baltika breweries annual reportfs.rts.ru/content/annualreports/570/2/go-eng09.pdf · baltika...

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CONTENTS

LETTER FROM THE PRESIDENT

ABOUT THE COMPANY

COMPANY'S PHILOSOPHY

MAIN EVENTS OF 2009

BRAND PORTFOLIO

BEER MARKET. THE COMPANY’S POSITION

FINANCIAL POSITION

KEY PROJECTS

CORPORATE SOCIAL RESPONSIBILITY

CORPORATE GOVERNANCE

RISK MANAGEMENT

SECURITIES

CONSOLIDATED FINANCIAL STATEMENTS

INTERESTED PARTY TRANSACTIONS

INFORMATION FOR SHAREHOLDERS AND INVESTORS

CONTACT INFORMATION

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Annual Report 20092

LETTER FROM THE PRESIDENT

Baltika Breweries 3

Dear Shareholders,

2009 was a challenging year for the

Company and for the brewing indus-

try as a whole. Despite the crisis and

negative legislative tendencies, we

managed to complete another suc-

cessful year. Notwithstanding a dif-

ficult economic situation, lower sales

volumes, increased competitor activity

and a drop in consumers’ purchasing

power, Baltika was able to increase its

market share and improve its financial

results due to a balanced brand port-

folio, innovations and the continued

development of sales and distribu-

tion channels. At the same time, we

strengthened our leadership across all

price segments, maintaining high qual-

ity production and consumer loyalty.

During the past year, we finished im-

plementing large-scale investment

projects, including increasing the ca-

pacity of the Yaroslavl malting house,

and completing modernization of the

Baltika-Baku Brewery. These invest-

ments will help the Company to de-

crease its exposure to fluctuations in

malt prices and to continue to develop

its sales abroad.

Baltika has continued to expand into foreign markets: licensed Baltika

beer production has started up in Australia, shipments began to Le-

banon, Vietnam, Chile and Guinea and Baltika № 7 beer is now sold in

Great Britain and Norway. Baltika continues to be Russia’s leading beer

exporter: the Company’s products can now be found in more than sixty

countries. During the past year, Baltika has maintained its market lead-

ing position as Europe’s largest selling brand (in terms of volume) and

also has become Russia’s highest selling consumer brand.

In 2009, the integration of Baltika into the Carlsberg Group continued.

Baltika and Derbes Brewery began the merger of their operations in

marketing, distribution and sales. Production of Baltika brands was also

launched in Kazakhstan.

I am sure that in the future the market will stabilize and restart its growth.

This will depend on both general economic factors, and also on legisla-

tive regulation of the industry.

We looked on 2009 as a ‘year of opportunities’ – believing that unfavora-

ble external factors would give us the impetus to search for new growth

opportunities: we were not mistaken. Thanks to the general situation on

the beer market, we focused on implementing excellence programs

aimed at improving the effectiveness of operational processes. Together

with contingency measures and the efforts of all Company employees

Baltika achieved strong performance.

2010 also promises to be a challenge, primarily due to a tripling of the

beer excise and a number of legislative initiatives to limit beer sales

and advertising. However, we would point out that Baltika, as a mar-

ket leader, is fit to face any challenge. Baltika has balanced production

capacities, a strong distribution system, a powerful professional team

and experience in beer production and promotion, as well as significant

potential to develop related beverage categories.

We are prepared for variety of development scenarios and we are con-

vinced that due to our flexible strategy and strong management team,

we will be able to successfully overcome any difficulties – as we have

done throughout our 20-year history.

I would like to express my sincerest gratitude to the Company’s employ-

ees for their hard work and diligence, for their readiness to act quickly,

proactively and boldly, and for their contribution to Baltika results.

Anton Artemiev

President, Baltika Breweries

Senior Vice President Eastern Europe,

Carlsberg Breweries A/S

4 Annual Report 2009

BALTIKA BREWERIES

Baltika Breweries was founded in St. Peters-

burg in 1990. Modern equipment and the use of

advanced technologies allowed for the highest

quality production, which made Baltika the leader

in the Russian beer market in 1996. The Company

retains its market-leading status today.

During its almost 20 year history, Baltika has

demonstrated dynamic development – acquir-

ing plants, introducing new production capacities

and actively broadening its distribution network

both domestically and internationally. At the end

of 2006, Baltika merged with three other Russian

brewing companies – Vena, Pikra and Yarpivo.

In April 2008, Baltika joined the international

Carlsberg Group, which now holds 88.86% of the

Company’s charter capital.

BALTIKA IN 2009

Russian beer market leader, with a market

share of more than 40%;

Sales volume – 42.7 million hectoliters;

Revenue – RUB 93,648.7 million;

Operating profit – RUB 29,617.5 million;

Operating margin – 31.6%;

Over 11,000 employees.

Currently, Baltika is the largest consumer goods

production company in Russia and Eastern

Europe. The Company has breweries in 10 Rus-

sian cities: St. Petersburg, Yaroslavl, Tula, Voro-

nezh, Rostov-on-Don, Samara, Chelyabinsk,

Novosibirsk, Krasnoyarsk and Khabarovsk. In

2008, the Company acquired a brewery in Azerba-

ijan. The total production capacity of its brewer-

ies is 52 million decaliters of beer per month. To

meet its own malt needs, the Company has built

two malt-houses in Tula and Yaroslavl and is also

developing agricultural projects in eight Russian

regions.

A diverse portfolio of brands allows the Company

to meet the most exacting consumers’ tastes. In

addition to the key Baltika brand, the Company

portfolio also includes around 40 beer, low-alco-

holic and non-alcoholic brands on the national and

regional levels, including: Arsenalnoye, Nevskoye,

Yarpivo, Tuborg, Carlsberg, Kronenbourg 1664,

and Asahi. The Baltika brand stands in first place

in terms of European sales (according to data

from Canadean and Euromonitor agencies) and

is also one of the three most expensive Russian

brands. Different sorts of Baltika brand beer are

produced under license in Australia, Great Britain,

Uzbekistan and Ukraine.

Baltika has a broad distribution network. The

Company’s products can be purchased in 98% of

Russia’s points of sale.

2010 marks Baltika’s 20th anniversary.

ABOUT THE COMPANY

5Baltika Breweries

COMPANY’S PHILOSOPHY

MISSION

We create high quality products and develop a

culture of beer consumption to bring people joy

and pleasure while socializing.

VISION

We want to become a benchmark in the brewing

industry – a model company that sets standards

for breweries worldwide.

For us, being a model company means being a

leader.

PRINCIPLES UNDER WHICH WE OPERATE

OBJECTIVES

What will contribute to achieving these objectives:

To help the Baltika brand achieve a leading position globally.

To increase Baltika’s share of the Russian beer market, while main-

taining high profitability and high quality products.

A focus on creating powerful brands, premiumisation and innovation.

Leadership in all market segments, regions and sales channels.

Maintaining high quality products and a high level of service.

Constant development of our employees’ competencies and profes-

sionalism.

Increasing business processes efficiency, along with operational

excellence.

Searching for additional sources of profit growth via:

— Widening sales geography;

— Developing related directions.

Our customers and consumers are at the heart

of every decision we make.

Together we are stronger.

We are each empowered to make a difference.

We want to win.

We are engaged with society.


MAIN EVENTS OF 2009

FEBRUARY

MARCH

APRIL

MAY

JUNE

JULY

The Company launched production of Tuborg Lemon and Tuborg Black. This is the first double launch in

Baltika’s history and it is a non-standard marketing solution that allowed the Company to create a unique joint

promotion strategy for the two different sorts.

The Company announced financial results for FY 2008.

The first import brand – Corona Extra – appeared in the Company’s portfolio. Due to the agreement with Grupo

Modelo (Mexico), Baltika became the exclusive distributor of Corona Extra beer on the territory of Russia,

Belarus, Kyrgyzstan, Turkmenistan, Tadzhikistan, and Uzbekistan.

Baltika began supplying Baltika № 7 Export and Baltika № 9 Extra to Lebanon. Baltika is the only Russian beer

available in this country’s market.

Baltika sent its first shipment of Baltika № 7 Export to Vietnam.

Baltika’s Vice President, HR & Corporate Affairs, Daniil Briman, was appointed Chairman of the Council of the

Union of Russian Brewers.

The Company’s Annual General Shareholders Meeting was held.

At the Monde Selection-2009 international contest four Baltika varieties received awards.

Baltika started production of Khlebny Kray kvass – a product in the ‘Refreshment drinks’ category wich is a

new direction for the Company. Kvass became the first non-alcoholic drink in Baltika’s portfolio to be sold

throughout Russia.

At the international contest, the iTQi Superior Taste Award, Baltika’s products received 5 awards.

Following modernization, a grand reopening was held at the Baltika-Baku brewery in Azerbaijan.

During Brandbuilding 2009, an annual event, results of the ‘Absolute brand’ contest were announced. Baltika

received a prestigious professional award for its success and skills in the development and promotion of the

Baltika brand.

The Company began licensed production of the Baltika № 3 Classic in Australia. This is the only Russian beer

that is produced under license in Australia.

In Yaroslavl, a ceremony was held to mark the opening of the second expansion of the malt-house – with a

capacity of 105,000 tons of malt per annum.

Baltika started the producing its new federal brand Zatecky Gus (Zatecky Goose). This beer is brewed using

an original recipe with the use of the famous Czech Saaz hop.

Baltika began exporting beer from the Company’s first foreign production site – Baltika-Baku brewery.

At the international World Beer Awards contest Baltika № 6 Porter received the title ‘World’s Best Stout/Porter.’

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17

25

02

08

21

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20

29

03

20

30

12

18

7Baltika Breweries

AUGUST

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER

10

27

09

02

02

21

25

28

31

Baltika began exporting Baltika № 7 Export to Norway.

Baltika № 7 Export beer was recognized as the best European lager at the BrewNZ Beer Awards international

contest.

At the International Beer Challenge contest, four Baltika products received awards: Baltika № 4 Original

received a golden award; Baltika № 7 Export was given a silver award and Baltika № 6 Porter and Baltika № 8

Wheat received bronze awards.

Baltika’s achievements in the area of personnel training and development were recognized with two awards –

in St. Petersburg, Baltika’s project ‘The school of internal coaches’ was recognized as the ‘Best HR project,’ in

Moscow it received a professional award in corporate training field at Trainings INDEX’09.

Ekaterina Azimina, Baltika’s Vice President, Finance and Economics, was named the winner of the national

award ‘Financial director-2009’ in the category ‘Best financial management for a large business.’

Baltika began supplying Chile with beer.

At the Russian awards ceremony, ‘Consumer good of the year,’ for the eleventh consecutive year, Baltika № 3

Classic was recognized as the ‘Best national brand’ in the ‘Beer’ category. In the ‘Licensed beer’ category, the

Tuborg brand was named the winner.

At the international European Beer Star Awards contest, two products from the ‘Baltika Select’ series –

Baltika № 4 Original and Baltika № 6 Porter – received awards.

Baltika began deliveries of beer to Malaysia.

The Company sent its first shipment of Baltika № 9 Extra and Baltika № 7 Export to Guinea.

At an Extraordinary Shareholders Meeting, shareholders voted to carry out licensed production of Baltika

brands at Derbes Brewery Ltd facilities (Kazakhstan).

The first shipment of Baltika beer, made up of six brands, was sent to Panama.

According to an expert evaluation performed by Forbes magazine, Baltika was recognized as 2009’s top-

selling brand, among all Russian consumer goods brands created in Russia or specifically for the domestic

market.

Baltika began producing the new brand Eve, which is focused on women audience.

A decision was adopted to reorganize Baltika-Almaty LLC – resulting in its joining Derbes Brewery Ltd.

A 20-year license agreement for production of Baltika’s brands in Kazakstan was signed with Derbes

Brewery Ltd.

02

23

27

11

18

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BRAND PORTFOLIO

9Baltika Breweries

During 2009, the Company continued to actively develop its brand

portfolio, which was supplemented by a broad range of novelties. This

allowed Baltika to not only maintain and strengthen its leadership across

all price segments, but also to occupy new market niches.

At the start of the reported period, the first imported brand entered the

Baltika portfolio: the famous Mexican beer Corona Extra, which is one of

the five most sold brands worldwide. In February, the Company carried

out the unique double launch of Tuborg Lemon and Tuborg Black, which

strengthened the premium image of the Tuborg brand. Successful brand

development of Kronenbourg 1664 was promoted by two exclusive art

series ‘Spirit of Paris on Kronenbourg 1664 cans.’

In a rating of Russian FMCG goods pro-

duced in Russia or specially for the Rus-

sian market, Forbes magazine named

Baltika the most popular brand. Arsenal-

noye, Nevskoye, Yarpivo and Bolshaya

Kruzhka were included in the Top-50

trademarks.

At the end of December, the Company’s assortment was supplemented

by the introduction of Eve, a new super-premium brand, focused exclu-

sively on a female target audience. It is an all natural refreshment drink

with a light sparkling taste and low alcohol content. Two Eve flavours –

featuring grapefruit and passion fruit juice – are produced under a

license from the Carlsberg Group.

In the premium segment, the main novelty of the year was Baltika Cooler

Lime beer, which reflects trends in the global market. This beer repre-

sents a combination of light refreshing beer and tropical lime tastes. This

is not the only change in the Baltika brand line-up: in the spring, Baltika

№ 4 Original joined the elite ‘Baltika Select’ series.


BRAND PORTFOLIO

Baltika beer brand portfolio by price segments

Baltika Breweries has a unique brand portfolio that is the strongest on the Russian beer market and includes around 40 beer,

low alcohol and non-alcoholic brands on both the national and regional level, which satisfies varied consumer demand.

11Baltika Breweries

A key 2009 project was the launch of the first federal

non-alcoholic product in the Company’s portfolio – the

Khlebny Kray (Granary Land) kvass. With enormous

brewing experience and expertise, Baltika was able to

offer its consumers an absolutely natural kvass, brewed

directly from malt using a traditional technology. Khlebny

Kray has a rich flavor and the classic refreshing taste of

a true Russian kvass*.

*Kvass is a traditional Russian non-alcoholic drink, very popular among Russians.

Significant attention was also devoted to devel-

oping regional lower mainstream brands. During

the reported period, brands such as Uralskiy

Master Zhivoye, Samara Svetloe and the

refreshing DV Ledyanoye, Sibirskiy Bochonok

Moroznoye and Don Ledyanoe, prepared based

on low-temperature filtration technology, were

added to the portfolio.

At the end of June, the Nevskoye brand line-up

was supplemented by a new beer Nevskoye

Zhivoye, brewed specially for St. Petersburg

residents. This beer is not pasteurized and non-

filtered.

The mainstream portfolio was broadened by the

introduction of the new Zatecky Gus brand. This

beer is brewed using an original recipe with fla-

vored Czech Saaz type hop.


BRAND PORTFOLIO

A month later, the jury at another renowned Euro-

pean contest, the iTQi Superior Taste Award

(Belgium), awarded the Company’s products

five awards in different categories: Baltika № 7

Export, Uralskiy Master Classic, Baltika Nine and

Nevskoye Classic received silver medals and Bal-

tika № 0 Non-alcoholic was awarded a bronze

medal.

In July, at the XI Moscow International Festival of

Beer, the first ‘gold’ was awarded to a novelty –

the Khlebny Kray kvass. During the ‘People’s

Degustation,’ guests rated it as the festival’s ‘Best

debut.’ As a result of voting by festival guests, for

the ninth consecutive time, Baltika № 3 Classic

was awarded the ‘Best People’s Beer’ and Bal-

tika № 0 Non-alcoholic was recognized as the

‘Best non-alcoholic beer.’ Tuborg Green was rec-

ognized as the ‘Best license beer.’

Throughout 2009, the Company actively partici-

pated in regional, all-Russian and international

contests. Both amateurs and professionals eval-

uated the quality of the Company’s products:

during the year, the Company’s beer and non-

alcoholic brands received more than 50 awards

of various caliber.

In April, at the international Monde Selection

(Belgium) contest, medals were awarded to four

brands of beer: gold awards were received by

Don Classic, Baltika Nine and Nevskoye Classic,

silver award – by Uralskiy Master Classic. This

year, for the first time, the Company nominated

for an international contest the regional brands

Don and Uralskiy Master. Recognition at Monde

Selection confirmed the Company’s full compli-

ance with international brewing standards.

AWARDS

13Baltika Breweries

In the fall of 2009, results from one of the most prestigious contests in the

brewing industry, the International Beer Challenge (Great Britain), were

announced. For the first time in the history of this contest, top awards

were won by Russian brands: Baltika № 4 Original received a gold medal

and Baltika № 7 Export was awarded a silver medal, while Baltika № 6

Porter and Baltika № 8 Wheat received bronze medals.

At the ceremony for Russia’s largest consumer good award ‘Consumer

good of the year,’ Baltika № 3 Classic was named ‘Best national brand’

in the ‘Beer’ category for the 11th consecutive year. In addition, Tuborg

received a well-deserved first place in the category ‘Licensed beer.’

Numerous awards recognize the great quality and superb taste of Baltika

products, as well as the utmost mastery of the Company’s employees.

At the end of July, according to results from the

worldwide degustation contest World Beer Awards

(Great Britain), Baltika № 6 Porter received the

honorary title ‘World’s best Stout/Porter.’ At the

World Beer Awards, beers are evaluated on

parameters such as: flavor, taste and aftertaste

completeness and complexity, balance and char-

acter availability.

During the summer, the Company was the only

Russian brewing industry representative at the

BrewNZ Beer Awards (New Zealand) contest.

Baltika № 7 Export was recognized as the best

‘European lager.’

In November, for the second consecutive time,

Baltika № 4 Original was awarded best ‘Red and

amber beer’ at the European Beer Star Awards

(Germany), and Baltika № 6 Porter won the ‘Porter’

category. This year competition was particularly

fierce: ‘Baltika Select’ brands competed against

836 other beers from 35 different countries.


BEER MARKET.THE COMPANY’S POSITION

15Baltika Breweries

During the last 10 years, the Russian

beer market has demonstrated sta-

ble development dynamics. Its annual

growth rates have exceeded those in

more developed European markets.

However, due to the effect of the glo-

bal crisis, the Russian beer market in

2009 experienced a 10.3% drop com-

pared with 2008. This was a result of

the fact that the world economic crisis

had a much more negative impact on

Eastern Europe and Russia than it did

on other regions. The crisis resulted in

lower income for the population and a

drop in purchasing power, particularly

during the second half of 2009 against

the background of consumers’ savings

growth. This led to lower demand for

nearly all categories of food products

and beverages – and beer was not

an exception. Another specific fac-

tor which negatively affected the beer

market was negative weather condi-

tions during summer and the fourth

quarter of 2009.

According to the Company’s internal estimates, in 2009, the Russian

beer market totaled 98 million hectoliters. Domestic beer consumption

dropped compared with 2008 and stood at 69 liters per person.

For large market players, a challenging situation tests a compa-

ny’s strengths, but on the other hand, it also offers an opportunity to

strengthen existing market positions.

In the Russian beer market all major international brewers are presented.

The members of international groups: Baltika, SUN InBev, Heineken,

Efes and SABMiller – hold over 80% share of the market.

Source: Company estimates

Source: Company estimates

Source: Business Analytica

Russian beer market development dynamics (w/o cocktails)

Russian beer consumption dynamics per person, liters

Leading producers share of the Russian beer market

THE RUSSIAN BEER MARKET

Year 2005 2006 2007 2008 2009

Beer market (million hectoliters) 86.3 94.9 109.7 109.3 98.0

Beer market growth (%) 6.0 10.0 15.7 -0.4 -10.3

9080706050403020100

6067

77 7769

6.5%8.8%

6.2%9.5%

Baltika

SUN InBev

Heineken

Efes

SABMiller

Others

2005 2006 2007 2008

2008

2009

2009

13.1% 13.6%38.8% 40.6%

19.0% 16.9%

13.8% 13.2%


The general fall off in purchasing capacity and lower personal dispos-

able income influenced the overall structure of consumption. Consumer

cost-saving primarily resulted in less frequent and lower volume pur-

chases, and to some degree, a switch toward more economic brands

The structure of the beer market and Baltika’s beer portfolio based on price segments, in natural terms

Dynamics of the Company’s market share in Russia


and packages and the trend for consumers to

switch from making purchases at low-size selling

points to buying through cheaper sales channels

(large discounters and supermarkets).

100

90

80

70

60

50

40

30

20

10

0

%

%

40

35

30

25

20

Beer market

2008

2006

2008

Baltika

2009

2007 2008 2009

2009



Super-premium

Premium

Mainstream

Lower mainstream and Discount

In unstable economic conditions and a declining market, the Company

strengthened its positions: Baltika’s market share increased 1.8%, from

38.8% in 2008 to 40.6% in 2009. The Company’s total sales dropped

5.7%, whereas Russian beer sales fell 6.4%. The Company’s 2009 sales

THE COMPANY’S POSITION IN RUSSIA

volume, in natural terms, was 42.7 million hectolit-

ers, including 41.7 million hectoliters of beer.

Baltika’s

share of the

Russian market

increased 1.8%

11% 10% 10% 9%

23% 23% 26% 25%

18% 18%25% 26%

48% 49%39% 40%

36.1%

38.3% 38.8%40.6%

17Baltika Breweries

During the reporting year, the Company strength-

ened its absolute leadership across all price seg-

ments of the market. These results were achieved

by demonstrating flexibility and successfully im-

plementing the Company’s development strategy,

in crisis conditions, via brand portfolio innova-

tion and maintaining consumer loyalty for Baltika

brands (despite an overall consumption decline).

The Company’s well-deserved reputation as a re-

liable and stable partner allows Baltika to keep at-

tractiveness to clients and distributors.

Beer market growth dynamics and the Company’s beer sales in Russia

%

20

15

10

5

0

-5

-10

-1520062005 2007 2008 2009

The Company’s beer

sales dynamics

Beer market dynamics

19%

1%

11%12%

16%

0%

-10%

-6%

10%

6%

Regional brands demonstrated strong dynamics: despite the overall

market decline, sales of the brands DV (+23%), Don (+13%) and Samara

(+10%), supported by innovations (the so called ‘live’ and ‘ice’ types of

beer), showed double digit growth. Baltika № 3 Classic – the leader of

the mainstream segment – again displayed its strength and potential,

demonstrating higher sales against an overall backdrop of lower con-

sumption. The new sort in the Baltika brand’s line-up Cooler Lime also

positively affected brand development. In the end of the year Baltika,

developing a new prospective segment of drinks oriented at female

audience, launched a brand Eve. As part of its strategy of developing

non-beer products, during the past year, Baltika entered the kvass cate-

gory with the Khlebny Kray brand and by the end of 2009, the Company

already held third place in the kvass market.

Sources: Rosstat and Company estimates


In 2009, growth rates for the global beer market slowed down, which

was largely due to the ongoing economic crisis, which influenced con-

sumer activity dynamics. However, according to Euromonitor (an inter-

Russia remains one of the world’s largest beer markets based on consumption volumes. According to estimates by the inter-

national research company Canadean, Russia is the fourth largest beer market in the world, after China, the United States and

Brazil.

THE WORLD BEER MARKET

national research company), in 2009, world beer

sales increased 1.1% and reached 184 billion lit-

ers of volume.

Dynamics of the global beer market, billion liters

2009 leading countries based on beer market volume (forecast), million hectoliters

200

180

160

140

120

100

80

60

40

20

0

450

400

350

300

250

200

150

100

50

0

In 2009, growth

rates on the

global beer

market slowed

down.

Russia is the

world’s fourth

largest beer

consuming

country,

based on beer

consumption

volume.

159169 178 182 184

20062005

China

USABra

zil

Russia

Ger

many

Mex

ico

Japan

Gre

at Brit

ain

Spain

Poland

2007 2008 2009F

Source: Euromonitor

Sources: Canadean and Baltika

409

241

108 98 9065 52 37 36

62


19Baltika Breweries

The slowing down of global beer market growth

impacted Baltika’s plans for sales abroad. As a

result of this, in 2009, the volume of the Com-

pany’s export sales totaled 1.8 million hectolit-

ers; and taking into account licensed production

abroad, the total volume of the Company’s sales

abroad exceeded 2.7 million hectoliters. Thus,

Baltika brands’ sales abroad (including Baltika-

Baku) in 2009 decreased 5% compared with

2008. The Baltika brand was responsible for more

than 65% of the 2009 total sales volume abroad.

BALTIKA IN THE WORLD

In 2009, Baltika successfully implemented a number of key projects on

the international market: in May, following large-scale modernization, the

Company started up the Baltika-Baku Brewery in Azerbaijan; in June,

production of Baltika № 3 Classic, under a licensing agreement, was

launched in Melbourne, Australia; in December 2009, Company share-

holders agreed to a licensing agreement to produce various Baltika and

Nevskoye brands at the Derbes Brewery facilities in the Republic of

Kazakhstan. More detailed information on these events can be found in

the ‘Key projects’ section of the annual report.

In 2009 Baltika continued its sales expansion and entered the new mar-

kets of: Norway, Lebanon, Guinea, Guinea-Bissau, Uganda, Chile, Pan-

ama, Vietnam and Malaysia. Today, Baltika products are sold in more

than 60 countries; and Baltika exports account for 70% of all exported

Russian beer.

Leading international beer market players

Four companies

account for

more than 40%

of the world beer

market.

Anheuser-Busch InBev NV 20%

SABMiller Plc 10%

Heineken NV 7%

Carlsberg Group 6%

Others 58%

Source: Euromonitor


FINANCIAL POSITION

21Baltika Breweries

Under conditions of decreased con-

sumer demand and a significant

decline in the beer market, Baltika’s

business was relatively resistant to

unfavorable external environmental

conditions. The Company managed to

contain the drop in sales volume and

demonstrated good financial results

in 2009, due to active brand portfolio

optimization work, sales and distribu-

tion development and proactive cost

cutting measures.

The Company’s 2009 sales volume dropped 5.7%. However, year-on-

year, revenue from sales increased 1.3% from 2008 and totaled 93,648.7

million rubles.

In 2009, the Company’s operating profit substantially increased (+31%)

compared to 2008 and reached 29,617.5 million rubles.

These significant results were achieved due to brand portfolio optimiza-

tion work and effective investment in the development of sales channels

and key regions.

In 2009, the Company maintained the net average price increase (6.8%)

on beer in line with the inflation rate in this category. Due to a three-fold

increase in the excise tax on beer effective as of January 2010, there

may be multi-directional dynamics affecting gross and net prices for

various brewers. However, as in previous years, Baltika plans to use a

weighted approach to pricing.

FINANCIAL POSITION

Indicators 2009 2008 Change 2009/2008

Sales, million hectoliters 42.7 45.3 -5.7%

Including sales in Russia,million hectoliters 39.6 42.3 -6.4%

Revenue, million RUB 93,648.7 92,482.3 +1.3%

Cost of sales, million RUB -42,394.9 -47,599.5 -10.9%

Gross profit, million RUB 51,253.8 44,882.8 +14.2%

Distribution expenses, million RUB -19,150.1 -20,132.5 -4.9%

Administrative expenses, million RUB -2,528.7 -2,602.2 -2.8%

Other income/ expenses, million RUB 42.5 125.9 -66.2%

Operating profit, million RUB 29,617.5 22,273.9 +31.0%

Profit for the year, million RUB 23,372.3 15,508.2 +50.7%

Operating margin, % 31.6 24.1 +7.5p.p.

Gross margin, % 54.7 48.5 +6.2p.p.

Return on assets (ROA), % 37.2 29.7 +7.5p.p.

Return on equity (ROE), % 46.5 41.0 +5.5p.p.

Return on capital employed (ROCE), % 50.8 38.1 +12.7p.p.

Earnings per share, RUB 147.14 97.99 +50.2%


FINANCIAL POSITION

A key factor contributing to increased profitabil-

ity was the anticipatory cost reduction in operat-

ing costs.

In addition to favorable circumstances in the raw

materials market and lower purchase prices,

caused by economic conditions, the Company

implemented various projects to upgrade oper-

ational effectiveness. Among the most impor-

tant cost-cutting projects were the Company’s

agricultural project to grow malting barley and

projects to up-grade its own malting houses,

which would dilute the Company’s dependence

on suppliers. Concluding long-term agreements

with suppliers, decreasing purchase volumes

(the prices of which are tied to foreign currency)

and outsourcing a number of functions had a

significant positive impact on cutting expenses.

As a result, 2009 expenses on producing goods

decreased 5.5% per unit year-on-year. Produc-

tion costs declined 10.9% compared with 2008.

Net operating margin increased 7.5p.p. com-

pared with the previous year and reached 31.6%.

The Company’s logistics have had an additional

positive effect on corporate cost reduction. Per

liter costs for warehousing and product trans-

portation were 10% lower in 2009 than in 2008.

These results can be attributed to the Company’s

efforts to build the most effective supply chain in

the industry. Factors which explained lower logis-

tics costs include: delivery route optimization,

the usage of own transport; decreased average

delivery distance as a result of cross-produc-

tion and supply chain optimization; warehouse

capacity optimization and controlling services

providers’ prices.

23Baltika Breweries

In 2009, the Company finalized two large

investment projects which had begun in 2008:

increasing malt-house capacity in Yaroslavl

(2009 investment reached 609 million rubles)

and modernizing the Baltika-Baku brewery

(2009 investment reached USD 13.6 million).

Other investment projects included: realizing

marketing innovations and developing sales

and management systems. Overall investment

totaled 3.7 billion rubles.

In 2009, the Company invested significant

resources in promoting its products. Compared

with 2008, promotional expenses decreased to

a lesser extent compared to other expenses. A

significant restructuring of commercial expenses

occurred during the reporting year, which

allowed for the best investment to be achieved.

In 2009, administrative expenses decreased

2.8%. As with other directions, this improvement

was achieved through increased effectiveness,

scale and the wider use of external service pro-

viders.

During 2009, due to higher net revenues, sig-

nificantly lower operating costs and optimized

working capital, the Company accumulated a sig-

nificant net cash flow – 30.4 billion rubles – which

was primarily spent on repaying loans and credits

and paying out dividends. In 2009, the Company

directed more than 7.5 billion rubles to repay ear-

lier received loans and credits, as well as paying

out dividends in the amount of 14 billion rubles.

Free cash flow was used to make short-term

investments on the money market.

In 2009, the Company was able to maintain and

increase its rate of return on capital employed

(ROCE). As of the end of 2009, this indicator

stood at 50.8%.

Investment

Liquidity and effectiveness

During 2009, the return on assets (ROA) increased and reached 37.2%.

This increase was primarily due to upgraded efficiency and a decrease

in overall investment volume. The return on equity (ROE) ratio increased

5.5p.p. and totaled 46.5%. Profit per share increased 50.2% and totaled

147.14 rubles per share for 2009.

In 2009, the Company carried out an extensive work to upgrade the

effectiveness of managing working capital. Due to the successful reali-

zation of numerous projects, without impact on the efficiency of the sup-

ply chain, inventory levels dropped and the turnover period for accounts

payable increased. Inventory optimization was conducted for all catego-

ries of items – finished goods, raw materials and unfinished goods. The

Company actively uses factoring schemes for interactions with materi-

als suppliers, gradually increases the quality of demand planning and

develops inventory management across the entire distribution chain.

Changes in the structure of current assets are also linked with the tem-

porary increase in accounts receivable, as a result of the accumulation

of product inventory in the place of sales to the final consumer, on the

eve of the New Year holidays. It is also worth noting the positive trend in

the average turnover level of these assets during the reporting period.

Year-on-year, Baltika increases the effectiveness of its asset usage,

which leads to greater profitability and earnings per share, which results

in higher paid-out dividends.


KEY PROJECTS

25Baltika Breweries

On June 18th, 2009, in Yaroslavl, the

Company held a ceremonial opening

of stage two of the malting plant – with

a capacity of 105,000 tons of malt per

annum. Doubling capacity of the Yaro-

slavl malt-house is an important stage

of Baltika’s investment policy, aimed

at decreasing production costs while

maintaining high quality production. The

decision to double malt-house capacity

in Yaroslavl was made largely due to the

Company’s successful launch of its own

agricultural project in Russia’s Central

Federal Region.

By 2009, the Company had carried out large-scale reconstruction of the

Baltika-Baku – a brewery, which has a 40 year history. A high tech PET

line was installed at the brewery, in addition, the filling line for glass bottle,

the cooking order and the fermentation and filtration rooms were mod-

ernized. A ceremonial opening of the brewery was held May 20th, 2009.

All equipment installed at the Baltika-Baku brewery was manufactured

by leading producers and conforms to international standards and Bal-

tika’s requirements regarding beer production. Post-modernization, the

brewery’s production capacity reached 1 million decaliters per month.

New equipment, coupled with the introduction of advanced brewing

technologies, allowed for higher quality local brands Xirdalan, Afsana,

Bizim and 33 Export to be produced, as well as the production launch of

Baltika and Arsenalnoye brands.

Baltika-Baku’s upgraded production capacity allows not only for the sat-

isfaction of increasing internal demand for high quality beer, but also for

production export to neighboring regions.

Brewery modernization was one of the largest investment projects in

the food sector in the Republic of Azerbaijan in recent years.

In June 2009, licensed production of Baltika № 3 Classic beer (in 0.33

liter bottles) started at the Independent Distillers Company in Mel-

bourne, Australia. The beer has been positioned in Australia’s growing

international premium beer segment and is sold in all Australian large

retail chains.

Baltika beer has been present in the Australian market since 2004 and

it is the only Russian beer in Australia. Among different types of Baltika

products, the most popular one – both among the Russian population

and with local Australians – is Baltika № 3 Classic. This was the reason

why the Company adopted a decision to produce this type of beer under

license in Australia, which significantly cut logistics costs and satisfied

higher demand for Baltika № 3 Classic beer in Australia.

Completing modernization of the Baltika-Baku brewery

Doubling malt-house capacity in Yaroslavl

Baltika № 3 production in Australia

On December 2nd, 2009, Baltika Breweries’ shareholders voted to con-

clude an agreement on the licensed production of Company brands at

Derbes Brewery LLC capacities in Kazakhstan.

Derbes Brewery is part of the Carlsberg Group and is one of the leaders

in the Kazakhstan beer market. The Brewery’s production capacity is

approximately 2.2 million hectoliters per annum. Derbes utilizes modern

high tech production methods that correspond to international stand-

ards. The product range includes brands such as: Derbes, Irbis, Alma-

Ata and Tuborg.

Licensed production in Kazakhstan


Agricultural project development

Baltika continues to develop its own agricultural

project to grow brewing barley. This project allows

the Company to restrain price growth for pro-

duced goods and decrease dependence on mar-

ket malt prices. In 2009, the average expenses

for barley grown within the project decreased

23% compared with 2008.

Baltika’s partners in its agricultural project are

agro-industrial businesses, which have a solid

production base, modern equipment, grain- dry-

ing capabilities and necessary storage condi-

tions. The Company has strict requirements

toward the barley it is supplied. Baltika specialists

control barley production technology across all

stages, which ensure the Company receives the

highest quality ingredients. Within this agricultural

project, Baltika offers its partner businesses elite-

type grains as trade credit.

KEY PROJECTS

According to the license agreement signed December

31st, 2009, Baltika granted the exclusive right for the

usage of trademarks, as well as the know-how for the

production, sales and distribution of licensed products,

for the Baltika and Nevskoye brands on the territory of

the Republic of Kazakhstan. The agreement is valid until

the end of 2029.

In 2009, preparations were started for licensed produc-

tion. These included: integrating Baltika’s and Derbes’

operating processes in the field of marketing, distribu-

tion and sales, conducting an audit of the Company’s

production capacities, test brewing beer and evaluating

the quality of produced beer through consumers taste-

testing.

27Baltika Breweries

According to data from the Institute of General

Genetics named after N. I. Vavilov of the Russian

Academy of Science, barley’s average cleanli-

ness (eliteness and the quality of types) in Russia

is 75%; only Baltika has the ability to reach 98%

cleanliness within the framework of its agricul-

tural project. The Company actively cooperates

with agricultural producers in Tula, Voronezh,

Lipetsk, Kursk, Penza, Ryazan, Tambov, Chelay-

binsk, Orel and other Russian regions. In 2009,

the Company signed 65 agreements to purchase

grain from agricultural companies in the Russian

Central and Privolzhye Federal Regions. Utilized

cultivation area increased 52% compared with

the previous year.

Excellence programs

The Company implements programs aimed at upgrading operational

effectiveness and maintaining high business profitability. Excellence pro-

grams have been introduced in areas, including: sales, logistics, pro-

duction and purchasing. In addition to this, the Company has continued

to actively work on the ‘Lean Production’ project.

‘Lean Production’ involves the systematic usage of principles, methods

and instruments to increase effectiveness, based on a voluntary sus-

tainable enhancement culture. Its primary goal is to minimize all types

of losses. In 2009, the Company continued to introduce ‘Lean Produc-

tion’ at all corporate production sites. Last year, large-scale personnel

training was conducted in the Company’s branches. The Company

continued to work on other projects: ‘Streamlining,’ ‘Visualization,’ ‘Fast

realignment,’ ‘Protection from unintentional errors’ and ‘Training lead-

ers,’ among others.

The Company developed the special programs ‘Ideas (Projects)’ and

‘Got an IDEA!’ which are directed at soliciting top-notch suggestions from

employees on how to optimize production activity. The best employee

suggestions are rewarded.


KEY PROJECTS

Sales development

In 2009, due to a general fall-off in the Russian beer market, the Com-

pany was able to significantly increase the economic efficiency of its

Russian trade operations and achieved strong distribution indicators, as

well as good results for presence in points of sale.

The Commercial Excellence (or ComEx) project started by the Company

is focused on improving commercial activity. In its pilot stage, project

was implemented in the North-West and Moscow-Center Regions in tra-

ditional retail channel.

Active work was carried out in many directions – including improving

interactions with distributors and forming a correct product mix based

on a point of sale’s specific characteristics. Particular attention was

paid to trainings for trade representatives that instilled an individualized

approach to clients and to effectively developing territories. Investment

in points of sale was also optimized.

In the territories in which the project was launched, the number of vis-

its per point of sale for each trade representative increased 5% com-

pared with 2008. The number of active clients that regularly purchased

the Company’s products increased 20%. The quantity of daily orders

increased and the share of shelf space went up, as did the average

quantity of represented assortment positions.

Furthermore, in 2009, the Company continued to develop its Retail Key

Account channel (in the format of modern hyper-, super- and mini- mar-

kets). The share of Baltika’s own distribution in this channel nearly dou-

bled compared with 2008 and represented nearly

one half of all sales in this channel. This strength-

ened the Company’s share in the given market

segment and resulted in growth of profitability.

In the area of on-trade beer sales, the Company

increased sales activities of PET-packaged beer

in specialized beer shops and kiosks. These

stores and kiosks have recently demonstrated

fast growth. In these segments, almost all key Bal-

tika brands are represented. As a result, across

Russia, 2009 draft beer sales increased 6%, and

coupled with tared production, there was a 10%

increase in on-trade compared with 2008.

In 2009, an important strategic step for the

Company’s sales department was to change its

approach towards trade marketing functions in

Russia. Its transformation into marketing through

trade channels, the basis of which is studying con-

sumers’ behavior at points of sale, will help apply

precise solutions in promoting brands through

various sales channels. It will also help strengthen

the Company’s success in the market.

29Baltika Breweries

‘Master of Planning’

The cross-functional ‘Master of Planning’ system

was launched at Baltika in January 2009. This is

an automated system to distribute volumes by the

Company’s branches based on demand forecast

and other factors, including: supply, production,

logistics and sales.

The system’s primary goal is to optimize company

costs, including those connected with raw mate-

rial purchases, production and finished product

transportation along the supply chain. This sys-

tem allows for high precision operational planning

at all of Baltika’s Russian breweries – based on

both decade and annual sales forecasts.

The Company’s principal expectations related to

the launch of the ‘Master of Planning’ project were

proven to be correct. All main goals were achieved,

including: improving and increasing planning

accuracy and economizing along the entire sup-

ply chain, taking into account factors such as: pro-

duction costs, final product delivery costs, limits on

warehouse and transport load, inventory volumes,

the repetition factor of production batches, prod-

uct distribution volumes across branches and the

definition of optimal delivery routes.

‘Reverse Bottle’ project

One of the Company’s priorities is to actively work with

returnable bottles. Over the last several years, Baltika

branches have implemented a large-scale ‘Reverse

Bottle’ project, aimed at increasing the level of returned

glassware in production. As a result of this project, dur-

ing the reporting period, the number of glass bottle

buy-back centers which work with Baltika bottles signifi-

cantly increased.

The use of recycled glass bottles is favorable from both

an ecological standpoint and from a business point of

view: it cuts production costs and also decreases envi-

ronmental impact.


CORPORATE SOCIALRESPONSIBILITY

31Baltika Breweries

The Principle ‘We are engaged with

society’ forms the groundwork of the

Company’s philosophy. Baltika makes

its contributions to social develop-

ment and environmental protection by

developing and introducing business

practices based on observing corpo-

rate social responsibility principles.

The Company’s market leading position provides it with significant com-

petitive advantages, which help it attract and retain the best specialists.

The Company aims to create working conditions that allow its employ-

ees to fully realize their potential in an effective manner.

Social partnership

The labor relations in the Company are built in accordance with the prin-

ciples of social partnership.

Since 2007, Baltika has had a Labor Collective Council, which is an

organ that represents the interests of all Company employees and pro-

vides them with the opportunity to participate in managing social pol-

icy. In July 2008, at the Council’s initiative and with the participation of

principal labor union organizations, a collective agreement was signed,

which recorded social guarantees and privileges, additional to the labor

legislation.

The 2nd General Conference of Company employees, which took place

in November 2009, summarized the Labor Collective Council’s results

over a two-year period and declared its activities satisfactory.

Compensation and benefits system

Baltika’s remuneration level is among the highest in the industry. Despite

the economic crisis and negative trends in the brewing industry, in 2009

the Company maintained a social package for its employees, as well as

increased employee remuneration 10% on the average.

The corporate social package includes a broad list of various benefits

and compensation including:

On its premises, the Company has eight sports and recreation com-

plexes that have modern fitness centers, saunas and pools. In 2009,

the Company opened new sports and recreation complexes at its

Khabarovsk, Krasnoyarsk, Voronezh, Chelyabinsk and Novosibirsk

branches.

The Company regularly conducts sports competitions for its employees.

In 2009, at all corporate branches, Baltika held sports days; corporate

teams also participated in football, mini-football, volley, basketball and

ski tournaments.

Labor relations

Voluntary medical insurance.

Life insurance and insurance against accidents.

Free meals in the Company’s canteens or compensation for meals

when an employee is travelling on business.

Welfare assistance in cases of weddings, childbirth, anniversaries

and retirement.

Additional payments for sick leave, travel expenses, etc.


Training & Development

Baltika focuses significant attention on developing its employees. This

is underscored by the type of programs that the Company’s HR Depart-

ment creates, the activities of the corporate training center and the pref-

erences given to internal candidates when vacancies arise.

To maintain its personnel development and training system, in 2009,

the Company developed the ‘Internal coaches school’ project, which is

aimed at creating additional development opportunities for employees

within the Company and on conducting regular training programs by

attracting and training experts from the Baltika team. Currently, the Com-

pany has 10 internal programs and more than 50 of its own coaches.

The ‘Internal coaches school’ has already received two awards: the

Trainings INDEX’09 professional award in the corporate training field in

the category ‘An effective solution in the field of training and develop-

ment for business support’ and recognition in the ‘Best HR project’ con-

test in the ‘Best anti-crisis project’ category.

Personnel Performance Appraisal

Baltika has instituted an Annual Performance Appraisal that allows the

Company to develop employees and to improve their personal skills.

This system allows to design a complex training and development plan

for each employee, prioritizing the business point-of-view, as well as

building a correct system of ‘manager-employee’ interaction based on

principles of trust and partnership.

Company’s ecological measures have multiple

components – water protection projects, waste

management and air protection measures, as

well as measures connected with rationally using

resources.

The Company does not limit its investment to

large-scale ecological programs, such as clean-

ing facility construction, or alternative energy

source usage projects. Baltika conducts events

for residents of various cities, which allow eve-

ryone to contribute to improving environmental

conditions and to making their lives more com-

fortable. For example, during an event in Novosi-

birsk, were liquidated spontaneous damps in the

city parks, in Chelyabinsk, residents cleaned the

embankment and a portion of the Miass River,

in Krasnoyarsk, a boulevard of 60 elm trees was

planted, in Rostov, a litter pick up was held on the

banks of the Kuban River and in Samara, the Ale-

kseevskiye Lakes were cleaned.

Environmental management


33Baltika Breweries

‘Earth Day’

On March 28, 2009, Baltika employees from

St. Petersburg to Khabarovsk supported the

‘Earth Day’ initiative. The aim of this World Wild-

life Fund (WWF) project is to draw attention to

the global warming and climate change chal-

lenges. For this event, for one hour, people

from all around the world stop using electricity

to decrease atmospheric greenhouse gas emis-

sions.

Helio-system in Khabarovsk

In February 2009, a sports and recreation com-

plex with a sauna, pool and relaxation zone was

opened at the Company’s Khabarovsk branch.

In September, the Company finished installing a

solar battery system at the site, which optimizes

energy consumption. Now, thanks to the imple-

mentation of this unique ecological project, the

complex can be heated via renewable energy.

Using solar energy helps cut energy consumption

and also decreases environmental impact.

The ‘Reverse Bottle’ project

In 2009, Baltika reused 682 million glass bottles in its

production. Multiple usage of recyclable packaging

decreases the negative environmental impact of glass

production. From year to year, the Company works to

increase the number of bottles returned to its breweries.


Baltika undertakes special measures to control and pre-

vent potential threats to the safety of the Company’s

employees and the employees of contractor organiza-

tions. Workplace safety depends not only on the techni-

cal level of the breweries, but also on personnel training

and the observance of safety rules (an area to which the

Company pays special attention).

Workplace evaluation

In 2009, to fulfill terms of its collective agreement, the

Company carried out large-scale workplace evalua-

tions, which focused on checking that labor conditions

conformed to established standards. Fourteen param-

eters were measured, including: noise, vibration, micro-

climate, light, labor heaviness and intensity. Workplace

appraisals will allow the Company to carry out organi-

zational, technical and health improvement measures,

as well as to provide employees with reasonable com-

pensation and other benefits for working in harmful labor

conditions.

Production quality is Baltika’s number one prior-

ity. The Company bears responsibility towards

its consumers and society to ensure quality pro-

duction, as well as to observe its safety. The

Company must also ensure that its products are

consumed in a responsible manner.

During the 1990s, Baltika was one of the first Rus-

sian companies to obtain the international quality

certificate ISO 9001. Since that time, the Compa-

ny’s quality management system has been main-

tained and regularly upgraded.

In 2009, it was confirmed that the Baltika-

St. Petersburg Brewery conforms to international

food safety management standards. The site

received a certificate of conformity for its brew-

ing production processes for its Hazard Analysis

and Critical Control Points management system.

During the certification process, both internal and

external audits were conducted, which checked

that product quality and business processes con-

formed to international requirements. HACCP

concept is based on seven basic principles that

focus on quality production and consumer health.

These principles call for the regular evaluation

and management of factors that affect the food

safety of production. Currently the development

and introduction of this system is ongoing at the

Company’s branches.

The brewing industry’s contribution to the Rus-

sian economy is not limited solely to breweries,

but also includes the development of related sec-

tors of the economy, such as: agriculture, tare

and packaging industry, transportation, retail and

public catering enterprises. Over 600,000 Rus-

sian jobs exist at companies that are partners of

the brewing industry.

Labor protection and industrial safety Consumer relations

Participation in social affairs

Social and economic partnership:

Agricultural project


35Baltika Breweries

Responsible drinking

In 2009, the Company participated in more than

60 holiday events across Russia and in a number

of cases, was the initiator of these events. Dur-

ing the year, more than 1.5 million people visited

these events – which allowed the public to evalu-

ate a wide selection of the Company’s beer and

non-alcoholic products, listen to a wide variety of

music and compete in various contests, as well

as to participate in events aimed at developing a

responsible beer consumption culture.

Baltika contributes to the development of the

agricultural sector in Russia’s regions. In 2005,

the Company began to implement its own brew-

ing beer barley project. The principal aim of this

project was to cut the cost of malt – one of the

primary ingredients in beer production – without

compromising quality. To achieve this result, a

decision was adopted to help Russian agricul-

tural producers grow high class beer barley,

and thus, to replace imported ingredients with

domestic ones.

Within the framework of beer and kvass festivals, exhibits were held that

displayed beer posters from the Carlsberg Breweries A/S collection. The

exhibition included posters from Scandinavian painters from the late XIX

to the early XX centuries, demonstrating various styles and directions,

which had long crossed advertising boundaries and formed part of the

foundation for historical and cultural development. Items in the collection

illustrated to exhibition attendees the history of the brewing industry and

the creation of a beer drinking culture, as well as the development of the

poster as an art form.

In 2009, the Company participated in beer and kvass festivals in 10

Russian cities: St. Petersburg, Moscow, Yaroslavl, Tula, Sochi, Rostov-

on-Don, Samara, Novosibirsk, Krasnoyarsk and Khabarovsk. The Days

of Khabarovsk, Krasnoyarsk, Novosibirsk, Tula and Rostov-on-Don

received corporate support, as did the ‘Anniversary of the Leningrad

Region’ in Vyborg. Popular Company brands sponsored large music

concerts.


For many years, Baltika has been engaged in

charitable activities that provide assistance to the

regions in which it is present. In total, during the

reporting year, the Company contributed around

RUB 126 million to charitable projects and other

socially important measures.

In 2009, Baltika continued to finance capital repairs

to the regional children’s clinical hospital in Yaro-

slavl; this project is scheduled to be completed by

the City’s 1,000th anniversary in 2010. The Com-

pany also allocated funds to capital repair of the

Kinelskaya Central District Hospital in the Samara

Region. Within the framework of a long-term

cooperation and partnership project with the Sci-

entific Research Institute of Pediatric Orthopedics

(named after G. I. Turner) in St. Petersburg, Bal-

tika provided financing to create an All-Russian

Educational Medical Diagnostic Center on the

basis of the institute to assist children affected by

locomotor diseases. The Company continued to

Charity

The Company continued to implement the ‘Beer patrol’ social project.

The aim of this project is to draw public attention to the illegal sale of

beer to minors. Whereas in 2008, public control over conformity with

beer sales regulations, with the participation of Baltika, was organized

at festive events – beer festivals and Days of the City, in 2009, checks

were also carried out at retail outlets to diminish the number of sales-

people violating the law. Overall, 42 raids were carried out in 24 Rus-

sian cities, as well as in one foreign city – Alma-Aty, Kazakhstan. ‘Patrol’

participants visited 890 retail points and uncovered approximately 200

breaches.

In addition, during the reporting year, Baltika again participated in the

Union of Russian Brewers ‘You are 18? Prove it!’ program, which includes

distributing special informational sticker and informing trade personnel

and buyers of the need to prohibit beer sales to minors.


37Baltika Breweries

Baltika is one of the largest taxpayers in the cities where its headquar-

ters and branches are located. The timely and full payment of taxes

to the budgets of all levels of government is standard practice for a

socially responsible company, which is guided by the principle of strictly

adhering to Russian legislation.

In 2009, Baltika’s total tax payments to the Russian federal budget

totaled RUB 10.5 billion and taxes paid to regional budgets stood at

RUB 17.6 billion.

For many years, Baltika has been one of the largest corporate taxpayers

to the St. Petersburg budget.

Taxes

provide support to Children’s Home № 8 and the

Children’s Hospice in St. Petersburg. Baltika also

acquired and installed a children’s playground

for Correctional School № 6 in St. Petersburg’s

Vyborg District.

Baltika also provided support to the following

medical institutions: the rehabilitation center

‘House of Hope on the Mountain’ in the Leningrad

Region, a recreational home for children and a

trauma department at the Emergency State Hos-

pital in Rostov-on-Don, as well as a children’s car-

diac sanatorium in Tula and a clinical hospital in

Voronezh.

In April 2009, the charitable program to install

playgrounds at Tshinval’s kindergartens (which

was launched in 2008) was concluded. Eduard

Kokoyty, President of the Republic of South Osse-

tia, personally thanked Baltika for support.

Substantial funds were directed at restoration and reconstruction work

on the Svyato-Troitskiy Izmaylovskiy Cathedral, which is a well-known

St. Petersburg architectural monument.

For several years, Baltika has participated in the ‘Duty’ social program –

under the patronage of St. Petersburg’s Governor. The Program is

aimed at helping veterans of the World War II and survivors of the Lenin-

grad Blockade.

The Company continued to provide assistance to sports organizations –

the ‘Dinamo’ volleyball club in Khabarovsk, the handball club ‘Rostov-on-

Don’ in Rostov-on-Don, the ‘Yenissey’ field hockey club in Krasnoyarsk,

the St. Petersburg Ski Racing Federation, the Novosibirsk State Social

Fund for Olympic gymnastics, among others.

In 2009, the Company sponsored the premiere staging of the St. Peters-

burg Russian Non-repertory Theater (named after A. Mironov) and also

provided financial assistance to conduct capital repairs on the ‘Kukly’

Theater for physically challenged children in St. Petersburg. Baltika also

provided regular support to the Krasnoyarsk Drama Theater (named

after A. S. Pushkin) and the charitable fund named after V. P. Astafiev.

Baltika received an honorary award, the ‘Golden Pelican,’ in the category

‘For the revival of arts patronage traditions.’


CORPORATEGOVERNANCE

39Baltika Breweries

Baltika adheres to best practice cor-

porate governance standards in full

accordance with the Corporate Gov-

ernance Code approved by Russian

securities authorities:

Corporate Governance Code observances

The Company observes the following provisions of the Corporate Gov-

ernance Code concerning:

Holding the General Shareholders Meeting:

Activities of the Board of Directors, as well as requirements for its

members:

All shareholders have the oppor-

tunity to receive effective protec-

tion in case their rights have been

infringed on;

Shareholders receive reliable and

effective settlement methods for

their share ownership rights;

Shareholders are able to participate

in the Company’s management

by adopting decisions on the most

important aspects of the Company’s

activity at the General Shareholders

Meeting;

The shareholders have the right

to receive regular, complete and

accurate information about the

Company;

Shareholders do not abuse their

rights;

The Company exercises control

over the use of confidential and pro-

prietary information.

Shareholders have the right to introduce items for the General Meet-

ing’s agenda, as well as the right to request convening a General

Shareholders Meeting without the provision of an extract from the

shareholder register;

The Company informs shareholders about convening the General

Shareholders Meeting not less than 30 days before the date of the

Meeting, regardless of agenda items, if the legislation does not fore-

see a longer term;

The Company’s President, members of the Board of Directors, mem-

bers of the Internal Audit Committee and the Auditor, as well as candi-

dates for the indicated management and control bodies, are obliged

to attend the General Shareholders Meeting;

The Provision on the Company’s management and control bodies

stipulates the availability of a registration procedure for participants at

the General Shareholders Meeting.

The Board of Directors is elected through cumulative voting;

Members of the Board have the right to receive information about the

Company that is needed to fulfill their functions. The order for con-

ducting Board meetings is stipulated in the Provision on management

and control bodies;

The approval of the Company’s annual budget (for current economic

activities), as well as the investment budget, fall under the compe-

tency of the Board of Directors in accordance with the charter;

Conditions of the President’s labor agreement are approved by the

Company’s Board of Directors;

The Company’s Provision on management and control bodies stipu-

lates that Board members must act in the interests of the Company

(this prevents conflicts of interest);

Members of the Board of Directors are required to inform the Com-

pany of any transactions involving Company securities;

The Board of Directors does not include individuals who have been

found guilty of crimes in the sphere of economic activity or crimes

against governmental authorities or the interests of state services and

municipal services, nor does it include individuals who have been

subject to administrative penalties for legislative breaches in the areas

of entrepreneurial activity and finance, taxation or the stock market;

The Board of Directors does not include persons, who are par-

ticipants, the CEO (Director), members of a management body or

employees of a competing legal entity.


A Provision on information policy was adopted to

define rules and approaches for information dis-

closure. On the Company’s corporate web site

(www.corporate.baltika.ru), official information

about the Company’s activity is published; other

information is also regularly disclosed on the site.

In addition to this, information that requires com-

pulsory disclosure on the stock market is pub-

lished on Interfax newswire. Izvestia newspaper

is the official print media that the Company uses

to inform shareholders about convening general

meetings. The Company’s Board of Directors

approved the Provision on insider information, for

information that is not publicly available and the

disclosure of which may substantially affect the

market price for the Company’s securities.

Governance structure

General Shareholders Meeting

Board of Directors

President

Vice President Finance

and Economics

Vice President Marketing

Vice PresidentHR & Corporate

Affairs

Vice PresidentSupply Chain

Vice President Sales in Russia

Requirements on the control bodies for the Company’s financial and

economic activity:

Information disclosure requirements:

A document was adopted that defines the Company’s internal control

procedures – the Provision on internal control and the audit of financial

and economic activity;

A special division exists in the Company that observes internal control

procedures: the internal audit and control department;

Internal control bodies do not include individuals who have been found

guilty of crimes in the sphere of economic activity or crimes against gov-

ernmental authorities or the interests of state services and municipal

services, nor does it include individuals who have been subject to admin-

istrative penalties for legislative breaches in the areas of entrepreneurial

activity and finance, taxation or the stock market;

Internal control bodies do not include persons, who are executives, par-

ticipants, CEOs (Directors), members of a management body or employ-

ees of a competing legal entity;

The internal audit department informs the Board of Directors’ Audit Com-

mittee on any detected infringements;

The Audit Committee evaluates the auditor’s conclusions before submit-

ting it to shareholders at the General Meeting.


41Baltika Breweries

The introduction of amendments and altera-

tions to the charter or the adoption of a new

edition of the charter (except for cases indi-

cated in the Federal Russian law “On Joint

Stock Companies”);

Corporate re-organization;

Liquidation of the Company, the appointment

of a liquidation commission and approval of

intermediate and final liquidation balances;

Defining the quantitative composition of the

Company’s Board of Directors, the election of

its members and the earlier cessation of their

powers;

Defining the number, nominal value and cat-

egory (type) of authorized shares and rights

granted by these shares;

Charter capital increases through a higher

nominal share value. Increased charter capi-

tal through the placement of additional shares

only in those cases, when in full accordance

with legislation, such resolutions can only be

adopted by the General Meeting;

Lower charter capital as a result of decreased

nominal share value, due to the Company

acquiring part of its shares to decrease their

total number, as well as through the cancella-

tion of purchased or bought back by the Com-

pany shares;

The election of members of the Company’s

Internal Audit Committee, as well as the earlier

cessation of their powers;

The approval of the Company’s auditors;

The payment (announcement) of dividends

based on first quarter, first six months and nine

month financial year results;

The approval of annual reports, annual finan-

cial reports, including the Company’s profit

and loss statements (income statements), as

well as profit distribution (including the pay-

ment (announcement) of dividends, excluding

The General Shareholders Meeting is the Com-

pany’s highest management body. In full accord-

ance with the law and the Company’s charter, the

following issues fall under the competency of the

General Meeting:

The General Shareholders Meeting

profit distributed as dividends as a result of first quarter, six months,

nine month or financial year) and Company losses as a result of the

financial year;

Defining the order of the General Meeting conduction;

Splitting and consolidating shares;

Adoption of resolutions on approving transactions in cases defined

by Article 83 of the law “On Joint Stock Companies;”

The adoption of resolutions on major transactions in cases defined by

Article 79 of the law “On Joint Stock Companies;”

The Company’s purchase of placed shares in cases determined by

the law “On Joint Stock Companies;”

The adoption of decisions for participating in financial and production

groups, associations and other commercial organization unions;

The adoption of internal documents regulating the activity of the Com-

pany’s bodies;

The resolution of other issues, as foreseen by the Law “On Joint Stock

Companies.”

In 2009, the Company held two General Shareholders Meetings: one

annual and one extraordinary.

On April 2nd, 2009 the Company held its Annual General Shareholders

Meeting, which approved the annual report, the profit and loss state-

ment based on results from the financial year and the 2008 profit distri-

bution and dividend payments.

The General Meeting elected the Board of Directors and the Company’s

Internal Audit Committee, as well as approved the Company’s auditors:

A&P Audit and KPMG. In addition, a new addition of the Company’s

charter was adopted and interested party transactions with Russian Rail-

ways OJSC and its affiliated parties were approved.

On December 2nd, 2009 an Extraordinary General Shareholders Meeting

(EGSM) of shareholders was held by absentee vote. During this Meeting,

the shareholders approved the conclusion of an agreement on produc-

ing licensed Baltika brands at Derbes Brewery Ltd (Kazakhstan). Only

minority shareholders, who were not interested parties in this transaction,

were allowed to participate in voting. In addition, the Meeting adopted

amendments to the corporate charter relating to the Company’s usage

of the trade name held by it.



The Board of Directors’ activity is focused on

the Company’s strategic management, including

adopting effective managerial decisions that are

aligned with corporate governance best practice,

as well as controlling the sole executive body’s

activity.

Principal tasks of the Board of Directors are:

The Company’s Board of Directors has seven

members, including two independent directors.

During the reporting period, the following changes

in the composition of the Board occurred: As

of April 2nd, 2009, Ulrik Andersen replaced Ale-

ksander Ikonnikov as a Board member.

During 2009, 19 meetings of the Company’s

Board of Directors were conducted – both in per-

son and in the form of absentee voting.

The Board of Directors

Forming an effective management system for

the Company;

Ensuring the Company’s stable financial position;

Defining prospective and priority directions for

the Company’s activities;

Developing and realizing strategic aims, which

the Company is facing.

43Baltika Breweries

Jorgen Buhl Rasmussen

Born 1955, higher education

Member of the Board since 2006

Holds positions in the following organizations:

The Board of Directors

Chairman of the Board

Members of the Company’s Board of Directors

Carlsberg Breweries A/S, President

Baltic Beverages Holding AB, Chairman of the Board of Directors

Independent Director




• Vimpelcom JSC, President

• GSM Association, Chairman of the Board of Directors

• MTG AB, member of the Board of Directors

• Dynasty Foundation for Non-commercial Programs,

member of the Board of Directors

Ulrik Andersen



Holds a position in the following organization:

• Carlsberg Breweries A/S, General Counsel & Vice President

Legal Counselling and Risk Management

Aleksander Izosimov

Independent Director




• 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 Management OJSC, member of the Board of Directors

Aleksander Shokhin




• Carlsberg Breweries A/S, Senior Vice President,

Corporate Supply Chain

• Danish Malting Group A/S, member of the Board of Directors

Hans Kasper Madsen




• Baltika Breweries, President

• Carlsberg Breweries A/S, Senior Vice President, Eastern Europe

• Derbes Brewery Ltd, Chairman of the Supervisory Board

• UZCARLSBERG LLC, Chairman of the Supervisory Board

• Slavutich OJSC, Chairman of the Supervisory Board

• Lvovska Pivovarnya OJSC, Chairman of the Supervisory Board

• Baku-Pivo OJSC, Chairman of the Supervisory Board

• Baltika-Baku LLC, Chairman of the Board of Directors

• Malt Plant Soufflet St. Petersburg CJSC, member of the Board of Directors

• Khlebny Dom OJSC, member of the Board of Directors

• Member of Russian Union of Industrialists and Enterpreuners (RUIE)’

Management Board

Anton Artemiev




• Carlsberg Breweries A/S, Vice President, Business Development

Eastern Europe

• Baltic Beverages Holding AB, member of the Board of Directors

• Derbes Brewery Ltd , member of the Supervisory Board

Bjorn Sondenskov


Audit Committee

The aim of creating the Committee is to upgrade

the effectiveness and quality of work of the Board

of Directors in the area of fostering and ensuring

open communication with the auditors, the Inter-

nal Auditing Committee and the structural divi-

sions of the internal audit, financial accounting

and finance and economic blocks of the Com-

pany through the preliminary consideration and

preparation of recommendations on the follow-

ing issues that fall under the competence of the

Committee:

The Appointments and Remuneration Committee

The principal goal of creating and the primary

activities of the Appointments and Remuneration

Committee are to contribute to attracting qualified

corporate management specialists and to create

incentives to stimulate successful work.

The Provisions on committees, adopted by the

Company’s Board of Directors, are principal doc-

uments that regulate the activity of committees

and define issues of their competence, as well

as how their membership is formed and how they

function.

The sole executive body

The sole executive body of the Company is the

President, who is responsible for managing the

Company’s current activities. Since 2005, Anton

Artemiev has been President of the Company.

Remuneration for members of the

managerial organs

In accordance with Item 2 of Article 64 of the law

“On Joint Stock Companies,” on April 2nd, 2009,

the Company’s Board of Directors set the maxi-

mum remuneration for Independent Directors on

the Board of Directors at 130,000 USD (in ruble

equivalent). The Board also set the maximum

amount for expense compensation (incurred

while carrying out their functions as Board mem-

bers) at 15,000 USD (in ruble equivalent) – leaving

this amount at the same level as in the previous

year. During 2009, Independent Directors on the

Board received remuneration in the amount of

RUB 3,278,194.

In accordance with Item 3 of Article 69 of the law

“On Joint Stock Companies,” the rights and obli-

gations of the Company’s President are regulated

by the indicated law and the Company’s charter,

as well as the agreement concluded between the

President and the Company. Remuneration for

fulfilling the function of the sole executive organ,

as well as other work conditions, is regulated by

the labor agreement signed by the President and

the Company.


Committees of the Board of Directors

Risks connected with the Company’s operations;

Management accounting;

Financial accounting;

External independent audit and internal audit;

Internal control procedures.

45Baltika Breweries

Interested party and major transactions

During 2009, Baltika Breweries concluded 90 interested party transactions. No transactions that would have been recognized

as major transactions – either by applicable Russian legislation or the Company’s charter – were completed during the reporting

year.

A complete list of interested party transactions is provided in the appropriate section of this Report.

The three-person Internal Auditing Committee is elected at the Annual Gen-

eral Meeting. Members of the Internal Auditing Committee are not allowed

to be members of the Board of Directors or hold any other Company man-

agement positions while they are Auditing Committee members.

The Annual General Shareholders Meeting (AGSM) held April 2nd, 2009,

elected the following individuals to serve on the Internal Auditing Com-

mittee:

The legitimacy, economic feasibility and effec-

tiveness (expediency) of financial and eco-

nomic operations carried out by the Company

during the examined period;

The fullness and correctness that the Company’s administrative doc-

uments reflect the Company’s economic and financial operations;

The legitimacy, economic feasibility and effectiveness (expediency) of

actions taken by the Company’s administration executives and struc-

tural division heads to ensure compliance with legislation, the charter,

adopted plans, programs and other internal corporate documents.

Name / year of birth / education

Vibeke Aggerholm

Born 1964

higher education

Charles Ericsson

Born 1948

higher education

Nadezhda Bazilevich

Born 1975

higher education

Vice President for Internal Audit at Carlsberg Breweries A/S,

member of the Institute of Internal Auditors’ (IIA) Board of Directors

Consultant for Baltic Beverages Holding АВ

Financial manager for Baltika Breweries

Position(s) held

The Internal Auditing Committee

The Internal Auditing Committee (a permanent

elected organ), in accordance with current legisla-

tion and the Company’s charter executes periodic

control over the Company’s financial and eco-

nomic activities, as well as the actions of its mana-

gerial organs and executives (including separate

divisions, services, branches and representative

offices), through checkups:


Financial risks

Baltika’s principal financial risks include: credit

risk, liquidity risk, currency and inflation risks. To

manage financial risks, the Company regularly

carries out short- and long-term forecasting,

develops a budgeting and forecasting system

and improves the principles of turnover capital

management.

Credit risk

Baltika is a company that has a short operating

cycle, which means the quick turnover of financial

means. As a result, the Company carries a mini-

mal credit load and is subject to a lower degree

of credit risk. Corporate credit risk arises prima-

rily due to contractual obligation non-fulfillment by

the Company’s customers or counteragents and

it is principally connected with accounts receiv-

able. The Company has implemented a credit

policy that defines interactions with customers.

The Company conducts credit evaluations of new

suppliers and clients and requests collateral guar-

antees for accounts payable.

Risk management

The Company’s activity is subject to various business risks. As a result of

this, Baltika developed a specialized risk management system that aims

to prevent, identify, analyze, control, monitor and minimize risks. The risk

management system is regularly reviewed by the Company’s manage-

ment based on changes in market conditions, as well as changes in the

Company’s activities.

The Company’s Board of Directors is responsible for the risk manage-

ment system and supervises it to ensure its effectiveness. The Board

of Directors’ Audit Committee controls the observance of corporate

policy in risk management and analyzes the risk management system

to determine its factual adequacy for risks. The Audit Committee carries

out its supervisory functions in conjunction with the Company’s internal

audit service.

In the case of one or more of the below-mentioned risks arising, the

Company is ready to undertake all necessary measures to minimize

negative consequences.


BALTIKA MANAGEMENT

Da

niil

Brim

an

Vic

e P

resid

ent,

HR

& C

orp

ora

te A

ffa

irs

Anto

n A

rtem

iev

Pre

sid

ent

Eka

terina

Azim

ina

Vic

e P

resid

ent,

Fin

ance a

nd

Eco

no

mic

s

Denis

Shers

tennik

ov

Vic

e P

resid

ent,

Ma

rketing

47Baltika Breweries

Denis

Lysa

kV

ice P

resid

ent,

Sa

les in R

ussia

Liquidity risk

Liquidity risk may arise due to the Company fail-

ing to fulfill its obligations in a timely manner. The

Company strives to maintain liquidity at an appro-

priate level.

Currency risks

Currency risks are due to changes in exchange

rates for foreign currency and affect the Com-

pany’s purchases of raw materials and services

that are used for corporate activities and that are

denominated in a foreign currency.

Such risks include:

The Company is subject to a greater degree of currency risks, because

on the one side, the bulk of the Company’s sales are ruble-denominated,

whereas on the other side, the price of some components and raw mate-

rials were priced in a foreign currency. The Company focuses all of its

efforts on minimizing currency risks, including working to decrease for-

eign currency-denominated liabilities and gradually increasing the share

of Russian suppliers for ingredients, raw materials, capital assets and

components. The Company also sees constantly increasing its export

volume as an important task, which will in turn lead to increased foreign

currency revenues. In 2009, to minimize currency risks, the Company

used various instruments, including: maintaining dual currency liabilities

in accordance with the Russian Central Bank’s dual currency basket, a

decrease in foreign currency liabilities and the use of indirect currency

risk hedging instruments.

To strengthen its position in the sector and to minimize the potential

impact of sector-specific risks, the Company has implemented a series

of measures, which includes: ensuring profitability and managing pro-

duction costs, implementing the Company’s market strategy which

focuses on building strong brands, premiumisation and innovation, the

development and production of new types of goods, the development

of a distribution system and promotion channels, the subsequent devel-

opment of sales geography and adjacent directions, the optimization of

investment activity, the complex evaluation of suppliers’ financial con-

ditions, including a preliminary one, and their support if necessary, the

continuation of the production process and geographical diversification

of risks and increased business process effectiveness and operational

excellence.

Industry- and country- specific risks

Key risk factors, which may negatively impact development of the brew-

ing industry, include:

An increase in excise duty;

A strengthening of governmental policy towards limiting the advertis-

ing, consumption and sales of beer;

A shift in the structure of consumption;

Beer market approaching its saturation level;

Greater competitive struggles within the market;

Higher prices for the main ingredients, as a result of general world

trends;

The actions of natural monopolies in the tariff regulation sphere and

limited access to their capacities (for example, heat and electricity

and railway transport);

Unfavorable weather conditions;

Economic decline.

Unfavorable currency exchange dynamics;

The negative influence of the financial crisis

on suppliers, which may result in decreased

liquidity or bankruptcy, narrow the market for

goods and services and also may result in

market redistribution and the appearance of

large monopolies, influencing the formation of

pricing policy.

Ale

xa

nd

er

Ded

eg

ka

ev

Vic

e P

resid

ent,

Sup

ply

Cha

in


SECURITIES

CHARTER CAPITAL

The Company’s charter capital totaled RUB 164,041,164 as of December 31st, 2009.

Issued and authorized shares

The Company’s charter capital structure, as of December 31st, 2009

Share issues

Shares from the following issues are now being traded:

Share type Number of shares Nominal valueper share, RUB

1. Issued shares

Registered ordinary shares 151,714,594 1

Preference shares, type ‘A’ registered shares 12,326,570 1

2. Authorized shares

Registered ordinary shares 3,808,291 1

Preference shares, type ‘A’ registered shares 440,450 1

Registration number

Share type Number of sharesin the issue

Nominal value of the share issue, RUB

Nominal valueper share, RUB

1-04-00265-АRegistered ordinary

shares151,714,594 151,714,594 1

2-04-00265-АPreference, type ‘A’ registered shares

12,326,570 12,326,570 1

Distribution of charter capital

Baltika Breweries’ largest shareholder is a subsidiary of Carlsberg Breweries A/S – Baltic Beverages Holding AB, which holds

88.86% of all shares. During the reporting year, there were no significant changes in the charter capital structure.

Baltic Beverages Holding AB 88.86%

Physical persons 8.08%

Nominal holders 2.78%

Legal entities 0.28%

49Baltika Breweries

Baltika capitalization dynamics relative to the MICEX index

140

120

100

80

60

40

20

0

-20

%

Company capitalization (According to MICEX SE)

December2008

December2009

January2009

February2009

March2009

April2009

May2009

June2009

July2009

August2009

September2009

October2009

November2009

MICEX index

Share circulation

Baltika Breweries shares are traded on two of

Russia’s trading platforms – the MICEX Stock

Exchange (since 2003) and RTS (since 2001). At

present, the Company’s shares that are traded on

stock exchanges are included on the List: ‘Securi-

ties approved for trading, but not listed.’ The Com-

pany’s ticker symbol for ordinary shares is: PKBA,

and preference shares trade under the ticker

PKBAP. The Company’s shares are included in

the calculation of the MICEX consumer goods

sector index (MICEX CGS).

Due to a number of Russian government stimu-

lus programs and higher commodity prices, in

the second half of 2009, an inflow of direct and

portfolio investment re-started, which helped rein-

vigorate the Russian economy and increased

interest in the shares of Russian companies.

Starting in February 2009, both ruble and dollar indices for the Russian

stock exchanges began to grow. By the end of 2009, the MICEX index

had increased 121% and RTS was up 129% compared with figures as of

the end of 2008.

During spring 2009, as a result of higher oil prices and the strengthening

of the ruble relative to the dollar-euro basket, there was a general uptick

in the stock market, which contributed to the growth of share prices for

consumer sector companies.

During the reporting year, the Company’s market capitalization increased

2.2 times and by the end of 2009 reached RUB 139.8 bln according to

data from MICEX (and USD 4.4 bln, according to RTS figures). In Russia,

the Company is the largest production company in the FMCG sector.

MICEX index +121%Company capitalization +125%


SECURITIES

Trading statistics are given based on MICEX SE data, since most trans-

actions with the Company’s shares were carried out on this exchange.

As a result of the rebound in the Russian economy in 2009 and strong

financial and economic indicators for the Company, Baltika’s share price

increased by 121% for ordinary shares and 186% for preference ones

during the reporting year.

Trade volume remained at approximately the

2008 level, whereas the number of transactions

in the Company’s shares increased significantly

in 2009: a 52% increase for ordinary shares and

28% higher for preference shares, which indi-

cates greater share liquidity.

Minimum share price* during the year, RUB

Maximum share price* during the year, RUB

Last transaction price*, RUB

2008 2009 2008 2009 2008 2009

Ordinary shares 300 349 1 209 850 385 850

Preference shares 277 305 815 880 308 880

*closing price indicated

Trading volumes, RUB mln

Statistics from trading of the Company’s shares

Number of transactions

500

400

300

200

100

0

20,000

15,000

10,000

5,000

0

2008

387

9,695

4,831

14,727

6,164

147

376

185

2008

2009

2009

Ordinary shares

Ordinary shares

Preference shares

Preference shares

51Baltika Breweries

Dividend payment indicators for the Company’s shares during the last 5 years

*A recommendation from the Board of Directors

Dividend policy

Baltika’s dividend policy is based on the principle

of fairly distributing profits among all shareholders

in direct proportion to the number of shares in a

particular category, taking into account a rational

correlation between total dividends and available

means to implement the Company’s strategic

development plans.

Information on the pay-out of declared (allocated) dividends

2009 accrued dividends totaled:

As of December 31st, 2009, shareholders were paid more than 99.7% of accrued dividends. The reason for the failure to fulfill all

obligations in full is due to shareholders failing to provide all data needed for payment.

Dividends for preference shares cannot be lower than the level indicated

by the Company’s charter.

2008 dividends were significantly higher – 1.6 times – compared with the

previous year.

Period, for which the dividends were paid

Dividend paid per ordinary share,

RUB

Dividend paid per preference share,

RUB

Dividend dynamicsfor ordinary shares,

% to 2004

Dividend dynamicsfor preference shares,

% to 2004

2005 24.33 24.33 175 134

2006 39.50 39.50 283 218

2007 52.00 52.00 373 287

2008 85.10 85.10 610 470

2009* 128.00 128.00 918 706

For ordinary shares – RUB 12,910,911,949 and 40 kopecks;

For preference shares, type ‘A’ – RUB 1,048,991,107.

OAO Baltika Breweries and subsidiaries

CONSOLIDATEDFINANCIAL STATEMENTSfor the year ended 31 December 2009

52

Baltika Breweries 53

Independent Auditors’ Report 54

Consolidated Statement of Financial Position 55

Consolidated Statement of Comprehensive Income 56

Consolidated Statement of Changes in Equity 57

Consolidated Statement of Cash Flows 58

Notes to the Consolidated Financial Statements 60

CONTENTS


ZAO KPMG69-71 A Marata st

Business centre «Renaissance Plaza»

St. Petersburg 191119, Russia

Telephone +7 (812) 313 7300

Fax +7 (812) 313 7301

Internet www.kpmg.ru

To ManagementOAO Baltika Breweries

We have audited the accompanying consolidated fi nancial statements of OAO Baltika Breweries (the “Company”) and its sub-sidiaries (the “Group”), which comprise the consolidated statement of fi nancial position as at 31 December 2009, and the con-solidated statements of comprehensive income, changes in equity and cash fl ows for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated fi nancial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining in-ternal control relevant to the preparation and fair presentation of consolidated fi nancial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical require-ments and plan and perform the audit to obtain reasonable assurance whether the consolidated fi nancial statements are free of material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nan-cial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material mis-statement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated fi nancial 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated fi nancial statements.We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our opinion.

OpinionIn our opinion, the consolidated fi nancial statements present fairly, in all material respects, the consolidated fi nancial position of the Group as at 31 December 2009, and its consolidated fi nancial performance and its consolidated cash fl ows for the year then ended in accordance with International Financial Reporting Standards.

ZAO KPMG 19 February 2010

ZAO KPMG, a company incorporated under the Laws

of the Russian Federation and a member fi rm of the

KPMG network of independent member fi rms affi li-

ated with KPMG International Cooperative (“KPMG

International”), a Swiss entity.

Independent Auditors’ Report

55Baltika Breweries

OAO Baltika Breweries and subsidiariesConsolidated Statement of Financial Position as at 31 December 2009

000’ RUR Note 20092008

(restated)2007

(restated)

ASSETS

Non-current assets

Property, plant and equipment 12 42,177,090 43,356,748 39,366,381

Intangible assets 13 14,001,800 13,791,191 11,736,964

Investments in equity accounted investees 14 293,183 340,038 267,990

Other investments 15 9,781 9,796 9,796

Total non-current assets 56,481,854 57,497,773 51,381,131

Current assets

Inventories 17 4,296,053 7,350,814 7,451,192

Other investments 15 9,051,299 - 2,335,890

Income tax receivable 6,566 583,952 7,131

Trade and other receivables 18 8,062,093 7,511,041 5,015,410

Cash and cash equivalents 19 1,740,702 1,691,594 2,708,501

Total current assets 23,156,713 17,137,401 17,518,124

Total assets 79,638,567 74,635,174 68,899,255

EQUITY AND LIABILITIES

Equity 20

Preference shares 84,978 84,978 85,442

Ordinary shares 736,129 736,129 736,164

Share capital 821,107 821,107 821,606

Additional paid-in capital 4,171,716 4,171,716 4,239,807

Foreign currency translation reserve 691,405 433,587 18,234

Retained earnings 57,997,085 48,584,719 41,606,610

Total equity 63,681,313 54,011,129 46,686,257

Non-current liabilities

Loans and borrowings 22 - 176,304 580,051

Deferred tax liabilities 16 1,631,672 1,387,124 1,431,460

Total non-current liabilities 1,631,672 1,563,428 2,011,511

Current liabilities

Loans and borrowings 22 181,572 7,562,837 11,171,172

Trade and other payables 23 13,398,581 11,006,602 8,832,197

Deferred income 129,057 94,670 135,760

Income tax payable 616,372 396,508 62,358

Total current liabilities 14,325,582 19,060,617 20,201,487

Total liabilities 15,957,254 20,624,045 22,212,998

Total equity and liabilities 79,638,567 74,635,174 68,899,255

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 60 to 81.


OAO Baltika Breweries and subsidiariesConsolidated Statement of Comprehensive Income for the year ended 31 December 2009

’000 RUR Note 2009 2008 (restated)

Revenue 93,648,747 92,482,283

Cost of sales (42,394,920) (47,599,507)

Gross profit 51,253,827 44,882,776

Other income 7 72,217 78,487

Distribution expenses (19,150,073) (20,132,532)

Administrative expenses 8 (2,528,721) (2,602,153)

Finance income 10 1,834,591 1,619,812

Finance costs 10 (2,349,918) (3,678,392)

Share of (loss) / profit of equity accounted investee (net of income tax) (29,734) 47,370

Profit before income tax 29,102,189 20,215,368

Income tax expense 11 (5,729,920) (4,707,119)

Profit for the year 23,372,269 15,508,249

Other comprehensive income

Foreign currency translation differences for foreign operations 257,818 415,353

Total comprehensive income for the year 23,630,087 15,923,602

Earnings per share

Basic and diluted earnings per share 21 147.14 RUR 97.99 RUR

These consolidated financial statements were approved by management on 19 February 2010 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 state-

ments set out on pages 60 to 81.

57Baltika Breweries

OAO Baltika Breweries and subsidiariesConsolidated Statement of Changes in Equity for the year ended 31 December 2009

000’ RURPreference

sharesOrdinary shares

Additional paid-in capital

Foreign currency

translation reserve

Retained earnings Total

Balance at 1 January 2008, as previously

reported

85,442 736,164 4,239,807 18,234 41,869,720 46,949,367

Impact of change in accounting policy - - - - (263,110) (263,110)

Balance at 1 January 2008 (restated) 85,442 736,164 4,239,807 18,234 41,606,610 46,686,257

Total comprehensive income for the year

Profit for the year (restated) - - - - 15,508,249 15,508,249


Foreign currency translation differences - - - 415,353 - 415,353

Total other comprehensive income - - - 415,353 - 415,353

Total comprehensive income for the year - - - 415,353 15,508,249 15,923,602

Transactions with owners, recorded directly in equity

Dividends to equity holders - - - - (8,530,140) (8,530,140)

Redemption of shares (464) (35) (68,091) - - (68,590)

Total transactions with owners (464) (35) (68,091) - (8,530,140) (8,598,730)

Balance at 31 December 2008 (restated) 84,978 736,129 4,171,716 433,587 48,584,719 54,011,129

Balance at 1 January 2009 (restated) 84,978 736,129 4,171,716 433,587 48,584,719 54,011,129

Total comprehensive income for the year

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


Foreign currency translation differences - - - 257,818 - 257,818

Total other comprehensive income - - - 257,818 - 257,818

Total comprehensive income for the year - - - 257,818 23,372,269 23,630,087

Transactions with owners, recorded directly in equity

Dividends to equity holders - - - - (13,959,903) (13,959,903)

Total transactions with owners - - - - (13,959,903) (13,959,903)

Balance at 31 December 2009 84,978 736,129 4,171,716 691,405 57,997,085 63,681,313

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 60 to 81.


OAO Baltika Breweries and subsidiariesConsolidated Statement of Cash Flows for the year ended 31 December 2009


OPERATING ACTIVITIES


Adjustments for:

Depreciation 12 4,447,579 4,615,461

Amortisation 13 196,730 180,436

Gain on disposal of property, plant and equipment and intangible assets 7 (72,217) (82,546)

Share of loss/(profit) of equity accounted investees 14 29,734 (47,370)

Interest expense 10 190,319 573,336

Interest income 10 (466,342) (253,209)

Income tax expense 11 5,729,920 4,707,119

Operating profit before changes in working capital and provisions 33,427,992 25,201,476

Decrease in inventories 3,221,273 202,700

Increase in trade and other receivables (551,052) (2,321,940)

Increase in trade and other payables 2,621,163 3,720,693

Cash flows from operations before income taxes and interest paid 38,719,376 26,802,929

Income taxes paid (4,688,122) (4,978,598)

Interest paid (261,011) (528,448)

Cash flows from operating activities 33,770,243 21,295,883

INVESTING ACTIVITIES

Proceeds from disposal of property, plant and equipment and intangible

assets

95,898 193,363

Interest received 386,600 279,006

Dividends received 27,300 18,564

Acquisition of property, plant and equipment and intangible assets (3,792,763) (8,744,468)

Acquisition of subsidiary, net of cash acquired - (2,182,556)

Sales of investment securities 15 -

Loans to related parties (2,189,360) -

Acquisition of bank promissory notes (6,782,197) (3,232,271)

Proceeds from sale of bank promissory notes - 5,542,365

Cash flows utilised by investing activities (12,254,507) (8,125,997)

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 60 to 81.

59Baltika Breweries

OAO Baltika Breweries and subsidiariesConsolidated Statement of Cash Flows for the year ended 31 December 2009


FINANCING ACTIVITIES

Proceeds from borrowings 52,172 29,798,605

Repayment of borrowings (7,539,049) (33,855,575)

Dividends paid (13,979,751) (8,609,718)

Redemption of shares - (1,520,105)

Cash flows utilised by financing activities (21,466,628) (14,186,793)

Net increase/(decrease) in cash and cash equivalents 49,108 (1,016,907)

Cash and cash equivalents at beginning of year 1,691,594 2,708,501

Cash and cash equivalents at end of the year 19 1,740,702 1,691,594

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 60 to 81.


OAO Baltika Breweries and subsidiariesNotes to the Consolidated Financial Statements for the year ended 31 December 2009

(a) Russian business environment

The Russian Federation has been experiencing political and economic change that

has affected, and may continue to affect, the activities of enterprises operating in this

environment. Consequently, operations in the Russian Federation involve risks that typ-

ically do not exist in other markets. In addition, the recent contraction in the capital and

credit markets and its impact on the Russian economy have further increased the level

of economic uncertainty in the environment. These consolidated financial statements

reflect management’s assessment of the impact of the Russian business environment

on the operations and the financial position of the Group. The future business environ-

ment may differ from management’s 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 ten companies and ten branches (together referred to

as the “Group”), produces and distributes beer, soft drinks and mineral water.

The Company’s registered office is situated at 6 Verkhny pereulok, 3, St. Petersburg,

194292, Russia.

As at 31 December 2009 Baltic Beverages Holding AB owned and controlled 93.5%

of the Company’s ordinary shares and 31.9% of the Company’s preference shares.

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with Inter-

national 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 (“RUR”), which

is the Company’s functional currency, the functional currency of the majority of the

Company’s subsidiaries and the currency in which these consolidated financial state-

ments are presented.

(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 applica-

tion 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:

1. BACKGROUND

2. BASIS OF PREPARATION

Note 13 – Intangible assets; and

Note 17 – Inventories.

(e) Changes in accounting policies and presentation

With effect from 1 January 2009 the Group changed its

accounting policies in the following areas:

(i) Accounting for borrowing costs

In respect of borrowing costs relating to qualifying assets

for which the commencement date for capitalisation is on

or after 1 January 2009, the Group capitalises borrowing

costs directly attributable to the acquisition, construction

or production of a qualifying asset as part of the cost of

that asset. Previously the Group immediately recognised all

borrowing costs as an expense. This change in accounting

policy was due to the adoption of IAS 23 Borrowing Costs

(2007) in accordance with the transitional provisions of such

standard; comparative figures have not been restated. The

change in accounting policy had no material impact on

earnings per share.

The Group has capitalised borrowing costs with respect

to property, plant and equipment under construction (see

note 3(e)(i)).

(ii) Determination and presentation of operating segments

As at 1 January 2009 the Group determines and presents

operating segments based on the information that internally is

provided to the Management Board, which is the Group’s chief

operating decision maker. This change in accounting policy is

due to the adoption of International Financial Reporting Stand-

ard 8 Operating Segments. The Group has early-adopted the

amendment to IFRS 8 introduced by Improvements to IFRS

accounting for borrowing costs;

determination and presentation of operating segments;

accounting for advertising materials; and

presentation of financial statements.

The remainder of the ordinary and preference shares are

widely held.

As at 31 December 2009 the Group consisted of twelve

production plants: Baltika-Saint-Petersburg, Baltika-Tula,

Baltika-Rostov, Baltika-Samara, Baltika-Khabarovsk,

Baltika-Vena, Baltika-Chelyabinsk, Baltika-Pikra, Baltika-

Yaroslavl, Baltika-Voronezh, Baltika-Novosibirsk and Balti-

ka-Baku and ten subsidiaries: OOO Universalopttorg, OOO

Terminal Podolsk, OOO Baltika-Ukraine, OOO Baltika, Bal-

tika S.R.L., Baltika-Almaty LLP, OOO Baltika-Bel, Baltika

Deutschland GmbH, LLC Baltika-Baku and OJSC Baku-

Pivo. The Group’s subsidiary, OOO Baltika-Moscow, was

liquidated in December 2008.

Most of the Group's customers are located in Russia. The

Group's 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.

61Baltika Breweries


April 2009. The new accounting policy in respect of operating

segments disclosures is presented as follows.

Comparative segment information has been re-presented in

conformity with the transitional requirements of such stand-

ard. Since the change in accounting policy only impacts

presentation and disclosure aspects, there is no impact on

earnings per share.

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 Group’s

other components. An operating segment’s operating

results are reviewed regularly by the Management Board to

make decisions about resources to be allocated to the seg-

ment and assess its performance, and for which discrete

financial information is available.

Segment results that are reported to the Management

Board include items directly attributable to a segment as

well as those that can be allocated on a reasonable basis.

(iii) Accounting for advertising materials

Since 1 January 2009 the Group has recognised expendi-

ture in respect of advertising materials as distribution

The accounting policies set out below have been consist-

ently 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 year’s presentation of which the

significant one relates to the reclassification of administra-

tive expenses in the amount of RUR 311,199 thousand and

distribution expenses in the amount of RUR 619,803 thou-

sand to cost of sales.

Management believes that such presentation is more

appropriate.

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. The finan-

cial statements of subsidiaries are included in the con-

solidated financial statements from the date that control

commences until the date that control ceases. The account-

ing policies of subsidiaries have been changed when neces-

sary to align them with the policies adopted by the Group.

(ii) Associates (equity accounted investees)

Associates are those entities in which the Group has signifi-

cant influence, but not control, over the financial and operat-

ing policies. Significant influence is presumed to exist when

the Group holds between 20% and 50% of the voting power

of another entity. Investments in associates are accounted

for using the equity method and are recognised initially at

cost. The Group’s investment includes goodwill identified

on acquisition, net of any accumulated impairment losses.

The consolidated financial statements include the Group’s

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 Group’s share

3. SIGNIFICANT ACCOUNTING POLICIES

expenses when it has a right to access those materials. Previously advertising materials

were recorded as inventory until given away to customers. This change in accounting

policy was due to the adoption of revised IAS 38 Intangible Assets (2008).

Comparative information has been re-presented so that it also is in conformity with the

revised accounting policy: advertising materials in the amount of RUR 346,198 thou-

sand were written off and deferred income tax in the amount of RUR 83,088 thousand

was recognised as an adjustment to retained earnings as at 1 January 2008. The effect

on the consolidated statement of financial position as at 31 December 2008 was a

decrease in inventory of RUR 332,652 thousand, a decrease in deferred tax liabilities of

RUR 66,530 thousand and a decrease in the retained earnings of RUR 266,122 thou-

sand. The effect on comprehensive income was to reduce profit for the year by RUR

3,012 thousand for the year ended 31 December 2008.

Earnings per share has been restated for the year ended 31 December 2008 accordingly.

(iv) Presentation of financial statements

The Group applies revised IAS 1 Presentation of Financial Statements (2007), which

became effective as at 1 January 2009. The revised standard requires a presentation

of all owner changes in equity to be presented in the statement of changes in equity,

whereas all non-owner changes in equity are presented in the consolidated statement of

comprehensive income.

Comparative information has been re-presented so that it also is in conformity with the

revised standard. Since the change in accounting policy only impacts presentation

aspects, there is no impact on earnings per 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 nil 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.

(iii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses aris-

ing 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 Group’s interest in the inves-

tee. 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 curren-

cies 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 trans-

lated 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. Foreign currency differences arising in retranslation are rec-

ognised in profit or loss, except for differences arising on the retranslation of availa-

ble-for-sale equity instruments which are recognised in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency

are translated using the exchange rate at the date of the transaction.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjust-

ments arising on acquisition, are translated to RUR at the exchange rate at the report-

ing date. The income and expenses of foreign operations are translated to RUR at

exchange rates at the dates of the transactions.

Foreign currency differences are recognised directly in other comprehensive income.

Since 1 January 2004, the Group’s date of transition to IFRSs, such differences have

been recognised in the foreign currency translation reserve. When a foreign operation



is disposed of, in part or in full, the relevant amount in the foreign currency translation

reserve is transferred to profit or loss as part of the profit or loss on disposal.

Foreign exchange gains and losses arising from a monetary item received from or pay-

able to a foreign operation, the settlement of which is neither planned nor likely in the

foreseeable future, are considered to form part of a net investment in a foreign opera-

tion and are recognised in other comprehensive income, and are presented within

equity in the foreign currency translation reserve.

(c) Financial instruments

(i) Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt 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 own-

ership 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 state-

ment 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 has the following non-derivative financial assets: held-to-maturity financial

assets, loans and receivables and available-for-sale financial assets.

Held-to-maturity financial assets

If the Group has the positive intent and ability to hold to maturity debt securities that are

quoted in an active market, then such financial assets are classified as held-to-maturity.

Held-to-maturity financial assets are recognised initially at fair value plus any directly attrib-

utable transaction costs. Subsequent to initial recognition held-to-maturity financial assets

are measured at amortised cost using the effective interest method, less any impairment

losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity

investments not close to their maturity would result in the reclassification of all held-to-ma-

turity investments as available-for-sale, and prevent the Group from classifying investment

securities as held-to-maturity for the current and the following two financial years.

Loans and receivables

Loans and receivables are 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 receiva-

bles are measured at amortised cost using the effective interest method, less any impair-

ment losses. Loans and receivables comprise trade and other receivables.

Cash and cash equivalents comprise cash balances and call deposits with original maturi-

ties of three months or less. Bank overdrafts that are repayable on demand and form an

integral part of the Group’s cash management are included as a component of cash and

cash equivalents for the purpose of the statement of cash flows.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are desig-

nated as available-for-sale and that are not classified in any of the previous categories.

The Group’s investments in equity securities and certain debt securities are classified

as available-for-sale 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 equity instruments

(see note 3(b)(i)), are recognised in other comprehensive income and presented within

equity in the fair value reserve. When an investment is derecognised or impaired, the

cumulative gain or loss in other comprehensive income is transferred to profit or loss.

Other

Other non-derivative financial instruments are measured at amortised cost using the

effective interest method, less any impairment losses. Investments in equity securities

that are not quoted on a stock exchange are principally valued using valuation tech-

niques such as discounted cash flow analysis, option pricing models and comparisons to

other transactions and instruments that are substantially the same. Where fair value can-

not be reliably measured, investments are stated at cost less impairment losses.

(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 con-

tractual provisions of the instrument.

The Group derecognises a financial liability when its con-

tractual 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 has the following non-derivative financial liabili-

ties: loans and borrowings and trade and other payables.

Such financial liabilities are recognised initially at fair value

plus any directly attributable transaction costs. Subsequent

to initial recognition these financial liabilities are measured

at amortised cost using the effective interest method.

(d) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs

directly attributable to the 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 Company’s option,

and any dividends are discretionary. Dividends thereon are

recognised as distributions within equity upon approval by

the Company’s shareholders.

Repurchase of share capital

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

as a deduction from total equity. When treasury shares are

sold or reissued subsequently, the amount received is rec-

ognized as an increase in equity, and the resulting surplus

or deficit on the transaction is transferred from/to additional

paid-in capital.

(e) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at

cost less impairment losses and, except for land, accumu-

lated depreciation. The cost of property, plant and equip-

ment 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

(see note 2(e)(i)). 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.

Gains and losses on disposal of an item of property, plant

63Baltika Breweries


and equipment are determined by comparing the pro-

ceeds from disposal with the carrying amount of property,

plant and equipment, and are recognised net within “other

income” in profit or loss.

(ii) Subsequent costs

The cost of replacing part 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 embod-

ied within the part will flow to the Group and its cost can

be measured reliably. The carrying amount of the replaced

part 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 calculated over the depreciable amount,

which is the cost of an asset, or other amount substituted for

cost, less its residual value.

Depreciation is recognised in profit or loss and allocated to

cost of converting materials to finished goods 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:

Depreciation methods, useful lives and residual values are

reviewed at each reporting date.

(f) Intangible assets

(i) Goodwill

Goodwill (negative goodwill) that arises on the acquisition of

subsidiaries is included in intangible assets.

Acquisitions of subsidiaries on or after1 January 2004

For acquisitions on or after 1 January 2004, goodwill rep-

resents the excess of the cost of the acquisition over the

Group’s interest in the net fair value of identifiable assets,

liabilities and contingent liabilities of the acquiree. When

the excess is negative (negative goodwill), it is recognised

immediately in profit or loss.

Acquisitions of minority interests

Goodwill arising on the acquisition of a minority interest in

a subsidiary represents the excess of the cost of the addi-

tional investment over the carrying amount of the net assets

acquired at the date of exchange.

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 equity accounted investee.

(ii) Other intangible assets

Intangible assets that are acquired by the Group, which

have finite useful lives, are measured at cost less accumu-

lated amortisation and accumulated impairment losses.

Buildings 20–40 years

Machinery and equipment 3–20 years

Kegs 10 years

(iii) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic ben-

efits 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 avail-

able 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 period vary between 1 to 10 years.

(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

Group’s 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 manu-

factured inventories and work in progress, cost includes an appropriate share of over-

heads 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) Financial assets

A financial asset 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, 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.

The Group considers evidence of impairment for receivables and held-to-maturity

investment securities at both a specific asset and collective level. All individually sig-

nificant receivables and held-to-maturity investment securities are assessed for spe-

cific impairment. All individually significant receivables and held-to-maturity investment

securities found not to be specifically impaired are then collectively assessed for any

impairment that has been incurred but not yet identified. Receivables and held-to-ma-

turity investment securities that are not individually significant are collectively assessed

for impairment by grouping together receivables and held-to-maturity investment secu-

rities 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 manage-

ment’s 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 cal-

culated as the difference between its carrying amount, and the present value of the

estimated future cash flows discounted at the asset’s 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.

Impairment losses on available-for-sale investment securities are recognised by trans-

ferring the cumulative loss that has been recognised in other comprehensive income,

and presented in the fair value reserve in equity, to profit or loss. The cumulative loss

that is removed from other comprehensive income and recognised in profit or loss is

the difference between the acquisition cost, net of any principal repayment and amor-

tisation, and the current fair value, less any impairment loss previously recognised in

profit or loss. Changes in impairment provisions attributable to time value 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-for-sale equity security is recognised

in other comprehensive income.

(ii) Non-financial assets

The carrying amounts of the Group’s 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 asset’s recoverable amount

is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet

available for use, recoverable amount is estimated each year at the same time.

The recoverable amount of an asset or cash-generating unit 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 spe-

cific to the asset. 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 (the “cash-generating unit”). The goodwill acquired in a

business acquisition, for the purpose of impairment testing, is allocated to cash-gener-

ating units that are expected to benefit from the synergies of the combination.

The Group’s corporate assets do not generate separate cash inflows. If there is an

indication that a corporate asset may be impaired, then the recoverable amount is

determined for the cash generating unit to which the corporate asset belongs.

An impairment loss is recognised if the carrying amount of an asset or its cash-generat-

ing unit exceeds its recoverable amount. Impairment losses are recognised in profit or

loss. Impairment losses recognised in respect of cash-generating units are allocated first

to reduce the carrying amount of any goodwill allocated to the units and then to reduce

the carrying amount of the other assets in the unit (group of units) 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 recover-

able amount. An impairment loss is reversed only to the extent that the asset’s 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.

Goodwill that forms part of the carrying amount of an investment in an equity accounted

investee is not recognised separately, and therefore is not tested for impairment sepa-

rately. Instead, the entire amount of the investment in an equity accounted investee

is tested for impairment as a single asset when there is objective evidence that the

investment in an equity accounted investee may be impaired.

(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 Russia’s 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 contri-

bution 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 dis-

count 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 exe-

cuted 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 depend-

ing on the individual terms of the contract of sale. For certain

sales, transfer usually occurs when the goods are received

at the customer’s warehouse; for other sales, transfer occurs

when the goods are dispatched from the Group’s premises.

(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 Group’s contributions to social pro-

grams benefit the community at large and are not restricted

to the Group’s 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), divi-

dend income, gains on the disposal of available-for-sale

financial assets and foreign currency gains. Interest income

is recognised as it accrues in profit or loss, using the effec-

tive interest method. Dividend income is recognised in

profit or loss on the date that the Group’s right to receive

payment is established, which in the case of quoted securi-

ties is the ex-dividend date.

Finance costs comprise interest expense on borrowings,

unwinding of the discount on provisions, losses on the dis-

posal of available-for-sale financial assets, foreign currency

losses and impairment losses recognized on financial assets.

Borrowing costs that are not directly attributable to the acqui-

65Baltika Breweries


sition, construction or production of a qualifying asset are rec-

ognised 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. Cur-

rent 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 differ-

ences 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 the fol-

lowing temporary differences: the initial recognition of assets

or liabilities in a transaction that is not a business combina-

tion and that affects neither accounting nor taxable profit or

loss, and differences relating to investments in subsidiaries

and jointly controlled entities to the extent that it is prob-

able that they will not reverse in the foreseeable future. In

addition, deferred tax is not recognised for taxable tempo-

rary 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 sub-

stantively 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.

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 reve-

nues and incur expenses, including revenues and expenses

that relate to transactions with any of the Group’s other

components. All operating segments’ operating results are

reviewed regularly by the Group’s Management Board to

make decisions about resources to be allocated to the seg-

ment and assess its performance, and for which discrete

financial information is available (see note 2(e)(ii)).

(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 2009,

and have not been applied in preparing these consolidated financial statements. Of these

pronouncements, potentially the following will have an impact on the Group’s operations.

The Group plans to adopt these pronouncements when they become effective.

Revised IAS 24 Related Party Disclosures (2009) introduces an exemption from the

basic disclosure requirements in relation to related party disclosures and outstand-

ing 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 retrospec-

tively for annual periods beginning on or after 1 January 2011. The Group has not

yet determined the potential effect of the amendment.

Amendment to IFRS 2 Share-based Payment – Group Cash-settled Share-based

Payment Transactions which clarifies that the entity receiving goods or services in a

share-based payment transaction that is settled by any other entity in the group or

any shareholder of such an entity in cash or other assets is required to recognise

the goods or services received in its consolidated financial statements. Amend-

ment will come into effect on 1 January 2010. The Group has not yet determined

the potential effect of the amendment.

Revised IFRS 3 Business Combinations (2008) and amended IAS 27 (2008) Con-

solidated and Separate Financial Statements came into effect on 1 July 2009

(i.e. they become mandatory for the Group’s 2010 consolidated financial state-

ments). The revisions address, among other things, accounting for step acquisi-

tions, require acquisition-related costs to be recognised as expenses and remove

the exception for changes in contingent consideration to be accounted by adjust-

ing goodwill. The revisions also address how non-controlling interests in subsidiar-

ies should be measured upon acquisition and require the effects of transactions

with non-controlling interests to be recognised directly in equity. The Group has not

yet determined the potential effect of the revised standard.

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 several phases and is

intended to replace International Financial Reporting Standard IAS 39 Financial

Instruments: Recognition and Measurement once the project is completed by the

end of 2010. The first phase of IFRS 9 was issued in November 2009 and relates

to the recognition and measurement of financial assets. The Group recognises that

the new standard introduces many changes to the accounting for financial instru-

ments and is likely to have a significant impact on Group’s 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.

IFRIC 17 Distributions of Non-cash Assets to Owners addresses the accounting for non-

cash dividend distributions to owners. The interpretation clarifies when and how a non-

cash dividend should be recognised and how the difference between the dividend paid

and the carrying amount of the net assets distributed should be recognised. IFRIC 17

became effective for annual periods beginning on or after 1 July 2009. The Group has

not yet determined the potential effect of the interpretation.

IFRIC 18 Transfers of Assets from Customers applies to accounting for transfers of

items of property, plant and equipment by entities that receive such transfers from

their customers. The interpretation clarifies the recognition and measurement of items

received, how the resulting credit, as well as the transfer of cash from customers

should be accounted for. IFRIC 18 applies prospectively to transfers of assets from

customers received on or after 1 July 2009. The Group has not yet determined the

potential effect of the interpretation.

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 entity’s equity instruments qualify as “consideration paid” in accordance with para-

graph 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 lia-

bility and how to account for the difference between the carrying amount of the finan-

cial 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. The

Group has not yet determined the potential effect of the interpretation.

Various Improvements to IFRSs have been dealt with on a standard-by-standard

basis. All amendments, which result in accounting changes for presentation, rec-

ognition or measurement purposes, will come into effect not earlier than 1 January

2010. The Group has not yet analysed the likely impact of the improvements on its

financial position or performance.



A number of the Group’s 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/or disclosure purposes based on the following

methods. When applicable, further information about the assumptions made in deter-

mining 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 arm’s length transaction after proper market-

ing wherein the parties had each acted knowledgeably and willingly. The fair value of

items of plant, equipment, fixtures and fittings 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 equip-

ment is primarily determined using depreciated replacement cost. This method consid-

ers the cost to reproduce or replace the property, plant and equipment, adjusted for

physical, functional or economical depreciation, and obsolescence.

(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.

4. DETERMINATION OF FAIR VALUES

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 Group’s activities are mainly limited to Russia which

has a uniform regulatory environment.

(c) Inventories

The fair value of inventories acquired in a business combi-

nation 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) Investments in equity and debt securities

The fair value of held-to-maturity investments and availa-

ble-for-sale financial assets is determined by reference to

their quoted bid price at the reporting date. The fair value

of held-to-maturity investments is determined for disclosure

purposes only.

(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.

(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.

The Group is engaged in the production and distribution of beer, soft drinks and min-

eral 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 Operat-

ing 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 Group’s chief operating decision maker has been determined as the Management

Board.

The segment represents the Group’s business of production and distribution of beer,

soft drinks and mineral water in Russia, Azerbaijan and other countries. Currently the

Group’s operations in Azerbaijan and other countries make an insignificant contribution

to the financial results of the Group.

The Management Board assesses the performance of the

operating segment based on adjusted earnings before

interest, tax, depreciation and amortization (EBITDA); meas-

ures for sales 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 finan-

cial statements as described in note 3.

5. SEGMENT REPORTING

’000 RUR 2009 2008

Revenue 93,648,747 92,482,283

EBITDA (including share of (loss) / profit of equity accounted investee

(net of income tax) RUR (29,374) thousand (2008: RUR 47,370 thousand )) 34,261,825 27,069,845

The segment information for the year ended 31 December 2009 is as follows:

Within the segment all business components demonstrate

similar economic characteristics:

67Baltika Breweries


’000 RUR 2009 2008

EBITDA (including share of (loss) / profit of equity accounted investee

(net of income tax)) 34,261,825 27,069,845

Depreciation and amortisation (4,644,309) (4,795,897)

Finance income 1,834,591 1,619,812

Finance costs (2,349,918) (3,678,392)

Profit before income tax 29,102,189 20,215,368

Income tax (5,729,920) (4,707,119)


A reconciliation of EBITDA to profit for the year is as follows:

(a) Overview

The Group has exposures to the following risks from the

use of financial instruments:

industry in which customers operate, as these factors may have an influence on credit

risk, particularly in the currently deteriorating economic circumstances. Substantially all of

Group’s customers are located in the Russian Federation. Approximately 14.9% (2008:

14.5%) of the Group’s revenue is attributable to sales transactions with a single customer.

Management has established a credit policy under which each new customer is ana-

lysed individually for creditworthiness before the Group’s standard payment and deliv-

ery terms and conditions are offered. The Group’s 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 Group’s benchmark

creditworthiness may transact with the Group only on a prepayment basis.

About 69% of the Group’s customers have been transacting with the Group for more

than 2 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 Group’s wholesale customers. The Group requires col-

lateral in respect of trade receivables. Credit evaluations are performed on all custom-

ers, 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 individu-

ally 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) Investments

The Group limits its exposure to credit risk by only investing in liquid securities in accord-

ance with Group’s deposit policy and only with counterparties that are in the top 50 rated

banks of Russian Federation according to the size of total assets. 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.

(c) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obliga-

tions associated with its financial liabilities that are settled by delivering cash or another

financial asset. The Group’s approach to managing liquidity is to ensure, as far as pos-

sible, 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 Group’s reputation.

Typically, the Group ensures that it has sufficient cash on demand to meet expected oper-

ational expenses for a period of 35 days, including the servicing of financial obligations; this

excludes the potential impact of extreme circumstances that cannot be reasonably pre-

dicted, 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:

This note presents information about Group’s exposure to

each of the above risks, the Group’s objectives, policies and

processes for measuring and managing risk and the Group’s

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 Group’s risk manage-

ment framework. The Board has established an Audit Com-

mittee which is responsible for developing and monitoring

the Group’s risk management policies. The Audit Committee

reports regularly to the Board of Directors on its activities.

The Group’s 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

Group’s activities. The Group, through its training and man-

agement standards and procedures, aims to develop a dis-

ciplined and constructive control environment in which all

employees understand their roles and obligations.

The Group’s Audit Committee oversees how management

monitors compliance with the Group’s risk management sys-

tem 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 cus-

tomer or counterparty to a financial instrument fails to meet its

contractual obligations and arises principally from the Group’s

receivables from customers and investment securities.

(i) Trade and other receivables

The Group’s exposure to credit risk is influenced mainly by

the individual characteristics of each customer. However, the

management of the Group also considers the demographics

of the Group’s customer base, including the default risk of the

6. FINANCIAL RISK MANAGEMENT

Credit risk

Liquidity risk

Market risk

USD 176,425 thousand multicurrency unsecured credit facility. Interest would be

payable for EURO/USD/RUR at the rate of LIBOR/EURIBOR/Cost of funds for the

lender+0.75%;


(d) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates

and interest rates will affect the Group’s income or the value of its holdings of financial

instruments. The objective of market risk management is to manage and control mar-

ket 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 denomi-

nated in a currency other than the respective functional currencies of the Group enti-

ties, primarily the Russian Rouble (RUR). The currencies in which these transactions

are primarily denominated are USD and EURO.

(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 Group’s exposure should

be subject to fixed or variable rates. However, at the time of raising new loans or bor-


rowings management uses its judgment to decide whether it

believes that a fixed or variable rate would be more favorable

to the Group over the expected period until maturity.

(iii) Other market risk

Material investments are managed on an individual basis

and are approved by the Board of Directors.

The primary goal of the Group’s investment strategy is to

maximise investment returns.

The Group does not enter into commodity contracts other

than to meet the Group’s expected usage and sale require-

ments; such contracts are not settled net.

(e) Capital management

The Group’s policy is to maintain a strong capital base so as to

maintain investor, creditor and market confidence and to sus-

tain future development of the business. The Board of Direc-

tors monitors the level of dividends to ordinary shareholders.

The Board of Directors seeks to maintain a balance between

the higher returns that might be possible with higher levels

of borrowings and the advantages and security afforded by

a sound capital position.

’000 RUR 2009 2008

Total liabilities 15,957,254 20,624,045

Less: cash and cash equivalents 1,740,702 1,691,594

Net debt 14,216,552 18,932,451

Total equity 63,681,313 54,011,129

Debt to capital ratio at 31 December 0.22 0.35

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

The Group’s debt to capital ratio at the end of the year was as follows:

7. OTHER INCOME

2009’000 RUR

2008’000 RUR

Gain on disposal of property, plant and equipment and intangible assets 72,217 82,546

Other expenses - (4,059)

72,217 78,487

8. ADMINISTRATIVE EXPENSES

2009’000 RUR

2008 (restated)’000 RUR

Wages and salaries 825,486 722,636

Depreciation and amortisation 484,592 455,320

Information technology and communications 170,580 188,031

Payroll taxes 105,673 105,965

Other payroll expenses 105,064 171,521

Facilities 94,432 201,554

Charity 35,244 50,547

Other administrative expenses 707,650 706,579

2,528,721 2,602,153

USD 143,460 thousand multicurrency unsecured credit facility. Interest would be

payable for EURO/USD/RUR at the rate of LIBOR/EURIBOR/Mosprime+0.375%;

USD 81,915 thousand multicurrency unsecured credit/overdraft facility. Interest

would be determined as each tranche is drawn down.

69Baltika Breweries


9. PERSONNEL COSTS

2009’000 RUR

2008’000 RUR

Wages and salaries 5,976,138 5,956,992

Contributions to state pension fund 760,122 803,800

Other payroll taxes 268,957 288,156

Other payroll expenses 575,089 504,836

7,580,306 7,553,784

10. FINANCE INCOME AND FINANCE COSTS

2009’000 RUR

2008 ’000 RUR

Recognised in profit or loss

Interest income on unimpaired held-to-maturity investments 93,068 137,798

Interest income on loans and receivables 1,188 -

Interest income on bank deposits 372,086 115,411

Foreign exchange gain 1,368,249 1,366,603

Finance income 1,834,591 1,619,812

Interest expense on financial liabilities measured at amortised cost 190,319 573,336

Foreign exchange loss 2,159,599 3,105,056

Finance costs recognised in profit or loss 2,349,918 3,678,392

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 466,342 253,209

Total interest expense on financial liabilities 190,319 573,336

Recognised in other comprehensive income

Foreign currency translation differences for foreign operations 257,818 415,353

Finance income recognised in other comprehensive income, net of tax 257,818 415,353

11. INCOME TAX EXPENSE

2009’000 RUR

2008 ’000 RUR

Current tax expense

Current year 5,498,430 4,734,655

Deferred tax expense

Origination and reversal of temporary differences 231,490 (27,536)

Total income tax expense 5,729,920 4,707,119

2009’000 RUR %

2008 ’000 RUR %

Profit before income tax 29,102,189 100 20,215,368 100

Income tax at applicable tax rate 5,820,438 20.0 4,851,688 24.0

Non-deductible expenses 353,281 1.2 557,832 2.8

Reduction in tax rate - - (277,425) (1.4)

Effects of tax concessions (496,860) (1.7) (340,979) (1.7)

Other 53,061 0.2 (83,997) (0.4)

5,729,920 19.7 4,707,119 23.3

The Group’s applicable tax rate is the corporate income tax rate of 20% for Russian companies (2008: 24%). With effect from 1 January 2009, the income

tax rate for Russian companies was reduced to 20%.



12. PROPERTY, PLANT AND EQUIPMENT

’000 RURLand and buildings

Machinery and equipment Kegs

Construction in progress Total

Cost/Deemed cost

At 1 January 2008 9,961,904 36,231,977 1,567,399 6,544,660 54,305,940

Additions 811,428 5,029,809 416,877 1,993,180 8,251,294

Acquisitions through business combinations 109,263 297,886 670 3,101 410,920

Disposals (7,974) (308,753) (7,416) - (324,143)

Transfers 862,959 2,462,801 302,561 (3,646,021) (17,700)

Effect of movements in exchange rates 18,494 56,324 113 1,108 76,039

At 31 December 2008 11,756,074 43,770,044 2,280,204 4,896,028 62,702,350

Additions 391,620 2,609,742 - 420,069 3,421,431

Disposals (11,796) (199,545) (19,524) (1,358) (232,223)

Transfers 2,654,700 441,446 (10,258) (3,088,393) (2,505)

Effect of movements in exchange rates 34,468 (19,323) (493) 11,430 26,082

At 31 December 2009 14,825,066 46,602,364 2,249,929 2,237,776 65,915,135

Depreciation and impairment losses

At 1 January 2008 (1,001,969) (13,327,579) (610,011) - (14,939,559)

Depreciation for the year (322,457) (4,101,108) (191,896) - (4,615,461)

Disposals 1,977 204,789 6,560 - 213,326

Transfers (8,347) 8,347 - - -

Effect of movements in exchange rates - (3,908) - - (3,908)

At 31 December 2008 (1,330,796) (17,219,459) (795,347) - (19,345,602)

Depreciation for the year (449,605) (3,965,845) (198,641) - (4,614,091)

Disposals 2,887 187,045 18,610 - 208,542

Transfers (334,275) 351,138 (16,863) - -

Effect of movements in exchange rates (78) 13,161 23 - 13,106

At 31 December 2009 (2,111,867) (20,633,960) (992,218) - (23,738,045)

Carrying amounts

At 1 January 2008 8,959,935 22,904,398 957,388 6,544,660 39,366,381

At 31 December 2008 10,425,278 26,550,585 1,484,857 4,896,028 43,356,748

At 31 December 2009 12,713,199 25,968,404 1,257,711 2,237,776 42,177,090

Depreciation expense of RUR 2,526,958 thousand has been included in cost of goods sold (2008: RUR 2,655,720 thousand), RUR 1,600,430 thousand

in distribution expenses (2008: RUR 1,660,394 thousand), RUR 320,191 thousand in administrative expense (2008: RUR 299,347 thousand) and RUR

166,512 thousand in cost of inventories as at 31 December 2009 (2008: Nil).

As a result of the change in accounting policy with respect to the treatment of borrowing costs, at 31 December 2009 capitalised borrowing costs related

to the construction of buildings amounted to RUR 3,318 thousand (2008: Nil).

71Baltika Breweries


13. INTANGIBLE ASSETS

’000 RUR Goodwill TrademarksSoftware and

licences Total

Cost

At 1 January 2008 11,598,819 - 400,087 11,998,906

Additions - - 248,487 248,487

Acquisitions through business combinations 1,638,615 45,004 56 1,683,675

Transfers - - 17,700 17,700

Effect of movements in exchange rates 277,246 7,608 13 284,867

At 31 December 2008 13,514,680 52,612 666,343 14,233,635

Additions - - 253,141 253,141

Transfers - - 2,505 2,505

Effect of movements in exchange rates 145,976 5,167 350 151,493

At 31 December 2009 13,660,656 57,779 922,339 14,640,774

Amortisation

At 1 January 2008 - - (261,942) (261,942)

Amortisation for the year - (1,252) (179,184) (180,436)

Effect of movements in exchange rates - (63) (3) (66)

At 31 December 2008 - (1,315) (441,129) (442,444)

Amortisation for the year - (6,054) (190,676) (196,730)

Effect of movements in exchange rates - 139 61 200

At 31 December 2009 - (7,230) (631,744) (638,974)

Carrying amounts

At 1 January 2008 11,598,819 - 138,145 11,736,964

At 31 December 2008 13,514,680 51,297 225,214 13,791,191

At 31 December 2009 13,660,656 50,549 290,595 14,001,800

Amortisation expense of RUR 12,589 thousand has been included in cost of goods sold (2008: RUR 7,246 thousand), RUR 19,740 thousand in distribu-

tion expenses (2008: RUR 17,217 thousand) and RUR 164,401 thousand in administrative expense (2008: RUR 155,973 thousand).

(a) Impairment testing of goodwill

For the purposes of impairment testing, goodwill is con-

sidered 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 man-

agement purposes.

The recoverable amount of the Group’s plants was based

on their value in use and was determined by discounting

the future cash flows generated from their continuing use.

The calculation of the value in use was based on the follow-

ing key assumptions:

The values assigned to the key assumptions represent management’s assessment of

future trends in the beer production industry and are based on both external sources

and internal sources.

Although no impairment loss was recognised in respect of goodwill the determination

of recoverable amount is sensitive to the rate at which the Group achieves its planned

growth in production.

In determining a value in use of RUR 180,090,000 thousand (compared to a carry-

ing amount of RUR 56,178,890 thousand) management has assumed that production

volume will reach 36,384 thousand hectolitres in the first year of the business plan and

52,700 thousand hectolitres by the tenth year.

If actual production were to be below estimated production by 44% in 2010 and sub-

sequent years, the value in use would approximate the carrying amounts of the plants

and goodwill.

Cash flows were projected based on actual operating

results and the five-year business plan. Cash flows for a

further 5-year period were extrapolated using a declin-

ing growth rate of 5% – nil.

In the first year of business plan revenue was projected

using declining rate of growth, that reflect current dif-

ficult business conditions. The anticipated annual pro-

duction growth included in the cash flow projections

was between 5% and 11% for the years 2011 to 2014

and reflects an expectation of a recovery in the econ-

omy at the end of 2010.

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 an industry aver-

age weighted average cost of capital, which was based on an average industry

debt to total capital ratio of 16.55% at a market interest rate of 6.89%.



The Group has the following investment in an equity accounted investee:

This company produces malt.

The Group’s share of losses in its equity accounted investee for the year ended 31 December 2009 was RUR 29,734 thousand (2008: profit RUR 47,370

thousand). The Group’s share of post-acquisition total recognised gains and losses in associates as at 31 December 2009 was RUR 232,255 thousand

(31 December 2008: RUR 279,108 thousand).

14. EQUITY ACCOUNTED INVESTEES

Country Ownership/Voting

Malterie Soufflet Saint Petersburg (“Soufflet”) Russia 30%

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, manage-

ment believes it unlikely that the fair value at the end of the reporting period would differ

significantly from their carrying amount.

15. OTHER INVESTMENTS

2009’000 RUR

2008 ’000 RUR

Non-current

Available-for-sale investments:

Measured at cost 9,781 9,796

Current

Investments held-to-maturity:

Promissory notes and bank deposits 6,860,751 -

Loans to related parties 2,190,548 -

9,051,299

The Group’s exposure to credit, currency and interest rate

risks related to other investments are disclosed in note 24.

During the year ended 31 December 2009 RUR 231,490 thousand (2008: RUR 27,536

thousand) of the movement in the net deferred tax liability was recognized in the income

statement and RUR 13,058 thousand (2008: RUR 830 thousand), relating to foreign

exchange differences, was recognized directly in other comprehensive income. During

16. DEFERRED TAX ASSETS AND LIABILITIES

Assets Liabilities Net

’000 RUR 20092008

(restated)2007

(restated) 20092008

(restated)2007

(restated) 20092008

(restated)2007

(restated)

Property, plant and

equipment - - - (2,557,771) (2,074,779) (1,989,837) (2,557,771) (2,074,779) (1,989,837)

Intangible assets 15,281 10,789 7,890 (10,102) (11,285) - 5,179 (496) 7,890

Investments - - - (17,459) (21,676) (15,192) (17,459) (21,676) (15,192)

Inventories 33,157 124,131 68,329 (15,246) - - 17,911 124,131 68,329

Trade and other

receivables 186,752 262,324 294,852 - - - 186,752 262,324 294,852

Trade and other

payables 733,716 323,372 202,498 - - - 733,716 323,372 202,498

Net tax assets/

(liabilities) 968,906 720,616 573,569 (2,600,578) (2,107,740) (2,005,029) (1,631,672) (1,387,124) (1,431,460)

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

the year ended 31 December 2008 RUR 15,970 thousand of

the movement in the net deferred tax liability was acquired

through business combination.

73Baltika Breweries


17. INVENTORIES

18. TRADE AND OTHER RECEIVABLES

19. CASH AND CASH EQUIVALENTS

2009’000 RUR



Raw materials and consumables 3,328,168 5,784,681 5,621,525

Work in progress 288,884 553,718 560,136

Finished goods and goods for resale 679,001 1,012,415 1,269,531

4,296,053 7,350,814 7,451,192

Write-down of inventories in the current year 178,636 253,860 147,335

2009’000 RUR

2008 ’000 RUR

Trade receivables 6,872,638 4,409,860

VAT receivable 165,512 321,637

Advances to suppliers 720,358 2,074,737

Other receivables 384,979 816,705

8,143,487 7,622,939

Accumulated impairment losses on receivables (81,394) (111,898)

8,062,093 7,511,041

2009’000 RUR

2008 ’000 RUR

Bank balances 288,368 1,553,939

Bank deposits and bank promissory notes 1,452,334 137,655

Cash and cash equivalents in the statement of financial position and in the statement of

cash flows 1,740,702 1,691,594

In 2009 raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales amounted to RUR 30,616,587

thousand (2008: RUR 37,569,015 thousand).

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

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

20. EQUITY

Number of shares unless otherwise stated Ordinary shares Ordinary shares Preference shares Preference shares

2009 2008 2009 2008

Authorised shares

Par value RUR 1 RUR 1 RUR 1 RUR 1

On issue at beginning of the year 151,714,594 151,721,708 12,326,570 12,394,003

Redemption - (7,114) - (67,433)

On issue at end of the year, fully paid 151,714,594 151,714,594 12,326,570 12,326,570

(a) Share capital and additional paid-in capital



RUR per share ’000 RUR

Year ended 31 December 2008

Preference shares

Dividends for 2007 52 640,981

Ordinary shares

Dividends for 2007 52 7,889,159

Year ended 31 December 2009

Preference shares

Dividends for 2008 85.1 1,048,991

Ordinary shares

Dividends for 2008 85.1 12,910,912

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.

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’ Meet-

ing. 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”). Thereaf-

The following table details the dividends declared by the Company for the years ended 31 December 2009 and 31 December 2008:

The shareholders’ meeting held on 2 April 2009 approved dividends amounting to RUR 13,959,903 thousand.

ter 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 Company’s statutory financial

statements, prepared in accordance with Russian Account-

ing Principles. As at 31 December 2009 the Company

had retained earnings, including profit for the current year

of RUR 34,906,210 thousand (31 December 2008: RUR

25,321,399 thousand).

21. EARNINGS PER SHARE

Number of shares unless otherwise stated 2009 2008

Issued shares at 1 January 151,714,594 151,721,708

Effect of redemption of shares - (6,939)

Weighted average number of shares for the for the year ended 31 December 151,714,594 151,714,769

2009’000 RUR


Profit for the year attributable to shareholders of the Company 23,372,269 15,508,249

Preference dividends recognised during the year (1,048,991) (640,981)

Profit attributable to ordinary shares 22,323,278 14,867,268

The calculation of earnings per share is based upon the profit for the year attributable to ordinary shares and the weighted average number of ordinary

shares outstanding during the year, calculated as shown below. The Company has no dilutive potential ordinary shares.

Weighted average number of ordinary shares

Profit attributable to ordinary shareholders

75Baltika Breweries


22. LOANS AND BORROWINGS

2009’000 RUR

2008 ’000 RUR


Secured bank loans - 176,304

- 176,304

Current liabilities

Unsecured bank loans - 4,116,537

Unsecured loan from Carlsberg Breweries A/S - 1,097,628

Unsecured loans from other companies - 1,852,639

Current portion of secured bank loans 181,572 496,033

181,572 7,562,837

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s

exposure to interest rate, foreign currency and liquidity risks, see note 24.

(a) Terms and debt repayment schedule

Terms and conditions of outstanding loans were as follows:

The bank loan is fully secured by the guarantee of the Company’s parent company, Baltic Beverages Holding AB.

31 December 2009 31 December 2008

’000 RUR CurrencyNominal

interest rateYear of maturity

Face value

Carrying amount Face value

Carrying amount

Secured bank loan USD

LIBOR

+0.75% 2009-2010 181,572 181,572 672,337 672,337

Unsecured bank loan USD

LIBOR

+0.65% 2009 - - 22,714 22,714

Unsecured bank loan USD

LIBOR

+0.375% 2009 - - 1,777,439 1,777,439

Unsecured bank loan EURO

EURIBOR

+0.375% 2009 - - 2,316,384 2,316,384

Unsecured loan from Carlsberg

Breweries A/S RUR 11.33% 2009 - - 1,097,628 1,097,628

Unsecured loans from other

companies EURO

EURIBOR

+0.75% 2009 - - 1,852,639 1,852,639

181,572 181,572 7,739,141 7,739,141

23. TRADE AND OTHER PAYABLES

2009’000 RUR

2008’000 RUR

Trade payables 5,214,709 5,645,034

Taxes payable 4,214,958 3,326,583

Accrued salaries, wages and benefits 1,276,828 1,359,334

Dividends payable 114,655 134,503

Payables to equity accounted investee 42,902 106,718

Other payables and provisions 2,534,529 434,430

13,398,581 11,006,602

There are actual and potential claims to the Group from

its suppliers that allege the Group has not fulfilled con-

tract 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 actual and poten-

tial disputes.

The Group’s exposure to currency and liquidity risk related to trade and other payables

is disclosed in note 24.



24. FINANCIAL INSTRUMENTS

Carrying amount

2009’000 RUR

2008’000 RUR

Trade and other receivables 7,341,735 5,436,304

Available-for-sale financial assets 9,781 9,796

Held-to-maturity investments 9,051,299 -

Cash and cash equivalents 1,740,702 1,691,594

18,143,517 7,137,694

Carrying amount

2009’000 RUR

2008’000 RUR

Wholesale customers 5,752,447 3,669,764

Retail customers 1,120,191 740,096

6,872,638 4,409,860

Accumulated impairment losses on receivables (81,394) (111,898)

6,791,244 4,297,962

Gross Impairment Gross Impairment

2009’000 RUR

2009 ’000 RUR

2008’000 RUR

2008 ’000 RUR

Current 6,680,914 - 4,203,372 -

Past due 0 – 90 days 110,330 - 78,501 -

Past due more than 90 days 81,394 81,394 127,987 111,898

6,872,638 81,394 4,409,860 111,898

(a) Credit risk

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:

Impairment losses

The ageing of trade receivables at the reporting date was:

The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:

The Group’s most significant customer, a domestic wholesaler, accounts for RUR 998,900 thousand of the trade receivables carrying amount as at

31 December 2009 (2008: RUR 858,434 thousand).

Substantially all the Group’s receivables relate to sales to customers in Russia.

2009’000 RUR

2008’000 RUR

Balance at beginning of the year 111,898 106,128

Impairment loss (reversed)/recognised (8,501) 49,453

Amounts written off against trade receivables (22,003) (43,683)

Balance at end of the year 81,394 111,898

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Based on historic default rates the Group believes that no general impairment allow-

ance is necessary in respect of trade receivables not past due and past due by up to

90 days. 94% of the balance, which includes the amount owed by the Group’s most

significant customer (see above), relates to customers that have a good track record

with the Group. The total impairment loss 31 December 2009 of RUR 81,394 thousand

relates to collective loss established for overdue receivables. Of the total impairment

loss as at 31 December 2008 of RUR 111,898 thousand, RUR 73,269 thousand relates

to claims from the Group’s most significant customer.

The allowance account in respect of trade receivables is

used to record impairment losses unless the Group is satis-

fied that no recovery of the amount owing is possible; at

that point the amount is considered irrecoverable and writ-

ten off against the financial asset directly.

77Baltika Breweries


31 December 2009’000 RUR

Carrying amount

Contractual cash flows 0-6 months 6-12 months 1-2 years 2-5 years

More than 5 years

Non-derivative financial liabilities

Secured bank loans 181,572 182,674 182,674 - - - -

Trade and other payables 13,398,581 13,398,581 13,398,581 - - - -

13,580,153 13,581,255 13,581,255 - - - -

31 December 2008’000 RUR

Carrying amount

Contractual cash flows 0-6 months 6-12 months 1-2 years 2-5 years

More than 5 years

Non-derivative financial liabilities

Secured bank loans 672,337 690,334 257,541 253,889 178,904 - -

Unsecured bank loans 4,116,537 4,174,388 4,174,388 - - - -

Unsecured loan from Carlsberg Breweries A/S 1,097,628 1,194,029 61,683 1,132,346 - - -

Unsecured loans from other companies 1,852,639 1,857,370 1,857,370 - - - -

Trade and other payables 11,006,602 11,006,602 11,006,602 - - - -

18,745,743 18,922,723 17,357,584 1,386,235 178,904 - -

(b) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments. It is not expected that the cash flows included in

the maturity analysis could occur significantly earlier, or at significantly different amounts.

Euro-denominated

2009

USD-denominated

2009

Euro-denominated

2008

USD-denominated

2008

Current assets

Cash and cash equivalents 11,428 29,234 267,362 429,560

Held-to-maturity investments 738,816 2,797,109

Trade receivables 15,789 - 6,696 2,705

Current liabilities

Secured bank loans - (181,572) - (496,033)

Unsecured bank loans - - (2,316,384) (1,800,153)

Unsecured loans from other companies - - (1,852,639) -

Trade payables (576,325) (109,563) (676,238) (93,556)


Secured bank loans - - - (176,304)

Gross balance sheet exposure 189,708 2,535,208 (4,571,203) (2,133,781)

Net Group exposure from commitments and anticipated transactions (75,139) - (248,355) (2,262)

Net exposure 114,569 2,535,208 (4,819,558) (2,136,043)

(c) Currency risk

Exposure to currency risk

The Group’s exposure to foreign currency risk was as follows based on notional amounts:

Average rate Reporting date spot rate

RUR 1 equals 2009 2008 2009 2008

USD 0.0315 0.0402 0.0331 0.0340

EURO 0.0227 0.0275 0.0230 0.0241

Sensitivity analysis

A 20% strengthening of the RUR, as indicated below,

against the following currencies at 31 December would

have increased (decreased) equity and profit or loss by the

amounts shown below. This analysis is based on foreign

The following exchange rates applied during the year and as at the end of the year:

currency exchange rate variances that the Group considered to be reasonably pos-

sible 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 2008.



A weakening of the RUR against the above currencies at 31 December would have had the equal but opposite effect on the above currencies to the

amounts shown above, on the basis that all other variables remain constant.

’000 RUR Equity Profit or loss

2009

USD (20% strengthening) (507,042) (507,042)

EUR (20% strengthening) (22,914) (22,914)

2008

USD (20% strengthening) 427,209 427,209

EUR (20% strengthening) 963,911 963,911

(d) Interest rate risk

Profile

At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

(e) 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 manage-

ment believes that the fair value of the Group’s financial assets and liabilities approximates their carrying amounts.

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 and equity by the amounts shown below.

This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2008.

’000 RUR Carrying amount

Fixed rate instruments 2009 2008

Financial assets 10,503,633 137,655

Financial liabilities - (7,044,090)

10,503,633 (6,906,435)

Variable rate instruments

Financial liabilities (181,572) (695,051)

Profit or loss and equity

2009’000 RUR

100 bpincrease

100 bpdecrease

Variable rate instruments (1,816) (1,816)

Cash flow sensitivity (1,816) (1,816)

2008’000 RUR

Variable rate instruments (6,951) (6,951)

Cash flow sensitivity (6,951) (6,951)

’000 RUR 2009 2008

Less than one year 222,589 264,539

Between one and five years 59,137 95,814

More than five years 239,070 249,362

520,796 609,715

25. OPERATING LEASES

Non-cancellable operating lease rentals are payable as follows:

The Group leases a number of land plots and buildings under operating leases. Les-

sors for these leases are state authorities and third parties. The leases of land plots are

typically run for 25-49 years. Leases of buildings are typically run for 11 months with an

option to renew the lease after that date. The Group has no contingent rent arrange-

ments or subleases.

During the year ended 31 December 2009 an amount of

RUR 287,110 thousand was recognised as an expense

in profit or loss in respect of operating leases (2008: RUR

315,972 thousand).

79Baltika Breweries


Project2009

’000 RUR

Baltika-St. Petersburg plant 129,569

Baltika-Rostov plant 47,971

Baltika-Baku plant 41,226

Baltika-Novosibirsk plant 22,835

Baltika-Samara plant 21,060

Baltika-Yaroslavl plant 16,072

Baltika-Tula plant 10,746

Baltika-Khabarovsk plant 2,798

Baltika-Voronezh plant 2,391

Baltika-Chelyabinsk plant 1,857

Baltika-Pikra plant 1,548

Total 298,073

26. CAPITAL COMMITMENTS

As at 31 December 2009 the Group had the following commitments relating to property, plant and equipment (31 December 2008: RUR 879,574 thousand):

27. CONTINGENCIES

Taxation contingencies in the Russian Federation

The taxation system in the Russian Federation is relatively

new and is characterised by frequent changes in legisla-

tion, official pronouncements and court decisions, which

are often unclear, contradictory and subject to varying

interpretation by different tax authorities. Taxes are sub-

ject to review and investigation by a number of authorities,

which have the authority to impose severe fines, penalties

and interest charges. A tax period remains open for review

by the tax authorities during the three subsequent calendar

years; however, under certain circumstances a tax period

may remain open longer. Recent events within the Russian Federation suggest that the

tax authorities are taking a more assertive position in their interpretation and enforce-

ment of tax legislation.

These circumstances may create tax risks in the Russian Federation that are substan-

tially more significant than in other countries. Management believes that it has provided

adequately for all tax liabilities based on its interpretations of applicable Russian tax leg-

islation, 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.

28. RELATED PARTY TRANSACTIONS

(a) Control relationships

The Company’s parent company is Baltic Beverages Hold-

ing AB (refer note 1(b)). The Company’s ultimate parent

company is Carlsberg A/S and the Company’s ultimate

controlling party is Carlsberg Foundation. Carlsberg A/S

produces consolidated financial statements that are avail-

able for public use.

As at 31 December 2007 Baltic Beverages Holding AB

was owned by Pripps Ringnes AB (50%) and Oy Hartwall

AB (50%). The parent company of Pripps Ringnes AB was

Carlsberg Breweries A/S. The ultimate parent company of Oy Hartwall AB was Scottish

& Newcastle Plc.

On 25 January 2008 the Boards of Sunrise Acquisitions Limited (a company jointly

owned by Carlsberg Breweries A/S and Heineken N.V.), and Scottish & Newcastle Plc

announced that they had reached agreement on the terms of a recommended acquisi-

tion of Scottish & Newcastle Plc. On 28 April 2008 the transaction became effective.

According to the terms of the acquisition Scottish & Newcastle Plc’s share of Baltic

Beverages Holding AB, as well as the French, Greek, Chinese and Vietnamese opera-

tions, were transferred to Carlsberg Breweries A/S, which is a subsidiary of Carlsberg

A/S, the Company’s ultimate parent Company.



’000 RUR 2009 2008

Salaries and bonuses 427,026 329,634

Contributions to State pension fund 12,719 10,253

Contributions to defined contribution plan 9,989 7,360

Termination benefits - 4,151

449,734 351,398

(b) Management remuneration

Key management received the following remuneration during the year, which is included in personnel costs (see note 8):

(c) Transactions with other related parties

The Group’s other related party transactions are disclosed below. Transactions with Scottish & Newcastle Plc and its operations which were transferred

to Heineken N.V. as a result of acquisition of Scottish & Newcastle Plc by Sunrise Acquisitions Limited are disclosed for the period 1 January 2008 to the

date of acquisition.

(i) Revenue

(ii) Expenses

’000 RURTransaction value

2009Transaction value

2008Outstanding balance


2008

Sale of goods:

Fellow subsidiaries 49,912 23,074 21,813 26,955

Scottish & Newcastle Plc - 2,531 - -

Royalties received

Fellow subsidiaries 62,767 68,017 - -

Scottish & Newcastle Plc - 177 - -

Interest received:

Carlsberg Breweries A/S 591 - 591 -

Parent company 597 - 597 -

Services provided:

Equity accounted investee 24,361 78,372 9,214 27,195

Other income

Parent company 79,237 - - -

217,465 172,171 32,215 54,150

’000 RURTransaction value

2009Transaction value



2008

Purchase of goods:

Equity accounted investee 571,736 962,130 42,902 106,718

Carlsberg Breweries A/S 13,971 2,245 33,062 (25,660)



Services received:

Carlsberg Breweries A/S 39,430 26,045 - -

Fellow subsidiaries 178 276 - -


Royalties paid:

Carlsberg Breweries A/S 630,571 610,331 291,756 252,061


Scottish & Newcastle Plc - 26,212 - -

Finance costs:

Carlsberg Breweries A/S 101,556 29,931 - 26,628

Fellow subsidiaries - 8,510 - 8,510

Other expenses:

Carlsberg Breweries A/S 150,766 20,681 162,688 20,681

Parent company - 74,905 - 73,472

1,545,391 1,797,737 541,046 465,843

81Baltika Breweries


The loans to Carlsberg Breweries A/S and to the parent company bear interest at 6.6% per annum and are due in January 2010.

(d) Pricing policies

Sales to and purchases from related parties are made on terms that prevail in arm’s length transactions. For the year ended 31 December 2009, the

Group recognized no impairment of receivables owed by related parties (2008: Nil).

During the year ended 31 December 2009 the Group’s

purchases of malt from Soufflet, an associate of the Group,

amounted to RUR 571,736 thousand (excluding VAT) or

17.1% of the total value of malt purchases and own pro-

duction and 41,926 tons or 12.6% of the total volume of

malt purchases and own production. During the year

ended 31 December 2008 the Group’s purchases of malt

On 19 February 2010, the Board of Directors recommended

dividends of RUR 20,997,269 thousand, and the recom-

mendation will be considered by the Company’s sharehold-

(iii) Loans

’000 RURAmount loaned

2009Amount loaned



2008

Loans received:

Carlsberg Breweries A/S - 2,009,294 - 1,071,000

Fellow subsidiaries - 3,033,888 - 1,844,129

Loans given:

Carlsberg Breweries A/S 1,089,360 - 1,089,360 -

Parent company 1,100,000 - 1,100,000 -

2,189,360 5,043,182 2,189,360 2,915,129

Name Nature of business Country of incorporation

Ownership/ voting

2009

Ownership/ voting

2008

OOO Baltika-Ukraine Distribution of Baltika beer Ukraine 100% 100%

Baltika S.R.L. Distribution of Baltika beer Moldova 100% 100%

Baltika-Almaty LLP Distribution of Baltika beer Kazakhstan 100% 100%

OOO Baltika Distribution of Baltika beer Kirgizia 100% 100%

OOO Baltika-Bel Distribution of Baltika beer Belorussia 100% 100%

OOO Terminal Podolsk Warehouse Russia 100% 100%

OOO Universalopttorg Warehouse Russia 100% 100%

Baltika Deutschland GmbH Distribution of Baltika beer Germany 100% 100%

Baltika-Baku LLC Beer Production Azerbaijan 100% 100%

Baku Pivo JSC Beer Production Azerbaijan 91% 91%

from Soufflet amounted to RUR 962,130 thousand (excluding VAT) or 14.7% of the

total value of malt purchases and own production and 58,266 tons or 14% 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.

ers at the annual shareholders’ meeting to be held on 8 April 2010. Dividend payments

will be made between 27 April and 31 December 2010.

29. SUBSIDIARIES

30. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE



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83Baltika Breweries

13.

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mie

v

Ma

rch 1

0th,

20

09

Bo

ard

of

Dire

cto

rs

17.

Ba

ltik

a B

rew

erie

s (

Buye

r) a

nd

Ca

rlsb

erg

B

rew

erie

s A

/S (

Se

ller)

Ad

ditio

na

l a

gre

em

ent

(№2

) to

the

Co

ntr

ac

t(№

01-0

8-C

B)

da

ted

Oc

tob

er

9th,

20

07

R

UB

7,6

90

,62

0.0

0S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

B

oa

rd,

J. B

. R

asm

usse

n

Ma

rch 1

0th,

20

09

Bo

ard

of

Dire

cto

rs

18.

Ba

ltik

a B

rew

erie

s (

Buye

r) a

nd

Fe

ldsc

hlo

sse

n

Ge

tra

nke

AG

(S

elle

r)A

gre

em

ent

on t

he

sa

le a

nd

purc

ha

se

of

be

er

Sw

iss f

ranc

s 1

,62

5,0

88

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Ma

rch 2

3rd,

20

09

Bo

ard

of

Dire

cto

rs

19.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

IC

S B

altik

a S

rl

(Exe

cuto

r)A

gre

em

ent

on t

he

pro

vis

ion o

f se

rvic

es

RU

B 4

,95

3,0

50

, e

xc

lud

ing

VA

T R

UB

89

1,5

49

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Ma

rch 2

3rd,

20

09

Bo

ard

of

Dire

cto

rs

20.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ba

ltik

a-A

lma

ty L

LC

(E

xe

cuto

r)A

gre

em

ent

on t

he

pro

vis

ion o

f se

rvic

es

Ka

za

khsta

ni te

ng

e 6

1,2

28

,98

1.6

, e

xc

lud

ing

VA

T

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Ma

rch 2

3rd,

20

09

Bo

ard

of

Dire

cto

rs

21.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

G

roup

Pro

cure

me

nt

AG

(S

elle

r)A

gre

em

ent

on t

he

sa

le a

nd

purc

ha

se

of

go

od

s

for

pro

mo

tio

na

l e

ve

nts

RU

B 9

,12

2,1

00

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Ma

rch 2

3rd,

20

09

Bo

ard

of

Dire

cto

rs

22.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

B

rew

erie

s A

/S (

Exe

cuto

r)C

onsultin

g s

erv

ice

s a

gre

em

ent

EU

R 5

1,0

00

, e

xc

lud

ing

VA

T E

UR

9,1

80

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

B

oa

rd,

J. B

. R

asm

usse

n

Ma

rch 2

3rd,

20

09

Bo

ard

of

Dire

cto

rs

23.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

B

rew

erie

s A

/S (

Exe

cuto

r)C

onsultin

g s

erv

ice

s a

gre

em

ent

GB

P 1

5,0

00

, e

xc

lud

ing

VA

T G

BP

2,7

00

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

B

oa

rd,

J. B

. R

asm

usse

n

Ma

rch 2

3rd,

20

09

Bo

ard

of

Dire

cto

rs

24.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

G

roup

Pro

cure

me

nt

AG

(S

elle

r)A

gre

em

ent

on t

he

sa

le a

nd

purc

ha

se

of

go

od

s

for

pro

mo

tio

na

l e

ve

nts

RU

B 7

45

,94

8S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Ma

rch 2

3rd,

20

09

Bo

ard

of

Dire

cto

rs

25.

Ba

ltik

a B

rew

erie

s (

Princ

ipa

l) a

nd

JS

C R

efs

erv

ice

(A

ge

nt)

Ag

enc

y c

ontr

ac

tA

gre

em

ent

pric

e s

et

ac

co

rdin

g t

o c

urr

ent

tariff

s

for

tra

nsp

ort

op

era

tor

(tra

ffic

ra

tes,

co

mm

issio

n

and

ag

ent

rem

une

ratio

n)

Me

mb

er

of

the

Bo

ard

,A

. N.

Sho

khin

Ap

ril 2

nd,

20

09

Ge

ne

ral M

ee

ting

of

sha

reho

lde

rs

26.

Ba

ltik

a B

rew

erie

s (

Clie

nt)

and

JS

C R

ussia

n R

ailw

ays

Ag

ree

me

nt

on t

he

se

ttle

me

nt

of

ac

co

unts

The

ac

co

unts

are

pe

rfo

rme

d f

or

tra

nsp

ort

atio

n

ba

se

d o

n c

urr

ent

tariff

s f

or

JS

C R

ussia

n

Ra

ilwa

ys

Me

mb

er

of

the

Bo

ard

,A

. N.

Sho

khin

Ap

ril 2

nd,

20

09

Ge

ne

ral M

ee

ting

of

sha

reho

lde

rs

27.

Ba

ltik

a B

rew

erie

s (

Clie

nt)

and

CJS

C R

usa

gro

tra

ns (

Fo

rwa

rde

r)F

reig

ht fo

rwa

rdin

g a

gre

em

ent

Ag

ree

me

nt

pric

e s

et

ac

co

rdin

g t

o c

urr

ent

tariff

s

for

the

exp

ed

ite

r (t

raff

ic r

ate

s,

co

mm

issio

n a

nd

e

xp

ed

ite

r re

mune

ratio

n)

Me

mb

er

of

the

Bo

ard

,A

. N.

Sho

khin

Ap

ril 2

nd,

20

09

Ge

ne

ral M

ee

ting

of

sha

reho

lde

rs

28.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

B

rew

erie

s A

/S (

Exe

cuto

r)A

gre

em

ent

on t

he

pro

vis

ion o

f se

rvic

es

EU

R 4

20

,60

0S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

B

oa

rd,

J. B

. R

asm

usse

n

Ap

ril 2

nd,

20

09

Bo

ard

of

Dire

cto

rs


29.

Ba

ltik

a B

rew

erie

s (

Se

ller)

and

Ba

ltik

a-B

aku L

LC

(B

uye

r)A

gre

em

ent

on s

up

ply

ing

eq

uip

me

nt

RU

B 9

6,3

02

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Pre

sid

ent,

M

em

be

r o

f th

e B

oa

rd,

A. O

. A

rte

mie

v

Ap

ril 2

nd,

20

09

Bo

ard

of

Dire

cto

rs

30.

Ba

ltik

a B

rew

erie

s (

Pa

ye

r o

f c

om

pe

nsa

tio

n)

and

U

niv

ers

alo

ptto

rg L

LC

(Re

ce

ive

r o

f c

om

pe

nsa

tio

n)

Ag

ree

me

nt

on c

om

pe

nsa

tio

n f

or

land

re

nta

l p

aym

ents

C

om

pe

nsa

tio

n is c

alc

ula

ted

ba

se

d o

n t

he

re

nta

l ra

te f

or

Univ

ers

alo

ptt

org

LL

C in a

cc

ord

anc

e w

ith

curr

ent

no

rma

tive

ac

ts o

f V

oro

ne

zh

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Ap

ril 2

nd,

20

09

Bo

ard

of

Dire

cto

rs

31.

Ba

ltik

a B

rew

erie

s (

Lic

ense

r) a

nd

Ba

ltik

a-B

aku

LLC

(Lic

ense

e)

Lic

ense

ag

ree

me

nt

Qua

rte

rly lic

ense

pa

ym

ents

in t

he

am

ount

of

10

% o

f ne

t tu

rno

ve

r fr

om

lic

ense

d p

rod

uc

tio

nS

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Pre

sid

ent,

M

em

be

r o

f th

e B

oa

rd,

A. O

. A

rte

mie

v

Ap

ril 1

5th,

20

09

Bo

ard

of

Dire

cto

rs

32.

Ba

ltik

a B

rew

erie

s (

Exp

ort

er)

and

Ba

ltik

a-B

aku

LLC

(Im

po

rte

r)A

gre

em

ent

on t

he

sup

ply

of

reta

il e

quip

me

nt

RU

B 3

,56

0,0

50

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Pre

sid

ent,

M

em

be

r o

f th

e B

oa

rd,

A. O

. A

rte

mie

v

Ap

ril 1

5th,

20

09

Bo

ard

of

Dire

cto

rs

33.

Ba

ltik

a B

rew

erie

s (

Princ

ipa

l) a

nd

IC

S B

altik

a S

rl

(Ag

ent)

A

ge

nc

y c

ontr

ac

tR

UB

2,9

95

,65

0

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Ap

ril 1

5th,

20

09

Bo

ard

of

Dire

cto

rs

34.

Ba

ltik

a B

rew

erie

s (

Buye

r) a

nd

Ca

rlsb

erg

Gro

up

P

roc

ure

me

nt A

G (

Se

ller)

Ag

ree

me

nt

on t

he

sa

le a

nd

purc

ha

se

of

go

od

s

for

pro

mo

tio

na

l e

ve

nts

RU

B 2

95

,59

0

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Ap

ril 2

9th,

20

09

Bo

ard

of

Dire

cto

rs

35.

Ba

ltik

a B

rew

erie

s (

Re

cip

ient)

and

Oy S

ine

bry

cho

ff A

b (

Inve

sto

r)A

gre

em

ent

on m

ark

eting

exp

ense

sE

UR

18

0,4

50

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

June

3rd,

20

09

Bo

ard

of

Dire

cto

rs

36.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

C

ana

da

Inc

. (E

xe

cuto

r)A

gre

em

ent

on t

he

pro

vis

ion o

f se

rvic

es

RU

B 4

53

,12

0 R

UB

or

US

D 1

4,1

60

, in

clu

din

g V

AT

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

June

3rd,

20

09

Bo

ard

of

Dire

cto

rs

37.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ba

ltik

a-B

el

LLC

(E

xe

cuto

r)

Sup

ple

me

nta

l a

gre

em

ent

to t

he

Co

ntr

ac

t o

n

the

pro

vis

ion o

f se

rvic

es (

№2

00

9-B

LR

) d

ate

d

Ja

nua

ry 2

9th,

20

09

RU

B 2

,18

4,6

68

, e

xc

lud

ing

VA

T

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

June

3rd,

20

09

Bo

ard

of

Dire

cto

rs

38.

Ba

ltik

a B

rew

erie

s (

Buye

r) a

nd

Ca

rlsb

erg

Gro

up

P

roc

ure

me

nt A

G (

Se

ller)

Ag

ree

me

nt

on t

he

sa

le a

nd

purc

ha

se

of

go

od

s

for

pro

mo

tio

na

l e

ve

nts

RU

B 3

13

,18

0

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

June

3rd,

20

09

Bo

ard

of

Dire

cto

rs

39.

Ba

ltik

a B

rew

erie

s (

Se

ller)

and

Ba

ltik

a-A

lma

ty

LLC

(B

uye

r)

Ke

g s

ale

s a

nd

purc

ha

se

ag

ree

me

nt

RU

B 8

,75

0,0

00

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

June

15

th,

20

09

Bo

ard

of

Dire

cto

rs

40.

Ba

ltik

a B

rew

erie

s (

Lic

ense

r) a

nd

Ba

ltik

a-A

lma

ty

LLC

(Lic

ense

e)

Lic

ense

ag

ree

me

nt

Qua

rte

rly lic

ense

pa

ym

ents

in t

he

am

ount

of

10

% o

f ne

t tu

rno

ve

r fr

om

lic

ense

d p

rod

uc

tio

nS

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

June

15

th,

20

09

Bo

ard

of

Dire

cto

rs

41.

Ba

ltik

a B

rew

erie

s (

Exp

ort

er)

and

Rin

gne

ss A

.S. (I

mp

ort

er)

Be

er

sup

ply

ag

ree

me

nt

Up

to

EU

R 6

0,0

00

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

June

26

th,

20

09

Bo

ard

of

Dire

cto

rs

42.

Ba

ltik

a B

rew

erie

s (

Sup

plie

r )

and

Ba

ltik

a L

LC

(C

usto

me

r)

Be

er

sup

ply

ag

ree

me

nt

RU

B 1

0,2

50

,00

0S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

June

26

th,

20

09

Bo

ard

of

Dire

cto

rs

43.

Ba

ltik

a B

rew

erie

s (

Se

ller)

and

De

rbe

s B

rew

ery

Ltd

(B

uye

r)C

ap

s s

up

ply

ag

ree

me

nt

RU

B 7

,01

2,9

39

.78

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,B

. S

ond

ensko

v,

Pre

sid

ent,

Me

mb

er

of

the

B

oa

rd,

A. O

. A

rte

mie

v

July

20

th,

20

09

Bo

ard

of

Dire

cto

rs


85Baltika Breweries

44.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

B

rew

erie

s A

/S (

Exe

cuto

r)A

dd

itio

na

l a

gre

em

ent

to t

he

Ag

ree

me

nt

on t

he

p

rovis

ion o

f c

onsultin

g s

erv

ice

s (

№1

_2

00

8)

da

ted

De

ce

mb

er

1st ,

20

08

GB

P 3

9,3

57

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n

July

20

th,

20

09

Bo

ard

of

Dire

cto

rs

45.

Ba

ltik

a B

rew

erie

s (

Ac

quire

r) a

nd

Ca

rlsb

erg

B

rew

erie

s A

/S (

Rig

hth

old

er)

A

gre

em

ent

on t

he

alie

na

tio

n o

f th

e e

xc

lusiv

e

rig

ht

RU

B 2

,75

7,6

60

.00

, in

clu

din

g V

AT

RU

B 4

20

,66

0S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n

July

20

th,

20

09

Bo

ard

of

Dire

cto

rs

46.

Ba

ltik

a B

rew

erie

s (

Lic

ense

e)

and

Ca

rlsb

erg

B

rew

erie

s A

/S (

Lic

ense

r)A

dd

itio

na

l a

gre

em

ent

to t

he

lic

ense

ag

ree

me

nt

da

ted

Oc

tob

er

1st ,

20

07

on t

he

usa

ge

of

the

Tub

org

bra

nd

In a

cc

ord

anc

e w

ith t

he

ma

in lic

ense

ag

ree

me

nt

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n

July

20

th,

20

09

Bo

ard

of

Dire

cto

rs

47.

Ba

ltik

a B

rew

erie

s (

Lic

ense

e)

and

Ca

rlsb

erg

B

rew

erie

s A

/S (

Lic

ense

r)A

dd

itio

na

l a

gre

em

ent

to t

he

lic

ense

ag

ree

me

nt

on t

he

usa

ge

of

the

Ca

rlsb

erg

tra

de

ma

rk d

ate

d

Ma

rch 2

2nd,

20

02

In a

cc

ord

anc

e w

ith t

he

ma

in lic

ense

ag

ree

me

nt

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n

July

20

th,

20

09

Bo

ard

of

Dire

cto

rs

48.

Ba

ltik

a B

rew

erie

s (

Exp

ort

er)

and

Ca

rlsb

erg

D

euts

chla

nd

Gm

bH

(Im

po

rte

r)B

ee

r sup

ply

ag

ree

me

nt

Up

to

EU

R 3

70

,00

0 (

or

RU

B 1

6,2

44

,92

4 )

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

July

20

th,

20

09

Bo

ard

of

Dire

cto

rs

49.

Ba

ltik

a B

rew

erie

s (

Exp

ort

er)

and

Ca

rlsb

erg

D

anm

ark

(Im

po

rte

r)B

ee

r sup

ply

ag

ree

me

nt

Up

to

EU

R 8

,70

6,4

74

(o

r R

UB

38

2,2

59

,45

9)

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

July

20

th,

20

09

Bo

ard

of

Dire

cto

rs

50.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

P

roc

ure

me

nt (S

he

nzhe

n)

Co

., L

td.

(Exe

cuto

r)A

gre

em

ent

on t

he

pro

vis

ion o

f se

rvic

es

The

pric

e o

f se

rvic

es is d

efine

d m

onth

ly b

ase

d

on t

he

lis

t o

f p

rovid

ed

se

rvic

es.

The

ove

rall

pric

e

of

the

ag

ree

me

nt

ca

nno

t e

xc

ee

d U

SD

60

,00

0

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

July

20

th,

20

09

Bo

ard

of

Dire

cto

rs

51.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

Ca

rlsb

erg

B

rew

erie

s A

/S (

Co

nsulta

nt)

Ad

ditio

na

l a

gre

em

ent

(№1

) to

the

Co

ntr

ac

t (№

1)

da

ted

Aug

ust

1st ,

20

08

on t

he

pro

vis

ion o

f se

rvic

es

Inc

rea

se

d t

he

co

ntr

ac

t p

ric

e f

rom

RU

B 3

91

,92

0

to R

UB

1,6

82

,95

5,

inc

lud

ing

VA

T

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n

Aug

ust

13

th,

20

09

Bo

ard

of

Dire

cto

rs

52.

Ba

ltik

a B

rew

erie

s (

Exe

cuto

r) a

nd

Ba

ltik

a-B

aku

LLC

(C

usto

me

r)A

gre

em

ent

on t

he

pro

vis

ion o

f se

rvic

es

The

pric

e o

f se

rvic

es is d

efine

d o

n p

er

ho

ur

rate

s a

nd

the

ca

teg

orie

s o

f sp

ec

ialis

ts.

The

o

ve

rall

pric

e o

f th

e a

gre

em

ent

ca

nno

t e

xc

ee

d

RU

B 5

0,0

00

,00

0

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Pre

sid

ent,

M

em

be

r o

f th

e B

oa

rd,

A. O

. A

rte

mie

v

Aug

ust

13

th,

20

09

Bo

ard

of

Dire

cto

rs

53.

Ba

ltik

a B

rew

erie

s (

Le

sso

r) a

nd

Ba

ltic

Be

ve

rag

es

Ho

ldin

g A

B (

Le

sse

e)

Ad

ditio

na

l a

gre

em

ent

to t

he

Ag

ree

me

nt

on

rent

(№1

) fo

r no

n-r

esid

entia

l p

rem

ise

s,

da

ted

Ja

nua

ry 1

6th,

20

09

In a

cc

ord

anc

e w

ith t

he

ma

in a

gre

em

ent

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n,

Me

mb

er

of

the

Bo

ard

,B

. S

ond

ensko

v

Aug

ust

13

th,

20

09

Bo

ard

of

Dire

cto

rs

54.

Ba

ltik

a B

rew

erie

s (

Se

ller)

and

De

rbe

s B

rew

ery

Ltd

(B

uye

r)A

gre

em

ent

on t

he

sa

le a

nd

purc

ha

se

of

eq

uip

me

nt

RU

B 1

,60

7,5

00

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

bo

ard

B.

So

nd

ensko

v,

Pre

sid

ent,

Me

mb

er

of

the

b

oa

rd A

rte

mie

v A

. O.

Aug

ust

13

th,

20

09

Bo

ard

of

Dire

cto

rs

55.

Ba

ltik

a B

rew

erie

s (

Se

ller)

and

Ba

ltik

a

De

uts

chla

nd

Gm

bH

(B

uye

r)A

dd

itio

na

l a

gre

em

ent

to t

he

Co

ntr

ac

t (№

65

6)

da

ted

De

ce

mb

er

26

th,

20

07

, o

n t

he

sup

ply

of

be

er

EU

R 1

,00

0,0

00

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Se

pte

mb

er

10

th,

20

09

Bo

ard

of

Dire

cto

rs

56.

Ba

ltik

a B

rew

erie

s (

Exe

cuto

r) a

nd

De

rbe

s

Bre

we

ry L

td (

Custo

me

r)A

gre

em

ent

on t

he

pro

vis

ion o

f se

rvic

es

The

pric

e o

f se

rvic

es is d

efine

d b

ase

d o

n p

er

ho

ur

rate

s a

nd

the

ca

teg

orie

s o

f sp

ec

ialis

ts.

The

o

ve

rall

pric

e o

f th

e a

gre

em

ent

ca

nno

t e

xc

ee

d

RU

B 5

0,0

00

,00

0

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

B.

So

nd

ensko

v,

Pre

sid

ent,

Me

mb

er

of

the

B

oa

rd,

A. O

. A

rte

mie

v

Se

pte

mb

er

10

th,

20

09

Bo

ard

of

Dire

cto

rs


57.

Ba

ltik

a B

rew

erie

s (

Co

nsulta

nt)

and

Ba

ltik

a-B

aku L

LC

(C

usto

me

r)A

dd

itio

na

l a

gre

em

ent

to t

he

Ag

ree

me

nt

(№w

/o)

da

ted

Aug

ust

25

th,

20

09

on c

onsultin

g s

erv

ice

s—

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Pre

sid

ent,

M

em

be

r o

f th

e B

oa

rd,

A. O

. A

rte

mie

v

Se

pte

mb

er

10

th,

20

09

Bo

ard

of

Dire

cto

rs

58.

Ba

ltik

a B

rew

erie

s (

Le

ga

l suc

ce

sso

r) a

nd

Ba

ltic

B

eve

rag

es H

old

ing

AB

(R

ights

ho

lde

r)A

gre

em

ent

on t

he

alie

na

tio

n o

f th

e e

xc

lusiv

e

rig

ht

RU

B 1

0,0

00

S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n,

Me

mb

er

of

the

Bo

ard

,B

. S

ond

ensko

v

Se

pte

mb

er

10

th,

20

09

Bo

ard

of

Dire

cto

rs

59.

Ba

ltik

a B

rew

erie

s (

Exe

cuto

r) a

nd

De

rbe

s B

rew

ery

Ltd

(C

usto

me

r)A

gre

em

ent

on p

rovid

ing

ra

il c

ars

fo

r use

The

pric

e o

f se

rvic

es is d

efine

d b

ase

d o

n the

ho

urly r

ate

s c

alc

ula

ted

de

pe

nd

ing

on s

tatio

ns o

f lo

ad

ing

and

unlo

ad

ing

. T

he

ove

rall

pric

e o

f th

e

ag

ree

me

nt

ca

nno

t e

xc

ee

d R

UB

50

,00

0,0

00

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,B

. S

ond

ensko

v,

Pre

sid

ent,

Me

mb

er

of

the

B

oa

rd,

A. O

. A

rte

mie

v

Se

pte

mb

er

10

th,

20

09

Bo

ard

of

Dire

cto

rs

60.

Ba

ltik

a B

rew

erie

s (

Exp

ort

er)

and

Ba

ltik

a

De

uts

chla

nd

Gm

bH

(Im

po

rte

r)

Ad

ditio

na

l a

gre

em

ent

to t

he

Co

ntr

ac

t (№

65

6)

da

ted

De

ce

mb

er

26

th,

20

07

, o

n t

he

sup

ply

of

be

er

—S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

Oc

tob

er

15

th,

20

09

Bo

ard

of

Dire

cto

rs

61.

Ba

ltik

a B

rew

erie

s (

Exp

ort

er)

and

Ba

ltik

a-B

aku

LLC

(Im

po

rte

r)A

gre

em

ent

on t

he

sup

ply

of

tra

de

eq

uip

me

nt

RU

B 2

,69

2,0

00

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Pre

sid

ent,

M

em

be

r o

f th

e B

oa

rd,

A. O

. A

rte

mie

v

Oc

tob

er

15

th,

20

09

Bo

ard

of

Dire

cto

rs

62.

Ba

ltik

a B

rew

erie

s (

Lic

ense

e)

Ca

rlsb

erg

B

rew

erie

s A

/S (

Lic

ense

r)S

up

ple

me

nta

l a

gre

em

ent

to t

he

Ap

pe

nd

ix S

‘A

dd

itio

na

l a

dve

rtis

ing

inve

stm

ents

und

er

the

lic

ense

ag

ree

me

nt

da

ted

Ma

rch 2

2nd,

20

02

fo

r 2007-2

00

9’, d

ate

d S

ep

tem

be

r 2

0th,

20

07

RU

B 6

58

,97

1 (

US

D 2

1,9

00

)S

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n

Oc

tob

er

15

th,

20

09

Bo

ard

of

Dire

cto

rs

63.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

JS

C S

lavutic

h (

Sup

plie

r)B

ee

r sup

ply

ag

ree

me

nt

RU

B 4

2,2

10

,00

0

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Pre

sid

ent,

Me

mb

er

of

the

B

oa

rd,

A. O

. A

rte

mie

v,

Me

mb

er

of

the

bo

ard

B.

So

nd

ensko

v

Oc

tob

er

15

th,

20

09

Bo

ard

of

Dire

cto

rs

64.

Ba

ltik

a B

rew

erie

s (

Lic

ense

e)

Ca

rlsb

erg

B

rew

erie

s A

/S (

Lic

ense

r)Lic

ense

ag

ree

me

nt

Qua

rte

rly lic

ense

pa

ym

ents

in t

he

am

ount

of

5%

o

f ne

t p

rofit

fro

m p

rod

uc

ed

and

so

ld lic

ense

d

pro

duc

tio

n

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,J. B

. R

asm

usse

n

Oc

tob

er

15

th,

20

09

Bo

ard

of

Dire

cto

rs

65.

Ba

ltik

a B

rew

erie

s (

Custo

me

r) a

nd

De

rbe

s B

rew

ery

Ltd

(E

xe

cuto

r)

Ag

ree

me

nt

on t

he

pro

vis

ion o

f se

rvic

es

The

pric

e o

f p

erf

orm

ed

wo

rks is d

efine

d u

nd

er

the

pro

ce

ss o

f th

e C

usto

me

r filin

g a

n a

pp

lica

tio

n

for

co

nd

uc

ting

wo

rk a

nd

the

Exe

cuto

r la

ter

ac

ce

pting

it.

The

Exe

cuto

r’s r

em

une

ratio

n w

he

n

att

rac

ting

third

pa

rtie

s t

ota

ls 5

% o

f th

e p

ric

e o

f w

ork

pe

rfo

rme

d b

y t

hird

pa

rtie

s (

sub

co

ntr

ac

tors

o

f th

e E

xe

cuto

r)

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Me

mb

er

of

the

Bo

ard

,B

. S

ond

ensko

v,

Pre

sid

ent,

Me

mb

er

of

the

B

oa

rd,

A. O

. A

rte

mie

v

Oc

tob

er

15

th,

20

09

Bo

ard

of

Dire

cto

rs

66.

Ba

ltik

a B

rew

erie

s (

Re

cip

ient)

and

Oy S

ine

bry

cho

ff A

b (

Inve

sto

r)A

gre

em

ent

on m

ark

eting

exp

ense

sE

UR

11

2,5

10

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

No

ve

mb

er

13

th,

20

09

Bo

ard

of

Dire

cto

rs

67.

Ba

ltik

a B

rew

erie

s (

Co

nsulta

nt)

and

De

rbe

s B

rew

ery

Ltd

(C

usto

me

r)A

gre

em

ent

on t

he

pro

vis

ion o

f c

onsultin

g

se

rvic

es

The

pric

e o

f se

rvic

es is d

efine

d s

ep

ara

tely

fo

r e

ac

h p

rovid

ed

co

nsultin

g s

erv

ice

ba

se

d o

n p

er

ho

ur

rate

s a

nd

the

ca

teg

orie

s o

f sp

ec

ialis

ts.

The

o

ve

rall

pric

e o

f th

e a

gre

em

ent

ca

nno

t e

xc

ee

d

RU

B 5

0,0

00

,00

0

Sha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B,

Pre

sid

ent,

Me

mb

er

of

the

B

oa

rd,

A. O

. A

rte

mie

v,

Me

mb

er

of

the

bo

ard

B.

So

nd

ensko

v

No

ve

mb

er

13

th,

20

09

Bo

ard

of

Dire

cto

rs


87Baltika Breweries

68.

Ba

ltik

a B

rew

erie

s (

Pa

ye

r o

f c

om

pe

nsa

tio

n)

and

Te

rmin

al-P

od

ols

k L

LC

(R

ec

eiv

er

of

co

mp

ensa

tio

n)

Ag

ree

me

nt

on r

ent

co

mp

ensa

tio

n a

nd

oth

er

pa

ym

ents

In

ac

co

rda

nc

e w

ith c

urr

ent

tariff

sS

ha

reho

lde

r B

altic

Be

ve

rag

es

Ho

ldin

g A

B

No

ve

mb

er

13

th,

20

09

Bo

ard

of

Dire

cto

rs

69.

Ba

ltik

a B

rew

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89Baltika Breweries

Baltika Breweries

Company Headquarters +7 (812) 325 9 325 3, 6th Verkhny PereulokSt. Petersburg, Russia194292www.baltika.ru

Shareholder Relations +7 (812) 329 91 09 [email protected]@spb.baltika.ru

Registrar

CJSC Natsionalnaya Registratsionnaya Kompaniya St. Petersburg Branch Office

+7 (812) 251 81 38+7 (812) 346 74 07

4-A Izmailovsky Prospekt, Office 314St. Petersburg, Russia 190005www.nrcreg.ru

Independent Auditors

ZAO KMPG St. Petersburg Branch Office

+7 (812) 313 73 00 69-71 A Marata Street Business Center ‘Renaissance Plaza’St. Petersburg, Russia [email protected]

CJSC A&P Audit +7 (812) 251 69 23 26 Rizhsky ProspektSt. Petersburg, Russia [email protected]

Official print mediumfor information disclosure

Newspaper Izvestia

Official corporate web sitefor information disclosure

www.corporate.baltika.ru

INFORMATION FOR SHAREHOLDERS AND INVESTORS


CONTACT INFORMATION

Company Breweries

Baltika-St. Petersburg Brewery +7 (812) 325 9 325 3 6th Verkhny PereulokSt. Petersburg, Russia 194292

Baltika-Voronezh Branch +7 (4732) 61 98 00 109 9th Yanvarya StreetVoronezh, Russia 394027

Baltika-Novosibirsk Branch +7 (383) 230 14 02 34 2nd Stantsionnaya StreetNovosibirsk, Russia 630041

Baltika-Pikra Branch +7 (3912) 59 12 00 90 60 Let OktyabryaKrasnoyarsk, Russia 660079

Baltika-Rostov Branch +7 (863) 250 51 02 146-A Dovatora StreetRostov-on-Don, Russia 344090

Baltika-Samara Branch +7 (846) 276 43 66 1 Baltiisky ProezdKinelsky District, Kinelsky VillageSamara Oblast, Russia 446110

Baltika-Tula Branch +7 (4872) 39 55 35 85 Odoevskoye ShosseTula, Russia 300036

Baltika-Khabarovsk Branch +7 (4212) 41 15 51 142 Voronezhskoye ShosseKhabarovsk, Russia 680042

Baltika-Chelyabinsk Branch +7 (351) 239 16 00 16 Ryleeva StreetChelyabinsk, Russia 454087

Baltika-Yaroslavl Branch +7 (4852) 58 32 03 63 Pozharskogo StreetYaroslavl, Russia 150066

Baltika-Baku Brewery +994 (12) 442 12 80+994 (12) 442 20 10

2/2 Shamakhinskoye ShosseAbsheronsky District, HyrdalanRepublic of Azerbaijan AZ0100

Company subsidiaries located abroad

Baltika-Bel LLC +375 (17) 28 9 54 69 15 Storozhevskaya Street, Office 302Minsk, Belarus 220002

ICS Baltika Srl +373 (22) 23 84 60 57/1 Mitropolita Benulescu-Bodoni Street, Office 418Kishinev, Moldova MD 2005

Baltika-Almaty LLC +7 (727) 258 59 40 153 Abaya Prospect, Office 24Almalinsky District, Almaty, The Republic of Kazakhstan 050009

Baltika-Ukraina LLC +380 (44) 494 18 40 94/98 Krasnoznamennaya Street, Office 4Kiev, The Republic of Ukraine 03026

Baltika LLC +996 (312) 30 60 82+996 (312) 30 60 83

121/1 Shopokov StreetBishkek, The Kyrgyz Republic 720075

Baltika Deutschland GmbH +49 (40) 728 13 928 26 GlockengiesserwallHamburg, Germany 20095

Representative offices in foreign countries

Representation in China +86 (10) 651 29 728 19 Tsziangomenvai, (The Citic Building, Tower A), Office 15-BBeijing, The People’s Republic of China 100004

91Baltika Breweries

Baltika Breweries conducts regular group tours

at the Company’s Russian breweries. During the

tours, visitors can learn about the Company’s his-

Baltika Breweries invites its guests to visit the

Museum of the History of Brewing in Siberia, which

is located on the grounds of the Baltika-Pikra

Branch in Krasnoyarsk. The Museum was created

in 2005, to help celebrate the 130th anniversary of

The Russian Union of Industrialists and Entrepreneurs (RUIE), a public association of employers;

The Union of Russian Producers of Beer and Non-alcoholic Products (The Union of Russian Brewers);

The Community of Producers under Company Trademarks, a non-commercial partnership (RusBrand);

The St. Petersburg Association of Joint Ventures;

The non-commercial partnership 'The Market Council for Organizing an Effective System of Wholesale and Retail Power and

Capacity Trade (the NP Market Council).

DESIGN, PRINT ARTGROOVE

Chelyabinsk, tel.: +7 (3512) 39 16 00

Khabarovsk, tel.: +7 (4212) 41 15 91

Kranoyarsk, tel.: +7 (3912) 59 13 41

Novosibirsk, tel.: +7 (383) 230 14 11

Samara, tel.: +7 (846) 276 43 33

St. Petersburg, tel.: +7 (812) 329 91 39

Rostov, tel.: +7 (863) 250 51 46

Tula, tel.: +7 (4872) 32 99 10

Voronezh, tel.: +7 (4732) 61 98 00

Yaroslavl, tel.: +7 (4852) 58 32 29

Tours can be booked by telephone:

tory and its activities, as well as becoming acquainted with beer produc-

tion technologies and taste the Company’s products.

ASSOCIATION PARTICIPATION

Baltika is a member of the following public organizations:

the Krasnoyarsk Brewery and the 15th anniversary of the Pikra Brewery.

The Museum has a unique exhibition on beer brewing.

In 2009, 62,000 people visited Company breweries. For the period from

1999 to 2009, the total number of visitors amounted more than 400,000.

Appointments for tours of the Company’s breweries

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