According to National Union of Pig Breeders, we operate the fifth largest pig breeding complex in Russia by production volumes. Our goal is to become a leader in Russia in production efficiency through application of advanced pig breeding technologies, optimization of resource management and utilization of synergies between our agricultural division and pig breeding operations.

Our pig breeding operations consist of breeding and rearing pigs and producing fodder at facilities located in the Belgorod region. We launched our pig breeding project in 2006. Our initial investment included the construction of our pig breeding complex and a fodder plant. Our pig breeding complex consists of six farms clustered in the Belgorod region within 60 kilometers of our fodder plant, which is adjacent to our Nezhegolsky grain elevator.

Fodder is the primary raw material in our pig rearing process, constituting approximately half of the total cost of production of livestock.

In 2009, our annual fodder consumption per ton of live-weight produced was 2.86 tons. In 2010, we reduced this figure to 2.78 tons of fodder per ton of live-weight through greater production efficiency.

Our fodder plant includes a laboratory responsible for confirming the quality of all ingredients used in our feed, which enables us to ensure a high quality of feed and maintain biological security. Once produced, feed is delivered to the farms by our own trucks.

We seek to implement best practices regarding biosecurity at our pig farms in order to produce pigs of high quality and reduce the risk of diseases.

Our farms are located on land controlled by the Group. There are no animal breeding farms or households within a 10-kilometres zone around our farms. Also, our farms are located at a distance of one to three kilometers from one another. Our pigs thus avoid contact with other animals, which helps prevent the pigs from contracting diseases from such animals and allows us to effectively implement other biosecurity measures.

The Group has invested RUR 5.8 billion in our pig breeding operations since their inception as a greenfield project in 2006. Operations at our pig breeding complex reached their maximum design capacity at the end of 2009, and limited capital expenditures in the next few years are planned with regard to the existing Belgorodsky Bacon complex, primarily to maintain and improve the existing technologies.

We are also planning significant capital expenditures to expand production at Belgorodsky Bacon by constructing another pig breeding site.