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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549





Form 10-K







|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



| | FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
| | -------------------------------------------

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



| | FOR THE TRANSITION PERIOD FROM
| | ------------------------------

COMMISSION FILE NUMBER 0-24341





Central European
Distribution Corporation

(Exact Name of Registrant as Specified in its Charter)







|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                      |  | 54-1865271                         
|(State or Other Jurisdiction ofIncorporation or Organization) |  | (I.R.S. EmployerIdentification No.)
|                                                              | 
|Two Bala Plaza, Suite #300, Bala Cynwyd, PA                   |  | 19004                              
|(Address of Principal Executive Offices)                      |  | (Zip code)                         





Registrants
telephone number, including area code: (610) 660-7817

Securities registered pursuant to Section 12(b) of the
Act:

Common Stock, par value $0.01 per share

(Title of Class)

Securities registered pursuant to
Section 12(g) of the Act:

Not Applicable





Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes  x    No   ̈

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrants knowledge in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K.     ̈.

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer  x      Accelerated filer   ̈      Non-accelerated filer   ̈      Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.):    Yes   ̈    No  x

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2009, was approximately
$ 992,188,312 (based on the closing price of the registrants common stock on the NASDAQ Global Select Market).

As
of February 22, 2010, the registrant had 69,451,680 shares of common stock outstanding.

Documents Incorporated by
Reference

Portions of the proxy statement for the annual meeting of stockholders to be held on April 29, 2010 are
incorporated by reference into Part III.









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TABLE OF CONTENTS



|           |  |                                                                                      |  |    
|---------- |  | ------------------------------------------------------------------------------------ |  | ---
|           |  | Page                                                                                
|PART I     |  |                                                                                     
|           |  |                                                                                     
|Item 1.    |  | Business                                                                             |  | 2  
|           |  |                                                                                     
|Item 2.    |  | Properties                                                                           |  | 25 
|           |  |                                                                                     
|Item 3.    |  | Legal Proceedings                                                                    |  | 26 
|           |  |                                                                                     
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                  |  | 26 
|           | 
|PART II    |  |                                                                                     
|           |  |                                                                                     
|Item 5.    |  | Market for Registrants Common Equity and Related Stockholder Matters                |  | 27 
|           |  |                                                                                     
|Item 6.    |  | Selected Financial Data                                                              |  | 28 
|           |  |                                                                                     
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of
Operation |  | 29 
|           |  |                                                                                     
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                           |  | 54 
|           |  |                                                                                     
|Item 8.    |  | Financial Statements and Supplementary Data                                          |  | 56 
|           |  |                                                                                     
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |  | 103
|           |  |                                                                                     
|Item 9A.   |  | Controls and Procedures                                                              |  | 103
|           | 
|PART III   |  |                                                                                     
|           |  |                                                                                     
|Item 10.   |  | Directors and Executive Officers of the Registrant                                   |  | 105
|           |  |                                                                                     
|Item 11.   |  | Executive Compensation                                                               |  | 105
|           |  |                                                                                     
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management                       |  | 105
|           |  |                                                                                     
|Item 13.   |  | Certain Relationships and Related Transactions                                       |  | 105
|           |  |                                                                                     
|Item 14.   |  | Principal Accountant Fees and Services                                               |  | 105
|           | 
|PART IV    |  |                                                                                     
|           |  |                                                                                     
|Item 15.   |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                      |  | 106
|           | 
|Signatures |  | 107                                                                                 



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The disclosure and analysis of Central European Distribution Corporation, or the Company, in
this report contain forward-looking statements, which provide the Companys current expectations or forecasts of future events. Forward-looking statements in this report include, without limitation:



| |  |  | information concerning possible or assumed future results of operations, trends in financial results and business plans, including those relating to
earnings growth and revenue growth, liquidity, prospects, strategies and the industry in which the Company and its affiliates operate, as well as the integration of recent acquisitions and other investments and the effect of such acquisitions and
other investments on the Company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | statements about the expected level of the Companys costs and operating expenses relative to its revenues, and about the expected composition of
its revenues;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | information about the impact of governmental regulations on the Companys businesses;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | other statements about the Companys plans, objectives, expectations and intentions; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | other statements that are not historical facts.
| | - |  | -----------------------------------------------

Words such as believes, anticipates and intends may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is
not forward-looking. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the
forward-looking statements. The Companys actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the factors described in the section entitled Risk Factors in this
report. Other factors besides those described in this report could also affect actual results. You should carefully consider the factors described in the section entitled Risk Factors in evaluating the Companys forward-looking
statements.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this report.
The Company undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this report, or to reflect the occurrence of unanticipated events. You should, however, review the factors and
risks the Company describes in the reports it files from time to time with the Securities and Exchange Commission, or SEC.

In
this Form 10-K and any amendment or supplement hereto, unless otherwise indicated, the terms CEDC, the Company, we, us, and our refer and relate to Central European Distribution
Corporation, a Delaware corporation, and, where appropriate, its subsidiaries.



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PART I



|Item 1. | Business
|------- | --------

Central
European Distribution Corporation (CEDC), a Delaware corporation incorporated on September 4, 1997, and its subsidiaries (collectively referred to as we, us, our, or the Company)
operate primarily in the alcohol beverage industry. We are the largest producer of vodka in the world and are Central and Eastern Europes largest integrated spirit beverages business, measured by total volume, with approximately
30.5 million nine-liter cases produced and sold in 2009. Our business primarily involves the production and sale of our own spirit brands (principally vodka), the importation on an exclusive basis of a wide variety of spirits, wines and beers
and the distribution of alcoholic beverages. Our primary operations are conducted in Poland, Russia and Hungary. We have eight manufacturing facilities located in Poland and Russia, and a total work force of more than 7,550 employees.

In Poland, we are the largest vodka producer with a brand portfolio that includes Absolwent, Zubrówka, Bols,
Palace and Soplica brands, each of which we produce at our Polish distilleries. Absolwent and Bols are the top-selling vodkas in the mainstream and premium segments, respectively, in Poland.

We are also the largest vodka producer in Russia, the worlds largest vodka market. Our Green Markbrand is the top-selling
mainstream vodka in Russia and the second-largest vodka brand by volume in the world and our Parliament and Zhuravli brands are the two top-selling sub-premium vodkas in Russia. We also produce and distribute Royal, the
top-selling vodka in Hungary. We believe the strength of our brands is a key component to the success of our company. For the year ended December 31, 2009, our Polish and Russian operations accounted for 59.2% and 38.4% of our revenues and
49.3% and 51.7% of our operating profit, respectively.

We are a leading importer of spirits, wines and beers in Poland,
Russia and Hungary, and we generally seek to develop a complete portfolio of premium imported wines and spirits in each of the markets we serve. We maintain exclusive import contracts for a number of internationally recognized brands, including
Jim Beam Bourbon, Campari, Jägermeister, Remy Martin Cognac, Guinness, Corona, Budvar, E&J Gallo wines, Carlo Rossi wines, Sutter Home wines, Metaxa Brandy, Sierra Tequila, Teachers Whisky, Cinzano, Old
Smuggler, Grants WhiskyandConcha y Toro wines. We are also the largest distributor of alcoholic beverages in Poland, with a broad nationwide distribution network and extensive brand portfolio.

Our strong market position and broad portfolio of brands in Poland, and our platform for further expansion in the Russian spirit market
established through our recent acquisitions in Russia, are two of our key competitive strengths, which we believe will enhance our position as Central and Eastern Europes largest integrated spirit beverage business. Through the integration of
Russian Alcohol Group (which we refer to as Russian Alcohol) and the Copecresto Enterprises Limited (which we refer to as Parliament) businesses, we expect to generate significant synergies.

In addition to our operations in Poland, Russia and Hungary, our three primary markets, we have distribution agreements for our vodka brands
in a number of key export markets including the United States, Japan, the United Kingdom, France and many other Western European countries. In 2009, exports represented 2.1% of our sales by value.

Our Competitive Strengths as a Group

Strong market position in PolandWe are a leading producer and importer of alcoholic beverages in Poland. Our brand portfolio includes top-selling brands that we produce as well
as brands which we import on an exclusive basis. We also distribute a wide range of locally produced alcoholic beverages. Our broad portfolio of products, which includes over 700 brands of alcoholic beverages, allows us to address a wide range of
consumer tastes and trends as well as wholesaler needs. Our economy brands have benefited recently from challenging economic conditions, while our premium and mainstream brands, including Absolwent and Bols,enable us to



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benefit from long-term premiumization trends taking place with Polish consumers. Our portfolio of top selling vodka brands and leading import brands also provides us with bargaining power in our
dealings with large retail chains. Additionally, our distribution infrastructure provides us with the distribution leverage to serve independent retailers and on-trade locations.

Solid platform for further expansion in the fragmented Russian spirits marketWe are the largest vodka producer in
Russia, producing approximately 18.0 million nine-liter cases in 2009. With the inclusion of Parliament, the Whitehall Group (which we refer to as Whitehall) and Russian Alcohol products, we have a large portfolio of alcoholic beverages,
including Green Mark, the top-selling mainstream vodka brand in Russia and the second largest vodka brand by volume in the world, and Parliament and Zhuravli, the two top-selling sub-premium vodka brands in Russia. These brands
are supported by a combined sales force of approximately 1,538 people. We believe our combined size and the geographic coverage of our sales force will contribute to market share gains and enable us to benefit from ongoing consolidation in the
Russian spirits market. Furthermore, we believe we have the necessary infrastructure to take advantage of growth opportunities with minimal additional costs.

Our sales force in Russia includes approximately 1,300 people allocated to Exclusive Sales Teams, or ESTs. ESTs are employed by wholesalers that carry our vodka products but focus exclusively on the
merchandising, marketing and sale of this portfolio. Because spirits advertising is heavily regulated in Russia, we believe that this structure provides us with meaningful marketing benefits as it allows us to maintain direct relationships with
retailers and to ensure that our products receive prominent shelf space. Wholesalers who employ our ESTs are solely compensated through a rebate on purchases of our vodka brands. This arrangement enables us to maintain an expansive and exclusive
sales force covering all regions of Russia with no associated fixed overhead costs.

Attractive import platform for
international spirit companies to market and sell products in Poland, Russia and HungaryOur existing import platform, under which we are the exclusive importer of numerous brands of spirits, wines and beers into each of our core
markets, combined with our sales and marketing organizations in Poland, Russia and Hungary provide us with an opportunity to continue to expand our import portfolio. We believe we are well positioned to serve the needs of other international spirit
companies that wish to sell products in these markets but lack the necessary distribution network and sales experience.

Attractive market dynamicsWe believe that a combination of factors make Poland and Russia attractive markets for companies involved in the alcoholic beverage industry.



| |  |  | Russia and Poland rank as the largest and fourth-largest markets for vodka in the world, respectively, by volume, and vodka accounts for over 90% of
all spirits consumed in both markets. Wine and beer consumption have also increased in both Poland and Russia, and we believe spirits sales value in both markets will continue to grow. As the largest producer of vodka and a leading importer of wine
and beer in both countries, we are well positioned to service demand in our markets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We believe that consumers in Poland and Russia increasingly demand a wider range of wine and spirits from mainstream to sub-premium brands, both
domestically produced and imported, and we are well positioned to meet that demand in the coming years with top-selling brands in the domestic vodka mainstream and sub-premium categories. Additionally, we believe that, unlike many of our
competitors, we are well positioned to meet that demand with the combination of our market-leading domestically produced products and our exclusive import portfolio.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Poland and Russia, we believe, based on industry statistics and our own experience, that approximately 60-65% of vodka sales are still made through
the so-called traditional trade, which consists primarily of smaller independently owned stores. The traditional trade provides our primary source of sales, which we serve in Poland through our nation-wide next day distribution platform
and sales to third party wholesalers. In Russia, we believe our large, dedicated sales force, which includes both a traditional sales force and ESTs, gives us a competitive advantage over our competitors in an extremely fragmented wholesaler and
retailer environment.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Professional and experienced management teamOur management team, led by
William Carey, has over 35 years of experience in the alcoholic beverages industry and has executed and integrated over 20 acquisitions within Poland, Russia and Hungary over the past ten years.

Growth Strategies

Realize synergies through the consolidation of our Russian businessesWe have acquired three of the leading spirit and wine businesses in Russia. With our acquisitions of Parliament and Russian Alcohol, we have the
leading overall vodka position as well as the leading mainstream and sub-premium brands in Russia. Through our significant economic interest in Whitehall, we have a leading import portfolio in Russia. We intend to integrate our Russian vodka
businesses, which are currently managed separately, in order to better leverage our management expertise and business relationships and also to take advantage of cross selling opportunities. We believe that opportunities exist to improve operational
profitability in Russia by eliminating operating cost overlap between the companies. By combining our market leading Russian brands with Whitehalls exclusive import portfolio, and leveraging the combined sales and distribution system of
Parliament and Russian Alcohol, we believe we will be able to enhance our leading market position in Russia.

Capitalize
on the Russian market consolidationThe Russian vodka market is currently fragmented, and we believe we have the necessary resources to take market share from struggling competitors. We estimate that the top five vodka producers
in Russia accounted for estimated 44% of the total market share in 2009 as compared to an estimated 26% in 2006. We believe, based on our experience of consolidation trends in Poland, that the combined market share of the top five vodka producers in
Russia could increase from 44% to 70-80% in the next five years as the Russian market continues to consolidate. We intend to capitalize on our leading brand position, our expansive sales and distribution network and the impact of the current
economic situation to expand our market share in Russia.

Develop our portfolio of exclusive import
brandsIn addition to the development of our own brands, our strategy is to be the leading importer of wines and spirits in the markets where we operate. We have already developed an extensive wine and spirit import portfolio within
Poland. In Russia, we intend to capitalize on the import platform of Whitehall and the combined sales and marketing strength of Parliament and Russian Alcohol by developing new import opportunities and capitalizing on the overall growth in imports.
In 2009, we began to import several new brands to Russia, including DeKuyper, Jose Cuervo, Galloand Borco and we expanded our exclusive Polish import relationship with Campari to include Hungary.

Continue to focus on sales of our domestic and export brands and exclusive import brandsWithin Poland and
Hungary, we look to continue to leverage the strength of our existing and long-standing sales and distribution networks to support our higher margin, owned and exclusive import brands. We also intend to seek new export opportunities for our vodka
brands, such as Zubrówka, through new export package launches and product extensions. We are also in the process of completing an extensive program to develop new packaging and marketing programs for Bols,
Zubrówka, Absolwent, Royal and Palace vodka in our core markets.

Recent Acquisitions

On September 25, 2009, the Company and certain of its affiliates acquired the remaining 15% of the share capital of its subsidiary,
Parliament. Parliament owns various alcoholic beverage production and distribution assets in Russia, including the Parliament vodka brand, which is a top selling sub-premium vodka brand in Russia.

On July 9, 2008, the Company, Lion Capital LLP (Lion Capital) and certain other investors completed an investment pursuant
to which the Company acquired an indirect equity stake in Russian Alcohol of approximately 42% and Lion Capital acquired substantially all of the remainder of the equity. The Company renegotiated the terms of this investment during 2009, acquiring
100% of the equity interests in Lion/Rally Cayman 6, a Cayman Islands company that is a holding company owning 100% of the equity interests in Russian



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Alcohol (Cayman 6). Pursuant to agreements entered into in November 2009, the Company acquired all of the equity interests in Cayman 6 not held by the Company, though Lion Capital
retained the sole voting share in Cayman 6 until after receipt of antimonopoly clearances for the acquisition of Russian Alcohol from the Russian Federal Antimonopoly Commission or FAS and the Antimonopoly Committee of the Ukraine. On
January 20, 2010, following receipt of the required approvals, the Company acquired the sole voting share of Cayman 6 from Lion Capital and thereby acquired control of Russian Alcohol. Russian Alcohol is the largest vodka producer in Russia and
produces leading vodka brands such as Green Mark, which is the number one vodka brand in Russia, and Zhuravli, a top selling premium vodka brand behind the Companys Parliament.

Industry Overview

Poland

The total net value of the alcoholic beverage market in Poland was estimated to be approximately $7 to $9 billion in 2009. Total sales value
of alcoholic beverages at current prices decreased by approximately 5% from December 2008 to December 2009. This decrease was due, for the most part, to the effects of the world-wide economic crisis. Poland fared better than most countries in the
region, but was nevertheless affected. Beer and vodka account for approximately 90% of the value of sales of all alcoholic beverages.

The alcoholic beverage distribution industry in Poland is competitive. We compete primarily with other distributors and indirectly with hypermarket chains and discount chains. We compete with various regional distributors in all regions
where our distribution centers and satellite branches are located. Competition with these regional distributors is greatest with respect to domestic vodka brands. The number of hypermarkets (which have been the primary threat to alcoholic beverage
distributors in Western Europe because they purchase directly from producers) has stabilized in Poland. However, there has been strong growth of discount chains. With these discount chains taking a bigger and bigger market share from the traditional
trade, the alcohol distribution industry is changing.

Spirits

We are one of the leading producers of vodka in Poland. We compete primarily with eight other major spirit producers in Poland, most of which
are privately-owned while the remainder are still state-owned. The spirit market in Poland is dominated by the vodka market. Domestic vodka consumption dominates the Polish spirits market with over 96% market share, as Poland is the fourth largest
market in the world for the consumption of vodka and one of the top 25 markets for total alcohol consumption worldwide. The Polish vodka market is divided into four segments based on quality and price(*):



| |  |  | Top premium and imported vodkas, with such brands as Finlandia, Absolut, Bols Excellent, Chopin, and
Królewska;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Premium segment, with such brands as Bols Vodka, Sobieski, Wyborowa, Smirnoff, Maximus, and Palace
Vodka;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Mainstream segment, with such brands as Absolwent,Batory,Zlota Gorzka, Luksusowa,Soplica,Zubrówka, Zoladkowa Gorzka, Polska; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | Economy segment, with such brands as Starogardzka, Krakowska,Boss,Niagara,Czysta
Slaska, Prezydent, Z Czerwona Kartka, andLudowa.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



|(*) | Brands in bold face type are produced by us.
|--- | --------------------------------------------

We produce vodka in all four segments and have our largest market share in the mainstream and premium segments. Though vodka brands compete against each other from segment to segment, the most competition
is found within each segment. As we have a presence in each category and have four of the top ten best selling vodka brands in Poland, and have approximately a 26% market share measured by value, we are in a good position to compete effectively in
all four segments.



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In terms of value, the top premium and imported segment accounts for approximately 6% of
total sales volume of vodka, while the premium segment accounts for approximately 18% of total sales volume. The mainstream segment, which is the largest, now represents 50% of total sales volume. Sales in the economy segment currently represent 28%
of total sales volume.

Wine

The Polish wine market, which grew to an estimated 95.6 million liters in 2009, is represented primarily by two categories: table wines, which account for 2% of the total alcohol market, and
sparkling wines, which account for 1% of the total alcohol market. As Poland has almost no local wine production, the wine market has traditionally been dominated by imports, with lower priced Bulgarian wines representing the bulk of sales. However,
over the last three years, sales of new world wines from regions such as the United States, Chile, Argentina and Australia have seen rapid growth. In 2009, it is estimated that sales of wine from these regions grew by 11% in volume. Also in 2009,
our exclusive agency brand, Carlo Rossi, became the number one selling wine in Poland in value replacing wines from old Warsaw Pact nations.

We believe that consumer preference is trending towards higher priced table wines. The best selling wines in Poland previously retailed for under $3 per bottle. Currently, the best selling wines retail in
the $4-$7 range.

Beer

Poland is the fourth largest beer market in Europe. Sales of beer were down an estimated 10% in volume in 2009 but still account for 50% of the total sales value of alcoholic beverages in Poland.

Three major international producers, Heineken, SAB Miller and Carlsberg, control 88% of the market through their local
brands.

Russia

Russia, with its official production of approximately 1.13 billion liters in 2009, is by far the largest vodka market worldwide. The Russian vodka market is fragmented, with, in our estimation, the top
five producers having a combined volume market share of approximately an estimated 44% in 2009. This number is up from 2006 when the top five producers only had an estimated 26% market share. Further sector consolidation has been ongoing in recent
years, with the potential to continue in the near term despite the market being down 9% in 2009. We estimate that the number of vodka producers in the market has decreased by half over the last five years, and the number of licensed vodka
manufacturers has dropped from 324 in 2004 to 145 in 2008. The Russian vodka market is well protected from foreign imports, primarily due to efficient mass production, limited advertising and high logistics costs, making it difficult to compete with
local producers. In addition, the Russian government has begun to introduce new legislation to limit the impact of unofficial production which could be beneficial in the short to medium term as the unofficial production is currently estimated at
40%, which is extremely high compared to other jurisdictions in which we operate.

We believe we are well-positioned to
continue to gain market share in 2010 as we have the leading brands by volume and value in the mainstream and sub-premium categories, dedicated ESTs in place and experienced management not only at the corporate level but also at the operating level.
In addition, the Russian government has put in place very restrictive policies on the advertising of spirits. We believe these policies make it difficult for any competitor to buy market share by out-spending its rivals.

Spirits

Vodka consumption dominates the Russian spirits market with over 95% market share. The Russian vodka market is divided into five segments based on quality and price: top premium, premium, sub-premium, mainstream, and economy. In terms of
value, the top premium segment accounts for approximately 0.1% of total



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sales volume of vodka, while the sub-premium and premium segment accounts for approximately 9.3% of total sales volume. The mainstream segment now represents 41.3% of total sales volume. Sales in
the economy segment currently represent 49.3% of total sales volume. as consumers have traded up from economy brands to mainstream and sub-premium brands continue, a trend we expect to continue.

Vodka represented 95% of the total Russian spirits market in 2009. Although our belief is that the vodka market decreased approximately 9%
in 2009 versus 2008, we believe that the market will stabilize in the first half of 2010 and that the premiumization that had occurred for 7 years before the crisis will return as wages begin to rise in Russia. As before, we believe the
premiumization process should most benefit the mainstream and sub-premium brands at the expense of the economy brands. We believe we are well-positioned for this with the best selling brands in both the sub-premium and mainstream sectors. In
addition, with our current capacity and relatively little capitalization expense, we plan to introduce new brands to the market to capture sales in any sector outside of the economy sector that we believe will have the most dynamic growth potential.

The Russian vodka market is quite fragmented, with the top five producers only having an estimated 43% market share in 2009
as compared to an estimated 78% market share in Poland and an estimated 80% market share in the Ukraine. We believe that the Russian market will experience trends similar to those experienced in the Polish market and will continue to see further
consolidation of the market as the retail infrastructure further consolidates and develops and the effects of the economic crisis stabilize and diminish. We believe that this consolidation post crisis will increase significantly over the next 3-5
years.

Wine

According to market data, Russia has relatively low wine consumption per capita (about 8.5 liters per year). It is expected to grow at an estimated 8.6% compound annual growth rate during the period from
2007-2012. It is estimated that the Russian wine market grew by 10% in 2009 and will grow at an 8.1% compound annual growth rate in volume terms during the period 2007-2012, and even more in value terms.

Currently the fastest growing category in the Russian wine market is sparkling wine. In 2009, sparkling wine sales grew 12% by volume and
20% by value terms, according to Euromonitor. Despite the fact that domestic wines prevail on the market, the share of imported higher quality wines has been constantly growing. We believe we can benefit in the future from the growing Russian wine
market through the import and distribution of high-value wines and the addition of new wines to our import and distribution portfolio in Russia. We have recently signed with Gallo to import on an exclusive basis Gallos Carlo Rossi wine
selection. Through Whitehall, we import wines from Constellation, Concho Toro and LVMH as well as others.

Long Drinks

The Long Drinks or Ready to Drink market in Russia consists of pre-mixed beverages with 9% or less alcohol content. The key
segments of the market are gin-based drinks, Alco-Energy drinks and fruit-based drinks. Our Bravo Premium distillery produces the gin-based Bravo Classic brand, which accounts for approximately 50% of our long drinks sales volume. In the
gin-based segment we have a 14% market share, in the Alco-Energy segment we have a 16% and in the fruit-based segment we have a 7% market share. We have focused over the last two years in improving the profitability of these products through a
combination of more targeted selling and mix improvement. The Long Drinks business has shown significant improvement in 2009 as compared to prior years.

Hungary

Spirits

The Hungarian spirit market is dominated primarily by bitters and brown spirits. Currently, the most popular spirit drinks are
Jägermeister, Royal Vodka, Fütyülos, Kalinka vodka, Unicom, Metaxa, Ballantines and Johnnie Walker. The current significant trends in the Hungarian spirit market are the overall
decrease in total spirit



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consumption and a pronounced move by the consumer to branded imported spirits. Our Royal Vodka brand is the number one selling vodka in Hungary. In addition, Hungary is now the third
largest market in the world for sales of our exclusive agency brand, Jägermeister.

We believe that the total size
of the spirit market in Hungary is approximately 58 million liters which has declined in 2009 by approximately 10%. However despite the decreasing total sales volume of spirits, we believe that the share of imported spirits, the segment in
which we operate, is growing (increasing 5% from 2008 to 2009, and 16.2% in the past five years), while the consumption of local spirits is in decline. The increasing share of import was a result of eliminated custom duty and the improving
purchasing power since the EU accession, as well as the continuous marketing and advertising activities of the imported spirit brands.

The spirit market is split into two major segments in Hungary: local producers and importers. The local producers are primarily dealing with low-cost, mainstream or below, local products, as well as with premium fruit-based spirits
(palinka). The import spirit market is more competitive and relatively fragmented. The major players are the market leader Zwack Unicum Zrt (with an interest in both the local and import spirit segment), CEDC as the biggest spirit importer company,
and Bacardi-Martini, Pernod Ricard Hungary, and Heinemann. Our advantage in Hungary is the combination of our wide portfolio which has the number one leading brands in the vodka, bitter and imported brandy categories, and our experienced sales and
marketing team which offers premium service and builds strong brand equities.

Operations by Country

Poland

We are a leading vodka producer by value and volume in Poland, and one of the largest producers of vodka in the world. We own two production sites in Poland: Bols and Polmos Białystok. In the Bols distillery, we produce the Bolsand Soplicavodka brands, among other spirit brands. Bolsvodka is the number one selling premium vodka in Poland by volume and value. Soplica has consistently been one of the top ten mainstream selling vodkas in Poland.
Polmos Białystok produces Absolwent, which is one of the leading vodkas in Poland for the last eight years. In addition to the Absolwentbrand, Polmos Białystok also produces Zubrówka, which also is exported out
of Poland to many markets around the world, including the United States, England, Japan and also France, where it is the number two imported premium vodka by volume.

We are the leading importer of spirits, wine and beer in Poland. We currently import on an exclusive basis approximately 40 leading brands of spirits, wine from over 40 producers and 5 brands of beer.

We are also the leading national distributor of alcoholic beverages in Poland by value, and we believe we offer one of the
broadest portfolios of alcoholic beverages with over 700 brands. We operate in a highly fragmented market, primarily served by an estimated 50 wholesale groups. We operate the largest nationwide delivery service in Poland, and we provide next day
delivery through our 18 distribution centers, 124 satellite branches and large fleet of delivery trucks. We believe that we are the leading distributor in each category of alcoholic beverages we distribute in Poland, except for beer.

Brands

We
produced and sold approximately 9.0 million nine-liter cases of vodka through our Polish business in 2009 in the four main vodka segments in Poland: top premium, premium, mainstream and economy.

Our mainstream Absolwent brand has been one of the leading vodkas in Poland for the last eight years, based on volume and value.
Bols vodka is the number one selling premium vodka in Poland and number two in Hungary by value. Soplica, a mainstream brand, has consistently been one of the top 10 selling vodkas in Poland. Our Zubrówka brand is the
second best selling flavored and colored vodka in Poland and is exported to markets



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around the world. In 2009, we sold abroad approximately 184,000 nine-liter cases of Zubrówka. In addition, we produce the top selling vodka in Hungary, Royal Vodka, which we
distribute through our subsidiary Bols Hungary.

Import Portfolio

We have exclusive rights to import and distribute approximately 40 leading brands of spirits, wine and beer into Poland and distribute these
products throughout the country. We also provide marketing support to the suppliers who have entrusted us with their brands.

Our exclusive import brands in Poland include the following:



|                   |  |                  |  |                    |  |                   |  |                         |  |           |  |             
|------------------ |  | ---------------- |  | ------------------ |  | ----------------- |  | ----------------------- |  | --------- |  | ------------
|LIQUEURS           |  | WHITE SPIRITS    |  | BROWN SPIRITS      |  | VERMOUTH &BITTERS |  | WINE &CHAMPAGNES        |  | BEER      |  | NONALCOHOLIC
|Disaronno Amaretto |  | Patron Tequila   |  | Jim Beam           |  | Cinzanovermouth  |  | Sutter Home             |  | Guinness  |  | Evian       
|Sambuca            |  | Tequila Sierra   |  | Camus              |  | Campari           |  | Miguel Torres           |  | Kilkenny  |  |             
|Amaretto Gozio     |  | Cana Rio Cachaca |  | Remy Martin        |  | Jaegermeister     |  | Concha y Toro           |  | Bitburger |  |             
|Amaretto Florence  |  | Gin Finsbury     |  | Metaxa             |  |                   |  | Gallo                   |  | Budweiser |  |             
|Amaretto Venice    |  | Nostalgia Ouzo   |  | Brandy Torres      |  |                   |  | Carlo Rossi             |  | Corona    |  |             
|Cointreau          |  | Grappa Piave     |  | Brandy St Remy     |  |                   |  | B. P. Rothschild        |  |           |  |             
|Passoa             |  | Grappa Primavera |  | Whisky Williams   |  |                   |  | Frescobaldi             |  |           |  |             
|Bols Liqueurs      |  | Tequila Sauza    |  | Whisky Teachers   |  |                   |  | Codorniu                |  |           |  |             
|                   |  | Gin Hendricks    |  | Whisky OldSmuggler |  |                   |  | Piper HeidsieckPenfolds |  |           |  |             
|                   |  |                  |  | Whisky GlenGrant   |  |                   |  | TriventeRosemount       |  |           |  |             
|                   |  |                  |  | Grants            |  |                   |  | Trinity Oaks            |  |           |  |             
|                   |  |                  |  | Glenfiddich        |  |                   |  | Terra doro             |  |           |  |             
|                   |  |                  |  | Balvenie           |  |                   |  | M.Chapoutier            |  |           |  |             
|                   |  |                  |  | Clan MacGregor     |  |                   |  | Boire Manoux            |  |           |  |             
|                   |  |                  |  | Rum Old Pascas     |  |                   |  | Faustino                |  |           |  |             
|                   |  |                  |  |                    |  |                   |  | J.Moreau & Fils         |  |          
|                   |  |                  |  |                    |  |                   |  | Kressmann               |  |           |  |             
|                   |  |                  |  |                    |  |                   |  | Laroche                 |  |           |  |             
|                   |  |                  |  |                    |  |                   |  |                         |  |           |  |             
|                   |  |                  |  |                    |  |                   |  |                         |  |           |  |             

Sales Organization and Distribution

Our business involves the distribution of products that we import on an exclusive basis and products we produce from our two distilleries
(Bols Poland and Polmos Białystok). In addition, we handle the distribution of a range of products from the local and international drinks companies operating in Poland for which we are the largest distributor for many of such suppliers.

We operate the largest nationwide next-day alcoholic beverage delivery service with 18 distribution centers and 124 satellite
branches located throughout Poland. We distribute over 700 brands of alcoholic beverages consisting of a wide range of alcoholic products, including spirits, wine and beer, as well as non-alcoholic beverages.



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The following table illustrates the breakdown of our sales in Poland in the twelve months
ended December 31, 2009, 2008 and 2007:



|                              |  |      |   |  |      |   |  |      |  
|----------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|Sales Mix by Product Category |  | 2009 |   |  | 2008 |   |  | 2007 |  
|Vodka                         |  | 73   | % |  | 76   | % |  | 72   | %
|Beer                          |  | 9    | % |  | 9    | % |  | 9    | %
|Wine                          |  | 10   | % |  | 7    | % |  | 8    | %
|Spirits other than vodka      |  | 4    | % |  | 6    | % |  | 10   | %
|Other                         |  | 4    | % |  | 2    | % |  | 1    | %
|                              |  |      |   |  |      |   |  |      |  
|Total                         |  | 100  | % |  | 100  | % |  | 100  | %

We distribute
products throughout Poland directly to approximately 25,000 outlets, including off-trade establishments, such as small and medium-size retail outlets, petrol stations, duty free stores, supermarkets and hypermarkets, and on-trade locations, such as
bars, nightclubs, hotels and restaurants, where the products we distribute are consumed. These accounts are serviced by approximately 650 salespeople in Poland. One of our key objectives is to distribute more of our own products over time and, to
that end, we have established an incentive compensation system for our salespeople for both products that we produce and products that we import exclusively into Poland.

Beginning in 2006, we implemented a more targeted sales approach. We narrowed the focus of our domestically located salespeople by assigning each sales person to a specific channel: key accounts
(hypermarkets, discount stores and gas stations), on-trade accounts or traditional trade accounts.

The hypermarket and
discount channels require a dedicated national sales team to handle their specific requirements. This team is responsible for promoting our brands in these national chains by implementing below the line activities, such as price promotions and
pallet displays.

The use of a national, dedicated on-trade only sales team, the largest sales team of its kind in Poland to
date, to work closely with bar, restaurant and hotel owners provides us with a key opportunity to promote and sell our brands and build brand awareness and brand equity with consumers. This is especially important given the restrictions on media
advertising for spirits. The traditional trade sales force continues to focus on the channel in Poland that is still the dominant area in terms of sales volume. In addition, each of these account groups is also assigned a marketing and merchandizing
team that works in conjunction with the sales team to serve the client.

The overall trend in distribution over the last
number of years has been the consolidation of the hypermarkets and the growth of the discount chains and locally-owned super market chains. These stores typically go direct to the producers or importers and cut out the distribution that the
traditional trade relies on. This is resulting in a more competitive landscape for distribution companies that focus on one market sector such as alcoholic beverages and not across many sectors to get the scale that will be required to keep
competitive.

Export activities

With a number of brands to export from Poland and Russia and with full control of both Parliament and Russian Alcohol, we are currently restructuring our export department to expedite the positioning of
the brands we believe have the greatest export potential. To that end, we have divided the export team into three regions: the ex CIS countries, which include our Green Mark and Parliament brands, among others, and Western Europe; the
Middle East, Africa and Duty Free; and the third region, the Americas and Asia Pacific. The last two groups will concentrate on our Green Mark, Zubrowka and Parliament brands, among others.

During 2009, our core export brands were Parliament, which grew by 16.7% in Germany, and Zubrowka, which was primarily
exported to the United Kingdom, France, Japan and the United States. In 2010, we plan to



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develop other markets and brands and current markets more aggressively than we have over the last few years. As an example, we are replacing our old importer of Zubrowka in the United
States with Remy Cointreau USA and are in discussions with other importers to assist us in developing our brands around the world.

We are continuing to develop our third party private label export business in which we produce vodka to be sold under labels other than our own. Customers range from major retail chains in Europe to premium brand owners in the United
States. For example, we currently produce Ultimat vodka (an ultra luxury vodka sold primarily in the United States) for Patron.

Sources and Availability of Raw Materials for Spirits that We Produce

The principal components in the
production of our distilled spirits are products of agricultural origin, such as rectified spirit, as well as flavorings, such as bison grass for Zubrówka, and packaging materials, such as bottles, labels, caps and cardboard boxes. We
purchase raw spirit, bison grass and all of our packaging materials from various sources in Poland by contractual arrangement and through purchases on the open market. Agreements with the suppliers of these raw materials are generally negotiated
with indefinite terms, subject to each partys right of termination upon six months prior written notice. The prices for these raw materials are negotiated every year.

We have several suppliers for each raw material in order to minimize the effect on our business if a supplier terminates its agreement with
us or if disruption in the supply of raw materials occurs for any other reason. We have not experienced difficulty in satisfying our requirements with respect to any of the products needed for our spirit production and consider our sources of supply
to be adequate at the present time. We do not believe that we are dependent on any one supplier in our production activities.

Employees

As of December 31, 2009, we employed in Poland 3,135 employees including 2,995 persons employed
on a full time basis.

Polish labor laws require that certain benefits be provided to employees, such as a certain number of
vacation days, maternity leave and retirement bonuses. The law also restricts us from terminating employees without cause and, in most instances, requires a severance payment of one to three months salary. Additionally, we are required to
contribute monthly payments to the governmental health and pension system. Most of our employees are not unionized, and we have had no significant employee relations issues. In addition to the required Polish labor law requirements, we maintain an
employee incentive stock option plan for key management and provide supplemental health insurance for qualified employees.

Government Regulations

The Company is subject to a range of regulations in Poland, including laws and
regulations on the environment, trademark and brand registration, packaging and labeling, distribution methods and relationships, pricing and price changes, sales promotions and public relations, and may be required to obtain permits and licenses to
operate its facilities. The Company is also subject to rules and regulations relating to changes in officers or directors, ownership or control.

The Company believes it is in compliance in all material respects with all applicable governmental laws and regulations in Poland, and expects all material governmental permits and consents to be renewed
by the relevant governmental authorities upon expiration. The Company also believes that the cost of administration and compliance with, and liability under, such laws and regulations does not have, and is not expected to have, a material
adverse impact on its financial condition, results of operations or cash flows.



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Environmental Matters

We are subject to a variety of laws and regulations relating to land use and environmental protection, including the Polish Environmental
Protection Law of April 27, 2001 (Dz.U. 2006. 129.902, as amended), the Polish Waste Law of April 27, 2001 (Dz.U. 2001. 62.628 as amended), the Polish Water Management Law of April 18, 2001 (Dz.U.2005.239. 2019, as amended) and the
Polish Act on Entrepreneurs obligations regarding the management of some types of waste and deposit charges of May 11, 2001 (Dz.U. 2001.63.639, as amended). We are not required to receive an integrated permit to operate our Polmos
Białystok and Bols production plants. However, we receive certain permits for the economic use of the environment, including water permits, permits for production and storage of waste and permits for discharge of pollutants into the atmosphere.
In addition, we have entered into certain agreements related to the servicing and disposal of our waste, including raw materials and products unsuitable for consumption or processing, paper, plastic, metal, glass and cardboard packaging, filtration
materials (used water filter refills), used computer parts, unsegregated (mixed) residential waste, damaged thermometers and alcoholmeters, used engine and transmission oils, batteries and other waste containing hazardous substances. In addition, we
pay required environmental taxes and charges related primarily to packaging materials and fuel consumption and we believe we are in material compliance with our regulatory requirements in this regard. While we may be subject to possible costs, such
as clean-up costs, fines and third-party claims for property damage or personal injury due to violations of or liabilities under environmental laws and regulations, we believe that we are in material compliance with applicable requirements and are
not aware of any material breaches of said laws and regulations.

Trademarks

With the acquisitions of the Bols and Polmos Białystok distilleries, we became the owners of vodka brand trademarks. The major
trademarks we have acquired are: Bolsvodka brand (we have a perpetual, exclusive, royalty-free and sub-licensable trademark agreement for Poland, Russia and Hungary), Soplica, which we own through Bols, and the Absolwent and
Zubrówka brands, which we own through Polmos Białystok. We also have the trademark for Royal Vodka, which is produced in Poland and which we currently sell in Hungary through our Bols Hungary subsidiary. See Risk
FactorsWe may not be able to protect our intellectual property rights.

Alcohol Advertising Restrictions

Polish regulations do not allow any form of above-the-line advertising and promotion, which is an advertising
technique that is conventional in nature and impersonal to customers, using current traditional media such as television, newspapers, magazines, radio, outdoor, and internet mass media for alcoholic beverages with greater than 18% alcohol content.

We believe we are in material compliance with the government regulations regarding above-the-line advertising and promotion.
To date, we have not been notified of any violation of these regulations.

Russia

We are the leading integrated spirits beverages business in Russia with an approximate 18.8% market share in vodka production. We produce
Green Mark, the number one selling vodka in Russia and as well as the leading sub-premium vodkas in Russia, Parliamentand Zhuravli.We also produce Yamskaya, the number one selling economy vodka in Russia, and premixed
alcohol drinks, or long drinks.

The hypermarkets and large retail chains are expanding throughout Russia with different sized
formatted stores, which are expected to better cover and penetrate those areas outside of the major cities of Russia. As we have central agreements in place with these hypermarkets and large retail chains as well as the largest trademark budget for
spirits in Russia and the leverage it brings, we expect to benefit from this expansion.

We hold an 80% economic interest in
Whitehall, which holds the exclusive rights to the import of such premium wine brands as Concha y Toro and Constellation brands, as well as certain Gruppo Campari brands.



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The company is also involved in a joint venture with Moet Hennessythe French spirits and champagne business of LVMH. In addition to these import activities, Whitehall is also the owner of
distribution centers in Moscow, Saint Petersburg, Rostov and Siberia as well as a wine and spirits retail network located in Moscow.

Brands

We produced and sold approximately 18.0 million nine-liter cases of vodka through our Russian
business in 2009 in the main vodka segments in Russia: top premium, premium, sub-premium, mainstream, and economy. In addition we produced and sold approximately 3.3 million nine-liter cases of long drinks

In the main stream segment we produce Green Mark, the number one selling brand in Russia, as well as the two leading sub-premium
brands, Zhuravli and Parliament. In the first half of 2008 we introduced Yamskaya, which was the number one selling economy vodka in Russia in 2009. In the second half of 2009, we also introduced Gerovayaand
Urozhay, both lower mainstream brands.

Import Portfolio

We are one of the leading importers of wine and spirits in Russia through our investment in the Whitehall. Whitehall has exclusive rights to
import and distribute a number of brands of spirits and wines into Russia. Exclusively imported brands include the following:



|              |  |        |  |                |  |                     
|------------- |  | ------ |  | -------------- |  | --------------------
|BROWN SPIRITS |  | WHITE  |  | CHAMPAGNES     |  | WINES               
|Hennessy Jose |  | Cuervo |  | Krug           |  | Asti Mondoro        
|Cortel Brandy |  |        |  | Veuve Clicquot |  | Concha y Toro       
|Glenmorangie  |  |        |  | Dom Perignon   |  | Hardys             
|Ardbeg        |  |        |  | Moet & Chandon |  | Robert Mondavi      
|Old Smuggler  |  |        |  |                |  | Paul Masson         
|Glen Grant    |  |        |  |                |  | Nobilo              
|Gautier       |  |        |  |                |  | Fine wine collection

Sales
Organization and Distribution

In Russia, we have a strong sales team that sells directly to the key retail accounts and
primarily relies on third-party distribution through wholesalers to reach the small to medium sized outlets. For sales of our vodka brands we also have ESTs that were introduced back in 2006. We staff over 1,300 people to ESTs that currently cover
the majority of Russia. The mission of these teams is to maintain direct relationships with retailers and ensure that the Companys products are properly positioned on the shelf. Members of ESTs are generally on the distributors
payrolls,which are indirectly remunerated by us via discounts granted to distributors. ESTs exclusively deal with our vodka products and currently control deliveries to approximately 53,000 points-of-sale (which is about 44% of all points-of-sale in
Russia).

The following table illustrates the breakdown of our sales in Russia:



|                                  |  |      |   |  |      |  
|--------------------------------- |  | ---- | - |  | ---- | -
|Sales Mix by Product Category     |  | 2009 |   |  | 2008 |  
|Vodka                             |  | 68   | % |  | 49   | %
|Wine and spirits other than vodka |  | 32   | % |  | 51   | %
|                                  |  |      |   |  |      |  
|Total                             |  | 100  | % |  | 100  | %

Sources and
Availability of Raw Materials for Spirits that We Produce

The principal components in the production of our distilled
spirits are products of agricultural origin, such as rectified spirit and packaging materials, such as bottles, labels, caps and cardboard boxes. We purchase raw



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spirit and all of our packaging materials from various sources in Russia by contractual arrangement and through purchases on the open market. Agreements with the suppliers of these raw materials
are generally negotiated with indefinite terms, subject to each partys right of termination upon six months prior written notice. The prices for these raw materials are negotiated every year. We have several suppliers for each raw
material in order to minimize the effect on our business if a supplier terminates its agreement with us or if disruption in the supply of raw materials occurs for any other reason. We have not experienced difficulty in satisfying our requirements
with respect to any of the products needed for our spirit production and consider our sources of supply to be adequate at the present time. We do not believe that we are dependent on any one supplier in our production activities.

Employees

As of December 31, 2009 we directly employed 4,284 individuals in Russia.

Government Regulations

The Company is subject to a range of regulations in Russia, including laws and regulations on the environment, trademark
and brand registration, packaging and labeling, distribution methods and relationships, pricing and price changes, sales promotions and public relations, and may be required to obtain permits and licenses to operate its facilities. The Company
is also subject to rules and regulations relating to changes in officers or directors, ownership or control.

In 2009, the
Russian government also introduced further restrictions on the selling of lower alcohol content products namely beer and ready to drink alcoholic beverages. As a result, these types of beverages can no longer be consumed legally on the street and
can no longer legally be bought at street kiosks. In addition minimum pricing for spirits was introduced with a half liter bottle of spirit (including vodka) having a minimum required retail shelf price of eighty-nine rubles. These restrictions are
the initial steps that the government is taking to reduce the presence of the unofficial market. We expect the government to continue with this program. For those of us in the official market, these are welcomed changes.

The Company believes it is in compliance in all material respects with all applicable governmental laws and regulations in Russia, and
expects all material governmental permits and consents to be renewed by the relevant governmental authorities upon expiration. The Company also believes that the cost of administration and compliance with, and liability under, such laws and
regulations does not have, and is not expected to have, a material adverse impact on its financial condition, results of operations or cash flows.

Alcohol Advertising Restrictions

Russian regulations do not allow any form
of above-the-line advertising and promotion, which is an advertising technique that is conventional in nature and impersonal to customers, using current traditional media such as television, newspapers, magazines, radio, outdoor signage
, and internet mass media, for alcoholic beverages with greater than 18% alcohol content.

We believe we are in material
compliance with the government regulations regarding above-the-line advertising and promotion. To date, we have not been notified of any violation of these regulations.

Trademarks

With the acquisition of Parliament and Russian Alcohol we
became the owners of vodka brand trademarks in Russia. The main trademarks we have are Parliament, Green Mark and Zhuravli vodka brands. We also have trademarks with other brands we own in Russia. See Risk FactorsWe
may not be able to protect our intellectual property rights.



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Hungary

Brands

In
July of 2006, we acquired the trademark for Royal Vodka, which we produce in Poland and which we currently sell in Hungary through our Bols Hungary subsidiary. Royal Vodka is the number one selling vodka in Hungary with market share of
approximately 27.6%.

Exclusive imported brands to Hungary include the following:



|            |  |                     |  |               |  |                    |  |                          
|----------- |  | ------------------- |  | ------------- |  | ------------------ |  | -------------------------
|CEDC BRANDS |  | VERMOUTH andBITTERS |  | LIQUEURS      |  | WHITE VODKAS       |  | BROWN SPIRITS            
|Bols Vodka  |  | Campari             |  | Jaegermeister |  | Jose Cuervo        |  | Cognac Remy Martin       
|Zubrówka    |  | Cinzano             |  | Bols Liqueurs |  | Silver Top Dry Gin |  | Metaxa                   
|Royal Vodka |  |                     |  | Cointreau     |  | Calvados Boulard   |  | Brandy St Remy           
|            |  |                     |  | Carolans      |  |                    |  | Grants                  
|            |  |                     |  | Passoa        |  |                    |  | Glenfiddich              
|            |  |                     |  | Galliano      |  |                    |  | Tulamore Dew Old
Smuggler
|            |  |                     |  | Irish Mist    |  |                    |  |                          

Sales Organization and Distribution

In Hungary, we employ approximately 25 salespeople who cover primarily on-trade and key account customers throughout the country.

Employees

As of December 31, 2009, we employed 49 employees including 47 persons employed on a full time basis.

Government Regulations

The Company is subject to a range of regulations in Hungary, including laws and
regulations on trademark and brand registration, packaging and labeling, distribution methods and relationships, pricing and price changes, sales promotions and public relations. The Company is also subject to rules and regulations relating to
changes in officers or directors, ownership or control.

The Company believes it is in compliance in all material respects
with all applicable governmental laws and regulations in Hungary, and expects all material governmental permits and consents to be renewed by the relevant governmental authorities upon expiration. The Company also believes that the cost of
administration and compliance with, and liability under, such laws and regulations does not have, and is not expected to have, a material adverse impact on its financial condition, results of operations or cash flows.

Corporate Operations and Other

The Corporate Operations and Other division includes traditional corporate-related items including executive management, corporate development, corporate finance, human resources, internal audit, investor relations, legal and public
relations.

Taxes

We operate in the following tax jurisdictions: Poland, the United States, Hungary, Russia, and the Netherlands. In Poland, Russia and Hungary we are primarily subject to Value Added Tax (VAT), Corporate Income Tax, Payroll Taxes, Excise
Taxes and Import Duties. In the United States we are primarily subject to Federal and Pennsylvania State Income Taxes, Delaware Franchise Tax and Local Municipal Taxes. We believe we are in material compliance with all relevant tax regulations.



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Excise taxes comprise significant portions of the price of alcohol and their calculations
differ by country. In Poland and Russia, where our production takes place, the value of excise tax rates for 2009 amounted to PLN 49.6 ($17.60) and RUB 191 ($6.36) per liter of 100% alcohol.

Research and Development

We do not have a separate research and development unit, as new product developments are primarily performed by our marketing department. Our activity in this field is generally related to improvements in packaging and extensions to our
existing brand portfolio, or revised production processes, leading to improved taste.

Available Information

We maintain an Internet website at http://www.cedc.com. Please note that our Internet address is included in this annual report as an
inactive textual reference only. The information contained on our website is not incorporated by reference into this annual report and should not be considered part of this report.

We file annual, quarterly and current reports, proxy statements and other information with the SEC. We make our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and most of our other SEC filings available free of charge through our Internet website as soon as reasonably practicable after we electronically file these
materials with the SEC. You may read and copy any document we file with the SEC at the SECs public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. These filings are also available to the public over the Internet at the SECs website at http://www.sec.gov. In addition, we provide paper copies of our SEC filings free of charge upon request. Please contact the Corporate
Secretary of the Company at 1-610-660-7817 or at our address set forth on the cover page of this annual report.

We have
adopted a code of ethics applicable to all of our officers, directors and employees, including our Chief Executive Officer and Chief Financial Officer (who is also our Principal Accounting Officer). The code of ethics is publicly available on the
investor relations page of our website at http://www.cedc.com. We intend to disclose any amendment to, or waiver from, any provision in our code of ethics that applies to our Chief Executive Officer and Chief Financial Officer by posting such
information in the investor relations section of our website at http://www.cedc.com and in any required SEC filings.



|Item 1A. | Risk Factors.
|-------- | -------------

Risks Related to Our
Business

We operate in highly competitive industries, and competitive pressures could have a material adverse effect on our
business.

The alcoholic beverages production and distribution industries in our region are intensely competitive. The
principal competitive factors in these industries include product range, pricing, distribution capabilities and responsiveness to consumer preferences, with varying emphasis on these factors depending on the market and the product.

In Poland, we face significant competition from various regional distributors and wholesalers, who compete principally on price. The effect
of this competition could adversely affect our results of operations. The majority of alcohol sales in Poland are still made through traditional trade outlets. Other sales are made in hypermarkets and large discount stores.

In Russia, hypermarket and large retail chains continue to grow their share of the trade. Traditional trade outlets typically provide us
with higher margins from sales as compared to hypermarkets and large retail chains. There is a risk that the expansion of hypermarkets and large retail chains will continue to occur in the future, thus



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reducing the margins that we may derive from sales to wholesalers that primarily serve the traditional trade. This potential margin reduction, however, will be partially offset by lower
distribution costs due to direct, bulk deliveries associated with sales to the modern trade.

As a manufacturer of vodka in
Poland and Russia, we face competition from other local producers. We compete with other alcoholic and nonalcoholic beverages for consumer purchases in general, as well as shelf space in retail stores, restaurant presence and distributor attention.
In addition, we compete for customers on the basis of the brand strength of our products relative to our competitors products. Our success depends on maintaining the strength of our consumer brands by continuously improving our offerings and
appealing to the changing needs and preferences of our customers and consumers. While we devote significant resources to the continuous improvement of our products and marketing strategies, it is possible that competitors may make similar
improvements more rapidly or effectively, thereby adversely affecting our sales, margins and profitability.

Our results are linked to
economic conditions and shifts in consumer preferences, including a reduction in the consumption of alcoholic beverages.

Our results of operations are affected by the overall economic trends in Poland, Russia and Hungary, the level of consumer spending, the rate of taxes levied on alcoholic beverages and consumer confidence in future economic conditions. The
current negative economic conditions and outlook, including volatility in energy costs, severely diminished liquidity and credit availability, falling equity market values, weakened consumer confidence, falling consumer demand, declining real wages
and increased unemployment rates, have contributed to a global recession. The effects of the global recession in many countries, including Poland and Russia, have been quite severe and it is possible that an economic recovery in those countries will
take longer to develop.

During the current period of economic slowdown, reduced consumer confidence and spending may result
in reduced demand for our products and limitations on our ability to increase prices and finance marketing and promotional activities. A continued recessionary environment would likely make it more difficult to forecast operating results and to
make decisions about future investments, and a major shift in consumer preferences or a large reduction in sales of alcoholic beverages could have a material adverse effect on our business, financial condition and results of operations.

Loss of key management would threaten our ability to implement our business strategy.

The management of future growth will require our ability to retain William Carey, our Chairman, Chief Executive Officer and President, as
well as certain other key members of management. William Carey, who founded our company, has been a key person in our ability to implement our business plan and grow our business.

Changes in the prices of supplies and raw materials could have a material adverse effect on our business.

Prices for raw materials used for vodka production may take place in the future, and our inability to pass on these increases to our customers could reduce our margins and profits and have a material
adverse effect on our business. We recently constructed storage tanks in Poland that will store up to six months use of raw spirit, which allows us to purchase raw spirit throughout the year at times when there are dips in raw spirit pricing.
However, we cannot assure you that the price of raw spirits will not continue to increase or that we will not lose the ability to maintain our inventory of raw spirits, either of which would have a material adverse effect on our financial condition
and results of operations.



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We are exposed to exchange rate and interest rate movements that could adversely affect our financial
results and comparability of our results between financial periods.

Our functional currencies are the Polish zloty,
Russian ruble and Hungarian forint. Our reporting currency, however, is the U.S. dollar, and the translation effects of fluctuations in exchange rates of our functional currencies into U.S. dollars may materially impact our financial condition and
net income and may affect the comparability of our results between financial periods.

In addition, our senior secured notes
and our convertible senior notes are denominated in euros and U.S. dollars and the proceeds of the note issuances have been on-lent to certain of our operating subsidiaries that have the Polish zloty and Russian ruble as their functional
currency. Movements in the exchange rate of the euro and U.S. dollar to Polish zloty and Russian ruble could therefore increase the amount of cash, in Polish zloty, that must be generated in order to pay principal and interest on our notes.

The impact of translation of our notes could have a material adverse effect on our reported earnings. The table below
summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of the Companys operations.



|                  |  |                                            |  |                                                 
|----------------- |  | ------------------------------------------ |  | ------------------------------------------------
|Exchange Rate     |  | Value of notional amount                   |  | Pre-tax impact of a 1% movement in exchange rate
|USD-Polish zloty  |  | $426 million                               |  | $4.3 million gain/loss                          
|USD-Russian ruble |  | $264 million                               |  | $2.6 million gain/loss                          
|EUR-Polish zloty  |  | 625 million or approximately $901 million |  | $9 million gain/loss                            

The table above
includes 245 million for the Senior Secured Notes that were redeemed on January 4, 2010, thus there will not be any foreign exchange impact from them after this date.

Foreign exchange rates may be influenced by various factors, including changing supply and demand for a particular currency; government
monetary policies (including exchange control programs, restrictions on local exchanges or markets and limitations on foreign investment in a country or on investment by residents of a country in other countries); changes in trade balances; trade
restrictions; and currency devaluations and revaluations. Additionally, governments from time to time intervene in currency markets, directly or by regulation, in order to influence prices. These events and actions are unpredictable and could
materially and adversely impact our results of operations and financial condition.

Weather conditions may have a material adverse
effect on our sales or on the price of grain used to produce spirits.

We operate in an industry where performance is
affected by the weather. Changes in weather conditions may result in lower consumption of vodka and other alcoholic beverages. In particular, unusually cold spells in winter or high temperatures in the summer can result in temporary shifts in
customer preferences and impact demand for the alcoholic beverages we produce and distribute. Similar weather conditions in the future may have a material adverse effect on our sales which could affect our financial condition and results of
operations. In addition, inclement weather may affect the availability of grain used to produce raw spirit, which could result in a rise in raw spirit pricing that could negatively affect margins and sales.

We are subject to extensive government regulation; changes in or violations of law or regulations could materially adversely affect our business and
profitability.

Our business of producing, importing and distributing alcoholic beverages in Poland and Hungary is
subject to regulation by national and local governmental agencies and European Union authorities. In addition, our business in Russia is subject to extensive regulation by Russian authorities. These regulations and laws address such matters as
licensing and permit requirements, competition and anti-trust matters, trade and pricing practices,



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taxes, distribution methods and relationships, required labeling and packaging, advertising, sales promotion and relations with wholesalers and retailers. Additionally, new or revised regulations
or requirements or increases in excise taxes, customs duties, income taxes, or sales taxes could materially adversely affect our business, financial condition and results of operations.

In addition, we are subject to numerous environmental and occupational, health and safety laws and regulations in the countries in which we
operate. We may incur significant costs to maintain compliance with evolving environmental and occupational, health and safety requirements, to comply with more stringent enforcement of existing applicable requirements or to defend against
challenges or investigations, even those without merit. Future legal or regulatory challenges to the industry in which we operate or our business practices and arrangements could give rise to liability and fines, or cause us to change our practices
or arrangements, which could have a material adverse effect on us, our revenues and our profitability. Governmental regulation and supervision as well as future changes in laws, regulations or government policy (or in the interpretation of existing
laws or regulations) that affect us, our competitors or our industry generally strongly influence our viability and how we operate our business. Complying with existing regulations is burdensome, and future changes may increase our operational and
administrative expenses and limit our revenues. For example, we are currently required to have permits to produce and import products, maintain and operate our warehouses, and distribute our products to wholesalers. Many of these permits, such as
our general permit for wholesale trade, must be renewed when they expire. Although we believe that our permits will be renewed upon their expiration, there is no guarantee that such will be the case. Revocation or non-renewal of permits that are
material to our business could have a material adverse affect on our business. Our permits could also be revoked prior to their expiration date due to nonpayment of taxes or violation of health requirements. Additionally, governmental regulatory and
tax authorities have a high degree of discretion and may at times exercise this discretion in a manner contrary to law or established practice. Such conduct can be more prevalent in jurisdictions with less developed or evolving regulatory systems
like Russia. Our business would be materially and adversely affected if there were any adverse changes in relevant laws or regulations or in their interpretation or enforcement. Our ability to introduce new products and services may also be affected
if we cannot predict how existing or future laws, regulations or policies would apply to such products or services.

We may not be able
to protect our intellectual property rights.

We own and license trademarks (for, among other things, our product names
and packaging) and other intellectual property rights that are important to our business and competitive position, and we endeavor to protect them. However, we cannot assure you that the steps we have taken or will take will be sufficient to protect
our intellectual property rights or to prevent others from seeking to invalidate our trademarks or block sales of our products as a violation of the trademarks and intellectual property rights of others. In addition, we cannot assure you that third
parties will not infringe on or misappropriate our rights, imitate our products, or assert rights in, or ownership of, trademarks and other intellectual property rights of ours or in marks that are similar to ours or marks that we license and/or
market. In some cases, there may be trademark owners who have prior rights to our marks or to similar marks. Moreover, Russia generally offers less intellectual property protection than in Western Europe or North America. We are currently involved
in opposition and cancellation proceedings with respect to marks similar to some of our brands and other proceedings, both in the United States and elsewhere. If we are unable to protect our intellectual property rights against infringement or
misappropriation, or if others assert rights in or seek to invalidate our intellectual property rights, this could materially harm our future financial results and our ability to develop our business.

Our import contracts may be terminated.

As a leading importer of major international brands of alcoholic beverages in Poland and Hungary, we have been working with the same suppliers in those countries for many years and either have verbal
understandings or written distribution agreements with them. In addition, we have recently acquired distribution contracts in Russia through our significant economic interest in Whitehall. Where a written agreement is in place, it is usually valid
for between one and five years and is terminable by either party on three to six months notice.



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Although we believe we are currently in compliance with the terms and conditions of our
import and distribution agreements, there is no assurance that all our import agreements will continue to be renewed on a regular basis, or that, if they are terminated, we will be able to replace them with alternative arrangements with other
suppliers. Moreover, our ability to continue to distribute imported products on an exclusive basis depends on some factors which are out of our control, such as ongoing consolidation in the wine, beer and spirit industry worldwide, or
producers decisions from time to time to change their distribution channels, including in the markets in which we operate.

Our
results of operations and financial condition may be adversely affected if we undertake acquisitions of businesses that do not perform as we expect or that are difficult for us to integrate.

At any particular time, we may be in various stages of assessment, discussion and negotiation with regard to one or more potential
acquisitions, not all of which will be consummated. We make public disclosure of pending and completed acquisitions when appropriate and required by applicable securities laws and regulations.

Acquisitions involve numerous risks and uncertainties. If we complete one or more acquisitions, our results of operations and financial
condition may be affected by a number of factors, including: the failure of the acquired businesses to achieve the financial results we have projected in either the near or long term; the assumption of unknown liabilities; the fair value of assets
acquired and liabilities assumed; the difficulties of imposing adequate financial and operating controls on the acquired companies and their management and the potential liabilities that might arise pending the imposition of adequate controls; the
challenges of preparing and consolidating financial statements of acquired companies in a timely manner; the difficulties in integration of the operations, technologies, services and products of the acquired companies; and the failure to achieve the
strategic objectives of these acquisitions. In addition, we may acquire a significant, but non-controlling, stake in a business, which could expose us to the risk of decisions taken by the acquired business controlling shareholder. For
example, we do not currently have a majority of the voting power in Whitehall and although we have negotiated contractual rights to board representation and other matters of corporate governance, we are subject to decisions of the controlling
shareholder in a way that we are not with our subsidiaries that we wholly-own or control and cannot assure you that our contractual rights will in all instances be sufficient to protect our interests.

Acquisitions in developing economies, such as Russia, involve unique risks in addition to those mentioned above, including those related to
integration of operations across different cultures and languages, currency risks and the particular economic, political, and regulatory risks associated with specific countries.

Future acquisitions or mergers may result in a need to issue additional equity securities, spend our cash, or incur debt, liabilities or
amortization expenses related to intangible assets, any of which could reduce our profitability.

Sustained periods of high inflation in
Russia may materially adversely affect our business there.

Russia has experienced periods of high levels of inflation
since the early 1990s. Despite the fact that inflation has remained relatively stable in Russia during the past few years, our profit margins from our Russian business could be adversely affected if we are unable to sufficiently increase our prices
to offset any significant future increase in the inflation rate.

We may fail to realize the anticipated benefits of the Russian Alcohol
transaction

The success of the Russian Alcohol transaction will depend on, among other things, our ability to realize
anticipated cost savings and our ability to combine the businesses of the Company and Russian Alcohol in a manner that does not materially disrupt existing relationships or otherwise result in decreased productivity. If we are unable to achieve
these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.



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The integration process could result in the loss of key employees, the disruption of our or
Russian Alcohols ongoing businesses or inconsistencies in standards, controls, procedures or policies that could adversely affect our ability to maintain relationships with third parties and employees or to achieve the anticipated benefits of
the transaction. To realize the benefits of the transaction, we must retain Russian Alcohols key employees. Among other things, in order to realize the anticipated benefits of the merger we must identify and eliminate redundant operations and
assets across a geographically dispersed organization.

Integration efforts between the two companies could also divert
management attention and resources. An inability to realize the full extent of, or any of, the anticipated benefits of the transaction, as well as any delays encountered in the integration process, could have an adverse effect on the Company.

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the
integration plan may not be realized. Actual cost synergies, if achieved at all, may be lower than we expect and may take longer to achieve than we anticipate. If we are not able to adequately address these challenges, the Company may be unable to
successfully integrate the operations of Russian Alcohol, or to realize the anticipated benefits of the integration of the two companies.

The developing legal system in Russia creates a number of uncertainties that could adversely affect our Russian business.

Russia is still developing the legal framework required to support a market economy, which creates uncertainty relating to our Russian business. We have limited experience operating in Russia, which could
increase our vulnerability to the risks relating to these uncertainties. Risks related to the developing legal system in Russia include:



| |  |  | inconsistencies between and among the Constitution, federal and regional laws, presidential decrees and governmental, ministerial and local orders,
decisions, resolutions and other acts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | conflicting local, regional and federal rules and regulations;
| | - |  | --------------------------------------------------------------



| |  |  | the lack of judicial and administrative guidance on interpreting legislation;
| | - |  | -----------------------------------------------------------------------------



| |  |  | the relative inexperience of judges and courts in interpreting legislation;
| | - |  | ---------------------------------------------------------------------------



| |  |  | the lack of an independent judiciary;
| | - |  | -------------------------------------



| |  |  | a high degree of discretion on the part of governmental authorities, which could result in arbitrary or selective actions against us, including
suspension or termination of licenses we need to operate in Russia;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | poorly developed bankruptcy procedures that are subject to abuse; and
| | - |  | ---------------------------------------------------------------------



| |  |  | incidents or periods of high crime or corruption that could disrupt our ability to conduct our business effectively.
| | - |  | --------------------------------------------------------------------------------------------------------------------

The recent nature of much of Russian legislation, the lack of consensus about the scope, content and pace of economic and political reform
and the rapid evolution of this legal system in ways that may not always coincide with market developments place the enforceability and underlying constitutionality of laws in doubt and result in ambiguities, inconsistencies and anomalies. Any of
these factors could adversely affect our Russian business.

An unpredictable tax system in Russia gives rise to significant
uncertainties and risks that complicate our tax planning and decisions relating to our Russian business.

The tax
system in Russia is unpredictable and gives rise to significant uncertainties, which complicate our tax planning and decisions relating to our Russian business. Tax laws in Russia have been in force for a relatively short period of time as compared
to tax laws in more developed market economies and we have less experience operating under Russian tax regulations than those of other countries.



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Russian companies are subject to a broad range of taxes imposed at the federal, regional and
local levels, including but not limited to value added tax, excise duties, profit tax, payroll-related taxes, property taxes, taxes or other liabilities related to transfer pricing and other taxes. Russias federal and local tax laws and
regulations are subject to frequent change, varying interpretations and inconsistent or unclear enforcement. It is not uncommon for differing opinions regarding legal interpretation to exist both between companies subject to such taxes and the
ministries and organizations of the Russian government and between different branches of the Russian government such as the Federal Tax Service and its various local tax inspectorates, resulting in uncertainties and areas of conflict. Tax
declarations are subject to review and investigation by a number of tax authorities, which are enabled by law to impose penalties and interest charges. The fact that a tax declaration has been audited by tax authorities does not bar that
declaration, or any other tax declaration applicable to that year, from a further tax review by a superior tax authority during a three-year period. As previous audits do not exclude subsequent claims relating to the audited period, the statute of
limitations is not entirely effective. In some instances, even though it may potentially be considered unconstitutional, Russian tax authorities have applied certain taxes retroactively. Within the past few years the Russian tax authorities appear
to be taking a more aggressive position in their interpretation of the legislation and assessments, and it is possible that transactions and activities that have not been challenged in the past may be challenged. As a result, significant additional
taxes, penalties and interest may be assessed. In addition, our Russian business is and will be subject to periodic tax inspections that may result in tax assessments and additional amounts owed by us for prior tax periods. Uncertainty relating to
Russian transfer pricing rules could lead tax authorities to impose significant additional tax liabilities as a result of transfer pricing adjustments or other similar claims, and could have a material adverse effect on our Russian businesses and
our company as a whole.

Russian Alcohol was not required to comply with the provisions of Sarbanes-Oxley and, therefore, we cannot
assure you that the financial results of Russian Alcohol do not contain deficiencies in their control over financial reporting that could lead to a material weakness.

In the second quarter of 2009 we began reporting Russian Alcohols financial results on a consolidated basis with ours. As a private
company, Russian Alcohol has not historically complied with the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley).

While we have evaluated the financial results of Russian Alcohol, we have not integrated Russian Alcohols internal controls with our Sarbanes-Oxley compliant internal controls and cannot ensure that Russian Alcohols controls
will comply with the rules applicable to U.S. public companies. Therefore, we cannot assure you that the financial results of Russian Alcohol do not contain deficiencies in their control over financial reporting that could lead to a material
weakness.

Risks Related to Our Indebtedness

Our substantial debt could adversely affect our financial condition or results of operations and prevent us from fulfilling our obligations under our notes.

We are highly leveraged and have significant debt service obligations. As of December 31, 2009 our indebtedness under our notes, other
credit facilities and capital leases amounted to approximately $1,798 million.

Our substantial debt could have important
consequences. For example, it could:



| |  |  | make it difficult for us to satisfy our obligations with respect to our notes and for the guarantors of our notes to satisfy their obligations with
respect to the guarantees;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require us to dedicate a substantial portion of our cash flows from operations to payments on our debt, which will reduce our cashflow available to
fund capital expenditures, working capital and other general corporate purposes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | place us at a competitive disadvantage compared to our competitors that have less debt than we do;
| | - |  | --------------------------------------------------------------------------------------------------



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| |  |  | limit our flexibility in planning for, or reacting to, changes to our industry;
| | - |  | -------------------------------------------------------------------------------



| |  |  | increase our vulnerability, and reduce our flexibility to respond, to general and industry specific adverse economic conditions; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our ability to borrow additional funds, increase the cost of any such borrowing and/or limit our ability to raise equity funding.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

We may incur substantial additional debt in the future. The terms of the indentures governing our notes
restrict our ability to incur, but will not prohibit us from incurring, additional debt. If we were to incur additional debt, the related risks we now face could become greater.

We require a significant amount of cash to service our indebtedness. Our ability to generate sufficient cash depends on a number of factors, many of which are beyond our control.

Our ability to make payments on or repay our indebtedness will depend on our future operating performance and ability to generate
sufficient cash. This depends, to some extent, on general economic, financial, competitive, market, legislative, regulatory and other factors discussed in these Risk Factors, many of which are beyond our control.

Historically, we met our debt service and other cash requirements with cash flows from operations and our existing revolving credit
facilities. As a result of certain acquisitions and related financing transactions, however, our debt service requirements have increased significantly. We cannot assure you that our business will generate sufficient cash flows from operating
activities, or that future debt and equity financing will be available to us in an amount sufficient to enable us to pay our debts when due or to fund our other financing needs.

If our future cash flows from operations and other capital resources are insufficient to pay our obligations as they mature or to fund our
liquidity needs, we may be forced to:



| |  |  | reduce or delay our business activities and capital expenditures;
| | - |  | -----------------------------------------------------------------



| |  |  | sell assets;
| | - |  | ------------



| |  |  | obtain additional debt or equity capital; or
| | - |  | --------------------------------------------



| |  |  | restructure or refinance all or a portion of our debt, including our notes, on or before maturity.
| | - |  | --------------------------------------------------------------------------------------------------

In addition, the terms of the indentures governing our notes limit our ability to pursue any of these alternatives. If we obtain additional
debt financing, the related risks we now face would intensify.

Furthermore, significant changes in market liquidity
conditions resulting in a tightening in the credit markets and a reduction in the availability of debt and equity capital could impact our access to funding and our related funding costs, which could materially and adversely affect our ability to
obtain and manage liquidity, to obtain additional capital and to restructure or refinance any of our existing debt.

We must rely on
payments from our subsidiaries to make cash payments on our notes, and our subsidiaries are subject to various restrictions on making such payments.

We are a holding company and hold most of our assets at, and conduct most of our operations through, direct and indirect subsidiaries. In order to make payments on our notes or to meet our other
obligations, we depend upon receiving payments from our subsidiaries. In particular, we may be dependant on dividends and other payments by our direct and indirect subsidiaries to service our obligations. Investors in our notes will not have any
direct claim on the cash flow or assets of our non-guarantor operating subsidiaries and our non-guarantor operating subsidiaries have no obligation, contingent or otherwise, to pay amounts due under our notes or the subsidiary guarantees, or to make
funds available to us for those payments. In addition, the payment



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of dividends and the making of loans and advances to us by our subsidiaries may be subject to various restrictions. Existing and future debt of certain of these subsidiaries may prohibit the
payment of dividends or the making of loans or advances to us. In addition, the ability of our subsidiaries to make payments, loans or advances to us may be limited by the laws of the relevant jurisdictions in which such subsidiaries are organized
or located. Any of the situations described above could make it more difficult for a subsidiary guarantor to service its obligations and therefore adversely affect our ability to service our obligations in respect of our notes. If payments are not
made to us by our subsidiaries, we may not have any other sources of funds available that would permit us to make payments on our notes.

Covenant restrictions under the indentures governing our notes impose significant operating and financial restrictions on us and may limit our ability to operate our business and consequently to make payments on our notes.

The indentures governing our notes will contain, and other financing arrangements that we may enter into in the future may
contain, covenants that restrict our ability to finance future operations or capital needs or to take advantage of other business opportunities that may be in our interest. These covenants restrict our ability to, among other things:



| |  |  | incur or guarantee additional debt;
| | - |  | -----------------------------------



| |  |  | make certain restricted payments;
| | - |  | ---------------------------------



| |  |  | transfer or sell assets;
| | - |  | ------------------------



| |  |  | enter into transactions with affiliates;
| | - |  | ----------------------------------------



| |  |  | create certain liens;
| | - |  | ---------------------



| |  |  | create restrictions on the ability of restricted subsidiaries to pay dividends or other payments;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | issue guarantees of indebtedness by restricted subsidiaries;
| | - |  | ------------------------------------------------------------



| |  |  | enter into sale and leaseback transactions;
| | - |  | -------------------------------------------



| |  |  | merge, consolidate, amalgamate or combine with other entities;
| | - |  | --------------------------------------------------------------



| |  |  | designate restricted subsidiaries as unrestricted subsidiaries; and
| | - |  | -------------------------------------------------------------------



| |  |  | engage in any business other than a permitted business.
| | - |  | -------------------------------------------------------

Events beyond our control, including changes in general business and economic conditions, may affect our ability to meet these requirements.
A breach of any of these covenants could result in a default under the indentures governing our notes.

Enforcing legal liability
against us and our directors and officers might be difficult.

We are organized under the laws of the State of Delaware
of the United States. Therefore, investors are able to effect service of process in the United States upon us and may be able to effect service of process upon our directors and executive officers. We are a holding company, however, and
substantially all of our operating assets are located in Poland, Hungary and, in connection with our recently completed acquisitions, Russia. Further, most of our directors and executive officers, and those of most of our subsidiaries, are
non-residents of the United States, and our assets and the assets of our directors and executive officers are located outside the United States. As a result, you may not be able to enforce against our assets (or those of certain of our directors or
executive officers) judgments of United States courts predicated upon the civil liability provisions of United States laws, including federal securities laws of the United States. In addition, awards of punitive damages in actions brought in the
United States or elsewhere may not be enforceable in Poland or Russia.



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##### Table of Contents

|Item 2. | Properties.
|------- | -----------

Our
significant properties can be divided into the following categories:

Production and rectification facilities. Our
production facilities in Poland comprise two plants with one located in Białystok, Poland for Polmos Białystok and the other one located in Oborniki Wielkopolskie, Poland for Bols. The Białystok facility is located on 78,665 square
meters of land which is leased from the government on a perpetual usufruct basis. The production capacity of our plant in Bialystok is approximately 24 million liters of 100% alcohol per year and currently, we use approximately 60% to 65% of
its production capacity. In the Polmos Białystok distillery we produce Absolwentand its taste variations, Batory, Białowieska, Cytrynówka, Czekoladowa, Kompleet, Vodka, Liberty Blue, Lider, Ludowa, Nalewka Wisniowa,
Nalewka MiodowaandPalace Vodka, Winiak Białostocki, Winiak Pałacowy, Wódka Imbirowa, Zubrówka.The plot on which the Białystok facility is located is unencumbered.

The Bols facility is located on 80,519 square meters of which 58,103 square meters are owned by us and 22,416 square meters are
leased from the government on a perpetual usufruct basis. The production capacity of our plant in Oborniki Wielkopolskie is 34.2 million liters of 100% alcohol per year. Currently we use about 60-65%of the plants production capacity. In
the Bols distillery we produce Bols Excellent, Bols Vodkaand its taste variations, Soplica, Soplica Szlachetna Polska, Soplica Tradycyjna Polska, Soplica Wisniowa Polska, Soplica Staropolska, Boss, Slaska, Niagara and Royal Vodka. The
plot on which the Bols facility is located in unencumbered.

The Topaz Distillery is part of Russian Alcohol, and became
part of the CEDC group in 2008. The distillery is one of the most advanced enterprises in Russia. It is certified to be in compliance with ISO 9001 and HACCP. The factory has ten, modern, hi-tech filling lines, its own rectifying equipment for
processing raw spirit, and a unique stream processor. The stream processor is an automated, hi-tech apparatus for the manufacturing of vodka, without any human intervention in the process. In the course of stream
processing, vodka passes through both silver and platinum filters. The Topaz distillery produces, among others, the Green Mark, Zhuravli, Yamskaya and Kalinov Lug brands. The plant was founded in 1995 and has a production
capacity of over 150 million liters annually.

The Parliament production plant uses an exceptional biological milk
purification method. Milk, added at a certain stage of production, absorbs all impurities and harmful substances. The milk is then removed in a multistage filtration process, leaving an absolutely pure vodka of the highest quality.

The First Kupazhniy Factory is part of Russian Alcohol, and became part of the CEDC group in 2008. The company is developing the two
fundamental components of its business activities: the manufacture of vodka and the extraction and bottling of natural mineral water from artesian wells. Four bottling lines have been installed at the factory, including a line for the exclusive 0.05
liter, 0.2 liter, and 0.5 liter PET containers. All vodka production at First Kupazhniy Factory takes place using the stream system, which completely automates the process. In this facility, we produce the Marusia and
Zhuravli brands. The plant was founded in 1976 and its production capacity reaches 35 million liters annually. The quality control system at First Kupazhniy Factory conforms to the international standard, ISO 9001.

The Bravo Premium distillery was the first in Russia to bottle alcoholic cocktails, beer and non-alcoholic beverages in aluminum cans. The
company has been affiliated with Russian Alcohol since 2005 and became part of the CEDC Group in 2008. In recent years Bravo Premium has gone through an intensive modernization of the manufacturing process, has purchased new pouring lines, built new
plant facilities and expanded its distribution network. Today, Bravo Premium is a premier facility for the production of alcoholic cocktails, with three pouring lines for cans, plastic bottles and glass containers. The factory produces such
cocktails as Funky Juz, China Town and Bravo Classic. The factory is certified to be in compliance with ISO 9001.

Office, distribution, warehousing and retail facilities.We own five warehousing and distribution sites located in various regions of Poland as well as nine retail facilities located in various regions of Poland. In Russia we own the
land and buildings in Balahikha, Moscow Region where the Parliament facilities are located.



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##### Table of Contents

Leased Facilities.Our primary corporate office is located in Warsaw, Poland, and we
have a rented corporate office in Budapest Hungary. In addition we operate over 85 warehousing and distribution sites and 45 retail facilities located in various regions of Poland. In Russia we lease over 10 office, warehouse and retail locations
primarily related to the Whitehall business. The lease terms expire at various dates and are generally renewable.

Research and
Development, Intellectual Property, Patents and Trademarks

We do not have a separate research and development unit.
Our activity in this field is generally related to improvements in packaging and extensions to our existing brand portfolio or revised production processes, leading to improved taste.



|Item 3. | Legal Proceedings.
|------- | ------------------

From
time to time we are involved in legal proceedings arising in the normal course of our business, including opposition and cancellation proceedings with respect to trademarks similar to some of our other brands, and other proceedings, both in the
United States and elsewhere. We are not currently involved in or aware of any pending or threatened proceedings that we reasonably expect, either individually or in the aggregate, will result in a material adverse effect on our consolidated
financial condition or results of operations.



|Item 4. | [Reserved.]
|------- | -----------



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PART II



|Item 5. | Market for Registrants Common Equity and Related Stockholder Matters.
|------- | ----------------------------------------------------------------------

Market Information

The Companys common stock has been traded on the
NASDAQ National Market, and its successor, the NASDAQ Global Select Market, under the symbol CEDC since June 1999. Prior thereto it traded on the NASDAQ Small Cap Market since our initial public offering in July 1998. On
September 22, 2008 the Companys stock was added to the NASDAQ Q-50 Index. The following table sets forth the high and low bid prices for the common stock, as reported on the NASDAQ Global Select Market, for each of the Companys
fiscal quarters in 2008 and 2009. These prices represent inter-dealer quotations, which do not include retail mark-ups, mark-downs or commissions and do not necessarily represent actual transactions.



|               |  |      |       |     |   |      
|-------------- |  | ---- | ----- | --- | - | -----
|               |  | High |       | Low
|2008           |  |      |       |     |   |      
|First Quarter  |  | $    | 62.52 |     | $ | 46.50
|Second Quarter |  |      | 75.47 |     |   | 56.32
|Third Quarter  |  |      | 77.48 |     |   | 28.95
|Fourth Quarter |  |      | 46.52 |     |   | 17.16
|2009           |  |      |       |     |   |      
|First Quarter  |  | $    | 24.87 |     | $ | 5.97 
|Second Quarter |  |      | 33.13 |     |   | 10.47
|Third Quarter  |  |      | 34.70 |     |   | 21.92
|Fourth Quarter |  |      | 36.41 |     |   | 26.44

On February 24,
2010, the last reported sales price of our common stock was $32.75 per share.

Holders

As of February 24, 2010, there were approximately 28,891 beneficial owners and 52 shareholders of record of common stock.

Dividends

CEDC has never
declared or paid any dividends on its capital stock. The Company currently intends to retain future earnings for use in the operation and expansion of its business. Future dividends, if any, will be subject to approval by the Companys board of
directors and will depend upon, among other things, the results of the Companys operations, capital requirements, surplus, general financial condition and contractual restrictions and such other factors as the board of directors may deem
relevant. In addition, the indenture for the Companys outstanding Senior Secured Notes due in 2016 may limit the payment amount of cash dividends on its common stock to amounts calculated in accordance with a formula based upon our net income
and other factors.

The Company earns the majority of its cash in nonUSD currencies and any potential future dividend
payments would be impacted by foreign exchange rates at that time. Additionally the ability to pay dividends may be limited by local equity requirements, therefore retained earnings are not necessarily the same as distributable earnings of the
Company.



27



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##### Table of Contents

Equity Compensation Plans

The following table provides information with respect to our equity compensation plans as of December 31, 2009:

Equity Compensation Plan Information



|                                                           |  |                                                                                          |  |                                                                          |       |                                                                                                                                        |        
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ----- | -------------------------------------------------------------------------------------------------------------------------------------- | -------
|Plan Category                                              |  | Number of Securities to beIssued Upon Exercise ofOutstanding Options,Warrants and
Rights |  | Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights |       | Number of SecuritiesRemaining Available forFuture Issuance
UnderEquity Compensation Plans(Excluding SecuritiesReflected in Column (a))
|                                                           |  | (a)                                                                                      |  | (b)                                                                      |       | (c)                                                                                                                                   
|Equity Compensation Plans Approved by Security Holders     |  | 1,560,624                                                                                |  | $                                                                        | 28.70 |                                                                                                                                        | 999,890
|Equity Compensation Plans Not Approved by Security Holders |  |                                                                                         |  |                                                                          |      |                                                                                                                                        |       
|Total                                                      |  | 1,560,624                                                                                |  | $                                                                        | 28.70 |                                                                                                                                        | 999,890



|Item 6. | Selected Financial Data
|------- | -----------------------

The following table sets forth selected consolidated financial data for the periods indicated and should be read in conjunction with and is qualified by reference to Managements Discussion and Analysis of Financial Condition and
Results of Operations, the consolidated financial statements, the notes thereto and the other financial data contained in Items 7 and 8 of this report on Form 10-K.



|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - |  | - | --------- | -
|Statement of Operations data:                                                                                          |  | 2005 |           |   | 2006 |   |           | 2007 |  |   | 2008      |   |  | 2009 |          
|Net sales                                                                                                              |  | $    | 749,415   |   |      | $ | 944,108   |      |  | $ | 1,189,822 |   |  | $    | 1,647,004 |   |  | $ | 1,507,139 |  
|Cost of goods sold                                                                                                     |  |      | 627,368   |   |      |   | 745,721   |      |  |   | 941,060   |   |  |      | 1,224,899 |   |  |   | 1,012,543 |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Gross profit                                                                                                           |  |      | 122,047   |   |      |   | 198,387   |      |  |   | 248,762   |   |  |      | 422,105   |   |  |   | 494,596   |  
|Sales, general and administrative expenses                                                                             |  |      | 70,404    |   |      |   | 106,805   |      |  |   | 130,677   |   |  |      | 223,373   |   |  |   | 278,448   |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Operating income                                                                                                       |  |      | 51,643    |   |      |   | 91,582    |      |  |   | 118,085   |   |  |      | 198,732   |   |  |   | 216,148   |  
|Non-operating income / (expense), net                                                                                  |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Interest (expense), net                                                                                                |  |      | (15,828   | ) |      |   | (31,750   | )    |  |   | (35,829   | ) |  |      | (53,447   | ) |  |   | (80,213   | )
|Other financial income / (expense), net                                                                                |  |      | (7,678    | ) |      |   | 17,212    |      |  |   | 13,594    |   |  |      | (132,936  | ) |  |   | 21,864    |  
|Amortization of deferred charges                                                                                       |  |      |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   | (38,501   | )
|Other income / (expense), net                                                                                          |  |      | (262      | ) |      |   | 1,119     |      |  |   | (1,770    | ) |  |      | 410       |   |  |   | 824       |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Income before taxes, equity in net income from unconsolidated investments and noncontrolling interests in subsidiaries |  |      | 27,875    |   |      |   | 78,163    |      |  |   | 94,080    |   |  |      | 12,759    |   |  |   | 120,122   |  
|Income tax (expense)                                                                                                   |  |      | (5,346    | ) |      |   | (13,986   | )    |  |   | (15,910   | ) |  |      | (11,872   | ) |  |   | (22,905   | )
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Equity in net earnings of affiliates                                                                                   |  |      |          |   |      |   |          |      |  |   |          |   |  |      | (9,002    | ) |  |   | (13,102   | )
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net income / (loss)                                                                                                    |  | $    | 22,529    |   |      | $ | 64,177    |      |  | $ | 78,170    |   |  | ($   | 8,115     | ) |  | $ | 84,115    |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Less: Net income / (loss) attributable to noncontrolling interests in subsidiaries                                     |  |      | 2,261     |   |      |   | 8,727     |      |  |   | 1,068     |   |  |      | 3,680     |   |  |   | 2,708     |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Less: Net income / (loss) attributable to redeemable noncontrolling interests in Whitehall Group                       |  |      |          |   |      |   |          |      |  |   |          |   |  |      | 6,803     |   |  |   | 3,078     |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net income /(loss) attributable to CEDC                                                                                |  | $    | 20,268    |   |      | $ | 55,450    |      |  | $ | 77,102    |   |  | ($   | 18,598    | ) |  | $ | 78,329    |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net income / (loss) per common share,                                                                                  |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Basic                                                                                                                  |  | $    | 0.72      |   |      | $ | 1.55      |      |  | $ | 1.93      |   |  | ($   | 0.42      | ) |  | $ | 1.46      |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net income / (loss) per common share, diluted                                                                          |  | $    | 0.70      |   |      | $ | 1.53      |      |  | $ | 1.91      |   |  | ($   | 0.42      | ) |  | $ | 1.45      |  
|                                                                                                                       |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Average number of outstanding shares of common stock at year end                                                       |  |      | 28,344    |   |      |   | 35,799    |      |  |   | 39,871    |   |  |      | 44,088    |   |  |   | 53,772    |  
|Balance Sheet Data:                                                                                                    |  | 2005 |           |   | 2006 |   |           | 2007 |  |   | 2008      |   |  | 2009 |          
|Cash and cash equivalents                                                                                              |  | $    | 60,745    |   |      | $ | 159,362   |      |  | $ | 87,867    |   |  | $    | 107,601   |   |  | $ | 152,177   |  
|Restricted cash                                                                                                        |  |      |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   | 481,419   |  
|Working capital                                                                                                        |  |      | 85,950    |   |      |   | 182,268   |      |  |   | 170,913   |   |  |      | 205,712   |   |  |   | 391,877   |  
|Total assets                                                                                                           |  |      | 1,084,472 |   |      |   | 1,326,033 |      |  |   | 1,782,168 |   |  |      | 2,483,686 |   |  |   | 4,446,893 |  
|Long-term debt and capital lease obligations, less current portion                                                     |  |      | 369,039   |   |      |   | 394,564   |      |  |   | 469,958   |   |  |      | 806,362   |   |  |   | 1,312,881 |  
|Stockholders equity                                                                                                   |  |      | 374,942   |   |      |   | 520,973   |      |  |   | 815,436   |   |  |      | 956,629   |   |  |   | 1,685,162 |  



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##### Table of Contents

|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operation
|------- | ------------------------------------------------------------------------------------

The following analysis should be read in conjunction with the Consolidated Financial Statements and the notes thereto appearing elsewhere in
this report.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Regarding Forward-Looking Information.

This report contains forward-looking statements, which provide our current expectations or forecasts of future events. These
forward-looking statements may be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, intends, may,
will or should or, in each case, their negative, or other variations or comparable terminology, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking
statements include all matters that are not historical facts. They appear in a number of places throughout this report and include, without limitation:



| |  |  | information concerning possible or assumed future results of operations, trends in financial results and business plans, including those relating to
earnings growth and revenue growth, liquidity, prospects, strategies and the industry in which the Company and its affiliates operate, as well as the integration of recent acquisitions and other investments and the effect of such acquisitions and
other investments on the Company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | statements about the expected level of our costs and operating expenses, and about the expected composition of the Companys revenues;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | information about the impact of governmental regulations on the Companys businesses;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | statements about local and global credit markets, currency exchange rates and economic conditions;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | other statements about the Companys plans, objectives, expectations and intentions; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | other statements that are not historical facts.
| | - |  | -----------------------------------------------

By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution
you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, the development of the industries in which we operate, and the effects of acquisitions and
other investments on us may differ materially from those anticipated in or suggested by the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and the development
of the industry in which we operate, are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.

We urge you to read and carefully consider the items of this and other reports and documents that we have filed with or furnished to the SEC
for a more complete discussion of the factors and risks that could affect our future performance and the industry in which we operate, including the risk factors described elsewhere in this Annual Report on Form 10-K. In light of these risks,
uncertainties and assumptions, the forward-looking events described in this report may not occur as described, or at all.

You
should not unduly rely on these forward-looking statements, because they reflect our views only as of the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement to reflect circumstances
or events after the date of this report, or to reflect on the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their
entirety by the cautionary statements referred to above and contained elsewhere in this report.



29



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##### Table of Contents

The following discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and the notes thereto found elsewhere in this report.

Overview

The Company is the worlds largest vodka producer and Central and Eastern Europes largest integrated spirit beverages business
with its primary operations in Poland, Russia and Hungary. During 2009 the Company continued its investment strategy in Russia by restructuring its purchase agreement with Lion Capital in April, 2009 and subsequently buying out the remainder of
Russian Alcohol in December, 2009. As a result, the Company began to consolidate the full activities of Russian Alcohol starting from the second quarter of 2009. Additionally the Company purchased the remaining minority interests in Parliament in
Russia, thus acquiring full ownership of its vodka producing assets and brands.

In connection with the completion of these
investments the Company completed three capital raising initiatives comprised of two public equity offerings, with net proceeds of approximately $491 million, and a notes offering with net proceeds of approximately $930 million. The primary use of
the equity proceeds was to fund the remaining buyout of Parliament and to partially fund the remaining buyout of Russian Alcohol. The proceeds from the notes offering were used to fund a portion of the buyout of Russian Alcohol, and to refinance the
Companys outstanding Senior Secured Notes due in 2012, approximately $390 million as well as the debt in place in Russian Alcohol, approximately $264 million. As a result of the notes offering the Company has extended the maturities of a
significant portion of its debt to 2016 as well as settling the majority of its payment obligations to Lion Capital for the purchase of Russian Alcohol.

Significant factors affecting our consolidated results of operations

Effect of
Acquisitions of Production Subsidiaries

During 2008 and 2009, the Company continued its acquisition strategy outside of
Poland and Hungary with its investments into the production and importation of alcoholic beverages in Russia, completing a number of acquisitions and investments, as described below, all of which have had an impact on our consolidated results of
operations beginning in the periods in which we first acquired an interest in the relevant entities.

The Parliament Acquisition

On March 11, 2008, the Company and certain of its affiliates entered into a Share Sale and Purchase Agreement and
certain other agreements with White Horse Intervest Limited, a British Virgin Islands Company (White Horse), and certain of White Horses affiliates, relating to the Companys acquisition from White Horse of 85% of the share
capital of Parliament. In connection with this acquisition, the Company paid a consideration of approximately $180 million in cash and 2.2 million shares of our common stock. On September 25, 2009, we amended the Share Sale and Purchase
Agreement and entered into a Minority Acquisition Share Sale and Purchase Agreement. Under the terms of the Minority Acquisition Share Sale and Purchase Agreement, we acquired the remaining 15% of the share capital of Parliament for total cash
consideration of $70.2 million on September 25, 2009. Under the terms of the amendment, we were required to pay cash consideration of approximately $16.7 million. The Company paid $9.9 million of that amount on October 30, 2009 and paid
the remainder on December 16, 2009.

The Whitehall Acquisition

On May 23, 2008, the Company and certain of its affiliates entered into, and closed upon, a Share Sale and Purchase Agreement and
certain other agreements whereby the Company acquired shares representing 50% minus one vote of the voting power, and 75% of the economic interests in Whitehall. Whitehall is a leading importer of premium spirits and wines in Russia. The aggregate
consideration paid by the Company was $200 million, paid in cash at the closing. In addition, on October 21, 2008, the Company issued 843,524 shares of its



30



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##### Table of Contents

common stock to the seller. On February 24, 2009, the Company and the seller amended the terms of the Stock Purchase Agreement governing the Whitehall acquisition to satisfy the
Companys obligations to the seller pursuant to a share price guarantee in the original Stock Purchase Agreement. As a result of the amended agreement and the payments due thereunder, the economic interest of the Company in Whitehall increased
from 75% to 80%.

The Company has consolidated its investment in Whitehall as of May 23, 2008, on the basis that
Whitehall is a Variable Interest Entity and the Company has been assessed as being the primary beneficiary.

In June 2009, the
FASB issued ASC Topic 810, which changes how a company determines whether an entity should be consolidated. The adoption of this standard may impact the current treatment of the Whitehall Group by the Company and the Company is current
assessing this treatment and potential impact on the financial statements. See Recently Issued Accounting Pronouncements for more detailed information on this topic.

Included within Whitehall is a 50/50 joint venture with Möet Hennessy (the MHWH J.V.). This joint venture is accounted for
using the equity method and is recorded on the face of the balance sheet in investments which were initially recorded at fair value. The current term of the joint venture is until June 2013, at which point Möet Hennessy will have the option to
acquire the remaining shares of the entity.

The Russian Alcohol Acquisition

On July 9, 2008, the Company completed an investment with Lion Capital and certain of Lion Capitals affiliates and certain other
investors, pursuant to which the Company, Lion Capital and such other investors acquired all of the outstanding equity of Russian Alcohol. In connection with that investment, the Company acquired an indirect equity stake in Russian Alcohol of
approximately 42%, and Lion Capital acquired substantially all of the remainder of the equity of Russian Alcohol. The agreements governing that investment gave the Company the right to acquire, and gave Lion Capital the right to require the Company
to acquire, Lion Capitals equity stake in Russian Alcohol (the Prior Agreement). On April 24, 2009, the Company entered into new agreements with Lion Capital to replace the Prior Agreement, which would permit the Company,
through a multi-stage equity purchase, to acquire over the next five years (including 2009) all of the equity interests in Russian Alcohol held by Lion Capital.

As a result of these agreements, the Company assessed Russian Alcohol as a variable interest entity, with the Company being the primary beneficiary. Pursuant to this change, the Company began to
consolidate Russian Alcohol as of the second quarter of 2009 and recorded a non-controlling interest of 9.4%, representing equity not held by the Company or Lion Capital. From the accounting perspective, the Company treated the acquisition of
Russian Alcohol equity interests held by Lion Capital as if this acquisition had happened on April 24, 2009. As of this date CEDC recorded at fair value all future payments due under these agreements as a liability. The total present value of
deferred consideration as of April 24, 2009, amounted to $447.2 million and was determined using a 14.5% discount rate. The present value of the liability was amortized over the period of time ending on the date the last payment is made which
was initially expected to be in 2013, with recognition of a non cash interest expense every quarter in the statement of operations. The discount amortization charge for the period from April 24, 2009 to December 31, 2009 amounted to $38.5
million.

On July 29, 2009, the Company entered into an agreement with Lion Capital pursuant to which Lion/Rally Cayman 7
L.P. (Cayman 7), a Cayman Exempted Limited Partnership, of which the Company holds 100% of the economic interests and is a limited partner, acquired an additional 6% indirect equity interest in Russian Alcohol from certain minority
investors in Russian Alcohol in exchange for $30,000,000 in cash funded by the Company. After giving effect to this acquisition, the Company held approximately 58% of the equity interests in Russian Alcohol. In addition, on August 3, 2009,
pursuant to the new agreements referenced above, the Company acquired additional indirect equity interests in Russian Alcohol giving it a total ownership interest of 59.8%.



31



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##### Table of Contents

On September 15, 2009, in connection with the Russian Alcohol acquisition, the Company
entered into a Settlement Agreement with Cirey Holdings Inc. (Cirey), a private company domiciled in the British Virgin Islands and the ultimate controlling party of Russian Alcohol, pursuant to which (i) Cirey received $50,000,000,
$17,500,000 of which was funded by the Company, (ii) the Company issued to Cirey 479,499 shares of our common stock and (iii) the Company received $32,500,000 additional limited partnership interests in Cayman 7.

On November 9, 2009, the Company entered into an agreement with Lion Capital and Kylemore International Invest Corp.
(Kylemore), an indirect minority stockholder of Russian Alcohol, for the acquisition of Kylemores indirect equity interests in Russian Alcohol. On November 10, 2009, the Company issued to Kylemore 949,034 shares of our
unregistered common stock, and Kylemore transferred all of its indirect equity interests in Russian Alcohol to Lion/Rally Cayman 6 (Cayman 6), a Cayman Islands investment vehicle through which the Company and Lion Capital own our
interests in Russian Alcohol. As a result, the Company, Lion Capital and certain co-Investors indirectly owned 100% of the equity in Russian Alcohol, and its total indirect equity interest in Russian Alcohol increased to 62.25%. Pursuant to the
agreement with Kylemore, on receipt of approval from the FAS and the Antimonopoly Committee of the Ukraine for CEDCs acquisition of control over Russian Alcohol, the Company paid Kylemore $5,000,000 on January 11, 2010, and will pay
further $5,000,000 on February 1, 2011. Also pursuant to this agreement, Peter Levin, one of the original owners of Russian Alcohol, will continue to be involved in the Russian Alcohols business as a non-executive member of the Operating
Board of Russian Alcohol and as Chairman of the Board of our Topaz distillery.

On December 9, 2009 the Company
accelerated the terms set up in the Lion Option Agreement and the Co-Investor Option Agreement, each dated April 24, 2009, and completed the Lion Option and the Co-Investor Option, respectively, thereby purchasing the remaining indirect equity
interests in Cayman 6, less the sole voting share of Cayman 6, comprising the remaining equity interest in Russian Alcohol that was not owned by the Company, from affiliates of Lion Capital.

In consideration of the Co-Investor Option, the Company made cash payments of $131,800,000 and 23,650,000 to Lion Capital. In
consideration of the Lion Option, the Company (1) made cash payments of $184,347,666 and 105,839,852 to Lion Capital; (2) deposited in an escrow account the amount of $23,991,072 and 51,315,337, which was released and paid to
Lion Capital on January 11, 2010 upon receiving of antimonopoly clearances for the acquisition from the FAS and the Antimonopoly Committee of the Ukraine; and (3) paid to Lion Capital the additional amounts of (a) $2,375,354 and
5,080,727 on the Escrow Release Date and (b) undertook to pay $10,689,092 and 22,863,269 on June 1, 2010, or at the election of Lion Capital, on any earlier date between April 20, 2010 and June 1, 2010. The Company
used a portion of the proceeds from the offering of its common stock, completed November 18, 2009, and the offering of its Senior Secured Notes due 2016, completed December 2, 2009, in order to fund such cash payments.

On January 20, 2010, after the receipt of antimonopoly clearances for the acquisition from the FAS and the Antimonopoly Committee of
the Ukraine, the Company purchased the sole voting share of Cayman 6 from an affiliate of Lion Capital and thereby acquired control of Russian Alcohol. The Company began consolidating all profit and loss results for Russian Alcohol beginning
April 1, 2009.

During 2009 and continuing this year, we have been active in integrating the production companies into
our Group. The acquisition and integration of these businesses into our operations have had a significant effect on our results of operations. As discussed below, these acquisitions have impacted our net sales, cost of goods sold, operating profit
and equity earnings from affiliates.

Effect of Debt Refinancing

In December 2009, the Company issued new euro and U.S. dollar Senior Secured Notes due in 2016 with net proceeds of approximately $930
million. Of these proceeds approximately $380.4 million was used to redeem our previously outstanding Senior Secured Notes due in 2012. Notice of redemption was given in December, 2009 and the proceeds were funded to the trustee, however the
actual repayment of the notes did not take place



32



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##### Table of Contents

until January, 2010. Therefore, as at December 31, 2009, the full amounts of the Senior Secured Notes due 2012 remained as a short term liability and the cash funded to the trustee was on
the balance as restricted cash. Additionally as a result of this the Company recognized interest expense in December, 2009 for both the new and old note issuances.

In the process of refinancing the debt of Russian Alcohol through the proceeds of the 2016 Notes, the Company recognized a one-time charge of approximately $13.9 million related to the write-off of
capitalized financing cost and net charge of $3 million related to the closure of hedges associated with the prior financing. These charges are reflected in Other Financial Expenses.

As these notes were funded in U.S. dollars and euros and lent to Polish zloty and Russian ruble reporting entities, the Company is
exposed to exchange rate movements as described in the following section.

Effect of Exchange Rate and Interest Rate Fluctuations

Substantially all of Companys operating cash flows and assets are denominated in Polish zloty, Russian ruble and
Hungarian forint. This means that the Company is exposed to translation movements both on its balance sheet and statement of operations. The impact on working capital items is demonstrated on the cash flow statement as the movement in exchange on
cash and cash equivalents. The impact on the statement of operations is by the movement of the average exchange rate used to restate the statement of operations from Polish zloty, Russian ruble and Hungarian forint to U.S. dollars. The amounts shown
as exchange rate gains or losses on the face of the statement of operations relate only to realized gains or losses on transactions that are not denominated in Polish zloty, Russian ruble or Hungarian forint.

Because the Companys reporting currency is the U.S. dollar, the translation effects of fluctuations in the exchange rate of our
functional currencies have impacted the Companys financial condition and results of operations and have affected the comparability of our results between financial periods.

The Company also has borrowings including its Senior Secured Notes due 2012, Convertible Notes due 2013 and Senior Secured Notes 2016 that
are denominated in U.S. dollars and euros, which have been lent to its operations where the functional currency is the Polish zloty and Russian ruble. The effect of having debt denominated in currencies other than the Companys functional
currencies is to increase or decrease the value of the Companys liabilities on that debt in terms of the Companys functional currencies when those functional currencies depreciate or appreciate in value, respectively. As a result of
this, the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the
results of the Companys operations.



|                  |  |                                            |  |                                                
|----------------- |  | ------------------------------------------ |  | -----------------------------------------------
|Exchange Rate     |  | Value of notional amount                   |  | Pre-tax impact of a 1%movement in exchange rate
|USD-Polish zloty  |  | $426 million                               |  | $4.3 million gain/loss                         
|USD-Russian ruble |  | $264 million                               |  | $2.6 million gain/loss                         
|EUR-Polish zloty  |  | 625 million or approximately $901 million |  | $9 million gain/loss                           

The table
above includes 245 million for the Senior Secured Notes that were redeemed on January 4, 2010, thus there will not be any foreign exchange impact from them after this date.



33



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Twelve months ended December 31, 2009 compared to twelve months ended December 31, 2008

A summary of the Companys operating performance (expressed in thousands except per share amounts) is presented below.



|                                                                                                                       |      |                         |           |      |  |    |           |  
|---------------------------------------------------------------------------------------------------------------------- | ---- | ----------------------- | --------- | ---- |  | -- | --------- | -
|                                                                                                                       |      | Year ended December 31, |          
|                                                                                                                       | 2009 |                         |           | 2008 | 
|Sales                                                                                                                  |      | $                       | 2,197,542 |      |  | $  | 2,136,570 |  
|Excise taxes                                                                                                           |      |                         | (690,403  | )    |  |    | (489,566  | )
|Net Sales                                                                                                              |      |                         | 1,507,139 |      |  |    | 1,647,004 |  
|Cost of goods sold                                                                                                     |      |                         | 1,012,543 |      |  |    | 1,224,899 |  
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Gross Profit                                                                                                           |      |                         | 494,596   |      |  |    | 422,105   |  
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Operating expenses                                                                                                     |      |                         | 278,448   |      |  |    | 223,373   |  
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Operating Income                                                                                                       |      |                         | 216,148   |      |  |    | 198,732   |  
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Non operating income / (expense), net                                                                                  |      |                         |           |      |  |    |           |  
|Interest (expense), net                                                                                                |      |                         | (80,213   | )    |  |    | (53,447   | )
|Other financial income / (expense), net                                                                                |      |                         | 21,864    |      |  |    | (132,936  | )
|Amortization of deferred charges                                                                                       |      |                         | (38,501   | )    |  |    |          |  
|Other non operating income, net                                                                                        |      |                         | 824       |      |  |    | 410       |  
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Income before taxes, equity in net income from unconsolidated investments and noncontrolling interests in subsidiaries |      |                         | 120,122   |      |  |    | 12,759    |  
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Income tax expense                                                                                                     |      |                         | (22,905   | )    |  |    | (11,872   | )
|Equity in net earnings of affiliates                                                                                   |      |                         | (13,102   | )    |  |    | (9,002    | )
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Net income / (loss)                                                                                                    |      | $                       | 84,115    |      |  | ($ | 8,115     | )
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Less: Net income attributable to noncontrolling interests in subsidiaries                                              |      |                         | 2,708     |      |  |    | 3,680     |  
|Less: Net income attributable to redeemable noncontrolling interests in Whitehall Group                                |      |                         | 3,078     |      |  |    | 6,803     |  
|Net income /(loss) attributable to CEDC                                                                                |      | $                       | 78,329    |      |  | ($ | 18,598    | )
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Net income / (loss) per share of common stock, basic                                                                   |      | $                       | 1.46      |      |  | ($ | 0.42      | )
|                                                                                                                       |      |                         |           |      |  |    |           |  
|Net income / (loss) per share of common stock, diluted                                                                 |      | $                       | 1.45      |      |  | ($ | 0.42      | )
|                                                                                                                       |      |                         |           |      |  |    |           |  

Net Sales

Net sales represents total sales net of all customer rebates, excise tax on production and imports, and value added tax. Total net sales decreased by approximately 8.5%, or $139.9 million, from $1,647.0
million for the twelve months ended December 31, 2008 to $1,507.1 million for the twelve months ended December 31, 2009. This decrease in sales is due to the following factors:



|                                                    |  |   |           |  
|--------------------------------------------------- |  | - | --------- | -
|Net Sales for twelve months ended December 31, 2008 |  | $ | 1,647,004 |  
|Increase from acquisitions                          |  |   | 357,531   |  
|Sales reduction in Polish distribution              |  |   | (153,991  | )
|Other business sales change                         |  |   | 5,015     |  
|Impact of foreign exchange rates                    |  |   | (348,420  | )
|                                                    |  |   |           |  
|Net sales for twelve months ended December 31, 2009 |  | $ | 1,507,139 |  

Factors impacting our
business sales for the twelve months ending December 31, 2009 include the decline in the Polish distribution business which was impacted by our program of reducing our wholesaling of lower margin SKUs, primarily beer, the shifting of consumers
purchasing to larger retail outlets and lower depletions



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during the first quarter of 2009 as a result of higher inventory levels in the market in Poland at the beginning of the quarter. These higher inventory levels in the market at the beginning of
the year, which impacted primarily the first quarter of 2009, were driven by the nine percent excise tax increase in Poland on December 31, 2008 which prompted customers to purchase additional product prior to December 31, 2008 at the
lower excise tax.

Based upon average exchange rates for the twelve months ended December 31, 2009 and December 31,
2008, our functional currencies meaning primarily Polish zloty and Russian ruble depreciated against the U.S. dollar, by approximately 30% and 28% respectively. This resulted in a decrease of $348.4 million of sales in U.S. dollar terms.
These decreases were partially offset by the consolidation of net sales of Russian Alcohol.

Our business split by segment,
which represents our primary geographic locations of operations, Poland, Russia and Hungary, is shown below:



|                |  |                                                      |           |      |   |          
|--------------- |  | ---------------------------------------------------- | --------- | ---- | - | ---------
|                |  | Segment Net Revenues Twelvemonths ended December 31,
|                |  | 2009                                                 |           | 2008
|Segment         |  |                                                      |          
|Poland          |  | $                                                    | 892,121   |      | $ | 1,305,629
|Russia          |  |                                                      | 578,433   |      |   | 297,892  
|Hungary         |  |                                                      | 36,585    |      |   | 43,483   
|                |  |                                                      |           |      |   |          
|Total Net Sales |  | $                                                    | 1,507,139 |      | $ | 1,647,004

Gross Profit

Total gross profit increased by approximately 17.2%, or $72.5 million, to $494.6 million for the twelve months ended December 31,
2009, from $422.1 million for the twelve months ended December 31, 2008, reflecting the increase in gross profit margins percentage in the twelve months ended December 31, 2009. Gross margin increased from 25.6% of net sales for the twelve
months ended December 31, 2008 to 32.8% of net sales for the twelve months ended December 31, 2009. The primary factor resulting in the improved margin was the full year inclusion of the newly acquired businesses in Russia, Parliament and
Whitehall, as well as the first time consolidation of the results of Russian Alcohol, which, as producers and importers, operate on a higher gross profit margin than the Polish business, which is significantly impacted by lower margin distribution
operations.

Operating Expenses

Operating expenses as a percent of net sales increased from 13.6% for the twelve months ended December 31, 2008 to 18.5% for the twelve months ended December 31, 2009. Total operating expenses
increased by approximately 24.6%, or $55.0 million, from $223.4 million for the twelve months ended December 31, 2008 to $278.4 million for the twelve months ended December 31, 2009. Approximately $114.6 million of this increase resulted
from the effects of the acquisition of Russian Alcohol in July 2008. Approximately $19.9 million resulted from the lower operating costs in our existing business, which include certain one off transaction related gains and losses described below.
The depreciation of the functional currencies against the U.S. dollar resulted in a $49.9 million reduction in our operating expenses for the twelve months ended December 31, 2009 as compared to the same period in the prior year.



|                                                             |  |   |         |  
|------------------------------------------------------------ |  | - | ------- | -
|Operating expenses for twelve months ended December 31, 2008 |  | $ | 223,373 |  
|Increase from acquisitions                                   |  |   | 124,908 |  
|Decrease from existing business growth                       |  |   | (19,909 | )
|Impact of foreign exchange rates                             |  |   | (49,924 | )
|                                                             |  |   |         |  
|Operating expenses for twelve months ended December 31, 2009 |  | $ | 278,448 |  



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The table below sets forth the items of operating expenses.



|                              |  |                                 |         |      |   |        
|----------------------------- |  | ------------------------------- | ------- | ---- | - | -------
|                              |  | Twelve Months EndedDecember 31,
|                              |  | 2009                            |         | 2008
|                              |  | ($ in thousands)               
|S,G&A                         |  | $                               | 221,560 |      | $ | 168,584
|Marketing                     |  |                                 | 46,534  |      |   | 43,954 
|Depreciation and amortization |  |                                 | 10,354  |      |   | 10,835 
|                              |  |                                 |         |      |   |        
|Total operating expense       |  | $                               | 278,448 |      | $ | 223,373

S,G&A increased
by approximately 31.4%, or $53.0 million, from $168.6 million for the twelve months ended December 31, 2008 to $221.6 million for the twelve months ended December 31, 2009. Approximately $100.0 million of this increase resulted primarily
from the consolidation of the results of Russian Alcohol and the remainder of the increase resulted primarily from the growth of the business, which increases were offset by the depreciation of the Polish zloty against the U.S. dollar.

Included in S,G&A are certain one off gains and losses including, a one-time gain in the twelve month period ended December 31,
2009, amounting to $225.6 million in operating income based on the re-measurement of previously held equity interests in Russian Alcohol to fair value, which was partially offset by certain one-ff charges including a $162.0 one off charge related to
non amortized discount of deferred consideration resulting from accelerated buyout of Lion Capitals interest in Russian Alcohol, a $15.0 million post closing cash settlement made to the original sellers for the Russia Alcohol Group, an
impairment charge of $20.3 million related to the Companys trademarks , as well as legal and advisory fees related to acquisitions.

Depreciation and amortization decreased by approximately 3.7%, or $ 0.4 million, from $10.8 million for the twelve months ended December 31, 2008 to $10.4 million for the twelve months ended
December 31, 2009 due to the impact of foreign exchange translation.

Operating Income

Total operating income increased by approximately 8.8%, or $17.4 million, from $198.7 million for the twelve months ended December 31,
2008 to $216.1 million for the twelve months ended December 31, 2009. This increase resulted primarily from the consolidation of the results of Russian Alcohol, from which the Company recognized a one-time gain in the twelve month period ended
December 31, 2009, amounting to $225.6 million in operating income based on the re-measurement of previously held equity interests in Russian Alcohol to fair value, which was partially offset by $162.0 of one off charge related to non amortized
discount of deferred consideration resulting from accelerated buyout of Lions interest in Russian Alcohol, a $15 million post closing cash settlement made to the original sellers for Russian Alcohol and an impairment charge of $20.3 million
related to the Companys trademarks.



|                           |  |                                                 |         |   |      |   |         |  
|-------------------------- |  | ----------------------------------------------- | ------- | - | ---- | - | ------- | -
|                           |  | Operating ProfitTwelve months
endedDecember 31, |        
|                           |  | 2009                                            |         |   | 2008 |  
|Segment                    |  |                                                 |         |  
|Poland                     |  | $                                               | 107,987 |   |      | $ | 124,920 |  
|Russia                     |  |                                                 | 110,363 |   |      |   | 73,374  |  
|Hungary                    |  |                                                 | 6,149   |   |      |   | 7,641   |  
|Corporate Overhead         |  |                                                 |         |   |      |   |         |  
|General corporate overhead |  |                                                 | (4,570  | ) |      |   | (3,353  | )
|Option Expense             |  |                                                 | (3,781  | ) |      |   | (3,850  | )
|                           |  |                                                 |         |   |      |   |         |  
|Total Operating Profit     |  | $                                               | 216,148 |   |      | $ | 198,732 |  



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Operating profit in Poland as a percent of net sales was 12.1% for the twelve months ended
December 31, 2009 as comparing to 9.6% in the same period in 2008. However this includes certain one off transaction related gains and losses as described above related to the acquisition of Russian Alcohol. These items impacted the Polish
Segment as a Polish subsidiary was the parent company for the Russian Alcohol acquisition. Excluding the impact of these items the operating profit in Poland as a percent of net sales was 8.9% for the twelve months ended December 31, 2009, as
compared to 9.6% in 2008. This reduction is primarily driven by lower margins in our distribution business as well as having lower distribution sales going through the fixed assets cost base.

The operating profit margin as a percent of net sales in Russia declined from 24.6% for the twelve months ended December 31, 2008 to
19.1% for the twelve months ended December 31, 2009, reflecting the impact of the consolidation of Russian Alcohol. Russian Alcohol operates primarily in the mainstream segment as compared to Parliament which is a sub-premium vodka and has
sales of ready to drink alcoholic beverages (long drinks) which operate on a lower margin than vodkas. Additionally the import products from Whitehall were impacted by higher purchase prices due to the impact of the devaluation of the Russian
ruble.

In Hungary there was a decline in operating profit as a percent of net sales from 17.6% for the twelve months ended
December 31, 2008 to 16.8% for the twelve months ended December 31, 2009. This decline was due primarily to higher local currency import costs in the first quarter of 2009 as the Hungarian business sales constitute only imported spirits
which have prices denominated primarily in euro.

Non Operating Income and Expenses

Total interest expense increased by approximately 50.2%, or $26.8 million, from $53.4 million for the twelve months ended December 31,
2008 to $80.2 million for the twelve months ended December 31, 2009. This increase resulted from the consolidation of the financial results of Russian Alcohol commencing in the second quarter of 2009 and additional borrowings to finance the
investment in Russian Alcohol in July 2008.

The Company recognized $21.9 million of other financial income in the twelve
months ended December 31, 2009, as compared to $132.9 million of losses for the twelve months ended December 31, 2008. This change is primarily related to the impact of movements in exchange rates on our USD and EUR denominated acquisition
financing, as well as from the bank charges related to early repayment of debt by Russian Alcohol that was subsequently refinanced from Senior Secured Notes due 2016 proceedings as costs of closing of hedges associated to this bank debt. The total
impact of these transactions amounted to $16.9 million.

The present value of the deferred consideration related to
acquisition in Russian Alcohol was amortized over the period of time up to December 8, 2009 when the Company accelerated the terms set up on the Option Agreement dated April 24, 2009 and purchased the remaining equity interest in Russian
Alcohol that was not owned by the Company. Up to this date the Company was recognizing a non cash interest expense every quarter in the statement of operations. The discount amortization charge for the twelve month period ended December 31,
2009 amounted to $38.5 million.

Other non operating items for the twelve months ended December 31, 2009 show net income
of $0.8 million in comparison to gains of $0.4 million in the twelve months ended December 31, 2008.

Income Tax

Our effective tax rate for the twelve months ending December 31, 2009 was 19.1%, which is mainly driven by the blended statutory tax
rates rate of 19% in Poland and 20% in Russia.

Non-controlling Interests and Equity in Net Earnings

Minority interest for the twelve months ending December 31, 2009 represents non-controlling interests held by third parties, consisting
primarily of a 20% minority interest in Whitehall, a 15% interest in Parliament prior



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to September 25, 2009 (when we acquired that minority stake) and approximately $2.5 million of minority interest related to certain minority shareholders of Russian Alcohol, whose full stake
was purchased by the Company in December, 2009.

Equity in net earnings for the twelve months ending December 31, 2009
include CEDCs proportional share of net loss from its investments accounted for under the equity method. This includes $17.7 million of losses from the investment in Russian Alcohol for the first quarter 2009, primarily due to the devaluation
of Russian ruble against U.S. dollar, while this investment was accounted for using the equity method, which was partially offset by $4.6 million of gain from the investment in the MHWH J.V. for the twelve months ended December 31, 2009.

Twelve months ended December 31, 2008 compared to twelve months ended December 31, 2007

A summary of the Companys operating performance (expressed in thousands except per share amounts) is presented below.



|                                                                                                                       |  |                                 |           |   |      |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | --------- | - | ---- | - | --------- | -
|                                                                                                                       |  | Twelve months endedDecember 31, |          
|                                                                                                                       |  | 2008                            |           |   | 2007 |  
|Sales                                                                                                                  |  | $                               | 2,136,570 |   |      | $ | 1,483,344 |  
|Excise taxes                                                                                                           |  |                                 | (489,566  | ) |      |   | (293,522  | )
|Net Sales                                                                                                              |  |                                 | 1,647,004 |   |      |   | 1,189,822 |  
|Cost of goods sold                                                                                                     |  |                                 | 1,224,899 |   |      |   | 941,060   |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|                                                                                                                       |  |                                
|Gross Profit                                                                                                           |  |                                 | 422,105   |   |      |   | 248,762   |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|Operating expenses                                                                                                     |  |                                 | 223,373   |   |      |   | 130,677   |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|Operating Income                                                                                                       |  |                                 | 198,732   |   |      |   | 118,085   |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|                                                                                                                       |  |                                
|Non operating income / (expense), net                                                                                  |  |                                 |           |   |      |   |           |  
|Interest (expense), net                                                                                                |  |                                 | (53,447   | ) |      |   | (35,829   | )
|Other financial (expense), net                                                                                         |  |                                 | (132,936  | ) |      |   | 13,594    |  
|Other non operating income / (expense), net                                                                            |  |                                 | 410       |   |      |   | (1,770    | )
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|Income before taxes, equity in net income from unconsolidated investments and noncontrolling interests in subsidiaries |  |                                 | 12,759    |   |      |   | 94,080    |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|Income tax (expense)                                                                                                   |  |                                 | (11,872   | ) |      |   | (15,910   | )
|Equity in net earnings of affiliates                                                                                   |  |                                 | (9,002    | ) |      |   |          |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|Net income / (loss)                                                                                                    |  | ($                              | 8,115     | ) |      | $ | 78,170    |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|Less: Net income / (loss) attributable to noncontrolling interests in subsidiaries                                     |  |                                 | 3,680     |   |      |   | 1,068     |  
|Less: Net income / (loss) attributable to redeemable noncontrolling interests in Whitehall Group                       |  |                                 | 6,803     |   |      |   |          |  
|                                                                                                                       |  |                                
|Net income /(loss) attributable to CEDC                                                                                |  | ($                              | 18,598    | ) |      | $ | 77,102    |  
|                                                                                                                       |  |                                
|Net income / (loss) per share of common stock, basic                                                                   |  | ($                              | 0.42      | ) |      | $ | 1.93      |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  
|Net income / (loss) per share of common stock, diluted                                                                 |  | ($                              | 0.42      | ) |      | $ | 1.91      |  
|                                                                                                                       |  |                                 |           |   |      |   |           |  



38



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Net Sales

Net sales represents total sales net of all customer rebates, excise tax on production and value added tax. Total net sales increased by approximately 38.4%, or $457.2 million, from $1,189.8 million for
the twelve months ended December 31, 2007 to $1,647.0 million for the twelve months ended December 31, 2008. This increase in sales is due to the following factors:



|                                                    |  |   |           |  
|--------------------------------------------------- |  | - | --------- | -
|Net Sales for twelve months ended December 31, 2007 |  | $ | 1,189,822 |  
|Increase from acquisitions                          |  |   | 346,826   |  
|Existing business sales growth                      |  |   | 43,321    |  
|Excise tax reduction                                |  |   | (97,089   | )
|Impact of foreign exchange rates                    |  |   | 164,124   |  
|                                                    |  |   |           |  
|Net sales for twelve months ended December 31, 2008 |  | $ | 1,647,004 |  

Factors impacting our
existing business sales for the twelve months ending December 31, 2008 include the growth of our key vodka brands, with Bols Vodka, our flagship premium vodka, growing by 12% and Soplica by 14% in volume terms as compared to the
twelve months ending December 31, 2007. Also impacting our sales growth has been our focus on reducing lower margin SKUs, primarily beer, and reducing as well the related sales and distribution costs for these products. We plan to
continue the streamlining process going into 2009.

As of January 2008, sales of products which we produce at Polmos Bialystok
and Bols to certain key accounts were moved from our distribution companies to the producer, Polmos Bialystok and Bols in order to reduce distribution costs. When a sale is reported directly from a producer, excise tax is eliminated from net sales
and when a sale is made from a distribution company the sales are recorded gross with excise tax. Therefore the movement of the sales contracts from a distributor to the producer reduces the amount of net sales reported through the elimination of
excise tax and also increases gross profit as a percent of sales. The impact of this sales reduction for the twelve months ended December 31, 2008 was $97.1 million.

Based upon average exchange rates for the twelve months ended December 31, 2008 and 2007, the Polish zloty appreciated by approximately 13%. This resulted in an increase of $164.1 million of sales in
U.S. dollar terms. However, as discussed above, the Polish zloty and Russian ruble recently have depreciated sharply against the U.S. dollar. As the Polish zloty and Russian ruble depreciate, sales will decrease in U.S. dollar terms.

As a result of our recent acquisitions in Russia, we have moved to a segmental approach to our business split by our primary
geographic locations of operations, Poland, Russia and Hungary. Included in the sales growth from acquisitions of $346.8 million was $297.9 million of sales related to the newly acquired Russian businesses of Parliament and Whitehall, which is
reflected in the Segment entitled Russia in the below table.



|                |  |                                                     |           |      |   |          
|--------------- |  | --------------------------------------------------- | --------- | ---- | - | ---------
|                |  | Segment Net RevenuesTwelve months
endedDecember 31,
|                |  | 2008                                                |           | 2007
|Segment         |  |                                                     |           |      |   |          
|Poland          |  | $                                                   | 1,305,629 |      | $ | 1,152,601
|Russia          |  | $                                                   | 297,892   |      |   |         
|Hungary         |  | $                                                   | 43,483    |      | $ | 37,221   
|                |  |                                                     |           |      |   |          
|Total Net Sales |  | $                                                   | 1,647,004 |      | $ | 1,189,822

Gross Profit

Total gross profit increased by approximately $173.3 million, to $422.1 million for the twelve months ended December 31, 2008, from
$248.8 million for the twelve months ended December 31, 2007, reflecting sales growth for the factors noted above in the twelve months ended December 31, 2008. Gross margin increased from



39



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20.9% of net sales for the twelve months ended December 31, 2007 to 25.6% of net sales for the twelve months ended December 31, 2008. Factors impacting our margins include improved
sales mix, lower spirit costs, the impact of excise tax as described above as well as the consolidation of Parliament and Whitehall from the first quarter and second quarter of 2008 respectively. Parliament and Whitehall which, as producer and
importer, operate on a higher gross profit margin than the Polish business, which is more heavily impacted by lower margin distribution operations. Margins were further improved from lower spirit pricing for the twelve months ended December 31,
2008 as well as the growth of the exclusive import brands.

Operating Expenses

Operating expenses consist of selling, general and administrative, or S,G&A expenses, advertising expenses, non-production
depreciation and amortization, and provision for bad debt. Total operating expenses increased by approximately 70.9%, or $92.7 million, from $130.7 million for the twelve months ended December 31, 2007 to $223.4 million for the twelve months
ended December 31, 2008. Approximately $31.4 million of this increase resulted from the effects of the acquisition of Parliament in March 2008, approximately $24.9 million of this increase resulted from the effects of the acquisition of
Whitehall, approximately $5.5 million of this increase resulted from the effects of the acquisition of PHS completed in September 2007 and the remainder of the increase resulted primarily from the growth of the business and the impact of foreign
exchange expenses as detailed below.



|                                                             |  |   |        
|------------------------------------------------------------ |  | - | -------
|Operating expenses for twelve months ended December 31, 2007 |  | $ | 130,677
|Increase from acquisitions                                   |  |   | 61,797 
|Increase from existing business growth                       |  |   | 10,322 
|Impact of foreign exchange rates                             |  |   | 20,577 
|                                                             |  |   |        
|Operating expenses for twelve months ended December 31, 2008 |  | $ | 223,373

The table below
sets forth the items of operating expenses.



|                              |  |                                 |         |      |   |        
|----------------------------- |  | ------------------------------- | ------- | ---- | - | -------
|                              |  | Twelve Months EndedDecember 31,
|                              |  | 2008                            |         | 2007
|                              |  | ($ in thousands)               
|S,G&A                         |  | $                               | 168,584 |      | $ | 106,401
|Marketing                     |  |                                 | 43,954  |      |   | 16,937 
|Depreciation and amortization |  |                                 | 10,835  |      |   | 7,339  
|                              |  |                                 |         |      |   |        
|Total operating expense       |  | $                               | 223,373 |      | $ | 130,677

S,G&A increased
by approximately 58.5%, or $62.2 million, from $106.4 million for the twelve months ended December 31, 2007 to $168.6 million for the twelve months ended December 31, 2008. Approximately $47.1 million of this increase resulted primarily
from the effects of the acquisitions discussed above and the remainder of the increase resulted primarily from the growth of the business and the appreciation of the Polish zloty against the U.S. dollar. However, as discussed above, the Polish zloty
and Russian ruble recently have depreciated sharply against the U.S. dollar. As the Polish zloty and Russian ruble depreciate, S,G&A will decrease in U.S. dollar terms. As a percent of sales, S,G&A has increased from 8.9% of net sales
for the twelve months ended December 31, 2007 to 10.2% of net sales for the twelve months ended December 31, 2008.

Depreciation and amortization increased by approximately 47.9%, or $ 3.5 million, from $7.3 million for the twelve months ended December 31, 2007 to $10.8 million for the twelve months ended December 31, 2008. This increase
resulted primarily from our existing business growth and the acquisitions of Parliament and Whitehall.

Operating Income

Total operating income increased by approximately 68.2%, or $80.6 million, from $118.1 million for the twelve months ended December 31,
2007 to $198.7 million for the twelve months ended December 31, 2008.



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Operating income as a percent of sales increased from 9.9% for the twelve months ended December 31, 2007 to 12.1% for the twelve months ended December 31, 2008. This increase resulted
primarily from the factors described under Net Sales above. The table below summarizes the segmental split of operating profit.



|                           |  |                                                 |         |   |      |   |         |  
|-------------------------- |  | ----------------------------------------------- | ------- | - | ---- | - | ------- | -
|                           |  | Operating ProfitTwelve months
endedDecember 31, |        
|                           |  | 2008                                            |         |   | 2007 |  
|Segment                    |  |                                                 |         |   |      |   |         |  
|Poland                     |  | $                                               | 124,920 |   |      | $ | 116,862 |  
|Russia                     |  |                                                 | 73,374  |   |      |   |        |  
|Hungary                    |  |                                                 | 7,641   |   |      |   | 7,491   |  
|Corporate Overhead         |  |                                                 |         |   |      |   |         |  
|General corporate overhead |  |                                                 | (3,353  | ) |      |   | (4,398  | )
|Option Expense             |  |                                                 | (3,850  | ) |      |   | (1,870  | )
|                           |  |                                                 |         |   |      |   |         |  
|Total Operating Profit     |  | $                                               | 198,732 |   |      | $ | 118,085 |  

Income Tax

Our effective tax rate for the twelve months ending December 31, 2008 was 93.0%, which was driven by a combination of the blended
statutory tax rates in the tax jurisdictions in which we operate, as well as a true up of our deferred tax asset. The Company has taken an additional non-cash provisions for tax loss carry forwards in the Carey Agri subsidiary. Due to the level of
foreign exchange losses incurred in 2008 as described above, management has determined that a portion of prior period tax losses will not be utilized in the future. As of December 31, 2008, the Company has provided for approximately $7 million,
or 50%, of the available tax loss carry forwards in its Carey Agri subsidiary. Effective January 1, 2009, the statutory tax rate in Russia has been reduced from 24% to 20%.

Non-controlling Interests and Equity in Net Earnings

Non-controlling
interest for the twelve months ending December 31, 2008 relates primarily to minority stakes of 25% in Whitehall Group and 15% in Parliament.

Equity in net earnings for the twelve months ending December 31, 2008 include CEDCs proportional share of net income from its investments accounted for under the equity method. This includes
$8.5 million of income from the investment in the MHWH J.V. and $17.5 million of losses from the investment in Russian Alcohol. Included in the results of Russian Alcohol were non cash foreign exchange losses related to the revaluation of debt
instruments denominated in U.S. dollars.

Non Operating Income and Expenses

Total interest expense increased by approximately 49.2%, or $17.6 million, from $35.8 million for the twelve months ended December 31,
2007 to $53.4 million for the twelve months ended December 31, 2008. This increase resulted from a combination of additional borrowings to finance the purchase of Russian Alcohol shares completed in July 2008, the issuance of our Convertible
Senior Notes to finance the Parliament acquisition and the Whitehall acquisition and increased interest rates in 2008 as compared to 2007.

The Company recognized $131.0 million of unrealized foreign exchange rate loss in the twelve months ended December 31, 2008, primarily related to the impact of movements in exchange rates on our
Senior Secured and Senior Convertible Notes, as these borrowings have been lent down to entities that have the Polish zloty as the functional currency, as compared to $23.9 million of gains for the twelve months ended December 31, 2007.



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Statement of Liquidity and Capital Resources

During the periods under review, the Companys primary sources of liquidity were cash flows generated from operations, credit
facilities, equity offerings, the Convertible Senior Notes offering, the 2009 Senior Secured Notes offering and proceeds from options exercised. The Companys primary uses of cash were to fund its working capital requirements, service
indebtedness, finance capital expenditures and fund acquisitions. The following table sets forth selected information concerning the Companys consolidated cash flow during the periods indicated.



|                                       |  |                                     |   |  |                                     |   |  |                                     |  
|-------------------------------------- |  | ----------------------------------- | - |  | ----------------------------------- | - |  | ----------------------------------- | -
|                                       |  | Twelve monthsendedDecember 31, 2009 |   |  | Twelve monthsendedDecember 31, 2008 |   |  | Twelve monthsendedDecember 31, 2007 |  
|                                       |  | ($ in thousands)                    |  
|Cash flow from operating activities    |  | 92,961                              |   |  | 72,196                              |   |  | 23,084                              |  
|Cash flow used in investing activities |  | (1,069,745                          | ) |  | (667,928                            | ) |  | (159,122                            | )
|Cash flow from financing activities    |  | 991,417                             |   |  | 646,210                             |   |  | 56,923                              |  

Fiscal year 2009
cash flow

Net cash flow from operating activities

Net cash flow from operating activities represents net cash flow from operations and interest. Net cash provided by operating activities for the twelve months ended December 31, 2009 was $93.0
million as compared to $72.2 million for the twelve months ended December 31, 2008. Working capital movements contributed $11.9 million of cash inflows for the twelve months ended December 31, 2009 as compared to $64.0 million of cash
outflow for the twelve months ended December 31, 2008. As the Company experienced lower organic growth rates in 2009 as compared to 2008, due to the global economic crisis, the business was able to reduce working capital requirements thus
improving cash flows from working capital movements.

Net cash flow used in investing activities

Net cash flows used in investing activities represent net cash used to complete our investments in entities that were not fully owned,
acquire fixed assets, deposit the cash required to fund our 2012 Senior Secured Notes redemption, and pay the substantial majority of deferred payment for Russian Alcohol. For the twelve months ended December 31, 2009, $573.5 million was used
to complete the remaining purchase in Parliament and Russian Alcohol. Of this approximately $93.4 million was used to fund the remaining minority buy out of Parliament Group and $455.6 million was paid for the remaining interest of Russian Alcohol,
with $110 million deferred until final anti-trust approval was obtained in January 2010 and $45 million, payable in cash or shares, deferred until April, 2010 at the earliest. Of the $110.5 million, $101.0 million was funded into escrow and is shown
in the cash outflow for changes in restricted cash. The remaining cash outflow in restricted cash of $380.5 million related to depositing with the trustee the amounts necessary to fund the early redemption of our 2012 Senior Secured Notes, which
took place in January 2010.

Net cash flow from financing activities

Net cash flow from financing activities primarily represents cash inflows from borrowings under credit facilities, and offerings of debt and
equity issuances, as well as cash used for servicing indebtedness. Net cash provided by financing activities for the twelve months ending December 31, 2009 was $991.4 million as compared to $646.2 million for the twelve months ending
December 31, 2008. The primary sources of cash flow from financing activities were two public equity offerings completed in July and November 2009, raising net proceeds of $491.0 million as well as the issuance of new Senior Secured Notes due
2016 raising net proceeds of $929.6 million. Offsetting these cash inflows was the repayment of debt, primarily the debt of Russian Alcohol of $35.0 million and $251.0 million for short and long term portions of this debt respectively. Additional
amounts include the payment of pre-acquisition tax penalties of Russian Alcohol, which is to be reimbursed by the sellers and has been netted off with loans from the sellers.



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Fiscal year 2008 cash flow

Net cash flow from operating activities

Net cash flow from operating
activities represents net cash from operations and interest. Net cash provided by operating activities for the twelve months ended December 31, 2008 was $72.2 million as compared to $23.1 million for the twelve months ended December 31,
2007. The primary drivers for the change were overall growth in the business and improved working capital management. Working capital movements utilized $64.0 million of cash outflows for the twelve months ended December 31, 2008 as compared to
$72.1 million of cash outflows for the twelve months ended December 31, 2007. Also included in working capital movements was a significant utilization of cash flow from the Parliament entities acquired in Russia which were newly formed legal
entities with no receivables, inventory and accounts payable balances as of acquisition date. Therefore approximately $27 million was funded into the business during the 12 months ending December 31, 2008 in order to build up a normalized
working capital base. Adding back the funding provided to Parliament of $27 million, our adjusted cash flow from operations would have been $99.2 million. Additionally the company acquired 75% of the economic interest in the Whitehall Group in May
2008. Furthermore the first quarter of the year traditionally is the highest cash flow generation period and the last quarter traditionally is the highest cash utilization period. Therefore, in 2008 the Company experienced the higher cash
utilization in the fourth quarter in connection with its Russian acquisitions, but not the higher cash generation in the first quarter.

Net cash flow used in investing activities

Net cash flows used in investing activities represent net cash used
to acquire subsidiaries and fixed assets as well as proceeds from sales of fixed assets. Net cash used in investing activities for the twelve months ended December 31, 2008 was $667.9 million as compared to $159.1 million for the twelve months
ended December 31, 2007. The primary cash outflows from investing activities for the twelve months ended December 31, 2008 were the cash consideration and expenses related to the Parliament, Whitehall and Russian Alcohol acquisitions and
the acquisition of $103.5 million in subordinated exchangeable notes in connection with the investment in Russian Alcohol.

Net cash flow
from financing activities

Net cash flow from financing activities represents cash used for servicing indebtedness,
borrowings under credit facilities and cash inflows from private placements and exercise of options. Net cash provided by financing activities was $646.2 million for the twelve months ended December 31, 2008 as compared to $56.9 million for the
twelve months ended December 31, 2007. The primary source of cash from financing activities was the Companys offering of $310 million of Convertible Secured Notes to fund the Parliament and Whitehall acquisition, which resulted in net
proceeds of $304.4 million, and the proceeds from the common equity offering of $233.8 million, which were used to fund the investment in Russian Alcohol, completed in July 2008.

The Companys Future Liquidity and Capital Resources

Financing Arrangements

Bank Facilities

As of December 31, 2009, $49.8 million remained available under the Companys overdraft facilities. These overdraft facilities are renewed on an annual basis.

As of December 31, 2009, the Company had utilized approximately $84.2 million of a multipurpose credit line agreement in connection
with the 2007 tender offer in Poland to purchase the remaining outstanding shares of Polmos Bialystok. The Companys obligations under the credit line agreement are guaranteed through promissory notes issued by certain subsidiaries of the
Company and are secured by 33.95% of the share capital of Polmos Bialystok. The indebtedness under the credit line agreement of $63.2 million matures on February 24, 2011 and of $21.0 million on August 11, 2010.



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On April 24, 2008, the Company signed a credit agreement with Bank Zachodni WBK SA in
Poland to provide up to $50 million of financing to be used to finance a portion of the Parliament and Whitehall acquisition, as well as general working capital needs of the Company. The agreement provides for a $30 million five year amortizing term
facility and a one year $20 million short term facility with annual renewal. In the second quarter of 2009 this facility was converted into Polish zloty. The maturity of term loan was extended to May 2013 and the maturity of the short term facility
was extended to May 2010. The loan is guaranteed by the Company, Bols Sp. z o.o, a wholly owned subsidiary of the Company (Bols) and certain other subsidiaries of the Company, and is secured by all of the capital stock of Bols and 60% of
the capital stock of Parliament.

On July 2, 2008, the Company entered into a Facility Agreement with Bank Handlowy w
Warszawie S.A., which provided for a term loan facility of $40 million, of which $33.3 million was outstanding as at December 31, 2009. The term loan matures on July 4, 2011 and is guaranteed by CEDC, Carey Agri and certain other
subsidiaries of the Company and is secured by all of the shares of capital stock of Carey Agri and subsequently will be further secured by shares of capital stock in certain other subsidiaries of CEDC.

The Company obtained all required waivers from its banks in connection with the Senior Secured Notes due 2016 offering.

Senior Secured Notes due 2012

In connection with the Bols and Polmos Bialystok acquisitions, on July 25, 2005 the Company completed the issuance of 325 million 8% Senior Secured Notes due 2012 (the 2012 Notes), of which approximately
245 million remained payable as of December 31, 2009. Interest was due semi-annually on the 25th of January and July, and the 2012 Notes are guaranteed on a senior basis by certain of the Companys subsidiaries.

On December 2, 2009, the Company issued a notice of redemption for the remaining outstanding portion of 2012 Notes and deposited
263.9 million (approximately US$380.4 million) of cash that we received upon the issuance of new Senior Secured Notes due 2016 (described below), representing the redemption price, call premium plus all interest that will be payable on
the settlement date, in an account with the trustee for the 2012 Notes. In connection with the notice of redemption and deposit, the indenture governing the 2012 Notes was discharged. Although this discharge removes substantially all of the
restrictions imposed by that indenture and makes the likelihood that further payments will be required of us with respect to the 2012 Notes remote, we concluded that it did not meet the definition of legally released in paragraph 16(b)
of FAS 140 (ASC 405-20-40-1(b)) and therefore we will not recognize the extinguishment of the remaining liability until January 4, 2010. Additionally the cash on deposit was recorded as Restricted Cash on the balance sheet as of
December 31, 2009. On January 4, 2010, the final redemption for these 2012 Notes was completed and all funds were remitted to the noteholders, discharging the Company of all remaining obligations.

Senior Secured Notes due 2016

On December 2, 2009, the Company issued and sold $380 million 9.125% Senior Secured Notes due 2016 and 380 million 8.875% Senior Secured Notes due 2016 (the 2016 Notes) in an offering to institutional investors
that was not required to be registered with the SEC. The Company used a portion of the net proceeds from the 2016 Notes to redeem the Companys outstanding 2012 Notes, having an aggregate principal amount of 245,440,000 on January 4,
2010. The remainder of the net proceeds from the 2016 Notes was used to (i) purchase Lion Capitals remaining equity interest in Russian Alcohol by exercising the Lion Option and the Co-Investor Option, pursuant to the terms and conditions
of the Lion Option Agreement and the Co-Investor Option Agreement, respectively (ii) repay all amounts outstanding under the Russian Alcohol credit facilities; and (iii) repay certain other indebtedness.

The 2016 Notes are guaranteed on a senior basis by certain of the Companys subsidiaries. We are required to ensure that subsidiaries
representing at least 85% of our consolidated EBITDA, as defined in the indenture,



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guarantee the notes. The notes are secured, directly or indirectly, by a variety of our and our subsidiarys assets, including shares of the issuer of the notes and subsidiaries in Poland,
Cypress, Russia, the Netherlands, Cayman Islands and Luxembourg, certain intercompany loans made by the issuer of the notes and our Russian finance company in connection with the issuance of the notes, trademarks related to the Soplica brand
registered in Poland and the European Union trademarks in the Parliament brand registered in Germany, and bank accounts over US$5.0 million. We are also required to use our reasonable best efforts to provide mortgages over our Polmos and Bols
production plants and the Russian Alcohol Siberian and Topaz Distilleries within specified time frames. The indenture governing the 2016 Notes contains certain restrictive covenants, including covenants limiting the Companys ability to: incur
or guarantee additional debt; make certain restricted payments; transfer or sell assets; enter into transactions with affiliates; create certain liens; create restrictions on the ability of restricted subsidiaries to pay dividends or other payments;
issue guarantees of indebtedness by restricted subsidiaries; enter into sale and leaseback transactions; merge, consolidate, amalgamate or combine with other entities; designate restricted subsidiaries as unrestricted subsidiaries; and engage in any
business other than a permitted business.

The 2016 Notes are secured, directly or indirectly, by a variety of our and our
subsidiarys assets, including shares of the issuer of the notes and subsidiaries in Poland, Cyprus, Hungary, Russia, the Netherlands, Cayman Islands, Luxembourg and Delaware, certain intercompany loans made by the issuer of the 2016 Notes and
further intercompany loans from the proceeds of the issuance of the 2016 Notes, trademarks related to the Soplica brand registered in Poland and the European Union, trademarks in the Parliament brand registered in Germany, bank accounts over
US$5.0 million in cash balances and mortgages over our Polmos Bialystok and Bols production plants in Poland. We are also required to use our reasonable best efforts to provide mortgages over our Russian Alcohol Siberian and Tula Distilleries within
specified time frames.

Convertible Senior Notes

On March 7, 2008, the Company completed the issuance of $310 million aggregate principal amount of 3% Convertible Senior Notes due 2013 (the Convertible Notes). Interest is due
semi-annually on the 15th of March and September, beginning on September 15, 2008. The Convertible Notes are convertible in certain circumstances into cash and, if applicable, shares of our common stock, based on an initial conversion rate of
14.7113 shares per $1,000 principle amount, subject to certain adjustments. Upon conversion of the notes, the Company will deliver cash up to the aggregate principle amount of the notes to be converted and, at the election of the Company, cash
and/or shares of common stock in respect to the remainder, if any, of the conversion obligation. The proceeds from the Convertible Notes were used to fund the cash portions of the acquisitions of Parliament and Whitehall.

Equity Issuances

On
February 24, 2009, the Company and the seller amended the terms of the Stock Purchase Agreement governing the Whitehall acquisition to satisfy the Companys obligations to the seller under a share price guarantee in the original Stock
Purchase Agreement. Pursuant to the terms of this amendment, the Company issued to the seller 2,100,000 shares of its common stock, made certain cash payments to the seller, and is obligated to make certain other cash payments to the seller in the
future, all as described under The Companys Future Liquidity and Capital Resources, below.

On July 24,
2009, the Company consummated the offer and sale of 9,185,000 shares of the Companys common stock (including over-allotment shares in a public offering), of which 7,685,000 shares were issued and sold by the Company. The Company received
$179.6 million from the offering after deducting underwriting discounts and estimated offering expenses payable by the Company.

On September 2, 2009, the Company filed a prospectus supplement with the SEC pursuant to a Registration Statement on Form S-3 registering for resale 540,873 shares of the Companys common stock issued to Cayman 5 in connection
with the Russian Alcohol acquisition.



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On September 15, 2009, the Company issued to Cirey Holdings, in connection with the
Russian Alcohol acquisition, 479,499 shares of the Companys common stock as earn-out payment.

On November 10,
2009, the Company issued to Kylemore 949,034 shares of the Companys common stock in exchange for the remaining indirect equity interest in Russian Alcohol that was not held by Lion Capital or CEDC, or approximately 3.76% of the equity
ownership of Russian Alcohol.

On November 24, 2009 the Company consummated an offer and sale of an aggregate of
10,250,000 shares of the Companys common stock, at a price of $31.00 per share. The Company received $308 million from the offering after underwriting discounts and estimated offering expenses payable by the Company.

Whitehall Acquisition

Pursuant to the Whitehall shareholders agreement, Polmos Bialystok has the right to purchase, and the other shareholder has the right to require Polmos Bialystok to purchase, all (but not less than all) of the shares of Whitehall
capital stock held by such shareholder. Either of these rights may be exercised at any time, subject, in certain circumstances, to the consent of third parties. The aggregate price that the Company would be required to pay in the event either of
these rights is exercised will fall within a range determined based on Whitehalls EBIT as well as the EBIT of certain related businesses, during two separate periods: (1) the period from January 1, 2008 through the end of the year in
which the right is exercised, and (2) the two full financial years immediately preceding the end of the year in which the right is exercised, plus, in each case, the time-adjusted value of any dividends paid by Whitehall. Subject to certain
limited exceptions, the exercise price will be (A) no less than the future value as of the date of exercise of $32.0 million and (B) no more than the future value as of the date of exercise of $89.0 million, plus, in each case, the
time-adjusted value of certain dividends paid by Whitehall.

Russian Alcohol Group Acquisition

On January 20, 2010, after the receipt of antimonopoly clearances for the acquisition from the Russian Federal Antimonopoly Commission,
the Antimonopoly Committee of the Ukraine, the Company purchased the sole voting share of Lion/Rally Cayman 6 (Cayman 6) from an affiliate of Lion Capital and thereby acquired control of Russian Alcohol. The company also paid $110
million in January, 2010, to Lion Capital by releasing $100 million from escrow, which is included in the restricted cash payment on the balance sheet as of December 31, 2009 and paid up the remaining $10 million from cash. The Company still
has an obligation to make the last remaining payment to Lion in April, 2010 of $45 million, which can be payable in cash or CEDC shares.

Capital Expenditure

Our net capital expenditure on tangible fixed assets for the twelve months ending
December 31, 2009, 2008, and 2007 was $14.8 million, $15.6 million and $23.1 million, respectively. Capital expenditures during the twelve months ended December 31, 2009 were used primarily for production equipment and fleet. Capital
expenditures during the twelve months ended December 31, 2008 were used primarily for production equipment and fleet. Capital expenditures during the twelve months ended December 31, 2007 were used primarily for investments in
rectification of approximately $16 million, as well as fleet, information systems and plant maintenance.

We have estimated
that maintenance capital expenditure for 2010, 2011 and 2012 for our existing business combined with our acquired businesses will be approximately $10.0 to $15.0 million per year. Future capital expenditure is expected to be used for our continued
investment in information technology, trucks, and routine improvements to production facilities. Pursuant to our acquisition of Polmos Bialystok, the Company is required to ensure that Polmos Bialystok will make investments of at least
77.5 million Polish zloty (approximately $27.2 million based on year end exchange rate) during the five years after the consummation of the acquisition. As of December 31, 2009 the company has completed 91.7% of these investment
commitments.



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A substantial portion of these future capital expenditure amounts are discretionary, and we
may adjust spending in any period according to our needs. We currently intend to finance all of our capital expenditure through cash generated from operating activities.

Contractual Obligations

The following table summarizes our contractual
obligations as of December 31, 2009:



|                                          |                              |                        |                 |  |          |         |          |   |                  |  |   |         |  |   |          
|----------------------------------------- | ---------------------------- | ---------------------- | --------------- |  | -------- | ------- | -------- | - | ---------------- |  | - | ------- |  | - | ---------
|                                          |                              | Payments due by period
|                                          | Total                        |                        | Less than1 year |  | 1-3years |         | 3-5years |   | More than5 years
|                                          | (unaudited) ($ in thousands)
|Long-term debt obligations                |                              | $                      | 1,311,511       |  | $        |        |          | $ | 96,427           |  | $ | 305,789 |  | $ | 909,295  
|Interest on long-term debt                |                              |                        | 628,048         |  |          | 100,393 |          |   | 191,679          |  |   | 176,338 |  |   | 159,638  
|Short-term debt obligations               |                              |                        | 483,209         |  |          | 483,209 |          |   |                 |  |   |        |  |   |         
|Interest on short-term debt               |                              |                        | 26,588          |  |          | 26,588  |          |   |                 |  |   |        |  |   |         
|Deferred payments related to acquisitions |                              |                        | 160,880         |  |          | 160,880 |          |   |                 |  |   |        |  |   |         
|Operating leases                          |                              |                        | 48,399          |  |          | 13,815  |          |   | 17,383           |  |   | 17,201  |  |   |         
|Capital leases                            |                              |                        | 3,095           |  |          | 1,724   |          |   | 1,371            |  |   |        |  |   |         
|Contracts with suppliers                  |                              |                        | 5,362           |  |          | 4,385   |          |   | 961              |  |   | 16      |  |   |         
|                                          |                              |                        |                 |  |          |         |          |   |                  |  |   |         |  |   |          
|Total                                     |                              | $                      | 2,667,092       |  | $        | 790,994 |          | $ | 307,821          |  | $ | 499,344 |  | $ | 1,068,933
|                                          |                              |                        |                 |  |          |         |          |   |                  |  |   |         |  |   |          

Approximately $380 million of the $483.2 million of
short term debt obligations were fully repaid on January 4, 2010 as part of the redemption of the Senior Secured Notes due in 2012.

Effects of Inflation and Foreign Currency Movements

Actual inflation in Poland was 3.5% in 2009, compared to
inflation of 4.2% in 2008. In Russia and Hungary respectively, the actual inflation for 2009 was at 8.8% and 5.6%, compared to actual inflation of 13.3% and 6.8% in 2008.

Substantially all of Companys operating cash flows and assets are denominated in Polish zloty, Russian ruble and Hungarian forint. This means that the Company is exposed to translation movements
both on its balance sheet and statement of operations. The impact on working capital items is demonstrated on the cash flow statement as the movement in exchange on cash and cash equivalents. The impact on the statement of operations is by the
movement of the average exchange rate used to restate the statement of operations from Polish zloty, Russian ruble and Hungarian forint to U.S. dollars. The amounts shown as exchange rate gains or losses on the face of the statement of operations
relate only to realized gains or losses on transactions that are not denominated in Polish zloty, Russian ruble or Hungarian forint.

The average zloty/dollar and ruble/dollar exchange rates used to create our statement of operations depreciated by approximately 30% and 28% respectively. The actual year end zloty/dollar and ruble/dollar exchange rates used to create our
balance sheet appreciated by approximately 4% and 2% as compared to December 31, 2008 respectively. Should this trend continue, our results of operations may be positively impacted due to a increase in revenue in U.S. dollar terms from the
currency translation effects of that appreciation. This may be partially offset by a similar increase in costs in U.S. dollar terms. Conversely if the trend reverses our results of operations may be negatively impacted due to a decrease in
revenue in U.S. dollar terms from the currency translation effects of that depreciation.

The Company has borrowings
including its Senior Secured Notes due 2012, Convertible Notes due 2013 and Senior Secured Notes due 2016 that are denominated in U.S. dollars and euros, which have been lent to its operations where the functional currency is the Polish zloty and
Russian ruble. The effect of having debt



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denominated in currencies other than the Companys functional currencies is to increase or decrease the value of the Companys liabilities on that debt in terms of the Companys
functional currencies when those functional currencies depreciate or appreciate in value respectively. As a result of this, the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax
impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of the Companys operations.



|                  |  |                                            |  |                                                
|----------------- |  | ------------------------------------------ |  | -----------------------------------------------
|Exchange Rate     |  | Value of notional amount                   |  | Pre-tax impact of a 1%movement in exchange rate
|USD-Polish zloty  |  | $426 million                               |  | $4.3 million gain/loss                         
|USD-Russian ruble |  | $264 million                               |  | $2.6 million gain/loss                         
|EUR-Polish zloty  |  | 625 million or approximately $901 million |  | $9 million gain/loss                           

The table above
includes 245 million for the Senior Secured Notes due in 2012 that were redeemed on January 4, 2010, thus there will not be any foreign exchange impact from them after this date.

Critical Accounting Policies and Estimates

General

The Companys discussion and analysis of its financial condition and results of operations are
based upon the Companys consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of net sales, expenses, assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different assumptions and conditions.

Revenue Recognition

Revenues of the Company include sales of its own produced spirit brands, imported wine, beer and spirit brands as well as
other third party alcoholic products purchased locally in Poland, the sale of each of these revenues streams are all processed and accounted for in the same manner. For all of its sources of revenue, the Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery of product has occurred, the sales price charged is fixed or determinable and collectability is reasonably assured. This generally means that revenue is recognized when title to the products are
transferred to our customers. In particular, title usually transfers upon shipment to or receipt at our customers locations, as determined by the specific sales terms of the transactions.

Sales are stated net of sales tax (VAT) and reflect reductions attributable to consideration given to customers in various customer
incentive programs, including pricing discounts on single transactions, volume discounts, promotional listing fees and advertising allowances, cash discounts and rebates. Net sales revenue includes excise tax except in the case where the sales are
made from the production unit or related to imported goods, in which case it is recorded net of excise tax.

Goodwill and Intangibles

Following the adoption of ASC Topic 805 and ASC Topic 350, goodwill and certain intangible assets having indefinite lives are
no longer subject to amortization. Their book values are tested annually for impairment, or more frequently, if facts and circumstances indicate the need. Fair value measurement techniques, such as the discounted cash flow methodology, are utilized
to assess potential impairments. The testing is performed at each reporting unit level. In the discounted cash flow method, the Company discounts forecasted performance plans to their present value. The discount rate utilized is the weighted average
cost of capital for the



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reporting unit. US GAAP requires the impairment test to be performed in two stages. If the first stage does not indicate that the carrying values of the reporting units exceed the fair
values, the second stage is not required. When the first stage indicates potential impairment, the company has to complete the second stage of the impairment test and compare the implied fair value of the reporting units goodwill to the
corresponding carrying value of goodwill.

Intangibles are amortized over their effective useful life. In estimating fair
value, management must make assumptions and projections regarding such items as future cash flows, future revenues, future earnings, and other factors. The assumptions used in the estimate of fair value are generally consistent with the past
performance of each reporting unit and are also consistent with the projections and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. If these
estimates or their related assumptions change in the future, the Company may be required to record an impairment loss for the assets. The fair values calculated have been adjusted where applicable to reflect the tax impact upon disposal of the
asset.

In connection with the Bols, Polmos Bialystok, Parliament and Russian Alcohol acquisitions, the Company has acquired
trademark rights to various brands, which were capitalized as part of the purchase price allocation process. As these brands are well established they have been assessed to have an indefinite life. These trademarks rights will not be amortized;
however, management assesses them at least once a year for impairment.

We recorded an impairment charge of $20.3 million
during the second quarter of 2009 that included an impairment to the carrying values of our trademarks.

As required by ASC
Topic 350, we tested for impairment our unamortized intangible assets at June 30, 2009, between the required annual tests, because we believed events had occurred and circumstances changed that would more likely than not reduce the fair value
of our trademarks and goodwill below their carrying amounts.

In order to perform the test of the impairment for goodwill and
indefinite lived intangible assets, it requires the use of estimates. We based our calculations as at December 31, 2009 on the following assumptions:



| |  |  | Risk free rates for Poland, Russia and Hungary used for calculation of discount rate were based upon current market rates of long term Polish
Government Bonds rates, long term Russian Government Bonds rates and long term Hungarian Government Bonds. When estimating discount rates to be used for the calculation we have taken into account current market conditions in Poland, Russia and
Hungary separately. As a result of our assumptions and calculations, we have determined discount rates of 8.59%, 11.88% and 10.24% for Poland, Russia and Hungary, respectively. Factoring in a deviation of 10% for the discount rate as compared to
managements estimate, there would still be no need for an impairment charge against goodwill.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have tested goodwill for impairment separately for the following reporting units: Poland Vodka Production, Domestic Distribution, Hungary
Distribution, Russia Vodka Production (including Parliament and Russian Alcohol) and Whitehall Group.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We estimated the growth rates in projecting cash flows for each of our reporting generating unit separately, based on a detailed five year plan related
to each reporting unit.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Taking into account estimations supporting our calculations under current
market trends and conditions we believe that no impairment charge is considered necessary through the date of the accompanying financial statements.

Accounting for Business Combinations

The acquisition of businesses is an
important element of the Companys strategy. Acquisitions made prior to December 31, 2008 were accounted for in accordance with SFAS No. 141, Business Combinations



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(SFAS 141). Effective January 1, 2009, all business combinations will be accounted for in accordance with ASC Topic 805 Business Combinations.

We account for our acquisitions made in 2008 under the purchase method of accounting in accordance with SFAS 141, Business Combinations, and
allocate the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The determination of the values of the assets acquired and liabilities assumed, as well as associated asset useful lives, requires
management to make estimates. The Companys acquisitions typically result in goodwill and other intangible assets; the value and estimated life of those assets may affect the amount of future period amortization expense for intangible assets
with finite lives as well as possible impairment charges that may be incurred.

The calculation of purchase price allocation
requires judgment on the part of management in determining the valuation of the assets acquired and liabilities assumed.

The
Company has consolidated the Whitehall Group as a business combination, on the basis that the Whitehall Group is a Variable Interest Entity in accordance with ASC Topic 810 Consolidation and the Company has been assessed as being the
primary beneficiary.

Involvement of the Company in variable interest entities (VIEs) and continuing involvement with
transferred financial assets.

Whitehall Group

On May 23, 2008, the Company and certain of its affiliates, entered into, and closed upon, a Share Sale and Purchase Agreement and certain other agreements whereby the Company acquired shares
representing 50% minus one vote of the voting power, and 75% of the economic interests, in the Whitehall Group. In consideration for additional payments made to the seller on February 24, 2009, the Company received an additional 375
Class B shares of Whitehall, which represents an increase of the Companys economic stake in Whitehall Group from 75% to 80%.

Transfers of Financial Assets

Except for the amount of $7.5 million that
was lent at market rates as a working capital by the Company to the Whitehall Group there were no transfers of financial assets to VIE as the Whitehall Group is a self financing body. Including the $7.5 million transfer, the Company does not have
any continuing involvement with transferred financial assets that allow the transferors to receive cash flows or other benefits from the assets or requires the transferors to provide cash flows or other assets in relation to the transferred
financial assets.

Variable Interest Entities

CEDC consolidated the Whitehall Group as a business combination as of May 23, 2008, on the basis that the Whitehall Group is a Variable
Interest Entity (VIE) and the Company has been assessed as being the primary beneficiary. Included within the Whitehall Group is a 50/50 joint venture with Möet Hennessy. This joint venture is accounted for using the equity method
and is recorded on the face of the balance sheet in investments with minority interest initially recorded at fair value on the face of the balance sheet. The current term of the joint venture is until June 2013 at which point Möet Hennessy will
have the option to acquire the remaining shares of the entity.

Based upon the review of Paragraph 4 CEDC management has
concluded that its interest in Peulla Enterprises, the special purpose vehicle (SPV), being a Cyprus company in which CEDC has 49.9% voting power, would not fall under any of scope exceptions. Therefore CEDC has evaluated whether the SPV
is a variable interest entity under the provisions of Paragraph 5 and thus the SPV subject to consolidation accounting.



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In determining the accounting treatment if the Whitehall Group is a VIE and needs to be
consolidated by CEDC, we considered the conditions outlined in ASC Topic 810.



| |  |  | Equity Investment at RiskWe concluded that the SPV would not meet the requirement of a VIE based upon Paragraph 5(a) as the interest would
be classified as equity under US GAAP, the at risk equity is sufficient to permit the entity to finance its activities. Neither equity holder will provide any additional material capital into the SPV. The SPV will be utilized solely as a
holding company with its economics determined by the underlying Whitehall Group.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Controlling Financial InterestsBoth shareholders, Mark Kaoufman acting through a Jersey trust (the Trust) and CEDC, are able
to direct the activities and operations of the Whitehall Group through their roles on the Board of Directors and their responsibilities for selection of executive level officers. However, the ultimate obligation to absorb losses of the entity or
right to receive the residual benefits will lie with CEDC at the time the put/call term ends. Should the business not perform, the Trust will have the right to put his shares to CEDC with a pre-agreed floor on the value of the put option. Thus the
Company is at risk of absorbing a greater portion of losses upon the Trusts exit than the Trust itself. Conversely at the end of the term, CEDC can call and if the business has over performed, the amount paid to the Trust on the call is capped
at a pre-agreed amount. As such, because the Trust is both limited in its losses and returns through the terms of the put/call with caps and floors, this criterion is met and would cause Whitehall Group to be considered a VIE.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disproportionate Voting RightsThe voting rights of the Trust and CEDC (50.1% and 49.9%) are not proportionate to their economic interests
(20% and 80%). In this structure, it appears CEDC has disproportionately fewer voting rights in relation to its economic rights.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Further, the below activities of the entity that are more closely associated with the activities of CEDC, thereby having substantially of the entitys activities conducted on its behalf. As CEDC has
disproportionately fewer rights while substantially all of Whitehalls activities are for CEDC, this would indicate that Whitehall Group lacks characteristic:



| |  |  | The operations of Whitehall Group are substantially similar in nature to the activities of CEDC;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | CEDC has a call option to purchase the interests of the other investors in the entity;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | The Trust has an option to put his interests to CEDC.
| | - |  | -----------------------------------------------------

Both the Trust and CEDC are precluded from transferring its interests in the SPV to any third-party without consent from the other party. Transfers are subject to an absolute other party discretion
standard, other than limited permitted transfers (i.e., to affiliates). As such, it appears a de facto relationship exists.

The primary factor to be considered here is the design and intent of the variable interest entity. The SPV that holds the Whitehall Group and the related shareholders agreement were created with the clear intent to maximize the financial
exposure that CEDC has to the Whitehall Group business and to ultimately allow CEDC to take full control of the business in 2013. CEDC bears the greatest level of economic share of the entities performance, both in terms of profit allocation
(80%) and valuation of the put/call option at the end with a clear floor and cap on payment. The put/call structure in place provide near assurance that at the end of the term CEDC will take full ownership of the business. Should the business
perform at or above plan, CEDC valuation is capped therefore would elect to call, and should the business under perform, the Trust will put the shares receiving the guaranteed minimum valuation.

In June 2009, the FASB issued ASC Topic 810, which changes how a company determines whether an entity should be consolidated. The adoption
of this standard may impact the current treatment of the Whitehall Group by the Company and the Company is current assessing this treatment and potential impact on the financial statements. See Recently Issued Accounting Pronouncements
for more detailed information on this topic.



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Russian Alcohol Group

On January 20, 2010, the Company completed its acquisition of Russian Alcohol. For further details on the whole structure of this
acquisition please refer to Note 2 of the accompanying financial statements attached herein.

At the lowest level of the
existing structure, all of Russian Alcohol companies are consolidated based on the fact that these are 100% wholly-owned companies. Therefore, we have evaluated and considered Cayman 7 as a variable interest entity for CEDC in the structure.

Transfers of Financial Assets

There were no transfers of financial assets to a VIE as Russian Alcohol is a self financing body. The Company does not have any continuing involvement with transferred financial assets that allow the
transferors to receive cash flows or other benefits from the assets or requires the transferors to provide cash flows or other assets in relation to the transferred financial assets.

Variable Interest Entities

Cayman 7 is a company in which Cayman 2 and CEDC are the sole limited partners and an affiliate of Lion Capital is the general partner. CEDC has 100% of the economic interests in Cayman 7, but Lion
Capital retains control of Cayman 7 through Cayman 2s ownership of a single voting share with de minimis economic rights (the Golden Share) but voting control of Cayman 7. As Cayman 7 has the right to call capital from CEDC to
settle obligations under the Option Agreement, CEDC has evaluated whether Cayman 7 is a variable interest entity under the provisions ASC Topic 810.

Based upon the review of Paragraph 4 CEDCs management has concluded that its direct interest in Cayman 7, as well as its indirect interest through Carey Agri and Cayman 2, would not fall under
any of these scope exceptions. Therefore CEDC has evaluated whether Cayman 7 is a variable interest entity under the provisions of Paragraph 5 of ASC Topic 810 and thus subject to consolidation accounting.

In determining the accounting treatment if Cayman 7 and, effectively, the whole Russian Alcohol is a VIE and needs to be consolidated by
CEDC, we considered the conditions outlined in ASC Topic 810.



| |  |  | Equity Investment at RiskWe concluded that as the contribution made by Cayman 2 was the only one that required substantial
investment, Cayman 2 should be defined as having its equity at risk. Moreover as Cayman 7 is not able to finance its operations without funds received from CEDC, we believe that Cayman 7 would meet the requirement of a VIE based upon Paragraph 5(a).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Controlling Financial InterestsCEDC concluded that the equity investment at risk does not meet the last item in Paragraph 5(b) as all
dividends from the business are passed to CEDC with CEDC not having its equity investment at risk. These dividends then reduce CEDCs payment obligations to Lion Capital (if dividends paid to CEDC by Russian Alcohol exceed the call option
price, Lion Capital has to return the excess as CEDCs call option obligations have been met). However, Lion Capital is not entitled to receive any dividends from Cayman 7 directly as CEDC has 100% of the economic interests, with Lion Capital
having voting control through voting rights. Therefore we believe that Paragraph 5(b) would cause Cayman 7 to be treated as a VIE.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disproportionate Voting RightsWe believe that both criteria, including lack of voting rights and the requirement that substantially all
activities of Cayman 7 involve or are conducted on behalf of CEDC (as Cayman 7 is a company created solely to facilitate CEDCs funding of the exercise of call options to purchase shares of Cayman 6), we believe that this would require Cayman 7
to be treated as a VIE.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The conclusion of CEDC management is that Cayman 7, including its interest in Cayman 6 and
indirectly in Russian Alcohol, is a VIE. CEDC, as the party most closely associated with Cayman 7 receiving all economic benefits from Russian Alcohol thorough the chain of subsidiaries, would be considered the primary beneficiary of Cayman 7 and
must therefore consolidate Cayman 7 together with all of Russian Alcohol as a business combination under ASC Topic 805.

On
December 9, 2009 we accelerated the terms set up on the Option Agreement dated April 24, 2009 and purchased the remaining equity interest in Russian Alcohol that was not owned by the Company. As a result of this Russian Alcohol is no
longer treated as a VIE, but rather consolidated as a fully owned subsidiary.

Share Based Payments

As of January 1, 2006, the Company adopted ASC Topic 718 CompensationStock Compensation requiring the recognition of
compensation expense in the Consolidated Statements of Operations related to the fair value of its employee share-based options.

Grant-date fair value of stock options is estimated using a lattice-binomial option-pricing model. We recognize compensation cost for awards over the vesting period. The majority of our stock options have a vesting period between one to
three years.

See Note 12 to our Consolidated Financial Statements for more information regarding stock-based compensation.

Recently Issued Accounting Pronouncements

In August 2009, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update No. 2009-05, Fair Value Measurements and Disclosures (ASU
2009-05), which is effective for financial statements issued for interim and annual periods ending after August 2009. ASU 2009-05 amends FASB Accounting Standards Codification (FASB ASC) Topic 820-10 (FASB ASC 820-10).
The update provides clarification on the techniques for measurement of fair value required of a reporting entity when a quoted price in an active market for an identical liability is not available. This update had no impact on the Companys
financial position, results of operations or cash flows.

In June 2009, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 168, The FASB Accounting Standards Codification ) and the Hierarchy of Generally Accepted Accounting Principlesa replacement of FAS No. 162 (SFAS No. 168),
which is effective for financial statements issued for interim and annual periods ending after September 15, 2009. SFAS No. 168 codified as ASC Topic 105-10 (FASB ASC 105-10). FASB ASC 105-10 identifies the sources of
accounting principles and the framework for selecting principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP (the GAAP hierarchy). This standard had no impact on the
Companys financial position, results of operations or cash flows.

In June 2009, the FASB issued ASC Topic 810,
Amendments to FASB Interpretation No. 46(R) (ASC 810). ASC 810 is a revision to FIN 46(R) and changes how a company determines whether an entity should be consolidated when such entity is insufficiently capitalized or is
not controlled by the company through voting (or similar rights). The determination of whether a company is required to consolidate an entity is based on, among other things, the entitys purpose and design and the companys ability to
direct the activities of the entity that most significantly impact the entitys economic performance. ASC 810 retains the scope of FIN 46(R) but added entities previously considered qualifying special purpose entities, or QSPEs, since the
concept of these entities is eliminated in ASC Topic 860. ASC 810 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2009. The Company is still in process of evaluating the potential impact of
adoption of ASC 810 on its consolidated financial position and results of operations. Should the company determine that the requirements for consolidating the Whitehall



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Group are not met under SFAS 167, the deconsolidation of this Group may result in a material impact on the presentation of the Companys results of operations. Specifically the lines of
revenues and costs before Income before taxes, equity in net income from unconsolidated investments and non-controlling interest in subsidiaries would be reduced, however the final net income or loss attributable to CEDC would remain unchanged.
Similarly the individual lines of the balance sheet will be effect however total equity would remain the same.

In April 2009,
the FASB issued FASB Staff Position (FSP) No. SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments(FSP No. SFAS 115-2 and SFAS 124-2), which is
codified in FASB ASC Topic 320-10. FSP No. SFAS 115-2 and SFAS 124-2 provides guidance to determine whether the holder of an investment in a debt security for which changes in fair value are not regularly recognized in earnings should
recognize a loss in earnings when the investment is impaired. This FSP also improves the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the consolidated financial statements. This guidance is
effective for interim reporting periods ending after June 15, 2009. The adoption of FSP FAS 115-2 and FAS 124-2 did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP No. SFAS 107-1 and Accounting Principles Board (APB) Opinion No. APB 28-1,
Interim Disclosures about Fair Value of Financial Instruments(FSP No. SFAS 107-1 and APB 28-1). FSP No. SFAS 107-1 and APB 28-1, which is codified in FASB ASC Topic 825-10-50, require disclosures about the
fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The Company adopted FSP No. SFAS 107-1 and APB 28-1 beginning April 1, 2009. This FSP had no
impact on the Companys financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP
No. SFAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(FSP No. SFAS 157-4). FSP
No. SFAS 157-4, which is codified in FASB ASC Topics 820-10-35-51 and 820-10-50-2, provides additional guidance for estimating fair value and emphasizes that even if there has been a significant decrease in the volume and level of activity
for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009. This FSP had no material impact
on the Companys financial position, results of operations or cash flows.

In December 2008, the FASB issued FSP
No. SFAS 132(R)-1, Employers Disclosures about Postretirement Benefit Plan Assets, (FSP No. SFAS 132(R)-1) which is codified in FASB ASC Topic 715-20-50. FSP No. SFAS 132(R)-1 requires enhanced
disclosures about the plan assets of a Companys defined benefit pension and other postretirement plans intended to provide financial statement users with a greater understanding of: 1) how investment allocation decisions are made;
2) the major categories of plan assets; 3) the inputs and valuation techniques used to measure the fair value of plan assets; 4) the effect of fair value measurements using significant unobservable inputs on changes in plan assets for
the period; and 5) significant concentrations of risk within plan assets. The disclosure requirements are annual and do not apply to interim financial statements and are required by us in disclosures related to the year ended December 31,
2009. We do expect the adoption of FSP SFAS 132R-1 to result in additional annual financial reporting disclosures and we are continuing to assess the potential effects of this pronouncement.



|Item 7A. | Quantitative and Qualitative Disclosure about Market Risk
|-------- | ---------------------------------------------------------

Our operations are conducted primarily in Poland and Russia and our functional currencies are primarily the Polish zloty, Hungarian forint and Russian ruble and the reporting currency is the U.S. dollar.
Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, inventories, bank loans, overdraft facilities and long-term debt. All of the monetary assets represented by these financial instruments
are located in Poland, Russia and Hungary. Consequently, they are subject to currency translation movements when reporting in U.S. dollars.



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If the U.S. dollar increases in value against the Polish zloty, Russian ruble or
Hungarian forint, the value in U.S. dollars of assets, liabilities, revenues and expenses originally recorded in Polish zloty, Russian ruble or Hungarian forint will decrease. Conversely, if the U.S. dollar decreases in value against the Polish
zloty, Russian ruble or Hungarian forint, the value in U.S. dollars of assets, liabilities, revenues and expenses originally recorded in Polish zloty, Russian ruble or Hungarian forint will increase. Thus, increases and decreases in the value of the
U.S. dollar can have a material impact on the value in U.S. dollars of our non-U.S. dollar assets, liabilities, revenues and expenses, even if the value of these items has not changed in their original currency.

The Company has borrowings including its Senior Secured Notes due 2012, Convertible Notes due 2013 and Senior Secured Notes 2016 that are
denominated in U.S. dollars and euros, which have been lent to its operations where the functional currency is the Polish zloty and Russian ruble. The effect of having debt denominated in currencies other than the Companys functional
currencies is to increase or decrease the value of the Companys liabilities on that debt in terms of the Companys functional currencies when those functional currencies depreciate or appreciate in value respectively. As a result of this,
the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of
the Companys operations.



|                  |  |                                            |  |                                                
|----------------- |  | ------------------------------------------ |  | -----------------------------------------------
|Exchange Rate     |  | Value of notional amount                   |  | Pre-tax impact of a 1%movement in exchange
rate
|USD-Polish zloty  |  | $426 million                               |  | $4.3 million gain/loss                         
|USD-Russian ruble |  | $264 million                               |  | $2.6 million gain/loss                         
|EUR-Polish zloty  |  | 625 million or approximately $901 million |  | $9 million gain/loss                           

The table above
includes 245 million for the Senior Secured Notes due in 2012 that were redeemed on January 4, 2010, thus there will not be any foreign exchange impact from them after this date.



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

Index to consolidated financial statements:



|                                                                                                                 |  |   
|---------------------------------------------------------------------------------------------------------------- |  | --
|Report of Independent Registered Public Accounting Firm                                                          |  | 57
|Consolidated Balance Sheets at December 31, 2009 and 2008                                                        |  | 59
|Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and
2007                       |  | 60
|Consolidated Statements of Changes in Stockholders Equity for the years ended December 
31, 2009, 2008 and 2007 |  | 61
|Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007                       |  | 62
|Notes to Consolidated Financial Statements                                                                       |  | 63



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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Central European Distribution Corporation

In our opinion, the accompanying
consolidated balance sheets and the related consolidated statement of operations, stockholders equity and cash flows present fairly, in all material respects, the financial position of Central European Distribution Corporation
(CEDC or the Company) and its subsidiaries at December 31, 2009 and December 31, 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity
with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for these financial statements, for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Managements Report on Internal Control over Financial Reporting appearing under Item 9A.
Our responsibility is to express opinions on these financial statements and on the Companys internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As
discussed in Notes 1 and 2 to the consolidated financial statements, the Company changed the manner in which it accounts for non-controlling interests, debt with conversion features and business combinations in 2009.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in the Management s Report in Internal Control over Financial Reporting appearing under Item 9A, management has
excluded the Russian Alcohol Group from its assessment of internal control over financial reporting as of December 31, 2009 because it was acquired by the Company in a purchase business



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combination during the year ended December 31, 2009. We have also excluded the Russian Alcohol Group from our audit of internal control over financial reporting. The Russian Alcohol group is a
wholly-owned subsidiary whose total assets and total revenues represent 20.0% and 21.2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2009.

/s/ PricewaterhouseCoopers Sp. z o. o.

Warsaw,
Poland

March 1, 2010



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED BALANCE SHEET

Amounts in columns expressed in thousands

(except share information)



|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | --------- | - | ----------------------------- | - | --------- | -
|                                                                                                                                                               |  | December 31,2009 |           |   | December 31,2008(as
adjusted) |  
|ASSETS                                                                                                                                                         |  |                  |           |   |                               |   |           |  
|Current Assets                                                                                                                                                 |  |                  |           |   |                               |   |           |  
|Cash and cash equivalents                                                                                                                                      |  | $                | 152,177   |   |                               | $ | 107,601   |  
|Restricted cash                                                                                                                                                |  |                  | 481,419   |   |                               |   |          |  
|Accounts receivable, net of allowance for doubtful accounts of $56,090 and $22,156 respectively                                                                |  |                  | 631,005   |   |                               |   | 430,683   |  
|Inventories                                                                                                                                                    |  |                  | 221,417   |   |                               |   | 180,304   |  
|Prepaid expenses and other current assets                                                                                                                      |  |                  | 46,654    |   |                               |   | 22,894    |  
|Deferred income taxes                                                                                                                                          |  |                  | 83,458    |   |                               |   | 24,386    |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|Total Current Assets                                                                                                                                           |  |                  | 1,616,130 |   |                               |   | 765,868   |  
|Intangible assets, net                                                                                                                                         |  |                  | 778,828   |   |                               |   | 570,505   |  
|Goodwill, net                                                                                                                                                  |  |                  | 1,726,625 |   |                               |   | 745,256   |  
|Property, plant and equipment, net                                                                                                                             |  |                  | 231,098   |   |                               |   | 92,221    |  
|Deferred income taxes                                                                                                                                          |  |                  | 27,123    |   |                               |   | 12,886    |  
|Equity method investment in affiliates                                                                                                                         |  |                  | 67,089    |   |                               |   | 189,243   |  
|Subordinated loans to affiliates                                                                                                                               |  |                  |          |   |                               |   | 107,707   |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|Total Non-Current Assets                                                                                                                                       |  |                  | 2,830,763 |   |                               |   | 1,717,818 |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|Total Assets                                                                                                                                                   |  | $                | 4,446,893 |   |                               | $ | 2,483,686 |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                           |  |                  |           |   |                               |   |           |  
|Current Liabilities                                                                                                                                            |  |                  |           |   |                               |   |           |  
|Trade accounts payable                                                                                                                                         |  | $                | 266,071   |   |                               | $ | 234,948   |  
|Bank loans and overdraft facilities                                                                                                                            |  |                  | 124,266   |   |                               |   | 109,552   |  
|Income taxes payable                                                                                                                                           |  |                  | 4,935     |   |                               |   | 7,227     |  
|Taxes other than income taxes                                                                                                                                  |  |                  | 207,168   |   |                               |   | 125,774   |  
|Other accrued liabilities                                                                                                                                      |  |                  | 100,266   |   |                               |   | 80,270    |  
|Short-term obligations under Senior Notes                                                                                                                      |  |                  | 358,943   |   |                               |   |          |  
|Current portions of obligations under capital leases                                                                                                           |  |                  | 1,724     |   |                               |   | 2,385     |  
|Deferred consideration                                                                                                                                         |  |                  | 160,880   |   |                               |   |          |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|Total Current Liabilities                                                                                                                                      |  |                  | 1,224,253 |   |                               |   | 560,156   |  
|Long-term debt, less current maturities                                                                                                                        |  |                  | 106,043   |   |                               |   | 170,510   |  
|Long-term obligations under capital leases                                                                                                                     |  |                  | 1,371     |   |                               |   | 2,194     |  
|Long-term obligations under Senior Notes                                                                                                                       |  |                  | 1,205,467 |   |                               |   | 633,658   |  
|Long-term accruals                                                                                                                                             |  |                  | 3,214     |   |                               |   | 5,806     |  
|Deferred income taxes                                                                                                                                          |  |                  | 198,495   |   |                               |   | 106,485   |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|Total Long Term Liabilities                                                                                                                                    |  |                  | 1,514,590 |   |                               |   | 918,653   |  
|Redeemable noncontrolling interests in Whitehall Group                                                                                                         |  |                  | 22,888    |   |                               |   | 33,642    |  
|Stockholders Equity                                                                                                                                           |  |                  |           |   |                               |   |           |  
|Common Stock ($0.01 par value, 80,000,000 shares authorized, 69,411,845 and 47,344,874 shares issued at December 31, 2009
and December 31, 2008, respectively) |  |                  | 694       |   |                               |   | 473       |  
|Additional paid-in-capital                                                                                                                                     |  |                  | 1,296,391 |   |                               |   | 816,490   |  
|Retained earnings                                                                                                                                              |  |                  | 264,917   |   |                               |   | 186,588   |  
|Accumulated other comprehensive income / (loss)                                                                                                                |  |                  | 123,310   |   |                               |   | (46,772   | )
|Less Treasury Stock at cost (246,037 shares at December 31, 2009 and December 31, 2008, respectively)                                                          |  |                  | (150      | ) |                               |   | (150      | )
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|Total CEDC Stockholders Equity                                                                                                                                |  |                  | 1,685,162 |   |                               |   | 956,629   |  
|Noncontrolling interests in subsidiaries                                                                                                                       |  |                  |          |   |                               |   | 14,606    |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|Total Equity                                                                                                                                                   |  |                  | 1,685,162 |   |                               |   | 971,235   |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  
|Total Liabilities and Stockholders Equity                                                                                                                     |  | $                | 4,446,893 |   |                               | $ | 2,483,686 |  
|                                                                                                                                                               |  |                  |           |   |                               |   |           |  

The accompanying notes are an integral part of the consolidated financial statements.



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Amounts in columns expressed in thousands

(except per share information)



|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|---------------------------------------------------------------------------------------------------------------------- | ---- | ----------------------- | --------- | ---- | ------------- | -- | --------- | - |  | - | --------- | -
|                                                                                                                       |      | Year ended December 31, |          
|                                                                                                                       | 2009 |                         |           | 2008 |               |    | 2007      |  
|                                                                                                                       |      |                         |           |      | (as adjusted) |    |           |   | 
|Sales                                                                                                                  |      | $                       | 2,197,542 |      |               | $  | 2,136,570 |   |  | $ | 1,483,344 |  
|Excise taxes                                                                                                           |      |                         | (690,403  | )    |               |    | (489,566  | ) |  |   | (293,522  | )
|Net Sales                                                                                                              |      |                         | 1,507,139 |      |               |    | 1,647,004 |   |  |   | 1,189,822 |  
|Cost of goods sold                                                                                                     |      |                         | 1,012,543 |      |               |    | 1,224,899 |   |  |   | 941,060   |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Gross Profit                                                                                                           |      |                         | 494,596   |      |               |    | 422,105   |   |  |   | 248,762   |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Operating expenses                                                                                                     |      |                         | 278,448   |      |               |    | 223,373   |   |  |   | 130,677   |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Operating Income                                                                                                       |      |                         | 216,148   |      |               |    | 198,732   |   |  |   | 118,085   |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Non operating income / (expense), net                                                                                  |      |                         |           |      |               |    |           |   |  |   |           |  
|Interest (expense), net                                                                                                |      |                         | (80,213   | )    |               |    | (53,447   | ) |  |   | (35,829   | )
|Other financial income / (expense), net                                                                                |      |                         | 21,864    |      |               |    | (132,936  | ) |  |   | 13,594    |  
|Amortization of deferred charges                                                                                       |      |                         | (38,501   | )    |               |    |          |   |  |   |          |  
|Other non operating income / (expense), net                                                                            |      |                         | 824       |      |               |    | 410       |   |  |   | (1,770    | )
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Income before taxes, equity in net income from unconsolidated investments and noncontrolling interests in subsidiaries |      |                         | 120,122   |      |               |    | 12,759    |   |  |   | 94,080    |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Income tax expense                                                                                                     |      |                         | (22,905   | )    |               |    | (11,872   | ) |  |   | (15,910   | )
|Equity in net earnings of affiliates                                                                                   |      |                         | (13,102   | )    |               |    | (9,002    | ) |  |   |          |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Net income / (loss)                                                                                                    |      | $                       | 84,115    |      |               | ($ | 8,115     | ) |  | $ | 78,170    |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Less: Net income / (loss) attributable to noncontrolling interests in subsidiaries                                     |      |                         | 2,708     |      |               |    | 3,680     |   |  |   | 1,068     |  
|Less: Net income / (loss) attributable to redeemable noncontrolling interests in Whitehall Group                       |      |                         | 3,078     |      |               |    | 6,803     |   |  |   |          |  
|Net income / (loss) attributable to CEDC                                                                               |      | $                       | 78,329    |      |               | ($ | 18,598    | ) |  | $ | 77,102    |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Net income per share of common stock, basic                                                                            |      | $                       | 1.46      |      |               | ($ | 0.42      | ) |  | $ | 1.93      |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  
|Net income per share of common stock, diluted                                                                          |      | $                       | 1.45      |      |               | ($ | 0.42      | ) |  | $ | 1.91      |  
|                                                                                                                       |      |                         |           |      |               |    |           |   |  |   |           |  

The accompanying notes are an integral part of the consolidated financial statements.



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN

STOCKHOLDERS EQUITY

Amounts in columns expressed in thousands

(except per share information)



|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  
|---------------------------------------------------------------- | ------------ | ------------ | -------------- | - | ------------------------ |  | ------ | ---------------- | -- | --- | --------------------------------------- |  | - | -------------------------------------- | - |  | ----- | ------- | - |  | -- | -------- | - |  | -- | ------- | - |  | - | --------- | -
|                                                                 |              | Common Stock |                |   | AdditionalPaid-inCapital |  |        | RetainedEarnings |    |     | Accumu-lated othercomprehen-sive income |  |   | Non-controllinginterest insubsidiaries |   |  | Total |        
|                                                                 | Common Stock |              | Treasury Stock |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |  
|                                                                 | No. ofShares |              | Amount         |   | No. ofShares             |  | Amount |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |  
|Balance at December 31, 2006                                     |              | 38,692       |                | $ | 387                      |  | 246    |                  | ($ | 150 | )                                       |  | $ | 374,985                                |   |  | $     | 128,084 |   |  | $  | 17,667   |   |  | $  | 21,395  |   |  | $ | 542,368   |  
|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  
|Net income for 2007                                              |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       | 77,102  |   |  |    |         |   |  |    | 1,068   |   |  |   | 78,170    |  
|Foreign currency translation adjustment                          |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       |        |   |  |    | 162,773  |   |  |    | (21,982 | ) |  |   | 140,791   |  
|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  
|Comprehensive income for 2007                                    |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       | 77,102  |   |  |    | 162,773  |   |  |    | (20,914 | ) |  |   | 218,961   |  
|Common stock issued in public placement                          |              | 1,554        |                |   | 16                       |  |       |                  |    |    |                                         |  |   | 42,338                                 |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 42,354    |  
|Common stock issued in connection with options                   |              | 272          |                |   | 3                        |  |       |                  |    |    |                                         |  |   | 5,538                                  |   |  |       |        |   |  |    |         |   |  |    |         |   |  |   | 5,541     |  
|Common stock issued in connection with acquisitions              |              | 48           |                |   | 0                        |  |       |                  |    |    |                                         |  |   | 1,693                                  |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 1,693     |  
|Refundable purchase price related to Botapol acquisition         |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   | 5,000                                  |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 5,000     |  
|Balance at December 31, 2007                                     |              | 40,566       |                | $ | 406                      |  | 246    |                  | ($ | 150 | )                                       |  | $ | 429,554                                |   |  | $     | 205,186 |   |  | $  | 180,440  |   |  | $  | 481     |   |  | $ | 815,917   |  
|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  
|Net income for 2008                                              |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       | (16,591 | ) |  |    |         |   |  |    | 3,680   |   |  |   | (12,911   | )
|Foreign currency translation adjustment                          |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       |        |   |  |    | (227,212 | ) |  |    | 10,445  |   |  |   | (216,767  | )
|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  
|Comprehensive income for 2008                                    |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       | (16,591 | ) |  |    | (227,212 | ) |  |    | 14,125  |   |  |   | (229,678  | )
|Common stock issued in public placement                          |              | 3,576        |                |   | 36                       |  |       |                  |    |    |                                         |  |   | 233,809                                |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 233,845   |  
|Common stock issued in connection with options                   |              | 121          |                |   | 1                        |  |       |                  |    |    |                                         |  |   | 5,739                                  |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 5,740     |  
|Common stock issued in connection with acquisitions              |              | 3,082        |                |   | 30                       |  |       |                  |    |    |                                         |  |   | 134,601                                |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 134,631   |  
|Balance at December 31, 2008(as reported)                        |              | 47,345       |                | $ | 473                      |  | 246    |                  | ($ | 150 | )                                       |  | $ | 803,703                                |   |  | $     | 188,595 |   |  | ($ | 46,772   | ) |  | $  | 14,606  |   |  | $ | 960,455   |  
|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  
|Adoption of ASC 470-20                                           |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   | 12,787                                 |   |  |       | (2,007  | ) |  |    |         |   |  |    |        |   |  |   | 10,780    |  
|Balance at December 31, 2008(as adjusted)                        |              | 47,345       |                | $ | 473                      |  | 246    |                  | ($ | 150 | )                                       |  | $ | 816,490                                |   |  | $     | 186,588 |   |  | ($ | 46,772   | ) |  | $  | 14,606  |   |  | $ | 971,235   |  
|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  
|Net income / (loss) for 2009                                     |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       | 78,329  |   |  |    |         |   |  |    | 2,708   |   |  |   | 81,037    |  
|Foreign currency translation adjustment                          |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       |        |   |  |    | 170,082  |   |  |    | (4,018  | ) |  |   | 166,064   |  
|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  
|Comprehensive income for 2009                                    |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       | 78,329  |   |  |    | 170,082  |   |  |    | (1,310  | ) |  |   | 247,101   |  
|Common stock issued in public placement                          |              | 17,935       |                |   | 179                      |  |       |                  |    |    |                                         |  |   | 486,967                                |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 487,146   |  
|Common stock issued in connection with options                   |              | 63           |                |   | 1                        |  |       |                  |    |    |                                         |  |   | 4,634                                  |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 4,635     |  
|Common stock issued in connection with acquisitions              |              | 4,069        |                |   | 41                       |  |       |                  |    |    |                                         |  |   | 81,156                                 |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   | 81,197    |  
|Acquisition of Russian Alcohol                                   |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       |        |   |  |    |         |   |  |    | 50,000  |   |  |   | 50,000    |  
|Purchase of Russian Alcohol shares from noncontrolling interest  |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   | (29,401                                | ) |  |       |        |   |  |    |         |   |  |    | (52,382 | ) |  |   | (81,783   | )
|Purchase of Whitehall Group shares from noncontrolling interest  |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   | (20,195                                | ) |  |       |        |   |  |    |         |   |  |    |        |   |  |   | (20,195   | )
|Gross up on trademarks in Parliament                             |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       |        |   |  |    |         |   |  |    | 15,993  |   |  |   | 15,993    |  
|Purchase of Parliament Group shares from noncontrolling interest |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   | (43,260                                | ) |  |       |        |   |  |    |         |   |  |    | (26,907 | ) |  |   | (70,167   | )
|Valuation adjustment                                             |              |             |                |   |                         |  |       |                  |    |    |                                         |  |   |                                       |   |  |       |        |   |  |    |         |   |  |    |        |   |  |   |          |  
|Balance at December 31, 2009                                     |              | 69,412       |                | $ | 694                      |  | 246    |                  | ($ | 150 | )                                       |  | $ | 1,296,391                              |   |  | $     | 264,917 |   |  | $  | 123,310  |   |  | ($ | 0       | ) |  | $ | 1,685,162 |  
|                                                                 |              |              |                |   |                          |  |        |                  |    |     |                                         |  |   |                                        |   |  |       |         |   |  |    |          |   |  |    |         |   |  |   |           |  

The accompanying notes are an integral part of the consolidated financial statements.



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

Amounts in columns expressed in thousands



|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  
|--------------------------------------------------------------------------------------------- | ---- | -------------------------------- | ---------- | ---- | ------------- | -- | -------- | - |  | - | -------- | -
|                                                                                              |      | Twelve months ended December 31, |           
|                                                                                              | 2009 |                                  |            | 2008 |               |    | 2007     |  
|                                                                                              |      |                                  |            |      | (as adjusted) |    |          |   | 
|Operating Activities                                                                          |      |                                  |            |      |               |    |          |   |  |   |          |  
|Net income                                                                                    |      | $                                | 84,115     |      |               | ($ | 8,115    | ) |  | $ | 78,170   |  
|Adjustments to reconcile net income to net cash provided by / (used in) operating activities: |      |                                  |            |      |               |    |          |   |  |   |          |  
|Depreciation and amortization                                                                 |      |                                  | 14,652     |      |               |    | 14,786   |   |  |   | 9,968    |  
|Deferred income taxes                                                                         |      |                                  | (32,378    | )    |               |    | (19,282  | ) |  |   | 9,957    |  
|Unrealized foreign exchange (gains) / losses                                                  |      |                                  | (38,760    | )    |               |    | 133,528  |   |  |   | (23,940  | )
|Cost of debt extinguishment                                                                   |      |                                  |           |      |               |    | 1,156    |   |  |   | 11,864   |  
|Stock options expense                                                                         |      |                                  | 3,782      |      |               |    | 3,850    |   |  |   | 1,866    |  
|Hedge revaluation                                                                             |      |                                  | 9,160      |      |               |    |         |   |  |   |         |  
|Equity income in affiliates                                                                   |      |                                  | 13,101     |      |               |    | 9,002    |   |  |   |         |  
|Gain on remeasurement of previously held equity interest, net of impairment                   |      |                                  | (12,418    | )    |               |    |         |   |  |   |         |  
|Amortization of deferred charges                                                              |      |                                  | 38,501     |      |               |    |          |   |  |   |          |  
|Other non cash items                                                                          |      |                                  | 1,333      |      |               |    | 1,314    |   |  |   | 7,284    |  
|Changes in operating assets and liabilities:                                                  |      |                                  |            |      |               |    |          |   |  |   |          |  
|Accounts receivable                                                                           |      |                                  | (53,483    | )    |               |    | (121,589 | ) |  |   | (38,812  | )
|Inventories                                                                                   |      |                                  | 1,268      |      |               |    | (41,712  | ) |  |   | (21,986  | )
|Prepayments and other current assets                                                          |      |                                  | 28,859     |      |               |    | 17,100   |   |  |   | 5,865    |  
|Trade accounts payable                                                                        |      |                                  | (2,049     | )    |               |    | 62,459   |   |  |   | (880     | )
|Other accrued liabilities and payables                                                        |      |                                  | 37,278     |      |               |    | 19,699   |   |  |   | (16,272  | )
|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  
|Net Cash provided by Operating Activities                                                     |      |                                  | 92,961     |      |               |    | 72,196   |   |  |   | 23,084   |  
|                                                                                              |      |                                  |           
|Investing Activities                                                                          |      |                                  |            |      |               |    |          |   |  |   |          |  
|Investment in fixed assets                                                                    |      |                                  | (18,696    | )    |               |    | (22,572  | ) |  |   | (25,787  | )
|Proceeds from the disposal of fixed assets                                                    |      |                                  | 3,874      |      |               |    | 6,943    |   |  |   | 2,670    |  
|Changes in restricted cash                                                                    |      |                                  | (481,419   | )    |               |    |         |   |  |   |         |  
|Purchase of financial assets                                                                  |      |                                  |           |      |               |    | (103,500 | ) |  |   |         |  
|Refundable purchase price related to Botapol acquisition                                      |      |                                  |           |      |               |    |         |   |  |   | 5,000    |  
|Acquisitions of subsidiaries, net of cash acquired                                            |      |                                  | (573,504   | )    |               |    | (548,799 | ) |  |   | (141,005 | )
|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  
|Net Cash used in Investing Activities                                                         |      |                                  | (1,069,745 | )    |               |    | (667,928 | ) |  |   | (159,122 | )
|                                                                                              |      |                                  |           
|Financing Activities                                                                          |      |                                  |            |      |               |    |          |   |  |   |          |  
|Borrowings on bank loans and overdraft facility                                               |      |                                  | 37,399     |      |               |    | 120,586  |   |  |   | 13,225   |  
|Borrowings on long-term bank loans                                                            |      |                                  |           |      |               |    | 43,192   |   |  |   | 122,508  |  
|Payment of bank loans, overdraft facility and other borrowings                                |      |                                  | (146,567   | )    |               |    | (31,935  | ) |  |   | (30,153  | )
|Payment of long-term borrowings                                                               |      |                                  | (265,517   | )    |               |    |         |   |  |   | 8        |  
|Net Borrowings of Senior Secured Notes                                                        |      |                                  | 929,569    |      |               |    |         |   |  |   |         |  
|Payment of Senior Secured Notes                                                               |      |                                  |           |      |               |    | (26,996  | ) |  |   | (95,440  | )
|Repayment of obligation to former shareholders                                                |      |                                  | (28,814    | )    |               |    |         |   |  |   |         |  
|Hedge closure                                                                                 |      |                                  | (14,417    | )    |               |    |         |   |  |   |         |  
|Movements in capital leases payable                                                           |      |                                  | (1,430     | )    |               |    | 1,216    |   |  |   | 445      |  
|Issuance of shares in public placement                                                        |      |                                  | 490,974    |      |               |    | 233,845  |   |  |   | 42,354   |  
|Transactions with equity holders                                                              |      |                                  | (7,876     | )    |               |    |         |   |  |   |         |  
|Net Borrowings on Convertible Senior Notes                                                    |      |                                  |           |      |               |    | 304,403  |   |  |   |         |  
|Dividends paid to minority shareholders                                                       |      |                                  | (2,758     | )    |               |    |         |   |  |   |         |  
|Options exercised                                                                             |      |                                  | 854        |      |               |    | 1,899    |   |  |   | 3,976    |  
|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  
|Net Cash provided by Financing Activities                                                     |      |                                  | 991,417    |      |               |    | 646,210  |   |  |   | 56,923   |  
|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  
|Currency effect on brought forward cash balances                                              |      |                                  | 29,943     |      |               |    | (30,744  | ) |  |   | 7,620    |  
|Net Increase / (Decrease) in Cash                                                             |      |                                  | 44,576     |      |               |    | 19,734   |   |  |   | (71,495  | )
|Cash and cash equivalents at beginning of period                                              |      |                                  | 107,601    |      |               |    | 87,867   |   |  |   | 159,362  |  
|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  
|Cash and cash equivalents at end of period                                                    |      | $                                | 152,177    |      |               | $  | 107,601  |   |  | $ | 87,867   |  
|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  
|Supplemental Schedule of Non-cash Investing Activities                                        |      |                                  |            |      |               |    |          |   |  |   |          |  
|Common stock issued in connection with investment in subsidiaries                             |      | $                                | 81,197     |      |               | $  | 134,631  |   |  | $ | 1,693    |  
|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  
|Supplemental disclosures of cash flow information                                             |      |                                  |            |      |               |    |          |   |  |   |          |  
|Interest paid                                                                                 |      | $                                | 84,694     |      |               | $  | 55,426   |   |  | $ | 40,136   |  
|Income tax paid                                                                               |      | $                                | 28,118     |      |               | $  | 33,919   |   |  | $ | 21,362   |  
|                                                                                              |      |                                  |            |      |               |    |          |   |  |   |          |  

The accompanying notes are an integral part of the consolidated financial statements.



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts in tables expressed in thousands, except per share information

1. Organization
and Significant Accounting Policies

Organization and Description of Business

Central European Distribution Corporation (CEDC), a Delaware corporation, and its subsidiaries (collectively referred to as
we, us, our, or the Company) operate primarily in the alcohol beverage industry. The Company is Central Europes largest integrated spirit beverages business. The Company is also the largest vodka
producer by value and volume in Poland and Russia and produces the Absolwent, Zubrowka, Bols, Parliament, Green Mark, Soplica and Zhuravli brands, among others. In addition, it produces and distributes Royal Vodka, the number one selling vodka in
Hungary. As well as sales and distribution of its own branded spirits, the Company is the leading distributor and the leading importer of spirits, wine and beer in Poland and a leading exclusive importer of wines and spirits in Poland, Russia and
Hungary.

Significant Accounting Policies

The significant accounting policies and practices followed by the Company are as follows:

Basis of Presentation

Our consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States. Our Company consolidates all entities that we control by ownership of a majority voting interest. We also consolidated the Whitehall Group, in which the Company controls 49.9% of voting interest,
and Russian Alcohol, where we obtained full voting control in January 2010. All inter-company accounts and transactions have been eliminated in the consolidated financial statements.

In June 2009, the FASB issued ASC Topic 810, which changes how a company determines whether an entity should be consolidated. The
adoption of this standard may impact the current treatment of the Whitehall Group by the Company and the Company is current assessing this treatment and potential impact on the financial statements. See Recently Issued Accounting
Pronouncements for more detailed information on this topic.

CEDCs subsidiaries maintain their books of account
and prepare their statutory financial statements in their respective local currencies.

The subsidiaries financial
statements have been adjusted to reflect accounting principles generally accepted in the United States of America (U.S. GAAP).

Effective January 1, 2009, we adopted the following pronouncements which require us to retrospectively restate previously disclosed consolidated financial statements. As such, certain prior period amounts have been reclassified in the
unaudited consolidated financial statements to conform to the current period presentation.



| |  |  | We adopted the provisions of Accounting Standards Codification(ASC) Topic 810-10, Consolidation, which
establishes and expands accounting and reporting standards for minority interests (which are recharacterized as noncontrolling interests) in a subsidiary and the deconsolidation of a subsidiary. As a result of our adoption of this standard, amounts
previously reported as minority interests in other partnerships on our balance sheets are now presented as noncontrolling interests in other partnerships within equity. Minority interests in Whitehall Group continue to be included in the mezzanine
section (between liabilities and equity) on the accompanying consolidated balance sheets because of the redemption feature of these units.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of adoption of ASC Topic 810-10, as at December 31, 2008, NCI related to our shareholding in Parliament and Polmos Bialystok amounting to $14.6 million would be reported as part



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



of equity and the amount of $33.6 million related to Whitehall Group would be disclosed in the mezzanine section.

ASC Topic 810-10 applies prospectively, except for presentation and disclosure requirements, which are applied retrospectively.

The changes in redeemable noncontrolling interests for the twelve months ended December 31, 2009 are shown below:



|                                                 |  |   |        |  
|------------------------------------------------ |  | - | ------ | -
|Balance at December 31, 2008                     |  | $ | 33,642 |  
|Net income for 2009                              |  |   | 3,078  |  
|Foreign currency translation adjustment          |  |   | (4,013 | )
|JV Revaluation into RUR as a functional currency |  |   | (3,091 | )
|Purchase of shares from noncontrolling interests |  |   | (6,728 | )
|Balance at December 31, 2009                     |  | $ | 22,888 |  



| |  |  | We adopted ASC Topic 470-20, Debt with Conversion and Other Options that is effective for our $310.0 million aggregate
principal amount of 3.00% Convertible Senior Notes (CSN) and requires retrospective application for all periods presented. The ASC Topic 470-20 requires the issuer of convertible debt instruments with cash settlement features to
separately account for the liability ($290.3 million as of the date of the issuance of the CSNs) and equity components ($19.7 million as of the date of the issuance of the CSNs) of the instrument. The debt component was recognized at the
present value of its cash flows discounted using a 4.5% discount rate, our borrowing rate at the date of the issuance of the CSNs for a similar debt instrument without the conversion feature. The equity component, recorded as additional paid-in
capital, was $12.8 million, which represents the difference between the proceeds from the issuance of the Debentures and the fair value of the liability, net of deferred taxes of $6.9 million as of the date of the issuance of the CSNs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ASC Topic 470-20 also requires an accretion of the resultant debt discount over the expected life of the
CSNs, which is March 7, 2008 to March 15, 2013. The consolidated statement of operations were retroactively modified compared to previously reported amounts as follows (in thousands, except per share amounts):



|                                                       |  |                                      |        |  
|------------------------------------------------------ |  | ------------------------------------ | ------ | -
|                                                       |  | Twelve months endedDecember 31, 2008 |       
|Additional pre-tax non-cash interest expense           |  |                                      | 3,087  |  
|Additional deferred tax benefit                        |  |                                      | 1,080  |  
|Retroactive change in net income and retained earnings |  |                                      | (2,006 | )
|Change to basic earnings per share                     |  | ($                                   | 0.05   | )
|Change to diluted earnings per share                   |  | ($                                   | 0.05   | )

For the twelve months
ended December 31, 2009, the additional pre-tax non-cash interest expense recognized in the consolidated statement of operations was $3.9 million. Accumulated amortization related to the debt discount was $7.0 million and
$3.1 million as of December 31, 2009 and December 31, 2008, respectively. The annual pre-tax increase in non-cash interest expense on our consolidated statements of operations to be recognized until 2013, the maturity date of the
CSNs, is as follows (in thousands):



|     |  |                                             
|---- |  | --------------------------------------------
|     |  | Pre-tax increase in non-cashinterest expense
|2010 |  | 4,098                                       
|2011 |  | 4,282                                       
|2012 |  | 4,285                                       



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



The FASB has issued FASB Statement No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principlescodified as ASC Topic 105 Generally Accepted Accounting Principles. ASC Topic 105 establishes the FASB Accounting Standards
Codification (Codification or ASC) as the single source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities
and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered,
non-SEC accounting literature not included in the Codification will become non-authoritative.

Following the Codification, the
Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates, which will serve to update the Codification, provide background
information about the guidance and provide the basis for conclusions on the changes to the Codification.

GAAP is not intended
to be changed as a result of the FASBs Codification project, but it will change the way the guidance is organized and presented. As a result, these changes will have a significant impact on how companies reference GAAP in their financial
statements and in their accounting policies for financial statements issued for interim and annual periods ending after September 15, 2009. CEDC adopted the Codification in this quarterly report by providing references to the Codification
topics alongside references to the existing standards.

The Company has performed an evaluation of subsequent events through
March 1, 2010, which is the date the financial statements were issued.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates and such differences may be material to the consolidated financial statements.

Foreign Currency Translation and Transactions

For all of the Companys subsidiaries the functional currency is the local currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each year-end.
The Statement of Operations are translated at the average rate of exchange prevailing during the respective year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of
stockholders equity. Transaction adjustments arising from operations as well as gains and losses from any specific foreign currency transactions are included in the reported net income/(loss) for the period.

The accompanying consolidated financial statements have been presented in U.S. dollars.



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



Tangible Fixed Assets

Tangible fixed assets are stated at cost, less accumulated depreciation. Depreciation of tangible fixed assets is computed by the
straight-line method over the following useful lives:



|                                                  |  |                          
|------------------------------------------------- |  | -------------------------
|Type                                              |  | Depreciation lifein years
|Transportation equipment including capital leases |  | 5                        
|Production equipment                              |  | 10                       
|Software                                          |  | 5                        
|Computers and IT equipment                        |  | 3                        
|Beer dispensing and other equipment               |  | 2-10                     
|Freehold land                                     |  | Not depreciated          
|Freehold buildings                                |  | 40                       

Leased equipment
meeting appropriate criteria is capitalized and the present value of the related lease payments is recorded as a liability. Amortization of capitalized leased assets is computed on a straight-line method over the useful life of the relevant assets.

Where the cost of equipment is approximately $1,500 per transaction, it is expensed to the statement of operations as
incurred.

The Company periodically reviews its investment in tangible fixed assets and when indicators of impairment exist,
an impairment loss is recognized.

Goodwill

Following the adoption of ASC Topic 805 and ASC Topic 350, goodwill and certain intangible assets having indefinite lives are no longer subject to amortization. Their book values are tested annually for
impairment, or more frequently, if facts and circumstances indicate the need. Fair value measurement techniques, such as the discounted cash flow methodology, are utilized to assess potential impairments. The testing is performed at each reporting
unit level. In the discounted cash flow method, the Company discounts forecasted performance plans to their present value. The discount rate utilized is the weighted average cost of capital for the reporting unit. US GAAP requires the
impairment test to be performed in two stages. If the first stage does not indicate that the carrying values of the reporting units exceed the fair values, the second stage is not required. When the first stage indicates potential impairment, the
company has to complete the second stage of the impairment test and compare the implied fair value of the reporting units goodwill to the corresponding carrying value of goodwill.

Involvement of the Company in variable interest entities (VIEs) and continuing involvement with transferred financial assets.

Whitehall Group

On
May 23, 2008, the Company and certain of its affiliates, entered into, and closed upon, a Share Sale and Purchase Agreement and certain other agreements whereby the Company acquired shares representing 50% minus one vote of the voting
power, and 75% of the economic interests, in the Whitehall Group. In consideration for additional payments made to the seller on February 24, 2009, the Company received an additional 375 Class B shares of Whitehall, which represents an increase
of the Companys economic stake in Whitehall Group from 75% to 80%.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



Transfers of Financial Assets

Except for the amount of $7.5 million that was lent at market rates as a working capital by the Company to the Whitehall Group there were no
transfers of financial assets to VIE as the Whitehall Group is a self financing body. Including the $7.5 million transfer, the Company does not have any continuing involvement with transferred financial assets that allow the transferors to receive
cash flows or other benefits from the assets or requires the transferors to provide cash flows or other assets in relation to the transferred financial assets.

Variable Interest Entities

CEDC consolidated the Whitehall Group as a
business combination as of May 23, 2008, on the basis that the Whitehall Group is a Variable Interest Entity (VIE) and the Company has been assessed as being the primary beneficiary. Included within the Whitehall Group is a 50/50
joint venture with Möet Hennessy. The current term of the joint venture is until June 2013 at which point Möet Hennessy will have the option to acquire the remaining shares of the entity.

Based upon the review of Paragraph 4 CEDC management has concluded that its interest in Peulla Enterprises, the special purpose vehicle
(SPV), being a Cyprus company in which CEDC has 49.9% voting power, would not fall under any of scope exceptions. Therefore CEDC has evaluated whether the SPV is a variable interest entity under the provisions of Paragraph 5 and thus the
SPV subject to consolidation accounting.

In determining the accounting treatment if the Whitehall Group is a VIE and needs to
be consolidated by CEDC, we considered the conditions outlined in ASC Topic 810.



| |  |  | Equity Investment at RiskWe concluded that the SPV would not meet the requirement of a VIE based upon Paragraph 5(a) as the interest would
be classified as equity under US GAAP, the at risk equity is sufficient to permit the entity to finance its activities. Neither equity holder will provide any additional material capital into the SPV. The SPV will be utilized solely as a
holding company with its economics determined by the underlying Whitehall Group.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Controlling Financial InterestsBoth shareholders, Mark Kaoufman acting through a Jersey trust (the Trust) and CEDC, are able
to direct the activities and operations of the Whitehall Group through their roles on the Board of Directors and their responsibilities for selection of executive level officers. However, the ultimate obligation to absorb losses of the entity or
right to receive the residual benefits will lie with CEDC at the time the put/call term ends. Should the business not perform, the Trust will have the right to put his shares to CEDC with a pre-agreed floor on the value of the put option. Thus the
Company is at risk of absorbing a greater portion of losses upon the Trusts exit than the Trust itself. Conversely at the end of the term, CEDC can call and if the business has over performed, the amount paid to the Trust on the call is capped
at a pre-agreed amount. As such, because the Trust is both limited in its losses and returns through the terms of the put/call with caps and floors, this criterion is met and would cause Whitehall Group to be considered a VIE.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disproportionate Voting RightsThe voting rights of the Trust and CEDC (50.1% and 49.9%) are not proportionate to their economic interests
(20% and 80%). In this structure, it appears CEDC has disproportionately fewer voting rights in relation to its economic rights.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Further, the below activities of the entity that are more closely associated with the activities of CEDC, thereby having substantially of the entitys activities conducted on its behalf. As CEDC has
disproportionately fewer rights while substantially all of Whitehall Groups activities are for CEDC, this would indicate that Whitehall Group lacks characteristic:



| |  |  | The operations of Whitehall Group are substantially similar in nature to the activities of CEDC;
| | - |  | ------------------------------------------------------------------------------------------------



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



| |  |  | CEDC has a call option to purchase the interests of the other investors in the entity;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | The Trust has an option to put his interests to CEDC.
| | - |  | -----------------------------------------------------

Both the Trust and CEDC are precluded from transferring its interests in the SPV to any third-party without consent from the other party. Transfers are subject to an absolute other party discretion
standard, other than limited permitted transfers (i.e., to affiliates). As such, it appears a de facto relationship exists.

The primary factor to be considered here is the design and intent of the variable interest entity. The SPV that holds the Whitehall Group and the related shareholders agreement were created with the clear intent to maximize the financial
exposure that CEDC has to the Whitehall Group business and to ultimately allow CEDC to take full control of the business in 2013. CEDC bears the greatest level of economic share of the entities performance, both in terms of profit allocation
(80%) and valuation of the put/call option at the end with a clear floor and cap on payment. The put/call structure in place provide near assurance that at the end of the term CEDC will take full ownership of the business. Should the business
perform at or above plan, CEDC valuation is capped therefore would elect to call, and should the business under perform, the Trust will put the shares receiving the guaranteed minimum valuation.

In June 2009, the FASB issued Statement of Financial Account Standards no. 167, which changes how a company determines whether an entity
should be consolidated. The adoption of this standard may impact the current treatment of the Whitehall Group by the Company and the Company is current assessing this treatment and potential impact on the financial statements. See Recently
Issued Accounting Pronouncements for more detailed information on this topic.

Russian Alcohol Group

On April 24, 2009, the Company entered into new agreements with Lion, to replace the Prior Agreement, which will permit the Company,
through a multi-stage equity purchase, to acquire over the next five years (including 2009) all of the equity interests in Russian Alcohol held by Lion (the Acquisition), including a Note Purchase and Share Subscription Agreement
between the Company, Carey Agri, Cayman 2, and Cayman 5. For further details on the whole structure of this acquisition please refer to Note 2 of the accompanying financial statements attached herein.

At the lowest level of the existing structure, all of Russian Alcohol companies up to the level of Lion/Rally Lux1 are consolidated based on
the fact that these are 100% wholly-owned companies. Therefore, we have evaluated and considered Cayman 7 as a variable interest entity for CEDC in the structure.

Transfers of Financial Assets

There were no transfers of financial assets
to a VIE as Russian Alcohol is a self financing body. The Company does not have any continuing involvement with transferred financial assets that allow the transferors to receive cash flows or other benefits from the assets or requires the
transferors to provide cash flows or other assets in relation to the transferred financial assets.

Variable Interest
Entities

Cayman 7 is a company in which Cayman 2 and CEDC are the sole limited partners and an affiliate of Lion is the
general partner. CEDC has 100% of the economic interests in Cayman 7, but Lion retains control of Cayman 7 through Cayman 2s ownership of a single voting share with de minimis economic rights (the Golden Share) but voting control
of Cayman 7. As Cayman 7 has the right to call capital from CEDC to settle obligations under the Option Agreement, CEDC has evaluated whether Cayman 7 is a variable interest entity under the provisions ASC Topic 810.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



Based upon the review of Paragraph 4 CEDCs management has concluded that its
direct interest in Cayman 7, as well as its indirect interest through Carey Agri and Cayman 2, would not fall under any of these scope exceptions. Therefore CEDC has evaluated whether Cayman 7 is a variable interest entity under the provisions of
Paragraph 5 of ASC Topic 810 and thus subject to consolidation accounting.

In determining the accounting treatment if Cayman
7 and, effectively, the whole Russian Alcohol is a VIE and needs to be consolidated by CEDC, we considered the conditions outlined in ASC Topic 810.



| |  |  | Equity Investment at RiskWe concluded that as the contribution made by Cayman 2 was the only one that required substantial investment,
Cayman 2 should be defined as having its equity at risk. Moreover as Cayman 7 is not able to finance its operations without funds received from CEDC, we believe that Cayman 7 would meet the requirement of a VIE based upon Paragraph 5(a).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Controlling Financial InterestsCEDC concluded that the equity investment at risk does not meet the last item in Paragraph 5(b) as all
dividends from the business are passed to CEDC with CEDC not having its equity investment at risk. These dividends then reduce CEDCs payment obligations to Lion (if dividends paid to CEDC by Russian Alcohol exceed the call option price, Lion
has to return the excess as CEDCs call option obligations have been met). However, Lion is not entitled to receive any dividends from Cayman 7 directly as CEDC has 100% of the economic interests, with Lion having voting control through voting
rights. Therefore we believe that Paragraph 5(b) would cause Cayman 7 to be treated as a VIE.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disproportionate Voting RightsWe believe that both criteria, including lack of voting rights and the requirement that substantially all
activities of Cayman 7 involve or are conducted on behalf of CEDC (as Cayman 7 is a company created solely to facilitate CEDCs funding of the exercise of call options to purchase shares of Cayman 6), we believe that this would require Cayman 7
to be treated as a VIE.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The conclusion of CEDC management is that Cayman 7, including its interest in
Cayman 6 and indirectly in Russian Alcohol, is a VIE. CEDC, as the party most closely associated with Cayman 7 receiving all economic benefits from Russian Alcohol thorough the chain of subsidiaries, would be considered the primary beneficiary of
Cayman 7 and must therefore consolidate Cayman 7 together with all of Russian Alcohol as a business combination under ASC Topic 805.

On December 9, 2009 we accelerated the terms set up on the Option Agreement dated April 24, 2009 and purchased the remaining equity interest in Russian Alcohol that was not owned by the Company. As a result of this Russian Alcohol
is no longer treated as a VIE, but rather consolidated as a fully owned subsidiary.

Intangible assets other than Goodwill

Intangibles consist primarily of acquired trademarks relating to well established brands, and as such have been deemed
to have an indefinite life. In accordance with ASC Topic 350, intangible assets with an indefinite life are not amortized but are reviewed at least annually for impairment. Additional intangible assets include the valuation of customer contracts
arising as a result of acquisitions, these intangible assets are amortized over their estimated useful life of 8 years.

Equity
investments

If the Company is not required to consolidate its investment in another company, the Company uses the
equity method if the Company can exercise significant influence over the other company. Under the equity



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



method, investments are carried at cost, plus or minus the Companys equity in the increases and decreases in the investees net assets after the date of acquisition and certain other
adjustments. The Companys share of the net income or loss of the investee is included in equity in earnings of equity method investees on the Companys Consolidated Statements of Operations. Dividends received from the investee reduce the
carrying amount of the investment. Equity investments are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable.

Impairment of long lived assets

In accordance with ASC Topic 805 and ASC Topic 350, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds
its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of an asset exceeds its fair value.

Revenue Recognition

Revenues of the Company include sales of its own produced spirit brands, imported
wine, beer and spirit brands as well as other third party alcoholic products purchased locally in Poland, the sale of each of these revenues streams are all processed and accounted for in the same manner. For all of its sources of revenue, the
Company recognizes revenue when persuasive evidence of an arrangement exists, delivery of product has occurred, the sales price charged is fixed or determinable and collectability is reasonably assured. This generally means that revenue is
recognized when title to the products are transferred to our customers. In particular, title usually transfers upon shipment to or receipt at our customers locations, as determined by the specific sales terms of the transactions.

Sales are stated net of sales tax (VAT) and reflect reductions attributable to consideration given to customers in various customer
incentive programs, including pricing discounts on single transactions, volume discounts, promotional listing fees and advertising allowances, cash discounts and rebates. Net sales revenue includes excise tax except in the case where the sales are
made from the production unit or are related to imported goods, in which case it is recorded net of excise tax.

Revenue Dilution

As part of normal business terms with customers, the Company provides for additional discounts and rebates off our
stand list price for all of the products we sell. These revenue reductions are documented in our contracts with our customers and are typically associated with annual or quarterly purchasing levels as well as payment terms. These rebates are divided
into on-invoice and off-invoice discounts. The on-invoice reductions are presented on the sales invoice and deducted from the invoice gross sales value. The off-invoice reductions are calculated based on the analysis performed by management and are
provided for in the same period the related sales are recorded. Discounts or fees that are subject to contractual based term arrangements are amortized over the term of the contract. For the twelve months ending December 31, 2009, the Company
recognized $117.9 million of off invoice rebates as a reduction to net sales.

Certain sales contain customer acceptance
provisions that grant a right of return on the basis of either subjective criteria or specified objective criteria. Where appropriate a provision is made for product return, based upon a combination of historical data as well as depletion
information received from our larger clients. The



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Companys policy is to closely monitor inventory levels with our key distribution customers to ensure that we do not create excess stock levels in the market which would result in a return
of sales in the future. Historically sales returns from customers has averaged less than 1% of our net sales revenue.

Shipping and
Handling Costs

Where the Company has incurred costs in shipping goods to its warehouse facilities these costs are
recorded as part of inventory and then to costs of goods sold. Shipping and handling costs associated with distribution are recorded in Selling, General and Administrative (S,G&A) costs.

Accounts Receivable

Accounts receivables are recorded based on the invoice price, inclusive of VAT (sales tax), and where a delivery note has been signed by the customer and returned to the Company. The allowances for doubtful accounts are based upon the aging
of the accounts receivable, whereby the Company makes an allowance based on a sliding scale. The Company typically does not provide for past due amounts due from large international retail chains (hypermarkets and supermarkets) as there have
historically not been any issues with collectability of these amounts. However, where circumstances require, the Company will also make specific provisions for any excess not provided for under the general provision. When a final determination is
delivered to the Company regarding the non-recovery of a receivable, the Company then charges the unrecoverable amount to the accumulated allowance.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market value.
Elements of cost include materials, labor and overhead and are classified as follows:



|                                    |  |                  |         |                  |   |        
|----------------------------------- |  | ---------------- | ------- | ---------------- | - | -------
|                                    |  | December 31,2009 |         | December 31,2008
|Raw materials and supplies          |  | $                | 35,922  |                  | $ | 18,352 
|In-process inventories              |  |                  | 2,914   |                  |   | 1,698  
|Finished goods and goods for resale |  |                  | 182,581 |                  |   | 160,254
|                                    |  |                  |         |                  |   |        
|Total                               |  | $                | 221,417 |                  | $ | 180,304
|                                    |  |                  |         |                  |   |        

Because of the nature of the products supplied by the
Company, great attention is paid to inventory rotation. Where goods are estimated to be obsolete or unmarketable they are written down to a value reflecting the net realizable value in their relevant condition.

Cost includes customs duty (where applicable), and all costs associated with bringing the inventory to a condition for sale. These costs
include importation, handling, storage and transportation costs, and exclude rebates received from suppliers, which are reflected as reductions to closing inventory. Inventories are comprised primarily of beer, wine, spirits, packaging materials and
non-alcoholic beverages.

Cash and Cash Equivalents

Short-term investments which have a maturity of three months or less from the date of purchase are classified as cash equivalents.



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Income Taxes and Deferred Taxes

The Company computes and records income taxes in accordance with the liability method. Deferred tax assets and liabilities are recorded based
on the difference between the accounting and tax basis of the underlying assets and liabilities based on enacted tax rates expected to be in effect for the year in which the differences are expected to reverse.

Employee Retirement Provisions

The Companys employees are entitled to retirement payments and in some cases payments for long-service (jubilee awards) and accordingly the Company provides for the current value of the
liability related to these benefits. A provision is calculated based on the terms set in the collective labor agreement. The amount of the provision for retirement bonuses depends on the age of employees and the pre-retirement time of work for the
Company and typically equals one months salary.

The Company does not create a specific fund designated for these payments and
all payments related to the benefits are charged to the accrued liability. The provision for the employees benefits is calculated annually using the projected unit method and any losses or gains resulting from the valuation are immediately
recognized in the statement of operations.

The Company also contributes to State and privately managed defined contribution
plans. Contributions to defined contribution plans are charged to the statement of operations in the period in which they are incurred.

Employee Stock-Based Compensation

The Company adopted ASC Topic 718 CompensationStock
Compensation requiring the recognition of compensation expense in the Consolidated Statements of Operations related to the fair value of its employee share-based options.

The Company recognizes the cost of all employee stock options on a straight-line attribution basis over their respective vesting periods,
net of estimated forfeitures. The Company has selected the modified prospective method of transition; accordingly, prior periods have not been restated.

ASC Topic 718 requires the recognition of compensation expense related to the fair value of employee share-based options. Determining the fair value of share-based awards at the grant date requires
judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility and the expected dividends. Judgment is also required in estimating the amount of share-based awards expected to be
forfeited prior to vesting. If actual forfeitures differ significantly from these estimates, share-based compensation expense could be materially impacted. Prior to adopting ASC Topic 718, the Company applied Accounting Principles Board
(APB) Opinion No. 25, and related Interpretations, in accounting for its stock-based compensation plans. All employee stock options were granted at or above the grant date market price. Accordingly, no compensation cost was
recognized for fixed stock option grants in prior periods.

The Companys 2007 Stock Incentive Plan (Incentive
Plan) provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to directors, executives, and other employees (employees) of the Company and to non-employee service providers of
the Company. Following a shareholder resolution in April 2003 and the stock splits of May 2003, May 2004 and June 2006, the Incentive Plan authorizes, and the Company has reserved for future issuance, up to 1,397,333 shares of Common Stock
(subject



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to an anti-dilution adjustment in the event of a stock split, re-capitalization, or similar transaction). The Compensation Committee of the Board of Directors of the Company administers the
Incentive Plan.

The option exercise price for stock options granted under the Incentive Plan may not be less than fair market
value but in some cases may be in excess of the closing price of the Common Stock on the date of grant. The Company uses the stock option price based on the closing price of the Common Stock on the day before the date of grant if such price is not
materially different than the opening price of the Common Stock on the day of the grant. Stock options may be exercised up to 10 years after the date of grant except as otherwise provided in the particular stock option agreement. Payment for the
shares must be in cash, which must be received by the Company prior to any shares being issued. Stock options granted to directors and officers as part of an employee employment contract vest after 2 years. Stock options granted to general employees
as part of a loyalty program vest after three years. The Incentive Plan was approved by CEDC shareholders during the annual shareholders meeting on April 30, 2007 to replace the Companys 1997 Stock Incentive Plan (the Old Stock
Incentive Plan), which expired in November 2007. The Stock Incentive Plan will expire in November 2017. The terms and conditions of the Stock Incentive Plan are substantially similar to those of the Old Stock Incentive Plan.

Before January 1, 2006 CEDC, the holding company, realized net operating losses and therefore an excess tax benefit (windfall)
resulting from the exercise of the awards and a related credit to Additional Paid-in Capital (APIC) of $2.2 million was not recorded in the Companys books. The excess tax benefits and the credit to APIC for the windfall should not be recorded
until the deduction reduces income taxes payable on the basis that cash tax savings have not occurred. The Company will recognize the windfall upon realization.

Comprehensive Income/(Loss)

Comprehensive income/(loss) is defined
as all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income/(loss) includes net income/(loss) adjusted by, among other items, foreign currency translation adjustments.
The translation gains/(losses) on the re-measurements from foreign currencies (primarily the Polish zloty and Russian ruble) to U.S. dollars are classified separately as a component of accumulated other comprehensive income included in
stockholders equity.

As of December 31, 2009, the Polish zloty exchange rate used to translate the balance sheet
strengthened compared to the exchange rate as of December 31, 2008, and as a result a gain to comprehensive income was recognized.

Segment Reporting

The Company primarily operates in one industry segment, the production and sale of
alcoholic beverages. As a result of the Companys expansion into new geographic areas, namely Russia, the Company has implemented a segmental approach to the business based upon geographic locations.

Net Income per Common Share

Net income per common share is calculated in accordance with ASC Topic 260 Earnings per Share. Basic earnings per share (EPS) are computed by dividing income available to common shareholders by the weighted- average number of
common shares outstanding for the year. The stock options and warrants discussed in Note 12 were included in the computation of diluted earnings per common share (Note 17).



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Recently Issued Accounting Pronouncements

In August 2009, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update No. 2009-05, Fair
Value Measurements and Disclosures (ASU 2009-05), which is effective for financial statements issued for interim and annual periods ending after August 2009. ASU 2009-05 amends FASB Accounting Standards Codification (FASB
ASC) Topic 820-10 (FASB ASC 820-10). The update provides clarification on the techniques for measurement of fair value required of a reporting entity when a quoted price in an active market for an identical liability is not
available. This update had no impact on the Companys financial position, results of operations or cash flows.

In June
2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification ) and the Hierarchy of Generally Accepted Accounting Principlesa replacement of
FAS No. 162 (SFAS No. 168), which is effective for financial statements issued for interim and annual periods ending after September 15, 2009. SFAS No. 168 codified as ASC Topic 105-10 (FASB ASC
105-10). FASB ASC 105-10 identifies the sources of accounting principles and the framework for selecting principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP
(the GAAP hierarchy). This standard had no impact on the Companys financial position, results of operations or cash flows.

In June 2009, the FASB issued ASC Topic 810, Amendments to FASB Interpretation No. 46(R) (ASC 810). ASC 810 is a revision to FIN 46(R) and changes how a company determines whether an entity should be
consolidated when such entity is insufficiently capitalized or is not controlled by the company through voting (or similar rights). The determination of whether a company is required to consolidate an entity is based on, among other things, the
entitys purpose and design and the companys ability to direct the activities of the entity that most significantly impact the entitys economic performance. ASC 810 retains the scope of FIN 46(R) but added entities previously
considered qualifying special purpose entities, or QSPEs, since the concept of these entities is eliminated in ASC Topic 860. ASC 810 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2009.
The Company is still in process of evaluating the potential impact of adoption of ASC 810 on its consolidated financial position and results of operations. Should the company determine that the requirements for consolidating the Whitehall Group are
not met under ASC 810, the deconsolidation of this Group may result in a material impact on the presentation of the Companys results of operations. Specifically the lines of revenues and costs before income before taxes, equity in net income
from unconsolidated investments and non-controlling interest in subsidiaries would be reduced, however the final net income or loss attributable to CEDC would remain unchanged. Similarly the individual lines of the balance sheet will be affected
however total equity would remain the same. The Company also does not expect any material impact on debt or other contractual obligations.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events(SFAS No. 165), codified in FASB ASC Topic 855-10, which establishes accounting and disclosure standards
for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It defines financial statements as available to be issued, requiring the disclosure of the date through which an entity has
evaluated subsequent events and the basis for that date, whether it be the date the financial statements were issued or the date they were available to be issued. FAS 165 is effective for our second quarter of 2009 and has not had a material impact
on our Consolidated Financial Statements.

In April 2009, the FASB issued FASB Staff Position (FSP)
No. SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments(FSP No. SFAS 115-2 and SFAS 124-2), which is codified in FASB ASC Topic 320-10. FSP
No. SFAS 115-2 and SFAS 124-2 provides guidance to



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determine whether the holder of an investment in a debt security for which changes in fair value are not regularly recognized in earnings should recognize a loss in earnings when the investment
is impaired. This FSP also improves the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the consolidated financial statements. This guidance is effective for interim reporting periods ending after
June 15, 2009. The adoption of FSP FAS 115-2 and FAS 124-2 did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued FSP No. SFAS 107-1 and Accounting Principles Board (APB) Opinion No. APB 28-1, Interim Disclosures about Fair Value of Financial Instruments(FSP No. SFAS 107-1 and APB 28-1). FSP No. SFAS 107-1 and APB 28-1, which is codified in FASB ASC Topic 825-10-50, require disclosures about the fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. The Company adopted FSP No. SFAS 107-1 and APB 28-1 beginning April 1, 2009. This FSP had no impact on the Companys financial position, results of operations
or cash flows.

In April 2009, the FASB issued FSP No. SFAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(FSP No. SFAS 157-4). FSP No. SFAS 157-4, which is codified in FASB ASC Topics
820-10-35-51 and 820-10-50-2, provides additional guidance for estimating fair value and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same. The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009. This FSP had no material impact on the Companys financial position, results of
operations or cash flows.

In December 2008, the FASB issued FSP No. SFAS 132(R)-1, Employers Disclosures
about Postretirement Benefit Plan Assets, (FSP No. SFAS 132(R)-1) which is codified in FASB ASC Topic 715-20-50. FSP No. SFAS 132(R)-1 requires enhanced disclosures about the plan assets of a Companys
defined benefit pension and other postretirement plans intended to provide financial statement users with a greater understanding of: 1) how investment allocation decisions are made; 2) the major categories of plan assets; 3) the
inputs and valuation techniques used to measure the fair value of plan assets; 4) the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and 5) significant concentrations of
risk within plan assets.

2. Acquisitions

Acquisitions made prior to December 31, 2008 were accounted for in accordance with SFAS No. 141, Business Combinations. Effective January 1, 2009, all business combinations
are accounted for in accordance with FAS 141R that is codified as ASC Topic 805 Business Combinations.

The Parliament
Acquisition

On March 11, 2008, the Company and certain of its affiliates entered into a Share Sale and Purchase
Agreement and certain other agreements with White Horse Intervest Limited, a British Virgin Islands Company, and certain of White Horses affiliates, relating to the Companys acquisition from White Horse of 85% of the share capital of
Copecresto Enterprises Limited, a Cypriot company, (which we refer to as Parliament). In connection with this acquisition, the Company paid a consideration of approximately $180 million in cash and 2.2 million shares of common stock.



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On September 22, 2009, the Company and certain of its affiliates and Seller entered
into (i) an amendment to the Original SPA (the Amendment) and (ii) a Share Sale and Purchase Agreement (the Minority Acquisition SPA). Under the terms of the Amendment, certain post-closing obligations in the
Original SPA regarding payment for certain assets were finalized in order to facilitate completion of the transactions contemplated by the Original SPA, in connection with the completion of the Companys acquisition of Copecresto pursuant to
the Minority Acquisition SPA. In connection with the Amendment, the Company was required to pay to Seller the remaining consideration for such assets of approximately $16.7 million The Company paid $9.9 million of that amount on October 30,
2009 and the remaining amount was paid on December 16, 2009.

Under the terms of the Minority Acquisition SPA, upon the
closing thereof on September 22, 2009, the Company, through an affiliate, acquired the remaining 15% of the share capital of Copecresto from Seller for total cash consideration of $70,167,734. In addition, on September 25, 2009, in
connection with the closing of the Minority Acquisition SPA, the Shareholders Agreement, dated March 13, 2008, by and among the Company, a subsidiary of the Company, Seller and Copecresto was terminated. The Minority Acquisition SPA contains
certain customary representations, warranties and covenants for a transaction of this type.

Under requirements of ASC Topic
810-10 Consolidation a change in ownership interests that does not result in change of control is considered an equity transaction. The identifiable net assets remain unchanged and any difference between the amount by which the NCI is
adjusted, and the fair value of the consideration paid is recognized directly in equity and attributed to the controlling interest. Thus we have recorded the 15% increase in ownership interests of Copecresto as a transaction within equity. As a
result of this transaction, NCI in Copecresto decreased by $26.9 million together with decrease in Additional Paid In Capital of $43.3 million, which was offset by cash outflow of $70.2 million.

The Whitehall Acquisition

On May 23, 2008, the Company and certain of its affiliates, entered into, and closed upon, a Share Sale and Purchase Agreement and certain other agreements whereby the Company acquired shares representing 50% minus one vote of the
voting power, and 75% of the economic interests, in the Whitehall Group. The Whitehall Group is a leading importer of premium spirits and wines in Russia. The aggregate consideration paid by the Company was $200 million, paid in cash at the closing.
In addition, on October 21, 2008 the Company issued to the Seller 843,524 shares of its common stock, par value $0.01 per share.

On February 24, 2009, the Company and the seller amended the terms of the Stock Purchase Agreement governing the Whitehall acquisition to satisfy the Companys obligations to the seller pursuant to a share price guarantee in the
original Stock Purchase Agreement. Pursuant to the terms of this amendment, the Company paid to the seller $5,876,351 in cash, and issued to the seller 2,100,000 shares of its common stock, in settlement of a minimum share price guarantee by the
Company. The Company also made an additional cash payment of $2,000,000 on March 15, 2009. The first portion of deferred payments already due under the original Stock Purchase Agreement amounting to 8,050,411 was settled August 4,
2009 and the remaining portion of 8,303,630 was paid on September 15, 2009. In consideration for these payments, the Company received an additional 375 Class B shares of Whitehall, which represents an increase in the Companys
economic stake from 75% to 80%.

The Company has consolidated the Whitehall Group as a business combination as of May 23,
2008, on the basis that the Whitehall Group is a Variable Interest Entity and the Company has been assessed as being the primary beneficiary. Included within the Whitehall Group is a 50/50 joint venture with Möet Hennessy. This



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joint venture is accounted for using the equity method and is recorded on the face of the balance sheet in investments with minority interest initially recorded at fair value on the face of the
balance sheet. The current term of the joint venture is until June 2013 at which point Möet Hennessy will have the option to acquire the remaining shares of the entity.

Under requirements of ASC Topic 810-10 Consolidation a change in ownership interests that does not result in change of control
is considered an equity transaction. The identifiable net assets remain unchanged and any difference between the amount by which the NCI is adjusted, and the fair value of the consideration paid is recognized directly in equity and attributed to the
controlling interest. Thus we have recorded the 5% increase in ownership interests of Whitehall Group as transaction between equity and mezzanine equity. As a result of this transaction, NCI in Whitehall Group decreased by $6.7 million together with
decrease in Additional Paid In Capital of $1.1 million, which was offset by cash outflow of $7.8 million.

In June 2009, the
FASB issued ASC Topic 810, which changes how a company determines whether an entity should be consolidated. The adoption of this standard may impact the current treatment of the Whitehall Group by the Company and the Company is current assessing
this treatment and potential impact on the financial statements. See Recently Issued Accounting Pronouncements for more detailed information on this topic.

The Russian Alcohol Acquisition

On July 9, 2008, the Company
completed an investment with Lion Capital and certain of Lion Capitals affiliates and certain other investors, pursuant to which the Company, Lion Capital and such other investors acquired all of the outstanding equity of Russian Alcohol. In
connection with that investment, the Company acquired an indirect equity stake in Russian Alcohol of approximately 42%, and Lion Capital acquired substantially all of the remainder of the equity of Russian Alcohol. The agreements governing that
investment gave the Company the right to acquire, and gave Lion Capital the right to require the Company to acquire, Lion Capitals equity stake in Russian Alcohol (the Prior Agreement).

On April 24, 2009, the Company entered into new agreements with Lion Capital to replace the Prior Agreement, which will permit the
Company, through a multi-stage equity purchase, to acquire over the next five years (including 2009) all of the equity interests in Russian Alcohol held by Lion Capital. As a result of these agreements, the Company has assessed Russian Alcohol as a
variable interest entity, with the Company being the primary beneficiary. Pursuant to this change, the Company has begun to consolidate Russian Alcohol as of the second quarter of 2009 and recorded a non-controlling interest of 9.4% representing
equity not held by the Company or Lion Capital. From the accounting perspective, the Company treated the acquisition of the Russian Alcohol equity interests held by Lion Capital as if this acquisition had happened on April 24, 2009. As of this
date CEDC recorded at fair value all future payments due under these agreements as a liability. The total present value of deferred consideration as of April 24, 2009 amounted to $447.2 million and was determined using a 14.5% discount rate.
The present value of the liability is amortized over the period of time ending on the date the last payment is made which is currently expected in 2013, with recognition of a non cash interest expense every quarter in the statement of operations.
The discount amortization charge for the period from April 24, 2009 to December 31, 2009 amounted to $38.5 million.

On July 29, 2009, the Company entered into an agreement with Lion Capital, pursuant to which Lion/Rally Cayman 7 L.P., a Cayman Exempted Limited Partnership, of which the Company holds 100% of the economic interests and is a limited
partner, acquired an additional 6% indirect equity interest in Russian Alcohol from



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certain minority investors in Russian Alcohol in exchange for $30,000,000 in cash funded by the Company. After giving effect to this acquisition, the Company holds approximately 58% of the equity
interests in Russian Alcohol. In addition, on August 3, 2009, pursuant to the new agreements referenced above, we acquired additional indirect equity interests in Russian Alcohol giving us a total ownership interest of 59.8%.

On November 9, 2009, the Company entered into an agreement with Lion Capital and Kylemore International Invest Corp.
(Kylemore), an indirect minority stockholder of Russian Alcohol, for the acquisition of Kylemores indirect equity interests in Russian Alcohol. On November 10, 2009, we issued to Kylemore 949,034 shares of our unregistered
common stock, and Kylemore transferred all of its indirect equity interests in Russian Alcohol to Lion/Rally Cayman 6 (Cayman 6), a Cayman Islands investment vehicle through which we and Lion Capital own our interests in Russian Alcohol.
As a result, the Company, Lion Capital and certain Co-Investors indirectly own 100% of the equity in Russian Alcohol, and our total indirect equity interest in Russian Alcohol increased to 62.25%. Pursuant to the agreement with Kylemore, on receipt
of approval from the Russian Anti-Trust Authority (FAS) for our acquisition of control over Russian Alcohol, the Company paid Kylemore $5,000,000 on January 11, 2010, and will pay further $5,000,000 on February 1, 2011. Also pursuant to
this agreement, Peter Levin, one of the original owners of Russian Alcohol, will continue to be involved in the Russian Alcohol business as a non-executive member of the Operating Board of Russian Alcohol and as Chairman of the Board of our Topaz
distillery.

On December 9, 2009 we accelerated terms set up in the Option Agreement dated April 24, 2009 and
completed the Lion Option and the Co-Investor Option, respectively, under the Co-Investor Option Agreement and the Lion Option Agreement, respectively and thereby purchased the remaining indirect equity interests in Cayman 6, less the sole voting
share of Cayman 6, comprising the remaining equity interest in Russian Alcohol that was not owned by the Company, from affiliates of Lion Capital LLP (Lion).

In consideration of the Co-Investor Option, the Company made cash payments of $131,800,000 and 23,650,000 to Lion. In consideration of the Lion Option, the Company (1) made cash payments of
$184,347,666 and 105,839,852 to Lion; (2) deposited in an escrow account the amount of $23,991,072 and 51,315,337, which was released and paid to Lion on January 11, 2010 upon receiving of antimonopoly clearances for the
acquisition from the Russian Federal Antimonopoly Commission and the Antimonopoly Committee of the Ukraine; and (3) paid to Lion the additional amounts of (a) $2,375,354 and 5,080,727 on the Escrow Release Date and (b) undertook
to pay $10,689,092 and 22,863,269 on June 1, 2010, or at the election of Lion, on any earlier date between April 20, 2010 and June 1, 2010. The Company used a portion of the proceeds from the offering of its common stock,
completed November 18, 2009, and the offering of its Senior Secured Notes due 2016, completed December 2, 2009, in order to fund such cash payments.

On January 20, 2010, after the receipt of antimonopoly clearances for the acquisition from the Russian Federal Antimonopoly Commission, the Antimonopoly Committee of the Ukraine, the Company
purchased the sole voting share of Lion/Rally Cayman 6 (Cayman 6) from an affiliate of Lion Capital LLP (Lion) and thereby acquired control of Russian Alcohol.

Starting from the second quarter of 2009, the Company began consolidating all profit and loss results for Russian Alcohol.



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The fair value of the net assets acquired in connection with the 2009 Russian Alcohol
Acquisition as of the acquisition date (April 24, 2009) is:



|                                        |  |                     |         |  
|--------------------------------------- |  | ------------------- | ------- | -
|                                        |  | RussianAlcoholGroup |        
|ASSETS                                  |  |                     |         |  
|Cash and cash equivalents               |  |                     | 154,276 |  
|Accounts receivable                     |  |                     | 147,196 |  
|Inventory                               |  |                     | 43,902  |  
|Deferred tax asset                      |  |                     | 35,184  |  
|Taxes                                   |  |                     | 14      |  
|Other current assets                    |  |                     | 52,296  |  
|Equipment                               |  |                     | 105,238 |  
|Intangibles, including Trademarks       |  |                     | 175,334 |  
|Investments                             |  |                     | 25      |  
|                                        |  |                     |         |  
|Total Assets                            |  | $                   | 713,465 |  
|                                        |  |                     |         |  
|LIABILITIES                             |  |                     |         |  
|Trade payables                          |  |                     | 42,895  |  
|Short term borrowings                   |  |                     | 44,368  |  
|Deferred tax                            |  |                     | 36,694  |  
|Other short term liabilities            |  |                     | 111,416 |  
|Long term borrowings                    |  |                     | 386,907 |  
|Long term accruals                      |  |                     | 50,000  |  
|                                        |  |                     |         |  
|Total Liabilities                       |  | $                   | 672,280 |  
|                                        |  |                     |         |  
|Net identifiable assets and liabilities |  |                     | 41,185  |  
|                                        | 
|Goodwill on acquisition                 |  |                     | 872,490 |  
|Consideration paid, satisfied in cash   |  |                     | 13,500  |  
|Consideration paid, satisfied in Notes  |  |                     | 110,639 |  
|Fair value of previously held interest  |  |                     | 292,289 |  
|Deferred consideration                  |  |                     | 447,247 |  
|Non-controlling interest                |  |                     | 50,000  |  
|                                        |  |                     |         |  
|Cash (acquired)                         |  | $                   | 154,276 |  
|                                        |  |                     |         |  
|Net Cash Inflow                         |  | ($                  | 140,776 | )

The goodwill arising out
of Russian Alcohol acquisition is attributable to the expansion of our sales and distribution platform in Russia that it provides to the Company as well as expected synergies to be utilized from consolidation of our Russian operations.

The Company recorded a provision for contingent consideration at fair value for $50 million as of the acquisition date. This
consideration was settled in the three month period ended September 30, 2009 through a payment by the Company of $65 million, which included an additional $15 million in earn-out payments.

Resulting from the acquisition of Russian Alcohol, the Company recognized a one-time gain on re-measurement of previously held equity
interest in the six month period ended June 30, 2009. The fair value of this gain amounts to $225.6 million.



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



During the second quarter of 2009, Russian Alcohol made payments related to
pre-acquisition tax penalties amounting to $28.8 million. These costs are to be reimbursed by the sellers and have been deducted from the loans payable to them.

The following table sets forth the unaudited pro forma results of operations of the Company for the twelve month periods ending December 31, 2009 and 2008. The unaudited pro forma results of
operations give effect to the Companys acquisitions as if they occurred on January 1, 2009 and 2008. The unaudited pro forma results of operations are presented after giving effect to certain adjustments for depreciation, amortization of
deferred financing costs, interest expense on the acquisition financing, and related income tax effects. The unaudited pro forma results of operations are based upon currently available information and certain assumptions that the Company believes
are reasonable under the circumstances. The unaudited pro forma results of operations do not purport to present what the Companys results of operations would actually have been if the aforementioned transactions had in fact occurred on such
date or at the beginning of the period indicated, nor do they project the Companys financial position or results of operations at any future date or for any future period.



|                                           |  |                                 |           |      |   |          
|------------------------------------------ |  | ------------------------------- | --------- | ---- | - | ---------
|                                           |  | Twelve months endedDecember 31,
|                                           |  | 2009                            |           | 2008
|Net sales                                  |  | $                               | 1,587,929 |      | $ | 2,227,660
|Net income                                 |  | $                               | 47,063    |      | $ | 138,813  
|                                           |  |                                
|Net income per share data:                 |  |                                 |           |      |   |          
|Basic earnings per share of common stock   |  | $                               | 0.88      |      | $ | 3.15     
|Diluted earnings per share of common stock |  | $                               | 0.87      |      | $ | 3.15     

3. Allowances for Doubtful Accounts

Changes in the allowance for doubtful accounts during each of the three years in the period ended December 31, were
as follows:



|                                                            |  |                         |        |   |      |   |        |      |  |   |        |  
|----------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                            |  | Year ended December 31, |       
|                                                            |  | 2009                    |        |   | 2008 |   |        | 2007 | 
|Balance, beginning of year                                  |  | $                       | 22,155 |   |      | $ | 29,277 |      |  | $ | 24,354 |  
|Effect of FX movement on opening balance                    |  |                         | 3,170  |   |      |   | (5,143 | )    |  |   | 4,696  |  
|Provision for bad debtsreported in statement of operations |  |                         | 7,702  |   |      |   | (748   | )    |  |   | (249   | )
|Charge-offs, net of recoveries                              |  |                         | (4,500 | ) |      |   | (1,814 | )    |  |   | 476    |  
|Change in allowance from purchase of subsidiaries           |  |                         | 27,563 |   |      |   | 583    |      |  |   |       |  
|                                                            |  |                         |        |   |      |   |        |      |  |   |        |  
|Balance, end of year                                        |  | $                       | 56,090 |   |      | $ | 22,155 |      |  | $ | 29,277 |  
|                                                            |  |                         |        |   |      |   |        |      |  |   |        |  

The change in allowance from purchase of subsidiaries of $27.6 million, recorded for the year ended
December 31, 2009, reflects the bad debt provision assessed on the opening balance sheet of Russian Alcohol at the time of acquisition.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



4. Property, plant and equipment

Property, plant and equipment, presented net of accumulated depreciation in the consolidated balance sheets, consists of:



|                               |  |              |         |   |      |   |         |  
|------------------------------ |  | ------------ | ------- | - | ---- | - | ------- | -
|                               |  | December 31, |        
|                               |  | 2009         |         |   | 2008 |  
|Land and buildings             |  | $            | 120,623 |   |      | $ | 43,992  |  
|Equipment                      |  |              | 129,653 |   |      |   | 59,119  |  
|Motor vehicles                 |  |              | 29,670  |   |      |   | 18,782  |  
|Motor vehicles under lease     |  |              | 5,301   |   |      |   | 7,421   |  
|Computer hardware and software |  |              | 23,446  |   |      |   | 20,447  |  
|                               |  |              |         |   |      |   |         |  
|Total gross book value         |  |              | 308,693 |   |      |   | 149,761 |  
|LessAccumulated depreciation  |  |              | (77,595 | ) |      |   | (57,540 | )
|                               |  |              |         |   |      |   |         |  
|Total                          |  | $            | 231,098 |   |      | $ | 92,221  |  
|                               |  |              |         |   |      |   |         |  

5. Goodwill

Goodwill, presented net of accumulated amortization in the consolidated balance sheets, consists of:



|                                          |  |              |           |      |   |          |  
|----------------------------------------- |  | ------------ | --------- | ---- | - | -------- | -
|                                          |  | December 31, |          
|                                          |  | 2009         |           | 2008 |  
|Balance at January 1,                     |  | $            | 745,256   |      | $ | 577,282  |  
|Impact of foreign exchange                |  |              | 93,079    |      |   | (165,276 | )
|Additional purchase price adjustments     |  |              | 15,800    |      |   |         |  
|Acquisition through business combinations |  |              | 872,490   |      |   | 333,250  |  
|                                          |  |              |           |      |   |          |  
|Balance at December 31,                   |  | $            | 1,726,625 |      | $ | 745,256  |  

In the fourth
quarter of 2009 the Company adjusted the value of goodwill recognized on the acquisition of Russian Alcohol due to new information as noted below.

In April 2009, when CEDC restructured its buyout agreement for Russian Alcohol with Lion and the initial put/call structure was replaced with a series of option payments that transferred ownership
(Option Agreement) of Russian Alcohol to CEDC over time, the management incentive program was also revised between Lion and its managers. At the time Lion communicated to CEDC that the cost of this incentive payment would be
approximately $20 million. Therefore in the revised option agreement it was agreed that Russian Alcohol would fund the payment of up to $20 million and any payment over this would be covered directly by Lion. At that point in time CEDC viewed the
payment of $20 million payable over the period of the Option Agreement as fixed and viewed this part of the effective purchase price of Russian Alcohol. However full information on this was not available at the time of the original PPA in April
2009, therefore this expense was not allocated to the PPA. Upon obtaining full clarity on this at year end, the Company believes it should have been originally allocated to goodwill and therefore the goodwill was increased for this amount less $4
million of deferred tax asset in the fourth quarter of 2009.

When CEDC revised the purchase structure of Russian Alcohol to
accelerate the option payments and acquire the remaining amount on November 19, 2009, with final change of control taking place in January 2010, upon receipt of anti-trust approval, the payment of the Management Incentive program was also
accelerated with the full amount of payment ($20 million) materializing in January 2010 upon the change of control to CEDC.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



Moreover the Company decreased the goodwill for the amount of $6.6 in the fourth quarter
of 2009. This relates to change of deferred tax liability resulting from an error in the initial goodwill calculation.

6. Intangible
Assets other than Goodwill

The major components of intangible assets are:



|                                   |  |                  |         |   |                  |   |         |  
|---------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                   |  | December 31,2009 |         |   | December 31,2008 |  
|Non-amortizable intangible assets: |  |                  |         |   |                  |   |         |  
|Trademarks                         |  | $                | 796,749 |   |                  | $ | 563,689 |  
|Impairment                         |  | ($               | 22,589  | ) |                  |   |        |  
|                                   |  |                  |         |   |                  |   |         |  
|Total                              |  |                  | 774,160 |   |                  |   | 563,689 |  
|Amortizable intangible assets:     |  |                  |         |   |                  |   |         |  
|Trademarks                         |  |                  | 5,783   |   |                  |   | 5,568   |  
|Customer relationships             |  |                  | 7,811   |   |                  |   | 7,749   |  
|Less accumulated amortization      |  |                  | (8,926  | ) |                  |   | (6,501  | )
|Total                              |  |                  | 4,668   |   |                  |   | 6,816   |  
|                                   |  |                  |         |   |                  |   |         |  
|Total intangible assets            |  | $                | 778,828 |   |                  | $ | 570,505 |  
|                                   |  |                  |         |   |                  |   |         |  

Management considers trademarks that are indefinite-lived assets to have high or market-leader brand
recognition within their market segments based on the length of time they have existed, the comparatively high volumes sold and their general market positions relative to other products in their respective market segments. These trademarks include
Soplica, Zubrówka, Absolwent, Royal, Parliament, Green Mark, Zhuravli and the rights for Bols Vodka in Poland, Hungary and Russia. Taking the above into consideration, as well as the evidence provided by analyses of vodka products life
cycles, market studies, competitive and environmental trends, management believes that these brands will generate cash flows for an indefinite period of time, and that the useful lives of these brands are indefinite. In accordance with ASC Topic
350-30, intangible assets with an indefinite life are not amortized but are reviewed at least annually for impairment.

Estimated aggregate future amortization expenses for intangible assets that have a definite life are as follows:



|               |  |   |      
|-------------- |  | - | -----
|2010           |  | $ | 1,353
|2011           |  |   | 1,282
|2012           |  |   | 1,184
|2013           |  |   | 1,169
|2014 and above |  |   | 513  
|               |  |   |      
|Total          |  | $ | 5,501
|               |  |   |      



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



7. Equity method investments in affiliates

We hold the following investments in unconsolidated affiliates:



|                |                   |                               |                  |                |                  |  |   |        
|--------------- | ----------------- | ----------------------------- | ---------------- | -------------- | ---------------- |  | - | -------
|                |                   |                               |                  | Carrying Value
|                | Type of affiliate |                               | December 31,2009 |                | December 31,2008
|Moet Henessy JV |                   | Equity-Accounted Affiliate    |                  | $              | 67,089           |  | $ | 77,918 
|Russian Alcohol |                   | Fully Consolidated Affiliate* |                  |                |                 |  |   | 111,325
|                |                   |                               |                  |                |                  |  |   |        
|                |                   | Total Carrying value          |                  | $              | 67,089           |  | $ | 189,243
|                |                   |                               |                  |                |                  |  |   |        



|* | As described in Note 2, from the second quarter of 2009, the Company began consolidating Russian Alcohol as a business combination. Russian Alcohol was accounted for
under the equity method in prior periods.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company has effective voting interest in Moet Hennessy JV of 25%
and obtained full voting control over Russian Alcohol in January 2010.

The summarized financial information of investments
are shown in the below table with the balance sheet financial information reflecting only the Moet Hennessy Joint Venture consolidated under the equity method as of December 31, 2009. The results from operations for the twelve months ended
December 31, 2009 and twelve months ended December 31, 2008 include the results of the Moet Hennessy Joint Venture together with the results of Russian Alcohol that was consolidated under the equity method until April 24, 2009.



|                                  |  |                                           |         |   |                                           |   |         |  
|--------------------------------- |  | ----------------------------------------- | ------- | - | ----------------------------------------- | - | ------- | -
|                                  |  | TotalDecember 31,
2009                    |         |   | TotalDecember 31,
2008                    |  
|Current assets                    |  | $                                         | 66,994  |   |                                           | $ | 587,031 |  
|Noncurrent assets                 |  |                                           | 382     |   |                                           |   | 483,567 |  
|Current liabilities               |  |                                           | 34,684  |   |                                           |   | 299,111 |  
|Noncurrent liabilities            |  |                                           | 5,713   |   |                                           |   | 430,516 |  
|                                  |  |                                           |         |   |                                           |   |         |  
|                                  |  |                                          
|                                  |  | TotalTwelve months endedDecember 31, 2009 |         |   | TotalTwelve months endedDecember 31, 2008 |  
|Net sales                         |  | $                                         | 162,736 |   |                                           | $ | 659,686 |  
|Gross profit                      |  |                                           | 68,076  |   |                                           |   | 200,475 |  
|Income from continuing operations |  |                                           | (25,904 | ) |                                           |   | (24,740 | )
|Net income                        |  |                                           | (33,005 | ) |                                           |   | (24,740 | )
|                                  |  |                                           |         |   |                                           |   |         |  

8. Exchangeable Convertible Notes

On July 9, 2008, the Company closed a strategic investment in Russian Alcohol and in addition to the equity investment, CEDC purchased exchangeable notes from Lion/Rally Lux 3 (Lux 3), a
Luxembourg company and indirect subsidiary of a Cayman Islands company (Cayman 2) that served as the investment vehicle.

The Notes rank pari passu with the other unsecured obligations of Lux 3 represent a direct and unsecured obligation of Lux 3 and are structurally subordinated to indebtedness of subsidiaries of Lux 3, including Pasalba Limited
(Pasalba), a company incorporated under the laws of the Republic of Cyprus that made the investment. The Notes have a principal amount of $103.5 million and accrued interest at a rate of 8.3% per annum, which interest may, at
Luxs 3 option, be paid in kind with additional Notes.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



On April 24, 2009 the Company sold to Cayman 2 the subordinated exchangeable loan
notes plus accrued interest for a total of $110.6 million, and used the proceeds to purchase an additional 100 million shares of Cayman 2, which resulted in an increase of the Companys indirect equity interest in RAG from 41.97% to
52.86%.

9. Accrued liabilities

The major components of accrued liabilities are:



|                   |      |              |         |  |   |       
|------------------ | ---- | ------------ | ------- |  | - | ------
|                   |      | December 31,
|                   | 2009 |              | 2008   
|Operating accruals |      | $            | 100,104 |  | $ | 69,391
|Hedge valuation    |      |              |        |  |   | 6,736 
|Accrued interest   |      |              | 162     |  |   | 4,143 
|                   |      |              |         |  |   |       
|Total              |      | $            | 100,266 |  | $ | 80,270
|                   |      |              |         |  |   |       

10. Borrowings

Bank Facilities

As of
December 31, 2009, $49.8 million remained available under the Companys overdraft facilities. These overdraft facilities are renewed on an annual basis.

As of December 31, 2009, the Company had utilized approximately $84.2 million of a multipurpose credit line agreement in connection with the 2007 tender offer in Poland to purchase the remaining
outstanding shares of Polmos Bialystok S.A. The Companys obligations under the credit line agreement are guaranteed through promissory notes by certain subsidiaries of the Company and are secured by 33.95% of the share capital of Polmos
Białystok S.A. The indebtedness under the credit line agreement of $63.2 million matures on February 24, 2011 and of $21.0 million on August 11, 2010.

On April 24, 2008, the Company signed a credit agreement with Bank Zachodni WBK SA in Poland to provide up to $50 million of financing to be used to finance a portion of the Parliament and Whitehall
acquisition, as well as general working capital needs of the Company. The agreement provides for a $30 million five year amortizing term facility and a one year $20 million short term facility with annual renewal. In the second quarter of 2009 this
facility was converted into Polish zlotys. The maturity of term loan was extended to May 2013 and the maturity of the short term facility was extended to May 2010. The loan is guaranteed by the Company, Bols Sp. z o.o, a wholly owned subsidiary of
the Company (Bols) and certain other subsidiaries of the Company, and is secured by all of the capital stock of Bols and 60% of the capital stock of Copecresto.

On July 2, 2008, the Company entered into a Facility Agreement with Bank Handlowy w Warszawie S.A., which provided for a term loan
facility of $40 million, of which $33.3 million was outstanding as at December 31, 2009. The term loan matures on July 4, 2011 and is guaranteed by CEDC, Carey Agri and certain other subsidiaries of the Company and is secured by all of the
shares of capital stock of Carey Agri and subsequently will be further secured by shares of capital stock in certain other subsidiaries of CEDC.

Senior Secured Notes due 2012

In connection with the Bols and Polmos Bialystok acquisitions, on July 25,
2005 the Company completed the issuance of 325 million 8% Senior Secured Notes due 2012 (the 2012 Notes), of which approximately



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



245 million remains payable. Interest is due semi-annually on the 25th of January and July, and the Notes are guaranteed on a senior basis by certain of the Companys
subsidiaries.

On December 2, 2009, the Company issued a redemption notice for the remaining outstanding portion of these
notes and deposited EUR 263.9 million (approximately US $380.4 million) of cash that we received upon the issuance of new Senior Notes (described below), representing the redemption price, call premium plus all interest that will be payable on
the settlement date, in an account with the trustee for the 2012 Notes. In connection with such redemption notice and deposit, the indenture pursuant to which the 2012 Notes were issued has been discharged. Although this discharge removes
substantially all of the restrictions imposed by that indenture and makes the likelihood that further payments will be required of us with respect to the Fixed Rate Notes due 2012 remote, we concluded that it did not meet the definition of
legally released in paragraph 16(b) of ASC 405-20-40-1(b)) and therefore we will not recognize the extinguishment of the remaining liability until January 4, 2010. As such the full amount of the notes has been classified as short
term on the balance sheet as of December 31, 2009. Additionally the cash on deposit was recorded as Restricted Cash on the balance sheet as of December 31, 2009. On January 4, 2010, the final redemption for these notes was completed
and all funds were remitted to the note holders, discharging the Company of all remaining obligations.

As of
December 31, 2009 and December 31, 2008, the Company had accrued interest of $12.2 million and $12.0 million respectively related to the 2012 Notes, that was paid together with the principal amount and 4% premium on early repayment on
January 4, 2010. Total obligations under the 2012 Notes are shown net of deferred finance costs, amortized over the life of the borrowings using the effective interest rate method as shown in the table below:



|                                     |      |              |         |      |              |   |         |  
|------------------------------------ | ---- | ------------ | ------- | ---- | ------------ | - | ------- | -
|                                     |      | December 31, |         |      | December 31, |  
|                                     | 2009 |              |         | 2008 |             
|Senior Secured Notes due 2012        |      | $            | 365,989 |      |              | $ | 357,934 |  
|Fair value bond mark to market       |      |              | (301    | )    |              |   | (7,124  | )
|Unamortized portion of closed hedges |      |              | (2,000  | )    |              |   | (553    | )
|Unamortized issuance costs           |      |              | (4,745  | )    |              |   | (5,223  | )
|                                     |      |              |         |      |              |   |         |  
|Total                                |      | $            | 358,943 |      |              | $ | 345,034 |  
|                                     |      |              |         |      |              |   |         |  

The full amounts of the Senior Secured Notes due 2012 were fully repaid on January 4, 2010 as part of
the redemption noted above.

Convertible Senior Notes

On March 7, 2008, the Company completed the issuance of $310 million aggregate principal amount of 3% Convertible Senior Notes due 2013 (the Convertible Notes). Interest is due
semi-annually on the 15th of March and September, beginning on September 15, 2008. The Convertible Senior Notes are convertible in certain circumstances into cash and, if applicable, shares of our common stock, based on an initial conversion
rate of 14.7113 shares per $1,000 principle amount, subject to certain adjustments. Upon conversion of the notes, the Company will deliver cash up to the aggregate principle amount of the notes to be converted and, at the election of the Company,
cash and/or shares of common stock in respect to the remainder, if any, of the conversion obligation. The proceeds from the Convertible Notes were used to fund the cash portions of the acquisition of Copecresto Enterprises Limited and Whitehall.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



As of December 31, 2009 the Company had accrued interest of $2.7 million related to
the Convertible Senior Notes, with the next coupon due for payment on March 15, 2010. Total obligations under the Convertible Senior Notes are shown net of deferred finance costs, amortized over the life of the borrowings using the effective
interest rate method as shown in the table below:



|                                                  |  |                  |         |   |                  |   |         |  
|------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                  |  | December 31,2009 |         |   | December 31,2008 |  
|Convertible Senior Notes                          |  | $                | 312,711 |   |                  | $ | 310,000 |  
|Unamortized issuance costs                        |  |                  | (4,209  | ) |                  |   | (4,791  | )
|Debt discount related to Convertible Senior Notes |  |                  | (12,665 | ) |                  |   | (16,585 | )
|                                                  |  |                  |         |   |                  |   |         |  
|Total                                             |  | $                | 295,837 |   |                  | $ | 288,624 |  
|                                                  |  |                  |         |   |                  |   |         |  

Senior Secured Notes due 2016

On December 2, 2009, the Company issued and sold $380 million 9.125% Senior Secured Notes due 2016 and 380 million 8.875% Senior Secured Notes due 2016 in an offering to institutional
investors that is exempt from registration under the U.S. Securities Act of 1933. The Company will use a portion of the net proceeds from the Senior Secured Notes due 2016 to redeem the Companys outstanding 8% Senior Secured Notes due 2012,
having an aggregate principal amount of 245,440,000 on January 4, 2010. The remainder of the net proceeds from the Senior Secured Notes due 2016 was used to (i) purchase Lion Capital LLPs remaining equity interest in Russian
Alcohol by exercising the Lion Option and the Co-Investor Option, pursuant to the terms and conditions of the Lion Option Agreement and the Co-Investor Option Agreement, respectively (ii) repay all amounts outstanding under Russian Alcohol
credit facilities; and (iii) repay certain other indebtedness.

As of December 31, 2009 the Company had accrued
interest of $12.2 million related to the Senior Secured Notes due 2016, with the next coupon due for payment on June 1, 2010. Total obligations under the Senior Secured Notes due 2016 are shown net of deferred finance costs, amortized over the
life of the borrowings using the effective interest rate method as shown in the table below:



|                              |  |                  |         |   |                  |   |  
|----------------------------- |  | ---------------- | ------- | - | ---------------- | - | -
|                              |  | December 31,2009 |         |   | December 31,2008
|Senior Secured Notes due 2016 |  | $                | 934,410 |   |                  | $ | 
|Unamortized issuance costs    |  |                  | (24,780 | ) |                  |   | 
|                              |  |                  |         |   |                  |   |  
|Total                         |  | $                | 909,630 |   |                  | $ | 
|                              |  |                  |         |   |                  |   |  

Total borrowings as disclosed in the financial
statements are:



|                                                                   |  |                  |           |                  |   |        
|------------------------------------------------------------------ |  | ---------------- | --------- | ---------------- | - | -------
|                                                                   |  | December 31,2009 |           | December 31,2008
|Short term bank loans and overdraft facilities for working capital |  | $                | 103,213   |                  | $ | 109,552
|Short term obligations under Senior Secured Notes                  |  |                  | 358,943   |                  |   |       
|Short term bank loans for share tender                             |  |                  | 21,053    |                  |   |       
|                                                                   |  |                 
|Total short term bank loans and utilized overdraft facilities      |  |                  | 483,209   |                  |   | 109,552
|                                                                   |  |                 
|Long term bank loans for share tender                              |  |                  | 63,158    |                  |   | 81,081 
|Long term obligations under Senior Secured Notes                   |  |                  | 909,630   |                  |   | 345,034
|Long term obligations under Convertible Senior Notes               |  |                  | 295,837   |                  |   | 288,624
|Other total long term debt, less current maturities                |  |                  | 42,885    |                  |   | 89,429 
|                                                                   |  |                  |           |                  |   |        
|Total debt                                                         |  | $                | 1,794,719 |                  | $ | 913,720
|                                                                   |  |                  |           |                  |   |        



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



The full of the short term obligations under Senior Secured Notes were fully repaid on
January 4, 2010 as part of the redemption noted above



|                                             |  |                  |          
|-------------------------------------------- |  | ---------------- | ---------
|                                             |  | December 31,2009
|Principal repayments for the following years |  |                  |          
|2010                                         |  | $                | 483,209  
|2011                                         |  |                  | 89,457   
|2012                                         |  |                  | 6,634    
|2013                                         |  |                  | 305,789  
|2014 and beyond                              |  |                  | 909,630  
|                                             |  |                  |          
|Total                                        |  | $                | 1,794,719
|                                             |  |                  |          

Included in the principle repayments due in 2010 are
the Senior Secured Notes due 2012 for $358.9 million which were fully repaid on January 4, 2010 as part of the redemption noted above.

11. Income and Deferred Taxes

The Company operates in several tax jurisdictions primarily: the United States
of America, Poland, Hungary and Russia. All subsidiaries file their own corporate tax returns as well as account for their own deferred tax assets and liabilities. The Company does not file a tax return in Delaware based upon its consolidated
income, but does file a return in Delaware based on the statement of operations for transactions occurring in the United States of America.

The Company adopted the provisions of ASC 740-10-25 Income taxes.ASC 740-10-25 prescribes a recognition threshold and a measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon
examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than
fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that
threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC
740-10-25 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. Adoption of ASC 740-10-25 did not have a significant impact on the Corporations financial statements. The company is
currently generating tax loss carry forwards in the United States at a 35% tax rate, which has the effect of reducing the overall effective tax rate below the 19% Polish statutory rate.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



The Company files income tax returns in the U.S., Poland, Hungary, Russia, as well as in
various other countries throughout the world in which we conduct our business. The major tax jurisdictions and their earliest fiscal years that are currently open for tax examinations are 2004 in the U.S., 2004 in Poland and Hungary and 2006 in
Russia.



|                                             |      |                         |         |      |  |      |        |  |   |        |  
|-------------------------------------------- | ---- | ----------------------- | ------- | ---- |  | ---- | ------ |  | - | ------ | -
|                                             |      | Year ended December 31, |        
|                                             | 2009 |                         |         | 2008 |  | 2007 |       
|Tax at statutory rate                        |      | $                       | 22,823  |      |  | $    | 2,424  |  | $ | 17,875 |  
|Tax rate differences                         |      |                         | 438     |      |  |      | 1,311  |  |   | (740   | )
|Valuation allowance for net operating losses |      |                         | (12,511 | )    |  |      | 4,290  |  |   | 2,401  |  
|Permanent differences                        |      |                         | 12,155  |      |  |      | 3,847  |  |   | (3,626 | )
|                                             |      |                         |         |      |  |      |        |  |   |        |  
|Income tax expense                           |      | $                       | 22,905  |      |  | $    | 11,872 |  | $ | 15,910 |  
|                                             |      |                         |         |      |  |      |        |  |   |        |  

Total income tax payments during 2009, 2008 and 2007 were $28,118, $33,919 and $21,362 respectively. CEDC
has paid no U.S. income taxes and has net operating U.S. loss carry-forward totaling $22.630.

Significant components of the
Companys deferred tax assets are as follows:



|                                                                        |      |              |          |      |  |    |          |   |  |    |          |  
|----------------------------------------------------------------------- | ---- | ------------ | -------- | ---- |  | -- | -------- | - |  | -- | -------- | -
|                                                                        |      | December 31, |         
|                                                                        | 2009 |              |          | 2008 |  |    | 2007     |  
|Deferred tax assets                                                     |      |              |          |      |  |    |          |   |  |    |          |  
|Accrued expenses, deferred income and prepaid, net                      |      | $            | 16,566   |      |  | $  | 10,572   |   |  | $  | 10,567   |  
|Allowance for doubtful accounts receivable                              |      |              | 8,793    |      |  |    | 1,529    |   |  |    | 3,749    |  
|Russian Alcohol acquisition                                             |      |              | 42,769   |      |  |    |         |   |  |    |         |  
|Unrealized foreign exchange losses                                      |      |              | 13,386   |      |  |    | 18,495   |   |  |    |         |  
|Net operating loss carry-forward benefit, Expiring in 2010  2026gross |      |              | 43,027   |      |  |    | 18,755   |   |  |    | 10,059   |  
|NOLs valuation allowance                                               |      |              | (4,380   | )    |  |    | (6,991   | ) |  |    | (2,401   | )
|                                                                        |      |              |          |      |  |    |          |   |  |    |          |  
|Net deferred tax asset                                                  |      | $            | 120,161  |      |  | $  | 42,360   |   |  | $  | 21,974   |  
|                                                                        |      |              |          |      |  |    |          |   |  |    |          |  
|Deferred tax liability                                                  |      |              |          |      |  |    |          |   |  |    |          |  
|Trade marks                                                             |      |              | 140,592  |      |  |    | 106,486  |   |  |    | 100,113  |  
|Unrealized foreign exchange gains                                       |      |              | 12,268   |      |  |    | 3,585    |   |  |    | 5,069    |  
|Remeasurement of previously held equity interest in Russian Alcohol     |      |              | 49,182   |      |  |    |         |   |  |    |         |  
|Timing differences in finance type leases                               |      |              |         |      |  |    | 7        |   |  |    | 60       |  
|Investment credit                                                       |      |              |         |      |  |    | 201      |   |  |    | 297      |  
|Deferred income                                                         |      |              | 563      |      |  |    | 616      |   |  |    |         |  
|APB 14-1 impact                                                         |      |              | 4,433    |      |  |    | 5,805    |   |  |    |         |  
|Other                                                                   |      |              | 1,036    |      |  |    | 679      |   |  |    |         |  
|                                                                        |      |              |          |      |  |    |          |   |  |    |          |  
|Net deferred tax liability                                              |      | $            | 208,074  |      |  | $  | 117,379  |   |  | $  | 105,539  |  
|                                                                        |      |              |          |      |  |    |          |   |  |    |          |  
|Total net deferred tax asset                                            |      |              | 120,161  |      |  |    | 42,360   |   |  |    | 21,974   |  
|Total net deferred tax liability                                        |      |              | 208,074  |      |  |    | 117,379  |   |  |    | 105,539  |  
|Total net deferred tax                                                  |      |              | (87,913  | )    |  |    | (75,019  | ) |  |    | (83,565  | )
|Classified as                                                           |      |              |          |      |  |    |          |   |  |    |          |  
|Current deferred tax asset                                              |      |              | 83,459   |      |  |    | 24,386   |   |  |    | 5,141    |  
|Non-current deferred tax asset                                          |      |              | 27,123   |      |  |    | 12,886   |   |  |    | 11,407   |  
|Non-current deferred tax liability                                      |      |              | (198,495 | )    |  |    | (112,291 | ) |  |    | (100,113 | )
|                                                                        |      |              |          |      |  |    |          |   |  |    |          |  
|Total net deferred tax                                                  |      | ($           | 87,913   | )    |  | ($ | 75,019   | ) |  | ($ | 83,565   | )
|                                                                        |      |              |          |      |  |    |          |   |  |    |          |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



Tax losses can be carried forward for the following periods:



|         |  |                    
|-------- |  | -------------------
|Hungary* |  | Unrestricted period
|U.S.     |  | 20 years           
|Russia   |  | 10 years           
|Poland   |  | 5 years            



|* | In some circumstances there is a need of Tax Offices permission to carry the loss forward
|- | ------------------------------------------------------------------------------------------

Tax liabilities (including corporate income tax, Value Added Tax (VAT), social security and other taxes) of the Companys subsidiaries
may be subject to examinations by the tax authorities for up to certain period from the end of the year the tax is payable, as follows:



|        |  |        
|------- |  | -------
|Poland  |  | 5 years
|Hungary |  | 6 years
|Russia  |  | 3 years

CEDCs U.S.
federal income tax returns are also subject to examination by the U.S. tax authorities. As the application of tax laws and regulations, and transactions are susceptible to varying interpretations, amounts reported in the consolidated financial
statements could be changed at a later date upon final determination by the tax authorities.

12. Stock Option Plans and Warrants

The Company adopted ASC Topic 718 CompensationStock Compensation requiring the recognition of
compensation expense in the Consolidated Statements of Operations related to the fair value of its employee share-based options.

The Company recognizes the cost of all employee stock options on a straight-line attribution basis over their respective vesting periods, net of estimated forfeitures. The Company has selected the modified prospective method of transition;
accordingly, prior periods have not been restated.

ASC Topic 718 requires the recognition of compensation expense in the
Consolidated Statements of Operations related to the fair value of employee share-based options. Determining the fair value of share-based awards at the grant date requires judgment, including estimating the expected term that stock options will be
outstanding prior to exercise, the associated volatility and the expected dividends. Judgment is also required in estimating the amount of share-based awards expected to be forfeited prior to vesting. If actual forfeitures differ significantly from
these estimates, share-based compensation expense could be materially impacted. Prior to adopting ASC Topic 718, the Company applied Accounting Principles Board (APB) Opinion No. 25, and related Interpretations, in accounting for
its stock-based compensation plans. All employee stock options were granted at or above the grant date market price. Accordingly, no compensation cost was recognized for fixed stock option grants in prior periods.

The Companys 2007 Stock Incentive Plan (Incentive Plan) provides for the grant of stock options, stock appreciation
rights, restricted stock and restricted stock units to directors, executives, and other employees (employees) of the Company and to non-employee service providers of the Company. Following a shareholder resolution in April 2003 and the
stock splits of May 2003, May 2004 and June 2006, the Incentive Plan authorizes, and the Company has reserved for future issuance, up to 1,397,333 shares of Common Stock (subject



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



to an anti-dilution adjustment in the event of a stock split, re-capitalization, or similar transaction). The Compensation Committee of the Board of Directors of the Company administers the
Incentive Plan.

The option exercise price for stock options granted under the Incentive Plan may not be less than fair market
value but in some cases may be in excess of the closing price of the Common Stock on the date of grant. The Company uses the stock option price based on the closing price of the Common Stock on the day before the date of grant if such price is not
materially different than the opening price of the Common Stock on the day of the grant. Stock options may be exercised up to 10 years after the date of grant except as otherwise provided in the particular stock option agreement. Payment for the
shares must be in cash, which must be received by the Company prior to any shares being issued. Stock options granted to directors and officers as part of an employee employment contract vest after 2 years. Stock options granted to general employees
as part of a loyalty program vest after three years. The Incentive Plan was approved by CEDC shareholders during the annual shareholders meeting on April 30, 2007 to replace the Companys 1997 Stock Incentive Plan (the Old Stock
Incentive Plan), which expired in November 2007. The Stock Incentive Plan will expire in November 2017. The terms and conditions of the Stock Incentive Plan are substantially similar to those of the Old Stock Incentive Plan.

Before January 1, 2006 CEDC, the holding company, realized net operating losses and therefore an excess tax benefit (windfall)
resulting from the exercise of the awards and a related credit to Additional Paid-in Capital (APIC) of $2.2 million was not recorded in the Companys books. The excess tax benefits and the credit to APIC for the windfall should not be recorded
until the deduction reduces income taxes payable on the basis that cash tax savings have not occurred. The Company will recognize the windfall upon realization.

A summary of the Companys stock option and restricted stock units activity, and related information for the twelve month periods ended December 31, 2009, 2008 and 2007 is as follows:



|                                 |  |                  |   |  |                                |      
|-------------------------------- |  | ---------------- | - |  | ------------------------------ | -----
|Total Options                    |  | Number ofOptions |   |  | Weighted-AverageExercise Price
|Outstanding at January 1, 2007   |  | 1,319,900        |   |  | $                              | 19.31
|Granted                          |  | 266,250          |   |  | $                              | 30.84
|Exercised                        |  | (272,475         | ) |  | $                              | 17.12
|Forfeited                        |  | (60,638          | ) |  | $                              | 23.26
|                                 |  |                  |   |  |                                |      
|Outstanding at December 31, 2007 |  | 1,253,037        |   |  | $                              | 22.02
|Exercisable at December 31, 2007 |  | 964,849          |   |  | $                              | 19.50
|Outstanding at January 1, 2008   |  | 1,253,037        |   |  | $                              | 22.02
|Granted                          |  | 234,375          |   |  | $                              | 56.88
|Exercised                        |  | (120,849         | ) |  | $                              | 15.60
|Forfeited                        |  | (16,312          | ) |  | $                              | 21.83
|                                 |  |                  |   |  |                                |      
|Outstanding at December 31, 2008 |  | 1,350,252        |   |  | $                              | 28.65
|Exercisable at December 31, 2008 |  | 1,033,225        |   |  | $                              | 22.19
|Outstanding at January 1, 2009   |  | 1,350,252        |   |  | $                              | 28.65
|Granted                          |  | 200,625          |   |  | $                              | 19.94
|Exercised                        |  | (59,827          | ) |  | $                              | 14.27
|Forfeited                        |  | (9,500           | ) |  | $                              | 60.92
|                                 |  |                  |   |  |                                |      
|Outstanding at December 31, 2009 |  | 1,481,550        |   |  | $                              | 27.85
|Exercisable at December 31, 2009 |  | 1,051,550        |   |  | $                              | 23.18



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



|                                 |  |                                |   |  |                                      |      
|-------------------------------- |  | ------------------------------ | - |  | ------------------------------------ | -----
|Nonvested restricted stock units |  | Number ofRestrictedStock Units |   |  | Weighted-Average GrantDate FairValue
|Nonvested at January 1, 2007     |  |                               |   |  | $                                    |     
|Granted                          |  | 37,930                         |   |  | $                                    | 34.71
|Vested                           |  |                               |   |  | $                                    |     
|Forfeited                        |  | (2,100                         | ) |  | $                                    | 34.51
|                                 |  |                                |   |  |                                      |      
|Nonvested at December 31, 2007   |  | 35,830                         |   |  | $                                    | 34.73
|Nonvested at January 1, 2008     |  | 35,830                         |   |  | $                                    | 34.73
|Granted                          |  | 38,129                         |   |  | $                                    | 66.52
|Vested                           |  | (600                           | ) |  | $                                    | 34.51
|Forfeited                        |  | (4,804                         | ) |  | $                                    | 48.75
|                                 |  |                                |   |  |                                      |      
|Nonvested at December 31, 2008   |  | 68,555                         |   |  | $                                    | 51.42
|Nonvested at January 1, 2009     |  | 68,555                         |   |  | $                                    | 51.42
|Granted                          |  | 25,009                         |   |  | $                                    | 24.89
|Vested                           |  | (2,740                         | ) |  | $                                    | 34.51
|Forfeited                        |  | (11,750                        | ) |  | $                                    | 45.00
|                                 |  |                                |   |  |                                      |      
|Nonvested at December 31, 2009   |  | 79,074                         |   |  | $                                    | 44.63

During 2009, the
range of exercise prices for outstanding options was $1.13 to $60.92. During 2009, the weighted average remaining contractual life of options outstanding was 5.2 years. Exercise prices for options exercisable as of December 31, 2009 ranged from
$1.13 to $44.15. The Company has also granted 25,009 restricted stock units to its employees at an average price of $24.89.

The Company has issued stock options to employees under stock based compensation plans. Stock options are issued at the current market price, subject to a vesting period, which varies from one to three years. As of December 31, 2009,
the Company has not changed the terms of any outstanding awards.

During the twelve months ended December 31, 2009, the
Company recognized compensation cost of $3.78 million and a related deferred tax asset of $0.65 million.

As of
December 31, 2009, there was $2.79 million of total unrecognized compensation cost related to non-vested stock options and restricted stock units granted under the Plan. The costs are expected to be recognized over a weighted average period of
24 months through 2009-2012.

Total cash received from exercise of options during the twelve months ended December 31,
2009 amounted to $0.9 million.

For the twelve month period ended December 31, 2009, the compensation expense related to
all options was calculated based on the fair value of each option grant using the binomial distribution model. The Company has never paid cash dividends and does not currently have plans to pay cash dividends, and thus has assumed a 0% dividend
yield. Expected volatilities are based on average of implied and historical volatility projected over the remaining term of the options. The expected life of stock options is estimated based on historical data on exercise of stock options,
post-vesting forfeitures and other factors to estimate the expected term of the stock options granted. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect on the date of grant for instruments with a remaining term
similar to the expected life of the options. In addition, the Company



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



applies an expected forfeiture rate when amortizing stock-based compensation expenses. The estimate of the forfeiture rates is based primarily upon historical experience of employee turnover. As
individual grant awards become fully vested, stock-based compensation expense is adjusted to recognize actual forfeitures. The following weighted-average assumptions were used in the calculation of fair value:



|                                    |  |               |  |              
|----------------------------------- |  | ------------- |  | -------------
|                                    |  | 2009          |  | 2008         
|Fair Value                          |  | $8.07         |  | $18.16       
|Dividend Yield                      |  | 0%            |  | 0%           
|Expected Volatility                 |  | 47.3% - 80.4% |  | 34.1% - 38.5%
|Weighted Average Volatility         |  | 57.6%         |  | 37.5%        
|Risk Free Interest Rate             |  | 0.4% - 0.5%   |  | 1.5% - 3.2%  
|Expected Life of Options from Grant |  | 3.2           |  | 3.2          

13. Commitments and Contingent
Liabilities

The Company is involved in litigation from time to time and has claims against it in connection with matters
arising in the ordinary course of business. In the opinion of management, the outcome of these proceedings will not have a material adverse effect on the Companys operations.

The Polmos Bialystok Acquisition

As part of the Share Purchase Agreement
related to the October 2005 Polmos Bialystok Acquisition, the Company is required to ensure that Polmos Bialystok will make investments of at least 77.5 million Polish zloty during the six years after the acquisition was consummated. As of
December 31, 2009, the Company had invested 71.1 million Polish zloty (approximately $24.9 million) in Polmos Bialystok.

The
Whitehall Acquisition

As part of the Whitehall Acquisition (see Note 2), the Company entered into a shareholders
agreement with the other shareholder pursuant to which the Company has the right to purchase, and the other shareholder has the right to require the Company to purchase, all (but not less than all) of the shares of Whitehall capital stock held by
such shareholder. Either of these rights may be exercised at any time, subject, in certain circumstances, to the consent of third parties. The aggregate price that the Company would be required to pay in the event either of these rights is exercised
will fall within a range, determined based on Whitehalls EBIT as well as the EBIT of certain related businesses, during two separate periods: (1) the period from January 1, 2008 through the end of the year in which the right is
exercised, and (2) the two full financial years immediately preceding the end of the year in which the right is exercised, plus, in each case, the time-adjusted value of any dividends paid by Whitehall. Subject to certain limited exceptions,
the exercise price will be (A) no less than the future value as of the date of exercise of $32.0 million, and (B) no more than the future value as of the date of exercise of $89.0 million, plus, in each case, the time-adjusted value of any
dividends paid by Whitehall.

In the event that the Company is required to refinance or retire the indebtedness described
above, and/or acquires the capital stock of Whitehall, such transactions would be financed through additional sources of debt or equity funding. We cannot provide assurances as to whether or on what terms such funding would be available.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



The Russian Alcohol Acquisition

As part of the acceleration of the Option Agreement on December 9, 2009, related to the Russian Alcohol Acquisition (see Note 2), the
company had a series of payment obligation payable in 2009 and 2010. As of December 31, 2009, the Company had remaining obligations under this agreement to Lion for $155 million of which $100 million was funded into escrow and recorded as
Restricted Cash on the balance sheet. In January 2010, the Company paid $110 million to Lion leaving the last remaining payment of $45 million, payable in cash or shares due in April 2010.

Also as part of the November 2009 agreement with Lion Capital and Kylemore International Invest Corp., for the acquisition of
Kylemores indirect equity interests in Russian Alcohol (see Note 2) the Company paid $5.0 million in January 2009 and is to pay another $5.0 million on February 1, 2011 to Kylemore.

Operating Leases and Rent Commitments

The Company makes rental payments for real estate, vehicles, office, computer, and manufacturing equipment under operating leases. The following is a schedule by years of the future rental payments under
the non-cancelable operating lease as of December 31, 2009:



|           |  |   |       
|---------- |  | - | ------
|2010       |  | $ | 13,815
|2011       |  |   | 8,695 
|2012       |  |   | 8,688 
|2013       |  |   | 8,616 
|Thereafter |  |   | 8,587 
|           |  |   |       
|Total      |  | $ | 48,399
|           |  |   |       

During the fourth quarter of 2009, the Company
continued its policy of renewing its transportation fleet by way of capital leases. The future minimum lease payments for the assets under capital lease as of December 31, 2009 are as follows:



|                   |  |   |       |  
|------------------ |  | - | ----- | -
|2010               |  | $ | 1,724 |  
|2011               |  |   | 1,371 |  
|2012               |  |   |      |  
|                   |  |   |       |  
|Gross payments due |  | $ | 3,095 |  
|Less interest      |  |   | (248  | )
|                   |  |   |       |  
|Net payments due   |  | $ | 2,847 |  
|                   |  |   |       |  

Supply contracts

The Company has various agreements covering its sources of supply, which, in some cases, may be terminated by either party on relatively short notice. Thus, there is a risk that a portion of the
Companys supply of products could be curtailed at any time.



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Amounts in tables expressed in thousands, except per share information



14. Stockholders Equity

On February 24, 2009, the Company and the seller amended the terms of the Stock Purchase Agreement governing the Whitehall acquisition
to satisfy the Companys obligations to the seller pursuant to a share price guarantee in the original Stock Purchase Agreement. Pursuant to the terms of this amendment, the Company paid to the seller $7,876,351 in cash, issued to the seller
2,100,000 shares of its common stock, and will make certain future cash payments, in settlement of a minimum share price guarantee by the Company and as consideration for additional equity in Whitehall, as discussed in Note 2, above.

On July 24, 2009, the Company consummated the offer and sale of 8,350,000 shares of the Companys common stock, of which 6,850,000
shares were issued and sold by the Company and 1,500,000 shares of common stock were sold by Mark Kaoufman. Pursuant to that offering, the Company granted the underwriters a 25-day over-allotment option to purchase up to an additional 835,000 shares
of common stock from the Company at the same price in a public offering pursuant to a Registration Statement on Form S-3 and a related prospectus filed with the Securities and Exchange Commission, which option the underwriters exercised in full. The
Company received $179.6 million from the Offering, including the over-allotment shares, after deducting underwriting discounts and estimated offering expenses payable by the Company.

On September 2, 2009, the Company filed a prospectus supplement with the Securities and Exchange Commission pursuant to a Registration
Statement on Form S-3 registering for resale by Lion/Rally Cayman 5, a company incorporated in the Cayman Islands, the 540,873 shares of the Companys common stock issued to Cayman 5 on that same date in connection with Russian Alcohol
acquisition. The Company did not receive any proceeds from the sale.

On September 15, 2009, the Company issued to Cirey
Holdings, in connection with Russian Alcohol acquisition, 479,499 shares of the Companys common stock. The Company did not receive any proceeds from the sale.

On November 10, 2009, the Company issued to Kylemore 479,499 shares of the Companys common stock in exchange of acquiring the remaining indirect equity interest in Russian Alcohol that was not
held by Lion or CEDC. The Company did not receive any proceeds from the sale.

On November 24, 2009 the Company
consummated an offer and sale of an aggregate of 10,250,000 shares of the Companys common stock, par value $0.01 per share, at a price of $31.00 per share. The Company received $308 million from the offering after underwriting discounts and
estimated offering expenses payable by the Company.

15. Interest income / (expense)

For the twelve months ended December 31, 2009 and 2008 respectively, the following items are included in Interest income / (expense):



|                              |      |                                 |         |      |  |    |         |  
|----------------------------- | ---- | ------------------------------- | ------- | ---- |  | -- | ------- | -
|                              |      | Twelve months endedDecember 31, |        
|                              | 2009 |                                 |         | 2008 | 
|Interest income               |      | $                               | 10,930  |      |  | $  | 10,226  |  
|Interest expense              |      |                                 | (91,143 | )    |  |    | (63,673 | )
|                              |      |                                 |         |      |  |    |         |  
|Total interest (expense), net |      | ($                              | 80,213  | )    |  | ($ | 53,447  | )



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



16. Other financial income / (expense)

For the twelve months ended December 31, 2009 and 2008, the following items are included in Other financial income / (expense):



|                                                              |      |                        |         |      |  |    |         |  
|------------------------------------------------------------- | ---- | ---------------------- | ------- | ---- |  | -- | ------- | -
|                                                              |      | Year endedDecember 31, |        
|                                                              | 2009 |                        |         | 2008 | 
|Foreign exchange impact related to foreign currency financing |      | $                      | 28,801  |      |  | ($ | 165,294 | )
|Foreign exchange impact related to long term Notes receivable |      |                        | 9,276   |      |  |    | 34,328  |  
|Early redemption costs connected with debt facility           |      |                        | (16,895 | )    |  |    |        |  
|Other gains / (losses)                                        |      |                        | 682     |      |  |    | (1,970  | )
|                                                              |      |                        |         |      |  |    |         |  
|Total other financial income / (expense), net                 |      | $                      | 21,864  |      |  | ($ | 132,936 | )

17. Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated.



|                                                                                 |      |                         |        |  |    |        |   |  |   |       
|-------------------------------------------------------------------------------- | ---- | ----------------------- | ------ |  | -- | ------ | - |  | - | ------
|                                                                                 |      | Year ended December 31,
|                                                                                 | 2009 |                         | 2008   |  |    | 2007  
|Basic:                                                                           |      |                         |        |  |    |        |   |  |   |       
|Net income                                                                       |      | $                       | 78,329 |  | ($ | 18,598 | ) |  | $ | 77,102
|                                                                                 |      |                         |        |  |    |        |   |  |   |       
|Weighted average shares of common stock outstanding                              |      |                         | 53,772 |  |    | 44,088 |   |  |   | 39,871
|Basic earnings per share                                                         |      | $                       | 1.46   |  | ($ | 0.42   | ) |  | $ | 1.93  
|                                                                                 |      |                         |        |  |    |        |   |  |   |       
|Diluted:                                                                         |      |                         |        |  |    |        |   |  |   |       
|Net income                                                                       |      | $                       | 78,329 |  | ($ | 18,598 | ) |  | $ | 77,102
|                                                                                 |      |                         |        |  |    |        |   |  |   |       
|Weighted average shares of common stock outstanding                              |      |                         | 53,772 |  |    | 44,088 |   |  |   | 39,871
|Net effect of dilutive employee stock options based on the treasury stock method |      |                         | 208    |  |    |       |   |  |   | 540   
|Totals                                                                           |      |                         | 53,980 |  |    | 44,088 |   |  |   | 40,411
|Diluted earnings per share                                                       |      | $                       | 1.45   |  | ($ | 0.42   | ) |  | $ | 1.91  
|                                                                                 |      |                         |        |  |    |        |   |  |   |       

As of December 31, 2008, the Company excluded
657 thousand shares from the above EPS calculation because they would have had antidilutive impact for the 2008 period presented.

Employee stock options grants have been included in the above calculations of diluted earnings per share since the exercise price is less than the average market price of the common stock during the twelve months periods ended
December 31, 2009, 2008 and 2007. In addition there is no adjustment to fully diluted shares related to the Convertible Senior Notes as the average market price was below the conversion price for the period.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



18. Financial Instruments

Financial Instruments and Their Fair Values

Financial instruments consist
mainly of cash and cash equivalents, accounts receivable, accounts payable, bank loans, overdraft facilities and long-term debt. The monetary assets represented by these financial instruments are primarily located in Poland, Hungary and Russia.
Consequently, they are subject to currency translation risk when reporting in U.S. Dollars.

The following methods and
assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:



| |  |  | Cash and cash equivalentsThe carrying amount approximates fair value because of the short maturity of those instruments.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | Short term securitiesThis consists of FX options to protect against foreign exchange risk of payments related to term loans denominated in
U.S. Dollars in years 2009 and 2010. At quarter end the change in fair value of options, based on the mark to market valuation, is recorded as a gain or loss in the consolidated statement of operations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equity method investment in affiliatesThe fair value of investment in joint venture with Möet Hennessy based on a independent
valuation prepared on acquisition.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Bank loans, overdraft facilities and long-term debtThe fair value of the Corporations debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the Corporation for debt of the same remaining maturities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The estimated fair values of the Corporations financial instruments are as follows:



|                                                    |                |                   |            |  |   |          
|--------------------------------------------------- | -------------- | ----------------- | ---------- |  | - | ---------
|                                                    |                | December 31, 2009
|                                                    | CarryingAmount |                   | Fair Value
|Cash and cash equivalents                           |                | $                 | 152,177    |  | $ | 152,177  
|Restricted Cash                                     |                |                   | 481,419    |  |   | 481,419  
|Equity method investment in affiliates              |                |                   | 67,089     |  |   | 67,089   
|Bank loans, overdraft facilities and long-term debt |                |                   | 1,435,776  |  |   | 1,435,776

Derivative financial
instruments

The Company is exposed to market movements in foreign currency exchange rates that could affect the
Companys results of operations and financial condition. In accordance with ASC Topic 815 Derivatives and Hedging, the Company recognizes all derivatives as either assets or liabilities on the balance sheet and measures those
instruments at fair value.

The fair values of the Companys derivative instruments can change with fluctuations in
interest rates and/or currency rates and are expected to offset changes in the values of the underlying exposures. The Companys derivative instruments are held to hedge economic exposures. The Company follows internal policies to manage
interest rate and foreign currency risks, including limitations on derivative market-making or other speculative activities.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



To qualify for hedge accounting under ASC Topic 815, the details of the hedging
relationship must be formally documented at the inception of the arrangement, including the risk management objective, hedging strategy, hedged item, specific risk that is being hedged, the derivative instrument, how effectiveness is being assessed
and how ineffectiveness will be measured. The derivative must be highly effective in offsetting either changes in the fair value or cash flows, as appropriate, of the risk being hedged.

Effectiveness is evaluated on a retrospective and prospective basis based on quantitative measures. When it is determined that a derivative
is not, or has ceased to be, highly effective as a hedge, the Company discontinues hedge accounting prospectively. The Company discontinues hedge accounting prospectively when (1) the derivative is no longer highly effective in offsetting
changes in the cash flows of a hedged item; (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; or (4) management determines that designating the
derivative as a hedging instrument is no longer appropriate.

Fair value hedges are hedges that offset the risk of changes in
the fair values of recorded assets, liabilities and firm commitments. The Company records changes in the fair value of derivative instruments which are designated and deemed effective as fair value hedges, in earnings offset by the corresponding
changes in the fair value of the hedged items.

In September 2005, the Company entered into a coupon swap arrangement which
exchanges a fixed euro based coupon of 8%, with a variable euro based coupon (IRS) based upon the 6 month Euribor rate plus a margin. The hedge was accounted for as a fair value hedge according to ASC Topic 815 and tested for effectiveness on a
quarterly basis using the long haul method. Under this method, as long as the hedge is deemed highly effective both the fair value of the hedge and the hedge item are marked to market with the net impact recorded as gain or loss in the statement of
operations.

In January 2009, the remaining portion of the IRS hedge related to the Senior Secured Notes was closed and
written off with a net cash settlement of approximately $1.9 million.

During 2009 also the Companys subsidiary, Russian
Alcohol was part of the following hedge transactions:



| |  |  | U.S. dollar to Russian ruble foreign exchange rate hedge to protect against foreign exchange risk of payments related to term loans denominated in U.S.
dollars.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest rate hedge to fix cost related to the term loans denominated in U.S. dollars with floating interest rate.
| | - |  | ------------------------------------------------------------------------------------------------------------------

Both of these hedges are not qualified for hedging accounting with all changes in fair values at the end of each interim period being
recorded as a gain or loss in the statement of operations base on the mark to market valuation. During the fourth quarter of 2009 the Company closed these hedges as the underlying bank facilities have been refinanced with proceeds received from
issuance of bonds in December 2009. These hedges then were written off with a net cash settlement of approximately $4.9 million.

19. Fair
value measurements

The Company adopted ASC Topic 820 Fair Value Measurements and Disclosures, which defines
fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the
measurement date. ASC Topic 820 establishes a three-level fair value hierarchy that prioritizes



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to
measure fair value are as follows:

Level 1Quoted prices in active markets for identical assets or liabilities.

Level 2Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and
liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company evaluated the position of each financial instrument measured at fair value in the hierarchy individually based on the valuation methodology applied. As at December 31, 2009, the Company
has no material financial assets or liabilities carried at fair value using significant level 1, level 2 or level 3 inputs.

In the fourth quarter of 2009 the Company subsidiary, Russian Alcohol closed the following hedge transactions that were valued using level 2 inputs:



| |  |  | U.S. dollar to Russian ruble foreign exchange rate hedge to protect against foreign exchange risk of payments related to term loans denominated in U.S.
dollars.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest rate hedge to fix cost related to the term loans denominated in U.S. dollars with floating interest rate.
| | - |  | ------------------------------------------------------------------------------------------------------------------

Both of these hedges are not qualified for hedging accounting with all changes in fair values at the end of each interim period being
recorded as a gain or loss in the statement of operations base on the mark to market valuation. During the fourth quarter of 2009 the Company closed these hedges as the underlying bank facilities have been refinanced with proceeds received from
issuance of bonds in December 2009. These hedges then were written off with a net cash settlement of approximately $4.9 million.

As of December 31, 2009 the Company is not part of any hedging transactions.

Coupon Swap

In September 2005, the Company entered into a coupon swap arrangement which exchanges a fixed euro based coupon of 8%, with a variable euro
based coupon (IRS) based upon the 6 month Euribor rate plus a margin. The hedge is accounted for as a fair value hedge according to ASC Topic 815 and is tested for effectiveness on a quarterly basis using the long haul method. Under this method, as
long as the hedge is deemed highly effective both the fair value of the hedge and the hedged item are marked to market with the net impact recorded as gain or loss in the statement of operations.

In January 2009, the remaining portion of the IRS hedge related to the Senior Secured Notes was closed and written off with a net cash
settlement of approximately $1.9 million.

20. Operating segments

As a result of the Companys expansion into new geographic areas, namely Russia, the Company has changed its internal management
financial reporting by implementing a segmental approach to the business based upon geographic locations. As such the Company operates in three primary segments: Poland, Russia and



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



Hungary. The business segments reflect how the Companys operations are managed, how operating performance within the Company is evaluated by senior management and the structure of its
internal financial reporting. For detailed description of types of products and services from each reportable unit derives its revenues, refer to Operations by country section included in Part I.

The Company evaluates performance based on operating income of the respective business units. The accounting policies of the segments are
the same as those described for the Company in the Summary of Significant Accounting policies in Note 1 and include the recently issued accounting pronouncement described in Note 1. Transactions between segments consist primarily of sales of
products and are accounted for at cost plus an applicable margin.

The Companys areas of operations are principally in
Poland, Russia and Hungary. Revenues are attributed to countries based on the location of the selling company.



|                |      |                                                      |           |  |      |           |  |   |          
|--------------- | ---- | ---------------------------------------------------- | --------- |  | ---- | --------- |  | - | ---------
|                |      | Segment Net RevenuesTwelve months ended
December 31,
|                | 2009 |                                                      | 2008      |  | 2007
|Segment         |      |                                                      |           |  |      |           |  |   |          
|Poland          |      | $                                                    | 892,121   |  | $    | 1,305,629 |  | $ | 1,152,601
|Russia          |      |                                                      | 578,433   |  |      | 297,892   |  |   |         
|Hungary         |      |                                                      | 36,585    |  |      | 43,483    |  |   | 37,221   
|                |      |                                                      |           |  |      |           |  |   |          
|Total Net Sales |      | $                                                    | 1,507,139 |  | $    | 1,647,004 |  | $ | 1,189,822



|                           |      |                                                  |         |      |  |   |         |   |  |   |         |  
|-------------------------- | ---- | ------------------------------------------------ | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                           |      | Operating ProfitTwelve months ended
December 31, |        
|                           | 2009 |                                                  |         | 2008 |  |   | 2007    |  
|Segment                    |      |                                                  |         |      |  |   |         |   |  |   |         |  
|Poland                     |      | $                                                | 107,987 |      |  | $ | 124,920 |   |  | $ | 116,862 |  
|Russia                     |      |                                                  | 110,363 |      |  |   | 73,374  |   |  |   |        |  
|Hungary                    |      |                                                  | 6,149   |      |  |   | 7,641   |   |  |   | 7,491   |  
|Corporate Overhead         |      |                                                  |         |      |  |   |         |   |  |   |         |  
|General corporate overhead |      |                                                  | (4,570  | )    |  |   | (3,353  | ) |  |   | (4,398  | )
|Option Expense             |      |                                                  | (3,781  | )    |  |   | (3,850  | ) |  |   | (1,870  | )
|                           |      |                                                  |         |      |  |   |         |   |  |   |         |  
|Total Operating Profit     |      | $                                                | 216,148 |      |  | $ | 198,732 |   |  | $ | 118,085 |  



|                                                                               |      |                                                                                                         |         |      |  |    |        |   |  |   |  
|------------------------------------------------------------------------------ | ---- | ------------------------------------------------------------------------------------------------------- | ------- | ---- |  | -- | ------ | - |  | - | -
|                                                                               |      | Equity in the net income of investeesaccounted for by the equity methodTwelve months ended December 31,
|                                                                               | 2009 |                                                                                                         |         | 2008 |  |    | 2007  
|Segment                                                                        |      |                                                                                                         |         |      |  |    |        |   |  |   |  
|Poland                                                                         |      | $                                                                                                       |        |      |  | $  |       |   |  | $ | 
|Russia                                                                         |      |                                                                                                         | (13,102 | )    |  |    | (9,002 | ) |  |   | 
|Hungary                                                                        |      |                                                                                                         |        |      |  |    |       |   |  |   | 
|                                                                               |      |                                                                                                         |         |      |  |    |        |   |  |   |  
|Total equity in the net income of investees accounted for by the equity method |      | ($                                                                                                      | 13,102  | )    |  | ($ | 9,002  | ) |  | $ | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



|                           |      |                                              |        |  |      |        |  |   |      
|-------------------------- | ---- | -------------------------------------------- | ------ |  | ---- | ------ |  | - | -----
|                           |      | DepreciationTwelve months ended December 31,
|                           | 2009 |                                              | 2008   |  | 2007
|Segment                    |      |                                              |        |  |      |        |  |   |      
|Poland                     |      | $                                            | 5,325  |  | $    | 7,890  |  | $ | 6,739
|Russia                     |      |                                              | 4,557  |  |      | 2,287  |  |   |     
|Hungary                    |      |                                              | 439    |  |      | 644    |  |   | 591  
|General corporate overhead |      |                                              | 33     |  |      | 14     |  |   | 8    
|                           |      |                                              |        |  |      |        |  |   |      
|Total depreciation         |      | $                                            | 10,354 |  | $    | 10,835 |  | $ | 7,339



|                           |      |                                            |        |      |  |    |        |   |  |   |       
|-------------------------- | ---- | ------------------------------------------ | ------ | ---- |  | -- | ------ | - |  | - | ------
|                           |      | Income taxTwelve months ended December 31,
|                           | 2009 |                                            |        | 2008 |  |    | 2007  
|Segment                    |      |                                            |        |      |  |    |        |   |  |   |       
|Poland                     |      | $                                          | 342    |      |  | ($ | 1,254  | ) |  | $ | 14,111
|Russia                     |      |                                            | 23,431 |      |  |    | 15,678 |   |  |   |      
|Hungary                    |      |                                            | 329    |      |  |    | 1,328  |   |  |   | 1,092 
|General corporate overhead |      |                                            | (1,197 | )    |  |    | (3,880 | ) |  |   | 707   
|                           |      |                                            |        |      |  |    |        |   |  |   |       
|Total Income tax           |      | $                                          | 22,905 |      |  | $  | 11,872 |   |  | $ | 15,910



|                          |                  |                               |                  |  |   |          
|------------------------- | ---------------- | ----------------------------- | ---------------- |  | - | ---------
|                          |                  | Identifiable Operating Assets
|                          | December 31,2009 |                               | December 31,2008
|Segment                   |                  |                               |                  |  |   |          
|Poland                    |                  | $                             | 1,641,706        |  | $ | 1,625,471
|Russia                    |                  |                               | 2,377,225        |  |   | 814,400  
|Hungary                   |                  |                               | 38,643           |  |   | 37,842   
|Corporate                 |                  |                               | 389,319          |  |   | 5,973    
|                          |                  |                               |                  |  |   |          
|Total Identifiable Assets |                  | $                             | 4,446,893        |  | $ | 2,483,686



|               |                  |          |                  |  |   |        
|-------------- | ---------------- | -------- | ---------------- |  | - | -------
|               |                  | Goodwill
|               | December 31,2009 |          | December 31,2008
|Segment        |                  |          |                  |  |   |        
|Poland         |                  | $        | 487,199          |  | $ | 469,094
|Russia         |                  |          | 1,232,101        |  |   | 269,109
|Hungary        |                  |          | 7,325            |  |   | 7,053  
|Corporate      |                  |          |                 |  |   |       
|               |                  |          |                  |  |   |        
|Total Goodwill |                  | $        | 1,726,625        |  | $ | 745,256

21. Related Party Transactions

In January of 2005, the Company entered into a rental agreement for a facility located in northern Poland, which is 33%
owned by the Companys Chief Operating Officer. The monthly rent to be paid by the Company for this location is approximately $16,300 per month and relates to facilities to be shared by two subsidiaries of the Company.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



During the twelve months of 2009, the Company made sales and purchases transactions with
ZAO Urhozay an entity partially owned by a CEDC Board Member, Sergey Kupriyanov. Urozhay was acting as a toll filler for the Company. All sales primarily related to raw materials for production were made on normal commercial terms, and total sales
for the twelve months ended December 31, 2009 were approximately $25.2 million. Purchases of finished goods from ZAO Urozhay were approximately $78.1 million. As of September 30, 2009 the Company began all production of Parliament vodka
form its own production unit and thereafter Urozhay stopped acting as a toll filler for the Company.

On September 25,
2009, the Company acquired the remaining 15% of the share capital of Parliament that it did not already hold. Mr. Sergey Kupriyanov, a member of the Companys board of directors, had an indirect minority interest in Parliament and as a
result thereof had an approximate 22% interest in the $70.2 million total consideration paid for the remaining 15% and the approximately $16.7 million paid by the Company in connection with the completion of the Companys initial acquisition of
85% of the share capital of Parliament (of which $9.9 million was paid on October 30, 2009 and the remainder was paid on December 16, 2009). The price terms under those transactions were determined based on arms-length negotiations among
the parties.

During the twelve months of 2009, the Company made sales to a restaurant which is partially owned by the Chief
Executive Officer of the Company. All sales were made on normal commercial terms, and total sales for the twelve months ended December 31, 2009 and 2008 were approximately $119,000 and $73,000.

22. Subsequent Events

On
January 4, 2010 the Company completed the redemption of its Senior Secured Notes due 2012 with the final payment of all outstanding principle, accrued interest and call premium, releasing the cash of 263.9 million (approximately
$380.4 million), recorded in Restricted Cash at year end, from the Trustee thus the relieving the Company of all of its remaining obligations under the Senior Secured Notes indenture.

On January 11, 2010, the Company paid $110 million to Lion as part of the acceleration of the Option Agreement concluded on
November 19, 2009 (see Note 2) and on January 20, 2010 the Company purchased the sole voting share of Lion/Rally Cayman 6 from an affiliate of Lion and thereby acquired full control of Russian Alcohol. The voting share comprised the
remaining interest in Russian Alcohol that was not owned by the Company and was only available to the Company after the receipt of antimonopoly clearances for the acquisition from the Russian Federal Antimonopoly Commission and the Antimonopoly
Committee of the Ukraine, which the Company has since received.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



23. Quarterly financial information (Unaudited)

The Companys net sales have been historically seasonal with 36% of the net sales occurring in the fourth quarter in 2009. The table
below demonstrates the movement and significance of seasonality in the statement of operations. For further information, please refer to Item 6. Selected Financial Data.



|                                         |      |               |         |                   |                |   |         |               |  |                   |                |   |      |   |         |                   |  |   |         |   |  |                   |         |   |  |    |         |    |  |    |         |  
|---------------------------------------- | ---- | ------------- | ------- | ----------------- | -------------- | - | ------- | ------------- |  | ----------------- | -------------- | - | ---- | - | ------- | ----------------- |  | - | ------- | - |  | ----------------- | ------- | - |  | -- | ------- | -- |  | -- | ------- | -
|                                         |      | First Quarter |         |                   | Second Quarter |   |         | Third Quarter |  |                   | Fourth Quarter |  
|                                         | 2009 |               |         | 2008(as adjusted) |                |   | 2009    |               |  | 2008(as adjusted) |                |   | 2009 |   |         | 2008(as adjusted) |  |   | 2009    |   |  | 2008(as adjusted) |        
|Net Sales                                |      | $             | 217,892 |                   |                | $ | 313,620 |               |  | $                 | 362,105        |   |      | $ | 421,302 |                   |  | $ | 390,099 |   |  | $                 | 452,441 |   |  | $  | 537,043 |    |  | $  | 459,641 |  
|Seasonality %                            |      |               | 14.5    | %                 |                |   | 19.0    | %             |  |                   | 24.0           | % |      |   | 25.6    | %                 |  |   | 25.9    | % |  |                   | 27.5    | % |  |    | 35.6    | %  |  |    | 27.9    | %
|Gross Profit                             |      |               | 61,162  |                   |                |   | 66,216  |               |  |                   | 119,696        |   |      |   | 103,738 |                   |  |   | 129,830 |   |  |                   | 115,832 |   |  |    | 183,908 |    |  |    | 136,319 |  
|Gross Profit %                           |      |               | 28.1    | %                 |                |   | 21.1    | %             |  |                   | 33.1           | % |      |   | 24.6    | %                 |  |   | 33.3    | % |  |                   | 25.6    | % |  |    | 34.2    | %  |  |    | 29.7    | %
|Operating Income                         |      |               | 20,306  |                   |                |   | 25,468  |               |  |                   | 247,224        |   |      |   | 42,843  |                   |  |   | 34,790  |   |  |                   | 52,840  |   |  |    | (86,172 | )  |  |    | 77,581  |  
|Operating Income %                       |      |               | 9.3     | %                 |                |   | 8.1     | %             |  |                   | 68.3           | % |      |   | 10.2    | %                 |  |   | 8.9     | % |  |                   | 11.7    | % |  |    | (16.0   | )% |  |    | 16.9    | %
|Net Income / (Loss) attributable to CEDC |      | ($            | 87,661  | )                 |                | $ | 18,365  |               |  | $                 | 213,726        |   |      | $ | 46,034  |                   |  | $ | 47,146  |   |  | ($                | 726     | ) |  | ($ | 94,882  | )  |  | ($ | 82,271  | )
|Basic earning per share                  |      | ($            | 1.83    | )                 |                | $ | 0.45    |               |  | $                 | 4.34           |   |      | $ | 1.08    |                   |  | $ | 0.85    |   |  | ($                | 0.02    | ) |  | ($ | 1.52    | )  |  | ($ | 1.76    | )
|Diluted earning per share                |      | ($            | 1.83    | )                 |                | $ | 0.44    |               |  | $                 | 4.00           |   |      | $ | 1.06    |                   |  | $ | 0.80    |   |  | ($                | 0.02    | ) |  | ($ | 1.52    | )  |  | ($ | 1.76    | )

For the three months ended
December 31, 2008, March 31, 2009 and December 31, 2009, the Company excluded 211 thousand, 81 thousand, and 366 thousand shares respectively from the above EPS calculation because they would have had antidilutive impact for the fourth
quarter 2008, the first quarter 2009 and the fourth quarter 2009 periods presented.

Seasonality is calculated as a percent of
full year sales recognized in the relevant quarter.

24. Geographic Data

Net sales and long-lived assets, by geographic area, consisted of the following for the three years ended December 31, 2009, 2008 and
2007:



|                                     |      |                         |           |  |      |           |  |   |          
|------------------------------------ | ---- | ----------------------- | --------- |  | ---- | --------- |  | - | ---------
|(In thousands)                       |      | Year ended December 31,
|                                     | 2009 |                         | 2008      |  | 2007
|Net Sales to External Customers (a): |      |                         |           |  |      |           |  |   |          
|United States                        |      | $                       | 1,257     |  | $    | 798       |  | $ | 716      
|International                        |      |                         |           |  |      |           |  |   |          
|Poland                               |      |                         | 871,383   |  |      | 1,281,738 |  |   | 1,139,431
|Russia                               |      |                         | 566,995   |  |      | 297,510   |  |   |         
|Hungary                              |      |                         | 36,585    |  |      | 43,482    |  |   | 37,221   
|Other                                |      |                         | 30,919    |  |      | 23,476    |  |   | 12,454   
|                                     |      |                         |           |  |      |           |  |   |          
|Total international                  |      |                         | 1,505,882 |  |      | 1,646,206 |  |   | 1,189,106
|                                     |      |                         |           |  |      |           |  |   |          
|Total                                |      | $                       | 1,507,139 |  | $    | 1,647,004 |  | $ | 1,189,822
|                                     |      |                         |           |  |      |           |  |   |          
|Long-lived assets (b):               |      |                         |           |  |      |           |  |   |          
|United States                        |      | $                       | 19        |  | $    | 51        |  | $ | 9        
|International                        |      |                         |           |  |      |           |  |   |          
|Poland                               |      |                         | 540,396   |  |      | 706,659   |  |   | 636,696  
|Russia                               |      |                         | 562,747   |  |      | 247,214   |  |   |         
|Hungary                              |      |                         | 976       |  |      | 1,288     |  |   | 1,088    
|                                     |      |                         |           |  |      |           |  |   |          
|Total international                  |      |                         | 1,104,119 |  |      | 955,161   |  |   | 637,784  
|                                     |      |                         |           |  |      |           |  |   |          
|Total consolidated long-lived assets |      | $                       | 1,104,138 |  | $    | 955,212   |  | $ | 637,793  
|                                     |      |                         |           |  |      |           |  |   |          



|(a) | Net sales to external customers based on the location to which the sale was delivered.
|--- | --------------------------------------------------------------------------------------

|(b) | Long-lived assets primarily consist of property, plant and equipment and trademarks.
|--- | ------------------------------------------------------------------------------------



102



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------

There were no changes in or disagreements with the accountants within the past two years.



|Item 9A. | Control and Procedures.
|-------- | -----------------------

Disclosure Controls and Procedures.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and
15(d)-15(e) of the Securities Exchange Act of 1934) refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. A companys internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Managements Report on Internal Control over Financial Reporting.

The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) and Rule 15(d)-15(f) of the Securities Exchange Act of 1934). Management assessed the effectiveness of the Companys internal control over financial reporting as of December 31, 2008, using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal ControlIntegrated Framework.

The Companys management has excluded Russian Alcohol from its assessment of internal controls over financial reporting as of December 31, 2009, because these companies were acquired by the Company in purchase business
combinations during the year ended December 31, 2009. Russian Alcohol is a subsidiary of the Company that is controlled by ownership of all voting interest, whose total assets and total revenues represent 20.0% and 21.2%, respectively, of the
related consolidated financial statements as of and for the year ended December 31, 2009.

Based on its assessment,
management has concluded that the Companys internal control over financial reporting was effective as of December 31, 2009.

Based upon the evaluation of the Companys disclosure controls and procedures as of the end of the period covered by this report, the Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure
controls and procedures were effective at the reasonable assurance level.

Inherent Limitations in Internal Control over
Financial Reporting.

The Companys management, including the Chief Executive Officer and Chief Financial Officer,
does not expect that the Companys disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Because of the limitations in



103



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Amounts in tables expressed in thousands, except per share information



all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Further, the design of
any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these
inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Accordingly, the Companys disclosure controls and procedures are designed to provide reasonable assurance that the
controls and procedures will meet their objectives.

Changes to Internal Control over Financial Reporting.

The Chief Executive Officer and the Chief Financial Officer conclude that, during the most recent fiscal quarter, there have been no
changes in the Companys internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.



104



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##### Table of Contents

PART III



|Item 10. | Directors and Executive Officers of the Registrant.
|-------- | ---------------------------------------------------

The information regarding our executive officers and directors required by this item is incorporated into this annual report by reference to our proxy statement for the annual meeting of stockholders to
be held on April 29, 2010. We will file our proxy statement for our 2009 annual meeting of stockholders within 120 days of December 31, 2009, our fiscal year-end.



|Item 11. | Executive Compensation.
|-------- | -----------------------

The information regarding executive compensation required by this item is incorporated into this annual report by reference to our proxy statement for the annual meeting of stockholders to be held on April 29, 2010. We will file our
proxy statement for our 2009 annual meeting of stockholders within 120 days of December 31, 2009, our fiscal year-end.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management.
|-------- | ---------------------------------------------------------------

The information regarding security ownership of certain beneficial owners and management is incorporated into this annual report by reference to our proxy statement for the annual meeting of stockholders
to be held on April 29, 2010. We will file our proxy statement for our 2009 annual meeting of stockholders within 120 days of December 31, 2009, our fiscal year-end.



|Item 13. | Certain Relationships and Related Transactions.
|-------- | -----------------------------------------------

The information regarding certain relationships and related transactions required by this item is incorporated into this annual report by reference to our proxy statement for the annual meeting of
stockholders to be held on April 29, 2010. We will file our proxy statement for our 2009 annual meeting of stockholders within 120 days of December 31, 2009, our fiscal year-end.



|Item 14. | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

The information regarding principal accountant fees and services required by this item is incorporated into this annual report by reference to the proxy statement for the annual meeting of stockholders to
be held on April 29, 2010. We will file our proxy statement for our 2009 annual meeting of stockholders within 120 days of December 31, 2009, our fiscal year-end.



105



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##### Table of Contents

PART IV



|Item 15. | Exhibits, Financial Statement Schedules and Reports on Form 8-K.
|-------- | ----------------------------------------------------------------

(a)(1) The following consolidated financial statements of the Company and report of independent auditors are included in Item 8 of this Annual Report on Form 10-K.

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2008 and 2009

Consolidated
Statements of Operations for the years ended December 31, 2007, 2008 and 2009

Consolidated Statements of Changes in
Stockholders Equity for the years ended December 31, 2007, 2008 and 2009

Consolidated Statements of Cash Flows for
the years ended December 31, 2007, 2008 and 2009

Notes to Consolidated Financial Statements



106



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.



CENTRAL EUROPEAN DISTRIBUTION CORPORATION(Registrant)By:

/s/    WILLIAM V.
CAREYWilliam V. CareyChairman, President and Chief Executive OfficerDate: March 1, 2010


POWER OF ATTORNEY

Each person whose individual signature appears below hereby authorizes and appoints William
V. Carey and Chris Biedermann, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to
execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents
or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                                     |  |                                                                               |  |              
|---------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | -------------
|Signature                                            |  | Title                                                                         |  | Date         
|                                                     |  |                                                                              
|/s/    WILLIAM V.
CAREY William V. Carey             |  | Chairman, President and Chief Executive Officer (principal executive officer) |  | March 1, 2010
|                                                     |  |                                                                              
|/s/    CHRISTOPHER
BIEDERMANN Christopher Biedermann |  | Chief Financial Officer (principal financial and accounting officer)          |  | March 1, 2010
|                                                     |  |                                                                              
|/s/    DAVID
BAILEY David Bailey                     |  | Director                                                                      |  | March 1, 2010
|                                                     |  |                                                                              
|/s/    N. SCOTT
FINE N. Scott Fine                   |  | Director                                                                      |  | March 1, 2010
|                                                     |  |                                                                              
|/s/    MAREK
FORYSIAK Marek Forysiak                 |  | Director                                                                      |  | March 1, 2010
|                                                     |  |                                                                              
|/s/    ROBERT P.
KOCH Robert P. Koch                 |  | Director                                                                      |  | March 1, 2010
|                                                     |  |                                                                              
|/s/    JAN W.
LASKOWSKI Jan W. Laskowski             |  | Director                                                                      |  | March 1, 2010
|                                                     |  |                                                                              
|/s/    MARKUS
SIEGER Markus Sieger                   |  | Director                                                                      |  | March 1, 2010
|                                                     |  |                                                                              
|/s/    SERGEY
KUPRIYANOV Sergey Kupriyanov           |  | Director                                                                      |  | March 1, 2010



107



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(a)(3) The following exhibits are either provided with this Form 10-K or are incorporated
herein by reference.



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                
|1.1           |  | Underwriting Agreement, dated as of March 3, 2008, by and between Central European Distribution Corporation and J.P. Morgan
Securities Inc. (filed as Exhibit 1.1 to the Current Report on Form 8-K filed with the SEC on March 7, 2008 and incorporated herein by reference).                                                                                                                     
|              | 
|1.2           |  | Underwriting Agreement, dated as of June 25, 2008, by and between Central European Distribution Corporation and J.P. Morgan
Securities Inc., as representative of the underwriters listed on Schedule 1 thereto (filed as Exhibit 1.1 to the Current Report on Form 8-K filed with the SEC on June 27, 2008 and incorporated herein by reference).                                                 
|              | 
|1.3           |  | Underwriting Agreement, dated as of July 20, 2009, among Central European Distribution Corporation, Mark Kaoufman and
Jefferies & Company, Inc. and UniCredit CAIB Securities UK Ltd., as representatives of the underwriters listed on Schedule 1 thereto (filed as Exhibit 1.1 to the Current Report on Form 8-K filed with the SEC on July 23, 2009 and
incorporated herein by reference).      
|              | 
|1.4           |  | Underwriting Agreement, dated as of November 18, 2009, between Central European Distribution Corporation and Jefferies &
Company, Inc. and UniCredit CAIB Securities UK Ltd., as representatives of the underwriters listed on Schedule 1 thereto (filed as Exhibit 1.1 to the Current Report on Form 8-K filed with the SEC on November 24, 2009 and incorporated herein by
reference).           
|              | 
|2.1           |  | Contribution Agreement among Central European Distribution Corporation, William V. Carey, William V. Carey Stock Trust, Estate of
William O. Carey and Jeffrey Peterson dated November 28, 1997 (filed as Exhibit 2.1 to the Registration Statement on Form SB-2, File No. 333-42387, with the SEC on December 17, 1997 (the 1997 Registration Statement), and
incorporated herein by reference).
|              | 
|2.2           |  | Investment Agreement for Damianex S.A. dated April 22, 2002, among Carey Agri International Poland Sp. z o.o., Central
European Distribution Corporation, Michael Ciapala, Boguslaw Barnat and Iwona Barnat (filed as Exhibit 2 to the Current Report on Form 8-K/A filed with the SEC on May 14, 2002, and incorporated herein by reference).                                                     
|              | 
|2.3           |  | Share Purchase Agreement for AGIS S.A. dated April 24, 2002, among Carey Agri International Poland Sp. z o.o., Central
European Distribution Corporation, Jacek Luczak and Slawomir Wisniewski (filed as Exhibit 2.2 to the Current Report on Form 8-K/A filed with the SEC on June 3, 2002, and incorporated herein by reference).                                                                
|              | 
|2.4           |  | Share Purchase Agreement for Onufry S.A. dated October 15, 2002, among Carey Agri International Poland Sp. z o.o., Central
European Distribution Corporation, Zbigniew Trafalski and Henryk Gawin (filed as Exhibit 2.4 to the Annual Report on Form 10-K filed with the SEC on March 17, 2003, and incorporated herein by reference).                                                             
|              | 
|2.5           |  | Share Purchase Agreement for Dako Sp. z o.o. dated April 16, 2003, among Carey Agri International Poland Sp. z o.o., Central
European Distribution Corporation, Waclaw Dawidowicz and Miroslaw Sokalski (filed as Exhibit 2.1 to the Quarterly Report on Form 10-Q filed with the SEC on May 15, 2003, and incorporated herein by reference).                                                      
|              | 
|2.6           |  | Share Purchase Agreement for Panta Hurt Sp. z o.o. dated September 5, 2003, among Carey Agri International Poland Sp. z
o.o., Central European Distribution Corporation, Wlodzimierz Szydlarski, Sylwester Zakrzewski and Wojciech Piatkowski (filed as Exhibit 2.6 to the Quarterly Report on Form 10-Q filed with the SEC on November 14, 2003, and incorporated herein by
reference).           



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                          
|2.7           |  | Share Purchase Agreement for Multi-Ex S.A. dated November 14, 2003, among Carey Agri International Sp. z o.o., Piotr
Pabianski and Ewa Maria Pabianska (filed as Exhibit 2.7 to the Annual Report on Form 10-K filed with the SEC on March 15, 2004, and incorporated herein by reference).                                                                                                                                  
|              | 
|2.8           |  | Share Purchase Agreement for Multi-Ex S.A. dated November 14, 2003, between Central European Distribution Corporation and
Piotr Pabianski (filed as Exhibit 2.8 to the Annual Report on Form 10-K filed with the SEC on March 15, 2004, and incorporated herein by reference).                                                                                                                                               
|              | 
|2.9           |  | Share Purchase Agreement for Multi-Ex S.A. dated December 18, 2003, between Central European Distribution Corporation and
Piotr Pabianski (filed as Exhibit 2.9 to the Annual Report on Form 10-K filed with the SEC on March 15, 2004, and incorporated herein by reference).                                                                                                                                               
|              | 
|2.10          |  | Share Sale Agreement for Miro sp. z.o.o. dated May 14, 2004, among Central European Distribution Corporation, Miroslawem
Grzadkowskim, Halina Grzadkowska, Jackiem Grzadkowskim and Kinga Grzadkowska (filed as Exhibit 2.10 to the Quarterly Report on Form 10-Q filed with the SEC on May 10, 2004, and incorporated herein by reference).                                                                                 
|              | 
|2.11          |  | Conditional Share Sale Agreement for Delikates Sp. z o.o. dated April 28, 2005 by and among Carey Agri International Poland
Sp. z o.o., Central European Distribution Corporation, Barbara Jernas, Szymon Jernas, Magdalena Namysl and Karol Jaskula (filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on May 4, 2005 and incorporated herein by
reference).                                        
|              | 
|2.12          |  | Share Sale Agreement, dated June 27, 2005, by and among Rémy Cointreau S.A., Botapol Management B.V., Takirra
Investment Corporation N.B., Central European Distribution Corporation and Carey Agri International Poland Sp. z o.o. (filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on July 1, 2005 and incorporated herein by
reference).                                                        
|              | 
|2.13          |  | Share Purchase Agreement, dated July 11, 2005, by and among the State Treasury of the Republic of Poland, Carey Agri
International-Poland Sp. z o.o. and Central European Distribution Corporation (filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on July 15, 2005 and incorporated herein by reference).                                                                                        
|              | 
|2.14          |  | Conditional Share Sale Agreement for Imperial Sp. z o.o. dated August 16, 2005 by and among Carey Agri International Poland
Sp. z o.o., Central European Distribution Corporation, and Tadeusz Walkuski (filed as Exhibit 2.11 to the Quarterly Report on Form 10-Q filed with the SEC on November 9, 2005 and incorporated herein by reference).                                                                            
|              | 
|2.15          |  | Share Sale and Purchase Agreement, dated March 11, 2008, by and among White Horse Intervest Limited, William V. Carey,
Central European Distribution Corporation, and Bols Sp. z o.o. (filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on March 17, 2008 and incorporated herein by reference).                                                                                                    
|              | 
|2.16          |  | Share Sale and Purchase Agreement, dated May 23, 2008, by and among Barclays Wealth Trustees (Jersey) Limited (in its
capacity as trustee of The First National Trust), WHL Holdings Limited, Polmos Bialystok S.A. and Central European Distribution Corporation (filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on May 30, 2008 and
incorporated herein by reference).                          
|              | 
|2.17          |  | Amendment No. 5 to Share Sale and Purchase Agreement, dated February 24, 2009, by and among Barclays Wealth Trustees
(Jersey) Limited (in its capacity as trustee of The First National Trust), WHL Holdings Limited, Polmos Bialystok S.A. and Central European Distribution Corporation. (filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on
March 2, 2009 and incorporated herein by reference).



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2.18          |  | Amendment No. 5 to Share Sale and Purchase Agreement, dated February 24, 2009, by and among Barclays Wealth Trustees
(Jersey) Limited (in its capacity as trustee of The First National Trust), WHL Holdings Limited, Polmos Bialystok S.A. and Central European Distribution Corporation (filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on
March 2, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                          
|              | 
|2.19          |  | Amendment to Share Sale and Purchase Agreement, dated September 22, 2009, by and among White Horse Intervest, Limited,
William V. Carey, Central European Distribution Corporation and Bols Sp. z o.o (filed as Exhibit 2.1 to the Periodic Report on Form 8-K filed with the SEC on September 28, 2009 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                         
|              | 
|2.20          |  | Share Sale and Purchase Agreement, dated September 22, 2009, by and among Bols Sp. z o.o and White Horse Intervest Limited
(filed as Exhibit 2.2 to the Periodic Report on Form 8-K filed with the SEC on September 22, 2009 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|3.1           |  | Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Quarterly Report of Form 10-Q filed with the SEC
on August 8, 2006 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|              | 
|3.2           |  | Amended and Restated Bylaws (filed as Exhibit 99.3 to the Periodic Report on Form 8-K filed with the SEC on May 3, 2006, and
incorporated herein by reference). Exhibit Number Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|              | 
|4.1           |  | Form of Common Stock Certificate (filed as Exhibit 4.1 to the 1997 Registration Statement and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              | 
|4.2           |  | Indenture, dated July 25, 2005, by and among Central European Distribution Corporation, Carey Agri International-Poland Sp.
z o.o., Onufry S.A., Multi-Ex S.A., Astor Sp. z o.o., Polskie Hurtownie Alkoholi Sp. z o.o., MTC Sp. z o.o., Przedsiebiorstwo Dystrybucji Alkoholi Agis S.A., Dako-Galant Przedsiebiorstwo Handlowo Produkcyjne Sp. z o.o., Damianex S.A., PWW
Sp. z o.o. and Miro Sp. z o.o., as Guarantors, The Bank of New York, as Trustee, Principal Paying Agent, Registrar and Transfer Agent, and ING Bank N.V., London Branch, as Note Security Agent (filed as Exhibit 4.1 to the Current Report on
Form 8-K filed with the SEC on July 25, 2005 and incorporated herein by reference).                                                          
|              | 
|4.3           |  | First Supplemental Indenture, dated August 31, 2005, by and among Central European Distribution Corporation, as Issuer,
Carey Agri International-Poland Sp. z o.o., Onufry S.A., Multi-Ex S.A., Astor Sp. z o.o., Polskie Hurtownie Alkoholi Sp. z o.o., MTC Sp. z o.o., Przedsiebiorstwo Dystrybucji Alkoholi Agis S.A., Dako-Galant Przedsiebiorstwo Handlowo Produkcyjne Sp. z
o.o., Damianex S.A., PWW Sp. z o.o. and Miro Sp. z o.o., as Initial Guarantors, Botapol Holding B.V. and Bols Sp. z o.o., as Additional Guarantors, The Bank of New York, as Trustee, and ING Bank N.V., London Branch, as Note Security Agent (filed as
Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on September 2, 2005 and incorporated herein by reference).
|              | 
|4.4           |  | Second Supplemental Indenture, dated as of March 30, 2006 among Central European Distribution Corporation, as Issuer, Carey
Agri International-Poland Sp. z o.o., Onufry S.A., Multi-Ex S.A., Astor Sp. z o.o., Polskie Hurtownie Alkoholi Sp. z o.o., MTC Sp. z o.o., Przedsiebiorstwo Dystrybucji Alkoholi Agis S.A., Dako-Galant Przedsiebiorstwo Handlowo Produkcyjne Sp. z o.o.,
Damianex S.A., PWW Sp. z o.o. and Miro Sp. z o.o., as Initial Guarantors, Botapol Holding B.V. and Bols Sp. z o.o., as Additional Guarantors, The Bank of New York, as Trustee, and ING Bank N.V., London Branch, as Note Security Agent (filed as
Exhibit 4.1 to the Quarterly Report on Form 10-Q filed with the SEC on August 8, 2006 and incorporated herein by reference).  



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.5           |  | Third Supplemental Indenture, dated as of July 7, 2006 among Central European Distribution Corporation, as Issuer, Carey
Agri International-Poland Sp. z o.o., Onufry S.A., Multi-Ex S.A., Astor Sp. z o.o., Polskie Hurtownie Alkoholi Sp. z o.o., MTC Sp. z o.o., Przedsiebiorstwo Dystrybucji Alkoholi Agis S.A., Dako-Galant Przedsiebiorstwo Handlowo Produkcyjne Sp. z o.o.,
Damianex S.A., PWW Sp. z o.o., Miro Sp. z o.o., Botapol Holding B.V. and Bols Sp. z o.o., as Guarantors, Delikates Sp. z o.o., Panta Hurt Sp. z o.o., Polnis Dystrybucja Sp. z o.o., Imperial Sp. z o.o. and Krokus Sp. z o.o., as New Guarantors,
The Bank of New York, as Trustee, and ING Bank N.V., London Branch, as Note Security Agent (filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q filed with the SEC on August 8, 2006 and incorporated herein by
reference).
|              | 
|4.6           |  | Base Indenture, dated as of March 7, 2008, by and between Central European Distribution Corporation, as Issuer and The Bank
of New York Trust Company, N.A., as Trustee (filed as Exhibit 4.6 to the Annual Report on Form 10-K filed with the SEC on March 2, 2009 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|              | 
|4.7           |  | Supplemental Indenture, dated as of March 7, 2008, by and between Central European Distribution Corporation, as Issuer and
The Bank of New York Trust Company, N.A., as Trustee (filed as Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on March 7, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|              | 
|4.8           |  | Registration Rights Agreement, dated March 13, 2008, by and between Central European Distribution Corporation and Direct
Financing Limited (filed as Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on March 17, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|              | 
|4.9           |  | Registration Rights Agreement, dated October 21, 2008 by and between Central European Distribution Corporation and Barclays
Wealth Trustees (Jersey) Limited (as Trustee of the First National Trust) (filed as Exhibit 4.9 to the Annual Report on Form 10-K filed with the SEC on March 2, 2009 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|              | 
|4.10          |  | Registration Rights Agreement, dated May 7, 2009, between Central European Distribution Corporation, Lion/Rally Cayman 4 and
Lion/Rally Cayman 5 (filed as Exhibit 4.1 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              | 
|4.11          |  | Warrant to purchase shares of common stock, dated June 30, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 4 (filed as Exhibit 4.2 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|              | 
|4.12          |  | Warrant to purchase shares of common stock, dated June 30, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 5 (filed as Exhibit 4.3 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|              | 
|4.13          |  | Warrant to purchase shares of common stock, dated June 30, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 4 (filed as Exhibit 4.4 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|              | 
|4.14          |  | Warrant to purchase shares of common stock, dated June 30, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 5 (filed as Exhibit 4.5 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.15          |  | Warrant to purchase shares of common stock, dated June 30, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 4 (filed as Exhibit 4.6 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                 
|              | 
|4.16          |  | Warrant to purchase shares of common stock, dated June 30, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 5 (filed as Exhibit 4.7 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                 
|              | 
|4.17          |  | Agreement, dated October 30, 2009, between Central European Distribution Corporation, Lion/Rally Cayman 4 and Lion/Rally
Cayman 5 (filed as Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on November 5, 2009 and incorporated herein by reference).                                                                                                                                                                                                                                     
|              | 
|4.18          |  | Warrant to purchase shares of common stock, dated October 2, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 4 (filed as Exhibit 4.2 to the to the Quarterly Report on Form 10-Q filed with the SEC on November 11, 2009, and incorporated herein by reference).                                                                                                                                                                                                             
|              | 
|4.19          |  | Warrant to purchase shares of common stock, dated October 2, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 5 (filed as Exhibit 4.3 to the to the Quarterly Report on Form 10-Q filed with the SEC on November 11, 2009, and incorporated herein by reference).                                                                                                                                                                                                             
|              | 
|4.20          |  | Warrant to purchase shares of common stock, dated October 2, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 4 (filed as Exhibit 4.4 to the to the Quarterly Report on Form 10-Q filed with the SEC on November 11, 2009, and incorporated herein by reference).                                                                                                                                                                                                             
|              | 
|4.21          |  | Warrant to purchase shares of common stock, dated October 2, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 5 (filed as Exhibit 4.5 to the to the Quarterly Report on Form 10-Q filed with the SEC on November 11, 2009, and incorporated herein by reference).                                                                                                                                                                                                             
|              | 
|4.22          |  | Warrant to purchase shares of common stock, dated October 2, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 4 (filed as Exhibit 4.6 to the to the Quarterly Report on Form 10-Q filed with the SEC on November 11, 2009, and incorporated herein by reference).                                                                                                                                                                                                             
|              | 
|4.23          |  | Warrant to purchase shares of common stock, dated October 2, 2009, issued by Central European Distribution Corporation to
Lion/Rally Cayman 5 (filed as Exhibit 4.7 to the to the Quarterly Report on Form 10-Q filed with the SEC on November 11, 2009, and incorporated herein by reference).                                                                                                                                                                                                             
|              | 
|4.24          |  | Indenture, dated as of December 2, 2009, by and between Central European Distribution Corporation, CEDC Finance Corporation
International, Inc., as Issuer and Deutsche Trustee Company Limited, as Trustee (including the respective forms of the $380,000,000 9.125% Senior Secured Note and the 380,000,000 8.875% Senior Secured Note, each due December 1, 2016)
(filed as Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on December 3, 2009 and incorporated herein by reference).
|              | 
|4.25*         |  | Form of Registration Rights Agreement, by and among Central European Distribution Corporation, Lion/Rally Cayman 4 and Lion/Rally
Cayman 5.                                                                                                                                                                                                                                                                                                                                                                 



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4.26*         |  | First Supplemental Indenture, dated December 29, 2009, by and among Bravo Premium LLC, JSC Distillery Topaz, JSC
Russian Alcohol Group, Latchey Limited, Limited Liability Company The Trading House Russian Alcohol, Lion/Rally Cayman 6, Lion/Rally Lux 1 S.A., Lion/Rally Lux 2 S.à r.l., Lion/Rally Lux 3 S.à r.l., Mid-Russian
Distilleries, OOO First Tula Distillery, OOO Glavspirttirest, Pasalba Limited, Premium Distributors sp. z o.o., Sibirsky LVZ, as Additional Guarantors, CEDC Finance Corporation International, Inc., as Issuer, the entities listed on Schedule I
thereto, as the existing Guarantors, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, London Branch, as Polish Security Agent and TMF Trustee Limited, as Security Agent.
|              | 
|10.1          |  | 2007 Stock Incentive Plan (filed as Exhibit A to the definitive Proxy Statement as filed with the SEC on March 27, 2007, and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|10.2          |  | Form of Stock Option Agreement with Directors under 2007 Stock Incentive Plan (filed as Exhibit 10.2 to the Annual Report on Form
10-K filed with the SEC on February 29, 2008, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|              | 
|10.3          |  | Form of Stock Option Agreement with Officers under 2007 Stock Incentive Plan (filed as Exhibit 10.3 to the Annual Report on Form
10-K filed with the SEC on February 29, 2008, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|              | 
|10.4          |  | Lease Agreement for warehouse at Bokserska Street 66a, Warsaw, Poland (filed as Exhibit 10.15 to the Current Report on Form 8-K
filed with the SEC on April 16, 2001, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              | 
|10.5          |  | Annex 2 to Lease Agreement dated February 19, 2003, for the warehouse located at Bokserska Street 66a, Warsaw, Poland (filed
as Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC on March 15, 2004, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              | 
|10.6          |  | Social guarantee package for the employees of Polmos Bialystok S.A. (filed as exhibit 10.1 to the Quarterly Report on Form 10-Q
filed with the SEC on August 8, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|              | 
|10.7          |  | Purchase Agreement dated as of August 3, 2005 by and among Central European Distribution Company and the investors signatory
thereto (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the SEC on November 9, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|              | 
|10.8          |  | Registration Rights Agreement dated as of August 3, 2005 by and among Central European Distribution Corporation and the
investors signatory thereto (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the SEC on November 9, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|              | 
|10.9          |  | Registration Rights Agreement, dated August 17, 2005, by and among Central European Distribution Corporation, Botapol
Management B.V. and Takirra Investment Corporation N.V. (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on August 23, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|              | 
|10.10         |  | Employment Agreement, dated August 10, 2005, by and between Central European Distribution Corporation and Richard Roberts
(filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on October 13, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|              | 
|10.11         |  | Annex, dated January 24, 2007, to the Employment Agreement dated as of August 10, 2005, between Richard Roberts and
Central European Distribution Corporation (filed as Exhibit 10.5 to the Current Report on Form 8-K filed with the SEC on January 24, 2007, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.12         |  | Trade Mark License, dated August 17, 2005, by and among Distilleerderijen Erven Lucas Bols B.V., Central European
Distribution Corporation and Carey Agri International Poland Sp. z o.o. (filed as Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on August 23, 2005 and incorporated herein by reference).                                                                                                                                                                                                      
|              | 
|10.13         |  | Deed of Tax Covenant, dated August 17, 2005, by and among Botapol Management B.V., Takirra Investment Corporation N.V.,
Rémy Cointreau S.A., Carey Agri International Poland Sp. z o.o. and Central European Distribution Corporation (filed as Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on August 23, 2005 and incorporated herein by
reference).                                                                                                                                                          
|              | 
|10.14         |  | Bank Guarantee, dated October 12, 2006, by and between Fortis Bank SA/NV, Austrian Branch and Carey Agri International
Poland Sp. z o.o. (filed as Exhibit 10.2 to the Current Report on Form 8K filed with the SEC on October 18, 2006 and incorporated herein by reference).                                                                                                                                                                                                                                                       
|              | 
|10.15         |  | Summary of Director Compensation (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the SEC on
November 8, 2006 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                           
|              | 
|10.16         |  | Facility Agreement, dated December 21, 2007, among Fortis Bank Polska S.A., Fortis Bank S.A./NV, Austrian Branch, and Bank
Polska Kasa Opieki S.A. and Carey Agri International-Poland Sp. z o.o. (filed as Exhibit 10.31 to the Annual Report on Form 10-K filed with the SEC on February 29, 2008, and incorporated herein by reference).                                                                                                                                                                                          
|              | 
|10.17         |  | Corporate Guarantee Agreement, dated December 21, 2007, between Fortis Bank Polska S.A., Fortis Bank S.A./NV, Austrian
Branch, Bank Polska Kasa Opieki S.A. and Central European Distribution Corporation (filed as Exhibit 10.32 to the Annual Report on Form 10-K filed with the SEC on February 29, 2008, and incorporated herein by reference).                                                                                                                                                                                  
|              | 
|10.18         |  | Shareholders Agreement, dated March 13, 2008, among White Horse Intervest Limited, Bols Sp. z o.o., Central
European Distribution Corporation and Copecresto Enterprises Limited (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on March 17, 2008 and incorporated herein by reference).                                                                                                                                                                                                                
|              | 
|10.19         |  | Amended and Restated Investment Commitment Letter, dated June 18, 2008, by and among Central European Distribution
Corporation, Lion Capital LLP acting for and on behalf of each of Lion Capital Fund I L.P., Lion Capital Fund I A L.P., Lion Capital Fund I B L.P., Lion Capital Fund I C L.P., Lion Capital Fund I SBS L.P.; and Lion Capital (Guernsey) Limited c/o
Aztec Financial Services (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on July 15, 2008 and incorporated herein by reference).
|              | 
|10.20         |  | Letter Agreement, dated May 22, 2008, between Central European Distribution Corporation and Pasalba Limited (filed as
Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on May 29, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                       
|              | 
|10.21         |  | Shareholders Agreement, dated July 8, 2008, by and among Central European Distribution Corporation, Lion/Rally Cayman
1 LP, Carey Agri International  Poland Sp. z o. o, Lion/Rally Carry ENG 1 LP and Lion/Rally Cayman 2 (filed as Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on July 15, 2008 and incorporated herein by reference).                                                                                                                                                                     
|              | 
|10.22         |  | Instrument by way of Deed Constituting US$103,500,000 Unsecured Exchangeable Loan Notes, dated July 8, 2008, by and among
Lion/Rally Cayman 2 and Lion/Rally Lux 1 S.A. and Lion/Rally Lux 3 S.a.r.l. (filed as Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on July 15, 2008 and incorporated herein by reference).                                                                                                                                                                                            
|              | 
|10.23         |  | Shareholders Agreement, dated May 23, 2008, by and among Barclays Wealth Trustees (Jersey) Limited (as trustee of The
First National Trust), Polmos Bialystok S.A. and Peulla Enterprises Limited (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 30, 2008 and incorporated herein by reference).                                                                                                                                                                                                



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.24         |  | Amendment No. 1 to Shareholders Agreement, dated February 24, 2009, by and among Barclays Wealth Trustees (Jersey)
Limited (as trustee of The First National Trust), Polmos Bialystok S.A. and Peulla Enterprises Limited. (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on March 2, 2009 and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              | 
|10.25         |  | Amended and Restated Employment Agreement, dated June 11, 2008, by and between Central European Distribution Corporation and
William V. Carey (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on June 17, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|              | 
|10.26         |  | Amended and Restated Employment Agreement, dated June 11, 2008, by and between Central European Distribution Corporation and
Christopher Biedermann (filed as Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on June 17, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|              | 
|10.27         |  | Amended and Restated Employment Agreement, dated June 11, 2008, by and between Central European Distribution Corporation and
Evangelos Evangelou (filed as Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on June 17, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|              | 
|10.28         |  | Amended and Restated Employment Agreement, dated June 11, 2008, by and between Central European Distribution Corporation and
James Archbold (filed as Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on June 17, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              | 
|10.29         |  | Amended and Restated Executive Bonus Plan (filed as Exhibit 10.5 to the Current Report on Form 8-K filed with the SEC on
June 17, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|10.30         |  | Facilities Agreement dated April 24, 2008 among Central European Distribution Corporation, Bols Sp. z o.o. and certain other
subsidiaries of Central European Distribution Corporation, and Bank Zachodni WBK S.A. as lender (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the SEC on May 9, 2008 and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|              | 
|10.31         |  | Labor Contract, dated April 1, 2008, between Parliament Distribution and Mr. Sergey Kupriyanov (filed as Exhibit 10.1 to the
Quarterly Report on Form 10-Q filed with the SEC on August 11, 2008 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|              | 
|10.32         |  | Facilities Agreement, dated July 2, 2008, among Central European Distribution Corporation, Carey Agri International-Poland
Sp. z o.o and certain other subsidiaries of Central European Distribution Corporation, and Bank Handlowy W Warszawie S.A. (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the SEC on August 11, 2008 and incorporated herein
by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|10.33         |  | Amendment and Restatement Agreement Relating to a Facility Agreement dated December 21, 2007, dated February 24, 2009,
by and among Carey Agri International-Poland Sp. z o.o., Central European Distribution Corporation, Astor Sp. z o.o., Bols Hungary KFT, Bols Sp. z o.o., Botapol Holding B.V., Dako-Galant Przedsiebiorstwo Handlowo Produkcyjne Sp. z o.o., Damianex
S.A. Delikates Sp. z o.o., Fine Wine & Spirit (FWS) Sp. z o.o., Imperial Sp. z o.o. Miro Sp. z o.o., MTC Sp. z o.o., Multi-Ex Sp. z o.o., Onufry S.A., Panta Hurt Sp. z o.o., Polnis Dystrybucja Sp. z o.o., Polskie Hurtownie Alkoholi Sp.
z o.o., Przedsiebiorstwo Dystrybucji Alkoholi Agis S.A., Przedsiebiorstwo Handlu Spozywczego Sp. z o.o., PWW Sp. z o.o., Saol Dystrybucja Sp. z o.o., Fortis Bank Polska S.A., Fortis Bank S.A./NV, Austrian Branch and Bank Polska Kasa Opieki
S.A. (filed as Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on March 2, 2009 and incorporated herein by reference).



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|10.34         |  | Amendment Agreement Relating to a Facility Agreement dated December 21, 2007 as Amended and Restated on February 24,
2009, dated February 24, 2009, by and among Carey Agri International-Poland Sp. z o.o., Central European Distribution Corporation, Astor Sp. z o.o., Bols Hungary KFT, Bols Sp. z o.o., Botapol Holding B.V., Dako-Galant Przedsiebiorstwo Handlowo
Produkcyjne Sp. z o.o., Damianex S.A. Delikates Sp. z o.o., Fine Wine & Spirit (FWS) Sp. z o.o., Imperial Sp. z o.o. Miro Sp. z o.o., MTC Sp. z o.o., Multi-Ex Sp. z o.o., Onufry S.A., Panta Hurt Sp. z o.o., Polnis Dystrybucja Sp. z o.o., Polskie
Hurtownie Alkoholi Sp. z o.o., Przedsiebiorstwo Dystrybucji Alkoholi Agis S.A., Przedsiebiorstwo Handlu Spozywczego Sp. z o.o., PWW Sp. z o.o., Saol Dystrybucja Sp. z o.o. and Bank Polska Kasa Opieki S.A. (filed as Exhibit 10.3 to the
Current Report on Form 8-K filed with the SEC on March 2, 2009 and incorporated herein by reference).
|              | 
|10.35         |  | Amendment No. 1 to Shareholders Agreement, dated February 24, 2009, by and among Barclays Wealth Trustees (Jersey)
Limited (as trustee of The First National Trust), Polmos Bialystok S.A., Central European Distribution Corporation and Peulla Enterprises Limited (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on March 2, 2009, and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|              | 
|10.36         |  | Senior Facilities Agreement, dated July 10, 2008, among Pasalba Ltd, Nowdo Limited, the Original Guarantors, Goldman Sachs
International, Bank Austria Creditanstalt AG, ING Bank N.V., London Branch, Raiffeisen Zentralbank Oesterreich AG, the Original Lenders, The Law Debenture Trust Corporation p.l.c. and the Issuing Bank (filed as Exhibit 10.1 to the to the Quarterly
Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|              | 
|10.37         |  | Intercreditor Deed, dated July 10, 2008, between Lion/Rally Lux 2 S.A. R.L., Lion/Rally Lux 3 S.A. R.L., Pasalba Ltd, Nowdo
Limited, Raiffeisen Zentralbank Oesterreich AG, The Law Debenture Trust Corporation p.l.c., the Issuing Bank, the Original Senior Lenders, the Original Intragroup Creditors, the Original Intragroup Debtors, the Original Hedge Provider, the Original
Obligors, the Senior Lenders, the Intragroup Creditors, the Intragroup Debtors and the Hedge Providers (filed as Exhibit 10.2 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                                   
|              | 
|10.38         |  | Deed of Amendment, dated December 23, 2008, in respect of a Senior Facilities Agreement, Deed of Guarantee and Covenants and
Intercreditor Deed, each dated July 10, 2008, between (among others) Pasalba Ltd, Nowdo Limited, Goldman Sachs International, Unicredit Bank Austria AG, ING Bank N.V., London Branch and Raiffeisen Zentralbank Oesterreich AG (filed as Exhibit
10.3 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              | 
|10.39         |  | Note Purchase and Share Sale Agreement, dated April 24, 2009, between Central European Distribution Corporation, Carey Agri
InternationalPoland Sp. z o.o., Lion/Rally Cayman 2 and Lion/Rally Cayman 5 (filed as Exhibit 10.1 to the Periodic Report on Form 8-K filed with the SEC on April 30, 2009 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|              | 
|10.40         |  | Commitment Letter, dated April 24, 2009, between Central European Distribution Corporation, Lion Capital LLP, Lion/Rally
Cayman 4 and Lion/Rally Cayman 5 (filed as Exhibit 10.2 to the Periodic Report on Form 8-K filed with the SEC on April 30, 2009 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|              | 
|10.41         |  | Option Agreement, dated May 7, 2009, between Central European Distribution Corporation, Lion/Rally Cayman 4, Lion/Rally
Cayman 5 and Lion/Rally Cayman 7 L.P (filed as Exhibit 10.6 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



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##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                         
|10.42         |  | Governance and Shareholders Agreement, dated May 7, 2009, among Central European Distribution Corporation, Lion/Rally Cayman
4, Lion/Rally Cayman 5, Lion/Rally Cayman 6, Lion/Rally Cayman 7 L.P. and Lion/Rally Cayman 8 (filed as Exhibit 10.7 to the to the Quarterly Report on Form 10-Q filed with the SEC on August 10, 2009, and incorporated herein by
reference).                                 
|              | 
|10.43         |  | Letter of Undertaking, dated April 24, 2009, between Central European Distribution Corporation, Lion Capital LLP, Lion/Rally
Cayman 4 and Lion/Rally Cayman 5 (filed as Exhibit 10.5 to the Periodic Report on Form 8-K filed with the SEC on April 30, 2009 and incorporated herein by reference).                                                                                                         
|              | 
|10.44         |  | Commitment Letter, dated July 29, 2009, between Central European Distribution Corporation, Lion/Rally Cayman 6 and
Lion/Rally Cayman 7 (filed as Exhibit 10.1 to the Periodic Report on Form 8-K filed with the SEC on August 4, 2009 and incorporated herein by reference).                                                                                                                                
|              | 
|10.45         |  | Sale and Purchase Agreement, dated July 29, 2009, between Lion/Rally Cayman 6, Euro Energy Overseas Ltd., Altek Consulting
Inc., Genora Consulting Inc., Lidstel Ltd., Pasalba Limited and Lion/Rally Lux 1 (filed as Exhibit 10.2 to the Periodic Report on Form 8-K filed with the SEC on August 4, 2009 and incorporated herein by reference).                                                           
|              | 
|10.46         |  | New Option Agreement, dated October 2, 2009 (as amended on October 30, 2009), between Central European Distribution
Corporation, Lion/Rally Cayman 4, Lion/Rally Cayman 5 and Lion/Rally Cayman 7 L.P. (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on November 5, 2009 and incorporated herein by reference).                                                               
|              | 
|10.47         |  | Agreement, dated November 9, 2009, by and among Lion/Rally Cayman 6, Kylemore International Invest Corp., Pasalba Limited,
Lion/Rally Lux 1 and Central European Distribution Corporation (filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on November 16, 2009 and incorporated herein by reference).                                                                           
|              | 
|10.48*        |  | Letter Agreement, dated November 12, 2009, between Bank Polska Kasa Opieki S.A. and Carey Agri International-Poland Sp. z
o.o.                                                                                                                                                                                                                                                                              
|              | 
|10.49*        |  | Letter Agreement, dated November 12, 2009, between Bank Handlowy w Warszawie S.A. and Carey Agri International-Poland Sp. z
o.o.                                                                                                                                                                                                                                                                            
|              | 
|10.50*        |  | Co-Investor Option Agreement, dated November 19, 2009, by and among Central European Distribution Corporation, Lion Capital,
Lion/Rally Cayman 4, Lion/Rally Cayman 5, Cayman 6, Lion/Rally Cayman 7 L.P and Lion/Rally Cayman 8.                                                                                                                                                                           
|              | 
|10.51*        |  | Lion Option Agreement, dated November 19, 2009, by and among Central European Distribution Corporation, Carey Agri
InternationalPoland Sp. z o.o., Lion Capital, Lion/Rally Cayman 4, Lion/Rally Cayman 5, Lion/Rally Cayman 6 and Lion Rally Cayman 7 L.P.                                                                                                                                                
|              | 
|10.52*        |  | Letter Agreement, dated November 25, 2009, between Bank Zachodni WBK S.A. and Bols Sp. z o.o.                                                                                                                                                                                                                                                                                                               
|              | 
|10.53*        |  | Loan Agreement, dated December 2, 2009, by and between CEDC Finance Corporation International, Inc., as Lender and Carey
Agri InternationalPoland Sp. z o.o., as Borrower.                                                                                                                                                                                                                                 
|              | 
|10.54*        |  | Loan Agreement, dated December 2, 2009, by and between CEDC Finance Corporation International, Inc., as Lender and Jelegat
Holdings Limited, as Borrower.                                                                                                                                                                                                                                                   
|              | 
|10.55*        |  | On-Loan Facility Agreement, dated December 1, 2009, by and between Jelegat Holdings Limited, as Lender, and Joint Stock
Company Distillery Topaz, OOO First Tula Distillery, Bravo Premium LLC, Limited Liability Company The Trading House Russian Alcohol, Joint Stock Company Russian Alcohol Group, ZAO Sibersky
LVZ, and Closed Joint Stock Company Mid Russian Distilleries, as Borrowers.
|              | 
|10.56*        |  | Form of Restricted Stock Award Agreement under 2007 Stock Incentive Plan.                                                                                                                                                                                                                                                                                                                                   



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##### Table of Contents

|              |  |                                                                                                          
|------------- |  | ---------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                      
|21*           |  | Subsidiaries of the Company.                                                                             
|              | 
|23*           |  | Consent of PricewaterhouseCoopers Sp. z o.o.                                                             
|              | 
|24.1*         |  | Power of Attorney (contained on signature page).                                                         
|              | 
|31.1*         |  | Rule 13a-14(a) Certification of the CEO in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|31.2*         |  | Rule 13a-14(a) Certification of the CFO in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|32.1*         |  | Section 1350 Certification of the CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.         
|              | 
|32.2*         |  | Section 1350 Certification of the CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.         



|* | Filed herewith.
|- | ---------------