CONTENTS SUMMARY OF KEY FINANCIAL INDICATORS ............................................................................................. 1 LETTER OF THE PRESIDENT OF THE MANAGEMENT BOARD TO SHAREHOLDERS .............................. 2 CORPORATE PROFILE OF ATLANTIC GRUPA ........................................................................................... 4 ABOUT THE COMPANY ........................................................................................................................... 4 COMPANY HISTORY ................................................................................................................................ 4 ORGANISATIONAL STRUCTURE ............................................................................................................ 8 OWNERSHIP STRUCTURE .....................................................................................................................10 CORPORATE MANAGEMENT OF ATLANTIC GRUPA ................................................................................12 CORPORATE MANAGEMENT .................................................................................................................14 GENERAL ASSEMBLY ............................................................................................................................14 SUPERVISORY BOARD OF ATLANTIC GRUPA .....................................................................................14 SUPERVISORY BOARD COMMITTEES ..................................................................................................17 MANAGEMENT BOARD OF ATLANTIC GRUPA ......................................................................................18 REMUNERATION POLICY FOR MANAGEMENT BOARD MEMBERS .....................................................19 STRATEGIC MANAGEMENT COUNCIL ..................................................................................................21 BUSINESS COMMITTEES .......................................................................................................................21 IMPLEMENTING THE PRINCIPLES OF CORPORATE GOVERNANCE ..................................................22 SPONSORSHIPS AND DONATIONS .......................................................................................................22 VALUE DAY .............................................................................................................................................28 SUSTAINABLE DEVELOPMENT AND ENVIRONMENTAL PROTECTION IN 2013..................................29 QUALITY CONTROL ................................................................................................................................31 INTEGRATED SYSTEM OF QUALITY, ENVIRONMENTAL AND FOOD SAFETY MANAGEMENT ..........33 HUMAN RESOURCES IN 2013 ................................................................................................................36 BUSINESS OPERATIONS OF ATLANTIC GRUPA .......................................................................................43 STRATEGIC BUSINESS UNIT BEVERAGES ...........................................................................................46 STRATEGIC BUSINESS UNIT COFFEE ..................................................................................................52 STRATEGIC BUSINESS UNIT SNACKS ..................................................................................................55 STRATEGIC BUSINESS UNIT SAVOURY SPREADS ..............................................................................59 STRATEGIC BUSINESS UNIT PHARMA AND PERSONAL CARE ...........................................................62 STRATEGIC BUSINESS UNIT SPORTS AND FUNCTIONAL FOOD ........................................................67 STRATEGIC DISTRIBUTION UNIT CROATIA ..........................................................................................70 I STRATEGIC DISTRIBUTION UNIT SLOVENIA, SERBIA, MACEDONIA ..................................................71 STRATEGIC DISTRIBUTION UNIT HORECA...........................................................................................74 STRATEGIC DISTRIBUTION UNIT INTERNATIONAL MARKETS ............................................................75 RUSSIAN AND CIS MARKET ...................................................................................................................76 FINANCIAL OPERATIONS OF ATLANTIC GRUPA ......................................................................................79 SALES DYNAMICS IN 2013 .....................................................................................................................81 PROFITABILITY DYNAMICS IN 2013 .......................................................................................................87 FINANCIAL INDICATORS IN 2013 ...........................................................................................................91 PERFORMANCE ON THE CROATIAN CAPITAL MARKET IN 2013 .........................................................93 OUTLOOK FOR 2014 ...............................................................................................................................95 RISKS OF ATLANTIC GRUPA ......................................................................................................................97 BUSINESS ENVIRONMENT RISK ...........................................................................................................97 INDUSTRY AND COMPETITION RISKS ..................................................................................................98 BUSINESS RISK ....................................................................................................................................100 FINANCIAL RISKS .................................................................................................................................102 ABBREVIATIONS .......................................................................................................................................104 AUDITOR’S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS .................................................105 CONTACTS ................................................................................................................................................168 II SUMMARY OF KEY FINANCIAL INDICATORS (in HRK million) 2013 2012* 2013/2012 Revenues 5,092.2 4,984.8 2.2% Sales 5,051.3 4,930.4 2.5% EBITDA 590.8 558.6 5.8% EBITDA margin 11.7% 11.3% +37 bp EBIT 424.6 399.2 6.4% EBIT margin 8.4% 8.1% +31 bp Net profit 199.0 112.5 76.9% Net profit margin 3.9% 2.3% +166 bp Net debt 2,059.3 2,353.1 (12.5%) Net debt/EBITDA 3.5 4.2 n/a Cash flow from operating activities 420.2 296.0 42.0% Capital expenditures 100.0 78.8 26.9% Market capitalization as at 31.12. 2,394.0 1,787.2 34.0% EV 4,504.7 4,187.5 7.6% EPS (in HRK) 58.5 30.5 91.9% PPS as at 31.12. (in HRK) 718.0 536.0 34.0% DPS (in HRK) 9.0 - n/a * Normalized 1 LETTER OF THE PRESIDENT OF THE MANAGEMENT BOARD TO SHAREHOLDERS The conditions in which we operate were considerably aggravated in the last several years, primarily by the long- standing crisis and the consequences it leaves in both business and social environment, especially in the region of South-Eastern Europe where Atlantic Grupa realises the majority of its revenues. However, owing to successful implementation of the strategy, in 2013 Atlantic Grupa continued with the organic sales growth and profitability improvement. We are particularly pleased that our business model has proven stable in a difficult economic environment, as confirmed by reported results and launching of new investments. Despite the challenges we managed to be continuously successful in generating growth in an environment of general decline or stagnation, which also includes the region, while by the results and growth achieved in the CIS markets and key European markets we confirm the company’s orientation towards internationalisation as our strategic focus. Thus, in addition to constantly working on building and developing quality working conditions and distinguishable corporate culture, we have placed added focus on strengthening our management team and developing capacities. At the same time, the company is continually dedicated to risk management, liquidity maintenance and debt management. Our expectations are as realistic and responsible as they are ambitious. As the company whose shares have been quoted on the official market of the Zagreb Stock Exchange for 25 consecutive quarters, we realise the results we announce, on the basis of which the capital market as well as our shareholders consider us to be a transparent, responsible and perspective company. However, our vision goes beyond the parameters which can only be measured by financial instruments. Owing to the clear vision of development we have grown from a local distributor with six employees in 1991 into one of the leading business systems in South-Eastern Europe with over 4,200 employees and companies in 11 countries. A significant internationalisation of the company’s business operations was initiated in 2013, in which the main levers are our brands with the highest potential for growth and expansion in international markets – Argeta, Donat Mg, Multipower, Bebi and Cedevita GO! In addition to the strong support of own capacities in the regional distribution system and cooperation with renowned distribution partners in the European markets of both West and East Europe, smooth implementation of