CJSC Moscow Efes Brewery - data.cbonds.info

October 2007

CJSC "Moscow Efes Brewery"

Placement price: at par (RUR1,000)

RUR 6 bln series 01 coupon bonds with a tenor of 3 years

Issued by Closed Joint Stock Company "Moscow Efes Brewery",Guaranteed by Opened Joint Stock Company "Brewery Union "Krasny Vostok � Solodovpivo"

I n f o r m a t i o n M e m o r a n d u m

L E A D M A N A G E R S

CJSC "Moscow Efes Brewery", established in accordance with Russian law (hereafter the "Issuer") is to place 6 mln coupon, non�convertible series 01 doc�umentary bearer bonds with required centralized storage with par values of RUR1,000 each, with six coupon payments and maturity on the 1,092nd day afterthe start of placement date, with the par value of RUR6 bln and cumulative coupon payments on the bonds with a surety by OJSC "Brewery Union "KrasnyVostok � Solodovpivo" (hereafter the "Surety") (hereafter the "Bonds") in accordance with the Decision of issuance and the Prospectus on securities regis�tered with the Federal Financial Markets Service (hereafter the "FFMS") on July 5th, 2007 (hereafter the "Decision of Issue" and "Securities Prospectus",respectively) with state registration number 4�01�00217�H. The interest rate for the first coupon is to be set at auction (hereafter the "Auction") in an annualpercentage on the date of the start of placement, to be conducted on MICEX (hereafter the "Exchange", "MICEX"). The auction is to take place in accordancewith the regulations and terms of the Exchange, which are in force on the date of the Bond placement. The rate for the first coupon is to be fixed until the firstput option or until maturity of the Bonds, depending on the decision to use a put option, about which the Issuer will provide information on the day of theannouncement of the placement date. The funds raised from the Bonds placement are to be used for investment purposes and to finance working capital (see"Use of Proceeds"). Issuance is made with a single certificate (hereafter the "Certificate"), which is required to be stored at National Depositary Center (here�after the "Depositary"). Additional certificates are not to be given to bondholders. Bondholders do not have the right to demand to be given the certificates.The list and attestation of rights to the Bonds, and the list and attestation of transfer of the Bonds, including encumbrance of the Bonds, are carried out by theDepositary during its fulfillment of its functions as a Depositary, and by depositaries that are deponents of the Depositary (hereafter collectively"Depositaries"). Rights of ownership of the Bonds are to be confirmed with written notices given by the Depositary and the Depositaries to the Bondholders.

CJSC "Moscow Efes Brewery" Information Memorandum

1October 2007

Information Memorandum CJSC "Moscow Efes Brewery"

2

Disclaimer

THE INFORMATION CONTAINED IN THE MEMORANDUM GIVES A SHORT DESCRIPTION OF THE BASIC TERMS

AND CONDITIONS OF THE BOND ISSUE ("BASIC ISSUE TERMS"). THE BASIC TERMS ARE ENTIRELY CONTAINED IN

THE ISSUE PROSPECTUS, WHICH IS REGISTERED BY THE FEDERAL FINANCIAL MARKETS SERVICE. INVESTORS ARE

STRONGLY RECOMMENDED TO CONSIDER INFORMATION GIVEN IN THE PROSPECTUS WHILE MAKING DECISION

TO INVEST IN THE BONDS.

THE INFORMATION CONTAINED IN THE MEMORANDUM WAS PROVIDED BY CJSC "MOSCOW EFES BREWERY"

(HEREAFTER THE "ISSUER"). THE LEAD MANAGER, REPRESENTATIVES THEREOF, OR COMPANIES AFFILIATED

WITH THE LEAD MANAGERS AND/OR WITH COMPANY THAT HAVE PROVIDED INFORMATION, HAVE NOT

UNDERTAKEN A CHECK OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THE

MEMORANDUM. THE LEAD MANAGERS DO NOT BEAR RESPONSIBILITY FOR THE COMPLETENESS OR ACCURA�

CY OF THE INFORMATION PROVIDED BY CJSC "MOSCOW EFES BREWERY". THIS MATERIAL AND THE INFORMA�

TION CONTAINED THEREIN ARE PURELY INFORMATIONAL AND CANNOT BE TREATED AS AN OFFER.

THE INFORMATION CONTAINED IN THE INFORMATIONAL MEMORANDUM IS NOT EXHAUSTIVE. ANY PARTY

CONSIDERING PURCHASING THE BONDS MUST UNDERTAKE ITS OWN ANALYSIS OF THE FINANCIAL CONDITION

OF THE ISSUER AND SURETY, AND OF THE BASIC CONDITIONS ON THE BASIS OF INFORMATION CONTAINED IN

THE ISSUE PROSPECTUS, PUBLISHED ON THE ISSUER'S SITE WWW.EFES.COM.RU.

ALL FORWARD LOOKING STATEMENTS REGARDING FUTURE EVENTS AND/OR ACTIONS, AND PROSPECTS OF

ECONOMIC ENVIRONMENT WHERE THE ISSUER OPERATES, INCLUDING FUTURE PLANS AND THE CERTAINTY OF

SPECIFIC EVENTS OCCURRING, EXPRESS OUR OPINION ON THE DAY OF PUBLICATION AND ARE SUBJECT TO

CHANGE WITHOUT PRIOR NOTICE.

THE LEAD MANAGERS DO NOT BEAR RESPONSIBILITY FOR ANALYSIS OF THE FINANCIAL AND/OR OTHER

INFORMATION ABOUT THE ISSUER AND SURETY, NOR FOR THE PROVISION OF ADDITIONAL INFORMATION.

EMPLOYEES OF THE LEAD MANAGER ARE NOT AUTHORIZED TO PROVIDE INFORMATION REGARDING THE

ISSUER AND/OR THE BONDS NOT CONTAINED IN THE MEMORANDUM.

THE DATE SHOWN ON THE FIRST PAGE OF THE MEMORANDUM DOES NOT INDICATE THAT INFORMATION CON�

TAINED IN THE MEMORANDUM IS COMPLETE AND/OR ACCURATE ON THAT DATE. NIETHER LEAD MANAGER

NOR ISSUER ARE RESPONSIBLE FOR UPDATING THE INFORMATION CONTAINED IN THE MEMORANDUM.

THIS MEMORANDUM IS NOT INTENDED FOR DISTRIBUTION IN THE US, UK, CANADA, AUSTRALIA AND

JAPAN.

THIS MEMORANDUM IS NOT AN OFFER OF SECURITIES FOR SALE IN THE ABOVEMENTIONED COUNTRIES. THE

BONDS CANNOT BE PLACED OR SOLD IN THE US WITHOUT REGISTRATION AND CANNOT BE EXEMPT FROM REG�

ISTRATION IN ACCORDANCE WITH THE US SECURITY ACT OF 1933 (WITH AMENDMENTS). THE ISSUER HAS NO

INTENTION TO REGISTER ANY PART OF THIS PLACEMENT OR TO OFFER ANY PUBLIC PLACEMENT IN THE US.

October 2007


Table of contents

EXECUTIVE SUMMARY ..........................................................................................................5Issuer and surety.................................................................................................................5Strategy...............................................................................................................................5Market share.......................................................................................................................6Selected financials ..............................................................................................................6Investment highlights..........................................................................................................7

TERMS AND CONDITIONS OF BOND ISSUE .......................................................................8USE OF PROCEEDS ..............................................................................................................10LEGAL STRUCTURE ..............................................................................................................11STRATEGY ............................................................................................................................14COMPETITIVE ENVIRONMENT............................................................................................15

Global industry overview .................................................................................................15Russian beer market .........................................................................................................16Major competitors ............................................................................................................19Competitive advantages....................................................................................................20

SALES, MARKETING AND DISTRIBUTION..........................................................................22Marketing .........................................................................................................................22Sales..................................................................................................................................23Distribution ......................................................................................................................24Customers .........................................................................................................................25

MANAGEMENT AND EMPLOYEES.......................................................................................26OPERATIONS .......................................................................................................................30

History..............................................................................................................................30Production facilities..........................................................................................................30The brewing process .........................................................................................................31Raw materials procurement..............................................................................................32Research and development...............................................................................................33Intellectual property rights ...............................................................................................33Legal matters ....................................................................................................................33

CAPITAL EXPENDITURES .....................................................................................................34SELECTED COMBINED FINANCIAL DATA ..........................................................................35

Profit and loss statement ..................................................................................................35Balance sheet....................................................................................................................38

RISK FACTORS......................................................................................................................41Country risks.....................................................................................................................41Industry risks ....................................................................................................................43Issuer's risks......................................................................................................................44

BOND DESCRIPTION...........................................................................................................47TAX CONSIDERATIONS.......................................................................................................53APPENDIX 1: AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF MOSCOW

EFES BREWERY FOR THE YEAR ENDED 31st OF DECEMBER, 2005 AND 2006 PREPARED IN ACCORDANCE WITH IFRS ..................................58

APPENDIX 2: FINANCIAL STATEMENTS OF CJSC ìMOSCOW EFES BREWERYî FOR THE PERIOD ENDED 30th OF JUNE, 2007 PREPARED IN ACCORDANCEWITH RAS ......................................................................................................88

3October 2007


4

APPENDIX 3: FINANCIAL STATEMENTS OF OJSC "BREWERY UNION � KRASNYVOSTOK � SOLODOVPIVO" FOR THE YEAR ENDED 31st OF DECEMBER, 2005 AND 2006 PREPARED IN ACCORDANCE WITH RAS..................................92

APPENDIX 4: FINANCIAL STATEMENTS OF OJSC "BREWERY UNION � KRASNY VOSTOK � SOLODOVPIVO" FOR THE PERIOD ENDED 30th OF JUNE, 2007 PREPARED IN ACCORDANCE WITH RAS..................104

APPENDIX 5: SURETYSHIP AGREEMENT...........................................................................108

October 2007


Executive summary

Issuer and Surety

CJSC "Moscow Efes Brewery" and its subsidiaries ("Efes Moscow") and OJSC "Brewing Union"Krasny Vostok � Solodovpivo" and its subsidiaries ("Krasny Vostok Goup", "KV Group") jointlyconstitute Efes Russia, i.e. business division of Efes Breweries International N.V. ("EBI"), engagedin production and sales of beer products in Russia. Together with Efes Russia EBI controls oper�ations of brewery facilities in Kazakhstan, Moldova and Serbia.

EBI is a majority�owned subsidiary of Anadolu Efes Biraclllk ve Malt Sanayii A.S. ("AnadoluEfes"), which controls 70.2 per cent of EBI, while the remaining 29.8 per cent is publicly held(traded on the London Stock Exchange). Anadolu Efes together with its subsidiaries and affili�ates produces and markets beer, malt and soft drinks across a geography including Turkey,Russia, other CIS countries, South�Eastern Europe and the Middle East. Anadolu Efes' beer andsoft drink interests include 15 breweries, six malteries and 12 Coca�Cola bottling facilities in 12 countries. Anadolu Efes's current annual brewing capacity is approximately 33.7 mln hec�tolitres, its malting capacity is approximately 236,500 tonnes and its Coca�Cola bottling capac�ity is approximately 573 mln unit cases. Anadolu Efes generated net sales on a combined basisof US$1.2 bln and US$1.8 bln in 2005 and 2006, respectively.

As of the year ended 31st of December, 2006 Efes Russia accounted for 79 per cent of EBI'ssales and 28 per cent of Anadolu Efes sales on a consolidated basis. Efes Russia's beer interestsinclude five breweries and four malteries with annual brewing capacity of approximately 20.2 mlnhectolitres and malting capacity of approximately 139,000 tonnes. Efes Russia generated netsales on a combined basis of US$369 mln, US$514 mln and US$308 mln in 2005, 2006 and1H2007, respectively.

Strategy

Efes Russia intends to pursue a strategy aimed at increasing revenue and profits, including:

1. Capitalize on the growth of the beer market in Russia. Viewing Russian beer market as oneof the most prospective for the development of beverage operations, Efes Russia intends tomaintain its position among the leading brewers in Russia and support demand for its productsby:

■ increasing the production capacity of its existing brewing facilities through the installation ofadditional production lines to continue serving areas with demonstrated growth potential;

■ establishing additional brewing facilities in Russia, through strategic acquisitions or green�field projects;

■ expanding Efes Russia's distribution system through a combination of direct order�taking inhigh density population areas and fostering preferential relationships with authorized deal�ers in other geographic areas.

2. Focus on high margin or growing segments. Efes Russia's product strategy is to focus on themost profitable, largest segments and/or those segments with the highest growth potential in theRussian beer market. To this end, Efes Russia seeks to have a brand portfolio that comprehen�sively covers all abovementioned beer segments.

5October 2007


6

3. Continue to create and invest in brands and pursue aggressive marketing campaigns. EfesRussia views its brand portfolio as a key asset and actively uses different advertising channelsto promote its brands in order to further increase brand awareness and customer loyalty withthe objective of gaining market share.

Market share

According to AC Nielsen estimates, Efes Russia ranks fourth in terms of market share by salesvolume in Russia, with approximately 8.6 per cent as of 30th of June, 2007 (8.5 per cent as of31st of December, 2006). In terms of capacity installed in 2006 Efes Russia occupied 3rd placeafter BBH and InBev. (Source: Brewers' Association)

Selected Financials

Selected financial results and ratios of Efes Russia in 2005�2006

SELECTED FINANCIALS, mln US$ 2005 2006

FINANCIAL RESULTS

Sales 369.3 513.6

EBITDA 74.7 96.9

Net Income 30.8 34.6

MARGINS

Gross Margin, % 49.5% 49.3%

EBITDA Margin, % 20.2% 18.9%

Net Margin, % 8.3% 6.7%

BALANCE SHEET ITEMS

Assets 347.4 732.5

Equity 233.1 522.9

Liabilities 114.2 209.6

DEBT & INTEREST EXPENSE

Total Debt, incl. 61.6 104.1

short�term loans and borrowings, % 72.8% 94.0%

long�term loans and borrowings, % 27.2% 6.0%

Interest Expense (net) (4.9) (6.9)

Cash and Cash Equivalents 3.9 8.6

Net Debt 57.7 95.5

FINANCIAL RATIOS

Sales/Total Debt 5.99 4.93

TotalDebt/EBITDA 0.83 1.07

TotalDebt/Equity 0.26 0.20

TotalDebt/Assets 0.18 0.14

EBITDA/Interest Expense (net) 15.2 14.1

Source: Data for 2005 are based upon comparable audited IFRS accounts of Efes Moscow for 2005�2006. Data for 2006 are based on unau�

dited combined results of 12 months audited comparable results of Moscow Efes Brewery and 10 months operations of Krasny Vostok

Group

In 1H2007 combined sales of Efes Russia totaled US$308.5 mln, EBITDA amounted to US$59.0mln (19.1 per cent margin) and net income totaled US$20,0 (6.5 per cent margin).

October 2007


Investment highlights

Strengths

Presence in growing market;

Strong market positions;

Branding and marketing expertise;

Tactical product positioning;

Expertise in managing organic growth and integrating acquisitions;

Self�sufficiency in raw material procurement;

Strong sales and distribution force;

Qualified Management;

Proven track record of adding brewing capacity in a cost effective manner;

Logistics benefits arising from multiple brewing facilities and cross�brewing.

Opportuni t ies

Further increase in beer consumption per capita in Russia to a level comparable with thatof developed countries;

Participation in the process of industry consolidation;

Historical and expected high growth rate in private consumption and income in Russia.

Financial and operational support of the parent company (EBI).

7October 2007

Terms and conditions


8 October 2007

The interest paid with the first coupon is to be set at auctionon the date of the Bonds' placement on MICEX. The couponrate is to be fixed for a term until the first put option or untilmaturity depending on the Issuer's decision regarding the useof put option, which the Issuer will announce on the day ofpublication of the placement date.

182 days

The non�commercial partnership National Depositary Center(hereafter "NDC", "Depositary").

The end of placement is to be the earliest of the following: a)the fifth business day following the first Bond placement day,or b) the date of placement of the last Bond of the issue.

OJSC "Brewery Union "Krasny Vostok � Solodovpivo".

Issuance Decision and Prospectus were registered in FSFM asof 5th of July, 2007 with Issue being assigned state registrationnumber 4�01�00217�H.

CJSC "Moscow Efes Brewery"

Citibank, Troika Dialog

Issuance is made with a single certificate (hereafter the"Certificate"), which is required to be stored at the NDC.Additional certificates are not to be given to bondholders.Bondholders do not have the right to demand to be given thecertificates. The list and attestation of rights to the Bonds, andthe list and attestation of transfer of the Bonds, includingencumbrance of the Bonds, are carried out by the NDC dur�ing its fulfillment of its functions as a Depositary, and bydepositaries that are deponents for the Depositary (hereaftercollectively "Depositaries"). Rights of ownership of the Bondsare to be confirmed with written notices given by the NDCand the Depositaries to the Bondholders.

Maturing 1,092 days after the placement date.

Citibank

The date of the start of the Bond issuance is to be set by theIssuer and made available to all interested parties no laterthan five days prior to the placement date by way of publi�cation on news services (AK&M, Interfax). Information on thestart of issuance is to be published on the Issuer's site atwww.efes.com.ru no later than four days prior to the Bondissuance date.

Coupon payments

Coupon period

Depositary

End of placement

Surety

Issuance Decision andProspectus

Issuer

Joint Lead Managers

List of rights to Bonds

Maturity date

Paying Agent

Placement date


9October 2007

Open subscription. On the date for the placement of theBonds on MICEX, an auction (hereafter "Auction") is to takeplace to determine the interest rate of the coupon one. Theauction is to take place in accordance with the Decision toIssue securities and with the securities issue Prospectus, andin accordance with the regulations and rules of the Exchangethat are in force on the date of the Bond issuance.

On the day when the Bond placement date is announced, theIssuer is to announce its intention regarding, and the date of,put option.

Bonds are to be placed in accordance with Russian legisla�tion.

Following state registration of the placement report, theBonds may freely circulate on both exchange and OTC mar�kets. The potential investor list is not limited.

6 mln non�convertible series 01 coupon documentary bearerbonds with par value of RUR1,000 each for the total amountof RUR6 bln maturing in 1,092 days.

Settlement for the bonds is to be conducted on "deliveryagainst payment" conditions.

Investment purposes and financing of working capital (see"Use of Proceeds").

Placement method/Exchange

Put option

Regulatory rights

Secondary market

Securities being placed

Settlement

Use of Proceeds


10 October 2007

Use of proceeds

Up to 75 per cent of amounts, received from the Bond issue will be used to finance purchaseof 92.9 per cent voting shares of OJSC "Brewing Union Krasny Vostok � Solodovpivo".

Up to 25 per cent of amounts received from the Bond issue will be used to refinance existingdebt.


Legal structure

EBI is a majority�owned subsidiary of Anadolu Efes, which together with its subsidiaries andaffiliates produces and markets beer, malt and soft drinks in Turkey, Russia, other CIS countries,South�Eastern Europe and the Middle East. Anadolu Efes, listed in the Istanbul Stock Exchange(ticker: AEFES.IS), is an operational entity under which the Turkey beer operations are managed,as well as a holding entity which is the majority shareholder of EBI that manages internationalbeer operations and is the largest shareholder of Coca�Cola Icecek A.S. ("CCI") that managesthe soft drink business in Turkey and international markets. Anadolu Efes has been active inSouth�Eastern Europe and Central Asia since 1991, when it first started to examine opportuni�ties to develop new markets for its business. At present, Anadolu Efes has beer and soft drinkoperations in Turkey, Russia, Kazakhstan, Moldova, Serbia, Azerbaijan, Turkmenistan,Kyrgyzstan, Iraq, Jordan, Syria and Tajikistan. In addition, Efes�branded beer products areexported to more than 50 countries including France, Germany, The Netherlands, Switzerland,the United Arab Emirates, Iraq, Kosovo, Lebanon, the United Kingdom and the United States.Currently, Anadolu Efes' beer and soft drink interests include 15 breweries, six malteries and12 Coca�Cola bottling facilities in 12 countries. Anadolu Efes's current annual brewing capac�ity is approximately 33.7 mln hectolitres, its malting capacity is approximately 236,500 tonnesand its Coca�Cola bottling capacity is approximately 573 mln unit cases. Anadolu Efes gener�ated net sales on a combined basis of US$1.2 bln and US$1.8 bln in 2005 and 2006, respec�tively. Anadolu Efes, in turn, forms a material part of the Anadolu Group, which consists ofAnadolu Endustri Holding A.S. and its subsidiaries and affiliates, and represents one of Turkey'sleading conglomerates.

Anadolu Group's beer operations in Turkey and EBI collectively form the Efes Beer Group("EBG").

EBI: major subsidiaries *

Source: Efes Russia

* The scheme does not include all EBI subsidiaries

As of the date of this Information Memorandum, EBI is a 70.22 per cent owned subsidiary ofAnadolu Efes. EBI is listed on the London Stock Exchange since the initial public offering inOctober 2004 with a free float of 29.78 per cent of its share capital in the form of global deposi�tary receipts. EBI's ownership interests in each of its operating companies as of the date of thisInformation Memorandum are as follows:

11October 2007

Anadolu Efes

Efes BreweriesInternational N.V.

70,2%

MoscowEfes Brewery

(Russia)

90,9%

Efes KaragandaBrewery

(Kazakhstan)

100,0%

Efes ZajecarBrewery(Serbia)

73,0%

Efes WeifertBrewery(Serbia)

96,5%

PublicGDR's listed in LSE

29,8%

Krasny VostokBrewing Group

(Russia)

92,9% 91,0%

Efes Vitanta MoldovaBrewery

(Moldova)


12

■ EBI directly and indirectly through its wholly owned subsidiary Euro Asien BrauereienHolding GmbH owns 90.85 per cent of voting shares of CJSC ìMoscow Efes Breweryî. Theremaining 9.15 per cent of CJSC ìMoscow Efes Breweryî is owned by EBRD (8.76 per centof voting shares) and EL&EL Ltd., an international investment company with major interestsin the brewing and packaging industries in Russia and elsewhere in the CIS (0.39 per cent ofvoting shares);

■ EBI directly owns 92.85 per cent of voting shares of OJSC ìBrewing Union ìKrasny Vostokñ Solodovpivoî. The remaining 7.15 per cent of OJSC ìBrewing Union ìKrasny Vostok ñSolodovpivoî is represented by holdings of individual investors who were the founders of theKrasny Vostok Group business;

■ EBI directly owns 100.0 per cent of Efes Karaganda Brewery, which operates EBI's Kazakh�based brewery assets;

■ EBI directly owns 96.5 per cent of Efes Vitanta Brewery, which operates EBI's Moldovan�based assets. The remaining 3.5 per cent is owned by individual shareholders;

■ EBI owns 90.97 per cent of Efes Weifert, which operates one of the Serbian breweries (inPancevo). The remaining 9.03 per cent is owned as follows: the Serbian government owns1.75 per cent and individual shareholders (including employees of Efes Weifert) own 7.28 per cent of Efes Weifert;

■ EBI owns approximately 72.96 per cent of Efes Zajecar, which operates the second breweryin Serbia (in Zajecar). The remaining 27.04 per cent is owned as follows: the Serbian gov�ernment owns 13.27 per cent and individual shareholders own 13.77 per cent of EfesZajecar.

The following diagram sets out the current shareholding structure and major subsidiaries of EfesRussia:

Legal structure of Efes Russia as of 01st of April, 2007(1)

Source: Efes Russia (1) The scheme includes all the operating subsidiaries but not all the subsidiaries of Efes Russia. Non�operating companies as well as compa�

nies being liquidated are not shown on the scheme

October 2007

Efes BreweriesInternational N.V.(the Netherlands)

Brewing Union Krasny Vostok Solodovpivo,OJSC (Kazan)

83,76 %*

* Of voting shares ** Cumulative share (of voting shares)

TRADEXPARTNER LTD.

6,04%*

MinorityShareholders

0,41%** 9,79%

Krasny VostokSibirskaya

PivovarennayaKompaniya, LLC(Novosibirsk)

Vostok Solod,LLC

(Kazan)

100,00% 100,00% 100,00%34,48 %

65,52 %

Moscow Efes Brewery, CJSC(Moscow)

Amstar,OJSC(UFA)

Rostov BeverageCJSC

(Rostov�on�Don)

EBRD(Great Britain)

EL&ELLimited

Euro AsienBrauereien

Holding GmbH(Germany)

82,09 %* 8,76 %* 8,76 %* 0,39 %*

Treasuryshares

MUTENA,CJSC

11,10 %*


A put option has been granted to the EBRD by EBI that may be exercisable between the 7th andthe 10th anniversary (2008 and 2011) of the date of EBRD's first subscription in the share capi�tal of CJSC ìMoscow Efes Breweryî. By such put option, EBRD will be entitled to sell its stakein CJSC ìMoscow Efes Breweryî to EBI at an option price determined by an independent valu�ation.

EBI includes it as liability in the consolidated financial statements at fair value. The liability forthe put option has been measured by applying a weighting of different valuation techniquesand US$103,400 (YTL 145.294) was presented in "other non�current liabilities" as "liability forput option" in the EBI's consolidated balance sheet.

13October 2007


14

Strategy

Efes Russia represents the largest branch of EBI and intends to pursue a strategy aimed atincreasing revenue and profits, including:

1) Capitalize on the growth of the beer market in Russia. Russia is currently the 3rd largest beermarket in the world (source: Canadean). Efes Russia believes that Russian market possessessignificant potential for future growth due to improving macroeconomic trends, and conse�quently higher purchasing power alongside a low base of per capita beer consumption com�pared to that of Western European countries. Efes Russia will continue to pursue a strategyaimed at growing organically and inorganically faster than the competition in Russia in orderto capitalize on such growth potential and intends to support demand for its products by:

■ increasing the capacity of its overall production platform through:

(i) the installation of additional production lines to continue serving areas with demon�strated growth potential, such as the capacity increase in Efes Russia's brewery in Ufa,whereby the capacity increased from 2.0 mln hl (1.2 mln hl in 2004) to 4.1 mln hl inJuly 2006;

(ii) establishing of additional brewing facilities in Russia, such as the completed acquisi�tion of a brewery in Ufa, establishment of greenfield brewery in Rostov in 2003, andthe acquisition of Krasny Vostok Group in February 2006;

■ expanding Efes Russia's distribution system through a combination of direct order�takingin high density population areas and fostering preferential relationships with authorizeddealers in other geographic areas.

For example, through the restructuring of its distribution system in Russia to increase theamount of sales effected through direct order�taking with retail outlets, Efes Russia increased thenumber of outlets served through direct order�taking in Moscow from approximately 2,500 in2004 to approximately 7,000 in 2005 and to approximately 11,500 in 2006. In areas, whereEfes Russia does not have direct order�taking it places significant emphasis on its relationshipwith authorized dealers, thereby seeking to minimize logistical complexity.

2) Focus on high margin or growing segments. Efes Russia's principal beer segments includepremium, mainstream and economy beers. Efes Russia's product strategy is to focus on themost profitable, largest segments and/or those segments with the highest growth potential inthe Russian beer market. To this end, Efes Russia seeks to have a brand portfolio that com�prehensively covers the principal beer segments in which it operates and that allows it tobenefit from key market trends including the increase in consumption of premium beers.

3) Continue to create and invest in brands and pursue aggressive marketing campaigns. EfesRussia views its brand portfolio as a key asset, due to the fact that brand perception is a crit�ical factor in a consumer's choice of beer in Russia. As such, Efes Russia makes extensiveuse of advertising, using appropriate media channels, and sponsoring sports, including foot�ball (soccer) and cultural events such as music concerts. Efes Russia intends to continue topromote its brands extensively in order to further increase brand awareness and customerloyalty with the objective of growing faster than the competition.

October 2007


Сompetitive environment

Global industry overview

The size of the worldwide beer market has grown at an estimated CAGR of 3.0 per centbetween 2001 and 2006 and was approximately 1.6 bln hectolitres in 2006. Production andconsumption patterns and corresponding growth rates, however, vary significantly from coun�try to country. The global brewing industry generally can be broken down into two major cat�egories: (i) mature markets, where consumption is either stable or slightly declining, and (ii)emerging markets, where consumption is growing. Most markets in Eastern and Central Europe,the Balkans and the CIS are among the emerging markets, while Western Europe and NorthAmerica are among the mature markets. The following table sets forth the development of beermarkets in major geographic regions of the world.

Global beer market in 2006�2011

Source: Canadean Global Beer Report 2006

* Data for 2006 is estimated by extrapolating figures for the period of 1st of January, 2006 to 30th of September, 2006 to cover the entirety of 2006

(1) Western Europe includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland (Republic), Italy, The Netherlands,

Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

(2) Eastern Europe includes Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Poland,

Romania, Russia, Serbia�Montenegro, Slovakia, Slovenia, Turkey and Ukraine.

(3) Asia includes Armenia, American Samoa, Azerbaijan, Bangladesh, Bhutan, Brunei, Cambodia, China, Cook Islands, Fiji, French

Polynesia, Georgia, Guam, Hong Kong, India, Indonesia, Japan, Kazakhstan, Kiribati, Kyrgyzstan, Laos, Macau, Malaysia, Maldives,

Mongolia, Naura, Nepal, New Caledonia, Niue, Norfolk Islands, Pacific Islands, Pakistan, Papua New Guinea, Philippines, Singapore,

Solomon Islands, South Korea, Sri Lanka, Taiwan, Tadjikistan, Thailand, Tonga, Turkmenistan, Tuvalu, Uzbekistan, Vanuatu, Vietnam and

Western Samoa.

Beer is considered to be a relatively local product. Until the middle of the twentieth century,the short shelf life of beer and difficulties of transportation necessitated local production.Technological advances have reduced these barriers, but the prevalence of local products hasremained. Industry participants believe that consumers in most countries continue to buy localbrands produced by local brewers and sold through local stores, pubs and restaurants at pricesthat vary widely around the world. As a result, most participants in the beer industry are stillregional or national, and only a few are international.

15October 2007

Market size CAGR 2006� Per capita CAGR 2006�

in 2006 2011 consumption 2011

(mhl)* in 2006 (litres)*

Western Europe (1) 294,4 0% 74 0%

Eastern Europe (2) 230,3 3% 58 4%

North America 253,3 �1% 76 �1%

Asia (3) 486,9 4% 13 3%


16

The general trend in the brewing industry is toward consolidation at the national and, to someextent, international levels. In many mature markets, the top two or three brewing companiesaccount jointly for a market share by sales volume of over 50.0 per cent. For example, the topthree brewing companies in each of France, Italy and the United Kingdom accounted forapproximately 81 per cent, 60 per cent and 68 per cent, respectively, of sales volume in therespective countries for 2006. On a worldwide level, consolidation is occurring, although it isnot as pronounced as in many mature markets. For example, whereas in 1999, the top 20 inter�national brewing companies accounted for approximately 37.7 per cent of sales volume world�wide, in 2004 they accounted for 65.4 per cent (source: Canadean).

Russian beer market

The Russian beer market is one of the most dynamic and highest volume growth markets inEurope, with both domestic and foreign producers trying to increase their market share in therapidly growing industry.

Largest beer markets in the world in 2006

Source: Canadean Global Beer Trends 2006

The market size has grown significantly, from approximately 63.0 mln hectolitres in 2001, toan estimated 95.7 mln hectolitres in 2006, constituting a CAGR of approximately 8.7 per cent(source: Canadean). In spite of regulatory changes, including federal restrictions imposed onproduction and distribution of alcohol drinks in Russia in 2006 (e. g., introduction of UnifiedState Automated Information System ("EGAIS system")) the Russian beer market is expected togrow further albeit at a slower rate.

In spite of the strong historical increase in beer consumption, estimated per capita beer con�sumption of approximately 67 litres remains relatively low when compared to mature markets.With a population of approximately 142.2 mln, Russia is among the most attractive beer mar�kets in the world, and, according to Canadean research, beer consumption in Russia is expect�ed to grow at a CAGR of approximately 3.9 per cent in the period from 2006 to 2011.

October 2007

330

231

96 94 9463 59 58

0

50

100

150

200

250

300

350mhl

China USA Russia Brazil Germany Japan Mexico UK


The solid growth in the Russian beer market is attributable to a number of factors, including:

(i) increasing supply of quality local products as international brewers replace small scale,local brewers, that do not have access to financial resources to fulfill needs for modernization;

(ii) changing demographics and an increasing switch from high alcohol (mainly vodka) to sub�stitutes in line with changing consumer preferences and increasing levels of health con�sciousness;

(iii) increased advertising and promotional campaigns, enhancing the visibility and image ofbeer;

(iv) increased availability of beer, as distribution networks are established and the shelf life ofbeer extends; and

(v) favorable government regulations, such as taxation, promoting a switch from high alcoholproducts to low alcohol products.

From 2001 to 2006 CAGR for beer consumption in Russia was approximately 8.7 per cent,compared to a negative CAGR for beer consumption in Western Europe of approximately 0.2 per cent over the same period. According to expert estimates, per capita beer consumptionin Russia is likely to grow further at a rate of some 3.9 per cent between 2006�2011, still out�performing Western European market. (source: Canadean).

Dynamics of per capita beer consumption in selected countries in 2006�2011

Country name CAGR in 2006�2011

China 5.1%

Russia 3.9%

France �0.6%

UK �0.6%

Germany �0.5%

Source: Canadean

17October 2007

Beer market in Russia in 2001�2006 (mhl)* Per capita beer consumption in different countries in 2006 (litres per year)

Source: Canadean Global Beer Report 2006 Source: Canadean Global Beer Trends 2006

* Data for 2006 is estimated by extrapolating figures for the period of 1st of January, 2006

to 30th of September, 2006 to cover the entirety of 2006

63.0

70.7

76.384.8

90.295.7

105.3

115.9

60

70

80

90

100

110

120

2001 2002 2003 2004 2005 2006 2008F 2011F

mhl

159

115

96

78

69

67

56

33

30

24

Czech Republic

Germany

UK

USA

Canada

Russia

Norway

France

Italy

China


18

The beer market in Russia can be split in five segments based primarily on average price. Theseare:

(i) Super premium segment brands: this category consists of all imported beer brands (outsideof CIS origin), licensed brands and ultra premium Russian brands. The brands in this seg�ment are priced at 64 Rubles per litre or higher.

(ii) Premium segment brands: this category consists of some licensed brands and some premi�um brands from CIS. The brands in this segment are priced between 40�60 Rubles per litre.

(iii) Upper mainstream brands: this category consists of national brands and are pricedbetween 38�43 Rubles per litre.

(iv) Lower mainstream brands: the brands in this category consist of national brands which arepriced between 29�38 Rubles per litre.

(v) Economy segment brands: this category consists of all brands that are priced below 29Rubles per litre.

In Russia, economy and mainstream brands accounted for approximately 93.4 per cent of salesvolume in the beer market in 2004, with super premium and premium brands accounting forthe remaining approximately 6.6 per cent of sales volume. In 2006, economy and mainstreambrands held a decreased share of approximately 90.0 per cent of sales volume, while the shareof sales volume held by super premium and premium brands had increased to approximately10.0 per cent, with premium brands alone accounting for 6.8 per cent (source: AC Nielsen). In1H2007 super premium and premium segment accounted for 11.3 per cent of the beer market,while the share of economy and mainstream brands decreased to 88.7 per cent. Beer con�sumption in different regions of Russia varies widely, and St. Petersburg and Moscow lead thenation in beer consumption.

Beer consumption per capita in Russian regions in 2006

Region Per capita consumption, litres

Urals 97.1

North�West 90.6

Siberia 73.4

Central 73.1

Volga 60.4

Far East 60.0

South 47.0

Source: Rosstat

In terms of packaging, PET�packaged beer constitutes the largest share of sales volume inRussia, followed by glass bottle and cans. For the last three years, the share of sales volume heldby canned and PET�packaged beer in Russia has grown at the expense, on a percentage basis,of bottled beer. From 2004 to 2006, the share of sales volume held by PET�packaged beer inRussia increased from 41.1 per cent to 47.9 per cent and further to 49.1 per cent in 1H2007.Share of sales volume held by cans increased from 13.5 per cent in 2004 to 13.6 per cent in2006 and to 14.1 per cent in 1H2007, while the share held by glass bottled beer decreasedfrom 44.2 per cent to 37.8 per cent and to 36.2 per cent, respectively (source: AC Nielsen).

October 2007


Market structure by package type in 2004�1H2007

Source: AC Nielsen

Major competitors

Efes Russia's principal competitors consist of large multinational brewers operating in Russia,who compete on the basis of price, brand image and quality. In recent years following theincrease in disposable income there was a shift in the industry from price�based competitiontowards competition based on quality, marketing, advertising and point�of�sale promotions.

Since 1999, the number of quality local brands produced by international brewers in theRussian beer market has increased. International operators with brewery interests in Russia arenow predominant in the Russian market. Efes Russia's principal competitors in Russia are BBH(a joint venture between Carlsberg and Scottish & Newcastle), InBev, Heineken and SAB Miller.To a lesser extent, Efes Russia also competes with small local brewers, none of which individ�ually represents any significant competition.

Major players in Russian beer market in 2005�1H2007

Source: AC Nielsen

19October 2007

13.5%

13.4%

13.6%

14.1%

44.2%

40.4%

37.8%

36.2%

41.1%

45.4%

47.9%

49.1%

0% 20% 40% 60% 80% 100%

2004

2005

2006

1H2007

Kegs Cans Bottles PET

Other Ochakovo SAB Miller

Efes Russia Heineken InBev BBH

34.9% 36.7% 37.8%

19.4% 19.2% 19.2%

16.6% 16.4% 15.9%

7.2% 8.5% 8.6%5.2%

6.0% 6.4%5.4% 4.0% 3.4%11.2% 9.3% 8.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 June 2007


20

Efes Russia ranks fourth in terms of market share by sales volume in Russia, with approximate�ly 8.6 per cent as of 30th of June, 2007 (8.5 per cent as of 31st of December, 2006 and 7.2 percent as of 31st of December, 2005). In terms of capacity installed Efes Russia in 2006 occupied3rd place after BBH and InBev.

Largest market players in terms of capacity installed as of mid 2006

Company name Number of breweries Brewing capacity, mhl

BBH 10 41.3

InBev 9 21.2

Efes Russia 5 20.2

Heineken Russia 10 17.7

Ochakovo 3 14.4

SAB Miller 1 5.2

Source: Brewers' Association

Competitive advantages

FIRST MOVER ADVANTAGE

Efes Russia was among the first players on the local market and such an early entry has givenit an opportunity to participate in the consolidation process of the Russian beer industry. At pre�sent local market is highly concentrated with five largest brewing companies accounting forover 85 per cent of total sales (source: AC Nielsen). As such, barriers to entry appear to be quiteserious while medium�sized players are in a position to cede their market share to industryleaders.

STRONG MARKET POSITION

Efes Russia is among the leading brewers, and its product portfolio includes some of the mostpopular and well�known beer brands in Russia. As of 31th of December, 2006, Efes Russia'sbrand Beliy Medved was among the Top 10 brands in the Russian beer market by volume share(source: AC Nielsen) and Forbes magazine named Efes Russia's brand Stary Melnik among Top10 Russian beer brands at the beginning of 2007. Accordingly, Management believes that EfesRussia is well placed to benefit from the continuing growth of the beer market in Russia, whichManagement believes will continue to generate increasing interest and demand for Efes Russia'sexisting products and present opportunities for expanding its product portfolio.

BRANDING AND MARKETING EXPERTISE

Efes Russia, together with its parent company EBI has developed considerable expertise in re�launching existing and creating new beer brands and promoting them to national prominence.A key component of Efes Russia's branding and marketing strategy is to reinforce the nationalcharacteristics of most of its brands. For example, Efes Russia launched the Stary Melnik brandin 1999, and Management believes that it is now one of the most widely recognized beerbrands in the country. In 2003, following the acquisition of the Ufa Brewery in Russia, EfesRussia relaunched its previously regional brands Beliy Medved and Sokol both of which havegained national recognition. Following the acquisition of the Krasny Vostok Group,Management started the rationalization of the brand portfolio, including reduction of the num�ber of brands and relaunching some of the newly acquired Krasny Vostok Group brands, suchas Krasny Vostok, Zhigulevskoe and Gold Beer.

October 2007


TACTICAL PRODUCT POSITIONING

Management believes that it has a strong expertise of tactical product positioning. This assumestimely shifts to more popular beer segments, such as growing premium segment in Russia, aswell as catching new trends in beverage packaging. For example, Efes Russia benefited from anincrease of demand for PET�packaged beer products by introducing economy segment brandBeliy Medved in 2003, Krasny Vostok, Gold Beer and Zhigulevskoe in 2006 whose aggregatePET sales volume was approximately 55 per cent of Efes Russia's total sales volume in 2006. Atpresent Efes Russia has a technological capability to produce high quality beer in all packagetypes, which makes it more flexible to any shifts in market demand.

EXPERTISE IN MANAGING ORGANIC GROWTH AND INTEGRATING ACQUISITIONS

Efes Russia has a proven track record of successfully managing rapid organic growth and inte�grating new acquisitions into its production through adding brewing capacity in a cost effectivemanner: it has grown through a combination of strategic acquisitions, greenfield developmentsand modular expansion of its brewing facilities, demonstrating its ability to apply the know�howwithin its parent EBI, while developing its own experience and expertise in managing growth.

QUALITY AND EXPERIENCE OF MANAGEMENT

Management believes that it has a distinct advantage over competitors because of its accumu�lated experience in Russia, and the length of time that many members of Management teamhave worked together. Efes Russia actively recruits from leading international companies andplaces special emphasis on in�house training of new team members.

NATIONWIDE STRONG SALES AND DISTRIBUTION FORCE

Management believes that it has a competitive advantage because of its strong sales and distri�bution force covering all Russian high�density population areas through a network of sales rep�resentatives (direct order�taking) and authorized dealers. Alongside a growth in disposableincome in Russia there was a shift within the national beverage industry from price�based com�petition towards aggressive promotion campaigns, stressing quality of the product and con�tributing to the brand awareness. In such conditions, nationwide sales force becomes a neces�sary prerequisite for support and further increase in market share.

LOGISTICS BENEFIT ARISING FROM MULTI�PLANTS AND CROSS�BREWING

Following the acquisition of the Krasny Vostok Group, all of Efes Moscow's products (exceptfor the licenced ones) started being produced in all the breweries of the Krasny Vostok Groupas well. This cross�brewing has brought significant advantages, as it enables effective cateringof high consumption growth regions of Russia including Eastern Regions of Russia through EfesRussia's products from the brewery in Novosibirsk.

SELF�SUFFICIENCY IN RAW MATERIAL PROCUREMENT

Efes Russia is able to supply a majority of its malt and pre�form requirement through its fourmalt production facilities (139 000 tonnes annual capacity) and pre�form production line (1.3 mln units/day). As such, possibility to generate a constant supply of malt provides a distinct competitive advantage over some local producers.

Efes Russia has an advantage of having good relationship with the suppliers, and the contractsare renewed on annual basis.

21October 2007


22

Sales, marketing and distribution

Marketing

Efes Russia views its brand portfolio as a key asset, as the Management believes that the imageof a brand and its message are essential elements in consumer's choice of beer. Efes Russiaseeks to have a brand portfolio that comprehensively covers the principal beer segments inwhich it operates, principally the premium, mainstream and economy segments. Managementbelieves that local positioning of its brands is a key element in facilitating better understandingof, and responses to, the needs of local consumers.

Efes Russia markets its brands through a broad range of marketing channels, including, amongothers, TV, billboard and radio advertising and consumer promotions (Above The Line ("ATL")and Below The Line ("BTL") activities). Television advertising is a part of Efes Russia's overallmarketing strategy as it allows Efes Russia to promote its brands at a national level. The empha�sis on a national brand promotes customer loyalty and latent demand for Efes Russia's productsand facilitates future growth by providing a solid consumer base in different regions.

Efes Russia also sponsors high profile sports, music festivals and other special events, therebygiving broad exposure to the local brands and to the Efes brand. Sponsorships include thebiggest Rock event in Russia "Krylia" sponsored by Stary Melnik, Stary Melnik sponsorship ofthe Russian National Football Team and the Efes International Blues Festival, among others.

As for BTL activities in 2006, more than 1,200,000 prizes were distributed trough in�store pro�motions in 82 different locations, which help to support the brand image in the field.

Efes Russia's marketing is principally aimed at the population aged between 18 and 40. EfesRussia focuses on this particular demographic because people within this age consume morebeer per capita than other age groups (which is consistent with per capita consumption patternsin Western economies) and are more likely to remain loyal to a brand if they form that loyaltyat a young age. Efes Russia's management believes that beer brands have longer product lifecycles than brands in many other consumer product sectors and that the strength of a beerbrand tends to endure over a long period of time once brand loyalty is established.

Management believes that Russian law, which restricts beer advertising and the advertising ofalcoholic beverages will primarily affect potential market entrants, acting as a barrier to entryby preventing the use of an important method for increasing brand awareness. Managementalso believes that these restrictions could, to some extent, represent an obstacle for incumbentparticipants to launch new products. However, Management believes that these new restric�tions are unlikely to significantly affect brand recognition of existing brands of incumbent par�ticipants such as Efes Russia. In any event, Management believes that Efes Russia benefits fromthe Anadolu Efes' extensive experience of operations in markets with similar restrictions.

The combined marketing and advertising expenditures of Efes Russia as a percentage of saleswere approximately 11.1 per cent in 2006 (11.4 per cent in 2005).

The following table sets out Efes Russia's brands in each segment.

October 2007


Efes Russia's brand portfolio

Segment Brands

Super Premium Warsteiner, SOL

Premium Amsterdam Navigator, Efes, Zlatopramen, Bavaria Premium

Upper Mainstream Stary Melnik

Lower Mainstream Sokol

Economy Beliy Medved, Krasny Vostok*, Zhigulevskoe*, Gold Beer*

Source: Efes Russia

* Brands of Krasny Vostok Group. The table does not include all brands of Krasny Vostok Group.

Among the licensed brands, in addition to Efes, Efes Russia brews Warsteiner under a licenseagreement with Warsteiner Brauerei Haus Cramer KG, SOL under a license agreement withCCMIP S.A., Switzerland subsidiary of Mexican FEMSA Cerveza, Zlatopramen under a licenseagreement with the Czech Drinks Union, Amsterdam Navigator under a license agreement withGrolsch and Bavaria Premium and Bavaria Malt, a non�alcoholic beer, under a license agree�ment from Bavaria N.V.

The marketing efforts of Efes Russia in the Russian market are currently aimed at expanding netsales of the mainstream and economy brands and promoting the international Efes, Warsteiner,SOL, Bavaria, Zlatopramen and Amsterdam Navigator brands to facilitate further brand devel�opment and recognition at the super premium and premium levels.

Sales

Overall net sales revenue of Efes Russia (including financial results of KV Group for March�December 2006) for the period ended 31st of December, 2006 and 2005 totaled US$513.6 mlnand US$369.3 mln, respectively. For the period ended 30th of June, 2007 net sales totaledUS$308.5 mln. In 1H2007 average sales price of Efes Russia increased. Average sales price waspositively impacted by price increases in the period and strenghtening of the rouble, but nega�tively effected by the increased share of economy segment products in total sales.

Efes Russia's sales dynamics in 2005�1H2007*

2005 2006 1H2007

Sales volume (l '000) 602,606 867,935 499,729

Net Sales (US$ '000) 369,324 513,577 308,460

Average Price (US$/Hl) 61.3 59.2 61.7

Source: Efes Russia

* Data for March�December 2006 and 1H2007 include figures of both Efes Moscow and Krasny Vostok Group

The largest portion of Efes Russia's sales is formed by economy segment, which is in line withoverall sales structure of the Russian beer market. Still, a significant number of Efes Russia prod�ucts are positioned primarily in the fastest growing premium segment of the market. In 1H2007,the volume share of the premium segment increased to 11 per cent from 9 per cent in 2006 and8 per cent in 2005.

23October 2007


24

Efes Russia's sales structure by segment in 2005�1H2007*

Brand type 2005 2006 1H2007

Super Premium 1% 1% 1%

Premium 7% 8% 10%

Upper Mainstream 26% 22% 17%

Lower Mainstream 7% 9% 7%

Economy 60% 60% 66%

Total 100% 100% 100%

Source: Efes Russia

* Data for 2006 and 1H2007 include figures of both Efes Moscow and Krasny Vostok Group

Most popular brands of Efes Russia � Beliy Medved, Stary Melnik and Gold Beer � collectivelyaccounted for 60 per cent and 62 per cent of total sales in Russia in 2006 and 1H2007, respec�tively.

Beliy Medved was among the top ten best selling brands in the Russian beer market by volumeand value as of December 2006 (source: AC Nielsen).

Efes Russia's products are currently packaged in cans, kegs, glass bottles and PET containers. In1H2007, bottles, cans, kegs and PET containers accounted for approximately 28 per cent, 10per cent, 2 per cent and 60 per cent of Efes Russia's sales volume, respectively.

Efes Russia's sales structure by package type in 2005�1H2007*

Package type 2005 2006 1H2007

Bottle 45% 31% 28%

Can 17% 12% 10%

PET 36% 55% 60%

Keg 2% 2% 2%

Total 100% 100% 100%

Source: Efes Russia

PET�packaged beverage has shown the highest amount of growth in the overall Russian marketin 2004�2006 and is estimated to represent 49.1 per cent of total packaging mix as of 30th ofJune, 2007 (source: AC Nielsen). To benefit from this trend Efes Russia introduced its first econ�omy segment brand Beliy Medved in 2003, followed by Krasny Vostok, Gold Beer,Zhigulevskoe and some other brands through Krasny Vostok Group integration in 2006. Theaggregate PET sales volume of these brands was approximately 55 per cent of Efes Russia's totalsales volume in 2006 and 60 per cent in 1H2007.

Distribution

Efes Moscow also operates as the sales and distribution company of Efes Russia. All productsproduced by the other production subsidiaries within Efes Russia are sold exclusively to EfesMoscow and further sold and distributed throughout Russia with the exemption of export saleswhich may be done directly.

Through the restructuring of its distribution system in Russia to increase the amount of saleseffected through direct order�taking with retail outlets, Efes Russia increased the number of out�lets served through direct order�taking in Moscow from approximately 2,500 in 2004 to approx�imately 7,000 in 2005 and approximately 11,500 in 2006.

October 2007


Efes Russia also has exclusive sales teams in more than 135 cities and towns in Russia, includ�ing Rostov�on�Don, Ufa, Ekaterinburg, Samara, Novosibirsk and St. Petersburg. These exclusivesales teams covered approximately 29,500 and 63,000 retail outlets outside of Moscowthroughout Russia in 2005 and 2006, respectively. As of 31st of December, 2006, the total salesforce of Efes Russia consisted of 626 people, including 176 sales representatives in Moscow.About 86 per cent of Efes Russia's sales as of 31st of December, 2006 were sales to authorizeddealers pursuant to a standard dealership agreement. Efes Russia currently has approximately175 authorized dealers.

Customers

Russian off�trade retail outlets that sell beer can be broadly classified under six categories:

(i) supermarkets with a selling area of at least 300 square metres, more than two check�outsand self�service;

(ii) mini markets with a selling area of under 300 square metres and usually one or two check�outs;

(iii) food stores which stock a wide range of foods;

(iv) "kiosks", selling items such as cigarettes, beer, soft drinks, and snacks, where customers areserved through a glass window with a selling area of under 12 square metres;

(v) "pavilions", which are relatively larger kiosks in which customers can be served through thecounter; and

(vi) open markets, which are groups of kiosks or pavilions.

The majority of off�trade sales points consist of smaller retail points, with food stores constitut�ing 57.6 per cent of all off�trade retail outlets in Russia and accounting for 50.9 per cent of beersales (source: AC Nielsen). Kiosks, pavilions and open markets collectively accounted for 31.4per cent of off�trade retail outlets and 30.7 per cent of beer sales as of December 2006 (source:AC Nielsen). Supermarkets and minimarkets accounted for 11.0 per cent of off�trade retail out�lets and 18.4 per cent of beer sales as of December 2006 (source: AC Nielsen).

In 2006 top 10 customers constituted 29 per cent share in overall sales volume of Efes Russiain value terms, while LLC ìSovet Plusî, LLC ìAlitaî, LLC ìAtlasî, LLC ìRikomî, and OJSC ìMarko Poloî were listed as the main customers.

25October 2007

Board of Directors of Efes Moscow

Name Birth date Position

Alejandro Jimenez 1950 Chairman of the Board of Efes Moscow, CFO & Chairman of the

Board of Management of Efes Breweries International NV,

Efes Holland TMC, Efes Karaganda Brewery, Efes Weifert

Brewery, Chairman of Efes Zajecar Brewery, Efes Vitanta

Moldova Brewery, Anadolu Efes Dls, Tic.; Member of

the Board of Anadolu Efes Biraclllk ve Malt Sanayi A.S,.,

Efes Pazarlama ve Dagltlm Ticaret A.S,., Tarbes

Tarim U..

ru..nleri ve Besicilik Sanayi ve Tic AS,

Ahmet Boyacloglu 1946 Member of the Board of Efes Moscow, Anadolu Efes TMC,

Efes Romania Ind. Si Comert SA (ERIC), Efes Vitanta Brewery,

Efes Productie, Efes Weifert Brewery, Efes Zajecar

Brewery, Efes Pazarlama ve Dagltlm Ticaret AS,,

Anadolu Bilisim Hizmetleri, Cypex Co Ltd, Efes Pilsen

Sports Club, Tarbes Tarim U..

ru..nleri ve Besicilik Sanayive

Tic AS,, Mc Donald's Anadolu Restoran I.sl. Ltd.,

Coca Cola I.c,ecek

Ahmet Tugrul Aglrbas 1968 Member of the Board, General Director of Efes Moscow;

Member of the Board, General Director of OJSC "Brewery

Union "Krasny Vostok � Solodovpivo", OJSC "Amstar";

General Director of LLC "Vostok Solod", LLC "CTD "Krasny

Vostok", LLC "KV�Sibpivkompania"; Member of the Board

of CJSC "Solodovnya "Mutena"; chairman of the Board

CJSC "Rostov Beverage", CJSC "Efes Entertainment"

Demir Sarman 1970 Member of the Board of Efes Moscow, Member of the Board of

Management, CFO of Efes Breweries International N.V, Member

of the Board Efes Holland TMC, Anadolu Efes TMC, Efes Karaganda

Brewery, Efes Vitanta Moldova Brewery, Efes Weifert Brewery,

Efes Zajecar Brewery, Efes Ukraine Brewery, OJSC "Amstar"

Onur Cevikel 1971 Member of the Board, CFO of Efes Moscow; General Director

of LLC "Krasny Vostok Invest"

Salih Serdar Bolukbasi 1959 Member of the Board of Efes Moscow, MC DONALD'S

Hamburger Restaurant Isletmeleri A.S, Ana Glda Otomotiv

ve I.htiyac, Maddeleri San. Ve Tic.A.S., Anadolu Bilisim

Hizmetleri A.S., CEO of Efes Karaganda Brewery, Chairman

of the Board of OJSC "Brewery Union

"Krasny Vostok � Solodovpivo"

Eldar Mirzoev 1953 Member of the Board of Efes Moscow

Ilshat Khairullin 1965 Member of the Board of Efes Moscow, Chairman of the

Board of OJSC "Brewery Union "Krasny Vostok � Solodovpivo"Source: Efes Russia


26

Management and employees

As defined by the Charter, Shareholders Meeting, Board of Directors and General Director con�duct general management of Efes Moscow.

Shareholders Meeting is a superior management body of the Issuer authorized to elect and dis�miss members of Board of Directors. Election of the Board is conducted annually by means ofa cumulative voting. General Director governs ordinary business activity of the Issuer.

Current members of the Board are presented in the table below.

October 2007

^

^


Current role of each Member of the Board of Directors of Efes Moscow is as follows:

Alejandro Jimenez

■ 2007� till present � President of Efes Beer Group & Chairman of the Board of Managementand CEO of EBI

■ 2001�2007 � Managing Director, Partner of Dinesa Corp. (Mexico)

■ 1994�2001� Chief Operating Officer and Member of the Board of Directors of PanamcoMexico

■ Date of Affiliation: 30th of April, 2007

■ Date of the latest election: 29th of June, 2007 � Chairman of the Board of Efes Moscow

■ Graduated from University of Texas with a Bachelor of Science degree in ChemicalEngineering

Ahmet Boyacioglu

■ 2001� till present � Member of the Board of EFES PAZARLAMA VE DAGITIM TICARET A.S. (Istanbul)

■ 2005�2007 � President of Efes Beer Group & Chairman of the Board of Management andCEO of EBI


■ Date of the latest election: 29th of June, 2007 � Member of the Board of Efes Moscow

■ Graduated from Middle East Technical University with a Bachelor's degree in BusinessManagement

Ahmet Tugrul Agirbas

■ 2001� 2005 � Marketing Director of Efes Russia

■ 2005� till present � General Director of Efes Russia

■ Date of Affiliation: 11th of October 2005


■ Graduated from Istanbul University with a Bachelor of Arts degree in Management

Demir Sarman

■ 2001� till present �CFO of EBI and Member of the Board of Management

■ Date of Affiliation: 28th of July, 2003


■ Graduated from Middle East Technical University with Bachelor of Science degree in Economics

Onur Cevikel

■ 2002� till present �CFO of Efes Moscow



■ Graduated from Istanbul University with a Bachelor of Arts degree in Management

Salih Serdar Bolukbasi

■ 2007 � till present � COO of Efes Beer Group, International Beer operations

■ Date of Affiliation: 1st of October, 2007

■ 2005 � 2007 � COO of Efes Beer Group, Russia & CIS Operations

■ 2001� 2005 � General Director of Anadolu Efes Turkey Beer Operations

27October 2007


28


■ Graduated from Middle East Technical University with a Bachelor of Science degree inEconomics

Eldar Mirzoev

■ 2001� till present � Projects Manager in Efes Moscow

■ 2004 � till present � Member of the Board of OJSC "Pokrovsky Stekolny Zavod"

■ 2006 � till present � Head of representative office of Anadolu Cam Sanayi AS



■ Graduated from Azerbaijanian University of National Economy

Ilshat Khairullin

■ 2007 � till present � Chairman of the Board of OJSC "Edelveis Group"

■ 2004 � 2006� Chairman of the Board of OJSC "Brewing Union "Krasny Vostok � Solodovpivo"

■ 2006 � 2007� Chairman of the Board of OJSC "Hiring Group"

■ 1999� 2004 � General Director of OJSC "Edelveis Group"

■ Date of Affiliation: 23th of June, 2006


■ Graduated from State Agricultural University of Kazan

Efes Russia's Organization Chart as of 30th of June, 2007

Source: Efes Russia

October 2007

MANAGING DIRECTORTugrul Agirbas

OPERATIONS DIRECTOROmer Ogun

LEGAL MANAGERAnastasia Schkarina

BUSINESSDEVELOPMENT

MANAGER

TECHNICAL DIRECTORLevent Tosun

SUPPLY CHAINSERVICES DIRECTOR

Levent Tomac

EXTERNALAFFAIRS MNG.

Valery Matveenkov

PLANT DIRECTOR

KAZANMehmet Kocak

PLANTDIRECTOR UFA

EduardGiniyatullin

PLANTDIRECTOR

NOVOSIBIRSKAhmet Sennaroglu

PLANTDIRECTORROSTOV

Pavel Filippov

PLANT DIRECTORMOSCOW

Dmitry Prokhorov

FINANCE DIRECTOROnur Cevikel

HUMAN RESOURCESDIRECTOR

Mehmet Buyukcolak

SALES DIRECTORIgor Bevz

MARKETING DIRECTORBerke Kardes

..

.. .. ..

..


Number of employees as of 31st of December, 2006*

Segments Number of employees

Administrative personnel 497

Operations 1,138

Sales and distribution 603

Other 614

Total 2,852

Source: Efes Russia

* Including Krasny Vostok Group

29October 2007


30

Operations

History

Efes Moscow was incorporated by EBI in March 1997 with the participation of Knyaz Rurik JSC("Knyaz Rurik"), a closed joint stock company established by the government of the City ofMoscow, to develop a maltery and brewery complex in Moscow. Efes Moscow was establishedto build a brewery and malting complex in Moscow and undertake the production, marketingand sale of beer and malt. Construction of the Moscow brewery started in January 1998 andcommercial production commenced in May 1999. In November 2001, Efes Moscow com�menced the construction of a new state�of�the�art brewery in Rostov�on�Don, where commer�cial production began in June 2003. In May 2003 Efes Moscow acquired 100 per cent of theshare capital of OJSC Amstar ("Amstar"), whose principal asset was a brewery in Ufa, througha combination of cash and shares in Efes Moscow. In February 2006, EBI expanded its Russianoperations through the KV Group acquisition, which added two breweries in Kazan andNovosibirsk, and three malteries in Kazan.

Production facilities

Efes Russia operates breweries in each of the cities of Moscow, Rostov, Ufa, Kazan andNovosibirsk, whose annual capacity is presented in the table below. Average annual capacityutilization of Efes Russia in 2005 and 2006 was 75 per cent and 49 per cent, respectively.

Efes Russia's production capacity as of 1st of January, 2007

Site Capacity, mhl

Kazan brewery 7.0

Moscow brewery 4.6

Ufa brewery 4.1

Novosibirsk brewery 3.0

Rostov brewery 1.5

Total 20.2

Source: Efes Russia

Kazan Brewery, in the city of Kazan, the capital city of the Federal Republic of Tatarstan, is oneof the two breweries acquired through the KV Group acquisition. The establishment of theKazan brewery in its earliest form dates back to 1872, when it was founded and built in thecentre of Kazan. Most of the brewery's modernization and enlargement took place in the lastseven years, with the brewery's annual brewing capacity reaching approximately to its currentlevel of 7.0 mln hectolitres, which can be expanded up to approximately 10.0 mln hectolitresper annum within the brewery's existing infrastructure. The brewery has three adjacent malter�ies that are situated on the same area. The Kazan facility employed 669 people as of December2006. Currently, the Kazan brewery produces Beliy Medved, Krasny Vostok, Solodov,Zhigulevskoe, Gold Beer and other beer products.

Since the beginning of the construction of the Moscow brewery in 1998, Efes Moscow hasmade substantial investments to increase its capacity. The initial layout and modular infras�tructure of the brewery provided a combined platform to expand the capacity rapidly and at alower cost relative to the initial capital outlay for construction. Following the commencement

October 2007


of its operations in 1999 with an annual capacity of 1.5 mln hectolitres, the annual capacity ofthe brewery was increased to approximately 2.2 mln hectolitres during 2001 and to approxi�mately 3.0 mln hectolitres in 2002 and then to its current annual capacity of approximately 4.6mln hectolitres in 2004. Currently, the Moscow brewery produces Beliy Medved, Stary Melnik,Sokol, Warsteiner, Zlatopramen, SOL, Bavaria and Efes beer products. The plant occupies atotal area of approximately 130,372 square meters, including a closed production area ofapproximately 20,000 square meters and a warehousing area of approximately 25,568 squaremeters. As of December 2006 Moscow facility employed 1,132 people.

Efes Moscow acquired the brewery in Ufa in August 2003. Currently, the Ufa brewery producesBeliy Medved, Stary Melnik, Sokol, Efes and Amsterdam Navigator beer products. In July 2006,the capacity of the brewery in Ufa was increased by 2.0 mln hectolitres, resulting in currentinstalled capacity of 4.1 mln hectolitres. The plant occupies a total area of 130,791 squaremeters, including a closed production area of approximately 21,204 square meters and a ware�housing area of approximately 14,296 square meters. As of December 2006 Ufa facilityemployed 435 people.

The Novosibirsk brewery, which is the second brewery acquired by the Krasny Vostok Groupacquisition, is located in Western Siberia near the cities of Tomsk, Barnaul, Kemerovo,Krasnoyarsk and Omsk. The Novosibirsk brewery was built as a greenfield project in 2002 andcontains modern infrastructure. The brewery is built on 14.2 hectares of land. Its existing brew�ing capacity is approximately 3.0 mln hectolitres per annum. As of December 2006Novosibirsk facility employed 331 people. Currently, the Novosibirsk brewery produces EfesPilsener, Stary Melnik, Sokol, Beliy Medved, Krasny Vostok, Zhigulevskoe, Gold Beer Greenbeer products.

The facility in Rostov was converted between November 2001 and June 2003 from a Coca�Cola bottling plant, which was previously operated by Anadolu Efes' soft drink business, into abrewery with an annual capacity of 1.5 mln hectolitres. The plant occupies a total area ofapproximately 67,845 square meters, including a closed production area of 13,029 squaremeters and a warehousing area of 13,992 square meters. Currently, the Rostov�on�Don brew�ery produces Beliy Medved, Sokol, Efes and Stary Melnik beer products. As of December 2006,Rostov facility employed 285 people.

The brewing process

The brewing process begins with barley, which is the fundamental ingredient of beer. Barley ismalted and combined with other ingredients such as sugar, rice, corn or wheat, which areadded to produce different beer flavours. The proportion of ancillary ingredients used in brew�ing varies according to local taste preferences and type of beer.

Malted barley is being lightly crushed into a coarse powder called grist. At this stage, the othercereals can be introduced, if required by the brewer's recipe, to produce particular character�istics of flavour or colour or appearance. The grist is transferred to a large vessel called a mashtun, where it is mashed with hot water. The natural components within malt dissolve in thewater (brewers term this water liquor), and eventually a sweet yellow liquid is run off. The wort,as it is called, is then boiled with hops in large vessels, known as coppers.

The next stage is fermentation, the most critical process of all. The hopped wort is cooled andrun into fermentation vessels. Air is dosed and yeast is added, and it begins to convert the nat�

31October 2007


32

ural sugars into alcohol, carbon dioxide and a range of subtle flavours. Lagers are fermentedwith a yeast that works at cool temperatures and sinks to the bottom of the fermenting vessel.Known as bottom fermentation, to ensure hygienic conditions, enclosed fermenters are usedwith a conical base, in which the yeast settles into the base.

Lagers are brought to condition in the brewery, some are refined and filtered and some are pas�teurized to guard against deterioration from beer microbes. They reach the consumer in kegs,bottles or cans. For lagers, there is a longer period of conditioning in the brewery at low tem�perature.

Efes Russia's manufacturing facilities adhere to strict quality principles that control all stages ofproduction starting from the raw material procurement stage and continuing throughout theproduction and distribution stages.

Raw materials procurement

The principal raw materials used by Efes Russia are barley, malt, hops, yeast, water and pack�aging materials, which include bottles, resin, cans and kegs. Efes Russia manufactures animportant part of the malt requirement for Efes Russia at its malting plants in Moscow and inKazan, which have annual capacities of 46,000 and 93,000 tones of malt, respectively, andobtains the remaining raw material requirements such as yeast, hops, barley and packagingmaterials from the open market.

Russia is one of the leading grain producers of the world, and Management does not expect anysignificant supply shortage of barley for malting. Rice, sugar and hops are procured locally, butare imported when the quality of such raw materials does not conform to the requirements ofEfes Russia's breweries. The costs of rice, sugar and hops are much less significant componentsof the total production cost compared to that of barley.

Prices and sources of agricultural raw materials are largely dependent on a number of factors,including (i) crop production, (ii) weather conditions, (iii) export demand, and (iv) governmentregulations. Efes Russia seeks to maintain downward pressure on raw material costs by strate�gically sourcing raw materials and working closely with major raw material suppliers by utiliz�ing EBG's overall procurement system.

Packaging materials, mainly bottles, resin (raw material for PET), kegs, cases and pallets are pro�cured locally. The most important packaging elements are glass bottles and resin. The chang�ing consumption pattern in Russia, away from draught and towards bottled products, attractsinvestment from glass manufacturers, thereby ensuring an adequate supply of glass bottles. Inaddition, through the Krasny Vostok Group acquisition, Efes Russia also acquired a pre�formproduction capacity of 1.3 mln units per day. Therefore Efes Russia is able to manufacture animportant part of its PET requirement in Kazan and sources resin from third party suppliers.

In 2006 top 10 suppliers constituted a 45.0 per cent share in overall supply volume of EfesRussia in value terms, while subsidiaries of Ruscam, OJSC ìKrasny Vostok � Agroî, LLC ìRexamBeverage Can Naro�Fominskî, subsidiaries of Storaenso Packaging, OJSC ìGPK Efremovskyî(Cargill) were listed as the main suppliers.

October 2007


Research and development

Management considers R&D activities to be an important component of its business. Most R&Dactivities of Efes Russia are undertaken in conjunction with EBI and EBG. These activitiesinclude continuing R&D work on improvements in raw materials, products, and packaging andproduction techniques.

R&D activities of EBG are undertaken at facilities in Turkey, with the cooperation of several uni�versities and the Ministry of Agriculture. The efforts of EBG have yielded, in the last sixteenyears, improved strains of barley seed such as Efes�3, Anadolu�98 and Efes�98, and have result�ed in the creation of new, experimental seed varieties.

EBG also conducts intensive research in hops varieties with a view to improve their quality andyield and has patented several varieties with the Turkish Ministry of Agriculture, including EfesAroma, Erciyas, Ege and Guney hops. Efes Russia evaluates on an ongoing basis the possibleapplication of these products to its own production processes, under the coordination of EBG.

The technical expertise and know�how within EBG is transferred to EBI's operating subsidiariesthrough long�term management and technical support agreements with EBG.

Intellectual property rights

Except for the trademarks relating to the Efes brand, which are owned by Anadolu Efes, thetrademarks relating to the local beer brands are held by each respective operating company ofEfes Russia.

Trademarks relating to the Efes brand are sublicensed by Anadolu Efes to Anadolu EfesTechnical and Management Consultancy N.V. ("AET"), which in turn sublicenses them to EfesHolland, a wholly owned subsidiary of AET incorporated in The Netherlands. Efes Holland sub�licenses the Efes trademarks to Efes Moscow. Management believes that it has taken appropri�ate measures to protect all of its material intellectual property.

Legal matters

There are no governmental, legal or arbitration proceedings, (including any such proceedingswhich are pending or threatened, of which Efes Russia is aware), which may have, or have hadduring the 12 months prior to the date of this Information Memorandum, a significant effect onthe financial position or profitability of Efes Russia or Efes Moscow.

33October 2007

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34

Capital expenditures

For the period ended 31st of December, 2005 and 2006 Efes Russia's capital expenditures totaledUS$61.1 mln and US$91.0 mln, respectively. Increase in capital outlays in 2006 was the result of:

1) increase in the capacity of the brewery in Ufa by 2.0 mln hectolitres, resulting in currentinstalled capacity of 4.1 mln hectolitres;

2) new bottle filling line and warehouse investment in Moscow;

3) capacity enhancement in Novosibirsk brewery resulting in the effective use of the currentinstalled capacity of 3.0 mln hectolitres.

Efes Russia's Capital Expenditures in 2005�2006*

US$ ë000 2005 2006

Land 980 1,006

Buildings 152 26,610

Infrastructure 931 1,857

Machinery and equipment 42,721 66,719

Motor vehicles 2,480 1,400

Other tangible assets 52 2,161

Construction in progress 13,833 (8,741)

Total CAPEX 61,149 91,011

Source: Efes Russia

* The figure for 2006 does not include expenditures on acquisition of subsidiaries.

October 2007


Selected combined financial data

Efes Russia's combined financial statements in respect of the financial years ended 31st ofDecember, 2005 and 2006 included in this Information Memorandum have been prepared inaccordance with International Financial Reporting Standards ("IFRS").

Efes Russia's combined results of the financial year ended 31st of December, 2005 include 12 months operations of Efes Moscow and are based on comparable audited IFRS accounts ofEfes Moscow for 2005�2006. Efes Russia's consolidated results of the financial year ended 31st ofDecember, 2006 include 12 months operations of Efes Moscow and 10 months operations ofKrasny Vostok Group. These combined financial results were not audited and were prepared forthe purpose of this Information Memorandum only.

Efes Russia's financial results for 2005�2006 presented in this Information Memorandum are notdirectly comparable due to the impact of additional capacity acquired (Krasny Vostok Group)during the periods presented.

The financial section of the Information Memorandum contains translations of certain amountsinto U.S. dollars at exchange rates specified in the table below.

Exchange Rates RUR/US$ in 2005�2006

2005 2006

RUR/US$, end of the year 28.7825 26.3311

RUR/US$, average (12 months) 28.2800 27.0600

RUR/US$, average (10 months) ñ 26.9650Source: Efes Russia

Profit and Loss Statement

Profit & Loss Statement of Efes Russia for 2005�2006(1)

US$ ë000 2005 $ per Hl % of Sales 2006 $ per Hl % of Sales

Sales 369,324 61.3 100.0% 513,577 59.2 100.0%

COGS

COGS (excl. DD&A) (168,195) (27.9) 45.5% (227,571) (26.2) 44.3%

DD&A in COGS (18,307) (3.0) 5.0% (32,648) (3.8) 6.4%

Total COGS (186,502) (30.9) 50.5% (260,219) (30.0) 50.7%

Gross profit 182,822 30.3 49.5% 253,357 29.2 49.3%

Operating expenses

Selling and distribution costs (96,434) (16.0) 26.1% (138,097) (15.9) 26.9%

G&A (30,647) (5.1) 8.3% (51,599) (5.9) 10.0%

DD&A in OPEX (9,068) (1.5) 2.5% (10,340) (1.2) 2.0%

Total operating expenses (136,149) (22.6) 36.9% (200,037) (23.0) 38.9%

Operating profit 46,673 7.7 12.6% 53,321 6.1 10.4%

Financial expense � net (4,910) (0.8) 1.3% (6,879) (0.8) 1.3%

EBT 41,763 6.9 11.3% 46,442 5.4 9.0%

Income tax (10,966) (1.8) 3.0% (11,867) (1.4) 2.3%

Minority interest (2) � � 0.0% � � 0.0%

Net income 30,797 5.1 8.3% 34,574 4.0 6.7%

EBITDA (3) 74,703 12.4 20.2% 96,901 11.2 18.9%Source: Efes Russia(1) Data for 2005 are based upon comparable audited IFRS accounts of Efes Moscow for 2005�2006. Data for 2006 are based on unauditedcombined results of 12 months audited results of Moscow Efes Brewery and 10 months operations of Krasny Vostok Group.(2) Minority interest is omitted.(3) EBITDA is calculated as earnings before interest (financial income/(expense) � net), tax, depreciation and amortization, minus minority inter�est, and as applicable, minus gain on holding activities, provisions, reserves and impairment.

35October 2007


36

Sales. Efes Russia's revenue is principally generated from sales of beer products in Russia anda small portion of revenue is derived from the sale of soft drinks and bottled water. Efes Russiarecords as "sales", revenues net of discounts and value added and sales taxes, in compliancewith IFRS. For the year ended 31st of December, 2005 and 2006, sales of beer products consti�tuted 99.8 per cent and 99.6 per cent of Efes Russia's overall sales (in physical terms), respec�tively. Sales of soft drinks for the year ended 31st of December, 2006 constituted only 0.4 percent (in physical terms).

Sales growth in 2006 was backed by both organic (consumption volumes and price dynamics)and inorganic factors (Krasny Vostok Group acquisition in February 2006). Overall, for the yearended 31st of December, 2006 sales of Efes Russia grew to US$513.6 mln compared toUS$369.3 mln a year ago.

Efes Russia's average sales price (dollar per hectolitre) for the years ended 31st of December, 2005and 2006 were US$61.3 and 59.2, respectively. The decline was largely attributed to the KrasnyVostok Group acquisition, whose brand portfolio is mostly comprised of economy brands.

Costs of goods sold. Costs of sales include materials used, depreciation, labour and other pro�duction expenses, including packaging. For the year ended 31st of December, 2006, materialsused, depreciation, utilities and maintenance, labour and other production expenses constitut�ed 72.0 per cent, 12.5 per cent, 7.1 per cent, 5.2 per cent and 3.1 per cent of total costs ofsales, respectively. Costs of sales are affected by fluctuations in raw material costs, principallythe price of malt and barley, and costs of packaging materials such as bottles, cans and PETcontainers and labels. Costs of sales are also affected by the level of investment in productioncapacities through depreciation charges to property, plant and equipment attributable to pro�duction.

For the year ended 31st of December, 2006 and 2005 cost of goods sold of Efes Russia totaledUS$260.2 mln and US$186.5 mln respectively. For the period 2005�2006 Efes Russia improvedits cost effectiveness as its production costs per hectolitre declined to US$30.0 from US$30.9 ayear ago.

Structure of COGS of Efes Russia for 2005�2006*

US$ ë000 2005 US$ per Hl % of Total 2006 US$ per Hl % of Total

Materials and components 145,580 24.2 78.1% 187,364 21.6 72.0%

Utilities and maintenance 10,293 1.7 5.5% 18,573 2.1 7.1%

Labour costs 7,102 1.2 3.8% 13,647 1.6 5.2%

Others 5,220 0.9 2.8% 7,987 0.9 3.1%

DD&A in COGS 18,307 3.0 9.8% 32,648 3.8 12.5%

Total 186,502 30.9 100.0% 260,219 30.0 100.0%

Source: Efes Russia

* Data for 2005 are based upon comparable audited IFRS accounts of Efes Moscow for 2005�2006. Data for 2006 are based on unaudited

combined results of 12 months operations for Moscow Efes Brewery and 10 months operations of Krasny Vostok Group

Operating expenses. The principal operating expenses of Efes Russia are selling and marketingexpenses and general and administrative expenses. For the year ended 31st of December, 2006,selling and marketing expenses constituted 69.0 per cent and general and administrativeexpenses constituted 25.8 per cent of total operating expenses.

October 2007


Structure of Operating Expenses of Efes Russia for 2005�2006*


Selling and distribution costs 96,434 16.0 70.8% 138,097 15.9 69.0%

G&A 30,647 5.1 22.5% 51,599 5.9 25.8%

DD&A in OPEX 9,068 1.5 6.7% 10,340 1.2 5.2%

Total 136,149 22.6 100.0% 200,037 23.0 100.0%

Source: Efes Russia



Selling and distribution expenses include marketing and advertising expenses, personnel expens�es relating to sales and marketing, distribution expenses and other expenses. For the year ended31st of December, 2006 and 2005, advertising, marketing and selling expenses constituted 12.3 per cent and 13.0 per cent of net sales, respectively.

General and administrative expenses consist primarily of personnel expenses, management andtechnical assistance fees, taxes and duties and other expenses.

Structure of G&A Expenses of Efes Russia for 2005�2006*


Labour costs 12,779 2.1 41.7% 21,329 2.5 41.3%

Business services 2,471 0.4 8.1% 6,019 0.7 11.7%

Management services 4,987 0.8 16.3% 3,918 0.5 7.6%

Taxes other than income tax 2,889 0.5 9.4% 7,397 0.9 14.3%

Royalty 164 0.0 0.5% 2,237 0.3 4.3%

Rent expenses 1,086 0.2 3.5% 1,277 0.1 2.5%

Transportation and

vehicle maintenance 348 0.1 1.1% 737 0.1 1.4%

Other 5,924 1.0 19.3% 8,685 1.0 16.8%

Total operating expenses 30,647 5.1 100.0% 51,599 5.9 100.0%

Source: Efes Russia



Operating expenses are principally affected by advertising and marketing budgets in responseto the competitive environment in Russia, the structure of distribution channels and the growthof operations, not only through the acquisition of brewing assets but also through investmentsin capacity expansion.

Operating profit. Efes Russia's operating profit for the year ended 31st of December, 2006 and2005 totaled US$53.3 mln and US$46.7 mln, respectively. Decline of operating margin from12.6 per cent to 10.4 per cent in 2006 was the result of abovementioned growth in operatingexpenses and a decrease in average price per hectolitre.

Net financial expense. Net financial income (expense) of Efes Russia is defined as the sum ofinterest expense on borrowings, interest expense on finance leases, foreign currency exchangegains (losses) and other financial income (expense). Net financial expense of Efes Russia for theperiod ended 31st of December, 2006 and 2005 was US$6.9 mln and US$4.9 mln, respectively.

Net Income. Efes Russia's net income for the year ended 31st of December, 2006 and 2005totaled US$34.6 mln and US$30.8 mln, respectively.

Over the past years significant portion of the accumulated profit is used to finance the investmentsand business expansion. In 2006 Efes Russia distributed around US$ 3 mln in dividends.

37October 2007


38

Trends in earnings in 2007

Management anticipates that volume and sales will experience an increase in 2007 relative to2006, all other things being equal, reflecting the impact of the addition of 12 months opera�tions of Krasny Vostok Group (existing brewing capacity of 10 mhl and malt production capac�ity of 93,000 tonnes), subsequent optimization following the completion of Krasny VostokGroup integration process, as well as organic sales growth consistent with past growth,premised on continued GDP growth in Russia and the continuation of existing consumertrends, with an increase in average beer consumption per capita.

In 1H2007 combined sales of Efes Russia totaled US$308.5 mln, while average price amount�ed to 61.7 US$/Hl from 59.2 US$/Hl in 2006. In 1H2007 average sales price of Efes Russiaincreased. Average sales price was positively impacted by price increases in the period andstrenghtening of the rouble, but negatively effected by the increased share of economy segmentproducts in total sales.

Management does not anticipate any significant fluctuations in its gross profit margins in theshort to medium term in spite of rising distribution and raw material costs. The price of resin, apetroleum derivative and the primary raw material used in PET container production, is likelyto fluctuate with oil prices, but any moderate increases in the price of resin are likely to be atleast partially offset by cost savings from the addition of PET production capacity purchased inthe Krasny Vostok Group acquisition.

Operating expenses are likely to continue to grow at levels consistent with past growth, drivenby continuous increases in selling and marketing expenses and general and administrativeexpenses supporting Efes Russia's overall growth. In 1H2007 Efes Russiaís combined EBITDAtotaled US$59.0 mln (19.1 per cent margin), operating profit totaled US$30.9 mln (10.0 per centmargin) and net income totaled US$20.0 mln (6.5 per cent margin).

Balance Sheet

Balance Sheet of Efes Russia for 2005�2006 (1)

US$ ë000 2005 % of Assets 2006 % of Assets

Non�current assets

PP&E (net) 224,536 64.6% 513,878 70.2%

Intangible assets 44,794 12.9% 49,058 6.7%

Deferred tax assets � 0.0% 3,438 0.5%

Total non�current assets 269,329 77.5% 566,374 77.3%

Current assets

Cash and cash equivalents 3,948 1.1% 8,600 1.2%

Inventories 31,622 9.1% 69,587 9.5%

Trade receivables (net) 18,640 5.4% 35,358 4.8%

Due from related parties 1,946 0.6% 4,805 0.7%

Other current assets 21,903 6.3% 47,766 6.5%

Total current assets 78,059 22.5% 166,117 22.7%

TOTAL ASSETS 347,389 100.0% 732,490 100.0%

Current liabilities

Trade payables 13,956 4.0% 24,938 3.4%

Due to related parties 16,937 4.9% 21,395 2.9%

Short�term borrowings 44,899 12.9% 97,896 13.4%

Income tax payable � 0.0% 926 0.1%

Other curen liabilities 10,497 3.0% 48,548 6.6%

Total current liabilities 86,288 24.8% 193,703 26.4%

October 2007


US$ ë000 2005 % of Assets 2006 % of Assets

Non�current liabilities

Long�term borrowings 16,750 4.8% 6,250 0.9%

Deferred tax liabilities 11,209 3.2% 9,680 1.3%

Total non�current liabilities 27,959 8.0% 15,930 2.2%

Total equity(2) 233,141 67.1% 522,857 71.4%

Minority interest (3) � 0.0% � 0.0%

TOTAL EQUITY AND LIABILITIES 347,389 100.0% 732,490 100.0%

Source: Efes Russia

(1) Data for 2005 are based upon comparable audited IFRS accounts of Efes Moscow for 2005�2006. Data for 2006 are based on unaudited


(2) Total equity represents the sum of equities of Efes Moscow and Kransy Vostok. If the consolidation accounted for intercompany holdings

(elimination effect) the result would be significantly different.

(3) Minority interest is omitted.

Assets. Efes Russia's asset base expanded considerably in 2005�2006 largely due to inorganicgrowth as a result of acquisition of KV Group. As of the year ended 31st of December, 2006 and2005 assets of Efes Russia totaled US$732.5 mln and US$347.4 mln, respectively. The largest part(over 70 per cent) of the asset base of Efes Russia as of 31st of December, 2006 was contributedby PP&E, represented by brewing facilities. As of 31st of December, 2006 US$17.0 mln of PP&Eas estimated based on market value was pledged to secure Efes Russia's loans and borrowings.

Up to 9.5 per cent of total assets of Efes Russia as of 31st of December, 2006 was representedby inventories, primarily malt, packaging materials, work in process, finished goods spare parts.Average inventory turnover period in 2006 and 2005 was 81 days and 65 days, respectively.The increase is mainly due to effect of increase in the number of operating plants.

Up to 6.7 per cent of total assets of Efes Russia as of 31st of December, 2006 was representedby intangible assets, primarily goodwill arose from acquisition of Amstar in 2003.

Up to 4.8 per cent of total assets of Efes Russia as of 31st of December, 2006 was representedby trade receivables, which average turnover period in 2006 and 2005 was 19 days and 16days, respectively. Given that trade payables turnover in 2006 totaled 31 days overall cash con�version cycle of Efes Russia in 2006 is estimated at 69 days.

Loans and borrowings. Total borrowings of Efes Russia totaled US$104.1 mln as of 31st ofDecember, 2006, while it's Debt/EBITDA ratio totaled 1.07x. As of 30th of June, 2007 EfesRussia's financial debt decreased to US$99.7 mln, of which dollar�denominated and ruble�denominated loans constituted 11.7 per cent and 88.3 per cent, respectively.

Efes Russia enjoys strong relationship with its creditors, and current debt book includes credi�tors like European Bank for Reconstruction and Development, Citibank, Garantibank,Finansbank, Yapi Kredi Bank and Deutsche Bank.

Efes Russia's Debt Book as of 30th of June 2007

Loan type Amount, mln US$

US$ loans variable interest rate (secured) 11.7

RUR loans fixed interest rate (secured) 7.9

RUR loans fixed interest rate 80.1

Total 99.7

Cash& Cash Equivalent (10.4)

Net Debt 89.4

Source: Efes Russia

39October 2007


40

Financial Debt repayment schedule*

Currency (mln) 2007 2008

RUR (in dollar equivalent) 62.3 25.8

US$ 8.6 3.1

Source: Efes Russia

* Excluding forthcoming ruble bond issue

October 2007


Risk factors

Any investment in ruble bonds under discussion is subject to a number of risks. Before makingany investment decision, prospective investors in ruble bonds should consider carefully the fac�tors and risks attached to such an investment, including, in particular, the Risk Factorsdescribed below, together with all other information contained in this InformationMemorandum. The information does not purport to be exhaustive. Additional risks and uncer�tainties not presently known to the Issuer, or that the Issuer currently deems immaterial, mayalso have an adverse effect on its business. Investors should consider carefully whether aninvestment in ruble bonds of Efes Moscow is suitable for them in light, among other things, ofthe information in this Information Memorandum and their personal circumstances.

Country risks

POLITICAL INSTABILITY

Since the dissolution of the Soviet Union, Russia has implemented market�based economicreforms. Although in recent years there has been a general improvement in economic indica�tors, there can be no assurance that the political and economic reforms necessary to completethe transition from centrally�planned to market�based economy will continue to be imple�mented. The political system of Russia is susceptible to periods of instability resulting fromreform, social unrest and rapid changes in government policies, any of which could have amaterial adverse effect on the activities of the Issuer. The policies pursued by the President, theagenda set by the Duma and any re�examination of the Russian privatization process of the1990s could have significant consequences for the Russian economy. Additional factor of polit�ical instability in the near�term is forthcoming Duma and Presidential elections in December2007 and March 2008, respectively. The Issuer's business prospects in Russia could be harmedin case of inconsistency in application of government policy in the implementation of structuralreforms.

ECONOMIC SLOWDOWN

The governments of Russia have at times implemented policies of economic reform and stabi�lization. These policies have, for example, involved liberalizing prices, reducing defenseexpenditure and subsidies for state�owned enterprises, privatizing state�owned enterprises,reforming the tax and bankruptcy systems, and introducing legal structures designed to permitprivate, market�based activities and foreign trade and investment. While these policies havemet with some success, there can be no assurance that such policies will continue to be pur�sued, or that, if pursued, they will be successful.

The Russian economy and the health of government finances remain highly dependent on oilexports and international oil prices. A sustained decline in oil prices could slow or disrupt theRussian economy, which could have an effect on disposable income and therefore consump�tion levels of products like premium beer, materially adversely affecting the Issuer. Moreintense inflationary pressure might also be a factor threatening to real disposable income andthus putting a downward pressure on trends in beer consumption in Russia.

Economic slowdown in Russia combined with resumed depreciation of national currencycould have a negative impact on Issuer's financial performance increasing its financial expens�es on dollar�denominated debt as well as hampering, to a certain extent, plans to finance cap�ital expenditures.

41October 2007


42

IMMATURITY OF LEGAL SYSTEMS, PROCESSES AND PRACTICE

Risks associated with the legal system in Russia include, to varying degrees (i) inconsistenciesbetween and among laws including tax legislation, presidential decrees, edicts, and govern�mental and ministerial orders and resolutions; (ii) conflicting local, regional and federal rulesand regulations; (iii) the lack of judicial or administrative guidance on interpreting the applica�ble rules; (iv) the untested nature of the independence of the judiciary and its immunity fromeconomic or political influences; (v) the relative inexperience of jurists, judges and courts ininterpreting recently enacted legislation and complex commercial arrangements; (vi) a highdegree of discretion on the part of governmental authorities; (vii) variability in the interpretationand application of tax laws and regulations by the respective tax authorities and (viii) a lack ofbinding judicial precedents. There is no suretyship that Efes Russia or any other claimant wouldobtain effective legal redress from any court or tribunal in Russia.

The recent enactment of many laws, the lack of consensus about the scope, content and paceof economic and political reform and the rapid evolution of the legal systems in ways that maynot always coincide with market developments have resulted in ambiguities, inconsistenciesand anomalies and the enactment of laws and regulations without a clear constitutional or leg�islative basis, that give rise to investment risks that do not exist in more developed legal sys�tems. In addition, legislation in Russia often contemplates implementing regulations that havenot yet been promulgated, leaving substantial gaps in the regulatory infrastructure.Furthermore, not all legislation is published and available for review. Legislation has beenenacted in Russia to protect private property against expropriation and nationalisation.However, due to the lack of experience in enforcing these provisions in the short time they havebeen in effect and due to potential political changes in the future, there can be no assurancethat such protections would be enforced in the event of an attempted expropriation or nation�alization. No assurance can be given that the future development of the laws and legal systemsin Russia will not have a material adverse effect on the Issuer.

LEGAL AND REGULATORY BURDENS

A large part of Efes Russia's business is subject to laws that affect its operations, including lawsand regulations relating to employment, health, sanitation, alcoholic beverage control and safe�ty standards. These laws and regulations impose a significant administrative burden on theIssuer and additional or more stringent requirements could be imposed in the future.

Regulatory uncertainty may make it difficult for the Issuer to plan investments or conduct itsbusiness in Russia. Failure to obtain necessary approvals or licenses or to make payments underregulations could delay Efes Russa's expansion plans, require it to incur additional, unantici�pated expenditures, cause delays in production or result in liability for fines and penalties.Although Management believes that Efes Russia currently holds all material licenses necessaryfor its existing operations and will obtain all necessary approvals and licenses required in con�nection with its expansion plans, no assurance can be given in this regard, and any failure toobtain such approvals or licenses may have a material adverse effect on the Issuer.

UNCERTAINTIES ABOUT THE RELIABILITY OF STATISTICAL INFORMATION

Official data published by federal, regional and local governments and agencies in Russia aresubstantially less complete and reliable than those of other, more developed countries. Officialstatistics may also be produced on different bases to those used in more developed countries.Due to the unavailability of alternative, reliable sources of country�specific statistics, Efes Russianecessarily relies to some extent on official data in its business planning. In addition, any dis�cussion of matters relating to Russian market herein is subject to uncertainty due to concerns

October 2007


about the completeness and reliability of available official and public information. Therefore,assumptions made by Efes Russia in its business plans may prove to be incorrect, which couldhave a material adverse effect on Efes Russia.

THE UNRELIABILITY OF THE RUSSIAN RAILWAY SYSTEM

Efes Russia currently relies to a significant extent on the rail freight network operated by OJSC Russian Railways, a state�owned company, for deliveries of its products to its distributorsin many parts of Russia and in particular east of the Urals. The Russian railway system is sub�ject to risks of disruption as a result of the declining physical condition of the facilities, a short�age of rail cars, the limited capacity of border stations and load shedding, including those dueto poorly maintained rail cars and train collisions. Railway tariffs for freight were increased2005�2006, resulting in corresponding increases in transportation costs. Although Efes Russiahas taken steps, including purchasing its own rail cars, to reduce the risk of disruption and toreduce its dependence on rail freight, a significant increase in rail freight or other transporta�tion costs could have a material adverse effect on the Issuer.

Industry risks

COMPETITION

The beer industry is highly competitive. Breweries compete mainly on the basis of brand image,price, distribution networks and, particularly in emerging markets, including Russia, productquality. Although the global beer industry is not highly concentrated, in most national marketsa small number of local brewers generally account for a very large majority of the market andinternational brands and smaller local brewers take up the remainder. The growth in beer con�sumption in Russia has attracted new market participants and has produced increasingly com�petitive environments in certain of these markets. The participants in these markets includemajor international beer companies with substantial financial resources greater than EfesRussia's and particular industry strengths. The Issuer intends to continue with strategiesdesigned to maintain or improve its competitive position in Russia but there cannot be anyassurance that these strategies will be successful. Any loss of market share could be permanent.Loss of market share to competitors, investment pressure to maintain a competitive position, oraggressive price discounting could have a material adverse effect on Efes Russia.

DECLINE IN CONSUMER DEMAND FOR BEER

Demand for beer depends on several factors including demographic factors, weather condi�tions 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,particularly in emerging markets. Imposition of, or increases in, excise or other taxes on beercould negatively affect the brewing industry with increased prices for consumers. Reduced con�sumption of beer in Russia could have a material adverse effect on the Issuer.

RESTRICTIONS ON BEER ADVERTISING, SALES OR CONSUMPTION

The implementation of restrictions on, or the prohibition of, beer advertising in the mass mediaor certain sales channels could have a material adverse effect on the results of operations of theIssuer. For example, on 20th of August, 2004, Mr. Putin, President of the Russian federation,signed a bill placing restrictions on beer advertising. Those restrictions include, among otherthings, a ban on the broadcasting of beer commercials on TV and radio between 7 a.m. and 10p.m., a prohibition on the promotion of beer as being "crucial in achieving success in sportsand personal life" and a prohibition on the use of images of people or animals on beer adver�

43October 2007


44

tising. The provisions of the new law took effect on 5th of September, 2004, with the exceptionof the restriction on the use of images of people or animals, which became effective on 1st ofJanuary, 2005.

There is also a risk that Russia may impose licensing obligations on distributors and sellers ofbeer, which may also have a material adverse effect on Issuer's results of operations. In April2005, Russia passed legislation which among other things, places restrictions on the sale andconsumption of beer in certain public places (including sports and cultural organizations) andimposes a minimum age of 18 years on the purchase of alcoholic beer. There is also a law,which restricts street beer consumption As a result of this legislative changes, growth in Russianbeer market could be materially adversely affected and new product development couldbecome more challenging, which could have a material adverse effect on the Issuer's opera�tions, financial conditions or results.

In addition, the Russian law imposes restrictions that affect sponsorship of sportive events bybeer producers (namely no advertising of beer can be performed in the sport facilities and with�in 100 meters of their location). Although Management believes that such restrictions do notsignificantly effect Efes Russia's business, there can be no assurance that these restrictions orany other similar restrictions, which may be imposed in the future, may adversely effect theIssuer's business.

INCREASE IN THE PRICES OF CERTAIN COMMODITIES AND RAW MATERIALS

Efes Moscow purchases commodities and raw materials for the production of beer. These com�modities and raw materials include barley, malt, aluminium cans and PET containers and, to alesser extent, corn grits, rice and hops. Although Efes Russia produces malt in large quantities,Efes Russia depends to some degree on third party supplies of malt. The prices of all these com�modities can fluctuate widely and are determined by global supply and demand and other fac�tors over which Issuer may not have control. Issuer rarely engages in hedging of raw materialcosts. Accordingly, any increases in commodity and raw material prices could have a direct andsignificant impact on Issuer's costs, which could have a material adverse effect on the Issuer.

INABILITY TO PROTECT INTELLECTUAL PROPERTY RIGHTS

Given the importance of brand recognition to its business, Issuer has invested considerableeffort in protecting its portfolio of intellectual property rights, including trademark registrationand domain names. However, Efes Russia cannot be certain that the steps it has taken will besufficient or that third parties will not infringe or misappropriate its proprietary rights.

Issuer's risks

POSSIBLE CONTAMINATION OF BEER PRODUCTS

A risk of contamination or deterioration exists at each stage of the production cycle, includingthe production and delivery of raw materials, the brewing and packaging of beer, the stockingand delivery of beer to distributors and retailers, and the storage and shelving of beer productsat the points of final sale. Actual or alleged contamination or deterioration of Efes Russia's beerproducts could have a material adverse effect on Efes Russia.

POSSIBLE INABILITY TO MANAGE GROWTH AND INTEGRATE ANY ACQUIRED BUSINESSES

Efes Russia's ability to capitalize on the future growth potential of the beer industry in Russia inorder to benefit from further economies of scale, better satisfy customer needs and competeeffectively against other international brewers, will depend upon its ability to assess, and to

October 2007


adjust its rate of expansion in accordance with demand for beer products in Russia. Althoughto date Efes Russia has been able to manage successfully the growth of its business, there canbe no assurance that Efes Russia will continue to be able to do so, that it will achieve theplanned growth or that expanded or additional breweries will operate profitably. If Efes Russiais unable to manage growth effectively, including, among other things, by finding qualifiedmanagement or deploying and replicating its business model and technical infrastructure, itsbusiness or financial condition could be materially adversely affected.

Although Efes Russia's strategy includes growth through acquisitions, its failure to find suitable acqui�sition targets, to implement successfully their acquisition, to finance them on acceptable terms or tointegrate them into its existing operations, could have a material adverse effect on the Issuer.

POSSIBLE CONSTRAINTS IN IMPLEMENTING INVESTMENT PROGRAMME

The planned development of Efes Russia's business and implementation of its proposed invest�ment programme are dependent on its ability to generate sufficient cashflow from its operationsand to obtain bank or other debt financing on acceptable terms to finance such programme.Although Efes Russia's current investment programme consists principally of capital expendi�tures necessary to maintain and effect moderate capacity increases at its existing operations,Efes Russia is constantly evaluating acquisition opportunities that would require additionalresources. If Efes Russia is not successful in generating sufficient cashflow or obtaining sufficientcapital to fund its planned expenditures, it may need to raise additional equity finance or someor all of its planned investments may be significantly delayed or abandoned. Any such delay orabandonment could have a material adverse effect on the Issuer.

POSSIBLE INABILITY TO RENEW KEY SUPPLY AND DISTRIBUTION AGREEMENTS THAT ARE DUE TO

EXPIRE

Efes Russia is a party to a number of agreements, including consulting agreements, brandlicence agreements, premises and equipment leases, raw material supply agreements and dis�tribution agreements. To the best of the knowledge of Management, Efes Russia is not in breachof any such agreement that is material to its business. Certain of such agreements, includingvarious supply and distribution agreements, have short terms. While Management expects thatmost existing agreements that are material to Efes Russia's business will be renewed or, if notrenewed, that alternate counter parties are available, on terms similar to those of existing agree�ments, there can be no assurance that the failure to renew such an agreement would not havea material adverse effect on the Issuer.

EFES RUSSIA'S DEPENDENCE ON ANADOLU EFES FOR SOME KEY SERVICES COULD RESULT IN IT

BEING SUBJECTED TO UNFAVOURABLE TERMS FOR, OR UNAVAILABILITY OF, THOSE SERVICES

Efes Russia has a number of commercial arrangements with certain companies within EBG.Pursuant to these arrangements, it is granted a license in respect of Efes branded beer productsmanufactured, bottled and marketed by them, and receive services relating to internal auditing,technical assistance, personnel recruitment and training, information technology support, pub�lic relations, and legal affairs.

A disruption in the relationship between Efes Russia and/or EBI and Anadolu Efes, whether asa result of Anadolu Efes selling part or all of its ownership interest in EBI or for any other rea�son, could result in EBG ceasing to provide any of these services, which could have a materi�al adverse effect on Efes Russia's business or financial condition. If there was a disruption in therelationship, the Issuer may not be able to obtain similar services from unrelated parties on

45October 2007


46

terms as favorable as those offered by EBG. Conversely, it is possible that EBI's relationship withAnadolu Efes may prevent it from attempting to obtain similar services from unrelated partieson terms as or more favorable. Efes Russia could be materially adversely affected by its depen�dence on EBG for those key services.

ISSUER'S DEPENDENCE ON KEY PERSONS

The success of Efes Russia depends to a large extent on its ability to retain the services of itssenior management team. There can be no assurance that members of senior managementwould remain with Efes Russia if Anadolu Efes ceased to have a direct or indirect controllinginterest in Efes Russia or that they will remain with Efes Russia in any event. There can also beno assurance that Efes Russia would be able to find adequate replacements for key persons andtherefore the departure of key members of management could have a material adverse effecton Efes Russia.

EFES RUSSIA MAY BE SUBJECT TO VAGUELY DRAFTED RUSSIAN TRANSFER PRICING RULES

Under Russian law, the tax authorities have the right to review, in order to consider whetherthey are an appropriate basis for the determination of taxes due, the prices for transactionsbetween related entities, for example between entities within a corporate group, and certainother types of transactions between independent parties, such as foreign trade transactions andtransactions that deviate by more than 20.0 per cent from market prices or that have significantprice fluctuations. The Russian transfer pricing rules are vaguely drafted, leaving wide scope forinterpretation by the Russian tax authorities and courts. Due to the uncertainties in interpreta�tion of Russian law in this area, the tax authorities may challenge Efes Russia's prices and pro�pose adjustments. If such price adjustments are upheld by the Russian courts and implement�ed, Efes Russia's effective tax rate could increase and future financial results could be adverselyaffected. In addition, Efes Russia could face significant losses associated with the assessedamount of prior tax underpaid and related interest and penalties, if profits are reallocated fromfavorable to less favorable tax jurisdictions, and the Issuer's effective income tax rate could beincreased in future periods.

LABOUR DISPUTES MAY CAUSE WORK STOPPAGES, STRIKES AND DISRUPTIONS

To the extent that Efes Russia may seek to lower production costs, improve the efficiency of itsfacilities, exploit synergies and cope with the demands of a changing market, Efes Russia couldimplement restructuring measures, including plant closures and workforce reductions.Restructurings could harm Efes Russia's employee relations and result in labour disputes.Although Efes Russia has not to date been affected by labour unrest in Russia, there can be nosuretyship that its own relations with its employees would not be affected by such events,which could have a material adverse effect on Efes Russia.

EFES MOSCOW'S CERTAIN LOAN AGREEMENTS MAY RESULT IN PAST OR FUTURE TECHNICAL

BREACHES

At present Management believes that Efes Moscow is substantially in compliance in all materi�al respects with the loan agreements that are currently in force, there can be no assurance thatit have not or will not from time to time incur technical breaches under their loan agreements.Although Management believes that its relationship with creditors is sound and based on mutu�al trust, a deterioration in the relationship with Efes Moscow's creditors could result in theenforcement of default provisions under any loan agreements that may be in breach, whichcould have a material adverse effect on Efes Russia.

October 2007


Bond description

Basic terms

6 mln non�convertible series 01 coupon documentary bearer bonds with the requirement ofcentralized storage, with par value of RUR1,000 each for the total amount of RUR6 bln withthe maturity in 1,092 days, to be placed by the Issuer based on the Decision of Issuance andSecurities Prospectus, which were registered with the Federal Financial Markets Service on 31st of August, 2007 (state Bond registration number 4�01�36176�R).

The following description is a short summary of the terms and conditions of the Bond issue. Itis strongly recommended that all potential investors familiarize themselves fully with theDecision of Issuance and the Securities Prospectus, as these documents, rather than this sum�mary, define the rights of investors as Bondholders.

List of rights to Bonds

Issuance is made with the use of a single Certificate, which will be stored at NDC. No addi�tional certificates will be provided to bondholders, bondholders do not have the right todemand the certificates. The list and attestation of rights to the Bonds, and the list and attesta�tion of transfer of the Bonds, including encumbrance of the Bonds, are carried out by NDC asDepositary, and by depositaries that are deponents for the Depositary (hereafter collectively"Depositaries"). Ownership of the Bonds is confirmed by written notices issued by NDC andDepositaries to Bondholders.

Bond ownership rights are transferred at the moment when the transfer, having been enteredonto the Bondholders' depot account, is registered with the NDC and the Depositaries.

Bond placement

Bond placement is pursued via sale�purchase agreements at par on MICEX. Joint Lead Managers(Underwriters) who act on behalf of the Issuer will provide placement services to the Issuer.

Settlement begins on the placement date following the calculation of the results of the auction(hereafter the "Auction") to determine the first coupon rate, and ends on the placement enddate.

The Auction, determining the first coupon rate, takes place on the Bond placement date. Theprocedure of the Auction is set out in clause 8.3 of the Decision of Issuance and in clause 2.7of the Securities Prospectus.

Bond trades are made by meeting bids set out in accordance with the requirements of theExchange and agreement and procedural conditions set out in the Decision of Issuance and theSecurities Prospectus.

BOND PLACEMENT PRICE

The placement price is set at RUR1,000 per bond.

Starting on the second day of Bond placement, the purchaser pays the accrued interest on the Bond.

AUCTION PARTICIPANTS

Potential investors may act independently if they are permitted to trade on the Exchange.

47October 2007


48

Potential investors who are not permitted to trade on the Exchange on their own must eitherenter into a relevant agreement with a broker of their choice, who has the right to performtrades on the Exchange, and to order such a broker to purchase Bonds, or to acquire access tothe Exchange themselves.

BIDDING PROCEDURE

On the Auction day, market participants of the Exchange (hereafter "Market participants") willmake marked bids for the Bonds, with the accounting code T0, using the Exchange's tradingsystem, both for themselves and for their clients. The time and procedure for making bids dur�ing the auction are set by the Exchange and are agreed with the Issuer and/or the Joint LeadManagers (Underwriters).

Bids to purchase the Bonds are to be sent by the Market Participants to any of Joint LeadManagers (Underwriters) during the Bond placement. Bids must contain the following impor�tant conditions:

■ The purchase price (100% of par);

■ The quantity of Bonds;

■ The rate of the first coupon;

■ Other parameters in accordance with the Exchanges rules of trading.

The rate of the first coupon must indicate, to two decimal places, the coupon rate at which thepotential investor (market participant) is prepared to purchase the amount of Bonds indicatedin the bid at par. A condition of Bond purchase is a pre�reservation of sufficient funds on theaccount of the Investor (Market participant),on whose behalf the bid is submitted to the MICEXClearing House.

DETERMINATION OF THE FIRST COUPON RATE

At the end of the bids' submission period at Auction, the Exchange will create a register of bids,as well as separate registers of bids addressed to each Joint Lead Manager (Underwriter), to begiven to each Joint Lead Manager (Underwriter).

Based on analysis of the bids received at Auction, Issuer will decide on the rate of the firstcoupon, and will provide its decision in written form to the Exchange no less than 30 minutesprior to announcing the decision to the information agencies. Following the publication by theinformation agency of the first coupon rate value, the Issuer informs Joint Lead Managers(Underwriters) of the size of the first coupon rate.

The announcement of the first coupon rate value is published by the Underwriters via theExchange's trading system by sending an electronic message to all Market participants.

The rate of the first coupon is fixed until maturity or the first put option, the tenor of which (ifany) is set and announced by the Issuer on the day when the placement date is announced. Therates of subsequent coupons are fixed until maturity or until next put option (should the Issuerdecide to set more than one put option).

ACCEPTANCE OF BIDS AT AUCTION

Upon receipt of information about the first coupon rate value from the Issuer, Joint LeadManagers (Underwriters) accept bids in accordance with the Decision of Issuance, theSecurities Prospectus, and the Exchange's rules of trading. Only bids with the coupon value lessor equal to the declared size of the first coupon are accepted.

October 2007


Priority in accepting bids for Bond purchase is given to the bids with lowest coupon rate value.In case of receipt of multiple bids with equal coupon rate value, priority is given to the earliestreceived bid first.

PROCEDURE OF SUBMITTING BIDS FOLLOWING THE END OF THE AUCTION

Following the setting of the rate of the first coupon and the acceptance of bids made during thecourse of the auction, Market participants, both independent and those acting on behalf ofpotential investors, may, during the course of the placement, send marked bids for Bond pur�chase at the placement price to any Joint Lead Managers (Underwriters) in case of an incom�plete placement at auction. Starting on the second day of Bond placement, the purchaser paysthe accrued interest on the Bond.

Bids submitted are accepted by Joint Lead Managers (Underwriters) in full if the quantity ofBonds indicated on the bid is not greater than the quantity of unplaced Bonds (no greater thanthe total quantity of Bonds offered at placement). Should a bid exceed the quantity of unplacedBonds, the bid will be fulfilled to the extent of the remaining quantity of Bonds. Should the JointLead Managers (Underwriters) place the entire volume of Bonds offered, no further bids will beaccepted.

Secondary trading

Non�residents may acquire Bonds in accordance with current Russian legislation.

On the OTC market, Bonds are traded with no limits until maturity.

Bonds cease trading on the Exchange on the day following the date of composition of a list ofowners and /or nominal holders of the Bonds for payment of each coupon, and resume tradingon the date of payment of the coupon. The last trading day is the date of composition of a listof owners and/or nominal holders of the Bonds for payment of the last coupon and redemptionof the Bonds.

Bond payments

COUPON PAYMENT DATES

The dates for payment of the six coupons are as follows:

Coupon number Days after the placement date

Coupon 1 182

Coupon 2 364

Coupon 3 546

Coupon 4 728

Coupon 5 910

Coupon 6 1,092

COUPON PAYMENTS

Payment is made in roubles in a non�cash basis to the Bond owner, who is defined as the owneras of the end of the 6th working day prior to the coupon payment date.

In the event that the coupon payment date falls on a non�working day, be it a state holiday ora day on which settlement operations are not conducted, payment is made on the next work�

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50

ing day. Bond owners are not entitled to interest or any other type of compensation for thisdelay in payment.

Bond owners who are not NDC deponents may authorize a nominal bondholder who is anNDC deponent to receive the coupon payments.

On the basis of the list of owners and/or nominal holders of the Bonds who can receive couponpayments, the Paying agent calculates the amount to be paid to each authorized entity.

On the date of coupon payment, the Paying agent transfers the requisite sum to the account ofthe authorized party. Should one party be authorized to accept payment on behalf of severalBond owners, this party is to receive the entire sum, undivided for each Bond owner.

Fulfillment of the Bond obligations to parties indicated on the list of owners and/or nominalBondholders to receive coupon payments is also applicable if the Bonds are disposed of afterthe date on which the list is created.

Coupons on unplaced bonds are not payable.

The obligation of the Issuer regarding payment of corresponding Bond coupons is consideredcompleted from the moment of transfer of funds to the account of the bank of the party autho�rized to receive coupon payments.

DEFINITION OF COUPON PAYMENT

The size of accrued coupon payments for each coupon is defined according to the followingformula:

AC = Par* C * ((T � T0) / 365)/ 100%, where

AC � accrued coupon, roubles;

Par � Par value of one Bond, roubles;

С � coupon rate of the first coupon, p.a.;

T � current date (date of acquisition) of the Bonds, days;

T0 � date of commencement of Bond placement or commencement of current coupon period,days.

The size of the accrued coupon for one Bond is defined to one kopeck (rounding is done inaccordance with the mathematical rounding methodology). The mathematical roundingmethod is defined as that by which the value of a whole kopeck (whole kopecks) remainsunchanged when the following figure is between 1 and 4, and is rounded up to the next wholenumber when the following figure is between 5 and 9).

MATURITY AND PAYMENT OF THE PRINCIPAL

The Bonds are redeemed at par in 1,092 days after the start date of the Bond placement, by theIssuer and/or a Paying agent upon the instructions of the Issuer. In the event that the couponpayment date falls on a non�working day, be it a state holiday or a day on which settlementoperations are not conducted, payment is made on the next working day. Bond owners are notentitled to interest or any other type of compensation for this delay in payment.

October 2007


Payment is made in roubles in a non�cash basis to the Bond owner, who is defined as the owneras of the end of the 3rd working day prior to Bond maturity.

On the date of redemption payment, the Paying agent transfers the requisite sum to the accountof the authorized party.

Should one party be authorized to accept payment on behalf of several Bond owners, this partyis to receive the entire sum, undivided for each Bond owner.

Fulfillment of the Bond obligations to parties indicated on the list of owners and/or nominalBondholders to receive the redemption payment is also applicable if the Bonds are disposed ofafter the date on which the list is created.

The obligation of the Issuer regarding payment of corresponding Bond coupons is consideredcompleted from the moment of transfer of funds to the account of the bank of the party autho�rized to receive the redemption payment.

Put option

Simultaneously with the announcement of the placement date, the Issuer may announce itsdecision to use a put option (early buy�back with a possibility of subsequent sale of securitieson the secondary market, if necessary). The Issuer has the right to acquire the Bonds by a wayof sale�purchase agreement in accordance with the Russian legislation, including the use of theIssuer's irrevocable public put offers, published in mass media. The decision for early buy�back(put�option) is made by the Issuer. When the decision is made, the terms and conditions of theBond acquisition are to be set, and published on the Issuer's website (www.efes.com.ru). Theterm of Bond acquisition may not begin prior to state registration of the Bond Placement Report.

The acquisition of Bonds by way of agreement with their owner(s), with the option of re�circu�lating them, in accordance with the put option is made in accordance with clause 10.2 of theDecision of Issuance and clause 9.1.2 "г" of the Securities Prospectus.

Surety

For the purposes of the Bond, the guarantor provides a surety covering the nominal amount ofthe Bonds (RUR 6 bln) and all future coupon payments.

In clause 12.2 of the Decision of Issuance and clause 9.1.2 section "з" of the SecuritiesProspectus is included an Offer to provide support in the form of a surety of the Bond issue asof 31st of May, 2007 (hereafter the "Offer"), which is public and is in accordance with the inten�tion of OJSC "Brewing Union "Kransny Vostok Solodovpivo" to enter into a surety agreement,on the terms indicated in the Offer and in accordance with the specified procedures, with anyparty that wishes to acquire the Bonds.

The Offer is irrevocable, i.e. may not be withdrawn during the term given to accept the Offer.

Acceptance of the Offer may only be made by acquiring one or more Bonds on the conditionsdefined in the Securities Prospectus and Decision of Issuance. Purchase of any quantity ofbonds indicates acceptance of the Offer and, correspondingly, the entering into of a Suretyagreement by the relevant party (hereafter "Surety Agreement") with the guarantor, in accor�dance with which the Surety bears joint responsibility with the Issuer for the fulfillment by theIssuer of obligations to Bondholders on conditions set out in the Offer. The Surety Agreementis considered to have been entered into from the moment of the appearance of rights to the

51October 2007


52

Bonds with the first Bond owner, whereby the written form of the Surety Agreement is consid�ered to have been fulfilled.

The Surety is responsible for the execution of the Issuer's obligations to the Bond owners interms of payment to the Bond owners of the par value (nominal amount), coupon payments(interest), timely acquisition of the Bonds by the Issuer, set out in the Securities Prospectus andthe Decision of Issuance.

The guarantor bears responsibility to the Bond owners for the total value of the Bonds (RUR6 bln) and the total amount of coupon payments (hereafter the "Surety Amount"), and incase of shortfall in the Guarantee Amount, for the fulfillment of all demands of the Bond own�ers presented to the Surety as set out in the Decision of Issuance, the Surety distributes theSurety Amount between the Bond owners proportionally to the claims presented in the waydescribed below. The sum of payments made by the Surety in accordance with the Guaranteeagreement that is insufficient to fully fulfill all of the demands of the Bond holders presented tothe Surety in the order set out in the Decision of Issuance and the Securities Prospectus, absentany other agreement, redeems first the nominal amount, and the remainder redeems the duecoupon payments (interest) and/or the sum of responsibility for non�fulfillment/improper fulfill�ment of the Issuer's obligations in terms of Bond acquisition.

In case of non�fulfillment or improper fulfillment by the Issuer of Bond obligations, the Suretyand Issuer bear joint responsibility. Once it has been established that the Issuer did not fulfillcertain Bond obligations, the Surety is responsible for fulfilling the obligations of the Issuer butonly for the part in which the Issuer did not fulfill these obligations.

October 2007


Tax considerations

The following is a general summary of Russian federal tax consequences of acquisition, own�ership and disposition of the Bonds by beneficial owners, including consequences relating toredemption of the Bonds and interest payments on the Bonds to the Bondholders, both Russianresidents and non�residents. This summary is a general guide only and should be treated withappropriate caution. This summary is based on the Russian federal tax law in effect on the dateof this Information Memorandum. The said legislation may be revised and its new provisionsmay have a retroactive effect. This summary does not seek to address the applicability of, andprocedures in relation to, taxes levied by the regions, municipalities or other non�federal levelauthorities of the Russian Federation. Nor does this summary seek to address the availability ofdouble tax treaty relief. This summary does not address any tax consequences arising under thelaws of any other jurisdiction. Bondholders should consult their own tax and other profession�al advisers prior to any investment as to the consequences of the acquisition, ownership anddisposition of the Bonds in their particular circumstances including, but not limited to, the con�sequences of receiving interest and selling or redeeming the Bonds. No representations withrespect to the Russian tax consequences to any particular holder are made hereby.

General

Many aspects of Russian tax are subject to significant uncertainty. Furthermore, the substantiveprovisions of Russian tax law applicable to financial instruments may be subject to more rapidand unpredictable change and inconsistency than in jurisdictions with more developed capitalmarkets and tax systems.

For the purposes of this summary, a "non�resident Bondholder" means (i) a physical person,actually present in the Russian Federation for less than 183 days in 12 consecutive months or(ii) a legal person or organisation, in each case not organised under Russian law, that holds anddisposes of the Bonds otherwise than through a permanent establishment in Russia. An appli�cable double tax treaty may affect tax residency.

Taxation of individuals

TAXATION OF THE ACQUISITION OF THE BONDS

No Russian tax implications arise for purchasers of the Bonds upon purchase of the Bonds.

TAXATION OF INTEREST

Taxation of resident Bondholders

Interest income paid to the Russian resident Bondholders is be subject to Russian personalincome tax to be withheld by a tax agent (the Issuer) at a source of payment at the rate of 13per cent.

Taxation of non�resident Bondholders

Interest income paid to non�resident Bondholders is be subject to Russian income tax to bewithheld by a tax agent (the Issuer) at a rate of 30 per cent.

The rate of withholding tax on income may potentially be decreased on the basis of a doubletax treaty between the Russian Federation and the country of residence of non�residentBondholder (see sub�section "Tax clearance procedures" below).

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TAXATION OF INCOME FROM SALE (REDEMPTION) OF THE BONDS

Taxation of the resident Bondholders

Capital gains received by Russian resident Bondholders from the sale of the Bonds must bedeclared on the Bondholders' annual tax return and is subject to personal income tax at the rateof 13%.

The tax base in respect of sale of the Bonds is calculated as sale proceeds less documentaryconfirmed expenses related to purchase, sale and keeping of these Bonds (including expensescompensated to a professional securities market participant, exchange duties, etc.).

When the Bonds are sold by the individual Bondholder through a Russian broker, trust manag�er or any other person acting in the interests of the Bondholder under a commission, agencyagreement or any other similar agreement, this person would be considered a tax agent andwould have to calculate, withhold and remit tax upon income payment to the individual with�in the tax period or at the end of a tax period. If a tax agent did not withhold personal incometax, the taxpayer shall pay the tax itself.

Taxation of the non�resident Bondholders

A non�resident individual Bondholders, should generally be subject to Russian tax in respect ofcapital gains realized on a sale, exchange or other disposal of the Bonds provided that incomefrom such sale, exchange or disposal of the Bonds is received from a source within Russia. Inthe absence of clear definition of what constitutes income from sources within Russia in thecase of sale of the Bonds there is a risk that the income from disposal of Russian securities maybe considered as income from a source in the Russian Federation. Thus, capital gains from thesale, exchange or disposal of the Bonds received by non�resident individual Bondholders froma source in the Russian Federation may be subject to tax in Russia at the rate of 30%.

The method of calculation of taxable capital gains from the sale, exchange or other disposal ofthe Bonds and procedure for withholding and remittance of personal income tax to the Statebudget should be similar to those applicable for resident Bondholders (see sub�section"Taxation of resident Bondholders" above).

The rate of withholding tax on income may potentially be decreased on the basis of a doubletax treaty between the Russian Federation and the country of the Non�resident Bondholder's taxresidency (see sub�section "Tax clearance procedures" below).

TAXATION OF INCOME FROM A REDEMPTION OF THE BONDS

The Russian Tax Code does not contain direct provisions regarding redemption of the Bonds.The Issuer is aware of some private clarifications, which state that partial redemption of the parvalue of the Bonds should not be considered income of the Bondholders, as in substance it rep�resents repayment of the principal amount of a loan. However income from redemption of theBonds may arise for Bondholders if the Bonds have been purchased at a discount (on the sec�ondary market). This income should be subject to personal income tax.

When an individual Bondholder (either resident or non�resident) purchases the Bonds througha Russian broker, trust manager or any other person acting in favor of the Bondholder under acommission, agency agreement or any other similar agreement, this person would be consid�ered a tax agent and would have to calculate, withhold and remit tax upon income payment tothe individual within the tax period or at the end of a tax period. If a tax agent did not withholdpersonal income tax, the taxpayer shall pay the tax itself.

October 2007


There is no clarity regarding the moment when the taxable income and accordingly a taxagent's obligation to withhold tax arise if a part of the face value of the Bonds purchased at adiscount (on the secondary market) is redeemed. In the Issuer's view and based on the com�ments provided by tax advisers, the most conservative approach in this case would be to esti�mate the tax base upon each partial redemption of the Bonds. The tax base of the Bondholder(either resident or non�resident) may be calculated as a difference between the repaid part ofthe face value and purchase costs of the Bonds in the percentage proportionate to the repaidpart of the Bonds' face value. In this case when transactions with the Bonds are executedthrough a broker, a trust manager or any other person acting in favor of the Bondholder undera commission, agency agreement or any other similar agreement this person would have towithhold tax upon income payment to the individual within the tax period or at the end of atax period.

Potential investors should consult their own advisers regarding the taxation of income fromredemption of the Bonds.


The resident Bondholders' income from redemption of the Bonds purchased at a discount (onthe secondary market) should be subject to personal income tax at the rate of 13% and mustbe reflected in the Bondholders' annual tax return.


The non�resident Bondholders' income from redemption of the Bonds purchased at a discount(on the secondary market) should be subject to personal income tax at a rate of 30%.

The personal income tax rate may potentially be decreased on the basis of the double tax treatybetween the Russian Federation and the country of the tax residence of non�residentBondholder (see sub�section "Tax clearance procedures" below).

Taxation of legal entities

TAXATION OF THE ACQUISITION OF THE BONDS

No Russian tax implications arise for purchasers of the Bonds upon purchase of the Bonds.

TAXATION OF INTEREST


Interest income on the Bonds paid to resident Bondholders should be subject to corporate prof�its tax at the rate of 15%. Corporate resident Bondholders are liable for Russian taxes on a self�declaration basis, i.e. the taxes should be declared and paid to the Russian tax authorities bycorporate Bondholders receiving the interest income on the Bonds.

Interest income should be included in the taxable base on the last day of a particular reporting(tax) period or on the date of the disposal of the Bonds regardless of the actual date of interestincome payment by the Issuer.

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56


Interest income on the Bonds paid to non�resident Bondholders should be subject to Russianwithholding tax. It may be assumed that interest on the Bonds should be subject to the with�holding tax at a general rate applicable to interest payable to the non�residents i.e. 20%. If adouble tax treaty between the Russian Federation and the country of the residence of non�res�ident Bondholder applies, the withholding tax rate on interest may be decreased (in the major�ity of cases to zero) (see sub�section "Tax clearance procedures" below).

Potential investors should consult their own advisers regarding the application of a tax rateapplicable to the interest income on the Bonds and regarding the application of respective dou�ble tax treaty.

TAXATION OF INCOME FROM SALE (REDEMPTION) OF THE BONDS


Income from the disposal of the Bonds by Russian resident Bondholders (legal entities or organ�isations) is subject to corporate profits tax at a rate of 24%. Taxable profits from the disposal ofthe Bonds (including their redemption) should be determined as the difference between thesales (redemption) price of the Bonds including the accumulated interest and the purchase priceof the Bonds, expenses relating to purchase and sale of the Bonds and the accumulated amountof interest income paid upon the purchase of the Bonds. The purchase and selling price of theBonds must be within the range of the minimal and the maximum price of the deals with theBonds, registered at stock exchange on the date of the trades. Taxable profit shall be definedin accordance with one of the established methods of writing off the cost of securities (FIFO,LIFO or unit cost).

Russian tax legislation contains the requirement that profit arising from operations with securi�ties quoted on a stock exchange must be calculated and accounted for separately from profitfrom operations with securities that are not quoted on a stock exchange and from operatingprofit. Therefore, Russian resident Bondholders that are legal entities or organisations may beable to apply losses arising in respect of the Bonds only to offset capital gains, or as a carry for�ward to offset future capital gains, from the sale, exchange or other disposition of securities ofa relevant category (quoted on a stock exchange or unquoted). Special tax rules apply toRussian legal entities that hold a dealer licence.


In accordance with the current tax legislation capital gains from sale (or any other disposal) ofthe Bonds by non�resident Bondholders are not subject to Russian withholding tax. However,there is a risk that the interest income accrued but not paid as of the date of sale of the Bondsmay be subject to withholding tax in Russia (see sub�section "Taxation of interest / Taxation ofnon�resident Bondholders" above).

TAXATION OF INCOME IN THE FORM OF A DISCOUNT RECEIVED UPON PURCHASE OF THE BONDS

ON A SECONDARY MARKET

Based on the definition of the interest income provided by the Tax Code income arising uponacquisition of the Bonds on a secondary market at discount to the par value (if any) should notbe qualified as interest income for tax purposes as it is not declared (established) by the Issuerin advance (i.e. established in the Decision on the Issuance of the Bonds). Rather than interest

October 2007


income such discount should comprise a part of the capital gains from disposal of the Bonds(see "Taxation of income from sale (redemption) of Bonds").

Tax clearance procedures

ADVANCE TAX CLEARANCE

Where income is received by the non�resident Bondholder, whether an individual or a legalentity or organization, or by a Russian permanent establishment of a foreign company from aRussian source, in order to use the benefits of an applicable double tax treaty, documentary evi�dence is required to confirm the applicability of the double tax treaty for which benefits areclaimed.

Currently, a non�resident Bondholder that is a legal entity (organisation) would need to provideto the payer of income a certificate of tax residence issued by the competent authority of therelevant treaty country. The tax residence certificate should be provided with respect to a cal�endar year when the income is paid.

A non�resident individual Bondholder would need to provide to the Russian tax authorities acertificate of tax residence issued by the competent tax authority of the relevant treaty country,for the calendar year when the income is paid. In addition, an individual Bondholder must pro�vide appropriate documentary proof of tax payments outside of Russia on income with respectto which treaty benefits are claimed. Because of uncertainties regarding the form and proce�dures for providing such documentary proof, individuals in practice may not be able to obtaintreaty benefits on receipt of proceeds from a source within Russia.

REFUND OF WITHHELD TAX

For a Bondholder that is not an individual and for which double tax treaty relief is available,advance treaty relief may be available, subject to the requirements and conditions of the lawsof the Russian Federation. If double tax treaty relief is available, and Russian withholding taxon income was withheld at the source of payment, a claim for refund of such tax can be filedwithin three years from the end of the tax period in which the tax was withheld.

For an individual Bondholder for which double tax treaty relief is available, if Russian with�holding tax on income was withheld by the source of payment, a claim for refund of such taxmay be filed within one year after the end of the year in which the tax was withheld.

The Russian tax authorities may, in practice, require a wide variety of documentation confirm�ing the right to benefits under a double tax treaty. Such documentation, in practice, may not beexplicitly required by the Tax Code.

Obtaining a refund of Russian tax withheld may be a time consuming process and can involveconsiderable practicable difficulties.

Potential investors should consult their own advisers regarding the application of a respectivedouble tax treaty and refund of withheld tax.

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58 October 2007

Appendix 1:

Audited consolidated financial statements of Moscow EfesBrewery for the year ended 31st of December, 2005 and2006 prepared in accordance with IFRS


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Appendix 2:

Financial statements of CJSC “Moscow Efes Brewery” forthe period ended 30th of June, 2007 prepared in accordancewith RAS


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92 October 2007

Appendix 3:

Financial statements of OJSC “Brewery Union “KrasnyVostok � Solodovpivo” for the year ended 31st of December,2005 and 2006 prepared in accordance with RAS


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Appendix 4:

Financial statements of OJSC “Brewery Union “KrasnyVostok � Solodovpivo” for the period ended 30th of June,2007 prepared in accordance with RAS


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Appendix 5:

Suretyship agreement

ОФЕРТАо предоставлении обеспечения в форме поручительства для целей выпуска облигаций

г. Казань "31" мая 2007 года

Настоящая Оферта является предложением заключить договор поручительства наусловиях, указанных в настоящей Оферте, любому лицу, желающему приобрестиоблигации Закрытого акционерного общества "Пивоварня Москва�Эфес" с обеспечением.

1. Термины и определения

1.1. "Андеррайтеры" � Закрытое акционерное общество "Инвестиционная компания"Тройка Диалог" и Закрытое акционерное общество коммерческий банк"Ситибанк".

1.2. "НДЦ" � Некоммерческое Партнерство "Национальный депозитарный центр",выполняющее функции депозитария Облигаций.

1.3. "Облигации" � процентные документарные облигации на предъявителя серии 01в общем количестве 6 000 000 (Шесть миллионов) штук номинальной стоимостью1 000 (Одна тысяча) рублей каждая, выпускаемые Эмитентом в соответствиис Эмиссионными Документами.

1.4. "Поручитель" � Открытое акционерное общество "Пивоваренное объединение"Красный Восток � Солодовпиво"

1.5. "Объем Неисполненных Обязательств" � объем, в котором Эмитент не исполнилОбязательства Эмитента.

1.6. "Обязательства Эмитента" � обязательства Эмитента перед владельцамиОблигаций, определенные пунктом 3.1. настоящей Оферты.

1.7. "Оферта" � настоящая Оферта. 1.8. "Сумма Обеспечения" � сумма в размере суммарной номинальной стоимости

Облигаций (6 000 000 000 рублей) и совокупного купонного дохода поОблигациям

1.9. "Событие Неисполнения Обязательств" � любой из случаев, указанных в пунктах3.3.1.�3.3.3. настоящей Оферты.

1.10."Срок Исполнения Обязательств Эмитента" � любой из сроков, указанныхв пунктах 3.3.1.� 3.3.3. настоящей Оферты.

1.11."Требование" � требование владельца Облигаций об исполнении обязательствк Поручителю, соответствующее условиям пунктов 3.7.1.� 3.7.5. настоящейОферты.

1.12. ФСФР � Федеральная служба по финансовым рынкам (ФСФР России).1.13."Эмиссионные Документы" � решение о выпуске ценных бумаг, проспект ценных

бумаг и сертификат Облигаций, утвержденные решением Совета директоровЭмитента 01 июня 2007 года (Протокол № 01/06/2007 от 01 июня 2007 года).

1.14."Эмитент" � Закрытое акционерное общество "Пивоварня Москва�Эфес",зарегистрированное в соответствии с законодательством Российской ФедерацииГосударственной регистрационной палатой при Министерстве Экономики

October 2007


Российской Федерации 14 марта 1997 года с присвоением номерагосударственной регистрации юридического лица Р�6415.16 внесенное в Единыйгосударственный реестр юридических лиц Межрайонной инспекцией МНСРоссии №39 по г.Москве 10.09.2002 за основным государственным регистраци�онным номером 1027739172042, расположенное по адресу 117546, РоссийскаяФедерация, г. Москва, ул. Подольских Курсантов, д. 15Б.

2. Условия акцепта Оферты

2.1. Настоящей Офертой Поручитель предлагает любому лицу, желающемуприобрести Облигации, заключить договор с Поручителем о предоставленииПоручителем в соответствии с законодательством Российской Федерации,учредительными документами Поручителя и условиями Оферты обеспеченияв форме поручительства для целей выпуска Облигаций. Договор поручительства,которым обеспечивается исполнение обязательств по облигациям, считаетсязаключенным с момента возникновения у их первого владельца прав на такиеоблигации, при этом письменная форма договора поручительства считаетсясоблюденной.

2.2. Оферта является публичной и выражает волю Поручителя заключить договорпоручительства на указанных в Оферте условиях и с соблюдением предусмотрен�ной процедуры с любым лицом, желающим приобрести Облигации.

2.3. Оферта является безотзывной, то есть не может быть отозвана в течение срока,установленного для акцепта Оферты.

2.4. Настоящая Оферта подлежит включению в полном объеме в ЭмиссионныеДокументы. Оферта считается полученной адресатом в момент обеспеченияЭмитентом всем потенциальным приобретателям Облигаций возможностидоступа к информации о выпуске Облигаций, содержащейся в ЭмиссионныхДокументах и подлежащей раскрытию в соответствии с законодательствомРоссийской Федерации и нормативными актами федерального органаисполнительной власти по рынку ценных бумаг.

2.5. Акцепт Оферты может быть совершен только путем приобретения одной илинескольких Облигаций в порядке и на условиях, определенных ЭмиссионнымиДокументами. Приобретение Облигаций в любом количестве означает акцептОферты и, соответственно, заключение таким лицом договора поручительствас Поручителем, по которому Поручитель несет солидарную с Эмитентомответственность за неисполнение или ненадлежащее исполнение Эмитентомобязательств перед приобретателем Облигаций на условиях, установленныхОфертой. С переходом прав на Облигацию к ее приобретателю переходят правапо указанному договору поручительства в том же объеме и на тех же условиях,которые существуют на момент перехода прав на Облигацию.

3. Обязательства Поручителя. Порядок и условия их исполнения.

3.1. Поручитель принимает на себя ответственность за исполнение Эмитентом егообязательств по выплате владельцам Облигаций их номинальной стоимости(основной суммы долга), выплате причитающихся процентов (купонного дохода),приобретению Эмитентом Облигаций на следующих условиях:3.1.1. Поручитель несет ответственность перед владельцами Облигаций

в размере, не превышающем Суммы Обеспечения, а в случае недостаточ�ности Суммы Обеспечения для удовлетворения всех требованийвладельцев Облигаций, предъявленных ими к Поручителю в порядке,

109October 2007


110

установленном Офертой, Поручитель распределяет Сумму Обеспечениямежду всеми владельцами Облигаций пропорционально предъявленнымими вышеуказанным образом требованиям;

3.1.2. Сумма произведенного Поручителем в порядке, установленномОфертой, платежа, недостаточная для полного удовлетворения всехтребований владельцев Облигаций, предъявленных ими к Поручителюв соответствии с условиями Оферты, при отсутствии иного соглашенияпогашает, прежде всего, основную сумму долга, а в оставшейся части �причитающиеся проценты (купонный доход) и/или суммуответственности за ненадлежащее исполнение Эмитентом обязательствпо приобретению облигаций.

3.2. Поручитель несет солидарную ответственность с Эмитентом перед владельцамиОблигаций. Поручитель обязуется отвечать за исполнение ЭмитентомОбязательств Эмитента только после того, как будет установлено, что Эмитентне исполнил Обязательства Эмитента, и только в той части, в которой Эмитентне исполнил Обязательства Эмитента .

3.3. Факт неисполнения или ненадлежащего исполнения Эмитентом ОбязательствЭмитента, считается установленным в следующих случаях:3.3.1. Эмитент не выплатил или выплатил не в полном объеме купонный доход

в виде процентов к номинальной стоимости Облигаций владельцамОблигаций в сроки, определенные Эмиссионными Документами;

3.3.2. Эмитент не выплатил или выплатил не в полном объеме основную суммудолга при погашении Облигаций в сроки, определенные ЭмиссионнымиДокументами, владельцам Облигаций;

3.3.3. Эмитент не выполнил требование или выполнил не в полном объеметребование владельцев Облигаций о приобретении Облигаций в срокии на условиях, определяемых Эмиссионными Документами. Срокиисполнения соответствующих Обязательств Эмитента наступают в дниприобретения Эмитентом Облигаций, установленные Эмитентомв соответствии с Эмиссионными Документами;

3.4. Поручитель обязуется в соответствии с условиями Оферты отвечать занеисполнение/ненадлежащее исполнение Эмитентом Обязательств Эмитентав Объеме Неисполненных Обязательств.

3.5. В своих отношениях с владельцами Облигаций Поручитель исходит из ОбъемаНеисполненных Обязательств, сообщенного Поручителю Эмитентом или по егопоручению третьими лицами или публично раскрытого Эмитентомв соответствии с законодательством Российской Федерации, если владельцамиОблигаций не будет доказан больший Объем Неисполненных Обязательств.

3.6. В случае установления факта неисполнения или ненадлежащего исполненияЭмитентом Обязательств Эмитента, Поручитель обязуется в соответствиис условиями Оферты отвечать за исполнение обязательств Эмитента в ОбъемеНеисполненных Обязательств и в пределах Суммы Обеспечения, есливладельцами Облигаций будут предъявлены к Поручителю Требования,соответствующие условиям Оферты.

3.7. Требование должно соответствовать следующим условиям: 3.7.1. Требование должно быть предъявлено к Поручителю в письменной

форме и подписано владельцем Облигаций или (в случае, еслиОблигации переданы в номинальное держание и номинальный держательуполномочен получать суммы погашения и/или иных доходов по

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Облигациям и/или требовать от Эмитента приобретения Облигацийи предъявлять Требование) номинальным держателем Облигаций, а, есливладельцем является юридическое лицо, также скреплено его печатью;

3.7.2. в Требовании должны быть указаны: фамилия, имя, отчество (дляфизических лиц), наименование (для юридических лиц) владельцаОблигаций, его ИНН, место жительства (для физических лиц), местонахождения (для юридических лиц), реквизиты его банковского счета,Объем Неисполненных Обязательств в отношении владельца Облигаций,направляющего данное Требование;

3.7.3. Требование должно быть предъявлено к Поручителю не позднее 90(девяноста) дней со дня наступления Срока Исполнения Обязательствв отношении владельца Облигаций, направляющего данное Требование(при этом датой предъявления считается дата подтвержденногополучения Поручителем соответствующего Требования);

3.7.4. к Требованию должна быть приложена подтверждающая права владельцаОблигаций на его Облигации выписка со счета ДЕПО в НДЦ,или депозитариях, являющихся депонентами по отношению к НДЦ;В случае предъявления требования, предполагающего погашениеОблигаций, также должна быть приложена копия отчета НДЦ,заверенная депозитарием, о переводе Облигаций в раздел счета депо,предназначенный для блокирования ценных бумаг при погашении

3.7.5. Требование и приложенные к нему документы должны быть направленыПоручителю заказным письмом, курьерской почтой или экспресс�почтой.

3.8. Поручитель рассматривает Требование в течение 14 (четырнадцати) рабочихдней со дня предъявления Поручителю Требования.

3.9. Не рассматриваются Требования, предъявленные к Поручителю позднее 90(девяносто) дней со дня наступления Срока Исполнения Обязательствв отношении владельцев Облигаций, направивших данное Требование.

3.10.В случае принятия решения Поручителем об удовлетворении Требования,Поручитель не позднее, чем в 5 (пятый) рабочий день с даты истечения срокарассмотрения (п. 3.8. Оферты) письменно уведомляет о принятом решениивладельца Облигаций или номинального держателя, направившего Требование.После направления таких уведомлений, Поручитель не позднее 10 (десятого)рабочего дня с даты истечения срока рассмотрения Требования об ИсполненииОбязательств, осуществляет платеж в размере соответствующего Требования обИсполнении Обязательств в соответствии с условиями Оферты на банковскийсчет владельца или номинального держателя Облигаций, реквизиты которогоуказаны в Требовании об Исполнении Обязательств. Поручитель не несетответственности за неисполнение своих обязательств, если такое неисполнениеобусловлено предоставлением Поручителю недостоверных данных, указанныхв п.3.7.2. настоящей Оферты, в таком случае любые дополнительные расходы понадлежащему исполнению Поручителем своих обязательств возмещаются за счетвладельца Облигаций или номинального держателя Облигаций.

3.11.В отношении Облигаций, в погашении которых отказано/требованиео погашении которых удовлетворено, Поручитель направляет информацию оботказе в удовлетворении Требования/ об удовлетворении Требования в НДЦ(с указанием наименования, Ф.И.О. владельца, количества Облигаций,наименования Депозитария, в котором открыт счет депо владельцу).

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4. Срок действия поручительства

4.1. Права и обязанности по поручительству, предусмотренному настоящейОфертой, вступают в силу с момента заключения приобретателем Облигацийдоговора поручительства с Поручителем в соответствии с п. 2.5. настоящейОферты.

4.2. Предусмотренное Офертой поручительство Поручителя прекращается:4.2.1. в случае прекращения Обязательств Эмитента. При этом, в случае

осуществления выплат по Облигациям владельцу Облигаций в полномобъеме настоящая Оферта прекращает свое действие в отношениитакого владельца, оставаясь действительной в отношении другихвладельцев Облигаций.

4.2.2. в случае изменения Обязательств Эмитента, влекущего увеличениеответственности или иные неблагоприятные последствия дляПоручителя, без согласия последнего;

4.2.3. по иным основаниям, установленным федеральным законом.

5. Прочие условия

5.1. Все вопросы отношений Поручителя и владельцев Облигаций, касающиесяОблигаций и не урегулированные Офертой, регулируются ЭмиссионнымиДокументами, понимаются и толкуются в соответствии с нимии законодательством Российской Федерации.

5.2. В случае неисполнения или ненадлежащего исполнения своих обязательств поОферте Поручитель и владельцы Облигаций несут ответственностьв соответствии с действующим законодательством.

5.3. Споры в связи с Офертой передаются на разрешение в Арбитражный судг. Москвы, если иное не предусмотрено применимым законодательствомРоссийской Федерации.

5.4. Настоящая Оферта составлена в 2 (двух) подлинных экземплярах, один изкоторых находится у Поручителя, второй хранится у одного из Андеррайтеров поместу его нахождения. В случае расхождения между текстамивышеперечисленных экземпляров Оферты, приоритет при толкованиии применении Оферты должен отдаваться экземпляру Оферты, хранящемусяу Андеррайтера.

6. Адреса и банковские реквизиты Поручителя

Место нахождения: 420054, Российская Федерация, Республика Татарстан, г. Казань, ул.Тихорецкая, д. 5

ИНН: 1659051577Р/С: 407 028 107 000 100 03 962 в АКБ Энергобанке (ОАО), г. КазаньК/С: 301 018 103 000 000 00 770БИК: 049205770

Генеральный директор

Ахмет Тугрул Агырбаш_________________________

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