excludes exports of 17,000, 15,000 and 27,000 hectoliters for 2003, 2004 and 2005,
respectively.  Geographic Coverage and Brands.
  38




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##### Table of Contents



Brewing Capacity.
   Location of Brewery
    
    Installed Capacity
    
    Regions Supplied(Hectoliters in millions)La Paz
    
    1.2
    
    Principally La PazSanta Cruz (CBN)
    
    0.8
    
    Santa CruzCochabamba
    
    0.6
    
    CochabambaHuari
    
    0.3
    
    Oruro, La Paz and PotosíTarija
    
    0.04
    
    Tarija
 Distribution
   Chile
  39




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##### Table of Contents



Beer Consumption in Chile
 Hectoliters in Thousands2003
    
    
    4,1812004
    
    
    4,2332005
    
    
    4,755
 
 Sales
       40




---



##### Table of Contents



Quinsa  ́s Domestic Beer Sales Volume, Market Share and Net Sales in Chile
 2003
    
    2004
    
    2005Sales volume (hectoliters in thousands)
    
    
    418
    
    
    
    379
    
    
    
    550Market share
    
    
    11.1
    (*)
    
    
    11.4
    %
    
    
    13.1
    %Net sales (in US$ millions)
    
    
    
    
    
    
    23.0
    
    
    
    35.6
 
 Geographic Coverage and Brands
   Brewing Capacity
  Distribution
  Paraguay
  41




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##### Table of Contents



.
    Beer Consumption in Paraguay
 Hectoliters in Thousands2003
    
    
    1,7372004
    
    
    1,9282005
    
    
    2,125
  Sales
     Quinsas Domestic Beer Sales Volume, Market Share and Net Sales in Paraguay
 2003
    
    2004
    
    2005Sales volume (hectoliters in thousands)
    
    
    1,614
    
    
    
    1,836
    
    
    
    2,040Market share
    
    
    94.3
    %
    
    
    95.2
    %
    
    
    96.0
    %Net sales (in US$ millions)
    
    
    
    
    
    
    90.6
    
    
    
    108.5
  42




---



##### Table of Contents



Geographic Coverage and Brands
   Brewing Capacity
   Distribution
  Uruguay
    43




---



##### Table of Contents



Beer Consumption in Uruguay
 Hectoliters in Thousands2003
    
    
    4662004
    
    
    5962005
    
    
    692
 
 Sales
    Quinsas Beer Sales Volume, Market Share and Net Sales in Uruguay
 2003
    
    2004
    
    2005Domestic Sales volume (hectoliters in
thousands)
    
    
    444
    
    
    
    584
    
    
    
    673Market share
    
    
    98.5
    %
    
    
    98.0
    %
    
    
    97.2
    %Exports (hectoliters in thousands)
    
    
    1
    
    
    
    9
    
    
    
    10Net sales (in US$ millions) (1)
    
    
    
    
    
    
    27.3
    
    
    
    37.7
 
 (1)
    
    Includes exports.  Geographic Coverage and Brands
  Brewing Capacity
  44




---



##### Table of Contents



Installed CapacityLocation of Brewery
    
    (hectoliters in millions)
    
    Region SuppliedMontevideo
    
    
    0.9
    
    
    Entire CountryMinas
    
    
    0.4
    
    
    Entire Country
 Distribution
  SOFT DRINK AND WATER OPERATIONS
  â â ® ® ®
  â ®
 45




---



##### Table of Contents



â â
 â
  Eco
 Sales
  Quinsas Soft Drink & Other Beverages Sales Volume, Market Share and Net Sales in Argentina
 2003
    
    2004
    
    2005Sales volume (hectoliters in thousands)
    
    
    5,901
    
    
    
    6,490
    
    
    
    8,155Market share
    
    
    19.5
    %
    
    
    18.7
    %
    
    
    19.6
    %Market share A brands
    
    
    26.0
    %
    
    
    28.3
    %
    
    
    29.5
    %Net sales (in US$ millions)
    
    
    
    
    
    
    167.9
    
    
    
    227.5
  46




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##### Table of Contents



Quinsas Soft Drink & Other Beverages Sales Volume, Market Share and Net Sales in Uruguay
 2003
    
    2004
    
    2005Sales volume (hectoliters in thousands)
    
    
    195
    
    
    
    281
    
    
    
    456Market share
    
    
    10.5
    %
    
    
    12.3
    %
    
    
    15.0
    %Net sales (in US$ millions)
    
    
    
    
    
    
    9.4
    
    
    
    14.3
   Terms of Sale.
 Points of Sale.
 Geographic Coverage
    47




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##### Table of Contents



Brands
 â â â â â â â â â â â â â â â â â â â â â â â â
 â â â â â â â â â â
 SEASONALITY
  Beer Volume Sales by Quarter as a Percentage of Total Annual Sales
 1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th Quarter2003
    
    2004
    
    2005
    
    2003
    
    2004
    
    2005
    
    2003
    
    2004
    
    2005
    
    2003
    
    2004
    
    2005Argentina
    
    28%
    
    
    30
    %
    
    
    30
    %
    
    
    18
    %
    
    
    18
    %
    
    
    18
    %
    
    
    20
    %
    
    
    20
    %
    
    
    20
    %
    
    
    34
    %
    
    
    32
    %
    
    
    32
    %Bolivia
    
    22%
    
    
    23
    %
    
    
    23
    %
    
    
    21
    %
    
    
    20
    %
    
    
    21
    %
    
    
    25
    %
    
    
    26
    %
    
    
    26
    %
    
    
    30
    %
    
    
    31
    %
    
    
    30
    %Chile
    
    34%
    
    
    28
    %
    
    
    23
    %
    
    
    20
    %
    
    
    18
    %
    
    
    17
    %
    
    
    18
    %
    
    
    21
    %
    
    
    21
    %
    
    
    28
    %
    
    
    33
    %
    
    
    39
    %Paraguay
    
    24%
    
    
    29
    %
    
    
    29
    %
    
    
    21
    %
    
    
    18
    %
    
    
    19
    %
    
    
    19
    %
    
    
    20
    %
    
    
    21
    %
    
    
    34
    %
    
    
    33
    %
    
    
    31
    %Uruguay
    
    23%
    
    
    27
    %
    
    
    30
    %
    
    
    15
    %
    
    
    15
    %
    
    
    13
    %
    
    
    17
    %
    
    
    18
    %
    
    
    17
    %
    
    
    46
    %
    
    
    40
    %
    
    
    40
    %
 Soft Drink Volume Sales by Quarter as a Percentage of Total Annual Sales
 1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th Quarter2003
    
    2004
    
    2005
    
    2003
    
    2004
    
    2005
    
    2003
    
    2004
    
    2005
    
    2003
    
    2004
    
    2005Argentina
    
    27%
    
    
    25
    %
    
    
    25
    %
    
    
    20
    %
    
    
    20
    %
    
    
    19
    %
    
    
    22
    %
    
    
    23
    %
    
    
    22
    %
    
    
    31
    %
    
    
    32
    %
    
    
    34
    %Uruguay
    
    24%
    
    
    26
    %
    
    
    22
    %
    
    
    17
    %
    
    
    20
    %
    
    
    21
    %
    
    
    18
    %
    
    
    22
    %
    
    
    22
    %
    
    
    42
    %
    
    
    32
    %
    
    
    35
    %
 RAW MATERIALS
 Raw MaterialsBeer
  48




---



##### Table of Contents



49




---



##### Table of Contents



Raw MaterialsSoft Drinks and Water
  â
 Amcor
 â
 MARKETING IN THE SOUTHERN CONE MARKETS
 MarketingBeer
 Product Presentations
   50




---



##### Table of Contents



Advertising and Promotional Activity
     Pricing
  51




---



##### Table of Contents



MarketingSoft Drinks and Water
 Product Presentations
 â
  Advertising and Marketing Activity
  COMPETITION IN THE SOUTHERN CONE MARKETS
 CompetitionBeer
   Warsteiner Anheuser-Busch
 52




---



##### Table of Contents



CompetitionSoft Drinks
 â B-brands
  53




---



##### Table of Contents



â
 MATERIAL LICENSES AND CONTRACTS
 Relationship with Heineken
  Termination of QI(B) Shareholders Agreement and Technical Assistance Agreements with Heineken
 QI(B) Shareholders Agreement
    54




---



##### Table of Contents



Effect of Transfer and Termination
    Relationship with PepsiCo
 â
 â
 â
 â
 55




---



##### Table of Contents



REGULATION
 Production and Marketing
       Pricing Controls, Excise Taxes and Import Tariffs
     56




---



##### Table of Contents



Environmental Regulation; Occupational Safety and Quality Control.
   ORGANIZATIONAL STRUCTURE
   57




---



##### Table of Contents



58




---



##### Table of Contents



59




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##### Table of Contents



*
    
    QI(B) holds its interest in Cervecería Chile directly and through wholly-owned U.S. and
Chilean non-operating subsidiaries.**
    
    The ownership interest information provided above corresponds to voting control.***
    
    We are currently in the process of merging Cervecería y Maltería Quilmes and CCBA. PROPERTY, PLANT AND EQUIPMENT
 Property
  Technical Capacity
    
    Average UtilizedType of Facility
    
    Location
    (hectoliters in thousands)
    Capacity (1)Brewery
    
    QuilmesArgentina
    
    5.7
    
    64%Brewery
    
    ZárateArgentina
    
    4.4
    
    74%Brewery
    
    LujánArgentina
    
    2.9
    
    42%Brewery
    
    MendozaArgentina
    
    2.3
    
    61%Brewery
    
    CorrientesArgentina
    
    1.7
    
    93%Beer Bottling Facility
    
    TucumánArgentina
    
    1.2
    
    80%Malting Plant
    
    Tres ArroyosArgentina
    
    (2) 123,000
    
    90%Malting Plant
    
    LlavallolArgentina (3)
    
    (2) 23,000
    
    104%Brewery
    
    La PazBolivia
    
    1.2
    
    74%Brewery
    
    TaquiñaBolivia
    
    0.6
    
    56%Brewery
    
    Santa CruzBolivia
    
    0.8
    
    91%Brewery
    
    HuariBolivia
    
    0.3
    
    92%Brewery
    
    TarijaBolivia
    
    0.04
    
    91%Brewery
    
    SantiagoChile
    
    0.8
    
    72%Brewery
    
    YpanéParaguay
    
    2.4
    
    84%Brewery
    
    MontevideoUruguay
    
    0.9
    
    54%Brewery
    
    MinasUruguay
    
    0.4
    
    53%Soft Drinks
    
    MontevideoUruguay
    
    0.6
    
    73%Soft Drinks
    
    Buenos Aires SouthArgentina
    
    10.9
    
    48%Juices
    
    Buenos Aires SouthArgentina
    
    0.4
    
    10%Isotonics(4)
    
    MontegrandeArgentina
    
    0.5
    
    40%Soft Drinks
    
    CórdobaArgentina
    
    2.1
    
    55%Soft Drinks
    
    TucumánArgentina
    
    2.4
    
    56%Soft Drinks
    
    TrelewArgentina
    
    0.6
    
    37%Glass Bottles
    
    Ypané-- Paraguay
    
    100tn/day
    
    n/a  (start-up)
 
 (1)
    
    Demand for our products is subject to marked seasonal fluctuations.
Consequently, the utilized capacity of our production facilities
during peak months may be considerably higher than the averages shown
above. In addition, average utilized capacity does not necessarily
reflect capacity utilization for any particular presentation.(2)
    
    Measured in tons. Capacity at the Tres Arroyos malting plant was
expanded to 190,000 tons during 2006. 60




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##### Table of Contents



(3)
    
    As a condition to their approval of our alliance with AmBev, the
Argentine antitrust authorities have required us to sell this facility
or lease it to third parties for at least 10 years.(4)
    
    We own only the plant and the equipment at this facility, which we use
as a filling line for the Gatorade® brands we produce. We do not own
the underlying land, although we are not required to pay any amounts
under our lease for use of such land. Plant Investment/Productivity Gains
 
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 INTRODUCTION
 IFRS Lux GAAP
  61




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##### Table of Contents



Principal differences between IFRS and U.S. GAAP
   (a) Valuation of property, plant and equipment
   (b) Inventory valuation
  (c) Capitalization of interest cost
   (d) Changes in fair value of financial assets through profit and loss
   (e) Differences in basis relating to purchase accounting
  62




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##### Table of Contents



(f) Change to consolidation
    (g) Acquisition of minority interest in QI(B)
   (h) Deferred income tax
  (i) Minority Interest
  (j) Net income
  (k) Cumulative translation differences exemption
  Comprehensive income (loss)
  63




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##### Table of Contents



OPERATING RESULTS
  Impact of Changes in our Prices and Changes in Volumes Sold on our Net Sales
  Impact of Inflation
   2003
    
    2004
    
    2005ArgentinaInflation
    
    
    3.7
    %
    
    
    6.1
    %
    
    
    12.3
    %Currency appreciation/(devaluation)
    
    
    13.0
    %
    
    
    (1.7
    %)
    
    
    (1.3
    %)BoliviaInflation
    
    
    3.9
    %
    
    
    4.6
    %
    
    
    6.0
    %Currency appreciation/(devaluation)
    
    
    (4.5
    %)
    
    
    (2.9
    %)
    
    
    (0.4
    %)ChileInflation
    
    
    1.1
    %
    
    
    2.4
    %
    
    
    3.7
    %Currency appreciation/(devaluation)
    
    
    17.7
    %
    
    
    4.5
    %
    
    
    10.4
    %ParaguayInflation
    
    
    9.3
    %
    
    
    2.8
    %
    
    
    9.9
    %Currency appreciation/(devaluation)
    
    
    15.3
    %
    
    
    (3.0
    %)
    
    
    1.0
    %UruguayInflation
    
    
    10.2
    %
    
    
    7.6
    %
    
    
    4.9
    %Currency appreciation/(devaluation)
    
    
    (7.8
    %)
    
    
    9.1
    %
    
    
    11.2
    %
 
 64




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##### Table of Contents



Impact of Currency Fluctuations
 (a) Functional and presentation currency
  (b) Transactions and balances
  (c) Companys entities
  (i)
    
    assets and liabilities for each balance sheet presented are translated at the closing
rate at the date of that balance sheet, except for equity accounts which are translated at
historical exchange rates;(ii)
    
    income and expenses for each income statement are translated at average exchange
rates (unless this average is not a reasonable approximation of the cumulative effect of
the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and(iii)
    
    all resulting exchange differences are recognised as a separate component of
equity (cumulative translation adjustment).
    Impact of Economic, Fiscal, Monetary and Political Policies on Our Operations
 Economic Crisis in Argentina
   65




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##### Table of Contents



Transfers outside Argentina
    
    
    The prepaid amount may not exceed the present value of the debt.
Alternatively, funds in an amount equal to the prepayment must be
disbursed under new financing that does not exceed the present value
of the debt, as long as such funds are exchanged for Argentine
currency on the Argentine foreign exchange markets. In either case,
present value is calculated using a discount rate equal to the rate
implied in U.S. currency future transactions (180 days) carried out in
regulated local markets.
    
    However, if a prepayment is made less than one year in advance of the
scheduled payment date, the amount prepaid can be the face value of
the indebtedness.
    
    The terms and conditions of any prepayment made as part of a
restructuring may not result in an increase in the present value
(calculated as described above) of outstanding indebtedness.
    Deposits in Argentine financial institutions
 66




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##### Table of Contents



Conversion of foreign currency denominated debts governed by Argentine law
  Credits and debts not related to the banking sector
  Deferral of the deductions from income tax
  Recent Improvements
  Discussion of Critical Accounting Policies
   67




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##### Table of Contents



(a) Estimated impairment of goodwill
  (b) Income taxes
  (c) Provision for contingencies
  Summary of Results of Operations
  20052004 IFRS
    
    IFRSNet sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    (46.1
    )%
    
    
    (42.6
    )%Gross profit
    
    
    53.9
    %
    
    
    57.43
    %Selling and marketing expenses
    
    
    (23.6
    )%
    
    
    (22.8
    )%Administrative and general expenses
    
    
    (6.5
    )%
    
    
    (5.7
    )%Other operating expenses (income)
    
    
    (2.5
    )%
    
    
    (0.08
    )%Operating income (loss)
    
    
    22.1
    %
    
    
    28.7
    %Net income (loss)
    
    
    13.8
    %
    
    
    16.9
    %
   68




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##### Table of Contents



Geographic SegmentData
    
    2004 IFRS
    
    
    2005 IFRSArgentinaNet sales
    
    $
    505.9
    
    
    $
    632.8Operating income (loss)
    
    
    88.5
    
    
    
    160.5Total assets
    
    
    578.0
    
    
    
    829.0BoliviaNet sales
    
    
    107.6
    
    
    
    124.6Operating income (loss)
    
    
    41.3
    
    
    
    57.0Total assets
    
    
    283.5
    
    
    
    237.6ChileNet sales
    
    
    23.0
    
    
    
    35.6Operating income (loss)
    
    
    (1.0
    )
    
    
    (3.0
    )Total assets
    
    
    20.5
    
    
    
    31.5ParaguayNet sales
    
    
    92.0
    
    
    
    109.3Operating income (loss)
    
    
    42.9
    
    
    
    53.9Total assets
    
    
    164.6
    
    
    
    140.7UruguayNet sales
    
    
    36.7
    
    
    
    52.0Operating income (loss)
    
    
    6.0
    
    
    
    14.4Total assets
    
    
    63.9
    
    
    
    62.6
 Fiscal 2005 Compared with Fiscal 2004
  Net Sales
  Beer
   69




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##### Table of Contents



Volumes  2004
    
    Volumes  2005
    
    Net sales  2004
    
    Net sales  2005Country
    
    (in hectoliters)
    
    (in hectoliters)
    
    (in US$ million)
    
    (in US$ million)Argentina
    
    
    10,480,000
    
    
    
    10,996,000
    
    
    
    335.7
    
    
    
    401.9Bolivia
    
    
    2,143,000
    
    
    
    2,326,000
    
    
    
    107.9
    
    
    
    125.1Chile
    
    
    380,000
    
    
    
    550,000
    
    
    
    23.0
    
    
    
    35.6Paraguay
    
    
    1,836,000
    
    
    
    2,040,000
    
    
    
    90.6
    
    
    
    108.5Uruguay
    
    
    593,000
    
    
    
    683,000
    
    
    
    27.3
    
    
    
    37.7Inter-company sales
    
    
    (56,000
    )
    
    
    (129,000
    )
    
    
    (1.8
    )
    
    
    (4.0
    )Total
    
    
    15,376,000
    
    
    
    16,465,000
    
    
    
    582.7
    
    
    
    704.7
      70




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##### Table of Contents



Soft Drinks and Water
  Volumes  2004
    
    Volumes  2005
    
    Net sales  2004
    
    Net sales  2005Country
    
    (in hectoliters)
    
    (in hectoliters)
    
    (in US$ million)
    
    (in US$ million)Argentina
    
    
    6,490,000
    
    
    
    8,155,000
    
    
    
    167.9
    
    
    
    227.4of which water is
    
    
    42,000
    
    
    
    30,000
    
    
    
    0.4
    
    
    
    0.3Uruguay
    
    
    281,000
    
    
    
    456,000
    
    
    
    9.4
    
    
    
    14.3of which water is
    
    
    7,000
    
    
    
    0
    
    
    
    0.1
    
    
    
    0.0Inter- company sales
    
    
    (2,000
    )
    
    
    (80,000
    )
    
    
    (0.1
    )
    
    
    (0.3
    )Total
    
    
    6,769,000
    
    
    
    8,531,000
    
    
    
    177.2
    
    
    
    241.4of which water is
    
    
    49,000
    
    
    
    30,000
    
    
    
    0.5
    
    
    
    0.3
   Other Sales
  Cost of Sales
  71




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##### Table of Contents



Gross Profit
  Other operating income
  Selling and Marketing Costs
  Administrative and General Expenses
  Other operating expenses
  Operating Profit
  Finance Costs  net
  72




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##### Table of Contents



Income Tax Expense
  Profit for the Year
  Profit attributable to Minority Interest
  LIQUIDITY AND CAPITAL RESOURCES
  
  
    
    The acquisition of foreign currency as an investment is limited,
on a monthly basis, to the larger of US$2 million or three times
the amount paid in certain taxes during the second month prior to
the acquisition of said foreign currency.
    
    The acquisition of foreign currency to pay principal on debt obligations can be made:
 a.
    
    on the date of maturity with no restrictions;
 73




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##### Table of Contents



b.
    
    within 365 days prior to the maturity date; orc.
    
    on any date when payment is due as a result
of the occurrence of specific conditions
expressly contemplated in refinancing
agreements of external debts entered into
with foreign creditors as of February 11,
2002.
 
    
    The acquisition of foreign currency to pay interest maturities on debt obligations can be made 15 days prior to the date of
each maturity for the payment of interests accrued during the then current interest period.
    
    In all cases, payments may be made only so long as the debt obligations are registered with the Central Bank, and only to
the extent funds disbursed under the debt obligations being repaid entered Argentina at least 365 days before the date of
payment.
    
    If we want to acquire foreign currency before principal and/or interest maturities become due, we must adhere to the
following limitations:
 a.
    
    Until June 30, 2006, we may acquire foreign
currency in an amount that shall not exceed
the lesser of 35% of the principal amount of
our restructured debt (with a maximum limit
of monthly purchases of foreign currency of
up to US$40 million) and the total amount of
interest accrued, either due or not, and of
principal due under the restructured debt.
Funds so acquired must be applied to pay
principal and/or interest before June 30,
2006.b.
    
    We may acquire additional amounts to those
set forth above, as long as the foreign
currency so acquired is applied to pay
principal and/or interest maturities within
360 days from the date of acquisition, and
the acquired amount does not exceed the
amounts payable under our debt obligations
within a period of 360 days as from the date
of acquisition.
      74




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##### Table of Contents



Operating Activities
   Investing Activities
   Financing Activities
   Capital Expenditures
  75




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##### Table of Contents



Capital expenditures excludingbottles and crates
    
    2004
    
    2005Brewing business
    
    
    36.3
    
    
    
    47.2Soft drinks and other beverages
    
    
    6.3
    
    
    
    24.1Malting facilities
    
    
    2.2
    
    
    
    13.1Other
    
    
    0.8
    
    
    
    8.0TOTAL
    
    
    45.6
    
    
    
    92.4
 Bottles and crates
    
    2004
    
    2005Brewing business
    
    
    22.8
    
    
    
    26.4Soft drinks and other beverages
    
    
    3.8
    
    
    
    8.0TOTAL
    
    
    26.6
    
    
    
    34.4
  External Funding
     76




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##### Table of Contents



Dividends
     3⁄4
 Stock Repurchases
   77




---



##### Table of Contents



Other Liquidity Matters
   
 
 CMQ Liquidity Matters
  78




---



##### Table of Contents



RESEARCH AND DEVELOPMENT
  TREND INFORMATION
     79




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##### Table of Contents



OFF BALANCE SHEET ARRANGEMENTS
  TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
  Payments due by period
 More than 5Contractual Obligations
    
    Total
    
    Less than 1 year
    
    1  3 years
    
    3  5 years
    
    yearsDebt obligations
    
    
    388.0
    
    
    
    96.3
    
    
    
    173.2
    
    
    
    59.3
    
    
    
    59.2Capital (Finance)
obligations
    
    
    4.8
    
    
    
    0.5
    
    
    
    3.6
    
    
    
    0.7
    
    
    
    Purchase obligations (*)
    
    
    5.6
    
    
    
    5.6
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    398.4
    
    
    
    102.4
    
    
    
    176.8
    
    
    
    60.0
    
    
    
    59.2
 
 (*)
    
    These are estimated dollar values (based on past purchase prices) on approximate volumes (based
on past experience) of barley 
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 DIRECTORS AND SENIOR MANAGEMENT
 Directors
 Articles of Incorporation Articles
  80




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##### Table of Contents



Name
    
    Date of BirthJacques-Louis de Montalembert (1)
    
    
    08-06-45Gonzalo Tanoira (1)(5)
    
    
    09-28-69Alvaro Sáinz de Vicuña (1)(2)
    
    
    07-12-52Federico Sáinz de Vicuña (1)(2)
    
    
    02-26-57Milton Seligman (6)
    
    
    08-19-51Victorio Carlos De Marchi (3)
    
    
    11-13-38Carlos Alberto da Veiga Sicupira (3)
    
    
    05-01-48João M. Giffoni Castro Neves (3)(4)
    
    
    03-31-67Alvaro Cardoso De Souza(3)
    
    
    09-05-48Gustavo Alfredo Horacio Ferrari(3)
    
    
    03-24-57Alexander James Christopher Harper
    
    
    03-16-48Floreal Horacio Crespo
    
    
    01-25-45Beverages Associates (BAC) Corp.
    
    
    Dunvegan S.A.
    
    
    
 
 (1)
    
    For purposes of the Quinsa Shareholders Agreement, these Directors are considered to
be nominated by BAC pursuant to its rights under that Agreement. Certain of these
directors are, nonetheless, independent, within the meaning of SEC Rule 3.03A.06.
See Item 6  Directors, Senior Management and Employees  Board Practices  Audit
Committee. See also Item 4. Information on the CompanyHistory and
DevelopmentRecent EventsRelationship with AmBev, and Item 7. Major Shareholders
and Related Party TransactionsMajor ShareholdersQuinsa Shareholders Agreement.(2)
    
    Alvaro Sáinz de Vicuña and Federico Sáinz de Vicuña are brothers.(3)
    
    For purposes of the Quinsa Shareholders Agreement, these Directors are considered to
be nominated by AmBev pursuant to its rights under that Agreement. Certain of these
directors are, nonetheless, independent, within the meaning of SEC Rule 3.03A.06.
See Item 6  Directors, Senior Management and Employees  Board Practices  Audit
Committee. See also Item 4. Information on the CompanyHistory and
DevelopmentRecent EventsRelationship with AmBev, and Item 7. Major Shareholders
and Related Party TransactionsMajor ShareholdersQuinsa Shareholders Agreement.(4)
    
    Replaced Mr. Magim Rodriguez, Jr., who resigned in August 2004.(5)
    
    Replaced Mr. Carlos Miguens, who resigned on May 17, 2006.(6)
    
    Mr. Seligman replaced Mr. Vergara Galvis.  Jacques-Louis de Montalembert
 81




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##### Table of Contents



Carlos J. Miguens
 Alvaro Sáinz de Vicuña C
 Federico Sáinz de Vicuña
 Gonzalo Tanoira
 Victorio Carlos De Marchi
 Carlos Alberto da Veiga Sicupira
 João M. Giffoni Castro Neves
 Alvaro Cardoso de Souza
 82




---



##### Table of Contents



Gustavo Alfredo Horacio Ferrari
 Floreal Horacio Crespo Fratelli Branca
Destilerías S.A. Edenor S.A., th
 Alexander J. C. Harper
 Milton Seligman
 Beverages Associates (BAC) Corp
 Dunvegan S.A.
 Senior Management
  83




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##### Table of Contents



Current Position
    
    
    
    
    Number of YearsName
    
    Position
    
    Held Since
    
    
    Date of Birth
    
    with QuinsaAgustín García Mansilla
    
    Chief Executive Officer
(CEO)
    
    
    1998
    
    
    01-11-56
    
    
    10Carlos Adjoyan
    
    Director, Human Resources
    
    
    1998
    
    
    03-05-52
    
    
    8Gustavo Castelli
    
    Chief Financial Officer
(CFO)
    
    
    2002
    
    
    08-10-59
    
    
    7Néstor Del Campo
    
    Director, Argentina
Beverages Division (ABD)
    
    
    2002
    
    
    08-03-63
    
    
    13Faustino Arias
    
    Director, International Beverage Division
    
    
    2003
    
    
    06-25-61
    
    
    20Pablo González
    
    Logistics Manager, ABD
    
    
    2004
    
    
    05-18-68
    
    
    11Nicolás Bamberg
    
    Industrial Manager, ABD
    
    
    2002
    
    
    10-28-56
    
    
    14Mariano Botas
    
    Corporate Communications, ABD
    
    
    2005
    
    
    04-21-66
    
    
    1Francis Cressall
    
    Group Treasurer
    
    
    2003
    
    
    06-03-59
    
    
    8Miguel A Gómez Eiriz
    
    General Manager Bolivia
    
    
    2003
    
    
    10-13-62
    
    
    15Adrián González Fischer
    
    National Sales and  Distribution Manager, ABD
    
    
    2003
    
    
    02-23-63
    
    
    13Fernando Lascano
    
    Corporate Affairs Manager
    
    
    2000
    
    
    12-28-45
    
    
    6Carlos Lariño
    
    Purchasing Manager, ABD
    
    
    1997
    
    
    10-19-45
    
    
    7Fernando Massuh
    
    Industrial relations, ADB
    
    
    2002
    
    
    01-20-66
    
    
    15Jorge Mastroizzi
    
    Marketing Manager, ABD
    
    
    2003
    
    
    10-04-69
    
    
    7
 Current Position
    
    
    
    
    Number of YearsName
    
    Position
    
    Held Since
    
    
    Date of Birth
    
    with QuinsaDaniel Montero
    
    Internal Auditor
    
    
    1999
    
    
    05-18-43
    
    
    7Fernando Ragni
    
    Soft Drink Manager, ABD
    
    
    2003
    
    
    10-07-51
    
    
    12Pablo Pereyra
    
    General Manager, Cerveceria Paraguaya
    
    
    2003
    
    
    08-28-67
    
    
    14Hernan Redin
    
    Planning and Budget Control, ADB
    
    
    1998
    
    
    05-04-67
    
    
    15Celso Rojas
    
    General Manager, FPV
    
    
    1998
    
    
    05-10-41
    
    
    33Gustavo Sampayo
    
    General Manager, Uruguay
    
    
    2003
    
    
    09-09-65
    
    
    19Pablo Sanchez
    
    General Manager, Cervecería Chile
    
    
    2003
    
    
    06-21-64
    
    
    8Hector Ordoqui
    
    Country Manager, Uruguay
    
    
    2003
    
    
    09-28-42
    
    
    17Silvio Szostak
    
    Chief Information Officer
    
    
    1998
    
    
    09-15-48
    
    
    8
  Agustín García Mansilla
 Carlos Adjoyan
 Gustavo Castelli
 84




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##### Table of Contents



Néstor Del Campo
 Faustino Arias*
 Pablo González
 Nicolás Bamberg
 Mariano Botas
 Francis Cressall
 Miguel Gómez Eiriz
 Adrián González Fischer
 Carlos Lariño
 Fernando Lascano
 Fernando Massuh
 Jorge Mastroizzi 85
    Table of Contents    Daniel Montero
 Pablo Pereyra
 Fernando Ragni
 Hernan Redin
 Celso Rojas
 Gustavo Sampayo
 Pablo Sánchez
 Hector Ordoqui
 Silvio Szostak
 Management Committees
  86




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##### Table of Contents



COMPENSATION
 Compensation of Management
    Compensation of Directors
   Employee benefits
 a) Short-term employee benefits
  b) Social security contributions
  87




---



##### Table of Contents



c) Employees severance indemnity
    d) Post-employment benefits
  e) Management bonus program
  BOARD PRACTICES
  Name
    
    Director Since
    
    
    Term ExpirationJacques-Louis de Montalembert
    
    
    1996
    
    
    June 2008Gonzalo Tanoira
    
    
    2005
    
    
    June 2009Alvaro Sáinz de Vicuña
    
    
    1996
    
    
    June 2011Federico Sáinz de Vicuña
    
    
    1993
    
    
    June 2009Milton Seligman
    
    
    2005
    
    
    June 2006Victorio Carlos De Marchi
    
    
    2003
    
    
    June 2008Carlos Alberto da Veiga Sicupira
    
    
    2003
    
    
    June 2009João M. Giffoni Castro Neves
    
    
    2005
    
    
    June 2009Alvaro Cardoso de Souza
    
    
    2005
    
    
    June 2006
 88




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##### Table of Contents



Name
    
    Director Since
    
    
    Term ExpirationGustavo Alfredo Horacio Ferrari
    
    
    2005
    
    
    June 2006Alexander James Christopher Harper
    
    
    2005
    
    
    June 2006Floreal Horacio Crespo
    
    
    2005
    
    
    June 2006Beverage Associates (BAC) Corp., represented by Guillermo Engels
    
    
    2003
    
    
    June 2008Dunvegan S.A., represented by Roberto Moses Thompson Motta
    
    
    2004
    
    
    June 2009
  Compensation Committee
   EMPLOYEES
    SHARE OWNERSHIP
 89




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##### Table of Contents



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 MAJOR SHAREHOLDERS
     Directors andBAC
    
    
    AmBev
    
    
    Executive OfficersClass A shares
    
    
    373,520,000
    
    
    
    230,920,000
    
    
    
    0Class B shares(3)
    
    
    0
    
    
    
    38,378,414
    
    
    
    0Economic Interest(1)
    
    
    34.46
    %
    
    
    56.71
    %
    
    
    0Voting Power(1)(2)(4)
    
    
    56.46
    %
    
    
    40.70
    %
    
    
    0
 
 (1)
    
    Net of treasury stock.
BACs voting power is limited by the Escrow Agreement, as explained above.(2)
    
    BAC is permitted to vote (without AmBevs consent) less than 50% of the voting power of Quinsa.(3)
    
    AmBevs total includes 12,000,000 Class B shares
acquired after February 1, 2003 as disclosed on AmBevs Schedule 13D/A filed with the SEC on October 9, 2003.(4)
    
    As of December 31, 2005, 11,202 ADSs were held by Directors and
Executive Officers, which is approximately 0.02% of Quinsas capital in terms of voting power.  The 2006 Letter Agreement
 90




---



##### Table of Contents



Quinsa Shareholders Agreement
  a.
    
    50% of the Directors constituting the Quinsa Board of Directors andb.
    
    for each of our subsidiaries, 50% of the number of Directors that
Quinsa is entitled to nominate under such subsidiarys charter
documents or by-laws, any existing shareholders agreement or
applicable law.
 Requisite Percentage Voting Interest
     91




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##### Table of Contents



Disclosure of Shareholder Ownership
  RELATED PARTY TRANSACTIONS
   (a) Sales of goods and services (US$ million)
 2005
    
    
    2004Sales of goods:Goods
    
    
    1.0
    
    
    
    Raw material
    
    
    0.4
    
    
    
    1.3By products
    
    
    0.8
    
    
    
    Sales of services:Storage services
    
    
    0.4
    
    
    
    2.6
    
    
    
    1.3
  (b) Purchases of goods and services (US$ million)
 2005
    
    
    2004Purchases raw materials: Raw materials
    
    
    11.1
    
    
    
    9.9Purchases of services: Services of key management personnel
    
    
    
    
    
    
    0.4 InBev (management services)
    
    
    0.5
    
    
    
     Logistics services
    
    
    
    
    
    
    1.3Other costs:
    
    
    1.0
    
    
    
    12.6
    
    
    
    11.6
  92




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##### Table of Contents



ITEM 8. FINANCIAL INFORMATION
 CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
  Legal Proceedings and Contingencies
    Dividend Policy
 3⁄4 3⁄4 3⁄4
 Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
 Market for the Class B shares
 93




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##### Table of Contents



NYSE LQU LSE Deposit Agreement
 Price per Class B share(1)
    
    Price per ADS(2)(3)High
    
    Low
    
    High
    
    Low2001
    
    $
    10.90
    
    
    $
    5.00
    
    
    $
    24.12
    
    
    $
    9.952002
    
    
    6.38
    
    
    
    2.52
    
    
    
    13.09
    
    
    
    5.732003
    
    
    8.16
    
    
    
    2.90
    
    
    
    16.77
    
    
    
    6.352004
    
    
    10.00
    
    
    
    7.25
    
    
    
    20.18
    
    
    
    14.572005
    
    
    17.00
    
    
    
    7.65
    
    
    
    35.77
    
    
    
    16.0620031st Quarter
    
    
    3.52
    
    
    
    2.72
    
    
    
    8.11
    
    
    
    6.352ndQuarter
    
    
    6.15
    
    
    
    3.21
    
    
    
    13.80
    
    
    
    7.653rd Quarter
    
    
    7.20
    
    
    
    5.69
    
    
    
    15.61
    
    
    
    11.564th Quarter
    
    
    8.16
    
    
    
    7.20
    
    
    
    16.77
    
    
    
    14.9420041st Quarter
    
    
    9.99
    
    
    
    7.80
    
    
    
    20.18
    
    
    
    16.652nd Quarter
    
    
    9.75
    
    
    
    7.45
    
    
    
    19.50
    
    
    
    14.573rd Quarter
    
    
    9.23
    
    
    
    7.25
    
    
    
    18.58
    
    
    
    14.894th Quarter
    
    
    8.89
    
    
    
    7.41
    
    
    
    17.99
    
    
    
    16.0020051st Quarter
    
    
    10.00
    
    
    
    7.65
    
    
    
    22.98
    
    
    
    16.062nd Quarter
    
    
    12.79
    
    
    
    9.75
    
    
    
    25.86
    
    
    
    22.593rd Quarter
    
    
    16.55
    
    
    
    11.50
    
    
    
    35.77
    
    
    
    24.174th Quarter
    
    
    17.00
    
    
    
    13.70
    
    
    
    34.20
    
    
    
    29.752006December 2005
    
    
    17.00
    
    
    
    14.80
    
    
    
    40.24
    
    
    
    32.70January 2006
    
    
    16.63
    
    
    
    15.40
    
    
    
    36.70
    
    
    
    34.66February 2006
    
    
    16.15
    
    
    
    15.90
    
    
    
    37.54
    
    
    
    34.98March 2006
    
    
    19.36
    
    
    
    18.17
    
    
    
    42.81
    
    
    
    38.20April 2006
    
    
    21.00
    
    
    
    17.00
    
    
    
    45.80
    
    
    
    37.65May 2006
    
    
    23.99
    
    
    
    21.00
    
    
    
    51.49
    
    
    
    46.40
 
 (1)
    
    Source: Luxembourg Stock Exchange.(2)
    
    Source: New York Stock Exchange.(3)
    
    The ADSs have been restated to give retroactive effect to the change in ratio of Class B
shares to ADSs. After approval of the recapitalization plan, each ADS represents two Class B
shares, whereas previously each ADR had represented one non-voting share. 94




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##### Table of Contents



Market for the Class A shares
  Price per Class A share (2)(3)High
    
    Low2001
    
    $
    0.98
    
    
    $
    0.552002
    
    
    0.73
    
    
    
    0.432003
    
    
    0.83
    
    
    
    0.292004
    
    
    1.03
    
    
    
    0.552005
    
    
    1.60
    
    
    
    0.6120031st Quarter
    
    
    0.51
    
    
    
    0.302ndQuarter
    
    
    0.71
    
    
    
    0.293rd Quarter
    
    
    0.83
    
    
    
    0.604th Quarter
    
    
    0.83
    
    
    
    0.7620041st Quarter
    
    
    1.03
    
    
    
    0.822nd Quarter
    
    
    0.99
    
    
    
    0.743rd Quarter
    
    
    0.92
    
    
    
    0.684th Quarter
    
    
    0.86
    
    
    
    0.5520051st Quarter
    
    
    1.00
    
    
    
    0.612nd Quarter
    
    
    1.25
    
    
    
    0.973rd Quarter
    
    
    1.60
    
    
    
    1.204th Quarter
    
    
    1.56
    
    
    
    1.372006December 2005
    
    
    1.55
    
    
    
    1.49January 2006
    
    
    1.74
    
    
    
    1.57February 2006
    
    
    1.75
    
    
    
    1.67March 2006
    
    
    1.88
    
    
    
    1.80April 2006
    
    
    2.12
    
    
    
    1.75May 2006
    
    
    2.37
    
    
    
    2.20
 
 (1)
    
    Source: Luxembourg Stock Exchange(2)
    
    The prices of our Class A shares have been restated to give retroactive effect to the
10:1 split which occurred as a result of our recapitalization in June 2001. 95




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##### Table of Contents



ITEM 10. ADDITIONAL INFORMATION
 MEMORANDUM AND ARTICLES OF INCORPORATION
 Register
 Mémorial Articles Articles of Incorporation
  Objects and Purposes
    The Board of Directors
  Voting
 96




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##### Table of Contents



Powers
 
    
    delegate to any of its members the powers to carry out its decisions
and to provide day-to-day management;
    
    confer to any person the powers necessary for our technical,
administrative and commercial management;
    
    constitute any committee and determine its function and authority; and
    
    authorize all substitutions in the powers it has delegated or conferred.
 Compensation
 Conflicts of Interest
 Capital Stock
  Dividends pari passu
 Voting Rights
 97




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##### Table of Contents



Rights to Share in Company Profits
 Liquidation Rights pari passu
 Conversion Rights Requests
  Pre-emptive Rights
 Redemption Rights/Sinking Fund
 Business Combinations
 Nonresident or Foreign Shareholders Conversion Rights
 Transferability
 General Meetings
  98




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MATERIAL CONTRACTS
  Share Exchange Agreement. Southern Holding Shares
 License Agreement
 99




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##### Table of Contents



Distribution Agreement
 Quinsa Shareholders Agreement
 Memorandum of Agreement
 Letter Agreement between Quinsa, BAC and AmBev.
 2005 Letter Agreement between Quinsa, BAC and AmBev
 100




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##### Table of Contents



2006 Letter Agreement between Quinsa, BAC and AmBev
 EXCHANGE CONTROLS
      101




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##### Table of Contents




    
    until June 30, 2005, CMQ may acquire foreign currency in an amount
that shall not exceed the lesser of 35% of the principal amount of its
restructured debt (with a maximum limit of monthly purchases of
foreign currency of up to US$40 million) and the total amount of
interests accrued, either due or not, and of capital due under the
restructured debt; and
    
    funds so acquired must be applied to pay principal and/or interest
before June 30, 2005. As of June 30, 2004, CMQ had purchased the
maximum amount of foreign currency allowed under this limitation.
     102




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##### Table of Contents



TAXATION
  Luxembourg Taxes
     United States Taxes
  
    
    certain financial institutions;
    
    insurance companies;
    
    dealers and traders in securities or foreign currencies;
    
    persons holding ADSs or shares as part of a hedge, straddle, conversion or other integrated
transaction;
    
    persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
 103




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##### Table of Contents




    
    persons liable for the alternative minimum tax;
    
    tax-exempt organizations;
    
    partnerships or other entities classified as partnerships for U.S. federal income tax purposes;
    
    persons holding ADSs or shares that own or are deemed to own more than ten percent of any class
of our stock; or
    
    persons who acquired ADSs or shares pursuant to the exercise of any employee stock option or
otherwise as compensation.
 Code
  
    
    a citizen or resident of the United States;
    
    a corporation, or other entity taxable as a corporation, created or
organized in or under the laws of the United States or of any
political subdivision thereof; or
    
    an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
   Taxation of Distributions
 Sale and Other Disposition of ADSs or Shares
 104




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##### Table of Contents



Passive Foreign Investment Company Rules PFIC
  Information Reporting and Backup Withholding
 CORPORATE GOVERNANCE
 Significant Differences between Quinsas Corporate Governance Practices and U.S. Companies
Practices under NYSE Sections
 On March 17, 2006 the board of the Luxembourg Stock Exchange approved a 10-point Luxembourg
Corporate Governance code that shall come into effect on January 1 st , 2007. Quinsa is
currently reviewing this new set of rules and its potential impact on its existing Corporate
Governance practices in order to adapt where necessary or desirable. The description below does not
take into account this new set of rules.
   105




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Director Independence.
 Standards for Evaluating Director Independence.
 Non-management Directors Meetings.
 Nominating/Corporate Governance Committee.
 Compensation Committee.
 Audit Committee.
   106




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Disclosure of Corporate Governance Guidelines.
 Evaluation of Board Performance.
 Code of Ethics.
 Certifications by the CEO.
 107




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##### Table of Contents



Notification of Non-fulfillment.
 Delegations by the Board.
 The Takeover Directive. The Takeover Directive. Law Directive
 DOCUMENTS ON DISPLAY
   
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
  108




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Principal Cash Flows and Related Weighted Average Interest Rates
 AverageweightedInterest Rate
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Total (1)Fixed rate loansDollar-denominated
    
    
    7.4
    %
    
    
    8.7
    
    
    
    17.4
    
    
    
    44.6
    
    
    
    29.7
    
    
    
    29.6
    
    
    
    29.6
    
    
    
    29.6
    
    
    
    189.2Local
currency-denominated
    
    
    10.4
    %
    
    
    55.1
    
    
    
    41.8
    
    
    
    13.4
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111.0Total fixed rate
loans
    
    
    
    
    
    
    63.8
    
    
    
    59.2
    
    
    
    58.0
    
    
    
    30.4
    
    
    
    29.6
    
    
    
    29.6
    
    
    
    29.6
    
    
    
    300.2Floating rate loansDollar-denominated
    
    
    9.0
    %
    
    
    33.0
    
    
    
    59.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92.6Total floating rate
loans
    
    
    
    
    
    
    33.0
    
    
    
    59.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92.6TOTAL
    
    
    
    
    
    
    96.8
    
    
    
    118.8
    
    
    
    58.0
    
    
    
    30.4
    
    
    
    29.6
    
    
    
    29.6
    
    
    
    29.6
    
    
    
    392.8
 
 (1)
    
    The carrying amounts of short-term debt and long-term debt approximate their
respective fair values.
 109




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Commodity Price Exposure
   Commodity Position on Balance Sheet
    
    Carrying Amount(1)(in US$ millions)Barley Inventory
    
    
    35.1Cans Inventory
    
    
    0.5Malt Inventory
    
    
    2.9PET preforms Inventory
    
    
    1.3Total
    
    
    39.8
 
 (1)
    
    The carrying amounts of these inventories approximate their respective fair values. Foreign Exchange Exposure
     110




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th
 
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15. CONTROLS AND PROCEDURES
  Evaluation of disclosure controls and procedures
  Changes in internal controls
 111




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##### Table of Contents



ITEM 16. [RESERVED]
 
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2004
    
    2005Audit Fees(1)
    
    
    662.5
    
    
    
    737.9Audit -related Fees(2)
    
    
    105.5
    
    
    
    43.2Tax Fees(3)
    
    
    195.5
    
    
    
    177.0AllOther Fees(4)
    
    
    3.9
    
    
    
    28.5
 
 (1)
    
    Audit fees includes fees for audit or review services in accordance with generally accepted auditing
standards, including statutory audit work for foreign operations.(2)
    
    Audit-related fees include services related to the performance of the audit not reported in audit fees.(3)
    
    Tax fees includes fees for tax compliance services.(4)
    
    All other fees includes fees billed related to publication provided to the Company. Audit Committees Pre-Approval Policies and Procedures.
 
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
 Not applicable.
 
 ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE COMPANY
 112




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##### Table of Contents



(d) Total Number
    
    (e) Approximateof ADSs
    
    Dollar Value ofPurchased in 2005
    
    ADSs that May(a) Total Number
    
    (b) Average Price
    
    
    
    
    
    as Part of Publicly
    
    Yet Be PurchasedPeriod of Fiscal
    
    of ADSs
    
    Paid per ADS
    
    © Total Dollar
    
    Announced Plans
    
    Under the Plans orYear
    
    Purchased
    
    (US$)
    
    Amount Paid
    
    or Programs
    
    ProgramsApril, 2005 (1)
    
    
    440,900
    
    
    
    24.43
    
    
    
    10,771,812
    
    
    
    440,900
    
    
    
    72,770,000May, 2005 (1)
    
    
    76,000
    
    
    
    24.95
    
    
    
    1,896,200
    
    
    
    516,900
    
    
    
    70,874,000August, 2005 (2)
    
    
    308,000
    
    
    
    30.88
    
    
    
    9,511,040
    
    
    
    824,900
    
    
    
    51,548,000November, 2005 (2)
    
    
    584,700
    
    
    
    31.50
    
    
    
    18,418,050
    
    
    
    1,409,600
    
    
    
    18,000,000TOTAL
    
    
    1,409,600
    
    
    
    28.80
    
    
    
    40,597,102
    
    
    
    1,409,600
 
 1)
    
    Pursuant to a US$50 million program announced on March 26th, 2004.2)
    
    Pursuant to a US$50 million program announced on October 13th, 2005.  PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    F-3Consolidated Statements of Income for each of the two years in the
period ended December 31, 2005
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity for
each of the two years in the period ended December 31, 2005
    
    
    F-5Consolidated Statements of Cash Flows for each of the two years
in the period ended December 31, 2005
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-7
 
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBITS
 Exhibits1.1
    
    Articles of Incorporation of Quinsa, as amended (equivalent of both charter and by-laws).2.1
    
    Deposit Agreement dated February 28, 2002 among Quinsa, The Bank of New York and the
holders from time to time of American Depositary Receipts issued thereunder
(incorporated by reference to the registration statement on Form F-6 filed on February
20, 2002; File No. 333-83226).*2.2
    
    Form of American Depositary Receipt for Quinsa Class B shares (included in Exhibit 2.1).*4.1
    
    Share Exchange Agreement dated May 1, 2002 among Companhia de Bebidas das AméricasAMBEV
and Quinsa (incorporated by reference to Exhibit 2.1 of the Schedule 13D relating to
Quinsa, filed on May 13, 2002 by AmBev).*4.2
    
    Memorandum of Agreement dated January 13, 2003 between Heineken, Quinsa, BAC and certain
of their respective affiliates dated January 13, 2003 (incorporated by reference to our
Annual Report on Form 20-F filed on June 27, 2003 filed as Exhibit 4.2).*4.3
    
    Letter Agreement dated January 13, 2003 between AmBev, BAC and Quinsa (incorporated by
reference to Exhibit 2.4 of the Schedule 13D/A relating to Quinsa filed on February 4,
2003 by AmBev).*4.4
    
    Quinsa Shareholders Agreement dated as of January 31, 2003 among BAC and AmBev
(incorporated by reference to Exhibit 2.5 to Amendment No. 1 to the Schedule 13D
relating to Quinsa filed on February 4, 2003 by AmBev).*4.5
    
    License Agreement dated January 31, 2003 between Quinsa and AmBev (incorporated by
reference to our Annual Report on Form 20-F filed on June 27, 2003 as Exhibit 4.4).*4.6
    
    Distribution Agreement dated January 31, 2003 between Quinsa and AmBev (incorporated by
 113




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##### Table of Contents



Exhibitsreference to our Annual Report on Form 20-F filed on June 27, 2003 as Exhibit 4.5).*4.7
    
    Share Pledge Agreement dated as of January 31, 2003, among BAC, AmBev and Quinsa
(incorporated by reference to Exhibit 2.9 to Amendment No. 1 to the Schedule 13D
relating to Quinsa filed on February 4, 2003 AmBev).*4.8
    
    Escrow Agreement dated as of January 31, 2003, among BAC, AmBev and The Bank of New York
(incorporated by reference to Exhibit 2.10 to Amendment No. 1 to the Schedule 13D
relating to Quinsa filed on February 4, 2003 by AmBev).*4.9
    
    U.S.$ 150,000,000 Credit Agreement dated as of March 22, 2005 among CMQ and the Branch
of Citibank N.A. established in the Republic of Argentina. (incorporated by reference to our Annual Report
on Form 20-F filed on June 30, 2005 (as amended on
November 23, 2005) as
Exhibit 4.9.*4.10
    
    Agreement dated as of August 3, 2005 among BAC, AmBev and Quinsa.4.11
    
    Agreement dated as of April 13, 2006 among BAC, AmBev and Quinsa.
 Exhibits8.1
    
    List of Subsidiaries.10.4
    
    Resolution of the Office of Competition, Deregulation and Consumer
Advocacy of the Ministry of Production of the Republic of Argentina
regarding the business combination of AmBev and QuinsaEnglish
Translation (incorporated by reference to Exhibit 2.09 to Amendment No.
1 to the Schedule 13D relating to Quinsa filed on February 4, 2003 by
AmBev).*11.1
    
    Code of Ethics (incorporated by reference to our Annual Report on Form
20-F filed on June 30, 2004 as Exhibit 11.1).*12.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.12.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.13.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.15.1
    
    Consent of A.C. Nielsen Argentina S.A.15.2
    
    Consent of A.C. Nielsen Chile.15.3
    
    Consent of CCR/IRI.15.4
    
    Consent of A.C. Nielsen Uruguay.15.5
    
    Consent of CIES Internacional.
 
 *
    
    Incorporated by reference. 114




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SIGNATURES




QUILMES INDUSTRIAL (QUINSA), Société Anonyme.By:
    
    /s/ Gustavo Castelli

Name: Gustavo CastelliTitle: Chief Financial OfficerDate: June 30, 2006 115




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##### Table of Contents



Quilmes Industrial Société Anonyme  Consolidated Financial Statements
  
 F-1




---



##### Table of Contents





Report of Independent
Registered Public Accounting Firm









PRICE
WATERHOUSE & Co. S.R.L.by
/s/ Marcelo de Nicola (Partner)Marcelo de Nicola





F-2



---



##### 



Quilmes Industrial (Quinsa) Société Anonyme
 
 Index to the consolidated financial statements
 Note
    
    
    
    PageConsolidated balance sheet
    
    
    F-4Consolidated statement
of income
    
    
F-5Consolidated statement of changes in shareholders equity
    
    
F-6Consolidated statement
of cash flow
    
    
F-7Notes to the consolidated financial statements:
    
    
F-91
    
    General information
    
    
F-92
    
    Summary of significant accounting policies:
    
    
F-92.1 Basis of preparation
    
    
F-92.2 Consolidation
    
    
F-92.3 Segment reporting
    
    
F-102.4 Foreign currency translation
    
    
F-102.5 Property, plant and equipment
    
    
F-102.6 Intangible assets
    
    
F-112.7 Impairment of non-financial assets
    
    
F-112.8 Financial assets
    
    
F-112.9 Inventories
    
    
F-122.10 Trade receivables
    
    
F-122.11 Cash and cash equivalents
    
    
F-122.12 Share Capital
    
    
F-122.13. Borrowings
    
    
F-122.14 Income taxes current and deferred
    
    
F-122.15 Employee benefits
    
    
F-132.16 Provisions
    
    
F-132.17 Revenue recognition
    
    
F-132.18 Leases
    
    
F-142.19 Dividend distribution
    
    
F-142.20 New accounting standards and IFRIC interpretations
    
    
F-143
    
    Financial risk management
    
    
F-153.1 Financial risk factors
    
    
F-153.2 Fair value estimation
    
    
F-154
    
    Critical accounting estimates and judgements
    
    
F-165
    
    Transition to IFRS
    
    
F-165.1 Basis of transition to IFRS
    
    
F-165.2 Reconciliations between IFRS and Lux Gaap
    
    
F-176
    
    Segment information
    
    
F-247
    
    Property, plant and equipment
    
    
F-268
    
    Intangible assets
    
    
F-279
    
    Investments in associates companies
    
    
F-2810
    
    Trade and other receivables
    
    
F-2811
    
    Inventories
    
    
F-2912
    
    Investments in financial assets
    
    
F-3013
    
    Other financial assets at fair value through profit or loss
    
    
F-3014
    
    Cash and cash equivalents
    
    
F-3115
    
    Share capital
    
    
F-3116
    
    Cumulative translation adjustment
    
    
F-3217
    
    Trade and other payables
    
    
F-3218
    
    Borrowings
    
    
F-3319
    
    Deferred income tax
    
    
F-3420
    
    Provisions
    
    
F-3621
    
    Other operating income
    
    
F-3722
    
    Expenses by nature
    
    
F-3723
    
    Employee benefit expense
    
    
F-3724
    
    Finance costs
    
    
F-3725
    
    Income tax expenses
    
    
F-3826
    
    Earnings per share
    
    
F-3827
    
    Dividends per share
    
    
F-3928
    
    Contingencies
    
    
F-3929
    
    Commitments
    
    
F-3930
    
    Related-party transactions
    
    
F-3931
    

Summary of the Quinsa group of companies
    
    
F-4032
    
    Events after the balance sheet date
    
    
F-4133
    
    Income statement  April 2005
    
    
F-4234
    
    Reconciliation of net income and shareholder's equity to US GAAP
    
    
F-43
  F-3




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 Consolidated balance sheet
 Note
    
    At 31 December 2005
    
    At 31 December 2004ASSETSNon-current assetsProperty, plant and equipment
    
    
    7
    
    
    
    609,7
    
    
    
    584,0Goodwill
    
    
    8
    
    
    
    168,7
    
    
    
    85,1Intangible assets
    
    
    8
    
    
    
    170,0
    
    
    
    177,1Investment in associates companies
    
    
    9
    
    
    
    1,2
    
    
    
    1,1Deferred income tax assets
    
    
    19
    
    
    
    57,5
    
    
    
    69,5Investments in financial assets
    
    
    12
    
    
    
    46,2
    
    
    
    105,4Trade and other receivables
    
    
    10
    
    
    
    3,4
    
    
    
    3,31.056,7
    
    
    
    1.025,5Current assetsInventories
    
    
    11
    
    
    
    109,4
    
    
    
    88,1Trade and other receivables
    
    
    10
    
    
    
    90,1
    
    
    
    75,9Other financial assets at fair value through profit or loss
    
    
    13
    
    
    
    3,4
    
    
    
    2,8Investments in financial assets
    
    
    12
    
    
    
    6,8
    
    
    
    3,4Cash and cash equivalents
    
    
    14
    
    
    
    152,7
    
    
    
    116,8362,4
    
    
    
    287,0Total assets
    
    
    
    
    
    
    1.419,1
    
    
    
    1.312,5EQUITYCapital and reserves attributable the Companys equity holdersShare capital
    
    
    15
    
    
    
    34,7
    
    
    
    41,7Treasury shares
    
    
    15
    
    
    
    (54,8
    )
    
    
    (190,9
    )Share premium
    
    
    15
    
    
    
    6,5
    
    
    
    200,5Legal reserve
    
    
    
    
    
    
    3,5
    
    
    
    4,2Cumulative translation adjustment
    
    
    16
    
    
    
    (19,7
    )
    
    
    (15,4
    )Retained earnings
    
    
    
    
    
    
    520,5
    
    
    
    406,8490,7
    
    
    
    446,9Minority interest
    
    
    
    
    
    
    72,0
    
    
    
    129,8Total equity
    
    
    
    
    
    
    562,7
    
    
    
    576,7LIABILITIESNon-current liabilitiesBorrowings
    
    
    18
    
    
    
    296,0
    
    
    
    260,1Deferred income tax liabilities
    
    
    19
    
    
    
    131,8
    
    
    
    132,3Provisions and other liabilities
    
    
    20
    
    
    
    43,9
    
    
    
    41,3471,7
    
    
    
    433,7Current liabilitiesTrade and other payables
    
    
    17
    
    
    
    192,0
    
    
    
    152,4Current tax liabilities
    
    
    
    
    
    
    84,3
    
    
    
    42,9Borrowings
    
    
    18
    
    
    
    96,8
    
    
    
    106,8Provisions and other liabilities
    
    
    20
    
    
    
    11,6
    
    
    
    384,7
    
    
    
    302,1Total liabilities
    
    
    
    
    
    
    856,4
    
    
    
    735,8Total equity and liabilities
    
    
    
    
    
    
    1.419,1
    
    
    
    1.312,5
  F-4




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 Consolidated statement of income
 Year ended 31 DecemberNote
    
    2005
    
    2004Net Sales
    
    
    6
    
    
    
    954,3
    
    
    
    765,2Cost of sales
    
    
    22
    
    
    
    (406,2
    )
    
    
    (352,5
    )Gross profit
    
    
    
    
    
    
    548,1
    
    
    
    412,7Other operating income
    
    
    21
    
    
    
    5,7
    
    
    
    5,4Selling and marketing costs
    
    
    22
    
    
    
    (217,2
    )
    
    
    (180,4
    )Administrative expenses
    
    
    22
    
    
    
    (54,8
    )
    
    
    (49,8
    )Other operating expenses
    
    
    22
    
    
    
    (7,7
    )
    
    
    (18,8
    )Operating profit
    
    
    
    
    
    
    274,1
    
    
    
    169,1Finance costs
    
    
    24
    
    
    
    (40,7
    )
    
    
    (30,5
    )Share of profit of associates
    
    
    9
    
    
    
    0,1
    
    
    
    Profit before income tax
    
    
    
    
    
    
    233,5
    
    
    
    138,6Income tax expense
    
    
    25
    
    
    
    (71,9
    )
    
    
    (33,2
    )Profit for the year
    
    
    
    
    
    
    161,6
    
    
    
    105,4Attributable to:Equity holders of the Company
    
    
    
    
    
    
    131,4
    
    
    
    81,7Minority interest
    
    
    
    
    
    
    30,2
    
    
    
    23,7161,6
    
    
    
    105,4Earnings per share for profit
attributable to the equity holders
of the Company during the year
(expressed in US$  per million
shares) basic and diluted  Class A shares
    
    
    26
    
    
    
    0,119
    
    
    
    0,072 basic and diluted  Class B Shares
    
    
    26
    
    
    
    1,171
    
    
    
    0,627
  F-5




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Quilmes Industrial (Quinsa) Société Anonyme
 
 
 Consolidated statement of changes in shareholders equity
 Note
    
    
    Attributable to equity holders of the Company
    
    Minorityinterest
 
    TotalequityCumulativeShare
    
    Share
    
    Treasury
    
    Legal
    
    translation
    
    Retainedcapital
    
    Premium
    
    shares
    
    reserve
    
    adjustment
    
    earningsBalance at 1 January 2004
    
    
    
    
    
    
    41,7
    
    
    
    200,5
    
    
    
    (62,2
    )
    
    
    3,4
    
    
    
    
    
    
    
    336,9
    
    
    
    132,5
    
    
    
    652,8Currency translation
adjustments
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,4
    )
    
    
    
    
    
    
    (1,9
    )
    
    
    (17,3
    )Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,7
    
    
    
    23,7
    
    
    
    105,4Legal reserve increase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0,8
    
    
    
    
    
    
    
    (0,8
    )
    
    
    
    
    
    
    Purchase of treasury shares
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    (128,7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128,7
    )Purchase of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,1
    )
    
    
    (16,1
    )Dividend
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,0
    )
    
    
    (8,4
    )
    
    
    (19,4
    )Balance at 31 December 2004
    
    
    
    
    
    
    41,7
    
    
    
    200,5
    
    
    
    (190,9
    )
    
    
    4,2
    
    
    
    (15,4
    )
    
    
    406,8
    
    
    
    129,8
    
    
    
    576,7Balance at 1 January 2005
    
    
    
    
    
    
    41,7
    
    
    
    200,5
    
    
    
    (190,9
    )
    
    
    4,2
    
    
    
    (15,4
    )
    
    
    406,8
    
    
    
    129,8
    
    
    
    576,7Currency translation
adjustments
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,3
    )
    
    
    
    
    
    
    0,3
    
    
    
    (4,0
    )Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,4
    
    
    
    30,2
    
    
    
    161,6Purchase of treasury shares
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    (65,6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65,6
    )Share capital reduction
    
    
    15
    
    
    
    (7,0
    )
    
    
    (194,0
    )
    
    
    201,7
    
    
    
    (0,7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,7
    )
    
    
    (29,7
    )Cash paid to minority
shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,1
    )
    
    
    (16,1
    )Dividend
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,7
    )
    
    
    (42,5
    )
    
    
    (60,2
    )Balance at 31 December 2005
    
    
    
    
    
    
    34,7
    
    
    
    6,5
    
    
    
    (54,8
    )
    
    
    3,5
    
    
    
    (19,7
    )
    
    
    520,5
    
    
    
    72,0
    
    
    
    562,7
  F-6




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 Consolidated
statement of cash flows
 Year ended 31 DecemberNote
    
    2005
    
    2004OPERATING ACTIVITIESProfit for the year
    
    
    
    
    
    
    161,6
    
    
    
    105,4Adjustments for :Depreciation and amortization
    
    
    22
    
    
    
    98,8
    
    
    
    96,3Income tax
    
    
    25
    
    
    
    71,9
    
    
    
    33,2Interest expenses
    
    
    
    
    
    
    30,9
    
    
    
    21,8Fair value (gains)/ loss on other financial assets at fair value
    
    
    13
    
    
    
    (0,4
    )
    
    
    0,7Interest gain other financial assets
    
    
    13
    
    
    
    (0,2
    )
    
    
    Share of profit of associates
    
    
    9
    
    
    
    (0,1
    )
    
    
    Net gain from sale of property, plant and equipment
    
    
    21
    
    
    
    (4,3
    )
    
    
    (1,7
    )Other non cash items
    
    
    
    
    
    
    30,1
    
    
    
    21,9Unrealized foreign exchange losses
    
    
    
    
    
    
    4,6
    
    
    
    0,2Currency translation adjustment
    
    
    
    
    
    
    (3,9
    )
    
    
    (6,1
    )Changes in working capital:Increase in inventories
    
    
    
    
    
    
    (25,2
    )
    
    
    (15,9
    )Increase/ (decrease) in trade and other receivables
    
    
    
    
    
    
    (16,5
    )
    
    
    (4,9
    )Increase in trade and other payables
    
    
    
    
    
    
    37,7
    
    
    
    18,3Decrease in provisions and other liabilities
    
    
    20
    
    
    
    (9,8
    )
    
    
    (2,9
    )Interest paid
    
    
    
    
    
    
    (27,5
    )
    
    
    (18,5
    )Income tax paid
    
    
    
    
    
    
    (18,0
    )
    
    
    (16,2
    )Cash flows provided by operating activities
    
    
    
    
    
    
    329,7
    
    
    
    231,6INVESTING ACTIVITIESAcquisition of property, plant and equipment
    
    
    7
    
    
    
    (126,8
    )
    
    
    (72,2
    )Acquisition of minority interest
    
    
    8
    
    
    
    (114,5
    )
    
    
    (31,5
    )Acquisition of intangible assets
    
    
    8
    
    
    
    (8,0
    )
    
    
    Proceeds from investment in financial assets
    
    
    
    
    
    
    55,8
    
    
    
    Purchase of investment in financial assets
    
    
    
    
    
    
    
    
    
    
    (51,1
    )Cash paid to minority shareholders
    
    
    
    
    
    
    (16,1
    )
    
    
    Proceeds from disposal of property, plant and equipment
    
    
    
    
    
    
    16,6
    
    
    
    29,7Cash flows used in investing activities
    
    
    
    
    
    
    (193,0
    )
    
    
    (125,1
    )FINANCING ACTIVITIESDividends paid to companys shareholders
    
    
    
    
    
    
    (17,7
    )
    
    
    (11,0
    )Dividends paid to minority interest
    
    
    
    
    
    
    (42,5
    )
    
    
    (8,4
    )Purchase of treasury shares
    
    
    15
    
    
    
    (65,6
    )
    
    
    (128,7
    )Proceeds from borrowings
    
    
    
    
    
    
    295,0
    
    
    
    198,4Payment of borrowings
    
    
    
    
    
    
    (271,4
    )
    
    
    (177,0
    )Cash flows used in financing activities
    
    
    
    
    
    
    (102,2
    )
    
    
    (126,7
    )
 F-7




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 Year ended 31 DecemberNote
    
    2005
    
    2004Net increase / (decrease) in cash and cash equivalents
    
    
    
    
    
    
    34,5
    
    
    
    (20,2
    )Cash and cash equivalents less overdrafts at beginning of year
    
    
    14
    
    
    
    116,8
    
    
    
    137,8Effect of exchange rate and currency translations adjustment
    
    
    
    
    
    
    0,4
    
    
    
    (0,8
    )Cash and cash equivalents less overdrafts at end of years
    
    
    14
    
    
    
    151,7
    
    
    
    116,8
  F-8




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 Notes to the consolidated financial statements
 
 1. General information
    th
 
 2. Summary of significant accounting policies
 
 2.1 Basis of preparation
      
 2.2 Consolidation
  (a) Subsidiaries
    F-9




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
  (b) Transactions and minority interests
  (c) Associates
    
 2.3 Segment reporting
  
 2.4 Foreign currency translation
 (a) Functional and presentation currency
  (b) Transactions and balances
   (c) Companys entities
  (i)
    
    assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;(ii)
    
    income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions); and(iii)
    
    all resulting exchange differences are recognised as a separate component of equity (cumulative translation adjustment).
   
 2.5 Property, plant and equipment
   F-10




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Quilmes Industrial (Quinsa) Société Anonyme
 
      buildings
    
    40-50 years   machinery
    
    10 years   vehicles
    
    5 years   furniture, fittings and equipment
    
    3-10 years   returnable bottles and crates
    
    5-10 years
    
 2.6 Intangible assets
 (a) Goodwill
   (b) Trademarks and licences
  
 2.7 Impairment of non-financial assets
   
 2.8 Financial Assets
  (a) Financial assets at fair value through profit or loss
  (b) Loans and receivables
  (c) Held-to-maturity investments
  F-11




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
  (d) Available-for-sale financial assets
  
 2.9 Inventories
   
 2.10 Trade and other receivables
  
 2.11 Cash and cash equivalents
  
 2.12 Share capital
    
 2.13 Borrowings
   
 2.14 Income tax  current and deferred
    F-12




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
  
 2.15 Employee benefits
 a)Short-term employee benefits
  b) Social security contributions
   c)Employees severance indemnity
    d)Post-employment benefits
  e) Bonus management program
  
 2.16 Provisions
  
 2.17 Revenue recognition
  (a) Sales of goods  wholesale
  (b) Interest income
  F-13




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Quilmes Industrial (Quinsa) Société Anonyme
 
 
 2.18 Leases
 (a) The Company is the lessee
  (b) The Company is the lessor
  
 2.19 Dividend distribution
   
 2.20 New accounting standards and IFRIC interpretations
  
    
    IAS 19 (Amendment), Employee Benefits(effective from 1 January 2006). This amendment introduces the option of an alternative recognition approach for actuarial gains and losses. It may impose
additional recognition requirements for multi-employer plans where insufficient information is available to apply defined benefit accounting. It also adds new disclosure requirements. Management
considered this amendment to IAS 19 and concluded that it is not relevant to the Company.
    
    IAS 21(Amendment)  Net Investment in a Foreign Operation(effective from 1 January 2006. This amendment identifies further monetary items that can form part of a parents net investment in a
foreign operation. The Companys management has not yet assessed the impact of this standard on its financial statements.
    
    IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast Intragroup Transactions (effective from 1 January 2006).The amendment allows the foreign currency risk of a highly probable
forecast intragroup transaction to qualify as a hedged item in the consolidated financial statements, provided that: (a) the transaction is denominated in a currency other than the functional currency
of the entity entering into that transaction; and (b) the foreign currency risk will affect consolidated profit or loss. This amendment is not relevant to the Companys operations, as the Company does
not have any intragroup transactions that would qualify as a hedged item in the consolidated financial statements as of 31 December 2005 and 2004.
    
    IAS 39 (Amendment), The Fair Value Option (effective from 1 January 2006).This amendment changes the definition of financial instruments classified at fair value through profit or loss and
restricts the ability to designate financial instruments as part of this category. The Companys management has not yet assessed the impact of this standard on its financial statements.
    
    IAS 39 and IFRS 4 (Amendment), Financial Guarantee Contracts (effective from 1 January 2006).This amendment requires issued financial guarantees, other than those previously asserted by the
entity to be insurance contracts, to be initially recognised at their fair value, and subsequently measured at the higher of (a) the unamortized balance of the related fees received and deferred, and
(b) the expenditure required to settle the commitment at the balance sheet date. Management considered this amendment to IAS 39 and concluded that it is not relevant to the Company.
    
    IFRS 1 (Amendment), First-time Adoption of International Financial Reporting Standardsand IFRS 6 (Amendment), Exploration for and Evaluation of Mineral Resources (effective from 1 January
2006).These amendments are not relevant to the Companys operations, as the Company does not carry out exploration for and evaluation of mineral resources.
    
    IFRS 6, Exploration for and Evaluation of Mineral Resources (effective from 1 January 2006).IFRS 6 is not relevant to the Companys operations.
    
    IFRS 7, Financial Instruments: Disclosures, and a complementary Amendment to IAS 1, Presentation of Financial Statements  Capital Disclosures (effective from 1 January 2007). IFRS 7
introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial
instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. It replaces IAS 30, Disclosures in the Financial
Statements of Banks and Similar Financial Institutions, and disclosure requirements in IAS 32, Financial Instruments: Disclosure and Presentation. It is applicable to all entities that report under
IFRS. The amendment to IAS 1 introduces disclosures about the level of an entitys capital and how it manages capital. The Companys management has not yet assessed the impact of this standard on its
financial statements.
 F-14




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 
    
    IFRIC 4, Determining whether an arrangement contains a Lease (effective from 1 January 2006).IFRIC 4 requires the determination of whether an arrangement is or contains a lease to be based
on the substance of the arrangement. It requires an assessment of whether: (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and (b) the arrangement
conveys a right to use the asset. Management is currently assessing the impact of IFRIC 4 on the Companys operations.
    
    IFRIC 5, Rights to interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (effective from 1 January 2006).IFRIC 5 is not relevant to the Companys
operations.
    
    IFRIC 6, Liabilities arising from Participating in a Specific Market  Waste Electrical and Electronic Equipment (effective from 1 December 2005).IFRIC 6 is not relevant to the Companys
operations.
    
    IFRIC 7, Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies (effective from 1 March 2006).IFRIC 7 is not relevant to the Companys operations.
    
    IFRIC 8, Scope of IFRS 2 (effective from 1 May 2006).IFRIC 8 is not relevant to the Companys operations.
    
    IFRIC 9, Reassessment of Embedded Derivatives (effective from 1 June 2006).IFRIC 9 prohibits subsequent reassessment of embedded derivatives unless there is a change in the terms of the
contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. IFRIC 9 is not relevant to the Companys operations.
 
 3. Financial risk management
 
 3.1 Financial risk factors
   (a) Market risk- currency risk
  (b) Credit risk
  (c) Liquidity risk
  (d) Cash flow and fair value interest rate risk
  
 3.2 Fair value estimation
    F-15




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Quilmes Industrial (Quinsa) Société Anonyme
 
 
 4. Critical accounting estimates and assumptions
   (a) Estimated impairment of goodwill
  (b) Income taxes
  (c) Provision for contingencies
  
 5. Transition to IFRS
 
 5.1 Basis of transition to IFRS
 5.1.1 Application of IFRS 1
    5.1.2 Exemptions from full retrospective application  elected by the Company
  (a) Business combinations exemption
  (b) Fair value as deemed cost exemption
  (c) Cumulative translation differences exemption
  F-16




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Quilmes Industrial (Quinsa) Société Anonyme
 
 5.1.3 Exceptions from full retrospective application followed by the Company
  (a) Derecognition of financial assets and liabilities exception
  (b) Hedge accounting exception
  (c) Estimates exception
  (d) Assets held for sale and discontinued operations exception
  (e) Exception from restatement of comparatives for IAS 32 and IAS 39
  
 5.2 Reconciliations between IFRS and Lux GAAP
  -
 -
 -
 -
  5.2.1 Summary of equity
 1 January 2004
    
    Note
    
    31 December 2004
    
    NoteTotal equity under LUX GAAP
    
    
    870,4
    
    
    
    
    
    
    
    913,4Restatement and remeasurement of
property, plant and equipment
    
    
    37,8
    
    
    
    5.2.2.
    (a)
    
    
    25,7
    
    
    
    5.2.3.
    (a)Deduction of treasury shares from equity
    
    
    (62,2
    )
    
    
    5.2.2.
    (e) (f) (g) (h)
    
    
    (190,9
    )
    
    
    5.2.3.
    (e) (f) (g) (h)Remeasurement of intangible asset
    
    
    (58,2
    )
    
    
    5.2.2.
    (c)
    
    
    (51,7
    )
    
    
    5.2.3.
    (c)Reversal of goodwill
    
    
    3,2
    
    
    
    5.2.2.
    (b)
    
    
    0,8
    
    
    
    5.2.3.
    (b)Reversal of provisions
    
    
    2,1
    
    
    
    5.2.2.
    (k)
    
    
    Deferred tax adjustments
    
    
    (140,3
    )
    
    
    5.2.2.
    (d) (j)
    
    
    (120,6
    )
    
    
    5.2.3.
    (d) (k)Total equity under IFRS
    
    
    652,8
    
    
    
    
    
    
    
    576,7
 5.2.2 Reconciliation of equity at 1 January 2004
 Effect of transition toNote
    
    Lux GAAP
    
    IFRS
    
    IFRSASSETSNon-current assetsProperty, plant and equipment
    
    
    a
    
    
    
    592,3
    
    
    
    37,8
    
    
    
    630,1Goodwill
    
    
    b
    
    
    
    66,4
    
    
    
    3,2
    
    
    
    69,6Intangible assets
    
    
    c
    
    
    
    252,0
    
    
    
    (58,2
    )
    
    
    193,8Investment in associates companies
    
    
    
    
    
    
    1,1
    
    
    
    
    
    
    
    1,1Deferred income tax assets
    
    
    d
    
    
    
    87,3
    
    
    
    9,7
    
    
    
    97,0Investments in financial assets
    
    
    e
    
    
    
    119,8
    
    
    
    (62,2
    )
    
    
    57,6
 F-17




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 Effect of transition toNote
    
    Lux GAAP
    
    IFRS
    
    IFRSTrade and other receivables
    
    
    
    
    
    
    8,4
    
    
    
    
    
    
    
    8,41.127,3
    
    
    
    (69,7
    )
    
    
    1.057,6Current assetsInventories
    
    
    
    
    
    
    82,6
    
    
    
    
    
    
    
    82,6Trade and other receivables
    
    
    
    
    
    
    68,3
    
    
    
    
    
    
    
    68,3Other financial assets at fair
value through profit and loss
    
    
    
    
    
    
    3,5
    
    
    
    
    
    
    
    3,5Cash and cash equivalents
    
    
    
    
    
    
    137,8
    
    
    
    
    
    
    
    137,8292,2
    
    
    
    
    
    
    
    292,2Total assets
    
    
    
    
    
    
    1.419,5
    
    
    
    (69,7
    )
    
    
    1.349,8EQUITYCapital and reserves attributable to equity holdersShare capital
    
    
    
    
    
    
    41,7
    
    
    
    
    
    
    
    41,7Treasury shares reserve
    
    
    f
    
    
    
    62,2
    
    
    
    (62,2
    )
    
    
    Treasury shares
    
    
    g
    
    
    
    
    
    
    
    (62,2
    )
    
    
    (62,2
    )Share premium
    
    
    h
    
    
    
    138,3
    
    
    
    62,2
    
    
    
    200,5Legal reserve
    
    
    
    
    
    
    3,4
    
    
    
    
    
    
    
    3,4Retained earnings
    
    
    l
    
    
    
    468,7
    
    
    
    (131,8
    )
    
    
    336,9714,3
    
    
    
    (194,0
    )
    
    
    520,3Minority interest
    
    
    i
    
    
    
    156,1
    
    
    
    (23,6
    )
    
    
    132,5Total equity
    
    
    
    
    
    
    870,4
    
    
    
    (217,6
    )
    
    
    652,8LIABILITIESNon-current liabilitiesBorrowings
    
    
    
    
    
    
    238,9
    
    
    
    
    
    
    
    238,9Deferred income tax liabilities
    
    
    j
    
    
    
    0,4
    
    
    
    150,0
    
    
    
    150,4Provisions and other liabilities
    
    
    k
    
    
    
    27,5
    
    
    
    (2,1
    )
    
    
    25,4266,8
    
    
    
    147,9
    
    
    
    414,7Current liabilitiesTrade and other payables
    
    
    
    
    
    
    134,7
    
    
    
    
    
    
    
    134,7Current tax liabilities
    
    
    
    
    
    
    35,3
    
    
    
    
    
    
    
    35,3Borrowings
    
    
    
    
    
    
    103,1
    
    
    
    
    
    
    
    103,1Provisions and other liabilities
    
    
    
    
    
    
    9,2
    
    
    
    
    
    
    
    9,2282,3
    
    
    
    
    
    
    
    282,3Total liabilities
    
    
    
    
    
    
    549,1
    
    
    
    147,9
    
    
    
    697,0Total equity and liabilities
    
    
    
    
    
    
    1.419,5
    
    
    
    (69,7
    )
    
    
    1.349,8
 Explanation of the effect of the transition to IFRS
  (a) Property, plant and equipment(i) Restatement of property, plant and equipment at fair value
    
    
    51,8(ii) Remeasurement of property, plant and equipment considering the functional currency of each subsidiary
    
    
    (14,0
    )Total impact  increase in PPE
    
    
    37,8(i) Management has applied the fair value for as deemed cost exemption for the property, plant and equipment of its Argentine, Bolivian and Paraguayan subsidiaries.(ii) Management has remeasured property, plant and equipment of its Uruguayan and Chilean subsidiaries considering their functional currency.
 (b) GoodwillReversal of the negative goodwill (Bolivia)
    
    
    3,2
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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
  Total impact  increase in goodwill
    
    
    3,2(c) Intangible asset(i) Reversal of the impairment of intangible assets
    
    
    84,4(ii) Effect of the translation to the functional currency
    
    
    (142,6
    )Total impact  decrease in intangible assets
    
    
    (58,2
    )(ii) Management has remeasured intangible assets considering each subsidiary functional currency. The carrying amount under
Lux GAAP was US$252,0 and the remeasured amount under IFRS US$193,8. The amount recognised under IFRS subsumed the
impairment charge recognised under Lux GAAP.(d) Deferred income tax assetsOverall impact of recognising deferred tax in accordance with IAS 12
    
    
    9,7Total impact  increase in deferred income tax assets
    
    
    9,7The Company has recalculated deferred tax in accordance with IAS 12.(e) Investments in financial assetsDeduction of treasury shares from equity
    
    
    (62,2
    )Total impact  decrease in investments in financial assets
    
    
    (62,2
    )Under Lux Gaap treasury shares were shown as financial assets.(f) Treasury Shares reserveReversal of share premium reserve
    
    
    (62,2
    )Total impact  decrease in Treasury Shares reserve
    
    
    (62,2
    )Under Lux Gaap treasury shares were shown as a financial asset and additionally the amount of treasury shares was credited
to share premium and debited to treasury shares reserve. Under IFRS purchases of equity shares are deducted from equity.(g) Treasury SharesDeduction of treasury shares from equity
    
    
    (62,2
    )Total impact  decrease in Treasury Shares
    
    
    (62,2
    )Under Lux Gaap treasury shares were shown as a financial asset and additionally the amount of treasury shares was credited
to share premium and debited to treasury shares reserve. Under IFRS purchases of equity shares are deducted from equity.(h) Share PremiumReversal of treasury shares reserve
    
    
    62,2Total impact  increase in Share premium reserve
    
    
    62,2Under Lux Gaap treasury shares were shown as a financial asset and additionally the amount of treasury shares was credited
to share premium and debited to treasury shares reserve. Under IFRS purchases of equity shares are deducted from equity.(i)Minority interest1) Property, plant and equipment
    
    
    5,02) Intangible assets
    
    
    (7,2
    )3) Deferred taxes
    
    
    (22,1
    )4) Provisions
    
    
    0,7Total impact  decrease in minority interest
    
    
    (23,6
    )(j) Deferred income tax liabilitiesOverall impact of recognising deferred tax in accordance with IAS 12
    
    
    150,0Total impact  increase in deferred income tax liabilities
    
    
    150,0The Company has recalculated deferred tax in accordance with IAS 12.
 F-19




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
  (k) ProvisionsReversal of provision
    
    
    (2,1
    )Total impact  decrease in provisions
    
    
    (2,1
    )Reversal of restructuring provisions as certain of the criteria specified by IAS 37 were not met(l) Retained earnings
  5.2.3 Reconciliation of equity at 31 December 2004
 Effect of transition toNote
    
    Lux GAAP
    
    IFRS
    
    IFRSASSETSNon-current assetsProperty, plant and equipment
    
    
    a
    
    
    
    558,3
    
    
    
    25,7
    
    
    
    584,0Goodwill
    
    
    b
    
    
    
    84,3
    
    
    
    0,8
    
    
    
    85,1Intangible assets
    
    
    c
    
    
    
    228,8
    
    
    
    (51,7
    )
    
    
    177,1Investments in associates companies
    
    
    
    
    
    
    1,1
    
    
    
    
    
    
    
    1,1Deferred income tax assets
    
    
    d
    
    
    
    58,3
    
    
    
    11,2
    
    
    
    69,5Investments in financial assets
    
    
    e
    
    
    
    296,3
    
    
    
    (190,9
    )
    
    
    105,4Trade and other receivables
    
    
    
    
    
    
    3,3
    
    
    
    
    
    
    
    3,31.230,4
    
    
    
    (204,9
    )
    
    
    1.025,5Current assetsInventories
    
    
    
    
    
    
    88,1
    
    
    
    
    
    
    
    88,1Trade and other receivables
    
    
    
    
    
    
    75,9
    
    
    
    
    
    
    
    75,9Other financial assets at fair
value through profit or loss
    
    
    
    
    
    
    2,8
    
    
    
    
    
    
    
    2,8Investments in financial assets
    
    
    
    
    
    
    3,4
    
    
    
    
    
    
    
    3,4Cash and cash equivalents
    
    
    
    
    
    
    116,8
    
    
    
    
    
    
    
    116,8287,0
    
    
    
    
    
    
    
    287,0Total assets
    
    
    
    
    
    
    1.517,4
    
    
    
    (204,9
    )
    
    
    1.312,5EQUITYCapital and reserves attributable to equity holdersShare capital
    
    
    
    
    
    
    41,7
    
    
    
    
    
    
    
    41,7Treasury shares reserves
    
    
    f
    
    
    
    190,9
    
    
    
    (190,9
    )
    
    
    Treasury shares
    
    
    g
    
    
    
    
    
    
    
    (190,9
    )
    
    
    (190,9
    )Share premium
    
    
    h
    
    
    
    9,6
    
    
    
    190,9
    
    
    
    200,5Legal reserve
    
    
    
    
    
    
    4,2
    
    
    
    
    
    
    
    4,2Cumulative translation adjustment
    
    
    i
    
    
    
    
    
    
    
    (15,4
    )
    
    
    (15,4
    )Retained earnings
    
    
    l
    
    
    
    515,8
    
    
    
    (109,0
    )
    
    
    406,8762,2
    
    
    
    (315,3
    )
    
    
    446,9Minority interest
    
    
    j
    
    
    
    151,2
    
    
    
    (21,4
    )
    
    
    129,8Total equity
    
    
    
    
    
    
    913,4
    
    
    
    (336,7
    )
    
    
    576,7LIABILITIESNon-current liabilitiesBorrowings
    
    
    
    
    
    
    260,1
    
    
    
    
    
    
    
    260,1Deferred income tax liabilities
    
    
    k
    
    
    
    0,5
    
    
    
    131,8
    
    
    
    132,3Provisions and other liabilities
    
    
    
    
    
    
    41,3
    
    
    
    
    
    
    
    41,3301,9
    
    
    
    131,8
    
    
    
    433,7Current liabilitiesTrade and other payables
    
    
    
    
    
    
    152,4
    
    
    
    
    
    
    
    152,4Current tax liabilities
    
    
    
    
    
    
    42,9
    
    
    
    
    
    
    
    42,9
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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
  Effect of transition toNote
    
    Lux GAAP
    
    IFRS
    
    IFRSBorrowings
    
    
    
    
    106,8
    
    
    
    
    
    
    
    106,8302,1
    
    
    
    
    
    
    
    302,1Total liabilities
    
    
    
    
    
    
    604,0
    
    
    
    131,8
    
    
    
    735,8Total equity and liabilities
    
    
    
    
    
    
    1.517,4
    
    
    
    (204,9
    )
    
    
    1.312,5
  (a) Property, plant and equipment(i) Restatement of property, plant and equipment at fair value
    
    
    36,2(ii) Remeasurement of property, plant and equipment considering the functional currency of each subsidiary
    
    
    (10,5
    )Total impact  increase in PPE
    
    
    25,7(i) Management has applied the fair value for as deemed cost exemption in respect of the property, plant and equipment of its Argentine,
Bolivian and Paraguayan subsidiaries.(ii) Management has remeasured property, plant and equipment of its Uruguayan and Chilean subsidiaries considering their functional currency.(b) GoodwillReversal of the negative goodwill (Bolivia)
    
    
    2,2Reversal of goodwill (Linthal)
    
    
    (1,4
    )Total impact  increase in goodwill
    
    
    0,8(c) Intangible assets(i) Reversal of the impairment of intangible assets
    
    
    78,8(ii) Effect of the translation to the functional currency
    
    
    (130,5
    )Total impact  decrease in intangible assets
    
    
    (51,7
    )(ii) Management has remeasured intangible assets considering each subsidiary functional currency. The carrying amount under Lux GAAP was US$228,8
and the remeasured amount under IFRS US$177,1. The amount
recognised under IFRS subsumed the impairment charge recognised under Lux GAAP.(d) Deferred income tax assetsOverall impact of recognising deferred tax in accordance with IAS 12
    
    
    11,2Total impact  increase in deferred income tax assets
    
    
    11,2The Company has recalculated deferred tax in accordance with IAS 12.(e) Investments in financial assetsElimination of treasury shares
    
    
    (190,9
    )Total impact  decrease in investments in financial assets
    
    
    (190,9
    )(f) Treasury shares reserveReversal of share premium reserve
    
    
    (190,9
    )Total impact  decrease in Treasury shares reserve
    
    
    (190,9
    )Under Lux Gaap treasury shares were shown as a financial asset and additionally the amount of treasury shares was credited to share premium and
debited to treasury shares reserve. Under IFRS purchases of
equity shares are deducted from equity.(g) Treasury sharesDeduction of treasury shares from equity
    
    
    (190,9
    )Total impact  decrease in Treasury shares
    
    
    (190,9
    )Under Lux Gaap treasury shares were shown as a financial asset and additionally the amount of treasury shares was credited to share premium and
debited to treasury shares reserve. Under IFRS purchases of
equity shares are deducted from equity.
 F-21




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
  (h) Share premiumReversal of treasury shares reserve
    
    
    190,9Total impact  increase in share premium reserve
    
    
    190,9Under Lux Gaap treasury shares were shown as a financial asset and additionally the amount of treasury shares was credited to share premium
and debited to treasury shares reserve. Under IFRS purchases of
equity shares are deducted from equity.(i) Cumulative translation adjustmentExchange differences
    
    
    (15,4
    )Total impact  decrease in cumulative translation adjustment
    
    
    (15,4
    )(j) Minority interest1) Property, plant and equipment
    
    
    2,92) Intangible assets
    
    
    (6,2
    )3) Deferred taxes
    
    
    (18,1
    )Total impact  decrease in minority interest
    
    
    (21,4
    )(k) Deferred income tax liabilitiesOverall impact of recognizing deferred tax in accordance with IAS 12
    
    
    131,8Total impact  increase in deferred income tax liabilities
    
    
    131,8The Company
has recalculated deferred tax in accordance with IAS 12.(l) Retained earningsThe cumulative effect of all of the above adjustments has resulted in a decrease in retained earnings in 31
December 2004 of US$109,0.
 5.2.4 Reconciliation of net income for year ended 31 December 2004
 Effect of transition toNote
    
    Lux GAAP
    
    IFRS
    
    IFRSNet Sales
    
    
    
    
    
    
    765,2
    
    
    
    
    
    
    
    765,2Cost of sales
    
    
    a
    
    
    
    (355,8
    )
    
    
    3,3
    
    
    
    (352,5
    )Gross profit
    
    
    
    
    
    
    409,4
    
    
    
    3,3
    
    
    
    412,7Other operating income
    
    
    b
    
    
    
    5,0
    
    
    
    0,4
    
    
    
    5,4Selling and marketing costs
    
    
    c
    
    
    
    (188,6
    )
    
    
    8,2
    
    
    
    (180,4
    )Administrative expenses
    
    
    
    
    
    
    (49,8
    )
    
    
    
    
    
    
    (49,8
    )Other operating expenses
    
    
    d
    
    
    
    (15,2
    )
    
    
    (3,6
    )
    
    
    (18,8
    )Operating profit
    
    
    
    
    
    
    160,8
    
    
    
    8,3
    
    
    
    169,1Finance
costs  net
    
    
    e
    
    
    
    (30,2
    )
    
    
    (0,3
    )
    
    
    (30,5
    )Profit before tax
    
    
    
    
    
    
    130,6
    
    
    
    8,0
    
    
    
    138,6Income tax expense
    
    
    f
    
    
    
    (52,0
    )
    
    
    18,8
    
    
    
    (33,2
    )Profit for the year
    
    
    
    
    
    
    78,6
    
    
    
    26,8
    
    
    
    105,4
 (a) Cost of salesImpact of fair value in depreciation
    
    
    3,3Total impact- decrease in cost of sales
    
    
    3,3(b) Other operating incomeTotal impact of other items
    
    
    0,4Total impact  increase in other operating income
    
    
    0,4(c) Selling and marketing costsTotal impact of intangible assets amortization
    
    
    8,1Total impact of property, plant and equipment depreciation
    
    
    0,1
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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 Total impact  decrease in selling and marketing costs
    
    
    8,2(d) Other operating expensesRestructuring provisions recorded against goodwill
    
    
    (1,5
    )Total impact of reversal of provisions
    
    
    (2,1
    )Total impact  increase in other operating expenses
    
    
    (3,6
    )(e) Finance costsCumulated impact of minor items
    
    
    (0,3
    )Total impact  increase in finance costs
    
    
    (0,3
    )(f) Income tax expenseTotal effect of tax adjustments
    
    
    18,8Total impact  decrease of income tax expenses
    
    
    18,8
 5.2.5 Reconciliation of cash flows for the year ended 31 December 2004
 Effect ofLux GAAP
    
    transition to IFRS
    
    IFRSOPERATING ACTIVITIESProfit for the year
    
    
    78,6
    
    
    
    26,8
    
    
    
    105,4Adjustments for :Depreciation and amortization
    
    
    108,0
    
    
    
    (11,7
    )
    
    
    96,3Net gain from sale of property, plant and equipment
    
    
    (9,6
    )
    
    
    7,9
    
    
    
    (1,7
    )Income tax
    
    
    52,0
    
    
    
    (18,8
    )
    
    
    33,2Interest expenses
    
    
    21,8
    
    
    
    
    
    
    
    21,8Fair value gains on other financial assets at fair value
    
    
    0,7
    
    
    
    
    
    
    
    0,7Other non cash items
    
    
    21,9
    
    
    
    
    
    
    
    21,9Unrealized foreign exchange losses
    
    
    1,7
    
    
    
    (1,5
    )
    
    
    0,2Currency translation adjustment
    
    
    
    
    
    
    (6,1
    )
    
    
    (6,1
    )Changes in working capitalIncrease in inventories
    
    
    (15,9
    )
    
    
    
    
    
    
    (15,9
    )Decrease in trade and other receivables
    
    
    (4,9
    )
    
    
    
    
    
    
    (4,9
    )Increase in trade and other payables
    
    
    18,3
    
    
    
    
    
    
    
    18,3Decrease in provisions and other liabilities
    
    
    (4,7
    )
    
    
    1,8
    
    
    
    (2,9
    )Interest paid
    
    
    (18,5
    )
    
    
    
    
    
    
    (18,5
    )Income tax paid
    
    
    (16,2
    )
    
    
    
    
    
    
    (16,2
    )
    
    
    
    
    
    
    
    Cash flow provided by operating activities
    
    
    233,2
    
    
    
    (1,6
    )
    
    
    231,6INVESTING ACTIVITIESAcquisition of property, plant and equipment
    
    
    (72,2
    )
    
    
    
    
    
    
    (72,2
    )Acquisition of minority interest
    
    
    (31,5
    )
    
    
    
    
    
    
    (31,5
    )Acquisition of intangible assets
    
    
    (1,6
    )
    
    
    1,6
    
    
    
    Purchase of investment in financial assets
    
    
    (51,1
    )
    
    
    
    
    
    
    (51,1
    )Proceeds from disposal of property, plant and equipment
    
    
    29,7
    
    
    
    
    
    
    
    29,7Cash flow used in investing activities
    
    
    (126,7
    )
    
    
    1,6
    
    
    
    (125,1
    )
 F-23




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 Effect ofLux GAAP
    
    transition to IFRS
    
    IFRSFINANCING ACTIVITIESDividends
paid to companys shareholders
    
    
    (11,0
    )
    
    
    
    
    
    
    (11,0
    )Dividends paid to minority interests
    
    
    (8,4
    )
    
    
    
    
    
    
    (8,4
    )Purchase of treasury shares
    
    
    (128,7
    )
    
    
    
    
    
    
    (128,7
    )Payment of borrowings
    
    
    (177,0
    )
    
    
    
    
    
    
    (177,0
    )Proceeds from borrowings
    
    
    198,4
    
    
    
    
    
    
    
    198,4Cash flow used in financing activities
    
    
    (126,7
    )
    
    
    
    
    
    
    (126,7
    )Net decrease in cash and cash equivalents
    
    
    (20,2
    )
    
    
    
    
    
    
    (20,2
    )Cash and cash equivalents less overdrafts at beginning of year
    
    
    137,8
    
    
    
    
    
    
    
    137,8Effect of exchange rate and currency translation adjustment
    
    
    (0,8
    )
    
    
    
    
    
    
    (0,8
    )Cash and cash equivalents less overdrafts at end of years
    
    
    116,8
    
    
    
    
    
    
    
    116,8
 
 6. Segment information
 (a) Primary reporting format geographical segments
  OtherArgentina
    
    Bolivia
    
    Paraguay
    
    Uruguay
    
    Chile
    
    Countries
    
    TotalTotal gross segment sales
    
    
    643,5
    
    
    
    125,7
    
    
    
    109,7
    
    
    
    52,0
    
    
    
    35,6
    
    
    
    
    
    
    
    966,5Inter-segment sales
    
    
    (10,7
    )
    
    
    (1,1
    )
    
    
    (0,4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,2
    )Net Sales
    
    
    632,8
    
    
    
    124,6
    
    
    
    109,3
    
    
    
    52,0
    
    
    
    35,6
    
    
    
    
    
    
    
    954,3Operating profit
    
    
    160,5
    
    
    
    57,0
    
    
    
    53,9
    
    
    
    14,4
    
    
    
    (3,0
    )
    
    
    (8,7
    )
    
    
    274,1Finance
costs  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,7
    )Share of profit of
associates (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0,1
    
    
    
    
    
    
    
    
    
    
    
    0,1Profit before income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    233,5Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71,9
    )Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,6
  OtherArgentina
    
    Bolivia
    
    Paraguay
    
    Uruguay
    
    Chile
    
    Countries
    
    TotalTotal gross segment sales
    
    
    513,3
    
    
    
    108,0
    
    
    
    94,4
    
    
    
    36,7
    
    
    
    23,0
    
    
    
    
    
    
    
    775,4Inter-segment sales
    
    
    (7,4
    )
    
    
    (0,4
    )
    
    
    (2,4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,2
    )Net Sales
    
    
    505,9
    
    
    
    107,6
    
    
    
    92,0
    
    
    
    36,7
    
    
    
    23,0
    
    
    
    
    
    
    
    765,2Operating profit
    
    
    88,5
    
    
    
    41,3
    
    
    
    42,9
    
    
    
    6,0
    
    
    
    (1,0
    )
    
    
    (8,6
    )
    
    
    169,1Finance
costs  net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,5
    )Profit before income tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138,6Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,2
    )Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,4
  F-24




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 Year ended 31 December 2005OtherArgentina
    
    Bolivia
    
    Paraguay
    
    Uruguay
    
    Chile
    
    Countries
    
    TotalDepreciation (Note 7)
    
    
    (61,8
    )
    
    
    (9,5
    )
    
    
    (7,4
    )
    
    
    (3,4
    )
    
    
    (2,8
    )
    
    
    
    
    
    
    (84,9
    )Amortization (Note 8)
    
    
    (4,2
    )
    
    
    (6,5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,2
    )
    
    
    (13,9
    )Impairment of trade
receivables (Note 20.2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,0
    )
    
    
    (1,0
    )
    
    
    
    
    
    
    (2,0
    )Profit sharing (Note 23)
    
    
    (12,5
    )
    
    
    (0,4
    )
    
    
    (0,2
    )
    
    
    (0,1
    )
    
    
    (0,2
    )
    
    
    
    
    
    
    (13,4
    )
 Year ended 31 December 2004OtherArgentina
    
    Bolivia
    
    Paraguay
    
    Uruguay
    
    Chile
    
    Countries
    
    TotalDepreciation (Note 7)
    
    
    (63,2
    )
    
    
    (7,9
    )
    
    
    (7,9
    )
    
    
    (1,9
    )
    
    
    (1,7
    )
    
    
    
    
    
    
    (82,6
    )Amortization (Note 8)
    
    
    (3,9
    )
    
    
    (6,5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,3
    )
    
    
    (13,7
    )Impairment of trade
receivables (Note 20.2)
    
    
    (0,9
    )
    
    
    
    
    
    
    (0,4
    )
    
    
    (0,8
    )
    
    
    (0,3
    )
    
    
    
    
    
    
    (2,4
    )Profit sharing (Note 23)
    
    
    (9,4
    )
    
    
    (0,2
    )
    
    
    (0,5
    )
    
    
    (0,2
    )
    
    
    (0,2
    )
    
    
    
    
    
    
    (10,5
    )
   OtherArgentina
    
    Bolivia
    
    Paraguay
    
    Uruguay
    
    Chile
    
    Countries
    
    TotalAssets
    
    
    829,0
    
    
    
    237,6
    
    
    
    140,7
    
    
    
    61,4
    
    
    
    31,5
    
    
    
    117,7
    
    
    
    1.417,9Associates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,2
    
    
    
    
    
    
    
    
    
    
    
    1,2Total assets
    
    
    829,0
    
    
    
    237,6
    
    
    
    140,7
    
    
    
    62,6
    
    
    
    31,5
    
    
    
    117,7
    
    
    
    1.419,1Liabilities
    
    
    626,7
    
    
    
    79,2
    
    
    
    47,3
    
    
    
    35,7
    
    
    
    25,7
    
    
    
    41,8
    
    
    
    856,4Capital expenditure (Notes 7 and 8)
    
    
    92,5
    
    
    
    14,8
    
    
    
    13,9
    
    
    
    8,1
    
    
    
    5,5
    
    
    
    
    
    
    
    134,8
  OtherArgentina
    
    Bolivia
    
    Paraguay
    
    Uruguay
    
    Chile
    
    Countries
    
    TotalAssets
    
    
    578,0
    
    
    
    283,5
    
    
    
    164,6
    
    
    
    62,8
    
    
    
    20,5
    
    
    
    202,0
    
    
    
    1.311,4Associates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,1
    
    
    
    
    
    
    
    
    
    
    
    1,1Total assets
    
    
    578,0
    
    
    
    283,5
    
    
    
    164,6
    
    
    
    63,9
    
    
    
    20,5
    
    
    
    202,0
    
    
    
    1.312,5Liabilities
    
    
    520,5
    
    
    
    79,1
    
    
    
    34,9
    
    
    
    37,4
    
    
    
    10,9
    
    
    
    53,0
    
    
    
    735,8Capital
expenditure (Notes 7 and 8)
    
    
    48,3
    
    
    
    8,9
    
    
    
    8,2
    
    
    
    4,1
    
    
    
    2,7
    
    
    
    
    
    
    
    72,2
  (b) Secondary reporting format  business segments
  Net Sales
    
    2005
    
    2004Beer
    
    
    704,7
    
    
    
    582,6Soft drinks and other beverages
    
    
    241,5
    
    
    
    177,2Other
    
    
    8,1
    
    
    
    5,4954,3
    
    
    
    765,2
 Total assets
    
    At 31 December 2005
    
    At 31 December 2004Beer
    
    
    864,2
    
    
    
    767,3Soft drinks and other beverages
    
    
    175,9
    
    
    
    157,6
 F-25




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 Total assets
    
    At 31 December 2005
    
    At 31 December 2004Other
    
    
    80,9
    
    
    
    63,31.121,0
    
    
    
    988,2Associates (Note 9)
    
    
    1,2
    
    
    
    1,1Unallocated assets
    
    
    296,9
    
    
    
    323,21.419,1
    
    
    
    1.312,5
  Capital expenditure
    
    2005
    
    2004Beer
    
    
    73,6
    
    
    
    59,0Soft drinks and other beverages
    
    
    40,1
    
    
    
    10,2Other
    
    
    21,1
    
    
    
    3,0134,8
    
    
    
    72,2
  Analysis of sales by category
    
    2005
    
    2004Sales of goods
    
    
    954,3
    
    
    
    765,2
 
 7. Property, plant and equipment
 Land &
    
    Machinery, plant
    
    Bottles and
    
    Work inbuildings
    
    and equipment
    
    crates
    
    progress
    
    TotalYear ended December 31, 2005CostValues at the beginning of the year
    
    
    208,6
    
    
    
    527,3
    
    
    
    104,2
    
    
    
    5,0
    
    
    
    845,1Exchange differences
    
    
    (1,5
    )
    
    
    (1,5
    )
    
    
    0,9
    
    
    
    (1,0
    )
    
    
    (3,1
    )Additions
    
    
    0,5
    
    
    
    20,5
    
    
    
    34,4
    
    
    
    71,4
    
    
    
    126,8Disposals
    
    
    (5,5
    )
    
    
    (4,0
    )
    
    
    (11,3
    )
    
    
    
    
    
    
    (20,8
    )Transfers
    
    
    5,3
    
    
    
    29,2
    
    
    
    0,1
    
    
    
    (34,6
    )
    
    
    Value at the end of the year
    
    
    207,4
    
    
    
    571,5
    
    
    
    128,3
    
    
    
    40,8
    
    
    
    948,0DepreciationAccumulated at the beginning of the year
    
    
    9,7
    
    
    
    193,3
    
    
    
    58,1
    
    
    
    
    
    
    
    261,1Exchange differences
    
    
    0,1
    
    
    
    (0,2
    )
    
    
    0,9
    
    
    
    
    
    
    
    0,8Depreciation charge (Note 22)
    
    
    5,0
    
    
    
    62,5
    
    
    
    17,4
    
    
    
    
    
    
    
    84,9Disposals
    
    
    (0,0
    )
    
    
    (2,4
    )
    
    
    (6,1
    )
    
    
    
    
    
    
    (8,5
    )Accumulated at the end of the year
    
    
    14,8
    
    
    
    253,2
    
    
    
    70,3
    
    
    
    
    
    
    
    338,3At 31 December 2005
    
    
    192,6
    
    
    
    318,3
    
    
    
    58,0
    
    
    
    40,8
    
    
    
    609,7Year ended December 31, 2004CostValues at the beginning of the year
    
    
    211,3
    
    
    
    499,7
    
    
    
    93,2
    
    
    
    15,8
    
    
    
    820,0Exchange differences
    
    
    (2,6
    )
    
    
    (5,0
    )
    
    
    (0,2
    )
    
    
    0,2
    
    
    
    (7,6
    )Additions
    
    
    3,8
    
    
    
    22,9
    
    
    
    26,6
    
    
    
    18,9
    
    
    
    72,2Disposals
    
    
    (5,8
    )
    
    
    (18,3
    )
    
    
    (15,4
    )
    
    
    
    
    
    
    (39,5
    )Transfers
    
    
    1,9
    
    
    
    28,0
    
    
    
    0,0
    
    
    
    (29,9
    )
    
    
    Value at the end of the year
    
    
    208,6
    
    
    
    527,3
    
    
    
    104,2
    
    
    
    5,0
    
    
    
    845,1DepreciationAccumulated at the beginning of the year
    
    
    5,5
    
    
    
    131,8
    
    
    
    52,6
    
    
    
    
    
    
    
    189,9Exchange differences
    
    
    0,0
    
    
    
    0,1
    
    
    
    (0,0
    )
    
    
    
    
    
    
    0,1
 F-26




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 Land &
    
    Machinery, plant
    
    Bottles and
    
    Work inbuildings
    
    and equipment
    
    crates
    
    progress
    
    TotalDepreciation charge (Note 22)
    
    
    4,6
    
    
    
    66,7
    
    
    
    11,3
    
    
    
    
    
    
    
    82,6Disposals
    
    
    (0,4
    )
    
    
    (5,3
    )
    
    
    (5,8
    )
    
    
    
    
    
    
    (11,5
    )Accumulated at the end of the year
    
    
    9,7
    
    
    
    193,3
    
    
    
    58,1
    
    
    
    
    
    
    
    261,1At 31 December 2004
    
    
    198,9
    
    
    
    334,0
    
    
    
    46,1
    
    
    
    5,0
    
    
    
    584,0
  
 8. Intangible assets
 Goodwill
    
    Trademarks & licences
    
    TotalYear ended December 31, 2005CostValues at the beginning of the year
    
    
    85,1
    
    
    
    239,5
    
    
    
    324,6Exchange differences
    
    
    (1,2
    )
    
    
    (1,5
    )
    
    
    (2,7
    )Additions
    
    
    84,8
    
    
    
    8,0
    
    
    
    92,8Value at the end of the year
    
    
    168,7
    
    
    
    246,0
    
    
    
    414,7AmortizationAccumulated at the beginning of the year
    
    
    
    
    
    
    62,4
    
    
    
    62,4Exchange differences
    
    
    
    
    
    
    (0,3
    )
    
    
    (0,3
    )Amortization charge (Note 22)
    
    
    
    
    
    
    13,9
    
    
    
    13,9Accumulated at the end of the year
    
    
    
    
    
    
    76,0
    
    
    
    76,0At 31 December 2005
    
    
    168,7
    
    
    
    170,0
    
    
    
    338,7Year ended December 31, 2004CostValues at the beginning of the year
    
    
    69,6
    
    
    
    243,6
    
    
    
    313,2Exchange differences
    
    
    0,1
    
    
    
    (4,1
    )
    
    
    (4,0
    )Additions
    
    
    15,4
    
    
    
    0,0
    
    
    
    15,4Value at the end of the year
    
    
    85,1
    
    
    
    239,5
    
    
    
    324,6AmortizationAccumulated at the beginning of the year
    
    
    
    
    
    
    49,8
    
    
    
    49,8Exchange differences
    
    
    
    
    
    
    (1,1
    )
    
    
    (1,1
    )Amortization charge (Note 22)
    
    
    
    
    
    
    13,7
    
    
    
    13,7Accumulated at the end of the year
    
    
    
    
    
    
    62,4
    
    
    
    62,4At 31 December 2004
    
    
    85,1
    
    
    
    177,1
    
    
    
    262,2
 
 1
    
    During the year 2004, the Company made the following minority interest
purchases:
 
    
    In November 2004, the Company, through Quilmes International Bermuda or QI(B)
increased its indirect ownership interest in Cervecería Paraguaya S.A. or Cervepar
from 85,80% to 87,36% for a total amount of US$ 5,3. The Company recorded this
acquisition of additional ownership interest following the policies described in note
2.2(b), recognizing an additional goodwill of US$ 3,5.
    
    The Company increased its indirect ownership interest in Cervecería Boliviana Nacional
or CBN to 85,14% for a total consideration of US$ 17,6. The Company recorded this
acquisition of additional ownership interest following the policies described in note
2.2(b). Goodwill recognized in this transaction amounted to US$ 10,3.
    
    In June 2004, the Company, through QI(B) increased its indirect ownership interest in
Incesa from 97,45% to 100,00% for a total amount of US$ 6,8. The Company recorded this
acquisition of additional ownership interest following the policies described in note
2.2(b), recognizing an additional goodwill of US$ 1,6.
 2
    
    On August 3, 2005 Quinsa announced that it has entered into an agreement
with its controlling shareholders BAC and AmBev pursuant it has agreed to purchase from BAC
its 5,32% equity interest in QI(B) for a preliminary price of US$ 110. Upon completion of
this transaction, Quinsa owns 92,95% of QI(B) and AmBev owns the remaining 7,05%. The
goodwill recognized, based on the final purchase price of US$ 114,5, amounted to US$ 84,8.3
    
    Amortization of US$ 13,9 million (2004: US$ 13,7 million) is included in
Selling and Marketing costs of the income statement.
 (a) Impairment tests for goodwill
  F-27




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
  At 31 December 2005
    
    At 31 December 2004Soft drinks and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    Soft drinks andBeer
    
    beverages
    
    Other
    
    Total
    
    Beer
    
    other beverages
    
    Other
    
    TotalArgentina
    
    
    78,6
    
    
    
    6,5
    
    
    
    
    
    
    
    85,1
    
    
    
    36,8
    
    
    
    
    
    
    
    
    
    
    
    36,8Bolivia
    
    
    28,6
    
    
    
    
    
    
    
    
    
    
    
    28,6
    
    
    
    12,5
    
    
    
    
    
    
    
    
    
    
    
    12,5Paraguay
    
    
    36,6
    
    
    
    
    
    
    
    
    
    
    
    36,6
    
    
    
    22,9
    
    
    
    
    
    
    
    
    
    
    
    22,9Uruguay
    
    
    17,5
    
    
    
    0,9
    
    
    
    
    
    
    
    18,4
    
    
    
    12,9
    
    
    
    
    
    
    
    
    
    
    
    12,9Chile
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Holdings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,3
    
    
    
    7,4
    
    
    
    
    
    
    
    168,7
    
    
    
    85,1
    
    
    
    
    
    
    
    
    
    
    
    85,1
  (b) Key assumptions used for value-in-use calculations
 BeerArgentina
    
    Bolivia
    
    Paraguay
    
    UruguayGross margin1
    
    
    65
    %
    
    
    70
    %
    
    
    68
    %
    
    
    69
    %Discount rate2
    
    
    11,4
    %
    
    
    12,3
    %
    
    
    11,6
    %
    
    
    11,1
    %
  
      
 9. Investments in associates companies
 At 1 January 2004
    
    
    1,1At 31 December 2004
    
    
    1,1At 1 January 2005
    
    
    1,1Share profit of associates
    
    
    0,1At 31 December 2005
    
    
    1,2
 
 10. Trade and other receivables
 At 31 December 2005
    
    At 31 December 2004Trade receivables
    
    
    61,5
    
    
    
    53,6Less provision for impairment of receivables (Note 20.2)
    
    
    (8,8
    )
    
    
    (8,2
    )Trade
receivables  net
    
    
    52,7
    
    
    
    45,4Prepayments and suppliers advances
    
    
    23,3
    
    
    
    19,1Receivables from related parties (Note 30)
    
    
    0,8
    
    
    
    0,3Financial leases receivables 1
    
    
    1,2
    
    
    
    1,4
 F-28




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 At 31 December 2005
    
    At 31 December 2004Tax and legal claims receivables
    
    
    4,6
    
    
    
    1,7Other receivables  PepsiCo
    
    
    6,0
    
    
    
    5,6Other receivables 2
    
    
    4,9
    
    
    
    5,793,5
    
    
    
    79,2Less non-current portion: trade receivables
    
    
    (3,4
    )
    
    
    (3,3
    )Current portion
    
    
    90,1
    
    
    
    75,9
 
 1
    
    The maturity of non-current financial leases fair value is as follows: At 31 December 2005
    
    At 31 December 2004Between 1 and 2 years
    
    
    0,3
    
    
    
    0,3Between 2 and 5 years
    
    
    0,6
    
    
    
    0,80,9
    
    
    
    1,1
  2005
    
    2004Non-currentFinancial leases receivables
    
    
    1,0
    
    
    
    1,3Unexpended financial cost
    
    
    (0,1
    )
    
    
    (0,2
    )0,9
    
    
    
    1,1
 2005
    
    2004CurrentFinancial leases receivables
    
    
    0,3
    
    
    
    0,3Unexpended financial cost
    
    
    
    
    
    
    0,3
    
    
    
    0,3
 
 2
    
    Includes provision for impairment of other receivables for US$ 1,7 (2004: US$ 1,4).   
 11. Inventories
 At 31 December 2005
    
    At 31 December 2004Raw materials, materials and spare parts 1
    
    
    81,6
    
    
    
    63,5Work in progress
    
    
    6,5
    
    
    
    7,3Finished goods
    
    
    21,3
    
    
    
    17,3109,4
    
    
    
    88,1
  
 1
    
    Includes provision for impairment on inventories for US$ 1,4 (2004: US$ 2,8). The Company has recognised a provision of US$ 1,7
(2004: US$ 2,2) for impairment of inventories. The loss has been included in Cost of sales in the income statement. F-29




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 12. Investments in financial assets
 At 31 December 2005
    
    At 31 December 2004Held-to-maturity invetsments: Boden 2012 Argentine government
bond denominated in US dollars with
interest equals to LIBOR 180 and
maturity date of 2012
    
    
    3,4
    
    
    
    4,0Time Deposits
    
    
    49,6
    
    
    
    104,8Total investments in financial assets
    
    
    53,0
    
    
    
    108,8Less non-current portion
    
    
    (46,2
    )
    
    
    (105,4
    )Current portion
    
    
    6,8
    
    
    
    3,4
  Beginning of year
    
    
    4,0
    
    
    
    4,0Disposals (1)
    
    
    (0,6
    )
    
    
    End of the year
    
    
    3,4
    
    
    
    4,0
 
    At 31 December 2005
    
    At 31 December 2004Between 1 and 2 years
    
    
    42,8
    
    
    
    58,6Between 2 and 5 years
    
    
    
    
    
    
    42,8Over 5 years
    
    
    3,4
    
    
    
    4,046,2
    
    
    
    105,4
  2005
    
    2004Time Deposits (US$)
    
    
    10,0
    %
    
    
    6,9
    %
 
 13. Other financial assets at fair value through profit or loss
 At 31 December 2005
    
    At 31 December 2004At 1 January
    
    
    2,8
    
    
    
    3,5Fair value adjustment
    
    
    0,6
    
    
    
    (0,7
    )Year ended 31 December
    
    
    3,4
    
    
    
    2,8Government
bond  US$(1)
    
    
    3,4
    
    
    
    2,83,4
    
    
    
    2,8
 
 (1)
    
    On February 2, 2005 CMQ accepted the Argentine government proposal for its defaulted public
debt by subscribing a bond denominated in U.S. dollars with a nominal discount of 66.3%. The bond
accrues interest at an annual rate of 8.28 % and falls due in 30 years. Interest is payable twice a
year in cash for the first 10 years and subsequently capitalized (i.e. added to the principal
amount). Principal is payable as from year 2024. F-30




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 14. Cash and cash equivalents
 At 31 December 2005
    
    At 31 December 2004Cash at bank and in hand
    
    
    28,0
    
    
    
    22,0Short-term bank deposits
    
    
    124,7
    
    
    
    94,8152,7
    
    
    
    116,8
   At 31 December 2005
    
    At 31 December 2004Cash and short term deposits
    
    
    152,7
    
    
    
    116,8Bank overdrafts (Note 18)
    
    
    (1,0
    )
    
    
    151,7
    
    
    
    116,8
 
 15. Share capital
 Number of
    
    Number ofA shares
    
    B shares
    
    Ordinary
    
    Share
    
    Treasury(thousands)
    
    (thousands)
    
    shares
    
    premium
    
    shares
    
    TotalAt 1 January 2004
    
    
    634.831
    
    
    
    62.959
    
    
    
    41,7
    
    
    
    200,5
    
    
    
    (62,2
    )
    
    
    180,0Conversion of shares
    
    
    (662
    )
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury shares purchased
    
    
    (2.397
    )
    
    
    (13.375
    )
    
    
    
    
    
    
    
    
    
    
    (128,7
    )
    
    
    (128,7
    )At 31 December 2004
    
    
    631.772
    
    
    
    49.650
    
    
    
    41,7
    
    
    
    200,5
    
    
    
    (190,9
    )
    
    
    51,3Share capital reduction
    
    
    
    
    
    
    
    
    
    
    (7,0
    )
    
    
    (194,0
    )
    
    
    201,7
    
    
    
    0,7Conversion of shares
    
    
    (1.012
    )
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury shares purchased
    
    
    (16.069
    )
    
    
    (2.826
    )
    
    
    
    
    
    
    
    
    
    
    (65,6
    )
    
    
    (65,6
    )At 31 December 2005
    
    
    614.691
    
    
    
    46.925
    
    
    
    34,7
    
    
    
    6,5
    
    
    
    (54,8
    )
    
    
    (13,6
    )
        F-31




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
        
 16. Cumulative translation adjustment
 Translation1 January 2004 Currency translation differences
    
    
    (15,4
    )Balance at 31 December 2004
    
    
    (15,4
    ) Currency translation differences
    
    
    (4,3
    )Balance at 31 December 2005
    
    
    (19,7
    )
 
 17. Trade and other payables
 At 31 December 2005
    
    At 31 December 2004Trade payables
    
    
    139,3
    
    
    
    111,4Social security and other taxes
    
    
    24,5
    
    
    
    20,0Payables to related parties (Note 30)
    
    
    10,0
    
    
    
    5,1Dividends payable
    
    
    4,0
    
    
    
    1,2Debt for acquisition of minority interest and finance cost (Note 24)
    
    
    5,4
    
    
    
    2,8Other payables
    
    
    8,8
    
    
    
    11,9192,0
    
    
    
    152,4
 F-32




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 18. Borrowings
 Non-current
    
    At 31 December 2005
    
    At 31 December 2004Bank borrowings
    
    
    291,7
    
    
    
    255,7Financial leases
    
    
    4,3
    
    
    
    4,4296,0
    
    
    
    260,1CurrentBank overdrafts (Note 14)
    
    
    1,0
    
    
    
    Bank borrowings
    
    
    94,8
    
    
    
    105,9Financial leases
    
    
    0,5
    
    
    
    0,4Other financial payables to related parties (Note 30)
    
    
    0,5
    
    
    
    0,596,8
    
    
    
    106,8Total borrowings
    
    
    392,8
    
    
    
    366,9
  ü
    CMQ (Argentina): US$ 4,8 of financial leases (2004: US$ 4,8) secured by the corresponding leased machinery, equipment, installations and
pallets. The carrying amounts of these assets are US$ 11,0 and US$ 12,2 at December 31, 2005 and 2004, respectively.ü
    CBN (Bolivia): Bank borrowings are secured with bottles and crates from CBNs plant.
  Total Borrowings
    
    6 months or less
    
    6-12 months
    
    1-2 years
    
    2-5 years
    
    Over 5 years
    
    TotalAt 31 December 2005
    
    
    132,1
    
    
    
    24,4
    
    
    
    59,1
    
    
    
    118,0
    
    
    
    59,2
    
    
    
    392,8At 31 December 2004
    
    
    258,9
    
    
    
    23,5
    
    
    
    57,2
    
    
    
    10,4
    
    
    
    16,9
    
    
    
    366,9
  At 31 December 2005
    
    At 31 December 2004Between 1 and 2 years
    
    
    118,8
    
    
    
    118,3Between 2 and 5 years
    
    
    118,0
    
    
    
    90,6Over 5 years
    
    
    59,2
    
    
    
    51,2296,0
    
    
    
    260,1
 At 31 December 2005
    
    At 31 December 2004US$
    
    ARS
    
    UYU
    
    CLP
    
    BOB
    
    US$
    
    ARS
    
    CLP
    
    BOBBank overdrafts
    
    
    5,5
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Bank borrowings
    
    
    7,7
    %
    
    
    10,9
    %
    
    
    4,8
    %
    
    
    7,0
    %
    
    
    8,5
    %
    
    
    6,4
    %
    
    
    12,1
    %
    
    
    3,6
    %
    
    
    11,0
    %Financial leases
    
    
    10,0
    %
    
    
    8,6
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,0
    %
    
    
    8,5
    %
    
    
    
    
    
    
    
 Note:
    
    ARS = Pesos Argentinos
    
    UYU = Pesos uruguayosCLP = Pesos Chilenos
    
    BOB = Pesos Bolivianos
 F-33




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
  Carrying amounts
    
    Fair values2005
    
    2004
    
    2005
    
    2004Bank borrowings
    
    
    291,7
    
    
    
    255,7
    
    
    
    289,9
    
    
    
    258,1Financial leases
    
    
    4,3
    
    
    
    4,4
    
    
    
    4,3
    
    
    
    4,4296,0
    
    
    
    260,1
    
    
    
    294,2
    
    
    
    262,5
   At 31 December 2005
    
    At 31 December 2004Non-currentFinancial leases
    
    
    4,8
    
    
    
    5,5Unexpended financial cost
    
    
    (0,5
    )
    
    
    (1,1
    )4,3
    
    
    
    4,4CurrentFinancial leases
    
    
    0,5
    
    
    
    0,4Unexpended financial cost
    
    
    
    
    
    
    0,5
    
    
    
    0,4
  At 31 December 2005
    
    At 31 December 2004US$
    
    
    281,7
    
    
    
    290,9ARS
    
    
    95,5
    
    
    
    68,2CLP
    
    
    6,9
    
    
    
    0,5UYU
    
    
    1,0
    
    
    
    BOB
    
    
    7,7
    
    
    
    7,3392,8
    
    
    
    366,9
 
 19. Deferred income tax
  At 31 December 2005
    
    At 31 December 2004Deferred tax assets: deferred tax asset to be recovered after more than 12 months
    
    
    44,1
    
    
    
    63,4 deferred tax asset to be recovered within 12 months
    
    
    13,4
    
    
    
    6,157,5
    
    
    
    69,5Deferred tax liabilities: deferred tax liability to be recovered after more than 12 months
    
    
    131,6
    
    
    
    132,3 deferred tax liability to be recovered within 12 months
    
    
    0,2
    
    
    
    131,8
    
    
    
    132,374,3
    
    
    
    62,8
 F-34




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
  1 January 2004
    
    
    53,4Income statement charge (Note 25)
    
    
    10,2Exchange differences
    
    
    (0,8
    )Year ended 31 December 2004
    
    
    62,81 January 2005
    
    
    62,8Income statement charge (Note 25)
    
    
    11,8Exchange differences
    
    
    (0,3
    )Year ended 31 December 2005
    
    
    74,3
  Property, plant andDeferred tax liabilities
    
    equipment
    
    Intangible assets
    
    Other assets
    
    TotalAt 1 January 2004
    
    
    93,7
    
    
    
    56,8
    
    
    
    0,1
    
    
    
    150,6Charged/(credited) to the income statement
    
    
    (13,1
    )
    
    
    (4,1
    )
    
    
    (0,3
    )
    
    
    (17,5
    )Acquisition of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange differences
    
    
    0,2
    
    
    
    (1,0
    )
    
    
    
    
    
    
    (0,8
    )At 31 December 2004
    
    
    80,8
    
    
    
    51,7
    
    
    
    (0,2
    )
    
    
    132,3At 1 January 2005
    
    
    80,8
    
    
    
    51,7
    
    
    
    (0,2
    )
    
    
    132,3Charged /(credited) to the income statement
    
    
    (8,6
    )
    
    
    (0,8
    )
    
    
    9,2
    
    
    
    (0,2
    )Exchange differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange differences
    
    
    (0,1
    )
    
    
    (0,2
    )
    
    
    
    
    
    
    (0,3
    )At 31 December 2005
    
    
    72,1
    
    
    
    50,7
    
    
    
    9,0
    
    
    
    131,8
 Deferred tax assets
    
    Provisions of assets
    
    Tax loss
    
    Other
    
    TotalAt 1 January 2004
    
    
    5,4
    
    
    
    83,9
    
    
    
    7,9
    
    
    
    97,2Charged/(credited) to income statement
    
    
    8,2
    
    
    
    (32,8
    )
    
    
    (3,1
    )
    
    
    (27,7
    )Exchange differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    At 31 December 2004
    
    
    13,6
    
    
    
    51,1
    
    
    
    4,8
    
    
    
    69,5At 1 January 2005
    
    
    13,6
    
    
    
    51,1
    
    
    
    4,8
    
    
    
    69,5Charged/(credited) to income statement
    
    
    4,9
    
    
    
    (15,0
    )
    
    
    (1,9
    )
    
    
    (12,0
    )Exchange differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    At 31 December 2005
    
    
    18,5
    
    
    
    36,1
    
    
    
    2,9
    
    
    
    57,5
   F-35




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 20. Provisions
 20.1. Provisions and other liabilities
 Profit Sharing &
    
    Legal, tax, laborBonuses
    
    and commercial claims
    
    TotalAt 1 January 2004
    
    
    6,5
    
    
    
    28,1
    
    
    
    34,6Charged to consolidated income statement:-Additional provision (Note 23)
    
    
    10,5
    
    
    
    3,2
    
    
    
    13,7-Unused amounts reversed
    
    
    
    
    
    
    (3,5
    )
    
    
    (3,5
    )Used during the year
    
    
    
    
    
    
    (2,9
    )
    
    
    (2,9
    )Exchange differences
    
    
    
    
    
    
    (0,6
    )
    
    
    (0,6
    )At 31 December 2004
    
    
    17,0
    
    
    
    24,3
    
    
    
    41,3At 1 January 2005
    
    
    17,0
    
    
    
    24,3
    
    
    
    41,3Charged to consolidated income statement:- Additional provision and finance cost
(Note 23 and 24)
    
    
    14,0
    
    
    
    9,1
    
    
    
    23,1- Reclassifications
    
    
    1,1
    
    
    
    
    
    
    
    1,1Used during the year
    
    
    (6,5
    )
    
    
    (3,3
    )
    
    
    (9,8
    )Exchange differences
    
    
    
    
    
    
    (0,2
    )
    
    
    (0,2
    )At 31 December 2005
    
    
    25,6
    
    
    
    29,9
    
    
    
    55,5
 Analysis of total provisions:
    
    31 December 2005
    
    31 December 2004 non-current
    
    
    43,9
    
    
    
    41,3 current
    
    
    11,6
    
    
    
    55,5
    
    
    
    41,3
 (a) Profit sharing & bonuses
  (b) Legal, tax, labor and commercial claims
   20.2. Deducted from assets
 Other receivables
    
    Inventories
    
    Trade receivableimpairment
    
    impairment
    
    impairment
    
    TotalAt 1 January 2004
    
    
    (1,2
    )
    
    
    (3,4
    )
    
    
    (12,4
    )
    
    
    (17,0
    )Charged to consolidated income statement:-Additional provision
    
    
    (0,2
    )
    
    
    (2,2
    )
    
    
    (2,4
    )
    
    
    (4,8
    )Used during the year
    
    
    
    
    
    
    2,8
    
    
    
    6,5
    
    
    
    9,3Exchange differences
    
    
    0,0
    
    
    
    0,0
    
    
    
    0,1
    
    
    
    0,1At 31 December 2004
    
    
    (1,4
    )
    
    
    (2,8
    )
    
    
    (8,2
    )
    
    
    (12,4
    )At 1 January 2005
    
    
    (1,4
    )
    
    
    (2,8
    )
    
    
    (8,2
    )
    
    
    (12,4
    )Charged to consolidated income statement:- Additional provision
    
    
    (0,3
    )
    
    
    (1,7
    )
    
    
    (2,0
    )
    
    
    (4,0
    )Used during the year
    
    
    
    
    
    
    3,1
    
    
    
    1,4
    
    
    
    4,5Exchange differences
    
    
    0,0
    
    
    
    0,0
    
    
    
    (0,0
    )
    
    
    (0,0
    )At 31 December 2005
    
    
    (1,7
    )
    
    
    (1,4
    )
    
    
    (8,8
    )
    
    
    (11,9
    )
 F-36




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 21. Other operating income
 2005
    
    2004Net gain from sale of tangible fixed assets
    
    
    4,3
    
    
    
    1,7Rental income
    
    
    0,3
    
    
    
    0,2Others
    
    
    1,1
    
    
    
    3,55,7
    
    
    
    5,4
 
 22. Expenses by nature
 2005
    
    2004Depreciation and amortisation (Notes 7 and 8)
    
    
    (98,8
    )
    
    
    (96,3
    )Employee benefit expense (Note 23)
    
    
    (132,3
    )
    
    
    (108,0
    )Raw materials and consumables used
    
    
    (251,2
    )
    
    
    (208,5
    )Transportation
    
    
    (46,2
    )
    
    
    (34,1
    )Advertising costs
    
    
    (68,7
    )
    
    
    (56,6
    )Provisions charged to the income statement:- Impairment of trade receivables
    
    
    (2,0
    )
    
    
    (2,4
    )- Impairment of other receivables
    
    
    (0,3
    )
    
    
    (0,2
    )- Impairment of inventories
    
    
    (1,7
    )
    
    
    (2,2
    )- Net impairment of provisions
    
    
    (9,1
    )
    
    
    0,3Other expenses
    
    
    (75,6
    )
    
    
    (93,5
    )Total
    
    
    (685,9
    )
    
    
    (601,5
    )Classified as: cost of sales
    
    
    (406,2
    )
    
    
    (352,5
    ) selling and marketing costs
    
    
    (217,2
    )
    
    
    (180,4
    ) administrative expenses
    
    
    (54,8
    )
    
    
    (49,8
    ) other operating expenses
    
    
    (7,7
    )
    
    
    (18,8
    )(685,9
    )
    
    
    (601,5
    )
 
 23. Employee benefit expense
 2005
    
    2004Wages and salaries, including severance indemnity
costs and termination benefits
    
    
    (81,0
    )
    
    
    (67,2
    )Social security costs
    
    
    (22,2
    )
    
    
    (17,7
    )Profit sharing
    
    
    (13,4
    )
    
    
    (10,5
    )Other expenses
    
    
    (15,7
    )
    
    
    (12,6
    )(132,3
    )
    
    
    (108,0
    )
 F-37




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 24. Finance costs
 2005
    
    2004Interest expense: bank borrowings and financial leases
    
    
    (46,6
    )
    
    
    (36,7
    ) interest from debt for acquisition of minority interest (Note 17)
    
    
    (1,0
    )
    
    
     interest accrued from profit sharing
    
    
    (0,6
    )
    
    
    (48,2
    )
    
    
    (36,7
    )Interest income: interest income from investments
    
    
    7,8
    
    
    
    5,5 others
    
    
    1,8
    
    
    
    2,69,6
    
    
    
    8,1Net foreign exchange transaction losses
    
    
    (2,1
    )
    
    
    (1,9
    )(40,7
    )
    
    
    (30,5
    )
 
 25. Income tax expense
 2005
    
    2004Current tax
    
    
    (60,1
    )
    
    
    (23,0
    )Deferred tax (Note 19)
    
    
    (11,8
    )
    
    
    (10,2
    )(71,9
    )
    
    
    (33,2
    )
  2005
    
    2004Profit before tax
    
    
    233,5
    
    
    
    138,6Tax calculated at domestic tax rates applicable to profits in the respective countries
    
    
    78,1
    
    
    
    46,4Income not subject to tax
    
    
    (9,4
    )
    
    
    (11,6
    )Expenses not deductible for tax purposes
    
    
    3,2
    
    
    
    2,6Utilisation of previously unrecognised tax losses
    
    
    
    
    
    
    (4,2
    )Income tax expense
    
    
    71,9
    
    
    
    33,2
  
 26. Earnings per share
 Basic and diluted
  Year ended December 31, 2005Class A
    
    Class BProfit attributable to equity holders of the Company
    
    
    74,5
    
    
    
    56,9Weighted average number of ordinary shares in issue (millions)
    
    
    626,6
    
    
    
    48,6Basic and diluted earnings per share (US$  per share)
    
    
    0,119
    
    
    
    1,171
 Year ended December 31, 2004Class A
    
    Class BProfit attributable to equity holders of the Company
    
    
    45,7
    
    
    
    36,0Weighted average number of ordinary shares in issue (millions)
    
    
    632,6
    
    
    
    57,4Basic and diluted earnings per share (US$  per share)
    
    
    0,072
    
    
    
    0,627
 F-38




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##### Table of Contents



Quilmes Industrial (Quinsa) Société Anonyme
 
 
 27. Dividends per share
 The dividends paid in 2005 and 2004 were US$ 17,7 (US$ 0,0157 per share Class A, US$ 0,157 per
share Class B and US$ 0,314 per ADR) and US$ 11,0 (US$ 0,008113 per share Class A, US$ 0,08113 per
share Class B and US$ 0,162 per ADR) respectively. A dividend in respect of the year ended
December 31, 2005 amounting to US$ 39,5 (US$ 0,03529 per share Class A, US$ 0,35285 per share Class
B and US$ 0,70570 per ADR), is to be proposed at the Annual General Meeting on June 22, 2006. These
financial statements do not reflect this dividend payable.
 
 28. Contingencies
 The Company is involved in litigation arising from time to time in the ordinary course of
business. Based on managements assessment and the advice of legal counsel, it is not anticipated
that the ultimate resolution of existing litigation will result in amounts in excess of recorded
provisions (Note 20) that would be material to the Companys consolidated financial position or
income statement.
 
 29. Commitments
 The Companys unrecognised purchase commitments at the balance sheet date are as follows:§
    
    Beer barley purchases: the Company agreed to sale seeds in
exchange for beer barley. At December 31, 2005 the company
committed to purchase 57.700 tons of beer barley. Although the
price has not yet been determined, the Company estimates that it
would cost approximately US$5,6.§
    
    Services and raw materials: in order to warranty the normal course
of the business, the Company has agreed with its suppliers, the
purchase of certain raw materials and the contract of essential
services.
 
 30. Related-party transactions
 The Company is controlled by Beverage Associates Corp. (BAC) and by Companhia de Bebidas das
Américas (through NCAQ and Dunvegan), whom at December 31, 2005 indirectly owned 33,4% and 54,9%
respectively, of Quinsas shares and 56,5% and 40,7% of the voting rights. The ultimate controlling
entity of the Company is InBev N.V.The following transactions were carried out with related parties:(a)
    
    Sales of goods and services
 2005
    
    2004Sales of goods:Goods
    
    
    1,0
    
    
    
    Raw materials
    
    
    0,4
    
    
    
    1,3By products
    
    
    0,8
    
    
    
    Sales of services:Storage services
    
    
    0,4
    
    
    
    2,6
    
    
    
    1,3
 The Company sold barley and seeds to Maltería Pampa S.A.
(AmBevs subsidiary) for US$ 0,4
(2004: US$ 1,3). Additionally, the Company sold goods to AmBev Peru and AmBev Ecuador, and by
products to Compal S.A. (which is 60% owned by Arfinsa, company indirectly owned by certain
members of the Bemberg family  the Companys primary shareholder).
Services consist mainly of storage services sold to Compal S.A.
 (b)
    
    Purchases of goods and services
 2005
    
    2004Purchases raw materials: Raw materials
    
    
    11,1
    
    
    
    9,9Purchases of services: Services of key management personnel
    
    
    
    
    
    
    0,4 InBev (management services)
    
    
    0,5
    
    
    
     Logistics services
    
    
    
    
    
    
    1,3Other costs:
    
    
    1,0
    
    
    
    12,6
    
    
    
    11,6
 F-39




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Quilmes Industrial (Quinsa) Société Anonyme
 
 The Company purchased several raw materials including malt, from Maltería Pampa S.A. (AmBevs
subsidiary), and corn grits and rice from Compal S.A. (which is 60% owned by Arfinsa, company
indirectly owned by certain members of the Bemberg family).Services consist mainly of: fees for services, corresponds to certain administrative fees
charged by Arfinsa; and integrated logistics support to the Companys supply chain, from the
inbound raw material supply through finished goods distribution, including dedicated contract
carriage, the management of carriers, and other supply chain services.(c)
    
    Key management compensation
 2005
    
    2004Wages, salaries and social security and other charges
    
    
    12,0
    
    
    
    9,5Profit sharing (Note 23)
    
    
    13,4
    
    
    
    10,525,4
    
    
    
    20,0
 (d)
    
    Year-end balances arising from sales / purchases of goods / services
 At 31 December 2005
    
    At 31 December 2004Receivables from related parties (Note 10):
    
    
    0,8
    
    
    
    0,30,8
    
    
    
    0,3Payables to related parties (Note 17):
    
    
    10,0
    
    
    
    5,1Other financial payables to related parties (Note 18)
    
    
    0,5
    
    
    
    0,510,5
    
    
    
    5,6
 Additionally, on August 3, 2005 Quinsa announced that it has entered into an agreement with its
controlling shareholder BAC and AmBev pursuant it has agreed to purchase from BAC its 5,32%
equity interest in QI(B) for a preliminary price of US$ 110 million. Upon completion of this
transaction, Quinsa owns 92,95% of QI(B) and AmBev owns the remaining 7,05%.. As
of December 31, 2005 the amount owed by the Company is US$ 5,4 (See note 17)..
 
 31. Summary of the Quinsa group of companies
 The consolidated financial statements include the accounts of Quinsa and
foreign controlled and affiliated subsidiaries. The following list summarizes
the direct and indirect equity holdings in each of the companies, which form
the Quinsa group.Participation of interest owned is shown as of December 31, 2005:
 Country
    
    Activity
    
    Economic interestHeld directly:.Quilmes International (Bermuda) Ltd.
    
    Bermuda
    
    Holding Company
    
    
    92,95
    %.Quilmes Industrial S.A.
    
    Argentina
    
    Holding Company
    
    
    90,00
    %Held indirectly:.Cervecería y Maltería Quilmes S.A.
    
    Argentina
    
    Manufacturing and bottling of beverages
    
    
    92,67
    %.Colosas S.A.
    
    Paraguay
    
    Manufacturing and bottling of beverages
    
    
    53,88
    %.Inversiones Bemberg Chile Ltda.
    
    Chile
    
    Holding Company
    
    
    92,95
    %.Noitca Ltd.
    
    British Virgin Islands
    
    Holding Company
    
    
    92,95
    %.Linthal S.A.
    
    Uruguay
    
    Holding Company
    
    
    92,95
    %.Sociedad de Inversiones y Comercio Vienher S.A.
    
    Panamá
    
    Holding Company
    
    
    92,95
    %.Fábrica Paraguaya de Vidrios S.A.
    
    Paraguay
    
    Manufacturing of glass bottles
    
    
    92,68
    %.CCBA S.A.
    
    Argentina
    
    Manufacturing and bottling of beverages
    
    
    92,95
    %.Quilmes Do Brasil Ltda.
    
    Brazil
    
    Holding Company
    
    
    92,67
    %.Publicidad Relator S.A.
    
    Argentina
    
    Promotion and Marketing of beverages
    
    
    92,66
    %
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Quilmes Industrial (Quinsa) Société Anonyme
 
 Country
    
    Activity
    
    Economic interest.Seven Up Concesiones S.A.I. y C.
    
    Argentina
    
    Manufacturing and bottling of beverages
    
    
    92,66
    %.Embotelladora Perla del Norte S.A.I.C.I.A. y F.
    
    Argentina
    
    Manufacturing and bottling of beverages
    
    
    92,66
    %.Aydecar S.A.
    
    Argentina
    
    Headcount supply services for carriers
    
    
    92,66
    %.Cervecería Paraguaya S.A.
    
    Paraguay
    
    Manufacturing and bottling of beverages
    
    
    81,20
    %.Cervecería Chile S.A.
    
    Chile
    
    Manufacturing and bottling of beverages
    
    
    92,95
    %.FNC S.A.
    
    Uruguay
    
    Manufacturing and bottling of beverages
    
    
    90,68
    %.Inversiones Cerveceras S.A.
    
    Panamá
    
    Holding Company
    
    
    92,95
    %.Cervecería Boliviana Nacional S.A.
    
    Bolivia
    
    Manufacturing and bottling of beverages
    
    
    79,25
    %.Embotelladora 9 de Julio S.A.I.C.I. y F.
    
    Argentina
    
    Manufacturing and bottling of beverages
    
    
    92,65
    %.Quilmes Industrial S.A.
    
    Argentina
    
    Holding Company
    
    
    8,92
    %.Intergal S.A.
    
    Argentina
    
    Merchandising and commercial services
    
    
    92,67
    %.Eco de los Andes S.A. (*)
    
    Argentina
    
    Manufacturing and bottling of water
    
    
    45,36
    %.Compañía Salus S.A. (*)
    
    Uruguay
    
    Manufacturing and bottling of water
    
    
    32,22
    %.Agrega S.A. (*)
    
    Argentina
    
    Purchase services
    
    
    23,17
    %
 
  
 32. Events after the balance sheet date
 Companhia de Bebidas das Américas (AmBev)  Beverage Associates Corp. (BAC)
transaction
         F-41




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Quilmes Industrial (Quinsa) Société Anonyme
 
  
 33. Income Statement  April 2005
   20051stJanuary to 30thApril
    
    
    1stMay to 31stDecemberNet Sales
    
    
    315,1
    
    
    
    639,2Cost of sales
    
    
    (130,3
    )
    
    
    (275,9
    )Gross profit
    
    
    184,8
    
    
    
    363,3Other operating income
    
    
    
    
    
    
    5,7Selling and marketing costs
    
    
    (65,9
    )
    
    
    (151,3
    )Administrative expenses
    
    
    (14,5
    )
    
    
    (40,3
    )Other operating expenses
    
    
    (0,7
    )
    
    
    (7,0
    )Operating profit
    
    
    103,7
    
    
    
    170,4Finance costs  net
    
    
    (8,1
    )
    
    
    (32,6
    )Share of profit of associates
    
    
    0,1
    
    
    
    Profit before income tax
    
    
    95,7
    
    
    
    137,8Income tax expense
    
    
    (29,5
    )
    
    
    (42,4
    )Profit for the year
    
    
    66,2
    
    
    
    95,4Attributable to:Equity holders of the Company
    
    
    53,3
    
    
    
    78,1Minority interest
    
    
    12,9
    
    
    
    17,366,2
    
    
    
    95,4
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Quilmes Industrial (Quinsa) Société Anonyme
 
 34 Reconciliation of net income and shareholders equity to US GAAP
  For the year ended December 31,2005
    
    
    2004Net income attributable to equity holders of the Company in accordance with IFRS
    
    
    131,4
    
    
    
    81,7US GAAP adjustments  income (expense)Valuation of property, plant and equipment (Note 34.a)
    
    
    19,9
    
    
    
    38,4Inventory valuation (Note 34.b)
    
    
    0,4
    
    
    
    (0,2
    )Capitalization of interest cost (Note 34.c)
    
    
    0,5
    
    
    
    Changes in fair value of financial assets through profit and loss (Note 34.d)
    
    
    (0,4
    )
    
    
    Differences in basis relating to purchase accounting (Note 34.e)
    
    
    (3,4
    )
    
    
    (3,7
    )Change to consolidation (Note 34.f)
    
    
    0,1
    
    
    
    0,1Deferred income tax (Note 34.h)
    
    
    (8,2
    )
    
    
    (12,6
    )Minority interest (Note 34.i)
    
    
    (0,7
    )
    
    
    (3,8
    )Net income in accordance with US GAAP
    
    
    139,6
    
    
    
    99,9Consolidated basic and diluted earnings per share in accordance with US GAAP:Net income per Class A common share
    
    
    0,13
    
    
    
    0,08Net income per Class B common share
    
    
    1,24
    
    
    
    0,90
 As of December 31,2005
    
    
    2004Shareholders equity in accordance with IFRS
    
    
    490,7
    
    
    
    446,9Valuation of property, plant and equipment (Note 34.a)
    
    
    (219,1
    )
    
    
    (240,7
    )Inventory valuation (Note 34.b)
    
    
    (1,3
    )
    
    
    (1,7
    )Capitalization of interest cost (Note 34.c)
    
    
    0,5
    
    
    
    Differences in basis relating to purchase accounting (Note 34.e).
    
    
    44,0
    
    
    
    47,4Change to consolidation (Note 34.f)
    
    
    (0,7
    )
    
    
    (0,8
    )Acquisition of minority interest in QI(B) (Note 34.g)
    
    
    (70,7
    )
    
    
    Deferred income tax (Note 34.h)
    
    
    60,7
    
    
    
    69,7Minority interest (Note 34.i)
    
    
    17,0
    
    
    
    19,9Shareholders equity in accordance with US GAAP
    
    
    321,1
    
    
    
    340,7
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Quilmes Industrial (Quinsa) Société Anonyme
 34 Reconciliation of net income and shareholders equity to US GAAP (continued)
  Year ended December 31,2005
    
    
    2004Shareholders equity at the beginning of the year in accordance with US GAAP
    
    
    340,7
    
    
    
    381,5Net income for the year in accordance with US GAAP
    
    
    139,6
    
    
    
    99,9Purchase of treasury stock
    
    
    (65,6
    )
    
    
    (128,7
    )Foreign currency translation
    
    
    (5,6
    )
    
    
    (1,0
    )Acquisition of minority interest in QI(B)
    
    
    (70,7
    )
    
    
    Changes in fair value of financial assets through profit and loss
    
    
    0,4
    
    
    
    Dividends paid in cash
    
    
    (17,7
    )
    
    
    (11,0
    )Shareholders equity at the end of the year in accordance with US GAAP
    
    
    321,1
    
    
    
    340,7
 (a) Valuation of property, plant and equipment
   (b) Inventory valuation
  (c) Capitalization of interest cost
   (d) Changes in fair value of financial assets through profit and loss
   F-44




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Quilmes Industrial (Quinsa) Société Anonyme
 34 Reconciliation of net income and shareholders equity to US GAAP (continued)
 (e) Differences in basis relating to purchase accounting
    (f) Change to consolidation
    (g) Acquisition of minority interest in QI(B)
   (h) Deferred income tax
  (i) Minority Interest
  F-45




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Quilmes Industrial (Quinsa) Société Anonyme
 34 Reconciliation of net income and shareholders equity to US GAAP (continued)
 (j) Net income
  (k) Cumulative translation differences exemption
  Comprehensive income (loss)
  Year ended December 31,2005
    
    
    2004Net income under US GAAP
    
    
    139,6
    
    
    
    99,9Other comprehensive (loss) income:Foreign currency translation
    
    
    (5,6
    )
    
    
    (1,0
    )Changes in fair value of financial assets through profit and loss
    
0,4
    
    
    Comprehensive income
    
    
    134,4
    
    
    
    98,9
 As of December 31,2005
    
    
    2004Accumulated other comprehensive loss
    
    
    (237,3
    )
    
    
    (232,1
    )
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##### Table of Contents



EXHIBIT INDEX
 Exhibits1.1
    
    Articles of Incorporation of Quinsa, as amended (equivalent of both charter and by-laws).2.1
    
    Deposit Agreement dated February 28, 2002 among Quinsa, The Bank of New York and the
holders from time to time of American Depositary Receipts issued thereunder
(incorporated by reference to the registration statement on Form F-6 filed on February
20, 2002; File No. 333-83226).*2.2
    
    Form of American Depositary Receipt for Quinsa Class B shares (included in Exhibit 2.1).*4.1
    
    Share Exchange Agreement dated May 1, 2002 among Companhia de Bebidas das AméricasAMBEV
and Quinsa (incorporated by reference to Exhibit 2.1 of the Schedule 13D relating to
Quinsa, filed on May 13, 2002 by AmBev).*4.2
    
    Memorandum of Agreement dated January 13, 2003 between Heineken, Quinsa, BAC and certain
of their respective affiliates dated January 13, 2003 (incorporated by reference to our
Annual Report on Form 20-F filed on June 27, 2003 filed as Exhibit 4.2).*4.3
    
    Letter Agreement dated January 13, 2003 between AmBev, BAC and Quinsa (incorporated by
reference to Exhibit 2.4 of the Schedule 13D/A relating to Quinsa filed on February 4,
2003 by AmBev).*4.4
    
    Quinsa Shareholders Agreement dated as of January 31, 2003 among BAC and AmBev
(incorporated by reference to Exhibit 2.5 to Amendment No. 1 to the Schedule 13D
relating to Quinsa filed on February 4, 2003 by AmBev).*4.5
    
    License Agreement dated January 31, 2003 between Quinsa and AmBev (incorporated by
reference to our Annual Report on Form 20-F filed on June 27, 2003 as Exhibit 4.4).*4.6
    
    Distribution Agreement dated January 31, 2003 between Quinsa and AmBev (incorporated byreference to our Annual Report on Form 20-F filed on June 27, 2003 as Exhibit 4.5).*4.7
    
    Share Pledge Agreement dated as of January 31, 2003, among BAC, AmBev and Quinsa
(incorporated by reference to Exhibit 2.9 to Amendment No. 1 to the Schedule 13D
relating to Quinsa filed on February 4, 2003 AmBev).*4.8
    
    Escrow Agreement dated as of January 31, 2003, among BAC, AmBev and The Bank of New York
(incorporated by reference to Exhibit 2.10 to Amendment No. 1 to the Schedule 13D
relating to Quinsa filed on February 4, 2003 by AmBev).*4.9
    
    U.S.$ 150,000,000 Credit Agreement dated as of March 22, 2005 among CMQ and the Branch
of Citibank N.A. established in the Republic of Argentina. (incorporated by reference to our Annual Report
on Form 20-F filed on June 30, 2005 (as amended on
November 23, 2005) as
Exhibit 4.9*4.10
    
    Agreement dated as of August 3, 2005 among BAC, AmBev and Quinsa.4.11
    
    Agreement dated as of April 13, 2006 among BAC, AmBev and Quinsa.
 Exhibits8.1
    
    List of Subsidiaries.10.4
    
    Resolution of the Office of Competition, Deregulation and Consumer
Advocacy of the Ministry of Production of the Republic of Argentina
regarding the business combination of AmBev and QuinsaEnglish
Translation (incorporated by reference to Exhibit 2.09 to Amendment No.
1 to the Schedule 13D relating to Quinsa filed on February 4, 2003 by
AmBev).*11.1
    
    Code of Ethics (incorporated by reference to our Annual Report on Form
20-F filed on June 30, 2004 as Exhibit 11.1).*12.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.12.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.13.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.15.1
    
    Consent of A.C. Nielsen Argentina S.A.15.2
    
    Consent of A.C. Nielsen Chile.15.3
    
    Consent of CCR/IRI.15.4
    
    Consent of A.C. Nielsen Uruguay.15.5
    
    Consent of CIES Internacional.
 
 *
    
    Incorporated by reference.