Notes to the financial statements for i-xii/2009 statement of income for the period from january 1, to december 31, 2009

6. 
   PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
   

1. 
   INTANGIBLE ASSETS
   

Housing loans to employees as of December 31, 2009 in the amount of CM 180,117 relate to long-term loans extended to Company employees. Loans are approved to employees at the following terms: up to 20-year maturities, at an annual interest rate of 4 percent. During 2005, pursuant to the November 11, 2005 Decision of the Association of Workers “Union of the Banja Luka Brewery,” (the “Union”), the Company assumed the receivables from the Union associated with the extended residential loans to employees in the total amount of CM 404,755 (Note 6), which were in previous years approved to employees by the Company, and subsequently such receivables were transferred from the Company to the Union.

1. 
   SHORT-TERM FINANCIAL PLACEMENTS
   

Amount of CM 76,471 relates to current portion of long-term housing loans.

Allowanced for impairment of materials and spare parts amounting to CM 94,777 was booked on December 31, 2009 in the warehouses 693 – raw materials amounting to CM 44,403 and warehouse 694 – spare parts amounting to CM 50,374.

Prepaid taxed and contributions of CM 86,458 refer to payment of customs fee of CM 6,053 for equipment that is to be registered as osnivački ulog (RJ-04/05-3/1-2017-143-15,2/07), dated February 28, 2007. We have submitted a request to be exempt from customs fee payment, however, the proceedings are still underway.

Amount of CM 80,405 refers to decreased VAT based on the issued credit notes to customers for annual rebates.

Amount of CM 66,127 is a contested receivable from Integral for the interest we have charged him.

Other receivables amounting to CM 38,037 relate to sick leave, which has not been refunded by the Health Insurance Funds Banja Luka and Doboj.

As of December 31, 2009 accruals in the amount of CM 61,164 entirely relate to deferred expenses for insurance of property and persons, based on the Insurance Agreement with entered into with Kosig Dunav osiguranje A.D. Banja Luka for one-year period commencing on March 31, 2009.

Aiming to reduce the Company’s financial burden and help to restructure business, the Company Management entered negotiations with Hypo Alpe Adria Bank A.D. Banja Luka in February 2007, to reduce margins on long-term loans, and defer principal repayment. Negotiations resulted in a reduction of margins for all loans to 3,5% from different previous levels that were as high as 7%. In addition, a grace period of12 months (until February 1, 2008) was approved in support of the Company’s cash flow. It was also agreed that loans would be repaid in equal monthly installments (rather than in quarterly installments, as used to be the case), with the same maturity. The overall effect of this are substantial savings in financial expenditures, realized despite increase in interest rates in the world market (EURIBOR, too, steadily increased throughout 2007), and a positive effect on the Company’s cash flow. Unfortunately, because of global economic crisis in 2009, Hypo Alpe Adria Bank A.D. Banja Luka increases margins on long-term loans to 7%.

1. 
   In February of 2007, the Company Management signed a Contract on approving a financial framework loan of 6,000,000 CM, with a three-year period of usage (maturity March 1, 2010). Based upon this, on February 27, 2009 a Contract on short-term overdraft loan of 2,650,000 CM, with maturity on July 31, 2009 and interest rate of 8,5%, fixed, was signed. On 31^st July 2009, new contract was signed with the Bank on a new short-term overdraft loan of 2,650,000 CM (with which the old loan was closed) with new maturity date on 1^st February 2010 and interest rate 8,5% fixed. As of December 31, 2009, the outstanding amount of the overdraft was used in the amount of CM 447,906.
   Within the Contract on approving a financial framework loan dated on February 27, 2009, a Contract on a short-term loan of 3,000,000 CM, with maturity on July 31, 2009, and interest rate of 8,5%, fixed, was signed. On 31^st July 2009, new contract was signed with the Bank on a new short-term loan of 3,000,000 CM (with which the old loan was closed) with new maturity date on 1^st February 2010 and interest rate 8,5% fixed. Both loans were approved for financing of working capital. The remaining part of the framework facility amounting to 350,000 CM is regularly used to obtain bank guarantees for import duties and letters of credit for purchases abroad.
   We remind that within the Contract on approving a financial framework from February 2007 a Contract on a short-term overdraft loan of 5,500,000 was signed (remaining 500,000 CM is used to obtain bank guarantees for import duties and letters of credit for purchases abroad). It was closed when the above-mentioned contracts came into effect.
   
   
   
2. 
   On June 9, 2008 the Company Management signed a Contract on a short –term loan of 4,000,000 CM with EURO fix clause with Hypo Alpe Adria Bank D,D, Mostar with maturity on June 1, 2009 and interest rate 8,00%, The loan was approved for financing of working capital. Negotiations on extending the maturity date were held in the first half of 2009. On the 16^th July 2009, the loan was repaid and exchanged with two new loans – 3,000,000 CM with maturity on March 31, 2010 and interest rate 9,5% and 1,000,000CM with maturity on December 1, 2009 and interest rate 9,5%.
   

3. 
   Altima
   On February 29, 2008 the Company Management signed Contracts on short-term loans with related legal entities: a loan of EUR 750,000 maximum with Altima Global Special Opportunities Master Fund Ltd and a loan of EUR 2,250,000 maximum with Altima Global Special Situations Master Fund Ltd with interest rate of three – month EURIBOR + 5,00%, As of June 30, 2009, loans were used in the full amount of 5,864,490 CM. Loans are approved for financing of working capital.
   

4. 
   A loan from Hypo Alpe Adria Bank A.D. Banja Luka totaling 20,000,000 CM was approved for the construction of and equipping the beer filling and bottling facility (“bottling”). As of December 31, 2009, the current portion of this loan amounts CM 2,069,113.
   
   
   
5. 
   A loan from Hypo Alpe Adria Bank A.D. Banja Luka totaling CM 2,660,000 was approved for long-term working capital. As of December 31, 2009 the current portion of this loan amounts CM 1,094,302.
   
   
   
6. 
   A loan from Hypo Alpe Adria Bank A,D,, Banja Luka totaling CM 2,000,000 was approved for the purpose of financing the completion of construction of the access bridge in Banja Luka. As of December 31, 2009, the current portion of this loan amounts CM 869,901.
   
   
   
7. 
   A loan from Hypo Alpe Adria Bank A.D. Banja Luka totaling CM 1,239,031 was approved for long-term working capital and the repayment of debt, which was due to Zepter bank. As of December 31, 2009, the current portion of this loan amounts CM 645,954.
   
   
   
8. 
   Loan from Hypo leasing D,O,O,, Sarajevo of EUR 279,649 relates to assumed liabilities, in accordance with the terms of the July 7, 2004 Agreement on Assignation, for the repayment of debt which the Company assumed from the entity, Integral Inženjering D.O.O. Laktaši. Namely, having assumed the obligations to settle the loan which Hypo Leasing D.O.O. Sarajevo extended to Integral Inženjering D.O.O. Laktaši for the purchase of equipment, the Company settled its obligations towards Integral Inženjering D.O.O Laktaši. The current portion of this loan is CM 0 as of December 31, 2009. Loan was paid off on June 5, 2009.
   
   
   
9. 
   Long-term liabilities under financial leasing relate to purchase of vehicles, as follows:
   

RENAULT MEGAN – 8 cars (passenger)

RENAULT LAGUNA – 1 car (passenger)

As of December 31, 2009, the current portion of this loan amounts CM 25,059.

4. 
   Bolero – loan relates to assumed liability of paying expenses for adaptation and reconstruction of business facilities in Doboj which has been rented to “Bolero” Doboj according to contract 1254/07 from 21,08,2007. Works on reconstruction amount to CM 41,145,25- VAT not included. The current portion of this loan is CM 14,701as of December 31, 2009.
   
   
   
5. 
   Riverwood – loan according to contract 130/08 from 17,11,2008, in the amount of CM 513,451 relates to payment of packaging machine. The current portion of this loan is CM 12,224 as of December 31, 2009.
   
   
   
6. 
   Town Banja Luka – loan relates to debt for utility fee from December 31, 2008, according to the contract on debt rescheduling from December 16,2009. The current portion of this loan is CM 11,054 as of December 31,2009.
   
   
   
7. 
   Town Banja Luka – loan relates to a debt for use of construction land from May 16, 2003, according to the contract on debt rescheduling from December 16, 2009. The current portion of this loan is CM 11,221 as of December 31,2009.
   

Maturities of long-term loans are as follows:

On the day of publishing a balance sheet, the Company is in negotiation process with Hypo Alpe Adria Bank A.D., Banja Luka and Hypo Alpe Adria Bank D.D., Mostar on rescheduling of long-term and short-term loan liabilities.

The company provided CM 1,731,781 for dividend for preference shares defined as 3% of nominal share value, reported in the Income Statement as a part of other finance expenses and covering the period from the disbursement of 21,000,000 paid for the purchase of 17,500,000 preference shares till 31^st December 2009 (please, see note 16).

Provisions for rebates as of 31^st December 2009 totaling CM 9,042 relate to the calculated rebates for 2005.

Provisions for severance payments totaling CM 139,098 relates to employees whose employment will cease in 2010.

21. LITIGATION

The Company is involved in various legal proceedings that have been filed by its suppliers in which it has been named as a defendant. As of December 31, 2009, the damages sought in legal actions initiated by the Company against its debtors amounted to CM 3,339,898. Legal actions in which the Company is a defendant as of 31^st December 2009 amount to CM 364,726, without effects of possible default interest.

The Company’s management judges that material losses are not likely to be sustained, hence a provision for potential losses arising in connection with the pending litigation has not been recorded in the financial statements for the year 2009.

22, COMMITMENTS

In accordance with the provisions of the Agreement on Commercial Co-operation ref, 01-25/03 dated on May 5, 2003 entered into with the Razvojna Banka Jugoistocne Evrope A, D,, Banja Luka, the Company has assumed an obligation to deposit to a non-interest-earning account the amount of CM 1,000,000 for a fixed term of 15 years, to serve as security on long-term loans that the Razvojna Banka has agreed to extend to the Company’s employees. As of the date of issuance of the accompanying financial statements, the Company has deposited the total amount of CM 257,500 in favor of the contractual deposit (Note 10),

During 2009, the Company had transactions with related parties as follows:

The amount of CM 567,244 relates to expenses of consultancy services provided by Altima UK Value Investments Ltd in 2009 based on the contract signed between the Company and Altima UK Value Investments Ltd on 31^st October 2006. The outstanding liabilities of CM 1,323,037 were generated by these expenses. The charges in respect of the services were determined on arm’s length basis.

The management of the Company consists of the Managing Director and of executive managers.