Pivovarna lasko annual report 2010

P I V O V A R N A L A Š K O A N N U A L R E P O R T

2010

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1. INTRODUCTION 4

1.1 Statement by the Chairman of the Management Board 5

1.2 Report of the Supervisory Board for 2010 7

1.3 Significant business achievements of the Pivovarna Laško Group 12

1.4 Significant business achievements of Pivovarna Laško, d. d. 15

1.5 Vision, mission, values and strategic objectives 19

1.6 Presentation of the Pivovarna Laško Group 21

1.7 Presentation of the parent company Pivovarna Laško, d. d. 24

1.8 Significant events in 2010 26

2. BUSINESS REPORT 32

2.1 Corporate governance 33

2.2 Statement on corporate governance and compliance with the Corporate

Governance Code 43

2.3 Report of the Management Board on extent of influence according

to Article 545 of the Companies Act (ZGD-1) 48

2.4 Shareholders and the impact of economic and other trends on operations 50

2.5 Sales 59

2.6 Supply flows 64

2.7 Production 65

2.8 Investments 71

2.9 Performance analysis 76

2.10 Risk Management 92

2.11 Marketing activities 98

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

CONTENTS

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3. SUSTAINABLE DEVELOPMENT 112

3.1 Concern and responsible relationship towards employees 113

3.2 Communications 122

3.3 Responsible attitude towards the social environment 124

3.4 Environmental protection 125

4. FINANCIAL REPORT 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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1.I N T R O D U C T I O N

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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 Share-

holders, 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 own-

ers 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 re-

programming 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 liquid-

ity 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

of the Company and its shareholders.

OPERATIONS IN 2010 MARKED BY RATIONALIZATION AND FINANCIAL STABILIZA-

TION OF THE COMPANY

The parent company Pivovarna Laško generated EUR 91 million in net sales revenues, EUR 11 million in

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

2010.

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

EUR 306.4 million in net sales revenues in 2010 which were 6.3 percent less then in 2009, the Group man-

aged 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 impair-

ment, 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 great-

est 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 bever-

ages 3 percent.

1.1Statement by the Chairman of the Management Board

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SHARE OF SALES ON FOREIGN MARKETS INCREASED

A large share in domestic sales represents considerable risk for the Pivovarna Laško Group and depend-

ency 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 inter-

est of both shareholders and creditors and employees.

Dušan Zorko, MSc

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

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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 Su-

pervisory 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

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.

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 af-

ter 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

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

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.

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

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

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

1.2Report of the Supervisory Board for 2010

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In addition to the above, the Supervisory Board also treated other current matters and adopted the key

resolutions that follow:

• The Supervisory Board gave its consent to the Management Board for the sale of non-strategic invest-

ments at its 16th session on 18 February 2010.

• At 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 In-

dividual 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.

• At 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 Super-

visory 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 Manage-

ment 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

the sale of its stake in Mercator d. d. will be observed in the sale of Mercator, d. d.

• At 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.

• At its 24th session on 22 November 2010 the Supervisory Board adopted the draft Plan for 2011. It ap-

pointed Peter Groznik as Chairman of the Audit Committee. The Supervisory Board obligates the Man-

agement 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 Pivor-

varna 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-

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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 es-

tablished 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 Decem-

ber 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 Pivo-

varna 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

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

COVERAGE OF NET LOSS

The Supervisory Board also confirmed the Management Board’s proposal to cover net losses simultane-

ously with the confirmation of the audited Annual Report of Pivovarna Laško, d. d. and the Pivovarna Laško

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

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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 Ra-

denci 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 ope-

rations, 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 program-

mes 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

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

Annual Report.

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

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 vali-

dation on foreign markets spanning from neighbouring Croatia and Italy to far-off China.

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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)

0

112.5

225.0

337.5

in E

UR

mil.

450.0 Net sales revenues

EBITDA

2008 2009 2010

14.622.855.4

306.4327.0360.0

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

by 36.1%.

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

Return on Equity (ROE)

Return on Assets (ROA)

-30.0

-24.0

-18.0

-12.0

in %

-6.0

0

6.0

2008 2009 2010

-3.9

-17.2

-10.1

-29.5

-1.3

-3.5

1.3Significant business achievements of the Pivovarna Laško Group

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KEY DATA ON OPERATIONS PIVOVARNA LAŠKO GROUP

( in EUR ) 2008 2009 2010

Net sales revenues 360,028,307 327,026,846 306,418,155

Net profit 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

1Net profit including depreciation

INDICATORS

2008 2009 2010

Net profit from sales revenues 1.1 % -49.6 % -8.4 %

EBIT share in sales revenues 7.1 % -1.6 % -3.2 %

EBITDA share in sales revenues 15.4 % 7.0 % 4.8 %

Return on Equity (ROE)2 -3.5 % -29.5 % -17.2 %

Return on Assets (ROA)3 -1.3 % -10.1 % -3.9 %

Liabilities / equity 1.741 3.193 3.829

2Net profit / average state of equity in the period

3Net profit / average state of assets in the period

NUMBER OF EMPLOYEES

( as at 31/12) 2008 2009 2010

In group, without Delo, d. d., Ljubljana 1,620 1,462 1,422

In the company Delo, d. d., Ljubljana 470 469 445

Total 2,090 1,931 1,867

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.

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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

Share (in %) 22.2 21.6 22.2

P L A N S F O R 2 0 1 1

TOTAL SALES OF BEER, WATERS, NON-ALCOHOLIC BEVERAGES AND OTHER ALCO-

HOLIC BEVERAGES AND PLANS FOR THE UPCOMING YEAR

0

500,000

1,000,000

1,500,000

in h

ecto

litre

s

2,000,000

2009 2010 Plans 2011

Juice, syrup

Water

Beer

Other alcohol

( in hl ) 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

Total 4,552,891 4,225,503 4,570,969

( in % ) 2009 2010 Plans 2011

Juice, syrup 31.2 31.2 29.9

Water 25.2 24.9 26.0

Beer 43.4 43.7 43.7

Other alcohol 0.2 0.2 0.4

Total 100.0 100.0 100.0

The Pivovarna Laško Group is planning sales of 4,571 million hectolitres of all beverage types in 2011, rep-

resenting an 8.2 % increase over sales in 2010. The plan was optimistically drawn up with increased sales

on foreign markets planned.

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

SALES REVENUES AND OPERATING PROFIT WITH AMORTISATION (EBITDA)

EBITDA

0

32.5

65.0

in E

UR

mil.

97.5

130.0

2008 2009 2010

18.223.821.5

91.399.7108.5

Net sales revenues

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

amortisation (EBITDA) decreased by 23.5 %.

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

Return on Equity (ROE)

Return on Assets (ROA)

-30.0

-24.0

-18.0

-12.0

in %

-6.0

0

6.0

2008 2009 2010

-1.5

-10.1

-1.3

-4.8-29.5-3.5

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

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NET PROFIT AND MARKET CAPITALIZATION

-45.0

-35.0

Net

pro

fit in

EU

R m

il.

Mar

ket c

apita

lisat

ion

in E

UR

mil.

-25.0

-15.0

-5.0

5.0

15.0

2008 2009 2010

0

200

400

600

800

1.000

-6.1 -45.0 -6.3

420

237

140

Net profit

Market capitalization in the end of the period

KEY DATA ON OPERATIONS OF PIVOVARNA LAŠKO, D. D.

( in EUR ) 2008 2009 2010


Net profit -6,094,056 -44,973,818 -6,292,260

Net cash flow1 2,532,032 -38,065,247 703,814

EBIT 12,867,447 16,898,111 11,223,795

EBITDA 21,493,535 23,806,682 18,219,869

Long-term assets 433,172,048 398,843,120 294,360,182


Equitiy 175,571,742 129,302,643 124,168,015




INDICATORS

2008 2009 2010

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 %

Liabilities / equity 1.635 2.301 2.349

2Net profit / average state of equity in the period

3Net profit / average state of assets in the period

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NUMBER OF EMPLOYEES

2008 2009 2010

Employees as at 31/12 324 321 318

Average number of employees 328 324 324

SHARE OF EXPORTS IN TOTAL SALES OF BEVERAGES OF PIVOVARNA LAŠKO, D. D.

( in hl ) 2008 2009 2010

Beer sale 1,046,292 978,833 938,640

Export 172,935 213,198 250,311

Share (in %) 16.5 21.8 26.7

MARKET SHARE OF BEER SALES ON THE SLOVENIAN MARKET

( in % ) 2008 2009 2010

Pivovarna Laško 48.3 45.1 42.3

Pivovarna Union, brands 32.5 34.2 35.9

Pivovarna Union, private labels 5.0 5.5 6.4

Imported beer 14.2 15.2 15.4

Total 100.0 100.0 100.0

DATA REGARDING PILR SHARES

2008 2009 2010

Total number of issued shares 8,747,652 8,747,652 8,747,652

Net profit / loss per share ( EUR ) -0.70 -5.14 -0.72

Dividend per share ( EUR ) / / /

Market value of share on 31/12 ( EUR ) 47.98 27.15 15.99

Avg. price per share / net profit or loss per share -68.54 -5.28 -22.21

Bookkeeping value of share on 31/12 ( EUR )4 20.07 14.78 14.19

Avg. price per share / bookkeeping value of share 2.39 1.84 1.13

Market capitalization in EUR ( 31/12 ) 419,712,343 237,498,752 139,874,955

4Equity on 31/12 / total number of shares

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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 su-

perior results in a better world through responsible and environmentally-friendly

operations.

VALUES

Knowledge, enterprise, partnerships, responsibility and appreciation. It is on the ba-

sis 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.

STRATEGIC OBJECTIVES

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

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

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.

1.5Vision, mission, values and strategic objectives

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PIVOVARNA

LAŠKO GROUP PIVOVARNA LAŠKO, d. d.

COMPOSITION Pivovarna Laško, d. d. 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

detail in continuation.

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1.6Presentation 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


• JADRANSKA PIVOVARA – Split, d. d., Croatia


• VITAL MESTINJE, d. o. o., Slovenia

96.92 percent business share

• DELO, d. d., Ljubljana, Slovenia

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

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

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

• 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.

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Associated companies

• BIRRA PEJA, Sh. a., Peć, Kosovo


• POSLOVNI SISTEM MERCATOR, d. d., Ljubljana, Slovenia


• THERMANA, d. d.,Laško, Slovenia


• SLOPAK, d. o. o., Ljubljana, Slovenia


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PIVO

VARN

AU

NIO

N, d

. d.,

Ljub

ljana

Ow

ners

hip:

97.8

92 %

JAD

RAN

SKA

PIVO

VARA

- Sp

lit, d

. d.

Ow

ners

hip:

99.

106

%

RAD

ENSK

A, d

. d.,

Rade

nci

Ow

ners

hip:

93.

81 %

VIT

AL,

d. o

. o.,

Mes

tinje

Busi

n. s

hare

: 96.

92 %

DEL

O, d

. d.,

Ljub

ljana

Ow

ners

hip:

100

%

MIR

AL

RAD

ENSK

A,

d. o

. o.,

Rade

nci

Busi

n. s

hare

: 10

0 %

FRU

CTA

L, d

. d.,

Ajd

ovšč

ina

Ow

ners

hip:

93.

02 %

FRU

CTA

LZA

GRE

B, d

. o. o

.,Za

greb

Busi

n. s

hare

: 10

0 %

EURO

FRU

ITSA

RAJE

VO, d

. o. o

.,Sa

raje

voBu

sin.

sha

re: 1

00

%

FRU

KTA

L M

AK

, a. d

.,Sk

opje

Ow

ners

hip:

89.

39 %

PIV

OVA

RN

A L

AŠK

O, d

. d.

PIV

OVA

RN

A L

AŠK

O G

RO

UP

Pare

nt c

ompa

ny

Pivo

varn

a La

ško

Ow

ners

hip

in D

elu

80.8

34 %

Rade

nska

Ow

ners

hip

in D

elu

19.16

6 %

Del

o su

bsid

iary

com

pany

:IZ

BERI

, d. o

. o.,

Ljub

ljana

Busi

n. s

hare

: 10

0 %

Del

o su

bsid

iary

com

pany

:V

EČER

, d. d

.,M

arib

orO

wne

rshi

p: 9

7.25

%

RA&

LA, d

. o. o

.,Sa

raje

vo

Busi

n. s

hare

: 10

0 %

FIRM

A D

EL, d

. o. o

.,La

ško

Busi

n. s

hare

: 10

0 %

Pivo

varn

a La

ško

Busi

n. S

h. in

RA

&LA

69.2

3 %

Rade

nska

Busi

n. S

h. in

RA

&LA

1.97

%

Pivo

varn

a U

nion

Busi

n. S

h. in

RA

&LA

11.4

8 %

Fruc

tal

Busi

n. S

h. in

RA

&LA

17.3

2 %

LAŠK

O G

RUPA

, d.o

.o.,

Zagr

eb

Busi

n. s

hare

: 10

0 %

on 3

1/12

/20

10

Subs

idia

ry c

ompa

nySu

bsid

iary

com

pany

Subs

idia

ry c

ompa

nySu

bsid

iary

com

pany

Subs

idia

ry c

ompa

nySu

bsid

iary

com

pany

Subs

idia

ry c

ompa

nySu

bsid

iary

com

pany

OR

GA

NIS

AT

ION

AL

CH

AR

T O

F T

HE

PIV

OV

AR

NA

LA

ŠKO

GR

OU

P A

S A

T 3

1 D

EC

EM

BE

R 2

010

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

The historical beginnings of Pivovarna Laško reach back to 1825, when the mead and gin-gerbread 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 eighty-five 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.

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

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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: [email protected]

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

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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 objec-tive 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 authen-

tic 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

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 supple-

mented 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 in-

formation is available on the website of the Ljubljana Stock Exchange, SEOnet and the Company’s website.

1.8Significant events in 2010

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The General Meeting of the Company did not adopt the proposed decision of the Management and Super-

visory 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 settle-

ment 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

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

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

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-

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

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

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

representative).

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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 De-

cember 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 deci-

sion 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’ Associa-

tion (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 judge-

ment 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

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 denation-

alisation 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 regard-

ing 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 Enforce-

ment 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

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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., Mer-

cator, 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

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

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

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

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

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

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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 resig-

nation 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 No-

vember 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 Su-

pervisory 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

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

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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 ac-

cording 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 im-

plemented 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 MeetingsThe 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

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

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

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 ShareholdersA 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 Sharehold-

ers 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.

Decisions of the General MeetingThe following important decisions were adopted at the 16th regular General Meeting regarding the de-

noted point in the agenda:

2.1. The General Meeting is acquainted with the Report of the Supervisory Board of the Company re-

garding 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 con-

sent 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.

2.1Corporate governance

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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.

4. The General Meeting of Shareholders adopts the amendments to the Statute of the Company in ac-

cordance 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

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 Su-

pervisory 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

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.

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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.

The Supervisory Board must within one month from the submission of the annual report review the an-

nual report and proposal for use of the distributable profit and draft a written report for the General Meet-

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

report, the annual report is adopted.

Composition of the Supervisory Board Composition of the Supervisory Board

as at 31 December 2010 as at 31 December 2009

Representatives of capital: 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: Employee representatives:

Andrej Kebe, Deputy Chairman Andrej Kebe, Deputy Chairman

Bojan Košak Bojan Košak

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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 me-

chanical 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.

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.

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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, Uni-

versity 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.

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

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, stating 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 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.

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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 com-

prising:

• monitoring of the financial reporting process and statutory audits of the annual and consolidated finan-

cial 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


Peter Groznik, DSc - Chairman Marjan Mačkošek - Chairman

since 22 November 2010 since 30 March 2010

Bojan Košak Bojan Košak

Marko Koleša 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

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 busi-

ness secrets of the Company.

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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 rep-

resent 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 ap-

pointed 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:


Dušan Zorko, MSc - Chairman Dušan Zorko, MSc

Robert Šega

Gorazd Lukman

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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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, respon-

sible 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 resigna-

tion of the Management Board member at its next session.


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

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 resig-

nation 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:

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RADENSKA, d. d., Radenci

Management Board Zvonko Murgelj

Supervisory Board Representatives of capital: Employee representatives:

Dragica Čepin, Franko Lipičar – Deputy

MSc – Chairwoman Chairman

Marjeta Zevnik Dominik Omar

Mirjam Hočevar

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


Anton Turnšek - Chairman Marjeta Zevnik – Deputy

Chairwoman

Franc Rojnik Terezija Peterka

Janko Remic

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

Management Board Drago Kavšek

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


Gorazd Lukman - Chairman Goran Domljanović

Pavel Teršek – Deputy Chairman

VITAL Mestinje, d. o. o.

Management Board Mira Močnik


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DELO, d. d., Ljubljana

Management Board Jurij Giacomelli


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


Jurij Giacomelli - Chairman The company does not

have any representatives.

Dragica Čepin, MSc

Mojca Međedović

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

Management Board Uroš Skuhala


Dušan Mohorko – Chairman Borko de Corti – Deputy

Chairman

Anton Balažič Petrina Šebart Žižek

Zvonko Murgelj

RA&LA, d. o. o., Sarajevo Management Board Šerif Krajišnik


FIRMA DEL, d. o. o., Laško

Management Board Dušan Zorko, MSc


LAŠKO GRUPA, d. o. o., Zagreb

Management Board Boris Matijaščić


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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 COR-

PORATE 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.

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

from individual provisions of the Code are given in continuation:

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

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 Com-

pany, even though these objectives are not stated in the Company Statute.

• Provision 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.

• Provisions 8 (second paragraph) and 17.2: The members of the Supervisory Board did not sign the indi-

vidual 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.

2.2Statement on corporate governance and compliance with the Corporate Governance Code

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• Provision 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 com-

munications 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.

• Provision 11: The Supervisory Board does not have a secretary. The tasks of the secretary of the Supervi-

sory Board are performed by the General Sector Director or his deputy.

• Provision 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.

• Provision 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).

• Provision 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.

• Provision 21.3: The Company does not publish notices in the foreign languages usually used in interna-

tional 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-

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:

• transactions 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;

• transactions are recorded and financial statements drawn up in accordance with the applicable legisla-

tion;

• any 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 ap-

plicable 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.

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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 Man-

agement 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 manage-

ment 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 contextu-

ally 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 suit-

able 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

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

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

d. d., due to transactions implemented 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 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.

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8. In accordance with the Statute of the Company, the Company Management Board may have a maxi-

mum 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 SHARE-

HOLDERS

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-

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


1902

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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 dam-ages 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:

• Pivovarna Laško, d. d. registered its outstanding receivables in the bankruptcy proceedings against In-

fond Holding finančna družba, d. d. on 29 March 2010 and submitted a request for the establishment of

a creditor’s committee.

• On 17 March 2010 Pivovarna Laško, d. d. registered its outstanding receivables in the compulsory set-

tlement 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 Com-

pany 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.

• On 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 suf-

fered for the entire scope of damage suffered is not yet known. Two potential compensations for damages

exist according to currently known facts:

• The pledging of 345,304 shares of Radenska, d. d., Radenci whose owner is Pivovarna Laško, d. d. to in-

sure 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

2.3Report of the Management Board of Pivovarna Laško, d. d. on extent of influence in accordance with Article 545 of the Companies Act (ZGD-1)

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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.

• Patronage statement of 31 December 2008 and 10 January 2009; Pivovarna Laško, d. d. received a cor-

respondence 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 com-

fort 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 acknowl-

edge 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 Pe-

rutnina 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-

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

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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 pro-vide 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 share-

holders 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

2008 2009 2010

Shareholders as at 31/12 8,420 8,268 7,940

Chain index / 98.2 96.0

2.4.1 IMPACT OF ECONOMIC AND OTHER TRENDS ON BUSINESS OPERATIONS

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.

2.4Shareholders and the impact of economic and other trends on business operations

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

NLB, d. d.

Kapitalska družba, d.d.

Hypo Alpe-Adria-Bank, AG

Probanka, d. d.

Other Legal entities

Individual shareholders

Foreigners

14.9 %

13.8 %

26.7 %7.0 %

7.0 %

7.1 %

23.5 %

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

NLB, d. d.

Kapitalska družba, d.d.

TKC

Probanka, d. d.

Other Legal entities

Individual shareholders

Foreigners

7.2 %

13.7 %

38.6 %6.8 %

7.0 %

7.1 %

19.6 %

( in % ) 2008 2009 2010

Legal entities 79.2 79.1 71.4

Individual shareholders 13.5 13.7 13.7

Foreigners 7.3 7.2 14.9

Total 100.0 100.0 100.0

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.

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TEN LARGEST SHAREHOLDERS OF PIVOVARNA LAŠKO, D. D. AT THE END OF THE YEAR

( 31/12/2010 ) Number of shares in % place

NLB, d. d. 2,056,738 23.512 1.

Kapitalska družba, d. d. 617,488 7.059 2.

Hypo Alpe-Adria-Bank, AG 615,515 7.036 3.

Probanka, d. d. 614,911 7.029 4.

GB, d. d. Kranj 542,448 6.201 5.

Skagen Kon-tiki Verdipapirfond 499,286 5.708 6.

NFD1 delniški investicijski sklad, d. d. 446,465 5.104 7.

Abanka, d. d. 285,463 3.263 8.

Banka Celje, d. d. 252,500 2.886 9.

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


NLB, d. d. 1,713,685 19.590 1.

Kapitalska družba, d. d. 617,488 7.059 2.

TCK, d. d. 613,300 7.011 3.

Probanka, d. d. 594,628 6.798 4.

GB, d. d. Kranj 542,448 6.201 5.

Skagen Kon-tiki Verdipapirfond 499,286 5.708 6.

NFD1 delniški investicijski sklad, d. d. 446,465 5.104 7.

Publikum Fin, d. o. o. 343,053 3.922 8.

Abanka, d. d. 285,463 3.263 9.

Banka Celje, d. d. 252,500 2.886 10.


Other minor shareholders 2,839,336 32.458


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.

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Capital ownership structure of the subsidiaries

LARGEST SHAREHOLDERS OF RADENSKA, D. D., RADENCI


Pivovarna Laško, d. d. 4,748,515 93.810 1.

Slovenijales, d. d. 22,062 0.436 2.

Radenska, d. d., Radenci 13,194 0.261 3.

Kozelj Bojan 6,042 0.119 4.

GBD, d. d. 4,666 0.092 5.

Počivavšek Tadej 2,063 0.041 6.

Vrankar Anton 1,500 0.030 7.

Potočnik Marko 1,451 0.029 8.

4 F, d. o. o. 1,260 0.025 9.

Camlek Marija 1,164 0.023 10.


Other minor shareholders 259,939 5.135



Pivovarna Laško, d. d. 4,748,053 93.801 1.

Lesnina LGM, d. o. o. Ljubljana 22,062 0.436 2.

Radenska, d. d. Radenci 13,194 0.261 3.

Kozelj Bojan 6,042 0.119 4.

GBD, d. d. 4,077 0.081 5.

Vrankar Anton 1,500 0.030 6.

4 F, d. o. o. 1,260 0.025 7.

Camlek Marija 1,164 0.023 8.

Petrič Stane 900 0.018 9.

Lesnina, d. d. 890 0.018 10.




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.

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LARGEST SHAREHOLDERS OF PIVOVARNA UNION, D. D., LJUBLJANA


Pivovarna Laško, d. d. 441,606 97.892 1.

May Alexander 3,652 0.810 2.

Skandij, d. o. o 384 0.085 3.

GBD, d. d. 120 0.027 4.

Potočnik Marko 118 0.026 5.

Energoplan, d. d. 100 0.022 6.

Pintar Nina 100 0.022 7.

Srakar Drago 86 0.019 8.

Pivovarna Union, d. d. 69 0.015 9.

Laknar Frančiška 40 0.009 10.

Total - Top ten largest shareholders 446,275 98.927


Total - All shareholders 451,114 100.000


Pivovarna Laško, d. d. 441,589 97.889 1.

May Alexander 3,652 0.810 2.

Skandij, d. o. o 384 0.085 3.

GBD, d. d. 109 0.024 4.

Energoplan, d. d. 100 0.022 5.

Pintar Nina 100 0.022 6.

Srakar Drago 86 0.019 7.

Pivovarna Union, d. d. 69 0.015 8.

Laknar Frančiška 40 0.009 9.

Skvarča Frančišek 40 0.009 10.

Total - Top ten largest shareholders 446,169 98.904



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



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.

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BUSINESS STAKES IN THE COMPANY VITAL MESTINJE, D. O. O.

( 31/12/2010 ) in %

Pivovarna Laško, d. d. 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.

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


Pivovarna Laško, d. d. 539,536 80.834

Radenska, d. d., Radenci 127,928 19.166



Pivovarna Laško, d. d. 539,516 80.831

Radenska, d. d., Radenci 127,928 19.166

Firma Del, d. o. o., Laško 20 0.003


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 ) Membership Number of shares Participation %

Dušan Zorko Uprava 450 0.0051

Andrej Kebe Nadzorni svet 9,393 0.1074

Bojan Košak Nadzorni svet 17,785 0.2033

Total 27,628 0.3158

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.

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Authorized and conditional capital

The General Meeting of Shareholders of the Company did not conclude any decisions regarding the con-

ditional 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, to-

gether with the other own shares of the Company, exceed 10 % of the Company’s share capital The authorisa-

tion 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 Manage-

ment 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 denationaliza-

tion beneficiaries. If a decision is issued in favour of the denationalization beneficiary, the share changes

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.

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AVERAGE MARKET VALUE OF PILR SHARES IN 2010

0

10

20

30

40

50

jan feb mar apr maj jun jul avg sep okt nov dec

( in EUR ) jan feb mar apr maj jun jul avg sep okt 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

0

10

20

30

40

200

1

200

2

200

3

200

4

*20

05

*20

06

*20

07

*20

08

*20

09

*20

10

( in EUR ) 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

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

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

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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 pos-

sible 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 (quar-

terly 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).

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.

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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 long-term 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 mar-

kets, 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

Total 100.0 100.0 100.0

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

years.

SALES OF BEER ON THE DOMESTIC AND FOREIGN MARKETS

in h

ecto

litre

s

0

225,000

450,000

675,000

900,000

2008 2009 2010

Domestic market

Foreign market

( in % ) 2008 2009 2010

Domestic market 83.5 78.2 73.3

Foreign market 16.5 21.8 26.7

Total 100.0 100.0 100.0

2.5Sales

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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 mar-

ket 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 man-

aged 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:

• changes in the sales terms in the sense of market competitiveness;

• reorganization and fortification of the sales teams;

• upgrade of the TEPOS (field promotion) system through more accurate monitoring of sales activities on

the field and direct ordering are now possible;

• introduction of a standardised reporting method;

• introduction of measurable monthly objectives for field representatives;

• introduction of package sales of products of the Pivovarna Laško Group;

• modified event conditions directed at expanding the product assortment of the Pivovarna Laško Group;

• increased frequency of visits to sales points;

• delivery which will be adapted to the wishes and needs of customers;

• establishment of standards for the positioning of advertising materials at various types of catering estab-

lishments;

• introduction 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.

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SALES ON THE SLOVENIAN MARKET VIA WHOLESALERS

AND DISTRIBUTION CENTRES

in h

ecto

litre

s

0

150,000

300,000

450,000

600,000

2008 2009 2010

Wholesalers

Distribution centers

( in % ) 2008 2009 2010

Wholesalers 65.9 70.5 69.3

Distribution centers 34.1 29.5 30.7

Total 100.0 100.0 100.0

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-

gressive price policy.

2.5.2 FOREIGN MARKETS

CroatiaIn 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-

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

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 Za-

greb 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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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 prod-

ucts 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. Do-

mestic 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 join-

ing 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 reor-

ganized 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 Herze-

govin 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 estab-

lishments (awnings, cooling racks, beverage filling machines, sunshades), attempting to include as many

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 legisla-

tion 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%).

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FYR Macedonia

A slight quantitative drop in sales (index 89) was recorded in 2010 however this is a good result consider-

ing 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 Macedo-

nian 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 com-

prises 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:

• The 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.

• The Company competes with multinationals on all these markets which have the status of domestic

breweries and are therefore exempt from paying customs duties.

• Foreign-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

domestic industry.

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

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

Markets of the European Union and other foreign markets

The sales of Pivovarna Laško products on European Union (EU) markets and other foreign markets in-

creased 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 Pivo-

varna 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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The Company is continuing with the joint operations of procurment offices in the Pivo-varna Laško Group which proved a good choice in past years, bringing specific synergy ef-fects. Good and correct relations among the Group’s members, a common and unified ap-proach 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 in-

creased 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 Septem-

ber 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

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 communica-

tions 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 ma-

nipulation 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.

2.6Supply flows

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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 the Company.

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 prin-

ciple of sustainable development.

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

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

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

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.

2.7Production

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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, pro-

duced 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 mar-

kets 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 as-

sessment 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 Octo-

ber 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 dis-

tribution 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

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 im-

portance 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.

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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 orga-

noleptic 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 expira-

tion 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 func-

tions 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

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

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.

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

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 equip-

ment 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 Company’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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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 col-

lected 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 unfold-

ing. Following a two-year pause, the Company again focused on optimizing and supplementing organolept-

cis 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 car-

ried 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

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 pack-

ing 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).

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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 supe-

rior 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 con-

trolling 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

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

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

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.

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. Prob-

lems 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 – lemon-

ades), 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 reclama-

tions. Over 8,158* samples against numerous parameters were examined in the field of physical-chemical

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analyses in 2010. The microbiological state of beer production and filling, filling of spring waters, final prod-

ucts and drinking water within the scope of the water distribution system were monitored by the microbio-

logical laboratory. More than 15,558* samples were processed by the microbiological laboratory in 2011 to date

(*source: Plilllis system, Pivovarna Laško). 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

and acquired knowledge in the future.

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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 main-

taining 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 con-

cluded 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

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

for 2011.

2.8.1. INVESTMENTS INTO PRODUCTION, ENERGY SOURCES AND ECOLOGY

“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 renova-

tion 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 prepa-

ration and beer beverage mixtures. Therefore individual elements of the ST2 line were replaced and recon-

nected with the technological water. They are connected to the new power system so that an optimal techno-

logical 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.

2.8Investments

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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 con-

struction 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-fab-

ricated 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 be-

gan 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, ar-

rangement 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”

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 pack-

aging. 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).

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

• Pivovarna Laško will acquire significant comparative advantages against competitors on the Slovene

market (return packaging is too expensive for discount stores);

• in 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;

• Pivovarna Laško will also acquire a comparative advantage on the Croatian market where it will be the

first to introduce such packaging;

• the 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 require-

ments.

All costs involving the development of the new crate were assumed by the potential supplier and pro-

ducer 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-

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

through investment.

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

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 im-

plemented 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.

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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 opera-

tion 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 exploi-

tation 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 in-

troducing 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 sav-

ings 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

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 re-

quirements 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 stand-

ards.

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.

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A pilot test was implemented involving the direct introduction and degradation of brewer’s yeast suspen-

sion 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 possi-

bility 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

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

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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 pro-

ducers 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 dives-

ture 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.

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 condi-

tions 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 prob-

lems 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.

2.9Performance analysis

1938

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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 ) 2010 sales 2009 sales 10/09 Index

Beer 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

Syrups* 61,538 64,288 95.7

Other alcoholic 8,137 8,942 91.0

Total 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

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% gen-

erated 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.

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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 news-

paper 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 previ-

ous 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 re-

sult. 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

than on the last day of 2009.

SALES BY EMPLOYEE

Sales per employeePivovarna Lasko Group

in E

UR

thou

sand

0.0

40.0

80.0

120.0

160.0

200.0

2008 2009 2010

164.1169.4172.3

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

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OPERATING EXPENSES FROM NET SALES REVENUES

Operating expenses in thenet revenue from sales ofPivovarna Lasko Group

in %

0.0

30.0

60.0

90.0

120.0

2008 2009 2010

104.5104.696.6

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 ini-

tial phase of introduction, are not yet optimally regulated. The Company expects to achieve its set business

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 Com-

pany 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 Laško products through product quality, a key objective also in 2011.

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SALES OF BEER AND WATER

( in hl ) 2008 2009 2010

Total sale 1,090,949 1,011,539 968,697


Beer sales 1,046,281 978,833 938,640


Water sales 44,657 32,706 30,057


Alcohol / other sales 11 - -

Chain index / / /

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

• BEER 938,640 hl,

representing a 4.1% decrease over 2009;

• NATURAL 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 condi-

tions 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

on other foreign markets, especially EU markets.

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

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.

Financial data

The Pivovarna Laško Group generated a total of EUR 91.3 million in net sales revenues in 2010, represent-

ing 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 mil-

lion 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.

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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 de-

creased. 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 invest-

ments in the amount of EUR 9.9 million.

Financial revenues comprised EUR 4.3 million and are approximately equivalent to those from the previ-

ous year. The Company realised a negative result from financing activities with financial expenses surpass-

ing 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 mil-

lion.

Notes to the Statement of financial position

Due to the commencement of the procedure of divesture of investments, the Company transferred invest-

ments in the subsidiaries Delo, d. d., and investments in Jadranska pivovarna – Split, d. d., totalling EUR

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 trans-

fer 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


Equity of the Group as at 31 December 2010 comprised EUR 124.2 million and was EUR 5.1 million lower


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SALES BY EMPLOYEE

Sales per employeePivovarna Lasko d.d.

in E

UR

thou

sand

160.0

80.0

0.0

240.0

320.0

400.0

2008 2009 2010

281.8307.6330.7

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

OPERATING EXPENSES FROM NET SALES REVENUES

Operating expenses in thenet revenue from sales ofPivovarna Lasko, d.d.

in %

0.0

30.0

60.0

90.0

120.0

2008 2009 2010

87.485.491.5

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

Plans

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 Compa-

ny 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.

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Following the equipping of the entire production-filling process and quality of all its products, the Com-

pany 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 Com-

pany’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 fac-

tors 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

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 non-

alcoholic beverages

On the Slovenian market, the Company’s desire is to, under the brand name Radenska, remain the lead-

ing 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 owner-

ship 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).

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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 buy-

ing 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.

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

( in EUR ) 2008 2009 2010


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


Equity 121,157,626 83,758,794 81,102,108

Reservations 2,688,039 2,721,028 2,558,036

Long-term liabilities 768,824 8,565,555 6,618,526


1Net profit including depreciacion

Radenska, d. d. generated EUR 29.2 million in operating revenues in 2010, EUR 28.0 million in operat-

ing 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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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 Laško

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

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 expan-

sion 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.


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

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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 predomi-

nantly sold in Slovenia. A general decrease in consumerism was highlighted in this segment.

KEY DATA ON OPERATIONS OF THE UNION GROUP

( in EUR ) 2008 2009 2010


Net profit 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


Equity 132,477,907 78,424,313 80,151,688




The Union Group generated EUR 149.1 million in net consolidated net sales revenues in 2010, represent-

ing a 6.5 % decrease over the previous year. Out of total sales revenues, 78.5 % were generated on the domes-

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

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

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

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 naložbe, 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 invest-

ments 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-for- sale.

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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 with-

in 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

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 lat-

ter 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.


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%.

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KEY DATA ON OPERATIONS OF VITAL MESTINJE, D. O. O.

( in EUR ) 2008 2009 2010


Net profit 53,250 47,569 -81,667

Net cash flow1 463,146 424,865 292,495

EBIT 89,753 48,000 -79,933

EBITDA 499,649 425,296 294,229

Long-term assets 2,215,201 2,066,005 2,530,278


Equity 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


Vital Mestinje concluded 2010 with a loss of EUR 81,667. Significant factors contributing to the loss in-

cluded 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-

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

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

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

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.

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Delo, d. d., publishes two leading Slovenian daily newspapers, Delo and Slovenske Novice, the only Sunday

newspaper, Nedelo, the specialized magazine Grafičar 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.


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 eco-

nomic 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 ) 2008 2009 2010


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 8,667,620 3,403,593 3,247,847

Long-term assets 41,553,901 25,398,404 24,192,498


Equity 27,980,341 15,665,385 13,472,842

Long-term liabilities - 4,041,689 3,158,602



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 Večer 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.

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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

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

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

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.

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.

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In their business operations Pivovarna Laško, d. d., and Pivovarna Laško Group are ex-posed 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.

• Taking 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.

• Intellectual 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.

• Reliability of suppliers and contractors is moderately exposed, and for the purposes of preventing busi-

ness 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

the same type of goods.

• Availability 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.

• Environmental 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 ad-

ditional impact on environmental protection.

• Protection 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 pos-

sibility of prompt elimination of the consequences.

• Through 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.

2.10Risk management

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• Through the ongoing and constant upgrading of information and communications technology, the Com-

pany 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 low-

est possible level.

BUSINESS RISKS

Risk description Control mode Exposure

Sale loss of market sales perform analysis, moderate

market research and

marketing communication

Intellectual risks associated with the monitoring patent moderate

property patent situatuin and the rule situation

of patent disputes

Reliability risk of non-competitive implementation of the moderate

of suppliers or disrupted supplies control input

and contractors

Availability risk of disruption routine annual preventive low

of of production maintenance

production capacity capacity

Protecting the risk of emergency-life regularly conduct preventive low

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

Risk conected to infor- relationships betwen ITC common mutual moderate

mation and communi- services are not formally agreements

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 as-

sessment of financial risks are required. In 2010 the Company again followed the objective of achieving sta-

ble 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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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 insol-

vency 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 collec-

tion, 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 turn-

ing 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 inter-

est rate. The Company concluded an interest rate swap in 2010 thereby protecting a good 20% 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 Company has not decided for interest rate pro-

tection 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 imple-

mented 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 cur-

rent 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.

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In order to avoid insolvency the Company manages liquidity risk, and forms and implements a regular li-

quidity 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 informa-

tion 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 eco-

nomic 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.

FINANCIAL RISKS

Risk description 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,

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the stability of Group’s operations became exposed to higher risks. As a result, the Group devotes consider-

ably 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 insol-

vency 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 liquid-

ity. 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 insur-

ance 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

• 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 favour-

able 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 liquid-

ity 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 transac-

tion 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.

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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 Laško, d. d. are described in the financial part of the Annual Report on

pages 264 through 266, in Note 30.

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The current unenviable economic situation is dictating increasingly greater cost effective-ness, 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 repre-

sent 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

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 pre-

pared 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;

2.11Marketing activities

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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 produc-

tion. 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

the Jubilejnik jubilee beer.

1. Eliksir

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

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 conjunc-

tion 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 pur-

chase 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 commu-

nication 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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3. Bandidos

Following the introduction of the renewed Bandidos on the market in March, in May communication ac-

tivities 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 popula-

tion 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 me-

dia, 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 togeth-

er with sub-projects lasted the entire summer. The supporting portion of the campaign represented com-

munication 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-

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

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 web-

site www.gremovhribe.si was set-up to support web-based communications and adapted POS materials pre-

pared 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.

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Over 1000 active promotional campaigns in the form of “Scratch parties” were carried out in bars to sup-

port 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 prepara-

tions 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 supply-

ing 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

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

projects for 2011.

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

A competition was published for the preparation of a proposal regarding the positioning, name, packag-

ing 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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New packaging for Laško 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

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

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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 non-

alcoholic 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

( in hl ) Plans 2011 Sales 2010 Indeks 11/10

Beer 1,996,695 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

Syrups 60,311 61,538 98.0

Other alcoholic 18,349 8,137 225.5

Total 4,570,969 4,225,503 108.2

- 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

Total 4,570,969 4,225,503 108.2

2.12Plans for 2011 and the development strategy

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Sales of the products of Fructal, d .d., Ajdovščina have been considered in all plans with the aim of ensur-

ing 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 effective-

ness 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 im-

plemented 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

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

Plan 2011

in h

ecto

litr

es

Beer

Mineral water

Spring and natural waters

Flavored water

Other non-alcoholic

Syrups

Other alcoholic

Fruitjuice, nectars

( 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

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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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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 direc-tor 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 Man-

agement 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 Meet-

ing 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 contextu-

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

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 Man-

agement 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 suf-

fered for the entire scope of damage suffered is not yet known, also due to unconcluded judicial procedures.

2.13Events following the conclusion of the fiscal year

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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 Meet-

ing 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 defend-

ent 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, respon-

sible 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 resigna-

tion of the Management Board member at its next session.


The mandate of the director of Jadranska pivovara – Split d. d. expired on 31 January 2011. Zlatko Bebić

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

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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

Budapest.

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 pro-

duction 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.

2.14Events prior to the 2010 fiscal year

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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., Mes-

tinje, 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

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

2005

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

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., Ljublja-

na, from Slovenska Odškodninska Družba, d. d., Ljubljana, to Pivovarno Laško, d. d. After the aforemen-

tioned 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, rep-

resenting a 94.09 % share of the target company.

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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

of Pivovarna Laško, d. d.

1952

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

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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 Com-

pany 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 organ-

ized at the beginning of the year for workers who had retired in the previous year. A trip for the employees

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

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

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

employee educational level.

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 Com-

pany 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 gradu-

ally 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.

3.1Concern and responsible relationship towards employees

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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. Em-

ployment 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

Leto 2008 v % Leto 2009 v % Leto 2010 v %

Management of the company 12 3.7 12 3.7 11 3.5

Production and technical sector 194 59.9 189 58.9 183 57.5

Commercial sector 73 22.5 75 23.4 81 25.5

Sektor financ, računov. in kontrolinga 19 5.9 18 5.6 19 6.0

General sector 26 8.0 27 8.4 24 7.5

Total 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 conse-

quently, 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

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

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 pro-

longation 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.

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EMPLOYEES BY AGE GROUP AS AT 31 DECEMBER 2010

Ž M Skupaj v %

Age from 19 to 25 years 2 3 5 1.6


Age from 31 to 35 years 14 16 30 9.4

Age from 36 to 40 years 19 33 52 16.4

Age from 41 to 45 years 37 58 95 29.9

Age from 46 to 50 years 24 44 68 21.4

Age from 51 to 55 years 18 40 58 18.2


Total 117 201 318 100.0

Age tree as at 31 December 2010

13

14

11 11 1112

1110 10

9 9 98 8 8

6 65 5 5

4 4

2 2 2 2 2 21 1 1

1 1 1 1 1 12 22 2 2

3 3 3

3

34 4 4 4

1

8

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7

8

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in y

ears

6157 58 5952 54 55 5647 48 49 5142 44 45 4637 38 39 4132 34 35 3633 43 53age 262524232221 27 28 29 31

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

Women:117 employees or 36,8 %average age is43 years, 4 months, 13 days.

Total:321 employed, average age isof our employees is 44 years, 2 months, 11 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 100.0 100.0 100.0

The ratio of male and female employees has not essentially changed in recent years with men comprising

approximately two thirds of the workforce.

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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 Com-

pany 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, en-

ergy, 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 at-

tending 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 employ-

ees 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

training on the job.

Company objectives are still focused on providing opportunities for the training of employees for the pur-

pose 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-

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

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EDUCATIONAL STRUCTURE OF THE EMPLOYEES OF PIVOVARNA LAŠKO

AS AT 31 DECEMBER 2010

Year 2008 share in % Year 2009 share in % Year 2010 share in %

Master 3 0.9 5 1.6 7 2.2

University 47 14.5 45 14.0 52 16.4

College 33 10.2 41 12.8 41 12.9

High school 73 22.5 62 19.3 60 18.9

Skilled 84 25.9 86 26.8 82 25.8

Semiskilled 31 9.6 29 9.0 29 9.1

Unskilled 53 16.4 53 16.5 47 14.8

Total 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-

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

of the retirement service of 37 years and 3 months. At the end of 2010 the new Pension and Disability Insur-

ance Act was adopted; however it still has not gone into effect.

3.1.6 EMPLOYMENT OF DISABLED PERSONS

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 rep-

resents 8.8% of the total number of employees. In accordance with the Vocational Rehabilitation and Em-

ployment 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 dis-

ability. 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.

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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 sup-

plementary 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 Com-

pany, by employing agency workers and students.

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 an-

nual 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

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

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.

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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 follow-

ing 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

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

3.1.11 OCCUPATIONAL HEALTH AND SAFETY

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

• safety 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 sys-

tem and internal transport.

• Measurements of microclimatic conditions (summer and winter) were carried out at all production work-

stations.

• inspection of hand-held fire extinguishers and inspection of hydrants, including measurements

• training 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.

• Periodic 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 find-

ings and recommendations of the occupational health specialist doctor were taken into account when

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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).

• All 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 oc-

cupational safety measures. An inspection was also carried out by the Slovenian Nuclear Safety Administra-

tion. Decisions for elimination were issued for the deficiencies discovered during the inspections. Deficien-

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

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1960

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In 2010 Pivovarna Laško, d. d. systematically established two-way communications be-tween the companies of the Group and their internal and external environments. The Pivo-varna 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, ac-

curate 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 share-

holders, 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

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

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.

3.2Communication

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3.2.4 COMMUNICATIONS WITH EMPLOYEES

Internal communications are one of the most important techniques which if suitably implemented en-

sures 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, bul-

letin 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.

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

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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. Pivo-

varna 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-

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

The significance given to awareness of social responsibility is also reflected by donations for predominant-

ly humanitarian projects, non-profit activities, support of the development of smaller clubs and associations

in the local environment.

3.3Responsible attitude towards the social environment

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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 unex-

pectedly 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

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

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

sions and wastes are introduced in technological procedures;

• the Company uses the method of preventing negative impacts on the environment from the initial phase

in development and investment activities;

• production and products are planned so as to minimize the negative impacts on the environment;

• through education and training the Company raises the environmental awareness of its employees to

responsibly in their regular work;

• activities for measuring and monitoring effects on the environment caused by its operations are planned

and carried out on a regular basis;

• environmental and energy indicators are precisely defined, grounded and measurable enabling the regu-

lar review of the success of operations;

• activities for efficient environmental management are planned and carried out on a regular basis;

• environmental awareness is encouraged and promoted in suppliers, outsourcers and other business

partners.

3.4Environmental protection

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Pivovarna Laško due to the challenges connected with the internal restructure and consolidation of op-

erations 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 objec-

tives; 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 develop-

ment 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 sig-

nificantly 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 waste-

water 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 fos-

sil 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

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 stor-

age of dangerous wastes. The environmental IRSOP inspectors issued four warnings, the causes of which

were remedied within 3 months.

3.4.2 ECOLOGY IN BEER PRODUCTION

In April the Company commenced with the practical introduction of adding fresh brewer’s yeast to tech-

nological 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.

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CIP treatment equipment in beer production and bottling represents a significant share in polluting tech-

nological 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

Beer sales

Water sales

Bee

r sa

les

in th

ousa

nd h

l

0

200

400

600

800

1,000

1,200

2008 2009 2010

0

200

400

600

800W

ater

Con

sum

ptio

n in

thou

sand

m³

(in hl) 2008 2009 2010

Water consumption per 1 hl of sold beer 5.8462 6.2666 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 col-

lected 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 diaton-

ic 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.

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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 steri-

lization 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 bot-

tling 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 clean-

ing 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 tech-

nological 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 distribu-

tion 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.

The municipality was again hit with floods in September. The water supply to the population was per-

formed 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 wa-

ter distribution system units a supply through the prompt switching off of certain connections and establish-

ment 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-

ried out the following major works:

• Borovo – replacement of 200 m of pipe-work;

• under the Laško Castle towards Urankar – replacement of 300 m of pipe-work;

• Šentrupert, at the construction site of the new school – replacement of 200 m of pipe-work;

• Polana – replacement of the pipework between the collection basin and water storage facility;

• arrangement of the Belovo pumping station;

• partial renovation of the mineshaft;

• continuation of geodetic surveys of the Rimske Toplice and Zidani Most aquifers;

• supervision over the construction of the Padežnik water distribution system and installation of connec-

tions;

• replacement of 250 m of the pipe-work at the location Na pristavi towards Trkulja;

• participation in the construction of the Vodiška-Škofca water distribution system;

• partial renovation of the Voluš–Vrh pipe-work, at the Mišnica stream;

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• replacement of a 150 m portion of the pipe-work at Šmohor;

• arrangement of the collecting pipe-work at the Štenge dam;

• commencement 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 purifica-

tion – 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.

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

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

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

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, con-

stantly 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.

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OVERVIEW OF INVESTMENTS INTO ECOLOGY

( in EUR ) 2008 2009 2010

Investments in water resources 630,001 593,786 488,218

Water resource Lurd 762 - -

Water resources water supply - Rudnik 23,593 - -

Indemnities water supply 1,000 1,125 999

Water supply maintenance 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

Environmental duty - waste waters 48,916 * 37,608

Indemnity to fishing club 1,500 - -

Waste - environmental duty 161,988 417,813 233,720

Expenses for environmental

protection - waste packaging 136,341 394,366 195,140

Environmental duty for waste packaging 8,393 9,336 6,643

Environmental duty for electrical

and electronical equipment - abroad 49 37 66

Easte diatomaceous earth treatment 17,205 14,074 31,871

Total 1,776,854 1,715,830 1,424,998

*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 (sem-

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

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

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

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

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

fulfilment of legal standards, reduction of employee health risks and improvement of the Company’s public

image.

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131

1964

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4.F I N A N C I A L R E P O R T

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4.1.1. STATEMENT OF THE FINANCIAL POSITION OF PIVOVARNA LAŠKO, D. D.


( in EUR ) Expl. note 2010 2009

ASSETS

Non-current assets 294,360,182 398,843,120

Intangible fixed assets 1 1,635,341 1,865,009

Property, plant and equipment 2 53,673,619 57,099,819

Investment properties 3 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

Long-term loans 5 16,296 30,307

Long-term operating receivables 6 573,467 670,316

Long-term deferred tax receivables 7,17.B 14,343,155 13,355,542

Current assets 121,469,248 27,948,020

Non-current assets held for sale 8 39,545,865 1,083,307

Inventories 9 8,877,962 11,123,139

Short-term operating receivables 10.A 13,999,334 15,051,078

Available-for sale financial assets 11 56,698,549 -

Short-term loans 12 2,250,738 561,213

Cash in banks, cheques and cash in hand 13 96,800 129,283

Deferred costs and accrued revenues 14 27,850 942

Total current assets 121,497,098 27,948,962

TOTAL ASSETS 415,857,280 426,792,082

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

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4.1.1. STATEMENT OF THE FINANCIAL POSITION OF PIVOVARNA LAŠKO, D. D.


( c o n t i n u e d )


EQUITY 124,168,015 129,302,643

Majority capital 15 124,168,015 129,302,643

Share capital 36,503,305 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

Non-current reservations 16 2,450,385 4,388,271

Non-current employee liabilities 16.A 1,105,422 1,456,443

Non-current reservations 16.B 1,344,963 2,931,828

Non-current liabilities 17 46,122,235 54,263,786

Non-current financial liabilities 17.A 46,122,235 54,263,786

Current liabilities 18 236,977,903 232,451,652

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 19 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.

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4.1.2 INCOME STATEMENT OF PIVOVARNA LAŠKO, D. D. FOR THE PERIOD

1 JANUARY – 31 DECEMBER 2010


Net sales revenuse 20 91,287,653 99,662,537

Changes in inventories of products and work in progress 20 (1,352,664) 1,337,663

Other operating revenues 20 1,059,263 961,266

Costs of goods, material and services 20 (60,428,686) (63,040,020)

Employee benefit expenses 20 (10,270,645) (10,666,177)

Depreciation of intangible and tangible fixed assets 20 (6,996,074) (6,908,571)

Non-current reservations 20 (110,235) (261,542)

Write-downs of value 20 (194,499) (2,549,990)

Other operating revenues 20 (1,770,318) (1,637,055)

OPERATING PROFIT 11,223,795 16,898,111

Financial revenues 21 4,332,001 4,090,990

Financial expenditures 21 (22,945,211) (73,650,021)

PROFIT BEFORE TAXATION (7,389,415) (52,660,920)

Tax 22 1,097,155 7,687,102

NET PROFIT/LOSS OF ACCOUNTING PERIOD (6,292,260) (44,973,818)

Net profit/loss per share 26 (0.7193) (5.1412)

Adjusted net profit/loss per share 26 (0.7193) (5.1412)


4.1.3 STATEMENT OF COMPREHENSIVE INCOME OF PIVOVARNA LAŠKO, D. D.

FOR THE PERIOD 1 January – 31 December 2010


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 27 (5,134,628) (46,410,593)

Total comprehensive income per share 27 (0.5870) (5.3055)

Diluted total comprehensive income per share 27 (0.5870) (5.3055)


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4.1.

4 S

TAT

EM

EN

T O

F C

HA

NG

ES

IN E

QU

ITY

OF

PIV

OV

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NA

LA

ŠKO

, D. D

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PE

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D 1

JA

NU

AR

Y –

31

DE

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20

10

Net

Shar

e C

apita

l Le

gal

Res

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s fo

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Oth

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To

tal p

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pr

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rom

N

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Rev

alua

tion

TO

TAL

( in

EU

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capi

tal

rese

rves

re

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trea

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sha

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rves

re

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prev

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yea

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profi

t su

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s C

AP

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1 Ja

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36,5

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85,5

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3,65

0,33

1

1,21

1,46

0

(20,

498)

-

4,84

1,29

3

- -

2,39

6,59

8

129,

302,

643

Tran

sact

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with

ow

ners

Oth

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- -

- -

8,43

0

(8,4

30)

- -

- -

-

Tran

sact

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with

ow

ners

-

- -

- 8,

430

(8

,430

) -

- -

- -

Cha

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in c

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sive

inco

me

Net

pro

fit o

f the

yea

r -

- -

- -

- -

- (6

,292

,260

) -

(6,2

92,2

60)

Rev

alua

tion

surp

lus

of fi

nanc

ial i

nves

tmen

ts

- -

- -

- -

- -

- 1,

267,

174

1,

267,

174

Rel

ated

taxe

s w

ith it

ems

com

preh

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ve in

com

e -

- -

- -

- -

- -

(109

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) (1

09,5

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Cha

nges

in c

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sive

inco

me

- -

- -

- -

- -

(6,2

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1,15

7,63

2

(5,1

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in c

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ss

- (5

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) -

- -

(542

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) (5

42,4

66)

- 6,

292,

260

-

-

Cre

atio

n re

serv

es fo

r ow

n sh

ares

-

- -

(550

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) -

550,

896

-

- -

- -

Cha

nges

in c

apita

l -

(5,7

49,7

94)

- (5

50,8

96)

- 8,

430

(5

42,4

66)

- 6,

292,

260

-

-

31 D

ecem

ber

2010

36

,503

,305

79

,811

,653

3,

650,

331

66

0,56

4

(12,

068)

-

4,29

8,82

7

- -

3,55

4,23

0

124,

168,

015

The

not

es o

n pa

ges

139

thro

ugh

192

are

a co

nstit

uent

par

t of t

he fi

nanc

ial s

tate

men

ts o

f Piv

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na L

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, d. d

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PIV

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20

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137

4.1.

5 S

TAT

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T O

F C

HA

NG

ES

IN E

QU

ITY

OF

PIV

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LA

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PE

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31

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20

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s fo

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pr

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( in

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s sh

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re

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pr

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surp

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CA

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1 Ja

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36,5

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102,

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25

,606

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24

6,61

7

(246

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) 8,

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34

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(1

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3,83

3,37

3

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742

Tran

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with

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Dis

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- -

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141,

494

-

141,

494

-

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141,

494

Tran

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with

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-

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- 14

1,49

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- 14

1,49

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- 14

1,49

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Net

pro

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f the

yea

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- -

- -

- -

- (4

4,97

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- (4

4,97

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Rev

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tion

surp

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of fi

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- -

- -

- -

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- (1

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Rel

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65,7

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65,7

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Cha

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- -

- -

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(44,

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(1

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) (4

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Cha

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by

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(1,6

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- (6

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- 44

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Cre

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-

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1,19

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-

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226,

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-

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(226

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(226

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- -

(226

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Cha

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(16,

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6,46

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964,

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84

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) (2

9,85

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9)

1,69

4,02

5

44,9

73,8

18

- -

31 D

ecem

ber

2009

36

,503

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85

,561

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3,

650,

331

1,

211,

460

(2

0,49

8)

- 4,

841,

293

-

- 2,

396,

598

12

9,30

2,64

3

The

not

es o

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139

thro

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192

are

a co

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par

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nanc

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tate

men

ts o

f Piv

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4.1.6 CASH FLOW STATEMENT OF PIVOVARNA LAŠKO, D. D.

FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010


CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 24 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 - (3,060,468)

Purchase of property, plant and equipment 2 (4,223,786) (797,477)

Purchase of intandible assets 1 (1,692) (910,220)

Purchase/sale of available for sale financial assets 4.B,11 (3,403,078) (11,426,792)

Interest received 21 443,575 332,487

Dividends and capital gains 21 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 21 (13,042,511) (12,549,810)

Purchase of treasury shares 15 - 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 13 129,283 90,103

Cash and cash equivalents at the end of the year 13 96,803 129,283


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4.1.7 COVERING BALANCE SHEET LOSSES OF THE FISCAL YEAR

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

( in EUR ) 2010 2009

Net loss of accounting period (6,292,260) (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

GENERAL INFORMATION

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

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

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 Slov-

enia 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 accord-

ance 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 require-

ment 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

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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 man-

datory financial statements should not rely exclusively on the financial statements and should prior to mak-

ing 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:

• IFRS 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);

• IFRS 3 (amended) “Business combinations”, adopted by the EU on 3 June 2009 (effective for annual

periods beginning on or after 1 July 2009);

• IFRS 1 (amended) “First-time Adoption of international financial reporting standards”, additional excep-

tions 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);

• IFRS 2 (amended) “Share-based payment”- group cash-settled share-based payment transactions , adopt-

ed by the EU on 23 March 2010 (effective for annual periods beginning on or after 1 January 2010);

• IAS 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);

• amendments 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);

• Amendments 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);

• IFRS 12 (amended) “Business Combinations”, adopted by the EU on 25.03.09 (effective for annual peri-

ods beginning on or after 30.03.09);

• IFRIC 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);

• IFRIC 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);

• IFRIC 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.

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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:

• Amendments to IAS 24 “Related party disclosures” - Simplifying the disclosure requirements for govern-

ment-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);

• amendments 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);

• amendment to IFRS 1 “First-time Adoption of international financial reporting standards”- Limited ex-

emption from comparative IFRS 7 disclosures for first-time adopters, adopted by the EU on 30 June 2010


• amendments 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);

• IFRIC 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:

• IFRS 9 “Financial instruments” (effective for annual periods beginning on or after 1 January 2013);

• amendments to IFRS 7 “Financial Instruments: IFRS 9 Disclosures”- Transfers of financial assets (effec-

tive for annual periods beginning on or after 1 July 2011);


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.

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Other revenues realised are recognised on the following basis:

• Interest 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;

• revenues from dividends are recognised when the Company becomes entitled to receive dividend pay-

ments.

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 rec-

ognised in the income statement.

3. 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 circum-

stances 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 dif-

ferences 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.

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5. Intangible fixed assets

Intangible fixed assets comprise investments in the acquisition of patents, licenses, brand names, good-

will, 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.

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.

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

10 years.

6. Tangible fixed assets

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-

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.

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.

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.

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Costs of financial liabilities for financing investments into tangible fixed assets are capitalized. Subse-

quent 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 oc-

cur. 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

need for revaluation is conducted each year.

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-for-

sale. 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 long-

term 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 Com-

pany did not possess any investments within the scope of this category in the current period.

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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 as-

sets 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 avail-

able 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 impair-

ments 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 im-

mediately recognised in profit and loss unless they are used as protection against risk.

9. Impairment of non-financial assets

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

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 asset’s

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.

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12. Operating receivables

At initial recognition, operating receivables are shown at fair value, later they are measured based on paid val-

ues 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.

15. Provisions for severance pay and jubilee awards

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. De-

ferred 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 em-

ployees, 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 ini-

tially recognised at fair value, and later measured according to realised payments using effective interest rates.

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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

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

defined in Article 247 of the Companies Act.

21. Dividends

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 Laško Pivovarna Group.

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NOTES TO THE NON-CONSOLIDATED FINANCIAL STATEMENTS


Year 2010 Licenses and IFA ( in EUR ) other IFAs in acquisition Total

COST OF PURCHASE

1 January 2010 2,786,904 571,229 3,358,133

Direct gains - 1,468 1,468

Transfer from investments in progress 567,658 (567,658) -

Transfer from fixed assets 224 - 224

31 December 2010 3,354,786 5,039 3,359,825

ACCUMULATED VALUE ADJUSTMENT

1 January 2010 1,493,124 - 1,493,124

Depreciation on the year 231,360 - 231,360

31 December 2010 1,724,484 - 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

Year 2009 Licenses and IFA ( in EUR ) other IFAs in acquisition Total

COST OF PURCHASE

1 January 2009 974,536 418,618 1,393,154

Direct gains - 159,786 159,786

Transfer from investments in progress 7,175 (7,175) -

Retraining 1,805,801 - 1,805,801

Disposals (608) - (608)

31 December 2009 2,786,904 571,229 3,358,133


1 January 2009 251,705 - 251,705

Depreciation on the year 186,660 - 186,660

Retraining 1,055,367 - 1,055,367

Disposals (608) - (608)

31 December 2009 1,493,124 - 1,493,124

CURRENT COST

31 December 2009 1,293,780 571,229 1,865,009

1 January 2009 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 insur-

ing short-term loans from banks, the Company pledged brands in the amount of EUR 50,000,000 consist-

ing of a portion of the assets of the Company and in accordance with accounting standards, own brands are

not disclosed in the financial statements.

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.

149

2. T

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31 D

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150

P

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9,91

3 23

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9,

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183,

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Dir

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-

- 29

9,82

6 -

- 2,

195,

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2,49

5,38

5

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- 1,

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889,

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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.


Year 2010 ( in EUR ) Properties Buildings Total

COST OF PURCHASE

1 January 2010 578,460 4,679,805 5,258,265

Transfer from tangible fixed assets 11,786 996,971 1,008,757

Transfer to assets held for sale - (2,943,324) (2,943,324)

31 December 2010 590,246 2,733,452 3,323,698


1 January 2010 - 194,497 194,497

Impairment - 368,721 368,721

Transfer from tangible fixed assets - 123,484 123,484

Transfer to assets held for sale - (240,612) (240,612)31 December 2010 - 446,090 446,090

CURRENT COST

31 December 2010 590,246 2,287,362 2,877,608

1 January 2010 578,460 4,485,308 5,063,768

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Year 2009 ( in EUR ) Properties Buildings Total

COST OF PURCHASE

1 January 2009 578,460 5,766,302 6,344,762

Retraining - (1,086,497) (1,086,497)

31 December 2009 578,460 4,679,805 5,258,265

NABRANI POPRAVEK VREDNOSTI

1. januar 2009 - 988,526 988,526

Impairment - 194,497 194,497

Retraining - (988,526) (988,526)

31 December 2009 - 194,497 194,497

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

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

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 implementa-

tion 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 short-

term loans from banks.

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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 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 7,428

220,756,637 263,163,162

Abroad:

Laško Grupa, d. o. o., Zagreb 100.000 % 2,709 -

RA&LA, d. o. o. Sarajevo 69.230 % 160,408 160,408

163,117 160,408

Total 220,919,754 263,323,570

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Information about the subsidiaries

Value Activity of the State of the Percent of total Net profit/lossCompany name company company participation 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 % 70,930,827 436,185

Delo Group, Ljubljana newspaper- Slovenija 80.83 % 19,796,225 (2,330,603)

publishing activity

Laško Grupa, d. o. o., Zagreb intermediate trade Hrvaška 100.00 % 2,709 -

Information about associates

Value Activity of the State of the Percent of total Net profit/lossCompany name company company participation 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 accord-

ing 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.

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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 Com-

pany 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 as-

sets available-for-sale.

Due to the financial insignificance of the companies Firma Del, d. o. o., Laško, and RA&LA, d. o. o., Sara-

jevo, 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

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

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

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

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 com-

pany 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:

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• the 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;

• the 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 Pivo-

varna 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


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

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

by excess financial investments and unnecessary property. A separate valuation was conducted for the invest-

ments 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 optimis-

tic 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 Com-

pany’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 invest-

ment disclosed in the ledger of Pivovarna Laško, d. d. by 78.79%.

1936

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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 pro-

cedure. 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


SHARES IN ASSOCIATED COMPANIES

Thermana, d. d., Laško 20.63 % - 1,594,000

Total - 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

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

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 - 48,892,029

Total 320,942 55,840,789

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Movement of assets available-for-sale

( in EUR ) 2010 2009

Balance as at 1st January 55,840,789 61,563,643

Changes in the year:

Transfer to long-term financial investment in associated companies - (3,837,454)

Revaluation 1,423,146 (1,885,400)

Transfer to long-term assets held for sale (56,724,195) -

Sales (218,798) -

Balance as at 31st December 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 Com-

pany 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

transferred to short-term assets are as follows: 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 EUR (5.49%), NLB funds in the amount of EUR

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 pur-

poses 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.

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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

Begining of the year - claims for deferred tax 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

Total 15,436,180 14,482,886

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

Fair value Liabilities to (financial ( in EUR ) employees assets) Other Total

RECEIVABLES FOR DEFFERED TAX

1 January 2009 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 - 77,117 - 77,117

31 December 2009 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

Change in the comprehensive

incomev vseobsegajočem donosu - (143,861) - (143,861)

31 December 2010 316,102 14,754,510 365,568 15,436,180

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 de-

ferred 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.

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( 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

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

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

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

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 opera-

tions was performed by the companies Ernest&Young, d. o. o., Ljubljana and Schonherr (Austria) in Novem-

ber 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 re-

view 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.

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b) Estimated value of the company Delo, d. d.


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 deci-

sions 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 com-

pany’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 as-

sessed. 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 oper-

ates was taken into consideration for assessing 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 and

reflected the company’s potential. Due to a decline in sales and non-fulfilment of the plan in 2010, the stra-

tegic 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 rev-

enues 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% ac-

cording 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 mar-

ket 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.

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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-for-

sale. 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 De-

cember 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 ration-

alization 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 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 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 sub-

mission 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.

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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.

Inventory surpluses and deficits

( 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

Short-term trade operating receivables:

on the domestic market 14,280,076 15,117,584

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) (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, rep-

resenting 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.

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Value adjustments of short-term operating receivables

( in EUR ) 2010 2009


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 col-

lected claims in the amount of EUR 163,089.

Maturities of trade receivables

( in EUR ) 2010 2009

TRADE RECEIVABLES

unmatured 12,174,153 12,265,405

up to 30 days 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


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.

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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

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

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 in-

vestments 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.

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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 -

12. Short–term loans

( in EUR ) 2010 2009

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

value adjustment was performed for the entire loan sum for 2010 given to Jadranski pivovari – Split, d. d. Fi-

nancial expenses arising from impairment of loans granted were disclosed in the amount of EUR 1,364,095

for loans exceeding the value of the surety. The value adjustment of short-term loans was implemented in

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

Change in Transfer to Debt position the initial New loans Repaiments Impairment Long term Debt position( in EUR ) 1/1/2010 state in year 2010 in year 2010 in 2010 passive accruals 31/12/2010

Subsidiaries

companies 5,149,262 5,149,262 3,228,000 - 1,364,025 1,863,975 -

Other

companies 9,849,613 9,299,613 - 300,000 - - 250,000

Total 14,998,875 14,448,875 3,228,000 300,000 1,364,025 1,863,975 250,000

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.

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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

14. Deferred costs and accrued revenues

( in EUR ) 2010 2009

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, re-

tained 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 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 im-

plemented 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. Pivo-

varna 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.

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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 in-

vestments 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:

Financial assets available-for-sale

( in EUR ) 2010 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 20.516 %

Total 100.000 %

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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

employee contributions in the amount of 16.1% for the surplus amount.

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;

• the 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;

• the 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

Benefits Tenure ( in EUR ) at retirement awards Total

1 January 2010 1,145,832 310,611 1,456,443

Increase - 110,235 110,235

Decrease (78,894) (29,059) (107,953)

Decrease (348,663) (4,640) (353,303)

31 December 2010 718,275 387,147 1,105,422

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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 por-

tion of the long-term accrued costs and deferred revenues in the amount of EUR 135,620 regards an exemp-

tion 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.).

Movement of long-term accrued costs and deferred revenues

Position Created Position( in EUR ) 1/1/2010 Eliminated in 2010 31/12/2010

Long term passive accruals

- the quota of disabled 92,230 - 43,390 135,620

Long term passive accruals

- 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 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

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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 long-

term 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



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

EUR 4,204,044 EUR.

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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

Fair value Fair value ( in EUR ) (properties, buildings) (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

Change in the balance sheet - (34,319) (34,319)

31 December 2010 1,092,511 514 1,093,025

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 6,646,439Short-term oparating liabilities to others:

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

Other short-term liabilities 358,117 368,283

Total 17,247,950 17,248,664

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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 paya-

bles. 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.

18. C. Short–term financial liabilities

( in EUR ) 2010 2009


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

Short term Debt position New loans part of Repaiments Debt position( in EUR ) 1/1/2010 in year 2010 long term loans in year 2010 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 - - - 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 - - 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

Total banks 186,397,171 60,150,822 27,601,737 98,823,058 175,326,672

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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.

19. Accrued costs and deferred revenues

( 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% owner-

ship 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 credi-

tor 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.

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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

comprises 97.5%, for sales of water 1.1% and for services 1.4%.

20. B. Analysis of revenues from sales by country

( in EUR ) 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 7,175

Total 1,059,263 961,266

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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

of marketing increased the most.

20. E. Costs by functional group

Production Cost of Year 2010 expenses of sold Expenses of general ( in EUR ) products and goods selling activities Total

Expenses of merchandise

sold - Horeca channel - 16,213,903 - 16,213,903

Expenses of materials and

mercdandise sold 23,125,737 379,615 298,779 23,804,131

Expenses of services 2,720,203 13,768,762 3,921,687 20,410,652

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

Revaluation operating

expenses at fixed assets 15,725 10,603 22,143 48,471


expenses at reverse assets - 135,895 10,132 146,027

Costs of reservations 58,233 29,278 22,724 110,235

Other expenses 340,310 50,434 1,379,575 1,770,319

Total 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.

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Expenses of merchandise

sold - Horeca channel - 17,759,586 - 17,759,586

Expenses of materials and

mercdandise sold 26,519,506 482,203 185,055 27,186,764


Depreciation 5,452,840 492,160 963,571 6,908,571



expenses at fixed assets 21 3,608 33,853 37,482


expenses at reverse assets - 10,020 2,502,488 2,512,508

Costs of reservations 110,135 50,425 100,982 261,542

Other expenses 464,432 123,004 1,049,619 1,637,055

Total 39,547,812 33,402,150 12,113,393 85,063,355

2o. F. Other operating expenses

( in EUR ) 2010 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

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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 (22,944,703) (73,647,810)

Financial expenditures from impairment and write-offs of investments (9,902,701) (61,100,211)

Financial expenditures from financial liabilities (13,042,002) (12,547,599)

Currency differences from financing (452) (1,502)

Negative currency differences (509) (2,211)

Positive currency differences 57 709

Net financial expenditures (18,613,210) (69,559,031)

Financial expenses exceeded financial revenues by EUR 18,613,209. Financial expenses arising from finan-

cial 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.

Based on value appraisals performed by a certified appraiser, the Company recognised the impairment

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 en-

tire amount of calculated interest in 2010 arising from the loan granted to Jadranska pivovara which increas-

es 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.

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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)

Tax, paid according to valid tax rate:

Revenue tax, calculated according to 20% tax rate (1,477,883) (11,058,793)

Correction of revenue to granted revenues tax level (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 Cor-

porate 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 contri-

butions, 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.

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23. Exchange rate differences

Exchange rate differences from operations and financing considered in the Income Statement are as fol-

lows:

( in EUR ) 2010 2009

Currency differences - in financing (453) (1,502)Total (453) (1,502)

24. Cash flow from operations


Operating profit of the period 20 11,223,795 16,898,109

Adjustments for:

Depreciation of property, plant and equipment 2.3 6,764,714 6,721,910

Depreciation of intangible fixed assets 1 231,360 186,660

Write-offs of non-current assets 520,027 -

Write-offs of current assets 146,027 2,526,368

Net movement in reservations 16 (1,937,886) -

5,724,242 9,434,938

Changes of reverse capital

Inventories and non-current assets for sale 8.9 2,244,907 (1,351,057)

Operating and other receivables 6,10 975,658 (1,956,373)

Operating and other liabilities 18.19 (247,436) (762,557)

2,973,129 (4,069,987)

Cash made from operation 19,921,166 22,263,060

25. Profit/loss per share

( in EUR ) 2010 2009

Profit/loss majority owners (6,292,260) (44,973,818)

Number of all issued ordinary shares 8,747,652 8,747,652

Number of own shares 755 755

Weighed number of issued ordinary shares 8,746,897 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.

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26. Comprehensive income per share

( in EUR ) 2010 2009

Comprehensive income majority owners (5,134,628) (46,410,593)

Number of all issued ordinary shares 8,747,652 8,747,652

Number of own shares 755 755


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

customers. The Company 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 rep-

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

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 im-

proved 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 mar-

ket 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

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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 Interest Change in fin. Amount of interest Difference rate Decrease in expenditures( in EUR ) interest rate in % in interest protection interest interest

Actual financial expenditures

with respect to interest 12,816,239 5.40 - - 12,816,239 -

Expenditures in case of

interest rate increase by 1 % 15,189,617 6.40 2,373,378 - 15,189,617 2,373,378

Expenditures in case of i

nterest rate decrease by 1 % 10,442,861 4.40 (2,373,378) - 10,442,861 (2,373,378)


interest rate increase by 1,5 % 16,376,305 6.90 3,560,066 - 16,376,305 3,560,066


interest rate decrease by 1,5 % 9,256,173 3.90 (3,560,066) - 9,256,173 (3,560,066)

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

2,373,378 or EUR 3,560,066 respectively taking into consideration the protection of the interest rate risk for

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 transac-

tions 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 sub-

sidiaries is envisaged in the financial restructuring plan. In this way the parent company would partially

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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 posi-

tion 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 deriva-

tive financial instruments. The Company did not insure against fair value risks in 2010 therefore the risks

defined in the table below exist.

Fair value Difference- Difference- Difference- as at influence on the influence on the influence on liability( in EUR ) 31/12/2010 value of N-CI revaluation surplus for deferred tax

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. Pivo-

varna 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.

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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. Pivo-

varna 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.

Pivovarna Laško, d. d. together with the other (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 recon-

ciliation 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 272,000 191,373

Variable part (stimulation) 3,204 16,580

Benefits - 152,000

Total 275,204 359,953

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Fixed part Variable part ( in EUR ) of receipts (stimulation) Benefits Total

MANAGEMENT BOARD

Dušan Zorko 192,000 600 - 192,600

Gorazd Lukman 40,000 600 - 40,600

Robert Šega 40,000 2,004 - 42,004

Total 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 ap-

pointed 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

INDIVIDUAL CONTRACTS

Fixed part of receipts 1,104,839 889,048


Benefits - 159,508

Total 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

SUPERVISORY BOARD

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

Anton Turnšek 1,881 4,793

Boris Završnik - 4,388

Iztok Seničar - 1,937

Simon Zdolšek - 858

Total 23,207 22,740

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( 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 -

32. Transactions with related parties

32. A. Sales to associates

( in EUR ) 2010 2009

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

Total associated companies and

companies of the Group 51,494,355 55,597,863

Total 64,917,012 68,826,137

32. B. Purchases from associates

( in EUR ) 2010 2009

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 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 associ-

ates apply predominantly to purchases of merchandise from the Horeca distribution channel.

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Open items from sales/purchases from associates

( in EUR ) 2010 2009

Receivables from operating to subsidary companies

Radenska, d. d. Radenci 154,101 51,992

Vital Mestinje, d. o. o. 108 49

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 associated companies and other related companies 6,585,915 7,285,850

Total 10,491,458 9,278,633

Liabilities from operating to subsidary companies

Radenska, d. d. Radenci 417,378 379,807

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 associated companies and other related companies 633,748 895,761

Total 5,237,115 5,717,822

The Company carried out a complete revaluation adjustment of receivables in 2010 due from the company

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


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.

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32. D. Loans granted to associates

( in EUR ) 2010 2009

Companies of the Group

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 - -

Other related companies

Infond Holding, d. d., Maribor 1,699,613 1,699,613

Center naložbe, d. d., Maribor 5,900,000 5,900,000

Value adjustments of given loans (7,599,613) (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.

32. E. Financial revenues

( in EUR ) 2010 2009



Delo, d. d., Ljubljana - 59,906

Jadranska pivovara - Split, d. d. 415,575 107,474



Infond Holding, d. d., Maribor - 17,326

Center naložbe, d. d., Maribor - 114,103

Total other related companies - 131,429

Total 1,555,219 2,548,484

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32. F. Financial expenses

( in EUR ) 2010 2009



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 15,800,431Total 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

Total other related companies - 7,696,274

Total 10,589,136 53,195,539

32. D. Sureties granted to associates

( in EUR ) 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 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)



Birra Peja, a. d., Peć 2,000,000 2,000,000

Center naložbe, d. d., Maribor 3,625,692 3,625,692

Value adjustments of guarantee (3,625,692) (3,625,692)

Total other related companies 2,000,000 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.

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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 an-

nual 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 In-

ternational 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:

• the financial statements have been prepared under the assumption that Pivovarna Laško, d. d. is a going

concern;

• that appropriate accounting policies were consistently applied and that any changes thereof have been

disclosed;

• that 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


Gorazd Lukman


1950

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4.2.1 CONSOLIDATED STATEMENT OF THE FINANCIAL POSITION OF THE PIVOVARNA

LAŠKO GROUP AS AT 31 DECEMBER 2010


ASSETS

Non-current assets 265,643,825 564,998,357

Intangible fixed assets 1 66,016,523 133,038,904

Property, plant and equipment 2 153,632,750 226,947,462

Investment properties 3 4,656,484 7,398,396

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

Long-term loans 5 10,444,245 6,603,695

Long-term operating receivables 6 717,347 744,239

Long-term deferred tax receivables 7,18.C 28,933,731 20,340,743

Current assets 370,997,307 116,256,468

Non-current assets held for sale 8 286,684,408 12,874,507

Inventories 9 21,376,855 37,987,391

Short-term operating receivables 10.A 30,660,793 49,764,422

Short-term receivables for overpaid income tax 10.B 1,595,596 2,338,805

Available-for sale financial assets 12.A 24,554,570 -

Short-term loans 11 4,733,715 11,086,139

Derivatives 12.B - 1,213,547

Cash in banks, cheques and cash in hand 13 1,391,370 991,657

Deferred costs and accrued revenues 14 210,569 541,321

Total current assets 371,207,876 116,797,789

TOTAL ASSETS 636,851,701 681,796,146

4.2Audited Consolidated Financial Statements of the Pivovarna Laško Group for the 2010 Fiscal Year, in accordance with IFRS

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4.2.1 CONSOLIDATED STATEMENT OF THE FINANCIAL POSITION OF THE PIVOVARNA

LAŠKO GROUP AS AT 31 DECEMBER 2010

( c o n t i n u e d )


EQUITY 131,889,003 162,594,380

Minority capital 16 9,557,633 9,977,067

Majority capital 15 122,331,370 152,617,313

Share capital 36,503,305 36,503,305

Capital reserves 78,908,924 78,908,924

Profit reserves 3,650,330 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

Non-current reservations 17 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 liabilities 18 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

Current liabilities 19 411,167,663 373,324,159

Liabilities of Group for disposal 8 67,250,490 -

Current operating liabilities 19.A 30,636,500 44,823,086

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 20 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.

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4.2.2. CONSOLIDATED INCOME STATEMENT OF THE PIVOVARNA LAŠKO GROUP FOR

THE PERIOD 1 JANUARY – 31 DECEMBER 2010


Net sales revenuse 21 306,418,155 327,026,846

Changes in inventories of products and work in progress 21 (1,027,370) 1,316,584

Capitalized own products and their services 21 53,278 35,818

Other operating revenues 21 4,744,413 8,428,658

Costs of goods, material and services 21 (197,692,079) (200,785,891)

Employee benefit expenses 21 (59,939,251) (64,471,310)

Amortization and depreciation of

intangible and tangible fixed assets 21 (24,441,457) (28,000,182)

Non-current reservations (28,382,288) (39,862,267)

Write-downs of value 21 (2,287,988) (1,085,846)

Other operating revenues 21 (7,331,428) (7,832,328)

OPERATING PROFIT (9,886,015) (5,229,918)

Financial revenues 22 2,334,858 5,622,536

Financial expenditures 22 (27,407,847) (210,561,567)

Share of loss/profit in associated companies 23 4,112,331 10,271,857

PROFIT BEFORE TAXATION (30,846,673) (199,897,092)

Deferred tax 24 6,033,538 40,576,837

Tax 24 (1,005,670) (2,779,391)

NET PROFIT/LOSS OF ACCOUNTING PERIOD (25,818,805) (162,099,646)

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 27 (2.94) (18.03)

Adjusted net profit/loss per share 27 (2.94) (18.03)



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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)

Total comprehensive income of majority owners per share (3.48) (14.41)

Diluted total comprehensive income of majority owners per share (3.48) (14.41)



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- -

- -

(156

,950

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) 38

,423

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(6

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) (12

5,42

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6)

(5,0

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trib

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net

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ding

to m

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(23,

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(21

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- (1

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39,5

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77)

(93,

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156

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- -

- -

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ss

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- -

- -

- 1,

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- -

- -

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- -

1,19

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- (9

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14

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- 37

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9

- 37

2,37

9

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win

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r ow

n sh

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-

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(336

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- (3

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- -

- -

(336

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) -

(336

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)

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- -

- -

131,

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(2

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(87,

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(1

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- (2

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- (2

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(23,

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(21

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315,

370

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- (1

91,4

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- (1

91,4

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31 D

ecem

ber

2009

36

,503

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78

,908

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3,

650,

330

1,

363,

200

(1

,363

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3,65

0,33

0

- -

40,4

53,8

25

(6,8

99,0

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152,

617,

313

9,

977,

067

162

,594

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exp

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tory

not

es a

nd p

olic

ies

on p

ages

20

3 to

272

are

a c

onst

ituen

t par

t of t

he F

inan

cial

Sta

tem

ents

of P

ivov

arna

Laš

ko G

roup

.

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4.2.6 CONSOLIDATED STATEMENT OF CASH FLOWS OF THE PIVOVARNA LAŠKO GROUP

FOR THE PERIOD 1 JANUARY – 31 DECEMBER 2010


CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 25 54,712,234 60,689,273

Income tax paid (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 4C - (3,837,454)

Purchase of property, plant and equipment 2 (10,964,743) (11,663,967)

Profits/losses in disposals purchase of

property, plant and equipment 2 65,533 193,774

Purchase of intandible assets 1 (527,742) (1,929,325)

Purchase/sale of available for sale financial assets 4.B,11 1,067,114 (48,577,164)

Interest received 22 1,718,756 4,648,146

Dividends and capital gains 22 616,102 -

Net cash generated/used in investing activities (8,024,980) (61,165,990)

CASH FLOWS FROM FINANCING ACTIVITIES

Interest paid 22 (22,074,537) (22,972,652)

Purchase of treasury shares 15 52,587 (985,963)

Decrease of capital (132,705) -

Proceeds from borrowings 18.19 320,568,418 258,537,166

Repayments of borrowings 18.19 (342,902,172) (232,677,404)

Dividends paid to Company¢s sherholders 15 (75,112) (145,374)

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



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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 headquar-

ters 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 regis-

tered 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.

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

financial statements. The audit is limited to the audit of mandatory financial statements for general use

thereby fulfilling the legal requirement o fan audit of obligatory financial statements. The audit treats the

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 Report-

ing 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:

• IFRS 1 (amended) “First-Time Adoption of IFRS”, adopted by the EU on 25 November 2009 (effective for


• IFRS 3 (amended) “Business combinations”, adopted by the EU on 03.07.09 (effective for annual periods

beginning on or after 1 July 2009);

• IFRS 1 (amended) “First-time Adoption of international financial reporting standards”, additional excep-

tions 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);

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• IFRS 2 (amended) “Share-based payment”- group cash-settled share-based payment transactions , adopt-

ed by the EU on 23 March 2010 (effective for annual periods beginning on or after 1 January 2010);

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


• amendments 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);


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);

• IFRS 12 (amended) “Business Combinations”, adopted by the EU on 25.03.09 (effective for annual peri-

ods beginning on or after 30.03.09);

• IFRIC 15 “Agreements for construction of real estate”, adopted by the EU on 22 July 2009 (effective for


• IFRIC 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);

• IFRIC 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:

• Amendments to IAS 24 “Related party disclosures” - Simplifying the disclosure requirements for govern-

ment-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);

• amendments 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);

• amendment to IFRS 1 “First-time Adoption of international financial reporting standards”- Limited ex-

emption from comparative IFRS 7 disclosures for first-time adopters, adopted by the EU on 30 June 2010


• amendments 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);

• IFRIC 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).

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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:

• IFRS 9 “Financial instruments” (effective for annual periods beginning on or after 1 January 2013);

• amendments 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);


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);

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

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

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

value is reflected in consolidation as impairment of trademarks and goodwill, which was generated at the

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. Prof-

its and losses of minority holders are disclosed in the Group’s income statement.

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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 Net profit/loss Activity of the Percent of total of year 2010Company name company State participation equity in EUR in EUR

SUBSIDARIES COMPANIES

Vital Mestinje, d. o. o. production of beverages Slovenija 96.920 % 3,357,788 (81,667)

Radenska, d. d., Radenci production of beverages Slovenija 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)

RA&LA, d. o. o., Sarajevo wholesale BiH 69.230 % 124,063 (5,207)

Group Union Ljubljana production of beer

and beverages Slovenija 97.892 % 70,930,827 436,185

Group Delo newspaper-publishing

activity Slovenija 80.834 % 19,796,225 (2,330,603)

Laško Grupa, d. o. o., Zagreb intermediate trade Hrvaška 100.000 % 2,709 -

Pivovarna Laško, d. d., Trubarjeva 28, Laško, draws up the consolidated annual report for the parent com-

pany and for subsidiaries in Pivovarna Laško Group. Due to their material irrelevance, the following com-

panies are not included in the consolidation: Del, d. o. o., Laško, RA&LA, d. o. o., Sarajevo and Laško Grupa,

d. o. o., Zagreb.

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:

• Interest 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

• Revenues 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 rec-

ognised in the income statement.

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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 circum-

stances 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 compa-

nies 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 ac-

cordance with IAS 28 from the date it became an associated company. According to the equity method a fi-

nancial 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.

Upon the acquisition of a financial investment, the associated company calculates each difference between

the costs of the financial investment and the investor’s share in the net fair values of the indentifiable assets,

debts and contingency liabilities in accordance with IFRS 3 – Business mergers.

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 val-

ue 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.

Value Net profit/loss Activity of the Percent of total of year 2010Company name company State participation equity in EUR 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

packaging waste Slovenija 38.960 % 1,166,620 (771,740)

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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 com-

parison 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 func-

tional and presentation currency of the controlling company (Pivovarna Laško, d. d.).

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 dif-

ferences 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 re-

porting 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.


Intangible fixed assets comprise investments in the acquisition of patents, licenses, brand names, good-

will, 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.

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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 meas-

ured 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 ap-

praisal 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.

The useful period for other intangible assets ranges from 3 to 10 years.

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

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-for-

sale. 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. The Group did

not possess any investments within the scope of this category in the current period.

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 long-

term 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.

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c) Held-to-maturity investments

Investments with fixed maturities which the Management Board of the Company intends to retain to ma-

turity 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 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 impair-

ments shown in the income statement cannot be performed for capital instruments.

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. Revalua-

tion 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 ac-

counted 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 inven-

tory are carried at cost less any amortisation and impairment losses.

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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. Subse-

quent 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.


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

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. As-

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 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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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.


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

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 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 pen-

sion 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.

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20. Deferred taxes

Deferred taxes are shown in their entirety while observing liability methods based on temporary differ-

ences between taxes associated with assets and liabilities and disclosed tax amounts in the financial state-

ments. 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 dis-

closed 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 Group’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.

22. 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.

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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214

25. Dividends

Until approved by the General Meeting of Shareholders, foreseen dividends are treated as retained earn-

ings.


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.

The tax base is decreased for recognized tax relief and for covering a loss brought forward.

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 invest-

ments and provisions. As this regards an assessment, there is some uncertainty regarding the attainment of

specific assumptions used at valuation.

PIV

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215

EX

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31 D

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2009

98

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PIV

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217

All intangible assets are measured according to the cost model. The brand names and goodwill items rep-

resent 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 Com-

pany 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

3,524,890.

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

standards, own brands are not disclosed in the financial statements.

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218

2. T

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P

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Cap

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Year

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( i

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Pro

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To

tal

CO

ST O

F P

UR

CH

ASE

31 D

ecem

ber

2009

52

,785

,951

16

6,84

5,14

6 40

2,88

8,48

4 54

,131

,632

22

,207

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(11,

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sfer

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31 D

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-

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- -

- 5,

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- (3

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-

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31 D

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2010

38

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31 D

ecem

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2008

43

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17

3,73

5,06

6 40

5,91

5,98

8 62

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8,27

8,69

3

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4,59

7 6,

229

17,7

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9 30

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sfer

to in

tang

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fixe

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sets

-

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Fr. Z

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lidat

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(607

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sfer

to in

vest

men

t pro

pert

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- (4

4,70

5)

- -

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(44,

705)

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alua

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-

(16,

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550)

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- 47

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098,

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sfer

from

inve

stm

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in p

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5,17

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alua

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83

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of im

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men

t 1,

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04

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7,11

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3

Tran

sfer

to…

2,

738,

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1,80

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Dis

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31 D

ecem

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2009

52

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6,84

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6 40

2,88

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103,

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31 D

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2008

-

80,3

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345,

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9

Cur

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s

- 94

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ear

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-

- (1

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inat

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g. fr

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lidat

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- -

- (6

96,6

38)

- -

(696

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sfer

to in

vest

men

t pro

pert

ies

- (2

7,02

6)

- -

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(27,

026)

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alua

tions

-

(16,

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221)

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- (1

6,81

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rain

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- -

- 47

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9 -

- 47

3,67

9

1 Ja

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09

- 63

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2 43

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4

Dep

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year

-

4,78

3,95

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399,

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2 (3

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545,

641

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(1,3

85,0

01)

Rev

alua

tions

-

(181

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) -

133,

375

- -

(47,

683)

Tran

sfer

to…

-

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807,

133

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807,

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Dis

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31 D

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2009

-

69,0

97,3

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349,

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62

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2009

52

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6,94

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4,59

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lidat

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- (5

44)

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(544

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sfer

to in

vest

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t pro

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- (1

7,67

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- -

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(17,

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09

43,7

29,5

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6,99

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0

PIV

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NA

LA

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222

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 revalu-

ation 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 pro-

cedure. 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.


Year 2010

( in EUR ) Properties Buildings Total

COST OF PURCHASE

1 January 2010 1,158,911 6,943,312 8,102,223

Revalutation (79,717) (268,385) (348,102)

Transfer from property, plant and equipment 11,786 996,971 1,008,757

Transfer to current assets for sale - (2,943,324) (2,943,324)

Decrease in value - (109,465) (109,465)

Transfer to non-current assets for sale - FRUCTAL - (44,705) (44,705)

Transfer to non-current assets for sale - DELO - (80,159) (80,159)

31 December 2010 1,090,980 4,494,245 5,585,225


1 January 2010 - 703,827 703,827

Depreciation - 7,217 7,217

Impairment - 368,721 368,721

Disposals - (5,388) (5,388)

Transfer from property, plant and equipment - 123,484 123,484

Transfer to current assets for sale - (240,612) (240,612)

Transfer to non-current assets for sale - FRUCTAL - (27,026) (27,026)

Transfer to non-current assets for sale - DELO - (1,482) (1,482)

31 December 2010 - 928,741 928,741

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

PIV

OV

AR

NA

LA

ŠK

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.D.

AN

NU

AL

RE

PO

RT

20

10

4

.FIN

AN

CIA

L R

EP

OR

T /

Piv

ov

ar

na

La

šk

o G

ro

up

223

Year 2009

( in EUR ) Properties Buildings Total

COST OF PURCHASE

31 December 2008 6,161,601 11,625,984 17,787,585

Revalutation (1,310,126) (1,359,492) (2,669,618)

Currency differences - 44,705 44,705

1 January 2009 4,851,475 10,311,197 15,162,672

Revalutation (14,244) (1,049,966) (1,064,210)

Retraining - (1,068,930) (1,068,930)

Decrease in value (3,678,321) (1,248,988) (4,927,309)

31 December 2009 1,158,910 6,943,313 8,102,223


31 December 2008 - 4,294,637 4,294,637

Revalutation - (2,669,506) (2,669,506)

Currency differences - 27,026 27,026

1 January 2009 - 1,652,157 1,652,157

Depreciation - 223,183 223,183

Retraining - (988,526) (988,526)

Decrease of value adjustment - (182,987) (182,987)

31 December 2009 - 703,827 703,827

CURRENT COST

31 December 2009 1,158,910 6,239,486 7,398,396

1 January 2009 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 impair-

ments. 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 prop-

erty 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 Decem-

ber 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 implementa-

tion 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.

PIV

OV

AR

NA

LA

ŠK

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AN

NU

AL

RE

PO

RT

20

10

4

. F

INA

NC

IAL

RE

PO

RT

/ P

ivo

va

rn

a L

aš

ko

Gr

ou

p

224

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


SHARES IN COMPANIES OF THE GROUP

In Slovenia:

Firma Del, d. o. o., Laško 100 % 7,427 7,427

Radenska, d. o. o., Zagreb 100 % 4,907 4,907

Radenska, d. o. o., Beograd 100 % 250 250

12,584 12,584

Abroad:

Laško Grupa, d. o. o., Zagreb 100 % 2,707 -

RA&LA, d. o. o., Sarajevo 100 % 232,241 232,241

Eurofruit Sarajevo, d. o. o. 100 % - 14,093

234,948 246,334

Transfer to current assets for sale - FRUCTAL (40,384) -

(40,384) -

Total 207,148 258,918

In accordance with IAS 27 the Company valuates long-term financial investments in subsidiaries accord-

ing to the cost model.

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 Com-

pany 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


Thermana, d. d., Laško 20.630 % - 1,594,000

Poslovni sistem Mercator, d. d., Ljubljana 24.340 % 132,934,216 134,612,076

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 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.

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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 invest-

ment 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 opera-

tions had been observed in the valuation. Thermana also acquired additional loans in 2010 which will have

a negative effect on cash flows in future years. Radenska, d. d. generated a loss of EUR 1,695,168 in 2010.

The Group 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 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 com-

pany Birra Peja, Sh. a., Peć for financial reporting purposes equalled zero.

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The most important elements and findings in the valuation of the company Birra Peja, Sh. a. are given in

continuation:

• The subject of the valuation was the minority ownership stake in the company (39.55%) with the proper-

ties of a majority stake because Pivovarna Union, d. d. via its management in the company had a signifi-

cant influence on the adoption of decisions by management bodies of the company and on the design of

strategies and business decisions (investments, indebtedness, etc.).

• The 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).

• The 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 pay-

ment 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.

• The 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.

• The required rate of return for equity capital ranges between 14.3 and 18.4%.

• The 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.

• The required rate of return for total (equity + debt) capital ranges between 12.5 and 16%.

• The 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.

• The 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.

• Operating 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.

• The EBIT margin will grow from 17% in 2009 to 9.6% in 2015 (7.5% according to the pessimistic sce-

nario). 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.

• The 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.

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• The 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 (man-

agement of the company, distribution of Pivovarna Union beverages, etc.) and has the option of purchas-

ing a majority share.

• The appraisers assessed that potential investors were predominantly strategic investors (especially in cur-

rent 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 (577,032) -

Total 718,449 30,829,924

Long-term financial assets are defined as investments available-for-sale. For investments whose fair values

can be reliably measured, the fair value of profits and losses are directly reflected in equity capital.

Investments in the amount of EUR 82,107 are shown among long-term financial investments available-

for-sale as at 31 December 2011 carried at fair value.

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 ) 2010 2009

Balance as at 1st January 30,829,924 197,281,029Changes in the year:

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 (26,896,371) (18,998,291)

Transfer to non-current assets for sale 31.12.2010 (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 fi-

nancial 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

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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 Goren-

jska, 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 invest-

ments 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

the calculation of the final value. The appraisers assessed that the market share of the minority shareholder

(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:

• The 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 manage-

ment as well as to impact the formulation of strategy and business decisions (on investments, borrowing

and so on).

• From 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 own-

ers through operations or through liquidation of the company.

• In 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.

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• Based 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:

• they are not traded;

• few transactions on the grey market;

• the majority shareholder holds over 75% of the capital whereas the minority share (5.74%) cannot

be modified by the statute;

• an 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)

has been expressed for the exchange (purchase) of the minority share which till now has only

been of an informative nature;

• only a limited number of financial investors with free funds in Slovenia and a limited interest of

foreign financial investors exist for the purchase of the minority share;

• therefore, 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 transac-

tions regarding majority stakes and 15% for comparable transactions with minority stakes.

• The appraisers used the method of comparable transactions for majority stakes and also the 20% dis-

count 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

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The Group discloses loans to Pivovarna Union, d. d. and the company Birra Peja, Sh. a., Peć among long-

term 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


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.

Fair value Liabilities to (financial ( in EUR ) Reservations employees assets) Other Total

RECEIVABLES FOR

DEFFERED TAX

1 January 2009 195,388 1,377,385 7,696,027 2,749,627 12,018,427

Change in the profit

and loss statement (79,399) (71,426) 34,822,646 (1,582,676) 33,089,145

Changes in

comprehensive income - - (624,647) - (624,647)

31 December 2009 115,989 1,305,959 41,894,026 1,166,951 44,482,925

Change in the profit

and loss statement 12,045 (138,092) 2,053,962 328,281 2,256,196

Changes in

comprehensive income - - 273,465 - 273,465

31 December 2010 128,034 1,167,867 44,221,453 1,495,232 47,012,586

Transfer to non-current

assets for sale - FRUCTAL (95,576) (171,338) (3,119,890) (514,039) (3,900,843)

Transfer to non-current

assets for sale - DELO - (383,719) (2,272,041) (172,820) (2,828,580)

31 December 2010 32,458 612,810 38,829,522 808,373 40,283,163

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.

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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 holi-

day 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 de-

ferred 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.


( in EUR ) 2010 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 bind-

ing 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.

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Group of assets and liabilities for divestment

Jadranska ( in EUR ) Fructal, d. d. Delo, d. d. pivovara, d. d. Total

GROUP OF ASSETS HELD FOR SALE

Brand value and goodwill 14,530,530 24,515,021 - 39,045,551

Intangible assets and deferred revenues 666,199 2,231,419 63,118 2,960,736

Property, plant and equipment 24,182,404 26,685,815 9,831,072 60,699,291

Investment properties 17,679 78,677 - 96,356

Available-for sale financial assets 724,539 577,032 - 1,301,571

Long-term loans - - 56,075 56,075

Long-term operating receivables 85,403 661 - 86,064

Long-term deferred tax receivables 3,165,283 1,185,546 - 4,350,829

Non-current assets held for sale 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 - 300,000

Short-term receivables for overpaid income tax - 17,365 - 17,365

Cash in banks, cheques and cash in hand 475,607 232,179 10,565 718,351

Deferred costs and accrued revenues 28,760 261,128 5,147 295,035

Total 67,052,031 72,242,335 10,821,113 150,115,479

LIABILITIES ASSOCIATED

WITH A GROUP OF ASSETS

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

Non-current operating liabilities - - 6,501 6,501

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, valu-

ations 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 opera-

tions was performed by the companies Ernest&Young, d. o. o., Ljubljana and Schonherr (Austria) in Novem-

ber 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

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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.

b) Estimated value of the company Delo, d. d.


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 deci-

sions 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 equals the cur-

rent 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.

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, The valuation is based

on the financial statements of Delo, d. d. On this basis, one first assesses the current value of free cash flows

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 pos-

sible 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, reflect-

ing 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% ac-

cording 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 is-

sues. 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.

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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 mar-

ket 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.




to their book or fair values, decreased by the costs of the sale which is lower. The fair value according to ac-

counting 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 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 owner-

ship 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 ap-

pointed 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.

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Interest for the purchase of a majority stake in Večer was expressed in the first phase following compre-

hensive 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 manage-

ment 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 re-

ceived 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 fol-

lowing 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

Competition Protection Office and Ministry of Culture).

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

fulfilled:

• payment of a deposit comprising 10% of the contractual value until 15 July 2010;

• that the Competition Protection Office will consent to the divestment of shares based on item 2 of deci-

sion no. 306-195/2008-57 dated 23 September 2009;

• that the Competition Protection Office in connection to the concentration arising due to the contract is-

sue a decision in accordance with the Prevention of Restriction of Competition Act, thereby establishing

if the announced concentration conforms to the rules of competition;

• that 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.

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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 invest-

ment 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.




to their book or fair values, decreased by the costs of the sale which is lower. The fair value according to ac-

counting 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

31 December 2010 for the purpose of financial reporting in accordance with IFRS 5 and amounted to EUR

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 com-

pany 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:

• The 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 formu-

lation of strategy and business decisions (on investments, borrowing and so on).

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• The 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.

• The method of the current value of expected free cash flows without including debt was used in assess-

ing 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 pay-

ments 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.

• The 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.

• The required rate of return for equity capital ranges between 8.6 and 9.6%.

• When preparing the projections, the appraiser focused only on key value drivers, thus envisaging two

scenarios of operations in the future (optimistic and pessimistic).

• The income statements and balance sheets of the Fructal Group for the period 2005-2010 were used as

starting points in preparing the projections.

• In preparing the projections, the appraiser also considered the future potential of the company (advan-

tages, disadvantages, threats and weaknesses), company analyses, analyses of the situation in the branch

and analyses of competitive companies, thus the operating plan does not represent an accurate forecast

for future operations.

• The 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.

• Considering 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 rev-

enues 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 pre-

dominantly due to increased sales abroad, maintain its market shares on the domestic market and par-

tially 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.

• The EBITDA margin will in the medium-term fluctuate between 9.9 and 13.5% according to the optimis-

tic 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 rationalisa-

tion of operations.

• Management 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.

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• In 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.

• All financial investments in the Fructal Group and surplus fixed assets are valuated on the basis of their

market values.

• The consolidated financial statements of the Fructal Group as at 31 December 2010 were used as a basis

for defining financial liabilities.

• The control premium of 0% was observed since future yield for the average majority strategic owner have

already in principal been implemented.

• The 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 assess-

ing 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

share with a possible span of between EUR 14 per share for the pessimistic scenario and EUR 20 per share

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 ration-

alization 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 sub-

mission 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.

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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 estab-

lished 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

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

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

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.

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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 - 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

( in EUR ) 2010 2009

Short-term trade operating receivables:

on the domestic market 43,446,494 41,309,633

on foreign markets 12,501,896 15,653,684


Total 44,056,231 44,948,190

Short-term oparating receivables on others 5,486,328 5,678,861

Advances 292,599 1,440,389


Balance of receivables 31.12. 47,587,099 49,764,422




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, rep-

resenting 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.

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Value adjustments of short-term operating receivables

( in EUR ) 2010 2009


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


Balance as at 31st December 2010 11,318,310 12,015,127

Maturities of trade receivables

( in EUR ) 2010 2009

TRADE RECEIVABLES

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

above 90 days 13,601,989 11,730,555






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 to-

talled 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.

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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


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 dis-

closed 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 -

Short -term loans 83,961,209 96,720,084





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.

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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 -

1. Other financial investments available-for-sale

Due to intended sale, the Company transferred the following investments from long-term financial in-

vestments to short-term financial assets availalbe-for-sale: investments in the shares of Elektro 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 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

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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) -


Total 1,391,370 991,657

Cash in banks, cheques and cash in hand reflect their fair values.

14. Deferred costs and accrued revenues

( in EUR ) 2010 2009

Deferred cost and accrued revenues 476,844 541,321



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, re-

tained 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 an-

nual 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 adjust-

ment of capital EUR 23,146,157.

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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 Slov-

enia 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 revalua-

tion 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 differ-

ences 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.

The ownership structure of capital as at 31 December 2010 is as follows:

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 20.516 %

Total 100.000 %

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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

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 and based on actuarial cal-

culations. Individual companies in the Group prepared their own calculations of provisions for envisaged

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 sala-

ries 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

Non-current reservations 3,469,156 3,390,491

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.

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Movement of long-term provisions and accrued costs and deferred revenues

Benefits Tenure ( in EUR ) at retirement 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

Transfer to liabilities for

non-current assets for sale - FRUCTAL (788,592) (374,690) (748,437) (1,911,719)


non-current assets for sale - SPLIT (956,251) - (234,092) (1,190,343)


non-current assets for sale - DELO (2,064,443) - (468,830) (2,533,273)

Stanje 31.12. 2010 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 provi-

sions decreased by EUR 278,772 in 2010.

18. Long-term liabilities

18. A. Long-term financial liabilities

( in EUR ) 2010 2009

Long-term loans obtained from banks 163,007,254 267,156,576

Long-term loans obtained from other companies 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

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Maturities of long-term financial liabilities

( in EUR ) 2010 2009





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

the 6-month EURIBOR, between +3.25% and 4% in 2010.

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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 Merca-

tor, 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 long-

term 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

( in EUR ) 2010 2009

Other long-term oparating liabilities 6,501 11,476


Total - 11,476

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18. C. Long-term deferred tax liabilities


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.

Fair value Fair value (properties, (financial Fair value ( in EUR ) buildings) assets) (trademarks) Other Total

LIABILITIES FOR DEFERRED TAX

1 January 2009 4,264,229 84,030 25,554,498 133,088 30,035,845

Change in the profit and loss statement (93,172) - (5,915,596) (20,443) (6,029,211)

Changes in comprehensive income 37,847 97,739 - (41) 135,545

31 December 2009 4,208,904 181,769 19,638,902 112,604 24,142,179

Change in the profit and loss statement (11,746) - (3,793,887) 28,291 (3,777,342)

Changes in comprehensive income 53,688 (73,863) - (41) (20,216)

31 December 2010 4,250,846 107,906 15,845,015 140,854 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

group of assets held for sale- DELO (1,643,034) - (4,085,836) - (5,728,870)

31 December 2010 1,844,902 71,464 9,292,212 140,854 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.

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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




Total 30,636,500 44,823,086

As at 31 December 2010 short-term operating liabilities prior to their transfer to non-current assets availa-

ble-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

of operating liabilities to liabilities connected to the group of assets for divestment on 31 December 2010.

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

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19. C. Short–term financial liabilities

( in EUR ) 2010 2009


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 259,895,460 176,956,656

Other short-term financial liabilities 6,265,335 5,033,019

Total 337,888,965 326,849,451




Total 313,280,673 326,849,451

As at 31 December 2010 short-term operating liabilities prior to their transfer to non-current assets avail-

able-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-

ber 2010.

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Movement of short-term liabilities

Short term part of long ( in EUR ) Debt position New loans term financial Transfer to Repaiments Debt position 1/1/2010 in year 2010 liabilities long term loans in year 2010 31/12/2010

Bank 1 111,182,610 43,860,700 40,109,797 - 73,637,609 121,515,498

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 - - - 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 - - - 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 - 2,000,000 7,000,000

Bank 14 - 1,000,000 - - - 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 - - - - 90,000

Total banks 316,825,241 215,612,039 69,190,134 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 Poslov-

ni 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 fi-

nancial 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, move-

able 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.

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20. Accrued costs and deferred revenues

( in EUR ) 2010 2009

Accrued costs and deferred revenues 6,961,970 8,888,661



Total 4,725,179 8,888,661

Accrued costs and deferred revenues refer to accrued costs for unused employee holiday leave and sever-

ance pay paid out due to technological surplus.

21. Analysis of revenues from sales and expenses

21. A. Analysis of revenues from sales by market

( in EUR ) 2010 2009

Sale revenues of products and services in Slovenia 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

Sale revenues of materials and merchandise sold on foreign markets 369,839 2,548,570

Total 306,418,154 327,026,846

21. B. Analysis of revenues from sales by country

( in EUR ) 2010 2009

Sale revenues in Slovenia 260,995,099 277,462,685

Sale revenues on foreign markets 45,423,056 49,564,161

Total 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 re-

ceivables 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.

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21. D. Analysis of costs by category

( in EUR ) 2010 2009

Expenses of materials and mercdandise sold 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

Other operating expenses 7,331,428 7,832,328

Total 320,074,491 342,037,824

Operating expenses without the impairment of the brand name and goodwill of Delo and Fructal amount-

ed 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

8,282,433 in comparison to the previous year predominantly due to increased costs of marketing.

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21. E. Costs by functional group


Expenses of materials

and mercdandise sold 108,365,808 2,391,772 4,120,502 114,878,082


Depreciation 19,193,525 2,390,953 2,856,979 24,441,457



expenses at fixed assets 66,985 30,185 27,111,860 27,209,030


expenses at reverse assets 4,831 1,055,717 112,710 1,173,258

Costs of reservations 193,661 95,282 1,999,045 2,287,988

Other expenses 2,707,780 1,598,795 3,024,853 7,331,428

Total 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.


Expenses of materials

and mercdandise sold 112,228,473 10,826,574 3,200,280 126,255,327


Depreciation 22,391,098 2,729,421 2,879,663 28,000,182



expenses at fixed assets 93,129 780,870 36,009,117 36,883,116


expenses at reverse assets - 1,886,356 1,092,795 2,979,151

Costs of reservations 460,135 50,425 575,286 1,085,846

Other expenses 3,517,986 434,958 3,879,384 7,832,328

Total 200,695,141 68,105,434 73,237,249 342,037,824

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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)

Positive currency differences 59,487 50,044

Net financial expenditures (25,072,989) (204,803,205)

The surplus of financial liabilities without participation in the profit of associated companies over financial

revenues in 2010 amounted to EUR 25,072,989 and is predominantly due to a surplus of financial liabilities

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 invest-

ments 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 rec-

ognised 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.

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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 tax-

able 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:

• deductions for research and development;

• deductions for voluntary supplementary pension insurance;

• deductions for the employment of disabled persons and

• deductions 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.

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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 (8,334,290)

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)

Cash made from operation 54,712,234 60,689,273

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26. A. Business segments

Newspaper- Year 2010 Other publishing ( in EUR ) Beer beverages 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)

Assets by segments 159,068,556 159,390,693 72,240,500 182,493,514 573,193,263

Trademarks 46,461,058

Positive goodwill 17,197,380

Liabilities by segments 355,378,409 75,327,350 34,296,101 39,960,838 504,962,698

Investments 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

Expenses withouth cash

flow as consequence 3,777,707 133,297 41,722 - 3,952,726

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Newspaper- Year 2009 Other publishing ( in EUR ) Beer beverages 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 (165,918,605)

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

Investments 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

Expenses withouth

cash flow as consequence 3,494,228 649,407 628,010 - 4,771,645

Sales by geographic segments are disclosed in Note 26. B.

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26. B. Geographic segments

( in EUR ) 2010 2009

Net sales revenue

Slovenija 258,752,009 277,462,686

Foreign market 47,666,144 49,564,160

Total 306,418,153 327,026,846

Sredstva

Slovenija 525,763,815 384,467,058

Foreign market 47,112,300 36,360,012

Investments on associated company 317,148 138,836,076

Trademarks (Slovenija) 46,461,058 93,194,513

Positive goodwill (Slovenija) 17,197,380 29,938,487

Total 636,851,701 682,796,146

Investments

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 Yugo-

slavia while assets on foreign markets relate exclusively to assets in the countries of the former Yugoslavia.

27. Profit/loss per share

Net loss per share is calculated with the distribution of net revenue which belongs to the shareholders,

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.

( in EUR ) 2010 2009

Profit (loss) majority owners (25,574,602) (156,950,499)


Number of own shares 42,973 44,621


Net profit per share (2.94) (18.03)

Adjusted net profit per share (2.94) (18.03)

28. Comprehensive yield per share

( in EUR ) 2010 2009

Comprehensive income majority owners (30,285,944) (125,426,366)


Number of own shares 42,973 44,621


Net comprehensive income per share (3.48) (14.41)

Adjusted net comprehensive income per share (3.48) (14.41)

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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 busi-

ness 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-

plementation 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 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 mar-

ket 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 con-

cluded 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.

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Average Interest Change in fin. Amount of interest Difference rate Decrease in expenditures( in EUR ) interest rate in % in interest protection interest interest

Actual financial expenditures with

respect to interest 20,410,364 5.18 - - 20,410,364 -


interest rate increase by 1% 24,350,589 6.18 3,940,225 (1,032,000) 23,318,589 2,908,225


interest rate decrease by 1% 16,470,139 4.18 (3,940,225) - 16,470,139 (3,940,225)


interest rate increase by 1,5% 26,320,701 6.68 5,910,337 (1,620,000) 24,700,701 4,290,337


interest rate decrease by 1,5% 14,500,027 3.68 (5,910,337) - 14,500,027 (5,910,337)


EUR 5,910,337.


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

with foreign markets were denominated in euros.

30. D. Liquidity risk

As at 31 December 2010 the Pivovarna Laško 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 compar-

ison to the previous year when the surplus of short-term liabilities comprised EUR 265,956,352. In accord-

ance 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 in-

dividual 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-

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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, concur-

rent checks for signs of impairment in comparison to their market value attained on the organised securities

market at the Ljubljana Stock Exchange is required.

Fair value Difference- Difference- Difference- as at influence on the influence on the influence on liability ( in EUR ) 12/31/2010 value of N-CI revaluation surplus for deferred tax

MELR value of the equity method 132,934,216

Market value MELR

on the day 31.12.2010 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 de-

noted 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.

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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., Pivo-

varna 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 ap-

plications 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.,

Radencie and payment of damages for the right to the mineral water and land on which the mineral water

springs were located On 23 December 2010 the beneficiaries in accordance with the Enforcement of Crimi-

nal 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. 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.

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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:

Other Fixed part revenues ( in EUR ) of receipts (stimulation) Benefits Total

MANAGEMENT

Pivovarna Laško, d. d.

Dušan Zorko 192,000 600 - 192,600

Gorazd Lukman 40,000 600 - 40,600

Robert Šega 40,000 2,004 - 42,004

Total 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

Group Fructal

Anton Balažič 49,563 6,460 - 56,023

Ales Škraba 50,805 - - 50,805

Drago Kavšekl 99,000 4,902 - 103,902

Emilija Mitevska 24,249 - - 24,249

Ilija Vidoevski 23,971 - - 23,971

Total 247,588 11,362 - 258,950

Radenska, d. d., Radenci

Zvonko Murgelj 61,400 8,350 - 69,750Total 61,400 8,350 - 69,750

Group Delo

Jurij Giacomelli 131,400 13,795 - 145,195

Samo Čok 87,475 10,171 - 97,646

Total 218,875 23,966 - 242,841

Vital Mestinje, d. o. o.

Zvonko Murgelj 89,513 - 41,630 131,143

Mira Močnik 7,001 243 - 7,244

Total 96,514 243 41,630 138,387

Total 952,177 63,381 41,630 1,057,188

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( in EUR ) 2010 2009

INDIVIDUAL CONTRACTS

Fixed part of receipts 3,705,769 5,662,498

Other revenues 194,878 283,230


Benefits 238,875 1,757,173

Total 4,315,016 7,875,323

( in EUR ) 2010 2009

SUPERVISORY BOARD

Attendance fees 119,682 160,603

Total 119,682 160,603

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( in EUR ) 2010 2009

SUPERVISORY BOARD

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 64

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 -

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( in EUR ) 2010 2009


Marko Koleša 1,012 -

Peter Groznik 349 -

Bojan Košak 990 -

Marjan Mačkošek 528 -

Total 2,879 -

34. Transactions with related parties

Purchases from related parties

( in EUR ) 2010 2009

Purchasing from companies of the Group 163,978 380,206

Purchasing from associated and other related parties 9,916,991 11,279,801

Total 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

Sales to related parties

( in EUR ) 2010 2009

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

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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 ful-

filled 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

100% stake in Delo, d. d. in November 2010. The deadline for the submission of non-binding offers was 26

January 2011. Discussions will be carried out with interested buyers. The continuation of the sale procedure

is dependent on them.

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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 Finan-

cial Statements of the Pivovarna Laško Group with explanatory notes for the year ended 31 December 2010

and declares:

• that the financial statements have been prepared under the assumption that the Pivovarna Laško Group

is a going concern;

• that appropriate accounting policies were consistently applied and that any changes thereof have been

disclosed;

• that 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

irregularities.

Laško, 28 March 2011

Dušan Zorko, MSc

Chairman of the Management Board

Robert Šega


Gorazd Lukman


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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

P I V O V A R N A L A Š K O A N N U A L R E P O R T

2010

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Pivovarna lasko annual report 2010

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