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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, 2001

[_]TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
   EXCHANGE ACT OF 1934

                For the transition period from        to

                        Commission File Number 0-24341

                   Central European Distribution Corporation

            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                  Delaware                                       54-1865271
        (State or other jurisdiction                          (I.R.S. employer
      of incorporation or organization)                     identification no.)

   1343 Main Street, Suite 301, Sarasota,
                   Florida                                         34236
  (Address of principal executive offices)                       (Zip code)
</TABLE>

                                (941) 330-1558
              Registrant's telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act: Not Applicable

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

                    Common Stock, Par Value $0.01 Per Share

                                Title of Class

   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 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. [_]

   The aggregate market value of the voting stock held by non-affiliates of
the registrant (based on the closing price of the registrant's common stock on
the Nasdaq National Stock Market) on March 8, 2002 was $34,813,761.*

   As of March 8, 2002, the registrant had 4,490,901 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, 2002 are incorporated by reference into Part III.
--------
* Solely for purposes of this calculation, all directors and executive
  officials of the registrant and all stockholders beneficially owning more
  than 5% of the registrant's common stock are considered to be affiliates.

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                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
 <C>        <S>                                                           <C>
 PART I
 Item 1.    Business                                                        3
 Item 2.    Properties                                                     19
 Item 3.    Legal Proceedings                                              19
 Item 4.    Submission of Matters to a Vote of Security-Holders            19

PART II
            Market for Registrant's Common Equity and Related
 Item 5.    Stockholder Matters                                            20
 Item 6.    Selected Financial Data                                        21
            Management's Discussion and Analysis of Financial Condition
 Item 7.    and Results of Operations                                      22
 Item 7A.   Quantitative and Qualitative Disclosures About Market Risk     27
 Item 8.    Financial Statements and Supplementary Data                    28

PART III
 Item 10.   Directors and Executive Officers of the Registrant             52
 Item 11.   Executive Compensation                                         52
            Security Ownership of Certain Beneficial Owners and
 Item 12.   Management                                                     52
 Item 13.   Certain Relationships and Related Transactions                 52

PART IV
            Exhibits, Financial Statement Schedules and Reports on Form
 Item 14.   8K                                                             52
 Signatures
</TABLE>
<PAGE>

   THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN STATEMENTS THAT ARE NOT
HISTORICAL FACTS AND MAY BE FORWARD-LOOKING. SUCH STATEMENTS INVOLVE
ESTIMATES, ASSUMPTIONS, RISKS AND UNCERTAINTIES. THERE IS NO ASSURANCE THAT
FUTURE RESULTS WILL NOT DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-
LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO BE
MATERIALLY DIFFERENT FROM THE FORWARD-LOOKING STATEMENTS ARE DISCLOSED UNDER
THE HEADING "BUSINESS--RISK FACTORS" AND THROUGHOUT THIS FORM 10-K.

                                    PART I

Item 1. Business

General

   The registrant (CEDC), and its subsidiaries, Carey Agri International
Poland Sp z o.o., ("Carey Agri"), Multi Trade Company (MTC), The Cellars of
Fine Wines (PWW), Polskie Hurtownie Alkoholi (PHA), Astor Company, and Fine
Wine & Spirits (FWS) are referred to herein jointly as the "Company". All of
CEDC subsidiaries are 100% owned, except for Astor Company, which is 97%
owned. MTC and PWW were acquired in 1999, PHA in 2000 and Astor Company in
2001. FWS was formed in 2001 to consolidate the Company's retail business. See
Note 10 to the notes to the consolidated financial statements.

   The Company, formed in 1990, is the leading importer and distributor of
alcoholic beverages in Poland. The Company operates the largest nationwide
next-day alcoholic beverage delivery service in Poland through its seventeen
regional offices located in Poland's principal cities, including Warsaw,
Krakow, Gdynia and Katowice. The Company currently distributes approximately
820 brands in three categories: beers, spirits and wines. The Company imports
and distributes ten international beers, including, but not limited to
GUINNESS, CORONA, MILLER, FOSTER'S, BECK'S PILSNER, BITBURGER and BUDWEISER
BUDVAR. The Company currently distributes approximately 190 spirit products,
including leading international brands of scotch, single malt and other
whiskeys, rums, bourbons, Polish vodkas, tequilas, gins, brandies, cognacs,
vermouths and specialty liquors, such as JOHNNIE WALKER, SMIRNOFF, ABSOLUT,
FINLANDIA, BACARDI, and BALLANTINES.

   The Company also imports and distributes 548 wine products, including, BPH
ROTHSCHILD, TORRES, BOLLA, CONCHA Y TORO, PENFOLDS, SUTTER HOME, GEORGES
DUBOEUF, MONDAVI, VEUVE CLICQUOT AND CODORNIU. In addition to its distribution
agreements with various alcoholic beverage suppliers, the Company is the
exclusive importer for Dunhill Cigars, General Cigar products and Evian water.

   The Company distributes its products throughout Poland to approximately
7,500 outlets, including off-trade establishments, such as small businesses,
medium size retail outlets, petrol stations, duty free, supermarkets and
hypermarkets, and on-trade locations, such as bars, nightclubs, hotels and
restaurants, where such products are consumed.

Industry Overview

   Consumption. In 2001, Poland was the fourth largest consumer of vodka in
the world according to the Company's own estimate. The total market for
alcoholic beverage products in Poland was approximately $3.5 billion in 2001
at the retail level as reported by Rynki Alkoholowe a Polish monthly trade
magazine. Traditionally, the population of Poland has primarily consumed
domestic vodka, but in recent years there has been a general shift in the
population's consumption habits from vodka to other types of alcohol that are
primarily imported, such as beers, wines and spirits. The shift in consumption
habits in Poland is a result of: (i) stabilization of the Polish economy,
including increased wages as well as a decrease in the rate of inflation from
14.9% in 1997 to 3.6% in 2001; (ii) an increase in tourism, which has created
a demand for imported products; (iii) an increase in multinational firms doing
business in Poland, which has brought both capital into the country and new
potential customers for the Company's products; and (iv) increased
availability and decreased real prices for imported products.

                                       3
<PAGE>

   Distribution. The market for the distribution of alcoholic beverages in
Poland remains highly fragmented. There are numerous distributors spread
throughout the country, mainly delivering primarily one type of product (i.e.,
domestic vodka). Furthermore, distributors have been located regionally,
rather than nationally, due to the difficulties in establishing a nationwide
distribution system, including the capital required to set up such a system,
and an extremely fragmented road infrastructure. Alcohol beverages are
distributed to both off-trade sites and on-trade sites. Off-trade sites
include Polish-owned and managed businesses such as small grocery stores as
well as major chain stores. On-trade sites include bars, nightclubs, hotels
and restaurants. There has been a trend to consolidate many off-trade sites,
which, would be classified as "mom and pop" stores as well as a trend toward
expanding major chain stores. This consolidation of chain stores is also
apparent in the rapid expansion of petrol stations, which are owned and
operated by major international companies, such as Shell, BP and Statoil. Many
of these petrol stations have convenience stores, which sell all types of
alcoholic beverages and in many areas, serve as local convenience stores. The
Company believes that it is well positioned to take advantage of both the
trends in consumption and distribution.

Business Strategy

   The principal components of the Company's business strategy are as follows:

   Expand Distribution Capacity. The Company plans to continue increasing its
distribution capacity by expanding the number of its regional offices in
Poland through the acquisition of existing wholesalers, particularly in areas
where the Company does not distribute directly. The Company seeks to acquire
successful wholesalers, which are primarily involved in the vodka distribution
business and are among the leading wholesalers in their region. The Company
would then add its higher margin imported brands to complement and enhance the
existing product portfolio and margin of the target company. This strategy not
only permits the Company to add geographic coverage and to increase its
customer base but, it also increases the Company's leverage with its supply
partners and its retail client base. Distribution capacity should continue to
increase also through organic growth.

   In implementing this strategy since the beginning of 2001, the Company
acquired 97% of the shares of Astor Company at the end of the first quarter of
2001. Astor located in the north of Poland had an approximate market share of
70 - 75% in their territory for all spirits sold in their region. Astor's net
sales for all of 2001 are approximately 20.0 million USD. Further, since the
end of 2001, the Company has reached a letter of intent dated January 8, 2002
for the purchase of 100% shares of Damianex Company. This acquisition, which
is still subject to several conditions and which is expected to close by the
end of March 2002, will add distribution capacity in the South Eastern part of
Poland. The Company has also signed a letter of intent with AGIS Company on
February 15, 2002 for the purchase of 100% of shares of AGIS Company. This
acquisition, which is also subject to certain conditions and which is expected
to be completed by the end of April 2002 will add distribution capacity in the
North Western part of Poland. Both of these companies had sales of
approximately 80.0 million USD each for 2001.

   By this strategy, of acquiring key regional wholesalers and thereby
increasing the existing client base, the Company should be able to leverage
its distribution model to sell directly to retail more of its higher margin
imported brands and so enhance both its import margin and distribution margin.
For products the Company distributes on a wholesale basis the Company is only
able to capture the distribution margin as it is buying from the importer or
local producer.

   Increase Product Offerings. One of the strengths of the Company is to add
new exclusive products to its range of beers, wines, and spirits. In 2001, the
Company added Bitburger, Franziskaner, and Amsterdam beers, Raynal brandy,
Escucudo Rojo from Rothschild, Santana from Faustino, Vinsanto from
Frescobaldi, Sunrise Carmener from Casillero del Diablo, Pinot Noir from
Concha y Toro, Baron de Bellac sparkling wine from C.F.G.V and General Cigar
products to its list of exclusive imports. The Company is also in exploratory
talks to import additional alcoholic and non-alcoholic products.

   Retail Store Development. In 2001, the Company opened its fourth and fifth
retail outlets, continued to expand its direct mail order catalogue, and
constructed an e-commerce infrastructure to complement its

                                       4
<PAGE>

nationwide distribution system during the year 2001. The Company started to
consolidate its retail stores, direct mail and internet operations under the
name "Fine Wine and Spirits" (FW&S). At the end of 2001, a new company was
opened under the name FW&S comprising the five exclusive wine and spirit
stores and a direct mail order catalog reaching 20,000 recipients every three
months. The Management of the Company has plans to expand the "Fine Wine and
Spirits" operations since it is profitable and enhances the sales of its
premium wines and spirits, most of which the Company imports into Poland. The
retail operations are approximately 1% of the Company's sales in 2001.

History

   CEDC's subsidiary Carey Agri was incorporated as a limited liability
company in July 1990 in Poland. It was founded by William O. Carey, who died
in early 1997, and Jeffrey Peterson, the Company's Vice Chairman. Mr. Carey's
son, William V. Carey, is the managing director of Carey Agri and the
President and Chief Executive Officer of CEDC. In February 1991, Carey Agri
was granted its first import beer license for which it started to import
various beers including FOSTER'S lager, GROLSCH, and products from Anheuser
Bush, which it sold to wholesalers. With these beverages, Carey Agri sought to
offer more products for which it had an exclusive import license and to market
and sell these products to the market segment of the Polish population who
were benefiting from the country's market transformation. Because of Carey
Agri's initial success with FOSTER'S lager, for which it still holds the
exclusive import license for Poland, it was able to diversify in 1992 by
importing other quality brand beers from Europe and the United States. Sales
during this period were typically in high volume consignments to other
wholesalers.

   In 1993, with the acceleration of the privatization of retail outlets in
Poland, Carey Agri began to implement a systematic delivery system in Warsaw
which could deliver alcoholic beverages to retail outlets on a reliable basis.
Carey Agri leased a warehouse, purchased trucks and hired and trained
operational personnel and began to sell directly to convenience shops, small
grocery stores and newly opened pubs. Because of this business experience,
Carey Agri was prepared to take advantage of the opportunity to expand its
import and delivery capacity in Warsaw when a large, foreign-owned supermarket
chain began operations in 1993, creating a significant increase in the demand
for the Company's product line. The Warsaw model of desirable product lines
and dependable prompt delivery of product was replicated by the Company in
Krakow (1993), Wroclaw (1994), Szczecin (1994), Gdynia (1994), Katowice
(1995), Torun (1995) and Poznan (1996). At the end of 2001, the Company
operated in seventeen locations.

   CEDC was incorporated in Delaware in 1997. In July 1998, the Company issued
2,000,000 shares of its common stock in an Initial Public Offering on the
NASDAQ Small Cap Market raising net proceeds of approximately $10.6 million.
During June of 1999, the Company was accepted onto the NASDAQ National Market
where it trades under the symbol CEDC.

Product Line

   The Company currently offers approximately 820 brands of beverages in five
categories: (a) beers; (b) spirits; (c) wines; (d) soft drinks and (e) cigars.
Its brands of imported beer accounted for 6.0%, 4.1% and 3.5% of net sales
revenues during the twelve-month period ended December 31, 1999, 2000 and
2001, respectively. The total spirits category accounted for 79.1%, 81.8% and
86.0% of net sales revenues for the same periods. The spirits category is
broken down in 2001 as a percent of total net sales as follows: Polish vodka
76.4%, CEDC exclusive import spirits 2.8%, and non-exclusive imported spirits
6.8%. Wine accounted for 7.2%, 8.5% and 6.9% of net revenues for the same
periods. Sales of other products were 3.6% of net sales for December 31, 2001,
and were insignificant during the years ended December 31, 1999 and 2000.

 Beer

   The Company distributes imported beer through each of its regional offices.
BUDWEISER BUDVAR, GUINNESS, CORONA, FOSTER'S LAGER, KILKENNY, MILLER GENUINE
DRAFT AND BECK'S PILSNER, BITBURGER, FRANZISKANER, and AMSTERDAM are
distributed and marketed throughout Poland on an exclusive basis.

                                       5
<PAGE>

   Most of the Company's distribution contracts for beer contain a minimum
purchase requirement and typically permit termination if the Company breaches
its agreements, such as failure to pay within a certain time period or to
properly store and transport the product. Trade credit is extended to the
Company for a period of time after delivery of products. The duration of these
contracts differ but typically range from 1 year to 3 years with an automatic
extension period unless one of the parties chooses to terminate the agreement.
Under the conditions of these contracts the Company is responsible for the
marketing that is to be done within the confines of the market. The Company
contributes up to 50% of the marketing budget depending upon the length of the
contract.

 Polish Vodka

   The Company purchases all of its domestic vodka products from local
distilleries (approximately 12 distilleries) and carries approximately 100
different brands, including the following:

<TABLE>
               <S>        <C>          <C>
               Wyborowa   Absolwent
               Bols       Zubrowka
               Luksusowa  Smirnoff*
               Belvedere  Extra Zytnia
               Chopin     Krakus
                         --------
               * produced in Poland
</TABLE>

   The Company's agreements with various state-owned Polish vodka producers
may be terminated by either party without cause with one month's prior written
notice. The contracts are generally for one year with an automatic extension
clause, which has been standard practice within the industry for the past ten
years. To date the Company has never had a distribution contract terminated by
any of the local vodka producers. The Company has no obligation to perform any
marketing activities with or on behalf of the local vodka producer.

   In 2001, the Company had sales of over 5% of its net sales with the
following companies; Polmos Bialystok (24.1%), Unicom Bols Group (14.9%),
Polmos Poznan (11.0%), Polmos Zielona Gora (7.5%) and Guinness UDV (7.1%).

                                       6
<PAGE>

 Imported Spirits

   The Company distributes all its imported spirit products through each of
its offices, mostly on a non-exclusive basis. The spirit products sold by the
Company include the following:

<TABLE>
<S>               <C>                             <C>
Scotch Whisky:    Johnnie Walker, Black, Blue,    Black & White
                  Gold and Red Labels             The Dimple
                  J&B Rare                        White Horse
                  Chivas Regal                    VAT 69
                  Ballantines Finest              Teacher's Highland Cream
                  Ballantines Gold Seal

Single Malt       Cragganmore                     Glenkinche
 Whisky:
                  Dalwhinne                       Oban
                  Lagavulan                       Talisker
                  Cardhu

Rum:              Bacardi Light, Gold and Black   Malibu
                  Captain Morgan

Bourbon:          Jack Daniel's Tennessee Whiskey
                  Jim Beam

Imported Vodkas:  Smirnoff                        Absolut Blue
                  Citron and Kurant               Finlandia

Tequila:          Jose Cuervo, Olmeca             Sierra*

Gins:             Gordon's London Dry             Beefeater
                  Finsbury

Brandy:           Metaxa                          Stock
                  Raynal*

Cognacs:          Hennessy                        Courvoisier
                  Martell                         Camus Cognac*

Vermouths:        Stock Blanco*, Rosa and         Cinzano Blanco, Rosso, Rose,
                  Extra Dry Martini Bianco,       Extra Dry, Americano, Orancio
                  Rosso, Rose, Extra Dry

Specialty
 Spirits:         Bailey's Irish Cream            Carolan's Irish Cream
                  Kahlua Coffee Liqueur           Grand Marnier
                  Bols Liquors                    Manderine Napoleon*
                  Jagermeister                    Sambuca*
                  Cana Rior*
</TABLE>
--------
* Denotes exclusive importation.

   The products distributed on a non-exclusive basis are contracted under the
same form as for local vodka producers.

   As for the spirit brands that the Company exclusively represents, the
contracts are generally for one to three years in length and can be terminated
with a minimum 90 days written notice by either party. The Company also shares
in the local marketing costs up to a limit of 50% depending on the length of
contract being served.

                                       7
<PAGE>

 Wine

   The Company represents 50 wine suppliers and imports, and distributes 469
products through each of its offices on an exclusive basis. The wine importing
company in the CEDC group is PWW dealing directly with the suppliers listed
below. Additionally the Company distributes other various sparkling wines,
vermouths, and champagnes on a non-exclusive basis like MOET & CHANDON, DOM
PERIGNON, PIPER HEIDSECK, MARTINI, and CINZANO etc.

                 List of Exclusive Brands for PWW by Supplier

<TABLE>
<CAPTION>
     French Wines                  Spanish Wines               Italian Wines
     ------------                  -------------               -------------
     <S>                           <C>                         <C>
     Veuve Clicquot Ponsardin      M. Torres                   Castello Banfi
     Krug                          Jean Leon                   Frescobaldi
     B. Ph. de Rothschild          Bodegas Bebidas             Cecchi
     Kressmann                     Marqucs de Vittoria         Luce della Vite
     Borie Manoux                  Faustino                    Marchesi di Barolo
     Andre Lurton                  Bodegas Victorians          Villadoria
     Jean Jean                     Codorniu                    Santa Margherita
     De Ladoucette                 Felix Solis                 Bolla
     J. Moreau & Fils                                          Coltiva
     Domaine Laroche
     Georges Duboeuf
     Faiveley
     Leon Beyer
     M. Chapoutier
     Ogier
     CFGV
<CAPTION>
     Californian                   Chilean                     Australian
     -----------                   -------                     ----------
     <S>                           <C>                         <C>
     Robert Mondavi                Concha y Torro              Penfolds
     Trinchero Estates             Torres Chile                Seppelt
     Marimar Torres
     Sutter Home
     Opus One
     Francis Coppola
<CAPTION>
     Other                         Champagnes                  South Africa
     -----                         ----------                  ------------
     <S>                           <C>                         <C>
     Lenz Mozer -- Austrian        Veuve Clicquot              Winecorp
     Morhena -- German             Krug
     Boutari -- Greek
     Sogrape -- Portugal
     Forrester -- Portugal
<CAPTION>
     New Zealand
     -----------
     <S>                           <C>                         <C>
     Jackson Estate
</TABLE>

   The Company has been co-operating with the same suppliers for three years
on both a verbal and when necessary a written contract basis. Where a written
contract is in place, it is usually valid for between one and three years with
a three to six month termination clause exercisable by either party. With
selected contracts the Company also shares in the local marketing costs on
either a defined amount or revenue percentage basis. Where a label does not
have sufficient demand the Company will consolidate shipments abroad before
receiving the goods into Poland where they are stored in the Company's bonded
warehouse until customs cleared for sale.

                                       8
<PAGE>

Sales Organization

   The Company employs approximately 125 salespeople who are assigned to one
of its seventeen regional offices. Each regional office has a sales manager,
who meets with the salespeople of that office on a daily basis to review
products and payments before the salespeople begin calling on customers. The
sales force at each office is typically divided into two categories: (a)
traditional trade; and (b) key accounts. These sales-people work on a daily
pre-order system, which, is routed by region, and take the sales-force to
approximately 20 calls a day. At the end of their day they return to the
office or telephone in their orders so orders can be processed to be
dispatched the next morning. The salesmen work on a 100% commission basis and
are supplied with a company car, and mobile phone. The Company covers their
travel expenses. The Company conducts periodical training to improve the
salesmen's knowledge of the Company's products as well as improve the
salespeople's selling skills.

Marketing

   The Company has its own Marketing Department, which consists of 12 people
including 6 Brand Managers who manage the marketing support of the brands the
Company imports exclusively into Poland. The Company manages a combined
marketing budget for all brands of approximately 1.5 million USD of which the
Company contributes up to 50% of the total budget. The brand owners contribute
the remaining part. The Company is responsible for all of the marketing
efforts within Poland from the production of point of sale materials, below
the line promotions, print work, public relation events, as well as overseeing
the draft beer installations of its exclusive brands throughout Poland.

Distribution System

   The Company's headquarters are located in Warsaw, the capital of Poland.
Sales and service branches are presently located in seventeen major cities
spread across Poland.

   In October 2000, the Company moved into a professional distribution
facility in Warsaw. The facility is approximately 9,750 m2 of warehouse
(including bonded warehouse) and 2,250 m2 of office space currently used as
the headquarters for CEDC. Management believes the warehouse facility has
enough extra space to expand for the next 5 to 7 years without any major
investment.

   The Company has developed its own centrally controlled, national next-day
distribution system for its alcoholic beverage products, and has the ability
to leverage its distribution to include non-alcoholic beverage products in its
system. The Company believes that it is the only independent distribution
business, which currently has this capability in Poland. For imported
products, the distribution network begins with a central bonded warehouse in
Warsaw. Products can remain in this warehouse without customs and other duties
being paid until the product is actually needed for sale. At such point, the
product is transferred to the Company's consolidation warehouse at the same
location or shipped directly to one of the regional office warehouses
connected to each of the Company's sales locations outside of Warsaw. Based on
current sales and projections, the regional offices are provided with
deliveries on a weekly or bi-weekly basis so that they are able to respond to
their customers' needs on a next-day basis. Because of the poor road
infrastructure in Poland, the Company currently operates through seventeen
regional office/warehouse depots.

   For products which the Company delivers for others who themselves import
the products into Poland, the distribution chain begins at the Company's
consolidation warehouse in Warsaw. From there, the product is delivered to
customers using the same procedures as described above.

   Except at peak periods during the summer holidays and other similar times
such as Christmas, Company-trained employees using Company-owned vehicles make
all deliveries. During such busy periods, the Company relies on independent
contractors, which are usually small family-run businesses with which the
Company has had relationships for several years. The Company has over 75
delivery trucks it uses for its direct deliveries in Poland. The Company
replaces its fleet every 3 - 4 years, which is an on-going process handled by
its Fleet Management Department.

                                       9
<PAGE>

Market For Product Line

   In the year ended December 31, 2001, approximately 68% of the Company's
total sales were through off-trade locations where the alcoholic beverages are
not consumed, another 17% through on-trade locations where the alcoholic
beverages are consumed, and the other 15% through other wholesalers. No single
or related customer(s) in any of these three markets accounted for more than
5% of net sales in 2001.

 Off-Trade Market

   There are two components of the Company's sales to locations where
alcoholic beverages are not consumed on premises. The most significant are
small, usually Polish-owned and managed businesses, including small grocery
stores. At December 31, 2001, the Company sold products to approximately 4,250
such business outlets, which typically stock and sell relatively few alcoholic
beverage products and wish to have access to the most popular selling brands.
The other components of the off-trade business are large supermarket chains,
which are typically non-Polish-owned, as well as smaller multi-store retail
outlets operated by major Western energy companies in connection with the sale
of gasoline products. The large supermarket chains typically offer a wide
selection of alcohol products, while the smaller retail outlets offer a more
limited selection.

 On-Trade Market

   There are three components to the Company's sales to locations where
alcoholic beverages are consumed: sales to (i) bars and nightclubs; (ii)
hotels; and (iii) restaurants. Bars and nightclubs are usually locally managed
businesses, although they may be owned and operated in major cities by a non-
Polish national. Hotels include worldwide chains such as Marriott, Sheraton
and Holiday Inn, as well as the major Polish chain, Orbis. Restaurants are
typically up-scale and located in major urban areas. This latter category also
includes two major United States-based restaurant chains, which operate in
Poland.

 Wholesale Trade

   The Company also sells products throughout Poland through other
wholesalers. There are a few written agreements with these wholesalers as this
trade channel is going through a major consolidation and the company's
strategy is to go direct to retail by passing this trade channel.

 Control of Bad Debts

   The Company believes that its close monitoring of customer accounts both at
the relevant regional office and from Warsaw has contributed to its success in
maintaining a low ratio of bad debts to net sales. During the years ended
December 31, 1999, 2000 and 2001, bad debt expense, as a percentage of net
sales were 0.28%, 0.39% and 0.40% of net sales, respectively. Management
believes the ongoing enhancement of computer systems for interoffice financial
and administrative controls will assist in maintaining a low ratio of bad
debts to net sales as the Company continues to expand. A more detailed
explanation of the bad debts provision is provided in item 7, Management's
Discussion and Analysis.

Competition

   The Company, as an early entrant in the post-Communist market in Poland,
has over ten years of experience in introducing, developing and refining
sales, marketing and customer service practices in the diverse and rapidly
developing Polish economy, which it believes is a competitive advantage in the
alcoholic beverage distribution business. The Company believes that it is
currently the only independent national distributor of an extensive and
diversified alcoholic beverage line in Poland.

   The Company competes with various regional distributors in all of its
offices. This competition is particularly vigorous with respect to the
domestic vodka category of its products offerings. One of the largest,
foreign-owned chain stores also sells directly to smaller retailers. The
Company addresses this regional competition, in part, through offering to
customers in the region a single source supply of more products than its
regional competitors typically offer and the Company is able to leverage its
market share to be price competitive while still maintaining its margins.

                                      10
<PAGE>

   The brands of beers, wines and spirits distributed by the Company compete
with other brands in each category, including some the Company itself
distributes. The Company expects this competition to increase as it adds more
brands, as international drinks and brewery companies expand production in
Poland and as the Polish produced products are distributed more efficiently.
In addition, the international drinks companies with which the Company
competes in the import sector of its business have greater managerial,
financial and other resources than does the Company.

   There have been regional wholesalers who have started to form buying groups
to achieve better discounts from the local vodka producers in relation to
volume. The Company expects this trend of local buying groups to continue in
the foreseeable future. While the Company views these regional buying groups
as a stronger competitor, the Company believes that the discounts and volume
rebates achieved by the Company are still advantageous to those being obtained
by these regional buying groups.

Directors and Executive Officers

   The directors and executive officers and their ages of CEDC as of February
27, 2002, are set forth below:


<TABLE>
<CAPTION>
             Name            Age                         Position(s)
             ----            ---                         -----------
   <S>                       <C> <C>
     William V. Carey......   37 Chairman, President and Chief Executive Officer
     Jeffrey Peterson......   51 Vice Chairman
     James T. Grossmann ...   61 Director
     Tony Housh............   35 Director
     Jan W. Laskowski......   45 Director
     Joe M. Richardson.....   49 Director
     Neil Crook............   39 Vice President and Chief Financial Officer
     Evangelos Evangelou ..   34 Vice President and Chief Operating Officer
     James Archbold........   41 Vice President, Secretary and Director of Investor Relations
</TABLE>

   Directors and executive officers of CEDC are elected to serve until they
resign or are removed, or are otherwise disqualified to serve, or until, their
successors are elected. All directors of CEDC are elected annually at the
annual meeting of stockholders. Executive officers of CEDC generally are
appointed at the board's first meeting after each annual meeting of
stockholders.

   William V. Carey has served as Chairman, President and Chief Executive
Officer of CEDC since its inception. Mr. Carey began working for Carey Agri in
1990, and in 1993 Mr. Carey instituted and supervised the direct delivery
system for Carey Agri's nationwide expansion. Mr. Carey, a 1987 graduate of
the University of Florida, played briefly on the professional golf circuit
before joining the Company. Mr. Carey is a member of the American Chamber of
Commerce in Poland.

   Jeffrey Peterson has served as Vice Chairman, Executive Vice President and
director of CEDC since its inception. Mr. Peterson was a co-founder of Carey
Agri in 1990, and is a member of the management board of that entity. Prior
thereto, Mr. Peterson contracted with African, Middle Eastern, South American
and Asian governments and companies for the supply of American agricultural
exports and selected agribusiness products, such as livestock, feed
supplements and veterinary supplies. Mr. Peterson has worked with
international banks and United States government entities to facilitate
support for exports from the United States.

   James T. Grossmann, a retired United States foreign-service officer, has
served as a director of CEDC since its inception. With the United States
Agency for International Development ("U.S.A.I.D."), during the years 1977 to
1996, Mr. Grossmann served in emerging markets in Central Europe, Central
America, Africa and Asia with a concentration on developing private sector
trading and investment through United States government-sponsored aid
programs. Immediately prior to his retirement in 1996, he managed a $300
million mass privatization and capital markets development program that
assisted 14 former state-controlled countries in Central Europe transition to
market economies.

                                      11
<PAGE>

   Tony Housh, is a principal at the regulatory affairs advisory firm of
Central Europe Access LLC. Mr. Housh was the Executive Director of the
American Chamber of Commerce in Poland from 1996 to 2000, where he obtained an
in-depth knowledge of the Polish regulatory framework. Mr. Housh has been a
director of the Company since August 2000. He is also a member of the
Chamber's Board of Directors as well as the Board of the Fulbright Commission.
Mr. Housh is a graduate of Katholieke Universitiet van Leuven (Belgium) and
the University of Kansas.

   Jan W. Laskowski has served as a director of CEDC since its inception. Mr.
Laskowski has lived and worked in Poland since 1991. He was the Vice President
and member of the management board of American Bank in Poland ("Amerbank")
until February 1999, a position he had held since 1996, where he was
responsible for business development. Before joining Amerbank in 1991, Mr.
Laskowski worked in London for Bank Liechtenstein (UK) Ltd from 1989 to 1991.
He began his career with Credit Suisse, also in London, where he worked for 11
years.

   Joe M. Richardson has served as a director of CEDC since its inception.
Since October 1994, Mr. Richardson has served as the Director of Sales and
Marketing Europe of Sutter Home Winery Inc., where he is responsible for
developing and managing the importation, distribution and sales of Sutter Home
Wines within Europe. From October 1993 until October 1994, Mr. Richardson
assisted Carey Agri in marketing development. Prior thereto, Mr. Richardson
had 19 years experience in the wine industry.

   Neil Crook joined the Company in February 2000 as Vice President and Chief
Financial Officer. From April 1996 to January 2000, he held the position of
Financial Controller in Xerox Polska Ltd, the autonomous subsidiary of Xerox
(Europe) Ltd in Poland. Prior thereto, he worked with Continental Can Polska
where he oversaw the financial operation of the construction of an aluminum
can manufacturing plant. Mr. Crook has six years experience in Poland and is a
United Kingdom registered F.C.M.A.

   Evangelos Evangelou joined the Company in September 1998 as Vice President
and Chief Operating Officer. From October 1993 until July 1998, Mr. Evangelou
was both Assistant Manager and General Manager of Louis Poland where he was
responsible for the day-to-day operations of all food and beverage outlets
within Warsaw International Airport. Prior to coming to Poland for Louis, Mr.
Evangelou was in food and beverage management in the United Kingdom.

   James Archbold joined the Company in January 2002 as Vice President,
Secretary and Director of Investor Relations. From August 1996 through January
1998, he held the position of National Sales Director for domestic brands for
Carey Agri. Previous to joining CEDC, he worked in Poland for AIG/Lincoln, a
real estate development company as Director of Marketing and Leasing. Prior to
coming to Poland in 1995, he worked in the retail brokerage industry in New
York, where he last worked for Paine Webber. Mr. Archbold holds a MA degree
from Columbia University in Applied Linguistics.

Employees

   The Company had approximately 660 full-time employees as of December 31,
2001. Substantially all employees were employed in Poland and, as required by
Polish law, have labor agreements with the Company. The Polish Labor Code,
which applies to each of these agreements, requires that certain benefits be
provided to employees, such as the length of vacation time and maternity leave
and a bonus of a month's salary paid upon retirement. This law also restricts
the discretion of the Company's management to terminate employees without
cause and requires in most instances a severance payment of one to three
months' salary. The Company made required monthly payments up to 20.41% of an
employee's salary to the governmental health and pension system and has
established a Social Benefit Fund as required by Polish law, but does not
provide other additional benefit programs. The Social Benefits system was
changed under Polish law effective January 1, 1999, and the employee is now
required to make monthly payments up to 24% of their salary. The Company's
employees are not unionized. The Company believes that its relations with its
employees are good. The Company also put in place an evaluation system in
order to improve the employees' morale.

                                      12
<PAGE>

Regulation

   The Company's business of importing and distributing alcoholic beverages is
subject to extensive regulation. The Company believes it is operating with all
licenses and permits material to its business. The Company is not subject to
any proceedings calling into question its operations in compliance with any
licensing and permit requirements.

 Import Of Products

 Import Permits

   Import permits must be obtained for specific consignments of alcoholic
beverages to be imported under the import license as well as under customs
quotas. See "--Customs Duties and Quotas." The Company must obtain such
permits for all its imported alcoholic beverages except for the beer and wine
brands. The application for a permit is usually made when products are ordered
and must specify the product, amount of product and source country. Permits
are issued for three months, and the Company must demonstrate to appropriate
officials that a permit covers each consignment it imports. Similar permits
must be obtained for the import of cigars.

 Approval Of Health Authorities

   Local health authorities at the place of import must also be notified of
what alcoholic beverages and cigars are being imported into Poland. This
notification is typically given when a particular shipment of products arrives
in Poland. In general, this notice permits the applicable health authorities
to determine that no product is entering the Polish market without having been
previously approved for sale in Poland. See "--Wholesale Activities--General
Norms."

 Wholesale Activities

   The Company must have additional permits from the Minister of Economy and
appropriate health authorities to operate its wholesale distribution business.
Furthermore, it must comply with rules of general applicability with regard to
packaging, labeling and transporting products.

 General Permits

   The Company is required to have permits for the wholesale trade of each of
its three product lines. The permit with regard to beer is issued for two
years and the current permit expires on March 28, 2003. The permit with regard
to spirits is issued for one year and the current permit expires on December
31, 2002. The permit for wine is issued for two years and the current permit
expires on March 28, 2003. One of the conditions of these permits is that the
Company sells its products only to those who have appropriate permits to
resell the products. A permit can be revoked or not renewed if the Company
fails to observe laws applicable to its business as an alcohol wholesaler,
fails to follow the requirements of a permit or if it introduces into the
Polish market alcohol products that have not been approved for trade. The
Company must also obtain separate permits for each of its warehouses.

 Health Requirements

   The Company must obtain the approval of the local health authorities to
open and operate its warehouses. This approval is the basis for obtaining the
permit for wholesale activities. The health authorities are primarily
concerned with sanitation and proper storage of alcoholic beverages, as well
as cigars. These authorities can monitor the Company's compliance with health
regulations. Similar regulations apply to the transport of alcoholic beverages
and cigars, and the drivers of such transports must themselves submit health
records to appropriate authorities.

                                      13
<PAGE>

 General Norms

   The Company must comply with a set of rules, usually referred to generally
as "Polish Norms," which constitute legal regulations concerning, as
applicable to the Company, standards according to which alcoholic beverages
and cigars are packaged, stored, labeled and transported. The Polish
Normalization Committee establishes these norms. In the case of alcoholic
beverages, the committee is composed of academics working with relevant
government ministries and agencies as well as experienced businessmen working
in the alcoholic beverage industry. The Company has received a certificate
after an inspection by the Central Standardization Institute, which is part of
the Ministry of Agriculture, indicating its compliance with applicable norms
as of the date thereof. Such certification is needed to import alcoholic
beverages. Health authorities also confirm compliance with these norms when
particular shipments of alcoholic beverages arrive in Poland. The Company is
in compliance with all the statutes of the Polish norms outlined above. See
"--Import of Products--Approval of Health Authorities."

 Customs Warehouse

   Since the Company operates a customs warehouse, further regulations apply,
and a permit from the President of the Main Customs Office and the approval of
health authorities are required to open and operate such a warehouse. The
applicable health concerns are the same as those discussed under "--Wholesale
Activities" with regard to non-custom warehouses. The Company received its
most current permit on December 28, 1998 from the President of the Main
Customs Office, which is for an unspecified period of time. The continued
effectiveness of the permit is conditioned on the Company's complying with the
requirements of the permit which are, in general, the proper payment of
customs duties and maintenance of an insurance policy.

 Customs Duties And Quotas

   As a general rule, the import of alcoholic beverages and cigars into Poland
is subject to customs duties and the rates of the duties are set by the Polish
government acting through the Council of Ministers for particular types of
products. In the Company's case, the duties vary by its product lines.
Currently the customs duties for beers are, 6% for beers produced within the
European Community and 30% for beers produced outside of the European
Community. For wines, 20% for wines produced within the European Community and
30% for wines produced outside the European Community. For imported spirits
the customs duties range from 75% to 95% irrespective of country of origin.

   Customs quotas for alcoholic beverages as well as for cigars are fixed
annually, with the current quotas being applicable through December 31, 2002.
There are no public guidelines on how the Minister of Economy has determined
the current quotas or may determine future quotas. If such quotas were
substantially reduced or eliminated, it would likely have an adverse impact on
the Company's business since the retail price of some of its imported alcohol
products would increase.

   To import alcoholic beverages and cigars under the quotas, the Company must
receive a permit, which is generally valid for three months and specifies what
products and what quality thereof may be imported from what country or group
of companies. It is the Company's practice to apply for this import permit
after concluding a contract for the import of a particular group of products.
The Company has always received the import permits for which it has applied,
although there can be no assurance that it will continue to do so in the
future.

 Advertising Ban

   Pursuant to the Alcohol Awareness Law of October 26, 1982, as amended,
there is an absolute ban on direct and indirect advertising of alcoholic
beverages in Poland. The definition of "alcoholic beverage" under such law
encompasses all the Company's alcoholic products. Promotions at the point of
sale and game contests are often used to limit the law's impact. The agency
charged with enforcing this law has successfully brought numerous cases in the
past few years alleging indirect advertising in the media. The Company has not
been involved in any such proceedings and seeks to comply fully with this law.

                                      14
<PAGE>

 Regulation of Retail Sales

   It is part of the Company's business strategy to operate retail outlets for
alcoholic beverages under the name "Fine Wine and Spirits" in major cities.
Under the Polish law requirements every one of these outlets must have a
retail permit to sell alcoholic beverages to the potential clients. The length
of such permits varies, from one to three years and is renewable. Also, every
new store needs to acquire a certificate from the local health authorities to
sell its products. The Company to obtain the above permits must first have a
long term lease agreement with the owner of the building. Furthermore, the
Company requires in every lease agreement a long-term notice with penalties in
order to safeguard its investments. All present retail outlets operate with
valid retail licenses, which can be renewed at the expiration date.

RISK FACTORS

 Risks related To The Company

   The failure to integrate smoothly the operations, management and other
personnel of acquired companies could adversely affect our ability to maximize
our business activities and financial performance.

   Our growth will depend in part on our ability to acquire additional
distribution capacity and effectively integrate these acquisitions into our
existing operations and systems of management and financial controls. Risks
associated with acquisitions include, but are not limited to, integration of
sales personnel, retention of key management, standardization of management
and controls, harmonization of sales and marketing strategies and procedures
and implementation of group financial reports and controls. We may not be able
to successfully integrate the operations of any acquisition, which could
negatively impact on our financial performance.

   Furthermore, since we have a history of maintaining the operational
independence of the companies we acquire, there are risks that the managers of
the subsidiaries, who were once the owners of their own companies, will not
successfully implement new business strategies and management and cost-control
systems. Our senior management, which is resident in Warsaw, may not be able
to coordinate the business activities of the group's various subsidiaries in
order to maximize the group's business potential as a nationwide distribution
network.

   The inability to adequately manage exchange-rate risk could significantly
affect the financial results of the Company and management's ability to make
financial projections.

   Certain of our operating expenses and capital expenditures are, and are
expected to continue to be, denominated in or indexed to U.S. Dollars or other
hard currencies. By contrast, substantially all of our revenue is denominated
in zloty. Any significant devaluation of the zloty against the U.S. Dollar
that we are unable to offset through price adjustments will require us to use
a larger portion of our revenue to service our U.S. Dollar-denominated
obligations. We have entered into transactions to hedge the risk of exchange
rate fluctuations. In 2001, these hedges decreased the fluctuations in the
quarterly results, but resulted in a new expense item. It is uncertain whether
the costs of the hedge transactions will be more of a burden to us than the
losses that may result from the exposure to exchange rate risk. It is also
uncertain whether we will be able to continue to obtain hedging arrangements
on commercially satisfactory terms. Accordingly, significant shifts in
currency exchange rates may have an adverse effect on our ability to service
our U.S. Dollar denominated obligations and, thus, on our financial condition
and results of operations.

   The following table sets forth, for the periods indicated, the noon
exchange rate (expressed in current zloty) quoted by the National Bank of
Poland. Such rates are set forth as zloty per U.S. Dollar. At March 01, 2002,
such rate was PLN 4.21 = $1.00.

<TABLE>
<CAPTION>
                                                             Year ended December
                                                                     31,
                                                             -------------------
                                                             1998 1999 2000 2001
                                                             ---- ---- ---- ----
     <S>                                                     <C>  <C>  <C>  <C>
     Exchange rate at end of period......................... 3.50 4.15 4.14 3.98
     Average exchange rate during period (1)................ 3.50 3.97 4.15 4.06
     Highest exchange rate during period.................... 3.81 4.35 4.60 4.50
     Lowest exchange rate during period..................... 3.41 3.41 4.07 3.91
</TABLE>
--------
(1) The average of the exchange rates on the last day of each month during
  the applicable period.

                                      15
<PAGE>

   The inability to maintain and expand our senior management would threaten
our ability to implement all of our business strategies.

   The management of future growth will require the ability to retain
qualified management personnel and to attract and train new personnel. Senior
leadership is necessary to develop the financial and cost controls,
information systems and marketing activities needed for us to prosper.
Further, the successful integration of acquired companies requires substantial
attention from our senior management team. Failure to successfully retain and
hire needed personnel to manage our growth and development would have a
material adverse effect on our ability to implement our business plan and grow
our business.

   A significant number of our largely short-term and non-exclusive supply
contracts may be unexpectedly terminated which would materially and adversely
affect our ability to generate revenue and operate profitably.

   We distribute approximately 85% of the alcoholic beverages in our portfolio
on a non-exclusive basis. Furthermore, most of our distribution agreements for
these beverages have a term of approximately one year, although several of
such agreements can be terminated by one party without cause on relatively
short notice. For example, the distribution agreements with respect to
domestic vodka (which accounted for approximately 76.4% of our net sales in
2001) can be terminated on one month's notice. Any termination of a
significant number of our supply contracts would adversely affect our ability
to generate revenue and operative profitably.

   The non-renewal of a significant number of our principal supply contracts
would materially and adversely affect our ability to generate revenue and
operate profitably.

   In 2001, we had sales of over 5% of our net sales with the following
companies; Polmos Bialystok (24.1%), Unicom Bols Group (14.9%), Polmos Poznan
(11.0%), Polmos Zielona Gora (7.5%) and Guinness UDV (7.1%). We have one-year
supply contracts with each of the named companies. The termination of our
relationship with any of these entities could have a material adverse effect
on our revenue and cash flows.

   The abrupt and unexpected termination of a significant number of our
exclusive supply contracts would likely depress net income significantly.

   We have exclusive rights to distribute in Poland certain alcoholic
beverages, which during 1999, 2000 and 2001 constituted approximately 15%, 18%
and 13%, respectively, of our net sales. These beverages constitute many of
the high-margin beverages we distribute. The distribution arrangements for
these beverages generally have one to three year terms. If any of these
exclusive relationships were terminated or not renewed, then our revenue and
cash flows would likely be reduced.

   Any diminution in the value of goodwill and intangible assets reflected on
our financial statements as a result of acquisitions could adversely affect
our financial position and market capitalization.

   Acquisitions may result in the recording of goodwill and intangible assets
on our financial statements. From January 1, 2002, we are following current
United States generally accepted accounting principles and periodically will
review the value of goodwill and other intangible assets and will incur a
write off where diminution of value is evidenced. These write-offs would
likely become necessary if acquired companies were to become unprofitable. Any
write-offs of these assets could have a negative impact on our market
capitalization and financial condition.

Risks Related to Growth through Acquisitions

   The inability to finance future acquisitions on acceptable terms would
undermine our basic business strategy of growing a Poland-wide distribution
network through acquisitions.

   Our ability to grow through the acquisition of additional companies will be
dependent upon the availability of capital to complete such acquisitions. We
intend to finance acquisitions through a combination of our available cash
resources, bank borrowings and, in appropriate circumstances, the further
issuance of equity and/or debt securities. These financing sources may not be
available to us on acceptable commercial terms when needed to fund an
acquisition, if at all, which could prevent us from growing a Poland-wide
distribution network.

                                      16
<PAGE>

   The absence of suitable acquisition targets would undermine our business
strategy of growing a Poland-wide network through acquisitions.

   We may not identify suitable acquisition candidates that are available on
terms acceptable to us. In addition, acquired businesses may not be profitable
at the time of their acquisition or may not achieve or maintain profitability
levels that justify our investment. Therefore, our acquisitions may not be
accretive to shareholder value immediately following any acquisition, which
could reduce our market capitalization.

   Our stockholders could experience unusual expense and uncertainty in trying
to enforce any judicial judgment against us.

   We are organized under the laws of the State of Delaware. Therefore, our
stockholders are able to affect service of process in the United States upon
us and may be able to affect service of process upon our directors. However,
we are also a holding company, all of the operating assets of which are
located outside the United States. As a result, it may not be possible for
investors to enforce judgments of United States courts against our assets
predicated upon the civil liability provisions of United States laws. We have
been advised by our counsel that there is doubt as to the enforceability in
Poland, in original actions or in actions for enforcement of judgments of U.S.
courts, of civil liabilities predicated solely upon the 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.

Risks Related to Investments in Poland and Emerging Markets

   The inability to adequately manage exchange-rate risk could adversely
affect our financial results and management's ability to make financial
projections.

   Certain of our operating expenses and capital expenditures are, and are
expected to continue to be, denominated in or indexed to U.S. Dollars or other
hard currencies. By contrast, substantially all of our revenue is denominated
in zloty, the currency of Poland. Any significant devaluation of the zloty
against the U.S. Dollar that we are unable to offset through price adjustments
will require us to use a larger portion of our revenue to service our U.S.
Dollar-denominated obligations. We have entered into transactions to hedge the
risk of exchange rate fluctuations. In 2001, these hedges decreased the
fluctuations in our quarterly results but resulted in a new expense item. It
is uncertain whether the costs of the hedge transactions will be more of a
burden to us than the losses that may result from the exposure to exchange
rate risk. It is also uncertain whether we will be able to continue to obtain
hedging arrangements on commercially satisfactory terms, if at all.
Accordingly, significant shifts in currency exchange rates may have an adverse
effect on our ability to service our U.S. Dollar denominated obligations and,
thus, on our financial condition and results of operations.

   The inability to predict and adequately manage inflation risk could
significantly affect our financial results and management's ability to make
financial projections.

   Since the fall of Communist rule in 1989, Poland has experienced high
levels of inflation and significant fluctuations in the exchange rate for the
zloty. The Polish government has adopted policies that slowed the annual rate
of inflation from approximately 15% in 1997 and to an average 5.5% for the
year 2001. We may not be able to predict or fully manage inflation, which has
had, and may continue to have, an adverse effect on our financial condition
and results of operations.

   Polish anti-monopoly regulations could threaten our basic business strategy
of growing through acquisitions.

   Under the Polish Anti-Monopoly Act, acquisitions may be blocked or have
conditions imposed upon them by the Polish Office for Protection of
Competition and Consumers (the "Anti-Monopoly Office") if the Anti-Monopoly
Office determines that the acquisition has a negative impact on the
competitiveness of the Polish market. The current body of Polish anti-monopoly
law is not well established and, therefore, it can be difficult to

                                      17
<PAGE>

predict how the Anti-Monopoly Office will act on an application. Generally,
companies that obtain control of 40% or more of their market may face greater
scrutiny from the Anti-Monopoly Office than those that control a lesser share.
Additionally, several types of reorganizations, mergers and acquisitions and
undertakings between business entities, including acquisitions of stock, under
circumstances specified in the Anti-Monopoly Act, require prior notification
to the Anti-Monopoly Office. Sanctions for failure to notify include fines
imposed on parties to the transaction and members of their governing bodies.
The Anti-Monopoly Office may not approve any or all of our proposed
acquisitions that would negatively impact our ability to institute our
business plan and grow our business.

   Polish regulations regarding customs duties and quotas could price some of
our high-margin products out of the market and/or reduce availability as to
make such products unprofitable to sell.

   Generally, the import of alcoholic beverages into Poland is subject to
customs duties, and the rates of the duties are set for particular types of
products. The Minister of Economy is authorized to establish a schedule of
quotas for alcoholic beverages for which the customs duties are substantially
reduced. Customs quotas for alcoholic beverages are fixed annually, with the
current quotas being applicable through December 31, 2002. There are no public
guidelines on how the Minister of Economy has determined the current quotas or
may determine future quotas. Any increase in customs duties or decrease in
customs quotas for alcoholic beverages would reduce our revenue and negatively
affect our cash flows.

   Increased Polish regulations of the alcoholic beverage industry could make
it difficult for us to operate in the industry profitably.

   The importation and distribution of alcoholic beverages in Poland are
subject to extensive regulation, requiring us to receive and renew various
permits and licenses to import, warehouse, transport and sell alcoholic
beverages. These permits and licenses often contain conditions with which we
must comply in order to maintain the validity of such permits and licenses.
Our import and sale of cigars are also subject to regulation. The various
governmental regulations applicable to the alcoholic beverage industry may not
be changed so as to impose more stringent requirements on us. If we were to
fail to be in compliance with applicable governmental regulations or the
conditions of the licenses and permits we receive, such failure could cause
our licenses and permits to be revoked and have a material adverse effect on
our business, results of operations and financial condition. Further, the
applicable Polish governmental authorities, in particular the Minister of
Economy, have articulated only general standards for issuance, renewal and
termination of the licenses and permits which we need to operate and,
therefore, such governmental authorities retain considerable discretionary
authority in making such decisions.

   The alcoholic beverage industry has become the subject of considerable
societal and political attention generally in recent years due to increasing
public concern over alcohol-related societal problems, including driving while
intoxicated, underage drinking and health consequences from the abuse of
alcohol. As a consequence of these concerns, the possibility exists for
further regulation of the alcoholic beverage industry in Poland. If alcohol
consumption in general were to come into disfavor among consumers in Poland,
our business operations could be materially and adversely affected.

   Deterioration in the market reforms undertaken by the Polish government
could make it more difficult for management to operate us and predict
financial performance.

   Poland has undergone significant political and economic change since 1989.
Political, economic, social and similar developments in Poland could in the
future have a material adverse effect on our business and operations. In
particular, changes in laws or regulations (or in the interpretations of
existing laws or regulations), whether caused by changes in the government of
Poland or otherwise, could materially adversely affect our business and
operations. Currently there are no limitations on the repatriation of profits
from Poland, for example, but foreign exchange control restrictions or similar
limitations may be imposed in the future with regard to repatriation of
earnings and investments from Poland. If such exchange control restrictions or
similar limitations are imposed, our ability to receive dividends or other
payments from our subsidiaries could be reduced, which would reduce our cash
flows and liquidity.

                                      18
<PAGE>

   Adverse effects in other emerging markets could adversely affect the
trading price of our Common Stock.

   Poland is generally considered by international investors to be an emerging
market. Political, economic, social and other developments in other emerging
markets may have an adverse effect on the market value and liquidity of our
Common Stock. In general, investing in the securities of issuers with
substantial operations in markets such as Poland involves a higher degree of
risk than investing in the securities of issuers with substantial operations
in the United States and other similar jurisdictions.

Item 2. Properties

Customs and Consolidation Warehouse

   The Customs and Consolidation Warehouse is a 9,750 square meters leased
facility located in Warsaw. The lease is for 5 years commencing November 2000
and the monthly rental, which is denominated in U.S. Dollars was approximately
$82,875 per month as of December 31, 2001.

Sales Offices and Warehouses

   The Company also has entered into leases for its Warsaw headquarters and
each of its seventeen regional sales offices and warehouses. The amount of
office and warehouse space leased varies between 536 square meters in Gdynia
up to 1,090 square meters in Krakow. The monthly lease payments, which are
denominated in Polish currency, vary between approximately $2,000 and $4,000
in the regional offices to $36,000 per month in Warsaw. The Warsaw lease is of
five year duration, commencing November 2000, without termination; five of the
other leases can be terminated by either party on three months prior notice;
one can be terminated by either party on two months prior notice.

Retail Outlets

   The Company has entered into a long term or indefinite term lease agreement
for all of its retail outlets. All lease agreements can be terminated on
mutual terms, or by a three to six month's prior notice by either party. The
lessor, however, has waived its right to terminate the agreement for three
years as long as the lessee is performing its obligations there under. Monthly
lease payments are currently $2,200 for the shop on Kredytowa Street in
Warsaw, $1,463 for the shop on Bokserska Street in Warsaw, $1,300 for the shop
on Wiertnicza Street in Wilanow, $2,295 for the shop on Warszawska Street in
Konstancin and $1,268 for the shop on Kalwaryjska Street in Krakow.

Item 3. Legal Proceedings

   The Company is involved in litigation from time to time in the ordinary
course of business. In management's opinion, such litigation, individually and
in the aggregate, is not material to the Company's financial condition or
results of operations.

Item 4. Submission Of Matters To A Vote Of Security Holders

   No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2001.

                                      19
<PAGE>

                                    PART II

Item 5. Market For Registrant's Common Equity And Related Stockholder Matters

Market Information

   The Company's common stock, $0.01 per share ("Common Stock") has been
traded on the NASDAQ National Market (the "National Market") under the symbol
"CEDC" since June 1999. Prior thereto it traded on the NASDAQ Small Cap Market
since its initial public offering in July 1998. Before such time, there was no
established public trading market for the Common Stock. The following table
sets forth the high and low sales prices for the Common Stock, as reported on
the NASDAQ National Markets for each of the Company's fiscal quarters in 2000
and 2001.

<TABLE>
<CAPTION>
                                                                  High     Low
                                                                 -------  -----
      <S>                                                        <C>      <C>
      Quarter Ended 3/30/00..................................... $  6.50  $4.31
      Quarter Ended 6/30/00..................................... $  5.44  $3.56
      Quarter Ended 9/30/00..................................... $  5.25  $3.50
      Quarter Ended 12/31/00....................................  $ 3.88  $1.06

<CAPTION>
                                                                  High     Low
                                                                 -------  -----
      <S>                                                        <C>      <C>
      Quarter Ended 3/30/01..................................... $  4.06  $1.88
      Quarter Ended 6/30/01..................................... $  5.21  $3.00
      Quarter Ended 9/30/01..................................... $  7.00  $3.93
      Quarter Ended 12/31/01....................................  $12.98  $5.17
</TABLE>

   On March 8, 2002, the last reported sales price of the Common Stock was
$12.70 per share.

Holders

   As of March 8, 2002, there were 1,394 recorded holders of the Common Stock.

Dividends

   CEDC has never declared or paid any dividends on its capital stock. Future
dividends will be subject to approval by CEDC's board of directors and will
depend upon, among other things, the results of the Company's operations, the
Company's capital requirements, surplus, general financial condition and
contractual restrictions and such other factors as the board of directors may
deem relevant.

   The Company has instituted a policy of having all of its subsidiaries
(except Carey Agri) pay dividends to their respective shareholders, either the
Company or Carey Agri. The subsidiaries, except for Carey Agri will distribute
50% of their respective current years after tax profits except for those
generated during the first year of ownership. The retained earnings prior to
January 1, 2001 are not considered distributable. As at December 31, 2001, the
Company's subsidiaries will provide for dividends of approximately $1,100,000
to Carey Agri and the Company. Based on the Company's shareholdings, CEDC will
receive $154,000 and Carey Agri $946,000.

   These dividends are being used initially to pay down acquisition debt and
to fund the day-to-day operations of the CEDC holding company. At December 31,
2001, the subsidiaries had approximately $7.4 million of retained earnings of
which $6.3 million is currently non-distributable.

   As CEDC is a holding company with no business operations of its own, its
ability to pay dividends will be dependent upon either cash flows and/or
earnings of its subsidiaries or the payment of funds by those subsidiaries to
CEDC. As Polish limited liability companies, the subsidiaries are permitted to
declare dividends only twice a year from their retained earnings, computed
under Polish Accounting Regulations after the audited financial statements for
that year have been provided to and approved by shareholders.

   Subsidiaries except for Carey Agri will distribute 50% of any current years
after tax profit except for those generated during the first year of
ownership. The retained earnings prior to January 1, 2001 are not considered
distributable. As at December 31, 2001, the Company's subsidiaries will
provide for dividends of $1,137,000 to

                                      20
<PAGE>

Carey Agri and CEDC. Based on the shareholdings, CEDC is obligated to receive
$154,000 and Carey Agri $983,000.

Unregistered common stock issued in 2001

   On April 5, 2001, the Company issued 31,264 shares of common stock in
connection with its acquisition of 97% of the voting shares of Astor Sp. z
o.o. See note 10 to the consolidated financial statements contained in item 8
of form 10K. These shares were issued pursuant to the exemption from
registration provided by regulation S.

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.

Income Statement Data:

<TABLE>
<CAPTION>
                                         Year ended December 31,
                                ---------------------------------------------
                                 1997     1998     1999      2000      2001
                                -------  -------  -------  --------  --------
                                   (in thousands, except for per share
                                                amounts)
<S>                             <C>      <C>      <C>      <C>       <C>
Net sales...................... $40,189  $54,011  $90,240  $131,233  $178,236
Cost of goods sold.............  34,859   45,864   77,471   113,687   154,622
Gross profit...................   5,330    8,147   12,769    17,546    23,614
Sales, general and
 administrative expenses.......   4,198    5,790    9,537    14,698    18,759
Operating income...............   1,132    2,357    3,232     2,848     4,855
Non-Operating income (expense)
  Interest expense.............    (200)    (192)    (374)     (955)   (1,345)
  Interest income..............      28      170      378       261        77
  Realized and unrealized
   foreign currency transaction
   losses, net.................    (326)      (5)    (215)     (494)      (12)
  Other income (expense), net..      15      ( 1)     (13)     (172)       83
                                -------  -------  -------  --------  --------
Income before income taxes.....     649    2,329    3,008     1,488     3,658
Income taxes...................    (341)    (861)  (1,106)     (503)   (1,132)
                                -------  -------  -------  --------  --------
Net income .................... $   308  $ 1,468  $ 1,902  $    985  $  2,526
                                =======  =======  =======  ========  ========
Net income per common share,
 basic (1)..................... $  0.17  $  0.56  $  0.47  $   0.23  $   0.58
                                =======  =======  =======  ========  ========
Net income per common share,
 diluted....................... $  0.17  $  0.56  $  0.47  $   0.23  $   0.57
                                =======  =======  =======  ========  ========
Average number of outstanding
 shares of common stock (1)....   1,780    2,635    4,050     4,334     4,359

Balance Sheet Data:

<CAPTION>
                                              December 31,
                                ---------------------------------------------
                                 1997     1998     1999      2000      2001
                                -------  -------  -------  --------  --------
                                             (in thousands)
<S>                             <C>      <C>      <C>      <C>       <C>
Cash and cash equivalents...... $ 1,053  $ 3,628  $ 3,115  $  2,428  $  2,466
Working capital (deficit)......    (508)  10,922    9,608     9,362     6,883
Total assets...................  12,530   21,926   38,966    59,311    68,977
Long-term debt and capital
 lease obligations, less
 current portion...............      47      --     3,622     7,988     3,495
Stockholders' equity...........     334   12,327   14,613    16,492    20,756
</TABLE>

                                      21
<PAGE>

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.

Overview

   The Company's operating results are generally determined by the volume of
alcoholic beverages that can be sold by the Company through its national
distribution system, the gross profits on such sales and control of costs. The
Company purchases the alcoholic beverages it distributes from producers as
well as other importers and wholesalers. Normally purchases are made with the
sellers providing a period of time, generally between 25 and 90 days, before
the purchase price is to be paid by the Company. Since the Company's initial
public offering in July 1998, however, the Company pays for a significant
portion of its domestic vodka purchases using cash on delivery terms in order
to receive additional discounts. The Company sells the alcoholic beverages
with a mark-up over its purchase price, which mark up reflects the market
price for such individual product brands in the Polish market. Additional
margins are available for premium-imported brands.

   The following comments regarding variations in operating results should be
read considering the rates of inflation in Poland during the period -- 1999,
9.8% 2000, 10.1% and 2001, 3.6%-- as well as the fluctuations of the Polish
zloty compared to the U.S. Dollar. The zloty in comparison to the U.S. Dollar
appreciated 0.1% in 2000 and appreciated 3.8% in 2001.

Results of Operations

 Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

   In the following Management, Discussion and Analysis section the reference
to "pro-forma accounts" means the 2001 historical financial results as
adjusted by deducting the elements of Astor for the nine months ended December
31, 2001 and for PHA for the three months to March 31, 2001. The basis of
preparation is still under US GAAP, the objective being to allow the reader to
assess the underlying condition of the Company excluding effects of
acquisitions reported for less than a full calendar year.

   Net sales increased $47.0 million or 35.8% from $131.2 million in 2000 to
$178.2 million in 2001. Of this increase $14.3 million relates to the
acquisition of Astor Company. On a pro-forma basis the Company had sales of
$152.7 million, which represents an internal growth rate of 16.4%. This
internal growth rate is mainly due to increased coverage and sales
productivity.

   Cost of goods sold increased $40.9 million or 36.0%, from $113.7 million in
2000 to $154.6 million in 2001. Of this increase $12.9 million relates to the
acquisition of Astor. On a pro-forma basis the cost of goods sold increased by
15.8%. Total gross profit increased $6.1 million, or 34.6%. On a pro-forma
basis the increase was 20.1%. Gross profit as a percentage of net sales
decreased in total from 13.4% in 2000 to 13.2% in 2001, the decrease being due
to the increased amount of vodka, which has a lower margin, in the product
line up. On a pro-forma basis the gross profit percentage was 13.8%, this pro-
forma increase is due to the greater buying leverage the Company is able to
exert on its suppliers and to the Company's strategy of extending its coverage
model to include the retail trade.

   Operating overhead expenses (excluding depreciation, amortization and bad
debt provision) increased $3.4 million or 26.0% from $13.1 million in 2000 to
$16.5 million in 2001. As a percentage of sales operating overheads decreased
from 10.0% in 2000 to 9.2% in 2001. Within the total operating overhead, $0.6
million relates from the acquisition of Astor Company. On a pro-forma basis
the year on year increase is 16.0%. The increase is mainly due to the Company
carrying a full year charge for its new distribution and customs facility in
Warsaw.

   Depreciation of tangible fixed assets increased from $366,000 in 2000 to
$841,000 in 2001 an increase of 129%. This increase is due to the Company's
investment in its logistics infrastructure, that is, delivery vehicles and
warehouse facilities. The increase due to the acquisition of Astor Company is
not material amounting to $15,000.

                                      22
<PAGE>

   Amortization of intangibles increased $67,000 from $695,000 in 2000 to
$762,000 in 2001. This increase is due to the acquisition of Astor Company and
to the inclusion of a full year charge for the PHA acquisition of 2000.

   The Company's bad debt provision is based on the ageing of its trade
receivables. Currently the Company has a policy of making provisions for 100%
of debtors over 365 days, 50% for debtors between 270 and 365 days, 25% for
debtors between 180 and 270 days and 12.5% for debtors between 90 and 180 days
old. From this total a reduction of 7.5% is made to reflect current cash
recovery rates. The trade receivables are recorded at a value including VAT
(sales tax), which is currently 22% of the net sales value. The charge to
income is based on the movement in the total reserve between any two balance
sheet dates. The charge for the year ended December 31, 2001 was $0.7 million,
on both the full and Pro-forma basis. This represents an increase of 37.5%
over the full year ended December 31, 2000. The increase is due to the
increase sales activity during the year. As a percentage of sales for 2001 the
charges equaled 0.40% and for 2000 it was 0.39%. The Company's experience is
that this policy gives adequate coverage and it expects to be able to continue
this policy in the immediate future and that the charge as a percentage of
sales should remain in the 0.3 to 0.5 % range.

   As a result of the factors mentioned above, the Company was able to improve
its operating profit from $2.8 million in 2000 to $4.8 million in 2001, an
increase of 71.4%. On a pro-forma basis the increase was 28.6% from $2.8
million to $3.6 million.

   In 2001, interest income was $77,000 compared to $261,000 in 2000. The
decrease was a result of using the excess funds in CEDC for operational
purposes.

   Interest expense increased $390,000 or 40.8% from $955,000 in 2000 to
$1,345,000 in 2001. On a pro-forma basis the increase is 20.7%. This increase
is mainly due to the Company's decision in November 2000 to migrate the
majority of its non-acquisition loans to local Polish zloty denominated loans.
The non-acquisition loans, or working capital loans are used solely to
facilitate the purchase of vodka on cash on delivery (COD) terms. This enables
the Company to obtain significant rebates or early settlement discounts. While
the coupon charge is higher (see note 6 and 8 in the financial statements
below) this policy means the Company reduces any exposure to foreign exchange
risks on its working capital loan book thereby making the cost/benefit
decision more transparent. As a percentage of net sales, interest expense was
0.7% in 2000 and 0.8% in 2001.

   Net realized and unrealized foreign currency transactions arise from the
restatement of non-Polish zloty assets and liabilities, which are primarily,
bank loans and their compensating hedging instruments. For the year ended
December 31, 2001, the Company incurred net foreign exchange losses of
$12,000, this compares to $494,000 loss for the year ended December 31, 2000,
a reduction of 97.5%. On a pro-forma basis the reduction was 79.1%.

   In addition, the Company no longer considered Poland to be a
hyperinflationary country since January 1, 1998 and made the Polish zloty the
functional currency for the operations of its subsidiaries. Therefore,
translation losses are now accounted for in equity, in the determination of
comprehensive income, rather than in the income statement. Such cumulative
losses were $2.2 million in 2000 and $1.7 million in 2001.

   The Company also had income from the sale of fixed assets during the year.
For 2001, this amounted to an income of $83,000, for 2000, it was a loss of
$96,000. These items are non-operating and immaterial and therefore not
reported further.

   Income tax expense increased $629,000 from $503,000 in 2000 to $1,132,000
in 2001. This increase is mainly due to the increase in income before income
taxes from $1.5 million in 2000 to $3.6 million in 2001.

   The effective Polish tax rate decreased from 33.8% in 2000 to 30.9% in
2001. The decrease in the statutory tax rate in Poland from 30% in 2000 to 28%
in 2001 and the effect of permanent differences between taxable

                                      23
<PAGE>

and financial income caused the decreased effective rate. The Company believes
its US deferred tax asset of $182,000 will be recovered by virtue of interest
and other income received from loans and other services provided to its
subsidiaries. The subsidiaries Polish deferred tax asset of $709,000 is due to
timing and should be recovered from future operating profits. See note 12 to
the consolidated financial statements for further information on income taxes.

   Net income increased $1.5 million from $1.0 million in 2000 to $2.5 million
in 2001. This increase is due to the factors noted above.

 Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

   In the following Management, Discussion and Analysis section the reference
to "pro-forma accounts" means the 2000 historical financial results are
adjusted by deducting the elements of PHA for the nine months ended December
31, 2000 and for MTC for the three months to March 31, 2000. The basis of
preparation is still under US GAAP; the objective is to allow the reader to
access the underlying condition of the Company, without regards to
acquisitions reported for less than a full year.

   Net sales increased $41.0 million, or 45% from $90.2 million in 1999 to
$131.2 million in 2000. This increase is mainly due to increased sales of
domestic vodka due to the acquisition of PHA. On a pro-forma basis the Company
had sales of $91.8 million, which represents an internal growth rate of 1.8%.
The low internal growth was due to the variable summer weather, which
adversely impacted sales in the important Polish holiday regions.

   Cost of goods sold increased $36.2 million, or 46.7%, from $77.5 million in
1999 to $113.7 million in 2000. As a percentage of net sales, cost of goods
sold increased from 85.8% to 86.6%. Gross margin as a percentage of sales
decreased from 14.2% in 1999 to 13.4% in 2000. This decrease is mainly due to
the dilutive effect of the PHA acquisition and the subsequent increase in the
share of domestic vodka of the groups' portfolio. On a pro-forma basis gross
margin as a percentage of sales increased to 14.7% for the year to December
31, 2000. This is a result of the Company exerting its buying leverage.

   Sales, general and administrative expenses increased $4.3 million or 54.7%
from $9.5 million in 1999 to $14.7 million in 2000. As a percentage of sales,
core selling costs increased from 10.6% in 1999 to 11.2% in 2000. As an
absolute value this increase is mainly due to the additional costs
consolidated because of the acquisition of PHA and as a percentage the
increase was because of one off integration costs. On a pro-forma basis the
increase was 18.9% to $10.5 million, which as a percentage of pro-forma sales
was 11.4%.

   Goodwill and trademark amortization increased from $0.4 million in 1999 to
$0.7 million in 2000, an increase of 75%. The increase was due to the full
year charge for the 1999 acquisitions of MTC and PWW plus the nine-month
charge following the acquisition of PHA.

   Depreciation of tangible fixed assets increased from $120,000 in 1999 to
$366,000 in 2000 an increase of 205%.

   Provisions for doubtful debts increased from $254,000 in 1999 to $517,000
in 2000. As a percentage of net sales the provision increased from 0.28% in
1999 to 0.39% in 2000. The reason for the increase was a change in policy for
the year 2000. Whereas US accounting rules do permit the level of doubtful
debt provisioning to be at the reasonable discretion of a company's
management, the Company has decided that because of the growth in sales it
would be more prudent to apply a systematic approach to debtor provisioning.
It is this change in method, which has brought about the increase in provision
rates. The Company expects this rate to be maintained in the 0.3-0.5% range
for the future.

   Interest expense increased $0.6 million or 155% from $0.4 million in 1999
to $1.0 million in 2000. This increase is mainly due to additional borrowing
required for financing the acquisitions and for supporting the higher sales
volume. On a pro-forma basis, interest expense was $0.6 million as a
percentage of net sales. Interest expense was 0.4% in 1999 and 0.7% in 2000.

                                      24
<PAGE>

   In 2000, interest income was $0.3 million compared to $0.4 million in 1999.

   Net realized and unrealized foreign currency transactions resulted in
losses of $215,000 in 1999 and $494,000 in 2000. On a pro-forma basis net
realized and unrealized foreign currency transaction losses were $0.6 million.
In addition, the Company no longer considered Poland to be a hyperinflationary
country since January 1, 1998 and made the Polish zloty the functional
currency for Carey Agri's operations. Therefore, translation losses are
accounted for in equity, in the determination of comprehensive income, rather
than in the income statement. Such translation losses were $1.9 million in
1999 and $2.2 million in 2000.

   Income tax expense decreased $0.6 million from $1.1 million in 1999 to $0.5
million in 2000. This decrease is mainly due to the decrease in income before
income taxes from $3.0 million in 1999 to $1.5 million in 2000.

   The effective tax rate decreased from 36.8% in 1999 to 33.8% in 2000. The
decrease in the statutory tax rate in Poland from 32% in 1999 to 30% in 2000,
the effective tax rate was slightly lower in 2000. See notes to the
consolidated financial statements for further information on income taxes.

   Net income decreased $0.9 million from $1.9 million in 1999 to $1.0 million
in 2000. This decrease is due to the factors noted above.

Statement of Liquidity and Capital Resources

   The Company's net cash balance remained the same for 2001 as it was for
2000 compared to a decrease of $0.7 million in 2000. The stabilization was a
result of the tighter credit terms given to wholesalers in the last weeks of
2001 so as to reduce any exposure to future possible doubtful debts.

   The Company was able to generate cash from operating activities in 2001 of
$2.7 million as opposed to a cash usage of $1.1 million in 2000. The cash was
generated from cash earnings, defined as net income adjusted for non-cash
income and expense items, of $4.4 million in 2001 compared to $2.4 million in
2000.

   Against this a net $2.8 million which was absorbed into working capital for
2001 compared to a net $4.7 million in 2000. Working capital has been defined
as the consolidated movements in trade receivables, trade payables and
inventories. The Company has been able to reduce its investment in working
capital by improved management of inventories driven from its new
consolidation warehouse, which resulted in inventory days decreasing by 33%
from 30.7 days in 2000 to 20.5 days in 2001. In addition, the Company was also
able to reduce its outstanding debtor days from 89 in 2000 to 82 in 2001. It
also reduced its outstanding creditor days from 85 in 2000 to 70 in 2001. The
decrease in creditor days is mainly due to the use of COD terms for purchases
of domestic vodka in the last weeks of 2001. For comparison purposes readers
should note that the trade receivables and payables figures include 22% VAT
(sales tax).

   In addition, funds were generated in net movements of accruals and
prepayments of $0.9 million for 2001, compared to $0.6 million in 2000.

   Investing activities amounted to $2.4 million in 2001 and are in most part
related to the acquisition of Astor. During the 2000 period, the investing
activities amounted to $5.6 million of which the largest part was the
acquisition of PHA with the balance being investment in the new consolidation
warehouse facility.

   The Company received $539,000 in funds as a result of option holders
exercising their options during the year. The Company was able to reduce net
borrowings by $0.8 million during the course of the year as opposed to
increasing net borrowing by $6.1 million in 2000. The nature of the Company's
business is that it has to invest heavily in working capital towards the end
of the calendar year, which is traditionally its busiest selling period. With
this in mind the Company arranged for various short-term funds to be available
to it. At December 31, 2001 the Company had $1.3 million of unused facilities
available to it within these short-term agreements (see note 8 of the Notes to
the Consolidated Financial Statements for additional information) .

                                      25
<PAGE>

Statement on Inflation and Currency Fluctuations

   Inflation in Poland was 3.6% for the whole of 2001, considerably lower than
the 8.9% in 2000.

   The percentage of aggregated purchases denominated in foreign currencies
has decreased resulting in lower foreign exchange exposure. However, the level
of borrowings denominated in U.S. Dollars and Euros has increased due to the
funding of the acquisitions. In 2001, the zloty appreciated 3.9% versus the
U.S. Dollar and appreciated 8.1% versus the Euro. Because of the volatility of
exchange rates during the year, loans were taken at weaker rates that those
achieved at year-end.

Seasonality

   The Company's sales have been historically seasonable with on average 30%
of the sales occurring in the fourth quarter. During 2001, sales in the fourth
quarter were 32% of the full year, this compares to 37% for the fourth quarter
of 2000. This movement is the result of improvements in sales productivity
initiated in 2000, which have resulted in a more balanced performance
throughout the year.

   The Company's working capital requirements are also seasonal, and are
normally highest in the months of December and January. Liquidity then
normally improves as collections are made on the higher sales during the
months of November and December.

Other Matters

   The Company continues to be involved in litigation from time to time in the
ordinary course of business. In management's opinion, the litigation in which
the Company is currently involved, individually and in the aggregate, is not
material to the Company's financial condition or results of operations.

   In March 2000, the Company completed it acquisition of 100% of PHA Sp. z.
o.o. a distributor in the southwest of Poland with a 1999 turnover of
approximately $43 million. The purchase price was approximately $5.3 million
and is a combination of cash and CEDC stock.

   During April 2001, the Company completed its acquisition of 97% of Astor
Sp. z.o.o. a distributor in the north of Poland with a 2001 turnover of
approximately $20.0 million. The purchase price is approximately $1.15 million
and 31,264 CEDC shares. The Company anticipates that the total acquisition
cost in regards to Astor Sp. z.o.o. will be approximately $4.0 million in cash
and shares (if targeted profits are achieved over the next two years-
contingent consideration).

   During January and February 2002, the Company signed two purchase intents
in regards to the acquisitions of Damianex S.A. (Polish spirit distributor)
and AGIS S.A. (Polish spirit distributor).

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 revenues, 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 and Margin Recognition

   The Company only recognizes revenue and margin when goods have been shipped
to customers on the basis of a validated customer order. The Company does not
operate a policy of goods shipped on consignment nor does it offer goods on a
sale or return basis.

                                      26
<PAGE>

Expenses

   The Company recognizes expenses in the period in which either the cost is
incurred or in the period in which the associated revenue and margin has been
recognized.

Provisions For Doubtful Debts

   The Company makes general provision for doubtful debt based on the aging of
its trade receivables. Where circumstances require it the Company will make
specific provision for any excess not provided for under the general
provision.

Inventory

   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
saleable value in their relevant condition.

Goodwill and Intangibles

   Goodwill associated with the excess purchase price over fair value of
assets acquired and other identifiable intangibles are currently amortized on
a straight line basis over their estimated useful lives.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

   The Company's operations are conducted primarily in Poland and the
functional currency of Carey Agri, MTC CFW, PHA, Astor and FWS is the Polish
zloty and the reporting currency is the U.S. Dollar. The Company's financial
instruments consist mainly of cash and cash equivalents, accounts receivable,
accounts payable, bank loans, overdraft facilities and long-term debt.
Substantially all of the monetary assets represented by these financial
instruments are located in Poland; consequently, they are subject to currency
translation risk when reporting in U.S. dollars. Accounts payable for imported
beverages are billed in various currencies and the Company is subject to
short-term swings in the currency markets for product purchases. However,
trade payables are settled relatively quickly so as to minimize this risk.
Bank borrowings are sensitive to interest and foreign currency market risks as
they usually bear interest at variable rates and are in more than one
currency. The Company had not attempted any serious hedging programs prior to
the end of 1999. However, in 2000 and 2001 it increased management of its
currency risk through the use of forward contracts. The fair value amounts of
open forward contracts as at December 31, 2000 was nil and as at December 31,
2001 were $7,677,000 and $1,493,000, respectively. The Company's sensitivity
to interest rates and foreign currency movements at December 31, 2001 is shown
below for its bank financial instruments:

<TABLE>
<CAPTION>
                                                           Year of Maturity
                                                        ----------------------
                                                         2002   2003    Total
                                                        ------ ------- -------
                                                          (thousands of USD)
<S>                                                     <C>    <C>     <C>
Bank loans payable in USD (interest varies with
 LIBOR)................................................ $4,187 $ 3,344 $ 7,531
Bank loans payable in EURO (interest varies with
 EURLIBOR)............................................. $1,219     --  $ 1,219
Bank loans payable in Polish zloty (interest varies
 with WIBOR)........................................... $2,408         $ 2,408
Bank overdrafts payable in Polish zloty (interest
 varies with WIBOR).................................... $3,959     --  $ 3,959
Total Bank Funding..................................... $9,861 $14,771 $15,117
</TABLE>


<TABLE>
<CAPTION>
Exchange rates against U.S. Dollar at  December 31, 2000 December 31, 2001
-------------------------------------  ----------------- -----------------
<S>                                    <C>               <C>               <C>
       Polish zloty...................      4.1432            3.9863
       EURO...........................      3.8544            3.5219
</TABLE>

                                      27
<PAGE>

Item 8. Financial Statements and Supplementary Data

Index to consolidated financial statements:

<TABLE>
<CAPTION>
                                                                        Page
                                                                        -----
<S>                                                                     <C>
Report of Independent Auditors.........................................    29

Consolidated Balance Sheets at December 31, 2000 and 2001..............    30

Consolidated Statements of Income for the years ended December 31,
 1999, 2000 and 2001...................................................    31

Consolidated Statements of Changes in Stockholders' Equity for the
 years ended December 31, 1999, 2000 and 2001..........................    32

Consolidated Statements of Cash Flows for the years ended December 31,
 1999, 2000 and 2001...................................................    33

Notes to Consolidated Financial Statements............................. 34-51
</TABLE>

                                       28
<PAGE>

                        REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Central European Distribution Corporation

   We have audited the accompanying consolidated balance sheets of Central
European Distribution Corporation as of December 31, 2001 and 2000 and the
related consolidated statements of income, changes in stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Central
European Distribution Corporation at December 31, 2001 and 2000, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States.

ERNST & YOUNG AUDIT Sp. z o.o.

Warsaw, Poland
March 1, 2002

                                      29
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                   Amounts in columns expressed in thousands

<TABLE>
<CAPTION>
                                                               December 31,
                                                              ----------------
                                                               2000     2001
                                                              -------  -------
<S>                                                           <C>      <C>
                           ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................  $ 2,428  $ 2,466
Accounts receivable, net of allowance for doubtful accounts
 of $1,230,000
 and $1,930,000 respectively................................   30,983   38,102
Inventories.................................................    9,557    9,001
Prepaid expenses and other current assets...................      809    1,560
Deferred income taxes.......................................      416      480
                                                              -------  -------
  TOTAL CURRENT ASSETS......................................   44,193   51,609

Intangible assets, net......................................    3,269    3,002
Goodwill, net...............................................    8,202    9,969
Equipment, net..............................................    3,031    3,372
Deferred income taxes.......................................       80      411
Other assets................................................      536      614
                                                              -------  -------
  TOTAL ASSETS..............................................  $59,311  $68,977
                                                              =======  =======
            LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Trade accounts payable......................................  $26,399  $29,685
Bank loans and overdraft facilities.........................    1,383    9,861
Income taxes payable........................................       35      308
Taxes other than income taxes...............................      928      999
Other accrued liabilities...................................      686    1,692
Current portions of obligations under capital leases........      --       269
Current portion of long-term debt...........................    5,400    1,912
                                                              -------  -------
  TOTAL CURRENT LIABILITIES.................................   34,831   44,726

  Long-term debt, less current maturities...................    7,988    3,344

  Long-term obligations under capital leases................   --          151
               COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred Stock ($0.01 par value, 1,000,000 shares
 authorized; no shares issued and outstanding)..............      --       --
Common Stock ($0.01 par value, 20,000,000 shares authorized,
 4,402,356 and 4,503,801 shares issued at December 31, 2000
 and 2001, respectively)....................................       45       46
Additional paid-in-capital..................................   14,175   15,383
Retained earnings...........................................    4,635    7,161
Accumulated other comprehensive loss........................   (2,243)  (1,684)
Less Treasury Stock at cost (64,100 shares at December 31,
 2000 and 72,900 shares at December 31, 2001)...............     (120)    (150)
                                                              -------  -------
  TOTAL STOCKHOLDERS' EQUITY................................   16,492   20,756
                                                              -------  -------
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................  $59,311  $68,977
                                                              =======  =======
</TABLE>

                            See accompanying notes.


                                       30
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME
                   Amounts in columns expressed in thousands
                            (except per share data)

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                   ---------------------------
                                                    1999      2000      2001
                                                   -------  --------  --------
<S>                                                <C>      <C>       <C>
Net sales......................................... $90,240  $131,233  $178,236
Cost of goods sold................................  77,471   113,687   154,622
                                                   -------  --------  --------
Gross profit......................................  12,769    17,546    23,614
Selling, general and administrative expenses......   8,795    13,120    16,445
Bad debt provision................................     254       517       711
Depreciation of tangible fixed assets.............     120       366       841
Amortization of intangible assets.................     368       695       762
                                                   -------  --------  --------
Operating income..................................   3,232     2,848     4,855
Non-operating income (expense)
  Interest expense................................    (374)     (955)   (1,345)
  Interest income.................................     378       261        77
  Realized and unrealized foreign currency
   transaction losses, net........................    (215)     (494)      (12)
  Other income (expense), net.....................     (13)     (172)       83
                                                   -------  --------  --------
Income before income taxes........................   3,008     1,488     3,658
Income tax expense................................   1,106       503     1,132
                                                   -------  --------  --------
Net income........................................ $ 1,902  $    985  $  2,526
                                                   -------  --------  --------
Net income per share of common stock, basic....... $  0.47  $   0.23  $   0.58
                                                   -------  --------  --------
Net income per share of common stock, diluted..... $  0.47  $   0.23  $   0.57
                                                   =======  ========  ========
</TABLE>


                            See accompanying notes.

                                       31
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                   Amounts in columns expressed in thousands

<TABLE>
<CAPTION>
                                       Common Stock
                                ---------------------------
                                   Issued      In Treasury
                                ------------- -------------
                                                                                  Accumulated
                                                             Additional              Other
                                No. of        No. of          Paid-in-  Retained Comprehensive
                                Shares Amount Shares Amount   Capital   Earnings     Loss       Total
                                ------ ------ ------ ------  ---------- -------- ------------- -------
<S>                             <C>    <C>    <C>    <C>     <C>        <C>      <C>           <C>
Balance at December 31, 1998..  3,780   $38    --      --     $10,651    $1,748     $  (110)   $12,327
Net income for 1999...........    --    --     --      --         --      1,902         --       1,902
Foreign currency translation
 adjustment...................    --    --                        --        --       (1,869)    (1,869)
                                -----   ---    ---   -----    -------    ------     -------    -------
Comprehensive income for
 1999.........................    --    --                        --      1,902      (1,869)        33
Common stock issued in
 connection with
 acquisitions.................    354     4                     2,249       --          --       2,253
                                -----   ---    ---   -----    -------    ------     -------    -------
Balance at December 31, 1999..  4,134   $42                   $12,900    $3,650     $(1,979)   $14,613
Net income for 2000...........    --    --                        --        985         --         985
Foreign currency translation
 adjustment...................    --    --                        --        --         (264)      (264)
                                -----   ---    ---   -----    -------    ------     -------    -------
Comprehensive income for
 2000.........................    --    --                        --        985        (264)       721
Treasury shares purchased.....                  64    (120)                                       (120)
Common stock issued in
 connection with
 acquisitions.................    268     3                     1,275       --          --       1,278
                                -----   ---    ---   -----    -------    ------     -------    -------
Balance at December 31, 2000..  4,402   $45     64   $(120)   $14,175    $4,635     $(2,243)   $16,492
Net income for 2001...........                                            2,526                  2,526
Foreign currency translation
 adjustment...................                                                          559        559
                                -----   ---    ---   -----    -------    ------     -------    -------
Comprehensive income for
 2001.........................                                            2,526         559      3,085
Treasury shares purchased.....                   9     (30)                                        (30)
Common stock issued in
 connection with IPO options..     70     1                       611                              612
Common stock issued in
 connection with acquisition..     32                             597                              597
                                -----   ---    ---   -----    -------    ------     -------    -------
Balance at December 31, 2001..  4,504   $46     73   $(150)   $15,383    $7,161     $(1,684)   $20,756
                                =====   ===    ===   =====    =======    ======     =======    =======
</TABLE>




                            See accompanying notes.

                                       32
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                   Amounts in columns expressed in thousands

<TABLE>
<CAPTION>
                                                        Year ended December
                                                                31,
                                                       -----------------------
                                                        1999    2000     2001
                                                       ------  -------  ------
<S>                                                    <C>     <C>      <C>
OPERATING ACTIVITIES
Net income...........................................  $1,902  $   985  $2,526
Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
  Depreciation and amortization......................     446    1,061   1,603
  Deferred income tax benefit........................    (162)    (184)   (395)
  Bad debt provision.................................     254      517     711
  Changes in operating assets and liabilities:
    Accounts receivable..............................  (1,517) (14,307) (5,157)
    Inventories......................................    (354)  (1,947)  1,227
    Prepayments and other current assets.............  (1,737)   1,002    (700)
    Trade accounts payable...........................     864   11,770   1,089
    Income and other taxes...........................    (799)     348     226
    Other accrued liabilities and other..............  (2,228)    (390)  1,612
                                                       ------  -------  ------
    Net Cash (used in)/provided by Operating
     Activities......................................  (3,331)  (1,145)  2,742
INVESTING ACTIVITIES
Purchases of equipment...............................  (1,113)  (1,898)   (735)
Proceeds from the disposal of equipment..............     137      112     101
Acquisitions of subsidiaries.........................  (4,758)  (3,855) (1,763)
                                                       ------  -------  ------
Net Cash Used In Investing Activities................  (5,734)  (5,641) (2,397)
FINANCING ACTIVITIES
Borrowings on bank loans and overdraft facility......  10,114    5,567   8,653
Payment of bank loans and overdraft facility.........  (7,949)  (3,714) (1,335)
Long-term borrowings.................................   6,387    8,280   1,827
Payment of long-term borrowings......................     --    (3,914) (9,959)
IPO warrants exercised...............................     --       --      537
Purchase of treasury shares..........................     --      (120)    (30)
                                                       ------  -------  ------
Net Cash provided by (used in) Financing Activities..   8,552    6,099    (307)
                                                       ------  -------  ------
Net Increase (Decrease) in Cash and Cash
 Equivalents.........................................    (513)    (687)     38
Cash and cash equivalents at beginning of period.....   3,628    3,115   2,428
                                                       ------  -------  ------
Cash and cash equivalents at end of period...........  $3,115  $ 2,428  $2,466
                                                       ======  =======  ======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
 ACTIVITIES
Common stock issued in connection with investment in
 subsidiaries (Note 10)..............................  $2,253  $ 1,278  $  597
                                                       ======  =======  ======
Common Stock issued to consultants...................  $  138  $    48  $   74
                                                       ======  =======  ======
Capital leases.......................................     --       --   $  516
                                                       ======  =======  ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Interest paid......................................  $  354  $   865  $1,241
  Income tax paid....................................   1,313      532   1,216
</TABLE>

                            See accompanying notes.

                                       33
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              Monetary amounts in columns expressed in thousands
                        (except per share information)


1. Organization and Description of Business

   Central European Distribution Corporation (CEDC) was organized as a
Delaware Corporation in September 1997 to operate as a holding company through
its then sole subsidiary, Carey Agri International Poland Sp. z o.o. (Carey
Agri). CEDC, Carey Agri and the other subsidiaries referred to later in this
note are referred to herein as the Company.

   CEDC's authorized capital stock consists of 20.0 million shares of common
stock, $0.01 par value, and 1.0 million shares of preferred stock, $0.01 par
value. No shares of preferred stock have been issued and its terms and
conditions will be established by the Board of Directors at a later date.

   In July 1998, CEDC had an initial public offering of 2,000,000 shares (at
$6.50 per share) receiving net proceeds of approximately $10.6 million. The
shares are currently quoted on the NASDAQ National Market.

   Carey Agri is a Polish limited liability company with headquarters in
Warsaw, Poland. Carey Agri distributes alcoholic beverages throughout Poland
and all operating activities are conducted within that country. It currently
has branches in the following Polish cities: Warsaw, Krakow, Szczecin, Gdynia,
Wrocaw, Torun, Katowice, Poznan, Zielona Gora, and Biaylstok.

   In March 1999, the Company purchased a significant portion of the business
assets, of Multi Trade Company S.C. (MTC). MTC is a distributor of alcoholic
beverages located in Biaystok, Poland.

   In May 1999, the Company purchased a significant portion of the business
assets, of the Cellar of Fine Wines S.C. (CFW). CFW is an importer and a
distributor of wines located in Sulejowek near Warsaw, Poland.

   In March 2000, the Company purchased 100% of the voting stock of Polskie
Hurtownie Alkoholi Sp. z o.o. (PHA). PHA is a distributor of alcoholic and
non-alcoholic beverages located in Zielona Gora, Poland.

   In April 2001, the Company purchased 97% of the voting stock of Astor Sp. z
o.o. (Astor). Astor is a distributor of alcoholic and non-alcoholic beverages
in Olsztyn, Poland. The remaining 3% will be issued to the Company over three
years with no added cost.

   During August 2001, the Company created a new Polish subsidiary--Fine Wines
& Spirits Sp. z o.o. (FWS). The new subsidiary will operate the Company's five
retail outlets.

   Pursuant to Polish statutory requirements, Carey Agri, MTC, CFW, PHA, Astor
and FWS may pay annual dividends, based on their audited Polish financial
statements, to the extent of their retained earnings as defined. At December
31, 2001, approximately $ 7,400,000 was available for payment of dividends.

2. Summary of Significant Accounting Policies

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

 Basis of Presentation

   The consolidated financial statements include the accounts of Central
European Distribution Corporation and its subsidiaries. All significant inter-
company accounts and transactions have been eliminated in the consolidated
financial statements.

   CEDC's subsidiaries maintain their books of account and prepare their
statutory financial statements in Polish zloties (PLN) in accordance with
Polish statutory requirements and the Accounting Act of 29 September 1994. The
subsidiaries' financial statements have been adjusted to reflect generally
accepted accounting principles in the United States of America (US GAAP).

                                      34
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


 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. Income Statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from the use of differing exchange rates from
period to period are included as a component of shareholders' equity. Gains
and losses from foreign currency transactions are included in net income for
the period.

   The accompanying consolidated financial statements have been prepared in US
Dollars.

   The exchange rates used on Polish zloty denominated transactions and
balances for translation purposes as of December 31, 2000 and 2001 for one US
dollar were 4.14PLN and 3.98PLN, respectively. As of March 1, 2002 the rate
had changed to 4.21 PLN.

 Equipment

   Equipment is stated at cost, less accumulated depreciation. Depreciation of
equipment is computed by the straight-line method over the following useful
lives:

<TABLE>
<CAPTION>
                                                                    Depreciation
                                                                      life in
                                  Type                                 years
                                  ----                              ------------
      <S>                                                           <C>
      Transportation equipment under capital leases................        2
      Transportation equipment.....................................        6
      Beer dispensing and other equipment..........................     2-10
</TABLE>

   Leased equipment meeting certain 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
term of the lease.

   The Company periodically reviews equipment, when indicators of impairment
exist and if the value of the asset is impaired, an impairment loss is
recognized.

 Goodwill

   Acquired goodwill is amortized on a straight-line basis over the period of
the expected economic benefit (20 years). The Company assesses the
recoverability of its goodwill whenever adverse events or changes in
circumstances or business climate indicate that expected future cash flows
(undiscounted and without interest charges) for individual business units may
not be sufficient to support the recorded goodwill. If undiscounted cash flows
are not sufficient to support the goodwill, an impairment charge would be
recognized to reduce the carrying value of the goodwill based on the expected
discounted cash flows of the business unit. No such charge has been considered
necessary through the date of the accompanying financial statements.

 Intangible assets

   Intangibles consist primarily of acquired trademarks. The trademarks are
amortized on a straight-line basis over the period of the expected economic
benefits (10 years). The Company assesses the recoverability of its trademarks
whenever adverse events or changes in circumstances or business climate
indicate that expected future cash flows (undiscounted and without interest
charges) for individual business units may not be sufficient to support the
recorded trademarks. If undiscounted cash flows are not sufficient to support
the recorded assets, an impairment charge would be recognized to reduce the
carrying value of the trademarks. No such charge has been considered necessary
through the date of the accompanying financial statements.

                                      35
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


   The acquired trademarks in the amount of $4,077,000 had accumulated
amortization of $879,000 and $1,146,000 for 2000 and 2001 respectively.

 Revenue Recognition

   Revenue is recognized when goods are shipped or delivered to customers. The
Company only recognizes revenue and margin when goods have been shipped to
customers on the basis of a validated customer order. The Company does not
operate a policy of goods shipped on consignment nor does it offer goods on a
sale or return basis.

 Advertising and Promotion Costs

   Advertising and promotion costs are expensed as incurred. Advertising and
promotion costs not reimbursed by suppliers were approximately $359,000,
$278,000 and $300,000 in 1999, 2000 and 2001, respectively.

 Inventories

   Inventories are stated at the lower of cost (first-in, first-out method) or
market. Cost includes customs duty and transportation costs. Inventories are
comprised primarily of beer, wine, spirits, and non-alcoholic beverages.

 Cash and Cash Equivalents

   Short-term investments that have a maturity of three months or less from
the date of purchase are classified as cash equivalents. Substantially all of
these amounts were located in bank accounts in Poland at December 31, 2001.

 Estimates

   The preparation of consolidated financial statements in conformity with US
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.

 Income Taxes

   The Company computes and records income taxes in accordance with the
liability method.

 Employee Stock-Based Compensation

   As permitted by Statement of Financial Accounting Standard (SFAS) No. 123,
"Accounting for Stock-Based Compensation," the Company accounts for its
employee stock-based compensation in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly,
no compensation costs have been recognized for fixed stock options issued
under the Company's employee stock incentive plan. The Company discloses pro
forma net income and net income per share as if the fair value method of SFAS
No. 123 had been used (see Note 14).

 Financial Instruments

   The Company uses derivative financial instruments (forward foreign currency
contracts) to hedge transactions denominated in foreign currencies in order to
reduce the currency risk associated with fluctuating exchange rates. Such
contracts are used primarily to hedge certain foreign denominated obligations.
The Company's policy is to maintain hedge coverage only on existing
obligations. The gains and losses on these contracts offset changes in the
value of the related exposures in accordance with SFAS 133 as amended by SFAS
138, which was adopted by the Company in 2001. The adoption of SFAS 133/138,
did not have a material effect

                                      36
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)

on the consolidated financial statements. The principal currencies hedged are
the U.S. Dollars, and the Euro. The duration of the hedge contract typically
does not exceed six months. The counter-parties to the contracts are large,
reputable commercial banks and accordingly, the Company expects all counter-
parties to meet their obligations.

 Comprehensive Income

   Comprehensive income is defined as all changes in equity during a period
except those resulting from investments by owners and distributions to owners.
Comprehensive income includes net income adjusted by, among other items,
foreign currency translation adjustments. The foreign translation losses/gains
on the remeasurements from Polish zloties to US dollars are classified
separately and the only component of the accumulated other comprehensive
income included in shareholders' equity.

   During the period ended December 31, 2001, the Company incurred foreign
currency translation gains of $559,000 and reported this amount as part of the
accumulated comprehensive loss in shareholders' equity. During 2001, the
Polish zloty strengthened during the second half of the year and as a result
reduced the amount of the currency translation loss as compared to the
previous year. Additionally translation losses with respect to long-term
inter-company transactions with the parent company are charged to other
comprehensive loss. No deferred tax benefit has been recorded on the
comprehensive loss in regards to the long-term inter-company transactions with
the parent company, as the repayment of the loan is not anticipated in the
foreseeable future.

 Segment Reporting

   The Company operates in one industry segment, the distribution of alcoholic
and non-alcoholic beverages. These activities are conducted by Carey Agri,
MTC, CFW, PHA, Astor and FWS in Poland. Substantially all revenues, operating
profits and assets relate to this business. CEDC assets (excluding inter-
company loans and investments) located in the United States of America
represent less than 1% of consolidated assets.

 Net Income Per Common Share

   Net income per common share is calculated in accordance with SFAS No. 128,
"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 14 were included in the computation of diluted earnings per
common share (Note 9).

 Reclassifications

   Certain amounts in the financial statements have been reclassified from
prior years to conform to the current year presentation.

 Recently Issued Accounting Pronouncements

   In June 2001, the FASB released SFAS 141 "Business Combinations". This
Statement requires that Combinations are accounted for by a single method--the
purchase method. This Statement also requires separate recognition of
intangible assets apart from goodwill if they meet the prescribed criteria.
Disclosure of the primary reasons for the business combination is required and
the allocation of the purchase price paid to the assets acquired and
liabilities assumed by major balance sheet caption is necessary. When the
amounts of goodwill and intangible assets acquired are significant in relation
to the purchase price paid, disclosure of other information about those assets
is required. The provisions of this Statement apply to all business
combinations initiated after June 30, 2001. The Company does not anticipate
any reclassifications of intangible assets from the application of SFAS 141.

   In June 2001, the FASB released SFAS 142 "Goodwill and other intangible
assets". This Statement addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes

                                      37
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)

APB Opinion No. 17, Intangible Assets. It addresses how intangible assets that
are acquired individually or with a group of other assets (but not those
acquired in a business combination) should be accounted for in financial
statements upon their acquisition. This Statement also addresses how goodwill
and other intangible assets should be accounted for after they have been
initially recognized in the financial statements. The provisions of this
Statement are required to be applied starting with fiscal years beginning
after December 15, 2001. Upon adoption of the new standard, the Company
anticipates that all amortization of goodwill as a charge to earnings will be
eliminated. Goodwill amortization charged to earnings during 2001 amounted to
approximately $494,000.

   In August 2001, the FASB released SFAS 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets". This standard supersedes SFAS 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be disposed of". This statement removes goodwill from its scope, (addressed
in SFAS 142) and addresses long-lived assets to be held and used, to be
disposed of other than by sale and to be disposed of by sale. The provisions
of this statements are required to be applied starting with fiscal years
beginning after December 15, 2001. The Company does not anticipate that this
statement will have a material effect on their financial statements.

3. Goodwill

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

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                ---------------
                                                                 2000    2001
                                                                ------  -------
      <S>                                                       <C>     <C>
      Goodwill................................................. $8,403  $10,664
      Less accumulated amortization............................   (201)    (695)
                                                                ------  -------
      Goodwill, net............................................ $8,202  $ 9,969
                                                                ======  =======
</TABLE>

4. Equipment

   Equipment, presented net of accumulated depreciation in the consolidated
balance sheets, consists of:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                 --------------
                                                                  2000    2001
                                                                 ------  ------
      <S>                                                        <C>     <C>
      Equipment under capital lease............................. $  --   $  516
      Transportation equipment..................................  2,542   3,234
      Beer dispensing and other equipment.......................  1,479   1,479
                                                                 ------  ------
                                                                  4,021   5,229
      Less accumulated depreciation.............................   (990) (1,857)
                                                                 ------  ------
      Equipment, net............................................ $3,031  $3,372
                                                                 ======  ======
</TABLE>

   In 2001, the Company recorded a depreciation expense related to equipment
under capital lease in the amount of $42,000. The accumulated depreciation for
equipment under capital lease was $42,000.

                                      38
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


5. Allowances for Doubtful Accounts

   Changes in the allowance for doubtful accounts during each of the three
years in the period ended December 31, 2001 were as follows:

<TABLE>
<CAPTION>
                                                                Year ended
                                                               December 31,
                                                            -------------------
                                                            1999   2000   2001
                                                            ----  ------ ------
      <S>                                                   <C>   <C>    <C>
      Balance, beginning of year........................... $181  $  343 $1,230
      Provision for bad debts..............................  254     517    711
      Charge-offs, net of recoveries.......................  (92)    --     (11)
      Acquired allowance from purchase of PHA..............  --      370    --
                                                            ----  ------ ------
      Balance, end of year................................. $343  $1,230 $1,930
                                                            ====  ====== ======
</TABLE>

6. Long Term Loans

   Long-term debt consists of the following;

<TABLE>
<CAPTION>
                                                                   December 31,
                                                                  --------------
                                                                   2000    2001
                                                                  ------- ------
      <S>                                                         <C>     <C>
      USD........................................................ $ 9,813 $5,256
      EUR........................................................ $ 3,095    --
      PLN........................................................ $   480    --
                                                                  ------- ------
      Total long-term debt....................................... $13,388 $5,256
                                                                  ======= ======

      Current Portion............................................ $ 5,400 $1,912
      Long-term Portion.......................................... $ 7,988 $3,344
</TABLE>

   In March 2000, the Company signed a loan agreement for $4,000,000 USD
denominated long-term loan. This loan was amended in March 2001 so that
repayment will start in March 2002. The Company is obliged to repay
installments of $1.15 million in 2002, 2003 and 2004 with the balance being
repaid in 2005. The loan is secured by the shares of PHA.

   In April 2001, the Company signed a loan agreement for $1,826,972 with
principal repayments of $63,480 per month. The Company repaid $571,320 in
2001. The loan is secured by shares of Astor.

   The weighted average interest rate on these two loans was 7.8% in 2000 and
6.2% for 2001.

   The principal repayments for the following years are as follows:

<TABLE>
<CAPTION>
                                                                           2001
                                                                          ------
      <S>                                                                 <C>
      2002............................................................... $1,912
      2003...............................................................  1,649
      2004...............................................................  1,150
      2005...............................................................    545
      Thereafter.........................................................    --
                                                                          ------
                                                                          $5,256
                                                                          ======
</TABLE>


                                      39
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)

7. Lease Obligations

   The Company entered into a non cancelable operating lease, for its main
warehouse and office in Warsaw, which stipulated monthly payments of $130,000
for five years, this lease cannot be terminated. The Company has the option to
renew the lease in five years. The following is a schedule by years of the
future rental payments under the non-cancelable operating lease as of December
31, 2001.

<TABLE>
      <S>                                                                 <C>
      2002............................................................... $1,560
      2003...............................................................  1,560
      2004...............................................................  1,560
      2005...............................................................  1,300
      Thereafter.........................................................    --
                                                                          ------
                                                                          $5,980
                                                                          ======
</TABLE>

   The Company also has rental agreements for all of the regional offices and
warehouse space. Monthly rentals range from approximately $2,000 to $11,670.
All of the regional office and warehouse leases can be terminated by either
party within two or three months prior notice. The retail shop lease has no
stated expiration date, but can be terminated by either party with three
months prior notice.

   The rental expense incurred under operating leases during 1999, 2000 and
2001 was as follows:

<TABLE>
<CAPTION>
                                                              1999  2000   2001
                                                              ---- ------ ------
      <S>                                                     <C>  <C>    <C>
      Rent expense........................................... $754 $1,442 $2,583
                                                              ==== ====== ======
</TABLE>

   During 2001, the Company entered into a number of capital leases for
transportation equipment. The future minimum lease payments for the assets
under capital lease at December 31, 2001 are as follows:

<TABLE>
      <S>                                                                  <C>
      2002................................................................ $280
      2003................................................................  157
      Thereafter..........................................................  --
                                                                           ----
                                                                           $437
      Less interest.......................................................  (17)
                                                                           ----
                                                                           $420
                                                                           ====
</TABLE>

8. Bank Loans and Overdraft Facilities

   The Company has banking facilities with six banks and the majority of the
Company's credit lines are of a short-term nature. The credit lines are
denominated in various currencies as follows:

<TABLE>
<CAPTION>
                                                                   December 31,
                                                                   -------------
                                                                    2000   2001
                                                                   ------ ------
      <S>                                                          <C>    <C>
      USD......................................................... $   14 $2,275
      EUR.........................................................    --   1,219
      PLN.........................................................  1,369  6,367
                                                                   ------ ------
                                                                   $1,383 $9,861
                                                                   ====== ======
</TABLE>

                                      40
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


   The weighted average interest rate on all bank loans and overdraft
facilities was 8.2% and 8.7% for December 31, 2000 and 2001 respectively. This
increase is due to the larger proportion of local currency debt within the
debt portfolio.

   In 1999, the Company obtained a long-term loan of $1,500,000 of which
$1,000,000 was repaid in May 2001.

   In April 1999, the Company obtained EUR denominated long-term loan of
1,380,000 EUR, which is due in May 2002. From May 2002, the loan will be
subjected to annual review and has therefore been reclassified as a short-term
facility. This loan is collateralized by inventory up to a value of 3,500,000
PLN.

   On May 16, 2000, the Company signed a loan agreement for $850,000. The loan
is repayable in installments of $212,500 commencing August 20, 2001. As at
December 31, 2001, $425,000 was outstanding of which $212,500 was repaid in
February 2002.

   On July 21, 2000, the Company signed a loan agreement for $750,000. The
loan was repaid in July 2001.

   In April 2001, the Company signed an overdraft agreement for 7,600,000
Polish zloty (approximately $1,900,000) with an annual renewal option. As at
December 31, 2001 the Company was using approximately 6,500,000 Polish zloty
(approximately $1,625,000) of this facility.

   In November 2001, the Company signed a short-term loan agreement for
3,000,000 Polish zloty (approximately $752,000) with an annual renewal option.

   In May 2001, the Company signed a loan agreement for 2,000,000 Polish zloty
(approximately $500,000) with an annual renewal option.

   In May 2001, the Company signed a 5,000,000 Polish zloty (approximately
$1,250,000) overdraft facility with an annual renewal option.

   In April 2001, when the Company acquired Astor it acquired a 4,600,000
Polish zloty (approximately $1,122,000) short-term revolving credit facility.
This facility was renewed in February 2002.

   In November 2001, the Company signed a six-month revolving trade credit
agreement for 3,500,000 Polish zloty (approximately $875,000). As at December
31, 2001, the Company had utilized 1,500,000 Polish zloty (approximately
$375,000) of this facility.

   At December 31, 2001, the Company had unused facilities of $1,300,000
within its agreed overdraft facilities denominated in Polish zloty.

                                      41
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


9. Earnings per share

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

<TABLE>
<CAPTION>
                                                            1999   2000   2001
                                                           ------ ------ ------
      <S>                                                  <C>    <C>    <C>
      Basic:
      Net income.......................................... $1,902 $  985 $2,526
                                                           ====== ====== ======
      Weighted average shares of common Stock
       outstanding........................................  4,050  4,334  4,359
                                                           ====== ====== ======
      Basic earnings per share............................ $ 0.47 $ 0.23 $ 0.58
                                                           ====== ====== ======
      Diluted:
      Net income.......................................... $1,902 $  985 $2,526
                                                           ====== ====== ======
      Weighted average shares of common stock
       outstanding........................................  4,050  4,334  4,359
      Net effect of dilutive employee stock options based
       on the treasury stock method.......................    --     --      54
      Net effect of dilutive stock options--based on the
       treasury stock method in regards to IPO
       options/warrants, contingent shares from
       acquisition and options issued to consultants......    --     --      34
                                                           ------ ------ ------
      Totals..............................................  4,050  4,334  4,437
                                                           ====== ====== ======
      Diluted earnings per share.......................... $ 0.47 $ 0.23 $ 0.57
                                                           ====== ====== ======
</TABLE>

   Warrants granted in connection with the 1998 Initial Public Offering,
options compensation to consultants, contingent shares for acquisitions and
employee stock options granted 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 portions of 2001.

10. Acquisitions

   The Company completed the acquisition of Astor Sp. z o.o. effective April
5, 2001, for a cash purchase price of $1,200,000 and 31,264 shares of CEDC
stock (stock valued at approximately $98,000) The shares issued may not be
sold without the Company's consent for three years subsequent to the
acquisition date. As part of the purchase agreement with Astor, a non-compete
agreement was established with the former stockholders for a period of three
years. The terms of the agreement allow for an additional payment of both cash
and Company stock, which are contingent upon Astor Sp. z o.o. achieving a
certain profit target. As at December 31, 2001, Astor achieved their projected
earnings and as a result the Company has accrued $369,000 and 44,753 shares of
CEDC stock (valued at approximately $498,000). If the acquired company is able
to achieve the remaining targeted earnings, the total acquisition cost is
expected to be approximately $4,000,000. Astor Sp. z o.o. is based in Olsztyn,
Poland. Its primary area of activity is the distribution of various spirits
and non-alcoholic beverages.

   The Company acquired 97% of the voting shares of Astor Sp. z o.o. Based on
the purchase agreement the remaining 3% of the voting shares will be received
by the Company over the next three years. No additional payment for this added
interest is required.

                                      42
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


   The acquisition of Astor Sp. z o.o. has been accounted for as a purchase,
and the operating results of the acquired company have been included in the
consolidated condensed financial statements from the date of acquisition. The
acquired goodwill will be amortized over a 20 year period. The amortization of
the acquired goodwill will cease as of January 1, 2002 as discussed in
"Summary of significant accounting policies--recently issued accounting
pronouncements".

   The acquisition was financed using the Company's loan facilities and
issuance of Company stock as indicated above. The remaining contingent
consideration if any, is expected to be finalized during the first quarter of
2003 and 2004.

   The Company obtained an independent valuation for this acquisition. The
cost of the acquisition was allocated to the tangible assets acquired based on
the underlying book values which approximated fair values at dates of
acquisition and estimated values per the valuation report. Astor had commenced
operations at the end of 2000 and thus no significant difference between book
values and estimated fair values existed. The excess ($2,245,000) of the cost
over the amounts allocated as described above represents goodwill.

   On March 31, 2000, the Company purchased 100% of the voting shares of
Polskie Hurtownie Alkoholi Sp. z o.o. (PHA) for $4 million cash and 268,126
shares of Common Stock. The shares issued may not be sold without the
Company's consent for three years subsequent to the acquisition. As part of
the purchase agreement with PHA a non-compete agreement was established with
the former stockholders for a period of three years.

   The Company obtained an independent valuation for this acquisition. The
cost of the acquisition was allocated to the tangible assets acquired based on
the fair values at dates of acquisition and estimated values per the valuation
report. The excess ($5,490,000) of the cost over the amounts allocated as
described above represents goodwill.

   Assuming consummation of the PHA and Astor acquisitions and the issuance of
common shares as of January 1, 2000, the un-audited pro-forma consolidated
operating results for 2000 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                                2000     2001
                                                              -------- --------
      <S>                                                     <C>      <C>
      Net sales.............................................. $140,706 $184,426
      Net income.............................................      862    2,526
      Net income per share data:
        Basic earnings per share of common stock............. $   0.19 $   0.58
        Diluted earnings per share of common stock........... $   0.19 $   0.57
</TABLE>

11. Financial Instruments, Commitments and Contingent Liabilities

 Financial Instruments With On-Balance Sheet Risk and Their Fair Values

   Financial instruments with on-balance sheet risk include cash and cash
equivalents, accounts receivable, certain other current assets, trade accounts
payable, overdraft facilities, and other payables. These financial instruments
are disclosed separately in the consolidated balance sheets and their carrying
values approximate their fair market values. The Companies on-balance sheet
risk is minimal as the financial instruments are denominated in stable
currencies and they are of a short-term nature whose interest rates
approximate current market rates.

                                      43
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


 Concentrations of Credit Risk

   Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of accounts receivable from Polish companies.
The Company restricts temporary cash investments to financial institutions
with high credit standing. Credit is given to customers only after a thorough
review of their credit worthiness. The Company does not normally require
collateral with respect to credit sales. The Company routinely assesses the
financial strength of its customers. As of December 31, 2001 and 2000, the
Company had no significant concentrations of credit risk. The Company has not
experienced large credit losses in the past.

 Inflation and Currency Risk

   The Polish government has adopted policies that in recent years has lowered
and made more predictable the country's level of inflation. The annual rate of
inflation was approximately 9.8% in 1999, 8.5% in 2000 and 3.6% in 2001. The
exchange rate for the zloty had stabilized and the rate of devaluation of the
zloty had decreased for the last several years. During the first two quarters
of 2001, the zloty decreased in value in respect to the US dollar, while in
the latter half of the year made a strong recovery against the US dollar.
Inflation and currency exchange fluctuations have had, and may continue to
have, an adverse effect on the financial condition and results of operations
of the Company.

   A portion of Carey Agri's, MTC's, CFW's and ASTOR's loans and accounts
payable and operating expenses are expected to continue to be, denominated in
or indexed to the U.S. Dollar or other non-Polish denominated currency. By
contrast, substantially all of the Company's revenue is denominated in Polish
zloty. Any devaluation of the zloty against the U.S. Dollar or other
currencies that the Company is unable to offset through price adjustments will
require the Company to use a larger portion of its revenue to service its non-
zloty denominated obligations. While the Company may enter into transactions
to hedge the risk of exchange rate fluctuations, it is unlikely that the
Company will be able to obtain hedging arrangements to completely eliminate
the currency risk. Accordingly, shifts in the currency exchange rates may have
an adverse effect on the ability of the Company to service its non-zloty
denominated obligations and, therefore may have an effect on the Company's
financial condition and results of operations.

 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 significant portion of the Company's supply of
products could be curtailed at any time. The Company has made payments to
suppliers to secure longer-term sources of supply.

 Contingent liabilities

   The Company is involved in some litigation and has claims against it for
matters arising in the ordinary course of business. In the opinion of
management, the outcome will not have a material adverse effect on the
Company's operations.

                                      44
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


12. Income Taxes

   Income tax expense consists of the following:

<TABLE>
<CAPTION>
                                                          Year ended December
                                                                  31,
                                                          ---------------------
                                                           1999   2000    2001
                                                          ------  -----  ------
<S>                                                       <C>     <C>    <C>
Current Polish income tax expense........................ $1,268  $ 687  $1,527
Deferred Polish income tax benefit, net..................   (101)  (195)   (331)
Deferred US income tax (benefit)/expense.................    (61)    11     (64)
                                                          ------  -----  ------
  Total income tax expense............................... $1,106  $ 503  $1,132
                                                          ======  =====  ======
</TABLE>

   Total Polish income tax payments (or amounts used as settlements against
other statutory liabilities) during 1999, 2000 and 2001 were $1,313,000,
$532,000 and $1,216,000 respectively. CEDC has paid no U.S. income taxes and
has net opening loss carry forwards totaling $579,000, of which $221,000 will
expire in 2014 and $358,000 will expire in 2016.

   Total income tax expense varies from expected income tax expense computed
at Polish statutory rates (34% in 1999, 30% in 2000 and 28% in 2001) as
follows:

<TABLE>
<CAPTION>
                                                              Year ended
                                                             December 31,
                                                          --------------------
                                                           1999   2000   2001
                                                          ------  ----  ------
<S>                                                       <C>     <C>   <C>
Tax at Polish statutory rate............................. $1,023  $446  $1,024
Increase in deferred tax asset valuation allowance
 relating primarily to bad debt expense..................     46   124     134
Effect of foreign currency exchange rate change on net
 deferred tax assets and reduction of deferred tax asset
 due to changes in tax rates.............................     14   (47)    (40)
Permanent differences:
  Non-taxable interest...................................    (15)  (20)     (8)
  Non-deductible taxes...................................     16   --        5
  Non-deductible transportation taxes....................      7   --        9
  Other non-deductible expenses..........................     15   --        8
                                                          ------  ----  ------
Income tax expense....................................... $1,106  $503  $1,132
                                                          ======  ====  ======
</TABLE>

                                      45
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


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

<TABLE>
<CAPTION>
                                                             December 31,
                                                             -------------
                                                             2000    2001
                                                             -----  ------
<S>                                                          <C>    <C>     <C>
Deferred tax assets:
  Allowance for doubtful accounts receivable................ $ 382  $  411
  Unrealized foreign exchange (losses)/gains, net...........   (75)     18
  Accrued expenses, deferred income and prepaids, net Carey
   Agri operating loss carry forward expiring 2005..........   147      43
  Carey Agri operating loss carry forward expiring 2005.....   134      40
  Tax benefit derived from sales to subsidiaries............   --      504
  CEDC operating loss carry-forward benefit, expiring in
   2012--2016...............................................    81     182
                                                             -----  ------
Total deferred tax assets................................... $ 669  $1,198
Less valuation allowance....................................  (173)   (307)
                                                             -----  ------
Net deferred tax asset...................................... $ 496  $  891
                                                             =====  ======
Shown as:
  Current deferred tax asset................................ $ 416  $  480
  Non-current deferred tax asset............................    80     411
                                                             -----  ------
                                                             $ 496  $  891
                                                             =====  ======  ===
</TABLE>

   Valuation allowances are provided when it is more likely that some or all
of the deferred tax assets will not be realized in the future. These
evaluations are based on expected future taxable income and expected reversals
of the various net deductible temporary differences. The valuation allowance
relates primarily to the future tax deductibility of the allowance for bad
debts.

   Prior to January 1, 2001, the Company had a policy to permanently reinvest
their earnings. As of January 1, 2001, the Company instituted a policy of
having all of its subsidiaries (except Carey Agri) pay dividends. Management
intends to distribute 50% of the earnings from the Polish subsidiaries for
2001.

   The retained earnings prior to January 1, 2001 are not considered
distributable. Deferred taxes have been created for these distributable
earnings.

   No deferred taxes have been created for the remaining undistributed
earnings as the Company intends to permanently reinvest these earnings.

   In November 1999, legislation was enacted which reduced the corporate
income tax rates in Poland effective January 1, 2000. The expected tax rate of
32% was reduced to 30% in 2000, 28% in 2001 and 2002, 24% in 2003 and 22%
thereafter.

   Carey Agri's, MTC's, CFW's, PHA's, FWS's, and Astor's tax liabilities
(including corporate income tax, Value Added Tax (VAT), social security and
other taxes) may be subject to examinations by Polish tax authorities for up
to five years from the end of the year the tax is payable. CEDC's US federal
income tax returns are also subject to examination by the US 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.

                                      46
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


13. Related Party Transactions

   A director of CEDC is also the director of one of the Company's suppliers
of wine. Purchases from this company amounted to approximately $471,600,
$630,600 and $705,000 in 1999, 2000 and 2001, respectively. This Company is
owed $124,000 as at December 31, 2001 for purchases made during 2001.

   The Company rents under a short-term rental agreement from the Company's
president a retail unit. The rent is $2,200 per month. The total rental
expense incurred during 2000 and 2001 in regards to this premises was $26,400
per year.

14. Stock Option Plans and Warrants

 Incentive Plan

   In November 1997, the CEDC 1997 Stock Incentive Plan ("Incentive Plan") was
created. This Incentive Plan provides for the grant of stock options, stock
appreciation rights, restricted stock and restricted stock units to directors,
executives, and other employees of CEDC and any of its subsidiaries or of any
service providers. The Incentive Plan authorizes the issuance of up to 750,000
shares of Common Stock (subject to anti-dilution adjustments in the event of a
stock split, recapitalization, or similar transaction). The compensation
committee of the board of directors will administer the Incentive Plan. The
Company has reserved 750,000 shares for future issuance in relation to the
Incentive Plan.

   The option exercise price for incentive stock options granted under the
Incentive Plan may not be less than 100% of the fair market value of the
Common Stock on the date of grant of the option. Options may be exercised up
to 10 years after grant, except as otherwise provided in the particular option
agreement. Payment for shares purchased under the Incentive Plan shall be made
in cash or cash equivalents. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of stock of CEDC,
however, the exercise price of any incentive stock option granted must equal
at least 110% of the fair market value on the grant date and the maximum term
of an incentive stock option must not exceed five years.

   A summary of the Company's stock option activity, and related information
for the years ended December 31, 2000 and December 31, 2001 as follows:

<TABLE>
<CAPTION>
                                                     Weighted-Average Weighted-Average
                         Options (000) Options (000)  Exercise Price   Exercise Price
                             2000          2001            2000             2001
                         ------------- ------------- ---------------- ----------------
<S>                      <C>           <C>           <C>              <C>
Outstanding at January
 1,.....................      284           334             --               --
Granted.................       50            89           $4.20            $4.03
Exercised...............      --            (65)            --               --
Forfeited...............      --            --              --               --
                              ---           ---           -----            -----
Outstanding at December
 31,....................      334           358           $7.02            $6.62

Exercisable at December
 31,....................      185           269           $6.69            $7.02

Weighted-average fair
 value of options
 granted................      --            --            $1.60            $1.92
</TABLE>

   Exercise prices for options outstanding as of December 31, 2001 ranged from
$2.25 to $8.00. The weighted-average remaining contractual life of those
options is approximately 6 years as of December 31, 2001. The table above does
not include options mentioned below where the exercise price is unknown or for
the warrants discussed below.

                                      47
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


 Stock Options Granted

   CEDC has granted stock options in early 1998 to its executive officers and
members of the Board of Directors for 82,500 shares of Common Stock in
connection with its initial public offering. The exercise price for 57,500 of
these options is the initial public offering price of $ 6.50 per share. The
exercise price of 10,000 options was the average trading price of Common Stock
for the last five trading days of 1998 of $5.70. The exercise price of 15,000
options is $4.89. These options may be exercised over a ten-year period.

   The Company has granted stock options under the Incentive Plan for 129,250
shares of Common Stock in September 1998 to certain of its employees. Options
for 21,500 shares have an exercise price of $6.50 and may be exercised from
September 1999 to September 2008. Options for 43,000 shares will have an
exercise price based on the market value of common shares as of August 1999
and are exercisable from September 2000 to September 2008. Options for 64,750
shares have an exercise price of $3.63 and are exercisable from August 2001 to
September 2008.

   During 2000 and 2001, the Company granted 50,000 and 89,000 stock options
respectively, to its staff, executive officers and members of the Board of
Directors. In 2000, the exercise price for the options was based on the market
price at the date of the option grant. In 2001, the exercise price for the
options was based on the market price on the day before the grant. The option
price ranged from $2.25 to $5.04.

   Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its incentive stock options under the fair value method of that
Statement.

   In regards to the options granted in connection with the initial public
offering, the Company has estimated the fair market value of the stock
underlying these options to be approximately 50% of the planned public
offering price due to various uncertainties as of the time of grant. This is
less than the present value of the expected exercise price. Therefore, the
fair value of the options granted in connection with the initial public
offering has been estimated to be minimal under the provisions of SFAS No.
123.

   As for the other stock options granted to employees, the fair value was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1999, 2000 and 2001 risk-free
interest rate of 5.5% dividend yield of 0%, volatility factors of the expected
market price of the Company's Common Stock of 0.68, and a weighted-average
expected life of the option of 10 years.

   The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected
stock price volatility. Since the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.

                                      48
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


   For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The effect
of any forfeiture is recognized when it occurs. The Company's pro forma
information for 1999, 2000 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                              1999  2000  2001
                                                             ------ ---- ------
      <S>                                                    <C>    <C>  <C>
      Net income as reported................................ $1,902 $985 $2,526
      Pro forma net income.................................. $1,770 $905 $2,355

      Pro forma earnings per share:
        Basic............................................... $  .44 $.19 $  .54
        Diluted............................................. $  .44 $.19 $  .53
</TABLE>

 Options Given to Vendors

   In late 1998, the Company granted options to a vendor for 50,000 shares of
common stock in exchange for a three-year service contract. These options are
exercisable from March 1999 until September 2004 at the following prices:
$5.90 until September 2002, $7.00 until September 2003, and $8.50 until
September 2004. Under APB 25 and FASB 123, the fair value of options given to
vendors must be expensed over the service period. Using the Black Scholes
method described above, with similar assumptions, the fair value of these
options was $75,000. These options were exercised during January 2002.

   In 1999, the Company granted options to a consulting firm for 75,000 shares
of common stock in exchange for a one-year service contract involving various
acquisition consultations. The exercise price of the options is $8.00. These
options shall be exercisable at any time during a period of nine years
commencing March 5, 2000. Using the Black-Scholes method, 75 periods were used
to determine the volatility of the price. The value of the options is
approximately $135,000. Based upon the 10 months of the service contracts
ended December 31, 1999, costs of $112,500 were capitalized to the purchase of
MTC and CFW or deferred with respect to the other pending acquisitions. The
remaining $22,500 was expensed to the statement of operations for the year
ended December 2000. In December 2001, 65,000 options were exercised.

   During October 2001, the Company granted 35,000 options to a consulting
firm in exchange for a one-year service contract involving various
consultations. The exercise price of the options is $7.71. These options
become exercisable at different intervals during 2002. Using the Black-Scholes
method, 150 periods were used to determine the volatility of the price. The
value of the options is approximately $300,000. Approximately $74,000 was
deferred as a non-current asset. The balance of the value will be recognized
when the services are determined and rendered.

   The above options were included in the calculation of diluted earnings per
share.

 Initial Public Offering Warrants and options

   In connection with the initial public offering, the Company agreed to sell
to the Representatives or their designees (for nominal consideration) warrants
to purchase 200,000 shares of Common Stock from the Company. The warrants are
exercisable at any time during a period of four years commencing July 1999.
The exercise price of the warrants is 130% of the initial public offering
price ($8.45 per share).

   The options issued during the Initial Public Offering consisted of 125,000
options, which are exercisable at any time commencing July 1999. The exercise
price of the options is $8.00 per share.

   The above warrants and options were included in the calculation of diluted
earnings per share.

                                      49
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              Monetary amounts in columns expressed in thousands
                        (except per share information)


15. Share repurchase program

   On November 27, 2000, the Company's Board of Directors authorized a share
repurchase program to buy up to 200,000 shares in the open market The Company
repurchased 64,100 shares in 2000 and 8,800 shares in 2001 in open market for
an aggregate cost of approximately $150,000 through December 31, 2001. The
Company may purchase the remaining authorized shares over the next twelve
months in the open market. These shares have been treated as treasury stock.

16. Derivative financial instruments

   Effective January 1, 2001, the Company adopted SFAS 133, which establishes
accounting and reporting standards for derivative instruments. All
derivatives, whether designated as hedging relationships or not, are required
to be recorded on the balance sheet at fair value. The Company uses
derivatives to moderate the financial market risks of its business operations.
Derivative products such as forward contracts are used to hedge the foreign
currency market exposures underlying certain liabilities with financial
institutions. The Company's accounting policies for these instruments are
based on its designation of these instruments as hedging transactions. An
instrument is designated as a hedge based in part on its effectiveness in risk
reduction and one-to-one matching of derivatives with the related balance
sheet risk.

   The Company has designated forward contracts as fair value hedges (i.e.,
hedging the exposure to changes in the fair value of the foreign denominated
bank loans), the gain or loss on the derivative instrument as well as the
offsetting gain or loss on the hedged item attributable to the hedged risk are
recognized in earnings in the current period.

   The adoption of SFAS 133 on January 1, 2001, resulted in no cumulative
adjustment to the financial statements.

   For currency forward contracts, effectiveness is measured by using the
forward-to-forward rate compared to the underlying economic exposure. The
Company's hedging policy was considered highly effective during the nine month
period ended September 30, 2001. The ineffective portion for the nine-month
period ended of $294,000 (gain) was recognized in non-operating income. During
the fourth quarter, the Company's hedging policy was not considered highly
effective. The Company recognized a $357,000 loss in non-operating income in
regards to their forward contracts during the fourth quarter.

   The fair value amount of open forward contracts as at December 31, 2000 was
nil and as at December 31, 2001 were $7,677,000 and $1,493,000 ($ amount
equivalent to EURO contract), respectively.

17. Subsequent events

   During February 2002, the Company signed two letters of intent regarding
the purchases of Damianex S.A. (Polish spirit distributor) and AGIS S.A.
(Polish spirit distributor).

   Agis S.A. sales for 2001 were approximately $76 million (un-audited). The
acquisition of Agis S.A. is scheduled for close by April 30, 2002.

   Damianex S.A. sales for 2001 were approximately $78 million (un-audited).
The acquisition of Damianex S.A. is scheduled for close by March 31, 2002.

   The acquisitions will be financed by a combination of cash obtained from
financial institutions and shares.

                                      50
<PAGE>

                   CENTRAL EUROPEAN DISTRIBUTION CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               Monetary amounts in columns expressed in thousands
                         (except per share information)

18. Quarterly financial information (Un-audited)

<TABLE>
<CAPTION>
                          First Quarter  Second Quarter   Third Quarter  Fourth Quarter
                         --------------- --------------- --------------- ---------------
                          2000    2001    2000    2001    2000    2001    2000    2001
                         ------- ------- ------- ------- ------- ------- ------- -------
                           (A)                     (B)

<S>                      <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Net Sales............... $18,720 $33,602 $31,323 $45,530 $32,103 $42,073 $49,087 $57,031
Gross Profit............   2,800   4,551   4,097   5,868   4,197   5,452   6,452   7,743
Operating Income........     247     584     850   1,330     491   1,140   1,260   1,801
Net Income.............. $    23 $   379 $    87 $   471 $   119 $   447 $   756 $ 1,229
Net Income per Common
 Share--Basic........... $  0.01 $  0.09 $  0.02 $  0.11 $  0.03 $  0.10 $  0.17 $  0.28
Net Income per Common
 Share--Diluted......... $  0.01 $  0.09 $  0.02 $  0.11 $ .0.03 $  0.10 $  0.17 $  0.26
</TABLE>
--------
(A) Purchase of PHA
(B) Purchase of ASTOR

                                       51
<PAGE>

                                   PART III

Item 10. Directors And Executive Officers Of The Registrant

   The information with respect to directors and executive officers of the
Company is incorporated herein by reference to the proxy statement for the
annual meeting of stockholders to be held on April 29, 2002.

Item 11. Executive Compensation

   The information with respect to executive compensation and transactions is
incorporated here by reference to the proxy statement for the annual meeting
of stockholders to be held on April 29, 2002.

Item 12. Security Ownership Of Certain Beneficial Owners And Management

   The information with respect to security ownership of certain beneficial
owners and management is incorporated herein by reference to the proxy
statement for the annual meeting of stockholders to be held on April 29, 2002.

Item 13. Certain Relationships And Related Transactions

   The information with respect to certain relationships and related
transactions is incorporated herein by reference to the proxy statement for
the annual meeting of stockholders to be held on April 29, 2002.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, And Reports On Form 8K

   (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 Auditors.

      Consolidated Balance Sheets at December 31, 2000 and 2001.

      Consolidated Statements of Income for the years ended December 31,
   1999, 2000 and 2001.

      Consolidated Statements of Changes in Stockholders' Equity for the
   years ended December 31,
   1999, 2000, and 2001.

      Consolidated Statements of Cash Flows for the years ended December 31,
   1999, 2000 and 2001.

      Notes to Consolidated Financial Statements.

   (a)(2) Schedules

     All schedules for which provision is made in the applicable accounting
  regulations of the Securities and Exchange Commission either have been
  included in the Company's consolidated financial statements or the notes
  thereto, are not required under the related instructions or are
  inapplicable, and therefore have been omitted.


                                      52
<PAGE>

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

<TABLE>
<CAPTION>
 Exhibit                                 Exhibit
 Number                                Description
 -------                               -----------
 <C>     <S>
  2.1    Contribution Agreement among Central European Distribution Corporation
         and William V. Carry, William V. Carry Stock Trust, Estate of William
         O. Carry 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 Commission on December 17, 1997 [the "1997
         Registration Statement'] and incorporated herein by reference.)

  3.1    Certificate of Incorporation (Filed as Exhibit 3.1 to the 1997
         Registration Statement and incorporated herein by reference.)

  3.2    Bylaws (Filed as Exhibit 3.2 to the 1997 Registration Statement and
         incorporated herein by reference.)

  4.1    Form of Common Stock Certificate (Filed as Exhibit 4.1 to the 1997
         Registration Statement and incorporated herein by reference.)

  4.2    Form of Warrant Agreement and attached form of Representatives'
         Warrant (Filed as Exhibit 4.2 to Amendment No. 1 on Form S-1 to Form
         SB-2 Registration Statement, File No. 333-42387, with the Commission
         on April 17, 1998 [the "First 1998 Registration Statement"] and
         incorporated herein by reference.)

 10.1    1997 Stock Incentive Plan (Filed as Exhibit 10.1 to the 1997
         Registration Statement and incorporated herein by reference.)

 10.1(a) Amendment to 1997 Stock Incentive Plan (Filed as 10.1(a) to Amendment
         No. 2 to Form S-1 Registration Statement, File No. 333-42387, with the
         Commission on May 19, 1998 [the "Second 1998 Registration Statement"]
         and incorporated herein by reference.)

 10.2    Employment agreement with William V. Carey and CEDC dated as of August
         1, 2001

 10.3    Employment agreement with Neil Crook and the Company (Filed as Exhibit
         10.1 to the Company's quarterly report on Form Q filed on May 15, 2000
         and incorporated herein by reference.)

 10.4    Employment agreement with Neil Crook and Carey Agri International
         Poland Sp. z o.o.

 10.5    Employment agreement with Evangelos Evangelou and CEDC dated September
         16, 2001.

 10.6    Executive Bonus Plan.

 10.7    Distribution contract with Polmos Bialystok. (to be filed by
         amendment)

 10.8    Distribution contract with Polmos Poznan. (to be filed by amendment)

 10.9    Distribution contract with Polmos Zielona Gora.(to be filed by
         amendment)

 10.10   Distribution contract with UDV Poland Sp. z.o.o. dated July 3, 1997
         (Filed as Exhibit 10.6 to the 1997 Registration Statement and
         incorporated herein by reference.)

 10.11   Distribution contract with Guiness/UDV. (to be filed by amendment)

 10.12   Distribution Agreement with Unicom Bols Group dated April 1, 1998.
         (Filed as Exhibit 10.13 to the Company's annual report on form 10-K
         for year ended December 31, 2000, and incorporated herein by
         reference.)

 10.15   Lease Agreement for warehouse at Bokserska Street 66a, Warsaw, Poland
         (Filed as Exhibit 10.14 in the Company annual report on 10-K for the
         year ended December 31, 2000 and incorporated herein by reference.)
</TABLE>


                                      53
<PAGE>

<TABLE>
<CAPTION>
 Exhibit                              Exhibit
 Number                             Description
 -------                            -----------
 <C>     <S>
 11      Statement re compensation of per share earnings, refer to Note 9
         (Notes to the Consolidated Financials)

 21      Subsidiaries of the Company

 99      Consent of Ernst & Young
</TABLE>


   (b) Reports on form 8-K in the last quarter of 2001

     No report on Form 8-K were filed by the Company in the last quarter of
  2001

   (c) Exhibits

     The response to this portion of Item 14 is submitted in the response to
  Item 14 (a) (3).

   (d) Financial Statement Schedules

     None.

                                       54
<PAGE>

                                  SIGNATURES

   Pursuant to the requirements of the 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.

<TABLE>
<S>                                              <C>
                                                 Central European Distribution Corporation


                                                          /s/ William V. Carey
                                                 By: _______________________________________
                                                              William V. Carey
                                                  Chairman, President, and Chief Executive
                                                                   Officer
</TABLE>

                                          Date: March 13, 2002

   Pursuant to the requirements of the Securities Exchange Act of 1933, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated below.

<TABLE>
<CAPTION>
             Signature                              Title                      Date
             ---------                              -----                      ----

<S>                                  <C>                                  <C>
      /s/ William V. Carey           Chairman, President and Chief        March 13, 2002
____________________________________  Executive
          William V. Carey            Officer (Principal Executive
                                      Officer)

      /s/ Jeffrey Peterson           Vice Chairman                        March 13, 2002
____________________________________
          Jeffrey Peterson

         /s/ Neil Crook              Vice President and Chief Financial   March 13, 2002
____________________________________  Officer
             Neil Crook               (Principal financial and accounting
                                      officer)

     /s/ James T. Grossmann          Director                             March 13, 2002
____________________________________
         James T. Grossmann

         /s/ Tony Housh              Director                             March 13, 2002
____________________________________
             Tony Housh

      /s/ Jan W. Laskowski           Director                             March 13, 2002
____________________________________
          Jan W. Laskowski

     /s/ Joe M. Richardson           Director                             March 13, 2002
____________________________________
         Joe M. Richardson

</TABLE>

                                      55