Pivovarna lasko annual report 2010 01 by David Bezgovšek

P I VOVA R N A

LAŠKO

ANNUAL

2 010

REPORT

P I V O VA R N A L A Š K O

ANNUAL REPORT

2010

CONTENTS

1. INTRODUCTION

1.1

Statement by the Chairman of the Management Board

1.2

Report of the Supervisory Board for 2010

1.3

Significant business achievements of the Pivovarna Laško Group

1.4

Significant business achievements of Pivovarna Laško, d. d.

1.5

Vision, mission, values and strategic objectives

1.6

Presentation of the Pivovarna Laško Group

1.7

Presentation of the parent company Pivovarna Laško, d. d.

1.8

Significant events in 2010

2. BUSINESS REPORT

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ANNUAL REPORT 2010

2.1

Corporate governance

2.2

Statement on corporate governance and compliance with the Corporate

Governance Code

2.3

Report of the Management Board on extent of influence according

33 43

to Article 545 of the Companies Act (ZGD-1)

2.4

Shareholders and the impact of economic and other trends on operations

2.5

Sales

2.6

Supply flows

2.7

Production

2.8

Investments

2.9

Performance analysis

2.10

Risk Management

2.11

Marketing activities

2.12

Plans for 2011 and the development strategy

103

2.13

Events following the conclusion of the fiscal year

106

2.14

Events prior to the 2010 fiscal year

108

3. SUSTAINABLE DEVELOPMENT

112

3.1

Concern and responsible relationship towards employees

3.2

Communications

122

3.3

Responsible attitude towards the social environment

124

3.4

Environmental protection

125

4. FINANCIAL REPORT

113

132

4.1

Audited financial statements of Pivovarna Laško, d. d.

133

4.1.1

Statement of the Financial Position

133

4.1.2

Income Statement

135

4.1.3

Statement of comprehensive income

135

4.1.4

Statement of changes in shareholder’s equity for 2010

136

4.1.5

Statement of changes in shareholder’s equity for 2009

137

4.1.6

Statement of cash flows

138

4.1.7

Coverage of loss for the fiscal year

139

4.1.8

Policies and notes to the non-consolidated financial statements

139

4.1.9

Statement of the Management

192

4.1.10

Independent auditor’s report

194

4.2

Audited consolidated financial statements of the Pivovarna Laško Group

196

4.2.1

Consolidated Statement of the Financial Position

197

4.2.2

Consolidated income statement

198

4.2.3

Consolidated statement of comprehensive income

199

4.2.4

Consolidated statement of changes in shareholder’s equity for 2010

200

4.2.5

Consolidated statement of changes in shareholder’s equity for 2009

201

4.2.6

Consolidated statement of cash flows

202

4.2.7

Policies and notes to the consolidated financial statements

203

4.2.8

Statement of the Management

273

4.2.9

Independent auditor’s report

274

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ANNUAL REPORT 2010

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ANNUAL REPORT 2010

1. INTRODUCTION

INTRODUCTION

1.1 Statement by the Chairman of the Management Board

The business results of the Group in 2010 are an additional argument for validating the new and more daring business strategy.

Dear Shareholders, valued Business Partners and Colleagues, An extraordinarily demanding year lies behind us. At the regular sessions of the General Meeting of Shareholders, the Management Board presented the new business strategy of the Group and for the purpose of facilitated realisation; it also recommends that the owners define the contractual group. Although the owners predominantly supported the new strategy, majority support for the formation of the contractual group was lacking. The most important tasks of the Management Board of Pivovarna Laško were thus discussions with banks regarding the reprogramming of financial liabilities and in accordance with the decisions of the Supervisory Board, the implementation of processes for the disposal of investments which did not comprise the basic activities of the Group. The high level of indebtedness of the Group and the fact it was unable to reach an agreement on the reprogramming of debts with bank creditors had a direct effect on the business results of the Company, at the same time representing an extremely demanding challenge for the Management Board in remedying liquidity problems. It is therefore so much more important that the initiated process of selling off investments which do not represent the basic activities of the Company be completed efficiently and in the best interest

OPERATIONS IN 2010 MARKED BY RATIONALIZATION AND FINANCIAL STABILIZATION OF THE COMPANY The parent company Pivovarna Laško generated EUR 91 million in net sales revenues, EUR 11 million in

1. INTRODUCTION

of the Company and its shareholders.

EUR 306.4 million in net sales revenues in 2010 which were 6.3 percent less then in 2009, the Group managed to reduce operating expenses by 6.4 percent, amounting to EUR 320.1 million. The operating loss of the Group in 2010 therefore amounted to EUR 9.9 million and is predominantly the result of an impairment of EUR 24.4 million of the trademarks of the company Delo, d. d. and Fructal, d. d. Not considering the impairment, the Group’s operations were positive, generating EUR 14.5 million in operating profit. The Pivovarna Laško Group generated 77.8 percent of its net sales revenues from sales of products and services on the domestic market and 22.2 percent on foreign markets. The sale of beer represents the greatest share in the sales structure with 43 percent, followed by mineral and spring waters with an almost 25 percent share. Non-alcoholic beverages represented 21 percent of total sales, juices 8 percent and other beverages 3 percent.

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The Pivovarna Laško Group sold 4.2 million hectolitres of beverages in 2010, and although it generated

ANNUAL REPORT 2010

operating profit and a net loss of EUR 6 million. Pivovarna Laško sold 938,000 hectolitres of beverages in 2010.

SHARE OF SALES ON FOREIGN MARKETS INCREASED A large share in domestic sales represents considerable risk for the Pivovarna Laško Group and dependency on weather conditions which were not very favourable for the sale of beverages in 2010. As a result, sales of beverages were somewhat lower than planned. In accordance with the new business policy, the Group focused considerably more attention to increasing sales on foreign markets, both in regions where it has been present for quite some time and also penetration of new markets, such as China. The high level of financial debt of the Group had a significant effect on its operating results, for the Group had to repay more than EUR 21 million in interest to banks. The financial debt of the Pivovarna Laško Group on 31 December 2010 thus amounted to EUR 397.5 million, of which EUR 388.8 million comprised loans from banks and EUR 88 million other financial liabilities. The bank loans were insured entirely through securities, mortgages and liens on moveable assets and receivables.

INTO 2011 WITH NEW PRODUCTS AND A FOCUS ON FOREIGN MARKETS In 2011 the Pivovarna Laško Group will sell 4.5 million hectolitres of beverages and generate EUR 391 million in net operating revenues, EUR 28 million in net profit and EUR 62 million in net cash flows from operating activities (EBITDA). The Group will also achieve these results through the development of new products and a more intensive approach on foreign markets. The business results of the Group in 2010 are an additional argument for validating the new and more daring business strategy as soon as possible, inclusive of the reorganisation of the companies to achieve as many internal synergies as possible and the divesture of investments that do not comprise basic activities of the Group. The Pivovarna Laško Group will, using such measures, significantly decrease its indebtedness, significantly stabilise operations more rapidly and again achieve good business results which are in the interest of both shareholders and creditors and employees.

Dušan Zorko, MSc

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ANNUAL REPORT 2010

1. INTRODUCTION

Chairman of the Management Board of Pivovarna Laško, d. d.

1.2 Report of the Supervisory Board for 2010

The Supervisory Board predominantly treated current business achievements, the state of assets of the Company, the interim and annual reports on operations, the work of the Management Board, the financial state of the Company, the Annual Economic Plan and restructuring of the Pivovarna Laško Group.

OPERATION OF THE SUPERVISORY BOARD The Supervisory Board which met at 10 regular sessions and 2 extraordinary sessions supervised the operations of the company Pivovarna Laško, d. d. in accordance with statutory provisions and the Statute of the Company. The Supervisory Board was chaired by the Chairman Anton Turnšek until the Supervisory Board’s 18th session held on 23 April 2010 in which he resigned as Chairman and member of the Supervisory Board. From the 20th session onwards, the Supervisory Board has been chaired by Marjan Mačkošek. The Supervisory Board is composed of the following members: Bojan Košak, Andrej Kebe, Vladimir Malenković, Aleksander Svetelšek, who resigned on 1 September 2010, and Peter Groznik who has been a member from 16 July 2010 onwards. Sessions of the Supervisory Board were held on the following dates: 18 February 2010, 30 March 2010, 23 April 2010, 10 June 2010, 30 August 2010, 6 September 2010, 27 September 2010, 21 October 2010, 22 November 2010 and 20 December 2010. The two correspondence sessions were held on 14 September 2010 and 6 October 2010. The Supervisory Board predominantly treated current business achievements, the state of assets of the

SIGNIFICANT RESOLUTIONS OF THE SUPERVISORY BOARD Due to the resignation of the Chairman of the Mangement Board Anton Turnšek, the Supervisory Board elected Marjan Mačkošek as the new Supervisory Board Chairman. The General Meeting of Shareholders elected Peter Groznik as a new member of the Supervisory Board on 16 July 2010. From 1 September 2010 onwards, the Supervisory Board operated in a composition of five members after Aleksander Svetelšek resigned as Supervisory Board member. Following the amendment of the Statute which was adopted by the General Meeting of Shareholders, Dušan Zorko was elected as Chairman of the

The Supervisory Board adopted the Strategy of Pivovarna Laško, d. d. up to the year 2014.

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Management Board at the 20th session of the Supervisory Board held on 30 August 2010 and Robert Šega

ANNUAL REPORT 2010

state of the Company, the Annual Economic Plan and restructuring of the Pivovarna Laško Group.

1. INTRODUCTION

Company, the interim and annual reports on operations, the work of the Management Board, the financial

The Supervisory Board actively monitored the liquidity situation of Pivovarna Laško d. d. and the Pivo-

and Gorazd Lukman elected members of the Management Board at its 21st session on 6 September 2010. The Supervisory Board treated the audited financial statements for the year 2009 and the Business System of Pivovarna Laško, d. d. and was acquainted with the business results of the Company.

varna Laško Group throughout the entire period in 2010 and the realisation of business results.

In addition to the above, the Supervisory Board also treated other current matters and adopted the key resolutions that follow: •T he Supervisory Board gave its consent to the Management Board for the sale of non-strategic investments at its 16th session on 18 February 2010. •A t its 17th session on 30 March 2010 the Supervisory Board was acquainted with the unaudited results for 2009. It was also acquainted with the Report on the Findings of a Special Audit of the Management of Individual Transactions of the Pivovarna Laško Group, prepared by the auditing firm BDO REvizija, d. o. o. and with the Restructure of the Pivovarna Laško Group project. • At its 18th session on 23 April 2010, the Supervisory Board approved the platform for the new business model and reorganisation of the Pivovarna Laško Group (contractual group and organisational model) and platform for the system’s growth until 2014. The Annual Report of Pivovarna Laško, d. d. and the Pivovarna Laško Group for 2009 and the Report of the Supervisory Board for 2009 were adopted. •A t its 19th session on 30 June 2010 the Supervisory Board approved the materials for the General Meeting of Shareholders of Pivovarna Laško, d. d. which was convened on 16 July 2010. • At its 20th session on 30 August 2010 the Supervisory Board elected the new Chairman of the Supervisory Board and issued a mandate to the Chairman of the Management Board Dušan Zorko. It was acquainted with the Report on the Special Audit performed by BDO Revizija, d. o. o. and required from the Management Board that it commence with the sale of Mercator, d. d. and continue the divestures of Delo, d. d. and Večer, d. d. due to the stipulations and expectations of the creditor banks. • At its 21st session on 6 September 2010 the Supervisory Board elected Robert Šega, responsible for the area of finance and Gorazd Lukman, responsible for the areas of sales and commerce as members of the Management Board of Pivorvarna Laško, d. d. and adopted the Rules of Procedure of the Management Board. The Supervisory Board was informed of the resignation of one of its members, namely Aleksander Svetelšek. • At its 22nd session on 27 September 2010 the Supervisory Board adopted the Strategy of Pivovarna Laško up to 2014 and submitted it to all creditor banks. The sales procedure mananged by NLB, d. d. regarding

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ANNUAL REPORT 2010

1. INTRODUCTION

the sale of its stake in Mercator d. d. will be observed in the sale of Mercator, d. d. •A t its 23rd session on 21 October 2010 the Supervisory Board allowed a lien to be placed on trademarks so as to extend the loan taken out at Hypo Alpe-Adria-Bank, d. d. •A t its 24th session on 22 November 2010 the Supervisory Board adopted the draft Plan for 2011. It appointed Peter Groznik as Chairman of the Audit Committee. The Supervisory Board obligates the Management Board to prepare an amendment to the Company’s Statute for the upcoming General Meeting for subsidiary companies for the purpose of standardising company operations in the Group. • At its 25th session on 20 December 2010 the Supervisory Board reviewed the liquidity situation of Pivorvarna Laško, d. d. and entrusted the Management Board with the task of intensifying the sale of the total package consisting of 23.34% of the shares in Mercator, d. d. The Business Plan for 2011 and a framework programme regarding the sessions of the Supervisory Board in 2011 were also adopted. • At its correspondence sessions on 14 September 2010 and 6 October 2010, the Supervisory Board gave its consent to the signing of a contract on the extension of the loan taken out at Hypo Alpe-Adria-Bank, d. d.

OPERATION OF THE AUDIT COMMITTEE The Audit Committee met for three sessions in 2010. The sessions were held 29 March 2010 and 21 April

2010 with the following composition: Marjan Mačkošek - Chairman (from 30 March 2010 to 22 November 2010) and members Bojan Košak and Marko Koleša, and on 9 December 2010 with the following composi-

tion: Peter Groznik, DSc – Chairman (from 22 November 2010 onwards) and members Bojan Košak and Marko Koleša. The Committee was acquainted with the unaudited, unconlidated and consolidated financial statements for 2009 at is session on 29 March 2010 and the report on the special audit. The Audit Committee proposed to the Supervisory Board that they recommend that the Management Board perform a review of individual transactions which were relevant to the proceedings from the report on the special audit which it had not yet reviewed. At its session on 21 April 2010 the Audit Committee was acquainted with the complete materials of the audited Annual Report of the parent company and Pivorvarna Laško Group for 2009, reviewed it and was acquainted with the additional notes from the certified auditor. Based on these data the Audit Committee established that the Company was threatened with insolvency, therefore it recommended that the Supervisory Board adopt appropriate decisions thereby charging the Management Board with the adoption of suitable measures for the sanitation of the incurred financial situation of the Company. At its session on 9 December 2010 the Audit Committee first met under the chairmanship of Peter Groznik, DSc. At this session the Audit Committee defined the guidelines for the Committee’s work in the future and decided that at the next session it would meet with the external auditor of the Company and become acquainted with the system of internal control and auditing in the Company.

INTERIM AND ANNUAL REPORTS FOR 2010 The Supervisory Board was acquainted with the unaudited interim report of Pivovarna Laško, d. d. and the Pivovarna Laško Group for the first half of the year (January – June 2010) at its 20th regular session on 30 August 2010. The Company published the summary of the unaudited interim report in accordance with legislative provisions and the Rules of the Ljubljana Securities Market. At its regular session on 31 March 2011 the Supervisory Board reviewed the audited annual report of Pivovarna Laško, d. d. and the Pivorvarna Laško Group for 2010, which had been audited by the auditing firm Deloitte Revizija, d. o. o., Ljubljana. The auditing firm issued its positive opinion on 28 March 2011. The Supervisory Board found no objections to the auditor’s report and approved it. The Supervisory Board had no objections to the Annual Report of Pivovarna Laško, d. d. and the Pivovarna

Group for 2010, which the Supervisory and Management Boards will submit to the General Meeting of Shareholders for approval. Net loss for the 2010 financial year amounted to EUR 6,292,260 on 31 December 2010. The Supervisory Board agrees with the Management Board’s proposal that the net loss for the 2010 financial year in the amount of EUR 6,292,260 be covered through provisions from profit and capital reserves. The Supervisory Board assesses that the operations of Pivovarna Laško, d. d. and the Pivovarna Laško Group and the work of the Management Board in 2010 were in accordance with expectations based on the general deterioration of the economic situation and changed financing conditions. The Supervisory Board has drawn up this report for the General Meeting of Shareholders of the Company in accordance with Article 282 of the Companies Act (ZGD-1). Laško, on 31 March 2011 Marjan Mačkošek Chairman of the Supervisory Board

ANNUAL REPORT 2010

The Supervisory Board also confirmed the Management Board’s proposal to cover net losses simultaneously with the confirmation of the audited Annual Report of Pivovarna Laško, d. d. and the Pivovarna Laško

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COVERAGE OF NET LOSS

1. INTRODUCTION

Laško Group for 2010 and unanimously confirmed it at its session on 31 March 2011.

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ANNUAL REPORT 2010

Historia magistra vitae History is life's teacher according to ancient Roman wisdom. The companies of the Laško Pivovarna Group draw life’s wisdom, knowledge and pride from their rich tradition which reaches back into the distant nineteenth century. The mead and gingerbread maker Franz Geyer in 1825, brothers Ivan and Peter Kosler in 1864 and Karl Henn in 1869 who were founders of breweries in Laško and Ljubljana and the first to collect Radenci mineral water were people characterised by historical courage and vision. One hundred and eighty-six years have passed since initial steps taken by the first breweries, with the companies of the Laško Pivovarna Group growing from local breweries and mineral water filling plants to the leading manufacturers of beer, non-alcoholic beverages and mineral and natural waters on the Slovenian market today. The tradition of developing new products reaches back 120 years when the brewer Simon Lukec in Laško through experimentation discovered the favourable effect that thermal water had on the taste of beer. The thermal beer is still being brewed by the Group today for it is intensively developing its operations, providing users with the most qualitative of products along with excellent supply of the market. With the aid of modern technologies, the Group develops appropriate products and market programmes that ensure a superior quality of beer, non-alcoholic beverages and mineral and natural waters. The brand names of the Laško Pivovarna Group have also intensively developed throughout the century, following the trends of the times with many of them even dictating trends. This is evidenced

passion know how to convince buyers in today’s times more so than ever, for the Group’s brands are among the leaders in each and every category on the Slovenian market, with many even enjoying validation on foreign markets spanning from neighbouring Croatia and Italy to far-off China.

ANNUAL REPORT 2010

The labels which give their products and brands a touch of pride and heart and an abundance of

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Annual Report.

1. INTRODUCTION

also by the historical examination of bottle labels which are the most important visual motives for this

1.3 Significant business achievements of the Pivovarna Laško Group

The Pivovarna Laško Group managed to reduce its number of employees by 3.3% in accordance with the multiannual restrictive employment policy of the Group. The optimistically set plan of sales for beverages for 2011 depends on increased sales on foreign markets. The share of exports in the total sales structure of beverages increased by 1 percentage point.

SALES REVENUES AND OPERATING PROFIT WITH AMORTISATION (EBITDA)

450.0

Net sales revenues

360.0

327.0

306.4 EBITDA

in EUR mil.

337.5

225.0 55.4

112.5

22.8

14.6

0 2008

2009

2010

Sales revenues decreased by 6.3% in 2010, while operating profit with amortisation (EBITDA) decreased

RETURN ON ASSETS (ROA) AND RETURN ON EQUITY (ROE)

6.0

-3.5

-29.5

0 -6.0 in %

ANNUAL REPORT 2010

1. INTRODUCTION

by 36.1%.

Return on Equity (ROE)

-17.2

Return on Assets (ROA)

-1.3 -3.9

-12.0

-10.1

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-18.0

-24.0 -30.0 2008

2009

2010

KEY DATA ON OPERATIONS PIVOVARNA LAŠKO GROUP ( in EUR )

Net sales revenues Net profit

2008

2009

2010

360,028,307

327,026,846

306,418,155

3,855,582

-162,099,646

-25,818,805

Net cash flow1

33,572,006

-134,099,464

-1,377,348

EBIT

25,700,173

-5,229,918

-9,886,015

EBITDA

55,416,597

22,770,264

14,555,442

Long-term assets

624,040,291

564,998,357

265,643,825

Short-term assets

187,235,021

116,797,789

371,207,876

Equitiy

295,977,383

162,594,380

131,889,003

Long-term liabilities

248,182,776

136,988,946

89,069,856

Short-term liabilities

267,115,153

382,212,820

415,892,842

2008

2009

2010

1.1 %

-49.6 %

-8.4 %

7.1 %

-1.6 %

-3.2 %

15.4 %

7.0 %

4.8 %

1Net profit including depreciation

INDICATORS

Net profit from sales revenues EBIT share in sales revenues EBITDA share in sales revenues Return on Equity (ROE)2

-3.5 %

-29.5 %

-17.2 %

Return on Assets (ROA)3

-1.3 %

-10.1 %

-3.9 %

1.741

3.193

3.829

2008

2009

2010

1,620

1,462

1,422

470

469

445

2,090

1,931

1,867

Liabilities / equity 2Net profit / average state of equity in the period

In group, without Delo, d. d., Ljubljana In the company Delo, d. d., Ljubljana Total

The number of employees in the company Delo, d. d., Ljubljana is displayed separately as Delo, d. d. does not fall under the same activity as the other associated companies of the Pivovarna Laško Group.

ANNUAL REPORT 2010

( as at 31/12)

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NUMBER OF EMPLOYEES

1. INTRODUCTION

3Net profit / average state of assets in the period

SHARE OF EXPORTS IN TOTAL SALES OF BEVERAGES OF THE PIVOVARNA LAŠKO GROUP ( in hl )

2008

2009

2010

Total sale of beverages

5,017,664

4,552,891

4,225,503

Export

1,111,450

983,381

938,089

22.2

21.6

22.2

Share (in %)

PLANS FOR 2011 TOTAL SALES OF BEER, WATERS, NON-ALCOHOLIC BEVERAGES AND OTHER ALCOHOLIC BEVERAGES AND PLANS FOR THE UPCOMING YEAR

2,000,000

Juice, syrup Water

in hectolitres

1,500,000

Beer

1,000,000 Other alcohol

500,000

0 2009

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ANNUAL REPORT 2010

1. INTRODUCTION

( in hl )

2010

Plans 2011

2009

2010

Plans 2011

Juice, syrup

1,421,936

1,317,025

1,368,444

Water

1,146,434

1,054,352

1,187,481

Beer

1,975,579

1,845,989

1,996,695

Other alcohol

8,942

8,137

18,349

4,552,891

4,225,503

4,570,969

( in % )

2009

2010

Plans 2011

Juice, syrup

31.2

29.9

Water

25.2

24.9

26.0

Beer

43.4

43.7

Total

Other alcohol Total

0.2

0.4

100.0

The Pivovarna Laško Group is planning sales of 4,571 million hectolitres of all beverage types in 2011, representing an 8.2 % increase over sales in 2010. The plan was optimistically drawn up with increased sales on foreign markets planned.

1.4 Significant business achievements of Pivovarna Laško, d. d.

Pivovarna Laško, d. d. managed to reduce the number of employees by 0.9% in accordance with the multiannual restrictive employment policy of the Company. The share of exports in the total sales structure of beverages was increased by 5 percentage points.

SALES REVENUES AND OPERATING PROFIT WITH AMORTISATION (EBITDA)

Net sales revenues

130.0 108.5

99.7

EBITDA

91.3

in EUR mil.

97.5

65.0 21.5

32.5

18.2

23.8

0 2008

2009

2010

Sales revenues decreased by 8.4 % in 2010 in comparison to the previous year, while operating profit with

RETURN ON ASSETS (ROA) AND RETURN ON EQUITY (ROE)

6.0 0

-29.5 -1.3

-12.0

Return on Equity (ROE)

-4.8 -1.5

-10.1

Return on Assets (ROA)

-18.0 -24.0 -30.0 2008

2009

2010

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in %

-6.0

-3.5

ANNUAL REPORT 2010

1. INTRODUCTION

amortisation (EBITDA) decreased by 23.5 %.

NET PROFIT AND MARKET CAPITALIZATION

5.0

-6.1

-45.0

-6.3

-5.0 -15.0

1.000

Net profit

800

Market capitalization in the end of the period

600 420 400

237

-25.0

140 -35.0 -45.0

200

Market capitalisation in EUR mil.

Net profit in EUR mil.

15.0

0 2008

2009

2010

KEY DATA ON OPERATIONS OF PIVOVARNA LAŠKO, D. D. ( in EUR )

Net sales revenues Net profit Net cash flow1 EBIT EBITDA Long-term assets

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ANNUAL REPORT 2010

1. INTRODUCTION

Short-term assets

2008

2009

2010

108,463,850

99,662,537

91,287,653

-6,094,056

-44,973,818

-6,292,260

2,532,032

-38,065,247

703,814

12,867,447

16,898,111

11,223,795

21,493,535

23,806,682

18,219,869

433,172,048

398,843,120

294,360,182

29,510,000

27,948,962

121,497,098

Equitiy

175,571,742

129,302,643

124,168,015

Long-term liabilities

161,706,940

58,652,057

48,572,620

Short-term liabilities

125,403,366

238,837,382

243,116,645

2008

2009

2010

1Net profit including depreciation

INDICATORS

Net profit or loss from sales revenues

-5.6 %

-45.1 %

-6.9 %

EBIT share in sales revenues

11.9 %

17.0 %

12.3 %

EBITDA share in sales revenues

19.8 %

23.9 %

20.0 %

Return on Equity (ROE)2

-3.5 %

-29.5 %

-4.8 %

Return on Assets (ROA)3

-1.3 %

-10.1 %

-1.5 %

1.635

2.301

2.349

Liabilities / equity 2Net profit / average state of equity in the period 3Net profit / average state of assets in the period

NUMBER OF EMPLOYEES

2008

2009

2010

Employees as at 31/12

324

321

318

Average number of employees

328

324

SHARE OF EXPORTS IN TOTAL SALES OF BEVERAGES OF PIVOVARNA LAŠKO, D. D. ( in hl )

Beer sale Export Share (in %)

2008

2009

2010

1,046,292

978,833

938,640

172,935

213,198

250,311

16.5

21.8

26.7

2010

MARKET SHARE OF BEER SALES ON THE SLOVENIAN MARKET ( in % )

2008

2009

Pivovarna Laško

48.3

45.1

42.3

Pivovarna Union, brands

32.5

34.2

35.9

Pivovarna Union, private labels Imported beer Total

5.0

5.5

6.4

14.2

15.2

15.4

100.0

2008

2009

2010

8,747,652

-0.70

-5.14

-0.72

Net profit / loss per share ( EUR ) Dividend per share ( EUR )

Market value of share on 31/12 ( EUR )

47.98

Avg. price per share / net profit or loss per share Bookkeeping value of share on 31/12 ( EUR )4 Avg. price per share / bookkeeping value of share Market capitalization in EUR ( 31/12 ) 4Equity on 31/12 / total number of shares

27.15

15.99

-68.54

-5.28

-22.21

20.07

14.78

14.19

2.39

1.84

1.13

419,712,343

237,498,752

139,874,955

ANNUAL REPORT 2010

Total number of issued shares

P I VOVA R N A L A Š KO D . D .

1. INTRODUCTION

DATA REGARDING PILR SHARES

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

1902

1.5 Vision, mission, values and strategic objectives

We are realising our mission by creating brand names with added value for our customers and shareholders and responsible and environmentall-friendly operations with which we strive to attain superior results.

VISION To become the leader in the production and sales of beverages. To strengthen the reputation and recognition of individual recognised brands on both domestic and foreign markets and increase market shares on individual markets. MISSION To create brands with added value for customers and shareholders. To attain superior results in a better world through responsible and environmentally-friendly operations. VALUES Knowledge, enterprise, partnerships, responsibility and appreciation. It is on the basis of these values that we realise our objectives through well-conceived strategies in the areas of marketing and development of offers, organisation, human resources management, technological development, financial resources management and a positive attitude to the wider social community.

sion of already attained positions on foreign markets in the past. Planned cost effectiveness will be achieved with the aid of expertly qualified colleagues operating as a team and in accordance with the Pivovarna Laško Group’s strategic orientation.

PIVOVARNA

LAŠKO GROUP

PIVOVARNA LAŠKO, d. d.

PRESENTATION

Production of beer,

Production of beer and

mineral, spring and natural

natural waters.

waters, non-alcholic beverages and

syrups for the production of beverages,

other alcoholic beverages,

newspaper and publishing activities,

retail and

wholesale services and other postal

and courier activities.

ANNUAL REPORT 2010

tions of own brands on the domestic market and renewed acquisition and expan-

P I VOVA R N A L A Š KO D . D .

Production and sale of innovative trendy products, maintaining the market posi-

1. INTRODUCTION

STRATEGIC OBJECTIVES

PIVOVARNA

LAŠKO GROUP

PIVOVARNA LAŠKO, d. d. Pivovarna Laško, d. d.

COMPOSITION

Pivovarna Laško, d. d.

Radenska, d. d.,

Radenci including the subsidiary company

Pivovarna Union, d. d.,

Ljubljana with the subsidiary companies

Jadranska pivovara – Split, d. d.

Vital Mestinje, d. o. o.

Delo, d. d., Ljubljana with the subsidiary companies

RA&LA, d. o. o., Sarajevo

Firma Del, d. o. o., Laško

Laško Grupa, d. o. o., Zagreb

Due to the financial insignificance of the companies RA&LA, Firma Del and Laško Grupa which were only established in November 2010 with a minimum amount of founding capital, they will not be dealt with in

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1. INTRODUCTION

detail in continuation.

1.6 Presentation of the Pivovarna Laško Group The Pivovarna Laško Group brings together producers of beer, mineral, spring and natural waters, non-alcoholic beverages, spirits and other alcoholic beverages and syrups for making beverages. It is also involved in newspaper and publishing activities, retail and wholesale trade activities and postal and courier activities.

Parent company • PIVOVARNA LAŠKO, d. d., Slovenia

Subsidiary companies • RADENSKA, d. d., Radenci, Slovenia 93.81 percent ownership stake • PIVOVARNA UNION, d. d., Ljubljana, Slovenia 97.892 percent ownership stake • JADRANSKA PIVOVARA – Split, d. d., Croatia 99.106 percent ownership stake • VITAL MESTINJE, d. o. o., Slovenia 96.92 percent business share

100 percent ownership stake – of which 80.834 % is owned by Pivovarna Laško, d. d. and 19.166% by Radenska, d. d. • RA&LA, d. o. o., Sarajevo, Bosnia and Herzegovina

1. INTRODUCTION

• DELO, d. d., Ljubljana, Slovenia

• FIRMA DEL, d. o. o., Laško, Slovenia 100 percent business share • LAŠKO GRUPA, d. o. o., Zagreb, Croatia 100 percent business share Due to the financial insignificance of the companies RA&LA, d. o. o., Sarajevo, Firma Del, d. o. o., and Laško Grupa, d. o. o., Zagreb, they will not be dealt with in detail in continuation.

P I VOVA R N A L A Š KO D . D .

d. d., 11.48 % by Pivovarna Union, d. d., Ljubljana and 17.32 % by Fructal d. d.

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100 percent ownership stake – of which 69.23 % is owned by Pivovarna Laško, d. d., 1.97 % by Radeenska,

Associated companies • BIRRA PEJA, Sh. a., Peć, Kosovo 39.55 percent ownership stake • POSLOVNI SISTEM MERCATOR, d. d., Ljubljana, Slovenia 23.34 percent ownership stake • THERMANA, d. d.,Laško, Slovenia 20.63 percent ownership stake • SLOPAK, d. o. o., Ljubljana, Slovenia

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1. INTRODUCTION

38.96 percent ownership stake

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FRUKTAL MAK, a. d., Skopje Ownership: 89.39 %

1. INTRODUCTION

Delo subsidiary company: IZBERI, d. o. o., Ljubljana Busin. share: 100 %

FRUCTAL ZAGREB, d. o. o., Zagreb Busin. share: 100 %

P I VOVA R N A L A Š KO D . D .

Pivovarna Union Busin. Sh. in RA&LA 11.48 %

Radenska Ownership in Delu 19.166 %

FRUCTAL, d. d., Ajdovščina Ownership: 93.02 %

MIRAL RADENSKA, d. o. o., Radenci Busin. share: 100 %

EUROFRUIT SARAJEVO, d. o. o., Sarajevo Busin. share: 100 %

Radenska Busin. Sh. in RA&LA 1.97 %

Pivovarna Laško Ownership in Delu 80.834 %

Busin. share: 96.92 %

Ownership: 99.106 %

Ownership: 97.892 %

Delo subsidiary company: VEČER, d. d., Maribor Ownership: 97.25 %

Ownership: 100 %

Fructal Busin. Sh. in RA&LA 17.32 %

Pivovarna Laško Busin. Sh. in RA&LA 69.23 %

Busin. share: 100 %

RA&LA, d. o. o., Sarajevo

Ownership: 93.81 %

DELO, d. d., Ljubljana

VITAL, d. o. o., Mestinje

JADRANSKA PIVOVARA - Split, d. d.

PIVOVARNA UNION, d. d., Ljubljana

Subsidiary company

RADENSKA, d. d., Radenci

Subsidiary company

Parent company

PIVOVARNA LAŠKO, d. d.

on 31/12/2010

PIVOVARNA LAŠKO GROUP

ORGANISATIONAL CHART OF THE PIVOVARNA LAŠKO GROUP AS AT 31 DECEMBER 2010

Busin. share: 100 %

FIRMA DEL, d. o. o., Laško

Subsidiary company

Busin. share: 100 %

LAŠKO GRUPA, d.o.o., Zagreb

Subsidiary company

1.7 Presentation of the parent company Pivovarna Laško, d. d.

The historical beginnings of Pivovarna Laško reach back to 1825, when the mead and gingerbread maker Franz Geyer set up a brewery in the former Valvasor Hospital. The building which still exists today is now the location of the Savinja Hotel. One hundred and eightyfive years has passed since then, with Pivovarna Laško growing from a local brewery to the leading producer of beer and together with other companies in the Group, into the leading producer of mineral and natural waters, non-alcoholic beverages and other beverages on the Slovene market.

1.7.1 COMPANY PROFILE PIVOVARNA LAŠKO, d. d., Trubarjeva 28, 3270 Laško, was entered into the register of companies under registration no. 1/00171/00, at the District Court of Celje, under the court decision no. SRG 95/00673 of September 1995.

Abbreviated company name: PIVOVARNA LAŠKO, d. d.

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1. INTRODUCTION

Organisation type: public limited company

Share capital:

EUR 36,503,305

Number of shares issued:

8,747,652 no par-value shares

Listing of shares:

Ljubljana Stock Exchange, stock exchange listing of regular shares

Ticker symbol:

PILR

Company registration number:

5049318

Tax Identification Number:

SI90355580

Activity code:

11.050

Type of business and principal activity: BEER PRODUCTION Three-member Management Board: Dušan Zorko, MSc Chairman of the Management Board

Gorazd Lukman, member of the Management Board:

Robert Šega, member of the Management Board

(currently undergoing resignation)

Chairman of the Supervisory Board: Marjan Mačkošek

TRANSACTION ACCOUNTS:

Raiffeisen Krekova banka, d. d.

IBAN SI56 2430 0900 0054 863

Nova Kreditna banka Maribor, d. d.

IBAN SI56 0451 5000 0909 883

Nova Ljubljanska banka, d. d., Ljubljana

IBAN SI56 0223 2002 0104 463

Abanka Vipa, d. d.

IBAN SI56 0510 0801 2922 332

Unicredit banka Slovenije, d. d.

IBAN SI56 2900 0000 1820 159

Hypo Alpe-Adria-Bank, d. d.

IBAN SI56 3300 0000 2722 975

Banka Sparkasse, d. d.

IBAN SI56 3400 0100 1922 773

Banka Celje, d. d., Bančna skupina Celje

IBAN SI56 0600 0000 1199 122

Probanka, d. d.

IBAN SI56 2510 0970 0565 280

Telephone: +386 3 734 80 00 Fax: +386 3 573 18 17 Website: info@pivo-lasko.si

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1. INTRODUCTION

Website: http://www.pivo-lasko.si

1.8 Significant events in 2010

The new business model envisages the restructure of the Pivovarna Laško Group into a Agreement on Management and afterwards, into a unified company with the strategic objective of the growth strategy and the net proceeds from the sale of EUR 355 million and EUR 60 million EBIT by 2014.

1.8.1 SIGNIFICANT BUSINESS EVENTS IN PIVOVARNA LAŠKO, D. D. Writ of execution on RARG shares owned by Pivovarna Laško, d. d. Pivovarna Laško, d. d. received a writ of execution from the District Court in Ljubljana, whereby the court at the proposal of the creditor bank Nova kreditna banka Maribor, d. d., (NKBM) on the basis of an authentic document, namely the a contract on the pledging of dematerialized securities, concluded on 25 March 2009 between the company NKBM as the creditor and the company Center naložbe, d. d., Maribor as the debtor and Pivovarna Laško, d. d., as the lienee (the contract was drawn up in the name of Pivovarna Laško, d. d., and signed by the previous Director Boško Šrot), allowing the writ of execution due to a claim of EUR 6,570,542.25 with with appertaining interests and costs against the debtor Pivovarna Laško, d. d., for 345,304 shares of the company Radenska, d. d., Radenci with the ticker symbol RARG, whose owner is Pivovarna Laško, d. d. The shares were pledged by Pivovarna Laško, d. d. ti the company NKBM to insure the loan obtained by the company Center naložbe, d. d., Maribor from NKBM. Pivovarna Laško, d. d. submitted an appead agains the writ of execution on 15 April 2011 for it feels that reasons exist which would prevent the execution. Based on the appeal of Pivovarna Laško, d. d., on 16 February 2011 the court decided that the writ of execution be reversed in the part allowing the execution and that the District Court in Maribor would decide

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1. INTRODUCTION

on the claim and costs in the contentious proceedings.

Business Plan and plan for the restructure of the Pivovarna Laško Group At its 18th regular session on 23 April 2010 the Supervisory Board confirmed the bases of the new business model and reorganisation of the Pivovarna Laško Group, which had been prepared and submitted by the Management Board, also confirming the bases for the growth strategy of the Pivovarna Laško Group up to 2014. The new business model envisages the restructuring of the Pivovarna Laško Group into a contractual group and afterwards into a unified company, with the main objective of the growth objective being net sales revenues of EUR 355 million and an EBIT of EUR 60 million by 2014. The presentations of the strategy and new business model of the Group are available on SEOnet website and the Company’s website. At its 22nd regular session on 27 September 2010 the Supervisory Board also confirmed the supplemented Strategy of the Pivovarna Laško Group up to 2014 submitted by the Management Board. The key points of the supplemented Strategy are available on SEOnet and the Company’s website.

Convocation of the 16th regular General Meeting of Shareholders of Pivovarna Laško, d. d. Pivovarna Laško, d. d., convened the 16th regular General Meeting of Shareholders of Pivovarna Laško, d. d. on 17 July 2010. The resolutions adopted at the 16th regular General Meeting of Shareholders and other information is available on the website of the Ljubljana Stock Exchange, SEOnet and the Company’s website.

The General Meeting of the Company did not adopt the proposed decision of the Management and Supervisory Boards that the General Meeting give its consent to the management contract concluded between the parent company Pivovarna Laško, d. d. and its subsidiaries Pivovarna Union, d. d., Radenska, d. d., Radenci and Fructal, d. d. which would have meant the restructure of the Pivovarna Laško Group or namely the denoted companies from the existing concern concern into a contractual group. A three-fourths majority for decisions regarding subscribed capital is required with 64.9% voting for the proposed resolution. Prior to the vote by the General Meeting regarding the aforementioned proposed resolution, the currently largest shareholder the company Nova Ljubljanska banka, d. d. acquainted the General Meeting that it supported the proposed restructure into a contractual group, however conditions for its adoption were not yet fulfilled and it suggested that a decision regarding this point be postponed until the Management Board of Pivovarna Laško presented the final and confirmed plan for the business and financial organisation of the Group.

Commencement of bankruptcy proceedings against the company Center naložbe, d. d. The District Court in Maribor through its decision on 13 August 2010 decided that the compulsory settlement proceedings against the debtor Center naložbe, d. d. be halted and that bankruptcy proceedings of the debtor commence, for the creditors did not agree on compulsory settlement. This regards the bankruptcy proceedings commenced against the debtor Center naložbe, d. d. last October suggested by the creditor companies Pivovarna Laško, d. d., Pivovarna Union, d. d., Radenska, d. d., Radenci, Delo, d. d., and Fructal, d. d., however the decision-making procedure on the proposal of the creditor companies was halted through the decision of the District Court in Maribor on 18 January 2010 until the compulsory settlement proceedings against the denoted debtor were concluded.

Changes to the composition of the Management Board of Pivovarna Laško, d. d. At the 16th regular General Meeting of Shareholders of Pivovarna Laško, d. d. on 16 July 2010, the General Meeting adopted the amendment of the Company’s Statute, whereby the Management Board of Pivorvarna Laško, d. d. could have a maximum of three members, one of whom would be appointed the Chairman of Procedure of the Management Board. At its 20th regular session on 30 August 2010 the Supervisory Board appointed Dušan Zorko, MSc as Chairman of the Management Board and at its 21st regular session on 6 September 2010 at the proposal of the Chairman of the Management Board, it appointed Robert Šega, responsible for the area of finance and Gorazd Lukman, responsible for the areas of sales and commerce as members of the Management Board of Pivorvarna Laško, d. d. The Chairman of the Management Board and

Changes to the Supervisory Board of Pivovarna Laško, d. d. Pivovarna Laško, d. d. received the resignation statement of the Chairman of the Supervisory Board Anton Turnšek on 30 April 2010 that as of that date he was resigning as Chairman of the Supervisory Board of Pivovarna Laško, d. d. and that he would be performing the function of a member of the Supervisory Board

1. INTRODUCTION

one of the Management Board members together represent and act on behalf of the Company.

until 31 August 2013. At its session on 30 August 2010 the Supervisory Board elected the new Chairman of the Supervisory Board Marjan Mačkošek. Aleksander Svetelšek resigned from his function as Supervisory Board member of Pivovarna Laško, d. d. on 1 September 2010. The composition of the Supervisory Board of Pivovarna Laško, d. d. on 31 December 2010 comprised: Marjan Mačkošek - Chairman, Peter Groznik, DSc – member, Vladimir Malenković, DSc - member (all

P I VOVA R N A L A Š KO D . D .

pervisory Board member. At the 16th General Meeting of Shareholders on 16 July 2010, Peter Groznik, DSc, was elected as a new member of the Supervisory Board – Representative of capital with a mandate lasting

ANNUAL REPORT 2010

until the election of a new Supervisory Board member at the next General Meeting of Shareholders of the Company and that he was resigning as member of the Supervisory Board on the day of election of a new Su-

are Representatives of capital) and Andrej Kebe – Deputy Chairman and Bojan Košak - member (Workers representative).

Changes to the Audit Committee of the Supervisory Board of Pivovarna Laško, d. d. At its regular session on 22 November 2010 the Supervisory Board established that Marjan Mačkošek had been elected the Chairman of the Supervisory Board on 30 August 2010 and as a result, discharged him from the function of Chairman and member of the Audit Committee of the Supervisory Board on 22 November 2010. At the same session on 22 November 2010 the Supervisory Board appointed Peter Groznik, DSc as member and Chairman of the Audit Committee. The composition of the Audit Committee of the Supervisory Board of Pivovarna Laško, d. d. on 31 December 2010 comprised: Dr. Peter Groznik, DSc – Chairman and members Marko Koleša and Bojan Košak.

Decision of the Securities Market Agency On 24 September 2010 Pivovarna Laško, d. d. received the decision of the Securities Market Agency (SMA) whereby SMA had established that on the day of the decision dated 21 September 2010 by the companies Banka Celje, d. d. and Nova Ljubljanska banka, d. d. are operating in a conciliatory manner and together with a 26.40 percent stake achieve and exceed the takeover limit in the target company Pivovarna Laško, d. d. The SMA prohibited the denoted banks on the day of the final decision from realising their voting rights in the target company Pivovarna Laško until both or one of them submits a takeover bid in the name and on behalf of the account of both for shares of the target company Pivovarna Laško (PILR) or divest PILR shares or decrease their stake so that together, they will no longer achieve the takeover threshold. Through its decision SMA halted the procedure of establishing the attainment of the takeover threshold and prohibited the realisation of voting rights against Abanka Vipa, d. d., Gorenjska banka, d. d., Banka Koper, d. d., Probanka, d. d., and Nova kreditna banka Maribor, d. d.

Nullity of decisions of the so-called back door of the General Meeting On 23 December 2010 Pivovarna Laško, d. d. received a judgment from the Higher Court in Celje on 23 December 2010 in which the Higher Court rejected the appeal of the PanSlovenian Shareholders’ Association (PSSA) and company Electa, d. o. o. against the judgement of the District Court of 6 November 2009 in which the District Court had decided that the resolutions adopted at the so-called spontaneous (back door) General Meeting on 29 May 2009 in Laško were null and void and confirmed that it felt the contested judgement of the District Court to be unfounded. The judgement of the Higher Court means that the contested judgement of the District Court in Celje has become final and that the resolutions taken at the so-called

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1. INTRODUCTION

spontaneous (back door) General Meeting were null and void and without legal effect.

1.8.2 SIGNIFICANT BUSINESS EVENTS IN THE PIVOVARNA LAŠKO GROUP Denationalisation demands at Radenska, d. d., Radenci The denationalization beneficiary Rudolf Höhn-Šarič, Baltimore, USA lodged a request for the denationalisation of nationalised real estate in 1993. The lodged request regards the restitution of an ownership stake in the former company and subordinate restitution into ownership and possession real estate and payment of damages. In kind, this represents the majority of land and buildings inside the Radenci Health Resort in Radenci and a portion of the land and buildings at the location of the current Boračeva bottling plant. The procedure being managed before the administrative unit has only just begun. Prepared applications regarding procedural assumptions have been filed within the procedure. The denationalisation beneficieries Michael Wiesler and Barbara Purre-Wiesler (the grandchildren of Dr. Anton Šarič) filed a request on 20 December 2010 for an out-of-court settlement on the basis of the Enforcement of Criminal Sanctions Act for the restitution of seized property which was nationalised from Anton Šarič through a judgement of the Court of Naitonal Slovene Honour. The beneficiaries assessed the value of the assets to be EUR 14.5 million. They are additionally enforcing the return of 12 brands of Radenska, d. d., Radenci and payment of damages for the right to the mineral water and land on which the mineral water

springs are located On 23 December 2010 the beneficiaries in accordance with the Enforcement of Criminal Sanctions Act carried out the entry into the land register in the form of a notice of dispute on all land parcels that are the subject of the denationalization procedure. The entry of the notice of dispute was also carried out for the aforementioned brands of Radenska, d. d., Radenci.

Sale of investments Due to the difficult liquidity situation, disinvestment activities began in 2010 in the sense of sales of all financial investments which do not represent the primary activity of producing beverages and the sale of all real estate unnecessary for operations. Procedures for the sale of shares in ČZP Večer, d. d., Delo d. d., Mercator, d. d., Fructal, d. d., Jadranska pivovara – Split, d. d., Thermana, d. d. and Probanka, d. d. are underway. The sale of all unlisted securities and stakes in other companies and the sale of the Hum and Savinja Hotels in Laško, part of the Tri lilije sports hall and a warehouse in Ljubljana. During the procedure involving the sale of the company Jadranska pivovara – Split, d. d., activities are underway for obtaining a non-binding offer for the purchase of a 99.11% equity stake in the aforementioned beer brewery owned by Pivovarna Laško, d. d. Two non-binding offers have been obtained until now. An inspection of Jadranska pivovara by interested buyers is envisaged. A number of non-binding offers for the 100% equity stake in the subsidiary Delo, d. d. owned by Pivovarna Laško, d. d. has been obtained. The prices offered were lower than expected. Discussions with bidders will be carried out regarding the possibility of increasing the non-binding offers therefore no decisions will be made until continued procedures are implemented. During the procedure for the sale of a 79.25 % equity stake in the company Večer, d. d., owned by Delo, d. d., a contract was signed in 2010 with the buyer 3Lan, d. o. o. Kupec who paid a deposit comprising 10 % of the entire purchase price. The Competition Protection Office (CPO) issued the seller Delo, d. d. its consent at the end of February 2011 for the sale of a 75% equity stake in the company Večer, d. d. to the company 3Lan, d. o. o. The consent of the Ministry of Culture and decision of the CPO was required to ensure that the sale will not result in an illegal concentration of companies in order to realise the denoted contract. In the procedure of the sale of a 93.73 % equity stake in the company Fructal, d. d. owned by Pivovarna ing on 15 April 2011. In the procedure of the sale of a 23.34 % equity stake in the company Mercator, d. d. owned by Pivovarna Laško, d. d. (8.43 %), Pivovarna Union, d. d. (12.33 %) and Radenska, d. d., Radenci (2.57 %), d. d., three offers were obtained based on a public call for bids, namely from the companies Agrokor, Mid Europa in Warburg

1. INTRODUCTION

Union, d. d. the call for non-binding offers is underway with the deadline for the submission of offers expir-

denoted equity stakes are underway. In the procedure of the sale of the unlisted securities BCER, EGKG, CEMG, EMAG, RLVG and ZVTG, shares with the BCER denotation, owned by Pivovarne Laško, d. d. were sold in December 2010 while ZVTG shares owned by Pivovarna Union, d. d. and Radenska, d. d., Radenci were sold in February 2011. Offers for the purchase of the EGKG and EMAG shares were received in December 2010 while no offers were received for the remaining shares being offered. In the procedure of the sale of real estate unnecessary for business activities are underway involving the sale of the Hum and Savinja Hotels, the Tri lilije sports hall and a warehouse in Ljubljana with a total value of

P I VOVA R N A L A Š KO D . D .

In the procedure of sale of a 6.27 % equity stake in the company Probanka, d. d. and 20.63% equity stake in the company Thermana, d. d. owned by Pivovarna Laško, d. d. activities for organisation of the sale of the

ANNUAL REPORT 2010

Pincus. A decision on the possible sale has not yet been adopted.

EUR 6.4 million. The public announcement of the sale of the aforementioned real estate was implemented in March 2011. Calls for bids are currently underway.

Changes in the management boards of subsidiaries The mandate of the Director of the subsidiary RA&LA, d. o. o., Sarajevo, Marku Božiček to date expired on 28 February 2010. Šerif Krajišnik was appointed as the new Director for a 4-year mandate, commencing on 1 March 2010. The Chairman of the Management Board of Fructal, d. d., Ajdovščina, Anton Balažič submitted his resignation statement on 31 March 2010. The Supervisory Board appointed the new Chairman of the Management Board Drago Davšek on 1 April 2010 for a mandate of five years. The General Meeting of Shareholders of the company Vital Mestinje, d. o. o., which was held on 26 November 2010, discharged the Director of the company Vital Mestinje, d. o. o., Zvonka Murglja, to commence on 30 November 2010. The General Meeting appointed Miro Močnik as the new Director for a mandate of 5 years.

Changes in the supervisory boards of subsidiaries On 15 July 2010 the mandates of the members of the Supervisory Board of the company Jadranska pivovara – Split, d. d., Anton Turnšek and Janko Remic on the basis of their prior resignation statements and Boško Šrot on the basis of his discharge by the General Meeting of Shareholders ceased. In accordance with the amended Statute which was adopted at the regular session of the General Meeting of Shareholders of the Company on 15 July 2010 whereby two members of the Supervisory Board would be appointed by the General Meeting and one member by the Worker’s Council, the General Meeting appointed Gorazd Lukman and Pavel Teršek as the two members of the Supervisory Board of Jadranska pivovara for a four-year mandate while the Worker’s Council appointed Goran Domljanović as the third member of the Supervisory Board. The Supervisory Board elected Gorazd Lukman as the Chairman of the Supervisory Board.

Establishment of the company Laško Grupa, d. o. o., in Croatia Pivovarna Laško, d. d. established a new subsidiary Laško Grupa, d. o. o., with its registered office in

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1. INTRODUCTION

Zagreb in November 2010. The company’s main activity is the promotion of sales of products from the

Pivovarna Laško Group on the Croatian market. Boris Matijaščić was appointed the director of the company.

1882

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2. BUSINESS REPORT

BUSINESS REPORT

2.1 Corporate governance

Corporate Governance operates according to a two-tier system whereby the Company is managed by the Management Board and Supervisory Board.

The principles of management of Pivovarna Laško, d. d. arise from valid legal norms in the Republic of Slovenia, internal acts of the Company and established good work practices. Management is carried out according to a two-tier system whereby the Company is managed by the Management Board and its operations monitored by the Supervisory Board. The bodies of the Company as set out in the Statute of Pivovarna Laško, d. d. are the General Meeting of Shareholders, Supervisory Board and Management Board of the Company.

2.1.1 GENERAL MEETING OF SHAREHOLDERS Pursuant to the provisions of the Companies Act, the General Meeting of Shareholders is the supreme body of the Company. The will of the shareholders who adopt fundamental and statutory decisions are implemented on the Company. One share represents one vote at the General Meeting. Pivovarna Laško, d. d. has no shares with limited voting rights. Own shares do not enable voting rights at the General Meeting.

Attendance at General Meetings The right to participate and vote at the General Meeting of Shareholders is held by those shareholders who have been entered into the share register of dematerialized shares at the Central Securities Clearing Corporation by the end of the fourth day prior to the convocation of a General Meeting (cut-off date) and who

Members of the Management Board and Supervisory Board may attend the General Meeting even if they are not shareholders Media representatives may also attend the General Meeting if they give notification of their attendance to the Management Board of the Company in writing within three days at the latest prior to the convocation of the General Meeting.

Convocation and implementation of the General Meeting of Shareholders A General Meeting of Shareholders is convened when it is for the benefit of the Company or when it is necessary in accordance with law and the Statute of the Company. A regular General Meeting of Shareholders is convened once a year at Pivovarna Laško, d. d., which in 2010 was convened on 11 June 2010 and held on 16 July 2010.

ANNUAL REPORT 2010

Board of the Company by the end of the fourth day prior to the convocation of the General Meeting.

2. BUSINESS REPORT

personally, or through a representative or nominee, gave notification of their attendance to the Management

The following important decisions were adopted at the 16th regular General Meeting regarding the denoted point in the agenda: 2.1.

The General Meeting is acquainted with the Report of the Supervisory Board of the Company regarding the examination and adoption of the Audited Annual Report for 2009 and the Report of the Supervisory Board on the examination of the Report on Relations with Subsidiary Companies.

2.2.

The General Meeting is informed that as at 31 December 2009 net operating loss for 2009 amounted to EUR 44,973,818 and that the Management Board with the Supervisory Board’s consent covered this loss through other profit reserves in the amount of EUR 6,201,081, legal reserves in the amount of EUR 21,956,463 and capital reserves in the amount of EUR 16,816,274.

P I VOVA R N A L A Š KO D . D .

Decisions of the General Meeting

2.4.1. The General Meeting does not grant a discharge to the previous Management Board – Director of the Company, Boško Šrot for the period from 1 January 2009 to 23 July 2009. 2.4.2. The General Meeting grants discharges to the Management Board and Director of the Company Dušan Zorko for the period from 24 July 2009 to 31 December 2009. 2.4.3. The General Meeting grants discharges to the members of the Supervisory Board of the Company for the 2009 business year. 3.1.

The General Meeting is acquainted with the Report on the Findings of a Special Audit of the Management of Individual Transactions of the Pivovarna Laško Group, dated 27 February 2010, prepared by the auditing firm BDO Revizija, d. o. o., Cesta v Mestni log 1, Ljubljana.

3.2.

In accordance with Article 327 of the Companies Act and based on the findings of the Report on the Findings of a Special Audit of the Management of Individual Transactions of Pivovarna Laško, d. d., dated 27 February 2010, the Management Board must file a suitable action for damages within six months at the latest following the day of implementation of the General Meeting.

The General Meeting of Shareholders adopts the amendments to the Statute of the Company in accordance with the provisions of the Companies Act (ZGD-1C) and other amendments of the Statute based on the contested proposal of NLB, d. d. in the enclosed text.

7. The General Meeting elects Peter Groznik, DSc is elected as a new member of the Supervisory Board – representative of capital, whose mandate shall commence on the day of his election and expire on 31 August 2013. The General Meeting also adopted the following decisions: • it was acquainted with the remuneration of the Management Board and members of the Supervisory Board of the Company for the 2009 business year (page 186 and 187); • it appointed the auditing firm (page 45) for the auditing of the financial statements for 2010. The General Meeting of Shareholders convenes the Management Board of its own initiative, at the request of the Supervisory Board or at the written request of the shareholders of the Company who possess at least a 5% equity stake in the Company. Shareholders may realise the rights from shares directly at the General Meeting or through their representatives. The General Meeting makes decisions according to the majority of votes cast unless otherwise provided

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2. BUSINESS REPORT

by law or the Statute of the Company. The General Meeting decides on the following matters which require a three-quarter majority vote: • amendments to the Statute; • reductions of share capital (including conditional increases); • approved increases to share capital; • status changes and termination of the Company; • exclusion of shareholders’ preferential rights in the issue of new shares; • election and early discharge of members of the Supervisory Board; • other matters, if so prescribed by law or the Statute. The General Meeting makes decisions regarding the granting of discharges to the Management and Supervisory Boards of the Company and at the same time makes decisions regarding the use of distributable profit. By granting discharges the General Meeting confirms and approves the work of the Management and Supervisory Boards for the business year. Discussions regarding the granting of discharges are carried out

P I VOVA R N A L A Š KO D . D .

in combination with discussions on the use of distributable profit. If the General Meeting does not grant

discharges, this is not deemed that the Management Board was given a vote of no confidence. Before the General Meeting of Shareholders decides that the distributable profit is to be used for dividends, the dividends belong to the shareholders who as owners are entered in the central register of securities at the Central Securities Clearing Corporation on the cut-off date which shall be decided through a decision on the use of distributable profit at each time.

The shareholder is obliged, when requested to inform the Company on the eventual form of the dividend transfer (data regarding the transaction account) and company registration number or PIN and tax number. If the shareholder fails to do so, the dividend will not be paid out in accordance with the provisions of the Statute.

2.1.2 SUPERVISORY BOARD The fundamental function of the Supervisory Board is to supervise the management of the Company’s business operations. The Supervisory Board appoints the members and Chairman of the Management Board. The composition of the Supervisory Board is defined by the Statute of the Company. The Supervisory Board of Pivovarna Laško, d. d. has six members, each of whom has the same rights and responsibilities unless otherwise stipulated by the Statute. Four members of the Supervisory Board elected by the General Meeting of Shareholders are capital representatives, while the other two members of the Supervisory Board are workers’ representatives and are elected by the Worker’s Council. The Supervisory Board is appointed by the General Meeting of Shareholders through a simple majority vote of the shareholders in attendance, except for the members of the Supervisory Board elected by the Worker’s Council. The members of the Supervisory Board are elected for a period of four years and may be re-elected after the expiry of their mandates. The Supervisory Board appoints the Chairman and Deputy Chairman of the Supervisory Board from amongst their members. The Chairman convenes and chairs the sessions of the Supervisory Board and is authorised to declare its will and announce decisions adopted by the Supervisory Board. The Chairman of the Supervisory Board represents the Company in disputes with the members of the Management Board and the Supervisory Board represents the Company in disputes against other bodies of the Company and third parties, if not otherwise agreed for each particular case. The Chairman of the Supervisory Board is always the representative of the shareholders. Sessions of the Supervisory Board are convened by the Chairman on his own initiative, on the initiative of any member of the Supervisory Board, or on the initiative of the Management Board. The Supervisory Board takes decisions at the sessions.

Composition of the Supervisory Board

as at 31 December 2010

as at 31 December 2009

Representatives of capital:

Marjan Mačkošek, Chairman

Anton Turnšek, Chairman

Dr. Peter Groznik, DSc

Aleksander Svetelšek

Dr. Vladimir Malenković, DSc

Marjan Mačkošek

Dr. Vladimir Malenković, Dsc

Employee representatives:

Andrej Kebe, Deputy Chairman

Bojan Košak

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report, the annual report is adopted.

P I VOVA R N A L A Š KO D . D .

ing of Shareholders and deliver it to the Management Board. If the Supervisory Board confirms the annual

2. BUSINESS REPORT

The Supervisory Board must within one month from the submission of the annual report review the annual report and proposal for use of the distributable profit and draft a written report for the General Meet-

1. Marjan Mačkošek Chairman of the Supervisory Board of Pivovarna Laško, d. d. since 30 August 2010.

Born in 1954. Highest attained education: university degree 2nd level mechanical engineering from the University of Maribor, obtained in 1983. Position: Štore Steel, d. o. o., General Director, since 1998 (called Jeklo Štore – steel manufacturer at that time, d. o. o.).

2. Dr. Peter Groznik, DSc Member of the Supervisory Board of Pivovarna Laško, d. d. since 16 July 2010.

Born in 1973. Highest attained education: DSc in Finance, Kelley School of Business, Indiana University Bloomington (United States of America) in 2003.

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Position: University of Ljubljana, Faculty of Law.

3. Dr. Vladimir Malenković, Dsc Member of the Supervisory Board of Pivovarna Laško, d. d. since 31 August 2009.

Born in 1966. Highest attained education: DSc in Strategic Management from the University of Ljubljana, Faculty of Law, obtained in 2005. Position: Advisor to the Management at Holding Slovenske elektrarne, d. o. o.

4. Andrej Kebe Member of the Supervisory Board of Pivovarna Laško, d. d. since October 2003.

Born in 1959. Highest attained education: BSc in Electrical Engineering, University of Ljubljana, obtained in 1984. Position: employed at Pivovarna Laško, d. d. since 9 October 1989.

5. Bojan Košak Member of the Supervisory Board of Pivovarna Laško, d. d. since September 1995.

Born in 1951. Highest attained education: BSc in Economics, University of Maribor, VEKŠ Maribor, obtained in 1974.

of Pivovarna Laško, d. d. and that he would be performing the function of a member of the Supervisory Board until the election of a new Supervisory Board member at the next General Meeting of Shareholders of the Company and that he was resigning as member of the Supervisory Board on the day of election of a new Supervisory Board member. At the 16th regular General Meeting of Shareholders on 16 July 2010, Peter Groznik, DSc, was elected as a new member of the Supervisory Board. At its session on 30 August 2010 the Supervisory Board elected the new Chairman of the Supervisory Board Marjan Mačkošek, commencing on 30 August 2010. Aleksander Svetelšek resigned from his function as Supervisory Board member of Pivovarna Laško, d. d. on 1 September 2010.

ANNUAL REPORT 2010

Pivovarna Laško, d. d. received the resignation statement of the Chairman of the Supervisory Board Anton Turnšek on 30 April 2010, stating that as of that date he was resigning as Chairman of the Supervisory Board

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Changes to the Supervisory Board of Pivovarna Laško, d. d.

2. BUSINESS REPORT

Position: employed at Pivovarna Laško, d. d. since 1 April 1976.

Audit Committee of the Supervisory Board of Pivovarna Laško, d. d. The tasks of the Audit Committee are defined in Article 280 of the Companies Act, with key tasks comprising: • monitoring of the financial reporting process and statutory audits of the annual and consolidated financial statements, • review and monitoring of the independence of the auditor for the Company’s annual report, • proposal to the Supervisory Board for the appointment of a candidate as auditor of the annual report, • supervision over the integrity of financial information provided by the Company, • assessment of the drawn-up annual report including the drafting of proposals for the Supervisory Board.

Composition of the Audit Committee

Composition of the AuditCommittee

as at 31 December 2010

as at 31 December 2009

Peter Groznik, DSc - Chairman

Marjan Mačkošek - Chairman

since 22 November 2010

since 30 March 2010

Bojan Košak

Marko Koleša

Changes to the Audit Committee of the Supervisory Board of Pivovarna Laško, d. d. At its 24th regular session on 22 November 2010 the Supervisory Board established that Marjan Mačkošek had been elected the Chairman of the Supervisory Board on 30 August 2010 and as a result, discharged him from the function of Chairman and member of the Audit Committee of the Supervisory Board on

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22 November 2010. At the same session on 22 November 2010, the Supervisory Board appointed Peter Gro-

znik, DSc as member and Chairman of the Audit Committee

Changes in the supervisory boards of subsidiaries 1. Jadranska pivovara – Split, d. d. On 15 July 2010 the mandates of the members of the Supervisory Board of the company Jadranska pivovara – Split, d. d., Anton Turnšek and Janko Remic on the basis of their prior resignation statements and Boško Šrot on the basis of his discharge by the General Meeting of Shareholders ceased. In accordance with the amended Statute which was adopted at the regular session of the General Meeting of Shareholders of the company on 15 July 2010 whereby two members of the Supervisory Board would be appointed by the General Meeting and one member by the Worker’s Council, the General Meeting appointed Gorazd Lukman and Pvel Teršek as the two members of the Supervisory Board of Jadranska pivovara for a four-year mandate while the Worker’s Council appointed Goran Domljanović as the third member of the Supervisory Board.

2.1.3 MANAGEMENT BOARD The Management Board runs the Company and adopts business decisions independently and at its own risk and represents the Company in disputes with third parties, adopts the Company’s development strategy, ensures proper management and treatment of risks, acts with due care and diligence and protects the business secrets of the Company.

The Management Board is composed of three members, namely: Dušan Zorko, MSc – Chairman of the Management Board, Gorazd Lukman – member of the Management Board, responsible for the areas of sales and commerce and Robert Šega – member of the Management Board, responsible for finance. The Chairman and members of the Management Board are appointed and recalled by the Supervisory Board, whereby members of the Management Board are appointed at the Chairman of the Management Board’s recommendation. The mandate of the Chairman and members of the Management Board is five years. The Chairman of the Management Board and one of the Management Board members together represent and act on behalf of the Company. The Management Board may appoint a procurator.

Changes to the Management Board of Pivovarna Laško, d. d. At the 16thregular General Meeting of Shareholders of Pivovarna Laško, d. d. on 16 July 2010, the General Meeting of the Company adopted the amendment of the Company’s Statute, whereby the Management Board of Pivorvarna Laško, d. d. could have a maximum of three members, one of whom shall be appointed the Chairman of the Management Board. At its 20th regular session on 30 August 2010 the Supervisory Board appointed Dušan Zorko, MSc as Chairman of the Management Board. At its 21st regular session on 6 September 2010 at the proposal of the Chairman of the Management Board, the Supervisory Board appointed Robert Šega, responsible for finance and Gorazd Lukman, responsible for sales and commerce as members of the Management Board of Pivorvarna Laško, d. d.

Composition of the three-member

Composition of the one-member Man-

agement Board:

Management Board:

as at 31 December 2010

as at 31 December 2009

Dušan Zorko, MSc - Chairman

Dušan Zorko, MSc

Robert Šega

1. Dušan Zorko Chairman of the Management Board of Pivovarna Laško, d. d. since 24 July 2009, when he replaced Boško Šrot as Director. Born in 1956. Highest attained education: MSc in Economics (major: (international exchanges)),

University of Maribor, VEKŠ Maribor, obtained in 1998.

Position:

employed at Pivovarna Laško, d. d. since 24 July 2009.

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Gorazd Lukman

2. Robert Šega Member of the Management Board of Pivovarna Laško, d. d. since 6 September 2010 and responsible for finance. Born in 1963. Highest attained education: MSc in Digital Communications and Multiprocessor Systems,

University of Ljubljana, Faculty of Electrical Engineering, obtained in 1990.

Position:

employed at Pivovarna Laško, d. d. since 1 June 2010.

3. Gorazd Lukman Member of the Management Board of Pivovarna Laško, d. d. since 6 September 2010 and responsible for sales and commerce. Born in 1959. Highest attained education: Business Commercial College Celje, obtained in 2004. Position:

employed at Pivovarna Laško, d. d. since 1 November 2009.

Changes to the Management Board of Pivovarna Laško, d. d. following the conclusion of the business year Pivovarna Laško, d. d. received the resignation statement of member of the Management Board, responsible for finance Robert Šega on 14 March 2011 that he was resigning from the position of member of the Management Board of Pivovarna Laško, d. d. The Supervisory Board of the Company will treat the resignation of the Management Board member at its next session.

Changes in the management boards of subsidiaries 1. RA&LA, d. o. o., Sarajevo The mandate of the Director of the subsidiary RA&LA, d. o. o., Sarajevo, Marko Božiček expired on

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28 February 2010. Šerif Krajišnik was appointed as the new Director for a 4-year mandate, commencing on

1 March 2010.

2. Fructal, d. d., Ajdovščina The Chairman of the Management Board of Fructal, d. d., Ajdovščina, Anton Balažič submitted his resignation statement on 31 March 2010. The Supervisory Board appointed the new Chairman of the Management Board Drago Davšek on 1 April

2.1.4 MANAGEMENT IN THE GROUP The Pivovarna Laško Group consists of the parent company Pivovarna Laško, d. d., five subsidiaries in Slovenia and three subsidiaries abroad. All the subsidiaries are majority owned by the parent company (more details on pages 21, 22 and 23 of this Report) Members of the management and administrative bodies of the subsidiaries as at 31 December 2010:

RADENSKA, d. d., Radenci Management Board

Zvonko Murgelj

Supervisory Board

Representatives of capital:

Dragica Čepin,

MSc – Chairwoman

Marjeta Zevnik

Mirjam Hočevar

Employee representatives: Franko Lipičar – Deputy

Chairman Dominik Omar

RADENSKA MIRAL Radenci, d. o. o. (subsidiary company of Radenska, d. d., Radenci) Management Board

Zvonko Murgelj

Supervisory Board

The company does not have a Supervisory Board.

PIVOVARNA UNION, d. d., Ljubljana Management Board

Dušan Zorko

Supervisory Board

Representatives of capital:

Employee representatives:

Anton Turnšek - Chairman

Marjeta Zevnik – Deputy

Chairwoman

Franc Rojnik

Terezija Peterka

Janko Remic

Supervisory Board

Representative of capital:

Employee representatives:

Terezija Peterka - Chairwoman

Anton Medvešek

Mirjam Hočevar – Deputy Chairwoman

JADRANSKA PIVOVARA - Split, d. d. Management Board

Nenad Buljan, until 31 January 2011

Zlatko Bebić, since 1 February 2011

Supervisory Board

Representatives of capital:

Employee representatives:

Gorazd Lukman - Chairman

Goran Domljanović

Pavel Teršek – Deputy Chairman

VITAL Mestinje, d. o. o. Management Board

Mira Močnik

Supervisory Board

The company does not have a Supervisory Board.

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Drago Kavšek

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Management Board

2. BUSINESS REPORT

FRUCTAL, d. d., Ajdovščina (subsidiary company of Pivovarna Union, d. d., Ljubljana)

DELO, d. d., Ljubljana Management Board

Jurij Giacomelli

Supervisory Board

Representatives of capital:

Employee representatives:

Marjeta Zevnik - Chairwoman

Branimir Piano

Robert Šega – Deputy Chairman

Jure Flerin

Dragica Čepin, MSc

IZBERI, d. o. o., Ljubljana (subsidiary company of Delo, d. d., Ljubljana) Management Board

Samo Čok

Supervisory Board

Representative of capital:

Jurij Giacomelli - Chairman

Dragica Čepin, MSc

Mojca Međedović

Employee representatives: The company does not have any representatives.

VEČER, d. d., Maribor (subsidiary company of Delo, d. d., Ljubljana) Management Board

Uroš Skuhala

Supervisory Board

Representative of capital:

Dušan Mohorko – Chairman

Employee representatives: Borko de Corti – Deputy

Chairman

Anton Balažič

Petrina Šebart Žižek

Zvonko Murgelj

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RA&LA, d. o. o., Sarajevo

Management Board

Šerif Krajišnik

Supervisory Board

The company does not have a Supervisory Board.

FIRMA DEL, d. o. o., Laško Management Board

Dušan Zorko, MSc

Supervisory Board

The company does not have a Supervisory Board.

LAŠKO GRUPA, d. o. o., Zagreb

Management Board

Boris Matijaščić

Supervisory Board

The company does not have a Supervisory Board.

2.2 Statement on corporate governance and compliance with the Corporate Governance Code The Management Board and Supervisory Board of Pivovarna Laško, d. d. hereby declare that the Company observes the Corporate Governace Code for Joint Stock Companies of 8 December 2009, which commenced use on 1 January 2010, with several exceptions that do not intervene in good management practices and in the cases denoted in this Statement.

2.2.1 COMPLIANCE OF COMPANY MANAGEMENT WITH THE PROVISIONS OF THE CORPORATE GOVERNMENT CODE FOR JOINT STOCK COMPANIES The Management Board and Supervisory Board of Pivovarna Laško, d. d. hereby declare that the Company observes the provisions of the Corporate Governance Code for Joint Stock Companies of 8 December 2009, which commenced use on 1 January 2010 (hereinafter: Code), with several exceptions that do not intervene in good management practices and in the cases denoted in this Statement. The Statement is a constituent part of the Annual Report for 2010 and is also available on the Company’s website www.pivo-lasko.si. The Statement refers to the 2010 business year, i.e. from 1 January 2010 to 31 December 2010. No changes have occurred in the Company’s corporate governance since the conclusion of the accounting period up to the Statement’s publication. The Company published its Statement on Conformity with the Code on 23 April 2010 in reference to the 2009 business year. The Code is published on the website of the Ljubljana Stock Exchange www.ljse.si.

pany’s value, and other objectives such as long-term value creation for shareholders, observance of social and environmental aspects of operations with the aim of ensuring sustainable development of the Company, even though these objectives are not stated in the Company Statute.

•P rovision 2: The management of the Company is focused at realising the strategic growth objectives of the Pivovarna Laško Group until 2014 and the establishment of a new business model for the Group. The bases for strategic growth and the new business model were approved by the Supervisory Board of the Company at its session on 23 April 2010. The presentation of the strategy and new business model of the Group was published on the website SEOnet of the Ljubljana Stock Exchange on 14 May 2010. The special document Corporate Governance Policy of the Company was rejected by both the Management and Supervisory Boards.

•P rovisions 8 (second paragraph) and 17.2: The members of the Supervisory Board did not sign the individual statements regarding the fulfilment of independency criteria as denoted in Point C.3 Annex C of the Code. Based on knowledge available to the Company, the members of the Supervisory Board fulfil all criteria of independency as defined in Point C.3 Annex C of the Code. The individual statements will be signed in 2011.

ANNUAL REPORT 2010

•P rovision 1: The Company operates in accordance with its key objective, which is to maximize the Com-

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from individual provisions of the Code are given in continuation:

2. BUSINESS REPORT

The explanations of the Management and Supervisory Boards of the Company regarding discrepancies

•P rovision 8.7: The Rules of Procedure of the Supervisory Board do not contain provisions regarding communications with the public in connection to decisions adopted at its sessions. The Chairman of the Management Board is, on the basis of a decision of the Supervisory Board, authorised to carry out communications with the public. Important decisions of the Supervisory Board are published on the SEOnet website of the Ljubljana Stock Exchange and on the websites of the companies in the Group.

•P rovision 11: The Supervisory Board does not have a secretary. The tasks of the secretary of the Supervisory Board are performed by the General Sector Director or his deputy.

•P rovision 13: The Supervisory Board appointed a three-member Audit Committee in March 2009 and did not appoint or establish any other special committees. Competent professional offices reported at the sessions as needed.

•P rovision 16.1: Remuneration of members of the Management Board is fixed. After adopting the annual report, the Supervisory Board may at its own discretion based on the criteria defined in an individual contract, grant a member of the Management Board a reward for the previous year, which may be paid out in cash or as shares in the Company (variable component).

•P rovision 20: The Company has not defined a Communications Strategy as a constituent part of the Management Policy. Expert services ensure Company communications and transparency of operations in a manner pursuant to the provisions of the Code.

•P rovision 21.3: The Company does not publish notices in the foreign languages usually used in international financial circles.

2.2.2 MAIN CHARACTERISTICS OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS IN CONNECTION TO THE ACCOUNTING REPORTING PROCEDURE Pivovarna Laško, d. d., manages risks and implements internal control procedures at all levels. The pur-

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2. BUSINESS REPORT

pose of internal controls is to ensure the accuracy, reliability, transparency and intervisibility of all processes

and the management of risks related to financial reporting. The internal control system at the same time establishes a mechanism for preventing irrational use of assets and contributes to cost-effectiveness. The internal control system includes procedures to ensure that:

• t ransactions are recorded on the basis of credible accounting documents, based on which transactions are recorded accurately and fairly, providing a guarantee that the company disposes of its assets in an honest and fair manner;

• t ransactions are recorded and financial statements drawn up in accordance with the applicable legislation;

• a ny unauthorised acquisition of the use and disposal of company assets, which would have a significant effect on financial statements are prevented or detected in a timely manner. Internal control in the Company is carried out by a Finance, Accounting and Controlling Department which is responsible for bookkeeping and the preparation of financial statements in accordance with applicable accounting, tax and other regulations. The adequacy of control operations within the scope of the information system is examined by authorized external contractors on an annual basis.

2.2.3 EXTERNAL AUDIT Regular external audit To ensure consolidation and standardisation within the Pivovarna Laško Group, the General Meeting of Shareholders of Pivovarna Laško, d. d., Pivovarna Union, d. d., Ljubljana, Radenska, d. d., Radenci, Fructal, d. d., Ajdovščina and Delo, d. d., Ljubljana appointed the auditing firm Deloitte Revizija, d. o. o., Ljubljana, as the certified auditor which within the scope of auditing the financial statements reports to the Management Board, Supervisory Board and Audit Committee of the Supervisory Board on its findings.

Report on the Findings of the Special Audit On 9 March 2010 Pivovarna Laško, d. d. received the Report on the Findings of a Special Audit of the Management of Individual Transactions of the Pivovarna Laško Group (hereinafter: Report), which was prepared by the auditing firm BDO Revizija, d. o. o., družba za revidiranje, Ljubljana pursuant to the General Meeting decision of 31 August 2009 regarding the appointment of a special auditing firm to examine the management of individual transactions of the Pivovarna Laško Group. The Management Board sent the Report to all the members of the Supervisory Board in accordance with the provisions of Article 320 of the Companies Act. The Supervisory Board reviewed the Report and was acquainted with it at its 17th regular session on 30 March 2010. Based on the finding of the Management Board that other transactions which were contextually connected to those under treatment had been implemented which the special audit had not included in the Report, the Supervisory Board recommended that the Management Board carry out an examination of these individual transactions. The Management and Supervisory Boards acquainted the General Meeting with the Report at the 16th regular General Meeting of Shareholders on 17 June 2010. Following the General Meeting’s acquaintance with the said Report, the General Meeting passed a decision that the Management Board had to file a suitable action for damages in accordance with Article 327 of the Companies Act and based on the findings from the Report within six months at the latest of the day the General Meeting of Shareholders was implemented. The action for damages was filed on 12 January 2011 against the company Atka-Prima, d. o. o. and Boško

will file additional lawsuits in the future for damages suffered for the entire scope of damage suffered due to not-yet concluded judicial procedures is not yet known.

2.2.4 DATA IN ACCORDANCE WITH THE SIXTH PARAGRAPH OF ARTICLE 70 OF THE ZGD-1 ACT 3. Data on significant direct ownership of Company securities is given on page 52 of this Annual Report Direct ownership thereof by the Management Board is disclosed on page 55 of this Annual Report. 4. The Statute of the Company does not contain any provisions granting holders of securities any special controlling rights. 6. The Statute of the Company does not contain limitations regarding particular shares or a defined number of votes. The Statute of the Company prescribes that shareholders intending to attend a General Meeting of Shareholders must register at the headquarters of the Company by the end of the fourth day at the latest prior to the convocation of the General Meeting or they will not be able to attend the General Meeting or implement their voting rights.

ANNUAL REPORT 2010

d. d., due to transactions implemented in 2008 and 2009. A possibility exists that Pivovarna Laško, d. d.,

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13,336,488.76 with with appertaining interests and costsin respect of damages suffered by Pivovarna Laško,

2. BUSINESS REPORT

Šrot. Pivovarna Laško, d. d., is demanding the payment of damages by the defendents in the amount of EUR

8. In accordance with the Statute of the Company, the Company Management Board may have a maximum of three members, one of whom shall be appointed the Chairman of the Management Board. The Chairman and members of the Management Board are appointed and recalled by the Supervisory Board, whereby members of the Management Board are appointed at the Chairman of the Management Board’s recommendation. The Supervisory Board may also prematurely recall the Chairman of the Management Board or an individual Management Board member in accordance with the law. Pursuant to the Company’s Statue, the Supervisory Board consists of six members. The Supervisory Board is appointed by the General Meeting of Shareholders through a simple majority vote of the shareholders in attendance, except for the two members of the Supervisory Board who are employee representatives who are elected by the Worker’s Council. A three-quarter majority vote is required for the premature recall of a Supervisory Board member. The Company’s Statute defines that a three-quarter majority vote by the General Meeting is required for an amendment of the Statute. 9. The General Meeting did not adopt the special decision on the purchase of own shares. The purchase of own shares is being implemented in accordance with the provisions of Article 247 of the ZGD-1 Act.

2.2.5 DATA REGARDING THE OPERATIONS OF THE GENERAL MEETING OF SHAREHOLDERS Data on operations of the General Meeting of Shareholders and its key competences and a description of shareholders rights and method of their declaration are included in the chapter Management on pages 33 to 35 of this Annual Report.

2.2.6 DATA REGARDING THE MANAGEMENT AND SUPERVISORY BOARDS Data on the composition and operation of management and control bodies and their committes are in-

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cluded in the chapter Management, on pages 35 through 40 of this Annual Report.

Laško, on 28 March 2011

Dušan Zorko, MSc

Marjan Mačkošek

General Manager

Chairman of the Supervisory Board

Robert Šega Member of the Management Board

Gorazd Lukman Member of the Management Board

1902

2.3 Report of the Management Board of Pivovarna Laško, d. d. on extent of influence in accordance with Article 545 of the Companies Act (ZGD-1) Pivovarna Laško, d. d. as a subsidiary company within the scope of a multi-level going concern concluded legal transactions which were established as damaging to the Company. With this report, Pivovarna Laško, d. d. is denoting measures for the restitution of damages from damaging legal transactions which were concluded by the previous Management Board of the Company.

The loans given to the companies Center naložbe, d. d. and Infond Holding, d. d. were never paid back. The purchase of shares of Thermana, d. d., – Zdravilišče Laško from the company Infond Holding, d. d. was implemented according to the acquisition price which was higher than the assessed market value of the shares of Thermana, d. d. at that time. Additional costs to the Company also arose in connection to the recovery of receivables from the company Center naložbe, d. d. The concern controlling company in the multi-level going concern Atka-Prima, d. o. o., did not return the funds to the damaged party Pivovarna Laško, d. d. neither in the business year or subsequently. The company Pivovarna Laško, d. d. as a diligent manager and the subsidiaries of the company in the previous multi-level going concern carried out all required procedures they were obliged to carry out:

•P ivovarna Laško, d. d. registered its outstanding receivables in the bankruptcy proceedings against Infond Holding finančna družba, d. d. on 29 March 2010 and submitted a request for the establishment of

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ANNUAL REPORT 2010

2. BUSINESS REPORT

a creditor’s committee.

•O n 17 March 2010 Pivovarna Laško, d. d. registered its outstanding receivables in the compulsory settlement proceedings against the company Center naložbe, d. d. Bankruptcy proceedings were initiated against Center naložbe, d. d. on 13 August 2010 in accordance with the district court decision. The Company submitted a request for the formation of a creditor’s committee, supplementing the application on 10 November 2010 with a separation right and the legal default interest.

•O n 12 January 2011 on the basis of a decision of the General Meeting, adopted at the regular General Meeting of Shareholders held on 31 August 2009, the Company filed an action for damages against the defendants the former controlling concern Atka-Prima, d. o. o. and Boško Šrot as its co-owner and legal representative and Director of Pivovarna Laško, d. d. for damages of EUR 13.3 million. A possibility exists that Pivovarna Laško, d. d., will file additional lawsuits in the future for damages suffered for the entire scope of damage suffered is not yet known. Two potential compensations for damages exist according to currently known facts:

•T he pledging of 345,304 shares of Radenska, d. d., Radenci whose owner is Pivovarna Laško, d. d. to insure a loan given to the company Center naložbe, d. d. in the amount of EUR 6,250,000 taken out at the bank NKBM, d. d. on the basis of a short-term framework loan from 12 March 2009; in this transaction Pivovarna Laško, d. d. acted as the lienee based on the contract on the lien on dematerialized securities of 5 June 2009. The book value of the pledged shares on 31 December 2010 was EUR 3,643,671. Center

naložbe, d. d. did not repay NKBM, d. d. the loan therefore NKBM, d. d., began execution of the pledged shares against Pivovarna Laško, d. d. for the outstanding loan amount of EUR 6,570,542.25 EUR with pp. Based on the appeal of Pivovarna Laško, d. d. against the writ of execution, on 16 February 2011 the writ of execution was repealed and the court will decide on the claim in a contentious proceeding. If NKBM, d. d. is successful in implementing the claim and payment is implemented from the value of the pledged shares, Pivovarna Laško, d. d. will be at a disadvantage and suffer damages.

•P atronage statement of 31 December 2008 and 10 January 2009; Pivovarna Laško, d. d. received a correspondence from Perutnina Ptuj, d. d. on 23 November 2009 in which the latter indicated that based on the loan agreement with the companies Infond Holding, d. d. and Center naložbe, d. d. and the comfort letter of 31 December 2008 signed by the previous Director of Pivovarna Laško, d. d. Boško Šrot on behalf of Pivovarna Laško, d. d. it had paid off the liability. Since the companies had ceased repayment of the loans, Perutnina Ptuj, d. d. had demanded payment in the approximate amount of EUR 11 million from Pivovarn Laško, d. d. based on the patronage statement. Pivovarna Laško, d. d. did not acknowledge the claim for it was not acquainted with the existence of the patronage statement of 31 December 2008 nor the circumstances and business relationship among the legal persons. Perutnina Ptuj, d. d. for the enforcement of the aforementioned claim filed a lawsuit which Pivovarna Laško, d. d. received on 15 February 2011 whereby Perutnina Ptuj, d. d. is demanding payment in the amount of EUR 10,116,488.71 with with appertaining interests and costs from the defendent Pivovarna Laško, d. d. The plaintiff Perutnina Ptuj, d. d. indicated in the lawsuit that it had suffered damages since the defendant had failed to fulfil the obligations stemming from the patronage statement of 10 January 2009. Pivovarna Laško, d. d. lodged a reply in which it repudiated the claim amount in full, seeing no grounds for the plaintiff’s claim. The court of first instance has not yet made a decision regarding the claim. If Perutnina Ptuj, d. d. suc-

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

2. BUSINESS REPORT

ceeds with the lawsuit Pivovarna Laško, d. d. will be at a disadvantage and suffer damages.

2.4 Shareholders and the impact of economic and other trends on business operations Today Pivovarna Laško, d. d. who has nearly 8,000 domestic and foreign shareholders is embarking on a path of development with the following basic business orientation: to provide users the most qualitative beer alongside excellent supply thereof to the market.

Pivovarna Laško has been organized as a joint stock company since 1995. The Company had 7,940 shareholders at the end of the 2010 business year, which is 328 shareholders or 4% less than in 2009. In 2008 2,488 shareholders of Pivovarna Laško, d. d. accepted a take-over bid.

NUMBER OF SHAREHOLDERS

Shareholders as at 31/12

2008

2009

2010

8,420

8,268

7,940

98.2

96.0

Chain index

2.4.1 IMPACT OF ECONOMIC AND OTHER TRENDS ON BUSINESS OPERATIONS

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

2. BUSINESS REPORT

Heavy fiscal encumbrances (excise duties) on products again influenced beer consumption in Slovenia in

2010. The stricter economic circumstances and resulting decrease in the living standard of the population led to poor competitiveness of beer in comparison to other comparable beverages, especially wine, which is not burdened by excise duties on alcoholic beverages.

2.4.2 CAPITAL OWNERSHIP STRUCTURE The share capital of the Company as at 31 December 2010 amounted to EUR 36,503,305 and is divided into 8,747,652 no par-value shares all of which have been paid in full. All shares are ordinary and registered in dematerialized form, bearing the PILR and PILH ticker symbols. As at 31 December 2010 8,611,481 shares bearing the PILR symbol and 136,171 shares bearing the PILH symbol were registered in the central register of the Central Securities Clearing Corporation (KDD) in Ljubljana.

CAPITAL OWNERSHIP STRUCTURE PIVOVARNA LAŠKO, D. D. AS AT 31 DECEMBER 2010

14.9 %

NLB, d. d.

23.5 %

Kapitalska družba, d.d. Hypo Alpe-Adria-Bank, AG

13.8 %

Probanka, d. d.

7.1 %

Other Legal entities Individual shareholders

7.0 %

Foreigners

26.7 %

7.0 %

CAPITAL OWNERSHIP STRUCTURE PIVOVARNA LAŠKO, D. D. AS AT 31 DECEMBER 2009

7.2 % NLB, d. d.

19.6 % 13.7 %

Kapitalska družba, d.d. TKC

7.1 %

Probanka, d. d. Other Legal entities

7.0 %

Individual shareholders

6.8 %

2009

2010

71.4

Legal entities

79.2

79.1

Individual shareholders

13.5

13.7

7.3

7.2

14.9

100.0

Foreigners Total

Largest shareholders Ten of the largest shareholders possessed a total of 6,161,285 shares or 70.4% of total share capital on 31 December 2010, representing a 4.3% decrease over 31 December 2009.

ANNUAL REPORT 2010

2008

P I VOVA R N A L A Š KO D . D .

( in % )

2. BUSINESS REPORT

Foreigners

38.6 %

TEN LARGEST SHAREHOLDERS OF PIVOVARNA LAŠKO, D. D. AT THE END OF THE YEAR ( 31/12/2010 )

NLB, d. d.

23.512

617,488

7.059

Hypo Alpe-Adria-Bank, AG

615,515

7.036

Probanka, d. d.

614,911

7.029

GB, d. d. Kranj

542,448

6.201

Skagen Kon-tiki Verdipapirfond

499,286

5.708

NFD1 delniški investicijski sklad, d. d.

446,465

5.104

Abanka, d. d.

285,463

3.263

Banka Celje, d. d.

252,500

2.886

230,471

2.635

10.

Total - Top ten largest shareholders

6,161,285

70.434

Other minor shareholders

2,586,367

29.566

Total - All shareholders

8,747,652

100.000

Number of shares

in %

place

1,713,685

19.590

2. BUSINESS REPORT

NLB, d. d.

ANNUAL REPORT 2010

place

2,056,738

( 31/12/2009 )

P I VOVA R N A L A Š KO D . D .

in %

Kapitalska družba, d. d.

Banka Koper, d. d., dvojezična firma: Banka

Number of shares

Kapitalska družba, d. d.

617,488

7.059

TCK, d. d.

613,300

7.011

Probanka, d. d.

594,628

6.798

GB, d. d. Kranj

542,448

6.201

Skagen Kon-tiki Verdipapirfond

499,286

5.708

NFD1 delniški investicijski sklad, d. d.

446,465

5.104

Publikum Fin, d. o. o.

343,053

3.922

Abanka, d. d.

285,463

3.263

Banka Celje, d. d.

252,500

2.886

10.

Total - Top ten largest shareholders

5,908,316

67.542

Other minor shareholders

2,839,336

32.458

Total - All shareholders

8,747,652

100.000

The share ownership structure of the Company did not essentially change in 2010 with banks prevailing as the owners as in 2009. NLB, d. d., remains in first place as the largest owner, increasing its 19.59 % stake in 2009 to 23.51% of Pivovarna Laško, d. d. in 2010. It is followed by Kapitalska družba, d. d., which with its 7.06% stake possesses the same amount as in 2009, followed by Hypo Alpe-Adria-Bank, AG which now with its 7.04% stake was not among the largest ten shareholders at the end of last year. Among the larger shareholders there are also Probanka, d. d. which increased its 6.80% stake of 2009 to 7.03% in 2010, followed by GB, d. d., Kranj. Skagen Kon-tiki Verdipapirfond and NFD 1 equity investment fund retain the same ownership stakes as at the end of the previous year. Other companies owned less than 4% of the shares of Pivovarna Laško, d. d. bearing the PILR ticker symbol as at 31 December 2010.

Capital ownership structure of the subsidiaries

in %

place

4,748,515

93.810

Slovenijales, d. d.

22,062

0.436

Radenska, d. d., Radenci

13,194

0.261

Kozelj Bojan

6,042

0.119

GBD, d. d.

4,666

0.092

Počivavšek Tadej

2,063

0.041

Vrankar Anton

1,500

0.030

Potočnik Marko

1,451

0.029

4 F, d. o. o.

1,260

0.025

1,164

0.023

10.

4,801,917

94.865

Camlek Marija Total - Top ten largest shareholders Other minor shareholders

259,939

5.135

5,061,856

100.000

Number of shares

in %

place

4,748,053

93.801

Lesnina LGM, d. o. o. Ljubljana

22,062

0.436

Radenska, d. d. Radenci

13,194

0.261

Kozelj Bojan

6,042

0.119

Total - All shareholders

( 31/12/2009 )

Pivovarna Laško, d. d.

GBD, d. d.

4,077

0.081

Vrankar Anton

1,500

0.030

4 F, d. o. o.

1,260

0.025

Camlek Marija

1,164

0.023

Petrič Stane

900

0.018

Lesnina, d. d.

890

0.018

10.

4,799,142

94.810

262,714

5.190

5,061,856

100.000

Total - Top ten largest shareholders Other minor shareholders Total - All shareholders

The ownership stake of the parent company Pivovarna Laško, d. d. increased from 93.801% at the end of 2009 to 93.810% as at 31 December 2010.

ANNUAL REPORT 2010

Pivovarna Laško, d. d.

Number of shares

P I VOVA R N A L A Š KO D . D .

( 31/12/2010 )

2. BUSINESS REPORT

LARGEST SHAREHOLDERS OF RADENSKA, D. D., RADENCI

LARGEST SHAREHOLDERS OF PIVOVARNA UNION, D. D., LJUBLJANA ( 31/12/2010 )

Pivovarna Laško, d. d.

97.892

3,652

0.810

Skandij, d. o. o

384

0.085

GBD, d. d.

120

0.027

Potočnik Marko

118

0.026

Energoplan, d. d.

100

0.022

Pintar Nina

100

0.022

Srakar Drago

0.019

Pivovarna Union, d. d.

0.015

0.009

10.

446,275

98.927

Other minor shareholders

4,839

1.073

451,114

100.000

Number of shares

in %

place

441,589

97.889

May Alexander

3,652

0.810

Skandij, d. o. o

384

0.085

GBD, d. d.

109

0.024

Energoplan, d. d.

100

0.022

Pintar Nina

100

0.022

Srakar Drago

0.019

Pivovarna Union, d. d.

0.015

Laknar Frančiška

0.009

Skvarča Frančišek

0.009

10.

446,169

98.904

4,945

1.096

451,114

100.000

Total - All shareholders

( 31/12/2009 )

2. BUSINESS REPORT

Pivovarna Laško, d. d.

ANNUAL REPORT 2010

place

441,606

Laknar Frančiška

P I VOVA R N A L A Š KO D . D .

in %

May Alexander

Total - Top ten largest shareholders

Number of shares

Total - Top ten largest shareholders Other minor shareholders Total - All shareholders

The ownership stake of the parent company Pivovarna Laško, d. d. increased from 97.889% at the end of 2009 to 97.892% as at 31 December 2010.

OWNERSHIP STAKES IN JADRANSKA PIVOVARA – SPLIT, D. D. ( 31/12/2010 )

Number of shares

in %

Pivovarna Laško, d. d.

3,255,152

99.106

Other minor shareholders

29,365

0.894

Total - All shareholders

3,284,517

100.000

The ownership stake of the parent company Pivovarna Laško, d. d. and other minority shareholders in the company Jadranska pivovara – Split, d. d. as at 31 December 2010 remained identical to the amount at the end of 2009. There are a total of 81 shareholders.

BUSINESS STAKES IN THE COMPANY VITAL MESTINJE, D. O. O. ( 31/12/2010 )

Pivovarna Laško, d. d.

in %

96.920

Other partners

3.080

Total all partners

100.000

The business stake of the parent company Pivovarna Laško, d. d. and other minority shareholders in the company Vital Mestinje, d. o. o. as at 31 December 2010 remained unchanged in comparison to the previous year.

in %

Pivovarna Laško, d. d.

539,536

80.834

Radenska, d. d., Radenci

127,928

19.166

Total - All shareholders

667,464

100.000

( 31/12/2009 )

Number of shares

in %

Pivovarna Laško, d. d.

539,516

80.831

Radenska, d. d., Radenci

127,928

19.166

Firma Del, d. o. o., Laško

0.003

Total - All shareholders

667,464

100.000

The ownership stake of the parent company Pivovarna Laško, d. d. increased by 0.003% from 31 December 2009 to 31 December 2010.

BALANCE OF SHARES AND STAKES OF MEMBERS OF THE MANAGEMENT AND SUPERVISORY BOARDS PIVOVARNA LAŠKO, D. D. IN THE SHARE CAPITAL OF THE COMPANY AS AT 31 DECEMBER 2010 ( shareholder )

Dušan Zorko

Membership Number of shares Participation %

Uprava

450

0.0051 0.1074

Andrej Kebe

Nadzorni svet

9,393

Bojan Košak

Nadzorni svet

17,785

0.2033

27,628

0.3158

Total

The number of shares of all members of the Management and Supervisory Boards of Pivovarna Laško, d. d. remains unchanged and identical to the previous years. Other members of the Management and Supervisory Boards were not owners of Pivovarna Laško, d. d. shares on 31 December 2010.

ANNUAL REPORT 2010

Number of shares

P I VOVA R N A L A Š KO D . D .

( 31/12/2010 )

2. BUSINESS REPORT

OWNERSHIP STAKES IN THE COMPANY DELO, D. D., LJUBLJANA

Authorized and conditional capital The General Meeting of Shareholders of the Company did not conclude any decisions regarding the conditional increase of shares or authorised capital.

Authorization to the Management Board for the acquisition of own shares The General Meeting of Shareholders empowered the Management Board of Pivovarna Laško, d. d. on 31 August 2009 to purchase own shares at a redemption price which could not be higher than the share price valid on the regulated market with the aim of maximizing the intrinsic value of the Company’s shares. The total number of shares obtained for the purpose described in the previous paragraph could not, together with the other own shares of the Company, exceed 10 % of the Company’s share capital The authorisation of the Management Board for the purchase of the treasury shares remains valid for 36 months from the receipt of this decision, namely from 31 August 2009 onwards. The Management Board may not acquire treasury shares for the sole purpose of trading. If the Management Board of the Company discovers that it no longer needs the shares obtained for the aforementioned purpose, it may dispose of them with the consent of the Supervisory Board of the Company.

2.4.3 SHARES Shares of Pivovarna Laško, d. d. with the PILR ticker symbol have been quoted on the securities market of the Ljubljana Stock Exchange since 1 February 2000 as ordinary shares. The share capital of the Company as at 31 December 2010 amounted to EUR 36,503,305 and is divided into 8,747,652 no par-value shares. As at 31 December 2010, 8,611,481 shares bearing the PILR symbol and 136,171 shares bearing the PILH symbol were registered in the central register of the Central Securities Clearing Corporation (KDD) in Ljubljana. The Company still has PILH shares from the ownership restructure procedure reserved for denationalization beneficiaries. If a decision is issued in favour of the denationalization beneficiary, the share changes

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ANNUAL REPORT 2010

2. BUSINESS REPORT

from a PILH share to a PILR and will begin quoting on the organised securities market.

Pivovarna Laško, d. d. did not acquire any treasury shares in 2010. As at 31 December 2010 the Company had 755 lots of redeemed treasury shares, which totals 0.0086 % of all shares, while its subsidiaries own the following numbers of shares: Radenska, d. d., 21,195 lots (0.2423%), Pivovarna Union, d. d., 6,287 lots (0.0719%) having sold 3,297 lots of PILR shares comprising EUR 52,587 to its employees and Fructal, d. d., 13,087 lots (0.1496 %) of PILR shares. The audited book value of PILR shares as at 31 December 2009 according to IFRS totals EUR 14.19. The market value of the shares at the end of 2010 amounted to EUR 15.99, which exceeds the book value by 12.7%. Each share gives its owner a voting right at the annual General Meeting of Shareholders and to participate in profits. In recent years the Company paid out nearly half of the annual net profits through dividends, with the remainder directed at investments and reserves. The Management Board of the Company supports the long-term dividend policy outlined for the coming years; however, it is dependent on rehabilitation and the financial restructure of the Company.

AVERAGE MARKET VALUE OF PILR SHARES IN 2010

50 40 30 20 10 0

( in EUR )

jan

feb

jan

feb

mar

apr

maj

jun

maj

jul

jun

avg

jul

sep

avg

okt

sep

nov

okt

dec

nov

dec

23.66 24.33 23.22 23.04 21.79 19.60 15.64 15.50 15.09 13.70 14.98 15.15

BOOK VALUE OF PILR SHARES AS AT 31 DECEMBER FOR THE PERIOD 2001-2010

40 30 20

*2008

*2010

*2007

*2009

*2006

2003

*2005

2004

( in EUR )

2002

2001

2002

2003

2004

*2005

*2006

*2007

*2008

*2009

*2010

19.68

22.12

23.07

22.82

20.11

21.93

26.45

20.90

14.78

14.19

ANNUAL REPORT 2010

2. BUSINESS REPORT

The book value of the share changed from EUR 24.44 to EUR 20.11 in 2005 due to the transition to IFRS.

P I VOVA R N A L A Ĺ KO D . D .

* under IFRS, for all years from 2000 to 2006 inclusive conversion from SIT to EUR 1 = SIT 239.640

2.4.4 FINANCIAL CALENDAR FOR 2011

GENERAL MEETING OF SHAREHOLDERS Foreseen for June 2011.

ENTITLEMENT TO DIVIDENDS If the General Meeting decides to pay-out dividends, then those shareholders who are entered into the share register on the third business day following the General Meeting are entitled to dividends.

PAYMENT OF DIVIDENDS Sixty days at the latest of the adopted decision on the payment of dividends.

ANNUAL REPORT The Company must publish the Annual Report within four months at the latest of the conclusion of the business year, namely by 30 April.

INTERIM REPORT The Company must publish an interim report for the first six months of the financial year as soon as possible and no later than two months following the end of this period, namely by 31 August.

QUARTERLY REPORTING The Company will also publish quarterly reports on the first three and nine months of operations (quarterly reporting). The Company must publish the quarterly reports as soon as possible and no later than two months following the end of quarterly accounting period (31 May and 30 September).

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

2. BUSINESS REPORT

OTHER INTERIM REPORTING

Pivovarna Laško, d. d. published the unaudited unconsolidated financial statements for 2010 with notes on 1 March 2011. Pivovarna Laško, d. d. will not publish the unaudited consolidated financial statements for 2010 for in the envisaged period it will publish the audited Annual Report for 2010. The publication of unaudited unconsolidated and consolidated financial statement is not legally prescribed or mandatory.

2.5 Sales

Sales declined especially on the domestic market, while growth is again being recorded on foreign markets. Increased sales on foreign markets is extremely important for the longterm development of Pivovarna Laško.

The total quantity of sales of Pivovarna Laško, d. d. in 2010 amounted to 968,697 hl and was 4.2% lower than in 2009. A decline of 8.1% and 4.2% were recorded for waters and beer, respectively. Sales especially declined on the domestic market, while growth is again being recorded on foreign markets, which is of extreme importance for Pivovarna Laško’s development.

SALES OF BEER AND WATER ( in % )

2008

2009

2010

Beer sales

95.9

96.8

96.9

Water sales

4.1

3.2

3.1

100.0

Total

The ratio between the sales of beer and waters in 2010 has remained almost identical to that in previous

2. BUSINESS REPORT

years.

SALES OF BEER ON THE DOMESTIC AND FOREIGN MARKETS

900,000

Domestic market Foreign market

ANNUAL REPORT 2010

450,000

225,000

0 2008

2009

2010

( in % )

2008

2009

2010

Domestic market

83.5

78.2

73.3

Foreign market Total

16.5

21.8

26.7

100.0

P I VOVA R N A L A Š KO D . D .

in hectolitres

675,000

2.5.1 SLOVENIAN MARKET Sales of beer Sales of beer in Slovenia decreased by 10.1% in 2010, reflecting the diminished buying power and growth of discount stores where currently only foreign beer brands are being sold. Slovenian consumers in Horeca remain loyal to domestic beer manufactures, while in stores, they partially also purchase more favourably priced foreign beers. Beer imports decreased by 3 % (sales in discount stores) in 2010, and possessed a market share of 15.6%. Diminished buying power is also confirmed by the fact that the share of purchases during promotional price campaigns has significantly increased. The quantitative market share of Pivovarna Laško beer in 2010 amounted to 41.8%, for Pivovarna Union beer (together with its brand names) 42.6% and for imported beers 15.6%. Despite increased lack of payment discipline on the domestic market, the Company again in 2010 managed its payment policy well, for the majority of payments are insured through bank guarantees and other forms of insurance. The greatest changes in 2010 were implemented in the area of catering and the sales teams of Horeca:

• c hanges in the sales terms in the sense of market competitiveness; • r eorganization and fortification of the sales teams; •u pgrade of the TEPOS (field promotion) system through more accurate monitoring of sales activities on the field and direct ordering are now possible;

• i ntroduction of a standardised reporting method;

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ANNUAL REPORT 2010

2. BUSINESS REPORT

• i ntroduction of measurable monthly objectives for field representatives;

• i ntroduction of package sales of products of the Pivovarna Laško Group; •m odified event conditions directed at expanding the product assortment of the Pivovarna Laško Group; • i ncreased frequency of visits to sales points; •d elivery which will be adapted to the wishes and needs of customers; • e stablishment of standards for the positioning of advertising materials at various types of catering establishments;

• i ntroduction of direct phone lines for resolving reclamations. The changed manner of work was in the second half of the year positively reflected by the increased number of buyers which are directly supplied by the Company via its distribution centres as is the market share of direct sales in the Horeca segment. The growth in buyer satisfaction was also clearly reflected in the results of a survey performed by the Aragon research agency of key suppliers on the market in the Horeca segment. The Company also increased activities for the premium segment, emphasizing the Laško Club brand and managing to increase sales for the aforementioned brand.

SALES ON THE SLOVENIAN MARKET VIA WHOLESALERS AND DISTRIBUTION CENTRES

600,000

Wholesalers Distribution centers

in hectolitres

450,000

300,000

150,000

0 2008

2009

( in % )

2010

2008

2009

2010

Wholesalers

65.9

70.5

69.3

Distribution centers

34.1

29.5

30.7

100.0

Total

Sales of waters Sales of the water Oda were 8.1% lower in 2010 in comparison with 2009, amounting to 30,057 hectolitres. Oda water is sold predominantly on the domestic market. Competition on the water market is extremely high between both Slovenian producers and foreign producers. The lowest prices for waters in stores can be found at discount stores while in Horeca the Dana and Costella waters continue to be sold using an ag-

Croatia In 2010 sales of Laško beer to Croatia amounted to 59,467 hectolitres, representing a 2 % fall in sales with respect to 2009. The Coatian beer market is declining with total sales of beer from all beer breweries on the Croatian market in 2010 amounting to 3,068,544 hectolitres and with an index of 92 is comparable to that of 2009 (source: Croatia Chamber of Economy). The company Orbico, d. o. o., Zagreb became the exclusive importer on the Croatian market in April. Up to that point, its subsidiary company Orvas Plus, d. o. o., Zagreb carried out distribution. Jadranska pivovara – Split, d. d. ceased with the production of Kaltenberg Pils beer in June 2010. Produc-

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gressive price policy.

vara – Split, d. d. remained the importer for Kaltenberg Pils beer on the Croatian market. Pivovarna Laško, d. d. established a new company Laško Grupa, d. o. o., with its registered office in Zagreb at the beginning of December 2010. The new company’s main task is to promote sales in the Horeca channel and stores with the aim of increasing sales of products of Pivovarna Laško and the entire Pivovarna Laško Group. By concentrating activities in the new company, the entire Pivovarna Laško Group will achieve synergy effects with regard to promoting sales, in cooperation and supplementation of import operations of individual members and market investments on the Croatian market.

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tion was relocated to Pivovarna Laško with 19,113 hectolitres of Kaltenberg produced in 2010. Jadranska pivo-

The three largest beer brewaries in Croatia: Zagreb (Inbev), Karlovac (Heineken) and Koprivnica (Carlsberg) appeared on the market in 2010 especially aggressively, predominantly through price promotions and the acquisition of catering establishments.

Bosnia and Herzegovina The Company sold 21,483 hectolitres of beer on the Bosnian and Herzegovin market in 2010, which in comparison with 2009 achieved an index of 73, of which 6,532 hectolitres comprised Zlatorog draught beer which in comparison with 2009 was at an index of 92. The Company managed to retain its competitiveness on the draught beer segment with this segment showing additional potential. In 2010 all beer with returnable packaging exclusively originated from Pivovarna Laško and no longer from Jadranska pivovara which caused a considerable price increase on the market for the Company’s products in returnable packaging due to customs duties (12%) and levies (EUR 0.10/litre). Croatian, Serbian and Montenegran beer breweries do not pay import duties for beer imports into Bosnia and Herzegovina. Domestic Bosnian and Herzegovin beer breweries joined forces in 2010, exerting pressure on the government to protect them against foreign competitors. Bosnia and Herzegovina is currently in the procedure for joining the European Union and has thus signed an association agreement on the gradual reduction of customs duties for EU Member States. It has to cease charging customs duties by 2013. Until that time, Slovenia is left in an unequal position. The company RA&LA, d. o. o., Sarajevo (joint group of members of the Pivovarna Laško Group) was reorganized in 2010. Promotional sales activities were left to the importer. All members of the Group continue to import all operating fixed assets via the Company. The Company also ensures all records on operating fixed assets, contracts on investments and the implementation of marketing activities. Synergies among the members of the Pivovarna Laško Group in being present on the Bosnia and Herzegovin market still have not displayed the expected results. The Company has implemented the largest number of joint projects with Fructal. The Company has consolidated the distributers in the trade sector. In the catering sector the Company and the Group members agreed on larger investments into catering establishments (awnings, cooling racks, beverage filling machines, sunshades), attempting to include as many

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products of the Pivovarna Laško Group in the sales offer as possible.

Serbia The Company is also confronted with leading global brewing companies on the Serbian market each of whom has its own brewery in Serbia. A genuine brewary war has arisen among them. The Company is also in an unequal position here due to the high customs duties on beer imported from the EU. The signing of an associate agreement between the EU and Serbia envisages equality with domestic breweries in 2013. The Company sold 4,641 hectolitres of beer on this market in 2010, which in comparison to 2009 achieved an index of 64. The Company managed to maintain its sales in the draught beer segment with this segment, where with 2,025 hectolitres in comparison with 2009, the Company is at the index 97. Operations with one of the importers ceased in 2010, forcing the Company to enforce a bank guarantee. Due to Serbian legislation the Company had to agree on the import of assortments of all products via one importer.

Republic of Kosovo This is a market where sales of the Company’s beer stabilized in 2010. The Company has a cooperation strategy with the Pećka pivovarna on this market. The Company is also present in the wholesale channel as is Horeca. Pivovarna Laško covers all key buyers. In the last quarter of 2010 the Company adopted the decision that the Pićka brewery would bottle the Zlatorog brand name under a license for Kosovo, Macedonia and Montenegro. This decision will contribute to the more competitive position of the Zlatorog brand on these markets (customs duties 12%).

FYR Macedonia A slight quantitative drop in sales (index 89) was recorded in 2010 however this is a good result considering the competitiveness of the Macedonian market. The Company is also present in the retail and Horeca channels. It covers all key buyer trade systems with draught beer and returnable bottles comprising the main assortment. Despite the large distance, the prices of the Company’s beer are competitive on this market for the importer works with a low margin, also investing its assets into the sale of Pivovarna Laško’s beer. In deciding for licensed production in Peća the Company will improve its competitive position on the Macedonian market even more.

Montenegro This is a market where sales of the Company’s beer stabilized in 2010. The quantitative index for the Company in this market is 98. The 2010 season was extremely poor and the capacity to pay in this country extraordinarily low. The presence of the Company’s assortment is only limited to Horeca, and primarily comprises draught beer. Considering quantities of sales, investment for entry into larger chain stores are to high. The Company is present in the Mercator chain which became the second largest merchant in Montenegro in the last quarter of 2010. The decision for licensed production in Peća will also enable the Company to expand the assortment in Montenegro so that in 2011 it will be present both in the Horeca channel and in wholesaler chains (customs duties 12%). All the markets in the regions of former Yugoslavia possess common characteristics regarding the sale of Laško beer:

•T he Company is a successful producer of draught beer. Laško brand recognition is still good among the older population while younger consumers are not too familiar with the Laško brand.

•T he Company competes with multinationals on all these markets which have the status of domestic breweries and are therefore exempt from paying customs duties.

•F oreign-owned breweries invest an enormous amount into market communications (breweries being one of the strongest advertisers). Propaganda is present here in the sense of: buy domestic and help

Markets of the European Union and other foreign markets The sales of Pivovarna Laško products on European Union (EU) markets and other foreign markets increased by 17.4% in 2010 in comparison to 2009. Total sales on EU and foreign markets in 2010 amounted to 119,469 hl. Sales of beer in Italy, the Company’s largest sales market in the EU, increased by 23.5% in 2010. The increase in sales is tied to the expansion of sales points in the merchant segment and the continuation of the easement bottling of Ceres Top Pilsner beer. The sales of Pivovarna Laško brands on the Italian market attained a level of 36,277 hl in 2010. Sales of Ceres Top Pilsner amounted to 66,290 hl. Sales of beer on the Austrian market recorded a 10 percent fall in 2010 compared to the previous year and amounted to 7,933 hl. The reason for the decrease in sales lies in an increase of the selling prices of Pivovarna Laško beer on the Austrian market at the beginning of 2010. Sales of beer in other countries: Hungary, Canada, Germany, USA, Switzerland, Australia, Netherlands, Malta, Sweden, Czech Republic, Slovakia, Romania and Belgium were somewhat lower than in the previous year.

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promotions via propaganda materials, branding sales points and sponsoring events.

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• I n addition to investments in the media, the aforementioned breweries also invest huge sums into sales

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domestic industry.

2.6 Supply flows

The Company is continuing with the joint operations of procurment offices in the Pivovarna Laško Group which proved a good choice in past years, bringing specific synergy effects. Good and correct relations among the Group’s members, a common and unified approach and continous communications with suppliers is the route we will take.

The Group’s position on the procurement market completely changed in 2010. Following a considerably good supply position in 2009, although satisfactory amounts existed, the trend of higher prices of nearly all materials was again evident and is continuing. The prices of basic raw materials for beer production increased in 2010. The agricultural harvest was heavily hit in individual European nations due to the weather conditions, leading to a rise in the prices of malt and maize meal. Agriculture of target countries of the Company such as Austria and Hungary were most heavily hit. Global trends in the plastic materials market shifted upwards in 2010 and will continue in 2011. Forecasts regarding price trends of all commodities for 2011 will be unfavourable for the brewing segment, for prices are envisaged to increase at least until September 2011. The general economic situation in Slovenia and continued resolution of problems at Pivovarna Laško, d. d. also had a negative effect on supplier confidence in 2010. The poorer liquidity situation with belated payments of obligations and uncertainty regarding the future has awakened a certain fear and uncertainty in suppliers. The Company is confronted with the fact that increasingly more suppliers are requiring some type of guarantee instrument for receivables or are setting up debt limits. Due to its correct relationship with suppliers, many of whom have been the Company’s partners for years, the Company is already receiving a

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normal supply. Sincere discussions and constant contact with suppliers is important. Despite the amount of

problems the Company was able to ensure all raw materials and repromaterials in 2010. The Company is continuing joint operations with procurement offices in the Pivovarna Laško Group which in past years has shown goods results, bringing certain synergy effects. The benefits highlighted in past years no longer apply due to events which are known to all. Good and correct relationships among the Group’s members, a joint and unified approach and ongoing communications is a path the Company intends to follow. These measures and improvement of the general situation will enable the Company to gain back supplier trust which is nevertheless still good. Despite poorer operating conditions in 2010, the Company managed to retain all its suppliers. The Company managed to manage costs by reducing and optimizing inventories and accelerating savings with regard to the procurement of required materials. Costs of procured materials remained at an index of 96 in 2010. With regard to operations regarding the maintenance of a human-friendly environment the Company will invest a lot of effort into using ecologically suitable materials which preserve the natural environment in its natural state to the greatest extent possible. In the procurement processes this predominantly involves manipulation of various types of packaging comprised of a variety of materials and the collection and recycling thereof. Raising environmental awareness is a constituent part of the Company’s operations.

2.7 Production

Despite economic and liquidity problems, the Company managed to successfully produce and fill an entire assortment of products in 2010, at the same time introducing several novelties which confirm the developmental orientation and innovativeness of Pivovarna Laško. The Company is especially proud of the three gold and one silver medal awarded on the international beer assessment Monde Selection which only confirms the Company’s focus on the highest standards of quality. Following numerous years of joint effort with procurement in the selection of superior raw materials and beer production materials has borne results. Time and time again it is pleased to find that the quality standards of Pivovarna Laško exceed the norms and standards of suppliers, who supply products or render services also to world-famous companies in the branch The Company is proud that in terms of organization it has joined with procurement department which is now a department in the production-technical division. In 2010 the Company improved the inventory turnover of spare parts in maintenance and raw materials in the production of beer, as well as the consumption of chemicals for cleaning manufacturing equipment. It systematically began with the supervision and management of energy resources and introduced the principle of sustainable development.

certainly a number of synergy effects in the area of managing filling lines, and consuming water and energy, and at the same time enable a breakthrough with innovative packaging also on adjacent markets In addition to planning the renewal of the production equipment, together with the human resources department the Company commenced the systematic rejuvenation of operational personnel in the field of filling, where in recent years a lack of quality professional and expert workers, particularly in the area of managing and maintaining the filling lines, has been noted. Not lastly, in addition to the numerous activities regarding ecology, the Company began introducing yeast suspensions into the cleaning equipment, thereby acquiring significant additional quantities of biogas at the same time terminating wasteful yeast drying equipment. As in previous years, a lot of work and effort was also invested in activities involving coordination among companies at the level of the Pivovarna Laško Group This was, with the exception of reducing costs, well reflected from the operational point of view and in the operating results of individual companies within the Group One of the major successes was the contract between GEN-I and members of the Pivovarna Laško Group which in will represent considerable savings in the purchase of electric power in the upcoming year.

ANNUAL REPORT 2010

return packaging, which will be realized together with the renewal of the filling line ST2. Parallelism would

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renewal of returnable packaging which should be achieved together with the rehaul of the ST2 filling line. Despite the wear on product lines for return packaging, the Company continued the project of renewing

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Despite the wearing of the production lines for returnable packaging, the Company continued with the

2.7.1 BEER PRODUCTION In 2010 the company produced 1,007,410 hl of wort of malt and 1,063 hl of the basis for the Vitamalt G Power licensed product. With the cessation of production in Jadranska pivovara – Split, d. d., production of Kaltenberg Pils beer was relocated to Laško in June 2010, followed by the relocation of the filling line after all beer stock in Split had been depleted. The second novelty in the filling program is Strong Ale beer which is filled into 0.33 l PET packaging for th RU Royal brewary. An increasingly larger share of the production programme represents the light beer Top Royal Pils, produced and filled in Laško under the license of the Danish brewery for the Italian market. The Danish brewery decided to discontinue the licensing cooperation for this product due to insufficient demand by exotic markets for the sweet beverage Vitamalt G Power. The quality of finished products fulfilled all requirements, both domestic and licensing requirements. In accordance with its financial capabilities, the Company systematically undertook the resolution of assessment reports regarding the HACCP certification system at the end of October 2009 (installation of insect screens, insect destruction lights, strips covered by protective sheets, etc.). The Company was again successfully awarded the HACCP certificate for the production and filling of beer, beer with additives and filling of spring water and management of entry materials and water distribution system of Laško in October 2010. The number of assessment recommendations was considerably smaller than at the time of initial certification. Training for employees involved in production, controls of quality, maintenance and filling, the water distribution network and those employed as seasonal workers was carried out. Internal assessments required for the maintenance of the HACCP system were regularly performed primarily to ensure the safety and

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quality of products and optimization of processes.

No irregularities were established during the sets of regular controls implemented by inspection offices. Insufficient attention has been given to direct contact with buyers in recent years which is of key importance for successful cooperation and confirming trust in the quality of products and successful market response. The Company actively cooperated with the commercial sector and its key buyers - Mercator, Tuš, Spar, KZ Metlika, Davidov Hram – presenting the production of its products, significance of their handling, cautioned of key problems arising in connection to this and listened to their wishes and suggestions. Towards the end of 2010 the Company acquired a large number of groups from the detailed sales area, particularly catering establishments for whom it organised training regarding the production, handling and manner of offering beer. The response was very positive. Despite these activities, the Company will have to intensively and regularly devote attention to the draft beer market and notify catering establishments regarding the maintenance of beer taps, handling of draft beer, use of CO2 as a propellant and sales of beer in general.

There were no complaints regarding the quality of products in the first half of the year with the reason for the return of some products predominantly due to expired expiration dates and inability to sell beer inventories. Some problems arose in the summer months regarding the microbiological stability of beer in barrels. The reason for the occurrence of these problems was the lack of continous filling of small batches of beer due to a shortage of barrels and more attention will need to be focused on this matter in the future. Towards the end of the year, the Company examined the complaints of several caterers regarding organoleptic changes in draft beer. Studies in the lab and on the field showed that the problem lay in the use of technical CO2. Some reclamations regarding draft beer were unfounded, arising in old stocks of beer without an expiration date denoted. The Company with the sales departments agreed that technologists and quality control personnel would respond to each market reclamation thereby resolving questions regarding the reasons for such reclamations. A unified system for managing and resolving reclamations was introduced which will enable enhanced transparency over market events.

2.7.2 MAINTENANCE AND ENERGY ENGINEERING Successful maintain Nance involves the assurance of uninterrupted production processes which are the basis for cost-effective production. To this end when planning maintenance processes all required activities which are interconnected are included in the entire production plan. The objectives of the cohesive functions are based on ensuring quality components and quantities of required materials for installation, both in terms of preventative and regular maintenance. The uninterrupted supply of energy and labour is of extreme importance. All maintenance processes are implemented in accordance with and with the support of the newly designed SAP information technology. The fact that all methods for work management and

increased funds for services and activities of external contractors. A somewhat increased flow of funds for the supply of primary energy sources has arisen in comparison to the previous year. Due to minimum investments into new technological equipment, increasingly more interventions into existing equipment and replacement of vital parts of worn peripheral equipment is required to achieve equivalent production characteristics. For this purpose, all planned repairs on nearly all technological equipment was carried out, from the supply and warehousing of raw materials, production-technological parts of equipment, filling and packaging of finished products to the supply of energy and preparation of water which is the basis of all production processes. It should be emphasized that the aforementioned work was also implemented with the aid of foreign contractors as the Company does not possess an adequte number of suitably qualified personnel for such work. Therefore the Companyâ&#x20AC;&#x2122;s objective in the future is to continue planning and training such qualified personnel enabling them to independently implement complex work which is the basis for implementing both preventative and regular maintenance works.

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From the economic aspect, the Company saves on the realised use of materials for spare parts but has

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should not be forgotten. As is already the established practice, the processing, technological, production and business systems are all inter-conciled, representing a complete whole for achieving planned objectives.

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implementation need to be reconciled with the principles of safety, standards and rationalisation of work

2.7.3. NEW PRODUCT DEVELOPMENT The development of new products and technologies requires changes and flexibility. They represent an important portion of the activities for attaining the common objectives of the Company. New ideas are collected responsibly and with zeal and best solutions and new products prepared. The Company monitored trends in the first half of 2010 and continued researching consumer wishes with the intention of satisfying the consumer with fresh sensory and visual experiences of new products. During the renewal of the Bandidos product line the question arose whether the products Light Lemon and Power should be terminated and the Bandidos line supplemented with new flavours. It was decided that a new flavour would follow the renewal of the Bandidos image in 2011 so the preparation of numerous samples and sensory analyses continued with the aim of assessing and selecting the new flavour. The Company assesses that the renewal of the image of the Bandidos product line in the first half of 2010 was right on target. Simultaneously with the Bandidos project, preparations for the Cider – Jabolčnik project were also unfolding. Following a two-year pause, the Company again focused on optimizing and supplementing organoleptcis for the naturally fermented beverage comprising Cider apple juice. The final product was prepared in production and confirmed as a potential real difference for market launch. Together with the marketing department the project continued to be implemented for the final taste test and confirmation of its suitability. Since the raw material is dependent on natural conditions (harvests) a great deal of energy was invested in ensuring a suitable apple concentrate. Considering increasingly greater pressure to reduce alcoholic beverage consumption, the Company carried out trial production of a beer with a 2.5% alcohol content. The product was well received in house and is envisaged to be launched onto the market in the first half of 2011. The Company also continued its development efforts in other areas, also in the area of modifying and improving packaging. Global trends are pointed towards increased ecological awareness and concern for the environment. In addition to the development and modification of packaging as one of the most important

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criteria in addition to marketing communications with consumers, the Company is increasingly highlight-

ing decreased effects of waste packaging on the environment. Testing of lighter foils and cardboard for packing products was carried out. Intensive preparations for the introduction of the project involving smaller crates for bottles (10 x 0.5 l) were implemented for the purpose of promoting return packaging. In cooperation with IHPS Žalec, the Company realised its task entitled “Monitoring the quality of beer aromas and identifying interfering components in them” which represents the continuation of research tasks from 2009. The results of research work of this type provides a new tool for evaluating the quality of the Company’s products and seeking causes for changes to and stability of the final product. The study “Pivo v PET”, a postgraduate thesis, represents the collected work of all internal research and IHPS research performed to date in the area of beer in PET. Preparations for a new postgraduate thesis began at the beginning of the year which will be carried out in cooperation with IHPS and the Biotechnical Faculty of Ljubljana entitled “Vpliv zaporedne uporabe kvasa Saccharomyces Pastorianus na kakovost piva« (Effect of successive application of the yeast Saccharomyces Pastorianus on the quality of beer).

2.7.4 QUALITY CONTROL The basic characteristic of the Company’s products is their superior quality. The products are produced and filled with love. The consistent quality of its products is one of the Company’s most important tasks. Production begins with regularly planned controls of entry and repro materials and carefully selected superior raw materials and continues with well planned process controls and control of final products not only to the warehouses, but also subsequent monitoring to all sales points. Special attention is given to the sensory profile of products. Immense time and energy are also invested in education and training, for the Company is aware that without these key elements, results will not be good and long-term. The economic crisis also left its mark in 2010 however the high standards of quality are an untouchable constant in the Company’s daily practice. The Company is especially pleased to have received medals for its products. Confirmation of the high quality and correct developmental direction of its products are the four quality medals received in April 2010 at the international Monde Selection 2010 competition. The Company received three gold medals for its products Laško Zlatorog, Eliksir and Bandidos Cuba Libra and a silver medal for Laško Club. Immense attention is given to positive cooperation with suppliers for the purpose of selecting and controlling superior quality raw materials and packaging materials. In the first six months the Company was faced with the fluctuating quality of the German malt. Suppliers and places of production were examined for this reason. The Company continues to resolve problems together with its suppliers due to the poor harvest and fluctuating quality of various types of barley and consequently, the extremely detailed supervision over quality of acquired malt. There were no larger problems regarding Austrian, Czech and Slovakian malt. Fat in cornmeal which represented the greatest and most frequent deviation from quality standards last year, decreased significantly at the beginning of the year, thereafter maintaining the desired value. The majority of hop stocks were acquired at the end of 2009, with some remaining at the beginning of 2010. The Company was confronted primarily with the unsuitable quality of the cultivator Savinski Golding where analyses of tested samples of varietyl purity showed unsuitable results, leading to the rejection of the supply. Acquisition of hops in the 2010 harvest year was carried out without interruption. The Company acquired the harvests of

The greatest problems regarding primary packaging was experienced in the first half of the year and involved rust and hardness of bottle stoppers of various suppliers. The reclamation of bottle stoppers of a supplier precisely during the Zlatorog Poln ponos (Zlatorog Full of Pride) campaign in the second half of the year should be emphasised, which caused serious problems on the market. Several smaller problems also arose regarding labels, predominantly involving the paper type and colour application. Damaged materials were established regarding cans, particularly due to the unsuitable thickness of the aluminium cans. Problems regarding foil and the unsuitable cut of leaflets arose with regard to secondary packaging. No larger problems arose with regard to the remaining packaging materials. A second chemical control in accordance with the Company’s established good laboratory practice in the areas of control, water analytics, phasal intermediate products (beer and non-alcoholic beverages – lemonades), by-products, final products and developmental analytics was implemented at the beginning of the year. No greater deviations in quality with regard to the control of physical-chemical parameters were observed during controls of final products, as was also reflected in the almost non-existent number of quality reclamations. Over 8,158* samples against numerous parameters were examined in the field of physical-chemical

ANNUAL REPORT 2010

The Company realises that the effects on nature are great and as a result, also on raw materials therefore additional monitoring and inspection is a necessary practice.

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in the case of varietal purity of hops cultivars, with no inconformity established for the 2010 year.

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all three cultivators. Acceptance analyses did not display greater deviations, this being especially important

analyses in 2010. The microbiological state of beer production and filling, filling of spring waters, final products and drinking water within the scope of the water distribution system were monitored by the microbiological laboratory. More than 15,558* samples were processed by the microbiological laboratory in 2011 to date (*source: Plilllis system, Pivovarna LaĹĄko). More than 23,719 samples and approximately 150,000 analyses were performed by the entire quality control department. As already for a number of years, the Company participated in three inter-laboratory European comparative schemes involving the areas of beer, water and malt. Through active participation in European comparative projects, the Company confirms and proves the correctness of its methods again and again. It is aware of the significance of beer sensory analyses. Therefore a sensory workshop was carried out in June for professional degustators. The aims of this workshop were as follow: learn to differentiate between various beer brands, describe the differences among the brands using standardized sensory terminology, learn the origin, significance and techniques of degustation for a large number of basic aromas and flavours arising in beer. All participants successfully passed the tests at the end of the training. This training will be continued not only through continued training for already certified degustators but also training for new degustators and participation at regular international comparative sensory schemes. The Company also continued its successful cooperation with the Health Insurance Institutes of Maribor, Celje and Gorica, the Slovenian Institute for Hop Research and Brewing and other European professional institutes in 2010. It will continue to prepare high quality products that are safe for consumers utilizing these partnerships

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and acquired knowledge in the future.

2.8 Investments

Despite continued operations under the difficult economic conditions in 2010 and with a delay all year, the Company managed to implement the most pressing investment which during the year, already showed synergy effects in key areas of the production process, new product development, logistics, energy supply and ecology.

Due to stricter economic circumstances in 2009, all investment activities except those necessary for maintaining production were halted so as to ensure uninterrupted market supply. The implementation of all investments planned for 2009 were thus postponed for 2010. Despite continued operations under the difficult economic conditions in 2010 and with a delay all year, the Company managed to implement the most pressing investment which during the year, already showed synergy effects in key areas of the production process, new product development, logistics, energy supply and ecology. Therefore already prior to the 2010 production season, the Company successfully implemented and concluded the projects “Ceres Packaging”, “Presentation of the Liquor Reservoirs”,” Renewal of the Boilers” and partially the “Energy Management« project and at the end of the year, the projects “Export of the Southern Filling Line” and “Ecological Projects – Biogas”. Owing to the financial limitations in 2010 the Company again was unable to launch all activities required for the start-up of urgently needed renovation and work supplementation on the over 20 year-old and worn

“Supplementation of the ST2 line with new equipment” Since a decision had been made in 2010 due to the stricter economic conditions that the planned renovation and supplementation of the ST2 filling line be postponed until 2011, only necessary preparatory works for the subsequent supplementation of the ST2 line were carried out in 2011. This predominantly included optimization of existing components of the line in the areas of syrup preparation and beer beverage mixtures. Therefore individual elements of the ST2 line were replaced and reconnected with the technological water. They are connected to the new power system so that an optimal technological process in this area of beverage filling is ensured via a panel of ventilation manifolds. The optimization project involving the preparation of beer mixture beverages had already been concluded in April enabling synergy effects regarding the use of energy sources and cleaning agents already evident throughout the 2010 production season with a significant decrease in product loss and emissions into the environment.

ANNUAL REPORT 2010

2.8.1. INVESTMENTS INTO PRODUCTION, ENERGY SOURCES AND ECOLOGY

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for 2011.

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ST2 filling lines and the directly connected project “10 x 0.5 l Crate” therefore this project was rescheduled

The repairs carried out on the ST1 and ST2 lines in the autumn represented preparatory work for the installation of the supplemented ST2 line in 2011 were successfully concluded as well as the rust-proof construction which alongside the reconstruction of the ST2 line and subsequent replacement of the ST1 line, serve as the main route for all infrastructural energy and technological water for supply to the filling lines in the locations of the A, B and AO filling facilities. The financial investment for all aforementioned works amounted to EUR 406,000 and was 33% less than the amount of funds planned for this project for 2010.

“Export of the southern filling facility and building demolition” Within the scope of logistics projects involving beverage filling (land purchases, construction of pre-fabricated warehousing facilities, redirection of truck access roads) the last phase envisaged is relocation to the southern plateau with a truck roundabout around the filling facilities. Because of difficulties encountered with administrative-technical documentation, project works only began in May and despite a strong increase in logistics activities during the season, all works were successfully concluded by the end of 2010. These project works comprise the relocation of the pre-fabricated facility for the needs of reception and guard services, arrangement of the truck roundabout, demolition of the KZ and Elektro Celje buildings, arrangement of an access road from the regional road and arrangement of anti-flooding guards for this area. The construction of the truck roundabout considerably improved logistical acceptance of empty packaging and disposal of full packaging remedied the threat to traffic safety on the Laško-Marija Gradec regional road and considerably improved the threat of flooding for the entire southern plateau of the filling facility. The flood protection was tested during autumns’ high water which for the first time following the construction thereof did not threaten the southern plateau. The investment amounted to EUR 380,000 and was 5 % less than the amount planned.

“Relocation of the liquor reservoirs”

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In order to construct the truck roundabout, the relocation of two existing liquor reservoirs and collection

basin was necessary from the southern filling plateau to the extreme eastern portion of the plateau. A new reinforced concrete collection basin had to be constructed together with the reservoir bases, all existing equipment had to be relocated to the new location and suitably connected with new installations to the existing hydraulic and power control system of glass cleaning machines with both ST1 and ST2 filling lines. Since all administrative-technical project documentation had already been prepared in 2009, the works began to be immediately implemented at the beginning of the year and were fully concluded by April 2010. The value of all implemented works in this project was EUR 267,000.

“10 x 0.5 l crates” Considering the trends in developed beer nations where increasing savings through smaller crates due to improved product turnover, growth in sales of return packaging and easier handling of purchased beer was observed, the Company began developing a completely new type of crate in 2007 which would, to a certain extent, redirect sales from economically and ecologically less suitable tin packaging to returnable glass packaging. The brewery has managed to expand its markets and its set of buyers with the new packaging. Four to five years ago only a very small number of breweries had smaller 10 x 50 cl crates in addition to 20 x 50 cl crates. Today the majority of strong brand names possess smaller packaging while some only come in 11 (10) x 50 cl crates. The latest example is Bavaria on the Dutch market, which has just entered the market with 2,400,000 new crates. Of these, 2,200,000 comprise smaller crates (11(19) x 50 cl) while only 200,000 comprise the larger crates (20 x 50 cl).

Through the introduction of the new packaging the Company estimates that:

•P ivovarna Laško will acquire significant comparative advantages against competitors on the Slovene market (return packaging is too expensive for discount stores);

• i n light of the envisaged rise in packaging and environmental tax, the investment of EUR 1,000,000 can already pay off in less than 4 years;

•P ivovarna Laško will also acquire a comparative advantage on the Croatian market where it will be the first to introduce such packaging;

• t he Company follows ecologically aware and sustainable development strategies which represent a strong marketing tool today. As the new crate project is directly tied to the supplementation of the ST2 filling line and moratorium in connection to it, activities regarding the project were also halted in 2010. Nevertheless in cooperation with packaging suppliers, the Company managed to prepare the technical documentation for the new crate and implement the creation of a prototype which satisfies all technical-technological and marketing requirements. All costs involving the development of the new crate were assumed by the potential supplier and producer of the crates, so that no funds were used by Pivovarna Laško. Activities regarding this project with the planned design of a tool for crate inject will be continued in 2011 with EUR 300,000 earmarked for this purpose.

“Ceres packaging” The product assortment expansion in 2010 also dictated investments into existing filling equipment. For the aforementioned product expansion, a portion of the funds were used for the upgrade and improvement of existing equipment while another were used for the purchase of a new cardboard packaging machine for 1 x 3, 2 x 2 and 2 x3 bottles which rounded off the entire offer of new final products and packaging. In addi-

PET-blower machine and ST3 filling line had to be equipped with the appropriate work formats. Within the scope of this project, the ST3 line was also supplemented with equipment required for filling the revamped image of the “Bandidos” product line. The project involving the expansion of the entire product assortment and appropriate packaging was implemented and successfully launched in April 2010 enabling the supply of export markets with the new products and packaging within the envisaged deadline. Additional requirements resulted in an increase in the financial investment from the envisaged EUR 500,000 to 800,000, or namely 60% more than earmarked for the project for 2010.

“Renewal of the industrial boiler” The increasingly more frequent production breakdowns and shortfalls necessitated the renewal of the over 20 year-old command control system of the boiler and peripheral equipment. As a result a state-of-the-art Se@vis-Saacke software and hardware were newly installed for the boiler. In the production and distribution of steam process this now ensures that high exploitation of the process, optimal use of primary natural gas and a high degree of safety and production reliability.

ANNUAL REPORT 2010

As additional requirements for packaging in PET packaging and packaging the new bottle sizes 0.66 l during implementation of the project, whose use dictated sale on export markets of western Europe, the

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through investment.

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tion to the basic bottle sizes 0.33 l and 0.5 l the palettes of new products in new formats were also expanded

Due to wear, the peripheral equipment of both boilers – power supply pumps, valves, probes and sensors were replaced, the last of which together with suitable software also enable fully automated 72-hour operation of the boilers without supervision. The already installed measuring equipment and connection with energy management software ensures optimal supervision over the use of energy sources and production exploitation of the boilers. The project’s implementation was carried out from January to May 2010, following which the system was successfully started-up. Due to the additional installation of equipment for optimizing the input and exploitation of biogas from the cleaning apparatuses, the actual investment amount exceeded the planned amount of EUR 550,000 for this project, and comprised EUR 575,000.

“Energy management – software and hardware” High energy costs and strict environmental regulations are increasingly dictating more reasons for introducing best practices in the field of energy management. The objectives are energy savings, increased energy efficiency, time efficiency, divided costs based on actual use and optimized forecasted use of various energy sources. The Company installed suitable measuring equipment for energy products which represents the greatest share of costs for the Company (natural gas, electricity, water/waste water, steam, air, CO2), necessary for continued analysis of measured data. Through the installation and use of modern software solutions for the collection and analysis are available to all who adopt decisions regarding subsequent measures in the area of energy management and savings. Approximately 50% of the planned project works were carried out in the first half of 2010, particularly the installation of equipment directly connected to the boilers and compressed air system where synergic savings have shown the highest results. Due to financing difficulties the project was terminated in the second half of the year and will be continued and concluded in 2011 (electricity, waste water, CO2). The investment amount for all activities involving this

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project implemented in 2010 was EUR 106,000.

“Renewal of the IT centre” With the transition to the SAP information system at the beginning of 2009, new hardware was also newly installed in the information centre. During summer production it was observed that the existing equipment installed for air conditioning the space did not meet the required parameters. Therefore new and more powerful equipment needs to be installed in the server area. Owing to the requirements of a high degree of security and reliability of operations, fire and flood protection and feedback notification of interruptions in operations will need to be ensured for these spaces in accordance with standards. Due to restricted funds in 2010 and assessment of the assured safety of server equipment operations, only activities related to the drawing up of project documentation were implemented at a cost of EUR 6,200. The implementation of all other project activities have been rescheduled for the first half of 2011.

“Ecological projects – biogas” As a result of the growth in energy costs and the TOC’s harmful emissions, the drying of waste brewer’s yeast is not longer cost effective and was terminated by IRSOP. Large costs would arise if the wet waste product was brought to a depot, also with regard to the transport thereof. Therefore in cooperation with the Biotechnical and Chemical Faculties of Ljubljana, a research study entitled “Možnosti uporabe odpadnega pivskega kvasa za pridobivanje bioplina v anaerobnem procesu razgradnje” (Possibilities of using waste brewar’s yeast for obtaining biogas in the anaerobic degradation process) has been underway since 2008.

A pilot test was implemented involving the direct introduction and degradation of brewer’s yeast suspension at the UASB reactor of the Company’s cleaning apparatuses which confirmed all expectations regarding successful degradation of this substrate in the anaerobic process. Results of the trials confirmed the possibility of degrading the Company’s entire produced quantity of yeast substrate and with the optimization of the reactor’s equipment, also additional quantities of other substrates which already considerably increases the creation of biogas by the apparatus and use thereof in the boilers and also suitably increases the level of OVE use. A test also confirmed the absolute economic benefit of the process, while additional pilot tests must be implemented for optimal operation of the reactor and regulation of surface power whose implementation is planned for 2011. The investment cost for this project in 2010 was EUR 23,000.

“Infrastructure acquisition” The expansion of the industrial complex on land allowing for this in accordance with spatial acts are also envisaged in the Company’s medium-term development plans for optimizing company activities. The earmarked funds of EUR 250,000 in 2010 for this purpose were not realised since the difference in the offer price of the real estate by Pivovarna Laško and the expected price of the sellers’ representatives were too great.

“Water sources” Funds in the amount of EUR 100,000 were earmarked in 2010 for research involving new water sources in the Jepihovec, Kal and Jurklošter acquifiers and protection of existing water sources, monitoring thereof in connection to obtaining concessions for use of these sources and preparation of project-technical and

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administrative documentation. Due to investment limitations, the project had been rescheduled for 2011.

2.9 Performance analysis

The Pivovarna Laško Group considers the 2010 fiscal year as a year of resolution and confrontation of liquidity problems due to non-strategic financial investments in the past. The Company will obtain stronger material bases for realising the set development strategy through reorganization, disinvestments and reprogramming.

The joint stock company Pivovarna Laško successfully combines the majority of Slovenian beverage producers into the Pivovarna Laško Group, which is complemented by the companies Jadranska pivovara – Split, d. d. and the newspaper and publishing company Delo, d. d., Ljubljana. The Pivovarna Laško Group considers the 2010 fiscal year as a year of resolution and confrontation of liquidity problems due to non-strategic financial investments in the past. The investment portfolio, specifics of individual investments and illiquidity on the capital market impeded and disabled the immediate divesture of unnecessary property by variable values. The Group’s market position on the domestic market is stable in the areas of beer and non-alcoholic beverage sales. This shows that despite the continued deterioration of selling conditions on the market in 2010 with Slovenia increasing excise duties on beer, the Group’s business policy regarding consumer supply has been correctly set. Sales of beverages to foreign markets increased in 2010. The Company will obtain stronger material bases for realising the set development strategy through reorganization, disinvestments and reprogramming.

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All companies in Slovenia which are in terms of capital integrated into the Pivovarna Laško Group (Pivo-

varna Laško, Pivovarna Union, Radenska, Fructal and Vital) in 2010 continued and implemented their efforts for optimum cooperation in the supply and sales areas. The results of such cooperation were reflected in the supply of raw materials, packaging, intermediate goods and other materials under favourable supply conditions and terms, as well as price conditions. Synergy effects are visible only after a longer period of time for such connections. The stricter market situation and demands of commercial companies for greater sales benefits shows that the Group’s orientation, namely the sale of products via its own Horeca distribution network - distribution of products for subsequent sale to the catering sector was a good one. Considering the reorganization problems of such an important business function, it is unrealistic to expect immediate more favourable business results, for the entire synergy effect will only be visible in future years. In 2011 the business strategy of the parent company Pivovarna Laško, d. d., and of the Pivovarna Laško Group will predominantly be to acquire new sales markets both on the markets of the European Union as well as on the markets of South-Eastern Europe. On all these markets, the Group will continue upgrading the marketing approach for awareness of all products of already established brands and will continue to strive towards achieving more favourable supply conditions.

1938

2.9.1 BUSINESS OPERATIONS OF THE GROUP The Pivovarna Laško Group (hereinafter: Group) sold a total of 4.226 million hl of all types of beverages in 2010, reflecting a 7.2 % decrease over 2009.

OVERALL SALE OF BEVERAGES OF THE PIVOVARNA LAŠKO GROUP ( in hl )

Beer

2010 sales

2009 sales

10/09 Index

1,845,989

1,975,579

93.4

Mineral water

595,497

598,668

99.5

Spring and natural waters

187,658

226,878

82.7

Flavored water

271,197

320,888

84.5

Fruit juices, nectars

333,546

368,608

90.5

Other non-alcoholic

921,941

989,040

93.2

61,538

64,288

95.7

Syrups* Other alcoholic Total

8,137

8,942

91.0

4,225,503

4,552,891

92.8

The weaker sales of beverages in 2010 were primarily the result of the crisis which was caused by the financial collapse of the market. The increased number of unemployed persons had an effect on the living standard of the population, resulting in decreased demand and use of beverages, predominantly observed in the sale of natural and flavoured waters. The increasingly greater competition on the market also contributed to this trend, appearing as new discount store chains such as Lidl and Hofer.

Financial data of the Group The Pivovarna Laško Group generated EUR 306.4 million in net sales revenues in 2010, representing a 6.3 decrease over the previous year. Net sales revenues from products and services amounted to EUR 304.6 million and were EUR 18.7 million or 5.8% lower than the previous year. Net sales revenues from products

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and services decreased by EUR 15.6 million on the domestic market and EUR 3.1 million on foreign markets.

Beer sales comprised a 41.6% share of total sales revenues while other beverage sales comprised a 32.5% share. Newspaper and publishing activities represented a 17.5% share of revenues and other revenues an 8.4% share. Out of total sales revenues, 85.2% were generated on the domestic market with the remainder, 14.8% generated on foreign markets. The Group still achieves its greatest share of foreign market revenues from the markets of the former Yugoslavia while the share of sales on EU markets has increased. Operating expenses which in 2010 amounted to EUR 320.1 million decreased by EUR 21.9 million or 6.4% in comparison to 2009. The greatest decrease was recorded for costs of materials and depreciation and amortization costs. The Group showed a revaluation of operating expenses due to impairment in the amount of EUR 27.2 million in 2010 representing a decrease of EUR 9.6 million over 2009. These expenses regarded the impairment of brands. Costs of services increased in 2010 predominantly due to increased costs of marketing activities. The Pivovarna Laško Group generated a EUR 9.9 million loss in 2010 and EUR 41.7 million in net cash flow from operating activities (EBITDA). The operating loss resulted from the impairment of brands. The Group generated a EUR 14.5 million operating profit from regular operating activities.

The Group disclosed a negative financing result in the amount of EUR 20.9 million, predominantly due to a surplus of payments over received interests. Net loss for the 2010 fiscal year amounted to EUR 25.8 million.

Notes to the Statement of financial position of the Group The financial position of the Pivovarna Laško Group is extremely serious. The high level of financial debt burdens current operations and threatening their existence and development. So as to resolve the liquidity position, the divesture of all non-strategic investments began to be intensively carried out in 2010 in line with the Group’s adopted 5-year operating strategy. Currently, the sale of a 79.25 percent stake in the newspaper company Večer, d. d. and a 100 percent stake in the company Delo, d. d. is underway. At the same time a strategic partner is being sought for the company Fructal, d. d. as well as procedures for the sale of a 23.34 percent stake in the company Poslovni sistem Mercator, d. d. and all other investments and property unnecessary for business. As at 31 December 2010 the Group showed a surplus of short-term liabilities over short-term assets in the amount of EUR 44,684,966, representing a considerably smaller liquidity risk in comparison to the previous year when the surplus of short-term liabilities comprised EUR 265,956,352. Financial liabilities on the last day of 2010 comprised EUR 397.5 million and were EUR 56.6 million lower than on the last day of 2009, partially due to the repayment of loans to banks and partially due to a transfer of obligations to non-current assets for the sale of the companies Delo, d. d., Fructal, d. d. and Jaranska pivovara, d. d. In the event of successfully concluded divestments, the Group will immensely decrease its indebtedness and consequently, its exposure to liquidity risk. Within the Group, indebtedness of individual companies will decrease to various degrees. Uncertainty remains regarding the success of the divestment of financial investments and unnecessary property and even alongside a successful disinvestment, the partner company Pivovarna Laško, d. d. will still remain over-indebted while individual subsidiary companies will have an excess of freely liquid assets. Therefore a financial restructuring of the dividend pay-outs of the subsidiaries is planned. This would enable the parent company to partially improve its liquidity situation and business result. Increasing sustainable resources would enable it to maintain and increase the value of its owners’ assets. Equity of the Group as at 31 December 2010 comprised EUR 131.9 million and was EUR 30.7 million lower

SALES BY EMPLOYEE

172.3

169.4

164.1 Sales per employee Pivovarna Lasko Group

ANNUAL REPORT 2010

160.0

in EUR thousand

120.0

80.0

40.0

0.0 2008

2009

2010

Sales by employee in the Pivovarna Laško Group decreased by 3.1% in 2010 in comparison to 2009.

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200.0

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than on the last day of 2009.

OPERATING EXPENSES FROM NET SALES REVENUES

120.0

96.6

104.6

104.5

2008

2009

2010

in %

90.0

Operating expenses in the net revenue from sales of Pivovarna Lasko Group

60.0

30.0

0.0

Operating expenses from net sales revenues in 2010 remains on the identical level as in the previous year.

Plans The Group plans to sell a total of 4,570,969 hl of all beverages on the domestic and foreign markets in 2011, representing an 8.2% increase over the quantity achieved in 2010. The plan has been optimistically drawn up due to greater sales planned on foreign markets.

2.9.2 OPERATIONS OF THE PARENT COMPANY The 2010 fiscal year will be remembered as one in which the Company was unable to realise the objectives set. The reasons were many and ranged from lack of understanding and support by the Company owners and banks to problems which arose from the reorganization of several business functions which in the initial phase of introduction, are not yet optimally regulated. The Company expects to achieve its set business

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objectives in the upcoming years.

The implemented impairment of several financial investments in 2010 will slacken somewhat in the upcoming period, but will in no way impede the planned development process. It is not expected that these events will have an effect on impairing the social security of employees. Increased globalization both on the domestic and foreign markets will only allow competitiveness through mergers and affiliation with similar companies. In line with the trend, the business-development strategy of the parent company and Group was adjusted enabling a competitive presence on the market. The Company and Group are endeavouring to adapt the business strategy to all eventual new market situations on individual markets. The endeavours of all employees in 2010 as in recent years were oriented at improving product quality enabled by the latest technological equipment in the production-filling process, especially the use of quality raw materials and water. The Company is aware that it will only be able to successfully retain all loyal buyers and consumers of all Pivovarna LaĹĄko products through product quality, a key objective also in 2011.

SALES OF BEER AND WATER ( in hl )

Total sale

2008

2009

2010

1,090,949

1,011,539

968,697

Chain index

92.7

Beer sales

1,046,281

Chain index

44,657

Chain index

938,640

93.6

95.9

32,706

Chain index

30,057

73.2

Alcohol / other sales

978,833

Water sales

95.8

91.9

Sales of Pivovarna Laško, d. d. in 2010 by segment:

•B EER

938,640 hl,

representing a 4.1% decrease over 2009;

•N ATURAL DRINKING WATER

30,057 hl,

representing an 8.1% decrease over 2009.

A number of factors led to the poorer sale of beer in 2010, from increased excise duties to poorer conditions for beer consumption, particularly in the summer months. Decreased sales of beer were also recorded on the domestic market, as well as on South-Eastern European markets while a growth in sales was observed

Financial data The Pivovarna Laško Group generated a total of EUR 91.3 million in net sales revenues in 2010, representing a 8.4% decrease over the previous year. Net sales revenues from products and services amounted to EUR 75.1 million and were EUR 6.7 million or 8.2% lower than in the previous year. Net sales revenues from products and services decreased by EUR 7.8 million on the domestic market, increasing by EUR 1.2 million on foreign markets. Revenues from sales of brands via the Horece distribution channel also decreased, namely by EUR 1.6 million. Beer sales comprised a 97.5 % share of total sales revenues, waters a 1.1% share and services a 1.4% share. Out of total sales revenues, 86.3 % were generated on the domestic market with the remainder, 13.7 % generated on foreign markets. The largest share of revenues is still achieved on the markets of the former Yugoslavia with the share of sales on EU markets increasing.

ANNUAL REPORT 2010

ly due to the reduced standard of consumers. It was established that a portion of consumers had replaced bottled water with regular tap water during the crisis period.

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Reduced sales of bottled waters which are predominantly sold on the domestic market were predominant-

2. BUSINESS REPORT

on other foreign markets, especially EU markets.

Operating expenses which in 2010 amounted to EUR 79.8 million decreased by EUR 5.3 million or by 6.4% in comparison to 2009. The largest decrease was recorded for costs of materials while expenses from acquisition prices of merchandise sold and revaluation adjustments of receivables also significantly decreased. Costs of services increased predominantly due to increased costs of marketing activities. The Pivovarna Laško Group generated EUR 11.2 million in operating profit (EBIT) and EUR 18.2 million in cash flows from operating activities (EBITDA), representing 23.5% or a EUR 5.6 million decrease over the previous year. The negative financial result arose due to a surplus of financial expenses over financial revenues stemming from interests in the amount of EUR 8.7 million and the impairment of financial investments in the amount of EUR 9.9 million. Financial revenues comprised EUR 4.3 million and are approximately equivalent to those from the previous year. The Company realised a negative result from financing activities with financial expenses surpassing financial revenues by EUR 18.6 million. Financial expenses from interests increased by EUR 0.5 million over the previous year and comprised EUR 13 million. Interest expenses exceeded operating profit by EUR 1.8 million. Such high interest amounts threaten the uninterrupted operations and development of the Company. Financial expenses from the impairment of investments in the amount of EUR 9.9 million are related to an impairment of investments in Delo, d. d. in the amount of EUR 6.5 million, an impairment of EUR 1.5 million of the investments in Thermano,d .d. and the revaluation of granted loans and interests to Jadranska pivovara - Split, d. d. in the amount of EUR 1.9 million. The Pivovarna Laško Group generated a EUR 7.4 million loss before taxes and a net loss of EUR 6.3 million.

Notes to the Statement of financial position Due to the commencement of the procedure of divesture of investments, the Company transferred investments in the subsidiaries Delo, d. d., and investments in Jadranska pivovarna – Split, d. d., totalling EUR

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35.9 million from long-term financial investments to short-term financial assets available for sale in accord-

ance with IFRS 5. The transfer of long-term investments to short-term investments was carried out for the investment in Poslovni sistem Mercator, Probanka and several smaller investments comprising a total value of EUR 56.7 million. Similarly, due to active sales, the Hum and Savinja Hotels with a total value of EUR 2.7 million were transferred from investment property to non-current assets available for sale. Despite the transfer of long-term assets to short-term assets, short-term liabilities still exceed short-term assets. The excess of short-term liabilities over short-term assets comprised EUR 121.6 million and has considerably decreased in comparison to the previous year in which the surplus amounted to EUR 210.9 million. Financial liabilities comprised EUR 265.9 million on the last day of 2010 and were EUR 3.6 million lower than on the last day of 2009. Equity of the Group as at 31 December 2010 comprised EUR 124.2 million and was EUR 5.1 million lower than on the last day of 2009.

SALES BY EMPLOYEE 400.0

330.7

307.6

281.8

2008

2009

2010

in EUR thousand

320.0

Sales per employee Pivovarna Lasko d.d.

240.0

160.0

80.0

0.0

Sales by employee in the Pivovarna Laško Group decreased by 8.4 % in 2010 in comparison to 2009.

OPERATING EXPENSES FROM NET SALES REVENUES

120.0

91.5

85.4

87.4

2008

2009

2010

in %

90.0

Operating expenses in the net revenue from sales of Pivovarna Lasko, d.d.

60.0

30.0

Pivovarana Laško, d. d. is planning 1,068,600 hl of beer sales for the 2011 fiscal year, representing a 10.3% increase over the quantity sold in 2010 and sales of 35,000 hl of bottled natural drinking water, representing a 16.4% increase over sales realised last year. Based on the planned quantities of beverage sales, the Company is planning net sales revenues of EUR 98.7 million or 8.1% more than the amount achieved in 2010. The operating efficiency ratio and EBITDA are expected to attain values of 1.230 and 0.245 respectively in 2011.

Conclusion The concluded 2010 fiscal year was not as successful as the periods several years ago, however the Company has established that its business policy is correctly focused, ensuring continued successful development. Pivovarna Laško, d. d., rightfully achieved its rank among the top food-processing companies in Slovenia in the past. It is boldly expected that despite the stricter economic conditions and financial crisis the Company will continue its operations showing positive results in the future.

ANNUAL REPORT 2010

Plans

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Operating expenses from net sales revenues increased by 2.3% in 2010 in comparison to 2009.

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0.0

Following the equipping of the entire production-filling process and quality of all its products, the Company will be able to compete with the most successful breweries in Europe. The Company desires to maintain the achieved level of excellence and leading position in its branch in Slovenia also in the future. The project involving the amalgamation of the Slovenian beverage industry and continuous search for new possibilities for exploiting synergies will remain the key strategy of the Company’s business policy. The Company will only be able to successfully compete with foreign corporations on the Slovenian and foreign markets through unification. The continued development of the Company will predominantly be dependent on the realisation of the denoted project. Nevertheless, the Company will also endeavour to focus on business connections with other beverage producers, particularly in the region of South-Eastern Europe. Pivovarna Laško, d. d., has proven many times in the past that knowledge and willpower are the key factors which will enable it to overcome all problems encountered resulting from increasingly less favourable operating conditions. The Company is planning to be even more successful in the future, predominantly through improved exploitation of synergy effects of affiliated companies in the area of joint brand marketing on foreign markets. In the future Pivovarna Laško, d. d., will continue to ensure its loyal consumers superior quality products and successful development and the long-term stability of investment assets and adequate yield on invested capital for its owners – the shareholders of the Company.

2.9.3 OPERATIONS OF SUBSIDIARIES 1. RADENSKA, D. D., RADENCI Company profile Development of the Radenska company commenced in 1869 when Dr. Harel Henn, a landowner, filled the first bottles with mineral water. A good fifty years later, in 1923, the mineral water had gained a therapeutic

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2. BUSINESS REPORT

reputation, and has been marketed with the three-heart symbol since 1936. The Radenska Tri srca brand is

one of the oldest brand names in Slovenia. The core business of Radenska is bottling and marketing natural mineral and spring waters and nonalcoholic beverages On the Slovenian market, the Company’s desire is to, under the brand name Radenska, remain the leading filling company of natural mineral waters, and in the area of bottled drinking waters and non-alcoholic beverages to maintain its development as an active and competitive company with a significant market share. In the export area, the Company strives to maintain its position as the leading Slovenian exporter of natural mineral waters under the brand name Radenska, and as an active filling company and/or seller of those specific products of Radenska which are, with regard to their quality, particularly interesting for the market on the territory of the former republics of Yugoslavia and Central Europe. Radenska, d. d., Radenci, is an affiliated company of the parent company Pivovarna Laško, d. d. The ownership share of the parent company represents a 93.80 % stake the capital. Radenska, d. d., Radenci, also has ownership stakes in other companies and is the owner or partner of the following companies: Radenska, d. o. o., Beograd (100 % ownership) and Radenska, d. o. o., Zagreb (100 % ownership) - these companies are not active, and Miral, d. o. o. (100 % ownership), RA&LA, d. o. o., Sarajevo (1.97 % ownership) and Odem GIZ Slopak, d. o. o. (9.74 % ownership).

Basic characteristics of operations in 2010 Total sales of Radenska, d. d. in 2010 comprised 93,939 million litres of beverages, representing a 9.5% decrease over 2009 and 8.2% less than planned. A somewhat larger decline in sold quantities over planned quantities was recorded for non-alcoholic beverages or 11.7% and waters with 7.4%. The total net financial result in 2010 amounted to EUR 26.8 million and was EUR 2 million or 7 % lower than in 2009. Sales generated in Slovenia amounted to EUR 24.2 million showing a 4.5% decrease over the previous year while sales in the region of South-Eastern Europe totalling EUR 1.0 million decreased by 23.7%, EU markets by EUR 1.2 million or 30.9% and sales in other countries by EUR 0.4 million or 0.3 % lower than in 2009. The sales quantity on the Slovenian market represented an 82.3% share of all sales, increasing by 4% over 2009 while the sales value in Slovenia represented 90.2% of total sales value and showed a 2.3% increase over 2009. The company again managed to maintain and even increase its market shares in individual categories compared to the competition through activities for key buyers on the domestic market. The largest decrease in sales was recorded on the EU market, namely a decrease of 5.4 million litres, representing a 38.7% reduction. In the total sales structure, this market fell from a 13.3% to a 9.0% share based on quantites in litres sold. The decline was almost exclusively caused by the cessation of filling of the S-Budget brand for Spar Hungary. Negative effects on the Croatian market were caused by the decline in buying power, administrative obstacles and rejection of Slovenian products by Croatian buyers. The company is not competitive on other markets of the former Yugoslavia (Bosnia and Herzegovina, Macedonia and Serbia) due to high import duties and the decline in sales can also be attributed to the relatively low investments in these markets.

2009

2010

31,891,846

30,234,647

28,546,478

Net profit

4,872,959

-36,833,222

456,936

Net cash flow1

8,009,730

-33,509,004

3,310,705

EBIT

7,014,120

1,467,336

1,254,152

EBITDA

10,150,891

4,791,554

4,107,921

Long-term assets

73,513,964

73,358,307

67,647,568

Short-term assets Equity Reservations

75,858,213

38,326,046

46,810,249

121,157,626

83,758,794

81,102,108

2,688,039

2,721,028

2,558,036

Long-term liabilities

768,824

8,565,555

6,618,526

Short-term liabilities

24,757,688

16,638,976

24,179,147

1Net profit including depreciacion

Radenska, d. d. generated EUR 29.2 million in operating revenues in 2010, EUR 28.0 million in operating expenses and an operating profit of EUR 1.2 million. Financial revenues amounted to EUR 2.7 million while financial expenses amounted to EUR 3.3 million, meaning a negative financial result of EUR 629.0 thousand. Net profit comprised EUR 456.9 thousand.

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Net sales revenues

2008

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( in EUR )

2. BUSINESS REPORT

KEY DATA ON OPERATIONS OF THE COMPANY RADENSKA, D. D., RADENCI

Employees In 2010 Radenska concluded the streamlining process involving a decrease in the number of employees. Seven new employees are envisaged to be employed in 2011. The average number of employees at the end of the month in 2011 will remain identical to the number in 2010. Work productivity and added value per employee is planned.

Conclusion The existing market environment in connection to known trends had an effect on the boldly set basic operating objectives in 2011. Processes which will have continued synergy effects within the Pivovarna LaĹĄko Group will be continued.

2. UNION GROUP Presentation of the Group The Union Group was established in 2001 when Pivovarna Union, d. d., took over Fructal, d. d. Pivovarna Union, d. d. is the parent company of the Union Group. In addition to parent company Pivovarna Union, d. d., the Union Group also includes the companies Fructal, d. d. and Fruktal Mak, a. d., whose basic activity is the production of juices and beverages. Pivovarna Union, d. d. is the 93.02 percent owner of the company Fructal, d. d., which is the 89.39 percent owner of the company Fruktal Mak, a. d. The Union Group also has associate companies abroad, namely the companies Birra Peja, Sh. a., Kosovo and Birra Peja Albania where it has a 39.55 ownership stake in the company Birra Peja, Sh. a., a beer brewer and a 100% ownership stake in Birra Peja, Sh. a., Kosovo of Albania. The vision of Union Group is to use its own trademarks to maintain a high level of awareness and at the same time customer loyalty, both in Slovenia as well as on adjacent markets outside the Slovenian borders. At the same time the company strives to become a leading regional producer with its own strong distribution network system. The Union Group comprises socially responsible companies with a high level of ecological awareness. The companies will continue implementing development and innovative programmes, which

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ANNUAL REPORT 2010

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will initiate change and create new trends in the market.

Their mission is to ensure high quality beverages satisfying the needs of the most demanding customers, which follow global trends and at the same time develop and discover new segments and trends. Both in the production of beer as well as in the production of non-alcoholic beverages, which are manufactured without preservatives, the company takes into account the most demanding food and technological standards. The Union Group creates a working environment for all its employees, which stimulates their professional and personal development. The strategic objectives of Union Group include the production and sale of innovative and trendy products, maintenance of the market positions of own brand names on the domestic market, and recovery and expansion of previously achieved positions on nearby markets. It intends to achieve planned cost effectiveness with professional colleagues acting as teams and in accordance with the culture of the Union Group.

Basic characteristics of operations in 2010 The Union Group sold 2,168,735 hl of beverages in 2010, reflecting a 5% decrease in sales over 2009 and 7% less than planned quantity. The Union Group sold 1,485 tons of food products representing an identical quantity as in 2009 and 3% less than the quantity planned for 2010. The Group sold 71% of its beverages on the Slovenian market and 29% on export markets. The best results were achieved by beer sales which only lagged by 2% behind quantities sold in the previous year and the planned quantity for 2010. The share of beer sales in Slovenia increased by 2% over 2009 however a decrease was recorded in export sales due to the termination of cooperation with a buyer for which the Union Group possessed a filling license and a decline

in sales of several brands. The Union Group had already partially substituted for the decline by acquiring a new buyer in Hungary in 2010. The Union Group sold 4% less non-alcoholic beverages in 2010 due to smaller sales in Slovenia. On the export markets, particularly the markets of South-Eastern Europe, despite the decline in purchasing power, large liquidity problems of buyers and administrative problems regarding good work, the sale of non-alcoholic beverages increased by 2%. The poorest results were observed in relation to sales of waters and flavoured waters which are predominantly sold in Slovenia. A general decrease in consumerism was highlighted in this segment.

KEY DATA ON OPERATIONS OF THE UNION GROUP ( in EUR )

Net sales revenues Net profit

2008

2009

2010

166,461,402

159,454,109

149,094,682

5,820,587

-51,645,016

-544,238

Net cash flow1

18,822,852

-39,120,762

10,732,943

EBIT

11,711,222

14,224,570

6,692,040

EBITDA

24,713,487

26,748,824

17,969,221

Long-term assets

213,911,437

212,779,353

109,516,705

Short-term assets

106,176,607

60,099,441

161,242,448

Equity

132,477,907

78,424,313

80,151,688

Long-term liabilities

55,829,068

60,400,381

32,929,532

Short-term liabilities

131,781,069

134,054,100

157,677,933

1Net profit including depreciacion

The Union Group generated EUR 149.1 million in net consolidated net sales revenues in 2010, representing a 6.5 % decrease over the previous year. Out of total sales revenues, 78.5 % were generated on the domes-

sales, leases and beverage filling in cooperation with other various services. Written-off values decreased by 8.5% in comparison to the previous year predominantly due to a 10% decrease in amortization. Labour costs decreased by 1.3%. Provisions for severance pay and jubilee awards increased by 215% due to a newly performed actuary calculation of future severance pay and jubilee awards. Financial revenues in the amount of EUR 5.3 million were 9.9% lower in 2010. Financial expenses in the amount of EUR 12.6 million were 85% lower than in 2009 when the Union Group impaired the loans with appurtenant interests granted to the companies Holding, d. d. and Center naloĹžbe, d. d. Investments were impaired by EUR 4.2 million in 2010 while the majority of other financial expenses comprised interests for loans received. The Union Group showed a net loss of EUR 0.5 million for 2010 whereby the net loss for the majority owner comprised EUR 0.3 million and EUR 0.2 million for the minority owner. For the purpose of the sale of investments, the Union Group transferred the long-term financial investments in the companies Mercator, d. d., Elektro Maribor, d. d. and several smaller investments totalling EUR 80.6 million to short-term financial investments available-forsale.

ANNUAL REPORT 2010

smaller quantities sold. Costs of services were 12.8% higher predominantly due to higher costs of marketing,

P I VOVA R N A L A Ĺ KO D . D .

Operating costs in the amount of EUR 144.2 million were 2.4% lower than in 2009, predominantly due to lower acquisition values of merchandise, lower costs of several raw materials and other materials due to

2. BUSINESS REPORT

tic market and the remainder, 21.5 % on foreign markets.

Due to activities and the intention of divesting a share in the company Fructal, d. d., the Union Group reclassified all assets of the Fructal Group in accordance with IFRS 5 amounting to EUR 53.1 million and all related obligations in the amount of EUR 26.3 million to the group for divestment. As at 31 December 2010 the Union Group, except for the reclassifications pursuant to IFRS 5, showed a excess of EUR 18.1 million of short-term liabilities over short-term assets. The financial liabilities of the Group, with the exception of the reclassification in accordance to IFRS 5, amounted to EUR 162.8 million as at 31 December 2010 and were EUR 3.6 million lower than the previous year.

Employees At the end of 2010 the Union Group had 797 employees, representing a 2.7% decrease over the year before. Due to the streamlining of employment in the past five years, the number of employees in the Union Group has radically decreased. Uninterrupted operations were ensured through the reallotment of personnel within the Group and if this was not possible, temp agencies were used. If such personnel showed potential and deemed necessary due to the nature of work, the Company hired them following a defined period. Urgent replacement for an uninterrupted work process is only possible in direct production while only reallocation of personnel or work is possible for auxiliary processes.

Conclusion The Union Group and its associates will operate in accordance with the adopted strategy of the Pivovarna Laško Group for the period until 2014. The sale of investments in companies which are not involved in the basic activity of the Union Group will be of key importance, particularly the sale or assurance of a suitable strategic partner for Fructal, d. d.

3. VITAL MESTINJE, D. O. O. Company profile

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The development of the company Vital Mestinja commenced over fifty years ago. The main activities of

the company are fruit processing and bottling of non-alcoholic beverages under its own trademark FRUPI. The company is also an important beverage bottler for the retail trademarks of various chain stores. The latter represents 80% of the company’s activities and is too high so the future strategy will be to increase the market share of the Frupi brand. The company desires to regain its leading market share in syrups in the Slovenian market and at the same time, focus on the increased quality of Frupi products which will be based on the Kozjansko apple which constitutes the basic raw material. The company has capital ties with Pivovarna Laško, d. d., the latter of which was the 96.92 percent owner of Vitala Mestinja as at 31 December 2010.

Basic characteristics of operations in 2010 Total sales of the Frupi brand and other retail brands amounted to EUR 4,489,551 and comprised 14,227,693 litres. In terms of quantity, the company realised 0.5% less than in 2009 and financially 8.8% less revenues due to the drastic decrease in prices of TBZ Mercator from 6 April 2010 onwards. Quantity sales of Frupi products fell by 14.9% in 2010 with financial realization lower by 5.5% due to the termination of eight Frupi brand products. TBZ Mercator recorded a quantity sales increase of 5% and an increase in financial realization of 1%.

KEY DATA ON OPERATIONS OF VITAL MESTINJE, D. O. O. ( in EUR )

Net sales revenues

2008

2009

2010

5,773,931

5,135,479

4,791,490

Net profit Net cash flow1 EBIT

53,250

47,569

-81,667

463,146

424,865

292,495

89,753

48,000

-79,933

499,649

425,296

294,229

Long-term assets

2,215,201

2,066,005

2,530,278

Short-term assets

2,593,015

2,271,181

2,106,924

Equity

EBITDA

3,391,887

3,439,456

3,357,788

Long-term liabilities

163,592

97,629

333,739

Short-term liabilities

1,252,737

800,101

945,675

1Net profit including depreciacion

Vital Mestinje concluded 2010 with a loss of EUR 81,667. Significant factors contributing to the loss included the drastic decrease of prices of TBZ Mercator, increased labour costs and increased energy costs and costs of current maintenance. Depreciation and amortization costs in 2010 were 0.8% lower than in 2009.

Employees The number of employees decreased by 3 employees in 2010 with 35 employees at Vital Mestinja as at 31 December 2010. Work has temporarily been reallocated among the existing employees however additional hiring will probably be required in the future due to occasional interruptions in the work process.

Conclusion Despite the negative result, operations in 2010 were satisfactory. Considering that beverage consump-

financial index of 115 recorded. The strategy involving the improvement of product quality has proven to be a positive one. The objective for 2011 is to increase the sale of Frupi products, select or replace products which are not cost effective and ensure cost effectiveness in all processes. At any rate, the company expects synergies with the Pivovarna Laško concern to help, enabling both to more easily follow objectives set for 2011.

4. DELO, D. D., LJUBLJANA Company profile Delo, d. d., has been one of the leading and most influential companies on the Slovenian media market and an important designer of public opinion for half a century. The early work of the company Delo dates back to 1955, when the newspaper and publishing company Slovenski Poročevalec was published which was the precursor to today’s company.

ANNUAL REPORT 2010

products were terminated, the growth of syrups has been very encouraging, with a quantity index of 111 and

P I VOVA R N A L A Š KO D . D .

was considerably aggressive in obtaining eight new TBZ Mercator brands and although a number of Frupi

2. BUSINESS REPORT

tion is declining, Vital Mestinja has managed to maintain quantity sales in the previous year. The company

Delo, d. d., publishes two leading Slovenian daily newspapers, Delo and Slovenske Novice, the only Sunday newspaper, Nedelo, the specialized magazine GrafiÄ?ar and four regular newspaper supplements. In addition, Delo has one of the most commonly visited web sites, www.delo.si, which is enhanced with video content.

Basic characteristics of operations in 2010 The effects of the economic recession has joined the internetisation of media trend as an alternative to printed media on the market. Changes in consumer habits and consequently, living habits has resulted in a decline in the reading of printed media and decreased general consumption thereof which is also reflected in the number of copies sold. Despite the negative trend regarding payable daily newspapers, the Delo media house has maintained its leading market position. The negative trend also continued on the advertisement market in 2010, the result of effects of the economic crisis. The share of television commercials has strengthened to the detriment of all printed media. The gross value of the total advertisement structure in Slovenia is growing but remained the same as in 2009 in actual terms.

KEY DATA ON OPERATIONS OF DELO, D. D., LJUBLJANA ( in EUR )

Net sales revenues

2. BUSINESS REPORT ANNUAL REPORT 2010 P I VOVA R N A L A Ĺ KO D . D .

2009

2010

60,499,049

53,756,136

53,728,875

Net profit

4,616,531

-11,522,245

-2,191,968

Net cash flow1

7,276,014

8,675,049

689,301

EBIT

6,008,137

556,397

366,578

EBITDA

2008

8,667,620

3,403,593

3,247,847

Long-term assets

41,553,901

25,398,404

24,192,498

Short-term assets

12,143,449

19,458,836

16,962,679

Equity

27,980,341

15,665,385

13,472,842

Long-term liabilities

4,041,689

3,158,602

Short-term liabilities

22,756,425

21,962,684

21,990,460

1Net profit including depreciacion

The company Delo generated a positive operating result in 2010. The negative total operating result was caused by the negative financing result. Based on the sales contract concluded with the company 3Lan, d. o. o. the company impaired the financial investment into VeÄ?er which had the greatest effect on the negative financing result.

Significant business events in 2010 The first edition of the new bi-monthly newspaper Pogeldi was issued in April. The newspaper targets the educated and demanding reader and also includes cultural, art and social contents. The newspaper is co-financed by the Ministry of Culture and City Municipality of Ljubljana within the Ljubljana as a Unesco Book Capital project. The state for the revamping of the contextual and design of the Delo newspaper was created through the appointment of the chief editor in May and consequent modification of several editorial positions.

The company sold its investment in ČZP Večer, d. d. to the company 3Lan, d. o. o. in June based on the decision of the Competition Protection Office. The sales contract was concluded under suspensory condition, namely with the acquisition of the consent of the Competition Protection Office and Ministry of Culture. The Competition Protection Office extended the deadline for the disposal of the shares in the company ČZP Večer to 28 February 2011 through a decision. The supervisory board of the company adopted the Strategy of the Company Delo for the Period 2010-2014 in August 2010 which represents the basis for the restructure of the company. The new organisation operates in a decentralized manner so that the media part is focused on concurrent restructure and development of all media brands. The procedure for sale of the company Delo commenced in October 2010. At the end of November a call for the collection of written bids for acquisition of shares in the company Delo was published in Delo and in the Financial Times. Interested bidders obtained an informative memorandum and submitted non-binding bids in January 2011. The newspaper Slovenske novice was chosen as the trusted brand out of all daily newspapers. The company Delo earned its membership in the International Newspaper Color Quality Club (INCOC) in 2010 with its daily newspapers. Through correct and consistent newspaper reproduction quality Delo has fulfilled the expectations of the commission. The multiple awards received has placed Delo amongst the ranks of the so-called Star Club. Delo has joined several most read global newspapers which are also available in mobile phone formats. Since the beginning of November the Delo and Nedelo newspapers are avilalbe for the popular iPad tablet. The supervisory board of delo appointed the new chief editor for the printed edition of Slovenske novice in December and editor for the Web edition of the same newspaper.

Employees

Conclusion Management’s priority tasks are focused at ensuring that the company regains growth as soon as possible. These predominantly involve the restructuring processes of both key projects, the Delo and Slovenske novice daily newspapers. The company Delo expects demanding economic circumstances in 2011 which will approximate those of 2010. The key factor of change in the branch will comprise the accelerated transition to digital platforms in lieu of the threat of a decline in sales of printed daily newspaper editions and limited advertisement budges. Regardless of the stricter economic situation, the company Delo is planning sales revenues of almost EUR 60 million for 2011.

ANNUAL REPORT 2010

employees than planned. At the end of December 2010 the companies Delo and Izberi had 445 employees, representing a 5% decrease in comparison to the end of 2009.

P I VOVA R N A L A Š KO D . D .

the work processes. Activities for accelerating the retirement of all employees fulfilling the conditions have been implemented since the beginning of the year. The company concluded 2010 with a smaller number of

2. BUSINESS REPORT

A high educational structure is characteristic for the company reflected in its activity and complexity of

2.10 Risk management

In their business operations Pivovarna Laško, d. d., and Pivovarna Laško Group are exposed to various business and financial risks, which are in most cases efficiently managed with an active and comprehensive approach.

2.10.1 MANAGING THE BUSINES RISKS OF PIVOVARNE LAŠKO, D. D. The activity of beverage production is exposed to the seasonal nature of consumption. This way business risks are also related to weather conditions during the seasonal summer period.

•T aking into account that the Company achieves almost 12.4 % of its physical realization on markets outside the European Union, business risks in this sales area are also exposed to possible unilateral measures of these countries, which could deteriorate marketing conditions on these markets So as to avoid possible surprises on strategic markets, the Company also monitors the strategy for these markets.

• I ntellectual property or trademarks are exposed to certain risks in appearing on the market of another producer, and that is why all our trademarks are protected at Office for Intellectual Property Protection.

•R eliability of suppliers and contractors is moderately exposed, and for the purposes of preventing business interruptions in this particular segment, the Company utilizes input control of the raw materials’ quality and of intermediate goods. Normally, the Company has two or more suppliers for the supply of

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the same type of goods.

•A vailability of production capacities is party exposed to business risks, mainly due to possible machinery breakdown. In order to avoid these production disturbances, the company ensures the smooth operation of production facilities with regular annual planned maintenance and preventive ongoing maintenance works.

•E nvironmental protection - the business environment is exposed to business risks due to wastewater generated in the production process. The company has reduced this risk to a minimum by activating a wastewater treatment plant. Regular monitoring of adverse impacts on the environment has an additional impact on environmental protection.

•P rotection of property - by implementing a protection plan regarding threats or managing property, the Company has reached a level which enables the timely detection of an event and consequently the possibility of prompt elimination of the consequences.

•T hrough continuous review of work conditions in the production process and the improvement thereof and concern for employee health and satisfaction risks connected to human resources management are quite small.

•T hrough the ongoing and constant upgrading of information and communications technology, the Company ensures stable, secure and reliable information support to business processes. This business policy endeavours to reduce risks connected to information and communications technology (ICT) to the lowest possible level.

BUSINESS RISKS Risk description

Control mode

Exposure

perform analysis,

moderate

market research and

marketing communication

monitoring patent

moderate

Sale

loss of market sales

Intellectual

risks associated with the

property

patent situatuin and the rule

situation

of patent disputes

Reliability

risk of non-competitive

implementation of the

moderate

or disrupted supplies

control input

Availability

risk of disruption

routine annual preventive

low

of production

maintenance

production capacity

capacity

Protecting the

risk of emergency-life

regularly conduct preventive

low

of suppliers

environment

environmental

activities

impact

Protecting property

risk of theft

systematic risk assessment

moderate

of property

and implement measures

in accordance with

security plan

Human resources

deterioration of working

checking and improving of

low

management

conditions

working conditions, concern

for customer satisfaction and

employee health

common mutual

moderate

agreements

Risk conected to infor-

relationships betwen ITC

mation and communi-

services are not formally

cations technology (ICT) defined

2.10.2 MANAGING THE FINANCIAL RISKS OF PIVOVARNA LAŠKO, D. D. To ensure the long-term stability of the Company’s operations, concurrent and detailed monitoring and assessment of financial risks are required. In 2010 the Company again followed the objective of achieving stable operations and reducing exposure to individual risks to an optimal level. Particularly significant among financial risks are credit risk, interest rate risk, currency risk and liquidity risk. Exposure to particular types

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ANNUAL REPORT 2010

and contractors

P I VOVA R N A L A Š KO D . D .

of financial risks and measures for protection against them is implemented in the company and evaluated based on the impacts on cash flows.

• Credit risks include all those risks affecting the decline of the company’s economic benefit due to insolvency of the company’s business partners (buyers) and failure to meet their contractual obligations. To this end, the Company supervises and monitors financial claims of its customers, both wholesalers and buyers in retail sale. In most cases the Company does business with known and verified business partners whose credit ratings are monitored on an ongoing basis while suitable limits are formed for individual partners. Buyers displaying a markedly low credit rating are provided with goods only on an advance payment basis. This prevents buyers from exceeding their payment capabilities. The Company utilizes mutual and chain compensations to manage credit risk which also have a positive effect on ensuring adequate cash flows for the Company. Accounts receivables are insured with traditional instruments for claim insurance, such as: bill, bank guarantee and mortgage. The company concurrently monitors claims per business partners and per their maturity, and contributes to improving the payment discipline of its buyers by prompt collection, charging interest on late payments, writing reminders, and with judicial recovery of debts due. The Company contributes additionally to improving the payment discipline of its buyers through the charging of default interest, written reminders and judicial recovery of outstanding receivables as well minimizing write-offs of uncoverable receivables. The Copmany did not record significant write-offs of receivables due to buyer non-payment in 2010. Credit risks are managed and represent a moderate rate of exposure for the company.

• Interest rate risk represents the possibility of changing the amount of the reference interest rate on the financial market, mainly due to long-term loans already taken in EUR, linked to a variable interest rate (EURIBOR), which demonstrated a negligible downward trend in the first half of 2010, with the trend turning slightly upwards in the second half and remaining that way until the end of the year. The trend in the growth of the reference interest rate is continuing in 2011. Financing under variable interest rate conditions represents one third of all Company financing while the other two thirds represents loans with a fixed interest rate. The Company concluded an interest rate swap in 2010 thereby protecting a good 20% of its longterm loans against growth of the reference interest rate in the upcoming three years. In accordance with the

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long-term strategy of the Company and Pivovarna Laško Group for 2011, a decrease in debt in the financing

segment under variable conditions is envisages, therefore the Company has not decided for interest rate protection when concluding additional transactions. The company’s exposure to interest rate risks is assessed as still high, but manageable.

• Currency risk is not a subject of the Company’s exposure in 2010 as exports and imports are implemented in EUR. Furthermore, the structure of the Company’s foreign sources of funding entirely consists of loans in the common currency of the European Monetary Union.

• Liquidity risk: such risk is connected to the effects of the recession on decreased loan capital of banks and stricter credit conditions. The Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act, among other things, governs the financial operations of legal entities. Particularly significant among financial risks is liquidity risk, which means the risk of loss due to short-term and long-term insolvency. In addition, the Company needs to monitor and ensure capital adequacy, which means that the Company must always have sufficient long-term financial resources at its disposal with regard to the volume and type of business it carries out. The Company must ensure an adequate ratio between short-term liabilities and current assets. Taking into account the last day of 2010, the Company disclosed an excess of current liabilities over current assets, which means the existence of a significant liquidity risk.

In order to avoid insolvency the Company manages liquidity risk, and forms and implements a regular liquidity management policy, which includes planning the expected cash outflows and sufficient cash inflows for them, bearing in mind the normal course of business operations and possible positions of liquidity crises. The Company establishes current and future needs for cash with the support of the business information system on a daily, weekly and monthly basis. The Company ensures coverage of possible daily liquidity deficiencies through suitable credit lines for the short-term regulation of cash flows in the form of revolving credits and the allowable transaction account limits. In addition, the Company further assesses that it will be possible to arrange renewals of the existing short-term funding resources or gain new resources of higher quality at maturity of the existing short-term loans at banks on the financial market. All loans taken at banks are adequately insured with the long-term business assets of the Company. All larger financial outflows are first planned for and covered through future financial inflows from operating activities and from short-term financing sources. In a similar manner, the Company also manages long-term solvency risks. Liquidity risk is assessed as quite high with regard to the situation on the financial market, as well as in the entire economic space and requires special attention. The financial risks of Pivovarna Laško, d. d., are described in the financial part of the Annual Report on pages 183 through 185, in Note 28.

Control mode

Exposure

Credit

risk of insolvency

determine credit ratings of

moderate

risk

of the business

customers, capping the buyer,

partners

use the appropriate

insurance instrument

Interest

revision of the

use of derivative financial

high

rate risk

reference interest rates

instruments -

in financial markets

interest shielding

Currency risk

possibility of adverse

business connections to the

low

exchange rate movements

national currency,

currency harmonization of

import and export transactions

Liquidity

inability of companies

provision of adequate credit

high

risk

to meet business

lines in financial markets,

and financial liabilities

proper financial

planning

2.10.3 MANAGING THE FINANCIAL RISKS OF THE PIVOVARNA LAŠKO GROUP Business operations expose the Pivovarna Laško Group to the following risks: credit risk, interest rate risk, currency risk, liquidity risk, etc. The entire activity of managing risks in the Group is focused on the unpredictability of financial markets and tries to minimize the potential negative effects of the financial performance of the Group. No particular working body is engaged in managing financial risks at the Group level; this is, namely, subject to the financial departments. Due to the global financial crisis of the last year,

ANNUAL REPORT 2010

Risk description

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FINANCIAL RISKS

the stability of Group’s operations became exposed to higher risks. As a result, the Group devotes considerably more attention and carries out more activities to manage these risks.

• Credit risks include all those risks affecting the decline of the Group’s economic benefit due to insolvency of business partners (buyers) and failure to meet their contractual obligations. To this end, the Group supervises and monitors financial claims of its customers, both wholesalers and buyers in retail sale. In most cases deals with known and verified business partners whose reliability and credit rating is monitored on an ongoing basis are concluded. The method of classifying buyers in credit rating classes and defining supply limits for individual buyers based on sales contracts is also used The Group implements mutual and chain compensations, thereby additionally contributing to the management of the Group’s current liquidity. Accounts receivables are insured with traditional instruments for claim insurance, such as: bill, bank guarantee and mortgage. Receivables of business partners and their maturities are concurrently monitored with reminders issued concurrently, default interest calculated, written reminders and judicial recovery of matured receivables thereby contributing to improved customer payment discipline. For buyers where insurance cannot be reliably ensured, transactions are carried out on the basis of advance payments. Credit risks are managed and represent a moderate rate of exposure for the Group.

• Interest rate risks represent the possibility change in the interest rate on the financial market, mainly due to taking out long-term loans linked to a variable interest rate (EURIBOR). The companies in the Group concluded an interest rate swap in 2010 thereby protecting a portion of its long-term loans against growth of the reference interest rate in the upcoming three years. In accordance with the long-term strategy of the Company and Pivovarna Laško Group for 2011, a decrease in debt in the financing segment under variable conditions is envisages, therefore the Group has not decided for interest rate protection when concluding additional transactions. The Group’s exposure to interest rate risks is assessed as still high, but manageable.

• Currency risk was negligible in the business operations of the Group in 2010 because the structure of Group’s business operations was mainly linked to EUR both in supply and sales, as well as in the financial segment. Currency risk is assessed as low in other currencies due to the insignificance of these business operations

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ANNUAL REPORT 2010

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• Liquidity risk arises from the possibility of a deficit of available financial resources and consequently the

Group’s inability to settle its liabilities within the agreed periods—both current operating liabilities as well as financial liabilities. The liquidity risk of Pivovarna Laško Group is with regard to the situation on the financial market as well as in the entire economic space quite high, but on the other hand quite manageable based on the activities carried out by the companies of the Group in this regard. The objective is to ensure suitable liquidity of the parent and subsidiary companies and enable all companies in the Group financing under the most favourable conditions. The Group consistently carries out a policy of regular liquidity management, which includes planning and monitoring cash inflows, and through the aid of suitable credit lines for short-term regulation of cash flows, although with quite some effort especially in during the non-seasonal period, successfully manages liquidity risk. Financing conditions deteriorated in the past year due to increased guarantees for loans taken out. The second half of 2010 saw a slight growth trend in the reference interest rate on the EU financial market however commercial banks nevertheless utilized defined the price of capital in the form of fixed interest rates. The Group still has open credit lines in the form of revolving credits and allowable limits on transaction accounts. In addition, the Group also applies allocating surpluses and deficits of financial assets within the framework of the Group in the short run. All larger financial outflows are first planned for and covered through future financial inflows from operating activities and from short-term financing sources.

In a similar manner, the Group also manages long-term payment solvency risks. The Group assesses that its exposure to liquidity risk is quite high with regard to the situation on the financial market, as well as in the entire economic space and requires special attention. The financial risks of Pivovarna LaĹĄko, d. d. are described in the financial part of the Annual Report on

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ANNUAL REPORT 2010

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pages 264 through 266, in Note 30.

2.11 Marketing activities

The current unenviable economic situation is dictating increasingly greater cost effectiveness, market competititveness, a search for new business opporutinities and observation of the wishes of consumers.

Organizational structure of the marketing business function: in accordance with the reorganisation, the marketing function in the Pivovarana Laško organizational structure was relocated from the staff function of the Chairman of the Management Board to a commercial function.

2.11.1 PIVOVARANA LAŠKO PRODUCTS The current unenviable economic situation is dictating increasingly greater cost effectiveness, market competitiveness, a search for new business opportunities and observation of the wishes of consumers. In accordance with the Company’s values and its basic activity, beer production was supplemented with a new stronger Eliksir beer in 2010. Production in the jubilee year also concluded with a limited series of Jubilenjnik beer. Eliksir is a dark bock beer with a 16% percent extract and 7.6% alcohol content while the Jubeljnik beer is a special light beer with a 13.4% extract and 6% alcohol content. Both new products represent stronger beers and thus broaden the basic offer. So as to ensure the best coverage of all beer segments through its brand portfolio, the Company introduced the renewed line of Bandidos products in March. The brand underwent a complete brand revamping with

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communications to consumers also modified. Consumers observed the greatest change in the new shape of

the 0.33l bottles, which are now richly decorated with engravings, thereby following the latest design trends. As a result of the renewal of the entire brand image, the Bandidos Power flavour was terminated as well as Bandidos in aluminium cans. The renewed Bandidos product line is available in cartons containing 24 x 0.33 l bottles and handy six-packs (6 x 0.33 l bottles) with four six-packs per tray. The umbrella brand Laško did not experience any changes from the aspect of image and architecture in 2010 except for the addition of Eliksir beer and the limited series of Jubilenjik beer which joined the products Laško Zlatorog, Laško Club, Laško Light and Export Pils. No changes were made to the other brands and product lines. Several promotional packagings were prepared to support sales:

• promotional packaging for Laško Zlatorog, six (5+1) cans; • promotional packaging for Laško Club, six (5+1) cans; • promotional packaging for Export Pils, six (5+1) cans; • promotional packaging for Ode, six (4 + 2) 1.5 litre bottles • holiday promotional packaging for Laško Zlatorog, six (0.5 l) bottles; • holiday promotional packaging for Laško Zlatorog, four (0.5 l) bottles;

2.11.2 PRICES Price positions did not change in 2010. Laško Zlatorog represents the middle price class while Laško Club, Dark, Light and Eliksir are classified as special beer and represent the premium segment of the product offer. Export Pils resulted as a response to the offer of lower-priced beers while the renewed Bandidos remains in the same lower premium position, namely beer for younger people. The Oda water maintains its middle price class position. The price positions of Pivovarna Laško products thus did not change in 2010 with the packaging and entire marketing activity suitably adapted for all positions.

2.11.3 MARKET COMMUNICATION Market communication with users is of key importance for the Company owing to increasingly fierce competition and increasingly broader offers of a variety of products. As has each company, based on its basic activity, namely the production of beer, Pivovarna Laško also has an adapted and characteristic network of market communication tools. Eight percent of the total planned sales revenues of Pivovarna Laško products for 2010 were earmarked for market communications on the domestic and foreign markets with 80% allocated for Slovenia and 20% for export markets.

Market communication in Slovenia Laško is a unique brand, known and valued by consumers with a 185-year tradition of quality beer production. Market communciation in the 2010 jubilee year was focused at key projects, which from the coporative aspect, comprises the Laško Zlatorog Poln ponosa (Full of Pride) campaign. The time allocation of activities by project was as follows: Eliksir Winter beer, Oda “Le voda” (Only Water) project, renewal of the entire Bandidos brand image, Laško Zlatorog, Poln ponosa (Full of Pride) project and

tivities included the purchase of advertising space on TV, the printed media and on the radio. A large amount of attention was given to activities for on-location sales promotions, namely in stores and the Horeca channel (distributor of products for resale in the catering sector).

2. Oda The advertising campaign for Oda water was prepared in February. The slogan “Oda, Le voda” (Oda, Only Water) was introduced based on market studies and the product’s market position. This slogan in conjunction with the “Življenje jo hoče” (Life Desires It) slogan represent the platform for the water’s continued communications. The purpose of the advertising campaign was to present Oda as an official water of the Slovenian Olympic representatives and raise the recall and recognisability of the brand through media purchase of advertising time during the Olympic Games in Vancouver. The media purchase included TV, radio, printed and Web advertisements supported by sales promotion activities on the market. The Oda communication activity continued in June with the introduction of a national SMS prize game, supported by a cost effective message to the consumer via suitable packaging, namely labels on plastic bottles comprising the website www.oda.si and communication via social networks.

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The communication campaign for the Eliksir beer continued in January and February. Communication ac-

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the Jubilejnik jubilee beer.

3. Bandidos Following the introduction of the renewed Bandidos on the market in March, in May communication activities joined the shelf stocking and sales activities. The entire approach to preparing the communications campaign encompassed TV spots, radio commercials, printed and Web advertisements and redesign of the Bandidos website. The effective network of communications on various web-based networks emphasizing Facebook, Youtube and the web portal www.zavedno.si which is particularly important for the target population of Bandidas proved to be a correct choice. Inclusion of the target population in dialogues, the messages of campaigns and communication personality of the new Bandidos resulted in over 20,000 Bandidos fans on Facebook until October which is an enviable success for the 3 months of planned management. Such a result confirms the correct approach for the Bandidos brand, namely the inclusion of web-based tools and strategic planning of web communications. In addition to the creation of a website and portal and social media, the latter also included the web prize game “Si upaš?” (Do you dare?) connected to the new recognised Bandidos logo and tattooing. The renewed Bandidos still expresses daring, a rebellious character and has at the same time become more urban and in step with current trends. The slogan which reads “Za vedno” (For ever) which replaced the popular slogan “Zgrabi ga!” (Grab one) is also new.

4. Laško Zlatorog From the corporate aspect and the aspect of the Laško umbrella brand, the most important project in 2010 was the Laško Zlatorog campaign which introduced a new slogan “Poln ponosa” (Full of Pride). The aim of the campaign was to fortify the image and recognisability of the Laško umbrella brand and at the same time influence the image of the corporate brand Pivovarna Laško. The campaign was launched in May and together with sub-projects lasted the entire summer. The supporting portion of the campaign represented communication of the image carried out in May and June through TV, radio, printed and web communications. Additional fortification of the image represented the second part of the campaign or namely the Zlatorog tranverse pride sub-project which comprise seven organised hikes in Slovenian mountains from June to September. Seven social gatherings for all those who loved mountains, healthy way of life and socializing was organised as hikes. The events also had a socially responsible nature, for Pivovarna Laško donated EUR 0.50 for the renewal of Slovenian hiking trails for each registered hiker. In addition to the aforementioned campaign, the »Poln ponos« (Full of Pride) prize game was also implemented which had an ecological con-

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tent. The Company donated EUR 0.50 for each set of bottle caps from returnable bottles for the renewal of

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Slovenian hiking trails. Pivovarna Laško thereby contributed EUR 36,242 for environmental protection and preservation of nature. Communications regarding the Zlatorog transversal pride stems from the umbrella campaign of the Poln ponos image which included media purchases on TV, the radio, in printed media and on the web. The website www.gremovhribe.si was set-up to support web-based communications and adapted POS materials prepared with the campaign receiving its own complete graphic image with a recognisable logo. The Zlatorog transversal has thus become a guideline for the future with new events and prizes. The conclusion of the year is usually focused at corporate communications. The sale of limited series of beer was concluded in 2010, comprising 1,825 hl of the new special Jubilenjnik light beer. Communications for this product were based on the conclusion of the 185th Jubilee of Pivovarna Laško and predominantly comprise PR messages and minimum purchases in printed media with the promotional emphasis being on communications with business partners.

5. Sales promotion Tied to the basic activity, i.e. the production of beer, sales promotion activities are adapted in terms of time and concentrated in months where the greatest consumption has been recorded, comprising the season for the Company.

Over 1000 active promotional campaigns in the form of “Scratch parties” were carried out in bars to support Horeca sales from May to the end of the World Soccer Championships in June. Sales of the Bandidos, bottled Laško Zlatorog, Laško Zlatorog draft and Laško Club were promoted with the aid of a representative team on the field and external teams. A fan slogan for the Laško line was also introduced “Navijaj po Laško” (Cheer the Laško Way) as communication support at sports events. This was communicated through TV spots prepared exclusively for the World Soccer Championships. The slogan was subsequently adapted to other important sports supported by Pivovarna Laško - basketball, handball and rowing.

6. Business cooperation Due to the nature of the Company’s basic activity, it is present on nearly all Slovenian events, from smaller and larger events to large outdoor events and smaller indoor events. The majority of events are held during May through September with the Company present in the form of business cooperation through sales and/ or marketing investments. Significant business cooperation in 2010 included events such as Zlata Lisica, accompanying events to the Olympic Games in Vancouver held throughout Slovenia, Planinca, the Lent event, events at Laško Pivovarna’s Pivo and Cvetje courts, presence at the World Wild Water Championships in Tacen and numerous other events. Depending on the type of business cooperation the Company was also present at the events themselves.

Marketing activities on foreign markets In accordance with the long-term strategic orientation of the Pivovarna Laško Group, intensive preparations and reconciliation of the Group’s members for joint penetration on foreign markets were carried out. Marketing activities regarding Pivovarna Laško brands on foreign markets were focused at the supplying of sales points and sales promotions. In 2010 no communication activities were carried out on foreign markets.

2.11.4 DEVELOPMENT PROJECTS In addition to researching trends, seeking new market niches and developing potential new products, the

A competition was published for the preparation of a proposal regarding the positioning, name, packaging and communication strategy for a new product apple cider. Four creative and advertising agencies were invited. Discussions and the development of packaging, the brand and preparation of starting points for a communication brief (competition for the preparation of communication campaigns following the product’s market launch) were carried out with the selcted agency. The name chosen was iC Cider with its introduction planned for the second week of April 2011. The Laško line was supplemented with two new products Laško Trim and Laško Malt which will come in two flavours. The first ranks as a light beer while the second is not even beer but a non-alcoholic sweet beverage which will supplement the gap in the Laško line. Both products will be launched on the market in the first half of March 2011. In addition to the three aforementioned novelties a new flavour will be added to the Bandidos family in March 2011. Activities were concentrated on finishing the project with a competition for the selection of the flavour. The name was chosen based on the flavour and currently all activities are geared at the prompt launch of the product on the market which is envisaged for the first half of March 2011.

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This means that plans for marketing activities emphasizing new products were actively being prepared.

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development-marketing team of Pivovarna Laško utilized the last third of 2010 to implement confirmed

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New packaging for LaĹĄko Zlatorog (2 l PET) will be introduced on the markets of former Yugoslavia therefore as opposed to recent years, market communications are envisaged for 2011. The initial discussions

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and brief were implemented with the selected agency regarding preparation of communication campaigns.

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2.12 Plans for 2011 and the development strategy

Pivovarna Laško Group’s desire is to remain the leading producer of beer and mineral and spring waters in Slovenia with a dominant market share and emphasizing superior quality and recognisability of products also successful on foreign markets.

The Pivovarna Laško Group will endeavour to remain the leading producer of beer and mineral and spring waters in Slovenia with a dominant market share and a competitive producer with a more visible market share in the field of non-alcoholic beverages. With an emphasis on high quality and product awareness, the Group plans to be successful also on foreign markets, particularly on the markets of South-Eastern Europe, in the area of selling beer, water and nonalcoholic beverages; we also aim to be comparable with European competition as far as business efficiency and return on equity are concerned.

PLAN FOR 2011 AND SALES IN 2010 OF THE PIVOVARNA LAŠKO GROUP - BY PRODUCT GROUP

1,845,989

108.2

Mineral water

722,703

595,497

121.4

Spring and natural waters

184,553

187,658

98.3

Flavored water

280,225

271,197

103.3

Fruit juices, nectars

333,893

333,546

100.1

Other non-alcoholic

974,240

921,941

105.7

60,311

61,538

98.0

Syrups Other alcoholic Total

18,349

8,137

225.5

4,570,969

4,225,503

108.2

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1,996,695

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Beer

Indeks 11/10

- BY INDIVIDUAL COMPANY ( in hl ) Plans 2011 Sales 2010

Indeks 11/10

Pivovarna Laško

1,114,800

968,697

115.1

Pivovarna Union

1,444,130

1,387,786

104.1

Radenska Radenci

1,032,464

939,393

109.9

Fructal Ajdovščina

721,005

666,945

108.1

Fruktal MAK Skopje

111,381

114,634

97.2

Vital Mestinje

147,189

148,048

99.4

4,570,969

4,225,503

108.2

Total

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( in hl ) Plans 2011 Sales 2010

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Sales of the products of Fructal, d .d., Ajdovščina have been considered in all plans with the aim of ensuring data comparability throughout the year despite planned sales of this subsidiary. The Group will continue with its strategic orientation with the emphasis on production and sale of innovative and trendy products, maintenance of the market positions of our own brand names on the domestic market, and recovery and expansion of previously achieved positions on nearby markets. It intends to achieve planned cost effectiveness through professional colleagues acting as teams and in accordance with the policies of the Pivovarna Laško Group. Activities involving sustainable development and concern for the environment will continue to be implemented to enable the Group’s social responsibility to be implemented through an optimal use of entry materials, raw materials and energy. The Group will safeguard and protect its own water sources and prevent negative effects on the environment due to development and investment activities. The Group expects through an efficient and rational approach to resolving ecological effects, it will achieve a competitive advantage in managing production, ecological and energy costs in this period of deteriorating economic circumstances.

QUANTITATIVE AND STRUCTURAL OVERVIEW OF THE PLANNED SALES OF BEVERAGES IN 2011 FOR THE PIVOVARNA LAŠKO GROUP

Beer

2.500.000

Mineral water

in hectolitres

2.000.000

Spring and natural waters

1.500.000

Flavored water

1.000.000

Fruitjuice, nectars Other non-alcoholic

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500.000

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Syrups

0 Plan 2011

Other alcoholic

( in hl )

Plans 2011

in %

Beer

1,996,695

43.7

Mineral water

722,703

15.8

Spring and natural waters

184,553

4.0

Flavored water

280,225

6.1

Fruit juices, nectars

333,893

7.3

Other non-alcoholic

974,240

21.4

Syrups

60,311

1.3

Other alcoholic

18,349

0.4

Total

4,570,969

100.0

CONSOLIDATED PROFIT PLAN OF THE PIVOVARNA LAŠKO GROUP FOR 2011 ( in euros, except headcount )

Plans 2011

Total income 391,500,424 Total expenditure 356,824,139 Depreciation

22,540,273

Total profit

34,676,285

Taxes

5,846,306

Net profit

28,829,979

Net cash flow1

51,370,252

EBIT

39,782,170

EBITDA

62,322,443

Average number of hours employees

1,773

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1Net profit including depreciation

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2.13 Events following the conclusion of the fiscal year In accordance with the decision of the 16th regular General Meeting of Shareholders on 17 July 2010, the Management Board of Pivovarna Laško, d. d. filed an action for damages against the company Atka-Prima, d. o. o. as the former controlling concer and former director of Pivovarna Laško, d. d. Boško Šrot.

Filing of an action for damages by the Pivovarna Laško Group On 9 March 2010 Pivovarna Laško, d. d. received the Report on the Findings of a Special Audit of the Management of Individual Transactions of the Pivovarna Laško Group (hereinafter: Report), which was prepared by BDO Revizija. d. o. o., družba za revidiranje, Ljubljana on the basis of the decision of the General Meeting of Shareholders of 31 August 2009. The Management Board sent the Report to all the members of the Supervisory Board in accordance with the provisions of Article 320 of the Companies Act. The Supervisory Board reviewed the Report and was acquainted with it at its 17th regular session on 30 March 2010. Based on the finding of the Management Board that other transactions which were contextually connected to those under treatment had been implemented which the special audit had not included in the Report, the Supervisory Board recommended that the Management Board carry out an examination of these individual transactions. The Management and Supervisory Boards acquainted the General Meeting with the Report at the 16th regular General Meeting of Shareholders on 17 June 2010. Following the General Meeting’s acquaintance with the said Report, the General Meeting passed a decision that the Management Board had to file a suitable action for damages in accordance with Article 327 of the Companies Act and based on the findings from the Report, within six months at the latest of the day the General Meeting of

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Shareholders was implemented. From the Report, it was established that due to several transactions which

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had not been managed to the benefit of Pivovarna Laško, d. d. or with the concern of a diligent and honest manager, the Company had suffered damage. In accordance with the decision of the 16th regular General Meeting of Shareholders on 17 July 2010, the Management Board of Pivovarna Laško, d. d. filed an action for damages against the company Atka-Prima, d. o. o. as the former controlling company and former director of Pivovarna Laško, d. d. Boško Šrot. In the action for damages, Pivovarna Laško, d. d. is demanding reparation in the amount of EUR 13,336,488.76 with with appertaining interests and costs due to damages suffered by the Company due to transactions carried out in 2008 and 2009. The subsidiaries Pivovarna Union, d. d., Radenska, d. d., Radenci, Fructal, d. d. and Delo, d. d., also filed actions for damages on 15 February 2011 with the competant courts against the company Atka-Prima, d. o. o. and Boško Šrot. In the actions for damages, the subsidiaries are demanding reparation in the amount of EUR 116,689,233.34 with due to damages suffered by the subsidiaries due to transactions carried out in 2008 and 2009. A possibility exists that Pivovarna Laško, d. d., will file additional lawsuits in the future for damages suffered for the entire scope of damage suffered is not yet known, also due to unconcluded judicial procedures.

Court decision in connection to the validity of decisions adopted at the 15th regular General Meeting of Shareholders of Pivovarna Laško, d. d. On 10 February 2011 Pivovarna Laško, d. d. received a judgment from the District Court in Celje in which the District Court with regard to the economic dispute of the suing party the PanSlovenian Shareholders’ Association (PSSA) against the sued party Pivovarna Laško, d. d. regarding the non-validity of the General Meeting’s decisions rejecting the initial demand of the suing party for the establishment of the nullity of the decisions as well as the subordinate plea for the rescission of the decisions adopted at the 15th General Meeting of Shareholders of Pivovarna Laško, d. d. of 31 August 2009. The judgement is not yet final.

Filing of a lawsuit against Pivovarna Laško, d. d. based on a comfort letter Pivovarna Laško, d. d. was handed a lawsuit on 15 February 2011 by the District Court in Celje in which the plaintiff Perutrnina Ptuj, d. d. was demanding payment of EUR 10,116,488.71 with pp from the defendent Pivovarna Laško, d. d. The plaintiff indicated in the lawsuit that it had suffered damages in the denoted amount since the defendant had failed to fulfil in full the obligations stemming from the comfort letter of 10 January 2009 which the previous director of Pivovarna Laško, d. d. had signed on behalf of the defendant. Pivovarna Laško, d. d. finds the claim of the plaintiff to be unjustified as it also asserted in its appeal. The court of first instance has not yet made a judgement regarding the matter.

Resignation of a member of the Management Board of Pivovarna Laško, d. d. Pivovarna Laško, d. d. received the resignation statement of member of the Management Board, responsible for finance Robert Šega on 14 March 2011 that he was resigning from the position of member of the Management Board of Pivovarna Laško, d. d. The Supervisory Board of the Company will treat the resignation of the Management Board member at its next session.

Changes in the management boards of subsidiaries The mandate of the director of Jadranska pivovara – Split d. d. expired on 31 January 2011. Zlatko Bebić

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was appointed as the new director at the supervisory board session of the company held on 31 January 2011.

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2.14 Events prior to the 2010 fiscal year

One hundred and eighty-five years has passed since Pivovarna Laško grew from a local brewery to the leading producer of beer and together with other companies in the Group, into the leading producer of mineral and natural waters, non-alcoholic beverages and other beverages on the Slovene market.

1825 Historical beginnings of Pivovarna Laško. A producer and seller of honey and ginger-bread producer, Mr Franz Geyer, in the former Valvasor Špital arranges a crafts brewery, which building still stands today.

1838 The brewery is bought by Mr Heinrich August Uhlich. He exports the beer to India and Egypt.

1867 Mr. Anton Larisch constructs the largest brewary of the time on Spodnje Štajersko along the foothills of Sv. Kristof and Šmihel.

1889 The brewery is purchased by an extremely nationally oriented brewer from Žalec, Mr Simon Kukec. As a novelty, he brews light and dark thermal beer as well as Ležak and Porter beer which is later renamed Dark Laško beer. The Laško pivo brand becomes increasingly more validated and is also sold in Egypt and

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Budapest.

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1924 The brewery brews the last beer. The Ljubljana Brewary Union secretly buys up the majority of its shares and ceases production. The closing of the Laško brewery had more than just a material effect. Initiatives to reopen the brewery are met with the cheers of innkeepers.

1929 Representatives of innkeeper cooperatives decide to construct a catering shareholding brewery in Laško.

1938 After many complications and severe opposition by the competition, they open the shareholders’ brewery Pivovarna Laško and present the new Laško beer under the trademark Zlatorog. Drinkers of the beer liked the beer so much that German occupiers allow maintenance of the trademark Laško beer due to the quality of the beer.

1944 During bombing of the railway bridge, the brewery was also hit and demolished. After World War II production in the brewery began again already in 1946 and was officially stopped in 1947. Since World War II Pivovarna Laško has constituted a single company the entire time. Particularly after 1960 the company has recorded an extraordinary development in sales: from 60,000 hl to 1,300,000 hl.

1990 After harmonization with the provisions of the Companies Act, the organization of the socially owned company is entered into the court register as court decision no. Srg 23/90 of 31 May 1990.

1991 In accordance with the provisions of the Companies Act, it is transformed into a joint stock company in mixed ownership. On 30 September 1991 the share and the social capital were assessed and division of shares conducted.

1995 At the first general meeting of shareholders of 20 April 1995, Pivovarna Laško is submitted to ownership transformation into a joint stock company with known owners. The company was entered into the court register with decision no. Srg 673/95 of 8 September 1995. The company becomes a joint stock company with more than 15,000 shareholders.

2000 Capital connections with Radenska, d. d., Radenci, Jadranska Pivovara, d. d., Split, and Vital, d. d., Mestinje, represent one of the most significant turning points in the company history. A new business strategy for development begins.

2002 The company succeeds with a public takeover bid of Pivovarna Union, d. d., Ljubljana. It obtains 47.86 percentage points of all its shares.

2003 Continuation of capital investments. The company gains a 24.98 % share in Delo, d. d., Ljubljana. The company becomes its largest owner.

2004 In December the company obtains an additional 27,011 shares (5.98 percent of property) of the joint stock

thus becomes the majority, 95.17 % owner of the company Union. In May the Competition Protection Office issues consent to the reported concentration of the companies Pivovarna Laško, d. d., and Pivovarna Union, d. d.

2006 Transfer of entry of 106,950 newly issued shares of the company Poslovna Sistem Mercator, d. d., Ljubljana, from Slovenska Odškodninska Družba, d. d., Ljubljana, to Pivovarno Laško, d. d. After the aforementioned transfer of entry, the joint stock company Pivovarna Laško ownes 317,498 shares MELR or 8.34 % of Mercator.

2007 Takeover bid for the buyout of the shares of Delo, newspaper and publishing company d. d., Ljubljana. Transferees of Pivovarna Laško, d. d., Radenska, d. d., and Talis, d. o. o., have a total of 628,044 shares, representing a 94.09 % share of the target company.

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In February the company buys from Interbrew Central European Holding B. V., Netherlands, the entire ownership share, namely 186,400 shares of the issuer Pivovarna Union, d. d., Ljubljana. Pivovarna Laško

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company Union Ljubljana. Pivovarna Laško, d. d., becomes a 53.85 % owner of all shares of Union.

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2008 A takeover bid for the purchase of shares of Pivovarna Laško, d. d. was published in February. Transferees of Infond Holding, d. d., Maribor, Cestno Podjetje Maribor, d. d., Fidina, d. d., Ljubljana, and Koto, d. d., Ljubljana, in total acqire 4,818,151 shares, representing a 55.08% share of the target company. Transferees offer EUR 88.00 per 1 share PILR, and 2,488 shareholders of Pivovarna Laško, d. d., accept the takeover bid. As at 31 December 2008 Infond Holding, d. d., is the majority owner of the company Pivovarna Laško, d. d., with a 52.97 % share.

2009 The bank creditors NLB, d. d., Hypo Alpe-Adria-Bank, d. d., Abanka, d. d., Banka Celje, d. d., Gorenjska banka, d. d., Probanka, d. d., Nova kreditna banka Maribor, d. d. and Banka Koper, d. d., acquire shares of Pivovarne Laško, d. d., (PILR), held by the company Infond Holding, d. d., pleged as insurance for the bank loans during the period from August to September. The banks thus acquired a significant ownership statke in Pivovarna Laško, d. d. As of 5 August 2009, Infond Holding, d. d., Maribor is no longer the majority owner

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of Pivovarna Laško, d. d.

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1952

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S U S TA I N A B L E D E V E L O P M E N T

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3.1 Concern and responsible relationship towards employees Employees are one of the cornerstones of the Company’s effective management, for with their knowledge, efforts and competence they contribute to good quality, and consequently customer satisfaction with the Company’s products.

The Company is very aware that employee satisfaction and business performance are inextricably linked. It successfully ensured a healthy and safe working environment and good participation among employees, which will be of great significance also in the future, leading to greater loyalty from employees to the Company the cultivation of the aforementioned qualities in workers. Employees are one of the cornerstones of the Company’s effective management, for with their knowledge, efforts and competence they contribute to good quality, and consequently customer satisfaction with the Company’s products. Employee satisfaction and commitment was maintained in different ways: meetings were organized for employees at the end of the year and a meeting for 50-year jubilee employees; workers who had retired in the last year were honoured and given memorial gifts, cards were sent out for special occasions, employees were enabled the use of holiday facilities, payment of additional pension insurance and co-financed dental services, with a possibility for sports activities in leasehold or rented sports facilities and similar. In addition to the above, in 2010 the Company also took care for former employees, with a meeting organized at the beginning of the year for workers who had retired in the previous year. A trip for the employees

Internal communications at Pivovarna Laško, d. d. are carried out via the internal newsletter “Laški pivar”. Employees are informed of the Company’s operations once a year and regularly communicate with the Company via the union, worker’s council, notice boards and electronic mail. The Company adopted a new organisational, systematic and payment system in 2010 which will be gradually upgraded in upcoming years. The introduction of a stimulating employee remuneration system is also envisaged.

3.1.1 EMPLOYEE SITUATION The Company concluded the last day of 2010 with 318 employees, representing a reduction of a little less than one percent over the previous year in 2009 when the number of employees was 321. Part-time work is carried out by 9 people, of whom 8 are disabled people; 1 full-time employee is currently on parental leave, which in total represents just 2.5% of all employees. There were 324 people employed at Pivovarna Laško, d. d. in 2010 on average, representing an identical number to that in 2009. The workforce comprises 63.2% males and 36.8% females, with the number of females increasing by 2 percentage points.

ANNUAL REPORT 2010

The Company’s objective in the future remains as follows: employment rationalization and growth of the employee educational level.

P I VOVA R N A L A Š KO D . D .

natural disasters and other unforeseeable events which threaten their social security.

3 . S U S TA I N A B L E D E V E LO P M E N T

and a New Year’s party was also implemented. Employees are also given assistance in the event of illness,

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The number of contractual employees increased somewhat with 18 workers contracted from job agencies at the end of December compared to 17 at the end of 2009. The contractual employees are predominantly allocated to the distribution centres and perform commissioning and warehousing work while 3 work at the parent company, performing the work of bottling and filling operators and 1 auxiliary work in the water distribution work unit. The Company hired 17 employees in the past year, reallocating two of them from Pivovarna Union. Employment contracts for a specified period of time were concluded with nine new hirees, three of whom have been employed for the duration of their apprenticeship. Twenty employment contracts were terminated in 2010 and the employees laid-off. One employee was put into disability retirement due to her health state, three fulfilled the conditions for full or pension retirement, three received regular termination of the employment contract due to business reasons, eight were found to be incapable, for one a mutually agreed termination of the employment contract was carried out, the definite period of employment had expired for two employees and unfortunately, two employees passed away in 2010.

EMPLOYEES BY SECTOR AS AT 31 DECE

Management of the company

v %

Leto 2009

v %

Leto 2010

3.7

3.5

194

59.9

189

58.9

183

57.5

Commercial sector

22.5

23.4

25.5

Sektor financ, računov. in kontrolinga

5.9

5.6

6.0

8.0

8.4

7.5

Production and technical sector

General sector Total

3 . S U S TA I N A B L E D E V E LO P M E N T

Leto 2008

324 100.0

321 100.0

318 100.0

The reduction in the total number of employees is a reflection of the gradual reorganisation of operations, change in the employee educational structure, growth of technological equipage of the Company and consequently, decreased number of employees with natural fluctuation upon retirement and replacement of lower qualified labour with higher education and contracting of workers.

3.1.2 AGE STRUCTURE

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

Considering the large number of employees who in 2010 would be fulfilling the minimum requirements

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for retirement in the upcoming two or three years and who due to regular termination of the employment contract visited the Institute of Pension and Invalidity Insurance or the Employment Service of Slovenia, the age structure of employees of Pivovarna Laško, d. d. had changed for the average age of 44.66 decreased to 43.66, or 43 years, 4 months and 13 days. Seventy percent of all employees are over the age of 40 and the share of employees up to age 30 increased from 2.5% to 3.8%. In recent years pension reform was still in a transitional period, which for women meant a gradual prolongation of the required years of service and age for fulfilling minimum conditions of retirement; this is one cause of the average age growth of employees in the Company. Now pension reform is experiencing a complete renewal with trends only apparent in the future.

EMPLOYEES BY AGE GROUP AS AT 31 DECEMBER 2010

Age from 19 to 25 years

Skupaj

v %

1.6

Age from 26 to 30 years

Age from 31 to 35 years

2.2 9.4

Age from 36 to 40 years

16.4

Age from 41 to 45 years

29.9

Age from 46 to 50 years

21.4

Age from 51 to 55 years

18.2

Age from 56 to 60 years Total

0.9

117

201

318

100.0

Age tree as at 31 December 2010

Total: 321 employed, average age is of our employees is 44 years, 2 months, 11 days.

13 12 11

11 10

10 9

6 5

Men: 201 employees or 63,2 % average age is 44 years, 8 months, 4 days.

5 4

31 32 33 34 35 36 37 38 39

41 42 43 44 45 46 47 48 49

51 52 53 54 55 56 57 58 59

1 2 3

3 4

4 5

5 6

6 7

7 8

8 9 11

Women: 117 employees or 36,8 % average age is 43 years, 4 months, 13 days.

EMPLOYEE COMPOSITION BY GENDER AS AT 31 DECEMBER 2010 ( in % )

2008

2009

2010

Women

35.5

35.8

36.8

Men

64.5

64.2

63.2

Total

100.0

The ratio of male and female employees has not essentially changed in recent years with men comprising approximately two thirds of the workforce.

3 . S U S TA I N A B L E D E V E LO P M E N T

age

ANNUAL REPORT 2010

2 1

21 22 23 24 25 26 27 28 29 1

P I VOVA R N A L A Š KO D . D .

2 1

in years

115

3.1.3 EMPLOYEE EDUCATION AND TRAINING Employees are given the opportunity to obtain professional and general knowledge for the Company is well aware that growth of its employees’ educational level is one of the conditions for the development Company efficiency and quality. This is why the educational structure of employees continues to improve from year to year, a result of employee training as well as a rational personnel policy - recruitment of new, highly educated staff and additional formal training of employees. Significant emphasis is placed on the acquisition of knowledge from areas such as informatics, finance and accounting, various specialized sales training, product quality and technical sciences; in addition the Company also carries out legally prescribed qualification and testing in the area of occupational safety, energy, etc. The total number of participants who obtained various training was 196, representing 61% of all full-time employees. In total, 2,202 hours of training were implemented, meaning that each participant received an average of 11 hours of training. In addition to employees, contracted and hired workers have also been attending professional training programmes. All employees acquired knowledge necessary for their work and tasks. The needs for training and their realization were left to the particular departments. In addition to acquiring functional knowledge through visitation of courses and seminars where employees receive specific training necessary for their work, employees are also given assistance in obtaining a higher education through the financing of tuition and possible utilization of a study holiday. In 2010, 8 employees of whom 2 successfully completed their studies (1 college degree and 1 master’s degree) attended educational institutions with the aim of obtaining a higher level of education. Currently the Company has six active contracts with employees, one attending a college, one in a specialised programme and four doing their master’s degrees. In the previous year there were no newly concluded agreements on

3 . S U S TA I N A B L E D E V E LO P M E N T

training on the job. Company objectives are still focused on providing opportunities for the training of employees for the purpose of obtaining a higher level of education, focused particularly on the acquisition of technical knowledge.

3.1.4 EDUCATIONAL STRUCTURE The share of employees with a completed 6th, 7th or 8th level education is growing while the number with a 5th level or lower education has declined. Almost a half (44%) of the employees have a 4th or 5th level edu-

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

cation, and each year the share of unqualified or auxiliary workers without a profession is slowly decreasing.

116

EDUCATIONAL STRUCTURE OF THE EMPLOYEES OF PIVOVARNA LAŠKO AS AT 31 DECEMBER 2010

Year 2008 share in %

Master University

Year 2009 share in %

Year 2010 share in %

0.9

1.6

2.2

14.5

14.0

16.4

College

10.2

12.8

12.9

High school

22.5

19.3

18.9

Skilled

25.9

26.8

25.8

Semiskilled

9.6

9.0

Unskilled Total

9.1

16.4

16.5

14.8

324

100.0

321

100.0

318

100.0

The technological equipment of the company is dictating the need for higher educational levels, to which particular attention will continue to be paid in the future. This could be achieved especially through the rational recruitment of new workers, since in the case of existing workers, particularly non-skilled workers this refers to older people who no longer show an interest in on-the-job training.

3.1.5 RETIREMENTS Four employees fulfilled the conditions for retirement, three of whom qualified for full pensions and one who went into disability retirement due to her state of health. The reason the Company has no workers who would go into retirement with the qualifying years of service and age is the implementation of an action plan for reducing the number of employees. The requirements for entitlement to retirement for men remained the same in 2010; for women a transi-

The current regulation provides the requested level or quota of disabled employees, compared to the total number of employees applying for the Company’s line of work, which is 6%. If an employer employs a larger number of disabled persons, the quota is exceeded and the employer is therefore entitled to a reward; if the employer fails to reach the quota, he must pay a contribution to the fund for Promotion of Employment of Persons with Disabilities. At the end of the year the Company employed 28 persons with the status of disabled person, which represents 8.8% of the total number of employees. In accordance with the Vocational Rehabilitation and Employment of Disabled Persons Act, which for the Company’s branch defines a minimum employment of 19 disabled persons, the Company has managed to surpass the quota by 9 persons. The company applies preventive measures to prevent the emergence of new restrictions arising from disability. In addition to preventive and curative care for their health, the Company also ensures that disabled persons are able to continue their work at positions of employment which are adjusted to their capabilities for work.

ANNUAL REPORT 2010

3.1.6 EMPLOYMENT OF DISABLED PERSONS

P I VOVA R N A L A Š KO D . D .

of the retirement service of 37 years and 3 months. At the end of 2010 the new Pension and Disability Insurance Act was adopted; however it still has not gone into effect.

3 . S U S TA I N A B L E D E V E LO P M E N T

tional period is still in effect where women could retire at the age of 56 years and 8 months upon fulfilment

117

Disabled employees have certain work limitations or are limited due to their health states which are taken into consideration when allocating them to a work position. Seven disabled persons perform their work on a four-hour basis, twenty are employed full time and one employee was referred for professional rehabilitation by the Institute of Pension and Invalidity Insurance which should be concluded in 2012.

3.1.7 VOLUNTARY SUPPLEMENTARY PENSION INSURANCE The pension plan includes 97% of all employees who have been employed for an indefinite employment period. In past annual reports, the Company wrote than from its entry into the pension scheme until 2007, when the Company transferred from a net to a gross method of collecting funds in the area of voluntary supplementary pension scheme, there have not been any essential changes; however, changes are expected in 2011 once the 10-year period since its inclusion into the scheme occurs. In accordance with the Personal Income Tax Act, the maximum amount recognized as a tax deduction of the voluntary supplementary pension insurance is valuated at the annual level. Premium valuation is usually carried out at the beginning of the year, in January. The Company remains one of the rare employers who in this manner ensure the long-term social security of its employees.

3.1.8 AGENCY WORKERS, STUDENT WORK As in previous years, in 2009 the Company also resolved substitution of the labour force during summer holidays and annual leaves, as well as for increased volumes of work due to the seasonal nature of the Company, by employing agency workers and students.

3 . S U S TA I N A B L E D E V E LO P M E N T

As in 2009, a greater number of contracted workers or agency workers were hired to also perform work in non-seasonal months in 2010. During this time employees utilized surplus hours and annual leave or replaced employees who were on holiday leave or utilizing surplus hours. At the end of 2010 six workers had been hired at the Celje and Maribor distribution centre, one at the Ljubljana distribution centre, one for the call centre, one at the pipeline work unit and three in the filling line. The workers were hired from the Adecco employment agency with which the Company concludes annual contracts on guaranteed employees with the contracts extended on a monthly basis. Besides shipping and warehouse workers for the business unit, the Adecco agency also referred a phone operator for the Call

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

Centre, an auxiliary water distribution maintenance worker for the water distribution unit and operators in

118

the filling line. In the past year the Company exploited the possibility of obtaining funds for employee on-the-job training. The Company applied for a tender of the Employment Service of Slovenia which approved a two-month job training for six workers who would be working as operators of filling machines. Following the conclusion of the two-month training period, the Company continued with an additional 5 months of training, selecting the top three employees out of the six. As already mentioned, during the season the Company hires students. The Company replaced the work of former seasonal workers in the bottling plant in the same manner. Five students undertaking work-studies who have fulfilled all requirements for the work of a forklift operator supplemented the need for hiring seasonal workers in the bottling plant. Additionally, the Company supplemented employees who were on holiday leave with the aid of 80 students. As the total number of people interested in performing holiday work was 194, more than half had to be rejected.

3.1.9 WAGES AND SALARIES The strategy regarding the area of wages and salaries in 2010 remained identical to that of 2009. Although it was envisaged that in 2010 the practice of previous years where a portion of salaries and wages would be paid out as shares of the Company would be started, this did not happen. Due to poorer business results, employees did not receive a 13th salary. In 2010 the average gross salary in Pivovarna Laško, d. d., totalled EUR 1,983.97 which is 3.3% lower than in 2009. The net average salary decreased by 2.7% compared to 2009 and totalled EUR 1,248.46.

3.1.10 WORKING HOURS Analysis of working time for 2010 showed that there were several positive movements in this business segment, displaying a greater exploitation of working time which attained a value of 81.3, improving by 1.3% over the previous year. Plans were realized. The available pool of working time which had decreased following a multi-annual trend due to a reduced number of employees stabilized in 2010 and is identical to that of the previous year. Better exploitation of working time is the result of a decreased number of public holidays with over 7,500 hours less exploitation of holiday leave. Decreased work absences due to sick leave were also recorded. The only increase in work absence was recorded for maternity leave which is at an index of 230 and has increased by 4,060 hours. Despite several positive movements in the structure of working time, it was established that 22 employees, representing 6.8% of the possible pool of working time, were absent. In the future the Company will again have to focus attention on individual absentee movements so that

• s afety inspection of working equipment was performed regularly, in accordance with instructions on safe work. Authorized firms carried out such inspection on working equipment for which the three-year period for examination expired, in the following plants: boiler room, bottling plant, canteens, carpentry workshop, warehouses, machine workshop, repair workshop, forklift workshop, water distribution system and internal transport.

•M easurements of microclimatic conditions (summer and winter) were carried out at all production workstations.

• i nspection of hand-held fire extinguishers and inspection of hydrants, including measurements • t raining of employees for the recertification examination for whom the occupational safety license had expired after two years A total of 149 trainings with examinations were realized in 2010. Trainings were also carried out also for all newly employed workers and students.

•P eriodic medical examinations of employees took place in the Health Centre in Laško and Health Centre in Celje. A total of 86 medical examinations were performed. The implemented examinations or findings and recommendations of the occupational health specialist doctor were taken into account when

ANNUAL REPORT 2010

Due to positive legislation Pivovarna Laško, d. d. implemented the following activities in 2010:

P I VOVA R N A L A Š KO D . D .

3.1.11 OCCUPATIONAL HEALTH AND SAFETY

3 . S U S TA I N A B L E D E V E LO P M E N T

the favourable trend does not take a turn for the worse.

119

allocation workers to their workstations. In the subsequent process, one worker was reviewed and given a class II classification (work possible under a shorter working time).

â&#x20AC;˘A ll employees were provided with appropriate working safety protection equipment, in accordance with the risk assessment. In 2010, the Company recorded ten workplace injuries and one injury outside work (on the way from work). A total of 203 work days were lost due to workplace injuries. Three inspections were carried out by the Slovenian Labour Inspectorate regarding implementation of occupational safety measures. An inspection was also carried out by the Slovenian Nuclear Safety Administration. Decisions for elimination were issued for the deficiencies discovered during the inspections. Deficien-

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

3 . S U S TA I N A B L E D E V E LO P M E N T

cies were remedied and the Labour Inspectorate and Nuclear Safety Inspectorate informed thereof.

120

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

3 . S U S TA I N A B L E D E V E LO P M E N T

1960

121

3.2 Communication

In 2010 Pivovarna Laško, d. d. systematically established two-way communications between the companies of the Group and their internal and external environments. The Pivovarna Laško team planned communications, simultaneously adapting them to the interests of various publics who have an effect on its operations.

3.2.1 COMMUNICATIONS WITH INVESTORS In accordance with the law, Pivovarna Laško provides investors and potential investors with sufficient, accurate and timely information. Information within the scope of the Company’s information disclosure policy encompasses business performance in the past and strategic development of the Company in the future. Pivovarna Laško, the shares of which are quoted on the Ljubljana Stock Exchange, is according to law obliged to publish prescribed information on the website of the aforementioned stock exchange (seonet.ljse. si), and to also publish this information on the website of the Company. The set of activities with investors and potential investors includes regular general meetings of shareholders, the convocation of press conferences alongside reporting on interim and annual operating results, individual meetings of representatives of the Company with representatives of investment companies, and

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

3 . S U S TA I N A B L E D E V E LO P M E N T

announcement of interim and annual reports in printed media and on the Company’s web sites.

122

3.2.2 COMMUNICATIONS WITH THE MEDIA The Company regularly informs the media of the activities of the Company, its business operations, plans and strategic guidelines via press releases. Relations with the media are based on correct participation, prompt response and valid standards of public relations.

3.2.3 COMMUNICATIONS WITH BUYERS A call centre has been at the buyers’ disposal from January 2009. Ten operators are available at the toll-free telephone number 080 1825, who accept customer orders for all products of the Pivovarna Laško Group. The Company introduced this project mainly to create simpler and more user friendly business operations. The call centre, which is located in the distribution centre of the Pivovarna Laško Group in Ljubljana takes orders for all distribution channels (trade, catering and institutions) and has established itself well in the two years of its operation.

3.2.4 COMMUNICATIONS WITH EMPLOYEES Internal communications are one of the most important techniques which if suitably implemented ensures satisfactory employee notification, motivation and satisfaction. Healthy mutual relationships are one of the essential elements for attaining good results. At Pivovarna Laško employees are promptly informed with relevant information and memos for the public. At the lowest frequency points in the Company, bulletin boards are available and generally expanded, and the indispensable Internet is generally used as a tool for communication. An important internal communication tool are internal websites - the intranet of Pivovarna Laško and of Pivovarna Laško Group. Use of the new tool has increased alongside the increased needs for mutual communications between different organizational departments and mixed project teams. The intranet enables interested persons access to joint use of specific documents. The communication tool has significantly contributed to the increased effectiveness of business processes. The internal newsletter of Pivovarna Laško (Laški Pivar) which was again introduced, has established itself well in the past two years. It is intended for both Pivovarna Laško employees and colleagues from the Pivovarna Laško Group and other interested persons. Employees receive the newsletter by email and the newsletter is also available in printed form in five locations at the Company. In addition to the above, it is also received by retirees of Pivovarna Laško, media representatives and other relevant members of the public.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

3 . S U S TA I N A B L E D E V E LO P M E N T

The newsletter is also available on the website of Pivovarna Laško.

123

3.3 Responsible attitude towards the social environment As a socially responsible company through more friendly technological investments into the environment, Pivovarna Laško has ensured that emissions from production have as little effect on the local environment as possible.

The investments of the past ten years clearly depict the great concern and weight the Company focuses on environmental relations, quality of life in local communities and social responsibility. A major portion of the Company’s investments represent investments into the construction and renewal of the local infrastructure. The products of Pivovarna Laško reflect tradition and the highest standards of quality on a daily basis. As a socially responsible company through more friendly technological investments into the environment, Pivovarna Laško has ensured that emissions from production have as little effect on the local environment as possible. Production processes are implemented in accordance with very strict European environmental standards while waste water is routed to a separate wastewater treatment plant. Pivovarna Laško has been one of the most important Slovenian supporters of sports in the last decade. Together with the other companies in the Group, it comprises the largest sponsor of Slovenian sports. Pivovarna Laško as well as the Group is active in the field of sponsoring the culture and development of local communities, as well as health and welfare. Pivovarna Laško is also the general sponsor and one of the carri-

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

3 . S U S TA I N A B L E D E V E LO P M E N T

ers of one of the most visited tourist events in Slovenia – Pivo in cvetje (Beer and Blossoms).

124

The significance given to awareness of social responsibility is also reflected by donations for predominantly humanitarian projects, non-profit activities, support of the development of smaller clubs and associations in the local environment.

3.4 Environmental protection

The sustainably focused system of work shown brings long-term results which in the end are expressed as increased profit for the Company, especially in fortifying the reputation and recognisability of its brands.

Inhabitants with their activities are increasingly influencing the complete image of the planet; as a result, negative global changes of the living environment occur, such as: climate change, shrinkage of green spaces, reduction of the drinking water supply, ozone depletion, rising CO2 levels in the atmosphere, acidification of sea water and the like. Pivovarna Laško is well aware that a responsible comprehensive approach to managing the environment and company energy efficiency will be necessary to reduce the impact of its technological processes on our environment. The Company is aware that sustainable development has to be one of the strategic guidelines of the Company supported by the Management Board and Company Management and integrated into the complete working process. Practical examples frequently show that company employees display an unexpectedly great interest in achieving environmental objectives. The sustainably focused system of work shown brings long-term results which in the end are expressed as increased profit for the Company, especially in fortifying the reputation and recognisability of its brands. To promote sustainable development of the Company, environmental management represents an integral

• t he Company uses the method of preventing negative impacts on the environment from the initial phase in development and investment activities;

•p roduction and products are planned so as to minimize the negative impacts on the environment; • t hrough education and training the Company raises the environmental awareness of its employees to responsibly in their regular work;

• a ctivities for measuring and monitoring effects on the environment caused by its operations are planned and carried out on a regular basis;

• e nvironmental and energy indicators are precisely defined, grounded and measurable enabling the regular review of the success of operations;

• a ctivities for efficient environmental management are planned and carried out on a regular basis; • e nvironmental awareness is encouraged and promoted in suppliers, outsourcers and other business partners.

ANNUAL REPORT 2010

sions and wastes are introduced in technological procedures;

P I VOVA R N A L A Š KO D . D .

• t he best available technique for ensuring effective use of materials and energy and reduction of emis-

3 . S U S TA I N A B L E D E V E LO P M E N T

part of company management, which has set the following environmental objectives:

125

Pivovarna Laško due to the challenges connected with the internal restructure and consolidation of operations has been confronted with the question of how to improve competitiveness based on the ensuing situation. Increased scope of sales, increased profitability and decreased operating costs are ongoing objectives; the question is how the achievement of these objectives can be additionally aided with which modern lever. One such lever is orientation of the management of the business system towards sustainable development and energy effectiveness of the business system. In this way, with the aid of suitable messages and an effective manner of communication a positive effect on the target public and consequently, on the end consumer could be achieved which could be reflected in an increase in the scope of sales. On the other hand, strategically oriented and effectively implemented measures for rationalizing energy use would aid in significantly decreasing operational costs. In this area it would also be possible for example to issue a limit for the purposes of the photovoltaic central to generate revenues (here the investment costs would be assumed by other investors) and various business models are possible based on the exploitation of business effects of individual technologies. Pivovarna Laško has through concrete multi-annual improvements of operations of the anaerobic wastewater treatment plant and addition of fresh brewer’s yeast in waste water taken a decisive step to utilizing renewable energy sources. Biogas generated from wastewater has already replaced a significant share of fossil energy (natural gas) in the boiler room. Production companies continue to invest funds into the ecologically most advanced technologies and deduct duties for environmental nuisance, and at the same time expect a response from the competent state institutions in the form of introducing “green tax reform”, which would provide for a targeted return of funds for ecological investments.

3.4.1 IPPC ENVIRONMENTAL PERMIT The Company’s ecological attitude towards the living environment has been proven regularly through 3 . S U S TA I N A B L E D E V E LO P M E N T

the strict implementation of all prescribed supervision in accordance with the environmental permit. It should be highlighted that all measured values satisfy the norms defined in environmental regulations. The Company delivered all required reports to the Environmental Agency of the Republic of Slovenia. It obtained all required assessments of wastes originating in the Company and deposited to the municipal waste depot (mixed municipal waste and waste Kieselguhr). A regular annual inspection was performed in 2010 which encompasses the complete set of requirements from environmental legislation emphasizing the control areas involving wastes, dangerous wastes and storage of dangerous wastes. The environmental IRSOP inspectors issued four warnings, the causes of which

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ANNUAL REPORT 2010

were remedied within 3 months.

126

3.4.2 ECOLOGY IN BEER PRODUCTION In April the Company commenced with the practical introduction of adding fresh brewer’s yeast to technological waste water. Through the gradual increase in the quantities of yeast added, a maximum additive content was achieved in August 2010. During this time wasted energy and ecologically unfavourable drying of brewer’s yeast was attained. The load for waste water at the entrance to the wastewater treatment plant was considerably increased in this manner with the production of biogas increased to cover 10% of the thermal energy needs of the brewery. The degradation of brewer’s yeast in the anaerobic waste treatment plant was certainly one of the largest energy-ecological projects in 2010.

CIP treatment equipment in beer production and bottling represents a significant share in polluting technological waste waters. By modifying cleaning parameters the Company has reduced the need for cleaning agents and replacing the majority with better bio-degradable ones, thus decreasing the Company’s influence on the living environment. In the areas of beer production and bottling, the Company consistently decreases the use of fresh water in line with best practices and supports measurements by suppliers of cleaning agents. This has enabled the Company to achieve a long-term lowest specific use of water, namely 5.66 hl/ 1 hl sold beer.

WATER CONSUMPTION 2008-2010

1,200

800

600

800 600

400

400 200

200 0

0 2010

Water consumption per 1 hl of sold beer

2008

5.8462

2009

6.2666

2010

5.8393

In 2010 the Company continued with an even stricter separation of wastes throughout the entire Company, thereby decreasing the quantity of directly deposited municipal wastes even more than in the previous year. The Company now separately collects 24 types of waste materials at two ecological islands. Separately collected waste packaging and other secondary raw materials fractions were handed over to authorised waste collectors for processing.

3.4.3 WASTE DIATONIC SOIL/WASHED DIATOMITE The acquisition of Slovenian technical consent for the material originating from a mixture of waste diatonic soil and wood ash has opened up new opportunities of using these two wastes for practical purposes. The Company is planning to commence the mixing and use of the materials in 2011 which is also the timeframe for commencing the closing the Strensko municipal waste depot which will result in the aforementioned materials also becoming commercially interesting. Through this project the Company has taken an extremely innovative approach to resolving problems related to wastes for a new useful material can be obtained from two waste materials.

3 . S U S TA I N A B L E D E V E LO P M E N T

(in hl)

ANNUAL REPORT 2010

2009

Water sales

P I VOVA R N A L A Š KO D . D .

2008

Beer sales

Water Consumption in thousand m³

Beer sales in thousand hl

1,000

127

3.4.4 CLEANING TECHNOLOGICAL EQUIPMENT USED FOR BEER PRODUCTION An important ecological project was also the rationalization of water use in the CIP treatment and sterilization of technological equipment in the beer bottling plant which is carried out in conjunction with the company Diversey. Based on the programme and practical experience the Company expects the use of fresh water and quantities of waste water to decrease significantly in 2011. When preparing the disinfectant agents for the procedures for cleaning production equipment in the bottling plant, the reconstruction of the dosage system for the disinfectant concentrate was implemented. The solution of the disinfectant agent can be prepared fresh in the prescribed work concentrations. The cleaning effect has been improved and the use of the concentrate decreased, and consequently also waste water production. In the cleaning of the production equipment, the Company continued to use cleaning agents with a high level of bio-degradability and a smaller quantity of additives which has a significant effect on the load of technological waste water and subsequently, on the improvement of watercourse ecosystems.

3.4.5 WATER RESOURCES Work on the water distribution system in 2010 was carried out according to plan. Sufficient quantities of quality water in accordance with HACCP principles were ensured during the 2010 period. The Company invested more energy into the takeover of the Zidani Most water distribution system according to the plan jointly drawn up with the municipality. Due to its poor state, work is being carried out on this water distribution system. A connection from the Šentrupert water distribution system, which has a poor leak rate, to the water distribution system of Trije studenci was also implemented. The connection which is approximately 1000 m in length will allow the Company to no longer have to supply water upon a drought for this area.

3 . S U S TA I N A B L E D E V E LO P M E N T

The municipality was again hit with floods in September. The water supply to the population was performed quite normally during individual floods so that consumers had normal quantities of water which they did not have to cook first. This enabled the Company with great effort to ensure all employees on the water distribution system units a supply through the prompt switching off of certain connections and establishment of new pumps. The floods and long periods of rain caused immense damage to the water distribution facilities and system. Certain capture basins and pipelines were damaged. Some of this damage has already been repaired however a great deal of work awaits the Company in the upcoming months. In addition to regular maintenance and operation of the water distribution system the Company also car-

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

ried out the following major works:

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•B orovo – replacement of 200 m of pipe-work; •u nder the Laško Castle towards Urankar – replacement of 300 m of pipe-work; •Š entrupert, at the construction site of the new school – replacement of 200 m of pipe-work; •P olana – replacement of the pipework between the collection basin and water storage facility; • a rrangement of the Belovo pumping station; •p artial renovation of the mineshaft; • c ontinuation of geodetic surveys of the Rimske Toplice and Zidani Most aquifers; • s upervision over the construction of the Padežnik water distribution system and installation of connections;

• r eplacement of 250 m of the pipe-work at the location Na pristavi towards Trkulja; •p articipation in the construction of the Vodiška-Škofca water distribution system; •p artial renovation of the Voluš–Vrh pipe-work, at the Mišnica stream;

• r eplacement of a 150 m portion of the pipe-work at Šmohor; • a rrangement of the collecting pipe-work at the Štenge dam; • c ommencement of works on the detailed renovation of the Klinar water storage facility.

3.4.6 ENERGY SUPPLY The energy devices and equipment the Company has at its disposal have entirely met the needs which constitute one of the links in the technological process, namely, within the framework of norms for these purposes. At the same time, in the area of energy engineering, by monitoring and supervising the generated emissions as a result of energy conversion, the Company endeavoured to achieve the minimum number of units or, together with the checked measurements, fall within the framework of units as statutorily set. A total of 12,506,780 kWh of electrical energy was required for all production and other functions in 2010, representing a specified use of 12.9 kWh/ 1 hl of beer. The use of purchased natural gas comprised 3,153,347 Sm3 and amounts to 3.2 Sm3/ 1 hl beer sold. Due to the increased quantity of biogas obtained, specific use has decreased by 3.5 Sm3/hl and represents a decrease of 8%.

3.4.7 CLEANING DEVICES The Company continued operation of the anaerobic wastewater treatment plant of Pivovarna Laško under optimal conditions in 2010. Inflow and outflow monitoring by the Institute of Public Health Maribor from the wastewater treatment plant is carried out on a regular basis, which indicates a high degree of purification – achieving up to an 86% average efficiency of degradation of KPK in technological wastewater. The total annual quantity of wastewater from the brewery was 386,757 m3, which was 13,001 m3 less than the previous year. In the operation of the wastewater treatment plant, biogas is also generated from wastewater, which contains minute concentrations of unwanted impurities (sulphur, carbon dioxide) after chemical treatment.

biogas as a renewable source of energy.

3.4.8 OVERVIEW OF INVESTMENTS AND COSTS FOR ECOLOGY Through its activity Pivovarna Laško has an influence on the local environment and for this reason, constantly invests funds into ecologically state-of-the-art technological equipment. The Company earmarks a specific share of its revenues for direct environmental operating costs which are depicted in the table below.

ANNUAL REPORT 2010

duction of steam. This year the company compensated 300,000 m3 (9% consumption) of natural gas with

P I VOVA R N A L A Š KO D . D .

wastewater treatment plant; most of it is used as an alternative source of heat in the boiler room for the pro-

3 . S U S TA I N A B L E D E V E LO P M E N T

At the annual level 544,000 m3 of biogas is generated, which is partly used for heating wastewater at the

129

OVERVIEW OF INVESTMENTS INTO ECOLOGY ( in EUR )

Investments in water resources Water resource Lurd Water resources water supply - Rudnik Indemnities water supply Water supply maintenance

2008

2009

2010

630,001

593,786

488,218

762

23,593

1,000

1,125

999

604,646

592,661

487,219

Water

54,614

62,446

53,925

Water reimbursements

35,312

32,805

33,931

Water concession

19,302

29,641

19,994

Waste waters

930,251

641,785

649,135

Waste water treatment plant

879,835

641,785

611,527

48,916

37,608

Environmental duty - waste waters Indemnity to fishing club Waste - environmental duty

1,500

161,988

417,813

233,720

136,341

394,366

195,140

8,393

9,336

6,643

Expenses for environmental protection - waste packaging Environmental duty for waste packaging Environmental duty for electrical and electronical equipment - abroad

Easte diatomaceous earth treatment

17,205

14,074

31,871

1,776,854

1,715,830

1,424,998

Total

*We already covered the environmental duty in the amount of 22.469 EUR with advance payments in 2008.

Competent professional personnel from the field of production and energy attend external trainings (sem3 . S U S TA I N A B L E D E V E LO P M E N T

for raising the process efficiency of the Company and achieving better ecological performance. Knowledge

ANNUAL REPORT 2010

inars, conferences and trades) several times a year, representing an important source of new information

are ecological characteristics which ensure high process exploitation, reduction for environmental pollution,

is then transferred to all employees throughout the year for the Company desires to establish an efficient environmental management system and a high level of environmental awareness, training and practical processes implementation for all employees. The Company focuses a great deal of attention on the introduction of ecotechnologies in the production process, particularly in the areas of efficient use of raw materials and energy and technology for reducing pollution; at the same time the Company assesses that the introduction of eco-technological solutions are

P I VOVA R N A L A Ĺ KO D . D .

significant for the entire business process. An important factor in the selection of technological equipment

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fulfilment of legal standards, reduction of employee health risks and improvement of the Companyâ&#x20AC;&#x2122;s public image.

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3 . S U S TA I N A B L E D E V E LO P M E N T

1964

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ANNUAL REPORT 2010

4. FINANCIAL REPORT

FINANCIAL REPORT

132

4.1 Audited financial statements of Pivovarna Laško, d. d. for the 2010 fiscal year, in accordance with IFRS

4.1.1. STATEMENT OF THE FINANCIAL POSITION OF PIVOVARNA LAŠKO, D. D. AS AT 31 DECEMBER 2010 ( in EUR )

Expl. note

2010

2009

Non-current assets

294,360,182

398,843,120

1,635,341

1,865,009

53,673,619

57,099,819

Investment properties

2,877,608

5,063,768

Non-current investments in subsidaries

4.A

220,919,754

263,323,570

Available-for sale financial assets

4.B

320,942

55,840,789

Non-current investments in associated companies

4.C

1,594,000

16,296

30,307

Long-term loans Long-term operating receivables Long-term deferred tax receivables

573,467

670,316

7,17.B

14,343,155

13,355,542

Current assets Non-current assets held for sale Inventories

121,469,248

27,948,020

39,545,865

1,083,307

8,877,962

11,123,139

10.A

13,999,334

15,051,078

Available-for sale financial assets

56,698,549

Short-term loans

2,250,738

561,213

Cash in banks, cheques and cash in hand

96,800

129,283

Short-term operating receivables

Deferred costs and accrued revenues

27,850

942

Total current assets

121,497,098

27,948,962

TOTAL ASSETS

415,857,280

426,792,082

ANNUAL REPORT 2010

1 2

P I VOVA R N A L A Š KO D . D .

Intangible fixed assets Property, plant and equipment

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

ASSETS

133

4.1.1. STATEMENT OF THE FINANCIAL POSITION OF PIVOVARNA LAŠKO, D. D. AS AT 31 DECEMBER 2010 (continued) ( in EUR )

Expl. note

2010

2009

EQUITY

124,168,015

129,302,643

124,168,015

129,302,643

Share capital

Majority capital

36,503,305

Capital reserves

79,811,653

85,561,447

Profit reserves

4,298,827

4,841,293

Revaluation surplus

3,554,230

2,396,598

LIABILITIES

291,689,265

297,489,439

2,450,385

4,388,271

Non-current employee liabilities

Non-current reservations

16.A

1,105,422

1,456,443

Non-current reservations

16.B

1,344,963

2,931,828

Non-current liabilities Non-current financial liabilities

46,122,235

54,263,786

17.A

46,122,235

54,263,786

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Current liabilities

134

236,977,903

232,451,652

Current operating liabilities

18.A

17,247,950

17,248,664

Current financial liabilities

18.C

219,729,953

215,202,988

Accured costs and deferred revenues

6,138,742

6,385,730

Total current liabilities

243,116,645

238,837,382

TOTAL LIABILITIES TO ASSET RESOURCES

415,857,280

426,792,082

The notes on pages 139 through 192 are a constituent part of the financial statements of Pivovarna Laško, d. d.

4.1.2 INCOME STATEMENT OF PIVOVARNA LAŠKO, D. D. FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010 ( in EUR )

Expl. note

2010

2009

Net sales revenuse

91,287,653

99,662,537

Changes in inventories of products and work in progress

(1,352,664)

1,337,663

Other operating revenues

1,059,263

961,266

Costs of goods, material and services

(60,428,686)

(63,040,020)

Employee benefit expenses

(10,270,645)

(10,666,177)

Depreciation of intangible and tangible fixed assets

(6,996,074)

(6,908,571)

Non-current reservations

(110,235)

(261,542)

Write-downs of value

(194,499)

(2,549,990)

Other operating revenues

(1,770,318)

(1,637,055)

11,223,795

16,898,111

OPERATING PROFIT

Financial revenues

4,332,001

4,090,990

Financial expenditures

(22,945,211)

(73,650,021)

(7,389,415)

(52,660,920)

PROFIT BEFORE TAXATION

Tax NET PROFIT/LOSS OF ACCOUNTING PERIOD

1,097,155

7,687,102

(6,292,260)

(44,973,818)

(0.7193)

(5.1412)

Adjusted net profit/loss per share

(0.7193)

(5.1412)

The notes on pages 139 through 192 are a constituent part of the financial statements of Pivovarna Laško, d. d.

4.1.3 STATEMENT OF COMPREHENSIVE INCOME OF PIVOVARNA LAŠKO, D. D. FOR THE PERIOD 1 January – 31 December 2010 ( in EUR )

Expl. note

2010

2009

Net profit/loss of accounting period

(6,292,260)

(44,973,818)

OTHER COMPREHENSIVE INCOME Financial assets for sale

1,267,174

(1,502,509)

Deferred taxes from revaluation

(109,542)

65,734

OTHER COMPREHENSIVE INCOME

1,157,632

(1,436,775)

TOTAL COMPREHENSIVE PROFIT

(5,134,628)

(46,410,593)

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

Net profit/loss per share

Total comprehensive income per share

(0.5870)

(5.3055)

Diluted total comprehensive income per share

(0.5870)

(5.3055)

The notes on pages 139 through 192 are a constituent part of the financial statements of Pivovarna Laško, d. d.

P I VOVA R N A L A Š KO D . D .

135

136

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

36,503,305

85,561,447

3,650,331

1,211,460

(20,498)

4,841,293

Transactions with owners

- -

- 8,430

8,430 (8,430)

(8,430) -

- -

36,503,305

Revaluation surplus of financial investments

Related taxes with items comprehensive income

Changes in comprehensive income Changes in capital

Cover current loss

Creation reserves for own shares

Changes in capital

31 December 2010

79,811,653

(5,749,794)

3,650,331

660,564

(550,896)

(12,068)

The notes on pages 139 through 192 are a constituent part of the financial statements of Pivovarna Laško, d. d.

Net profit of the year

8,430

550,896

(542,466)

4,298,827

(542,466)

6,292,260

(6,292,260)

(5,134,628)

(109,542)

1,267,174

(6,292,260)

3,554,230 124,168,015

1,157,632

(109,542)

1,267,174

Changes in comprehensive income

Other changes

TOTAL CAPITAL

2,396,598 129,302,643

Net profit from Net Revaluation previous years profit surplus

Transactions with owners

1 January 2010

Share Capital Legal Reserves for Treasury Other profit Total profit ( in EUR ) capital reserves reserves treasury shares shares reserves reserves

4.1.4 STATEMENT OF CHANGES IN EQUITY OF PIVOVARNA LAŠKO, D. D. FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010

P I VOVA R N A L A Š KO D . D .

137

Transactions with owners

Revaluation surplus of financial investments

Related taxes with items comprehensive income

Changes in comprehensive income

102,377,721

Capital reserves

25,606,794

Legal reserves

246,617

Reserves for treasury shares

141,494

(246,617)

Treasury shares

8,944,574

Other profit reserves

141,494

34,551,368

Total profit reserves

(1,694,025)

(44,973,818)

(1,436,775)

65,734

(1,502,509)

3,833,373

Net profit from Net Revaluation previous years profit surplus

36,503,305

Creation reserves for own shares

Drawing reserves for own shares

Changes in capital

31 December 2009

85,561,447

(16,816,274)

3,650,331

(21,956,463)

1,211,460

964,843

(226,119)

1,190,962

(20,498)

84,625

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

The notes on pages 139 through 192 are a constituent part of the financial statements of Pivovarna Laško, d. d.

Cover current loss

Cover losses by the assembly

(8,944,574)

(84,625)

(964,843)

(6,201,081)

(1,694,025)

4,841,293

(29,851,569)

(226,119)

226,119

(28,157,544)

(1,694,025)

1,694,025

44,973,818

2,396,598

Changes in capital

Net profit of the year

Changes in comprehensive income

36,503,305

Share capital

Disposal of own shares

Transactions with owners

1 January 2009

( in EUR )

4.1.5 STATEMENT OF CHANGES IN EQUITY OF PIVOVARNA LAŠKO, D. D. FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2009

129,302,643

(226,119)

226,119

(46,410,593)

65,734

(1,502,509)

(44,973,818)

141,494

175,571,742

TOTAL CAPITAL

4.1.6 CASH FLOW STATEMENT OF PIVOVARNA LAŠKO, D. D. FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010 ( in EUR )

Expl. note

2010

2009

CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations

19,921,165

22,263,060

Net cash generated from operating activities

19,921,165

22,263,060

CASH FLOWS FROM INVESTING ACTIVITIES Cash payments for financial assets on associated company

4.C

Purchase of property, plant and equipment

(4,223,786)

(797,477)

Purchase of intandible assets

(1,692)

(910,220) (11,426,792)

Purchase/sale of available for sale financial assets

(3,060,468)

4.B,11

(3,403,078)

Interest received

443,575

332,487

Dividends and capital gains

3,888,427

3,758,503

Net cash generated/used in investing activities

(3,296,554)

(12,103,967)

CASH FLOWS FROM FINANCING ACTIVITIES Interest paid

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ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Purchase of treasury shares

138

(13,042,511)

(12,549,810)

141,492

Proceeds from borrowings

17.18

64,766,151

25,205,202

Repayments of borrowings

17.18

(68,380,731)

(22,916,797)

Net cash used/generated in financing activities

(16,657,091)

(10,119,913)

NET DECREASE / INCREASE IN CASH AND CASH EQUIVALENTS

(32,480)

39,180

Cash and cash equivalents at the begining of the year

129,283

90,103

Cash and cash equivalents at the end of the year

96,803

129,283

The notes on pages 139 through 192 are a constituent part of the financial statements of Pivovarna Laško, d. d.

4.1.7

COVERING BALANCE SHEET LOSSES OF THE FISCAL YEAR

The accumulated loss for 2010 was EUR 6,292,260. ( in EUR )

2010

Net loss of accounting period

(6,292,260)

2009

(44,973,818)

Remaining net loss: Accumulated profit to cover net loss

542,466

6,201,081

Regulatory reserves to remain net loss

21,956,463

Capital reserves to remain net loss

5,749,794

16,816,274

BALANCE - SHEET LOSS 31st December

The Supervisory Board proposed to the Management Board and General Meeting that net loss for the 2010 financial year in the amount of EUR 6,292,260 be covered through provisions from profit and capital reserves.

4.1.8 POLICIES AND NOTES TO THE NON-CONSOLIDATED FINANCIAL STATEMENTS

obliged to perform an annual audit of its operations. The main activity of the Company is the production and sale of beer, malt and waters. It also performs other wholesale and retail trade activities. Pivovarna Laško, d. d. is the parent company of the Pivovarna Laško Group with its headquarters in Slovenia at Trubarjeva ulica 28, 3270 Laško, Slovenia. Ordinary shares of the company are listed on the Ljubljana Stock Exchange under the PILR label. The share capital of the company comprises EUR 36,503,304.96, which represents 8,747,652 freely transferrable nominal shares. No restrictions exist regarding the pay-out of dividends or other capital pay-outs.

ACCOUNTING GUIDELINES In the year 2010 the same accounting policies were applied as in preceding years. The financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, which include the standards and interpretations issued by the International Accounting Standards Board (IASB) and SIC. These mandatory financial statements have been prepared to conform to legal requirements. In accordance with law the Company must ensure the independent audit of the financial statements. The audit is limited to the audit of mandatory financial statements for general needs thereby fulfilling the legal requirement of the audit of mandatory financial statements. The audit treats the mandatory financial statements as a whole and does not provide a guarantee on individual types of items, accounts or transactions. Audited

ANNUAL REPORT 2010

decision no. Srg 95/00673 and under application no. 1/00171/00. It is classified as a large company and is

P I VOVA R N A L A Š KO D . D .

Pivovarana Laško, d. d. is a public limited company, registered at the District Court in Celje under the

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

GENERAL INFORMATION

139

financial statements are not intended for use by any party for the purpose of making decisions regarding ownership, financing or any other concrete transaction related to the Company. Therefore users of the mandatory financial statements should not rely exclusively on the financial statements and should prior to making decisions, implement other suitable procedures.

a) Standards and intepretations effective in the current period The following amendments to the existing standards issued by the International Accounting Standards Board (IASB) and adopted by the EU are currently valid:

• I FRS 1 (amended) “First-time Adoption of international financial reporting standards”, adopted by the EU on 25 November 2009 (effective for annual periods beginning on or after 1 January 2010);

• I FRS 3 (amended) “Business combinations”, adopted by the EU on 3 June 2009 (effective for annual periods beginning on or after 1 July 2009);

• I FRS 1 (amended) “First-time Adoption of international financial reporting standards”, additional exceptions for users using IFRS for the first time, adopted by the EU on 23 June 2010 (effective for annual periods beginning on or after 1 January 2010);

• I FRS 2 (amended) “Share-based payment”- group cash-settled share-based payment transactions , adopted by the EU on 23 March 2010 (effective for annual periods beginning on or after 1 January 2010);

• I AS 27 (amended) “Consolidated and separate financial statements”, adopted by the EU on 3 June 2009

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ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

(effective for annual periods beginning on or after 1 July 2009);

140

• a mendments to IFRS 39 “Financial Instruments: recognition and measurement” – eligible hedged items, adopted by the EU on 15 September 2009 (effective for annual periods beginning on or after 1 July 2009);

•A mendments to various standards and interpretations “Improvements to IFRS (2009)” resulting from the annual improvement project for IFRS published on 16 April 2009 (IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 18, IAS 36, IAS 38, IAS 39, IFRIC 9 and IFRIC 16) primarily with a view to remove inconsistencies and clarify wording, adopted by the EU on 23 March 2010 (effective for annual periods beginning on or after 1 January 2010);

• I FRS 12 (amended) “Business Combinations”, adopted by the EU on 25.03.09 (effective for annual periods beginning on or after 30.03.09);

• I FRIC 15 “Agreements for construction of real estate”, adopted by the EU on 22 July 2009 (effective for annual periods beginning on or after 1 January 2010);

• I FRIC 16 “Hedges of a net investment in a foreign operation”, IFRIC 17 “Distribution of non-cash assets to owners”, adopted by the EU on 26 November 2009 (effective for annual periods beginning on or after 1 November 2009);

• I FRIC 18 “Transfer of assets from customers”, adopted by the EU on 27 November 2009 (effective for annual periods beginning on or after 1 November 2009) The denoted amendments of existing standards did not affect the Company’s accounting policies.

b) Standards and interpretations issued by the IASB and adopted by the EU, but not yet effective On the day of approval of these financial statements the following standards, revisions and interpretations adopted by the EU have been issued, but are not yet effective:

•A mendments to IAS 24 “Related party disclosures” - Simplifying the disclosure requirements for government-related entities and clarifying the definition of a related party, adopted by the EU on 19 July 2010 (effective for annual periods beginning on or after 1 January 2011);

• a mendments to IAS 32 “Financial instruments: presentation” – accounting for rights issues, adopted by the EU on 23 December 2009 (effective for annual periods beginning on or after 1 February 2010);

• a mendment to IFRS 1 “First-time Adoption of international financial reporting standards”- Limited exemption from comparative IFRS 7 disclosures for first-time adopters, adopted by the EU on 30 June 2010 (effective for annual periods beginning on or after 1 July 2010);

• a mendments to IFRIC 14 “IAS 19 – limit on a defined benefit asset, minimum funding requirements and their interaction” - Prepayments of a minimum funding requirement, adopted by the EU on 19 July 2010 (effective for annual periods beginning on or after 1 January 2011);

• I FRIC 19 “Extinguishing financial liabilities with equity instruments”, adopted by the EU on 23 July 2010 (effective for annual periods beginning on or after 1 July 2010). The Company opted not to adopt these standards, amendments and interpretations before they enter into force. The Company estimates that the adoption of these standards, amendments and interpretations will

interpretations exist which are not yet effective:

• I FRS 9 “Financial instruments” (effective for annual periods beginning on or after 1 January 2013); • a mendments to IFRS 7 “Financial Instruments: IFRS 9 Disclosures”- Transfers of financial assets (effective for annual periods beginning on or after 1 July 2011);

•A mendments to various standards and interpretations “Improvements to IFRS (2010)” resulting from the annual improvement project for IFRS published on 6 May 2010 (IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34, IFRIC 13) primarily with a view to remove inconsistencies and clarify wording, adopted by the EU on 23 March 2010 (most amendments are to be applied for annual periods beginning on or after 1 January 2011); The Company estimates that the adoption of these standards, amendments and interpretations will not have a significant impact on the Company’s financial statements during the period of initial application.

1. Recognition of revenues Revenues are recognised on the basis of the sale of products, services and merchandise and takeovers of these on the part of customers (exclusive of VAT and excise duties), foreseen reclamations, rebates and discounts. Sales revenues are recognised when a significant portion of the risk and benefits of ownership of the goods is transferred from the seller to the buyer.

ANNUAL REPORT 2010

On the day of approval of these financial statements the following accounting standards, revisions and

P I VOVA R N A L A Š KO D . D .

c) Standards and interpretations issued by the IASB, but not yet adopted by the EU

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

not have a significant impact on the Company’s financial statements during the period of initial application.

141

Other revenues realised are recognised on the following basis:

• I nterest revenues – are recognised upon their arising unless a doubt exists that they will be collected, whereby the amount is written off for the replacement value; interest revenues from that point on are recognised on the basis of interest rates serving as a discontinuation of future cash flows;

• r evenues from dividends are recognised when the Company becomes entitled to receive dividend payments.

2. Investments into subsidiaries An associated group company is a company where the controlling company has the controlling capital share or controlling influence due to any other reason and which enters the group for which joint financial statements are prepared. Investments into subsidiaries are assessed at their original historical costs. Revenues from profit sharing are acknowledged as revenue from financing, when they are paid or when the General Meeting approves a preposition on profit sharing and payment of the dividend. Investments are impaired whenever their replaceable values are lower than their book values. Losses attributed to impairments are immediately recognised in the income statement.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

3. Financial assets held until maturity

142

Associated companies are companies in which the company has between 20% and 50% of the voting rights, and where it has a significant impact on business, but they are not controlled. Financial investments in associated companies are valued at cost, but must be reviewed each year, and may not exist if the circumstances indicate the need for impairment. To this end, valuations are carried out of investments in associated companies authorized by the business appraisers. If the estimated value of an investments is lower than cost, the difference is recognized as a financial expense and has a demonstrable impact on the level of income.

4. Reporting currency a) Functional and reporting currency The items presented in the financial statements of the Company are denoted in euros (EUR), which is also the functional and reporting currency of the Company.

b) Transactions and balances Foreign currency transactions are converted into the reporting currency using the exchange rate valid on the day of the transaction. Profits and losses arising from these transactions and in the conversion of cash and liabilities, denominated in a foreign currency, are recognised in the Income Statement. Exchange rate differences arising from debt securities and other financial instruments are recognised at fair value and are included in the profit or loss of transactions with foreign currencies. Exchange rate differences in non-monetary items such as securities kept for trading are shown as a portion of the increase or decrease of fair value. Exchange rate difference in the sale of securities available-for-sale is recognised directly in capital under revaluation surpluses, which are a constituent part of reserves.

5. Intangible fixed assets Intangible fixed assets comprise investments in the acquisition of patents, licenses, brand names, goodwill, intangible fixed assets under development, computer software and other intangible fixed assets (IAS 38). An intangible fixed asset is only recognised as an asset if it is likely that future economic benefits will flow to the Company and if its cost can be reliably measured. Pivovarna Laško, d. d. uses the cost model (IAS 38.74), thus intangible assets are carried at cost less any amortisation and impairment losses and collective loss due to impairment.

b) Other intangible assets Whenever computer software is not considered a constituent part of the appropriate computer hardware, they are treated as intangible assets. Other intangible assets are shown at cost less any amortisation and impairment losses and collective losses due to impairment. The useful period for other intangible assets is

cial statements a test for signs of impairment and need for revaluation is conducted each year. Equipment and piece inventory are carried at cost less any amortisation and impairment losses. Amortisation is calculated according to the straight-line method. The expected functional useful lives of individual asset groups comprise: real estate

20–40 years;

plant and machinery

4–10 years;

computer hardware

2–4 years;

motor vehicles

4–8 years;

other equipment

3–7 years.

ANNUAL REPORT 2010

Tangible fixed assets include real estate, equipment and piece inventory. Since 2008 real estate is valued using the revaluation model. Prior to this period they were valued at cost. When preparing the annual finan-

P I VOVA R N A L A Š KO D . D .

6. Tangible fixed assets

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

10 years.

143

Costs of financial liabilities for financing investments into tangible fixed assets are capitalized. Subsequent costs are included in the book value of the asset or are recognised as a special assets, which is only suitable if the future economic benefits connected to this asset will be observed in the Group and if the costs of such an asset can be reliably measured. The book value of spare parts is not disclosed separately. The costs of all other repair and maintenance work are included in the income statement in the period they occur. Amortization from revaluation is directly recognised as a cost in profit or loss. A revaluation surplus is performed and recognised in retained earnings upon removal of the fixed asset from use.

7. Investment property Investment property is property (land and buildings, parts of buildings or both) owned by the Company or under financial lease for the purpose of earning rent or increasing the value of the property. Investment property is not used for production or sale of goods or services, for administrative purposes or for regular operations. Investment property is land or buildings, acquired the appreciation of long-term investments or leased out and not for sale in the near future. Investment property is only recognised as an asset if it is likely that future economic benefits will flow to the Company and if its cost can be reliably measured. In 2008 the Company changed from using the cost method to using the fair value model for measuring investment property. When preparing the annual financial statements a test for signs of impairment and

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a ĹĄ ko, d. d.

need for revaluation is conducted each year.

144

8. Financial assets The Company classifies its investments into the following categories: financial assets at fair value through profit or loss, loans and receivables, financial investments held-to-maturity and financial assets available-forsale. The classification depends on the purpose for which the investment was acquired.

a) Financial assets at fair value through profit or loss This category is divided into two sub-categories: financial assets for trade and assets determined by fair value through profit or loss upon recognition. Investments obtained for the purpose of generating profit from short-term (less than one year) fluctuations in price are classified as available-for-trade and fall under short-term assets. These assets are measured at fair value; realized/unrealized profit and loss arising from changes in fair value are included in the income statement for the period in which they arose.

b) Loans and receivables Loans and receivables are non-derivative financial assets with unchangeable or determinable payments which are not traded on the active market. They are included under short-term assets, except those with maturities exceeding 12 months following the balance sheet date. In this case, they are classified among longterm assets. Loans and receivables are shown in the balance sheet under operating and other receivables according to paid values while observing the effective interest rate.

c) Held-to-maturity investments Investments with fixed maturities which the Management Board of the Company intends to retain to maturity are classified as investments held to maturity and are classified among long-term assets. The Company did not possess any investments within the scope of this category in the current period.

d) Financial assets available-for-sale Financial assets available-for-sale are those non-implemented financial assets marked as available-for-sale or those not classified in any other category. Assets in this category are valued according to their fair values or at cost if their fair value cannot be reliably ascertained. If the assets are valued according to their fair values, their fair value revaluation is directly recognised in capital. The Company assesses whether there is objective evidence that a financial asset or group of financial assets is impaired on each balance sheet date. Characteristic or a long-term decrease in their fair values below cost is considered an indicator of an impairment of shares in the event of the sale of financial assets available for sale. If such evidence exists for financial asset available for sale, the cumulative loss measured as a difference between cost and the current fair value shown as an impairment loss in the income statement - is removed from capital or comprehensive income and shown in the income statement. Reversals of impairments shown in the income statement cannot be performed for capital instruments.

e) Derivative financial instruments Derivative financial instruments are used for managing interest rate risks. They comprise interest options and interest swaps. Derivative financial instruments are first recognised at cost on the day a contract is concluded and later revalued to the fair value on the reporting date. Profits and losses connected to changes in fair value are immediately recognised in profit and loss unless they are used as protection against risk.

replacement value. The replacement value is higher for fair value assets less costs of sales and value upon use. For the purpose of establishing impairment, assets are broken down into their smallest unit for which cash flows can be defined, independently from other units (cash generating units). The value of goodwill is assessed annually depending on a need for impairment.

10. Non-current assets available-for-sale Non-current assets (group for disposal) available-for-sale are those non-current assets for which the book values are estimated to be reconciled predominantly with their sale in the following twelve months and which will not be further used. The denoted assets are valued according to the lower of their book and fair values, decreased by the costs of sale.

11. Inventories Inventories are stated at the lower of cost and net realisable value according to the method of weighted average pricing. The value of finished products and work in progress consists of total manufacturing costs which includes the costs of processing materials, production labour costs, amortization, services and other manufacturing costs. The net realizable value is estimated based on customary sales prices decreased by the costs of conversion and sales.

ANNUAL REPORT 2010

sets which are amortised are tested for impairment whenever events or circumstances reflect impairment in an asset. Losses due to impairment are recognised for the surplus of the book value amount over the assetâ&#x20AC;&#x2122;s

P I VOVA R N A L A Ĺ KO D . D .

Assets which have a limited functional life are not amortized and are tested annually for impairment. As-

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko, d. d.

9. Impairment of non-financial assets

145

12. Operating receivables At initial recognition, operating receivables are shown at fair value, later they are measured based on paid values using the effective interest rate method less impairment. Impairments of operating receivables are made when the Company expects that it will not be capable of realising the entire amount of the matured receivable. The impairment amount represents the difference between the book value and the current value of (expected) estimated future cash flows discounted by the effective interest rate. The impairment amount is recognised in profit or loss.

13. Cash and cash equivalents For the cash flow statement, cash and cash equivalents comprise cash on hand, sight deposits at banks and investments into the money market instruments with no bank overdrafts. Overdrafts of bank accounts are included under short-term financial liabilities in the balance sheet.

14. Provisions Provisions are recognised when the Company shows a legal obligation as a result of past events for which a probable likelihood exists in the future that it will have to settle the liability and when a reliable estimate of the liability can be made. Provisions may not be formed to cover future losses from operations.

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a ĹĄ ko, d. d.

15. Provisions for severance pay and jubilee awards

146

The net liabilities of the Company in connection to long-term benefits under years of service, except for pension schemes are the earnings which employees obtain in exchange for their service during current and previous periods. Such liabilities are calculated using the method of foreseen significance of units and are discounted to their current values.

16. Deferred taxes Deferred taxes are shown in their entirety while observing liability methods based on temporary differences between taxes associated with assets and liabilities and disclosed tax amounts in the financial statements. Deferred tax is calculated using the tax rate (and legislation) as prescribed by law and valid on the balance sheet date which is expected to be used at the time the deferred tax is realised or liability for deferred tax settled. Deferred tax receivables are recognised if a possibility exists that a tax gain is expected in the future using temporary differences. Deferred tax liabilities are recognised upon revaluation of assets. Deferred tax liabilities are shown as a set-off amount in the balance sheet. The tax rate in 2009 amounted to 21% and from 2010 onwards, 20%.

17. Operating liabilities Operating liabilities comprise credit to suppliers for purchased merchandise or services and liabilities to employees, the State, owners or others. Liabilities are recognised if it is likely that due to their settlement, factors enabling economic benefit are decreased and the amount for settlement can reliably be measured. They are initially recognised at fair value, and later measured according to realised payments using effective interest rates.

18. Financial liabilities Financial liabilities are recognised at fair value upon their arising, exclusive of any arising transaction costs. In the upcoming period, financial liabilities are measured according to their realised payment using effective interest rates. Any difference between receipts (exclusive of transaction costs) and liabilities are recognised in profit or loss throughout the entire period of the financial liability.

19. Share capital Ordinary shares are classified under capital. Transaction costs directly associated with the issue of new shares which are not connected to the acquisition of the Company are shown as a decrease in capital. Any surpluses over the fair value of received paid-in amounts in excess of the book value of newly issued shares are recognised as paid-in capital surpluses.

20. Own shares If the Company reacquired its own shares in the business year, the paid amount inclusive of transaction costs, exclusive of tax is deducted from total capital as own shares (treasury shares) until these shares are removed, reissued or sold. The Company must form reserves for own shares in the identical amount for that business year. At the same time it must form reserves for own shares for PILR shares owned by subsidiaries. Reserves for own shares are released when its own shares are disposed of or removed, crediting the source from which they were formed. Upon the sale of such shares, the difference between the sale and book value of own shares are

Until approved by the General Meeting of Shareholders, foreseen dividends are treated as retained earnings.

22. Reporting by segments Business segments are formed by products or services which on the basis of risk and benefits, differ from products and services of other segments. Regional (geographic) segments comprise products or services within a specific economic environment which are exposed to risk and benefits which differ from risk and benefits in other economic environments. Operations by segment are not individually disclosed in the annual reports of individual companies but are disclosed in the Annual Report of the LaĹĄko Pivovarna Group.

ANNUAL REPORT 2010

21. Dividends

P I VOVA R N A L A Ĺ KO D . D .

defined in Article 247 of the Companies Act.

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko, d. d.

directly calculated into equity capital and have no effect on profit or loss. Own shares is used for the purposes

147

NOTES TO THE NON-CONSOLIDATED FINANCIAL STATEMENTS 1. Intangible fixed assets Year 2010 ( in EUR )

Licenses and other IFAs

IFA in acquisition

Total

COST OF PURCHASE 1 January 2010 Direct gains Transfer from investments in progress Transfer from fixed assets 31 December 2010

2,786,904

571,229

3,358,133

1,468

567,658

(567,658)

224

3,354,786

5,039

3,359,825

ACCUMULATED VALUE ADJUSTMENT 1 January 2010 Depreciation on the year 31 December 2010

1,493,124

231,360

1,724,484

CURRENT COST 31 December 2010

1,630,302

5,039

1,635,341

1 January 2010

1,293,780

571,229

1,865,009

IFA in acquisition

Total

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Year 2009 ( in EUR )

148

Licenses and other IFAs

COST OF PURCHASE 1 January 2009 Direct gains Transfer from investments in progress Retraining Disposals 31 December 2009

974,536

418,618

1,393,154

159,786

7,175

(7,175)

1,805,801

(608)

2,786,904

571,229

3,358,133

ACCUMULATED VALUE ADJUSTMENT 1 January 2009

251,705

Depreciation on the year

186,660

1,055,367

(608)

1,493,124

Retraining Disposals 31 December 2009

1,493,124

CURRENT COST 31 December 2009 1 January 2009

1,293,780

571,229

1,865,009

722,831

418,618

1,141,449

There were no liens on the Company’s intangible assets as at 31 December 2010. For the purpose of insuring short-term loans from banks, the Company pledged brands in the amount of EUR 50,000,000 consisting of a portion of the assets of the Company and in accordance with accounting standards, own brands are not disclosed in the financial statements.

149

Production plant and machines

106,810,473

(255,655)

1,519,809

105,546,319

24,912,688

(708,031)

(166,780)

941,595

26,812

24,819,092

(34,869) -

Retraining

Transfer to investment property

Disposals

31 December 2010

97,982,829

(207,933)

3,098,026

95,092,736

18,972,022

(692,521)

(88,615)

1,309,254

18,443,904

ANNUAL REPORT 2010

28,196,539

27,261,799

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

8,047,057

1 January 2010

P I VOVA R N A L A Š KO D . D .

8,017,964

31 December 2010 10,453,583

8,827,644

6,375,188

5,940,666

CURRENT COST

10,690,983

7,761,481

(1,284)

1,400,814

6,361,951

3,341,591

2,929,502

6,664,489

956,620

Depreciation on the year

5,742,738

1 January 2010

ACCUMULATED VALUE ADJUSTMENT

- 987,441

33,926,288

8,017,964

(29,093)

Disposals

31 December 2010

817,202 (830,191)

11,787

(11,787)

33,939,277

Transfer to investment property

8,047,057

Transfer from investments in progress

Direct gains

1 January 2010

9,703,542

Other plant and Small equipment inventory

COST OF PURCHASE

Year 2010 ( in EUR ) Properties Buildings

2. Tangible fixed assets

685,861

696,043

(4,277,834)

4,288,016

685,861

Capital assets in acquisition

57,099,819

53,673,618

131,380,821

(900,454)

(123,484)

(1,284)

6,764,714

125,641,329

185,054,439

(992,779)

(1,008,758)

4,314,828

182,741,148

Total

150

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Production plant and machines

(326,332) 105,546,319

222,605

(3,636,025)

299,826

108,659,913

24,819,092

(775,851)

796,895

889,681

23,908,367

- (3,107)

Retraining

Transfer to investment property

Disposals

31 December 2009

9,703,542

(144,018)

831,541

95,092,736

(3,537,210)

3,279,050

95,350,896

18,443,904

(668,458)

1,545,721

1,278,487

16,288,154

6,361,951

(144,017)

3,200

(389,704)

1,177,073

5,715,399

8,047,057

8,582,208

31 December 2009

1 January 2009

29,404,653

28,196,539

13,309,017

10,453,583

7,620,213

6,375,188

CURRENT COST

3,690,326

3,341,591

5,742,738

996,272

987,301

Depreciation on the year

3,762,272

1. januar 2009

ACCUMULATED VALUE ADJUSTMENT

- (389,706)

33,939,277

(563,272)

8,047,057

Disposals

31 December 2009

1,098,684 -

33,166,925

28,121

Retraining

Transfer from investments in progress

8,582,208

Direct gains

1 January 2009

9,405,725

Other plant and Small equipment inventory

COST OF PURCHASE

Year 2009 ( in EUR ) Properties Buildings

P I VOVA R N A L A Š KO D . D .

162,850

685,861

(1,879,162)

206,614

2,195,559

162,850

Capital assets in acquisition

62,769,267

57,099,819

125,641,329

(815,582)

3,200

(1,384,921)

6,721,911

121,116,721

182,741,148

(1,809,473)

(1,830,752)

2,495,385

183,885,988

Total

The divestment of tangible fixed assets represents the sale and write-off of such assets. The Company did not financially lease any of its tangible assets. The Company has been utilizing the revaluation model for valuing real estate since 2008 while equipment and piece inventory are valued using the cost model. The Company realized a profit of EUR 22,524 from the sale of tangible fixed assets which is shown as a revaluation of operating revenue and a loss of EUR 48,472 which is shown as a revaluation of operating expenses. The company pledged tangible fixed assets which on 31 December 2010 amounted to EUR 35,328,253 to insure long-term loans. The book value of pledged real estate amounted to EUR 28,504,684 and of pledged equipment EUR 6,823,569. As at 31 December 2010 the Company showed liabilities for the purchase of tangible fixed assets of EUR 195,002.

3. Investment property Year 2010 ( in EUR ) Properties Buildings

Total

COST OF PURCHASE 1 January 2010 Transfer from tangible fixed assets Transfer to assets held for sale 31 December 2010

578,460

4,679,805

5,258,265

11,786

996,971

1,008,757

(2,943,324)

590,246

2,733,452

3,323,698

194,497

Impairment

368,721

Transfer from tangible fixed assets

123,484

Transfer to assets held for sale

(240,612)

31 December 2010

446,090

CURRENT COST 31 December 2010

590,246

2,287,362

2,877,608

1 January 2010

578,460

4,485,308

5,063,768

ANNUAL REPORT 2010

194,497

P I VOVA R N A L A Ĺ KO D . D .

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko, d. d.

ACCUMULATED VALUE ADJUSTMENT 1 January 2010

151

Year 2009 ( in EUR ) Properties Buildings

Total

COST OF PURCHASE 1 January 2009 Retraining 31 December 2009

578,460

5,766,302

6,344,762

(1,086,497)

578,460

4,679,805

5,258,265

NABRANI POPRAVEK VREDNOSTI 1. januar 2009

988,526

Impairment

194,497

Retraining

(988,526)

31 December 2009

194,497

CURRENT COST 31 December 2009

578,460

4,485,308

5,063,768

1 January 2009

578,460

4,777,776

5,356,236

Investment property also includes property which is not used for carrying out the basic activity but leased out by the Company. The Tri Lilije sports arena and catering facilities (Hotel Hum, Hotel Savinja and Tabor Castle) and holiday facilities are all recorded as investment property. The Company generated EUR 302,339 in expenses and EUR 296,282 in revenues from investment property. The investment property was assessed by a certified real estate appraiser on 31 December 2010. The assessed value of the investment property was

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a ĹĄ ko, d. d.

lower than the book value therefore the Company showed the difference as an impairment of operating

152

expenses in the amount of EUR 368,721. The Management Board commenced with the procedure of divesting the catering facilities Hotel Hum and Hotel Savinja and Tri lilije sports arena in the beginning of 2011. They estimate that a probability exists that both hotels will be sold within the space of a year if a suitable buyer is found whereas the implementation of the sale of the sports arena is quite demanding and complex. Due to these assumptions, the value of both hotels whose assed value as at 31 December 2010 was EUR 2,702,713, in the balance sheet on the last day of 2010 was transferred from investment property and is shown under non-current assets available-for-sale. Investment property in the amount of EUR 1,992,335 has been pledged as insurance for long- and shortterm loans from banks.

4. Long– term financial investments 4. A. Long-term financial investments in subsidiaries ( in EUR )

Share in capital

2010

2009

SHARES IN COMPANIES OF THE GROUP In Slovenia: Pivovarna Union, d. d. Ljubljana

97.892 %

169,267,845

169,265,873

Vital Mestinje, d. o. o.

96.920 %

1,457,761

Radenska, d. d. Radenci

93.810 %

50,023,603

50,018,983

Delo, d. d. Ljubljana

80.834 %

42,413,117

Firma Del, d. o. o. Laško

100.000 %

7,428

220,756,637

263,163,162

Abroad: Laško Grupa, d. o. o., Zagreb RA&LA, d. o. o. Sarajevo

100.000 %

2,709

69.230 %

160,408

163,117

160,408

263,323,570

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

220,919,754

ANNUAL REPORT 2010

P I VOVA R N A L A Š KO D . D .

Total

153

Information about the subsidiaries Activity of the State of the Percent Company name company company participation

Value of total Net profit/loss equity of year 2010 ( in EUR ) ( in EUR )

Subsidiaries companies Vital Mestinje, d. o. o.

production of beverages

Slovenija

96.92 %

3,357,788

(81,667)

Radenska, d. d., Radenci

production of beverages

Slovenija

93.81 %

81,102,108

456,936

Firma Del, d. o. o., Laško

production of beverages

Slovenija 100.00 %

51,540

(182)

Jadranska Pivovara - Split, d. d.

beer production

Hrvaška

99.11 %

(890,772) (5,382,618)

RA&LA, d. o. o., Sarajevo

wholesale

BiH

69.23 %

124,063

(5,207)

Union Group

production of beer and beverages

Slovenija

97.89 %

70,930,827

newspaper-

Slovenija

80.83 %

19,796,225 (2,330,603)

Delo Group, Ljubljana

436,185

publishing activity

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Laško Grupa, d. o. o., Zagreb

154

intermediate trade

Hrvaška 100.00 %

2,709

Information about associates Activity of the State of the Percent Company name company company participation

Value of total Net profit/loss equity of year 2010 ( in EUR ) ( in EUR )

Associated company Thermana, d. d., Laško

activity of spa,

Slovenija 22.630 % 28,535,802 (1,695,168)

hotels and other

establishments

In accordance with IAS 27 the Company valuates long-term financial investments in subsidiaries according to the cost model. On 31 December 2010 a revaluation was again performed again by an certified business appraiser for the purpose of determining impairments. Value assessments were performed for the following companies: Delo, d. d., including its investment in Večer, Pivovarna Union, d. d., Fructal, d. d., Radenska, d. d. and Vital Mestinje, d. o. o. The estimated value of Pivovarna Union, d. d., which also includes an investment into its subsidiary Fructal, d. d. exceeds the book value of the investment value disclosed in the accounts of Pivovarna Laško, d. d. Similarly the book values exceeded the estimated values for the companies Radenska, d. d. and Vital Mestinja, d. o. o. of and that is why no need for impairment exists. No impairment for the denoted investments is required. The estimated value of investments in the Union Group amounted to EUR 197,239,654 or EUR 447 per share, in the company Radenska, d. d., EUR 89,438,315 or EUR 19 per share, and in the company Vital Mestinje, d. o. o., EUR 1,648,000.

Long-term financial investments in subsidiaries increased in 2010 due to additional acquisitions in the amount of EUR 9,302. Pivovarna Laško, d. d. increased its investment into the subsidiary Pivovarna Union, d. d. by EUR 1,972 and into Radenska, d. d. by EUR 4,620, and also established the company Laško Grupa, d. o. o. in Croatia with founding capital in the amount of EUR 2,709. Due to the procedure of sale, the Company transferred investments into the subsidiary Delo, d. d. in the amount of EUR 42,413,118 from long-term financial investments to short-term financial assets available-for-sale. Prior to the transfer, the investment into Delo, d. d. based on an assessment implemented by the certified business assessor had been impaired by EUR 6,501,965. The estimated value of the investment as at 31 December 2010 was EUR 35,911,152. The long-term financial investment into the company Jadranska pivovara – Split, d. d. was impaired in full in 2009, therefore its value on the last day of 2010 was equal to zero. A divestment procedure is also underway in connection to this investment therefore this investment was also transferred to short-term assets available-for-sale. Due to the financial insignificance of the companies Firma Del, d. o. o., Laško, and RA&LA, d. o. o., Sarajevo, Pivovarna Laško, d. d. does not include these companies in the consolidation, as also the company Laško Grupa, d. o. o., Zagreb due to its only having been established in December 2010 using minimal founding capital. All other subsidiary companies are consolidated using the method of full consolidation.

Value assessments of subsidiary companies a) Estimated value of Pivovarna Union, d. d., Ljubljana

majority owner may also squeeze out the existing minority owners. An 8.5 percent required rate of yield on equity and a 7.7 percent required rate of yield on total capital were applied. The appraiser conducted the work on the basis of the non-consolidated financial statements of the company Pivovarna Union, d. d. as at 31 December 2010. When using this method, one first assesses the current value of free cash flows without repayments of interest and the principal value of loans (total equity value), and then adds on the value of the subsidiary company Fructal plus the value of excess financial investments and unnecessary property. All financial liabilities and calculated premiums and discounts were deducted from this figure. The basis for calculating sales revenues are operations in 2010 and the Business Plan of the Company for 2011 which were taken into consideration upon an optimistic scenario while a decreased sale of juices and non-alcoholic beverages is observed in the event of a pessimistic scenario. A minimum quantitative growth in revenues is planned for the medium-term, namely an average annual growth of 3.3% according to the optimistic scenario and 2.4% according to the pessimistic scenario. The required level of equity capital in the assessment comprised 8.5% and the required level of total capital 7.7%. In assessing the value of Pivovarna Union, a large portion of the value comes from financial investments whose value based on the optimistic scenario amounts to EUR 150,200,000 and based on the pessimistic one, EUR 132,100,000. Income tax and sales costs have been taken into consideration for the investments which are the subject of sale. The market values of the following investments were taken into account during the assessment:

ANNUAL REPORT 2010

formulation of strategy and business decisions (on investments, borrowing and so on). At the same time the

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of the valuation was the majority ownership share of the company (97.892%), enabling the majority owner to impact the process of adopting decisions on bodies of the company management as well as to impact the

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

Valuation was carried out by an accredited business appraiser registered with the Slovenian Institute of Auditors. The valuation was based on the method of the current value of expected cash flows. The subject

155

• t he majority stake in Fructal (93.02%) in the amount of EUR 20 per share according to the optimistic scenario and EUR 14 per share according to the pessimistic one;

• a minority stake (12.33%) in Poslovni sistem Mercator in the amount of EUR 170 per share; • a minority stake (5.74%) in EMAG in the amount of EUR 3.5 per share; • t he estimated value of the investment in Birra Pejo (39.55%) is EUR 0, identical to the value of the futures contract for the purchase of shares of this company. Based on the valuation method used, the fair market value of the 97.89 percent ownership share in Pivovarna Union comprises EUR 197,239,654 or EUR 447 per share with a possible span ranging from EUR 383 to EUR 511 per share, surpassing the value of the investment disclosed in the ledger of Pivovarna Laško, d. d. by 16.75%.

b) Estimated value of the company Radenska, d. d., Radenci Valuation was carried out by an accredited business appraiser registered with the Slovenian Institute of Auditors. The valuation was based on the method of the current value of expected cash flows. The appraiser conducted the work on the basis of the financial statements of the company Radenska, d. d. as at 31 October 2010 and an assessment of operations until the last two months of 2010. When using this method, one first assesses the current value of free cash flows without repayments of interest and the principal value of loans (total equity value), which is then deducted by all financial liabilities of the company, and on the value thus

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ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

obtained premiums and discounts are taken into account. The value obtained in this way is then increased

156

by excess financial investments and unnecessary property. A separate valuation was conducted for the investments of a 19.2% share in the company Delo, d. d. and 2.6% share in Poslovni Sistem Mercator with the total equity stake of all companies of the Pivovarna Laško Group taken into consideration. The method of the current value of expected free cash flows without including debt was used in assessing the values of these investments. A required rate of return on total capital (WACC) ranging from 7.45 to 7.6% was using in the assessment. The Income Statement for the period January-October 2010 and the assessed potential of the company which is based on the average growth of net sales revenues of 2.2% a year according to the optimistic scenario and 0.7% according to the pessimistic scenario and an estimate of the share of operating profit in sales revenues (EBITDA margin) ranging from 9.2 to 12.8% according to the optimistic scenario and from 7.2 to 10.1% according to the pessimistic scenario were used as starting points for creating projections. Within the scope of the current values of surplus investments, the appraisal of investments into the Company’s 19.2 percent stake in the company Delo (whereby a majority stake has been established due to the total share of the Group comprising a majority ownership stake) and the 2.6% stake in Poslovni sistem Mercator whereby the total ownership stake comprising the stakes of companies in the Pivovarna Laško Group were included were appraised separately. The method of the current value of expected free cash flows without including debt was also used in assessing the values of these investments. All other financial investments in the company and surplus fixed assets are assessed in the amount of their market values (in the case of listed investments according the stock price) or book values (in the case of other investments). At the same time, the method of market comparison as a control method was also used in assessing the values of investments. Based on the valuation method used the fair market value of the 93.8% ownership share in Radenska comprises EUR 89,438,315 or EUR 19.00 per share, surpassing the value of the investment disclosed in the ledger of Pivovarna Laško, d. d. by 78.79%.

1936

As shown in the Business Report of this Annual Report, denationalization claims have been initiated against Radenska, d. d. The denationalization beneficiaries entered a notice of impending action in the land registry denoting disputes with regard to all land parcels which are the subject of the denationalization procedure. The entry of the notice of dispute was also carried out for the aforementioned brands of Radenska, d. d., Radenci. It is expected that resolution of the denoted denationalisation claims will be a long-term process and may significantly affect future operations of the company, and consequently the valuation of financial investments in the subsidiary.

4. B. Long-term financial investments in associated companies ( in EUR )

Share in capital

2010

20099

SHARES IN ASSOCIATED COMPANIES Thermana, d. d., Laško Total

20.63 %

1,594,000

On 31 December 2010 Pivovarna Laško, d. d., owned 645,003 shares of Thermana, d. d., representing a 20.63% ownership stake in the aforementioned company. The original purchase value of the investment comprised EUR 6,897,921. Based on an appraisal, the Company implemented an impairment of EUR 5,303,921 on investments in 2009, impairing the remainder by the amount of EUR 1,594,000 in 2010. The impairment was recognised based on the valuation from the previous year and in consideration of whether projected operations had been observed in the valuation. Thermana also acquired additional loans in 2010

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ANNUAL REPORT 2010

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which will have a negative effect on cash flows in future years.

158

The Company is discussing the possibility of the sale of the investment with the other owners, issuing a mandate for organisation of a sale to NLB, d. d., Ljubljana. The agreement regarding the implementation of the sale has been prepared and sent to owners with more than a 50% share in the investment who are interested in the joint sale of their stake as a package. Pivovarna Laško, d. d. signed the agreement on 20 December 2010. In February 2011 activities for obtaining the consent for the sale from the subscribers was carried out. On 28 February 2011 the agreement was signed and reconciled by NLB, d. d., Pivovarna Laško, d. d. and Zavarovalnica Triglav, d. d., which together represents a 44.85% ownership stake in Thermana, d. d. Reconciliation activities with the remaining potential signers of the agreement on the implementation of sales of shares is continuing.

4. C. Long-term financial assets available-for-sale ( in EUR )

2010

2009

Other investments in shares at the cost of purchase

320,942

6,948,760

Other investments in shares at the fair value Total

48,892,029

320,942

55,840,789

Movement of assets available-for-sale ( in EUR )

2010

2009

55,840,789

61,563,643

Balance as at 1st January

Changes in the year: Transfer to long-term financial investment in associated companies Revaluation Transfer to long-term assets held for sale Sales Balance as at 31st December

(3,837,454)

1,423,146

(1,885,400)

(56,724,195)

(218,798)

320,942

55,840,789

The value of available-for-sale long-term financial assets fell by EUR 55,519,847 compared to the previous year. The majority of the decrease in the amount of EUR 55,301,049 regards a transfer among short-term financial assets available-for-sale due to the planned divestment of the majority of investments. The Company transferred the investment in Poslovni sistem Mercator in the amount of EUR 50,069,435 and the investment in Etol, d. d. in the amount of EUR 57,708 to short-term assets available-for-sale. The denoted investments were reclassified to Class IV among long-term financial investments measured at fair value via capital. Both investments were revalued in 2010 by EUR 1,423,146. The long-term financial investments that had been valuated at cost and due to the planned divestment

83,574 the Primus Mutual Fund in the amount of EUR 83,459. The Company also sold its investment in Zavarovalnica Triglav, d. d. in 2010 thereby realising a financial gain of EUR 145,528 and the investment in Banka Celje, d. d. realising a capital gain of EUR 51,062.

5. Long-term loans Long-terms loans refer to long-term housing loans granted by the company to its employees for the purposes of solving their housing-related issues.

6. Long-term operating receivables ( in EUR )

2010

2009

Long-term receivables to others

573,467

670,316

Total

573,467

670,316

Long-term operating receivables refer to the production equipment for the Bandidos brand, which was given on financial lease to a business partner from Belarus.

ANNUAL REPORT 2010

Ceste Mostovi Celje, d. d., in the amount of EUR 238.355 EUR (5.49%), NLB funds in the amount of EUR

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(6.27%), shares of Elektra Gorenjska, d. d., in the amount of EUR 974.333 (1.6%), shares in the company

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko, d. d.

transferred to short-term assets are as follows: shares of Probanka, d. d., in the amount of EUR 5,217,259

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7. Long-term receivables for deferred tax Long-term receivables and liabilities for deferred tax are calculated on the basis of temporary differences using the liability method in consideration of a 20% tax rate. ( in EUR )

2010

2009

14,482,886

6,718,667

Changes in the profit and loss statement

1,097,155

7,687,102

Changes in the balance sheet

(143,861)

77,117

15,436,180

14,482,886

Begining of the year - claims for deferred tax

Total

As at 31 December 2010 the Company showed net long-term receivables from deferred taxes in the amount of EUR 14,343,155 which is EUR 987,613 less than in the previous year.

Movement of long-term receivables for deferred tax Liabilities to ( in EUR ) employees

Fair value (financial assets) Other

Total

RECEIVABLES FOR DEFFERED TAX

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ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

1 January 2009

160

398,901

4,313,882

2,005,884

6,718,667

Change in the profit and loss statement

(8,880)

9,336,428

(1,640,446)

7,687,102

Change in the comprehensive incomev vseobsegajočem donosu 31 December 2009

77,117

390,021

13,727,427

365,438

14,482,886

Change in the profit and loss statement

(73,919)

1,170,944

130

1,097,155

(143,861)

316,102

14,754,510

365,568

15,436,180

Change in the comprehensive incomev vseobsegajočem donosu 31 December 2010

The increase in long-term receivables for deferred tax equals EUR 953,294. Receivables in the amount of EUR 1,170,944 were formed due to the impairment of financial assets, increasing profit or loss. Due to an increase of financial assets to a higher fair value, the value of long-term receivables for deferred tax decreased by EUR 143,861 which had an effect on comprehensive income but not on profit or loss. Receivables for deferred tax decreased additionally due to a reduction in liabilities to employees in the amount of EUR 73,919. Long-term deferred tax liabilities refer to the conversion of long-term financial assets for sale and real estate to fair value, which is reflected in a revaluation surplus. A 20% tax rate was utilized.

8. Non-current assets available-for-sale ( in EUR )

2010

2009

Properties for sale

3,634,713

1,083,307

Other non-current assets held for sale

35,911,152

Total

39,545,865

1,083,307

The value of real estate which the Company intends to dispose of within one year was presented among non-short-term assets available for sale, namely the business storage spaces with appertaining land in Ljubljana, Hotel Hum and Hotel Savinja. The value of the real estate was disclosed at the assessed fair value. Non-current assets available-for-sale in the total amount of EUR 2,702,713 have been pledged as insurance for long- and short-term loans from banks. In accordance with IFRS 5 the Company classified the investment in the subsidiary Delo, d. d. valued at EUR 35,911,152 and the investment into the subsidiary Jadranska pivovara – Split, d. d. whose value on 31 December 2010 was zero among non-current assets available-for-sale.

1. Financial investment in the company Delo, d. d., Ljubljana a) Procedures in the sale of a 100% stake in the company Delo, d. d., Ljubljana

over the posted value. As a result the Company showed financial expenses in the amount of EUR 6,501,966. The Pivovarna Laško Group is selling its entire stake in the company Delo, d. d. In addition to Pivovarna Laško, d. d. which had an 80.13% ownership stake in the aforementioned company, the subsidiary Radenska, d. d. also has a 19.17% ownership stake in the company. Procedures connected to the sale of the investment commenced in October 2010 when a mandate for the organised sale was submitted to the company KPMG, d. o. o., Ljubljana. A detailed tax inspection of operations was performed by the companies Ernest&Young, d. o. o., Ljubljana and Schonherr (Austria) in November 2010. A call for bids in the newspapers Delo and Financial Times (UK) was published on 30 November 2010. The deadline for submitting interest in cooperation was 14 December 2010. On 21 December 2010 an informative memorandum was dispatched to the potential investors and seven non-disclosure agreements signed. The deadline for submitting non-binding bids was 28 January 2011. A number of non-binding offers arrived by this date however the offered prices were lower than expected. Discussions with tenderers were carried out in February regarding the possibility of increasing the non-binding bids. Discussions with three tenderers had been carried out by 1 March 2011 who will additionally obtain the Vendor due diligence for review and participate in a management presentation. The deadline for submitting the improved non-binding bids is 8 April 2011. If a decision is made to continue the procedures of sale, a detailed review of operations will be carried out in May 2011 and the contract on the sale of the investment signed by the end of July 2011. The deadline for final payment is dependent on acquisition of the consent of the Consumer Protection Office and Ministry of Culture.

ANNUAL REPORT 2010

investment in Delo, d. d. was EUR 35,911,152 or EUR 67 per share, representing a EUR 6,501,966 decrease

P I VOVA R N A L A Š KO D . D .

financial assets available-for-sale. Based on a valuation it was established that the fair value of the financial

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

Due to the procedure of sale in accordance with IFRS 5 the Company transferred investments into the subsidiary Delo, d. d. in the amount of EUR 35,911,152 from long-term financial investment to short-term

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b) Estimated value of the company Delo, d. d. Valuation was carried out by an accredited business appraiser registered with the Slovenian Institute of Auditors. The subject of the valuation was the majority ownership stake in the company for together the Pivovarna Laško Group has a 100% ownership stake enabling the owner to influence the adoption of decisions in the management body of the Company and on the formation of strategies and business decisions. The valuation was based on the method of the current value of expected free cash flows while the methods of comparable companies and comparable transactions were used as control methods. The appraisers started their work from the assumption that the company’s market value equalled the current value of expected free cash flows in accordance with the general financial assumption that the company’s value equalled the sum of all future benefits which it brings to its owner. The method of the current value of expected free cash flows without including debt was used in assessing the value of the company. The valuation is based on the financial statements of Delo, d. d. On this basis the current value of free cash flows without the repayments of interest and the principal value of loans is first assessed. Following that, the obtained value is deducted by all financial liabilities of the company, and the value obtained in this way is corrected for possible potential liabilities, premiums and discounts, and increased by the value of surplus funds and excess financial investments. The valuation took into account the assessment of the operations of the company and business plan of the company Delo, d. d., for 2011, which according to the appraisers is optimistic. The Strategic Business Plan 2010-2014 and potential of the Group on the basis of an analysis of branches in which the company operates was taken into consideration for assessing future yield. The business plan is not an accurate forecast of

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ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

future operations.

162

The appraisers assessed that the Strategic Business Plan of the Delo, d. d. 2010-1014 was optimistic and reflected the company’s potential. Due to a decline in sales and non-fulfilment of the plan in 2010, the strategic plan was taken into consideration in the valuation projections using a deviation (of one or two years). Net sales revenues during the forecasted period (2010-2016) will grow by an average annual rate of 4.9% according to the optimistic scenario and by 3.8% according to the pessimistic scenario. The greatest growth in revenues will originate from a growth in advertising revenues, particularly from Internet revenues where the company will continue with the development of a new website for all issues of Delo. The growth of revenues from editions (average annual growth of 3.0% optimistically or 2.5% pessimistically) was, in addition to the improved economic situation, also due to the contextual quality and contextual and graphic redesign of the issues. The strengthening of the brand and introduction of new editorial information system has had an additional effect on the accessibility of Delo on a number of media platforms (Internet, mobile phones) and provided a possibility of calculating the digital contents of users. The level of earnings from operations (EBIT) was planned at 10.9% of sales revenues in 2016 according to the optimistic scenario and at 8.3% according to the pessimistic scenario which is in accordance with the long-term and current (2010) average in the branch. A portion of the assessed value originates from the surplus of financial investments and surplus assets in the company Delo. The value of financial investments in the company Večer was observed in the book value of EUR 9,250.00 which reflects the sales price. Similarly, a portion of the assessed value represents the market value of the subsidiary Izberi, d. o. o. (100% owned by Delo, d. d.) as at 31 December 2010. A required rate of return on total capital (WACC) of 9.9% taking into account a 10% discount for lack of liquidity was used in the assessment. The market share of the company in the market (leading newspaper agency), strength of its brands as well as the strategic and political position of the company were also taken into account. When determining the discount, the fact that the appraiser did not observe the full potential of the company as envisaged in the company’s strategic plan (also not taking into consideration the company’s strategic plan in the optimistic scenario) should be taken into account.

Based on these assumptions, the market value of the 100% ownership stake as at 31 December 2010 amounted to EUR 45,572,000 or EUR 68.5 per share. Due to the commencement of procedures for the sale of the aforementioned company, Pivovarna Laško, d. d. is obliged in accordance with IFRS 5 (Non-current assets available-for-sale and established operations) to measure non-current assets (or group for divestment) classified under assets available-for-sale according to their book or fair values, decreased by the costs of the sale which is lower. In accordance with IAS 36 the Company showed an impairment of EUR 6,501,965 of the investment, thereafter transferring the impaired investment whose value on the last day of 2010 comprised EUR 35,911,152 to short-term assets available-forsale. The fair value according to accounting standards is contextually usually equal to the market value as the base value within the framework of standards for valuating companies. Therefore the appraiser, within the scope of these values, assessed the market value decreased by the costs of the sale which comprises direct costs of the sale or divestment. The fair value decreased by the costs of the sale for the 100% equity capital of the company Delo on 31 December 2010 for the purpose of financial reporting in accordance with IFRS 5 amounted to EUR 44,428,000 or EUR 67 per share.

2. Financial investment in Jadranska pivovara – Split, d. d. a) Procedures in the sale of a 99.11% stake in the company Jadranska pivovara – Split, d. d. The management of Pivovarna Laško decided in 2009 that due to its poor financial position and for rationalization purposes it would terminate production in Jadranska pivovara, relocating production to Laško, and

in the Croatian newspaper Poslovni dnevnik and on the Mergemarkt business portal on 26 November 2011, The company Caper prepared a list of potential buyers sending them a teaser by 17 December 2010. The informative memorandum prepared on 24 December 2010 was submitted to two potential buyers, namely SABMiler and Bavaria NV. The deadline for submitting non-binding bids was 2 March 2011. Prior to this date an inspection of Jadranska pivovara was carried out for interested buyers. The deadline for the submission of non-binding offers was extended twice. During this time both SABMiler and Bavaria NV withdrew from their offers however a new buyer appeared, Arena, d. o. o., Split. Despite the extended deadline for the submission of bids to 25 March 2011, Arena, d. o. o. did not submit a bid. The Management Board established the sales procedure as unsuccessful and will adopt a decision regarding further procedures.

b) Estimated value of the company Jadranska pivovara – Split, d. d. Based on the assessment of the investment from 2008, the book value in the ledgers of Pivovarna Laško, d. d. is equal to zero. In 2009 a value assessment of the investment was not performed however a valuation of real estate and moveable property was. In 2010 the Company reviewed the latest value assessment and assessed that no new circumstances or facts existed that would point to the value of the moveable property and real estate significantly changing compared to the latest valuation. Considering that the investment has a posted value of zero, a new value assessment of the investment is unnecessary for there are no indications of an improved financial state of the denoted company.

ANNUAL REPORT 2010

In autumn 2010 a mandate for the sale of the 99.11% stake in Jadranski pivovari – Split, d. d. was therefore submitted to the company Caper, d. o. o., Zagreb. The intention to sell the stake publically was published

P I VOVA R N A L A Š KO D . D .

also the filling of beer. The Company intensively sought a buyer throughout the year however no transaction was concluded with individual buyers interested in acquiring the production line.

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

sell the production line to the most favourable bidder. Its forecast regarding the relocation of production was realised in 2010. In April 2010 Jadranska pivovara ceased the production activity and in the autumn of 2010,

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9. Inventories ( in EUR )

2010

2009

Material and raw material

5,929,076

6,914,834

Unfinished production

749,917

791,506

Products

1,813,588

3,124,663

Merchandise

385,381

292,136

Total

8,877,962

11,123,139

The value of inventories compared to the previous year decreased by EUR 2,245,177 or by 20.2%. The value of finished products and materials especially decreased. No inventories were pledged as at 31 December 2010 nor any revaluation of the values of inventories implemented. The book value of inventories does not exceed their net recoverable value.

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ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Inventory surpluses and deficits

164

( in EUR )

2010

2009

Inventory surpluses

16,603

32,524

Inventory shortages

(14,834)

(26,576)

No substantial deficits or surpluses were established during the regular annual inventory.

10. A. Short–term operating receivables ( in EUR )

2010

2009

14,280,076

15,117,584

Short-term trade operating receivables: on the domestic market on foreign markets

3,746,424

4,024,214

Less value adjustment

(4,975,710)

(4,835,059)

Total

13,050,790

14,306,739

Short-term oparating receivables on others

1,008,951

697,700

Advances

30,903

137,949

Less value adjustment

(91,310)

Total

13,999,334

15,051,078

As at 31 December 2010 the Company disclosed EUR 13,999,334 in short-term operating receivables, representing a EUR 1,051,744 reduction over the amount on the last day of the previous year. Due to decreased sales, short-term operating receivables from domestic buyers predominantly decreased. The disclosed value of short-term operating and other receivables reflects their fair values.

Value adjustments of short-term operating receivables ( in EUR )

2010

2009

Balance as at 1st January

4,835,059

2,599,720

Recovered receivables written-down

(163,089)

(204,551)

Final write-down of receivables

(240,813)

(62,599)

Decrease in value correction in the year

544,553

2,502,489

Balance as at 31st December

4,975,710

4,835,059

The value adjustment of trade receivables increased due to a lawsuit in the amount of EUR 128,978 and due to a value adjustment for interest charged from loans granted to Jadranska pivovara – Split, d. d. in the amount of EUR 415,575. Write-offs of receivables decreased in the amount of EUR 240,813 and due to collected claims in the amount of EUR 163,089.

Maturities of trade receivables ( in EUR )

2010

2009

12,265,405

890,124

1,888,743

from 30 to 60 days

183,692

141,897

from 60 to 90 days

50,861

66,037

above 90 days

4,727,670

4,779,716

Balance as at 31st December

18,026,500

19,141,798

Trade receivables in the amount of EUR 1,761,219 are insured through guarantees in the amount of EUR 2,049,000. As at 31 December 2010 the Company had loans received insured through trade receivables in the amount of EUR 9,500,000.

10. B. Short-term receivables for excess corporate income tax payment The Company showed a tax loss of EUR 651 in its 2010 tax return. The uncovered tax loss as at 31 December 2010 comprised EUR 1,274,977 and applies to the established and uncovered tax loss in 2008 and 2010. In 2009 the Company did not show a tax base therefore it did not pay advance corporate income tax in 2010.

ANNUAL REPORT 2010

12,174,153

P I VOVA R N A L A Š KO D . D .

unmatured up to 30 days

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

TRADE RECEIVABLES

165

11. Short-term financial assets available-for-sale ( in EUR )

2010

2009

Available - for sale short term financial assets at cost of purchase

6,571,334

Available - for sale short term financial assets at fair value

50,127,215

Total

56,698,549

As at the last day of 2010 the value of short-term financial assets available-for-sale amounted to EUR 56,698,549 and was transferred from long-term financial investments in their entirety in 2010 due to the envisaged sale thereof in 2011.

1. Financial investment in the company Poslovni sistem Mercator, d. d., Ljubljana As at 31 December 2010 the Company was the owner of 317,498 MELR shares (8.43%), which taking into account a market value of EUR 157.70 per share on 31 December 2010, amounts to EUR 50,069,435. The fair value of the aforementioned stake as at 31 December 2010 is EUR 908,746 lower than the acquisition cost, which amounted to EUR 50,977,838 or EUR 160.56 per share.

a) Procedures in the sale of a 23.43% stake in the company PS Mercator, d. d., Ljubljana Following unsuccessful discussions with banks, the Supervisory Board of Pivovarna Laško, d. d. instructed the Management Board to implement the public sale of the MELR shares. A contract on consultation for the

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

sale was signed with NLB, d. d. on 3 February 2011. A public tender for the sale of the 23.43% stake in the

166

company PS Mercator owned by the Pivovarna Laško Group was published on 4 February 2011. The deadline for the submission of binding offers was denoted in the public tender, namely 9 March 2011. In conjunction with the public sale, negotiations with the financial fund Mid Europa Parnters LTD from Great Britain were carried out in February. Three offers had been received by 9 March 2011 from: Mid Eura UK, Agrokor HR and Warburg Pincus US.

2. Other financial investments available-for-sale Due to intended sale, the Company transferred the following investments from long-term financial investments to short-term financial assets available-for-sale: shares of Probanka, d. d., in the amount of EUR 5,217,259 (6.27%), shares of Elektra Gorenjska, d. d., in the amount of EUR 974,333 (1.6%), shares in the company Ceste Mostovi Celje, d. d., in the amount of EUR 238,355 (5.49%), and shares in the company Etol Celje, d. d. in the amount of EUR 57,780 (0.21%). At the same time it also transferred the already realized sale of its investment in NLB skladi in the amount of EUR 83,574 and investment in the Primus mutual fund in the amount of EUR 83,459 from long-term financial investments. All investments except the one in the Etol shares are valuated according to the cost model. On the last day of 2010 an impairment review of all assets available-for-sale was made. On this basis, an impairment of the investment into the shares of the company Elektro Gorenjska, d. d. in the amount of EUR 27,065 was disclosed whose effect was reflected in financial expenses.

Movement of short-term financial assets available-for-sale ( in EUR )

2010

2009

Balance as at 1st January

Transfer from long term financial investment

56,698,549

Balance as at 31st December

56,698,549

2010

2009

Changes in the year:

12. Short–term loans ( in EUR )

Short -term deposits

2,000,738

11,213

Short -term loans

17,926,875

13,298,875

Less value adjustment

(17,676,875) (12,748,875)

Total

2,250,738

561,213

Short-term loans granted to the subsidiary Jadranska pivovara – Split, d. d. increased by EUR 3,228,000 in 2010, whereby a portion of the granted loans in the amount of EUR 1,863,905 represented a surety given to Jadranski in previous years, for which a liability arose in 2009 (accrued costs and deferred revenues) for which a value adjustment was formed for the entire amount which had an effect on profit or loss for 2009. A

this manner since a great probability exists that the loans will not be repaid. Short-term loans granted to other entities decreased by EUR 300,000 in 2010 while deposits at banks increased by EUR 1,989,525.

Movement of short-term granted loans Debt position ( in EUR ) 1/1/2010

Change in the initial New loans Repaiments Impairment state in year 2010 in year 2010 in 2010

Transfer to Long term Debt position passive accruals 31/12/2010

Subsidiaries companies

5,149,262 5,149,262

3,228,000

9,849,613 9,299,613

14,998,875 14,448,875

3,228,000

- 1,364,025

1,863,975

250,000

300,000 1,364,025

1,863,975

250,000

Other companies Total

300,000

The interest rate for short-term loans in 2010 amounted to an average of 5.9%. The disclosed value of short-term loans reflects their fair value.

ANNUAL REPORT 2010

for loans exceeding the value of the surety. The value adjustment of short-term loans was implemented in

P I VOVA R N A L A Š KO D . D .

nancial expenses arising from impairment of loans granted were disclosed in the amount of EUR 1,364,095

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

value adjustment was performed for the entire loan sum for 2010 given to Jadranski pivovari – Split, d. d. Fi-

167

13. Cash in banks, cheques and cash in hand ( in EUR )

2010

2009

Cash in banks

16,323

47,967

Cash in hand and received cheques

27,633

23,555

Cash items in the process of collection

52,844

57,761

Total

96,800

129,283

2010

2009

14. Deferred costs and accrued revenues ( in EUR )

Deferred cost and accrued revenues

27,850

942

Total

27,850

942

15. Capital The capital of Pivovarna Laško, d.d. comprises called-up capital, capital reserves, revenue reserves, retained profit or loss from previous years, surpluses from the revaluation of financial investments classified into assets-for-sale and also not-yet distributed profit for the financial year.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Share capital is shown as registered capital (capital from stakes or financial investment loans). Share

168

capital is divided into called-up share capital and uncalled share capital. Uncalled share capital is a deduction from share capital. Called-up capital of the company Pivovarna Laško, d. d. is defined in the company Statute and amounts to EUR 36,503,304.96. It is divided into 8,747,652 freely transferable registered nominal shares. Each share gives its owner a voting right at the annual General Meeting of Shareholders and to participate in profits. The nominal value of called-up capital amounted to EUR 36,503,304.96. Capital reserves on the last day of 2010 amounted to EUR 79,980,488 having decreased in 2010 due to the recommendation of the management Board to cover current loss in the amount of EUR 5,580,959. Capital reserves in the amount of EUR 102,377,721 were formed due to paid-in capital surplus following two implemented capital injections from shareholders which exceeded the nominal value of paid-in shares by the amount of EUR 79,231,564 and a general revaluation adjustment of capital for the purpose of maintaining the real value of capital in the amount of EUR 23,146,157. Legal reserves in the amount of EUR 3,650,331, reserves for own shares in the amount of EUR 550,896 and own shares as a deduction item in the amount of EUR 12,068 were shown under reserves. Reserves for own shares decreased in 2010 due to a revaluation of EUR 498,309 due to the sale of 3,297 lots of PILR comprising EUR 52,587 which the subsidiary Pivovarna Union, d. d. sold to its emplyees. Pivovarna Laško, d. d. did not acquire any treasury shares in 2010. As at 31 December 2010 Pivovarna Laško, d. d. owned 755 lots of PILR shares, Radenska, d. d. 21,195 lots, Pivovarna Union, d .d. 6,287 lots and Fructal, d. d. 13,087 lots. Treasury shares were recalculated to the listed price on 31 December 2010 which comprised EUR 15.99 per share. The decline in the values of shares had an effect on decreasing the capital of individual companies in the financial statements. Pivovarna, d .d. as the parent company has formed reserves for own shares for the total value of shares owned by companies in the Pivovarna Laško Group. Reserves for own shares decreased by EUR 550,896 at the cost of other revenue reserves.

Legal reserves may only be used for covering losses. A revaluation surplus was created from revaluation effects of financial assets available-for-sale and real estate at fair value. Long- and short-term financial investments of the Company, measured at fair value are classified as investments available-for-sale. The fair values of gains or losses from these investments are directly reflected in equity capital and the revaluation surplus. Due to a reduction in the share price the Company in 2010 due to a recalculation of MELR shares to their fair value increased the revaluation surplus by EUR 1,294,440 and decreased the revaluation surplus from revaluation of other long-term financial investments by EUR 12,096 and due to the dissolution thereof because the sale of investments in the amount of EUR 124,777. No value assessments of real estate were performed in 2010 therefore the revaluation surplus under this heading has not changed. The change in revaluation surplus under the heading of revaluations of financial assets available-for-sale is as follows:

2009

Revaluation on fair value

1,267,174

(1,502,509)

Liabilities from deferred tax

(109,542)

65,734

Total

1,157,632

(1,436,775)

Ownership structure as at 31 December 2010 Shareholder

Participation in %

NLB, d. d.

23.512 %

Kapitalska družba, d.d.

7.059 %

Hypo Alpe-Adria-Bank AG

7.036 %

Probanka, d. d.

7.029 %

GB, d. d. Kranj

6.201 %

Skagen Kon-tiki Verdipapirfond

5.708 %

NFD 1 Delniški investicijski sklad, d. d.

5.104 %

Abanka, d. d.

3.263 %

Banka Celje, d. d.

2.886 %

Banka Koper, d. d., Dvojezična firma: Banka

2.635 %

Infond Holding, d. d., - v stečaju

2.330 %

CPM, d. d.

1.622 %

D.S.U., d. o. o.

1.557 %

Infond, d. o. o., - PE Uravnoteženi vzajemni

1.410 %

Probanka upravljanje, d. o. o., - PE Vzajemni

1.129 %

Nova KBM, d. d.

1.002 %

Other small shareholders Total

20.516 % 100.000 %

ANNUAL REPORT 2010

2010

P I VOVA R N A L A Š KO D . D .

( in EUR )

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

Financial assets available-for-sale

169

The book value of the shares of Pivovarna Laško, d. d. as at 31 December 2010 in accordance with IFRS totals EUR 14.19. The market value of the shares at the end of 2010 amounted to EUR 15.99, which exceeded the book value by 12.6%.

16. Provisions for long–term accrued costs and deferred revenues 16. A. Provisions for severance pay and jubilee awards ( in EUR )

2010

2009

Reservations for benefits and tenure awards

1,105,422

1,456,443

Total

1,105,422

1,456,443

Provisions are formed for foreseen severance payments and payments of jubilee awards for long-time service of employees on the balance sheet date, discounted by the current value. Provisions were formed for expected payments. When calculating potential liabilities from severance pay the provisions of the Decree on tax treatment for the reimbursement of costs and other income from the employment relationship must be taken into account; if the amount of severance pay exceeds the amount form the Decree on tax treatment for the reimbursement of costs and other income from the employment relationship the employer must also pay

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

employee contributions in the amount of 16.1% for the surplus amount.

170

Overview of additional assumptions:

• the growth of average wages in the Republic of Slovenia is assumed to be 3.5% annually and represents the estimated long-term growth of wages;

• t he growth of severance payment amounts upon retirement and jubilee awards in the amount of 3.5% annually from the Decree on tax treatment for the reimbursement of costs and other income from the employment relationship is taken into account in the calculation;

• t he calculation of liabilities from reverence payments is tied to the retirement service period of each individual employee. The selected discounted interest rate is 4.90% annually as the amount at the end of December 2010 amounted to a yield of 10-year company bonds with a high credit rating in the Euro zone.

Movement of provisions for severance pay and jubilee awards ( in EUR )

1 January 2010 Increase

Benefits at retirement

Tenure awards

Total

1,145,832

310,611

1,456,443

110,235

Decrease

(78,894)

(29,059)

(107,953)

Decrease

(348,663)

(4,640)

(353,303)

718,275

387,147

1,105,422

31 December 2010

Provisions for severance pay and jubilee awards decreased by EUR 107,953 in comparison to 2009 due to actual retirements as well as a change in the employee structure and changed conditions of retirement by the amount of EUR 243,068.

16. B. Long–term accrued costs and deferred revenues ( in EUR )

2010

2009

Long-term passive accruals

1,344,963

2,931,828

Total

1,344,963

2,931,828

The long-term accrued costs and deferred revenues relate to the surety given to Jadranska pivovara – Split, d. d. for loans taken out with banks, namely the long-term portion of the loan in the amount of EUR 1,209,343 for which a value adjustment was carried out in 2009, recognised under financial expenses. A portion of the long-term accrued costs and deferred revenues in the amount of EUR 135,620 regards an exemption for the contribution pension and disabled insurance for disabled persons over the defined quota, which can only be used for the purposes defined in Article 61 of the Vocational Rehabilitation and Employment of Disabled Persons Act – ZZRZI (investments into operating assets connected to the work of disabled persons, improvement of working conditions for disabled persons, maintenance and creation of new job positions for disabled persons, etc.).

Created in 2010

Position 31/12/2010

43,390

135,620

Long term passive accruals - the quota of disabled

92,230

- guarantee JP

2,839,598

(1,630,255)

1,209,343

Total

2,931,828

(1,630,255)

43,390

1,344,963

Long term passive accruals

Long-term accrued costs and deferred revenues decreased by EUR 1,630,255 in 2010 due to the transfer of the current portion of liabilities from the surety to Jadranska pivovara to short-term accrued costs and deferred revenues and the increased exemption for disability pension insurance for disabled persons in the amount of EUR 43,390.

17. Long-term liabilities 17. A. Long-term financial liabilities ( in EUR )

2010

2009

Long-term loans obtained from banks

73,723,973 160,262,504

Transfer to short-term financial liabilities

(27,601,738) (105,998,718)

Total

46,122,235

54,263,786

ANNUAL REPORT 2010

Position 1/1/2010 Eliminated

P I VOVA R N A L A Š KO D . D .

( in EUR )

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

Movement of long-term accrued costs and deferred revenues

171

Long-term financial liabilities regard long-term loans received from banks. In comparison to the previous year, the value of long-term loans decreased by EUR 8,141,551 EUR. The interest rate for long-term loans in 2010 amounted to an average of 5.6%. The disclosed value of longterm loans reflects their fair value.

Maturities of long-term loans ( in EUR )

2010

2009

Maturity from 4 to 6 years

4,204,044

8,299,304

Maturity from 2 to 4 years

18,074,866

18,441,258

Maturity from 1 to 2 years

23,843,327

27,523,224

Short-term part of long-term financial liabilities

27,601,736 105,998,718

Total

73,723,973 160,262,504

In 2010 Pivovarna Laško, d. d. took out a total of EUR 8,577,229 in new long-term loans from banks and achieved a conversion of short-term loans to long-term loans in the amount of EUR 7,730,000. It also repaid EUR 20,756,391 in long-term loans in 2010. In 2011 the amount of EUR 27,601,738 in long-term loans will fall due for payment, in 2012 EUR 23,843,327, in 2013 EUR 10,897,834, in 2014 EUR 7,177,032 and in 2015

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

EUR 4,204,044 EUR.

172

173

8,577,229

7,730,000

5,230,000

2,500,000

Changes from short-term

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko, d. d.

Total banks

ANNUAL REPORT 2010

100,376,933

160,262,504

Bank 5

P I VOVA R N A L A Ĺ KO D . D .

85,571

58,500,000

Bank 3

Bank 4

1,300,000

Bank 1

Main debt New loans 1.1.2010 in year 2010

Bank 2

( in EUR )

Maturities of long-term loans

80,789,371

22,289,371

58,500,000

22,056,391

20,461,973

74,418

220,000

1,300,000

Transfer between short- Repaiments term loans in year 2010

73,723,971

66,202,818

11,153

5,010,000

2,500,000

Main debt 31.12.2010

27,601,737

25,734,870

11,153

1,320,000

535,714

A part that is due in 2011

46,122,234

40,467,948

3,690,000

1,964,286

Long-term part

To insure the long-term loans The Company pledged 429,339 shares of Pivovarna Union, d. d. which comprises 95.2% of all shares of Pivovarna Union, d. d., 180,404 shares of Poslovni sistem Mercator, d. d., or 4.8% of all shares in the aforementioned company and 270,648 shares of Elektra Gorenjska, d. d. or 1.6% of all shares of this company. The book value of the pledged shares as at 31 December 2010 comprised EUR 194,263,155. A portion of the long-term loans were insured through a mortgage in the amount of EUR 23,481,480. The value of all unpaid long-term loans which were insured through shares, a mortgage, liens on moveable assets and receivables amounted to EUR 46,122,235 as at 31 December 2010.

17. B. Long-term deferred tax liabilities ( in EUR )

2010

2009

Long-term deferred tax liabilities

1,093,025

1,127,344

Total

1,093,025

1,127,344

Long-term deferred tax liabilities in the amount of EUR 1,093,025 in the financial position were decreased by the amount of deferred tax receivables. The amount of long-term deferred tax liabilities did not essentially change in comparison to 2009.

Movement of long-term deferred tax liabilities

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

( in EUR )

174

Fair value (properties, buildings)

Fair value (financial assets)

Total

LIABILITIES FOR DEFERRED TAX 1 January 2009

1,092,511

34,833

1,127,344

31 December 2009

1,092,511

34,833

1,127,344

(34,319)

1,092,511

514

1,093,025

Change in the balance sheet 31 December 2010

The long-term deferred tax liabilities refer to a revaluation of real estate that was performed in 2008 in the amount of EUR 1,092,511 and the revaluation of financial assets available-for-sale to their fair value in the amount of EUR 514.

18. Short-term liabilities 18. A. Short–term operating liabilities ( in EUR )

2010

2009

Short-term liabilities to companies in the Group as suppliers

4,603,366

4,822,061

Short-term liabilities to other suppliers

7,181,607

6,646,439

to employees

591,793

1,219,303

to the state

4,396,447

3,726,686

Short-term liabilities for advances

116,620

465,892

Short-term oparating liabilities to others:

Other short-term liabilities

358,117

368,283

Total

17,247,950

17,248,664

The largest share of short-term operating liabilities comprised trade payables in the amount of EUR 11,781,355 which in comparison to the previous year did not significantly change and represented 68.3% of all short-term operating liabilities. Liabilities to companies in the Group represented 39% of all trade payables. This was followed by liabilities to the State in the amount of EUR 4,396,447 related to value added tax, excise duties and tax contributions from the 2010 salaries and wages which were paid out in 2011. Employee liabilities comprising EUR 591,793 were EUR 627,510 lower than in the previous year due to the calculation of the 13th month salary for 2009.

18. B. Short-term tax liabilities As at 31 December 2010 the Company as on the last day of 2009 did not disclose any corporate income tax liabilities. The Company showed a surplus of tax revenues over expenses in the amount of EUR 22,482 in 2010. The tax base for 2010 amounted to EUR 159,691. Uncovered tax loss on the last day of 2010 amounted to EUR 1,274,977.

2009

Short-term part of long-term financial liabilities

27,601,737

105,998,718

Short-term financial liabilities for interest from loans

2,229,175

1,654,675

Short-term loans obtained from the companies in the Group

41,245,435

26,400,000

Short-term loans obtained from banks

147,724,934

80,398,453

Other short-term financial liabilities

928,672

751,142

Total

219,729,953

215,202,988

As at 31 December 2010 short-term financial liabilities amounted to EUR 219,729,953. Short-term loans taken out at banks amounted to EUR 175,326,672 and for the companies in the Group EUR 41,245,435.

Movement of short-term loans from banks Debt position New loans ( in EUR ) 1/1/2010 in year 2010

Short term part of Repaiments long term loans in year 2010

Debt position 31/12/2010

Bank 1

6,800,000

535,714

3,800,000

3,535,714

Bank 2

7,400,000

69,817

7,330,183

Bank 3

11,428,571

1,428,571

10,000,000

Bank 4

81,418,183

16,200,000

25,734,870

46,118,182

77,234,871

Bank 5

11,400,000

Bank 6

863,031

2,131,720

2,994,751

Bank 7

5,780,000

1,320,000

5,780,000

1,320,000

Bank 8

2,000,000

Bank 9

58,500,000

5,000,000

53,500,000

Bank 10

80,535

11,153

80,535

11,153

Bank 11

2,726,851

39,819,102

36,545,953

6,000,000

186,397,171

60,150,822

27,601,737

98,823,058

175,326,672

Total banks

ANNUAL REPORT 2010

2010

P I VOVA R N A L A Š KO D . D .

( in EUR )

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

18. C. Short–term financial liabilities

175

The value of short-term financial liabilities on the last day of 2010 amounted to EUR 219,729,953 which had increased by EUR 4,526,965 compared to the previous year. Short-term loans from banks decreased by EUR 11,070,500 while short-term loans acquired from banks by the companies in the Group increased by EUR 14,800,000. The average interest rate for short-term loans from banks in 2010 comprised 5.4% and for short-term loans obtained by companies of the Pivovarna Laško Group by 5.91%. The disclosed value of short-term loans reflects their fair value. To insure the short-term loans the Company pledged 539,516 shares (80.83%) of Delo, d. d., 3,739,803 shares (73.88%) of Radenska, d. d., 10,956 shares (2.4%) of Pivovarna Union, d. d., 137,094 shares (3.6%) of Poslovni sistem Mercator, d. d., 213,115 shares (6.27%) of Probanka, d. d., Maribor and 645,003 shares (20.6%) of Thermana, d. d., Laško. The book value of the pledged shares as at 31 December 2010 comprised EUR 106,254,467. A portion of the short-term loans are additionally insured with a mortgage and a lien on moveable assets and investment real estate. The book value of the pledged real estate, moveable assets and investment real estate as at 31 December 2010 comprised EUR 16,716,044. Short-tem loans of the Company are also insured through receivables whose value as at 31 December 2009 amounted to EUR 9,500,000 and a lien on the real estate of the company Fructal, d. d. whose book value on 31 December 2010 amounted to EUR 9,791,377 and a lien on brands in the amount of EUR 50,000,000. The value of all unpaid short-term loans which were insured through shares, a mortgage and liens on moveable assets, investment real estate and receivables amounted to EUR 175,326,671 as at 31 December 2010. Short-term loans in the amount of 41,245,435 which the Company obtained from its subsidiaries are insured with bills of exchange.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

19. Accrued costs and deferred revenues

176

( in EUR )

2010

2009

Accrued costs and deferred revenues

6,138,742

6,385,730

Total

6,138,742

6,385,730

Accrued costs and deferred revenues decreased due to the repayment of loans taken out by the subsidiary Jadranska pivovara – Split, d. d. which were repaid through the surety given by Pivovarna Laško, d. d. which due to its poor financial situation Jadranska pivovara, d. d. was unable to repay. The value of the surety for the loan to Jadranska pivovara – Split, d. d. at the end of 2009 amounted to EUR 5,110,524 and on the last day of 2010 EUR 2,037,275. The short-term portion of the surety shown among accrued costs and deferred revenues decreased by a payment in the amount of EUR 1,863,905 and increased by the short-term portion of the surety in the amount of EUR 1,630,254. Liabilities arising from the lien on 345,304 shares of Radenska, d. d. which represents a 6.8% ownership stake in the denoted company are also shown among accrued costs and deferred revenues. Pivovarna Laško, d. d. showed liabilities in the amount of EUR 3,637,650 under this heading among accrued costs and deferred revenues which is identical to the book value of the pledged shares. The previous management board of Pivovarna Laško, d. d. pledged 345,304 shares of Radenska, d. d. for a loan in the amount of EUR 6,250,000 which had been taken out with the Nova kreditna banka Maribor by its controlling company at that time Center naložbe, d. d. Since Center naložbe, d. d. failed to repay the loan upon maturity the creditor Nova kreditna banka Maribor, d. d. based on the contract on the lien of securities, filed an application for execution. The Company filed an appeal against the execution decision however the judicial proceeding has not yet been concluded.

The Company also shows liabilities to employees for unused work hours performed and unpaid holiday leave among accrued costs and deferred revenues. The value of these liabilities did not essentially change in comparison to the previous year.

20. Analysis of revenues from sales and expenses 20. A. Analysis of revenues from sales by key products ( in EUR )

2010

2009

Beer

73,197,493

79,877,888

Other beverages (water)

821,735

914,096

Sale revenues of merchandise - Horeca channel

16,211,970

17,449,257

Sale revenues of merchandise and materials

238,749

554,161

Other

817,706

867,135

Total

91,287,653

99,662,537

Sales revenues decreased by 8.4% in comparison to the previous year. Revenues from the sale of products and services on the domestic market decreased by EUR 7,849,567 and on the foreign market, increased by EUR 1,150,178. Revenues from the sale of merchandise in the Horeca distribution channel also decreased, namely by EUR 1,582,990. The share of beer sales in total revenues from the sale of products and services

2010

2009

Sale revenues of products and services in Slovenia

81,014,449

90,447,006

Sale revenues of products and services on foreign markets

10,273,204

9,215,531

Total

91,287,653

99,662,537

Sales revenues on the domestic market decreased by EUR 9,432,557 in comparison to the previous year, while they increased by EUR 1,057,673 on the foreign market. Although the greatest share of revenues on foreign markets is still achieved in the markets of former Yugoslavia, the share of sales in the EU has been increasing.

20. C. Other operating revenues ( in EUR )

2010

2009

Revenues from elimination reservations

379,776

138,754

Other operating revenues (approved superrabats…)

233,240

109,802

Revaluation operating revenues (elimination of impairment, …)

254,325

705,535

Revaluation revenuse from investment properties

137,899

Other operating revenues - customers (interest on arrears, exchange differences) 54,023 Total

1,059,263

7,175 961,266

ANNUAL REPORT 2010

( in EUR )

P I VOVA R N A L A Š KO D . D .

20. B. Analysis of revenues from sales by country

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

comprises 97.5%, for sales of water 1.1% and for services 1.4%.

177

20. D. Analysis of costs by category ( in EUR )

2010

2009

Expenses of merchandise sold - Horeca channel

16,213,903

17,759,586

Expenses of materials and mercdandise sold

23,804,131

27,186,764

Expenses of services

20,410,652

18,093,670

Depreciation

6,996,074

6,908,571

Expenses of salaries

7,425,529

7,708,443

Benefits on payments for social security

1,269,656

1,364,976

Other labor costs

1,575,460

1,592,758

Revaluation operating expenses at fixed assets

48,472

37,482

Revaluation operating expenses at reverse assets

146,027

2,512,508

Costs of reservations

110,235

261,542

Other operating expenses

1,770,318

1,637,055

Total

79,770,457

85,063,355

Operating expenses in comparison to the previous year decreased by EUR 5,599,632 or by 6.6%. The greatest decrease in expenses was observed for costs of materials which decreased by EUR 3,382,632 EUR or by 12.4%. The acquisition value of merchandise and value adjustment of receivables also significantly decreased. Costs of services increased by EUR 2,316,982 EUR or by 12.8%. Out of all costs of services, costs

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a ĹĄ ko, d. d.

of marketing increased the most.

178

20. E. Costs by functional group Year 2010 ( in EUR )

Production expenses of sold Expenses of products and goods selling

Cost of general activities

Total

Expenses of merchandise sold - Horeca channel

16,213,903

23,125,737

379,615

298,779

23,804,131 20,410,652

Expenses of materials and mercdandise sold Expenses of services

2,720,203

13,768,762

3,921,687

Depreciation

5,493,739

526,259

976,076

6,996,074

Expenses of salaries

4,524,364

3,002,812

2,743,469

10,270,645

15,725

10,603

22,143

48,471

135,895

10,132

146,027

Revaluation operating expenses at fixed assets Revaluation operating expenses at reverse assets Costs of reservations Other expenses Total

58,233

29,278

22,724

110,235

340,310

50,434

1,379,575

1,770,319

36,278,311

34,117,561

9,374,585

79,770,457

Production costs decreased by EUR 3,181,707 and costs of general activities by EUR 3,319,680. Selling costs increased by EUR 550,238. The costs of the audit performed by the company Deloitte revizija, d. o. o. for 2010 amounted to EUR 49,900.

Year 2009 ( in EUR )

Production expenses of sold Expenses of products and goods selling

Cost of general activities

Total

17,759,586

Expenses of merchandise sold - Horeca channel

17,759,586

Expenses of materials and mercdandise sold Expenses of services

26,519,506

482,203

185,055

27,186,764

2,191,579

11,921,257

3,980,834

18,093,670

Depreciation

5,452,840

492,160

963,571

6,908,571

Expenses of salaries

4,809,299

2,559,887

3,296,991

10,666,177

3,608

33,853

37,482

10,020

2,502,488

2,512,508

110,135

50,425

100,982

261,542

Revaluation operating expenses at fixed assets Revaluation operating expenses at reverse assets Costs of reservations Other expenses Total

464,432

123,004

1,049,619

1,637,055

39,547,812

33,402,150

12,113,393

85,063,355

2009

Tax, other charges

41,298

63,194

Duties on wather and ecology

333,223

466,286

Compensation for loan

138,336

116,712

Association memberships

32,066

30,094

Other cossts (grants, executions)

327,273

461,897

Expenditures for interest on arrears

197,019

119,291

Elimination expenditures investment properties

657,926

194,497

Other operating expenditures

43,177

185,084

Total

1,770,318

1,637,055

ANNUAL REPORT 2010

2010

P I VOVA R N A L A Ĺ KO D . D .

( in EUR )

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko, d. d.

2o. F. Other operating expenses

179

21. Net financial expenses ( in EUR )

2010

2009

Financial revenues without currency differences

4,331,945

4,090,281

Financal revenues on the basis of profit shares

3,888,427

3,758,503

Financial revenues from loans given

442,791

330,872

Financial revenues from accounts receivable

727

906

Financial expenditures without currency differences Financial expenditures from impairment and write-offs of investments Financial expenditures from financial liabilities

(22,944,703) (73,647,810) (9,902,701) (61,100,211) (13,042,002) (12,547,599)

Currency differences from financing

(452)

(1,502)

Negative currency differences

(509)

(2,211)

Positive currency differences

709

Net financial expenditures

(18,613,210) (69,559,031)

Financial expenses exceeded financial revenues by EUR 18,613,209. Financial expenses arising from financial liabilities amounted to EUR 13,042,002 and from impairment of financial investments EUR 9,902,700. Financial expenses arising from loans received from banks amounted to EUR 10,734,501 EUR, and loans received from companies in the Group EUR 2,307,500.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Based on value appraisals performed by a certified appraiser, the Company recognised the impairment

180

of financial investments in the subsidiary Delo, d. d., in the amount of EUR 6,501,966 among financial expenses. At the same time on the basis of the appraisal, it showed the impairment of the investment in Thermana, d. d. in the amount of EUR 1,594,000 and impairment of the investment in Elektro Gorenjska in the amount of EUR 27,065. It also showed expenses from the revaluation adjustments for loans granted to Jadranska pivovara – Split, d. d. in the amount of EUR 1,364,095 among financial expenses. A value adjustment was formed for the entire amount of calculated interest in 2010 arising from the loan granted to Jadranska pivovara which increases financial revenues by EUR 415,575, the identical amount of which was shown among financial expenses. Financial expenses from interests despite the somewhat lower indebtedness compared to the previous year increased by EUR 494,403.

22. Corporate income tax ( in EUR )

2010

2009

Deferred tax

(1,097,155)

(7,687,102)

Total

(1,097,155)

(7,687,102)

( in EUR )

2010

2009

Profit and loss before taxation

(7,389,415) (52,660,920)

(3,901,721)

(3,712,102)

Non-recognized revenue by tax

11,313,618

65,142,293

Tax base I

22,482

8,769,271

Change in tax base

137,209

91,874

Tax base II

159,691

8,861,145

Tax relief

159,691

(658,914)

Cover the tax losses

(8,202,231)

Tax base III

Tax loss

(1,274,326)

Tax

In 2010 the Company showed a surplus of taxable revenues over tax-exemptible expenses in the amount of EUR 22,482. On the last day of 2010 the Company disclosed a tax base of EUR 159,691 EUR, reduced by the identical amount of tax deduction. The tax deductions which the Company could use to reduce the tax base for 2010 amounted to EUR 702,382. From the calculated tax base in such a manner the Company in calculating the tax return for 2010 took advantage of a tax deduction of EUR 159,691 and carried forward to the upcoming tax period unused tax deductions for investments in accordance with Article 55a of the Corporate Income Tax Act in the amount of EUR 30,000 and a deduction for donations (payment for cultural purposes and donations to volunteer societies established as protection against natural and other disasters) in the amount of EUR 72,382. Unused tax deductions which can no longer be exploited amounted to EUR 600,000. On the last day of 2010 the Company showed an uncovered tax loss of EUR 1,274,325 of which deferred tax receivables according to a 20% tax rate amounted to EUR 254,865 which will be accounted for in future years from taxable income. The authorities can examine the operations of a business and require the payment of additional tax as a result, along with past interest or penalties which have to do with the revenue tax or other taxes and contributions, anytime within five years of when the tax is levied. The Management Board of the Company is not aware of any circumstances which could represent significant liabilities under this heading. A tax inspection of corporate income tax for 2007 was concluded in 2010. The tax authorities following the conclusion of the tax inspection issued a decision ordering the Company to pay taxes in the amount of EUR 39,809. The subject of the tax inspection also included transactions related to the purchase and sale of ITBG shares based on the conclusion of option contracts. The Tax Administration published a record on 5 January 2010. The Company filed a complaint against the findings in the record on 5 February 2010 related predominantly to the transaction with ITBG shares. The Tax Administration issued an additional record on 20 September 2010 in which it established that the increase in the tax base through trade in ITBG shares did not have suitable legal grounds according to the provisions of the Corporate Income Tax Act (ZDDPO-2), therefore it granted the Company the claim for this portion of the complaint. A decision was issued on 29 October 2010 which the Company did not contest.

ANNUAL REPORT 2010

(1,477,883) (11,058,793)

Correction of revenue to granted revenues tax level

P I VOVA R N A L A Ĺ KO D . D .

Revenue tax, calculated according to 20% tax rate

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko, d. d.

Tax, paid according to valid tax rate:

181

23. Exchange rate differences Exchange rate differences from operations and financing considered in the Income Statement are as follows: ( in EUR )

2010

2009

Currency differences - in financing

(453)

(1,502)

Total

(453)

(1,502)

2010

2009

24. Cash flow from operations ( in EUR )

Expl. note

Operating profit of the period

11,223,795

16,898,109

Adjustments for: Depreciation of property, plant and equipment

2.3

6,764,714

6,721,910

231,360

186,660

Write-offs of non-current assets

520,027

Write-offs of current assets

146,027

2,526,368

Depreciation of intangible fixed assets

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Net movement in reservations

182

(1,937,886)

5,724,242

9,434,938

Changes of reverse capital Inventories and non-current assets for sale Operating and other receivables Operating and other liabilities

8.9

2,244,907

(1,351,057)

6,10

975,658

(1,956,373)

18.19

(247,436)

(762,557)

2,973,129

(4,069,987)

19,921,166

22,263,060

2010

2009

Cash made from operation

25. Profit/loss per share ( in EUR )

Profit/loss majority owners Number of all issued ordinary shares

(6,292,260) (44,973,818) 8,747,652

8,747,652

Number of own shares

755

Weighed number of issued ordinary shares

8,746,897

Net profit per share

(0.72)

(5.14)

Adjusted net profit per share

(0.72)

(5.14)

Net loss per share is calculated with the distribution of net revenue which belongs to the shareholders and with the weighted average number of shares which are on the market during the year, with the exception of the average number of own shares.

26. Comprehensive income per share ( in EUR )

Comprehensive income majority owners Number of all issued ordinary shares

2010

2009

(5,134,628) (46,410,593) 8,747,652

8,747,652

Number of own shares

755

Weighed number of issued ordinary shares

8,746,897

Comprehensive income per share

(0.59)

(5.31)

Adjusted comprehensive income per share

(0.59)

(5.31)

27. Dividends per share The Company did not pay out dividends in 2009 and 2010.

28. Financial risks 28. A. Credit risk Credit risk comprises all risks having an effect on decreasing the economic benefits of the Company due to the insolvency of business partners (buyers) and non-fulfilment of contractual liabilities. For this reason, the Company regularly supervises and monitors financial receivables from both wholesalers and retailer

are restricted from purchasing goods exceeding their payment capacities. Within the scope of credit risk management, the Company utilizes mutual and chain compensation which also have a positive effect on ensuring adequate cash flow for the Company. Receivables are insured through traditional instruments for insuring receivables such as bills of exchange, bank guarantees and mortgages. The Finance Office monitors the receivables by business partner and maturity on a concurrent basis and through concurrent collection both internally via their own collection offices and via external agencies with a large portion of receivables collected prior to judicial enforcement. The charging of default interest, issuing of written reminders and in the end phase also implementation of judicial enforcement of matured receivables has resulted in improved payment discipline of buyers and limits the write-off of uncollectible receivables to a minimum. The Company did not record any significant write-offs of receivables due to non-payment in 2010. Credit risk is managed and represents a moderate degree of exposure.

28. B. Interest rate risk Interest rate risk represents the possibility of a change of the reference interest rate on the financial market predominantly due to long-term loans already taken out denominated in EUR tied to a variable interest rate (EURIBOR) which in the first half of 2010 already displayed a slight declining trend with the trend slightly turning upwards and continuing until the end of the year. The growth trend of the reference interest is continuing in 2011. Financing under a variable interest rate represents one third of all financing of the Company while the remaining two thirds represent loans with a fixed interest rate. The Company concluded interest rate swaps in 2010 thereby protection a good 20% of its long-term loans against a growth of the reference interest rate in the next three years. In accordance with the long-term strategy of the Company and

ANNUAL REPORT 2010

resenting the limit for goods that can be supplied to an individual buyer. For buyers showing an extremely bad credit rating, supply is only implemented on the basis of advance payment. In this manner buyers

P I VOVA R N A L A Ĺ KO D . D .

credit ratings it monitors concurrently. Based on the aforementioned a limit is defined for each partner rep-

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko, d. d.

customers. The Company predominantly does business with known and verified business partners whose

183

Pivovarna Laško Group a reduction in indebtedness in financing under variable conditions is expected in 2011 therefore the Company has not yet made a decision regarding the conclusion of additional transactions for protecting the interest rate. The Company’s exposure to interest rate risk remains high, but manageable.

Average Amount of interest Difference ( in EUR ) interest rate in % in interest

Interest Change in fin. rate Decrease in expenditures protection interest interest

Actual financial expenditures with respect to interest

12,816,239

5.40

12,816,239

15,189,617

6.40

2,373,378

15,189,617

2,373,378

10,442,861

4.40

(2,373,378)

10,442,861 (2,373,378)

16,376,305

6.90 3,560,066

16,376,305 3,560,066

9,256,173

3.90 (3,560,066)

9,256,173 (3,560,066)

Expenditures in case of interest rate increase by 1 % Expenditures in case of i nterest rate decrease by 1 % Expenditures in case of interest rate increase by 1,5 % Expenditures in case of interest rate decrease by 1,5 %

If the average interest rate increased by 1% expenses would increase by EUR 2,373,378, and for 1.5% by EUR 3,560,066. If the interest rate decreased by 1% or 1.5% respectively financing expenses would decrease by EUR

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

2,373,378 or EUR 3,560,066 respectively taking into consideration the protection of the interest rate risk for

184

a portion of long-term financial liabilities..

28. C. Currency risk Currency risk had a negligible impact on the Company’s operations in 2010 for the majority of transactions with foreign markets were denominated in euros.

28. D. Liquidity risk On the last day of 2010 the Company disclosed a surplus of short-term liabilities over short-term assets in the amount of EUR 121,619,547 representing a considerable liquidity risk. In accordance with the adopted five-year strategy of operations for the Pivovarna Laško Group, procedures for the sale of all non-strategic investments began to be intensively implemented in 2010. Currently, the sale of a 79.25% stake in the newspaper company Večer, d. d. and a 100% stake in the company Delo, d. d. is underway. At the same time a strategic partner is being intensively sought for the company Fructal, d. d. Procedures for the sale of a 23.34% stake in the company Poslovni sistem Mercator, d. d. and all other investments and property not required for operations are also being carried out. In the event of successfully concluded sale procedures, the Company will considerably decrease its indebtedness and consequently its exposure to liquidity risk. Nevertheless, uncertainty exists regarding the successful implementation of the sale of financial investments and unnecessary property and even following the successfully implemented disinvestment, the parent company Pivovarna Laško, d. d. will still remain over-indebted while individual subsidiaries will have large amounts of freely liquid assets. Therefore the payment of dividends by the subsidiaries is envisaged in the financial restructuring plan. In this way the parent company would partially

improve its liquidity position and business result. The increase in sustainable sources would enable the maintenance and increase of value of the assets or its owners. Until the successfully implemented sale of individual investments, the Company will experience serious liquidity problems which it will only be able to successfully resolve through agreements with banks (with the latter acting as creditors or as important owners of the Company). The only solution for the liquidity position of the Company in the event of the unsuccessful sale of the assets is the acquisition of new sustainable sources (capital increase). This would represent a supplement to permanent reconciliation with banks on the extension of payment of matured loan instalments within the scope of strategic measures involving financial restructuring. Discussions with banks are currently underway regarding the possibility of a comprehensive reprogramming of loans in the long-term. Discussions with regard to the reprogramming of debt are being implemented daily whereas discussions regarding the acquisition of new sustainable sources have not yet taken place.

28. E. Cash flow risk Cash flow risk is reflected in risk regarding the fair values of assets. Risk can be managed using derivative financial instruments. The Company did not insure against fair value risks in 2010 therefore the risks defined in the table below exist.

Balance as at 31st December 2010

50,069,435

Increase in price by 10 %

55,076,379

5,006,944

4,005,555

1,001,389

Decrease in price by 10 %

45,062,492

(5,006,944)

(4,005,555)

(1,001,389)

Increase in price by 5 %

52,572,907

2,503,472

2,002,777

500,694

Decrease in price by 5 %

47,565,963

(2,503,472)

(2,002,777)

(500,694)

The calculation of risks pertains to a long-term financial investment into Mercator Poslovni Sistem, which represent 99.9% of the value of financial assets intended for sale, which are evaluated according to their fair value. If an increase or decrease of financial investments’ value, which is estimated according to their fair value, occurs, it is reflected in the increase or decrease of the surplus from revaluation directly in the capital and, at the same time, with the liability for the deferred tax. Upon the sale thereof, the entire difference from the original acquisition price which amounts to EUR 50,977,838 or EUR 160.59 per share is expressed as a financial revenue or financial expense (depending on the sale price realised) in the Income Statement.

29. Contingent liabilities Contingent liabilities regard guarantees or sureties granted in the amount of EUR 19,067,490. Sureties in the amount of EUR 18,597,490 were granted to subsidiaries for loans taken out at banks while EUR 470,000 in sureties was given to other non-related parties. The subsidiary Radenska, d. d. was given a surety in the amount of EUR 7,850,000 EUR, the subsidiary Pivovarna Union, d. d. a surety in the amount of EUR 8,747,490 and the associate Birra Peja, Peć a surety in the amount of EUR 2,000,000. A cross-guarantee for loans taken out from banks was issued between Pivovarno Laško, d. d. and the company Fructal, d. d. Pivovarna Laško, d. d. pledged 662,624 RARG shares for the loan taken out by Fructal, d. d. whose book value as at 31 December 2010 amounted to EUR 6,957,552. In return Fructal, d. d. pledged real estate with a book value of EUR 9,791,377 as at 31 December 2010 for a loan taken out by Pivovarna Laško, d. d.

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

Difference- Difference- Differenceinfluence on the influence on the influence on liability value of N-CI revaluation surplus for deferred tax

ANNUAL REPORT 2010

Fair value as at 31/12/2010

P I VOVA R N A L A Š KO D . D .

( in EUR )

185

A contingent liability for Pivovarna Laško, d. d. also arises from the patronage statement signed by the former management of the Company on 31 December 2008 addressed to Perutnina Ptuj, d. d. The patronage statement was not disclosed in the Annual Report for 2008 due to the former Management Board’s failure to disclose it. On 20 November 2009 Perutnina Ptuj, d. d. demanded a refund of EUR 11,600,120 from Pivovarno Laško. The denoted amount regards a loan taken out on the basis of a signed patronage statement by Perutnina Ptuj, d. d. and approved by the companies Center naložbe, d. d. and Infond Holding, d. d. Pivovarna Laško, d. d. with the aid of legal experts is examining the claim and desires to establish the likelihood of having to return the demanded amount. It has obtained a number of legal opinions for this purpose. Based on the legal opinions obtained the Company estimates that no obligation to pay the demanded amount exists for Pivovarna Laško, d. d. therefore the Company did not disclose the said liability in its accounting ledgers. On 15 February 2011 Pivovarna Laško, d. d. received a lawsuit in connection to the patronage statement from the District Court in Celje which Mr. Boško Šrot as the Director of the Company supposedly signed on 10 January 2009. In the lawsuit, the plaintiff Perutnina Ptuj, d. d. is demanding a payment of EUR 10,116,489 with the legally prescribed default interest from 1 january 2010 onwards until payment. Pivovarna Laško, d. d. has filed an appeal against the lawsuit in court. The Securities Market Agency issued a Decision on Violation no. 014-1080-60/2008 on 9 December 2008 due to a violation of takeover legislation (v Odločbi so odgovorne osebe Pivovarna Union, d. d., Pivovarna Laško, d. d., Radenska, d. d., and responsible legal persons are deemed the responsible persons) ordering the Company to pay a EUR 170,000 fine. A petition for judicial protection has been filed. An appeal was lodged on 30 November 2010 and on 10 December 2010 additionally submitted the denoted judgement to the Securities Market Agency.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Pivovarna Laško, d. d. together with the other (Pivovarna Union, d. d., Radenska, d. d. and Infond Holding,

186

d. d. currently undergoing bankruptcy) received a demand for payment of various damage claims (totalling EUR 408,218.05) from 28 plaintiffs due to the supposed violation of takeover legislation, supposed reconciliation of operations and supposed attainment of the takeover threshold from individual shareholders. A statement of defence has been filed by the Company against the lawsuit with prepared applications already filed for several cases.

30. Business mergers No business mergers were implemented in 2010.

31. Receipts of management and employees according to individual contracts The Company is managed by the Management and Supervisory Boards whose gross earnings are shown in the tables below: ( in EUR )

2010

2009

MANAGEMENT BOARD Fixed part of receipts Variable part (stimulation) Benefits Total

272,000

191,373

3,204

16,580

275,204

152,000 359,953

( in EUR )

Fixed part of receipts

Variable part (stimulation) Benefits

Total

MANAGEMENT BOARD Dušan Zorko Gorazd Lukman Robert Šega Total

192,000

600

192,600

40,000

600

40,600

40,000

2,004

42,004

272,000

3,204

275,204

The Company was represented and managed by the Director Dušan Zorko, MSc until 6 September 2010. From 6 September 2010 onwards a three-member Management Board of Pivovarna Laško, d. d. was appointed for a mandate of five years. The Management Board is composed of Dušan Zorko, MSc – Chairman of the Management Board, RobertŠega, MSc - member of the Management Board responsible for the areas of finance, controlling and IT and Gorazd Lukman – member of the Management Board responsible for the area of commercial activities. Fifteen employees in addition to the members of the Management Board received a salary on the basis of individual contracts in 2010. Earnings received by employees on the basis of individual contracts in 2010 are shown in the tables below: ( in EUR )

2010

2009

Fixed part of receipts

1,104,839

889,048

Variable part (stimulation)

27,470

30,393 159,508

1,132,309

1,078,949

In 2010 the members of the Supervisory Board of Pivovarna Laško, d. d., received attendance fees in the total amount of EUR 23,207 in accordance with Article 30 of the Statute and the decision of the last General Meeting of Shareholders. ( in EUR )

2010

2009

Marjan Mačkošek

4,845

990

Vladimir Malenković

4,080

1,096

Peter Groznik

3,018

SUPERVISORY BOARD

Bojan Košak

3,762

4,158

Andrej Kebe

4,270

4,158

Aleksander Svetelšek

1,351

362

Anton Turnšek

1,881

4,793

Boris Završnik

4,388

Iztok Seničar

1,937

Simon Zdolšek

858

Total

23,207

22,740

ANNUAL REPORT 2010

Total

P I VOVA R N A L A Š KO D . D .

Benefits

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

INDIVIDUAL CONTRACTS

187

( in EUR )

2010

2009

Marko Koleša

1,012

Peter Groznik

349

Bojan Košak

990

Marjan Mačkošek

528

Total

2,879

( in EUR )

2010

2009

REVIEW COMMISSION OF SUPERVISORY BOARD

32. Transactions with related parties 32. A. Sales to associates

Radenska, d. d., Radenci

844,359

627,158

Vital Mestinje, d. o. o.

799

1,094

Union Group

11,958,601

11,938,913

Delo Group

2,832

Jadranska pivovara - Split, d. d.

616,066

661,109

Total companies of the Group

13,422,657

13,228,274

companies of the Group

51,494,355

55,597,863

Total

64,917,012

68,826,137

( in EUR )

2010

2009

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

Total associated companies and

188

32. B. Purchases from associates

Radenska, d. d., Radenci

2,473,348

2,435,374

Vital Mestinje, d. o. o.

232,055

423,704

Union Group

19,051,647

19,898,396

Delo Group

27,341

30,365

Jadranska pivovara - Split, d. d.

245,320

1,157,000

RA&LA, d. o. o., Sarajevo

100,986

249,846

Total companies of the Group

22,130,697

24,194,685

Total associated companies and other related companies

2,310,140

4,381,411

Total

24,440,837

28,576,096

The data are shown at gross value with value added tax included in the amounts. Purchases from associates apply predominantly to purchases of merchandise from the Horeca distribution channel.

Open items from sales/purchases from associates ( in EUR )

2010

2009

154,101

51,992

Receivables from operating to subsidary companies Radenska, d. d. Radenci Vital Mestinje, d. o. o.

108

Union Group

1,207,018

1,940,742

Delo Group

2,832

Jadranska pivovara - Split, d. d.

2,541,484

2,373,753

Value adjustments of claims to Jadranska pivovara - Split, d.d.

(2,373,753)

Total companies of the Group

3,905,543

1,992,783

Total associated companies and other related companies

6,585,915

7,285,850

Total

10,491,458

9,278,633

417,378

379,807

Liabilities from operating to subsidary companies Radenska, d. d. Radenci Vital Mestinje, d. o. o.

21,954

26,395

Union Group

4,153,308

4,350,385

Delo Group

1,835

2,100

Jadranska pivovara - Split, d. d.

58,953

RA&LA, d. o. o., Sarajevo

8,892

4,421

Total companies of the Group

4,603,367

4,822,061

Total associated companies and other related companies

633,748

895,761

Total

5,237,115

5,717,822

Jadranska pivovara – Split, d. d. regarding calculated interests in the amount of EUR 415,575.

32. C. Loans obtained from associates in EUR )

2010

2009

Radenska, d. d., Radenci

33,100,000

20,400,000

Union Group

8,100,000

6,000,000

Firma Del, d. o. o., Laško

45,435

42,985

Total

41,245,435

26,442,985

Interest liabilities from received loans towards the company Radenska, d. d. as at 31 December 2010 amounted to EUR 508,924 and to the company Pivovarna Union, d. d. EUR 103,872.

P I VOVA R N A L A Š KO D . D .

The Company carried out a complete revaluation adjustment of receivables in 2010 due from the company

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

189

32. D. Loans granted to associates ( in EUR )

2010

2009

Jadranska pivovara - Split, d. d. (long-term loan)

3,228,000

5,149,262

Value adjustments of given loans to Jadranska pivovara - Split, d.d.

(3,228,000)

(5,149,262)

Total companies of the Group

1,699,613

Companies of the Group

Other related companies Infond Holding, d. d., Maribor Center naložbe, d. d., Maribor

5,900,000

Value adjustments of given loans

(7,599,613)

Total other related companies

Total

The Company approved a short-term loan of EUR 3,228,000 to the subsidiary Jadranska pivovara – Split, d. d. for the payment of severance pay and settlement of obligations to banks for which a declaration of surety had been signed in the past. A revaluation adjustment had already been implemented for the surety given in the amount of EUR 1,863,905 with the liability disclosed among accrued costs and deferred revenues. For the loan given in the amount of EUR 1,364,095 the Company implemented a revaluation adjustment in 2010 recognising it among financial expenses for a great probability exists that the loan will not be repaid.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

32. E. Financial revenues

190

( in EUR )

2010

2009

1,139,644

2,249,675

Companies of the Group Radenska, d. d., Radenci Delo, d. d., Ljubljana

59,906

Jadranska pivovara - Split, d. d.

415,575

107,474

Total companies of the Group

1,555,219

2,417,055

Infond Holding, d. d., Maribor

17,326

Other related companies Center naložbe, d. d., Maribor

114,103

Total other related companies

131,429

Total

1,555,219

2,548,484

32. F. Financial expenses ( in EUR )

2010

2009

1,843,095

1,035,693

Companies of the Group Radenska, d. d., Radenci Union Group

464,405

383,434

Delo, d. d., Ljubljana - inpairment

6,501,966

28,279,707

Jadranska pivovara - Split, d. d. - inpairment loans and interest

1,779,670

15,800,431

Total companies of the Group

10,589,136

45,499,265

Infond Holding, d. d., Maribor

1,716,939

Center naložbe, d. d., Maribor

5,979,335

Other related companies

Total other related companies

7,696,274

Total

10,589,136

53,195,539

2010

2009

Jadranska pivovara - Split, d. d. (for bank loans)

3,246,619

5,110,524

Fructal, d. d., Ajdovščina (662.624 RARG - for bank loans)

6,957,552

Radenska, d. d., Radenci (for bank loans)

7,850,000

8,000,000

Pivovarna Union, d. d., Ljubljana (for bank loans)

8,747,490

10,747,490

Total

26,801,661

30,815,566

Value adjustments of guarantee in Jadranska pivovara - Split, d.d.

(3,246,619)

(5,110,524)

Total companies of the Group

23,555,042

25,705,042

2,000,000

32. D. Sureties granted to associates ( in EUR )

Other related companies Birra Peja, a. d., Peć Center naložbe, d. d., Maribor

3,625,692

Value adjustments of guarantee

(3,625,692)

Total other related companies

2,000,000

Total

25,555,042

27,705,042

As at 31 December 2010 the amount of sureties given to associates totalled EUR 25,555,042, representing a decrease of EUR 2,150,000 over the previous year.

ANNUAL REPORT 2010

P I VOVA R N A L A Š KO D . D .

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko, d. d.

Companies of the Group

191

33. Business events following the end of the fiscal year Business events following the end of the fiscal year in Pivovarna, d. d. are described on pages 106 and 107 of the Business Report of the Annual Report, Chapter 2.13. No business events which could have an effect on the financial statements occurred following the end of the fiscal year. EUR 12.2 million in loan instalments fell due in the first quarters, all of which were reprogrammed. A short-term loan in the amount of EUR 53.5 million fell due in February the maturity of which was similarly extended, namely to 30 September 2011. All other short-term loans in the total amount of EUR 75.8 million maturing in the first quarter of 2011 were extended based on individual contractual maturities, namely for a period from 3 months to one year.

4.1.9 STATEMENT OF THE MANAGEMENT The Management Board of the company Pivovarna Laško, d. d. is responsible for the preparation of the annual report of the Company as well as the financial statements, in a manner providing the public with a fair presentation of the financial position and the results of operations of the Company in accordance with the International Financial Reporting Standards adopted by the European Union and the Companies Act for 2010. The Management Board of Pivovarna Laško, d .d. confirms the Business Report and Financial Statements with explanatory notes for the year ended 31 December 2010 and declares:

• t he financial statements have been prepared under the assumption that Pivovarna Laško, d. d. is a going

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n e L a š ko, d. d.

concern;

192

• t hat appropriate accounting policies were consistently applied and that any changes thereof have been disclosed;

• t hat the accounting estimates have been prepared in a fair and diligent manner and are in accordance with the principle of prudence and good management. The Management Board is responsible for the implementation of measures ton ensure maintenance of the value of the assets of the Company and for the prevention and detection of fraud and other irregularities.

Laško, 28 March 2011

Dušan Zorko

Chairman of the ManagementBoard

Robert Šega Member of the Management Board

Gorazd Lukman

Member of the Management Board

1950

194

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

195

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4.2 Audited Consolidated Financial Statements of the Pivovarna Laško Group for the 2010 Fiscal Year, in accordance with IFRS 4.2.1 CONSOLIDATED STATEMENT OF THE FINANCIAL POSITION OF THE PIVOVARNA LAŠKO GROUP AS AT 31 DECEMBER 2010 ( in EUR )

Expl. note

2010

2009

ASSETS Non-current assets Intangible fixed assets

66,016,523

133,038,904

153,632,750

226,947,462 7,398,396

4,656,484

Non-current investments in subsidiaries

4.A

207,148

258,918

Available-for sale financial assets

4.B

718,449

30,829,924

Investments in associated companies

4.C

317,148

138,836,076

10,444,245

6,603,695

Long-term loans Long-term operating receivables

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Long-term deferred tax receivables

P I VOVA R N A L A Š KO D . D .

564,998,357

Property, plant and equipment Investment properties

196

265,643,825

717,347

744,239

7,18.C

28,933,731

20,340,743

Current assets

370,997,307

116,256,468

Non-current assets held for sale

286,684,408

12,874,507

Inventories Short-term operating receivables

8 9

21,376,855

37,987,391

10.A

30,660,793

49,764,422 2,338,805

Short-term receivables for overpaid income tax

10.B

1,595,596

Available-for sale financial assets

12.A

24,554,570

4,733,715

11,086,139

12.B

1,213,547

1,391,370

991,657

Short-term loans Derivatives Cash in banks, cheques and cash in hand

210,569

541,321

Total current assets

Deferred costs and accrued revenues

371,207,876

116,797,789

TOTAL ASSETS

636,851,701

681,796,146

4.2.1 CONSOLIDATED STATEMENT OF THE FINANCIAL POSITION OF THE PIVOVARNA LAŠKO GROUP AS AT 31 DECEMBER 2010 (continued) ( in EUR )

Expl. note

2010

2009

EQUITY

131,889,003

162,594,380

Minority capital

9,557,633

9,977,067

Majority capital

122,331,370

152,617,313

Share capital

36,503,305

Capital reserves

78,908,924

Profit reserves

3,650,330

Revaluation surplus

42,217,836

40,453,825

Net profit and loss from previous years

110,742

Net profit and loss

(25,574,602)

Revaluation reserve

(13,485,165)

(6,899,071)

LIABILITIES

504,962,698

519,201,766

4,805,958

9,716,064

Non-current employee liabilities

17.A

2,788,161

6,325,573

Non-current reservations

17.B

2,017,797

3,390,491

Non-current reservations

84,263,898

127,272,882

Non-current financial liabilities

18.A

84,263,898

127,261,406

Non-current operating liabilities

18.B

11,476

411,167,663

373,324,159

67,250,490

19.A

30,636,500

44,823,086

Current liabilities Liabilities of Group for disposal Current operating liabilities Current tax payment liabilities

19.B

1,651,622

Current financial liabilities

19.C

313,280,673

326,849,451

Accured costs and deferred revenues

4,725,179

8,888,661

Total current liabilities

415,892,842

382,212,820

TOTAL LIABILITIES TO ASSET RESOURCES

636,851,701

681,796,146

The explanatory notes and policies on pages 203 to 272 are a constituent part of the Financial Statements of Pivovarna Laško Group.

ANNUAL REPORT 2010

P I VOVA R N A L A Š KO D . D .

Non-current liabilities

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

197

4.2.2. CONSOLIDATED INCOME STATEMENT OF THE PIVOVARNA LAŠKO GROUP FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010 ( in EUR )

Net sales revenuse

Expl. note

2010

2009

306,418,155

327,026,846

Changes in inventories of products and work in progress

(1,027,370)

1,316,584

Capitalized own products and their services

53,278

35,818

Other operating revenues

4,744,413

8,428,658

Costs of goods, material and services

(197,692,079)

(200,785,891)

Employee benefit expenses

(59,939,251)

(64,471,310)

(24,441,457)

(28,000,182)

Non-current reservations

Amortization and depreciation of intangible and tangible fixed assets

(28,382,288)

(39,862,267)

Write-downs of value

(2,287,988)

(1,085,846)

Other operating revenues

(7,331,428)

(7,832,328)

(9,886,015)

(5,229,918)

OPERATING PROFIT

Financial revenues

2,334,858

5,622,536

Financial expenditures

(27,407,847)

(210,561,567)

Share of loss/profit in associated companies

4,112,331

10,271,857

(30,846,673)

(199,897,092)

PROFIT BEFORE TAXATION

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

198

Deferred tax

6,033,538

40,576,837

Tax

(1,005,670)

(2,779,391)

(25,818,805)

(162,099,646)

NET PROFIT/LOSS OF ACCOUNTING PERIOD

Minority owners share of the net profit

(244,203)

(5,149,147)

Majority owners share of the net profit

(25,574,602)

(156,950,499)

Profit/loss per majority owners share Net profit/loss per share

(2.94)

(18.03)

Adjusted net profit/loss per share

(2.94)

(18.03)

The explanatory notes and policies on pages 203 to 272 are a constituent part of the Financial Statements of Pivovarna Laško Group.

4.2.3. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE PIVOVARNA LAŠKO GROUP FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010 ( in EUR )

2010

2009

Net profit/loss of accounting period

(25,818,805)

(162,099,646)

OTHER COMPREHENSIVE INCOME Revaluation reserve from associated company

69,307

Financial assets for sale

(3,207,490)

10,921,674

Profit/loss from property revaluation

489,485

Deferred taxes from revaluation

132,347

(1,946,192)

Other comprehensive income - associated company

(2,442,531)

22,665,474

OTHER COMPREHENSIVE INCOME

(4,958,882)

31,640,956

TOTAL COMPREHENSIVE PROFIT

(30,777,687)

(130,458,690)

Other comprehensive profit

(4,958,882)

31,640,956

Minority owners share

(247,540)

116,823

Majority owners share

(4,711,342)

31,524,133

Total comprehensive profit

(30,777,687)

(130,458,690)

Minority owners share

(491,743)

(5,032,324)

Majority owners share

(30,285,944)

(125,426,366) (14.41)

Diluted total comprehensive income of majority owners per share

(3.48)

(14.41)

The explanatory notes and policies on pages 203 to 272 are a constituent part of the Financial Statements of Pivovarna Laško Group.

ANNUAL REPORT 2010

(3.48)

P I VOVA R N A L A Š KO D . D .

Total comprehensive income of majority owners per share

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

199

200

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Disposal of own shares

Payment of dividends

Increases/decreades of capital components

Other changes

Transactions with owners

Revaluation surplus of investment properties

Revaluation surplus of financial investments MELR

Related taxes with items comprehensive income

Revaluation reserve

Other comprehensive income - equity method Mercator -

Changes in comprehensive income

Changes in capital

3,650,331

Treasury shares

812,304

(498,309)

(52,587)

(812,304)

550,896

498,309

52,587

1,363,200 (1,363,200)

Legal Reserves for reserves treasury shares

3,650,331

(498,309)

498,309

3,650,331

498,309

531,334

69,307

145,648

- (3,015,100)

(110,742)

(498,309)

1,874,752 (6,586,094) (30,285,944)

4,212,870 (6,655,401) (2,442,531)

145,648

- 498,309

- (25,574,602)

110,742 (25,574,602) 42,217,835 (13,485,165) 122,331,370

110,742

531,334

- (3,015,100)

- (25,574,602)

- 40,453,825 (6,899,071) 152,617,314

- (25,574,602)

570,619

498,309

147,422

(75,112)

258

583,130

(93,903)

69,307

132,347

(498,309)

9,557,633 131,889,003

(491,744) (30,777,688)

- (2,442,531)

(13,301)

(192,390) (3,207,490)

258

51,796

(93,903)

(244,204) (25,818,806)

72,310

147,422

(75,112)

9,977,067 162,594,381

Net Total majority Total profit profit from Net Revaluation Revaluation owners Minority TOTAL reserves previous years profit surplus reserve capital capital CAPITAL

The explanatory notes and policies on pages 203 to 272 are a constituent part of the Financial Statements of Pivovarna Laško Group.

36,503,305 78,908,924

Other

31 December 2010

Creation reserves for own shares

Revaluation surplus of property, plant and equipment

Changes in capital

Revaluation surplus of intangible fixed assets

Net profit of the year

Changes in comprehensive income

Capital reserves

36,503,305 78,908,924

Share capital

Transactions with owners

1 January 2010

( in EUR )

4.2.4 CONSOLIDATED STATEMENT OF CHANGES IN OWNER’S EQUITY OF THE PIVOVARNA LAŠKO GROUP FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010

P I VOVA R N A L A Š KO D . D .

201

Capital reserves

Disposal of own shares

Payment of dividends

Increases/decreades of capital components

Other Increases/decreades

Transactions with owners

(985,963)

189,384

- (1,175,347) -

Other profit reserves

(985,963)

189,384

- (1,175,347)

Revaluation surplus of financial investments

Related taxes with items comprehensive income

Other

Changes in comprehensive income

- (23,468,797) (21,956,464)

Drawing reserves for own shares

Other

Changes in capital

36,503,305 78,908,924

3,650,330

(219,446)

(964,843)

(87,491)

(336,954)

226,119

(139,374)

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

146,260

1,635,129 (1,635,129)

3,650,330

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

(370,917)

(145,374)

189,384

- (1,916,987)

- 10,775,646

- 22,665,474

(29,205) (1,946,192)

146,028 10,921,674

- (156,950,499) (5,149,147) (162,099,646)

(985,963) (1,746,910) (2,732,873)

(191,440)

(226,865)

(336,954)

372,379

- 40,453,825 (6,899,071) 152,617,313

131,955 (18,798,802) (39,769,303) (92,268,710) 155,315,370

131,955

- (17,614,513) (39,570,977) (93,910,725) 156,950,499

1,363,200 (1,363,200)

854,008

(336,954)

1,190,962

The explanatory notes and policies on pages 203 to 272 are a constituent part of the Financial Statements of Pivovarna Laško Group.

31 December 2009

Creation reserves for own shares

- (23,468,797) (21,956,464)

to manager decisoins

Cover loss

Distribution of net profit according

(370,917)

(145,374)

- (1,175,347)

- (1,230,619) (1,230,619)

189,384

- 29,564,545 (6,899,071) 22,665,474

- (1,916,987)

- 10,775,646

- (1,175,347)

- 279,221,082 16,756,301 295,977,383

(191,440)

(226,865)

(336,954)

372,379

9,977,067 162,594,380

- (156,950,499) 38,423,204 (6,899,071) (125,426,366) (5,032,324) (130,458,690)

- (156,950,499)

2,030,621

Changes in capital

Net profit of the year

1,635,129

Net Total majority Total profit profit from Net Revaluation Revaluation owners Minority TOTAL reserves previous years profit surplus reserve capital capital CAPITAL

(509,192) 18,798,802 44,405,596 92,268,710

Treasury shares

Changes in comprehensive income

Increase treasury shares

509,192

Legal Reserves for reserves treasury shares

36,503,305 102,377,721 25,606,794

Share capital

Transactions with owners

1 January 2009

( in EUR )

4.2.5 CONSOLIDATED STATEMENT OF CHANGES IN OWNER’S EQUITY OF THE PIVOVARNA LAŠKO GROUP FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2009

4.2.6 CONSOLIDATED STATEMENT OF CASH FLOWS OF THE PIVOVARNA LAŠKO GROUP FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010 ( in EUR )

Expl. note

2010

2009

CASH FLOWS FROM OPERATING ACTIVITIES 25

54,712,234

60,689,273

Income tax paid

Cash generated from operations

(1,005,670)

(2,478,505)

Net cash generated from operating activities

53,706,564

58,210,768

CASH FLOWS FROM INVESTING ACTIVITIES Expenditure for investments in associated companies Purchase of property, plant and equipment

(3,837,454)

(10,964,743)

(11,663,967)

65,533

193,774

Profits/losses in disposals purchase of property, plant and equipment Purchase of intandible assets

(527,742)

(1,929,325)

4.B,11

1,067,114

(48,577,164)

Interest received

1,718,756

4,648,146

Dividends and capital gains

616,102

Purchase/sale of available for sale financial assets

Net cash generated/used in investing activities

(8,024,980)

(61,165,990)

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

CASH FLOWS FROM FINANCING ACTIVITIES

202

Interest paid

(22,074,537)

(22,972,652)

Purchase of treasury shares

52,587

(985,963)

(132,705)

Proceeds from borrowings

Decrease of capital 18.19

320,568,418

258,537,166

Repayments of borrowings

18.19

(342,902,172)

(232,677,404)

(75,112)

(145,374)

Dividends paid to Company¢s sherholders

Net cash used/generated in financing activities

(44,563,521)

1,755,773

NET DECREASE / INCREASE IN CASH AND CASH EQUIVALENTS

1,118,063

(1,199,449)

Cash and cash equivalents at the begining of the year

991,658

2,191,107

Cash and cash equivalents at the end of the year

2,109,721

991,658

The explanatory notes and policies on pages 203 to 272 are a constituent part of the Financial Statements of Pivovarna Laško Group.

4.2.7 POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GENERAL INFORMATION The main activities of the Pivovarna Laško Group (Group) are: production of beer, mineral and spring waters, soft drinks and syrups for the production of beverages, distilled spirits, wholesale service and the newspaper publishing activity. Pivovarna Laško, d. d. (Company) is the parent company of the Pivovarna Laško Group with its headquarters in Slovenia: Trubarjeva ulica 28, 3270 Laško, Slovenia. The Group’s ordinary shares are quoted on the Ljubljana Stock Exchange under the designation “PILR”. The Group’s share capital totals EUR 36,503,304.96 representing 8,747,652 ordinary freely negotiable registered no-par-value shares No limitations on the payment of dividends and other equity payments exist. The Group operates on the basis of a going-concern. The consolidated financial statements were approved by the Company’s Management Board on 28 March 2011.

ACCOUNTING GUIDELINES 1. Basis for preparation of the report The same accounting policies were applied in 2010 as in the preceding years.

obligatory financial statements as a whole and does not offer assurance regarding individual types of items, accounts or transactions. Audited financial statements are not intended for use by any party for the purposes of decision-making regarding ownership, financing and any other concrete transactions connected to the Company. Correspondingly, users of the obligatory financial statements may not rely exclusively on the financial statements and must carry out other suitable procedure prior to making decisions. The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, which include the standards and interpretations issued by the International Accounting Standards Board (IASB) and SIC.

a) Standards and interpretations effective in the current period The following amendments to the existing standards issued by the International Accounting Standards Board (IASB) and adopted by the EU are currently valid:

• I FRS 1 (amended) “First-Time Adoption of IFRS”, adopted by the EU on 25 November 2009 (effective for annual periods beginning on or after 1 January 2010);

• I FRS 3 (amended) “Business combinations”, adopted by the EU on 03.07.09 (effective for annual periods beginning on or after 1 July 2009);

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thereby fulfilling the legal requirement o fan audit of obligatory financial statements. The audit treats the

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financial statements. The audit is limited to the audit of mandatory financial statements for general use

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These obligatory consolidated financial statements have been prepared for the purpose of adhering to legislative requirements. In accordance with law the Company must ensure an independent audit of these

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• I AS 27 (amended) “Consolidated and separate financial statements”, adopted by the EU on 3 June 2009 (effective for annual periods beginning on or after 1 July 2009);

• a mendments to IAS 39 “Financial instruments: recognition and measurement” – eligible hedged items, adopted by the EU on 15 September 2009 (effective for annual periods beginning on or after 1 July 2009);

• I FRS 12 (amended) “Business Combinations”, adopted by the EU on 25.03.09 (effective for annual periods beginning on or after 30.03.09);

• I FRIC 15 “Agreements for construction of real estate”, adopted by the EU on 22 July 2009 (effective for annual periods beginning on or after 1 January 2010);

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1 November 2009);

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• I FRIC 19 “Extinguishing financial liabilities with equity instruments”, adopted by the EU on 23 July 2010 (effective for annual periods beginning on or after 1 July 2010).

The Company opted not to adopt these standards, amendments and interpretations before they enter into force. The Company estimates that the adoption of these standards, amendments and interpretations will not have a significant impact on the Company’s financial statements during the period of initial application.

c) Standards and interpretations issued by the IASB, but not yet adopted by the EU On the day of approval of these financial statements the following accounting standards, revisions and interpretations exist which are not yet effective:

• I FRS 9 “Financial instruments” (effective for annual periods beginning on or after 1 January 2013); • a mendments to IFRS 7 “Financial Instruments: IFRS 9 “Financial instruments: Disclosures”- Transfers of financial assets (effective for annual periods beginning on or after 1 July 2011);

2. Consolidation Subsidiary companies in which the Group’s indirect or direct equity is larger than half of voting rights or can in any other way influence operation are considered consolidated. They are consolidated in the Group’s

acquisition of the aforementioned companies. Impairment from associated companies was also eliminated. For the purpose of the provision of consistent and correct data for the needs of the Group’s consolidation and financial reporting, accounting policies needed to be harmonized with the controlling company’s policies. At the accounting of takeovers, the Group uses the purchase method. The cost of purchase of a takeover is assessed as the fair value of assets and capital instruments given and assumed liabilities on the day of transaction, together with the expenses directly attributable to the takeover. Assumed assets, liabilities and conditional liabilities attaching to a takeover are initially recorded at the fair value on the day of the takeover, irrespective of the size of the minority interest. A surplus of the purchase price over the fair value of the Group’s interest in net assets of an acquired undertaking is recorded as positive goodwill. If carrying amount of the investment exceeds the net value of the subsidiary’s assets, the difference is recognised through profit or loss as an impairment loss. The Group treats transactions with minority holders the same as transactions with external partners. Profits and losses of minority holders are disclosed in the Group’s income statement.

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value is reflected in consolidation as impairment of trademarks and goodwill, which was generated at the

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among the Group’s companies are eliminated for the purpose of consolidation. Impairment of the long-term investments in the companies Delo, d. d. and Fructal, d. d. was also eliminated and its reduction to the fair

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statements from the day when the Group took over their controlling interest and their consolidation ends when the Group has no controlling interest in them anymore. All transactions and receivables and liabilities

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3. Composition of affiliates The interrelated group of companies in which the company Pivovarna Laško, d. d., holds its financial investments is composed of the following companies: Value Activity of the Percent of total Company name company State participation equity in EUR

Net profit/loss of year 2010 in EUR

SUBSIDARIES COMPANIES Vital Mestinje, d. o. o. production of beverages Slovenija Radenska, d. d., Radenci production of beverages Slovenija

96.920 %

3,357,788

(81,667)

93.810 %

81,102,108

456,936

Firma Del, d. o. o., Laško beer production

Slovenija

100.000 %

51,540

(182)

Jadranska pivovara - Split, d. d. beer production

Hrvaška

99.106 %

(890,772)

(5,382,618)

BiH

69.230 %

124,063

(5,207)

Slovenija

97.892 %

70,930,827

436,185

Slovenija

80.834 %

19,796,225

(2,330,603)

Hrvaška

100.000 %

2,709

RA&LA, d. o. o., Sarajevo wholesale Group Union Ljubljana production of beer and beverages Group Delo newspaper-publishing activity Laško Grupa, d. o. o., Zagreb intermediate trade

Pivovarna Laško, d. d., Trubarjeva 28, Laško, draws up the consolidated annual report for the parent company and for subsidiaries in Pivovarna Laško Group. Due to their material irrelevance, the following companies are not included in the consolidation: Del, d. o. o., Laško, RA&LA, d. o. o., Sarajevo and Laško Grupa,

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d. o. o., Zagreb.

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4. Recognition of revenues Revenues are recognised on the basis of the sale of products, services and merchandise and takeovers of these on the part of customers (exclusive of VAT and excise duties), foreseen reclamations, rebates and discounts. Sales revenues are recognised when a significant portion of the risk and benefits of ownership of the goods is transferred from the seller to the buyer. Group revenues are a sum of the revenue of individual companies included in the Group. Revenues obtained within the group of companies are excluded from group revenues. Other revenues realised are recognised on the following basis:

• I nterest revenues – are recognised upon their arising unless a doubt exists that they will be collected, whereby the amount is written off for the replacement value. Interest revenues from that point on are recognised on the basis of interest rates serving as a discontinuation of future cash flows

•R evenues from dividends are recognised when Group becomes entitled to receive dividend payments. 5. Investments into subsidiaries An associated group company is a company where the controlling company has the controlling capital share or controlling influence due to any other reason and which enters the group for which joint financial statements are prepared. Investments into subsidiaries are assessed at their original historical costs. Revenues from profit sharing are acknowledged as revenue from financing, when they are paid or when the General Meeting approves a preposition on profit sharing and payment of the dividend. Investments are impaired whenever their replaceable values are lower than their book values. Losses attributed to impairments are immediately recognised in the income statement.

6. Financial assets held until maturity Associated companies are companies in which the company has between 20% and 50% of the voting rights, and where it has a significant impact on business, but they are not controlled. Financial investments in associated companies are valued at cost, but must be reviewed each year, and may not exist if the circumstances indicate the need for impairment. To this end, valuations are carried out of investments in associated companies authorized by the business appraisers. If the estimated value of an investments is lower than cost, the difference is recognized as a financial expense and has a demonstrable impact on the level of income. Investments in associated companies are calculated according to the equity method. Associated companies are companies in which the company has between 20% and 50% of the voting rights, and where it has a significant impact on business, but they are not controlled. The financial investment in the associated company is calculated according to the equity method in accordance with IAS 28 from the date it became an associated company. According to the equity method a financial investment is first carried at cost with the book value increasing or decreasing to reflect the investor’s share in the company’s profit or loss in which the investor has a significant influence which occurs following the date on which the financial investment was implemented. The amount obtained from the distribution of the net profit of the company in which the investor has a significant influecne decreases the book value of the financial investment. A recalculation of the book value is also required if the investor’s proportionate equity stake changes, however, these changes are not shown in the income statement. Such changes also include those resulting from a revaluation of tangible fixed assets and financial investments, exchange rate differences and recalculation of the differences arising following the business merger.

Goodwill connected to the associated company is included in the book value of the financial investment. Amortization of this goodwill is not allowed and is therefore not included when establishing the investor’s share in the profits or losses of the associated company. Each surplus of the investor’s share in the net fair values of the indentifiable assets, debts and contingency liabilities of the associated company over the costs of the financial investment is excluded from the book value of the financial investment and instead included as a revenue upon the established investor’s share in the net profits or losses of the associated company for the period in which the financial investment was acquired.

Activity of the Percent Company name company State participation

Value of total equity in EUR

Net profit/loss of year 2010 in EUR

ASSOCIATED COMPANY Thermana, d. d., Laško

activity of spa,

hotels and other

establishments

Slovenija

20.630 %

28,535,802

(1,695,168)

Group Mercator Lj.

trade company

Slovenija

23.340 % 798,165,000

30,387,000

Birra Peja, Sh. a., Peć

wholesale

Kosovo

39.550 %

3,561,879

(8,242,579)

Slopak, d. o. o., Ljubljana

deal with Slovenija

38.960 %

1,166,620

(771,740)

packaging waste

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debts and contingency liabilities in accordance with IFRS 3 – Business mergers.

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the costs of the financial investment and the investor’s share in the net fair values of the indentifiable assets,

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Upon the acquisition of a financial investment, the associated company calculates each difference between

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As at 31 December 2010 the Group showed the equity investment into the company Birra Peja, Sh. a., Peć, Kosovo and investment into the company Thermana, d. d., Laško among long-term financial investments. The Group’s ownership stake in the associated company Birra Peja, Sh. a., Peć, Kosovo on the last day of 2010 comprised 39.55%, the stake in the comapy Slopak 38.96% and in Thermana 20.63% which in comparison to the previous year decreased by 1.94% due to the capital increase which was implemented. The Pivovarna Laško Group valuated the investment in 23.34% of the shares of Poslovni sistem Mercator (MELR) in 2010 according to the equity method, increased by its participation in profit, decreased by the amount of paid out dividends and increased or decreased by the proportionate amount of changes in other comprehensive yield of the Mercator Group. As at 31 December 2010 based on the equity revaluation method, the investment was classified among short-term assets available-for-sale.

7. Currency of reporting a) Functional and reporting currency The items disclosed in the financial statements of individual companies of the Group are nominated in the currency of the primary environment - the country in which an individual company operates (this is the so-called “functional currency”). Consolidated financial statements are disclosed in euros, which is the functional and presentation currency of the controlling company (Pivovarna Laško, d. d.).

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and liabilities, denominated in a foreign currency, are recognised in the Income Statement.

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Exchange rate differences arising from debt securities and other financial instruments are recognised at fair value and are included in the profit or loss of transactions with foreign currencies. Exchange rate differences in non-monetary items such as securities kept for trading are shown as a portion of the increase or decrease of fair value. Currency differences in securities available-for-sale are included in the revaluation reserves on equity.

c) Companies in the Group Income statements and cash flow statements of subsidiary companies abroad are converted into the reporting currency of the controlling company on the basis of the average foreign currency rate, and balance sheets are converted into the reporting currency with the use of the exchange rate valid at 31 December. If a company abroad is sold, the currency differences realized at the sale are recognized in the profit or loss statement as a part of the profit/loss of the sale.

8. Intangible fixed assets Intangible fixed assets comprise investments in the acquisition of patents, licenses, brand names, goodwill, intangible fixed assets under development, computer software and other intangible fixed assets (IAS 38). An intangible fixed asset is only recognised as an asset if it is likely that future economic benefits will flow to the company and if its cost can be reliably measured. Pivovarna Laško, d. d. uses the cost model (IAS 38.74), thus intangible assets are carried at cost less any amortisation and impairment losses and collective loss due to impairment.

b) Goodwill Goodwill represents a surplus in the cost of an acquired company over the fair value of the net asset share of the acquired company on the day of the acquisition. Goodwill arising upon the acquisition of subsidiary companies is recognized in intangible fixed assets. Goodwill is checked, tested for impairments and measured at the initial value decreased by cumulated impairments on an annual basis. Profits or losses at the sale of a company include the current value of positive goodwill referring to the company sold. A renewed appraisal was performed on 31 December 2010 or namely an impairment test on the goodwill of the investment in Delo, d. d. and Fructal, d. d. From the value assessment performed by the certified business appraiser, impairment in the amount of EUR 11,741,105 was seen as required regarding the investments, with the share in Fructal, d. d. comprising EUR 8,216,215 and the investment in Delo, d. d. EUR 3,524,890.

a) Patents, brand names and licenses Disbursements for the purchase of patents, brand names and licenses are capitalised and amortised using the straight-line method during their “useful periods of life” (amortisation period). If the useful period of life cannot be determined, such assets are not depreciated and only a test of impairment is performed on an annual basis. If a revaluation is required, the value of intangible fixed assets must be estimated and written-off up to the amount of their replacement values. The life span of brands cannot be determined therefore an impairment test was performed. Based on the appraisal performed by the certified business appraiser on 31 December 2010, an impairment of the brands of Delo, d. d. in the amount of EUR 5,019,001 and the brands of Fructal, d. d. in the amount of EUR 7,668,902 was made.

impairment losses and collective losses due to impairment. The useful period for other intangible assets is 10 years.

9. Financial assets The Group classifies its investments into the following categories: financial assets at fair value through profit or loss, loans and receivables, financial investments held-to-maturity and financial assets available-forsale. The classification depends on the purpose for which the investment was acquired.

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Whenever computer software is not considered a constituent part of the appropriate computer hardware, they are treated as intangible assets. Other intangible assets are shown at cost less any amortisation and

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b) Other intangible assets

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The useful period for other intangible assets ranges from 3 to 10 years.

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c) Held-to-maturity investments Investments with fixed maturities which the Management Board of the Company intends to retain to maturity are classified as investments held to maturity and are classified among long-term assets. The Group did not possess any investments within the scope of this category in the current period.

d) Financial assets available-for-sale Financial assets available-for-sale are those non-implemented financial assets marked as available-for-sale or those not classified in any other category. They are also valued according to their fair values, if their fair value can be ascertained. In the event the investment is subject to trade on the securities market, then the fair value is deemed as the market price. The fair value of a particular investment may also be valuated. Valuations are carried out by accredited business appraisers, who are registered at the Slovenian Institute of Auditors. In 2010, accredited business appraisers valuated the investment in the company Elektro Maribor, d. d. The effects of revaluations increase or decrease the equity value (surplus) of the revaluation. Effects of impairment of financial assets increase financial expenses and have an effect on profit or loss. Those financial assets for which the fair value cannot be established are valued at cost. The Group assesses whether there is objective evidence that a financial asset or group of financial assets is impaired on each balance sheet date. Characteristic or a long-term decrease in their fair values below cost is considered an indicator of an impairment of shares in the event of the sale of financial assets availablefor- sale. If such evidence exists for financial asset available-for-sale, the cumulative loss measured as a difference between cost and the current fair value shown as an impairment loss in the income statement is removed from capital or comprehensive income and shown in the income statement. Reversals of impair-

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ments shown in the income statement cannot be performed for capital instruments.

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10. Derivative financial instruments Derivatives are those instruments which are used for protection against exposure to financial risks. They are used as a tool to protect against a change in the fair value or cash flow of a risk-exposed protected item. As a subject of trade, it represents an independent financial instrument exposed to risk. Initially, they are recognized at cost and are subsequently revalued to the fair value. Profit or loss from the revalued derivative for the protection of the fair value against risk is recognized in profit and loss. Revaluation of a financial instrument which is used for cash flow protection is recognized directly in equity when the protection is successful, while the unsuccessful part of the profit or loss from the instrument for the protection against risk is recognized in the income statement. The Group uses derivatives for protection against exposure to currency and interest rate risks, and for cash flow protection against risk. Integrated derivatives must be separated from the host contract and accounted for as a derivative only if the economic features and risks of the integrated derivative are not closely connected with the economic features and risks of the host contract, if a special instrument with the same provisions as the integrated derivatives is sufficient for the determination of the derivative, and if a complex instrument is measured at the fair value through the income statement.

11. Tangible fixed assets Tangible fixed assets include real estate, equipment and piece inventory. Since 2008 real estate has been valued using the revaluation model. Prior to this period they were valued at cost. Equipment and piece inventory are carried at cost less any amortisation and impairment losses.

Amortisation is calculated according to the straight-line method. The expected functional useful lives of individual asset groups comprise: real estate

20–40 years;

plant and machinery

4–10 years;

computer hardware

2–4 years;

motor vehicles

4–8 years;

other equipment

3–7 years.

Land is not amortised for it is considered as having an unlimited life. Similarly, assets under acquisition are also not amortised until they are available for use. Since the book value of assets is greater than the estimated recoverable amount, assets must be revalued to the estimated recoverable amount (impairment) – IAS 36. The recoverable value of the asset is the larger of the following: its fair value decreased by sale expenses, or its value in use. Profits and losses arising from the disposal of land, buildings and equipment are determined on the basis of their book values and have an effect on profit and loss. Returnable packaging (drums, bottles and crates) are shown among tangible fixed assets while observing a useful life of three or four years. Costs of financial liabilities for financing investments into tangible fixed assets are capitalized. Subsequent costs are included in the book value of the asset or are recognised as a special assets, which is only suitable if the future economic benefits connected to this asset will be observed in the Group and if the costs of such an asset can be reliably measured. The book value of spare parts is not disclosed separately. The costs

property is not used for production or the sale of goods or services, for administrative purposes or for regular operations. Investment property is land or buildings, acquired the appreciation of long-term investments or leased out and not for sale in the near future. Investment property is only recognised as an asset if it is likely that future economic benefits will flow to the company and if its cost can be reliably measured. In 2008 the Group changed from using the cost method to using the fair value model for measuring investment property. When preparing the annual financial statements a test for signs of impairment and need for revaluation is conducted each year. Investment property is decreased by accumulated amortization according to the straight-line depreciation method, considering the useful life of a particular investment property and accumulated loss due to impairment. Bearing in mind the modified valuation policy on the fair value model, the revaluation effects (impairment and strengthening) are reflected in the profit and loss account.

13. Impairment of non-financial assets Assets which have a limited functional life are not amortized and are tested annually for impairment. Assets which are amortised are tested for impairment whenever events or circumstances reflect impairment in an asset. Losses due to impairment are recognised for the surplus of the book value amount over the asset’s replacement value. The replacement value is higher for fair value assets less costs of sales and value upon use.

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Investment property is property (land and buildings, parts of buildings or both) owned by the Group or under financial lease for the purpose of earning rent or increasing the value of the property. Investment

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12. Investment property

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of all other repair and maintenance work are included in the income statement in the period they occur.

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For the purpose of establishing impairment, assets are broken down into their smallest unit for which cash flows can be defined, independently from other units (cash generating units). The value of goodwill is assessed annually depending on a need for impairment.

14. Non-current assets available-for-sale Non-current assets (group for disposal) available-for-sale are those non-current assets for which the book values are estimated to be reconciled predominantly with their sale in the following twelve months and which will not be further used. Non-current assets classified as held for sale are measured at the lower of two values: book value or fair value, decreased by selling costs. In 2010 the Group classified the investments into Večer, d. d., Maribor, Poslovni sistem Mercator, assets and corresponding liabilities of Delo, d. d. and the assets and corresponding liabilities of Fructal, d. d. and Jadranske pivovare – Split, d. d. among non-current assets available-for-sale due to the intended sale thereof.

15. Inventories Inventories are stated at the lower of cost and net realisable value according to the method of weighted average pricing. The value of finished products and work in progress consists of total manufacturing costs which includes the costs of processing materials, production labour costs, amortization, services and other manufacturing costs. The net realizable value is estimated based on customary sales prices decreased by the costs of conversion and sales.

16. Operating receivables

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At initial recognition, operating receivables are shown at fair value, later they are measured based on

212

paid values using the effective interest rate method less impairment. Impairments of operating receivables are made when the Group expects that it will not be capable of realising the entire amount of the matured receivable. The impairment amount represents the difference between the book value and the current value of (expected) estimated future cash flows discounted by the effective interest rate. The impairment amount is recognised in profit or loss.

17. Cash and cash equivalents For the cash flow statement, cash and cash equivalents comprise cash on hand, sight deposits at banks and investments into the money market instruments with no bank overdrafts. Overdrafts of bank accounts are included under short-term financial liabilities in the balance sheet.

18. Provisions Provisions are recognised when the Company shows a legal obligation as a result of past events for which a probable likelihood exists in the future that it will have to settle the liability and when a reliable estimate of the liability can be made. Provisions may not be formed to cover future losses from operations.

19. Provisions for severance pay and jubilee awards The net liabilities of the Group in connection to long-term benefits under years of service, except for pension schemes are the earnings which employees obtain in exchange for their service during current and previous periods. Such liabilities are calculated using the method of foreseen significance of units and are discounted to their current values.

20. Deferred taxes Deferred taxes are shown in their entirety while observing liability methods based on temporary differences between taxes associated with assets and liabilities and disclosed tax amounts in the financial statements. Deferred tax is accounted for at the acquisitions with respect to the initial recognition of assets and liabilities which have no influence either on the operating profit, tax profit or loss. Deferred tax is calculated using the tax rate (and legislation) as prescribed by law and valid on the balance sheet date which is expected to be used at the time the deferred tax is realised or liability for deferred tax settled. Deferred tax receivables are recognised if a possibility exists that a tax gain is expected in the future using temporary differences. Deferred tax liabilities are recognised upon revaluation of assets. Deferred tax is disclosed on the basis of temporary differences arising from investments in subsidiary companies, except when time balance of the closure of temporary differences is under the Groupâ&#x20AC;&#x2122;s control and there is a probability that temporary differences will not be cancelled in the near future. Deferred tax liabilities are shown as a set-off amount in in the Balance sheet. The tax rate in 2010 comprised 20%.

21. Operating liabilities Operating liabilities comprise credit to suppliers for purchased merchandise or services and liabilities to employees, the State, owners or others. Short-term accrued costs and deferred revenues are also treated as operating liabilities. Liabilities are recognised if it is likely that due to their settlement, factors enabling economic benefit are decreased and the amount for settlement can reliably be measured. They are initially recognised at fair value, and later measured according to realised payments using effective interest rates.

23. Share capital Ordinary shares are classified under capital. Transaction costs directly associated with the issue of new shares which are not connected to the acquisition of the company are shown as a decrease in capital. Any surpluses over the fair value of received paid-in amounts in excess of the book value of newly issued shares are recognised as paid-in capital surpluses.

24. Own shares If the company reacquired its own shares in the business year, the paid amount inclusive of transaction costs, exclusive of tax is deducted from total capital as own shares (treasury shares) until these shares are removed, reissued or sold. The company must form reserves for own shares in the identical amount for that business year. At the same time it must form reserves for own shares for PILR shares owned by subsidiaries. Reserves for own shares are released when its own shares are disposed of or removed, crediting the source from which they were formed. Upon the sale of such shares, the difference between the sale and book value of own shares is directly calculated into equity capital and has no effect on profit or loss. Own shares is used for the purposes defined in Article 247 of the Companies Act.

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effective interest rates. Any difference between receipts (exclusive of transaction costs) and liabilities are recognised in profit or loss throughout the entire period of the financial liability.

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Financial liabilities are recognised at fair value upon their arising, exclusive of any arising transaction costs. In the upcoming period, financial liabilities are measured according to their realised payment using

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22. Financial liabilities

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25. Dividends Until approved by the General Meeting of Shareholders, foreseen dividends are treated as retained earnings.

26. Reporting by segments Business segments are formed by products or services which on the basis of risk and benefits, differ from the products and services of other segments. Regional (geographic) segments comprise products or services within a specific economic environment which are exposed to risk and benefits which differ from risk and benefits in other economic environments.

27. Reserves The tax statements of Pivovarna Laško, d. d., and companies of the Pivovarna Laško Group in Slovenia are drawn up in compliance with the International Financial Reporting Standards as adopted by the EU and the Corporate Income Tax Act. The corporate income tax rate in 2010 comprised 20%. The tax base is the profit as a surplus of revenues over expenses according to the Corporate Income Tax Act whereby revenues and expenses shown in the income tax statement established according to law or accounting standards are used as the tax base.

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The tax base is decreased for recognized tax relief and for covering a loss brought forward.

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28. Assessment of the values of individual items On the basis of assessments of the management, appraisers, actuaries and other experts, the following assets and liabilities were assessed: intangible fixed assets, real estate, investment property, financial investments and provisions. As this regards an assessment, there is some uncertainty regarding the attainment of specific assumptions used at valuation.

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Positive goodwill

(24,515,021) 46,974,329

Transfer to non-current assets for sale - DELO

31 December 2010

17,197,382

(11,741,105)

28,938,487

- -

Transfer to non-current assets for sale - DELO

31 December 2010

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98,707,783

1 January 2010

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46,974,329

31 December 2010

28,938,487

17,197,382

CURRENT COST

- -

Transfer to non-current assets for sale - FRUCTAL

Transfer to non-current assets for sale - SPLIT

- -

Depreciation on the year

Disposals

- -

Transfer

1 January 2010

31 December 2009

ACCUMULATED VALUE ADJUSTMENT

(14,530,530)

Transfer to non-current assets for sale - SPLIT

Transfer to non-current assets for sale - FRUCTAL

- -

Transfer from property, plant and equipment

Disposals

(12,687,903)

Transfer from investments in progress

Impairment

98,707,783

Direct gains

1 January 2010

Changes

31 December 2009

COST OF PURCHASE

Year 2010

Trademarks

EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Intangible fixed assets

3,180,327

1,020,650

5,494,635

(934,021)

(164,025)

(523,066)

891,443

6,224,304

(5,249)

6,229,553

6,515,285

(3,094,072)

(227,143)

(4,191)

(539,896)

224

637,177

360,694

9,382,492

(27,388)

9,409,880

Licenses and other IFAs

107,155

(702,132)

(589,728)

(394,202)

(547,163)

224,709

126,928

(1,291,860)

(1,056,209)

(529,411)

59,677

234,083

Property rights

2,105,152

1,526,297

(71,924)

(637,177)

130,246

2,105,152

IFA in acquisition

133,038,904

66,016,526

4,904,907

(934,021)

(164,025)

(394,202)

(1,070,229)

1,116,152

6,351,232

(5,249)

6,356,481

70,921,433

(27,681,017)

(227,143)

(15,590,930)

(1,069,307)

224

(24,429,008)

550,617

139,367,997

(27,388)

139,395,385

Total

216

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

98,707,783

28,938,487

(5,915,596)

34,854,083

1 January 2009

31 December 2009

CURRENT COST

5,716,283

(604,890)

1,055,367

106,229

159,035

532,528

4,468,014

(20,446)

4,488,460

9,409,880

(479,833)

1,805,801

1,006,383

7,077,529

(22,914)

7,100,443

Licenses and other IFAs

128,131,780

98,194,513 34,854,083

28,938,487

2,611,983

3,693,597

513,270

- -

307,962

51,327

- -

Transfer from property, plant and equipment

31 December 2009

- -

153,981

Disposals

Revaluation

Gains

Depreciation on the year

1 January 2009

Elimination Fr. Zg. from consolidation

31 December 2008

ACCUMULATED VALUE ADJUSTMENT

31 December 2009

- -

Transfer from property, plant and equipment

Disposals

(29,577,978)

Transfer from investments in progress

128,285,761

Impairment

Positive goodwill

Direct gains

1 January 2009

Elimination Fr. Zg. from consolidation

31 December 2008

COST OF PURCHASE

Year 2009 Trademarks

P I VOVA R N A L A Š KO D . D .

125,186

107,155

126,928

18,031

108,897

234,083

Property rights

1,340,571

2,105,152

(1,006,383)

1,770,964

1,340,571

IFA in acquisition

167,063,603

133,038,904

6,356,481

(604,890)

1,055,367

414,191

210,362

550,559

4,730,892

(20,446)

4,751,338

139,395,385

(479,833)

1,805,801

(35,493,574)

1,770,964

171,792,027

(22,914)

171,814,941

Total

All intangible assets are measured according to the cost model. The brand names and goodwill items represent the largest value amongst long-term intangible fixed assets; the value of each is every year assessed and the possible need for impairment determined. As at 31 December 2010, a verification of fair value for goodwill was performed by an accredited appraiser registered at the Slovenian Institute of Auditors. The basis for verifying the need for impairment of brand names and goodwill was the assessment of the value of Union Group and Delo, d. d. The method of the current value of expected free cash flows was applied in assessing the value. On the basis of the valuation, in 2009 the Group disclosed an impairment of the brand names of the company Delo, d. d. of EUR 5,019,001, the brand names of Fructal in the amount of EUR 7,668,902 and an impairment of goodwill related to the investment in Fructal, d. d. in the amount of EUR 8,216,215 and in the investment in Delo in the amount of EUR 3,524,890. The value of the brand names of Delo, d. d. as at 31 December 2010 amounted to EUR 24,515,021, those of Union, d. d. EUR 46,461,058 and those of Fructal, d. d. EUR 14,530,530. Due to the intended sale, the Company also transferred the total value of the brand names of Delo, d. d. and Fructal, d. d. among short-term assets on the last day of 2010. Only the value of the brand names of Pivovarna Union, d .d. is shown under intangible fixed assets as at 31 December 2010. Due to the takeover of the Union Group, goodwill in the amount of EUR 17,197,382 is shown in the consolidated financial statements of the Pivovarna Laško Group as at 31 December 2010. An impairment of goodwill regarding the company Fructal in the amount of EUR 8,216,215 was recognised based on the value assessment. Goodwill from the takeover of Delo, d. d. was impaired in its entirety in the amount of EUR

ANNUAL REPORT 2010

standards, own brands are not disclosed in the financial statements.

P I VOVA R N A L A Š KO D . D .

For the purpose of insuring short-term loans from banks, the Company pledged brands in the amount of EUR 50,000,000 consisting of a portion of the assets of the Group and in accordance with accounting

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

3,524,890.

217

218

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

Impairment

(3,866,721)

(2,738,234)

38,636,854

Transfer to non-current assets for sale- DELO

31 December 2010

(89,487)

(8,312,952)

Transfer to non-current assets for sale - SPLIT

Disposals

Transfer to non-current assets for sale 31.12.2010

(11,787)

310,042

Revaluations

Transfer to investment properties

11,787

554,624

52,779,582

(6,369)

52,785,951

Transfer from investments in progres

Retraining

Direct gains

1 January 2010

Transfer to intangible fixed assets

Currency differences

31 December 2009

COST OF PURCHASE

107,956,083

(21,393,975)

(11,328,728)

(156,497)

(27,398,543)

(830,191)

(458,378)

170,056

1,817,769

504,394

167,030,176

185,030

166,845,146

Year 2010 ( in EUR ) Properties Buildings

2. Tangible fixed assets

P I VOVA R N A L A Ĺ KO D . D .

299,968,271

(16,800,972)

(32,188,270)

(6,323,040)

(52,870,012)

(1,610,200)

(555,825)

6,117,261

1,335,343

402,863,986

(24,498)

402,888,484

Production plant and machines

38,036,342

(8,179,213)

(2,857,914)

(7,483,020)

(166,664)

1,794,887

967,930

53,960,336

27,388

(198,684)

54,131,632

22,886,714

(700,235)

29,063

1,240,773

109,241

22,207,872

Other plant and Small equipment inventory

2,827,919

(20,048)

(11,783)

(187,214)

(9,290)

(10,982,477)

(3,210)

10,938,928

3,103,013

(12)

3,103,025

Capital assets in acquisition

510,312,183

(49,132,442)

(47,395,502)

(10,314,387)

(96,073,817)

(979,579)

(2,068,578)

(75,727)

(3,210)

14,410,460

701,944,965

27,388

(44,533)

701,962,110

Total

219

Production plant and machines

Other plant and Small equipment inventory

- - - - - - - - - - - -

Currency differences

Transfer from intangible fixed assets

1 January 2010

Depreciation on the year

Retraining

Revaluations

Transfer to investment properties

Transfer to non-current assets for sale 31.12.2010

Disposals

Transfer to non-current assets for sale - SPLIT

Transfer to non-current assets for sale- DELO

31 December 2010

43,711,071

(2,382,983)

(7,619,261)

(18,014)

(20,031,583)

(34,869)

20,757

(327)

4,493,191

69,284,160

186,782

69,097,378

266,629,692

(13,413,551)

(29,945,143)

(6,015,793)

(45,746,391)

(179,706)

12,159,990

349,770,286

(13,660)

349,783,946

29,132,136

(6,650,093)

(2,783,862)

(6,112,153)

(88,499)

3,539,338

41,227,405

5,249

(192,406)

41,414,562

17,206,534

(670,517)

29,063

(1,284)

3,132,759

14,716,513

(977)

(1,286)

2,236

(13)

2,249

Capital assets in acquisition

P I VOVA R N A L A Š KO D . D .

1 January 2010

Currency differences

31 December 2010

ANNUAL REPORT 2010

97,746,016

64,245,012

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

52,779,582

38,636,854

53,093,700

33,338,579

12,732,931

8,904,206

7,491,359

5,680,180

3,100,777

2,827,919

CURRENT COST

31 December 2009

ACCUMULATED VALUE ADJUSTMENT

Year 2010 ( in EUR ) Properties Buildings

226,944,365

153,632,750

356,679,433

(22,446,627)

(37,564,404)

(9,489,163)

(71,891,413)

(94,305)

(160,233)

(327)

23,325,305

475,000,600

5,249

(19,297)

475,014,648

Total

220

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Production plant and machines

52,785,951

(575,337)

Disposals

31 December 2009

2,738,234

Transfer to…

1,633,590

Impairment

Elimination of impairment

83,329

Revaluations

5,176,552

Retraining

Transfer from investments in progres

Direct gains

1 January 2009

43,729,583

Revaluations

Retraining

(16,813,550)

Transfer to investment properties

166,845,146

(457,134)

(2,738,234)

1,765,827

(196,381)

9,006,503

1,098,684

1,482,841

156,883,040

(44,705)

6,229

173,735,066

Elimination Fr. Zg. from consolidation

4,597

43,724,986

Transfer to intangible fixed assets

Currency differences

31 December 2008

402,888,484

(6,704,824)

3,687,112

4,500,869

(3,636,025)

568,349

404,473,003

(1,460,710)

17,725

405,915,988

COST OF PURCHASE

Year 2009 ( in EUR ) Properties Buildings

P I VOVA R N A L A Š KO D . D .

54,131,632

(7,883,336)

24,604

(4,457,580)

137,390

1,262,332

889,681

1,470,757

62,687,784

473,679

(607,145)

(119,408)

2,174

62,938,484

22,207,872

(1,411,943)

1,803,933

1,360,688

(389,706)

223,705

20,621,195

Other plant and Small equipment inventory

3,103,025

(20,011,583)

203,354

11,568,271

11,342,983

11,342,974

Capital assets in acquisition

701,962,110

(17,032,574)

1,803,933

7,111,133

(4,457,580)

24,338

1,295,361

(1,834,012)

15,313,923

699,737,588

473,679

(16,813,550)

(44,705)

(607,145)

(1,580,118)

30,734

718,278,693

Total

221

Production plant and machines

- (48,449)

- - - - - - - - - - - - -

Elimination Fr. Zg. from consolidation

Transfer to investment properties

Revaluations

Retraining

1 January 2009

Gains

Depreciation on the year

Retraining

Revaluations

Transfer to…

Disposals

31 December 2009

8,507

349,783,946

(6,361,207)

(3,537,210)

16,085,667

374

343,596,322

(1,460,710)

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

(17,679) 93,336,386

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

43,729,583

Transfer to investment properties

1 January 2009

5,287

4,597 -

97,747,768

52,785,951

Elimination Fr. Zg. from consolidation

Currency differences

31 December 2009

60,876,681

9,219

53,104,538

CURRENT COST

69,097,378

(181,058)

996,272

4,783,959

63,546,654

(16,812,221)

(27,026)

942

Currency differences

Adjustment for year 2008

345,048,525

80,384,959

31 December 2008

ACCUMULATED VALUE ADJUSTMENT

Year 2009 ( in EUR ) Properties Buildings

18,728,787

(544)

908

12,717,070

41,414,562

(7,622,770)

133,375

1,545,641

3,399,319

43,958,997

473,679

(696,638)

(119,408)

1,266

44,300,098

8,982,084

7,491,359

14,716,513

(1,320,817)

1,807,133

(389,704)

2,980,790

11,639,111

Other plant and Small equipment inventory

11,340,779

3,100,776

2,249

2,204

2,196

Capital assets in acquisition

236,994,300

(17,679)

(544)

20,011

226,947,462

475,014,648

(15,353,243)

1,807,133

(47,683)

(1,385,001)

27,249,780

374

462,743,288

473,679

(16,812,221)

(27,026)

(696,638)

(1,580,118)

10,723

481,374,889

Total

The divestment of tangible fixed assets represents the sale and write-off of such assets. The Group did not financially lease any of its tangible assets. The Group has been utilizing the revaluation model for valuing real estate since 2008 while equipment and piece inventory are valued using the cost model. The Group realized a profit of EUR 45,336 from the sale of tangible fixed assets which is shown as a revaluation of operating revenue and a loss of EUR 110,869 which is shown as a revaluation of operating expenses. The company pledged tangible fixed assets which on 31 December 2010 amounted to EUR 100,293,645 to insure long-term loans. The book value of pledged real estate amounted to EUR 93,470,076 and of pledged equipment EUR 6,823,569. As shown in the Business Report of this Annual Report, denationalization claims have been initiated against Radenska, d. d. The denationalization beneficiaries entered a notice of impending action in the land registry denoting disputes with regard to all land parcels which are the subject of the denationalization procedure. The entry of the notice of dispute was also carried out for the aforementioned brands of Radenska, d. d., Radenci. As at 31 December 2010 the Group shows a liability for tangible fixed assets in the amount of EUR 852,558.

3. Investment property Year 2010 ( in EUR )

Properties

Buildings

Total

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

COST OF PURCHASE

222

1 January 2010

1,158,911

6,943,312

(79,717)

(268,385)

(348,102)

11,786

996,971

1,008,757

Transfer to current assets for sale

(2,943,324)

Decrease in value

(109,465)

Transfer to non-current assets for sale - FRUCTAL

(44,705)

Revalutation Transfer from property, plant and equipment

Transfer to non-current assets for sale - DELO 31 December 2010

8,102,223

(80,159)

1,090,980

4,494,245

5,585,225

ACCUMULATED VALUE ADJUSTMENT 1 January 2010

703,827

Depreciation

7,217

Impairment

368,721

Disposals

(5,388)

Transfer from property, plant and equipment

123,484

Transfer to current assets for sale

(240,612)

Transfer to non-current assets for sale - FRUCTAL

(27,026)

Transfer to non-current assets for sale - DELO

(1,482)

31 December 2010

928,741

CURRENT COST 31 December 2010

1,090,980

3,565,504

4,656,484

1 January 2010

1,158,911

6,239,485

7,398,396

Year 2009 ( in EUR )

Properties

Buildings

Total

COST OF PURCHASE 31 December 2008 Revalutation Currency differences 1 January 2009 Revalutation Retraining Decrease in value 31 December 2009

6,161,601

11,625,984

17,787,585

(1,310,126)

(1,359,492)

(2,669,618)

44,705

4,851,475

10,311,197

15,162,672

(14,244)

(1,049,966)

(1,064,210)

(1,068,930)

(3,678,321)

(1,248,988)

(4,927,309)

1,158,910

6,943,313

8,102,223

ACCUMULATED VALUE ADJUSTMENT 31 December 2008

4,294,637

Revalutation

(2,669,506)

Currency differences

27,026

1 January 2009

1,652,157

Depreciation

223,183

Retraining

(988,526)

Decrease of value adjustment

(182,987)

31 December 2009

703,827

6,239,486

7,398,396

4,851,475

8,659,040

13,510,515

In 2010 the Group generated EUR 368,766 in revenues and EUR 704,547 in expenses from investment property. Revenues were generated from rents, while expenses refer to charged depreciation and impairments. Based on a value assessment Pivovarna Laško, d. d. showed an impairment of its investment real estate in the amount of EUR 302,339 EUR and impairment from its investment in Radenska, d. d. in the amount of EUR 402,208. Investment property also includes property which is not used for carrying out the basic activity but leased out by the Group. The following real estate property is recorded at Pivovarna Laško, d. d. as real estate property investments: Sports Hall Tri Lilije, Hotel Hum, Hotel Savinja and Restaurant Grad Tabor and holiday capacities; at Radenska, d. d., the administrative building in Radenci and business buildings in Boračevo, Petanjci and Sarajevo The investment property was assessed by a certified real estate appraiser on 31 December 2010. The Management Board commenced with the procedure of divesting the catering facilities Hotel Hum and Hotel Savinja and Tri lilije sports arena in the beginning of 2011. They estimate that a probability exists that both hotels will be sold within the space of a year if a suitable buyer is found whereas the implementation of the sale of the sports arena is quite demanding and complex. Due to these assumptions, the value of both hotels whose assed value as at 31 December 2010 was EUR 2,702,713, in the balance sheet on the last day of 2010 was transferred from investment property and is shown under non-current assets available-for-sale. In 2008 the Group changed from using the cost method to using the fair value model for measuring investment property. Investment properties upon taking into account the cost are decreased by accumulated amortization according to the straight-line depreciation method, considering the useful life of a particular investment property.

ANNUAL REPORT 2010

1,158,910

1 January 2009

P I VOVA R N A L A Š KO D . D .

31 December 2009

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

CURRENT COST

223

In order to ensure long-term and short-term loans, the Group pledged investment properties in the amount of EUR 1,992,335.

4. A. Long-term financial investments in subsidiaries

( in EUR )

Share in capital

2010

2009

SHARES IN COMPANIES OF THE GROUP In Slovenia: Firma Del, d. o. o., Laško

100 %

7,427

Radenska, d. o. o., Zagreb

100 %

4,907

Radenska, d. o. o., Beograd

100 %

250

12,584

Abroad: Laško Grupa, d. o. o., Zagreb

100 %

2,707

RA&LA, d. o. o., Sarajevo

100 %

232,241

Eurofruit Sarajevo, d. o. o.

100 %

14,093

234,948

246,334

Transfer to current assets for sale - FRUCTAL

(40,384)

Total

207,148

258,918

In accordance with IAS 27 the Company valuates long-term financial investments in subsidiaries accord-

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

ing to the cost model.

224

Due to the financial insignificance of the companies Del, d. o. o., Laško and RA&LA, d. o. o., Sarajevo, Radenska, d. o. o. and Zagreb in Radenska, d. o. o., Beograd the Group does not include these companies in the consolidation. All other subsidiary companies are consolidated using the method of full consolidation. Long-term financial investments in subsidiaries increased by EUR 2,707 in 2010 or namely by the amount of founding capital in the company Laško Grupa, d. o. o. in Croatia. Due to the procedure of sale, the Company tranferred investments into the subsidiary Delo, d. d. in the amount of EUR 40,384 from long-term financial investment to short-term financial assets available-for-sale.

4. B. Long-term financial investments in associated companies ( in EUR )

Share in capital

2010

2009

Thermana, d. d., Laško

20.630 %

1,594,000

Poslovni sistem Mercator, d. d., Ljubljana

24.340 %

Birra Peja, Sh. a., Peć, Kosovo

39.550 %

2,630,000

Slopak, d. o. o., Ljubljana

38.960 %

317,148

Transfer to short-term investments - MELR (132,934,216)

Total

132,934,216 134,612,076

317,148 138,836,076

As at 31 December 2010 the Group owned 878,841 shares or 23.34% of Poslovni sistem Mercator, d. d., Ljubljana (Pivovarna Laško, d. d., 8.43%, Pivovarna Union, d. d., 12.33% and Radenska, d. d. 2.57%), 645,003 shares or 20.63% in Thermana, d. d., Laško and 700 shares (39.55%) in the company Birra Peja, Sh. a., Peć, Kosovo and a 38.96 percent share in the company Slopak, d. o. o., Ljubljana.

Investments in associated companies are valuated in accordance with the equity method. The value of the investments increased or decreased respectively in 2010 by the appurtenant portion or profit or loss. This value was appropriately decreased if the fair value thereof was established as lower. Revaluation to the higher fair value in accordance with IFRS is not recognised. The fair value of investments traded on the organised securities market is recognised on the basis of the listed price at the Ljubljana Stock Exchange whereas for other investments, fair value is established based on a value assessment. Due to profit attained from Poslovni sistem Mercator the investment increased by EUR 7,092,326 in 2010 and decreased by the amount of paid-out dividends, or namely EUR 6,327,655. At the same time the investment was also reduced by the appertaining portion of other comprehensive income in the amount of EUR 2,442,531. The value of the investment in MELR shares on the last day of 2010 amounted to EUR 132,934,216 or EUR 151.26 per share. The fair value of the denoted investment based on the listed stock price amounted to EUR 138,593,226 or EUR 157.7 per share. In accordance with the rules of the equity method, the investment was not revalued to a higher fair value. Due to the planned sale and in accordance with IFRS 5 the Pivovarna Laško Group transferred the investment into Poslovni sistem Mercator in the amount of EUR 132,934,216 to short-term assets available-for-sale.

Investment in the subsidiary Thermana, d. d. On 31 December 2010 Pivovarna Laško, d. d., owned 645,003 shares of Thermana, d. d., representing a 20.63% ownership stake in the aforementioned company. The original purchase value of the investment comprised EUR 6,897,921. Based on a appraisal, the Group implemented an impairment of EUR 5,303,921 on investments in 2009, and impairing the remainder, i.e. by EUR 1,594,000 in 2010. The impairment was recognised based on the valuation from the previous year and in consideration of whether projected operations had been observed in the valuation. Thermana also acquired additional loans in 2010 which will have

of the sale has been prepared and sent to owners with more than a 50% share in the investment who are interested in a joint sale of their stake as a package. Pivovarna Laško, d. d. signed the agreement on 20 December 2010. In February 2011 activities for obtaining the consent for the sale from the subscribers was carried out. On 28 February 2011 the agreement was signed and reconciled by NLB, d. d., Pivovarna Laško, d. d. and Zavarovalnica Triglav, d. d., which together represents a 44.85% ownership stake in Thermana, d. d. Reconcilliation activities with the remaining potential signers of the agreement on the implementation of sales of shares is continuing.

Investment into the associated company Birra Peja, Sh. a., Peć The company Birra Peja, Sh. a., Peć is an associated company of Pivovarna Union, d. d. the latter of whom owns 700 shares or a 39.55 percent stake in the associate company. As at 31 December 2010 the value of all assets of the company Birra Peja, Sh. a. totalled EUR 30,046,130 whereas long-term and short-term liabilities totalled EUR 26,484,251. The company realised total revenues of EUR 16,136,629 in 2010 and a net loss of EUR 8,242,578. In 2010 the Group recognised a decrease in long-term financial investments in the associated company in the amount of EUR 2,630,000 and a decrease in the derivative financial instrument (stock option for the purchase of an additional stake) in the amount of EUR 1,202,286. The Group recognised a total of EUR 3,832,286 in financial expenses. A valuation was carried out on the last day of 2010 by an accredited business appraiser registered with the Slovenian Institute of Auditors. Using the method of the current value of expected free cash flows, the appraiser estimated that on 31 December 2010 the market value of the 39.55 percent equity stake in the company Birra Peja, Sh. a., Peć for financial reporting purposes equalled zero.

ANNUAL REPORT 2010

mandate for organisation of a sale to NLB, d. d., Ljubljana. The agreement regarding the implementation

P I VOVA R N A L A Š KO D . D .

The Group is discussing the possibility of the sale of the investment with the other owners, issuing a

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

a negative effect on cash flows in future years. Radenska, d. d. generated a loss of EUR 1,695,168 in 2010.

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The most important elements and findings in the valuation of the company Birra Peja, Sh. a. are given in continuation:

•T he subject of the valuation was the minority ownership stake in the company (39.55%) with the properties of a majority stake because Pivovarna Union, d. d. via its management in the company had a significant influence on the adoption of decisions by management bodies of the company and on the design of strategies and business decisions (investments, indebtedness, etc.).

•T he appraisers felt that the company’s market value equalled its current value of expected free cash flows, in accordance with a general financial assumption that the company’s value equals the sum of all future benefits which it brings to its owner(s).

•T he method of the current value of expected free cash flows without including debt was used in assessing the value of the company. In this method, first the current value of expected free cash flows without payment of interest and principal (value of total capital) is assessed, after which all financial liabilities of the company are deducted due to revaluation of the subject, i.e. the equity capital of the company. The value obtained in this way is additionally adjusted for possible potential liabilities, premiums and discounts.

•T he methods of comparable companies and comparable transactions were used as control methods by the appraisers in the value assessment. The value of a share obtained on the basis of MVIC/Sales, MVIC/ EBIT and EVIC/EBITDA ratios are comparable to values estimated on the basis of cash flows.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

•T he required rate of return for equity capital ranges between 14.3 and 18.4%.

226

•T he required rate of yield for total debt capital will be decreased from 8.9% in the projection period in 2010 to 7.0% in 2015.

•T he required rate of return for total (equity + debt) capital ranges between 12.5 and 16%. •T he appraisers took into consideration the business plan and potential of the company in the assessment of future yield, the company’s current operations and findings from an analysis of its activities.

•T he appraisers planned the growth of revenues from the sales of beverages for the period 2011 to 2015 at around 7.7 to 9.1% which is predominantly due to the strengthening of the market share on the Kosovo market and entry into the Albanian market. In the optimistic plan the appraisers took the plan of the management of Birra Peja as a base, whereby the company would increase sales in all beverage segments. A more stable growth for all segment beverages was used in the pessimistic scenario.

•O perating costs will lag behind the growth of revenues, predominantly due to the relative decrease in labour and service costs and reduction of amortization (relatively as a share in sales revenues) which is a consequence of a smaller scope of investments in the future.

•T he EBIT margin will grow from 17% in 2009 to 9.6% in 2015 (7.5% according to the pessimistic scenario). The EBIT margin will grow from 4.9% (adapted) in 2010 to 19.7% in 2015 (18.2% according to the pessimistic scenario). According to projections the company will attain the lowest EBITDA margin as a comparable company in the region for the company Birra Peja was in a extremely poor financial state on 31 October 2010.

•T he appraisers took into account a portion of a land parcel (land plot no. 4617/1 measuring 36,268 m2) and the “Stara restavracija” building totalling EUR 467,000 as surplus assets.

•T he appraisers did not include the discount for the minority owner, for despite the fact that Pivovarna Union, d. d. formally and legally owned a minority share, it is already actively using the company (management of the company, distribution of Pivovarna Union beverages, etc.) and has the option of purchasing a majority share.

•T he appraisers assessed that potential investors were predominantly strategic investors (especially in current conditions on the capital market) therefore they observed a discount for a deficiency in marketability in the amount of 20% based on an analysis of the share characteristics of the company which are not traded on the stock exchange in assessing the value of the minority package of shares.

4. C. Long-term financial assets available-for-sale ( in EUR )

2010

2009

Other investments in shares at the cost of purchase

727,345

12,261,500

Other investments in shares at the fair value

568,136

18,568,424

Total

1,295,481

30,829,924

Transfer to current assets for sale - DELO Total

(577,032)

718,449

30,829,924

Long-term financial assets are defined as investments available-for-sale. For investments whose fair values

For investments carried at cost, due to the negligible ownership stake, the fair values were not able to be reliably assessed. The Group has a number of investments involving smaller values which are carried at cost.

Movement of assets available-for-sale ( in EUR )

Balance as at 1st January Changes in the year:

2010

2009

30,829,924 197,281,029

Transfer to N-CI in associated companies (MELR) + Thermana, d. d.

(317,148) (142,764,639)

Gains

825

4,030,884

Revaluation

(1,238,150)

(8,707,648)

Transfer to non-current assets for sale Transfer to non-current assets for sale 31.12.2010

(26,896,371) (18,998,291) (724,539)

Transfer to non-current assets for sale - DELO

(577,032)

Sale

(359,060)

(11,411)

Balance as at 31st December

718,449

30,829,924

The value of available-for-sale long-term financial assets fell by EUR 30,111,475 compared to the previous year. Due to the envisaged divestment of the majority of investments, the Group transferred long-term financial investments in the amount of EUR 26,896,371 to short-term financial assets available-for-sale. The Group also transferred the following investments to short-term assets: investments in the shares of Elektro

ANNUAL REPORT 2010

for-sale as at 31 December 2011 carried at fair value.

P I VOVA R N A L A Š KO D . D .

Investments in the amount of EUR 82,107 are shown among long-term financial investments available-

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

can be reliably measured, the fair value of profits and losses are directly reflected in equity capital.

227

Maribor, d. d. in the amount of EUR 6,728,124 (5.74%), in the shares of Zavarovalnica Triglav in the amount of EUR 6,771,869 (1.7%), in the shares of Probanka, d. d. in the amount of EUR 5,217,259 (6.27%), in the shares of Premogovnika Velenje in the amount of EUR 4,000,000 (7.09%), in the shares of Elektra Gorenjska, d. d. in the amount of EUR 947,333 (1.6%), in the shares of Ceste Mostovi Celje, d. d. in the amount of EUR 238,355 (5.49%) and investments into the mutual funds Probanka Alfa, Perspektiva, Triglav renta, NLB skladi and the Primus mutual fund. The value for the sale of available long-term financial assets has decreased by the amount of investment revaluation to their fair values in the amount of EUR 1,238,150. The Group sold off investments in the total amount of EUR 359.060. Due to the planned sale, the Group transferred the long-term financial investments to assets available-for-sale in accordance with IFRS 5 in the companies Delo, d. d., Fructal, d. d. and Jadranska pivovara – Split, d. d. in the amount of EUR 1,302,571.

Impairment of investments in the company Elektro Maribor, d. d. Based on a valuation assessment performed by a certified business assessor, the value of the investment amounted to EUR 6,728,124 or EUR 3.5 per share, representing a EUR 384,464 decrease over the amount on 31 December 2009. The Group showed an impairment for this amount which was recognized under financial expenses.

Valuation method used In calculating the final values of the shares of the company Elektro Maribor, d. d. the appraisers equally took into consideration the assessed values acquired on the basis of three methods, namely the method of comparable trading companies, method of comparable transaction and the movement of shares on the grey market. In this way, the values calculated using individual methods were each used with a 33.3% weight in

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

the calculation of the final value. The appraisers assessed that the market share of the minority shareholder

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(5.74%) in the equity capital of the company Elektro Maribor on 31 October 2010 for the purpose of financial reporting was equal to the arithmetic average of values obtained using the aforementioned methods, namely EUR 3.5. At the same time the appraisers also felt that a possible span existed in the values, ranging from EUR 3.0 (grey market) and EUR 4.0 (comparable transactions). The most important elements and findings in the valuation of the company Elektro Maribor, d. d. are given in continuation:

•T he subject of the valuation was the minority ownership share of the company (5.74%), which does not enable Pivovarna, d. d. to impact the process of adopting decisions on bodies of the company management as well as to impact the formulation of strategy and business decisions (on investments, borrowing and so on).

•F rom the aspect of standard valuation methods for companies, the company Elektro Maribor, d. d. can be classified as a company whose equity stakes are not freely traded on the securities market (“closely held companies”). A variety of methods exist for assessing the values of such companies. These methods are usually based on some type of valuation of the capacity of the company to generate earnings for its owners through operations or through liquidation of the company.

• I n countries with developed capital market, the methods used for valuating companies are often based on a market comparisons of similar companies whose shares are publically traded on the securities market (comparative trading companies method) or companies which in the recent past had been sold or merged with other companies (comparable transactions method). The market value of equity capital for such companies is thus more or less known. The appraisers also used an analysis of the movement of share values on the grey market in their appraisal.

•B ased on analyses of the treated company and branches, the appraisers calculated multiplicators which are used for valuating companies:

• multiplicator values of total capital based on sales revenues (MVIC/Sales);

• multiplicator values of total capital based on profit before interest, taxes and amortisation (MVIC/ EBITDA).

A selection of comparative companies, suitable multiplicators and calculation of their adaptation to the characteristics of the dealt with company (political and macroeconomic risks) and an assessment of the final value taking into account the discount for the lack of marketability and discount for the minority owner were used to calculate the value of the shares. The results of the analysis of the characteristics of the shares or minority stake (5.74%) are as follows:

• t hey are not traded;

• f ew transactions on the grey market;

• t he majority shareholder holds over 75% of the capital whereas the minority share (5.74%) cannot be modified by the statute;

• a n interest exists regarding strategic owners but only for the majority share and in agreement with the Republic of Slovenia; occasional interest by the majority owner (Republic of Slovenia)

foreign financial investors exist for the purchase of the minority share;

• t herefore, based on the analyses of the characteristics of the shares and minority stake (5.74%) the appraisers appropriately used the discount for lack of marketability which was 30% in the comparative companies trading their shares on the stock market, 20% for comparable transactions regarding majority stakes and 15% for comparable transactions with minority stakes.

•T he appraisers used the method of comparable transactions for majority stakes and also the 20% discount for the minority owner in its value assessment of Elektro Maribor. The Group has a lien on all EMAG shares for the insurance of loans taken out.

5. Long-term loans ( in EUR )

2010

2009

Long-term loans to associated companies

9,871,580

5,870,650

Other Long-term loans

628,740

733,045

Transfer to current assets for sale - SPLIT

(56,075)

Total

10,444,245

6,603,695

ANNUAL REPORT 2010

• o nly a limited number of financial investors with free funds in Slovenia and a limited interest of

P I VOVA R N A L A Š KO D . D .

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

has been expressed for the exchange (purchase) of the minority share which till now has only been of an informative nature;

229

The Group discloses loans to Pivovarna Union, d. d. and the company Birra Peja, Sh. a., Peć among longterm loans which together with interests amounts to EUR 9,871,580. The loans are insured through bills of exchange and liens on real estate and fall due in 2014. The interest rate fluctuates between the 6-month EURIBOR +0.9% and the 6-month EURIBOR +3.8%. Other long-terms loans primarily refer to long-term housing loans granted by the Group to its employees. The interest rate on average comprised a 6-month EURIBOR + 1%.

6. Long-term operating receivables ( in EUR )

2010

2009

Long-term receivables to others

718,008

744,239

Transfer to current assets for sale - DELO

(661)

Total

717,347

744,239

Long-term operating receivables refer to the production equipment for the Bandidos brand, which was given on financial lease to a business partner from Belarus.

7. Long-term receivables for deferred tax Long-term receivables and liabilities for deferred tax are calculated on the basis of temporary differences with consideration of liability method and tax rate valid in the year the receivables or liabilities for deferred

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

tax are realized. The tax rate for the calculation of corporate income tax comprised 20% in 2010.

230

Liabilities to ( in EUR ) Reservations employees

Fair value (financial assets) Other

Total

RECEIVABLES FOR DEFFERED TAX 1 January 2009

195,388

1,377,385

7,696,027

2,749,627

12,018,427

(79,399)

(71,426)

34,822,646

(1,582,676)

33,089,145

(624,647)

115,989

1,305,959

41,894,026

1,166,951

44,482,925

12,045

(138,092)

2,053,962

328,281

2,256,196

Change in the profit and loss statement Changes in comprehensive income 31 December 2009 Change in the profit and loss statement Changes in comprehensive income 31 December 2010

273,465

128,034

1,167,867

44,221,453

1,495,232

47,012,586

(95,576)

(171,338)

(3,119,890)

(514,039)

(3,900,843)

(383,719)

(2,272,041)

(172,820)

(2,828,580)

32,458

612,810

38,829,522

808,373

40,283,163

Transfer to non-current assets for sale - FRUCTAL Transfer to non-current assets for sale - DELO 31 December 2010

As at 31 December 2010 the Company showed net long-term receivables from deferred taxes in the amount of EUR 28,933,731 which is EUR 8,591,988 less than in the previous year.

As at 31 December 2010 deferred tax receivables from the impairment of financial investments in the amount of EUR 38,829,522 from liabilities to employees for severance pay, jubilee awards and unused holiday leave in the amount of EUR 612,810 and other in the amount of EUR 840,031 are shown under long-term receivables for deferred tax. Receivables from tax losses of the subsidiary Jadranska pivovara – Split, d. d. which amounted to EUR 30,152,142 are not shown under long-term receivables for deferred tax because the subsidiary does not expect any taxable income in the future under this heading. Receivables for deferred tax due to tax losses using a 20% tax rate amounted to EUR 6,030,428. Long-term receivables for deferred tax increased by EUR 2,529,661 in the past year. Receivables for deferred tax arising from the revaluation of financial investments to fair value especially increased, namely by EUR 2,327,427. The increase in receivables for deferred tax in the amount of EUR 2,053,962 EUR increases profit or loss, while the increase in the amount of EUR 273,465 increases comprehensive income and is reflected directly in the statement of changes in equity. On 31 December 2010 the Group transferred all receivables for deferred tax of Fructal, d. d. in the amount of EUR 3,900,843 and of Delo, d. d. in the amount of EUR 2,828,580 to non-current assets available-for-sale the Group.

2009

Non-current assets for sale - properties

3,634,713

12,874,507

Non-current assets for sale - MERCATOR

132,934,216

Non-current assets for sale - FRUCTAL

67,052,031

Non-current assets for sale - DELO

72,242,335

Non-current assets for sale - SPLIT

10,821,113

Total

286,684,408

12,874,507

All assets of the companies Delo, d. d. in the amount of EUR 72,242,335, Fructal, d. d. in the amount of EUR 67,052,031 and Jadranska pivovara – Split, d. d. in the amount of EUR 10,821,113 are shown among short-term assets available-for-sale due to their planned divestment in 2011. The value of real estate which the Group intends to dispose of within one year was also disclosed among non-current assets, namely the business storage spaces with appertaining land in Ljubljana, Hotel Hum and Hotel Savinja. The value of the real estate was disclosed at the assessed fair value and amounted to EUR 3,634,713. Due to the procedure of sale, the Group tranferred investments in the associated company Poslovni sistem Mercator in the amount of EUR 132,934,216 from long-term financial investments to non-current assets available-for-sale. Non-current assets available-for-sale in the amount of EUR 2,702,713 have been pledged as insurance for long- and short-term loans from banks. In 2009 the Company had disclosed an investment into ČZP Večer in the amount of EUR 11,208,000 among non-current assets available-for-sale, which the Group due to difficulties in obtaining consent from official institutions to the day of the drawing up of the consolidated Annual Report, despite the signed binding contract and security lodged did not manage to sell. Similarly the sale of real estate in the amount of EUR 1,666,507 was also not realised. Active sale procedures are being carried out for the divestment of real estate.

ANNUAL REPORT 2010

2010

P I VOVA R N A L A Š KO D . D .

( in EUR )

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

8. Non-current assets available-for-sale

231

Group of assets and liabilities for divestment ( in EUR ) Fructal, d. d. Delo, d. d.

Jadranska pivovara, d. d.

Total

GROUP OF ASSETS HELD FOR SALE Brand value and goodwill

14,530,530

24,515,021

39,045,551

666,199

2,231,419

63,118

2,960,736

24,182,404

26,685,815

9,831,072

60,699,291

17,679

78,677

96,356

724,539

577,032

1,301,571

56,075

85,403

661

86,064

3,165,283

1,185,546

4,350,829

583,200

9,178,904

9,762,104

Inventories

11,607,022

1,236,600

722,424

13,566,046

Short-term operating receivables

10,985,405

5,741,988

132,712

16,860,105

Derivatives

300,000

Short-term receivables for overpaid income tax

17,365

475,607

232,179

10,565

718,351

28,760

261,128

5,147

295,035

67,052,031

72,242,335

Intangible assets and deferred revenues Property, plant and equipment Investment properties Available-for sale financial assets Long-term loans Long-term operating receivables Long-term deferred tax receivables Non-current assets held for sale

Cash in banks, cheques and cash in hand Deferred costs and accrued revenues Total

10,821,113 150,115,479

LIABILITIES ASSOCIATED

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

WITH A GROUP OF ASSETS

232

Non-current reservations

1,911,719

2,533,273

1,190,343

5,635,335

Non-current financial liabilities

5,244,454

3,158,602

1,221,184

9,624,240

6,501

Non-current operating liabilities Deferred tax liabilities

2,530,762

4,095,373

6,626,135

Current financial liabilities

8,804,938

13,664,790

2,138,564

24,608,292

Current operating liabilities

8,822,095

6,089,094

2,298,029

17,209,218

Accured costs and deferred revenues

1,303,978

2,227,039

9,752

3,540,769

Total

28,617,946

31,768,171

6,864,373

67,250,490

Value of assets held for sale

38,434,085

40,474,164

3,956,740 82,864,989

Since the Group is selling the assets of companies that will be the subject of sale in 2011 at fair value, valuations of the individual companies have been prepared.

1. Assets and libilities of the company Delo, d. d., Ljubljana a) Procedures in the sale of a 100% stake in the company Delo, d. d., Ljubljana The Pivovarna Laško Group sold its entire stake in the company Delo, d. d. In addition to Pivovarna Laško, d. d. which had an 80.13% ownership stake in the aforementioned company, the subsidiary Radenska, d. d. also owns a 19.17% ownership stake in the company. Procedures connected to the sale of the investment commenced in October 2010 when a mandate for the organised sale was submitted to the company KPMG, d. o. o., Ljubljana. A detailed tax inspection of operations was performed by the companies Ernest&Young, d. o. o., Ljubljana and Schonherr (Austria) in November 2010. A call for bids in the newspapers Delo and Financial Times (UK) was published on 30 November 2010. The deadline for submitting interest in cooperation was 14 December 2010. On 21 December 2010 an

informative memorandum was dispatched to the potential investors and seven non-disclosure agreements signed. The deadline for submitting non-binding bids was 28 January 2011. A number of non-binding offers arrived by this date however the offered prices were lower than expected. Discussions with tenderers were carried out in February regarding the possibility of increasing the nonbinding bids. Discussions with three tenderers had been carried out by 1 March 2011 who will additionally obtain the Vendor due diligence for review and participate in a management presentation. The deadline for submitting the improved non-binding bids is 8 April 2011. If a decision is made to continue the procedures of sale, a detailed review of operations will be carried out in May 2011 and the contract on the sale of the investment signed by the end of July 2011. The deadline for final payment is dependent on acquisition of the consent of the Consumer Protection Office and Ministry of Culture.

without the repayments of interest and the principal value of loans. Following that, the obtained value is deducted by all financial liabilities of the company, and the value obtained in this way is corrected for possible potential liabilities, premiums and discounts, and is increased by the value of surplus funds and excess financial investments. The valuation took into account the assessment of the operations of the company and business plan of the company Delo, d. d., for 2010, which according to the appraisers is optimistic. The Strategic Business Plan 2010-2014 and potential of the Group on the basis of an analysis of branches in which the company operates was taken into consideration for assessment of future yield. The business plan is not an accurate forecast of future operations. The appraisers assessed that the Strategic Business Plan of the Delo, d. d. 2010-1014 was optimistic, reflecting the company’s potential. Due to a decline in sales and non-fulfilment of the plan in 2010, the strategic plan was taken into consideration in the valuation projections using a deviation (of one or two years). Net sales revenues during the forecasted period (2010-2016) will grow by an average annual rate of 4.9% according to the optimistic scenario and by 3.8% according to the pessimistic scenario. The greatest growth in revenues will originate from a growth in advertising revenues, particularly from Internet revenues where the company will continue with the development of a new website for all issues of Delo. The growth of revenues from editions (average annual growth of 3.0% optimistically or 2.5% pessimistically) was in addition to improved economic situation also due to the contextual quality and contextual and graphic redesign of the issues. The strengthening of the brand and introduction of new editorial information system had an additional effect on the accessability of Delo on a number of media platforms (Internet, mobile phones) and provided a possibilitiy of calculating the digital contents of users. The level of earnings from operations (EBIT) was planned at 10.9% of sales revenues in 2016 according to the optimistic scenario and at 8.3% according to the pessimistic scenario which is in accordance with the long-term and current (2010) average in the branch.

ANNUAL REPORT 2010

on the financial statements of Delo, d. d. On this basis, one first assesses the current value of free cash flows

P I VOVA R N A L A Š KO D . D .

the value of the company. The valuation is based on the financial statements of Delo, The valuation is based

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

The method of the current value of expected free cash flows without including debt was used in assessing

233

A portion of the assessed value originates from the surplus of financial investments and surplus assets in the company Delo. The value of financial investments in the company Večer was observed in the book value of EUR 9,250,00 which reflects the sales price. Similarly, a portion of the assessed value represents the market value of the subsidiary Izberi, d. o. o. (100% owned by Delo, d. d.) as at 31 December 2010. The assessment used the required rate of return on equity of 11.7% and total capital (WACC) in 9.9% and incorporated the discount for lack of liquidity of the 10%. The market share of the company in the market (leading newspaper agency), strength of its brands as well as the strategic and political position of the company were also taken into account. When determining the discount, the fact that the appraiser did not observe the full potential of the company as envisaged in the company’s strategic plan (also not taking into consideration the company’s strategic plan in the optimistic scenario) should be taken into account. Based on these assumptions, the market value of the 100% ownership stake as at 31 December 2010 amounted to EUR 45,708,000 or EUR 68.5 per share. Due to the commencement of procedures for the sale of the aforementioned company, Pivovarna Laško, d. d. is obliged in accordance with IFRS 5 (Non-current assets available-for-sale and established operations) to measure non-current assets (or group for divestment) classified under assets available-for-sale according to their book or fair values, decreased by the costs of the sale which is lower. The fair value according to accounting standards is contextually usually equal to the market value as the base value within the framework of standards for valuating companies. Therefore the appraiser, within the scope of these values, assessed

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ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

the market value decreased by the costs of the sale which comprises direct costs of the sale or divestment.

234

The fair value decreased by the costs of the sale for the 100% equity capital owner of the company Delo on 31 December 2010 for the purpose of financial reporting in accordance with IFRS 5 amounts to EUR 44,560,000 or EUR 67 per share.

c) Financial investment in the company Večer, d. d., Maribor The value of investments in the shares of the company ČZP Večer, d. d. is also shown among short-term assets available-for-sale within the scope of assets of the Delo. d. d. The company Delo. d. d. acquired a 79.243% stake in the company ČZP Večer in 2008. Delo, d. d. does not have voting rights from the ownership of ČZP Večer shares surpassing 19.9% due to Article 44 of the Prevention of Money Laundering Act therefore the Group financial statements were not prepared. The company Delo, d. d. has commenced with the procedure for selling the shares in accordance with the decision of the Competition Protection Office. At its session on 6 June 2010 the Supervisory Board appointed an expert committee to prepare expert starting points for the sale of the stake in Večer, d. d. External consultants performed an economic and legal examination of the aforementioned company. A call for the written tenders was published for the purchase of at least 191,943 shares (75%) of the company Večer, d. d. in domestic and foreign media. On 10 and 11 March 2010 the company Delo, d. d. based on the Supervisory Board’s consent regarding the committee’s proposal for the sale of at least 75% of the total 79.24% stake in the company Večer, d. d. began the international publication and publication of its text in the newspapers Delo and Večer and in the printed version and website of the Financial Times. The work of the committee was implemented in cooperation with the company KPMG which managed the selling procedure and the law firm Senica and partners. The sales committee directed the selling process via obligatory decisions.

Interest for the purchase of a majority stake in Večer was expressed in the first phase following comprehensive sales activities by KMPG, which directly and through its offices in other European countries notified over 120 relevant potential interested parties, as well as other European media and publishing companies and investment funds which are also active in this field. Following payment of a deposit and receipt of the complete tender documentation by five tenderers, Delo received four non-binding offers which differed considerably from each other in terms of value, namely: (1) a consortium of Styrian banks under the management of Pošta Slovenija, (2) Medijski partner, (3) DZS and (4) Tomaž Županec, s. p. Three of the tenderers responded to the presentation of their offers while the consortium of Styrian companies withdrew from further action. After the careful examination of the company by DZS, none of the three remaining interested bidders submitted a binding offer by the deadline of 10 June. None desired to continue the process of sale at the additional request of KPMG. At its meeting on Monday, 16 June 2010 the committee established that no binding offers had been received by the deadline. However, a written binding offer from the computer company 3Lan, d. o. o. was received by KPMG a day after. At the following session of the committee on 16 June 2010, the committee treated the binding offer, establishing that it was suitable regardless of the fact that it had been received following the prescribed deadline. Therefore it was included subsequently in the procedure of sale. The offer contains an offer price of EUR 9.25 million for the 79.24 percent share in the company Večer and expresses preparedness to seek synergies between the seller, buyer and Večer. The Supervisory Board made a decision regarding the sale at its session on 22 June 2010, authorizing the Chairman of the Management Board of Delo to sign the Sale Contract. The contract was concluded under deferred conditions (a condition for its enforcement is the consent of the competent authorities, namely the

•p ayment of a deposit comprising 10% of the contractual value until 15 July 2010; • t hat the Competition Protection Office will consent to the divestment of shares based on item 2 of decision no. 306-195/2008-57 dated 23 September 2009;

• t hat the Competition Protection Office in connection to the concentration arising due to the contract issue a decision in accordance with the Prevention of Restriction of Competition Act, thereby establishing if the announced concentration conforms to the rules of competition;

• t hat the Ministry of Culture issue consent to the buyer for the acquisition of more than a 20% equity or management share or share of voting rights in the company ČZP Večer, d. d. in accordance with the Media Act. The Group received confirmation on 15 July 2010 providing evidence that the buyer had remitted a deposit in the amount of EUR 925,000 at Banka Koper. The Competition Protection Office issued a decision on 23 December 2010 extending the deadline for the release of shares of the company Večer, d. d. defined in the decision to and including 28 February 2011. Annex no. 2 to the contract on the sale of shares of the company ČZP Večer to the company 3Lan, d. o. o. was signed on 25 January 2011 as well as a notarial statement regarding the storage of the advance payment.

ANNUAL REPORT 2010

fulfilled:

P I VOVA R N A L A Š KO D . D .

The contract on the sale of the investment in the company Večer was concluded with the company 3Lan on 23 June 2010. The contract will enter into force once all conditions given in continuation are cumulatively

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Competition Protection Office and Ministry of Culture).

235

The Competition Protection Office issued its consent for the sale on 28 February 2010. The decision of the Ministry of Culture had not yet been received by the publication of the Annual Report. Valuation of the investment in the company Večer was performed in accordance with IFRS 5. The investment was measured at fair value, decreased by the costs of its sale. The value of the investment in the company Večer equals EUR 9,178,904 and is based on the contract on the sale of shares of ČZP Večer to the company 3Lan, d. o .o. Based on the sale contract and IFRS, the Group impaired the investment by EUR 2,029,096 in 2010. The impairment is reflected among financial expenses. Receivables for deferred tax in the amount of EUR 202,910 were formed. The shares of the company Večer, d. d. were, following the taking out of a loan for their acquisition, pledged to NLB, d. d. Following the sale of the shares in Večer, funds will be remitted to NLB, d. d. to cover the short-term loan. Due to the commencement of procedures for the sale of the aforementioned company, Pivovarna Laško, d. d. is obliged in accordance with IFRS 5 (Non-current assets available-for-sale and established operations) to measure non-current assets (or group for divestment) classified under assets available-for-sale according to their book or fair values, decreased by the costs of the sale which is lower. The fair value according to accounting standards is contextually usually equal to the market value as the base value within the framework of standards for valuating companies. Therefore the appraiser, within the scope of these values, assessed the market value decreased by the costs of the sale which comprises direct costs of the sale or divestment. The fair value decreased by the costs of the sale for the 100% equity capital owner of the company Delo on

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

31 December 2010 for the purpose of financial reporting in accordance with IFRS 5 and amounted to EUR

236

44,428,000 or EUR 67 per share. The Group has liens on real estate and moveable assets of the Delo Group in the amount of EUR 15,690,885 for the purpose of insuring loans taken out with banks.

2. Assets and libilities of the company Fructal, d. d., Ajdovščina a) Procedures in the sale of a 93.73% stake in the company Fructal, d. d., Ajdovščina The Pivovarna Laško Group is selling its 93.73% ownership stake in the aforementioned company which is owned by the subsidiary Pivovarna Union, d. d. Procedures related to the sale of the investment began in December 2010. A financial consultant, the company Unicredit CAIB was selected in January 2011. A comprehensive financial and tax review was performed by the auditing firm BDO, d. o. o. and concluded in February. A comprehensive legal review was performed by the company Wolf Theiss, d. o. o., Ljubljana. A call for written tenders was published in the newspaper Delo on 18 February 2011. The deadline for the submission of non-binding offers was 15 April 2011 and the deadline for the submission of binding offers 31 May 2011. A contract with the buyer was signed in the end of July and the acquisition price received at the end of August.

b) Estimated value of the company Fructal, d. d., Ajdovščina The most important elements and findings during the valuation procedure as as follows:

•T he subject of the valuation was a 93.02% ownership stake in the company, enabling the owner to impact the process of adopting decisions on bodies of the company management as well as to impact the formulation of strategy and business decisions (on investments, borrowing and so on).

•T he appraiser started work from the assumption that the company’s market value equalled the current value of expected free cash flows, in accordance with a general financial assumption that the company’s value equals the sum of all future benefits which it brings to its owner.

•T he method of the current value of expected free cash flows without including debt was used in assessing the values of the company which serve as the basis of the consolidated financial statements of the Fructal Group as at 31 December 2010. In this method, the current value of free cash flows without payments of interest and principal (value of total capital) is first assessed and then decreased by all financial and contingent liabilities. The value obtained in this way is then increased by the current value of excess financial investments and unnecessary property. The appropriate premiums and discounts were then deducted from this figure.

•T he method of market comparisons was also used as a control method in the company value assessment, for it is extremely difficult to find a comparative company with a similar sales and/or cost structure or a comparative transaction.

•T he required rate of return for equity capital ranges between 8.6 and 9.6%. •W hen preparing the projections, the appraiser focused only on key value drivers, thus envisaging two scenarios of operations in the future (optimistic and pessimistic).

•T he income statements and balance sheets of the Fructal Group for the period 2005-2010 were used as starting points in preparing the projections.

•T he business plan of the company for 2010 was not taken into account due to the appraiser assessing it as too optimistic. The non-consideration of business plan for 2010 is the reason why actual data for 2010 significantly deviate from the operating plan for 2010.

•C onsidering the data from the analyses of the branch and expectations of the company’s management, the appraiser took into consideration the management plan of the company for 2011, namely that revenues would remain on a similar level as 2009 (optimistic scenario) and that a somewhat lower growth was expected (pessimistic scenario). The continued crisis and change in consumer habits, success of sales via new distributors and investments into the maintenance and enlargement of market shares on key markets will to a larger extent, have an effect on the movement of revenues. In the medium-term, it is planned for the optimistic scenario that the company will achieve a higher growth in revenues predominantly due to increased sales abroad, maintain its market shares on the domestic market and partially develop new products. Therefore according to the optimistic scenario the planned average growth of revenues during the period 2011-2016 comprised 3.8% or 3.2% according to the pessimistic scenario.

•T he EBITDA margin will in the medium-term fluctuate between 9.9 and 13.5% according to the optimistic scenario or between 9.3 and 12.1% according to the pessimistic scenario, which is slightly under the average margin of foreign competitors. The EBITDA margin will improve through continued rationalisation of operations.

•M anagement plans for 2011 have been considered in planning investments and in the medium-term the company should gradually earmark a third of its generated EBITDA to investments on the annual level.

ANNUAL REPORT 2010

and analyses of competitive companies, thus the operating plan does not represent an accurate forecast for future operations.

P I VOVA R N A L A Š KO D . D .

tages, disadvantages, threats and weaknesses), company analyses, analyses of the situation in the branch

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

• I n preparing the projections, the appraiser also considered the future potential of the company (advan-

237

• I n calculating changes to short-term net operating assets, the appraiser used the consolidated balance sheet from 31 December 2010 and the envisaged changes in the policy of managing individual types of short-term assets and liabilities. The management plan for 2011 has also been considered. The portion of working capital in net sales revenues throughout the projection period will gradually decline and attain a normal level of 18.7%.

•A 2% growth of the residual has been observed for both scenarios. •A ll financial investments in the Fructal Group and surplus fixed assets are valuated on the basis of their market values.

•T he consolidated financial statements of the Fructal Group as at 31 December 2010 were used as a basis for defining financial liabilities.

•T he control premium of 0% was observed since future yield for the average majority strategic owner have already in principal been implemented.

•T he appraiser feels that an interest exists regarding potential investors (strategic and financial), thus on the basis of analyses of the characteristic of companies not traded on the stock exchange when assessing the value of the majority share package, a discount for insufficient liquidity (majority stake) in the amount of 10% has been implemented. The fair value, reduced by the costs of the sale for the 93.73 percent equity stake in the company Fructal on 31 December 2010 for the purpose of financial reporting in accordance with IFRS 5 equals EUR 17 per

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

share with a possible span of between EUR 14 per share for the pessimistic scenario and EUR 20 per share

238

for the optimistic scenario. The Group has liens on securities and real estate the company Fructal, d. d. in the amount of EUR 14,038,882 for the purpose of insuring loans taken out with banks.

3. Assets and liabilities of the company Jadranska pivovara – Split, d. d. a) Procedures in the sale of a 99.11% stake in the company Jadranska pivovara – Split, d. d. The management of Pivovarna Laško decided in 2009 that due to its poor financial position and for rationalization purposes it would terminate production in Jadranska pivovara, relocating production to Laško, and sell the production line to the most favourable bidder. Its forecast regarding the relocation of production was realised in 2010. In April 2010 Jadranska pivovara ceased the production activity and in the autumn of 2010, also the filling of beer. The Company intensively sought a buyer throughout the year however no transaction was concluded with the individual buyers interested in acquiring the production line. In autumn 2010 a mandate for the sale of the 99.11% stake in Jadranski pivovari – Split, d. d. was therefore submitted to the company Caper, d. o. o., Zagreb. The intention to sell the stake publically was published in the Croatian newspaper Poslovni dnevnik and the Mergemarkt business portal on 26 November 2011, The company Caper prepared a list of potential buyers sending them a teaser by 17 December 2010. The informative memorandum prepared on 24 December 2010 was submitted to two potential buyers, namely SABMiler and Bavaria NV. The deadline for submitting non-binding bids was 2 March 2011. Prior to this date an inspection of Jadranska pivovara was carried out for interested buyers. The deadline for the submission of non-binding offers was extended twice. During this time both SABMiler and Bavaria NV withdrew from their offers however a new buyer appeared, Arena, d. o. o., Split. Despite the extended deadline for the submission of bids to 25 March 2011, Arena, d. o. o. did not submit a bid. The Management Board established the sales procedure as unsuccessful and will adopta a decision regarding further procedures.

b) Estimated value of the company Jadranska pivovara – Split, d. d. Based on the assessment of the investment from 2008, the book value in the ledgers of Pivovarna Laško, d. d. is equal to zero. In 2009 a value assessment of the investment was not performed however a valuation of real estate and moveable property was. In 2010 the Company reviewed the latest value assessment and assessed that no new circumstances or facts existed that would point to the value of the moveable property and real estate significantly changing compared to the latest valuation. Considering that the investment has a posted value of zero, a new value assessment of the investment is unnecessary for there are not indications of the improved financial state of the denoted company.

4. Financial investment in the company Poslovni sistem Mercator, d. d., Ljubljana As at 31 December 2010 the Group owned 878,841 shares or a 23.34% ownership stake in Poslovni system Mercator, d. d., Ljubljana (Pivovarna Laško, d. d., 8.43%, Pivovarna Union, d. d., 12.33% and Radenska, d. d., 2.57%). Due to the significant ownership share Poslovni system Mercator is an associated company of the Pivovarna Laško Group and the investment is valuated in accordance with the equity method. The value of the investment is increased by the corresponding portion of profit and reduced by the amount of dividends paid-out and changes comprehensive income by the corresponding amount. Values of investments established in this manner are comparable to the market values of the investments. If the market value is lower an impairment is recognised. Revaluation to the higher fair value in accordance with IFRS is not recognised. The fair value of the investment is reflected in the listed price of shares at the Ljubljana Stock Exchange. All MELR shares have been pledged as insurance for bank loans.

a) Procedures in the sale of a 23.43% stake in the company PS Mercator, d. d., Ljubljana

carried out in February.

ANNUAL REPORT 2010

for the submission of binding offers was denoted in the public tender, namely 9 March 2011. In conjunction with the public sale, negotiations with the financial fund Mid Europa Parnters LTD from Great Britain were

P I VOVA R N A L A Š KO D . D .

sale was signed with NLB, d. d. on 3 February 2011. A public tender for the sale of the 23.43% stake in the company PS Mercator owned by the Pivovarna Laško Group was published on 4 February 2011. The deadline

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Following unsuccessful discussions with banks, the Supervisory Board of Pivovarna Laško, d. d. instructed the Management Board to implement the public sale of the MELR shares. A contract on consultation for the

239

9. Inventories ( in EUR )

2010

2009

Material and raw material

19,831,502

21,851,699

Unfinished production

3,938,198

4,670,334

Products

10,646,983

10,968,816

Merchandise

526,218

496,542

Transfer to current assets for sale - FRUCTAL

(11,607,022)

Transfer to current assets for sale - SPLIT

(722,424)

Transfer to current assets for sale - DELO

(1,236,600)

Total

21,376,855

37,987,391

The value of inventories compared to the previous year decreased by EUR 3,044,790 or by 8.7%. The value of finished products and materials especially decreased. No inventories were pledged as at 31 December 2010 nor any revaluation of the values of inventories implemented. The book value of inventories does not exceed their net recoverable value. The Group established a surplus of EUR 174,614 of inventory and a deficiency of EUR 120,581 during the regular annual inventory.

10. A. Short–term operating receivables

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

( in EUR )

240

2010

2009

43,446,494

41,309,633

12,501,896

15,653,684

Short-term trade operating receivables: on the domestic market on foreign markets Less value adjustment Total

(11,892,159) (12,015,127) 44,056,231

44,948,190

Short-term oparating receivables on others

5,486,328

5,678,861

Advances

292,599

1,440,389

Less value adjustment

(2,248,059)

(2,303,018)

Balance of receivables 31.12.

47,587,099

49,764,422

Transfer to current assets for sale - FRUCTAL

(11,053,442)

Transfer to current assets for sale - SPLIT

(132,711)

Transfer to current assets for sale - DELO

(5,740,153)

Balance of receivables 31.12.

30,660,793

49,764,422

As at 31 December 2010 the Company disclosed EUR 47,144,143 in short-term operating receivables, representing a EUR 2,620,279 reduction over the amount on the last day of the previous year. Receivables on foreign markets particularly decreased. The Group transferred EUR 16,875,496 in short-term operating receivables to short-term assets available-for-sale. The disclosed value of short-term operating and other receivables reflects their fair value.

Value adjustments of short-term operating receivables ( in EUR )

2010

2009

Balance as at 1st January

12,015,127

10,024,807

Recovered receivables written-down

(336,055)

(313,481)

Final write-down of receivables

(858,531)

(3,276,399)

Decrease in value correction in the year

1,418,423

4,765,742

Increase adjustment from sued

1,048,057

544,198

Decrease in value correction in the year

91,652

(178,451)

Revaluation

52,496

447,941

Transfer of interests

289

770

Transfer to non-current assets for sale 31.12.2010

(1,772,990)

Other

479,627

Total

12,138,095

12,015,127

Transfer to non-current assets for sale - DELO

(819,785)

Balance as at 31st December 2010

11,318,310

12,015,127

2010

2009

unmatured

31,481,677

34,157,631

up to 30 days

7,503,176

6,960,617

from 30 to 60 days

2,594,445

3,089,329

from 60 to 90 days

767,103

1,025,185

Maturities of trade receivables ( in EUR )

11,730,555

55,948,390

56,963,317

Transfer to current assets for sale - FRUCTAL

(12,826,432)

Transfer to current assets for sale - SPLIT

(81,901)

Transfer to current assets for sale - DELO

(5,930,460)

Balance as at 31st December 2010

37,109,597

56,963,317

As at 31 December 2010 matured trade receivables prior to their transfer to non-current assets-for-sale amounted to EUR 24,466,713. A revaluation adjustment was performed for matured receivables which totalled 12,138,095 EUR whereas no revaluation was implemented for the difference of EUR 12,328,618. Trade receivables comprising EUR 3,274,170 are insured through received guarantees. The Group has a portion of its trade receivables on foreign markets in the amount of EUR 2,131,500 insured with SID – Prva kreditna zavarovalnica, d. d., Ljubljana. Trade receivables in the amount of EUR 9,500,000 are used as insurance for bank loans.

ANNUAL REPORT 2010

13,601,989

P I VOVA R N A L A Š KO D . D .

above 90 days Balance as at 31st December

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

TRADE RECEIVABLES

241

10. B. Short-term receivables for excess corporate income tax payment ( in EUR )

2010

2009

Receivables for overpaid corporate income tax

1,612,961

2,338,805

Transfer to current assets for sale - DELO

(17,365)

Total

1,595,596

2,338,805

Short-term receivables for surplus corporate tax payment refer to an excess of advance tax payments which are calculated on the basis of liabilities for 2009. Receivables from surplus corporate tax payments are disclosed by Radenska, d. d. and Pivovarna Union, d. d.

11. Short–term loans ( in EUR )

2010

2009

Short-term part of long-term loans given

346

1,163,519

Short-term deposits

4,186,633

5,982,140

Interest from loans to other

39,936

83,961,209

96,720,084

Short -term loans

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Less value adjustment

242

(83,154,409) (92,779,604)

Balance as at 31st December 2010

5,033,715

11,086,139

Transfer to current assets for sale - DELO

(300,000)

Balance as at 31st December 2010

4,733,715

11,086,139

As at 31 December 2010 the Group disclosed EUR 806,800 in short-term loans granted and EUR 4,186,633 in short-term deposits. The Group showed a revaluation adjustment of loans granted in the amount of EUR 83,154,409 on the last day of 2010. During 2009 the Group approved loans totalling EUR 92,050,000 to two companies which were its subsidiaries at the time of approval, namely: EUR 54,250,000 in short-term loans to the company Infond Holding, d. d. and EUR 37,800,000 to the company Center naložbe, d. d. Due to insolvency and the introduction of bankruptcy and forced settlement proceedings, the Group implemented a revaluation adjustment for the entire value of the loans granted to the two subsidiaries, showing financial expenses. The Group discloses a smaller loan value and valuation adjustment of the loans granted in the amount of EUR 9,400,000 on 31 December 2010 due to the transfer of assets from the company Fructal among short-tern assets for divestment. In 2010 the Group also performed a revaluation adjustment for a loan granted to a non-affiliated entity in the amount of EUR 525,000 since the loans will be repaid. The interest rates for short-term deposits range from 0.5 to 2.65%, and for short-term granted loans 5.7 to 6.10%. The disclosed value of short-term loans reflects their fair value.

12. A. Short-term financial assets available-for-sale ( in EUR )

2010

2009

Available-for sale short term financial assets at the cost of purchase

7255113

Available-for sale short term financial assets at the fair value

17,299,457

Total

24,554,570

As at the last day of 2010 the value of short-term financial assets available-for-sale amounted to EUR 24,554,570 and was transferred from long-term financial investments in their entirety in 2010 due to the envisaged sale thereof in 2011.

Movement of short-term financial assets available-for-sale ( in EUR )

2010

2009

Balance as at 1st January

Transfer from long-term financial assets

24,554,570

Balance as at 31st December 2010

24,554,570

Changes in the year:

d. in the amount of EUR 6,728,124 (5.74%), in the shares of Zavarovalnica Triglav in the amount of EUR 6,771,869 (1.7%), in the shares of Probanka, d. d. in the amount of EUR 5,217,259 (6.27%), in the shares of Premogovnika Velenje in the amount of EUR 4,000,000 (7.09%), in the shares of Elektra Gorenjska, d. d. in the amount of EUR 947,333 (1.6%), in the shares of Ceste Mostovi Celje, d. d. in the amount of EUR 238,355 (5.49%) and investments into the mutual funds Probanka Alfa, Perspektiva, Triglav renta, NLB skladi and the Primus mutual fund. The Group realised the sale of its investments in Zavarovalnica Triglav, NLB skladi and the investment in the Primus mutual fund. For the purpose of insuring long- and short-term loans from banks, the Group pledged: 213,115 shares (6.27%) of Probanka, d. d., Maribor, 270,648 shares of Elektro Gorenjska or 1.6% of all shares, 307,623 shares of Zavarovalnica Triglav, d. d., (1.15%) and 1,271 shares in Telekom, with a total value of EUR 11,691,074.

12. B. Derivative financial instruments ( in EUR )

2010

2009

Derivatives

1,213,547

Total

1,213,547

ANNUAL REPORT 2010

vestments to short-term financial assets availalbe-for-sale: investments in the shares of Elektro Maribor, d.

P I VOVA R N A L A Ĺ KO D . D .

Due to intended sale, the Company transferred the following investments from long-term financial in-

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

1. Other financial investments available-for-sale

243

The Group discloses an option contract for the purchase of shares of the company Birra Peja, Sh. a., Peć among derivative financial instruments which was appraised by a certified business appraiser at the end of 2010. Based on the appraisal, the fair value is equal to zero therefore the Group showed an impairment of the aforementioned instrument in the amount of EUR 1,202,286 among financial expenses.

13. Cash in banks, cheques and cash in hand ( in EUR )

2010

2009

Cash in banks

1,208,426

809,445

Cash in hand and received cheques

33,280

32,550

Monetary resources in foreign currency

37,248

75,539

Cash items in the process of collection

355,159

74,123

Transfer to non-current assets for sale - SPLIT

(10,564)

Transfer to non-current assets for sale - DELO

(232,179)

Total

1,391,370

991,657

( in EUR )

2010

2009

Deferred cost and accrued revenues

476,844

541,321

Cash in banks, cheques and cash in hand reflect their fair values.

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

14. Deferred costs and accrued revenues

244

Transfer to current assets for sale - SPLIT

(5,147)

Transfer to current assets for sale - DELO

(261,128)

Total

210,569

- 541,321

Deffered costs and accrued revenues refer to short-term deferred costs or expenses and short-term accrued revenues.

15. Capital of the majority shareholder The capital of Pivovarna Laško, d.d. comprises called-up capital, capital reserves, revenue reserves, retained profit or loss from previous years, surpluses from the revaluation of financial investments classified into assets-for-sale and also not-yet distributed profit for the financial year. Share capital is shown as registered capital (capital from stakes or financial investment loans). Share capital is divided into called-up share capital and uncalled share capital. Uncalled share capital is a deduction from share capital. Called-up capital of the Group is defined in the Statute and amounts to EUR 36,503,305. It is divided into 8,747,652 freely transferable registered nominal shares. Each share gives its owner a voting right at the annual General Meeting of Shareholders and to participate in profits. As at 31 December 2010 capital reserves equalled EUR 78,908,924. In past years capital reserves were formed from paid-in capital surpluses following two implemented capital injections from shareholders which exceeded the nominal value of paid-in shares and a general revaluation adjustment of capital. The value of the paid-in capital surplus comprised EUR 79,231,564 and that of the general revaluation adjustment of capital EUR 23,146,157.

Legal reserves in the amount of EUR 3,650,330, reserves for own shares in the amount of EUR 812,304, own shares as a deduction item in the amount of EUR 812,304 and other revenue reserves are shown among reserves. Legal reserves may be used for covering losses or endowment capital. The tax legislation in Slovenia was amended in 2010. PILR, RARG, PULG and FRAG shares are shown among own shares. The Group had 41,324 PILR shares, 85 PULG and 13.194 RARG 1,646 FRAG shares on the last day of 2010. The book value of PILR shares comprised EUR 660,564 on 31 December 2010 with the value of shares in subsidiaries accounting for EUR 151,740. Pivovarna Laško, d. d. had 755 PILR shares valued at EUR 20,498 and 40,569 shares of its subsidiaries in the amount of EUR 1,138,375. The Group divested 3,297 lots of its own PILR shares in the amount of EUR 52.587 in 2010. Net profit or loss from previous years increased due to the utilization of the revaluation surplus for the portion related to the amortisation of revalued real estate. The revaluation surplus decreased due the effects of the revaluation of financial assets available-for-sale to their fair value in the amount of EUR 2.935.277 and increased by the proportionate amount of the effect from the revaluation of tangible fixed assets in the amount of EUR 5,684,863 whereby the share of the revaluation of tangible fixed assets of the Mercator Group equalled EUR 5,157,440. In 2010 the Group formed EUR 878,745 in receivables for deferred tax from the revaluation thereof which reduces the revaluation surplus. The capital of the Group decreased in 2010 by the amount of off-set reserves from exchange rate differences arising from conversions of foreign companies in the amount of EUR 6,586,094. The capital of the Pivovarna Laško Group decreased by 6.655.401 due to the Group’s participation in the amended capital of the Mercator Group.

NLB, d. d.

23.512 %

Kapitalska družba, d.d.

7.059 %

Hypo Alpe-Adria-Bank AG

7.036 %

Probanka, d. d.

7.029 %

GB, d. d. Kranj

6.201 %

Skagen Kon-tiki Verdipapirfond

5.708 %

NFD 1 Delniški investicijski sklad, d. d.

5.104 %

Abanka, d. d.

3.263 %

Banka Celje, d. d.

2.886 %

Banka Koper, d. d., Dvojezična firma: Banka

2.635 %

Infond Holding, d. d., - v stečaju

2.330 %

CPM, d. d.

1.622 %

D.S.U., d. o. o.

1.557 %

Infond, d. o. o., - PE Uravnoteženi vzajemni

1.410 %

Probanka upravljanje, d. o. o., - PE Vzajemni

1.129 %

Nova KBM, d. d.

1.002 %

Other small shareholders

20.516 %

Total

100.000 %

ANNUAL REPORT 2010

Participation in %

P I VOVA R N A L A Š KO D . D .

Shareholder

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

The ownership structure of capital as at 31 December 2010 is as follows:

245

16. Capital of minority owners The capital of minority owners amounted to EUR 9,557,633 on the last day of 2010 and reflects a EUR 419,434 decrease in comparison to 2009. Minority capital decreased in 2010 by the established loss of value of EUR 244,204, payment of dividends of EUR 75,112 and revaluation of fixed assets of EUR 41,849 EUR and revaluation of financial investments to fair value in the amount of EUR 205,691.

17. Provisions for long–term accrued costs and deferred revenues 17. A. Long-term liabilities to employees ( in EUR )

2010

2009

Long-term liabilities to employees

6,972,137

6,325,573

Transfer to liabilities for non-current assets for sale - FRUCTAL

(1,163.282)

Transfer to liabilities for non-current assets for sale - SPLIT

(956,251)

Transfer to liabilities for non-current assets for sale - DELO

(2,064.443)

Total

2.788,161

6,325,573

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

culations. Individual companies in the Group prepared their own calculations of provisions for envisaged

246

severance pay and jubilee awards on the basis of the calculation and methodology of the certified procurator used in previous years. Employees according to the collective agreement and employees with individual contracts except for the Management Board are entitled to severance pay upon retirement equalling two average monthly gross salaries in the Republic of Slovenia for the past three months or namely, in the amount of two employee salaries if this proves more favourable for the employee. Jubilee awards are paid out to employees based on the total length of service, namely 50, 75% or 100% of the average net salary in the company for the last three months for 10, 20 ,or 30 years respectively of services completed. The selected discount rate is 4.9%.

17. B. Provisions ( in EUR )

2010

2009

3,390,491

Non-current reservations

3,469,156

Transfer to liabilities for non-current assets for sale - FRUCTAL

(748,437)

Transfer to liabilities for non-current assets for sale - SPLIT

(234,092)

Transfer to liabilities for non-current assets for sale - DELO

(468,830)

Total

2,017,797

3,390,491

Long-term provisions relate to pending lawsuits of subsidiaries and are formed on the basis of attorney opinions and estimates.

Movement of long-term provisions and accrued costs and deferred revenues

( in EUR )

Benefits at retirement

Tenure awards Other

Total

1 January 2010

5,261,155

1,064,418

3,390,491

9,716,064

Increase

1,585,293

636,367

415,414

2,637,074

Decrease - drawing

(524,242)

(163,922)

(414,083)

(1,102,247)

Decrease - elimination

(522,109)

(7,386)

(280,103)

(809,598)

31 December 2010

5,800,097

1,529,477

3,111,719

10,441,293

(788,592)

(374,690)

(748,437)

(1,911,719)

(956,251)

(234,092)

(1,190,343)

Transfer to liabilities for non-current assets for sale - FRUCTAL Transfer to liabilities for non-current assets for sale - SPLIT Transfer to liabilities for non-current assets for sale - DELO Stanje 31.12. 2010

(2,064,443)

(468,830)

(2,533,273)

1,990,811

1,154,787

1,660,360

4,805,958

The Group formed additional long-term provisions in 2010 for severance pay upon retirement and jubilee awards in the amount of EUR 2,221,660, utilising or dissolving EUR 1,217,659 in provisions. Other provisions decreased by EUR 278,772 in 2010.

Long-term loans obtained from banks Long-term loans obtained from other companies

2010

2009

163,007,254 267,156,576 71,019

Total

163,078,273 267,156,576

Transfer to short-term financial liabilities

(69,190,134) (139,895,170)

Total

93,888,139 127,261,406

Transfer to liabilities for non-current assets for sale - FRUCTAL

(5,244,452)

Transfer to liabilities for non-current assets for sale - SPLIT

(1,221,187)

Transfer to liabilities for non-current assets for sale - DELO

(3,158,602)

Total

84,263,898 127,261,406

ANNUAL REPORT 2010

( in EUR )

P I VOVA R N A L A Ĺ KO D . D .

18. A. Long-term financial liabilities

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

18. Long-term liabilities

247

Maturities of long-term financial liabilities ( in EUR )

2010

2009

Maturity from 4 to 6 years

5,316,174

8,561,596

Maturity from 2 to 4 years

34,019,778

53,797,560

Maturity from 1 to 2 years

54,481,168

64,902,313

Short-term part of long-term financial liabilities

69,190,134 139,895,175

Total

163,007,254 267,156,644

The interest rate for long-term loans of the Group fluctuated on average between 4.12% and 5,6% and for

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

the 6-month EURIBOR, between +3.25% and 4% in 2010.

248

ANNUAL REPORT 2010

P I VOVA R N A L A Ĺ KO D . D .

Total banks

16,963,229

1,000,000

12,730,000

5,000,000

5,230,000

2,500,000

Changes in short-term loans

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

267,156,576

4,812,500

Bank 13

Bank 16

6,557,376

Bank 12

1,846,000

5,000,000

Bank 11

3,268,864

4,500,000

Bank 10

Bank 14

2,187,500

Bank 9

Bank 15

7,000,000

Bank 8

- -

5,000,000

58,500,000

Bank 6

5,000,000

Bank 7

85,571

Bank 4

Bank 5

386,000

3,254,856

Bank 3

8,577,229

145,209,450

Bank 2

2,000,000

19,934,459

Bank 1

Debt position New loans ( in EUR ) 1.1.2010 in year 2010

Movement of long-term financial liabilities

249

80,789,371

58,500,000

22,289,371

53,053,180

1,031,250

733,641

1,117,103

1,442,624

700,000

625,000

7,000,000

2,000,000

74,414

220,000

2,084,103

30,796,557

5,228,488

163,007,254

3,781,250

2,535,223

728,897

5,000,000

5,114,752

6,000,000

3,800,000

1,562,500

3,000,000

5,011,157

5,010,000

4,056,753

100,700,751

16,705,971

Transfer to short-term Repaiments Debt position loans in year 2010 31.12.2010

69,190,134

638,393

1,332,052

710,884

1,170,213

5,114,752

3,280,303

3,800,000

1,562,500

2,000,000

814,727

1,320,000

1,279,582

40,109,797

6,056,931

A part that is due in 2011

93,817,120

3,142,857

1,203,171

18,013

3,829,787

2,719,697

1,000,000

4,196,430

3,690,000

2,777,171

60,590,954

10,649,040

A part of long term

In 2010 the Group took out EUR 16,963,229 in new long-term loans. It acquired EUR 12,730,000 in long-term loans from the short-term loans and repaid EUR 53,026,599 in existing loans. A total of EUR 69,190,134 in long-term loans fell due for payment in 2010 and are shown as short-term loans. The long-term financial liabilities of the Group are insured through a lien on securities, real estate and moveable assets. To insure the long-term loans The Company pledged 429,339 shares of Pivovarna Union, d. d. which comprises 95.2% of all shares of Pivovarna Union, d. d., 644,794 shares of Poslovni sistem Mercator, d. d., or 17.2% of all shares in the aforementioned company, 464,390 shares of Fructal, d. d. or 18.53% of all Fructal shares and 270,648 shares of Elektro Gorenjska, d. d. or 1.6% of all shares of this company. The book value of the pledged shares as at 31 December 2010 comprised EUR 269,336,026. A portion of the longterm loans are insured through a mortgage in the amount of 18,621,404 and a portion through the pledging of moveable assets whose value on the last day of 2010 amounted to EUR 2,463,153. The value of all unpaid long-term loans which were insured through shares, a mortgage, liens on moveable assets and receivables amounted to EUR 82,701,398 as at 31 December 2010 while EUR 1,562,500 of all loans were not insured. The disclosed value of long-term loans reflects their fair value.

18. B. Long–term operating liabilities

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

( in EUR )

250

2010

2009

Other long-term oparating liabilities

6,501

11,476

Transfer to liabilities for non-current assets for sale - SPLIT

(6,501)

Total

11,476

18. C. Long-term deferred tax liabilities Long-term receivables and liabilities for deferred tax are calculated on the basis of temporary differences with consideration of liability method and tax rate valid in the year the receivables or liabilities for deferred tax are realized. The tax rate for the calculation of corporate income tax comprised 20% in 2010.

( in EUR )

Fair value (properties, buildings)

Fair value (financial Fair value assets) (trademarks) Other

Total

LIABILITIES FOR DEFERRED TAX 1 January 2009 Change in the profit and loss statement Changes in comprehensive income 31 December 2009

4,264,229

84,030 25,554,498

133,088 30,035,845

(93,172)

- (5,915,596)

(20,443) (6,029,211)

37,847 4,208,904

97,739

181,769 19,638,902

(41)

135,545

112,604 24,142,179

Change in the profit and loss statement Changes in comprehensive income 31 December 2010

(11,746) 53,688 4,250,846

- (3,793,887) (73,863)

107,906 15,845,015

28,291 (3,777,342) (41)

(20,216)

140,854 20,344,621

Transfer to liabilities associated with a group of assets held for sale - FRUCTAL

(762,910)

(36,442) (2,466,967)

- (3,266,319)

Transfer to liabilities associated with a - (4,085,836) 71,464

9,292,212

- (5,728,870) 140,854 11,349,432

Long-term liabilities for deferred tax as at 31 December 2010 amounted to EUR 11,349,432 and regards the value of the established revaluation surplus for financial assets available-for-sale in the amount of EUR 71,464, revaluation of the Pivovarna Union brand name in the amount of EUR 9,292,212, revaluation of the real estate of the Group in the amount of EUR 1,844,902 and other revaluations in the amount of EUR 140,854. Long-term deferred tax liabilities in the statement of the the financial position were decreased by the amount of deferred tax receivables.

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

1,844,902

ANNUAL REPORT 2010

(1,643,034)

P I VOVA R N A L A Ĺ KO D . D .

group of assets held for sale- DELO 31 December 2010

251

19. Short-term liabilities 19. A. Short–term operating liabilities ( in EUR )

2010

2009

Short-term liabilities to companies in the Group as suppliers

68,946

1,228,415

Short-term liabilities to other suppliers

30,386,922

26,917,991

Short-term oparating liabilities to others: to employees

4,897,704

5,176,881

to the state

9,284,076

8,328,506

Short-term liabilities for advances

707,106

617,804

Other short-term liabilities

2,716,187

2,553,489

Total

48,060,941

44,823,086

Transfer to liabilities for non-current assets for sale - FRUCTAL

(9,040,150)

Transfer to liabilities for non-current assets for sale - SPLIT

(2,298,029)

Transfer to liabilities for non-current assets for sale - DELO

(6,086,262)

Total

30,636,500

44,823,086

As at 31 December 2010 short-term operating liabilities prior to their transfer to non-current assets available-for-sale amounted to EUR 48,060,941 representing a EUR 3,237,855 increase over the amount on the last day of the previous year. In accordance with IFRS 5 the Pivovarna Laško Group transferred EUR 17,424,441

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

of operating liabilities to liabilities connected to the group of assets for divestment on 31 December 2010.

252

19. B. Short-term tax liabilities ( in EUR )

2010

2009

Short-term liabilities for tax payment

9,537

1,651,622

Transfer to liabilities for non-current assets for sale - DELO

(9,537)

Total

1,651,622

19. C. Short–term financial liabilities ( in EUR )

Short-term part of long-term financial liabilities

2010

2009

69,190,134 139,868,585

Short-term financial liabilities for interest from loans

2,538,036

2,945,214

Short-term loans obtained from the companies in the Group

2,045,977

Short-term loans obtained from banks Other short-term financial liabilities Total

259,895,460 176,956,656 6,265,335

5,033,019

337,888,965 326,849,451

Transfer to liabilities for non-current assets for sale - FRUCTAL

(8,804,938)

Transfer to liabilities for non-current assets for sale - SPLIT

(2,138,564)

Transfer to liabilities for non-current assets for sale - DELO

(13,664,790)

Total

313,280,673 326,849,451

As at 31 December 2010 short-term operating liabilities prior to their transfer to non-current assets available-for-sale amounted to EUR 337,888,965 representing a EUR 11,039,514 increase over the amount on the last day of the previous year. In accordance with IFRS 5 the Pivovarna Laško Group transferred EUR 24,608,292 of operating liabilities to liabilities connected to the group of assets for divestment on 31 Decem-

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

ber 2010.

253

Movement of short-term liabilities

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

( in EUR ) Debt position New loans 1/1/2010 in year 2010

254

Short term part of long term financial Transfer to Repaiments liabilities long term loans in year 2010

Debt position 31/12/2010

Bank 1

111,182,610

43,860,700

40,109,797

Bank 2

7,532,634

217,435

1,279,582

4,750,069

4,279,582

Bank 3

17,352,882

94,035,730

6,056,931

90,431,122

27,014,421

Bank 4

2,497,454

Bank 5

70,900,000

5,000,000

65,900,000

Bank 6

7,400,000

69,817

7,330,183

Bank 7

11,573,771

27,724,000

5,114,752

30,297,771

14,114,752

Bank 8

8,326,667

3,280,303

1,546,667

10,060,303

Bank 9

10,080,535

28,945,000

814,727

34,025,535

5,814,727

Bank 10

5,780,000

1,320,000

5,780,000

1,320,000

Bank 11

2,000,000

Bank 12

15,000,000

7,000,000

7,600,000

14,400,000

Bank 13

7,000,000

2,000,000

7,000,000

Bank 14

1,000,000

Bank 15

25,288,453

4,200,000

1,170,213

5,000,000

7,048,571

18,610,095

Bank 16

14,618,658

710,884

1,218,658

14,110,884

Bank 17

863,031

2,131,720

2,994,751

Bank 18

800,000

2,000,000

3,800,000

1,100,000

5,500,000

Bank 19

625,000

1,562,500

625,000

1,562,500

Bank 20

1,036,000

1,332,052

1,036,000

1,332,052

Bank 21

1,375,000

638,393

1,375,000

638,393

Bank 22

90,000

316,825,241 215,612,039

69,190,134

Total banks

73,637,609 121,515,498

5,000,000 267,541,819 329,085,595

The disclosed value of short-term financial liabilities reflects their fair value. To insure the short-term loans the Group pledged 667,444 shares (100%) of Delo, d. d., 3,739,803 shares (73.88%) of Radenska, d. d., 10,956 shares (2.4%) of Pivovarna Union, d. d., 217,531 shares (5.78%) of Poslovni sistem Mercator, d. d., 213,115 shares (6.27%) of Probanka, d. d., Maribor, 645,003 shares (20.6%) of Thermana, d. d., Laško, 1,219,513 shares of Fructal, d. d. (48.67%), 307,623 shares of Zavarovalnica Triglav, d. d. and 1,271 shares of Telekom. The book value of the pledged shares based on data from individual financial statements on which the specific shares are valuated according to historical cost amounted to EUR 151,441,306 on 31 December 2010. A portion of the short-term loans are additionally insured with a mortgage and a lien on moveable assets and investment real estate. The book value of the pledged real estate, moveable assets and investment real estate as at 31 December 2010 comprised EUR 54,668,176. Short-term loans of the Company are additionally insured through receivables whose value on 31 December 2010 was EUR 21,860,000 and a lien on the brand names of Pivovarna Laško, d. d. in the amount of EUR 50,000,000. The value of all unpaid short-term loans which were insured through shares, a mortgage and liens on moveable assets, investment real estate and receivables for insured short-term loans amounted to EUR 329,085,594 as at 31 December 2010. The average effective interest rate for short-term loans taken out fluctuated between 5.25 and 5.9% of the fixed or variable 3-month EURIBOR, increased by 5.15 percentage points.

20. Accrued costs and deferred revenues ( in EUR )

2010

2009

Accrued costs and deferred revenues

6,961,970

8,888,661

Transfer to liabilities for non-current assets for sale - SPLIT

(9,752)

Transfer to liabilities for non-current assets for sale - DELO

(2,227,039)

Total

4,725,179

8,888,661

Accrued costs and deferred revenues refer to accrued costs for unused employee holiday leave and severance pay paid out due to technological surplus.

21. Analysis of revenues from sales and expenses 21. A. Analysis of revenues from sales by market 2009

259,541,341 252,285,574

Sale revenues of products and services on foreign markets

45,053,217

47,015,590

Sale revenues of materials and merchandise sold in Slovenia

1,453,757

25,177,112

369,839

2,548,570

306,418,154 327,026,846

21. B. Analysis of revenues from sales by country ( in EUR )

Sale revenues in Slovenia Sale revenues on foreign markets Total

2010

2009

260,995,099 277,462,685 45,423,056

49,564,161

306,418,155 327,026,846

Sales revenues on foreign markets were predominantly realised from sales on the markets of the former Yugoslavia and in the EU.

21. C. Other operating revenues Other operating revenues equalled EUR 4,744,413. Revenues from the sale of fixed assets, collected receivables for which a revaluation of receivables was formed in previous years, revenues from the dissolution of long-term provisions and obtained subsidies are shown among other operating revenues.

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

Sale revenues of materials and merchandise sold on foreign markets Total

ANNUAL REPORT 2010

Sale revenues of products and services in Slovenia

2010

P I VOVA R N A L A Ĺ KO D . D .

( in EUR )

255

21. D. Analysis of costs by category ( in EUR )

Expenses of materials and mercdandise sold

2010

2009

114,878,082 126,255,327

Expenses of services

82,813,997

74,530,564

Depreciation

24,441,457

28,000,182

Expenses of salaries

43,425,485

44,566,288

Benefits on payments for social security

7,816,758

7,638,151

Other labor costs

8,697,008

12,266,871

Revaluation operating expenses at fixed assets

27,209,030

36,883,116

Revaluation operating expenses at reverse assets

1,173,258

2,979,151

Costs of reservations

2,287,988

1,085,846

7,331,428

7,832,328

Other operating expenses Total

320,074,491 342,037,824

Operating expenses without the impairment of the brand name and goodwill of Delo and Fructal amounted to EUR 295,644,929. The Group impaired the goodwill and brand name of the company Delo, d. d. by the amount of EUR 8,543,891 EUR and the goodwill and brand name of the company Fructal, d. d. by EUR 15,885,671. Costs of materials, raw materials and merchandise decreased by EUR 11,377,245 in comparison to the previous year,predominantly due to the reduced scope of sales. Costs of services increased by EUR

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

8,282,433 in comparison to the previous year predominantly due to increased costs of marketing.

256

21. E. Costs by functional group Year 2010 ( in EUR )

Production expenses of sold Expenses of products and goods selling

Cost of general activities

Total

Expenses of materials and mercdandise sold

108,365,808

2,391,772

4,120,502

114,878,082

Expenses of services

24,048,304

47,234,280

11,531,413

82,813,997

Depreciation

19,193,525

2,390,953

2,856,979

24,441,457

Expenses of salaries

37,170,981

9,616,971

13,151,299

59,939,251

66,985

30,185

27,111,860

27,209,030

4,831

1,055,717

112,710

1,173,258

193,661

95,282

1,999,045

2,287,988

Revaluation operating expenses at fixed assets Revaluation operating expenses at reverse assets Costs of reservations Other expenses Total

2,707,780

1,598,795

3,024,853

7,331,428

191,751,875

64,413,955

63,908,661

320,074,491

The costs related to the audit of the Pivovarna Laško Group for 2010 amounted to EUR 174,223 and that of other auditing services EUR 14,000. Cost of general activities

Total

Expenses of materials and mercdandise sold

112,228,473

10,826,574

3,200,280

126,255,327

Expenses of services

21,140,387

42,562,360

10,827,817

74,530,564

Depreciation

22,391,098

2,729,421

2,879,663

28,000,182

Expenses of salaries

40,863,933

8,834,470

14,772,907

64,471,310

93,129

780,870

36,009,117

36,883,116

1,886,356

1,092,795

2,979,151

460,135

50,425

575,286

1,085,846

Revaluation operating expenses at fixed assets Revaluation operating expenses at reverse assets Costs of reservations Other expenses Total

3,517,986

434,958

3,879,384

7,832,328

200,695,141

68,105,434

73,237,249

342,037,824

ANNUAL REPORT 2010

Production expenses of sold Expenses of products and goods selling

P I VOVA R N A L A Š KO D . D .

Year 2009 ( in EUR )

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

257

22. Net financial expenses ( in EUR )

2009

2010

Financial revenues without currency differences

2,275,371

5,572,492

Financal revenues on the basis of profit shares

589,378

321,820

Financial revenues from loans given

1,455,427

5,088,402

Financial revenues from accounts receivable

228,210

162,270

Financial revenues from sale of securities

2,356

Financial expenditures without currency differences

(27,130,311) (210,387,002)

Financial expenditures from impairment and write-offs of investments

(5,273,215) (187,453,091)

Financial expenditures from financial liabilities

(21,763,578) (22,529,632)

Financial expenditures from operating liabilities

(93,518)

(404,279)

Currency differences from financing

(218,049)

11,305

Negative currency differences

(277,536)

(38,739)

59,487

50,044

Positive currency differences Net financial expenditures

(25,072,989) (204,803,205)

The surplus of financial liabilities without participation in the profit of associated companies over financial

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

revenues in 2010 amounted to EUR 25,072,989 and is predominantly due to a surplus of financial liabilities

258

arising from received loans over financial revenues received from granted loans. The negative result due to interest amounts to EUR 21,763,578. At the same time the Group also showed financial expenses due to the impairment of financial investments in the amount of EUR 5,273,215. The impairments regarded the impairment of investments in the shares of the following companies: Večer, d. d., in the amount of EUR 2.029.096, Thermana, d. d., in the amount of EUR 1,244,287, Elektro Maribor in the amount of EUR 384,464, Elektro Gorenjska, d. d., in the amount of EUR 27,065, Zvon ena in the amount of EUR 371,385 and Eurofruit, d. d., in the amount of EUR 14,093. Based on the value assessment of the certified business appraiser, the companies in the Group recognised an impairment possibility for the purchase of an additional stake in the company Birra Peja in the amount of EUR 1,202,286.

23. Share of the (loss)/profits in associated companies ( in EUR )

2010

2009

Share of loss/profit in associated company

4,112,331

10,136,031

Total

4,112,331

10,136,031

The share in profits of the subsidiaries refer to the Group’s participation in the profit of Poslovni sistem Mercator, d. d. in the amount of EUR 7,092,044, its share in the loss of Thermana, d. d. in the amount of EUR 349,713 and its share in the loss of Birra Peje, Sh. a. in the amount of EUR 2,630,000.

24. Corporate income tax ( in EUR )

2010

2009

Current tax

1,005,670

2,779,391

Deferred tax

(6,033,538) (40,576,837)

Total

(5,027,868) (37,797,446)

Deferred tax which affects profit or loss is shown in the table entitled movement of long-term receivables for deferred tax (Note 7) and in the table entitled movement of long-term liabilities for deferred tax (Note 18.C). The income tax of the Group differs from the theoretical tax amount which would arise if the basic tax rates of the domestic country were used. The tax base is calculated as a difference between taxable revenues and taxable expenses at the level of each individual company in the Group. If taxable expenses exceeds taxable revenues the company will show a tax loss which can be covered from future taxable revenues. The following companies in the Pivovarna Laško Group showed an covered tax loss as at 31 December 2010: Pivovarna Laško, d. d., in the amount of EUR 1,274,977, Jadranska pivovara – Split, d. d., in the amount of EUR 27,561,633 and Fructal, d. d. in the amount of EUR 521,384.89. The tax base is reduced by tax deductions related to:

•d eductions for donations. The authorities can check the operations of a business and require the payment of additional tax as a result, along with past interest or penalties which have to do with the revenue tax or other taxes and contributions, anytime within five years of when the tax is levied. The Management Board of the Company is not aware of any circumstances which could represent significant liabilities under this heading.

ANNUAL REPORT 2010

•d eductions for the employment of disabled persons and

P I VOVA R N A L A Š KO D . D .

•d eductions for voluntary supplementary pension insurance;

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

•d eductions for research and development;

259

25. Cash flow from operations ( in EUR )

2010

2009

Operating profit of the period

(9,945,684)

(5,229,918)

Adjustments for: Depreciation of property, plant and equipment

23,345,636

27,538,653

Depreciation of intangible fixed assets

1,095,821

460,450

Write-offs of fixed assets

27,244,086

36,883,116

Write-offs of short-term assets

1,138,202

2,979,151

Net movement in reservations

725,229

(661,982)

Payment share in the profits in associated companies

6,327,373

4,929,175

59,876,347

72,128,563

Changes of reverse capital Inventories and non-current assets for sale

15,918,998

Operating and other receivables

(27,406,638)

10,374,438

Operating and other liabilities

16,269,211

(8,249,520)

4,781,571

(6,209,372)

54,712,234

60,689,273

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Cash made from operation

260

(8,334,290)

26. Reporting by segments 26. A. Business segments Year 2010 Other ( in EUR ) Beer beverages

Newspaper- publishing activity Other

Total

Net sales revenues by segments 143,429,829

106,686,671

53,728,877

26,021,672

329,867,049

Revenues among segments 15,820,442

7,239,026

69,171

320,257

23,448,896

Net sales revenues 127,609,387

99,447,645

53,659,706

25,701,415

306,418,153

Operating profit and loss 18,125,778

(18,558,836) (8,201,132)

(1,251,825)

(9,886,015)

Financial revenues/ expenditures (net)

(27,702,989)

Profits/losses in associated companies

6,742,331

Profit and loss before tax

(30,846,673)

Tax

5,027,868

Profit and loss of accounting period

(25,818,805) 573,193,263 46,461,058

Positive goodwill

17,197,380

Liabilities by segments

355,378,409

159,390,693

504,962,698

75,327,350

34,296,101

39,960,838

8,739,010

4,088,024

1,452,545

373,665

14,653,244

Depreciation 12,920,819

7,976,004

2,920,426

624,208

24,441,457

133,297

41,722

3,952,726

Investments

Expenses withouth cash flow as consequence

3,777,707

ANNUAL REPORT 2010

72,240,500 182,493,514

Trademarks

P I VOVA R N A L A Ĺ KO D . D .

Assets by segments 159,068,556

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

261

Year 2009 Other ( in EUR ) Beer beverages

Newspaper- publishing activity Other

Total

Net sales revenues by segments 150,804,759

112,316,232

53,686,373

36,873,654

353,681,018

Revenues among segments 18,560,224

7,699,985

25,480

368,483

26,654,172

Net sales revenues 132,244,535

104,616,247

53,660,893

36,505,171

327,026,846

Operating profit and loss 22,705,007

5,332,510

477,987

(33,745,422)

(5,229,918)

Financial revenues/ expenditures (net)

(204,803,205)

Profits/losses in associated companies

6,317,072

Profit and loss before tax

(203,716,051)

Tax

37,797,446

Profit and loss of accounting period Assets by segments

392,964,881

154,003,298

80,254,884

54,573,083

681,796,146

Liabilities by segments 375,322,378

70,058,403

33,562,043

40,258,942

519,201,766

9,714,243

3,711,223

3,699,845

885,904

18,011,215

Depreciation 13,171,304

8,998,774

2,876,080

781,462

25,827,620

649,407

628,010

4,771,645

P I VOVA R N A L A Ĺ KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

Investments

262

(165,918,605)

Expenses withouth cash flow as consequence

3,494,228

Sales by geographic segments are disclosed in Note 26. B.

26. B. Geographic segments ( in EUR )

2010

2009

Net sales revenue Slovenija Foreign market Total

258,752,009 277,462,686 47,666,144

49,564,160

306,418,153 327,026,846

Sredstva Slovenija Foreign market Investments on associated company Trademarks (Slovenija) Positive goodwill (Slovenija) Total Investments

525,763,815 384,467,058 47,112,300

36,360,012

317,148 138,836,076 46,461,058

93,194,513

17,197,380

29,938,487

636,851,701 682,796,146

Slovenija

13,979,725

16,697,344

Foreign market

673,519

1,313,871

Total

14,653,244

18,011,215

Net sales revenues on foreign markets were predominantly realised on the markets of the former Yugoslavia while assets on foreign markets relate exclusively to assets in the countries of the former Yugoslavia.

the average number of own shares. ( in EUR )

Profit (loss) majority owners

2010

2009

(25,574,602) (156,950,499)

Weighed number of issued ordinary shares

8,747,652

Number of own shares

42,973

44,621

Weighed number of issued ordinary shares

8,704,679

8,703,031

Net profit per share

(2.94)

(18.03)

Adjusted net profit per share

(2.94)

(18.03)

2010

2009

28. Comprehensive yield per share ( in EUR )

Comprehensive income majority owners

(30,285,944) (125,426,366)

Weighed number of issued ordinary shares

8,747,652

Number of own shares

42,973

44,621

Weighed number of issued ordinary shares

8,704,679

8,703,031

Net comprehensive income per share

(3.48)

(14.41)

Adjusted net comprehensive income per share

(3.48)

(14.41)

ANNUAL REPORT 2010

with the weighted average number of shares which are on the market during the year, with the exception of

P I VOVA R N A L A Ĺ KO D . D .

Net loss per share is calculated with the distribution of net revenue which belongs to the shareholders,

4 . F I N A N C I A L R E P O R T / P i vova r n a L a ĹĄ ko G r o u p

27. Profit/loss per share

263

29. Dividends per share The parent company Pivovarna Laško, d. d. did not pay out dividends in 2010, nor did it pay dividends in 2009. In 2010 it only paid out dividends to its subsidiary Radenska, d. d. Minority shareholders of Radenska, d. d. obtained dividends totalling EUR 75,112.

30. Financial risks 30. A. Credit risk Credit risk comprises all risks having an effect on decreasing the economic benefits of the Group due to the insolvency of business partners (buyers) and non-fulfilment of contractual liabilities. For this reason, the Group regularly supervises and monitors financial receivables from both wholesalers and retailer customers. The Group predominantly does business with known and verified business partners whose credit ratings it monitors concurrently. Based on the aforementioned a limit is defined for each partner representing the limit for goods that can be supplied to an individual buyer. For buyers showing an extremely bad credit rating, supply is only implemented on the basis of advance payment. In this manner buyers are restricted from purchasing goods exceeding their payment capacities. Within the scope of credit risk management, the Group utilizes mutual and chain compensation which also have a positive effect on ensuring adequate cash flow for the Group. Receivables are insured through traditional instruments for insuring receivables such as bills of exchange, bank guarantees and mortgages. The finance offices monitor the receivables by business partner and maturity on a concurrent basis and through concurrent collection both internally via their own collection offices and via external agencies with a large portion of receivables collected prior to judicial enforcement. The charging of default interest, issuing of written reminders and in the end phase also im-

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

plementation of judicial enforcement of matured receivables has resulted in improved payment discipline

264

of buyers and limits the write-off of uncollectible receivables to a minimum. The Group did not record any significant write-offs of receivables due to non-payment in 2010. Credit risk is managed and represents a moderate degree of exposure.

30. B. Interest rate risk Interest rate risk represents the possibility of a change of the reference interest rate on the financial market predominantly due to long-term loans already taken out denominated in EUR tied to a variable interest rate (EURIBOR) which in the first half of 2010 already displayed a slight declining trend with the trend slightly turning upwards and continuing until the end of the year. The trend in the growth of the reference interest rate is continuing in 2011. Financing under variable interest rate conditions represents one third of all Group financing while the other two thirds represents loans with a fixed interest rate. The Group concluded interest rate swaps in 2010 thereby protection a good 20% of its long-term loans against a growth of the reference interest rate in the next three years. In accordance with the long-term strategy of the Pivovarna Laško Group a reduction in indebtedness in financing under variable conditions is expected in 2011 therefore the Group has not yet made a decision regarding the conclusion of additional transactions for protecting the interest rate. The Group’s exposure to interest rate risk remains high, but manageable.

Amount of ( in EUR ) interest

Average interest Difference rate in % in interest

Interest Change in fin. rate Decrease in expenditures protection interest interest

Actual financial expenditures with respect to interest

20,410,364

5.18

- 20,410,364

Expenditures in case of interest rate increase by 1%

24,350,589

6.18

3,940,225 (1,032,000) 23,318,589

2,908,225

Expenditures in case of interest rate decrease by 1%

16,470,139

4.18 (3,940,225)

- 16,470,139

(3,940,225)

Expenditures in case of interest rate increase by 1,5%

26,320,701

6.68

5,910,337 (1,620,000) 24,700,701

4,290,337

Expenditures in case of interest rate decrease by 1,5%

14,500,027

3.68 (5,910,337)

- 14,500,027

(5,910,337)

If the average interest rate increased by 1% expenses would increase by EUR 3,940,225, and for 1.5% by EUR 5,910,337. If the average interest rate increased by 1% expenses would increase by EUR 3,940,225, and for 1.5% by EUR 5,910,337.

30. C. Currency risk Currency risk had a negligible impact on the Group’s operations in 2010 for the majority of transactions

ison to the previous year when the surplus of short-term liabilities comprised EUR 265,956,352. In accordance with the adopted five-year strategy of operations for the Pivovarna Laško Group, procedures for the sale of all non-strategic investments began to be intensively implemented in 2010. Currently, the sale of a 79.25% stake in the newspaper company Večer, d. d. and a 100% stake in the company Delo, d. d. is underway. At the same time a strategic partner is being intensively sought for the company Fructal, d. d. Procedures for the sale of a 23.34% stake in the company Poslovni sistem Mercator, d. d. and all other investments and property not required for operations are also being carried out. In the event of successfully concluded divestments, the Group will immensely decrease its indebtedness and consequently its exposure to liquidity risk. Within the Group, indebtedness of individual companies will decrease in various degrees. Uncertainty remains regarding the success of the divestment of financial investments and unnecessary property, even alongside a successful disinvestment the parent company Pivovarna Laško, d. d. will still remain over-indebted while individual subsidiary companies will have an excess of freely liquid assets. Therefore the payment of dividends by the subsidiaries is envisaged in the financial restructuring plan. In this way the parent company would partially improve its liquidity position and business result. The increase in sustainable sources would enable the maintenance and increase of value of the assets or its owners. Until the successfully implemented sale of individual investments, the Group will experience serious liquidity problems which it will only be able to successfully resolve through agreements with banks (with the latter acting as creditors or as important owners of the Group). The only solution for the liquidity position of the Group in the event of the unsuccessful sale of the assets is the acquisition of new sustainable sources (capital increase). Discussions with banks regarding the possibilities of a comprehensive reprogramming of debt in the long-term are being carried out within the scope of strategic measures involving financial restruc-

ANNUAL REPORT 2010

As at 31 December 2010 the Pivovarna Laško Group showed a surplus of short-term liabilities over shortterm assets in the amount of EUR 44,684,966, representing a considerably smaller liquidity risk in compar-

P I VOVA R N A L A Š KO D . D .

30. D. Liquidity risk

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

with foreign markets were denominated in euros.

265

turing as a supplement to permanent reconciliation with banks on the extension of payment for matured loan instalments to the level of the Group. Discussions with regard to the reprogramming of debt are being implemented daily whereas discussions regarding the acquisition of new sustainable sources have not yet taken place.

30. E. Cash flow risk Cash flow risk is reflected in risk regarding the fair values of assets. Risk can be managed using derivative financial instruments. The company did not insure against the fair value risks in 2010 therefore the risks defined in the table below exist and relate to the shares of Poslovni sistem Mercator (MELR). Although the investment in MELR shares has been valuated in accordance with the equity method of valuation, concurrent checks for signs of impairment in comparison to their market value attained on the organised securities market at the Ljubljana Stock Exchange is required. ( in EUR )

MELR value of the equity method

Fair value Difference- as at influence on the 12/31/2010 value of N-CI

Difference- influence on the revaluation surplus

Difference- influence on liability for deferred tax

132,934,216

Market value MELR

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

on the day 31.12.2010

266

138,593,226

Increase in price by 10%

152,452,549

13,859,323

11,087,458

2,771,865

Decrease in price by 10%

124,733,903

(13,859,323)

(11,087,458)

(2,771,865)

Increase in price by 5%

145,522,887

6,929,661

5,543,729

1,385,932

Decrease in price by 5%

131,663,565

(6,929,661)

(5,543,729)

(1,385,932)

If an increase or decrease of financial investments’ value, which is estimated according to their fair value, occurs, it is reflected in the increase or decrease of the surplus from revaluation directly in the capital and, at the same time, with the liability for the deferred tax. Investments carried at cost or investments in associated companies valuated in accordance with the rules of the equity method are not included in the risk calculation.

31. Contingent liabilities Contingent liabilities refer to guarantees or sureties given in the amount of EUR 2,083,516 to associated companies for loans taken out with banks and to other non-related entities in the amount of EUR 470,000. It should be mentioned that contingent liabilities also include the contingent liability arising from the patronage statement signed by Mr. Boško Šrot, the previous Director of Pivovarna Laško, d. d. in January 2009 which was addressed to the company Pertutnina Ptuj, d. d. With this statement, the parent company Pivovarna Laško, d. d. guarantees Perutnina Ptuj, d. d. that it would fulfill the denoted obligations of EUR 20 million with appurtenant interest. Contingent liabilities of the Group in the annual report for the year ended on 31 December 2008 were not disclosed in accordance with IFRS. On 20 November 2009 Perutnina Ptuj, d. d. demanded a refund of EUR 11,600,120 from the parent company Pivovarna Laško, d. d. The denoted amount regards a loan taken out on the basis of a signed patronage statement by Perutnina Ptuj, d. d. and approved by the companies Center naložbe, d. d. and Infond Holding, d. d. The Group with the aid of legal experts is examing the claim and desires to establish the likelihood of having to return the demanded amount. It has obtained a number of legal opinions for this purpose. Based on the legal opinions obtained the management of the Group estimates that no obligation to pay the demanded amount exists for the Group therefore the Group did not disclose the said liability in its accounting ledgers.

On 15 February 2011 Pivovarna Laško, d. d. received a lawsuit in connection to the patronage statement from the District Court in Celje which Mr. Boško Šrot as the Director of the Company supposedly signed on 10 January 2009. In the lawsuit, the plaintiff Perutnina Ptuj, d. d. is demanding a payment of EUR 10,116,489 with the legally prescribed default interest fro 1 January 2010 onwards until payment. Pivovarna Laško, d. d. has filed an appeal against the lawsuit in court. The Securities Market Agency issued a Decision on Violation No. 014-1080-60/2008 on 9 December 2008 due to a violation of takeover legislation (the responsible persons being Pivovarna Union, d. d., Pivovarna Laško, d. d., Radenska, d. d., and responsible legal persons) ordering the Group to pay a EUR 510.000 fine. A petition for judicial protection has been filed. An appeal was lodged on 30 November 2010 and on 10 December 2010 additionally submitted the denoted judgement to the Securities Market Agency. Pivovarna Laško, d. d. together with the other defendants (Pivovarna Union, d. d., Radenska, d. d. and Infond Holding, d. d. currently undergoing bankruptcy) received a demand for payment of various damage claims (totalling EUR 408,218.05) from 28 plaintiffs due to the supposed violation of takeover legislation, supposed reconciliation of operations and supposed attainment of the takeover threshold from individual shareholders. A statement of defence has been filed by the Company against the lawsuit with prepared applications already filed for several cases. The denationalisation beneficiaries Michael Wiesler and Barbara Purre-Wiesler (the grandchildren of Dr. Anton Šairič) filed a request on 20 December 2010 in an out-of-court procedure based on the Enforcement of Criminal Sanctions Act for the restitution of seized property which was nationalised from Anton Šarič through a judgement of the Court of National Slovene Honour The beneficiaries assessed the value of the assets to be EUR 14.5 million. They are additionally enforcing the return of 12 brands of Radenska, d. d.,

carried out for the aforementioned brands of Radenska, d. d., Radenci. It is expected that resolution of the denoted denationalisation claims will be a long-term process and may significantly affect future operations of the subsidiary Radenska, d. d. and the Pivovarna Laško Group.

32. Business mergers No business mergers were implemented in 2010.

ANNUAL REPORT 2010

parcels that are the subject of the denationalization procedure. The entry of the notice of dispute was also

P I VOVA R N A L A Š KO D . D .

springs were located On 23 December 2010 the beneficiaries in accordance with the Enforcement of Criminal Sanctions Act carried out the entry into the land register in the form of a notice of dispute on all land

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Radencie and payment of damages for the right to the mineral water and land on which the mineral water

267

33. Receipts of management and employees according to individual contracts The Management Board and Supervisory Board of the parent company Pivovarna Laško, d. d. and the majority of companies associated with the Pivovarna Laško Group and their earnings for 2010 are presented in the tables below: Fixed part ( in EUR ) of receipts

Other revenues (stimulation) Benefits

Total

MANAGEMENT Pivovarna Laško, d. d. Dušan Zorko Gorazd Lukman Robert Šega Total

192,000

600

192,600

40,000

600

40,600

40,000

2,004

42,004

272,000

3,204

275,204

Pivovarna Union, d. d., Ljubljana

Dušan Zorko

55,800

16,256

72,056

Total

55,800

16,256

72,056

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Group Fructal

268

Anton Balažič

49,563

6,460

56,023

Ales Škraba

50,805

Drago Kavšekl

99,000

4,902

103,902

Emilija Mitevska

24,249

23,971

247,588

11,362

258,950

Ilija Vidoevski Total

Radenska, d. d., Radenci Zvonko Murgelj

61,400

8,350

69,750

Total

61,400

8,350

69,750

Group Delo Jurij Giacomelli Samo Čok Total

131,400

13,795

145,195

87,475

10,171

97,646

218,875

23,966

242,841

Vital Mestinje, d. o. o. Zvonko Murgelj Mira Močnik Total

89,513

41,630

131,143

7,001

243

7,244

96,514

243

41,630

138,387

Total

952,177

63,381

41,630

1,057,188

( in EUR )

2010

2009

Fixed part of receipts

3,705,769

5,662,498

Other revenues

194,878

283,230

Variable part (stimulation)

175,494

172,422

Benefits

238,875

1,757,173

Total

4,315,016

7,875,323

( in EUR )

2010

2009

Attendance fees

119,682

160,603

Total

119,682

160,603

INDIVIDUAL CONTRACTS

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

SUPERVISORY BOARD

269

( in EUR )

2010

2009

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

SUPERVISORY BOARD

270

Marjan Mačkošek

4,845

990

Vladimir Malenković

4,080

1,096

Peter Groznik

3,018

Bojan Košak

3,762

4,158

Andrej Kebe

4,270

4,158

Aleksander Svetelšek

1,351

362

Marjeta Zevnik

14,896

12,850

Mirjam Hočevar

8,434

8,660

Terezija Peterka

11,400

6,724

Robert Šega

6,194

1,482

Dragica Čepin

9,183

2,847

Sonja Tominec

2,559

1,297

Franko Lipičar

2,895

1,192

Omar Dominik

2,895

1,192

Pavel Teršek

2,286

Boško Šrot

9,852

Jože Sadar

2,456

Gorazd Šetina

1,978

2,520

Tadeja Filipič Stojanovič

2,156

2,520

Branko Šafarič

2,156

2,520

Anton Medvešek

4,003

4,143

Vilijam Iztok Počkaj

1,110

894

Jure Jež

1,110

671

Lilijana Ipavec

889

894

Franc Rojnik

4,258

5,020

Anton Turnšek

7,417

10,468

Boris Završnik

4,388

Iztok Seničar

1,937

Dušan Zorko

11,884

Rebeka Lah

9,661

Branimir Piano

5,419

22,926

Janko Remic

4,258

Jure Ferlin

2,860

Andrijana Starina Kosem

19,919

Simon Zdolšek

858

Total

119,682

160,603

( in EUR )

2010

2009

Attendance fees

2,879

Total

2,879

REVIEW COMMISSION OF SUPERVISORY BOARD

( in EUR )

2010

2009

REVIEW COMMISSION OF SUPERVISORY BOARD Marko Koleša

1,012

Peter Groznik

349

Bojan Košak

990

Marjan Mačkošek

528

Total

2,879

( in EUR )

2010

2009

Purchasing from companies of the Group

163,978

380,206

34. Transactions with related parties

11,279,801

10,080,969

11,660,007

( v EUR )

2010

2009

Liabilities to companies of the Group (RA&LA)

23,664

6,516

Liabilities purchasing from associated and other related parties

2,569,364

1,820,449

Total

2,593,028

1,826,965

2010

2009

Sales to related parties ( in EUR )

Sales to associated and other related parties

142,031,437 130,970,739

Total

142,031,437 130,970,739

( in EUR )

2010

2009

Receivables from associated and other related parties

19,105,523

19,763,325

Total

19,105,523

19,763,325

ANNUAL REPORT 2010

9,916,991

Total

P I VOVA R N A L A Š KO D . D .

Purchasing from associated and other related parties

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

Purchases from related parties

271

35. Business events following the end of the fiscal year Business events following the end of the fiscal year in the Pivovarna Laško Group are described on pages 106 and 107 of the Business Report of the Annual Report, Chapter 2.13. No business events which could have an effect on the financial statements occurred following the end of the fiscal year. All loans and loan instalments which have matured into payment in the first quarter of this year which total EUR 205.3 million were based on the individual contractual maturities, extended for a period of a maximum of one year. In February 2011 Radenska, d. d., Radenci sold off all shares in Zavarovalnica Triglav, d. d. The sale resulted in a realization of EUR 821,955. Long-term receivables for deferred tax decreased due to the divesture of shares reducing net profit by EUR 1,024,637. Annex no. 2 to the contract on the sale of shares of the company ČZP Večer to the company 3Lan, d. o. o. dated 23 June 2010, was signed on 24 January 2011 and the deposit contract extended at the notary managing the storage of the payed deposit. On 28 February 2011 the Competition Protection Office issued its consent for the sale of shares of ČZP Večer, d. d. to the company 3Lan, d. o. o. The Ministry of Culture has not yet issued its decision. This means that the deferred conditions from the Contract on the Sale of Shares of 23 June 2010 have not yet been fulfilled and consequently, the Contract on the Sale of Shares has not yet gone into force. The owners of Delo, d. d., Pivovarna Laško, d. d. and Radenska, d. d. published a tender for the sale of the

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

100% stake in Delo, d. d. in November 2010. The deadline for the submission of non-binding offers was 26

272

January 2011. Discussions will be carried out with interested buyers. The continuation of the sale procedure is dependent on them.

4.2.8 STATEMENT OF THE MANAGEMENT The Management Board of the company Pivovarna Laško, d. d. is responsible for the preparation of the annual report of the Pivovarna Laško Group as well as the financial statements, in a manner providing the public with a fair presentation of the financial position and the results of operations of the companies in accordance with the International Financial Reporting Standards adopted by the European Union and the Companies Act for 2010. The Management Board of Pivovarna Laško, d .d. confirms the Business Report and Consolidated Financial Statements of the Pivovarna Laško Group with explanatory notes for the year ended 31 December 2010 and declares:

• t hat the financial statements have been prepared under the assumption that the Pivovarna Laško Group is a going concern;

• t hat appropriate accounting policies were consistently applied and that any changes thereof have been disclosed;

• t hat the accounting estimates have been prepared in a fair and diligent manner and are in accordance with the principle of prudence and good management. The Management Board is responsible for the implementation of measures to ensure maintenance of the value of the assets of the Pivovarna Laško Group and for the prevention and detection of fraud and other

Dušan Zorko, MSc

Chairman of the Management Board

Robert Šega

Member of the Management Board

Gorazd Lukman

Member of the Management Board

ANNUAL REPORT 2010

P I VOVA R N A L A Š KO D . D .

Laško, 28 March 2011

4 . F I N A N C I A L R E P O R T / P i vova r n a L a š ko G r o u p

irregularities.

273

274

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

275

P I VOVA R N A L A Š KO D . D .

ANNUAL REPORT 2010

C O L O P H O N Publisher: Pivovarna Laško, d. d., Trubarjeva 28, 3270 Laško Design: atelje.Balant Text: Pivovarna Laško, d. d. Translating: Gormat, d. o. o., Domžale and Pivovarna Laško, d. d. Print: Tiskarna Formatisk, d. o. o., Ljubljana Edition: 30 June 2011