The Shape of the Carlsberg Group

Contents

A Brief Presentation 2 Supervisory Board and Executive Board 4 The Shape of the Carlsberg Group 5 Highlights and Key Figures 7 Report for 1998/99 8 The Danish Brewing Operations 15 Carlsberg and the Environment 17 The International Brewing Operations 19 Nordic Region 19 UK 20 Central, Eastern and Southern Europe 21 Western Europe and Exports 25 Asia, Africa, North and Latin America 29 Carlsberg's Alcohol Policy 32 Carlsberg's Policy on Gene Technology 33 Soft Drinks, Coca-Cola Nordic Beverages 35 Group Staff Functions 37 Accounts for 1998/99 43 Financial Review 44 Accounting Policies 49 Turnover etc. in Major Subsidiaries 51 Group Companies 52 Profit and Loss Account 53 Balance Sheet 54 Cash Flow Statement 56 Notes to the Accounts 57 Auditors' Report 65 Subsidiaries and Associated Companies 67 Shares and Shareholders 71 Announcements to the Stock Exchange, Financial Calendar, Annual General Meeting 72

1 A Brief Presentation

The Carlsberg Group is one of the world’s major interna- Ever since Carlsberg’s foundation, the Company has tional brewing groups, with Carlsberg and Tuborg being operated its own research departments. In 1875, the two of the most widely-sold beer brands on a global scale. Carlsberg Laboratory was established. It has now been integrated into the Carlsberg Research Center which has The Group comprises the Parent Company - the Carlsberg 80 laboratories equipped with the latest technology and a Breweries founded in 1847 and Tuborg Breweries founded staff of about 150. In addition to extensive basic research, in 1873 - and about 100 subsidiaries and associated com- brewing related research is conducted into enzyme chem- panies, the majority of which are situated outside istry, protein chemistry, carbohydrate chemistry, plant Denmark. The Group has a workforce of approximately breeding and genetics, as well as the malting, brewing 22,000 employees, if all associated companies are inclu- and fermenting processes. Moreover, process and product ded. It sells its products in about 150 markets. development takes place in a variety of departments within the Company. The core business of the Carlsberg Group is the production and sale of beer. More than 88 per cent of beer sales Carlsberg A/S is a company publicly quoted on the are achieved outside Denmark. International brewing Copenhagen Stock Exchange with some 11,000 registered operations include the export of beer brewed in Denmark, shareholders. The largest, single shareholder by far is the as well as local brewing at 73 production sites in 40 coun- Carlsberg Foundation, which is required by its charter to tries. Local production, according to the Group’s specifica- hold a minimum of 51 per cent of the share capital in tions, is handled partly by breweries in which the Group Carlsberg A/S. Only one other shareholder, the Danish holds capital interests, and partly by breweries and part- Labour Market Supplementary Pension Scheme, accounts ners with which agreements have been made for the pro- for more than 5 per cent of the shares. Over the years, duction and sale of Carlsberg and Tuborg beer. the employees of the Parent Company have accepted offers to buy shares on favourable terms or have been The Group's activities within the soft drink sector are car- granted shares in connection with Carlsberg's 150 years' ried out mainly by Coca-Cola Nordic Beverages A/S, anniversary in 1997. which produces and markets household names such as The Carlsberg Foundation was established by Carlsberg’s Coca-Cola, Fanta and Sprite in the Nordic countries. founder, Brewer J.C. Jacobsen, and its income goes to support Danish natural and social sciences as well as the The Group also has interests in other business areas, humanities. The Carlsberg Foundation also administers most significantly through the ownership of Royal and maintains the Frederiksborg Museum of National Scandinavia A/S, the largest applied arts group in the History and the Carlsberg Laboratory. Nordic countries. Royal Scandinavia incorporates the The New Carlsberg Foundation, a separate department of Royal Porcelain Manufactory, Bing & Grøndahl, Georg the Carlsberg Foundation with its own board of directors, Jensen Silversmiths, Holmegaard Glassworks and Illums has the special task of acquiring works of art for Danish Bolighus, the Swedish companies Orrefors Kosta Boda museums and institutions. It is also responsible for the and BodaNova-Höganäs Keramik, as well as the Italian administration and maintenance of the Ny Carlsberg art glassware company Venini. Glyptotek, in collaboration with the Danish government and the City of Copenhagen. The Group also includes Vingaarden, one of Denmark’s The Tuborg Foundation, which operates in support of largest wine and spirits companies and A/S Kjøbenhavns activities of benefit to society, is another department of Sommer-Tivoli. the Carlsberg Foundation with its own board of directors.

The annual report includes examples of Carlsberg's international advertising campaign starring some of Carlsberg's world-famous means of distribution. Photos by Bent Rej.

2 A Brief Presentation

On 30 September 1999 Vietnam's Prime Minister Phan Van Khai visited Carlsberg. The photo shows His Excellency Phan Van Khai (left), President and Group Chief Executive Officer Flemming Lindeløv and Group Managing Director Michael C. Iuul.

3 Supervisory Board and Executive Board

Supervisory Board Executive Board

Poul Chr. Matthiessen Flemming Lindeløv Professor D.Econ., Chairman. Member of the Supervisory President, Group Chief Executive Officer. Chairman of the Board of Royal Scandinavia A/S. Supervisory Board of Royal Scandinavia A/S. Deputy Chair- man of the Supervisory Board of Coca-Cola Nordic Beverages A/S. Member of the Supervisory Board of A/S Kjøbenhavns Erik B. Rasmussen Sommer-Tivoli, Carlsberg Brewery Hong Kong Limited, Hong Director, Deputy Chairman. Kong, Carlsberg Brewery Malaysia Berhad, Malaysia, Carlsberg Chairman of the Supervisory Board of A/S Dansk Shell. Finans A/S, Carlsberg-Tetley PLC, UK, Danbrew Ltd. A/S, Member of the Supervisory Board of Billetkontoret A/S. Dansk Olie og Naturgas A/S, Ejendomsaktieselskabet af 3/9 1930, Falcon Bryggerier AB, Sweden, H. Lundbeck A/S, Oy Sinebrychoff Ab, Finland, Superfos a/s. Hans Andersen Brewery Worker, Carlsberg A/S. Employee board member. Michael C. Iuul Torkild Andersen Group Managing Director, International. Chairman of the Professor, D.Ph. Supervisory Board of Carlsberg International A/S, Carlsberg Brewery Hong Kong Limited, Hong Kong, Carlsberg Marketing (Singapore) Pte Ltd., Singapore, Carlsberg-Tetley Brewing Jens Bigum Limited, UK, Carlsberg-Tetley PLC, UK, Danbrew Ltd. A/S, Managing Director, MD Foods amba. Hannen Brauerei GmbH, Germany, Oy Sinebrychoff Ab, Member of the Supervisory Board of Per Aarsleff A/S. Finland, Tuborg International A/S, United Breweries Interna- tional Limited A/S. Deputy Chairman of the Supervisory Board Povl Krogsgaard-Larsen of Carlsberg Brewery (Thailand) Co. Ltd., Thailand, Carlsberg Finans A/S, Carlsberg Italia S.p.A., Italy. Member of the Super- Professor, D.Sc., Ph.D., Dr.h.c. Member of the Board of visory Board of Aktieselskabet Th. Wessel & Vett, NESA A/S, Directors of Acadia Pharmaceuticals A/S. Sophus Berendsen A/S, Magasin du Nord, Carlsberg Brewery Malaysia Berhad, Malaysia, Carlsberg Malawi Brewery Limited, Jens Larsen Malawi, Carlsberg-Importers S.A., Belgium, Gorkha Brewery Porcelain Painter, Royal Scandinavia A/S. Ltd., Nepal, Grupo Cruzcampo S.A., Spain, Hue Brewery Ltd., Member of the Supervisory Board of Royal Scandinavia A/S. Vietnam, Israel Beer Breweries Ltd., Israel, South-East Asia Bre- Employee board member. wery Ltd., Vietnam, Unicer-União Cervejeira, S.A., Portugal, Carlsbrew Brewery (Shanghai) Company Limited, China, Carlsbrew Brewery (Guangdong) Ltd., China. Palle Marcus Managing Director. Chairman of the Supervisory Board of Coloplast A/S. Deputy Chairman of the Supervisory Board of Walther Paulsen Den Danske Bank Aktieselskab and Novo Nordisk A/S. Group Managing Director, Finance and Administration. Member of the Supervisory Board of Novo A/S. Deputy Chairman of the Supervisory Board of Royal Scandi- navia A/S. Member of the Supervisory Board of A/S Kjøben- havns Sommer-Tivoli, Carlsberg (UK) Limited, UK, Carlsberg- Axel Michelsen Tetley PLC, UK, Coca-Cola Nordic Beverages A/S, Danske In- Professor, D.Ph. vest Administration A/S, Det Berlingske Officin A/S, Ejendoms- aktieselskabet af 3/9 1930, Tuborg Nord I/S, Vingaarden A/S. Erik Dedenroth Olsen EDP Office Manager, Carlsberg A/S. Nils Smedegaard Andersen Employee board member. Group Managing Director, Nordic. Chairman of the Supervisory Board of Coca-Cola Nordic Beverages A/S, Danish Malting Group A/S, Dryckes Distributören AB, John Petersen Sweden, Falcon Bryggerier AB, Sweden, Svyturys Brewery, Silversmith, Royal Scandinavia A/S. Member of the Lithuania. Member of the Supervisory Board of Oy Sinebry- Supervisory Board of Royal Scandinavia A/S. choff AB, Finland, Hannen Brauerei GmbH, Germany. Employee board member.

December 1999. The management's board memberships are Per Øhrgaard disclosed pursuant to the Danish Companies Accounts Act. Professor, D.Ph.

4 The Shape of the Carlsberg Group

Supervisory Board

Executive Board

Beer Soft Drinks Other Companies Group Staff Functions

Coca-Cola Nordic Denmark Beverages A/S

United Kingdom Group Staff Functions • Corporate Communications Nordic Region • Secretariat • Corporate Marketing • Corporate Technology Organisation Central, Eastern and • Corporate Human Southern Europe Resources • Corporate Finance Western Europe • Project Department and Exports • Corporate Treasury and Risk Management • Corporate IT Asia, Africa, North • Strategic Sourcing and Latin America • Property Department

Divisions Central, Eastern and Southern Corporate Human Resources Division Denmark Europe Kurt Israelsen, Vice President Lars Kjær, Executive Vice President Finn Jakobsen, Vice President Stig Christensen, Vice President Corporate Finance Jørgen Glistrup, Vice President Western Europe and Exports Per Brøndum Andersen, Vice Claus Bo Jacobsen, Vice President Bjørn Søndenskov, Vice President President Steen Jespersen, Vice President Jette W. Knudsen, Plant Manager Asia, Africa, North and Latin Project Department Mogens Rüdiger, Vice President America Lars Fellman, Vice President Finn Terkelsen, Vice President Mogens Thomsen, Vice President Helge Ussing, Senior Vice President Corporate Treasury and Risk Group Staff Functions Management UK Corporate Communications Jesper Bærnholdt, Vice President Ebbe Dinesen, Chief Executive Henrik Mølstrøm, General Manager Steve C. Bailey, Finance Director Corporate IT Doug Clydesdale, Marketing and Secretariat Torben Melskens, Vice President Managing Director Take Home Sales Hans Henrik Schmidt, Legal Counsel Colin Povey, Commercial Director Strategic Sourcing Bernie W. Ray, Managing Director Corporate Marketing Preben Østergaard, Vice President On-Trade Sales Annette Tingstrup, Vice President John J. Smith, Operations Director Property Department Corporate Technology Orla Kristensen, Vice President Nordic Region Organisation Nils S. Andersen, Group Managing Svend Erik Albrethsen, Executive Vice Trust Administration Director President Niels C. Roelsen, Vice President Klaus Bock, Executive Vice President

5 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg ad) has been removed to reduce file size. Highlights and key figures

Group 5-year summary 1994/95 1995/96 1996/97 1997/98 1998/99

Sales of beer - in million hectolitres *) Sold in Denmark 4.8 4.7 4.5 4.2 4.0 Sold outside Denmark 24.5 25.1 26.8 31.1 33.0 Total sales 29.3 29.8 31.3 35.3 37.0

Sales of soft drinks - in million hectolitres Sold in Denmark 2.4 2.4 2.5 2.6 3.2 Sold outside Denmark 1.2 1.8 3.1 6.9 10.6 Total sales 3.6 4.2 5.6 9.5 13.8

Total sales of beer and soft drinks - in million hectolitres *) 32.9 34.0 36.9 44.8 50.8

Highlights in DKK million Turnover 17,072 17,965 19,378 29,321 31,285 Excise duties 3,721 4,034 4,460 7,237 7,131 Operating profit 1,212 1,252 1,255 1,554 1,673 Special items, net - - - 243 79 Financial items, net 208 319 501 423 -119 Profit before tax 1,420 1,570 1,756 2,220 1,633 Group profit 1,077 1,126 1,256 1,744 1,156 Parent Company's share 1,003 1,063 1,242 1,641 1,164 Total assets 18,599 21,467 24,928 30,952 29,889 Equity 8,242 8,912 10,266 10,904 11,853 Investments in tangible fixed assets, etc. 1,547 1,513 1,042 1,287 2,024 Depreciation and write-down 790 834 877 1,305 1,354

Number of employees **) 17,563 18,519 18,081 20,589 21,906

Key figures Net profit ratio 1) 9.1% 9.0% 8.4% 7.0% 6.9% Return on investment 2) 10.9% 10.0% 8.1% 8.2% 7.3% Equity ratio 3) 44.3% 41.5% 41.2% 35.2% 39.7% Return on equity 4) 13.5% 13.1% 13.1% 16.5% 10.2% Gearing 5) -19.7% -11.7% -3.2% 15.5% 36.1% Dividend per share of DKK 20 6) 3.4 3.4 3.6 4.0 4.0 Earning per share of DKK 20 7) 15.69 16.63 19.43 25.68 18.21 Year-end market quotation for B-shares 270 353 374 400 257

1) Operating profit as per cent of net turnover 2) Operating profit as per cent of average operating assets 3) Equity at year-end as per cent of total liabilities *) Sales of Carlsberg and Tuborg beer, including beer brewed under 4) Group profit as per cent of average equity licence, and other beer brands brewed by breweries of the 5) Interest-bearing net liabilities as per cent of equity Carlsberg Group and its associated companies. 6) Dividend for the year per DKK 20 share 7) Parent Company's share of profit for the year per DKK 20 share **) Including all employees in pro-rata consolidated companies.

7 Report for 1998/99

Carlsberg's turnover in the past year increased by DKK 2.0 which corresponds to 20 per cent of the share capital or billion to DKK 31.3 billion. The growth in turnover de- DKK 256 million, which is unchanged from last year's rives primarily from the acquisition of new companies. dividend. It is proposed to transfer the remaining dispo- After depreciations the operating profit totalled DKK sable amount to the reserves. 1,673 million compared with DKK 1,554 million last year, an increase of 7.7 per cent. Depreciations amounted to The Carlsberg Group's equity level reached DKK 11,853 DKK 1,354 million against DKK 1,305 million last year. million compared to DKK 10,904 million last year. Equity Due to cost savings and the positive effect of a warm sum- was positively influenced by the year's net profit (less mer, particularly in the Nordic region, the result is slightly dividend) and by changes in minority interests as well as better than was expected after the first six months. exchange rate adjustments. It was negatively affected by the write-off of Group goodwill. Special items, covering non-recurring items that are not directly attributable to the normal running of the compa- Provisions amounted to DKK 3.3 billion. Other provi- ny, amounted to DKK 79 million compared to DKK 243 sions totalled DKK 1.6 billion against DKK 2.6 billion last million last year. Profits from the sale of business areas and year. The decrease in other provisions is mainly attribu- property as well as the reversal of excess provisions from table to the use of provisions in connection with Coca- completed projects are booked as income under this item. Cola Nordic Beverages and Carlsberg-Tetley (see enclosed On the expenditure side, this item includes provisions for Financial Review). the scheduled transfer of Coca-Cola Tapperierne A/S’s soft drink production from Glostrup to Fredericia and provi- The year saw total investments of DKK 2.0 billion, which sions for expenditures in connection with the division of is DKK 0.7 billion more than last year. The large increase the organisation into three business areas (see below). in investments primarily derives from investments in new production plants in Carlsberg-Tetley in England, In connection with Diageo plc's sale of the Spanish brew- Coca-Cola Nordic Beverages and Sinebrychoff in Finland. ing company Grupo Cruzcampo, it was agreed that Carlsberg will sell its 10 per cent shareholding in Grupo At 30 September 1999 the funds available, consisting of Cruzcampo for a substantial three-digit million figure (see liquid funds and listed securities, amounted to DKK 3.2 notice to the Danish Stock Exchange of 29 June 1999). billion. This has been calculated using the official stock However, as the Spanish competition authorities have not exchange prices. Furthermore, confirmed but unutilised at present approved the sale of Grupo Cruzcampo, the credit facilities amounted to about DKK 3.0 billion. share transaction has not yet been completed. Total global sales of beer in the Carlsberg Group Financial items totalled DKK -119 million. As expected, increased by 1.7 million hectolitres to 37.0 million hecto- this was considerably less than last year (DKK 423 mil- litres in the past year, corresponding to a growth of 4.8 lion), which was characterised by gains from the sale of per cent. The global consumption of beer continues to financial assets. The development in this item also rise, however with large regional differences. Soft drink reflects the significant investments in production plant sales amounted to DKK 13.8 million hectolitres against and acquisitions of companies made in recent years. DKK 9.5 million hectolitres last year.

The profits before and after tax amounted to DKK 1,633 Excess capacity and intensified competition have speeded million and DKK 1,156 million respectively. As expected, up the consolidation of the international beer industry. this was considerably below the level of last year. The tax Carlsberg is monitoring this development closely and will rate was 29.2 per cent against 21.4 per cent last year. The continue to aim at strengthening its position as one of the low tax rate last year was attributable to tax-exempt in- world's leading international brewing companies. In this come from the sale of property and financial assets. connection, and in order to increase the focus on beer activities, it has been decided to divide the entire beer Carlsberg A/S's share of the Group profit totalled DKK 1.2 business – Carlsberg Beer - into two business units, billion against DKK 1.6 billion in 1997/98. It is proposed Carlsberg Denmark and Carlsberg International. The that a dividend of DKK 4.00 per DKK 20 share be paid, remaining business areas will be concentrated in two

8 Report for 1998/99

units, Carlsberg Soft Drink and Carlsberg (Finance). The organisational division is also intended to clarify the de- Sales of beer velopment of results within Carlsberg's various focus areas. Total

98/99 Carlsberg A/S's Supervisory Board has also approved a general strategic plan for the Carlsberg Group which 97/98 continues to focus on the Group's beer and soft drink 96/97 activities. This also means that Carlsberg A/S will launch a project aiming at divesting the 65 per cent share- 95/96 holding in Royal Scandinavia and the 43 per cent share- 94/95 holding in A/S Kjøbenhavns Sommer-Tivoli. millionmio. hl. hls 0 5 10 15 20 25 30 35

The development in the operating profit must be seen in the light of a number of important circumstances in the beer and soft drink sector: Sales of soft drinks in Denmark • Total beer sales in Denmark decreased by 4.5 per cent 98/99 in the past year, which is a smaller decrease than in 1997/98, but still more than expected. However, the 97/98

actual decline in beer consumption is somewhat 96/97 smaller as the Danish-German cross-border trade in 95/96 beer has increased considerably in recent years. 94/95

Carlsberg's market share in the Danish market rose by millionmio. hl. hls 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 approx. 1 percentage point to approx. 71 per cent in the course of the year. The improvement primarily took place within the lower-priced segment, whereas Turnover the market share of the branded products remained at level with last year. 98/99

97/98 As a consequence of recent years' decline in beer sales and intense competition in the Danish beer market, 96/97 extensive restructuring measures within sales, produc- 95/96 tion and distribution have been initiated. These initia- 94/95 tives have resulted in considerable savings, but they have mia. kr. 0 5 10 15 20 25 30 not been sufficient to compensate for the continued DKK bn decline in beer sales. New restructuring and adjustment projects are currently under preparation in co-operation with the employees. The objective is to obtain additional Operating profit cost savings in order to maintain an acceptable level of profitability from the Danish beer activities. 98/99

97/98 With a view to maintaining the position in the lower- priced segment for beer and soft drinks, Carlsberg 96/97

acquired the long-standing business partner and soft 95/96 drink producer Saltum-Houlbjerg (see the Interim 94/95 Report of 8 June 1999). Saltum-Houlbjerg has a 13 per mia.DKK kr. bn 0 0.5 1.0 1.5 2.0 cent share of the Danish soft drink market and about 1/3 of sales within the lower-priced segment.

9 Report for 1998/99

• In 1998/99 Carlsberg's 100 per cent owned subsidiary Carlsberg-Tetley (UK) recorded an operating profit of Profit before tax

DKK 331 million, which is at level with last year and 98/99 better than expected. The on-going reorganisation of the company and the intensified marketing of 97/98 Carlsberg-Tetley’s attractive brands as well as savings, 96/97 particularly on fixed costs, proceed ahead of schedule. 95/96

• The earnings of the 60 per cent owned Finnish brew- 94/95

ery Sinebrychoff were highly satisfactory, not least mia.DKK kr.bn 0.0 0.5 1.0 1.5 2.0 2.5 due to an unusually warm summer. In addition, the brewery increased its market share both within beer and soft drinks as well as other beverages, including ■ ■ the so-called energy drink sector. Total assets Equity

The Swedish subsidiary Falcon Bryggerier AB, which is 98/99

wholly owned by Sinebrychoff, registered a satisfac- 97/98 tory result, and increased its sales volume for beer by about 9 per cent in the past year. The Vena brewery 96/97

in St. Petersburg, which is 66.7 per cent owned by 95/96 Sinebrychoff, recorded a negative and unsatisfactory result – primarily because of the collapse of the 94/95 Russian economy. mia.DKK kr.bn 0 5 10 15 20 25 30 35

• The Svyturys brewery in Lithuania, in which Carlsberg acquired the controlling interest as of 1 ■ Group profit ■ Depreciation April 1999, recorded a significant improvement in ■ Investments in tangible fixed assets sales and a positive operating profit. 98/99

• The German beer market is characterised by declining 97/98 beer consumption and intense price competition, which has led to declining results for the majority of 96/97 the German beer industry. This is also the case for 95/96 Carlsberg's 100 per cent owned brewery, Hannen 94/95 Brauerei in Mönchengladbach, which again registered mia.DKK kr.bn 0.0 0.5 1.0 1.5 2.0 a negative result despite very high production efficiency. A reorganisation and consolidation of the German beer industry in the near future now seems Key figures inevitable. Carlsberg will observe the development, Earnings per share of DKK 20 and the Group's future role in this market will be seriously considered with a view to consolidating and 98/99 developing the sales of the Tuborg and Carlsberg 97/98 brands in Germany. 96/97 • Carlsberg's brewery activities in Italy, Portugal and 95/96 Poland (1998 accounts) all achieved a positive development in results. 94/95 per sharekr. 0 5 10 15 20 25 30 of DKK 20

10 Report for 1998/99

• The beer business in the Far East, which includes breweries in for example China, Malaysia, Thailand and Key figures Vietnam, has been characterised by intensified com- Equity ratio

petition. Earnings in Malaysia remained stable at a 98/99 high level. The breweries in Thailand were very successful in the past year and are now market leaders. 97/98 Earnings in Hong Kong, which is now supplied with 96/97 beer from Carlsberg's brewery in Guangdong after the 95/96 local brewery was closed down, also saw a positive development. Sales in China have not met expecta- 94/95 tions, and consequently the financial result remains per cent% 0 5 10 15 20 25 30 35 40 45 unsatisfactory. The reorganisation within production and distribution will, however, continue, and with Key figures increased sales and marketing efforts a positive de- Return on equity velopment is expected for sales as well as earnings.

98/99 • The Coca-Cola Nordic Beverages group (CCNB), which now includes production and sale of Coca- 97/98

Cola products in Denmark, Sweden, Norway, Iceland 96/97 and Finland, develops according to expectations. 95/96 CCNB recorded a positive development in sales and gained market shares in several countries. Due to 94/95

heavy start-up costs and running-in expenses the per cent% 0.0 2.5 5.0 7.5 10.0 12.5 15.0 17.5 group registered a negative result. However, these substantial costs are covered by the provisions made in Carlsberg's accounts when CCNB was established, and Key figures the group is thus registered in the accounts with a Gearing positive contribution. 98/99 • Carlsberg's export and licence business registered 97/98 good progress. Despite declining exports to several traditional export markets (including Russia), exports 96/97 were successfully increased. This was partly due to the 95/96 development of new markets and partly to increased sales to the cross-border trade. 94/95 per cent% -30.0 -22.5 -15.0 -7.5 0.0 7.5 15.0 22.5 30.0 • Among the other activities of the Carlsberg Group, Royal Scandinavia recorded an operating profit at level with last year (see the notice to the Copenhagen Stock Key figures Exchange of 17 November 1999). Danbrew again pro- Dividend as per cent of share capital duced excellent results. Tivoli now seems to be experien- 98/99 cing a favourable development in earnings (cf. notice to the Copenhagen Stock Exchange of 18 November 1999). 97/98

Developments within the property business, which pri- 96/97 marily covers activities at the former Tuborg brewery 95/96 property, lived up to expectations. Carlsberg maintains its strategy of developing the areas in question in co- 94/95

operation with contractors and financial investors, with per cent% 0 5 10 15 20 a view to selling the property at a later time.

11 Report for 1998/99

Quarterly reports The Carlsberg Group´s Sales of Beer - in million hls

In future, Carlsberg will publish quarterly reports for the Asia, America, Africa Nordic Region first three months and after nine months of each finan- Other European markets Denmark cial year in addition to the interim report. Carlsberg thus UK complies with the recommendations of the Copenhagen 40 Stock Exchange.

35.3 37.0 The year 2000

This year considerable attention has been focused on the year 2000 problems in all Group companies. In order to achieve a smooth transition to the year 2000, extensive 32 upgrading and replacement of IT systems and technical 7.8 9.1 equipment have been made. Furthermore, contingency plans have been prepared in order to minimise the potential damages arising from failures in systems and business procedures. The companies have also made every effort to ensure that no negative impact from the millennium change is caused by suppliers and service providers. Although it is obviously impossible to give any 24 guarantees in this connection, the management esti- mates that the transition to the year 2000 will not cause major problems to the Group companies. 12.0 12.8

Research

The research and development activities of the Carlsberg Research Center, which includes the Carlsberg 16 Laboratory, continued with undiminished efforts in 1998/99. The expenses, amounting to approx. DKK 80 million after the deduction of external grants, are charged to the Profit and Loss Account. Several new products 8.2 7.8 – including Carlsberg Extra Cool, the PEN bottle (plastic bottle for beer), all-malt products etc. – have been developed and introduced in the course of the year. 8 In the past year 150 full-time employees and 25 visiting researchers have worked at the Research Center. 3.1 3.3

Alcohol policy and policy on gene technology 4.2 4.0

In the past year Carlsberg A/S has adopted an alcohol 0 policy, which states Carlsberg A/S’s position on the sale 97/98 98/99 of alcoholic products. Furthermore, Carlsberg has also

12 Report for 1998/99

drawn up a policy clarifying Carlsberg A/S’s stand on ing years is expected to be influenced positively by the genetically-modified raw materials. on-going restructuring measures as well as by increased market shares in a number of key markets within beer as well as soft drinks. Future prospects Carlsberg is making efforts to ensure the future develop- Carlsberg's focus areas in the years ahead will be: ment and expansion of the company in the international • Intensified efforts for the Carlsberg brand internatio- beer market. In that connection the company's principal nally. shareholder, The Carlsberg Foundation, has announced • Intensified efforts to find partners in key beer markets. that the related financial and legal aspects are currently • Increased efficiency within all functions. subject to careful consideration and investigation. • Increased and more frequent information to the shareholders. • Divestment of business areas not related to beer and Annual General Meeting soft drinks. The Annual General Meeting will be held on Monday 20 In the soft drink sector the running-in of the newly estab- December 1999 at 16.30 hours in Tivolis Koncertsal, lished soft drinks group, Coca-Cola Nordic Beverages, Copenhagen, Denmark. will continue, and a positive result is expected to be achieved within the next two years. Decisions and proposals of In total, the Carlsberg Group expects a small increase in Supervisory Board to Annual turnover next year and an operating profit at level with General Meeting this year. Because of the substantial investments in new plant and company acquisitions mentioned above, the The Supervisory Board proposes to the Annual General financial items will remain negative next year. The nega- Meeting that a dividend of DKK 4.00 (4.00) per DKK 20 tive trend will, however, be more than off-set by gains share be paid, or 20 per cent (20 per cent). DKK 256 mil- from the sale of Grupo Cruzcampo and divestment of lion (DKK 256 million) has been appropriated for that shareholdings in non-beverage related companies. Given purpose. As for the remaining amount available, totalling these assumptions, the profit before tax will show an DKK 908 million, it is proposed that it be appropriated to increase compared to 1998/99. The result for the follow- reserves.

Copenhagen, 29 November 1999

Poul Chr. Matthiessen Flemming Lindeløv Professor, D.Econ President Chairman Group Chief Executive Officer

This is a translation of the original Danish Report for 1998/99. Please notice that only the Danish version has legal validity.

13 To allow a faster download of this PDF-dokument, this full-page image (Danish Tuborg ad) has been removed to reduce file size. The Danish Brewing Operations

In 1999, the Danish beer market was characterised by a In the spring of 1999, the Carlsberg Group acquired the continued sales decline of 4.5 per cent. Total beer sales entire share capital of the soft drink company Saltum- amounted to 5.4 million hectolitres, corresponding to an Houlbjerg Bryggerier A/S. Prior to the acquisition the annual per capita consumption of 107 litres. The actual Group had a long-standing and close business relation- level of consumption is, however, estimated to be ship with the company within the segment of lower- somewhat higher as the Danish private import of beer priced products and private labels. again showed significant increases. According to a study made by The Danish Institute of Border Region Studies, This year the Carlsberg Group once again participated in private import now amounts to approx. 1 million hecto- PR efforts carried out by the Danish Brewers' Association litres of beer, corresponding to about 16 per cent of total (Bryggeriforeningen) to influence consumers' choice of Danish beer consumption. beverages to the advantage of beer. Furthermore, the Association participated in updating the voluntary guide- The competitive situation in Denmark was influenced by lines on marketing of alcoholic beverages. That project is the negative market trend and the fight for market expected to be completed by the end of 1999. shares. Overall, the Carlsberg Group achieved a minor increase in market share to 71 per cent due to a small Through The Danish Brewers' Association Carlsberg also improvement of the share of the discount and private participated in negotiations with the retail trade on how label brands. In general, the market shares for the to improve the efficiency of the existing system for return- Group's Carlsberg, Tuborg and Wiibroe brands remained able bottles. The establishment of a deposit and return unchanged. system for one-way packaging was also discussed in case such packaging is allowed in the Danish market. A preli- Increased marketing and sales efforts have been made in minary agreement has been made with the retail trade order to turn the tide, for example through the introduc- regarding these issues, and plans for the creation of a tion of new product and packaging types. Carlsberg Gl. new company (Dansk Retur Pant A/S) to run these activi- Hof, Carlsberg Export, Carlsberg Extra Cool and Tuborg ties are currently being prepared. It is expected that the Twister helped to boost the interest for Danish beer. The company will be operative in the year 2000. relaunching of Tuborg Red Label was also quite successful. Furthermore, the world's first refillable plastic bottle for beer was introduced for the main products Carlsberg Pilsner and Tuborg Green Label. The introduction genera- ted keen interest from consumers and the media, and judging from the sales during the first months it seems that the consumers have welcomed this light bottle. Denmark The new sales and distribution system, which is still Lars Kjær being optimised, has proven its strength after the initial Executive Vice President running-in period. Among other things, the system makes it possible to focus increased attention on cus- The division handles tomer needs. the production, distribution and marketing of the Group's products to the Danish market, Recent years' adjustment of the cost base in Division as well as production for the exports markets Denmark continued with the improvement of efficiency supplied from Denmark. in all functions within the division. The division has production plants in Valby, Carlsberg Bryggerierne, in Fredericia Tuborg A vision programme focusing on customers, brands and Fredericia Bryggeri and in Saltum, Saltum- employees was launched in 1999. The purpose is to Houlbjerg Bryggerier and a staff of 2,343 improve the understanding of Division Denmark's goals employees. and strategies internally and to strengthen co-operation between the departments.

15 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg ad) has been removed to reduce file size. Carlsberg and the Environment

Carlsberg’s environmental policy has been in effect at its Danish breweries for a number of years. Extensive energy and environmental control systems have been established with extremely positive results, and these efforts have been recognised by the authorities as well as by other interested parties.

In the past few years, Carlsberg has become the owner of a large number of foreign breweries. As a consequence, it has become necessary to set up a general environmental policy for all Group companies, including the establishment of actual environmental management systems as a central part of the management task.

Carlsberg's objective is to introduce local environmental management systems, with central registration of the results achieved, to form the basis for reporting at Group level.

The environmental management of the Carlsberg breweries is ensured by local management and controlled cen- trally by Carlsberg Corporate Operations Control. Carlsberg is presently working on a reporting system which shall form the basis of local environmental management and ensure that compliance with the Group’s environmental policy can be documented both locally and at Group level.

System building and operations are costly, but it is Carlsberg’s experience that energy and environmental management will contribute favourably to the company results.

Carlsberg’s environmental policy 1. Carlsberg recognises its responsibility as regards protec- tion of the environment wherever Carlsberg operates.

2. Carlsberg will seek to meet the needs of the consumers, customers, and employees in an environ- mentally sound and sustainable manner, through continuous improvement in environmental per- formance in all Group activities.

3. Carlsberg will systematically endeavour to minimise adverse effects on the environment and optimise the use of natural resources.

17 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg ad) has been removed to reduce file size. The International Brewing Operations

The agenda which has characterised most consumer Nordic Region goods industries for many years is now having an effect on the brewing industry. Global consolidation trends are Sweden more evident than ever, and as a consequence the large Last year the Swedish market experienced a declining brewing companies are becoming even larger through trend, but it has recovered this year due particularly to a acquisitions. Small companies either exit the market or warm summer and now shows some progress. The are taken over. Financial analysts monitoring the interna- increase in private imports, which put pressure on the tional brewing industry have expressed surprise at the Swedish market last year, diminished mainly because of speed with which the consolidation takes place. They the introduction of low-priced beer produced in Sweden. estimate that the main players for the "end game" will Total beer sales amounted to 5.1 million hectolitres with soon become apparent. an annual per capita consumption of 57 litres. This development must be considered a big challenge to The Carlsberg Group brewery Falcon Bryggerier AB is a Carlsberg, which is one of the world's most international 100 per cent owned subsidiary of Oy Sinebrychoff Ab. brewers with a portfolio of very strong brands. With the Falcon's annual sales amounted to 1.2 million hectolitres right strategy, this trend offers entirely new growth corresponding to about 23 per cent of the Swedish beer opportunities for the Group. market. The brewery has succeeded in increasing its mar- Seen in a global perspective, the beer industry continues ket share within all distribution channels. Due to the to show moderate growth, although with very large competitive situation Falcon introduced a beer in the regional differences. Asia and Latin America are expe- low-price segment at the Swedish state monopoly outlet riencing heavy increases in beer consumption, whereas Systembolaget. This initiative secured Falcon the leading consumption is stagnant/declining particularly in position as well as a positive development for its brands. Western Europe and Scandinavia. In 1998/99, Carlsberg's sales outside Denmark totalled 33 million hectolitres, Carlsberg, which is marketed by Falcon Bryggerier AB, has which is an increase of 5 per cent compared to last year. shown a positive development. Tuborg, which for a long time has been produced and distributed exclusively by AB Pripps, has now been partially transferred to Falcon. After several years of decline, sales have improved during the last part of the year. Falcon Bryggerier AB and Coca-Cola Nordic Beverages A/S co-operate on distribution through the 50/50 joint venture, Dryckes Distributören AB. The co-operation, which has been in a running-in phase, has resulted in a positive development in transport economics and customer service.

Finland Nordic Region The Finnish beer market has been under pressure because Nils S. Andersen of the increase in consumption of cider and soft drinks Group Managing Director among other things. However, the situation improved during the unusually warm summer, and beer sales are The division is responsible now at level with last year. Total beer sales in the market for the Group's brewery activities in Scandina- amounted to approx. 4.1 million hectolitres, and the via, Finland, Iceland and the Baltic States, in- annual per capita consumption of 80 litres is higher than cluding sales of Carlsberg and Tuborg as well as the European average. Lager now constitutes more than local brands. Group Managing Director Nils S. 85 per cent of total sales. Andersen is Chairman of the Supervisory Board of Coca-Cola Nordic Beverages, which handles The excise duties on beer continue to be among the high- soft drink activities in the Nordic region. est in the EU, and they have been put under pressure, not least due to the extensive private import from the Baltic States in particular.

19 The International Brewing Operations

Oy Sinebrychoff Ab, in which Carlsberg A/S has a 60 per growth. The retail trade accounts for 80 per cent of sales, cent interest, continues to capture market shares and primarily in 50 cl returnable bottles. now has approx. 40 per cent of the total market. During the period Sinebrychoff relaunched its main brand Koff. Due to the high level of import duties introduced in Despite increased competition from international compe- 1994, imported beer constitutes only a modest share of titors, Sinebrychoff's energy drink, Battery, managed to total sales. The Carlsberg and Tuborg brands are exported maintain its leading position in the segment. to this growth market.

Carlsberg is Finland's biggest international brand and is Other Markets marketed by Oy Sinebrychoff Ab. Carlsberg sales are In Greenland, the Carlsberg and Tuborg brands are mar- modest but increasing. keted by the partly owned production company Nuuk Imeq. Both brands are also represented in Iceland. Norway After a difficult year in 1998, the Norwegian market saw a positive development following the introduction of a UK system for returnable cans in May 1999. The system The beer market in the United Kingdom is characterised resulted in a considerable reduction in the substantial by continued intense competition, and the industry saw duties on disposable packaging. The sales of cans now considerable changes in the past year. The consolidation constitute 50 per cent of total sales in the retail trade. has continued with undiminished strength. This means Imported beer constitutes a small part of Norwegian con- that the number of particularly regional breweries is fall- sumption at 2 per cent of the alcoholic beer market. ing and the concentration among pub chains continues. Total sales amounted to 2.3 million hectolitres and the annual per capita consumption, which is hampered by the heavy excise duties, totalled 51 litres. Consumption thus ranks among the lowest in Europe.

In Norway, Carlsberg is distributed by Ringnes a.s. and the level of sales has been maintained. Carlsberg is the predominant international beer brand in Norway.

UK The largest international brand after Carlsberg is Tuborg, Ebbe Dinesen which is distributed by Hansa Borg Bryggerier ASA. Tuborg Chief Executive sales showed an extremely favourable development.

The division, which Lithuania comprises the 100 per cent owned subsidiary In April 1999, Carlsberg acquired the controlling interest Carlsberg-Tetley, is responsible for production, in one of the leading Lithuanian breweries, Svyturys AB, distribution and marketing of the Group's in the port town of Klaipeda. Other investors are The products in the United Kingdom. The compa- Investment Fund for Central and Eastern Europe (IØ) in ny's main products, Carlsberg and Tetley’s, Denmark and the European Bank for Reconstruction and are among the three leading brands in the UK Development. The brewery was founded in 1784 and in the Lager and Ale segments respectively. restructured as a limited company in 1990. Its brand Carlsberg-Tetley's head office is situated in Baltijos has a 26 per cent market share. Considerable Northampton, which also houses one of the investments have been made towards modernising and three breweries. The other two breweries are expanding the production plant. In order to keep up located in Leeds and Wrexham. The division with demand, investments to increase the brewery's capa- has a staff of 2,867 people. city continue. The Lithuanian beer market amounted to 1.7 million hectolitres. With a yearly per capita consumption of 47 litres there is considerable potential for

20 The International Brewing Operations

The result is increased market shares for the strong other things due to the effective exploitation of brands at the expense of smaller and local brands. Carlsberg's international sponsorships. Furthermore, Total beer sales in the UK amounted to 56 million hecto- international beer brands have captured a small, but litres which was a minor decrease of 2 per cent. The increasing share of the Polish market. With Poland's annual per capita consumption totalled 103 litres. opening to the EU, these brands are expected to make a Carlsberg-Tetley has now completed the second year of stronger impact in the future. The Polish brewing in- its restructuring plan. The objective is to make Carlsberg- dustry is currently undergoing a consolidation, which is Tetley the most efficient brewery in the market through anticipated to lead to a reduction in the number of reductions in the total cost base and necessary invest- breweries in the long run. The annual per capita con- ments in brewing plant and distribution. Carlsberg-Tetley sumption of beer is 52 litres. has invested in its breweries in Northampton and Leeds, leading to an increase in capacity. Consequently, it is Croatia now possible to transfer all draught production to these The beer market in Croatia has declined to a per capita two breweries. The scheduled closing of the Wrexham consumption of 72 litres a year due to the recession in brewery is expected to take place in February 2000. The the country. The brewery of Panonska Pivovara is one of past year also saw Carlsberg-Tetley opening a new natio- the most modern in the region, and its product portfolio nal distribution centre and closing several depots. consists of locally produced Tuborg and local Croatian Carlsberg-Tetley's total sales volume declined compared brands. The brewery achieved a small increase in its mar- with last year. This decline is attributable to a scheduled ket share, and Tuborg maintained its position among the reduction of the distribution agreement with Allied leaders in the premium segment. Domecq. Despite the pressure on sales volume, the operating profit is considerably better than expected. This is Romania due to, among other things, increased focus on the sales The Romanian per capita consumption amounted to 40 of the company's biggest brands with a higher margin, litres a year in a declining market caused by the econo- combined with considerable cost savings. mic recession. This trend particularly affected the devel- The Carlsberg brands are developing satisfactorily in the opment in sales for the premium brands. Through sub- lager segment, which constitutes an increasing part of stantial and dedicated efforts, United Romanian total beer consumption. New activities for Carlsberg Breweries Bereprod SRL succeeded in maintaining Export were received positively by consumers, strengthe- Tuborg's leading position in the premium segment and ning focus on the product and increasing sales. This simultaneously increased Tuborg's market share in makes it possible for Carlsberg-Tetley to play a more sig- Romania. In order to offer a broader portfolio, the brew- nificant part in the profitable and growing premium ery introduced the Skol brand in the standard segment in lager segment. the middle of 1999. In the past year, Tetley's Bitter again succeeded in increasing its share of the Ale segment. The total sales volume Russia also increased, which is satisfactory considering the con- The beer market initially declined significantly following tinued decline in Ale consumption. the Russian foreign-exchange crisis in August 1998. However, since the spring of 1999 sales have again shown a growing trend dominated by low-priced local Central, Eastern and Southern Europe standard products. The annual per capita consumption amounted to 20 litres. Poland The partly-owned Carlsberg brewery, Okocim, produces The Vena brewery, which is partly owned by Carlsberg beer exclusively for the premium segment. It registered through the Finnish company Sinebrychoff, registered declining sales for its Polish beer brands in a market with significant sales progress, but earnings were negatively moderate growth and intense competition. The brewery influenced by the weakened rubel. The brewery is under- was founded in 1845 and has a long-standing tradition as going renovation and is expanding in accordance with supplier of Polish quality beer. Carlsberg is produced schedule. The launch of locally produced Tuborg, which locally by Okocim and shows great progress, among is a strong brand in Russia, is currently being prepared.

21 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg ad) has been removed to reduce file size. The International Brewing Operations

Traditionally, Carlsberg Italia's main brand in the premium segment is Tuborg and sales were at a similar level to last year. Among the many Tuborg activities that took place, the Tuborg sponsored music festivals that were organised in several large Italian cities should be mentioned. Central, Eastern and Southern Europe In the past year, Carlsberg Italia has actively followed the Finn Jakobsen strategy of expanding its distribution through the acqui- Vice President sition of wholesalers, particularly in Northern and Central Italy. The division is responsible for the Group's brewery related activities in Central, Eastern Portugal and Southern Europe. The division sells Carlsberg A/S holds a considerable stake in the Portuguese Carlsberg, Tuborg as well as local brands brewery Unicer-União Cervejeira S.A. which, apart from from breweries in Group subsidiaries and its beer production also sells products within soft drinks, from licensees. The division is also responsi- water and cask wine. Despite intense competition, Unicer ble for exports to Group companies and other was able to consolidate its position as leader in a market partners in the region. where annual per capita consumption is 65 litres.

During the summer of 1999, Carlsberg, which is the leading international premium brand, was relaunched, attracting a great deal of attention from the media. Carlsberg is therefore now available in a light, green bottle. Advertising efforts were substantial and sales increased Israel considerably. Israel Beer Breweries Ltd. continues to report very satisfactory growth in sales volumes and market shares for both Tuborg Royal Danish, which is also produced and distri- Carlsberg and Tuborg. Among other things, this is due to buted by Unicer, recorded a stable development. It a high level of activity in the media and in sales channels. remains the preferred strong beer in the market, which is With an annual per capita consumption of 15 litres, beer dominated by light beer types, particularly lager. consumption in Israel remained stable at a relatively low level. However, increases are expected to follow improve- Spain ments in the economy and progress in tourism. In Spain, the production and marketing of the Carlsberg brand is handled by Spain's largest brewery, Grupo Italy Cruzcampo S.A. The annual per capita consumption is 68 The stagnating consumption of beer, amounting to 25 litres, and at the beginning of the year total sales showed litres per capita a year, and the concentration of suppliers a minor increase. Despite typically tough competition in in the Italian beer market resulted in increased competi- the market, the Carlsberg brand was able to maintain its tion. Carlsberg Italia S.p.A. did, however, manage to position in the international segment. This was partly due maintain its position as the third largest brewery in the to a successful and award winning advertising campaign market with a varied brand portfolio in all segments. called Carls & Berg, which strengthened the brand's The increase in Carlsberg sales was primarily due to local image. use of the Group's international football, skiing and music sponsorships. Particularly worth mentioning Carlsberg achieved considerable exposure as the main among the many sponsorship activities are the World sponsor of the World Championships in Athletics in Cup in alpine skiing in Sestriere and the MTV Music Seville in August 1999. Through the co-operation with Awards in Milan. Furthermore, Carlsberg was relaunched Grupo Cruzcampo, the sponsorship became a success and in a new international bottle. resulted in immediate improvements in sales.

23 To allow a faster download of this PDF-dokument, this full-page image (international Tuborg ad) has been removed to reduce file size. The International Brewing Operations

Grupo Cruzcampo was put up for sale, and in mid-1999 Kronenbourg S.A., the biggest brewery in France, handles an agreement was made between the owners of Grupo the distribution of Carlsberg and Tuborg to the retail Cruzcampo and Heineken regarding the sale of the com- trade, and the distribution of Carlsberg to the restaurant pany to Heineken. The completion of that agreement is, sector in the rest of France. however, still awaiting approval by the Spanish competi- Carlsberg is brewed locally at Brasseries Kronenbourg tion authorities. S.A., while Tuborg is imported from Denmark.

Other Markets Switzerland Carlsberg A/S's brands are produced and marketed in a In Switzerland, the total beer sales declined in the past number of other markets in the region on the basis of year and the annual per capita consumption totalled 59 licence agreements. litres. Due to declining consumption and continued growth of private labels, the market is characterised by Carlsberg is sold in Cyprus, Malta, Greece and The Canary intensified competition. Islands, while Tuborg is present in Turkey and Hungary. Tuborg is brewed under licence by Switzerland's largest brewery, Feldschlösschen Getränke AG, while Carlsberg is imported from Denmark. Despite the competitive situa- Western Europe and Exports tion, the sales of Tuborg showed a small improvement due to increased marketing efforts in connection with a Belgium relaunch of Tuborg. The total Belgian market continued to decline and the annual per capita consumption amounted to 98 litres. Private labels continue to prosper in the market and are becoming increasingly important. Despite fierce competition, the sales of the Carlsberg brand fully met expectations and again showed progress. Carlsberg is the largest imported international beer brand in Belgium. The Carlsberg and Tuborg brands still domi- nate the premium segment in the Belgian market and are ranked 1st and 2nd, respectively.

Carlsberg is marketed by Carlsberg Importers S.A.-N.V., Western Europe and and from April 1999, the company also became sole dis- Exports tributor of Tuborg. Carlsberg Importers is a joint venture Bjørn Søndenskov company between the Haelterman group and Carlsberg Vice President A/S, in which Carlsberg holds a 10 per cent share.

The division handles the majority of exports France from the Carlsberg Group companies, primarily Total beer sales in France, where annual per capita con- to markets in which the Group has no local sumption is 37 litres, continued to decrease. The fall in production. Furthermore, the commercial re- consumption is primarily attributable to the restaurant sponsibility for exports from the Group's brew- sector, whereas the retail trade has succeeded in main- eries in the United Kingdom is handled by the taining status quo. UK subsidiary Tetley’s Export Company. The division is responsible for licence agreements in Despite increased competition in the market, the sales of several Western European countries as well as the Carlsberg brand were stable. Carlsberg France S.A. the Group's brewery activities in Germany. handles distribution of Carlsberg, Tuborg, Super Bock (Portugal), Tetley's Export (UK), Skol (UK) and Halida (Vietnam) in the restaurant sector in Paris. Brasseries

25 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg ad) has been removed to reduce file size. The International Brewing Operations

Germany Exports Germany is still the biggest market for beer in Europe Total export sales showed a considerable increase despite with an annual per capita consumption of 127 litres. The the crisis in Russia and the CIS countries - which used to German beer industry is characterised by a highly frag- constitute important export markets for the Carlsberg mented brewery structure with more than 1,200 breweries Group. However, exports to these markets were resumed and 5,000 brands of mainly regional importance. Because by the end of the period although to a smaller extent of this structure the German market differs significantly than previously. Tuborg sales to Canada and the Middle from other Western European markets. Total beer con- East, and Carlsberg sales to the Caribbean and Australia sumption has shown a declining trend in recent years, showed growth. The economic crisis in Latin America which added to increasing excess capacity in the brewing and Africa affected exports to these areas. industry has resulted in intensive price competition. During the year, several new export projects have been launched including increased export efforts for Carlsberg It must be anticipated that this competitive situation will in Hungary, Uganda, Australia and Taiwan. lead to the long expected consolidation of the German Exports of both Carlsberg and Tuborg to the cross-border brewing industry in the years ahead. trade showed substantial growth in the past year. This was mainly because of the low excise duties and petrol Despite intensified competition, Tuborg managed to im- prices in Germany, the opening of the Great Belt bridge prove sales and maintains its position as Germany's lead- linking Denmark's main island with the Jutland peninsu- ing international brand. In July 1999, Hannen Brauerei la, and the intense marketing of border shops in the GmbH acquired the alt-bier brand Gatzweiler, which has a Danish media. The Carlsberg Group's launch of new prod- very strong position in Düsseldorf. This has strengthened ucts also helped to improve the market share which still Hannen's position in the regional market for speciality remains modest considering the Group's position in the beer and the brewery is now the second largest producer of Danish market, however. Alt-bier. The total sales of Hannen Brauerei showed a small increase for the branded products, however, the sales of Sales to the duty-free market, which primarily covered Hannen Alt were not satisfactory. The company, which is take-home sales on planes and ferry lines in Northern located in Nordrhein-Westfalen, is a wholly-owned Carls- Europe, ceased as of 1 July 1999 because of an EU deci- berg A/S subsidiary, and one of the most efficient breweries sion regarding sales within the EU. Sales on lines to non- of the Group companies. Apart from Tuborg, Hannen EU countries are not affected by this decision. Brauerei also produces and bottles Carlsberg and the Ger- man Alt-bier specialities Hannen Alt as well as Gatzweiler. Instead, a new market called Travel-Retail has emerged within the EU. Due to large differences in VAT and excise Ireland duties between the EU countries it is still possible to sell The Irish beer market again showed general growth and, products to people travelling within the EU. However, with an annual per capita consumption of 157 litres, sales in this segment are considerably lower than the for- Ireland ranks far above the European average. The major mer duty-free sales. part of beer sales takes place in the restaurant sector, which accounts for more than 85 per cent of total sales. Exports of Tetley's English Ale showed good progress in all markets and during the year Tetley's was launched in In recent years, lager beer has manifested itself as the the USA, Canada and in Malta, among other places. most important segment in the market and this development has continued in the past year. Carlsberg holds a strong position in this segment, and despite intensified competition the brand has maintained its position as the third largest lager brand. Carlsberg's position is continuously strengthened through growing investments in the brand, and, among other things, a new advertising campaign has been launched. Carlsberg is brewed under licence by Ireland's largest brewery, Guinness Ireland Limited.

27 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg ad) has been removed to reduce file size. The International Brewing Operations

Asia, Africa, North and Latin America the brewery in the Guangdong province in China. The marketing companies in Singapore and Taiwan were sold Malaysia to Carlsberg A/S. Thus, CBHK has become the holding Despite intense price competition, the Malaysian market company of the newly established marketing company experienced a declining trend with per capita consump- Carlsberg Hong Kong Ltd. (CHK) and of the two breweries tion totalling 7 litres a year. Carlsberg Brewery Malaysia Carlsbrew Brewery (Guangdong) Ltd. and Carlsbrew Brew- Berhad, in which Carlsberg A/S has a 27.85 per cent in- ery (Shanghai) Ltd. Together the two breweries handle terest, registered a decreasing volume in the domestic production, distribution and sales in China. market despite improved sales for Danish Royal Stout porter. Carlsberg Green Label is the leading lager brand China with a market share of 60 per cent. The decline in the The development in sales in China did not meet expecta- beer market is caused partly by the general economic tions. This regards the Carlsberg brand as well as the crisis in Asia and partly by higher beer prices following Group's local brand in Shanghai, Karhu. Despite a rising an increase in excise duties. The sales of beer to trend in the beer market, which amounted to an annual export/duty-free did, however, show good progress. per capita consumption of 16 litres, the sales of premium beer did not show a similar development. Together with Singapore increased price competition, this has resulted in declin- In Singapore, Carlsberg is marketed by Carlsberg Market- ing sales for the Carlsberg brand. ing (Singapore) Pte. Ltd., which Carlsberg A/S acquired A number of improvements have been initiated, includ- from Carlsberg Brewery Hong Kong Limited in May ing a change in the distribution structure. The positive 1999. This year, Carlsberg achieved a small improvement results of these initiatives are expected to take effect in in market shares in a stagnating market. the year 2000. The sales of the Group's local brand in southern China, Dragon 8, developed positively. Thailand In spite of the serious economic crisis in Thailand, the Vietnam growth in consumption has continued during the past The Vietnamese beer market has stagnated following the year, reaching 15 litres per capita annually. The develop- economic crisis in the country, but with an annual per ment has been particularly beneficial to the low-priced capita consumption of 7 litres, the market still has great segment. Carlsberg Brewery (Thailand) Co., Ltd., in which potential. Carlsberg A/S has a minority shareholding, is the market leader in this segment with Thailand's most popular beer brand - Beer Chang. The market for premium beer, which includes Carlsberg, has not followed the general market trend and sales of Carlsberg were stagnant. The general market development makes it necessary to increase capacity further and a third brewery with a ca- Asia, Africa, North and pacity of 4.5 million hectolitres is planned. Latin America Mogens Thomsen Hong Kong Vice President The economic crisis in Hong Kong seems to have passed, but the downward trend in beer consumption still con- The division is responsible for the Group's tinues. In recent years, Carlsberg's market share in Hong overseas brewery activities in Group com- Kong has declined slightly. panies and associated companies as well as licence partners in Asia, Africa and North With a view to adjusting the organisation to the changing and Latin America. The division sells Carls- market conditions, Carlsberg Brewery Hong Kong Ltd. berg and Tuborg as well as local brands. (CBHK) was restructured. Production in Hong Kong has ceased and the Hong Kong market is now supplied from

29 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg ad) has been removed to reduce file size. The International Brewing Operations

The sales of both Carlsberg and the local brands recorded North and Latin America a decline. In order to meet the growing demand for The total beer market in Canada was unchanged with an Carlsberg and Halida in the northern part of Vietnam a annual per capita consumption of 65 litres. Imports show- sales office was opened in that area. Furthermore, the ed substantial growth at the expense of local production. sales office in Nha Trang was merged with the office in Considering this trend, the sales of Carlsberg, which is Ho Chi Minh City located further to the south. brewed and distributed in Canada through a licence agreement with The Labatt Brewing Company Limited, Tuborg and the local brand from Hue Brewery Ltd., were satisfactory and showed a marginal increase unlike Huda, also experienced a small decline. the major part of the local brands. This growth can be attributed to Carlsberg's strong position in Toronto's South Korea draught beer segment, whereas sales of bottles/cans South Korea was badly affected by the economic crisis in remained unchanged. Asia, and consumers have, to some extent, replaced beer with cheaper alcoholic beverages. Thus, with an annual The export of Tuborg to the Canadian market showed per capita consumption amounting to 34 litres, the beer good progress. Tuborg is imported and distributed by the market is declining. Especially the sales of foreign brands Labatt-owned import company Oland Specialty Beer have deteriorated due to extensive customer loyalty Company. towards local brands. In the USA, the total sales of beer increased slightly and The premium brand Carlsberg, which is brewed by Hite for the second year in a row imports registered an in- Brewery Co. Ltd in South Korea, did register some increasing growth rate. The sales of Carlsberg remained crease however, although sales have not yet reached a largely unchanged but must still be characterised as satisfactory level. slightly unsatisfactory. The sale and distribution of Carlsberg in the United States is handled in co-operation In mid-April 1999 Carlsberg A/S acquired convertible with Labatt USA L.L.C. By the end of 1999, the distribu- bonds in Hite Brewery Co. Ltd.. When the bonds are tion of Carlsberg's products is expected to be fully devel- converted into share capital, Carlsberg will have a 15 to oped in accordance with the original goals. 20 per cent shareholding in the company. In 1996, Carlsberg and Brahma entered into an agree- Japan ment regarding production under licence in Brazil. This In Japan, the total beer sales were stagnant with an annu- was finally approved by the Brazilian authorities in al per capita consumption of 53 litres. Sales of beer with August 1999. Sections of the agreement, which relate to a malt content below 50 per cent – Happoushu – have other parts of South America, are still under considera- increased at the expense of regular beer. Excise duties are tion. The annual per capita consumption in the country lower on these products, which are consequently also amounted to 50 litres and showed a declining trend in cheaper. Happoushu now constitutes 20 per cent of total the past year. Beer imports are at a minimum as sales of beer sales. As the only foreign beer brand, Carlsberg has non-Brazilian brands declined significantly during the maintained its market share and position as the predomi- year. Considering the potential, the sales of Carlsberg nant international draught beer. Carlsberg's partner in remained slightly unsatisfactory. Japan is Suntory Limited. Other Markets In the Tivoli amusement park in Kurashiki, visitors have Carlsberg is also produced and sold in Nepal, Sri Lanka the possibility of enjoying several of the Carlsberg and Malawi by local breweries partly owned by Carlsberg Group's products, namely Carlsberg Elephant, Tuborg and in The Philippines and Indonesia on the basis of licen- and the locally produced Carlsberg Draft. ce agreements. Similar Tuborg licence agreements exist in Cameroon and The Ivory Coast.

31 Carlsberg’s Alcohol Policy

Carlsberg’s Alcohol Policy

Throughout history, beer has played an important part of As brewer of one of the world’s leading beer brands, daily life in most of the world. Most people enjoy drink- Carlsberg naturally cannot ignore the political debate ing a glass of beer while spending a pleasant time togeth- regarding alcohol in Denmark and internationally. er with friends or family. Furthermore, recent research Therefore, Carlsberg has decided to clarify its policies on has shown that moderate beer consumption has favour- alcohol consumption. This will be done internally at the able effects, especially in relation to cardiovascular dis- breweries by reinforcing information and education ac- eases. Naturally, this knowledge is inspiring and has a tivities and externally by initiating activities which positive effect on the political debate regarding alcohol. encourage sensible alcohol attitudes and limit abuse.

Carlsberg acknowledges that the abuse of beer products Based on the fact that the majority of consumers enjoy may have serious consequences for the individual as well beer in a sensible and moderate manner, Carlsberg wants as for society. Likewise, Carlsberg feels that any abuse in to focus on abuse in order to ensure that the efforts are connection with the consumption of our products will concentrated on the groups and individuals who are not damage Carlsberg’s reputation. able to recognise the personal and social consequences.

Apart from acknowledging its moral obligation, Carlsberg Carlsberg's alcohol policy: also has an interest in fighting abuse. Therefore, 1. Carlsberg stresses that beer is a low-alcohol product, Carlsberg has used a slogan emphasising that beer is "for which is compatible with a healthy lifestyle and thirst not for comfort" for quite a number of years in should be enjoyed in a responsible manner. However, Denmark. The slogan has been used extensively in adver- Carlsberg acknowledges the fact that extreme and tising campaigns and other marketing material. In 1993, excessive consumption of beer products may have Carlsberg co-founded GODA (The Association of Sensible adverse personal, social and health consequences. Alcohol Attitudes) which, among other things, is invol- ved in preventive information activities and instruction 2. Carlsberg recommends that consumers enjoy beer in specifically directed at young people. Through the a sensible manner and rejects abuse. Danish Brewers’ Association, Carlsberg has entered into an agreement with the authorities regarding a set of 3. Carlsberg will not actively market beer products to voluntary guidelines for the marketing of alcohol prod- children and young people. ucts - a strict set of rules governing the sale and marketing of beer in Denmark. 4. Carlsberg urges consumers to avoid drink-driving.

The Amsterdam Group and the European Brewers’ 5. Carlsberg aims at carrying out responsible sales and Association are working on the introduction of a similar marketing activities in accordance with current na- set of international voluntary guidelines to take effect in tional and international guidelines, and applicable the new year. legislation in the individual markets.

6. Carlsberg supports specific activities to promote sound beer culture and limit alcohol abuse and related damages.

32 Carlsberg’s Policy on Gene Technology

Carlsberg’s Policy on Gene Technology

Carlsberg has a long-standing and well-known tradition • Carlsberg considers gene technology to be part of the in research. Consequently, for several years now, it has natural scientific development, within the process of been normal practice to work with genetic engineering in refinement in its broadest sense. the basic research projects carried out at the Carlsberg Research Centre. • Carlsberg uses research into gene technology to Over the last few years, gene technology has also been obtain knowledge of the various techniques and to employed in research into raw materials at the research obtain a better insight into the genetic properties of laboratory, i.e. in the attempts to develop improved the raw materials. strains of yeast and malting barley. It is looked upon as a natural continuation of the traditional refinement and • The prerequisites for any utilisation of gene techno- cross-breeding work which has been going on for more logy in the brewing of beer is that it is approved by than a hundred years at Carlsberg. the authorities, that it does not involve any risk to the consumer, the environment or the staff, that the Research into yeast is well advanced and in many other technology is approved by the brewing industry, and sectors, primarily within production of drugs such as insu- that it is generally accepted by society both in lin, genetically-engineered yeast strains are widely used. Denmark and abroad.

Genetic research into barley has just begun, but it will Carlsberg has no plans at present to employ genetically- presumably be many years before genetically-modified modified raw materials or yeast strains. barley can be used in beer production. Because Carlsberg wishes to have the best possible information at its disposal and due to the significant number of positive aspects which exist in the area and on account of the public debate on these matters, Carlsberg’s management has formulated a precise policy on gene technology:

33 To allow a faster download of this PDF-dokument, this full-page image (international Coca-Cola ad) has been removed to reduce file size. Soft Drinks

Coca-Cola Nordic Beverages A/S (CCNB), which is now which is characterised by an extremely large per capita more than two years old, is a joint venture co-operation consumption of soft drinks. In 1998/99, CCDN succeed- between The Coca-Cola Company (49%) and Carlsberg ed in maintaining a positive trend in sales. (51%). CCNB was established because The Coca-Cola Company wanted to set up a global co-operation with a Coca-Cola Juomat Oy (CCJ), CCNB's Finnish subsidiary, limited number of units handling production, sale and co-operates with the 60 per cent Carlsberg-owned Oy distribution in a large geographic area and Carlsberg Sinebrychoff Ab on production and distribution of Coca- wanted to increase its focus on the beverage market in Cola products. CCJ experienced market progress in the the Nordic region. CCNB is one of the 11 "Anchor past year. Bottlers" designated by The Coca-Cola Company. In the spring, Iceland was added to CCNB's portfolio of During the year, the Icelandic bottler joined the group of countries with the acquisition of Vifilfell ehf, The Coca- wholly-owned CCNB companies with bottling plants in Cola Bottling Company of Iceland, which has produced Denmark, Sweden, Norway and Finland. CCNB's bottling Coca-Cola products under licence in Iceland since 1941. plants have the right to bottle, sell and distribute bever- Iceland has the highest per capita consumption of Coca- ages with The Coca-Cola Company's brands, including Cola products in the world - more than 100 litres. Coca-Cola, Coca-Cola Light, Fanta and Sprite. CCNB experiences increasing competition and aggressive The total soft drink consumption in the Nordic markets marketing from producers of both branded products and did not show the expected rate of growth. However, discount labels, while the customers want better and CCNB did increase its share of the total soft drink mar- more structured suppliers. As a consequence, CCNB has ket. worked intensely in 1999 on becoming an efficient "Anchor Bottler", as regards organisation as well as busi- In the past financial year, the Danish soft drink market ness procedures. saw an increase of 2.7 per cent. The production of all soft drinks of the Carlsberg Group as well as all Coca-Cola products takes place in Denmark at Coca-Cola Tapperierne A/S's (CCTD) production plants in Glostrup and Fredericia. This year CCTD decided to concentrate production in Fredericia, as this will make the company stronger and more competitive in the long term. In the past year the company experienced improved sales and Svend Ivan Petersen increased its market share. Chief Executive, Coca-Cola The Swedish market is supplied by Coca-Cola Drycker Nordic Beverages A/S Sverige AB (CCDS), which has one of the world's most modern production plants. The distribution is handled Coca-Cola Nordic Beverages is a joint ven- by Dryckes Distributören AB, a company established by ture between The Coca-Cola Company and CCDS and Falcon Bryggerier AB, which is 60 per cent Carlsberg A/S. The company has a staff of owned by Carlsberg. CCDS increased its market share in 3,352 people and total sales amounting to the past year. 8.8 million hectolitres of soft drinks in a geographic area covering the Nordic region. In Norway, Coca-Cola Drikker AS (CCDN) inaugurated its new factory in Lörenskog near Oslo in the spring. This factory supplies the majority of the Norwegian market,

35 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg sponsorship) has been removed to reduce file size. Group Staff Functions

A number of Group staff functions were established in of this organisational change is partly to ensure optimum connection with the implementation of Carlsberg's strat- use of the Group’s technical know-how as regards sup- egy project The Carlsberg Way of Doing Business. Their task port to the breweries and partly to optimise the use of is to service the individual divisions and provide quali- resources in the entire technology organisation. This fied support to ensure fast and flexible exploitation of the includes avoiding the building-up of cost-demanding resources and expertise available in Carlsberg's organisa- parallel competencies. tion. The technical organisation must have the necessary Corporate Communications resources to ensure: During the past year, Carlsberg has strengthened the communication within the Carlsberg Group. CCWeb, an • that the Executive Board and the Supervisory Board intranet site in English, has been expanded both as receive thorough information about each individual regards contents and users and, apart from general infor- brewery’s stage and development, mation and news, seven different departments now each • that targets securing competitiveness are set up at the have a home page on CCWeb, which they, among other breweries, things, use to exchange experience with colleagues in • that the breweries are given the necessary qualified Carlsberg’s breweries around the world. technical assistance. At present, the employees of 12 breweries have access to CCWeb, which is playing an increasingly significant part Operations Control is a relatively small unit which co- in the important exchange of knowledge between the operates closely and continuously with the Group’s brew- various companies. This process will be strengthened in eries. It ensures that optimum targets and guidelines as the years to come. regards product control, production costs, investments and environmental issues are established. The editorial content has been elaborated somewhat in Carlsberg’s international magazine "The Brew" which is Technical Services offers technical support from the entire now published six times annually. Employees all over the technology organisation, including Carlsberg Research word have access to in-depth information on the Group’s Centre and Danbrew. development, including The Carlsberg Way of Doing Business. The competence of this organisation will continue to be expanded in order to support the Group’s competitive During the spring of 1999, Carlsberg opened a new visit- strength. ors centre at the original and now protected Old Carlsberg brewery, which was founded by brewer J.C. Corporate Marketing Jacobsen in 1847. Each year, more than 100,000 visitors The Carlsberg brand is probably the company’s most at the Carlsberg Visitors Centre are introduced to important asset and major resources are spent on strength- Carlsberg’s fascinating history - from the very beginning ening the brand’s global position. Marketing activities are to today’s international brewery group. The new centre carried out in the local markets as well as by the Parent has attracted a great deal of attention, and a reviewer at Company. The secret lies in ensuring that the Carlsberg one of the leading Danish magazines described the brand represents similar values throughout the world Visitors Centre as “an innovation of the highest quality”. while at the same time paying attention to the significant cultural differences in the individual markets.

Corporate Technology Organisation The part played by Corporate Marketing consists of provid- At present, the technology organisation of the Carlsberg ing the local market organisations with the best possible Group is being restructured and this involves a division basis for their activities. This is primarily done through of the resources into two units: Operations Control and guidelines on the brand’s basic values and through global Technical Services, respectively. and regional activities supporting Carlsberg’s interna- This organisational change is a natural consequence of tional position. the division of functions which has taken place. The aim

37 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg sponsorship) has been removed to reduce file size. Group Staff Functions

Furthermore, various tools and advice are offered, and Once again, the international Task Force has successfully attempts are made to promote the exchange of inspira- supported the local markets in their promotion activities tion across the markets. and has made a great effort in connection with the carrying out of the major international activities. In the Brand Guardianship area, which focuses on ensuring the brands’ vitality and international consistency, a Human Resource Development new rejuvenated Carlsberg product design has been A Group HR Committee consisting of the HR managers introduced in a number of markets, including Carlsberg’s of the Group's subsidiaries has been established. The export range of products. committee formulates staff/HR strategies and co-ordinates practical issues such as rotations between the com- In order to strengthen the Carlsberg brand’s vitality and panies, recruitment and management training. relevance with the consumers, the global activities have Carlsberg's international expansion has led to increased been increased significantly. In the world of sports, Carls- focus on career planning, particularly for managers. A berg’s commitment to international football is a fine joint system for career and succession planning has been example. As one of the main sponsors of the finals in the established with the subsidiaries. Areas like occupation of Super Cup, the UEFA Cup and the Cup finals, as sponsor key positions and development of key employees are co- of Liverpool and, once again, as official main sponsor of ordinated with the Group companies to create a broad the European championships in football, Euro2000 in basis for recruitment of managers and specialists for the the Netherlands and Belgium, there is no doubt that Group companies. Carlsberg is Part of the Game. This message was presented to the consumers through advertisements in regional TV- Employees may apply for key positions across the compa- channels in Europe and Asia. nies, and information about vacant positions is published on the Group's intranet – CCWeb. As a result, more posi- In the area of alpine skiing, Carlsberg is not only an acti- tions than previously are now occupied by employees ve sponsor in a major number of events, such as the from other companies. This is in keeping with Carlsberg's World Championship and the World Cup in alpine ski- aim of having company managements consisting partly of ing, but also offers “Probably the best after-ski” to the local people with extensive knowledge of the market and consumers. The year’s biggest event in this area was the partly of people with international experience. World Championship held in Vail, USA, where Carlsberg In the past year, an agreement was made regarding the was very active. Carlsberg’s sponsorship of the exclusive establishment of a European Works Council (EWC) in the skiing site Verbier should also be mentioned in this con- Group. Elections for the EWC were held in the autumn nection. Moreover, Carlsberg sponsored the World of 1999. The EWC consists of representatives from brew- Championship in athletics in Seville in August 1999. eries, Royal Scandinavia and Coca-Cola Nordic Beverages in Finland, Sweden, Norway, Denmark, Germany, the On the music scene, Carlsberg sponsored the MTV United Kingdom and Italy. European Music Awards and, in this connection, the Carlsberg Best Fan Award was carried out as a global ac- Carlsberg International Training Centre offers a variety of tivity and used in a number of local markets. Other courses conducted in English within areas like sales and examples of Carlsberg’s activities in the music arena are marketing, production and distribution as well as HR to Carlsberg’s sponsorship of the English group Suede’s tour subsidiaries and partners. Additional offers are a in Asia and the North European event ‘Probably 99’ with Brewmaster education at Masters level, as well as practi- street sports and live music, which was also supplement- cal training at the Group's production sites. In the past ed with regional TV-advertising. season, employees from 31 countries participated in the Training Centre's courses and other offers. Next season, Finally, the international Corporate campaign, which has new courses within environmental policy, HR develop- illustrated how Carlsberg is delivered to all parts of the ment and sales management will be offered. world for more than 10 years, showed motifs from, among other places, Nepal, the Faeroe Islands, and Brazil in 1999.

39 Group Staff Functions

Corporate IT Contingency plans have been prepared in order to mini- A new IT-strategy has been developed for the Group. This mise the potential damages arising from failures in sys- strategy is to ensure that the Group's IT-solutions support tems and business procedures because of the millennium the business development in the best way possible, and change. Carlsberg has made every possible effort to ensu- that standardisation with a view to optimum use of re that no negative impact from the millennium change knowledge and synergies takes place across the compa- is caused by suppliers and service providers. nies. The strategy has been presented to the Group companies, and many have already begun the implementa- Corporate Finance tion. In this connection, a competence centre has been Carlsberg Corporate Finance is responsible for the man- set up to support the companies during the implementa- agement of financial development and standing at Group tion phase according to the philosophy: faster, less costly level. This is achieved through the approval of the budg- and better. Experience from previous implementation ets and business plans presented by the individual divi- projects, for example in the Danish division, is extensively sions. used as a basis. Each individual operating division reports the realised The implementation of the Internet-based CCWeb also figures as well as the estimated results to the Group man- continues. It is intended as a tool for general sharing of agement regularly. Throughout the year, the budgets and knowledge and for the competence development of action plans are monitored closely to ensure efficient Group employees within all business areas. management of the Group's economic development.

This year considerable attention has been focused on the Project Department year 2000 problems in all Group companies. In order to The Project department was re-established in 1999 as a achieve a smooth transition to the year 2000, extensive Group staff function because of the accelerating consoli- upgrading and replacement of IT systems and technical dation process in the international brewing industry. The equipment have been made. Project department has focused on external growth and

Carlsberg and its Employees

A company's most important asset is its staff. This also Thus, the majority of Carlsberg’s companies offer the holds true for Carlsberg, whose success is founded on employees a variety of leisure activities. The employees competent and committed employees. Today, approxi- can stay fit in the sports clubs which offer a wide range of mately 22,000 people work in the Group companies. The different types of sport. For those who are not interested jobs are numerous, but irrespective of whether they are in sports, there are various associations within areas such related to the purchase of raw material, production, dis- as photography, art, theatre, music, and so on. tribution, sale/marketing or customer service, each Furthermore, Carlsberg arranges various social events for employee helps to ensure that the consumer associates the employees and their families such as employee days, Carlsberg’s products with excellent quality. parties and guided tours.

Carlsberg’s tradition of an active and committed relation- Education is another important area which Carlsberg sup- ship to its employees is long-standing. It is not simply a ports. The employees are offered education and training matter of the general salary and working conditions, in many different areas, for example languages, IT, and including a pleasant and safe working environment. brewing technology. Carlsberg also wants the employees to be able to lead a healthy and interesting life after working hours.

40 Group Staff Functions

acquisition possibilities in Carlsberg’s target areas, which scientific presentations at the European Brewing has led to investments in the Hite brewery in South Convention in Cannes in May 1999. The laboratory has Korea, the Svyturys brewery in Lithuania, the Gatzweiler also developed an extremely sensitive method to detect brand in Germany and the Vifilfell Coca-Cola operation infections in connection with brewing procedures, so in Iceland. that Carlsberg and Tuborg beer is brewed with the high- The consolidation process has now entered into its sec- est possible hygienic standard. ond stage where the targets of the international brewing industry will be the acquisition of major national companies in mature markets without growth possibilities, or Corporate Treasury and Risk multinational brewing groups which have given up their Management ambitions of expanding further due to lack of resources. Corporate Treasury is the Group's central treasury and insurance unit. Corporate Treasury includes the treasury Strategic Sourcing department in Carlsberg A/S and the company Carlsberg Carlsberg Strategic Sourcing (CSS) was established in April Finans A/S. The two units have joint staff. Carlsberg 1998 and is staffed by experienced purchasing officers Finans A/S handles the large transactions, whereas the and employees who are responsible for the preparation day-to-day tasks are handled by the treasury department and implementation of global and pan-European sour- in Carlsberg A/S. Carlsberg Finans A/S is the internal cing strategies as well as the co-ordination of purchases bank connection and co-ordinates the deployment of the for selected breweries. The breweries participating are Group's cash resources and capital requirements as well Carlsberg in Denmark, Carlsberg-Tetley in the UK, Falcon as hedging transactions. in Sweden, Sinebrychoff in Finland, Hannen in Germany, The framework of the financial transactions is deter- Okocim in Poland, Carlsberg Italia in Italy and Unicer in mined by the Finance Committee, which is also the Portugal. Each brewery operates as an independent busi- Supervisory Board of Carlsberg Finans A/S. ness unit with due consideration to the strategies and goals set out by CSS for the relevant sourcing area.

The strategy as regards sourcing is to obtain substantial and measurable competitive advantages through the introduction of effective purchasing procedures and to establish close co-operation with selected suppliers, which can contribute to the overall objectives of the Carlsberg Group.

Research and Development In the past year, the Product and Process Development Department has played a central part in the development of the new PEN plastic bottle for beer. The bottle is a sen- sation within primary packaging and as such it has been the object of much publicity in the media all over the world.

Carlsberg has also strengthened its knowledge level regarding "Beer and Health" by establishing a group which gathers knowledge and sets up an effective knowledge bank which is used in the debate on this subject. All Carlsberg's research regarding any future employment of genetically-modified raw materials has been concentrated in the Carlsberg Laboratory. The Carlsberg Research Laboratory contributed with four

41 To allow a faster download of this PDF-dokument, this full-page image (international Carlsberg ad) has been removed to reduce file size. Accounts 1998/99

The Carlsberg Group Accounts, Notes etc. for 1998/99

43 Financial Review

1998/99 in outline: than last year. The decline is exclusively attributable to • Sales of beer and soft drinks amounted to 50.8 mil- "Financial items" and "Special items". lion hectolitres against 44.8 million hectolitres in 1997/98. As mentioned above, the operating profit of the Group is • Turnover of DKK 31.3 billion, an increase of DKK 2.0 larger than last year, which is primarily the result of billion. newly acquired Group companies in the international • Operating profit of DKK 1,673 million, against DKK beer division and improvements in CCNB's and 1,554 million in 1997/98. Danbrew's contributions to the consolidated accounts of • Special non-recurring items amounted to net DKK 79 the Carlsberg Group. However, items pulling in the million against DKK 243 million in 1997/98. opposite direction are beer activities in China, Russia, • Net financial items showed costs of DKK 119 million Germany and Denmark. against earnings of DKK 423 million last year. • Profit before tax totalled DKK 1,633 million, compa- On 30 September 1998, Carlsberg and The Coca-Cola red to DKK 2,220 million in 1997/98. Company signed an agreement to transfer activities in • Equity amounted to DKK 11.9 billion after appropria- Norway and Finland to Coca-Cola Nordic Beverages. tions to reserves from the profit of the year, deduc- These two companies are thus fully consolidated in tion of dividend and write-off of goodwill etc. compa- CCNB’s accounts for the entire financial year 1998/99. red to DKK 10.9 billion in 1997/98. As of 1 January 1999, CCNB also took over activities in Iceland from The Coca-Cola Company. Group goodwill Accounting policies in connection with this transaction has been written off Accounting policies are unchanged from last year. against equity in accordance with the Carlsberg Group's current accounting policies. The annual accounts have been prepared in accordance with Danish accounting legislation and the reporting In addition, Carlsberg acquired the controlling interest in requirements of the Copenhagen Stock Exchange, which Saltum-Houlbjerg A/S in Denmark in 1998/99 as well as include current Danish accounting standards. For further Svyturys in Lithuania. Carlsberg also acquired ConAgra's details please see “Accounting Policies” on page 49. 50 per cent shareholding in the Danish Malting Group. Group goodwill in connection with these transactions The annual accounts apply Carlsberg's accounting principle has also been written off against equity. In 1998/99 these of immediately writing off Group goodwill against equity. companies have contributed positively to Carlsberg's operating profit with an amount of just over DKK 50 mil- During the last five years the Carlsberg Group has made lion. considerable company acquisitions and has thus immediately written off DKK 3,476 million against equity, of Carlsberg also invested in the South Korean brewery Hite, which DKK 409 million occurred in 1998/99. If the initially through convertible bonds which can be conver- Group goodwill had been capitalised and amortised over ted into shares at a later stage. Carlsberg will then obtain 20 years, the Group's result before tax for 1998/99 would a shareholding of approx. 15 per cent. The capital partici- have been DKK 174 million smaller and, at 30 September pation (the convertible bonds) is included in the Balance 1999, equity would have been DKK 3,140 million larger. Sheet at cost price under "Other investments" in "Financial fixed assets". In the accounts of the Carlsberg Indirect production costs have not been included in the Group only the interest/dividend received from this value of the Group's stocks. Had such costs been inclu- investment will be included. ded, the stock’s value would have been DKK 321 million larger at year-end, while a gain of DKK 25 million would Turnover have been recorded for the operating profit. Sales of beer in the Group increased by 1.7 million hectolitres (+4.8 per cent) to 37.0 million hectolitres while soft The Profit and Loss Account, in general drink sales saw an increase of 4.3 million hectolitres The profit before tax of the Carlsberg Group amounted (+45.3 per cent) to 13.8 million hectolitres. to DKK 1,633 million, which is DKK 587 million lower

44 Financial Review

The turnover, which includes royalties, increased by been taken, and in the Parent Company, for instance, almost 7 per cent to DKK 31.3 billion, primarily due to new control systems to support simplified business rou- the addition of companies to CCNB reduced by the de- tines have been implemented with a satisfactory result. cline in turnover in the United Kingdom. The decline in In the CCNB group similar projects have been launched, the UK was in line with the expectations to the supply which will increase efficiency and improve support for agreements entered into with Allied Domecq. It was also the company's operations. caused by intensified focus on Group brands and less on the products in the lower-priced segment. Other operating income, net Other operating income mainly relates to the normal oper- In the aggregate, and adjusted for exchange rate trends ating profit from the Group's investments in property. This and the new acquisitions, the turnover of the Carlsberg financial year also saw construction activity, particularly in Group's beer business was slightly below last year both the area around Tuborg's former brewery property. internationally and nationally. Profit before tax of other associated companies Turnover in soft drinks showed an increase which is pri- The results of other associated companies showed a small marily attributable to the inclusion of the Coca-Cola increase compared to last year. The increase mainly deri- activities in Norway, Finland and Iceland. ves from the Polish brewery Okocim and Tivoli, whereas the Croatian brewery Panonska Pivovara recorded a small Turnover in companies outside the beverage sector is decrease. somewhat smaller than last year, among other things because of the divestment of 60 per cent of Vingaarden Special items, net after the first half of the financial year. However, this is This item includes significant non-recurring amounts by and large compensated for by increased turnover in which are not directly attributable to the normal running the engineering firm Danbrew. of the company. Last year this item included net gains of DKK 243 million against DKK 79 million this year. For Production costs 1998/99 this comprises gain from the divestment of busi- In the financial year, production costs increased by about ness areas, which includes share gain from the disposal of 7 per cent compared to last year. The production costs the 60 per cent shareholding in Vingaarden A/S totalling showed a relatively smaller increase than the increase in DKK 61 million. Furthermore, the Carlsberg Group sold turnover. This is the consequence of, among other non-operating property resulting in profits of approx. DKK things, the considerable restructuring measures imple- 130 million. Reversal of provisions not utilised in connec- mented in recent years, particularly in Denmark and the tion with completed projects amounted to DKK 56 million. United Kingdom, which are still in progress. Savings from these measures will continue to affect the annual Costs of about DKK 118 million to cover the closing of accounts positively in the years to come. Coca-Cola Tapperierne's production plant in Glostrup and the concentration of the entire Danish production Sales and distribution costs capacity in Fredericia have been registered as expendi- Sales and distribution costs showed an increase of almost ture. Carlsberg has allocated DKK 50 million for expendi- 13 per cent in the financial year which is primarily tures in connection with the scheduled division of the attributable to the newly acquired companies. organisation. Furthermore, the Carlsberg Group maintains a high level of advertisement and sponsorship activities. The distribu- Financial items tion sector is also currently undergoing structural chang- The financial items are considerably below the level of es that will result in cost-savings in the years to come. last year and the preceding years. This is due to the realisation of increased value of securities in previous years, Administration costs both as regards marketable shares and investment securi- The increase in administration costs can primarily be ties. In 1998/99 only minor capital gains were realised attributed to the newly acquired companies. Measures to compared to previous years, just as the write-down of improve efficiency in the administration functions have capital participations and investments was minimal.

45 Financial Review

Corporation tax foreign currencies. Deductions in equity are primarily Proportionally, corporation tax is above the level of last attributable to Group goodwill in connection with the year, which must be seen in the light of the fact that sig- takeover of the Coca-Cola activities in Iceland, Saltum- nificant special items and financial gains in the financial Houlbjerg as well as the Svyturys brewery in Lithuania year 1997/98 were not included in the taxable income. and the Danish Malting Group. The tax charge amounts to 29.2 per cent of the profit before tax compared to 21.4 per cent in 1997/98. Other provisions At 30 September 1999 other provisions amounted to DKK Minority interests 1,589 million against DKK 2,557 million last year. This Minority interests have changed from constituting a net year additions of DKK 331 million were recorded under part of a profit in 1997/98 to covering a minor part of a this item and disposals of DKK 1,299 million. loss in 1998/99. This is, among other things, due to the Coca-Cola activities in Norway and Finland, which regis- Additions under this item during the year amounting to ter negative results during the running-in period. In addi- DKK 43 million are related to the scheduled transfer of tion, the minority interests in Russia and China are also Coca-Cola Tapperierne's production from Glostrup to burdened with their part of the recorded deficit. Fredericia. The provisions include amounts for severance payments, expenses for the transfer of technical equip- The balance ment and other expenses necessary to complete the proj- The balance sheet total at 30 September 1999 was redu- ect. The write-down of excess production equipment to ced by 3.4 per cent compared to last year. This is mainly the expected realisable value has been deducted from the ascribable to the employment of available funds, for book value of the assets. In connection with the said example for the acquisition of companies, reduction of restructuring of production, a restructuring and adjust- loans and application of provisions. ment programme has also been initiated within distribution. This has resulted in provisions of DKK 45 million. In As in previous years, further information about unbooked the light of the declining beer consumption, the Danish added value in the balance sheet can be seen in the beer division has made provisions for initiated structural Notes. changes within logistics and sales, amounting to DKK 80 million. Provisions totalling DKK 50 million have also Tangible fixed assets been made to cover the realisation of the previously men- The increase in this item is derived partly from newly tioned division of Carlsberg's organisation. The remaining acquired companies and partly from the substantial additions, amounting to DKK 113 million, relate to restructuring initiatives begun within several areas of the various IT adjustments, other adjustments and guarantees Carlsberg Group. which may arise in Carlsberg's Group companies.

Deferred taxation Provisions of previous years have been applied in accor- Last year the Carlsberg Group changed its accounting dance with the original plans. This concerns the applica- policy to include deferred tax assets in the balance sheet. tion of provisions made on 1 October 1997 to cover the Both the Group's deferred tax assets and liabilities have running-in expenses for CCNB and structural changes increased during this financial year. This is, among other during the start-up phase of the group. In 1998/99, DKK things, a consequence of tax assets from Group compa- 420 million after tax were used for these purposes within nies which are entitled to carry-forward losses and, as re- production, sales, distribution and administration. The gards liabilities, from an increase in taxable depreciation group has used considerable amounts for, among other allowances in profit-yielding companies. things, the running-in of new production plant, a new distribution system, the discontinuing of a temporary bott- Equity ling contract as well as for employment of new staff and The increase of the Group's equity mainly derives from training within almost all business areas. The remaining appropriations to reserves from the result for the year as part of these provisions amounted to DKK 540 million well as net exchange rate adjustments of capital invested after tax and will be applied during the following three in Group companies and the related long-term loans in financial years. At the year-end of 1996/97 provisions were

46 Financial Review

made for an extensive three-year restructuring programme credit facilities amounted to DKK 3.0 billion. About DKK at Carlsberg-Tetley. The project is proceeding according to 1.4 billion of the available funds consist of Danish bonds plans, and in 1998/99 expenditures of DKK 273 million, with an average duration of about 1.7 years. particularly for severance payments, were applied. The project is expected to be completed in the financial year Carlsberg's loan portfolio consists of listed bond loans, 1999/00 in which the remaining amount of DKK 165 mil- bilateral loan agreements and syndicated credits, primari- lion is also expected to be spent. In 1995/96 Carlsberg ly drawn in currencies in which Carlsberg holds assets. received compensation from the former partner in The listed bond loans are: Carlsberg-Tetley, Allied Domecq, covering future reduc- CHF 100 million, maturity 2004 tions in income and additional expenses in relation to GBP 200 million, maturity 2013 new supply agreements and pension schemes. The share of the compensation relating to 1998/99 has been registered To hedge against interest rate risks, interest rate instru- as income in the profit and loss account, amounting to ments as well as fixed and variable rate financial facilities DKK 141 million after tax, and DKK 65 million will be are applied. In that connection 61 per cent of the long- registered in 1999/00. In previous years Carlsberg reserved term loans are raised at fixed rates to maturity and 39 per DKK 200 million to cover risks in Group companies. That cent at variable rates. amount has been used for the write-down of assets in the Vena brewery in Russia due to the instability in the coun- Foreign currencies try. The remaining use of provisions, totalling DKK 265 The Carlsberg Group works on a global scale, and the million, was related to the restructuring measures initiated preparation of the annual accounts consists in the in previous years in Denmark and in Royal Scandinavia adding up of items in a number of different foreign cur- and to unused amounts from completed projects registered rencies. The distribution of currencies is illustrated by the in the profit and loss account under special items. graphs below, comprising five different categories of currency: the Danish krone, British pound, other Western Cash flow European currencies, Asian currencies and miscellaneous. The cash flow statement has been prepared in accordance Turnover excl. excise duties 1998/99: with the Danish Accounting Standard No. 11. The DKK 24.2bn (1997/98: DKK 22.1bn) statement gives a complete overview of the origin and application of the cash flow throughout the year. Cash Danish kroner flow from the operation of the Group, inclusive of finan- British pounds cial items, but exclusive of changes in the working capi- Other Western tal amounted to DKK 2.7 billion. In addition, the Group European currencies has sold securities and companies resulting in a positive Asian currencies contribution of DKK 1.5 billion. DKK 2.0 billion is applied for the purchase of tangible fixed assets, DKK 0.6 bil- Miscellaneous lion for acquisition of companies etc., and increase of %05 10152025303540 tied-up working capital amounted to DKK 0.9 billion. 97/98 98/99 During the year DKK 1.1 billion has been used for provi- Operating profit 1998/99: sions and special items net, and when summed up, and DKK 1,673m (1997/98: DKK 1,554m) taking into account other Group debt reductions, a negative cash flow of DKK 2.1 billion appears for the Group. Danish kroner At 30 September 1999, the Group holds liquid assets British pounds totalling DKK 1.8 billion. Other Western European currencies

Available funds Asian currencies At 30 September 1999 the funds available, consisting of liquid funds and listed securities, amounted to DKK 3.2 Miscellaneous billion. This has been calculated using the official stock %010 2030405060 exchange prices. Furthermore, confirmed but unutilised 97/98 98/99

47 Financial Review

Assets berg Group has aimed at balancing assets and liabilities at Danish kroner a reasonable level in the individual currency categories, the development in exchange rates has resulted in a com- British pounds paratively equal increase/decrease in assets and liabilities. Other Western European currencies

Asian currencies Financial risks As a consequence of many sizeable international invest- Miscellaneous ments and reasonably large liquid stock, the Carlsberg %05 10152025303540 Group is obviously exposed to a number of financial Liabilities risks. Currency exposure arises as a result of the fact that Danish kroner about 47 per cent of the Group's primary operations orig- inate from foreign Group companies translating into British pounds Danish kroner according to a computed average, and Other Western European currencies fluctuations in these currencies will directly impact on

Asian currencies the profit and loss account of the Group. With reference to the chart showing the distribution of primary oper- Miscellaneous ations above, it will be fluctuations particularly in the %05 10152025303540 British pound and other Western European currencies As appears from the graph no significant changes have that will influence the Group result. been made regarding the distribution of currencies compared to last year. Danish kroner, British pounds and In the balance sheet, fluctuations in exchange rates affect other Western European currencies remain the central primarily the translation of the foreign subsidiaries' equi- currencies for Carlsberg. ty at the exchange rate ruling at the balance sheet date. Assets and liabilities within the individual currency catego- Adjustment is made directly against equity as is the case ries are practically of the same dimension, with the British for the long-term loans in foreign currency raised to pound showing a bias in favour of the liabilities however. cover the investments. Not all investments are covered, but the uncovered part is not assessed to affect the When included in the Carlsberg Group accounts, the Group's equity substantially. accounts of foreign subsidiaries and associated companies are translated into Danish kroner in accordance with the The Carlsberg Group advances loans to the on-trade, par- official exchange rates. The balance sheet applies the ticularly in the United Kingdom through Carlsberg- exchange rates on the balance date whereas the profit Tetley. Even though loans have been reduced during the and loss account is translated according to a computed past years, total loans still constitute a considerable item average of the exchange rates throughout the year. The in the balance sheet. The loans are subjected to continu- development in the exchange rates of importance to the ous control and supervision, and it is assessed that provi- Carlsberg Group is as set out below: sions to the reserves are sufficient to cover any loss.

Profit and Loss Account Balance Sheet 44 per cent, or DKK 1.4 billion, of Carlsberg's liquid stock Currency 1997/98 1998/99 1997/98 1998/99 is in the form of Danish bonds with a DKK duration of GBP 1122.12 1101.35 1082.21 1146.20 approx. DKK 24 million, with which amount the year's USD 679.04 676.63 637.10 696.37 DEM 380.96 380.19 380.29 380.05 result will be reduced should the interest rate increase by FIM 125.72 125.05 124.92 125.02 1 per cent. The liquid funds included in the liquid stock SEK 86.31 82.75 81.11 85.24 of about DKK 1.8 billion are invested as short-term de- PTE 3.72 3.71 3.71 3.71 posits in banks or other financial credit institutions, all ITL 0.39 0.38 0.38 0.38 having satisfactory creditworthiness. It is assessed that CHF - - 459.37 465.30 these arrangements involve no risk of loss. As is shown in the table, all currencies stated have weakened compared to last year. The profit and loss account for The Carlsberg Group primarily applies financial instru- this financial year is, to an insignificant extent, influenced ments to cover agreements, resulting in no other signifi- negatively by these currency developments. As the Carls- cant material risks to the Group.

48 Accounting Policies

Accounting Policies In the case of disposal of subsidiaries and associated com- The annual accounts have been prepared in accordance panies, the company's result is included in the Group's with Danish accounting legislation and current account- profit and loss account until the date of disposal. Any ing standards. The accounting policies are unchanged realised gains or losses constituting the difference in from last year. To facilitate comparison, a reclassification value compared to the book value at the date of disposal of costs in the comparative figures for 1997/98 has been is recorded in the profit and loss account. made. The reclassifications in question particularly relate to the transfer of costs between the functions produc- Foreign Currencies tion, sales and distribution and administration. The accounts of foreign subsidiary and associated companies are translated into Danish kroner at the average Consolidation Principles exchange rates during the financial year for income and The Group accounts for the Carlsberg Group comprise the expense items and at the exchange rates using the clos- accounts of the Parent Company, Carlsberg A/S, and its ing rate for assets and liabilities. Exchange gains and loss- subsidiaries, i.e. entities in which the Parent Company, es resulting from the translation of the net assets of directly or indirectly, holds a controlling interest. foreign companies at exchange rates using the closing The Group accounts also include associated companies, rate are taken directly to equity. which by agreement are managed jointly with one or more other companies based on pro-rata consolidation in the Amounts receivable and payable in foreign currencies Group accounts, with the proportionate ownership share have been translated into Danish kroner at the exchange of the individual assets, liabilities, income and expenses. rates ruling at the balance sheet date. Hedging arrange- Other associated companies are included in the accounts at ments are assessed separately. Realised and unrealised a proportionate share of their financial results and equity. exchange gains and losses are recorded in the profit and loss account. Exchange gains or losses after tax on liabil- The Group accounts have been prepared on the basis of ities to hedge investments in subsidiary or associated the accounts of the Parent Company and its subsidiary companies are taken directly to equity. and pro-rata consolidated companies, by combining items of a uniform nature and eliminating intercompany Turnover sales, licences, interest, dividends, profits and balances. Sales are recorded as income upon delivery. Licence fee Shareholdings in subsidiary and pro-rata consolidated income is recorded on the basis of amounts earned during associated companies have been offset against a propor- the year. Contract work in progress for the account of third tionate share of the equity of the relevant companies, parties is recorded under the percentage of completion stated in accordance with the accounting policies of the method and is recorded in the balance sheet under stocks Group. Minority shareholders’ share of profit and equity after a conservative evaluation of each contract. in subsidiaries has been stated separately. Research and Development Expenditure In the case of acquisition of subsidiary and associated com- Research and development expenditure is charged to the panies as well as increases in shareholdings therein, any profit and loss account as incurred. excess of the cost price over net assets stated in accordance with Group accounting policies at the date of acquisition Special Items is, wherever possible, allocated to the assets and liabilities This item includes significant non-recurring items which of the relative companies. Any remaining amount (Group are not directly attributable to the normal running of the goodwill) is taken directly to equity. As a starting point, company, including certain relatively large profits or loss- any negative difference in value (reduction in value) is ta- es arising from disposals, special write-downs, provisions ken to equity. To the extent that a negative difference in and any reversals of such items. value at the time of acquisition is attributable either to expected reductions in future operating results or in restruc- Share of Subsidiary and Associated turing expenses, the difference in value is appropriated to Companies’ Profit or Loss other reserves and used when the reductions and expenses Share of the profit or loss of the subsidiary and associated are realised. companies is recorded in accordance with the accounting

49 Accounting Policies

policies of the Carlsberg Group. Adjustments are made stated in the balance sheet of the Parent Company with a for changes in unrealised intercompany profits and the share of the net assets of the companies in question in result is entered in the profit and loss account of the accordance with Group accounting policies, less unreal- Parent Company. Share of the estimated tax charge of ised intercompany profits. these companies is recorded under corporation tax. Other financial fixed assets are stated at cost or lower value at the balance sheet date. Corporation Tax The Parent Company is taxed jointly with its wholly- Stocks owned Danish subsidiaries and certain foreign subsidiaries. Stocks are stated at purchase price or production cost The aggregate tax charge of the jointly-taxed Danish com- (average method), or net realisable value, if lower. Write- panies is allocated to the individual entities in proportion down is effected for obsolete stocks. Production over- to their taxable incomes (the full allocation method). heads are not included in the production cost.

Deferred Tax Marketable Securities Deferred tax is provided for all temporary differences be- Marketable shares and bonds are stated at cost or at the tween accounting and tax values and deferred tax assets quoted price at year end if lower. are included in the balance sheet at the expected realis- Realised and unrealised gains or losses, constituting the able value. Provisions are not made for deferred tax which difference between sales proceeds and cost, are included may arise from the realisation of shares at book value. in the profit and loss account.

Intangible Fixed Assets Financial Instruments Intangible fixed assets are charged against income in the Financial instruments, including forward exchange con- year of acquisition. However, Group goodwill is written off tracts and options, are used in the normal course of busi- against equity. In case intangible fixed assets are taken ness of the Group, mainly to cover existing commit- over in connection with the acquisition of a company, the ments, as well as repos. Financial instruments are treated amount is included in the computation of goodwill. in the accounts in accordance with the accounting policies applied for the underlying assets and liabilities. Tangible Fixed Assets Tangible fixed assets are recorded at purchase price or Cash Flow Statement cost less accumulated depreciation. Value adjustments The cash flow statement has been prepared in accordance have taken place in certain foreign subsidiary and associ- with the indirect method and is based on the Group's ated companies in accordance with local accounting operating profit. The statement shows the Group's cash practice. The draught beer equipment of Carlsberg-Tetley flows in operating activities, investing activities and is recorded as a basic stock stated at cost. Depreciation is financing activities as liquid funds at the beginning and provided under the straight-line method over the estima- end of the financial year. ted economic lives of the assets: Cash flows from operating activities include the Group's operating result adjusted for financial items, corporation Buildings 20 - 50 years tax paid, depreciation and other items not involving cash Plant and machinery 10 - 20 years receipts and cash payments. The adjusted operating Other fixtures and fittings, profit is regulated for the change in the working capital tools and equipment such as stocks, debtors, creditors etc for the year. including soft drink machines 3 - 10 years Cash flows from investing activities arise from the acquisi- Plastic crates and returnable bottles together with other tions and disposals of undertakings, investments in other minor fixed assets are charged against profits in the year fixed assets and dividends received. of acquisition. Cash flows from financing activities include dividends paid by the Parent Company and changes in long-term debt etc. Financial Fixed Assets Shareholdings in subsidiary and associated companies are Liquid funds at the end of the financial year include cash less short-term bank debt due on demand.

50 Turnover, Operating Profit and Equity - in major subsidiaries and associated companies (based on the accounts reported by the companies to the Carlsberg Group)

Operating Turnover profit Equity DKK million DKK million DKK million Share

Companies outside Denmark Carlsberg-Tetley PLC, Northampton, United Kingdom 8,908 331 5,227 100% Oy Sinebrychoff, Helsinki, Finland 5,351 240 781 60% Unicer-União Cervejeira, S.A., Porto, Portugal 1) 2,373 303 1,316 31% Carlsberg Brewery Malaysia Berhad, Kuala Lumpur, Malaysia 1) 1,425 213 833 28% Carlsberg Italia S.p.A., Varese, Italy 1,101 36 108 75% Okocimskie Piwowarskie S.A., Brzesko, Poland 2) 648 95 619 45%

Companies in Denmark Coca-Cola Nordic Beverages A/S, Copenhagen 5,868 -209 4) 1,076 51% Danbrew Ltd. A/S, Copenhagen 518 76 319 100% Royal Scandinavia A/S, Copenhagen 2,186 103 1,655 65% A/S Kjøbenhavns Sommer-Tivoli, Copenhagen 3) 339 24 278 43%

The figures shown for turnover, operating profit and equity represent the aggregate accounting figures for the companies in question.

1) Pro-rata consolidated associated company. 2) Other associated company. The figures shown are from the calendar year 1998. 3) Other associated company. 4) Included in the accounts of the Carlsberg Group after adjustment for Carlsberg's provisions for structural changes and running-in expenses as mentioned in the Financial Review.

51 Group Companies

Carlsberg A/S Share Exchange Share capital DKK 1,278,125,640 capital in rate at Share 1,000 Currency 30.09.99 Brewing Companies Denmark Carlsberg A/S, Copenhagen Nordic Region Oy Sinebrychoff, Helsinki, Finland ...... ❍ 60% 244,985 FIM 125.02 6 subsidiaries Falcon Holding Ab, Falkenberg, Sweden ...... ❍ 3) 60% 150,000 SEK 85.24 UK Carlsberg-Tetley PLC, Northampton, England ...... ❍ 100% 90,004 GBP 1146.20 Carlsberg-Tetley Brewing Limited, Northampton, England 6 subsidiaries Central, Eastern and Southern Europe Carlsberg Italia S.p.A., Varese, Italy ...... ❍ 75% 8,400 ITLm 0.3800 13 subsidiaries Unicer-União Cervejeira, S.A., Porto, Portugal ...... ◆ 1) 2) 31% 19,500 PTEm 3.710 7 subsidiaries Cervuniao-Gestao e Investimentos, SGPS, Lda., Porto ...... ❏ 2) 50% 3,600 PTEm 3.710 C.O.S.A.R.-Sociedade Gestora de Participações Sociais, Lda., Porto . . . ❏ 2) 50% 3,324 PTEm 3.710 S.A.R.C.-Sociedade Gestora de Participações Sociais, Lda., Porto . . . . ❏ 2) 50% 3,324 PTEm 3.710 International Breweries B.V., Bussum, Netherlands ...... ❏ 20% 62 USD 696.37 Israel Beer Breweries Ltd., Ashkelon, Israel ...... ❏ 20% 42 ILS 163.00 Nuuk Imeq A/S, Nuuk, Greenland ...... ❏ 24% 38,000 DKK Okocimskie Piwowarskie S.A, Brzesko, Poland ...... ❏ 1) 45% 22,000 PLN 170.00 Panonska Pivovara d.o.o., Koprivnica, Croatia ...... ❏ 40% 159,932 HRK 98.29 AB Svyturys, Klaipeda, Lithuania ...... ❍ 58% 18,000 LTL 174.10 Western Europe Carlsberg France S.A., Paris, France ...... ❍ 100% 5,200 FRF 113.32 Hannen Brauerei GmbH, Mönchengladbach, Germany ...... ❍ 100% 35,003 DEM 380.05 5 subsidiaries Asia, Africa, North and Latin Amerika Carlsberg Agency Inc., New York, USA ...... ❍ 100% 10 USD 696.37 1 subsidiary Carlsberg Marketing (Singapore) Pte Ltd., Singapore ...... ❍ 100% 1,000 SGD 409.00 Carlsberg Asia Pte Ltd, Singapore ...... ❍ 100% 100 SGD 409.00 Carlsberg Brewery Hong Kong Limited, Hong Kong ...... ❍ 51% 250,000 HKD 89.65 4 subsidiaries Carlsberg Brewery Malaysia Berhad, Kuala Lumpur, Malaysia ...... ◆ 1) 28% 153,000 MYR 185.25 2 subsidiaries Gorkha Brewery Ltd,Katmandu, Nepal ...... ❏ 48% 466,325 NPR 10.00 Hue Brewery Ltd., Hue, Vietnam ...... ❏ 35% 216,788 VND 0.05 Carlsberg Malawi Brewery Limited, Blantyre, Malawi ...... ❍ 49% 20,000 MWK 16.27 Southern Bottlers Limited, Blantyre, Malawi South-East Asia Brewery Ltd., Hanoi, Vietnam ...... ❏ 35% 212,705 VND 0.05 Other Companies Carlsberg International A/S, Copenhagen ...... ❍ 100% 1,000 DKK Danbrew Ltd. A/S, Copenhagen ...... ❍ 100% 2,000 DKK 1 subsidiary Danish Malting Group A/S, Vordingborg, Denmark ...... ❍ 100% 100,000 DKK Tuborg International A/S, Copenhagen ...... ❍ 100% 1,000 DKK United Breweries International Limited A/S, Copenhagen ...... ❍ 100% 500 DKK Soft Drink Companies Coca-Cola Nordic Beverages A/S, Copenhagen ...... ❍ 51% 600,009 DKK 5 subsidiaries Saltum-Houlbjerg Bryggerier A/S, Saltum, Denmark ...... ❍ 100% 10,000 DKK Other Companies A/S Kjøbenhavns Sommer-Tivoli, Copenhagen ...... ❏ 1) 43% 45,733 DKK J.C. Bentzen A/S, Copenhagen ...... ❍ 100% 30,000 DKK Carlsberg Finans A/S, Copenhagen ...... ❍ 100% 25,000 DKK Carlsberg (UK) Limited, Northampton, England ...... ❍ 100% 100 GBP 1146.20 Ejendomsaktieselskabet matr. nr. 43ei Avedøre by, Copenhagen . . . . ❍ 100% 10,000 DKK Ejendomsaktieselskabet Tuborg Nord B, Copenhagen ...... ❍ 100% 25,000 DKK Ejendomsinteressentskabet Tuborg Nord B Ejendomsaktieselskabet Tuborg Nord C, Copenhagen ...... ❍ 100% 10,000 DKK Ejendomsaktieselskabet Tuborg Nord D, Copenhagen ...... ❍ 100% 10,000 DKK Investeringsselskabet af 29. oktober 1962 A/S, Copenhagen ...... ❍ 100% 5,000 DKK 3 subsidiaries Nepko A/S, Copenhagen ...... ❍ 100% 1,000 DKK Royal Scandinavia A/S, Copenhagen ...... ❍ 1) 65% 323,321 DKK 36 subsidiaries Vingaarden A/S, Odense, Denmark ...... ❏ 40% 15,000 DKK 3 subsidiaries

Symbols ❍ Subsidiaries ◆ Pro-rata consolidated associated company ❏ Other associated company 1) Stock-exchange listed company 2) The three Portuguese companies jointly own the controlling interest in the listed company Unicer-Uniäo Cervejeira, S.A. which is pro-rata consolidated 3 ) Falcon Holding is 100 per cent owned by Oy Sinebrychoff Ab 52 Profit and Loss Account 1998/99

Parent company Group

1997/98 1998/99 Note 1998/99 1997/98 DKK DKK DKK DKK million million million million 4,760 4,601 1 Turnover 31,285 29,321 1,635 1,535 2 Production costs 12,699 11,894 1,151 1,088 Excise duties on beer and soft drinks, etc. 7,131 7,237 1,974 1,978 Gross profit 11,455 10,190 1,555 1,688 2 Sales and distribution expenses 8,194 7,258 269 211 2 Administrative expenses 1,743 1,532 71 48 3 Other operating income, net 91 102 1,283 1,082 4 Profit before tax of subsidiaries 4 Profit before tax of pro-rata 115 170 consolidated companies 4 Profit before tax 45 56 of other associated companies 64 52 1,664 1,435 Operating profit 1,673 1,554 -147 153 5 Special items, net 79 243 1,517 1,588 Profit before financial items 1,752 1,797 326 38 6 Income from other financial fixed assets, etc. 46 337 713 492 7 Other interest income and similar income 593 755 63 16 Write-down of financial fixed assets, marketable securities, etc. 23 87 436 473 8 Interest expenses and similar expenses 735 582 2,057 1,629 Profit before tax 1,633 2,220 416 465 9 Corporation tax 477 476 Group profit 1,156 1,744 Minority interests -8 103 1,641 1,164 Profit for the year, Carlsberg A/S's share 1,164 1,641

Proposed appropriation: 256 256 Dividend to shareholders 1,385 908 Appropriated to reserves 1,641 1,164

53 Balance Sheet at 30 September 1999

Parent company Assets Group

30.9.98 30.9.99 Note 30.9.99 30.9.98 DKK DKK DKK DKK million million million million Fixed assets 10 Tangible fixed assets 1,408 1,288 Land and buildings 4,730 4,381 996 928 Plant and machinery 5,737 4,513 76 109 Other fixtures and fittings, tools and equipment 3,082 2,767 197 29 Construction in progress 374 1,069 2,677 2,354 13,923 12,730 11 Financial fixed assets 6,255 8,167 Shares in subsidiaries 364 326 Loans to subsidiaries 1,001 1,152 Shares in associated companies 769 680 16 - Loans to associated companies 4 22 246 590 Other investments and shareholdings 624 278 0 0 Other loans 1,516 1,411 - - 16 Deferred tax 1,077 698 0 0 12 Holding of own shares 0 0 7,882 10,235 3,990 3,089 10,559 12,589 Total fixed assets 17,913 15,819

Current fixed assets Stocks and debtors 120 103 13 Stocks 2,150 2,066 266 307 Trade debtors 4,665 4,232 3,577 1,483 Amounts owed by subsidiaries 39 176 Amounts owed by associated companies 280 110 430 804 Other debtors 1,394 1,630 13 11 Pre-payments and accrued income 247 254 4,445 2,884 8,736 8,292 Marketable securities and liquid assets 165 28 14 Shares 30 167 2,687 1,415 14 Bonds and other securities 1,417 2,784 135 719 Cash at bank and in hand 1,793 3,890 2,987 2,162 3,240 6,841 7,432 5,046 Total current assets 11,976 15,133

17,991 17,635 Total assets 29,889 30,952

54 Balance Sheet at 30 September 1999

Parent company Equity and liabilities Group

30.9.98 30.9.99 Note 30.9.99 30.9.98 DKK DKK DKK DKK million million million million 15 Equity 1,278 1,278 Share capital 1,278 1,278 8,375 9,113 Reserves 9,113 8,375 9,653 10,391 10,391 9,653 Minority interests 1,462 1,251 9,653 10,391 Total equity 11,853 10,904

Provisions 68 68 Pensions and similar commitments 280 270 327 305 Liability for deposits on returnable packaging 791 766 96 155 16 Deferred tax 682 361 361 327 17 Other 1,589 2,557 852 855 Total provisions 3,342 3,954

Liabilities 18 Long-term liabilities - - Bond loans 2,997 2,842 3,853 4,047 Amounts owed to subsidiaries - 202 Credit institutions 2,616 2,055 - - Other 10 79 3,853 4,249 5,623 4,976 Current liabilities - - Bond loans 1,180 54 1,053 18 Credit institutions 689 2,169 263 247 Trade creditors 2,606 2,970 1,185 872 Amounts owed to subsidiaries 4 1 Amounts owed to associated companies 4 5 - - Corporation tax 152 166 232 267 Excise duties and VAT 1,372 1,056 627 454 Other creditors 1,600 3,493 13 25 Accrual and deferred income 1,212 949 256 256 Proposed dividend 256 256 3,633 2,140 9,071 11,118 7,486 6,389 Total liabilities 14,694 16,094

17,991 17,635 Total equity and liabilities 29,889 30,952 19 Contingent liabilities and other commitments, etc.

55 Cash Flow Statement for the Group

1998/99 1997/98 DKK million DKK million Operating profit 1,673 1,554 Depreciation 1,354 1,305 Other adjustments -169 -68 Financial income, net -96 374 Corporate tax paid -20 -467 Cash flow from operations before changes in working-capital 2,742 2,698 Change in debtors -503 -5 Change in stocks -125 222 Change in creditors, excise duties, etc. -293 -558 Cash flow, operations 1,821 2,357

Special items including adjustments in provisions -1,091 -505

Acquisition of tangible fixed assets -2,024 -1,287 20 Acquisition of subsidiaries and associated companies -621 -1,373 20 Disposal of subsidiaries and associated companies 125 545 Acquisition of other financial fixed assets, net -399 369 Disposal of marketable securities, net 1,427 824 Dividend from associated companies 33 5 Cash flow, investments -1,459 -917

Dividend paid -256 -230 Minority interests 255 1,679 Financial income and expenditure -1,408 -664 Cash flow, financing -1,409 785

Net cash flow from operations, investments and financing -2,138 1,720

Liquid assets at the beginning of the year 3,890 2,198 Foreign exchange adjustments of liquid assets 41 -28 Cash flow for the year -2,138 1,720 Liquid assets at the end of the year 1,793 3,890

The statement of cash flow cannot be derived solely from the published annual accounts.

56 Notes to the accounts (DKK million)

1 Group turnover distributed over principal activities: 1998/99 1997/98 %% Beverage companies in Denmark ...... 6,121 20 6,010 20 Beverage companies outside Denmark ...... 21,907 70 20,128 69 Other companies ...... 3,257 10 3,183 11 31,285 100 29,321 100

Licence fees are included in turnover. For further details, please see the Financial Review.

2 Total wages, salaries, personnel costs, depreciation and fees to auditors appointed at the Annual General Meeting of the Parent Company are as follows:

Wages, salaries and personnel costs: 1998/99 1997/98 Group: Wages, salaries and remuneration ...... 4,402 3,689 Pensions ...... 278 277 Other social security costs ...... 473 371 Other personnel costs ...... 55 72 5,208 4,409 Parent Company: Wages, salaries and remuneration ...... 869 719 Pensions ...... 56 60 Other social security costs ...... 9 12 Other personnel costs ...... 28 30 962 821

Wages, salaries, remuneration and pensions for the Group and the Parent Company include remuneration paid to the Executive Board of the Parent Company of DKK 12 million (1997/98: DKK 13 million) and to the Supervisory Board of DKK 3 million (1997/98: DKK 2 million).

In the financial year the average number of employees in the Parent Company was 2,799 (1997/98: 2,292) and in the Group 21,906 (1997/98: 20,589) of whom 2,355 (1997/98: 2,336) were employed in pro-rata consolidated companies.

Fees to the auditors appointed at the Annual General Meeting 1998/99 1997/98 KPMG C. Jespersen: Audit ...... 2 2 Other services ...... 4 2 PricewaterhouseCoopers: Audit ...... 2 1 Other services ...... 9 19

Other services relate to fees for reorganisation of administration, including the implementation of new computer systems, decided in previous years.

Depreciation and write-down: 1998/99 1997/98 Parent Company ...... 263 301 Group companies ...... 1,091 1,004 Group ...... 1,354 1,305

3 Other operating income, net includes income from rental properties and external contributions to the Carlsberg Research Center.

57 Notes to the accounts (DKK million)

4 Profit from investments: 1998/99 1997/98 Group:

Profit of other associated companies comprises:

Profit before tax ...... 64 52 Corporation tax ...... 28 21 Profit after tax ...... 36 31

Parent Company:

Profits of subsidiaries comprises:

Profit before tax ...... 1,082 1,283 Corporation tax ...... 360 343 Profit after tax ...... 722 940

Profit of pro-rata consolidated associated companies comprises:

Profit before tax ...... 170 115 Corporation tax ...... 87 41 Profit after tax ...... 83 74

Profit of other associated companies comprises:

Profit before tax ...... 56 45 Corporation tax ...... 28 21 Profit after tax ...... 28 24

5 Special items comprises: Group Parent Company Income: Profits arising from the disposal of property ...... 130 86 Reversal of provisions ...... 56 56 Profits arising from the disposal of shares ...... 61 61 Total income ...... 247 203

Expenditure: Restructuring ...... 118 0 Division of the organisation ...... 50 50 Total expenditure ...... 168 50

Special items, net ...... 79 153

Please see the Financial Review

6 Income from other financial fixed assets, etc:

Realised gains relating to income from other financial fixed assets, etc. amounting to DKK 3 million (1997/98: DKK 298 million, including profits from the disposal of shares in Royal Scandinavia and own shares).

7 Includes interest paid by subsidiaries to the Parent Company of DKK 88 million (1997/98: DKK 168 million).

Realised gains relating to marketable shares and bonds totalling DKK 149 million (1997/98: DKK 228 million) have been included in the Group accounts.

8 Includes interest paid by the Parent Company to subsidiaries of DKK 299 million (1997/98: DKK 82 million).

58 Notes to the accounts (DKK million)

9 Corporation tax comprises: 1998/99 1997/98 Parent Company's share of tax on profit for the financial year ...... 97 19 Adjustment for previous years ...... -107 -8 Tax charge for Parent Company, adjusted ...... -10 11 Parent Company's share of tax in subsidiaries, cf. note 4 ...... 360 343 Parent Company's share of tax in associated companies, cf. note 4 ...... 115 62 Parent Company's share of Group tax ...... 465 416 Minority shareholders' share of Group tax ...... 12 60 Group ...... 477 476

In the financial year corporation taxes paid amount to DKK 20 million for the Group (1997/98: DKK 467 million) and DKK -33 million for the Parent Company (1997/98: DKK 222 million) including taxes paid abroad. The Parent Company and its Danish subsidiaries participate in the tax on account scheme.

The corporation tax is influenced by non-taxable gains etc.

10 Tangible fixed assets: Land and Plant and Other fixtures Construction buildings machinery and fittings, etc. in progress Group: Cost Balance at 1 October 1998 ...... 6,011 8,684 5,714 1,069 Additions, acquisition of companies ...... 113 304 69 30 Additions during year ...... 456 988 785 695 Disposals from divestment of companies ...... 46 22 26 - Disposals during year ...... 575 361 1,068 132 Currency translation adjustments, etc ...... 155 7 291 27 Transfers ...... 201 817 61 -1,079 Balance at 30 September1999 ...... 6,315 10,417 5,826 610

Revaluation Balance at 1 October 1998 ...... 735 538 18 - Additions, acquisitions of companies ...... 32 36 2 - Revaluation and write-downs for the year ...... 6 6 - - Currency translation adjustments, etc ...... 44 16 - - Balance at 30 September1999 ...... 817 596 20 -

Depreciation and write-downs Balance at 1 October 1998 ...... 2,365 4,709 2,965 - Additions, acquisition of companies ...... 37 193 28 - Depreciation and write-downs for the year ...... 152 680 582 236 Disposals from divestment of companies ...... 27 18 19 - Depreciation and write-downs eliminated on disposals during year . . 131 292 905 - Currency translation adjustments, etc ...... 6 -1 118 - Transfers ...... - 5 -5 - Balance at 30 September 1999 ...... 2,402 5,276 2,764 236

Book value at 30 September 1999 ...... 4,730 5,737 3,082 374

The book value of land and buildings in Denmark amounted to DKK 1,974 million. The book value of investment property in Denmark amounted to DKK 335 million. The value of property in Denmark as assessed for tax purposes amounted to DKK 4,628 million at 1 January 1999.

Depreciation and write-downs for the year includes write-down of the fixed assets of Vena in Russia by DKK 296 million.

59 Notes to the accounts (DKK million)

10 continued Land and Plant and Other fixtures Construction buildings machinery and fittings, etc. in progress Parent Company: Cost Balance at 1 October 1998 ...... 2,631 2,349 165 197 Additions during year...... 48 1 19 170 Disposals during year ...... 349 61 23 - Transfers ...... 185 107 46 -338 Balance at 30 September 1999 ...... 2,515 2,396 207 29

Depreciation and write-down Balance at 1 October 1998 ...... 1,223 1,353 89 - Depreciation and disposals for the year ...... 76 151 36 - Depreciation and write-downs eliminated on disposals during year . . 72 41 22 - Transfers ...... - 5 -5 - Balance at 30 September 1999 ...... 1,227 1,468 98 -

Book value at 30 September 1999 ...... 1,288 928 109 29

The value of land and buildings as assessed for tax purposes at 1 January1999 aggregated DKK 3,632 million to which should be added the value of land and buildings, for which no official valuation has been made, the net value of additions and disposals since 1 January 1999 and construction in progress. Differences in the value as compared to the book value are primarily related to production properties.

11 Financial fixed assets: Associated Other companies investments, Other Shares Loans etc. loans Group: Cost Balance at 1 October 1998 ...... 1,013 28 792 1,664 Addition, acquisition of companies ...... 3 1 3 29 Additions during year ...... 56 4 355 495 Disposals during year ...... 1 17 - 516 Currency translation adjustments, etc ...... 36 -5 -2 89 Transfers ...... - -1 1 - Balance at 30 September 1999 ...... 1,109 10 1,149 1,761

Value adjustments Balance at 1 October 1998 ...... -202 - -418 - Share of profit for the year ...... 30 - - - Dividends received ...... -33 - - - Disposals during year ...... - - - - Currency translation adjustments, etc ...... 2 - - - Balance at 30 September 1999 ...... -203 - -418 -

Depreciation and write-downs Balance at 1 October 1998 ...... 131 6 96 253 Depreciation and write-downs for the year ...... 6 - 11 32 Disposals during year ...... - - - 12 Currency translation adjustments etc ...... - - - -28 Balance at 30 September 1999 ...... 137 6 107 245

Book value at 30 September 1999 ...... 769 4 624 1,516

Other loans mainly relate to free-trade loans in the UK.

The quoted value of stock-exchange listed associated companies of the Group at 30 September 1999 exceeds their book value by DKK 1,116 million (30.09.98: DKK 1,135 million).

The quoted value of other stock-exchange listed shares of the Group at 30 September 1999 exceeds their book value by DKK 50 million.

60 Notes to the accounts (DKK million)

11 continued Associated Subsidiaries companies Other invest- Shares Loans Shares Loans ments, etc. Parent Company: Cost Balance at 1 October 1998 ...... 6,597 476 1,570 22 714 Additions during year ...... 1,540 - 12 - 387 Disposals during year ...... 183 38 1 16 - Currency translation adjustments, etc...... - - - - - Transfers ...... 2 - -2 - - Balance at 30 September1999 ...... 7,956 438 1,579 6 1,101

Value adjustments Balance at 1 October 1998 ...... -188 - -447 - -418 Share of profit for the year ...... 722 - 111 - - Dividends received ...... -82 - -89 - - Additions during year ...... - - Disposals during year ...... 11 - - - - Group goodwill, currency translation adjustments, etc. -3 - -18 - -1 Transfers ...... -138 - 138 - - Balance at 30 September 1998 ...... 300 - -305 - -419

Depreciation and write-downs Balance at 1 October 1998 ...... 154 112 122 6 50 Depreciation and write-downs for the year ...... -65 - - - 42 Disposals during year ...... - - - - - Currency translation adjustments, etc...... ----- Transfers ...... - - - - - Balance at 30 September 1998 ...... 89 112 122 6 92

Book value at 30 September 1998 ...... 8,167 326 1,152 - 590

12 Holding of own shares: Number of % of shares at Nominal share DKK 20 each value capital Holding at 30 September 1999 and 1 October 1998 ...... 200,000 4 0.3

The quoted value of the holding of own shares at 30 September 1999 amounted to DKK 51 million booked at DKK 0 million.

61 Notes to the accounts (DKK million)

13 Stocks: 30.9.1999 30.9.1998 Group: Raw materials and consumables ...... 624 538 Work in progress ...... 230 225 Finished goods of own production and goods purchased for resale ...... 1,275 1,271 Contract work in progress for the account of third parties ...... 21 32 2,150 2,066

Contract work in progress for the account of third parties is stated at the appropriate proportion of the contract price DKK 333 million (30.9.1998: DKK 882 million) less payments received on account, DKK 313 million (30.9.1998: DKK 850 million). Based on a conservative evaluation, accumulated profit on work in progress has been included in the amount of DKK 44 million (30.9.1998: DKK 66 million).

30.9.1999 30.9.1998 Parent Company: Raw materials and consumables ...... 42 49 Work in progress ...... 17 20 Finished goods of own production and goods purchased for resale ...... 44 51 103 120

14 The quoted values of shares and bonds owned by the Parent Company at 30 September 1999 exceed their book values by DKK 17 million (30.9.98: DKK 78 million)

15 The share capital comprises: Number of shares at Nominal DKK 20 each value A-shares ...... 35,257,090 705 B-shares ...... 28,649,192 573 1,278

Movements in equity in the financial year: Group Parent Company 1998/99 1997/98 1998/99 1997/98 Equity at 1 October ...... 10,904 10,266 9,653 9,644 Deferred tax assets at the beginning of the year ...... - 294 - - Profit for the year ...... 1,156 1,744 1,164 1,641 Write-off of Group goodwill ...... -438 -2,460 -374 -897 Adjustment of Group goodwill from previous years ...... 29 - 111 - Negative differences in value related to acquisitions ...... - 149 - 149 Changes in minority interests ...... 215 1,452 - - Reversal of provisions related to Carlsberg-Tetley ...... - 283 - 283 Currency translation adjustments of Group companies ...... 484 -311 399 -182 Other adjustments of Group companies ...... -134 -118 -199 -590 Reversal of revaluation of shares, net ...... - -153 - -153 Currency translation adjustments of loans, net ...... -107 14 -107 14 Proposed dividend for Carlsberg A/S ...... -256 -256 -256 -256 Equity at 30 September ...... 11,853 10,904 10,391 9,653

Movements in reserves in the financial year: 1998/99 1997/98 Reserves at 1 October ...... 8,375 8,366 Appropriated from profit for the year ...... 908 1,385 Other movements ...... -170 -1,376 Reserves at 30 September ...... 9,113 8,375

62 Notes to the accounts (DKK million)

16 Deferred tax: 1998/99 1997/98 Group: Assets: Balance at 1 October ...... 698 - Adjustment at the beginning of the year, (change of accounting policy) ...... - 294 Additions, acquisitions (incl. adjustment for previous years) ...... 194 546 Relating to income for the year...... 185 -142 Balance at 30 September ...... 1,077 698

Liabilities: Balance at 1 October ...... 361 250 Adjustment for previous years ...... -9 83 Additions, acquisitions ...... 35 - Disposals, divestments ...... -2 - Relating to income for the year ...... 297 28 Balance at 30 September ...... 682 361

Parent Company: Liabilities: Balance at 1 October ...... 96 - Adjustment for previous years ...... -6 - Additions, mergers ...... - 104 Relating to income for the year ...... 65 -8 Balance at 30 September ...... 155 96

The provision for deferred tax in the balance sheet relates to differences in accounting and tax values. Deferred tax assets are included in the balance sheet at the expected realisable value.

No further provision has been made for tax liabilities which may arise from realisation of tangible fixed assets and shares.

17 Other provisions: Group Parent Company Balance at 1 October 1998 ...... 2,557 361 Additions ...... 331 150 Applied and reversed during year ...... 1,299 184 Balance at 30 September 1998 ...... 1,589 327

For further explanation, please see the Financial Review.

18 The long-term liabilities of the Group aggregate DKK 5,623 million (30.9.1998: 4,976 million) and of the Parent Company DKK 4,249 million (30.9.1998: 3,853 million) of which DKK 3,541 million (30.9.1998: DKK 2,998 million) and DKK 2,584 million (30.9.1998: DKK 2,687 million) respectively, are due for repayment more than five years after the balance sheet date.

63 Notes to the accounts (DKK million)

19 Contingent liabilities and other commitments etc. of the Group: 30.9.1999 30.9.1998 Securities given to credit institutions ...... 186 1,279 Mortgage loans secured in land and buildings, etc ...... 1,187 1,260 Security given for unused credit lines ...... 598 460 Guarantees given, etc ...... 719 629 Leasing and rental commitments, etc ...... 385 221 Purchasing obligations related to tangible fixed assets ...... 628 587

Carlsberg A/S has provided security in respect of loans amounting to DKK 7,104 million (30.09.98: DKK 6,712 million) raised by subsidiaries. Carlsberg A/S has a contractual obligation, which may become effective in certain circumstances, to purchase shares in Oy Sinebrychoff Ab.

Forward exchange contracts and options: 30.9.1999 30.9.1998 Parent Company: Sale of foreign currencies ...... 5,736 88 Purchase of foreign currencies ...... 3,575 94

Carlsberg Finans A/S: Sale of foreign currencies ...... 426 2,005 Purchase of foreign currencies ...... 17 984

The company has furthermore entered into forward rate agreements relating to the funding of marketable securities, etc.

20 Acquisition and disposal of subsidiaries and associated companies 1998/99 1997/98 Acquistion: Assets acquired: Fixed assets ...... -299 -4,641 Current assets ...... -208 -2,301 Liabilities taken over: Provisions ...... 35 589 Long-term liabilities ...... 69 1,379 Short-term liabilities ...... 188 4,646 Minority interests ...... -27 1,415 Group goodwill ...... -379 -2,460 Total price ...... -621 -1,373

Disposal: Assets disposed of: Fixed assets ...... 35 325 Current assets ...... 185 462 Liabilities disposed of: Provisions ...... - -58 Long-term liabilities ...... - -154 Short-term liabilities ...... -115 -230 Minority interests ...... 20 200 Total price ...... 125 545

64 Management Endorsement

The Supervisory Board and the Executive Board have today approved that the annual accounts of both the Carlsberg Group and the Parent Company for the financial year 1998/99, ended 30 September 1999, be presented to the Annual General Meeting for approval.

Copenhagen, 29 November 1999

Executive Board of Carlsberg A/S

Flemming Lindeløv President and Group Chief Executive Officer

Michael C. Iuul Walther Paulsen Nils S. Andersen

The Supervisory Board of Carlsberg A/S

Poul Chr. Matthiessen Erik B. Rasmussen Chairman Deputy Chairman

Hans Andersen Torkild Andersen Jens Larsen

Povl Krogsgaard-Larsen Palle Marcus Axel Michelsen

Erik Dedenroth Olsen John Petersen Jens Bigum Per Øhrgaard

65 Auditors’ Report

We have audited the financial statements for the financial assessment of the accounting policies applied and the esti- year 1 October 1998 to 30 September 1999 presented by mates made. In addition, we have evaluated the overall the Supervisory Board and the Executive Board of the adequacy of the presentation in the financial statements. Carlsberg Group and the Parent Company, Carlsberg A/S. Our audit has not resulted in any qualifications.

Basis of Opinion Opinion We have planned and conducted our audit in accordance In our opinion, the financial statements have been pre- with generally accepted auditing standards to obtain rea- pared in accordance with the accounting provisions of sonable assurance that the financial statements are free Danish legislation and give a true and fair view of the from material misstatements. Based on an evaluation of Group’s and the Parent Company’s assets and liabilities, materiality and risk, we have, during the audit, tested the financial position and profit for the year 1 October 1998 to basis and documentation for the amounts and the disclo- 30 September 1999. sures in the financial statements. Our audit included an

Copenhagen, 29 November 1999

KPMG C.Jespersen PricewaterhouseCoopers

Aksel Runge Johansen Poul Erik Olsen Morten Iversen Fin T. Nielsen State Authorised State Authorised State Authorised State Authorised Public Accountant Public Accountant Public Accountant Public Accountant

66 Subsidiaries

Subsidiaries, Associated Companies and Others

Carlsberg-Tetley PLC Hannen Brauerei GmbH Israel Beer Breweries Ltd. Carlsberg Italia S.p.A. Carlsberg-Tetley Brewing Ltd. Germany Israel Italy United Kingdom Senefelderstrasse 25 Amitek Bldg. Via Olona, 103 140 Bridge Street D-41066 Mönchengladbach 11 Ben Gurion Street I-21056 Induno Olona (VA) GB-Northampton NN1 1PZ Management: Erik Juul IL-Givat Shmuel Management: Marcello Verratti Management: Ebbe Dinesen Rasmussen and Michael Hollmann Management: Rafi Baharav Employees: 411 Employees: 2,867 Employees: 292 Employees: 250 Share: 75 per cent Share: 100 per cent Share: 100 per cent Share: 20 per cent Unicer S.A.-União Cervejeira S.A. Falcon Holding AB Ókocimskie Zakl´ady Nuuk Imeq A/S Portugal Falcon Bryggerier AB Piwowarskie S.A. Greenland Apartado 1044 Sweden Poland Postbox 1075 P-4466-955 S. Mamede de Årstadvägen Ul. Browarna 14 GRL-3900 Nuuk Infesta Codex Box 164 PL-32-800 Brzesko Management: Nis Nissen Porto S-311 22 Falkenberg Management: Marko Marinko Employees: 63 Management: José Manuel Management: Lars Påhlson Employees: 1,056 Share: 23.68 per cent Capelo Soares da Fonseca Employees: 565 Share: 44.98 per cent Employees: 1,694 Share: 100 per cent owned by Grupo Cruzcampo, S.A. Share: 31 per cent Oy Sinebrychoff Ab United Romanian Breweries Spain Bereprod SRL Avda. de Andalucía, 1 Carlsberg Brewery Oy Sinebrychoff Ab Romania E-41007 Seville Hong Kong Limited Finland 89 Biruintei Blvd. Management: Allen F. Peeters Hong Kong P.O. Box 87 Com. Pantelimon Employees: 2,235 1 Dai Kwai Street SF-04201 Kerava ROM-Bucharest Share: 11 per cent Tai Po Industrial Estate Management: Johan Furuhjelm Management: Isaac Sheps Tai Po, New Territories Employees: 870 Employees: 420 Carlsberg Importers S.A.-N.V. Adm. direktør: Jesper Bjørn Share: 60 per cent Share: 100 per cent owned by Belgium Madsen (Group), Vincent Kelly International Breweries (Nether- Industrielaan 16-20 (CHK) OAO Vena lands) B.V., in which Carlsberg B-1740 Ternat Management: 1,271 (Group), Russia A/S has a 20 per cent interest Management: Paul Haelterman 259 (CBHK) 1 Farforovskaya str. Employees: 45 Share: 51 per cent RUS-St. Petersborg 193171 Panonska Pivovara d.o.o. Share: 10 per cent Management: Sergei Khudoleev Croatia Carlsbrew Brewery Employees: 350 Ulica Danica 3 Carlsberg France S.A. (Guangdong) Limited Share: 66 per cent owned by HR-48000 Koprivnica France China Oy Sinebrychoff Ab Management: Kresimir Mulvaj 40, rue du Kéfir 28 Elin South Road Employees: 309 Sénia 301 Huizhou City AB Svyturys Share: 40 per cent F-94537 Orly Cedex Guangdong 516001 Lithuania Management: Michel Normann Management: Edwin Lam Kuliu Vartu 7 Türk Tuborg Bira ve Malt Employees: 23 Employees: 511 LT-5799 Klaipéda Sanayii A.S. Share: 100 per cent Share: 99 per cent owned by Management: Tomas Kucinskas Turkey Carlsberg Brewery Hong Kong Employees: 303 P.K. 150 Limited Share: 57 per cent TR-35212 Izmir Management: Taner Ciger Employees: 470 Share: 2.24 per cent

67 To allow a faster download of this PDF-dokument, this full-page image (Royal Copenhagen products) has been removed to reduce file size. Subsidiaries

Carlsbrew Brewery (Shanghai) Carlsberg Brewery Malaysia Carlsberg Marketing Coca-Cola Nordic Beverages A/S Limited Berhad (Singapore) Pte. Ltd. Hellerup, Denmark China Malaysia Singapore Strandvejen 60 1 Jin Xi Road P.O. Box 10617/ 745 Toa Payoh Lorong 5 DK-2900 Hellerup Songjiang Industrial Zone 50720 Kuala Lumpur #04-01 HBM Building Management: Svend Ivan Shanghai 201600 Management: Jørgen Bornhøft Singapore 319455 Petersen and Shirley Pih Management: Henrik Juel Employees: 660 Management: Mervin Sim Employees: 3,352 Andersen Share: 27.85 per cent Employees: 46 Share: 51 per cent Employees: 501 Share: 100 per cent Share: 95 per cent owned by Danbrew Ltd. A/S Vingaarden A/S Carlsberg Brewery Hong Kong Copenhagen, Denmark Gorkha Brewery Limited Odense, Denmark Limited Rahbeks Allé 21 Nepal Gammel Højmevej 30 DK-1801 Frederiksberg C P.O. Box 4140 DK-5250 Odense SV Carlsberg Malawi Brewery Management: Jens Due New Baneshwor Management: Peter Schaltz and Limited Employees: 97 Katmandu Jørgen Nielsen Malawi Share: 100 per cent Management: Chandra Prakash Employees: 174 P.O.Box 1050 Khetan Share: 40 per cent Blantyre Danish Malting Group A/S Employees: 225 Management: Chadwick L. Vordingborg, Denmark Share: 48.3 per cent Royal Scandinavia A/S Mphande Spirevej 5, Ørslev Copenhagen, Denmark Employees: 326 DK-4760 Vordingborg Carlsberg Brewery (Thailand) Smallegade 45 Share: 49 per cent Management: Kim G. Jørgensen Co., Ltd. DK-2000 Frederiksberg Employees: 22 Thailand Management: Knud Odgaard Southern Bottlers Limited Share: 100 per cent 288/35-37 Surawongse Road Pedersen, Michael Ring og Malawi Bangkok 10500 Hardy Thøgersen P.O.Box 406 J.C. Bentzen A/S Management: Sawat Sopa Employees: 3,628 Blantyre Copenhagen, Denmark Employees: 440 Share: 65 per cent Management: Chadwick L. Ny Carlsberg Vej 100 Share: 8 per cent Mphande DK-1799 Copenhagen V A/S Kjøbenhavns Sommer-Tivoli Employees: 1,874 Management: Ole Bent Andersen Beer Thai (1991) Co. Ltd. Copenhagen, Denmark Share: Carlsberg Malawi Brewery Employees: 26 Thailand Vesterbrogade 3 Limited 49.8 per cent Share: 100 per cent 288/35-37 Surawongse Road DK-1630 Copenhagen V Carlsberg A/S 8.56 per cent Bangkok 10500 Management: Lars Liebst and Carlsberg Finans A/S Management: Sawat Sopa Niels Leth Espensen South-East Asia Brewery Ltd. Copenhagen, Denmark Employees: 1,031 Employees: 504 Vietnam Ny Carlsberg Vej 100 Share: 8 per cent Share: 43 per cent 167B Minh Khai Street DK-1799 Copenhagen V Hanoi Management: Jesper Bærnholdt Ceylon Brewery Ltd. Management: Nguyen Ngoc Bao Employees: 7 Sri Lanka Employees: 327 Share: 100 per cent 83, George R. De Silva Mawatha Share: 35 per cent Colombo 13 Tuborg Nord B, C, D Management: Suresh Shah Hue Brewery Ltd. Copenhagen, Denmark Employees: 165 Vietnam Ny Carlsberg Vej 100 Share: 8 per cent Thuan An Street DK-1799 Copenhagen V Hue City Management: Orla Kristensen Management: Nguyen Minh Share: 100 per cent Employees: 245 Share: 35 per cent

69 To allow a faster download of this PDF-dokument, this full-page image (Tivoli in Copenhagen) has been removed to reduce file size. Shares and Shareholders

Shares Shareholders

Carlsberg A/S’s shares are listed on the Copenhagen Stock The Carlsberg Foundation is registered as holder of 55.2 Exchange in class Carlsberg A with 20 votes per DKK 20, per cent of the share capital in Carlsberg A/S and The and Carlsberg B with 2 votes per DKK 20. Danish Labour Market Pension Scheme as holder of 13.5 per cent. No other shareholder is recorded to hold more The ISIN code of the A-shares is DK001018167-6 and than 5 per cent. DK001018175-9 of the B-shares. There are 35.5 million Carlsberg A-shares and 28.6 million Carlsberg B-shares. The remaining shares are held by 20,000 shareholders of Total trading volume amounts to DKK 1,278 million, dis- whom about 13,186 are registered. The registered share- tributed on DKK 573 million for the B-shares and DKK 705 holders represent a total share capital of DKK 1,124 bil- million for the A-shares in the denomination of DKK 20. lion.

The Carlsberg B-share is listed on the KFX-index, and total turnover in 1998/99 amounted to 12.2 million shares at a total value of DKK 3.9 billion. The previous year turnover amounted to 9.8 million shares at the value of DKK 4.3 billion. The most substantial shareholders can be divided into In 1998/99 the highest quoted price for the Carlsberg B- groups as set out below. Shareholders holding shares of at share was 445 and the lowest quoted closing price was least 0.1 per cent are included in the table. 255. Highest and lowest quoted prices in 1997/98 were Trade Share in per cent 522 and 335 respectively. The Carlsberg Foundation 55.2% Banks and insurance companies 2.5% At the year-end, the market value amounted to DKK 16.4 Pension funds etc. 22.9% billion against DKK 24.5 billion the year before. The Foreign investors 2.5% quoted price of the Carlsberg B-share at the year-end was Total 83.1% 257 against 400 at the end of 1997/98.

Development of the Carlsberg B-share compared to the general index and the KFX Key figures in relation to shares

150 1997/98 1998/99 140 Price of the B-share at year-end 400 257 130 Cash Flow per share 36.88 28.49 120 110 Earnings per share 25.68 18.21 100 Dividend per share 4.0 4.0 90 80 70 60 50 01-10-97 06-11-97 16-12-97 03-02-98 17-03-98 01-05-98 18-06-98 30-07-98 10-09-98 18-04-99 19-01-99 31-05-99 12-07-99 21-10-98 02-12-98 02-03-99 23-08-99

KFX Carlsberg B General index

71 Announcements to the Stock Exchange

Announcements to the Copenhagen Stock Exchange A/S since 1 October 1998 - Exclusive of notices of the expected dates of interim reports and preliminary profit statements.

Carlsberg A/S 5 November 1998 Managing Director Sven G. Petersen retires from the Executive Board as of 31 December 1998. 30 November 1998 Preliminary Profit Statement 1997/98. 5 March 1999 Group Managing Director Nils S. Andersen appointed as new member of the Executive Board as of 1 May 1999. 10 March 1999 Carlsberg A/S sells its 60 per cent shareholding in Vingaarden A/S to Oy Marli Ab. 22 April 1999 Carlsberg A/S invests in the Korean brewery group Hite. 28 April 1999 Carlsberg A/S acquires the majority of the shares in the Lithuanian brewery Svyturys. 21 May 1999 New employee representation on Carlsberg A/S' Supervisory Board. 29 June 1999 Carlsberg A/S to sell shareholding in Grupo Cruzcampo in Spain. 29 November 1999 Preliminary Profit Statement 1998/99.

Royal Scandinavia A/S 18 November 1998 Preliminary Profit Statement 1997/98. 11 December 1998 Changes in the day-to-day management in Royal Scandinavia. 26 February 1999 Holding of own shares. 10 March 1999 CEO Olle Markköö joins the Group Executive Board of Royal Scandinavia. 21 May 1999 Interim Report. 17 November 1999 Preliminary Profit Statement 1998/99.

A/S Kjøbenhavns Sommer-Tivoli 16 November 1998 Preliminary Profit Statement 1997/98. 27 May 1999 Interim Report. 16 September 1999 Notice regarding the expected annual result for 1998/99 (adjusted upwards). 18 November 1999 Preliminary Profit Statement 1998/99.

Financial Calendar 20 December 1999 Annual General Meeting. 27 December 1999 Payment of dividend. Expected releases of accounting reports: Week 23/2000 Interim Report 1999/2000. Week 48/2000 Annual Report and Accounts 1999/2000.

Annual General Meeting Carlsberg A/S 20 December 1999 at 16.30 hours Tivolis Koncertsal 20, Tietgensgade Copenhagen V Denmark