Euribor: 1.0% 10/5/2020 10/15/2020 Maturity 2/1/2017 ISIN US15080BAC00

Potential Trade Company: CEDC 10/5/20 21:51

WORK IN PROGRESS

Trade info BUSINESS/ SITUATION OVERVIEW To do/ Next Steps Name: CEDC

Product: 8% senior notes (step up) This is a Post chapter 11 situation (company exited in June 2013) Market share evolution as of FX impact (to model) Price Context: #NAME? live bbg feed CEDC is the largest producer in Russia/ Poland, with key brands such as Green Mark & Zubrowska Excise tax 52W High: #NAME? live bbg feed Russia/ Poland key market to understand 52W Low: #NAME? live bbg feed Was taken over by Roustam Tariko (Russian Billionnaire behind / Standard Bank) as part of restructuring in Spring 2013 Cash flow look quite weak/ dig more (WC impact) Issuance date: May-13 (post chapter 11) More on Tariko angle Understand Russian Standard better => Overall this is a relatively complex situation from business point of view with major structural issue in Russia (Excise Tax) => A lot of the trade thesis is around Tariko's involvment and his capability to turnaround the business Exit route?/ merger with Russian Standard? Ownership: Roustam Tariko: 100% Understand local debt Legal Work

Simplified cap structure FINANCIAL SNAPSHOT Historical, $m 2009 2010 2011 2012 Pro Forma FCF Mar-13 EBITDAx LTV $m PF Revenue 1,563.1 1,738.0 EBITDA ( 105.0) [1] Excise tax (861.0) (908.4) Interest on debt ( (60.0) [2] Cash -63.0 Net sales 689.4 702.1 829.6 815.7 Capex ( (15.0) Tax ( (10.0) Capital lease 1.5 FCF ( 30.0) Existing credit facility 115.2 EBITDA 193.5 125.1 77.3 % debt outstanding 4.2% New secured notes 468.0 % net sales 28.1% 17.8% 9.5% Cash flow generation pretty tight but looks ok-ish see detailed plan for more details Total senior debt 584.7 Operating profit/ (loss) (57.6) (1,013.0) (328.4) Net senior debt 521.7 5.4x

New convert 200.0 Adj. EBITDA (adding back restructuring expenses) 105.7 Legal- important to look at?

Total debt (gross) 784.7 ability to repay subs before senior Total debt (net) 721.7 7.5x incurrence of debt at senior level?

Implied Equity 245.0 [3] 2.6x basket for loans to Roust ?

Total capitalisation 1,029.7 10.8x Comp valuation Follow up with VH on this LTV senior 50.7% Estimated leverage at YE 13 6.2x synergie LTV junior 70.1% 717.0 517.0 9.5x Stock 108.0 108.0 7.9x Average LTM EBITDA 95.7 Sep-13 6.6x 4.8x 77.2

NOTE: DEBT BREAKDOWN NOT REPORTED AS OF SEPTEMBER BUT NET DEBT $717.0m SO IN LINE

As of Q3 13 company has indicated that they are -10% below FY target of $120m EBITDA So on current trend should reach about $108m

Investment Summary Recommendation

Company/Deal positives Company/ Deal Negatives

Significant Equity Cushion / Equity injection from R. Tariko Dependency on owner/ not easy to take keys if another restructuring is required Strong brands/ market position (market leader in Russia (#1) & Poland (#2) Russian crackdown on Vodka massively impacting market (increased excise tax, ban on adverstising etc) Looks tight on cash flow (will burn cash for next 3 years) Strong owner with right marketing skills & political connections in Russia Poor quality of financial reporting historically Potential synergies with Russian Standard/ could even be merged at some point (operational merger is underway/ Balance sheet merger is probably 2/3 years away) Potential from export- Tariko has proven experience on that with Russian Standard- (both in central Europe and Western market) Weak juridiction (Political risk) Quality of management seem to be improving (numbers of ex Coke executive on board including CEO) FX risk (Revenue in Russian Ruble & Polish Zloty vs Debt in USD) Valuation supported by alternative buyer (Alpha consortium) bid as part of the restructuring process Excise tax increase in Poland in Jan 14 (+15%, should be a one off)

Conclusion/ Key Findings EXPECTED YIELD

Overall I think this is a very interesting situation but risk is fairly high- however strong research could get us more comforable (particularly on market issue) Price YTM YTM - 1Y Yield to June 2015 (2Y from restructuring Support and expertise from Tariko seems to be very strong Apr-18 Apr-17 Jun-15 Recent numbers are encouraging in the context of difficult market in Russia + chapter 11 exit ( 90.5) 13.0% 13.6% 18.3% Recommendation ( 91.5) 12.7% 13.2% 17.4% ( 93.0) 12.2% 12.6% 16.2% Take a medium size position at this stage (preferably in senior) Continue work/ Understand market situation in Russia better as well as what Tariko is doing/ trying to achieve with the business This could have potential to become core position + the convert might be playable on bigger size if we get further comfort DETAILED FINANCIALS

KEY TAKEWAYS By country Net sales 2011 2012 Change % of 12 sales A. Quality of data/ financials is not great. There has been massive write-off/ restatements Poland 226.4 237.6 +4.9% 29.1% B. Profitablity has massively deteriorated over last 4 years Russia 572.1 550.3 -3.8% 67.5% C. Cash flow generation has been very weak - this need to be explored in more details Hungary 31.0 27.8 -10.5% 3.4% D. Operating Profit now 40.4% Poland/ 54% Russia (with signicant shifts recently) Total net sales 829.6 815.7 -1.7%

P&L, $m 2009 2010 2011 2012 Period growth (09-12) However Poland was 68% of operating profit in 2011 (ie much more profitable than Russia) Russia was only 20% of operating profit in 2011 Revenue 1,563.1 1,738.0 Excise tax (861.0) (908.4) In 2012, Poland was 40.7% of operating profit and Rusia 53.8%: ie massive shift of operating profit from Poland to Russia Net sales 689.4 702.1 829.6 815.7 +18.3% Need to understand that in more details

COGS (340.5) (392.5) (530.5) (488.3) Breakdown of Cost 2010 2011 2012 Gross Profit 348.9 309.7 299.1 327.4 -6.2% % net sales 50.6% 44.1% 36.1% 40.1% SG&A 220.5 244.9 Marketing 30.8 28.9 Operating Expenses (367.3) (1,312.1) (655.7) D&A 10.8 9.0 ow impairement charge (1,057.8) (372.9) Sub total 262.2 282.8 ow other 7.9 Normalised Opex (367.3) (262.2) (282.8) Impairement charges 1057.8 372.9 Gain on remeasusrement of previously held equity interest (7.9) - Operating profit/ (loss) (57.6) (1,013.0) (328.4)

Normalised Operating prodit/ (loss) (57.6) 36.9 44.5 Total operating expenses 1,312.1 655.7

EBITDA 193.5 125.1 77.3 % net sales 28.1% 17.8% 9.5% Borrowing Restructuring costs 28.4

Adjusted EBITDA 105.7 % net sales 13.0%

Cash Flow, EURm 2010 2011 2012

Cash from operations (28.1) 30.0 (99.0)

Cash flow from investing activities 464.9 [4] (56.9) (8.7)

Cash flow from financing (426.8) 10.1 93.2

Total Cash flow 10.0 (16.8) (14.4)

=> Need to look in much more detail at historical cash flow at it seems very weak => However quality of reporting fairly poor

Normative cash flow

COMPANY PLAN/ FORECAST

KEY TAKEWAYS To do look at Russian/ Polish GDP- forecast A. Expected recovery in EBITDA is very gradual Model next 3/4 year stressing management assumptions B. Forecast to burn cash for next 3 years (with significant impact of working cap swing C. As a result deleveraging will be pretty limited in next 3 years

Company plan, P&L CAGR 2012-2017 $m 2012 2013 2014 2015 2016 2017

Gross Sales Revenue 2,040.2 2,286.3 2,515.6 2,668.0 2,809.8 2,963.0 7.75% Excise tax (961.2) (1,053.8) (1,201.6) (1,295.1) (1,369.4) (1,445.0) 8.50% Discount & Allowances (242.7) (284.5) (332.1) (362.7) (392.1) (422.2) 11.71%

Net Sales Revenue 836.3 948.0 981.9 1,010.2 1,048.3 1,095.8 5.55% Growth +13.4% [5] +3.6% +2.9% +3.8% +4.5%

COGS (497.0) (566.9) (591.3) (614.8) (640.6) (670.8)

Gross Margin 339.3 381.1 390.6 395.4 407.7 425.0 % net sales 40.6% 40.2% 39.8% 39.1% 38.9% 38.8%

Total Operating Costs (262.1) (299.4) (265.7) (264.7) (264.5) (265.5) EBITDA 77.2 81.7 124.9 130.7 143.2 159.5 15.62% % net sales 9.2% 8.6% 12.7% 12.9% 13.7% 14.6% [6]

D&A (22.1) (20.8) (19.9) (19.9) (19.3) (18.8)

Operating Income 55.1 60.9 105.0 110.8 123.9 140.7 20.62% % net sales 6.6% 6.4% 10.7% 11.0% 11.8% 12.8%

Implied leverage (senior) 6.4x 4.2x 4.0x 3.6x 3.3x very simplistic/ assuming debt flat

Revenue per Country, company plan CAGR $m 2012 2013 2014 2015 2016 2017 2012-2017

Gross Revenue-Russia 1,084.3 1,332.5 1,504.6 1,639.2 1,757.9 1,870.2 11.52% [7] +22.9% +12.9% +8.9% +7.2% +6.4% Net Revenue-Russia 519.6 630.2 655.8 673 697.1 723.5 6.84% +21.3% +4.1% +2.6% +3.6% +3.8% Net revenue to gross revenue 47.9% 47.3% 43.6% 41.1% 39.7% 38.7%

Gross Revenue-Poland 824.9 821.6 869.5 877.8 887.4 912.7 2.04% [8] -0.4% +5.8% +1.0% +1.1% +2.9% Net Revenue-Poland 250.7 253.4 258.1 266.2 275 290.6 3.00% [9] +1.1% +1.9% +3.1% +3.3% +5.7%

Net revenue to gross revenue 30.4% 30.8% 29.7% 30.3% 31.0% 31.8%

Gross Revenue-Other 131 132.2 141.6 151 164.4 180.1 6.57% +0.9% +7.1% +6.6% +8.9% +9.5% Net Revenue-Other 66.1 64.5 68 71 76.2 81.7 4.33% [10] -2.4% +5.4% +4.4% +7.3% +7.2% Net revenue to gross revenue 50.5% 48.8% 48.0% 47.0% 46.4% 45.4%

Cash Flow, $m, Company Plan 2013 2014 2015 2016 2017

EBITDA 81.8 124.9 130.7 143.2 159.5

2012 cash restructuring expense (1.4) - - - - Change in Working Cap (61.9) (66.0) (53.2) (50.8) (51.9) [11] Other Non-Operating Costs (8.2) (8.3) (8.5) (8.7) (9.0) Taxes (12.1) (5.4) (6.6) (9.0) (12.4)

Operating Cash Flow (1.8) 45.2 62.4 74.7 86.2

Investing Cash Flows (19.5) (14.5) (9.6) (9.3) (9.0)

Interest on Guarantees & Local Credit Lines (18.5) (19.8) (21.9) (23.7) (25.2) this is a significant items/ need to understand local line of credit Interest on new notes (15.9) (40.4) (45.1) (47.6) (47.5) Interest on Convertibles PIK Notes - - - - - Change in Loans Paybables (16.7) 10.4 10.4 10.8 10.5 Change in RTL Term Loan 15.0

Financing cash flow (36.1) (49.8) (56.6) (60.5) (62.2)

Net cash flow (57.4) (19.1) (3.8) 4.9 15.0

Cash beginning of Period 84.2 26.8 7.7 3.9 8.8 Cash end of period 26.8 7.7 3.9 8.8 23.8

Working Cap Analysis

Working cap, company plan 2012 2013 2014 2015 2016 2017

Trade accounts receivables 255.9 278.1 307.5 334.2 362.0 392.6 DoS 111.7 107.1 114.3 120.8 126.0 130.8

Account Receivables Excices 160.0 184.1 220.0 248.6 272.9 296.7 (60.8) (63.8) (66.8) (70.1) (72.7) (74.9)

Inventory 270.6 297.3 341.2 378.2 415.5 453.8 48.4 47.5 49.5 51.7 54.0 55.9 of growth revenue

Trade A/P, Excise and VAT Payables (228.7) (236.0) (272.5) (303.1) (331.5) (359.7) 57.2 53.1 55.5 57.9 60.2 62.1

Total Working Cap 457.8 523.5 596.2 657.9 718.9 783.4 Change (65.7) (72.7) (61.7) (61.0) (64.5) ow Excise (24.1) (35.9) (28.6) (24.3) (23.8) % total 36.7% 49.4% 46.4% 39.8% 36.9% Working cap days of gross revenue 81.9 83.6 86.5 90.0 93.4 96.5 change in days 1.7 2.9 3.5 3.4 3.1 if WC flat days 81.9 81.9 81.9 81.9 81.9 81.9 Amount 457.8 513.0 564.5 598.7 630.5 664.9 Change -55.2 -51.5 -34.2 -31.8 -34.4 Vs plan -10.5 -21.2 -27.5 -29.2 -30.1

2012 2013 2014 2015 2016 2017 Period change Current 9/23/2013

RUB/USD 30.478 31.996 33.608 35.256 36.801 38.315 +25.7% 25% depreciation expected over period 31.858 PLN/USD 3.1 3.183 3.252 3.301 3.353 3.366 +8.6% HUF/USD 221.4 226.398 240.649 251.023 260.8 270.129 +22.0% UAH/USD [12]

CAGR

Gross revenue RUB 33,047 42,635 50,567 57,792 64,692 71,657 16.74% [13] +29.0% +18.6% +14.3% +11.9% +10.8%

Back to USD at current rate 1,037 1,338 1,587 1,814 2,031 2,249 Upside vs plan

Net Revenue RUB 15,836 20,164 22,040 23,727 25,654 27,721 11.85% +27.3% +9.3% +7.7% +8.1% +8.1%

Back to USD at current rate 497 633 692 745 805 870 Upside vs plan -23 3 36 72 108 147

2013 ANALYSIS

2012 2013

Company plan, P&L 2013 Our estimated based on $m 2012 PLAN H1

Gross Sales Revenue 2,040.2 2,286.3 Excise tax (961.2) (1,053.8) Discount & Allowances (242.7) (284.5)

Net Sales Revenue 836.3 948.0 836.3 sales stable in H1/ so would be disappointing vs BP Growth +13.4%

COGS (497.0) (566.9)

Gross Margin 339.3 381.1 364.6 impact of price of Spirit? % net sales 40.6% 40.2% 43.60% "increase of more than 3 percentage point in H1

Total Operating Costs (262.1) (265.0) on a PF basis (263.6) average mid 2012/2013// business looks more in cost reduction mode

EBITDA 77.2 116.1 101.1 % net sales 9.2% 12.2% => 2013 EBITDA Probably would be slighly below target but at a decent level ($100m plus)

D&A (22.1) (20.8)

Operating Income 55.1 95.3 % net sales 6.6% 10.1% Current Trading

KEY TAKEWAYS => Current trading is encouraging despite massive drop in volume in H1 driven by increased excise tax in Russia => Q3 numbers showing significant improvement vs YTD- market remaining toughs => Reported numbers still heavily impacted by one-off & clean accounting start- so we will have really clean numbers only in 2014

Q3- QUARTERLY Q3-12 Q3-13 Change YTD - 9 MONTHS Q3-12 q3-13 Change

Volume (thousands of 9-liter cases) Volume (thousands of 9-liter cases) Poland 2,455.0 2,899.0 +18.1% Poland 7,246.0 7,849.0 +8.3% Russia 4,224.0 4,044.0 -4.3% Russia 12,296.0 10,375.0 -15.6% Hungary 115.0 116.0 +0.9% Hungary 331.0 297.0 -10.3% Total Volume 6,794.0 7,059.0 +3.9% Total Volume 19,873.0 18,521.0 -6.8%

P&L, $m P&L, $m Gross Sales 401.1 440.1 +9.7% Gross Sales 1,125.6 1,158.7 +2.9% Excise taxes (209.8) (247.2) +17.8% Excise taxes (601.1) (629.8) +4.8%

Net sales 191.3 192.9 +0.8% Net sales 524.5 528.9 +0.8%

COGS (109.3) (124.3) [14] +13.7% COGS (312.1) (327.3) +4.9% % net sales (32.8%) (37.0%) % net sales (59.5%) (61.9%) FAIRLY BIG INCREASE IN COGS- TO BE UNDERSTOOD

Gross Profit 82.0 68.5 -16.4% Gross Profit 212.5 201.5 -5.1% % net sales 42.9% 35.5% % net sales 40.5% 38.1%

Operating expenses (67.5) (59.8) -11.5% Operating expenses (184.5) (182.2) -1.2% Provision for doubtful debts 0.7 (0.1) -108.6% Provision for doubtful debts (3.5) (1.6) -54.7%

Operating Income 15.2 8.7 -42.4% Operating Income 24.6 17.8 -27.6% % net sales 4.6% 2.6% % net sales 7.4% 5.3%

Adjustment KEY NOTES ON Q3- 2013 Adjusted GP for fresh start 212.5 221.2 +4.1%

Significant improvement in volume vs YTD Adjusted Op inc for fresh start (on GP) 24.6 37.5 +52.5% Poland is star performing market, Russia still under pressure Adding SG&A adjustment 24.6 47.0 +91.3%

Net sales are flattish (excise impact) D&A 15.1 11.2 COGS are impacting by 2 elements: - One off re-evaluation of inventories as part of fresh accounting start EBITDA 39.6 58.2 LTM FY2012 77.2 no adjustment - impact of July 2012 excise increase (positive margin impact from prestocking last year) LTM Q3 95.7 - Excluding fresh start adjustment GM would have been 39.5% (ie in line in YTD)

This also impact operating profit - for time being best is look at YTD adjusted

9m-12 9m-13 Net sales by segment Q3-12 Q3-13 Change Operating income 24.6 17.6 D&A 15.1 11.2 $m and $ EBITDA 39.6 28.8 -27.4% Poland 56.5 64.9 +15.0% Russia 128.9 121.9 -5.5% Hungary 6.0 6.1 +1.9% Total 191.3 192.9 +0.8%

Net sales 56,471,000.0 64,920,000.0 Volume 22,095,000.0 26,091,000.0 Av. net price per liter Poland 2.56 2.49 -2.6%

Net sales 128,895,000.0 121,861,000.0 Volume 38,016,000.0 36,396,000.0 Av. net price per liter Russia 3.39 3.35 -1.2%

Working Cap Key BS items, $m Q3-13 Jun-12 Dec-12 Jun-13 Cash and equivalent 52.565 DSO 39 33 Account receivables 215.6 DoH 41 39 Inventories 123.3

Trade payable Inventories 174.7 141.6

Half-Year H1-12 H1-13 Change Russia Vodka: decline driven by increase in excise tax, increased black market and increasing imposition of bans on alcohol sales during specific times in specific regions Volume (thousands of 9-liter cases) Poland 4,791.0 4,952.0 +3.4% WhiteHall: loss of contract with Mondora & Moet Hennesy- business will be wind down Russia 8,072.0 6,300.0 -22.0% Hungary 216.0 181.0 -16.2% Bravo Business (Alcoholic cocktails): remained stable -

Total Volume 13,079.0 11,433.0 -12.6% Need to understand more Whitehall business Where do we see international volume? $m Gross Sales 718.6 Excise taxes (382.6) Market Share (volume)

Net sales 333.2 336.0 +0.8% H1-13 comment Poland Vodka 23% stable COGS (202.7) (203.0) +0.1% Russia Vodka 11% stable (60.8%) (60.4%) Ukraine 8% stable Gross Profit 130.5 133.0 +1.9% Bravo 9% increased in ready-to-drink market shares % net sales 39.2% 39.6% Costs Operating expenses (117.0) (122.4) +4.7% Provision for doubtful debts (4.1) (1.2) -72.0% H1: Spirit prices Russia YTD by +4.5%; Poland -5.7% Operating Income 9.4 9.4 +0.2% Glass procurement Flat % net sales 2.8% 2.8% Discount and allowances similar to last year

Half Year Comments Net debt Revenue flat vs H1-13 (despite volume decline) 6/5/2013 Gross Profit up Operating profit up (excluding restructuring/ chapter 11 costs) Short term debt 91.2 Long Term Debt 646.6 Other 18.0 Total debt 755.7 H1-13 Cash -69.7

Net Debt 686.1

VOLUME TRACKING

Q1 vs PY Q2 vs PY Q3 vs PY YTD vs PY

Russia, incl international -13.7% -26.8% -4.3% -15.6%

Poland, incl. International +3.3% +3.3% +19.1% +8.3%

Hungary -25.6% -7.1% +1.0% -10.3%

Total CEDC -7.3% -15.9% +3.9% -6.80%

CHAPTER 11 OVERVIEW

Key Elements Filed in April 13 Got out June 13 Eliminated $665.2m of debt from BS

RTL involvment

197.00 cash 30.00 RTL note 16.90 Cash for 2013 243.90

+ convert fully written iff + Equity previously invested written off

XCHANGE RATIO:

2016 notes: 982.2 (outstanding pre-restructuring) 172 cash 17.5% 450 new secured notes 45.8% 200 new convert 20.4% 822 total 83.7% 83.7% recovery

2013 convert' 155.3 (outstanding pre-restructuring- excluding owned by Roust)

25 cash 16.1% all these numbers to get fully confirmed 30 notes 19.3% 55 35.4% 35.4% recovery non participating: 16.9 cash to share between all non participating

So total cash in: 213.9 Financed by Roust trading in exchange of 100% of equiyt

of 250m for face 170 that got cancellted? To be confirmed plus he bought shares pre chaper 11

Roust Owned $102.6m (face value) of the convert that he cancelled

Advisers involved: to CEDC: Skadden, Arps, Slate, Meagher & Flom Houlihan Lokey Alvarez & Marsal (CRO)

To bonholders: Moelis

BUSINESS

BUSINESS DESCRIPTION Revenue by business line 2012 Revenue EBITDA One of the largest producurs of vodka in the world Central and Eastern Europe's largest integrated spirit beverages business (by volume- 29.9 million nine-liter cases produced/ sold in 2012) Two part if the business: i) production of sales of own spirit (primarily Vodka) ii) importation on an exclusive basis of a wide variety of spirits, wine and beers Main operations in Poland & Russia, small operations in Hungary & Ukraine

Also export market (4.2% of 2012 revenue) export in US, UK, France, Japan (Zubrovska brand as well of Zhuravli, Parliament and Zubrowka)

Produce Vodka+ Import other spirtit

6 operational manufacture need to get more details on those 4,100 employess

Build in distribution network in Poland in 1998 through the acquisition of 3 regional polish distributors+ a leading wine importers in 2005, entered the Vodka production business thru the acquisition of Polomos Bialystock, a leading distillery and production facility in eastern Poland

PRODUCTION PLANTS

Pushkino Russia 10 bottling lines Produces Green Mark, Zhuravli and Yamskaya Established 1995 capacity 150 million liters annually

Parliament Production Russia

Oborniki Poland 5 bottling lines Produces and

Polmos Bialystok Producs 40 brands including Zubrowska, Absolwent and Place Vodka capacity 80milion liters of spirits per annum

Novosibirsk The Novosibirsk distillery is one of the newest and most modern distilleries belonging to CEDC in Russia The factory was open in 2008, with a production capacity reaches more than 11 million deciliters of vodka and seven million deciliters of alcoholic cocktails per year The Novosibirsk distillery produces Green Mark and Yamskaya , as well as popular Russian cocktails like Bravo Classic. Bravo Premium The Bravo Premium plant was CEDC’s first in Russia to bottle alcohol cocktails, beers and non-alcoholic beverages in aluminum cans.

MARKET

POLAND

Total alcoholic beverage market (Beer, Wine, Spirit): $8.8bn in 2012 Non CEDC CEDC Vodka 4 segments: Top premium and imported , Absolut,

Premium , , , Maximus Bols Vodka, Palace Vodka

Mainstream Żołądkowa Gorzka, , , Polska, Czysta de LuxAbsolwent, Batory, Złota Gorzka, Soplica, Żubrówka Bison Grass, Żubrówka Biała

Economy Segment Starogardzka, Krakowska, 1906, Z Czerwoną Kartką, Żytniówka, Boss, Niagara, Śląska, Ludowa.

Market share in Poland (of Vodka market, in value)

23.20% 2012 where is #2? #

CEDC Market Share in Poland

2011 24.00% JJ12 23.4% 2012 23.00% AS12 22.8% ON12 22.2% DJ13 22.6% FM13 22.8% AM13 22.8% JJ13 22.2% AS13 22.4%

Source: AC Nielsen Poland bi-monthly reporting

New Management Team in Polan

GM Monzer Elabrashy- joined August 13 Previously Coca-Cola Company, Cocoa Cola Hellenic, Red Bull and Henkel

Chief operations Director Witold Franczak joined Sept 2013 >20Y experience in alcohol industry- Previously at Sobiesky

Regional Marketing Director Vodkas Mariusz Kiepas joined Sept 13 >20year in marketing, including Coca-Cola

RUSSIA Key Brands Green Mark Parliament Zhuravli

entered market in 2008- How/ which acquisition

Vodka Fragmented market : top 5 producers have 54.3% market share but consolidating (was 26% back in 2006) 50% of the market is black market

impact on restriction of advertising of spitit to clarify

Impact of higher spirit price

look like declining market

MASSIVE EXCISE TAX INCREASE HERE: 10% in Jan12 how much is excise per bottle on average vs retail price? 18% in July 12% 33% in Jan 13 Note that excise tax is on the volume (not price); therefore impacting more low end of market

CEDC has around 15% share by volume in vodka production in 2011 (careful this is VOLUME and PRODUCTION) of tax non tax Total say 10 50% 5 5 10 10% 5.5 5 10.5 Produce Green Mark: #1 selling brand in Russia 18% 6.49 5 11.49 alsa Zhuravli and Parliament 33% 8.6317 5 13.6317 0.36317 Supplier risk here

Official production (total market, million liter, 2011) 940 CEDC is biggest producer so given scale advantage (ie even if margin were too high for evereyone CEDC should be winner at the end?)

Vodka has 90% market share of the Russian spirit market 5 segments Volume Premium 1.50% Sub-Premium 9.60% Mainstream 43.80% Economy & cheap 45.20% FX Roubles 230 Vodka market decreased -3% in 2011 vs 2010, should expect continuous decline over next few years USD 6.94 Price for half liter Green Mark Need to have a look at Rosstat data vs Nielsen / apparently some discrepancy there Russia GDP per capita 14,247 USD per liter 13.88 0.0974% ROSSTAT Data UK 38,514 Vodka, 40% and over, ordinary, per litre need to add Bottle of Smirnoff (£) 19 xrate to USD 1.55 USD 29.45 0.0765% Ratio 1.3x so Vodka now slightly more expensive in Russia than in UK as a % of GBP per capita

IMPACT OF ADVERTISING BAN TO BE UNDERSTOOD AS WELL

Whitehall business: Will be wind down from July 13 to end of Q1-14 this is expected to have a positive financial impact

Bravo Business:

CEDC Market Share in Russia

2011 11.30% JJ12 11.1% 2012 10.80% AS12 10.8% ON12 10.5% DJ13 10.5% FM13 10.5% AM13 11.0% JJ13 10.7% AS13 10.9%

Source: AC Nielsen Poland bi-monthly reporting EXCISE TAX

RUB to USD 0.0299 (ie divide by 34 to get USD number)

USD USD 400 12.0 500 15.0 80 2.4 100 3.0 94.4 2.8 118 3.5 169.7 5.1 212.1 6.3

RUB per month Average Russian Earnings in most regions 15,000 Rural Areas 6,000

HUNGARY has Royal Vodka trademark (produced in Poland) #1 selling Vodka with c. 53% market share

International Green mark launched in the UK may 2012

VALUATION

no real direct comp

Diageo/ Pernod trading around 15x EBITDA but not really comparables

Transaction on & Absolut

Synergy listed in Russia trade at around 5.0x EBITDA Stock Spirit recently listed (#1 in Poland) Belvedere alternative offer from Alpha consortium/ similar value to what Tariko paid

STRUCTURE

Do legal work: How easy to enforce?/ what are actual securities How easy to cut out convert in new restructuring? How much local line senior/ pari to the seniors can get there Loan to Roust- what is framework for that?

HISTORY

1990 Founded as a distributor of alcoholic beverage in Poland 2005 entered the Vodka manufacturing business Acquired Bialystok (leading production plant in Poland) a lot of acquisitions/ therefore integration problem BOLS (leader in the premium vodka segment) 2006 acquisition of BOLS Hungary (including Royal Vodka tradmark, the most popular brand in the Hungarian market) 2008 Started expansion in Russia Acquisition of Russian Alcohol Group Acquisition of Parliament company became the largest vodka producer in Russia and one of the biggest vodka makers in the world 2010-2011 Acquisition of Whitehall

ROUSTAM TARIKO

Roustam Tariko founder of Russian Standard net worth estimated around $1bn

Founded Russian Standard from scratch Began his empire by importing Martini in Russia (so know the space pretty well) 0

NEWS FLOW

8/30/2013 CEDC appoints president for Poland (ex Coke executive)

4% 0 [1] Author: based on PF indicated as of Q3

[2] Author: potentially to refince with cost of WC facility and cost of guarentee lines

[3] This is pure cash in in restructuring. Excluding value of the convert cancelled by Tariko

[4] Author: probably asset sales but to validate

[5] Author: Looks overly optimistic after H1-13

[6] Author: Recovery in margin is very significant and needs to be justified

[7] Author: fairly aggressive growth forecast in Russia, even in light of expected tax excise (lower share of net sales)

[8] Author: Poland assumption reasonnable

[9] Author:

[10] Author: growth is other countries expcted to be good but nothing stellar

[11] Author: Major working cap swings needs to be understood- see below/ looks too conservative

[12] Author: Ukraine

[13] Author: IE THE REVENUE ASSUMPTION IN LOCAL CURRENCY IS MUCH MORE AGGRESSIVE THAN PERCEIVED IN USD (AS DEPRECIATION IS FACTORED IN) [14] Author: one off impact of inventories re-evaluation (clean accounitng start in June)