BALTIKA BREWERY ●

Established in 1990

●

The Company consists of


Baltika Brewery Plant in St. Petersburg;
Baltika
Don Brewery Plant in Rostov
on
Don;
Tulskoye pivo Brewery Plant in Tula;
a plant under construction in Samara;
a plant under construction in Khabarovsk;
Ltd. Baltika
Moscow Trading Company;
20 sales subdivisions ;
trade delegates in Germany. ●

Over 20 beers, as well as soft drinks, mineral and mineralized waters.

●

Over 7,000 employees.

●

Number of registered shareholders
over 1,500 natural and juridical persons.

●

Quality prize winner of Russian Federation Government in 1997.

●

Member of the European Foundation Of Quality Management (EFQM in Brussels) and the Academy of Quality Issues (Moscow).

●

Member of the Union of Russian Beer Manufacturers.

●

Leading beer manufacturer and distributor in Russia and Eastern Europe.

●

The Company’s products are exported in the countries of the former Soviet Union and all over the world.

●

The Company’s products are included in the 100 best Russian products list.

●

The Company’s stocks are included in the list of NP Stock Market RTS.

●

The Company is audited by the international company KPMG and ZAO A&P Audit.

BALTIKA’S PRESIDENT MESSAGE

Dear Sirs ●

The year 2001 was successful in all areas of activity of the Baltika Company. The strat


egy we chose allowed us to achieve the highest indices for all of the eleven
year history of Baltika’s existence, and to strengthen its position among the largest European and world brewing companies. ● In highly competitive circumstances, the Company was able to preserve its status as one of the most effective industrial organizations in the count
ry.

●

In 2001 a series of highly significant decisions in the life of the Company were

taken. We began to reorganize the company with the goal of creating an effective cor
porate structure of management, in order to provide more efficient deci
sion
making and thus improving the Company.

●

One of the Company’s

important areas of activity is the development of interaction with fede
ral and local authorities and the strengthening of partnership relations with the regions, based on principles of social responsibility and the priority of the law in mutual relations.

●

An

important element of the Company’s corporate strategy is an employee recruitment policy aimed at social pro
tection of the personnel as a funda
mental condition of Company stability.

●

I would like to thank everyone who has con


tributed to the successes of the Company in the year 2001.

●

We know the tasks that

must be fulfilled; the goals toward which we are striving are in sight; and we believe in successful future of our business!

Taimuraz Bolloev President

January 2002, St. Petersburg

ANNUAL REPORT 2001

3

BALTIKA’S PRESIDENT MESSAGE

Dear Sirs ●

The year 2001 was successful in all areas of activity of the Baltika Company. The strat


egy we chose allowed us to achieve the highest indices for all of the eleven
year history of Baltika’s existence, and to strengthen its position among the largest European and world brewing companies. ● In highly competitive circumstances, the Company was able to preserve its status as one of the most effective industrial organizations in the count
ry.

●

In 2001 a series of highly significant decisions in the life of the Company were

taken. We began to reorganize the company with the goal of creating an effective cor
porate structure of management, in order to provide more efficient deci
sion
making and thus improving the Company.

●

One of the Company’s

important areas of activity is the development of interaction with fede
ral and local authorities and the strengthening of partnership relations with the regions, based on principles of social responsibility and the priority of the law in mutual relations.

●

An

important element of the Company’s corporate strategy is an employee recruitment policy aimed at social pro
tection of the personnel as a funda
mental condition of Company stability.

●

I would like to thank everyone who has con


tributed to the successes of the Company in the year 2001.

●

We know the tasks that

must be fulfilled; the goals toward which we are striving are in sight; and we believe in successful future of our business!

Taimuraz Bolloev President

January 2002, St. Petersburg

ANNUAL REPORT 2001

3

THE COMPANY’S MISSION

THE COMPANY’S STRATEGY

We work to be the best Russian brewery in each respect :

●

●

Internal Strengthening of our leading position in the

in consumer satisfaction: so that the consumer feels that he buys the best beer;

Russian brewing industry. ●

●

in business: by means of profit and income growth;

●

in employee satisfaction: so that employees know that

External Active promotion in the countries of the former Soviet Union and other countries.

they are important to the Company; ●

in influence on Society: Society should recognize the Company’s activities as beneficial.

IMPLEMENTATION OF THE MISSION AND STRATEGY

Basic demands of consumers ● Meeting their needs; ● Highest quality of the products; ● Moderate prices.

Conditions for successful business ● Running the business efficiently; ● Priority of primary tasks over minor tasks.

Company’s values ● ● ●

●

●

● ●

Baltika brand; Working for the consumer; Quality of the manufactured products; Baltika is the best place to work; Ability to react quickly to changes in the market; Discipline; Mutually profitable relationships with business partners.

Main business strategies ● Manufacture of prod
ucts commensurate with the world quality standards; ● Efficient functioning of all processes; ● Partnership on a mutually profitable basis.

ANNUAL REPORT 2001

5

THE COMPANY’S MISSION

THE COMPANY’S STRATEGY

We work to be the best Russian brewery in each respect :

●

●

Internal Strengthening of our leading position in the

in consumer satisfaction: so that the consumer feels that he buys the best beer;

Russian brewing industry. ●

●

in business: by means of profit and income growth;

●

in employee satisfaction: so that employees know that

External Active promotion in the countries of the former Soviet Union and other countries.

they are important to the Company; ●

in influence on Society: Society should recognize the Company’s activities as beneficial.

IMPLEMENTATION OF THE MISSION AND STRATEGY

Basic demands of consumers ● Meeting their needs; ● Highest quality of the products; ● Moderate prices.

Conditions for successful business ● Running the business efficiently; ● Priority of primary tasks over minor tasks.

Company’s values ● ● ●

●

●

● ●

Baltika brand; Working for the consumer; Quality of the manufactured products; Baltika is the best place to work; Ability to react quickly to changes in the market; Discipline; Mutually profitable relationships with business partners.

Main business strategies ● Manufacture of prod
ucts commensurate with the world quality standards; ● Efficient functioning of all processes; ● Partnership on a mutually profitable basis.

ANNUAL REPORT 2001

5

THE BREWING INDUSTRY

RUSSIAN MARKET The country’s brewing industry has been on the rise over the past few years. Since 1996, a steady growth in both beer manufacturing and consumption has been observed. According to the statistics provided by the Goskomstat of the Russian Federation, 324 large and medium
size companies were involved in beer manu
facturing in 2001; and with mini
plants included, this number exceeds 400. According to the preliminary statis
tics, the volume of beer marketing by the end of 2001 was 60.5 million hecto
liters, which exceeded the index of the year 2000 (52.3 million hectoliters) by 16 per cent. Beer manufacturing in the Russian Federation grew from 51.6 mil
lion hectoliters in 2000 to 60.4 million hectoliters in 2001, or by 17 per cent. Beer export from the Russian Federation has shown a definite tendency to grow, although its share in the total volume of manufacture remains fairly low (around 1 per cent in 2001). The share of import
ed beer to the Russian Federation decreased slightly, and was as high as 1.5 per cent of the total market value. In spite of the fact that Russia con
tinues to lag behind the European coun
tries in terms of beer consumption per capita, its steady growth indicates a promising potential. An average index of beer consumption in the countries of Western Europe is 80 liters, and in some countries
over 100 liters per person. In Russia, for the reported year, the beer consumption index reached 41 liters per capita, as opposed to 36 liters in the year 2000. The highest beer consump
tion indices were observed in Moscow (around 70 liters per capita per year) and in St. Petersburg (around 60 liters per capita per year) in 2001.

Development of the beer market in Russia and growth of sales volumes of the Baltika Company in 1990
2001

Beer consumption in Russia in 1985
2001, liters per capita

The Company’s share in the Russian beer market in 1991
2001

*

ANNUAL REPORT 2001

7

THE BREWING INDUSTRY

RUSSIAN MARKET The country’s brewing industry has been on the rise over the past few years. Since 1996, a steady growth in both beer manufacturing and consumption has been observed. According to the statistics provided by the Goskomstat of the Russian Federation, 324 large and medium
size companies were involved in beer manu
facturing in 2001; and with mini
plants included, this number exceeds 400. According to the preliminary statis
tics, the volume of beer marketing by the end of 2001 was 60.5 million hecto
liters, which exceeded the index of the year 2000 (52.3 million hectoliters) by 16 per cent. Beer manufacturing in the Russian Federation grew from 51.6 mil
lion hectoliters in 2000 to 60.4 million hectoliters in 2001, or by 17 per cent. Beer export from the Russian Federation has shown a definite tendency to grow, although its share in the total volume of manufacture remains fairly low (around 1 per cent in 2001). The share of import
ed beer to the Russian Federation decreased slightly, and was as high as 1.5 per cent of the total market value. In spite of the fact that Russia con
tinues to lag behind the European coun
tries in terms of beer consumption per capita, its steady growth indicates a promising potential. An average index of beer consumption in the countries of Western Europe is 80 liters, and in some countries
over 100 liters per person. In Russia, for the reported year, the beer consumption index reached 41 liters per capita, as opposed to 36 liters in the year 2000. The highest beer consump
tion indices were observed in Moscow (around 70 liters per capita per year) and in St. Petersburg (around 60 liters per capita per year) in 2001.

Development of the beer market in Russia and growth of sales volumes of the Baltika Company in 1990
2001

Beer consumption in Russia in 1985
2001, liters per capita

The Company’s share in the Russian beer market in 1991
2001

*

ANNUAL REPORT 2001

7

BALTIKA’S POSITION ON THE EUROPEAN AND WORLD MARKETS

THE BREWING INDUSTRY

The volume of sales of the Baltika brand in 2001 was 7.9 million hectoliters (a 16 per cent growth). The typical annual growth in sales of the leading brands for the markets of western countries is 4 to 5 per cent. In the reported year, as a result of the significant growth of sales of the Baltika brand, its position in the chart of the best European brands altered favourably; the Baltika brand moved from the fifth place it occupied in 2000 to the fourth place. The total volume of sales of Baltika, according to the statistics for the year 2001, was 14 million hectoliters, and its annual growth
32 per cent. Today, the Company is charted among the top thirty leading world companies in total volume of sales, and the Baltika brand is one of the thirty best
selling brands in the world.

EUROPEAN BREWING INDUSTRY STATISTICS FOR THE YEAR 2000* Ten leading European beer brands, sales in the year 2000.

Fifteen leading European brewing companies, sales in the year 2000.

Ten leading European beer brands, average annual sales growth, 1996
2000, per cent.

Fifteen leading European brewing companies, average annual sales growth 1996
2000, per cent.

* At the moment of compilation of this Annual Report, the statistics for Europe for 2001 were incomplete.

8

ANNUAL REPORT 2001

ANNUAL REPORT 2001

9

BALTIKA’S POSITION ON THE EUROPEAN AND WORLD MARKETS

THE BREWING INDUSTRY

The volume of sales of the Baltika brand in 2001 was 7.9 million hectoliters (a 16 per cent growth). The typical annual growth in sales of the leading brands for the markets of western countries is 4 to 5 per cent. In the reported year, as a result of the significant growth of sales of the Baltika brand, its position in the chart of the best European brands altered favourably; the Baltika brand moved from the fifth place it occupied in 2000 to the fourth place. The total volume of sales of Baltika, according to the statistics for the year 2001, was 14 million hectoliters, and its annual growth
32 per cent. Today, the Company is charted among the top thirty leading world companies in total volume of sales, and the Baltika brand is one of the thirty best
selling brands in the world.

EUROPEAN BREWING INDUSTRY STATISTICS FOR THE YEAR 2000* Ten leading European beer brands, sales in the year 2000.

Fifteen leading European brewing companies, sales in the year 2000.

Ten leading European beer brands, average annual sales growth, 1996
2000, per cent.

Fifteen leading European brewing companies, average annual sales growth 1996
2000, per cent.

* At the moment of compilation of this Annual Report, the statistics for Europe for 2001 were incomplete.

8

ANNUAL REPORT 2001

ANNUAL REPORT 2001

9

PARTICIPATION IN THE ACTIVITY OF THE UNION OF RUSSIAN BEER MANUFACTURERS

Since the moment of the creation of the Union of Russian Beer Manufacturers, Baltika Brewery has participated actively in its operation. Baltika’s president, T. Bolloev, is a member of the managing board and is a vice
chairman of the Union’s Council. Four meetings of the Union’s Council were held in 2001. During those meetings, the following problems were discussed: prob
lems of legal norms and their foundation in the branch industry, customs and tariff regulation, tax policy for domestic raw mate
rial sources, branch
industry machine building, as well as vari
ous organizational questions. The activities of Baltika within the framework of opera
tions of the Union of Russian Beer Manufacturers in the reporting period was focused on solving the imperative prob
lems of the branch industry. Among the issues on the agenda was the effort to cancel a directive by the Sanitary General of the Russian Federation “On strengthening the sanitary and epidemic control of beer” which in effect was aimed at destroying the branch industry. As a result of the active and carefully planned efforts of Baltika and other members of the Union, the directive was canceled. The Union, in joint cooperation with the specialists of Baltika, continually kept in view the problem of guaranteeing the legal functioning of the branch industry. This was essen
tial, since a number of officials persistently attempted to incorporate elements of government control in the develop
ing relationships on the beer market, which could in essence be reduced to one general ambition: to implement the same rules and laws in the production and turnover of beer as those applicable presently for the production of strong alcoholic beverages. During its activity, Baltika’s management and other members of the Union collaborated with members of the State Duma, members of the Federation Council, employees of profile ministries and organizations, and participated in the activities of councils of experts, commissions, and working groups on questions of development of the Agricultural and Industrial Complex, established by the federal bodies of leg
islative and executive authority, including those concerning the brewing industry. Baltika’s further participation in the operation of the Union will provide for an increase of the role of the former in the development and defending of interests of the beer and soft drinks industry, as well as in creating conditions for inter
action between beer manufacturers and bodies of government authority.

ANNUAL REPORT 2001

11

PARTICIPATION IN THE ACTIVITY OF THE UNION OF RUSSIAN BEER MANUFACTURERS

Since the moment of the creation of the Union of Russian Beer Manufacturers, Baltika Brewery has participated actively in its operation. Baltika’s president, T. Bolloev, is a member of the managing board and is a vice
chairman of the Union’s Council. Four meetings of the Union’s Council were held in 2001. During those meetings, the following problems were discussed: prob
lems of legal norms and their foundation in the branch industry, customs and tariff regulation, tax policy for domestic raw mate
rial sources, branch
industry machine building, as well as vari
ous organizational questions. The activities of Baltika within the framework of opera
tions of the Union of Russian Beer Manufacturers in the reporting period was focused on solving the imperative prob
lems of the branch industry. Among the issues on the agenda was the effort to cancel a directive by the Sanitary General of the Russian Federation “On strengthening the sanitary and epidemic control of beer” which in effect was aimed at destroying the branch industry. As a result of the active and carefully planned efforts of Baltika and other members of the Union, the directive was canceled. The Union, in joint cooperation with the specialists of Baltika, continually kept in view the problem of guaranteeing the legal functioning of the branch industry. This was essen
tial, since a number of officials persistently attempted to incorporate elements of government control in the develop
ing relationships on the beer market, which could in essence be reduced to one general ambition: to implement the same rules and laws in the production and turnover of beer as those applicable presently for the production of strong alcoholic beverages. During its activity, Baltika’s management and other members of the Union collaborated with members of the State Duma, members of the Federation Council, employees of profile ministries and organizations, and participated in the activities of councils of experts, commissions, and working groups on questions of development of the Agricultural and Industrial Complex, established by the federal bodies of leg
islative and executive authority, including those concerning the brewing industry. Baltika’s further participation in the operation of the Union will provide for an increase of the role of the former in the development and defending of interests of the beer and soft drinks industry, as well as in creating conditions for inter
action between beer manufacturers and bodies of government authority.

ANNUAL REPORT 2001

11

THE MAIN EVENTS IN THE LIFE OF THE COMPANY IN 2001

JANUARY ● “Don” Beer wins the “100 best Russian products” competi
tion in 2000 ● 36 cylindrical
conical tanks (CCT) began operating in St. Petersburg ● A new filtering line began operating in Rostov
on
Don FEBRUARY ● First batch of alcohol
free beer was produced ● A new line for filtering and weighing of malt began operat
ing at Baltika
Don Plant

●

●

industry in Tula region which Quality System were certified by the Gosstandart for compliance with GOST R ISO 9001
96 In St. Petersburg, the Baltika Company held its annual cer
emony for conferring the “Baltika Brewery Award for World
class Stars of the Musical Arts and Young Musicians,” with
in the framework of the 9th International Arts Festival “The Stars of the White Nights” First batch of the new premium
class “Parnassus” beer was produced

MARCH ● A new “Baltika No. 8 Pshenichnoye” (Wheat) beer was intro
duced to the market ● A new boiler was launched at Tulskoe pivo Plant ● Filtration line No. 2 in St. Petersburg was modernized ● Sales subdivisions in Vologda and Smolensk were opened ● Export of the brand “Arsenalnoye” began

JULY ● The decision to build a plant in Samara was made ● The Baltika Company participated in the 3rd Moscow Beer Festival ● First batch of “Don” beer in PET was produced ● Tulskoye Pivo Plant expanded and put into operation a new storehouse for ready products ● Sales subdivisions in Ulan
Ude and Khabarovsk were opened

APRIL ● A new line for packaging beer into aluminum cans began operating in St. Petersburg ● The Keraflux unit, lowering industrial losses of raw materi
als, began operating in St. Petersburg ● 27 CCT began operating at Tulskoye pivo Plant

AUGUST ● The Baltika trademark was the only brand representing Russia at the 5th International Beer Festival in Berlin ● “Arsenalnoye” Beer Celebration was held in Kaluga ● In Moscow, the MAKS
2001 International Air Show was held, and Baltika granted special prizes to the best participants

MAY ● A sales subdivision in Murmansk was opened ● Export of the brand “Don” began ● A new department for processing and a boiler began operat
ing in St. Petersburg

SEPTEMBER ● The new “Don Originalnoye” (Original) beer was introduced ● A scheduled stage of reconstruction of Tulskoe Pivo Plant was accomplished, allowing an increase in the capacity of the plant up to 370 million liters of beer a year ● First batch of non
alcoholic beer in 0.5
liter aluminum cans was produced ● For the second time, Baltika became co
founder of the prize foundation for the Elena Obraztsova at the 2nd International Contest for Young Opera Singers ● Sales subdivisions in Astrakhan and Perm were opened ● The decision to build a plant in Khabarovsk was made ● Corporation
wide introduction of the system of electronic documentation circulation on the basis of Lotus Notes began

JUNE ● The Baltika Company participated in the 5th Beer Festival in St. Petersburg ● A new brewing department began operating at Baltika
Don Plant ● Baltika
Don Plant became the first company of the food industry in Rostov region which Quality System were certi
fied by the Gosstandart for the compliance with GOST R ISO 9001
96 ● Tulskoye Pivo Plant became the first company of the food

ANNUAL REPORT 2001

13

THE MAIN EVENTS IN THE LIFE OF THE COMPANY IN 2001

JANUARY ● “Don” Beer wins the “100 best Russian products” competi
tion in 2000 ● 36 cylindrical
conical tanks (CCT) began operating in St. Petersburg ● A new filtering line began operating in Rostov
on
Don FEBRUARY ● First batch of alcohol
free beer was produced ● A new line for filtering and weighing of malt began operat
ing at Baltika
Don Plant

●

●

industry in Tula region which Quality System were certified by the Gosstandart for compliance with GOST R ISO 9001
96 In St. Petersburg, the Baltika Company held its annual cer
emony for conferring the “Baltika Brewery Award for World
class Stars of the Musical Arts and Young Musicians,” with
in the framework of the 9th International Arts Festival “The Stars of the White Nights” First batch of the new premium
class “Parnassus” beer was produced

MARCH ● A new “Baltika No. 8 Pshenichnoye” (Wheat) beer was intro
duced to the market ● A new boiler was launched at Tulskoe pivo Plant ● Filtration line No. 2 in St. Petersburg was modernized ● Sales subdivisions in Vologda and Smolensk were opened ● Export of the brand “Arsenalnoye” began

JULY ● The decision to build a plant in Samara was made ● The Baltika Company participated in the 3rd Moscow Beer Festival ● First batch of “Don” beer in PET was produced ● Tulskoye Pivo Plant expanded and put into operation a new storehouse for ready products ● Sales subdivisions in Ulan
Ude and Khabarovsk were opened

APRIL ● A new line for packaging beer into aluminum cans began operating in St. Petersburg ● The Keraflux unit, lowering industrial losses of raw materi
als, began operating in St. Petersburg ● 27 CCT began operating at Tulskoye pivo Plant

AUGUST ● The Baltika trademark was the only brand representing Russia at the 5th International Beer Festival in Berlin ● “Arsenalnoye” Beer Celebration was held in Kaluga ● In Moscow, the MAKS
2001 International Air Show was held, and Baltika granted special prizes to the best participants

MAY ● A sales subdivision in Murmansk was opened ● Export of the brand “Don” began ● A new department for processing and a boiler began operat
ing in St. Petersburg

SEPTEMBER ● The new “Don Originalnoye” (Original) beer was introduced ● A scheduled stage of reconstruction of Tulskoe Pivo Plant was accomplished, allowing an increase in the capacity of the plant up to 370 million liters of beer a year ● First batch of non
alcoholic beer in 0.5
liter aluminum cans was produced ● For the second time, Baltika became co
founder of the prize foundation for the Elena Obraztsova at the 2nd International Contest for Young Opera Singers ● Sales subdivisions in Astrakhan and Perm were opened ● The decision to build a plant in Khabarovsk was made ● Corporation
wide introduction of the system of electronic documentation circulation on the basis of Lotus Notes began

JUNE ● The Baltika Company participated in the 5th Beer Festival in St. Petersburg ● A new brewing department began operating at Baltika
Don Plant ● Baltika
Don Plant became the first company of the food industry in Rostov region which Quality System were certi
fied by the Gosstandart for the compliance with GOST R ISO 9001
96 ● Tulskoye Pivo Plant became the first company of the food

ANNUAL REPORT 2001

13

THE MAIN EVENTS IN THE LIFE OF THE COMPANY IN 2001

OCTOBER ● First batch of “Don Yuzhnoye” (Southern) beer in 0.5
liter aluminum cans was produced ● First batch of “Arsenalnoye Traditsionnoye” (Traditional) beer in 0.5
liter aluminum cans was produced ● For the first time simultaneously in every subdivision of the Company, its staff was polled in order to gauge its satisfac
tion with various aspects (2,378 employees) ● The construction of the first section of a thermal
electric power station for meeting the needs of the Company and the Malthouse Soufflet in thermal and electric energy began in St. Petersburg

●

●

●

NOVEMBER ● For the first time in Russia two special beers (beer cock
tails) “Baltika Lemon” and “Baltika Cherry” were introduced ● Sales subdivision in Kemerovo was opened ● The Company initiated a movement “To the Health of the Nation!” ● The Federal Scientific Research Narcological Rehabilitation Center of the Ministry of Health of the Russian Federation (Moscow) carried out a series of tests of the “Baltika No. 0 Non
Alcoholic
Free ” beer, as a result of which it was assigned to the category of non
alcoholic beverages and can be consumed by people on duty in high
risk jobs DECEMBER ● The Baltika Company was named the leading company of Quality by the federal contest “100 best Russian products in 2001”, organized on the initiative of the Gosstandart of the Russian Federation and the social organization “Academy of Quality Issues” ● The Baltika Company became a winner in the All
Russian Contest “Best Russian Companies,” organized with support of the Government of the Russian Federation, in nomina
tions “For the most efficient utilization of all manufactur
ing resources” and “For an irreproachable business reputa
tion”. In addition, according to the results of the competi
tion, it was charted among 100 best companies in Russia ● All the beers of “Arsenalnoye” brand won in the “100 best Russian products” competition in 2001 ● “Baltika No. 3 Klassicheskoye” (Classic) was awarded the “Product of the Year” in the nomination “Beer”

●

●

Moscow hosted a “Baltika Beer Brewing Company Cup” hockey tour
nament. The best European players competed for the title of unofficial champion of the continent Baltika
Don Plant received a diplo
ma in the nomination category “Manufacture modernization” with
in the framework of the contest “Leader of the 21st century” among the companies of the Southern fed
eral region The Company acquired 700 new railroad freight wagons Tulskoye Pivo Plant began mounting a production line for packaging beer in aluminum cans In Tula the construction of a canteen for 180 persons and a cafeteria for 20 persons began

During the year 2001, over 15,000 people toured the Baltika (St. Petersburg) plant. Among them were: ■ Michael, Prince of Kent; ■ Minister of agriculture of the Russian Federation A. Gordeev; ■ General secretary of the Labor party of Korea Kim Chen Ir; ■ a delegacy of the consulate of South Africa, headed by the Consul General of South Africa Mochubela Jacob Seku; ■ Commission for foreign affairs of All
China Meeting of People’s Representatives headed by the vice
chairman of the Commission Sun Qingwei; ■ Vice
minister of industry, science and modern technologies of the Russian Federation S. Mitin; ■ Vice
manager of the Department of trade inspectorate of the Ministry of Economics of the Russian Federation N. Nazina; ■ a delegation of participants of the Russian
Chinese confer
ence on “Social reforms and market relationships. Problems and perspectives,” headed by the leader of the Development Study Center of the Government Council of China Sun Xiaxu: ■ Vice
chairman of the Gosstandart of the Russian Federation Yu. Gusakov.

ANNUAL REPORT 2001

15

THE MAIN EVENTS IN THE LIFE OF THE COMPANY IN 2001

OCTOBER ● First batch of “Don Yuzhnoye” (Southern) beer in 0.5
liter aluminum cans was produced ● First batch of “Arsenalnoye Traditsionnoye” (Traditional) beer in 0.5
liter aluminum cans was produced ● For the first time simultaneously in every subdivision of the Company, its staff was polled in order to gauge its satisfac
tion with various aspects (2,378 employees) ● The construction of the first section of a thermal
electric power station for meeting the needs of the Company and the Malthouse Soufflet in thermal and electric energy began in St. Petersburg

●

●

●

NOVEMBER ● For the first time in Russia two special beers (beer cock
tails) “Baltika Lemon” and “Baltika Cherry” were introduced ● Sales subdivision in Kemerovo was opened ● The Company initiated a movement “To the Health of the Nation!” ● The Federal Scientific Research Narcological Rehabilitation Center of the Ministry of Health of the Russian Federation (Moscow) carried out a series of tests of the “Baltika No. 0 Non
Alcoholic
Free ” beer, as a result of which it was assigned to the category of non
alcoholic beverages and can be consumed by people on duty in high
risk jobs DECEMBER ● The Baltika Company was named the leading company of Quality by the federal contest “100 best Russian products in 2001”, organized on the initiative of the Gosstandart of the Russian Federation and the social organization “Academy of Quality Issues” ● The Baltika Company became a winner in the All
Russian Contest “Best Russian Companies,” organized with support of the Government of the Russian Federation, in nomina
tions “For the most efficient utilization of all manufactur
ing resources” and “For an irreproachable business reputa
tion”. In addition, according to the results of the competi
tion, it was charted among 100 best companies in Russia ● All the beers of “Arsenalnoye” brand won in the “100 best Russian products” competition in 2001 ● “Baltika No. 3 Klassicheskoye” (Classic) was awarded the “Product of the Year” in the nomination “Beer”

●

●

Moscow hosted a “Baltika Beer Brewing Company Cup” hockey tour
nament. The best European players competed for the title of unofficial champion of the continent Baltika
Don Plant received a diplo
ma in the nomination category “Manufacture modernization” with
in the framework of the contest “Leader of the 21st century” among the companies of the Southern fed
eral region The Company acquired 700 new railroad freight wagons Tulskoye Pivo Plant began mounting a production line for packaging beer in aluminum cans In Tula the construction of a canteen for 180 persons and a cafeteria for 20 persons began

During the year 2001, over 15,000 people toured the Baltika (St. Petersburg) plant. Among them were: ■ Michael, Prince of Kent; ■ Minister of agriculture of the Russian Federation A. Gordeev; ■ General secretary of the Labor party of Korea Kim Chen Ir; ■ a delegacy of the consulate of South Africa, headed by the Consul General of South Africa Mochubela Jacob Seku; ■ Commission for foreign affairs of All
China Meeting of People’s Representatives headed by the vice
chairman of the Commission Sun Qingwei; ■ Vice
minister of industry, science and modern technologies of the Russian Federation S. Mitin; ■ Vice
manager of the Department of trade inspectorate of the Ministry of Economics of the Russian Federation N. Nazina; ■ a delegation of participants of the Russian
Chinese confer
ence on “Social reforms and market relationships. Problems and perspectives,” headed by the leader of the Development Study Center of the Government Council of China Sun Xiaxu: ■ Vice
chairman of the Gosstandart of the Russian Federation Yu. Gusakov.

ANNUAL REPORT 2001

15

MAIN RESULTS OF THE COMPANY ACTIVITY

In 2001 Baltika was still leading among Russian beer man
ufacturing companies. The volume of beer manufacture increased by more than 30 per cent in comparison to that of the year 2000. In the reported year, the Company realized the pre deter
mined plan and conquered 22.5 percent of the beer market. The total volume of sales in 2001 reached 14.006 million hec
toliters of beer, which was by 32 per cent more than the vol
ume of sales in 2000. Main indices of manufacture of the Company Index kind

Units

2000

2001

Growth, per cent

Production volumes Company beer coctails, soft drinks, mineral water

million hl 10.736 14.109 million hl

including: Baltika Brewery (St. Petersburg) beer million hl coctails, soft drinks, mineral water million hl Baltika
Don Brewery Plc. beer million hl soft drinks, mineral water million hl Tulskoye pivo Brewery* beer million hl oft drinks, mineral water million hl

31

0.039

0.040

3

7.763

8.624

11

0.032

0.036

13

1.403


2.060


47


1.570 0.007

3.425 0.004

118
43

14.006

32

7.900 2.163 2.898 1.045

16 10 146 56

0.033 7.2


11 33

Sales volumes Company beer million hl 10.629 including: «Baltika» million hl 6.822 «Medovoye» million hl 1.963 «Arsenalnoye» million hl 1.176 «Don» million hl 0.669 Coctails, soft drinks, mineral water million hl 0.037 Average number thousand persons 5.4 of employees per year

* The statistics for Tulskoe pivo Brewery are for the whole year 2000. In the GAAP financial reports Tulskoe pivo Brewery has been included in the Company’s structure since August 2000.

ANNUAL REPORT 2001

17

MAIN RESULTS OF THE COMPANY ACTIVITY

In 2001 Baltika was still leading among Russian beer man
ufacturing companies. The volume of beer manufacture increased by more than 30 per cent in comparison to that of the year 2000. In the reported year, the Company realized the pre deter
mined plan and conquered 22.5 percent of the beer market. The total volume of sales in 2001 reached 14.006 million hec
toliters of beer, which was by 32 per cent more than the vol
ume of sales in 2000. Main indices of manufacture of the Company Index kind

Units

2000

2001

Growth, per cent

Production volumes Company beer coctails, soft drinks, mineral water

million hl 10.736 14.109 million hl

including: Baltika Brewery (St. Petersburg) beer million hl coctails, soft drinks, mineral water million hl Baltika
Don Brewery Plc. beer million hl soft drinks, mineral water million hl Tulskoye pivo Brewery* beer million hl oft drinks, mineral water million hl

31

0.039

0.040

3

7.763

8.624

11

0.032

0.036

13

1.403


2.060


47


1.570 0.007

3.425 0.004

118
43

14.006

32

7.900 2.163 2.898 1.045

16 10 146 56

0.033 7.2


11 33

Sales volumes Company beer million hl 10.629 including: «Baltika» million hl 6.822 «Medovoye» million hl 1.963 «Arsenalnoye» million hl 1.176 «Don» million hl 0.669 Coctails, soft drinks, mineral water million hl 0.037 Average number thousand persons 5.4 of employees per year

* The statistics for Tulskoe pivo Brewery are for the whole year 2000. In the GAAP financial reports Tulskoe pivo Brewery has been included in the Company’s structure since August 2000.

ANNUAL REPORT 2001

17

COMPANY STRUCTURE

The Company consists of Baltika Brewery in St. Petersburg, Baltika
Don Brewery Plc. in Rostov
on
Don, Tulskoye pivo Brewery in Tula, plants under construction in Samara and Khabarovsk, as well as 21 sales subdivisions, including the trading company Baltika
Moscow Ltd. ZAO Malthouse Soufflet St. Petersburg is also a depended company. The brewery in St. Petersburg was established in 1990 and is now one of the largest beer producers in Europe (at one plant). Its annual production volume is 850 million liters. Baltika
Don Brewery Plc. is the largest brewery in the South of Russia; it joined the Company in January 1998. Tulskoye pivo Brewery is one of the largest breweries in Russia; it joined the Company in August 2000.

Baltika
Moscow Ltd. is a trade company which promotes the Company’s products in Moscow and Moscow Region. It was established by Baltika Brewery in March 1997. ZAO Malthouse Soufflet St. Petersburg is the largest malt production plant in Russia. It was put into operation by the joint efforts of Group Soufflet (France) and Baltika in 2000. The construction of plants in Samara and Khabarovsk began in 2001. Sales subdivisions of the Company are opened in twenty Russian cities.

MANUFACTURING AND SALES ENTERPRISES OF THE BALTIKA COMPANY

Baltika Brewery (St. Petersburg)

Tulskoye pivo Brewery (Tula)

Baltika
Don Brewery Plc. (Rostov
on
Don)

Brewery in Khabarovsk

ZAO Malthouse Soufflet St. Petersburg

Baltika
Moscow Ltd. (Moscow)

Sales subdivisions (20)

Brewery in Samara

ANNUAL REPORT 2001

19

COMPANY STRUCTURE

The Company consists of Baltika Brewery in St. Petersburg, Baltika
Don Brewery Plc. in Rostov
on
Don, Tulskoye pivo Brewery in Tula, plants under construction in Samara and Khabarovsk, as well as 21 sales subdivisions, including the trading company Baltika
Moscow Ltd. ZAO Malthouse Soufflet St. Petersburg is also a depended company. The brewery in St. Petersburg was established in 1990 and is now one of the largest beer producers in Europe (at one plant). Its annual production volume is 850 million liters. Baltika
Don Brewery Plc. is the largest brewery in the South of Russia; it joined the Company in January 1998. Tulskoye pivo Brewery is one of the largest breweries in Russia; it joined the Company in August 2000.

Baltika
Moscow Ltd. is a trade company which promotes the Company’s products in Moscow and Moscow Region. It was established by Baltika Brewery in March 1997. ZAO Malthouse Soufflet St. Petersburg is the largest malt production plant in Russia. It was put into operation by the joint efforts of Group Soufflet (France) and Baltika in 2000. The construction of plants in Samara and Khabarovsk began in 2001. Sales subdivisions of the Company are opened in twenty Russian cities.

MANUFACTURING AND SALES ENTERPRISES OF THE BALTIKA COMPANY

Baltika Brewery (St. Petersburg)

Tulskoye pivo Brewery (Tula)

Baltika
Don Brewery Plc. (Rostov
on
Don)

Brewery in Khabarovsk

ZAO Malthouse Soufflet St. Petersburg

Baltika
Moscow Ltd. (Moscow)

Sales subdivisions (20)

Brewery in Samara

ANNUAL REPORT 2001

19

THE COMPANY’S DEVELOPMENT

MANUFACTURE The year 2001 was a year of a dynamic development of the Company. Changes were made both in quality and in quantity. The former concerned the development of the production and scientific
technical basis of the Company. Changes in quanti
ty refer primarily to the expansion of the Company and an increase in its production potential. Total volume of the Company’s investments was $105 million, which is greater by 11 per cent than in 2000.

Investments in 1996
2001

To insure the steady growth of manufacture in 2001, the Company began realization of large
scale projects and pro
grams: the construction of new breweries in Samara and Khabarovsk and upgrading the power capacities of the plants in St. Petersburg, Rostov
on
Don and Tula. In the fall of 2001, the Company began construction of two new beer
brewing plants in Samara and Khabarovsk. This will allow the Company to strengthen its positions in Central Russia and the Far East. The scheduled capacity of each plant is 1 million hectoltres of beer per year. The strategy for developing the Company’s capacity implies that the new plants will stand on an equal footing with the existing ones. This will be achieved by implementing a single technical policy, by which the Company opts for time
tested equipment and contractors, providing high
quality work. The total amount of the Company’s investments into new plants in 2001 was $2 million. Because of the continually growing volume of railroad transportation, and in order to become independent from the Ministry of Railroad Transport, the Company decided to

acquire its own railroad freight wagons. In the reported year, Baltika acquired 700 new railroad freight wagons for $11.4 million. In 2001, in order to increase the quality of its products, upgrade its technical and manufacturing basis, as well as to increase the capacity of its plants, the Company realized a number of investment projects. Below are listed the most important of those. ● Baltika (St. Petersburg)
mounting and startup of a new nine
ton boiler with a capac
ity of twelve brews a day;
mounting of 36 new cylindrical
conical tanks (CCT);
mounting and startup of a line for production of non
alco
holic beer with a capacity of 6,000 liters/hour;
introduction of a line for packaging in aluminum cans with a capacity of 60 thousand cans/hour;
mounting of a bottling block and a bottle
washer with a capacity of 60 thousand bottle/hour;
introduction of a new pre
processing department;
modernization of the water
preparation department;
mounting and startup the Keraflux unit, minimizing the loss
es of raw materials during production;
acquiring and mounting of the new Westphalia separator. The total amount of Company’s investments into the Baltika plant (St. Petersburg) in 2001 was $59 million Baltika
Don
mounting of a new nine
ton boiler with a capacity of twelve brews a day;
mounting and startup of a polyethylene bottle production line with a capacity of 20 thousand bottles/hour;
mounting and startup of 14 CCT and 4 forefaces;
mounting of a new filtering line;
modernization of the pre
processing department of the brew
ery;
reconstruction of the water preparation department;
introduction of a line for thermal packaging of battles with beer. ●

The total amount of Company’s investments into the Baltika
Don plant in 2001 was $20 million.

ANNUAL REPORT 2001

21

THE COMPANY’S DEVELOPMENT

MANUFACTURE The year 2001 was a year of a dynamic development of the Company. Changes were made both in quality and in quantity. The former concerned the development of the production and scientific
technical basis of the Company. Changes in quanti
ty refer primarily to the expansion of the Company and an increase in its production potential. Total volume of the Company’s investments was $105 million, which is greater by 11 per cent than in 2000.

Investments in 1996
2001

To insure the steady growth of manufacture in 2001, the Company began realization of large
scale projects and pro
grams: the construction of new breweries in Samara and Khabarovsk and upgrading the power capacities of the plants in St. Petersburg, Rostov
on
Don and Tula. In the fall of 2001, the Company began construction of two new beer
brewing plants in Samara and Khabarovsk. This will allow the Company to strengthen its positions in Central Russia and the Far East. The scheduled capacity of each plant is 1 million hectoltres of beer per year. The strategy for developing the Company’s capacity implies that the new plants will stand on an equal footing with the existing ones. This will be achieved by implementing a single technical policy, by which the Company opts for time
tested equipment and contractors, providing high
quality work. The total amount of the Company’s investments into new plants in 2001 was $2 million. Because of the continually growing volume of railroad transportation, and in order to become independent from the Ministry of Railroad Transport, the Company decided to

acquire its own railroad freight wagons. In the reported year, Baltika acquired 700 new railroad freight wagons for $11.4 million. In 2001, in order to increase the quality of its products, upgrade its technical and manufacturing basis, as well as to increase the capacity of its plants, the Company realized a number of investment projects. Below are listed the most important of those. ● Baltika (St. Petersburg)
mounting and startup of a new nine
ton boiler with a capac
ity of twelve brews a day;
mounting of 36 new cylindrical
conical tanks (CCT);
mounting and startup of a line for production of non
alco
holic beer with a capacity of 6,000 liters/hour;
introduction of a line for packaging in aluminum cans with a capacity of 60 thousand cans/hour;
mounting of a bottling block and a bottle
washer with a capacity of 60 thousand bottle/hour;
introduction of a new pre
processing department;
modernization of the water
preparation department;
mounting and startup the Keraflux unit, minimizing the loss
es of raw materials during production;
acquiring and mounting of the new Westphalia separator. The total amount of Company’s investments into the Baltika plant (St. Petersburg) in 2001 was $59 million Baltika
Don
mounting of a new nine
ton boiler with a capacity of twelve brews a day;
mounting and startup of a polyethylene bottle production line with a capacity of 20 thousand bottles/hour;
mounting and startup of 14 CCT and 4 forefaces;
mounting of a new filtering line;
modernization of the pre
processing department of the brew
ery;
reconstruction of the water preparation department;
introduction of a line for thermal packaging of battles with beer. ●

The total amount of Company’s investments into the Baltika
Don plant in 2001 was $20 million.

ANNUAL REPORT 2001

21

THE COMPANY’S DEVELOPMENT

SALES Tulskoye Pivo
mounting of a new nine
ton boiler and a wort cooler;
mounting of 27 new CCT for beer fermenting and yeast col
lectors;
mounting of six forefaces;
modernization of the filtering line;
modernization of the pre
processing department of the brew
ery. ●

The total amount of Company’s investments into the Tulskoye Pivo Plant in 2001 was $24 million. During the project design of the implementation of new equipment and modernization of old equipment, a great amount of attention was paid not only to increasing the over
all capacity of the Company, but also to insuring the safety of labor, as well as to lowering of expenses for beer production.

FINANCING SOURCES OF INVESTMENTS Investments at the head company in St. Petersburg and the affiliate company in Tula were made using the Company’s own funds. This was achieved due to:
growth of the volumes of manufacture and sales;
maintaining a stable level of profitability of sales. Seventy per cent of investments at the Rostov
on
Don plant were financed from the company’s own sources, the other 30 per cent were made due to internal loans of the head Company. As a result
all investment program of the Company in 2001 ($105 million) was accomplished using the Company’s own profits. The Company used certain loans to cover routine cashier breaks over the course of the year. Main Company’s banks
counteragents are the largest banks of Russia
Sberbank of the Russian Federation, JSC KB Menatep St. Petersburg, JSC PSB, as well as the local branches of the largest international banks
Dresdner Bank, Citi Bank, Credit Lione Rusbank, and ABN
AMRO Bank. Irreproachable credit history of the Company, stable finan
cial results have created a positive credit rating of the Company, which allowed for getting credits with the minimal

22

ANNUAL REPORT 2001

for the Russian market interest
bearing rates. The Baltika Company took the 1st place in the nomina
tion “The Best Investor in St. Petersburg” of the competi
tion “The Best International Project of the Year”.

The primary goal of the Company within the framework of its main strategy is to increase the share on the Russian beer market. To reach this goal, the Company had to expand its dis
tribution network. Eight new sales subdivisions were opened in Vologda, Smolensk, Murmansk, Khabarovsk, Ulan
Ude, Astrakhan, Kemerovo and Perm in 2001. At the end of the reported year, Baltika had 21 sales subdivisions with over 1,100 employees. The year 2001 resulted in strengthening of the positions of the Company’s sales subdivisions on the beer market in the regions. The volume of sales in the reported year grew significantly in comparison to the year 2000:
in sales subdivisions
by 64 per cent;
in stores
by 29 per cent;
in beer
on
tap sales
by 32 per cent.

COMPANY’S REORGANIZATION In the middle of 2001, the Company began its reorganiza
tion by joining Baltika
Don Brewery Plc. and Tulskoye pivo Brewery to Baltika Brewery. The primary goals of the consolidation are:
strengthening the positions of the consolidated Company on the Russian beer market, as well as on international beer markets;
optimization of management of the Company by centraliz
ing basic management functions of the Company, excluding duplicated functions, and cutting down administrative expenses;
carrying out common marketing and advertising policies;
increasing profits and product manufacture volumes;
increasing the investment attractiveness of the consolidat
ed Company on the market of credits and capitals;
implementing a single social policy in the Company, aimed at meeting the needs of the personnel at a maximum rate.

The total amount of Company’s investments into the development of the sales system in 2001 was $20 million.

DISTRIBUTION MAP

After reorganization, the affiliate stock holding companies will become the branches of a united Company
the Baltika Company, and the stockholders of Baltika
Don Brewery Plc. and Tulskoye pivo Brewery will become the stockholders of the Baltika Company by obtaining its stocks. After finishing the consolidation, a significant raise of val
ues of stocks of the new Company is foreseen, due to the join
ing of the three companies and increasing of the investment attractiveness of Baltika. By joining two profitable companies, the total profit grows respectively, and it can be put into pay
ing the dividends on stocks of Baltika Brewery. Finishing reorganization of the Company is scheduled for the second quarter of 2002.

ANNUAL REPORT 2001

23

THE COMPANY’S DEVELOPMENT

SALES Tulskoye Pivo
mounting of a new nine
ton boiler and a wort cooler;
mounting of 27 new CCT for beer fermenting and yeast col
lectors;
mounting of six forefaces;
modernization of the filtering line;
modernization of the pre
processing department of the brew
ery. ●

The total amount of Company’s investments into the Tulskoye Pivo Plant in 2001 was $24 million. During the project design of the implementation of new equipment and modernization of old equipment, a great amount of attention was paid not only to increasing the over
all capacity of the Company, but also to insuring the safety of labor, as well as to lowering of expenses for beer production.

FINANCING SOURCES OF INVESTMENTS Investments at the head company in St. Petersburg and the affiliate company in Tula were made using the Company’s own funds. This was achieved due to:
growth of the volumes of manufacture and sales;
maintaining a stable level of profitability of sales. Seventy per cent of investments at the Rostov
on
Don plant were financed from the company’s own sources, the other 30 per cent were made due to internal loans of the head Company. As a result
all investment program of the Company in 2001 ($105 million) was accomplished using the Company’s own profits. The Company used certain loans to cover routine cashier breaks over the course of the year. Main Company’s banks
counteragents are the largest banks of Russia
Sberbank of the Russian Federation, JSC KB Menatep St. Petersburg, JSC PSB, as well as the local branches of the largest international banks
Dresdner Bank, Citi Bank, Credit Lione Rusbank, and ABN
AMRO Bank. Irreproachable credit history of the Company, stable finan
cial results have created a positive credit rating of the Company, which allowed for getting credits with the minimal

22

ANNUAL REPORT 2001

for the Russian market interest
bearing rates. The Baltika Company took the 1st place in the nomina
tion “The Best Investor in St. Petersburg” of the competi
tion “The Best International Project of the Year”.

The primary goal of the Company within the framework of its main strategy is to increase the share on the Russian beer market. To reach this goal, the Company had to expand its dis
tribution network. Eight new sales subdivisions were opened in Vologda, Smolensk, Murmansk, Khabarovsk, Ulan
Ude, Astrakhan, Kemerovo and Perm in 2001. At the end of the reported year, Baltika had 21 sales subdivisions with over 1,100 employees. The year 2001 resulted in strengthening of the positions of the Company’s sales subdivisions on the beer market in the regions. The volume of sales in the reported year grew significantly in comparison to the year 2000:
in sales subdivisions
by 64 per cent;
in stores
by 29 per cent;
in beer
on
tap sales
by 32 per cent.

COMPANY’S REORGANIZATION In the middle of 2001, the Company began its reorganiza
tion by joining Baltika
Don Brewery Plc. and Tulskoye pivo Brewery to Baltika Brewery. The primary goals of the consolidation are:
strengthening the positions of the consolidated Company on the Russian beer market, as well as on international beer markets;
optimization of management of the Company by centraliz
ing basic management functions of the Company, excluding duplicated functions, and cutting down administrative expenses;
carrying out common marketing and advertising policies;
increasing profits and product manufacture volumes;
increasing the investment attractiveness of the consolidat
ed Company on the market of credits and capitals;
implementing a single social policy in the Company, aimed at meeting the needs of the personnel at a maximum rate.

The total amount of Company’s investments into the development of the sales system in 2001 was $20 million.

DISTRIBUTION MAP

After reorganization, the affiliate stock holding companies will become the branches of a united Company
the Baltika Company, and the stockholders of Baltika
Don Brewery Plc. and Tulskoye pivo Brewery will become the stockholders of the Baltika Company by obtaining its stocks. After finishing the consolidation, a significant raise of val
ues of stocks of the new Company is foreseen, due to the join
ing of the three companies and increasing of the investment attractiveness of Baltika. By joining two profitable companies, the total profit grows respectively, and it can be put into pay
ing the dividends on stocks of Baltika Brewery. Finishing reorganization of the Company is scheduled for the second quarter of 2002.

ANNUAL REPORT 2001

23

THE COMPANY’S DEVELOPMENT

EXPORT In July 2001, the Company’s export division was separated and headed by an Export Director. The volume of the products of Baltika Brewery exported in 2001 was 410 thousand hecto
liters, which exceeds the same index of the previous year by 4 times (106 thousand hl). The share of export sales in the total volume of sales of the Company was 3 per cent (in 2000 this index read 1 per cent). The range of the exported products was notably widened; the products of affiliate companies also began to be exported. During the reported year we widened the geographical range of export sales. The volume of sales of the products to

the CIS countries in 2001 grew by 4.6 times in comparison to 2000; the worldwide index grew by 1.5 times. Beer export in 2000
2001 (by brands)

BEER EXPORT MAP

DEVELOPING A BASIS FOR PRODUCT QUALITY CONTROL In order to maintain the high quality of beer, it is neces
sary to analyze thoroughly the manufactured products and undertake beer researches. For this reason, in 2001 the Testing laboratory was completely reconstructed; new research departments were opened, such as a sensor analysis laborato


ry, a laboratory for scientific
technical developments, and a laboratory for auxiliary materials. New research branches were mastered, aimed at the in
depth study of beer, increasing its quality, as well as modernizing beer production technologies. To develop further and improve technologies for producing

ANNUAL REPORT 2001

25

THE COMPANY’S DEVELOPMENT

EXPORT In July 2001, the Company’s export division was separated and headed by an Export Director. The volume of the products of Baltika Brewery exported in 2001 was 410 thousand hecto
liters, which exceeds the same index of the previous year by 4 times (106 thousand hl). The share of export sales in the total volume of sales of the Company was 3 per cent (in 2000 this index read 1 per cent). The range of the exported products was notably widened; the products of affiliate companies also began to be exported. During the reported year we widened the geographical range of export sales. The volume of sales of the products to

the CIS countries in 2001 grew by 4.6 times in comparison to 2000; the worldwide index grew by 1.5 times. Beer export in 2000
2001 (by brands)

BEER EXPORT MAP

DEVELOPING A BASIS FOR PRODUCT QUALITY CONTROL In order to maintain the high quality of beer, it is neces
sary to analyze thoroughly the manufactured products and undertake beer researches. For this reason, in 2001 the Testing laboratory was completely reconstructed; new research departments were opened, such as a sensor analysis laborato


ry, a laboratory for scientific
technical developments, and a laboratory for auxiliary materials. New research branches were mastered, aimed at the in
depth study of beer, increasing its quality, as well as modernizing beer production technologies. To develop further and improve technologies for producing

ANNUAL REPORT 2001

25

THE COMPANY’S DEVELOPMENT

new brands of beer, and to imitate new technological devices in beer production, the company acquired a mini
plant, the startup of which is scheduled for the beginning of 2002.

INFORMATION TECHNOLOGIES During the year 2001, the Company actively promoted the development of information technologies. We maintained our partnership with leading Russian and international compa
nies, such as Compaq, IBM, Lexmark, Nienshants, IT, Monolith
Info and others. The main results of this promotion were a significant rise of the number of automated workplaces in the Company, as well as improvement of the information and communication lines between Baltika (St. Petersburg), its affiliate companies and sales subdivisions.

QUALITY MANAGEMENT SYSTEM Relying on the positive experience of the head Company’s plant in St. Petersburg, in 2001 Quality management systems in the affiliate companies in Tula and Rostov
on
Don were developed, introduced and certified by the Gosstandart of the Russian Federation, complying with the requirements of the Russian GOST R ISO 9001
96 Standard. In 2001, the Quality Management system at the head plant in St. Petersburg passed successfully four inspections by cer
tifying organizations: the Gosstandart of the Russian Federation, Center for testing and certifications St. Peterburg (Test
St. Peterburg), Russian Maritime Register of Shipping, and twice by Lloyd’s Register Quality Assurance (Great Britain). These organizations confirmed the compliance of the Company’s Quality System with the requirements of the Russian GOST R ISO 9001
96 standard and the international ISO 9001
94 standard. In addition to this, certified internal auditors carried out 208 inspections of observance of the requirement of the Quality management system in all Company departments. Responding to the publication in 2000 of the 3rd edition of the international standard of the ISO 9000 series, which dif
fers from the 1994 edition not only in terms of a new

“process” approach to management, but in generally extend
ed requirements, the Quality System adopted its new name
the Quality management system. The International Standards Organization and the Gosstandart of the Russian Federation made the decision of undergoing certification (voluntary) for compliance to the new requirements. The Company’s manage
ment made the decision to acknowledge the new approach to the management and to prepare for certification. In 2001, the Company began preparations for the re
certi
fication of the Quality system. A thorough examination of the requirements of the international ISO 9001
2000 Standard “Quality management systems. Requirements” was carried out together with the board of directors, managers of the depart
ments, internal auditors and the Quality system representa
tives. In developing new requirements of the standard, the mission and strategy of the Company, the main demands of the consumer, conditions for successful business, basic busi
ness strategies and values of the Company were clarified. A new method for the “process” approach was also developed, and so on. Re
certification of the Quality System is scheduled for October 2002.

ENVIRONMENT PROTECTION While developing, the Company pays an increasing atten
tion to protecting the environment. In 2001, in the interests of taking measures for lowering its harmful effects on the environment, the Company mounted a new system for collect
ing and removing brewing wastes. Investments into this proj
ect was $0.2 million. The Keraflux unit for lowering yeast humidity was put in exploitation. The contractor was the German Company Seitz Schenk Filtersystems Gmbh. Amount of investments was $1.5 million. In 2001, the Company signed a contract with Danbrew. This company specializes in assistance for projects for estimating the quality of wastes of breweries. This will allow to undertake preliminary steps for carrying out such tasks as the recon
struction of the kieselguhr’s collector, neutralization of wash
ing solutions and lowering the aluminum content in the tubs of bottle
washing machines, and mounting the system for fil
tering the waste from the water purification station.

ANNUAL REPORT 2001

27

THE COMPANY’S DEVELOPMENT

new brands of beer, and to imitate new technological devices in beer production, the company acquired a mini
plant, the startup of which is scheduled for the beginning of 2002.

INFORMATION TECHNOLOGIES During the year 2001, the Company actively promoted the development of information technologies. We maintained our partnership with leading Russian and international compa
nies, such as Compaq, IBM, Lexmark, Nienshants, IT, Monolith
Info and others. The main results of this promotion were a significant rise of the number of automated workplaces in the Company, as well as improvement of the information and communication lines between Baltika (St. Petersburg), its affiliate companies and sales subdivisions.

QUALITY MANAGEMENT SYSTEM Relying on the positive experience of the head Company’s plant in St. Petersburg, in 2001 Quality management systems in the affiliate companies in Tula and Rostov
on
Don were developed, introduced and certified by the Gosstandart of the Russian Federation, complying with the requirements of the Russian GOST R ISO 9001
96 Standard. In 2001, the Quality Management system at the head plant in St. Petersburg passed successfully four inspections by cer
tifying organizations: the Gosstandart of the Russian Federation, Center for testing and certifications St. Peterburg (Test
St. Peterburg), Russian Maritime Register of Shipping, and twice by Lloyd’s Register Quality Assurance (Great Britain). These organizations confirmed the compliance of the Company’s Quality System with the requirements of the Russian GOST R ISO 9001
96 standard and the international ISO 9001
94 standard. In addition to this, certified internal auditors carried out 208 inspections of observance of the requirement of the Quality management system in all Company departments. Responding to the publication in 2000 of the 3rd edition of the international standard of the ISO 9000 series, which dif
fers from the 1994 edition not only in terms of a new

“process” approach to management, but in generally extend
ed requirements, the Quality System adopted its new name
the Quality management system. The International Standards Organization and the Gosstandart of the Russian Federation made the decision of undergoing certification (voluntary) for compliance to the new requirements. The Company’s manage
ment made the decision to acknowledge the new approach to the management and to prepare for certification. In 2001, the Company began preparations for the re
certi
fication of the Quality system. A thorough examination of the requirements of the international ISO 9001
2000 Standard “Quality management systems. Requirements” was carried out together with the board of directors, managers of the depart
ments, internal auditors and the Quality system representa
tives. In developing new requirements of the standard, the mission and strategy of the Company, the main demands of the consumer, conditions for successful business, basic busi
ness strategies and values of the Company were clarified. A new method for the “process” approach was also developed, and so on. Re
certification of the Quality System is scheduled for October 2002.

ENVIRONMENT PROTECTION While developing, the Company pays an increasing atten
tion to protecting the environment. In 2001, in the interests of taking measures for lowering its harmful effects on the environment, the Company mounted a new system for collect
ing and removing brewing wastes. Investments into this proj
ect was $0.2 million. The Keraflux unit for lowering yeast humidity was put in exploitation. The contractor was the German Company Seitz Schenk Filtersystems Gmbh. Amount of investments was $1.5 million. In 2001, the Company signed a contract with Danbrew. This company specializes in assistance for projects for estimating the quality of wastes of breweries. This will allow to undertake preliminary steps for carrying out such tasks as the recon
struction of the kieselguhr’s collector, neutralization of wash
ing solutions and lowering the aluminum content in the tubs of bottle
washing machines, and mounting the system for fil
tering the waste from the water purification station.

ANNUAL REPORT 2001

27

SOCIAL RESPONSIBILITY OF THE COMPANY

COMPANY’S STAFF Contemporary experience has shown that dynamic devel
opment, high competition potential and fulfillment of all pre
determined tasks is impossible without continual upgrading of business and professional qualities of personnel, attracting new qualified staff, and enhancing the high motivation of employees. In accordance with its mission statement, Baltika pays much attention to raising the social status of Company’s personnel, its development and training.

The Company’s personnel distribution chart (as of December 31, 2001)

Development of the Company results in the growth of the number of employees. In the reported year, the number of employees grew at the plant in St. Petersburg, as well as at the affiliate companies and at the marketing subdivisions.

Total number of the Company’s personnel in 1997
2001 (as of December 31, 2001)

ANNUAL REPORT 2001

29

SOCIAL RESPONSIBILITY OF THE COMPANY

COMPANY’S STAFF Contemporary experience has shown that dynamic devel
opment, high competition potential and fulfillment of all pre
determined tasks is impossible without continual upgrading of business and professional qualities of personnel, attracting new qualified staff, and enhancing the high motivation of employees. In accordance with its mission statement, Baltika pays much attention to raising the social status of Company’s personnel, its development and training.

The Company’s personnel distribution chart (as of December 31, 2001)

Development of the Company results in the growth of the number of employees. In the reported year, the number of employees grew at the plant in St. Petersburg, as well as at the affiliate companies and at the marketing subdivisions.

Total number of the Company’s personnel in 1997
2001 (as of December 31, 2001)

ANNUAL REPORT 2001

29

SOCIAL RESPONSIBILITY OF THE COMPANY

The staff policy of the Company was implemented in three main directions:

1,600 employees received professional training at the plant. The expenses for education and training grow annually.

Selection and training of the staff On
going recruitment among the best students of profile institutions for employment in the Company.

Monitoring personnel’s satisfaction and developing a cor
porate spirit In order to heighten professional skills, implement experi
ence exchange and develop corporate spirit, a personnel rota
tion program was put into operation. An exchange between employees from Baltika, Baltika
Don and Tulskoye pivo took place. In the fall of 2001, for the first time the Company organ
ized a poll among all the employees at each plant and sales subdivision of the Company. 2 378 employees participated in the poll. The 2001 poll showed, that 88 per cent of the staff were proud of working for the Company, over 90 per cent were sure that the Company would keep succeeding in the future. This kind of reliance of the personnel on its strength and the potential of the Company is the key to stability and success of any corporation. The results of the poll allowed to compare the results not only between the Company’s plants, but also between single Administrations.

Educating and developing personnel Several primary guidelines in education and training have been selected for the subsequent full centralization:
management and leadership;
sales, merchandising, sales management;
personnel management;
corporate information systems. In the course of the last year, we negotiated with Moscow State University for Food Manufacturers and St. Petersburg State University for Low Temperature Food Technologies on the topic of creation of a Russian National Brewing School and profile training (re
training) of employees, specialists and managers of subdivisions. We continued to cooperate with international brewing schools in training the Company’s specialists. In joint cooper
ation with Orkla Brand School (Norway), we developed a spe
cial program for marketing and managing the brand, within the framework of which a number of specialists of the market
ing department have studied (and some are still studying). In addition, brewing and bottling technology specialists from Sweden have been invited to instruct Baltika’s employees. Over 500 employees participated in various seminars, training programs and conferences in 2001. Additionally, over

Expenses for educating the Company’s employees in 1999
2001

SOCIAL PROGRAMS One of the Company’s priorities is constant care of height
ening the social status of its employees, of their health, leisure and quality of life. The Company’s staff salaries were raised by 45 per cent in 2001. The Company still offered free meals for the night shift, partial reimbursement of food and transportation expenses, organized free buss shuttle from and to the subway stations, reimbursed half of the costs of vacations for the employees and their children. The Company spent over 1 million rubles for sponsoring the vacations for the personnel in 2001. The Company organizes various site
seeing tours to other cities (Novgorod, Vyborg, Pushkin, and so on). The most pop
ular are the tours to the palaces of St. Petersburg. Over the course of less than half a year, around 1,300 of Baltika’s employees took various sightseeing tours. In 2001, the Company organized two trips for 150 employ
ees to Moscow (for the Great Beer Festival and the final game of the international ice
hockey tournament “The Baltika

Brewery Cup”), as well as a New Year cele
bration for 106 employees at St. Petersburg suburb resorts. At Baltika (St. Petersburg) we have several sport clubs for mini
soccer, volleyball, basketball, ping
pong, athletic gymnastics, and aerobics.

PARTICIPATION IN BEER FESTIVALS Since 1997, St. Petersburg, a city truly considered the beer capital of Russia, has been gathering brewers and beer enthu
siasts from all over the country at beer festival. In June 2001, this highly popular celebration took place in beautiful squares and thoroughfares of the city on the Neva
St. Petersburg. The colorful parade of the participants along Nevsky prospect was lead by the most numerous group representing Baltika Brewery. The grand opening of the festival began with the speech of the governor of St. Petersburg. On an impro
vised stage by the Bronze Horseman, Baltika and a radio sta
tion with the same name organized a live concert featuring popular performers, and a contest with prizes. Along the embankment, Baltika’s marquees and tents were built where everyone could enjoy his favorite beer. Over 27,000 liters of Baltika beer was consumed during this day. The total number of visitors of the beer festival in St. Petersburg exceeded 500,000 people. In July, Moscow hosted the 3rd beer festival, where the best breweries from Moscow participated. Three Company’s plants
Baltika (St. Petersburg), Baltika
Don and Tulskoye pivo
represented the other regions of Russia. During the people’s beer tasting that was organized within the framework of the festival, “Baltika No. 3 Klassicheskoye” (Classic) beer won the first prize in the “People’s Brand” nomination. ”Baltika No. 0 Non
Alcoholic” was the best alcohol
free beer. In the nomination “Best Beer from Russian Regions” “Arsenalnoye Traditsionnoye” (Traditional) manufactured by Tulskoye pivo Brewery took the first place, “Don Yuzhnoye” (Southern) took the second, and in the nomination “Best Dark Beer” “Arsenalnoye Temnoye” (Dark) took the third place.

ANNUAL REPORT 2001

31

SOCIAL RESPONSIBILITY OF THE COMPANY

The staff policy of the Company was implemented in three main directions:

1,600 employees received professional training at the plant. The expenses for education and training grow annually.

Selection and training of the staff On
going recruitment among the best students of profile institutions for employment in the Company.

Monitoring personnel’s satisfaction and developing a cor
porate spirit In order to heighten professional skills, implement experi
ence exchange and develop corporate spirit, a personnel rota
tion program was put into operation. An exchange between employees from Baltika, Baltika
Don and Tulskoye pivo took place. In the fall of 2001, for the first time the Company organ
ized a poll among all the employees at each plant and sales subdivision of the Company. 2 378 employees participated in the poll. The 2001 poll showed, that 88 per cent of the staff were proud of working for the Company, over 90 per cent were sure that the Company would keep succeeding in the future. This kind of reliance of the personnel on its strength and the potential of the Company is the key to stability and success of any corporation. The results of the poll allowed to compare the results not only between the Company’s plants, but also between single Administrations.

Educating and developing personnel Several primary guidelines in education and training have been selected for the subsequent full centralization:
management and leadership;
sales, merchandising, sales management;
personnel management;
corporate information systems. In the course of the last year, we negotiated with Moscow State University for Food Manufacturers and St. Petersburg State University for Low Temperature Food Technologies on the topic of creation of a Russian National Brewing School and profile training (re
training) of employees, specialists and managers of subdivisions. We continued to cooperate with international brewing schools in training the Company’s specialists. In joint cooper
ation with Orkla Brand School (Norway), we developed a spe
cial program for marketing and managing the brand, within the framework of which a number of specialists of the market
ing department have studied (and some are still studying). In addition, brewing and bottling technology specialists from Sweden have been invited to instruct Baltika’s employees. Over 500 employees participated in various seminars, training programs and conferences in 2001. Additionally, over

Expenses for educating the Company’s employees in 1999
2001

SOCIAL PROGRAMS One of the Company’s priorities is constant care of height
ening the social status of its employees, of their health, leisure and quality of life. The Company’s staff salaries were raised by 45 per cent in 2001. The Company still offered free meals for the night shift, partial reimbursement of food and transportation expenses, organized free buss shuttle from and to the subway stations, reimbursed half of the costs of vacations for the employees and their children. The Company spent over 1 million rubles for sponsoring the vacations for the personnel in 2001. The Company organizes various site
seeing tours to other cities (Novgorod, Vyborg, Pushkin, and so on). The most pop
ular are the tours to the palaces of St. Petersburg. Over the course of less than half a year, around 1,300 of Baltika’s employees took various sightseeing tours. In 2001, the Company organized two trips for 150 employ
ees to Moscow (for the Great Beer Festival and the final game of the international ice
hockey tournament “The Baltika

Brewery Cup”), as well as a New Year cele
bration for 106 employees at St. Petersburg suburb resorts. At Baltika (St. Petersburg) we have several sport clubs for mini
soccer, volleyball, basketball, ping
pong, athletic gymnastics, and aerobics.

PARTICIPATION IN BEER FESTIVALS Since 1997, St. Petersburg, a city truly considered the beer capital of Russia, has been gathering brewers and beer enthu
siasts from all over the country at beer festival. In June 2001, this highly popular celebration took place in beautiful squares and thoroughfares of the city on the Neva
St. Petersburg. The colorful parade of the participants along Nevsky prospect was lead by the most numerous group representing Baltika Brewery. The grand opening of the festival began with the speech of the governor of St. Petersburg. On an impro
vised stage by the Bronze Horseman, Baltika and a radio sta
tion with the same name organized a live concert featuring popular performers, and a contest with prizes. Along the embankment, Baltika’s marquees and tents were built where everyone could enjoy his favorite beer. Over 27,000 liters of Baltika beer was consumed during this day. The total number of visitors of the beer festival in St. Petersburg exceeded 500,000 people. In July, Moscow hosted the 3rd beer festival, where the best breweries from Moscow participated. Three Company’s plants
Baltika (St. Petersburg), Baltika
Don and Tulskoye pivo
represented the other regions of Russia. During the people’s beer tasting that was organized within the framework of the festival, “Baltika No. 3 Klassicheskoye” (Classic) beer won the first prize in the “People’s Brand” nomination. ”Baltika No. 0 Non
Alcoholic” was the best alcohol
free beer. In the nomination “Best Beer from Russian Regions” “Arsenalnoye Traditsionnoye” (Traditional) manufactured by Tulskoye pivo Brewery took the first place, “Don Yuzhnoye” (Southern) took the second, and in the nomination “Best Dark Beer” “Arsenalnoye Temnoye” (Dark) took the third place.

ANNUAL REPORT 2001

31

SOCIAL RESPONSIBILITY OF THE COMPANY

In August 2001, the Baltika Company was the only domes
tic enterprise representing Russia at the Fifth International Beer Festival in Berlin, in which the largest European manu
factures participated.

CHARITY AND SPONSORSHIP Year by year the Baltika Company had been involved in charity and sponsorship activities, proving its status of a social Company. Traditionally, Baltika pays much attention to culture and arts. In June 2001, on the Palace Square, within the framework of the 9th International Arts Festival “The Stars of the White Nights”, for the fifth time running the ceremony of conferring the “Baltika Company Award for World
class Stars of the Musical Arts and Young Musicians” took place. The famous tenor Placido Domingo, the Director of the State Hermitage Mikhail Piotrovsky, the Art Director of Mariinsky Theater Valerij Gergiev and the President of the Baltika Company Taimuraz Bolloev granted the laureates with diplomas, honor
able silver medals and cash awards. The total amount of the Prize was $50,000. The laureates of the Grant
prix were Uliana Lopatkina and Yuri Bashmet. Since the establishing of the Prize, twenty
three honored artists have become its laureates. In 2001, with the support of the Baltika Company Oktyabrskij Concert Hall conducted the second concert of the “Music from A to Z” series for schoolchildren, at which kids got acquainted with the wonderful world of music. Children found out about musical genres, musical instruments and voices, and the history of music, as well as contemporary styles. Baltika also supports theaters
G.Tovstonogov Great Academic Drama Theater, House of Humor and Satire, and the Saint
Petersburg
Opera Theater. Additionally, the Company supports film studios by financing movie shootings and festivals. National sport also receives financial support from the Baltika. In October, the Company participated in organizing the International Tennis Tournament “St. Petersburg Open 2001”, featuring the world’s most famous tennis stars. In December 2001, Moscow hosted the 34th International Ice Hockey Tournament. For five years Baltika Company has been

sponsoring this tournament Baltika took all financial obligations of the “Baltika” vol
leyball team (former “Avtomobilist”), and helps the St. Petersburg buggy
racing team “Neva
Ring”, supports international contests on short
track, the world’s equestrian sports championship and other sports events. Baltika patronizes Orphanage No. 8 in Vyborgskiy district of St. Petersburg. In 2001, the Company helped the Soldiers
Invalids Rehabilitation Center; this help was for the Russian soldiers wounded in battles. At the end of 2001, Baltika participated in an action organ
ized in Chechen republic by Federal Security Bureau of St. Petersburg and Leningrad Region. The organizers acquired medical equipment for the hospitals, equipment for schools and regional authority offices etc. The Company supports hospitals, museums, schools and universities, sponsors church renovation and cultural monu
ment restoration activities. In 2001, the Company spent over 40 million rubles for charity and sponsorship.

ANNUAL REPORT 2001

33

SOCIAL RESPONSIBILITY OF THE COMPANY

In August 2001, the Baltika Company was the only domes
tic enterprise representing Russia at the Fifth International Beer Festival in Berlin, in which the largest European manu
factures participated.

CHARITY AND SPONSORSHIP Year by year the Baltika Company had been involved in charity and sponsorship activities, proving its status of a social Company. Traditionally, Baltika pays much attention to culture and arts. In June 2001, on the Palace Square, within the framework of the 9th International Arts Festival “The Stars of the White Nights”, for the fifth time running the ceremony of conferring the “Baltika Company Award for World
class Stars of the Musical Arts and Young Musicians” took place. The famous tenor Placido Domingo, the Director of the State Hermitage Mikhail Piotrovsky, the Art Director of Mariinsky Theater Valerij Gergiev and the President of the Baltika Company Taimuraz Bolloev granted the laureates with diplomas, honor
able silver medals and cash awards. The total amount of the Prize was $50,000. The laureates of the Grant
prix were Uliana Lopatkina and Yuri Bashmet. Since the establishing of the Prize, twenty
three honored artists have become its laureates. In 2001, with the support of the Baltika Company Oktyabrskij Concert Hall conducted the second concert of the “Music from A to Z” series for schoolchildren, at which kids got acquainted with the wonderful world of music. Children found out about musical genres, musical instruments and voices, and the history of music, as well as contemporary styles. Baltika also supports theaters
G.Tovstonogov Great Academic Drama Theater, House of Humor and Satire, and the Saint
Petersburg
Opera Theater. Additionally, the Company supports film studios by financing movie shootings and festivals. National sport also receives financial support from the Baltika. In October, the Company participated in organizing the International Tennis Tournament “St. Petersburg Open 2001”, featuring the world’s most famous tennis stars. In December 2001, Moscow hosted the 34th International Ice Hockey Tournament. For five years Baltika Company has been

sponsoring this tournament Baltika took all financial obligations of the “Baltika” vol
leyball team (former “Avtomobilist”), and helps the St. Petersburg buggy
racing team “Neva
Ring”, supports international contests on short
track, the world’s equestrian sports championship and other sports events. Baltika patronizes Orphanage No. 8 in Vyborgskiy district of St. Petersburg. In 2001, the Company helped the Soldiers
Invalids Rehabilitation Center; this help was for the Russian soldiers wounded in battles. At the end of 2001, Baltika participated in an action organ
ized in Chechen republic by Federal Security Bureau of St. Petersburg and Leningrad Region. The organizers acquired medical equipment for the hospitals, equipment for schools and regional authority offices etc. The Company supports hospitals, museums, schools and universities, sponsors church renovation and cultural monu
ment restoration activities. In 2001, the Company spent over 40 million rubles for charity and sponsorship.

ANNUAL REPORT 2001

33

BEER BRANDS

The “Baltika” trademark appeared in 1992. Today, it is the most famous and popular beer brand in Russia. It is repre
sented by nine beers. “Baltika” is positioned as popular high
quality medium
price beer. In 2001, the brand was promoted under the mottos: “The famous Beer of Russia,” “Beer that is brewed for you”, and “The three waves of delight.” By the end of 2001, the share of “Baltika” brand on the Russian market was 12.6 per cent, ant its share in the Company’s sales was 56 per cent. The sales of the “Baltica” brand grew by 16 per cent in comparison with the previous year. In 2001 “Baltika No. 3 Klassicheskoye” (Classic) award
ed a title “Product of the Year.” Sales of the Baltika Company’s brands over the year 2001, million hl

The brand “Don” was introduced in 1998 in accordance with the preferences of the consumers of the southern region of Russia and is represented by four beers. It is positioned as popular high
quality beer at affordable prices for local mar
keting. The brand was promoted in 2001 as beer for southern resorts under mottos: “Southern beer brand – for you and your friend” and “For you and your friend…” In 2001, the share of the brand on the market was 1.7 per cent; its share in the Company’s total volume of sales was 7.5 per cent. The sales of the “Don” brand grew by 57 per cent. In 2000, a new Tula brand “Arsenalnoye” was introduced. The brand was developed according to the results of con
sumers’ preferences revealed in a market research. The “Arsenalnoye” brand includes five beers. It was promoted under mottos: “Arsenalnoye
beer of Tula’s craftsmen” and “Arsenalnoye
beer with a man’s temper.” Positioned as pop
ular high
quality beer at affordable prices. In 2001, the share of the “Arsenalnoye” brand on the market was 4.8 per cent; its share in the Company’s total volume of sales was over a fifth part. “Arsenalnoye” is the most progressively developing Company’s brand. In 2001, its sales grew by 272 per cent.

Knowing the Russian traditional appreciation of honey, in 1999 the Company’s brewers introduced the “Medovoye” (Honey) brand. It is represented by two beers
“Medovoye Legkoye” (Light) and “Medovoye Krepkoye” (Strong). The brand is positioned as popular high
quality beer for marketing at prices available throughout all territory of Russia. Meeting the demands of the consumers, the beer is bottled in 1.5
liter plastic bottles. In 2001, the share of “Medovoye” on the mar
ket was 3.4 per cent; its share in the Company’s total volume of sales was 15.4 per cent. The sales of the “Medovoye” brand grew by 10 per cent in comparison with the previous year.

ANNUAL REPORT 2001

35

BEER BRANDS

The “Baltika” trademark appeared in 1992. Today, it is the most famous and popular beer brand in Russia. It is repre
sented by nine beers. “Baltika” is positioned as popular high
quality medium
price beer. In 2001, the brand was promoted under the mottos: “The famous Beer of Russia,” “Beer that is brewed for you”, and “The three waves of delight.” By the end of 2001, the share of “Baltika” brand on the Russian market was 12.6 per cent, ant its share in the Company’s sales was 56 per cent. The sales of the “Baltica” brand grew by 16 per cent in comparison with the previous year. In 2001 “Baltika No. 3 Klassicheskoye” (Classic) award
ed a title “Product of the Year.” Sales of the Baltika Company’s brands over the year 2001, million hl

The brand “Don” was introduced in 1998 in accordance with the preferences of the consumers of the southern region of Russia and is represented by four beers. It is positioned as popular high
quality beer at affordable prices for local mar
keting. The brand was promoted in 2001 as beer for southern resorts under mottos: “Southern beer brand – for you and your friend” and “For you and your friend…” In 2001, the share of the brand on the market was 1.7 per cent; its share in the Company’s total volume of sales was 7.5 per cent. The sales of the “Don” brand grew by 57 per cent. In 2000, a new Tula brand “Arsenalnoye” was introduced. The brand was developed according to the results of con
sumers’ preferences revealed in a market research. The “Arsenalnoye” brand includes five beers. It was promoted under mottos: “Arsenalnoye
beer of Tula’s craftsmen” and “Arsenalnoye
beer with a man’s temper.” Positioned as pop
ular high
quality beer at affordable prices. In 2001, the share of the “Arsenalnoye” brand on the market was 4.8 per cent; its share in the Company’s total volume of sales was over a fifth part. “Arsenalnoye” is the most progressively developing Company’s brand. In 2001, its sales grew by 272 per cent.

Knowing the Russian traditional appreciation of honey, in 1999 the Company’s brewers introduced the “Medovoye” (Honey) brand. It is represented by two beers
“Medovoye Legkoye” (Light) and “Medovoye Krepkoye” (Strong). The brand is positioned as popular high
quality beer for marketing at prices available throughout all territory of Russia. Meeting the demands of the consumers, the beer is bottled in 1.5
liter plastic bottles. In 2001, the share of “Medovoye” on the mar
ket was 3.4 per cent; its share in the Company’s total volume of sales was 15.4 per cent. The sales of the “Medovoye” brand grew by 10 per cent in comparison with the previous year.

ANNUAL REPORT 2001

35

COMPANY’S PRODUCTS

“Baltika No. 0 Bezalkogolnoye” (Non
Alcoholic) special beer This beer has been produced since 2001 and has a classic taste. It is the perfect choice for beer enthusiasts in many situa
tions. Its unique brewing tech
nology allows to preserve the best qualities of beer. Ingredients: water, light barley malt, molasses, hops. Alcohol content
no more than 0.5 % vol. Original wort gravity – 12.0 %. Calorific value
21 Kcal per 100 g of beer. Nutritional value
no more than 4.6 g of carbohydrates per 100 g of beer. Produced in 0.5
liter glass bottles and 0.5
liter aluminum cans. Shelf life
6 months.

“Baltika No. 1 Svetloye” (Light) beer This beer has been produced since 1992. A light beer brewed of select malt. “Baltika Light” is a beverage for real enjoyment. It is distinguished by a delicate golden color, a pleasant malt flavor and aroma of hops. Ingredients: water, light barley malt, molasses, hops. Alcohol content
no less than 4.4 % vol. Original wort gravity
11.0 %. Calorific value
39.0 Kcal per 100 g of beer. Nutritional value
no more than 4.8 g of carbohydrates per 100 g of beer. Produced in 0.5
liter glass bottles. Shelf life
6 months. Awards:
100 Best Russian Products 1999

ANNUAL REPORT 2001

37

COMPANY’S PRODUCTS

“Baltika No. 0 Bezalkogolnoye” (Non
Alcoholic) special beer This beer has been produced since 2001 and has a classic taste. It is the perfect choice for beer enthusiasts in many situa
tions. Its unique brewing tech
nology allows to preserve the best qualities of beer. Ingredients: water, light barley malt, molasses, hops. Alcohol content
no more than 0.5 % vol. Original wort gravity – 12.0 %. Calorific value
21 Kcal per 100 g of beer. Nutritional value
no more than 4.6 g of carbohydrates per 100 g of beer. Produced in 0.5
liter glass bottles and 0.5
liter aluminum cans. Shelf life
6 months.

“Baltika No. 1 Svetloye” (Light) beer This beer has been produced since 1992. A light beer brewed of select malt. “Baltika Light” is a beverage for real enjoyment. It is distinguished by a delicate golden color, a pleasant malt flavor and aroma of hops. Ingredients: water, light barley malt, molasses, hops. Alcohol content
no less than 4.4 % vol. Original wort gravity
11.0 %. Calorific value
39.0 Kcal per 100 g of beer. Nutritional value
no more than 4.8 g of carbohydrates per 100 g of beer. Produced in 0.5
liter glass bottles. Shelf life
6 months. Awards:
100 Best Russian Products 1999

ANNUAL REPORT 2001

37

COMPANY’S PRODUCTS

“Baltika No. 3 Klassicheskoye” (Classic) beer The beer was developed and put into production in 1992 and has been particularly popular since then. “Baltika Classic” is a foamy, golden brew with a delicate flavor of malt and the aroma of hops. Ingredients: water, light barley malt, hops.

“Baltika No. 6 Porter” beer “Baltika Porter” is a traditional dark beer based on old brewing recipes. Baltika brews this beer of the best dark and light malts, with the addi
tion of superior types of hops. Ingredients: water, light caramel and burned malt, molasses, hops.

Alcohol content
no less than 4.8 % vol.

Alcohol content
no less than 7.0 % vol.

Original wort gravity – 12.0 %.

Original wort gravity
17.0 %.

“Baltika No. 8 Pshenychnoye” (Wheat) special beer This beer has been produced since 2001. This is a non
filtered beer produced of wheat malt with a light fruit flavor and slightly sweet taste. A hint of spices gives it a refined and unforgettable taste. Ingredients: water, wheat malt, caramel and light barley malt, hops.

Calorific value
42 Kcal per 100 g of beer

Calorific value
60 Kcal per 100 g of beer.

Alcohol content
no more than 5.0 % vol.

Nutritional value
no more than 4.8 g of carbohydrates

Nutritional value
no more than 6.0 g of carbohydrates

Original wort gravity
12.5 %.

“Baltika No. 10 Yubileinoye” (Jubilee) special beer This beer was developed to mark the 10th anniversary of the “Baltika” brewery. Special, light, medium strength beer with an unforget
table, distinctive taste will make a lasting impression on anyone who tries it. Bitter almond and basil give this brew an inimitable taste. Ingredients: water, light barley malt, golden syrup, hops, natural oils of bitter almond and basil.

per 100 g of beer.

per 100 g of beer.

Calorific value
45 Kcal per 100 g of beer.

Alcohol content
no less than 5.2 % vol.

Produced in 0.5
liter glass bottles.

Produced in 0.5
liter glass bottles.

Nutritional value
no more than 3.4 g of carbohydrates per 100 g

Original wort gravity
13.0 %.

Shelf life
6 months.

Shelf life
6 months.

of beer.

Calorific value
50 Kcal per 100 g of beer.

Awards:

Awards:

Produced in 0.5
liter glass bottles, and 30
liter kegs.

Nutritional value
no more than 4.2 g of carbohydrates per 100 g


Best Beer 1995


Best Ladies’ Beer 1995

Shelf life
6 months.

of beer.


The People’s Beer 1999 (Gold Medal)


Gold Medal of the exhibition “Beer Auction
95” in St. Petersburg

Produced in 0.33
liter glass bottles.


100 Best Russian Products 1999


Best Dark Beer 1996

Shelf life
6 months.


Honorary title “Made in St. Petersburg.”


Best Dark Beer 1999 (Silver Medal).


Best Product 1999, 2001

“Baltika No. 9 Krepkoye” (Strong) This beer was developed and put into production in 1998 and imme
diately won a permanent group of consumers. A light beer brewed of select components using the latest technologies, is an original combi
nation of strength and drinkabi
lity. Ingredients: water, light barley malt, golden syrup, hops.

“Parnassus” beer This is an elite beer for true con
noisseurs. Light beer with a deli
cate taste and aroma of malt and hops. Ingredients: water, light barley malt, hops.

Alcohol content
no less than 8.0 % vol.

Calorific value
46 Kcal per 100 g of beer.

Original wort gravity
16.5 %.

Nutritional value
no more than 4.8 g

Nutritional value
no more than 4.8 g of carbohydrates

“Baltika No. 7 Export” beer This beer was first pro
duced in 1994 for the Goodwill Games in Saint Petersbourg. This is an elite beer. It can satisfy the most demand
ing beer enthusiasts. Ingredients: water, light barley malt, hops.

Calorific value
62 Kcal per 100 g of beer.

of carbohydrates per 100 g of beer.

per 100 g of beer.

Alcohol content
no less than 5.4 % vol.

Nutritional value
no more than 3.7 g of carbohydrates per 100 g

Produced in 0.33 and 0.5
liter glass bottles.

Produced in 0.5
liter glass bottles and 30
liter kegs.

Original wort gravity
12.5 %.

of beer.

Shelf life
6 months.

Shelf life
6 months.

Calorific value
44 Kcal per 100 g of beer.

Produced in 0.5
liter glass bottles, and aluminum 0.5
liter cans.

Awards:

Nutritional value
no more than 4.5 g of carbohydrates per 100 g

Shelf life
6 months.


Best Original Beer 1999 (Silver Medal).

of beer.

Awards:

Produced in 0.5
liter aluminum cans, 5
liter barrels, and 30
liter kegs.


100 Best Russian Products 1999.

“Baltika No. 4 Originalnoye” (Original) beer This beer has been produced since 1992. “Baltika Original” is a dark beer, distinguished by a hint of grain and aroma of caramel malt. Ingredients: water, light caramel and rye malt, molasses, hops. Alcohol content
no less than 5.6 % vol. Original wort gravity
15.0 %. Calorific value
54 Kcal per 100 g of beer.

Alcohol content
no less than 5.6 % vol. Original wort gravity
13.0 %.

Shelf life
6 months. Awards and certificates:
100 Best Russian Products 1999
Best Classic Beer 1999 (Gold Medal).

38

ANNUAL REPORT 2001

ANNUAL REPORT 2001

39

COMPANY’S PRODUCTS

“Baltika No. 3 Klassicheskoye” (Classic) beer The beer was developed and put into production in 1992 and has been particularly popular since then. “Baltika Classic” is a foamy, golden brew with a delicate flavor of malt and the aroma of hops. Ingredients: water, light barley malt, hops.

“Baltika No. 6 Porter” beer “Baltika Porter” is a traditional dark beer based on old brewing recipes. Baltika brews this beer of the best dark and light malts, with the addi
tion of superior types of hops. Ingredients: water, light caramel and burned malt, molasses, hops.

Alcohol content
no less than 4.8 % vol.

Alcohol content
no less than 7.0 % vol.

Original wort gravity – 12.0 %.

Original wort gravity
17.0 %.

“Baltika No. 8 Pshenychnoye” (Wheat) special beer This beer has been produced since 2001. This is a non
filtered beer produced of wheat malt with a light fruit flavor and slightly sweet taste. A hint of spices gives it a refined and unforgettable taste. Ingredients: water, wheat malt, caramel and light barley malt, hops.

Calorific value
42 Kcal per 100 g of beer

Calorific value
60 Kcal per 100 g of beer.

Alcohol content
no more than 5.0 % vol.

Nutritional value
no more than 4.8 g of carbohydrates

Nutritional value
no more than 6.0 g of carbohydrates

Original wort gravity
12.5 %.

“Baltika No. 10 Yubileinoye” (Jubilee) special beer This beer was developed to mark the 10th anniversary of the “Baltika” brewery. Special, light, medium strength beer with an unforget
table, distinctive taste will make a lasting impression on anyone who tries it. Bitter almond and basil give this brew an inimitable taste. Ingredients: water, light barley malt, golden syrup, hops, natural oils of bitter almond and basil.

per 100 g of beer.

per 100 g of beer.

Calorific value
45 Kcal per 100 g of beer.

Alcohol content
no less than 5.2 % vol.

Produced in 0.5
liter glass bottles.

Produced in 0.5
liter glass bottles.

Nutritional value
no more than 3.4 g of carbohydrates per 100 g

Original wort gravity
13.0 %.

Shelf life
6 months.

Shelf life
6 months.

of beer.

Calorific value
50 Kcal per 100 g of beer.

Awards:

Awards:

Produced in 0.5
liter glass bottles, and 30
liter kegs.

Nutritional value
no more than 4.2 g of carbohydrates per 100 g


Best Beer 1995


Best Ladies’ Beer 1995

Shelf life
6 months.

of beer.


The People’s Beer 1999 (Gold Medal)


Gold Medal of the exhibition “Beer Auction
95” in St. Petersburg

Produced in 0.33
liter glass bottles.


100 Best Russian Products 1999


Best Dark Beer 1996

Shelf life
6 months.


Honorary title “Made in St. Petersburg.”


Best Dark Beer 1999 (Silver Medal).


Best Product 1999, 2001

“Baltika No. 9 Krepkoye” (Strong) This beer was developed and put into production in 1998 and imme
diately won a permanent group of consumers. A light beer brewed of select components using the latest technologies, is an original combi
nation of strength and drinkabi
lity. Ingredients: water, light barley malt, golden syrup, hops.

“Parnassus” beer This is an elite beer for true con
noisseurs. Light beer with a deli
cate taste and aroma of malt and hops. Ingredients: water, light barley malt, hops.

Alcohol content
no less than 8.0 % vol.

Calorific value
46 Kcal per 100 g of beer.

Original wort gravity
16.5 %.

Nutritional value
no more than 4.8 g

Nutritional value
no more than 4.8 g of carbohydrates

“Baltika No. 7 Export” beer This beer was first pro
duced in 1994 for the Goodwill Games in Saint Petersbourg. This is an elite beer. It can satisfy the most demand
ing beer enthusiasts. Ingredients: water, light barley malt, hops.

Calorific value
62 Kcal per 100 g of beer.

of carbohydrates per 100 g of beer.

per 100 g of beer.

Alcohol content
no less than 5.4 % vol.

Nutritional value
no more than 3.7 g of carbohydrates per 100 g

Produced in 0.33 and 0.5
liter glass bottles.

Produced in 0.5
liter glass bottles and 30
liter kegs.

Original wort gravity
12.5 %.

of beer.

Shelf life
6 months.

Shelf life
6 months.

Calorific value
44 Kcal per 100 g of beer.

Produced in 0.5
liter glass bottles, and aluminum 0.5
liter cans.

Awards:

Nutritional value
no more than 4.5 g of carbohydrates per 100 g

Shelf life
6 months.


Best Original Beer 1999 (Silver Medal).

of beer.

Awards:

Produced in 0.5
liter aluminum cans, 5
liter barrels, and 30
liter kegs.


100 Best Russian Products 1999.

“Baltika No. 4 Originalnoye” (Original) beer This beer has been produced since 1992. “Baltika Original” is a dark beer, distinguished by a hint of grain and aroma of caramel malt. Ingredients: water, light caramel and rye malt, molasses, hops. Alcohol content
no less than 5.6 % vol. Original wort gravity
15.0 %. Calorific value
54 Kcal per 100 g of beer.

Alcohol content
no less than 5.6 % vol. Original wort gravity
13.0 %.

Shelf life
6 months. Awards and certificates:
100 Best Russian Products 1999
Best Classic Beer 1999 (Gold Medal).

38

ANNUAL REPORT 2001

ANNUAL REPORT 2001

39

COMPANY’S PRODUCTS

“Medovoye Legkoye” (Honey Light) special beer This beer was developed and put into pro
duction in 1999. Mild, light beer brewed to a special recipe with natural honey added. It is distin
guished by a rich golden color and unique aroma. A special feature of the new packaging is the Company’s imagery embossed on the bottles. This marking is not only an unusual embel
lishment to the packaging but also a sure protection of “Medovoye Legkoye” against imitation. Ingredients: water, light barley and caramel malt, golden syrup, honey, hops. Alcohol content
no less than 4.1 % vol. Original wort gravity
11.0 %. Calorific value
42 Kcal per 100 g of beer. Nutritional value
no more than 4.6 g of carbohydrates per 100 g of beer. Produced in 1.5
liter plastic bottles. Shelf life
6 months.

“Baltika Lemon” special beer Special light beer made of water, light barley malt, lemon syrup and hops. A combination of lemon and light beer gives this brew even more refreshing and energizing taste and aroma. Original wort gravity
11.4 %. Calorific value
44.1 Kcal per 100 g of beer. Nutritional value
not more than 5.9 g of carbohydrates per 100 g of beer. Produced in 0.5
liter aluminum cans. Shelf life
8 months.

“Baltika Cherry” special beer Special semi
dark beer made of water, light bar
ley malt, caramel and rye malt, cherry syrup and hops. An original combination of dark beer and juicy fresh cherries gives this beverage a won
derful rich aroma. Enthusiasts of refined cock
tails will appreciate an inimitable bouquet of this beer. Original wort gravity
12.2 %. Calorific value
47.4 Kcal per 100 g of beer.

Alcohol content
no less than 7.6 % vol. Original wort gravity
16.0 %. Calorific value
62.0 Kcal per 100 g of beer. Nutritional value
no more than 6.6 g of carbohydrates per 100 g of beer. Produced in 1.5
liter plastic bottles. Shelf life
6 months.

40

ANNUAL REPORT 2001

Shelf life
12 months.

Alcohol content
no less than 2.7 % vol.

Alcohol content
no less than 2.8 % vol.

“Medovoye Krepkoye” (Honey Strong) special beer This beer was developed and put into pro
duction in 1999 to follow the “Medovoye Legkoye” beer. Light beer brewed of select malt with natu
ral honey added. Ingredients: water, light barley and caramel malt, golden syrup, honey, hops.


chronic diseases of the liver and gall ducts;
chronic colitis and enterocolitis;
chronic pancreatitis;
metabolic disorders.

Nutritional value: 6.4 g of carbohydrates per 100 g of beer. Produced in 0.5
liter aluminum cans. Shelf life
8 months.

“Khrustalnaya” (Crystal) mineral water Natural, ecologically pure, low
mineralized, curative table water. It has a pleasant salty taste and is recommend
ed for prevention and treat
ment of:
chronic gastritis with a nor
mal or reduced secretory function of the stomach;

“Serbryanaya Ladoga” (Silver Ladoga) mineralized water Carbonated water, produced form purified water with the addition of Ca2+, Mg2+, and K+ salts. Has a pleasant refreshing taste and is a recommended soft drink for everyday con
sumption. Shelf life
12 months.

“Ladoga No. 1 Lemonade” A highly carbonated non
alcoholic clear drink with a delicate lemon flavor. Produced of natural extracts and flavorings. It not only quenches the thirst but also enriches the body with vita
mins and minerals. Contains calcium, vitamin B6, folic acid, niacin (nicotinic acid).

“Ladoga No. 2 Citron” A highly carbonated, non
alcoholic, revitalizing tonic drink. Contains guarana extract made of the seeds of South American liana, lemon oil, caffeine. This drink will give you vigor and energy. Calorific value
39 Kcal per 100 g of the drink. Nutritional value
no more than 10.2 g of carbohydrates in 100 g of the drink. Shelf life
8 months.

“Ladoga No. 3 Citrus
mix” A highly carbonated drink with the flavor and aroma of grapefruit, with up to 5 % nat
ural juice content. A very tasty, healthy and refreshing drink. Calorific value
49 Kcal per 100 g of the drink. Nutritional value
no more than 12.5 g of carbohydrates in 100 g of the drink. Shelf life
8 months.

Calorific value
37 Kcal per 100 g of the drink. Nutritional value
no more than 9.6 g of carbohydrates in 100 g of the drink. Shelf life
8 months.

ANNUAL REPORT 2001

41

COMPANY’S PRODUCTS

“Medovoye Legkoye” (Honey Light) special beer This beer was developed and put into pro
duction in 1999. Mild, light beer brewed to a special recipe with natural honey added. It is distin
guished by a rich golden color and unique aroma. A special feature of the new packaging is the Company’s imagery embossed on the bottles. This marking is not only an unusual embel
lishment to the packaging but also a sure protection of “Medovoye Legkoye” against imitation. Ingredients: water, light barley and caramel malt, golden syrup, honey, hops. Alcohol content
no less than 4.1 % vol. Original wort gravity
11.0 %. Calorific value
42 Kcal per 100 g of beer. Nutritional value
no more than 4.6 g of carbohydrates per 100 g of beer. Produced in 1.5
liter plastic bottles. Shelf life
6 months.

“Baltika Lemon” special beer Special light beer made of water, light barley malt, lemon syrup and hops. A combination of lemon and light beer gives this brew even more refreshing and energizing taste and aroma. Original wort gravity
11.4 %. Calorific value
44.1 Kcal per 100 g of beer. Nutritional value
not more than 5.9 g of carbohydrates per 100 g of beer. Produced in 0.5
liter aluminum cans. Shelf life
8 months.

“Baltika Cherry” special beer Special semi
dark beer made of water, light bar
ley malt, caramel and rye malt, cherry syrup and hops. An original combination of dark beer and juicy fresh cherries gives this beverage a won
derful rich aroma. Enthusiasts of refined cock
tails will appreciate an inimitable bouquet of this beer. Original wort gravity
12.2 %. Calorific value
47.4 Kcal per 100 g of beer.

Alcohol content
no less than 7.6 % vol. Original wort gravity
16.0 %. Calorific value
62.0 Kcal per 100 g of beer. Nutritional value
no more than 6.6 g of carbohydrates per 100 g of beer. Produced in 1.5
liter plastic bottles. Shelf life
6 months.

40

ANNUAL REPORT 2001

Shelf life
12 months.

Alcohol content
no less than 2.7 % vol.

Alcohol content
no less than 2.8 % vol.

“Medovoye Krepkoye” (Honey Strong) special beer This beer was developed and put into pro
duction in 1999 to follow the “Medovoye Legkoye” beer. Light beer brewed of select malt with natu
ral honey added. Ingredients: water, light barley and caramel malt, golden syrup, honey, hops.


chronic diseases of the liver and gall ducts;
chronic colitis and enterocolitis;
chronic pancreatitis;
metabolic disorders.

Nutritional value: 6.4 g of carbohydrates per 100 g of beer. Produced in 0.5
liter aluminum cans. Shelf life
8 months.

“Khrustalnaya” (Crystal) mineral water Natural, ecologically pure, low
mineralized, curative table water. It has a pleasant salty taste and is recommend
ed for prevention and treat
ment of:
chronic gastritis with a nor
mal or reduced secretory function of the stomach;

“Serbryanaya Ladoga” (Silver Ladoga) mineralized water Carbonated water, produced form purified water with the addition of Ca2+, Mg2+, and K+ salts. Has a pleasant refreshing taste and is a recommended soft drink for everyday con
sumption. Shelf life
12 months.

“Ladoga No. 1 Lemonade” A highly carbonated non
alcoholic clear drink with a delicate lemon flavor. Produced of natural extracts and flavorings. It not only quenches the thirst but also enriches the body with vita
mins and minerals. Contains calcium, vitamin B6, folic acid, niacin (nicotinic acid).

“Ladoga No. 2 Citron” A highly carbonated, non
alcoholic, revitalizing tonic drink. Contains guarana extract made of the seeds of South American liana, lemon oil, caffeine. This drink will give you vigor and energy. Calorific value
39 Kcal per 100 g of the drink. Nutritional value
no more than 10.2 g of carbohydrates in 100 g of the drink. Shelf life
8 months.

“Ladoga No. 3 Citrus
mix” A highly carbonated drink with the flavor and aroma of grapefruit, with up to 5 % nat
ural juice content. A very tasty, healthy and refreshing drink. Calorific value
49 Kcal per 100 g of the drink. Nutritional value
no more than 12.5 g of carbohydrates in 100 g of the drink. Shelf life
8 months.

Calorific value
37 Kcal per 100 g of the drink. Nutritional value
no more than 9.6 g of carbohydrates in 100 g of the drink. Shelf life
8 months.

ANNUAL REPORT 2001

41

COMPANY’S PRODUCTS

“Don Stanichnoye” beer A refreshing beverage, perfect for quenching your thirst. This beer is brewed according to a special recipe and has a mild malt taste and the bitterness of hops. Ingredients: water, light barley malt, golden syrup, hops.

“Arsenalnoye Legkoye” (Light) beer Light beer with a clear taste and a touch of the bitterness of hops. Ingredients: water, light barley malt, molasses, hops.

4.0 % vol.

“Don Yuzhnoye” (Southern) beer Light beer with a soft bitterness of hops and a distinc
tive malt taste. Brewed utilizing special technology. Ingredients: water, light barley malt, molasses, hops.

Nutritional value
no more than 3.7 g

“Arsenalnoye from Traditsionnoye” (Traditional) beer This beer is brewed using water, light barley and caramel malt, rice, molas
ses and hops. It has a malt taste and a subtle bit
terness of hops.

Original wort gravity
11.0 %.

Alcohol content
no

of carbohydrates per 100 g of beer.

Alcohol content
no

Calorific value
42 Kcal per 100 g of

less than 6.0 % vol.

Produced in 0.5
liter glass bottles,

less than 5.1 % vol.

beer.

Original wort gravity
16 %.

1.5
liter polyethylene plastic bottles.

Original wort gravity
13 %.

Nutritional value
no more than 4.6 g of carbohydrates per 100 g

Calorific value
62 Kcal per 100 g of beer.

Shelf life
4 months.

Calorific value
49 Kcal per 100 g of beer.

of beer.

Nutritional value
no more than 6.6 g of carbohydrates per 100 g

Produced in 0.5
liter glass bottles, 1.5
liter polyethylene bottles and

of beer.

30
liter kegs.

Produced in 0.5
liter glass bottles, 1.5
liter polyethylene bottles and

Shelf life
4 months..

0.5
liter aluminum cans.

Alcohol content
no less than

Shelf life
4 months.

Alcohol content
no less than 4.2 % vol. Original wort gravity
11 %. Calorific value
41 Kcal per 100 g of beer.

Nutritional value
no more than 4.2 g of carbohydrates per 100 g of beer.

“Arsenalnoye Classic” beer A drink for true connoisseurs of European tradi
tions of beer brewing. It has a perfectly bal
anced taste and a delicate aroma of hops. Ingredients: water, light barley malt, molasses, hops.

Produced in 0.5
liter glass bottles, 1.5
liter plastic bottles, 0.5
liter glass aluminum cans, and 30 and 50
liter kegs. Shelf life
4 months.

“Don Classic” beer This beer was first produced in May 2000. Light beer with original taste qualities, a delicate aroma and a pleasant bitterness of hops. Ingredients: water, light barley malt, golden syrup, hops.

“Don Original” beer This beer is brewed according to a special recipe and has a mild malt taste and the bitter
ness of hops. Ingredients: water, light barley and caramel malt, molasses, hops. Alcohol content
no less than 5.3 % vol.

Produced in 0.5
liter glass bottles and 30 and 50
liter kegs.

Alcohol content
no less than

Original wort gravity
13 %.

Shelf life
4 months.

4.5 % vol.

Calorific value
51 Kcal per 100 g of beer.

Alcohol content
no less than

Original wort gravity
12.0 %.

Nutritional value
no more than 4.8 g of carbohydrates

7.0 % vol.

Calorific value
46 Kcal per 100 g

per 100 g of beer.

of beer.

Produced in 0.5
liter glass bottles, 1.5
liter polyethylene plastic bottles

Nutritional value
no more than 4.7 g of carbohydrates per 100 g

and 30
liter kegs.

of beer.

Shelf life
4 months.

Alcohol content
no less than 4.5 % vol. Original wort gravity
12 %. Calorific value
45 Kcal per 100 g of beer. Nutritional value
no more than 4.2 g of carbohydrates per 100 g of beer.

“Arsenalnoye Krepkoye” (Strong) beer Light beer with rich malt taste and a wine savor; has a bal
anced bitterness of hops, and a clear distinctive aroma. Ingredients: water, light barley malt, molasses, hops.

Original wort gravity
16 %.

Produced in 0.5
liter glass bottles, 1.5
liter polyethylene bottles and

“Arsenalnoye Temnoye” (Dark) beer This beer is made of water, light barley and cara
mel malt, molasses and hops. Caramel malt gives it a unique distinctive taste, an aroma of hops with a touch of caramel and an intensive color.

30
liter kegs.

Alcohol content
no less than 5.6 % vol.

Produced in 0.5
liter glass bottles and 1.5
liter plastic bottles.

Shelf life
4 months.

Original wort gravity
15 %.

Shelf life
4 months.

Calorific value
61 Kcal per 100 g of beer. Nutritional value
no more than 4.5 g of carbohydrates per 100 g of beer.

Calorific value
57 Kcal per 100 g of beer. Nutritional value
no more than 5.2 g of carbohy drates per 100 g of beer. Produced in 0.5
liter glass bottles. Shelf life
4 months.

42

ANNUAL REPORT 2001

ANNUAL REPORT 2001

43

COMPANY’S PRODUCTS

“Don Stanichnoye” beer A refreshing beverage, perfect for quenching your thirst. This beer is brewed according to a special recipe and has a mild malt taste and the bitterness of hops. Ingredients: water, light barley malt, golden syrup, hops.

“Arsenalnoye Legkoye” (Light) beer Light beer with a clear taste and a touch of the bitterness of hops. Ingredients: water, light barley malt, molasses, hops.

4.0 % vol.

“Don Yuzhnoye” (Southern) beer Light beer with a soft bitterness of hops and a distinc
tive malt taste. Brewed utilizing special technology. Ingredients: water, light barley malt, molasses, hops.

Nutritional value
no more than 3.7 g

“Arsenalnoye from Traditsionnoye” (Traditional) beer This beer is brewed using water, light barley and caramel malt, rice, molas
ses and hops. It has a malt taste and a subtle bit
terness of hops.

Original wort gravity
11.0 %.

Alcohol content
no

of carbohydrates per 100 g of beer.

Alcohol content
no

Calorific value
42 Kcal per 100 g of

less than 6.0 % vol.

Produced in 0.5
liter glass bottles,

less than 5.1 % vol.

beer.

Original wort gravity
16 %.

1.5
liter polyethylene plastic bottles.

Original wort gravity
13 %.

Nutritional value
no more than 4.6 g of carbohydrates per 100 g

Calorific value
62 Kcal per 100 g of beer.

Shelf life
4 months.

Calorific value
49 Kcal per 100 g of beer.

of beer.

Nutritional value
no more than 6.6 g of carbohydrates per 100 g

Produced in 0.5
liter glass bottles, 1.5
liter polyethylene bottles and

of beer.

30
liter kegs.

Produced in 0.5
liter glass bottles, 1.5
liter polyethylene bottles and

Shelf life
4 months..

0.5
liter aluminum cans.

Alcohol content
no less than

Shelf life
4 months.

Alcohol content
no less than 4.2 % vol. Original wort gravity
11 %. Calorific value
41 Kcal per 100 g of beer.

Nutritional value
no more than 4.2 g of carbohydrates per 100 g of beer.

“Arsenalnoye Classic” beer A drink for true connoisseurs of European tradi
tions of beer brewing. It has a perfectly bal
anced taste and a delicate aroma of hops. Ingredients: water, light barley malt, molasses, hops.

Produced in 0.5
liter glass bottles, 1.5
liter plastic bottles, 0.5
liter glass aluminum cans, and 30 and 50
liter kegs. Shelf life
4 months.

“Don Classic” beer This beer was first produced in May 2000. Light beer with original taste qualities, a delicate aroma and a pleasant bitterness of hops. Ingredients: water, light barley malt, golden syrup, hops.

“Don Original” beer This beer is brewed according to a special recipe and has a mild malt taste and the bitter
ness of hops. Ingredients: water, light barley and caramel malt, molasses, hops. Alcohol content
no less than 5.3 % vol.

Produced in 0.5
liter glass bottles and 30 and 50
liter kegs.

Alcohol content
no less than

Original wort gravity
13 %.

Shelf life
4 months.

4.5 % vol.

Calorific value
51 Kcal per 100 g of beer.

Alcohol content
no less than

Original wort gravity
12.0 %.

Nutritional value
no more than 4.8 g of carbohydrates

7.0 % vol.

Calorific value
46 Kcal per 100 g

per 100 g of beer.

of beer.

Produced in 0.5
liter glass bottles, 1.5
liter polyethylene plastic bottles

Nutritional value
no more than 4.7 g of carbohydrates per 100 g

and 30
liter kegs.

of beer.

Shelf life
4 months.

Alcohol content
no less than 4.5 % vol. Original wort gravity
12 %. Calorific value
45 Kcal per 100 g of beer. Nutritional value
no more than 4.2 g of carbohydrates per 100 g of beer.

“Arsenalnoye Krepkoye” (Strong) beer Light beer with rich malt taste and a wine savor; has a bal
anced bitterness of hops, and a clear distinctive aroma. Ingredients: water, light barley malt, molasses, hops.

Original wort gravity
16 %.

Produced in 0.5
liter glass bottles, 1.5
liter polyethylene bottles and

“Arsenalnoye Temnoye” (Dark) beer This beer is made of water, light barley and cara
mel malt, molasses and hops. Caramel malt gives it a unique distinctive taste, an aroma of hops with a touch of caramel and an intensive color.

30
liter kegs.

Alcohol content
no less than 5.6 % vol.

Produced in 0.5
liter glass bottles and 1.5
liter plastic bottles.

Shelf life
4 months.

Original wort gravity
15 %.

Shelf life
4 months.

Calorific value
61 Kcal per 100 g of beer. Nutritional value
no more than 4.5 g of carbohydrates per 100 g of beer.

Calorific value
57 Kcal per 100 g of beer. Nutritional value
no more than 5.2 g of carbohy drates per 100 g of beer. Produced in 0.5
liter glass bottles. Shelf life
4 months.

42

ANNUAL REPORT 2001

ANNUAL REPORT 2001

43

INFORMATION FOR SHAREHOLDERS AND INVESTORS

Beginning from September 5, 2001, regular and privileged Company’s stocks have been listed in NP Stock Market RTS, and by the end of the year their value grew by more than 100 per cent.

Special group for working with stocks and with the Company’s shareholders: Phone: (812) 329
91
09 fax: (812) 329
91
09

Information on the issued stocks and their distribution:
Regular stocks
107,087,200;
Privileged stocks
13,485,600. Nominal value of both regular and privileged stock is 1 ruble a piece. Total number of registered shareholders as of December 13, 2001
1,567; 24 of them are juridical persons. At the present time, the largest Company’s shareholder is the Baltic Beverages Holding AB (Sweden), which possesses 58.6 per cent of the Company’s capital. The affiliate structure of Baltic Beverages Holding AB the Baltic Beverages Invest Acziebulaget possesses 16.8 per cent of the Company’s stocks.

Address in the Internet: www.baltika.ru

Registered Share of the stocks shareholders capital, per cent Residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3 Non
residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77.7

Information about the organization providing a legislative stocktaking for the Company (the Company’s registrar):
full name ZAO United Registrar, AeroAvkar affiliate;
license number 01178, issued December 2, 1996 by FKTsB of Russia;
address 196066 Russia, St. Petersburg, Moskovsky pr., 212
phone/fax (812) 373
54
24

List of mass media where you can find information about the Company:
“Izvestiya” newspaper
“Vechernij Peterburg” newspaper.

ANNUAL REPORT 2001

69

BOARD OF DIRECTORS

Adam Tlekhuray Vice
president

Nikolay Negodov Personnel Director

Oleg Latyshev Sales Director

Aleksandr Dedegkaev Production Director

Boris Rykunov Technical Director

Aleksandr Nikonov Finance and Economics Director

Dmitry Kistev Export Director

Maxim Dozmarov Marketing Director

Gennady Gushchin Resources development Director

ANNUAL REPORT 2001

71

BOARD OF DIRECTORS

Adam Tlekhuray Vice
president

Nikolay Negodov Personnel Director

Oleg Latyshev Sales Director

Aleksandr Dedegkaev Production Director

Boris Rykunov Technical Director

Aleksandr Nikonov Finance and Economics Director

Dmitry Kistev Export Director

Maxim Dozmarov Marketing Director

Gennady Gushchin Resources development Director

ANNUAL REPORT 2001

71

CONTACT INFORMATION

Baltika Brewery No. 3, 6th Verkhny per., 194292 St. Petersburg E
mail: [email protected] Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(812) 329
91
00 Press agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(812) 326
66
73 Dispatcher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(812) 329
91
26 Wholesale department . . . . . . . . . . . . . . . . . . . . . . .(812) 329
91
38 Shop sales department . . . . . . . . . . . . . . . . . . . . . . .(812) 329
91
37 Draught beer sales department . . . . . . . . . . . . . .(812) 329
91
29 External distribution service . . . . . . . . . . . . . . . . .(812) 326
66
65 Personnel department . . . . . . . . . . . . . . . . . . . . . . . .(812) 329
91
41 Advertisement and PR department . . . . . . . . . .(812) 329
91
39 Marketing department . . . . . . . . . . . . . . . . . . . . . . .(812) 329
91
56 Department for exports to foreign countries . . . . . . . . . . . . . . . . . . . . . . . . . .(812) 326
62
67 Department for export to the countries of the former Soviet Union . . . . . . . . . . . . . . . . . .(812) 329
78
68 Technical support services . . . . . . . . . . . . . . . . . . .(812) 326
61
66 Department of packaging . . . . . . . . . . . . . . . . . . . .(812) 329
91
54 Stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(812) 329
91
57 24
hour information desk . . . . . . . . . . . . . . . . . . . .(812) 329
91
60

Baltika
Don Brewery Plc. No. 146
A, Dovatora ul., 344090, Rostov
on
Don E
mail: [email protected] Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(8632) 22
27
90 Dispatcher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(8632) 22
76
44 Department of large wholesales . . . . . . . . . . . . .(8632) 92
19
32 Department of smaller wholesales . . . . . . . . . . .(8632) 92
19
29 Department of draught and keg beer . . . . . . . .(8632) 22
76
77 Marketing and advertisement service . . . . . . .(8632) 92
19
31 Tulskoye pivo Brewery No. 85, Odoevskoye shosse, 300036, Tula E
mail: [email protected] Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(0872) 39
55
35 Wholesales and retail department . . . . . . . . . . .(0872) 32
99
12 39
56
07 Draught beer sales department . . . . . . . . . . . . . .(0872) 39
51
51 Marketing department . . . . . . . . . . . . . . . . . . . . . . .(0872) 39
20
47 32
99
10 Baltika
Moscow Ltd. No. 116, Dmitrievskoye shosse, 109029, Moscow Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(095) 483
23
17

SALES SUBDIVISIONS Astrakhan No. 10, 1st proyezd Rozhdestvenskogo, Yuznyj promuzel Kutum, 414057 [email protected] (8512) 39
10
31 Vologda No. 2a, Lunacharskogo ul., 160010 [email protected] (8172) 25
72
72, 25
72
41

72

Krasnodar No. 41, Odesskaya ul., 350020 [email protected] (8612) 53
81
77, 51
67
47 55
96
67 Krasnoyarsk No. 37, Davydova ul., 660049 [email protected] (3912) 64
93
39, 64
97
90

Voronezh No. 1, Otlichnikov per., 394028 [email protected] (0732) 48
99
76

Murmansk No. 8, Domostroitelnaya ul., 183018 [email protected] (8152) 43
19
21

Ekaterinburg No. 24, Montazhnikov ul., 620046 [email protected] (3432) 52
54
76

Nizhnij Novgorod No. 43, Fedoseenko ul., 603045 [email protected] (8312) 22
18
73, 23
94
04

Kemerovo No. 2, Shaturskaya ul., 650006



Novosibirsk No. 25, Kubovaya ul., Karier Mochishche, 630040 [email protected] (3832) 90
61
11, 90
61
10

ANNUAL REPORT 2001

Omsk No. 1, Razdolnaya ul., 644105 [email protected] (3812) 28
42
41

Smolensk No. 9a, Industrialnaya ul., 214031 [email protected] (0812) 51
34
20, 51
34
15

Perm No. 75, Penzenskaya ul., 614113 [email protected] (3422) 33
78
13

Ulan
Ude No. 20, Zherdeva ul., 670042 [email protected] (3012) 33
53
75, 41
81
84

Pyatigorsk No. 1, Kislovodskoye shosse, 357538 [email protected] (87933) 7
25
36

Ufa No. 47, Industrialnoye shosse, 450027 [email protected] (3472) 43
05
34

Samara No. 70, Tovarnaya ul., 443068 [email protected] (8462) 97
25
81, 97
22
62 97
25
18

Khabarovsk No. 7, Sidorenko ul., 680015 [email protected] (4212) 29
63
23

Saratov No. 3, Krymskij proyezd, 410039 [email protected] (8452) 92
26
87

Yaroslavl No. 14, Magistralnaya ul., 150049 [email protected] (0852) 21
97
36

CONTENTS

BALTIKA’S PRESIDENT MESSAGE ................................................3 THE COMPANY’S MISSION ............................................................5 THE COMPANY’S STRATEGY ..........................................................5 IMPLEMENTATION OF THE MISSION AND STRATEGY .................5 THE BREWING INDUSTRY Russian market ........................................................................7 Baltika’s position on the European and world markets ...................................................................8 European Brewing Industry statistics for the year 2000 .....................................................................8 Participation in the activity of the Union of Russian Beer Manufacturers .....................11 THE MAIN YEAR EVENTS IN THE COMPANY’S LIFE ..................13 MAIN RESULTS OF THE COMPANY ACTIVITY.............................19 COMPANY STRUCTURE ................................................................19 COMPANY DEVELOPMENT Manufacture...........................................................................21 Financing sources of investments ......................................22 Company reorganization ......................................................22 Sales........................................................................................23 Export sales............................................................................25 Product quality control development ................................25 Information technologies ....................................................27 Quality management system ...............................................27 Environment protection .......................................................27 COMPANY’S SOCIAL RESPONSIBILITY Company’s staff .....................................................................29 Social programs .....................................................................31 Participation in Beer festivals .............................................31 Charity and sponsorship .......................................................33 BEER BRANDS .............................................................................35 COMPANY PRODUCTS ..................................................................37 FINANCIAL REPORTS AND THEIR ANALYSIS ............................45 INFORMATION FOR SHAREHOLDERS AND INVESTORS .............69 BOARD OF DIRECTORS ................................................................70 CONTACT INFORMATION ............................................................72

BALTIKA BREWERY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 and 2000 (in thousands U.S. dollars, except share data)

ASSETS

Independent Auditors’ Report

The Board of Directors and Shareholders Baltika Brewery Group:

We have audited the accompanying consolidated balance sheets of Baltika Brewery and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for the years then ended. These consolidated financial statements, as set out on pages 47 to 63, are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated finan
cial statements based on our audits.

Current assets: Cash and cash equivalents Trade accounts receivable, net (note 2) Loans receivable, net (note 3) Inventories (note 4) Prepayments and other receivables (note 5) Total current assets

2001

16,414 6,169 10,552 56,694 32,478 122,307

4,897 4,044 418 46,470 21,654 77,483

$

425 5,132 382,692 623 511 179

56 4,085 304,601 417 386 642

$

17,055

21,738

11,281 9,413 6,581 5,553 1,262 51,145

15,988 5,827 5,159 5,125 1,101 54,938

Long
term debt, excluding current installments (note 9) Total liabilities

14,000 65,145

18,000 72,938

Minority interest

49,907

32,044

2,963 23,530 370,097 (463) 396,127

2,963 23,530 255,167
281,660

511,179

386,642

Investment securities (note 6) Investments in affiliated companies (note 7) Property, plant and equipment net (note 8) Intangible assets Total assets

$

2000

LIABILITIES AND SHARE CAPITAL We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the finan
cial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presenta
tion. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the finan
cial position of Baltika Brewery and subsidiaries as of December 31, 2001 and 2000, the results of their operations, shareholders' equity and comprehensive income and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Current Liabilities: Trade accounts payable Short
term debt including current installments of long
term debt Accrued salaries, wages and benefits Accrued taxes Other liabilities Due to related parties (note 16) Total current liabilities

Shareholders’ equity (note 12): Preference shares Ordinary shares Retained earnings Treasury shares Total shareholders’ equity March 04, 2002

Commitments and contingencies (note 14)

St. Petersburg, Russian Federation Total liabilities and shareholders’ equity

$

See accompanying notes to consolidated financial statements. A. A. Nikonov Acting Finance and Economic Director

46

ANNUAL REPORT 2001

S. A. Alexeyev Chief accountant

ANNUAL REPORT 2001

47

BALTIKA BREWERY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 and 2000 (in thousands U.S. dollars, except share data)

ASSETS

Independent Auditors’ Report

The Board of Directors and Shareholders Baltika Brewery Group:

We have audited the accompanying consolidated balance sheets of Baltika Brewery and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for the years then ended. These consolidated financial statements, as set out on pages 47 to 63, are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated finan
cial statements based on our audits.

Current assets: Cash and cash equivalents Trade accounts receivable, net (note 2) Loans receivable, net (note 3) Inventories (note 4) Prepayments and other receivables (note 5) Total current assets

2001

16,414 6,169 10,552 56,694 32,478 122,307

4,897 4,044 418 46,470 21,654 77,483

$

425 5,132 382,692 623 511 179

56 4,085 304,601 417 386 642

$

17,055

21,738

11,281 9,413 6,581 5,553 1,262 51,145

15,988 5,827 5,159 5,125 1,101 54,938

Long
term debt, excluding current installments (note 9) Total liabilities

14,000 65,145

18,000 72,938

Minority interest

49,907

32,044

2,963 23,530 370,097 (463) 396,127

2,963 23,530 255,167
281,660

511,179

386,642

Investment securities (note 6) Investments in affiliated companies (note 7) Property, plant and equipment net (note 8) Intangible assets Total assets

$

2000

LIABILITIES AND SHARE CAPITAL We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the finan
cial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presenta
tion. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the finan
cial position of Baltika Brewery and subsidiaries as of December 31, 2001 and 2000, the results of their operations, shareholders' equity and comprehensive income and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Current Liabilities: Trade accounts payable Short
term debt including current installments of long
term debt Accrued salaries, wages and benefits Accrued taxes Other liabilities Due to related parties (note 16) Total current liabilities

Shareholders’ equity (note 12): Preference shares Ordinary shares Retained earnings Treasury shares Total shareholders’ equity March 04, 2002

Commitments and contingencies (note 14)

St. Petersburg, Russian Federation Total liabilities and shareholders’ equity

$

See accompanying notes to consolidated financial statements. A. A. Nikonov Acting Finance and Economic Director

46

ANNUAL REPORT 2001

S. A. Alexeyev Chief accountant

ANNUAL REPORT 2001

47

BALTIKA BREWERY AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2001 and 2000 (in thousands U.S. dollars)

BALTIKA BREWERY AND SUBSIDIARIES Consolidated Statement of Shareholders’ Equity and Comprehensive Income Years ended December 31, 2001 and 2000 (in thousands U.S. dollars, except share data)

2001 Net sales

$

Cost of goods sold Gross profit

2000

Preference shares

537,377

333,407

298,270

197,816

Balances at January 1, 2000

135,591

Net income

239,107

$

2,963

Ordinary shares

23,530

Retained earnings

188,588

Treasury shares

Total shareholders equity




83,111

215,081 83,111

Comprehensive income Selling, general and administrative expenses Operating income

63,100

26,924

176,007

108,667

Dividends declared Preference shares Ordinary shares Balances at December 31, 2000

Other income (expense) Equity in income of affiliates Interest income

641

1,025

Net income

3,221

1,387

Treasury stock acquired

Interest expense (note 10)

(2,060)

(2,481)

Comprehensive income

Other expense, net

(1,440)

(2,971)

Dividends declared

Foreign currency income/(loss)

(2,793)

3,428

173,576

109,055

Income before income taxes

26,152

2,963

23,530

(2,330) (14,202)

255,167




129,027

281,660 129,027

(463)

(463)


Preference shares

(1,980)

Ordinary shares Balances at December 31, 2001

Income taxes (note 11)

$

(2,330) (14,202)

(1,980)

(12,117) $

2,963

23,530

370,097

(12,117) (463)

396,127

21,760 See accompanying notes to consolidated financial statements.

Income for the year Minority interest Net income

$

147,424

87,295

18,397

4,184

129,027

83,111

See accompanying notes to consolidated financial statements.

48

ANNUAL REPORT 2001

ANNUAL REPORT 2001

49

BALTIKA BREWERY AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2001 and 2000 (in thousands U.S. dollars)

BALTIKA BREWERY AND SUBSIDIARIES Consolidated Statement of Shareholders’ Equity and Comprehensive Income Years ended December 31, 2001 and 2000 (in thousands U.S. dollars, except share data)

2001 Net sales

$

Cost of goods sold Gross profit

2000

Preference shares

537,377

333,407

298,270

197,816

Balances at January 1, 2000

135,591

Net income

239,107

$

2,963

Ordinary shares

23,530

Retained earnings

188,588

Treasury shares

Total shareholders equity




83,111

215,081 83,111

Comprehensive income Selling, general and administrative expenses Operating income

63,100

26,924

176,007

108,667

Dividends declared Preference shares Ordinary shares Balances at December 31, 2000

Other income (expense) Equity in income of affiliates Interest income

641

1,025

Net income

3,221

1,387

Treasury stock acquired

Interest expense (note 10)

(2,060)

(2,481)

Comprehensive income

Other expense, net

(1,440)

(2,971)

Dividends declared

Foreign currency income/(loss)

(2,793)

3,428

173,576

109,055

Income before income taxes

26,152

2,963

23,530

(2,330) (14,202)

255,167




129,027

281,660 129,027

(463)

(463)


Preference shares

(1,980)

Ordinary shares Balances at December 31, 2001

Income taxes (note 11)

$

(2,330) (14,202)

(1,980)

(12,117) $

2,963

23,530

370,097

(12,117) (463)

396,127

21,760 See accompanying notes to consolidated financial statements.

Income for the year Minority interest Net income

$

147,424

87,295

18,397

4,184

129,027

83,111

See accompanying notes to consolidated financial statements.

48

ANNUAL REPORT 2001

ANNUAL REPORT 2001

49

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2001 and 2000 (in thousands U.S. dollars, except share data)

2001 Net cash provided by operating activities (note 13)

2000

161,913

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

53,430

(a) Description of Business Baltika Brewery (the “Company”) is an open joint
stock company incorporated under Russian legislation and was

Cash flows from investing activities:

registered on July 21, 1992. The Company produces beer and mineral water. Other services it renders include the

Capital expenditures

(114,656)

Proceeds on disposal of fixed assets Acquisition of subsidiary – Tulskoye pivo Brewery Inflow from subsidiary acquisition – Tulskoye pivo Brewery Purchase of investment securities Additional contribution to associate Purchase of bank promissory notes Net change in loans made to third parties Net cash used in investing activities

(70,634)

1,477

117




(19,991)




21,584

(369)

(9)

(407)

(838)

(2,890)




transport and distribution of Company products. As at year end the subsidiaries of the Company are Tulskoe pivo Brewery (Tulskoe pivo), Baltika
Don Brewery Plc. (Baltika
Don) and Baltika
Moscow Ltd. Their principal activities are similar to those of the Company. Most of the Company’s customers are located in Russia. The Company’s raw materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers. (b) Effects of the Russian business environment on activities in Russia

(10,134)

2,259

The Russian Federation has been experiencing political and economic change which has affected, and may contin


(126,979)

(67,512)

ue to affect, the activities of enterprises operating in this environment. Consequently, operations in the Russian Federation involve risks, which do not typically exist in other markets.

Cash flows from financing activities:

The accompanying financial statements reflect management’s assessment of the impact of the Russian business

Bank indebtedness

(6,708)

9,366

environment on the operations and the financial position of Baltika Brewery and subsidiaries (the Group). The

(13,712)

(16,135)

future business environment may differ from management’s assessment. The impact of such differences on the

Dividends paid to minority

(534)

(71)

Payments to acquire treasury shares

(463)




Proceeds from long
term borrowings




20,000

Repayments of long
term borrowings

(2,000)




The Russian rouble is not a convertible currency outside the Russian Federation and, accordingly, any conversion

Net cash used in financing activities

(23,417)

13,160

of Russian rouble amounts to US dollars should not be construed as a representation that Russian rouble amounts

Dividends paid

operations and financial position of the Group may be significant. (c) Convertibility of the Rouble

have been, could be, or will be in the future, convertible into US dollars at the exchange rate shown, or at any other Increase/(decrease) in cash and cash equivalents

11,517

Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year

$

(922)

4,897

5,819

16,414

4,897

exchange rate. (d) Principles of Accounting The statutory accounts of the Company are maintained in accordance with Russian accounting regulations and are stated in Russian roubles. The accompanying financial statements have been prepared in accordance with U.S. gen


See accompanying notes to consolidated financial statements.

erally accepted accounting principles (“US GAAP”) and have been translated to U.S. dollars (“USD”) in accordance with the Statement of Financial Accounting Standards No. 52 (“SFAS 52”), “Accounting for Foreign Currency Translation”. USD transactions are shown at their historical value. Foreign currency (Russian rouble) denominated accounts are converted into USD in accordance with accounting for highly inflationary economies under SFAS 52. Under this method, monetary assets and liabilities denominated in roubles are translated into USD at the prevailing period end exchange rate. All other assets and liabilities are translated at historic exchange rates. Revenues, expenses and cash flows have been translated, where practicable, at historic rates as of the date of the transaction. Otherwise, revenues, expenses and cash flows have been translated using annual average rates. Foreign currency gains and losses resulting from the use of these different rates are included in the statement of operations. Rouble to USD exchange rates used at December 31, 2001 and 2000 were 30.14 and 28.16 roubles to 1 USD, respectively.

50

ANNUAL REPORT 2001

ANNUAL REPORT 2001

51

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2001 and 2000 (in thousands U.S. dollars, except share data)

2001 Net cash provided by operating activities (note 13)

2000

161,913

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

53,430

(a) Description of Business Baltika Brewery (the “Company”) is an open joint
stock company incorporated under Russian legislation and was

Cash flows from investing activities:

registered on July 21, 1992. The Company produces beer and mineral water. Other services it renders include the

Capital expenditures

(114,656)

Proceeds on disposal of fixed assets Acquisition of subsidiary – Tulskoye pivo Brewery Inflow from subsidiary acquisition – Tulskoye pivo Brewery Purchase of investment securities Additional contribution to associate Purchase of bank promissory notes Net change in loans made to third parties Net cash used in investing activities

(70,634)

1,477

117




(19,991)




21,584

(369)

(9)

(407)

(838)

(2,890)




transport and distribution of Company products. As at year end the subsidiaries of the Company are Tulskoe pivo Brewery (Tulskoe pivo), Baltika
Don Brewery Plc. (Baltika
Don) and Baltika
Moscow Ltd. Their principal activities are similar to those of the Company. Most of the Company’s customers are located in Russia. The Company’s raw materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers. (b) Effects of the Russian business environment on activities in Russia

(10,134)

2,259

The Russian Federation has been experiencing political and economic change which has affected, and may contin


(126,979)

(67,512)

ue to affect, the activities of enterprises operating in this environment. Consequently, operations in the Russian Federation involve risks, which do not typically exist in other markets.

Cash flows from financing activities:

The accompanying financial statements reflect management’s assessment of the impact of the Russian business

Bank indebtedness

(6,708)

9,366

environment on the operations and the financial position of Baltika Brewery and subsidiaries (the Group). The

(13,712)

(16,135)

future business environment may differ from management’s assessment. The impact of such differences on the

Dividends paid to minority

(534)

(71)

Payments to acquire treasury shares

(463)




Proceeds from long
term borrowings




20,000

Repayments of long
term borrowings

(2,000)




The Russian rouble is not a convertible currency outside the Russian Federation and, accordingly, any conversion

Net cash used in financing activities

(23,417)

13,160

of Russian rouble amounts to US dollars should not be construed as a representation that Russian rouble amounts

Dividends paid

operations and financial position of the Group may be significant. (c) Convertibility of the Rouble

have been, could be, or will be in the future, convertible into US dollars at the exchange rate shown, or at any other Increase/(decrease) in cash and cash equivalents

11,517

Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year

$

(922)

4,897

5,819

16,414

4,897

exchange rate. (d) Principles of Accounting The statutory accounts of the Company are maintained in accordance with Russian accounting regulations and are stated in Russian roubles. The accompanying financial statements have been prepared in accordance with U.S. gen


See accompanying notes to consolidated financial statements.

erally accepted accounting principles (“US GAAP”) and have been translated to U.S. dollars (“USD”) in accordance with the Statement of Financial Accounting Standards No. 52 (“SFAS 52”), “Accounting for Foreign Currency Translation”. USD transactions are shown at their historical value. Foreign currency (Russian rouble) denominated accounts are converted into USD in accordance with accounting for highly inflationary economies under SFAS 52. Under this method, monetary assets and liabilities denominated in roubles are translated into USD at the prevailing period end exchange rate. All other assets and liabilities are translated at historic exchange rates. Revenues, expenses and cash flows have been translated, where practicable, at historic rates as of the date of the transaction. Otherwise, revenues, expenses and cash flows have been translated using annual average rates. Foreign currency gains and losses resulting from the use of these different rates are included in the statement of operations. Rouble to USD exchange rates used at December 31, 2001 and 2000 were 30.14 and 28.16 roubles to 1 USD, respectively.

50

ANNUAL REPORT 2001

ANNUAL REPORT 2001

51

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

(e) Principles of Consolidation

Available
for
sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax

Subsidiary companies are those companies in which the Company directly or indirectly holds more than 50% of the

effect, on available
for
sale securities are excluded from earnings and are reported as a separate component of

voting rights and is able to exercise control. Subsidiary companies have been fully consolidated from the date the

other comprehensive income until realized. Realized gains and losses from the sale of available
for
sale securities

Company acquired control. Minority interests in the income and assets and liabilities of the subsidiaries are dis


are determined on a specific identification basis.

closed separately.

A decline in the market value of any available
for
sale security below cost that is deemed to be other than tempo


As at December 31, 2001, the subsidiary companies which are both included in the consolidation and registered in

rary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost

Russia, consist of the following:

basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related Nature of Business

Ownership

available
for
sale security as an adjustment to yield using the effective interest method. Dividend and interest

Baltika
Moscow Ltd.

Distribution of Baltika beer

100.00%

income are recognized when earned.

Baltika
Don

Production and distribution of beer

82.03%

Tulskoe pivo

Production and distribution of beer

50.00%

Name

(j) Derivative Instruments and Hedging Activities In June 1998 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting

The Company has obtained control over Tulskoe pivo by means of 50% direct ownership, and the fact that another

Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Certain Hedging Activities.” In June 2000

major shareholder in Tulskoe pivo is the parent of the Company owing directly 35.69%. The Company is able to

the FASB issued SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activity, an

appoint or remove the majority of the members of the Board of Directors.

Amendment of SFAS 133.” SFAS No. 133 and SFAS No. 138 require that all derivative instruments be recorded on the

Associated companies are those companies over which the Company can exercise significant influence, but which

balance sheet at their respective fair values. SFAS No. 133 and SFAS No. 138 are effective for all fiscal quarters of

it cannot control. Associated companies are accounted for by the equity method. As at December 31, 2001, the only

all fiscal years beginning after June 30, 2000; the Company adopted SFAS No. 133 and SFAS No. 138 on January 1,

associated company is a company founded in conjunction with the Soufflet group
ZAO Malthouse Soufflet St.

2001. Financial assets and liabilities as at December 31, 2001 were re
measured to fair values in accordance with

Petersburg (ZAO Soufflet). This company produces malt.

the provisions of SFAS 107 (see note 17 )

(f) Cash Equivalents

(k) Investments in Affiliated Companies

Cash equivalents of $16,414 th. and $4,897 th. at December 31, 2001 and 2000, respectively, consist of bank bal


Investments in the common stock of affiliated companies are accounted for by the equity method. The Company

ances and short
term certificates of deposit held in local banks. For purposes of the consolidated statements of

would recognize a loss when there is a loss in value in the investment which is other than a temporary decline.

cash flows, the Company considers all short
term deposits to be cash equivalents. (l) Property, Plant and Equipment (g) Loans Receivable

Property, plant and equipment are stated at cost. Depreciation on plant and equipment is calculated on the

Loans receivable are recorded at cost, less the related allowance for impaired loans receivable. Management, con


straight
line method over the estimated useful lives of the assets as follows.

sidering current information and events regarding the borrowers’ ability to repay their obligations, considers a loan

Asset

to be impaired when it is probable that the Company will be unable to collect all amounts due according to the

Buildings Construction Machinery and equipment Trucks Other

contractual terms of the loan agreement. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate. Impairment losses are included in the allowance for doubtful accounts through a charge to bad debt expense. (h) Inventories

Estimated useful lives

50
100 years 25
50 years 8.3
10 years 7.1 years 8.3
10 years

(m) Income Taxes

Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average method

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recog


for all inventories.

nized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryfor


(i) Investment Securities

52

wards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income

Investment securities at December 31, 2001 consist of equity securities. The Company classifies its equity securi


in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax

ties as available
for
sale.

assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ANNUAL REPORT 2001

ANNUAL REPORT 2001

53

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

(e) Principles of Consolidation

Available
for
sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax

Subsidiary companies are those companies in which the Company directly or indirectly holds more than 50% of the

effect, on available
for
sale securities are excluded from earnings and are reported as a separate component of

voting rights and is able to exercise control. Subsidiary companies have been fully consolidated from the date the

other comprehensive income until realized. Realized gains and losses from the sale of available
for
sale securities

Company acquired control. Minority interests in the income and assets and liabilities of the subsidiaries are dis


are determined on a specific identification basis.

closed separately.

A decline in the market value of any available
for
sale security below cost that is deemed to be other than tempo


As at December 31, 2001, the subsidiary companies which are both included in the consolidation and registered in

rary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost

Russia, consist of the following:

basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related Nature of Business

Ownership

available
for
sale security as an adjustment to yield using the effective interest method. Dividend and interest

Baltika
Moscow Ltd.

Distribution of Baltika beer

100.00%

income are recognized when earned.

Baltika
Don

Production and distribution of beer

82.03%

Tulskoe pivo

Production and distribution of beer

50.00%

Name

(j) Derivative Instruments and Hedging Activities In June 1998 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting

The Company has obtained control over Tulskoe pivo by means of 50% direct ownership, and the fact that another

Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Certain Hedging Activities.” In June 2000

major shareholder in Tulskoe pivo is the parent of the Company owing directly 35.69%. The Company is able to

the FASB issued SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activity, an

appoint or remove the majority of the members of the Board of Directors.

Amendment of SFAS 133.” SFAS No. 133 and SFAS No. 138 require that all derivative instruments be recorded on the

Associated companies are those companies over which the Company can exercise significant influence, but which

balance sheet at their respective fair values. SFAS No. 133 and SFAS No. 138 are effective for all fiscal quarters of

it cannot control. Associated companies are accounted for by the equity method. As at December 31, 2001, the only

all fiscal years beginning after June 30, 2000; the Company adopted SFAS No. 133 and SFAS No. 138 on January 1,

associated company is a company founded in conjunction with the Soufflet group
ZAO Malthouse Soufflet St.

2001. Financial assets and liabilities as at December 31, 2001 were re
measured to fair values in accordance with

Petersburg (ZAO Soufflet). This company produces malt.

the provisions of SFAS 107 (see note 17 )

(f) Cash Equivalents

(k) Investments in Affiliated Companies

Cash equivalents of $16,414 th. and $4,897 th. at December 31, 2001 and 2000, respectively, consist of bank bal


Investments in the common stock of affiliated companies are accounted for by the equity method. The Company

ances and short
term certificates of deposit held in local banks. For purposes of the consolidated statements of

would recognize a loss when there is a loss in value in the investment which is other than a temporary decline.

cash flows, the Company considers all short
term deposits to be cash equivalents. (l) Property, Plant and Equipment (g) Loans Receivable

Property, plant and equipment are stated at cost. Depreciation on plant and equipment is calculated on the

Loans receivable are recorded at cost, less the related allowance for impaired loans receivable. Management, con


straight
line method over the estimated useful lives of the assets as follows.

sidering current information and events regarding the borrowers’ ability to repay their obligations, considers a loan

Asset

to be impaired when it is probable that the Company will be unable to collect all amounts due according to the

Buildings Construction Machinery and equipment Trucks Other

contractual terms of the loan agreement. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate. Impairment losses are included in the allowance for doubtful accounts through a charge to bad debt expense. (h) Inventories

Estimated useful lives

50
100 years 25
50 years 8.3
10 years 7.1 years 8.3
10 years

(m) Income Taxes

Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average method

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recog


for all inventories.

nized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryfor


(i) Investment Securities

52

wards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income

Investment securities at December 31, 2001 consist of equity securities. The Company classifies its equity securi


in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax

ties as available
for
sale.

assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ANNUAL REPORT 2001

ANNUAL REPORT 2001

53

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

(n) Pension and Other Postretirement Plans

well as their effect on the future operation and earnings are not predictable. The occurrence of significant losses

The Company and its subsidiaries make contributions to the Pension Fund of the Russian Federation as required by

and impairments associated with facilities could have a material effect on the Company’s operations and no provi


Russian law. The contributions amount to 26% of gross salaries and are expensed as incurred. The Company has

sions for self
insurance to cover such items are incorporated into these financial statements.

not recorded any commitments payable to management or employees on retirement. (s) Recently Issued Accounting Standards (o) Use of Estimates

In August, 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long
Lived Assets

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets

(SFAS No. 144). SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long


and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in con


lived assets. This Statement requires that long
lived assets be reviewed for impairment whenever events or changes

formity with generally accepted accounting principles. Actual results could differ from those estimates.

in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expect


(p) Impairment of Long
Lived Assets and Long
Lived Assets to Be Disposed Of

ed to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an

The Company accounts for long
lived assets in accordance with the provisions of SFAS No. 121, “Accounting for the

impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value

Impairment of Long
Lived Assets and for Long
Lived Assets to Be Disposed Of.” This Statement requires that long


of the asset. SFAS No. 144 requires companies to separately report discontinued operations and extends that

lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in cir


reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution

cumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be

to owners) or is classified as held for sale. Assets to be disposed of are reported at the lower of the carrying amount

held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected

or fair value less costs to sell. The Company is required to adopt SFAS No. 144 on January 1, 2002.

to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (q) Revenue Recognition

(2) TRADE RECEIVABLES Trade receivables at December 31, 2001 and 2000 consist of the following: 2001

The Company recognizes revenue on sales when products are shipped and the customer takes ownership and assumes risk of loss. Revenues are stated net of value
added taxes charged to customers.

Trade receivables

$

6,459

4,825

(290)

(781)

$

6,169

4,044

2001

2000

$

10,552







418

$

10,552

418

Less: allowance for doubtful debts (r) Commitments and Contingencies

2000

A considerable degree of uncertainty currently exists in the Russian Federation with regard to the direction of domestic economic policy, regulatory policy and political developments. Group management is unable to predict what changes in conditions may occur and what effect such changes may have on the financial statements.

(3) LOANS RECEIVABLE

As Russian commercial legislation, and tax legislation in particular, contains provisions which can be interpreted in more than one way, and due to the tax authorities’ practice, as developed in a generally unstable environment,

Loans receivable at December 31, 2001 and 2000 consist of the following:

of arbitrarily judging business activities and arbitrarily classifying enterprises’ activities where the regulatory basis for such a decision is insufficient, management’s judgement of the Group’s business activities may not coincide

Loan receivable from JSC Krinitsa

with the tax authorities’ interpretation of these same activities.

Loan receivable from ZAO Soufflet

Management is not currently aware that any situations exist which may be challenged by the tax authorities which have not already been reflected in the financial statements. However, if a particular treatment was to be chal
lenged by the tax authorities, significant penalties may be imposed on the Group. Although the actual amount of

See note (14) Legal proceeding below for more details covering the JSC Krinitsa Loan.

tax due on a transaction may be minimal, penalties can be charged at 20% of the value of the outstanding tax amount and also include interest accrued thereon at 1/300 of Central Bank of Russia interest rate per day. The Group is affected by political, legislative, fiscal and regulatory developments in Russia and also to physical risks of various kinds. The nature and frequency of the developments and risks, which are not covered by insurance, as

54

ANNUAL REPORT 2001

ANNUAL REPORT 2001

55

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

(n) Pension and Other Postretirement Plans

well as their effect on the future operation and earnings are not predictable. The occurrence of significant losses

The Company and its subsidiaries make contributions to the Pension Fund of the Russian Federation as required by

and impairments associated with facilities could have a material effect on the Company’s operations and no provi


Russian law. The contributions amount to 26% of gross salaries and are expensed as incurred. The Company has

sions for self
insurance to cover such items are incorporated into these financial statements.

not recorded any commitments payable to management or employees on retirement. (s) Recently Issued Accounting Standards (o) Use of Estimates

In August, 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long
Lived Assets

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets

(SFAS No. 144). SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long


and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in con


lived assets. This Statement requires that long
lived assets be reviewed for impairment whenever events or changes

formity with generally accepted accounting principles. Actual results could differ from those estimates.

in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expect


(p) Impairment of Long
Lived Assets and Long
Lived Assets to Be Disposed Of

ed to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an

The Company accounts for long
lived assets in accordance with the provisions of SFAS No. 121, “Accounting for the

impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value

Impairment of Long
Lived Assets and for Long
Lived Assets to Be Disposed Of.” This Statement requires that long


of the asset. SFAS No. 144 requires companies to separately report discontinued operations and extends that

lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in cir


reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution

cumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be

to owners) or is classified as held for sale. Assets to be disposed of are reported at the lower of the carrying amount

held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected

or fair value less costs to sell. The Company is required to adopt SFAS No. 144 on January 1, 2002.

to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (q) Revenue Recognition

(2) TRADE RECEIVABLES Trade receivables at December 31, 2001 and 2000 consist of the following: 2001

The Company recognizes revenue on sales when products are shipped and the customer takes ownership and assumes risk of loss. Revenues are stated net of value
added taxes charged to customers.

Trade receivables

$

6,459

4,825

(290)

(781)

$

6,169

4,044

2001

2000

$

10,552







418

$

10,552

418

Less: allowance for doubtful debts (r) Commitments and Contingencies

2000

A considerable degree of uncertainty currently exists in the Russian Federation with regard to the direction of domestic economic policy, regulatory policy and political developments. Group management is unable to predict what changes in conditions may occur and what effect such changes may have on the financial statements.

(3) LOANS RECEIVABLE

As Russian commercial legislation, and tax legislation in particular, contains provisions which can be interpreted in more than one way, and due to the tax authorities’ practice, as developed in a generally unstable environment,

Loans receivable at December 31, 2001 and 2000 consist of the following:

of arbitrarily judging business activities and arbitrarily classifying enterprises’ activities where the regulatory basis for such a decision is insufficient, management’s judgement of the Group’s business activities may not coincide

Loan receivable from JSC Krinitsa

with the tax authorities’ interpretation of these same activities.

Loan receivable from ZAO Soufflet

Management is not currently aware that any situations exist which may be challenged by the tax authorities which have not already been reflected in the financial statements. However, if a particular treatment was to be chal
lenged by the tax authorities, significant penalties may be imposed on the Group. Although the actual amount of

See note (14) Legal proceeding below for more details covering the JSC Krinitsa Loan.

tax due on a transaction may be minimal, penalties can be charged at 20% of the value of the outstanding tax amount and also include interest accrued thereon at 1/300 of Central Bank of Russia interest rate per day. The Group is affected by political, legislative, fiscal and regulatory developments in Russia and also to physical risks of various kinds. The nature and frequency of the developments and risks, which are not covered by insurance, as

54

ANNUAL REPORT 2001

ANNUAL REPORT 2001

55

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

(9) LONG
TERM DEBT

(4) INVENTORIES Inventories are stated at the lower of cost or market value and are calculated using the weighted
average method.

Long
term debt at December 31, 2001 and 2000 consists of the following:

Inventory consists of the following: Raw materials and supplies

$

Work in progress Finished goods $

2000

18,096

20,198

2000

42,694

38,230

5,553

3,382

principal due November 2006

8,447

4,858

Total long
term debt

18,096

20,198

56,694

46,470

Less current installments

(4,096)

(2,198)

14,000

18,000

Borrowings under financing agreement with EBRD, LIBOR interest plus margin, payable each six months,

Long
term debt, excluding current installments (5) PREPAYMENTS AND OTHER RECEIVABLES

$

In 1999, the Company entered into a financing agreement with EBRD that permits the Company to borrow up to $40,000 th., bearing interest at LIBOR plus margin percentage. Borrowings under the financing agreement should

Prepayments and other receivables at December 31, 2001 and 2000 consists of the following: VAT receivable

2001 2001

$

2001

2000

11,457

10,242

According to the EBRD loan agreement, unless the Bank otherwise agrees in writing, the Company may not declare

be repaid in ten equal semi
annual installments commencing November 28, 2001.

Deferred tax asset

1,424

1,196

or pay any dividends, distribute any of its share capital, purchase, redeem or acquire any of its shares, or make any

Profit tax receivable

7,210

2,338

payment of principal on any subordinated debt, if:

Advances to suppliers

4,593

4,229

1. An Event of Default or Potential Event of Default has occurred and is continuing or would occur as a result of

Bank promissory notes

2,890




Other $

such declaration or payment or such other action as aforesaid; or

4,904

3,649

2. The resulting proforma Debt Service Coverage Ratio as defined by the contract, and without double counting any

32,478

21,654

declaration, payment or making of the same dividend or distribution for the annualised 11
month period ending with the month prior to the proposed undertaking of such action as referred to point 1 above would be below 1.8:1.

(6) INVESTMENT SECURITIES Investment securities consist of equity securities in Menatep Bank, Bin Bank and 10% stake in Rosbalt agency.

(10) INTEREST COST The Company has not capitalized interest cost as a component of the cost of construction in progress, as no loans

All securities are classified in available
for
sale category.

were received for the purpose of financing construction works. The following is a summary of interest cost incurred during 2001 and 2000: 2001

(7) INVESTMENTS IN AFFILIATED COMPANIES Investments in affiliated companies consist of 30% of the common stock of ZAO Soufflet, malt producing company.

Interest cost capitalized

$







2,060

2,481

2,060

2,481

Deferred

Total

Interest cost charged to income Total interest cost incurred

2000

$

(8) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31, 2001 and 2000 consists of the following: 2001 Buildings

$

Machinery and equipment Construction in progress Less: accumulated depreciation $

2000

94,080

78,132

335,153

226,549

(11) INCOME TAXES Income tax expense attributable to income from continuing operations consists of: Current

37,607

58,625

Year ended December 31, 2001

26,380

(228)

26,152

(84,148)

(58,705)

Year ended December 31, 2000

22,956

(1,196)

21,760

382,692

304,601

Property, plant and equipment includes production equipment, which has been pledged under the terms of long
term loan agreement with EBRD, amounting to $66,765 th. as at the date of pledge in 1999.

56

ANNUAL REPORT 2001

ANNUAL REPORT 2001

57

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

(9) LONG
TERM DEBT

(4) INVENTORIES Inventories are stated at the lower of cost or market value and are calculated using the weighted
average method.

Long
term debt at December 31, 2001 and 2000 consists of the following:

Inventory consists of the following: Raw materials and supplies

$

Work in progress Finished goods $

2000

18,096

20,198

2000

42,694

38,230

5,553

3,382

principal due November 2006

8,447

4,858

Total long
term debt

18,096

20,198

56,694

46,470

Less current installments

(4,096)

(2,198)

14,000

18,000

Borrowings under financing agreement with EBRD, LIBOR interest plus margin, payable each six months,

Long
term debt, excluding current installments (5) PREPAYMENTS AND OTHER RECEIVABLES

$

In 1999, the Company entered into a financing agreement with EBRD that permits the Company to borrow up to $40,000 th., bearing interest at LIBOR plus margin percentage. Borrowings under the financing agreement should

Prepayments and other receivables at December 31, 2001 and 2000 consists of the following: VAT receivable

2001 2001

$

2001

2000

11,457

10,242

According to the EBRD loan agreement, unless the Bank otherwise agrees in writing, the Company may not declare

be repaid in ten equal semi
annual installments commencing November 28, 2001.

Deferred tax asset

1,424

1,196

or pay any dividends, distribute any of its share capital, purchase, redeem or acquire any of its shares, or make any

Profit tax receivable

7,210

2,338

payment of principal on any subordinated debt, if:

Advances to suppliers

4,593

4,229

1. An Event of Default or Potential Event of Default has occurred and is continuing or would occur as a result of

Bank promissory notes

2,890




Other $

such declaration or payment or such other action as aforesaid; or

4,904

3,649

2. The resulting proforma Debt Service Coverage Ratio as defined by the contract, and without double counting any

32,478

21,654

declaration, payment or making of the same dividend or distribution for the annualised 11
month period ending with the month prior to the proposed undertaking of such action as referred to point 1 above would be below 1.8:1.

(6) INVESTMENT SECURITIES Investment securities consist of equity securities in Menatep Bank, Bin Bank and 10% stake in Rosbalt agency.

(10) INTEREST COST The Company has not capitalized interest cost as a component of the cost of construction in progress, as no loans

All securities are classified in available
for
sale category.

were received for the purpose of financing construction works. The following is a summary of interest cost incurred during 2001 and 2000: 2001

(7) INVESTMENTS IN AFFILIATED COMPANIES Investments in affiliated companies consist of 30% of the common stock of ZAO Soufflet, malt producing company.

Interest cost capitalized

$







2,060

2,481

2,060

2,481

Deferred

Total

Interest cost charged to income Total interest cost incurred

2000

$

(8) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31, 2001 and 2000 consists of the following: 2001 Buildings

$

Machinery and equipment Construction in progress Less: accumulated depreciation $

2000

94,080

78,132

335,153

226,549

(11) INCOME TAXES Income tax expense attributable to income from continuing operations consists of: Current

37,607

58,625

Year ended December 31, 2001

26,380

(228)

26,152

(84,148)

(58,705)

Year ended December 31, 2000

22,956

(1,196)

21,760

382,692

304,601

Property, plant and equipment includes production equipment, which has been pledged under the terms of long
term loan agreement with EBRD, amounting to $66,765 th. as at the date of pledge in 1999.

56

ANNUAL REPORT 2001

ANNUAL REPORT 2001

57

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

Income tax expense attributable to income from continuing operations differed from the amounts computed by

As of December 31, 2001 the Company had authorized and issued share capital of 107,087,200 ordinary shares and

applying the income tax rate of 29% to pretax income from continuing operations as a result of the following:

13,485,600 preference shares with a par value of 1 rouble each.

Computed “expected” tax expense

$

2001

2000

Preference shares earn dividends calculated on the basis of the nominal value multiplied by the interest rate of the

50,337

32,716

Savings Bank of the Russian Federation, plus 10%. In accordance with the Company Charter, preference shares grant

Increase (reduction) in income taxes resulting from:

shareholders the following additional rights: if the Company is liquidated, the nominal value of preference shares

Change in the beginning
of
the year balance of deferred

will be returned to shareholders. Shareholders are entitle to sell their shares to the Company at their nominal value

tax assets and liabilities allocated to income tax expense

(228)

(1,196)

US GAAP adjustments

(422)

352

(25,211)

(7,047)

Tax concessions on fixed assets purchases Tax concessions granted in respect of local portion

adjusted for inflation. Distributable reserves are restricted to the rouble denominated retained earnings of the Company as determined by Russian legislation. Distributable reserves of subsidiaries may be distributed via parent Company first. At December 31, 2001 the dollar equivalent of the amount available for distribution for Parent company and its sub


of tax for excise payers Tax effect of non
deductible expenditures Other, net $

(6,551)

(8,416)

5,114

7,601

3,113

(2,250)

26,152

21,760

sidiaries, calculated based on statutory retained earnings of consolidated financial statements of the Company in roubles with application of period end rate is $ 264,557 th. (2000: $154,529 th.). The following table demonstrates declared dividends for the years ended December 31, 2001 and December 31, 2000:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and

USD per share

Thousands

equivalent

USD

2000

deferred tax liabilities at December 31, 2001 and 2000 are presented below. 2001

2000 Preference shares

Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts

RUR per share

$

Final portion of dividends for 1999

193

6.79

1,144

Interim dividends for 2000

197

7.03

1,186

183

139

122

18

125

158

Final portion of dividends for 1999

148

5.22

6,986

for unused vacation and period end bonuses

1,306

840

Interim dividends for 2000

151

5.39

7,216

Investments in affiliated companies under equity method

(442)

(67)

Total dividends declared ordinary shares in 2000

156

106

Inventories, principally due to obsolete inventory written off

Total dividends declared preference shares in 2000

2,330

Prepayments and other receivables, principally due to allowance for doubtful accounts Accrued salaries, wages and benefits, principally due to reserve

Unrealized inter
company gain in inventory Other Total gross deferred tax assets

(26)

2

1,424

1,196

Less valuation allowance Net deferred tax assets

$







1,424

1,196

(12) SHARE CAPITAL AND DIVIDENDS

Ordinary shares

14,202

2001 Preference shares Final portion of dividends for 2000

132

4.59

774

Interim dividends for 2001

208

7.15

1,206

Total dividends declared preference shares in 2001

1,980

As of December 31, 2000 the Company had authorized and issued share capital of 1,338,590 ordinary shares and

58

168,570 preference shares with a par value of 80 roubles each.

Ordinary shares

The shareholders meeting of the Company held on March 28, 2001 approved a decision to carry out a split of the

Final portion of dividends for 2000

102

3.55

nominal value of preference and ordinary shares from 80 roubles per share to 1 rouble per share and thus increase

Interim dividends for 2001

160

5.5

the number of shares on issue. These changes were registered on September 19, 2001.

Total dividends declared ordinary shares in 2001

ANNUAL REPORT 2001

4,752 7,365 12,117

ANNUAL REPORT 2001

59

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

Income tax expense attributable to income from continuing operations differed from the amounts computed by

As of December 31, 2001 the Company had authorized and issued share capital of 107,087,200 ordinary shares and

applying the income tax rate of 29% to pretax income from continuing operations as a result of the following:

13,485,600 preference shares with a par value of 1 rouble each.

Computed “expected” tax expense

$

2001

2000

Preference shares earn dividends calculated on the basis of the nominal value multiplied by the interest rate of the

50,337

32,716

Savings Bank of the Russian Federation, plus 10%. In accordance with the Company Charter, preference shares grant

Increase (reduction) in income taxes resulting from:

shareholders the following additional rights: if the Company is liquidated, the nominal value of preference shares

Change in the beginning
of
the year balance of deferred

will be returned to shareholders. Shareholders are entitle to sell their shares to the Company at their nominal value

tax assets and liabilities allocated to income tax expense

(228)

(1,196)

US GAAP adjustments

(422)

352

(25,211)

(7,047)

Tax concessions on fixed assets purchases Tax concessions granted in respect of local portion

adjusted for inflation. Distributable reserves are restricted to the rouble denominated retained earnings of the Company as determined by Russian legislation. Distributable reserves of subsidiaries may be distributed via parent Company first. At December 31, 2001 the dollar equivalent of the amount available for distribution for Parent company and its sub


of tax for excise payers Tax effect of non
deductible expenditures Other, net $

(6,551)

(8,416)

5,114

7,601

3,113

(2,250)

26,152

21,760

sidiaries, calculated based on statutory retained earnings of consolidated financial statements of the Company in roubles with application of period end rate is $ 264,557 th. (2000: $154,529 th.). The following table demonstrates declared dividends for the years ended December 31, 2001 and December 31, 2000:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and

USD per share

Thousands

equivalent

USD

2000

deferred tax liabilities at December 31, 2001 and 2000 are presented below. 2001

2000 Preference shares

Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts

RUR per share

$

Final portion of dividends for 1999

193

6.79

1,144

Interim dividends for 2000

197

7.03

1,186

183

139

122

18

125

158

Final portion of dividends for 1999

148

5.22

6,986

for unused vacation and period end bonuses

1,306

840

Interim dividends for 2000

151

5.39

7,216

Investments in affiliated companies under equity method

(442)

(67)

Total dividends declared ordinary shares in 2000

156

106

Inventories, principally due to obsolete inventory written off

Total dividends declared preference shares in 2000

2,330

Prepayments and other receivables, principally due to allowance for doubtful accounts Accrued salaries, wages and benefits, principally due to reserve

Unrealized inter
company gain in inventory Other Total gross deferred tax assets

(26)

2

1,424

1,196

Less valuation allowance Net deferred tax assets

$







1,424

1,196

(12) SHARE CAPITAL AND DIVIDENDS

Ordinary shares

14,202

2001 Preference shares Final portion of dividends for 2000

132

4.59

774

Interim dividends for 2001

208

7.15

1,206

Total dividends declared preference shares in 2001

1,980

As of December 31, 2000 the Company had authorized and issued share capital of 1,338,590 ordinary shares and

58

168,570 preference shares with a par value of 80 roubles each.

Ordinary shares

The shareholders meeting of the Company held on March 28, 2001 approved a decision to carry out a split of the

Final portion of dividends for 2000

102

3.55

nominal value of preference and ordinary shares from 80 roubles per share to 1 rouble per share and thus increase

Interim dividends for 2001

160

5.5

the number of shares on issue. These changes were registered on September 19, 2001.

Total dividends declared ordinary shares in 2001

ANNUAL REPORT 2001

4,752 7,365 12,117

ANNUAL REPORT 2001

59

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

For US GAAP purposes, share capital has been translated into US dollars in the accompanying balance sheet at the

(14) COMMITMENTS AND CONTINGENCIES As at December 31, 2001, the Company had the following major capital commitments to be completed in 2002:

exchange rate effective as at the date of registration. The Shareholder’s meeting held on March 28, 2001 approved dividends equivalent to 5,527 thousand US dollars for

Project

the second half of 2000.

St. Petersburg plant

Amount in thousands USD 7,475

The Board of Directors held on June 22, 2001 approved dividends equivalent to 8,571 thousand US dollars for the

Baltika Don plant

3,875

first half of 2001.

Tulskoye pivo plant

1,040

During 2001 the Company performed operations on repurchase and selling of ordinary and preference shares

Samara plant

118,522 ordinary shares and 35,440 preference shares were purchased and 57,462 ordinary shares and 34,940 pref


Total

283 12,673

erence shares were sold during 2001. As at December 31, 2001 the balance of treasury shares amounted to 61,060 Pre
construction work with regard to constructing breweries in Khabarovsk and Samara is under way. The Company

ordinary and 500 preference shares.

plans to invest not less than $50 million into construction of each of the two mentioned breweries. Due to expansion activity, the Company is in the process of selecting breweries for proposed acquisitions. (13) RECONCILIATION OF NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES

Negotiations commenced in 2000 with a number of breweries located in Russia and CIS countries and are contin


The reconciliation of net income to net cash provided by operating activities for the years ended December 31,

uing into 2002.

2001 and 2000 follows: 2001

2000

129,027

83,111

The Company has applied to the International Arbitary Commercial Court in Moscow Chamber of Commerce claim


Cash flows from operating activities: Net income

Legal Proceedings

$

ing $2 million from JSC Krinitsa, brewery located in Minsk, of loan installments that had to be repaid on January

Adjustments to reconcile net income to net cash provided

18, 2002 and February 1, 2002 of total loans receivable of $ 10 million provided to JSC Krinitsa and outstanding as

by operating activities:

at December 31, 2001. Originally the loan was provided to JSC Krinitsa for the purpose of being used for recon


Depreciation and amortization (Gain)/loss on disposal of property and equipment

27,359

20,408

struction of Krinitsa plant and effecting the purchase of 50% plus one share in JSC Krinitsa share capital by Baltika

703

688

Brewery. As no share issue process had started at the date it was planned to, Baltika Brewery has claimed the first







(641)

(1,018)

JSC Krinitsa.




(4,757)

In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on

18,397

4,184

installments not repaid on the due date. The future of the loan is not certain at the date of preparation of these

Non
cash interest on long
term indebtedness and capital lease Undistributed income of affiliates Foreign currency translation adjustment Minority interest

financial statements, and no provision has been created as at December 31, 2001 for amounts receivable from

the Company’s consolidated financial position, results of operations or liquidity.

Changes in operating assets and liabilities: Financial Guarantees

(Increase)/decrease in trade receivables

(2,125)

4,490

(Increase)/decrease in prepayments

(7,934)

(10,991)

As of December 31, 2001, the Company has issued guarantees aggregating $7.5 million on borrowings by its affili


(10,224)

(15,308)

ate ZAO Soufflet. It is expected that the Company will not be required to make payments under its guarantees. The

(211)

1,845

Company monitors the financial performance of its associate. No amount has been accrued for the Company’s obli


7,401

(30,323)

(Increase)/decrease in inventory Increase/(decrease) in advances received

gation under its guarantee arrangements.

Increase/(decrease) in accounts payable, accrued liabilities, taxes payable and other current liabilities Increase/(decrease) in amount due to related parties Net cash provided by operating activities

161

1,101

161,913

53,430

(15) RESTRUCTURING In 2001, the Company adopted a long
term strategic plan to re
organize the current structure of the Group by

The Company paid $ 2,163 th. and $2,305 th. for interest and $31,836 th. and $22,253 th. for income taxes in 2001

undertaking a business combination of two existing subsidiaries Baltika
Don and Tulskoe pivo with the parent

and 2000, respectively.

Company. As a result of the proposed combination it is planned that above mentioned subsidiaries will become branches of the parent company in June 2002.

60

ANNUAL REPORT 2001

ANNUAL REPORT 2001

61

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

For US GAAP purposes, share capital has been translated into US dollars in the accompanying balance sheet at the

(14) COMMITMENTS AND CONTINGENCIES As at December 31, 2001, the Company had the following major capital commitments to be completed in 2002:

exchange rate effective as at the date of registration. The Shareholder’s meeting held on March 28, 2001 approved dividends equivalent to 5,527 thousand US dollars for

Project

the second half of 2000.

St. Petersburg plant

Amount in thousands USD 7,475

The Board of Directors held on June 22, 2001 approved dividends equivalent to 8,571 thousand US dollars for the

Baltika Don plant

3,875

first half of 2001.

Tulskoye pivo plant

1,040

During 2001 the Company performed operations on repurchase and selling of ordinary and preference shares

Samara plant

118,522 ordinary shares and 35,440 preference shares were purchased and 57,462 ordinary shares and 34,940 pref


Total

283 12,673

erence shares were sold during 2001. As at December 31, 2001 the balance of treasury shares amounted to 61,060 Pre
construction work with regard to constructing breweries in Khabarovsk and Samara is under way. The Company

ordinary and 500 preference shares.

plans to invest not less than $50 million into construction of each of the two mentioned breweries. Due to expansion activity, the Company is in the process of selecting breweries for proposed acquisitions. (13) RECONCILIATION OF NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES

Negotiations commenced in 2000 with a number of breweries located in Russia and CIS countries and are contin


The reconciliation of net income to net cash provided by operating activities for the years ended December 31,

uing into 2002.

2001 and 2000 follows: 2001

2000

129,027

83,111

The Company has applied to the International Arbitary Commercial Court in Moscow Chamber of Commerce claim


Cash flows from operating activities: Net income

Legal Proceedings

$

ing $2 million from JSC Krinitsa, brewery located in Minsk, of loan installments that had to be repaid on January

Adjustments to reconcile net income to net cash provided

18, 2002 and February 1, 2002 of total loans receivable of $ 10 million provided to JSC Krinitsa and outstanding as

by operating activities:

at December 31, 2001. Originally the loan was provided to JSC Krinitsa for the purpose of being used for recon


Depreciation and amortization (Gain)/loss on disposal of property and equipment

27,359

20,408

struction of Krinitsa plant and effecting the purchase of 50% plus one share in JSC Krinitsa share capital by Baltika

703

688

Brewery. As no share issue process had started at the date it was planned to, Baltika Brewery has claimed the first







(641)

(1,018)

JSC Krinitsa.




(4,757)

In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on

18,397

4,184

installments not repaid on the due date. The future of the loan is not certain at the date of preparation of these

Non
cash interest on long
term indebtedness and capital lease Undistributed income of affiliates Foreign currency translation adjustment Minority interest

financial statements, and no provision has been created as at December 31, 2001 for amounts receivable from

the Company’s consolidated financial position, results of operations or liquidity.

Changes in operating assets and liabilities: Financial Guarantees

(Increase)/decrease in trade receivables

(2,125)

4,490

(Increase)/decrease in prepayments

(7,934)

(10,991)

As of December 31, 2001, the Company has issued guarantees aggregating $7.5 million on borrowings by its affili


(10,224)

(15,308)

ate ZAO Soufflet. It is expected that the Company will not be required to make payments under its guarantees. The

(211)

1,845

Company monitors the financial performance of its associate. No amount has been accrued for the Company’s obli


7,401

(30,323)

(Increase)/decrease in inventory Increase/(decrease) in advances received

gation under its guarantee arrangements.

Increase/(decrease) in accounts payable, accrued liabilities, taxes payable and other current liabilities Increase/(decrease) in amount due to related parties Net cash provided by operating activities

161

1,101

161,913

53,430

(15) RESTRUCTURING In 2001, the Company adopted a long
term strategic plan to re
organize the current structure of the Group by

The Company paid $ 2,163 th. and $2,305 th. for interest and $31,836 th. and $22,253 th. for income taxes in 2001

undertaking a business combination of two existing subsidiaries Baltika
Don and Tulskoe pivo with the parent

and 2000, respectively.

Company. As a result of the proposed combination it is planned that above mentioned subsidiaries will become branches of the parent company in June 2002.

60

ANNUAL REPORT 2001

ANNUAL REPORT 2001

61

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

This restructuring is not planned to result in the termination of any employees and management has not created

The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and cash equivalents, trade accounts receivables, prepayments and other receivables, trade accounts

any provision in connection with the proposed restructuring during 2001.

payables, due to related company, accrued salaries wages and benefit and other liabilities (nonderivatives): The carrying amounts approximate fair value because of the short maturity of these instruments. (16) RELATED PARTY TRANSACTIONS

Loans receivable: The fair value of the loan is determined as the present value of expected future cash flows

In 2001 the Group purchased raw materials (i.e. malt) from ZAO Soufflet, an associate to the group amounting to a

discounted at the originally contracted effective interest rate. See note (14) Legal proceeding above for more

total of $31,279 th., or 52% of total malt purchases of Baltika plant by value, and 79,933 tonns, or 46% in total malt

details covering the JSC Krinitsa loan.

purchases of Baltika plant by volume. Liability to ZAO Soufflet for malt as at December 31, 2001 amounted to $1,262 th.

Investment securities: The fair values of equity investments are based on quoted market prices at the report


The Group has provided ZAO Soufflet with the following services during 2001: security services (Baltika plant and

ing date for those or similar investments.

ZAO Soufflet plant are very close to each other), and canteen services to ZAO Soufflet employees.

Long
term debt: The carrying amounts of the Company’s long
term debt approximate fair value because the

The Group leased from ZAO Soufflet part of its malt storage premises. The lease payment paid by the Group for 324

loan is provided to the Company at terms currently offered at the market for the similar loans of comparable

square meters having a 5,000 tonne of storage capacity amounted to EUR 650 per month.

maturities to like borrowers. That is the loan incurs LIBOR interest plus margin, payable each six months.

ZAO Soufflet also rendered other services to the Group for insignificant amounts. Additional contributions to the share capital of ZAO Soufflet were made in January 2001. The contributions were made by the purchase of 29,94% of the new issue of shares for equivalent of $407 th. during January 2001, as a result Baltika maintained its 30% stake in ZAO Soufflet. During 2001 ZAO Soufflet repaid the 7.5% loan to the Company that was outstanding as at December 31, 2000 in amount of $413 th., together with accrued interest to date of payment.

(17) FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2001 and 2000. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. 2001 Carrying amount

2000 Fair value

Carrying amount

Fair value

Financial assets: Cash and cash equivalents

$

Trade accounts receivables Loans receivable Investment securities Prepayments and other receivables

16,414

16,414

4,897

4,897

6,169

6,169

4,044

4,044

10,552

10,552

418

418

425

425

56

56

32,478

32,478

21,654

21,654

17,055

17,055

21,738

21,738

1,262

1,262

1,101

1,101

Financial liabilities: Trade accounts payables Due to related company

$

Accrued salaries, wages and benefits

9,413

9,413

5,827

5,827

Other liabilities

5,553

5,553

5,125

5,125

Long
term debt

14,000

14,000

18,000

18,000

The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions.

62

ANNUAL REPORT 2001

ANNUAL REPORT 2001

63

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

BALTIKA BREWERY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2001 and 2000

This restructuring is not planned to result in the termination of any employees and management has not created

The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and cash equivalents, trade accounts receivables, prepayments and other receivables, trade accounts

any provision in connection with the proposed restructuring during 2001.

payables, due to related company, accrued salaries wages and benefit and other liabilities (nonderivatives): The carrying amounts approximate fair value because of the short maturity of these instruments. (16) RELATED PARTY TRANSACTIONS

Loans receivable: The fair value of the loan is determined as the present value of expected future cash flows

In 2001 the Group purchased raw materials (i.e. malt) from ZAO Soufflet, an associate to the group amounting to a

discounted at the originally contracted effective interest rate. See note (14) Legal proceeding above for more

total of $31,279 th., or 52% of total malt purchases of Baltika plant by value, and 79,933 tonns, or 46% in total malt

details covering the JSC Krinitsa loan.

purchases of Baltika plant by volume. Liability to ZAO Soufflet for malt as at December 31, 2001 amounted to $1,262 th.

Investment securities: The fair values of equity investments are based on quoted market prices at the report


The Group has provided ZAO Soufflet with the following services during 2001: security services (Baltika plant and

ing date for those or similar investments.

ZAO Soufflet plant are very close to each other), and canteen services to ZAO Soufflet employees.

Long
term debt: The carrying amounts of the Company’s long
term debt approximate fair value because the

The Group leased from ZAO Soufflet part of its malt storage premises. The lease payment paid by the Group for 324

loan is provided to the Company at terms currently offered at the market for the similar loans of comparable

square meters having a 5,000 tonne of storage capacity amounted to EUR 650 per month.

maturities to like borrowers. That is the loan incurs LIBOR interest plus margin, payable each six months.

ZAO Soufflet also rendered other services to the Group for insignificant amounts. Additional contributions to the share capital of ZAO Soufflet were made in January 2001. The contributions were made by the purchase of 29,94% of the new issue of shares for equivalent of $407 th. during January 2001, as a result Baltika maintained its 30% stake in ZAO Soufflet. During 2001 ZAO Soufflet repaid the 7.5% loan to the Company that was outstanding as at December 31, 2000 in amount of $413 th., together with accrued interest to date of payment.

(17) FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2001 and 2000. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. 2001 Carrying amount

2000 Fair value

Carrying amount

Fair value

Financial assets: Cash and cash equivalents

$

Trade accounts receivables Loans receivable Investment securities Prepayments and other receivables

16,414

16,414

4,897

4,897

6,169

6,169

4,044

4,044

10,552

10,552

418

418

425

425

56

56

32,478

32,478

21,654

21,654

17,055

17,055

21,738

21,738

1,262

1,262

1,101

1,101

Financial liabilities: Trade accounts payables Due to related company

$

Accrued salaries, wages and benefits

9,413

9,413

5,827

5,827

Other liabilities

5,553

5,553

5,125

5,125

Long
term debt

14,000

14,000

18,000

18,000

The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions.

62

ANNUAL REPORT 2001

ANNUAL REPORT 2001

63

BALTIKA BREWERY Analysis of Operation Results and Financial Status of the Company

BALTIKA BREWERY Analysis of Operation Results and Financial Status of the Company

ANALYSIS OF OPERATION RESULTS AND FINANCIAL STATUS OF THE COMPANY

The Company’s structure of expenditures, %

Product sales revenues (Net Sales) According to the results of the year 2001, the total net sales was $537.4 million. Net cash flows provided by operating activities grew by 61% for the period in question. The main factors that influ
enced this growth were higher sales volumes and products price rising. The structure of Net Sales is as follows: ●

beer
$508.6 million;

●

mineral water and soft drinks
$0.5 million;

●

other sales (product delivery services, realization of packaging materials, etc.)
$28.3 million. In addition to the expenses for raw and other materials, the following expenses have shown a rapid growth rate:

The structure of (beer) sales in a cross
section of the Company’s brands is shown below: Name of brand

“Baltika”

“Arsenalnoye”

“Medovoye”

“Don”

Total

Meas. units

In 2000

In 2001

Growth, %

Million roubles

6,158

9,076

47

Million dollars

219.0

310.4

42

Million roubles

613

2,768

352

Million dollars

21.9

94.6

332

Million roubles

1,686

2,097

24

Million dollars

60.0

72.0

20

Million roubles

482

927

92

Million dollars

17.2

31.6

84

Million dollars

318.1

508.6

60

●

transportation expenses (2.3 times);

●

expenses for marketing and advertisement (2.1 times).

The growth of transportation expenses is caused by raising of rates for railroad shipping (by 61% over the course of the year), the growth of sales volumes through the Company’s sales subdivisions, and by widening of the geographical range of marketing. The overall increase of competition on the Russian beer market, as well as the growth of prices on the market of adver
tising services was also a factor for the significant growth of expenditures for advertisement in 2001. Net Profit Utilization and Dividend Policy In 2001, in accordance with the active statutes, based on the decision of the Shareholders General Meeting and Board of Directors, the Company twice paid dividends to its shareholders: dividends for the totals of the year 2000, and pre
liminary dividends for the year 2001. It is worth pointing out that a constant consideration of the interests of its shareholders, implementation of the deci
sions of the highest managing department
the Shareholders General Meeting
as well as the stability of the dividend policy has been one of the basic principles of the Company over the whole period of its existence. Despite the highest volume of Company investment on record ($105 million), the Company is still planning on distributing around 20% of

Costs of Sales

the income among its shareholders; the income from preference shares is around 30% higher than the income from reg


Operation expenses of the Company in 2001 were $361 million. The growth of expenses in comparison to the year 2000

ular shares. The total amount of dividends in 2001 was $13.7 million.

was 61%.

This approach earned high marks for the Company and its activities among mass media, business representatives, and

The main components of the operating costs are expenditures on raw materials (60%), salaries including social secu


public opinion in general.

rity payments (11%), transportation expenses (9%), repairs and maintenance of equipment and utilities (6%), and

In particular, in the annual ratings of Expert magazine, in the nominations reflecting public opinion about the largest

expenditures for marketing and advertisement (4%) (see chart).

domestic enterprises, the Company took 2nd place in the “The most appealing company” rating;

The main factors determining this growth of the cost of raw materials were due to: ●

the growth in volume of sales of the Company’s products (in natural expression);

●

the growth in currency prices of basic raw materials (primarily for malt
by 17%; and for hops
by 48%);

●

changes in the final product structure (in particular: the introduction in March 2001 of canned beer production, a

3rd place in the nomination “Reputation rating.”

process which has a high rate of material consumption).

64

ANNUAL REPORT 2001

ANNUAL REPORT 2001

65

BALTIKA BREWERY Analysis of Operation Results and Financial Status of the Company

BALTIKA BREWERY Analysis of Operation Results and Financial Status of the Company

ANALYSIS OF OPERATION RESULTS AND FINANCIAL STATUS OF THE COMPANY

The Company’s structure of expenditures, %

Product sales revenues (Net Sales) According to the results of the year 2001, the total net sales was $537.4 million. Net cash flows provided by operating activities grew by 61% for the period in question. The main factors that influ
enced this growth were higher sales volumes and products price rising. The structure of Net Sales is as follows: ●

beer
$508.6 million;

●

mineral water and soft drinks
$0.5 million;

●

other sales (product delivery services, realization of packaging materials, etc.)
$28.3 million. In addition to the expenses for raw and other materials, the following expenses have shown a rapid growth rate:

The structure of (beer) sales in a cross
section of the Company’s brands is shown below: Name of brand

“Baltika”

“Arsenalnoye”

“Medovoye”

“Don”

Total

Meas. units

In 2000

In 2001

Growth, %

Million roubles

6,158

9,076

47

Million dollars

219.0

310.4

42

Million roubles

613

2,768

352

Million dollars

21.9

94.6

332

Million roubles

1,686

2,097

24

Million dollars

60.0

72.0

20

Million roubles

482

927

92

Million dollars

17.2

31.6

84

Million dollars

318.1

508.6

60

●

transportation expenses (2.3 times);

●

expenses for marketing and advertisement (2.1 times).

The growth of transportation expenses is caused by raising of rates for railroad shipping (by 61% over the course of the year), the growth of sales volumes through the Company’s sales subdivisions, and by widening of the geographical range of marketing. The overall increase of competition on the Russian beer market, as well as the growth of prices on the market of adver
tising services was also a factor for the significant growth of expenditures for advertisement in 2001. Net Profit Utilization and Dividend Policy In 2001, in accordance with the active statutes, based on the decision of the Shareholders General Meeting and Board of Directors, the Company twice paid dividends to its shareholders: dividends for the totals of the year 2000, and pre
liminary dividends for the year 2001. It is worth pointing out that a constant consideration of the interests of its shareholders, implementation of the deci
sions of the highest managing department
the Shareholders General Meeting
as well as the stability of the dividend policy has been one of the basic principles of the Company over the whole period of its existence. Despite the highest volume of Company investment on record ($105 million), the Company is still planning on distributing around 20% of

Costs of Sales

the income among its shareholders; the income from preference shares is around 30% higher than the income from reg


Operation expenses of the Company in 2001 were $361 million. The growth of expenses in comparison to the year 2000

ular shares. The total amount of dividends in 2001 was $13.7 million.

was 61%.

This approach earned high marks for the Company and its activities among mass media, business representatives, and

The main components of the operating costs are expenditures on raw materials (60%), salaries including social secu


public opinion in general.

rity payments (11%), transportation expenses (9%), repairs and maintenance of equipment and utilities (6%), and

In particular, in the annual ratings of Expert magazine, in the nominations reflecting public opinion about the largest

expenditures for marketing and advertisement (4%) (see chart).

domestic enterprises, the Company took 2nd place in the “The most appealing company” rating;

The main factors determining this growth of the cost of raw materials were due to: ●

the growth in volume of sales of the Company’s products (in natural expression);

●

the growth in currency prices of basic raw materials (primarily for malt
by 17%; and for hops
by 48%);

●

changes in the final product structure (in particular: the introduction in March 2001 of canned beer production, a

3rd place in the nomination “Reputation rating.”

process which has a high rate of material consumption).

64

ANNUAL REPORT 2001

ANNUAL REPORT 2001

65

BALTIKA BREWERY Financial Analysis

FINANCIAL ANALYSIS

BALTIKA BREWERY Financial Analysis

Capital Investments and Fixed Assets The growth of the aforementioned items of the assets of the balance including the charged depreciation by $79.1 mil


Structure and Quality of the Assets

lion (+26%) reflects the active investment policy of the Company, and the advanced rate of growth of the operation

As of December 31, 2001, the Total Assets of the company were worth $511.2 million, and had grown in value by $124.5

profit induced the growth in profitability of utilization of non
current assets of the Company from 35% in 2000 to 45%

million, or 32%, over the course of the year. The main reasons for the growth of the assets were: the investment acti


in 2001.

vity and dynamic production development of the Company. Considering the fact, that such growth of assets of the Company provided for a growth in volume of sales by 61%, it can be concluded that over the course of the past year the

Structure and quality of) Liabilities

Company managed to increase the efficiency of utilization of its resources
The Return on Assets Ratio raised from 21% in 2000 to 25% in 2001. Volume of assets of the Company, million dollars

Trade accounts payable The share of trade accounts payable in the Company’s liabilities over the course of the year decreased from 10% to 7.8%. The main reasons for this were: discharge liabilities in capital investments in order to take advantage of the Current Assets

investment privilege, and decrease of currency risks of the Company in anticipation of the growth in the dollar

The share of current assets in the total Assets grew only slightly, from 21.1% in 2000, to 23.9% in 2001. The main fac


exchange rate in the beginning of the year.

tors determining this growth were: ●

●

growth of more than 3 times (from $4.9 million to $16.4 million) of high liquid assets: (cash and bank short
term

Short
term Loans

deposits with high profitability rate). This allows us to conclude that the Company has all necessary financial

The amount of short
term bank loans decreased by $4.7 million over the course of the year and was $11.3 million by

resources for realization of the ambitious investment program for the winter of 2001
2002;

the end of the year; this included $4.1 million
the long
term debt of the Company by the European Bank of

increase of Inventories by 22% (+$10.8 million), which is connected with the growth of the Company’s business in

Reconstruction and Development, which is to be paid during the next 12 months starting from the end of the reported

general, the continually growing number of it’s distribution centers, and the share of the Company’s volume of sales

year.

through these; ●

the growth of the debt for income tax (+$5 million) is caused by the fact that the tax paid in accordance with the

Long
term Loans

current tax law by means of advanced payments during the reported period, regardless the investment privilege, will

The long
term loans obtained by the Company are still represented only by the EBRD loan.

be retrieved from the budget in the first half of 2002; ●

●

VAT (+$1.2 million), paid but not presented for reimbursement, which is connected with the general order of pre


Company Capital and Minority Share

senting VAT for basic resources at the moment of their introduction (during the period of active investment in

The share of the Company’s own capital in the Total Liability and Equity (balance currency) during the reported period

incomplete objects of capital investments, significant amounts of VAT paid to the suppliers accumulate and are pre


grew to 77.4%. The amount of the minority share of the affiliate companies sharing the capital was allocated from the

sented in the corresponding item of the balance);

main capital and was 11.2%. The profitability of the Company’s own capital grew in 2001 to 33%, as opposed to 30%

debts of banks in bills of exchange (+$2.9 million) during the period of temporary surplus liquidity; the purchase of

in 2000.

bills of exchange of reliable banks is considered to be one of the kinds of highly profitable short
term investments of the Company.

66

ANNUAL REPORT 2001

ANNUAL REPORT 2001

67

BALTIKA BREWERY Financial Analysis

FINANCIAL ANALYSIS

BALTIKA BREWERY Financial Analysis

Capital Investments and Fixed Assets The growth of the aforementioned items of the assets of the balance including the charged depreciation by $79.1 mil


Structure and Quality of the Assets

lion (+26%) reflects the active investment policy of the Company, and the advanced rate of growth of the operation

As of December 31, 2001, the Total Assets of the company were worth $511.2 million, and had grown in value by $124.5

profit induced the growth in profitability of utilization of non
current assets of the Company from 35% in 2000 to 45%

million, or 32%, over the course of the year. The main reasons for the growth of the assets were: the investment acti


in 2001.

vity and dynamic production development of the Company. Considering the fact, that such growth of assets of the Company provided for a growth in volume of sales by 61%, it can be concluded that over the course of the past year the

Structure and quality of) Liabilities

Company managed to increase the efficiency of utilization of its resources
The Return on Assets Ratio raised from 21% in 2000 to 25% in 2001. Volume of assets of the Company, million dollars

Trade accounts payable The share of trade accounts payable in the Company’s liabilities over the course of the year decreased from 10% to 7.8%. The main reasons for this were: discharge liabilities in capital investments in order to take advantage of the Current Assets

investment privilege, and decrease of currency risks of the Company in anticipation of the growth in the dollar

The share of current assets in the total Assets grew only slightly, from 21.1% in 2000, to 23.9% in 2001. The main fac


exchange rate in the beginning of the year.

tors determining this growth were: ●

●

growth of more than 3 times (from $4.9 million to $16.4 million) of high liquid assets: (cash and bank short
term

Short
term Loans

deposits with high profitability rate). This allows us to conclude that the Company has all necessary financial

The amount of short
term bank loans decreased by $4.7 million over the course of the year and was $11.3 million by

resources for realization of the ambitious investment program for the winter of 2001
2002;

the end of the year; this included $4.1 million
the long
term debt of the Company by the European Bank of

increase of Inventories by 22% (+$10.8 million), which is connected with the growth of the Company’s business in

Reconstruction and Development, which is to be paid during the next 12 months starting from the end of the reported

general, the continually growing number of it’s distribution centers, and the share of the Company’s volume of sales

year.

through these; ●

the growth of the debt for income tax (+$5 million) is caused by the fact that the tax paid in accordance with the

Long
term Loans

current tax law by means of advanced payments during the reported period, regardless the investment privilege, will

The long
term loans obtained by the Company are still represented only by the EBRD loan.

be retrieved from the budget in the first half of 2002; ●

●

VAT (+$1.2 million), paid but not presented for reimbursement, which is connected with the general order of pre


Company Capital and Minority Share

senting VAT for basic resources at the moment of their introduction (during the period of active investment in

The share of the Company’s own capital in the Total Liability and Equity (balance currency) during the reported period

incomplete objects of capital investments, significant amounts of VAT paid to the suppliers accumulate and are pre


grew to 77.4%. The amount of the minority share of the affiliate companies sharing the capital was allocated from the

sented in the corresponding item of the balance);

main capital and was 11.2%. The profitability of the Company’s own capital grew in 2001 to 33%, as opposed to 30%

debts of banks in bills of exchange (+$2.9 million) during the period of temporary surplus liquidity; the purchase of

in 2000.

bills of exchange of reliable banks is considered to be one of the kinds of highly profitable short
term investments of the Company.

66

ANNUAL REPORT 2001

ANNUAL REPORT 2001

67

BALTIKA BREWERY Financial Analysis

Analysis of Profitability, Liquidity and Financial Independence Operating margin in 2001 was 33%. In spite of the growth of prices for basic raw materials, tariffs for the services of natural monopolies, and expenditures for shipping and products selling, this index improved by 1% in comparison to the previous period and still remains high in comparison to the average index in industry in general, as well as in the branch industry. The main liquidity Ratios improved greatly in comparison to the previous year. The Coverage Ratio (the Current Liquidity Ratio) grew from 1.5 to 2.4, and the Absolute Liquidity Ratio grew from 0.6 to 0.8. The indices characterizing the level of financial independence of the Company show that the Company depends only slightly on external creditors. For example, the Gearing Index, which describes the ratio of loans to the Company’s own resources, went down from 37% to 29%, the Equity Ratio grew from 73% to 77%, and the Debt Service Coverage grew from 6.4% to 18.1% over the course of the year. This leads to the conclusion that the overall financial stability and independence of the Company is very high. Business Activity Indices Growth rates in 2001 in comparison to 2000, %

Rac—advanced capital variation rate; Rr—variation rate of Net Sales; Rpr—operation profit variation rate. It is obvious from the chart that during the reported period the Company observed not only a significant tempo in the Sales, but also improved the efficiency of utilization of its resources. The ratio of the indices Rpr > Rr > Rac shows that the operation profit of the Company grew faster than the Sales due to lowering of the production, sales and distribu
tions expenses, and the growth of the volume of sales grew more rapidly than the volume and cost of attracted resources, which became possible only as a result of increasing the profitability of their utilization.

68

ANNUAL REPORT 2001