Use these links to rapidly review the documentTable of Contents Index to Financial Statements

---

---

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

---

Form 20-F

|o  | Registration Statement pursuant to Section 12 (b) or (g) of The Securities Exchange Act of 1934                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------
|or
|ý  | Annual report pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934 for the fiscal year ended December 31, 2002
|or
|o  | Transition report pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934                                        

Commission file number: 333-14278

---

WIMM-BILL-DANN FOODS OJSC(Exact name of Registrant as specified in its charter)

RUSSIAN FEDERATION(Jurisdiction of incorporation or organization)

16 Yauzsky Boulevard, Moscow 109028 Russian Federation(Address of Principal Executive Offices)

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

|Title of Each Class                                                                                              |  | Name of Each Exchange on Which Registered
|---------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|AMERICAN DEPOSITARY SHARES,
EACH REPRESENTING ONE ORDINARY
SHARE, PAR VALUE 20 RUSSIAN RUBLES PER
ORDINARY SHARE |  | NEW YORK STOCK EXCHANGE                  

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

NONE(Title of Class)

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:

NONE(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

44,000,000 ordinary shares, par value 20 Russian rubles each, as of December 31, 2002.

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: ý |  | No: o
|------ |  | -----

Indicate by check mark which financial statement item the Registrant has elected to follow:

|Item 17 o |  | Item 18 ý
|--------- |  | ---------

---

---

---



Table of Contents



|Item 1  |  | Identity of Directors, Senior Management and Advisors   |  | 1  
|------- |  | ------------------------------------------------------- |  | ---
|Item 2  |  | Offer Statistics and Expected Timetable                 |  | 1  
|Item 3  |  | Key Information                                         |  | 1  
|A.      |  | Selected Financial Data                                 |  | 1  
|B.      |  | Capitalization and Indebtedness                         |  | 3  
|C.      |  | Reasons for the Offer and Use of Proceeds               |  | 3  
|D.      |  | Risk Factors                                            |  | 3  
|Item 4  |  | Information on Our Company                              |  | 30 
|A.      |  | History and Development                                 |  | 30 
|B.      |  | Business Overview                                       |  | 32 
|C.      |  | Organizational Structure                                |  | 58 
|D.      |  | Property, Plants and Equipment                          |  | 59 
|Item 5  |  | Operating and Financial Review and Prospects            |  | 61 
|A.      |  | Operating Results                                       |  | 61 
|B.      |  | Liquidity and Capital Resources                         |  | 76 
|C.      |  | Research and Development, Patents and Licenses, Etc.    |  | 88 
|D.      |  | Trend Information                                       |  | 88 
|Item 6  |  | Directors, Senior Management and Employees              |  | 90 
|A.      |  | Directors and Senior Management                         |  | 90 
|B.      |  | Compensation of Directors and Senior Management         |  | 93 
|C.      |  | Board Practices                                         |  | 93 
|D.      |  | Employees                                               |  | 96 
|E.      |  | Share Ownership                                         |  | 96 
|Item 7  |  | Major Shareholders and Related Party Transactions       |  | 97 
|A.      |  | Major Shareholders                                      |  | 97 
|B.      |  | Related Party Transactions                              |  | 98 
|C.      |  | Interests of Experts and Counsel                        |  | 100
|Item 8  |  | Financial Information                                   |  | 100
|A.      |  | Consolidated Statements and Other Financial Information |  | 100
|B.      |  | Significant Changes                                     |  | 100
|Item 9  |  | The Offer and Listing                                   |  | 102
|Item 10 |  | Additional Information                                  |  | 102
|A.      |  | Share Capital                                           |  | 102
|B.      |  | Charter and Certain Requirements of Russian Legislation |  | 102
|C.      |  | Material Contracts                                      |  | 112
|D.      |  | Exchange Controls                                       |  | 115
|E.      |  | Taxation                                                |  | 116
|F.      |  | Dividends and Paying Agents                             |  | 121
|        |  |                                                         |  |    

i

---

|G.      |  | Statement by Experts                                                         |  | 121
|------- |  | ---------------------------------------------------------------------------- |  | ---
|H.      |  | Documents on Display                                                         |  | 121
|I.      |  | Subsidiary Information                                                       |  | 121
|Item 11 |  | Quantitative and Qualitative Disclosures about Market Risk                   |  | 121
|Item 12 |  | Description of Securities Other than Equity Securities                       |  | 127
|Item 13 |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 128
|Item 14 |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 128
|Item 15 |  | Controls and Procedures                                                      |  | 128
|Item 16 |  | Not applicable                                                               |  | 128
|Item 17 |  | Financial Statements                                                         |  | 129
|Item 18 |  | Financial Statements                                                         |  | 129
|Item 19 |  | Exhibits                                                                     |  | 130

ii

---



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Matters discussed in this document may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements in order to encourage companies to provide prospective information about their businesses. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

We
desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection with this safe
harbor legislation. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future
events and financial performance. The words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project" and similar expressions identify forward-looking statements. Forward-looking
statements appear in a number of places including, without limitation, "Item 3D: Key InformationRisk Factors," "Item 4: Information on our Company" and "Item 5: Operating and Financial
Review and Prospects," and include statements regarding:



The
forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's
examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because
these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will
achieve or accomplish these expectations, beliefs or projections. In addition to these important factors and matters discussed elsewhere herein and in the documents incorporated by reference herein,
important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements including the achievement of the anticipated levels of
profitability, growth, cost and synergy of our recent acquisitions, the timely development and acceptance of new products, the impact of competitive pricing, the ability to obtain necessary regulatory
approvals, the impact of general business and global economic conditions and other important factors described from time to time in the reports filed by us with the Securities and Exchange Commission.

Except
to the extent required by law, neither we, nor any of our respective agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any
of the forward-looking statements contained or incorporated by reference in this document.

CURRENCIES AND EXCHANGE RATES

In this annual report, references to "U.S. dollars" or "$" are to the currency of the United States, and references to "rubles" are to the currency of the Russian
Federation.

iii

---



PART I

Item 1    Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2    Offer Statistics and Expected Timetable

Not applicable.

Item 3    Key Information



The selected consolidated and combined financial data set forth below at December 31, 2002, 2001, 2000 and 1999 and for the years then ended have been
derived from our audited financial statements prepared in accordance with U.S. GAAP. The selected financial data set forth below at and for the year ended December 31, 1998 have been derived
from our unaudited financial statements prepared in accordance with U.S. GAAP. The selected consolidated and combined financial data should be read in conjunction with our Consolidated and Combined
Financial Statements as of December 31, 2002 and
2001 and for the years ended December 31, 2002, 2001 and 2000 and "Item 5. Operating and Financial Review and Prospects" included elsewhere herein.

|                                                               |                                            | For the years ended December 31, |     
|-------------------------------------------------------------- | ------------------------------------------ | -------------------------------- | ----
|
|
|Statement of Operations Data:                                  |                                            |                                  |     
|Sales                                                          |                                            | 824,734                          |     
|Cost of sales                                                  |                                            | (579,707                         | )   
|                                                               |                                            |                                  |     
|Gross profit                                                   |                                            | 245,027                          |     
|Selling and distribution expenses                              |                                            | (109,527                         | )   
|General and administrative expenses                            |                                            | (62,955                          | )   
|Other operating expenses                                       |                                            | (6,497                           | )   
|                                                               |                                            |                                  |     
|Operating income                                               |                                            | 66,048                           |     
|Financial income and expenses, net                             |                                            | (14,131                          | )   
|                                                               |                                            |                                  |     
|Income before provision for income taxes and minority interest |                                            | 51,917                           |     
|Provision for income taxes(1)                                  |                                            | (14,249                          | )   
|Minority interest                                              |                                            | (1,922                           | )   
|                                                               |                                            |                                  |     
|Income from continuing operations                              |                                            | 35,746                           |     
|Income (loss) from discontinued operations(2)                  |                                            |                                 |     
|                                                               |                                            |                                  |     
|Net income                                                     |                                            | 35,746                           |     
|                                                               |                                            |                                  |     
|Earnings per sharebasic and diluted:                          |                                            |                                  |     
|                                                               | Income from continuing operations          |                                  | 0.83
|                                                               | Income (loss) from discontinued operations |                                  | 0.00
|                                                               | Net income                                 |                                  | 0.83
|Dividends per share(3)                                         |                                            |                                 |     
|                                                               |                                            |                                  |     

1

---

|Weighted average common shares outstanding(4)   |  | 43,063,014 |   | 34,888,000 |   | 34,552,000 |   | 34,552,000 |   | 34,552,000    |    
|----------------------------------------------- |  | ---------- | - | ---------- | - | ---------- | - | ---------- | - | ------------- | ---
|Other Data from Continuing Operations:          |  |            |   |            |   |            |   |            |   |               |    
|Adjusted EBITDA (unaudited)(5)                  |  | 83,346     |   | 73,721     |   | 46,830     |   | 19,340     |   | 29,537        |    
|Adjusted EBITDA margin (unaudited)(6)           |  | 10.1       | % | 10.9       | % | 10.1       | % | 5.4        | % | 6.7           | %  
|Capital expenditures                            |  | 136,100    |   | 57,653     |   | 25,423     |   | 32,650     |   | 31,499        |    
|Cash (used in) provided by operating activities |  | (6,863     | ) | 12,591     |   | 16,771     |   | 6,696      |   | Not available | (7)
|Cash used in investing activities               |  | 122,677    |   | 55,486     |   | 27,772     |   | 42,454     |   | Not available | (7)
|Cash provided by financing activities           |  | 152,600    |   | 44,613     |   | 21,581     |   | 31,897     |   | Not available | (7)

|                                            |  | At December 31,
|------------------------------------------- |  | ---------------
|
|
|Balance Sheet Data:                         |  |                
|Total assets of continuing operations       |  | 589,093        
|Total assets                                |  | 589,093        
|Total net assets of continuing operations   |  | 282,884        
|Total net assets of discontinued operations |  |               
|Total debt from continuing operations(8)    |  | 186,039        
|Total liabilities of continuing operations  |  | 284,660        

---

Notes:

2

---



2002

2001

2000

1999

1998(Amounts in thousands of U.S. dollars)

(unaudited)Income before provision for income taxes and minority interest

51,917

49,873

32,226

8,971

23,816Interest expense

12,818

11,126

5,638

2,563

616Depreciation and amortization

18,611

12,722

8,966

7,806

5,105Adjusted EBITDA

83,346

73,721

46,830

19,340

29,537




Not applicable.



Not applicable.



An investment in our ADSs and/or loan participation notes, or "notes", involves a high degree of risk. You should carefully consider the
following information about these risks, together with the information contained in this document, before you decide to buy our ADSs and/or notes. If any of the following risks actually occurs, our
business, financial condition or results of operations could be adversely affected. In that case, the trading price of our ADSs and/or notes could decline and you could lose all or part of your
investment. For a description of the notes, see "Item 8. Financial InformationB. Significant Charges."

We have described the risks and uncertainties that our management believes are material, but these risks and uncertainties may not be the only ones we face.
Additional risks and uncertainties, including those we currently do not know or deem immaterial, may also result in deceased revenues, increased expenses or other events that could result in a decline
in the price of our ADSs and/or notes.

Risks Relating to Business Operations in Emerging Markets

Emerging markets such as the Russian Federation are subject to greater risks than more developed markets, including significant legal, economic and
political risks.

Investors in emerging markets such as the Russian Federation should be aware that these markets are subject to greater risk than more developed markets, including
in some cases significant legal, economic and political risks. Investors should also note that emerging economies such as the economy of the Russian Federation are subject to rapid change and that the
information set out herein may

3

---

become
outdated relatively quickly. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their
investment is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved and investors are urged to
consult their own legal and financial advisors before making an investment in our ADSs and/or notes.

Financial turmoil in emerging markets could cause the price of our securities to suffer.

Financial turmoil in Russia and other emerging markets in 1997 and 1998 adversely affected market prices in the world's securities markets for companies that
operate in those developing economies. Financial turmoil in these countries could cause decreases in prices for securities of or related to our company, even if the Russian economy remains relatively
stable.

Risks Relating to Our Business and Industry

Economic downturns could hurt our turnover and materially and adversely affect our strategy to increase our sales of premium brands.

Demand for dairy and juice products, as well as bottled water, depends primarily on demographic factors and consumer preferences as well as factors relating to
discretionary consumer spending, including the general condition of the economy and general levels of consumer confidence. The willingness of consumers to purchase branded food and beverage products
depends in part on local economic conditions. In periods of economic uncertainty, consumers tend to purchase more economy brands and, to the extent that our business strategy depends on the expansion
of the sales of premium brands, our results of operations could suffer. Reduced consumption of our products in any of our key markets could reduce our turnover and profitability.

The failure of our geographic expansion strategy could hamper our continued growth and profitability.

Our expansion strategy depends, in part, on funding growth in additional markets, on our ability to identify attractive opportunities in markets that will grow
and on our ability to manage the operations of acquired or newly established businesses. Should growth decline in our existing markets, not increase as anticipated in markets in which we have recently
acquired or established businesses, or not increase in markets into which we subsequently expand, our geographic expansion strategy may not be successful and our business and profitability may suffer.
We describe our geographic expansion strategy under "Item 4. Information on Our CompanyB. Business OverviewBusiness Strategy."

Our growth strategy relies on acquisitions and establishing new businesses, and our future growth, results of operations and market share would be
adversely affected if we fail to identify suitable targets, outbid competing bidders or finance acquisitions on acceptable terms.

Our strategy depends on us being a large manufacturer in the dairy and juice sectors so that we can benefit from economies of scale, better satisfy customer needs
and compete effectively against other producers. Our growth will suffer if we are unable to implement our acquisition strategy, whether because we fail to identify suitable targets, outbid competing
bidders or finance acquisitions on acceptable terms or for any other reason. Furthermore, any acquisitions or similar arrangements may harm our business if we are unsuccessful in our integration
process or fail to achieve the synergies and savings we expect. We describe our acquisition strategy under "Item 4. Information on Our CompanyB. Business
OverviewBusiness Strategy."

4

---

Increased competition and consumer preference for low-price, lower-quality juice products primarily in the regions outside of Moscow and
St. Petersburg have resulted in declining profit margins in our juice segment, which have adversely affected and may continue to adversely affect our results of operations.

Although juice consumption in Russia is increasing, our profit margins on our juice products decreased in 2002 due to vigorous market competition from domestic
and foreign producers and to consumer preference for low-price, lower-quality juice products primarily in the regions outside of Moscow and St. Petersburg where per capita household
incomes are generally lower. These factors put downward pressure on juice prices in all price categories in 2002. At the same time, prices for juice concentrate increased. A continuation of these
trends may cause a further decline in our juice prices and profit margins and, consequently, have a further negative effect on our results of operations.

We may not be able to integrate our recently acquired companies into our operations.

We have recently acquired a number of new companies. There can be no assurance that we will be able to integrate these businesses successfully into our existing
operations. Our failure to integrate these companies successfully could have a material adverse effect on our results of operations. See "Item 4. Information on Our
CompanyA. History and Development."

Our inability to develop new brands, products and product categories could significantly inhibit our future growth and profitability.

Our business expansion strategy contemplates our entry into new product categories, development of new products and marketing new brands in existing product
lines. This strategy is designed to increase our market share and revenues by increasing consumer demand in our existing markets and entering into new market segments. The success of this strategy
depends, in part, on our ability to anticipate the tastes and dietary habits of consumers and to offer products that appeal to their preferences. Our failure to anticipate, identify or react to
changes in consumer preferences and consequent failure successfully to develop new brands, products and product categories could negatively affect our expansion strategy and have a significant adverse
effect on our revenues.

If we do not continue to be an efficient producer in a highly competitive environment, particularly in relation to purchases of our packaging and raw
materials, and our advertising and marketing expenditures, our results of operations will suffer.

Our success depends in part on our continued ability to be an efficient producer in a highly competitive industry. If we cannot continue to control costs through
productivity gains or by eliminating redundant costs resulting from acquisitions, our results of operations will suffer. In particular, price increases and shortages of packaging and raw materials
could adversely affect our results of operations. For example, our results of operations may be affected by the availability and pricing of packaging materials, principally cardboard and plastic
containers, and raw materials, principally raw milk and juice concentrate. We are substantially dependent upon a single supplier of packaging materials, Tetra Pak, which may make us more vulnerable to
changes in global supply and demand and their effect on price and availability of these materials. In addition, we are currently renegotiating certain pricing terms in our framework agreement with
Tetra Pak pursuant to which we purchase packaging materials. Failure to conclude an agreement on commercially reasonable terms would have a material adverse effect on our results of operations.
Additionally, weather conditions and other factors beyond our control significantly influence the price and availability of our raw materials. A number of our raw materials, such as juice concentrate
and sugar, are international commodities and are subject to international price fluctuations.

Our
success also depends on our continued ability to be an effective advertiser in a market where media inflation on leading national television channels exceeded 80% in 2002. A
substantial increase in

5

---

the
prices of any of the foregoing, which we may not be able to pass on to customers through price increases, or a protracted interruption in supply with respect to packaging or raw materials, could
have a material adverse effect on our financial condition and results of operations. See "Item 4. Information on Our CompanyB. Business Overview."

We may be unable to continue to add products and greater production capacity in faster growing and more profitable categories.

The food industry's growth potential is constrained by population growth, which has been falling in Russia. Our success depends in part on our ability to expand
our business faster than populations are growing in the markets that we serve, or notwithstanding declines in the populations in those markets. One way to achieve that growth is to enhance our
portfolio by adding products and greater production capacity in faster growing and more profitable categories. If we do not succeed in making these enhancements, our results of operations may suffer.

Our inability to address the seasonal difference between the demand for dairy products and the supply of raw milk could result in a significant increase
in our production costs, reducing our turnover and profitability.

The demand for our dairy products is significantly higher during the winter months, when Russian raw milk production is at its lowest. Conversely, during the
summer months we generally experience depressed demand for dairy products in many markets, while raw milk production is at its peak. If we are unable to mitigate this inverse relationship
successfully, either through the purchase of raw milk during the winter at commercially competitive prices or through the use of dry milk, our production costs will increase significantly in the
winter, reducing our profitability.

In the event that the Moscow City Government were to reduce significantly the prices or the amount of products it purchases from our baby food business,
then our revenues from this business could be substantially reduced.

In 2002, the Moscow City Government purchased approximately 61% of the baby food products we produced in Moscow at a discount of approximately 20.1% from the
market price of these products, and the proceeds of the baby food products sold to the Moscow City Government made up approximately 51% of the total proceeds of the Moscow Baby Food Plant. We supply
these products to the Moscow City Government pursuant to a tender held on a yearly basis. In the event that we were to lose a tender, or the Moscow City Government was to reduce significantly the
prices or the amount of products it purchases from our baby food business, and we were unable to find alternative purchasers, then our revenues from this business could be substantially reduced. We
discuss the sale and distribution of products produced at the Moscow Baby Food Plant in "Item 4. Information on Our CompanyB. Business OverviewCurrent
OperationsDistribution."

Our substantial reliance on independent retailers and independent distributors for the distribution of our products could lower our turnover and reduce
our competitiveness.

We sell our products either directly to retailers, including supermarkets, grocery shops and restaurants, or to independent distributors for resale to retail
outlets. We expect sales to retailers and independent distributors to continue to represent a significant portion of our revenues. Our operations and distribution costs could be affected by the
increasing consolidation of these entities, particularly as these customers become more sophisticated and attempt to force lower pricing and increased promotional programs. For example, in the spring
of 2001, several Russian supermarket chains formed a loose alliance which publicly announced its intention not to purchase our products. Although these supermarket chains now purchase our products,
there can be no assurance that they will continue to do so or that they or other supermarket chains will not attempt a similar consolidation of market power in the future. Certain retailers also seek
price discounts from manufacturers. Additionally, a number of

6

---

large
Western retailers, such as the Turkish retailer Ramenka, the German retailer Metro and the French retailer Auchan, have already opened stores in the Moscow region, and we expect that the
presence of these retailers will increase price competition and competition for shelf space.

We
also compete with other brands for shelf space in retail stores and marketing focus by our independent distributors and retailers, and our independent distributors and retailers offer
other products, sometimes including their own brands, that compete directly with our products. If independent distributors and retailers give higher priority to other brands, purchase less of, or even
refuse to buy, our products, seek substantial discounts, or devote inadequate promotional support to our brands, it could materially and adversely affect our turnover and reduce our competitiveness
and profitability.

Independent distributors may export our products to countries where such products do not meet the requirements of applicable legislation. The consequent
recalls of our products and the associated negative publicity may adversely affect our reputation in the Russian Federation, the Commonwealth of Independent States, or "CIS", and abroad, and adversely
affect our results of operations.

In exporting our products, we attempt to meet the standards and requirements of applicable legislation governing the import of food products into the importing
country. Independent distributors have, in some cases, attempted to export our products to countries where such products did not meet the requirements of applicable legislation.

For
instance, one of our independent dairy distributors exported our Darling Mila milk to the United States in January 2003. This milk was subsequently recalled from stores in
February 2003, when food inspectors discovered that the milk contained sulfonamide. Whereas Russian legislation does not explicitly prohibit sulfonamide in milk, United States legislation does
prohibit it. The recall, which was
publicized in the Russian press, and any similar events that may occur in the future could negatively affect our reputation in the Russian Federation, the CIS and abroad, and adversely affect our
results of operations.

We do not carry the types of insurance coverage customary in other countries for a business of our size and nature, and a significant occurrence could
cause significant harm to our operations and profitability.

In June 2003, we acquired "all risks" insurance coverage of a type customary in Russia for our eleven major production facilities covering the most valuable
equipment at these facilities. At present, however, we do not carry insurance for business interruption or for third party liability in respect of property or environmental damage arising from
accidents. In the event that a major event were to affect one of our facilities, we could experience substantial property loss and significant disruptions in our production capacity which, in turn,
could cause significant harm to our operations and profitability. For example, if substantial production capacity were lost at Lianozovo Dairy Plant, which is our primary production facility, we would
not be able to replace a substantial portion of this capacity with capacity from our other plants, potentially resulting in the interruption of the production of a number of our products. We do not
maintain separate funds or otherwise set aside reserves for these types of events.

Our management information system may be inadequate to support our future growth.

Our management information system is significantly less developed in certain respects than those of food producers in more developed markets and may not provide
our management with as much or as accurate information as those in more developed markets. In addition, we may encounter difficulties in the ongoing process of implementing and enhancing our
management information system. Our inability to maintain an adequate management information system may adversely affect our business.

7

---

We may not be able to protect our intellectual property rights adequately, resulting in material harm to our financial results and ability to develop
our business.

Given the importance of brand recognition to our business, we have invested considerable effort in protecting our portfolio of intellectual property rights,
including trademark registration. However, we cannot be certain that the steps we have taken will be sufficient or that third parties will not infringe or misappropriate our proprietary rights. For
example, in 2002 and 2003 there were two instances of infringement on our "Ginger Up" trademark. The infringement ceased in the first instance after we sent a warning letter identifying the violation,
and we are currently in the process of addressing the second instance of infringement. Moreover, Russia and the other countries of the CIS in which we
operate generally offer less intellectual property protection than in Western Europe or North America. If we are unable to protect our proprietary rights against infringement or misappropriation, it
could materially harm our future financial results and our ability to develop our business. We describe our patents and trademarks under "Item 4. Information on Our
CompanyB. Business OverviewCurrent OperationsTrademarks and Patents."

Failure of several of our brand names and images, for which trademarks are currently being sought, to be awarded trademark protection could materially
affect our marketing plans, resulting in increased advertising expenses and adversely affecting our financial results.

As of January 30, 2003, we had 195 pending trademark applications in Russia and 78 pending trademark applications abroad. The trademark application for one
of our products, Wonder-Berry, was rejected in Finland and Bulgaria, and we are in the process of contesting the rejection in Bulgaria. If our pending applications are not granted trademark status, we
will have limited ability to defend these brand names or images from use by others, significantly reducing the value of any advertising using these brand names or images. This will negatively affect
our marketing plans for the products that utilize these brand names or images, and may require us to develop a different marketing approach for these products, resulting in increased advertising
expenses and adversely affecting our financial results.

Failure to comply with existing governmental regulations, or increased governmental regulation of our operations, could result in substantial additional
compliance costs or administrative penalties which would adversely affect our financial results and could reduce our ability to maintain or increase production.

Our operations and properties are subject to regulation by various government entities and agencies. As a producer of food products, our operations are subject to
quality, health and safety, production, packaging, quality, labeling and distribution standards. The operations of our production and distribution facilities are also subject to various environmental
laws and workplace regulations. We believe that our current legal and environmental compliance programs adequately address these concerns and that we are in substantial compliance with applicable laws
and regulations. However, compliance with, or any violation of, current and future laws or regulations could require material expenditures by us or otherwise adversely effect our business or financial
results. See "Item 4. Information on Our CompanyB. Business OverviewRegulation" below.

Additionally,
under relevant Russian legislation, Russian regulatory agencies can impose various sanctions for violations of environmental standards. These sanctions may include civil
and administrative penalties applicable to a company and criminal and administrative penalties applicable to its officers. Also, in the course, or as a result, of an environmental investigation,
regulatory authorities can issue an order halting part or all of the production at a plant which has violated environmental standards. We have been, at various times, subject to administrative
sanctions for failure to comply with environmental regulations relating to effluent discharge and to minor administrative sanctions for violations relating to waste disposal. In the event that
production at one of our facilities was partially or wholly prevented due to this type of sanction, our production capability would suffer significantly and our operating results would suffer.

8

---

If we are unable to obtain adequate funding, we may have to limit our operations substantially, with a resulting negative impact on our operating results and loss of market
share.

We
plan to make significant capital expenditures, particularly in connection with our acquisition of new companies, expansion of existing operations, and upgrades of existing facilities.
For the fulfillment of our capital spending plans, excluding expenditures for acquisitions, we spent approximately $57.7 million in 2001 and $136.1 million in 2002, and have budgeted
$154.5 million for 2003. We spent approximately $15.0 million in 2001 and $39.6 million in 2002 on capital expenditures for acquisitions. We have also budgeted
$54.9 million for acquisitions in 2003. However, future financing may not be sufficient to meet our planned needs in the event of the following potential developments:



To
meet our financing requirements, we may need to attract additional equity or debt financing. Debt financing in Russia, particularly long-term debt financing, on
commercially acceptable terms may be difficult to obtain, and we may not be able to borrow in the international capital markets on acceptable terms in the future. If we cannot obtain adequate funds to
satisfy our capital requirements, we may need to limit our operations significantly, which could negatively affect our market share and operating results.

Rapid growth and expansion may cause us difficulty in obtaining adequate managerial and operational resources, restricting our ability to expand our operations
successfully.

We
have experienced rapid growth and development in a relatively short period of time. Management of such growth has required significant managerial and operational resources and is
likely to continue to do so. Our future operating results depend in significant part upon the continued contributions of a small number of our key senior management and technical personnel. Management
of growth will require, among other things:



Our
success will depend, in part, on our ability to continue to attract, retain and motivate qualified personnel. Competition in Russia for personnel with relevant expertise is intense,
due to the small number of qualified individuals, and we attempt to structure our compensation packages in a manner consistent with evolving standards of the Russian labor market. We are not insured
against damage that may be incurred in case of the loss or dismissal of our key personnel. Our failure successfully to manage our growth or personnel needs could have a material adverse effect on our
business, operating performance and financial condition.

Since
our initial public offering, or IPO, in February 2002, our chief operating officer has departed and our chief financial officer has been replaced. Departures of senior
management may be disruptive to our business and our success will depend, in part, on continuity in our senior management team.

We are controlled by a group of shareholders whose interests could conflict with those of the holders of our ADSs and/or notes.

As
of June 1, 2003, approximately 66.38% of our outstanding common stock is owned by the group of shareholders that owned us prior to our IPO. This group has acted in concert
since our establishment and, since 1997, pursuant to a Partnership and Cooperation Agreement, amended and restated January 16, 2002, which requires the parties to vote the same way. This group
continues and

9

---

will
continue to be bound by this agreement to vote as a block for at least two years from January 16, 2002. This agreement gives them control over us and the ability to elect a majority of the
directors, appoint management and approve certain actions requiring the approval of a majority of our shareholders. The interests of these shareholders could conflict with those of the holders of our
ADSs and/or notes and materially adversely affect your investment.

In the event that our equipment rental arrangements were deemed to be subject to licensing requirements, our subsidiaries engaging in these arrangements could be subject to
liquidation or face the invalidation of the rental contracts.

A
number of our subsidiaries purchase equipment which they then, in turn, lease to raw material producers. In addition, many of our dairy plants that also produce juice products,
including the Lianozovo Dairy Plant, lease equipment to juice producers. Prior to February 11, 2002, when the new Federal Law on Licensing of Certain Types of Activities became effective,
Russian legislation required a license for financial leasing activities, but it is unclear whether this requirement extended to our leasing activities. Although leasing activities are no longer
subject to licensing, in the event that the relevant governmental authorities were to successfully claim that a license was required for our past leasing activities, we would be subject to significant
negative consequences such as the potential liquidation of the leasing entity and invalidation of the relevant contracts.

If any of our subsidiaries is forced into liquidation due to negative net equity, our results of operations could suffer.

In
accordance with Russian legislation, in the event that a company's net assets, as stated in the annual balance sheet prepared under Russian accounting standards, fall below the
minimum charter capital required by law, the company must voluntarily liquidate. Should the company fail to act, its creditors may accelerate their claims or demand early performance of obligations
and demand payment of damages, and governmental authorities may seek the involuntary liquidation of the company.

Six
of our trade company subsidiaries and one of our production subsidiaries, the Gulkevichsky Butter Factory, have net assets below the minimum charter capital required by law. These
subsidiaries, individually and taken together, are not material to our operations. We have not taken any steps to remedy this situation because we believe that, as long as these subsidiaries continue
to fulfill their obligations, the risk of their liquidation is minimal. While we understand that a Moscow court recently liquidated a company pursuant to this legislation, we are not aware of any
situation where a Russian
company has been liquidated pursuant to this legislation if it has met all of its obligations, as each of these seven subsidiaries has. Therefore, we believe that this risk is remote and have not
included it as a contingency in the notes to our financial statements which appear elsewhere in this document. However, if involuntary liquidation were to occur, we would be forced to reorganize the
operations we currently conduct through these subsidiaries.

In the event that deficiencies or ambiguities in privatization legislation are successfully exploited to attack our ownership in a privatized company and we are unable to
defeat this claim, we risk losing our ownership interest in the company or its assets, which could materially affect our production capability, market share and results of
operations.

Our
business includes a number of privatized companies in Russia and other countries of the former Soviet Union, and our acquisition strategy will likely involve additional privatized
companies. To the extent that privatization legislation has been vague, internally inconsistent and in conflict with other legislation, including conflicts between federal and local privatization
legislation, most, if not all, privatizations are arguably deficient and therefore are vulnerable to attack. For instance, a series of presidential decrees issued in 1991 and 1992 which granted to the
government of Moscow the right to adopt its own privatization procedures were subsequently held invalid by the Constitutional Court of the Russian Federation in 1993, which ruled, in part, that the
presidential decrees addressed issues

10

---

which
were the subject of federal law. While this court ruling, in theory, does not require any implementing actions, the presidential decrees were not officially annulled by another presidential
decree until 2000. In the event that any of our privatized companies are subject to attack as having been improperly privatized and we are unable to defeat this claim, we risk losing our ownership
interest in the company or its assets, which could materially affect our production capability, market share and results of operations. Most important, as the ownership of the majority of our other
subsidiaries is through Lianozovo Dairy Plant, and as Lianozovo Dairy Plant constitutes the majority of our production capacity, its loss would substantially and negatively affect us.

Additionally,
of the 99% of Lianozovo Dairy Plant and 93% of Tsaritsino Dairy Plant which we own, 15% of each were acquired in separate investment tenders held by the Department of State
and Municipal Property of the Moscow Government. Under the legislation governing such tenders, a tender is not valid unless at least two participants submit bids. In the investment tenders for
Lianozovo Dairy Plant and Tsaritsino Dairy Plant, the only two participants were entities which were under common control, an arguable violation of this requirement. In the event that the Russian
government authorities were successfully to maintain that these tenders were not duly held since the participants were under common control, we could lose 15% of our stakes in Lianozovo Dairy Plant
and Tsaritsino Dairy Plant, substantially and negatively affecting our results of operations.

In the event that companies which, as a result of our corporate reorganization for our initial public offering, were transferred by us but continue to be associated in the
public mind with the
"Wimm-Bill-Dann" name give rise to shareholder liability or reputational issues, our results of operations or reputation could suffer.

As
part of our corporate reorganization for our initial public offering, we transferred our interests in a bank, Expobank, and four breweries to certain of our shareholders. These
shareholders, in turn, have disposed of their interests in the bank, but retain their interests in the breweries. In the event that these companies, which are no longer owned by us but may continue to
be associated with the "Wimm-Bill-Dann" name in the public mind, are subject to negative publicity, this could affect our reputation. For example, there have been press reports
about a dispute regarding the exclusion, in the fall of 2000, of minority shareholders from a shareholders' meeting of a beer company previously owned by us and now owned by our current shareholders,
some of whom are also members of our Board of Directors. These press reports repeated allegations made by the excluded minority shareholders as to the illegality of their exclusion, although their
exclusion was upheld in court. Press speculation of a similar nature could raise concerns about how the holders of our ADSs and/or notes and minority shareholders in our company, will be treated,
negatively affecting the price of the ADSs and/or notes. Additionally, we could be held responsible for any shareholder liability which arises in connection with these companies and their operations
during the time which they were owned by our subsidiaries.

Possible implementation of new federal or local government policies, or selective application of existing policies, affecting the food industry could substantially and
negatively affect our turnover and operating margin.

Possible
implementation of new federal or local government policies, or selective application of existing policies, affecting the food industry could have a significant impact on our
business. For example, the federal and local governments have been known to implement trade barriers, subsidies and other policies favoring certain producers. Additionally, customs regulations in
Russia are unclear, subject to frequent change and are applied inconsistently. The imposition of higher customs duties on products we import would increase the costs of our products and reduce our
turnover, while the implementation of price controls on products we produce would reduce our operating margin. For example, federal customs regulations enacted during 2001 subject juice concentrate
imports to the highest level of customs duties allowed for that particular category of imports. In addition, federal customs regulations enacted during 2002 stipulate minimum declaration amounts for
imported goods.

11

---

As
a result of such regulations, we may be forced to declare a higher value for imported goods than the amount actually paid and, consequently, pay a higher tariff on such goods.

Another
example of a government regulation that has affected us is Government Regulation No. 988, which, as of January 1, 2004, requires food producers intending to develop
and offer a new food product to the public to file an application for the product's state registration and incorporation into the State Register of Permitted Food Products. The implementation of this
regulation may cause delays in the introduction of our new products and result in increased production costs.

Increased domestic production by our foreign competitors could reduce our competitive advantages against them, which would adversely affect our market share and results of
operations.

A
number of our foreign competitors, such as Danone, Parmalat, Campina, Ehrmann, Onken, and Pascuale, have begun to invest in domestic production facilities, beginning to reduce the
competitive advantages that we have over foreign competitors without domestic production capability. If this trend continues, we will lose a significant advantage that we currently have, as a domestic
producer, over our foreign competitors, which would adversely affect our market share and results of operation.

Allegations about certain of our shareholders or directors could adversely affect our reputation.

Certain
of our shareholders and directors, including the Chairman of our Board of Directors, are shareholders in, and directors of, a group of related companies sometimes referred to as
"Trinity." The Trinity group engages in automobile distribution, financial services, security services, casinos, construction, advertising and engineering. We purchased Municipal Guard Agency, a
security services company, from the Trinity group in 2001. Prior to and in the beginning of 2002, we obtained security services from Trinity-Negus, and we currently (i) purchase milk from
Poultry Factory Gorki-2 and (ii) receive transportation services from Avto-40, all companies in the Trinity group. See "Item 7. Major Shareholders and Related Party
TransactionsB. Related Party Transactions" for a description of these transactions. The Trinity group has been the subject of speculation in the Russian press, including with respect to
possible links with organized crime. However, no charges have been brought by governmental authorities against any of our shareholders or directors and, to the best of our knowledge, none has been
threatened. In addition, our largest shareholder, who is not a member of our Board of Directors, was convicted of a violent crime in 1980 under the Soviet system and served nine years in a labor camp.
Press speculation about these or other matters relating to our shareholders or directors could adversely affect our reputation and the price of our ADSs and/or notes.

If the Ministry of Antimonopoly Policy and Support of Entrepreneurial Activity were to conclude that we acquired or created a new company in contravention of antimonopoly
legislation, it could impose administrative sanctions and require the unwind of such transactions, adversely affecting our acquisition strategy and our results of operations.

Our
business has grown substantially through the acquisition and founding of companies, many of which required the prior approval or subsequent notification of the Russian Ministry of
Antimonopoly Policy and Support of Entrepreneurial Activity or its predecessor agencies. In part, relevant legislation restricts the acquisition or founding of companies by groups of companies or
individuals acting in concert without this approval or notification. While we believe that we have complied with the applicable legislation for our acquisitions or new companies, this legislation is
sometimes vague and subject to varying interpretations. Additionally, although the common ownership by our shareholders of a number of companies which are now our subsidiaries was generally made known
to the Ministry of Antimonopoly Policy and Support of Entrepreneurial Activity and its predecessors, the existence of the shareholders' agreement among our current shareholders was not disclosed. If
the Ministry of Antimonopoly Policy and Support of Entrepreneurial Activity were to conclude that an acquisition or creation of a new company was done in contravention of applicable legislation, it
could impose

12

---

administrative
sanctions and require the unwind of such transactions, adversely affecting our acquisition strategy and our results of operations.

Further restrictions on our business which is categorized as a monopoly, or the extension of monopoly status to other of our businesses, could result in the regulation of our
prices and restriction of our commercial activities, significantly affecting our results of operations.

Under
Russian legislation, the Russian Ministry of Antimonopoly Policy and Support of Entrepreneurial Activity may categorize a company as a dominant force in a market. Our baby food
business is categorized as a monopoly in Moscow and the Moscow region, placing restrictions on our ability to increase our profit margins for that business. Any ruling that any of our other businesses
is a monopoly could result in the regulation of our prices and restrictions on our commercial activities. The imposition of government-determined prices could, in turn, result in competitive
disadvantages and a significant decline in revenues. Additionally, restrictions on expansion or government-mandated withdrawal from regions or markets would negatively affect our plans for expansion
and could reduce our market share.

In the event that minority shareholders were to contest successfully existing, or were to prevent future, approval of transactions among our subsidiaries which require special
approval in accordance with Russian legislation, this could limit our operational flexibility and adversely affect our results of operations.

We
own less than 100% of a number of our subsidiaries, including our most important subsidiary, Lianozovo Dairy Plant. Under Russian law, certain transactions defined as "interested
party transactions" require approval by disinterested directors or shareholders of the companies involved. "Interested party transactions" include transactions in which a member of the board of
directors, an officer of a company or any person that owns, together with any affiliates of that person, at least 20% of a company's voting shares, or any person that is entitled to give binding
instructions to a company, is interested, if that person, or that person's relatives or affiliates, is



See
"Item 4. Information on Our CompanyB. Business OverviewRegulation" for more details on the transactions that require this approval under Russian law. Our
subsidiaries engage in numerous transactions which require interested party transaction approvals in accordance with Russian law. These transactions have not always been properly approved, and
therefore may be contested by minority shareholders. In the event that minority shareholders were to contest successfully existing interested party transactions among our subsidiaries, or prevent the
approval of these transactions in the future, this could limit our operational flexibility and adversely affect our results of operations.

In
addition, certain transactions between members of a consolidated corporate group may be considered interested party transactions under Russian law even when the companies involved are
wholly-owned by the parent company. While we generally endeavor to obtain all corporate approvals required under Russian law to consummate transactions, we have not always applied special approval
procedures in connection with our consummation of transactions with or between our subsidiaries. In the event that a claim is filed in relation to certain transactions with or between our
subsidiaries, such transactions are found to have been interested party transactions, and we are found to have failed to

13

---

obtain
the appropriate approvals therefor, such transactions may be declared invalid. The unwinding of any transactions concluded with or between our subsidiaries may have a negative impact on our
business and results of operation.

Risks Relating to Our Financial Condition

Inflation could increase our costs and decrease our operating margins.

The Russian economy has been characterized by high rates of inflation, including a rate of 84.4% in 1998, although, according to the Central Bank of Russia, it
subsided to 15.1% during 2002. When the rate of inflation exceeds the rate of devaluation, resulting in real appreciation of the ruble against the U.S. dollar, we can experience inflation-driven
increases in U.S. dollar terms of certain of our costs, such as salaries, which are sensitive to rises in the general price levels in Russia. In this situation, due to competitive pressures, we may
not be able to raise the prices for our products sufficiently to preserve operating margins. Accordingly, high rates of inflation in Russia relative to the rate of devaluation could increase our costs
and decrease our operating margins.

Changes in exchange rates could increase our costs, decrease the value of our ruble-denominated monetary assets, prevent us from repaying our debts, or increase competition
from foreign producers.

Over
the past several years, the ruble has fluctuated dramatically against the U.S. dollar, in the great majority of instances falling in value. The Russian Central Bank has from time to
time imposed various currency-trading restrictions in attempts to support the ruble. The ability of the Russian government and the Russian Central Bank to maintain a stable ruble will depend on many
political and economic factors. These include their ability to finance budget deficits without recourse to monetary emissions, to control inflation and to maintain sufficient foreign currency reserves
to support the ruble.

A
significant portion of our costs and expenditures, including costs of packaging, juice concentrate and certain other raw materials, as well as capital expenditures and borrowings
(including the $150 million loan we received in connection with our May 2003 Eurobond offer) are either denominated in or tightly linked to the U.S. dollar or euro, while substantially
all of our revenues are denominated in rubles. As a result, devaluation of the ruble against the U.S. dollar or the euro can adversely affect us by increasing our U.S. dollar or euro costs in ruble
terms. If we cannot increase our ruble prices in line with ruble devaluation due to competitive pressures, this will lead to a loss of revenue and income in U.S. dollar terms. Additionally, if the
ruble declines and prices cannot keep pace, we could have difficulty covering our dollar- or euro-denominated costs or repaying our U.S. dollar- or euro-denominated
indebtedness.

The
devaluation of the ruble also results in losses in the value of ruble-denominated monetary assets, such as ruble deposits and accounts receivable.

The
decline in the value of the ruble against the U.S. dollar also reduces the U.S. dollar value of tax savings arising from tax incentives for capital investment and the depreciation of
our property, plant and equipment since their basis for tax purposes is denominated in rubles at the time of the investment or acquisition. Increased tax liability would increase our total expenses.

On
the other hand, a strengthening of the ruble results in a relative decrease in the price of imported products, as does a strengthening of the ruble in real terms (even if it declines
in nominal terms). The strengthening of the ruble in nominal or real terms enhances our ability to import raw materials, to cover our U.S. dollar-denominated or U.S. dollar-linked costs and to repay
our U.S. dollar-denominated indebtedness, but also increases the ability of foreign producers who export products to Russia to compete effectively with us in the Russian market. See also "Item 11.
Quantitative and Qualitative Disclosures about Market Risk."

14

---

Our inability to obtain permission from the Central Bank of Russia pursuant to currency control regulations may hinder our ability to enter into certain
hard-currency-denominated transactions.

Certain
payments in foreign currency are subject to prior permission by the Central Bank of Russia, including, with various exceptions, the following:



These
regulations are subject to substantial changes and varying interpretations, complicating both the process of determining whether permission of the Central Bank of Russia is
required and the process of obtaining permission. If we are unable to obtain Central Bank of Russia permissions for hard-currency-denominated transactions requiring such permissions, our
ability to enter into such transactions may be hindered. In addition, in the event that we failed in the past to obtain Central Bank of Russia permissions for hard-currency-denominated
transactions and borrowings requiring such permissions, such failure could result in severe penalties, including the unwinding of such transactions, fines and administrative penalties assessed against
us and criminal and administrative penalties assessed against our management which, in turn, would negatively affect our business.

Restrictions on investments outside Russia or in hard-currency-denominated instruments in Russia expose our cash holdings to devaluation.

Though
our ability to place foreign currency deposits in Russian banks is not limited, currency regulations established by the Central Bank of Russia restrict investments by Russian
companies outside Russia and in most hard-currency-denominated instruments in Russia, and there are only a limited number of ruble-denominated instruments in which we may invest our excess
cash. Any balances maintained in rubles will give rise to losses if the ruble devalues against the U.S. dollar. Moreover, defaults on our ruble-denominated investments may result in substantial losses
for us.

Some of our customers and other debtors may fail to pay us or to comply with the terms of their agreements with us which could adversely affect our results of
operations.

Russia's
inexperience with a market economy relative to more developed economies poses numerous risks that could interfere with our business. For example, the failure to satisfy
liabilities is widespread among Russian businesses and the government. Furthermore, it is difficult for us to gauge the creditworthiness of some of our customers, as there are no reliable mechanisms,
such as reliable credit reports or credit databases, for evaluating their financial condition. Consequently, we face the risk that some of our customers or other debtors will fail to pay us or fail to
comply with the terms of their agreements with us, which could adversely affect our results of operations.

Continued or increased limitations on the conversion of rubles to hard currency in Russia could increase our costs when making payments in hard currency to suppliers and
creditors and could cause us to default on our obligations to them.

Our
major capital expenditures are generally denominated and payable in various foreign currencies, including U.S. dollars and euro. To the extent such major capital expenditures involve
the importation of equipment and related items, Russian legislation permits the conversion of ruble revenues into foreign currency. However, the market in Russia for the conversion of rubles into
foreign currencies is limited. The scarcity of foreign currencies may tend to inflate their values relative to the ruble, and such a market may not continue to exist.

15

---

Additionally,
any delay or other difficulty in converting rubles into a foreign currency to make a payment or delay or restriction in the transfer of foreign currency could limit our
ability to meet our payment and debt obligations, which could result in the loss of suppliers, acceleration of debt obligations and cross-defaults.

If the various initiatives we have used to reduce our tax burden are successfully challenged by the Russian tax authorities, we will face significant losses associated with the
assessed amount of tax underpaid and related interest and penalties, which would have a material impact on our financial condition and results of operations.

We
have used, and continue to use, various initiatives to reduce our tax burden. As described below, several of our tax initiatives have recently been challenged by the Russian tax
authorities. There have also been press reports of instances in which the Russian tax authorities have successfully challenged structures similar to those we use. If any of our initiatives are
successfully challenged by the Russian tax authorities, we would face significant losses associated with the assessed amount of tax underpaid and related interest and penalties. These losses could
have a material impact on our financial condition and results of operations. See Note 30 to our Consolidated and Combined Financial Statements as of December 31, 2001 and 2002 and for
the years ended December 31, 2000, 2001 and 2002.

On
May 23, 2003 a claim was filed with the Arbitration Court of the City of Moscow by our subsidiary, Fruit Rivers, in relation to a tax assessment in the amount of approximately
$6.9 million (including interest and penalties) Fruit Rivers received from the Russian Tax Authority. The assessment relates to Fruit Rivers' use of a small enterprise tax exemption in its
calculation of its profit tax liability during 2002. On May 27, 2003, the Arbitration Court granted Fruit Rivers an injunction prohibiting the Russian Tax Authority from undertaking any actions
to enforce this assessment until the court issues a ruling on the merits in relation to this matter. A hearing on this case has been scheduled for July 23, 2003.

Our
management believes that Fruit Rivers has a solid legal standing in connection with this claim and will continue to vigorously defend its position that tax optimization initiatives
used by us and our subsidiaries are in compliance with the Russian tax law. However, if the courts were to rule in the Russian Tax Authority's favor, we would be liable for the amount of the
assessments and could potentially be liable for significant additional amounts.

In
addition, on May 26, 2003, we received notice that an appeal was filed by the Russian Tax Authority with the Federal Arbitration Court of the Moscow District in a case relating
to the Russian Tax Authority's assessment of approximately $2.4 million (including penalties) against Fruit Rivers. This assessment related to the calculation of value added tax, or VAT, on
juice products sold by Fruit Rivers during 2001. Fruit Rivers challenged this assessment in the Moscow Arbitration Court on December 9, 2002 and the court voided the decision and assessment of
the Russian Tax Authority in this matter. The court's decision was affirmed by the appellate division of the Moscow Arbitration Court on February 27, 2003. A hearing on the new appeal was held
on June 16, 2003, at which time the Federal Arbitration Court of the Moscow District affirmed the decision of Moscow Arbitration Court and the appellate division of the Moscow Arbitration Court
voiding the decision and assessment of the Russian Tax Authority and dismissed their appeal.

While
we believe that Fruit Rivers and our other subsidiaries have complied and continue to comply with their VAT obligations, we cannot assure you that the Russian Tax Authorities will
not further appeal this case or in the future make claims against other Wimm-Bill-Dann subsidiaries for additional VAT amounts with respect to sales of juice or other products.
These claims could be significantly larger than the claim made in connection with Fruit Rivers and our ability to recover VAT owed by the Russian Tax Authority could also be jeopardized. The resulting
losses could have a material adverse impact on our financial condition and results of operations.

16

---

The elimination of a tax privilege from which we currently benefit and/or a successful challenge by the tax authorities of our use of this tax privilege would materially
adversely affect our results of operations.

In
2000, 2001 and 2002, our juice-products subsidiaries benefited from small enterprise tax legislation. If we had not taken advantage of this benefit in 2000, 2001 and 2002, our tax
expenses would have increased by $6.0 million, $14.1 million and $5.7 million, respectively. This tax benefit was eliminated as of January 1, 2002. However, even under the
amended legislation, our small enterprises that were formed prior to January 1, 2002, will be able to continue to use this benefit for two years from the date on which they were formed, and in
the third and fourth years after they were formed, income tax will be levied at a rate of 25% and 50% of the income tax rate, respectively. This change in legislation could materially adversely affect
our results of operations in the future. See "Item 5. Operating and Financial Review and ProspectsA. Operating ResultsProvision for Income Taxes."

In
addition, our Fruit Rivers subsidiary recently received a tax assessment from the Russian Tax Authority in the amount of approximately $6.9 million relating to Fruit Rivers'
use of the small enterprise tax exemption in its calculation of its profit tax liability, and it has initiated a proceeding in the courts to challenge this assessment. See "If the various
initiatives we have used to
reduce our tax burden are successfully challenged by the Russian tax authorities, we will face significant losses associated with the assessed amount of tax underpaid and related interest and
penalties, which would have a material impact on our financial condition and results of operations" above for additional detail regarding this tax claim.

We are only able to conduct banking transactions with a limited number of creditworthy Russian banks as the Russian banking system remains underdeveloped. Consequently, we face
increased risk in our domestic banking transactions, including potential tax liabilities.

Russia's
banking and other financial systems are not well developed or regulated and Russian legislation relating to banks and bank accounts is subject to varying interpretations and
inconsistent applications. In addition, the 1998 financial crisis resulted in the bankruptcy and liquidation of many Russian banks. Most creditworthy Russian banks are located in Moscow and there are
fewer in the regions. Although we have tried to reduce our risk by receiving and holding funds in a number of Russian banks, including subsidiaries of foreign banks, another prolonged banking crisis
or insolvency of some of our banks could adversely affect our business and our ability to complete banking transactions in Russia.

In
addition, we have also experienced problems with transmitting tax payments through certain Russian banks. For example, in May 2003 two of our subsidiaries, Ramenskoe Milk LLC
and Wimm-Bill-Dann Purchaser OJSC, received tax assessments from the Russian Tax Authority for non-payment of taxes due. The assessment was for a total combined
amount of approximately $100,000 and resulted from the failure of the subsidiaries' banks to transfer tax payments to the state budget upon receiving the relevant payment orders. While the Russian Tax
Code provides that a taxpayer is deemed to have paid a tax when the corresponding payment order is received by the taxpayer's bank, recent press reports have indicated that the Russian Tax Authority
has been actively and often successfully challenging such payments if the tax is not in fact paid due to the failure of the bank to transfer such tax payment. Russian courts often rule in favor of the
Russian Tax Authority in such cases.

Our
management believes that each of Ramenskoe Milk LLC and Wimm-Bill-Dann Purchaser OJSC complied with their respective tax payment obligations that are the
subject of the assessments. However, if the courts were to rule in the Russian Tax Authority's favor in these matters, these subsidiaries and other of our subsidiaries that have faced similar problems
would be liable for the amount of the assessments and potentially for interest and penalties on such amounts, and could potentially be liable for significant additional amounts.

17

---

Vaguely drafted Russian transfer pricing rules and lack of reliable pricing information may potentially impact the financial results of our business
activities.

Russian
transfer pricing rules entered into force in 1999, giving Russian tax authorities the right to make transfer pricing adjustments and impose additional tax liabilities in respect
of all controlled transactions, provided that the transaction price differs from the market price by more than 20.0%. Controlled transactions include transactions between related entities and certain
other types of transactions between independent parties, such as foreign trade transactions or transactions with significant (by more than 20.0%) price fluctuations. The Russian transfer pricing rules
are vaguely drafted, leaving wide scope for interpretation by Russian tax authorities and arbitration courts. Due to the uncertainties in interpretation of transfer pricing legislation, the tax
authorities may challenge our prices and propose adjustments. If such price adjustments are upheld by the Russian arbitration courts and implemented, our future financial results could be adversely
affected. In addition, we could face significant losses associated with the assessed amount of prior tax underpaid and related interest and penalties, which would have an adverse impact on our
financial condition and results of operations.

Risks Relating to the ADSs, notes and the Trading Market

Certain of our shareholders are engaged in preliminary discussions in relation to a possible transaction which may result in the acquisition of all or a majority of our shares
by Groupe Danone. Such transaction, if consummated, may result in a change of control under our loan agreements and/or lead to a delisting of our ADSs and a termination of our ADS
program.

As
of the date of this annual report, certain of our shareholders are engaged in preliminary discussions in relation to a possible transaction, which may or may not result in the
acquisition of all or a majority of our shares by Groupe Danone. We have, at the request of these shareholders, cooperated in such preliminary discussions. As of the date of this annual report, no
agreement with respect to price or other material terms or conditions of a transaction has been reached. Moreover, no assurance can be made that these discussions will continue or that any agreement
with respect to a transaction will be reached, or, if reached, what the form of the transaction will be. The terms of any such transaction may or may not be extended to our public shareholders.
However, if consummated, such transaction may result in a change of control under our various loan agreements and/or lead to a delisting of our ADSs from the New York Stock Exchange and a termination
of our ADS program. See "We may not have the ability to raise the funds necessary to finance a prepayment of certain of our outstanding indebtedness in case of a change of control event"
below for a description of the change in control event in the Loan Agreement relating to the Eurobond.

Because the depositary may be considered the beneficial holder of the shares underlying the ADSs, these shares may be arrested or seized in legal proceedings in Russia against
the depositary.

Because
Russian law may not recognize ADS holders as beneficial owners of the underlying shares, it is possible that you could lose all your rights to those shares if the depositary's
assets in Russia are seized or arrested. In that case, you would lose all the money you have invested.

Russian
law might treat the depositary as the beneficial owner of the shares underlying the ADSs. This would be different from the way other jurisdictions, such as the states of the
United States, treat ADSs. In those jurisdictions, although shares may be held in the depositary's name or to its order and it is therefore a "legal" owner of the shares, the ADS holders are the
"beneficial," or real owners. In those jurisdictions, no action against the depositary, the legal owner, would ever result in the beneficial owners losing their shares. Because Russian law may not
make the same distinction between legal and beneficial ownership, it may only recognize the rights of the depositary in whose name the shares are held, not the rights of ADS holders, to the underlying
shares.

18

---

Thus,
in proceedings brought against a depositary, whether or not related to shares underlying ADSs, Russian courts may treat those underlying shares as the assets of the depositary,
open to seizure or arrest. We do not know yet whether the shares underlying ADSs may be seized or arrested in Russian legal proceedings against a depositary. In the past, a lawsuit has been filed
against a depositary bank other than Bankers Trust Company seeking the seizure of various Russian companies' shares represented by ADSs. In the event that this type of suit were successful in the
future against a depositary bank, and if the shares are seized or arrested, the ADS holders involved would lose their rights to the underlying shares.

Because the rights of nominee holders and depositaries are not well developed, you will be unable to direct the voting of the shares represented by our ADSs and may not be able
to obtain some of the benefits due to you as a holder of our ADSs.

The
Federal Law on the Securities Markets provides that shares may be held by nominees entitled to vote the shares on behalf of the beneficial owner upon receipt of the appropriate
instructions from the beneficial owner. The nominee is required to provide information on the beneficial holder of the shares upon the demand of the registrar. The custodian under the deposit
agreement, OOO Deutsche Bank, is registered as the nominee owner for Bankers Trust Company, as depositary; under Russian law, however, Bankers Trust Company in turn might be viewed as the owner of the
shares underlying the ADSs. Since Russian law prohibits a shareholder from voting in more than one way on any agenda item, the depositary may not be in a position to vote the shares it holds on behalf
of ADR holders other than as a block. Further, in the past, nominees have reportedly experienced difficulty in convincing registrars of their right to represent the beneficial holder and in convincing
tax authorities of the right of beneficial holders to obtain the benefits available under an applicable tax treaty. This could result in your being unable to obtain some of the benefits due to you as
a holder of our ADSs, including the ability to exercise your voting rights.

Even if Russian legislation is amended to allow for voting of our ADSs, your voting rights with respect to the shares represented by our ADSs are limited by the terms of the
deposit agreement for our ADSs.

Even
if Russian legislation is amended to allow for voting of our ADSs, you will be able to exercise voting rights with respect to the common shares represented by ADSs only in
accordance with the provisions of the deposit agreement relating to the ADSs. However, there are practical limitations upon your ability to exercise your voting rights due to the additional procedural
steps involved in communicating with you. For example, the Federal Law on Joint Stock Companies requires us to notify shareholders at least 20 days in advance of any meeting. Our common
shareholders will receive notice directly from us and will be able to exercise their voting rights by either attending the meeting in person or voting by power of attorney.

As
an ADS holder, you, by comparison, will not receive notice directly from us. Rather, in accordance with the deposit agreement, we will provide the notice to the depositary. The
depositary has undertaken in turn, as soon as practicable thereafter, to mail to you the notice of such meeting, voting instruction forms and a statement as to the manner in which instructions may be
given by holders. To exercise your voting rights, you must then instruct the depositary how to vote its shares. Because of this extra procedural step involving the depositary, the process for
exercising voting rights may take longer for you than for holders of common shares. ADSs for which the depositary does not receive timely voting instructions will not be voted at any meeting. Except
as described in this document, you will not be able to exercise voting rights with respect to the shares of common stock that underlie the ADSs.

19

---

The price of our ADSs may be highly volatile.

The liquidity of a securities market is often a function of the volume of the underlying shares that are publicly held by unrelated parties. Although our ADS
holders are entitled to withdraw the equity shares underlying the ADSs from the depositary at any time, there is no public market for our shares. This, in turn, may affect the liquidity of our ADSs
and their trading price. In addition, the trading prices of the ADSs may be subject to wide fluctuations in response to many factors, including:



In
addition, because there was no prior trading market for the notes issued in May 2003 there can be no assurance that a liquid market will develop for the notes, that holders of
the notes will be able to sell their notes for a price that reflects their value or at all. Se "Item 8. Financial InformationB. Significant Changes" for a description of the notes.

You may be unable to repatriate your earnings from our ADSs.

Russian currency control legislation pertaining to payment of dividends currently provides that ruble dividends on common stock may be paid to the depositary or
its nominee and converted into U.S. dollars by the depositary for distribution to owners of ADSs without restriction. Also, ADSs may be sold by non-residents of Russia for U.S. dollars
outside Russia without regard to Russian currency control laws as long as the buyer is not a Russian resident.

Under
the terms of the deposit agreement, there is no restriction on the sale of our ADSs to Russian residents. Russian currency control legislation, however, effectively limits the
ability of a non-resident of Russia to sell our ADSs to a Russian resident. Without a Central Bank license, which in practice is difficult to obtain, Russian residents must purchase
securities for rubles and may not purchase foreign-currency denominated securities, such as our ADSs. Accordingly, an ADS holder seeking to sell its holding to a Russian resident would need first to
convert its ADSs into shares and establish a special ruble investment account, while the repatriation of proceeds from the sale of securities in Russia may be subject to costs and delays.

The
ability of the depositary and other persons to convert rubles into U.S. dollars is also subject to the availability of U.S. dollars in Russia's currency markets. Although there is an
existing market within Russia for the conversion of rubles into U.S. dollars, including the interbank currency exchange and over-the-counter and currency futures markets, the
further development of this market is uncertain. At present, there is no market for the conversion of rubles into foreign currencies outside of Russia and no viable market in which to hedge
ruble-currency and ruble-denominated investments.

Future sales of common stock or ADSs may affect the market price of our common stock and ADSs.

Sales, or the possibility of sales, of substantial numbers of shares of our common stock or ADSs in the public market following our initial public offering could
have an adverse effect on the market trading prices of the ADSs. We now have 44,000,000 authorized shares of common stock, all of which are outstanding. Our subsequent equity offerings may reduce the
percentage ownership of our shareholders. Newly issued stock may have rights, preferences or privileges senior to those of common stock.

20

---

You may have limited recourse against us and our officers and directors because we generally conduct our operations outside the United States and
substantially all of our officers and directors reside outside the United States.

Our presence outside the United States may limit your legal recourse against us. We do not have any presence in the United States and are incorporated under the
laws of the Russian Federation. Substantially all of our directors and executive officers named in this document reside outside the United States, principally in Russia. All or a substantial portion
of our assets and the assets of our officers and directors are located outside the United States.

As
a result, you may not be able to effect service of process within the United States on us or on our officers and directors. Similarly, you may not be able to obtain or enforce U.S.
court judgments against us, our officers and directors, including actions based on the civil liability provisions of the federal securities laws of the United States. There is no treaty between the
United States and Russia providing for reciprocal recognition and enforcement of foreign court judgments in civil and commercial matters. These limitations may deprive you of effective legal recourse
for claims related to your investment in the ADSs.

The
deposit agreement provides for disputes, controversies and causes of action brought by any party thereto against us to be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association; provided that any controversy, claim or cause of action relating to or based upon the provisions of the federal securities laws of the United
States or the rules or regulations promulgated thereunder may, but need not, be submitted to arbitration. The Russian Federation is a party to the United Nations (New York) Convention on the
Recognition and Enforcement of Foreign Arbitral Awards. However, it may be difficult to enforce arbitral awards in the Russian Federation due to a number of factors, including the inexperience of
Russian courts in international commercial transactions, official and unofficial political resistance to enforcement of awards against Russian companies in favor of foreign investors, Russian courts'
inability to enforce such orders (for example, upon a finding that the enforcement of an arbitration award violates public policy or a supervening law of the Russian Federation), and corruption.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

We have a substantial amount of outstanding indebtedness, primarily consisting of the obligations we entered into in connection with our Eurobond offering, our
ruble bonds, bank loans and obligations under equipment financing. As at December 31, 2002, our consolidated total debt was approximately
US$186.0 million of which US$115.1 million was secured by equipment or inventory. On April 15, 2003 we issued RUR1.5 billion ruble-denominated bonds (US$48 million
at the April 15, 2003 exchange rate), and on May 21, 2003 we completed a $150 million Eurobond offer. See "Item 8. Financial InformationB. Significant Changes" for a
description of our bond offerings.

Our
ability to make payments on and to refinance our indebtedness, and to fund planned capital expenditures and research and development efforts will depend on our ability to generate
cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are unable to
generate sufficient cash flow or otherwise obtain funds necessary to make required payments, we may default under the terms of our indebtedness, and the holders of our indebtedness would be able to
accelerate the maturity of such indebtedness, which could cause defaults under our other indebtedness.

21

---

We
cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule
or that future borrowings will be available to us under our credit facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. We may need to
refinance all or a portion of our indebtedness, including the Loan relating to the Eurobond, on or before maturity, sell assets, reduce or delay capital expenditures or seek additional capital. We
cannot assure you that any refinancing or additional financing would be available on the commercially reasonable terms, or whether our assets could be sold, or if sold, whether the proceeds therefrom
would be sufficient to meet our debt service obligations. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance debt on commercially reasonable terms,
would materially and adversely affect our business, financial condition, results of operations and business prospects.

Covenants in our debt agreements, including the Loan Agreement relating to the Eurobond, restrict our ability to borrow and invest, which could impair
our ability to expand or finance our future operations.

Our short-term and long-term debt agreements, including the Loan Agreement relating to the Eurobond, contain covenants that impose
operating and financial restrictions on us and our subsidiaries. These restrictions significantly limit, and in some cases prohibit, among other things, our and certain of our subsidiaries' ability to
incur additional debt, provide guarantees, create liens on assets or enter into business combinations. Failure to comply with these restrictions would constitute a default under our debt agreements,
including the Loan Agreement and Loan relating to the Eurobond, and any of our other senior debt containing cross default provisions could become immediately due and payable. In addition, some of our
debt agreements contain provisions which permit our lenders to require us to repay our debt to them in the event of a deterioration in our financial condition.

We may not have the ability to raise the funds necessary to finance a prepayment of certain of our outstanding indebtedness in case of a change of
control event.

The terms of the Loan Agreement relating to the Eurobond and some of our other debt agreements require that we prepay the debt upon the occurrence of certain
change of control events. A change of control event will generally be triggered at such time as any person or entity (excluding several of our major shareholders acting individually or as a group):
(i) is or becomes interested, directly or indirectly, in the aggregate of more than 50% of our capital stock with voting power, or (ii) has or acquires the right to appoint or remove a
majority of our Board of Directors, or (iii) has or acquires control of a majority of our voting rights, in each case in circumstances where, solely as a result of any such event as specified
by the relevant rating agencies, a rating decline (as further described in the Loan Agreement relating to the Eurobond) would result.

However,
it is possible that we will not have sufficient funds at the time of the change of control to satisfy such prepayment obligations, or to refinance the debt on commercially
reasonable terms, which would materially and adversely affect our business, financial condition, results of operations and business prospects.

If the Central Bank of Russia requires us to hold a license in order to make payments in U.S. dollars under the Loan relating to the Eurobond or the
Guarantee, we will need to apply for a license. Without a license, we may be restricted in our ability to make payments under the Loan Agreement relating to the Eurobond and/or the Guarantee.

Central Bank of Russia regulations are subject to substantial change and varying interpretations which complicate the process of determining whether a license is
needed as well as the process of obtaining a permission. With respect to the Loan relating to the Eurobond and the Guarantee by three of our subsidiaries, we have received legal advice that a license
is not required and that the Loan and the Guarantee would only need to be registered if the borrower were a Russian licensed bank. There is

22

---

some
uncertainty as to whether or not a license would be required following an event of default under the Loan Agreement relating to the Eurobond, depending on who would be deemed to be the lender at
that time. If the Central Bank of Russia clarifies or advises in the future that a foreign currency license is required for payments by us under the Loan and/or our subsidiaries under the Guarantee,
we will need to apply for a license. We cannot assure you that we will receive such a license in such case. If we do not receive such a license, we cannot assure you that we will be able to make
payments on the Loan or that our guarantor subsidiaries will be able to make payments under the Guarantee in U.S. dollars.

Foreign judgments may not be enforceable against us.

Judgments rendered by a court in any jurisdiction outside the Russian Federation will be recognized by courts in Russia only if an international treaty providing
for the recognition and enforcement of judgments in civil cases exists between the Russian Federation and the country where the judgment is rendered. No such treaty exists between the United States
and the Russian Federation or the United Kingdom and the Russian Federation for the reciprocal enforcement of foreign court judgments. The Loan Agreement relating to the Eurobond and the Guarantee
provide that controversies, claims and causes of action brought by any party thereto against us may be settled by arbitration in accordance with the Arbitration Rules of the United Nations Commission
on International Trade Law, also known as UNCITRAL. The Russian Federation is a party to the United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
However, it may be difficult to enforce arbitral awards in the Russian Federation due to a number of factors, including the inexperience of Russian courts in international commercial transactions,
official and unofficial political resistance to enforcement of awards against Russian companies in favor of foreign investors and Russian courts' inability to enforce such orders.

Upon the occurrence of certain circumstances described in the Loan Agreement relating to the Eurobond we may or must prepay the Loan.

Under the terms of the Loan Agreement relating to the Eurobond we may, subject to certain conditions, prepay the Loan relating to the Eurobond if we are required
to increase our payments for tax reasons regardless of whether the increased payment obligation results from any change in the applicable tax laws or treaties or from the change in application of
existing tax laws or treaties. We may also prepay the Loan if we are required to indemnify the Bank in respect of Increased Costs (as defined in the Loan Agreement). We must prepay the Loan if it
becomes illegal for the Bank to make or fund the Loan, to allow the Loan to remain outstanding, or to maintain its agreed funding source of the Loan. In case of any such prepayment, all outstanding
notes would be redeemable at par with accrued interest. We cannot assure you that we would be able to satisfy such prepayment obligations, or to refinance the debt on commercially reasonable terms,
which would materially and adversely affect our business, financial condition, results of operations and business prospects.

You may not have an effective remedy under U.S. securities laws against Arthur Andersen ZAO in connection with a material misstatement or omission in
our financial statements for the years ended December 31, 2000 and 2001.

Our consolidated and combined financial statements for the years ended December 31, 2000 and 2001 were audited by Arthur Andersen ZAO, which issued a
publicly available audit report expressing its unqualified opinion with respect thereto. Arthur Andersen ZAO has ceased to operate in Russia and, as a result, has not reissued the audit report
included in this document relating to our consolidated and combined financial statements for the years ended December 31, 2000 and 2001. As a result, you will not be able to recover against
Arthur Andersen ZAO under U.S. securities laws for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen

23

---

ZAO,
or any omissions to state a material fact required to be stated therein. Therefore, you may have no effective remedy against Arthur Andersen ZAO in connection with a material misstatement or
omission in these financial statements. Additionally, we have not requested our current auditors to re-audit our consolidated and combined financial statements for the years ended
December 31, 2000 and 2001 and cannot assure you that a re-audit by our current auditors would not have resulted in a restatement or uncovered an untrue statement of material fact
or an omission to state a material fact in such financial statements.

Risks Relating to the Russian Federation

Political Risks

Since 1991, Russia has sought to transform itself from a one-party state with a centrally-planned economy to a pluralist democracy with a
market-oriented economy. As a result of the sweeping nature of the reforms, and the failure of some of them, the Russian political system remains vulnerable to popular dissatisfaction, as well as to
unrest by particular social and ethnic groups. Significant political instability could have a material adverse effect on the value of foreign investments in Russia, including the value of our ADSs
and/or notes.

Governmental instability could adversely affect the value of investments in Russia and the value of our ADS and/or notes.

The composition of the Russian governmentthe prime minister and the other heads of federal ministrieshas at times been highly unstable.
Six different prime ministers, for example, headed governments between March 1998 and May 2000. On December 31, 1999, President Yeltsin resigned and Vladimir Putin was
subsequently elected president on March 26, 2000. While President Putin has maintained governmental stability and policies generally oriented towards the continuation of economic reforms, no
assurance can be given that such conditions will continue over time. State Duma elections are to be held at the end of 2003 and presidential elections in 2004. The value of investments in Russia,
including in our ADSs and notes, could be reduced and our prospects could be harmed if governmental instability recurs or if reform policies are reversed.

Conflict between federal and regional authorities and other conflicts could create an uncertain operating environment that would hinder our
long-term planning ability and could adversely affect the value of investments in Russia and the value of our ADSs and notes.

The Russian Federation is a federation of republics, territories, regions, cities of federal importance and autonomous areas. The delineation of authority among
the members of the Russian Federation and the federal governmental authorities is, in many instances, uncertain and sometimes contested. Lack of consensus between the federal government and local or
regional authorities often results in the enactment of conflicting legislation at various levels and may result in political instability. This lack of consensus hinders our long-term
planning efforts and creates uncertainties in our operating environment, both of which may prevent us from efficiently carrying out our expansion plans.

Additionally,
ethnic, religious, historical and other divisions have, on occasion, given rise to tensions, and in certain cases, to military conflict. Russian military forces have been
engaged in Chechnya in the past and are currently involved in ground and air operations there. The spread of violence, or its intensification, could have significant political consequences. These
include the imposition of a state of emergency in some or all of the Russian Federation. These events could materially adversely affect the value of investments in Russia, including in the value of
our ADSs and notes.

24

---

Economic Risks

Economic instability in Russia could adversely affect consumer demand, particularly for premium products, materially adversely affecting our expansion
plans.

Since the dissolution of the Soviet Union, the Russian economy has experienced:



The
Russian economy has been subject to abrupt downturns. In particular, on August 17, 1998, in the face of a rapidly deteriorating economic situation, the Russian government
defaulted on its ruble-denominated securities, the Central Bank of Russia stopped its support of the ruble and a temporary moratorium was imposed on certain hard currency payments. These actions
resulted in an immediate and severe devaluation of the ruble and a sharp increase in the rate of inflation, a dramatic decline in the prices of Russian debt and equity securities and an inability of
Russian issuers to raise funds in the international capital markets.

These
problems were aggravated by the near collapse of the Russian banking sector after the events of August 17, 1998, as evidenced by the revocation of the banking licenses of a
number of major Russian banks. This further impaired the ability of the banking sector to act as a consistent source of liquidity to Russian companies, and resulted in the losses of bank deposits in
some cases.

There
can be no assurance that recent trends in the Russian economysuch as the increase in the gross domestic product, a relatively stable ruble, and a reduced rate of
inflationwill continue or will not be abruptly reversed. Moreover, the recent fluctuations in international oil and gas prices, the strengthening of the ruble in real terms relative to
the U.S. dollar and the consequences of a relaxation in monetary policy, or other factors, could adversely affect Russia's economy and our business in the future, particularly our expansion plans.

Russia's physical infrastructure is in very poor condition, which could disrupt normal business activity.

As a general matter, Russia's physical infrastructure largely dates back to Soviet times and has not been adequately funded and maintained over the past decade.
Particularly affected are the rail and

25

---

road
networks, power generation and transmission; communication systems; and building stock. For example, during the winter of 2000-2001, electricity and heating shortages in Russia's
far-eastern Primorye region seriously disrupted the local economy. Road conditions throughout Russia are poor, with many roads not meeting minimum requirements for usability and safety.

The
deterioration of Russia's physical infrastructure harms the national economy, disrupts the transportation of goods and supplies, adds costs to doing business in Russia and can
interrupt business operations, and this could have a material adverse effect on our business and the value of our ADSs and notes.

Fluctuations in the global economy may adversely affect Russia's economy, limiting our access to capital and adversely affecting the purchasing power of
our customers and thus our business.

Russia's economy is vulnerable to market downturns and economic slowdowns elsewhere in the world. As has happened in the past, financial problems or an increase
in the perceived risks associated with investing in emerging economies could dampen foreign investment in Russia and adversely affect the Russian economy. Additionally, because Russia produces and
exports large amounts of natural gas and oil, the Russian economy is especially vulnerable to the price of natural gas and oil on the world markets and a decline in the price of natural gas and oil
could slow or disrupt the Russian economy. These developments could severely limit our access to capital and could adversely affect the purchasing power of our customers and thus our business.

Social Risks

Crime and corruption could disrupt our ability to conduct our business and could materially adversely affect our financial condition and results of
operations.

The political and economic changes in Russia since the early 1990s have resulted in reduced policing of society and increased lawlessness. Reportedly, organized
criminal activity has increased significantly, particularly in large metropolitan centers. Property crime in large cities has increased substantially. In addition, the Russian and international press
have reported high levels of official corruption in Russia and other countries of the CIS, including the bribing of officials for the purpose of initiating investigations by government agencies. Press
reports have also described instances in which government officials have engaged in selective investigations and prosecutions to further commercial interests of the government and individual
officials. Additionally, published reports indicate that a significant number of Russian media regularly publish slanted articles in return for payment. Our operations could be adversely affected by
illegal activities, corruption or by claims implicating us in illegal activities, which could materially adversely affect the value of our ADSs and notes.

Social instability could increase support for renewed centralized authority, nationalism or violence and thus materially adversely affect our ability to
conduct our business effectively.

The failure of the government and many private enterprises to pay full salaries on a regular basis and the failure of salaries and benefits generally to keep pace
with the rapidly increasing cost of living have led in the past, and could lead in the future, to labor and social unrest. For example, in 1998, miners in several regions of Russia, demanding payment
of overdue wages, resorted to strikes which included blocking major railroads. Such labor and social unrest may have political, social and economic consequences, such as increased support for a
renewal of centralized authority; increased nationalism, with restrictions on foreign involvement in the economy of Russia; and increased violence. Any of these could restrict our operations and lead
to the loss of revenue, materially adversely affecting us.

26

---

Risks Relating to the Russian Legal System and Russian Legislation

Weaknesses relating to the Russian legal system and Russian legislation create an uncertain environment for investment and for business activity.

Russia is still developing the legal framework required by a market economy. Several fundamental Russian laws have only recently become effective. The recent
nature of much of Russian legislation, the lack of consensus about the scope, content and pace of economic and political reform and the rapid evolution of the Russian legal system in ways that may not
always coincide with market developments place the enforceability and underlying constitutionality of laws in doubt and result in ambiguities, inconsistencies and anomalies. In addition, Russian
legislation often contemplates implementing regulations that have not yet been promulgated, leaving substantial gaps in the regulatory infrastructure. Among the risks of the current Russian legal
system are:



All
of these weaknesses could affect our ability to enforce our rights to intellectual property or under contracts, or to defend ourselves against claims by others. Furthermore, we
cannot assure you the
regulators, judicial authorities or third parties will not challenge our compliance with applicable laws, decrees and regulations.

Lack of independence and the inexperience of the judiciary, the difficulty of enforcing court decisions and governmental discretion in instigating,
joining and enforcing claims could prevent us or you from obtaining effective redress in a court proceeding, materially adversely affecting an investment in our ADSs and notes.

The independence of the judicial system and its immunity from economic, political and nationalistic influences in Russia remain largely untested. The court system
is understaffed and underfunded. Judges and courts are generally inexperienced in the area of business and corporate law. Judicial precedents generally have no binding effect on subsequent decisions.
Not all Russian legislation and court decisions are readily available to the public or organized in a manner that facilitates understanding. The Russian judicial system can be slow. Enforcement of
court orders can in practice be very difficult in Russia. All of these factors make judicial decisions in Russia difficult to predict and effective redress uncertain. Additionally, court claims are
often used in furtherance of political aims. We may be subject to such claims and may not be able to receive a fair hearing. Additionally, court orders are not always enforced or followed by law
enforcement agencies.

These
uncertainties also extend to property rights. During Russia's transformation from a centrally planned economy to a market economy, legislation has been enacted to protect private
property against expropriation and nationalization. However, it is possible that due to the lack of experience in enforcing these provisions and due to potential political changes, these protections
would not be enforced in the event of an attempted expropriation or nationalization, or if our business is reorganized. Some government entities have tried to renationalize privatized businesses.
Expropriation or nationalization of any of our entities, their assets or portions thereof, potentially without adequate compensation, would have a material adverse effect on our business and on the
value of our ADSs and notes.

27

---

Unlawful or arbitrary government action may have an adverse affect on our business and the value of an investment in our ADSs and notes.

Government authorities have a high degree of discretion in Russia and at times exercise their discretion arbitrarily, without hearing or prior notice, and
sometimes in a manner that is contrary to law. Moreover, the government also has the power in certain circumstances, by regulation or government act, to interfere with the performance of, nullify or
terminate contracts. Unlawful or arbitrary governmental actions have included withdrawal of licenses, sudden and unexpected tax audits, criminal prosecutions and civil actions. Federal and local
government entities also used common defects in matters surrounding share issuances and registration as pretexts for court claims and other demands to invalidate such issuances and registrations
and/or to void transactions, often for political purposes. Unlawful or arbitrary government action, if directed at us, could have a material adverse effect on our business and on the value of our ADSs
and notes.

Shareholder liability under Russian legislation could cause us to become liable for the obligations of our subsidiaries.

The Civil Code and the Federal Law on Joint Stock Companies generally provide that shareholders in a Russian joint stock company are not liable for the
obligations of the joint stock company and bear only the risk of loss of their investment. This may not be the case, however, when one person or entity is capable of determining decisions made by
another. The person or entity capable of determining such decisions is called an effective parent. The person or entity whose decisions are capable of being so determined is called an effective
subsidiary. The effective parent bears joint and several responsibility for transactions concluded by the effective subsidiary in carrying out these decisions if



In
addition, an effective parent is secondarily liable for an effective subsidiary's debts if an effective subsidiary becomes insolvent or bankrupt resulting from the action or inaction
of an effective parent. This is the case no matter how the effective parent's capability to determine decisions of the effective subsidiary arises. For example, this liability could arise through
ownership of voting securities or by contract. In these instances, other shareholders of the effective subsidiary may claim compensation for the effective subsidiary's losses from the effective parent
which caused the effective subsidiary to take action(s) or fail to take action(s) knowing that such action(s) or failure to take action(s) would result in losses. Accordingly, in our position as
effective parent of the subsidiaries in which we own, directly or indirectly, more than 50% of the charter capital, we could be liable, in the cases described above, for their debts. The total
liabilities (indebtedness, including, but not limited to, vendor financing obligations, and other payables) of our effective subsidiaries, as of December 31, 2002, amounted to
$265.4 million, excluding intercompany indebtedness, deferred tax liabilities and government grants. In addition, our subsidiaries have other liabilities. This total liability, which is joint
and several with the liability of the subsidiary, could materially adversely affect us.

Shareholder rights provisions under Russian law may impose additional costs on us, which could cause our financial results to suffer.

Russian law provides that shareholders, including holders of our ADSs, that vote against or abstain from voting on certain matters have the right to sell their
shares to us at market value in accordance with Russian law. The decisions that trigger this right to sell shares include:



28

---



Our
obligation to purchase shares in these circumstances, which is limited to 10% of our net assets calculated, according to the Russian accounting standards, at the time the matter at
issue is voted upon, could have an adverse effect on our cash flow and our ability to service our indebtedness.

Changes in the Russian tax system could materially adversely affect an investment in our ADSs and notes.

Generally, taxes payable by Russian companies are substantial and numerous. These taxes include, among others:



All
of these taxes are subject to change. Additionally, each region may establish regional sales tax applicable to sales of goods and services to individuals at a rate of up to 5%.

Laws
related to these taxes have not been in force for significant periods, in contrast to more developed market economies; therefore, the government's implementation of these
regulations is often unclear or nonexistent. Accordingly, few precedents with regard to tax clarifications have been established. Often, differing opinions regarding legal interpretation exist both
among and within government ministries and organizations, such as the Ministry of Taxes and Duties and its various inspectorates, creating uncertainties and areas of conflict. Tax declarations,
together with other legal compliance areas including, for example, customs matters, are subject to review and investigation by a
number of authorities, who are enabled by law to impose severe fines, penalties and interest charges. Generally, tax declarations remain open and subject to inspection for a period of three years
following the tax year. The fact that a year has been reviewed does not close that year, or any tax declaration applicable to that year, from further review by a superior authority during the
three-year period. These facts create tax risks in Russia that are more significant than typically found in countries with more developed tax systems.

The
taxation system in Russia is subject to frequent changes and inconsistent enforcement at the federal, regional and local levels. In some instances, new tax rules have been given
retroactive effect. In addition to our substantial tax burden, these conditions complicate our tax planning and related business decisions. For example, tax laws are unclear with respect to the
deductibility of certain expenses and at times we have taken a position that is aggressive in this regard, but that we consider to be in compliance with current law. This uncertainty exposes us to
significant fines and penalties and to enforcement measures despite our best efforts at compliance, and could result in a greater than expected tax burden. To date, the system of tax collection has
been relatively ineffective, resulting in the continual imposition of new taxes in an attempt to raise government revenues. These factors raise the risk of a sudden imposition of arbitrary or onerous
taxes on us. This could adversely affect the value of our ADSs and notes.

There
is a risk of imposition of new taxes on us, which could adversely affect the price or value of our ADSs and notes. During 2000, 2001 and 2002, the Russian government undertook a
revision of the

29

---

Russian
tax system and passed certain laws implementing tax reform. The new laws reduce the number of taxes and the overall tax burden on businesses and simplify the tax laws. However, the new tax
laws continue to rely heavily on the judgments of local tax officials and fail to address many existing problems. Many issues associated with the practical application of new legislation are unclear
and this complicates our tax planning and related business decisions. This uncertainty may expose us to fines and penalties. Even if further reforms of the Tax Code are enacted, they may not result in
significant reduction of the tax burden for Russian companies and the establishment of a more efficient tax system. Conversely, additional tax collection measures may be introduced. Accordingly, we
may have to pay significantly higher taxes, which could have a material adverse effect on our business.

Moreover,
financial statements of Russian companies are not consolidated for tax purposes. Therefore, each of our Russian entities pays its own Russian taxes and may not offset its
profit or loss against the loss or profit, respectively, of another of our entities. In accordance with legislation that entered into force on January 1, 2002, domestic dividends will be
subject to withholding tax at 6%, though in the case of dividends flowing through a multitiered corporate structure, taxation at each level of dividend payment may be reduced.

Other Risks

We have not independently verified information regarding our competitors, nor have we independently verified official data from Russian government
agencies.

We have derived substantially all of the information contained in this document concerning our competitors from publicly available information, including press
releases and filings under U.S. securities laws, and we have relied on the accuracy of this information without independent verification.

In
addition, some of the information contained in this document has been derived from official data of Russian government agencies. The official data published by Russian federal,
regional and local governments are substantially less complete or researched than those of Western countries. Official statistics may also be produced on different bases than those used in Western
countries. Any discussion of matters relating to Russia in this document must, therefore, be subject to uncertainty due to concerns about the completeness or reliability of available official and
public information.

The
veracity of some official data released by the Russian government may be questionable. In the summer of 1998, the Director of the Russian State Committee on Statistics ("Goskomstat")
and a number of his subordinates were arrested and charged with manipulating economic data to hide the actual output of various companies.

Item 4    Information on Our Company



We trace our history back to 1992, when a group of individuals formed an enterprise which began leasing a production line at the Lianozovo Dairy Plant and
purchasing juice concentrates and packaging materials. On November 25, 1992, we produced the first carton of juice carrying the Wimm-Bill-Dann brand name. We selected
this brand name to attract consumers who preferred products with foreign-sounding names due to perceived higher quality and novelty and, since its introduction, the
"Wimm-Bill-Dann" name has become a brand name recognized in a substantial percentage of Russian households.

To
take advantage of the opportunities arising from the privatization of Russian state-owned assets, our current shareholders then began acquiring shares in the Lianozovo Dairy Plant in
Moscow, and

30

---

continued
to expand their juice product enterprises. Our growth has been accomplished, in part, through significant acquisitions, including the following:



Additionally,
in the latter part of 2000, we began a corporate and organizational restructuring to facilitate our initial public offering and our future expansion, both within the CIS
and internationally. As part of this restructuring, we disposed of our interests in Expobank and four breweries. Our operations are currently organized into three divisions: dairy products, juice
products and water products, all operating under the umbrella of our holding company, Wimm-Bill-Dann Foods OJSC, which was incorporated on May 31, 2001.

We
completed our initial public offering on February 14, 2002 and listed our shares of common stock, represented by American Depositary Shares, or ADSs, on the New York Stock
Exchange under the symbol "WBD." Each ADS represents one underlying share of our common stock.

For
a description of our principal capital expenditures and divestitures since our initial public offering, as well as those currently in progress, see "Item 5. Operating and Financial
Review and ProspectsB. Liquidity and Capital Resources."

Our
legal name is Wimm-Bill-Dann Foods OJSC, and we are incorporated as an open joint stock company under the laws of the Russian Federation with registration
number 103 7700236738. We operate in the Russian Federation under a number of different trademarks and brand names, as more fully described below in "B. Business
OverviewCurrent OperationsOur products and brands." Our business objectives, set forth in Article 4 of our charter, include the production and sale of food products,
including milk and sour milk products, mineral water, fruit and vegetable juices and beverages and children's food. Our head office is located at 16 Yauzsky Boulevard, Moscow 109028, Russian

31

---

Federation,
and our telephone number is +7-095-733-9726. We have appointed Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715 as our
registered agent for service of process.



We are a large, fast-growing Russian manufacturer of dairy and juice products. In 2002, approximately 68% of our net revenues were derived from the
sale of dairy products and approximately 32% from the sale of juice products. Since our founding in 1992, we have become a market leader in Russia in both the dairy and juice products markets. In the
dairy products market, according to an AC Nielsen study of nine major cities located throughout Russia, including Moscow and St. Petersburg, we were the market leader (with the exception of
open-air markets), during 2002 in all packaged dairy markets except for pasteurized milk. Our market shares by sales volume were 33% in traditional dairy products, 44% in enriched dairy
products and 45% in yogurt and dessert dairy products. In the juice products market, in 2002, according to the Russian Union of Juice Producers, we had a 31% share of the Russian juice market.
According to a Business Analytica survey, from September through December 2002, we had a 43% share of the juice market in Moscow, the largest juice-consuming area in Russia. As of
April 1, 2003, we had 23 manufacturing operations in over 21 locations in Russia and the other countries of the Commonwealth of Independent States, or CIS, and our distribution network
encompassed over 70 cities in the CIS.

Our
goal is to offer our consumers quality food and beverage products through the use of carefully selected raw materials, modern production technology and strict quality control. All of
our products are made according to our own recipes and reflect our understanding of consumer demand.

Our
principal dairy products include



Our
juice products include



We
also commenced the commercial production of bottled natural mineral water in March 2003.

Our
principal geographic market is Russia, with the Central Region of Russia, encompassing Moscow, Voronezh and Nizhny Novgorod, being the most significant. Each of our production and
distribution facilities is owned by a separate subsidiary of ours.

32

---

Business Strategy

We aim to retain our position as a leading nationwide producer of quality food and beverage products and to expand our production and sales in order to attain
higher revenues, cash flow and earnings. To achieve these objectives, we use the following strategies:



Focus on and expand our core areas of business: dairy and juice products.We focus on two areas of
food and beverage consumption: dairy and juice products. We believe that we are well-positioned to retain and enhance our leading positions in these core businesses and related businesses
by:



Expand the geographic reach and the production capacity of our core businesses.Since 2000, we have
been acquiring production units in various regions of Russia and the CIS. We believe that the establishment of large production facilities in the regions that are characterized by high population
density and the availability of abundant raw materials is an efficient development strategy. Among the advantages of having production capacities in the regions of Russia are the avoidance of high
transportation costs, the availability of a low-cost labor force and the availability of low cost milk

33

---

resources,
which are generally up to 20% cheaper in the regions than in Moscow. We expect to rely on our existing distribution networks and to expand our distribution units geographically as we
increase our production capacity.

We
believe that the fragmented nature of the dairy industry in Russia will continue to give rise to opportunities for strategic acquisitions, constructing new capacity and attracting new
customers. In turn, we expect these combined factors to bring about an increase in our geographic coverage. We intend to continue to implement this strategy, which we expect will involve the
investment of approximately $610 million over the next three years for the acquisition and construction of production capacity and new equipment, as follows:



Improve operating efficiencies.We intend to improve the quality of our products, reduce our costs,
increase our cash flow and improve employee productivity through:



34

---



Expand into the production of new dairy and beverage products.We intend to expand into the
production of new dairy and beverage products by:



35

---



Current Operations

Dairy industry

Consumption.Russian dairy consumption is relatively low compared to most European countries and is
characterized by two primary trendsthe comparatively stable development of the market for traditional dairy products, and a more rapidly developing market for yogurt and dessert dairy
products. The following table illustrates the per capita consumption of liquid dairy products in liters per year in selected European countries in 2001, based on the most current data available from
Tetra Pak:

|Country       |  | 2001 
|------------- |  | -----
|Finland       |  | 156.4
|Ireland       |  | 139.4
|Sweden        |  | 119.6
|Denmark       |  | 119.1
|Spain         |  | 118.7
|Great Britain |  | 100.9
|Netherlands   |  | 99.9 
|Portugal      |  | 98.4 
|Belarus       |  | 76.9 
|Germany       |  | 70.9 
|Austria       |  | 70.4 
|France        |  | 70.1 
|Russia        |  | 69.4 
|Estonia       |  | 61.9 
|Italy         |  | 60.9 
|Poland        |  | 42.4 
|Ukraine       |  | 10.8 

Source:
Tetra Pak

Based
on data from Tetra Pak, a Swedish food product packaging manufacturer from which we purchase a substantial portion of our packaging materials, per capita consumption of liquid
dairy products in Russia was 67.0 and 69.4 liters per year in 2000 and 2001, respectively, which we estimate
rose to 70.6 liters in 2002, levels that are relatively low compared to the majority of European countries. The demand for dairy products remained relatively stable in the aftermath of the 1998
Russian financial crisis and the ensuing decline in per capita income, as dairy products are generally considered to be staple consumer goods. Additionally, increasing per capita income following the
immediate aftermath of the 1998 financial crisis has positively affected dairy consumption, particularly of higher-priced products such as yogurt and dessert dairy products.

According
to our estimates, consumption of packaged dairy products in Russia increased by 7.6% between 2001 and 2002. We believe that packaged dairy product consumption levels will
continue to increase in Russia as the consumption of bulk liquid milk decreases due to increasing per capita incomes, the growing desire and demand for sterilized milk and the greater convenience of
packaged products. Consumption of bulk liquid milk, which generally consists of unpackaged milk sold in markets to consumers who bring their own packaging, is still relatively common in Russia.

Additionally,
a number of packaged dairy products are relative newcomers to the Russian market. For instance, yogurt is a relatively new product for Russian consumers. Since its first
widespread commercial appearance in Russia in the early 1990s, yogurt's popularity has increased. Per capita consumption, however, remains low. According to GFK, annual per capita consumption of
yogurt (including drinking yogurt) in Russia's 25 largest cities in 2002 was about 2.6 kilograms, whereas the general range for most European countries, according to our estimates, was
15-20 kilograms. Other new

36

---

dairy
products in Russia include dairy desserts, mousse, fruit-flavored traditional products, flavored milk and combined juice-dairy products. Several flavored yogurt drinks were introduced into the
Russian market during 2002.

By
our estimates, based on preliminary Goskomstat data for 2002, cheese consumption in Russia increased by 45% between 2000 and 2002, from 2 kilograms per capita to 2.9 kilograms per
capita, respectively. We believe that cheese consumption levels will continue to grow due to increasing per capita incomes and the greater variety of cheese products available to Russian consumers.

Production.Milk production and processing in Russia declined dramatically during the 1990s due to
the general state of the Russian economy, a lack of raw materials due, in part, to the slaughter of dairy cows necessitated by a shortage of feed, and a sharp increase in energy prices. Additionally,
the majority of Russian milk producers, comprising individual farmers and collective agricultural enterprises, operate with inefficient and outdated facilities and equipment and function under
outdated management practices.

The
result of this decline was a drop in processing volumes and an increased reliance upon imported dairy products. While the financial crisis of 1998 aided Russian producers to some
extent, as it pushed
imported foods out of the Russian market, it also caused difficulties for Russian companies that depended on imported materials for production. In general, producers that were able to limit their
exposure to fluctuations in the value of the ruble and to establish links with Russian suppliers survived the crisis and took leading positions in the marketplace. The milk processing sector, however,
still remains fragmented, and currently includes over 3,200 large, medium and small enterprises. There is evidence, though, that the process of consolidation is continuing, with the less efficient
producers going out of business or being acquired by larger companies. For example, in addition to our dairy plant acquisitions during 2002, our new competitor Planet Group, a subsidiary of Russian
oil company Sibneft, also acquired several dairy plants in Russia and Ukraine.

Additionally,
foreign, particularly European, producers have recognized the potential for growth in the demand in Russia for milk, yogurt and dairy desserts and are investing in the
Russian market. A number of European producers, such as Danone, Parmalat, Campina and Ehrmann, produce dairy products in Russia, and comprise our principal competition in the yogurt and dairy desert
segment of the dairy product market. According to media reports, both Danone and Ehrmann intend to continue to invest in Russia-based facilities in order to increase their output capacities during
2003.

Juice industry

Consumption.Before the early 1990s, consumption of juice products in Russia was limited. Juice
products produced in the Soviet Union included only vegetable juices and fruit juices made of locally grown fruits such as apples and pears. Most Russian households tried orange, pineapple, grapefruit
and other exotic fruit juices for the first time in 1991 and 1992, following the dissolution of the Soviet Union. Russian juice consumption grew each year until 1998, when consumption fell following
the 1998 financial crisis, which led to a reduction in Russian incomes and a significant increase in the cost of juice products due to the increase in the ruble cost of imported juice packaging and
ingredients. While Russian juice consumption has begun to recover from the effects of the 1998 financial crisis, it is still relatively low compared to most European countries. The following table
shows annual per capita juice product consumption in liters in Russia and selected European countries in 2001, according to the most current data available from Tetra Pak:

|Country        |  | 2001
|-------------- |  | ----
|Russia         |  | 9   
|United Kingdom |  | 28  
|Poland         |  | 28  
|Germany        |  | 56  
|Hungary        |  | 29  
|Czech Republic |  | 20  
|Latvia         |  | 14  
|Bulgaria       |  | 8   

Source:
Tetra Pak

37

---

The
annual per capita juice product consumption in Russia in 2002 was estimated by the Russian Union of Juice Producers to be approximately 10 liters.

Production.Following the dissolution of the Soviet Union and the economic reforms that liberalized
import procedures, foreign producers were able to capture a significant share of the Russian juice market by importing their products. However, the 1998 financial crisis caused a majority of the
foreign companies to leave the market, and also forced a majority of Russian producers to decrease or discontinue juice production.

Since
then, the juice products market has begun to recover. Since 1999, the market for juice products has witnessed significant increases in sales volume, stimulated by rising Russian
incomes and an increased interest in health issues, as well as by the advertising efforts of juice producing companies.

Additionally,
a number of Russian producers that survived the 1998 financial crisis have managed to restructure their production facilities using Western technologies and to strengthen
their market positions. In 2002, according to the Russian Union of Juice Producers, Russian producers had a market share of 95.6%. Russian producers often use cheaper domestic inputs and modern
packaging technologies, and they increasingly promote their brands on a national scale. The industry is now experiencing consolidation, as demonstrated by the increase in acquisition activity and the
decrease in the number of brands on the market. According to a Business Analytica survey conducted in Russia's eleven largest cities, from September through December 2002, there were
approximately 131 brands of juice products in the Russian juice market, though only ten of these brands accounted for 84.5% of the market. Western companies, whose products dominated the Russian juice
market a few years ago, now have been forced to increase promotion of their brands and to develop local manufacturing to compete with Russian producers.

Our products and brands

Our dairy and juice products accounted for 68.3% and 31.7% of our net sales in 2002, respectively. Our principal geographic market is Russia, with the Moscow
market being among the most significant. The following table sets forth our annual consolidated net sales, the proportion of consolidated net sales accounted for by our main business lines, our
reported annual production volume and the growth rate by production volume of our main business lines:

|                                       |  | 2002 |       | 2001 |   | 2000  |  
|-------------------------------------- |  | ---- | ----- | ---- | - | ----- | -
|Dairy products                         |  |      |       |      |   |       |  
|Sales (in millions)                    |  | $    | 563.0 |      | $ | 485.4 |  
|Percent of total sales                 |  |      | 68.3  | %    |   | 72.0  | %
|Sales volume (in thousand metric tons) |  |      | 946.0 |      |   | 847.2 |  
|Annual volume growth (% year on year)  |  |      | 11.7  | %    |   | 34.4  | %
|Juice products                         |  |      |       |      |   |       |  
|Sales (in millions)                    |  | $    | 261.7 |      | $ | 189.2 |  
|Percent of total sales                 |  |      | 31.7  | %    |   | 28.0  | %
|Sales volume (in million liters)       |  |      | 476.7 |      |   | 327.1 |  
|Annual volume growth (% year on year)  |  |      | 45.6  | %    |   | 30.7  | %
|Total net sales (in millions)          |  |      | 824.7 |      |   | 674.6 |  

38

---

Dairy products and brands

Our principal dairy product lines, types of products, brands, and their approximate percentage of our total production by volume in 2001 and 2002 are as follows:

|Product line               |  | Types of products                                                                                                                                |  | Brands                                                                                                                 |  | Approximate
percentage of
total
production
by volume
in 2002 |  | Approximate
percentage of
total
production
by volume
in 2001
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------ |  | ------------------------------------------------------------
|Traditional products       |  | Sterilized and pasteurized milk, butter, cream, traditional sour-milk products such as kefir, cottage cheese, soft cottage cheese and sour cream |  | "Little House in the Village," "Darling Mila," "Kuban Cow," "Happy Milkman," "M," "Slavyanochka" and "Nizhny Novgorod" |  | 63.2%                                                        |  | 68.4%                                                       
|Yogurts and dairy desserts |  | Traditional and drinking yogurt and dairy desserts, including mousse, fruit-flavored milk and kefir, puddings and flavored cottage cheese        |  | "Wonder," "Dessertino, " "Frugurt," "Lada" and "Ginger Up"                                                             |  | 19.7%                                                        |  | 19.7%                                                       
|Enriched products          |  | Milk, sour-milk and juice-milk and yogurt products enriched with vitamins, microelements, bacterium and other components                         |  | "Bio-Max," "Mazhitel" and "Doctor Bifi"                                                                                |  | 11.7%                                                        |  | 6.6%                                                        
|Dairy products for infants |  | Milk, sour milk and other dairy products intended for use by infants and children                                                                |  | "Agusha"                                                                                                               |  | 4.6%                                                         |  | 4.7%                                                        
|Cheese                     |  | Traditional cheese products                                                                                                                      |  | "Orlov's Creameries" and unbranded cheese                                                                              |  | 0.8%                                                         |  | 0.6%                                                        

The Russian market for packaged dairy products has several defined market segments. The market can also be divided into non-branded and branded
products, although non-branded products generally only cover the mass market segments. Our branding policy is designed to ensure that we reach customers in most of the segments with the right mix of
brands, brand images and packaging formats. We support strong national brands, as well as local brands which are well established in the regions. The following chart illustrates our estimates of the
current market segment positioning for our major brands, as well as a general description of the purchasers which each market segment covers:

|             |  | General purchaser
characteristics |  | Traditional
products            |  | Yogurts and
dairy
desserts                       |  | Health-oriented
enriched
products |  | Dairy products
for infants
|------------ |  | --------------------------------- |  | ------------------------------- |  | ------------------------------------------------ |  | --------------------------------- |  | --------------------------
|Premium      |  |                                  |  | Aged 25-45                      |  |                                                  |  | "Mazhitel"                        |  | "Biovit"                  
|             |  |                                  |  | Annual income of $3,000 or more |  |                                                  |  |                                   |  |                           
|Upper-middle |  |                                  |  | Aged 25-45                      |  | "Little House in                                 |  | "Ginger Up"                       |  | "Bio-Max"                 
|and middle   |  |                                  |  | Annual income of                |  | the Village"                                     |  | "Wonder"                          |  |                           
|             |  |                                   |  | $1,250 or more                  |  |                                                  |  |                                   |  |                           
|Middle and   |  |                                  |  | Aged 18-65                      |  | "Happy Milkman,"                                 |  | "Frugurt"                         |  | "Doctor Bifi"             
|lower-middle |  |                                  |  | Annual income of $800 or more   |  | "Slavyanochka," "Darling Mila," "Kuban Cow," "M" |  |                                   |  |                           
|Mass         |  |                                  |  | Aged 35-55                      |  | "Nizhny Novgorod"                                |  | "Lada"                            |  |                           
|             |  |                                  |  | Annual income of $400 or more   |  |                                                  |  |                                   |  |                           

---

Note:    Our
estimates of annual income have been converted to dollars for your convenience. See "Item 5. Operating and Financial Review and ProspectsA. Operating
ResultsExchange Rates and Inflation."

39

---

In general, we seek to maintain at least one brand within most dairy market segments, and we intend to develop new brands to expand our coverage
of attractive segments, including the premium segment. For example, in 2002 we developed the "Ginger Up" brand, which is targeted at children and includes dairy products as well as juices.

Market trends and competition.Overall, the Russian dairy market has been growing modestly over the
last three years. According to Tetra Pak, the total market for liquid dairy products in Russia was 9.8 billion liters in 2000 and 10.0 billion liters in 2001. We estimate that the market increased to
10.3 billion liters in 2002. We believe that consumption may increase, as rising household incomes in Russia may tend to bring about higher protein consumption and preferences for value-added
products. In particular, Russian households have proven receptive to yogurt, enriched dairy products and dessert dairy products. Given the existing low per capita consumption, we see this market
segment as providing an opportunity for growth. We also expect continued growth in the consumption of products with long shelf lives, including sterilized milk.

We
aim to produce quality products to satisfy the demands of consumers, using quality ingredients, modern technology and the results of scientific research. Due to our marketing
strategy, large distribution network and effective product promotion, we have managed to gain leading positions across most dairy product sectors in the Russian market. According to an AC Nielsen
study conducted in nine major cities located throughout Russia, in 2002, we were the leader in almost all packaged dairy markets with a market share, in terms of sales volume, of 33.4% in traditional
dairy products, 43.5% in enriched dairy products and 45.4% in yogurt and dessert dairy products. We also process a significant portion of the raw milk processed in Russia. According to statistics of
the Ministry of Agriculture of the Russian Federation, in 2002, total raw milk production in Russia was 33.5 million tons, of which
13.4 million tons was used in industrial processing and the rest was used for immediate consumption. The 1.1 million tons of raw milk that we processed in 2002 represented approximately 8.2% of the
total industrial raw milk processed in Russia.

Though
some measure of consolidation is occurring in the Russian dairy industry, the milk processing sector in Russia remains fragmented and currently includes over 3,200 enterprises.
Due to the high degree of fragmentation, the market is very price competitive. In 1999, we responded to this competitive challenge by holding our prices constant in an inflationary environment.
However, from 2000 to the present, we have expanded our distribution service, reduced our sales to wholesalers and increased our sales to retailers, and increased advertising. We believe that these
strategies have increased public awareness of our products and helped us to continue to expand our market share without aggressive pricing.

In
the traditional dairy products markets, we compete primarily with local producers, such as St. Petersburg-based Petmol and the Moscow-based Ostankino Dairy Plant and Ochakovo Dairy
Plant, as well as with a number of smaller producers in other regions of Russia. In the enriched dairy products market, we compete primarily with Danone, the Ochakovo Dairy Plant and Petmol. In the
yogurt and desserts market and, to some extent, in the children's products market, we compete with foreign producers such as Danone, Campina, Onken and Ehrmann who continue to invest in their
businesses in Russia. We view the following producers as our primary competitors:



40

---



We
believe that we generally have several advantages over other Russian producers, including a larger production capacity and higher quality products, as well as greater innovation, new
product development, geographical coverage, centralized management and marketing capabilities. However, many other domestic producers tend to benefit in comparison to us from lower cost bases,
including lower advertising and distribution costs, and, for certain consumers, a preferred image.

Recent
trends also indicate that industry consolidation may lead to the appearance of larger domestic producers, which could become significant competitors. For example, according to
press reports, a subsidiary of Multon, our principal competitor in the Russian juice market, acquired a 20% stake in the Ochakovo Dairy Plant in December 2001, and the two controlling
shareholders of Multon subsequently acquired a further 48% stake in the Ochakovo Dairy Plant. This acquisition of 68% of the Ochakovo Dairy Plant by Multon and Multon shareholders may increase the
competitive position of the plant in the Russian dairy market by affording it the benefits of Multon's wider distribution network and marketing potential. In addition, we saw the emergence in 2002 of
a new competitor in the dairy market. Planet Group undertook a string of acquisitions during 2002, including its acquisition of our major competitor Petmol in St. Petersburg and Galakton, Ukraine's
largest dairy plant. These acquisitions, along with its potential access to resources from Russian oil company Sibneft, its parent company, will likely heighten its competitive position substantially
in the Russian and CIS dairy products market.

Foreign
dairy manufacturers generally have large promotional budgets and advanced production know-how, allowing them to offer quality and innovative products, and strong distribution
networks. While foreign manufacturers generally tended in the past to focus on niche markets, usually in the premium segment, they are now increasingly concentrating on producing products for the
average Russian consumer with an average income. Moreover, whereas our foreign competitors tended in the past to rely primarily on imported products, which are more expensive, a number of these
companies, such as Danone, Parmalat, Campina and Ehrmann, have invested and continue to invest in domestic production facilities, reducing the competitive advantages that we have over foreign
competitors without domestic production capability. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and Industry Increased domestic
production by our foreign competitors could reduce our competitive advantages against them, which would adversely affect our market share and results of operation."

For
example, Danone owns two plants in Russia and has introduced several of its yogurt brands into the Russian market, some of which were developed specifically for Russian consumers.
The Dutch company Campina also owns a dairy plant in Russia that produces fresh yogurts and yogurts with a long shelf life. In addition, the German companies Ehrmann and Onken produce yogurt at
Russian

41

---

plants,
and Onken has reportedly invested over 20 million euro to install milk production equipment in its yogurt factory. Due to their increased domestic production of yogurt and dairy desserts,
foreign producers have become our main competitors in these sectors, whereas we mainly compete with domestic producers in the traditional milk products sector.

We
believe that we have several important competitive advantages that will allow us to maintain a leading position in the Russian dairy market: strong and diversified brands, stable
access to raw milk, a broad proprietary distribution network, new product development focus, modern production assets and technology, access to external capital and a strong management team. We intend
to take advantage of these strengths through our strategy of promoting brand awareness and loyalty with an emphasis on product quality, as well as by continuing our efforts of the last three years to
focus on developing new products equal to or better in quality than those offered by Western producers.

Juice products and brands

Our juices are produced primarily at the Ramenskiy Dairy Plant, Lianozovo Dairy Plant and Tsaritsino Dairy Plant. We also produce juices at our plants in Nizhny
Novgorod, Timashevsk, Vladivostok, Novosibirsk and Kiev. According to the Russian Union of Juice Producers, we had a 31.4% share of the Russian juice market during 2002.

Our
principal juice product lines and types of products and brands are as follows:

|Product Line                         |  | Brands and Types of Products
|------------------------------------ |  | ----------------------------
|Juice and nectars                    |  |                            
|produced from juice                  |  |                            
|concentrate                          |  |                            
|                                     |  |                            
|                                     |  |                            
|Traditional berry-juice-based drinks |  |                            
|Other juice-based drinks             |  |                            
|                                     |  |                            

Products in the juice products market tend to be branded and, as with the dairy products market, there are several defined segments. However, the
market segmentation tends to fall along different lines than the dairy products market, primarily due to the tendency for dairy products to be considered food staples. We have positioned our portfolio
of juice and nectar brands so that we have at least one of our brands in each of the five juice product market segments, with two or three brands in particularly competitive segments. The following
chart illustrates our estimates of the current market

42

---

segment
positioning for our major brands, as well as a general description of the purchasers which each market segment covers:

|             |  | General Purchaser
Characteristics |  | Juice and
nectars
produced
from juice
concentrate |  | Traditional
berry-
juice-based
drinks |  | Other
juice-based
drinks |  | Juice-content
products for
infants and
children
|------------ |  | --------------------------------- |  | ------------------------------------------------- |  | ------------------------------------- |  | ------------------------ |  | -----------------------------------------------
|Premium      |  | 
                               |  | Aged 25-45
Annual income of $2,000 or more        |  | "Rio Grande"                          |  |                          |  |                                                
|Upper-middle |  | 
                               |  | Aged 20-50
Annual income of $1,250 or more        |  | "J-7"                                 |  | "Wonder
Berry"           |  | "DJ"                                           
|Middle       |  | 
                               |  | Aged 25-45
Annual income of $800 or more          |  | "100%
Gold"                           |  |                          |  |                                                
|Lower-middle |  | 
                               |  | Aged 16-50
Annual income of $600 or more          |  | "Lovely
Garden"                       |  |                          |  |                                                
|Mass market  |  | 
                               |  | Aged 16-55
Annual income of $400 or more          |  | "Dr. Fresh"                           |  |                          |  |                                                

---

Note:    Our
estimates of annual income have been converted to dollars for your convenience. See "Item 5. Operating and Financial Review and ProspectsA. Operating
ResultsExchange Rates and Inflation."

Market trends and competition.The Russian juice market grew steadily from the time
of the dissolution of the Soviet Union until the 1998 financial crisis, following which there was a significant decrease in consumption from which the market had substantially recovered by 2000. The
total market for juice products, defined as the total consumption of domestically produced and imported products, increased to 1,480 million liters in 2002, according to the Russian Union of Juice
Producers, from 760 million liters in 2000, according to Tetra Pak. We believe that rising household incomes in Russia and the increasing preference for juice over fresh fruits, which generally
accompanies increased incomes, will encourage the consumption of vitamin-rich, value-added products with different tastes and nutritional characteristics. For example, according to a Business
Analytica survey of 11 major Russian cities (the "Business Analytica Survey"), in Moscow and St. Petersburg, which enjoy higher average per capita incomes than most other parts of Russia, combined
average consumption of juice in September through December 2002 was approximately 31 liters per capita, as opposed to national per capital consumption of approximately 10 liters per
capita.

The
markets for juice products in Moscow, the Moscow region and St. Petersburg are relatively mature compared to other regions of Russia and is expected to exhibit relatively modest
growth rates in the future. We believe that our growth opportunities lie in the regions of Russia with lower fresh fruit availability or rising household income. We also believe that greater potential
for growth lies in regions and CIS countries which are relatively undeveloped in terms of juice consumption, such as central and southern Russia, Siberia, the Far East and Ukraine.

Juice
consumption in the Asian part of Russia and Central Asia has exhibited limited growth, primarily caused by low purchasing power and the absence of a juice consumption culture in
those regions. Given these market characteristics, we are pursuing a marketing strategy aimed at promoting juice drinking habits by emphasizing the health benefits. We expect growth in demand in these
markets to be slower than in other parts of Russia.

The
operating environment has been challenging since the 1998 financial crisis. Competitive pressures have intensified because of the low purchasing power of households outside of Moscow
and St. Petersburg and the rising number of domestic producers. We initially responded to this competitive challenge by holding our prices constant in an inflationary environment, as well as by
introducing two new brands, one targeted at the middle-market price segment and the other at the mass-market price segment. During 2000 through 2002, we expanded our distribution service, reduced our
sales to

43

---

wholesalers
and increased our sales to retailers, added another mass market brand and increased advertising. As a result, in 2002, according to the Russian Union of Juice Producers, we had a 31.4%
share of the Russian juice market. According to the Business Analytica Survey, from September through December 2002, we had a 43.4% share of the juice market in Moscow. We believe that
these strategies have increased public awareness of our products and increased our sales to retailers, which has allowed us to continue to expand our market share at acceptable prices. At the same
time, however, our profit margins on our juice products decreased in 2002 due to vigorous market competition from domestic and foreign producers and due to consumer preference for low-price,
lower-quality juice products primarily in the regions outside of Moscow and St. Petersburg where per capita incomes are generally lower. See "Item 3. Key InformationD. Risk
FactorsRisks Relating to our Business and Industry Increased competition and consumer preference for low-price, lower-quality juice products primarily in the regions outside
of Moscow and St. Petersburg have resulted in declining profit margins in our juice segment, which may adversely affect our results of operations."

Our
principal competitors in the Russian juice market include the following companies:



An
important factor behind the success of domestic producers is the relatively low price of the products which they can offer at a quality level satisfactory to consumers. However, we
believe that we have significant competitive advantages over these Russian producers, including greater production capacity, marketing capabilities, brand awareness, brand value and distribution
networks, as well as higher quality products.

Several
foreign companies invested in domestic production facilities during 2001, including Coca-Cola, which began large-scale production of its "Minute Maid" brand juices at a
production facility in the Russian city of Orel. In addition, the Russian-Finnish joint venture United Juice Co. started production in St. Petersburg of its "Marli" brand juices, and the German
company Glocken Gold began to produce its juices at a plant outside of Moscow. Domestic production by foreign producers in Russia reduces the competitive advantages that we have over foreign
competitors without domestic production capability. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and IndustryIncreased domestic
production by our foreign competitors could reduce our competitive advantages against them, which would adversely affect our market share and results of operation."

However,
we believe that we can compete successfully against foreign producers. We offer our customers quality juice products with a range of different tastes and nutritional
characteristics. We also have a wide network of production facilities and sell our products through a broad proprietary distribution network with good customer service standards. Further, we have a
quality brand portfolio which ranks highly in almost all market segments, and we plan to continue to devote significant resources to advertising and marketing our leading brands.

44

---

Bottled water

We obtain natural mineral water from an underground source near the Valdai National Preserve, and in March 2003 we launched our bottled water factory in
the town of Okulovka in the Novgorod region. This plant is capable of processing up to 360,000 liters of bottled water per day. The still and sparkling natural drinking water bottled at our Okulovka
plant became commercially available during May 2003 and is marketed in Moscow and St. Petersburg under the "Sanctuary Valdai" brand name. As of December 31, 2002, we invested a total of
$6.5 million in the development of our bottled water production, and have allocated $6.6 million for investment in our bottled water business in 2003.

Although
there is no significant history of consumption of non-aerated bottled drinking water in Russia, the situation is changing due to environmental factors. Especially in
large cities such as Moscow, there is a rising interest in bottled drinking water. The mineral water market is expanding not only in terms of production volumes, but also in terms of the number of
brands. Moreover, the number of Russian premium brands is growing, while the share of imported brands is declining.

Our
aim in entering the bottled water sector is to satisfy the growing demand among Russian consumers for quality mineral water using ecologically pure Russian sources. As our Okulovka
bottling plant is strategically located near the Valdai Nature Preserve between Moscow and St. Petersburg, we will initially seek to enter the mineral water markets in these two cities. Thereafter we
intend to open several factories near ecologically sound water sources and market our water locally with local brand names, all under the umbrella "Sanctuary" brand.

We
believe that our primary competitors in this area will be Pepsi's "Aqua Minerale" and Coca-Cola's "BonAqua," as well as Borzhomi, Narzan and Saint Springs, all of which
are produced in the CIS.

We
plan to position our new brand in a more up-to-date style, accentuating the fact that it is a naturally produced mineral water, and will offer both still and
carbonated waters in a variety of bottle sizes, giving consumers a wider choice.

New Product Development

We invest significant financial and human resources in new product development, focusing on long-term strategic development projects that are expected
to create innovative products and technologies. Our product development department located at the Lianozovo Dairy Plant in Moscow had 21 employees as of December 31, 2002. It often cooperates
with third parties such as Russian research institutions, specialized research firms and suppliers. In 1999 and 2000, we spent approximately $1.4 million to establish a department focused on
new product development. In 2001, we spent approximately $1.3 million on activities associated with new product development, including $0.5 million directly on new product development
and $0.8 million on the development of our own research center. During 2002, we spent approximately $0.9 million on new product development.

Much
of our new product development effort over the past three years has focused on higher-margin, value-added yogurt and dessert products to help ensure that we can offer products which
match the quality and variety offered by our main foreign competitors in Russia. At present, we are focused on the development of enriched dairy products oriented towards Russian consumers, taking
into consideration the general deficit of micro- and macro-nutrients in the diets of the average Russian consumer. We attempt to link new product development with marketing and sales in an effort to
create innovative products and technologies.

Recent
new product developments include a new line of nectars marketed under the "Ginger Up" brand, which is targeted at infants and children and includes traditional dairy products as
well as juice drinks; a new range of enriched dairy products produced under the "Bio-Max" brand such as thick yogurts, yogurt beverages with fruit and bio-kefir with vitamins;
and a new juice and dairy mix

45

---

produced
under the "Mazhitel" brand. In 2003 we also introduced the locally themed "Vivat" brand of juices in St. Petersburg in connection with that city's 300th anniversary as well as a line of
innovative products under the "Neo" brand.

Besides
new product development, recent technological innovations include the development of our own stabilizers and bacteria cultures for the production of certain dairy products. These
new products will allow us to replace some of the raw materials which we currently import.

Advertising and Marketing

Our advertising and promotional strategies are prepared internally by our marketing and advertising departments who work closely with advertising agencies and
design studios. Our general policy and
overall aim is to promote our brands nationally and strengthen our image as a leading Russian producer of high quality products. To implement this policy, we create brand-oriented, national
advertising campaigns for consumers throughout Russia. This advertising primarily consists of television commercials, which allows us to reach the largest number of Russian consumers.

Additionally,
given the diversity of the regions in which we operate and in order to enhance flexibility in responding to regional market trends, we supplement our national television
advertising campaigns with regional advertising and marketing, consisting primarily of advertisements on local TV, promotions, point-of-sale displays, merchandising and
billboards. To the extent that this regional advertising is based on national campaigns, our regional marketing managers are responsible for adapting it to regional consumption patterns and needs.
Regional campaigns can also be created by regional brand managers, subject to central coordination and approval.

Our
advertising and marketing expenditures of $14.3 million in 2000, $19.6 million in 2001 and $34.9 million in 2002 constituted 3.1%, 2.9% and 4.2% of net sales,
respectively. Though we are, in some instances, able to obtain volume discounts, we expect these expenditures, as a percent of net sales, to increase due to market competition and annual media
inflation. According to Gallup, we were the seventh largest advertiser in Russia by advertising expenditures for 2000, the eighth largest advertiser in Russia in 2001, and the fourth largest
advertiser in 2002.

A
majority of our advertising expenditures are for the promotion of our leading nationwide brands, such as "J-7" and "Wonder." We plan to continue to allocate the bulk of our
advertising budget to a limited group of strategic brands which are highly ranked in their respective markets, helping us to compete against the non-branded products of small Russian
producers, as well as against branded products produced by Western and larger Russian manufacturers. We also plan to continue our aggressive advertising of selected new products.

We
continually seek fresh outlets for promoting our brands. For example, since 2001 we have sponsored the television program "The Last Hero" (the Russian version of "Survivor"), the
first reality-based series on Russian television. In this connection, our "J-7" brand products are featured in virtually all public relations and marketing relating to the
showon billboards, J-7 packaging, television and print advertisements, as well as on the show itself. We intend to continue our sponsorship of The Last Hero during the show's
next season. Another example of innovative marketing is our active promotion of the "Ginger Up" brand, which is targeted at children, with aggressive media advertising, and a unique "Ginger Up"
magazine for children.

We
have also built brand awareness through charitable work and sponsored events. For several years, we have sponsored events of a program of the International Charity Foundation called
"Hope Around the World." This program helps young orphans in 102 towns around the world. We also sponsor events of Ronald McDonald's Sports and Recreation Center for Children, which helps mentally and
physically disabled children; cooperate with the Society for Helping Children with Heart Diseases; and assist in the organization of International Invalid's Day, organized under the auspices of UNESCO

46

---

in
Russia. We also support various Moscow children's charities and concerts for children. In addition, we serve as a trustee of the Charity Foundation for special grants, which is headed by Mstislav
Rostropovich, a prominent Russian musician.

Sales and Distribution

The broad distribution of our products is an important element in maintaining sales growth and providing services to our customers. We attempt to meet the
changing and increasing demands of our customers by planning appropriate stock levels and reasonable delivery times consistent with achieving the optimal economics of distribution. In order to achieve
these objectives, we have developed a proprietary network of distribution centers and sales offices that are strategically located in approximately 70 cities in Russia and other countries of the CIS,
providing us with a broad national presence and facilitating the sale of our products to more than 15,000 customers. For the purposes of establishing pricing policies, coordinating interaction with
local authorities, production and raw material purchase planning, we divide Russia into two sales and distribution areas: European Russia and Asian Russia.

Distribution.Due to different consumption patterns and product characteristics, our dairy and juice
products businesses require different distribution strategies. We have therefore built two largely independent distribution systems for our dairy and juice products, although we use the same marketing
approach in each business and take advantage of synergies between the systems to the extent possible. Our bottled water will be distributed using our existing dairy and juice distribution networks as
well as a new water distribution network. The distribution strategy for water will largely follow the distribution strategy we developed for our juice products.

Given
the limited shelf life of dairy products, their distribution tends to focus on local customers near the production facilities. Typically, key dairy sales personnel are located at
the production plant and are responsible for regional sales activities, including facilitating orders and coordinating deliveries, customer account management, marketing analysis and reporting to
headquarters. We also operate smaller representative offices in surrounding towns which have the same responsibilities for local customers.

Our
infant dairy products, produced by the Moscow Baby Food Plant, are largely purchased by the Moscow City Government, which in turn distributes them through specialized milk kitchens
located around Moscow and the Moscow region. In 2001 and 2002, approximately 74.1% and 60.8%, respectively, of our child and infant dairy products sales volumes were distributed through these milk
kitchens, with the remaining sales volumes being sold through our distributors. The dairy products sales volume distributed through the milk kitchens decreased during 2002 while at the same time the
volume of commercial sales of dairy products increased. Thus, whereas in January 2002, the dairy products sales volume distributed through these milk kitchens comprised 68.0% of the
distribution volume and 60.2% of the proceeds of the Moscow Baby Food Plant, by December 2002, the dairy products sales volume distributed through these milk kitchens comprised 54.1% of the
distribution volume and 42.8% of the proceeds of the Moscow Baby Food Plant. Our sales to the Moscow City Government, which result from a tender process and were at prices approximately 7% below
market price in 2001 and approximately 20.1% below market price in 2002, constituted approximately 4.4% of our total dairy product sales in 2001 and approximately 2.3% in 2002. The increased discount
in 2002 resulted from the increase in the market price for the products sold to the Moscow City Government relative to the tender price during 2002.

Juice
products have longer shelf lives than dairy products, which allows us to distribute these products to customers across the country. We have established a broad proprietary
distribution network, with distribution centers in all key Russian cities with populations of more than one million and representative offices and sales agents in smaller regions. Typically, a
distribution center includes sales

47

---

and
marketing personnel dedicated to serving each customer group separately, and accounting and logistics personnel. Further, in order to build strong relationships with major customers, we have
adopted a concept of key account management which enables us to negotiate better trade terms with such customers.

Customer base and pricing.We distribute our products through a variety of channels, including
independent distributors and wholesalers, supermarket chains, small- and medium-sized grocery stores, open-air markets and restaurants. As a percentage of total sales during 2002,
approximately 66% of our dairy products volume and 80% of our juice products volume were delivered through independent distributors and 34% of our dairy products volume and 20% of our juice products
volume were delivered by direct distribution.

Our
general distribution strategy for dairy products is to increase the share of direct distribution to retailers such as supermarket chains, grocery shops and restaurants while
maintaining our relationships with independent distributors. Increased direct distribution to retailers allows for greater flexibility with short-lived dairy products and should improve gross margins
and increase our marketing potential, although direct distribution will also result in higher transportation and sales costs. To this end, we have expanded our proprietary distribution network.

Our
distribution strategy for juice products is to sustain and enhance our relations with independent distributors with most of whom we have developed long-standing,
beneficial relationships.

Independent distributors.As a percentage of our total sales during 2002 we sold approximately 66% of our dairy products
volume and 80% of our juice products volume through large networks of independent distributors, structured as follows:



A
number of independent distributors with which we work purchase both dairy and juice products from us. We offer our independent distributors certain discounts off our base prices. A
long-term tariff plan is developed with each independent distributor that provides the terms of the discount and deferred payment plans. The terms of these tariff plans may be adjusted
from time to time based on the performance of a distributor.

Independent
distributors purchase directly from us and then resell our products through their own distribution centers. Given the importance of these customers, we process orders from
independent distributors relatively quickly. Since the Lianozovo Dairy Plant computer center launched its electronic order system in January 2000, some of the transactions at the Lianozovo
Dairy Plant with independent distributors have been executed through the Internet. In 2001, we started to use an automated order system with all of our independent distributors who purchase our
products in large volumes, and in 2002 we began using this automated order system with our smaller independent distributors as well.

48

---

Our
general policy with regard to independent distributors is to limit their influence on our business by restricting each distributor's purchases to no more than 5% of the total sales
volumes of either our dairy or juice products. We expect the number of independent distributors with which we work to grow in the future, while at the same time we will seek to increase our direct
distribution with respect to our dairy products. Further, we seek to maintain control over the pricing of our products by distributors. Independent distributors that violate our pricing guidelines
more than three times are no longer given a discount on our base prices. Monitoring compliance with these pricing guidelines is conducted by a special department.

Supermarket chains.As a percentage of total sales in 2002, we sold approximately 8% of our dairy products volume and 7% of
our juice products volume to supermarket chains in Russia. Our approach to supermarket chains is to increase our share in this sector by becoming the supplier of choice to the major retailers by
developing key supplier relationships and improving customer service standards. We have focused our business on major retailers whose market shares are continuing to grow, such as Ramstore,
Perekryostok, Seventh Continent, Kopeika and others. We also sell our products to wholesaler Metro, whose customers are mainly small- and medium-sized businesses that purchase our products in bulk for
resale or everyday business use. Similar to independent distributors, supermarket chains receive a discount based on the volumes they purchase during each month. We aim to maintain retail price
control with supermarkets in the same manner as with independent distributors.

We
also plan to launch in 2004 an online project currently under development with supermarket chains and other retailers. Participants will order products through the Internet using
equipment and software provided by us that will enable them to access the Internet and upgrade their purchasing process. We have already implemented an Internet-based program for our Moscow dairy
product distributors, and we plan to expand our Internet-based distribution program in the future.

While
relationships with supermarket chains are currently beneficial for us, we expect that the growth of certain chains and consolidation of market power may increase the bargaining
power of some of these customers. For example, some Russian supermarket chains have from time to time created informal alliances in an attempt to obtain greater price discounts from manufacturers. We
do not intend to seek or sustain inefficient sales volumes and may withdraw from unprofitable business relationships. See "Item 3. Key InformationD. Risk FactorsRisks
Relating to Our Business and IndustryOur substantial reliance on independent retailers and wholesalers for the distribution of our products could lower our turnover and reduce our
competitiveness." Additionally, certain supermarket chains have begun to charge limited fees for shelf space for juice products, and we are generally charged limited fees for shelf space for dairy
products in Ukraine. We expect that this trend will continue.

Small retailers.As a percentage of total sales in 2002, we sold approximately 21% of our dairy products volume and 8% of our
juice products volume to small retailers. We have a dedicated sales force whose responsibility includes managing our relationships with small- and medium-sized grocery stores and open-air
market retailers. These retailers are charged our base price for our products. While we do not have any formal programs to monitor the retail prices charged by these entities, we encourage them to
follow our pricing guidelines.

Cash-and-carry stores.In Moscow, we also have our own cash-and-carry stores
which sell primarily milk and dairy products and through which, as a percentage of sales, we sold approximately 5% of our dairy products volume in 2002. Sales at these stores are at our base price. We
intend to maintain our sales through this type of store, though we do not intend to open additional stores.

Other sales.We are a supplier of McDonald's restaurants in Russia. Under our agreements with McDonald's, we supply
sterilized milk for sale under the "McDonald's" brand in their restaurants. We

49

---

also
sell our juice products directly to certain airlines, restaurants, schools, hotels and other establishments.

Transportation.We sell from our plant warehouses, distribution centers, cash-and-carry stores or
through direct delivery. We deliver our products to customers directly using third-party truck and railway delivery services and our own truck fleet. We do not charge our customers a delivery fee for
the shipment of products to our regional distribution centers, though a delivery fee may be assessed for the delivery to a customer from such distribution centers.

Export program.We export our juice products to the Netherlands, Israel, Germany, the United States,
Canada, Australia, Great Britain, Armenia, Moldova, Estonia, Latvia and Lithuania. With the exception of the Netherlands, where we operate a subsidiary with a distribution network, our juice products
are distributed in these countries through independent distributors. Our total juice export sales were approximately $0.7 million in 2000, $1.0 million in 2001 and $2.5 million in
2002.

In
addition to the export of juice products, we also export our dairy products to other European and CIS countries, where they are distributed through independent distributors. Our total
dairy export sales were approximately $0.5 million in 2000, $2.9 million in 2001 and $2.6 million in 2002. We plan to increase the export of milk products to CIS countries.

We
began exporting our products to Western markets in 1999, in particular our traditional berry-juice drinks which we marketed under the "Wonder Berry" brand. We selected this product
because of its distinctiveness and the opportunity it presented to take advantage of the expansion of the red-berry juice market in Europe.

In
preparing to begin our export program, we commissioned Indumar Ogilvey to conduct a survey of potential demand for our products in the Netherlands. Qualitative and quantitative
testing of the "Wonder Berry" drink among Dutch consumers produced rather promising results, and we began to sell this drink in the Netherlands in the autumn of 2000. Wonder Berry is currently sold in
stores throughout Benelux.

In
early 2000, we began selling our juice products in Israel, where our "Wonder Berry," "100% Gold" and "Rio Grande" juice products are currently available. In order to address consumer
preferences in Israel, our "Wonder Berry" juice products have been certified kosher.

We
also began to ship "Wonder Berry" to Australia during 2002, where it was sold in approximately 185 Woolworth outlets.

We
intend to continue market tests and market research in, as well as one-off deliveries to, foreign countries in order to determine future potential markets.

In
exporting our products to a country, we attempt to meet the applicable legislation governing the import of food products into the country. Independent distributors have, in some
cases, attempted to export products to other countries that did not meet applicable legislation. For instance, an independent distributor attempted to export several of our juice products into the
U.S. which did not conform to Federal Drug Administration requirements in October 2000.

Production and raw materials



As an internal quality standard, and in addition to compliance with the relevant Russian quality standards, we attempt to ensure that our products conform to the
quality standards of organizations such as the World Health Organization, l'Association Francaise de Normalisation and the Food and Agricultural Organization, as well as the regulations of the
European Union. We are also a member of the International Federation of Fruit Juice Producers and the Russian Union of Juice Manufacturers.

50

---

In
addition, we were certified in 2001 and 2002 for meeting the British Retail Consortium (BRC) food technical standard, which required a third-party assessment of our premises, operational systems
and procedures by a certified BRC auditor, and we intend to seek such certification again for 2003. We have also helped relevant Russian government agencies initiate and develop corresponding
regulations for the Russian market.

In
developing new types of products, we cooperate closely with the Institute of Nutrition of the Russian Academy of Medical Sciences, Moscow State University of Food Production and the
GFL-Laboratory in Berlin, Germany. This cooperation has provided our employees with scientific advice, solutions to technical problems and on-site training.

We
have our own research laboratory with a team of scientists and experts. Samples of all our primary ingredients and samples of our final products undergo microbiological analysis and
in-depth testing. In addition, we have laboratories at all of our plants that perform random quality checks on our products at all stages, including quality checks on the raw milk supplied
by dairies to us, the materials at our production facilities and the finished products in our warehouses. Some of our products have been singled out for their quality. For example, the Institute of
Nutrition of the Russian Academy of Sciences has recommended the products of the Tsaritsino Dairy Plant for children from the age of eight months, as well as for pre-school children.

We
have been upgrading our facilities with advanced technological engineering. Our significant investments in manufacturing have helped enable our products to compete with those of
leading domestic and international manufacturers. For example, at the Lianozovo Dairy Plant, we have installed new production lines of Tetra Brik Aseptic, of Tetra Pak, Sweden, for bottling juices,
nectars and milk into cartons with a plastic cap and an application foil tape. Additionally, the reconstruction of the Moscow Baby Food Plant and installation of new production lines there has allowed
us to improve the quality of the products produced at this plant. All the lines at the Moscow Baby Food Plant are now equipped with aseptic technology. The method of ultrafiltration we use at this
plant also allows us to produce a children's cheese paste which retains its most beneficial nutrient, serum protein, giving it a higher nutritional value than similar products manufactured at other
dairy plants.

We
have uniform quality standards for all our enterprises. When we enter regional markets, we seek to raise the standards of consumption to a higher level, offering a wide range of
quality products at reasonable prices.

We
also seek to make efficient use of our milk supply and handle surplus raw milk resulting from seasonal differences in supply by processing this milk into longer-life
products such as milk powder and butter. Our ability to handle these imbalances in supply is important for cost-effective purchasing of raw milk throughout the year.

51

---





The main raw materials we use to produce our dairy and juice products include the following:



The
prices of each of the foregoing raw materials are generally volatile.

Our
purchasing policy is to increase the share of locally produced food raw materials that satisfy our quality standards. We have focused on developing partnerships with established
leaders in the field of local food production, including the leading Russian raw milk, dry milk, fruit and sugar producers. In each region where we require raw milk, we establish direct supply
contracts with local individual farmers and collective farms. We have also begun entering into more purchasing arrangements with Russian suppliers of raw materials in the juice sector. In 2002 we also
acquired Depsona, a fruit juice and concentrate producer in Central Russia, which will allow us to reduce our dependence on imported juice concentrates. We purchase substantially all of our raw
materials directly and do not engage in a significant amount of barter transactions.

We
also purchase certain raw materials such as bacteria cultures, juice concentrate and flavorings from foreign manufacturers due to the unavailability of products of appropriate quality
locally. We use quality raw materials, supplied by producers from approximately 25 countries such as Cargill (U.S.), Quatrale (Brazil), Jahncke (Germany), Givaudan (Germany), Hahn (Germany), Wild
(Germany), and Firmenich (Switzerland). Our flagship "J-7" juice line, the best-selling juice brand in Russia, was created with consulting assistance from Cargill, the world's
largest supplier of juice concentrates.

"Milk Rivers" program.We have strengthened our position in the dairy market by developing our own
network of raw material suppliers, in significant part through investments that support agricultural producers. As of December 31, 2002, our investment in these programs has totaled
approximately $14.3 million.

In
the summer of 1999, we merged and formalized these programs under our "Milk Rivers" program (referred to as "Dairy Rivers" in the notes to our financial statements included elsewhere
in this document), through which we provide local dairies with trade loans, feed, and leased combines and milking and refrigeration equipment. In selecting dairies to participate in this program, we
choose only those that seek to increase the quality of their products and raise the productivity of their herds.

Under
the Milk Rivers program, we have rented advanced German and Swedish feed production, milking and refrigeration equipment for periods from three to eight years to approximately 90
agricultural enterprises located in the Moscow region. The lease receivables are offset with milk supplies based on a predetermined schedule during the lease term. The lease receivables are
denominated in U.S. dollars and Russian rubles. The lessees have the option to settle receivables through the delivery of milk supplies based on a predetermined schedule. The settlement is based on
milk prices that are either fixed in U.S. dollars in the range of $0.17 to $0.21 per kilogram, depending upon the quality, which approximates the average cash prices at the inception of the lease, or
is variable dependent upon prevailing market prices. Equipment leased out to farms includes milking and

52

---

refrigeration
equipment for accelerated milk freezing and the temporary storage of milk at farms, and mangers and other technical devices that increase the productivity of farms. The type of equipment
provided depends on the needs of each particular farm. We have also set up a service center to assist the participants in keeping the leased equipment in good repair.

Under
the Milk Rivers program, we also extend credits to dairy farmers for the purchase of cattle.

We
plan to eventually expand the scope of this program to include all regions of Russia and other CIS countries where we produce our dairy products. For example, we have commenced the
Milk Rivers program and invested $2.0 million in the Krasnodarskiy region in Russia, where we have two production plants.

Other initiatives.A key factor for enhancing milk productivity of a herd and increasing milk quality
is the availability of a good feed base. This particular problem has been one of the most important in recent years and arose because of harvesting problems deriving from a lack of modern harvesting
machinery. For this reason, the second stage of the Milk Rivers program has entailed providing a number of the participating agricultural enterprises with new feed-harvesting machines.
Doppstadt, a German company, has become our partner in this project.

We
believe that providing dairies with wholesome, well-balanced compound animal feed is essential for increasing the productivity of dairy herds, especially in the winter. We
have participated in a program since 1999 with feed producers Gerkules (Klin) and AO Lukhovitsky Milling Plant and, in 2001, we purchased grain and supplied approximately 36,200 tons of wholesome
compound feed to dairies in the Moscow region and adjacent regions. In 2002, we purchased grain and supplied approximately 29,800 tons of wholesome compound feed to dairies. As with the Milk Rivers
program, payment for the feed is made with milk supplies. The offset milk price is in a range which approximates average cash prices for milk.

Seasonality

The demand for our dairy products is significantly higher during the winter months, when Russian raw milk production is at its lowest. Conversely, during the
summer months we generally experience depressed demand for dairy products, while raw milk production is at its peak. To address these seasonal demands, we have commenced and expanded the production of
dry milk at some of our dairy production facilities for use in production during the winter months, and have also acquired plants that specialize in the production of dry milk.

The
demand for our juice products traditionally peaks during April through May and in December. We believe that the high demand during April through May is related to the public's
heightened desire for vitamin-rich food and drink products during the transition from winter to spring, and that the high demand in December is related to increased juice consumption
during the holidays.

The
demand for both dairy and juice products in southern Russia rises in the summer due to an increase in the number of tourists. To meet this seasonal increase in demand in southern
Russia, we have expanded to double the capacity at our plants located in Timashevsk and Kiev, and in 2002 we acquired dairy plants in the Krasnodar region and in Kharkov, Ukraine.

Packaging

Our principal packaging raw materials include materials needed for packaging our dairy and juice products, consisting mainly of composed material, polymeric
material and foil. Our principal supplier of composed material for the production of milk and juice carton containers is Tetra Pak, the world leader in manufacturing equipment and materials for
aseptic packaging of liquid food products. Tetra Pak supplies approximately 90% of our packaging materials, and we are substantially dependent upon this sole supplier to meet our requirements. As a
major Russian consumer of Tetra Pak products, we have

53

---

annual
contracts with Tetra Pak, which supplies us from its Russian plants as well as from European plants.

We
have established similar relationships with companies such as SIG Combibloc, GEA Finnah, Senaplast, APV, Solvay and Huhtamaki Van Leer. As part of our strategy to increase locally
produced raw materials, we are developing relationships with Russian manufacturers of packaging materials, in particular with companies such as Lintekhnoresurs and Soyuz. We also intend to begin using
more plastic packaging for our products.

Trademarks and Patents

We have registered brand names and trademarks throughout Russia and in other countries. As of December 31, 2002, we had successfully registered 122
trademarks in Russia and 40 trademarks abroad. The trademark application for one of our products, "Wonder Berry," was rejected in Finland and Bulgaria, and we are currently contesting the rejection in
Bulgaria. We successfully contested the rejection of our "Wonder Berry" trademark application in Armenia. As of January 30, 2002, we had 195 pending trademark applications in Russia and 78
pending trademark applications abroad. The brand names listed above under "Our products and brandsDairy products and brands" and "Our products and
brandsJuice products and brands," which we have registered in Russia, are material to us. We also own several licenses, patents and proprietary recipes, know-how and
technologies related to our products and processes. See "Item 3. Key InformationD. Risk FactorsRisks Relating to our Business and IndustryWe may not be
able to protect our intellectual property rights adequately, resulting in material harm to our financial results and ability to develop our business" for a description of the risks related to the
protection of our trademarks.

Insurance

In June 2003, we acquired insurance coverage for our eleven major production facilities, including the Lianozovo Dairy Plant, Tsaritsino Dairy Plant,
Moscow Baby Food Plant, Ramenski Dairy Plant, Timashevsk Dairy Plant, Ufa Dairy Plant, Kiev Dairy Plant, Kharkov Dairy Plant, Bishkek Dairy Plant, Siberian Dairy Plant and Vladivostok Dairy Plant. The
insurance is provided by a leading Russian insurer, AlfaInsurance, and reinsured by AIG Russia and Munich Re. The coverage is a standard "All Risks" insurance package covering the most valuable
equipment at these facilities.

Regulation

Production, sale and distribution of foods and beverages in the Russian Federation is regulated by general civil legislation and by special legislation that
includes quality standards and various safety and sanitary rules.



Aside from federal executive bodies and their structural subdivisions that have authority over general issues, such as defense, internal affairs, security, border
service, justice, tax enforcement and rail transport, there are a large number of government agencies directly involved in regulating and supervising the quality and safety of food in the Russian
Federation.

The State Sanitary Epidemiological Service, a division of the Ministry of Health Protection of the Russian Federation.The
Ministry of Health Protection of the Russian Federation is the principal federal body authorized to supervise sanitary and epidemiological issues in the Russian Federation. The State Sanitary
Epidemiological Service of the Russian Federation (or Gossanepidservice) is a division within the Ministry charged with carrying out these supervisory responsibilities. The organs of Gossanepidservice
develop, review, revise, examine, approve, give effect to, publish, control and supervise sanitary-epidemiological rules (which include sanitary rules, sanitary standards, and hygienic

54

---

requirements).
Gossanepidservice also monitors the sanitary conditions of production sites and equipment, fulfillment of sanitary standards for raw material and finished product storage at
manufacturing plants, and compliance with sanitary standards for the storage and sale of food products at wholesale and retail outlets, and businesses catering to the public.

The State Committee on Standardization and Metrology.The State Committee on Standardization and Metrology sets and oversees
compliance with obligatory general and industrial standards.

The State Veterinary Service, a division of the Veterinary Department of the Ministry of Agriculture of the Russian
Federation.The State Veterinary Service supervises the sanitary safety of raw food materials used in the production of food products and beverages where such raw
food materials are of derived from animals.

The State Inspectorate for Trade, Quality of Goods, and Protection of Consumers' Rights under the Ministry of Economic Development and Trade of the Russian
Federation.The State Inspectorate for Trade, Quality of Goods, and Protection of Consumers' Rights monitors the quality and safety of food products at wholesale
and retail outlets and carries out inspections of sellers' premises.



Russian legislation regulating quality and safety of foods and beverages includes the following acts:



55

---





Certain food and beverage products (such as children's products, dietary foods, milk products enriched by vitamins and/or other microelements, additives to food,
and food products manufactured using technologies that have never been applied in the Russian Federation) must be registered with the Russian government if they are either manufactured in Russia or
imported into Russia for the first time. The regulation makes it illegal to manufacture, import or circulate products that are subject to state registration but have not been registered.

The
product registration process includes:



The
state registration of products is carried out by the Ministry of Health and certain divisions of the State Sanitary Epidemiological Service of the Russian Federation authorized by
the Ministry of Health (or together with the Ministry of Agriculture with respect to products derived from animals).



The certification of products and services is currently regulated by the Law on the Certification of Products and Services, which sets forth certification
requirements in the Russian Federation. This law will be superceded by the Federal Law on Technical Regulation when it becomes effective in July 2003. Product certification is a procedure
whereby an agency authorized by the government confirms that a product complies with technical regulations, standards and requirements. Milk products, juice and beverages are subject to mandatory
certification. Conformity symbols evidencing that the manufacturer has undergone certification procedures are required to be printed on a product's packaging. Failure to mark a product with a required
conformity symbol carries possible administrative sanctions.

56

---



A supplier of raw milk must provide a certificate stating that the farm from which it originated has passed a health inspection. Milk bought in bulk must also
conform to requirements with respect to temperature, color, sedimentation, content of neutralizers, heavy metals, density, protein content, fat content, alcohol content and other characteristics.



Laboratory employees and technical specialists must verify that the condition of equipment, implements, raw materials and packaging conform to sanitary
requirements. For example, in the course of manufacturing, microbiological tests must be conducted of samples of raw materials, packaging and products. Products are tested for their content of
chemical pollutants, toxins, medicinal and hormonal preparations, radionuclides and pathogenic microorganisms. They are also tested to identify bacteria, yeast and mold content, and to determine their
sterility and the effectiveness of the pasteurization process. Products are also examined to determine the amounts of certain nutrients they contain, including protein, fat, vitamins, and
carbohydrates. In addition, the cleanliness of the factory, storage conditions and employees must be monitored.

Food
products and beverages must be transported in specially equipped vehicles, for which sanitary registration documents must have been issued.



Manufacturers and suppliers of all types of packaging materials used in the production of dairy and juice products must provide certificates of conformity and
sanitary-epidemiological certificates for packaging materials showing that the packaging materials are permitted and safe for contact with the food products.

The
Law on the Protection of Consumers' Rights determines the scope and format of the information that should be made available to consumers. According to this law and other state
standards, the packaging of finished products must contain the following information: the name of the product, information regarding its certification, conditions of use (if necessary),
contraindications (if any), preservatives and food additives, net mass or volume, ingredients, nutritive value, conditions of storage, shelf life, name and address of the manufacturer and other
information. The law also authorizes a wide range of government and public agencies to monitor producers' compliance with the requirements of the law and imposes sanctions and penalties if such
requirements are not met.



The Law on the Quality and Safety of Food Products defines children's food products as food products specially designed for children under 14 that meet certain
nutritional requirements. Such products are subject to more stringent sanitary-epidemiological standards. For example, certain ingredients and components are prohibited for use in children's food
products, and the procedures for monitoring raw materials and ingredients used in manufacturing, technological processes, and sanitary conditions of production are stricter for children's dairy
products than for other dairy products. Laboratory analyses and tests must be conducted for a broader list of microbiological indicators. Packaging materials for children's dairy products must be
certified for use with children's products. Children's dairy products are also subject to special labeling requirements. For example, packaging of children's dairy products must bear information on
the purpose and conditions of use of such products.

57

---



The Russian Ministry of Antimonopoly Policy and Support of Entrepreneurial Activity (the Antimonopoly Ministry) is the governmental agency that regulates the
prevention and limitation of monopolistic activity and the support of competition in the market. The Russian Law on Competition and Restriction of Antimonopoly Activity on Commodity Markets prohibits
the abuse of a dominant position to limit competition. The Antimonopoly Ministry has included our subsidiary, the Moscow Baby Food Plant, in its register of entities holding a dominant position, as
the plant controls over 35% of the market for milk products for babies in Moscow and the Moscow region. A dominant position does not impose additional reporting or other requirements on us; however,
because of our dominant position, the Antimonopoly Ministry monitors our activities.



The following chart sets out the current corporate structure of our holding company and our primary operating subsidiaries, as well as our percentage ownership of
the common stock of each subsidiary as of April 1, 2003.

Corporate Organization

The following chart sets out the current corporation structure of our holding company and our primary operating subsidiaries, as well as our percentage ownership
of the common stock of each subsidiary as of April 1, 2003.

LOGO

58

---





Production facilities

We currently manufacture our products at 23 production facilities, including 20 plants that principally produce dairy products, two plants that produce
exclusively juice products and one water production plant. We have made substantial investments to maintain and enhance quality, lower costs and increase productivity. Over 2000, 2001 and 2002, we
invested approximately $271.9 million in the modernization of our existing production facilities and acquisitions of new production assets. Our main production plants are capable of managing
the production of a diverse and relatively rapidly changing product range, enabling us to adapt quickly to changes in consumer demand on a seasonal basis or otherwise. We have started extensive
modernization and cost cutting programs at a number of our recently acquired plants, such as the Rubtsovsk Dairy Plant, Kiev Dairy Plant, Bishkek Dairy Plant, Nizhny Novgorod Dairy Plant and Ufa Dairy
Plant, which have caused a temporary reduction of utilization rates.

We
also review our production headcount with the aim to enhance productivity. Sales per employee, calculated on the basis of our total headcount, which is a common measure of
productivity used in the food industry, was $72,000 dollars per employee in 2000, $60,000 per employee in 2001, and $50,773 per employee in 2002. The decrease in sales per employee in 2001 was caused
by the high number of production employees at the less automated regional plants we acquired during that year, and the further decrease in 2002 was caused by the high growth in our sales and
distribution personnel in connection with the expansion of our distribution network into the regions.

The
following table contains data regarding our production facilities. It should be noted that raw milk throughput capacity and production output are not identical measures, as different
dairy products

59

---

require
different amounts of raw milk for their production. Product output of a plant therefore depends on the types of products being produced there.

|                                  |  |      |  |      |  | Production in 2000 |     | Production in 2001 |  | Production in 2002 | 
|--------------------------------- |  | ---- |  | ---- |  | ------------------ | --- | ------------------ |  | ------------------ | 
|
|
|
|Moscow and Moscow region          |  |      |  |      |  |                    |     |                    |  |                    | 
|Lianozovo Dairy Plant             |  | 1995 |  | 1989 |  | 402.3              |     | 127.7              |  | 438.6              | 
|Tsaritsino Dairy Plant            |  | 1996 |  | 1975 |  | 100.3              |     | 74.1               |  | 123.3              | 
|Moscow Baby Food Plant            |  | 1996 |  | 1992 |  | 36.2               |     | 0.0                |  | 39.1               | 
|Ramenski Dairy Plant              |  | 1997 |  | 1982 |  | 3.8                |     | 43.6               |  | 2.5                | 
|Central Russia (excluding Moscow) |  |      |  |      |  |                    |     |                    |  |                    | 
|Nizhny Novgorod Dairy Plant       |  | 1998 |  | 1984 |  | 31.8               |     | 0.0                |  | 33.1               | 
|Timashevsk Dairy Plant            |  | 2000 |  | 1990 |  | 54.2               |     | 0.0                |  | 62.5               | 
|Ufa Dairy Plant                   |  | 2001 |  | 1971 |  | 40.1               |     | 0.0                |  | 44.1               | 
|Dairy Anninskoye Moloko           |  | 2001 |  | 1978 |  |                    |     |                   |  | 2.6                | 
|Novokuybishevskoe Moloko(6)       |  | 2002 |  | 1975 |  |                    |     |                    |  |                    | 
|Roska(6)                          |  | 2002 |  | 1987 |  |                    |     |                    |  |                    | 
|Depsona(6)                        |  | 2002 |  | 1996 |  |                    |     |                    |  |                    | 
|Asian Russia                      |  |      |  |      |  |                    |     |                    |  |                    | 
|Siberian Dairy Plant              |  | 1998 |  | 1961 |  | 42.2               |     | 1.7                |  | 58.9               | 
|Karasuk Dairy Plant               |  | 1999 |  | 1952 |  | 3.6                |     | 0.0                |  | 4.9                | 
|Vladivostok Dairy Plant           |  | 1998 |  | 1947 |  | 9.9                |     | 0.0                |  | 12.8               | 
|Rubtsovsk Dairy Plant             |  | 2001 |  | 1954 |  | 0.0                |     | 0.0                |  | 1.0                | 
|Other CIS countries               |  |      |  |      |  |                    |     |                    |  |                    | 
|Kiev Dairy Plant                  |  | 2001 |  | 1973 |  | 13.8               |     | 0.0                |  | 20.8               | 
|Kharkov Dairy Plant(6)            |  | 2002 |  | 1973 |  |                    |     |                    |  |                    | 
|Bishkek Dairy Plant               |  | 2000 |  | 1990 |  | 6.0                |     | 0.0                |  | 8.9                | 
|Total(5)                          |  |      |  |      |  | 744.2              | (2) | 247.1              |  | 853.1              | 

---

Notes:

At December 31, 2002, certain of our assets served as collateral for loans from Sberbank, Bank of Moscow, the Moscow City Government and
others and vendor financing obligations, including:



60

---



Item 5    Operating and Financial Review and Prospects



The following discussion of our financial condition and results of continuing operations, except where otherwise indicated, should be read in conjunction with
(a) our Consolidated Financial Statements and the related notes as of December 31, 2002 and for the year then ended, which have been audited by the independent public accounting firm of
Ernst & Young (CIS) Limited; (b) our Consolidated and Combined Financial Statements and the related notes as of December 31, 2001 and 2000 and for the years then ended, which have
been audited by the independent public accounting firm of Arthur Andersen ZAO and appear elsewhere in this document, (c) our business description and (d) the risk factors beginning on
page 3. Our Consolidated Financial Statements and Consolidated and Combined Financial Statements have been prepared in accordance with the accounting principles generally accepted in the United
States ("U.S. GAAP").

Basis of Presentation of Financial Results

We maintain our records and prepare our statutory financial statements in accordance with the domestic (primarily being Russian) accounting principles and tax
legislation. The consolidated financial statements presented in this document have been prepared from domestic accounting records for presentation in accordance with U.S. GAAP. These consolidated
financial statements and results differ from the financial statements issued for statutory purposes in Russia in that they reflect adjustments not recorded in our domestic books, which are required to
present the financial position, results of operations and cash flows in accordance with U.S. GAAP.

In
connection with WTO accession talks, the U.S. Department of Commerce and the European Union deemed Russia to have market economy status beginning in 2002. However, the Russian economy
continues to display certain traits consistent with that of a market in transition. These characteristics have in the past included higher than normal inflation, lack of liquidity in the capital
markets, and the existence of currency controls which cause the national currency to be illiquid outside of Russia. The continued success and stability of the Russian economy will be significantly
affected by the government's continued actions with regard to supervisory, legal, and economic reforms.

Exchange Rates and Inflation

Translation (remeasurement) of domestic currency-denominated financial statements into U.S. dollars has been performed in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign currency translation," as the majority of our operations were in hyperinflationary economies. The objective of this
remeasurement process is to produce the same results that would have been reported if the accounting records had been kept in U.S. dollars.

For
entities operating in hyperinflationary economies, monetary assets and liabilities have been translated at the year-end exchange rate. Non-monetary assets and
liabilities have been translated at historical rates. Share capital has been translated at the date of registration of Wimm-Bill-Dann Foods OJSC ("WBD Foods") and on the dates
of additional share issues. Revenues, expenses and cash flows have been translated at the dates of the respective transactions. Remeasurement differences resulting from the use of these rates have
been accounted for as currency remeasurement gains and losses in the Consolidated and Combined Statements of Operations.

Our
principle future operating cash flows will be generated in Russian rubles. As a result, future movements in the exchange rate between the ruble and U.S. dollar will affect the U.S.
dollar carrying value of our monetary assets and liabilities. Such changes may also affect our ability to realize assets as represented in terms of U.S. dollars in the Consolidated and Combined
Financial Statements.

61

---

As
of January 1, 2003, Russia no longer meets the U.S. GAAP definition of a hyperinflationary economy. Therefore, from this date our financial statements will be prepared using
the local currency, the ruble, as the functional currency for WBD Foods' Russian subsidiaries, although we will continue to report in U.S. dollars. Therefore, our future currency gains and losses will
reflect the combination of our monetary positions in U.S. dollars and euros and exchange rate fluctuations between the ruble and the U.S. dollar and between the ruble and the euro. The potential
impact of such a change on our financial position and results of operations cannot be estimated.

The
following tables show, for the periods indicated, certain information regarding the exchange rate between the ruble and the U.S. dollar, based on data published by the Central Bank
of Russia. These rates may differ from the actual rates used in the preparation of our financial statements and other financial information appearing herein.

|                        |  | Rubles per U.S. dollar
|----------------------- |  | ----------------------
|
|Year ended December 31, |  |                       
|2002                    |  | 31.86                 
|2001                    |  | 30.30                 
|2000                    |  | 28.87                 
|1999                    |  | 27.00                 
|1998                    |  | 20.99                 

---

Note:

|               |  | Rubles per U.S. dollar
|-------------- |  | ----------------------
|
|September 2002 |  | 31.65                 
|October 2002   |  | 31.74                 
|November 2002  |  | 31.84                 
|December 2002  |  | 31.86                 
|January 2003   |  | 31.88                 
|February 2003  |  | 31.85                 
|March 2003     |  | 31.60                 
|April 2003     |  | 31.38                 
|May 2003       |  | 31.12                 

On
June 11, 2003 the exchange rate between the ruble and the U.S. dollar was approximately 30.51 rubles per $1.00.

62

---

The
following table shows the rates of inflation in Russia for the years indicated:

|                        |  | Inflation
rate |  
|----------------------- |  | -------------- | -
|Year ended December 31, |  |                |  
|2002                    |  | 15.1           | %
|2001                    |  | 18.6           | %
|2000                    |  | 20.2           | %
|1999                    |  | 36.5           | %
|1998                    |  | 84.4           | %

---

Note:

Our
results of operations are affected by the relationship between the rate of inflation and the rate of devaluation of the ruble against the U.S. dollar (i.e., by the real appreciation
or depreciation of the ruble against the U.S. dollar). As shown in the following table, there is no direct relationship between these two rates, and in 2002, 2001 and 2000 the ruble appreciated in
real terms against the U.S. dollar (by way of contrast, the ruble depreciated in real terms in 1998):

|                                                                      |  | 2002 |   | 2001 |   | 2000 |  
|--------------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|Inflation                                                             |  | 15.1 | % | 18.6 | % | 20.2 | %
|Devaluation of the ruble relative to the U.S. dollar in nominal terms |  | 5.4  | % | 7.0  | % | 4.3  | %

---

Notes:

Although
it is not practicable to provide reasonably quantifiable information in respect of all income statement captions, the following tables show how the real appreciation of the
ruble against the U.S. dollar positively affected our reported net sales for the years ended December 31, 2002, 2001 and 2000.

|                                                                                            |  | 2002 |              | 2001 |   | % Increase  
|------------------------------------------------------------------------------------------- |  | ---- | ------------ | ---- | - | ------------
|Net sales (in U.S.$ thousand) as reported in our consolidated and combined income statement |  | $    | 824,734      |      | $ | 674,616     
|Indexed ruble sales                                                                         |  |      | 27.3 billion |      |   | 23.9 billion

|                                                                                            |  | 2001 |              | 2000 |   | % Increase  
|------------------------------------------------------------------------------------------- |  | ---- | ------------ | ---- | - | ------------
|Net sales (in U.S.$ thousand) as reported in our consolidated and combined income statement |  | $    | 674,616      |      | $ | 465,411     
|Indexed ruble sales                                                                         |  |      | 20.7 billion |      |   | 17.1 billion

---

Note:

Consequently,
our revenues, as adjusted for inflation, increased by 14.2% and 21.1% compared with increases of 22.3% and 45.0%, after translation into U.S. dollars, in the years ended
December 31, 2002 and 2001, respectively.

63

---

A
significant part of our costs and expenditures, as well as liabilities, are either denominated in or tightly linked to the U.S. dollar and the euro. These include capital expenditures
and borrowings as well as costs of packaging materials, juice concentrates, certain other raw materials and to a more limited extent, salaries. As a result, devaluation of the ruble against the U.S.
dollar or the euro can adversely affect us by increasing our costs in ruble terms. If we cannot increase our ruble selling prices in line with ruble devaluation due to competitive pressures, our
margins will suffer. Other things being equal, it is easier for us to maintain our margins when the ruble is appreciating in real terms against the U.S. dollar or the euro. See also "Item 4.
Information on Our CompanyB. Business OverviewMarket Trends and Competition." Additionally, if the ruble declines and prices cannot keep pace, we could have difficulty
covering our U.S. dollar-denominated or euro-denominated costs or repaying our U.S. dollar-denominated or euro-denominated indebtedness.

The
decline in the value of the ruble against the U.S. dollar also reduces the U.S. dollar value of tax losses carried forward and the deductible amount of depreciation of our property,
plant and equipment since their basis for tax purposes is denominated in rubles at the time of the investment or acquisition. Any increased tax liability would increase our total expenses.

Generally,
as the value of the ruble declines against the U.S. dollar, net ruble monetary liability positions result in currency remeasurement gains and net ruble monetary asset
positions result in currency remeasurement losses. As the value of the euro strengthens against the U.S. dollar, net euro monetary liability positions result in currency remeasurement losses and net
euro monetary asset positions result in currency remeasurement gains. Our net ruble monetary liability position decreased from $70.4 million at December 31, 2001 to $6.4 million
at December 31, 2002 and during 2002 the ruble declined against the U.S. dollar. Our net euro monetary liability position increased to $28.5 million at December 31, 2002 from
$18.9 million at December 31, 2001 and the euro strengthened against the U.S. dollar. As a result of the combination of our monetary positions in rubles and euros and exchange rate
fluctuations in the year ended December 31, 2002, we recognized a currency remeasurement loss of $2.9 million. As a result of the combination of our monetary positions in rubles and
euros and exchange rate fluctuations in the year ended December 31, 2001, we recognized a currency remeasurement gain of $2.5 million. Currency remeasurement gains and losses were
reflected in our Consolidated and
Combined Statements of Operations. We have not engaged in any activities to hedge our dollar- or euro-denominated liabilities, as the market for these types of financial instruments in
Russia is not well developed and costs of these instruments are relatively high. See "Item 11. Quantitative and Qualitative Disclosures about Market RiskForeign Currency Risk" for
a presentation of our ruble-, dollar- and euro-denominated monetary assets and liabilities at December 31, 2002 and 2001. See also "Item 3. Key InformationD.
Risk FactorsRisks Relating to Our Financial Condition."

Certain
of our costs, such as salaries and supplies, are also sensitive to rises in the general price level in Russia. In the future, due to competitive pressures, we may not be able to
raise the prices for our products sufficiently to preserve operating margins. Accordingly, high rates of inflation could increase our costs and decrease our operating margins. See also
"Item 11. Quantitative and Qualitative Disclosures about Market RiskForeign Currency Risk".

64

---

Results of Continuing Operations

The following table summarizes the results of our continuing operations for the years ended December 31, 2002, 2001 and 2000:

|                                    |  | 2002 |          | % |       | 2001 |   | %        |   | 2000  |  | %
|----------------------------------- |  | ---- | -------- | - | ----- | ---- | - | -------- | - | ----- |  | -
|
|Sales                               |  | $    | 824,734  |   | 100.0 |      | $ | 674,616  |   | 100.0 |  | $
|Cost of sales                       |  |      | (579,707 | ) | 70.3  |      |   | (492,990 | ) | 73.1  |  |  
|Gross profit                        |  |      | 245,027  |   | 29.7  |      |   | 181,626  |   | 26.9  |  |  
|Selling and distribution expenses   |  |      | (109,527 | ) | 13.3  |      |   | (62,213  | ) | 9.2   |  |  
|General and administrative expenses |  |      | (62,955  | ) | 7.6   |      |   | (54,461  | ) | 8.1   |  |  
|Other operating expenses            |  |      | (6,497   | ) | 0.8   |      |   | (4,498   | ) | 0.7   |  |  
|Operating income                    |  |      | 66,048   |   | 8.0   |      |   | 60,454   |   | 9.0   |  |  
|Financial income and expenses, net  |  |      | (14,131  | ) | 1.7   |      |   | (10,581  | ) | 1.6   |  |  
|Provision for income taxes          |  |      | (14,249  | ) | 1.7   |      |   | (14,166  | ) | 2.1   |  |  
|Minority interest                   |  |      | (1,922   | ) | 0.2   |      |   | (3,962   | ) | 0.6   |  |  
|                                    |  |      |          |   |       |      |   |          |   |       |  |  
|Income from continuing operations   |  | $    | 35,746   |   | 4.3   |      | $ | 31,745   |   | 4.7   |  | $
|                                    |  |      |          |   |       |      |   |          |   |       |  |  

---

Note:

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Sales

Sales increased by 22.3% to $824.7 million in 2002 from $674.6 million in 2001. The dairy segment continued to be our largest business segment
representing 68.3% of net sales in 2002 compared to 72.0% in 2001.

|               |  | Year ended December 31,
|-------------- |  | -----------------------
|
|
|Dairy products |  | $                      
|Juice products |  |                        
|               |  |                        
|               |  | $                      
|               |  |                        

Sales
in our dairy segment increased to $563.0 million in 2002 from $485.5 million in 2001. Of this 16.0% increase, 11.7% related to volume growth (9.7% organic and 2.0%
from acquisitions) and 4.3% related to an increase in prices in U.S. dollar terms. The average prices of our dairy products in U.S. dollar terms increased to $0.60 per kilogram in 2002 from $0.57 per
kilogram in 2001. We sold 946.0 thousand tons in 2002 and 847.2 thousand tons of dairy products in 2001. Our improved dairy sales were due to our increased presence in the regions, the
development of additional products in our product portfolio and increased advertising and marketing activities.

Sales
in our juice segment increased to $261.7 million in 2002 from $189.2 million in 2001. This 38.4% increase was due to organic growth in volumes, which contributed
45.4% to the sales growth, and a decrease in average prices, which had a negative effect on sales growth of 7.0%. Our increased juice sales volumes were due to our increased presence in the regions,
the development of our product portfolio and increased advertising and marketing activities. We sold 476.7 million liters of juice in 2002 and 327.1 million liters of juice in 2001. In
2002, the Russian juice industry experienced significant price competition. As a result of this and due to the increased share of lower-price, lower-quality brands in

65

---

our
juice product portfolio, primarily in sales to the regions where per-capita income is lower, the average prices of our juice products in U.S. dollar terms decreased to $0.55 per liter
in 2002 from $0.58 per liter in 2001.

Sales
per employee decreased to $51,000 in 2002 from $60,000 in 2001 as a result of our acquisitions during 2002 of businesses with comparatively low sales per employee. The average
number of employees increased to 16,243 in 2002 from 11,335 in 2001.

Cost of Sales

Cost of sales primarily consists of expenses relating to raw materials (concentrates for juices, raw milk for dairy products and packaging materials for all
products), as they comprised 87.3% and 88.9% of our total cost of sales in 2002 and 2001, respectively. The table below sets forth these costs for both 2002 and 2001:

|                 |  | Year ended December 31,
|---------------- |  | -----------------------
|
|
|Raw materials    |  | $                      
|Personnel        |  |                        
|Depreciation     |  |                        
|Utilities        |  |                        
|Goods for resale |  |                        
|Other            |  |                        
|                 |  |                        
|                 |  | $                      
|                 |  |                        

Raw
materials costs increased by 15.4% between 2002 and 2001 but decreased as a percentage of sales to 61.4% in 2002 from 65.0% in 2001. In our dairy segment, the raw materials to sales
ratio decreased to 60.8% in 2002 from 69.4% in 2001 due to an increase in selling prices, an increase in the share of higher value-added products in the product portfolio and lower raw milk prices
compared to 2001. In our juice segment, the raw materials to sales ratio increased to 62.6% in 2002 from 53.8% in 2001 due to lower average selling prices and the higher cost of concentrates and other
ingredients resulting, in part, from bad harvests and poor weather conditions in juice concentrate-producing regions. The higher cost of the major components of our juice products adversely affected
the raw materials to sales ratio despite the increase in the share of lower-end brands in the product portfolio. In both segments, economies of scale achieved on purchases of packaging
materials had a positive effect on the raw materials to sales ratios. In the dairy segment, approximately 60% of our raw material costs were ruble-denominated and 40% were
hard-currency-denominated. In the juice segment, substantially all of our raw material costs were hard-currency denominated.

See
also "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and IndustryIf we do not continue to be an efficient producer
in a highly competitive environment, particularly in relation to purchases of our packaging and raw materials and our advertising and marketing expenditures, our results of operations will suffer."

Personnel
costs increased by 32.1% between 2002 and 2001. The average number of production personnel has increased to 8,812 in 2002 from 7,162 in 2001 resulting from various acquisitions
in 2002 and 2001 and the hiring of new production personnel as a result of installing new production lines at almost every production site. Our payroll cost per production employee increased by 7.1%
to approximately $3,000 in 2002 from $2,800 in 2001 due to recruitment of higher-qualified personnel, the increase in pay rates throughout Russia, as well as the effect of aligning the level of salary
at plants we acquired in 2001 to the salary levels at our existing plants.

66

---

Depreciation
increased by 41.2%, reflecting additional capital expenditures in 2001 and 2002.

Goods
for resale include various dairy products. In 2002, we further increased our purchases of cheese which we purchased from independent cheese producers. These purchases were
necessary to effect our increased sales of cheese.

Utility
costs increased by 25.6% in 2002 due to the increase in our production and warehouse facilities, as well as an increase in electricity and gas tariffs.

Gross Margin

Our gross profit increased by 34.9% to $245.0 million in 2002 from $181.6 million in 2001. Our gross margin also increased to 29.7% in 2002 from
26.9% in 2001.

Gross
margin in our dairy segment increased to 29.3% in 2002 from 22.8% in 2001. This increase was primarily due to lower prices for raw milk, and an increase in the share of high
value-added products in our dairy segment product portfolio. Improved economies of scale also had a positive impact on the cost of packaging materials and, therefore, the gross margin.

Gross
margin in our juice segment decreased to 31.0% in 2002 from 37.9% in 2001 primarily due to higher prices on juice concentrates and berries, the impact of consumer preference for
low-price, lower-quality juice products primarily in the regions outside of Moscow and St. Petersburg where per-capita income is lower and competitive pricing pressures. In
2002, the Russian juice industry experienced significant price competition due to our main competitors' attempts to gain market share by using price dumping tactics. See "Item 3. Key
InformationD. Risk FactorsRisks Relating to our Business and IndustryIncreased competition and consumer preference for low-price, lower-quality juice
products primarily in the regions outside Moscow and St. Petersburg have resulted in declining profit margins in our juice segment, which may adversely affect our results of operations."

Selling and Distribution Expenses

Selling and distribution expenses increased by 76.1% between 2002 and 2001. As a percentage of sales, selling and distribution expenses increased to 13.3% in 2002
from 9.2% in 2001. Our selling and distribution expenses in 2002 and 2001 were as follows:

|                                        |  | Year ended December 31,
|--------------------------------------- |  | -----------------------
|
|
|Advertising and marketing               |  | $                      
|Personnel                               |  |                        
|Transportation                          |  |                        
|Materials and supplies                  |  |                        
|Warehouse                               |  |                        
|Other                                   |  |                        
|                                        |  |                        
|Total selling and distribution expenses |  | $                      
|                                        |  |                        

Advertising
and marketing expenses increased in 2002 by $15.3 million, or 78.2% in absolute terms, and by 1.3% in relation to sales, to 4.2% in 2002 from 2.9% in 2001, due to the
continuation of our regional expansion program and annual media inflation on leading national television channels which exceeded 80%. Despite these price increases, we were able to obtain volume
discounts and thus manage the cost increase more effectively. In 2002, TV advertising expenses represented more than half of our advertising budget. In 2002, 37.0% of our revenues came from sales in
the regions as compared to 29.5% in 2001. The increase in regional sales was achieved through the strengthening of our

67

---

advertising
presence in these markets. The share of regional advertising out of our total advertising and marketing expenses increased to 14.1% in 2002 from 2.5% in 2001.

Personnel
expenses increased by 91.6% in 2002 as compared to 2001. This increase was due to the substantial increase of our sales force as part of our regional expansion program, as well
as the acquisition of new subsidiaries. The average number of employees in our selling and distribution department increased to 4,326 in 2002 from 1,996 in 2001 as we continued the expansion of our
distribution network into the regions and to increase our direct sales to retailers. In 2002, the higher costs of personnel arising from the increase in our direct sales to retailers were offset in
part by the higher selling prices we were able to charge retailers as compared to independent distributors, which had the effect of increasing our gross margin compared with 2001. Our payroll cost per
employee decreased by 11.3% to $7,100 in 2002 from $8,000 in 2001 due to our acquisition of new subsidiaries and the setting up of new distribution centers in the regions where average salaries are
lower. Our personnel costs as a percentage of sales increased to 3.7% in 2002 from 2.4% in 2001.

Transportation
costs, which primarily consist of external transportation costs, increased by 44.1% in 2002 as compared to 2001. Our transportation expenses as a percentage of sales
increased to 3.0% in 2002 from 2.5% in 2001. This was mainly due to the expansion of our distribution network into the regions and an increase in the number of routes for both our juice and dairy
segments, which allowed us to increase the share of our sales in various regions.

General and Administrative Expenses

General and administrative expenses increased by 15.6% in 2002 as compared to 2001, but decreased as a percentage of sales to 7.6% in 2002 from 8.1% in 2001. Our
general and administrative expenses in 2002 and 2001 were as follows:

|                                          |  | Year ended December 31,
|----------------------------------------- |  | -----------------------
|
|
|Personnel                                 |  | $                      
|Taxes other than income tax               |  |                        
|Audit, consulting and legal fees          |  |                        
|Materials and supplies                    |  |                        
|Depreciation                              |  |                        
|Communication costs                       |  |                        
|Rent                                      |  |                        
|Insurance                                 |  |                        
|Security expenses                         |  |                        
|Other                                     |  |                        
|                                          |  |                        
|Total general and administrative expenses |  | $                      
|                                          |  |                        

Personnel
expenses increased by 16.5% due to an increase in the average number of administrative personnel to 3,105 in 2002 from 2,177 in 2001 resulting from our acquisitions in 2002 and
2001 and the need for higher qualified personnel as a result of our public company status. Our average cost per employee decreased to $10,900 in 2002 from $13,300 in 2001 due to lower salary levels in
the regions.

Taxes,
other than income tax, include road users tax, which is levied on our sales, and advertising tax, which is levied on our advertising expenses. The increase in these taxes of 40.5%
in 2002 compared to 2001 was due to higher sales and advertising expenses in 2002 compared with 2001.

68

---

Operating Income

Operating income increased to $66.0 million in 2002 from $60.5 million in 2001, representing an increase of 9.1%. Operating income as a percentage
of sales decreased to 8.0% in 2002 from 9.0% in 2001 due to selling and distribution expenses as a percentage of sales being higher in 2002 compared with 2001. In the dairy segment, our operating
income increased by 49.8% to $66.2 million in 2002, or 11.8% in relation to sales, from $44.2 million in 2001, or 9.1% in relation to sales. In the juice segment, our operating income
decreased by 45.2% to $18.4 million in 2002, or 7.0% in relation to sales, from $33.5 million in 2001, or 17.7% in relation to sales. The decrease was due to the decrease in the gross
margin and an increase in advertising, transportation and sales-force expenses due to our continuing regional expansion program.

Our
operating income in 2002 and 2001 benefited from certain tax planning initiatives to reduce our operating taxes. These initiatives were subject to unsuccessful challenge by the
Russian tax authorities in respect of the years ended December 31, 1997 and 1998, and may be subject to challenge in respect of later periods. If successful, any such challenge could result in
significant financial losses. See Note 30 to our Consolidated and Combined Financial Statements as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001
and 2000 for a quantification of the benefits we have obtained from these initiatives and our potential losses if the initiatives are successfully challenged. We will vigorously defend any claim that
these initiatives are contrary to Russian tax law.

We
significantly reduced these tax initiatives in 2002 following positive changes in tax legislation. We will seek to mitigate the adverse effect of the increase in operating taxes
resulting from the reduction of these initiatives by increases in selling prices in U.S. dollar terms to the extent the competition allows us to do so. See also "Item 3. Key InformationD.
Risk FactorsRisks Relating to Our Financial Condition."

Financial Income and Expenses

Financial income and expenses comprised the following:

|                                        |  | Year ended December 31, |       
|--------------------------------------- |  | ----------------------- | ------
|
|
|Interest and bank charges               |  | $                       | 15,025
|Interest income                         |  |                         | (2,928
|Currency remeasurement losses (gains)   |  |                         | 2,860 
|Other financial (income) expense        |  |                         | (826  
|                                        |  |                         |       
|Total financial income and expense, net |  | $                       | 14,131
|                                        |  |                         |       

Interest
and bank charges increased by 13.5% in 2002 compared to 2001. This resulted from an increase in our short- and long-term borrowings, including vendor financing
obligations, to $186.0 million at December 31, 2002 from $143.5 million at December 31, 2001. The decrease in weighted average interest rates on our debt resulted from our
increased credit worthiness due to our public company status and a general reduction of interest rates in Russia.

Interest
income of $2.9 million resulted from the investment of cash proceeds received from our IPO in February 2002.

Currency
remeasurement gains in 2001 became losses in 2002 as a result of the following developments. As the value of the ruble declined against the U.S. dollar, net ruble monetary
liability positions result in currency remeasurement gains and net ruble monetary asset positions result in currency remeasurement losses. As the value of the euro strengthens against the U.S. dollar,
net euro

69

---

monetary
liability positions result in currency remeasurement losses and net euro monetary asset positions result in currency remeasurement gains. Our net ruble monetary liability position decreased
from $70.4 million at December 31, 2001 to $6.4 million at December 31, 2002 and during 2002 the ruble declined against the U.S. dollar. Our net euro monetary liability
position increased to $28.5 million from $11.8 million at December 31, 2001 at December 31, 2002 and the euro strengthened against the U.S. dollar. As a result of the
combination of our monetary positions in rubles and euros and exchange rate fluctuations in the year ended December 31, 2002, we recognized a currency remeasurement loss of $2.9 million.
As a result of the combination of our monetary positions in rubles and euros and exchange rate fluctuations in the year ended December 31, 2001, we recognized a currency remeasurement gain of
$2.5 million.

Provision for Income Taxes

Our provision for income taxes for the years ended December 31, 2002 and 2001 was as follows:

|                                 |  | Year ended December 31,
|-------------------------------- |  | -----------------------
|
|
|Current provision                |  | $                      
|Deferred charge                  |  |                        
|                                 |  |                        
|Total provision for income taxes |  | $                      
|                                 |  |                        

Provision
for income taxes amounted to $14.2 million in 2002 and 2001. These provisions comprise current income tax charges of $14.2 million in 2002 and
$12.0 million in 2001, and deferred tax charges of $0.04 million in 2002 and $2.2 million in 2001. Deferred tax charges arise on temporary differences between the bases of
computing income under domestic principles and U.S. GAAP.

In
2002 our effective income tax rate was 27.4% compared to the Russian statutory income tax rate of 24.0%. The difference in the tax rates was primarily due to
non-deductible expenses for Russian statutory taxation purposes, change in valuation allowance for deferred tax asset and tax benefits for small enterprises. In 2001 our effective income
tax rate was 28.4% compared to the Russian statutory income tax rate of 35.0%. The difference was primarily due to tax benefits for small enterprises and baby food products and investment and social
infrastructure maintenance credits, non-deductible expenses for Russian statutory taxation purposes, change in valuation allowance for deferred tax asset and recognition of a deferred tax
liability resulting from the tax effect of our investment programs in the Lianozovo Dairy Plant ("LMK") and the Tsaritsino Dairy Plant ("TsMK"). See "Acquisitions" and Note 19 to
our Consolidated and Combined Financial Statements as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000. As a result of the adoption of Chapter 25 of
the Second Part of the Tax Code and with effect from January 1, 2002, the income tax rate in Russia was reduced from 35% to 24% and income tax benefits, being investment and social
infrastructure maintenance credits and baby food products benefit, were abolished.

In
2002 and 2001, we benefited from the small enterprise tax legislation, which was used in the companies operating in the juice segment. Under income tax legislation which was in effect
before January 1, 2002 small enterprises involved in certain activities, such as food processing, were exempt from income taxes for the first two years of operations and, in the third and
fourth years, income taxes were levied at a rate of 25% and 50% of the income tax rate, respectively. Had we not taken advantage of the small enterprise tax benefit in 2002 and 2001, our income tax
expense would have been higher by $5.7 million and $14.1 million, respectively. The income tax benefit for small enterprises was abolished from January 1, 2002, except that the
benefit continues to be available to enterprises that were established before July 1, 2001. Starting from January 1, 2002 our juice production has been primarily concentrated in two
small enterprises, Fruit Rivers and Nectarin, which were registered in March and April 2001, respectively. As a result, we will continue to benefit from the small enterprise tax legislation for
the next several years in the manner described above. We intend to continue to structure our juice business to meet the technical requirements of the small enterprise tax legislation, to the extent it
remains in effect. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Financial ConditionThe elimination of a tax privilege from which we
currently benefit would materially adversely affect our results of operations."

70

---

Minority Interest

The minority interests in the Consolidated and Consolidated and Combined Statement of Operations reflect the net income and losses of our subsidiaries that are
attributable to the minority shareholders in those subsidiaries. In 2002 and 2001, net profits on continuing operations attributable to minority shareholders of our subsidiaries reduced to
$1.9 million from $4.0 million as a result of acquisitions by us of additional shares in our subsidiaries, the Moscow Baby Food Plant (ZDMP), LMK and Kiev Dairy No. 3 ("KMMZ").

Net Income

Net income from continuing operations in 2002 was $35.7 million (4.3% of sales), compared with $31.7 million (4.7% of sales) in 2001.

Net
profit (before corporate and common expenses, deferred tax and minority interest) of our dairy segment was $44.6 million (7.9% of dairy segment sales) in 2002 and $26.8 million (5.5%
of dairy segment sales) in 2001. Net profit (before corporate and common expenses, deferred tax and minority interest) of our juice segment was $12.7 million (4.9% of juice segment sales) in 2002 and
$28.3 million (15.0% of juice segment sales) in 2001. Our common and corporate expenses, including depreciation, legal, audit and consulting fees, head office maintenance expenses, expenses on global
marketing research, charity and holding company personnel expenses were $19.6 million and $17.2 million in 2002 and 2001, respectively, and are included in general and administrative expenses as
discussed above. See Note 28 to our Consolidated Financial Statements as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000 for a detailed analysis of our segments.

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

Sales

Sales for the year ended December 31, 2001 increased by 45.0% compared to the year ended December 31, 2000, from $465.4 million to $674.6 million. The main
reasons for our improved sales in both the dairy and juice segments were increased advertising and marketing, as evidenced by a 36.7% increase in our advertising and marketing expenditures as compared
with 2000. Sales in each of our two segments were as follows:

|               |  | Year ended December 31,
|-------------- |  | -----------------------
|
|
|Dairy products |  | $                      
|Juice products |  |                        
|               |  |                        
|               |  | $                      
|               |  |                        

In
2001, our dairy products sales increased by 49.1% compared to 2000, from $325.5 million to $485.5 million. This resulted from a 20.2% increase related to the acquisition of new
subsidiaries, a 13.3% increase in volumes related to our existing business and a 15.6% increase in prices in U.S. dollar terms related to our existing business. Our average price on dairy products
increased from $0.52 per kilogram in 2000 to $0.57 per kilogram in 2001. We sold 847.2 thousand tons of dairy products in 2001 and 630.2 thousand tons of dairy products in 2000. The reasons for our
improved sales of dairy products were changes in our products portfolio resulting in increased sales of products with higher prices such as "Wonder" dessert dairy products in the Moscow region and
sterilized milk in other regions, a continued move to direct sales to retailers and an increase in the number of our merchandising personnel who work with the retailers to increase the visibility and
awareness of our product range.

71

---

Juice
segment sales increased by 35.2% to $189.2 million in 2001 from $139.9 million in 2000. The reasons for our improved sales of juice products were numerous advertising and marketing
campaigns, advertising and marketing initiatives independently undertaken by retailers, improvements in customer service and increased penetration into regional markets. Our juice products sales
increase resulted from a 31.7% increase in volumes and a 3.5% increase in prices in U.S. dollar terms. In the juice segment, our average price in U.S. dollar terms increased to $0.58 in 2001 from
$0.56 per liter in 2000. We sold 327.1 million liters of juices in 2001 and 250.3 million liters of juices in 2000.

Sales
per employee decreased to $60,000 in 2001 from $72,000 in 2000 as a result of our acquisitions during 2001 of businesses with comparatively low sales per employee. The average
number of employees increased to 11,335 as of December 31, 2001 from 6,466 as of December 31, 2000.

Cost of Sales

Expenses relating to raw materials (concentrates for juices, milk for dairy products and packaging for all sales), comprised 88.9% and 91.5% of our total cost of
sales in 2001 and 2000, respectively. The table below shows our cost of sales for both 2001 and 2000:

|                 |  | Year ended December 31,
|---------------- |  | -----------------------
|
|
|Raw materials    |  | $                      
|Personnel        |  |                        
|Depreciation     |  |                        
|Goods for resale |  |                        
|Utilities        |  |                        
|Other            |  |                        
|                 |  |                        
|                 |  | $                      
|                 |  |                        

Raw
material costs increased by 37.3% between 2001 and 2000 but decreased as a percentage of sales from 68.6% to 65.0%. The decrease in the raw materials to sales ratio was due to (1) an
increase in the share of value-added products in our products portfolio; (2) an increase in sales prices in U.S. dollar terms and (3) a slight decrease in dairy segment packaging prices and in juice
segment concentrate prices in U.S. dollar terms as a result of our increased use of Russian suppliers and a reduction in customs duties. We increased our selling prices in line with increases in the
costs of our ruble-denominated raw materials. This, together with the fact that inflation significantly exceeded the devaluation of the ruble versus the U.S. dollar during 2001, resulted in a
reduction of our raw material costs as a percentage of sales. In the dairy segment, approximately 60% of our raw material costs are ruble-denominated and 40% are hard-currency-denominated. In the
juice segment, substantially all of our raw material costs are hard-currency denominated.

Personnel
costs increased by 68.4% between 2001 and 2000 due to an overall rise in salaries in Russia and the hiring of personnel with higher qualifications than we previously employed.
Further, the movement in personnel costs also reflected the increase in our sales, as salaries and wages were aligned with changes in production levels, as well as the acquisitions of new subsidiaries
that were less efficient than our existing subsidiaries. The average number of production personnel increased to 7,162 in 2001 from 4,280 in 2000. Our payroll cost per employee remained stable at
approximately $2,800 in 2001 and in 2000.

Depreciation
increased by 32.7%, reflecting the additional capital expenditure in 2001 and 2000.

Goods
for resale include various dairy products, and in particular cheese, which increased significantly in 2001 compared with 2000. As we did not produce cheese in significant volumes
during

72

---

2001,
we purchased cheese from independent cheese producers and sold these cheese products along with our other dairy products in order to satisfy our customers' desires for more extensive dairy
product lines.

Utility
costs increased by 152.6% as a result of rises in electricity and gas tariffs, a temporary switch to state-provided water at LMK due to the reconstruction of its own water well
facilities and the installation and use of more energy-intensive production equipment.

Gross Margin

Our gross margin for 2001 showed an improvement compared to 2000, increasing to 26.9% in 2001 from 25.0% in 2000. We largely maintained our dairy segment gross
margin at 22.7% in 2001 as compared to 2000 with only a 0.5% reduction from 2000 levels despite the acquisition of several new
subsidiaries with low gross margins. The increase in our juice segment gross margin from 29.8% to 37.9% resulted from (1) an introduction of new products with higher gross margins; (2) a slight
decrease in raw material prices in U.S. dollar terms; and (3) a significant decrease in customs duties for certain concentrates. We also raised selling prices in line with the inflation of the ruble;
therefore, our juice segment gross margin also improved in 2001 as a result of a higher inflation rate in 2001 compared to the depreciation rate of the ruble against the U.S. dollar and a significant
portion of hard-currency-denominated juice production expenses.

Selling and Distribution Expenses

Selling and distribution expenses increased by 82.2% between 2001 and 2000. As a percentage of sales, selling and distribution expenses increased to 9.2% in 2001
from 7.3% in 2000. The composition of such expenses was as follows:

|                          |  | Year ended December 31,
|------------------------- |  | -----------------------
|
|
|Advertising and marketing |  | $                      
|Transportation            |  |                        
|Personnel                 |  |                        
|Warehouse                 |  |                        
|Other                     |  |                        
|                          |  |                        
|                          |  | $                      
|                          |  |                        

Advertising
and marketing expenses increased by 36.7% as we continued our policy of increasing our market share and as we introduced new products into the market. Advertising and
marketing expenses in the dairy segment increased by 45.5% and in the juice segment by 24.6%. Advertising and marketing expenses increased more in the dairy segment due to increasing competition in
the Russian dairy sector. Advertising and marketing expenses also increased in connection with the promotion of "Ginger Up", a new brand of dairy and juice products for children. The increase in
advertising and marketing expenses of our juice segment resulted from more severe competition in the juice market in 2001 in comparison with 2000 and the expansion of advertising and marketing
campaigns into regional markets. In 2001, TV advertising expenses represented more than half of our advertising budget. Advertising and marketing expenses as a percentage of sales were stable as
compared to 2000 at approximately 3%.

Personnel
costs increased by 77.9% in both the dairy segment and the juice segment. This was due to a rise in the number of people we employed, which primarily resulted from the increase
in the size of our sales and distribution department targeting direct sales to retailers. The average number of employees in our selling and distribution department increased to 1,996 in 2001 from 881
in 2000. In

73

---

2001,
the higher costs of personnel arising from the increase in our direct sales to retailers were offset in part by the higher selling prices we were able to charge retailers as compared to
independent distributors, which had the effect of increasing our gross margin compared with 2000. We also expanded our distribution network to the regions, which resulted in more people being on the
payroll. Our payroll cost per employee decreased by 21.6% to $8,000 in 2001 from $10,200 in 2000 due to the acquisition of new subsidiaries with 865 sales and distribution personnel with comparatively
low salaries. Our personnel costs as a percentage of sales increased to 2.4% in 2001 from 1.9% in 2000.

Transportation
costs, which primarily consist of external transportation costs, increased by 154.2%. Our transportation expenses as a percentage of sales increased to 2.5% in 2001 from
1.4% in 2000. This was primarily due to an increase in our juice-segment sales, especially in various regions of Russia. In contrast, transportation expenses in our milk segment have always been
relatively low due to the closer location of customers to our production facilities caused by the short shelf life of our milk products, although there was an increase in these expenses during 2001
due to increased yogurt sales and an increase in intra-group sales with the objective of raising sales in our regional companies.

General and Administrative Expenses

General and administrative expenses increased by 26.6% in 2001 compared to 2000, but decreased from 9.2% in 2000 to 8.1% in 2001 as a percentage of sales. The
composition was as follows:

|                            |  | Year ended December 31,
|--------------------------- |  | -----------------------
|
|
|Personnel                   |  | $                      
|Taxes other than income tax |  |                        
|Security                    |  |                        
|Audit, consulting and legal |  |                        
|Insurance                   |  |                        
|Depreciation                |  |                        
|Other                       |  |                        
|                            |  |                        
|                            |  | $                      
|                            |  |                        

Personnel
expenses increased by 96.6% as a result of the increase of our payroll costs per employee, to $13,300 in 2001 from $11,300 in 2000, reflecting overall labor market conditions
and the establishment of Wimm-Bill-Dann Foods OJSC as our holding company. The average number of our administration personnel increased to 2,177 in 2001 from 1,305 in 2000.

Taxes
other than income tax include road users tax, social infrastructure and maintenance tax, which are taxes that are levied on our sales, and advertising tax, which is levied on our
advertising expenses. The overall decrease in such taxes amounted to 57.3%, which reflected a decrease in the rates of certain taxes effective from January 1, 2001.

From
January 1, 2001, the road users tax rate was reduced to 1.0% from 2.5%, and the social infrastructure and maintenance tax was abolished from its previous rate of 1.5%. In 2001 and
2000, the
road users tax charge amounted to $6.8 million and $11.6 million, respectively, and the social infrastructure and maintenance tax charges were $0 and $6.9 million, respectively. Due to the increase in
our advertising and marketing expenses, our advertising and other taxes charge increased to $1.7 million in 2001 from $1.2 million in 2000.

In
2001, we launched an insurance program for technological facilities and equipment at our plants, which caused our insurance expenses to increase to $1.2 million in 2001 from $0.2
million in 2000.

74

---

Operating Income

Operating income increased significantly to $60.5 million in 2001 from $37.9 million in 2000, representing an increase of 59.6%. Operating income as a percentage
of sales improved from 8.1% in 2000 to 9.0% in 2001. In the dairy segment, our operating income increased from $29.5 million in 2000 to $44.2 million in 2001, representing an increase of 49.8%. In
2001, we made several acquisitions of new subsidiaries in the dairy segment. However, such acquisitions did not increase our operating income in 2001. In the juice segment, our operating income
increased to $33.5 million in 2001 from $18.7 million in 2000, representing an increase of 79.1% which resulted from new high-margin products and a decrease in the cost of certain raw materials.

Our
operating income in 2001 and 2000 benefited from certain tax planning initiatives to reduce our operating taxes. See "Year Ended December 31, 2002 Compared to Year Ended
December 31, 2001."

Financial Income and Expenses

Financial income and expenses comprised the following:

|                             |  | Year ended December 31, |       
|---------------------------- |  | ----------------------- | ------
|
|
|Interest and bank charges    |  | $                       | 13,236
|Currency remeasurement gains |  |                         | (2,483
|Other                        |  |                         | (172  
|                             |  |                         |       
|                             |  | $                       | 10,581
|                             |  |                         |       

Interest
and bank charges increased by 96.4% in 2001 over 2000. This resulted from an increase in our short- and long-term borrowings as of December 31, 2001 compared with December 31,
2000 from $67.8 million to $122.0 million, respectively. In 2001, we made significant investments in property, plant and equipment and in the acquisition of new dairy subsidiaries which resulted in an
increase in the need for debt financing. We believe that our credit worthiness increased as a result of our strengthened balance sheet in 2001, and that this factor led to a decrease in weighted
average interest rates and reduced bank charges.

Our
currency remeasurement gains represented exchange gains and losses arising on re-translation of ruble- and euro-denominated monetary assets and liabilities into U.S. dollars.
Currency measurement gains increased during 2001, which is a reflection of an increase in our net ruble- and euro-denominated monetary liability positions.

Provision for Income Taxes

Provision for income taxes increased from $9.6 million in 2000 to $14.2 million in 2001. These provisions comprised a current income tax charge of $12.0 million
for 2001 and $9.7 million for 2000, and a deferred tax charge of $2.2 million for 2001 and a benefit of $0.1 million for 2000. Deferred tax benefits and charges arise on temporary differences between
the basis of computing income under Russian accounting principles and U.S. GAAP.

In
2001 our effective income tax rate was 28.4% compared to the Russian statutory income tax rate of 35.0%. The difference was primarily due to tax benefits for small enterprises and
baby food products and investment and social infrastructure maintenance credits, non-deductible expenses for Russian statutory taxation purposes, change in valuation allowance for deferred tax asset,
recognition of a deferred tax liability resulting from the tax effect of our investment programs in LMK and TsMK. See "Acquisitions" and Note 19 to our Consolidated and Combined Financial
Statements as of December

75

---

31,
2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000. In 2000 our effective income tax rate was 29.7% compared to the Russian statutory income tax rate of 30.0%. The difference
was primarily due to non-deductible expenses for Russian statutory taxation purposes and tax benefits for small enterprises and baby food products and investment and social infrastructure maintenance
credits. With effect from January 1, 2001 the income tax rate increased from 30% to 35%. We did not experience any significant adverse effects on our liquidity position as a result of the change in
the income tax rate because of our positive operating cash flows and our ability to offset income tax liabilities with VAT receivable.

In
2001 and 2000, we benefited from the small enterprise tax legislation, which was used in the companies operating in the juice segment. See " Year Ended December 31, 2002
Compared to Year Ended December 31, 2001."

Minority Interest

The minority interests in the Consolidated and Combined Statement of Operations reflect the net income and losses of our subsidiaries that are attributable to the
minority shareholders in those subsidiaries. In 2001 and 2000, net profits on continuing operations attributable to minority shareholders of our subsidiaries were $4.0 million and $1.5 million,
respectively.

Prior
to July 2001, the Moscow City Government owned 15% of the shares of the LMK and TsMK. In May 2000, we signed share purchase agreements with the Moscow City Government for the
purchase of 15% of the shares of LMK and TsMK. TsMK agreed to purchase 15% of the LMK shares for $0.9 million and to invest $8.2 million of plant and equipment. LMK agreed to purchase 15% of the TsMK
shares for $0.2 million and to invest $5.5 million in plant and equipment. By December 31, 2000 the purchase consideration had been paid, and by May 31, 2001 all the investments had been made.
However, due to statutory procedural reasons, the transfer of share ownership did not occur until July 2001. As a result, an advance of $1.1 million was recognized for the cash which had been paid at
December 31, 2000, and the Moscow City Government's 15% ownership in LMK and TsMK were treated as minority interests until July 2001 on the basis that transfer of ownership had not yet occurred.

Net Income

Net income from continuing operations for 2001 was $31.7 million (4.7% of sales) compared with $21.2 million (4.6% of sales), for 2000. Our net profit (before
corporate and common expenses, deferred tax and minority interest) for the dairy segment was $26.8 million (5.5% of sales) in 2001 and $15.2 million (4.7% of sales) in 2000. Our net profit (before
corporate and common expenses, deferred tax and minority interest) in the juice segment was $28.3 million (15.0% of sales) in 2001 and $17.7 million (12.6% of sales) in 2000. Our common and corporate
costs, including depreciation, legal, audit fees and other consulting fees, head office maintenance expenses, expenses on global marketing researches, charity and holding company personnel expenses in
2001 and 2000 were $17.2 million and $10.3 million, respectively, which reflects the additional costs associated with the establishment and operation of WBD Foods OJSC.



Working Capital

As at December 31, 2002 our cash and cash equivalents balance was $29.3 million and our working capital balance was $55.3 million. Working capital increased in
2002 from a negative balance of $23.6 million in 2001 mainly due to the increase in cash and cash equivalents, trade accounts receivable, taxes receivable and a decrease in trade accounts payable. The
increase in cash and cash equivalents from

76

---

$6.9
million in 2001 to $29.3 million in 2002 primarily represents the unused balance of our IPO proceeds.

Trade
accounts receivable increased to $60.1 million in 2002 from $25.3 million in 2001. This was due to an increase in the average number of days for payment of trade receivables,
driven in part by the improved credit-worthiness of our customers and changes in market practice, as well as a greater seasonal increase in juice sales in 2002 as compared to 2001. Average trade
receivables increased to 10-19 days, for the reasons discussed above, in 2002 compared to 6-10 days in 2001. Based on our assessment of collectibility, bad debt allowance was increased to 4.4% of
debtors compared to 2.2% in 2001. See "Item 3. Key InformationD. Risk FactorsRisks Relating to our Financial Condition."

Taxes
receivable represents VAT (value added tax) due from the state budget. The increase to $68.4 million at December 31, 2002 from $34.9 million at
December 31, 2001 was primarily due to the following: (1) the overall increase in sales: we charge customers 10% VAT on most of our dairy and juice products, whereas the VAT that we are
charged on most of our purchases is 20%; (2) significant purchases of property, plant and equipment, the VAT on which can only be offset against VAT payable when the assets have been put into
operation: we had $95.8 million of construction-in-progress at December 31, 2002 compared to $36.9 million at December 31, 2001. Under existing tax legislation we are able
to offset this VAT against income taxes and other taxes payable to the state, which for the years ended December 31, 2002 and 2001 amounted to $4.0 million and $4.8 million, respectively
and to recover from the state budget. We intend to take all legally available steps, including filing litigation claims, to facilitate the recovery of taxes receivable from the state budget. See
"Item 3. Key InformationD. Risk FactorsRisks Relating to our Financial Condition".

Inventory
in both our dairy and juice segments primarily consisted of raw materials and finished goods. Turnover of inventory in days as of December 31, 2002 amounted to
55 days, as compared to 54 days as of December 31, 2001. The relatively high number of days in inventory is a reflection of our wide product range. We believe inventory is well
controlled and appropriately managed as reflected by our minimal need for reserves for damaged or out-of-date product.

Trade
accounts payable decreased to $40.1 million at December 31, 2002 from $48.6 million at December 31, 2001. This is a reflection of tighter payment terms
applied to apple concentrate supplies due to the low harvest in 2002, and a year-end payment to Tetra Pak, our major supplier of packaging materials, in the amount of $29.2 million, based on
our contractual arrangements. Trade payables averaged 30 days as of December 31, 2002 and 36 days as of December 31, 2001.

Cash Flows

A summary of our cash flows from continuing operations were as follows:

|                                                                                                       |  | Year ended December 31, |  
|------------------------------------------------------------------------------------------------------ |  | ----------------------- | -
|
|
|Cash flows (used in) provided by operating activities                                                  |  | (6,863                  | )
|Cash flows used in investing activitiescash paid for the acquisition of subsidiaries                  |  | (39,571                 | )
|Cash flows used in investing activitiescash paid for the acquisition of property, plant and equipment |  | (78,505                 | )
|Cash provided by financing activities                                                                  |  | 152,600                 |  

In
2002, the major sources of our liquidity were our initial public offering proceeds of $162.1 million and bank loans. Net cash used in operating activities in 2002 was
$6.9 million, compared with a $12.6 million net cash inflow in 2001. The negative cash flows in 2002 are primarily attributed to an

77

---

increase
in accounts receivable ($34.9 million), taxes receivable ($32.9 million) and a decrease in trade accounts payable ($13.3 million).

We
spent $122.7 million on our investment activities in 2002, including acquisitions of property, plant and equipment of $78.5 million, acquisitions of subsidiaries of
$39.6 million, investments in direct financing leases of $1.8 million and other investment activities of $2.8 million.

Proceeds
from the initial public offering were primarily used to finance our investment activities and repay loans bearing the highest interest rates.

In
2001, net cash provided by operating activities was $12.6 million, a decrease of 24.9% over 2000. This decrease is primarily attributable to increases in our inventories
($30.3 million), trade accounts receivable ($14.1 million), as well as taxes receivable ($13.9 million). These changes were due to the overall increase in our business.

In
2001, we spent $8.9 million on the acquisition of subsidiaries, which was double that of 2000. The acquisitions were made in different regions of Russia and in the Ukraine.

Following
our expansion strategy, we continued to purchase property, plant and equipment during 2001 in order to increase production facilities in our new and existing subsidiaries. As a
result, we acquired 2.6 times more equipment in 2001 than in 2000 in anticipation of the expected positive development of the macroeconomic situation in Russia.

In
2001, our main sources of financing for the acquisition of subsidiaries and acquisition of property, plant and equipment were short- and long-term debt which increased by
$54.3 million as at December 31, 2001 over December 31, 2000 level. Net cash provided by financing activities in 2001 was $44.6 million, which primarily reflects the
increase in short- and long-term loans and $16.8 million of bonds issued in November 2001.

In
2000, net cash provided by operating activities of continuing operations was $16.8 million, which is primarily attributable to an increase in both net income and trade accounts
payable offset by a rise in inventories and accounts receivable. Net cash used in investing activities of continuing operations was $27.8 million, which primarily related to investments in
property, plant and equipment and acquisitions of subsidiaries. Net cash provided by financing activities was $21.6 million, which primarily reflects the increase in short- and long-term debt
and pay-out of dividends.

Currently,
cash transfers between us and our subsidiaries and between our subsidiaries are mainly comprised of intercompany loans, repayment of principal and interest on intercompany
loans, investments in share capital and dividend distributions. Dividends may be declared on an annual basis based on a recommendation by the board of directors approved at shareholders meeting.
Dividends must be paid out of net earnings and may not exceed undistributed net profit determined under Russian statutory accounting principals.

Debt

In 2002, we continued to adhere to our core financial policies aimed at minimizing borrowing costs and reducing financial risks through:



78

---



Principal sources of liquidity

Our short-term demands for liquidity, including seasonal fluctuations in working capital requirements, are met by cash flows from operations and borrowings under
short-term credit facilities. We also rely on long-term borrowings and domestic and international securities offerings to finance capital expenditures and acquisitions. We expect to finance future
liquidity needs through cash flows from operations and additional external indebtedness. The availability of external financing is influenced by many factors, including our financial position and
market conditions. Under certain circumstances, we may be required to repay certain short-term and long-term indebtedness. See "Item 3. Key InformationD. Risk
FactorsRisks Relating to Our Financial ConditionCovenants in our debt agreements restrict our ability to borrow and invest, which could impair our ability to expand or
finance our future operations".

Short-Term and Long-Term Loans

Short-term and long-term loans as at December 31, 2002 amounted to $101.1 million, which represents a 3.9% decrease over December 31, 2001.
Our short-term loans as at December 31, 2002 and 2001 are summarized in the following table:

|                           |  |      |   | At December 31,
|-------------------------- |  | ---- | - | ---------------
|
|
|
|Bank of Moscow             |  | 16.5 | % | $              
|Sberbank                   |  | 16.0 | % |                
|Moscow Business World Bank |  | 16.3 | % |                
|International Moscow Bank  |  | 10.5 | % |                
|Vneshtorgbank              |  | 18.0 | % |                
|Citibank (Ukraine)         |  | 21.4 | % |                
|Commerzbank                |  | 6.6  | % |                
|Moscow City Government     |  | 7.4  | % |                
|Alfa Bank                  |  | 17.0 | % |                
|Citibank T/O               |  | 19.5 | % |                
|Rosdorbank                 |  |     |   |                
|Other                      |  | 21.0 | % |                
|                           |  |      |   |                
|                           |  |      |   | $              
|                           |  |      |   |                

The
above loans can be categorized in the following currencies:

|                 |  | At December 31,
|---------------- |  | ---------------
|
|
|Russian rubles   |  | $              
|U.S. dollars     |  |                
|Euro             |  |                
|Other currencies |  |                
|                 |  |                
|                 |  | $              
|                 |  |                

79

---

Our
long-term loans position as at December 31, 2002 and 2001 is summarized in the following table:

|                       |  |      |   | At December 31,
|---------------------- |  | ---- | - | ---------------
|
|
|
|ING Bank (Eurasia)     |  | 3.7  | % | $              
|Aval                   |  | 13.0 | % |                
|Raiffeisenbank         |  | 4.4  | % |                
|Alfa Bank              |  |     |   |                
|Moscow Industrial Bank |  |     |   |                
|Other                  |  | 8.9  | % |                
|                       |  |      |   |                
|                       |  |      |   | $              
|                       |  |      |   |                

The
above loans can be categorized in the following currencies:

|                 |  |  |  | At December 31,
|---------------- |  |  |  | ---------------
|
|
|U.S. dollars     |  |  |  | $              
|Euro             |  |  |  |                
|Russian rubles   |  |  |  |                
|Other currencies |  |  |  |                
|                 |  |  |  |                
|                 |  |  |  | $              
|                 |  |  |  |                

Our
overall loan level decreased by $4.1 million as of December 31, 2002 compared with December 31, 2001 as a result of an increase in our own
financial resources. As of December 31, 2002 we had total committed but unused borrowing of $5.0 million under short-term facilities and $3.2 million under long-term facilities. Our
principal lenders are as follows:

BANK
OF MOSCOWwe had five ruble-denominated short-term loans and lines of credit with the Bank of Moscow as of December 31, 2002, amounting to $27.5 million. These
loans are primarily utilized for working capital purposes. The average interest rate on these loans is 16.5%. These borrowings are secured with property, plant and equipment and inventory.

SBERBANKwe
had eleven ruble-denominated short-term loans and lines of credit with Sberbank as of December 31, 2002, amounting to $23.0 million. These loans are
primarily utilized for working capital purposes and for the purchase of raw materials and plants and equipment. The average interest rate on these loans is 16.0%, and most of these loans are secured
with property, plant and equipment and inventory.

MOSCOW
BUSINESS WORLD BANK ("MDM Bank")we had five ruble-denominated short-term loans with MDM Bank as of December 31, 2002, amounting to $14.1 million. These loans
are primarily utilized for the financing of working capital. The average interest rate on these loans is 16.3%. These loans are unsecured.

INTERNATIONAL
MOSCOW BANK ("IMB")we had one U.S. dollar-denominated short-term loan and one ruble-denominated short-term loan with IMB as of December 31, 2002,
amounting to $5.0 million and $3.1 million, respectively. These loans are primarily utilized for working capital purposes and for the purchase of plant and equipment. The interest rates
are LIBOR plus 5.4% on the U.S. dollar-denominated loan, and 16.5% on the ruble-denominated loan. These loans are secured with property, plant and equipment and inventory.

VNESHTORGBANKwe
had one ruble-denominated short-term line of credit with Vneshtorgbank as of December 31, 2002, which is utilized for working capital purposes. The
interest rate is 18%, and this line of credit is secured with plant and equipment for $6.3 million.

80

---



COMMERZBANKwe had one U.S. dollar-denominated short-term line of credit, one euro-denominated short-term loan, and one euro-denominated long-term line of credit, amounting
to $3.0 million, $0.1 million and $0.3 million, respectively, as of December 31, 2002. The interest rates are one-month LIBOR plus 5.25%, one-month EURIBOR plus 3.5%, and
one-month EURIBOR plus 2.0%, respectively. These borrowings are primarily used for the purchase of plant and equipment. These borrowings are unsecured.

MOSCOW
CITY GOVERNMENT ("MCG")we had three MCG loans amounting to $2.9 million as of December 31, 2002. These loans are provided by the MCG as we produce milk,
which is regarded by the MCG as a vital product. As a result, these loans have a favorable interest rate equal to one third of the Central Bank of Russia's rate, which was 21.0% at December 31,
2002. These loans are seasonal, as they are used to finance our dry milk production during July to September of each year. Some of these loans are guaranteed by Sberbank.

CITIBANK
(UKRAINE)we had one line of credit and two Ukrainian grivna-denominated loans, amounting to $0.3 million and $3.4 million, respectively, as of
December 31, 2002. These borrowings are used for working capital purposes. The interest rates are 16.0% on the line of credit and 22.0% on the loans. The borrowings are secured with property,
plant and equipment and inventory, and are guaranteed by ZAO KB Citibank (Moscow).

ALFA
BANKwe had one short-term ruble-denominated line of credit amounting to $1.6 million as of December 31, 2002, which is used for working capital purposes.
The interest rate is 17.0%. This line of credit is unsecured.

Bonds

On November 1, 2001, our subsidiary LMK issued unsecured ruble-denominated bonds amounting to 500,000,000 rubles ($15.7 million at the
December 31, 2002 exchange rate). The bonds are unconditionally guaranteed by WBD Foods and mature 1,093 days from November 1, 2001. Interest is payable every three months until
maturity. The interest rate is recalculated every quarter using formulas based on market rates and Central Bank of Russia refinancing rates. For the first quarter, the interest was fixed at 22.75%.
For the period from November 1, 2002 to January 31, 2003 the interest rate was 18.0%. LMK is obliged to redeem a bond if its holder notifies LMK of its intention to redeem the bond
between October 10, 2003 and October 24, 2003.

During
2001 and 2002, our subsidiary Bishkeksut issued unsecured Kyrgyz som-denominated bonds amounting to 40,000,000 Kyrgyz soms ($0.4 million at the December 31, 2002
exchange rate). For the first year, interest was fixed at 30.0%; for the period from December 1, 2002 to December 1, 2003 the interest rate is 18.0%.

On
April 15, 2003, we issued ruble-denominated bonds on the Moscow Interbank Currency Exchange amounting to 1.5 billion rubles ($48 million at the April 15,
2003 exchange rate) to Russian institutional investors, guaranteed by Vitafrukt, one of our juice subsidiaries. The bonds mature on April 11, 2006. Interest is payable semi-annually. For the
first coupon payment, interest is fixed at 12.9%, and subsequent interest payments will be indexed to the inflation rate. The bondholders have the right to demand prepayment in the event of payment
defaults in relation to debt in excess of $10 million or if certain financial tests are not met.

On
May 21, 2003 we completed a US$150 million Eurobond Regulation S/144A transaction. The transaction is structured as loan participation notes issued by UBS (Luxembourg)
S.A. for the sole purpose of funding a loan to us pursuant to a Loan Agreement guaranteed by our subsidiaries Lianozovo Dairy Plant, Tsaritsino Dairy Plant and Trade Company Wimm-Bill-Dann pursuant to
a guarantee. The notes were issued at par and mature on May 21, 2008. Interest is payable semi-annually at 8.50%. The notes are listed on the London Stock Exchange. The net proceeds we received
from the

81

---

loan
were $147.9 million. We intend to use approximately U.S. $100 million of the aggregate proceeds of the loan and the April 2003 ruble-denominated bond to fund capital
expenditures and approximately U.S. $95 million to refinance certain existing short-term indebtedness.

Capital Expenditures

Our total capital expenditures in 2002, excluding acquisitions, amounted to $136.1 million including $78.5 million of cash expenditures,
$56.8 million of vendor credits and $0.8 million of capital government grants. Capital expenditures in our dairy segment amounted to $99.7 million and related to the installation
of yogurt, soft cheese, dairy dessert and other production lines, the installation of bottling lines and the reconstruction of acquired production facilities. Capital expenditures in our juice segment
amounted to $26.5 million and related to the installation of new production lines, the conversion of the Ramensky plant from a dairy to a juice production facility and the modernization of
warehouse facilities acquired. Capital expenditures in our water segment amounted to $5.6 million and related to the construction of the water plant at Okulovka in the Novgorod region and the
installation of bottle blowing and water bottling lines. Our corporate and common capital expenditures, including those relating to the completion of the construction of our office building, totaled
$4.3 million. Common capital expenditures refer to assets used in the production of juice and milk.

Our
capital expenditures, excluding acquisitions, for the period from 2000 to 2002 are set forth in the following table:

|                                  |  | Year ended December 31, |      | 
|--------------------------------- |  | ----------------------- | ---- | 
|
|
|Dairy segment                     |  | $                       | 20.1 | 
|Juice segment                     |  |                         | 2.2  | 
|Water segment                     |  |                         | 1.5  | 
|Corporate and common expenditures |  |                         | 1.6  | 
|                                  |  |                         |      | 
|Total capital expenditures        |  | $                       | 25.4 | 
|                                  |  |                         |      | 

Our
estimated capital expenditures, excluding acquisitions, for the period from 2003 to 2005 are set forth in the following table:

|                                  |  | Year ended December 31, |       | 
|--------------------------------- |  | ----------------------- | ----- | 
|
|
|Dairy segment                     |  | $                       | 81.0  | 
|Juice segment                     |  |                         | 60.4  | 
|Water segment                     |  |                         | 6.6   | 
|Corporate and common expenditures |  |                         | 6.5   | 
|                                  |  |                         |       | 
|Total capital expenditures        |  | $                       | 154.5 | 
|                                  |  |                         |       | 

Our
estimated future capital expenditures are forward-looking statements and actual capital expenditures may differ materially from those described above. See "Cautionary Statement
Regarding Forward-Looking Statements." We intend to finance our capital expenditures through cash inflows from operating activities and external sources of finance, including a portion of the
aggregate proceeds from our May 2003 Eurobond-related loan and our April 2003 ruble-denominated bond. See also "Item 3. Key InformationD. Risk FactorsRisks Relating to
Our Business and Industry."

82

---

Acquisitions of Subsidiaries

During 2002, 2001 and 2000 we made a number of acquisitions for a total consideration of $39.6 million, $15.0 million and $4.4 million,
respectively, with the goal of entering into new markets and strengthening our operational presence in the regions of Russia, Ukraine and Kyrgyzstan:

|                                         |  | Direct ownership
interest acquired, % |  | Cash cost of
investment
|---------------------------------------- |  | ------------------------------------- |  | -----------------------
|
|2002                                     |  |                                       |  |                        
|Roska                                    |  | 100                                   |  | $                      
|Ruselectrocenter (Tomilino)              |  | 100                                   |  |                        
|Kharkovsky Dairy Plant                   |  | 82                                    |  |                        
|ZDMPminority interest                   |  | 25                                    |  |                        
|Depsona                                  |  | 95                                    |  |                        
|Novokuibyshevsk Moloko                   |  | 87                                    |  |                        
|Burynsky Dairy Powder Factory            |  | 76                                    |  |                        
|Tujmazinsky Molokozavod                  |  | 85                                    |  |                        
|Veidelevsky Factory                      |  | 100                                   |  |                        
|Gulkevichsky Butter Factory              |  | 52                                    |  |                        
|Other                                    |  | various                               |  |                        
|                                         |  |                                       |  |                        
|Total 2002                               |  |                                       |  | $                      
|                                         |  |                                       |  |                        
|2001                                     |  |                                       |  |                        
|KMMZ                                     |  | 60                                    |  | $                      
|Ufamolagroprom                           |  | 50                                    |  |                        
|TsMKminority interest(1)                |  | 10                                    |  |                        
|Anninskoye Moloko                        |  | 100                                   |  |                        
|Rubtsovsky Dairy                         |  | 100                                   |  |                        
|LMKminority interest                    |  | 15                                    |  |                        
|TsMKminority interest                   |  | 15                                    |  |                        
|TsMKminority interest(1)                |  | 5                                     |  |                        
|Other                                    |  | various                               |  |                        
|                                         |  |                                       |  |                        
|Total 2001                               |  |                                       |  | $                      
|                                         |  |                                       |  |                        
|2000                                     |  |                                       |  |                        
|Bishkeksut                               |  | 67                                    |  | $                      
|Molochny Kombinat"MK"minority interest |  | 57                                    |  |                        
|Other                                    |  | various                               |  |                        
|                                         |  |                                       |  |                        
|Total 2000(2)                            |  |                                       |  | $                      
|                                         |  |                                       |  |                        

---

Notes:

83

---

Below
is a description of the major acquisitions, both acquisitions of minority interests and acquisitions of new companies.

In
July 2002, we acquired a 100% interest in Roska, a St. Petersburg dairy company, for $11.6 million. The results of Roska's operations have been included in our Consolidated and
Combined Financial Statements from July 31, 2002. Through this major acquisition, we established our dairy production capacity in the North-West region of Russia.

In
October 2002, we acquired a 100% interest in Ruselectrocenter (Tomilino) for $6.0 million. The results of Ruselectrocenter's operations have been included in our
Consolidated and Combined Financial Statements from October 31, 2002. The acquisition of this logistics base in the Moscow region will provide us with a key warehousing and distribution center
for Moscow and the Moscow region.

In
October 2002, we acquired 95.4% of Depsona for $3.5 million. The results of Depsona's operations have been included in our Consolidated and Combined Financial Statements
from October 1, 2002. This acquisition will give us a key additional source of domestic concentrates, reducing our exposure to volatility in the global market for juice concentrates.

We
increased our presence in Ukraine with the acquisition of 82.3% of the Kharkovsky Dairy Plant in June 2002 for $5.1 million, and with the acquisition of 76.0% of the Burynsky
Dairy Powder Factory in the Sumy region, Northern Ukraine in November 2002 for $1.7 million, to ensure a supply of quality raw powdered milk for Ukrainian production. The results of
Kharkovsky Dairy Plant's operations have been included in our Consolidated and Combined Financial Statements from July 1, 2002 and the results of the Burynsky Dairy Powder Factory's operations have
been included in our Consolidated and Combined Financial Statements from December 1, 2002.

We
also increased our ownership in the Moscow Baby Food Plant (ZDMP) to 77.3% in June 2002 through the acquisition of an additional 25.1% from one of its shareholders for
$5.0 million.

Other
key 2002 acquisitions include: the acquisition of a controlling stake in Novokuibyshevskmoloko in the Samara region, Central Russia, specializing in dry fat-free milk, dairy
products and fermented milk products, and Tujmazinsky Molokozavod in the Republic of Bashkortostan, Western Siberia, providing a local supply of quality raw powdered milk in the Siberian region. The
results of Novokuibyshevskmoloko's operations have been included in our Consolidated and Combined Financial Statements from June 30, 2002 and the results of Tujmazinsky Molokozavod operations will be
included in our Consolidated and Combined Financial Statements from January 1, 2003.

In
April 2001, at the same time as WBD Foods LLC acquired an interest in LMK and Rodnik in exchange for shares of participation in WBD Foods LLC, an additional share of
participation in WBD Foods LLC was exchanged for additional shares in TsMK. That exchange was accounted for as the acquisition of a minority interest in 2001.

In
July 2001 WBD Foods received the ownership for 15% of shares of LMK and TsMK acquired from the Moscow City Government. TsMK purchased 15% of LMK's shares for $0.9 million and
invested $8.2 million of plant and equipment. LMK purchased 15% of TsMK's shares for $0.2 million and invested $5.5 million of plant and equipment. This agreement resulted from
the Moscow City Government's desire to sell its remaining interests in these entities and the importance of these entities to our business. This acquisition was accounted for as the acquisition of
minority interests in 2001.

In
March 2001, LMK acquired 60% of the outstanding common stock of Kiev Dairy No. 3 ("KMMZ"), one of the major dairy plants in Ukraine. The cost of acquisition was $4.0 million,
which was paid in April 2000 to Alfa Bank in its role as agent broker for the acquisition of KMMZ. The ownership of these shares was not transferred to LMK until March 2001, as it was
conditional on

84

---

receiving
Central Bank of Russia approval. The results of KMMZ have been consolidated from March 2001.

In
March 2001, LMK acquired 50.1% of the outstanding common stock of Ufamolagroprom, a leading dairy in Bashtorkostan. The cost of acquisition was $5.5 million, which was paid in cash.
The results of Ufamolagroprom have been consolidated from January 2001.

In
June 2001, we also acquired a 100% interest in Rubtsovsky Dairy and in August 2001, we acquired a 100% interest in Dairy Anninskoye Moloko. The cost of both acquisitions was
$1 million each. The results of Rubtsovsky Dairy and Dairy Anninskoye Moloko have been consolidated from July 2001.

In
December 2000, LMK acquired a further 57% of the outstanding common stock of MK (40% was acquired in September 1999 and accounted for at cost), a major milk producing plant in
Timashevsk, Krasnodar region of Russia. The cost of acquisition was $6.5 million which was paid in cash ($2.7 million was paid in 1999, $3.8 millionin 2000). The
results of MK have been consolidated from December 2000.

See
"Item 4. Information on Our CompanyB. Business OverviewBusiness Strategy" for more information on our expansion strategy and Note 4 to our
Consolidated and Combined Financial Statements included elsewhere in this document.

Contractual Obligations and Commercial Commitments

In the ordinary course of business, our primary contractual obligations regarding cash involve debt service, including bank loans, bonds, and vendors equipment
financing obligations.

The
table below summarizes our obligations and commitments to make future payments under long-term contracts, such as debt and vendors financing agreements.

|                                   |  | Payments due by periods
At December 31, 2002
|---------------------------------- |  | --------------------------------------------
|
|
|Unconditional purchase obligations |  | $                                           
|Vendor financing obligations       |  |                                             
|Other long-term obligations        |  |                                             
|Bonds payable                      |  |                                             
|Long-term loans                    |  |                                             
|                                   |  |                                             
|Total contractual cash obligations |  | $                                           
|                                   |  |                                             

We
do not have any contingent commitments as at December 31, 2002.

Environmental and Product Liability

We are subject to the requirements of environmental laws and regulations. While we devote resources designed to maintain compliance with these requirements, there
can be no assurance that we operate at all times in complete compliance with all such requirements. We could be subject to potentially significant fines and penalties for any noncompliance that may
occur. Although we have made and will continue to make capital and other expenditures to comply with environmental requirements, in 2002 we did not incur, and in 2003 we do not expect to incur,
material capital expenditures for environmental controls. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and IndustryFailure to
comply with existing governmental regulations, or increased governmental regulation of our operations, could result in substantial additional compliance

85

---

costs
or administrative penalties which would adversely affect our financial results and could reduce our ability to maintain or increase production."

We
also face an inherent business risk of exposure to product liability claims in the event that consumption of our products results in personal illness or death, and there can be no
assurance that we will not experience any material product liability losses in the future. In addition, if any of the products we have produced are determined to be unsuitable for consumption, we may
be required to participate in a recall involving such products. We have not had any significant historical experience of such claims and are unaware of any potential unasserted claims. See
"Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and IndustryFailure to comply with existing governmental regulations, or increased
governmental regulation of our operations, could result in substantial additional compliance costs or administrative penalties which would adversely affect our financial results and could reduce our
ability to maintain or increase production" and "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and IndustryIndependent distributors
may export our products to countries where such products do not meet the requirements of applicable legislation. The consequent recalls of our products and the associated publicity may negatively
impact our reputation in the Russian Federation, CIS and abroad, and adversely affect our results of operations."

Critical Accounting Policies and Estimates

Critical accounting policies are those policies that require the application of management's most challenging, subjective or complex judgments, often as a result
of the need to make estimates about the
effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgments that are sufficiently sensitive to give materially different
results under different assumptions and conditions. We believe that our most critical accounting policies are those described below. For a detailed discussion of these and other accounting policies,
see Note 3 to our Consolidated and Combined Financial Statements as of December 31, 2002 and 2001 and for the years then ended included elsewhere herein.

Estimates and assumptions

The preparation of our financial statements in accordance with U.S. GAAP required our management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and of revenues and expenses during the reporting period. Management reviews all significant estimates affecting the financial statements on a recurring basis and
records the effect of any adjustments as necessary.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts reflects provisions for customers receivables to reduce receivables to amounts expected to be collected. We use significant
judgment in estimating uncollectible amounts. In estimating uncollectible amounts, we consider factors such as current overall economic conditions, industry-specific economic conditions, historical
customer performance and anticipated customer performance. While we believe our processes effectively address our exposure for doubtful accounts, changes in the economy, industry, or specific customer
conditions may require adjustments to the allowance for doubtful accounts recorded in our Consolidated and Combined Financial Statements.

Inventory Valuation

We review our inventory balances to determine if inventories can be sold at amounts equal to or greater than their carrying amounts. The review includes
identification of slow moving inventories, obsolete inventories, expired inventories and discontinued products or lines of products. The identification process includes historical performance of the
inventory, current operational plans for the

86

---

inventory,
as well as industry and customer specific trends. Obsolete items are provided or written off. If our actual results differ from our expectations with respect to the selling of our
inventories at amounts equal to or greater then their carrying amounts, we would be required to adjust our inventories accordingly.

Depreciation periods for property, plant and equipment

Depreciation periods of property, plant and equipment are based on estimated useful lives of related assets. The adoption of depreciation periods requires
judgment in determining appropriate estimated useful lives over which the related assets will be utilized. In estimating useful lives, we consider factors such as our historical experience and the
industry, manufacturers' estimates, anticipated use and our maintenance policies. As these factors change, management estimates may change and we could be required to reassess depreciation periods for
property, plant and equipment and consider impairment.

Recent Accounting Pronouncements

During 2001, the Financial Accounting Standards Board ("FASB") issued several new accounting standards, including SFAS No. 141, "Business Combinations",
SFAS No. 142, "Goodwill and Other Intangible Assets", SFAS No. 143, "Accounting for Asset Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets".

In
June 2001, the FASB issued SFAS No. 141, "Business Combinations", and No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests in accordance with SFAS
No. 142. Other intangible assets continue to be amortized over their useful lives. Impairment losses that arise due to the initial application of this standard are reported as a cumulative
effect of a change in accounting principle. We adopted SFAS No. 141, "Business Combinations" which was effective for business combinations consummated after June 30, 2001. We adopted
SFAS No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002 and discontinued amortization of goodwill as of such date.

We
completed the transitional impairment test for existing goodwill as of January 1, 2002 during the second quarter of 2002. Based on a comparison of the carrying amounts of our
reporting units with the fair values of the reporting units, we determined that no goodwill was impaired as of that date. Fair values of the reporting units were established using the discounted cash
flow method.

The
adoption on January 1, 2002 of the above mentioned standards did not have a material impact on our financial position or results of operations.

Accounting Pronouncements Issued But Not Yet Adopted

During 2002, the FASB issued several new accounting standards, including SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Corrections, SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". In November 2002, the FASB also issued Interpretation
No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". These standards are not expected to have a material impact
on our financial position or results of operations.

In
July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 replaces EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)", and changes the timing of recognition for certain exit
costs associated with restructuring activities. Under SFAS No. 146, certain exit costs would be recognized over the period in

87

---

which
the restructuring activities occur. Currently, exit costs are recognized when we commit to a restructuring plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002, though early adoption is allowed. We will adopt SFAS 146 for exit or disposal activities that are initiated after December 31, 2002. The provisions of
SFAS No. 146 could result in our recognizing the cost of future restructuring activities over a period of time as opposed to as a one-time expense.

In
November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee.
The disclosure provisions of FIN 45 are effective for financial statements of annual periods that end after December 15, 2002. The provisions for initial recognition and measurement are
effective on a prospective basis for guarantees that are issued or modified after December 31, 2002.

Employee Stock Option Plans

On August 30, 2002, our Board of Directors authorized management to develop a stock option plan for our officers and key employees. On January 31,
2003, an issue of 1.35 million additional shares was approved by the shareholders meeting to fund this stock option plan. The Board of Directors is currently formulating the terms and
conditions of the plan.

Litigation

For a description of current claims see "Item 8. Financial InformationA. Consolidated Statements and Other Financial
Information7. Litigation."

Recent Developments

For a description of significant developments since December 31, 2002, see "Item 8. Financial InformationB. Significant Changes." For a
description of material contracts we have entered into since December 31, 2002, see "Item 10. Additional InformationC. Material Contracts."



We invest significant financial and human resources in new product development, focusing on long-term strategic development projects that are expected to create
innovative products and technologies. Our product development department located at the Lianozovo Dairy Plant in Moscow had 21 employees as of December 31, 2002. It often cooperates with third
parties such as Russian research institutions, specialized research firms and suppliers. In 1999 and 2000, we spent approximately $1.4 million to establish a department focused on new product
development. In 2001, we spent approximately $1.3 million on activities associated with new product development, including $0.5 million directly on new product development and
$0.8 million on the development of our own research center. During 2002, we spent approximately $0.9 million on new product development. For a more detailed discussion of new product
development see "Item 4. Information on Our CompanyB. Business OverviewNew Product Development."



Dairy Segment

In 2002, we witnessed an increase in the total supply of raw milk, which resulted in lower prices as compared to 2001. In 2003, we expect raw milk prices to
remain stable in ruble terms and to increase

88

---

in
U.S. dollar terms due to the expected continued appreciation of the ruble against the dollar in real terms.

In
2002, average prices for our products were higher compared with average prices in 2001 due to an increase in the share of high value-added products in our dairy segment product
portfolio. We expect this trend to continue in 2003.

Juice segment

In 2002, we witnessed price increase in juice concentrate and other ingredients and we expect this trend to continue in 2003 resulting in part from bad harvests
and poor weather conditions in juice-concentrate producing regions. We do not expect this increase to be dramatic in 2003. However, prices may be influenced by weather conditions and the harvest.

In
2002, average selling prices in our juice segment decreased as compared to 2001 due to significant price competition and the increased share of lower-price, lower-quality brands in
our juice product portfolio as we expanded into the lower-income regions. We believe that average selling prices in the regions will generally continue to be lower than average selling prices in
Moscow and St. Petersburg due to the difference in the product portfolio and consumer preferences in the regions. At the same time, however, we believe that rising household incomes in Russia and the
increasing preference for juice over fresh fruits, which generally accompanies increased incomes, will encourage the consumption of vitamin-rich, value-added products with different tastes and
nutritional characteristics.

Selling and distribution expenses

Our selling and distribution costs increased in 2002 as compared to 2001, both in absolute terms and as a percentage of sales. In particular, our advertising,
personnel and transportation costs increased, in large part as a result of our regional expansion program. Advertising costs were also driven upwards by increases in prices charged by the media. The
continuation of these trends, taken together with the continuing competitive pressure on our prices, particularly in our juice business, and the continuing
shift in our juice product-mix towards lower-priced products as we continue to expand into the regions, as discussed above, may have a negative impact on our operating income and net income in 2003 as
compared to 2002.

Except
as discussed elsewhere in this document, we are not aware of any trends, uncertainties, demands and commitments or events that are reasonably likely to have a material effect on
our sales, income from operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or
financial conditions. See also "Item 4. Information on Our CompanyB. Business OverviewDairy Products and BrandsMarket Trends and Competition" and
"Item 4. Information on Our CompanyB. Business OverviewJuice Products and BrandsMarket Trends and Competition," "Cautionary Statements Regarding Forward-
Looking Statements" and "Item 3. Key InformationD. Risk Factors."

89

---

Item 6    Directors, Senior Management and Employees



Our directors and executive officers, and their respective ages and positions as of May 10, 2003, were as follows:

|Name                   |  | Year of Birth |  | Position                                                    
|---------------------- |  | ------------- |  | ------------------------------------------------------------
|David Iakobachvili     |  | 1957          |  | Chairman                                                    
|Sergei A. Plastinin    |  | 1968          |  | Director and Chairman of Management Board                   
|Guy de Selliers        |  | 1952          |  | Director                                                    
|Mikhail V. Dubinin     |  | 1969          |  | Director                                                    
|J.B. Mark Mobius       |  | 1936          |  | Director                                                    
|Michael A. O'Neill     |  | 1945          |  | Director                                                    
|Alexander S. Orlov     |  | 1948          |  | Director                                                    
|Vladimir N. Sherbak    |  | 1939          |  | Director                                                    
|Victor A. Tutelyan     |  | 1942          |  | Director                                                    
|Earnest Linwood Tipton |  | 1934          |  | Director                                                    
|Evgeny G. Yasin        |  | 1934          |  | Director                                                    
|Vladimir Preobrajensky |  | 1961          |  | Chief Financial Officer, Management Board Member            
|Maxim Byrdin           |  | 1972          |  | Head of Dairy Business Unit, Management Board Member        
|Dmitri Kolokatov       |  | 1973          |  | Head of Juice Business Unit, Management Board Member        
|Leonid A. Kompaniets   |  | 1957          |  | Management Board Member                                     
|Mikhail V. Kondyrev    |  | 1970          |  | Head of Mineral Water Business Unit, Management Board Member
|Dmitri V. Kuprianov    |  | 1972          |  | Management Board Member                                     
|Pavel A. Smirnov       |  | 1972          |  | Management Board Member                                     

---

Note:

David Iakobachvilihas served as Chairman of our Board of Directors since June 8, 2001. He also serves as chairman of the board of
directors of the following companies: Prospect OJSC, a utility repair and services company, and Metelitza-Club CJSC, an entertainment and restaurant company. In addition, he is a director of Trinity
LLC, a technical equipment and services company, and Aeroport Financial Services Limited, an investment company. Mr. Iakobachvili owns 6.4% of our outstanding stock.

Sergei A. Plastininserves as the Chairman of our Management Board, which is our chief executive officer position. In 1993, he served as
General Director of UT Center LLC; from 1994 to 1995 he was General Director of NPP of Juices and Drinks JSC; from 1996 to 1998 he was Deputy Director of PK Lianfruct JSC; from 1996 to 1998 he served
as Deputy Director of Production of Foods CJSC; and from 1998 to 1999 he was Deputy Director of Lianozovo Dairy Plant. Since 1996, Mr. Plastinin has acted as Executive Director of PAG Rodnik
CJSC. In 1998, Mr. Plastinin has served as Deputy General Director of Production and Trade Group WBD CJSC. In addition, since 1998 Mr. Plastinin has acted

90

---

as
a consultant to Lianozovo Dairy Plant. All of these companies either currently are or formerly were a part of our group of companies. Mr. Plastinin owns 12.2% of our outstanding stock.

Guy de Selliersreceived a degree in engineering in 1975 and in economics in 1977 at the University of Lourain. Currently, Mr. de
Selliers acts as Chairman of Leader Capital, a project equity fund. During 1998-2000, he acted as Chairman, Head of Europe, of Fleming Investment Bank. Mr. de Selliers is also a director in
Solvay S.A., a global group of pharmaceutical and chemical companies, Norilsk Nickel, and an advisory director to Fortis, an international financial services provider. He was also a Deputy Vice
President of EBRD from 1991 to 1997. He acted as Chief Executive Officer of MC.BBL investment bank from 1997 to 1998.

Mikhail Dubininserved as Deputy General Director of ISSA, one of the first companies of our group, from 1992 to 1993. From 1993 to 1994
he was the General Director of UT Center LLC; from 1994 to 1995 he was Executive Director of NPP of Juices and Drinks JSC; from 1995 to 1996 he was President of Trade Company WBD CJSC; from 1996 to
1997 he was consultant at Trade Company WBD CJSC; from 1997 to 1998 he served as Deputy Director (Economic Affairs) of Lianozovo Dairy Plant; from 1998 to 2002 he was Deputy General Director of
Production and Trade Group WBD. All of these companies either currently are or formerly were a part of our group of companies. Mr. Dubinin owns 10.2% of our outstanding stock.

J.B. Mark Mobiusjoined the Templeton organization in 1987 as president of Templeton Emerging Markets Fund Inc. in Hong Kong. Dr. Mobius
has spent over thirty years working in Asia and other parts of the emerging markets world. As a result of his experience, in 1999 Dr. Mobius was appointed joint chairman of the World Bank and
Organization for Economic Cooperation and Development (OECD) Global Corporate Governance Forum's Investor Responsibility Taskforce. He has been a member of the board of directors of Lukoil since 2002.
Dr. Mobius holds Bachelor's and Master's degrees from Boston University, as well as a Ph.D. in economics and political science from the Massachusetts Institute of Technology. Dr. Mobius has studied at
the University of Wisconsin, University of New Mexico, and Kyoto University in Japan.

Michael A. O'Neillreceived a degree in Industrial Engineering from the College of Commerce Rathmines in 1967. He is also a Board member
of Efes Brewers International, ZAO Perekriostok and CTEKMoscow. From 1989 to 1991, Mr. O'Neill was Deputy Region Manager of the Coca-Cola Company. From 1991 to 1997 he was the
Region Manager of Eurasia of the Coca-Cola Company. From 1997 to 2000, Mr. O'Neill was the President of Nordic and Northern Eurasia Division of the Coca-Cola Company. In 2000,
Mr. O'Neill retired from the Coca-Cola Company and he has acted as consultant to it since then.

Alexander S. Orlovwas director of the milk department of Moscow Baby Food Plant from 1992 to 1994; from 1994 to 1997, Mr. Orlov
served as General Director of Moscow Baby Food Plant; from 1997 to 1998 he was General Director of Lianozovo Dairy Plant. From May 1998 through December 2002, Mr. Orlov has served as
General Director of Production and Trade Group WBD. In addition, Mr. Orlov acts as a consultant to Lianozovo Dairy Plant and as Deputy Chairman (but not a member) of our Management Board.
Mr. Orlov graduated from the Moscow Technology Institute of Meat and Milk Industry in 1975. Mr. Orlov owns 6.2% of our outstanding stock.

Vladimir N. Sherbakgraduated from Krasnodar Polytechnic Institute in 1966 and from the Academy of Social Science of the Central Committee
of the Communist Party in 1982. From 1996 to 1999 Mr. Sherbak was Deputy Minister of Agriculture of the Russian Federation; from 1999 to 2000 he was Deputy Prime Minister of the Russian
Federation for Agriculture.

Earnest Linwood Tiptonhas served on the International Dairy Food Association (IDFA) and its organizations for over 35 years in various
posts, culminating with his appointment to President and CEO in 1983. He is a respected resource on agricultural trade policy for Capitol Hill and federal

91

---

agencies,
and he has served as an advisor under both Republican and Democratic administrations, including his presidential appointment to the National Commission on Agricultural Trade and Export
Policy in 1984. Mr. Tipton is a past president and chairman of the board of the National Economists Club and the National Economic Education Foundation. Prior to joining IDFA, he worked as an
economist for a milk producers' cooperative and as a dairy economic consultant. Mr. Tipton also served as an officer in the U.S. Army Finance Corp. and holds Bachelor's and Master's degrees
from the University of Missouri.

Victor A. Tutelyangraduated from the Moscow Medical Institute in 1965. He is an academician of the Russian Academy of Medical Science and
has been the chief secretary of its Presidium since 2000. Currently, Mr. Tutelyan is the head of the Institute of Nutrition of the Russian Academy of Medical Science. From 1980 to 2000,
Mr. Tutelyan was the Deputy Director of the Institute of Nutrition of the Russian Academy of Medical Science.

Evgeny G. Yasingraduated from the Hydrotechnical Institute in 1957 with a degree in engineering and in 1963 from Moscow State University
with a degree in economics. He has been a professor in the High School of Economy of the State University since July 1998. Currently, Mr. Yasin serves as a director of Vostokenergo OJSC. From
2000 to 2002 he served as a director of VimpelCom OJSC. From 1991 to 1994, Mr. Yasin was the Director of Economic Policy for the Russian Society of Manufactures and Entrepreneurs. In 1994, he
was the head of the Analytical Center of the Administration of the Russian President. From 1994 to 1998, Mr. Yasin was the Minister of Economy of Russia. In 1998, Mr. Yasin acted as a
Minister for the Russian government.

Vladimir Preobrajenskygraduated from the Moscow Aviation Institute in 1984. He has also studied at Moscow State University, the London
Business School and Harvard University. Mr. Preobrajensky has served as our Chief Financial Officer since July 2002 and is currently a member of our Management Board. From May 1999 until May
2001, he served as the Chief Financial Officer and Vice President for Business Development of Vimpel Communications.

Maxim Byrdinjoined the Company in 1993 and served as the Executive Director of Trade Company WBD from 1995 until 1997. Currently,
Mr. Byrdin serves as a member of our Management Board and
as Head of the Dairy Business Unit. Mr. Byrdin graduated from the State Academy of Management in 1994.

Dmitri Kolokatovserved as the Managing Director for Trade Company WBD from 1998 until 2000 and currently serves as a member of our
Management Board and as Head of the Juice Business Unit. From 1996 through 1997, Mr. Kolokatov was the marketing manager at GR&T, and from 1995 through 1996 he was the marketing manager at
Merloni Electrodomestici. Mr. Kolokatov graduated from the Moscow Aviation Institute in 1996.

Leonid A. Kompanietsserved as Head of the Hardware Department from 1982 to 1984, as Production Manager from 1984 through 1986, and as
Chief Engineer in 1997 at the Moscow Baby Food Plant. From 1987 to 1994, Mr. Kompaniets served as the Production Manager at the Lianozovo Dairy Plant, and from 1994 to 2001 he served as the
Production Director at the Lianozovo Dairy Plant. Since 2001, Mr. Kompaniets has served as Director of Operations at the Lianozovo Dairy Plant. In addition, he is a member of our Management
Board. Mr. Kompaniets graduated from the Moscow Technological Institute of the Meat and Dairy Industry in 1979, and from the Moscow Institute of Electronic Mechanical Engineering in 1984.

Mikhail V. Kondyrevjoined Trade Company WBD CJSC in 1995 as a sales manager. During 1996 he served as the lead manager of our priority
clients department and subsequently as head of this department. In 1997 he served as the head of our new project development department. Since 1998, Mr. Kondyrev has been the head of the
strategic development department at the Lianozovo Dairy Plant. He is also currently the head of our Mineral Water Business Unit and a member of our Management Board.

92

---

Dmitri V. Kuprianovhas served as the Head of the Human Resources Department of the Lianozovo Dairy Plant since September 1998. He is also
currently a member of our Management Board. Mr. Kuprianov graduated from Moscow State University in 1998.

Pavel A. Smirnovjoined Trade Company Wimm-Bill-Dann in 1997 as an expert analyst. From 1998 to 1999 he served as the Acting Head of the
Dairy Product Development Department of the Lianozovo Dairy Plant. Since August 1999, Mr. Smirnov has served as Head of the Marketing Department of our Dairy Business Unit and as a member of
our Management Board. Prior to joining us, Mr. Smirnov worked at the Central Research Institute of the Ministry of Defense of the Russian Federation after graduating from the Dzerzhinsky
Military Academy in 1995.

Several
of our employees are related to members of our Board of Directors or senior management. In particular, Alexander S. Orlov's son works for WIMM-BILL-DANN Germany GmbH; the father
of Evgeny L. Yaroslavsky, who is a member of our controlling group of shareholders and on the board of directors of a number of our subsidiaries, is an administrator of one our buildings; the wife of
Roman V. Bolotovsky, our general counsel, is an engineer at Tsaritsino Dairy Plant; and the wife of Victor Y. Yevdokimov, who is a member of the board of directors and management of a number of our
subsidiaries, is an engineer at Tsaritsino Dairy Plant.



In 2002, the aggregate amount of compensation paid to the directors, executive officers and Management Board members of Wimm-Bill-Dann Foods OJSC as a group for
services in all capacities was $1.9 million. No funds were set aside for pension, retirement and other similar benefits for the same directors and executive officers as of December 31,
2002.

Pursuant
to internal guidelines governing the activities of our Board of Directors, each independent director was compensated $50,000 during 2002 (pro rated for those who served less
than a full year) plus all transportation and lodging expenses incurred in connection with board meetings. From 2003, we will compensate each board member $50,000 annually, plus transportation and
lodging expenses incurred in connection with board meeting attendance, and up to $2,000 per year for other expenses incurred in connection with board-related activities. The Chairman of the Board will
be compensated $300,000 annually plus transportation and lodging expenses incurred in connection with board meeting attendance, and up to $2,000 per year for other expenses incurred in connection with
board-related activities.



Members of our Board of Directors are elected by a majority vote of shareholders at our annual general meeting using a cumulative voting system. Each director is
elected for a term that lasts until the next annual general meeting and may be re-elected an unlimited number of times. Our Board of Directors currently consists of eleven members, seven of whom are
independent directors. The Board of Directors has the authority to make overall management decisions for the Company, except those matters reserved to the shareholders. See "General
Meetings of Shareholders" for more information regarding the competence of our shareholders' meetings. The members of our Board of
Directors, as well as the members of the board of directors of our subsidiaries, do not serve pursuant to a contract, though we plan to conclude such contracts in the near future.

All
of our directors were elected on May 31, 2002, and, pursuant to Russian law, their terms will expire on the date of our next annual shareholders' meeting, which will take
place between May 1 and June 30, 2003. The business address for all of our officers and directors is 16 Yauzsky Boulevard, Moscow 109028, Russian Federation.

93

---



The size of our Management Board, which consists of our executive officers, is determined by the Board of Directors and currently consists of 8 members:
S. Plastinin, V. Preobrajensky, P. Smirnov, M. Byrdin, D. Kolokatov, M. Kondyrev, L. Kompaniets and D. Kuprianov. Members of the Management
Board are nominated by the Chairman of the Management Board and confirmed by our Board of Directors for a term of three years. The Management Board is the collective executive body of the Company and,
under the direction of the Chairman of the Management Board, is responsible for our day-to-day management.



The Board of Directors appoints the Chairman of our Management Board, our chief executive officer, for a term of three years. The rights, obligations and the
times and amounts of payment for the Chairman's services are determined pursuant to our Charter and by contract. The Chairman of the Management Board is responsible for day-to-day management of our
activities.



Our Audit Committee was established on April 24, 2003 by a decision of our Board of Directors and functions pursuant to a Charter approved by the Board. It
is currently comprised of three independent directors, G. de Selliers, E. Linwood Tipton and V. Sherbak, appointed by the Board of Directors on
April 24, 2003. The goals and objectives of the Audit Committee, as set forth in the Charter, are to assist the Board of Directors in carrying out its oversight responsibilities in the areas of
:



According
to the Charter, the Audit Committee shall meet, separately from the non-independent directors, at least once during each fiscal quarter and more frequently as the Committee
deems desirable.

94

---





Our Disclosure Committee was formed on March 24, 2003 by order of the Chairman of our Management Board. It is composed of V. Preobrajensky, R. Bolotovsky, M.
Byrdin, D. Kolokatov, D. Kuprianov, E. Laryushkina and J. Yadegar. Ms. Laryushkina is our Financial Controller and Mr. Yadegar is our Deputy Chief Financial Officer for Investor Relations. The
Disclosure Committee functions pursuant to a Charter and meets as determined by the Committee. It is directly supervised by and reports to the Chairman of the Management Board and Chief Financial
Officer.

According
to its Charter, the Disclosure Committee is tasked with:



As
set forth in the Charter, the Disclosure Committee is also responsible for all aspects of information disclosure, including ensuring proper documentary execution, transmission,
implementation and performance of our rules and principles of information disclosure as well as for coordinating the work of our legal department, external and internal auditors, and our other
departments for the purpose of preparation our annual reports and other disclosure documents in accordance applicable law.



Our Investment and Strategic Planning Committee was formed on April 24, 2003 by a decision of our Board of Directors and functions pursuant to bylaws approved by
the Board. It is composed of S. Plastinin, M. Dubinin, M. O'Neill and V. Tutelyan. According to its bylaws, the Investments and Strategic Planning Committee is designed to assist the Board of
Directors in approving and carrying out its oversight responsibilities in relation to significant investment programs, mergers and acquisitions, and strategic planning.

According
to the bylaws, the Investment and Strategic Planning Committee shall meet not less than once during each fiscal quarter.



Our Personnel and Compensation Committee was formed on April 24, 2003 by a decision of our Board of Directors and functions pursuant to bylaws approved by the
Board. It is composed of A. Orlov, E. Yasin and J.B. Mark Mobius. According to the bylaws, the Personnel and Compensation Committee is tasked with assisting in the selection of Board of Directors
candidates. Its members also assist the Management Board in formulating and implementing:



According
to the bylaws, the Personnel and Compensation Committee shall meet not less than once during each fiscal quarter.

95

---



The Audit Commission verifies the accuracy of our financial reporting under Russian law and generally supervises our financial activity. The members of our Audit
Commission are nominated and elected by our shareholders for a term of one year. A Director may not simultaneously be a member of the Audit Commission. Our Audit Commission currently has six members:
N. Vasilieva, N. Kolesnikova, E. Gorshechnikova, E. Kuznetsova, N. Romanova and E. Smirnova. Our Audit Commission operates in accordance with terms set forth in specific guidelines.



In 2002, we had an average of 16,243 employees within Russia and the other countries of the CIS, including 8,812 production employees, 4,326 commercial employees
and 3,105 administrative employees. We also had 18 employees in the Netherlands, Germany and Israel. We do not employ a significant number of part-time employees. To date, we have experienced a low
level of departures, voluntary or otherwise. We have not experienced any work stoppages, and we consider our relations with employees to be strong. Some of our employees are unionized and are employed
pursuant to collective labor agreements.

|Average for the year ended December 31, |  | Production
and Supply |  | Marketing and
Distribution |  | General and
Administration |  | Percent
Increase over
Prior Year |  
|--------------------------------------- |  | --------------------- |  | -------------------------- |  | -------------------------- |  | -------------------------------- | -
|2002                                    |  | 8,812                 |  | 4,326                      |  | 3,105                      |  | 43                               | %
|2001                                    |  | 7,162                 |  | 1,996                      |  | 2,177                      |  | 75                               | %
|2000                                    |  | 4,280                 |  | 881                        |  | 1,305                      |  | 16                               | %

Our
personnel enjoy a relatively high level of social security. We provide subsidies for meals, medical care and summer vacations for employees and their children. Our employees have
opportunities to upgrade their qualifications by participating in training sessions and taking courses. Starting in 1998, leading managers of our subsidiaries have been involved in programs to upgrade
their professional skills through a program of the Russian government. We seek to maintain effective management teams at our regional subsidiaries by recruiting qualified new employees, transferring
existing employees from our Moscow subsidiaries, as well as through customized retraining programs and on-site training in our Moscow subsidiaries. Programs for training local personnel have been or
are being developed and implemented at each of our regional plants.



Each ADS is the economic equivalent of one share of our common stock.

The
aggregate beneficial interest of our directors, senior management and employees as of December 31, 2002, was as follows:

Number of Shares of common stock

% of common stock outstanding16,545,471

37.60%


For
further description of the individual interest of our directors and senior management, see "Item 7. Major Shareholders and Related Party TransactionsA. Major
Shareholders."

96

---

Item 7    Major Shareholders and Related Party Transactions



The following table sets forth information regarding the beneficial ownership of our common stock as of May 10, 2003, of the following:



|Name of Beneficial Owner                      |       | Number of
Shares
Owned |            | Percentage
of Shares
Outstanding |       
|--------------------------------------------- | ----- | ---------------------- | ---------- | -------------------------------- | ------
|Sergei A. Plastinin(1)(2)                     |       | 5,351,421              |            | 12.16                            | %     
|Mikhail V. Dubinin(1)                         |       | 4,471,421              |            | 10.16                            | %     
|David Iakobachvili(1)                         |       | 2,818,347              |            | 6.41                             | %     
|Gavril A. Yushvaev                            |       | 8,272,948              |            | 18.80                            | %     
|United Burlington Investments Ltd.            |       | 2,771,264              |            | 6.30                             | %     
|Alexander S. Orlov(1)                         |       | 2,738,282              |            | 6.22                             | %     
|Mikhail I. Vishnyakov                         |       | 1,357,798              |            | 3.09                             | %     
|Evgeny L. Yaroslavsky                         |       | 1,163,163              |            | 2.64                             | %     
|Templeton Strategic Emerging Markets Fund LDC |       | 518,000                |            | 1.18                             | %     
|Viktor E. Evdokimov                           |       | 264,405                |            | 0.60                             | %     
|Other                                         |       | 1,865,307              |            | 4.24                             | %     
|American Depositary Receipt Holders           |       | 12,407,644             |            | 28.20                            | %     
|                                              | Total |                        | 44,000,000 |                                  | 100.00

---

Notes:

As
of May 10, 2003, we had 44,000,000 shares of common stock outstanding. The total number of WBD ADSs outstanding was 12,407,644, representing underlying ownership of 28.20% shares,
approximately 28.20% of our outstanding share capital. The shares underlying the ADSs are deposited with Deutsche Bank Trust Company Americas and the local custodian is OOO Deutsche Bank. All shares
of common stock have the same voting rights.

Based
on our share register, we believe we are not directly or indirectly owned or controlled by another corporation or government, and that there are no arrangements the operation of
which may result in a change of control. From the date of completion of our initial public offering, February 14, 2002, there have not been any significant changes in the percentage ownership held by
any major shareholders other than Aleksandrs Timohins' sale of 100% of his 6.95% stake to United Burlington Investments Limited in March 2003. In addition, in May 2003, certain shareholders in our
controlling group of shareholders, some of whom are members of our Board of Directors, sold shares held by them amounting to approximately 4.0% of our total outstanding share capital. See "Item 3. Key
InformationD. Risk FactorsWe are controlled by a group of shareholders whose interests could conflict with those of the holders of our ADSs and notes." In connection with
this sale, we entered into a deposit agreement with Deutsche Bank Trust Company Americas.

Since
our initial public offering, Groupe Danone, our competitor in the dairy market, has acquired approximately 7.2% of our ADSs. As of the date of this annual report, certain of our
shareholders are engaged in preliminary discussions in relation to a possible transaction, which may or may not result in

97

---

the
acquisition of all or a majority of our shares by Groupe Danone. We have, at the request of these shareholders, cooperated in such preliminary discussions. As of the date of this annual report, no
agreement with respect to price or other material terms or conditions of a transaction has been reached. Moreover, no assurance can be made that these discussions will continue or that any agreement
with respect to a transaction will be reached, or, if reached, what the form of the transaction will be. The terms of any such transaction may or may not be extended to our public shareholders.



We entered into transactions with related and certain other parties. All transactions with the related parties were concluded on an arm's length basis. See Note
29 to our Consolidated and Combined Financial Statements as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000.

Disposition of Bank and Brewery Businesses

As part of our corporate reorganization, in the spring of 2001 we disposed of our controlling interests in Expobank, a banking company, and Central European
Brewing Company LLC, a holding company for four breweries. These dispositions were based on the desire to focus on our core dairy and juice business and to divest our ancillary operations before our
initial public offering. These dispositions were completed through a distribution of shares of Expobank and Central European Brewing Company LLC to certain members of our controlling group of
shareholders: Mikhail V. Dubinin, Alexander S. Orlov, Sergei A. Plastinin, Mikhail I. Vishnyakov, Gavril A. Yushvaev, Evgeny L. Yaroslavsky and Aleksandrs Timohins, several of whom are also members of
our Board of Directors. See "Item 6. Directors, Senior Management and EmployeesA. Directors and Senior Management" for a list of the members of our Board of Directors. In exchange, these
same individuals simultaneously transferred their ownership in Tsaritsino Dairy Plant, totaling 55.3%, to Lianozovo Dairy Plant. The exchange was completed in April 2001. In addition, Mr. Vishnyakov,
our shareholder, sold shares constituting 1.5% of Tsaritsino Dairy Plant to the Moscow Baby Food Plant in exchange for 5.0% of the shares of Expobank owned by the Moscow Baby Food Plant.

Trinity-Negus

Trinity-Negus, a Russian security services company, provided us with security services in 2000, 2001 and 2002 for which we paid approximately $1.7 million, $2.2
million and $0.2 million, respectively. Trinity-Negus is a wholly owned subsidiary of Trinity LLC, in which two of our current shareholders, David Iakobachvili and Evgeny Yaroslavsky, are shareholders
and directors, and Mikhail Vishnyakov is a director. Messrs. Iakobachvili, Yaroslavsky and Vishnyakov collectively own 17.4% of our common shares.

Adonis

During 2002 and 2001, we paid for construction of an administrative building amounting to $2.3 million and $4.1 million, respectively, to Adonis, a limited
liability company, which is controlled by members of the control group of shareholders. The construction was capitalized as of December 31, 2002. As of December 31, 2002, there were no outstanding
advances in respect of Adonis.

Poultry Factory Gorki-2

During 2002 and 2001, we purchased milk from Poultry Factory Gorki-2, a closed joint stock company, which is controlled by members of the control group of
shareholders, amounting to $0.3 million and $0.6 million, respectively. At December 31, 2002 and 2001 there were no outstanding accounts payable to Poultry Factory Gorki-2 in respect of milk received.

98

---

Expobank

During 1999 and 2000, we maintained bank accounts at, and received debt financing from, Expobank, a Russian bank which we, at that time, controlled. In April
2001, we transferred our interest in Expobank to certain of our shareholders in exchange for shares owned by these shareholders in Tsaritsino Dairy Plant. See "Disposition of Bank and
Brewery Businesses" for a description of this exchange. These shareholders, on July 21, 2001, sold their interests in Expobank to MDM Bank, an unrelated entity. We received short-term financing of
approximately $18.3 million and $7.8 million during 2000 and 1999, respectively, all of which was repaid within the year. Bank charges and interest relating to these financings were $176,000 and
$271,000 for 2000 and 1999, respectively, with interest rates varying from 5% to 55% during 2000 and 29% to 39% during 1999. We currently have no debt outstanding from Expobank, and any future
transactions with Expobank will be on arm's-length terms.

Sale of Shares to Templeton Strategic Emerging Markets Fund LDC

On January 4, 2002, certain of our controlling shareholders, Gavril Yushvaev, Mikhail Dubinin, Sergei Plastinin, Aleksandrs Timohins, Alexander Orlov, Mikhail
Vishnyakov, Evgeny Yaroslavsky, and Viktor Evdokimov, entered into an agreement, to which we are also a party, to sell a total of 518,000 of our shares, constituting approximately 1.48% of our shares
prior to the completion of our initial public offering, to Templeton Strategic Emerging Markets Fund LDC for a total amount of approximately $10.0 million, or $19.2870 per share. As part of the
agreement, Templeton Strategic Emerging Markets Fund LDC agreed to nominate Dr. Mark Mobius to our Board of Directors.

Under
the Templeton agreement, we had given Templeton a put option which it did not exercise and which expired upon the consummation of our initial public offering. We also provided a
number of representations and warranties to Templeton, including representations and warranties regarding our capital structure, ability of selling shareholders to enter into the agreement and its
enforceability, the accuracy of our audited financial statements as of and for the years ended 1999 and 2000, and the absence of any event which would have a material adverse effect on us since the
date of those financial statements. Templeton does not have any registration rights agreement with us.

Brewery Volga, Volga-Invest and Moskvoretzky Brewery

As of December 31, 2002, we had loan receivables from Brewery Volga, Volga-Invest and Moskvoretzky Brewery amounting to $0.7 million. These loans were
interest-free, ruble-denominated and mature during 2003. The loans were provided in 2001 before the alienation of these breweries, described more fully above under "Disposition of Bank
and Brewery Businesses." From 2003, these loans will have an interest rate of 10% per annum.

Purchase of Stake in Moscow Baby Food Plant

Mr. Alexander Orlov, a party to the Amended and Restated Partnership and Cooperation Agreement, owned 4,666, or 25.1%, of the outstanding shares of the Moscow
Baby Food Plant, of which we beneficially owned 51%. Our Board of Directors and shareholders approved our purchase of this stake for approximately $5 million, and we purchased Mr. Orlov's 25.1% stake
in June 2002.

Wimm-Bill-Dann Trans

During 2002, 2001 and 2000 we received transportation services from Wimm-Bill-Dann Trans, a closed joint stock company that is our investee, amounting to
approximately $6.0 million, $5.3 million, and $1.9 million, respectively. As of December 31, 2002, 2001 and 2000 advances paid to Wimm-Bill-Dann Trans in respect of
transportation services amounted to $0.1 million, $0.2 million and $0, respectively.

99

---

Perekriostok

One of the members of our Board of Directors is also a member of the Board of Directors of Trade House "Perekriostok," which buys dairy and juice products from
us. Sales to Perekriostok in 2002 were $6.7 million. The amount due to us from Perekriostok at December 31, 2002 was $0.4 million.



Not applicable.

Item 8    Financial Information



On May 23, 2003 a claim was filed with the Arbitration Court of the City of Moscow by our subsidiary, Fruit Rivers, in relation to a tax assessment in the amount
of approximately $6.9 million (including interest and penalties) Fruit Rivers received from the Russian Tax Authority. In addition, on May 26, 2003, we received notice that an appeal was filed by the
Russian Tax Authority with the Federal Arbitration Court of the Moscow District in a case relating to the Russian Tax Authority's assessment of approximately $2.4 million (including penalties) against
Fruit Rivers. This appeal was subsequently dismissed by the Federal Arbitration Court of the Moscow District on June 16, 2003. For a more detailed description of these tax claims and our potential
liability in relation thereto, see "Item 2. Key InformationD. Risk FactorsRisks Related to Our Financial ConditionIf the various initiatives we have used to
reduce our tax burden are successfully challenged by the Russian tax authorities, we will face significant losses associated with the assessed amount of tax underpaid and related interest and
penalties, which would have a material impact on our financial condition and results of operations" and "The elimination of a tax privilege from which we currently benefit and/or a
successful challenge by the tax authorities of our use of this tax privilege would materially adversely affect our results of operations."



For a discussion of our policy on dividend distributions, see "Item 10. Additional InformationB. Charter and Certain Requirements of Russian
LawDividends and Dividend Rights."



In January 2003, we acquired a 100% interest in Sibirsky Syr ZAO in the Siberian region for US$2.6 million. This acquisition provides us with a warehousing and
refrigerating base adjacent to our principal Siberian production facility, Sibirskoe Moloko Dairy Plant.

In
March 2003, we commenced operations at our bottled water factory in the Novgorod Region. As of December 31, 2002 our total investment in the water segment amounted to $7.2 million.

100

---

In
March 2003, Aleksandrs Timohins sold of 100% of his 6.95% stake in our share capital to United Burlington Investments Limited.

On
April 15, 2003, we issued ruble-denominated bonds on the Moscow Interbank Currency Exchange amounting to 1.5 billion rubles ($48 million at the April 15, 2003 exchange rate) to
Russian institutional investors, guaranteed by Vitafrukt, one of our juice subsidiaries. The bonds mature on April 11, 2006. Interest is payable semi-annually. For the first coupon payment, interest
is fixed at 12.9%, and subsequent interest payments will be indexed to the inflation rate. The bondholders have the right to demand prepayment in the event of payment defaults in relation to debt in
excess of $10 million or if certain financial tests are not met.

On
May 21, 2003 we completed a US$150 million Eurobond Regulation S/144A transaction. The transaction is structured as loan participation notes issued by UBS (Luxembourg) S.A. for the
sole purpose of funding a loan to us pursuant to a Loan Agreement guaranteed by our subsidiaries Lianozovo Dairy Plant, Tsaritsino Dairy Plant and Trade Company Wimm-Bill-Dann pursuant to a guarantee.
The notes were issued at par and mature on May 21, 2008. Interest is payable semi-annually at 8.50%. The notes are listed on the London Stock Exchange. The net proceeds we received from the loan were
$147.9 million. We intend to use approximately U.S. $100 million of the aggregate proceeds of the loan and the April 2003 ruble-denominated bond to fund capital expenditures and approximately U.S. $95
million to refinance certain existing short-term indebtedness.

On
May 23, 2003 a claim was filed with the Arbitration Court of the City of Moscow by our subsidiary, Fruit Rivers, in relation to a tax assessment in the amount of approximately $6.9
million (including interest and penalties) Fruit Rivers received from the Russian Tax Authority. In addition, on May 26, 2003, we received notice that an appeal was filed by the Russian Tax Authority
with the Federal Arbitration Court of the Moscow District in a case relating to the Russian Tax Authority's assessment of approximately $2.4 million (including penalties) against Fruit Rivers. This
appeal was subsequently dismissed by the Federal Arbitration Court of the Moscow District on June 16, 2003. For a more detailed description of these tax claims and our potential liability in relation
thereto, see "Item 2. Key InformationD. Risk FactorsRisks Related to Our Financial ConditionIf the various initiatives we have used to reduce our tax burden are
successfully challenged by the Russian tax authorities, we will face significant losses associated with the assessed amount of tax underpaid and related interest and penalties, which would have a
material impact on our financial condition and results of operations" and "The elimination of a tax privilege from which we currently benefit and/or a successful challenge by the tax
authorities of our use of this tax privilege would materially adversely affect our results of operations."

In
May, 2003, certain shareholders in our controlling group of shareholders, some of whom are members of our Board of Directors, sold shares held by them amounting to approximately 4.0%
of our total outstanding share capital.

As
of the date of this annual report, certain of our shareholders are engaged in preliminary discussions in relation to a possible transaction, which may or may not result in the
acquisition of all or a majority of our shares by Groupe Danone. We have, at the request of these shareholders, cooperated in such preliminary discussions. As of the date of this annual report, no
agreement with respect to price or other material terms or conditions of a transaction has been reached. Moreover, no assurance can be made that these discussions will continue or that any agreement
with respect to a transaction will be reached, or, if reached, what the form of the transaction will be. The terms of any such transaction may or may not be extended to our public shareholders.

101

---



Item 9    The Offer and Listing

(Items
9A 1-3, 9A 5-7, B, D, E and F are not applicable.)



The following table sets forth the monthly high and low market prices per ADS on the New York Stock Exchange for each of the most recent six months; the quarterly
high and low market prices per ADS for each quarter since our initial public offering in February 2002; and the annual high and low market prices per ADS during 2002. Our ordinary shares are
currently listed in Russia on the RTS and admitted for listing on MICEX.

|                    |  | High |       | Low
|------------------- |  | ---- | ----- | ---
|May 2003            |  | $    | 20.99 |    
|April 2003          |  | $    | 19.08 |    
|March 2003          |  | $    | 19.69 |    
|February 2003       |  | $    | 19.39 |    
|January 2003        |  | $    | 18.97 |    
|December 2002       |  | $    | 18.40 |    
|First Quarter 2003  |  | $    | 19.69 |    
|Fourth Quarter 2002 |  | $    | 20.50 |    
|Third Quarter 2002  |  | $    | 21.50 |    
|Second Quarter 2002 |  | $    | 24.95 |    
|2002                |  | $    | 24.95 |    



Our ordinary shares are listed in Russia on the RTS and admitted for listing on MICEX. American Depositary Receipts, each representing one of our ordinary shares,
have been listed on the New York Stock Exchange under the symbol "WBD" since February 8, 2002.

Item 10    Additional Information



Not applicable.



We describe below material provisions of our charter in effect on the date of this document and certain requirements of Russian legislation. In addition to this
description, we urge you to review our charter to learn its complete terms.

Our Purpose

Article 4.1 of our charter provides that our main goal is to earn a profit by providing the fullest and highest-quality satisfaction of the needs of legal
entities and individuals for the products and services we offer.

Rights Attaching to Shares

Pursuant to our charter, we have the right to issue registered common shares, preferred shares, and other securities provided for by legal acts of the Russian
Federation with respect to securities.

102

---

Preferred
shares may be issued only after corresponding amendments have been made to our charter pursuant to a resolution of the general meeting of shareholders.

We
have issued only common shares. Holders of our common shares have the right to vote at all general meetings of shareholders. As required by the Federal Law on Joint Stock Companies
and our charter, all of our common shares have the same par value and grant to the shareholders who own them an identical amount of rights. Each fully paid share of common stock, except for treasury
shares, gives its holder the right to:



Preemptive Rights and Anti-Takeover Protections

Our charter provides existing shareholders with a preemptive right to purchase shares or convertible securities during an open subscription. In addition, the
Federal Law on Joint Stock Companies provides shareholders with a preemptive right to purchase shares or convertible securities during a closed subscription if the following two conditions are met:
(i) the shareholders did not participate in voting or voted against such subscription and (ii) persons other than the shareholders may subscribe for the shares pursuant to the
subscription terms. Russian legislation also requires that any person that intends, either alone or with affiliates, to acquire 30% or more of the common stock of a company having more than 1,000
common shareholders must give at least 30, but no more than 90, days' prior written notice to the existing shareholders.

103

---

Additionally,
a person acquiring 30% or more of the common stock of a company with more than 1,000 shareholders, within 30 days of acquiring 30% or more, must offer to buy all of
common stock or securities that are convertible into common stock at a price not lower than the weighted average acquisition price of the common stock over the six months before the date of
acquisition of 30% or more of the common stock. This requirement also applies to any acquisitions of 5% or more of the outstanding shares of a company in over the 30% level. Failure to observe this
requirement results in the limitation of the acquirer to voting only those shares which were purchased in compliance with this
requirement. This requirement may be waived in a company's charter or by a resolution adopted by a majority vote at a shareholders meeting, excluding the votes of the person acquiring shares. Our
charter does not contain a waiver in relation to, and our shareholders have not waived, this requirement. Russian legislation is unclear on whether this requirement applies to shareholders already
owning over 30% of a company's common stock.

Dividends and Dividend Rights

The Federal Law on Joint Stock Companies and our charter set forth the procedure for determining the annual dividends that we distribute to our shareholders.
According to our charter, annual dividends are recommended to a shareholders meeting by a majority vote of the board of directors, and approved by an annual shareholders meeting by a majority vote.
The annual dividend approved at an annual shareholders meeting may not be more than the amount recommended by the board of directors. Annual dividends are distributed to shareholders and nominal
holders who were included in the company's register on the day on which the list of persons having the right to participate in the annual shareholders' meeting was compiled. See "General
Meetings of ShareholdersNotice and Participation." Dividends are not paid on treasury shares.

The
Federal Law on Joint Stock Companies allows dividends to be paid only out of net profits for the current year calculated under Russian accounting principles and as long as the
following conditions have been met:



Distributions on Liquidation to Shareholders

Under Russian legislation, liquidation of a company results in its termination without the transfer of rights and obligations to other persons as legal
successors. Our charter allows us to be liquidated:



Following
a decision to liquidate us, the right to manage its affairs would pass to the liquidation commission which, in the case of voluntary liquidation, is appointed by shareholders
meeting and, in an involuntary liquidation, is appointed by the court. Creditors may file claims within a period to be determined by the liquidation commission, but which is at least two months from
the date of publication of notice of liquidation by the liquidation commission.

The
Civil Code gives creditors the following order of priority during liquidation:



104

---



The
remaining assets of a company are distributed among shareholders in the following order of priority:



Risks Regarding Exercise of Rights Associated with ADSs

The regulations governing nominee holders, custodians and depositaries are not yet well developed in Russia. The existing regulations could be interpreted as
requiring a nominee holder or a depositary to obtain a license from the Russian authorities to act in that capacity with regard to shares of our common stock. This applies to both Russian and foreign
nominee holders and depositaries. This could result in your inability to exercise your rights as a holder of our ADSs, including voting. The same problem may also affect the ability of the depositary
to grant a discretionary proxy to a person designated by us if you do not give any voting instructions. Further, in the past, nominees have reportedly experienced difficulty in convincing registrars
of their right to represent the beneficial holder and to obtain the benefits for the beneficial holders available under an applicable tax treaty. This could result in your inability to obtain the
benefits due to you as a holder of our ADSs. However, the Federal Law on the Securities Markets provides that shares may be held by nominees entitled to receive dividends and to vote the shares on
behalf of the beneficial owner upon receipt of the appropriate instructions from the beneficial owner. The nominee is required to provide information on the beneficial holder of the shares upon the
demand of the registrar. Some of the difficulties initially experienced by investors appear to have been abated by the Federal Law on the Securities Markets and by the regulations on registrars that
govern issues concerning nominees.

Approval of the Ministry of Antimonopoly Policy of the Russian Federation

Pursuant to Russian antimonopoly legislation, transactions exceeding a certain amount or involving a company considered to have a dominant market position and
which would result in a shareholder's (or a group of affiliated shareholders) shareholdings in a company equaling or exceeding 20% of the total shareholdings in a company must be approved in advance
by the Ministry of Antimonopoly Policy of the Russian Federation.

Notification of Foreign Ownership

Pursuant to Russian securities legislation, any foreign person or company acquiring shares in a Russian joint stock company must notify the Russian Federal
Commission on Securities Markets of such acquisition on the date of such acquisition in the form and substance required by Russian securities legislation. In addition, foreign persons registered as
individual entrepreneurs in Russia who acquire shares in a Russian joint stock company and foreign companies that acquire shares in a Russian joint stock company may need to notify the Russian tax
authorities within one month following such acquisition if they are already registered with the Russian tax authorities at the time of acquisition. Russian law is unclear as to whether foreign persons
and companies that are not registered with the Russian tax authorities at the time of their share acquisitions must register solely for the reason of such

105

---

share
acquisitions. Other than these requirements, there are no requirements or restrictions with respect to foreign ownership of shares in the Company.

Liability of Shareholders

The Civil Code and the Federal Law on Joint Stock Companies generally provide that shareholders in a Russian joint stock company are not liable for the
obligations of the joint stock company and bear only the risk of loss of their investment. This may not be the case, however, when one company is capable of determining decisions made by another
company. The company capable of determining such decisions is called an effective parent. The company whose decisions are capable of being so determined is called an effective subsidiary. The
effective parent bears joint and several responsibility for transactions concluded by the effective subsidiary in carrying out these decisions if



Thus,
a shareholder of an effective parent is not itself liable for the debts of the effective parent's effective subsidiary, unless that shareholder is itself an effective parent of the
effective parent. Accordingly, you will not be personally liable for our debts or those of our effective subsidiaries unless you control our business.

In
addition, an effective parent is secondarily liable for an effective subsidiary's debts if an effective subsidiary becomes insolvent or bankrupt resulting from the action or inaction
of an effective parent. This is the case no matter how the effective parent's capability to determine decisions of the effective subsidiary arises, such as through ownership of voting securities or by
contract. In these instances, other shareholders of the effective subsidiary may claim compensation for the effective subsidiary's losses from the effective parent that caused the effective subsidiary
to take any action or fail to take any action knowing that such action or failure to take action would result in losses.

Alteration of Capital



We may increase our charter capital by



Generally,
a decision to increase the charter capital by issuing additional shares or increasing the nominal value of issued shares requires a majority vote of a shareholders meeting. In
addition, the
issuance of shares above the number provided in our charter necessitates a charter amendment, which requires a three-quarters affirmative vote of a shareholders meeting.

The
Federal Law on Joint Stock Companies requires that newly issued shares be sold at market value, except in limited circumstances where (i) existing shareholders exercise a
preemptive right to purchase shares at not less than 90% of their market value or the price paid by third parties, or (ii) fees up to 10% are paid to intermediaries, in which case the fees paid
may be deducted from the price. The market value may not be set at less than the nominal value of the shares. The board of directors and an independent appraiser value any in-kind payments
for the new shares.

The
Federal Commission on the Securities Market, under the power given to it by the Federal Law on the Securities Market, has issued detailed procedures for the registration and issue of
shares of a joint stock company. These procedures require

106

---





The Federal Law on Joint-Stock Companies does not allow a company to reduce its charter capital below the minimum charter capital required by law. As of
December 31, 2002, the charter capital minimum for an open joint stock company was approximately $3,140. Our charter requires that any decision to reduce our charter capital, whether through
the repurchase and cancellation of shares or a reduction in the nominal value of the shares, is by a majority vote of a shareholders meeting. Additionally, within 30 days of a decision to
reduce our charter capital, we must issue written notice to
our creditors and publish this decision. Our creditors would then have the right to demand, within 30 days of the publication or mailing of our notice, repayment of all amounts due to them, as
well as compensation for damages.

The
Federal Law on Joint Stock Companies allows the shareholders or the board of directors to authorize the repurchase of up to 10% of our shares in exchange for cash. The repurchased
shares either must be resold within one year of their repurchase or the shareholders must decide to cancel such shares and then either decrease the charter capital or increase the nominal value of the
remaining shares to preserve the total amount of the charter capital.

The
Federal Law on Joint Stock Companies allows us to repurchase our shares only if, at the time of repurchase:



Russian
legislation and our charter provide that our shareholders may demand repurchase of their shares if



and
as long as the shareholder demanding repurchase opposed the action or did not participate in the vote on such issues. In addition, there is some uncertainty under Russian law as to whether the
shareholder may demand repurchase of its shares if we decide on a closed subscription for our shares. We may spend up to 10% of our net assets for a share redemption.

Directors

Our charter provides that our entire board of directors is up for election at each annual general shareholders meeting and that our board of directors is elected
through cumulative voting. Before the

107

---

expiration
of their term, the directors may be removed as a group at any time without cause by a majority vote of a shareholders meeting.

The
Federal Law on Joint Stock Companies requires at least a seven-member board of directors for an open joint stock company with more than 1,000 holders of common stock, and at least a
nine-member board of directors for an open joint stock company with more than 10,000 holders of common stock. Our charter provides that our board of directors consists of eleven members.

The
Federal Law on Joint Stock Companies prohibits a board of directors from acting on issues that fall within the exclusive competence of the general shareholders meeting. Our board of
directors has the exclusive power to decide the following issues



Our
charter generally requires a majority affirmative vote of the directors present for an action to pass, with the exception of actions for which Russian legislation requires a
qualified or unanimous vote, such as approval of major transactions or interested party transactions.

Interested Party Transactions

The Federal Law on Joint Stock Companies contains requirements for transactions with "interested parties." The definition of an "interested party" includes
members of the board of directors, officers of a company and any person that owns, together with any affiliates, at least 20% of a company's voting shares or is able to direct the actions of the
company, if that person, or that person's relatives or affiliates is



108

---



The
Federal Law on Joint Stock Companies also introduces the definition of "an independent director" who is not, and within the year preceding the decision was not, a general director or
a member of the management board if, in this instance, the person's spouse, parents, children, brothers or sisters are not persons occupying positions in the management authorities of the company or
otherwise an affiliate of the company.

An
interested party transaction entered into by a company with 1,000 or less shareholders shall be adopted by a majority vote of directors who are not "interested parties" in the
transaction.

The
Federal Law on Joint Stock Companies requires that a transaction by companies with more than 1,000 shareholders with an interested party be approved by a majority vote of the
"independent directors" of the company who are not "interested parties" in the transaction. For companies with 1,000 or less shareholders, a transaction with an interested party must be approved by a
majority vote of the directors who are not "interested parties" in the transaction if the number of these directors is sufficient to constitute a quorum.

A
majority of shareholders who are not "interested parties" in the transaction is also required if:



Approval
by a majority of shareholders who are not "interested parties" may not be required for a transaction with an "interested party" if such transaction is substantially similar to
transactions concluded by the company and the party in the normal course of business before such party became an "interested party."

Major Transactions

The Federal Law on Joint Stock Companies defines a "major transaction" as a transaction, or series of transactions, involving the acquisition or disposition, or a
possibility of disposition of 25% or more of the balance sheet value of the assets of a company, with the exception of transaction completed in the normal course of business or a transaction, or
series of transactions, involving placement of common shares, or securities convertible into common shares, comprising more than 25% of previously placed common shares. Major transactions involving
assets ranging from 25% to 50% of the balance sheet value of the assets of a company require unanimous approval by all members of the board of directors or a simple majority affirmative vote of a
shareholders meeting. Major transactions involving assets in excess of 50% of the balance sheet value of the assets of a company require a three-quarters vote by a shareholders meeting.

General Meetings of Shareholders



The powers of a shareholders meeting are set forth in the Federal Law on Joint Stock Companies and in our charter. A shareholders meeting may not decide issues
that are not included in the list of its

109

---

competence
by the Federal Law on Joint Stock Companies and our charter. Among the issues which the shareholders have the exclusive power to decide are



Voting
at a shareholders meeting is generally on the principle of one vote per share of common stock, with the exception of the election of the board of directors, which is done through
cumulative voting. Decisions are generally passed by an affirmative vote of a majority of the voting shares present at a shareholders meeting. However, Russian law requires a three-quarters
affirmative vote of the voting shares present at a shareholders meeting to approve the following:



The
quorum requirement for our shareholders meetings is met if holders of shares that account for more than 50% of the votes have registered for participation in the meeting in person or
whose ballots were timely received by us before the meeting. If the 50% quorum requirement is not met, another shareholders meeting must be scheduled and the quorum requirement is satisfied if holders
of shares that account for at least 30% of the votes are present at that meeting.

The
annual shareholders meeting must be convened by the board of directors between March 1 and June 30 of each year, and the agenda must include the following items:



A
shareholder or group of shareholders owning in the aggregate at least 2% of the issued voting shares may introduce proposals for the agenda of the annual shareholders meeting and may
nominate candidates for the board of directors, management board, counting commission, audit commission and general director. Any agenda proposals or nominations must be provided to the company no
later than 30 calendar days after December 31.

110

---

Extraordinary shareholders meetings may be called by the board of directors on its own initiative, or at the request of the audit commission, independent auditor or a shareholder or
group of shareholders owning in the aggregate at least 10% of the issued voting shares as of the date of the request.

A
general meeting of shareholders may be held in direct form or by absentee ballot. The direct form contemplates the adoption of resolutions by the general meeting of shareholders
through the joint personal attendance of the shareholders and their authorized representatives for the purpose of discussing and voting on issues on the agenda. However, if a ballot is mailed to a
shareholder for participation at a meeting convened in a direct form, the shareholder may complete and mail the ballot back to us without personally attending the meeting. The absentee ballot
contemplates the determination of shareholders' opinions on issues on the agenda by means of a written poll.



All shareholders entitled to participate in a given general shareholders meeting must be notified of a meeting, whether the meeting is to be held in direct or
remote form, no less than 20 days prior to the date of the meeting. However, if reorganization is an agenda item, shareholders must be notified at least 30 days prior to the date of the
meeting, and if it is an extraordinary shareholders meeting to elect the board of directors by cumulative vote, shareholders must be notified at least 50 days prior to the date of the meeting.
The list of shareholders entitled to participate in a general shareholders meeting is to be compiled on the basis of data in our register of shareholders on the date established by the Board of
Directors.

The
date established for the compilation of the list of shareholders entitled to participate in a general shareholders meeting may be neither earlier than the date of adoption of the
resolution to hold a general shareholders meeting nor later than 50 days before the date of the meeting or, in the case of a shareholders meeting to elect the Board of Directors by cumulative
vote, not later than 65 days before the date of the meeting.

The
following issues cannot be decided by absentee ballot:



The
right to participate in a general meeting of shareholders may be exercised by a shareholder as follows:





All of our shares are common registered shares. Russian legislation requires that a joint stock company maintain a register of its shareholders. Since
June 28, 2001, Central Moscow Depository OJSC has maintained our register of shareholders.

111

---

The
purchase, sale or other transfer of shares is accomplished through the registration of the transfer in the share register, or the registration of the transfer with a depositary if
shares are held by a depositary. The registrar or depositary may not require any documents in addition to that which is required by Russian legislation. Any refusal to register the shares in the name
of the transferee or, upon request of the beneficial holder, in the name of a nominee holder, is void and may be disputed.



Russian legislation requires that each joint stock company establish a reserve fund to be used only to cover the company's losses, redeem the company's bonds and
redeem the company's shares in cases when other funds are not available. Our charter provides for a reserve fund of 5% of our charter capital, funded through mandatory annual transfers of at least 5%
of our net profits until the reserve fund has reached the 5% requirement.



The following is a description of contracts that have been entered into by us and/or our subsidiaries that may be material to our business:

Loan Agreement relating to the Eurobond and Guarantee

On May 14, 2003, we entered into a loan agreement with UBS (Luxembourg) S.A. as lender, pursuant to which UBS (Luxembourg) S.A. lent to us a principal
amount of U.S.$150,000,000 on May 21, 2003.
The loan matures on May 21, 2008, and interest is payable by us semi-annually in arrears at an annual rate of 8.5%. For the sole purpose of financing this loan to us, UBS
(Luxembourg) S.A. issued U.S.$150,000,000 8.5% Loan Participation Notes due 2008 on May 21, 2003.

The
above-mentioned loan to us is initially, unconditionally, irrevocably, jointly and severally guaranteed by the Lianozovo Dairy Plant, the Tsaritsino Dairy Plant and Trade Company
Wimm-Bill-Dann pursuant to a guarantee dated May 14, 2003 entered into with UBS (Luxembourg) S.A.

Both
the loan agreement and the guarantee are governed by English law. In the loan agreement, we agreed to certain covenants in respect of, amongst other things, liens, asset sales,
transactions with affiliates and related persons, change of control, mergers and similar transactions, no limitation on dividend or other payments affecting our subsidiaries and maintenance of certain
ratios. In the guarantee, Lianozovo Dairy Plant, Tsaritsino Dairy Plant and Trade Company Wimm-Bill-Dann agreed to similar covenants.

Tetra Pak Agreement for Our Milk Product Packages

On January 1, 2003, Lianozovo Dairy Plant entered into a supply agreement to purchase packages for our milk products from JSC Tetra Pak AO of Moscow. The
contract terminates on December 31, 2003. The price for each type of packaging is specified in the contract. The contract sets an approximate price of $40 million, but specifies that the
exact sum will be determined in accordance with the cost of the packing material actually delivered. The contract does not specify a total quantity of packages. Under this agreement, Tetra Pak
delivers packages in accordance with orders placed by Lianozovo Dairy Plant. Tetra Pak has the right to deliver up to 10% more or less than the quantity ordered, and the price will be adjusted
accordingly.

Tetra Pak Agreement for Our Juice Product Packages

On January 1, 2003, ZAO Wimm-Bill-Dann Purchaser entered into a supply agreement to purchase packages for its products from JSC
Tetra Pak AO of Moscow. The contract terminates on

112

---

December 31,
2003. The price for each type of packaging is specified in the contract. The contract does not specify a total price or quantity of packages. We estimate that the total amount of
our purchases under the contract will be approximately $50 million, though the exact sum will be determined in accordance with the cost of the packing material actually delivered. Under this
agreement, Tetra Pak delivers packages to us in accordance with a delivery schedule to be agreed between Tetra Pak and the purchaser. Tetra Pak has the right to deliver up to 10% more or less than the
quantity ordered, and the price will be adjusted accordingly.

Amended and Restated Partnership and Cooperation Agreement

Of our current shareholders, Gavril Yushvaev, Mikhail Dubinin, Sergei Plastinin, Aleksandrs Timohins, Alexander Orlov, David Iakobachvili and Mikhail Vishnyakov
acted in concert since 1997 pursuant to a Partnership and Cooperation Agreement which required the parties to vote the same way. These shareholders observed this obligation by holding meetings prior
to build a consensus approach on questions requiring shareholder approval prior to calling a shareholders' meeting. On January 16, 2002, these shareholders amended and restated this agreement
to include the following:

New Party.Viktor Evdokimov was added as a party to the agreement.

Independent Directors.The parties to the agreement undertake to use their best efforts to ensure that a majority of our
directors are "independent." A director is considered "independent" if that person is not



Voting.The parties to the agreement are required to vote all of our shares that they own in the same way. In order to
determine how the parties will vote, the agreement requires them to attempt to agree unanimously on a single voting position on each item on the agenda for a shareholders' meeting. If they are unable
to do so, then the following procedures are followed:



113

---



Third-Party Beneficiaries.Beneficial owners of the our ADSs are third-party beneficiaries of the agreement and are entitled
to enforce and bring actions in respect of the agreement. An action may only be brought, however, if beneficial owners of ADSs constituting more than 50% of our outstanding ADSs, excluding any ADSs
held by the parties to the agreement, are parties to such action.

Dispute Resolution.The governing law of the agreement is the law of the State of New York. Any dispute, controversy or cause
of action brought arising under the agreement will be settled by arbitration under the Commercial Arbitration Rules of the American Arbitration Association. Any cause of action brought by beneficial
owners of more than 50% of the outstanding ADSs, excluding any ADSs held by parties to the agreement, at the option of these owners, may be brought in arbitration under the Commercial Arbitration
Rules of the American Arbitration Association or may be litigated in the federal or state courts in the Borough of Manhattan. The parties to the agreement expect to appoint C T Corporation System, 111
Eighth Avenue, New York, New York 10011, as agent for service of process in New York.

Term.The agreement may not be terminated until the earlier to occur of:



Upon
the occurrence of the first two events described above, the agreement automatically terminates. Otherwise, subject to these conditions, the agreement continues in full force and
effect until terminated by any party to the agreement by giving 30 days' prior written notice to all other parties to the agreement and to us. See "Item 3. Key InformationD. Risk
FactorsRisks Relating to our Business and IndustryWe are controlled by a group of shareholders whose interests could conflict with those of the holders of our ADSs and
notes."

Lianozovo Dairy Plant Bonds Issuance and Our Guarantee

On November 1, 2001 Lianozovo Dairy Plant issued unsecured ruble denominated bonds amounting to 500,000,000 rubles (approximately $15.7 million at
the December 31, 2002 exchange rate). The issuance was registered by the Russian Federal Commission on Securities Markets on October 11, 2001, and the report on the results of the
issuance was registered by the Russian Federal Commission on Securities Markets on November 23, 2001. The bonds mature 1,093 days from November 1, 2001 (on November 1,
2004). Interest is payable quarterly. For the first year, interest was fixed at 22.75% and is subsequently adjusted depending upon market conditions and market rates of interest. For the period from
November 1, 2002 to January 31, 2003 interest was fixed at 18.00%. Lianozovo Dairy Plant is obliged to redeem a bond if its holder notifies Lianozovo Dairy Plant of its intention to
redeem the bond between October 10, 2003 and October 24, 2003. Management believes that the likelihood of any bondholders requesting redemption directly from Lianozovo Dairy Plant during
this two week period is remote.

We
entered into Agreement No. 2-WBD with Lianozovo Dairy Plant on September 10, 2001, whereby we undertook to act a guarantor with respect to the bonds. The
guarantee, unanimously approved by our shareholders on September 7, 2001, expires upon repayment of the bonds or of the guarantee in full.

114

---



Capital import and export restrictions

Russian currency exchange legislation limits the exchangeability of rubles for foreign currency and the use of foreign currency in Russia. Russian currency
legislation currently permits, and Russian foreign investment legislation currently guarantees, the right of foreign investors to convert ruble income received on investments in Russia (including
dividends, profits and interest) and to transfer it abroad. However, the actual repatriation of proceeds from the sale of certain investments may be postponed for as long as 365 days.

Foreign
currency may be freely exchanged for rubles in Russia, but the exchange of rubles for foreign currency in Russia is restricted and rubles may not be exported (subject to certain
exceptions applicable to authorized banks and individuals) or exchanged outside Russia. Non-residents may freely convert foreign currency into rubles. However, non-residents,
other than individuals, may only do so through ruble accounts which are subject to strict regulations.

The
currency exchange rules govern transactions in foreign currencies and currency valuables (including foreign currency-denominated securities) between Russian residents (including
citizens, permanent residents and legal entities established under Russian law) and foreign currency and ruble transactions between residents and non-residents. Russian currency
legislation distinguishes between "current" foreign currency transactions and foreign currency transactions involving a "movement of capital."

"Current"
foreign currency transactions generally may be freely carried out between residents and between residents and non-residents. "Movement of capital" transactions in
foreign currency, including the purchase and sale of securities (except for the acquisition of shares of a Russian company by non-resident shareholders in consideration for their
contributions of foreign currency into the Russian company's share capital) and real estate transactions (except for the acquisition and lease of real estate located in Russia by
non-residents from non-individual residents of Russia), generally require a license from the Russian Central Bank. The prevailing view is that the license is only required for
Russian residents involved in such "movement of capital" transactions. Cash transactions in foreign currency are generally prohibited within Russia.

Following
the financial crisis of 1998, additional regulations on foreign currency exchange were enacted. For example, the mandatory exchange of 75% of export revenues of Russian
companies was required to be effected through the domestic foreign currency market. This requirement has been assisting the Russian Central Bank in increasing its foreign currency reserves. In 2001,
the mandatory exchange requirement was reduced to 50% of export revenues.

Since
2001, certain steps have been taken to remove some of the more onerous currency control requirements. In particular, Russian companies can now receive long-term loans
from foreign lenders without a Central Bank license provided that certain conditions are met.

In
the years ended December 31, 2000, 2001 and 2002, we had minimal sales in foreign currency, although we plan to increase these sales. This requirement further increases
balances in our ruble-denominated accounts and, consequently, our exposure to devaluation risk.

Restrictions on the remittance of dividends, interest or other payments to non-residents

The Federal Law on Foreign Investments in the Russian Federation specifically guarantees foreign investors the right to repatriate their earnings from Russian
investments. However, the Russian exchange control regime may materially affect your ability to do so.

Central
Bank Instruction #93-I on the Procedure for Opening Bank Accounts for Non-Residents in Russian currency, which addresses the payment of dividends to
non-residents, provides that ruble

115

---

dividends
on common stock may be paid to the depositary or its nominee and converted into U.S. dollars by the depositary for distribution to owners of ADSs without restriction. Also, ADSs may be sold
by non-residents of Russia for U.S. dollars outside Russia without regard to Russian currency control laws as long as the buyer is not a Russian resident.

Under
the terms of the deposit agreement, there is no restriction on the sale of our ADSs in Russia to Russian residents. However, Russian currency control legislation will affect the
ability of a non-resident of Russia to sell our ADSs to a Russian resident. Without a Central Bank license, a Russian resident generally can only purchase securities for rubles and up to
$75,000 of foreign-currency denominated securities, such as our ADSs. Additionally, the repatriation of proceeds from the sale of securities in Russia may be subject to costs and delays.

The
ability of the depositary and other persons to convert rubles into U.S. dollars is also subject to the availability of U.S. dollars in Russia's currency markets. Although there is an
existing market within Russia for the conversion of rubles into U.S. dollars, including the interbank currency exchange and over-the-counter and currency futures markets, the
further development of this market is uncertain. At present, there is no market for the conversion of rubles into foreign currencies outside of Russia and no viable market in which to hedge
ruble-currency and ruble-denominated investments.



The following discussion describes the material United States federal and Russian income and withholding tax consequences to you if you are a U.S. holder of
common stock or ADSs and a resident of the United States for purposes of the United States-Russia income tax treaty and are fully eligible for benefits under the United States-Russia income tax
treaty. Subject to certain provisions of the United States-Russia income tax treaty relating to limitations on benefits, you generally will be a resident of the United States for treaty purposes that
is entitled to treaty benefits if you are:



The
benefits under the United States-Russia income tax treaty discussed in this document generally are not available to U.S. persons who hold ADSs or common stock in connection with the
conduct of a business in the Russian Federation through a permanent establishment as defined in the United States-Russia income tax treaty. Subject to certain exceptions, a U.S. person's permanent
establishment under the United States-Russia income tax treaty is a fixed place of business through which such person carries on business activities in the Russian Federation (generally including, but
not limited to, a place of management, a branch, an office, and a factory). Under certain circumstances, a U.S. person may be deemed to have a permanent establishment in the Russian Federation as a
result of activities carried on in the Russian Federation through agents of the U.S. person. This summary does not address the treatment of holders described in this paragraph.

The
following discussion is based on:



116

---



all
as in effect on the date of this document. All of the foregoing are subject to change, possibly on a retroactive basis, after the date of this document. This discussion is also based, in part, on
representations of the depositary, and assumes that each obligation in the deposit agreement and any related agreements will be performed in accordance with its terms. The discussion with respect to
Russian legislation is based on our understanding of current Russian law and Russian tax rules, which are subject to frequent change and varying interpretations.

We
believe, and the following discussion assumes, that for United States federal income tax purposes, we are not a passive foreign investment company or a foreign personal holding
company for the current taxable year and will not become a passive foreign investment company or foreign personal holding company in the future.

The
following discussion is intended as a general description only and is not intended as tax advice to any particular investor. It is also not a complete analysis or listing of all
potential United States federal or Russian income and withholding tax consequences to you of ownership of common stock or ADSs. We urge you to consult your own tax adviser regarding the specific
United States federal, state, and local and Russian tax consequences of the ownership and disposition of the common stock or ADSs under your own particular factual circumstances.

Russian Income and Withholding Tax Considerations

The Russian tax rules applicable to U.S. holders are characterized by significant uncertainties and by an absence of interpretive guidance. Russian tax
authorities have not provided any guidance regarding the treatment of ADS arrangements, and there can be no certainty as to how the Russian tax authorities will ultimately treat those arrangements. In
particular, it is unclear whether Russian tax authorities will treat U.S. holders as the beneficial owners of the underlying shares for the purposes of the United States-Russia income tax treaty. If
the Russian tax authorities were not to treat U.S. holders as the beneficial owners of the underlying shares, then the benefits discussed below regarding the United States-Russia income tax treaty
would not be available to U.S. holders. See "Item 3. Key InformationD. Risk FactorsRisks Relating to the Russian Legal System and Russian LegislationYou may not
be able to benefit from the United States-Russia income tax treaty." Russian tax law and procedures are also not well developed, and local tax inspectors have considerable autonomy and often interpret
tax rules without regard to the rule of law. Both the substantive provisions of Russian tax law and the interpretation and application of those provisions by the Russian tax authorities may be subject
to more rapid and unpredictable change than in jurisdictions with more developed capital markets.

117

---





Dividends paid to U.S. holders generally will be subject to Russian withholding tax at a 15% rate to 30% rate for individual holders. This tax may be reduced to
5% to 10% under the United States-Russia income tax treaty for U.S. holders. There is significant uncertainty, however, regarding the procedures and documentation required for claiming tax treaty
benefits by non-resident legal entities as of January 1, 2002. U.S. holders wishing to claim treaty benefits with respect to dividends payments should provide the required
documentation to us as soon as possible and in any event before the dividend payment date. These procedures are described in greater detail under "United States-Russia Income Tax Treaty Procedures"
below.

If
the appropriate documentation has not been provided to us before the dividend payment date, we are required to withhold tax at the full rate, and U.S. holders qualifying for a reduced
rate under the United States-Russia income tax treaty then would be required to file claims for a refund within one to three years with the Russian tax authorities. There is significant uncertainty
regarding the availability and timing of such refunds.



U.S. holders generally should not be subject to any Russian income or withholding taxes in connection with the sale, exchange, or other disposition of ADSs or
common stock outside of Russia if the shares or ADSs are not sold to a Russian resident. Sales or other dispositions of ADSs or common stock to Russian residents, however, may be subject to Russian
income or withholding taxes, and for such a sale by a U.S. holder, the Russian resident purchaser may be required to withhold 20% to 30% of any gain realized on the sale. Although the Russian tax
rules provide for a procedure to determine a holder's tax basis for the purpose of determining taxable gain, there is some risk that in practice a Russian resident purchaser may withhold tax on the
entire proceeds of the transaction. However, U.S. holders may be able to avoid Russian withholding tax on the disposition of common stock or ADSs to Russian residents, or obtain a refund of any
withheld amounts, by relying on the United States-Russia income tax treaty and complying with the appropriate procedures described below.



Under current rules, to claim the benefit of a reduced rate of withholding under the United States-Russia income tax treaty, a non-resident generally
must provide official certification from the U.S. tax authorities of eligibility for the treaty benefits, which certification must meet the requirements of Russian law.

The
Russian tax authorities have not yet adopted regulations that detail the procedure for claiming tax treaty benefits.

In
the United States, a U.S. holder may obtain the appropriate certification of eligibility for tax treaty benefits by mailing a letter requesting such certification, together with
certain information, to: IRSPhiladelphia Service Center, Foreign Certification Request, P.O. Box 16347, Philadelphia, PA 19114-0447. The procedures for obtaining
certification are described in greater detail in Internal Revenue Service Publication 686. Because obtaining this required certification from the Internal Revenue Service may take six to eight weeks,
U.S. holders should apply for such certification as soon as possible within the relevant calendar year.

The
depositary has no obligation to assist an ADS holder with the completion and filing of any tax forms.

After
January 1, 2002, if a Russian resident withholds tax on capital gains or other amounts, U.S. holders, other than individuals, may apply for a tax refund by filing form
No. 1011DT (2002) or form No. 1012DT (2002), which must be signed by the U.S. tax authorities, and certain other documents with

118

---

the
Russian tax authorities. The filing for a tax refund should occur within three years following the end of the tax term during which the withholding occurred. However, procedures for processing
such claims have not been fully established, and there is significant uncertainty regarding the availability and timing of such refunds. Individual holders may also apply for a tax refund, which
filing should take place no later than one year following the end of the tax term during which the withholding occurred. There is even more uncertainty as for the procedure and practical availability
of such refunds for individuals. It is also unclear whether U.S. holders are subject to the general rules applicable to tax refunds, whereby the holder would need to file for a tax refund pursuant to
the time period requirements described in this paragraph, but no later than one month following the date on which such U.S. holder became aware of the withholding.

United States Federal Income Tax Considerations

The following is a general description of the material United States federal income tax consequences that apply to you if you are, for United States federal
income tax purposes, a beneficial owner of ADSs or common stock who is a citizen or resident of the United States, a corporation (including any entity treated as a corporation for United States
federal income tax purposes) created or organized in or under the laws of the United States or a political subdivision thereof, an estate the income of which is subject to U.S. tax regardless of its
source, or a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons can control all substantial trust decisions or,
if the trust was in existence on August 20, 1996 and has properly elected to continue to be treated as a United States person. If a partnership (including any entity treated as a partnership
for United States federal income tax purposes) is a beneficial owner of ADSs or common stock, the United States federal income tax treatment of a partner in the partnership will generally depend on
the status of the partner and the activities of the partnership. Since your United States federal income and withholding tax treatment may vary depending upon your particular situation, you may be
subject to special rules not discussed below. Special rules will apply, for example, if you are:



In
addition, this summary is generally limited to persons holding common stock or ADSs as "capital assets" within the meaning of Section 1221 of the United States Internal Revenue
Code and whose functional currency is the United States dollar. The discussion below also does not address the effect of any United States state or local tax law or foreign tax law.

For
purposes of applying United States federal income and withholding tax law, a holder of an ADS will be treated as the owner of the underlying shares of common stock represented by
that ADS.

119

---



For United States federal income tax purposes, the gross amount of a distribution, including any Russian withholding taxes, with respect to common stock or ADSs
will be treated as a taxable dividend to the extent of our current and accumulated earnings and profits, computed in accordance with United States federal income tax principles. Under recently enacted
legislation, for taxable years beginning after December 31, 2002 and before January 1, 2009, if you are a non-corporate taxpayer such dividends may be taxed at the lower
applicable capital gains rate provided certain holding period requirements are satisfied. Non-corporate U.S. holders are strongly urged to consult their own tax advisors as to the
applicability of the lower capital gains rate to dividends received with respect to ADSs or shares of common stock. Distributions in excess of our current or accumulated earnings and profits will be
applied against and will reduce your tax basis in common stock or ADSs and, to the extent in excess of such tax basis, will be treated as gain from a sale or exchange of such common stock or ADSs. You
should be aware that we do not intend to calculate our earnings and profits for United States federal income tax purposes. If you are a corporation, you will not be allowed a deduction for dividends
received in respect of distributions on common stock or ADSs, which is generally available for dividends paid by U.S. corporations.

If
a dividend distribution is paid in rubles, the amount includible in income will be the U.S. dollar value of the dividend, calculated using the exchange rate in effect on the date the
dividend is includible in income by you, regardless of whether the payment is actually converted into U.S. dollars. Any gain or loss resulting from currency exchange rate fluctuations during the
period from the date the dividend is includible in your income to the date the rubles are converted into U.S. dollars will be treated as ordinary income or loss. You may be required to recognize
foreign currency gain or loss on the receipt of a refund of Russian withholding tax pursuant to the United States-Russia income tax treaty to the extent the United States dollar value of the refund
differs from the dollar equivalent of that amount on the date of receipt of the underlying dividend.

Russian
withholding tax at the rate applicable to you under the United States-Russia income tax treaty will be treated as a foreign income tax that, subject to generally applicable
limitations and conditions, is eligible for credit against your U.S. federal income tax liability or, at your election, may be deducted in computing taxable income. If Russian tax is withheld at a
rate in excess of the rate applicable to you under the United States-Russia income tax treaty, you may not be entitled to credits for the excess amount, even though the procedures for claiming refunds
and the practical likelihood that refunds will be made available in a timely fashion are uncertain.

A
dividend distribution will be treated as foreign source income and will generally be classified as "passive income" or, in some cases, "financial services income" for United States
foreign tax credit purposes. The rules relating to the determination of the foreign tax credit, or deduction in lieu of the foreign tax credit, are complex and you should consult your own tax advisors
with respect to those rules.



The sale of common stock or ADSs will generally result in the recognition of gain or loss in an amount equal to the difference between the amount realized on the
sale and your adjusted basis in such common stock or ADSs. That gain or loss will be capital gain or loss if the common stock or ADSs are capital assets in your hands and will be long-term
capital gain or loss if the common stock or ADSs have been held for more than one year. If you are an individual, such realized long-term capital gain is generally subject to a reduced
rate of United States federal income tax. Limitations may apply to your ability to offset capital losses against ordinary income.

Deposits
and withdrawals of common stock by you in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.

120

---

If
Russian tax is withheld on the sale of common stock or ADSs, you may not be entitled to credits for the amount withheld, even though the procedures for claiming refunds under the
United States-Russia income tax treaty and the practical likelihood that refunds will be made available in a timely fashion are uncertain.



Dividends and proceeds from the sale or other disposition of common stock or ADSs that are paid in the United States or by a U.S. related financial intermediary
will be subject to U.S. information reporting rules and United States backup withholding tax, unless you are a corporation or other exempt recipient. In addition, you will not be subject to backup
withholding if you provide your taxpayer identification number and certify that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons generally are not subject
to information reporting or backup withholding, but such holders may be required to provide certification as to their non-U.S. status.



Not applicable.



Not applicable.



The documents that are exhibits to or incorporated by reference in this document can be read at the U.S. Securities and Exchange Commission's public reference
facilities at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330 or, from outside the United States, at 1-202-942-8090. Copies may also be obtained from the SEC website at
www.sec.gov. Information about
Wimm-Bill-Dann Foods OJSC is also available on the web at www.wbd.com. Information included in our website does not form part of this document.



Not applicable.

Item 11    Quantitative and Qualitative Disclosures about Market Risk

The following is a discussion of our market risk exposures from changes in both foreign currency exchange rates and interest rates.

We
are exposed to market risk from changes in both foreign currency exchange rates and interest rates. Foreign currency exchange risks exist to the extent that our revenues are primarily
denominated in Russian rubles and our costs are denominated in currencies other than Russian rubles. We are subject to market risk deriving from changes in interest rates on our floating and fixed
rate debts which may affect the cost of our financing. We do not use financial instruments, such as foreign exchange forward contracts, foreign currency options, interest rate swaps and forward rate
agreements, to manage these market risks. We do not hold or issue derivatives or other financial instruments for trading purposes. We do not use derivatives or other financial instruments to limit our
currency and interest rate risk exposures because the market for these types of financial instruments in Russia is not well developed and the costs of these instruments is relatively high. We are
monitoring the market for these instruments and will consider their use if the related costs become lower.

121

---

Interest Rate Risk

The table below provides information about our fixed- and variable-rate borrowings.

Our
interest rate exposure results mainly from debt obligations. At December 31, 2002, we had debt amounting to $186.0 million, which comprised variable-rate
borrowings of $32.2 million
and fixed-rate borrowings of $153.9 million, including vendor financing obligations of $68.9 million.

Our
fixed-rate bank debt consists entirely of short-term bank obligations which we roll over on a continuous basis at current market rate and, thus, are able to
manage our interest rate risk exposure.

We
have not entered into transactions designed to hedge against interest rate risks, which may exist under our current, or future, indebtedness. Once the market in Russia for hedging
instruments matures, we will assess our options for hedging interest rate risk and may enter into such arrangements.

The
table below presents the principal cash flows and related weighted average interest rates, by expected maturity dates, of our variable and fixed-rate debt obligations as
of December 31, 2002.

122

---



|                               |  |              |  | Expected Maturity Date as of December 31, |        |  |       |  |       | 
|------------------------------ |  | ------------ |  | ----------------------------------------- | ------ |  | ----- |  | ----- | 
|
|
|Variable-rate debt:            |  |              |  |                                           |        |  |       |  |       | 
|International Moscow Bank      |  | U.S. dollars |  | $                                         | 5,000  |  |      |  |      | 
|Commerzbank, line of credit    |  | U.S. dollars |  |                                           | 3,000  |  |      |  |      | 
|ING-Bank, line of credit       |  | U.S. dollars |  |                                           | 578    |  | 578   |  | 578   | 
|Moscow City Government         |  | Rubles       |  |                                           | 1,793  |  |      |  |      | 
|ING-Bank, line of credit       |  | Euro         |  |                                           | 638    |  | 638   |  | 475   | 
|ING-Bank, line of credit       |  | U.S. dollars |  |                                           | 173    |  | 173   |  | 173   | 
|Raiffeisenbank, line of credit |  | Euro         |  |                                           | 477    |  |      |  |      | 
|Commerzbank, line of credit    |  | Euro         |  |                                           | 121    |  | 121   |  | 86    | 
|ING-Bank, line of credit       |  | U.S. dollars |  |                                           | 65     |  | 65    |  | 65    | 
|Bonds payable(1)               |  | Rubles       |  |                                           | 15,731 |  |      |  |      | 
|Bonds payable(2)               |  | Som          |  |                                           | 365    |  |      |  |      | 
|Other                          |  | Euro         |  |                                           | 290    |  |      |  |      | 
|Total variable rate debt:      |  |              |  | $                                         | 28,231 |  | 1,575 |  | 1,377 | 

---

Notes:

We
have not experienced significant changes in the market risks associated with our debt obligations in the table above subsequent to December 31, 2002, except for the issuance of
1.5 billion of ruble-denominated bonds on April 15, 2003 and our receipt of a $150 million loan from UBS (Luxembourg) S.A. For a description of these transactions see "Item 8.
Financial InformationB. Significant Changes."

123

---



|                              |  |              |  | Expected Maturity Date as of December 31, |        |  |        |  |        |  |       
|----------------------------- |  | ------------ |  | ----------------------------------------- | ------ |  | ------ |  | ------ |  | ------
|
|
|Fixed-rate debt:              |  |              |  |                                           |        |  |        |  |        |  |       
|Moscow Bank                   |  | Rubles       |  | $                                         | 27,491 |  |       |  |       |  |      
|Sberbank                      |  | Rubles       |  |                                           | 11,012 |  |       |  |       |  |      
|Sberbank, lines of credit     |  | Rubles       |  |                                           | 10,648 |  |       |  |       |  |      
|Vneshtorgbank, line of credit |  | Rubles       |  |                                           | 6,292  |  |       |  |       |  |      
|Moscow Business World Bank    |  | Rubles       |  |                                           | 4,719  |  |       |  |       |  |      
|Moscow Business World Bank    |  | Rubles       |  |                                           | 4,600  |  |       |  |       |  |      
|Citibank                      |  | Grivnas      |  |                                           | 3,308  |  |       |  |       |  |      
|Moscow Business World Bank    |  | Rubles       |  |                                           | 3,241  |  |       |  |       |  |      
|International Moscow Bank     |  | Rubles       |  |                                           | 3,146  |  |       |  |       |  |      
|Alfa Bank, line of credit     |  | Rubles       |  |                                           | 1,573  |  |       |  |       |  |      
|Moscow Business World Bank    |  | Rubles       |  |                                           | 1,573  |  |       |  |       |  |      
|Yugbank, line of credit       |  | Rubles       |  |                                           | 1,573  |  |       |  |       |  |      
|Moscow City Government        |  | Rubles       |  |                                           | 983    |  |       |  |       |  |      
|Sberbank, line of credit      |  | Rubles       |  |                                           | 953    |  |       |  |       |  |      
|Citibank                      |  | Rubles       |  |                                           | 692    |  |       |  |       |  |      
|Yugbank                       |  | Rubles       |  |                                           | 682    |  |       |  |       |  |      
|Vendor financing              |  | Euro         |  |                                           | 5,442  |  | 4,765  |  | 3,095  |  | 2,546 
|Vendor financing              |  | U.S. dollars |  |                                           | 8,942  |  | 9,143  |  | 9,226  |  | 8,975 
|Other                         |  | Various      |  |                                           | 2,516  |  |       |  |       |  |      
|Total fixed rate debt:        |  |              |  | $                                         | 99,386 |  | 13,908 |  | 12,321 |  | 11,521

The carrying amounts of short-term loans approximate their fair values due to their short maturity. We believe that the carrying value
of our long-term debt approximates its fair value.

Foreign Currency Risk

We are exposed to movements in the ruble and euro exchange rates relative to the U.S. dollar.

124

---

Our ruble-denominated monetary assets and liabilities at December 31, 2002 and 2001 are as follows:

|                                                          |                                         | 2002 |         | 2001  
|--------------------------------------------------------- | --------------------------------------- | ---- | ------- | ------
|
|CURRENT ASSETS:                                           |                                         |      |         |       
|                                                          | Cash and cash equivalents               |      | $       | 10,247
|                                                          | Trade receivables, net                  |      |         | 57,007
|                                                          | Taxes receivables                       |      |         | 67,422
|                                                          | Net investment in direct finance leases |      |         | 742   
|                                                          | Deferred tax asset                      |      |         | 522   
|                                                          | Other current assets                    |      |         | 3,655 
|Total current assets                                      |                                         |      | 139,595 |       
|NET INVESTMENT IN DIRECT FINANCE LEASESlong-term portion |                                         |      | 1,556   |       
|OTHER ASSETS                                              |                                         |      | 388     |       
|CURRENT LIABILITIES:                                      |                                         |      |         |       
|                                                          | Trade accounts payable                  |      |         | 14,262
|                                                          | Advances received                       |      |         | 3,852 
|                                                          | Short-term loans                        |      |         | 81,524
|                                                          | Bonds payable                           |      |         | 15,731
|                                                          | Long-term loans, current portion        |      |         | 326   
|                                                          | Taxes payable                           |      |         | 15,279
|                                                          | Accrued liabilities                     |      |         | 6,947 
|                                                          | Other payables                          |      |         | 9,473 
|Total current liabilities                                 |                                         |      | 147,394 |       
|LONG-TERM LIABILITIES:                                    |                                         |      |         |       
|Long-term loans                                           |                                         |      |        |       
|Other payables                                            |                                         |      | 568     |       
|Total long-term liabilities                               |                                         |      | 568     |       
|Net ruble denominated monetary liabilities                |                                         | $    | 6,424   |       

Short-term
loans of $81.5 million in the table above are due at various dates within a year from December 31, 2002. Other long-term payables are
primarily due before December 31, 2004.

125

---



Our euro-denominated monetary assets and liabilities at December 31, 2002 and 2001 were as follows:

|                                          |                                  | 2002 |        | 2001  
|----------------------------------------- | -------------------------------- | ---- | ------ | ------
|
|CURRENT ASSETS:                           |                                  |      |        |       
|                                          | Cash and cash equivalents        |      | $      | 3,449 
|                                          | Trade receivables, net           |      |        | 190   
|                                          | Taxes receivables                |      |        | 289   
|                                          | Other current assets             |      |        | 422   
|Total current assets                      |                                  |      | 4,350  |       
|CURRENT LIABILITIES:                      |                                  |      |        |       
|                                          | Trade accounts payable           |      |        | 12,444
|                                          | Short-term loans                 |      |        | 98    
|                                          | Long-term loans, current portion |      |        | 1,424 
|                                          | Taxes payable                    |      |        | 83    
|                                          | Accrued liabilities              |      |        | 43    
|                                          | Other payables                   |      |        | 5,495 
|Total current liabilities                 |                                  |      | 19,587 |       
|LONG-TERM LIABILITIES:                    |                                  |      |        |       
|                                          | Long-term loans                  |      |        | 1,321 
|                                          | Other payables                   |      |        | 11,913
|Total long-term liabilities               |                                  |      | 13,234 |       
|Net euro-denominated monetary liabilities |                                  | $    | 28,471 |       

A
short-term loan of $0.1 million, in the table above, is due in January 2003. Long-term loans, excluding the current portion, are primarily due
before December 31, 2005, and other long-term payables are primarily due before December 31, 2007.

The
carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term loans reported in the consolidated and combined balance sheet
approximate their fair values due to the short maturity of those instruments. We believe that the carrying value of our long-term debt approximates its fair value.

Generally,
as the value of the ruble declines against the U.S. dollar, net ruble monetary liability positions result in currency remeasurement gains and net ruble monetary asset
positions result in currency remeasurement losses. As the value of the euro strengthens against the U.S. dollar, net euro monetary liability positions result in currency remeasurement losses and net
euro monetary asset positions result in currency remeasurement gains. Our net ruble monetary liability position decreased from $70.4 million at December 31, 2001 to $6.4 million
at December 31, 2002 and during 2002 the ruble declined against the U.S. dollar. Our net euro monetary liability position increased from $18.9 million at December 31, 2001 to
$28.5 million at December 31, 2002 and the euro strengthened against the U.S. dollar. As a result of the combination of our monetary positions in rubles and euro and exchange rate
fluctuations in the year ended December 31, 2002, we recognized a currency remeasurement loss of $2.9 million. As a result of the combination of our monetary positions in rubles and euro
and exchange rate fluctuations in the year ended December 31, 2001, we recognized a currency remeasurement gain of
$2.5 million. Currency remeasurement gains and losses were reflected in our consolidated and combined statements of operations.

As
of January 1, 2003, Russia no longer meets the U.S. GAAP definition of a hyperinflationary economy. Therefore, from this date, our financial statements will be prepared using
the local currency, the ruble, as the functional currency for WBD Foods' Russian subsidiaries. Therefore, our future currency remeasurement gains and losses will be a result of the combination of our
monetary positions

126

---

in
U.S. dollars and euro and exchange rate fluctuations between the ruble and the U.S. dollar and between the ruble and the euro. The potential impact of such a change on our financial position and
results of operations cannot be estimated.

Our
U.S. dollar-denominated monetary assets and liabilities at December 31, 2002 and 2001 were as follows:

|                                                           |                                          | 2002 |        | 2001  
|---------------------------------------------------------- | ---------------------------------------- | ---- | ------ | ------
|
|CURRENT ASSETS:                                            |                                          |      |        |       
|                                                           | Cash and cash equivalents                |      | $      | 15,476
|                                                           | Trade receivables, net                   |      |        | 614   
|                                                           | Taxes receivables                        |      |        |      
|                                                           | Net investments in direct finance leases |      |        | 595   
|                                                           | Deferred tax asset                       |      |        | 240   
|                                                           | Other current assets                     |      |        | 396   
|Total current assets                                       |                                          |      | 17,321 |       
|NET INVESTMENTS IN DIRECT FINANCE LEASESlong term portion |                                          |      | 2,826  |       
|CURRENT LIABILITIES:                                       |                                          |      |        |       
|                                                           | Trade accounts payable                   |      |        | 11,814
|                                                           | Advances received                        |      |        | 31    
|                                                           | Short-term loans                         |      |        | 8,000 
|                                                           | Long-term loans, current portion         |      |        | 815   
|                                                           | Taxes payable                            |      |        | 12    
|                                                           | Accrued liabilities                      |      |        | 1,071 
|                                                           | Other payables                           |      |        | 9,244 
|Total current liabilities                                  |                                          |      | 30,987 |       
|LONG-TERM LIABILITIES:                                     |                                          |      |        |       
|                                                           | Long-term loans                          |      |        | 3,143 
|                                                           | Other payables                           |      |        | 42,566
|Total long-term liabilities                                |                                          |      | 45,709 |       
|Net U.S. dollar-denominated monetary liabilities           |                                          | $    | 56,549 |       

Short-term
loans of $8.0 million, in the table above, are due between August and November 2003. Long-term loans, excluding the current portion, are
due before
December 31, 2006. Other long-term payables are primarily due before September 30, 2011.

See
also "Item 5. Operating and Financial Review and ProspectsA. Operating ResultsExchange Rates and Inflation."

Item 12    Description of Securities Other than Equity Securities

Not applicable.

127

---



PART II

Item 13    Defaults, Dividend Arrearages and Delinquencies

None.

Item 14    Material Modifications to the Rights of Security Holders and Use of Proceeds



On January 16, 2002, we filed a registration statement on Form F-1 (Registration No. 333-14278) under the Securities
Act of 1933, as amended, with the Commission with respect to our initial public offering. The Registration Statement was declared effective on February 7, 2002, and the offering was completed
on February 12, 2002. All of the 7,480,000 ADSs offered by us pursuant to the offering at an initial offering price of $19.50 per ADS were sold for a total of $145.9 million. The
underwriters purchased an additional 1,520,000 ADSs from us at the offering at the price of $19.50 per ADS for a total of $29.6 million. The underwriters of the offering were ING Barings
Limited (as an agent for ING Bank, N.V., London branch), Credit Suisse First Boston (Europe) Limited, J.P. Morgan Securities Ltd., Renaissance Capital Investments (Cyprus) Limited and
Salomon Brothers International Ltd. The net proceeds we received from the offering was approximately $161.7 million, after deducting an estimated $8.8 million in underwriting
discounts and commissions and an estimated $5 million in regulatory, legal, accounting and other miscellaneous fees and expenses.

During
2002, we used approximately $161.7 million of our net proceeds for the following purposes:

|Use                                                                                                             |  | Approximate Amount
|--------------------------------------------------------------------------------------------------------------- |  | ------------------
|Capital expenditures, including the purchase of dairy and juice equipment and acquisitions of additional plants |  | $                 
|Retirement of portions of our current short-term and long-term debt                                             |  | $                 
|General corporate purposes, such as working capital                                                             |  | $                 
|                                                                                                                |  |                   
|Total:                                                                                                          |  | $                 

Item 15    Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's
management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Within
90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the
Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the
foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective in timely identifying material information
potentially required to be included in the Company's SEC filings.

There
have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company
completed its evaluation.

Item 16    Not Applicable.

128

---



PART III

Item 17    Financial Statements

See instead Item 18.

Item 18    Financial Statements

See pages F-1 through F-49.

129

---



Index to Financial Statements



|                                                                                                                  |  | Page
|----------------------------------------------------------------------------------------------------------------- |  | ----
|Wimm-Bill-Dann                                                                                                    |  |     
|Report of Independent Auditors                                                                                    |  | F-2 
|Report of Independent Public Accountants(1)                                                                       |  | F-3 
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                      |  | F-4 
|Consolidated and Combined Statements of Operations for the years ended December 31, 2002, 2001 and 2000           |  | F-6 
|Consolidated and Combined Cash Flow Statements for the years ended December 31, 2002, 2001 and 2000               |  | F-7 
|Consolidated and Combined Statements of Shareholders' Equity for the years ended December 31, 2002, 2001 and 2000 |  | F-10
|Notes to the Consolidated and Combined Financial Statements                                                       |  | F-11

---

F-1

---

REPORT OF INDEPENDENT AUDITORS

The
Board of Directors and Shareholders
Wimm-Bill-Dann Foods

We
have audited the accompanying consolidated balance sheet of Wimm-Bill-Dann Foods, a Russian Open Joint Stock Company ("the Company"), as of December 31, 2002, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year then ended. 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 audit. The consolidated and combined financial statements of Wimm-Bill-Dann Foods as of December 31, 2001 and 2000 and for the years then
ended, were audited by other auditors who have ceased operations and whose report dated April 15, 2002, expressed an unqualified opinion on those statements.

We
conducted our audit 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 audit provides a reasonable basis for our opinion.

In
our opinion, the 2002 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wimm-Bill-Dann Foods as of
December 31, 2002 and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

/s/
ERNST & YOUNG (CIS) LIMITED

Moscow,
Russia
March 17, 2003

F-2

---

GRAPHIC

This report is a copy of the previously issued Arthur Andersen ZAO report.
Arthur Andersen ZAO has not reissued this report nor consented to its inclusion herein.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
Wimm-Bill-Dann Foods:

We
have audited the accompanying consolidated and combined balance sheets of Wimm-Bill-Dann Foods, a Russian Open Joint Stock Company, and its subsidiaries ("the
Group") as of December 31, 2000 and 2001 and the related consolidated and combined statements of operations, cash flows and shareholders' equity for the years ended December 31, 1999,
2000 and 2001. These consolidated and combined financial statements are the
responsibility of the Group's management. Our responsibility is to express an opinion on these consolidated and combined 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 consolidated and combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated and combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall consolidated and combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated and combined financial statements referred to above present fairly, in all material respects, the financial position of
Wimm-Bill-Dann Foods and its subsidiaries as of December 31, 2000 and 2001 and the results of their operations and their cash flows for the years ended
December 31, 1999, 2000 and 2001 in conformity with accounting principles generally accepted in the United States.

GRAPHIC

Moscow,
Russia
April 15, 2002

F-3

---



WIMM-BILL-DANN FOODS        CONSOLIDATED BALANCE SHEETS  AS OF DECEMBER 31, 2002 AND 2001        (Amounts in thousands of U.S. dollars)

ASSETS

|                                                                    |                                                    | 2002 |         | 2001   
|------------------------------------------------------------------- | -------------------------------------------------- | ---- | ------- | -------
|CURRENT ASSETS:                                                     |                                                    |      |         |        
|                                                                    | Cash and cash equivalents (Note 6)                 |      | $       | 29,340 
|                                                                    | Trade receivables, net (Note 7)                    |      |         | 60,146 
|                                                                    | Inventory, net (Note 8)                            |      |         | 86,063 
|                                                                    | Taxes receivable                                   |      |         | 68,352 
|                                                                    | Advances paid                                      |      |         | 10,811 
|                                                                    | Net investment in direct financing leases (Note 9) |      |         | 1,338  
|                                                                    | Deferred tax asset (Note 19)                       |      |         | 1,850  
|                                                                    | Other current assets                               |      |         | 5,810  
|                                                                    |                                                    |      |         |        
|Total current assets                                                |                                                    |      | 263,710 |        
|PROPERTY, PLANT AND EQUIPMENT, net(Note 11)                         |                                                    |      | 293,580 |        
|INTANGIBLE ASSETS, net(Note 10)                                     |                                                    |      | 2,736   |        
|GOODWILL(Note 12)                                                   |                                                    |      | 19,885  |        
|NET INVESTMENT IN DIRECT FINANCING LEASESlong-term portion(Note 9) |                                                    |      | 4,381   |        
|LONG-TERM INVESTMENTS(Note 13)                                      |                                                    |      | 1,989   |        
|OTHER ASSETS(Note 14)                                               |                                                    |      | 2,812   |        
|                                                                    |                                                    |      |         |        
|Total long-term assets                                              |                                                    |      | 325,383 |        
|                                                                    |                                                    |      |         |        
|                                                                    | Total assets                                       |      | $       | 589,093
|                                                                    |                                                    |      |         |        

The
accompanying notes are an integral part of these statements.

F-4

---

WIMM-BILL-DANN FOODS        CONSOLIDATED BALANCE SHEETS  AS OF DECEMBER 31, 2002 AND 2001        (Amounts in thousands of U.S. dollars, except share amounts)

LIABILITIES AND SHAREHOLDERS' EQUITY

|                                           |                                                                                                                                                                                                                           | 2002 |         | 2001   
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------- | -------
|CURRENT LIABILITIES:                       |                                                                                                                                                                                                                           |      |         |        
|                                           | Trade accounts payable                                                                                                                                                                                                    |      | $       | 40,144 
|                                           | Advances received                                                                                                                                                                                                         |      |         | 3,905  
|                                           | Short-term loans (Note 16)                                                                                                                                                                                                |      |         | 94,050 
|                                           | Long-term loans, current portion (Note 16)                                                                                                                                                                                |      |         | 2,483  
|                                           | Bonds payable (Note 17)                                                                                                                                                                                                   |      |         | 16,096 
|                                           | Taxes payable                                                                                                                                                                                                             |      |         | 15,551 
|                                           | Accrued liabilities (Note 15)                                                                                                                                                                                             |      |         | 8,346  
|                                           | Government grantscurrent portion (Note 20)                                                                                                                                                                               |      |         | 2,033  
|                                           | Other payables (Note 18)                                                                                                                                                                                                  |      |         | 25,770 
|                                           |                                                                                                                                                                                                                           |      |         |        
|Total current liabilities                  |                                                                                                                                                                                                                           |      | 208,378 |        
|LONG-TERM LIABILITIES:                     |                                                                                                                                                                                                                           |      |         |        
|                                           | Long-term loans (Note 16)                                                                                                                                                                                                 |      |         | 4,546  
|                                           | Government grantslong-term portion (Note 20)                                                                                                                                                                             |      |         | 8,568  
|                                           | Deferred taxes (Note 19)                                                                                                                                                                                                  |      |         | 8,121  
|                                           | Other long-term payables (Note 18)                                                                                                                                                                                        |      |         | 55,047 
|                                           |                                                                                                                                                                                                                           |      |         |        
|Total long-term liabilities                |                                                                                                                                                                                                                           |      | 76,282  |        
|                                           |                                                                                                                                                                                                                           |      |         |        
|Total liabilities                          |                                                                                                                                                                                                                           |      | 284,660 |        
|                                           |                                                                                                                                                                                                                           |      |         |        
|COMMITMENTS AND CONTINGENCIES(Note 30)     |                                                                                                                                                                                                                           |      |         |        
|MINORITY INTEREST(Note 22)                 |                                                                                                                                                                                                                           |      | 21,549  |        
|SHAREHOLDERS' EQUITY(Note 21):             |                                                                                                                                                                                                                           |      |         |        
|                                           | Common stock: 44,000,000 shares authorized, issued and outstanding with a par value of 20 rubles at December 31, 2002, and 44,000,000 shares authorized and 35,000,000 shares issued and outstanding at December 31, 2001 |      |         | 29,908 
|                                           | Share premium account                                                                                                                                                                                                     |      |         | 164,132
|                                           | Retained earnings                                                                                                                                                                                                         |      |         | 88,844 
|                                           |                                                                                                                                                                                                                           |      |         |        
|Total shareholders' equity                 |                                                                                                                                                                                                                           |      | 282,884 |        
|                                           |                                                                                                                                                                                                                           |      |         |        
|Total liabilities and shareholders' equity |                                                                                                                                                                                                                           | $    | 589,093 |        
|                                           |                                                                                                                                                                                                                           |      |         |        

The
accompanying notes are an integral part of these statements.

F-5

---



WIMM-BILL-DANN FOODS        CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS  FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000        (Amounts in thousands of U.S. dollars, except share and
per share data)

|                                                                                                       |  | 2002 |            | 2001 |   | 2000       |  
|------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | ---- | - | ---------- | -
|SALES(Note 28)                                                                                         |  | $    | 824,734    |      | $ | 674,616    |  
|COST OF SALES(Note 23)                                                                                 |  |      | (579,707   | )    |   | (492,990   | )
|                                                                                                       |  |      |            |      |   |            |  
|Gross profit                                                                                           |  |      | 245,027    |      |   | 181,626    |  
|SELLING AND DISTRIBUTION EXPENSES(Note 24)                                                             |  |      | (109,527   | )    |   | (62,213    | )
|GENERAL AND ADMINISTRATIVE EXPENSES(Note 25)                                                           |  |      | (62,955    | )    |   | (54,461    | )
|OTHER OPERATING EXPENSES                                                                               |  |      | (6,497     | )    |   | (4,498     | )
|                                                                                                       |  |      |            |      |   |            |  
|Operating income                                                                                       |  |      | 66,048     |      |   | 60,454     |  
|FINANCIAL INCOME AND EXPENSES, NET(Note 26)                                                            |  |      | (14,131    | )    |   | (10,581    | )
|                                                                                                       |  |      |            |      |   |            |  
|Income before provision for income taxes and minority interest                                         |  |      | 51,917     |      |   | 49,873     |  
|PROVISION FOR INCOME TAXES(Note 19)                                                                    |  |      | (14,249    | )    |   | (14,166    | )
|MINORITY INTEREST(Note 22)                                                                             |  |      | (1,922     | )    |   | (3,962     | )
|                                                                                                       |  |      |            |      |   |            |  
|INCOME FROM CONTINUING OPERATIONS                                                                      |  |      | 35,746     |      |   | 31,745     |  
|Income from discontinued operations, net of income tax expense of $386 and $370, respectively (Note 5) |  |      |           |      |   | 103        |  
|                                                                                                       |  |      |            |      |   |            |  
|NET INCOME                                                                                             |  | $    | 35,746     |      | $ | 31,848     |  
|                                                                                                       |  |      |            |      |   |            |  
|Weighted average number of shares outstanding                                                          |  |      | 43,063,014 |      |   | 34,888,000 |  
|Earnings per sharebasic and diluted:                                                                  |  |      |            |      |   |            |  
|Income from continuing operations                                                                      |  | $    | 0.83       |      | $ | 0.91       |  
|Income from discontinued operations                                                                    |  |      |           |      |   | 0.00       |  
|Net income                                                                                             |  | $    | 0.83       |      | $ | 0.91       |  

The
accompanying notes are an integral part of these statements.

F-6

---



WIMM-BILL-DANN FOODS        CONSOLIDATED AND COMBINED CASH FLOW STATEMENTS  FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000        (Amounts in thousands of U.S. dollars)

|                                                                                            |                                                                       | 2002                                                                                        |        | 2001    |        | 2000   |        
|------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------ | ------- | ------ | ------ | -------
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                       |                                                                       |                                                                                             |        |         |        |        |        
|Income from continuing operations                                                           |                                                                       | $                                                                                           | 35,746 |         | $      | 31,745 |        
|Adjustments to reconcile income to net cash provided by operating activities:               |                                                                       |                                                                                             |        |         |        |        |        
|                                                                                            | Minority interest                                                     |                                                                                             |        | 1,922   |        |        | 3,962  
|                                                                                            | Depreciation                                                          |                                                                                             |        | 18,447  |        |        | 12,225 
|                                                                                            | Amortization of intangible assets                                     |                                                                                             |        | 164     |        |        | 42     
|                                                                                            | Amortization of goodwill                                              |                                                                                             |        |        |        |        | 455    
|                                                                                            | Currency remeasurement gain relating to bonds payable                 |                                                                                             |        | (1,295  | )      |        | (257   
|                                                                                            | Finance lease expense                                                 |                                                                                             |        |        |        |        | 50     
|                                                                                            | Provision for obsolete inventory                                      |                                                                                             |        | 1,154   |        |        | 182    
|                                                                                            | Provision for doubtful accounts                                       |                                                                                             |        | 1,970   |        |        | 226    
|                                                                                            | Loss on disposal of property, plant and equipment                     |                                                                                             |        | 606     |        |        | 341    
|                                                                                            | Earned income on net investments in direct financing leases           |                                                                                             |        | (395    | )      |        | (561   
|                                                                                            | Deferred tax expense (benefit)                                        |                                                                                             |        | 38      |        |        | 2,173  
|                                                                                            | Currency remeasurement loss relating to cash and cash equivalents     |                                                                                             |        | 639     |        |        | 300    
|                                                                                            | Non-cash rental received                                              |                                                                                             |        | 1,606   |        |        | 1,621  
|                                                                                            | Unrealized holding gain for trading securities                        |                                                                                             |        | (742    | )      |        | (318   
|                                                                                            | Write off of net investment in direct financing leases                |                                                                                             |        | 162     |        |        | 288    
|                                                                                            | Write off of trade receivables                                        |                                                                                             |        | 1,262   |        |        |       
|Changes in operating assets and liabilities:                                                |                                                                       |                                                                                             |        |         |        |        |        
|                                                                                            | Decrease (increase) in inventories                                    |                                                                                             |        | 5,194   |        |        | (30,296
|                                                                                            | Increase in trade accounts receivable                                 |                                                                                             |        | (34,893 | )      |        | (14,107
|                                                                                            | Decrease (increase) in advances paid                                  |                                                                                             |        | 3,189   |        |        | (5,434 
|                                                                                            | Increase in taxes receivable                                          |                                                                                             |        | (32,880 | )      |        | (13,885
|                                                                                            | Decrease (increase) in other current assets                           |                                                                                             |        | 2,782   |        |        | (3,285 
|                                                                                            | (Decrease) increase in trade accounts payable                         |                                                                                             |        | (13,279 | )      |        | 9,377  
|                                                                                            | Increase (decrease) in advances received                              |                                                                                             |        | 1,390   |        |        | (306   
|                                                                                            | Increase (decrease) in taxes payable                                  |                                                                                             |        | 1,028   |        |        | 5,356  
|                                                                                            | (Decrease) increase in accrued liabilities                            |                                                                                             |        | (1,081  | )      |        | 1,326  
|                                                                                            | Increase in other current payables                                    |                                                                                             |        | 619     |        |        | 5,216  
|                                                                                            | (Decrease) increase in other long-term payables                       |                                                                                             |        | (216    | )      |        | 6,155  
|                                                                                            |                                                                       |                                                                                             |        |         |        |        |        
|                                                                                            |                                                                       | Net cash (used in) provided by operating activities associated with continuing operations   |        |         | (6,863 | )      |        
|                                                                                            |                                                                       |                                                                                             |        |         |        |        |        
|Net income from discontinued operations                                                     |                                                                       |                                                                                             |       |         |        | 103    |        
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |                                                                       |                                                                                             |        |         |        |        |        
|                                                                                            | Minority interest                                                     |                                                                                             |        |        |        |        | (96    
|                                                                                            | Depreciation                                                          |                                                                                             |        |        |        |        | 97     
|                                                                                            | Amortization of goodwill                                              |                                                                                             |        |        |        |        | (38    
|                                                                                            | Allowance for doubtful accounts                                       |                                                                                             |        |        |        |        | (89    
|                                                                                            | Deferred tax expense (benefit)                                        |                                                                                             |        |        |        |        | 247    
|                                                                                            | Currency remeasurement loss relating to cash and cash equivalents     |                                                                                             |        |        |        |        | 212    
|                                                                                            | Net change in operating assets and liabilitiesthe Breweries (Note 5) |                                                                                             |        |        |        |        | (276   
|                                                                                            | Net change in operating assets and liabilitiesExpobank (Note 5)      |                                                                                             |        |        |        |        | (12,628
|                                                                                            |                                                                       |                                                                                             |        |         |        |        |        
|                                                                                            |                                                                       | Net cash (used in) provided by operating activities associated with discontinued operations |        |         |       |        |        
|                                                                                            |                                                                       |                                                                                             |        |         |        |        |        
|Total net cash (used in) provided by operating activities                                   |                                                                       |                                                                                             | (6,863 | )       |        | 123    |        
|                                                                                            |                                                                       |                                                                                             |        |         |        |        |        

The accompanying notes to financial statements are an integral part of these statements.

F-7

---

WIMM-BILL-DANN FOODS        CONSOLIDATED AND COMBINED CASH FLOW STATEMENTS  FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000        (Amounts in thousands of U.S. dollars)

|                                                                                                           |                                                                  | 2002                                                                            |          | 2001    |          | 2000    |        
|---------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------- | ------- | -------- | ------- | -------
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                      |                                                                  |                                                                                 |          |         |          |         |        
|                                                                                                           | Cash paid for acquisitions of subsidiaries, net of cash acquired |                                                                                 | $        | (39,571 | )        | $       | (8,855 
|                                                                                                           | Cash paid for acquisitions of property, plant and equipment      |                                                                                 |          | (78,505 | )        |         | (45,417
|                                                                                                           | Cash paid for net investments in direct financing leases         |                                                                                 |          | (1,843  | )        |         | (855   
|                                                                                                           | Cash paid for acquisitions of investments                        |                                                                                 |          | (285    | )        |         | (145   
|                                                                                                           | Proceeds from disposal of investments                            |                                                                                 |          |        |          |         | 137    
|                                                                                                           | Cash paid for other long-term assets                             |                                                                                 |          | (2,473  | )        |         | (351   
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|                                                                                                           |                                                                  | Net cash used in investing activities associated with continuing operations     |          |         | (122,677 | )       |        
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|                                                                                                           | Acquisition of discontinued operations (Note 5)                  |                                                                                 |          |        |          |         |       
|                                                                                                           | Purchase of property, plant and equipmentthe Breweries          |                                                                                 |          |        |          |         | (322   
|                                                                                                           | Purchase of property and equipmentExpobank                      |                                                                                 |          |        |          |         | (30    
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|                                                                                                           |                                                                  | Net cash used in investing activities associated with discontinued operations   |          |         |         |         |        
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|Total cash used in investing activities                                                                    |                                                                  |                                                                                 | (122,677 | )       |          | (55,838 | )      
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                      |                                                                  |                                                                                 |          |         |          |         |        
|                                                                                                           | Proceeds from issuance of capital stock, net of direct expenses  |                                                                                 |          | 162,127 |          |         |       
|                                                                                                           | Increase in short-term loans                                     |                                                                                 |          | 771     |          |         | 32,232 
|                                                                                                           | Proceeds from long-term loans                                    |                                                                                 |          | 4,226   |          |         | 4,695  
|                                                                                                           | Repayment of long-term loans                                     |                                                                                 |          | (9,930  | )        |         | (2,475 
|                                                                                                           | Repayment of vendors financing obligations                       |                                                                                 |          | (5,058  | )        |         | (5,909 
|                                                                                                           | Proceeds from bonds payable                                      |                                                                                 |          | 559     |          |         | 16,832 
|                                                                                                           | Repayment of obligations under capital leases                    |                                                                                 |          | (95     | )        |         | (762   
|                                                                                                           | Dividends paid                                                   |                                                                                 |          |        |          |         |       
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|                                                                                                           |                                                                  | Net cash provided by financing activities associated with continuing operations |          |         | 152,600  |         |        
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|                                                                                                           | Increase in short-term loansthe Breweries                       |                                                                                 |          |        |          |         | 721    
|                                                                                                           | Cash disposed of with discontinued operations                    |                                                                                 |          |        |          |         | (5,175 
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|                                                                                                           |                                                                  | Net cash used in financing activities associated with discontinued operations   |          |         |         |         |        
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|Total cash provided by financing activities                                                                |                                                                  |                                                                                 | 152,600  |         |          | 40,159  |        
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|Total cash provided by operating, investing and financing activities associated with continuing operations |                                                                  |                                                                                 | 23,060   |         |          | 1,718   |        
|Impact of exchange rate differences on cash and cash equivalents associated with continuing operations     |                                                                  |                                                                                 | (639     | )       |          | (300    | )      
|Cash paid for acquisition of discontinued operations                                                       |                                                                  |                                                                                 |         |         |          |        |        
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        
|Net increase in cash and cash equivalents associated with continuing operations                            |                                                                  |                                                                                 | 22,421   |         |          | 1,418   |        
|                                                                                                           |                                                                  |                                                                                 |          |         |          |         |        

The accompanying notes to financial statements are an integral part of these statements.

F-8

---



WIMM-BILL-DANN FOODS        CONSOLIDATED AND COMBINED CASH FLOW STATEMENTS  FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000        (Amounts in thousands of U.S. dollars)

|                                                                                                                       |                                                               | 2002 |        | 2001   |   | 2000    |       
|---------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ---- | ------ | ------ | - | ------- | ------
|Total cash (used in) provided by operating, investing and financing activities associated with discontinued operations |                                                               |      |       |        |   | (17,274 | )     
|Cash paid for acquisition of discontinued operations                                                                   |                                                               |      |       |        |   |        |       
|Impact of exchange rate differences on cash and cash equivalents associated with discontinued operations               |                                                               |      |       |        |   | (212    | )     
|                                                                                                                       |                                                               |      |        |        |   |         |       
|Net (decrease) increase in cash and cash equivalents associated with discontinued operations                           |                                                               |      |       |        |   | (17,486 | )     
|                                                                                                                       |                                                               |      |        |        |   |         |       
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                   |                                                               |      | 22,421 |        |   | (16,068 | )     
|CASH AND CASH EQUIVALENTS,at beginning of period                                                                       |                                                               |      | 6,919  |        |   | 22,987  |       
|                                                                                                                       |                                                               |      |        |        |   |         |       
|Cash and cash equivalents associated with continuing operations,at end of period                                       |                                                               |      | 29,340 |        |   | 6,919   |       
|Cash and cash equivalents associated with discontinued operations,at end of period                                     |                                                               |      |       |        |   |        |       
|                                                                                                                       |                                                               |      |        |        |   |         |       
|CASH AND CASH EQUIVALENTS,at end of period                                                                             |                                                               | $    | 29,340 |        | $ | 6,919   |       
|                                                                                                                       |                                                               |      |        |        |   |         |       
|SUPPLEMENTAL INFORMATION ASSOCIATED WITH CONTINUING OPERATIONS:                                                        |                                                               |      |        |        |   |         |       
|                                                                                                                       | Income taxes paid                                             |      | $      | 13,081 |   | $       | 3,073 
|                                                                                                                       | Interest paid                                                 |      |        | 14,261 |   |         | 10,769
|                                                                                                                       | Income taxes offset with VAT receivables                      |      |        | 2,437  |   |         | 2,752 
|                                                                                                                       | Taxes other than income taxes offset with VAT receivables     |      |        | 1,601  |   |         | 2,087 
|                                                                                                                       | Vendor financed acquisitions of property, plant and equipment |      |        | 51,957 |   |         | 23,586

The
accompanying notes are an integral part of these statements.

F-9

---

WIMM-BILL-DANN FOODS        CONSOLIDATED AND COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY  FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000        (Amounts in thousands of U.S. dollars, except
share amounts)

|                                      |  | Common Stock
(Note 1) |  |   |        |  |   |         | 
|------------------------------------- |  | --------------------- |  | - | ------ |  | - | ------- | 
|
|
|BALANCES at December 31, 1999         |  | 34,552,000            |  | $ | 23,755 |  | $ |        | 
|Net income                            |  |                      |  |   |       |  |   |        | 
|Dividends declared                    |  |                      |  |   |       |  |   |        | 
|                                      |  |                       |  |   |        |  |   |         | 
|BALANCES at December 31, 2000         |  | 34,552,000            |  |   | 23,755 |  |   |        | 
|Issue of shares (Note 4)              |  | 448,000               |  |   | 308    |  |   | 7,850   | 
|Net income                            |  |                      |  |   |       |  |   |        | 
|Distribution to shareholders (Note 5) |  |                      |  |   |       |  |   |        | 
|                                      |  |                       |  |   |        |  |   |         | 
|BALANCES at December 31, 2001         |  | 35,000,000            |  |   | 24,063 |  |   | 7,850   | 
|Issue of shares (Note 21)             |  | 9,000,000             |  |   | 5,845  |  |   | 156,282 | 
|Net income                            |  |                      |  |   |       |  |   |        | 
|                                      |  |                       |  |   |        |  |   |         | 
|BALANCES at December 31, 2002         |  | 44,000,000            |  | $ | 29,908 |  | $ | 164,132 | 
|                                      |  |                       |  |   |        |  |   |         | 

The
dividends shown above are the dividend payments made by subsidiaries of Wimm-Bill-Dann Foods when they were separate legal entities and before the formation
of Wimm-Bill-Dann Foods. Consequently, those dividends were determined based on the results of the individual entities and the ownership interest in those entities and not on
the share capital of Wimm-Bill-Dann Foods.
Wimm-Bill-Dann Foods has not paid any dividends for any of the periods presented.

For
the years ended December 31, 2002, 2001 and 2000 comprehensive income equaled net income.

The
accompanying notes are an integral part of these statements.

F-10

---

WIMM-BILL-DANN FOODS

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2002 AND 2001 AND FOR THE YEARS ENDED
DECEMBER 31, 2002, 2001 AND 2000

(Amounts in thousands of U.S. dollars, except where otherwise indicated)

1.     The Company

Wimm-Bill-Dann Foods ("WBD Foods" or "the Company") is an open joint stock company registered in Russia. It is a holding company which, as
at December 31, 2002, owned controlling interests in 23 manufacturing facilities in 19 locations in Russia and the Commonwealth of Independent States ("CIS"), as well as distribution centers in
26 cities in Russia and abroad ("the Group"). WBD Foods has a strong and diversified branded portfolio with over 1,100 types of dairy products and over 170 types of juice, nectars and still drinks.

The
Group was formed as follows:

On
April 16, 2001, Wimm-Bill-Dann Foods LLC ("WBD Foods LLC") was formed by a group of individual shareholders who owned shares in Lianozovo Dairy ("LMK"),
PAG Rodnik ("Rodnik") and various juice production companies.

The
shares of LMK and Rodnik were exchanged for an ownership interest in WBD Foods LLC and as a result WBD Foods LLC became the majority shareholder of LMK and Rodnik.

Subsequent
to the exchange, in October and December 2001, the juice production business, owned by the same group of shareholders described above, was transferred to Fruit Rivers
LLC.

Prior
to WBD Foods LLC exchanging for shares of participation to acquire LMK and Rodnik and the transfer of the juice production companies, these companies were under the common control
of a control group, being a group of shareholders who were shareholders in each of the above named entities, who held a majority of the shares of each of the above entities, and who were contractually
bound by a pre-existing written agreement entered into in 1997, to vote as a single unit all of their shares.

As
a consequence of the above exchange, those shareholders in each of the above named entities who were members of the control group, became the holders of all of the ownership
interests of WBD Foods LLC.

Certain
shareholders in each of the above named companies were not members of the control group and WBD Foods LLC did not give any shares of participation to them in exchange for their
interest in the above named companies. Consequently, those shareholders outside of the control group retained a minority interest in certain entities controlled by WBD Foods LLC.

The
acquisition by WBD Foods LLC of LMK and Rodnik, therefore, represents a reorganization under common control, and has been accounted for, for the periods presented, in a manner
similar to a pooling of interests. The financial statements, therefore, have been prepared on the basis that WBD Foods LLC existed for all of the periods presented and was the majority
shareholder of the underlying entities named above for all the periods presented.

At
the same time as WBD Foods LLC acquired the control group's interest in LMK and Rodnik for shares of participation, an additional share of participation in WBD Foods LLC was exchanged
for additional shares in Tsaritsino Dairy, a subsidiary of LMK. That exchange has been accounted for as an acquisition of a minority interest in 2001.

On
May 31, 2001, WBD Foods LLC was restructured into an open joint stock company and named Wimm-Bill-Dann Foods. For all periods up to May 31, 2001,
earnings per share were based on

F-11

---

34,552,000
shares, being the number of shares issued to the members of the control group upon the restructuring of WBD Foods LLC, and that number of shares has been treated as outstanding for all
these periods.

2.     Russian Environment and Current Economic Situation

The Russian economy while deemed to be of market status beginning in 2002, continues to display certain traits consistent with that of a market in transition.
These characteristics have in the past included higher than normal historic inflation, lack of liquidity in the capital markets, and the existence of currency controls which cause the national
currency to be illiquid outside of Russia. The continued success and stability of the Russian economy will be significantly impacted by the government's continued actions with regard to supervisory,
legal, and economic reforms.

3.     Summary of Significant Accounting Policies

Accounting Principles

All companies of the Group maintain their accounting books and records in domestic currency based on domestic accounting regulations. The consolidated and
combined financial statements have been prepared in order to present WBD Foods' consolidated financial position, results of operations, and cash flows in accordance with accounting principles
generally accepted in the United States ("U.S. GAAP") and expressed in terms of U.S. dollars (see paragraph "Translation Methodology" below).

Principles of Consolidation

The consolidated and combined financial statements of the Company include the accounts of WBD Foods and its subsidiaries that were controlled by the
control group of shareholders before reorganization and are controlled by WBD Foods after reorganization (see Note 1 for description of reorganization). This control is determined when the
control group of shareholders (before reorganization) or WBD Foods (after reorganization) own, either directly or indirectly, more than 50% of the voting rights of a company's share capital and are
able to govern the financial and operating policies of an enterprise so as to benefit from its activities. The purchase method of accounting is used for acquired businesses. Companies acquired or
disposed of during the year are included in the consolidated and combined financial statements from the date of acquisition or to the date of disposal.

All
significant intercompany balances and transactions have been eliminated in consolidation.

Minority
interests in the net assets and net results of companies within the Group are shown under "Minority interests" in the accompanying consolidated and combined balance sheets and
statements of operations.

Translation Methodology

The consolidated and combined financial statements have been prepared using a stable currency, the U.S. dollar, as the majority of the Company's operations are in
hyperinflationary economies. In respect of Wimm-Bill-Dann Netherlands B.V. and Wimm Bill Dann (Israel) Limited, the U.S. dollar has been used to prepare the financial
statements as this is their functional currency. The financial statements of Kiev Dairy Plant ("KMMZ") and Kharkov Dairy Plant (Ukraine) have been prepared

F-12

---

using
the Ukrainian grivna as the functional currency. Translation (remeasurement) of domestic currency denominated financial statements into U.S. dollars has been performed in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign currency translation". The objective of this remeasurement process is to produce the same results that would
have been reported if the accounting records had been kept in U.S. dollars.

For
entities operating in hyperinflationary economies, monetary assets and liabilities have been translated at the period-end exchange rate. Non-monetary assets
and liabilities have been translated at historical rates. Share capital has been translated at the date of registration of WBD Foods and on the dates of additional share issues (see Note 1).
Revenues, expenses and cash flows have been translated at the dates of respective transactions. Remeasurement differences resulting from the use of these rates have been accounted for as currency
remeasurement gains and losses in the accompanying consolidated and combined statements of operations.

The
Company's principle future operating cash flows will be generated in Russian rubles. As a result, future movements in the exchange rate between the ruble and U.S. dollar will affect
the carrying value of the Company's assets and liabilities. Such changes may also affect the Company's ability to realize assets as represented in terms of U.S. dollars in the accompanying
consolidated and combined financial statements.

Starting
from January 1, 2003 Russia is no longer considered a hyperinflationary economy. Therefore, financial statements will be prepared using the local currency, the Russian
ruble, as a functional currency for WBD Foods' Russian subsidiaries. Subsequent translation to reporting currency, the U.S. dollar, will be made in accordance with SFAS No. 52.

Management Estimates

The preparation of the consolidated and combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the consolidated and combined financial statements and the reported amounts of revenues and expenses during the reporting
period. Examples include estimates of provisions for bad and doubtful accounts, obsolete inventory, and valuation allowance for deferred tax assets. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents represent cash on hand and in the Company's bank accounts and short-term investments having original maturities of less than
three months.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at their net realizable value which approximates their fair value.

The
Company provides an allowance for doubtful accounts based on management's periodic review of accounts, including the delinquency of account balances. Delinquency status is based on
contractual terms. The Company evaluates the collectibility of its receivables at least quarterly, based upon various factors, including the financial condition and payment history of major customers,
an overall review of collections experience of other accounts and economic factors or events expected to affect the

F-13

---

Company's
future collections. Trade receivables are written-off when evidence exists that they will not be collectible. The Company generally does not require collateral from its credit
customers.

Inventory

Inventories, including work-in-process, are valued at the lower of cost or market, after the reserve for excess and obsolete items. Cost
is the price paid or the consideration given to acquire the asset. Cost is determined on the basis of weighted average cost. For processed inventories, cost is the sum of the expenditures and charges,
direct and indirect, in bringing goods to
their existing conditions or location. It includes the applicable allocation of production fixed and variable overhead costs. Market is the current replacement cost, whether by purchase or by
reproduction, limited to the estimated selling price less any costs of completion and disposal (net realizable value) at the maximum level, and net realizable value, less an allowance for normal
profit at the minimum level. Net realizable value is the selling price in the ordinary course of business, less the costs of completion, marketing, and distribution. Unrealizable inventory is fully
written off.

Value-Added Taxes

Value-added taxes ("VAT") related to sales are payable based upon invoices issued to the customer or collection of respective receivables. VAT incurred for
purchases may be reclaimed, subject to certain restrictions, against VAT related to sales.

VAT
related to purchase transactions that are subject to offset against taxes payable after the balance sheet dates are recognized in the balance sheets on a gross basis.

Property, Plant and Equipment

Property, plant and equipment are stated at historic acquisition cost, less accumulated depreciation.

The
acquisition cost of property, plant and equipment comprise its purchase price, including import duties and non-refundable purchase taxes and any directly attributable
costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the assets have been put into operation, such as repairs and maintenance costs, are
normally expensed in the period the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected
to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property,
plant and equipment. When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and any gain or loss resulting from their disposal is included in other
operating expenses of the consolidated and combined statement of operations.

F-14

---

The
carrying value of property, plant and equipment, as determined above, less expected residual value, is depreciated on a straight-line basis over the estimated useful
lives of the related assets. The following estimated useful lives have been applied:

Buildings

50 yearsMachinery and equipment

820 yearsComputer hardware

35 yearsOther

510 years


Construction
in progress comprises costs directly related to construction of property, plant and equipment plus an appropriate allocation of variable and fixed overheads that are
incurred in construction. Construction in progress is depreciated once the property, plant and equipment are put into operation.

The
Company capitalizes interest costs with respect to qualifying construction projects.

Impairment of Long-Lived Assets

When events and circumstances occur indicating that the carrying amount of a long-lived asset (group) may not be recoverable, the Company estimates
the future undiscounted cash flows expected to derive from the use and eventual disposition of the asset (group). If the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the long-lived asset (group), the Company would then calculate the impairment as the excess of the carrying value of the asset (group) over the
estimate of its fair market value.

Capital LeasesLessee's Accounting

At the inception of the lease, the Company recognizes capital leases as assets and liabilities in the balance sheet at amounts equal to the fair value of the
leased property or, if lower, the present value of the future minimum lease payments. In calculating the present value of the future minimum lease payments the discount factor used is the interest
rate implicit in the lease when it is practicable to determine; otherwise, the Company's incremental borrowing rate is used. Initial direct costs incurred are included as part of the asset. Lease
payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period.

A
capital lease gives rise to depreciation expense for the asset (included in depreciation expense) as well as a finance expense (included in financial income and expenses, net) for each
accounting period. The depreciation policy for leased assets is consistent with that for depreciable assets that are owned.

Capital LeasesLessor' Accounting

The Company presents assets leased as a receivable equal to the net investment in the lease. Finance income is based on a pattern reflecting a constant periodic
rate of return on the net

F-15

---

investment
outstanding and included in other operating expenses. Initial direct costs are deferred and expensed over the period in which the related revenue is recognized.

Intangible assets

Intangible assets with determinable useful lives are amortized using the straight-line method over their estimated period of benefit, ranging from two
to fifteen years. Indefinite-lived intangibles are evaluated annually for impairment or when indicators exist indicating such assets may be impaired, such determination of fair value being based on a
valuation model that incorporates expected future cash flows and profitability projections.

Goodwill

Goodwill represents the purchase price for businesses acquired in excess of the fair value of identifiable net assets acquired. Starting from January 1,
2002 with the adoption of SFAS 142, "Goodwill and Other Intangible Assets", goodwill is no longer amortized, but instead tested for impairment at least annually or whenever indicators of
impairment arise. In 2000 and 2001 for acquisitions made before June 30, 2001, goodwill was amortized using the straight-line method over fifteen years.

In
cases where the fair value of the net assets acquired exceed the purchase price, that excess (negative goodwill) is allocated as a pro rata reduction of the amounts that otherwise
would have been assigned to all of the acquired assets excluding financial assets other than investments accounted for by the equity method, assets to be disposed of by sale, deferred tax assets and
any other current assets. If any excess remains after reducing to zero the amounts that otherwise would have been assigned to those assets, that remaining excess is recognised as an extraordinary gain
in the period in which the business combination is completed.

Investments

WBD Foods holds interests in several Russian legal entities which are valued at cost and are not readily marketable securities (see Note 13). Management
periodically assesses the realizability of the carrying values of the investments and provides valuation reserves, if required. Investments classified as trading securities are valued at fair value
and are classified as other current assets.

Revenue Recognition

Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can
be measured reliably.

Sales
are recognized, net of VAT and discounts, when goods are shipped to customers. At the time of shipment, in accordance with the Company's standard sales agreements, the title is
transferred and the customer assumes the risk and rewards of ownership. This policy is consistent with the Russian Civil Code which states that legal title transfers when a products is shipped to a
customer unless specifically overridden by the sales agreement.

F-16

---

The
Company offers sales volume discounts based on individual customer volumes acquired in a previous month. An accrual for such discounts is made at the end of each accounting period
and is recognized as a reduction of revenue in the consolidated and combined statement of operations.

Shipping and Handling Costs

Shipping and handling costs incurred by the Company are reflected in sales and distribution expenses in the accompanying consolidated and combined statement of
operations.

Government Grants

Government grants are recognized when the related cash or assets are received. Government grants are deferred and amortized to income over the period necessary to
match them with the related costs that they are intended to compensate. Grants received are treated as deferred income in the accompanying consolidated and combined financial statements. The
amortization of government grants related to acquisition of property, plant and equipment is recognized in cost of sales when depreciation expense of the related long-term assets is
recognized. Interest expense incurred in government grant loan programs is recognized in financial income and expenses, net.

Taxation

Deferred tax assets and liabilities are recognized for the expected future tax consequences of existing differences between financial reporting and tax reporting
bases of assets and liabilities, and loss or tax credit carryforwards using enacted tax rates expected to be in effect at the time these differences are realized. Valuation allowances are recorded for
deferred tax assets where it is unlikely that such assets will be realized. In accordance with SFAS No. 109, "Accounting for income taxes", the Company does not recognize deferred taxes for
differences between the domestic currency equivalent of U.S. dollar cost and domestic tax basis of nonmonetary assets and for the difference that results from indexing of nonmonetary assets for tax
purposes as the U.S. dollar is the functional currency.

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred. Advertising costs for the years ended December 31, 2002, 2001 and 2000 were $32,355, $18,263 and
$12,804, respectively, and are reflected as a component of selling and distribution expenses in the accompanying consolidated and combined statements of operations (see Note 24).

Earnings per Share

Earnings per common share for 2000 have been determined using the number of WBD Foods' shares issued on May 31, 2001, to the members of the control group.
Earnings per common share for 2001 and 2002 have been determined based upon the weighted average number of shares outstanding during these periods. There are no potentially dilutive securities.

F-17

---

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term loans reported in the consolidated and
combined balance sheets approximate fair values due to the short maturity of those instruments. Management is of the opinion that the carrying value of the Company's long-term loans
approximates fair value.

Research and Development Costs

Research and development costs are expensed as incurred. The Company incurred $930, $519 and $407 of such costs during the years ended December 31, 2002,
2001 and 2000, respectively.

Segment Reporting

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", requires that a business enterprise reports financial and descriptive
information about its reportable operating segments. WBD Foods currently manages its business as two major operating segmentsdairy and juice production and distribution, and accordingly,
reports segmental information on this basis.

Reclassifications

Where necessary, corresponding figures have been adjusted to conform with changes in the presentation of the current year. Such reclassifications had no impact on
net income or shareholders' equity.

New Accounting Pronouncements

During 2001 the Financial Accounting Standards Board issued several new accounting standards, including SFAS No. 141, "Business Combinations", SFAS
No. 142, "Goodwill and Other Intangible Assets", SFAS No. 143, "Accounting for Asset Retirement Obligations", SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets".

Under
the new rules of SFAS No. 142, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests. Other
intangible assets continue to be amortized over their useful lives. Impairment losses that arise due to the initial application of this standard are reported as a cumulative effect of a change in
accounting principle. The Company has adopted SFAS No. 141, "Business Combinations" which was effective for business combinations consummated after June 30, 2001. The Company
adopted SFAS No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002 and discontinued amortization of goodwill as of such date.

The
Company completed the transitional impairment test for existing goodwill as of January 1, 2002 during the second quarter of 2002. Based on comparison of the carrying amounts
of the Company's reporting units with the fair values of the reporting units, the Company determined that no goodwill was impaired as of that date. Fair values of the reporting units were established
using the discounted cash flow method.

F-18

---

The
impact of non-amortization of goodwill on the Company's net income for the year ended December 31, 2002 was $993 or $0.02 per share of common
stockbasic and diluted. Amortization expense for goodwill for the year ended December 31, 2001 was $455.

The
adoption on January 1, 2002 of the above mentioned standards did not have a material impact on the financial position or the results of operations of the Company.

Accounting Pronouncements Issued But Not Yet Adopted

During the year ended December 31, 2002 the Financial Accounting Standards Board issued several new accounting standards, including SFAS No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Corrections", SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities". These standards are not expected to have a material impact on the financial position or the results of operations of the Company.

In
July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 replaces EITF Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)", and changes
the timing of recognition for certain exit costs associated with restructuring activities. Under SFAS No. 146 certain exit costs would be recognized over the period in which the restructuring
activities occur. Currently, exit costs are recognized when the Company commits to a restructuring plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002, though early adoption is allowed. The Company will adopt SFAS No. 146 for exit or disposal activities that are initiated after December 31, 2002. The
provisions of SFAS No. 146 could result in the Company recognizing the cost of future restructuring activities over a period of time as opposed to as a one-time expense. This
standard is not expected to have a material impact on the financial position or the results of operations of the Company.

In
November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee.
The disclosure provisions of FIN 45 are effective for financial statements of annual periods that end after December 15, 2002. The provisions for initial recognition and measurement are
effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. This interpretation is not expected to have a material impact on the financial position or
the results of operations of the Company.

4.     Businesses Acquired

Acquisition of minority interests

In
June 2002, WBD Foods acquired 25% of Moscow Baby Food Plant ("ZDMP"), a subsidiary, from one of its shareholders for $5,000 paid in cash. The fair value of net assets acquired
in excess of purchase price of $3,461 was subsequently recorded as a reduction of the value of intangible assets and property, plant and equipment. The change in minority interest related to this
acquisition is presented as "Acquisitions by the Company of minority interests in subsidiaries" in Note 22.

F-19

---

In
April 2001, at the same time as the exchange of shares for WBD Foods LLC's shares of participation, an additional share of participation in WBD Foods LLC was exchanged for
additional shares in Tsaritsino Dairy Plant ("TsMK"), a subsidiary. The acquisition of 9.6% of TSMK was in exchange for cash amounting to $1,156 and the share of participation in WBD Foods LLC, which
was subsequently exchanged for 448,000 shares of WBD Foods OJSC at $18 per share, being the estimated fair value per share of WBD Foods OJSC in April 2001, and resulted in a credit to the share
premium account of $7,850. The change in minority interest related to this acquisition is presented as "Acquisitions by the Company of minority interests in subsidiaries" in Note 22.

In
May 2000, the Group signed share purchase agreements with the Moscow City Government for the redemption of 15% of the shares of LMK and TsMK. TsMK agreed to purchase 15% of
LMK's shares for $900 and to invest $8,150 of plant and equipment under an investment program. LMK agreed to purchase 15% of TsMK's shares for $190 and to invest $5,500 of plant and equipment under an
investment program. This agreement resulted from the Moscow City Government's desire to sell its remaining interest in these entities and the importance of these entities to WBD's business. By
December 31, 2000, the purchase consideration had been paid and was recognized as an advance of $1,090. The investment of plant and equipment was made during the period July 2000 through
June 2001. The Moscow City Government's 15% ownership in LMK and TsMK was treated in the accompanying consolidated and combined financial statements as a minority interest until
July 2001 on the basis that transfer of ownership was dependent upon the fulfillment of the terms and conditions of the investment program which was completed in July 2001. The purchase
price was primarily allocated to property, plant and equipment. The fair value of net assets acquired in excess of purchase price resulting from this allocation of $13,133 was subsequently recorded as
a reduction against property, plant and equipment resulting in total property, plant and equipment acquired of approximately $1,100. The change in minority interest related to this acquisition is
presented as "Acquisitions by the Company of minority interests in subsidiaries" in Note 22.

The
Company made a number of other acquisitions of minority interests in certain subsidiaries during the years ended December 31, 2002 and 2001. The total cash consideration paid
for these acquisitions was $1,536 and $560. The acquisitions made during 2002 and 2001 resulted in fair value of net assets acquired in excess of purchase price of $602 and $2,695, respectively, which
was recorded as a reduction of the value of property, plant and equipment. Certain acquisitions of minority interests made during the year ended December 31, 2002 resulted in goodwill of $402.
The changes in minority
interests related to these acquisitions are presented as "Acquisitions by the Company of minority interests in subsidiaries" in Note 22.

These
acquisitions are included in WBD Foods' operating results from their respective dates of acquisition. Pro Forma results of operations reflecting these acquisitions have not been
presented because the results of operations of the acquired companies, either individually or collectively, are not material to consolidated results of operations.

New acquisitions

2002

In
June 2002, the Company acquired 82.3% of Kharkov Dairy Plant for $5,136, paid in cash. Kharkov Dairy Plant is a strong player on the Ukranian market with a stable supply of raw
materials.

F-20

---

The
results of Kharkov Dairy Plant operations have been included in the consolidated financial statements since June 30, 2002.

In
July 2002, a 100% interest in Roska, a St. Petersburg dairy company, was acquired by the Company for $11,634, paid in cash. Roska is one of St. Petersburg's most modern and
best equipped dairy plants with excellent location and access roads. Through this major acquisition in St. Petersburg, WBD Foods established substantial dairy production capacity in the
North-West region of Russia, one of the most strategically important regions in the whole of the country. The results of Roska operations have been included in the consolidated financial
statements since July 31, 2002.

In
October 2002, the Company acquired 100% of Ruselectrocenter for $6,000, paid in cash. The acquisition of this warehouse complex will allow WBD Foods to optimize the juice
distribution network in the key Moscow city and Moscow regional markets. The complex is equipped with the latest technology in automated control systems, and will provide a comprehensive range of
services from storage to direct delivery to clients. The results of Ruselectrocenter operations will be included in the consolidated financial statements starting from October 31, 2002.

In
October 2002, the Company acquired 95.4% of Depsona for $3,458. Depsona is a strong player in the South region of Russia. The factory has access to large reserves of
high-quality local raw
materials, which will allow the Company to reduce its dependence on imported juice concentrates. The results of Depsona operations have been included in the consolidated financial statements since
September 30, 2002.

The
Company also acquired an interest in a number of other companies during 2002 for $6,807, paid in cash.

The
total cash consideration paid for all new acquisitions made in 2002 was $33,035 attributable to property, plant and equipment ($26,641), goodwill ($8,304), other intangible assets
($1,783) and other current assets ($7,208) less liabilities ($10,901).

2001

During
March 2001, the Company acquired a 50.1% interest in Ufamolagroprom in exchange for total consideration of $5,500. This consideration was paid in the beginning of 2001. The
Company also acquired an interest in a number of other companies during the year ended December 31, 2001 for $6,686.

All
acquisitions discussed above have been accounted for using the purchase method of accounting and, accordingly, the assets acquired and liabilities assumed have been recorded at their
fair values as of the dates of the acquisitions. For the acquisitions that resulted in excess of fair value of the assets acquired and liabilities assumed over the purchase price the difference has
been deducted proportionately from non-current assets acquired (excluding long-term investments in marketable securities). For acquisitions that resulted in excess of purchase
price over the fair value of the assets acquired and liabilities assumed such excess was recorded as goodwill.

These
acquisitions are included in WBD Foods' operating results from their respective dates of acquisition. Pro Forma results of operations reflecting these acquisitions have not been
presented

F-21

---

because
the results of operations of the acquired companies, either individually or collectively, are not material to consolidated results of operations.

5.     Discontinued operations

During 1997, LMK acquired approximately 82% of the outstanding shares of Expobank for a total amount approximating $6,000. During 1998, LMK made an additional
investment of $6,900 in Expobank in connection with a capital contribution by major shareholders of Expobank. LMK's acquisition and investment in Expobank was made based on the economic condition in
Russia during 1998 as a method of ensuring access to funding for the operations of WBD.

During
2000, in an attempt to diversify the investments of the shareholder group, LMK acquired ownership interest in certain breweries including Brewery Volga, Volga-Invest, PiP and
Moskvoretzky Brewery (collectively referred to as the Breweries). The aggregate purchase price of these investments was approximately $7,500.

On
December 8, 2000, the Board of Directors of LMK passed a general resolution to alienate LMK's interest in Expobank and the Breweries. This decision was based on the desire to
focus on the core dairy and juice business and to cease operations in businesses that were dissimilar. At this time there was no determination as to the timing or method of such disposition.

On
March 19, 2001, at the annual shareholders' meeting of LMK, a decision was made that any alienation of Expobank and the Breweries should be completed through a distribution of
shares to certain of the controlling group of shareholders. These same individuals simultaneously transferred their direct ownership in TsMK to LMK. The exchange was completed in April 2001 and
was recorded in WBD's consolidated and combined financial statements at that date as a distribution to shareholders.

The
historical financial statements have been restated to reflect Expobank and the Breweries as discontinued operations for all periods presented. Operating results of the discontinued
operations were summarized below. The amounts included income tax provisions based on the standalone results of Expobank and the Breweries. There have been no allocations of general and administrative
corporate costs or interest expense related to the overall corporate credit facilities to the discontinued operations. As Expobank and the Breweries essentially functioned as independent entities no
corporate costs were eliminated upon the discontinuance of such operations.

F-22

---



Expobank

|                                                     |                                         | Period
between
January 1
and April 25,
2001 |        | Year ended
December 31,
2000 |  
|---------------------------------------------------- | --------------------------------------- | ------------------------------------------- | ------ | ---------------------------- | -
|Interest income                                      |                                         | $                                           | 691    |                              | $
|Interest expense                                     |                                         |                                             | (258   | )                            |  
|Provision for impairment                             |                                         |                                             | 90     |                              |  
|                                                     |                                         |                                             |        |                              |  
|Net interest income                                  |                                         |                                             | 523    |                              |  
|Non-interest income                                  |                                         |                                             | 1,142  |                              |  
|Administrative expenses and other                    |                                         |                                             | (1,261 | )                            |  
|Amortization of negative goodwill                    |                                         |                                             | 170    |                              |  
|                                                     |                                         |                                             |        |                              |  
|Net income before income taxes and minority interest |                                         |                                             | 574    |                              |  
|Income taxes                                         |                                         |                                             | (313   | )                            |  
|Minority interest                                    |                                         |                                             | (52    | )                            |  
|                                                     |                                         |                                             |        |                              |  
|                                                     | Net income from discontinued operations |                                             | $      | 209                          |  
|                                                     |                                         |                                             |        |                              |  

The Breweries

|                                                 |                                       | Period
between
January 1
and April 25,
2001 |        | Three months
ended
December 31,
2000 |  
|------------------------------------------------ | ------------------------------------- | ------------------------------------------- | ------ | ------------------------------------ | -
|Sales                                            |                                       | $                                           | 5,181  |                                      | $
|Cost of sales                                    |                                       |                                             | (5,068 | )                                    |  
|Operating expenses                               |                                       |                                             | (90    | )                                    |  
|                                                 |                                       |                                             |        |                                      |  
|Operating loss                                   |                                       |                                             | 23     |                                      |  
|Financial (expense) income                       |                                       |                                             | (72    | )                                    |  
|Amortization of goodwill                         |                                       |                                             | (132   | )                                    |  
|                                                 |                                       |                                             |        |                                      |  
|(Loss) income before taxes and minority interest |                                       |                                             | (181   | )                                    |  
|Income taxes                                     |                                       |                                             | (73    | )                                    |  
|Minority interest                                |                                       |                                             | 148    |                                      |  
|                                                 |                                       |                                             |        |                                      |  
|                                                 | Net loss from discontinued operations |                                             | $      | (106                                 | )
|                                                 |                                       |                                             |        |                                      |  

The
assets and liabilities of the discontinued operations are summarized below. These balances reflect the payable to the Group for deposits made to Expobank, as these amounts remained
outstanding upon the disposition of the business.

F-23

---

|                              |       | Expobank |        | The Breweries |   | Total 
|----------------------------- | ----- | -------- | ------ | ------------- | - | ------
|
|Current assets:               |       |          |        |               |   |       
|Cash and precious metals      |       | $        | 2,650  |               | $ | 7,834 
|Due from Russian Central bank |       |          | 4,210  |               |   | 11,580
|Placement with banks          |       |          | 11,609 |               |   | 9,313 
|Trading securities            |       |          | 11,041 |               |   | 11,456
|Loans to customers            |       |          | 12,708 |               |   | 10,585
|Trade receivables             |       |          |       |               |   |      
|Inventory                     |       |          |       |               |   |      
|Other                         |       |          | 3,413  |               |   | 3,577 
|                              |       |          |        |               |   |       
|                              | Total |          |        | 45,631        |   |       
|                              |       |          |        |               |   |       
|Long-term assets:             |       |          |        |               |   |       
|Property, plant and equipment |       |          | 1,656  |               |   | 1,802 
|Goodwill                      |       |          |       |               |   |      
|Trading securities            |       |          | 3,654  |               |   | 3,791 
|Loans to customers            |       |          | 2,214  |               |   | 1,844 
|Other                         |       |          |       |               |   |      
|                              |       |          |        |               |   |       
|                              | Total |          |        | 7,524         |   |       
|                              |       |          |        |               |   |       
|Current liabilities:          |       |          |        |               |   |       
|Trade accounts payable        |       |          |       |               |   |      
|Taxes payable                 |       |          |       |               |   |      
|Deposits from banks           |       |          | 12,330 |               |   | 14,336
|Deposits from WBD             |       |          | 1,027  |               |   | 900   
|Deposits from customers       |       |          | 26,448 |               |   | 32,103
|Other                         |       |          | 7,116  |               |   | 7,392 
|                              |       |          |        |               |   |       
|                              | Total |          |        | 46,921        |   |       
|                              |       |          |        |               |   |       
|Long-term liabilities:        |       |          |        |               |   |       
|Debt                          |       |          |       |               |   |      
|Promissory notes              |       |          | 107    |               |   | 107   
|Negative goodwill             |       |          | 4,598  |               |   | 4,768 
|                              |       |          |        |               |   |       
|                              | Total |          |        | 4,705         |   |       
|                              |       |          |        |               |   |       
|Net assets                    |       | $        | 1,529  |               | $ | 2,176 
|                              |       |          |        |               |   |       

Positive goodwill that arose on the acquisition of the Breweries was amortized over 10 years. Negative goodwill, being the excess of the
fair value of the net assets acquired over the purchase price, that arose on the acquisition of Expobank, after reduction of non-current assets (excluding long-term investments
in marketable securities), was amortized over 10 years.

Increases
and decreases in operating assets and liabilities of Expobank are summarized below.

F-24

---

|                                                                   |                                                             | Period
between
January 1
and April 25,
2001 |        | Year ended
December 31,
2000 |  
|------------------------------------------------------------------ | ----------------------------------------------------------- | ------------------------------------------- | ------ | ---------------------------- | -
|Decrease (increase) in reserve deposit with Central Bank of Russia |                                                             | $                                           | 265    |                              | $
|Increase in placements with banks                                  |                                                             |                                             | (2,340 | )                            |  
|Decrease (increase) in trading securities                          |                                                             |                                             | 588    |                              |  
|Increase in loans to customers                                     |                                                             |                                             | (2,379 | )                            |  
|(Decrease) increase in deposits from banks                         |                                                             |                                             | (2,006 | )                            |  
|Increase (decrease) in deposits from WBD                           |                                                             |                                             | 127    |                              |  
|(Decrease) increase in deposits from customers                     |                                                             |                                             | (5,655 | )                            |  
|(Decrease) increase in promissory notes                            |                                                             |                                             | (2,139 | )                            |  
|Change in other operating assets and liabilities                   |                                                             |                                             | 911    |                              |  
|                                                                   |                                                             |                                             |        |                              |  
|                                                                   | Net (decrease) increase in operating assets and liabilities |                                             | $      | (12,628                      | )
|                                                                   |                                                             |                                             |        |                              |  

There
were no material cash flows from/used in operating activities, financing activities or investing activities of the Breweries since the date of acquisition to April 25, 2001.

6.     Cash and Cash Equivalents

Cash and cash equivalents as of December 31, 2002 and 2001 were comprised as follows:

|                 |                                 | 2002 |        | 2001  
|---------------- | ------------------------------- | ---- | ------ | ------
|Rubles           |                                 | $    | 10,247 |       
|Hard currencies  |                                 |      | 9,076  |       
|Cash equivalents |                                 |      | 10,017 |       
|                 |                                 |      |        |       
|                 | Total cash and cash equivalents |      | $      | 29,340
|                 |                                 |      |        |       

Cash
equivalents mostly represent hard currency time-deposits in Russian banks with maturity less than 3 months.

7.     Trade Receivables, net

Trade receivables as of December 31, 2002 and 2001 were comprised as follows:

|                                |                        | 2002 |        | 2001   |  
|------------------------------- | ---------------------- | ---- | ------ | ------ | -
|Trade receivables               |                        | $    | 62,883 |        | $
|Allowance for doubtful accounts |                        |      | (2,737 | )      |  
|                                |                        |      |        |        |  
|                                | Trade receivables, net |      | $      | 60,146 |  
|                                |                        |      |        |        |  

F-25

---

The
movement in the allowance for doubtful accounts for the years ended December 31, 2002, 2001 and 2000 was as follows:

|                             |                                                                   | 2002 |       | 2001  |   | 2000
|---------------------------- | ----------------------------------------------------------------- | ---- | ----- | ----- | - | ----
|Balance, beginning of period |                                                                   | $    | 581   |       | $ | 355 
|                             | Allowance for doubtful accounts acquired in business combinations |      |       | 495   |   |     
|                             | Provision for doubtful accounts                                   |      |       | 1,970 |   |     
|                             | Write off of trade receivables                                    |      |       | (309  | ) |     
|                             |                                                                   |      |       |       |   |     
|Balance, end of period       |                                                                   | $    | 2,737 |       | $ | 581 
|                             |                                                                   |      |       |       |   |     

F-26

---



8.     Inventory, net

Inventory as of December 31, 2002 and 2001 was comprised as follows:

|                                   |                | 2002 |        | 2001   |  
|---------------------------------- | -------------- | ---- | ------ | ------ | -
|Raw materials                      |                | $    | 67,888 |        | $
|Work in progress                   |                |      | 2,981  |        |  
|Finished goods                     |                |      | 16,530 |        |  
|Reserve for inventory obsolescence |                |      | (1,336 | )      |  
|                                   |                |      |        |        |  
|                                   | Inventory, net |      | $      | 86,063 |  
|                                   |                |      |        |        |  

Obsolescence
and net realizable value reserves expense during 2002, 2001 and 2000 amounted to $(1,154), $(182) and $427, respectively, and was included in cost of sales in the
accompanying consolidated and combined statements of operations.

9.     Net Investment in Direct Financing Leases

Commencing from 1999, the Company announced a program called "Dairy Rivers of Russia" with the purpose of ensuring a steady and reliable source of milk. Under
this program the Company acquired agricultural equipment and leased such equipment to several farms. These transactions were classified as direct financing leases. The lease agreements vary from three
to eight years and provide a free of charge equipment transfer option at the end of the lease term. The lease receivables are denominated in U.S. dollars and Russian rubles. The lessees have
the option to settle receivable through the delivery of milk supplies to the Company based on a predetermined schedule. The settlement is based on milk prices that are either fixed in U.S. dollars in
the range from $0.17 to $0.21 per kilogram, depending upon the quality, which approximates the average cash prices at the inception of the lease, or is variable dependent upon prevailing market
prices.

The
following lists the components of the net investment in direct financing leases at December 31, 2002 and 2001:

|                                        |                   | 2002 |        | 2001  |  
|--------------------------------------- | ----------------- | ---- | ------ | ----- | -
|Total future minimum lease payments     |                   | $    | 6,759  |       | $
|Less: Unearned income                   |                   |      | (1,040 | )     |  
|                                        |                   |      |        |       |  
|Net investment in direct finance leases |                   | $    | 5,719  |       | $
|                                        |                   |      |        |       |  
|                                        | Current portion   |      |        | 1,338 |  
|                                        | Long-term portion |      |        | 4,381 |  

F-27

---

At
December 31, 2002 total future minimum lease payments for each of the five succeeding fiscal years are as follows:

|Years ended December 31, |  |  
|------------------------ |  | -
|2003                     |  | $
|2004                     |  |  
|2005                     |  |  
|2006                     |  |  
|2007                     |  |  
|Thereafter               |  | $

10.   Intangible Assets

Identifiable intangible assets as of December 31, 2002 and 2001 were comprised as follows:

|                                           |                        | 2002              |   | 2001  |      
|------------------------------------------ | ---------------------- | ----------------- | - | ----- | -----
|
|Intangible assets with determinable lives: |                        |                   |   |       |      
|                                           | Supplier contracts     |                   | $ | 1,459 |      
|                                           | Trademarks             |                   |   | 218   |      
|                                           | Customer relationships |                   |   | 106   |      
|                                           | Others                 |                   |   | 514   |      
|Intangible assets with indefinite lives:   |                        |                   |   |       |      
|                                           | Trademarks             |                   |   | 692   |      
|                                           |                        |                   |   |       |      
|                                           |                        | Intangible assets |   | $     | 2,989
|                                           |                        |                   |   |       |      

During
2002, changes in intangible assets primarily relates to the Company's acquisition of $1,459 relating to supplier contracts, $910 in trademarks and $106 in customer relationships.
Supplier contracts have a weighted average useful life of 5 years, customer relationships and trademarks have a useful life of 2 years. The remaining $692 of acquired intangible assets
have indefinite lives and were assigned to trademarks.

Amortization
expense relating to the net carrying amount of intangible assets at December 31, 2002 is estimated to be $433 in 2003, $446 in 2004, $331 in 2005, $331 in 2006 and
$222 in 2007.

F-28

---

11.   Property, Plant and Equipment

The net book value of property, plant and equipment at December 31, 2002 and 2001 was comprised as follows:

|                                                        |                                    | 2002 |          | 2001    |  
|------------------------------------------------------- | ---------------------------------- | ---- | -------- | ------- | -
|Buildings                                               |                                    | $    | 59,293   |         | $
|Freehold machinery and equipment                        |                                    |      | 187,625  |         |  
|Leasehold machinery and equipment                       |                                    |      |         |         |  
|Computer hardware                                       |                                    |      | 6,624    |         |  
|Other                                                   |                                    |      | 26,173   |         |  
|                                                        |                                    |      |          |         |  
|Gross book value of property, plant and equipment       |                                    |      | 279,715  |         |  
|Accumulated depreciation                                |                                    |      | (100,414 | )       |  
|Advances paid for property, plant and equipment         |                                    |      | 18,485   |         |  
|Construction in progress and equipment for installation |                                    |      | 95,794   |         |  
|                                                        |                                    |      |          |         |  
|                                                        | Property, plant and equipment, net |      | $        | 293,580 |  
|                                                        |                                    |      |          |         |  

The
Company capitalized interest costs of $2,131, $493 and $321 during the years ended December 31, 2002, 2001 and 2000, respectively, with respect to qualified construction
projects.

The
gross book value of plant and equipment includes $3,065 in 2001 which were leased assets. The accumulated depreciation related to these leased assets was $706 as of
December 31, 2001.

Depreciation
expense during the years ended December 31, 2002, 2001 and 2000 amounted to $18,447, $12,225 and $8,903, respectively. This included amortization of leased assets of $235
per annum for the years ended December 31, 2000 and 2001.

12.   Goodwill

The Company's interest in the aggregate fair value of identifiable net assets of certain subsidiaries acquired in 2002, 2001 and 1998, was below the fair value of
the consideration paid which resulted in goodwill. The goodwill was being amortized in the consolidated and combined statement of operations on a straight-line basis over a
fifteen-year period until the adoption of SFAS No. 142 on January 1, 2002, which requires that goodwill is no longer amortized, but is tested for impairment on an annual
basis and whenever indicators of impairment arise. Therefore, the Company does not amortize goodwill commencing from January 1, 2002 (see Note 3).

The
movement of goodwill for the years ended December 31, 2002 and 2001 comprised:

|Balance at December 31, 2000 |  | $ | 933    |  
|---------------------------- |  | - | ------ | -
|Acquisitions                 |  |   | 10,701 |  
|Amortization                 |  |   | (455   | )
|                             |  |   |       
|Balance at December 31, 2001 |  | $ | 11,179 |  
|Acquisitions                 |  |   | 8,706  |  
|                             |  |   |       
|Balance at December 31, 2002 |  | $ | 19,885 |  
|                             |  |   |       

F-29

---

13.   Long-term Investments

At December 31, 2002 and 2001 the Company had the following direct investments in Russian companies:

|             |                             | 2002    |  | 2001
|------------ | --------------------------- | ------- |  | ----
|
|Albumin      |                             | 40.6%   |  | $   
|Samara Lakto |                             | 4.0%    |  |     
|Other        |                             | various |  |     
|             |                             |         |  |     
|             | Total long-term investments |         |  |     
|             |                             |         |  |     

The
investment in Albumin, an open joint-stock company, is carried on the cost method as no significant influence is exercised by the Company as of December 31, 2002 and 2001, as
evidenced by the Company not having significant influence over financial or operating policies of Albumin and having no representation on the Board of Directors.

14.   Other Assets

Other assets at December 31, 2002 and 2001 were comprised as follows:

|                                        |                    | 2002 |       | 2001 
|--------------------------------------- | ------------------ | ---- | ----- | -----
|Advance for acquisition of Sibirski Syr |                    | $    | 2,379 |      
|Other                                   |                    |      | 433   |      
|                                        |                    |      |       |      
|                                        | Total other assets |      | $     | 2,812
|                                        |                    |      |       |      

In
May, 2002 LMK paid $2,379 in cash to a broker for the acquisition of shares of Sibirsky Syr. The ownership of these shares was not transferred to LMK until January 2003. As of
January 15, 2003 LMK owned 100% of Sibirsky Syr and as a result, its net assets and results of operations will be consolidated from that date.

15.   Accrued Liabilities

Accrued liabilities at December 31, 2002 and 2001 were comprised as follows:

|                         |                           | 2002 |       | 2001 
|------------------------ | ------------------------- | ---- | ----- | -----
|Payroll related accruals |                           | $    | 3,987 |      
|Interest accruals        |                           |      | 1,759 |      
|Other accruals           |                           |      | 2,600 |      
|                         |                           |      |       |      
|                         | Total accrued liabilities |      | $     | 8,346
|                         |                           |      |       |      

F-30

---

16.   Short-term and Long-term Loans

Short-term loans at December 31, 2002 and 2001 comprised the following:

|                                                     |  | 2002 |  | 2001
|---------------------------------------------------- |  | ---- |  | ----
|
|U.S.$ denominated, due August
November 2003         |  | 2    |  | $   
|EURO denominated, due January 2003                   |  | 1    |  |     
|Ruble denominated, due January
December 2003        |  | 31   |  |     
|Other currency denominated, due FebruaryAugust 2003 |  | 5    |  |     
|                                                     |  |      |  |     
|Total short-term loans                               |  |      |  | $   
|                                                     |  |      |  |     

Borrowings with Vneshtorgbank

The
Company has a ruble denominated line of credit with Vneshtorgbank with a total limit $6,292. At December 31, 2002, the Company had no unused borrowings under this credit line.
The credit line agreement stipulates that Vneshtorgbank can demand immediate repayment of the outstanding principal and interest, an increase in the amount of pledged assets or additional guarantees,
if any statutory quarterly revenues of LMK fall below 105% of the revenues in the comparative quarter of the previous year.

Borrowings with International Moscow Bank

The
Company has a U.S. dollar denominated loan with International Moscow Bank ("IMB") at LIBOR plus 5.40% with a limit of $5,000 and a ruble denominated loan at 16.50% with a limit of
$3,146. At December 31, 2002, the Company had no unused borrowings under these loans. The U.S. dollar denominated loan agreement stipulates that if LMK's average monthly turnover on its
accounts in IMB falls below 90% of this borrowing, the floating rate in this period will be 5.65%.

F-31

---

Long-term
loans at December 31, 2002 and 2001 comprised the following:

|                                                                                                                                                                                                 |  | 2002 |  | 2001 |      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- |  | ---- | -----
|
|U.S.$ denominated                                                                                                                                                                                |  |      |  |      |      
|ING Bank (Eurasia), lines of credit, interest payable at one month LIBOR plus 1.71% (3.09% at December 31, 2002) due NovemberDecember 2006                                                      |  | 3    |  | $    | 3,438
|Bank Aval, line of credit, interest payable at 13.00% due August 2004                                                                                                                            |  | 1    |  |      | 520  
|Alfa Bank, interest payable at 13.15% due April 2002                                                                                                                                             |  |     |  |      |     
|Credit Lyonnais Rusbank, lines of credit, interest payable at one month LIBOR plus 2.50% (4.34% at December 31, 2001) due beginning January 2001 through November 2002 by quarterly installments |  |     |  |      |     
|EURO denominated                                                                                                                                                                                 |  |      |  |      |      
|ING Bank (Eurasia), line of credit, interest payable at three months EURIBOR plus 2.10% (5.00% at December 31, 2002) due by January 2006 by quarterly installments                               |  | 1    |  |      | 1,751
|Raiffeisenbank, line of credit, interest paid at three months LIBOR plus 2.00% (4.86% at December 31, 2002) due October 2003                                                                     |  | 1    |  |      | 477  
|Commerzbank, line of credit, interest payable at three months EURIBOR plus 2.00% (4.90% at December 31, 2002) due July 2005 by quarterly installments                                            |  | 1    |  |      | 328  
|ZAO KB Citibank, interest payable at three months LIBOR plus 1.50% (4.36% at December 31, 2002) due May 2003 by quarterly installments                                                           |  | 1    |  |      | 189  
|                                                                                                                                                                                                 |  |      |  |      |      

F-32

---

|Ruble denominated                                                                      |  |   |  |  |     |  |   |        |   |   |        |  
|-------------------------------------------------------------------------------------- |  | - |  |  | --- |  | - | ------ | - | - | ------ | -
|MIB, line of credit, interest payable at 26.00% due April 2003 by monthly installments |  |  |  |  |    |  |   | 1      |   |   | 1,121  |  
|Other (weighted average rate of 15.76% at December 31, 2002)                           |  | 2 |  |  | 326 |  |   | 2      |   |   | 515    |  
|Ukrainian grivna denominated                                                           |  |   |  |  |     |  |   |        |   |   |        |  
|Bank Aval, interest payable at 27.00% due MayAugust 2003                              |  |  |  |  |    |  |   | 3      |   |   | 1,259  |  
|                                                                                       |  |   |  |  |     |  |   |        |   |  
|Total amount of long-term borrowings                                                   |  |   |  |  |     |  |   | 7,029  |   |   | 13,262 |  
|                                                                                       |  |   |  |  |     |  |   |        |   |  
|Less current portion of long-term loans                                                |  |   |  |  |     |  |   | (2,483 | ) |   | (8,099 | )
|Total long-term loans                                                                  |  |   |  |  |     |  | $ | 4,546  |   | $ | 5,163  |  
|                                                                                       |  |   |  |  |     |  |   |        |   |  

Borrowings with ING Bank (Eurasia)

The
Company has four lines of credit with ING Bank (Eurasia) with a limit of $5,122 and EURO 4,114 (equivalent to $4,286 at December 31, 2002). At December 31, 2002,
the Company had $2,582 of unused borrowings under these lines of credit.

Borrowings with Raiffeisenbank and Commerzbank

The
Company has two lines of credit with Raiffeisenbank and Commerzbank with a limit of EURO 2,662 (equivalent to $2,773 at December 31, 2002). At December 31, 2002,
the Company had $342 of unused borrowings under these lines of credit.

Borrowings with ZAO KB Citibank

The
Company has a loan with ZAO KB Citibank. The loan agreement stipulates immediate repayment if the Company's average monthly turnover on its current account with ZAO KB Citibank falls
below 900 million rubles (equivalent to $28,316 at December 31, 2002).

Guarantees

Certain
of the Company's loans are guaranteed by other parties as follows:



F-33

---



At
December 31, 2002 and 2001, WBD Foods and certain other major subsidiaries guaranteed certain short-term and long-term bank loans received by other
subsidiaries of WBD Foods. The aggregate amount of such guarantees equaled to the carrying amount of the respective short-term and long-term loans.

Maturity of long-term loans

Aggregate
maturity of long-term loans outstanding at December 31, 2002 was as follows:

|Years ended December 31, |  |  
|------------------------ |  | -
|2003                     |  | $
|2004                     |  |  
|2005                     |  |  
|2006                     |  |  
|2007                     |  |  
|                         |  |  
|Total long-term loans    |  | $
|                         |  |  

Collateral

Certain
of the Company's assets served as collateral for the short-term and long-term loans from Sberbank, Moscow City Government, International Moscow bank, Bank
of Moscow and others.

At
December 31, 2002 and 2001 the assets that served as collateral consisted of the following:



17.   Bonds Payable

On November 1, 2001 LMK issued unsecured ruble denominated bonds amounting to 500,000,000 rubles ($15,731 at December 31, 2002 exchange rate). The
bonds are unconditionally guaranteed by WBD Foods and mature 1,093 days from November 1, 2001 (on November 1, 2004). Interest is payable quarterly. For the first year,
interest was fixed at 22.75% and is subsequently adjusted depending upon market conditions and market rates of interest. For the period from November 1, 2002 to January 31, 2003 interest
was fixed at 18.00%. LMK is obliged to redeem a bond if its holder notifies LMK of its intention to redeem the bond between October 10, 2003 and October 24, 2003. Management believes
that the likelihood of any bondholders requesting redemption directly from LMK during this two week period is remote.

During
2001 and 2002 Bishkeksut, a subsidiary, issued unsecured som denominated bonds amounting to 40,000,000 Kyrgyz soms ($365 at December 31, 2002 exchange rate). For the first
year,

F-34

---

interest
was fixed at 30.00%, for the period from December 1, 2002 to December 1, 2003 the interest rate is 18.00%.

18.   Other payables

Other payables primarily represent payables for property, plant and equipment and was comprised as follows as of December 31, 2002 and 2001:

|                                                  |                                          | 2002               |         | 2001   |       
|------------------------------------------------- | ---------------------------------------- | ------------------ | ------- | ------ | ------
|Other payables for property, plant and equipment: |                                          |                    |         |        |       
|                                                  | Current payables                         |                    | $       | 5,264  |       
|                                                  | Vendors financing obligations, including |                    |         |        |       
|                                                  |                                          | current portion   |         |        | 14,384
|                                                  |                                          | long-term portion |         |        | 54,480
|                                                  |                                          |                    |         |        |       
|                                                  |                                          |                    | 74,128  |        |       
|                                                  |                                          |                    |         |        |       
|Other payables:                                   |                                          |                    |         |        |       
|                                                  | Current payables                         |                    |         | 5,992  |       
|                                                  | Long-term payables, including            |                    |         |        |       
|                                                  |                                          | current portion   |         |        | 130   
|                                                  |                                          | long-term portion |         |        | 567   
|                                                  |                                          |                    |         |        |       
|                                                  |                                          |                    | 6,689   |        |       
|                                                  |                                          |                    |         |        |       
|Total other payables                              |                                          |                    | 80,817  |        |       
|                                                  |                                          |                    |         |        |       
|Less current liabilities                          |                                          |                    | (25,770 | )      |       
|                                                  |                                          |                    |         |        |       
|                                                  | Total other long-term payables           |                    | $       | 55,047 |       
|                                                  |                                          |                    |         |        |       

The
Company has agreements with suppliers of equipment which provide financing for the period from 1 to 9 years. Total amount of vendor financing obligations is $51,509 and EURO
16,655 (eqivalent to $17,355 at December 31, 2002). This financing is provided at interest rates of LIBOR plus 1.50% or EURIBOR plus 1.50%. The majority of equipment financing is provided by
one supplier. At December 31, 2002, property, plant and equipment amounting to $48,978 served as collateral under these financing agreements.

F-35

---

Aggregate
maturity of other long-term payables outstanding at December 31, 2002 was as follows:

|Years ended December 31,                         |                                |   |        
|------------------------------------------------ | ------------------------------ | - | -------
|2003                                             |                                | $ | 14,514 
|2004                                             |                                |   | 14,476 
|2005                                             |                                |   | 12,321 
|2006                                             |                                |   | 11,520 
|2007                                             |                                |   | 7,578  
|Thereafter                                       |                                |   | 9,152  
|                                                 |                                |   |        
|Total maturity of other long-term payables       |                                |   | 69,561 
|Less current portion of other long-term payables |                                |   | (14,514
|                                                 |                                |   |        
|                                                 | Total other long-term payables |   | $      
|                                                 |                                |   |        

F-36

---



19.   Income Tax

WBD Foods' provision for income taxes for the years ended December 31, 2002, 2001 and 2000 was as follows:

|                          |                                  | 2002 |        | 2001   |   | 2000   |       
|------------------------- | -------------------------------- | ---- | ------ | ------ | - | ------ | ------
|Current provision         |                                  | $    | 14,211 |        | $ | 11,993 |       
|Deferred charge (benefit) |                                  |      | 38     |        |   | 2,173  |       
|                          |                                  |      |        |        |   |        |       
|                          | Total provision for income taxes |      | $      | 14,249 |   | $      | 14,166
|                          |                                  |      |        |        |   |        |       

In
Russia, the Group's statutory income tax rate in 2000 was 30%. From January 1, 2001, the Group's Russian statutory income tax rate increased to 35% as a result of changes in
the legislation. The deferred tax net asset increased by $51 as the result of such change in the statutory tax rate. From
January 1, 2002, WBD Foods' statutory income tax rate was 24% as a result of further changes in Russian legislation.

The
actual provision for income taxes reconciled to WBD Foods' theoretical tax provision at statutory rate was as follows for the respective periods ended:

|                                         |                                                                                                     | 2002 |        | 2001   |   | 2000   |        
|---------------------------------------- | --------------------------------------------------------------------------------------------------- | ---- | ------ | ------ | - | ------ | -------
|Income before provision for income taxes |                                                                                                     | $    | 51,917 |        | $ | 49,873 |        
|                                         | Russian statutory tax rate                                                                          |      |        | 24     | % |        | 35     
|                                         | Theoretical tax provision at statutory rate                                                         |      |        | 12,460 |   |        | 17,455 
|                                         | Expenses not deductible for Russian statutory taxation purposes                                     |      |        | 3,483  |   |        | 6,309  
|                                         | Profit tax privileges                                                                               |      |        | (4,855 | ) |        | (11,943
|                                         | U.S. GAAP remeasurement loss (gain) not taxable/deductable for domestic statutory taxation purposes |      |        | 686    |   |        | (869   
|                                         | Change in valuation allowance                                                                       |      |        | 2,147  |   |        | 746    
|                                         | Deferred tax liability resulting from tax effect of investment program                              |      |        |       |   |        | 3,436  
|                                         | Deferred tax credit resulting from decrease in statutory tax rate to 24%                            |      |        |       |   |        | (546   
|                                         | Differences in statutory tax rate and future tax rate (24%)                                         |      |        |       |   |        | (1,678 
|                                         | Other                                                                                               |      |        | 328    |   |        | 1,256  
|                                         |                                                                                                     |      |        |        |   |        |        
|Actual provision for income taxes        |                                                                                                     | $    | 14,249 |        | $ | 14,166 |        
|                                         |                                                                                                     |      |        |        |   |        |        

In
2001 and 2000 income tax privileges were investment and social infrastructure maintenance credits, small enterprises benefit and baby food products benefit. In 2002 income tax
privilege was small enterpises benefit.

The
income tax benefit for small enterprises was abolished as of January 1, 2002, except that the benefit will continue to be available to enterprises that were established before
July 1, 2001. Such enterprises are exempt from income taxes for the first two years of operations and in the third and

F-37

---

forth
years income taxes are levied at a rate of 25% and 50% of the income tax rate, respectively. Starting from January 1, 2002 the Group's juice production primarily concentrated in two small
enterprises, Fruit Rivers and Nectarin, which were registered in March and April 2001, respectively.

Following
the change in the income tax legislation, the baby food products tax benefit, investment and social infrastructure maintenance credits have been abolished from
January 1, 2002. However, certain expenses, including advertising expenses, insurance expenses, interest expenses and other expenses which had limited income tax deductibility in 2001, became
deductible in 2002.

Unused
credits, such as profit tax privileges, may not usually be carried forward under Russian tax legislation. Accordingly, tax credits are reflected in the Group's consolidated and
combined financial statements only to the extent and in the year in which the credits are utilized.

Temporary
differences between the tax bases of assets and liabilities and the respective carrying amounts in these consolidated and combined financial statements give rise to the
following deferred tax assets and liabilities at December 31, 2002 and 2001:

|                                                              |                                                                               | 2002 |        | 2001   |  
|------------------------------------------------------------- | ----------------------------------------------------------------------------- | ---- | ------ | ------ | -
|Deferred tax assets/(liabilities) arising from tax effect of: |                                                                               |      |        |        |  
|                                                              | Salary related accruals                                                       |      | $      | 771    |  
|                                                              | Sales volume discount accrual                                                 |      |        | 222    |  
|                                                              | Other accrued liabilities                                                     |      |        | 1,560  |  
|                                                              | Losses carried forward                                                        |      |        | 2,893  |  
|                                                              | Other                                                                         |      |        |       |  
|                                                              |                                                                               |      |        |        |  
|Gross deferred tax asset                                      |                                                                               |      | 5,446  |        |  
|                                                              | Less valuation allowance for deferred tax asset                               |      |        | (2,893 | )
|                                                              |                                                                               |      |        |        |  
|                                                              | Deferred tax asset net of valuation allowance                                 |      |        | 2,553  |  
|                                                              |                                                                               |      |        |        |  
|                                                              | Capital leases                                                                |      |        | (1,763 | )
|                                                              | Investment programs                                                           |      |        | (2,182 | )
|                                                              | Valuation of assets at fair market value as a result of business acquisitions |      |        | (4,879 | )
|                                                              | Other                                                                         |      |        |       |  
|                                                              |                                                                               |      |        |        |  
|Gross deferred tax liability                                  |                                                                               |      | (8,824 | )      |  
|                                                              |                                                                               |      |        |        |  
|Net deferred tax liability                                    |                                                                               | $    | (6,271 | )      | $
|                                                              |                                                                               |      |        |        |  
|Analyzed as to:                                               |                                                                               |      |        |        |  
|                                                              | Current deferred tax asset                                                    |      |        | 1,850  |  
|                                                              | Long-term deferred tax liability                                              |      |        | 8,121  |  

For
statutory income tax purposes, WBD Foods had accumulated tax losses of $12,055 which may be carried forward for use against future income. Their use is restricted to a maximum of 30%
of taxable income per annum and expire in 2012.

For
financial reporting purposes, a valuation allowance has been recognized to reflect management's estimate of the realization of this deferred tax asset. A valuation allowance is
provided when it is more likely than not that some or all of the deferred tax assets will not be realized in the

F-38

---

future.
These evaluations are based on expectations of future taxable income and reversals of various taxable temporary differences.

20.   Government Grants

In 19931999 ZDMP received capital grants from the Russian and Moscow Governments. These grants related to the acquisition of property, plant and
equipment for baby food production and are recognized in the consolidated and combined statements of operations in the period in which the depreciation expense on the related property, plant and
equipment is incurred. The conditions of the grants are that ZDMP must continue to use the related property, plant and equipment for baby food production. Management believes that it has complied with
this condition and will continue to comply in the future.

The
movement in capital government grants during the years ended December 31, 2002 and 2001 comprised:

|Balance at December 31, 2000 |                                                                                | $ | 17,954 |       
|---------------------------- | ------------------------------------------------------------------------------ | - | ------ | ------
|                             | Amortization                                                                   |   |        | (2,545
|                             | Grant received                                                                 |   |        | 484   
|                             |                                                                                |   |       
|Balance at December 31, 2001 |                                                                                | $ | 15,893 |       
|                             | Amortization                                                                   |   |        | (2,565
|                             | Grant received                                                                 |   |        | 806   
|                             | Fair value adjustment on acquisition of minority interest in ZDMP (see Note 4) |   |        | (3,533
|                             |                                                                                |   |       
|Balance at December 31, 2002 |                                                                                | $ | 10,601 |       
|                             |                                                                                |   |       

Grants
are amortized once the related property, plant and equipment are put into operation. Amortization is reported as a reduction in the depreciation expense of the related property,
plant and equipment.

During
the year ended December 31, 2002 WBD Foods received operating grants from the Russian Government and Moscow City Government in the amount of $979 ($1,524 in 2001). These
grants related to interest rates on loans used for acquisition of milk and other raw materials, and are recognized in the consolidated and combined statements of operations in the period in which the
related interest expense is incurred. The grants were provided at two thirds of the Central Bank of Russia interest rate (equating to 21% at December 31, 2002) or in a fixed amount
approximating to half of interest expense. The conditions of the grants are that WBD Foods must use the related loans received from Russian banks for the acquisition of milk and other raw materials
and the loans should be repaid upon maturity and no later than April 2003 for majority of these loans. Management believes that the Company has complied with these conditions.

21.   Shareholders' Equity

On February 8, 2002, WBD Foods issued and sold 9,000,000 new ordinary shares (ADSs) registered with the U.S. Securities and Exchange Comission at an
initial offering price of $19.50 per

F-39

---

share
for total consideration, net of underwriting discount, of $166,725. Net direct expenses related to the issue of shares amounted to $4,598. Nominal value of shares issued was 20 rubles per share.

In
accordance with Russian corporate laws, earnings available for dividends are limited to profits, denominated in domestic currency, after certain deductions. At December 31,
2002 retained earnings of WBD Foods which are distributable under statutory legislation totaled 239 million rubles ($7,532 translated at the exchange rate as at December 31, 2002).

22.   Minority Interest

The movement in minority interest during the years ended December 31, 2002 and 2001 comprised:

|Balance at December 31, 2000 |                                                                   | $ | 37,767 |        
|---------------------------- | ----------------------------------------------------------------- | - | ------ | -------
|                             | Acquisitions by the Company of minority interests in subsidiaries |   |        | (20,788
|                             | Acquisitions of subsidiaries                                      |   |        | 5,119  
|                             | Minority interest share in income from continuing operations      |   |        | 3,962  
|                             | Minority interest in net loss of discontinued operations          |   |        | (96    
|                             | Minority interest related to discontinued operations              |   |        | (2,588 
|                             |                                                                   |   |       
|Balance at December 31, 2001 |                                                                   | $ | 23,376 |        
|                             | Acquisitions by the Company of minority interests in subsidiaries |   |        | (5,825 
|                             | Acquisitions of subsidiaries                                      |   |        | 2,076  
|                             | Minority interest share in income from continuing operations      |   |        | 1,922  
|                             |                                                                   |   |       
|Balance at December 31, 2002 |                                                                   | $ | 21,549 |        
|                             |                                                                   |   |       

23.   Cost of Sales

Cost of sales for 2002, 2001, and 2000 were comprised of the following:

|                 |                     | 2002 |         | 2001    |   | 2000   
|---------------- | ------------------- | ---- | ------- | ------- | - | -------
|Raw materials    |                     | $    | 506,086 |         | $ | 438,360
|Personnel        |                     |      | 26,548  |         |   | 20,103 
|Depreciation     |                     |      | 14,983  |         |   | 10,609 
|Utilities        |                     |      | 10,971  |         |   | 8,734  
|Goods for resale |                     |      | 13,770  |         |   | 10,273 
|Other            |                     |      | 7,349   |         |   | 4,911  
|                 |                     |      |         |         |   |        
|                 | Total cost of sales |      | $       | 579,707 |   | $      
|                 |                     |      |         |         |   |        

F-40

---

24.   Selling and Distribution Expenses

Selling and distribution expenses for 2002, 2001, and 2000 were comprised of the following:

|                          |                                         | 2002 |        | 2001    |   | 2000  
|------------------------- | --------------------------------------- | ---- | ------ | ------- | - | ------
|Advertising and marketing |                                         | $    | 34,857 |         | $ | 19,562
|Personnel                 |                                         |      | 30,620 |         |   | 15,978
|Transportation            |                                         |      | 24,700 |         |   | 17,144
|Materials and supplies    |                                         |      | 6,311  |         |   | 2,597 
|Warehouse                 |                                         |      | 5,228  |         |   | 2,408 
|Other                     |                                         |      | 7,811  |         |   | 4,524 
|                          |                                         |      |        |         |   |       
|                          | Total selling and distribution expenses |      | $      | 109,527 |   | $     
|                          |                                         |      |        |         |   |       

25.   General and Administrative Expenses

General and administrative expenses for 2002, 2001, and 2000 were comprised of the following:

|                                 |                                           | 2002 |        | 2001   |   | 2000  
|-------------------------------- | ----------------------------------------- | ---- | ------ | ------ | - | ------
|Personnel                        |                                           | $    | 33,800 |        | $ | 29,016
|Taxes other than income tax      |                                           |      | 11,872 |        |   | 8,452 
|Audit, consulting and legal fees |                                           |      | 2,613  |        |   | 2,170 
|Materials and supplies           |                                           |      | 2,399  |        |   | 1,623 
|Depreciation                     |                                           |      | 2,075  |        |   | 1,111 
|Communication costs              |                                           |      | 1,800  |        |   | 1,324 
|Rent                             |                                           |      | 1,531  |        |   | 1,176 
|Security expenses                |                                           |      | 559    |        |   | 2,210 
|Other                            |                                           |      | 6,306  |        |   | 7,379 
|                                 |                                           |      |        |        |   |       
|                                 | Total general and administrative expenses |      | $      | 62,955 |   | $     
|                                 |                                           |      |        |        |   |       

26.   Financial Income and Expenses, net

Financial income and expense, net for 2002, 2001, and 2000 were comprised of the following:

|                                      |                                         | 2002 |        | 2001   |   | 2000   |       
|------------------------------------- | --------------------------------------- | ---- | ------ | ------ | - | ------ | ------
|Interest expense                      |                                         | $    | 12,818 |        | $ | 11,126 |       
|Interest income                       |                                         |      | (2,928 | )      |   | (126   | )     
|Currency remeasurement losses (gains) |                                         |      | 2,860  |        |   | (2,483 | )     
|Bank charges                          |                                         |      | 2,207  |        |   | 2,110  |       
|Other financial (income) expense      |                                         |      | (826   | )      |   | (46    | )     
|                                      |                                         |      |        |        |   |        |       
|                                      | Total financial income and expense, net |      | $      | 14,131 |   | $      | 10,581
|                                      |                                         |      |        |        |   |        |       

F-41

---

27.   Pension Costs

Starting from January 1, 2001 all social contributions (including contributions to the Pension fund) were substituted with a unified social tax ("UST")
calculated by the application of a regressive rate from 35.6% to 5% to the annual gross remuneration of each employee. WBD Foods allocates UST to three social funds (including the Pension fund) where
the rate of contributions to the Pension fund vary from 28% to 5% respectively depending on the annual gross salary of each employee. During 2000 WBD Foods contributed to the Russian Federation state
pension scheme ("Pension fund") in respect of its employees. WBD Foods' pension scheme contribution amounted to 28% of employees' gross salaries. The Russian Federation state pension fund
contributions are expensed as incurred. Pension costs amounted to $13,505, $8,270 and $4,290 in 2002, 2001 and 2000, respectively. WBD has no other pension obligations.

F-42

---



28.   Segment Information

The Company's major reportable continuing business segments are dairy and juice segments. They are strategic business units that produce and offer distinctive
products, i.e. sterilized and pasteurized milk, yogurts, dairy desserts, and other dairy products in the dairy segment and fruit juices, nectars, and juice based drinks in the juice segment.

WBD's
accounting policy for segments is the same as those described in the summary of significant accounting policies. Management evaluates segment performance based on segment profit or
loss before minority interests and deferred taxes. Transfers between segments are made at values that approximate market values.

Continuing Operating Segmentyear ended December 31, 2002

|                                                                         |  | Dairy |          | Juice |   | Other    |   | Corporate
assets/
expenses |  | Common
assets/
expenses |   | Intersegment
receivables |   | Consolidated |  
|------------------------------------------------------------------------ |  | ----- | -------- | ----- | - | -------- | - | -------------------------- |  | ----------------------- | - | ------------------------ | - | ------------ | -
|Total sales                                                              |  | $     | 569,034  |       | $ | 263,309  |   |                           |  |                        |   |                         |   |             |  
|Intersegment sales                                                       |  |       | (6,052   | )     |   | (1,557   | ) |                           |  |                        |   |                         |   |             |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |              |  
|Sales to external customers                                              |  |       | 562,982  |       |   | 261,752  |   |                           |  |                        |   |                         |   |             |  
|Cost of sales                                                            |  |       | (398,068 | )     |   | (180,609 | ) |                           |  |                        |   | (1,030                   | ) |             |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |              |  
|Gross profit                                                             |  |       | 164,914  |       |   | 81,143   |   |                           |  |                        |   | (1,030                   | ) |             |  
|Operating expenses                                                       |  |       | (98,678  | )     |   | (62,792  | ) |                           |  | (17,509                 | ) |                         |   |             |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |              |  
|Operating income                                                         |  |       | 66,236   |       |   | 18,351   |   |                           |  | (17,509                 | ) | (1,030                   | ) |             |  
|Financial income and expense, net and current provision for income taxes |  |       | (21,659  | )     |   | (5,636   | ) |                           |  | (1,047                  | ) |                         |   |             |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |              |  
|Net segment profit                                                       |  | $     | 44,577   |       | $ | 12,715   |   |                           |  | (18,556                 | ) | (1,030                   | ) |             |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |              |  
|Segment total assets                                                     |  | $     | 384,018  |       | $ | 194,060  |   | 7,093                      |  | 24,907                  |   | 14,540                   |   | (35,525      | )
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |              |  
|Expenditure for segment property, plant and equipment                    |  | $     | 99,734   |       | $ | 26,538   |   | 5,645                      |  | 3,759                   |   | 404                      |   |             |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |              |  

F-43

---

Continuing Operating Segmentyear ended December 31, 2001

|                                                                         |  | Dairy |          | Juice |   | Other    |   | Corporate
assets/
expenses |  | Common
assets/
expenses |   | Intersegment
receivables |   | Consolidated
and
combined |  
|------------------------------------------------------------------------ |  | ----- | -------- | ----- | - | -------- | - | -------------------------- |  | ----------------------- | - | ------------------------ | - | ------------------------- | -
|Total sales                                                              |  | $     | 494,682  |       | $ | 192,158  |   |                           |  |                        |   |                         |   |                          |  
|Intersegment sales                                                       |  |       | (9,230   | )     |   | (2,994   | ) |                           |  |                        |   |                         |   |                          |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |                           |  
|Sales to external customers                                              |  |       | 485,452  |       |   | 189,164  |   |                           |  |                        |   |                         |   |                          |  
|Cost of sales                                                            |  |       | (374,884 | )     |   | (117,496 | ) |                           |  |                        |   | (610                     | ) |                          |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |                           |  
|Gross profit                                                             |  |       | 110,568  |       |   | 71,668   |   |                           |  |                        |   | (610                     | ) |                          |  
|Operating expenses                                                       |  |       | (66,360  | )     |   | (38,186  | ) |                           |  | (16,626                 | ) |                         |   |                          |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |                           |  
|Operating income                                                         |  |       | 44,208   |       |   | 33,482   |   |                           |  | (16,626                 | ) | (610                     | ) |                          |  
|Financial income and expense, net and current provision for income taxes |  |       | (17,384  | )     |   | (5,190   | ) |                           |  |                        |   |                         |   |                          |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |                           |  
|Net segment profit                                                       |  | $     | 26,824   |       | $ | 28,292   |   |                           |  | (16,626                 | ) | (610                     | ) |                          |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |                           |  
|Segment total assets                                                     |  | $     | 214,718  |       | $ | 121,839  |   | 1,967                      |  | 5,384                   |   | 23,220                   |   | (14,411                   | )
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |                           |  
|Expenditure for segment property, plant and equipment                    |  | $     | 30,801   |       | $ | 9,784    |   | 88                         |  | 4,476                   |   | 12,504                   |   |                          |  
|                                                                         |  |       |          |       |   |          |   |                            |  |                         |   |                          |   |                           |  

F-44

---

Continuing Operating SegmentYear ended December 31, 2000

|                                                                         |  | Dairy |          | Juice |   | Other   |   | Corporate
assets/
expenses |  | Common
assets/
expenses |   | Intersegment
receivables |   | Consolidated
and
combined |  
|------------------------------------------------------------------------ |  | ----- | -------- | ----- | - | ------- | - | -------------------------- |  | ----------------------- | - | ------------------------ | - | ------------------------- | -
|Total sales                                                              |  | $     | 332,013  |       | $ | 141,644 |   |                           |  |                        |   |                         |   |                          |  
|Intersegment sales                                                       |  |       | (6,531   | )     |   | (1,715  | ) |                           |  |                        |   |                         |   |                          |  
|                                                                         |  |       |          |       |   |         |   |                            |  |                         |   |                          |   |                           |  
|Sales to external customers                                              |  |       | 325,482  |       |   | 139,929 |   |                           |  |                        |   |                         |   |                          |  
|Cost of sales                                                            |  |       | (250,015 | )     |   | (98,228 | ) |                           |  |                        |   | (834                     | ) |                          |  
|                                                                         |  |       |          |       |   |         |   |                            |  |                         |   |                          |   |                           |  
|Gross profit                                                             |  |       | 75,467   |       |   | 41,701  |   |                           |  |                        |   | (834                     | ) |                          |  
|Operating expenses                                                       |  |       | (45,945  | )     |   | (23,004 | ) |                           |  | (9,455                  | ) |                         |   |                          |  
|                                                                         |  |       |          |       |   |         |   |                            |  |                         |   |                          |   |                           |  
|Operating income                                                         |  |       | 29,522   |       |   | 18,697  |   |                           |  | (9,455                  | ) | (834                     | ) |                          |  
|Financial income and expense, net and current provision for income taxes |  |       | (14,308  | )     |   | (1,012  | ) |                           |  |                        |   |                         |   |                          |  
|                                                                         |  |       |          |       |   |         |   |                            |  |                         |   |                          |   |                           |  
|Net segment profit                                                       |  | $     | 15,214   |       | $ | 17,685  |   |                           |  | (9,455                  | ) | (834                     | ) |                          |  
|                                                                         |  |       |          |       |   |         |   |                            |  |                         |   |                          |   |                           |  
|Segment total assets                                                     |  | $     | 175,752  |       | $ | 89,619  |   | 2,100                      |  | 1,781                   |   | 4,228                    |   | (38,441                   | )
|                                                                         |  |       |          |       |   |         |   |                            |  |                         |   |                          |   |                           |  
|Expenditure for segment property, plant and equipment                    |  | $     | 20,091   |       | $ | 2,231   |   | 1,477                      |  |                        |   | 1,624                    |   |                          |  
|                                                                         |  |       |          |       |   |         |   |                            |  |                         |   |                          |   |                           |  

The reconciliation between net segment profit and consolidated and combined income from continuing operations for the years ended
December 31, 2002, 2001 and 2000 was as follows:

|                              |                                                             | 2002 |        | 2001   |   | 2000   |       
|----------------------------- | ----------------------------------------------------------- | ---- | ------ | ------ | - | ------ | ------
|Total net segment profit      |                                                             | $    | 37,706 |        | $ | 37,880 |       
|Minority interest             |                                                             |      | (1,922 | )      |   | (3,962 | )     
|Deferred tax (charge) benefit |                                                             |      | (38    | )      |   | (2,173 | )     
|                              |                                                             |      |        |        |   |        |       
|                              | Consolidated and combined income from continuing operations |      | $      | 35,746 |   | $      | 31,745
|                              |                                                             |      |        |        |   |        |       

F-45

---



The changes in the carrying amount of goodwill for each segment for the years ended December 31, 2002, 2001 and 2000 were as follows:

|                             |              | Dairy |        | Juice  |       | Other |     | Total |  
|---------------------------- | ------------ | ----- | ------ | ------ | ----- | ----- | --- | ----- | -
|Balance at December 31, 2000 |              | $     | 933    |        |      |       |    |       | $
|                             | Acquisitions |       |        | 10,224 |       |      |     | 477   |  
|                             | Amortization |       |        | (455   | )     |      |     |      |  
|                             |              |       |        |        |       |       |     |       |  
|Balance at December 31, 2001 |              |       | 10,702 |        |      |       | 477 |       |  
|                             | Acquisitions |       |        | 7,492  |       | 1,214 |     |      |  
|                             |              |       |        |        |       |       |     |       |  
|Balance at December 31, 2002 |              | $     | 18,194 |        | 1,214 |       | 477 |       | $
|                             |              |       |        |        |       |       |     |       |  

As
of December 31, 2002, and 2001, segment total assets equalled consolidated total assets.

For
the years ended December 31, 2002, 2001, and 2000, approximately 95%, 97% and 99% of sales were generated in and sold to customers in Russia. As of December 31, 2002
and 2001, the long-lived assets of the Company were primarily located in Russia.

The
financial data above does not reflect information by WBD Foods' separate products and sales as it is impracticable to produce this information.

The
majority of the Company's packaging materials is purchased from one supplier. There can be no assurance that, in the event of a loss of this supplier or unfavourable developments in
the business practices of this supplier, substantially all of the current levels of packaging materials could be purchased at comparable, or nearly comparable, prices on the international market.

29.   Related Parties

Trinity-Negus

During
2002, 2001 and 2000, the Company engaged in transactions with Trinity-Negus ("Trinity"), a private security company, which is owned by members of the control group of
shareholders. Trinity provided the companies of the Group with security services in 2002, 2001 and 2000 amounting to approximately $221, $2,206 and $1,721, respectively. As of December 31, 2001
and 2000 accounts payable to Trinity in respect of security services amounted to $201 and $173, respectively.

Wimm-Bill-Dann Trans

During
2002, 2001 and 2000 the Company received transportation services from Wimm-Bill-Dann Trans ("WBD Trans"), a closed joint stock company, which is a WBD
Foods' investee, amounting to approximately $5,909, $5,251, and $1,870, respectively. As of December 31, 2002, 2001 and 2000 advances paid to WBD Trans in respect of transportation services
amounted to $138, $190 and $24, respectively.

F-46

---

Perekriostok

One
of the members of WBD Foods' Board of Directors is also a member of the Board of Directors in Trade House "Perekriostok" ("TH"), which buys dairy and juice products from WBD Foods.
Sales to TH in 2002 were $6,804. Amount due from TH at December 31, 2002 was $372.

Adonis

During
2002 and 2001, the Company paid for construction of an administrative building amounting to $2,278 and $4,140, respectively, to Adonis, a limited liability company, which is
controlled by members of the control group of shareholders. The construction was capitalized as of December 31, 2002. As of December 31, 2002, there were no outstanding advances in
respect of Adonis.

Poultry Factory Gorki-2

During
2002 and 2001 the Company purchased milk from Poultry Factory Gorki-2, a closed joint stock company, which is controlled by members of the control group of
shareholders, amounting to $291 and $580, respectively. As of December 31, 2002 and 2001 accounts payable to Poultry Factory Gorki-2 in respect of milk received amounted to $15 and
$10, respectively.

The Breweries

As
of December 31, 2002 the Company had loans receivable from Brewery Volga, Volga-Invest and Moskvoretzky Brewery amounting to $693. These loans are interest free, ruble
denominated and mature during 2003. The loans were provided in early 2001 and before the alienation of the Breweries (see Note 5). As of December 31, 2002 these loans were included in
other current assets.

Current shareholders

During
2002 WBD Foods acquired 25.1% interest in ZDMP from a current shareholder for $5,000 (see Note 4).

F-47

---

30.   Commitments and Contingencies

Property, plant and equipment purchase commitments

As
of December 31, 2002, contracted expenditures for the purchase of property, plant and equipment in the period subsequent to December 31, 2002 were as follows:

|Years ended December 31, |                                    |   |      
|------------------------ | ---------------------------------- | - | -----
|2003                     |                                    | $ | 1,213
|2004                     |                                    |   | 1,175
|2005                     |                                    |   | 872  
|2006                     |                                    |   | 750  
|2007                     |                                    |   | 710  
|Thereafter               |                                    |   | 144  
|                         |                                    |   |      
|Total commitments        |                                    |   | 4,864
|Less interest expense    |                                    |   | (300 
|                         |                                    |   |      
|                         | Total commitments at present value |   | $    
|                         |                                    |   |      

Insurance

In
2002 the Company did not have insurance coverage for its major plant facilities, business interruption, product liability or third party liability in respect of property or
environmental damage arising from accidents on the Company property or relating to the Company operations. Until the Company obtains adequate insurance coverage, there is a risk that the loss or
destruction of certain assets could have a material adverse effect on the Company's operations and financial position.

As
of December 31, 2002, the Company is unaware of any asserted or unasserted claims.

Taxation

During
2002, 2001 and 2000 WBD used certain tax optimisation initiatives. These initiatives may be challenged by the Russian tax authorities. WBD believes that the tax savings to the
Company for 2002, 2001 and 2000 in respect of these initiatives amounted to approximately $3.5 million, $5.6 million and $8.0 million, respectively. Should the Russian tax
authorities question these initiatives and prove
successful in their claim, they would be entitled to recover these amounts, together with penalties amounting to 20% of such amounts and interest at the rate of 1/300 of the Central Bank of Russia
rate, equating to 0.07% at December 31, 2002, for each day of delay for late payment of such amounts. Management will vigorously defend any claims that these initiatives are contrary to Russian
tax law.

Environmental Remediation Costs

The
Company is not aware of any potential environmental claims and therefore does not have any liabilities associated with environmental remediation costs recorded as of
December 31, 2002 or December 31, 2001.

F-48

---

31.   Subsequent events

Employee Stock Option Plan

On
August 30, 2002 the Board of Directors authorized management to develop a stock option plan for officers and key employees of the Company. On January 31, 2003, an issue
of 1,350,000 additional shares has been approved by a shareholders meeting to fund an employee stock option plan. Details of the plan are currently under review by the Board of Directors.

32.   Subsequent debt issuance and refinancing (unaudited)

On April 15, 2003, the Company issued ruble-denominated bonds on the Moscow Interbank Currency Exchange amounting to 1.5 billion rubles ($48 million
at the April 15, 2003 exchange rate) to Russian institutional investors, guaranteed by Vitafrukt, one of the Company's juice subsidiaries. The bonds mature on April 11, 2006. Interest is
payable semi-annually. For the first coupon payment, interest is fixed at 12.9%, and subsequent interest payments will be indexed to the inflation rate. The bondholders have the right to demand
prepayment in the event of payment defaults in relation to debt in excess of $10 million or if certain finacial tests are not met.

On
May 14, 2003, the Company entered into a loan agreement with UBS (Luxembourg) S.A. as lender, pursuant to which UBS (Luxembourg) S.A. lent to the Company a
principal amount of U.S.$150 million on May 21, 2003. The loan matures on May 21, 2008, and interest is payable semi-annually in arrears at an annual rate of 8.5%. For the sole
purpose of financing this loan to the Company, UBS (Luxembourg) S.A. issued U.S.$150 million 8.5% Loan Participation Notes due 2008 on May 21, 2003.

The
above-mentioned loan is initially, unconditionally, irrevocably, jointly and severally guaranteed by the Lianozovo Dairy Plant, the Tsaritsino Dairy Plant and Trade Company
Wimm-Bill-Dann pursuant to a guarantee dated May 14, 2003 entered into with UBS (Luxembourg) S.A.

The
Company intends to use approximately U.S. $95 million of the aggregate proceeds of the loan and the April 2003 ruble-denominated bond to refinance certain existing short-term
indebtedness.

F-49

---



Item 19    Exhibits

|1.1  |  | Charter of WBD OJSC (English Translation)                                                                                                                                                                                                                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1  |  | Deposit Agreement, dated January 17, 2002, by and among the Company, the Depositary, and the holders and beneficial owners from time to time of the ADRs is hereby incorporated by reference to Exhibit 2.1 to the Annual Report filed pursuant
to Section 13 or 15(d) of The Securities Exchange Act of 1934 for the fiscal year ended December 31, 2001 on Form 20-F/A.
|4.1  |  | U.S. $150,000,000 Loan Agreement Dated as of 14 May 2003 between Open Joint Stock Company Wimm-Bill-Dann Foods as Borrower and UBS (Luxembourg) S.A. as Lender                                                                                                                                                                                                           
|4.2  |  | Deed of Guarantee Dated as of 14 May 2003 between OAO Lianozovo Dairy Plant, OAO Tsaritsino Dairy Plant, ZAO Trade Company Wimm-Bill-Dann as Guarantors and UBS (Luxembourg) S.A. as Lender                                                                                                                                                                              
|4.3  |  | Contract No. P31002, dated January 1, 2003, by and between PJSC Lianozovo Dairy and JSC Tetra Pak AO                                                                                                                                                                                                                                                                     
|4.4  |  | Contract No. P31009, dated January 1, 2003, by and between ZAO Wimm-Bill-Dann Purchaser and JSC Tetra Pak AO                                                                                                                                                                                                                                                             
|4.5  |  | Subsoil Use License No. 01948 issued to Rodniki Valdaya Limited Liability Company; License Agreement on the terms of subsoil use for the extraction of up to 500 m3/day of underground drinking water from exploitation wells No. 2537 and
No. 2542 (English Translation)                                                                                                
|4.6  |  | Exchange Agreement No. B-01, dated April 4, 2001, by and between Moscow Baby Food Plant and Mikhail Vishnyakov is incorporated herein by reference to Exhibit 10.2 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)                                                                                                             
|4.7  |  | Exchange Agreement No. B-02, dated April 4, 2001, by and between Lianozovo Dairy Plant and Mikhail Vishnyakov is incorporated herein by reference to Exhibit 10.3 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)                                                                                                              
|4.8  |  | Exchange Agreement No. B-03, dated April 4, 2001, by and between Lianozovo Dairy Plant and Mikhail Dubinin is incorporated herein by reference to Exhibit 10.4 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)                                                                                                                 
|4.9  |  | Exchange Agreement No. B-04, dated April 4, 2001, by and between Lianozovo Dairy Plant and Alexander Orlov is incorporated herein by reference to Exhibit 10.5 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)                                                                                                                 
|4.10 |  | Exchange Agreement No. B-05, dated April 4, 2001, by and between Lianozovo Dairy Plant and Sergei Plastinin is incorporated herein by reference to Exhibit 10.6 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)                                                                                                                
|4.11 |  | Exchange Agreement No. B-06, dated April 4, 2001, by and between Lianozovo Dairy Plant and Gavril Yushvaev is incorporated herein by reference to Exhibit 10.7 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)                                                                                                                 
|4.12 |  | Exchange Agreement No. B-07, dated April 4, 2001, by and between Lianozovo Dairy Plant and Evgeny Yaroslavsky is incorporated herein by reference to Exhibit 10.8 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)                                                                                                              
|4.13 |  | Exchange Agreement No. TsK-01, dated April 5, 2001, by and between Lianozovo Dairy Plant and Mikhail Vishnyakov is incorporated herein by reference to Exhibit 10.9 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)                                                                                                            
|     |  |                                                                                                                                                                                                                                                                                                                                                                          

130

---

|4.14 |  | Exchange Agreement No. TsK-02, dated April 5, 2001, by and between Lianozovo Dairy Plant and Mikhail Dubinin is incorporated herein by reference to Exhibit 10.10 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)    
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.15 |  | Exchange Agreement No. TsK-03, dated April 5, 2001, by and between Lianozovo Dairy Plant and Alexander Orlov is incorporated herein by reference to Exhibit 10.11 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)    
|4.16 |  | Exchange Agreement No. TsK-04, dated April 5, 2001, by and between Lianozovo Dairy Plant and Sergei Plastinin is incorporated herein by reference to Exhibit 10.12 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)   
|4.17 |  | Exchange Agreement No. TsK-05, dated April 5, 2001, by and between Lianozovo Dairy Plant and Aleksandrs Timohins is incorporated herein by reference to Exhibit 10.13 to Amendment No. 2 to the Registration Statement on
Form F-1 (Registration No. 333-14278)
|4.18 |  | Exchange Agreement No. TsK-06, dated April 5, 2001, by and between Lianozovo Dairy Plant and Gavril Yushvaev is incorporated herein by reference to Exhibit 10.14 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278)    
|4.19 |  | Exchange Agreement No. TsK-07, dated April 5, 2001, by and between Lianozovo Dairy Plant and Evgeny Yaroslavsky is incorporated herein by reference to Exhibit 10.15 to Amendment No. 2 to the Registration Statement on Form F-1
(Registration No. 333-14278) 
|4.20 |  | Amended and Restated Partnership and Cooperation Agreement is incorporated herein by reference to Exhibit 99.1 to Amendment No. 2 to the Registration Statement on Form F-1 (Registration No. 333-14278)                                                       
|6.1  |  | Statement on earnings per share calculation
Please see "Item 18. Financial Statements."                                                                                                                                                                        
|8.1  |  | List of the Company's Subsidiaries                                                                                                                                                                                                                             
|10.1 |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                             
|10.2 |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                             

131

---

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to
sign this annual report on its behalf.

|                    | WIMM-BILL-DANN FOODS OJSC
|------------------- | -------------------------
|                    | By:                      
|                    | Name:                    
|                    | Title:                   
|Date: June 27, 2003 |                          

---

I, Sergei A. Plastinin, certify that:

1.     I
have reviewed this annual report on Form 20-F of Wimm-Bill-Dann Foods OJSC;

2.     Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.     The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent function):



6.     The
registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

|Date: June 27, 2003                                                        | 
|-------------------------------------------------------------------------- | 
|/s/SERGEI A. PLASTININSergei A. Plastinin
Chairman of the Management Board | 

---

I, Vladimir V. Preobrajensky, certify that:

1.     I
have reviewed this annual report on Form 20-F of Wimm-Bill-Dann Foods OJSC;

2.     Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.     The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent function):



6.     The
registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

|Date: June 27, 2003                                                           | 
|----------------------------------------------------------------------------- | 
|/s/VLADIMIR V. PREOBRAJENSKYVladimir V. Preobrajensky
Chief Financial Officer | 

---