Situation after unexpected amendments to the Alcohol Law

After  the  amendments to the Alcohol Law become effective, prohibiting

importing of spirit, Latvia will lose a considerable part of its export

potential. As to "Latvijas Balzams", if will turn into a defendant in a

lawsuit  due  to  default on contractual obligations. Output for export

exceeds  the  domestic  one  5  times.  It  is expected that default on

international contracts may cause material damage to the company - even

shutdown of operations.

Pursuant  to  international product certification, the export contracts

have to be fulfilled using spirit produced in Russia. The amendments to

the  law  exclude this possibility. Thus, the fulfilment of contractual

obligations  is in jeopardy. Due to default, sanctions will be applied,

and  "Latvijas balzams" and Latvian state will become defendants due to

default on international contracts.

On behalf of "Latvijas Balzams" management -

Juris Gulbis,

Chairman of Management Board