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Contents

PRESIDENT STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 AbouT ThE CoMPANy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 CoMPANyS PhILoSoPhy . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 MAIN EVENTS of 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 bEER MARKET . ThE CoMPANyS PoSITIoN . . . . . . . . . . . . . . . . . 10 bRAND PoRTfoLIo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 fINANCIAL PoSITIoN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 KEy PRoJECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 CoRPoRATE SoCIAL RESPoNSIbILITy . . . . . . . . . . . . . . . . . . . . . 36 PERSoNNEL AND huMAN RIGhTS . . . . . . . . . . . . . . . . . . . 37 LAboR PRoTECTIoN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ENVIRoNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 MARKETING CoMMuNICATIoN . . . . . . . . . . . . . . . . . . . . . 44 CoMMuNITy ENGAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . 45 buSINESS EThICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 CoRPoRATE GoVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 RISK MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECuRITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 CoNSoLIDATED fINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 64 INTERESTED PARTy TRANSACTIoNS . . . . . . . . . . . . . . . . . . . . . . . 95 INfoRMATIoN foR ShAREhoLDERS AND INVESToRS . . . . . . . 101 CoNTACT INfoRMATIoN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Presidents Statement

Presidents Statement

Dear Ladies and Gentlemen, 2010 was a critical year for the Russian brewing industry, as all brewing companies had to considerably increase their product prices to compensate for a tripled beer excise rate. Baltika was among the companies that increased their prices in advance, with said measures affecting sales volume and the Companys market share dynamics principally in the modern trade format. Lower sales volume resulted in negative dynamics for the Companys financial performance. Despite the decline in sales, the Company earned a good profit, remained high profitability and demonstrated the ability to manage fixed costs in highly volatile market conditions. All this was possible due to continually upgrading efficiency and implementing working capital optimization projects, as well as having a strategy aimed at financing priority projects. During 2010, we continued investing in our operations. New projects included launching a new canning line at the Baltika-Rostov facility, developing an artesian well for drinking water production in Yaroslavl and implementing two bio-gas projects at the Companys facilities in Yaroslavl and Samara. We also invested in developing trade infrastructure and upgrading management systems. These projects, coupled with favorable conditions on the raw materials market in H1 2010, enabled the Company to considerably decrease production costs and contributed to our financial results. Throughout 2010, we focused on optimizing our brand portfolio. We launched a record number of new beverages in non-beer categories, including: cider, water and lemonade. At that, we focused on developing our key product beer. By the end of the year, our flagship Baltika beer brand became one of the top three best selling consumer brands in Russia. Integration of the Company into the Carlsberg Group continued with the launch of the Baltika No. 7 Export brand, which is produced under license at the Slavutich breweries in Ukraine (which are also owned by the Group). The Company granted distribution

and promotion rights for the Baltika brand to other companies of the Group in Estonia, Latvia and Lithuania. We continued to develop export sales by entering the major Latin American beer markets of Mexico and Brazil, expanded our presence in Africa and strengthened the Companys position in Europe. In Russia, 2010 was marked by obviously positive economic trends the country came out of the recession and almost overcame its consequences. The dynamics for household income and the consumer confidence index were also positive. Due to these factors, coupled with unusually hot weather in the Q3 and a gradual price increase, the beer market in H2 2010 stabilized. Taken together, this gives us hope that the beer market will grow in the coming year. Corporate social responsibility remains an important component of the Companys strategy. This concept implies that the Company takes into account the interests of the public and is responsible for the influence that it has on customers, consumers, employees, suppliers, shareholders, local communities and other stakeholders, not to mention the environment. We treat social responsibility as a platform that supports our development. Social responsibility is integrated into all of the Companys operational spheres. We enter 2011 as industry leaders with a balanced brand portfolio, as well as a strong distribution system and confidence in our future. Market development will surely depend not only on the Russian economy, but also on implementing legal restrictions in the production and sales of beer. Nevertheless, the Company hopes to achieve objectives and maintain consumer loyalty in any scenario. I would like to thank all of the Companys employees for their professionalism, diligence and creativity. Let me also thank the Companys shareholders and investors for the trust they place in our management team and for their belief in the Companys success.

Anton Artemiev President Baltika Breweries Senior Vice President Eastern Europe Carlsberg Breweries A/S

Baltika Breweries | Annual report 2010

The Company in 2010


Baltika Breweries was founded in St. Petersburg in 1990. The use of modern equipment and advanced technologies and standards made the Company a top quality producer. The Company became the leader in the Russian beer market in 1996 and has held this title ever since. Throughout its 20-year history, the Company has achieved dynamic growth by acquiring production facilities, commissioning new ones, expanding and upgrading existing facilities and broadening the Russian (as well as foreign) distribution networks. In 2006, Baltika Breweries merged with three large Russian beer producers Vena, Pikra, and Yarpivo. Today, Baltika is the largest FMCG producer in Russia and Eastern Europe. The Companys production facilities are located in 10 Russian cities, including: St. Petersburg, Yaroslavl, Tula, Voronezh, Rostov-on-Don, Samara, Chelyabinsk, Novosibirsk, Krasnoyarsk and Khabarovsk. In 2008, the Company purchased a brewery in Azerbaijan. The total production capacity of the facilities stands at 5.2 million hectoliters of beer per month. Baltika is the malt production leader among Russian and CIS breweries. To satisfy its malt demand, the Company built two of its own malting plants in Tula and Yaroslavl. The facilities capacity of each of these malting plants stands at 105 thousand tons per annum. The Company also owns a 30 % share in the Malt Plant Soufflet St. Petersburg CJSC (with a production capacity of 110 thousand tons per annum). In addition, the Company is developing its own agricultural project, which is being implemented in eight Russian regions. The Companys diverse brand portfolio meets the needs of the most demanding consumers. In addition to Baltika, which is the key brand, the product range includes more than 40 beer, low alcohol and nonalcoholic brands on both a national and regional scale, including: Arsenalnoe, Nevskoe, Yarpivo, Tuborg, Carlsberg, Kronenbourg 1664 beers, Somersby cider, Zhivoy Ruchey drinking water, Khlebny Krai kvass and Crazy lemonade. According to data compiled by the Canadean and Euromonitor international

2010 marked the Companys 20th anniversary.

The Company in 2010

agencies, Baltika, the Companys flagship brand, is the top selling brand in Europe. It is also one of the three most valuable brands in Russia, according to Interbrand international agency. Baltika products are produced under license agreements in different CIS and other countries.

The Companys extensive distribution network ensures that corporate products are available in 98 % of Russias retail facilities. Baltic Beverages Holding AB (a subsidiary of Carlsberg Breweries A/S) became the Companys major shareholder in 2008, holding 89.01 % of the Companys charter capital.

Baltika Breweries | Annual report 2010

Our mission: why we exist


Our mission is the basis for our Companys philosophy, which reflects our purpose and governs our Companys existence. We create high quality products and develop a culture of responsible beer consumption to bring people joy and pleasure from socializing.

Our Vision: what we would like to be


Our vision is an orientation point for the Companys development. We strive to be the benchmark for the brewing industry, the company setting standards and being a reference point for breweries all over the world. For us, being the benchmark means being the leader in three areas: the best brands, the best team, and the best results. The best brands: we are market leaders thanks to our strong brands which people choose not only based on their preferences or possibilities, but also because of their attitude towards our Company. The best team: in our Company, highly trained professional specialists cooperate effectively and achieve the best results in every area. The best results: Company operates with the highest and most consistent operational profitability among the largest brewing companies in the world.

Our objectives and strategies: what we are striving for


Our Companys objectives are the concrete results that we hope to achieve. Our strategy is the means to achieve the objectives.

Objectives: To bring the Baltika brand to the leading positions in the world. To increase Baltikas share in the Russian beer market while maintaining high profitability and the high quality of our products.

Strategy: A focus on creating powerful brands, premiumisation, and innovation. Leadership in all market segments, regions, and sales channels. Maintaining the high quality of our products and the high level of service. Constant development of competencies and professionalism of our employees. Increasing the efficiency of our business processes along with operational excellence. The search for additional sources for profit growth via: the widening of sales geography; the development of related directions.

Companys Philosophy
The Winning Behaviours Principles under which we operate

A GlocAl approach is the key to our overall success. This entails finding the right balance between working closely together at a GLObal level whilst allowing LOCAL brands and initiatives to flourish. It requires versatile combinations and synergy among different cultures. This is what sets us apart from our competitors and is critical for our overall success.

We are each empowered to make a difference


Our Company welcomes initiative and new ideas for business development from all of our employees and enables the realization of these ideas. Innovation helps us constantly develop and strengthen our position as leaders. We are not afraid of difficult tasks and take responsibility for all actions and decisions we take while keeping in mind that they all affect the whole Companys results and reputation.

Our customers and consumers are at the heart of every decision we make
We are responsible for the following: Forourconsumers,webear responsibility for the high quality of our product and service; Forourpartners,we bear responsibility for the fulfillment of all our obligations. We strive to understand the needs and preferences of our consumers and clients and base our strategy on this insight. We strive for perfection and continuously evaluate the ways we work to improve our professionalism.

We want to win
We are constantly exploring and are always ready to adapt in response to the latest challenges. We are steadfast in the achievement of our goals and are prepared to work proactively, quickly, and boldly. We do not retreat in the face of difficulties and we learn from mistakes. The specific of the market does not affect our entrepreneurial spirit, for we are by nature leaders when it comes to attaining results.

We are engaged with society Together we are stronger


We respect peoples individuality and welcome differences in culture, traditions, and brands. We value cooperation and working for a common goal. It is teamwork that allows our Company to achieve success; therefore we share best practices and always help one another, even when this goes beyond our immediate responsibilities. The Company is responsible to uphold societys values, rules and regulations, and to run our business in a conscientious way. We are ecologically and socially responsible company and we devote a great deal of attention to protecting the environment and to supporting those in need of our help. For us, social responsibility is a social partnership and establishing appropriate working conditions for our employees.

Baltika Breweries | Annual report 2010

January
January 1st Baltika started to supply Asahi Super Dry licensed beer to France and Italy.

February
February 15th February 18
th

the Company signed a contract to supply beer to numerous African countries. Baltika started producing ateck Gus (Zatecky Goose) beer in 0.5 liter aluminum cans. the Company started producing the new Arsenalnoye Gold beer brand.

February 24th

March
March 15th March 25th March 27th the Baltika No. 20 Jubilee brand is produced to mark the Companys 20th anniversary. the first can of Baltika No. 7 Export licensed beer was produced at the Slavutich breweries (Carlsberg Group, Ukraine). the Khlebny Krai Kvass 7 Grains brand was launched.

April
April 5th April 8th April 11th April 13th the Siberian Cask Live beer brand was launched. the Companys financial reports and 2009 dividends were approved at the Companys Annual General Shareholders Meeting. the Baltika No. 8 Wheat beer brand received the Silver Medal in the Wheat Beer, Unfiltered category at the World Beer Cup. a new beer canning line was commissioned at the Baltika-Rostov production facility. The capacity of the new line is 60 thousand 0.5 liter cans and 30 thousand 1 liter cans per hour. the new Baltika Draught beer brand was launched.

April 23rd

May
May 4th May 11th May 19th May 20th May 24th the Nevskoe Imperial beer brand was launched. the ateck Gus ern (Zatecky Goose Black) was launched. the Zhivoy Ruchey (Life Spring) drinking water brand was launched. a biological gas installation was commissioned at the Baltika-Samara production facility. the first batch of the Companys products was delivered to Costa Rica.

June
Sales of cola, orange and lemon flavored Crazy non-alcoholic drinks began in June. June 1
st

the Company started beer delivery to the Democratic Republic of Congo. the St. Petersburg government named the Company The Best Taxpayer in St. Petersburg for the sixth time in a row. the Company launched a product in the new category the natural apple cider Somersby. a brewery museum was opened at the Baltika-St. Petersburg production facility to commemorate the Companys 20th anniversary. the Company started supplying beer to Syria.

June 4th June 11th June 17th June 24th

Main Events of 2010


July
July 9th July 11th July 28
th

the Baltika No. 8 Wheat, Baltika No. 4 Original and Baltika No. 6 Porter beer brands were awarded medals at the International Beer Challenge. Baltika beer brands received seven medals at the II Big Moscow Beer Festival. the Baltika No. 6 Porter beer brand received the title Europes Best Baltic Porter at the World Beer Awards.

August
August 2nd August 17th August 26th the Company started exporting beer to Mexico and Brazil. the process of integrating the Companys subsidiary, Baltika-Almaty LLC and DERBES Brewery Ltd (Carlsberg Group) in Kazakhstan was completed. a decision on paying interim dividends for H1 2010 was made at the Extraordinary General Shareholders Meeting, which was held in absentia.

September
September 13th the first bottling of the Siberian Cask Classic beer brand took place at the BaltikaNovosibirsk production facility.

October
October 12th October 26th October 27th the Company won The Best HR Project-2010 contest in The Best Innovative Project category for successfully implementing employee development programs. the production of Old Bobby premium beer was launched. the Company was awarded the Save Energy National Prize from the Moscow government in The Best Energy Saving Project of the Year category.

November
In November, a biological gas installation was commissioned at the Baltika-Yaroslavl production facility. November 2nd the Company received an award in The Supplier of St. Petersburg contest organized by the St. Petersburg government for its contribution to developing the consumer market. Baltika No. 3 Classic, Baltika No. 7 Export and Tuborg Green were awarded the Top Prize at the Russian Good of the Year contest. the Companys Baltika No. 4 Original was awarded the Gold Medal at the European Beer Stars Awards contest for the third time. the Company signed license agreements with companies of Carlsberg Group for promoting, selling and distributing Baltika beer in Lithuania, Latvia and Estonia. the Company won the PEOPLE INVESTOR Grand Prix in the HR Management category.

November 10th November 11th November 15th November 25th

December
December 1st the Company entered a new segment of the natural malt-based non-alcoholic beverages market, launching production of Baltika No. 0 Apple, Baltika No. 0 Grain, Baltika No. 0 Ginger and Baltika No. 0 Lemon for export markets. the Eve peach flavored brand was launched. for the fifth time, the Baltika brand became one of the top three brands in price ratings prepared by the Interbrand international agency. In December, Baltika brand was recognized by Forbes Magazine as one of Russias ten most dynamic brands.

December 9th December 13th

beer Market . The Companys Position

Beer Market. The Companys Position


The Russian beer market and Baltikas positions
For several years, the Russian beer market demonstrated stable growth, but the world economic downturn affected 20082009 market dynamics.

2010 was an extraordinary year for the Russian beer brewing industry. As of January 1st, 2010, the excise rate for beer with an alcoholic content of 0.5 to 8.6 % increased 200 %. The Company minimized the influence of this essential increase on sales volume by implementing a pricing strategy based on gradual price increases throughout the year. The effect was also somewhat lessened due to market revival in H2 2010.

The gradual restoration of consumer confidence and consumer spending which had fallen during the economic downturn, strong consumer loyalty and a hot summer all improved market dynamics in Q3 and Q4 2010. According to internal estimates for 2010, the market declined by 4 %, while demonstrating positive dynamics in H2 2010. In Q4 2010, the market declined 1 % compared to the same quarter in the previous year. Based on internal estimates, the 2010 volume of the Russian beer market stood at approximately 94 million hectoliters.

20052010 Russian Beer Market Dynamics


Year Beer market, million hectoliters As compared with preceding year, % 2005 86.3 2006 94.9 2007 109.7 2008 109.3 2009 98.0 2010 93.9

10

16

-0.4

-10

-4

Source: internal estimates

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Baltika Breweries | Annual report 2010

2010 sales volume (in percentage) as compared with 2009


-12 Total sales volume (including sales abroad and non-beer products) Beer sales volume (Russia) In-market beer sales (Russia) +42

-13 -4 In-market non-beer sales (Russia)

In-market sales of beer in Russia* fell 4 % compared with 2009, whereas in 2010, total in-market sales dropped 3 %. During Q4, in-market beer sales in Russia grew 2 %. In 2010, the beer sales volume volume in Russia** dropped 13 % due to distributors building stocks during Q4 2009 ahead of the excise rate increase. The Companys total sales volume fell by 12 %. According to AC Nielsen agency (Urban Russia), the Companys market share as of the end of 2010 was comparable to 2009 levels standing at 39.7 % (compared with 39.8 % in 2009). A 0.4 % increase was seen in Q4 2010, compared with Q4 2009. The excise rate increase resulted in an unprecedented rise in consumer prices. Baltika was one of the companies who started to increase its prices in the beginning of the year. Therefore, the Companys products became more expensive during the year, compared with products of its major competitors. This affected the Companys market share primarily in the modern trade segment. The modern Russian beer market can boast the presence of all major international beer brewers, including: Carlsberg, InBev, Heineken, Efes and SABMiller. The total market share for these top five companies exceeds 85 %.
* In-market sales mean products sold by distributors to trade outlets in Russia. ** Beer sales volume means shipments by the Company, taking into account product stocks accumulated during 2009 prior to the excise rate increase.

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Beer Market. The Companys Position


Russian market shares for major beer producers
13.2 % 6.9 % 7.0 % 14.7 %

9.7 %

2009

39.8 % 10.7 %

2010

39.7 %

14.4 % 16.0 %

11.7 % 16.2 %

Baltika Efes

Inbev SABMiller

Heineken Others

Source: AC Nielsen (Urban Russia)*


*Urban Russia includes towns with a population of more than 10,000 (excluding rural populations).

2010 Economic Development and Consumer Trends


According to data from Rosstat (the Russian Statistics Service), 2010 macro-economic indices looked healthier than 2009 numbers with an 8 % industrial production increase. GDP and disposable income and retail sales increased 4 %. The unemployment rate fell 11 %. The impact of the economic downturn on consumer behavior was considerable, with the majority of consumers switching their preferences to less expensive beer and packaging in H1 2010. The significance of the modern trade channel also grew. Nonetheless, statistical data for H2 2010 illustrates consumers growing interest in premium offers and customary consumer standards. The modern trade tendency gained strength during the year. The Company continued to develop non-beer products in 2010, entering a number of new categories (see the Brand Portfolio section). As of the end of 2010, total sales of non-beer products in Russia grew 42 %.

20072010 dynamics for the Companys share of the beer market, %


2007 2008 2009 2010 37.4 38.4 39.8 39.7

Source: AC Nielsen (Urban Russia)

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Baltika Breweries | Annual report 2010

International Beer Market


In 2010, Russia remained the position of the fourth largest global beer market in terms of volume, with per capita beer consumption totalling 66 liters (Companys estimate). Global leaders of 2010 in terms of per capita beer consumption, liters
151 108 102 102 101 98 91 90 89 87 81 77 77 76 66

Czech Republic Germany

2010 global leaders in beer market volume, million hectoliters


China USA Brazil Russia Germany Japan Mexico Great Britain The Republic of South Africa Poland

Slovakia Austria Ireland Slovenia Estonia Belgium

454 239 126 94 88 69 64 44 35 33

Australia Poland Finland USA Bulgaria

Source: Euromonitor (estimate)

Romania Russia

Source: Euromonitor (estimate), Baltika internal data

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Beer Market. The Companys Position


Leading international breweries
56 % 19 % Anheuser-Busch Inbev SABMiller

2010

10 %

Heineken Carlsberg

9% 6%

Others

Source: Euromonitor

Four companies still control approximately 45 % of the international beer market.

The Companys Global Position


The Companys products are sold in more than 70 countries worldwide. Every sixth bottle of Baltika beer is sold abroad. The Company holds a 70 % share of the total volume of beer exported from Russia. In 2010, the sales volume abroad for the Companys brands grew 19 % compared with 2009, exceeding 3.3 million hectoliters in natural units. The share of sales abroad in the Companys total sales volume increased in 2010, totaling approximately 8.4 %. The Baltika brand makes up more than 70 % of the Companys total sales abroad. During 2010, the Company entered major Latin American markets, including Mexico and Brazil. The Company also launched sales in Cameroon and Congo and expanded its presence in Europe, as well as in Asian and Pacific countries. Deliveries of licensed Asahi Super Dry to France and Italy were launched in January. The Company is licensed to produce bottled (0.44l) Asahi Super Dry beer for 36 European countries. The Company is also authorized to distribute this brand in Russia, the Baltic countries and numerous CIS countries. Deliveries of Baltika No. 6 Porter beer to Finland were launched in February. Baltika No. 3 Classic became the only Russian beer available on the high-speed St. PetersburgHelsinki Allegro trains. The Company continued its integration into the Carlsberg Group, with a line of licensed brands consisting of Baltika No. 0 Non-Alcoholic, Baltika No. 3 Classic and Baltika No. 9 Extra produced in Ukraine by the Slavutich breweries complemented by Baltika No. 7 Export brand. The Company signed licensing agreements with Carlsberg Group companies A/S Aldaris (Latvia), Saku Olletehase AS (Estonia) and SvyturysUtenos Alus (Lithuania) for promoting, selling and distributing Baltika beer in Latvia, Estonia and Lithuania. In 2010, the Company developed a unique new product a natural malt-based non-alcoholic drink with four flavors: Baltika No. 0 Grain, altika No. 0 Apple, Baltika No. 0 Lemon and Baltika No. 0 Ginger. The beverages are produced from non-fermented beer wort and have a rich malt flavor and the thirst-quenching capacity of light beer, while containing no alcohol. Sales of the new product started in the Middle East in December. During 2010 the Company represented the Russian brewing industry at different international occupational fairs, festivals and contests, and received numerous awards for the quality of its products.

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brand Portfolio

Brand Portfolio
Beer brands Super premium segment

Premium segment

Mainstream segment

Lower mainstream and discount segments

Non-beer brands

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Baltika Breweries | Annual report 2010

Baltika owns a unique brand portfolio, which is the strongest on the Russian beer market. The portfolio includes more than 30 national and regional beer brands. In addition, the portfolio includes low alcohol and non-alcoholic beverages, such as kvass, drinking water and lemonade. The portfolio offers brands for any segment, region or taste. According to a Forbes Magazine index of consumer goods, Baltika brand became the best seller among consumer goods produced in Russia, or for Russia. The top fifty brands in the index included famous corporate brands such as Arsenalnoe, Nevskoe, Yarpivo and Bolshaya Kruzhka (King-Size Mug).

Tuborg
Tuborgs leadership in the super premium segment remains as stable as ever. The brands position was further strengthened by producing Tuborg Green canned in designer cans dedicated to various musical trends. The limited number of Tuborg Green designer cans was launched in H2 2010. The three versions Rock, Hip-Hop and Disco were designed by Danesadwork European agency.

Eve
The Company launched the Eve super premium brand on the market in the beginning of the year. This is a totally new product developed by Carlsberg Groups process engineers and is intended exclusively for women. Baltika specialists developed a unique product promotion concept and an incomparable bottle design. These were both used to launch the Eve brand in Russia. The Eve brand, a completely natural refreshing drink with a light sparkly taste and low alcohol content, became popular in no time. A new peach-flavored Eve was produced at the end of 2010 to complement the existing grapefruit and passion fruit-flavored drinks.

Baltika Draught
In the premium segment, Baltika Draught beer was 2010s primary novelty. What sets the brand apart is its special processing technology, which maintains the properties of freshly brewed beer.

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Brand Portfolio
In 2010, the Company continued to actively develop its portfolio, adding numerous new products. This enabled the Company not only to preserve but also to strengthen its leadership across all price segments, including entering new market niches. The Company also developed on its economy brands. During the year, the brand portfolio was strengthened with the additions of: Arsenalnoe Gold, Bolshaya Kruzhka Yachmennoye Bochkovoye (King-Size Mug Barley Draught), Sibirsky Bochonok Zhivoe (Siberian Cask Live) and Uralsky Master Ledyanoe (Ural Master Ice).

Baltika No. 20 Jubilee


Baltika No. 20 Jubilee was developed to commemorate the Companys 20th anniversary. This brand is meant for sale only during 2010. Using numerous aromatic malts resulted in a unique light lager taste.

Nevskoe Imperial
The package design for all brands that fall under the Nevskoe premium brand line-up was modified in the beginning of May, and a new sort Nevskoe Imperial was launched.

Old Bobby
In the fall, the premium portfolio was complemented by the addition of the Old Bobby brand, which is brewed according to traditional English recipes. The brand includes two types of beer Ale and Lager which are bottled in special pint bottles.

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Baltika Breweries | Annual report 2010

2010 was marked by the rapid development of corporate activities in producing non-beer brands. A record number of different drinks entered the market.

ateck Gus
ateck Gus, a successful new mainstream brand which was first produced in 2009, was complemented by ateck Gus ern in May. This dark beer is brewed using select light, caramel and black malt according to the best Czech brewing traditions.

Zhivoy Ruchey
In the end of April, Zhivoy Ruchey (Life Spring) carbonated and noncarbonated drinking water appeared on the market in the European part of Russia. The water is taken from a 80-meters artesian well in Yaroslavl. The water preserves its natural mineralization during treatment.

Khlebny Krai
A new sort of the successful Khlebny Krai kvass (which production began in 2009) also appeared on the market in April. The new Khlebny Krai 7 Grains contains 7 different cereals, ensuring the optimal content of useful ingredients. According to data presented by AC Nielsen, compared to 2009, the share of Khlebny Krai kvass on the kvass market grew 2.6 %, to reach 7.6 %.

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Brand Portfolio
The Company intends to further develop its brand portfolio to fully satisfy its consumers tastes and preferences.

Crazy
The sales of the Crazy carbonated soft drink (with cola, orange and lemon flavors) began in June. All three flavors are bottled in 0.5, 1 and 2 liter PET-bottles the most popular packaging for such drinks.

Somersby
The Somersby apple cider a premium segment novelty was launched by the Company in the summer. The apple cider is produced under a license from the Carlsberg Group. Somersby is a successful European brand that is sold in Denmark, Sweden, Norway, Belgium and Finland. Somersby is a naturally low alcohol content (4.7 %) beverage brewed from apple juice. Key cities for Somersby sales are St. Petersburg and Moscow.

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Baltika Breweries | Annual report 2010

Awards
In April, the Companys Baltika No. 8 Wheat brand won the Silver Medal at the World Beer Cup international competition in Chicago (USA). The Companys brands were prize winners many times over at prestigious competitions. In 2006, the Companys Baltika No. 0 Non-Alcoholic won the Silver Medal, while in 2008 Baltika No. 6 Porter was awarded a Bronze Medal. In July, the Companys Baltika No. 8 Wheat won the Silver Medal at the International Beer Challenge in London (Great Britain) in the Wheat Hefeweizen and Kristalweizen category. Baltika No. 4 Original and Baltika No. 6 Porter won the Bronze Medal in the Viennese Lager and Baltic Porter and Russian Imperial Stout categories respectively. atech Gus ern, a new corporate brand, won its first Gold Medal at the XII Moscow International Beer Festival. The brand was recognized as The Best Dark Beer by festival participants in the Peoples Testing. Baltika No. 3 Classic was recognized as The Most Popular beer for the tenth time, while Baltika No. 0 Non-Alcoholic was named The Best Non-Alcoholic Beer. Kronenbourg 1664 was recognized as The Best Licensed Beer.

Each year, Baltika presents its products at various Russian and international contests. Awards received by the Company are the best means to certify the highest quality of its products. The total number of awards received by the Company during the last decade totals more than 400.

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Brand Portfolio

Each of these awards not only certifies the highest degree of professionalism of corporate brewers, but also demonstrates results achieved by the Company in upgrading its quality management system.

Baltika No. 6 Porter was awarded the honorary title The Best Baltic Porter in Europe. The title was awarded at the end of July at the World Beer Awards international competition held in London (Great Britain). In November, Baltika No. 4 Original was named the best in the Red and Amber Lager category at the European Beer Star Awards (Nuremberg, Germany). The Company won the title for the third year in a row. Also in November Baltika No. 3 Classic and Baltika No. 7 Export won the titles of The Best Domestic Brand for the mainstream and premium price segments in the Beer category at the major Good of the Year competition. Tuborg brand was named the best in the Beer: the licensed brand category.

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financial Position

Financial Position

In 2010, an unprecedented increase in the excise duty for beer increased the selling price for products of brewing companies. The increase exceeded the inflation rate. This reduced the market as a whole, resulting in a decrease in the Companys sales volumes. The Company mitigated this negative effect by upgrading the efficiency of all operations and maintaining a pricing strategy of gradual price increases throughout the year.

Key Financial Performance Indicators Sales, million hectoliters Net revenue, million rubles Cost of sales, million rubles Gross profit, million rubles Distribution expenses, million rubles Administrative expenses, million rubles Operating profit*, million rubles Operating profit before depreciation, million rubles Profit for the year, million rubles Operating margin, % Gross margin, % ROA, % ROE, % ROCE, % EPS, rubles

2010 37.6 79,307 -34,162 45,145 -18,552 -2,429 23,631 29,187 19,171 29.8 56.9 33.5 42.9 43.9 112.55

2009 42.7 93,720 -42,466 51,254 -19,150 -2,529 29,618 34,262 23,372 31.6 54.7 37.2 46.5 50.8 147.14

Change, 2010 / 2009 -12 % -15 % -20 % -12 % -3 % -4 % -20 % -15 % -18 % -1.8 p.p. +2.2 p.p. -3.7 p.p. -3.6 p.p. -6.9 p.p. -23.5 %

* Operating profit includes other incomes and is adjusted taking into account incomes and costs from participation in dependent companies.

25

Baltika Breweries | Annual report 2010

A substantial decrease in production and sales volumes due to the increased tax load and the effect of stocks accumulated by distributors resulted in negative dynamics for the Companys financial performance indicators. However, despite the above, the Company managed to maintain high margin and demonstrated the ability to manage fixed costs in highly volatile market conditions. This was possible due to continually upgrading efficiency and exercising a high level of control over costs. For example, administrative expenses were cut by RUB 100 million during the reporting period. As with other positive effects, cost optimization was the result of efficiency increases and expanded outsourcing. This considerably decreased cost of sales compared with 2009. Favorable prices for basic raw materials in H1 2010 yielded good results, as barley and malt prices reached their lowest point in the last four years. Adverse weather conditions during the summer of 2010 (harvest ripening season) decreased the barley crop, which led to a sharp increase in barley and malt prices by the end of 2010. This affected year-end profits.

During 2010, the Company continued to implement programs to increase operational efficiency, including: developing its own agricultural project, energy saving measures, expanding cross production, optimizing the use of the Companys transportation vehicles, developing storage logistics and the direct delivery project, Lean Production and much more. Considerable investments were made into launching new products, promoting points of sales, strengthening the commercial infrastructure, upgrading IT management systems and implementing environmental projects.

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Financial Position
Liquidity and efficiency
Due to high operating profit in 2010 and working capital optimization, as well as the implementation of the strategy for investing in priority projects, the Company accumulated a considerable volume of free cash flow, the major share of which was used for dividend payments according to a resolution adopted at the Annual General Shareholders Meeting. Dividends paid by the Company in 2010 exceeded RUB 27 billion, of which RUB 21 billion were 2009 dividends and the rest the interim 2010 dividends. Temporarily free cash funds were used by the Company for short-term investments on the capital market. During 2010, the Company continued to upgrade its working capital management system. Reducing the working capital / net revenue indicator more than two times demonstrates success in this field. Despite an increase in the excise component of receipts, the share of trade receivables was considerably reduced. The improved turnover in trade receivables can primarily be attributed to efficient interaction with the Companys distributors and the maintenance of low overdue trade receivables in the traditional retail and on-trade channels. The deficit on the grain market (caused by poor grain crop) led to the establishment of reserve stocks of barley and malt to cover market risks, thereby influencing material stock levels as of the end of the year. However, the Company successfully implemented projects to upgrade supply chain management, which helped maintain sufficient stock throughout the year and reduced the average level considerably.

Trade working capital / net revenue, 2009 / 2010


% 10 8 6 4 2 0
Trade working capital / Net revenue 2009 Stocks Trade receivables Trade accounts payable Trade working capital / Net revenue 2010

2.7 % 6.3 %

-3.2 % -2.5 % 3.3 %

Achieving strong results for optimizing working capital made it possible for the Company to focus on upgrading the quality of services for distributors while maintaining a sufficient stock of products in highly volatile demand conditions. Strengthening partner relationships with suppliers and implementing efficient financial instruments improved the turnover of trade accounts payable with no appreciable effect on the Companys costs. Despite a considerable improvement in working capital efficiency and on-line investment management, the efficiency of the Companys assets declined slightly due to the reduction in operating profit under the above-mentioned market conditions. It is worth noting, however, that the efficiecy of the Companys assets is still higher than the industry average.

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Key Projects

Key Projects

Logistics
The Company has implemented cost cutting and efficiency improvement measures, including logistics, in 2010. Compared with 2009, specific storage and delivery costs per liter produced by the Company decreased 16 %. The effect was achieved as a result of corporate efforts to implement a series of measures to upgrade supply chain efficiency, including optimizing the use of corporate transportation vehicles, expanding cross production, that is producing different Baltika brands at different production facilities, upgrading the automated production planning system, moderating service providers prices and optimizing storage logistics. The most significant logistics projects include developing and launching an open electronic auction for purchasing delivery services using third-party motor transportation. The auction enabled the Company to hold down costs despite rising rates for transportation services. Another project involved implementing an open bidding system to repair the Companys railway cars. This system improved supply agreement conditions. Another project entailed implementing a monitoring system for motor freight transport using the GPS system, which allowed the Company to control transportation route efficiency. Upgrading storage logistics continued throughout 2010, including implementing numerous projects designed to upgrade operational efficiency at warehouses via standardization the Companys accounting policy. A new project called Regional Logistics was launched, which involved carrying out audits of the organization of storage using in-

house and third-party warehouses, optimizing the quantity, geographic location of storage facilities and warehouse operations. Implementation of the automated storage accounting system continued at the Companys branch facilities. In 2010, the WMS (Warehouse Management System) was implemented in both Yaroslavl and Khabarovsk. During 2010, functions of the Master of Planning supply chain system were improved, with further widening of production geography. To upgrade management decision efficiency concerning logistics and enhancing control over logistics, a new IT tool, Business Intelligence (BI), was implemented. Implementing BI accelerated the response to changes and enabled the Company to analyze the performance of the logistics service, upgrading control over all links in the supply chain. All of the above-mentioned measures contributed to cutting logistics costs.

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Baltika Breweries | Annual report 2010

Agricultural Project
During the last six years, the Company has developed its own agricultural project, which is designed to ensure required brewing barley volumes, as well as to reduce raw material costs while maintaining high quality products. In addition, the project contributes to agricultural development and provides employment for more than 15 thousand people across Russia. In 2010, abnormally hot and dry weather in numerous Russian regions resulted in a substantial decrease in the harvest of brewing barley suitable for brewing purposes both in Russia and abroad. The Company managed not only to maintain a greater share of its own barley, but also to further develop the agricultural project in these complex conditions. For example, an area was experimentally sown in Siberia and Far East. The Companys cultivation areas are located practically all across the country, including areas in the Central, Central-Black Earth, Siberian and Far East regions. The Company actively uses the services of agricultural producers in the Central and Central-Black Earth regions. In 2010, project participants included agricultural facilities in the Tula, Voronezh, Lipetsk, Ryazan, Tambov, Orel, Omsk and Amur Regions. The project has considerable upside potential in Siberia, the Urals and the Far East. In 2010 The Union of Russian Producers of Beer and NonAlcoholic Beverages awarded the Order For Services in the Development of the Beer Brewing Industry to Vladimir Sukhonin, Head of the Department of Agricultural Projects Management of Baltika Breweries, for agricultural project development. On the whole, the projects development has been successful, with an increase in the number of partner producer. Due to the agricultural project the Company optimized corporate purchases, as well as increased the interest of partner producers who receive stable purchase orders. The high quality of barley is realized thanks to a developed control system that is applied throughout the cycle, from seed stock to barley storage. The Russian Ministry of Agriculture awarded Ekaterina Azimina, Baltika Vice President for Finance and Economics, and Alexander Dedegkaev, Baltikas Vice President for Supply Chain, with Letters of Merit for their long-standing work in this sphere of agricultural production.

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Key Projects
Quality Management System
Baltika cares about its consumers and pays significant attention to product quality and safety. During the 1990s, Baltika was one of the first Russian companies to obtain the ISO 9001 Certificate of Quality. The Company implemented and maintains the operation of its Quality Management System (QMS), which enables the standardization, unification and regulation of key processes. QMS is a flexible system that ensures the efficient operation of facilities. The system is being continuously improved, taking into account Russian and foreign requirements, as well as changes in business processes. In 2009, the Company developed and implemented a Food Products Safety Management System (FPSMS) at its St. Petersburg facility. FPSMS development involved describing the product (beer) production process, the training of involved employees and performing internal audits. By the end of the year, the FPSMS at the St. Petersburg facility was certified as complying with the ISO 22000:2005 international standard (GOST P ISO 22000-2007), based on (Hazard Analysis and Critical Control Points) principles. The inspection audit was performed by the certifying authority in 2010. Currently, the Food Products Safety Management System is being implemented at other corporate production facilities. International standards certification is voluntary. It confirms that the Companys operations are based on best international practices used to maintain and upgrade the quality and safety of products and business processes. The Company wrapped up implementing the Laboratory Information Management System (LIMS) in all corporate branches in 2010. LIMS replaced the previous information management system, ensuring greater functionality and flexibility. The new system is just a stage in implementing a new automated lot accounting system (an accounting method according to which each lot of goods documented by one and the same document is stored in individual packages). The main LIMS functions are to process and store test result data and to communicate the data to involved departments. LIMS ensures the quick entry, analysis, storage and management of laboratory data, enabling personnel to check test results for compliance with corresponding regulatory documents and specifications and to monitor test results in real time throughout the entire production process, from raw material entry to the production of finished goods. In addition, the system can be integrated with other automated systems to facilitate the solution of tasks for the facility as a whole. Additional enhancement of LIMS functions and features, including integration with the Companys data systems, is planned for 2011.

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Baltika Breweries | Annual report 2010

Efficiency Improvement Programs


Lean Production The Company continues to develop its Lean Production project intended to minimize all types of costs. In 2010, Baltika introduced project technologies, including: Tagging, Value Stream Mapping, Kaizen-blitz (Rapid Improvement Process), Total Production Maintenance and the Single Minute Exchange of Dyes. Changeover time is a vital factor for any company looking to build its production based on just-in-time manufacturing and economic lot size concepts. Rapid changeover is a way to convert equipment to run different products and avoid storing unusable stock at the Companys warehouse. In 2010, the economic benefit of implementing only one Single Minute Exchange project in the Companys bottling room during one peak season month totaled RUB 30 million. Streamlining production flows, reducing losses from stock and materials and increasing production rates and the performance of bottling lines under projects ensured significant cost saving. Your Idea Works! The Your Idea Works! project is three years old. The project is designed to search for and implement ideas suggested by Baltikas employees. The goal of the project is to implement production process improvements which do not require global changes and/or investments. During the reporting period, the number of ideas received from corporate employees exceeded 400. In the mediumterm, potential savings from the suggested ideas could total approximately RUB 80 million per year. Business Excellence Fund In 2010, the Got an Idea! motivational program for the sales department was further developed to become the BEF or Business Excellence Fund. This program collects the best ideas suggested by the Companys employees related to implementing new standards of brand activation at points of sale, that are suitable for subsequent integration into daily practices. The Master of Planning A cross-functional automatic system called The Master of Planning is used within the framework of the Companys initiative to upgrade operational efficiency. The system distributes volumes among branches based on forecast demand and numerous other factors, including supply, production, logistics and sales. The Master of Planning allows costs related to the purchase of raw materials, production and product delivery along the entire supply chain to be optimized.

Investments
In 2010, total corporate investments stood at RUB 2.9 billion. Major investments were channeled at launching and supporting new products, commercial infrastructure and information technologies improvements and were targeted at efficiency upgrading and cutting costs. Investment projects included constructing new grain storage and renovating the existing one, as well as numerous environmental projects. The project for inhouse water supply provisions (artesian drinking water) at the Companys facility in Yaroslavl was implemented, thus enabling the Company to reduce costs and to start the production of the new product Zhivoy Ruchey drinking water. Constructing Grain Storage in Khabarovsk The Company began implementing a project that involved constructing a 3,200-ton grain storage facility in Khabarovsk in 2010. In-house facilities for malt and barley storage will allow the Company to upgrade grain quality control and cut costs associated with leasing third-party storage facilities. Construction related to the assembly and installation of silos was wrapped up in 2010.

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Key Projects
Renovating Grain Storage in Voronezh Renovating the existing grain storage involves replacing the intake plant, the tower, the head-house and basement equipment to receive and offload grain in compliance with industrial safety requirements. Decanting Equipment Balancing economic, social and environmental factors, while making managerial decisions, is one of the Companys key principles. The Company invests considerable amounts in energy-saving technologies and lessening the impact of equipment on the environment. In 2010, decanting equipment was installed at the Companys production facilities in St. Petersburg, Voronezh and Chelyabinsk. Equipment for dewatering kizelgur (the material used to filter beer) was installed within the framework of the Companys environmental program. New decanting equipment will lessen environmental impact by reducing the volume and mass of wasted kizelgur, which can be used as raw material in other production processes. Launching a New Canning Line at the BaltikaRostov Production Facility A new canning line at the Baltika-Rostov production facility was installed and commissioned in 2010. The economic effect and production capacity of the new line were calculated using The Master of Planning system. The production capacity of the new line is 60 thousand half-liter cans and 30 thousand liter cans per hour. Launching the line in Rostov will decrease delivery costs and broaden the range of products produced at the facility. Canned beer produced at the Baltika-Rostov production facility can be exported to Ukraine, Transcaucasia and Turkmenistan. The products will also be sold in the South of Russia. Bio-gas in Samara and Yaroslavl To support Russias energy-saving policy and to upgrade power consumption efficiency, the Company implemented an environmental project that uses bio-gas as boiler fuel. The project was implemented in 2010 at two of the Companys production facilities in Samara and Yaroslavl. It is assumed that using bio-gas will cut natural gas consumption by 10 % per annum. The first bio-gas project was realized in 2008 at Baltika-Khabarovsk.

The Artesian Well in Yaroslavl The Company surveyed operations in numerous Russian regions to find water that has an optimal and balanced natural chemical composition, suitable for producing a new drinking water called Zhivoy Ruchey. The water produced from the artesian well developed at the Baltika-Yaroslavl production facility meets these requirements perfectly. The water produced from a depth is subject to multistage treatment including fine purification using nanometric filters which preserve the waters natural mineralization. On-line Scheduling of Filling Shops The integrated development of information systems for the Operations Division involves implementing on-line scheduling for filling shops. In 2010, on-line scheduling was implemented at the Companys production facilities in Rostov-on-Don, Tula and Chelyabinsk. On-line scheduling is a part of MES (Manufacturing Execution System) and involves acquiring data and organizing the operation of filling shops, including equipment and software. Scheduling allows monitoring filling shops, thus providing an opportunity to upgrade the management efficiency of ships. Utilizing data acquired from on-line scheduling increased production equipment efficiency. On average, efficiency increased 3 %.

33

Baltika Breweries | Annual report 2010

Sales Development
In 2010, the Companys Sales Division was re-organized partly due to centralizing sales channel management. A separate department was launched to deal with key national customers. Within the division, the regional sales structures were also individualized. In addition, the 1st stage of the planned changes in trade marketing function was completed and the function was renamed as Trade Channel Marketing. The transformation was designed to ensure a new quality of management at points of purchase*, based on a deeper understanding of buyers motivation, and to take this motivation into account, depending on specific sales channels. The first stage of the transformation included developing long-term strategies for each trade channel, optimizing the principles and processes of crossfunctional planning for promotional campaigns, establishing standards for the activating brands at points of sale and training key employees on new operating principles. Additional transformation will involve upgrading buyer relations and synchronizing the operation of all commercial functions, as well as increasing the quality coverage of activations. The most recent year was marked by the addition of a significant number of non-beer beverages to the Companys portfolio. To introduce new beverages to the market, a special model was developed, which ensures the balanced development of both beer and non-beer segments.

The on-trade channel segment was actively developed, which led to the Companys record-breaking performance with sales growth exceeding 13 % in 2009. Employees of the on-trade channel continued to communicate about the Companys brands in the HoReCa segment, by developing new segmentation of the retail trade, which will improve visualization of the Baltika brands for the channels target consumers. During the year, 4,316 Baltika employees, including top managers, participated in Baltikas Landing Party action. This Program was organized by the Company to assist field employees in the sales department during high season and to share experience. On November 2nd, 2010, the Company received the Supplier of St. Petersburg award for its contribution to developing the consumer market from the City Government.

* The point-of-purchase, or POP is the point where a buyer decides to buy this or that product, brand or package.

34

Key Projects
Investments in Personnel
Continually developing competencies and upgrading personnels occupational skills constitutes one of the Companys strategic goals. The Corporate University of Baltika (CUB) was established in 2010 based on best practices in personnel development and training. The University is intended to offer a complex approach to corporate development, and to implementing a development culture in which each employee is not only aware of the importance of continuous development, but also uses every development opportunity provided by the Company. The CUB departments listed below integrate support and development tools, career planning and continuity, as well as training programs for employees across all levels. The Leadership and Management Department supports developing and training managers across all levels. The Department provides career development, continuity and managerial skills programs. Consulting services on managerial issues are also included in the curriculum. The Business Skills Department facilitates upgrading business skills, including: negotiating and project management, etc. The Department offers not only training courses, but also programs for the improving English language skills, as the language is in greater demand among employees due to the growing number of international projects. The Production and Engineering Department facilitates professional development in production and engineering, using mentoring and knowledgetransfer techniques. The Occupational Department supports the development of specific knowledge, such as finance and information technology, providing trainees with basic knowledge in related fields. There is also a Sales Success Department, which offers training opportunities for employees in the sales department. These opportunities include field training and special professional advancement programs. To support development, corporate employees are offered different competency assessment methods. To identify the strong sides and areas for development of the Companys personnel, the Company uses the following assessment techniques: annual performance assessment (mandatory for all employees), assessment and development centers, 360-degree assessment. All these specific methods ensure a complex approach to development and career planning.

Professional Awards
The Companys achievements in personnel management were recognized with two awards in fall 2010. The Company was awarded the 2010 PEOPLE INVESTOR Prize in the HR Management category for its motivational programs Your Idea Works! and Ive Got an Idea! The Company also won The Best HR Project contest in The Best Innovative Project category, for its PEAK and Challenge programs. These career development and continuity programs were recognized for being implemented in the best possible manner.

35

Corporate Social Responsibility

Corporate Social Responsibility

Personnel and Human Rights


We value our employees, because they are at the heart of our success. The Company strives to create conditions which enable its employees to develop their skills to the fullest degree in an open and creative working environment. Social Partnership Corporate labor relations are based on respect and commitment to employees rights in accordance with social partnership principles. In 2007, Baltika established the Personnel Council, which is a body that represents the interests of all employees and enables them to be engaged in the Companys social policy management. At the initiative of the Council and with the involvement of members of primary trade union bodies, the Company signed its collective bargaining contract in July 2008, which governs corporate social and labor relations, establishes mutual obligations for employees and the administration and expands employment guarantees for a three-year period. The main provisions of said contract are related to compensation packages, work and vacation time, conditions and labor protection. Last year, the Company began to develop a new version of its collective bargaining contract that will be concluded in 2011 when the existing contract expires. Compensation and Benefits Package The salary level at Baltika is one of the highest in the industry with the well-balanced compensation package. This enables the Company to attract highly-skilled personnel and provide good remuneration to employees. In 2010, the average employees remuneration package increased 8 %. The compensation package includes a wide range of benefits and compensation, such as: Voluntary health insurance;
* The United Nations Global Compact, which was launched in July 2000, is both a political platform and a practical framework for businesses committed to sustainable development and responsible relationships in the business environment. As an initiative to upgrade the quality of corporate governance approved by corporate CEOs, it is focused on pursuing the universal consistency of business activities and strategies with ten universally accepted principles in the areas of human rights, labor, the environment and anti-corruption efforts.

The Companys philosophy is based on a We are engaged with society principle. Baltika contributes to societal development and environmental protection by introducing business practices that follow corporate social responsibility (CSR) principles. In May 2008, Carlsberg Group companies, which include Baltika, signed on to the United Nations Global Compact* which stipulates ten principles of sustainable and responsible development businesses. These principles are reflected in the Carlsberg Group CSR Policy, which was approved in 2010. The Policy covers the following key areas: Personnel and human rights; Labor protection; Environment; Marketing communication; Community engagement; Business ethics. In 2010, Baltika reviewed corporate documents related to CSR to make them consistent with Carlsberg Group Policy and developed and approved Baltikas own CSR policies. Baltikas CSR strategy was introduced on a systemic level and covers all business areas, from resource conservation to development a culture of responsible drinking.

Life and accident insurance; Free meals at the Companys canteens or meal compensation for employees who are travelling on business; Financial benefits in the case of marriage, the birth of a child, anniversary dates or retirement; and Additional payments for illnesses, travelling expenses and other reasons.

37

Baltika Breweries | Annual report 2010

Baltika branches operate fitness centers outfitted with sophisticated workout facilities, saunas and swimming pools. The Company leases gym halls and football fields for its personnel and hosts various sporting events. Baltika owns a holiday center in the Leningrad Region providing year-round service, including a multipurpose fitness and entertainment complex. The complex runs a food production facility fitted with the most sophisticated kitchen and technical appliances that caters to 200 people, a 24-meter swimming pool with an up-to-date water treatment system, four saunas with mini swimming pools, a workout facility and a gymnasium. Baltika employees participate in numerous federal sporting events, including: Ski Track of Russia, an open mass cross-country skiing race, and city sports tournaments. In April 2010, the Krasnoyarsk branch team won the City Cup in the mini-football championship for the Nevsky District Council of Industrialists and Entrepreneurs of St. Petersburg. During the reporting period, more than 1,000 Baltika employees participated in sporting events.

38

Corporate Social Responsibility

Labor Protection
Baltika is committed to ensuring the job safety of all corporate employees and contractors and is responsible for meeting high labor production standards. In 2010, to monitor compliance with legal requirements in the areas of labor, industrial and fire safety and civil defense, the Company introduced the socalled mutual audit system, which are audits performed by the Companys branch employees in other branches. In addition, the Company developed performance indicators to assess compliance with labor protection regulations, reviewed standards of providing free work clothes, work boots and other individual protective gear to employees and established the self-assessment system to ensure compliance with labor protection regulations. The Company regularly evaluates job safety rules compliance by its employees and holds integrated job safety days. Production shops are fitted with hi-tech equipment that regularly controls technical conditions. Work places are outfitted with sophisticated office equipment, and the production and office environments are monitored for lighting, dust content, noise, ventilation and other indicators. Employees receive free work clothes and boots, individual protective gear, detergents and disinfectants and drinking water.

Environment
Baltika meets Russian environmental regulation requirements, national environmental standards and the provisions of its in-house environmental policy, which were developed in accordance with CSR Policy. Under its Environmental Policy, the Company aims to optimize natural resources consumption and use environmentally-friendly products, materials and technologies. Key areas of corporate activity related to the environment: Minimize environmental impact; Upgrade waste treatment; and Efficiently utilize resources.

39

Baltika Breweries | Annual report 2010

Environmental Management In 2010, the Company began preparations to receive ISO 14001, an international environmental management certificate. As part of the preparation process, Baltika established special working groups to implement the environmental management system (EMS), developed a range of internal regulations and guidelines and identified and assessed environmental issues. ISO 14001 will certify that the Company efficiently implements its environmental management system which prevents risks related to environmental impact. The Company carried out so called mutual audits to control environmental regulation compliance in the spheres of labor protection, industrial and fire safety and civil defense. Returnable Bottle Project The Company looks to optimize the utilization and processing of packaging materials to minimize environmental impact. To increase the share of returnable bottles in the 2010 production process, the Company continued to implement its Returnable Bottle Project. During the reporting period, the share of returnable bottles used for production purposes amounted approximately 36 %. The Company developed and offered its vendors a special targeted program focused on turn-in points located in different Russian regions to up bottle collection. As a result, the number of glass bottle centers increased 30 % compared with 2009.

Energy Efficiency Energy efficiency is an important component of Baltikas environmental policy. The Company undertakes different efforts to upgrade energy efficiency, including projects involving alternative energy source usage. In 20022003, the Companys breweries in St. Petersburg and Rostov-on-Don commissioned their own thermal power plants which allowed them to partially meet their internal demand for electric and thermal power. In 2009, the BaltikaKhabarovsk branch installed a solar battery system to heat the fitness center for corporate employees. Bio-fuel is widely used in Europe as an alternative energy source. In Russia, this technology was first implemented at the Baltika-Khabarovsk plant which put into operation a unit to burn biofuel produced by sewage treatment facilities. In 2010, the project to use bio-fuel as a boiler house fuel was also implemented at Baltikas Samara and Yaroslavl plants. These projects will minimize environmental impact and conserve natural gas. As part of the 2010 energy efficiency program, Baltika has developed Leadership Energy, a special domestic program aimed at reducing costs both in primary production and energy production that looks to promote efficient energy resource usage by its employees. In 2010, the Company collected more than 400 proposals to upgrade energy efficiency from 300 employees involved in the program; most of these proposals are now being implemented.

40

Corporate Social Responsibility

In 20092010, for energy efficiency purposes, three of the Companys plants (in Rostov-on-Don, St. Petersburg and Tula) installed systems for monitoring, measuring and managing energy resources which enable them to meet the challenges of the Companys energy use management and ensure continuous energy saving and cost reduction. The automated monitoring, measuring and managing system for energy resources is designed to collect, process, maintain and display data on consumed energy resources and enables the Company to meet the following challenges:

making the collecting, processing and storing of data from local measuring stations automatic; monitoring delivered and used energy resources; engaging in the technical record-keeping and review of energy use; and integrating existing energy measuring systems in a single information space. The Company plans to install these systems at all of its other production sites, putting them into operation and introducing an operational planning system for its own energy resources. In 2010, Baltika joined the non-commercial partnership Association of Buyers in the Wholesale and Retail Electric Power (Capacity) Markets, which protects the interests of large power consumers and participates in dialogue between the business community and governmental authorities.

41

Baltika Breweries | Annual report 2010

Total volume of energy resources used by Baltika in 2010 in physical and monetary terms
Resource type Electric power Gas Diesel fuel Oil fuel Bio-fuel Thermal energy Gasoline Gas for loaders (propane) TOTAL Unit kWh thousand m3 Tons Tons thousand m3 MW liters Kg Volume 385,509,751 125,190 10,594 3,866 1,154 1,113,525 3,902,664 2,018,803 Cost, RUB 659,642,692 378,544,529 162,849,260 56,531,472 0 585,414,326 75,007,561 35,650,764 1,953,640,604

For its contribution to efficient energy use, Baltika received the 2010 Save Energy! national award, which was launched by the Moscow Government and sponsored by the Russian Ministry of Energy and the Russian Energy Agency, and was nominated for The best corporate energy efficiency project for successfully implementing projects to use alternative energy sources, as well as for its efforts to upgrade energy efficiency.

42

Corporate Social Responsibility

Earth Hour For two years now, employees of all of Baltikas breweries from St. Petersburg to Khabarovsk have been involved in Earth Hour, a World Wildlife Fund awareness campaign. The international campaign is aimed at attracting public attention to the issues of global warming and climate change. During this event, supporters abstain from using electricity for one hour to reduce greenhouse gas emissions. Campaigns Involving City Residents Not only does Baltika fund large-scale environmental programs, such as constructing treatment plants and using alternative energy sources, but it also hosts environmental awareness campaigns for city residents enabling them to contribute to environmental improvement and to upgrade living standards. In 2010, Rostov-on-Don held its fourth social contest for the best yard improvement plan My Favorite Yard. Participants cleaned city yards and participated in the voluntary clean-up of the Chukovsky City Park. Baltikas Chelyabinsk branch participated in the city target program Yard-2010 to develop childrens playgrounds around the city. Forty young apple trees were planted in the Krasnoyarsk City Park to commemorate the 135th anniversary of the Companys brewery in Krasnoyarsk. Chelyabinsk holds a regular campaign to remove trash from the Miass River volunteers and professional divers cleaned up the river bed and its embankments. Garbage bins designed by the Companys employees and students from the citys Institutes of Architecture were installed in Novosibirsks Zayeltsovsky Park as part of the Clean City Park program. In Yaroslavl, the Company sponsored the city contest Yaroslavl in Flowers to commemorate the citys 1,000th anniversary. Zhivoy Ruchey to Wildlife In August and September of 2010, the Zhivoy Ruchey (Life Spring) water brand hosted an environmental campaign in six Russian cities. More than 420 volunteers participated in the campaign and cleaned the banks of water reservoirs in Moscow, Yaroslavl, Voronezh, St. Petersburg, Rostov-on-Don and Samara. Approximately 120 tons of trash were collected and removed.

43

Baltika Breweries | Annual report 2010

Marketing Communication
The Company undertakes different efforts to promote responsible consumption and voluntarily assumes self-regulation responsibilities from the Union of Russian Brewers. Code of Business Communication for Russian Brewers On March 30th, 2010, at the Annual General Meeting of the Union of Russian Brewers, representatives from small-, medium- and large-sized Russian breweries approved the Code of Business Communication, a document that stated existing and future brewers approaches to advertising. Baltika was one of the initiators of the Code. The Code both emphasizes the strict observance of the applicable Law on Advertising and proposes additional and voluntary restrictions for promoting brewery products. For example, brewers shall not use any slang directed at minors, position the alcoholic strength of a beer as an advantage for any beer brand, state that low alcohol beers help avoid the abuse of beer and shall prohibit the sale of beer to minors at public events. The Special Supervisory Board consisting of independent experts shall monitor compliance with provisions of the Code of Business Communication. The Supervisory Board is headed by Natalia Fonareva, Chairman of the Russian Chamber of Commerce and Industry on business regulation and one of the authors of the Russian Law on Advertising. Warning Notice on Packing Subject to applicable Russian laws, all beer advertising and promotional materials shall carry warning notices of the risks associated with abusing beer. President Dmitry Medvedev in his Instructions to the Russian Government proposed extending legal requirements to include consumer packaging of alcohol products and low-alcohol beverages, beer and beer-based beverages. The Union of Russian Brewers proposed that brewing companies voluntarily put warning notices on beer packaging without waiting for the relevant legal requirement. The brewery companies, members of the Union of Russian Brewers, including Baltika Breweries, which had approved the above decision started to distribute products carrying the warning notice for risks associated with abusing beer on packaging as of June 1st, 2010. The notice must cover at least 10 % of a bottle label or the surface-side of a can and carry warnings of the harm from beer abuse, as well as a sign 18 Selling beer to minors is prohibited designed and approved by the Union of Russian Brewers.

44

Corporate Social Responsibility

Community Engagement
Caring for communities is one of the basic principles of the Companys operations. We are aware of the impact that we have on local communities in which we operate, as well as our opportunities to cooperate with them. Therefore, we take responsibility for making a positive contribution to these communities development. Beer Patrol In 2010, Baltika continued implementing its social project Beer Patrol, which was originally launched in 2008. The Project looks to pursue public control over complying with the law that prohibits beer sales to minors. Public inspections are carried out at all public events hosted by Baltika and in all retail outlets. In 2009, the Company carried out inspections to prevent the improper and negligent conduct of sellers in 24 Russian cities, including: Astrakhan, Voronezh, Volgograd, Yekaterinburg, Ivanovo, Krasnodar, Krasnoyarsk, Lipetsk, Moscow, Novomoskovsk, Novosibirsk, Penza, Omsk, Rostov-on-Don, Samara, St. Petersburg, Sochi, Stavropol, Tambov, Tula, Ufa, Khabarovsk, Chelyabinsk, Yaroslavl and Alma-Aty in Kazakhstan. In 2010, Belarus and three additional Russian cities Kaluga, Kursk and Orel also joined the project. In 20092010, the Company conducted 80 raids and inspected approximately 1,000 retail outlets and reported violations in roughly one third of them. Beer Patrol is expanding its geographic coverage, increasing the number of program participants and shifting the emphasis on the Companys involvement in the project. The Company acts less as an inspections organizer and more as an expert assisting in the supervision and public organization of efforts to combat legal violations. In 2010, the Company sponsored the Public Control initiative in Yekaterinburg, Civil Patrol in Samara and Public Control raids in the Southern Federal Region towns. Project efforts include putting up a special sign Are you 18? Prove that! in retail outlets, as well as educating sales personnel about necessary steps to check a buyers age. These efforts are preventive in nature and enable the Company to reduce the amount of unauthorized beer sales to persons under the age of 18.

Are you 18? Prove it! The sale of beer to minors is prohibited. Its the low! You can show your passport, driving license or student card

45

Baltika Breweries | Annual report 2010

The Culture of Responsible Drinking In addition to the brewing history museum in Krasnoyarsk, the Company opened a new museum at the Baltika-St. Petersburg plant in 2010. The opening ceremony for the Brewing History Museum in St. Petersburg coincided with Baltikas 20th anniversary on June 17th, 2010. The Museum has six main sections. Visitors can learn about the history of brewing starting in Ancient Egypt and can take a look at a Russian cabin and learn about Russian brewing traditions and its role in peasants life. The section on Russian brewing traditions reconstructs the atmosphere of a St. Petersburg dive in the late 19th early 20th century (the Russian dive is a bar that sells porter). The display includes a collection of decorative art objects, a unique collection of beer bottles, brewers appliances and one of Russias largest collections of hutter stoppers manufactured in Germany more than 100 years ago (which have a high historical and artistic value). The Soviet period is represented by a traditional 1970s beer tank. The contributions of the Carlsberg and the Jacobsen family, founders of the Danish brewing industry, to the development of the brewing industry, science and art are represented in the section devoted to European brewing. The museum exhibition includes the history of Baltika. Visitors can see how the plant looked 20 years ago, as well as the Companys first labels, bottles and mugs. In 2010, the Company hosted several photo shows Beer. 100 years of history in photographs based on photographs collected by the Museum. The Company presented shows in special tents at the kvass and beer festivals during the summer in different Russian cities, as well as in local galleries and museums.

rehabilitation center, the Tula Emergency Care Hospital named after Vanykin and the Chelyabinsk city social movement, Iskorka, to help pediatric oncology patients. To commemorate the 65th anniversary of World War II victory, Baltika paid special attention to veterans. The BaltikaNovosibirsk branch hosted a gala concert for members of the Novosibirsk Society of Victims of the Leningrad Siege Blockadnik and presented gifts to all veterans. Targeted social assistance was provided to 400 veterans, invalids, war participants and workers on the home front. The Company funded the reconstruction of the Main Line of the Tula Defense Memorial. The Company continues to provide charitable support to local sport clubs, including: Dynamo volleyball club in Khabarovsk, the Rostov-on-Don handball club, the Yenisei Russian hockey club in Krasnoyarsk and Sibselmash in Novosibirsk. The Company contributed more than RUB 10 million to supporting City Days and other public events across Russia. In 2010, Baltika funded City Days in Khabarovsk, Krasnoyarsk, Novosibirsk, Tula, Rostovon-Don and the Leningrad Regional Anniversary event in Kingisepp. For many years,

Charity and Sponsorship For many years, Baltika has provided targeted charitable and sponsorship support in all regions in which it is present. In 2010, the Company contributed RUB 122 million to charitable projects and important social events. The Companys public efforts are focused on funding health and social protection projects and sponsoring city celebration events. The Company completed its largest charitable project in 2010 in Yaroslavl it funded the overhaul of the regional childrens hospital to coincide with the Citys 1,000th anniversary. Under a long-term cooperation and support project with Turner Childrens Orthopedic Research Institute, Baltika funded the renovation of the Institutes laboratory department. Baltika sponsored the St. Petersburg Childrens Hospice, the Mountain House of Hope

46

Corporate Social Responsibility

the Company has been a partner of the St. Petersburg International Economic Forum. In 2010, Baltika participated in 60 celebratory events across Russia and hosted some of them. Within one year, more than 1.5 million Russian citizens visited events hosted or supported by the Company and paid tribute to a large selection of beers and non-alcoholic beverages offered by the Company, listened to various musical styles and participated in contests, competitions and campaigns aimed at promoting responsible beer consumption. The hosts emphasized banning the sale of beer to minors under 18. Last year, Baltika participated in kvass and beer festivals in ten Russian cities: St. Petersburg, Moscow, Yaroslavl, Tula, Sochi, Rostov-on-Don, Samara, Novosibirsk, Krasnoyarsk and Khabarovsk. Large-scale musical events were held under the auspices of the Companys popular brands: the Ilmen Festival of Art Songs, GreenFest, Transmusicales, the Stereoleto session and the Movida Corona concerts.

Promotion of Popular Traditions During the summer, the Khlebny Krai kvass brand held entertainment and awareness campaigns, Kvass Parties, in ten Russian cities. Approximately four thousand people mostly children and teenagers participated in these campaigns. The campaigns were aimed at making young Russians aware of popular Russian traditions. The hosts invited experts in old popular crafts and held contests for the best knowledge of popular traditions, proverbs and sayings. In Samara, children learned to make pottery, birch bark platting, embroidery and crochet work. In Rostovon-Don, they painted clay and wood work, learned the basics of popular singing and played popular instruments. In Kazan, children learned to weave beads, cut wood, weave and make leather mosaics. They also learned a lot about the history of kvass and its role in Russias national culture. These campaigns are aimed at developing a healthy society and preserving spiritual heritage, as well as spurring the interest of young Russians in Russian history and promoting patriotism.

Taxes
Baltika is one of the largest taxpayers generating a significant portion of tax revenues in cities where the Companys headquarters and branches are located. The timely and full payment of taxes to budgets across all levels is customary for a socially responsible company that strictly complies with Russian laws. In 2010, the Companys tax payments to budgets at all levels and extrabudgetary funds totaled RUB 50.6 billion. For many years now, Baltika has been the company that generates the largest tax revenues for St. Petersburgs budget.

Business Ethics
The Company follows generally accepted norms and best practice business ethics. The Companys business ethics policy establishes corporate principles for running the business as a responsible partner and is an instrument to protect its reputation. The policy includes a set of key provisions, in particular, the Conflict of Interests provision under which the Company only pursues business interests when selecting new partners and concluding agreements and avoids any conflicts of interests with existing business connections and the personal interests of its employees; the Provision on Complying with Competition Laws under which the Company makes efforts to prevent unfair competition in business practice and partner relationships; the Fraud Prevention Provision and the Provision on Inadmissible Corrupt Practices.

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Corporate Governance

Corporate Governance

Observing the Corporate Governance Code


The Company observes the following provisions of the Corporate Governance Code, concerning: Baltika adheres to best practice corporate governance standards in full accordance with the Corporate Governance Code, which has been approved by Russian securities authorities: All shareholders have the right to effective protection if their rights have been infringed on; Shareholders have access to reliable and effective settlement methods for share ownership rights; Shareholders are able to participate in the Companys management by adopting decisions on the most important aspects of corporate activity at the General Shareholders Meeting; Shareholders have the right to receive regular, full and accurate corporate information; Shareholders do not abuse their rights; The Company exercises control over using confidential and proprietary information. Holding the General Shareholders Meeting:

Shareholders have the right to introduce items in to the General Meetings agenda, as well as the right to request convening a General Shareholders Meeting without providing an extract from the shareholder register; The Company informs shareholders about convening a General Shareholders Meeting not less than 30 days prior to the date of the Meeting, regardless of agenda items, if legislation does not call for a longer period of time; The Companys President, members of the Board of Directors, members of the Internal Audit Committee and the Auditor, as well as candidates for indicated management and control bodies, are required to attend the General Shareholders Meeting; The Provision on the Companys management and control bodies stipulates the availability of registration procedures for participants at the General Shareholders Meeting.

Activities of the Companys Board of Directors, as well as requirements for its members: The Board of Directors is elected via cumulative voting; Members of the Board have the right to receive corporate information that is necessary to fulfill their functions. The order for conducting Board meetings is stipulated in the Provision on management and control bodies; The approval of the Companys annual budget (for current operational economic activities), as well as the investment budget, falls under the competency of the Companys Board of Directors in accordance with the Charter; The Companys Provision on management and control bodies stipulates that Board members must act in the interests of the Company (preventing conflicts of interest);

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Baltika Breweries | Annual report 2010

Baltika Management

Denis Sherstennikov Vice President, Marketing

Ekaterina Azimina Vice President, Finance and Economics

Members of the Board of Directors are required to inform the Company of any transactions that involve corporate securities; The Board of Directors does not include individuals who have been found guilty of economic crimes or crimes against governmental authorities or the interests of State and municipal services; The Board of Directors does not include persons who are participants, CEO (Manager), members of a management body or as employees in a competing legal entity.

Requirements for the Companys control bodies on financial and economic activity: A document was adopted by the Companys Board of Directors that defines corporate internal control procedures the Provision on internal control and auditing financial and operational activity; A special corporate division exists that observes internal control procedures: the internal audit and control department; Internal control bodies do not include individuals who have been found guilty of economic crimes or crimes against governmental authorities or the interests of State and municipal services; Internal control bodies do not include persons who are executives, participants, CEO (Manager), members of a management body or employees in a competing Company; The internal audit and control department informs the Board of Directors Audit Committee on any detected violations; The Audit Committee evaluates auditors conclusions prior to submitting them to shareholders at the Companys General Shareholders Meeting.

50

Corporate Governance

Anton Artemiev President

Denis Lysak Vice President, Sales in Russia

Alexander Dedegkaev Vice President, Supply Chain

Governance Structure

President

Vice President, Finance and Economics

Vice President, Marketing

Vice President, Supply Chain

Vice President, Sales in Russia

Security Director

IT Director

Corporate Affairs Director

HR Director

Legal Director

Export Sales Director

51

Baltika Breweries | Annual report 2010

Information disclosure requirements: A Provision on information policy was adopted to define rules and approaches for information disclosure. On the Companys corporate web site (www.corporate.baltika. ru), official information regarding corporate activity is published; other information is also regularly disclosed on the site. In addition to this, information that requires compulsory stock market disclosure is published on the Interfax newswire. Izvestia newspaper is the official print media outlet that the Company uses to inform shareholders about convening general meetings. The Companys Board of Directors approved the Provision on insider information, which refers to information that is not publicly available and the disclosure of which may substantially affect the market price of the Companys securities.

General Shareholders Meeting


The General Shareholders Meeting is the Companys supreme management body. In full accordance with applicable laws and the Companys charter, the following issues fall under the competency of the General Meeting: Introducing amendments and alterations to the Charter or adopting a new edition of the Charter (except in cases indicated in the Russian law On joint stock companies); Corporate re-organization; Liquidating the Company, appointing a liquidation commission and approving intermediate and final liquidation balances; Defining the number of members on the Companys Board of Directors, electing its members and early terminating their powers; Determining the number, nominal value and category (type) of authorized shares and rights granted by these shares; Increasing charter capital through a higher nominal share value. Upping charter capital by placing additional shares only in those cases, when in full accordance with Russian legislation, such resolutions can only be adopted by the General Meeting;

52

Corporate Governance
Decreasing charter capital by decreasing the nominal value via the Companys acquisition of a portion of shares to decrease their total number, as well as by cancelling purchased or bought back corporate shares; Electing members of the Companys Internal Audit Committee, as well as early terminating their powers; Approving the Companys auditors; Paying (announcing) dividends based on Q1, H1 and nine month financial year results; Approving annual reports, annual accounting reports, including the Companys profit and loss statements (profit and loss accounts), as well as profit distribution (including the payment (announcement) of dividends, excluding profit distributed as dividends as a result of Q1, H1, nine month or FY) and corporate losses as a result of the financial year; Defining the order of conducting the General Meeting; Splitting and consolidating shares; Adopting resolutions on approving transactions in cases defined by Article 83 of the Russian law On joint stock companies; Adopting resolutions on major transactions in cases defined by Article 79 of the Russian law On joint stock companies; Purchasing (by the Company) placed shares in cases determined by the Russian law On joint stock companies; Adopting decisions on participating in financial and production groups, associations and other commercial organization unions; Adopting internal documents regulating the activities of the Companys bodies; Resolving other issues, as foreseen under the Russian law On joint stock companies.

In 2010, the Company held two General Shareholders Meetings: one annual (AGM) and one extraordinary (EGM). On April 8th, 2010, the Company held its Annual General Shareholders Meeting, which approved the annual report, the profit and loss statement based on full year results and 2009 profit distribution and dividend payments in the amount of RUB 128 per share. The General Meeting elected the Companys Board of Directors and the Internal Audit Committee, as well as approved the Companys auditors: CJSC A&P Audit and ZAO KPMG. In addition, new revisions of the Charter and the Provision on the Companys management and control bodies were adopted, as were interested party transactions with Baltic Beverages Holding AB and Russian Railways OJSC and its affiliates. On August 30th, 2010, an Extraordinary General Shareholders Meeting was held via absentee voting, during which shareholders approved paying (announcing) dividends for H1 2010 in the amount of RUB 42 per share.

53

Baltika Breweries | Annual report 2010

The main tasks of the Board of Directors include:

54

Corporate Governance

Hans Kasper Madsen Born 1961, higher education Member of the Board of Directors since 2008 Holds positions in the following organizations: Carlsberg Breweries A/S, Senior Vice President, Operations Danish Malting Group A/S, member of the Board of Directors

Ulrik Andersen Born 1965, higher education Member of the Board of Directors since 2009 Holds a position in the following organization: Carlsberg Breweries A/S, General Counsel & Vice President Legal Counselling and Risk Management Baltic Beverages Holding AB, member of the Board of Directors

Vladislav Grib Independent Director Born 1972, higher education Member of the Board of Directors since 2010 Holds positions in the following organizations: The Russian Academy of Legal Sciences, Chairman of the Executive Committee Yurist (Lawyer) Publishing Group Ltd, Editor-in-Chief The Federal Chamber of Russian Federation Lawyers, Vice President Head of the Civil Society Chair at the Moscow State Institute of International Relations, MFA, RF

Alexander Shokhin Independent Director Born 1951, higher education Member of the Board of Directors since 2008 Holds positions in the following organizations: RUIE, President The State University Higher School of Economics, President Lukoil OJSC, member of the Board of Directors Fortum OJSC, member of the Board of Directors Russian Railways OJSC, member of the Board of Directors TMK OJSC, member of the Board of Directors TNK-BP Limited OJSC, member of the Board of Directors Novorossiysk Sea Trade Port OJSC, member of the Board of Directors

The Companys Board of Directors consists of seven members, including two independent directors. During the reporting period, the membership of the Companys Board of Directors underwent the following changes: on April 8th, 2010 Alexander Izosimov was replaced by Vladislav Grib. During 2010, 17 meetings of the Companys Board of Directors were conducted both in person and via absentee voting.

Issues considered at meetings of the Companys Board of Directors included the following: Approving the Companys strategic development plans; Approving launch of new products, including: Old Bobby beer, Somersby cider and Zhivoy Ruchey drinking water; Concluding licensing agreements; Approving the 2011 Company budget.

55

Baltika Breweries | Annual report 2010

Committees of the Companys Board of Directors


Audit Committee The purpose of the Committee is to upgrade the effectiveness and quality of work of the Board of Directors in fostering and ensuring open communication with auditors, the Internal Audit Committee and structural divisions of the internal audit, accounting and finance and economic division of the Company via the preliminary consideration and preparation of recommendations to the Board of Directors on the following issues that fall under the competency of the Committee: Risks associated with corporate operations; Management reporting; Financial accounting; External independent audit and internal audit; Internal control procedures.

The sole executive body


The sole executive body of the Company is the President, who is responsible for managing the Companys current operations. Anton Artemiev has held this position since 2005.

Remuneration for members of management bodies


In accordance with Item 2 of Article 64 of the Russian law On joint stock companies, on April 2nd, 2009, the Companys AGM set the maximum remuneration for the Board of Directors independent directors at RUB 3,900,000. The Board also set a maximum for expense compensation (incurred while carrying out functions as Board members) at RUB 450,000 leaving this amount at the same level as in the previous year and converting the amounts set in dollars into rubles, thus following the Companys policy on reducing liabilities in foreign currencies. During 2010, independent directors received remuneration totaling RUB 3,039,558. In accordance with Item 3 of Article 69 of the Russian law On joint stock companies, the rights and obligations of the Companys President are regulated by the indicated law and the corporate charter, as well as an agreement concluded between the President and the Company. Remuneration for fulfilling the function of the sole executive body, and other work conditions, is regulated by a labor agreement signed between the President and the Company.

The Nomination and Remuneration Committee The primary purpose and principal activities of the Nomination and Remuneration Committee consist of contributing to involving qualified specialists in corporate governance, and in creating incentives for efficient functioning. The basic documents regulating the activities of the committees and in determining their frame of reference, membership and functions are the following: Provisions on the Audit Committee of the Board of Directors (approved by a resolution of the Board of Directors as of September 6th, 2006, Minutes No. 6/n as of September 6th, 2006); Provisions on the Nomination and Remuneration Committee of the Board of Directors (approved by a resolution of the Issuers Board of Directors as of March 27th, 2007, Minutes No. 5 as of March 27th, 2007).

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Corporate Governance
The Audit Commission
In accordance with current Russian legislation and the Companys Charter, the Audit Commission (a permanently operating elected body) executes periodic control over the Companys financial and operational activities, as well as the actions of its management bodies and executives (including separate divisions, services, branches and representative offices) by checking on the following: The legitimacy, economic feasibility and effectiveness (expediency) of financial transactions and operations carried out by the Company during the examined period; The completeness and accuracy of the Companys administrative documents which reflect the Companys financial transactions and operations; The legitimacy, economic feasibility and effectiveness (expediency) of actions taken by the Companys executives and the heads of structural divisions to ensure compliance with relevant legislation, the Charter, adopted plans, programs and other internal corporate documents. The three-member Audit Commission is elected by the Annual General Shareholders Meeting. Members of the Audit Commission are not allowed to be members of the Companys Board of Directors or to hold any other corporate management positions. The following persons were elected to serve as members of the Companys Audit Commission at the Annual General Shareholders Meeting, which was held April 8th, 2010: Vibeke Aggerholm Born 1964, higher education Vice president for Internal Audit at Carlsberg Breweries A/S, member of the Board of Directors for the Institute of Internal Auditors (IIA) Charles Ericsson Born 1948, higher education Consultant for Baltic Beverages Holding Nadezhda Bazilevich Born 1975, higher education Financial manager for Baltika Breweries

Interested party and major transactions


During 2010, Baltika Breweries completed 72 interested party transactions. No transactions that are recognized by applicable Russian legislation or the corporate charter as major transactions were completed during the reporting year. A complete list of interested party transactions is provided in the appropriate section of this Report.

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Baltika Breweries | Annual report 2010

Risk management
The Companys operation is subject to various business risks. The Company has developed a special risk management system to prevent, identify, control, monitor and minimize risks. The risk-related policy and management system are subject to periodic analysis and revision in accordance with changes in the Companys operation, as well as in external conditions. The Companys Board of Directors is responsible for implementing the risk management system. The Board of Directors also controls system functioning. The Audit Committee of the Companys Board of Directors controls adherence to the risk management policy and analyzes the expediency of the risk management system, in conjunction with the Companys Internal Audit Department. In case any of the risks listed below arise, the Company is ready to take appropriate measures to minimize their consequences.

Financial Risks The Companys primary financial risks are associated with foreign exchange, credit and liquidity. To minimize financial risks that can affect the Companys financial performance, a complex action plan has been developed and implemented that consists of the following points: To analyze financial risks, yearly, quarterly, monthly, etc. planning, evaluating actual profitability and cash flow, calculating the open FX position; Implementing cost cutting programs; Budget control on an on-going basis; Controlling working capital the Company implements a program to manage accounts receivable, accounts payable and stocks; The Company grants secured supplier credits to its buyers. Foreign exchange risks may arise due to changing exchange rates. The risk is inherent to purchasing raw materials and services the Company uses that are denominated in foreign currencies. The Companys foreign exchange risk exposure is high, since a significant share of the Companys sales is rubledenominated, whereas prices for equipment components and raw materials used in production are denominated in foreign currency. The Company makes every effort to reduce foreign exchange risks. Measures include reducing foreign currency liabilities, as well as increasing the number of domestic suppliers of raw materials, fixed assets and components. The Company also uses passive instruments to hedge foreign exchange risk. One of the Companys main tasks is to increase foreign currency revenues by increasing export volume.

58

Corporate Governance
Market risk. The principal market risk factors that can affect corporate development are the following: Higher prices for basic raw materials due to corn failure; Further increases in the excise tax rate; Tightening governmental policy, resulting in limitations concerning the production, sale, consumption and advertising of beer; Changes in consumption structure; Beer consumption nearing the saturation level; Increasing competition; Higher rates set by natural monopoly providers; Unfavorable weather conditions which can affect sales; Economic downturns. Liquidity risk. The availability of free cash funds makes the Company less prone to liquidity risk. The Companys cooperation with major Russian and international banks, which provide a broad range of financial services, minimizes liquidity risks if shortterm cash shortages occur. Despite the availability of free cash funds, the Company actively implements liquidity management and control methods, which are based on the following procedures: Medium- and short-term planning for the volumes and structure of revenues and costs related to liabilities and assets; Forming an optimal asset and liability structure; Controlling the balance between assets and liabilities in terms of volumes and due dates. Liquidity analysis enables the Company to forecast in a timely manner the probability of liquidity decreases and is the basis for the preparation, grounding and adopting managerial decisions.

Credit risk may arise primarily due to failures of the Companys buyers and agents to meet their contractual obligations. The risk is associated mainly with accounts receivable. The Companys credit policy defines relationships with buyers. The Company performs periodic credit evaluations on its customers the Companys customers are required to provide securities for accounts receivable.

To strengthen its industry position and to mitigate market risk, the Company has implemented an action plan, consisting of the following: developing the Companys own agricultural project; optimizing profitability and production cost management; implementing the Companys marketing strategy focused on forming strong brands, bonuses and innovations; developing and producing new products; developing distribution systems and promotion channels; engaging in further geographical expansion and developing beverages that are alternatives to beer; optimizing investment activities; completing the complex evaluation of the financial condition of supplies; supporting suppliers (when necessary); diversifying risks; upgrading the efficiency of business processes; and optimizing costs and operational excellence.

59

Baltika Breweries | Annual report 2010

Charter Capital
The Companys charter capital totals RUB 164,041,164. No changes in charter capital were carried out in 2010.

Share Issues
Issued shares
State registration number 1-04-00265- 2-04-00256-

Share type Registered ordinary Type A registered preference

Number of shares issued 151,714,594 12,326,570

Nominal value of the issue, RUB 151,714,594 12,326,570

Charter Capital Distribution


The Companys majority shareholder is Baltic Beverages Holding , a subsidiary of Carlsberg Breweries A/S. Baltic Beverages Holding AB holds 89.01 % of the Companys total shares. In 2010, the charter capital structure remained virtually the same. As of December 31st, 2010, the total number of registered shareholders stood at 2,670, including 28 legal entities, of which 9 are custodians, and 2,642 physical persons.

Charter Capital Structure as of December 31st, 2010 2.76 % 0.14 % 8.09 %

Baltic Beverages Holding AB Physical Persons Custodians Legal entities

89.01 %

60

Securities
Shares in Circulation
The Companys shares are traded on two domestic stock exchanges: the RTS Stock Exchange (since 2001) and the MICEX Stock Exchange (since 2003). As the most liquid share in the consumer goods sector, the Companys shares are used to calculate the corresponding industry index of MICEX Stock Exchange (MICEX CGS). The Company is the leader in market capitalization among Russian consumer goods producers. In 2010, the Companys market capitalization increased 1.8 times to reach RUB 248 billion (based on MICEX data) or USD 8 billion (according to RTS data) by year end.

Tickers Ordinary shares Type A preference shares P

In H1 2010, the Companys shares followed general stock market trends, which was affected by the debts of Euro Zone countries. Beginning from H2, the upward trend grew and the market trended higher at the end of the year. By year end, Russian stock exchanges indices grew 23 % (MICEX) and 22.5 % (RTS), led by higher share prices for consumer sector companies. The MICEX consumer sector index grew by 85 % by year end. The value of the Companys shares increased due to the general market upswing, which resulted in growing investor interest, including from western investors, in the consumer sector.

Baltika capitalization dynamics versus MICEX indices in 2010


%

Company capitalization +77 % MICEX index +23 % MICEX Consumer Sector index +85 %

January

February

March

April

May

June

July

August September October November December

Company capitalization MICEX index MICEX Consumer Sector index

61

Baltika Breweries | Annual report 2010

Statistics concerning trading in the Companys shares


Minimum price per share during the year, RUB 2009 Ordinary shares Type A preference shares 349 305 2010 775 781 Maximum price per share during the year, RUB 2009 850 880 2010 1,558.47 1,319.90 Price of last transaction, RUB* 2009 850 880 2010 1,527.85 1,319.90

* Price of last transactions on 31.12.2009 and 30.12.2010

The above statistics are based on MICEX Stock Exchange data, since this is the primary trading floor for transactions with the Companys shares. Compared with 2009, the price for the Companys shares grew during the reporting year; the price of ordinary and preference shares increased by 80 % and 50 % respectively. The liquidity of the Companys shares also grew in 2010, with transaction volume of preference shares increasing nearly three times compared with 2009, while the same indicator for ordinary shares grew 1.7 times. In monetary terms, the total share trading volume increased by 68 % compared with 2009.

Number of transactions (based on MICEX data) Ordinary shares


2009 2010 14,727 25,525

Preference shares
2009 2010 6,154 18,322

Share trading volume, RUB million (based on MICEX data) Ordinary shares
2009 2010 376 576

Preference shares
2009 2010 185 368

62

Securities
Dividend Policy
The Companys dividend policy is based on fairly distributing profits among shareholders in proportion to the number of shares owned. The policy also takes into account the rational balance between dividends and funds required to implement the Companys strategic development plans.

Dividends paid per Company share, 20052009


Dynamics for dividends per share, % compared with 2005 162 214 350 526

Dividend payment period 2005 2006 2007 2008 2009

Dividend per share, RUB 24.33 39.50 52.00 85.10 128.00

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oAo baltika breweries and subsidiaries

CoNSoLIDATED fINANCIAL STATEMENTS


for the year ended 31 December 2010

Contents
Independent Auditors Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . 67 Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . 69 Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . 70 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . 72

65

ZAO KPMG Renaissance Plaza Business Center, 6971 A, Ul. Marata, St. Petersburg, Russia 191119

Telephone Fax Internet

+7 (812) 313 7300 +7 (812) 313 7301 www.kpmg.ru

Independent Auditors Report


The Management OAO Baltika Breweries We have audited the accompanying consolidated financial statements of OAO Baltika Breweries (the Company) and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2010, and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes comprising a summary of significant accounting policies and other explanatory information. Managements Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. ZAO KPMG 18 February 2011

ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity.

66

Consolidated Statement of Financial Position as at 31 December 2010

000 RUB

Note

2010

2009

ASSETS Non-current assets


Property, plant and equipment Intangible assets Investments in equity accounted investees Other investments 12 13 14 15 39,078,860 14,255,934 215,186 87,251 42,177,090 14,001,800 293,183 9,781

Total non-current assets

53,637,231

56,481,854

Current assets
Inventories Other investments Income tax receivable Trade and other receivables Cash and cash equivalents 18 19 17 15 5,781,434 3,895,312 98,573 6,660,671 566,986 4,296,053 9,051,299 6,566 8,062,093 1,740,702

Total current assets Total assets

17,002,976 70,640,207

23,156,713 79,638,567

The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 72 to 94.

67

Consolidated Statement of Financial Position as at 31 December 2010

000 RUB

Note

2010

2009

EQUITY AND LIABILITIES Equity


Preference shares Ordinary shares Share capital Share premium Foreign currency translation reserve Retained earnings 84,978 736,129 821,107 4,171,716 753,745 49,281,269 84,978 736,129 821,107 4,171,716 691,405 57,997,085

Total equity

55,027,837

63,681,313

Non-current liabilities
Deferred tax liabilities 16 1,943,118 1,631,672

Total non-current liabilities

1,943,118

1,631,672

Current liabilities
Loans and borrowings Trade and other payables Deferred income Income tax payable 22 23 13,258,512 284,895 125,845 181,572 13,398,581 129,057 616,372

Total current liabilities Total liabilities Total equity and liabilities

13,669,252 15,612,370 70,640,207

14,325,582 15,957,254 79,638,567

The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 72 to 94.

68

Consolidated Statement of Comprehensive Income for the year ended 31 December 2010

000 RUB Revenue Cost of sales

Note

2010 79,306,979 (34,161,877)

2009 93,720,164 (42,466,337)

Gross profit
Other income Distribution expenses Administrative expenses Other expenses 7 8 6

45,145,102
75,551 (18,551,647) (2,429,000) (551,231)

51,253,827
72,217 (19,150,073) (2,528,721)

Results from operating activities


Finance income Finance costs 10 10

23,688,775
1,269,192 (712,991)

29,647,250
1,834,591 (2,349,918)

Net finance costs


Share of loss of equity accounted investees (net of income tax) Profit before income tax Income tax expense 11

556,201
(57,629) 24,187,347 (5,016,165)

(515.327)
(29,734) 29,102,189 (5,729,920)

Profit for the year

19,171,182

23,372,269

Other comprehensive income


Foreign currency translation differences for foreign operations 62,340 257,818

Total comprehensive income for the year

19,233,522

23,630,087

Earnings per share


Basic and diluted earnings per share 21 112.55 RUB 147.14 RUB

These consolidated financial statements were approved by management on 18 February 2011 and were signed on its behalf by: Anton Artemiev President Ekaterina Azimina Vice-President of finance and economy

The consolidated statement of comprehensive income is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 72 to 94.

69

Consolidated Statement of Changes in Equity for the year ended 31 December 2010

000 RUB

Preference shares

Ordinary shares

Share premium

Foreign currency translation reserve 433,587

Retained earnings

Total

Balance at 1 January 2009

84,978

736,129

4,171,716

48,584,719

54,011,129

Total comprehensive income for the year


Profit for the year 23,372,269 23,372,269

Other comprehensive income


Foreign currency translation differences 257,818 257,818

Total other comprehensive income Total comprehensive income for the year Transactions with owners, recorded directly in equity
Dividends to equity holders Total transactions with owners Balance at 31 December 2009

257,818 257,818

23,372,269

257,818 23,630,087

84,978

736,129

4,171,716

691,405

(13,959,903) (13,959,903) 57,997,085

(13,959,903) (13,959,903) 63,681,313

000 RUB

Preference shares

Ordinary shares

Share premium

Foreign currency translation reserve 691,405

Retained earnings

Total

Balance at 1 January 2010 Total comprehensive income for the year Profit for the year Other comprehensive income Foreign currency translation differences

84,978

736,129

4,171,716

57,997,085

63,681,313

19,171,182

19,171,182

62,340

62,340

Total other comprehensive income Total comprehensive income for the year Transactions with owners, recorded directly in equity
Dividends to equity holders Total transactions with owners Balance at 31 December 2010

62,340 62,340

19,171,182

62,340 19,233,522

84,978

736,129

4,171,716

753,745

(27,886,998) (27,886,998) 49,281,269

(27,886,998) (27,886,998) 55,027,837

The consolidated statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 72 to 94. 70

Consolidated Statement of Cash Flows for the year ended 31 December 2010

000 RUB

Note

2010

2009

OPERATING ACTIVITIES
Profit for the year 19,171,182 23,372,269

Adjustments for:
Depreciation Amortisation Impairment losses on property, plant and equipment Gain on disposal of property, plant and equipment and intangible assets Share of loss of equity accounted investees (net of income tax) Gain on disposal of subsidiary Interest expense Interest income Income tax expense 12 13 8 6 14 6 10 10 11 4,777,578 227,831 550,248 (72,902) 57,629 (2,568) 1,025 (543,396) 5,016,165 4,447,579 196,730 (72,217) 29,734 190,319 (466,342) 5,729,920

Operating profit before changes in working capital and provisions


Change in inventories Change in trade and other receivables Change in trade and other payables

29,182,792
(1,308,974) 1,401,422 (158,470)

33,427,992
3,221,273 (551,052) 2,621,163

Cash flows from operations before income taxes and interest paid
Income taxes paid Interest paid

29,116,770
(5,287,253) (1,110)

38,719,376
(4,688,122) (261,011)

Cash flows from operating activities

23,828,407

33,770,243

INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment and intangible assets Disposal of subsidiary, net of cash disposed of Interest received Dividends received Acquisition of property, plant and equipment and intangible assets Sales of investment securities Repayment of- / (origination of) loans to related parties Acquisition of investments Proceeds from disposal of investments 217,205 4,160 521,229 (3,045,724) 1,689,360 3,488,794 95,898 386,600 27,300 (3,818,693) 15 (2,189,360) (6,782,197)

Cash flows from /(used in) investing activities

2,875,024

(12,280,437)

FINANCING ACTIVITIES
Proceeds from borrowings Repayment of borrowings Dividends paid (181,487) (27,695,522) 52,172 (7,539,049) (13,979,751)

Cash flows used in financing activities Net (decrease) /increase in cash and cash equivalents
Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash and cash equivalents

(27,877,009) (1,173,578)
1,740,702 (138)

(21,466,628) 23,178
1,691,594 25,930

Cash and cash equivalents at 31 December

19

566,986

1,740,702

The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 72 to 94. 71

OAO Baltika Breweries and subsidiaries

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

1. Background

(a) Russian business environment The Groups operations are primarily located in the Russian Federation. Consequently, the Group is exposed to the economic and financial markets of the Russian Federation which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation. The consolidated financial statements reflect managements assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from managements assessment. (b) Organisation and operations OAO Baltika Breweries (the Company) is an open joint stock company as defined by the Civil Code of the Russian Federation and was registered on 21 July 1992, and, through a controlling interest in eight companies and ten branches (together referred to as the Group), produces and distributes beer, soft drinks and mineral water.

The Companys registered office is situated at 6 Verkhny pereulok, 3, St. Petersburg, 194292, Russia. As at 31 December 2010 Baltic Beverages Holding AB owned and controlled 93.65 % of the Companys ordinary shares and 31.9 % of the Companys preference shares. The remainder of the ordinary and preference shares are widely held. As at 31 December 2010 the Group consisted of twelve production plants: Baltika-Saint-Petersburg, Baltika-Tula, Baltika-Rostov, BaltikaSamara, Baltika-Khabarovsk, Baltika-Vena, Baltika-Chelyabinsk, Baltika-Pikra, Baltika-Yaroslavl, Baltika-Voronezh, Baltika-Novosibirsk and Baltika-Baku and eight subsidiaries: OOO Terminal Podolsk, OOO Baltika-Ukraine, OOO Baltika, Baltika S.R.L., OOO Baltika-Bel, Baltika Deutschland GmbH, LLC Baltika-Baku and OJSC Baku-Pivo. In November 2010 the Group sold 3 % of the shares of OOO Universalopttorg to a third party. In December 2010, it sold the remaining shares to the same third party. The sale of the subsidiary did not have a significant effect on the Groups operations. Most of the Groups customers are located in Russia. The Groups raw materials are readily available and the Group is not dependent on a single supplier or only a few suppliers. Related party transactions are detailed in note 28.

2. Basis of preparation

(a) Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standard (IFRSs). (b) Basis of measurement The consolidated financial statements are prepared on the historical cost basis except that property, plant and equipment was revalued to determine deemed cost as part of the adoption of IFRSs; and the carrying amounts of assets, liabilities and equity items in existence at 31 December 2002 include adjustments for the effects of hyperinflation, which were calculated using conversion factors derived from the Russian Federation Consumer Price Index published by the Russian Statistics Agency, GosKomStat. Russia ceased to be hyperinflationary for IFRS purposes as at 1 January 2003. (c) Functional and presentation currency The national currency of the Russian Federation is the Russian Rouble (RUB), which is the Companys functional currency, the functional currency of the majority of the Companys subsidiaries and the currency in which these consolidated financial statements are presented. All financial information presented in RUB has been rounded to the nearest thousand.

(d) Use of judgements, estimates and assumptions The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes: Note 13 Intangible assets; Note 17 Inventories; and Note 18 Trade and other receivables

72

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

(e) Changes in accounting policies and presentation With effect from 1 January 2010, the Group changed its accounting policies in the following areas: accounting for business combinations accounting for leases of land distribution of non-cash assets to owners of the Group (i) Accounting for business combinations From 1 January 2010 the Group has applied IFRS 3 Business Combinations (2008) in accounting for business combinations. The change in accounting policy has been applied prospectively and has had no material impact on earnings per share. Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. Acquisitions on or after 1 January 2010 For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as: the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination, are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. For the measurement of goodwill prior to 1 January 2010, see note 3(f) (i). (ii) Accounting for leases of land The amendment to IAs 17 Leases regarding the leases of land became effective from 1 January 2010. The amendment removed the earlier exemption which allowed leases of land to be classified as operating leases regardless of the length of the lease term. The amended guidance requires all existing leases of land to be reassessed and reclassified if necessary as finance leases if the finance lease classification criteria are met. At 1 January 2010, the Group reassessed all existing land lease contracts and as a result it was assessed that existing land lease contracts do not qualify as finance lease contracts and, therefore, the classification was not changed (see note 25).

(f) Accounting policies for new transactions and events Distributions of non-cash assets to owners of the Company From 1 January 2010 the Group has applied IFRIC 17 Distributions of Non-cash Assets to Owners in accounting for distributions of non-cash assets to owners of the Company. The new accounting policy has been applied prospectively. The Group measures a liability to distribute non-cash assets as a dividend to the owners of the Company at the fair value of the assets to be distributed. The carrying amount of the dividend is remeasured at each reporting date and at the settlement date, with any changes recognised directly in equity as adjustments to the amount of the distribution. On settlement of the transaction, the Group recognises the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss.

3. Significant accounting policies

The accounting policies set out below have been consistently applied to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities, except as explained in note 2(e), which addresses changes in accounting policies. Certain comparative amounts have been reclassified to conform with the current years presentation in the amount of RUB 71,417 thousand resulting in an increase of revenue and an increase of cost of sales for the same amount. Management believes that such presentation is more appropriate. (a) Basis of consolidation (i) Business combinations The Group has changed its accounting policy with respect to accounting for business combinations. See note 2(e)(i) for further details.

(ii) Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. (iii) Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is loSt. Subsequently it

73

OAO Baltika Breweries and subsidiaries

is accounted for as an equity-accounted investee or as an available-forsale financial asset depending on the level of influence retained. (iv) Investments in associates (equity accounted investees) Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 % and 50 % of the voting power of another entity. Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Investments in associates are accounted for using the equity method and are recognised initially at coSt. The cost of the investment includes transaction costs. The consolidated financial statements include the Groups share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Groups share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest including any long-term investments is reduced to zero and the recognition of further losses is discontinued, except to the extent that the Group has an obligation or has made payments on behalf of the investee. (v) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Groups interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (b) Foreign currencies (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising in retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments which are recognised in other comprehensive income. (ii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to RUB at the exchange rate at the reporting date. The income and expenses of foreign operations are translated to RUB at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income. Since 1 January 2004, the Groups date of transition to IFRSs, such differences have been recognised in the foreign currency translation reserve in equity. However, if the operation is a non-

wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented in the translation reserve in equity. (c) Financial instruments (i) Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group classifies non-derivative financial assets into the following categories: loans and receivables and available-for-sale financial assets. Loans and receivables Loans and receivables are a category of financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise the following classes of assets: loans and receivables as presented in note 15 and trade and other receivables as presented in note 18. Cash and cash equivalents Cash and cash equivalents comprise cash balances, deposits and highly liquid investments with maturities at initial recognition of three months or less. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the above categories of financial assets. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(i)(i)) and foreign currency differences on available-for-sale debt instruments (see note 3(b)(i)), are recognised in other comprehensive income and

74

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

presented within equity in the fair value reserve. When an investment is derecognised or impaired, the cumulative gain or loss in equity is transferred to profit or loss. Unquoted equity instruments whose fair value cannot reliably be measured are carried at coSt. Available-for-sale financial assets comprise equity securities. (ii) Non-derivative financial liabilities The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method. Other financial liabilities comprise loans and borrowings and trade and other payables. (d) Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Preference share capital Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Companys option, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon approval by the Companys shareholders. Repurchase, disposal and reissue of share capital (treasury shares) When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects, and is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve for own shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium. (e) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment, except for land, are measured at cost less accumulated depreciation and impairment losses. The cost of property, plant and equipment at 1 January 2004, the date of transition to IFRSs, was determined by reference to its fair value at that date. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net within other income/other expenses in profit or loss. (ii) Subsequent costs The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii) Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows: Buildings Machinery and equipment Kegs 2040 years 320 years 10 years

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. (f) Intangible assets (i) Goodwill Goodwill (negative goodwill) that arises on the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see note 2(e)(i). Acquisitions prior to 1 January 2004 As part of its transition to IFRSs, the Group elected to restate only those business combinations that occurred on or after 1 January 2004. In respect of acquisitions prior to 1 January 2004, goodwill represents the difference between the Companys interest in a subsidiarys net identifiable assets on the date of transition and the cost of that interest. Acquisitions between 1 January 2004 and 1 January 2010 For acquisitions between 1 January 2004 and 1 January 2010, goodwill represents the excess of the cost of the acquisition over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in profit or loss. Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equityaccounted investee.

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OAO Baltika Breweries and subsidiaries

(ii) Other intangible assets Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses. (iii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands is recognised in profit or loss as incurred. (iv) Amortisation Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use since this most closely reflects the expected pattern of consumption of future economic benefits embodied in the asset. The estimated useful lives of other intangible assets, which comprise trademarks, software and licences, for the current and comparative periods vary from between 1 and 10 years. Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. (g) Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and the leased assets are not recognised on the Groups statement of financial position. (h) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average principle and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (i) Impairment (i) Non-derivative financial assets A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

Loans and receivables The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant loans and receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics. In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for managements judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the assets original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. Available-for-sale financial assets Impairment losses on available-for-sale investment securities are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-forsale equity security is recognised in other comprehensive income. (ii) Non-financial assets The carrying amounts of the Groups non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its estimated recoverable amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. The Groups corporate assets do not generate separate cash inflows and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.

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Notes to the Consolidated Financial Statements for the year ended 31 December 2010

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (j) Employee benefits (i) Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans, including Russias State pension fund, are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value. (ii) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. (k) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (l) Revenue Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, excise taxes, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised. The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale. For certain sales, transfer usually occurs upon dispatch of the products to the customer; for other sales, transfer occurs upon receipt of the products by the customer.

(m) Other expenses (i) Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. (ii) Social expenditure To the extent that the Groups contributions to social programs benefit the community at large and are not restricted to the Groups employees, they are recognised in profit or loss as incurred. (n) Finance income and finance costs Finance income comprises interest income on funds invested (including available-for-sale financial assets), gains on the disposal of availablefor-sale financial assets and foreign currency gains. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings and foreign currency losses. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a gross basis. (o) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. In accordance with the tax legislation of the Russian Federation, tax losses and current tax assets of a company in the Group may not be set off against taxable profits and current tax liabilities of other Group

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companies. In addition, the tax base is determined separately for each of the Groups main activities and, therefore, tax losses and taxable profits related to different activities cannot be offset. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (p) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares. (q) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Groups other components. All operating segments operating results are reviewed regularly by the Groups Management Board to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Groups Management Board include items directly attributable to a segment. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill. (r) New Standards and Interpretations not yet adopted A number of new Standards, amendments to Standards and Interpretations are not yet effective as at 31 December 2010, and have not been applied in preparing these consolidated financial statements. Of these pronouncements, potentially the following will have an impact on the Groups operations. The Group plans to adopt these pronouncements when they become effective. Revised IAs 24 Related Party Disclosures (2010) introduces an exemption from the basic disclosure requirements in relation to related party disclosures and outstanding balances, including commitments, for government-related entities. Additionally, the

standard has been revised to simplify some of the presentation guidance that was previously non-reciprocal. The revised standard is to be applied retrospectively for annual periods beginning on or after 1 January 2011. The Group has not yet determined the potential effect of the revised standard. Amended IFRS 7 Disclosures Transfers of Financial Assets introduces additional disclosure requirements for transfers of financial assets in situations where assets are not derecognised in their entirety or where the assets are derecognised in their entirety but a continuing involvement in the transferred assets is retained. The new disclosure requirements are designated to enable the users of financial statements to better understand the nature of the risks and rewards associated with these assets. The amendment is effective for annual periods beginning on or after 1 July 2011. The Group has not yet determined the potential effect of the amendment. IFRS 9 Financial Instruments will be effective for annual periods beginning on or after 1 January 2013. The new standard is to be issued in phases and is intended ultimately to replace International Financial Reporting Standard IAs 39 Financial Instruments: Recognition and Measurement. The first phase of IFRS 9 was issued in November 2009 and relates to the classification and measurement of financial assets. The second phase regarding classification and measurement of financial liabilities was published in October 2010. The remaining parts of the standard are expected to be issued during the first half of 2011. The Group recognises that the new standard introduces many changes to the accounting for financial instruments and is likely to have a significant impact on Groups consolidated financial statements. The impact of these changes will be analysed during the course of the project as further phases of the standard are issued. The Group does not intend to adopt this standard early. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments provides guidance on accounting for debt for equity swaps by the debtor. The interpretation clarifies that an entitys equity instruments qualify as consideration paid in accordance with paragraph 41 of International Financial Reporting Standards IAs 39 Financial Instruments: Recognition and Measurement. Additionally, the interpretation clarifies how to account for the initial measurement of own equity instruments issued to extinguish a financial liability and how to account for the difference between the carrying amount of the financial liability extinguished and the initial measurement amount of the equity instruments issued. IFRIC 19 is applicable for annual periods beginning on or after 1 July 2010. Various Improvements to IFRSs have been dealt with on a standard-by-standard basis. All amendments, which result in accounting changes for presentation, recognition or measurement purposes, will come into effect not earlier than 1 January 2011. The Group has not yet analysed the likely impact of the improvements on its financial position or performance.

4. Determination of fair values

A number of the Groups accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (a) Property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing

seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. The fair value of items of plant and equipment is based on market approach and cost approaches using quoted market prices for similar items when available. When no quoted market prices are available, the fair value of property, plant and equipment is primarily determined using depreciated replacement coSt. This method considers the cost to reproduce or replace the property, plant and equipment, adjusted for physical, functional or economical depreciation, and obsolescence.

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Notes to the Consolidated Financial Statements for the year ended 31 December 2010

(b) Intangible assets The fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. (c) Inventories The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

(d) Equity and debt securities The fair value of equity securities is determined by reference to their quoted closing bid price at the reporting date, or if unquoted, determined using a valuation technique. Valuation techniques employed include market multiples and discounted cash flow analysis using expected future cash flows and a market-related discount rate. (e) Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes or when acquired in a business combination. (f) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

5. Segment reporting

The Group is engaged in the production and distribution of beer, soft drinks and mineral water and has identified these operations as a single reportable segment. The Group identified the segment in accordance with the criteria set in IFRS 8 Operating Segments and based on the way the operations of the Group are regularly reviewed by the chief operating decision maker to analyze performance and allocate resources within the Group. The Groups chief operating decision maker has been determined as the Management Board. The segment represents the Groups business of production and distribution of beer, soft drinks and mineral water in Russia, Azerbaijan and other countries. Currently the Groups operations in Azerbaijan and other countries make an insignificant contribution to the financial results of the Group. Within the segment all business components demonstrate similar economic characteristics: the products and customers; the business processes are integrated and uniform: the Group manages its operations centrally. Purchasing, logistics, finance, HR and IT functions are centralized; the Groups activities are mainly limited to Russia which has a uniform regulatory environment. The Management Board assesses the performance of the operating segment based on measures for sales, adjusted earnings before interest, tax, depreciation and amortization (EBITDA), segment assets and segment liabilities and other information are consistent with that in the consolidated financial statements. The accounting policies used for the segment are the same as accounting policies applied for the consolidated financial statements as described in note 3.

The segment information for the year ended 31 December 2010 is as follows: 000 RUB Revenue EBITDA (including share of loss of equity accounted investees (net of income tax) RUB (57,629) thousand (2009: RUB (29,734) thousand )) Segment assets Investments in equity accounted investees Capital expenditures Segment liabilities 2010 79,306,979 2009 93,720,164

29,186,803

34,261,825

70,640,207 215,186 2,604,981 15,612,370

79,638,567 293,183 3,421,431 15,957,254

A reconciliation of EBITDA to profit for the year is as follows: 000 RUB EBITDA (including share of loss of equity accounted investees (net of income tax)) Depreciation and amortisation and impairment losses on property, plant and equipment Finance income Finance costs Profit before income tax Income tax Profit for the year 2010 29,186,803 2009 34,261,825

(5,555,657) 1,269,192 (712,991) 24,187,347 (5,016,165) 19,171,182

(4,644,309) 1,834,591 (2,349,918) 29,102,189 (5,729,920) 23,372,269

Approximately 17.9 % (2009: 14.9 %) of the Groups revenue is attributable to sales transactions with a single customer. Substantially all of Groups customers are located in the Russian Federation.

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6. Other income

7. Administrative expenses

2010 000 RUB Gain on disposal of property, plant and equipment and intangible assets Gain on disposal of subsidiary Other income 72,902 2,568 81 75,551

2009 000 RUB Wages and salaries 72,217 72,217 Depreciation and amortisation Information technology and communications Compulsory social security contributions Other payroll expenses Facilities Charity Contributions to defined contribution plan Other administrative expenses

2010 000 RUB 819,518 533,724 145,829 112,690 74,450 90,399 20,920 11,003 620,467 2,429,000

2009 000 RUB 825,486 484,592 170,580 105,673 105,064 94,432 35,244 9,989 697,661 2,528,721

8. Other expenses

9. Personnel costs

2010 000 RUB Impairment losses on property, plant and equipment Other expenses (550,248) (983) (551,231)

2009 000 RUB Wages and salaries Compulsory social security contributions Other payroll expenses Contributions to defined contribution plan

2010 000 RUB 5,800,568 1,030,152 473,818 11,003 7,315,541

2009 000 RUB 5,976,138 1,029,079 575,089 9989 7,590,295

80

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

10. Finance income and finance costs

2010 000 RUB Recognised in profit or loss Foreign exchange gain Interest income on bank deposits Interest income on loans and receivables Finance income Foreign exchange loss Interest expense on financial liabilities measured at amortised cost Finance costs recognised in profit or loss The above financial income and costs include the following in respect of assets/(liabilities) not at fair value through profit and loss: Total interest income on financial assets Total interest expense on financial liabilities Recognised in other comprehensive income Foreign currency translation differences for foreign operations Finance income recognised in other comprehensive income, net of tax 62,340 62,340 543,396 (1,025) 725,796 406,766 136,630 1,269,192 (711,966) (1025) (712,991)

2009 000 RUB 1,368,249 372,086 94,256 1,834,591 (2,159,599) (190,319) (2,349,918)

466,342 (190,319)

257,818 257,818

11. Income tax expense

2010 000 RUB Current tax expense Current year Deferred tax expense Origination and reversal of temporary differences Total income tax expense 310,318 5,016,165 4,705,847

2009 000 RUB 5,498,430 231,490 5,729,920

The Groups applicable tax rate is the corporate income tax rate of 20 % for Russian companies (2009: 20 %). Reconciliation of effective tax rate: 2010 000 RUB Profit before income tax Income tax at applicable tax rate Non-deductible expenses Effects of tax concessions Other 24,187,347 4,837,469 361,430 (259,946) 77,212 5,016,165 % 100 20,0 1,5 (1,1) 0,3 20,7 2009 000 RUB 29,102,189 5,820,438 353,281 (496,860) 53,061 5,729,920 % 100 20,0 1,2 (1,7) 0,2 19,7

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12. Property, plant and equipment

000 RUB Cost / Deemed cost At 1 January 2009 Additions Disposals Transfers Effect of movements in exchange rates At 31 December 2009 Additions Disposals Transfers Effect of movements in exchange rates At 31 December 2010 Depreciation and impairment losses At 1 January 2009 Depreciation for the year Disposals Transfers Effect of movements in exchange rates At 31 December 2009 Depreciation for the year Disposals Impairment Transfers Effect of movements in exchange rates At 31 December 2010 Carrying amounts At 1 January 2009 At 31 December 2009 At 31 December 2010

Land and buildings

Machinery and equipment 43,770,044 2,609,742 (199,545) 441,446 (19,323) 46,602,364 2,036,599 (908,315) 732,333 17,694 48,480,675

Kegs

Construction in progress

Total

11,756,074 391,620 (11,796) 2,654,700 34,468 14,825,066 84,623 (119,838) 514,156 7,028 15,311,035

2,280,204 (19,524) (10,258) (493) 2,249,929 15,603 (44,687) 390 51 2,221,286

4,896,028 420,069 (1,358) (3,088,393) 11,430 2,237,776 468,156 (1,246,879) 807 1,459,860

62,702,350 3,421,431 (232,223) (2,505) 26,082 65,915,135 2,604,981 (1,072,840) 25,580 67,472,856

(1,330,796) (449,605) 2,887 (334,275) (78) (2,111,867) (459,341) 23,386 (418) (2,548,240)

(17,219,459) (3,965,845) 187,045 351,138 13,161 (20,633,960) (4,277,014) 790,476 (550,248) (2,111) (24,672,857)

(795,347) (198,641) 18,610 (16,863) 23 (992,218) (217,630) 36,978 (29) (1,172,899)

(19,345,602) (4,614,091) 208,542 13,106 (23,738,045) (4,953,985) 850,840 (550,248) (2,558) (28,393,996)

10,425,278 12,713,199 12,762,795

26,550,585 25,968,404 23,807,818

1,484,857 1,257,711 1,048,387

4,896,028 2,237,776 1,459,860

43,356,748 42,177,090 39,078,860

Depreciation expense of RUB 2,750,918 thousand has been included in cost of goods sold (2009: RUB 2,526,958 thousand), RUB 1,677,216 thousand in distribution expenses (2009: RUB 1,600,430 thousand), RUB 349,444 thousand in administrative expense (2009: RUB 320,191 thousand) and RUB 176,407 thousand in cost of inventories as at 31 December 2010 (2009: RUB 166,512 thousand). Impairment loss In 2010 the Group has decided to cease production of beer at one of its production plants. The Group tested related brewery production facilities for impairment and recognized an impairment loss of RUB 550,248 thousand with respect to property, plant and equipment. The recoverable amount represents the assets fair value less cost to sell and it was determined by reference to both external sources (active market) and internal sources (historical data on sale of similar and same assets). The impairment provision was recognised in other expenses in the amount of RUB 550,248 thousand.

82

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

13. Intangible assets

000 RUB Cost At 1 January 2009 Additions Transfers Effect of movements in exchange rates At 31 December 2009 Additions Transfers Effect of movements in exchange rates At 31 December 2010 Amortisation At 1 January 2009 Amortisation for the year Effect of movements in exchange rates At 31 December 2009 Amortisation for the year Effect of movements in exchange rates At 31 December 2010 Carrying amounts At 1 January 2009 At 31 December 2009 At 31 December 2010

Goodwill

Trademarks

Software and licences 666,343 253,141 2,505 350 922,339 426,934 196 1,349,469

Total

13,514,680 145,976 13,660,656 53,692 13,714,348

52,612 5,167 57,779 1,513 59,292

14,233,635 253,141 2,505 151,493 14,640,774 426,934 55,401 15,123,109

(1,315) (6,054) 139 (7,230) (5,883) (236) (13,349)

(441,129) (190,676) 61 (631,744) (221,948) (134) (853,826)

(442,444) (196,730) 200 (638,974) (227,831) (370) (867,175)

13,514,680 13,660,656 13,714,348

51,297 50,549 45,943

225,214 290,595 495,643

13,791,191 14,001,800 14,255,934

Amortisation expense of RUB 16,232 thousand has been included in cost of goods sold (2009: RUB 12,589 thousand), RUB 27,319 thousand in distribution expenses (2009: RUB 19,740 thousand) and RUB 184,280 thousand in administrative expense (2009: RUB 164,401 thousand). (a) Impairment testing for cash generating units containing goodwill For the purpose of impairment testing, goodwill is considered at the Group level and has not been allocated to individual plants. This represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. The recoverable amount of the Groups plants was based on their value in use and was determined by discounting future cash flows generated from the continuing use of the plants. Unless indicated otherwise, value in use in 2010 was determined similarly as in 2009. (b) Key assumptions used in discounted cash flow projections Key assumptions used in the calculation of recoverable amounts are discount rates, terminal value growth rates and EBITDA margins. (i) Discount rate An after-tax discount rate of 14.5 % was applied in determining the recoverable amount of the plants. The discount rate was estimated based on past experience, and industry average weighted average cost of capital, which was based on an average industry debt to total capital ratio of 30.00 % at market interest rate of 8.56 %. The pre-tax discount rate is 19.24 %. (ii) Terminal value growth rate Cash flows were projected based on past experience, actual operating results and the Groups five-year business plan. Cash flows for a further 5-year period were extrapolated using a declining growth rate of 2 % nil (2009: 5 % nil), which does not exceed the long-term average growth rate for the industry.

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(iii) Budgeted EBITDA growth Budgeted EBITDA is expressed as the compound annual growth rates in the initial five years of the plans used for impairment testing and has been based on past experience adjusted for the following: In the first year of the business plan sales volume was projected to be higher than in 2010 since the market continued to grow after the general downturn the market experienced during the past two years and substantial increase in excise tax in 2010. The anticipated annual sales volume growth included in the cash flow projections for the years 2012 to 2015 is based on expectations of demand growth levels driven by a return to beer consumption levels of 3 years ago. Sales price growth was assumed to be a small margin above inflation in 2011 and in line with the inflation forecast by official state authorities in 20122015. Raw material costs are expected to increase significantly in 2011 due to the poor harvest in 2010 and to increase at a rate of 22 % reducing to 10 % during the years 2012 to 2015. Other costs are expected to increase at a rate of 10 % reducing to 7 % during the years 2012 to 2015.

(c) Sensitivity to changes in assumptions Although no impairment loss was recognized in respect of goodwill the determination of the recoverable amount is sensitive to the rate at which the Group achieves its planned growth in production. In determining a value in use of RUB 195,757,003 thousand (compared to a carrying amount of RUB 53,334,794 thousand), management has assumed that production volume will gradually increase and by 2015 will be 21 % greater than volumes projected for 2011. If actual production volume were to be below estimated production volume by 22 % in 2011 and subsequent years, the value in use would approximate the carrying amounts of the plants and goodwill.

14. Equity accounted investees


The Group has the following investment in an equity accounted investee: Country CJSC Malterie Soufflet Saint Petersburg (Soufflet) Russia Ownership/Voting 30 %

15. Other investments

2010 000 RUB Non-current Available-for-sale investments: Measured at cost 87,251

2009 000 RUB

9,781

This company produces malt. In 2010 the Group did not receive dividends from its investment in the equity accounted investee. The Groups share of losses in its equity accounted investee for the year ended 31 December 2010 was RUB 57,629 thousand (2009: loss RUB 29,734 thousand). The Groups share of post-acquisition total recognised gains and losses in associates as at 31 December 2010 was RUB 154,258 thousand (31 December 2009: RUB 232,255 thousand).

Current Loans and receivables: Deposits Originated loans to related parties 3,395,262 500,050 3,895,312 6,860,751 2,190,548 9,051,299

Available-for-sale investments stated at cost comprise unquoted equity securities in the brewery and banking industries. There is no market for these investments and there have not been any recent transactions that provide evidence of fair value. However, management believes it unlikely that the fair value at the end of the reporting period would differ significantly from their carrying amount. The Groups exposure to credit, currency and interest rate risks related to other investments are disclosed in note 24.

84

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

16. Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets 2010 17,230 44,652 209,558 507,995 779,435 2009 15,281 33,157 186,752 733,716 968,906 2010 (2,632,587) (9,188) (10,440) (70,338) (2,722,553) Liabilities 2009 (2,557,771) (10,102) (17,459) (15,246) (2,600,578) 2010 (2,632,587) 8,042 (10,440) (25,686) 209,558 507,995 (1,943,118) Net 2009 (2,557,771) 5,179 (17,459) 17,911 186,752 733,716 (1,631,672)

000 RUB Property, plant and equipment Intangible assets Investments Inventories Trade and other receivables Trade and other payables Net tax assets/(liabilities)

During the year ended 31 December 2010 RUB 310,318 thousand (2009: RUB 231,490 thousand) of the movement in the net deferred tax liability was recognized in the income statement and RUB 1,128 thousand (2009: RUB 13,058 thousand), relating to foreign exchange differences, was recognized directly in other comprehensive income.

17. Inventories

18. Trade and other receivables

2010 000 RUB Raw materials and consumables Work in progress Finished goods and goods for resale Write-down of inventories in the current year 4,215,009 449,659 1,116,766 5,781,434 127,316

2009 000 RUB 3,328,168 288,884 679,001 4,296,053 178,636 Trade receivables Advances to suppliers VAT receivable Other receivables Trade and other category receivables (current)

2010 000 RUB 3,241,860 2,228,165 134,331 1,056,315 6,660,671

2009 000 RUB 6,791,244 720,358 165,512 384,979 8,062,093

In 2010 raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales amounted to RUB 24,926,176 thousand (2009: RUB 30,616,587 thousand).

The Groups exposure to credit risk and currency risk related to trade and other receivables is disclosed in note 24.

19. Cash and cash equivalents

2010 000 RUB Bank balances Deposits Cash and cash equivalents in the statement of financial position and in the statement of cash flows 361,145 205,841 566,986

2009 000 RUB 288,368 1,452,334 1,740,702

The Groups exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 24.

85

OAO Baltika Breweries and subsidiaries

20. Capital and reserves

(a) Share capital and share premium

Number of shares unless otherwise stated Authorised shares Par value On issue at beginning of the year On issue at end of the year, fully paid RUB 1

Ordinary shares 2010 RUB 1 151,714,594 151,714,594 2009 RUB 1

Preference shares 2010 RUB 1 12,326,570 12,326,570 2009

151,714,594 151,714,594

12,326,570 12,326,570

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The holders of preference shares have no right of conversion or redemption, but are entitled to an annual dividend equal to the nominal value of the shares multiplied by the interest rate of the Savings Bank of the Russian Federation, plus 10 %. If the dividend is not paid, preference shares carry the right to vote until the following Annual Shareholders Meeting. However, the dividend is not cumulative. The preference shares also carry the right to vote in respect of issues that influence the interests of preference shareholders, including reorganisation and liquidation of the Company. In the event of liquidation, preference shareholders first receive any declared unpaid dividends and the par value of the preference shares (liquidation value). Thereafter all shareholders, ordinary and preference, participate equally in the distribution of the remaining assets. (b) Dividends In accordance with Russian legislation, distributable reserves are limited to the balance of accumulated retained earnings as recorded in the Companys statutory financial statements, prepared in accordance with Russian Accounting Principles. As at 31 December 2010 the Company had retained earnings, including profit for the current year, of approximately RUB 24,166,377 thousand (31 December 2009: RUB 34,906,210 thousand). The following table details the dividends declared by the Company for the years ended 31 December 2010 and 31 December 2009: RUB per share Year ended 31 December 2009 Preference shares Dividends for 2008 Ordinary shares Dividends for 2008 Year ended 31 December 2010 Preference shares Dividends for 2009 Ordinary shares Dividends for 2009 Preference shares Interim dividends for 2010 Ordinary shares Interim dividends for 2010 42 6,372,013 42 517,716 128 19,419,468 128 1,577,801 Profit for the year attributable to shareholders of the Company Preference dividends recognised during the year Profit attributable to ordinary shares 85.1 12,910,912 The following is a reconciliation of the profit attributable to ordinary shareholders: Profit attributable to ordinary shareholders 2010 000 RUB 19,171,182 (2,095,517) 17,075,665 2009 000 RUB 23,372,269 (1,048,991) 22,323,278 85.1 1,048,991 000 RUB

21. Earnings per share

The calculation of earnings per share at 31 December 2010 was based on the profit for the year attributable to ordinary shareholders of RUB 17,075,665 thousand (2009: RUB 22,323,278 thousand), and a weighted average number of ordinary shares outstanding during the year of 151,714,594 (2009: 151,714,594), calculated as shown below. The Company has no dilutive potential ordinary shares. Weighted average number of ordinary shares Number of shares Issued shares at 1 January Weighted average number of shares for the for the year ended 31 December 2010 151,714,594 151,714,594 2009 151,714,594 151,714,594

The shareholders meeting held on 8 April 2010 approved dividends amounting to RUB 20,997,269 thousand. The interim dividends for 6 months of 2010 amounting to RUB 6,889,729 thousand were approved by an extraordinary shareholders meeting on 26 August 2010.

86

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

22. Loans and borrowings

This note provides information about the contractual terms of the Groups interest-bearing loans and borrowings, which are measured at amortised coSt. For more information about the Groups exposure to interest rate, foreign currency and liquidity risks, see note 24. 2010 000 RUB Current liabilities Current portion of secured bank loans 181,572 181,572 2009 000 RUB

(a) Terms and debt repayment schedule Terms and conditions of outstanding loans were as follows: 31 December 2010 Face value Carrying amount 31 December 2009 Face value 181,572 181,572 Carrying amount 181,572 181,572

000 RUB

Currency

Nominal interest rate LIBOR 6m +0,75 %

Year of maturity 20092010

Secured bank loan

USD

The bank loan was fully secured by the guarantee of the Companys parent company, Baltic Beverages Holding AB.

23. Trade and other payables

2010 000 RUB Trade payables Taxes payable Accrued salaries, wages and benefits Dividends payable Payables to equity accounted investee Other payables and provisions 6,387,505 3,787,166 1,449,655 306,131 38,487 1,289,568 13,258,512

2009 000 RUB 5,214,709 4,214,958 1,276,828 114,655 42,902 2,534,529 13,398,581

There are potential claims against the Group from certain of its suppliers that allege the Group has not fulfilled contract terms. The information usually required by IAs 37 Provisions, Contingent Liabilities and Contingent Assets in respect of these claims is not disclosed on the grounds that it can be expected to prejudice seriously the position of the Group in potential disputes. The Groups exposure to currency and liquidity risk related to trade and other payables is disclosed in note 24.

87

OAO Baltika Breweries and subsidiaries

24. Financial instruments and risk management

(a) Overview The Group has exposures to the following risks from the use of financial instruments: Credit risk Liquidity risk Market risk This note presents information about Groups exposure to each of the above risks, the Groups objectives, policies and processes for measuring and managing risk and the Groups management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the Groups risk management framework. The Board has established an Audit Committee which is responsible for developing and monitoring the Groups risk management policies. The Audit Committee reports regularly to the Board of Directors on its activities. The Groups risk management systems are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed regularly to reflect changes in market conditions and the Groups activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Groups Audit Committee oversees how management monitors compliance with the Groups risk management system and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. (b) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Groups receivables from customers and loans and receivables. (i) Trade and other receivables The Groups exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, the management also considers the demographics of the Groups customer base, including the default risk of the industry in which customers operate, as these factors may have an influence on credit risk, particularly in the currently deteriorating economic circumstances. Approximately 17.9 % (2009: 14.9 %) of the Groups revenue is attributable to sales transactions with a single customer. Substantially all of Groups customers are located in the Russian Federation. Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Groups standard payment and delivery terms and conditions are offered. The Groups review includes background checks on new customers. Purchase limits are established for each customer, and represent the maximum open amount without requiring approval from the Credit Committee; these limits are reviewed monthly. Customers that fail to meet the Groups benchmark creditworthiness may transact with the Group only on a prepayment basis.

About 68 % of the Groups customers have been transacting with the Group for more than two years, and losses have occurred infrequently. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale or retail customers, geographic location, maturity, and existence of any previous financial difficulties. Trade receivables relate mainly to the Groups wholesale customers. The Group requires collateral in respect of trade receivables in the form of bank guarantees. Credit evaluations are performed on all customers, other than related parties, requiring credit over a certain amount. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. (ii) Loans and receivables The Group limits its exposure to credit risk by only investing in liquid securities in accordance with Groups deposit policy and only with counterparties that are mostly state-owned banks or the banks approved by ultimate parent company. In order to determine the amounts to be deposited with each bank the Group studies the financial statements of the bank and bank credit ratings. The status of the banks is reconsidered every 6 months. The Group does not expect any counterparties to fail to meet its obligations. (iii) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Carrying amount 2010 000 RUB Trade and other receivables Available-for-sale financial assets Loans and receivables Cash and cash equivalents 4,298,175 87,251 3,895,312 566,986 8,847,724 2009 000 RUB 7,176,223 9,781 9,051,299 1,740,702 17,978,005

The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was: Carrying amount 2010 000 RUB Wholesale customers Retail customers Accumulated impairment losses on receivables 1,798,666 1,529,902 3,328,568 (86,708) 3,241,860 2009 000 RUB 5,752,447 1,120,191 6,872,638 (81,394) 6,791,244

The Groups most significant customer, a domestic wholesaler, accounts for RUB 960,911 thousand of the trade receivables carrying amount at 31 December 2010 (2009: RUB 998,900 thousand). Substantially all the Groups receivables relate to sales to customers in Russia.

88

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

Impairment losses The ageing of trade receivables at the reporting date was: Gross 2010 000 RUB Current Past due 090 days Past due more than 90 days 2,965,484 277,686 85,398 3,328,568 Impairment 2010 000 RUB 1,310 85,398 86,708 Gross 2009 000 RUB 6,680,914 110,330 81,394 6,872,638 Impairment 2009 000 RUB 81,394 81,394 Balance at beginning of the year Impairment loss recognised/ (reversed) Amounts written off against trade receivables Balance at end of the year The movement in the allowance for impairment in respect of trade receivables during the year was as follows: 2010 000 RUB 81,394 10,788 (5,474) 86,708 2009 000 RUB 111,898 (8,501) (22,003) 81,394

Based on historic default rates the Group believes that no general impairment allowance is necessary in respect of trade receivables not past due and past due by up to 90 days. 97 % of the balance, which includes the amount owed by the Groups most significant customer (see above), relates to customers that have a good track record with the Group. The total impairment loss 31 December 2010 of RUB 86,708 thousand relates to collective loss established for overdue receivables (2009: RUB 81,394 thousand). The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amount is considered irrecoverable and written off against the financial asset directly.

(c) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Groups approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Groups reputation. Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 18 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as instability of financial system and the impact of monopolists and changes in statutory regulations. In addition the Group maintains the following lines of credit: USD 205,991 thousand multicurrency unsecured credit facility. Interest would be payable for EURO / USD / RUB at the rate of LIBOR / EURIBOR / Cost of funds for the lender +0.75 %. USD 105,935 thousand multicurrency unsecured credit/overdraft facility. Interest would be determined as each tranche is drawn down. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of the netting agreements. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

31 December 2010 000 RUB Non-derivative financial liabilities Trade and other payables

Carrying amount 13,258,512 13,258,512

Contractual cash flows 13,258,512 13,258,512

06 months 13,258,512 13,258,512

612 months

12 years

25 years

More than 5 years More than 5 years

31 December 2009 000 RUB Non-derivative financial liabilities Secured bank loans Trade and other payables

Carrying amount 181,572 13,398,581 13,580,153

Contractual cash flows 182,674 13,398,581 13,581,255

06 months 182,674 13,398,581 13,581,255

612 months

12 years

25 years

89

OAO Baltika Breweries and subsidiaries

(d) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Groups income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. (i) Currency risk The Group is exposed to currency risk on purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group entities, primarily the Russian Rouble (RUB). The currencies in which these transactions are primarily denominated are USD, EURO and AZN. In respect of monetary assets and liabilities denominated in foreign currencies, the Groups policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. Exposure to currency risk The Groups exposure to foreign currency risk was as follows based on notional amounts: EURdenominated 2010 Current assets Cash and cash equivalents Loans and receivables Trade receivables Current liabilities Secured bank loans Trade payables Gross balance sheet exposure Net exposure (388,857) 184,766 184,766 (363,427) 2,377,542 2,377,542 (15,083) 218,798 218,798 (576,325) 189,708 189,708 (181,572) (109,563) 2,535,208 2,535,208 (8,275) 40,633 40,633 3,579 558,944 11,100 12,734 2,728,235 64,891 108,083 60,907 11,428 738,816 15,789 29,234 2,797,109 17,593 31,315 USDdenominated 2010 AZNdenominated 2010 EURdenominated 2009 USDdenominated 2009 AZNdenominated 2009

000 RUB

The following exchange rates applied during the year and as at the end of the year: RUB 1 equals USD EURO AZN Average rate 2010 0.0329 0.0248 0.0264 2009 0.0315 0.0227 0.0252 Reporting date spot rate 2010 0.0328 0.0248 0.0262 2009 0.0331 0.0230 0.0266

Sensitivity analysis A 20 % strengthening of the RUB, as indicated below, against the following currencies at 31 December would have decreased profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2009. 000 RUB 2010 USD (20 % strengthening) EUR (20 % strengthening) AZN (20 % strengthening) 2009 USD (20 % strengthening) EUR (20 % strengthening) AZN (20 % strengthening) (507,042) (22,914) (7,959) (475,508) (26,069) (43,672) Equity Profit or loss

A weakening of the RUB against the above currencies at 31 December would have had an equal, but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

90

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

(ii) Interest rate risk Changes in interest rates impact primarily loans and borrowings by changing either their fair value (fixed rate debt) or their future cash flows (variable rate debt). Management does not have a formal policy of determining how much of the Groups exposure should be subject to fixed or variable rates. However, at the time of raising new loans or borrowings management uses its judgment to decide whether it believes that a fixed or variable rate would be more favourable to the Group over the expected period until maturity. Profile At the reporting date the interest rate profile of the Groups interestbearing financial instruments was: 000 RUB Fixed rate instruments Financial assets Variable rate instruments Financial liabilities (181,572) 4,101,153 4,101,153 10,503,633 10,503,633 Carrying amount 2010 2009

(e) Accounting classifications and fair values (i) Fair values The basis for determining fair value is disclosed in note 4. The fair value of unquoted equity instruments is discussed in note 15. In other cases management believes that the fair value of the Groups financial assets and liabilities approximates their carrying amounts. Interest rates used for determining fair value The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve at the reporting date plus an adequate credit spread, and were as follows: 2010 Short-term bank deposits in RUB Short-term bank deposits in USD Short-term bank deposits in EUR Short-term bank deposits in AZN Originated loans to related parties Loans and borrowings 1.90 % 11.00 % 2009 3.30 % 13.15 %

3.50 % 5.90 % 0.50 % 5.90 % 3.50 % 3.90 % 1.30 % 3.90 % 6.50 % 3.67 % LIBOR 6m + 0.75 % 6.60 % LIBOR 6m + 0.75 %

Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in interest rates at the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit and loss by the amounts shown below. There would have been no impact directly on equity. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2009. Profit or loss 2010 000 RUB Variable rate instruments Cash flow sensitivity 2009 000 RUB Variable rate instruments Cash flow sensitivity (iii) Other market risk Material investments are managed on an individual basis and all buy and sell decisions are approved by the Board of Directors. The primary goal of the Groups investment strategy is to maximise investment returns. The Group does not enter into commodity contracts other than to meet the Groups expected usage and sale requirements; such contracts are not settled net. (1,816) (1,816) 1,816 1,816 100 bp increase 100 bp decrease

(f) Capital management The Groups policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the level of dividends to ordinary shareholders. The Groups debt to capital ratio at the end of the year was as follows: 000 RUB Total liabilities Less: cash and cash equivalents Net debt Total equity Debt to capital ratio at 31 December 2010 15,612,370 (566,986) 15,045,384 55,027,837 0.27 2009 15,957,254 (1,740,702) 14,216,552 63,681,313 0.22

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

91

OAO Baltika Breweries and subsidiaries

25. Operating leases


Non-cancellable operating lease rentals are payable as follows: 000 RUB Less than one year Between one and five years More than five years 2010 180,599 53,126 109,193 342,918 2009 222,589 59,137 239,070 520,796

26. Capital commitments


As at 31 December 2010 the Group had the following commitments relating to property, plant and equipment (31 December 2009: RUB 298,073 thousand):
Project Baltika-St. Petersburg plant Baltika-Rostov plant Baltika-Novosibirsk plant Baltika-Khabarovsk plant Baltika-Yaroslavl plant Baltika-Pikra plant Baltika-Samara plant Baltika-Chelyabinsk plant Baltika-Baku plant Baltika-Tula plant Baltika-Voronezh plant 2010 000 RUB 148,390 31,080 26,018 21,801 17,900 12,553 6,488 3,522 2,808 1,249 483 272,292

The Group leases a number of land plots and buildings under operating leases. Lessors for these leases are state authorities and third parties. The leases of land plots typically run for 649 years. Leases of buildings typically run for 11 months with an option to renew the lease after that date. The Group has no contingent rent arrangements or subleases. During the year ended 31 December 2010 an amount of RUB 268,848 thousand was recognised as an expense in profit or loss in respect of operating leases (2009: RUB 287,110 thousand).

27. Contingencies

28. Related party transactions

(a) Insurance The insurance industry in the Russian Federation is in a developing state and many forms of insurance protection common in other parts of the world are not yet generally available. The Group does not have full coverage for its plant facilities, business interruption, or third party liability in respect of property or environmental damage arising from accidents on Group property or relating to Group operations. Until the Group obtains adequate insurance coverage, there is a risk that the loss or destruction of certain assets could have a material adverse effect on the Groups operations and financial position (b) Taxation contingencies in the Russian Federation The taxation system in the Russian Federation continues to evolve and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are sometimes contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open longer. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive and substance-based position in their interpretation and enforcement of tax legislation. These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.

(a) Control relationships The Companys parent company is Baltic Beverages Holding AB (refer note 1(b)). The Companys ultimate parent company is Carlsberg A/S and the Companys ultimate controlling party is the Carlsberg Foundation. Carlsberg A/S produces consolidated financial statements that are available for public use. (b) Management remuneration Key management received the following remuneration during the year, which is included in personnel costs (see note 9): 000 RUB Salaries and bonuses Compulsory social security contributions Contributions to defined contribution plan Termination benefits 2010 398,169 5,503 11,003 26,427 441,102 2009 427,026 12,719 9,989 449,734

92

Notes to the Consolidated Financial Statements for the year ended 31 December 2010

(c) Transactions with other related parties The Groups other related party transactions are disclosed below. (i) Revenue Transaction value 2010 431,237 570,978 2,690 2,229 16,958 57,059 1,081,151 (ii) Expenses Transaction value 2010 231,072 11,379 57,979 96,188 11,610 417,385 19,484 106,812 951,909 Transaction value 2009 571,736 13,971 18,380 39,430 178 630,571 18,803 101,556 150,766 1,545,391 Outstanding balance 2010 38,487 3,300 30,351 1,805 35,209 5,987 317,336 432,475 Outstanding balance 2009 42,902 33,062 7,012 291,756 3,626 162,688 541,046 Transaction value 2009 49,912 62,767 591 597 24,361 79,237 217,465 28,594 197,350 Outstanding balance 2010 134,164 34,542 50 Outstanding balance 2009 21,813 591 597 9,214 32,215

000 RUB Sale of goods: Fellow subsidiaries Royalties received Fellow subsidiaries Interest received: Carlsberg Breweries A/S Parent company Services provided: Fellow subsidiaries Equity accounted investee Other income Parent company

000 RUB Purchase of goods: Equity accounted investee Carlsberg Breweries A/S Fellow subsidiaries Services received: Carlsberg Breweries A/S Fellow subsidiaries Royalties paid: Carlsberg Breweries A/S Fellow subsidiaries Finance costs: Carlsberg Breweries A/S Other expenses: Carlsberg Breweries A/S

During the year ended 31 December 2010 the Groups purchases of malt from Soufflet, an associate of the Group, amounted to RUB 231,072 thousand (excluding VAT) or 6.9 % of the total value of malt purchases and own production and 30,008 tons or 9.1 % of the total volume of malt purchases and own production. During the year ended 31 December 2009 the Groups purchases of malt from Soufflet amounted to RUB 571,736 thousand (excluding VAT) or 17.1 % of the total value of malt purchases and own production and 41,926 tons or 12.6 % of the total volume of malt purchases and own production. All outstanding balances with related parties are to be settled in cash within two months of the reporting date. None of the balances are secured.

93

OAO Baltika Breweries and subsidiaries

(iii) Loans Amount loaned 2010 1,100,523 348,697 1,449,220 Amount loaned 2009 1,089,951 1,100,597 2,190,548 Outstanding balance 2010 500,050 500,050 Outstanding balance 2009 1,089,951 1,100,597 2,190,548

000 RUB Loans given: Carlsberg Breweries A/S Parent company

The outstanding loan to Carlsberg Breweries A/S bear interest at 3.67 % per annum and is due in January 2011.

29. Subsidiaries
Country of incorporation Ukraine Moldova Kazakhstan Kirgizia Belorussia Russia Russia Germany Azerbaijan Azerbaijan Ownership / voting 2010 100 % 100 % 100 % 100 % 100 % 100 % 100 % 91 % Ownership / voting 2009 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 91 %

Name OOO Baltika-Ukraine Baltika S.R.L. Baltika-Almaty LLP OOO Baltika OOO Baltika-Bel OOO Terminal Podolsk OOO Universalopttorg Baltika Deutschland GmbH Baltika-Baku LLC Baku Pivo JSC

Nature of business Distribution of Baltika beer Distribution of Baltika beer Distribution of Baltika beer Distribution of Baltika beer Distribution of Baltika beer Warehouse Warehouse Distribution of Baltika beer Beer Production Beer Production

94

2010 Corporate Transactions that are Deemed Related Party Transactions Based on the Federal Law On Joint Stock Companies
Contract Price RUB 9,496,635.65 Belorussian rubles 175,615,860, including VAT in the amount of Belorussian rubles 26,788,860 RUB 953,845.92, including VAT in the amount of RUB 145,501.92 Kazakh tenge 2,001,339, including VAT in the amount of Kazakh tenge 305,289 Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors Interested party(ies) Date and Approval Authority 21.01.2010, the Board of Directors 21.01.2010, the Board of Directors 21.01.2010, the Board of Directors 21.01.2010, the Board of Directors 21.01.2010, the Board of Directors 11.02.2010, the Board of Directors

No

Contracting Parties

Type of Contract

1.

Baltika Breweries (Seller) and Baltika-Baku LLC (Buyer)

Sales Agreement

2.

Baltika Breweries (Supplier) and Carlsberg Denmark (Buyer)

Additional Agreement to Beer Supply Contract No. 773 as of 30.11.2009

3.

Baltika Breweries (Customer) and Baltika-Bel LLC (Contractor)

Additional Agreement No. 3 to Contract No. 04/08-BLR as of 30.01.2008 on trademark promotion services

4.

Baltika Breweries (Customer) and ICS Baltika SRL (Contractor)

Additional Agreement No. 3 to Contract No. 04/08-MD as of 30.01.2008 on trademark promotion services

5.

Baltika Breweries (Customer) and Baltika-Almaty LLC (Contractor)

Additional Agreement No. 5 to Contract No. 02/0-KZ as of 30.01.2008 on trademark promotion services

6.

Baltika Breweries (Seller) and Baltika-Baku LLC (Buyer)

Additional Agreement No. 1 to Equipment Supply Contract No. Ref/SAB-202/2010 as of 21.01.2010 Remuneration is determined by the Parties for each consulting service on an individual basis. Per the agreement, remuneration cannot exceed Euro 5,000,000 As stipulated by the License Agreement

7.

Baltika Breweries (Client) and Feldschlsschen Getrnke AG (Consultant)

Consulting Service Agreement

11.02.2010, the Board of Directors

8.

Baltika Breweries (Licensor) and UZCARLSBERG LLC (Licensee)

Additional Agreement to the License Agreement for the production of Baltika beer as of 23.05.2008

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors

22.03.2010, the Board of Directors

9.

Baltika Breweries (Contractor) and UZCARLSBERG LLC (Customer)

Service Agreement concerning processing equipment maintenance and operation

The price of services is determined by hourly rates which depend on the category of the Contractors specialists. The total price of the Agreement shall not exceed RUB 2,500,000 The Agents fee shall be 5 % of the actual costs borne by the Agent, but shall not exceed RUB 44,035. The total price of the Agreement, including Agents fee, shall not exceed RUB 924,735

22.03.2010, the Board of Directors

10.

Baltika Breweries (Principal) and ICS Baltika SRL (Agent)

Agency Agreement on cargo custom clearance

Baltic Beverages Holding AB shareholder

22.03.2010, the Board of Directors

11.

Baltika Breweries (Supplier) and DERBES Brewery Ltd (Buyer)

Additional Agreement to Beer Supply Agreement No. D-363/09 as of 26.11.2009

As stipulated by the Contract

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors, B. Sndenskov, member of the Board of Directors Euro 20,060, including Russian VAT (18 %) totaling Euro 3,060 Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors

22.03.2010, the Board of Directors

2010 Corporate Transactions that are Deemed Related Party Transactions Based on the Federal Law On Joint Stock Companies

12.

Baltika Breweries (Customer) and Carlsberg Breweries A/S (Contractor)

Consulting Service Agreement

22.03.2010, the Board of Directors

95

96
Contract Price As stipulated by the License Agreement Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors 16.04.2010, the Board of Directors Interested party(ies) Date and Approval Authority The price of third-party services and the Agents remuneration shall be determined by the Parties in individual agreements concluded within the framework of the Agency Agreement. The total price of the Agreement, including the Agents fee, shall not exceed Belorussian rubles 472,000,000, including Russian VAT Baltic Beverages Holding AB shareholder Belorussian rubles 233,792,995.96, including Russian VAT, and an Agency fee in the amount of Belorussian rubles 1,855,499.96, including Russian VAT Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder RUB 8,933,832, including Russian VAT in the amount of RUB 1,608,089.76 RUB 2,894,728, including Russian VAT in the amount of RUB 521,051.04 16.04.2010, the Board of Directors 16.04.2010, the Board of Directors 16.04.2010, the Board of Directors 16.04.2010, the Board of Directors 16.04.2010, the Board of Directors

No

Contracting Parties

Type of Contract

13.

Baltika Breweries (Licensor) and UZCARLSBERG LLC (Licensee)

Additional Agreement to the License Agreement on the production and sale of Baltika beer as of 23.05.2008

14.

Baltika Breweries (Principal) and Baltika-Bel LLC (Agent)

Agency Agreement

15.

Baltika Breweries (Principal) and Baltika-Bel LLC (Agent)

Additional Agreement No. 1 to Agency Agreement No. 02/2010-BLR

16.

Baltika Breweries (Customer) and ICS Baltika SRL (Contractor)

Additional Agreement to the Paid Service Agreement No. 2010-MD as of 23.12.2009

17.

Baltika Breweries (Customer) and ICS Baltika SRL (Contractor)

Supplement No. 3 to Paid Service Agreement No. 2010-MD as of 23.12.2009

Baltika Breweries | Annual report 2010

18.

Baltika Breweries (Customer) and Baltika-Ukraine LLC (Contractor) RUB 2,229,040

Additional Agreement No. 1 to Paid Service Agreement No. 2010-UKR as of 01.01.2010

19.

Baltika Breweries (Buyer) and UZCARLSBERG LLC (Supplier)

T-shirt Supply Agreement

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors. Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors

16.04.2010, the Board of Directors

20.

Baltika Breweries (Seller) and Baltika-Baku LLC (Buyer) RUB 4,174,893.90 RUB 10,588,200

Stabilizer Sales Agreement

16.04.2010, the Board of Directors 16.04.2010, the Board of Directors 16.04.2010, the Board of Directors

21.

Baltika Breweries (Buyer) and Carlsberg Group Procurement AG (Supplier) RUB 6,656,640

Flash-card Supply Agreement

22.

Baltika Breweries (Buyer) and UZCARLSBERG LLC (Supplier)

T-shirt Supply Agreement

23.

Baltika Breweries (Buyer) and CJSC Malt Plant Soufflet St. Petersburg (Seller)

Malt Supply Agreement

RUB 7,700, excluding VAT, per 1 ton till the supply volume under the Agreement reaches 30,000 tons; RUB 7,350 excluding VAT, per 1 ton when the supply volume under the Agreement is 30,001 tons and more. The total price of the Agreement shall not exceed RUB 510,300,000, excluding VAT RUB 1,581,188

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors

14.05.2010, the Board of Directors

24.

Baltika Breweries (Seller) and Baltika-Baku LLC (Buyer)

Additional Agreement No. 2 to Contract No. Ref/SAB-202/2010

Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors

14.05.2010, the Board of Directors 14.05.2010, the Board of Directors

25.

Baltika Breweries (Buyer) and Carlsberg Breweries A/S (Seller)

Additional Agreement No. 3 to Contract No. 01-08-CB

No Euro 115,510 Baltic Beverages Holding AB shareholder 25.06.2010, the Board of Directors

Contracting Parties

Type of Contract

Contract Price

Interested party(ies)

Date and Approval Authority

26.

Baltika Breweries (Beneficiary) and Oy Sinebrychoff Ab (Investor)

Marketing Cost Agreement

27.

Baltika Breweries (Lessor) and DERBES Brewery Ltd (Lessee)

Freight-car Leasing Agreement

Payment shall be made based on the actual use of freight cars, based on daily rates calculated depending on final destination

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors, B. Sndenskov, member of the Board of Directors Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors Baltic Beverages Holding AB shareholder

25.06.2010, the Board of Directors

28.

Baltika Breweries (Contractor) and Baltika-Baku LLC (Customer) As stipulated by the primary contract Up to Euro 6,000

Additional Agreement No. 1 to Contract No. BL/BK-1M

25.06.2010, the Board of Directors 25.06.2010, the Board of Directors

29.

Baltika Breweries (Buyer) and Baltika Deutschland GmbH (Supplier)

Supply Agreement

30.

Baltika Breweries (Creditor) and Baltic Beverages Holding AB (Borrower)

Credit Agreement

The credit is for Euro 28,000,000; interest rates are as follows: RUB for a period of 1 week 4.05 % APR; for a period of 1 month 4.55 % APR; for a period of 2 months 4.90 % APR; for a period of 3 months 5.55 % APR; for a period of 6 months 6.40 % APR; USD for a period of 1 week 0.75 % APR; for a period of 1 month 1.65 % APR; for a period of 2 months 1.90 % APR; for a period of 3 months 2.40 % APR; for a period of 6 months 3.40 % APR; Euro for a period of 1 week 0.60 % APR; for a period of 1 month 0.87 % APR; for a period of 2 months 1.30 % APR; for a period of 3 months 2.10 % APR; for a period of 6 months 3.35 % APR RUB 1,100,000,000 (one billion one hundred million); the interest rate is the best market interest rate for the corresponding period and amount plus 0.15 % APR As stipulated by the License Agreement Euro 585,000 Canadian dollars 17,205, including Russian VAT in the amount of Canadian dollars 3,096.9 RUB 644,859.96

Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors, B. Sndenskov, member of the Board of Directors, U. Andersen, member of the Board of Directors

25.06.2010, the Board of Directors

31.

Baltika Breweries (Party 1) and Carlsberg Breweries A/S (Party 2)

Fund Allocation Agreement

Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors

25.06.2010, the Board of Directors

32.

Baltika Breweries (Licensee) and Carlsberg Breweries A/S (Licensor)

Additional Agreement to the Carlsberg Trademark License Agreement as of 22.03.2002

09.07.2010, the Board of Directors 09.07.2010, the Board of Directors 09.07.2010, the Board of Directors 13.08.2010, the Board of Directors 13.08.2010, the Board of Directors

33.

Baltika Breweries (Supplier) and Oy Sinebrychoff Ab (Buyer)

Beer Supply Contract

34.

Baltika Breweries (Customer) and Carlsberg Canada Inc. (Contractor)

Paid Service Agreement

35.

Baltika Breweries (Licensee) and Oy Sinebrychoff Ab (Licensor)

Agreement on the termination of the License Agreement as of 08.01.2001

2010 Corporate Transactions that are Deemed Related Party Transactions Based on the Federal Law On Joint Stock Companies

36.

Baltika Breweries (Exporter) and Baltika-Baku LLC (Importer)

Sales Agreement

97

98
Contract Price RUB 50,000,000 Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors 13.08.2010, the Board of Directors 13.08.2010, the Board of Directors 13.08.2010, the Board of Directors 08.09.2010, the Board of Directors 23.09.2010, the Board of Directors Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors Baltic Beverages Holding AB shareholder A. Artemiev, President, member of the Board of Directors Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors Interested party(ies) Date and Approval Authority RUB 1,045,000 Quarterly license payments in the amount of 5 % of net sales of licensed products Euro 303,500, excluding Russian VAT Quarterly license payments in the amounts specified below (in % of net sales of licensed products):
Beer trademark Slavutich Khmilne Arsenal Royalty percentage 3.0 2.5 2.5

No

Contracting Parties

Type of Contract

37.

Baltika Breweries (Consultant) and Baltika-Baku LLC (Company)

Additional Agreement to the Consulting Service Agreement as of 25.08.2005

38.

Baltika Breweries (Consultant) and Baltika-Baku LLC (Company)

Additional Agreement to the Consulting Service Agreement as of 25.08.2005

39.

Baltika Breweries (Seller) and OJSC Lvovska Pivovarnya (Buyer)

Sales Agreement

40.

Carlsberg Breweries A/S (Licensor) and Baltika Breweries (Licensee)

Somersby License Agreement

41.

Baltika Breweries (Purchaser) and Carlsberg Breweries A/S (Rightholder)

Alienation of the Exclusive Rights Agreement

Baltika Breweries | Annual report 2010

42.

Baltika Breweries (Licensee) and OJSC PBK Slavutich (Licensor)

License Agreement for the production of Slavutich, Khmilne and Arsenal beer.

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors

23.09.2010, the Board of Directors

43.

Baltika Breweries (Licensee) and OJSC PBK Slavutich (Licensor) Quarterly license payments in the amount of 3.5 % of net sales of the licensed product. Euro 800

License Agreement for Lvivske production

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors

23.09.2010, the Board of Directors 23.09.2010, the Board of Directors 25.10.2010, the Board of Directors

44.

Baltika Breweries (Exporter) and Baltika Deutschland GmbH (Importer)

Equipment Sales Agreement

45.

Baltika Breweries (Buyer) and OJSC PBK Slavutich (Supplier)

Beer Supply Contract

Product price is set at the usual Supplier costs, plus a 5 % margin. The total price of the Contract shall not exceed RUB 100,000,000 (one hundred million)

46.

Baltika Breweries (Licensor) and AS Aldaris (Licensee)

License Agreement

One-time license fee of Euro 1,350,000 and quarterly license payments in the amount of 5 % of net sales of products (receipts), sold by the Licensee in Latvia. The total fee and license payments shall not exceed Euro 27,000,000 during the entire term of the Agreement

Baltic Beverages Holding AB shareholder

25.10.2010, the Board of Directors

47.

Baltika Breweries (Licensor) and AS Saku (Licensee)

License Agreement

One-time license fee of Euro 690,000 and quarterly license payments in the amount of 5 % of net sales of products (receipts), sold by the Licensee in Estonia. The total fee and license payments shall not exceed Euro 27,000,000 during the entire term of the Agreement

Baltic Beverages Holding AB shareholder

25.10.2010, the Board of Directors

48.

Baltika Breweries (Licensor) and Utenos alus UAB (Licensee)

License Agreement

One-time license fee of Euro 960,000 and quarterly license payments in the amount of 5 % of net sales of products (receipts), sold by the Licensee in Lithuania. The total fee and license payments shall not exceed Euro 27,000,000 during the entire term of the Agreement

Baltic Beverages Holding AB shareholder

25.10.2010, the Board of Directors

No Product price is set at usual supplier costs, plus a 5 % margin. The total price of the Contract shall not exceed Euro 7,000,000 Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors 25.10.2010, the Board of Directors 25.10.2010, the Board of Directors 25.10.2010, the Board of Directors 25.10.2010, the Board of Directors Product price is set at the usual supplier costs, plus a 5 % margin. The total price of the Contract shall not exceed Euro 5,000,000 Product price is set at the usual supplier costs, plus a 5 % margin. The total price of the Contract shall not exceed Euro 5,000,000 USD 1,200 (one thousand two hundred)

Contracting Parties

Type of Contract

Contract Price

Interested party(ies)

Date and Approval Authority

49.

Baltika Breweries (Supplier) and AS Aldaris (Buyer)

Beer and Beverages Supply Contract

50.

Baltika Breweries (Supplier) and AS Saku (Buyer)

Beer and Beverages Supply Contract

51.

Baltika Breweries (Supplier) and Utenos alus UAB (Buyer)

Beer and Beverages Supply Contract

52.

Baltika Breweries (Bailor) and UZCARLSBERG (Bailee)

Bailment Agreement

53.

Baltika Breweries (Customer) and DERBES Breweries Ltd (Contractor)

Service Agreement

5.5 % of the price of the concluded Contract. The estimated price of services stands at Kazakh tenge 7,922,998. Russian VAT is not applicable

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors, B. Sndenskov, member of the Board of Directors

25.10.2010, the Board of Directors

54.

Baltika Breweries (Lessor) and DERBES Breweries Ltd (Lessee) As stipulated by the primary Contract

Additional Agreement to Contract No. D-20/10 as of 01.01.2010

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors. B. Sndenskov, member of the Board of Directors Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder

25.10.2010, the Board of Directors

55. Euro 142,350

Baltika Breweries (Exporter) and Carlsberg Canada Inc. (Importer) Euro 393,000

Additional Agreement No. 5 to Contract No. 648 as of 01.01.2008

25.10.2010, the Board of Directors 13.11.2010, the Board of Directors

56.

Baltika Breweries (Beneficiary) and Oy Sinebrychoff Ab (Investor)

Marketing Cost Agreement

57.

Baltika Breweries (Contractor) and DERBES Breweries Ltd (Customer)

Additional Agreement No. 1 to Contract No. BL-AL-0809 as of 02.09.2009

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors, B. Sndenskov, member of the Board of Directors Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors

13.11.2010, the Board of Directors

58.

Baltika Breweries (Seller) and Baltika-Baku LLC (Buyer) RUB 5,900,000

Equipment Sales Agreement

08.12.2010, the Board of Directors 08.12.2010, the Board of Directors 08.12.2010, the Board of Directors

59.

Baltika Breweries (Licensee) and Carlsberg Breweries A/S (Licensor)

Additional Agreement VII to the TUBORG Trademark License Agreement

As stipulated by the License Agreement

60.

Baltika Breweries (Licensee) and Carlsberg Breweries A/S (Licensor)

Additional Agreement IX to the TUBORG Trademark License Agreement

As stipulated by the License Agreement

2010 Corporate Transactions that are Deemed Related Party Transactions Based on the Federal Law On Joint Stock Companies

61.

Baltika Breweries (Licensee) and Carlsberg Breweries A/S (Licensor)

Additional Agreement II to the License Agreement concluded with Carlsberg Breweries A/S

As stipulated by the License Agreement

Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors

08.12.2010, the Board of Directors

99

100
Contract Price RUB 100,000 Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors 08.12.2010, the Board of Directors 24.12.2010, the Board of Directors 24.12.2010, the Board of Directors 24.12.2010, the Board of Directors 24.12.2010, the Board of Directors 29.12.2010, the Board of Directors 29.12.2010, the Board of Directors 29.12.2010, the Board of Directors Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder Baltic Beverages Holding AB shareholder, J.B. Rasmussen, member of the Board of Directors Interested party(ies) Date and Approval Authority RUB 21,029,500, excluding VAT Belorussian rubles 148,736,640, including 18 % Russian VAT Belorussian rubles 3,490,104,408, including 18 % Russian VAT RUB 832,891.20, including 18 % Russian VAT As stipulated by the primary Agreement Euro 583.20, excluding Russian VAT

No

Contracting Parties

Type of Contract

62.

Baltika Breweries (Seller) and Baltika-Baku LLC (Buyer)

Equipment Sales Agreement

63.

Baltika Breweries (Customer) and Carlsberg Breweries A/S (Contractor)

Service Agreement

64.

Baltika Breweries (Customer) and Baltika-Bel LLC (Contractor)

Additional Agreement to Paid Service Agreement No. 04/08-BLR as of 30.01.2008

65.

Baltika Breweries (Customer) and Baltika-Bel LLC (Contractor)

Paid Service Agreement

66.

Baltika Breweries (Customer) and Baltika LLC (Contractor)

Additional Agreement to Service Agreement No. 07/08-KG as of 30.01.2008

67.

Baltika Breweries (Customer) and BaltikaLLC (Contractor)

Additional Agreement No. 7 to Service Agreement No. 07/08-KG as of 30.01.2008

68.

Baltika Breweries (Customer) and ICS Baltika SRL (Contractor)

Additional Agreement No. 4 to Service Agreement No. 04/08-MD as of 30.01.2008

Baltika Breweries | Annual report 2010

69.

Baltika Breweries (Customer) and Carlsberg Breweries A/S (Contractor)

Service Agreement

70.

Baltika Breweries (Seller) and DERBES Brewery Ltd (Buyer) RUB 188,107

Sales Agreement

Baltic Beverages Holding AB shareholder, A. Artemiev, President, member of the Board of Directors. B. Sndenskov, member of the Board of Directors A. Shokhin, member of the Board of Directors

29.12.2010, the Board of Directors

71.

Baltika Breweries (Client) and CJSC Rusagrotrans (Shipping Agent)

Shipping Agency Agreement

The Agreement price is set according to current rates of the Shipping Agent (traffic rates, fees and the Shipping Agents remuneration)

08.04.2010, the General Shareholders Meeting

72.

Baltika Breweries (Creditor) and Carlsberg Breweries A/S (Borrower)

General Loan Agreement

Loan amounts shall be up to Euro 300,000,000. The interest rates payable on each loan shall be calculated as follows: the maximum interest rate on deposits, offered by the most reliable Russian banks (defined as those that hold investment ratings assigned by Fitch Ratings, Standard & Poors or Moodys) for legal entities for the same period for a given currency and similar amount, plus 0.15 % per annum

Baltic Beverages Holding AB, J.B. Rasmussen, member of the Board of Directors

08.04.2010, the General Shareholders Meeting

Information for Shareholders and Investors

Baltika Breweries Corporate Headquarters Tel.: +7 (812) 325-9325 3 6th Verkhny Pereulok, St. Petersburg, Russia, 194292 Elfimov@spb.baltika.ru Risuliev@spb.baltika.ru

Shareholder Relations

Tel.: +7 (812) 329-9109

Registrar Closed Joint Stock Company Computershare Registrar, St. Petersburg branch Tel.: +7 (812) 251-8138 Fax: +7 (812) 346-7407 4-A Izmailovsky Ave., Office 314, St. Petersburg, Russia, 198005 www.nrcreg.ru

Independent Auditors 69-71 A Renaissance Plaza Business Center Marata St., St. Petersburg, Russia, 191119 stp@kpmg.ru 26 Rizhsky Ave., St. Petersburg, Russia, 198103 apaudit@quantum.ru Izvestia newspaper

Closed Joint Stock Company KPMG, St. Petersburg branch

Tel.: +7 (812) 313-7300 Fax: +7 (812) 313-7301

Closed Joint Stock Company A&P Audit Official print medium for information disclosure Corporate website for information disclosure

Tel.: +7 (812) 251-6923

www.corporate.balitka.ru

101

Baltika Breweries | Annual report 2010

Company Breweries Baltika-St. Petersburg Brewery +7 (812) 325-9325 3 6th Verkhny Pereulok, St. Petersburg, Russia, 194292 109 9th Janvarya St., Voronezh, Russia, 394027 34 2nd Stantsionnaya St., Novosibirsk, Russia, 630041 90 60 let Oktyabrya St., Krasnoyarsk, Russia, 660079 146-A Dovatora St., Rostov-on-Don, Russia, 344090 1 Baltiisky Proezd, Kinelsky Village, Kinelsky District, the Samara Region, Russia, 446110 85 Odoevskoye Shosse, Tula, Russia, 300036 142 Voronezhskoye Shosse, Khabarovsk, Russia, 680042 16 Ryleeva St., Chelyabinsk, Russia, 454087 63 Pozharskogo St., Yaroslavl, Russia, 150066

Baltika-Voronezh branch

+7 (4732) 61-9800

Baltika-Novosibirsk branch

+7 (383) 230-1402

Baltika-Pikra branch

+7 (3912) 59-1200

Baltika-Rostov branch

+7 (863) 250-5102

Baltika-Samara branch

+7 (846) 276-4366

Baltika-Tula branch

+7 (4872) 39-5535

Baltika-Khabarovsk branch

+7 (4212) 41-1551

Baltika-Chelyabinsk branch

+7 (351) 239-1600

Baltika-Yaroslavl branch Foreign subsidiaries of the Company Baltika-Bel LLC

+7 (4852) 58-3208

+375 (17) 286-2741 +996 (312) 30-6082 +996 (312) 30-6083 +49 (40) 728-13928

3 Gorny Pereulok, Office 11, Minsk, Belarus, 220071 121/1 Shopokova St., Bishkek, the Kyrgyz Republic, 720075 26 Glockengiesserwall, Hamburg, Germany, 20095 2 Per. 2 Shamakhinskoye Shosse, Khyrdalan Town, the Absheron District, the Republic of Azerbaijan, AZ0100

Baltika LLC

Baltika Deutschland GmbH

Baltika-Baku LLC

+994 (12) 442-1280 +994 (12) 442-2010

Representative offices in foreign countries 19 Tsziangomenvai, the CITIC Building, Tower A, Office 15-B, Beijing, the Peoples Republic of China, 100004

Representative office in China

+86 (10) 651-29728

102

ontact Information
To arrange a group tour of the Companys production facilities: The Company organizes regular group tours of its Russian production facilities. During these tours, visitors can learn about key events in the corporate history, Company activities and brewing processes. Visitors can also taste the Companys products. To arrange a tour, call one of our facilities at the numbers listed below: Chelyabinsk Khabarovsk Krasnoyarsk Novosibirsk Rostov Samara St. Petersburg Tula Voronezh Yaroslavl +7 (3512) 39-1600 +7 (4212) 41-1591 +7 (3912) 59-1341 +7 (383) 230-1411 +7 (863) 250-5146 +7 (846) 276-4333 +7 (812) 329-9139 +7 (4872) 32-9910 +7 (4732) 61-9800 +7 (4852) 58-3229

The Company invites the public to visit the Siberian Brewing History Museum located at the Baltika-Pikra production facility in Krasnoyarsk. The Museum was founded in 2005 to mark the 130th anniversary of the Krasnoyarsk Brewery, as well as Pikras 15th anniversary. The second Brewing History Museum was founded in St. Petersburg at corporate headquarters to mark the Companys 20th anniversary. The museums have unique exhibits on display, which can be tasted during tours of production facilities. In 2010, more than 62,000 people visited the Companys production facilities. For the 19992010 period, the total number of visitors numbers in excess of 450,000.

Association Participation The Company is a member of the following organizations: The Union of Russian Producers of Beer and Non-Alcoholic Beverages non-profit organization; The Russian Union of Industrialists and Entrepreneurs; The Association of Brand Producers non-profit partnership (RusBrand); The Association of Joint Ventures (St. Petersburg); The Market Council on the Organization of Efficient Wholesale and Retail Trade in Energy and Power non-profit partnership (The Market Council); The Association of Buyers in the Wholesale and Retail Electric Power (Capacity) Markets.

103

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