ANNUAL REPORT

SYNERGY CONTENTS

1. Company Overview 2 ƒƒCompany Position in the Industry 5 ƒƒBrands 8 2. Address by Chairman of the Management Board and Address by Chairman of the Board of Directors 34 3. Key Events 2014 38 4. Strategy. Development perspectives 42 5. Marketing 44 6. Distribution and import 48 7. Production 88 8. Export Operations 90 9. PentAgro Group 94 10. Financial Review – report by the Board of Directors for priority areas 96 11. Social Responsibility 102 12. To Shareholders and Investors 106 13. Corporate Management 112 14. Description of key risk factors. 128 Risk Management 15. Consolidated Financial Statements 131 16. Appendix – Report on Compliance with Corporate Code of Conduct Provisions 136

1 OJSC SYNERGY COMPANY OVERVIEW

History

The history of Synergy Group started in 1998, when Alexander Mechetin together with the other shareholders founded the Joint Stock Company Synergy-Vostok. At that time development of food production in the Far East of Russia was the core business of Synergy-Vostok JSC. Synergy Co (hereinafter referred to as «the Group», «the Company») was established in December 2004 to optimize the corporate structure of the existing group of companies.

In 1999 the Company acquired a majority interest in one of the largest meat products manufacturer in Primorye, Nakhodkinsky Meat Processing Plant, JSC.

In 2000, Ussuriysky Milk Plant OJSC became a part of the Group. Today, this plant is one of the leaders on the dairy market in Primorye.

Since 2003, an agro-industrial complex in the Saratov region has been operating under the control of the Group. It was created on the basis of Mikhailovskaya Poultry Farm JSC, the largest poultry enterprise in the Saratov region, and today, being represented by two companies, it is one of the largest poultry enterprises in the Volga region. Apart from Mikhailovskaya Poultry Farm JSC, the complex includes PPZ Tsarevshchinsky-2 JSC (brood broiler egg production).

Since 2002, the Group has been actively developing its spirits branch: a series of mergers and take-overs have been done, that ensured rapid increase of the Group's share on the federal market of spirits and brought it to the top three companies.

In 2002, the Group acquired the majority interest of Open Joint Stock Company Ussuriysky Balsam, the spirits market leader of Primorsky Territory.

In 2003, it acquired the majority interest of Open Joint Stock Company URAL-ALKO Perm Distillery, the largest producer in the Urals region.

In 2004, Open Joint Stock Company Arkhangelsk Distillery (ALVIZ OJSC), the absolute market leader in the Arkhangelsk region, joined the Group.

In 2005, the Group's business line Spirits production was reinforced with the acquisition of the majority interest of Open Joint Stock Company Khabarovsky Distillery, which enabled the Group to increase its market share of spirits in the Far Eastern Federal District.

Since 2005, spirits production has been a strategic priority for the Group's development. Relying on its dominant positions in the local markets in the regions where production facilities are located, the

2 ANNUAL REPORT 2014 COMPANY OVERVIEW

Group launched a number of federal brands and ensured their wider distribution.

In 2006, leading manufacturers of Nizhny Novgorod and Kemerovo regions, «ROOM« JSC and Mariinsky Distillery OJSC, entered the Group. In April 2006, the Group continued to develop its dairy branch and acquired the majority interest of Open Joint Stock Company DAKGOMZ (Komsomolsk-on-Amur). The amalgamation of two leading regional dairy producers, DAKGOMZ and Ussuriysky Milk Plant OJSC, enabled the Group to become one of the largest market players in this segment in the Far East.

In 2007, a deal was made on acquisition of TRADITIONS OF QUALITY, the factory near Moscow, and the Belenkaya vodka brand, one of the leaders in the middle-priced segment. Moreover, this year Beluga, the flagship brand of the Group was acquired, which became an absolute leader in the super-premium segment very soon.

In March 2008, the Group completed a deal on acquisition of Myagkov, one of the most successful brands in the lower premium segment.

Information on the current main affiliated companies of the Group:

Holding companies

Open Joint-Stock Company Synergy

Joint-Stock Company Penta Agrogroup

Open Joint-Stock Company Synergy Capital

Open Joint-Stock Company Synergy-Vostok

Distilleries

Joint-Stock Company ROOM

Open Joint-Stock CompanyArkhangelsk Distillery

Open Joint-Stock Company Khabarovsky Distillery

Open Joint-Stock Company Mariinsky Distillery

Open Joint Stock Company URALALKO Perm Distillery

3 OJSC SYNERGY COMPANY OVERVIEW

Trading houses

Joint-Stock Company Synergy Market Arkhangelsk

Limited Liability Company Sinergy Market Vostok

Limited Liability Company Sinergy Market DV

Limited Liability Company Sinergy Import

Limited Liability Company Sinergy Market Khabarovsk

Limited Liability Company Sinergy Market Nizhny Novgorod

Limited Liability Company Sinergy Market Vladivostok

Limited Liability Company Sinergy Market Perm

Limited Liability Company Sinergy Market Trading House

Limited Liability Company Beluga Vodka International

Food manufacturers

Open Joint-Stock Company DAKGOMZ

Open Joint-Stock Company Mikhailovskaya Poultry Farm

Open Joint-Stock Company Ussuriysky Milk Plant

Open Joint-Stock Company Nakhodkinsky Meat Processing Plant

Open Joint Stock Company

PPZ Tsarevshchinsky-2

Joint-Stock Company RodStor

4 ANNUAL REPORT 2014 COMPANY OVERVIEW

Company Position in the Industry

Synergy is the largest company in the Russian spirit market. Our core business is the production and distribution of strong alcoholic beverages of the highest quality. Nowadays Synergy unites more than 9,000 of employees and presents its production in over 60 countries around the world.

Well-balanced portfolio of trademarks ensures the presence of Company’s production in all key segments of strong alcoholic beverages. Synergy key vodka brands today are the following: BELUGA, Veda, Myagkov, Belenkaya, and Gosudarev Zakaz. The Company presents the following trademarks: Zolotoy Rezerv, Kamenniy Lev and Staraya Gvardia in the brandy segment. Whisky segment is represented by the trade mark Fox & Dogs. The company is the leader in the production of bitter and sweet liqueurs of the Doctor August line.

Synergy is an exclusive representative and distributor for premium producers of the world-famous trade marks: the multibrand company William Grant & Sons, Camus, the family-owned Cognac house, the iconic bitter (herbal liqueur) Riga Balsam, Armenian brandy Tsar Tigran, Amarula cream liqueur, Barcelo rum, wine companies.

Synergy has one of the most powerful and effective production complexes in Russia: 7 distilleries that are situated throughout the Russian Federation. Some of them have more than a century- old history. Nowadays all the distilleries of Synergy use the most modern equipment with a total output of over 15 million decalitres. The Company also manages its own largest distributive system in Russia with the staff of more than 3,000 highly-skilled employees.

The additional business of Synergy is foodstuff manufacturing that is carried out by the subsidiary company PentAgro, JSC (www. penta-agro.ru).

High levels of professionalism and achievements of the company are recognized by the business community. The Company has long- term international Issuer Default Rating (IDR) at level «B+» and national long-term rating at level 'А-(rus)' assigned by Fitch Ratings.

Synergy considers itself as a responsible participant of the national spirits market and implements the proactive policy of social responsibility.

5 OJSC SYNERGY COMPANY OVERVIEW

Regarding these directions, financial and organizational support of cultural and social projects, charity assistance are the essential part of the Company business. Synergy closely cooperates with professional industrial sector and government institutions (the Union of Spirits Manufacturers, Federal Service for Spirits Market Regulation). Besides, Synergy acts as a responsible taxpayer – at the year-end of 2014 the total payments of Synergy Co and its affiliated companies to the budgets of different levels amounted to 25 billion rubles.

Spirits Sales Overview (Combined Information of All Operating Press Releases in 2014

Sales, ‘000 decalitres1 2013 2014 % change Aggregate annual volume 12 541 11 021 -12 Q1 1 900 1 729 -9 Q2 2 847 2 645 -7 Q3 3 080 2 845 -8 Q4 4 714 3 803 -19

Revenue, RUB mln Gross profit, RUB mln Net income, RUB mln

30 000 13 000 2 000 28 163 26 378 12 028

25 000 12 000 1 541 11 280 1 500

20 000 10 000

42,8% 42,7% 5,8% 1 090

15 000 8 000 1 000

3,9% 10 000 6 000

500

5 000 4 000

0 0 0

2013 2014 2013 2014 2013 2014

Revenue, RUB mln Gross profit, RUB mln Net income, RUB mln Gross Profit Margin Net Profit Margin

1 1 decalitre is 10 litres

6 ANNUAL REPORT 2014

BRANDS

Synergy’s portfolio of strategic national brands comprises a number of vodka, brandy and whisky brands. These trademarks have long been successful and constitute good shares in fast growing spirits segments. Federal brands are sold not only in the Russian Federation, but also abroad. Each brand is highly popular with consumers and targeted at a certain segment, ranging from the super-premium to the middle-priced, which ensures higher profitability of the Company’s national portfolio as a whole.

The Company pays a lot of attention to the basic marketing function, branding, innovations, and restyling, which boost customers’ loyalty and brings new ones. Each of the Synergy brands has its own clear-cut features and character as well as unique positioning.

Beluga vodka is the Company’s flagship product, brand No.1 in the super-premium and ultra-premium segments in Russia. The unique combination of traditions and innovations together with the usage of the best ingredients allowed Beluga vodka to have pride of place in the list of symbols of Russia. Advanced equipment of Mariinsky Distillery, artesian water wells, the possibility to use expensive malt spirit, and years-long experience of experts are the basic principles of stability and high quality of the product.

In 2011, two new production lines, Beluga Transatlantic Racing and Beluga Allure, were launched. Both of them win the markets successfully.

Myagkov vodka is one of the key players in the Russian vodka market in the sub-premium segment. The main competitive advantage of the brand is its exceptional smooth taste. This unique peculiarity of the product appears due to combination of softened water, dynamic filtration, and natural ingredients during the production process.

The Myagkov brand team keeps it under control: the assortment of the Myagkov brand is regularly accomplished with new products of the most popular market trends, such as liqueurs. 40%-strong Myagkov Cranberry, Myagkov Lemon, Myagkov Chili & Honey, as well as 20%-strong Myagkov liqueurs have all taken their place in the brand line.

The Company launched the brand restyling. Restyling brought additional strength, which allowed Myagkov to become competitive globally. The product is now contemporary, premium and innovative.

8 ANNUAL REPORT 2014 BRANDS

Belenkaya vodka is one of the leaders in the vodka market in Russia in 2014, as reported by NIELSEN information and research company. Due to this, it was awarded annual national prize Product of the Year in the vodka category. Belenkaya is on the way to strengthen its leadership in the market leaving the competitors far behind. Moreover, the brand is the Top 10 World vodka brands (7th place as rated by The Millionaires’ Club of Drinks International, 2014). This results from the stable high quality of the product.

Russian Ice vodka. After revolutionary restyling its brand package design in 2013, Russian Ice started to correspond to all the criteria of the modern vodka market. This had a significant impact on sales and distribution of the brand in 2014: at the year-end of 2014 as compared to 2013, it increased by 120%, sales volume reached 300,000 decalitres.

Gosudarev Zakaz (Sovereign’s Order) vodka is the leader in the economy segment of the spirits market and is Top 10 of the Russian vodka market. For the last 3 years the sales of vodka Gosudarev Zakaz have steadily demonstrated growth, and in 2014 the sales totalled almost 1,500,000 dl. Gosudarev Zakaz vodka wins more and more customers thanks to its high quality inheriting sovereign’s production traditions which imply the maximum level of vodka’s purity.

9 OJSC SYNERGY BRANDS

Zolotoy Rezerv brandy. The Company actively works both in the vodka and brandy segments of spirit market. It should be noted that brandy market ranks second after the vodka one in terms of volume in Russia. Developing its own brand Zolotoy Rezerv, the Company makes the top five of the biggest manufacturers of brandy in Russia.

Staraya Gvardia and Kamenniy Lev brandies. Last year the Company made a sure step towards brandy portfolio development and reinforcement of its positions in this market by launching two new products Staraya Gvardia and Kamenniy Lev. Staraya Gvardia was deliberately created for successful promotion in the middle- priced segment in the Russian market, whereas Kamenniy Lev is one of the leaders in the sub-premium segment. The new brandies went on very strong in 2014, during the first year the sales volume reached 66,000 decalitres, which ensured sales increase for high margin Brandy segment of the Company by 15%.

Fox & Dogs whisky. Last year the company presented its own brand in one of the growing categories – whisky Fox & Dogs. The whisky production is executed at the manufacturing facilities of William Grant & Sons company, one of the world’s whisky market leaders, which guarantees high quality of products. Moreover, the taste of Fox & Dogs whisky has been specially developed by the masters of blending of the company William Grant & Sons with consideration of the Russian consumers’ preferences.

Ussuriysky Balsam and Doctor August

Starting from the end of 2014, three new products were launched in the Russian market. Ussuriysky Balsam, Ussuryisky liqueur and Ussuriysky ginseng essence. Moreover, the Company introduced a new product, a series of Doctor August liqueurs. The range of taste is truly unprecedented: 28 items split into five categories: bitter, sweet, brandy, liqueurs and aperitifs. The target is to strengthen its leading positions in the liqueur segment and reach sales volume of 1 million decalitres by the end of next year.

10 ANNUAL REPORT 2014 11 OJSC SYNERGY BELUGA

Beluga vodka is a unique product, it is the leader in the segment of super and ultra-premium vodkas in Russia in terms of sales. It is the first truly premium, global Russian brand. Beluga is manufactured at Mariinsky Distillery. The base of the first-class product consists of high quality ingredients, painstaking work of masters, their focused attention to every detail and continuous production control. Beluga vodka is actively promoted in export markets in Europe, Asia, the US and the Middle East; and it is sold in more than 70 countries worldwide (178 airports.) Today the assortment of Beluga consists of 4 products:

Beluga Noble is the flagship product in the Beluga brand family. This designer drink obtained the status of «the classics». Beluga Noble has a noble flavourful taste because it comprises some unique natural ingredients. Malt spirit and the purest artesian water are traditional ingredients and they are of primary importance in the Beluga vodka production. As soon as the beverage is ready, the thirty-day 'rest' period starts. This kind of technology has been proven for centuries. It eliminates strong spirituous smell and provides Beluga Noble with a flavourful taste and soft aroma.

Beluga Transatlantic Racing is a limited series of Beluga vodka, created in honour of our sailing team that took part and won number of brilliant victories at the most prestigious sailing world cups. The unique formula, which is the basis for the Beluga Transatlantic Racing production, requires the addition of the barley malt traditional for vodka Beluga, and it is purified by running through a specific cotton filter, which makes the taste of the vodka soft, clean and elegant.

Beluga Allure is a collection series of Beluga vodka, created in honour of our horse polo team that made a series of victories in major championships of world importance. Beluga Allure is the personification of aristocracy and nobility inherent in this royal sport bordering on art.

Beluga Gold Line is a limited series for those who truly appreciate luxury. Beluga Gold Line is available in a limited edition with own serial number on each bottle. Harmonious, solemnly noble flavour of this vodka is the result of long creative search of the Company’s specialists.

12 ANNUAL REPORT 2014 BELUGA

13 OJSC SYNERGY MYAGKOV

Myagkov vodka is one of the key players in the Russian vodka market in the sub-premium segment. Today the assortment of the Myagkov brand comprises 2 kinds of vodka: Myagkov and Myagkov Silver; 3 kinds of bitter liqueur: Myagkov Cranberry, Myagkov Lemon and Myagkov Chili & Honey; 1 sweet liqueur Myagkov Ashberry with Brandy and liqueur Myagkov Cappuccino.

In the future the brand is going to renew the assortment to offer more unusual and creatively different products as well as the line of liqueurs and bitter liqueurs 'for women' is going to be expanded.

In 2014 the Myagkov brand underwent restyling with the main purpose to place it in the premium range and strengthen its position in the subpremium segment.

Design update involved a new bottle, a new label, and a new cap. Thus, the wave-like embossing made the bottle more ergonomic. The label is there now to cater to consumers’ needs and prevents counterfeiting: materials used in its production are limited and available to selected market leaders only.

The product looks actual, technological and innovative, stands out on the shelf and is highly competitive with major international market players.

Restyling was applied to the entire brand packaging line. The composition and the quality remained at the same high level.

14 ANNUAL REPORT 2014 MYAGKOV

15 OJSC SYNERGY VEDA

Veda vodka is a contemporary product that combines both traditional technologies and the unique «double ice filtering» method distinguishing Veda from the other brands. The production of this premium vodka was launched in 2004. Thanks to the dynamic strategy of promotion that lasted for three years, the brand became the second most popular in the premium segment.

Customers consider the Veda brand to be an innovation product, the creation of the latter is only possible through the use of by far the most updated technologies.

Today Veda vodka is manufactured at one of the most up-to-date and hi-tech enterprises in Russia – at Mariinsky Distillery located in Siberia and being a part of Synergy.

16 ANNUAL REPORT 2014 RUSSIAN ICE

Russian Ice is one of the Synergy’s oldest brands, which has taken its rightful place in the Company’s assortment for 10 years. After the revolutionary restyling, the brand package design became fully correspondent to the criteria of the contemporary market and it made the trademark more popular as well as increased the consumer audience. The present strong vodka taste of Russian Ice is achieved thanks to use of high quality spirit Lux class and a special technology of multiple filtration that includes charcoal, gold and silver filtration.

In 2014, product sales increased significantly (by 120% compared to 2013), as well as the distribution level (30 000 outlets). It got back to largest retail networks of Russia. In 2015, the brand assortment is expected to grow, that will allow Russian Ice to compete in the large-scale stores.

17 OJSC SYNERGY BELENKAYA

Belenkaya vodka is the sales leaders in the vodka market in Russia in 2014, as reported by NIELSEN information and research company. Due to this, it was awarded annual national prize Product of the Year in the vodka category. Moreover, the brand is the Top 10 World vodka brands (7th place as rated by The Millionaires’ Club is Drinks International, 2014).

Those results are from the stable high quality of the product. The quality performance of Belenkaya is several times higher than the GOST standards. Strong manufacturing traditions and rigid quality requirements make sure that every drop of vodka runs through 13 meters of the charcoal filter, which makes the product especially popular with the connoisseurs.

The development of the brand product line is achieved particularly through limited series. The New-Year limited series based on Belenkaya Lux Vodka and New-Year styled, as well as a limited series of Belenkaya Lux Vodka with unique camouflaged design and horses’ images have taken their place in the market of limited edition products.

In order to attract more audience with «here and now» orders, a new 0.1 l volume (a glass) was launched. The benefits are obvious: High-quality product and appropriate consumption format.

18 ANNUAL REPORT 2014 BELENKAYA

19 OJSC SYNERGY GOSUDAREV ZAKAZ

Gosudarev Zakaz (Sovereign’s Order) is the acknowledged leader in the lower price segment in the Russian vodka market, a permanent member of the reputable rankings of The Millionaires’ Club. For the last three years the brand has shown a steady increase: total sales growth for 2012 – 2014 was 55%. Thanks to the new product Gosudarev Zakaz Pepper launched in the range of bitter liqueurs in 2014, the brand sales exceeded the rate 1.5 million decalitres.

In 2015 it planned expansion of the product line brand with two new flavours of vodka.

The success of Gosudarev Zakaz vodka in the market is preconditioned not only by a more modern and premium package design but also by the high quality of products inheriting the imperial sovereign production traditions which imply the highest degree vodka purity.

20 ANNUAL REPORT 2014 FOX&DOGS

The popularity of the Scotch blended whisky in the Russian market is growing year by year, as evidenced by double figures of growth in import of this product.

Scotch blended whisky Fox & Dogs is a proprietary trademark of the company Synergy, a new offer of the classic Scotch whisky, the taste of which is adapted to the taste of the Russian consumer; it has a high degree of softness and balance. Fox & Dogs whisky is manufactured at the plants of one of the world market leaders – the company William Grant & Sons, with the direct participation of its famous masters of blending.

The outstanding features of blending can be called the use of more than 20 types of malt spirits, whose average age is more than 5 years, as well as grain spirit produced at one of the best grain distilleries in Scotland.

The original taste of Fox & Dogs whisky is complemented with the bright product design that represents an embodiment of the famous Scottish legend, the name is simple and easy to remember and the price for the consumer is affordable.

21 OJSC SYNERGY KAMENNIY LEV

Kamenniy Lev (Stone Lion) brandy is a newly- designed product in Synergy assortment of brandies that is destined to strengthen the Company’s position in the sub-premium segment. Kamenniy Lev was created on the model of the best European samples and stands out among its competitors in the range of Russian brandy. The main advantage of the Kamenniy Lev brand is the production of the latter only from French cognac materials. Status strict design of the bottle is made in the premium frosted dark-green colour scheme that makes the product more attractive. The taste of Kamenniy Lev is characterized by fruity hints with subtle vanilla and chocolate flavours.

22 ANNUAL REPORT 2014 STARAYA GVARDIA

Another brandy of mid-price segment called Staraya Gvardia (Old Guard) was produced. This product naturally complemented the Company’s brandy range. The original taste obtained through French cognac materials, a bright design of the product that personifies world military history, all these arouse considerable interest of consumers in Staraya Gvardia brandy.

23 OJSC SYNERGY ZOLOTOY REZERV

Zolotoy Rezerv (Gold Reserve) brandy is the result of the unique combination of centuries long traditions and modern technologies. French cognac materials of 5 years ageing give Zolotoy Rezerv a deep harmonic taste and a pleasant mature aroma.

Zolotoy Rezerv is a new strong player in the Russian brandy market. Annual sales growth allowed the Company to be listed as one of the top five brandy manufacturers in Russia. In order to achieve this goal the brand underwent restyling: a new bottle with a metal vine-shaped decor and a new label to focus using French distillates were introduced.

24 ANNUAL REPORT 2014 ZOLOTOY REZERV

25 OJSC SYNERGY DOCTOR AUGUST

Doctor August is a collection of liqueurs prepared with respect for traditions and with use of the latest technologies. Rich flora of Russia is fully reflected in its great flavour. Berries and fruits for Doctor August liqueurs are picked on the days of their most generous blooming.

Exquisite flavour and aroma of Doctor August liqueurs are guaranteed by careful handling of ingredients, rigorous selection, high-quality alcohol, and specially prepared water.

26 ANNUAL REPORT 2014 DOCTOR AUGUST

27 OJSC SYNERGY CAPTAIN'S

One of the oldest Synergy plants, Ussuriysky Balsam, launched a new beverages product line, Captain’s rum. It comprises three products: Gold (dark rum), Silver (light rum), Strong (48% dark rum).

Naturally planted spices allowed experts to significantly improve the flavour of the product, which has long been well known to consumers in the Far East.

Such categories as rum, gin and whiskey have been showing steady growth in the Russian market, with the biggest surplus in the economy segment. The spirits range Captain’s is dedicatedly developed to offer the consumers the first price.

In December 2014, the first product of the Captain’s line, Captain’s Rum Gold was launched in the federal distribution network. High organoleptic quality and unique flavour of Captain’s Rum are well supported with the marine-styled product design.

In 2015, the Captain’s Rum line is going to expand and include Captain’s Gin and Captain’s Whiskey.

28 ANNUAL REPORT 2014 USSURIISKY BALSAM

Ussuriysky Balsam, Ussuriysky liqueur and Ussuriysky ginseng essence are produced using the most advanced technologies, preserving the natural taste of taiga herbs. Strong tonic effect is achieved thanks to accurate following of the manufacturing procedure stated in the secret recipe.

In the USSR, Ussuriysky Balsam had long remained a product in short supply, available only to employees of «closed» enterprises and the party elite. Today, the product has overcome all the social and geographical boundaries. This legendary beverage is now available to every connoisseur of eco-products.

29 OJSC SYNERGY TIGROFF

The Tigroff line includes: Tigroff classic, Tigroff with ginseng, and Tigroff with royal jelly. Classic taste and flavour, original citrus notes, freshness of the aftertaste – this is the effect of a special recipe, which also includes the Lux alcohol and lemongrass extracts. One of the main distinguishing features of the Tigroff line is its original design, black or white mat bottle, which clearly stands out on the shelf in the store and in a bar.

30 ANNUAL REPORT 2014 MEDVEZHY UGOL

Medvezhy Ugol (Bear’s Place) vodka combines manufacturing traditions of Siberian vodka and innovative solutions to create its truly unique taste. The product is born in Siberia and was initially targeted for this region only. But today the situation has changed. Due to its unique composition and outstanding design, Medvezhy ugol is gaining credits not only among consumers in Russia, but also winning high-profile Russian and international competitions and tastings. Mild taste with lime-tree notes and unique flavour are achieved through a balanced addition of floral honey and orange oil.

31 OJSC SYNERGY RZHANOY KOLOS

Due to its key component, rye-based alcohol, Rzhanoy Kolos (Ear of Rye) vodka has distinctive and mild aroma of rye bread. Themed bottle and a debossed image of a sun with rye rays covered with premium varnish make the product so very special. For 2015, the brand plans to strengthen its environmental-friendly positioning by launching another product in the line based on sprouted rye grains.

In terms of price the product is positioned in the middle priced segment of the Russian market.

32 ANNUAL REPORT 2014 ARKHANGELSKAYA NORTH TEMPERED

Vodka Arkhangelskaya North Tempered was created by experts of Arkhangelsk Distillery, one of the oldest companies in the Group. To create its unique taste, vodka Arkhangelskaya North Tempered uses all the advantages of the production location in the North: Unique natural ingredients of marine and plant origin, a special preparation system of soft northern water, and long-lasting 2-week exposure in finishing tubs aged more than 100 years.

Character of the vodka is highlighted with a status design, emphasized with a circular label, old-style font and special foil.

In terms of price the product is positioned in the subpremium segment of the Russian market.

33 OJSC SYNERGY ADDRESS BY CHAIRMAN OF THE MANAGEMENT BOARD

In 2014, we continued to develop in the framework of our long-term strategy, which is based on the innovative and diversified approach in business, and the Company showed growth in certain financial indicators across all segments.

Our sales increased by 5% as a result of proactive price policy and dynamic development of export and import operations. The gross profit also increased by 7%, which ensured profitability at the level of 2013. Shipments decreased by 12%, while demonstrating at the same time much better dynamics compared to the Russian spirits market in general, which allowed Synergy to increase its market share.

In 2014, the Company escalated international expansion with its super-premium brand Beluga, export of which increased by 21% in volume terms. In general, export transactions of the Company increased by 27%, and import – by 37%. It should be noted that the dynamic development of exclusive distribution of our partners’ brands is fully in line with Synergy diversification strategy. We do not want to stay bound only to vodka business and intend to be the leader in the market of strong spirits and wines.

Today we dominate in the distilled beverages market, owning ALEXANDER popular brands, having a unique distribution platform, being the independent premium spirits importer N№1 and one of the largest MECHETIN spirits exporters in the country.

As for development of our distribution business in 2014, we should mention signing exclusive contracts with the South African and Spanish partners such as Distell LTD and Torres. Now, the Company represents world N№2 cream-liquor Amarula and brandy Torres on the territory of Russia. Also, the Synergy's portfolio has been widened with Ron Barcelo rum. An important milestone in the CHAIRMAN development of our premium distribution business was the launch of a project on wine trade marks import. Today, we distribute wines OF THE from major wine regions of the world. Revenue growth due to MANAGEMENT import operations exceeds 50%. BOARD Objective evaluation of our achievements and reliability of our strategy has been confirmed by Fitch Ratings, the international rating agency, with the upgrade of the International credit rating from «B» to «B+» with «Stable» outlook. Fitch official statement noted that Synergy has leadership in the Russian market, which is supported with strong brands portfolio, more advanced distribution platform and larger operation scale as compared with most competitors.

34 ANNUAL REPORT 2014 ADDRESS BY CHAIRMAN OF THE MANAGEMENT BOARD

In conclusion I would also like to note that despite of the unfavourable economic situation, we will continue to move forward. With all the necessary operational and financial resources, widest product portfolio, skilled and experienced employees, Synergy is going to stay the market leader demonstrating advanced business standards.

I want to thank our employees, partners and shareholders for their support and confidence in Synergy, without your participation this could never be achieved. Together we can reach new horizons, while remaining an open and efficient company.

Alexander Mechetin Chairman of the Management Board of Synergy Co

35 OJSC SYNERGY ADDRESS BY CHAIRMAN OF THE BOARD OF DIRECTORS

Dear shareholders,

Synergy was and remains a truly systemically company, being a base and a consolidating element of the country’s spirits industry. The Company contributes to the development of civilized Russian spirits market at the operational level, as well as through its legislative initiatives and corrective measures for the current situation.

2014 was a challenging year for the industry and Synergy in particular. Despite complicated conditions, we continued to implement our strategy and achieve more ambitious development goals in our business areas.

Using its market advantages, Synergy has retained the market leadership during the whole 2014, strengthened its presence not only in domestic but also external markets, launched new products, developed existing brands, and widened product import portfolio.

It resulted from the diversity of our business and innovative approaches in solving the problems. Moreover, the Company has constantly followed its basic operation principles: high productivity, effective cost control, operational optimization of business processes SERGEY as adjusted to changing market situation. MOLCHANOV Synergy's results could not have been achieved without the contemporary management board, who have guided the company’s activities for many years, have unique experience, knowledge and skills for successful business and development of the Company in accordance with international corporate management principles. Of course, we owe our success to all the Synergy’s employees. On behalf of the Board of Directors I would like to thank them for their hard work, loyalty, and devotion.

I also want to express my gratitude to all the investors and partners CHAIRMAN OF who believe in the Company and support it. We will continue build relationships with you based on transparency, dialogue and mutual THE BOARD OF trust.

DIRECTORS Speaking about the future, I would like to note significant potential of the Company. We will continue to develop our strengths, in particular spirits production and distribution competences, to enter new markets.

36 ANNUAL REPORT 2014 ADDRESS BY CHAIRMAN OF THE BOARD OF DIRECTORS

Synergy today is at a very important development stage: Our strong industrial background, unique distribution system, excellent knowledge of the industry and professional management of business processes give us both market advantages and ensure the foundation for our future success. We are proud to be the only Russian public spirits company and will always strive to ensure best corporate management, openness, and transparency.

Sergey Molchanov, Chairman of the Board of Directors of Synergy Co

37 OJSC SYNERGY KEY EVENTS 2014

Launch of the Wine Project in September, 2014

Since September 2014 Synergy started to import and sell a range of exclusive wines from major wine-producing countries: France, Italy, Spain, Ukraine, the South Africa.

For a very short time, we have managed to sign contracts with 10 world's major wine producers and form an assortment of 80 SKU wines for sale in the off-trade channel.

From September to December 2014 we sold more than 620,000 bottles of sparkling and non-sparkling wine, of which 33% are French wines, 31% – Italian wines, 22% – Ukrainian wines, 9% – Spanish wines, and 5% – South African wines (starting from the end of October 2014), and activated more than 130 distributors throughout Russia, as well as federal and local key customers.

Import portfolio increased

Synergy distribution portfolio increased in 2014: Exclusive contracts with the South African and Spanish partners (Distell LTD and Torres ) have been signed. Now, the Company represents N№2 cream-liquor in the world Amarula and brandy Torres on the territory of Russia. Also, Synergy portfolio received high quality Ron Barcelo rum from the Dominican Republic.

Noble House project launched in November 2014

The Noble House project was launched in 2014. This is a new and ambitious Company’s project, which aims at being in top five in terms of volumes and professional expertise in the mid-term perspective. Noble House is focused on direct sales of exclusive imported and local product range in HORECA (Moscow and St Petersburg) to private and corporate clients.

Today there are 29 on-trade sales specialists in the Noble House who work in Moscow and St Petersburg and are split into several divisions: private and corporate clients, regional on-trade sales, marketing and purchasing.

Noble House has entered into contracts with a number of high rated suppliers in Italy, Spain, France, Germany, Chile and the South Africa.

38 ANNUAL REPORT 2014 KEY EVENTS 2014

Export leaders: Beluga and Belenkaya

Beluga

Last year, the Beluga brand showed successful growth of 39% in Western Europe. We signed a contract with a new distributor in France. Sales increase in Germany as compared to 2013 totalled 43% (as compared to 2012 – 190%). The brand holds strong leading positions in Germany, the UK, France, Italy and Spain.

Belenkaya

In 2014, this leading brand has been actively developing the export channel as the one with high priority. Sales increase as compared to 2013 is 14%. As reported by IWSR 2013-2014, Belenkayais the absolute market leader in Kazakhstan, Kyrgyzstan and Armenia. The nearest plan is to launch sales of the brand in a strategic market of the United States, the world’s second biggest spirits market after Russia, as well as distribution via Duty Free channels.

Captain’s in the federal market A new beverages product line, Captain’s rum was launched at one of the oldest Synergy plants, Ussuriysky Balsam. It comprises three products: Gold (dark rum), Silver (light rum), Strong (48% dark rum).

In 2014, the Company started to develop and implement its own project for production of Russian analogues of spirits in the growing segments of rum, gin and whiskey under the umbrella brand Captain’s. These categories have been showing stable growth in the Russian spirits market, with the biggest surplus in the economy segment. The spirits range Captain’s is dedicatedly developed to offer the consumers the first price. Vast experience of Synergy technologists allows to achieve high organoleptic properties of products with use of natural ingredients in the production. In December 2014, the first product of the Captain’s line, Captain’s Rum Gold was launched in the federal distribution network. In 2015, the Captain’s Rum line is going to expand and include Captain’s Gin and Captain’s Whiskey.

39 OJSC SYNERGY KEY EVENTS 2014

Rzhanoy Kolos and Arkhangelskaya North Tempered are new vodka brands of the Company Rzhanoy Kolos Vodka

Rzhanoy Kolos vodka is a new product in the Company's assortment, which opens up a new trend of using bread, rye and eco-themes. For 2015, the brand plans to strengthen its environmental-friendly positioning by launching another product in the line based on sprouted rye grains. In terms of price the product is positioned in the middle-priced segment of the Russian market.

Vodka Arkhangelskaya North Tempered

The product was created by experts of Arkhangelsk Distillery, one of the oldest companies in the Group. To create its unique taste, vodka Arkhangelskaya North Tempered uses all the advantages of the production location in the North: Unique natural ingredients of marine and plant origin, a special preparation system of soft northern water, and long-lasting 2-week exposure in finishing tubs aged more than 100 years. In terms of price the product is positioned in the subpremium segment of the Russian market.

Other new products Starting from the year-end of 2014 three new products were launched in the Russian market. Ussuriysky Balsam, Ussuryisky liqueur and Ussuriysky roots. Moreover, the Company introduced a new product, a series of liqueurs Doctor August. The range of taste is truly unprecedented: 28 items split into five categories: bitter, sweet, brandy, liqueurs and aperitifs. The Company's target is to strengthen its leading positions in the liqueurs segment and reach sales volume of 1 million decalitres by the end of next year.

40 ANNUAL REPORT 2014 OJSC SYNERGY STRATEGY

The strategic goal of Synergy is being the leader in spirits production and distribution in Russia. Another goal that the Company aims at is widespread international recognition and awareness of the Beluga brand. The envisaged way to obtain the goals is the expansion of direct distribution, building dedicated sales teams, increasing the Synergy brands awareness and representation. The key element of the Company’s current development program is the widest possible operations diversification in the domestic and international spirits markets.

Through natural growth and business areas development, the Company plans to occupy 20-25% of the legal spirits market in Russia. It should be noted that today the Company has well-balanced portfolio of federal brands covering all the main categories in all price segments.

The Company aims to increase profitability through status upgrade and diversification of spirits sales. The nearest goal is to achieve profitability of 20% of its spirits business as rated with EBITDA.

The Company also adheres to the conservative approach for debt indicators, the Company’s debts may not exceed triple ratio of net financial debt to EBITDA.

Development perspectives

Since 2002, Synergy has been carefully selecting the brands to be included in its federal distribution network, and today the Company's portfolio of own brands covers segments of vodka, liqueurs, balsams, brandy and whiskey.

These brands are sold everywhere in Russia and are in high demand. The Company’s development strategy ensures continuous overall efficiency improvement, production costs optimization, and systematic market expansion. Moreover, the Company is considering the possibility of distribution strengthening by adding

42 ANNUAL REPORT 2014 STRATEGY

selective international premium brands to its distribution portfolio that is expected to boost the Company’s operational efficiency. Development of the Company’s own brands in the category of brandy should cover at least 10% of the market, which is the second largest spirits category in Russia. In the segment of liqueurs the Company’s market share is about 15% with a target to obtain 20-25% in the future.

Diversification activities will include expanded distribution of exclusive and well-known international brands, as well as export development. The Company is the largest independent spirits importer and one of the leading spirits exporter. The development strategy envisages building up leadership in export and import operations, and further operational diversification.

In 2014, the Company started importing wines from major wine- producing countries and this development area will stay on the agenda.

Given the legal limitations for spirits advertisement, the Company pays special attention to trade marketing, working on larger representation of its high-quality brands in retail networks. Synergy carefully monitors the format and parameters of such product placement and develops its distribution system by increasing the number of exclusive sales teams in particular.

43 OJSC SYNERGY MARKETING

Marketing plays an important role in the Company’s activities: Its marketing team is always looking for better solutions that would improve the products. This is an important part of activities aimed at keeping the Company’s leading position in the market. Since 2012, by virtue of law, spirits advertisement in the media became completely restricted. For this reason the Company introduced certain changes to its marketing strategy and strengthened positioning of the brands in the trading structure. Active trade marketing events for distributors, promotion in retail outlets, promos for consumers – these activities help not only maintain, but also increase the brand loyalty. Premium lodges with Beluga For the summer 2014, Russia’s 80 best summer terraces were Beluga branded. Flagship summer diners of Moscow such as Vanilla, MOST and Strelka, as well as Ginza diners in St. Petersburg offered original Beluga-based cocktails designed by chef bartenders. ƒƒIn the winter 2014 – 2015, the terrace Beluga Apres-Ski was opened at the ski resort Rosa Khutor in Krasnaya Polyana (Sochi). Beluga Bar interiors are made of fine wood with forged décor, its design echoes Art Deco and the atmosphere of a nice French chalet. Beluga Apres-ski terrace is situated in the central ski resort at a restaurant famous for its Black Sea cuisine, near the main ski lift. ƒƒIn 2014, another Beluga Apres Ski terrace was opened in the French Alps. Beluga pop-up bar is situated in the five-star hotel Alpaga, near Megeve resort, at 1,100 meters altitude. ƒƒLast summer, a Beluga bar was opened in one of the most famous restaurants in Nice, La Reserve. For many years, this restaurant has been a go-to place for many celebrities and tourists from around the world. The reason for its popularity is not only chef Mediterranean cuisine, nice service and luxurious 1930-styled interiors, but also splendid views on the bay.

44 ANNUAL REPORT 2014 MARKETING

Beluga supports important cultural events around the world ƒƒ49 nominees, 2 months of voting, the jury consisting of 6,000 readers of the Interview magazine and website. Interview Russia Magazine with the support of the spirits brand Beluga celebrated its third anniversary by choosing 10 most beautiful and communicative persons as evaluated by the Interview.. ƒƒIn the summer of 2014 Beluga joined the celebrations of the 100th anniversary of the Russian pavilion in Venice and the opening of the FAIR ENOUGH exhibition. The event was organized by the supervisor of the Russian pavilion at the 14th International Architecture Biennale, which is Institute Strelka, and the Museum of Contemporary Art Garage that presented a special booklet dedicated to the anniversary of the pavilion. The 14th International Architecture Biennale was attended by Remment Koolhaas, Alexander Mamut (Chairman of the Board of Trustees of the Institute Strelka), Daria Zhukova, President of Falcon Private Bank Eduardo Leyeman, Len Blavatnik (Access Industries), Anton Belov (Museum Garage), Varvara Melnikova (Strelka), Olga Karput and Pavel Te (Capital Group), Ilona Stolie, Gregory Pirumov (Ministry of Culture), Margarita Pushkina (Cosmoscow), Vasily Tsereteli (MMOMA), Teresa Mavica (V-A-C Foundation), Danish Architect Bjarke Ingels, director of the London Design Museum Deyan Sudjic, Sofia and Roman Trotsenko (Vinzavod), Mark Garber (GHP Group), Ekaterina Mtsituridze (Roskino), Olga Zakharova (Gorky Park), Sandra Nedvetskaya (Cosmoscow) and Andreas Rumbler (Christie's), Alexei Karakhan (FK Otkrytie), and many others. ƒƒAt the opening of the European Biennial of Contemporary Art Manifesto 10 and celebration of the 250th anniversary of the State Hermitage Museum, Beluga presented an art exhibit installation named Stick it by Beluga created in collaboration with young St. Petersburg artists. Piles of packaging film, almost a kilometre of Scotch tape and wooden elements were all brought together to form an unusual object resembling molecular structure. Each visitor was invited to take part in a common performance and become a co-author of this piece of art by posting a bright sticker on the exhibit. By the end of the evening was the installation was all bright orange matching the official colour of Manifesto 10.

45 OJSC SYNERGY MARKETING

One of the main persons of Manifesto 10 was of course its chief .. supervisor Kasper Konig, he was invented the recipe that the opening partner Beluga used to develop the namesake Konig Cocktail, a bitter, dry and slightly spicy beverage. The cocktail has .. become an absolute hit, especially after Kasper Konig’s pledges there would be no headache in the morning. Myagkov redesigned its liqueurs Restyling involved Myagkov Chili & Honey, Myagkov Cranberry, Myagkov Lemon, a sweet liqueur Myagkov Ashberry with Brandy and liqueur Myagkov Cappuccino. The new bottles are styled in the same way as Myagkov vodka which was also redesigned this year. Larger wording of the name and alcohol content should help customers easily recognize beverages and their strength. Production of redesigned liqueurs started in November, and in December the product was already available in stores. According to the Myagkov brand team, the sales of the redesigned products might increase by 15%. Myagkov goes active As a part of night clubs cooperation, a number of Moscow (B2, 16 tonnes, Arma) and St. Petersburg (Dom Byta) night clubs became Myagkov branded. Moreover, Myagkov actively supports shows of famous performers and bands: Elka, Vasya Oblomov, Nargiz Zakirova, Leonid Agutin, Moralny Codex, Tantsy Minus, B-2, Triangle Sun, MC Xander, 10 years Dirt Crew Recordings, and others.

46 ANNUAL REPORT 2014 MARKETING

Russian Ice is rapidly gaining positions in the market After revolutionary packaging redesign, Russian Ice met all the criteria of today’s consumers and has taken its well-deserved place in the Russian vodka market. A contract with a Hollywood actor Sylvester Stallone provided for using of his images on all kinds of product packaging of the brand. Without any doubt, the image of the actor, who had already supported the brand back in 2010, drew attention of consumers to the new version of the product not only in Russia, but also in the CIS countries. In June 2014, a limited edition of 400,000 bottles of new Russian Ice was launched in the market – in a gift box and with an image of Sylvester Stallone. Apart from the gift packaging with Sylvester Stallone's images, the launch was also supported with the advertising campaign at football matches (with TV broadcasting) and a number of promos in retail outlets. Belenkaya gaining more fans In 2014, promotion and support of the brand was done by means of advertising at football matches of Championships, games of Russia’s leading clubs in the Champions League, UEFA Europa League play-offs 2014/2015, and 2014 United Supercup, which were broadcasted on main TV channels (Channel 1, Russia 1, Russia 2, NTV). Each match attracted an estimated 40 million viewers. By the end of 2014, Belenkaya advertising is calculated to reach more than half a million people.

Belenkaya also maintained its export activities: Regular massive advertising campaigns were organized on central TV channels of Lithuania and Armenia, also outdoor advertising proved the most effective tool. Branded billboards were placed on the main streets of the capitals and major regional cities of Georgia and Latvia.

47 OJSC SYNERGY DISTRIBUTION AND IMPORT

Distribution Synergy group of companies performs the sales through one of the most branched distribution networks in Russia.

Distribution network consists of several complementary channels: direct sales including own retail outlets and sales through independent distributors. Today the team that performs sales has 3,600 people. The Company’s distribution network geography is divided into two parts: West and East. In those regions where distilleries are located, Synergy exploits its own sales personnel, warehouses and its own transportation fleet to deliver the product directly to retail outlets.

Implementing the distribution network expansion the Company considerably increased promotion and sales personnel.

Each key brand occupied a special place on shop shelves after Synergy had developed and approved its own standards of merchandising.

In this connection the main aim of the Company’s trade representatives and merchandisers became the corresponding product placement on shop shelves. Synergy is the only spirit Company in Russia where the merchandiser staff has 500 people and which in 2012 launched a special system, allowing the Company to track the accomplishment of the plan and optimize the effectiveness of allocation of own forces. Nowadays the sales are accompanied by trade marketing program implementation, in particular by motivation campaigns for partners and advertising material distribution in sale outlets. For instance, the program aimed at trade outlets motivation to exhibit the full assortment of Synergy on the best place is called A Gold Shelf. 10,000 retail outlets are involved in this campaign monthly.

Every employee involved in sales of the Company’s trademarks should understand the value of brands, in order to achieve this there are 15 professional trainers in the Company’s personnel. Every day the trainers organize master classes and put the information about unique brands across. Apart from the work with own personnel the Company reinforces its positions among bartenders, waiters and waitresses, and restaurateurs: 20 brand ambassadors work for them.

48 ANNUAL REPORT 2014 DISTRIBUTION AND IMPORT

Import

2014 has seen the active development of Synergy Import, a business area for import of premium spirits in Russia. Three years ago it was just a small department, which is working with 20 top suppliers now, has an annual turnover of 4.5 bn rubles and sales volume of 400 000 decalitres per year (its share in Synergy spirits segment is 13%). The Synergy Import portfolio is carefully selected: each category is studied, only leading brands with direct sales without subsidiaries are being selected for cooperation. We should also mention the pride of the Synergy Import' portfolio, the iconic producers William Grant & Sons and Camus. During the two years of cooperation with Camus we managed to triple sales volumes, and according to experts this is not the limit: Camus has a new design and a new marketing strategy, so that its presence in the Russian market is more than optimistic. Also, we have been efficiently cooperating with Riga Balsam for almost a year now. Talking about the development of distribution business in 2014, it is important to mention the signing of an exclusive contract with the South African and Spanish partners Distell LTD and Torres. Now, the Company represents N№2 cream-liquor in the world Amarula and brandy Torres on the territory of Russia. The Company is now an official distributor of the second popular cream liqueur in the world Amarula and brandy Torres in the territory of Russia.Also, the Synergy portfolio has been widened with rum Ron Barcelo. An important milestone in the development of our premium distribution business was the launch of a project on wine import. Today, we are the distributors of wines from major wine regions of the world. Revenue growth due to import operations exceeded 50%.

49 OJSC SYNERGY GRANT’S

The history of Grant’s started thanks to William Grant in 1898 when he made his first blend. It is the oldest family blend in Scotland. 110 years later Grant’s whisky is still produced using traditional technologies that are cherished and handed over from generation to generation. The flavourful and balanced taste of all products in Grant’s line is achieved thanks to production on the base of grain whisky Girvan. This whisky undergoes vacuum distillation under the conditions of relatively low temperatures that contributes to keeping the sophisticated hints in the end product.

Grant’s Family Reserve. Thanks to delicate malt notes Speyside style is recognized unmistakably. One can distinguish subtle oak and smoke notes, as well as sweet fruity aroma.

Grant’s Ale Cask Finish. Ageing in former ale barrels gives the whiskey tender crème brule flavour and silky malt notes.

Grant’s Sherry Cask. Maturing the whiskey in hand-made sherry barrels gives warm spicy notes, sherry earthy tones and dried fruit shades.

Grant’s Aged 8 Years Old. Aged for 8 years in oak barrels, the blend has sweet fruity Speyside-like aroma with bright malt notes.

Grant’s Aged 12 Years Old is the mixture of best single malt and grain blends aged for at least 12 years. After the 'marriage' the blend is further aged in barrels from American whiskey. As a result, we have a scotch sort with incredibly rich and smooth taste.

Grant’s Aged 25 Years Old. To create this elegant, sophisticated, incredibly aromatic beverage, the Blend Master, Brian Kinsman, uses whiskey aged in oak sherry and bourbon barrels for at least 25 years. The ready blend undergoes additional ageing during several months to give the beverage luxurious, fragrant, yet elegant style. Some of the whiskeys of the Grant's 25 Years Old line are no longer manufactured and thus unique in its kind.

50 ANNUAL REPORT 2014 GRANT’S

51 OJSC SYNERGY GLENFIDDICH

William Grant & Sons founder has forever changed the history of scotch. Even 125 years later, Glenfiddich is the most titled single malt Scotch whisky in the world.

Glenfiddich 12 Years Old is a whisky with light fruity aroma, with subtle hints of young pear and oak. It is achieved thanks to vatting in barrels previously containing Oloroso sherry or bourbon and to the purest water from Robbie Dubh spring.

Glenfiddich Rich Oak 14 Years Old is filled with spicy oak and vanilla tones acquired as a result of vatting in new previously not used barrels made of Spanish and American oak.

Glenfiddich 15 Years Old is a single-malt whisky with a rich bright honey spicy flavour. It is vatted in three different types of oak barrels: previously containing sherry, bourbon and in barrels made of new oak.

Glenfiddich 18 Years Old is a single-malt whisky with a mild and rich flavour, it is vatted in barrels previously containing sherry or bourbon, this whisky is extra vatted for another three months in oak vats until the 'marriage' of spirits occurs.

Glenfiddich 19 Years Old Age of Discovery has a versatile taste with ripe fig hints, baked fruit, cinnamon and black pepper. This whisky is extra vatted in barrels previously containing Madeira.

Glenfiddich Malt Master Edition is the first whisky that undergoes 'double ageing' in two different types of oak barrels: traditional and sherry.

Glenfiddich Cask of Dreams. For the first time scotch is extra vatted in barrels made of Russia oak. The taste is bright, tannins and sweet-oaky. The main emphasis is bitterness of heather honey.

Glenfiddich 21 Years Old Gran Reserva. Glenfiddich 21 Years Old Gran Reserva is vatted in oak barrels made of American oak for 21 years, that give the soft and flavourful taste. Extra-ageing in barrels previously containing the Caribbean rum gives this drink some sweet hints of toffee, fig and vanilla.

Glenfiddich 26 Years Old Excellence is the first single-malt whiskey which is vatted for 26 years exclusively in oak barrels made of American oak. It has a soft and delicate aroma with floral undertones.

Glenfiddich 30 Years Old. Glenfiddich 30 Years Oldis made according to exceptional old supply from distillery. The taste is flavourful and harmonious, once tasting its plum hints with some ripe banana, it is impossible to forget it.

Glenfiddich 40 Years Оld is an exclusive position that is produced annually – no more than 600 bottles. It has a luxury, silken and tender taste.

Glenfiddich 50 Years Old is vatted in two sherry barrels – one of which is a little older than 50 years old. The whisky has kept al the freshness, fruit hints and acquired an unusual birch bark flavour.

52 ANNUAL REPORT 2014 GLENFIDDICH

53 OJSC SYNERGY THE BALVENIE

The Balvenie is a unique selection of single malt Scotch whisky, created by the master of distillery David Stewart. Each type of this whisky has its unique flavour: rich, soft, with bright hints of honey, unique for The Balvenie. The collection consists of eight tastes of single malt whisky. The Balvenie DoubleWood 12 Years Old. The Balvenie DoubleWood 12 Years Old spends many years in traditional oak barrels and afterwards in the final stage it is put into a barrel, where previously Oloroso sherry was kept. The Balvenie Caribbean Barrel 14 Years Old is vatted in oak barrels previously containing bourbon and then it is extra vatted for several months in barrels previously containing Caribbean rum. The Balvenie Single Barrel 15 Years Old is vatted in one barrel previously containing bourbon. The number of such a barrel can be found on each bottle. The Balvenie Double Wood 17 Years Old. The Balvenie Double Wood 17 Years Old is a whisky that first aged in a barrel made of American oak (it added some sweet hints of vanilla) and then was put into sherry barrels made of European oak. The Balvenie Peated Barrel 17 Years Old is vatted in barrels of peated sorts of the Balvenie as well as in new barrels made of American oak. The Balvenie PortWood 21 Years Old. In order to produce this whisky the blend of rare sorts the Balvenie is extra vatted in barrels previously containing branded sorts of port wine. The Balvenie TUN 1401 batch 5. For this series of whisky the master chose special old American and sherry barrels, their year of «birth» which varies from 1966 to 1991. The whisky from those barrels blend and age in a tremendous «marriage» Tun 1401. The Balvenie Thirty 30 Years Old is a rare and truly peculiar single malt whisky, for which David Stewart selects only the best barrels that are often older than 30 years old. The Balvenie Forty 40 Years Old. In order to produce each of these drink batches that consists of only 150 bottles, David Stewart carefully selected and then blended whisky from the most rare barrels kept at the distillery. The Balvenie Fifty is vatted in an oak barrel made from European oak previously containing sherry and is presented in a glass bottle manually blown that is kept in a wooden case.

54 ANNUAL REPORT 2014 THE BALVENIE

55 OJSC SYNERGY TULLAMORE D.E.W.

Tullamore D.E.W. is the premium blended Irish whisky with a harmonious taste. For its production three kinds of whisky are used: the so-called «whisky of distilling tank», grain and single-malt whisky. After the creation of the blend the drink is aged in special oak barrels to give it an even greater softness. You can enjoy Tullamore D.E.W. both in pure form and with ice, soda, or lime.

Tullamore D.E.W. line apart from the blend of standard ageing has another two products: single malt whisky Tullamore D.E.W. 10 Years Old and blended Tullamore D.E.W. 12 Years Old.

Tullamore D.E.W. 10 Years Old is vatted for 10 years in barrels previously containing bourbon, Oloroso sherry, port wine and Madeira. This is the only Irish single-malt whisky that is brought to perfection in four different types of barrels. These specially selected barrels enrich and make the aroma of the drink stronger as a result it acquires a splendid complex and flavourful taste.

Tullamore D.E.W. 12 Years Old is a blended Irish whisky created from carefully selected barrels of 12- and 15-year- old ageing. The drink acquires its perfection thanks to triple distillation, crystal-clear water, selected barley and ageing in barrels previously containing bourbon and Oloroso sherry.

56 ANNUAL REPORT 2014 TULLAMORE D.E.W.

57 OJSC SYNERGY CLAN MACGREGOR

Clan MacGregor is a high-quality Scotch whisky, which people enjoy in more than 30 countries around the world; it proudly carries its badge and motto: We are of royal descent. Today Clan MacGregor is one of the most popular blends in the UK. It is skilfully blended from a selection of finest malt and grain sorts of Scotch whisky, and its fresh, balanced mellow taste with hints of fruitiness is highly appreciated by lovers of this drink.

58 ANNUAL REPORT 2014 CLAN MACGREGOR

59 OJSC SYNERGY MONKEY SHOULDER

Monkey Shoulder is an original brand in the world of whisky, where cherishing traditions are considered to be the norm. Despite its modern daring style, this Scotch is produced following inviolable laws of the production of genuine Scotch drink. Monkey Shoulder is produced by blending three malts of three best Speyside distilleries. It ages in the barrels previously containing bourbon of the first filling, these barrels are prepared by coopers of the malt distillery. Triple malt gives this scotch a rich taste. The master of the malt distillery personally selects no more than 27 casks of three types of single-malt whisky, 'marries' them in a special tun and then leaves them there for several months. Then he puts the scotch into barrels, where it acquires its individual taste and aroma.

60 ANNUAL REPORT 2014 MONKEY SHOULDER

61 OJSC SYNERGY MILAGRO

Тequila Milagro is more than just tequila. It is produced from 100% blue agave, the raw material that is grown on own plantations, harvested by hand and is roasted in clay ovens. Triple distillation in small batches creates a drink with a slight aroma and soft taste. Reposado and Anejo sorts age in oak barrels longer than it is accepted in the industry. Premium bottles are blown according to a unique technology and are processed manually.

The collection consists of 6 tastes:

Milagro Silver has hints of blue agave as well as vegetable and citrus hints, and a spicy aftertaste.

Milagro Reposado has hints of blue agave with subtle flavour of caramel and toast, and a spicy aftertaste.

Milagro anejo has caramel and coconut with chocolate, tobacco and banana notes, and a little sweet spicy aftertaste.

Milagro Select Barrel Reserve Silver has a bright taste of blue agave and vanilla hints, and a dry spicy aftertaste.

Milagro select barrel reserve reposado is pure with vanilla, black pepper and cinnamon hints, and a dry aftertaste.

Milagro select barrel reserve anejo has the flavour of not sweet chocolate, tobacco leaves, toffee with bright oak hints, and a dry aftertaste.

62 ANNUAL REPORT 2014 MILAGRO

63 OJSC SYNERGY HENDRICK’S

Hendirck’s is the gin that is produced in an unusual way with the addition of non-standard ingredients which give it an original flavour and aroma – extracts from the petals of Bulgarian rose and fresh cucumber. Hendrick’s is especially valuable because the main eleven ingredients (the so-called botanicals, the combination of which gives this drink its unique character) are delivered from different corners of the planet.

Hendrick’s is the only gin that is produced with the help of two stills: a Carter-Head still and a copper Bennett still. Due to this fact the drink has an outspoken bouquet.

Hendrick’s is produced in Scotland using only pure water from the local natural springs. The gin is hand- crafted in very small batches of only 450 litres each.

64 ANNUAL REPORT 2014 HENDRICK’S

65 OJSC SYNERGY CAMUS

Founded in 1863, Camus is a family-owned company that has a unique portfolio of premium spirit brands which are popular all over the world. Today, Camus products are sold in almost every country and international airport in the world, and onboard a large number of airlines.

Camus represents the history of the cognac house, which since 1863 was owned by five generations of a family, where the exceptional skill of creating outstanding cognacs with a unique, elegant style was passed from father to son.

Passionate devotion to duty is alive today due to Cyril Camus. Being loyal to his heritage, he preserves the independence of Camus and is the inspirer of what we call a Living Tradition. The Camus family create cognacs of some unique style, they can satisfy the taste of the most demanding connoisseur of this noble drink.

The House Signature comes from the most precious vineyards of the CAMUS family in Borderies AOC. CAMUS is one of the largest landowners in the Borderies cru – the smallest of the six growth areas of the Cognac AOC – famous for the ageing potential of its eaux-de-vie

Borderies eaux-de-vie are much soughtafter, often being selected to enter the most prestigious blends for their floral notes, aromatic persistence, hints of spice and sweet pastries and excellent ageing properties.

Thanks to continuous search for new flavours, Camus discovered the vineyards of Île de Re, which allowed it to create a range of exclusive island cognacs. Ile de Ré island is located in the Bois à Terroirs appellation: the most westerly part of the Cognac AOC.With a range of single-growth Cognacs, made from eaux-de- vie distilled and aged on the island, CAMUS Ile de Re Cognacs show a pronounced maritime influence. The island Re is found off the west coast of France, in the Charente Maritime department. Located in the area of Bois Ordiner, the island is the westernmost part of the Appellation Cognac.

66 ANNUAL REPORT 2014 CAMUS

67 OJSC SYNERGY RIGA BLACK BALSAM

JSC LATVIJAS BALZAMS – is a leading producer of alcohol beverages in the Baltics with a history steeped in tradition since 1900. It is one of the most significant exporters in Latvia – its products are available in more than 30 countries worldwide.

Riga Black Balsam is the main brand in the company’s portfolio. This bitter has been produced since 1752. It is one of the oldest drinks.

Riga Black Balsam product range consists of three tastes: classic balsam, with the taste of black currant and balsam with rum.

Riga Black Balsam

Deliciously different, exceptionally smooth and velvety on the palate, Riga Black Balsam opens a whole world of sensations with its 24 ingredients. Subtle hints of linden blossom, birch bud, valerian root, raspberry, bilberry, and ginger as well as touches of nutmeg and black peppercorn tease the palate and come alive in the glass.

Riga Black Balsam Currant

The blend of two traditional Latvian flavors – Riga Black Balsam and black currants – along with ginger aroma forms the unique bouquet of this drink.

Riga Black Balsam Element

Riga Black Balsam ELEMENT recipe is a special composition of magnificent flavours which is based on original 24 all natural ingredient recipe with addition of high-quality rum.

68 ANNUAL REPORT 2014 PINNACLE

Domaine Pinnacle is a family estate with not only fine orchards, but also its own production site of cider, located on the southern slopes of the Pinnacle mountain in the eastern part of Canadian Quebec. Created from 6 different sorts of apples collected during the peak season, Pinnacle Ice Cider delights with splendid harmony of sweetness and refreshing apple tones. Its rich taste is unlike anything you have ever tasted before.

69 OJSC SYNERGY GREAT VALLEY

More than two thousand years ago, under the guidance of Tsar Tigran the Great (an outstanding leader and land owner) Ancient Armenia was one of the most powerful countries in the region. Its territory covered the land from the Сaspian Sea to the Black and Mediterranean Sea. The Great Valley Company created brandy Tsar Tigran in his honour.

Tsar Tigran product range consists of ages:3 years, 5 years, 7 years, 10 years, 15 years, 20years and even 30 years!

Tsar Tigran 3 years old brandy is the youngest in the line. It has a gold colour and an expressive aroma of dried fruits added by hints of candied fruits, chocolate and vanilla. This brandy has a mellow warm aftertaste.

Tsar Tigran 5 years old brandy has a deep gold colour. In the aroma dominate hints of flowers, orange candied peel, nuts and chocolate. The taste is well- balanced and harmonious. This brandy has long-lasting aftertaste with hints of roasted almond.

70 ANNUAL REPORT 2014 GREAT VALLEY

71 OJSC SYNERGY PLANTATION

The vast Plantation’s collection is composed of 7 vintages from different Caribbean regions and blends from one area each (Trinidad, Barbados, Panama, Guyana, Nicaragua, Jamaica and Grenada). Plantation is now a full range of seven vintage rums and three blended rums made by Ferrand's cellar master. Each rum is the perfect expression of its. Plantation rums are first aged for many years in the Caribbean, in its hot and humid climate, generally in young bourbon casks. When they reach maturity, they are shipped to Maison Ferrand’s Château de Bonbonnet at their natural strength in order to preserve their richness of aroma and flavor. There, they are matured by our cellar master for several months to a year in small oak casks in order to give them even more elegance, refinement and roundness.

72 ANNUAL REPORT 2014 PLANTATION

73 OJSC SYNERGY RON BARCELO

Since 1930, The Dominican Republic has been the home of Ron Barcelo. Incomparable quality rum produced in the best conditions offered by the Caribbean. San Pedro de Macoris, where is located factory/ facilities /warehouse, has an average temperature of 30 degrees and humidity of 90% ideal for aging. Natural aging process in American oak barrels, according to the Dominican Republic rum producing standards, give the product rich colour, unique flavour and taste.

74 ANNUAL REPORT 2014 RON BARCELO

75 OJSC SYNERGY ABSENTE

Liquor consisting of wormwood extract alcohols, sugar, wormwood, anise alcohols, anise, melissa and lemon balm. Absente and Grande Absente are products of highest quality, they are produced from natural ingredients by Distilleries et Domaines de Provence company, in the birthplace of absinthe – in France. Distilleries et Domaines de Provence takes care of traditions and quality of their products and produces absinthe from the same ingredients as it was during the Belle Epoque.

76 ANNUAL REPORT 2014 AMARULA

Amarula is a cream liqueur from South Africa. It is made with sugar, cream and the fruit of the African marula tree (Sclerocarya birrea) which is also locally called the Elephant tree or the Marriage Tree. It has an alcohol content of 17% by volume. It has had some success at international spirit ratings competitions, winning a gold medal at the 2006 San Francisco World Spirits Competition.

77 OJSC SYNERGY ANTICA SAMBUCA

Antica Sambuca is an iconic brand, a product of exceptional character, developed and custom-made in the Valley between Dolomites Mountains and Venice. With a modern and eye-catching packaging it really stands out from the crowd and it projects itself among the high end spirits brands.

It’s a truly versatile product, equally at home in shot, premium cocktails, or as a mixed drinks.

78 ANNUAL REPORT 2014 ANTICA SAMBUCA

79 OJSC SYNERGY BERNEROY

Calvados Berneroy is one of the world's best spirits with the flavour of apples and old oak, it has been made in the famous province Normandy, France, for at least five centuries. It is produced from carefully selected apples from the best orchards. Single distillation ensures high saturation of fruity cider and gives the product natural apple flavour. Ageing in tested oak barrels restricts tannins content and preserves rich aroma.

80 ANNUAL REPORT 2014 BERNEROY

81 OJSC SYNERGY WINE

Chablis. Pascal Bouchard. (France)

Pascal Bouchard Estate is a family-owned winery of five generations of winemakers. Today, the Bouchard family owns vineyards with a total area of 32 hectares, those are Clima, Montmains Beauroy, Fourchaume and Mont-de-Milieu in the Premier Cru, as well as Les Clos, Vaudésir and Blanchot in the Grand Cru. In addition, the Domaine produces wines Chablis and Petit Chablis. Pascal Bouchard total production volume is about 220,000 bottles/year.

Champagne. Maillly Grand Cru. (France)

Maillly Grand Cru is the only Champagne House producing wine following the principle of Grand Cru Classé Bordeaux: all sparkling wines are made from grapes harvested only from Grand Cru own vineyards. Maillly cellars are built in chalky grounds. They look like a gallery a few kilometres long: it took more the winemakers more than 30 years to dig the cellars and create perfect conditions for production and storage of its Grand Cru champagne. This is where it is kept during many years, placed 19 meters deep underground in the cold quiet atmosphere of the historic (chalky) caves.

Champagne. Guy Charlemagne. (France)

Guy Charlemagne vineyards (15 hectares) are located in Champagne, in the heart of Côte de Blancs in a small village of Messnil sur Oger. Since 1892, all sparkling wines Guy Charlemagne have been produced and vinified only from its own vineyards of Chardonnay (87%) and Pinot Noir. Bottles of champagne are stored in dark chalk cellars at constant temperature. Each year about 130,000 bottles are produced, of which 30% are sold in France and 70% exported.

Les Grands Chais de France. (France)

The largest French wines producer since 1979. Produces about 1 million bottles a day. The annual turnover of Les Grands Chais de France is around 841 million euros. Brands of Les Grands Chais de France are widely represented in international networks such as Metro Cash and Carry, Auchan Product lines: Blanc Foussy, Paul Chevalie, Baron de Rothberg, Croix de Vignes, Prestigium, Pierre Fontaine.

82 ANNUAL REPORT 2014 WINE

Maison Bouey. (France)

The history of Maison Bouey originated in 1901. Today Maison Bouey is a major producer and exporter of Bordeaux wines, covering all segments and regions of Bordeaux wines from inexpensive to the most exclusive castle wines. The company is one of five largest suppliers of the French retailers, it owns 6% of the market. Maison Bouey products are available in all French stores and networks. To date, Maison Bouey turnover is 34 million Euros and 16 million bottles. The company is among five largest merchant Bordeaux houses Product lines: Chateau Haut Clary, Chateau Bellegrave, Chateau La Motte, Chateau Le Ministre.

Toscana. Castello di Querceto. (Italy)

The Francois family came to Tuscany in the XIX century, they have owned estate Castello di Querceto since 1897. The castle originating from the Longobards still has the medieval look. After the acquisition of the castle, which was considered a country residence, the best plots of its land became vineyards. The estate Castello di Querceto is located among green hills at the altitude of 470 meters above the sea level. The total area of the estate is about 1900 hectares. There are a bottling shop and four cellars in the territory of the castle, which cover different stages of wine production from fermentation to ageing. The biggest part of Castello di Querceto produce are wines Chianti, Chianti Classico and Chianti Classico Riserva.

Tosсana. Nottola. (Italy)

Nottola estate is located in the valley of Val di Chiana in the wine area Vino Nobile di Montepulchiano, which appeared more than 1,000 years ago. Wine Nobile di Montepulchiano – the legacy of great historical and cultural value has been produced in this estate for more than a thousand years. Cavaliere Ante-Rivo Joemarelli who was a passionate winemaker bought the Nottola estate in the late eighties. The estate consisted of Bracci, a XIX century villa surrounded by typical Tuscany farmhouses, olive groves, vineyards and wine cellars with a total area of only 10 hectares. Cavaliere planted new vinegrapes and renovated the buildings; enologist Riccardo Cotarella lent a hand in creation of a particular

83 OJSC SYNERGY WINE

wine style. Nottola wines gained recognition around the world not only among wine lovers, but also among the best wine experts Wine Advocate and Wine Spectator. To date, the Nottola estate has 23 hectares of vineyards, olive groves and 1,700 sq. m. of cellars equipped with modern technological solutions. Piemonte. Pelissero. (Italy)

Family house Pelissero is located in Treiso, in the heart of Barbaresco production area. Wine-making experience of the Pelissero family started with selling of grapes to other producers, some time later a younger generation of the Pelissero family decided to produce their own wine. As a result, the first Pelissero wines appeared in 1960, and today they take a well-deserved place among the best wines of Piemonte. All the production process is controlled by a professional enologist Giorgio Pelissero, one of the most talented modernist winemaker with wide views. Each year, 20 hectares of vineyards bring about 100,000 bottles of wine.

Toscana. Terenzi. (Italy)

Wine House Terenzi was founded by Florio Terenzi in the early nineties. The area of vineyards Terenzi is 52 hectares, it is divided into 5 subareas: Cerreto Piano, Crognoleta, Madrechiesa, Montedonico and Salaioli – all with different types of soil. More than 12 different sorts of grapes are planted there, among them: Cabernet Franc, Cabernet Sauvignon, Merlot, Sangiovese, Syrah, Vermentino and Viognier. The total production volume of the Terenzi winery is 300,000 bottles a year, the biggest part of which are D.O.C. wines. Morellino di Scansano and D.O.C. Maremma. There are a restaurant and a hotel at the Terenzi estate for visitors.

Fratelli Martini Secondo Luigi SPA. (Italy)

The company was founded in 1947. Today the company is a big group which produces more than 35 million litres of wine per year. Fratelli Martini Secondo Luigi SPA is the largest wine producer in Italy. Product lines: Marchesini Lambrusco, Marchesini Spumante, Casa Sant Orsola.

84 ANNUAL REPORT 2014 WINE

Pasqua. (Italy)

Pasqua is a family-owned company with more than 80 year history and experience in wine-making. To date, Pasqua produces 13.8 million bottles of wine a year. The area of vineyards is 139 hectares (as of 2014). The company is one of the leaders in the wine market in Italy and abroad. Pasqua wines are available in more than 50 countries. Product lines: sparkling and non-sparkling wines from Veneto.

Natale Verga. (Italy)

The company was founded in 1895 by the Verga family, today it is managed by the family's fourth generation. The wine house has a leading position in the Italian market. All Natale Verga wines are typical Italian wines that are produced from traditional sorts, the wines are available in more than 40 countries of the world. Product lines: Il Gaggio, Natale Verga.

Rias Baixas. Vinigalicia (Spain)

The Vinigalicia was founded in the eighties of the previous century. During this time, family traditions have been successfully merged with high-technology equipment and rigid control at every production stage, which allowed the Vinigalicia to offer high quality and unique wine. The heart of appellation Galicia is the area called Ribera Sacra with its 1550 hectares of vineyards. «A dream come true», say the founders of the Vinigalicia. Due to the fact that the company owns a number of vineyards in Galicia and also other regions of Spain, the company can offer a wide range of wines, liquors and olive oil.

Penedes. Maset (Spain)

Maset del Lleó is a producer of quality wines and cava for more than two centuries now – since 1777. This wine house was founded by the Massana family, which began to produce cava with use of the Champenoise method with sur lie ageing for more than 12 months. Today Maset is a large winery located in the heart of Alt Penedès and specialized in the production of the best Spanish Priorat wines and cava. (D.O.)

85 OJSC SYNERGY WINE

Bodegas Murviedro. (Spain)

The winery Murviedro was founded in 1927 as a Spanish branch of the Schenk Group, one of the leaders of the wine sector in Europe. Bodegas Murviedro produces more than 35 million bottles a year and covers the whole range of wines. The strategic plan of the Murviedro winery, one of the most important wineries in the Valencia region, is to create a global brand of wine promoted with international trade. Product lines: Gran Castillo

Cherubino. (Spain)

The company's history began in 1831. Today, wine production is focused on the produce of medium and high priced range. Production volume is over 10 million bottles a year. The products are exported in more than 60 countries. Product lines: Lacrima Purpura.

Mozel. Markus Molitor. (Germany)

The winery is located in the heart of Wehlener Klosterberg. Old vineyards with centenary vines are planted on steep slopes at an angle of 80% and can be processed only manually. They are the basis for unequaled Riesling Molitor. 94% of Riesling grapes are harvested from these steep slopes. Apart from Riesling Molitor, there is also Pinot Blanc and Pinot Noir in some areas. The famous winemaker pays special attention to hand-picking of grapes deeming it the decisive moment in building the quality of wines.

Cono Sur. (Chile)

In 1993 the winery Cono Sur was founded. During its first year Cono Sur produced 30,000 boxes of wine, today it sells not less than 4 million litres a year. Cono Sur wines received more than 150 medals and awards during its first five years after foundation, which they still do at the most prestigious international wine exhibitions. Today the winery owns more than 20 vineyards in 1,400 hectares of land that stretches across the whole Chile territory in the most prestigious and popular valleys.

86 ANNUAL REPORT 2014 WINE

In 2010, Cono Sur became the first wine producer in America and the third one in the world in biological viticulture and winemaking, today it is positioned as a leader in environmental protection. All the works at the vineyards are carried out under the motto of organic soil and vines cultivation – only natural fertilizers are used. Instead of usage of insecticides Cono Sur enologists bring in geese that eat the viticide, thereby maintaining the biological balance of the terroir. Product lines: Tocornal, Bicicleta, Reserva Especial, Single Vineyard, 20 Barrels Limited Edition, Silencio

Artemovsk winery. (Ukraine)

Artemovsk winery is the largest enterprise in Eastern Europe for production of sparkling wines following the classical bottle method. In 1954 the first 500,000 bottles of sparkling wine were produced. The factory has modern equipment, but the classical bottle technology mandatory implies manual operation and individual control of each bottle. Sparkling wines are exported to over 20 countries and are available in the range of on- and off-trade in Ukraine, Russia and countries of Central and Western Europe. Special achievements of the Artyomovsk Winery have been noted with the highest international professional awards. Product lines: Crimea.

Distell. (South Africa)

Distell is the largest wine producer of South Africa. Distell was founded in 2000 through the merger of the region's wineries South African Farmers Winery (SFW) and Distillers Corporation (founded in 1945). Today the company is a leader in production and export of South African wines. Product lines: Obikwa, Fleur Du Cap.

87 OJSC SYNERGY PRODUCTION

Synergy Group operates 7 distilleries that according to the strategic Company’s interests are located in the largest federal districts including Central, Far Eastern, North-Western, Volga and Siberian. The number of distilleries and their geographic diversification provide the Company with additional savings in matters of logistics and also reduction of technological risks in production activities. It also facilitates aversion of other operational risks whichsome companies having only one production facility experience attimes.

All 7 distilleries operate advanced German and Italian equipmentwith more than 15 million decalitres of total capacity.

Our Distilleries

Production programs of all distilleries include production of the full range of national and local brands. The only exceptions are Beluga and Veda brands which are produced exclusively at the Mariinsky Distillery in Siberia. Synergy distilleries are an important component of the Group's distribution system: they are widely used as large logistic centres in their respective regions.

Traditsii Kachestva Distillery is one of the largest distilleries that produces strong spirit beverages in Russia, it is located in Krasnoznamensk town, Moscow region. The distillery was founded in 1997 and joined the Group in 2007. In 2009 the distillery became one of the top ten largest distilleries in terms of production volumes. The distillery operates advanced Italian equipment. The distillery operates as a large logistic and production centre producing all national vodka brands of the Group throughout the whole western part of Russia up to Ural border.

Arkhangelsk Distillery was founded in 1899 and is now the largest distillery in Arkhangelsk region. The distillery was acquired by Synergy in 2004 and is one of the leading strong spirit beverage producers in the region. The distillery operates advanced high-performance German and Italian equipment.

«ROOM» Nizhny Novgorod Distillery was founded in 1993 in Nizhny Novgorod and was acquired by Synergy in 2006. The distillery operates new Italian equipment.

88 ANNUAL REPORT 2014 PRODUCTION

URALALKO Perm Distillery is the leading strong spirit beverage producer, that is top 50 of the largest plants in the region. It joined Synergy in 2003. The distillery commenced its activities in 1968 and specialized initially in grape wine production and sales. The distillery operates advanced German and Italian equipment. Besides, UralAlko functions as the distribution centre for the Company products representing all national vodka brands of the Group in the Ural region of Russia.

Ussuriysky Balsam has been the leading factory in the spirit industry of the Primorsky Territory for more than 100 years. The distillery joined Synergy in 2002. It was founded in 1894 by Mikhail Pyankov, the merchant. The factory operates both as production and distribution centre and presents all national vodka brands of the Company in the Far East of Russia.

Mariinsky Distillery in Kemerovo Region is one of the leading distilleries in Russia. The factory has been in operation since 1900 and it functions as the logistic centre performing production and distribution of the whole range of the Company products in Siberia. The distillery joined Synergy in 2006.

Khabarovsky Distillery, founded in 1881, is the largest distillery in the Far East. The distillery joined Synergy in 2005.

89 OJSC SYNERGY EXPORT OPERATIONS

In 2014 Synergy continues to strengthenits export network which amounts to over 70 countries in the world. Sales performance clearly demonstrates the leading position in 2014: the Company ranks among the top three of the largest exporters of Russian vodka.

Synergy is the only company in Russia that successfully exports vodka of super-premium segment. The high-quality product and thoroughly considered development strategy allow the Company to make ambitious plans of the Company’s brands promotion in the export markets.

The highest growth was noted in the super-premium vodka segment. Export sales of the Beluga brand increased by 20% for the fiscal year. It is worth mentioning that Beluga vodka ranks among Top 5 super-premium vodka brands in the world.

The Company places emphasis on seven main export directions: Asia and Australia, CIS and the Baltic countries, Africa and the Middle East, Eastern Europe, Western Europe, Latin America, the USA, as well as Duty Free.

Export sales of super-premium brands are building up. The share of Beluga export sales, including the United States, increased by 4% and amounted to 36% of the Company's total sales volume in 2014.

The top five leading countries in sales of super-premium vodka Beluga are Kazakhstan, Vietnam, the Baltic countries, Germany and the United Kingdom.

High growth rates were also demonstrated by other brands of Synergy portfolio, in particular, the Belenkaya brand. Sales increased by 16% as compared to 2013.

Last year Synergy signed a distribution agreement with a number of countries, such as: Montenegro, Sri Lanka, Mauritius, Maldives (through a sub-distributor in the United Arab Emirates), Denmark and Malta. Thus, the geography of the brand ambassadors has become wider. There are Synergy employees in Asia, Australia, Germany, Austria, Switzerland, France, the Baltic States, Kazakhstan and the Caucasus who are working to increase sales volumes of Synergy brands and develop local distribution.

Last year, the Beluga brand showed successful growth of 39% in Western Europe. A contract was signed with a new distributor in France. Sales increase in Germany as compared to 2013 is 43%, and as compared to 2012 – 190%. All the Company's off- trade special offers did work in the German market, and our recommendations for the development of the on-trade channel have also been effective.

90 ANNUAL REPORT 2014 EXPORT OPERATIONS

Leading positions are still held by: Germany, the UK, France, Italy and Spain.

The Asian region showed an increase of 28%. Effective work with a distributor in Vietnam still allows to consider this country as a leader in Beluga sales. The growth of more than 21% as compared to 2013 has been shown. Thanks to marketing support and successful distributor's actions in India, the sales figures have become quadrupled. The Company did first shipments to the Philippines.

Sales leaders in Eastern Europe were Bulgaria and Slovakia. In addition, last year we started the project Beluga Intense, whereas we developed a 43-degree vodka especially for the market of South Africa, where special requirements to such beverages apply.

By the end of the year we did the first shipments to countries of one of the most promising areas, Latin America, such as: Mexico, Brazil, Chile and the Caribbean.

The year marked development and strengthening of sales through Duty Free channel, which covers over 170 directions in Russia and abroad.

Sales increase as compared to 2013 is 12%. Sochi and St.Petersburg airports showed an increase over the reporting period in the territory of Russia. Paris, Rome and Warsaw showed a double- digit growth inWestern Europe. The plans for 2015 are the active promotion of Synergy brands in airports of Asia and America.

The listing in 40 airports of the largest cities around the world (such as Cancún, Mumbai, Laos, Doha, Bodrum, Athens and others) is the result of the work fulfilled in 2014. During the last year a lots of successful promotion campaigns with the use of brand decorations and promotion staff in the biggest shops of Duty Free were held.

It is important to mention that in 2013 Synergy expanded its presence in the US. Thanks to signing a contract with a new importer, now it is possible to buy the Beluga brand products in more than 30 States.

In 2015, Synergy is expecting to rely on its solid basis for the long- term profitable growth.

91 OJSC SYNERGY GEOGRAPHY AND DISTRIBUTION

Arkhangelsk Perm Nizhny Novgorod Mariinsk Moscow Kemerovo Rgn.

Krasnoznamensk Moscow Rgn. Khabarovsk Kiyiv Ussuriysk the Primorsky Territory усурийскк правильно Almaty Vladivostok

Miami

Main offices Representative offices

Distilleries

USA

Russia Canada

CIS Australia

Asia Mexico

Europe Brazil

92 ANNUAL REPORT 2014 Arkhangelsk Perm Nizhny Novgorod Mariinsk Moscow Kemerovo Rgn.

Krasnoznamensk Moscow Rgn. Khabarovsk Kiyiv Ussuriysk the Primorsky Territory усурийскк правильно Almaty Vladivostok

Miami

Main offices Representative offices

Distilleries

USA

Russia Canada ƒƒOur products are sold in over 70 countries of the world. CIS Australia ƒƒThe Company operates 7 distilleries. Asia Mexico ƒƒ2 offices: in Moscow and Vladivostok. Europe Brazil ƒƒ3 representative offices: in Kiev, Almaty and Miami.

93 OJSC SYNERGY PENTAGRO GROUP FOODSTUFF

The Company owns and operates agricultural and food business enterprises, carrying out the production, marketing and sales, poultry meat, dairy and meat products in Russia. In 2009, all the assets of this business were consolidated into a separate company – JSC PentaAgro which is a 100% owned subsidiary of Synergy Co. PentAgro member companies have leading market positions in the regions of their presence. Marketing and sales of food products are carried out exclusively under the names of local brands and mainly in those regions where the corresponding production plants are located. Products are distributed through direct sales, distributors and wholesalers.

Dairy Products Dairy products are manufactured and sold primarily in the Primorsky and Khabarovsk Territories. The company’s dairy assets include two manufacturing businesses: Ussuriysky Milk Plant, OJSC located in the city of Ussuriysk of the Primorsky Territory and OJSC «DAKGOMZ» located in Komsomolsk on Amur of the Khabarovsk Territory.

These factories produce over 100 different products including different categories such as sterilized and pasteurized milk, sour cream, cottage cheese, butter, cultured milk and soya products, ice cream, etc. JSC «DAKGOMZ» is one of the few manufacturers of soya milk products in Russia and the only manufacturer of such products in the Russian Far East.

94 ANNUAL REPORT 2014 PENTAGRO GROUP FOODSTUFF

Meat Processing Meat products are produced by Nakhodkinsky Meat Processing Plant with location in the city of Nakhodka, the Primorsky Territory, and are sold throughout the Far East. The plant produces a wide range of processed meat: sausages, ham, salami and semi-processed meat. The company is focused on producing high-margin products in the medium price and premium market segments of the processed meat market.

Poultry Meat Production Poultry products are distributed mainly in Saratov Region and in the neighbouring regions of the Volga Federal District. The essential in poultry business is an integrated poultry production complex in Saratov Region. Its core assets are JSC Mikhailovskaya Poultry Farm and the stud farm JSC PPZ Tsarevschinsky-2. The poultry production complex produces the brood chicken egg, broiler chickens and products made from them – more than 100 kinds of high quality products, including chilled poultry meat, semi-finished products, ready meals and sausages. The complex also has its own distribution network, sales department and its own retail stores.

95 OJSC SYNERGY FINANCIAL REVIEW REPORT BY THE BOARD OF DIRECTORS FOR PRIORITY AREAS

Financial performances and operations

The table below illustrates the consolidated financial results for 2014, as compared with 2013.

(in million roubles, except for those indicators which are otherwise stated)

2014 2013 % change

Sales, thousands dL 11 021 12 534 -12 Sales, including excise tax 46 814 44 594 +5 Net revenue 28 163 26 378 +7 Cost of sales 16 135 15 098 +7 Gross profit 12 028 11 280 +4 Gross profit margin, % 42,7 42, 8 -0,1 пп General and administrative expenses 2 411 2 053 +17 Selling expenses 7 389 5 871 +26 EBITDA 2 973 3 674 -19 EBITDA margin, % 10,6 13,9 -3,3 пп Operating income 2 274 3 127 -27 Operating income margin, % 8,1 11,9 -3,8 пп Net financial expenses 945 1 202 -21 Net profit 1 090 1 541 -29 Net income margin, % 3,9 5,8 -1,9 пп Income per share, RUB 61,73 82,32 -25

96 ANNUAL REPORT 2014 FINANCIAL OVERVIEW REPORT BY THE BOARD OF DIRECTORS FOR PRIORITY AREAS

The excise tax significantly increased since January 1, 2014, which resulted in overall market decrease by 22%. Synergy Group shipments showed a 12% decrease (from 12,534 mln dl to 11,021 mln dl), however, due to an increase in shipment prices and export and import activities, the Company managed to almost completely mitigate this decrease (net revenue increased by 7% from RUB 26,378 mln to RUB 28,163 mln.)

Gross profit margin has not changed, so the gross profit showed the same growth as the net revenue: + 7% to RUB 12,028 mln.

General and administrative expenses increased by 17% and amounted to RUB 2,411 mln due to the growth in labor costs and office rent which are usually contracted in US dollars.

The increase in commercial expenses by 26% was aimed at maintaining market share in a situation of declining sales and a simultaneous increase in the shipment prices. A significant part of commercial expenses correlates with the price of products and the excise tax and thus increased in proportion to the excise tax growth (25% from January 1, 2014).

The consolidated 2014 EBITDA declined by 19% from RUB 3,674 mln to RUB 2,973 mln. The decline is due to a number of key factors:

1. The common factor of 25% excise tax growth since January 1, 2014 increased the share of grey market of excite-free spirits and contributed to significant reduction of the legal vodka market;

2. Missing factor of creating of additional reserves by distributors before the traditional increase of the excise rate. At the end of 2014 this factor was missing, since the government froze the excise tax increase in 2015 and 2016. The Group evaluates the impact of this factor at about 1 million dl, or RUB 350-400 mln of lost operating profit.

At the same time, the Group welcomed the factor of the excise rate freezing for the next 2 years and expects effectiveness of a number of governmental measures aimed at supporting producers.

The net profit decreased by 29% from RUB 1,541 mln to RUB 1,090 mln. The main factors for this decrease are the same as for EBITDA, plus growth of financial expenses indirectly linked with the excise tax increase, which led to increase in bank guarantees and financing of the increased debts volumes.

97 OJSC SYNERGY FINANCIAL OVERVIEW REPORT BY THE BOARD OF DIRECTORS FOR PRIORITY AREAS

Revenue Company's revenue in 2014 is 28,163 mln rubles, which is 7% more than in 2013.

Revenue, RUB mln

30 000

5 722

5 228 25 000

22 441 21 150 20 000

15 000

10 000

0 2013 2014

Foodstuff Spirits

Share of segments in revenue

20% 20%

80% 80%

2013 2014

Foodstuff Foodstuff Spirits Spirits

98 ANNUAL REPORT 2014

FINANCIAL OVERVIEW REPORT BY THE BOARD OF DIRECTORS FOR PRIORITY AREAS

Share of Segments in Gross Profit

9% 10%

91% 90%

2013 2014

Foodstuff Foodstuff Spirits Spirits

Alcohol segment The alcohol segment dynamics is similar to the overall group results: a drop in sales volume, an increase in revenues and gross profit due to an increase in prices and dynamic diversification of the Group's operations. The Gross Profit Margin has not changed significantly.

Food Segment In 2014, Mikhailovskaya Poultry Farm has become significant and positive contribution to the segment. After renovation, completed in 2013, its production performance increased, which in favourable 2014 market conditions resulted into significant profitability increase.

The results of dairy and meat product lines in 2014 are comparable to those of 2013.

100 ANNUAL REPORT 2014 FINANCIAL OVERVIEW REPORT BY THE BOARD OF DIRECTORS FOR PRIORITY AREAS

Capital structure In 2014, the total debt of the Group increased by RUB 2,029 mln and amounted to RUB 8,708 mln. Whereas the flight of capital linked with reduction in taxes payables was generally mitigated by the positive effect from the reduction of finished goods stocks, the increase in accounts receivable, raw materials stock growth and purchase of own shares (in 2014 – RUB 418 mln) required additional funding. The growth of accounts receivable was due to the excise tax growth rate, since the customers' debts include the excise tax.

The table below illustrates the changes in the capital structure as of December 31, 2014, compared to previous period. (In RUB mln, except for those indicators which are otherwise stated)

31.12.2014 31.12.2013 In annual terms, %

Total debt 8 708 6 679 +30,4 Long-term debt 5 544 5 802 -4,5 Long-term debt 2 904 877 +261,6 Share of long-term debt in total debt, % 64 87 -23 пп Share of unsecured liabilities 49 62 -13 пп in total debt, % Cash and cash equivalents 482 467 +3,2 Total capital and reserves 19 144 18 369 +4,2 Total capital 25 220 24 716 +2 Net debt / EBITDA 2,77 1,69 +63,6

No growth of excise tax after January 1, 2015 implies there would be no need in additional credit resources in 2015. In addition, the Group intends to take some measures to reduce the working capital.

Fitch, the rating agency, positively assessed the fact of freezing the excise tax in the coming years to stabilize the market, and in December 2014 upgraded the long-term international credit rating of the issuer default to 'B+', and the national long-term rating to 'A-' (rus). Synergy OJSC was assigned 'Stable' outlook.

101 OJSC SYNERGY SOCIAL RESPONSIBILITY

Synergy builds its long-term development based not only on its commercial interests, but also on the principles of social responsibility and ethical standards of doing business, always considering the balance between business and society interests.

The Company seeks to make a contribution to the development of the Russian economy and the prosperity of the country’s population. Thus, in 2014 the total volume of its tax payments exceeded 25 billion roubles. Synergy’s management is convinced that the achievement of excellent results and management effectiveness are to a considerable extent determined by the level of trust to the Company. Trust, in its turn, is based on fair treatment and respect for all parties, concerned: shareholders, customers, business partners, and employees. We build relationships with these groups and shape the corporate reputation, which is one of the most significant non-financial assets, especially important for any company operating in the consumer sector of the market.

Our corporate and social responsibility policy is based on the following four priority areas:

ƒƒsocially responsible marketing and development of responsible alcohol consumption culture; ƒƒsocially responsible human resources policy based on mutual respect, fair compensation and providing our employees with professional growth opportunities; ƒƒtaking care of the environment and preservation of natural resources; ƒƒsocial and cultural initiatives encouraging harmonious society development.

Socially Responsible Marketing Synergy is one of the leaders of the Russian spirit market and with the help of its activity in spirit brands promotion it tries to set an example of socially responsible marketing within the above mentioned market. The Company’s products promotion and distribution are aimed exceptionally at adult consumers and we take into account risks related to excessive alcohol consumption.

The Company performs marketing activities in full compliance with the Russian legislation and puts its advertisements only on channels allowed by the law. Besides meeting regulation authorities’ requirements, the Company developed its own system of standards

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in responsible alcohol consumption and informing consumers, which are based on recommendations and guidelines of such international organizations as the European Alcohol and Health Forum and the EU Council of Ministers. Synergy does not impose alcohol consumption process in its marketing activity but makes adults aware of its products in order they could make a conscious choice in favour of one or another brand. Synergy also acts as initiator of a wider spreading of information materials explaining the negative effects of excessive alcohol consumption. So, in 2007, the Company developed and approved its own medium-term information and explanatory program called «Responsible alcohol consumption».

The main objectives of this project are the avoidance of alcohol consumption among the under age, explanation of the potential harm of spirit products to some groups of consumers (pregnant women, people suffering from central nervous system diseases, etc.), prevention of road accidents that happen due to drink-driving.

Apart from following the legislation and more detailed in-house standards Synergy actively participates in forming industry standards in responsible marketing area. Company’s specialists take part in the development of such standards in the basis of the Union of Alcoholic Beverage Producers as well as in cooperation with the Federal Service for Spirit Market Regulation. Socially Responsible Human Resources Policy

Synergy’s employees are a guarantee of the Company’s future achievements. This is the reason for high significance of ethical and socially responsible human resources policy for the Company. Motivation of the staff, objective assessment of the professional contributions of each employee, talent support and providing conditions for the self-realization of specialists are among the main goals of the human resources policy. Particular attention is paid to improving life standards of Company’s employees and their families. Benefits related to healthcare protection can be used by production staff as well as office employees.

Professional medical checks are carried out at production facilities twice a year. Voluntary Health Insurance scheme is operating for office staff. Moreover, employees and their family members can use benefits related to holiday options. In particular, employees can be treated at health resorts at the Company’s expense once a year, and they can also send their children to health resorts and summer camps. The Company tries to do its best in encouraging its employees to lead a healthy lifestyle.

103 OJSC SYNERGY SOCIAL RESPONSIBILITY

Synergy sticks to the principle of equal opportunities and the Company guarantees freedom from any kind of discrimination to its employees. The Company closely monitors staff promotions to ensure that career advancement is always the result of productivity gains, higher business skills and gained experience. Recruitment and promotion are carried out without regard to gender, age, national origin, religious beliefs, political opinions or membership in public associations. All government rules for employer – employee relations are strictly adhered to.

Taking Care of the Environment The Company operates in compliance with Russian legal requirements to environmental protection and seeks to minimize the negative impact of its production process and waste on the nature. The rational use of energy conservation and industrial waste management are among Company’s priority areas in environmental protection.

The Company is conscious of the fact that plenty of limited natural resources, such as water and hydrocarbon fuel, are used in the production process. The Company seeks the ways to utilize resources as carefully as possible. It shall be noted that conservation of resources has both ethical and economic significance for Synergy – it is an important component of its general cost management system. Plant modernization consistently performed by the Company includes building environmental construction and equipment of production facilities with production monitoring systems preventing environmental damage.

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Social and Cultural Initiatives From year to year Synergy builds up its participation in projects that are aimed at social support of population in the regions where Company’s facilities are based. The Company conducts system- based charitable activity and pursues a comprehensive approach to solving social problems in cooperation with the local authorities.

The Company provides aid to poorest social groups but does not try to use this aid to promote its products. Neither of such projects is used for information or advertising purposes. Moreover, Synergy takes all measures necessary to avoid any associations between the aid that is addressed to the under age and Company’s alcohol brands.

Apart from targeted aid Synergy actively participates in the program of Russian national public organization «Delovaya Rossiya» (Business Russia) that is oriented to aid orphans, large families that adopt children from orphanages and infant orphanages. In addition to the above-mentioned program the Company regularly transfers money to «Delovaya Rossiya» to purchase toys, medication, clothes, books and many other things necessary for such children and their families. Company was awarded the «Public Recognition» certificate for this aid.

105 OJSC SYNERGY TO SHAREHOLDERS AND INVESTORS

Shareholder Capital The Synergy Co authorized capital amounts to 2,495,404,900 rubles divided into 24,954,049 uncertified registered ordinary shares with a nominal value of 100 rubles.

Synergy Co ordinary shares were issued under State Registration Number 1-01-55052-E, ISIN: RU000A0HL5M1.

The Synergy Co stock registrar was Open Joint Stock Company «Reestr» (License No. 10-000-1-00254 issued by the Russian Federal Committee for Securities Market on 13.09.2002, without restriction on the period of validity.)

Company’s shares (Bloomberg code SYNGRU Equity, SYNG RX Equity, Reuters code SYNG RTS) are listed at the MOEX stock exchange CJSC in the quotation list of the first level under the SYNG code.

Data on entities entitled to dispose 5 or more percent of securities (as of the date of the preparation of the list of entities entitled to participate at an extraordinary general meeting of shareholders, – 17.10.2014):

Full corporate name: BNP PARIBAS SECURITIES SERVICES. Location: 3, RUE D’ANTIN, 75002, PARIS, FRANCE Participation share in the authorized capital, %: 9.02 Share of owned ordinary shares, %: 9.02

Full corporate name: TOTTENWELL LIMITED Location: Cyprus, city Limassol, postal index 4525, 8, Fanu Kleovulu Str., Moni Participation share in the authorized capital, %: 18.93 Share of owned ordinary shares, %: 18.93 TOTTENWELL LIMITED is an organization controlled by the Company.

Full corporate name: DEEPLINE CONSULTANTS LIMITED Location: THEMISTOCLES DERVIS STREET, 12, PALAIS D’IVOIRE, 1ST FLOOR, H/C/ 1066, NICISIA, CYPRUS Participation share in the authorized capital, %: 10.66 Share of owned ordinary shares, %: 10.66

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Full corporate name:SINEXEC SECURITES LIMITED Location: 13 CASTLE STREET, ST HELIER, JERSEY JE4 0Z Participation share in the authorized capital, %: 14.38 Share of owned ordinary shares, %: 14.38

Full corporate name: SWORD ENTERPRISES LIMITED Location: 13 CASTLE STREET ST HELER JERSEY JE4 0Z Participation share in the authorized capital, %: 14.35 Share of owned ordinary shares, %: 14.35

Full corporate name: NEW MINES CS INVESTMENTS LIMITED Location: Cyprus, 3032 Limassol, office 102, bld A Oasis Centre, 97 Gladstonos Str. Participation share in the authorized capital % 741 Share of owned ordinary shares, %: 7.41

Full corporate name: PENTAGRO HOLDINGS LIMITED Location: Cyprus, Limassol, P/B 3030, floor 5, KRISALIA COURT building, 206 Arch. Makariu III Str. Participation share in the authorized capital, % 5.09 Share of owned ordinary shares, %: 5.09

Shares are acquired by PENTAGRO HOLDINGS LIMITED from SKY YIELD INVESTMENTS LIMITED, acquisition date - August 14, 2014.

PENTAGRO HOLDINGS LIMITED is an organization controlled by the Company.

Account for Payment of Declared (Accrued) Dividendson Company Shares Throughout 2014, dividends on ordinary registered shares of Synergy Co were neither accrued nor paid. The Company considers it expedient to reinvest the whole retained earnings and is not planning the dividends payment. Thus, the Company fulfils its strategic plans to expand sales and increase its marketshare, and Company’s shareholders get the benefit in the form of the stock value increase.

107 OJSC SYNERGY TO SHAREHOLDERS AND INVESTORS

Outstanding Bonds

Documentary interest-bearing Documentary interest-bearing inconvertible inconvertible bearer bonds with compulsory exchange-traded bearer bonds with centralized storage and redeemable compulsory centralized storage and early at the nominal value redeemable by demand of an exchange-traded bond bearer

03 Series BО-03 Series

State 4-03-55052-Е 4В02-03-55052-Е Registration Number dated 11.09.2008 dated 24.05.2012

Stock exchange MICEX MICEX Quotation List – B Ratings – B/RR4 Fitch Ratings Trading Code RU000A0JQA82 RU000A0JR2G2 ISIN Code RU000A0JQA82 RU000A0JR2G2 Volume at par 2.5 bn Rubles 2 bn Rubles Bond Nominal Value per piece 1,000 RUB 1,000 RUB Issue Quantity 2,500,000 pieces 2,000,000 pieces Placement date 24.08.2009 06.06.2012 Maturity date 18.08.2014 03.06.2015 Circulation period 1,820 days 1,092 days Number of Coupons ten six Coupon period 182 days 182 days Originator VTB Svyaz-Bank, VT Capital

Synergy Co Ratings Fitch Ratings

Valuation date Rating

05.12.2014 Issuer's default long-term rating in foreign currency: 'B+' 05.12.2014 Issuer's default long-term rating in the national currency: 'B+' 05.12.2014 National long-term rating: 'А-(rus)'

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List of Major Transactions Conducted during the Reporting Year In the reporting year the Company did not make any deals recognized as major ones according to the Federal Law «On Joint- Stock Companies», or any other deals that demand the procedure for the approval of major transactions according to the Articles of Association of Synergy Co. List of Interested Party Transactions Made in the Reporting Year In the reporting year the Company did not make any transactions recognized as interested party transactions according to the Federal Law «On Joint-Stock Companies». Review of Transactions Made by Controlled Legal Entities Transactions on the bank guarantee receipt for the production and sale of alcohol products are the main transaction type made by spirits plants that are controlled by Synergy Co legal entities. Conditions under which these transactions are made are market ones. The Company does not consider transactions on bank guarantee receipt to be major transactions.

Investor Calendar for 2015

General Meeting of Shareholders May 29 Annual General Meeting of Synergy OJSC Shareholders

Publication of Operating Results January Publication of operating results for Q4 and full 2014 April Publication of operating results for Q1 2015 July Publication of operating results for H1 2015 October Publication of operating results for Q3 2015

Publication of IFRS Financial Statements April Publication of IFRS Financial Statements for 2014 April Publication of IFRS Financial Statements for H1 2015

109 OJSC SYNERGY TO SHAREHOLDERS AND INVESTORS

Information about Each Energy Resource Utilization in the Reporting Year The Company consumes electricity and heating energy within ordinary amounts necessary for the administrative employees' proper functioning. The Company rents office premises through a thirdparty and the current rental agreement does not assume defining a separate sum of compensation for renter’s utilized energy resources in the total rental payment sum. Information about the Compliance by Synergy Co with the Corporate Management Code In its practice Synergy Co plans to implement actively provisions of the Corporate Management Code recommended for application by Letter of the Bank of Russia No. 06-52/2463 dated 10.04.2014 «On the Corporate Management Code» in order to increase the Company's attractiveness for existing and potential investors.

Work was done in the reporting period to identify novelties of the Corporate Management Code to be implemented in Synergy Co corporate management as well as to prepare for the application of recommendations of the Corporate Management Code by the Company.

A report on the compliance with corporate management principles stated in the Corporate Management Code, planned (envisioned) actions and events of the Company to modernize the corporate management model and practice are provided in the Annex to this annual report.

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CORPORATE MANAGEMENT

Synergy Co works its way to the optimum management model guided by global best practices, the Russian market environment and the specifics of its business.

The corporate management system of the dynamic company in a developing market cannot remain static. That is the reason why Synergy Co focuses the improvement of this system for the benefit of its shareholders.

The Synergy corporate management is based on the following principles:

ƒƒaspiration for the most efficient usage of Company’s assets to receive economic profit ƒƒstrict compliance with the current law ƒƒequal treatment of all shareholders of the Company ƒƒbusiness transparency, timely and complete information disclosure ƒƒattention and respect for all parties concerned in the Company’s business

The Company’s supreme management body is the General Meeting of Shareholders. It controls the Board of Directors that performs general management of Company’s operations and determines its priority operation areas and its development strategy. Executive bodies reporting to the Board of Directors are the Chairman of the Management Board (the sole executive body) and the Management Board (the collegial executive body) that carry out company’s operative management. Additional control of Company’s financial and business operations is exercised by the Internal Audit Department, the Board of Director's Audit Committee, an independent auditor and the Review Commission. General Meeting of Shareholders

Synergy Co shareholders participate in the corporate management by voting at the General Meeting of Shareholders in accordance with Federal Law «On Joint-Stock Companies» No. 208‑FZ: shareholders of company’s ordinary shares may take part in the General Meeting of Shareholders with the right to vote on all matters within its competence. In 2014, the annual General Meeting of Shareholders and one extraordinary General Meeting of Shareholders were held. The agenda of the extraordinary General Meeting of Shareholders included the appointment of the Chairman of the Management Board (the sole executive body) of the Company.

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Board of Directors

The Company's Board of Directors consists of 7 persons, the two of which are independent members of the Board. The Board of Directors operating in 2014 was elected at the Synergy annual General Meetings of Shareholders held on June20, 2013 and June 19, 2014.

Composition of the Board of Directors elected at the annual General Meeting of Shareholders dated June 20, 2013:

ƒƒAleevsky, Dmitriy A. ƒƒBelokopytov, Nikolai V. ƒƒGomzyakov, Andrey A. ƒƒKuptsov, Sergey A. ƒƒMalashenko, Nikolai G. ƒƒMechetin, Alexander A. ƒƒMolchanov, Sergey V.

Composition of the Board of Directors elected at the annual General Meeting of Shareholders dated June 19, 2014: ƒƒBelokopytov, Nikolai V. ƒƒGomzyakov, Andrey A. ƒƒZavadnikov, Valentin G. ƒƒKuptsov, Sergey A. ƒƒMalashenko, Nikolai G. ƒƒMechetin, Alexander A. ƒƒMolchanov, Sergey V.

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Nikolai Belokopytov Deputy Chairman of the Management Board of Synergy Co, Chief Financial Officer — Deputy Chairman of the Management Board

Has occupied executive positions at enterprises of Synergy Group Co for 14 years. Graduated from the Institute of Economics and Management of the Far Eastern State Technical University.

As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.006 % of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.006 %. Shares were acquired on 07.05.2014.

Nikolai Belokopytov indirectly owns Company's shares in the amount of 0.93 % of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.93 %.

No conflict of interests is present.

Sergey Kuptsov Head of the Investment Department at Synergy Co

Has been working for Synergy Co for 14 years. Before that occupied executive positions in investment company «Tiger Securities» in Vladivostok. Graduated from the Far Eastern State University, Physics Department. Has a qualification certificate of the Federal Committee of Equity Market, Series 1.0.

As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.049% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.049%. During the reporting year, Sergey Kuptsov made the following transactions: acquisition of 16,200 Company's ordinary registered shares, the transaction date is 07.05.2014, alienation of 3,000 Company's ordinary registered shares, the transaction date is 11.06.2014, alienation of 1,000 Company's ordinary registered shares, the transaction date is 31.10.2014.

Sergey Kuptsov indirectly owns Company's shares in the amount of 0.13% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.13%.

No conflict of interests is present.

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Sergey Molchanov Chairman of the Board of Directors at Synergy Co, Chief Operations Director

Has held executive positions in companies of Synergy Group Co for 13 years. Graduated from the Far Eastern State University, Economics Department, with the «economist» specialty. Earned a Bachelor’s Degree in Management at the University of Maryland University College.

As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.006% of the Synergy OJSC authorized capital, ownership percentage of ordinary shares is 0.006%. Shares were acquired on 07.05.2014.

Sergey Molchanov indirectly owns Company's shares in the amount of 0.93% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.93%.

No conflict of interests is present.

Alexander Mechetin Chairman of the Management Board at Synergy Co

The founder of Synergy Group Co; has been the Head of the Company for 15 years. Graduated from the Institute of Economics and Management of the Far Eastern State Technical University, and the Law Department of the Far Eastern State University. In 2001 defended his PhD thesis in economics on the topic «Organizational and Economic Provisioning of Enterprises Reforming in the Transition Period». Has the EMBA degree of the Oxford University.

As of the end of the reporting period (31.12.2014) owned Synergy OJSC shares in the amount of 0.01% of the Synergy Coauthorized capital, ownership percentage of ordinary shares is 0.01%. During the reporting year Alexander Mechetin made the following transactions: acquisition of 67,500 Company's ordinary registered shares, the transaction date is 07.05.2014, alienation of 64,400 Company's ordinary registered shares, the transaction date is 07.08.2014. Alexander Mechetin indirectly owns Company's shares in the amount of 28.73% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 28.73%.

No conflict of interests is present.

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Nikolai Malashenko Head of the Legal Department at Synergy Co

Has been the Head of the Synergy Co Legal Department since 2004. Before that occupied different executive positions in Synergy-Vostok OJSC. Graduated from the Far Eastern State University obtaining two specialties: «law» and «financial management».

As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.0004% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.0004%. During the reporting year Nikolai Malashenko made the following transactions: alienation of 9,000 Company's ordinary registered shares, the transaction date is 12.02.2014, acquisition of 8,100 Company's ordinary registered shares, the transaction date is 07.05.2014, alienation of 8,100 Company's ordinary registered shares, the transaction date is 11.06.2014, alienation of 1,000 Company's ordinary registered shares, the transaction date is 11.08.2014.

No conflict of interests is present.

Andrey Gomzyakov Independent director,

Director General of «Mir Produktov« CJSC

Graduated from the Finance and Economics Institute of the Far Eastern State Agrotechnical University, with the «economist- organizer» specialty. As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.01% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.01%.

During the reporting year Andrey Gomzyakov made a transaction on acquiring 1,350 Company's ordinary registered shares, the transaction date is 07.05.2014.

No conflict of interests is present.

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Dmitriy Aleevsky Independent Director, Managing Director of Raiffeisen Investment LLC

Prior to joining Raiffeisen Investment in 2013, held senior positions in different Russian and foreign banks. Over that period completed more than 35 deals in banks such as UBS Warburg, ING Barings, ABN Amro, and MDM Bank; including capital funds raising projects and M&A transactions. Got an honour science degree from the Leningrad Institute of Mechanics, also earned an MBA degree from William E. Simon, University of Rochester, New York, US.

Did not possess any Synergy OJSC shares throughout the reporting period.

Valentin Zavadnikov Independent Director, Vice President of the SKOLKOVO Management School, Moscow

For 10 years (2002-2012) was the Chairman of the Federation Council's Committee on Industrial Policy. Graduated from the Admiral Nevelsky Far Eastern Higher Engineering Marine College, with the 'Water Transportation Use' specialty.

Did not possess any Synergy Co shares throughout the reporting period.

No conflict of interests is present.

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Committees of the Board of Directors

There are four Committees in the Board of Directors: the Audit Committee, the Strategic Planning Committee, the HR and Remuneration Committee, and the Financial Committee. Committees carry out a preliminary review of the most important issues related to the management of the Company, and make recommendations for Meetings of the Board of Directors.

The Audit Committee of the Board of Directors (hereinafter «the Audit Committee») ensures the actual participation of the Board of Directors in control over Company’s financial and economic activities. The Audit Committee acts on the premise that professional awareness of members of the Board of Directors relating to financial and economic activities of the Company is necessary for the Board of Directors to monitor the implementation of budgets (financial and business plans) of the Company, as well as to monitor the effectiveness of the internal supervision and risk management of the Company. Exceptional functions of the Audit Committee include the assessment of auditor-candidates of the Company, assessment of auditor’s opinion, assessment of the effectiveness of the Company’s internal audit and preparation of improvement proposals. Goals and objectives of the Audit Committee and the procedure for coordination with Company’s bodies are stated in the Provision on the Audit Committee of the Synergy Co Board of Directors. The Audit Committee consists of the independent members of the Board of Directors, who are not the sole executive body of the Company and (or) members of the collegial executive body of the Company. It is headed by an independent director. Members of the Audit Committee are: ƒƒAndrey Gomzyakov (Chairman of the Committee, Independent Director) ƒƒValentin Zavadnikov (Independent Director) ƒƒSergey Kuptsov The Strategic Planning Committee of the Board of Directors of the Company (hereinafter «the Strategic Planning Committee») ensures the determination of strategic objectives and development of priority areas of the Company; including business planning, budgeting and other plans of Company’s financial and business activities for the long-term and current perspective. Goals, objectives and functions of the Strategic Planning Committee and the procedure for coordination with Company’s bodies are stated in the Provision on the Strategic Planning Committee of the Synergy Co Board of Directors.

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CORPORATE MANAGEMENT

Members of the Strategic Planning Committee are:

ƒƒAlexander Mechetin ƒƒNikolai Belokopytov

The HR and Remuneration Committee of the Board of Directors of the Company (hereinafter «The HR and Remuneration Committee») ensures the involvement of most qualified specialists in the management of the Company and creation of necessary incentives for their successful work.

Goals, objectives and functions of the HR and Remuneration Committee and the procedure for coordination with Company’s bodies are stated in the Provision on the HR and Remuneration Committee of the Synergy Co Board of Directors. The HR and Remuneration Committee consists of independent members of the Board of Directors, who are not the sole executive body of the Company and (or) members of the collegial executive body of the Company. It is headed by an independent director. Members of the HR and Remuneration Committee are:

ƒƒAndrey Gomzyakov (Chairman of the Committee) ƒƒSergey Molchanov ƒƒSergey Kuptsov

The Financial Committee of the Board of Directors of the Company (hereinafter «the Financial Committee») ensures a preliminary review of materials relating to transactions that are Company’s major transactions and (or) interested party transactions which should be approved by the Board of Directors. The aim of the Financial Committee is to develop and make recommendations as well as advise the Board of Directors of the Company in transactions approval. Goals, objectives and functions of the Financial Committee and the procedure for coordination with Company’s bodies are stated in the Provision on the Financial Committee of the Synergy Co Board of Directors. Members of the Financial Committee are:

ƒƒNikolai Belokopytov (Chairman of the Financial Committee) ƒƒSergey Kuptsov ƒƒNikolai Malashenko

Executive Bodies of Synergy Co

Executive bodies of Synergy Co act for the benefit of the Company and its shareholders, and report to the General Meeting of Shareholders and the Board of Directors.

The work of executive bodies is assessed by the

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Company as efficient.

While performing their duties the Management Board and the Chairman of the Management Board were governed by the legislation of the Russian Federation, provisions of the Company's Articles of Association, the Provision on the Management Board and guidelines of the Company's Board of Directors.

Management Board

The Management Board develops the operating policy of the Company, coordinates the work of services and divisions of the Company’s apparatus, it also make decisions on important issues of current economic operations.

The Management Board acts on the basis of the Company’s Articles of Association approved by the General Meeting of Shareholders, the Provision on the Synergy Co Collegial Executive Body and other in-house documents of the Company. According to the Synergy Co Articles of Association, the number of members of the Company’s Management Board is defined by the Board of Directors and comprises of at least 4 (four) persons. The current Management Board was appointed by the Board of Directors on June 30, 2014 (Minutes No. 136 dated 30.06.2014). Before holding the Synergy Co General Meeting of Shareholders on June 19, 2014, the Management Board performed its activity having the same membership

Composition of the Management Board

Elena Kim, Synergy Co chief accountant. As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.006% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.006%.

Alexander Prokopyev, Advisor to the Chairman of the Synergy Co Management Board on Security. As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.008% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.008%.

Oleg Yasenov, Synergy OJSC Marketing Director. As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.01% of the Synergy Co authorized capital, the share of owned ordinary shares is 0.01%. During the reporting year O. Yasenov made a transaction on acquiring 2,700 Company's ordinary registered shares, the transaction date is 07.05.2014.

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Chairman of the Management Board

The Chairman of the Management Board of the Company is appointed by the General Meeting of Shareholders for the period of 5 (five) years. During 2014 (since December 17, 2009) functions of the Synergy Co sole executive body (Chairman of the Management Board) were performed by Alexander Mechetin

The extraordinary General Meeting of Shareholders date December 16, 2014 appointed Alexander Mechetin as the Chairman of the Management Board for a new term starting from December 18, 2014.

Rights and duties, responsibility and compensation package of the Chairman of the Management Board are determined in the contract that is signed with him by the Company.

Alexander Mechetin is the founder of Synergy Group Co and has been the Head of the Company for 15 years. Graduated from the Institute of Economics and Management of the Far Eastern State Technical University, and the Law Department of the Far Eastern State University. In 2001, defended a PhD thesis in economics on the topic «Organizational and Economic Provisioning of Enterprises Reforming in the Transition Period». Has the EMBA degree of the Oxford University.

As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.01% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.01%. During the reporting year, Alexander Mechetin made the following transactions: acquisition of 67,500 Company's ordinary registered shares, the transaction date is 07.05.2014, alienation of 64,400 Company's ordinary registered shares, the transaction date is 07.08.2014.

Alexander Mechetin indirectly owns Company's shares in the amount of 28.73% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 28.73%.

Total amount of remuneration (compensation for expenses) of the person holding the position of the Sole Executive Body, Members of the Collegial Executive Body and Members of the Board of Directors of the Company.

An employment contract, where the amount of remuneration obtained by the Sole Executive Body is defined, was concluded between Synergy Co and the person holding the position of the Sole Executive Body.

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CORPORATE MANAGEMENT

Members of the Synergy Co Collegial Executive Body do not get any remuneration or compensation for performing their duties.

Members of the Synergy Co Board of Directors get remuneration (compensation for expenses) according to the Provision on Remuneration for Members of the Synergy Co Board of Directors.

In 2014 and following 2014 no decision on the remuneration payment (compensation of expenses) to persons holding positions of the sole executive boy, members of the collegial executive bodies and members of the Board of Directors were not taken and payments were not made.

Information about the amount of remuneration for each management body (except for an individual performing functions of the sole executive body of the issuer's management):

Board of Directors, RUB thd

Indicator 2014 Salary 107 562.7 Bonus 64 967.9 TOTAL 172 530.6

Collegial Executive Body, RUB thd

Indicator 2014 Salary 79 852.1 Bonus 37 220.5 TOTAL 117 072.6

Corporate Secretary

The Corporate Secretary ensures the compliance of Company's divisions and officials with requirements of regulations of the existing legislation, the Company's Articles of Association as well as other documents guaranteeing the realization of rights and legitimate interests of shareholders: organizes activities of the Board of Directors and its Committees; acts to prepare, convene and conduct General Meetings of Shareholders; controls the compliance with the information disclosure procedure defined by the legislation; accounts for and considers applications and requests of shareholders on corporate management and the realization of shareholders' rights;

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interacts with professional participants of the stock market and state bodies on issues related to the regulation of corporate relationships and the stock market; controls the implementation of decisions made by the General Meeting of Shareholders and the Board of Directors; as well as ensures the compliance with determined rules and procedures including the procedure for maintaining the register of owners of registered securities, the procedure for approving major transactions and interested party transactions, the procedure for issuing Company's shares, the realization of shareholders' rights on their placement, other procedures aimed at protecting rights and proprietary interests of shareholders. Dmitriy Timoshin, Head of the Corporate Law department, is the Corporate Secretary of Synergy Co. He has higher legal education: graduated from the Academy of National Economy under the Government of the Russian Federation. As of the end of the reporting period (31.12.2014) owned Synergy Co shares in the amount of 0.0008% of the Synergy Co authorized capital, ownership percentage of ordinary shares is 0.0008%. During the reporting year Dmitriy Timoshin made a transaction on acquiring 2025 Company's ordinary registered shares, the transaction date is 07.05.2014.

Audit of the Company

The annual General Meeting of Shareholders of the Company held on June 19, 2014 appointed as the Company's auditor Limited liability Company Baker Tilly Rusaudit (location: 15, bld 1, Zubarev per., 129164 Moscow, INN 7716044594, OGRN 1037700117949), which is a member of self-regulated organization of auditors Non- Profit Partnership Institution of Professional Auditors (location: office, 419, 14, bld 1, Nametkina Str., 117420 Moscow, Russia). The procedure for selecting the Company's auditor: candidates of potential auditors are proposed by the Board of Directors for their approval at the General Meeting of Shareholders. Remuneration of the auditor: for an independent inspection of RAS accounting (financial) statements for 2014 the Issuer paid 270,000 Rubles to the auditor; for an independent inspection of Company's IFRS consolidated financial statements - 21,780,000 Rubles; for non-audit services - 767,000 Rubles.

Results of the assessment of the effectiveness of internal and external audit by the Audit Committee.

Internal Audit In accordance with the Provision on the Synergy Co Internal Audit

126 ANNUAL REPORT 2014 CORPORATE MANAGEMENT

Department, main tasks of the Department are to modernize internal control and risk management systems, ensure the authenticity and expediency of accounting and taxation statements, etc. Following the analysis of activities of the Internal Audit Department for the 2014 financial year, the Audit Committee considers the organization and its implementation of functions and performance of the Internal Audit Department as satisfactory.

External Audit Внешний аудит The Synergy Co external audit for the 2014 financial year under IFRS consolidated statements and individual reports under the Russian Accounting Standards was conducted by independent auditor company Baker Tilly Rusaudit LLC, which is a part of international auditor and consulting network Baker Tilly International. Quality standards of this network and companies being part hereof are recognized worldwide. The Synergy Co Audit Committee considers the audit process to be efficient and having satisfactory results.

Transparency of Information and Relations with Shareholders and Investors

Synergy Co appreciates its relations with institutional and private investors and strives for maximum transparency of its operation. Dialogue with investors is a process that is conducted by the Company on a daily basis. The Internal Department of Shareholder and Investor Relations assists the Management Board and the Board of Directors in communicating with shareholders and the investment community as a whole. The Department maintains regular contact with institutional investors and investment analysts and regularly makes perception studies to reveal the investors’ opinion of the Company’s operation. Disclosure of Company’s semi-annual and annual financial results is accompanied by direct communication of investors with Synergy Co leadership on the telephone and via Internet conferences. The Synergy Co website contains a constantly updated section for investors, which includes news about the circulation of Company’s securities on the market, presentations, and disclosure of financial results and information about corporate management.

127 OJSC SYNERGY DESCRIPTION OF MAIN RISK FACTORS. RISK MANAGEMENT

Synergy Co would not be able to reach its strategic goals without the timely identification and effective management of existing and potential risks. Risk management and internal control facilitate the attainment of strategic goals by most efficient means and enable to maintain high quality of the Company's management. The risk management and internal control system is based on interaction between Company's management bodies, its structural divisions and individual employees as well as division of their competences. Risk control includes all measures aimed at timely risk identification in order to reduce or exclude it. It may be implemented by internal audit, external audit and internal control. The Board of Directors assesses the effectiveness of the risk management and internal control system of the Company as satisfactory.

Economic Risks Risk of Decreasing Demand. The main market risk is decreasing demand for Company’s products, in the first place, decreasing demand for vodka. The customers’ change of preference in favour of other spirit beverages and development of state programmes in healthcare can lead to decreasing demand for vodka.

Decreasing Demand Risk Management. The Company developed a demand survey system in all segments of its products that allows to respond quickly to possible demand fluctuations. Synergy Co expects that probable decrease in vodka demand will, first of all, affect illegal production and the cheap price segment. The diversified portfolio of the Company’s brands protects it from decreasing demand in different price segments. The demand behaviour in Company’s priority vodka premium segments differs greatly from demand behaviour concerning vodka on the whole; and the Company forecasts an active growth in this segment.

In order to support and develop customers’ demand for Synergy production, the Company regularly performs the update (restyling) of its own brands.

Apart from the Company’s focus on making premium products, Synergy actively diversifies and enters another premium segments of strong spirits. So, within the framework of developing its trademark portfolio the Company has expanded its range, issued its whisky brand, launched its family of liquors and herbal liquors.

Resource Price Fluctuation Risk. An increase in prices for resources used in the production higher than it was expected can negatively affect Company’s results by increasing production costs and logistics expenses.

128 ANNUAL REPORT 2014 DESCRIPTION OF MAIN RISK FACTORS. RISK MANAGEMENT

Additional risk factors connected to resources are the expediency and volumes of supplied raw materials.

Resource Price Fluctuation Risk Management. Synergy Co monitors inflation dynamics of resources utilized by the Company, minimizes resource price fluctuations by means of signing long-term agreements with suppliers, optimization of the purchasing process and efficient stock management as well as its own proactive price policy.

Financial Risks The Company considers the following financial risks: customer and bank-counterparty credit risks, interest rate fluctuations, under-liquidity risks as well as the violation of conditions of credit agreements (covenants). Currency exchange rate fluctuations are considered to be insignificant because the Company does not have considerable amounts of transactions with foreign contractors. Information about financial risks and efforts of the Company in minimizing them can be found in notes to consolidated financial statements (paragraph 27 – Financial Risk Management).

Production Risks Technology Risks. Synergy Co carries out an investment program aimed at increasing production capacities, increasing performance, decreasing production costs and maintaining production quality in the process of the growing production scale. The installation, start-up and maintenance of equipment demand considerable internal and external engineering resources. Failures in the design process or in the installation process can lead to the production plan breakdown and to Company’s increased costs. The deterioration of equipment operating conditions can lead to the violation of product quality standards.

Technology Risk Management. In order to reduce technology risks, the Company developed a system of scheduled preventive overhauls and monitoring of product quality. There is a program of regular modernization of equipment to avoid excessive wear. In order to reduce technology risks, Synergy Co carefully chooses equipment suppliers and signs long-term service agreements. The Company carries out the insurance program of fixed assets corresponding to industry standards. The level of technical staff training is regularly assessed and is improved by means of different trainings and educational programs. Risk of Losing Valuable Employees. Competitive conditions on the labor market create the

129 OJSC SYNERGY DESCRIPTION OF MAIN RISK FACTORS. RISK MANAGEMENT

Risk of Losing Valuable Employees. Competitive conditions on the labor market create the risk of losing key skills and competence due to employees leaving the Company. There is also a risk of the impossibility to find new qualified personnel that are essential for maintaining and expanding the Company’s operation.

Risk Management of Losing Valuable Employees.

To manage this risk, Synergy Co continues to develop programs of personnel retaining by means of fair labor compensation, creating comfortable work conditions and developing corporate culture.

Regulatory Risks Risks of Legislation Alterations and Changes in the State Regulations. The Russian legal system has faced frequent and substantial alterations in legislation and state regulation in strong spirit beverages production and operation for the last three years. The foundation of the Federal Service for Spirit Market Regulation of the Russian Federation in 2009 became an important step towards the more efficient and balanced regulation of the industry. Regulatory risks affecting the Company’s operation comprise such risks as tax and excise duty increase for strong spirit beverages, withdrawal of a license and refusal of the manufacturing license renewal, as well as risks of regulating relating industries with a possibly negative effect for the Company. At the moment, regulation of advertising does not incur considerable risks because the advertisement for strong spirit beverages is significantly limited.

Risk Management of Legislation Alterations and Changes in the State Regulations. Synergy Co acts in strict accordance with the legislation applied to the Company and promptly responds to any alterations in it. The Company strives to constructive dialogue with regulatory bodies regarding the interpretation and application of legal regulations. The Company actively takes part in informing legislation bodies about the situation in the industry, first and foremost, participating in activities of industry organization Union of Alcoholic Beverage Producers. President of the Company Alexander Mechetin is a member of the Management Board of the Union of Alcoholic Beverage Producers. Strengthening state regulation gives hope to a gradual reduction of an illegal market, which in its turn will have a positive effect on legal producers’ results. The Company expects that the predicted increase of excise duty for alcohol will influence the beer market more than the vodka market, which will definitely have a positive effect on Company’s results.

130 ANNUAL REPORT 2014 CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income, RUB mln

2014 2013

Sales 46 814 44 594

Excise taxes (18 651) (18 216)

Net Revenue 28 163 26 378

Net Cost (16 135) (15 098)

Gross Profit 12 028 11 280

General and administrative expenses (2 411) (2 053)

Selling Expenses (7 389) (5 871)

Other income/(expenses) 46 (229)

Operating Profit 2 274 3 127

Net Finance Costs (945) (1 202)

Profit before taxation 1 329 1 925

Income tax (239) (384)

Profit for the period 1 090 1 541

Attributable to:

Main shareholders 1 065 1 486

Minority shares 25 55

Basic revenue per share 61,73 82,32

131 OJSC SYNERGY CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of the Financial Position, RUB mln

2014 2013 ASSETS Non-current assets Fixed assets 7 021 6 327 Goodwill 235 213 Intangible assets 7 002 6 693 Other long-terms assets 122 254 Deferred tax assets 456 506 Total non-current assets 14 836 13 993

Current assets Inventories 5 355 7 096 Biological assets 290 163 Trade and other receivables 13 153 12 162 Prepayments 571 383 Income tax overpaid 32 18 Cash and cash equivalents 482 467 Total current assets 19 883 20 289 TOTAL ASSETS 34 719 34 282

EQUITY CAPITAL AND LIABILITIES Equity and reserves Share capital 2 495 2 495 Treasury shares (785) (733) Retained earnings 11 127 10 062 Other reserves 5 572 5 829 Share of non-controlling shareholders 735 716 Total equity and reserves 19 144 18 369

Non-current liabilities Loans and borrowings 5 544 5 804 Deferred tax liabilities 532 543 Total non-current liabilities 6 076 6 347

Current liabilities Loans and borrowings 3 164 875 Trade and other payables 6 153 8 377 Income tax payable 182 314 Total current liabilities 9 499 9 566 TOTAL EQUITY CAPITAL AND LIABILITIES 34 719 34 282

132 ANNUAL REPORT 2014 CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Capital Flow Statement, RUB mln

Share of non- Total Share Treasury Retained Other contro- equity Total capital shares earnings reserves lling capital share- holders

Balance 2 567 (704) 8 576 6 263 16 702 669 17 371 as of December 31, 2012

Other changes in the share of – – – – – 1 1 non-controlling shareholders

Dividends accrued for non- – – – – – (9) (9) controlling shareholders

Repurchase of own shares – (101) – (434) (535) – (535)

Total changes not reflected in the net profit (72) (29) – (434) (535) 8 (543)

Total income for the period – – 1 486 – 1 486 55 1 541

Balance 2 495 (733) 10 062 5 829 17 653 716 18 369 as of December 31, 2013

Other changes in the share of – – – – – 1 1 non-controlling shareholders

Dividends accrued for non- – – – – – (7) (7) controlling shareholders

Payments based on shares – 20 – 89 109 – 109

Repurchase of own shares – (72) – (346) (418) – (418)

Total changes not reflected in the net profit – (52) – (257) (309) (6) (315)

Total income for the period – – 1 065 – 1 065 25 1 090

Balance as of December 31, 2014 2 495 (785) 11 127 5 572 18 409 735 19 144

133 OJSC SYNERGY CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Cash Flow Statement, RUB mln

2014 2013 Cash flows from operating activities Profit before income tax and finance costs 2 274 3 127

Amendments for the determination of the net cash flow from operating activities Depreciation and amortisation 699 547 (Gain)/loss on disposal of fixed assets (10) 66 Payments based on shares 109 – (Gain)/loss on write-off of accounts payable (87) (12) Other non-monetary operations 78 (47) Changes in current capital: (Increase)/decrease in inventories and biological assets (1 826) (288) (Increase)/decrease in accounts receivable (1 288) (2 553) Increase/(decrease) in accounts payable (2 854) (1 765) Cash flows from operating activities 747 2 605

Interest paid (1 265) (1 276) Income tax paid (360) (319) Net cash flow from operating activities (878) 1 010

Cash flows from investing activities Acquisition of subsidiaries 11 44 Disposal of other financial assets (790) (1 147) Disposal of fixed and intangible assets 96 450 Net cash flow from investing activities (683) (653)

Cash flows from financing activities Repurchase of own shares (418) (535) Dividends paid for non-controlling shareholders (16) – Loans received 30 926 (22 813) Loans repaid (28 916) (22 875) Net cash flow from financing activities 1 576 (597)

Net increase/(decrease) in cash and cash equivalents 15 (240) Cash and cash equivalents at beginning of the year 467 707 Cash and cash equivalents at end of the year 482 467

134 ГОДОВОЙ ОТЧЕТ 2014 Taste brought by time

Produced using cognac wine materials from France ANNEX TO SHAREHOLDERS AND INVESTORS

Report on the Compliance with Principles and Recommendations of the Corporate Management

No. Principle (-s) of corporate management Short description of the or key criterion (recommendation) extent to what a principle Explanation of key reasons, factors and developments due or key criterion are not to which a principle or key criterion are not complied with complied with or complied with not in full, description of used alternative corporate management mechanisms and tools

1. Rights of shareholders and equality of conditions of shareholders during the implementation of their rights by them

1.1 The Company shall ensure equal and fair treatment for all shareholders in implementation of their right to participate in Company's management. The corporate management system and practice shall ensure equal conditions for all shareholders - holders of shares of one category (type) including minority (small) shareholders and foreign shareholders as well as equal treatment of them from the Company

1.1.1. The Company approved an internal document Complied determining main procedures for the preparation, convening and conducting the General Meeting of Shareholders corresponding to recommendations of the Corporate Management Code including the obligation of the Company to:

notify shareholders of the General Meeting of Complied Shareholders and provide them with access to materials including place messages and materials on the Company's web-site at least 30 days prior to its convention (unless the Russian legislation sets a larger term); No. Principle (-s) of corporate management Short description of the or key criterion (recommendation) extent to what a principle Explanation of key reasons, factors and developments due or key criterion are not to which a principle or key criterion are not complied with complied with or complied with not in full, description of used alternative corporate management mechanisms and tools

1. Rights of shareholders and equality of conditions of shareholders during the implementation of their rights by them

1.1 The Company shall ensure equal and fair treatment for all shareholders in implementation of their right to participate in Company's management. The corporate management system and practice shall ensure equal conditions for all shareholders - holders of shares of one category (type) including minority (small) shareholders and foreign shareholders as well as equal treatment of them from the Company

1.1.1. The Company approved an internal document Complied determining main procedures for the preparation, convening and conducting the General Meeting of Shareholders corresponding to recommendations of the Corporate Management Code including the obligation of the Company to:

notify shareholders of the General Meeting of Complied Shareholders and provide them with access to materials including place messages and materials on the Company's web-site at least 30 days prior to its convention (unless the Russian legislation sets a larger term);

disclose information on the date of the preparation of Internal documents of the The date of the preparation of persons entitled to participate the list of persons entitles to participate in the General Company do not provide in the General Meeting of shareholders is determined at Meeting of Shareholders at least 7 days prior to it; for the term for information least 10 days prior to a decision on the General Meeting of disclosure on the date of Shareholders in accordance with Federal Law No. 208-FZ preparation of the list of dated 26.12.1995 On Joint-Stock Companies Information on persons entitled to participate the date of the preparation of the list of persons entitled to in the General Meeting of participate in the General Meeting of Shareholders is disclosed Shareholders in accordance with the Provision on the Disclosure of Information by Issuers of Registerable Securities (approved by the Bank of Russia, No. 454-P dated 30.12.2014) - within one day from the preparation of the minutes of the meeting of the Board of Directors where the date was decided when persons entitled to realize rights on Issuer's securities are determined

provide additional information and materials under Complied agenda issues by the General Meeting of Shareholders in accordance with the Corporate Management Code

1.1.2. The Company undertakes to provide shareholders Complied possibilities to ask questions on Company's activities to members of management and control bodies, members of the Audit Committee, the Chief Accountant, company's auditors as well as nominees to management and control bodies during the preparation and convention of the General Meeting of Shareholders. Said obligations are stated in the Articles of Association or in-house documents of the Company

1.1.3. The Company undertake to adhere to the principle Said obligations are not As of now the legislation does not define the term of quasi- of unacceptability of activities leading to the artificial stated in the Articles of treasury shares; regulations governing the convention of the redistribution of corporate control (for instance, voting Association or in-house General Meeting of Shareholders do not provide / describe with quasi-treasury shares, decision making on the documents of the Company the procedure for excluding quasi-treasury shares from payment of dividends in limited financial conditions, voting / a quorum. As of now, the reform on changes in the decision making on the non-payment of dividends regulation of activities of legal entities is being developed and on privileged shares set in the Company's Articles of if the respective changes are introduced on the legislative Association provided that there are sufficient sources level, the Company will introduce amendments to its for their payment.) Said obligations are stated in in-house documents the Articles of Association or in-house documents of the Company 1.1.4. Said obligations are not stated in the Articles of No other criteria Association or in-house documents of the Company

1.2. Shareholders should be provided with an equal and fair opportunity to participate in Company's profits by receiving dividendsдивидендов

1.2.1. The Company approved an internal document There is no internal The Company currently does not plan to take decisions on determining the Company's dividend policy document determining the the dividend payment. An internal document determining the corresponding to recommendations of the Corporate company's dividend policy Company's dividend policy is under development Management Code and setting, inter alia: the procedure for determining a part of the net profit (for companies being consolidated financial statements, - a minimum part (share) of consolidated net profit) sent for the dividend payment provided which dividends are announced; the minimum size of dividends on Company's shares if different categories (types); the obligation of the disclosure of a document determining the Company's dividend policy, on the Company's web-site on the Internet.

1.2.2. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

2. Board of Directors of the Company

2.1. The Board of Directors determines main strategic benchmarks of Company's activities for the long term and Company's key performance indicators, effects strategic management of the Company, determines main principles and approaches to the organization of the risk management and internal control system in the Company, controls activities of Company's executive bodies, sets the Company's policy on remuneration of members of the Board of Directors and executive bodies as well as implements other key functions 1.1.4. Said obligations are not stated in the Articles of No other criteria Association or in-house documents of the Company

1.2. Shareholders should be provided with an equal and fair opportunity to participate in Company's profits by receiving dividendsдивидендов

1.2.1. The Company approved an internal document There is no internal The Company currently does not plan to take decisions on determining the Company's dividend policy document determining the the dividend payment. An internal document determining the corresponding to recommendations of the Corporate company's dividend policy Company's dividend policy is under development Management Code and setting, inter alia: the procedure for determining a part of the net profit (for companies being consolidated financial statements, - a minimum part (share) of consolidated net profit) sent for the dividend payment provided which dividends are announced; the minimum size of dividends on Company's shares if different categories (types); the obligation of the disclosure of a document determining the Company's dividend policy, on the Company's web-site on the Internet.

1.2.2. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

2. Board of Directors of the Company

2.1. The Board of Directors determines main strategic benchmarks of Company's activities for the long term and Company's key performance indicators, effects strategic management of the Company, determines main principles and approaches to the organization of the risk management and internal control system in the Company, controls activities of Company's executive bodies, sets the Company's policy on remuneration of members of the Board of Directors and executive bodies as well as implements other key functions

2.1.1. The Company formed the Board of Directors that: Complied determines main strategic areas of Company's activities for the long term and Company's key performance indicators; controls activities of Company's executive bodies; determines principles and approaches to the organization of risk management and internal control in the Company; sets the Company's policy on remuneration of members of the Board of Directors, executive bodies and other key management employees of the Company

2.1.2. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

2.2. The Board of Directors shall be an efficient and professional body of the Company's management able to make objective independent judgements and take decisions meeting interests of the Company and its shareholders. The Chairman of the Board of Directors shall facilitate the most effective performance of functions charged with the Board of Directors. Meetings of the Board of Directors, preparation for it and participation of members of the Board of Directors in it shall endure the effective activities of the Board of Directors

2.2.1. An independent director should be the Chairman of Not complied The Chairman of the Company's Board of Directors is the Board of Directors or a senior independent director not included into executive bodies (the Chairman of the should be determined among elected independent Management Board, the Management Board) directors who will coordinate the work of independent directors and interact the Chairman of the Board of Directors

2.2.2. Company's In-house documents state the procedure Complied for preparing and conducting meetings of the Board of Directors providing members of the Board of Directors with an opportunity to properly prepare for its holding and providing for as follows: terms of the notification of members of the Board of Directors on an upcoming meeting; terms of the submission of documents (bulletins) for voting and receiving filled in documents (bulletins) during absentee meetings; the possibility of submitting and taking into account a written opinion on agenda issues for members of the Board of Directors absent at in-person meetings; possibility of discussing and voting by conference and video conference calls

2.2.3. Most important issues are decided at in-person During the reporting year not Due to different work schedules, work specifics of members meetings of the Board of Directors. The list of such all issues recommended by of the Board of Directors, a majority of meetings of the Board issues corresponds to recommendations of the the Corporate Management of Directors is held in absentia. Members of the Board of Corporate Management Code Code were decided on Directors keep in contact through modern communications in-person meetings of the due to which meetings in absentia do not impact the quality Board of Directors of decisions made by the Board of Directors

2.2.4. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

2.3. The Board of Directors shall include a sufficient number of independent directors

2.3.1. Independent directors are at least one third of the The number of independent 2 out of 7 members of the Company's Board of Directors are elected membership of the Board of Directors directors does not correspond independent to Code requirements

2.3.2. Independent directors correspond to criteria of Complied independence recommended by the Corporate Management Code in full

2.3.3. The Board of Directors (The Nomination Committee The Board of Directors The HR and Remuneration Committee will assess (HR, Appointment) conducts assessment of the (The HR and Remuneration independence of independent members of the Board of compliance of nominees to members of the Board of Committee) did not conduct Directors during the election of independent directors Directors with independence criteria assessment of the compliance previously not included into the Board of Directors of nominees to members of the Board of Directors with independence criteria 2.3.4. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

2.4. The Board of Directors should create committee for the preliminary review of most important issues of Company's activities

2.4.1. The Board of Directors created an Audit Committee 2 independent directors The Company's Board of Directors created an Audit consisting of independent directors the functions are included in the Audit Committee the functions of which are stated in the Provision of which are stated in in-house documents and Committee on the Audit Committee of the Board of Directors. 2 directors correspond to recommendations of the Corporate out of 3 directors in the Audit Committee are independent. Management Code The Audit Committee is headed by an independent director.

2.4.2. The Company's Board of Directors created a 1 independent director The Company's Board of Directors created a HR and Remuneration Committee (may be joined with the is included in the Audit Remuneration Committee the functions of which are stated in Nomination (HR, Appointment) Committee) consisting Committee the Provision on the HR and Remuneration Committee of the of independent directors the functions of which Board of Directors. 1 independent director is included in the correspond to recommendations of the Corporate HR and Remuneration Committee who is its Chairman Management Code

2.4.3. The Company's Board of Directors created a HR Functions of the Nomination Extension of functions of the HR and Remuneration and Appointment Committee (may be joined with the Committee are performed by Committee of the Board of Directors in accordance with Remuneration Committee) the majority of members of the HR and Remuneration recommendations with the Corporate Management Code for which are independent directors and the functions of Committee of the Board the Nomination Committee is under development now. 1 which correspond to recommendations of the Corporate of Directors and not independent director is included in the HR and Remuneration Management Code in full correspond to Committee who is its Chairman recommendations of the Corporate Management Code for the Nomination Committee.

2.4.4. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

2.5. The Board of Directors should ensure the assessment of the quality of work of the Board of Directors, its committees and members of the Board of Directors.

2.5.1. Assessment of the quality of work of the Board of External organizations The Board of Directors plans to engage external organizations Directors is conducted on the regular basis at least (consultants) are not involved (consultants) for assessment of the quality of its work once per year and at least once per three years such in assessment of the in the future assessment is conducted with the use of an external quality of work of the Board organization (consultant) of Directors 2.5.2. Other key criteria (recommendations) of the Corporate Management Code related to the said corporate management principle(-s), according to the Company

3. Corporate Secretary of the Company

3.1. Effective current interaction with shareholders, coordination of Company's activities on protection of rights and interests of shareholders, support of efficient operations of the Board of Directors are ensured by the corporate secretary (special structural division headed by the corporate secretary)

3.1.1. The Corporate secretary reports to the Board of There is no position of the Functions of the Corporate secretary are performed by the Directors, is appointed and dismissed on a decision or Corporate secretary in the secretary of the Board of Directors who is appointed and consent of the Board of Directors Company dismissed by a decision of the Board of Directors.

3.1.2. The Company approved an internal document There is no internal An internal document determining rights and obligations determining rights and obligations of the Corporate document determining of the Corporate secretary is under development. As of Secretary (the Provision on the Corporate Secretary), rights and obligations of the now the Corporate secretary is governed by the Corporate the contents of which corresponds to recommendations Corporate secretary Management Code of the Corporate Management Code

3.1.4. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

4. System of remuneration of members of the Board of Directors, executive bodies and other key management employees of the Company

4.1. Remuneration paid by the Company shall be sufficient for attracting, motivating and retaining persons with competence and qualification necessary for the Company. Remuneration payment to members of the Board of Directors, executive bodies and other key management employees of the Company should be made in accordance with the remuneration policy in the Company

4.1.1. The Company regulated all payments, benefits and Complied privileges provided to members of the Board of Directors, executive bodies and other key management employees of the Company.

4.1.2. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company 4.2. The remuneration system for members of the Board of Directors should ensure the rapprochement between financial interests of directors and long-term financial interests of shareholders

4.2.1. The Company does not use other forms of monetary No decision on remuneration remuneration of members of the Board of directors of members of the Board of except for the fixed annual remuneration Directors was taken during the reporting year

4.2.2. In the Company, members of the Board of Directors Complied do not have an opportunity to participate in option programs and the right of sale of Company's shares belonging to them does not depend on the attainment of specific performance indicators

4.2.3. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

4.3. The remuneration system for executive bodies and other key management employees of the Company should provide for the dependence of remuneration from the results of Company's operations and their personal contribution to this result.

4.3.1. The Company has introduced the program for long- Complied term motivation of members of executive bodies and other key managers of the Company

4.3.2. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

5. Risk Management and Internal Control System

5.1. The Company should create an efficient risk management and internal control system aimed to ensuring the reasonable reliability in attaining goals set to the Company

5.1.1. The Board of Directors determined principles and Complied approaches to the organization of the risk management and internal control system in the Company 5.1.2. The Company established a separate structural division The Company established a The organization of a structural division on risk management on risk management and internal control separate structural division is under development on internal control

5.1.3. The Company developed and introduced the Complied Company's anti-corruption policy determining measures aimed at shaping elements of corporate culture, the organizational structure, rules and procedures ensuring corruption avoidance

5.1.4. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

5.2. For systemic independent assessment of reliability and effectiveness of the risk management and internal control system and corporate management practice, the Company should organize internal audit

5.2.1. The Company established a separate structural division The Company established an The work of the internal audit department on the assessment performing internal audit functions, functionally reporting internal audit department, of the effectiveness of the risk management system and to the Company's Board of Directors. Functions of functions of which do not assessment of corporate management is under development this division correspond to recommendations of the include assessment of the Corporate Management Code and include, inter alia: effectiveness of the risk assessment of the effectiveness of the internal management system as well control system; as assessment of corporate assessment of the effectiveness of the management risk management system; assessment of corporate management (if there is no corporate management committee)

5.2.2. The head of the internal audit department reports to Not complied The head of the internal audit department works under the the Company's Board of Directors, is appointed and Audit Committee of the Board of Directors. The structure of dismissed upon a decision of the Board of Directors the department and the staff number of it are approved by the Audit Committee

5.2.3. The Company approved the internal audit policy (the Complied Provision on Internal Audit) determining goals, tasks and functions of internal audit 5.2.4. The Company approved the internal audit policy (the No other criteria Provision on Internal Audit) determining goals, tasks and functions of internal audit

6. Disclosure of Information on the Company, Information Policy of the Company

6.1. The Company and its activities should be transparent for shareholders, investors and other persons concerned

6.1.1. The Company approved an internal document The Company approved In practice, the Company uses all the above mentioned determining the information policy of the Company the Provision on the Use of methods of interaction with investors and other persons corresponding to recommendations of the Corporate Information about Synergy concerned. The Provision on the Use of Information about Management Code. The Company's information policy Co activities but methods of Activities of the Company is now being brought to compliance includes the following methods of interaction with interaction with investors and with recommendations of the Corporate Management Code investors and persons concerned: other persons concerned are organization of a special page on the Company's not stated there web-site on the Internet with answers to frequent questions of shareholders and investors, a regularly updated calendar of Company's corporate events as well as other useful information for shareholders and investors; regular meetings of members of executive bodies and other key managers of the Company with analysts; regular presentations (including in the form of teleconferences, web-casts) and meetings with the participation of members of management bodies and other key managers including publication of accounting (financial) statements of the Company or related to main investment projects and plans for the Company's strategic development

6.1.2. The Company's information policy is performed The Provision on the The Provision on the Use of Information about Activities by Company's executive bodies. Control of proper Use of Information about of the Company is now being brought to compliance with information disclosure and compliance with the Synergy Co Activities recommendations of the Corporate Management Code information policy is effected by the Board of Directors does not include these of the Company provisions of the Corporate Management Code 6.1.3. The Company set procedures ensuring coordination The Provision on the The Provision on the Use of Information about Activities of activities of all services and structural divisions Use of Information about of the Company is now being brought to compliance with of the Company related to information disclosure or Synergy Co Activities recommendations of the Corporate Management Code operations of which may lead to the need to disclose does not include these information provisions of the Corporate Management Code

6.1.4. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

6.2. The Company should timely disclose full, accurate and reliable information on the Company to ensure the possibility of taking reasonable relations by Company's shareholders and investors

6.2.1. If there is a significant share of foreign investors in Complied the capital, the Company in parallel with information disclosure in Russian ensures information disclosure of most important information on the Company (including notifications on the General Meeting of Shareholders, the annual report of the Company) in a foreign language, which is common on the financial market

6.2.2. The Company ensures information disclosure not Complied only about the company but also about legal entities controlled by it that have a significant impact for it

6.2.3. The Company discloses annual and mid-term (semi- Complied annual) consolidated or individual financial statements prepared in accordance with the International Financial Reporting Standards (IFRS). Annual consolidated or individual financial statements are disclosed together with an auditor's opinion while mid-term (semi-annual) consolidated or individual financial statements - together with a report on results of a review auditor inspection or auditor's opinion 6.2.4. The Company disclosed a special memorandum Not complied There is no person controlling the Company with plans on the Company of a person controlling the Company. Is this memorandum prepared in accordance with recommendations of the Corporate Management Code?

6.2.5. The Company ensures disclosure of this information Complied on biographies of members of the Board of Directors including information on whether they are independent directors as well as operational information disclosure on the loss of the independent director status by a member of the Board of Directors

6.2.6. The Company discloses information on the capital Complied structure in accordance with recommendations of the Corporate Management Code

6.2.7. The Company's annual report contains additional Complied information recommended by the Corporate Management Code: a short review of most significant transactions including inter-related transactions made by the Company and controlled legal entities for the last year; a report on the operations of the Board of Directors (including committees of the Board of Directors) for the year including: data on the number of in-person (absence) meetings, participation of every member of the Board of Directors at meetings, description of most significant issues and problems considered at meetings of the Board of Directors and committees of the Board of Directors, main recommendations of committees to the Board of Directors; data on the direct or indirect ownership of Company's shares by members of the Board of Directors and executive bodies of the Company; data on the conflict of interests if members of the Board of Directors and executive bodies (including related to the participation of the said persons in management bodies of Company's competitors); description of the remuneration system for members of the Board of Directors including the amount of individual remuneration following the year by every member of the Board of Directors (with the breakdown to basic, additional remuneration for chairmanship in the Board of Directors, chairmanship (membership) in committees by the Board of Directors, participation in a long-term motivation program, level of participation of every member of the Board of Directors in an option program if there is any), compensation of expenses related to participation in the Board of Directors as well as expenses of the Company for the insurance of liability of directors as members of management bodies;

6.2.8. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

6.3. Provision of information and documents by the Company at requests of shareholders should be made in accordance with the principles of equal access and non-onerousness

6.3.1. In accordance with the information policy of the Complied Company, shareholders of the Company holding the equal number of voting shares of the Company are ensured with equal access to information and documents of the Company

6.3.2. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

7. Significant Corporate Actions

7.1. Actions that significantly affect or may affect the structure of the shareholder capital and financial position of the Company and, thus, the state of shareholders (significant corporate actions) shall be performed on an equal basis ensuring observation of rights and interests of shareholders and other persons concerned

7.1.1. The Company's Articles of Association determines The Competence of the A decision on the reorganization of the Company, an increase the list (criteria) of transactions or other actions the Board of Directors does not and decrease in the Company's authorized capital is made by consideration of which is in the competence of the cover the following issues: the General Meeting of Shareholders (the first two of them – Company's Board of Directors including: reorganization of the upon a recommendation of the Board of Directors). reorganization of the Company, acquisition of 30 or Company, acquisition of As regards remaining issues, the Company is assessing the more percent of Company's voting shares, increase or 30 or more percent of feasibility of their inclusion to the competence of the Board decrease in the Company's authorized capital, listing Company's voting shares, of Directors and delisting of Company's shares, transactions on (take over), increase or the sale of shares of legal entities controlled by the decrease in the Company's Company that have a significant impact on it as a authorized capital; approval result of which the Company loses control over such of transactions on the sale legal entities; of shares of legal entities transactions including inter-related transactions with controlled by the Company property of the Company or legal entities controlled that have a significant impact by it, the cost of which exceeds the sum stated in on it as a result of which the the Company's Articles of Association or which has Company loses control over a significant impact on commercial activities of the such legal entities; Company; establishment of a legal establishment of a legal entity controlled by the entity controlled by the Company, which has a significant impact on Company, which has Company's activities; a significant impact on alienation of treasury and quasi-treasury shared by Company's activities; the Company alienation of treasury and quasi-treasury shared by the Company

7.1.2. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

7.2. The Company should ensure such a procedure for significant corporate actions that would enable shareholders to timely receive full information on such actions, secures their possibility to impact such actions and guarantees observation and adequate level of protection of their rights during such actions 7.2.1. Company's internal documents provide for the principle Complied of equal conditions for all Company's shareholders during significant corporate actions affecting rights and legitimate interests of shareholders as well as state additional measures protecting rights and legitimate interests of Company's shareholders noted in the Corporate Management Code including: engagement of an independent assessor with impeccable reputation recognized in the market and the experience of assessments in the relevant sphere or provision of grounds for not engaging an independent assessor for determining the cost of property alienated or acquired under a major transaction or interested party transaction; determination of the cost of Company's shares during their acquisition and buy-back by an independent assessor with impeccable reputation recognized in the market and the experience of assessments in the relevant sphere given the weighted share price for a reasonable period, not taking into account an effect related to the exercise of the respective transaction by the Company (including not taking into account changes in the share price due to spreading information on the respective transaction made by the Company) as well as not paying heed to a discount for the alienation of shares within a non-controlling package; extension of the list of reasons under which members of the Company's Board of Directors and other persons provided for in the legislation are deemed interested in Company's transactions in order to assess the actual relationships between respective persons

7.2.2. Other key criteria (recommendations) of the Corporate No other criteria Management Code related to the said corporate management principle(-s), according to the Company

(Footnotes) 1. Stated in para 168 Part B of the Corporate Management Code 2. Stated in para 172 Part B of the Corporate Management Code 3. Stated in para 180 Part B of the Corporate Management Code 4. Stated in para 186 Part B of the Corporate Management Code 5. Stated in para 217 Part B of the Corporate Management Code 6. Stated in para 218 Part B of the Corporate Management Code 7. Stated in para 279 Part B of the Corporate Management Code

The present annual report was prepared by Synergy consumer spending and demand for some or all of its OJSC (hereinafter referred to as the Company, Synergy products; changes in consumer preferences and tastes, Group, Group or Synergy) together with its subsidiaries. demographic trends or views on risk factors concerning By reading this annual report, you agree to observe the the health status; increasing commodity and price following restrictions and warnings. This annual report pressure from competitors, as well as their unexpected is a strictly confidential document meant only for the actions that could result in the loss of its market share, recipient; it shall not be handed over to the press or increase of costs and reduction of Company’s growth any other persons and cannot be reproduced, either potential; the Company’s current and future ability to in whole or in part, in any form whatsoever. Failure to carry out a merger, to achieve equity participation in comply with this restriction may constitute a violation companies, to buy and sell the companies, to integrate, of the applicable law on the stock market. This annual to achieve anticipated synergies and/or cost reduction; report does not represent, does not constitute a part expenditure levels of the Company and those of its of, and should not be construed as representing or competitors to carry out marketing and advertising, as constituting a part of any offer for sale or transfer, an well as implementation of technical innovations; the invitation to submit an offer for purchase or acquisition Company’s ability to protect its intellectual property of shares of the Company or any of its subsidiaries in rights; the growing awareness of the producer’s any administrative-territorial unit; or inducement to carry responsibility for the quality of its products and for out investment activity in any administrative territorial harm done to an individual’s health in Russia; changes unit. Neither this annual report, nor any part of it, nor in the legislation and regulation as well as in the the fact of its distribution are the basis or guide for policies of the Government of the Russian Federation action in connection with any contracts, commitments or and of the regional authorities, including changes in investment decisions. the legislation, policy and regulation concerning the consumption and advertising of alcoholic beverages The present annual report may contain statements that along with their taxation; changes in raw materials are or may be considered as forward-looking statements and labour costs; renewal of distribution rights and under the U.S. federal securities laws and foresee the distribution agreements on favourable terms after their protection provided by this "safe harbor" law. Examples expiry; technological developments that can affect the of such forward-looking statements include Company's distribution of products; changes in financial and capital statements related to its preliminary estimates, forecasts, markets, including significant interest rate and foreign projections, strategies, plans, objectives, goals, currency exchange rates fluctuations, which can make prospects, preliminary estimates, intentions, assumptions the Company’s access to financing difficult or increase and targets, including those relating to purchases, its cost, as well as affect the Company’s financial sales, products or services, results of activities, financial activities; changes in accounting standards, accounting condition, liquidity, prospects and dividend policy; policies and practices; presence of skilled staff including statements regarding the efficiency of Company’s the experts in the area of accounting; ability to identify activities and the state of the industry in the future; other risks inherent in the Company’s business and to other statements that are not based on strict accordance manage the risks associated with the above mentioned with the facts of the past or present; initial assumptions factors. on which such statements are based. This list of important factors is not exhaustive. The By their very nature, forward-looking statements involve readers of the report should carefully weigh such inherent risks and uncertainties, both general and factors and other uncertainties and events, especially specific, and there is a possibility that forecasts in these when it comes to the political, economic, social and statements will not come true. Among other things, legal environment in which the Company operates. forward-looking statements are based on numerous initial Such forward-looking statements reflect the situation assumptions concerning the present and future business current only for the date on which they were made, strategy of Company’s business activities, as well as and the Company undertakes no obligation to add concerning conditions under which the Company will the latest data or revise any of these statements. The operate in the future. readers of the report should not place undue reliance on forward looking statements. The Company makes The readers of the report should keep in mind several no representation or warranty and does not promise important factors that could disrupt Company’s initial that the results envisaged by such forward-looking assumptions and cause significant differences between statements will be achieved, each of these forward- the actual results of its activities and its preliminary looking statements is only one version of many possible estimates, forecasts, projections, strategies, plans, goals, scenarios, which should not be considered as the most objectives, prospects, preliminary calculations, intentions, likely or usual version. assumptions and targets stated in such forward looking statements.These factors include: changes in political, social, legal and economic conditions in Russia as a whole or in those regions of Russia where the Company operates, including changes in the level of

152 ANNUAL REPORT 2014 Synergy Co SYNERGY 30/1, bld 1, Obrucheva Str., 117485 Moscow, Russia tel.: +7 /495/ 510 2695 +7 /495/ 775 3050 fax: +7 /495/ 510 2697 +7 /495/ 775 3052 website: www.sygroup.ru e-mail: [email protected]