Management report Field of activity The enterprise was founded in 1900, but the actual name it has got in 1970. Today, LB is a leading producer of alcoholic beverages in the Baltics. Totally, AS “Latvijas balzams” produces more than 130 different kinds of alcoholic beverages. AS “Latvijas balzams” major shareholder is “S.P.I. Distilleries. B. V.” which owns 6,595,745 shares or 88.05% of the company's equity capital. The activity of enterprise in 1st half year of 2008 AS “Latvijas balzams” is the biggest producer of alcoholic beverages in Latvia, as well as one of the largest taxpayers in Latvia. During first six months of 2008 LB paid 22.9 millions lats to the state budget, including excise tax amounting to 17.5 million lats. The unaudited turnover of the company in the first six months of year 2008 was 50.9 million lats, which is by 2% more than during first six months of 2007. The decrease in turnover at local market was 4.8% as compared to the same period in 2007. In comparison with 2007, the export market sales increased by 14.5%, or 2 529 thousands lats. During the first six months of year 2008, the sales to the EU counties increased by 16.2% in comparison with the same period in 2007. Sales to Lithuania increased by 19.4% and to Estonia by 10.8% as compared to the same period in 2007. The top sales focus markets are Baltic States, Poland and Scandinavia, meanwhile new export markets are being acquired. After losses in 1st quarter of 2008 the company, having proceeded with steps to increase its business efficiency and amend price policy, has returned to profitability. The profit for the reporting period was 1 418 thousands lats, that's 5% less than in the first six months in 2007 (1 495 thousands lats). Future perspectives of activity For the second half year of 2008 AS “Latvijas balzams” priorities will be control of production expenses and limitation of cost increase as well as continuation of export business development. AS Latvijas balzams Chairman of the Board Karlis Andersons Riga, 26 August, 2008