our values actions results - Morningstar, Inc

our values

Honesty

Loyalty

Respect

Responsibility

Trust

Education

Quality and Service

Teamwork

Resources Optimization

Innovation and Creativity

gmodelo.com

actions results

2001 Annual Report

2001 An

nual repo

rt Gru

po

Mo

delo

m080_FRONT Cov_ENG 5/22/02 9:32 PM Page 1

Global Reports LLC

Grupo Modelo, founded in 1925, is the leader in the production and marketing

of beer in Mexico with 61.7% of the total (domestic and export) market

share, as of December 31st, 2001. It has eight brewing plants in the country, with

a total annual installed capacity of 46.0 million hectoliters. Currently, it brews and

distributes ten brands; Corona Extra, the number one Mexican beer sold in the

world, Modelo Especial, Victoria, Pacífico, Negra Modelo and other regional

brands. It exports five brands with presence in more than 150 countries and is the

exclusive importer of Anheuser-Busch’s products in Mexico, including the brands

Budweiser and Bud Light. Grupo Modelo trades in the Mexican Stock Exchange

since 1994 with the ticker symbol gmodeloc.

contents

Financial highlights

Letter to the shareholders

Sales

Advertising

Information technologies

Operations

The Modelo total quality

system

Board of Directors

Corporate structure

Financial summaries

Management discussion

& analysis

Financial information

Glossary

1

2

6

14

17

18

22

24

25

26

30

33

57

mission statement

Produce, distribute and sell quality beer:

• With excellent service

• At a competitive price

• Optimizing resources

• Surpassing customer expectations

• With the collaboration of employees, suppliers and

distributors, contributing to their economic, cultural and

social development

• Improving the profitability of the business

• Protecting the natural resources and

• Cooperating with the progress of the community

and the country

Investor relations

José Parés GutiérrezCommunications and

Investor Relations Director

Campos Elíseos 400 18th FloorColonia Lomas de Chapultepec

c.p. 11000, Mexico CityTel. (5255) 5283 3600Fax (5255) 5280 6718

[email protected]

glossary

Biogas. Gas produced during the transformation of organic

matter present in wastewater, in absence of oxygen. Its main

components are methane and is used as alternate fuel in

steam generators.

Anaerobic bio-degradation. Transformation of organic

matter present in wastewater, using microorganisms capable

of developing themselves in an oxygen depleted environment.

Fossil fuels. A natural resource with finite characteristics,

used for power generation.

Fuel oil. A derivative from petroleum refinery which is used

to produce power in steam boilers and generators.

Malt plant. Plant where under controlled procedures,

cleaned barely is transformed into malt through the steeping,

germination and kilning processes.

Brew house. Building where different equipment converts raw

materials used in the brewing process into a liquid known as wort.

Unitank. A cylindrical tank with a conical bottom where wort

is first fermented and afterwards aged.

Installed capacity. The theorical total annual capacity that a

plant can produce with its present infraestructure.

Hectoliter. Measure used in the Brewing Industry equivalent

to 100 liters.

Des

ign

: m

ilen

io3.

com

.mx

P

rin

tin

g:C

ham

pag

ne

Fin

e Pr

inti

ng

Printed on recycled paper

m080_BACK Cov_ENG 5/22/02 9:22 PM Page 1

Global Reports LLC

financial highlightsGrupo Modelo S.A. de C.V. and Subsidiaries.

Figures in millions of constant Mexican pesos as of December 31, 2001 except shipments of beer, per share data and employees.

Shipments of Beer -Million hectoliters-

Domestic Market 28.45 28.02 1.5

Export Market 9.99 8.55 16.8

Total Market 38.44 36.57 5.1

Net Sales 32,169 30,620 5.1

Operating Income 7,854 7,956 -1.3

EBITDA 9,272 9,152 1.3

Net Majority Income 3,623 3,405 6.4

Funds Provided by Operating Activities 6,359 6,627 -4.0

Capital Expenditures 3,100 3,564 -13.0

Depreciation and Amortization 1,642 1,495 9.8

Financial Situation as of December 31

Total Assets 51,778 47,296 9.5

Total Liabilities 10,525 10,393 1.3

Majority Stockholders' Equity 30,804 27,631 11.5

Outstanding Shares at Year End (million)

Common Shares 3,252 3,252 0.0

Book Value per Share 9.47 8.50 11.4

Earnings per Share 1.11 1.05 6.4

Dividend per Common Share 0.12 0.23 -47.4

Closing Stock Price 20.51 25.40 -19.3

Return on Equity 11.76% 12.32%

Number of Employees and Workers 48,445 46,890 3.3

Year ended December 2001 2000 change %

Grupo Modelo 1 2001 Annual Report

m080_Nar Eng.r1 5/22/02 9:35 PM Page 1

Global Reports LLC


On behalf of the Board of Directors, we are pleased to report

our results for 2001.

Grupo Modelo consolidated its position as leader in the

Mexican brewing industry during 2001, we did so in a year of

economic slowdown, which impacted economies in many

countries where our products are sold, including Mexico. The

solid financial position, the quality of our products and

services, as well as the commitment of our personnel, have

been the solid corporate practices that allowed us to move for-

ward.

Net sales reached $32,169 million pesos, and the total

volume of beer sales grew 5.1%, to 38.4 million hectoliters,

which was achieved as a result of domestic and export sales

increases of 1.5% and 16.9%, respectively.

The Company’s beer volume for the domestic market was

28.4 million hectoliters. This allowed us to increase market

share to 56.4%, strengthening Grupo Modelo’s leadership in

Mexico. During the year we launched the new 12 oz

aluminum can presentation of Pacífico regional beer,

available in the Northwest of Mexico. Also, the image of this

brand was reinforced through the development of new

packaging and presentations.

Regarding advertising, the Company increased its efforts to

strengthen the presence of its products in the market. For

that reason, 24 new ad campaigns were launched for our

national and regional brands.

letter to the shareholders

Dear Shareholders:

Antonino Fernández RodríguezChairman of the Board

Carlos Fernández GonzálezCEO

m080_Nar Eng.r1 5/22/02 9:35 PM Page 2

Global Reports LLC

21.5

%78

.5%


For 2001, exports represented 26.0% of the total volume, a

2.6 points increase relative to last year’s mix. United States

and Canada remain the largest markets abroad, where

Corona Extra continues being the leading brand in the

import segment. Another important result for Grupo Modelo

in 2001, is that two of its brands are among the top ten

imported beers in the US market, after Modelo Especial

climbed to tenth place.

Cervezas Internacionales, that distributes exclusively

Anheuser-Busch products in Mexico, has done an excellent

job with Budweiser, Bud Light and O’Doul’s, growing 22.6%

in volume during the year. These brands are sold mainly in

resorts and border regions of our country.

Operating income reached $7,854 million pesos, represen-

ting a 24.4% operating margin, one of the industry’s high-

est worldwide.

Investments for acquiring minority interest during the year

contributed to the 6.4% growth in majority net income,

which was $3,623 million pesos, or a $1.11 per share. On

the other hand, the net margin, expanded 20 base points,

reaching an 11.3% over net sales.

Our convenience stores, “Extra”, raised their sales in 64.5%,

and the store format reconversion project was fully completed.

Investments in fixed assets during 2001 were $3,100 million

pesos, mainly for expansion and modernization projects in

all areas of the Company.

During early June, the expansion of the third phase of

Compañía Cervecera de Zacatecas was completed, becoming

the largest brewery in Latin America. This brewery, which

started operations in 1997, increased its annual capacity from

10.0 to 15.0 million hectoliters, creating over 3,500 direct

The operating margin

reached 24.4%, one of

the highest in the

brewing industry

worldwide.

2001

2000

1999

1998

1997

Net Sales(Millions of constant Mexican pesosas of December 31, 2001)

Domestic Exports

23.3

%

22.6

%

24.0

%

24.1

%

76.7

%

77.4

%

76.0

%

75.9

%

$32,

169

$30,

621

$27,

957

$26,

347

$23,

525

m080_Nar Eng.r1 5/22/02 9:35 PM Page 3

Global Reports LLC

9.1%


jobs for the region. This expansion makes Grupo Modelo’s

annual installed capacity increase to 46.0 million hectoliters.

Our capacity utilization reached 88.4%, allowing us to meet

our production, maintenance and reconversion programs.

Grupo Modelo acquired all the shares of Envatap, S.A. de

C.V., Tapas Metálicas, S.A. de C.V., Tapas y Tapones de

Zacatecas, S.A. de C.V., Envases de Zacatecas, S.A. de C.V.

and Promotora de Servicios de Zacatecas, S.A. de C.V., to

ensure the quality and supply of aluminum cans, as well as

the crown caps for glass bottle presentation. These

acquisitions strengthen our supply-chain, guaranteeing the

supply, quality and price.

During April, Grupo Modelo paid dividends of $401 million

pesos, corresponding to $0.12 pesos per share, and repre-

senting 11.8% of the Net Majority Profits as of 2000.

Grupo Modelo is well known for its commitment with its

personnel. This year we continued contributing to intellectu-

al development through training programs, achieving 25

hours average per employee. These efforts increase the

knowledge and skills necessary in jobs where technological

changes demand constant training.

During the recent years, we have invested in ecology to meet

one of the social responsibilities of Grupo Modelo. Even

though in the short-term these investments do not create

financial benefits, they contribute to the protection of the

environment, benefiting the current and further generations.

According to the Competitive Management Model that

Grupo Modelo has promoted, in order to enhance firm

development of the Company towards the future. We

should point out, among others, the efforts towards

preserving and protecting the environment. Our Company

has started an aggressive policy of actions and results,

focused on the conservation of the country’s natural

resources. Following this guideline, our environmental man-

agement system for the breweries and service companies

complied with the ISO 14001 international standard

certificate, for pollution prevention and continuous improve-

ment. The importance of this effort is demonstrated through

the certification of seven of our breweries and four service

companies. Also, we voluntarily adhered to the “Clean

Industry” program, promoted by Mexico’s environmental

authorities (SEMARNAT), where as of now, 11 strategic

business units have been certified.

Within the activities for promoting reforestation and

ecological recovery, it is important to highlight the efforts

done by the Company at the “Iztaccihuatl – Popocateptl

National Park”, located southeast of Mexico City. This

2001

2000

1999

1998

1997

Capital Structure(Millions of constant Mexican pesosas of December 31, 2001)

Stockholders’ Equity Total Liabilities

20.3

%

22.0

%

9.3%

9.9%

79.7

%

78.0

%90.9

%

90.7

%

90.1

%

$51,

778

$47,

296

$44,

622

$40,

599

$38,

805

m080_Nar Eng.r1 5/22/02 9:35 PM Page 4

Global Reports LLC


project offsets the negative effects of illegal deforestation,

allowing greater water infiltration to the underground.

Also, in Zacatecas, we started the Modelo Environmental

Management Unit, allowing the protection and reproduc-

tion of different wildlife species, according to Wildlife Units

Conservation, Management and Sustainable Use Systems

promoted by SEMARNAT.

These are only some of the actions that Grupo Modelo has

implemented in compliance with its corporate responsibility

that has distinguished the Company throughout the years.

The community has also been a recipient of our efforts

through Filantropía Modelo, whose contributions are geared

towards education, social programs, environmental issues,

health as well as culture and arts.

Dear shareholders, the results of the actions taken during the

year in Grupo Modelo are as a consequence of the dedication

and hard work of our people. On this special occasion, we

would like to give them an special acknowledgement.

Both, new and ongoing projects for this year will provide

the strength and capability to continue being a Company

of concrete actions and excellent results.

Sincerely,

Antonino Fernández RodríguezChairman of the board

Carlos Fernández GonzálezCEO

Mexico City, April, 2002

m080_Nar Eng.r1 5/22/02 9:35 PM Page 5

Global Reports LLC


SalesIn 2001, Grupo Modelo’s total shipments of beer set a new record, reaching 38.4

million hectoliters, of which 28.4 million were for the domestic market, and 10.0

million were exports. The total beer sales posted a 5.1% increase, ahead of the

average of 3.4% of the Mexican brewing industry.

Grupo Modelo achieved an increase in total market share, reaching 61.7%.

For the year, the domestic volume grew 1.5% as compared to 2000. With this

growth, the domestic market share increased by 30 basis points, consolidating the

leadership of Grupo Modelo, getting a 56.4% of the domestic market. These

positive results reflect the consistency of the marketing strategies and the sales

efforts carried out by the Company and its personnel.

Despite of Mexico’s economic slowdown during the second half of the year, Grupo

Modelo’s volume grew in the three regions of the country, producing a favorable

performance of all the brands.

Exports maintained their positive trend, growing 16.9% relative to the previous

year and achieving an 84.4% share of the total Mexican beer exports.

Control air emissions in the

combustion equipment used

for steam generation.

action

Total Market Share

61.7

%

57.1

%

51.7

%

47.0

%

38.2

%

2001

1996

1991

1986

1977

m080_Nar Eng.r1 5/22/02 9:35 PM Page 6

Global Reports LLC


Mexico

The domestic market showed positive results, amidst the difficult economy that

tested the Company’s capability. The market share increase was possible mainly due

to the hard work of the sales force to provide better service to each and every

customer, together with a series of marketing strategies implemented during the

year, and that are expected to be successful also in the future.

The one liter and 11 oz presentations maintained a good performance. Nevertheless,

aluminum cans suffered a downturn, reflecting the economic situation, and the

consumers switch to the returnable presentations.

The Company’s strong distribution network in Mexico allows a direct contact with

the market, enabling better information and servicing, thus strengthening the

Group’s leadership in the more than 200 thousand point-of-sales served by Grupo

Modelo. The 446 agencies and sub-agencies distributed 82% of the total volume.

The off-premise represented 79.6% of the domestic volume. Grupo Modelo’s

Modelo Brewery achieved a “Phase 1 – Ozone Environmental

Contingency Plan” exemption from the Mexico City

government, being the first company to be granted

such an exemption in the metropolitan area.

result

Cervecería Modelo, one step ahead in ecology.

Domestic Market Share

56.4

%

54.8

%

50.9

%

45.7

%

38.5

%

2001

1996

1991

1986

1977

m080_Nar Eng.r1 5/22/02 9:35 PM Page 7

Global Reports LLC


action

transportation fleet is now comprised of 11,568 vehicles,

distributed among tractors, trailers, trucks, pick-ups and other

units, 240 more units relative to 2000. The service and

assistance provided to the off-premise has been the key to

grow our sales in these points of sale.

United States and CanadaGrupo Modelo is steadily going global, by being present now

in more than 150 countries. The US and Canada remain the

major markets outside Mexico, representing over 90% of the

Company’s export volumes. These markets posted a 17%

growth, while the rest of countries grew 15%.

The Company importers for the US, Barton Beers and The

Gambrinus Company, have done an excellent job, raising

volumes in a particularly difficult year, where economic

slowdown and distributor consolidation posed an additional

challenge.

Communicate the benefits of caring forthe environment, within the personnelof the organization, contractors, guidedtours at the facilities, as well as inschools and at external events.

Export Brand Portfolio.

The imported beer segment in

the US market continues

growing.

m080_Nar Eng.r1 5/22/02 9:35 PM Page 8

Global Reports LLC


Approximately 100,000 people wereintegrated into the environmental awareness programs,whose area of influence encompasses environmentalconcerns outside of the organization.

Promotion of environmentalawareness throughguided tours.

Market share for the imported beer is growing in the United

States. During the last three years, imports had been gaining

one percentage point per year, while in 2001 they earned

almost 2 percentage points. These trends encourage working

even harder to increase and consolidate Modelo’s products

leadership in that market. Import beer already represents

11.8% of the total beer industry in the US.

Corona Extra remains the leader of the import segment with a

28.4% market share, its volume growth was 16.0%. This year

was also special because another brand brewed by Modelo,

placed among the top ten imported beers. Modelo Especial

became the number tenth after growing 26.5% in 2001.

result

u.s.a. Canada u.s.a.

m080_Nar Eng.r1 5/22/02 9:35 PM Page 9

Global Reports LLC

Grupo Modelo Brand Portfolio.


The aluminum can presentation of

Corona Extra for the US market

represented an excellent alternative to

penetrate channels where glass

presentation is not allowed, such as

stadiums, swimming pool bars,

marinas, hotel minibars, etc.

Corona Light, a brand produced

exclusively for the US market, continues gaining market

share and currently holds the eleventh position of the import

segment, growing 25.7% during the last year. This brand is

second place among imported light beers in the United States.

Our distributors have promoted all the brands of Grupo

Modelo’s export portfolio, with outstanding performances

posted by Pacífico and Negra Modelo, growing their volumes

in 18.4% and 21.9% respectively.

Corona Light grew

25.7% during 2001

in the U.S.

Contributing to the preservation andreproduction of wildlife species is anongoing commitment of Grupo Modelo.Thus, Zacatecas has been incorporatedin the Wildlife Units Conservation,Management and Sustainable UseSystem (uma).

action

m080_Nar Eng.r1 5/22/02 9:36 PM Page 10

Global Reports LLC


Canada represents the Company’s second most important

export market. The two importers are The Mark Anthony

Group and Molson Breweries Ltd., for distributing our

products in the western and eastern territories, respectively.

Corona continues being the best selling import in Canada.

As in the United States, the imported beer segment is

Top Imported Beer Brands in the U.S.A. (Thousand Cases of 24 (12 Fl. Oz.) Bottles)

Brand 1999 2000 2001E Change% Mkt. Share00-01E 2001E

1. Corona Extra 64,880 73,330 85,061 16.0% 28.4%

2. Heineken 47,025 53,500 57,250 7.0% 19.1%

3. Labatt Blue 12,525 14,130 15,825 12.0% 5.3%

4. Tecate 8,945 11,025 11,580 5.0% 3.9%

5. Guinness 9,580 10,080 10,480 4.0% 3.5%

10. Modelo Especial 4,310 5,260 6,656 26.5% 2.2%

11. Corona Light 3,735 4,630 5,820 25.7% 1.9%

15. Pacífico 1,775 2,800 3,314 18.4% 1.1%

23. Negra Modelo 1,350 1,485 1,810 21.9% 0.6%

Source: Impact DatabankE: Estimates

growing its market share, and during 2001 it held an 8.0%

share of the Canadian volume.

The growth in both countries reflects the consumers’

preference for the Modelo products.

During the first year of operations, the ModeloEnvironmental ManagementUnit (uma) achieved the birthof white tail deer, and rockymountain ram.

result

The UMA keeps more than twelve endangered species.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 11

Global Reports LLC


EuropeA determining factor for our success has been the regional

presence through the representation offices in Madrid and

Brussels. Corona has consolidated its leading position in the

import segment in more and more countries, such as

Belgium, France, Iceland, Norway and Turkey. Growth in

some of these nations reached 100%.

Asia and OceaniaThe Singapore representation office supports exports to Asia

and Oceania. Corona Extra is the import leader in Thailand

and Vietnam. Another important country because of its

growth has been China, where Corona is widely accepted in

tourist areas. Corona also is the leader for the Australian

bottled import segment.

Minimize solids in sanitary landfills

by generating economically viable

and environmentally friendly

alternatives to dispose of

by-products and waste.

action

Export Market Share

84.4

%

78.4

%

67.1

%

67.1

%

1.3%

2001

1996

1991

1986

1977

Independent distributors are

supported by the offices

around the world.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 12

Global Reports LLC


Top Selling Beer Brands Worldwide (Million Hectoliters)

SHIPMENTS CHANGE

Brand Brewing Company 1996 1997 1998 1999 2000 97-98 98-99 99-00

1. Budweiser Anheuser-Busch Inc. 49.2 49.9 48.2 46.9 46.7 -3.3% -2.7% -0.5%

2. Bud Light Anheuser-Busch Inc. 24.8 27.5 31.0 34.5 38.1 12.8% 11.4% 10.5%

3. Skol American Beverage Co. 12.9 19.4 22.1 23.6 28.9 13.9% 6.9% 22.4%

4. Asahi Super Dry Asahi Breweries Ltd. 18.5 21.7 23.5 24.3 24.5 8.1% 3.5% 1.0%

5. Corona Extra Grupo Modelo 17.5 19.5 20.8 22.4 24.1 6.6% 7.9% 7.3%

6. Heineken Heineken NV 18.0 18.8 19.4 20.4 21.6 3.1% 5.5% 5.7%

7. Coors Light Coors Brewing Co. 17.1 17.6 17.8 18.9 19.6 1.3% 5.9% 3.7%

8. Brahama Chopp American Beverage Co. 24.9 21.9 20.4 19.5 19.6 -7.0% -4.6% 0.6%

9. Miller Lite Miller Brewing Co. 18.8 19.1 18.7 18.8 18.9 -2.5% 0.6% 0.6%

10.Polar Cervecería Polar CA 13.7 15.3 15.0 14.8 15.0 -1.5% -1.6% 1.6%

Total 215.3 230.6 236.8 244.1 257.0 2.7% 3.1% 5.3%

Source: Impact Databank

Latin AmericaExports to these countries grew as a result of the excellent

efforts of importers and distributors, which, supported by

the representation offices located in Costa Rica and

Argentina, helped Corona Extra to maintain the leading

position for imports in the region. This was the case of Costa

Rica, El Salvador, Guatemala, Nicaragua, Jamaica, Dominican

Republic, Trinidad and Tobago, Turks & Caicos Islands,

Curazao, Venezuela, Bolivia, Colombia and Ecuador.

Because of on-going programs for reduction, recovery,

segregation, reuse, recycling and waste commercialization,

during the past year, Grupo Modelo

avoided disposal of 732,500 tons. of

by-products and recyclable materials.

result

Environmental culture is present all across the different areas of the organization.

Colombia Puerto Rico

m080_Nar Eng.r1 5/22/02 9:36 PM Page 13

Global Reports LLC


AdvertisingAccording to the Modelo brands’ selling strategies, different

ad campaigns were launched during 2001, targeted towards

renovating and making them accessible to current and

potential consumers.

All of the products’ images were reinforced throughout

Mexico by 24 new ad campaigns that contributed to a better

positioning of the portfolio. Because of their importance in the

total mix, Corona and Victoria were the most outstanding.

In the ads for Corona, the emphasis is on the international

presence and recognition that the brand has in the countries

where is sold. With Victoria, on the other hand, special

importance is placed on the regional nature of this brand,

thus making it the first option for an objective audience.

Committed with the promotion of sport activities in Mexico,

during 2001 several major events were sponsored, including

the “Pacifico International Marathon”, held in Mazatlán.

More than 4,600 runners, both Mexican and from 13 other

Preserving water by investments in recovery, treatment and reutilization systems, supported also with awarenesscampaigns for an efficient use of thisvital resource.

action

The new ad campaigns

renovated the brand image of

the portfolio.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 14

Global Reports LLC


countries, participated in the race. Also, for this third edition

of the competition, registration was up 50% relative to the

first race.

As for soccer, more than 10 thousand players, from 320

schools, participated in the 2001 Copa Corona Universitaria.

The 448 participant teams, men and women, played a total

of more than 3,000 matches.

The Santos Laguna team of the major professional soccer

league in Mexico was this year’s summer champion, and

reached semi-finals in the Merconorte Cup. FIFA named the

Santos Laguna club number 61 in the world, based on

results. Also, the Company continued sponsoring soccer

teams in different divisions of the sport.

In Mexico’s pro baseball leagues, Modelo sponsored the

following clubs: Leones de Yucatán, Los Rojos del Aguila de

Veracruz, Cafetaleros de Cordoba, Guerreros de Oaxaca,

Venados de Mazatlán, Yaquis de Cd. Obregón, and Cañeros

de los Mochis.

Water consumption has been reduced inapproximately 30% in the productionareas of the 8 breweries, in addition toother savings in the general areas of thecompanies.

result

Continuous investments inthe water treatment plants.

Commited with the promotion

of sport activities in Mexico.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 15

Global Reports LLC


actionUse the cleanest fuels, such as

natural gas, consistent with

Modelo’s commitment to pollution

prevention.

In motor sports, speedboats and race cars, Grupo Modelo

was present during 2001. The Corona team won second

place in the Nauticopa, while in Formula 3 racing, called the

Corona Cup, the Modelo sponsored team finished first.

Modelo maintained presence in concerts by national and

international well known artists. Also, Modelo sponsored

artistic and cultural activities to promote them around

the country.

Currently, there are Mexican suppliers for the development

of promotional items, allowing us to have a broader and

more selective portfolio of products.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 16

Global Reports LLC

Cervecería Modelo, Cervecería Modelo

de Guadalajara and Cervecería Modelo

de Torreón have eliminated the emission

of particles and sulfur dioxide in

combustion gases from equipment

used for steam generation.

result

TechnologyThe Company has focused on intensifying strategies to

strengthen its telecommunications infrastructure, implement

systems for greater administrative efficiency and e-business

strategies. Grupo Modelo, aware of the importance of an infra-

structure capable of warranting business continuity, set the

Business Recovery Plan in case of contingencies.

The Company network allows and expedite, secure and eco-

nomic way of communicating among the many business units.

Regarding e-business, work has continued on e-procurement

initiatives and strengthening the demand and production

management systems.

The demand and production management system provides

timely and effective information for a proper decision making

process. Having the latest technology available allows

maintaining updated systems that integrates and strengthens

the distribution chain.

The use of point-of-sale (POS) terminals has facilitated the

automation of processes consolidating information about

consumer preferences, and the objective needs of the public

across the nation, reinforcing the quality and service that have

distinguished Grupo Modelo.

State-of-the-art brewing house.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 17

Global Reports LLC


Voluntary participation in the “CleanIndustry” certification program, by whichthe Federal Government gives an awardin recognition for total compliance withMexican Environmental Regulations.

action

Certificate of “Clean Industry”.

OperationsThe third phase of Compañía Cervecera de Zacatecas was

completed in July, 2001, thus arriving to a 15.0 million

hectoliter annual installed capacity, and becoming the Group’s,

and all of Latin America’s, largest brewery plant. With this,

Grupo Modelo had a 46.0 million hectoliter annual installed

capacity as of year-end 2001.

The construction of a malt plant in Zacatecas brewing facility

is according to schedule. The initial capacity of this project will

be 50,000 annual tons of malt, and it can be expanded based

on market conditions and the Company’s requirements. This

project features state-of-the-art technology, provided by

Seeger Industrial, a Grupo Modelo subsidiary located in Spain.

High standards guarantee the quality of Grupo Modelo’s products.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 18

Global Reports LLC


Eleven strategic units, including the 8breweries, were granted the “CleanIndustry” certificate. Earning and maintaining this certificate providesassurance to government, communityand financial markets about our environmental responsibility.

result

The investments during the year amounted to $3,100

million pesos, allocating 23.0% in the Zacatecas project,

and 33.4% in Trópico.

By 2005, once all expansion projects are completed, Grupo

Modelo’s annual installed capacity will be at 60.0 million

hectoliters.

All the expansion projects are based on the analysis made by

Grupo Modelo, of the further demand in Mexico and abroad.

The year’s capacity utilization level was

88.4%, a figure that allows the necessary

flexibility for serving the markets as well

as procurement programs.

As part of the Company’s continuous

modernization programs, approximately

one quarter of capital expenditures

were allocated to update equipment,

facilities and working areas, at the other

6 breweries.

The expansions of the fourth phase of Zacatecas are in

progress, reaching a planned annual capacity of 20.0 million

hectoliters. The economies of scale achieved at this plant have

benefited the entire organization.

Also, the expansion of Compañía Cervecera del Trópico,

located in Tuxtepec, Oaxaca, continues as scheduled. This

plant has a 7.0 million hectoliter annual installed capacity,

which is projected to be more than double by 2005, reaching

16.0 million annual hectoliters.

Capital Expenditures

3,10

0

3,56

4

3,15

3

4,53

1

2,88

6

2001

2000

1999

1998

1997

Depreciation & Amortization

1,64

2

1,49

5

1,42

6

1,33

6

1,27

2

2001

2000

1999

1998

1997

(Millions of constant Mexican pesos as of December, 31 2001)

Investment per each peso of depreciation:

1997 $2.27 1998 $3.39 1999 $2.21 2000 $2.38 2001 $1.89

m080_Nar Eng.r1 5/22/02 9:36 PM Page 19

Global Reports LLC


Maximize the use of natural resourcesincorporating the bio-gases produced during the anaerobic biodegradation from the water treatment plant into thesteam generation process.

action

The expansions, modernization and replacement of brewery

equipment were possible largely because of the excellent work

performed by Inamex de Cerveza y Malta, S.A. de C.V., a

Group subsidiary located in Texcoco, outside Mexico City.

In the distribution centers owned by the Company across

Mexico, 597 million pesos were invested to expand and

modernize the infrastructure that facilitates the merchandising

of its products in the country.

One of Grupo Modelo’s top priorities is to ensure the quality

and supply of its indirect inputs, that was the reasoning behind

the acquisition of the remaining 50% of the aluminum can

and crown cap manufacturers Envatap, Tapas Metálicas, Tapas

y Tapones de Zacatecas, Envases de Zacatecas and Promotora

de Servicios de Zacatecas.

The freight companies, Tramo and Fleza, continued sup-

porting the operations, covering more than 15 million

miles during the year, carrying raw materials and finished

products all over Mexico.

43.5

0

39.6

3

39.5

0

35.0

0

35.0

0

2001

2000

1999

1998

1997

Installed Capacity vs Utilization(Millions of hectoliters)

85.6

%

92.1

% 87.3

%

92.3

% 88.4

%

One quarter of the CAPEX was

allocated to update equipment

at the breweries.

Installed Capacity Utilization (%)

m080_Nar Eng.r1 5/22/02 9:36 PM Page 20

Global Reports LLC


There has been a reduction in fossil fuelutilization per unit of steam produced

providing diverse benefits, such as a reduction in natural gas and fuel oil consumption.

result

The biogas produced in the water treatment plants generates savings in power generation.

Grupo Modelo, always concerned about the environment,

worked throughout 2001 to meet the “Clean Industry”

government certification for all its breweries. Currently, the

eight brewing plants and other three subsidiaries have

achieved the certification.

Also a testimony of the environmental commitment, was the

distinction “Environmental Merit Award”, earned by the

subsidiary Cebadas y Maltas, that transforms barley into malt.

The award is an acknowledge from the Mexican Federal

Well-trained personneloperate the modernunitanks, where thefermentation and aging processesare done.

Government to those companies who perform important

actions in protection, preservation and improvement of the

environment, along with sustained management of natural

resources. The award was received during the celebrations of

“World Environmental Day” in Mexico.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 21

Global Reports LLC

Implement an environmental management system pursuant to ISO 14001, thus ensuring pollution prevention and the continuous improvement of the environmental performance.

action

Modelo Quality SystemIn a more competitive environment, Grupo Modelo remains

seeking and creating opportunities to improve at all levels of

the Company.

The fundamentals and basic concepts of Modelo’s Total

Quality System were incorporated in the Competitive

Management Model, which allows the organization a steady

direction into the future. Also, this model represents the

framework for assessing and measuring performance within

the Company through several key performance indicators

oriented, among others, on customers, products, services,

operations, human resources, finance, and environmental

protection and preservation.

The Modelo products reflect the new world-trend towards

high quality standards. As part of the efforts to continue

outperforming, all the companies of Grupo Modelo have

worked for the ISO 9000 certification. This international

Cía. Cervecera de Zacatecas, Latin America’s largest brewery.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 22

Global Reports LLC


As of today, seven breweriesand four service companiesare certified under ISO 14001international standard.

result

Aerial view of the recreational facility in Zacatecas, Zac.

standard pro-

motes the adop-

tion of a process

based approach

to develop and

improve quality

management systems, raising customer satisfaction through

exceeding their expectations.

World-class companies facilitate teamwork, forming and

integrating teams that share goals and responsibilities

towards meeting the Company’s mission. Aware of the

importance of developing and training its personnel, Grupo

Modelo promotes teamwork as the driver for sharing

expertise and knowledge among its people. To build up this,

the Company organized the first National Grupo Modelo

Teamwork Forum to create high performance teams within

the Organization.

On the other hand, teams from Cervecería Modelo México,

Compañía Cervecera de Zacatecas, Cervecería del Pacífico

and Inamex de Cerveza y Malta were winners in the National

Quality Control and Teamwork Circles Contest. This is the

fourth time in a row that Company representatives receive

this important award from the Mexican President.

PersonnelTotal Employees & Workers

48,4

45

46,8

90

44,0

40

42,0

97

41,1

49

50

45

40

35

30

2001

2000

1999

1998

1997

m080_Nar Eng.r1 5/22/02 9:36 PM Page 23

Global Reports LLC


corporate structure

Domestic

Support the

Operations Area

Breweries

Cía. Cervecera de Zacatecas

Cervecería Modelo

Cía. Cervecera del Trópico

Cervecería Modelo de

Guadalajara

Cervecería Modelo del

Noroeste

Cervecería Modelo de Torreón

Cervecería del Pacífico

Cervecería Yucateca

International

Spain

seginsa

Engineering

Domestic446 Agencies andSub-Agencies

Exports

operations

Service

sales

Procermex

Canacermex

Eurocermex

Iberocermex

Asiacermex

Latincermex

m080_Nar Eng.r1 5/22/02 9:36 PM Page 25

Global Reports LLC


Financial Summary - Operations

Grupo Modelo S.A. de C.V. and Subsidiaries

Figures in millions of constant Mexican pesos as of December 31, 2001 except per share data.

2001 2000 1999 1998

Shipments of Beer -Million Hectoliters-

Domestic Market 28.45 28.02 26.91 25.79

Export Market 9.99 8.55 7.55 6.46

Total Market 38.44 36.57 34.46 32.25

Net Sales 32,169 30,620 27,957 26,347

Cost of Goods Sold 14,611 13,660 13,083 12,598

Gross Profit 17,558 16,960 14,873 13,749

Operating Expenses 9,705 9,004 8,099 7,645

Operating Income 7,854 7,956 6,774 6,105

Interest (Gained) Paid -Net- -688 -883 -902 -1,597

Monetary Loss 309 563 476 922

Integral Financing Cost -379 -320 -426 -675

Other (Income) Expenses -Net- -368 -280 -266 -287

Profit before Taxes and Legal Profit Sharing 8,601 8,566 7,466 7,067

Income Tax and Assets Tax Incurred 2,891 2,778 2,394 1,821

Deferred Income Tax 8 193 -84 407

Legal Profit Sharing 689 690 582 588

Profit after Taxes and Legal Profit Sharing 5,014 4,895 4,573 4,251

Equity in Income of Associates and

non - consolidated Subsidiaries -1 -4 -1 -1

Profit before Minority Interest 5,013 4,891 4,572 4,250

Minority Interest -1,390 -1,486 -1,403 -1,349

Extraordinary Items 0 0 99 94

NET MAJORITY INCOME 3,623 3,405 3,268 2,995

PER SHARE DATA

Net Income per Share after Extraordinary Items 1.11 1.05 1.01 0.92

Cash Dividends Paid:

Total Common Stock Dividend 401 763 54 1,637

Per Share 0.12 0.23 0.02 0.50

Total Preferred Stock Dividend 0 0 0 0

Per Share 0.00 0.00 0.00 0.00

Number of Outstanding Shares (Millions)

Common Shares 3,252 3,252 3,252 3,252

Preferred Shares 0 0 0 0

Notes :1 During 1993, an extraordinary dividend of $1,825 was paid, according to the Investment Agreement with Anheuser-Busch.

This amount is included in the $1,907.

2 The number of outstanding shares was adjusted to reflect the two stock splits registered in August, 1995 and October, 1998, both of 4 for 1.

3 On December 31, 1996, PC shares were converted to B shares class II.

4 In December, 1998, an extraordinary dividend of $1,277 was paid.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 26

Global Reports LLC


1997 1996 1995 1994 1993 1992

24.96 23.66 22.22 23.14 21.66 20.31

4.99 3.72 2.89 2.08 1.7 1.63

29.95 27.38 25.11 25.22 23.36 21.94

23,526 20,639 21,635 21,624 19,270 17,989

11,617 10,233 10,832 9,316 8,699 8,717

11,909 10,406 10,803 12,308 10,571 9,273

6,590 6,131 6,624 8,130 7,577 7,047

5,318 4,275 4,179 4,178 2,994 2,226

-991 -1,477 -2,742 -1,052 -549 -542

707 1,010 2,168 380 204 269

-284 -468 -574 -672 -345 -273

-365 -350 -309 -270 -129 -466

5,968 5,093 5,062 5,120 3,468 2,964

1,148 859 1,676 1,714 1,156 889

670 669 -11 -4 109 77

561 511 592 524 370 275

3,590 3,054 2,805 2,885 1,833 1,723

-1 -2 -1 -35 -7 -1

3,589 3,052 2,804 2,850 1,826 1,722

-1,128 -909 -931 -868 -551 -539

84 47 0 50 0 0

2,544 2.190 1,873 2,033 1,275 1,183

0.78 0.67 0.58 0.63 0.42 0.44

308 252 252 187 1,907 81

0.11 0.09 0.09 0.06 0.70 0.03

176 213 235 83 0 -

0.54 0.65 0.72 0.26 0.00 -

3,252 3,252 2,927 2,927 2,715 2,715

0 0 325 325 325 0.0

m080_Nar Eng.r1 5/22/02 9:36 PM Page 27

Global Reports LLC


Financial Summary - Balance Sheet and Additional Information


Figures in millions of constant Mexican pesos as of December 31, 2001 except per share data.

Consolidated Balance Sheet Information

2001 2000 1999 1998

Working Capital (DEFICIT) 12,600 10,561 10,319 8,823

Current Ratio 4.9 4.5 5.0 5.1

Property, Plant and Equipment -Net- 32,871 30,698 28,679 26,855

Total Debt to Total Assets (%) 20.3% 22.0% 9.1% 9.3%

Deferred Income Taxes 6,784 6,669 1,287 1,540

Long Term Debt 0 0 0 0

Majority Stockholders’ Equity 30,804 27,631 29,920 27,066

Return on Equity 11.8% 12.3% 10.9% 11.1%

Book Value per Share 9.47 8.50 9.20 8.32

Total Assets 51,778 47,296 44,622 44,599

Additional Information

Capital Expenditures and Equity Investments 3,819 4,495 3,153 4,531

Depreciation and Amortization 1,642 1,495 1,426 1,336

EBITDA 9,272 9,152 7,885 7,164

Effective Tax Rate 41.7% 42.8% 38.7% 39.8%

Profit before Income Tax to Net Sales (%) 26.7% 27.9% 26.7% 26.8%

Price to Earnings per Share 18.4 25.3 29.3 29.1

Market Price per Share (HIGH/LOW) 26.70/18.75 27.15/18.60 27.65/18.60 24.60/14.75

Notes: 1 Grupo Modelo, S.A. de C.V.'s shares began trading in the Mexican Stock Exchange in February, 1994.

2 The number of outstanding shares was adjusted as a result of the two stock splits registered in August, 1995 and October, 1998, both of 4 for 1.

3 The capital expenditures include the equity investments of $719 in 2001 and $931 in 2000.

2001 Total Assets’ Breakdown (Total Assets=100%)

3.4%

8.7%

1.7%

16.0%

63.5%

6.7% Cash & MarketableSecurities

Accounts Receivable

Inventories

Fixed Assets (Net)

Investment in Associates

Others

Total Assets: 51,778.0 millions ofconstant Mexican pesos as ofDecember 31, 2001.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 28

Global Reports LLC


1997 1996 1995 1994 1993 1992

10,244 8,678 7,794 10,219 6,908 6.291

5.6 5.3 4.4 5.0 4.0 3.8

23,594 21,992 22,293 20,884 18,532 17,249

9.9% 8.1% 7.1% 8.3% 8.9% 8.3%

1,361 730 98 165 169 77

0 0 0 0 0 0

25,936 24,208 24,263 24,883 19,727 17,793

9.8% 9.0% 7.7% 8.2% 6.5% 6.7%

7.98 7.44 7.46 7.65 6.49 6.55

38,805 35,367 35,563 36,505 30,047 27,562

2,886 3,003 3,895 2,472 1,833 2,356

1,271 1,092 1,072 911 858 1,362

6,320 5,095 4,929 5,166 3,772 3,453

39.9% 40.0% 44.6% 43.7% 47.1% 41.9%

25.4% 24.7% 23.4% 23.7% 18.0% 16.5%

32.8 29.7 35.5 31.6 - -

19.00/10.77 12.00/7.74 9.33/4.35 5.82/3.64 - -

2001 Total Liabilities’ Breakdown (Total Liabilities=100%)

7.7%

14.7%1.3%

69.6%

6.7% Accrued Taxes

Difered Taxes

Accounts Payable

Accrued Salaries &Wages

Others

Total Liabilities: 10,525.2 millionsof constant Mexican pesos as ofDecember 31, 2001. Total Liabilitiesrepresented 20.3% of Total Assets.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 29

Global Reports LLC


Management’s Discussion and Analysis 2001

The following analysis shall be read together with the consolidated financial statements of

Grupo Modelo S.A. de C.V. and its subsidiaries, together with their respective notes.

The Group’s financial statements have been prepared according to Mexican Generally

Accepted Accounting Principles.

The figures of the financial statements and their notes, as well as the following analysis are

in constant Mexican Pesos as of December 31, 2001.

SalesTotal shipments of beer during 2001 grew 5.1%, to 38.4 million hectoliters. The growth was

the result of a 1.5% increase in the domestic market, and 16.9% in exports, that represent-

ed 26.0% of the total volume, while in 2000, it was 23.4%.

Beer shipments(million hectoliters) 2001 2000 Increase

Domestic 28.452 28.025 1.5%Export 9.994 8.549 16.9%Total 38.446 36.574 5.1%

Regional brands had an outstanding performance during the year, especially the Yucatan

and the Pacífico brands. It is important to highlight that Pacifico had great acceptance in

its new can presentation, launched in February.

Domestic Brand Portfolio

16.6%

58.3%

11.9%

8.2%

3.4%1.1% 0.5%

Corona

Modelo Especial

Victoria

Pacífico

Estrella

Negra Modelo

Yucatecas

Net SalesThe net sales for 2001 were 32,169 million pesos, a 5.1% increase compared to last year.

Net Sales 2001 2000 Increase

Domestic 21,969 21,194 3.7%Export 7,509 6,935 8.3%Other Income 2,690 2,491 8.0%Total 32,169 30,620 5.1%

Beer SalesThe growth in domestic sales reflects the price increase implemented in March and April 2001. In the previous year,

prices were adjusted in January. On the other hand, export revenues in 2001 reflect the strong Peso and its stability

relative to the dollar.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 30

Global Reports LLC


Other Normal Incomes to the ActivityThe total of other normal income grew to 2,690 million pesos, 8.0% above last year. This amount includes income

not directly generated from beer sales, such as royalties, soft drinks, wine, liquor and food sales in the convenience

stores, income from sports teams, and sales of byproducts. Also are included the sales of Anheuser-Busch products,

which are imported and distributed in Mexico by Grupo Modelo.

Cost of Goods SoldFor 2001, COGS rose to 14,611 million pesos, which represents a 7.0% increase relative to last year, reflecting the

strong growth in exports that went from representing 23.4% of total volume in 2000, to 26.0% in 2001. This

segment has an important weight on cost of sales since glass bottles are non-returnable.

Gross ProfitGross profit rose to 17,558 million pesos, 3.5% above 2000. This represents 54.6% of the net sales, a 90 base points

drop from last year.

Operating ExpensesThe operating expenses during 2001 amounted to 9,705 million pesos, 7.8% higher than the 9,004 million pesos in

2000. This increase was used to reinforce the brand image of all Modelo products, specifically through advertising

campaigns that allowed the growth in the domestic shipments.

Operating ProfitThe operating profits reached 7,854 million pesos, a 1.3% reduction as compared to 2000. The operating margin

went down 1.6 percentage points, falling to 24.4%.

The Company expects to improve its profitability in the near future by sustaining a cost control program.

Depreciation and AmortizationFor the period, the depreciation and amortization charges totaled 1,642 million pesos, a 9.8% increase versus 2000.

In spite of investments to expand capacity, depreciation has remained relatively stable as a percentage of sales. It’s

important to note that fixed assets investments have been strategically planned, and linked to market growth, to avoid

situations of unutilized capacity.

Integral Cost of FinancingFor the year 2001, the integral cost of financing (favorable for Grupo Modelo) shows an 18.7% increase, or 379

million pesos. This means that the real interest rate was higher in 2001 than in 2000, although inflation and nominal

interest rates for the current year were lower than last year.

TaxesThe effective tax rate in effect for the year went down to 41.7%, from 42.8% during 2000.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 31

Global Reports LLC


Management’s Discussion and Analysis 2001

Net IncomeAs of December 31, 2001, net income climbed to 3,623 million pesos, a 6.4% increase as compared to last year, when

it reached 3,405 million pesos. This was favored by the recent investments made by the Company and for the growth

in the integral cost of financing.

Financial SituationAt year-end 2001, current assets were 15,799 million pesos, of which cash and marketable securities totaled 8,303

million pesos, which are invested in fixed rate bonds. Also, inventories represented 28.5% of current assets, reaching

4,508 million pesos.

Grupo Modelo continued with its investment strategy during 2001. Capital expenditures were 3,100 million pesos,

allocated as follows:

Investments 2001 Integration

Trópico 1,035 33.4%

Zacatecas 713 23.0%

Breweries and other factories 781 25.2%

Sales 571 18.4%

Total 3,100 100.0%

In 2001, short-term liabilities represented 6.2% of total assets. The Company continues with its policy of having no

debt, and total liabilities were 20.3%, also from the total assets, with a slight reduction when compared to 22.0% in

2000. As in last year, long term liabilities are mainly comprised by deferred taxes, which totaled 6,784 million pesos.

DividendsAs of December 31, 1998, a proposal was made to shareholders to pay a total cash dividend equal to the greater of

(i) 15% of the consolidated net income of the period ending on December 31, 1992, which totaled 45 million pesos,

or (ii) an amount equal to the "free cash flow" of the last immediate period. For the foregoing effects, "free cash

flow" shall mean the total majority net income of Grupo Modelo, S.A. de C.V., plus depreciation and amortization;

plus / minus changes in working capital, less capital expenditures, less payment of principal in case of debt.

A dividend payment of 401 million pesos was paid during 2001. These funds were from the Net Reinvested Tax Income

Account, for an amount of 0.12 pesos per share. This dividend was paid in exchange for coupon 9 of the shares titles.

m080_Nar Eng.r1 5/22/02 9:36 PM Page 32

Global Reports LLC

Grupo Modelo 33 Annual Report 2001

Mexico City, February 15, 2002

To the Stockholders ofGrupo Modelo, S. A. de C. V.:

We have audited the consolidated balance sheets of Grupo Modelo, S. A. de C. V. and Subsidiaries, asof December 31, 2001 and 2000, and the related consolidated statements of income, changes instockholders’ equity and changes in financial position, in Mexican pesos, for the years then ended. Theseconsolidated financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in Mexico. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement, and that they are prepared in accordance withgenerally accepted accounting principles in Mexico. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all materialrespects, the consolidated financial position of Grupo Modelo, S. A. de C. V. and Subsidiaries, as ofDecember 31, 2001 and 2000, and the consolidated results of their operations, changes in theirstockholders’ equity and changes in their financial position, stated in Mexican pesos, for the years thenended, in conformity with generally accepted accounting principles in Mexico.

PricewaterhouseCoopers

Rafael Maya Urosa, P.A.

Report of Independent Accountants

m080_FIN_ENG 5/22/02 9:30 PM Page 33

Global Reports LLC


ASSETS CURRENT:Cash and marketable securities $ 8,302,552 $ 6,394,470Accounts and notes receivable (Note 3) 1,039,778 1,055,811Inventories (Note 4) 4,507,773 4,524,606Prepaid expenses and other current items 1,949,152 1,561,019Total current assets 15,799,255 13,535,906LONG-TERM ACCOUNTS AND NOTES RECEIVABLE (Note 3) 147,258 153,498INVESTMENT IN SHARES OF ASSOCIATES AND NON-CONSOLIDATED SUBSIDIARIES (Note 5) 1,766,513 2,099,647PROPERTY, PLANT AND EQUIPMENT (Note 6) 47,950,820 44,088,353Accumulated depreciation (15,079,787) (13,390,728)

32,871,033 30,697,625OTHERS ASSETS:Unamortized expenses and goodwill, net 1,000,715 639,901Labor obligations upon retirement (Note 7) 193,227 168,911

1,193,942 808,812

Total assets $ 51,778,001 $ 47,295,488

LIABILITIESSHORT-TERM:Suppliers $ 805,324 $ 682,690Employees’ profit sharing 675,801 659,333Sundry creditors and accrued liabilities 605,511 656,434Excise tax on production and services payable 601,103 576,384Income tax payable 511,190 400,390Total short-term liabilities 3,198,929 2,975,231

DEFERRED TAX (Note 10 g.) 6,784,425 6,668,794CONTINGENCIES AND COMMITMENTS (Note 7):Labor obligations upon retirement 541,895 749,224Total liabilities 10,525,249 10,393,249

STOCKHOLDERS’ EQUITYCOMMON STOCK (Note 8) 12,697,956 12,697,956PREMIUM ON SHARE SUBCRIPTION 845,656 845,656ACCUMULATED INCOME (Notes 8 and 10):Legal reserve 990,427 822,660Reserve for acquisition of own shares 534,145 534,145Retained earnings 17,264,993 14,429,269Profit for the year, according to the statement of income 3,622,783 3,404,953

22,412,348 19,191,027INITIAL EFFECT OF DEFERRED TAX (4,243,280) (4,243,280)ADJUSTMENT TO CAPITAL FOR LABOR OBLIGATIONS UPON RETIREMENT (Note 7) (515,723) (551,494)INSUFICIENCY IN RESTATEMENT OF STOCKHOLDERS’ EQUITY (392,523) (309,298)Total majority interest 30,804,434 27,630,567

MINORITY INTEREST:Anheuser-Busch Companies, Inc. 9,019,191 7,947,422Other investors 1,429,127 1,324,250Total minority interest 10,448,318 9,271,672Total stockholders’ equity 41,252,752 36,902,239

Total liabilities and stockholders’ equity $ 51,778,001 $ 47,295,488

Consolidated Balance Sheets


As of December 31, 2001 and 2000 (Notes 1, 2 and 13)(Amounts in thousands of constant Mexican pesos as of December 31, 2001)

2001 2000

The following notes are part of these consolidated statements.

m080_FIN_ENG 5/22/02 9:30 PM Page 34

Global Reports LLC


NET SALES FROM MAIN ACTIVITY $ 29,478,298 $ 28,129,302OTHER INCOME 2,690,284 2,491,101

32,168,582 30,620,403COST OF SALES 14,610,521 13,660,383

Gross profit 17,558,061 16,960,020

OPERATING EXPENSES:Sales and distribution 7,181,676 6,801,945Administrative 2,503,401 2,201,862Goodwill amortization 19,438

9,704,515 9,003,807Operating profit 7,853,546 7,956,213

OTHER INCOME, Net 368,127 280,020

INTEGRAL RESULT FROM FINANCING:Interest earned and paid, net 712,009 895,650Loss from monetary position (308,621) (563,237)Foreign exchange loss, net (23,894) (12,686)

379,494 319,727Profit before provisions 8,601,167 8,555,960

PROVISIONS FOR:Income tax (Note 10) 2,898,465 2,970,398Employees’ profit sharing 688,506 690,200

3,586,971 3,660,598

Profit before income of associates and non-consolidated subsidiaries 5,014,196 4,895,362

INCOME FROM ASSOCIATES AND NON-CONSOLIDATEDSUBSIDIARIES (Note 5) (1,035) (4,075)

CONSOLIDATED NET PROFIT FOR THE YEAR $ 5,013,161 $ 4,891,287

MAJORITY INTEREST $ 3,622,783 $ 3,404,953

MINORITY INTEREST:Anheuser-Busch Companies, Inc. $ 1,086,408 $ 997,868Other investors 303,970 488,466MINORITY INTEREST $ 1,390,378 $ 1,486,334

EARNINGS PER SHARE (Amounts in Mexican pesos, attributable to majority interest) $ 1.1141 $ 1.0471

Consolidated Income StatementsFor the years ended December 31, 2001 and 2000 (Notes 1, 2 and 13)(Amounts in thousands of constant Mexican pesos as of December 31, 2001)

2001 2000


m080_FIN_ENG 5/22/02 9:30 PM Page 35

Global Reports LLC


Balances at January 1, 2000, with amounts restated at Mexican pesos of December 31, 2000 purchasing power $ 12,162,386 $ 809,988 $ 636,570

Adjustment to equity from recognition of initial effect of Statement D-4,relative to Deferred Tax.

Appropriation of the profit for the year 1999, approved in the General Ordinary Stockholders´ Meeting held on April 24, 2000,

as follows:

To retained earningsTo legal reserve 143,659Dividend payment at the rate of twenty one thousand three hundred thirty

three hundredths of Mexican peso per share in circulation

Minority interest reduction arising from sale of shares and payment of dividends.

Application of restatement of prior year’s profit and cancellationof restatement on dividends paid 7,733

Comprehensive income (Note 9)

Balances at December 31, 2000, restated 12,162,386 809,988 787,962

Effects of restatement for the year 535,570 35,668 34,698

Balances at December 31, 2000, with amounts restated at Mexicanpesos of December 31, 2001 purchasing power 12,697,956 845,656 822,660

Appropriation of the profit for the year 2000, approved in the General Ordinary Stockholders´ Meeting held on April 23 2001, as follows:

To retained earningsTo legal reserve 163,067Dividend payment at the rate of twelve cents of Mexican

peso per share in circulation Reduction of minority interest from sale of shares

Application of restatement of prior year’s profit and cancellation ofrestatement on dividends paid 4,700

Comprehensive income (Note 9)

Balances at December 31, 2001, restated $ 12,697,956 $ 845,656 $ 990,427

Consolidated Statements of Changes in Stockholders’ Equity


For the years ended December 31, 2001 and 2000 (Note 1, 2 and 13)(Amounts in thousands of constant Mexican pesos as of December 31, 2001, except dividends per share amount)

Commonstock

Premium onshare

subscriptionLegal

reserve


m080_FIN_ENG 5/22/02 9:30 PM Page 36

Global Reports LLC


$ 511,616 $ 11,572,510 $ 3,130,598 $ (93,352) $ (72,424) $ 10,176,053 $ 38,833,945

$ (4,064,308) (1,389,952) (5,454,260)

2,729,522 (2,729,522)(143,659)

(693,698) (693,698)

(1,015,146) (1,015,146)

212,341 (257,417) (37,343)

3,261,340 (434,881) (223,828) 1,109,659 3,712,290

511,616 13,820,675 3,261,340 (4,064,308) (528,233) (296,252) 8,880,614 35,345,788

22,529 608,594 143,613 (178,972) (23,261) (13,046) 391,058 1,556,451

534,145 14,429,269 3,404,953 (4,243,280) (551,494) (309,298) 9,271,672 36,902,239

3,098,273 (3,098,273)(163,067)

(390,211) (390,211)(206,865) (206,865)

127,662 (143,613) (11,251)

3,622,783 35,771 (83,225) 1,383,511 4,958,840

$ 534,145 $ 17,264,993 $ 3,622,783 $ (4,243,280) $ (515,723) $ (392,523) $ 10,448,318 $ 41,252,752

Reserve foracquisition of own

sharesRetainedEarnings For the year

Initialeffect of

deferred tax

Adjustement to capital for

laborobligations

upon retirement

Insufficiencyin

restatement ofstockholders’

equityMinorityinterest Total

Accumulated income

m080_FIN_ENG 5/22/02 9:30 PM Page 37

Global Reports LLC


OPERATING ACTIVITIES:Consolidated net income for the year $ 5,013,161 $ 4,891,287

ITEMS APPLIED TO INCOME NOT REQUIRING THE USE OF CASH:Depreciation and amortization for the year 1,641,838 1,494,836Increase in deferred tax 7,572 77,923Cost surplus on acquisition of shares 13,674Equity in income of associates and non-consolidated subsidiaries, net of dividends

received and initial effect of Statement D-4 (94,020) 149,521

6,568,551 6,627,241FUNDS PROVIDED BY (USED IN):Decrease in accounts and notes receivable 279,120 238,171Increase in excise tax on production and services payable 83,622 43,539Decrease (increase) in inventories 19,767 (571,242)Increase in employees’ profit sharing 11,795 113,666Increase in prepaid expenses and other current items (387,300) (36,282)(Decrease) increase in trade accounts payable, sundry creditors and accrued liabilities (216,740) 211,485

Funds provided by operations 6,358,815 6,626,578

FINANCING ACTIVITIES:Dividend payment (includes $37,343 of restatement effects; $38,987 in 2000) (401,459) (763,232)Dividend payment to minority stockholders (129,831) (111,788)Labor obligations upon retirement, net (173,670) (92,235)Acquisition of minority interest shares (77,033) (948,060)Decrease in notes payable in real terms (36,532)Net effect in liability and stockholders’ equity as per the application of the Statement D-4 (330,729)

(818,525) (2,246,044)INVESTING ACTIVITIES:Decrease (increase) in shares of associates and non-consolidated subsidiaries, net 31,209 (16,270)Decrease (increase) in unamortized expenses and goodwill 24,135 (21,023)Acquisition of property, plant an equipment, net (3,100,225) (3,564,130)Acquisition of shares of new subsidiaries incorporated to the consolidation (710,683)Increase in other assets (75,981) (211,611)

(3,831,545) (3,813,034)

Increase in cash and marketable securities 1,708,745 567,500

Balance at beginning of year 6,394,470 5,826,970Cash and marketable securities of subsidiaries incorporated to the consolidation 199,337

Balance at end of year $ 8,302,552 $ 6,394,470

2001 2000

Consolidated Statements of Changes in Financial Position


For the years ended December 31, 2001 and 2000 (Note 1, 2 and 13)(Amounts in thousands of constant Mexican pesos as of December 31, 2001)

The following notes are part of these consolidated statements

m080_FIN_ENG 5/22/02 9:30 PM Page 38

Global Reports LLC


Notes to the Consolidated Financial StatementsAs of December 31, 2001 and 2000(Amounts in thousands of constant Mexican pesos as of December 31, 2001)

1. Incorporation and business purpose

a) The Group is mainly engaged in the production and sale of beer, which began in 1925.

b) The main activity of the holding group is holding 76.75% of the capital stock of Diblo S.A. de C.V., whose

business purpose is holding the real estate and the investment in shares of subsidiaries involved in the production,

distribution and sale of beer in Mexico and abroad. The most important companies, on the basis of their

operations and stockholders’ equity, are as follows:

Brewers:Cervecería Modelo, S. A. de C. V. 100Compañía Cervecera de Zacatecas, S. A. de C. V. 100Compañía Cervecera del Trópico, S. A. de C. V. 100Cervecería Modelo de Guadalajara, S. A. de C. V. 100Cervecería Modelo de Torreón, S. A. de C. V. 100Cervecería Modelo del Noroeste, S. A. de C. V. 100Cervecería del Pacífico, S. A. de C. V. 100Cervecería Yucateca, S. A. de C. V. 100

Transformation of barley to malt:Cebadas y Maltas, S. A. de C. V. 100

Machinery manufacturers:Inamex de Cerveza y Malta, S. A. de C. V. 100

Manufacturer of beer cans and crowns: Promotora de Servicios de Zacatecas, S. A. de C. V. 100

Agencies distributing beer and other products:La Modelo en Monterrey, S. A. de C. V. 100Distribuidora Pacífico y Modelo de la Paz, S. A. de C. V. 100Comercial Nueva Laguna, S. A. de C. V. 100Impulsora Mercantil de San Pablo, S. A. de C. V. 100Expansión Comercial de Zumpango, S. A. de C. V. 100Las Cervezas de México en Puebla, S. A. de C. V. 100Distribuidora Pacífico y Modelo de Mazatlán, S. A. de C. V. 100La Corona de los Reyes, S. A. de C. V. 100Cerveza Corona de Zacatecas, S. A. de C. V. 100Impulsora Mercantil de la Costa, S. A. de C. V. 70La Cerveza Corona del Centro, S. A. de C. V. 62Distribuidora Modelo de Toluca, S. A. de C. V. 60

Company controlling distributors of beer and other products abroad:Procermex, Inc. (1) 100

Real-estate companies engaged in distribution of beer and other products:Inmobiliaria de Tampico, S. A. de C. V. 100Promotora del Sureste, S. A. de C. V. 100Inmobiliaria Bajacal, S. A. de C. V. 100Impulsora del Nazas, S. A. de C. V. 100Impulsora Tapatía, S. A. de C. V. 100Impulsora de la Periferia, S. A. de C. V. 100Metropolitana de Bienes Raíces, S. A. de C. V. 100Administración y Promoción de Inmuebles, S. A. de C. V. 100Impulsora Potosina, S. A. de C. V. 100Promotora e Impulsora Acapulqueña, S. A. de C. V. 80

(1) On December 31, 2000, the shareholding was 60%. In July 2001, the Group acquired the remaining 40%, whichgave rise to goodwill of $35,984 that will be amortized over a period of five years.

Percentage of shareholding

m080_FIN_ENG 5/22/02 9:30 PM Page 39

Global Reports LLC


Notes to the Consolidated Financial Statements


2. Accounting policies

The main accounting policies applied by the group in the preparation of its consolidated financial statements are

in line with generally accepted accounting principles. These accounting principles require that Group management

make estimations based on circumstances and apply certain assumptions in determining the valuation of some

items included in the consolidated financial statements. Although these could differ from actual effects, Group

management considers that the estimations and assumptions used at the date of issuance of the consolidated

financial statements are reasonable. The main policies are summarized as follows:

a) Consolidation - The Group prepares consolidated financial statements, which include the financial situation and

the results of the companies in which Diblo S.A. de C.V. has control and direct or indirect participation of more

than 50% of the capital stock; significant intercompany operations have been eliminated in consolidation.

b) Bases for preparation - The financial statements of the holding company and its subsidiaries include the effects

of inflation on the financial information, as required by Statement B-10 and the amendments thereto, issued by

the Mexican Institute of Public Accountants (MIPA).

c) Comparability - The figures in the consolidated financial statements and the notes thereto are stated uniformly

in pesos of December 31, 2001 purchasing power by applying factors derived from the National Consumer Price

Index (NCPI).

d) Conversion of the financial information of subsidiaries located abroad - The conversion to Mexican pesos

of the financial information of subsidiaries located abroad, which is the basis for consolidation, was carried out in

accordance with the provisions of Statement B-15, “Transactions in Foreign Currency and Conversion of the

Financial Statements of Foreign Operations”, issued by the MIPA, following the method of integrated foreign

operations. In converting monetary items, the free purchase exchange rate of $9.11 ($9.52 in 2000) per US dollar

was used. Nonmonetary items and the statement of income were converted to domestic currency at the rate of

exchange in effect at the date on which the underlying operations were carried out. The effects of this conversion

are shown in the integral result from financing.

e) Marketable securities - These are recorded at acquisition cost, which is similar to market value.

f) Inventories - These are valued by the last-in, first-out method, and are restated using the manufacturing or

replacement cost method. Said restatement does not exceed market value.

g) Cost of sales - Restatement is based on the restated value of inventory.

h) Investment in shares of associate and non-consolidated subsidiaries - Permanent investments in shares are

recorded at acquisition cost, and valued applying the equity method.

m080_FIN_ENG 5/22/02 9:30 PM Page 40

Global Reports LLC


i) Property, plant and equipment - These are recorded at acquisition cost, and restated by applying NCPI based

factors to the net replacement value, determined by independent experts, up to December 31, 1996, and based

on the date of acquisition, in the case of purchases made after that date.

j) Construction in progress and prepayments to suppliers - These are recorded at the value of the disbursements,

and are restated by applying NCPI based factors according to the date of payment.

k) Depreciation - This item was calculated on the restated value of property, plant and equipment, based on the

probable useful lives determined by independent appraisers. As from the 1997 acquisitions, the useful lives are

determined by the Group’s technical department.

l) Unamortized expenses and goodwill - These items are recorded at acquisition cost and restated by applying

NCPI based factors according to the date of the disbursements. Licences and permits are recorded at acquisition

value, which, at the date of the financial statements, is similar to market value.

m) Amortization - Acquisition cost and restatement of installation and organization expenses are amortized by the

straight-line method on the ending balance for each period. The rate used for accounting purposes is 10%;

goodwill is amortized over the period in which the Group considers that the investment will be recovered.

n) Foreign currency - Assets and liabilities representing rights and obligations receivable or payable in foreign

currency are converted to domestic currency at the rate of exchange in effect on the dates in which the respective

operations are entered into (see Note 12). Balances at the end of the period are valued at the exchange rate in

effect at the end of the period, and resulting differences are recorded directly in the income statement for that

period, and form part of the integral result from financing.

o) Labor obligations upon retirement - Labor obligations for projected benefits, as well as unamortized items and

the net cost for the period of seniority premiums and the employee pension plan are determined by independent

actuaries using the unit cost method. They are recorded as per the guidelines of Statement D-3, “Labor

Obligations”, issued by the MIPA. Contributions to the trusts handling plan assets are determined on the same

bases as in prior years, and correspond to pension plans approved by tax authorities.

p) Severance pay - These payments are charged to the income statement for the year in which they are made.

q) Deferred income tax and employees’ statutory profit sharing - In recognizing deferred income tax, the

holding company and its subsidiaries use the comprehensive method of assets and liabilities, which consists of

determining said tax by applying the income tax rate corresponding to temporary differences between the book

and tax value of assets and liabilities at the date of the financial statements. The accrued effect of this accounting

change as from the date on which it went into effect, which was January 1, 2000 gave rise to $4,243,280 of net

increase in the deferred tax liability, and a reduction in stockholders’ equity of the same amount.


m080_FIN_ENG 5/22/02 9:30 PM Page 41

Global Reports LLC




r) Restatement of stockholders’ equity - Stockholders’ equity was restated by applying NCPI based factors,

according to the date of contribution. The effects of that restatement are shown in the consolidated financial

statements in each of the underlying accounts.

s) Insufficiency in the restatement of stockholders’ equity - The balance of this account is represented by the

algebraic sum of the items “Result from holding non-monetary assets” and “Accumulated equity monetary

result” which are described below:

Results from holding nonmonetary assets - Represents the change in value of nonmonetary assets for reasons

other than inflation. It is determined only when applying the specific costs method, since these costs are compared

to restatements determined by applying NCPI based factors. If specific costs exceed indexes, there will be a gain

from said holding; otherwise, there will be a loss. The result from holding nonmonetary assets arising up to 1996

from restating fixed assets is available to the stockholders, and like other stockholders’ equity accounts, was

restated by applying NCPI based factors.

Accumulated equity monetary result - This is the result arising from the initial restatement of financial

statement amounts.

t) Result from monetary position - This represents the effect of inflation on monetary assets and liabilities, even

when they continue to have the same nominal value. When monetary assets exceed monetary liabilities, there is

a loss on monetary position, because when these assets are used, an amount equal to nominal value is available,

but with lower purchasing power. When liabilities are higher, there is a gain, since they are covered with money

of lower purchasing power. Said effects are charged or credited to the income statement, as part of the integral

result from financing.

u) Comprehensive Income - As of January 1, 2001, Statement B-4 “Comprehensive Income”, entered into effect.

This statement requires that the various items making up the stockholders’ equity gains during the year be shown

in the statement of stockholders’ equity under the item of comprehensive income.

v) Earnings per share - Earnings per share attributable to majority interest were calculated considering the average

ordinary current shares.

m080_FIN_ENG 5/22/02 9:30 PM Page 42

Global Reports LLC



3. Accounts and notes receivable

The balance of this account is as follows:

Customers $ 1,043,195 $ 967,945Sundry debtors 67,627 76,817Sales agents 43,344 39,952

1,154,166 1,081,714Less- Allowance for doubtful accounts (171,155) (156,701)

938,011 925,013Value added tax credited and withheld 22,854 83,568Non-consolidated related companies (see Note 11) 165,688 187,065Officers and employees 15,483 13,663

1,187,036 1,209,309Less - short-term accounts and notes receivable (1,039,778) (1,055,811)

Long- term accounts and notes receivable $ 147,258 $ 153,498

4. Inventories

The balance of this account is as follows:

Finished products and production in process $ 1,035,769 $ 973,312Raw materials 930,851 898,531Containers and packaging 1,730,064 1,854,827Spare parts 529,828 483,327Advertising items 246,349 268,462Merchandise in transit 71,312 67,436

4,544,173 4,545,895Less- Allowance for slow-moving inventories (36,400) (21,289)

$ 4,507,773 $ 4,524,606

Item 2001 2000

Item 2001 2000

m080_FIN_ENG 5/22/02 9:30 PM Page 43

Global Reports LLC




5. Investment in shares of associates and non-consolidated subsidiaries

a) The balance of this account is as follows:

Dirección de Fábricas, S. A. de C. V. (holding company of glass container

manufacturing companies) 41 $ 1,685,814 $ 1,590,725Extractos y Maltas, S. A. de C. V. 26 96,237 97,395Seeger Industrial, S. A. 81 9,490 10,184Fábrica Nacional de Malta, S. A. de C. V. 100 7,609 8,756Envatap, S. A. de C. V. 206,376Promotora de Servicios de Zacatecas, S. A. de C. V. 91,246Envases de Zacatecas, S.A de C.V. 39,169Tapas Metálicas, S. A. de C. V. 37,442Arrendadora y Promotora Deportiva

de Toluca, S. A. de C. V. 30,376Tapas y Tapones de Zacatecas, S. A. de C. V. 9,189

1,799,150 2,120,858Others 24,164 20,343

1,823,314 2,141,201Less - estimation for decrease in book value (56,801) (41,554)

$ 1,766,513 $ 2,099,647

2001 2000Percentage of shares forming

the capital stockCompanies

b) The consolidated financial statements do not include the statements of financial position of Seeger Industrial S.A.,

since the accounting policies followed by this subsidiary differ from those of the other companies comprising the

Group. Investment in this subsidiary is less than 0.01% of consolidated assets in both periods. Changes in

accounting policies and the respective adjustments are expected to be made in future years.

c) Up to March 2001 Tapas y Tapones de Zacatecas, S. A. de C. V., Envases de Zacatecas, S. A. de C. V., Promotora

de Servicios de Zacatecas, S. A. de C. V., Tapas Metálicas, S. A. de C. V. and Envatap, S. A. de C. V are considered

to be associated companies, and in April 2001, the remaining 50% of the shares of said companies was acquired.

Therefore, as of that date, they are included in the consolidation process, giving rise to goodwill of $317,757,

which will be amortized over a period of 15 years.

d) Investment in shares of associates and non-consolidated subsidiaries includes participation in the profits of those

entities, amounting to $222,634 ($294,507 in 2000). As of 2000, participation in the profits of associated

companies manufacturing items necessary for the production of beer have been shown reducing the cost of sales.

m080_FIN_ENG 5/22/02 9:30 PM Page 44

Global Reports LLC



6. Property, plant and equipment - net

a) The balance of this account is made up as follows:

Land $ 892,091 $ 2,499,572 $ 3,391,663 $ 3,266,140Machinery and equipment 6,749,402 6,364,784 13,114,186 10,839,646Transportation equipment 1,557,360 801,091 2,358,451 2,353,068Buildings and other constructions 3,084,826 5,156,661 8,241,487 7,593,067Computer equipment 188,961 24,141 213,102 197,137Furniture and other equipment 127,513 72,068 199,581 935,245Antipollution equipment 311,205 273,071 584,276 251,750Construction in progress and

prepayments to suppliers 4,339,098 429,189 4,768,287 5,261,572

$ 17,250,456 $ 15,620,577 $ 32,871,033 $ 30,697,625

Depreciation for the period amounted to $1,587,374 ($1,469,827 in 2000).

2001 2000

Net historicalcost

Net restatement

Net totalvalue

Net totalvalue

b) Group management estimates that the completion of construction in progress and prepayments to suppliers will

require an additional investment, as shown below:

Extension to the production capacity of the following plants:- Compañía Cervecera del Trópico, S.A. de C.V. $ 2,819,851 $ 3,717,773- Compañía Cervecera de Zacatecas, S.A. de C.V. 246,175 1,341,532

Construction of warehouses, offices and acquisition andinstallation of new production lines at the plants. 404,453 559,702

$ 3,470,479 $ 5,619,007

The main part of the production line expansion for the fourth stage of Cía. Cervecera de Zacatecas will be

concluded in 2003, and Cía. Cervecera del Trópico is expected to be concluded in 2005.

Additional Investment

Description 2001 2000

Item

m080_FIN_ENG 5/22/02 9:30 PM Page 45

Global Reports LLC


7. Contingencies and commitments

a) The Group has a pension and seniority premium plan to cover obligations contained in labor contracts and in the

Federal Labor Law. These compensations are only available after employees have been with the company for a

certain number of years.

- At the date of the consolidated financial statements, accrued liabilities for labor obligations upon retirement

are composed as follows:



Current benefit obligations $ 2,738,687 $ 2,679,411Additional amount for projected benefits 278,891 296,750

Projected benefit obligations 3,017,578 2,976,161Plan assets (trust fund) (2,212,062) (1,943,394)

805,516 1,032,767Items to be amortized over a period of 18 to 24 years:For adjustments to variations (1,134,026) (1,120,706)For past services (34,246) (99,926)

Projected net assets (362,756) (187,865)Additional liability comprising:Intangible assets 193,227 168,911Adjustment to capital 711,424 768,178

Accrued liability $ 541,895 $ 749,224

- Intangible assets and the adjustment to capital are created by those subsidiaries for which the trust fund and

current net liability are less than current benefit obligations.

- Contributions to trusts handling plan assets for the period amounted to $352,988 ($176,132 in 2000). The

trusts made payments of $102,020 ($69,867 in 2000) to the beneficiaries in the period.

- The net cost for the period was $180,271 ($83,897 in 2000) and, like projected benefit obligations, was

determined on the basis of a real rate of estimated yields of 5% and an average rate of salary increases of 1.5%

in both periods.


m080_FIN_ENG 5/22/02 9:30 PM Page 46

Global Reports LLC



b) There is an unquantified liability for amounts payable to personnel in the cases contemplated in the Federal Labor

Law and in the collective labor contract. Severance payments of $49,942 ($36,315 in 2000) were paid in the

period.

c) Several lawsuits have been brought before the relevant authorities for a various matters. In the opinion of the

Group’s officers and lawyers, these lawsuits will be settled favourably. Otherwise, the result of the lawsuits will not

substantially affect the financial situation or the results of consolidated operations.

d) At the close of the period, there are commitments for the purchase of inventory, machinery and equipment

amounting to approximately one hundred and forty seven million six hundred and ninety thousand US dollars (one

hundred and fifteen million four hundred thousand US dollars in 2000).

e) At the date of these financial statements, straight leasing contracts have been signed for air transportation

equipment for obligatory terms of 7 and 10 years; and total monthly lease payments of 194,000 US dollars

m080_FIN_ENG 5/22/02 9:30 PM Page 47

Global Reports LLC




8. Common stock and retained earnings

a) Breakdown of the restatement of certain stockholders’ equity accounts:

Capital stock $ 2,839,652 $ 9,858,304 $ 12,697,956Premium on share subscription 193,388 652,268 845,656Accumulated income:Legal reserve 673,355 317,072 990,427Reserve for acquisition of

own shares 150,000 384,145 534,145Retained earnings 10,809,536 6,455,457 17,264,993Profit for the year 3,520,391 102,392 3,622,783

$ 18,186,322 $ 17,769,638 $ 35,955,960

2001

b) As of December 31, 2001 and 2000, common stock is comprised of 3,251,759,632 shares, with no par value,

divided as follows:

Fixed portion of the capital stock:Series A class I shares - With no withdrawal rights, represented by1,459,389,728 common shares, fully subscribed and paid in; these sharesmust always represent 56.10% of total voting shares, and may only beacquired directly or indirectly by Mexican individuals or business entities(historical value). $ 785,996

Variable capital:Series B class II shares - Represented by 1,142,017,984 common votingshares, fully subscribed and paid in, which may in no case represent morethan 43.90% of total voting shares, and are subject to no subscriptionlimitations (historical value). 1,085,855

Series C class II shares - Represented by 650,351,920 common nonvotingshares, fully subscribed and paid in, which may at no time represent morethan 20% of the capital stock (historical value). 967,801

2,839,652

Effect of restatement 9,858,304

$ 12,697,956

HistoricalamountItem

Effect ofrestatement

Restatedamounts

Description Amount

m080_FIN_ENG 5/22/02 9:30 PM Page 48

Global Reports LLC



9. Comprehensive income

The Group’s comprehensive income for 2001 is as follows:

Net income $ 5,013,161Adjustment to capital for labor obligations upon retirement 56,757Result from holding nonmonetary assets (111,078)

Comprehensive income $ 4,958,840

Comprehensive income as of December 31, 2000 was $ 3,875,761.

10. Income tax and profit restrictions

a) The distribution of retained earnings in cash or in kind is subject to Income Tax, payable by the company, and is

considered a definitive payment, on the basis of the following:

- Dividends paid are free from Income Tax if they arise from the Net Tax Income Account. Any amount paid in

excess is subject to 35% Income Tax on the result of multiplying the dividend paid by the factor 1.5385. The

respective tax is payable by the company, and may be credited against the company’s Income Tax arising in the

following three years. Dividends paid are not subject to tax withholding

- Dividends arising from the Net Reinvested Tax Income Account are subject to 5% Income Tax. The rate is 3%

for Net Reinvested Tax Income Account arising in 1999.

- At the balance sheet date, dividends have been decreed amounting to $390,211 ($693,698 in 2000) at

historical values arising from the Net Reinvested Tax Income Account, on which deferred corporate Income Tax

was paid amounting to $18,002 ($32,018 in 2000); a provision had been made for that amount in the

preceding period.

b) Grupo Modelo S.A. de C.V. is authorized to determine Income Tax as per the tax consolidation regime, together

with its direct and indirect subsidiaries, as specified in the Income Tax Law. As from January 1999, amendments

went into effect for determining the consolidated tax result, the most important of which are as follows:

- The percentage of shareholding in the subsidiaries is the amount arrived at by multiplying the real participation of

the controlling company in the controlled companies by 0.60. The unamortized tax losses of controlled companies

included in the determination of the consolidated tax result, which amortize those tax losses against tax profits

arising in the period, are considered in the percentage of shareholding held (direct or indirect). As from 2002 period,

the controlling company will also consolidate by the factor 0.60 of its individual fiscal results.

Description: Total

m080_FIN_ENG 5/22/02 9:30 PM Page 49

Global Reports LLC




d) In 1999, the Income Tax rate was modified and the general rate of 35% was implemented, plus deferral for

reinvestment of profits, applying 30% to reinvested fiscal profits; in the period in which the latter are paid out as

dividends, the remaining 5% tax is paid. The rate applicable in 1999 to reinvested profits was 32%. Therefore,

dividends declared from the Net Reinvested Tax Income Account created in 1999 are subject to 3% Income Tax.

The aforementioned procedure was in effect up to 2001, and the deferral of tax corresponding to the balance of

the Net Reinvested Tax Income Account will be paid as dividends are paid in future years.

e) At the date of the consolidated balance sheet, there are tax losses that will affect the consolidated tax result by

$39,302 ($61,189 in 2000), and that can be amortized against future tax profits, after restatement. In this period,

$25,189 ($10,206 in 2000) of prior years’ losses at historical values, have been amortized.

f) Certain companies incurred no Income Tax, and therefore, Asset Tax is considered an account receivable by those

companies when there is certainty that said amount can be credited against Income Tax in future periods; this is

shown in the consolidated balance sheet, together with deferred tax, as provided for in Statement D-4, Revised,

amounting to $91,778 ($5,896 in 2000).

Asset Tax in excess of Income Tax incurred by controlled companies, where there is no certainty that the tax can

be recovered, was charged directly to results of the period, and amounted to $40,230 ($45,036 in 2000), at

historical value.

At the date of the consolidated financial statements, there is Asset Tax of $92,544 ($154,204 in 2000) for which

a refund can be requested in the following ten years, after restatement, provided Income Tax exceeds Asset Tax

in any of those periods.

- The concept of effective control of subsidiaries is eliminated, and companies in which the direct or indirect

participation through another controlled company does not exceed 50% may not be included in the

consolidation.

- Tax losses of the controlling or controlled companies, arising on an individual basis, may not be amortized under

current tax provisions, but must be added to the consolidated profits or subtracted from the consolidated tax

losses in the period in which the right is lost.

c) At the date of the financial statements, the balances of the net tax income account are as follows:

Item 2001 2000

Net Tax Income Account $ 8,157,704 $ 7,677,221

Net Reinvested Tax Income Account $ 4,707,561 $ 3,032,857

m080_FIN_ENG 5/22/02 9:30 PM Page 50

Global Reports LLC



g) Deferred tax - The main temporary items giving rise to the liability for deferred tax at the date of the financial

statements are analyzed below:

Fixed assets and other assets $ 5,650,891 $ 5,552,666Inventories 1,387,864 1,395,309Labor obligations upon retirement 126,965 65,752Customers (60,553) (54,845)Liability provisions (32,026) (38,902)

Subtotal 7,073,141 6,919,980

Tax credits corresponding to:Tax losses (196,938) (245,290)Asset tax receivable (91,778) (5,896)

Total liability for deferred tax $ 6,784,425 $ 6,668,794

- As a result of the amendments to the Income Tax Law approved as from January 1, 2002, the Income Tax rate

(35%) will be reduced annually as from 2003 until it reaches the nominal rate of 32% in 2005. Therefore, the

effect of this gradual reduction in the Income Tax rate will be to increase stockholders’ equity and reduce the

deferred Income Tax liability by approximately $600,000 in 2002.

h) The Income Tax provision as of December 31 is made up as follows:

Income Tax incurred $ 2,849,584 $ 2,737,216Asset tax 41,309 49,468Deferred Income Tax 7,572 183,714

$ 2,898,465 $ 2,970,398

2001 2000

Item 2001 2000

Effect on deferred Income Tax of:

m080_FIN_ENG 5/22/02 9:30 PM Page 51

Global Reports LLC




11. Operations with non-consolidated related companies

The main transactions entered into with non-consolidated related companies are analyzed as follows:

Purchases:Purchase of containers and packaging 3,571,937 4,347,736Purchase of raw materials 300,706 307,813Purchase of machinery 69,788 96,677

3,942,431 4,752,226

Sales:Sales of recyclable materials 91,914 50,221Sales of machinery and maintenance services 16,819 54,964Freights collected 2,676 2,991Services collected 2,662 2,578

114,071 110,754

12. Foreign currency position and operations

a) At the date of the consolidated balance sheet, the Group had the following foreign currency position:

AssetsU.S. dollars 56,734 43,628

LiabilitiesU.S. dollars 36,538 27,764

In thousands



m080_FIN_ENG 5/22/02 9:30 PM Page 52

Global Reports LLC


b) These currencies are valued in 2001 at the following exchange rates:

At the free-market exchange rate ($ 9.11 for assets and $ 9.18 for liabilities per U.S. dollar) $ 516,879 $ 335,518


c) At the end of the period, there were inventories amounting to fifty six million five hundred and eighty six

thousand US dollars (forty seven million three hundred and thirty thousand US dollars in 2000), most of which

can only be acquired abroad.

d) During the year, the following US dollars operations were carried out:

Exportation of finished products $ 781,016 $ 665,785Royalties charged 107,796 91,492Exportation of packaging and others 12,821 12,854

901,633 770,131

Purchase of machinery and payment of other services 99,615 135,067Purchase of inventory 108,345 59,369Freights, advertising and others 139,343 105,558Purchase of spare parts 14,753 12,216

362,056 312,210

Net $ 539,577 $ 457,921

In thousands

b) The free peso/dollar exchange rate at the date of issuance of the consolidated financial statements (February 15,

2002) was $9.05.

Description Assets Liabilities

2001 2000Description

m080_FIN_ENG 5/22/02 9:30 PM Page 53

Global Reports LLC




14. Financial instruments

Financial instruments potentially subject to risk concentration consist mainly of accounts receivable and temporary

investments. The Group places cash surpluses at prestigious credit institutions. Credit risk concentration

concerning accounts receivable is limited, due mainly to the large number of customers and their geographic

distribution. The Group considers that the estimation for doubtful accounts properly covers those that could

represent a risk of recovery, and continually monitors their behavior. When necessary, the estimation is adjusted.

15. Other events in the 2000 period

During the 2000 period, the Group invested $873,750 (at historical value) purchasing shares in the minority

interest of 64 subsidiaries forming part of Mexico’s distribution network. This operation gave rise to an excess

of book value over cost of shares amounting to $16,209, which was credited to income for the period.

Domestic $ 24,659,115 $ 4,356,437 $ 51,326,863Export 7,509,467 656,724 451,138

$ 32,168,582 $ 5,013,161 $ 51,778,001

Domestic $ 23,684,993 $ 4,113,573 $ 46,856,554Export 6,935,410 777,714 438,934

$ 30,620,403 $ 4,891,287 $ 47,295,488

13. Information by segment

Segment data is analyzed as follows:

IncomeNet profit

(estimated)

Identifiable

assets

Description 2001

2000

m080_FIN_ENG 5/22/02 9:30 PM Page 54

Global Reports LLC


Mexico City, February 15, 2002

To the Stockholders ofGrupo Modelo, S.A. de C.V.:

In my capacity as Statutory Auditor and in compliance with the provisions of Article 166 of theMexican Corporations Law and of the Company's bylaws, I hereby submit my report on theveracity, sufficiency and reasonability of the financial information presented to you by the Boardof Directors in connection with the Company's operations for the year ended December 31,2001.

I have attended the Stockholders' and Board of Directors' meetings, to which I was summoned,and I have obtained from the Company's Management all information and documentation relatedto the operations, transactions and accounting records that I considered necessary to examine.My examination was carried out in accordance with auditing standards generally accepted inMexico.

In my opinion, the accounting and financial reporting policies and criteria followed by thecompany and applied by Management in preparing the financial information presented to the Stockholders are adequate and sufficient, and were applied in a manner consistent with that ofthe previous year. Therefore, said information accurately, reasonably and sufficiently presents the financial position of Grupo Modelo, S.A. de C.V. at December 31, 2001 and the results of itsoperations, the changes in its stockholders' equity and the changes in its financial position for theyear then ended, in conformity with accounting principles generally accepted in Mexico.

Hugo Lara SilvaStatutory Auditor

Opinion of the Statutory Auditor

m080_FIN_ENG 5/22/02 9:30 PM Page 55

Global Reports LLC


Opinion of the Statutory Auditor

To the Stockholders ofGrupo Modelo, S.A. de C.V.

In my capacity as statutory auditor and in compliance with Article 166 of the MexicanCorporations Act and the bylaws of Grupo Modelo, S.A. de C.V., I am pleased to submitmy report on the consolidated finacial statements for the year ended December 31, 2001,presented to you by the Board of Directors.

Among the auditing procedures applied, I personally (or in my absence the alternatestatutory auditor) attended the Stockholders' and the Board of Directors' meetings to whichI was summoned. I reviewed, to the extent that I considered necessary in the circumstances,the unqualified report of the Company's independent auditors, dated February 15, 2002,issued as a result of their audit of the financial statements made in accordance with auditingstandards generally accepted in Mexico. Such financial statements are the responsibility ofthe Company's management.

In my opinion, based on my review and that of the independent auditors, the accounting andreporting policies and criteria observed by the Company in the preparation of theconsolidated financial statements that are being presented to the stockholders' are adequateand sufficient and were applied on a basis consistent with that of the prior year.Consequently, it is also my opinion that the above-mentioned consolidated financialstatements present fairly, in all material respects, the consolidated financial position ofGrupo Modelo, S.A. de C.V. and subsidiaries at December 31, 2001, the consolidatedresults of their operations, changes in their stockholders' equity and changes in theirfinancial position for the year then ended in conformity with accounting principles generallyaccepted in Mexico.

C.P.C. Alberto Tiburcio CelorioStatutory Auditor

Mexico City, MexicoFebruary 15, 2002

m080_FIN_ENG 5/22/02 9:30 PM Page 56

Global Reports LLC

Documents

our values actions results - Morningstar, Inc