Download COCA-COLA HELLENIC BOTTLING CO SA (Form

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ANNUAL REPORT ON FORM 20-F
(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended: December 31, 2006
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from
to
OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of event requiring this shell company report:
Commission file number: 1-31466
COCA-COLA E ΛΛ HNIKH ETAIPEIA
EM Φ IA ΛΩΣΕΩΣ ΑΝΩΝΥΜΟΣ ET AIPEIA
(Exact name of Registrant as specified in its charter)
COCA-COLA HELLENIC BOTTLING COMPANY S.A.
(Translation of Registrant’s name into English)
THE HELLENIC REPUBLIC
(Jurisdiction of incorporation or organization)
9 Fragoklissias Street
151 25 Maroussi Athens, Greece
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Ordinary shares of nominal value € 0.50 per ordinary share
Represented by American Depositary Shares (ADSs),
Each ADS representing one ordinary share*
*
New York Stock Exchange
Not for trading, but only in connection with the listing of the ADSs, pursuant to the requirements of the New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Securities Exchange Act of 1934: None
Number of outstanding shares of each of the Registrant’s classes of capital or common stock as at December 31, 2006, the close of the period covered by the annual report:
242,067,916 ordinary shares of nominal value € 0.50 per ordinary share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
Yes 
No 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Yes 
No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes 
No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer 
Accelerated filer
Indicate by check mark which financial statement item the registrant has elected to follow.

Non-accelerated filer
Item 17 
Item 18 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes 
No 

TABLE OF CONTENTS
Page
Special Note Regarding Forward Looking Statements
Presentation of Financial and Other Information
PART I
Item 1
Identity of Directors, Senior Management and Advisers
Item 2
Offer Statistics and Expected Timetable
Item 3
Key Information
Item 4
Information on the Company
Item 4A
Unresolved Staff Comments
Item 5
Operating and Financial Review and Prospects
Item 6
Directors, Senior Management and Employees
Item 7
Major Shareholders and Related Party Transactions
Item 8
Financial Information
Item 9
The Offer and Listing
Item 10
Additional Information
Item 11
Quantitative and Qualitative Disclosures about Market Risk
Item 12
Description of Securities Other than Equity Securities
PART II
Item 13
Defaults, Dividend Arrearages and Delinquencies
Item 14
Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15
Controls and Procedures
Item 16A
Audit Committee Financial Expert
Item 16B
Code of Ethics
Item 16C
Principal Accountant Fees and Services
Item 16D
Exemption from the Listing Standards of Audit Committees
Item 16E
Purchases of Equity Securities by the Issuer and Affiliated Persons
PART III
Item 17
Financial Statements
Item 18
Financial Statements
Item 19
Exhibits
Signatures
2
3
4
5
5
5
5
20
56
57
101
119
132
135
143
157
157
158
158
158
158
159
159
159
160
160
161
161
161
161
163
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This annual report contains forward-looking statements that involve risks and uncertainties, in particular under Item 3D, “Risk Factors”,
Item 4, “Information on the Company” and Item 5, “Operating and Financial Review and Prospects”. In some cases, we use words such as
“believe”, “outlook”, “guidance”, “intend”, “expect”, “anticipate”, “plan”, “target” and similar expressions to identify forward-looking
statements. All statements other than statements of historical facts, including, among others, statements regarding our future financial position
and results, business strategy, the effects of our recent acquisitions on our business and financial condition, our future dealings with The
Coca-Cola Company, budgets, projected levels of consumption and production, projected raw and packaging materials and other costs,
estimates of capital expenditure and plans and objectives of management for future operations, are forward-looking statements. You should not
place undue reliance on these forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because
they reflect our current expectations and assumptions as to future events and circumstances that may not prove accurate. Our actual results
could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described under Item 3D,
“Risk Factors” included elsewhere in this annual report.
We believe that, as of the date of this annual report, these forward-looking statements are reasonable. However, we cannot assure you that
our future results, level of activity, performance or achievements will meet the expectations reflected in the forward-looking statements.
Moreover, neither we nor any other person assume responsibility for the accuracy and completeness of the forward-looking statements. Unless
we are required by law to update these statements, we will not necessarily update any of these statements after the date of this annual report,
either to conform them to actual results or for changes in our expectations.
3
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Our financial year is January 1 to December 31. We prepare our financial statements in accordance with accounting principles generally
accepted in the United States of America (“United States”), or US GAAP. This annual report includes our audited consolidated balance sheets
as at December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the
three years in the period ended December 31, 2006.
In 2002, the European Council adopted a regulation requiring European Union publicly-traded companies to prepare financial statements
under International Financial Reporting Standards, or IFRS, effective for the fiscal year commencing January 1, 2005. In line with such
European Union regulation, Greek legislation has provided that Greek publicly-traded companies prepare their statutory financial statements in
accordance with IFRS as adopted by the European Union, with effect from January 1, 2005.
In this annual report, references to “euro” and “ € ” are to the lawful currency of the member states of the European Union that adopted the
single currency in accordance with the Treaty Establishing the European Community (signed in Rome on March 25, 1957), as amended by the
Treaty of European Union signed in Maastricht on February 7, 1992. Greece adopted the euro as its lawful currency as of January 1, 2001, at
the irrevocably fixed exchange rate of € 1.00 = 340.75 Greek drachmas. The following countries in which we operate have also adopted the
euro as their lawful currency: Austria, Italy, Montenegro, the Republic of Ireland and Slovenia.
All references to “$” and “dollars” are to the lawful currency of the United States. You should read Item 3A, “Key Information—Selected
Financial Data—Exchange rate information” for historical information regarding the exchange rates between the euro and the US dollar based
on the noon buying rates in The City of New York for cable transfers in euro, as certified for customs purposes by the Federal Reserve Bank of
New York. No representation is made that euro or US dollar amounts referred to in this annual report have been, could have been or could be
converted into US dollars or euro at these particular rates or at any rates at all. Solely for convenience, this annual report contains translations
of certain euro balances into US dollars at specified rates. These are simply translations, and you should not expect that a euro amount actually
represents a stated US dollar amount or that it could be converted into US dollars at specified rates. In this annual report, the translations of
euro into US dollars have been made at a rate of € 1.00 = $1.3365, being the exchange rate between the euro and the US dollar as of June 15,
2007.
Unless otherwise specified, sales volume is measured in terms of unit cases sold. A unit case equals 5.678 liters or 24 servings of 8 US
fluid ounces each. The unit case is the typical volume measure used in our industry.
Unless otherwise indicated, any statements included in this annual report regarding our competitive position are based on information
obtained from CANADEAN. In particular, see Item 4B, “Information on the Company—Business Overview—Our operations”.
4
PART I
ITEM 1
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. Directors and Senior Management
Not applicable.
B. Advisors
Not applicable.
C. Auditors
Not applicable.
ITEM 2
OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3
KEY INFORMATION
A. Selected Financial Data
The summary financial information (statement of operations, cash flow, balance sheet, and share and per share data, cash operating profit
and reconciliation of net income to cash operating profit) set forth below for the five year period ended December 31, 2006 has been derived
from our audited consolidated financial statements prepared in accordance with US GAAP. Our consolidated balance sheets as of
December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three
years in the period ended December 31, 2006, are included elsewhere in this annual report.
We define cash operating profit, or COP, as operating profit before deductions for depreciation (included both in cost of goods sold and in
selling, delivery and administrative expenses), impairment charges, stock option compensation and amortization of intangible assets. COP
serves as an additional indicator of our operating performance and not as a replacement for measures such as cash flows from operating
activities and operating profit as defined and required under US GAAP. We believe that COP is useful to investors as a measure of operating
performance because it reflects the underlying operating cash costs by eliminating depreciation and amortization of intangible assets. In
addition, we believe that COP is a measure commonly used by analysts and investors in our industry and that current shareholders and potential
investors in our company use multiples of COP in making investment decisions about our company. Accordingly, we have disclosed this
information to permit a more complete analysis of our operating performance. COP, as we calculate it, may not be comparable to similarly
titled measures reported by other companies.
5
You should read the following summary financial information together with Item 5, “Operating and Financial Review and Prospects” and
our audited consolidated financial statements and the related notes included in this annual report.
December 31,
2006 (1)
Statement of operations data:
Net sales revenue
Cost of goods sold
Gross profit
Selling, delivery, administrative
expenses and other operating items
Operating profit
Cumulative effect of accounting
change for SFAS No. 123(R), net
of income taxes
Cumulative effect of accounting
change for SFAS No. 142, net of
income taxes
Net income
Cash flow data:
Net cash provided by operating
activities
Net cash used in investing activities
Net cash provided by (used in)
financing activities
Balance sheet data:
Franchise rights, net
Share capital
Total assets
Net assets
Long-term debt, less current portion
Share and per share data:
Average ordinary shares outstanding
Net income per ordinary share: basic
Net income per ordinary share: diluted
Cash dividends proposed per ordinary
share (2)
Capital return declared per ordinary
share (3)
Other operating data:
Unit cases volume
Cash operating profit (COP)
Ratio of earnings to fixed charges
Reconciliation of net income to cash
operating profit:
Net income
Cumulative effect of accounting change
for SFAS No. 123(R), net of income
taxes of € 0.2 million in 2006
Cumulative effect of accounting change
for SFAS No. 142, net of income
taxes of € 25.0 million in 2002
Minority interests
Share of (income) of equity method
investees
Income tax expense
Other expenses
Other income
Interest income
Interest expense
Operating profit
Plus:
Amortization of intangible assets
Depreciation of property, plant and
equipment
Stock option compensation (4)
Impairment charges
Cash operating profit (COP)
$
$
$
7,179.9
(4,386.8 )
2,793.1
As at and for the year ended
December 31,
December 31,
December 31,
December 31,
2006
2005
2004
2003
(amounts in millions of euro or dollars, as indicated, except for sales volume data in units,
per share data in euro or dollars, as indicated, number of ordinary shares outstanding
and ratio of earnings to fixed charges)
€
5,372.2
(3,282.3 )
2,089.9
(2,179.5 )
613.6
(1,630.8 )
459.1
(1.1 )
(0.8 )
€
4,633.9
(2,749.9 )
1,884.0
€
(1,433.3 )
450.7
4,201.9
(2,500.9 )
1,701.0
€
(1,279.2 )
421.8
4,017.5
(2,443.6 )
1,573.9
December 31,
2002
€
(1,196.0 )
377.9
—
—
—
3,839.4
(2,366.4 )
1,473.0
(1,178.5 )
294.5
—
—
418.9
—
313.4
—
298.9
—
272.1
—
231.9
(94.0 )
58.0
926.3
(783.9 )
693.1
(586.5 )
545.2
(585.1 )
489.7
(328.1 )
579.4
(416.2 )
350.8
(477.5 )
19.2
14.4
174.7
(167.6 )
(220.7 )
97.8
2,669.5
161.7
9,739.9
4,218.9
2,026.7
240,733,468
1.74
1.74
€
€
1,997.4
121.0
7,287.6
3,156.7
1,516.4
240,733,468
1.30
1.30
€
€
1,996.4
120.3
6,734.8
2,923.3
1,278.4
238,326,756
1.25
1.25
€
€
1,987.4
119.1
5,978.6
2,561.0
1,424.6
236,958,191
1.15
1.14
€
€
1,948.4
118.5
5,744.9
2,256.3
1,302.9
236,674,925
0.98
0.98
€
€
2,017.4
73.4
5,900.2
2,713.2
950.9
236,668,596
0.25
0.25
0.43
0.32
0.30
0.28
0.20
0.19
—
—
—
—
2.00
—
$
1.723.6
1,093.8
5.9
€
1,723.6
818.5
4.4
€
1,539.1
761.5
6.5
€
1,404.0
711.2
5.6
€
1,349.5
652.1
5.4
€
1,256.2
565.9
3.9
$
418.9
€
313.4
€
298.9
€
272.1
€
231.9
€
58.0
$
$
1.1
0.8
—
—
—
—
—
6.4
—
4.8
—
10.5
—
13.1
—
11.0
94.0
15.8
(33.1 )
119.2
0.1
(0.5 )
(13.8 )
115.3
613.6
(24.8 )
89.2
0.1
(0.4 )
(10.3 )
86.3
459.1
(23.9 )
111.8
3.0
(2.5 )
(3.3 )
56.2
450.7
(5.2 )
77.4
8.3
(4.2 )
(6.6 )
66.9
421.8
(4.3 )
83.9
7.1
(4.9 )
(11.5 )
64.7
377.9
(4.3 )
73.3
4.2
(6.5 )
(10.3 )
70.3
294.5
€
€
€
€
€
0.9
0.7
0.2
—
—
—
441.3
5.3
32.7
1,093.8
330.2
4.0
24.5
818.5
309.7
—
0.9
761.5
285.8
—
3.6
711.2
274.2
—
—
652.1
271.4
—
—
565.9
€
€
6
€
€
€
(1)
(2)
Convenience translation figures are translated at the June 15, 2007 noon buying rate for euro of € 1.00 = $1.3365. The translation to US dollars has been provided solely for the purposes of
convenience and should not be construed as a representation that the amounts represent, or have been or could be converted into US dollars at that or any other rate.
The proposed dividends for the years ended December 31, 2002 to December 31, 2006 were declared and paid in the subsequent year.
(3)
On August 19, 2003, we announced our intention to effect a leveraged re-capitalization with a view towards improving the efficiency of our capital structure. In connection with the leveraged
re-capitalization, we held an extraordinary general meeting on September 15, 2003, which approved a share capital increase through the capitalization of € 518.3 million of additional paid-in capital
(reflecting an increase of the par value of ordinary shares from € 0.31 to € 2.50 per ordinary share). This capital increase was approved by the Greek Ministry of Development on September 24,
2003 and consummated on October 1, 2003, with the payment of certain related taxes. On October 1, 2003, the board of directors called a second extraordinary general meeting which took place on
October 31, 2003 and which approved a share capital decrease of € 473.3 million (reflecting a decrease of the par value of ordinary shares from € 2.50 to € 0.50 per ordinary share) and the return of
€ 2.00 per ordinary share to all shareholders of Coca-Cola Hellenic Bottling Company S.A. The capital decrease was approved by the Greek Ministry of Development on November 10, 2003 and the
Athens Stock Exchange was duly notified at its board meeting of November 14, 2003. The capital return payment to shareholders began on December 5, 2003. As at December 31, 2003, €
472.9 million had been returned to shareholders. The leveraged re-capitalization resulted in a capital return of € 2.00 per ordinary share to all shareholders of Coca-Cola Hellenic Bottling Company
S.A. The capital return and the payment of taxes and related expenses of € 4.0 million were financed with the net proceeds from the offering of $900.0 million notes. These notes were issued in
September 2003, by Coca-Cola Hellenic Bottling Company S.A. through Coca-Cola HBC Finance B.V. in an aggregate principal amount of $500.0 million due in 2013 and in an aggregate principal
amount of $400.0 million due in 2015. In December 2003, an exchange offer was made by Coca-Cola Hellenic Bottling Company S.A. in order to affect the exchange of the privately placed notes
for similar notes registered with the SEC. Acceptances under the offer, which was finalized in February 2004, were $898.1 million.
(4)
Effective January 1, 2006, the Company adopted the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement No. 123 (R), Stock Option Compensation ,
using the modified-prospective transition method. Further details can be found in note 20 of our consolidated financial statements.
Exchange rate information
The table below shows the low, high, average and period-end noon buying rates for the years 2002 to 2006 in the City of New York for
cable transfers in euro as certified for customs purposes by the Federal Reserve Bank of New York for dollars per € 1.00. The average is
computed using the noon buying rate on the last business day of each month during the period indicated.
Year ended December 31,
Low
2002
2003
2004
2005
2006
0.86
1.04
1.18
1.17
1.31
High
1.05
1.26
1.36
1.35
1.33
Average
End of
period
0.95
1.13
1.24
1.24
1.32
1.05
1.26
1.35
1.18
1.32
The table below shows the low, high, average and period-end noon buying rates for euro for each month during the six months prior to the
date of this annual report.
Month
Low
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007 (through June 15, 2007)
1.31
1.29
1.29
1.31
1.34
1.34
1.33
High
1.33
1.33
1.32
1.34
1.37
1.36
1.35
Average
End of
Period
1.32
1.30
1.31
1.32
1.35
1.35
1.34
1.32
1.30
1.32
1.34
1.37
1.34
1.34
Dividend and dividend policy
Our articles of association and Greek corporate law govern the payment of dividends. Dividends are paid to our shareholders out of net
income. The relevant amounts are calculated based on our
7
unconsolidated financial statements. Prior to the payment of any dividends, we are required by Greek law to allocate an amount of at least 5%
of our net income (on an unconsolidated basis) to a statutory reserve account until this reserve equals at least one-third of our total share
capital. The total amount to be distributed with respect to any financial year must not be less than 35% of net income (on an unconsolidated
basis and after first subtracting any allocation to the abovementioned statutory reserve account) or 6% of paid-up share capital, whichever is
higher. These statutory provisions may be overridden in certain circumstances, subject to obtaining the necessary supermajority approval by
our shareholders.
We are required by Greek law to convene our annual general meeting within six months after the end of our fiscal year for our
shareholders to approve our financial statements and the distribution of a dividend for the previous fiscal year. We are required to commence
payment of any dividend approved for distribution to our shareholders within seven working days of the record date for the payment of
dividends, as determined and published by our company. You should read Item 10B, “Additional Information—Memorandum and Articles of
Association—Dividends” for additional information on the requirements of Greek law and our articles of association for the allocation of
dividends.
As our business evolves to deliver more stable and predictable cash flows, we believe it is appropriate also for our dividend policy to
evolve for the benefit of our shareholders. Consequently, we declared a dividend for 2006 of € 0.32 per share, a 6.7% increase over the
dividends declared in respect of 2005. We will seek to maintain dividends within a pay-out ratio of 20-30% of income with at least a 5% per
annum dividend per share increase.
The following table shows the amounts paid or payable to the holders of our ordinary shares both on a per share basis and in the aggregate
for each of the past five fiscal years. Dividends paid historically are not necessarily representative of dividends to be paid in the future.
Per ordinary
share
€
$ (2)
Year
0.24
0.25
0.35
0.38
0.43
Total(1)
€
$ (2)
(in millions)
(1)
2002
0.19
2003
0.20
2004
0.28
2005
0.30
2006
0.32
Based on the actual number of ordinary shares in issue as of the dividend record date.
45.0
47.4
66.7
72.2
77.5
(2)
The US dollar amounts are based on the noon buying rate for euro on June 15, 2007, which was € 1.00 = $1.3365.
56.6
59.7
84.0
90.9
103.6
In December 2003, we made a capital return payment to our shareholders of € 2.00 per ordinary share as part of a leveraged
re-capitalization. For additional information on the leveraged re-capitalization see “Selected Financial Data” above, as well as Item 5,
“Operating and Financial Review and Prospects—Major recent transactions”.
We pay dividends solely in euro. The Depositary will convert any dividends on ordinary shares represented by ADSs into US dollars if it
can do so on a reasonable basis and can transfer the proceeds to the United States. Fluctuations in the exchange rate between the euro and the
US dollar will affect the US dollar amounts received by holders of ADSs upon conversion by the Depositary of cash dividends paid in euro on
the ordinary shares represented by the ADSs.
8
B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
D.
Risk Factors
You should carefully consider the risks and uncertainties described below. You should also refer to the other information set out in this
annual report, including our audited consolidated financial statements and the related notes. The risks and uncertainties described below are
those that we currently believe may materially affect our company and any investment you make in our company. If these events occur, the
trading price of our ordinary shares and ADSs could decline. Additional risks and uncertainties that do not currently exist or that we are
unaware of may also become important factors that adversely affect our company and your investment.
Risks relating to our relationship with The Coca-Cola Company and The Kar-Tess Group
If The Coca-Cola Company exercises its right to terminate our bottlers’ agreements, upon the occurrence of certain events, or is unwilling
to renew these agreements, our net sales revenue may decline dramatically. In addition, if The Coca-Cola Company is unwilling to renew
our bottlers’ agreements on terms at least as favorable to us as the current terms, our net sales revenue could also be adversely affected.
Our bottlers’ agreements with The Coca-Cola Company are fundamental to our business. The trademarked beverages of The Coca-Cola
Company represented approximately 93% of our total sales volume in 2006. We produce, sell and distribute The Coca-Cola Company’s
trademarked beverages pursuant to standard bottlers’ agreements with The Coca-Cola Company covering each of our territories. The bottlers’
agreements include limitations on our degree of exclusivity in our territories and, to the extent permitted by law, on our ability to market
competing brands not owned by The Coca-Cola Company in our countries outside the European Economic Area. The European Economic
Area comprises the member states of the European Union as well as Norway, Iceland and Liechtenstein.
We enter into bottlers’ agreements with The Coca-Cola Company for each of our territories. Each of our bottlers’ agreements has a fixed
initial term. These agreements, the terms of which were extended with effect as from January 1, 2004 and all of which expire in
December 2013, may be renewed, at The Coca-Cola Company’s discretion, until 2023. The bottler agreement for our newly acquired
subsidiary in Cyprus has been extended by The Coca-Cola Company until March 2008 and we are currently negotiating with The Coca-Cola
Company in order to obtain a bottler agreement for that territory with the same terms (including duration) as those that apply in our other
territories. Accordingly, our business is dependent on The Coca-Cola Company’s willingness to renew our bottlers’ agreements when they
expire. In addition, The Coca-Cola Company has the right to terminate our bottlers’ agreements upon the occurrence of certain events. You
should read Item 7B, “Major Shareholders and Related Party Transactions—Related Party Transactions—Our relationship with The Coca-Cola
Company” for a description of the circumstances under which The Coca-Cola Company may terminate its bottlers’ agreements with us. If The
Coca-Cola Company exercises its right to terminate the bottlers’ agreements upon the occurrence of certain events, or, if upon expiration of
their initial term, The Coca-Cola Company is unwilling to renew these agreements, our sales will decline dramatically. In addition, if The
Coca-Cola Company is unwilling to renew our bottlers’ agreements on terms at least as favorable to us as the current terms, our net sales
revenue could also be adversely affected.
9
The Coca-Cola Company could exercise its rights under the bottlers’ agreements in a manner that would make it difficult for us to achieve
our financial goals.
Our bottlers’ agreements govern our purchases of concentrate, which represents our most significant raw materials cost. The Coca-Cola
Company determines the price we pay for concentrate at its discretion. In particular, The Coca-Cola Company may seek to increase concentrate
prices in our eleven countries that entered the European Union in 2004 and in 2007 in order to bring concentrate prices in those countries in
line with the rest of the European Union. The Coca-Cola Company normally increases concentrate prices after discussions with us so as to
reflect trading conditions in the relevant country. The Coca-Cola Company has other important rights under the bottlers’ agreements, including
the right, to the extent permitted by local law, to set the maximum price we may charge to our customers in countries outside the European
Economic Area and the right to approve our suppliers of certain packaging and other raw materials. The combination of The Coca-Cola
Company’s right to set our concentrate prices and its right to limit our selling prices in some of our countries could give The Coca-Cola
Company considerable influence over our profit margins and the results of our operations.
We cannot assure that The Coca-Cola Company’s objective to maximize revenue from sales of concentrate will in all cases be fully
aligned with our objective to realize profitable volume growth. It is thus possible that The Coca-Cola Company could exercise its rights under
the bottlers’ agreements to determine concentrate prices, to set maximum prices we may charge to customers outside the European Economic
Area and to approve certain of our suppliers in a manner that would make it difficult for us to achieve our financial goals.
The Kar-Tess Group and The Coca-Cola Company have substantial influence over the conduct of our business and their interests may
differ from the interests of other shareholders.
The Kar-Tess Group currently owns approximately 29.7% and The Coca-Cola Company currently indirectly owns approximately
23.4% of our outstanding share capital. The Coca-Cola Company holds its shares through five companies which constitute The Coca-Cola
Company Entities: Coca-Cola Overseas Parent Limited, The Coca-Cola Export Corporation, Barlan, Inc. and Refreshment Product
Services, Inc., each a Delaware company, and Atlantic Industries, a Cayman Islands company. In connection with the acquisition of
Coca-Cola Beverages plc in August 2000, The Kar-Tess Group and The Coca-Cola Company Entities entered into a shareholders’ agreement
that governs certain aspects of their relationship. The Kar-Tess Group and The Coca-Cola Company Entities have agreed to maintain their
combined shareholdings during the term of the shareholders’ agreement at over 50% of our outstanding share capital and The Coca-Cola
Company Entities have agreed to maintain their shareholding at no less than 22%. Under their shareholders’ agreement, The Kar-Tess Group
and The Coca-Cola Company Entities have also agreed that, based on a ten-member board of directors, The Coca-Cola Company would be
represented by two directors and The Kar-Tess Group would be represented by four directors. The Kar-Tess Group and The Coca-Cola
Company Entities have also agreed that they will each vote their shares so as to maintain their respective proportional representation on our
board in the event the number of directors increases or decreases. The Kar-Tess Group and The Coca-Cola Company Entities have agreed to
nominate the remaining directors jointly. Our board of directors currently consists of twelve members. No party or group of parties may
unilaterally terminate the shareholders’ agreement prior to December 2008. However, at any time the parties may agree to terminate the
shareholders’ agreement, which would also be terminated if we cease to exist or if one group of parties elects to terminate it upon breach of
the agreement by the other group of parties. After December 2008, the shareholders’ agreement will remain in force unless terminated by
either group of parties on three months’ written notice.
These arrangements give The Kar-Tess Group and The Coca-Cola Company significant influence over our business and enables them,
together, to determine the outcome of all actions requiring approval
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by our board of directors and the outcome of corporate actions that require shareholder approval, with the exception of matters requiring an
extraordinary quorum and supermajority approval. You should read Item 7B, “Major Shareholders and Related Party Transactions—Related
Party Transactions—The shareholders’ agreement between The Kar-Tess Group and The Coca-Cola Company Entities” for a description of the
shareholders’ agreement and Item 10B, “Additional Information—Memorandum and Articles of Association—Matters requiring extraordinary
quorum and supermajority approval” for additional information on the matters requiring extraordinary quorum and supermajority approval.
The interests of The Kar-Tess Group and The Coca-Cola Company may differ from those of other shareholders. As a result of their
influence on our business, The Kar-Tess Group and The Coca-Cola Company could prevent us from making certain decisions or taking certain
actions that would protect the interests of shareholders other than The Coca-Cola Company and The Kar-Tess Group or which would benefit
us. For example, they might vote against an acquisition of us by a third party, meaning our other shareholders would not receive the premium
over the then-current market price of our ordinary shares that they might otherwise receive upon such an acquisition. You should read Item 7,
“Major Shareholders and Related Party Transactions” for additional information on our relationship with The Kar-Tess Group and The
Coca-Cola Company and Item 10B, “Additional Information—Memorandum and Articles of Association—Matters requiring extraordinary
quorum and supermajority approval” for information on the rights of majority and minority shareholders pursuant to our articles of association
and under Greek law.
Our success depends in part on The Coca-Cola Company’s success in marketing and product development activities.
We derive the majority of our revenues from the production, sale and distribution of the trademarked
beverages of The Coca-Cola Company. The Coca-Cola Company owns the trademarks of these products and has primary responsibility for
consumer marketing and brand promotion. The profitable growth of our existing brands depends in part on The Coca-Cola Company’s
consumer marketing activities, including The Coca-Cola Company’s discretionary contributions to our annual marketing plan. The expansion
of our family of brands depends to a considerable extent on The Coca-Cola Company’s product expansion strategy, particularly with respect to
new brands. If The Coca-Cola Company were to reduce its marketing activities, the level of its contributions to our annual marketing plan or its
commitment to the development or acquisition of new products, particularly new non-carbonated soft drink, or non-CSD products, these
reductions could lead to decreased consumption of trademarked beverages of The Coca-Cola Company in the countries in which we operate.
This would, in turn, lead to a decline in our share of the non-alcoholic beverages market and sales volume and adversely affect our growth
prospects.
We depend on The Coca-Cola Company to protect its trademarks.
Brand recognition is critical in attracting consumers to our products. In each country in which we operate, The Coca-Cola Company owns
the trademarks of all of its products which we produce, distribute and sell. We rely on The Coca-Cola Company to protect its trademarks in the
countries where we operate, which include some countries that offer less comprehensive intellectual property protection than the United States
and the European Union. If The Coca-Cola Company fails to protect its proprietary rights against infringement or misappropriation, this could
undermine the competitive position of the products of The Coca-Cola Company and could lead to a significant decrease in the volume of
products of The Coca-Cola Company that we sell. Since trademarked beverages of The Coca-Cola Company represent a high proportion of our
total sales volume, this would materially and adversely affect our results of operations.
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Risks relating to our company and the non-alcoholic beverages industry
Weaker consumer demand for carbonated soft drinks, or CSDs, could harm our revenues and profitability.
At the present time, our revenues and profitability remain substantially dependent upon sales of our core CSD products, particularly in our
established countries. Although per capita consumption of CSDs in our established countries has generally continued to increase, the rate of
increase has slowed down in recent years. This weakening of consumer demand for CSDs can be explained, in part, by demographic trends.
Teenagers and young people account for the majority of CSD consumption in our established countries. Currently, these countries are
experiencing declining birth rates and ageing populations, which reduce the number of people in those age groups that traditionally are most
likely to consume CSD products.
Another trend adversely affecting growth in CSD consumption in our established countries is the increased consumer focus on well-being,
health and fitness, as well as concerns about obesity. Some consumers perceive non-CSD beverages such as juices, waters, sports and energy
drinks to be more closely associated with a healthier life style. Consequently, consumption of these alternative beverages is growing at a faster
rate than consumption of CSDs. While this trend is most pronounced in our established countries, it also exists to some extent in our
developing and emerging countries. If this trend toward alternative beverages becomes more prevalent in our developing and emerging
countries, it could harm prospects for future profitable growth in the CSD category.
If any of these trends impedes profitable growth in consumption of our core CSD brands, this could severely impair our business and
prospects.
Our growth prospects may be harmed if we are unable to expand successfully in the non-CSD segment.
We believe that the non-CSD category offers significant growth potential. We intend, together with The Coca-Cola Company, to expand
our product offerings in this category, which includes juices, waters, sports and energy drinks and other ready-to-drink beverages, such as teas
or coffees. Expanding our presence in this highly competitive category will require The Coca-Cola Company to spend significantly on
consumer marketing, brand promotion and/or brand acquisition and us to invest significantly in production, sales, distribution development
and/or business acquisitions. We cannot assure you that The Coca-Cola Company will successfully develop and promote new non-CSD brands
or that we will be able to increase our sales of new non-CSD products. If we are unable to expand in the non-CSD category, our growth
prospects may be harmed.
The lack of institutional continuity and safeguards in our emerging and developing countries could adversely affect our competitive
position, increase our cost of regulatory compliance and/or expose us to a heightened risk of loss due to fraud and criminal activity.
While our emerging and developing countries are in the process of transition to market economies, stable political institutions and
comprehensive regulatory systems, some of them lack the institutional continuity and strong procedural and regulatory safeguards typical in
our established countries. As a result, in these countries we are exposed to regulatory uncertainty in areas such as customs duties for
concentrate, which could increase our cost of regulatory compliance, and we enjoy less comprehensive protection for some of our rights,
including intellectual property rights, which could undermine our competitive position.
The lack of institutional continuity also exacerbates the effect of political uncertainty in our emerging and developing countries and could
adversely affect the orderly operation of markets and consumer purchasing power. In addition, in countries with a large and complicated
structure of government and administration, such as the Russian Federation, national, regional, local and other governmental bodies may issue
inconsistent decisions and opinions that could increase our cost of regulatory compliance.
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Finally, we operate in some countries where corruption historically has been a problem. It is our policy to comply with the US Foreign
Corrupt Practices Act and similar regulations. This may put us at a competitive disadvantage against competitors that are not subject to, or do
not comply with, the same regulations. In addition, in some of the environments in which we operate, businesses like ours are exposed to a
heightened risk of loss due to fraud and criminal activity, even though we review our financial systems regularly in order to minimize such
losses.
Adverse economic conditions in our emerging and developing countries could adversely affect demand for our products.
From time to time some of our emerging and developing countries have experienced difficult economic conditions, including relatively
low levels of per capita gross domestic product, or GDP, high inflation or hyper-inflation and high levels of unemployment. In particular,
Nigeria has faced political, social and economic unrest in recent years, including prolonged strikes and several fuel shortages, which all
together adversely affected our sales volume in that country.
Adverse economic conditions in our emerging and developing countries may hurt consumer confidence and purchasing power, resulting in
reduced consumption generally or increased demand for local non-premium brands, which are typically of lower quality, but more affordable
than our brands. This could adversely affect demand for our products. In addition, our customers may face difficulties in making payment for
goods purchased due to unfavorable economic conditions.
The sustainability of our growth in our developing and emerging countries depends partly on our ability to attract and retain sufficient
number of qualified and experienced personnel for which there is strong demand.
In recent years, we have been experiencing significant growth in a number of our developing and emerging countries. As our business
continues to grow, macro-economic conditions continue to improve and the level of our investment in such countries increases, we are faced
with the challenge of being able to attract and retain a sufficient number of qualified and experienced personnel in an increasingly competitive
labor market. Our ability to sustain our growth in these countries may be hindered if we are unable to successfully meet this challenge.
Competition law enforcement by the European Union and national authorities may have a significant adverse effect on our competitiveness
and results of operations.
Our business is subject to the competition laws of the countries in which we operate and, with respect to our activities affecting the
European Union, is also subject to EU competition law. The admission in 2004 and 2007 to the European Union of eleven of the European
countries in which we operate has increased the impact of EU competition law on our business.
On June 29, 2005, the Greek Competition Authority requested the Company to provide information on our commercial practices as a
result of a complaint by certain third parties regarding our level of compliance with its decision of January 25, 2002, which imposed a fine on
us for certain discount and rebate practices and required changes with respect to placing coolers in certain locations and lending them free of
charge. On October 7, 2005, we were served with notice to appear before the Greek Competition Authority. On June 14, 2006, the Greek
Competition Authority issued a decision imposing a daily penalty of € 5,869 for each day that we failed to comply with the decision of
January 25, 2002. The Greek Competition Authority imposed this penalty for the period from February 1, 2002 to February 16, 2006, resulting
in a total penalty of € 8.7 million. On August 31, 2006, we deposited an amount of € 8.9 million, reflecting the amount of the fine and
applicable tax, with the Greek authorities. This deposit was a prerequisite to filing an appeal pursuant to Greek law. As a result of this deposit,
we have increased the charge to our financial statements in connection with this case to € 8.9 million. We believe that we have
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substantial legal and factual defenses to the Authority’s decision. You should read Item 8A, “Financial Information—Consolidated Statements
and Other Financial Information—Legal proceedings” for additional information.
We cannot predict if competition law enforcement by the European Union or national competition authorities will result in significant
fines being imposed upon us or result in adverse publicity, or require us to change our commercial practices or whether related private lawsuits
could require us to pay significant amounts in damages. Any of these outcomes could limit our competitiveness and adversely affect our
operating results.
We are engaged in a highly competitive business. Adverse actions by our competitors or other changes in the competitive environment may
adversely affect our results of operations.
The non-alcoholic beverages business is highly competitive in each of our countries. We compete with, among others, bottlers of other
international or regional brands of non-alcoholic beverages. We also face significant competition from private label brands of large retail
groups. A change in the number of competitors, the level of marketing or investment undertaken by our competitors, or other changes in the
competitive environment in our markets may cause a reduction in the consumption of our products and in our market share and may lead to a
decline in our revenues and/or an increase in our marketing or investment expenditures, which may materially and adversely affect our results
of operations. Competitive pressure may also cause channel and product mix to shift away from our more profitable packages and channels, for
example the immediate consumption channel.
In particular, we face intense price competition, especially in our emerging and developing countries, from producers of local
non-premium CSD brands, which are typically sold at prices lower than ours. In addition, we face increasing price competition from certain
large retailers that sell private label products in their outlets at prices that are lower than ours, especially in countries with a highly concentrated
retail sector. In some of our countries, we are also exposed to the effect of imports from adjacent countries of lower priced products, including,
in some cases, trademarked products of The Coca-Cola Company bottled by other bottlers in the Coca-Cola system. The entry into the
European Union of all but one of our developing countries, as well as two of our emerging countries, will increase their exposure to such
imports from other European Union countries. In addition, the enlargement of the European Union could lead to increased imports by
wholesalers and large retailers of products produced and sold by us in any of these countries for resale at low prices in our other territories,
particularly our established countries, where the prices of our products are generally higher than in most of our developing countries. While this
practice would not affect our sales volume overall, it could put pressure on our pricing in the countries that receive such imports of lower
priced products.
If there is a change in our competitors’ pricing policies, an increase in the volume of cheaper competing products imported into our
countries or the introduction of new competing products or brands, including private label brands, and if we fail to effectively respond to such
actions, we may lose customers and market share and/or the implementation of our pricing strategy may be restricted, in which case our results
of operations will be adversely affected.
The increasing concentration of retailers and independent wholesalers, on which we depend to distribute our products in certain countries,
could lower our profitability and harm our ability to compete.
We derive a large and increasing proportion of our revenues from sales of our products either directly to large retailers, including
supermarkets and hypermarkets, or to wholesalers for resale to smaller retail outlets. We expect such sales to continue to represent a significant
portion of our revenues. Most of our countries are experiencing increased concentration in the retail and wholesale sectors, either because large
retailers and wholesalers are expanding their share in the relevant market, or as a result of increased consolidation among large retailers and
wholesalers.
14
We believe that such concentration increases the bargaining power of large retailers and wholesalers. Our products compete with other
non-alcoholic beverage brands for shelf space in retail stores and with other fast-moving consumer goods for preferential in-store placement.
Our retailer and wholesaler customers also offer other products, sometimes including their own brands that compete directly with our products.
These large retailers and wholesalers could use their increasing market power in a way that could lower our profitability and harm our ability to
compete.
Contamination or deterioration of our products could hurt our reputation and depress our revenues.
The contamination or deterioration of our products, whether actual or alleged, deliberate or accidental, could harm our reputation and
business. A risk of contamination or deterioration exists during each stage of the production cycle, including during the production and delivery
of raw materials, the bottling and packaging of our products, the stocking and delivery of our products to retailers and wholesalers and the
storage and shelving of our products at the final points of sale. Any such contamination or deterioration could result in a recall of our products
and/or criminal or civil liability and restrict our ability to sell our products which, in turn, could have a material adverse effect on our business
and prospects. These events, including incidents involving other bottlers of The Coca-Cola Company’s products, could also adversely impact
our competitiveness and revenues by harming the reputation of The Coca-Cola Company’s brands.
Adverse weather conditions could reduce demand for our products.
Demand for our products is affected by weather conditions in the countries in which we operate. Consumption is particularly strong during
the second and third quarters when demand rises due to warmer weather and, in some of our countries, increased tourist activity. As a result,
unseasonably cool temperatures in our countries could adversely affect our sales volume and the results of our operations for the year.
Price increases and shortages of raw materials and packaging materials could adversely affect our results of operations.
Our results of operations may be affected by the availability and pricing of raw materials and packaging materials, including water, sugar
and other sweeteners, glass, labels, plastic resin, closures, plastic crates, aluminum, aseptic packages and other packaging products and
ingredients, some of which are priced in currencies other than the functional currencies of our operating companies.
Water is the main ingredient in substantially all of our products. As demand for water continues to increase around the world and as the
quality of available water deteriorates, we may incur increasing production costs or face capacity constraints.
In addition, changes in global supply and demand and market fluctuations, weather conditions, government controls, exchange rates,
currency controls and other factors may substantially affect the price of both raw materials and packaging materials. A substantial increase in
the prices of these materials will increase our operating costs, which will depress our profit margins if we are unable to recover these additional
operating costs from our customers. To some extent, derivative financial instruments and supply agreements can protect against increases in
raw materials and commodities costs, but they do not provide complete protection over the longer term. In addition, the hedging instruments we
use establish the purchase price for the commodities in advance of the time of delivery and, as such, it is possible that these hedging
instruments may lock us into prices that are ultimately higher than the actual market price at the time of delivery.
A sustained interruption in the supply of such materials could also lead to a significant increase in the price of such materials or could
impede our production process if we are unable to find suitable
15
substitutes. In each case, this could have a significant adverse effect on our results of operations. You should read Item 4B, “Information on the
Company—Business Overview—Raw materials” and Item 5, “Operating and Financial Review and Prospects—Principal factors affecting the
results of our operations—Raw material costs” for additional information on our procurement of packaging and raw materials and the cost of
raw materials.
Increase in the cost of energy could affect our profitability.
We operate fleets of motor vehicles in some of our countries and use significant amounts of electricity, natural gas and other energy
sources to operate our bottling plants. A substantial increase in the price of fuel and other energy sources would increase our costs and,
therefore, could negatively impact our profitability.
Fluctuations in exchange rates may adversely affect the results of our operations and financial condition.
We derive a portion of our revenues from countries that have functional currencies other than our reporting currency, the euro. As a result,
any fluctuations in the values of these currencies against the euro impact our income statement and balance sheet when results are translated
into euro. If the euro appreciates in relation to these currencies, the euro value of the contribution of these operating companies to our
consolidated results and financial position would decrease.
We incur currency transaction risks whenever one of our operating companies enters into either a purchase or sale transaction using a
currency other than its functional currency. In particular, our purchases of, among other things, concentrate, which amounted to €
1,049.3 million in 2006, are priced predominantly in euro and US dollars, while we sell our products in countries other than Austria, Greece,
Italy, Montenegro and the Republic of Ireland in local currencies. We cannot assure that we will be able to hedge against the long-term effects
of this foreign exchange exposure. We attempt to reduce our currency transaction risk, where possible, by matching currency sales revenue and
operating costs. Given the volatility of currency exchange rates, we cannot assure that we will be able to manage our currency transaction risks
effectively or that any volatility in currency exchange rates will not have a material adverse effect on our financial condition or results of
operations.
We are exposed to the impact of exchange controls, which may adversely affect our profitability or our ability to repatriate profits.
The currencies of Nigeria, the Russian Federation, Romania, Bulgaria, Ukraine, Serbia, Armenia, Bosnia and Herzegovina, Belarus and
Moldova can only be converted within certain limits or for specified purposes established by their governments. These countries represented
35.5% of our net sales revenue in 2006. In countries where the local currency is convertible only within prescribed limits or for specified
purposes, it may be necessary for us to comply with exchange control formalities and to ensure that all relevant permits are obtained before we
can repatriate profits of our subsidiaries in these countries. Such controls may have a material adverse effect on our profitability or on our
ability to transfer the profits that we earn out of these countries.
Our operations are subject to extensive regulation, including resource recovery, environmental and health and safety standards. Changes
in the regulatory environment may cause us to incur liabilities or additional costs or limit our business activities.
Our production, sales and distribution operations are subject to a broad range of regulations, including environmental, trade, labor,
production, food safety, advertising and other regulations. Governments may also enact or increase taxes that apply to the sale of our products.
More restrictive regulations or higher taxes could lead to increasing prices, which in turn may adversely affect the sale and
16
consumption of our products and reduce our revenues and profitability. You should read Item 4B, “Information on the Company—Business
Overview—Regulation” for additional information on the regulations to which we are subject.
Some environmental laws and regulations may result in significant additional costs or diminish our ability to formulate and implement
marketing strategies that we believe could be more effective, such as the use of a particular packaging material. A number of governmental
authorities in the countries in which we operate have considered or are expected to consider and in some of our countries, particularly member
states of the European Union, have already adopted legislation aimed at reducing the amount of discarded waste. Such programs have included,
for example, requiring the attainment of certain quotas for recycling and/or the use of recycled materials, imposing deposits or taxes on plastic,
glass or metal packaging material and/or requiring retailers or manufacturers to take back packaging used for their products. Such legislation,
as well as voluntary initiatives similarly aimed at reducing the level of waste, could require us to incur greater costs for packaging and set
higher wholesale prices to cover these incremental costs, which could be passed on to consumers and hurt our sales. In addition, such
legislation could prevent us from promoting certain forms of profitable non-returnable packages or otherwise adversely impact our business
and prospects. For additional information, see Item 4B, “Information on the Company—Business Overview—Environmental matters”.
In addition, we are subject to a broad range of environmental and health and safety laws and regulations in each of the countries in which
we operate. They relate to, among other things, waste water discharges, air emissions from solvents used in coatings, inks and compounds, the
use and handling of hazardous materials and waste disposal practices. If we fail to comply with applicable environmental standards, we may
face liabilities. In the event of pollution, potential liabilities could be greater for gradual pollution for which insurance policies are not readily
available in the insurance market or for any other events of pollution not arising from sudden, identifiable, unintended and unexpected
circumstances for which we have secured insurance coverage. Environmental regulations are becoming more stringent in many of the countries
in which we operate. In particular, governments and public interest groups are becoming increasingly aware and concerned about the public
health and environmental consequences of carbon dioxide emissions. The introduction of regulation seeking to restrict carbon dioxide
emissions might require increased investment in our cooler infrastructure and result in greater operating costs.
The enlargement of the European Union in 2004 and in 2007 has resulted in the application of European Union labor, tax, accounting and
environmental regulations in eleven additional countries in which we operate. This could lead to an increase in our compliance costs and make
compliance more complicated, at least in the short-term.
If local customs authorities successfully challenge the classification under which we currently import concentrate in some of our countries,
we may have to pay additional customs duties.
Under our bottlers’ agreements with The Coca-Cola Company, we are responsible for the importation of concentrate for The Coca-Cola
Company’s trademarked beverages in each of our countries. Customs authorities in Hungary, Romania, Poland, the Russian Federation and
Belarus have in the past five years challenged the product classification under which we have been importing this concentrate, arguing that a
different classification applies. If such alternative classifications did apply, we would be required to pay additional customs duties in those
countries for some past and for any future concentrate imports. The Hungarian, Belarusian, Polish and Russian customs authorities have since
conceded that the current classification is accurate. However, there are still other similar cases pending before Romanian courts, some of which
have ruled against our position. Customs authorities of other countries may also try to challenge the current importation classification. We
continue to oppose any such attempts by local customs authorities to challenge the concentrate importation classifications by seeking court
protection where necessary. However, we cannot assure that we will prevail in any relevant administrative or court
17
proceeding. You should read Item 8A, “Financial Information—Consolidated Statements and Other Financial Information—Legal
proceedings” for additional information on these disputes.
Other risks relating to an investment in our ordinary shares or ADSs
You may not be able to enforce judgments against us or some of our directors or officers.
We are incorporated under the laws of Greece. Substantially all of our assets are located outside the United States. In addition, the
majority of our officers and directors are residents of countries other than the United States. As a result, you may not be able to effect service of
process within the United States upon these persons or enforce a US court judgment based on civil liabilities under the US federal securities
laws against us or these persons. Courts outside the United States, including in Greece, may decide not to impose civil liability on us, our
directors or our officers for a violation of the federal securities laws of the United States. In addition, there is uncertainty as to the
enforceability in Greece of judgments of United States courts because such enforcement is subject to ascertainment by the Greek courts of a
number of conditions, including that the foreign court has jurisdiction under Greek law and that the judgment is not contrary to good morals
and public policy, as determined by Greek courts. In addition, it is uncertain if a Greek court would apply the federal laws of the United States
in any action brought before such court. You may therefore not be able to enforce any US judgments in civil and commercial matters against us
or some of our officers or directors.
Sales of substantial amounts of our ordinary shares by The Kar-Tess Group or The Coca-Cola Company Entities or the perception that
such sales could occur, could adversely affect the market value of our ordinary shares or ADSs.
The Kar-Tess Group and The Coca-Cola Company Entities have agreed among themselves to maintain their combined shareholding at
over 50% and The Coca-Cola Company Entities have agreed with The Kar-Tess Group to maintain its shareholding at no less than 22% of
our outstanding share capital, during the term of their shareholders’ agreement. The current term of the shareholders’ agreement expires in
December 2008, after which either group of parties may terminate it on three months’ written notice. However, The Kar-Tess Group and
The Coca-Cola Company Entities may sell additional ordinary shares in our company, subject only to the limitations set forth in their
shareholders’ agreement. Under their shareholders’ agreement, each of The Kar-Tess Group (on the one hand) or The Coca-Cola Company
Entities (on the other) may consent to sales of ordinary shares by the other party at any time. Sales of substantial amounts of our ordinary
shares or ADSs in the public market by The Kar-Tess Group or The Coca-Cola Company Entities, or the perception that such sales could
occur, could adversely affect the market price of our ordinary shares or ADSs and could adversely affect our ability to raise capital through
future capital increases.
The euro/dollar exchange rate could adversely affect the market price of our ordinary shares and the dollar value of dividends we pay in
respect of our ordinary shares and ADSs.
The price of our ordinary shares is quoted in euro. Movements in the euro/dollar exchange rate may affect the US dollar price of our ADSs
and the US dollar equivalent of the price of our ordinary shares. We will calculate and pay any cash dividends in euro and, as a result, exchange
rate movements will affect the US dollar amount of dividends that you will receive from the Depositary if you hold ADSs.
Pre-emptive rights may not be available to you and, as a result, your investment could be diluted.
Under Greek law, prior to the issue of any class of shares, a company incorporated in Greece is required to offer existing holders of such
class of shares pre-emptive rights to subscribe and pay for sufficient new shares to maintain their existing ownership percentages. US holders
of our ADSs or
18
ordinary shares may not be able to exercise pre-emptive rights for new ordinary shares unless a registration statement under the US Securities
Act of 1933 is effective with respect to such rights and new ordinary shares, or an exemption from the registration requirements is available.
Our decision to file a registration statement will depend on the costs and potential liabilities associated with any such registration statement, the
perceived benefits to us of enabling US holders of our ADSs or ordinary shares to exercise their pre-emptive rights and any other facts, which
we consider appropriate at the time. To the extent that US holders of our ADSs or ordinary shares are not able to exercise pre-emptive rights
granted in connection with an issue of our ordinary shares, their proportional shareholding in our company would be diluted.
The Athens Stock Exchange may be less liquid than other major exchanges, and may exhibit volatility, which may adversely affect your
ability to trade our ordinary shares.
The principal trading market for our ordinary shares is the Athens Stock Exchange, or the ATHEX. The ATHEX may be less liquid than
major markets in Western Europe and the United States. As a result, shareholders may have difficulty buying and selling our ordinary shares,
especially in large numbers. In 2006, the average daily trading volume on the ATHEX was approximately € 342.7 million and the average daily
trading volume of our ordinary shares on the ATHEX was approximately € 5.3 million. By comparison, in 2005, the average daily trading
volume on the ATHEX was approximately € 210.0 million and the average daily trading volume of our ordinary shares on the ATHEX was
approximately € 4.6 million.
In addition, stock markets in general, including the ATHEX, can be highly volatile. You may not be able to trade large amounts of our
ordinary shares or ADSs during or following periods of volatility. You should read Item 9A, “The Offer and Listing—Offer and Listing
Details” for additional information on the ATHEX.
Greek corporate law and our articles of association may not grant you certain of the rights and protections generally afforded to
shareholders of US companies under US federal and state laws.
The rights provided to our shareholders under Greek corporate law and our articles of association differ in certain respects from the rights
that you would typically enjoy as a shareholder of a US company under applicable US federal and/or state laws. For example, only
shareholders holding a minimum of 5% of our share capital may ask for an inspection of our corporate records, while under Delaware corporate
law any shareholder, irrespective of the size of his or her shareholdings, may do so. Furthermore, we will generally be exempt from the US
Securities Exchange Act of 1934 rules regarding the content and furnishing of proxy statements to our shareholders. In particular, the notice to
a general meeting of the shareholders of a Greek company typically sets forth only the items on the agenda for this meeting but it does not
include management’s recommendations with respect to such items. Accordingly, if you participate in a general meeting of our shareholders
through a representative, you may not be able to give him or her voting instructions with advance knowledge of management’s position on the
items included in the agenda for that meeting.
Under Greek corporate law, shareholders are also unable to initiate a derivative action, a remedy typically available to shareholders of US
companies, in order to enforce a right of our company, in case we fail to enforce such right ourselves. In addition, a majority of more than 75%
of our shareholders may release a director from any liability, including if he or she has acted in bad faith or has breached his or her duty of
loyalty, provided that two years have lapsed since the cause of action arose against such director. In contrast, most US federal and state laws
prohibit a company from releasing a director from liability if he or she has acted in bad faith or has breached his or her duty of loyalty. Our
directors, officers and principal shareholders will also be exempt from the reporting and the short-swing profit recovery provisions contained in
Section 16 of the US Securities Exchange Act of 1934. However, these persons are and will continue to be required to comply with applicable
Greek legislation prohibiting insider dealing. Finally,
19
Greek corporate law imposes a particular set of restrictions on the ability of a Greek company to repurchase its own shares, which could be
more restrictive than the share repurchase regime applicable to US companies, and does not provide for any kind of appraisal rights in the case
of a business combination.
For additional information on these and other aspects of Greek corporate law and our articles of association, you should read Item 9C,
“The Offer and Listing—Markets—Market regulation,” Item 10A, “Additional Information—Share Capital” and Item 10B, “Additional
Information—Memorandum and Articles of Association”. As a result of these differences between Greek corporate law and our articles of
association, on the one hand, and US federal and state laws, on the other hand, in certain instances, you could receive less protection as a
shareholder of our company than you would as a shareholder of a US company.
ADS holders may not be able to exercise voting rights or receive distributions as readily as holders of ordinary shares.
Holders of ADSs who would like to vote their underlying shares at our general meetings must instruct The Bank of New York as
Depositary on how to vote these underlying shares. Neither we nor The Bank of New York as Depositary can guarantee that you will receive
the notice for the general meeting or any voting materials provided by The Bank of New York in time to ensure that you instruct The Bank of
New York to vote the ordinary shares underlying your ADSs. In addition, The Bank of New York and its agents are not responsible for failure
to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to vote and there may
be nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested. In addition, you may not receive the
distributions we make on our ordinary shares or any value for them if it is illegal or impracticable for The Bank of New York to make them
available to you.
ITEM 4
INFORMATION ON THE COMPANY
A. History and Development of the Company
We were formed through the combination of Hellenic Bottling Company S.A. and Coca-Cola Beverages plc on August 9, 2000.
Hellenic Bottling Company S.A., a corporation incorporated under the laws of Greece in 1969, was headquartered in Athens. In 1981,
Kar-Tess Holding S.A. acquired a 99.9% interest in Hellenic Bottling Company S.A. Hellenic Bottling Company S.A.’s shares were listed on
the Athens Stock Exchange in July 1991 and it became one of the largest non-financial companies listed in Greece. The Kar-Tess Group held
an interest of approximately 68.6% in Hellenic Bottling Company S.A. immediately prior to its acquisition of Coca-Cola Beverages plc in
August 2000.
Hellenic Bottling Company S.A.’s original territory was Greece, where The Coca-Cola Company granted it bottling rights in 1969. After
1981, Hellenic Bottling Company S.A. expanded its business through acquisitions and, immediately prior to the acquisition of Coca-Cola
Beverages plc, operated bottling plants in 11 countries having an aggregate population of approximately 200 million. Hellenic Bottling
Company S.A. had operations in Greece, Bulgaria, Armenia, the Former Yugoslav Republic of Macedonia (through an equity investment),
Serbia, Montenegro, Northern Ireland, the Republic of Ireland, Nigeria, part of Romania, Moldova and part of the Russian Federation (through
an equity investment).
20
In July 1998, Coca-Cola Amatil Limited, an Australian-based bottler of the products of The Coca-Cola Company, de-merged its European
operations, resulting in the formation of Coca-Cola Beverages plc. These territories consisted of Austria, Switzerland, Croatia, the Czech
Republic, Hungary, Poland, Slovakia, Slovenia, Belarus, Bosnia and Herzegovina, part of Romania and Ukraine. Coca-Cola Beverages plc also
acquired the Northern and Central Italian bottling operations of The Coca-Cola Company. As a result, immediately prior to its acquisition by
Hellenic Bottling Company S.A., Coca-Cola Beverages plc had bottling operations in 13 countries with an aggregate population of
approximately 200 million. Coca-Cola Beverages plc was incorporated under the laws of England and Wales and was listed on the London
Stock Exchange, with a secondary listing on the Australian Stock Exchange. Immediately prior to Coca-Cola Beverages plc’s acquisition by
Hellenic Bottling Company S.A., The Coca-Cola Company held, directly and indirectly, a 50.5% interest in Coca-Cola Beverages plc, and The
Olayan Group, a diversified multinational Saudi Arabian group, which holds an interest in the bottler of products of The Coca-Cola Company
for Saudi Arabia, held a 10.8% interest. The remainder of Coca-Cola Beverages plc’s shares was publicly held.
Following the acquisition of Coca-Cola Beverages plc, Hellenic Bottling Company S.A. was renamed Coca-Cola Hellenic Bottling
Company S.A. and became the second largest bottler of products of The Coca-Cola Company in the world at that time, based on sales volume.
We retained our headquarters in Athens and our shares were listed on the Athens Stock Exchange, with secondary listings on the London and
Australian Stock Exchanges.
On November 23, 2001, we purchased from The Coca-Cola Company all of its wholly owned and majority owned bottling operations in
the Russian Federation through the purchase of the Cyprus holding company, Star Bottling Limited, and LLC Coca-Cola Stavropolye Bottlers.
The Russian operating subsidiary of Star Bottling Limited is LLC Coca-Cola HBC Eurasia following the merger of LLC Coca-Cola
Vladivostok Bottlers in 2005. In addition, on the same date we also purchased The Coca-Cola Company’s 40% interest in Coca-Cola Molino
Beverages Limited, a company in which we already held the remaining 60%. As a result of this acquisition, we gained the exclusive rights to
sell and distribute products of The Coca-Cola Company in all of the Russian Federation. On January 2, 2002, we completed the acquisition
from The Coca-Cola Company of its bottling operations in the Baltic countries of Lithuania, Estonia and Latvia.
On April 5, 2006, we successfully completed the tender offer for the outstanding share capital of Lanitis Bros Public Limited
(subsequently renamed Lanitis Bros Limited), a beverage company in Cyprus, with a strong portfolio of products, including those of The
Coca-Cola Company, as well as its own juice and dairy products. Following completion of the tender offer, we acquired 95.43% of the share
capital of Lanitis Bros Limited. The total consideration paid for these shares was € 71.5 million (excluding acquisition costs) with the
assumption of debt of an additional € 5.6 million. Following completion of the tender offer, we initiated a mandatory buy-out process in
accordance with Cypriot law for the purposes of acquiring the remaining shares in Lanitis Bros Limited. Lanitis Bros Limited has been delisted
from the Cyprus Stock Exchange. As at December 31, 2006, we had acquired an additional 11,218,735 shares representing 4.48% of the share
capital of Lanitis Bros Limited for a total consideration of € 3.4 million, bringing our equity ownership to 99.91%.
We listed our ADSs on the New York Stock Exchange on October 10, 2002. We believe that this listing has increased our visibility to the
international investment community and enhanced our comparability with our international peer group.
Since 2002, we have expanded our presence in the non-CSD category. We acquired Römerquelle GmbH, an Austrian mineral water
company (December 2003) and Gotalka d.o.o., a Croatian mineral water company (January 2004), Bankya Mineral Waters Bottling Company
EOOD, a Bulgarian mineral water company (June 2005), and we developed the NaturAqua mineral water brand in Hungary and the
21
Olimpja water brand in Bosnia. We acquired jointly with The Coca-Cola Company, Valser Mineralquellen AG, a Swiss mineral water bottler
(September 2002), Dorna Apemin S.A., Romania’s premier sparkling mineral water company (December 2002), Multivita sp. z o.o., a Polish
mineral water company (October 2003), Vlasinka d.o.o., a Serbian mineral water company (April 2005), the Multon Z.A.O. group, a leading
Russian fruit juice producer (April 2005), and Fresh & Co, a leading juice company in Serbia (March 2006). Lanitis Bros Limited, which was
acquired by us in April 2006, also has a significant juice and dairy business in addition to its CSD business. Most recently, we acquired jointly
with The Coca-Cola Company Fonti del Vulture S.r.l., a producer of high quality mineral water in Italy with significant water reserves
(July 2006). We also acquired a hot beverages vending operator in Hungary, Yoppi Kft. (August 2006) and Eurmatik S.r.l. (May 2007), a
vending operator in Italy.
Our address is: 9 Fragoklissias Street, 151 25 Maroussi, Athens, Greece. Our telephone number is (011) 30 210 618 3100. We have
appointed CT Corporation System, located at 111 Eighth Avenue, 13th Floor, New York, NY 10011, USA, as our agent for service of process
in any suit, action or proceeding with respect to our ordinary shares or ADSs and for actions under US federal or state securities laws brought
in any US federal or state court located in The City of New York, Borough of Manhattan, and we have submitted to the jurisdiction of such
courts. Our authorized representative in the United States is Puglisi & Associates.
B. Business Overview
Overview
Our business and our products
Our business consists of producing, selling and distributing non-alcoholic beverages consisting primarily of products of The Coca-Cola
Company. We are one of the largest bottlers of non-alcoholic beverages in Europe, operating in 28 countries with a total population of
approximately 540 million people (including our equity investment in Brewinvest S.A.). In 2006, we sold approximately 1.7 billion unit cases,
generating net sales revenue of € 5.4 billion.
Our products include carbonated soft drinks, or CSDs, and non-CSDs, including juices, waters, sports and energy drinks and other
ready-to-drink beverages such as teas and coffees. In 2006, CSDs accounted for 71% and non-CSDs accounted for 29% of our sales volume, as
compared, respectively, to 74% and 26% in 2005 and 78% and 22% in 2004. We offer our products in a range of flavors and package
combinations which vary from country to country.
We are one of The Coca-Cola Company’s key bottlers, that is, bottlers in which The Coca-Cola
Company has a significant equity interest and which The Coca-Cola Company regards as strategic partners based on factors such as size,
geographical diversification and financial and management resources. We believe that our success and the success of the products of The
Coca-Cola Company in our markets rely in large part upon the alignment of strategic objectives between us and The Coca-Cola Company, with
the two companies working together and combining their respective skills and assets to maximize opportunities to increase sales and profits in
the countries in which we operate. As part of this relationship, we work together with The Coca-Cola Company such that The Coca-Cola
Company has primary responsibility for consumer marketing and brand promotion, while we produce, sell and distribute the products of
The Coca-Cola Company and execute customer marketing at the points of sale.
Under our bottlers’ agreements with The Coca-Cola Company, we have the right to produce and the exclusive right, subject to certain
limitations, to sell and distribute products of The Coca-Cola Company in each of our territories. Sales of products of The Coca-Cola
Company represented approximately 93% of our total sales volume in 2006, with sales of products under The Coca-Cola brand, the world’s
most recognized brand, representing approximately 38% of our total sales volume. In
22
addition to Coca-Cola, our other core brands include Fanta, Sprite and Coca-Cola light (which we sell in some of our countries under the
diet Coke trademark). Our core brands together accounted for approximately 63% of our total sales volume in 2006. We also produce, sell
and distribute a broad family of brands of other CSD and non-CSD products which varies from country to country. Together with
The Coca-Cola Company, we are committed to exploring new growth opportunities by introducing new products and packages that satisfy
the changing demands and preferences of consumers in our markets.
Our markets
We group our countries into three segments. The countries included in each segment share similar levels of political and economic
stability and development, regulatory environments, growth opportunities, customers and distribution infrastructures. Our three segments are as
follows:

Established Countries, which are Italy, Greece, Austria, the Republic of Ireland, Northern Ireland, Switzerland and Cyprus.

Developing Countries, which are Poland, Hungary, the Czech Republic, Croatia, Lithuania, Latvia, Estonia, Slovakia and Slovenia.

Emerging Countries, which are the Russian Federation, Romania, Nigeria, Ukraine, Bulgaria, Serbia, Montenegro, Belarus, Bosnia
and Herzegovina, Armenia, Moldova and the Former Yugoslav Republic of Macedonia (through an equity investment).
Our strengths
World’s leading brands
We produce, sell and distribute Coca-Cola, the world’s leading brand of non-alcoholic beverages in terms of sales volume and the world’s
most recognized brand. The other brands licensed to us by The Coca-Cola Company are also among the leading brands in their market
categories. In particular, Coca-Cola light (diet Coke), Sprite and Fanta, together with Coca-Cola, are four of the world’s five best selling
non-alcoholic beverages in terms of sales volume.
Substantial scale benefits
We are the second largest bottler of products of The Coca-Cola Company in the world in terms of net sales revenue and market
capitalization, operating in 28 countries with a total population of approximately 540 million. Our scale offers significant opportunities arising
from the sharing of knowledge and best practices across our countries, procurement savings and coordination and optimization of investment
planning, including capital expenditure.
Key bottler of The Coca-Cola Company
We are one of The Coca-Cola Company’s key bottlers, reflecting our strategic importance within the Coca-Cola system. We work closely
with The Coca-Cola Company, utilizing our respective skills and assets to maximize the opportunities to increase sales in our countries and,
ultimately, increase value to our shareholders over the long-term. However, The Coca-Cola Company could exercise significant influence over
our profit margins by virtue of its rights under our bottlers’ agreements to determine the price of concentrate we buy from The Coca-Cola
Company and, to the extent permitted by local law, the maximum price we may charge to our customers outside the European Economic Area.
23
Balanced portfolio of markets
Our established countries provide us with a stable source of revenues and cash flow, while our developing and emerging countries provide
us with significant growth opportunities. This balance allows us to minimize external financing of our long-term growth, reduce earnings
volatility and limit our exposure to the effects of potential economic or political instability in our developing and emerging countries.
Significant markets with high growth potential
We believe that many of our developing and emerging countries are underdeveloped in terms of CSD and non-CSD consumption. In 2006,
for example, the Russian Federation and Nigeria, which together account for more than half of the total population of our countries, had a
weighted average annual CSD consumption of approximately 95.4 servings per capita, compared to over 300 in Western Europe. Additionally,
as the beverage of choice in our emerging and developing countries continues to evolve from tap water and homemade drinks toward branded
CSDs and non-CSDs, we believe that we are well positioned to capture a substantial share of this market growth. Not only is there an
opportunity for sales revenue growth in these countries through increased market penetration, but countries such as Nigeria generally have a
more favorable demographic profile for CSD consumption since there are larger numbers of young people who consume more CSDs.
However, many of our developing and emerging countries are subject to economic and political volatility that may limit our ability to achieve
growth in such countries.
Modern business infrastructure
Since 2001, we have invested in excess of € 2.4 billion in property, plant and equipment, to modernize our plant infrastructure and to
expand the availability of cold drink equipment such as coolers. As a result, we believe that we have the production capacity and distribution
infrastructure to meet volume growth at a relatively low incremental capital cost and to expand the availability of our products, especially the
more profitable single-serve packages.
Large and skilled sales force
We believe that we have one of the largest and best-trained sales forces in the non-alcoholic beverages industry in each of our countries.
This allows us to work closely and develop strong relationships with our customers.
Experienced management
Our senior management team has extensive experience in the non-alcoholic beverages industry. This provides us with strong knowledge
of the industry, familiarity with our customers and understanding of the development, manufacture and sale of our products.
Our strategy
Our strategic objective is to maximize shareholder value over time. Our management also uses four key measures to evaluate our
performance: profitable volume growth, growth in operating profit, growth in COP, and return on invested capital, or ROIC.
In order to achieve this objective we have set the following six main priorities:

to increase our beverage categories in order to become a more diverse alcohol-free beverage company;

to build brand equity in order to create value for customers;

to drive profitable package mix and exploit new channels in order to enhance margins;
24

to manage capital for growth and value;

to drive cost efficiency throughout the business; and

to create superior sustainable returns.
Building capabilities
Our strategy starts with our people. We believe that our success to date is due in large part to our experienced management team and to the
dedication and professionalism of our approximately 43,000 employees. We will continue to build employee excellence by recruiting the best
people and providing intensive and ongoing training and career development. At the same time, we will continue to use our compensation
system to closely align our employees’ incentives with the achievement of our financial objectives and the creation of shareholder value.
Operating across 28 countries has taught us that our local employees are in the best position to evaluate the particular circumstances of
each market category and address its specific needs. Accordingly, throughout our operations, responsibility and accountability for improving
performance and delivering results is placed in the hands of those closest to the market, including our country and local managers. We believe
that this fosters a high degree of innovation and responsiveness to our customers.
Developing our markets by delivering superior customer service and quality products
The second key element of our strategy is to further develop each of our markets by delivering superior customer service and quality
products. Our blueprint for executing this strategy can be summarized in a simple formula: availability, affordability, acceptability and
activation.
Availability means placing our range of products within easy reach of consumers in the “right” package, in the “right” location, at the
“right” time. We focus on developing strong relationships with our customers in order to ensure that the “right” products are in stock, highly
visible and readily accessible wherever and whenever consumers may desire a non-alcoholic beverage.
Affordability means offering a wide variety of desirable, premium quality products, in packages appropriate for the occasion, at the “right”
price. In doing so, we aim to reach as many consumers as possible while taking into account the differing levels of purchasing power in the
countries in which we operate.
Acceptability means supplying an extensive and growing range of products that meet the highest quality standards in each country,
enhancing their acceptability to consumers. Our experience in quality control, customer service and efficient distribution, combined with a
detailed understanding of consumer needs and access to the most effective communications channels, allows us to reach out to customers and
consumers in each of our markets and meet their demands.
Activation means motivating consumers to choose our products by improving product availability and attractiveness at the point of
purchase and by building brand strength in our local markets. We achieve this in close cooperation with our customers through the placement
of cold drink equipment, such as coolers and vending machines, the provision of signage and other point-of-sale materials and the
implementation of local marketing and promotional initiatives.
25
Broadening our product range
Consumer preferences and demands are constantly evolving throughout our markets. In order to satisfy these demands, we continuously
build on our strong family of brands by introducing new flavors and packages for our existing brands, launching existing brands in new
markets and re-launching or reinvigorating existing brands where appropriate. In addition, in order to take full advantage of opportunities in
market categories with high growth potential, particularly non-CSD categories such as waters, juices, energy and sports beverages and other
ready-to-drink beverages such as teas and coffees, we plan to launch new products developed by The Coca-Cola Company and to acquire or
develop new local products to offer consumers more choice.
In recent years, for instance, we acquired Römerquelle GmbH, an Austrian mineral water company (December 2003) and Gotalka d.o.o., a
Croatian mineral water company (January 2004), Bankya Mineral Waters Bottling Company EOOD, a Bulgarian mineral water company
(June 2005), and we developed the NaturAqua mineral water brand in Hungary and the Olimpija water brand in Bosnia. We acquired jointly
with The Coca-Cola Company Valser Mineralquellen AG, a Swiss mineral water bottler (September 2002), Dorna Apemin S.A., Romania’s
premier sparkling mineral water company (December 2002), Multivita sp. z o.o., a Polish mineral water company (October 2003), Vlasinka
d.o.o., a Serbian mineral water company (April 2005), the Multon Z.A.O. group, a leading Russian fruit juice producer (April 2005), Fresh &
Co, a leading juice company in Serbia (March 2006) and Fonti del Vulture S.r.l., a producer of high quality mineral water (July 2006). Lanitis
Bros Limited, which we acquired in April 2006, also has a significant juice and dairy business in addition to its CSD business.
Improving efficiency and optimizing use of capital
We have benefited in several ways from the increase in the size of our company over the past seven years:

By centralizing our procurement function, we have been able to reduce our costs of raw materials and packaging.

By implementing best practices across the company, we have been able to improve our sales and distribution systems.
We intend to continue taking advantage of these benefits of scale to improve the efficiency of our operations. We also intend to continue
to modernize our production and distribution infrastructure and invest in advanced IT systems to enhance productivity.
At the same time, we intend to continue to manage our capital expenditure carefully by focusing our investment on more profitable areas
of our business, such as cold drink equipment for use in the immediate consumption channel. Our immediate consumption channels include
restaurants and cafés, bars, kiosks, grocery stores, gas stations, sports and leisure venues and hotels. Products sold in our immediate
consumption channels typically generate lower volumes and higher margins per retail outlet than our future consumption channels. Through the
careful management of our capital expenditure, the efficient deployment of our assets, including cold drink equipment and distribution
infrastructure, across our countries and the use of appropriate financing arrangements, we aim to optimize the utilization of our capital. As a
result, we believe that we have the production capacity and distribution infrastructure to meet volume growth at a relatively low incremental
capital cost.
We believe that considerable opportunities exist for sustained, profitable growth in our existing territories. While we remain open to the
possibility of acquiring new territories over time on an opportunistic basis, this does not currently form part of our core business strategy.
26
Our products
We produce, sell and distribute both CSD and non-CSD products under the brands of The Coca-Cola Company in all of our countries. We
also produce, sell and distribute CSD products under the brands that The Coca-Cola Company acquired for certain countries from Cadbury
Schweppes plc in 1999. Schweppes Holdings Limited, a wholly owned subsidiary of The Coca-Cola Company, has granted to us the rights to
produce, sell and distribute these beverages in Greece, the Republic of Ireland, Northern Ireland, Nigeria, the Russian Federation, Bulgaria,
Bosnia and Herzegovina, Croatia, Ukraine, the Former Yugoslav Republic of Macedonia, Slovenia, Estonia, Lithuania and Latvia. In some of
our countries, we produce, sell and distribute non-CSD products licensed by Beverage Partners Worldwide, a joint venture between The
Coca-Cola Company and Nestlé S.A. The Coca-Cola Company owns the trademarks for all products of The Coca-Cola Company that we
produce, sell and distribute in each country in which we operate. As a result, we rely on The Coca-Cola Company to protect its brands in our
markets.
In some of our countries, we also produce, sell, distribute and market our own brands. These include our range of Amita juices and our
mineral water, Avra, in Greece, our Römerquelle mineral water in Austria, our Deep River Rock packaged water and Fruice juices in the
Republic of Ireland and Northern Ireland and our Lanitis juices and dairy products in Cyprus. We also distribute certain CSD and non-CSD
products which we purchase from other companies unaffiliated with The Coca-Cola Company in some of our countries.
In 2006, CSD beverages of The Coca-Cola Company accounted for 71% of our sales volume, non-CSD beverages of The Coca-Cola
Company, principally Bonaqua, Dorna and Valser waters, Cappy juices, PowerAde and Nestea, licensed to us by Beverage Partners
Worldwide, accounted for approximately 23%, and other beverages, principally our Amita juices and Avra, Deep River Rock and
Römerquelle waters, accounted for approximately 6%. The following table sets forth our top five brands in 2006 in terms of sales volume as
a percentage of our total sales volume:
Sales volume in 2006
as a percentage of
total sales volume
Coca-Cola
Fanta
Sprite
Coca-Cola light
Bonaqua / Bonaqa
38
12
7
6
6
69
27
We offer our beverages in both refillable and non-refillable packages and in a range of flavors designed to meet the demands of our
consumers. The main packaging materials for our beverages are PET (a plastic resin), glass and cans. In addition, we provide fast food
restaurants and other immediate consumption outlets with fountain products. Fountains consist of dispensing equipment that mixes the fountain
syrup with carbonated or still water, enabling fountain retailers to sell finished CSDs or non-CSDs to consumers in cups or glasses. The
following table sets forth some of our most important products, including both products that The Coca-Cola Company and other parties have
licensed to us and the products that we own.
Products licensed by
The Coca-Cola
Company (CSDs)
Coca-Cola / Coke
Coca-Cola light / Coke light
diet Coke
Coca-Cola Zero / Coke Zero
Cherry Coca-Cola
Coca-Cola light with lemon
diet Coke with lemon
Vanilla Coke
Fanta
Fanta light
Sprite
Sprite light
Sprite Zero
Ali
Cappy Sprizz
Fresca
Frisco
Fruktime
Frutina
Kinley
Krest
Lift
Lifter
Lilt
Limca
Linnuse
Mezzo Mix
Pilskalina
(1)
Products licensed by
The Coca-Cola
Company (Non-CSDs)
Bankia
Bistra
Bonaqa / Bonaqua
BPM
Burn
Cappy
Dobry
Dorna
Eva
Five Alive
Izvorul Alb
Kropla Beskidu
Lilia / Lilia Kiss
Matúšov Prameð
Mickey’s Adventure
Minute Maid
Multivita
NaturAqua
Nico
Oasis
Olimpija
Poiana Negri
PowerAde
Rich
Rosa
Solaria
Sveva
Vivien
Vita
Valser
Products licensed
by others
Almdudler
Black Ice Coffee (1)
Dr. Pepper (2)
Nescafé Xpress (1)
Nestea (1)
Schweppes (2)
Tonic Water and
Tuborg Soda (3)
Valvert (4)
Our own products
Amita
Avra
Deep River Rock
Fruice
Frulite
Lanitis Juice
Lanitis Milk
Lyttos
Markusquelle
Next (5)
Römerquelle
Su-Voce (5)
Tanora
WaterBlue
Zelita
Third-party
products
distributed by us
Amstel (6)
Heineken (6)
Sió
Vittel
Appletiser
We produce, sell and distribute Black Ice Coffee, Nestea and Nescafé Xpress under a license from Beverage Partners Worldwide. On March 27, 2007, The
Coca-Cola Company and Nestlé announced their agreement that all coffee initiatives revert from Beverage Partners Worldwide to The Coca-Cola Company and
Nestlé on a market-by-market basis during an orderly transition period ending no later than December 31, 2008. We anticipate no immediate impact on our
operations as a result of this agreement.
(2)
We produce, sell and distribute Dr. Pepper and Schweppes under a license from Schweppes Holdings Limited.
(3)
We produce, sell and distribute Tuborg Soda and Tonic Water under a license from Carlsberg Breweries A/S.
(4)
We produce, sell and distribute Valvert under a license from Nestlé S.A.
(5)
These brands are owned by Fresh & Co, a juice company in Serbia which we purchased jointly with The Coca-Cola Company in March 2006.
(6)
We distribute Heineken in the south-west region of the Republic of Ireland, Bulgaria and the Former Yugoslav Republic of Macedonia and Amstel in Cyprus.
28
Our operations
Our territories encompass whole countries except, Northern Ireland, the only region of the United Kingdom in which we operate.
The following table illustrates key measures of consumption and certain key economic indicators for the countries within each segment for
2006.
Our CSD
servings
per capita
in 2006 (1)
Established:
Italy (Northern and Central)
Greece
Austria
Switzerland
The Republic of Ireland and Northern Ireland
Cyprus
Established countries (7)
Developing:
Poland
Hungary
Czech Republic
Croatia
Slovakia
Lithuania
Latvia
Estonia
Slovenia
Developing countries (7)
Emerging:
Russian Federation
Romania
Nigeria
Ukraine
Serbia and Montenegro
Bulgaria
Belarus
Bosnia and Herzegovina
Former Yugoslav Republic of Macedonia
Armenia
Moldova
Emerging countries (7)
All countries (pro forma) (7)
Total CSD
servings per
capita in
2006 (1)(2)
Our CSD
category
share
in 2006
(%) (2)
Our total
(CSD and
non-CSD)
volume
(million
unit cases)
in 2006 (3)(4)
Country
(or, if
different,
territory)
population
(million)
in 2006 (5)
GDP per
capita ($)
in 2006 (6)
105.9
185.9
147.8
153.9
253.0
154.8
139.9
215.3
233.8
355.1
311.7
456.4
235.9
263.6
49.2
79.5
41.6
49.4
55.2
65.6
53.5
213.9
149.0
84.4
75.0
72.2
11.9
606.4
38.8
10.7
8.2
7.6
5.7
0.8
71.8
30,619
21,729
37,721
51,200
46,335
20,737
33,414
61.3
135.6
80.0
112.4
52.0
46.8
66.3
89.0
54.7
75.4
181.0
275.3
531.3
167.1
316.2
135.5
100.4
157.4
153.6
242.3
33.9
49.3
15.1
67.3
16.5
34.6
66.0
56.5
35.6
35.5
133.0
85.0
52.2
26.6
18.9
8.8
8.4
6.9
5.0
344.8
38.5
10.0
10.2
4.5
5.4
3.6
2.3
1.3
2.0
77.8
8,749
13,369
11,624
8,312
8,609
8,447
7,138
10,350
18,733
9,907
31.4
103.5
20.4
23.4
97.3
112.5
27.5
65.1
111.4
36.9
6.8
34.6
54.6
152.4
193.9
35.7
125.9
179.7
285.2
98.8
112.3
210.7
80.8
29.6
110.7
150.3
20.6
53.4
57.2
18.6
54.1
39.5
27.8
58.0
52.9
45.7
23.0
37.3
39.2
314.9
145.6
142.2
74.0
53.4
51.3
15.9
13.9
10.4
4.7
2.3
828.6
1,779.8
141.4
22.3
135.0
46.3
10.8
7.3
9.7
4.5
2.1
3.0
4.3
386.7
536.3
5,185
3,554
617
1,761
1,987
3,803
2,937
2,012
3,028
2,221
599
2,791
7,921
Plus: Exports
Less: Brewinvest S.A. (8)
Less: Multon Z.A.O. group (9)
Less: Fresh & Co (10)
All countries (reported)
8.2
(10.4 )
(51.3 )
(2.7 )
1,723.6
29
Sources: Information on total CSD servings per capita and our CSD category share has been obtained from CANADEAN, except for Nigeria
and Armenia, for which such information cannot be obtained from CANADEAN. In addition, the following adjustments have been made to
category share numbers:

Our CSD category share in Greece consists of our 75.3% share relating to products of The Coca-Cola Company and our 4.2% share
relating to Tuborg Soda and Tonic Water and Zelita, as derived from CANADEAN.

The CANADEAN CSD data for Switzerland does not currently include our product, Ali. Incorporating the effect of Ali, based on our
internal estimates, in both category share and total CSD balances, increases our category share from 48.9% to 49.4%.

Our CANADEAN CSD category share in Austria includes both the category share relating to products of The Coca-Cola Company
and to the Almdudler brand.
Information on country or territory population and GDP per capita has been obtained from The World Factbook of Central Intelligence
Agency, except for the population of our Italian territory. The bottlers’ agreement that we have been granted by The Coca-Cola Company in
respect of Italy covers the northern and central regions of the country. As a result, the territory in which we distribute CSDs in Italy is limited to
these regions. As the population of this territory cannot be obtained from The World Factbook of Central Intelligence Agency or other
independent sources we have calculated a figure based on our internal estimates.
(1)
Per capita consumption is defined as the average number of eight US fluid ounce servings consumed per person per year in a specific
market. We have calculated per capita consumption of our CSD products in each country by multiplying our CSD category share obtained
from CANADEAN by the total number of CSD servings per capita in such countries obtained from CANADEAN, with the exception of
Nigeria and Armenia, for which no information on total CSD servings per capita and CSD category share can be obtained from
independent sources. As a result, we have calculated per capita consumption of our CSD products in these two countries by multiplying
our unit case volume by 24 (the average number of servings in a unit case) and dividing by the population.
(2)
Information on CSD category share in relation to Italy can only be obtained from independent sources with respect to the entire
country. As the area in which we distribute CSDs in Italy is limited to the northern and central regions, our estimate of total CSD servings
per capita in our Italian territory is based on our CSD servings per capita and externally available CSD category share information.
(3)
One unit case corresponds to 24 servings of eight US fluid ounces.
(4)
The total volume for Italy represents the volume in respect of both distribution of products of The Coca-Cola Company in our franchise
territory of northern and central Italy and the distribution of the water products of Fonti del Vulture S.r.l across the whole of Italy.
(5)
The population figure provided for Italy represents our internal estimate of the population of northern and central regions of the
country, being the territory over which we distribute CSDs.
(6)
The GDP per capita of Italy represents the GDP per capita of Italy as a whole and not only that of the northern and central parts of the
country, which constitute our franchise territory for products of The Coca-Cola Company. The GDP per capita reported for Ireland reflects
a population-weighted average of the GDP per capita for the Republic of Ireland and Northern Ireland (as based on the GDP for the
United Kingdom).
(7)
(8)
Population-weighted average for all territories in the category.
The results of Brewinvest S.A., a joint venture of which we own 50% that is engaged in the bottling and distribution of beer and
non-alcoholic beverages in Bulgaria and the Former Yugoslav Republic
30
of Macedonia, are not consolidated into our results of operations under US GAAP. Instead, they are reflected in our share of income of
equity method investees.
(9)
The results of Multon Z.A.O. group, a joint venture of which we own 50% that is engaged in the production and distribution of juice
products in the Russian Federation, are not consolidated into our results of operations under US GAAP. Instead, they are reflected in our
share of income of equity method investees.
(10)
The results of Fresh & Co, a joint venture of which we own 50% that is engaged in the production and distribution of juice products in
Serbia, are not consolidated into our results of operations under US GAAP. Instead, they are reflected in our share of income of equity
method investees.
We believe that the preceding table illustrates the potential to increase consumption of our beverages, particularly in our emerging and
developing countries, which still exhibit relatively low levels of CSD consumption per capita, as compared to our established countries. For
example, the population-weighted average servings of CSDs per capita was 110.7 in our emerging countries and 242.3 in our developing
countries in 2006. In contrast, the population-weighted average servings of CSDs per capita was 263.6 in our established countries in 2006.
Established Countries
Introduction
Our established countries are Italy, Greece, Austria, the Republic of Ireland, Northern Ireland, Switzerland and Cyprus. These countries
generally enjoy a high degree of political and economic stability and have substantially similar macroeconomic characteristics. In particular,
they typically exhibit high levels of disposable income per capita, which enhances the affordability of our products, especially our more
profitable single-serve packages designed for immediate consumption.
Established countries are characterized by high consumer sophistication, high consumption volumes per capita, moderate rates of
consumption growth for CSDs and a trend toward faster growth in consumption of non-CSDs, particularly waters and juices. We believe that
the growth in consumption of non-CSDs, which some consumers perceive as being associated with physical well-being, health and fitness, is
strongly influenced by current demographic trends, including an ageing and increasingly affluent population.
The most important trend generally affecting the future consumption channel in our established countries is increasing concentration of the
retail sector. At the same time, we see many opportunities for further growth in the more profitable immediate consumption channel in these
countries where we continue to see opportunities to extend our penetration of small retail outlets, specialized consumption venues and at work.
Activation at the final point of sale is also a key focus of our sales and marketing efforts in these countries.
We sell our products in our established countries through a combination of wholesalers and our direct delivery system. During 2006 and
the first part of 2007, we sought to expand our direct distribution capabilities.
In 2006 and 2005, we took certain initiatives to consolidate our manufacturing network by rationalizing sites, through consolidation,
relocating manufacturing lines, and streamlining our warehouses. The established countries affected by these initiatives were mainly the
Republic of Ireland and Northern Ireland, Austria and Greece.
Net sales revenue in our established countries amounted to € 2,244.9 in 2004, € 2,261.8 million in 2005, and € 2,473.5 million in 2006
which accounted for 53.4%, 48.8% and 46.0% of our total net sales revenue in 2004, 2005 and 2006, respectively.
31
Italy
Our business in Italy encompasses the manufacture and distribution of the products of The Coca-Cola Company in our franchise territory
of northern and central Italy and the distribution of the water products of Fonti del Vulture S.r.l across the whole of Italy. Fonti del Vulture S.r.l
was acquired in July 2006, jointly with The Coca Cola Company.
Our franchise territory for northern and central Italy encompasses approximately two-thirds of the Italian population. In the territory, we
are one of the largest bottlers of non-alcoholic beverages and the leader in the CSD category in terms of sales volume, with a category share of
49.2% in 2006. CSD per capita consumption in our Italian territory is lower than in any of our other established countries and consumption
growth of non-CSDs, particularly mineral waters, teas and juices, continues to increase more rapidly than that of CSDs. We believe that the low
per capita consumption of CSDs in Italy relative to our other established countries represents a significant growth opportunity.
Total volume for 2006 increased by 18.7% against 2005. Of this, 15.2% related to the acquisition of Fonti del Vulture S.r.l. and the
remaining 3.5% to our core business. In 2006, we continued to focus on light products with the introduction of Sprite Zero and continued
investment in Coca Cola Light, Fanta Free and Nestea Light. We also continued to diversify our range of products into new categories with the
launch of Aquarius. In 2006, we undertook a number of promotional activities linked to major events, starting with our winter promotion in
connection with the Turin Olympics, followed by our football promotion linked to the FIFA World Cup and our summer promotion
co-developed with MTV.
In 2006, we continued to drive incremental profitable volume growth. One of the key factors in our performance was a 17.0% growth in
sales of 0.5 liter PET bottles and an overall increase of 4.5% in single-serve packages (excluding Fonti del Vulture S.r.l.). We achieved strong
growth in the 0.5 liter package across all channels. This was primarily due to the implementation of our direct distribution system, which
contributed significantly to the strong growth of the 0.5 liter package in the immediate consumption channel, and secondarily due to improved
brand visibility, as a result of increased in-store marketing efforts and activation, as well as additional cooler placements both in the immediate
and in the future consumption channels.
In 2006, we also realized the full economic and operational benefit of the aseptic line that was added to our Nogara plant in 2005. The new
aseptic line allows us to produce directly our increasing volumes of Nestea and PowerAde, which were previously produced through third-party
toll-fillers.
Although there has been an increasing level of concentration and consolidation in both the wholesale and retail channels since the
mid-1990s, the beverage distribution sector in Italy remains relatively fragmented at both the wholesale and the retail level compared to other
Western European countries. In 2006, we completed the roll-out of our direct distribution system in the immediate consumption channel. While
this initiative is part of a multi-year plan, the results have already been very positive particularly in terms of improved distribution of our
profitable single serve packages, such as 0.5 liter packages, and of our non-carbonated beverages.
Greece
We are the largest bottler of non-alcoholic beverages and the leader in the CSD category in Greece in terms of sales volume, with a 79.5%
category share in 2006. We have operated in Greece since 1969. We believe Greece is one of the countries where we have been particularly
successful in diversifying our family of brands. In Greece, in addition to our strong presence in the CSD category with the core brands of The
Coca-Cola Company, we have been very successful in the non-CSD category, where we are the leading producer of water with our Avra
mineral water and Lyttos brands and of fruit juices with our Amita and Frulite brands. We believe that our significant and successful
experience in the non-CSD category in
32
Greece will be beneficial in our effort to achieve a leading position in the non-CSD category in other countries.
Immediate consumption channels are particularly important for our business in Greece. Relying on systematic work and significant
investments, we have developed a consumption channel that consists of approximately 130,000 small outlets in the Greek market, including
kiosks, grocery stores, cafés, bars and gas stations. We plan to further improve the availability of our cold drink products for impulse
consumption by investing in cold drink equipment and expanding our sales force in this channel.
We sell the majority of our products to a large number of wholesalers and distributors, which distribute our products to small outlets. We
also deliver our products directly to some of our customers, such as supermarket chains and other key accounts.
We incur higher transportation costs in the Greek Islands than in mainland Greece because we need to ship many of our products by sea.
In addition, our core consumers in the Greek Islands are tourists. As a result, demand for our products in the Greek Islands is concentrated in
the tourist season from mid-April to September and varies from island to island based upon the nationality, age range and preferences of the
tourists who typically visit each island. In order to address the special circumstances under which we operate, we have separated our
distribution operations in the Greek Islands from those in mainland Greece.
We have also developed different forms of marketing activities for different target consumers, with sponsorships, club advertisements,
prize contests and instant win programs. In the Greek Islands, we have implemented programs that focus on impulse consumption as well as the
consumption habits of tourists.
O n February 24, 2006, we ceased operations in the Athens plant, and production was transferred to our Schimatari plant (which is 40
kilometres north from Athens). In addition, on March 10, 2006, the warehouses in Messologi, Corfu and Rhodes were closed. In December, we
undertook additional restructuring following an organizational streamlining across the administrative support and logistic functions. These
initiatives are expected to support the growth of the Greek business as well as yield significant operating efficiency benefits in future years.
Austria
We believe that we are the largest bottler of non-alcoholic beverages in Austria in terms of sales volume, with a 41.6% share of the CSD
category in 2006.
In addition to the core brands of The Coca-Cola Company, our CSD brands include Mezzo Mix and Almdudler, a popular national CSD
product. We also own Römerquelle, the second largest water brand in Austria, in terms of sales volume. The flavored variant of Römerquelle,
Emotion, is the leading brand in the growing flavored water segment.
For distribution in our immediate consumption channel, we rely on a combination of our direct delivery system and a group of seven
major wholesalers. We seek to maintain strong relationships with these wholesalers by establishing stronger interaction with them, entering into
joint marketing development activities and providing more innovative consumer communication initiatives. In 2006, we increased our sales
force by 30% by hiring additional market developers whose task is to provide even better service to accounts covered by wholesalers. We also
realigned merchandising standards, increased outdoor cooler placements and improved route plans as well as the bonus structure of our sales
force.
For distribution in our future consumption channel, we deliver our products to large retail chains through their central warehouses and to
other retailers through our direct delivery system. We are also currently working closely with wholesalers in many parts of Austria allowing us
to optimize our warehousing infrastructure, consolidate warehouses where possible and use wholesaler and distributor
33
warehouses where it is commercially reasonable to do so. In 2006, we undertook a rationalization of our price to package strategy which has
benefited our major retail customers, in terms of the overall profit they derive from our product portfolio, and has laid the foundations for
increased collaboration between our company and such customers.
Switzerland
We believe that we are the largest bottler of non-alcoholic beverages in Switzerland in terms of sales volume, with a 49.4% share of the
CSD category in 2006.
In addition to the core CSD brands of The Coca-Cola Company, our CSD brands include Kinley and our non-CSD brands include Valser
mineral water, Nestea, Minute Maid, Mickey’s Adventure juices and PowerAde sports drinks. We believe that our mix of CSD and non-CSD
products provides us with the appropriate beverage options to address the changing preferences and tastes of Swiss consumers with light CSD
brands continuing to grow strongly and Valser and Nestea brands outperforming their respective categories. In 2006, we broadened our water
product portfolio by introducing Valser Viva, a health and wellness variant of the Valser brand.
During 2006, we continued to pursue our strategy of improving access of Swiss consumers to our products by substantially increasing our
sales force and securing additional listings in key Swiss retailers. Furthermore, we invested heavily in the training and development of our sales
teams, as well as in new marketing materials for marketplace activation. As a result, both our brand exposure and distribution and sales of
single-serve packages improved significantly. In addition, marketing support for the Coca-Cola family of brands increased significantly in 2006
resulting in positive growth in terms of sales volume and category share.
The Swiss distribution system for non-alcoholic beverages relies primarily on wholesalers which are highly concentrated. As a result, our
relationship with our key wholesalers is particularly important to us. In 2006, we applied a new wholesaler partner model which has
significantly improved the manner in which we interact with key customers. We believe that this partnership model will be instrumental in
providing us with better access to our customers and, ultimately our final consumers, in a cost effective manner.
The Republic of Ireland and Northern Ireland
We believe we are the largest bottler of non-alcoholic beverages in the Republic of Ireland and Northern Ireland and the leader in the CSD
category in terms of sales volume, with a combined category share of 55.2% in 2006. As one of our established markets, the Republic of
Ireland and Northern Ireland has been a very successful market for our diversification strategy. Our growth of water sales in 2006 was 12%
making Deep River Rock the second largest water brand in terms of sales volume in the island of Ireland. We have also broadened our water
product portfolio with the introduction of new still and sparkling flavor variants.
In addition to the core CSD brands of The Coca-Cola Company, our brands in the Republic of Ireland and Northern Ireland include
Dr. Pepper, Fanta Exotic and Fanta Ice Lemon. Sprite and Sprite Zero hold a 23% share of the lemon/lime segment.
In the energy and sports category, our brands are BPM holding a 4.7% share of the category and PowerAde with 21% share of the
category. In the still drinks segment our brands are Fruice pure juice, Five Alive and Oasis. Our main water brand is Deep River Rock and we
also hold a license to distribute Vittel throughout the territory. Our key mixer brand is Schweppes which is available in various flavors
including tonic, soda and ginger ale holding a combined 65% share of the mixer category.
We sell the majority of our products to independent wholesalers and distributors that distribute our products to smaller outlets, and we
deliver our products directly to certain key customers, including
34
supermarket chains. Smaller outlets have retained a significant portion of the retail market in the Republic of Ireland throughout 2006.
However, there are indications of consolidation as a result of the abolition of legislation prohibiting sales of products below cost, a pricing
tactic often employed by large retailers, as well the conversion of centrally located retail outlets due to the lucrative real estate market.
We have developed targeted initiatives to stimulate consumer interest in our products, including strategic point-of-purchase displays,
increased presence and visibility of our cold drink equipment, particularly coolers, and promotion of our 0.5 liter package range. As a result of
our cold drink equipment placement and activation strategy, we were able to successfully launch new products and packages, and promote our
water and juice brands within the immediate consumption channel during 2006.
Our project to consolidate our three production facilities into one production plant in Northern Ireland at Knockmore Hill continued to
progress during 2006. Construction commenced in January 2006 and is now at a very advanced stage. We have already started commissioning
the new equipment and we plan to have the new plant fully operational in the second half of 2007.
On September 28, 2005, we acquired the second largest vending company in the Republic of Ireland, Vendit Limited. The acquisition has
strengthened our route to market in this channel. It also offers us further growth opportunities and the ability to conduct market tests for new
products before launching them across all channels.
Developing Countries
Introduction
Our developing countries are Poland, Hungary, the Czech Republic, Croatia, Lithuania, Latvia, Estonia, Slovakia and Slovenia. All but
Croatia entered the European Union on May 1, 2004. All our developing countries have market-oriented economies and have generally enjoyed
political and economic stability in recent years following the implementation of significant structural reforms. Our developing countries have
lower disposable income per capita than our established markets and continue to be exposed to economic volatility from time to time.
Macroeconomic conditions have been positive in our developing countries over the last three years, with all countries experiencing
positive real GDP growth. The entry of all of our developing countries, other than Croatia, into the European Union, has resulted in increased
political and economic stability due to their gradual alignment with the principles, objectives and regulations of the European Union.
Our developing countries are typically characterized by lower per capita consumption of CSDs than in our established countries. The
Coca-Cola Company’s products were introduced in the early 1990s in most of our developing countries, where they have since become
established premium brands. Consumers in some developing countries continue to move away from tap water and home made drinks to
branded products as beverages of choice. In addition, consumers in these markets have shown an increasing interest in branded beverages
associated with well-being and fitness, such as water and juices.
The non-alcoholic beverages market tends to be fragmented in our developing countries, with no single market participant typically
holding a leading share in more than one market category. In addition, consumers tend to be more price-sensitive in our developing countries
than in our established countries. Consequently, our products often face competition from local non-premium brands, which, in a number of
cases, have been present in the market for many years and remain popular with consumers.
35
We believe that developing countries offer significant growth opportunities for both our CSD and non-CSD products, and we are
committed to maximizing these opportunities by introducing new products, flavors and packages in both the future consumption and the
immediate consumption channels. In the future consumption channel, our priority is to develop an efficient distribution infrastructure and
expand our sales force. In the immediate consumption channels, we plan to make significant investments to increase availability by placing
coolers and other cold drink equipment in retail outlets and other consumption venues.
Net sales revenue in our developing countries amounted to € 732.7 million in 2004, € 841.1 million in 2005 and € 993.2 million in 2006,
which accounted for 17.4%, 18.2% and 18.5% of our total net sales revenue in 2004, 2005 and 2006, respectively.
Poland
Poland is our largest developing country in terms of both population and sales volume. We are the largest bottler of non-alcoholic
beverages in Poland in terms of sales volume, with a 33.9% share of the CSD category in 2006. PowerAde is category leader in the isotonic
drink category, while Nestea is category leader in the ice tea category. We believe that Poland represents a significant growth opportunity for
our business as per capita consumption of our products is still relatively low, compared to most of our other developing markets.
In addition to the core brands of The Coca-Cola Company, our CSD brands in Poland include Lift. Our water brands are Kropla Beskidu,
Vita and Multivita. Kropla Beskidu has successfully become the third water brand in terms of sales volume only two years after it was
launched. We also sell and distribute Cappy juice, Nestea ready-to-drink tea, the PowerAde family of sports drinks and the energy drink Burn.
Nestea, in particular, experienced significant growth during 2006 in the context of a rapidly growing ready-to-drink tea category.
Economic conditions in Poland have been improving following its accession to the European Union with the economy growing at a rate of
5.8% in 2006. This trend has benefited consumer spending and, in turn, the sales of our products.
During 2006, we continued investments in cold drink equipment and focused on increasing our activation efforts. In addition, we
significantly minimized our cost per unit case while achieving our targets on maintaining and improving the quality of our products and
production processes.
Hungary
We believe that we are the largest bottler of non-alcoholic beverages in Hungary in terms of sales volume. In 2006, we maintained our
leadership in the CSD category, where we had a share of 49.3%, despite the highly competitive nature of the Hungarian non-alcoholic
beverages market, which is characterized by the presence of other major international brands and local non-premium brands. Hungary has one
of the most developed CSD markets in Central and Eastern Europe, with a per capita consumption of 275.3 servings in 2006.
In addition to the core brands of The Coca-Cola Company, our CSD brands in Hungary include Lift and Kinley and our non-CSD brands
are Bonaqua and NaturAqua mineral water. Other brands include PowerAde sports drinks, Nestea ready-to-drink tea and Cappy juice.
Key developments during 2006 included the continued successful sales growth of our NaturAqua mineral water. We believe that, based on
our sales of NaturAqua and our Bonaqua sales in Hungary, we are one of the leaders in the water category. During 2006, our Nestea ice tea
sales increased significantly versus 2005 and we believe that we are now the category leader in ice teas in terms of sales volume and net sales
revenue. Our juices also experienced growth both in terms of existing packages and package
36
extensions. During 2006, we continued to focus on increasing the proportion of our products that are packaged in smaller serving sizes, as these
package sizes tend to generate higher profit margins. In 2006, we also entered into a distribution agreement with Brown-Forman Corporation to
distribute Jack Daniels, Finlandia, and Southern Comfort in Hungary.
Demand among Hungarian consumers for non-CSDs, such as mineral waters, juices and energy drinks, has been increasing. We intend to
explore further growth opportunities in this category by introducing new products.
Emerging Countries
Introduction
Our emerging countries are the Russian Federation, Romania, Nigeria, Ukraine, Bulgaria, Serbia, Montenegro, Belarus, Bosnia and
Herzegovina, Armenia, Moldova and The Former Yugoslav Republic of Macedonia. These countries are exposed to greater political and
economic volatility and have lower per capita GDP than our developing or established countries. As a result, consumer demand in our
emerging countries is especially price sensitive, making the affordability of our products even more important. We seek to promote our
products through a strategic combination of pricing, packaging and promotional programs taking into account local economic conditions.
Our emerging countries are typically characterized by lower per capita CSD consumption than our established and developing countries.
Consumers in some emerging countries are moving away from tap water and home made drinks as their principal beverages and have shown an
increasing interest in branded beverages. In some of our emerging countries, consumers are showing particular interest in juices and branded
waters.
In general, our emerging countries have a relatively undeveloped distribution infrastructure and a fragmented retail sector. In order to
expand the availability of our products, our priority has been to establish reliable distribution networks through a combination of our own direct
delivery system and independent distributors and wholesalers where this is economically more efficient. We also focus on improving the
availability of chilled products by placing coolers and other cold drink equipment in the market.
We believe that our emerging countries provide significant growth opportunities. Some of the factors that influence these growth
opportunities include the relatively low consumption rates, the population size (especially in the Russian Federation, Nigeria and Ukraine) and
the favorable demographic characteristics, notably the larger proportion of young people in countries such as Nigeria who typically consume a
higher amount of CSD products.
Bulgaria and Romania entered the European Union as of January 1, 2007. We believe that EU membership will gradually benefit the
economies of those countries and provide additional safeguards of political stability.
Net sales revenue in our emerging countries amounted to € 1,224.3 million in 2004, € 1,531.0 million in 2005 and € 1,905.5 million in
2006, which accounted for 29.2%, 33.0% and 35.5% of our total net sales revenue in 2004, 2005 and 2006, respectively.
Russian Federation
We are the exclusive bottler of the products of The Coca-Cola Company for all of the Russian Federation and the largest bottler of CSDs
in the Russian Federation in terms of sales volume. Our share of the CSD category in the Russian Federation in 2006 was 20.6%. In addition to
the core brands of The Coca-Cola Company, the products of The Coca-Cola Company we produce and sell in the Russian
37
Federation include the popular local brand Fruktime, offered in flavors familiar to Russian consumers as well as Schweppes-branded products.
Our juice brands include Rich, Nico and Dobry, part of the product portfolio of the Multon Z.A.O. group, a leading juice producer jointly
acquired with The Coca-Cola Company in April 2005. Our other main non-CSD brand is Bonaqua water. We also sell and distribute Nestea
ready-to-drink tea, the energy drink Burn and the range of PowerAde sports drinks. Our non-CSD portfolio has demonstrated stable and strong
growth, in terms of sales volume and, at an even higher rate, net sales revenues.
In 2006, our sales volume of non-alcoholic beverages in the Russian Federation grew by 14.9% compared to 2005, due to improvement of
the economy in the Russian Federation, increased brand awareness, enhanced cold drink availability, improved sales and distribution
performance and increased investment in sales and distribution infrastructure. GDP continued to grow and inflation continued to stabilize in
2006.
We are continuously investing in our manufacturing facilities, sales equipment and distribution infrastructure. In 2006, the investment in
these assets exceeded € 65 million. We distribute our products primarily through our direct delivery system but also through wholesalers and
independent distributors. We believe that we have one of the largest direct distribution networks in the Russian Federation comprising over 70
distribution centers in all key cities of the country. At the same time, we continue to implement our distribution strategy for improving the
availability of our products, in particular of our single-serve packages, across the country. We are also making progress in the integration of our
sales and distribution systems with the Multon Z.A.O. group. One of our major priorities, during 2006, was the preparation for the adoption of
the SAP integrated system of software applications which was successfully launched on January 1, 2007. We expect the SAP system to
improve our efficiency in supply chain planning, manufacturing and stock management.
Romania
We believe that we are the largest bottler of CSDs in Romania in terms of sales volume. Our share of the CSD category in Romania in
2006 was 53.4%.
In addition to the core brands of The Coca-Cola Company, we also produce and sell the Dorna water brands as well as distribute Nestea.
In 2006, we continued to expand our product offerings in the non-carbonated categories by introducing new flavor extensions to our Nestea,
Cappy and Fanta brands and through strong marketing support. We also introduced new packages for a number of our products in the water,
juice and CSD categories.
During 2006, macro-economic and business conditions continued to improve. GDP increased by 7.7% and inflation decreased to 6.6%.
Reforms in anticipation of accession to the European Union continued and Romania became a member of the European Union as of January 1,
2007.
As part of our strategy for Romania, we continue to invest in our production infrastructure in order to meet volume growth and we seek to
improve operating efficiencies by leveraging our strong distribution network which covers the entire territory, while maintaining our focus on
customer relationships and quality throughout our business. In 2006, we completed the investment in a new aseptic line which has materially
upgraded our production capabilities and already benefited our profitability.
Nigeria
We believe that we are the largest bottler of non-alcoholic beverages in Nigeria in terms of sales volume, with a 57.2% share of the CSD
category in 2006. Our non-CSD brands are leaders in their respective categories. We and our corporate predecessors have bottled products of
The Coca-Cola Company in Nigeria since 1953. At December 31, 2006, we owned 66.4% of our Nigerian bottler, Nigerian
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Bottling Company plc, with the balance of the shares being publicly held and listed on the Lagos Stock Exchange.
In addition to the core brands of The Coca-Cola Company, our CSD brands in Nigeria include a range of Schweppes products and Limca,
a lemon-lime product which we sell in part of Nigeria. Our non-CSD brands include Eva packaged water, which is the leading water brand in
Nigeria in terms of sales volume. During 2006, we introduced can packaging for our CSD products and Burn in the growing energy drinks
category.
We believe Nigeria offers significant growth potential for our business. It is Africa’s most populous country, with an estimated
135 million inhabitants, a significant proportion of whom are under the age of 15, and its climate favors consumption of non-alcoholic
beverages. The federal government of Nigeria continues to pursue its commitment to introducing economic reforms through prudent fiscal
management in order to accelerate economic growth. We also believe that Nigeria provides significant growth opportunities for our packaged
water and our juice products. There is also significant potential for consumer activation in fast growing consumption channels through
promotional activities, as well as product and package innovations. Demand is growing for non-returnable convenience packages, such as PET
bottles, with respect to CSDs and water, and carton with respect to juices. We are the leaders in the introduction and use of such packaging.
Due to the favorable demographic characteristics of Nigeria, we believe that our long-term business prospects there should continue to improve
so long as the country continues to develop economically and per capita income continues to rise.
Due in part to the fragmented nature of the retail sector and the absence of hypermarkets and supermarket chains, our distribution in
Nigeria is largely managed directly by us, although we also rely on wholesalers and strategic supply depots. As a result, one of our priorities is
to improve the efficiency and reliability of our distribution network. We continue to expand our pre-selling system for high-volume outlets,
strategic supply depots and key accounts with more than 60% of our sales now generated through this system. In addition, we continue to
expand our dealer base selectively, and at the same time focus our attention on helping our higher volume dealers improve their merchandising
standards, while expanding the availability of chilled products. Our effort to improve efficiencies both in distribution and in cold drink
availability was supported by investments on distribution trucks and cold drink equipment.
We also intend to increase our presence and improve our visibility in key Nigerian population centers, including Lagos and other large
cities. As part of this strategy, since 1999 we have established and maintain approximately 530 independent strategic distribution centers. These
distribution centers have distribution equipment to reach smaller customers in congested or outlying areas and have enabled us to reach smaller
outlets, which represent 65% of our Nigerian customer base, more efficiently. Due to the low availability of electricity in outlets in Nigeria, we
also manufacture and distribute ice to support the supply of cold drinks in the immediate consumption channel.
We continue to upgrade and improve our bottling facilities. In 2006, we built a new manufacturing plant in Abuja and transferred
production that was carried out at the Onitsha and Makurdi plants to other production sites within Nigeria. We expect the program of gradual
modernization and reconstruction of our Nigerian facilities (plants and distribution depots) to continue to require further investment to expand
our overall capacity in order to meet increased consumer demand in the future. As part of the reorganization of our operations in 2006,
including the closing of the plants at Onitsha and Makurdi, we reduced our number of employees in Nigeria by 1,300.
We are committed to environmental development and sustainability. Currently, we own six operational effluent treatment plants. We
expect that all our production facilities will have operational effluent treatment plants in the near future.
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Sales and marketing
Brand and market development
In all our countries and particularly in our emerging and developing territories, we believe that there continue to be significant
opportunities to promote increased consumption of CSDs and non-CSDs. Initially, we aim to develop these opportunities by executing
brand-specific promotions and quality merchandising that are designed to encourage consumers to develop a preference for our brands,
increase our consumer base and drive purchasing frequency. As beverage per capita consumption increases, we apply greater focus toward the
development of specialized distribution channels (including workplace and leisure venues), with the overall objective of improving margins as
well as increasing volumes.
Generally, The Coca-Cola Company focuses on consumer marketing, which involves building brand equity, analyzing consumer
preferences and formulating the brand marketing strategy and media advertising design. Traditionally, the principal focus of The Coca-Cola
Company is on the Coca-Cola, Coca-Cola light, Fanta and Sprite brands. However, we and The Coca-Cola Company are also committed to
developing jointly and introducing into our markets new non-CSD products to satisfy the increasing demand for such products and maximize
their growth potential. We plan to achieve this through the development of existing brands, such as Cappy, Nestea, PowerAde, the launch of
new ones and acquisitions, such as Dobry, Nico and Rich in the Russian Federation, Bankia in Bulgaria and Rosa, Next and Su-Voce in Serbia
and Lilia and Lilia Kiss in Italy.
We develop our fully-owned brands (Amita, Avra, Römerquelle, RiverRock, Tsakiris snacks and others) with the same criteria as above,
always seeking to expand consumption occasions and brand preference.
We concentrate on executing customer marketing activities, which involves developing a strong relationship with customers, marketing at
the point of sale and carrying out a broad range of promotional activities and merchandising. We support such market execution by conducting
regular customer satisfaction surveys in our territories and by developing innovative material for retail sales activation, including new racks,
point-of-sale visuals and sales aids for our customers. We conduct market analysis to better understand the shoppers and the purchase occasions
in different trade channels. This information is used to develop the entire beverage category at every point of sale. Finally, we also work closely
with The Coca-Cola Company, bringing together our complementary skills to develop annual sales and marketing plans, and promoting and
marketing The Coca-Cola Company’s beverages in each of our established, developing and emerging countries.
We sponsor significant sporting, cultural and community activities across all of our countries in partnership with The Coca-Cola
Company, a major supporter of important international events and programs. We seek to integrate consumer marketing and sponsorship
activities with our retail promotions. In conjunction with the global sponsorship of the Olympic Games by The Coca-Cola Company, which
dates back to 1928, we engage in a range of promotions. The Coca-Cola Company’s association with the World Cup also enables us to engage
in one of the largest and most prestigious sporting events in the world and realize significant benefits from the unique marketing opportunities
that it provides.
Our partnership with The Coca-Cola Company extends beyond sports and includes other very popular sponsorship-related marketing
initiatives. At the same time, these sponsorship initiatives complement our local initiatives, which involve active participation in a broad range
of events, from a host of musical and entertainment promotions to cultural and festive occasions, as well as a wide variety of national
celebrations.
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Revenue growth initiative
As part of our effort to engage successfully in what we call our “revenue growth initiative”, we seek to optimize our product prices
relative to value, identify the best mix of brands, packages and channels, drive packaging innovation and emphasize customer management. As
a result of this approach, we have introduced new packages to attract new consumers in the category, we have developed immediate
consumption channels in each of our territories by investing in cold drink equipment and have also put in place a training program together
with The Coca-Cola Company for our employees, in which we emphasize revenue growth initiative principles. We also seek to identify good
revenue growth practices in our territories based on actual results which we share with the other territories across our group.
Our sales and marketing organization
In each of our territories, we tailor our sales and marketing strategy to reflect the level of development and local customs in the
marketplace. We ensure that those closest to the market, our national and regional sales and marketing organizations, are responsible and
accountable for successfully implementing that strategy. Local sales forces are in the best position to evaluate the particular circumstances of
each market and address its specific needs. Accordingly, we encourage responsibility, flexibility and innovation at a local level.
Our key sales and marketing personnel typically include:


the commercial director, who has overall responsibility for the country’s sales and marketing activities;
the marketing manager, who has overall responsibility for the development of channel-specific plans and programs, marketing
analysis and company-owned brand plans;

the key account managers, who are responsible for developing customer-specific plans and programs; and

the national sales manager who leads the regional sales organization.
We usually divide a country into different sales areas, each with a region manager who has responsibility for implementing national
strategies at the local level and who leads a team of representatives responsible for sales, customer relations, merchandising and individual
account management. Our teams work closely with the relevant marketing teams of The Coca-Cola Company in developing and executing our
sales and marketing plan.
Key account management
We use collaborative key account management principles to build strong and long-term relationships with our major customers. Our key
account managers work together with our major customers to improve our respective profit margins by increasing volume and revenue growth
while reducing distribution costs. Our key account managers also negotiate the terms of our commercial cooperation arrangements with our
major customers, including marketing activities and promotional events. To ensure that our key account managers have the right skills, we
regularly run training programs for them on how to manage large customers.
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Distribution
Our distribution channels
We classify different categories of customers into two broad distribution channels based on the type of consumption that they supply:

future (mainly at home) consumption, where consumers buy beverages in multi-serve (typically one liter and above or
multi-package) packages for consumption at a later time; and

immediate or impulse (mainly away from home) consumption, where consumers buy beverages in chilled single-serve (typically 0.5
liter or smaller) packages and fountain products for immediate consumption.
We then segment these two broad channels further into specific channels, such as hypermarkets, supermarkets, grocery stores,
wholesalers, restaurants and cafés, entertainment centers and offices in order to collate data and develop marketing plans specific to each
channel. Some of these channels, such as grocery stores, fall into both consumption channels. For all channels and consumption occasions, we
strive to offer consumers the appropriate choice of beverage categories and brands to address their refreshment and hydration needs. At the
same time we also strive to satisfy our customers’ service and business needs.
Future consumption
Our principal future consumption channels are traditional grocery stores, supermarkets, hypermarkets and discount stores. Products sold in
our future consumption channels typically generate higher volumes and lower margins per retail outlet than those sold in our immediate
consumption channels.
We believe that one key to success in future consumption channels is working effectively with customers by driving total category growth
in order to achieve favorable product placement at the point of sale. Key account managers are an important part of this strategy.
We continuously develop and implement marketing and promotional programs to profitably increase volumes in our future consumption
channels. Examples include price promotions on multi-serve multi-packs, offering gifts for multiple purchases, running prize competitions and
product sampling events.
We have started to work with our customers on the improvement of our supply chain through data exchange and other initiatives which
seek to improve out-of-stock and inventory management.
Since the early 1990s, major retailers, such as hypermarket and supermarket chains, have grown and consolidated significantly in many of
the countries in which we operate. Such retailers are increasing their market share within the retail sector and account for a growing proportion
of retail sales. The most international among them have also built powerful information systems which allow them to analyze their purchases
across countries and compare prices and the profitability of our products. Some have also created international buying offices or participate in
international buying groups that seek to establish agreements with suppliers at an international level. In addition, in some countries
hypermarkets and supermarket chains have developed or may develop their own private label products that compete directly with ours.
Immediate consumption
Our immediate consumption channels include restaurants and cafés, bars, kiosks, gas stations, sports and leisure venues and hotels.
Products sold in our immediate consumption channels typically generate lower volumes and higher margins per retail outlet than our future
consumption channels.
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We believe that consumers generally prefer consuming our beverages chilled. Accordingly, a key strategy to increase sales in the
immediate consumption channel is to ensure that products are available at the right temperature by investing in cold drink equipment, such as
coolers. This type of investment also expands our marketplace for impulse consumption by reaching consumers in areas not served by
traditional retail outlets, such as offices.
Our focus in emerging countries, such as the Russian Federation and Nigeria, is to build a basic cold drink infrastructure through the
placement of coolers. We also see opportunities to increase the availability of our products in our developing and established countries, where
the infrastructure for drink equipment is more extensive. For instance, in our established markets we have targeted specific sub-channels of our
impulse consumption channel, such as consumption at work.
As in our future consumption channels, key account management is also necessary in certain immediate consumption channels, such as
international quick-service restaurant groups.
Our distribution infrastructure
We operate a mixed distribution system under which we deliver our products to the ultimate point of sale directly or indirectly through
wholesalers and independent distributors.
We deliver our products to the point of sale directly using our own fleet of vehicles or dedicated independent third-party carriers wherever
it is appropriate, based on the structure of the local retail sector and on local geographical considerations. By establishing a dedicated direct
delivery capability in our countries we have been able to reach customers in areas where few adequate alternative distribution systems are
available. In these countries, we believe that direct delivery to customers represents a significant competitive advantage by enabling a closer
customer relationship and providing greater influence over how our products are presented to consumers. Direct delivery allows us to analyze
and respond to retail demand and influence consumer purchasing patterns through merchandising and in-store execution and facilitates locally
relevant marketing.
In all of our countries, we coordinate and monitor our deliveries through our own warehouse and distribution network and control centers.
Our direct delivery system covers a significant portion of our customers across our countries through 262 distribution centers. Deliveries are
generally made between 24 and 48 hours from the time an order is taken. We are engaged in an ongoing process of adjusting and restructuring
our distribution systems in order to improve customer service, reduce costs and inventory levels and increase asset utilization.
Wholesalers fulfill an important role in the distribution of most retail product categories. We are working to develop closer relationships
with our key wholesalers to ensure that all elements of our sales and marketing efforts are implemented as effectively as possible and that
appropriate customer service levels are met.
Production
We produce our CSDs by mixing treated water, concentrate and sweetener. We carbonate the mixture and fill it into refillable or
non-refillable containers on automated filling lines and then package the containers into plastic cases, cardboard cartons or encase them in
plastic film on automated packaging lines.
Our processed table waters, Eva and Bonaqua, are produced by stabilizing treated water with ozone, subsequently filled into glass and
plastic packages for distribution. We add a certain mix and quantity of minerals supplied by The Coca-Cola Company to Bonaqua water as part
of the production process. We also add carbon dioxide to carbonated Bonaqua products. For purposes of our Bonaqua production in Slovakia,
only, we extract and bottle natural spring water from the water source. The majority of our water
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products other than Bonaqua are natural spring or mineral waters. We produce them by bottling water drawn directly from a source or well
using automated filling lines.
Our non-carbonated products are produced by mixing treated water with, depending on the product, concentrated juice and/or concentrate
flavors and sugar. They are then pasteurized and filled, in one of three ways: aseptically into multi-layer cardboard or plastic packages, by way
of hot-filling and sealing in glass or aluminum packages, or by pasteurizing the product in glass or aluminum packages after it is filled and
sealed in the container.
Our dairy products are produced from fresh milk to which we apply a separation process to remove the cream. The cream is then added
back into the milk at various percentages depending upon the final product and subsequently pasteurised. The surplus cream is then transferred
to another line, which is used only for cream pasteurisation. The final products are then filled into plastic bottles and distributed in chilled
storage to the market place.
Sealed cans and bottles are imprinted with date codes that allow us to fully trace the product’s point of origin, including the production
line on which it was produced, the production batch and the time of filling. This allows us to identify the ingredients, production parameters
and primary packaging used. The date codes also permit us to track products in the trade and to monitor and replace inventory in order to
provide fresh products. We purchase all of the packages for our products from third parties, except in the case of PET bottles which, in many of
our production facilities, we manufacture ourselves from preforms or resin.
Quality assurance
We believe that ensuring that our products are of a high quality is critical to the success of our business. We are fully committed to
maintaining the highest standards with respect to the purity of water, the quality of our other raw materials and ingredients and the integrity of
our packaging in each of our countries.
We continuously monitor the production process for compliance with these standards. We have sophisticated control equipment for the
key areas of our processes to ensure that we comply with applicable specifications. We manage these control systems through formalized
quality management systems, ISO 9001 and The Coca-Cola Quality System. We have implemented Hazard and Critical Control Points
(HACCP) food safety programs to ensure the safety and hygiene of our products. In 2006, we completed the planning for the implementation of
the new ISO 22000 food safety standard to all of our facilities. This program is expected to be implemented in the second half of 2007.
Independent audits are also performed regularly to confirm that we comply with quality standards, to assess the effectiveness of our quality
management systems and to assure that all our key controls are independently validated. During 2006, 74 of 81 of our manufacturing facilities,
comprising CSD and/or juice plants, milk and mineral water plants, including the plants of our joint ventures, underwent independent quality
audits.
We maintain a quality control laboratory at each production facility for testing raw materials, packaging and finished products to ensure
that they comply with local regulatory requirements and the strict quality standards stipulated in our bottlers’ agreements with The Coca-Cola
Company, which cover the entire value chain. We are also required to obtain supplies of raw materials (ingredients and packaging) from
suppliers approved by The Coca-Cola Company.
In addition, we regularly undertake quality audits in the distribution channels to check compliance with package and product
specifications. This process involves taking regular random samples of beverages from the various channels and testing them against
established quality criteria.
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Raw materials
Our principal raw material, in terms of volume, is water, and all of our CSD production facilities are equipped with water treatment
systems to provide treated water that meets all local regulatory requirements and the strict standards of The Coca-Cola Company. Our second
key ingredient is concentrate, which we purchase from companies designated by The Coca-Cola Company. Our other major raw materials
include sugar and other sweeteners, juice concentrates, carbon dioxide, glass, labels, plastic resin, closures, plastic crates, aluminum cans,
aseptic packages and other packaging materials.
Expenditure for concentrate constitutes our largest individual raw material cost, representing approximately 44.3% of our total raw
material costs in 2006. Under our bottlers’ agreements with The Coca-Cola Company, we are required to purchase concentrate for all of the
beverages of The Coca-Cola Company from companies designated by The Coca-Cola Company. The Coca-Cola Company also determines the
price of concentrate for all of the brands of The Coca-Cola Company for each country. In practice, however, The Coca-Cola Company
normally sets prices after discussions with us so as to reflect trading conditions in the relevant countries and to ensure that such prices are in
line with our annual marketing plan.
Our principal sweetener is sugar, which we purchase from multiple suppliers in Europe. We also purchase raw sugar for some of our
countries that is then refined into white sugar by third party contractors, and in some cases we purchase high fructose syrup, which is used
either alone or in combination with sugar. We do not separately purchase low-calorie sweeteners because sweeteners for our low-calorie
beverage products are contained in the concentrate that we purchase from The Coca-Cola Company. The term of purchase contracts for sugar is
typically 12 months. The price of sugar varies from time to time and we seek to hedge our exposure to any price increases by entering into
futures contracts, which typically have maturities of up to 18 months. On May 1, 2004, nine countries in which we operate joined the European
Union. These were Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. On January 1, 2007,
Bulgaria and Romania also acceded to the European Union. As of the date of their accession, these countries adopted the sugar regime of the
European Union. This means that the minimum selling price for sugar became the European Union intervention price plus the cost of transport
and profit margin. Our operations in these eleven countries use either locally produced or imported sugar or high fructose syrup during the
production process. The cost of these sweeteners increased significantly as a result of the accession to the European Union of these countries.
Recently, we have also experienced increases in some of our other raw material costs, including juice concentrates, oil and aluminum
cans. We believe the cost increases in juice concentrates were in large part due to weather, crop failures and other local factors and those
relating to oil and aluminum cans to supply and demand and other market forces. We seek to hedge our exposure to aluminum price increases
by entering into aluminum futures contracts with our suppliers, which contracts also typically mature within one or two years. You should read
Item 5B, “Operating and Financial Review and Prospects—Liquidity and capital resources—Market risk—Commodity price risk” for
additional information on our hedging activities.
In compliance with the quality standards prescribed by our bottlers’ agreements with The Coca-Cola Company, we purchase all
containers, closures, cases, aseptic packages and other packaging materials and labels from approved manufacturers. We also purchase cold
drink equipment, such as coolers, from third party approved suppliers.
Our major cold drink equipment supplier is Frigoglass S.A. In 2006, we made purchases from Frigoglass S.A. totaling € 209.4 million
compared to € 143.8 million in 2005 and € 165.1 million in 2004. In 2006, we purchased from Frigoglass S.A. € 33.7 million of raw and
packaging materials and € 175.7 million of coolers and other cold drink equipment and spare parts. This compares with € 55.8 million and €
88.0 million, respectively, in 2005 and € 66.3 million and € 98.8 million, respectively, in 2004. The purchases
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of coolers in 2006 represented 90% of our total cooler requirements. The Kar-Tess Group holds a 44.1% interest in Frigoglass S.A. Under the
terms of a supply agreement that we entered into with Frigoglass S.A. in 1999, initially set to expire on December 31, 2004 and extended in
June 2004, on substantially similar terms, to December 31, 2008, we have the status of a non-exclusive most favored client of Frigoglass S.A.,
and we are required to obtain at least 60% of our annual requirements of coolers, as well as other raw materials, from Frigoglass S.A. We have
entered into all our supply agreements with Frigoglass S.A. on an arm’s length basis. You should read Item 7B, “Major Shareholders and
Related Party Transactions—Related Party Transactions—Our relationship with The Kar-Tess Group—Supply agreement with Frigoglass
S.A.” for additional information on our relationships with The Kar-Tess Group and Frigoglass S.A.
We seek to ensure the reliability of our supplies by using, where possible, a number of alternate suppliers and transportation contractors.
The majority of our procurement operations, other than those relating to The Coca-Cola Company’s concentrate, are centrally managed by our
central procurement department.
We believe that we presently have sufficient access to materials and supplies, although strikes, weather conditions, customs duty
regulations or other governmental controls or national emergency situations could adversely affect the supply of specific materials in particular
territories. You should read Item 3D “Risk Factors” for additional information on the effect price increases and shortages of raw materials
could have on our results of operations.
Competition
The non-alcoholic beverages industry is highly competitive in each of our countries. Non-alcoholic beverages are offered by a wide range
of competitors, including major international, European, local and regional beverage companies and hypermarket and supermarket chains
through their own private labels. In particular, we face intense price competition from local non-premium brand producers and distributors,
which typically produce, market and sell lower quality CSDs and other non-alcoholic beverages at prices lower than ours, especially during the
summer months. In some of our countries, we are also exposed to the effect of imports from adjacent countries of lower priced products,
including, in some cases, trademarked products of The Coca-Cola Company bottled by other bottlers in the Coca-Cola system.
In most of our countries we face greater competition in non-CSDs, including waters and juices, where our business is typically less
developed and our brands are less established than in our core CSD business, and there are often significant national and international
competitors with established brands and strong market positions. However, we intend to continue to develop our non-CSD business and are
confident that our significant capabilities in the sale, marketing and distribution of non-alcoholic beverages, combined with our substantial
business infrastructure and strong customer relationships, will allow us to improve our competitive position in this category of our business.
We compete primarily on the basis of pricing, advertising, brand awareness, distribution channels, retail space management, customer
marketing, customer point of access, local consumer promotions, package innovations, product quality and new products. One of the most
significant factors affecting our competitive position is the consumer and customer goodwill associated with the trademarks of our products.
The Coca-Cola Company plays a central role in the global marketing and brand building of its products. We rely on The Coca-Cola Company
to enhance the awareness of The Coca-Cola Company’s brands against other non-alcoholic international and local beverage brands.
The diversity in consumer tastes, distribution channels and economic conditions in the different countries in which we operate, and even
among the different regions of these countries, is one of the main challenges of our business. We adjust our competitive strategy to local market
conditions so that our products remain attractive, widely available and affordable to local consumers.
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Regulation
The production, packaging, transportation, safety, advertising, labeling and ingredients of our products are subject to various European,
national and local regulation. In particular, European Union regulation is increasingly important to us as approximately 49.7% of our 2006
sales volume was generated from our established and developing countries that are members of the European Union.
The principal areas of regulation to which we are subject are environmental matters and trade regulation. Other regulatory issues involve
food laws and food safety, excise and value added taxes.
Environmental matters
We are subject to different environmental legislation and controls in each of our countries. In addition, at all of our plants manufacturing
the products of The Coca-Cola Company we have adopted “The Coca-Cola Quality System evolution 3” which includes an environmental
management system that is specific to the Coca-Cola bottling system and have initiated our own environmental standards, performance
indicators and internal reporting. These controls and standards are often stricter than those required by the local laws of the countries in which
our plants are located and address specific issues that impact our business. In 2001, we began implementing an environmental management
system based on the ISO 14000 standard at all our plants and facilities. By the end of 2006, 59 of our 81 plants had been certified to such
standard by internationally recognized audit bodies. We anticipate that existing plants will complete certification by the end of 2008, instead of
the end of 2007 as we had initially planned. We plan to achieve certification of the newly acquired plants within two years.
Independent environmental audits were completed in 59 of 81 of our manufacturing facilities, comprising CSD and/or juice plants, milk
and mineral water plants, including the plants of our joint ventures. Our other plants underwent an internal audit. All of these audits were
performed for purposes of establishing key performance indicators and internal reporting processes to monitor compliance with environmental
standards going-forward. We have appointed country environmental coordinators who are responsible for implementing and maintaining our
environmental management system, as well as for collecting and reporting country- specific data. They meet on a regular basis to share best
practices in this area in order to better manage the environmental control process across the group.
In addition, we have implemented waste minimization and environmental management programs with respect to several aspects of our
business, including usage of our raw materials, energy consumption and water discharge. We also cooperate with packaging suppliers to reduce
the potential impact of packaging materials on global warming in accordance with international guidelines and standards.
Sometimes, achieving compliance with applicable standards and legislation requires plant modifications and capital expenditure, such as
the installation of waste water treatment plants, and we have in place an active program to ensure that we fully comply with these requirements.
Laws and regulations may also limit noise levels and the discharge of waste products, as well as impose waste treatment and disposal
requirements. Some of the jurisdictions in which we operate have laws and regulations, which require polluters or site owners or occupants to
clean up contamination.
European Union legislation requires each member state and accession candidate to implement the European Union directive on packaging
and packaging waste at the national law level, set waste recovery and recycling targets and require manufacturers and retailers, including
ourselves and our customers, to implement the applicable standards. The European Union packaging directive relates to all types of packaging,
and its primary objective is the minimization of packaging and packaging waste, by requiring an increase in recycling and re-usage of
packaging waste, the promotion of other forms of recovery for packaging waste and, as a result, a reduction of the quantity of disposed
packaging waste.
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In particular, the directive sets targets for both the recovery and recycling of waste and for the reduction in the quantity of packaging waste
for disposal. The original directive of 1994 required that these targets be achieved by 2001 (2006 for Greece, the Republic of Ireland and
Portugal), when these targets were also scheduled to be reviewed. Due to the late transposition of the directive into national laws in some
member states and the need to evaluate experiences and the costs and benefits of revised, second-stage targets, a new directive with revised
targets did not come into force until February 2004. The directive’s targets are to be achieved by the end of 2008 (2011 for Greece, the
Republic of Ireland and Portugal). Member states had 18 months, until August 2005, to enact national laws to implement the new directive.
Separate targets were set in the accession agreements of our nine countries that joined the European Union on May 1, 2004. In particular, new
member states will have to comply by the end of 2012 (2013 for Malta, 2014 for Poland and 2015 for Latvia). The directives set forth certain
requirements for packaging and authorize member states to introduce national economic instruments (taxes and levies) to achieve the
directives’ objectives. We continue to work closely with governments and other industry participants to implement recovery schemes. These
are either implemented or are in the process of implementation in all our European Union countries, including our developing countries which
have recently entered the European Union.
We believe that the environmental regulatory climate in each country in which we operate is becoming increasingly strict and expect this
trend to continue in the future. In particular, the regulatory environment in our Central and Eastern European countries is being brought in line
with the standards that exist within the rest of the European Union. As part of this trend, the new European Union member countries in which
we operate have been implementing new environmental standards, applicable to our operations in those countries. These new environmental
standards have already increased and are expected to further increase our compliance costs. The accession of Romania and Bulgaria in 2007
and the possible accession of Croatia are expected to have similar results.
Trade regulation
Our business, as the bottler of beverages of The Coca-Cola Company and other producers within specified geographic countries, is subject
to competition laws of general applicability. In particular, the Treaty of Rome, which established the European Economic Community (now the
European Union), precludes restrictions on the free movement of goods among the member states. As a result, unlike our international bottlers’
agreements, our European bottlers’ agreements grant exclusive bottling territories to us subject to the exception that the European Union and/or
European Economic Area Bottlers of The Coca-Cola Company’s beverages can, in response to unsolicited orders, sell such products in any
European Union and/or European Economic Area country. You should read Item 7B, “Major Shareholders and Related Party
Transactions—Related Party Transactions—Our relationship with The Coca-Cola Company—Bottlers’ Agreements”, for additional
information on the provisions of our international and European bottlers’ agreements, and Item 8A, “Financial Information—Consolidated
Statements and Other Financial Information—Legal proceedings” for information on our undertaking to the European Commission applying to
our commercial practices in the European Union and on certain proceedings against us before national competition authorities.
Insurance
We obtain insurance on a group level to cover losses resulting from property damage, business interruption and liability risks. Our local
subsidiaries obtain fleet insurance and other policies in order to comply with local statutory requirements.
We have implemented appropriate methodologies to identify, assess and control key risks. We also use external professional advisers both
to verify our group risk management approach and to support our risk management process at our group and local level.
48
We have established best practice risk control guidelines, which are audited at all our key plants and other key facilities. These guidelines
and audits focus on property loss control, safety management, business continuity planning, fleet management and environmental compliance.
We also organize training courses in accordance with our best practice risk control guidelines.
Information technology
Information technology systems are critical to our ability to manage our business. Our information technology systems enable us to
coordinate our operations, from production scheduling and raw material ordering to order-taking, truck loading, routing, customer delivery,
invoicing, customer relationship management and decision support.
We are implementing SAP, an integrated system of software applications providing a common framework for our accounting, planning,
production, procurement, infrastructure maintenance, human resources and cost management activities. We have developed SAP applications
based on a global template that can be implemented and supplemented by our subsidiaries to address their local needs. In particular, in 2001
and 2002, we developed global SAP templates covering the areas of finance, human resources and supply chain at a total cost of approximately
€ 4.5 million. These templates have subsequently been deployed in Switzerland, Greece, Serbia, Montenegro, Lithuania, Latvia, Estonia and
Bulgaria through 2003 with deployment in the Republic of Ireland and Northern Ireland concluding in the second quarter of 2004. During
2004, we developed enhanced templates introducing advanced capabilities in the areas of demand planning and forecasting, cross-border
supply chain management, plant and fleet maintenance and business planning with integrated information reporting. These were successfully
deployed during 2004 and 2005 across Switzerland, Hungary, Poland, the Czech Republic, Slovakia, Austria and Slovenia and are being
operated under a common environment of associated data and business process standards. During 2005, we extended this deployment to
Bosnia, Croatia, Romania, Moldova, Ukraine and our central office in Athens. During 2006 we rolled-out these templates in the Russian
Federation and Belarus, thus covering approximately 60% of our volume under one integrated environment. In 2006, we also enhanced our
template to cover advanced customer management activities in the areas of customer relationship management, promotion management and
equipment management as well as field sales execution, truck management and yard management. We are currently validating these additional
capabilities through a pilot implementation program in Czech Republic and in Slovakia anticipating full implementation in January 2008. We
expect to continually enhance these capabilities as we deploy these templates across our group by 2011 at an estimated cost of less than €
75 million for the entire program.
We and The Coca-Cola Company also invest in information systems across our territories in order to ensure that detailed, usable
information on sales, customer performance and consumer preferences and behavior is regularly available. We believe that this provides us
with a competitive advantage. We use this information to evaluate and refine our marketing plans and, as a result, treat different categories of
customers appropriately. In every country we use a core sales and distribution system called BASIS. This system was developed and is
maintained by The Coca-Cola Company on behalf of The Coca-Cola Company’s bottlers and governed by an information technology council
in which we participate. With strengths in the areas of direct store delivery, customer and asset accounting BASIS enables critical front office
processes to be superceded by SAP which has superior customer relationship capabilities, enabling a fully integrated business process and
systems environment. Finally, we are constantly deploying mobile solutions for sales, merchandising, delivery and equipment service to
varying degrees across our countries. This program has enabled 3,200 users to date with an additional 2,500 planned for 2007 representing an
investment of over € 9 million during both 2006 and 2007. This significant investment in mobile capability is in recognition of the value
opportunities of equipping our field representatives with mobile technology that
49
will leverage our scale and provide an easy mechanism for readily deploying best practices in the area of customer, equipment and delivery
management throughout our business.
In late 2003, we made a decision to realign our corporate and country Information Systems (“IS”) organizations into one functional
organization for our entire group. This move complemented our strategy of deploying standard enterprise solutions, including applications,
data, and hardware in support of best practice standard business processes. As a result of this decision, accountability for all IS activities,
people and budgets was realigned to a central information systems team. We believe that this new organizational structure is now better
positioned to drive standardization, best practice deployment and operating efficiencies across our countries. Following the establishment of a
shared services organization in Sofia, Bulgaria, we are continuing the process of transitioning those services that exist at a country level to this
more efficient and cost effective center, while at the same time strengthening our IT capability on the country level by focusing such capability
to territory-specific business services. Our shared services organization also provides new services such as data management, training and SAP
consulting in a more effective manner as compared to offering those services in each of our territories. We are now receiving the benefits of
this initiative and have already achieved ISO 9000 certification by Lloyds.
Standardizing and managing our technology assets is another area of focus. The recent establishment of our technology department has
already resulted in reduced ownership costs for hardware, software and telecommunications and at the same time increased service levels and
high security standards which are all critical to our business. The major infrastructure optimization program that we launched in 2004 is
expected to drive down infrastructure operating costs in line with best industry standards. In 2007, we initiated a project for the full outsourcing
of our data center as we continue to work towards containing costs as well as improving service levels, security and availability of our critical
business systems. We continue to work closely with The Coca-Cola Company as members of the information technology council with the
objective of improving existing technology services, standards and controls within the Coca-Cola system from business applications through to
infrastructure and security in order to ensure that we leverage the scale of the Coca-Cola system and its resources to drive best practices,
improve relationships with vendors and continue to provide a robust and secure IT environment.
We actively engage our retail partners and industry peers through our continued representation on committees such as the CIES Retailer
Forum and the European Bottler Advisory Board as part of our effort to meet current challenges and take advantage of future opportunities in
the way information technology affects our business.
50
C.
Organizational Structure
The table below sets forth a list of our principal subsidiaries, their country of registration and our effective ownership interest in such
subsidiaries as at April 30, 2007.
Subsidiary
Country of registration
Partially owned subsidiaries
Coca-Cola Beverages AG
Coca-Cola Beverages Hrvatska d.d.
Coca-Cola Hellenic Bottling Company Armenia
Coca-Cola Bottlers Iasi S.A.
Coca-Cola HBC Bulgaria AD
Coca-Cola HBC—Srbija A.D., Zemun
Coca-Cola Hellenic Bottling Company—Crna Gora d.o.o., Podgorica.
Deepwaters Investments Limited
Dorna Apemin S.A.
Dorna Investments Limited
Fonti del Vulture S.r.l.
Lanitis Bros Limited
Leman Beverages Holdings S.à.r.l
Nigerian Bottling Company plc
S.C. Cristalina S.A.
Valser Mineralquellen AG
Vlasinka d.o.o., Surdulica
Wholly owned subsidiaries
3E (Cyprus) Limited
AS Coca-Cola HBC Eesti
Balkaninvest Holdings Limited
Bankya Mineral Waters Bottling Company EOOD
CCBC Services Limited
CC Beverages Holdings II B.V.
CCB Management Services GmbH
CCB Services Limited
CCHBC Insurance (Guernsey) Limited
Chisinau Beverages Services S.R.L.
Clarina Bulgaria Limited
Clarina Holding S.àr.l
Coca-Cola Beverages (Hungary) Kft
Coca-Cola Beverages Austria GmbH
Coca-Cola Beverages Belorussiya
Coca-Cola Beverages B-H d.o.o. Sarajevo
Coca-Cola Beverages Ceska republika, spol. s r.o.
Coca-Cola Beverages Holdings Limited
Coca-Cola Beverages Slovakia, s.r.o.
Coca-Cola Beverages Ukraine Limited
Coca-Cola Bottlers (Ulster) Limited
Coca-Cola Bottlers Chisinau S.R.L.
Coca-Cola Bottling Company (Dublin) Limited
Coca-Cola HBC Finance B.V.
51
Switzerland
Croatia
Armenia
Romania
Bulgaria
Serbia
Montenegro
Cyprus
Romania
Guernsey
Italy
Cyprus
Luxembourg
Nigeria
Romania
Switzerland
Serbia
Cyprus
Estonia
Cyprus
Bulgaria
Republic of Ireland
The Netherlands
Austria
England and Wales
Channel Islands
Moldova
Bulgaria
Luxembourg
Hungary
Austria
Belarus
Bosnia and Herzegovina
Czech Republic
Republic of Ireland
Slovakia
Ukraine
Northern Ireland
Moldova
Republic of Ireland
The Netherlands
% ownership at
April 30, 2007
99.9 %
99.9 %
90.0 %
99.2 %
85.4 %
89.1 %
89.1 %
50.0 %
49.9 %
50.0 %
50.0 %
99.9 %
90.0 %
66.4 %
49.9 %
99.9 %
50.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
Coca-Cola HBC Finance plc
Coca-Cola HBC Italia S.r.l.
Coca-Cola HBC Kosovo L.L.C.
Coca-Cola HBC Polska sp. z o.o.
Coca-Cola HBC Romania Limited
Coca-Cola HBC Slovenija d.o.o.
Coca-Cola Magyarország Italok Kft.
Coca-Cola Molino Beverages Limited
Dunlogan Limited
Elxym S.A.
Jayce Enterprises Limited
John Daly and Company Limited
Killarney Mineral Water Manufacturing Company Limited
LLC Coca-Cola HBC Eurasia
Molino Beverages Holding S.à.r.l.
MTV West Kishinev Bottling Company S.A.
Panpak Limited
Römerquelle GmbH
SIA Coca-Cola HBC Latvia
Softbev Investments Limited
Softbul Investments Limited
Softinvest Holdings Limited
Star Bottling Limited
Star Bottling Services Corp
Tsakiris S.A.
UAB Coca-Cola HBC Lietuva
Vendit Limited
Yoppi Kft
England and Wales
Italy
Kosovo
Poland
Romania
Slovenia
Hungary
Cyprus
Northern Ireland
Greece
Cyprus
Republic of Ireland
Republic of Ireland
Russian Federation
Luxembourg
Moldova
Republic of Ireland
Austria
Latvia
Cyprus
Cyprus
Cyprus
Cyprus
British Virgin Islands
Greece
Lithuania
Republic of Ireland
Hungary
52
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
D.
Property, Plant and Equipment
Distribution
Our distribution centers are strategically located centers through which our products may transit on their route to our customers and where
our products are stored for a limited period of time, typically three to five days. Our central warehouses are part of our bottling plants’
infrastructure and tend to store larger quantities of our products for a longer period of time (seven to ten days) than our distribution centers. The
following table sets forth the number of our distribution centers and warehouses (both leased and owned) for each segment and each country
within that segment as of December 31, 2006.
Number of
distribution
centers
Established Countries:
Italy
Greece
Austria
The Republic of Ireland and Northern Ireland
Switzerland
Cyprus
Total Established Countries
Developing Countries:
Poland
Hungary
Czech Republic
Croatia
Slovakia
Lithuania
Latvia
Estonia
Slovenia
Total Developing Countries
Emerging Countries:
Russian Federation (1)
Romania
Nigeria
Ukraine
Bulgaria
Serbia and Montenegro (2)
Former Yugoslav Republic of Macedonia (3)
Belarus
Bosnia and Herzegovina
Armenia
Moldova
Total Emerging Countries
Sub-total
Less: Multon Z.A.O. group (1)
Less: Fresh & Co (2)
Less: Brewinvest S.A. (3)
Total
(1)
Number of
warehouses
4
3
4
6
5
3
25
4
7
3
2
5
1
22
22
10
5
4
3
3
1
1
—
49
4
2
1
4
1
1
—
1
1
15
66
6
80
15
6
10
11
4
3
1
1
203
277
—
(4 )
(11 )
262
13
6
13
2
4
3
1
1
1
1
1
46
83
(11 )
(1 )
(1 )
70
The results of Multon Z.A.O. group, a joint venture of which we own 50% and which is engaged in the bottling and distribution of our
juice products in the Russian Federation, are not consolidated into
53
our results of operations under US GAAP. Instead they are reflected in our share of income of equity method investees.
(2)
The results of Fresh & Co, a joint venture of which we own 50% and which is engaged in the bottling and distribution of our juice
products in Serbia and Montenegro, are not consolidated into our results of operations under US GAAP. Instead they are reflected in our
share of income of equity method investees.
(3)
The results of Brewinvest S.A., a joint venture of which we own 50% and which is engaged in the bottling and distribution of our
products in the Former Yugoslav Republic of Macedonia, are not consolidated into our results of operations under US GAAP. Instead they
are reflected in our share of income of equity method investees.
Production
We operated 77 plants as at December 31, 2006, comprised of 62 CSD and/or juice plants, 14 mineral water plants and a bottle
manufacturing plant (excluding the snack food plant). In addition to this, we manage the CSD plant operated by Brewinvest S.A.’s CSD
business, a joint venture in which we own 50%, the two juice plants operated by the Multon Z.A.O. group and one juice plant operated by
Fresh & Co, joint ventures in which we own 50%. However, for US GAAP purposes, the results of these entities are not consolidated into our
results of operations, but are reflected in our share of income of equity method investees.
An increasing number of our countries work together with contract packers, which produce a portion of the products of The Coca-Cola
Company on our behalf. In general, third-party contract packers account for a small proportion of our overall sales, but are increasingly used
for new product categories (such as aseptic PET juices, ice teas and sports/isotonic drinks, coffee in cans and PET, juices in glass). The use of
contract packers for CSD is in significant decline.
54
The following table sets forth the number of our plants and filling lines for each segment and each country within that segment as of
December 31, 2006.
Number of
plants (1)
Established Countries:
Italy
Greece
Austria
The Republic of Ireland and Northern Ireland
Switzerland
Cyprus
Total Established Countries
Developing Countries:
Poland
Hungary
Czech Republic
Croatia
Slovakia
Lithuania
Latvia (3)
Estonia
Slovenia (4)
Total Developing Countries
Emerging Countries:
Russian Federation (5)
Romania
Nigeria
Ukraine
Bulgaria
Serbia and Montenegro (6)
Former Yugoslav Republic of Macedonia (7)
Belarus
Bosnia and Herzegovina
Armenia
Moldova
Total Emerging Countries
Sub-total
Less: Multon Z.A.O. group (5)
Less: Fresh & Co (6)
Less: Brewinvest S.A. (7)
Total
(1)
Excludes the snack food plant in Greece.
(2)
Excludes fountain product filling lines and snack food production lines.
(3)
We produce the products for the Latvian market in Lithuania and Estonia.
55
Number of
filling lines (2)
6
7
3
2
3
1
22
19
31
13
6
10
8
87
4
2
1
3
1
1
—
1
—
13
15
7
4
8
3
1
—
3
—
41
13
7
13
1
4
3
1
1
1
1
1
46
81
(2 )
(1 )
(1 )
77
43
18
32
6
13
18
3
2
3
2
1
141
269
(17 )
(11 )
(3 )
238
(4)
Third-party contract packers produce approximately 60% of the products for the Slovenian market. The remainder is produced by us
(Austria, Croatia and Czech Republic).
(5)
The results of Multon Z.A.O. group, a joint venture of which we own 50% and which is engaged in the bottling and distribution of our
juice products in the Russian Federation, are not consolidated into our results of operations under US GAAP. Instead they are reflected in
our share of income of equity method investees.
(6)
The results of Fresh & Co, a joint venture of which we own 50% and which is engaged in the bottling and distribution of our juice
products in the Serbia and Montenegro, are not consolidated into our results of operations under US GAAP. Instead they are reflected in
our share of income of equity method investees.
(7)
The results of Brewinvest S.A., a joint venture of which we own 50% and which is engaged in the bottling and distribution of our
products in the Former Yugoslav Republic of Macedonia, are not consolidated into our results of operations under US GAAP. Instead they
are reflected in our share of income of equity method investees.
In recent years, we have made substantial investments in developing modern, highly automated production facilities throughout our
countries. In certain cases, this has also entailed establishing plants on greenfield sites and installing our own infrastructure where necessary to
ensure consistency and quality of supply of electricity and raw materials, such as water. During 2005, we developed our aseptic beverage
capacity by installing four additional high-speed aseptic lines in Italy, Romania, Hungary and the Russian Federation. In that same year, we
also expanded our CSD production capacity in the Russian Federation and Ukraine by installing new production lines in our Ekaterinburg,
Moscow and Kiev plants. During 2005, we also launched a project to upgrade our water production capacity by adding new production
facilities, including bottling lines, in Bulgaria and Serbia. During 2006, we continued work on all of these projects. We own this entire new
production infrastructure except for the aseptic carton filling lines, the majority of which are provided to us free of capital charge by the
manufacturers of the proprietary packaging materials used in these lines under a volume-based packaging material supply arrangement.
We have reduced the number of plants in our countries over time as we have built new and more efficient plants and closed smaller, older
sites. For instance, in 2005, we commenced work on a project in Ireland to develop a single all-island production facility which would replace
our existing manufacturing facilities there. We expect that project to be completed in the second half of 2007. Also in 2005, in an effort to
consolidate our supply chain infrastructure in Crete, Greece, we commenced construction of a new manufacturing plant and warehouse, which
was completed in 2006. Upon completion, we closed the existing facility and shifted operations to the new one. In February 2006, we closed
our Athens, Greece plant and transferred production to our Schimatari plant (which is 40 kilometers away from Athens). In addition, in
March 2006 as part of our rationalization efforts in Greece, we closed our warehouses in Messologi, Corfu and Rhodes .
We use computer modeling techniques to optimize our production and distribution cost structure on a country-by-country basis. Our
system seeks to optimize the location and capacity of our production and distribution facilities based upon present and estimated consumer
demand.
We believe that we have a modern and technologically advanced mix of production facilities and equipment that is sufficient for our
productive capacity and at the same time provides us with the ability to further increase our production capacity at a relatively low incremental
capital cost. We aim to continually improve the utilization of our asset base and carefully manage our capital expenditure.
ITEM 4A
UNRESOLVED STAFF COMMENTS
Not applicable.
56
ITEM 5
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
The following Operating and Financial Review and Prospects section is intended to help the reader understand our company. This section
is provided as a supplement to, and should be read in conjunction with, our audited financial statements and the other financial information
contained elsewhere in this annual report. Our financial statements have been prepared in accordance with generally accepted accounting
principles in the United States. The Operating and Financial Review and Prospects includes the following sections:

Our business , a general description of our business.

Key financial results , a presentation of the most critical financial measures we use to track our operating performance.

Major recent transactions , a description of the recent acquisitions and other transactions that have impacted, or will impact, our
performance.

Application of critical accounting policies , a discussion of accounting policies that require critical judgments and estimates.

Principal factors affecting the results of our operations , a discussion of the primary factors that have a significant impact on our
operating performance.

Operating results , an analysis of our company’s consolidated results of operations during the three years presented in our financial
statements. The analysis is presented both on a consolidated basis, and by business segment through to operating profit.

Liquidity and capital resources , an analysis of cash flows, sources and uses of cash.

Outlook and trend information , a review of the outlook for, and trends affecting, our business.

Tabular disclosure of contractual obligations , a discussion of our contractual obligations as at December 31, 2006.
Our business
Our business consists of producing, selling and distributing non-alcoholic beverages, primarily products of The Coca-Cola Company,
which accounted for approximately 93% of our sales volume in 2006. We are one of the world’s largest Coca-Cola bottlers, serving a
population of approximately 540 million people in 28 countries (including through our equity investment in Brewinvest S.A., a business
engaged in the bottling and distribution of beer and non-alcoholic beverages in Bulgaria and the Former Yugoslav Republic of Macedonia).
We aggregate these 28 countries into three business segments. The countries included in each segment share similar levels of political and
economic stability and development, regulatory environments, growth opportunities, customers and distribution infrastructures. Our three
business segments are as follows:

Established countries , which are Italy, Greece, Austria, the Republic of Ireland, Northern Ireland, Switzerland and Cyprus.

Developing countries , which are Poland, Hungary, the Czech Republic, Croatia, Lithuania, Latvia, Estonia, Slovakia and Slovenia.
57

Emerging countries , which are the Russian Federation, Romania, Nigeria, Ukraine, Bulgaria, Serbia, Montenegro, Belarus, Bosnia
and Herzegovina, Armenia, Moldova and the Former Yugoslav Republic of Macedonia.
Our products include both carbonated soft drinks, or CSDs, and non-CSDs, including juices, waters, sports and energy drinks, and other
ready-to-drink beverages such as teas and coffees. In 2006, CSDs accounted for 71% and non-CSDs accounted for 29% of our sales volume,
respectively. Our core brands are Coca-Cola, Fanta, Sprite and Coca-Cola light (diet Coke), which together accounted for approximately 63%
of our total sales volume in 2006.
Key financial results
We consider the key performance measures for the growth of our business and its profitability to be volume, operating profit, cash
operating profit, or COP, and return on invested capital, or ROIC. The following table shows our results with respect to the following key
performance measures from the year ended December 31, 2004 to the year ended December 31, 2006, as well as, in each case, the year-on-year
change in percentage terms.
Key performance measures:
2006
Unit case volume (in millions)
Operating profit (euro in millions)
COP (euro in millions)
ROIC
1,723.6
459.1
818.5
7.8 %
% change
12.0
1.9
7.5
5.4
2005
1,539.1
450.7
761.5
7.4 %
% change
9.6
6.9
7.1
(7.5 )
2004
1,404.0
421.8
711.2
8.0 %
Unit case volume
We measure our sales volume in unit cases. A unit case equals 5.678 liters or 24 servings of 8 US fluid ounces each. The unit case is a
typical volume measure used in our industry.
In 2006, our sales volume increased by 184.5 million unit cases, or 12.0%, compared to 2005. We delivered strong volume growth in all
product categories and reporting segments. This was primarily due to product innovation, further expansion of our existing product range
across our markets, strong market place execution and the continuous roll-out in the market of additional coolers. In particular, strong
performances in the Russian Federation, Romania, Poland and Ukraine accounted for a material portion of our sales volume growth. We have
also benefited from more favorable weather in some of our territories in 2006 and the first time contribution of our 2006 acquisitions, Fonti del
Vulture S.r.l. and Lanitis Bros Limited.
In 2005, our sales volume increased by 135.1 million unit cases, or 9.6%, compared to 2004. We delivered very solid organic volume
growth in all product categories. This was primarily due to strong performances in the Russian Federation, driven by continued investment in
sales force capability, distribution and cold drink infrastructure, and in Romania, reflecting strong market execution, expansion of the portfolio
through new packages and flavors extensions and excellent performance of our Romanian water business. In Nigeria, despite a price increase in
CSD categories in September 2005, there was a positive performance in all product categories. Poland and Ukraine also accounted for a
material portion of our sales volume growth.
Operating profit
In 2006, we increased operating profit by € 8.4 million, or 1.9% in comparison with 2005. This comprised an additional € 205.9 million
contribution from gross profit, partially offset by an additional € 197.5 million of selling, delivery and administrative expenses.
58
In 2005, we increased operating profit by € 28.9 million, or 6.9% in comparison with 2004. This comprised an additional € 183.0 million
contribution from gross profit, partially offset by an additional € 154.1 million of selling, delivery and administrative expenses.
COP
We define COP as operating profit (loss) before deductions for depreciation (included both in cost of goods sold and in selling, delivery
and administrative expenses), impairment of property, plant and equipment, stock option compensation and amortization of intangible assets.
COP serves as an additional indicator of our operating performance and not as a replacement for measures such as cash flows from operating
activities and operating profit as defined and required under US GAAP. We believe that COP is useful to investors as a measure of operating
performance because it considers the underlying operating cash costs by eliminating depreciation and amortization of intangible assets. In
addition, we believe that COP is a measure commonly used by analysts and investors in our industry and that current shareholders and potential
investors in our company use multiples of COP in making investment decisions about our company. Accordingly, we have disclosed this
information to permit a more thorough analysis of our operating performance. COP, as we calculate it, may not be comparable to similarly
titled measures reported by other companies. Internally, our management uses COP as one of the main measures to allocate resources and
evaluate the performance of each of our business segments.
In 2006, our COP increased by € 57.0 million over 2005 and in 2005 by € 50.3 million over 2004. These increases were due to the same
factors that contributed to our operating profit growth during the same periods.
ROIC
We use ROIC as an important performance indicator to measure our success in utilizing our existing asset base and allocating capital
expenditures. The importance of the ROIC calculation to our business is demonstrated by the fact that in 2005 and 2006, our management
incentive plan for our middle and senior managers used ROIC along with growth in sales volume and operating profit as the criteria for
assessing their business performance. ROIC serves as an additional indicator of our performance and not as a replacement for measures such as
operating profit and net income as defined and required under US GAAP. Accordingly, we have disclosed this information to permit a more
complete analysis of our operating performance. ROIC, as we calculate it, may not be comparable to similarly titled measures reported by other
companies.
We define ROIC as follows:
Return on Invested Capital
=
Operating profit + share of income of equity method investees
- income tax expense - tax shield
Capital employed
Our “tax shield”, which reflects the tax benefit that we receive on our borrowings, is equal to our interest expense multiplied by the Greek
statutory tax rate of 29%. Our “capital employed” equals our shareholders’ equity plus our net borrowings.
Our ROIC of 7.8% for 2006, reflected an increase of 5.4% over the ROIC of 7.4% for 2005. This increase was a result of a decrease in the
income tax expense (net of tax shield), a decrease in net debt and improved operating performance, which was reflected in the increase of 2.0%
in the operating profit and the share of income of equity method investees, as compared to 2005. In particular, the effective tax rate on the
operating profit and equity income decreased from 27.3% in 2005 to 23.6% in 2006. This was largely due to the one-off benefit during 2006
resulting from the enactment of lower tax rates in a number of our
59
countries (primarily in Switzerland), causing the redenomination of significant deferred tax liability balances. Capital employed increased by
2.4%, primarily due to an increase in shareholders’ equity by 8.0% or € 233.4 million, reflecting mainly net income of € 313.4 million earned
in 2006 that was partially offset by an € 11.8 million negative effect from the translation of the financial statements of foreign subsidiaries, as
many of our local currencies weakened against the euro, and cash dividends of € 72.2 million declared in 2006. Net debt decreased by 7.0% or
€ 120.8 million, primarily due to the increase in cash and cash equivalents.
Our ROIC of 7.4% for 2005, reflected a decrease of 7.5% over the ROIC of 8.0% for 2004. This decrease was a result of an increase in the
income tax expense (net of tax shield) and in net debt in 2005, partially offset by improved operating performance, which was reflected in the
increase of 11.1% in the operating profit and the share of income of equity method investees. The effective tax rate on the operating profit and
equity income increased from 23.6% in 2004 to 27.3% in 2005. This was largely due to the lack in 2005 of one-off benefit created during prior
years by the enactment of lower tax rates in a number of our countries (during 2004, primarily in Austria and the Czech Republic), causing the
redenomination of significant deferred tax liability balances. Capital employed increased by 14.2%, primarily on the basis of an increase in net
debt increased by 14.3% or € 217.1 million, resulting from the increase of short term borrowings. Of this increase, € 168.2 million related to the
investment in the Multon Z.A.O. group in April 2005. In addition, shareholders’ equity increased by 14.1% or € 362.3 million, primarily
reflecting the € 298.9 million of net income earned in 2005 and a € 91.2 million of positive effect from the translation of the financial
statements of foreign subsidiaries, as many of our local currencies strengthened against the euro.
December 31,
December 31,
December 31,
2006
2005
2004
(euro in millions, except percentages)
Tax shield:
Interest expense
Greek statutory tax rate
(86.3 )
29 %
(25.0 )
Numerator:
Operating profit
Share of income of equity method investees
Income tax expense
Tax shield
Denominator:
Cash and cash equivalents
Short-term borrowings
Current portion of long-term debt
Current portion of capital lease obligations
Long-term debt, less current portion
Capital lease obligations, less current portion
Net debt
Shareholders’ equity
Capital employed
ROIC
(66.9 )
35 %
(23.4 )
459.1
24.8
(89.2 )
(25.0 )
369.7
450.7
23.9
(111.8 )
(18.0 )
344.8
421.8
5.2
(77.4 )
(23.4 )
326.2
(288.7 )
269.3
—
33.9
1,516.4
82.2
1,613.1
3,156.7
4,769.8
(168.5 )
310.0
243.9
19.8
1,278.4
50.3
1,733.9
2,923.3
4,657.2
(31.3 )
76.0
—
15.0
1,424.6
32.5
1,516.8
2,561.0
4,077.8
7.8 %
60
(56.2 )
32 %
(18.0 )
7.4 %
8.0 %
Major recent transactions
Summary of recent acquisitions
In recent years, we have selectively broadened our portfolio of non-CSD brands through acquisition of natural mineral water and juice
brands, in order to capture sales opportunities through our local distribution and marketing capabilities. While we remain open to the possibility
of acquiring new territories over time on an opportunistic basis, this does not currently form part of our core business strategy.
Acquired business
Gotalka d.o.o
Vlasinka d.o.o
Multon Z.A.O. group
Bankya Mineral Waters
Bottling Company EOOD
Vendit Limited
Fresh & Co d.o.o.
Lanitis Bros Public Limited
Lanitis Bros Public Limited minority
interest
Fonti del Vulture S.r.l.
Yoppi Kft.
Eurmatik S.r.l.
(1)
Effective date
of acquisition
January 28, 2004
April 14, 2005
April 20, 2005
Primary focus
Water
Water
Juice
Business
segment
Developing
Emerging
Emerging
June 2, 2005
September 28, 2005
Water
Vending
Emerging
Established
March 13, 2006
April 5, 2006
Juice
CSDs/Juice/Dairy
December 31, 2006
July 5, 2006
August 22, 2006
May 31, 2007
CSDs/Juice/Dairy
Water
Vending
Vending
Location
Croatia
Serbia
Russian
Federation
Consideration
7.8
10.9
168.2
10.9
6.3
Emerging
Established
Bulgaria
Republic of
Ireland
Serbia
Cyprus
Established
Established
Developing
Established
Cyprus
Italy
Hungary
Italy
3.4
5.8
1.9
16.3
(1)
9.0
72.5
Cost includes the share of the purchase price paid by us plus our transaction costs but excludes any amounts of short-term or long-term debt held by the acquired
businesses at the time of the acquisition and assumed by us.
The acquisition of Gotalka d.o.o. (2004)
On January 28, 2004, we completed the acquisition of 100% of the shares of the Croatian mineral water company Gotalka d.o.o., through
our 99.9% owned subsidiary, Coca-Cola Beverages Hrvatska d.d. The acquisition included a production facility at Budinscina and the mineral
water brands Bistra, Gotalka and Claria. Total consideration for the acquisition was € 7.2 million (excluding acquisition costs), with transaction
costs of € 0.6 million. The trademark was subsequently sold to The Coca-Cola Company for € 8.6 million. For additional information, see Item
7B, “Major Shareholders and Related Party Transactions—Related Party Transactions—Our relationship with The Coca-Cola Company.”
The acquisition of Vlasinka d.o.o. (2005)
On April 14, 2005, we acquired 100% of the shares of the Serbian mineral water company, Vlasinka d.o.o., together with The Coca-Cola
Company. Our share of the acquisition consideration was € 10.5 million (excluding transaction costs). We effectively purchased the operating
assets and liabilities of the business at Surdulica in Southern Serbia, while The Coca-Cola Company effectively purchased the mineral water
brand Rosa for € 10.5 million. Our transaction costs amounted to € 0.4 million.
The acquisition of the Multon Z.A.O. group (2005)
On April 20, 2005, we completed jointly with The Coca-Cola Company the acquisition of the Multon Z.A.O. group, a leading juice
producer in the Russian Federation. The Multon Z.A.O. group has production facilities in Moscow and St. Petersburg and produces and
distributes juice products under the brands, Rich, Nico and Dobry. The total consideration for the acquisition was US$471.0 million ( €
359.9 million) (excluding acquisition costs), plus the assumption of debt of US$35.9 million ( € 27.4 million). Our share of the purchase price
and debt was US$253.5 million ( € 193.7 million). Our
61
transaction costs amounted to € 1.9 million. The acquisition is a joint venture and is being accounted for under the equity method.
The acquisition of Bankya Mineral Waters Bottling Company EOOD (2005)
On June 2, 2005, we acquired 100% of the Bulgarian mineral water company, Bankya Mineral Waters Bottling Company EOOD. The
acquisition includes production facilities located just outside of Sofia and the mineral water brand, Bankia. Total consideration for the
acquisition was € 10.7 million (excluding acquisition costs), with transaction costs of € 0.2 million and the assumption of debt of an additional
€ 2.2 million. The Bankia trademark was subsequently sold to The Coca-Cola Company in 2005 for € 6.4 million. For additional information,
see item 7B, “Major Shareholders and Related Party Transactions—Related Party Transactions—Our relationship with The Coca-Cola
Company”.
The acquisition of Vendit Limited (2005)
On September 28, 2005, we acquired 100% of Vendit Limited, one of the largest independent vending operators in the Republic of
Ireland. The total consideration for the acquisition was € 5.9 million (excluding acquisition costs), with transaction costs of € 0.4 million and
the assumption of debt of an additional € 0.8 million.
The acquisition of Fresh & Co. d.o.o (2006)
On March 13, 2006, we acquired, jointly with The Coca Cola Company, 100% of Fresh & Co. d.o.o., one of the leading producers of fruit
juices in Serbia. The acquisition includes a production facility located at Subotica and the juice and nectar brands, Next and Su-Voce. The
consideration for the acquisition was € 17.1 million (excluding acquisition costs) with the assumption of debt of an additional € 23.5 million.
Our share of the purchase price and debt was € 20.3 million. Our transaction costs amounted to € 0.4 million. The acquisition is a joint venture
and is being accounted for under the equity method.
The acquisition of Lanitis Bros Public Limited (2006)
On April 5, 2006, we successfully completed the tender offer for the outstanding share capital of Lanitis Bros Public Limited
(subsequently renamed Lanitis Bros Limited), a beverage company in Cyprus, with a strong portfolio of products, including those of The
Coca-Cola Company as well as its own juice and dairy products. Following completion of the tender offer, we acquired 95.43% of the share
capital of Lanitis Bros Limited. The total consideration paid for these shares was € 71.5 million (excluding acquisition costs) with the
assumption of debt of an additional € 5.6 million. Our transaction costs amounted to € 1.0 million.
Following completion of the tender offer, we initiated a mandatory buy-out process in accordance with Cypriot law for the purposes of
acquiring the remaining shares in Lanitis Bros Limited. Lanitis Bros Limited has been delisted from the Cyprus Stock Exchange. In July and
August of 2006, we had acquired an additional 11,218,735 shares representing 4.48% of the share capital of Lanitis Bros Limited for a total
consideration of € 3.4 million, bringing our equity ownership to 99.91%.
The acquisition of Fonti del Vulture S.r.l. (2006)
On July 5, 2006, we acquired, jointly with The Coca-Cola Company, 100% of Fonti del Vulture S.r.l., a producer of high quality mineral
water in Italy with significant water reserves. The consideration for the acquisition was € 10.4 million (excluding acquisition costs and net debt
assumed). Our share of the purchase price was € 5.2 million. Our transaction costs amounted to € 0.6 million.
62
The acquisition of Yoppi Kft. (2006)
On August 22, 2006, we acquired 100% of Yoppi Kft., a hot beverages vending operator in Hungary. Total consideration for the
acquisition was € 1.9 million with the assumption of debt of an additional € 0.1 million.
The acquisition of Eurmatik S.r.l (2007)
On May 31, 2007, we announced the completion of the acquisition of 100% of Eurmatik S.r.l., a vending operator in Italy. At this stage,
the total consideration for the acquisition was € 15.8 million with no debt assumed (excluding acquisition costs). The final consideration is
subject to changes for final working capital adjustments. Transaction costs are approximately € 0.5 million.
Application of critical accounting policies
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the amounts reported in the financial statements and
accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under
the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies include our more significant judgments and estimates used in the preparation of our
consolidated financial statements. Management has discussed the development, selection and disclosure of these critical accounting policies
with the audit committee of our board of directors.
Basis of presentation and consolidation
Our consolidated financial statements are prepared in accordance with US GAAP. We consolidate all entities that we control by ownership
of a majority voting interest, and consolidate variable interest entities for which our company is the primary beneficiary, should such
circumstances arise.
Our acquisitions have been accounted for under the purchase method of accounting both where we have obtained a controlling interest in
the acquired business and the business was not under common control at the time of the acquisition. The amounts assigned to the identifiable
assets acquired and liabilities assumed in connection with these acquisitions were based on estimated fair values as of the date of the
acquisition, with the remainder, if any, recorded as goodwill. The fair values were determined by our management, taking into consideration
information supplied by the management of acquired entities, valuations supplied by independent appraisal experts and other relevant
information. The valuations have been based primarily upon future cash flow projections for the acquired assets, discounted to present value.
We use the equity method to account for investments for which we have the ability to exercise significant influence over operating and
financial policies. Our consolidated net income includes our share of the net earnings of these companies. The difference between consolidation
and the equity method impacts certain financial ratios because of the presentation of the detailed line items reported in the financial statements.
However, our consolidated net income for the period and our shareholders’ equity at the end of the period are the same whether the investment
in the company is accounted for under the equity method or the company is consolidated. Our judgments regarding the level of influence over
each equity method investment include considering key factors such as our ownership interest, representation on the board of directors,
participation in policy-making decisions and material intercompany transactions.
63
Intangible assets
Intangible assets comprise a significant portion of our balance sheet. As at December 31, 2006, there was € 2,795.8 million of intangible
assets recorded on our balance sheet, reflecting 38.4% of our total assets. The main components of this intangible asset balance were €
1,997.4 million of franchise rights related to our bottlers’ agreements with The Coca-Cola Company, € 34.8 million of trademarks and €
760.5 million of goodwill.
The Coca-Cola Company does not grant perpetual franchise rights outside the United States, nonetheless, we believe our franchise
agreements will continue to be renewed at each expiration date and, therefore, essentially have an indefinite useful life. We determine the
useful life of our trademarks after considering potential limitations that could impact the life of the trademark, such as technological limitations,
market limitations, and the intent of management with regard to the trademark. All the trademarks that we have recorded on our balance sheet
have been assigned an indefinite useful life as they have an established sales history in the applicable region, it is our intention to receive a
benefit from them indefinitely and there is no indication that this will not be the case. We evaluate the useful life assigned to the trademarks on
an annual basis. If the trademarks were determined to have finite lives, they would be amortized over their useful lives.
In accordance with Financial Accounting Standards Board (FASB) Statement No.142, Goodwill and Other Intangible Assets (“Statement
No. 142”), goodwill and indefinite-lived intangible assets (including franchise rights and trademarks) are not amortized but are reviewed at
least annually for impairment. Finite-lived intangible assets are amortized over their estimated useful lives.
We test for goodwill impairment using the two-step process described in Statement No. 142. The first step is a screen for potential
impairment, while the second step measures the amount of any impairment. Fair values are derived using discounted cash flow analysis, based
on cash flow assumptions consistent with our internal planning, discounted at rates reflecting market comparability adjusted to our facts and
circumstances. We evaluate franchise rights and trademarks for impairment by comparing the applicable carrying value to the fair value
determined based on the present value of estimated future cash flows from such assets.
The accuracy of our assessments of fair value is based on management’s ability to accurately predict key variables such as sales volume,
prices, spending on marketing and other economic variables. Predicting these key variables involves uncertainty about future events. However,
the assumptions we use are consistent with those employed for internal planning purposes.
Property, plant and equipment
As of December 31, 2006, the net book value of property, plant and equipment was € 2,486.2 million, representing 34.1% of total assets.
Property, plant and equipment is initially stated at cost. Depreciation on property, plant and equipment is computed using the straight-line
method over their estimated useful lives. We have determined useful lives of property, plant and equipment after consideration of historical
results and anticipated results based on our current plans. Our estimated useful lives represent the period the asset remains in service assuming
normal routine maintenance. We review the estimated useful lives assigned to property, plant and equipment when our business experience
suggests that they do not properly reflect the consumption of the economic benefits embodied in the property, plant or equipment nor result in
the appropriate matching of cost against revenue. Factors that lead to such a conclusion may include physical observation of asset usage,
examination of realized gains and losses on asset disposals, and consideration of market trends such as technological obsolescence or change in
market demand.
64
We perform impairment reviews of property, plant and equipment and other long-lived assets, when events and circumstances indicate the
assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those
assets. Any impairment loss is measured by comparing the fair value of the asset to its carrying amount.
The accuracy of our assessments of fair value is based on management’s ability to accurately predict key variables such as sales volume,
prices, spending on marketing and other economic variables. Predicting these key variables involves uncertainty about future events, however,
the assumptions we use are consistent with those employed for internal planning purposes.
In 2006, we incurred € 24.5 of impairment of property, plant and equipment. Following our review of our three-year plan, we decided to
accelerate the implementation of the refillable bottle strategy. The implementation of this strategy led to the booking of a non-cash charge on
certain refillable PET and glass bottles and crates in Austria, Bulgaria, Nigeria, Poland, Greece and some other markets for a total of € 15.1
million in 2006 and nil in 2005 and 2004. The additional € 9.4 million consists primarily of impairment on production and other equipment, as
compared to € 0.9 million in 2005 and € 3.6 million in 2004.
Revenue recognition
We recognize revenue when all of the following conditions are met: evidence of a binding arrangement exists (generally, purchase orders),
products have been delivered and there is no future performance required, and amounts are collectable under normal payment terms. Revenue
is stated net of sales discounts, listing fees and marketing and promotional incentives paid to customers. Listing fees are incentives provided to
customers for carrying our products in their stores. Fees that are subject to contractual-based term arrangements are amortized over the term of
the contract. All other listing fees are expensed as incurred. The amounts deducted from sales for marketing and promotional incentives are net
of amounts received from The Coca-Cola Company as a contribution toward the cost of such marketing and promotional incentives.
Where we distribute third party products, we recognize the related revenue earned based on the gross amount invoiced to the customer
where we act as principal, take title to the products and have assumed the risks and rewards of ownership. We recognize revenue on the basis of
the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier), where we act as an agent without assuming
the relevant risks and rewards.
Employee Benefits—Statutory Termination and Pension Plans
The Company accounts for the statutory termination benefits and pension plans in accordance with the provisions of FASB Statement
No. 87, Employers’ Accounting for Pensions (‘Statement No. 87’), including the application of actuarial methods and assumptions in
conjunction with professional actuaries and the related disclosure provisions of FASB Statement No. 132 (revised 2003), Employers’
Disclosures about Pensions and Other Postretirement Benefits (‘Statement No. 132 (R)’). The Company adopted Statement No. 87 as at
January 1, 1999, as it was not feasible to apply Statement No. 87 for these plans as at January 1, 1989, the effective date specified in the
standard. The amortization periods for the transition obligations range from 10 to 18 years.
A number of the Company’s operations have long service benefits in the form of jubilee plans. These plans are measured at the present
value of estimated future cash outflows with immediate recognition of actuarial gains and losses.
During 2006, the Company also adopted FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans—an amendment of FASB Statement No. 87, 88, 106 and 132 (R) (‘Statement No. 158’). Statement No. 158 requires that
previously disclosed but unrecognized
65
actuarial gains or losses, prior service costs or benefits and transitional obligations or assets be recognized generally through adjustment to
accumulated other comprehensive income and the funded status of the defined benefit plans to be recognized on the balance sheet.
Derivative financial instruments
We use derivative financial instruments for hedging purposes. Interest rate swaps and option cap agreements are used to manage
interest-rate risk exposure. Foreign currency forward and option contracts and currency swaps are used to manage foreign currency exposure.
We also use futures contracts to manage our exposure to changes in the price of sugar.
Derivative financial instruments are initially recognized in the balance sheet at cost and are subsequently remeasured at their fair value.
The fair values of derivative financial instruments are estimated based on dealer quotes and independent market valuations. Changes in the fair
value of derivative financial instruments are recognized periodically in either income or in shareholders’ equity as a component of
comprehensive income, depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies
as a fair value hedge or a cash flow hedge. Generally, changes in fair values of derivative financial instruments accounted for as fair value
hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedged risks.
Changes in fair values of derivative financial instruments accounted for as cash flow hedges, to the extent they qualify for hedge accounting,
are recorded in accumulated other comprehensive income, net of deferred taxes. Changes in fair values of derivative financial instruments not
qualifying as hedges are reported in income.
Income taxes
In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (‘Interpretation No. 48’), an
interpretation of FASB Statement No. 109, Accounting for Income Taxes . Interpretation No. 48 clarifies the accounting and reporting for
income taxes where interpretation of the law is uncertain. Interpretation No. 48 prescribes a comprehensive model for the financial statement
recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in
income tax returns. We adopted this Statement on January 1, 2007. As a result of the implementation, we recognized a decrease of € 1.6 million
in the liability for unrecognized tax benefits, which was accounted for as an increase to the balance of retained earnings as of January 1, 2007.
As of the date of adoption of Interpretation No. 48 and after the impact of recognizing such a decrease in liability, our unrecognized tax
benefits totaled € 26.4 million, all of which, if recognized, may affect our effective tax rate. We are not aware of any matters that are
reasonably possible to cause the total amounts of unrecognized tax benefits to significantly increase or decrease within the period of twelve
months after the adoption of Interpretation No. 48.
Deferred tax assets represent items to be used as a deduction or credit in future tax returns. As at December 31, 2006, we had
approximately € 109.2 million of deferred tax assets related principally to operating loss carry-forwards arising from operations outside Greece,
and temporary differences in the deduction of depreciation and accrued expenses. Ordinarily, operating loss carry-forwards are only capable of
being utilized by each of the operating entities that recorded the loss. We have established a valuation allowance of approximately € 6.4 million
for deferred tax assets that we do not believe will be realized. The estimate of the amount of the valuation allowance is based upon our estimate
of future taxable income and other relevant factors such as time limitations on the utilization of net operating losses.
66
Contingencies
Our company is subject to various claims and contingencies related to legal proceedings. Due to their nature, such legal proceedings
involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions.
Management assesses the probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as
appropriate. For additional information, see also Item 8A, “Financial Information—Consolidated Statements and Other Financial
Information—Legal proceedings”.
Principal factors affecting the results of our operations
Our relationship with The Coca-Cola Company
General
We are a producer, distributor and seller primarily of the products of The Coca-Cola Company. The Coca-Cola Company controls the
global product development and marketing of its brands. The Coca-Cola Company’s ability to perform these functions successfully has a direct
effect on our sales volume and results of operations. We produce the beverages of The Coca-Cola Company, engage in local marketing and
promotional activities, establish business relationships with local customers, develop local distribution channels and distribute the products of
The Coca-Cola Company to customers either directly or indirectly through independent distributors and wholesalers. Our business relationship
with The Coca-Cola Company is mainly governed by bottlers’ agreements entered into between The Coca-Cola Company and us. You should
read Item 7B “Major Shareholders and Related Party Transactions—Related Party Transactions—Our relationship with The Coca-Cola
Company” for additional information on our relationship with The Coca-Cola Company and a detailed description of the terms of the bottlers’
agreements.
Purchase of concentrate
Expenditure for concentrate constitutes our largest individual raw material cost. The total cost of concentrate expensed during 2006
amounted to € 1,097.1 million, as compared to € 938.6 million in 2005, and € 859.0 million for 2004. Concentrate represented approximately
33.4% of our total cost of goods sold in 2006, as compared to 34.1% in 2005, and 34.3% in 2004. The cost of concentrate as a percentage of
our cost of sales has been reducing slowly over time, despite the increase in absolute terms, mainly because the portion of our cost of sales
relating to our own water brands and juices has increased in response to increased demand for these products. Under our bottlers’ agreements,
we are required to purchase concentrate for all beverages of The Coca-Cola Company from companies designated by The Coca-Cola Company.
The Coca-Cola Company is entitled under the bottlers’ agreements to determine the price we pay for concentrate at its discretion. In practice,
however, The Coca-Cola Company normally sets the price after discussions with us to reflect trading conditions in the relevant countries and to
be in line with our annual marketing plan.
We expect amounts of concentrate purchased from The Coca-Cola Company to track our sales volume growth. We anticipate the price of
concentrate we purchase from The Coca-Cola Company for each of the countries in which we operate to be determined mainly by reference to
inflation and our ability to implement price increases in the relevant country.
67
Pricing in countries outside the European Union
The Coca-Cola Company is also entitled, to the extent permitted by local law, under the bottlers’ agreements to set the maximum price we
may charge to our customers in countries outside the European Union. In practice, we work closely with The Coca-Cola Company to determine
our pricing strategy in light of the trading conditions prevailing at the relevant time in each of these countries. The combination of The
Coca-Cola Company’s right to set our concentrate prices and its right to limit our selling prices in our countries outside the European Union
could give The Coca-Cola Company considerable influence over our gross profit margins.
Marketing and promotional support
The Coca-Cola Company makes contributions to us in respect of marketing and promotional support programs to promote the sale of its
products in our territories. Contributions received from The Coca-Cola Company for marketing and promotional support programs amounted to
€ 50.4 million, € 39.8 million and € 47.0 million for the years ended December 31, 2006, 2005 and 2004, respectively. These contributions, if
related to payments we make to specific customers for marketing and promotional incentives, are recognized as a reduction of our payments to
customers. These payments to customers, net of contributions received from The Coca-Cola Company, are deducted from sales revenue. In
2006, such contributions totaled € 29.9 million as compared to € 17.6 million in 2005 and € 21.1 million in 2004. Payments for marketing
programs not specifically attributable to a particular customer are recognized as either a reduction of selling, delivery and administrative
expenses or cost of goods sold. In 2006, these contributions amounted to € 20.5 million compared to € 22.2 million in 2005 and € 25.9 million
in 2004. The levels of support programs are jointly determined annually on a territory-by-territory basis to reflect the mutually agreed annual
marketing plan for that territory and expected sales volume for the year. The Coca-Cola Company is under no obligation to participate in the
programs or continue past levels of funding into the future. Given our relationship with The Coca-Cola Company to date, there is no reason to
believe that such support will be reduced or withdrawn in the future.
The Coca-Cola Company also makes support payments for the placement of cold drink equipment, in recognition of the importance of our
strategy to invest in the placement of cold drink equipment in order to increase higher margin immediate consumption sales. Support payments
are recognized over the life of the asset. The total amount of such payments totaled € 83.3 million in 2006 as compared to € 26.6 million in
2005 and € 15.0 million in 2004. These support payments are subject to reimbursement if certain conditions stipulated in the agreements are not
met including minimum volume. Management believes the risk of reimbursements is remote. Further support payments are made solely at the
discretion of The Coca-Cola Company.
Other transactions with The Coca-Cola Company
We enter into a number of other transactions with The Coca-Cola Company in the context of our business relationship. In 2005, the
Company received total cash proceeds of € 6.4 million for the sale of the water brand, Bankia. In 2004, we sold trademarks to The Coca-Cola
Company for total cash proceeds of € 11.2 million. Of this, € 8.6 million related to the sale of Gotalka water brands, particularly Bistra, and the
remainder to the sale of the Bosnian water brand, Olimpija. The € 2.6 million payment for the Olimpija brand was outstanding as at
December 31, 2004, and payment was received in the first quarter of 2005.
Other income primarily comprises a toll-filling relationship in Poland of € 15.6 million in 2006, € 11.4 million in 2005 and nil in 2004 and
rent, facility and other costs of € 2.0 for the year ended December 31, 2006 as compared to € 2.1 million for the year ended December 31, 2005
and € 1.7 million for the year ended December 31, 2004. Other expenses relate to facility costs charged by The Coca-Cola Company, a toll
filling relationship and shared costs. These other expenses amounted to € 4.0 million in 2006,
68
€ 1.4 million in 2005 and € 4.2 million in 2004. With the exception of the toll-filling arrangements, balances are included in selling, delivery
and administrative expenses.
In addition to concentrate, we purchase from The Coca-Cola Company finished goods and other materials. The cost of these purchases
amounted to € 87.6 million in 2006, as compared to € 89.4 million in 2005 and € 49.7 million in 2004. The purchases of finished goods are
primarily purchases of PowerAde product. The growth since 2004 was due to the roll-out of PowerAde across additional markets and increased
demand within existing markets. We also purchase concentrate from Beverage Partners Worldwide, a 50/50 joint venture between The
Coca-Cola Company and Nestlé. Purchases of concentrate from Beverage Partners Worldwide amounted to € 73.0 million in 2006, as
compared to € 44.2 million in 2005 and € 27.8 million in 2004. These amounts are included in our cost of goods sold. The steady increase in
concentrate purchases from Beverage Partners Worldwide from 2004 to 2006 reflects both the broader availability of Nestea products across
our markets and increased demand for those products, along with the introduction of Nescafé Xpress in 2005.
During 2006, we sold € 16.6 million of finished goods and raw materials to The Coca-Cola Company, a slight increase on sales of €
11.8 million for 2005 and of € 8.4 million for 2004.
Amounts payable to and receivable from The Coca-Cola Company
As at December 31, 2006, The Coca-Cola Company owed us € 65.9 million, as compared to € 68.6 million as at December 31, 2005, and
€ 45.1 million as at December 31, 2004. We owed The Coca-Cola Company a total of € 110.8 million, € 92.0 million and € 69.3 million as at
December 31, 2006, 2005 and 2004, respectively. These amounts solely reflect trade balances. There were no loans over the course of the
period.
Economic conditions and pricing in our emerging and developing countries
Our developing and emerging countries have lower disposable income per capita than our established countries and continue to be subject
to economic volatility from time to time. Incidents of currency devaluation, or revaluation, the level of inflation, the rate of economic growth
and the rate of unemployment in those countries influence consumer confidence and consumer purchasing power and, in turn, the consumption
of our products. For example, in 2004 and 2005, Nigeria faced political, social and economic unrest and several fuel shortages, which all
together adversely affected our sales volume in that country. A central element of our strategy for achieving sustainable profitable volume
growth is our ability to anticipate changes in local economic conditions and their impact on consumer demand in order to attain the optimal
combination of pricing and sales volume.
Channel mix
We sell our products through two broadly defined distribution channels: future consumption channels, including hypermarkets,
supermarkets and grocery stores, where consumers typically buy beverages in multi-serve (one liter and above or multi-package) packages for
future (at home) consumption; and immediate consumption channels, including restaurants and cafés, grocery stores, gas stations, sports and
leisure venues and hotels, where consumers typically buy beverages in chilled single-serve (0.5 liter or smaller) packages and fountain products
for immediate consumption. Single-serve packages sold through immediate consumption channels typically generate higher margins than
multi-serve packages sold through future consumption channels. This is primarily due to consumers’ willingness to pay a premium to consume
our products chilled at a convenient location. In addition, this is also influenced by the price sensitivity and bargaining power of large retailers
and wholesalers that represent our principal customers in the future consumption channel.
69
Channel mix refers to the relative percentages of our sales volume comprising single-serve packages sold for immediate consumption and
multi-serve packages sold for future consumption. A favorable channel mix occurs, when sales of our higher margin single-serve packages
increase relative to sales of multi-serve packages, while an unfavorable channel mix occurs, when our volume shifts toward more multi-serve
packages that generate lower margins. One of the strategies we use to improve channel mix is to invest in cold drink equipment, such as
coolers, which we make available to retail outlets. This represents a significant portion of our capital expenditure. During 2006, for example,
approximately 33% of our net purchases of property, plant and equipment were for coolers.
Raw material costs
Raw material costs, including concentrate, represented 75.4% of our total cost of goods sold in 2006, as compared to 75.6% in 2005 and
77.1% in 2004. Our major raw materials, other than water and concentrate, are sugar and other sweeteners, carbon dioxide, juice concentrates,
glass, labels, plastic resin, closures, plastic crates, aluminum cans, aseptic packages and other packaging materials. The entry into the European
Union in recent years of eleven of our countries has led to an increase in the cost of sugar. For additional information, see below under “Impact
of governmental, economic, fiscal, monetary and political policies—Expansion of the European Union.”
Under the terms of a supply agreement that we entered into with Frigoglass S.A. in 1999, initially set to expire on December 31, 2004 but
subsequently extended in June 2004 on substantially similar terms, to December 31, 2008, we are obligated to obtain at least 60% of our annual
requirements of coolers, glass bottles, PET resin, PET preforms, as well as plastic closures, crates, sleeves and labels from Frigoglass S.A. The
prices, at which we purchase these products, are agreed between us and Frigoglass S.A. at the beginning of each year. If an agreement is not
reached, the applicable prices will be determined based on the average prices of non-exclusive other primary European suppliers to The
Coca-Cola Company’s European bottlers. We have the status of most favored customer of Frigoglass S.A., which means that the price to us
must be less than the prices charged to other customers of Frigoglass S.A. that do not have this status, and any orders placed by us must be
dealt with in absolute priority with respect to orders from those other customers. Frigoglass S.A., however, is not required to apply most
favored customer pricing for any product for which they provide us with less than 50% of our annual supply requirements. In addition, most
favored customer status does not apply to any products which we purchase from Frigoglass S.A. which are categorized as commodities and for
which we have requested, and have received, fixed prices. During 2006, we made purchases from Frigoglass S.A. totaling € 209.4 million,
compared to € 143.8 million in 2005 and € 165.1 million in 2004. In 2006, we purchased from Frigoglass S.A. € 33.7 million of raw materials
and packaging materials and other purchases and € 175.7 million of coolers and other cold drink equipment and spare parts. This compares to €
55.8 million for purchases of raw and packaging materials and € 88.0 million for the purchase of coolers and other cold drink equipment and
spare parts in 2005 and € 66.3 million and € 98.8 million, respectively, in 2004. The Kar-Tess Group holds a 44.1% interest in Frigoglass S.A.
You should read Item 7B “Major Shareholders and Related Party Transactions—Related Party Transactions—Our relationship with The
Kar-Tess Group—Supply agreement with Frigoglass S.A.” for additional information on our relationship with Frigoglass S.A.
Weather conditions
Weather conditions directly affect consumption of all our products. High temperatures and prolonged periods of warm weather favor
increased consumption of our products, while unseasonably cool weather, especially during the spring and summer months, adversely affects
our sales volume and consequently, net sales revenue. For example, in the first half of 2004, we experienced increased rainfall and low
temperatures across Europe, which reduced volume growth. In addition, two weeks of continuous rainfall in Nigeria during December 2004
severely disrupted our distribution. In 2005 and 2006, favorable weather conditions have contributed to our sales volume growth in most of our
territories.
70
Seasonality
Product sales in all of our countries are generally higher during the warmer months of the year, which are also periods of increased tourist
activity in many of these countries, as well as during holiday periods such as Christmas and Easter. We typically experience our best results of
operations during the second and third quarters. In 2006, for example, we realized 19.0% of our sales volume in the first quarter, 27.8% in the
second quarter, 29.3% in the third quarter and 23.9% in the fourth quarter.
Foreign currency
Our results of operations are affected by foreign exchange exposures, which arise primarily from adverse changes in exchange rates in our
emerging and developing countries. In particular:

Our operating companies, other than those in Italy, Greece, Austria, the Republic of Ireland, Slovenia and Montenegro, have
functional currencies other than our reporting currency, the euro, and, as a result, any change in the exchange rates between these
functional currencies and the euro affects our statement of income and balance sheet when the results of those operating companies are
translated into euro.

Raw materials purchased in currencies such as the US dollar or the euro can lead to higher cost of goods sold in countries with
weaker functional currencies which, if not recovered through local price increases, will lead, in turn, to reduced gross profit margins. As
at December 31, 2006, all of our concentrate, which represents 44.3% of our raw material costs, was sourced through supply
agreements denominated in euro, US dollars or Nigerian naira.

Currency fluctuations impact our foreign currency denominated balances, such as interest expense on borrowings denominated in
foreign currencies.
Impact of inflation
The level of inflation has a direct impact on the method used to translate the financial statements of our subsidiaries operating outside the
euro zone. FASB Statement No. 52 (“Statement No. 52”) provides that, in a hyper-inflationary economy, defined as an economy with
cumulative inflation for the three-year period preceding the balance sheet date of approximately 100% or more, the effect of exchange rate
fluctuations is included in the determination of net income for the period and is reflected as gains or losses in the related statement of income
within other income (expense). Belarus was classified as a hyper-inflationary economy for the year ended December 31, 2005. Our operations
there ceased applying hyper-inflationary accounting with effect from January 1, 2006. Our operations in Serbia and Romania ceased applying
hyper-inflationary accounting with effect from January 1, 2005 and July 1, 2004, respectively. In each of the 2005 and 2004 fiscal years, the
impact on the statement of income of restating net monetary assets from local to functional currency, pursuant to Statement No. 52, was
minimal. In 2006, none of our entities operated in a hyper-inflationary environment.
For all other countries, which are not considered hyper-inflationary economies, foreign currency translation adjustments are included as
part of accumulated other comprehensive income (loss), a component of shareholders’ equity.
Taxation
The Greek statutory income tax rate for 2006 was 29.0% and decreased to 25.0% in 2007. Statutory income tax rates in the countries in
which we operate range from 0% to 37.0%. Our effective income tax rate decreased to 23.3% for 2006, as compared to 28.1% in 2005. This
decrease was mainly attributable to additional reductions in tax rate in certain of our countries and an increase in capital investment incentives,
tax holidays and change in valuation allowance, partially offset by an increase in local taxes.
71
Amortization and impairment of intangible assets
As discussed above under “Application of critical accounting policies—Intangible assets”, intangible assets comprise a significant portion
of our balance sheet. We consider that 99.9% of the € 2,795.8 million of intangible assets recorded on our balance sheet as at December 31,
2006 relates to assets that have indefinite useful lives.
Statement No. 142 requires that an annual impairment assessment be conducted following implementation of Statement No. 142, unless
factors indicate that the test should be made earlier. In accordance with Statement No. 142, impairment assessments were conducted in each of
the three years ended December 31, 2006, and no impairment was indicated.
Impact of governmental, economic, fiscal, monetary and political policies
Expansion of the European Union
On May 1, 2004, nine countries in which we operate entered the European Union. These are Cyprus, the Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Bulgaria and Romania entered the European Union on January 1, 2007.
These countries have implemented extensive reforms to enable the transition to market economies and have adopted strict fiscal and
monetary policies to converge with the fiscal and monetary standards set by the European Union. We believe that, overall, we will benefit from
the increased economic and political stability in these countries as a result of their gradual alignment with the principles, objectives, economic
standards and regulations of the European Union.
The enlargement of the European Union has resulted in the application to all but one of our developing countries of European Union labor,
tax, accounting and environmental regulations, with a resulting increase in the cost and complexity of compliance, at least in the short-term. In
particular, the implementation of the European Union packaging directive in the new European Union countries has further restricted our
ability to use certain packaging materials or methods.
Our European Union accession countries have adopted the European Union sugar regime as of the date of their accession. This means that
the minimum selling price for sugar has become the European Union intervention price plus the cost of transport and profit margin. Our
operations in these eleven countries use either locally produced or imported sugar or high fructose syrup during the production process. The
cost of these sweeteners has increased as a result of the accession to the European Union of these countries. Prior to accession, our sweetener
prices varied from just below to significantly below the European Union intervention price. Post accession there has been a significant rise in
sweetener costs in these countries. We expect that the ongoing reform of the European Union sugar regime will result in a gradual reduction in
sugar costs starting in 2009. A portion of these savings will be invested in increased marketing and promotional activities aimed at building
brand equity and supporting revenue growth.
The entry into the European Union of eleven of our countries has also increased their exposure to imports from adjacent countries of lower
priced products, including, in some cases, trademarked products of The Coca-Cola Company bottled by other bottlers in the Coca-Cola system.
At least at present, the prices of our products in our European Union developing and emerging countries are generally lower than the prices of
non-alcoholic beverages, including trademarked products of The Coca-Cola Company, sold in the other European Union countries. In addition,
the enlargement of the European Union could lead to an increase of imports by wholesalers and large retailers of lower priced products we
produce and sell in any of our European Union developing and emerging countries to our other territories, particularly our established
countries, where prices of our products are generally higher than prices in most of our developing countries. While this practice would not
necessarily affect our sales volume overall, it could put pressure on our pricing in the countries that receive such imports of lower priced
products. It could also
72
lead to an increase of our overall sales volume as wholesalers and large retailers from European Union countries that are not amongst our
territories with higher priced non-alcoholic beverages may choose to purchase some or all of their supplies from our operations.
The Coca-Cola Company may also seek to increase concentrate prices in our eleven countries that entered the European Union in 2004
and in 2007 in order to bring concentrate prices in those countries in line with the rest of the European Union, in which case, maintaining our
profit margin will partly depend on our ability to recover the increased concentrate cost by implementing price increases in the relevant
countries.
Croatia has submitted an application for entry to the European Union. On April 20, 2003, the European Commission recommended that
Croatia be granted formal European Union candidate status. Currently however, the adoption of a timetable for Croatia to start accession
negotiations with the European Union has been postponed.
European Union competition law
Our business activities affecting the European Union are subject to EU competition law. Between 1999 and 2004, the Directorate General
for Competition of the European Commission conducted an investigation into various commercial practices of The Coca-Cola Company and
certain Coca-Cola bottlers in Austria, Belgium, Denmark, Germany and Great Britain regarding possible abuse of dominant position. In 2004,
together with The Coca-Cola Company and other Coca-Cola bottlers, we engaged in a dialogue with the European Commission to identify and
address the commercial practices under review by the Commission. As part of this dialogue, we submitted draft proposals incorporating
undertakings that address all such practices in the European Union. On June 22, 2005, the European Commission announced that it had adopted
a Commitment Decision based on this undertaking and following consultation with us, The Coca-Cola Company and the other Coca-Cola
bottlers, as well as national competition authorities of the member states of the European Union, relied on the undertaking as a basis for
terminating its investigation. The undertaking potentially applies in 27 European countries, covering those channels of distribution where The
Coca-Cola Company-branded CSDs account for over 40% of the national sales and twice the nearest competitor’s share. The commitments
relate broadly to exclusivity, percentage-based purchasing commitments, transparency, target rebates, tying, assortment or range commitments
and agreements concerning products of other suppliers. In addition to these commitments, the undertaking applies to shelf space commitments
in agreements with take-home customers, to financing and availability agreements in the on-premise channel and to commercial arrangements
concerning the installation and use of technical equipment, such as coolers, fountain equipment, and vending machines. As part of our dialogue
with the European Commission, we had already taken steps to adjust some of our commercial practices prior to the adoption of the
Undertaking, and we believe that the implementation of the undertaking will not have a material adverse effect on our business and financial
results. The full text of the undertaking is available on our corporate website at www.coca-colahbc.com.
The admission to the European Union on May 1, 2004 of our eight Central and Eastern European countries and on January 1, 2007 of
Bulgaria and Romania along with the acquisition in 2006 of operations in Cyprus, has increased the potential impact of EU competition law on
our business.
Adoption of International Financial Reporting Standards by Greek companies
In 2002, the European Council adopted a regulation requiring European Union publicly-traded companies to prepare financial statements
under IFRS, effective for the fiscal year commencing January 1, 2005. In line with such European Union regulation, Greek legislation has
provided that Greek publicly-traded companies prepare their statutory financial statements in accordance with IFRS with effect from January 1,
2005.
73
A.
Operating results
Year ended December 31, 2006 compared to year ended December 31, 2005
The following table shows certain income statement and other financial data, as well as the change in percentage terms, from the year
ended December 31, 2005 to the year ended December 31, 2006.
Coca-Cola Hellenic Bottling Company S.A.
Change
2006
2005
%
(euro in millions except unit case
volume in millions)
Net sales revenue
Cost of goods sold
Gross profit
Selling, delivery, administrative expenses and other operating items
Operating profit
Interest expense
Interest income
Other income
Other expense
Income tax expense
Share of income of equity method investees
Minority interests
Cumulative effect of accounting change for Statement
No. 123(R) adoption, net of applicable income taxes of
€ 0.2 million
Net income
COP
Unit case volume
5,372.2
(3,282.3 )
2,089.9
(1,630.8 )
459.1
(86.3 )
10.3
0.4
(0.1 )
(89.2 )
24.8
(4.8 )
4,633.9
(2,749.9 )
1,884.0
(1,433.3 )
450.7
(56.2 )
3.3
2.5
(3.0 )
(111.8 )
23.9
(10.5 )
15.9
19.4
10.9
13.8
1.9
53.6
212.1
(84.0 )
(96.7 )
(20.2 )
3.8
(54.3 )
(0.8 )
313.4
818.5
1,723.6
—
298.9
761.5
1,539.1
—
4.9
7.5
12.0
The following table shows certain income statement and other financial data for the years ended December 31, 2006 and December 31,
2005, expressed in each case as a percentage of net sales revenue.
Coca-Cola
Hellenic
Bottling
Company S.A.
2006
2005
Net sales revenue
Cost of goods sold
Gross profit
Selling, delivery and administrative expenses
Operating profit
COP
100.0
(61.1 )
38.9
(30.4 )
8.5
15.2
100.0
(59.4 )
40.6
(30.9 )
9.7
16.4
Volume
In 2006, our sales volume increased by 184.5 million unit cases, or 12.0%, compared to 2005. Our emerging markets accounted for
51.2%, our developing markets for 21.1% and our established markets for 27.7% of the increase, respectively.
The major contributor to our growth was our operation in the Russian Federation, representing an 18.5% contribution to the increase in
total sales volume with strong growth in both the CSD category and
74
across all non-CSD categories. This has been achieved through the expansion of our portfolio, our focus on market execution, continuous
roll-out of coolers and investment in manufacturing and distribution infrastructure. Romania, Ukraine and Serbia accounted for 12.0%, 7.1%
and 6.4%, respectively, of our total sales volume increase, driven by our continuous focus on market execution. The remaining emerging
markets contributed 7.2% to our sales volume growth. Overall, our emerging markets benefited from increased political stability and improving
macro-economic conditions in 2006.
The performance of our established markets, representing a 27.7% contribution to the increase in total sales volume, was bolstered by the
first year contribution of Fonti del Vulture S.r.l. and Lanitis Bros Limited. Lanitis Bros Limited and Fonti del Vulture S.r.l. were acquired in
April 2006 and July 2006 and accounted for 14.9% and 6.4%, respectively, of our total sales volume increase in 2006. Excluding the effect of
these acquisitions, our established territories would have made a positive contribution of 6.3% to our total sales volume. In particular, Greece
made a positive contribution of 2.5% which was driven by strong end-outlet execution, product innovation on our Amita juice brand and the
benefit of favorable weather. Italy made a positive contribution of 3.5% reflecting the successful roll-out of our route-to-market initiative
across the country, leading to expanded outlet coverage and increased penetration of our full product range. The remaining established markets
contributed 0.4% to our sales volume growth.
All operations in the developing markets segment reported strong volume growth. In particular, Poland contributed 7.8% to our total sales
volume increase, supported by increased outlet penetration and the introduction of new products and packaging. The remaining developing
countries contributed 13.3% to our sales volume growth.
Net sales revenue
We recognize net sales revenue at the time we deliver products to our customers. You should read “Application of critical accounting
policies—Revenue recognition” for more information on when we recognize revenue. Of the € 738.3 million increase in net sales revenue in
2006 compared with 2005, € 374.5 million, or 50.7% of the increase, was attributable to the emerging markets segment. The contribution of our
operations in the Russian Federation to this result was € 155.8 million. This reflected volume growth of 14.9% as a result of our focus on
market execution through model outlets, continuous roll-out of coolers, strong performance of the new product categories and improved
pricing. In addition, Romania contributed € 76.8 million as a result of package and flavor extensions supported by a new aseptic line. This
reflects the strength of our Romanian market execution combined with the positive development of the country. Nigeria made a positive
contribution of € 30.3 million, an 8.9% increase compared to 2005, primarily aided by price increases introduced in late 2005 in almost all
product categories. The Russian Federation, Romania and Nigeria, all benefited from the strengthening of the local currency against the euro.
Our established countries contributed € 211.7 million, or 28.7% to the total increase, of which € 95.4 million was attributable to the first
year contribution of Lanitis Bros Limited and Fonti del Vulture S.r.l. Excluding the effect of acquisitions, Italy made a positive contribution of
€ 52.1 million, reflecting improved outlet execution and cooler placement despite reduced margins at the retail level. Greece made a positive
contribution of € 44.7 million, primarily due to increased investment in sales force and cold drink equipment placement.
In the developing markets, net sales revenue increased by € 152.1 million over 2005. The increase comprised a € 56.4 million and € 29.8
million contribution from our Polish and Czech operations, respectively, combined with a positive contribution of € 65.9 million from the
remaining developing market countries.
Overall pricing, in terms of net sales revenue per unit case slightly increased to € 3.12 in 2006 compared with € 3.01 in 2005. This largely
reflects the effect of our initiatives to improve channel and
75
package mix and pricing, as well as the strengthening of the local currency against the euro in the Russian Federation, Romania and Nigeria.
This increase was mostly offset by the increased contribution to net sales revenue of the Russian Federation and our water products due to the
fact that prices of such products are generally lower than the weighted average prices for our products in other markets and product lines.
Cost of goods sold
Our cost of goods sold comprises raw materials, inward freight and warehousing, labor and manufacturing costs. Our average cost of
goods sold per unit case marginally increased from € 1.79 in 2005, to € 1.90 in 2006 as a result of significant pressure from higher raw material
costs and restructuring costs partially offset by the success of our supply chain optimization initiatives. Restructuring costs for 2006 amounted
to € 63.3 million compared to € 14.3 million in 2005, of which € 34.3 million, as compared to € 6.8 million in 2005, were in the form of
redundancy charges, accelerated depreciation accounted for € 5.9 million compared to € 6.6 million in 2005, while impairment charges to
production equipment amounted to € 9.4 million compared to € 0.9 million in 2005. In addition, an impairment charge of € 13.7 million on
certain refillable PET and glass bottles and crates was recorded in 2006 while there was no similar charge in 2005. Our restructuring costs
relate primarily to our initiatives to develop a single all-island production facility in Ireland and to rationalize our production capabilities in
Greece and Nigeria.
The cost of concentrate purchased from The Coca-Cola Company, our most important raw material, marginally increased from 20.3% of
our net sales revenue in 2005, to 20.4% in 2006. Depreciation included in our cost of goods sold increased from € 146.3 million in 2005 to €
156.2 million in 2006, primarily as a result of the Lanitis Bros Limited and Fonti del Vulture S.r.l. acquisitions within 2006.
Gross profit
Our gross profit margin decreased from 40.7% in 2005, to 38.9% in 2006, as a result of the increase in the cost of goods sold.
Selling, delivery and administrative expenses
Our selling expenses include the cost of our sales force, advertising expenses and our investment in coolers. Delivery expenses consist
primarily of the cost of our fleet of vehicles, distribution centers and warehouses through which we distribute a significant portion of our
products, as well as fees charged by third party shipping agents. Also included in our selling, delivery and administrative expenses is
depreciation, mainly of coolers, vehicles, distribution centers and warehouses and other non-production related items. The single most
significant component of our selling, delivery and administrative expenses is the cost of our sales force.
In 2006, selling costs (including depreciation) amounted to € 828.4 million or 15.4% of our net sales revenue, as compared to €
720.4 million, or 15.5% in 2005. The ratio of selling costs over net sales revenue marginally decreased, despite the fact that we incurred € 5.2
of restructuring charges in 2006 (nil in 2005). The increase in selling costs was due to the growth in sales and associated selling costs,
particularly in Greece, Nigeria and Russia. The increase in selling costs reflects our focus on strengthening our sales force and improving
marketing efforts.
Delivery costs (including depreciation) increased, in absolute terms, to € 476.9 million in 2006 from € 387.7 million in 2005 reflecting
increased sales volume and higher costs. These higher costs were primarily due to an increase in delivery costs (including depreciation) as a
percentage of our net sales revenue from 8.4% in 2005 to 8.9% in 2006 resulting mainly from increased fuel costs. Restructuring costs of € 8.0
million were incurred in 2006 reflecting redundancy charges of € 6.8 million, € 0.4 million of accelerated depreciation and € 0.8 million of
charges in relation to an onerous lease. These charges were incurred primarily in respect of the consolidation of warehousing facilities in
Greece, Croatia, Austria and the
76
Republic of Ireland. This compared with redundancy charges of € 3.2 million, € 1.1 million of charges in relation to an onerous lease and
accelerated depreciation of € 1.3 million incurred in 2005 in respect of the consolidation of production and warehousing facilities in Austria,
the Republic of Ireland and Northern Ireland.
Administrative expenses (including depreciation) amounted to € 335.1 million in 2006, compared to € 325.2 million in 2005.
Administration costs decreased as a percentage of net sales revenue, from 7.0% in 2005 to 6.2% in 2006, reflecting our efforts to keep
administration costs under control, despite the fact that we incurred restructuring charges included in administrative expenses of € 7.3 million
during 2006.
Other operating items in 2006 consist of the cost of a fine imposed by the Greek Competition Authority of € 9.3 million and a gain on sale
of our site in Dublin of € 18.9 million. For additional information related to the fine imposed by the Greek Competiotion Authority, you should
read Item 8A, “Financial Information—Consolidated Statements and Other Financial Information—Legal proceedings” for additional
information. There were no such other operating items in 2005.
The inclusion of warehousing and distribution costs in selling, delivery and administrative expenses is consistent with the practice of most
bottlers of The Coca-Cola Company. It may not, however, be consistent with other businesses within the retail and distribution sector. As a
result, our gross margins may not be directly comparable to the gross margins of other retailers and distributors. If warehousing and distribution
costs were included in our cost of goods sold, our gross profit for 2006 would be € 1,613.0 million, and our gross margin 30.0% compared to €
1,496.3 million and 32.3%, respectively, for 2005.
Operating profit
Operating profit increased by 1.9% reflecting primarily sales volume growth, offset by operating expenses and cost of goods sold
increases.
Interest expense
Interest expense increased from € 56.2 million for 2005 to € 86.3 million for 2006. This increase reflected the increase of interest rates
during 2006 and the issuance of the € 350.0 million of Floating Rate Notes. The notes were primarily issued in order to fund the acquisition of
Lanitis Bros Limited and the repayment of the remaining € 233.0 million of the outstanding debt under our € 625.0 million 5.25% Eurobond
that matured on June 27, 2006.
Interest income
Interest income increased from € 3.3 million for 2005 to € 10.3 million for 2006 as a result of higher cash balances and higher interest
rates in 2006.
Other income
Other income of € 0.4 million in 2006 is comprised of € 0.1 million of gains on interest rate swaps that were not eligible for hedge
accounting, € 0.2 million of foreign currency exchange gains and € 0.1 million of external dividends received. In 2005, other income of € 2.5
million in 2005 comprised € 2.1 million of gains on sales of financial investments and € 0.3 million of foreign currency exchange gains, as well
as € 0.1 million of external dividends received.
77
Other expenses
Other expenses of € 0.1 million in 2006 consist of losses on interest rate swaps that were not eligible for hedge accounting. Other expense
of € 3.0 million in 2005 consisted of losses on interest rate swap that were not eligible for hedge accounting.
Income tax expense
The effective tax rate decreased from 28.1% in 2005 to 23.3% in 2006. Of this decrease, 1.5% or € 5.7 million was attributed to the
enactment of lower statutory tax rates in a number of our territories, such as Switzerland and Slovenia, which produced a one-off benefit from
the reassessment of significant deferred tax balances in 2006. Tax holiday exemptions and capital investment incentives also increased during
2006. The reduction of our effective tax rate was partially offset by the impact of additional local taxes.
Share of income of equity method investees
The share of income of equity method investees primarily reflected the results of the Multon Z.A.O. group and Fresh & Co, joint ventures,
which are engaged in the production and distribution of juice products in the Russian Federation and Serbia, respectively and of Brewinvest
S.A., a joint venture engaged in the bottling and distribution of beer and non-alcoholic beverages in Bulgaria and the Former Yugoslav
Republic of Macedonia. The share of profit of equity method investees increased from € 23.9 million in 2005 to € 24.8 million in 2006,
primarily due to the improved operating performance of the Multon Z.A.O. group. Fresh & Co contributed a loss of € 2.6 million in 2006.
Minority interests
Minority interests consist primarily of the public shareholders’ 33.6% interest in Nigerian Bottling Company plc, our operating company
in Nigeria, which is listed on the Lagos Stock Exchange. Minority interests decreased from € 10.5 million in 2005 to € 4.8 million in 2006, due
to a decrease in contribution to our net income from our Nigerian operations.
Net income
Net income was € 313.4 million in 2006, as compared to € 298.9 million in 2005. The € 14.5 million increase, as explained above, was
primarily due to the improvement in our operating profit, interest income and reduced tax expense, partially offset by an increase in the interest
expense.
COP
In 2006, COP increased by 7.5% over 2005 for the same reasons underlying the increase in operating profit during the same period.
78
Year ended December 31, 2005 compared to year ended December 31, 2004
The following table shows certain income statement and other financial data, as well as the change in percentage terms, from the year
ended December 31, 2004 to the year ended December 31, 2005.
Coca-Cola Hellenic Bottling Company S.A.
Change
2005
2004
%
(euro in millions except unit case
volume in millions)
Net sales revenue
Cost of goods sold
Gross profit
Selling, delivery and administrative expenses
Operating profit
Interest expense
Interest income
Other income
Other expense
Income tax expense
Share of income of equity method investees
Minority interests
Net income
COP
Unit case volume
4,633.9
(2,749.9 )
1,884.0
(1,433.3 )
450.7
(56.2 )
3.3
2.5
(3.0 )
(111.8 )
23.9
(10.5 )
298.9
761.5
1,539.1
4,201.9
(2,500.9 )
1,701.0
(1,279.2 )
421.8
(66.9 )
6.6
4.2
(8.3 )
(77.4 )
5.2
(13.1 )
272.1
711.2
1,404.0
10.3
10.0
10.8
12.0
6.9
(16.0 )
(50.0 )
(40.5 )
(63.9 )
44.4
359.6
(19.8 )
9.9
7.1
9.6
The following table shows certain income statement and other financial data for the years ended December 31, 2005 and December 31,
2004, expressed in each case as a percentage of net sales revenue.
Coca-Cola
Hellenic
Bottling
Company S.A.
2005
2004
Net sales revenue
Cost of goods sold
Gross profit
Selling, delivery and administrative expenses
Operating profit
COP
100.0
(59.4 )
40.6
(30.9 )
9.7
16.4
100.0
(59.5 )
40.5
(30.4 )
10.1
16.9
Volume
In 2005, our sales volume increased by 135.1 million unit cases, or 9.6%, compared to 2004. This reflects a diverse performance across
our business. Our emerging markets accounted for 72.1% and our developing markets for 27.8% of the increase, respectively, with our
established markets experiencing essentially flat sales volume growth.
The major contributor to our growth was our operation in the Russian Federation, representing a 30.1% contribution to the increase in total
sales volume with strong double-digit volume growth across all product categories. This result has been achieved through the expansion of our
portfolio, our focus on market execution through model outlets and the continuous roll out of coolers. Romania performed very well, with a
13.0% contribution to sales volume, driven by strong market execution and continued strong performance of its water business. Nigeria and
Ukraine accounted for 10.0% and 12.5%, respectively, of our total sales volume increase. The remaining emerging markets contributed 6.6% to
our sales volume growth.
79
The performance of our established markets was flat compared to 2004. Italy achieved volume growth due to gains in category shares.
Switzerland, Austria and Greece were impacted by increased competition from private labels in the fast growing large retailer channel.
All operations in the developing markets segment reported strong volume growth. In particular, Poland contributed 15.3% to our total
sales volume increase, driven by strong execution in our brand packaging and pricing strategy. The remaining developing countries contributed
12.5% to our sales volume growth.
Net sales revenue
The emerging markets segment accounted for € 306.6 million, or 71.0%, of the € 432.0 million increase in net sales revenue in 2005
compared to 2004. The contribution of our operations in the Russian Federation to this result was € 138.6 million. This reflected volume
growth of 21.6% as a result of our focus on market execution through model outlets and continuous roll-out of coolers as well as the expansion
of our outlet coverage and distribution. In addition, Romania contributed € 61.6 million as a result of strong execution in brand, packaging and
pricing strategy and continued strong performance in our Romanian water business. Nigeria made a positive contribution of € 56.1 million, a
19.8% increase compared to 2004, primarily aided by volume growth of 10.4%. The Russian Federation, Romania and Nigeria, all benefited
from the strengthening of the local currency against the euro.
Our established countries contributed € 16.9 million, or 3.9% to the total result. Italy made a positive contribution of € 23.0 million,
reflecting an improvement in pricing, channel mix and new product launches, while Greece made a negative contribution of € 12.5 million,
primarily due to increased competition from private labels in the fast growing large retailer channel.
In the developing markets, net sales revenue increased by € 108.5 million over 2004. The increase comprised a € 57.2 million contribution
from our Polish operation combined with a positive contribution of € 51.3 million from the remaining developing market countries.
Overall pricing, in terms of net sales revenue per unit case remained stable, at € 3.01 in 2005, slightly increased from € 2.99 in 2004. This
largely reflects the effect of our initiatives to improve channel / package mix and pricing, mostly offset by the increased importance of net sales
revenue from our relatively low priced Russian operation and the increased contribution of water in our sales volume, due to the fact that prices
of our water products are generally lower than the weighted average prices for our products in other product lines.
Cost of goods sold
Our average cost of goods sold per unit case marginally increased from € 1.78 in 2004, to € 1.79 in 2005 as a result of significant pressure
from higher raw material costs and restructuring costs, partially offset by the success of our supply chain optimization initiatives. Restructuring
costs for 2005 amounted to € 14.3 million, of which € 6.8 million was in the form of redundancy charges, € 6.6 million was in the form of
accelerated depreciation and € 0.9 million was in the form of impairment charges to production equipment. These costs primarily relate to the
initiatives to develop a single all-island production facility in Ireland. They also reflect the rationalization of the production capabilities
between the Czech Republic and Slovakia. By comparison, no restructuring charges were reflected in cost of goods sold in 2004.
The cost of concentrate purchased from The Coca-Cola Company, our most important raw material, marginally decreased from 20.4% of
our net sales revenue in 2004, to 20.3% in 2005, reflecting an increase in 2005 of net sales revenue relating to our own water brands and juices,
as well as the weakening of the US dollar against the euro and other local currencies. Depreciation included in our cost of goods sold increased
from € 139.9 million in 2004 to € 146.3 million in 2005, primarily as a result of accelerated depreciation in connection with the redundancy
charges described above.
80
Gross profit
Our gross profit margin increased from 40.5% in 2004, to 40.7% in 2005, as a result of volume growth, per unit case revenue growth and
our continued efforts to manage costs and improve production efficiencies. The effect of foreign exchange on gross profit margin was largely
neutral.
Selling, delivery and administrative expenses
Our selling expenses include the cost of our sales force, advertising expenses and our investment in coolers. Delivery expenses consist
primarily of the cost of our fleet of vehicles, distribution centers and warehouses through which we distribute a significant portion of our
products, as well as fees charged by third party shipping agents. Also included in our selling, delivery and administrative expenses is
depreciation, mainly of coolers, vehicles, distribution centers and warehouses and other non-production related items. The single most
significant component of our selling, delivery and administrative expenses is the cost of our sales force.
In 2005, selling costs (including depreciation) amounted to € 720.4 million or 15.5% of our net sales revenue, as compared to €
624.1 million, or 14.9% in 2004. The increase was due to the growth in sales and associated selling costs, particularly in the Russian
Federation, Poland and Italy. The increase in selling costs reflects our focus on strengthening our sales force and improving marketing efforts.
Delivery costs (including depreciation) increased, in absolute terms, to € 387.7 million in 2005 from € 338.9 million in 2004 reflecting
increased sales volume and higher costs. These higher costs, mainly from reflecting increased fuel costs is reflected in the increase in delivery
costs (including depreciation) as a percentage of our net sales revenue from 8.1% in 2004 to 8.4% in 2005. Restructuring costs of € 5.6 million
were incurred in 2005 reflecting redundancy charges of € 3.2 million, € 1.3 million of accelerated depreciation and € 1.1 million of charges in
relation to an onerous lease. These charges were incurred primarily in respect of the consolidation of warehousing facilities in Austria and the
Republic of Ireland. This compared with redundancy charges of € 7.5 million and asset impairment charges of € 3.6 million incurred in 2004 in
respect of the consolidation of production and warehousing facilities in Greece, Austria, the Republic of Ireland and Northern Ireland.
Administrative expenses (including depreciation) amounted to € 325.2 million in 2005, compared to € 316.2 million in 2004.
Administration costs decreased as a percentage of net sales revenue, from 7.5% in 2004 to 7.0% in 2005, reflecting our efforts to keep
administration costs under control.
The inclusion of warehousing and distribution costs in selling, delivery and administrative expenses is consistent with the practice of most
bottlers of The Coca-Cola Company. It may not, however, be consistent with other businesses within the retail and distribution sector. As a
result, our gross margins may not be directly comparable to the gross margins of other retailers and distributors. If warehousing and distribution
costs were included in our cost of goods sold, our gross profit for 2005 would be € 1,496.3 million, and our gross margin 32.3% compared to €
1,362.1 million and 32.4%, respectively, for 2004.
Operating profit
Operating profit increased by 6.9% reflecting primarily sales volume growth, gross profit margin improvement and controlled growth in
our operating expenses.
Interest expense
Interest expense decreased from € 66.9 million for 2004 to € 56.2 million for 2005. This decrease reflected the successful tender offer, on
July 12, 2004, for € 322.0 million of the outstanding debt on the Eurobond which matured in June 2006. In addition, we repaid the € 300.0
million Eurobond in
81
December 2004. This was partially offset by the increased level of debt under our commercial paper program, which was used mainly to fund
our acquisitions.
Interest income
Interest income decreased from € 6.6 million for 2004 to € 3.3 million for 2005 due to lower level of excess funds for investment by our
Nigerian operation.
Other income
Other income of € 2.5 million in 2005 is comprised of € 2.1 million of gains on sales of financial investments and € 0.3 million of foreign
currency exchange gains and € 0.1 million of external dividends received. In 2004, other income of € 4.2 million consisted of € 3.5 million
representing gains on interest rate swaps that were not eligible for hedge accounting and € 0.7 million of foreign currency exchange income
including exchange gains from re-measurement of certain currencies into functional currencies in highly inflationary countries.
Other expenses
Other expenses of € 3.0 million in 2005 consist of losses on interest rate swap that were not eligible for hedge accounting. Other expense
of € 8.3 million in 2004 consisted of exchange losses of € 3.4 million and € 4.9 million of losses on interest rate swaps that were not eligible for
hedge accounting.
Income tax expense
The effective tax rate increased from 21.7% in 2004 to 28.1% in 2005. Of this increase, 3.6% or € 19.2 million was attributed to the
enactment of lower statutory tax rates in a number of our territories, such as Austria and the Czech Republic, which produced a one-off benefit
from the reassessment of significant deferred tax balances in 2004 that was not repeated in 2005. In addition, expenses that are not deductible
for tax purposes, tax holiday exemptions and capital investment incentives were decreased. This decrease was partially offset by the reduced
impact of additional local taxes and income not subject to tax.
Share of income of equity method investees
The share of income of equity method investees primarily reflected the results of the Multon Z.A.O. group and Brewinvest S.A., joint
ventures in which we hold a 50% interest, which are engaged in production and distribution of juice products in the Russian Federation and in
the bottling and distribution of beer and non-alcoholic beverages in Bulgaria and the Former Yugoslav Republic of Macedonia, respectively.
The share of profit of equity method investees increased from € 5.2 million in 2004 to € 23.9 million in 2005, with € 20.1 million of the
increase being attributable to the acquisition of the Multon Z.A.O. group in 2005.
Minority interests
Minority interests decreased from € 13.1 million in 2004 to € 10.5 million in 2005, due to a decrease in contribution to our net income
from our Nigerian operations.
Net income
Net income was € 298.9 million in 2005, as compared to € 272.1 million in 2004. The € 26.8 million increase, as explained above, was
primarily due to the improvement in our operating profit and share of income from equity method investees and reduced interest expense,
partially offset by an increase in the charge for income tax.
82
COP
In 2005, COP increased by 7.1% over 2004 for the same reasons underlying the increase in operating profit during the same period.
Reporting segments
Year ended December 31, 2006 compared to year ended December 31, 2005
The following table provides certain financial information for our three business segments, as well as our corporate center, for each of the
two years ended December 31, 2006, in each case, both in absolute numbers and as a percentage of our group’s total corresponding to each line
item of this table. Internally, our management uses COP as the main measure in order to allocate resources and evaluate the performance of
each of our business segments. There are no material amounts of product sales or transfers between our countries. The elimination of
inter-segment assets reflects loans from our financing subsidiaries to our various operating companies to cover a portion of our operating
companies’ funding requirements.
Year ended
December 31, 2006
(euro in millions
except unit case
volume in millions)
Established countries
Unit case volume
Net sales revenue
Operating profit
Depreciation of property, plant and equipment
Amortization
Impairment
Stock option compensation
COP
Total assets
Developing countries
Unit case volume
Net sales revenue
Operating profit
Depreciation of property, plant and equipment
Amortization
Impairment
Stock option compensation
COP
Total assets
Emerging countries
Unit case volume
Net sales revenue
Operating profit
Depreciation of property, plant and equipment
Impairment
Stock option compensation
COP
Total assets
Corporate / inter-segment receivables
Total assets
Total
Unit case volume
Net sales revenue
Operating profit
Depreciation of property, plant and equipment
Amortization
Impairment
Stock option compensation
COP
Total assets
83
%
Year ended
December 31, 2005
(euro in millions
except unit case
volume in millions)
%
614.6
2,473.5
225.0
125.9
0.6
13.3
1.3
366.1
3,789.4
35.7
46.0
49.0
38.1
85.7
54.3
32.5
44.7
52.0
563.5
2,261.8
251.0
120.1
0.1
—
—
371.2
3,625.6
36.6
48.8
55.7
38.8
50.0
—
—
48.7
53.8
344.8
993.2
71.8
66.1
0.1
4.1
0.7
142.8
1,426.6
20.0
18.5
15.6
20.0
14.3
16.7
17.5
17.5
19.6
305.9
841.1
47.0
68.9
0.1
0.9
—
116.9
1,312.4
19.9
18.2
10.4
22.2
50.0
100.0
—
15.4
19.5
764.2
1,905.5
162.3
138.2
7.1
2.0
309.6
1,987.1
44.3
35.5
35.4
41.9
29.0
50.0
37.8
27.3
669.7
1,531.0
152.7
120.7
—
—
273.4
1,741.9
43.5
33.0
33.9
39.0
—
—
35.9
25.9
84.5
1.1
54.9
0.8
1,723.6
5,372.2
459.1
330.2
0.7
24.5
4.0
818.5
7,287.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
1,539.1
4,633.9
450.7
309.7
0.2
0.9
—
761.5
6,734.8
100.0
100.0
100.0
100.0
100.0
100.0
—
100.0
100.0
Established countries
The following table shows our volume performance for the year ended December 31, 2006 as compared to the year ended December 31,
2005:
2006
Italy
Greece
Austria
The Republic of Ireland and Northern Ireland
Switzerland
Cyprus
2005
Change
(in millions of unit cases)
214.2
149.4
85.2
78.0
75.9
11.9
614.6
180.4
144.9
86.8
75.8
75.6
—
563.5
33.8
4.5
(1.6 )
2.2
0.3
11.9
51.1
Change
%
18.7
3.1
(1.8 )
2.9
0.4
n/a
9.1
Sales volume in our established markets was 614.6 million unit cases in 2006, an increase of 9.1% over 2005, predominantly as a result of
the acquisitions of Lanitis Bros Limited and Fonti Del Vulture S.r.l. In Italy, volume growth of 15.2% was due to the water acquisition and
volume growth of 3.5% due to category share gains of the Italian operation. This strong performance reflects the successful roll-out of our
route-to-market initiative across the country, leading to expanded outlet coverage and increased penetration of our full product range. In
Greece, new product innovation on our Amita juice brand and the benefit of favorable weather resulted in 3.1% volume growth. The Republic
of Ireland and Northern Ireland delivered solid volume growth of 2.9% across all product categories. In Austria and Switzerland, we continued
to invest in building our commercial capabilities and our route-to-market initiatives as we create a solid platform for future sustainable volume
and profit growth in the mid-term.
Our operations in established markets contributed € 366.1 million to our COP for the year 2006, representing a 1.4% decrease compared to
2005. Established countries were particularly affected by the restructuring charges recorded in 2006.
In 2006, we achieved an operating profit of € 225.0 million for the established markets compared to an operating profit of € 251.0 million
in 2005. This is primarily due to the increase in restructuring charges incurred by the established markets. Restructuring costs for 2006
amounted to € 83.9 million, reflecting € 53.0 of redundancy charges, € 6.3 million of accelerated depreciation, impairment charges of property,
plant and equipment of € 9.4 million and impairment of bottles of € 15.1 million. These costs primarily relate to the initiatives to develop a
single all-island production facility in Ireland and the rationalization of warehousing and production facilities in Greece and the Republic of
Ireland. In 2005, restructuring charges amounted to € 19.0 million, reflecting € 10.0 of redundancy charges, € 7.9 million of accelerated
depreciation and € 1.1 million of charges in relation to an onerous lease. These costs primarily relate to the initiatives to develop a single
all-island production facility in Ireland and the rationalization of warehousing facilities in Austria and the Republic of Ireland.
84
Developing countries
The following table shows our volume performance for the year ended December 31, 2006 as compared to the year ended December 31,
2005:
2006
Poland
Hungary
Czech Republic
Croatia
Baltic countries
Slovakia
Slovenia
2005
Change
(in millions of unit cases)
133.0
85.0
52.2
26.6
24.1
18.9
5.0
344.8
118.7
74.7
45.3
25.3
20.1
17.4
4.4
305.9
Change
%
14.3
10.3
6.9
1.3
4.0
1.5
0.6
38.9
12.0
13.8
15.2
5.1
19.9
8.6
13.6
12.7
Sales volume in our developing markets was 344.8 million unit cases in 2006, an increase of 12.7% over 2005. Poland was the key
performer in terms of sales volume growth with an increase of 12.0%. Hungary, the Czech Republic and the Baltic countries experienced sales
volume increases of 13.8%, 15.2% and 19.9%, respectively. Our ongoing focus on marketplace execution, expanded cooler placement and
brand building activities all contributed to category share gains over the year across most product categories and countries. During the year, we
launched Nestea Green Tea across most countries and introduced our Burn energy drink in Poland in a new aluminum package which has
strong consumer appeal. The water category also grew strongly benefiting from strong marketing support, leading to growth across both the
immediate and future consumption channels.
Our operations in developing markets contributed € 142.8 million to our COP in 2006, 22.2% above 2005. COP improvement was strong
in this segment, driven by strong volume growth, pricing initiatives and product mix benefits resulting from strong growth of our high value
core brands. Our key markets of Poland, Hungary and the Czech Republic were the most significant contributors to profit growth over the year.
In 2006, we achieved an operating profit of € 71.8 million compared to an operating profit of € 47.0 million in 2005.
Emerging countries
The following table shows our volume performance for the year ended December 31, 2006 as compared to the year ended December 31,
2005:
2006
Russian Federation
Romania
Nigeria
Ukraine
Bulgaria
Serbia and Montenegro
Belarus
Bosnia and Herzegovina
Armenia
Moldova
2005
Change
(in millions of unit cases)
263.6
145.6
142.2
74.0
51.3
50.7
15.9
13.9
4.7
2.3
764.2
85
229.4
123.5
143.6
60.9
41.3
39.0
13.5
12.5
4.2
1.8
669.7
34.2
22.1
(1.4 )
13.1
10.0
11.7
2.4
1.4
0.5
0.5
94.5
Change
%
14.9
17.9
(1.0 )
21.5
24.2
30.0
17.8
11.2
11.9
27.8
14.1
Sales volume in our emerging markets was 764.2 million unit cases in 2006, 14.1% above 2005. The Russian Federation achieved strong
growth, benefiting from our continued cold drink equipment placements and new product launches. Serbia and Montenegro experienced sales
volume increase of 30.0% reflecting our continuous investment in sales force and the political and economic stability. In Romania, Bulgaria
and Ukraine, our continued focus on quality market execution resulted in sales volume increases of 17.9%, 24.2% and 21.5%, respectively,
across all product categories.
Our operations in emerging markets contributed € 309.6 million to our COP in 2006, 13.2% above 2005. The Russian Federation and
Romania delivered strong COP growth during 2006, mainly driven by strong sales volume growth across almost all categories, as well as
favorable pricing and mix.
In 2006, we achieved an operating profit of € 162.3 million compared to an operating profit of € 152.7 million in 2005.
86
Year ended December 31, 2005 compared to year ended December 31, 2004
The following table provides certain financial information for our three business segments, as well as our corporate center, for each of the
two years ended December 31, 2005, in each case, both in absolute numbers and as a percentage of our group’s total corresponding to each line
item of this table. Internally, our management uses COP as the main measure in order to allocate resources and evaluate the performance of
each of our business segments. There are no material amounts of product sales or transfers between our countries. The elimination of
inter-segment assets reflects loans from our financing subsidiaries to our various operating companies to cover a portion of our operating
companies’ funding requirements.
Year ended
December 31, 2005
(euro in millions
except unit case
volume in millions)
Established countries
Unit case volume
Net sales revenue
Operating profit
Depreciation of property, plant and equipment
Amortization
Impairment of property, plant and equipment
COP
Total assets
Developing countries
Unit case volume
Net sales revenue
Operating profit
Depreciation of property, plant and equipment
Amortization
Impairment of property, plant and equipment
COP
Total assets
Emerging countries
Unit case volume
Net sales revenue
Operating profit
Depreciation of property, plant and equipment
COP
Total assets
Corporate / inter-segment receivables
Total assets
Total
Unit case volume
Net sales revenue
Operating profit
Depreciation of property, plant and equipment
Amortization
Impairment of property, plant and equipment
COP
Total assets
%
Year ended
December 31, 2004
(euro in millions
except unit case
volume in millions)
%
563.5
2,261.8
251.0
120.1
0.1
—
371.2
3,625.6
36.6
48.8
55.7
38.8
50.0
—
48.7
53.8
563.5
2,244.9
245.8
119.1
—
3.6
368.5
3,538.6
40.1
53.4
58.3
41.7
—
100.0
51.8
59.2
305.9
841.1
47.0
68.9
0.1
0.9
116.9
1,312.4
19.9
18.2
10.4
22.2
50.0
100.0
15.4
19.5
268.3
732.7
40.6
64.4
—
—
105.0
1,260.2
19.1
17.4
9.6
22.5
—
—
14.8
21.1
669.7
1,531.0
152.7
120.7
273.4
1,741.9
43.5
33.0
33.9
39.0
35.9
25.9
572.2
1,224.3
135.4
102.3
237.7
1,187.9
40.8
29.2
32.1
35.8
33.4
19.8
54.9
0.8
1,539.1
4,633.9
450.7
309.7
0.2
0.9
761.5
6,734.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
87
(8.1 )
1,404.0
4,201.9
421.8
285.8
—
3.6
711.2
5,978.6
(0.1 )
100.0
100.0
100.0
100.0
—
100.0
100.0
100.0
Established countries
The following table shows our volume performance for the year ended December 31, 2005 as compared to the year ended December 31,
2004:
2005
Italy
Greece
Austria
The Republic of Ireland and Northern Ireland
Switzerland
2004
Change
(in millions of unit cases)
180.4
144.9
86.8
75.8
75.6
563.5
178.0
145.8
89.7
72.9
77.1
563.5
2.4
(0.9 )
(2.9 )
2.9
(1.5 )
0.0
Change
%
1.3
(0.6 )
(3.2 )
4.1
(1.9 )
0.0
Sales volume in our established markets was 563.5 million unit cases in 2005, flat versus 2004. In Italy, volume growth of 1.3% was
primarily due to market share gains. In the Republic of Ireland and Northern Ireland, we increased the sales of water and juices by introducing
new packaging and increasing expenditure on marketing. Switzerland, Austria and Greece were particularly impacted by increased competition
from private labels in the fast growing large retailer segment.
Our operations in established markets contributed € 371.2 million to our COP for the year 2005, representing a 0.7% increase compared to
2004. Italy was the key driver of this segment’s profitability, delivering strong COP growth. This was due to the increasing strength of our
execution in the immediate consumption channels, combined with our focus on reducing operating expenses and our continuous efforts to
optimize pricing.
In 2005, we achieved an operating profit of € 251.0 million for the established markets compared to an operating profit of € 245.8 million
in 2004. This is despite the increase in restructuring charges incurred by the established markets. Restructuring costs for 2005 amounted to €
19.0 million, reflecting € 10.0 of redundancy charges, € 7.9 million of accelerated depreciation and € 1.1 million of charges in relation to an
onerous lease. These costs primarily relate to the initiatives to develop a single all-island production facility in Ireland and the rationalization of
warehousing facilities in Austria and the Republic of Ireland. In 2004, redundancy charges of € 7.5 million and asset impairment charges of €
3.6 million were incurred in relation to the consolidation of production and warehousing facilities in Greece, Austria, the Republic of Ireland
and Northern Ireland.
Developing countries
The following table shows our volume performance for the year ended December 31, 2005 as compared to the year ended December 31,
2004:
2005
Poland
Hungary
Czech Republic
Croatia
Baltic countries
Slovakia
Slovenia
2004
Change
(in millions of unit cases)
118.7
74.7
45.3
25.3
20.1
17.4
4.4
305.9
88
98.0
69.2
42.3
23.5
16.9
14.4
4.0
268.3
20.7
5.5
3.0
1.8
3.2
3.0
0.4
37.6
Change
%
21.1
7.9
7.1
7.7
18.9
20.8
10.0
14.0
Sales volume in our developing markets was 305.9 million unit cases in 2005, an increase of 14.0% over 2004. Poland was the key
performer, achieving volume growth of 21.1%, driven by strong execution of our packaging, mix and pricing strategy and the performance of
our Multivita water. Hungary and Czech Republic experienced sales volume increase of 7.9% and 7.1%, respectively.
Our operations in developing markets contributed € 116.9 million to our COP in 2005, 11.3% above 2004. COP improvement was strong
in this segment, driven by higher volume, improved gross profit margins and favorable currency impact, mainly in Poland, Hungary and Czech
Republic.
In 2005, we achieved an operating profit of € 47.0 million compared to an operating profit of € 40.6 million in 2004.
Emerging countries
The following table shows our volume performance for the year ended December 31, 2005 as compared to the year ended December 31,
2004:
2005
Russian Federation
Nigeria
Romania
Ukraine
Bulgaria
Serbia and Montenegro
Belarus
Bosnia and Herzegovina
Armenia
Moldova
2004
Change
(in millions of unit cases)
229.4
143.6
123.5
60.9
41.3
39.0
13.5
12.5
4.2
1.8
669.7
188.7
130.1
106.0
44.0
35.3
38.8
10.7
13.1
4.1
1.4
572.2
40.7
13.5
17.5
16.9
6.0
0.2
2.8
(0.6 )
0.1
0.4
97.5
Change
%
21.6
10.4
16.5
38.4
17.0
0.5
26.2
(4.6 )
2.4
28.6
17.0
Sales volume in our emerging markets was 669.7 million unit cases in 2005, 17.0% above 2004. The Russian Federation achieved
double-digit growth, benefiting from our continued cold drink equipment placements and new product launches. Romania performed very well,
driven by strong market execution and continued strong performance of its water business. Nigeria achieved 10.4% growth, with strong
performance in all product categories. Ukraine experienced 38.4% growth driven by positive performance in CSDs, energy drinks and water,
under the Bonaqua trademark.
Our operations in emerging markets contributed € 269.5 million to our COP in 2005, 14.5% above 2004. The Russian Federation and
Romania delivered strong COP growth during 2005, mainly driven by sales volume growth, pricing and mix improvements and continued
investment in cold drink equipment.
In 2005, we achieved an operating profit of € 152.7 million compared to an operating profit of € 135.4 million in 2004.
B. Liquidity and capital resources
Our sources of capital include, but are not limited to, cash flows from operations, the issuance of debt, bank borrowings and the issuance
of equity securities. We believe that available short-term and long-term capital resources are sufficient to fund our financial commitments and
operating needs.
89
Cash flows provided by operating activities
Our cash flows provided by operating activities from the year ended December 31, 2004 to the year ended December 31, 2006 are as
follows:
2006
Net income due to operating activities plus adjustments to reconcile net
income to net cash provided by operating activities
Changes in operating assets and liabilities, net of effect of acquisitions
Net cash provided by operating activities
2005
2004
(euro in millions)
652.9
40.2
693.1
594.3
(49.1 )
545.2
527.4
(37.7 )
489.7
Our primary source of cash flow is funds generated from operations. In 2006, the increase in net cash provided by operating activities
amounted to an additional € 147.9 million over 2005. This was not only due to solid business operating results, but also due to a favorable
change in the working capital position. In 2005, the increase in net cash provided by operating activities amounted to € 55.5 million as
compared to 2004. This mainly reflects the solid business operating results, partially offset by increased working capital needs.
Cash flows used in investing activities
Our cash flows used in investing activities from the year ended December 31, 2004 to the year ended December 31, 2006 are as follows:
2006
Purchases of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Cash payments for acquisitions, net of cash acquired
Proceeds from sale of trademarks
Return of investment of equity method investees
Proceeds from sale of investments
Purchase of investments
Net cash used in investing activities
2005
(euro in millions)
(560.0 )
37.7
(78.1 )
—
5.6
10.0
(1.7 )
(586.5 )
(427.5 )
27.4
(196.0 )
9.0
—
5.1
(3.1 )
(585.1 )
2004
(360.8 )
21.0
(3.1 )
8.6
—
6.7
(0.5 )
(328.1 )
Purchases of property, plant and equipment accounted for our most significant cash outlay for investing activities in each of the three years
ended December 31, 2006. We focus our capital investment on the most profitable areas of the business, such as cold drink equipment and
immediate consumption packaging. We continue to redeploy plant and equipment within our group where possible, minimizing the cash
outflows and improving our returns on existing assets.
Set forth below are our purchases of property, plant and equipment in our three business segments for the period from the year ended
December 31, 2004 to the year ended December 31, 2006. We have also set forth these capital expenditures as a percentage of our total capital
expenditure in the relevant period.
2006
(euro in
millions)
Business segment
Established countries
Developing countries
Emerging countries
Total purchases of property, plant and
equipment
%
2005
(euro in
millions)
%
2004
(euro in
millions)
%
183.5
94.1
282.4
32.8
16.8
50.4
107.9
77.4
242.2
25.2
18.1
56.7
108.1
74.9
177.8
30.0
20.7
49.3
560.0
100.0
427.5
100.0
360.8
100.0
90
Purchases of property, plant and equipment for 2006 represented a € 132.5 million, or 31.0%, increase over 2005. This increase was
primarily due to cold drink equipment placements which continue to support our strategy of building brand equity and driving availability of
our more profitable packages through the immediate consumption channel. Additionally, we continue to strategically invest in production
equipment and capacity in the fast growing single-serve packages, as well as in new production technologies for non-CSDs. The increase in
capital expenditure by € 66.7 million in 2005, compared to 2004 reflects our continuous investments in coolers and production equipment.
Cash payments for acquisitions of € 78.1 million in 2006 relate to the acquisition of Lanitis Bros Limited, Fonti del Vulture S.r.l. and
Yoppi Kft. Cash payments for acquisitions of € 196.0 million in 2005 relate to the acquisition of the Multon Z.A.O. group, Vlasinka d.o.o.,
Bankya Mineral Waters Bottling Company EOOD and Vendit Limited. Cash payment for acquisitions of € 3.1 million in 2004 related to
Gotalka d.o.o. and the acquisition of a number of minority interests in our subsidiaries. In 2005, we received € 6.4 million from The Coca-Cola
Company in respect of the sale of the Bankia trademark and a further € 2.6 million of proceeds regarding the sale of Olimpija trademarks sold
in 2004. In 2004, we received € 8.6 million from The Coca-Cola Company in respect of the sale of the Gotalka trademarks. For additional
information, see “Major recent transactions” above.
Cash flows provided by (used in) financing activities
Our cash flows provided by (used in) financing activities from the year ended December 31, 2004 to the year ended December 31, 2006
are as follows:
2006
Proceeds from issuance of debt
Repayments of debt
Support payments from The Coca-Cola Company for cold drink equipment
placements
Payments on capital lease obligations
Return of capital to shareholders
Proceeds from issue of shares
Dividends paid
Net cash provided by (used in) financing activities
2005
(euro in millions)
2004
696.8
(662.5 )
586.9
(373.4 )
725.9
(854.5 )
54.8
(20.4 )
—
22.5
(76.8 )
14.4
16.7
(16.6 )
—
36.6
(75.5 )
174.7
6.4
(11.7 )
(0.4 )
19.2
(52.5 )
(167.6 )
Issuances and repayments of debt include both short-term and long-term financing activities.
Issuances and repayment of debt in 2006 were primarily under the € 2 billion Euro Medium Term Note (EMTN) Program of the
Company. The net issuance of debt for the year was € 34.3 million. The additional funding was required in order to fund the acquisition of
Lanitis Bros Limited, Fonti del Vulture S.r.l and Yoppi Kft.
Issuances and repayment of debt in 2005 were primarily under the commercial paper program. The net issuance of debt for the year was €
213.5 million. The additional funding was required in order to fund the acquisition of the Multon Z.A.O. group, Vlasinka d.o.o., Bankya
Mineral Waters Bottling Company EOOD and Vendit Limited.
91
On March 24, 2006, the Company completed, through its wholly owned subsidiary Coca-Cola HBC Finance plc, the issue of a € 350.0
million 3-year Euro-denominated floating rate bond. The transaction was executed under the Company’s EMTN program. Proceeds from the
bond offering were used to fund the repayment of the remaining € 233.0 million outstanding debt under the Company’s € 625.0 million 5.25%
Eurobond, which matured on June 27, 2006, as well as to provide short-term liquidity at the completion of certain acquisitions made in the
year. Contractual interest repricing dates for the bond are the 24th day of March, June, September and December of each year until maturity.
On July 12, 2004, we announced a successful tender offer for € 322.0 million of the outstanding debt on the Eurobond which matured in
June 2006. On the same date, we successfully completed, through our wholly-owned subsidiary Coca-Cola HBC Finance B.V., a €
500.0 million bond issue. The issue was completed off our Euro Medium Term Note Program and has a term of seven years. Proceeds from the
new issue were used to finance the tender offer and to partially fund our repayment of the € 300.0 million Eurobond in December 2004.
In 2006, we received proceeds from the issue of shares of € 22.5 million. This followed the resolution by our board of directors on
December 20, 2006, to increase the share capital of the company by 1,375,914 ordinary shares, following the exercise of stock options by
option holders pursuant to our company’s stock option plan. This was recorded as € 0.7 million to issued capital and € 21.8 million to
additional paid-in capital. For further details on our employee stock option plan, refer to Item 6B, “Directors, Senior Management and
Employees—Compensation—Stock Option Plan”.
In 2005, we received proceeds from the issue of shares of € 36.6 million. This followed the resolution by our board of directors on
December 21, 2005, to increase the share capital of the company by 2,431,873 ordinary shares, following the exercise of stock options by
option holders pursuant to our company’s stock option plan. This was recorded as € 1.2 million to issued capital and € 35.4 million to
additional paid-in capital.
We have paid seventeen consecutive annual dividends to the shareholders of our company, starting in 1991. We paid € 72.2 million, €
66.7 million and € 47.4 million in the years ended December 31, 2006, 2005 and 2004, respectively. You should read Item 3A, “Key
Information—Selected Financial Data—Dividend and dividend policy” for additional information. We also make dividend payments to the
minority interest shareholders in our subsidiaries.
Working capital
Our working capital position for the three years ended December 31, was as follows:
2006
Current assets
Current liabilities
Working capital
Add back: deposit liabilities on returnable containers
Working capital, excluding deposit liabilities
2005
(euro in millions)
1,617.0
(1,397.7 )
219.3
100.7
320.0
1,357.3
(1,528.0 )
(170.7 )
137.1
(33.6 )
2004
1,080.7
(960.4 )
120.3
142.0
262.3
Our working capital as at December 31, 2006 increased by € 353.6 million over the working capital balance as at December 31, 2005. The
main reason for this was the decrease in the net balance of current debt, for the reasons discussed above in “Liquidity and capital
resources—Cash flows provided by (used in) financing activities”. The working capital decrease of € 295.9 million from December 31, 2004 to
December 31, 2005 was primarily due to the increase in the level of current debt held.
92
We believe that a working capital deficit is not unusual for us and should not be considered to indicate a lack of liquidity. Excluding our
deposit liabilities for returnable containers held by customers, which amounted to € 142.0 million at December 31, 2004, we would have had a
positive working capital of € 262.3 million at December 31, 2004. As at December 31, 2005, we had a negative working capital of €
33.6 million excluding deposit liabilities for returnable containers of € 137.1 million. Likewise, as at December 31, 2006, we had a positive
working capital of € 320.0 million excluding deposit liabilities for returnable containers of € 100.7 million. Although our deposit liabilities are
classified as a current liability, our returnable containers, including those held by customers on deposit, are classified within property, plant and
equipment. We believe that presenting our working capital excluding deposit liabilities for returnable containers is useful to investors because it
allows them to compare our working capital information with that of other bottlers that do not use returnable packaging.
Although we seek to finance our capital expenditures from operating cash flows, we may also use short-term borrowing facilities. As a
result, we may operate with working capital deficits until these borrowings and expenditures are funded with either further operating cash flows
or long-term borrowings. We review our cash requirements and financial resources on a monthly basis for a rolling 12-month period. We
continue to maintain adequate current assets to satisfy current liabilities when they are due and have sufficient liquidity and financial resources
to manage our day-to-day cash requirements. Taking into consideration our established borrowing facilities, operating cash flows and access to
capital markets, we believe that we have sufficient liquidity and working capital to meet our present and budgeted requirements.
Holding company structure
The amount of dividends payable by our operating subsidiaries to us is subject to, among other restrictions, general limitations imposed by
the corporate laws and exchange control restrictions of the respective jurisdictions where those subsidiaries are organized and operate.
Dividends paid to us by certain of our subsidiaries are also subject to withholding taxes. In the context of our taxation management policy, our
subsidiaries do not remit dividends to us in cases where it would be disadvantageous to do so from a tax point of view. We seek to satisfy the
operating cash flow requirements of our operations in each country with cash generated from that country. Acquisitions and significant capital
investments are financed centrally, with funds provided to our operating subsidiaries in the form of equity or inter-company loans, depending
on a variety of considerations including tax. Where withholding taxes on dividends are potentially significant, we are able to extract cash from
operating subsidiaries in other ways, such as through capital reduction techniques and loans from operating subsidiaries to holding companies.
Consequently, we have not incurred material withholding taxes on remittance of dividends or cash from our operating subsidiaries. We may
however be substantially dependent in the future on sources of financing other than dividends, including external sources, in order to satisfy our
cash requirements at the holding company level.
Borrowings and funding sources
Funding policies
Our general policy is to retain a minimum amount of liquidity reserves in the form of cash and cash equivalents (highly liquid investments
with maturities of less than three months) on our balance sheet while maintaining the balance of our liquidity reserves in the form of
committed, unused credit facilities and credit lines, to ensure that we have cost-effective access to sufficient financial resources to meet our
short- and medium-term funding requirements. These include the day-to-day funding of our operations as well as the financing of our capital
expenditure program. In order to mitigate the possibility of liquidity constraints, we endeavor to maintain a minimum of € 500.0 million of
financial headroom. Financial
93
headroom refers to the excess committed finance available, after considering cash flows from operating activities, dividends, interest expense,
tax expense, acquisitions and capital expenditure requirements.
Cash and cash equivalents
Our cash and cash equivalent balances for the three years ended December 31, were as follows:
2006
(euro in
millions)
Euro or euro equivalent
Cyprus pounds
Nigerian naira
Romanian leu
Swiss franc
Russian rubble
Croatian kuna
Serbian dinnar
UK sterling
Bosnia and Herzegovina convertible mark
US Dollar
Belarusian rouble
Polish zloty
Other
239.4
12.3
7.6
7.2
3.6
3.2
3.2
2.4
2.0
1.7
1.4
1.0
0.6
3.1
288.7
%
82.9
4.3
2.6
2.5
1.3
1.1
1.1
0.8
0.7
0.6
0.5
0.3
0.2
1.1
100.0
2005
(euro in
millions)
%
82.2
—
7.1
0.5
1.7
2.8
0.4
—
60.9
—
1.2
0.4
11.1
0.2
168.5
2004
(euro in
millions)
48.8
—
4.2
0.3
1.0
1.7
0.2
—
36.2
—
0.7
0.2
6.6
0.1
100.0
13.9
—
3.9
—
2.2
1.6
0.6
0.5
3.5
—
2.0
0.3
1.3
1.5
31.3
%
44.4
—
12.4
—
7.0
5.1
1.9
1.6
11.2
—
6.4
1.0
4.2
4.8
100.0
Our cash and cash equivalents balance at December 31, 2006 was € 288.7 million, representing an increase of € 120.2 million from the
balance at December 31, 2005 and an increase of € 257.4 million from the balance as at December 31, 2004. The increase of the cash and cash
equivalents balance between 2004 and 2006 was principally the result of our strategy to build cash balances to pre-fund debt maturities as well
as expected acquisition activity.
While there are restrictive controls on the movement of funds out of certain of the countries in which we operate, these restrictions have
not had a material impact on our liquidity, as the amounts of cash and cash equivalents held in such countries, particularly Nigeria, are
generally retained for capital expenditure.
Debt—general
Our debt as at December 31, 2006, 2005 and 2004 is as follows:
2006
Short-term borrowings
Current portion of long-term debt
Current portion of capital lease commitments
Long-term debt, less current portion
Capital lease obligations, less current portion
Total long-term debt, including capital leases
Gross debt, including capital lease obligations
Cash and cash equivalents
Net debt
2005
(euro in millions)
269.3
—
33.9
1,516.4
82.2
1,632.5
1,901.8
(288.7 )
1,613.1
94
310.0
243.9
19.8
1,278.4
50.3
1,592.4
1,902.4
(168.5 )
1,733.9
2004
76.0
—
15.0
1,424.6
32.5
1,472.1
1,548.1
(31.3 )
1,516.8
As at December 31, 2006, 61.6% of our gross debt was denominated in euro and 35.4% in US dollars. This compared to 55.7% in euro
and 40.7% in US dollars, as at December 31, 2005, and 53.8% in euro and 43.3% in US dollars, as at December 31, 2004.
We manage our debt in two distinct portfolios: short-term debt and long-term debt. The short-term debt portfolio includes all debt
repayment and working capital requirements within 12 months, and the long-term portfolio contains all other debt, such as Eurobonds, with
maturities longer than 12 months. We launched our commercial paper program during 2002 to fund our short-term debt portfolio needs. The
debt outstanding under our commercial paper program is backstopped using a syndicated loan facility. We service our short-term debt portfolio
principally through operating cash flows.
We mainly manage our interest rate costs by using interest rate risk management products. These products consist of fixed to floating rate
interest rate swaps, and interest rate cap options. As at December 31, 2006, 69% of gross debt (including leases) had been converted to a
floating rate obligation through the use of interest rate swaps. As at December 31, 2005 and 2004, 80% and 92%, respectively, of gross debt
(including leases) had been converted to a floating rate obligation through the use of interest rate swaps.
During 2004, we purchased interest rate cap options on floating rate obligations. The decision to purchase options as compared to using
swaps was taken in order to continue benefiting from the lower floating interest rate environment, while having in place protection against
adverse interest rate movements. The options are marked to market with gains and losses recognized in net income. The option premiums are
expensed to the statement of income through the option revaluation process. As at December 31, 2006 the options had a maturity of 18 months.
Commercial paper program and committed credit facilities
In March 2002, the Company established a € 1.0 billion global commercial paper program with various financial institutions to further
diversify its short term funding sources. The program consists of a multi-currency Euro-commercial paper facility and a US dollar denominated
US commercial paper facility. The commercial paper notes may be issued either as non-interest bearing notes sold at a discount or as interest
bearing notes at a fixed or at a floating rate, or by reference to an index or formula. All commercial paper issued under the program must be
repaid within 1 to 365 days. The outstanding amount under the commercial paper program at December 31, 2006 was € 184.0 million and €
210.0 million in December 31, 2005.
As at June 15, 2007, we had an outstanding balance of € 197.0 million under the commercial paper program. The weighted average
interest rate that applies to this outstanding balance is 4.0%.
As of December 31, 2004, Coca-Cola Hellenic Bottling Company S.A. had a € 900.0 million syndicated loan facility, of which the first
tranche of € 450.0 million matured on May 14, 2005. During August 2005, Coca-Cola Hellenic Bottling Company S.A. replaced its remaining
€ 450.0 million syndicated loan facility with a € 600.0 million facility issued through various financial institutions expiring on August 1, 2010.
This facility will be used as a backstop to the € 1.0 billion global commercial paper program and carries a floating interest rate over EURIBOR
and LIBOR. The facility allows us to draw down, on one to five days notice, amounts in tranches and repay them in periods ranging from one
to six months, or any other period agreed between the financial institutions and the Company. In the aggregate, the Company has a maximum
available borrowing under the global commercial paper program and the backstop facility of € 1.0 billion. No amounts have been drawn under
the syndicated loan facility.
95
US debt-shelf program
In December 2003, we registered with the SEC a debt-shelf program amounting to $2.0 billion guaranteed notes that we may issue from
time to time through our wholly-owned Dutch finance subsidiary, Coca-Cola HBC Finance B.V. As at June 15, 2007, no amounts had been
drawn under the debt-shelf program.
Euro medium-term note program
We have established a € 2.0 billion euro medium-term note program. The purpose of this program is to facilitate our access to the
European debt capital markets. Notes issued under the euro medium-term note program are subject to standard market covenants and events of
default, including a negative pledge clause and a cross-acceleration clause for failure to repay indebtedness greater than € 10.0 million.
The program has been used five times since it was launched in 2001, raising a total of € 1,975 million. The first Eurobond issue occurred
in June 2001 at an interest rate of 5.25% and raised € 625.0 million. The Eurobond had a maturity of June 2006, and has now been repaid in
full. Over the course of 2003, we purchased and cancelled € 70.0 million of the outstanding 5.25% Eurobond that matured in June 2006. On
July 12, 2004, the Company finalized a successful tender offer for a further € 322.0 million of the outstanding debt on the 5.25% Eurobond
which matured in June 2006. On the same date, the Company successfully completed, through its wholly owned subsidiary Coca-Cola HBC
Finance B.V., a € 500.0 million bond issue at an interest rate of 4.375%. The issue has a term of seven years. Proceeds from that issue were
used to finance the tender offer and to partially fund the repayment of the € 300.0 million 4.0% Eurobond in December 2004. The remaining €
233.0 million outstanding on the 5.25% Eurobond was repaid in June 2006. The repayment of this Eurobond was pre-funded in March 2006,
with the issue of € 350.0 million of floating rate notes, maturing in March 2009. Part of the proceeds of the € 350.0 million Eurobond were
used to fund the acquisition of Lanitis Bros Public Limited. This issuance followed the renewal in March 2006 of our euro medium-term note
program.
At December 31, 2006, there was € 850.0 million of Eurobonds outstanding under the euro medium-term note program, with details as
follows:
Issue Date
July 2004
March 2006
Amount
Interest
€ 500.0 million
€ 350.0 million
Fixed 4.375%
Floating (EURIBOR + 0.2%)
Term
7 years
3 years
Notes issued in the US market
On September 17, 2003, Coca-Cola Hellenic Bottling Company S.A. successfully completed, through its wholly owned finance subsidiary
Coca-Cola HBC Finance B.V., a US$900.0 million ( € 681.9 million at December 31, 2006 exchange rates) global offering of privately placed
notes with registration rights. The first tranche consisted of an aggregate principal amount of US$500.0 million ( € 378.8 million) due in 2013
and the second tranche consisted of an aggregate principal amount of US$400.0 million ( € 303.1 million) due in 2015. The net proceeds of the
offering were used to refinance certain outstanding debt, including the repayment of € 200.0 million bonds which matured on December 17,
2003, the leveraged re-capitalization of the Group and the acquisition of Römerquelle GmbH. In December 2003, an exchange offer was made
by Coca-Cola Hellenic Bottling Company S.A. in order to affect the exchange of the privately placed notes for similar notes registered with the
US Securities and Exchange Commission (SEC). Acceptances under the offer, which was finalized in February 2004, amounted to US$898.1
million. The notes are fully, unconditionally and irrevocably guaranteed by Coca-Cola Hellenic Bottling Company S.A. These notes are not
subject to financial covenants.
96
The decision to use the US debt capital markets instead of the Eurobond market was driven by favorable pricing available in the US debt
capital markets as compared to the Eurobond market and the desire to further diversify our funding sources.
Credit rating
Our credit rating by Standard and Poor’s is “A (stable)” and by Moody’s is “A3 (stable)” for long-term obligations and A-1 and P-2,
respectively, for short-term obligations. Our credit ratings may be changed, suspended or withdrawn at any time and are not a recommendation
to buy, hold or sell any of our securities.
Market risk
Treasury policies and objectives
We face financial risks arising from adverse movements in currency exchange rates, interest rates and commodity prices. Our board of
directors has approved our treasury policy, which provides the control framework for all treasury and treasury-related transactions. Our treasury
department is responsible for managing the financial risks of our group in a manner consistent with the policies approved by our board of
directors. These policies include:

Hedging transactional exposures to reduce risk and limit volatility. Derivative financial instruments may be used provided they
qualify as hedging activities under our hedging policies.

Ensuring that all transactions are executed in the most cost-efficient manner, are controlled effectively and are undertaken with
approved counter-parties.
Hedging of financial risks includes activities that reduce risk or convert one type of risk to another. The use of financial instruments is
restricted to circumstances where they do not subject us to increased market risk. To qualify as hedging, an activity should be expected to
produce a measurable offset to the risk relating to an asset, liability or committed or forecast transaction. In the context of our overall treasury
policy, and in line with board-approved operating parameters, specific objectives apply to the management of financial risks. These objectives
are disclosed under their respective headings below. We use derivative financial instruments to manage actual interest, currency and
commodity risks arising in the normal course of business, some of which are and will be accounted for as effective hedges whereas others are
not and cannot be accounted for as hedges. We do not, as a matter of policy, enter into speculative financial transactions.
The board of directors has delegated authority to execute transactions, including hedging activities with approved financial institutions, to
the chief financial officer and the director of treasury. Under this authority, only specified permitted financial instruments, including
derivatives, may be used for specific permitted transactions.
Interest rate risk
Our interest rate exposure generally relates to our debt obligations. We manage our interest rate costs using a combination of fixed and
floating rate debt, interest rate swap and option cap agreements. Interest rate swap agreements outstanding at June 15, 2007 have maturities
ranging from July 2011 to September 2015. The agreements involve the receipt of fixed rate amounts in exchange for floating rate interest
payments over the life of the agreements without an exchange of the underlying principal amount.
We have entered into interest rate swap agreements to convert our € 233.0 million (originally € 625.0 million) and € 500.0 million fixed
rate debt that we raised under our € 2.0 billion euro medium-term note program to a floating rate based on EURIBOR. The notional amounts of
these swaps at December 31, 2006 were € 500.0 million, as the interest rate swap of € 233.0 million matured in June 2006.
97
During 2005, we recognized in other expense a loss of € 3.0 million in relation to interest rate swaps that were not eligible for hedge
accounting. By comparison, over the course of 2004, we recognized in other expense a net loss of € 1.4 million in relation to interest rate swaps
that were not eligible for hedge accounting. This amount was comprised of a € 3.5 million gain included in other income, in respect of interest
rate swaps that do not qualify for hedge accounting and a € 4.9 million loss included in other expense, from the effect of the undesignation of a
portion of our interest rate swaps.
During 2004 and 2005, we used interest rate and cross currency swaps to convert our $500.0 million and $400.0 million notes issued in
the US market from fixed rate US dollar denominated debt to floating rate debt based on EURIBOR. The agreements involve the receipt of
fixed rate amounts in exchange for floating rate interest payments over the life of the agreements.
A 1% change in the market interest rates on floating rate debt outstanding at December 31, 2006 would increase interest expense on an
annual basis by € 13.2 million for a 1% increase in rates and would decrease by € 17.9 million for a 1% decrease in rates. The effect of a 1%
change in market interest rates for 2005 would have changed interest expense by approximately € 18.3 million, and for 2004, approximately €
15.0 million. These amounts are determined by calculating the effect of a hypothetical interest rate change on our floating rate debt, after giving
consideration to our interest rate swap and option agreements. These amounts do not include the effects of certain potential results of changing
interest rates, such as a different level of overall economic activity, or other actions management may take to mitigate this risk. Furthermore,
this sensitivity analysis does not assume alterations in our gross debt or other changes in our financial position.
Foreign exchange risk
We use financial instruments, such as forward foreign exchange contracts and foreign currency options, to reduce our net exposure to
currency fluctuations. These contracts normally mature within one year. As a general objective, we attempt to hedge at least 50% of foreign
exchange transaction exposures based on a 12-month rolling forecast. It is our policy to negotiate the terms of hedging products to match the
terms of the hedged items to maximize hedge effectiveness.
At December 31, 2006 and 2005, we had forward foreign exchange contracts, principally between the euro and the US dollar, Polish zloty,
Hungarian forint, Czech koruna, Swiss franc, Croatian kuna and Romanian leu. The aggregate notional amounts of these contracts for both
purchase and sale of foreign currencies were € 187.3 million as at December 31, 2006, as compared to € 145.0 million as at
December 31, 2005.
The notional amount of foreign currency option contracts for Polish zloty and Hungarian forint were € 27.5 million as at December 31,
2006, as compared to € 16.5 million as at December 31, 2005.
During 2003, we entered into cross currency swaps to cover the currency risk related to the $500.0 million and $400.0 million notes
discussed above under “Borrowings and funding sources—Notes issued in the US market”. At December 31, 2006 and 2005 the fair value of
the cross currency swaps represented a payable of € 122.0 million and € 43.3 million, respectively.
Commodity price risk
We are exposed to the effect of changes in the price of sugar, mainly in our emerging countries where there is no, or only limited,
regulatory control over the price of sugar. We are also exposed to price fluctuations in aluminum and resin. To manage a portion of the price
risk of sugar costs, we use sugar futures contracts traded on regulated futures exchanges. The sugar futures contracts typically have maturities
of up to 18 months after the balance sheet date. The changes in market values of such contracts have historically been effective in offsetting
sugar price fluctuations. In 2006, we recorded a loss of € 10.3
98
million in selling, delivery and administrative expenses in respect of sugar futures of which € 1.8 million related to futures for 17,000 metric
tones of white sugar which were outstanding at December 31, 2006. There was neither a loss nor gain as at December 31, 2005 and there was a
gain of € 0.5 million as at December 31, 2004.
We enter into multi-year volume purchase commitments with aluminum can manufacturers for a portion of our production requirements.
Generally, these volume commitments are at fixed prices except for the aluminum content. We can, in quantities of our choice, request the
manufacturer to fix the prices of the aluminum content in reference to market rates. We try to reduce our exposure to resin price fluctuations by
buying forward where it is commercially reasonable to do so, or, particularly in Eastern Europe, by entering into transactions for the purchase
of resin based on a fixed annual price. In Central and Western Europe, pricing is adjusted quarterly with a portion of our purchases indexed to
PCI, an industry price indicator.
Credit risk
We have no significant concentrations of credit risk due to our large customer base. We have put in place policies to help ensure that sales
of products and services are only made to customers with an appropriate credit history.
Within the context of treasury operations, the group’s exposure to credit risk is managed by establishing approved counterparty and
country limits, detailing the maximum exposure that the group is prepared to accept with respect to individual counterparties / countries. In
addition, and in relation to derivative financial instruments, prior to the entering into any types of such instruments, the counterparty must have
at least one credit rating which is no lower than AA-/Aa3. Derivative counterparties and cash transactions are limited to high credit quality
financial institutions. We have policies that limit the amount of credit exposure to any single financial institution. The extent of the credit risk
depends upon the instrument used. The degree of credit exposure associated with each instrument is determined by an Assessed Counterparty
Exposure, or ACE. An ACE is a measure of the perceived inherent credit exposure arising from transactions in each instrument or facility. The
ACE calculation is based on a fair value of the position, the product maturity and the counterparty’s credit ratings. The total credit exposure to
a counterparty or country is recognized as the sum of the ACE for all transactions entered into with that counterparty or country.
Our maximum exposure to credit risk in the event that counterparties fail to perform their obligations in relation to each class of
recognized financial asset, other than derivative financial instruments, is the carrying amount of those assets as indicated in the balance sheet.
Credit risk arises with respect to derivative financial instruments from the potential failure of counterparties to meet their obligations under the
contract or arrangement.
C.
Research and development, patent and licenses
Not applicable.
D.
Outlook and trend information
During the first quarter of 2007 our sales volume increased by 18.6% against the first quarter of 2006, while our net sales revenue
increased by 17.5% over the first quarter of 2006. Our net sales revenue benefited from the strong volume growth, price realization and positive
currency impact due to the positive translation effect resulting from the strengthening of the Russian, Romanian, Czech and Polish currencies
against the euro. In addition, pricing initiatives and favorable mix improvements, in line with our plans, had a favorable effect. Strong volume
growth and selective price realization helped offset raw material cost pressures, leading to gross profit and operating margins remaining stable
versus the first quarter of 2006.
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Russia, Romania, Bulgaria, Serbia and the key developing countries all contributed significantly to the improved profitability. Cost of goods
sold per unit case decreased slightly from € 1.93 to € 1.91. On May 31, 2007, we announced the completion of the acquisition of 100% of
Eurmatik S.r.l., a vending operator in Italy. Eurmatik S.r.l. has a long tradition in the Italian vending industry and is currently operating in all
segments of the vending business such as hot and cold beverages, water and snacks. At this stage, the total consideration for the transaction was
€ 15.8 million with no debt assumed (excluding acquisition costs).
E.
Off-balance sheet arrangements
We do not have any off-balance sheet arrangements, as such term is defined for purposes of Item 5E of Form 20-F, that have or are
reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is material to investors.
F.
Tabular disclosure of contractual obligations
The following table reflects our contractual obligations as at December 31, 2006, excluding the items discussed below.
Payment due by period
Contractual obligations
Total
Short-term borrowings
Long-term debt
Estimated interest payments
Operating leases
Capital leases
Capital purchase obligations
Other long-term purchase obligations
Total
269.3
1,516.4
486.1
129.1
116.1
167.1
181.4
2,865.5
Less than
1 year
269.3
—
74.4
31.4
33.9
167.1
64.4
640.5
1-3 years
(euro in millions)
—
349.3
154.9
52.9
55.4
—
113.2
725.7
4-5 years
—
498.5
134.8
32.5
17.8
—
1.3
684.9
After
5 years
—
668.6
122.0
12.3
9.0
—
2.5
814.4
Refer to note 8 to our consolidated financial statements for further information regarding short-term borrowings and long-term debt.
Long-term debt bears variable interest rate or has been swapped from fixed to variable interest rate through the use of interest rate and
cross currency swaps. We calculated estimated interest payments on the basis of estimated interest rates and payment dates based on our
determination of the most likely scenarios for each relevant debt instrument. We typically expect to settle such interest payments with cash
flows from operating activities and/or short-term borrowings.
Refer to note 16 to our consolidated financial statements for further information regarding operating leases, capital leases, capital purchase
obligations, and other long-term purchase obligations.
The above table does not reflect employee benefit obligations. Refer to note 10 to our consolidated financial statements for further
information.
The above table does not reflect the impact of derivatives and hedging instruments, other than for long-term debt, which are discussed in
detail above under “Market Risk”.
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ITEM 6
A.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
Our board of directors and senior management are responsible for our management. In particular, senior management is responsible for
the day-to-day management of our company in accordance with the instructions, policies and operating guidelines established by our board of
directors. The board approves three-year strategic and financial plans and detailed annual budgets. The business address of our directors and
senior management is c/o Coca-Cola Hellenic Bottling Company S.A., 9 Fragoklissias Street, 151 25 Maroussi, Athens, Greece.
Directors nominated by The Kar-Tess Group and The Coca-Cola Company Entities
Mr. G. A. David, Mr. A. G. David, Mr. A. Leventis and Mr. H. Leventis were nominated by The Kar-Tess Group. Messrs. Cummings and
Finan were nominated by The Coca-Cola Company Entities. The Kar-Tess Group and The Coca-Cola Company Entities also agreed to
designate the remaining non-executive members of our board of directors jointly and to maintain their respective proportional representation on
our board of directors in the event that the number of directors increases or decreases. Mr. G. A. David is the father of Mr. A. G. David and a
first cousin of Mr. A. Leventis and Mr. H. Leventis. Mr. A. Leventis and Mr. H. Leventis are brothers.
Directors
Name
George A. David
Doros Constantinou
Kent Atkinson
Antonio D’Amato
Alexander B. Cummings
Anastasis G. David
Irial Finan
Anastasios P. Leventis
Haralambos K. Leventis
Sir Michael Llewellyn-Smith
Nigel Macdonald
Samir Toubassy
(1)
Age
Title
70
56
62
50
51
36
50
66
64
68
62
67
Chairman of the Board
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Vice-Chairman of the Board
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Initially Elected
January 2, 1981
August 22, 2003
September 6, 2000
January 1, 2002
September 13, 2006
July 27, 2006
October 23, 1997 (1)
October 27, 2000
September 18, 2002
September 6, 2000
June 17, 2005
September 6, 2000
Mr. Finan originally served as a member of the board of directors of Hellenic Bottling Company S.A. from October 23, 1997 to
August 30, 2000 (Hellenic Bottling Company S.A. consummated its acquisition of Coca-Cola Beverages plc and was renamed Coca-Cola
Hellenic Bottling Company S.A. on August 9, 2000). He then served on the board of directors from May 18, 2001 to August 21, 2003. His
current term began on June 17, 2005.
George A. David
Mr. David graduated from the University of Edinburgh in 1959. He began his career that same year with the group of companies owned
by his uncle Mr. A.G. Leventis in Nigeria. He was sales manager from 1959 to 1962, branch manager from 1962 to 1964, general manager of
the technical division from 1964 to 1965, executive director from 1966 to 1978, and managing director of Leventis Technical Limited from
1972 to 1978, when he assumed responsibility for family interests in Greece. After 1981, he assumed responsibility for Kar-Tess Holding S.A.
investments. Today, he holds a position on the board of directors of Petros Petropoulos AVEE and Titan Cement Company S.A. Mr. David is a
trustee of the A.G. Leventis
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Foundation, a member of the Institute of Defence and Foreign Policy (ELIAMEP) and the Center for Asia Minor Studies. Mr. David is a
member of our human resources committee and social responsibility committee.
Doros Constantinou
Mr. Constantinou graduated from the University of Piraeus in 1974 and holds a degree in Business Administration. Mr. Constantinou
started his career in auditing with Price Waterhouse where he worked for ten years. In 1985, he joined Hellenic Bottling Company S.A., where
he held several senior financial positions. In 1996, he was appointed to the position of chief financial officer and remained in that position until
August 2000. He was a key member of the management team that led the integration of Hellenic Bottling Company S.A. and Coca-Cola
Beverages plc. In 2001, Mr. Constantinou became managing director of Frigoglass S.A., one of the leading global manufacturers of
commercial refrigerators and packaging products with operations in 16 countries and a listing on the Athens Stock Exchange. Mr. Constantinou
was appointed managing director of Coca-Cola Hellenic Bottling Company S.A. in August 2003. He also directly oversees the performance of
our Greek and Cypriot operations.
Kent Atkinson
Mr. Atkinson was chief financial officer of Lloyds TSB Group plc from January 1995 until his retirement in June 2002. He continued as a
non-executive director of that board until April 2003. He began his career in 1964 with the Bank of London in South America, which was later
acquired by Lloyds Bank plc. After a number of appointments with Lloyds Bank in various countries in South America and the Middle East, he
transferred to the United Kingdom in 1989 as regional executive director for the South East and then general manager of the retail operations,
UK Retail Banking division, before assuming his position as chief financial officer. Mr. Atkinson is the senior independent director and
chairman of the audit committee and a member of the remuneration and nominations committees of telent plc, a non-executive director and a
member of the audit committee and the strategy and M&A committee of Gemalto N.V., a non-executive director and chairman of the audit
committee of Standard Life plc and the chairman of Standard Life Bank Limited, a non-executive director and member of the audit committee
of Millicom International Cellular S.A., and the chairman of Link Plus Corporation. Mr Atkinson is our senior independent director and the
chairman of our audit committee.
Antonio D’Amato
Mr. D’Amato started his business career in 1979 with Cartoprint in Milan, part of the Finseda Group, a leading European company in the
production of food packaging. He was employed in various capacities and in 1991, he became president of the Finseda Group. Since 1996,
Mr. D’Amato has been a member of the board of directors of Confindustria, the Confederation of Italian Industry. From 1999 to May 2000, he
was president of the Industrial Union of Naples. In May 2000, he was elected president of Confindustria. In August 2000, Mr. D’Amato was
appointed vice president of UNICE (Union of Industrial and Employers’ Confederations of Europe) and later that year became a member of
CNEL (Italian National Council for Economy and Labor). In July 2001, he became president of the LUISS University in Rome, a leading
private Italian university.
Alexander B. Cummings
Mr. Cummings is president and chief operating officer of the Africa Group of The Coca-Cola Company and is responsible for The
Coca-Cola Company operations in Africa, which encompasses a total of 56 countries and territories across the continent. Born in Liberia, West
Africa, Mr. Cummings joined The Coca-Cola Company in 1997 as region manager, Nigeria. In 2000, he was named president of The
Coca-Cola Company North and West Africa Division. He is the chairman of the Coca-Cola Africa
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Foundation and he serves on the boards of Africare, Clark Atlanta University and the Executive Leadership Council. In addition to our board,
Mr. Cummings is also a board member of the following bottling partner entities of The Coca-Cola Company: Coca-Cola Sabco (Pty.) Ltd.,
Equatorial Coca-Cola Bottling Company and The Coca-Cola Company of Egypt. Mr. Cummings is a member of our human resources
committee and social responsibility committee.
Anastassis G. David
Mr. David graduated from Tufts University Massachussets in 1993 and began his career in the Coca-Cola bottling system in the United
States. From 1994 to 1997, Mr. David held several positions in the sales and marketing departments of Hellenic Bottling Company S.A. During
1997, Mr. David worked for PricewaterhouseCoopers S.A., focusing on accounting and business finance. From 1998 to date, Mr. David’s
principal activity has been as advisor to the Kar-Tess Group on its bottling investments. Mr. David was Chairman of Navios Corporation, a
major bulk shipping company, from 2002 to 2005, he currently serves as a member of the board of directors of IDEAL Group S.A. and Aegean
Airlines S.A. He is also a member of the Advisory Board of Fares Center at Tufts University.
Irial Finan
Mr. Finan is an executive vice president of The Coca-Cola Company and president of bottling investments and supply chain, a position
responsible for managing The Coca-Cola Company’s equity investments in bottler operations and overseeing the operations of The
Coca-Cola Company-owned bottlers around the world. Mr. Finan joined the Coca-Cola system in 1981 with Coca-Cola Bottlers
Ireland, Limited, based in Dublin, where for several years he held a variety of accounting positions. From 1987 until 1990, Mr. Finan served
as finance director of Coca-Cola Bottlers Ireland, Limited. From 1991 to 1993, he served as managing director of Coca-Cola Bottlers
Ulster, Limited, based in Belfast. He was managing director of Coca-Cola Bottlers in Romania and Bulgaria until late 1994. From 1995 to
1999, he served as managing director of Molino Beverages, and joint managing director of Hellenic Bottling Company with operational
responsibility for expanding markets, including the Republic of Ireland, Northern Ireland, Romania, Moldova, the Russian Federation and
Nigeria. He was the lead member of the integration team in relation to the acquisition of Coca-Cola Beverages plc. In April 2000, Mr. Finan
became one of our three regional directors and was given responsibility for 16 countries. Mr. Finan served from 2001 until 2003 as managing
director of Coca-Cola Hellenic Bottling Company S.A. Mr. Finan joined The Coca-Cola Company and was named president of bottling
investments in August 2004. Mr. Finan serves on the boards of directors of Coca-Cola Enterprises Inc., Coca-Cola FEMSA S.A., Coca-Cola
Amatil Limited, and the supervisory board of Coca-Cola Erfrischungsgetranke AG. He is a non-executive director of Alltracel
Pharmaceuticals and chairman of their audit committee. He also serves as non-executive director of Co-operation Ireland.
Anastasios P. Leventis CBE OFR
Mr. Leventis has been working in Nigeria for the group of companies controlled by Mr. A.G. Leventis since the 1960s, where he became
involved in all aspects of operations and, in particular, the expansion and development of their commercial activities. He is on the board of
directors of Boval S.A., which has widespread investments worldwide, as well as subsidiaries of Boval S.A. in Nigeria. Mr. Leventis is
chairman of the A.G. Leventis Foundation. On April 4, 1990, Mr. Leventis was accredited as honorary commissioner for the Republic of
Cyprus to Nigeria by the government of the Republic of Cyprus. Mr. Leventis was honored with the award of the Commander of the Order of
the British Empire in the Queen’s Birthday Honors List of 2004 and was also honored with the award of Order of “Madarski Konnik” by the
President of Bulgaria in 2004. He was appointed Officer of Order of the Federal Republic of Nigeria in 2002. Mr. Leventis serves on the
councils of several non-profit organizations.
103
Haralambos K. Leventis
Mr. Leventis graduated from Cambridge University in 1963 and was admitted to the English Bar in 1964. He moved to Nigeria in 1964 to
work for the companies controlled by Mr. A.G. Leventis. He was involved in the management of a number of companies in the group,
especially in Leventis Motors Limited, where he was the executive director responsible to the board for the management of the company.
Mr. Leventis is a director of a number of companies in the Leventis group in Nigeria and elsewhere and also a trustee of the A.G. Leventis
Foundation.
Sir Michael Llewellyn-Smith KCVO CMG
Sir Michael Llewellyn-Smith had a distinguished career in the British diplomatic service, including postings to Moscow, Paris and Athens,
culminating in positions as British Ambassador to Poland from 1991 to 1996 and then British Ambassador to Greece between 1996 and 1999).
He is currently a member of the council of London University, vice president of the British School of Athens and member of the council of the
Anglo-Hellenic League. He is also a historian and author of a number of books about Greece. Sir Michael Llewellyn-Smith is chairman of both
our human resources and social responsibility committees.
Nigel Macdonald
Mr. Macdonald worked for 27 years with Ernst & Young before retiring as a partner in 2003. During that time, Mr. Macdonald served as a
senior partner in Ernst & Young’s UK practice and served for a time as vice chairman of the accounting and auditing committees of its
worldwide practice. Mr. Macdonald is a member of the Institute of Chartered Accountants of Scotland of which he was the president between
1993 and 1994. He is also an advisor to, and a member of the audit committee of, the International Oil Pollution Compensation Fund, as well as
a trustee of the National Maritime Museum and chairman of its remuneration committee and of its audit committee. Between 1994 and 2001,
he was a member of the Industrial Development Advisory Board of the UK government and, from 1992 until the end of 2004 he was also a
member of the Board of the British Standards Institute and chairman of its audit committee. From 1990 until 2006 he was a member of the
Review Panel of the Financial Reporting Council and from 1998 until 2005 he was a member of the UK Compensation Commission, serving
on its specialist panels on electricity and water. Mr. Macdonald is a member of our audit committee.
Samir Toubassy
Mr. Toubassy holds a BBA from the American University of Beirut and an MBA from Golden Gate University of San Francisco. In 1980,
he joined The Olayan Group as an Executive Vice President responsible for several of its operating companies. He is currently President of
Olayan Development Corporation and Group Vice President of The Olayan Group. Mr. Toubassy is a board member of the Olayan Financing
Company and The Coca-Cola Bottling Company of Saudi Arabia. He serves on the Board of Trustees of Thunderbird—The Garvin School of
International Management. Mr. Toubassy is a member of the Advisory Board for the Churchill Archives Centre, Churchill College, Cambridge
University and is also a member of the Dean’s Council, John F. Kennedy School of Government at Harvard University and a member of the
Aspen Institute’s Middle East Strategy Group. Mr. Toubassy is a member of our audit committee.
104
Senior Management
Our senior management team consists of the following persons, all of whom are members of our operating committee:
Name
Age
Doros Constantinou
Manik (Nik) Jhangiani
John Brady
56
41
49
Richard Smyth
49
Pericles Venieris
49
Alexis Sacre
56
Jan Gustavsson
Bernard P. Kunerth
Kleon Giavassoglou
Dimitris Lois
41
52
55
46
Title
Managing Director
Chief Financial Officer
Region Director; Italy, Republic of Ireland, Northern Ireland,
Russian Federation, Belarus, Ukraine and Armenia
Region Director; Austria, Poland, Hungary, Czech Republic,
Slovakia and Slovenia
Region Director; Switzerland, Croatia, Serbia, Montenegro,
Bosnia and Herzegovina, the Former Yugoslav Republic of
Macedonia and Nigeria
Region Director; Estonia, Latvia, Lithuania, Bulgaria, Romania
and Moldova
General Counsel and Company Secretary
Human Resources Director
Director of Supply Chain Services
Executive Advisor to Managing Director
Doros Constantinou
Mr. Constantinou is a member of both our board of directors and our senior management team. His biography is set forth above under
“Directors”.
Manik (Nik) Jhangiani
Mr. Jhangiani commenced his career in the Coca-Cola system in 1998 as an international audit manager for The Coca-Cola Company.
Mr. Jhangiani transferred to Coca-Cola Hellenic Bottling Company S.A. in September 2000, as director of internal audit. In January 2002, he
was promoted to the role of group controller and in July 2004, became chief financial officer. Prior to joining the Coca-Cola system,
Mr. Jhangiani held various audit and operational finance roles with Colgate-Palmolive Company, including serving as finance director for their
start-up operation in Nigeria. He started his career in the New York office of Deloitte & Touche.
John Brady
Mr. Brady joined the Coca-Cola system in 1982. He held various positions with Coca-Cola USA until 1992, when he became general
manager and operations director for Coca-Cola Indonesia. From 1994 to 1998 Mr. Brady worked as region manager for The Coca-Cola
Company and Coca-Cola Amatil in Indonesia. In 1998, Mr. Brady became region director for Coca-Cola Beverages plc, where he was
responsible for the Czech Republic, Hungary, Poland and Slovakia. In 2001, Mr. Brady became responsible for Austria, Italy, Switzerland and
Nigeria as a regional director of Coca-Cola Hellenic Bottling Company S.A. From 2003 to 2004 he worked as regional vice president for the
Northeast Region for Coca-Cola North America and in March 2004, he was appointed president and chief executive officer for Coca-Cola
Bottlers’ Sales and Services Company. In January 2006, Mr. Brady returned to Coca-Cola Hellenic Bottling Company S.A. as region director
responsible for Italy, the Republic of Ireland, Northern Ireland, Russian Federation, Belarus, Ukraine and Armenia.
105
Richard Smyth
Mr. Smyth joined our management team in February 2003 after working for Bristol-Myers Squibb in Bangkok, where he was vice
president—Southeast Asia of the company’s nutritional drinks business. As vice president, he was responsible for the Philippines, Malaysia,
Singapore, Thailand, Indonesia, Vietnam and Australia. Prior to this, he was the general manager for Bristol-Myers Squibb in the Philippines.
Mr. Smyth spent 13 years working with Nestlé where his roles included serving as general manager of a joint venture with Danone in Slovakia,
working as chief operating officer of their Filipino Confectionery Division, and holding senior marketing roles in Hungary and the Czech
Republic. While based in Switzerland, he was responsible for Nestlé’s world-wide duty free business. He is responsible for our operations in
Austria, Poland, Hungary, the Czech Republic, Slovakia, and Slovenia.
Pericles Venieris
Mr. Venieris commenced his career with Hellenic Bottling Company S.A. in 1979. He held various positions in the finance and sales
departments until 1991, when he was appointed general manager of the Rhodes and Corfu plants. In 1994, he was appointed general manager
of our Bulgarian operations. In 1996, he was also assigned the responsibility for our South-West Greece division. In 1997, Mr. Venieris was
appointed country manager of our Greek operations. In June 2001, he became a region director, with responsibility for Greece, Bulgaria,
Romania, Moldova, the Former Yugoslav Republic of Macedonia and Serbia and Montenegro and, on September 1, 2002, he also assumed
responsibility for Croatia, Bosnia and Herzegovina and Armenia. In January 2005, Mr. Venieris became region director for Switzerland,
Croatia, Serbia, Montenegro, Bosnia and Herzegovina, the Former Yugoslav Republic of Macedonia and Nigeria.
Alexis Sacre
Mr. Sacre graduated with an MS in Civil Engineering from the University of Texas and worked for D’Appolonia Consulting Engineers in
Brussels and Paris until 1982. In 1983, he obtained an MBA from INSEAD and joined Abela, an International Food Service Company in
London. He moved with Abela and managed its operations in Athens and Beirut. Mr. Sacre joined Coca-Cola Hellenic Bottling Company
S.A. in 1997 when he was appointed country manager in Bulgaria. In 2002, he became country manager for Romania and Moldova. In
September 2004, he became region director, responsible for Estonia, Latvia, Lithuania, Bulgaria, Romania and Moldova.
Jan Gustavsson
Mr. Gustavsson began his career with the Coca-Cola system in 1995. From 1995 to 1997, he served as assistant division counsel in the
Nordic & Northern Eurasia Division of The Coca-Cola Company. Mr. Gustavsson worked with the law firm of White & Case LLP from 1997
to 1999 and previously from 1993 to 1995. In 1999, Mr. Gustavsson joined Coca-Cola Beverages plc as deputy general counsel and was
appointed general counsel and company secretary of Coca-Cola Hellenic Bottling Company S.A. in August 2001.
Bernard P. Kunerth
Prior to joining the Coca-Cola system, Mr. Kunerth held various human resource management positions with 3M, Financiere Agache,
and Henkel in France. From 1987 to 1996 he was the regional human resources director for Western Europe and then the Americas with
S.C. Johnson. Mr. Kunerth joined the Coca-Cola system in 1996 as regional human resources director for The Coca-Cola Company in
London. In 1997, he transferred to the position of vice-president of human resources for Europe with Coca-Cola Enterprises Inc. and in
July 2001 was appointed vice-president for human resources for all of Coca-Cola Enterprises Inc., responsible for compensation, benefits,
performance management and
106
talent management. He became group human resources director of Coca-Cola Hellenic Bottling Company S.A. in 2004.
Kleon Giavassoglou
Prior to joining the Coca-Cola system, Dr. Giavassoglou worked as an assistant professor at the University of Patras and as a consultant
for engineering projects. He was also associated with Hellenic Bottling Company S.A. as a consultant engineer, supervising the construction of
the Patras plant from 1979 to 1980. Dr. Giavassoglou commenced his career with Hellenic Bottling Company S.A. in 1983. He held several
positions of increasing responsibility in the maintenance and technical operations departments until 1993, when he was appointed general
manager of our operations in Northern Greece. In 1995, he was appointed technical operations manager of our Greek operations and in 1998
technical director of Hellenic Bottling Company S.A. In 2000, Dr. Giavassoglou became regional technical and engineering director of
Coca-Cola Hellenic Bottling Company S.A. and in February 2004, supply chain services director.
Dimitris Lois
Mr. Lois joined Coca-Cola Hellenic Bottling Company in June 2007 as executive advisor to the managing director. Prior to his
appointment, he served as managing director of Frigoglass S.A. He joined Frigoglass S.A. in 1997, as the general manager of the STIND S.A.
glass plant in Bulgaria, later becoming country manager for Bulgaria. In 2000, he was appointed commercial refrigeration director, and in
2001, following Frigoglass S.A.’s acquisition of the Norcool Group and Husky, he was appointed director of the newly created cool division.
He was appointed managing director in August 2003. Mr. Lois started his career in 1988 at Grecian Magnesite S.A., where he held various
managerial posts including the position of business development manager. Mr. Lois holds degrees in Chemical Engineering from the Illinois
Institute of Technology (BSc.) and North Eastern University (MSc.).
Mr. Constantinou, Mr. Venieris, Dr. Giavassoglou and Mr. Lois are employed by Coca-Cola Hellenic Bottling Company S.A. All other
members of our senior management are employed by various subsidiaries of Coca-Cola Hellenic Bottling Company S.A. although their
responsibilities cover the entire group.
Operating Committee
Our operating committee is comprised of the members of senior management listed above and chaired by our managing director. The
operating committee seeks to ensure effective co-ordination and decision-making through our business. The committee meets nine times each
year and is responsible for:

the overall operational direction of our company.

developing group strategy.

agreeing action plans to support each of our territories.

setting annual targets and agreeing annual business plans which include a comprehensive program of goals and strategies agreed
between the country general managers and the regional directors. These annual business plans form the basis of the company’s
performance progress.

working with the country general managers to review and adjust, where necessary, the cooperation framework ensuring consistent
behavior throughout the different countries.
107
B.
Compensation
Remuneration policy
We aim to provide total compensation for our staff that is fair and sufficient to employ people with the talents and skills necessary to
conduct and grow our business and maximize shareholder value. To achieve our operating objectives, we must attract, retain and motivate high
caliber senior managers for whom we recognize there is an international market. The human resources committee aims to provide total
compensation that is competitive by reference to other multinational companies similar to us in terms of size, geographic spread and
complexity. In line with our commitment to maximize shareholder value, our policy is to link a significant portion of remuneration for our
senior managers to the performance of the business through incentives and stock option plans. Equity related compensation of executives aligns
the financial interests of senior management with those of our shareholders. In constructing and reviewing remuneration packages, our
emphasis is on linking pay with performance by rewarding effective management of business performance as well as individual achievement.
Compensation and pension benefits of directors and senior management
The total remuneration paid to or accrued for our directors and senior management team, including stock option grants, during 2006
amounted to € 11.2 million. Pension and post-employment benefits for directors and for our senior management team during 2006 amounted to
€ 0.7 million. Members of our senior management team either participate in their home country pension scheme or in the Coca-Cola HBC
International Retirement Savings Plan, as appropriate.
Management incentive plan
We operate a management incentive plan for all our managers. In 2006, the individual incentive was based on annual business
performance against targets in volume, COP and economic profit, as well as individual accomplishments against annual objectives. For
purposes of compensation plans we define economic profit as adjusted operating profit minus our cost of capital. Adjusted operating profit is
calculated as operating profit plus amortization of intangible assets, less income tax expense and the “tax shield” as defined in Item 5,
“Operating and Financial Review and Prospects—Key Financial Results”. Individual objectives are set by senior management so as to be
demanding but achievable. Exceptional business unit performance where objectives are exceeded may result in awards in excess of the
individual target awards. Compensation under the management incentive plan is normally paid in cash. We paid a total of approximately €
25.4 million to eligible employees under the plan based on individual and business unit performance for 2006.
Long-term incentive plans
All senior management, excluding our executive team, participate in our long-term incentive plans. We adopted these cash-based plans for
implementation in 2003 as a replacement of the stock option plans for middle ranking employees. The plans cover three-year periods and
incentive payouts for the 2004-2006 plan was based on economic profit performance against three-year objectives. For purposes of
compensation plans we define economic profit as adjusted operating profit minus cost of capital . Adjusted operating profit is calculated as
operating profit plus amortization of intangible assets, less income tax expense and the “tax shield” as defined in Item 5, “Operating and
Financial Review and Prospects—Key Financial Results”. The target payout from the plan is determined for each individual based on their
seniority, performance and potential. Exceptional business unit performance where objectives are exceeded may result in awards in excess of
the individual target payout. We believe that this plan will have a greater motivational impact on the participating employees because they can
more directly link their efforts to the performance of their specific business unit than under the stock option plan. We paid a total
108
of approximately € 6 million to eligible employees under the 2004-2006 plan based on business unit performance measured in terms
of economic profit.
Stock option plans
Senior managers of our company are eligible to participate in our stock option plans. Options are viewed as an integral part of the total
remuneration package for senior managers. We discontinued granting stock options to middle management as the long-term incentive plans
fully replaced the stock option plans as part of their compensation.
Options are typically granted at an exercise price equal to the average value of the mid-price quotation of our shares at close of trading on
the Athens Stock Exchange over the last ten working days before the date of grant. Option grants vest in one-third increments each year for
three years and can be exercised for up to ten years from the date of grant.
Options are approved by the board of directors upon the recommendation of the human resources committee following advice by
management and based on a view of competitive market conditions for employee remuneration and employees’ performance. The stock option
award for the managing director is approved by the board of directors based on the recommendation of the human resources committee.
Our company views stock options as a long-term component of the total remuneration package of its senior managers whose roles have an
impact on the results of the business as a whole and it intends to continue issuing stock options to these employees, taking into account, among
other factors, its profit growth, business prospects and financial condition as well as individual employee performance and the competitive
market conditions of employee remuneration. Under Greek law, the terms of any options granted during each year must be approved by our
shareholders at a general meeting. In addition, under Greek legislation, all options outstanding at any time under all our stock option plans may
not exceed 10% of our outstanding share capital.
The following table summarizes information about options outstanding as at December 31, 2006.
Exercise
Price
2001 Stock Option Plan
Sub Plan 1
Sub Plan 2
Sub Plan 3
Sub Plan 4
Sub Plan 6
2003A Stock Option Plan
2003-2004 Stock Option
Plan/2003 Grant
2003-2004 Stock Option
Plan/2004 Grant
2005-2009 Plan/2005
Grant
2005-2009 Plan/2006A
Grant
2005-2009 Plan/2006B
Grant
2005-2009 Plan/2006
Grant
Total
Vesting
status 2006
Vesting
dates for
further
increments
Vesting
dates for
further
increments
Vesting
dates for
further
increments
End of
option
period
Number of
stock
options
outstanding
€ 23.32
20.97
17.06
14.68
14.53
12.95
fully vested
fully vested
fully vested
fully vested
fully vested
fully vested
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
07.11.2008
09.29.2008
12.08.2009
12.12.2010
12.12.2011
12.10.2012
233,218
631
180,848
472,218
220,810
28,500
16.76
fully vested
—
—
—
12.14.2013
99,334
18.63
two-thirds
12.03.2007
—
—
12.02.2014
354,791
23.30
one-third
12.02.2007
12.02.2008
—
12.01.2015
762,868
24.85
none
03.21.2007
03.21.2008
03.21.2009
03.20.2016
50,000
23.02
none
06.23.2007
06.23.2008
06.23.2009
06.22.2016
30,000
28.06
none
12.13.2007
12.13.2008
12.13.2009
12.12.2016
1,010,800
3,444,018
109
A summary of stock option activity under all plans in 2006 is as follows:
Weighted
average
remaining
contractual
life
(years)
Number
of stock
options
Weighted
average
exercise
price
Outstanding at January 1, 2006
Granted
Exercised
Forfeited
Outstanding at December 31, 2006
3,847,059
1,090,800
(1,375,914 )
(117,927 )
3,444,018
€ 18.19
27.77
16.45
19.07
€ 21.89
7.3
€
26.6
Exercisable at December 31, 2006
1,619,745
€ 17.27
5.1
€
18.9
Aggregate
intrinsic
value
(in millions)
Compensation expense recorded for the year ended December 31, 2006 for all stock options was € 4.0 million and out of this amount € 2.1
million was related to stock options vested in 2006.
At the annual general meeting of June 17, 2005, our shareholders adopted a plan covering the period from 2005 to 2009 to grant stock
options for a maximum of 4,950,000 ordinary shares to our executives subject to approval of the board of directors. During 2006, the board of
directors approved the grant of 1,090,800 stock options under this authorization, at a weighted average exercise price of € 27.77, representing
approximately 0.4% of our outstanding share capital as of December 31, 2006. The senior management team and our managing director
received an aggregate of 650,000 stock options under this grant for their recent performance.
Under Greek law, ordinary shares may be issued pursuant to a stock option plan only during the month of December. As a result, the terms
of our stock option plan provide that any option must be exercised no later than December 17 in any given year for the ordinary shares to be
issued in the same year. Eligible employees who leave our company for another company of the Coca-Cola system in which The Coca-Cola
Company holds, directly or indirectly, at least a 20% interest, or employees who retire at no earlier than the age of 55 and with a minimum
experience of 10 years within the Coca-Cola system, may still exercise options granted to them under the plan in accordance with the general
rules. In the event the employment of an option holder is terminated due to death, injury or disability, all his outstanding options vest and are
exercisable no later than the month of December following the first anniversary of the termination. If the employment terminates for any other
reason or we cease to control the subsidiary employing the option holder, the options that have already vested may be exercised no later than
the following December. Options lapse and cease to be exercisable if the option holder transfers, pledges or encumbers the option in any way,
if his employment is terminated due to dishonesty, fraud or misconduct or if we enter into liquidation.
You should read note 20 to our consolidated financial statements for additional information on our stock option plans.
Stock appreciation rights
We adopted the employee stock option plans in 2001. Previously, we had issued stock appreciation rights to certain of our employees,
including employees who previously held Coca-Cola Beverages stock options. Upon adoption of the stock option plans, all such rights, except
those held by retirees and employees located in countries where granting and exercising stock options was impractical or not permitted, were
converted into stock options carrying over the same exercise prices, vesting periods and expiration dates.
110
We still operate a stock-based compensation plan, under which senior managers, located in countries where granting and exercising stock
options are impractical or not permitted, are granted stock appreciation rights. The terms of the stock appreciation rights are based on the basic
terms and conditions of stock option grants except that instead of shares, the holders receive a payment equal to the positive difference between
the market price of our ordinary shares at the date of exercise and the exercise price.
The following table summarizes information on stock appreciation rights outstanding on December 31, 2006.
Phantom
Option Plan
1998A
1999
2000
2001
2003
2004
2005
Total
Exercise
price
Vesting
status 2006
€ 23.32
17.06
14.68
14.53
16.76
18.63
23.30
fully vested
fully vested
fully vested
fully vested
fully vested
two-thirds
one-third
Vesting
dates for
further
increments
—
—
—
—
—
12.03.2007
12.02.2007
Vesting
dates for
further
increments
—
—
—
—
—
—
12.02.2008
End of
exercise
period
Number of
SARs
outstanding
07.11.2008
12.08.2009
12.12.2010
12.12.2011
12.14.2013
12.02.2014
12.01.2015
111,339
80,035
44,900
23,700
4,000
10,000
11,000
284,974
A summary of stock appreciation rights activity under all plans in 2006 is as follows:
Weighted
average
remaining
contractual
life (years)
Number
of SARs
Weighted
average
exercise
price
Outstanding at January 1, 2006
Exercised
Forfeited
Outstanding at December 31, 2006
531,482
(218,239 )
(28,269 )
284,974
€ 18.37
16.86
21.54
€ 19.21
3.2
€
3.0
Exercisable at December 31, 2006
274,306
€ 19.08
3.0
€
2.9
Aggregate
intrinsic
value
(in millions)
As at December 31, 2006, there was € 0.04 million of total unrecognized compensation cost related to stock appreciation rights, which is
expected to be recognized over a weighted average period of 1.27 years. Total liability paid during 2006 in respect of the exercise of stock
appreciation rights was € 2.0 million compared to € 0.7 million in 2005 and € 1.1 million in 2004.
Stock purchase plan
We operate an employee share ownership plan, The Coca-Cola HBC Stock Purchase plan, in which eligible employees can participate.
The human resources committee of the board of directors determines eligibility. Under the terms of this plan, employees have the opportunity
to invest 1% to 15% of their salary in our ordinary shares. We match up to a maximum of 3% of the employees’ salary by way of contribution.
Our matching shares are purchased monthly on the open market and vest 350 days after the purchase. In order to adapt the plan to the Greek
legal framework in the case of employees resident in Greece, we match our Greek-resident employees’ contribution up to a maximum of 5% of
their salary with
111
an annual employer contribution, which we make in December, and matching shares purchased in December vest immediately.
Forfeited shares (i) do not revert back to us and (ii) may be used to reduce future matching contributions. The cost of shares purchased by
our matching contributions is amortized over 12 months and the unamortized deferred compensation is reflected in shareholders’ equity. The
expense for 2006, 2005 and 2004 totaled € 3.0 million, € 2.2 million and € 2.1 million, respectively. Dividends received in respect of shares
held by the trust accrue to the employees. Shares held in the plan are treated as outstanding for purposes of determining earnings per share. In
2006, the fair value of unvested shares held by the trust was € 2.3 million compared to € 1.5 million in 2005 and the number of unvested shares
was 76,280 in 2006 compared to 58,851 in 2005.
Employee benefit obligations
Statutory termination benefits and pension benefits for employees
Employees of our subsidiaries in Nigeria, Greece, Bulgaria, Serbia, Montenegro, Croatia, Poland, Romania, Slovenia and Austria are
entitled to statutory termination benefits generally based on each employee’s length of service, employment category and remuneration. The
cost of providing these benefits is accrued over the employees’ actuarially determined service period.
Our subsidiaries in the Republic of Ireland, Northern Ireland, Greece, Switzerland and Austria sponsor defined benefit pension plans. Of
the four plans in the Republic of Ireland, three have plan assets as do the two plans in Northern Ireland, the plan in Greece and the plans in
Switzerland. The Austrian plans do not have plan assets.
Italian severance indemnity
Employee benefit obligations also include the liability for severance indemnities related to employees of the Italian subsidiary. The
severance indemnity liability arose from local civil and labor laws and is calculated based on each employee’s length of service, employment
category and remuneration. There is no vesting period or funding requirement associated with the liability. Consistent with the provisions of
Emerging Issues Task Force (“EITF”) Issue No. 88-1, Determination and Vested Benefit Obligations for a Defined Benefit Plan , the liability
recorded in the balance sheet is based on the amount that the employee would be entitled to, on the expected date of termination.
Jubilee plans
We provide long service benefits in the form of jubilee plans to our employees in Austria, Nigeria, Croatia, Slovenia and Poland. These
plans are measured at the present value of the estimated future cash outflows with immediate recognition of actuarial gains and losses.
Defined contribution plans
We also sponsor defined contribution plans covering employees at five of our subsidiaries. Our contributions to these plans were €
7.0 million in 2006, € 6.3 million in 2005 and € 6.5 million in 2004.
C. Board Practices
Board of directors
Our articles of association require that our board of directors consists of a minimum of 7 and a maximum of 15 members. Currently, we
have 12 directors and there is no age retirement requirement. Our board of directors is appointed by our shareholders at a general meeting for a
three-year term. The current
112
term of our directors expires in 2008. The term of each member is extended until the date of the annual general meeting of the shareholders of
the year in which such term expires. In case of death, resignation or removal of any member of the board of directors, the remaining directors
are required to elect a replacement for the remainder of the board’s term and such election must be submitted for approval at the first annual
general meeting of the shareholders following the replacement. If our shareholders do not approve such election, then such shareholders elect
the replacement for the director whose position has been vacated at their annual general meeting.
Our board of directors meets at regular intervals during the year. There are certain matters that are reserved for full consideration by the
board of directors, including issues of policy, strategy and approval of our chart of authority and budgets. The members of our board of
directors are supplied on a timely basis with comprehensive information on the business development and financial position of our company,
the form and content of which the board believes is satisfactory to discharge its duties and carry out its responsibilities. All directors have
access to our general counsel and there is a procedure in place to enable them to receive additional professional advice at the expense of our
company. Non-executive directors have full access to the managing director, the members of our senior management as well as our external
auditors and our internal audit team.
Greek Codified Law 3016/2002 requires that at least one-third of the board of directors of Greek listed companies is comprised of
non-executive members, two of whom must be independent. Greek Codified Law 3016/2002 provides that an independent director must not
have any direct or indirect relationship with the company or its affiliates that would interfere with the exercise of independent judgment. Our
board of directors complies with these provisions of Greek Codified Law 3016/2002.
In 2000, in connection with the listing of our shares on the London Stock Exchange, we entered into a relationship agreement with The
Kar-Tess Group and The Coca-Cola Company Entities which, among other things, requires us to maintain during the term of the agreement on
our board of directors two independent directors, that is, directors free from any business or other relationship with The Kar-Tess Group or The
Coca-Cola Company which could materially interfere with the exercise of their independent judgment in relation to matters concerning our
company. The relationship agreement also restricts the directors nominated by The Kar-Tess Group and The Coca-Cola Company from taking
part in and voting at board meetings in connection with matters in which the shareholder they represent has an interest. You should read
Item 7B, “Major Shareholders and Related Party Transactions—Related Party Transactions—The relationship agreement among us, The
Kar-Tess Group and The Coca-Cola Company Entities” for additional information on the relationship agreement. There is no specific provision
in our articles of association with respect to the directors’ power, in the absence of an independent quorum, to vote compensation to themselves
or any members of their body. However, pursuant to Greek Codified Law 2190/20, Article 24, compensation to a company’s board members is
to be paid out of our net income (after deductions for ordinary reserves and the amount required for distribution to shareholders of the first
dividend declared for the relevant financial year, equal to at least 6% of the company’s paid-up share capital) or otherwise must be approved by
a special resolution of the ordinary general meeting of its shareholders. The amount of compensation granted to a company’s board member, or
members, may be reduced by a Greek court if an objection is raised by shareholders representing at least one-tenth of the company’s share
capital and if the court finds such compensation to be “exorbitant”. The remuneration of our directors is subject to approval by our
shareholders.
Directors’ service agreements
Mr. Constantinou, our managing director, has an employment agreement with the Company. None of the other members of our board of
directors has entered into a service contract or other arrangements with us or any of our subsidiaries.
113
Committees of the board of directors
Human resources committee
The human resources committee comprises three non-executive directors: Sir Michael Llewellyn-Smith (chairman), Mr. Alexander
Cummings and Mr. George A. David. The chairman of the human resources committee is appointed by the board. The committee meets at least
four times a year. The managing director and the human resources director normally attend meetings of the human resources committee except
when the discussions concern matters affecting them personally. The human resources committee operates pursuant to written terms of
reference and is responsible for:

establishing the principles governing our human resources policy and the compensation policy of the company that will guide
management decision-making and action.

overseeing succession planning policy and making recommendations to the board of directors on the succession of the managing
director and the appointments and terminations of executives.




overseeing our talent management framework to ensure that there is a continuous development of talent for key roles.
establishing our compensation strategy and approving company-wide compensation and benefit plans and compensation for senior
managers.
making recommendations to the board of directors on compensation of the managing director.
making recommendations to the board of directors concerning potential non-executive directors, drawing on the best available
outside resources.
Audit committee
The audit committee comprises Mr. Kent Atkinson (chairman), Mr. Nigel Macdonald and Mr. Samir Toubassy. The chairman of the audit
committee is appointed by the board. Our general counsel and company secretary is also the secretary of the audit committee. The committee
meets at least four times a year. Our chief financial officer, as well as our external auditors and the head of our internal audit team, normally
attend all meetings of the audit committee. The committee also meets separately with our external auditors at least once a year. The committee
has access to outside legal counsel and other independent professional advice, as it may deem necessary. The committee operates under written
terms of reference and its duties include:



making recommendations to our shareholders in relation to the appointment, selection and termination of our external auditors and
approving the remuneration and terms of engagement of our external auditors.
discussing with the external auditors before the audit commences the nature and scope of the audit.
reviewing our annual financial statements before submission to the board, focusing particularly on any changes in accounting policies
and practices, major decision areas, significant adjustments resulting from the audit, the going concern assumption, compliance with
accounting standards and compliance with any applicable stock exchange and legal requirements.

discussing issues arising from the interim reviews and annual audits and any matters the external auditors may wish to discuss.

reviewing the internal audit program, receiving summaries of internal audit investigations and considering the responses of the
internal audit department to any reports or communications submitted by the external auditors.
114

reviewing the effectiveness of corporate governance and internal control systems and, in particular, the external auditor’s
management letter and management’s response.

reviewing and recommending approval to the board of our code of business conduct, as well as our treasury policy and chart of
authority, which provide the control framework for all transactions.

administering and enforcing, in conjunction with the board of directors, our code of ethics for senior executives and directors.


establishing procedures for the receipt, retention and treatment of complaints received by our company regarding accounting, internal
accounting controls or auditing matters, and for the confidential, anonymous submission by company employees of concerns regarding
questionable accounting or auditing matters.
considering any other matters, as appropriate.
The audit committee is also responsible for the oversight and monitoring of our compliance with Sarbanes-Oxley Act, Section 404,
regarding internal control over financial reporting.
Social responsibility committee
The social responsibility committee comprises three non-executive directors: Sir Michael Llewellyn-Smith (Chairman), Mr. Alexander
Cummings and Mr. George A. David. The social responsibility committee takes responsibility for the development and supervision of
procedures and systems to ensure the pursuit of our citizenship and environmental goals. The committee’s written terms of reference cover the
following areas:

establishing principles governing corporate social responsibility and environmental policies.

ensuring transparency and openness at all levels in our business conduct in the context of our pursuit of our corporate social
responsibility and environmental goals.

establishing an operating council responsible for developing and implementing policies and strategies to achieve our citizenship and
environmental goals and ensuring group-wide capabilities to execute such policies and strategies.

ensuring and overseeing the communication of our status and progress in the implementation of policies, strategies, regulatory
compliance and engagement with all stakeholders.

considering other topics as appropriate.
Corporate governance
As part of our company’s commitment to best practice in corporate governance matters, we have implemented a number of measures to
enhance internal control and risk management within our company.
Internal audit
Our internal audit department reports to the audit committee, which reviews and approves the internal audit work program for each year.
The internal audit department comprises 18 full-time internal staff covering a range of disciplines and business expertise. Its objective is to
provide assurance to the board of directors on internal controls across the group. For this purpose, the head of the internal audit department
makes regular presentations to the audit committee.
115
The internal audit function monitors the internal financial control system across all the countries in which we operate and reports to
management and the audit committee on its findings. The work of the internal auditors is focused on the areas of greatest risk to the company,
determined by using a risk management approach to audit planning. Audit reports and recommendations are prepared subsequent to each audit
and appropriate measures are taken to implement such recommendations. A summary report setting forth a summary of all significant
recommendations and relevant measures is provided to the audit committee and board of directors. The managing director, along with the
relevant regional and country managers, as well as the group’s chief financial officer, general counsel and corporate controller receive a copy
of issued reports.
Disclosure committee
A disclosure committee has been established and disclosure controls and procedures were adopted to ensure the accuracy and
completeness of the company’s public disclosures. The disclosure committee comprises the company’s chief financial officer, general counsel,
corporate controller and director of investor relations.
The identification and management of risk
The company has in place a risk management function for the identification, assessment and control of key business risks. Risks covered
are those arising from a range of sources in three broad categories: the external environment in which the business operates, business processes,
and the information available for business decisions. The risk identification and assessment process has been incorporated as part of the
company’s annual business plan process since 2001. This covers all countries and involves senior management of the company and of each
business unit. The process enables a regular review to take place by management of the risks associated with the business and the plans to
address them. It consists of four stages:

pre-business plan workshop in risk assessment at country and group level involving all senior management.

alignment of key identified business risks with specific business plan activities during business plan preparation.

post-business plan country and group level review of the effectiveness of risk management action plans.

regular audit of progress in management of key risks.
Accountability
Financial and other authorization limits have been set and procedures for approving capital and investment expenditure have been
established. The country is the basic unit for purposes of business performance and our policy is to maintain accountability at the country level.
Head office functions focus on policy and group issues and provide support functions and expertise where it is not practical or efficient to
provide these at a country level.
Certain differences between our practices and the corporate governance listing standards of the New York Stock Exchange
Greek corporate law and our corporate practices differ in certain respects from the corporate governance listing standards of the New York
Stock Exchange. In particular, these standards require US companies listed on the New York Stock Exchange to have a majority of
independent directors on their board and to have a nominating/corporate governance committee and a compensation committee,
116
both entirely comprised of independent members. Based on the shareholders’ agreement (described in detail below under Item 7, “Major
Shareholders and Related Party Transactions”) between the Kar-Tess Group and The Coca-Cola Company Entities, four of our directors are
designated by The Kar-Tess Group and two are designated by The Coca-Cola Company. We have also appointed five directors that our board
has determined to be independent: Mr. Kent Atkinson, Sir Michael Llewellyn-Smith, Mr. Antonio D’Amato, Mr. Samir Toubassy and
Mr. Nigel Macdonald. Our human resources committee, which fulfils certain duties of the nominating/corporate governance committee and the
compensation committee, is, in turn, comprised of Sir Michael Llewellyn-Smith, Mr. Alexander Cummings and Mr. George A. David. Our
human resources committee does not have sole authority to determine our managing director’s compensation.
We are continually reviewing our corporate governance standards and procedures in light of the relevant debates and rulemaking projects
in Greece, Europe and the United States, in order to ensure that our corporate governance systems remain in line with international best
practices.
D. Employees
Employees
The following table provides a breakdown by activity and by segment of the average number of our full-time employees on a full-time
equivalent basis, including the employees of our subsidiaries, in 2006, 2005 and 2004.
(1)
Average number of
employees in (1)
2006
2005
2004
By Activity
Production and Warehousing
Sales and Marketing
Administration
Distribution
Total
14,975
15,726
4,871
5,035
40,607
14,549
15,319
4,868
4,484
39,220
14,148
14,077
4,904
4,538
37,667
By Segment
Established Countries
Developing Countries
Emerging Countries
Total
9,530
7,091
23,986
40,607
8,653
7,387
23,180
39,220
8,871
6,904
21,892
37,667
In addition to the information presented in the table above, we consider the 501 employees of Brewinvest S.A.’s CSD business, a joint
venture in which we own 50%, to be our employees. We also consider the 1,485 and the 349 of the employees of the Multon Z.A.O. group
and Fresh & Co, respectively, joint ventures in which we own 50%, to be our employees. However, for US GAAP purposes, the results of
these entities are not consolidated into our results of operations, but are reflected in our share of income of equity method investees.
We employ a significant number of seasonal employees each year to meet the increased demand for our products during the second and
third quarters. On average, on an annual basis we employ in excess of 3,700 seasonal employees.
Approximately 30% of our employees were members of the 36 independent trade unions operating in our business as of December 31,
2006. Trade union participation varies within our unionized countries, for example, in Nigeria over 80% of our nearly 6,800 permanent
employees are union members. Part of our workforce in Austria, Bulgaria, Croatia, Greece, the Republic of Ireland, Romania, Northern Ireland,
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Italy, the Russian Federation, Slovenia, Serbia and Montenegro are also unionized. A further 57% of Coca-Cola HBC employees are covered
by collective labor agreements. Typically, these agreements cover procedural and substantive issues including terms and conditions of
employment, employment benefits, access to training, grievance and disciplinary procedures, right of appeal and health and safety in the
workplace.
We are committed to communicating directly with all employees, whether unionized or not, about major change initiatives. In the event of
redundancies, consultation takes place with employees and their representatives on the reasons for the change, the impact and the implications
for affected employees. We aim to develop a working environment where employees are valued, respected and able to develop the skills
necessary to address our challenging business needs. A unionized labor environment carries a risk of industrial action. However, we consider
our relationship with our workforce to be good.
In 2004, political strikes against governmental increases in fuel prices organized by the food and drinks industrial unions in Nigeria
resulted in a 15 day disruption to our plants there. In the first half of 2006 local restructuring programs resulted in industrial unrest in Greece
and Croatia . In February 2006, an occupation of two warehouses and a plant in Croatia by a minority of employees ended after ten days when
it was ruled to be illegal by the courts. Continuity of supply was not disrupted and our planned changes were implemented. In Greece, a
restructuring program announced in January 2006 led to protests which included sporadic stoppages of short duration. The program was
finalized in March 2006. There were no other major business disruptions resulting from strikes or other industrial relations matters in the past
five years.
The Coca-Cola HBC European Works Council, “EWC”, was established in 2002 under the European Works Council Directive 94/45/EU.
This forum previously comprised of employee and management representatives from Austria, Greece, Italy, Northern Ireland and the Republic
of Ireland. In 2005, representation was expanded to include operations in our countries that joined the European Union in 2004, namely the
Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. In 2007 our EWC will be enlarged to include
representatives from the most recently admitted members of the EU, Bulgaria and Romania as well as Cyprus which became one of our
territories in 2006. Our EWC is comprised of representatives of management and representatives of employees. It provides an annual forum for
consultation on transnational matters affecting more than one of our countries in the European Union. Under the terms of the agreement, the
parties undertake to participate in the council in a spirit of co-operation, good faith and mutual trust. The operation of the council does not
affect the exclusive right of management to make business, financial, commercial and technological decisions.
The health, safety and welfare of our employees are paramount, and we are committed to achieving the most stringent standards of
workplace safety and health. In 2004, we adopted a new Occupational Health and Safety Policy and launched a three-year group-wide initiative
to introduce the Occupational Health and Safety Assessment Series, or “OHSAS”, 18000 across all territories. The new health and safety
program is designed to enhance both performance and conformance by implementing independently certificated and standardized OHSAS
18000 systems. Compliance with national occupational health and safety standards, our previous standard, still remains the minimum
requirement in all operations.
E. Share Ownership
Except as disclosed below under Item 7 “Major Shareholders and Related Party Transactions—Major shareholders”, as of the date of this
annual report, none of the members of our board of directors beneficially owns more than 1% of our ordinary shares.
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ITEM 7
A.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major shareholders
Prior to acquisition of Coca-Cola Beverages plc, The Kar-Tess Group had a 68.6% interest in us, while The Coca-Cola Company held,
directly and indirectly, 50.5% and The Olayan Group, a diversified multinational Saudi Arabian group which holds an interest in the bottler of
products of The Coca-Cola Company for Saudi Arabia, held 10.8% of the outstanding share capital of Coca-Cola Beverages plc. The
Coca-Cola Company and the Olayan Group exchanged their entire shareholdings in Coca-Cola Beverages plc for our ordinary shares at the
time of the acquisition.
Our principal shareholders are Boval S.A. and Kar-Tess Holding S.A. (both of which are Luxembourg companies and which together
comprise The Kar-Tess Group), jointly holding approximately 29.7% of our outstanding ordinary shares, and The Coca-Cola Company, which
indirectly holds approximately 23.4% of our outstanding ordinary shares. Four members of our board of directors, Mr. G. A. David,
Mr. A. G. David, Mr. A. Leventis and Mr. H. Leventis, were nominated by The Kar-Tess Group and elected in accordance with the provisions
of a shareholders’ agreement between The Kar-Tess Group and The Coca-Cola Company Entities. You should read “The shareholders’
agreement between The Kar-Tess Group and The Coca-Cola Company Entities” for a more detailed description of the shareholders’ agreement.
By virtue of their responsibilities within The Kar-Tess Group, Mr. G. A. David, Mr. A. G. David, Mr. A. Leventis and Mr. H. Leventis may be
deemed, under the rules of the US Securities and Exchange Commission, to be the beneficial owners of our ordinary shares held by The
Kar-Tess Group. However, each of these individuals disclaims such beneficial ownership.
The Coca-Cola Company holds its shares through five companies that are parties to the shareholders’ agreement with The Kar-Tess Group
relating to us and which constitute The Coca-Cola Company Entities: Coca-Cola Overseas Parent Limited, The Coca-Cola Export Corporation,
Barlan, Inc. and Refreshment Product Services, Inc., each a Delaware company, and Atlantic Industries, a Cayman Islands company. The
shares held by The Coca-Cola Company Entities are all beneficially owned by CCHBC Grouping, Inc., a Delaware company and an indirect,
wholly-owned subsidiary of The Coca-Cola Company. Messrs. Cummings and Finan were nominated by The Coca-Cola Company and elected
in accordance with the provisions of the shareholders’ agreement between The Kar-Tess Group and The Coca-Cola Company Entities.
In addition, by reason of the shareholders’ agreement between The Kar-Tess Group and The Coca-Cola Company Entities, The Kar-Tess
Group and The Coca-Cola Company may be deemed to constitute a “group” pursuant to the rules of the US Securities and Exchange
Commission, and each may be deemed to have a beneficial ownership interest in our shares held by the other. However, each of Mr. G. A.
David, Mr. A. G. David, Mr. A. Leventis and Mr. H. Leventis, Kar-Tess Holding, Boval S.A. and Socomex S.A., The Coca-Cola Company
Entities and CCHBC Grouping for all purposes and in all jurisdictions disclaims any such beneficial ownership interest.
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The chart below describes the interests held in us by The Kar-Tess Group and The Coca-Cola Company as at June 20, 2007.
(1)
(2)
Collectively, The Kar-Tess Group.
The shares held by The Coca-Cola Company Entities are all beneficially owned by CCHBC Grouping, Inc., a Delaware company and
an indirect wholly-owned subsidiary of The Coca-Cola Company.
The table below sets forth the interests equal to or exceeding 5% of our outstanding share capital notified to us by the relevant
shareholders as at June 20, 2007.
Percentage of
ordinary
shares %
As at
June 20, 2007
Name
The Kar-Tess Group (1)(2)
Kar-Tess Holding S.A. (1)(2)
Boval S.A.
The Coca-Cola Company
Coca-Cola Overseas Parent Limited (3)
Atlantic Industries (3)
Other shareholders related to The Coca-Cola Company (3)
The Olayan Group
Competrol Establishment
(1)
Number of
ordinary
shares
As at
June 20, 2007
23.5
6.2
29.7
56,978,932
14,869,250
71,848,182
12.4
7.9
3.1
23.4
30,001,980
19,182,913
7,556,493
56,741,386
5.0
12,105,263
Kar-Tess Holding S.A. restructured its investment in Coca-Cola Hellenic Bottling Company S.A. on November 18, 2003. As a result of
this restructuring, 22,319,386 or approximately 9.4% of Coca-Cola Hellenic Bottling Company S.A.’s ordinary shares were transferred
from Kar-Tess Holding S.A. to individuals and entities who were either current shareholders of Kar-Tess Holding S.A. or persons or
entities nominated by them, none of whom has acquired more than 2.5% of the outstanding ordinary shares of Coca-Cola Hellenic
Bottling Company S.A. All buyers and transferees committed to a twelve-month lock-up effective as of the date of this restructuring
transaction.
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(2)
On December 30, 2005, Kar-Tess Holding S.A. informed us that it merged with our shareholder Socomex S.A. Therefore, the
11,351,312 shares in Coca-Cola Hellenic Bottling Company S.A. previously owned by Socomex S.A. are now owned by Kar-Tess
Holding S.A.
(3)
These shares are all beneficially owned by CCHBC Grouping, Inc., a Delaware company and an indirect, wholly-owned subsidiary of
The Coca-Cola Company.
Except as set forth in the shareholders’ agreement between The Kar-Tess Group and The Coca-Cola Company Entities, none of our major
shareholders have special voting rights. You should read “The shareholders’ agreement between The Kar-Tess Group and The Coca-Cola
Company Entities” below for a more detailed description of the voting rights of, and the voting arrangements among, the parties to the
shareholders’ agreement.
B. Related Party Transactions
Our relationship with The Coca-Cola Company
The Coca-Cola Company system
The Coca-Cola system is based on a division of functions between The Coca-Cola Company and its various bottlers that is intended to
optimize the production, marketing and distribution of The Coca-Cola Company’s beverages world-wide.
The Coca-Cola Company owns the trademarks of the beverages of The Coca-Cola Company, controls the global marketing of The
Coca-Cola Company’s brands and supplies the bottlers of The Coca-Cola Company’s products with the concentrate for such products.
In their local markets, the bottlers of The Coca-Cola Company’s products undertake to:

produce the products of The Coca-Cola Company.

engage in local marketing and promotional activities customized to the particular circumstances of the markets in which they operate.


establish business relationships with local customers and develop local distribution channels, for example, by investing in cold drink
equipment, such as coolers.
distribute the products of The Coca-Cola Company to retailers either directly or indirectly through wholesalers.
The Coca-Cola Company maintains relationships with independently owned bottlers in whom The Coca-Cola Company has no ownership
interest, with bottlers in which The Coca-Cola Company has invested and holds a non-controlling ownership interest and with bottlers in which
The Coca-Cola Company has invested and holds a controlling ownership interest.
Key bottler of The Coca-Cola Company
We are one of the world’s largest bottlers of The Coca-Cola Company’s products, and we believe that we have strategic importance within
the Coca-Cola system. As one of The Coca-Cola Company’s key bottlers, we work closely with The Coca-Cola Company, utilizing our
respective skills and assets to maximize the opportunities to increase sales in our countries and, ultimately, increase value over the long-term to
our shareholders. In 2006, the products of The Coca-Cola Company accounted for approximately 93% of our total sales volume. The
Coca-Cola Company has also licensed to us the use of The Coca-Cola Company trademark in our corporate names. We view our objectives as
being aligned with The Coca-Cola Company’s objectives and The Coca-Cola Company shares this view.
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Bottlers’ agreements
The Coca-Cola Company has the ability to exert significant influence over the conduct of our business under a number of bottlers’
agreements entered into between The Coca-Cola Company and our operating companies for the countries in which we operate. Bottlers’
agreements are the standard contracts that The Coca-Cola Company enters into with bottlers outside the United States for the sale of
concentrate for The Coca-Cola Company’s trademarked beverages. All the bottlers’ agreements entered into by The Coca-Cola Company and
ourselves with respect to our non-European Union markets are in the form of The Coca-Cola Company’s standard international bottlers’
agreements. The bottlers’ agreements for our European Union countries, including Austria, Greece, Italy (Northern and Central), Northern
Ireland and the Republic of Ireland, are The Coca-Cola Company’s standard European Union bottlers’ agreements. On August 19, 2003, we
announced that The Coca-Cola Company has granted an extension of the bottlers’ agreements between us and The Coca-Cola Company
covering the 26 countries in which we operated at that time, effective on January 1, 2004 and for an initial term of ten years, lasting until
December 2013, with the option to request a further ten-year extension to 2023. The new agreements cover our developing countries that
entered the European Union on May 1, 2004. These are in the form of European Union International Bottlers’ Agreements. On May 1, 2004,
we received waivers from The Coca-Cola Company bringing the existing bottlers’ agreements for countries entering the European Union on
May 1, 2004 in compliance with European Union rules of competition until such time as negotiations for new bottlers’ agreements have been
completed and new agreements have been entered into. Any provisions in the existing bottlers’ agreements which were not in compliance with
the European Union rules of competition were waived. In all other respects the provisions of these bottlers’ agreements remain in full force
and effect.
On July 30, 1999, The Coca-Cola Company announced that it had completed the acquisition of the beverage brands of Cadbury
Schweppes plc in certain countries. Schweppes Holdings Limited, a wholly owned subsidiary of The Coca-Cola Company, has granted to us
the rights to sell and distribute these beverages in the Republic of Ireland and Northern Ireland pursuant to bottlers’ agreements substantially
similar to the standard European Union bottlers’ agreement and in Greece, Nigeria, the Russian Federation, Bulgaria, Bosnia and Herzegovina,
Croatia, Ukraine, the Former Yugoslav Republic of Macedonia, Slovenia, Estonia, Lithuania and Latvia pursuant to bottlers’ agreements
substantially similar to the standard international bottlers’ agreement of The Coca-Cola Company, except that the bottlers’ agreements for
Bosnia and Herzegovina, Croatia and Slovenia are renewable for an additional term of five years.
International bottlers’ agreements (for countries outside the European Economic Area)
Exclusivity. Our operating companies have the right to produce and the exclusive rights granted by The Coca-Cola Company in their
territories to sell and distribute those beverages of The Coca-Cola Company in those containers, such as glass bottles, plastic bottles and/or
cans, specifically identified in each agreement. The Coca-Cola Company retains the right to produce and sell, or authorize third parties to
produce and sell, beverages of The Coca-Cola Company in any manner or form not specified in the bottlers’ agreement within the relevant
territory. The Coca-Cola Company also retains the right to produce or authorize third parties to produce the products covered by the agreement
in the territory of the operating company for sale outside that territory. The international bottlers’ agreements also contemplate that there may
be instances in which large or special buyers have operations transcending the boundaries of our operating company’s territories and, in such
instances, our operating companies agree not to oppose any additional measures deemed necessary by The Coca-Cola Company to improve
sales and distribution to such customers. Our local operating companies are prohibited from producing or handling any beverage product other
than products of The Coca-Cola Company or from acquiring or holding an interest in a
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party that engages in such business in the territories covered by these agreements without The Coca-Cola Company’s prior consent.
Supply of concentrate. Our international bottlers’ agreements require us to purchase all our requirements of concentrate for beverages of
The Coca-Cola Company from The Coca-Cola Company and its authorized suppliers. The Coca-Cola Company sells concentrate to us at prices
that The Coca-Cola Company determines on an annual basis in its sole discretion, including the conditions of shipment and payment as well as
the currency of the transaction. The Coca-Cola Company normally increases concentrate prices after discussions with us so as to reflect trading
conditions in the relevant country.
Packaging of the products of The Coca-Cola Company. We must distribute all the products of The Coca-Cola Company in containers
authorized by The Coca-Cola Company. The Coca-Cola Company has the right to approve, in its sole discretion, any kind of packages and
containers for The Coca-Cola Company’s beverages, including their size, shape and other attributes. The Coca-Cola Company may, in its
sole discretion, redesign or discontinue any package of any beverage of The Coca-Cola Company, subject to certain limitations, so long as
The Coca-Cola Company’s beverages covered by the relevant agreement are not all discontinued. We must purchase all containers, closures,
cases and other packaging materials and labels from manufacturers approved by The Coca-Cola Company. The Coca-Cola Company is the
sole owner of the trademarks that identify The Coca-Cola Company’s beverages and of the secret formulae used in concentrates. We are
prohibited from producing other products or packages that would imitate, infringe or cause confusion with the products, trade dress,
containers or trademarks of The Coca-Cola Company, or from acquiring or holding an interest in a party that engages in such activities.
Other conditions. We are required to maintain adequate production and distribution facilities and inventories of bottles, caps, boxes,
cartons and other exterior packaging or materials as well as to undertake adequate quality control measures prescribed by The Coca-Cola
Company. We also undertake to develop, stimulate and meet the demand for The Coca-Cola Company’s beverages and use all approved means
and spend such funds on advertising and other forms of marketing as may be reasonably required to meet that objective and to maintain sound
financial capacity to secure the performance of our obligations to The Coca-Cola Company. We are required to submit to The Coca-Cola
Company for each of our territories an annual business plan, which must be acceptable to The Coca-Cola Company. In practice, however, we
work closely with The Coca-Cola Company to develop our annual business plan in light of the then prevailing trading conditions in each
territory.
Trans-shipping. Our operating companies are prohibited from making sales of The Coca-Cola Company’s beverages outside of their
prescribed territories or to anyone intending to resell the beverages outside those territories without the consent of The Coca-Cola Company.
The Coca-Cola Company may impose financial penalties on operating companies whose products are found in another bottler’s territory or
even cancel the license for the type of containers found in the other bottler’s territory.
Pricing. Our operating companies set the price of products sold to retailers at their discretion. The Coca-Cola Company is also entitled,
to the extent permitted by local law, under the bottlers’ agreements to set the maximum price we may charge to our customers in countries
outside the European Union. In practice, we work closely with The Coca-Cola Company to determine our pricing strategy in light of the trading
conditions prevailing at the relevant time in each of these countries. The combination of The Coca-Cola Company’s right to set our concentrate
prices and its right to limit our selling prices in our countries outside the European Union could give The Coca-Cola Company considerable
influence over our gross profit margins.
Assignment/Change of control. Each operating company is prohibited from assigning, transferring or pledging its bottlers’ agreement
with The Coca-Cola Company, or any interest in it, whether voluntarily or involuntarily, without the consent of The Coca-Cola Company. In
addition, our operating company may not undergo a change of control without the consent of The Coca-Cola Company.
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Term. The international bottlers’ agreements expire in 2013. If our operating companies have complied fully with the agreements
during the initial term, are “capable of the continued promotion, development and exploitation of the full potential of the business” and request
an extension of the agreement, an additional term until 2023 may be granted in The Coca-Cola Company’s sole discretion.
Termination. Either party to an international bottlers’ agreement may, with 60 days’ written notice to the other party, terminate the
bottlers’ agreement in the event of non-compliance of the other party with its terms so long as the party in non-compliance has not cured such
noncompliance during this 60-day period. Either party may also terminate the agreement by written notice to the other party if its terms violate
applicable law or if any of the parties is unable to legally obtain foreign exchange to remit abroad in payment of imports of concentrate.
In addition, The Coca-Cola Company may terminate an international bottlers’ agreement with any of our operating companies
immediately by written notice to our operating company in the event that:

the operating company suspends payments to creditors, declares bankruptcy, is declared bankrupt, is expropriated or nationalized, is
liquidated or dissolved or if a receiver is appointed to manage the business of the operating company.

the operating company transfers control, assigns the bottlers’ agreement, delegates performance under the agreement or fails to report
to The Coca-Cola Company material changes in its ownership.

if the operating company or any individual or legal entity that controls, owns a majority of the shares in or, directly or indirectly,
influences the management of the operating company engages in the production of non-alcoholic beverages other than The Coca-Cola
Company’s non-alcoholic beverages, whether through direct ownership of such operations or through control or administration thereof,
provided that, upon request, the operating company shall be given six months to remedy such situation.
Moreover, if an operating company does not wish to pay the required price for concentrate for the beverage “Coca-Cola”, it must so notify
The Coca-Cola Company in writing within 30 days of receipt of The Coca-Cola Company’s new prices, in which case the bottlers’ agreement
in relation to concentrate for the beverage “Coca-Cola” will terminate automatically 3 months after the date of such notice. In case an operating
company refuses to pay the required price for concentrate other than concentrate for the beverage “Coca-Cola”, The Coca-Cola Company may
at its option cancel the bottlers’ agreement in relation to such concentrate or terminate the entire agreement, in each case with three months’
written notice.
In addition to The Coca-Cola Company’s termination rights described above, if our operating company does not comply with the
standards and instructions established by The Coca-Cola Company relating to the production of the licensed products, The Coca-Cola
Company is entitled to suspend the operating company’s authorization to produce such products of The Coca-Cola Company until the default
has been corrected to The Coca-Cola Company’s satisfaction. The Coca-Cola Company may also elect, in the event that an operating company
breaches the terms of the agreement with respect to a particular product, to cancel the authorization granted to such operating company under
the agreement in respect of that product.
European Union bottlers’ agreements
Exclusivity. Our operating companies have the right to produce and the exclusive rights granted by The Coca-Cola Company in their
territories to sell and distribute the products of The Coca-Cola Company in those containers, such as glass bottles, plastic bottles and/or cans,
specifically identified in each agreement. The Coca-Cola Company retains the right to produce and sell, or authorize third parties
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to produce and sell, the beverages in any manner or form not specified in the bottlers’ agreement within the relevant territory. The Coca-Cola
Company also retains the right to produce, or authorize third parties to produce in the territory of the operating company, the products covered
by the agreement for sale outside that territory. The European Union bottlers’ agreements also contemplate that there may be instances in
which large or special buyers have operations transcending the boundaries of the operating company’s territories. In such instances, our
operating companies agree not to oppose, without valid reason, any additional measures deemed necessary by The Coca-Cola Company to
improve sales and distribution to such customers. Our operating companies also agree not to oppose any measures taken by The Coca-Cola
Company in compliance with the competition rules of the European Economic Area.
Supply of concentrate. The provisions of the European Union bottlers’ agreements relating to the supply of concentrate are substantially
similar to the corresponding provisions of the international bottlers’ agreements described above.
Packaging of the products of The Coca-Cola Company. The provisions of the European Union bottlers’ agreements relating to the
packaging of the products of The Coca-Cola Company are substantially similar to the corresponding provisions of the international bottlers’
agreement described above.
Other conditions. The European Union bottlers’ agreements contain substantially similar conditions to the conditions of the
international bottlers’ agreements described above.
Trans-shipping. Our operating companies are prohibited from making sales of The Coca-Cola Company’s beverages outside their
prescribed territories, or to anyone intending to resell these beverages outside those territories, without the consent of The Coca-Cola
Company, except for sales arising out of an unsolicited order from a customer in another Member State of the European Economic Area or
sales to a customer intending to export to another such Member State. The Coca-Cola Company may impose financial penalties on operating
companies whose products are found in another bottler’s territory in violation of the bottlers’ agreement or even cancel the license for the type
of containers found in the other bottler’s territory.
Pricing.
Our operating companies set the price of products sold to retailers in their discretion.
Assignment/Change of control. The assignment and change of control provisions of the European bottlers’ agreement are substantially
similar to the assignment provisions of the international bottlers’ agreements described above.
Term. The European Union bottlers’ agreements expire in 2013, unless terminated earlier as provided in the agreements. If our
operating companies have complied fully with the agreements during the initial term, are “capable of the continued promotion, development
and exploitation of the full potential of the business” and request an extension of the agreement, an additional term until 2023 may be granted
in the sole discretion of The Coca-Cola Company. The bottlers’ agreement relating to the production, distribution and sale of products of The
Coca-Cola Company in Greece does not specifically provide for our ability to request the renewal of such agreement.
Termination. The termination provisions of the European Union bottlers’ agreements are substantially similar to the termination
provisions of the international bottlers’ agreements described above, except that the European Union bottlers’ agreements may not be
terminated in connection with the violation of terms that are particular to the international bottlers’ agreements, such as the restriction on the
production of beverages other than beverages of The Coca-Cola Company.
Purchase of concentrate, other raw materials and finished goods
Our operating companies purchase concentrate and other items such as finished products from The Coca-Cola Company and its
subsidiaries. The total purchases of concentrate for 2006 amounted to
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€ 1,049.3 million as compared to € 905.5 million in 2005 and € 857.7 in 2004. In addition to concentrate, we purchase from The Coca-Cola
Company finished goods and other materials. The cost of these purchases amounted to € 87.6 million in 2006, as compared to € 89.4 million
in 2005 and € 49.7 million in 2004. In 2006, we purchased concentrate from Beverage Partners Worldwide, a joint venture between The
Coca-Cola Company and Nestlé S.A., on an arm’s length basis amounting to € 73.0 million compared to € 44.2 million in 2005 and €
27.8 million in 2004. As of December 31, 2006, we owed € 6.5 million to Beverage Partners Worldwide and Beverage Partners Worldwide
owed to us € 1.4 million. This compared with € 2.4 million owed to Beverage Partners Worldwide and € 0.4 million owed by Beverage
Partners Worldwide to us, as at December 31, 2005.
Marketing and promotional support
The Coca-Cola Company makes contributions to us in respect of marketing and promotional support programs to promote the sale of its
products in our territories. Contributions received from The Coca-Cola Company for marketing and promotional support programs amounted
to € 50.4 million, € 39.8 million and € 47.0 million for the years ended December 31, 2006, 2005 and 2004, respectively. These contributions,
if related to payments we make to specific customers for marketing and promotional incentives, are recognized as a reduction of our payments
to customers. These payments to customers, net of contributions received from The Coca-Cola Company, are deducted from sales revenue. In
2006, such contributions totaled € 29.9 million as compared to € 17.6 million in 2005 and € 21.1 million in 2004. Payments for marketing
programs not specifically attributable to a particular customer are recognized as either a reduction of selling, delivery and expenses or cost of
goods sold. In 2006, these contributions amounted to € 20.5 million compared to € 22.2 million in 2005 and € 25.9 million in 2004. The levels
of support programs are jointly determined annually on a territory-by-territory basis to reflect the mutually agreed annual marketing plan for
that territory and expected sales volume for the year. The Coca-Cola Company is under no obligation to participate in the programs or
continue past levels of funding into the future. Given our relationship with The Coca-Cola Company to date, there is no reason to believe that
such support will be reduced or withdrawn in the future.
The Coca-Cola Company also makes support payments for the placement of cold drink equipment, in recognition of the importance of our
strategy to invest in the placement of cold drink equipment in order to increase higher margin immediate consumption sales. Support payments
are recognized over the life of the asset. The total amount of such payments totaled € 83.3 million in 2006 as compared to € 26.6 million in
2005 and € 15.0 million in 2004. Payments received are deferred and amortized over the life of the asset and are recognized as a reduction to
our selling expenses. These support payments are subject to reimbursement if certain conditions stipulated in the agreements are not met
including minimum volume. Further support payments are made solely at the discretion of The Coca-Cola Company.
Recent acquisitions with The Coca-Cola Company
We and The Coca-Cola Company are jointly pursuing the development or acquisition of mineral water and juice opportunities with view
toward expanding our presence in the water and juice segments. As part of this strategy, we have a common understanding with The Coca-Cola
Company with respect to water acquisitions, whereas we will have full ownership of the operating assets and exercise managerial control over
the relevant business, while The Coca-Cola Company will own the brands and, jointly with our company, the water source in the case of
mineral waters. Where a separation of brands from operating assets is not feasible due to legal or tax reasons, the acquired property will
continue to be jointly owned by The Coca-Cola Company and us. In that case, we will retain the management and operational control of the
acquired business and we will work with The Coca-Cola Company towards the eventual transfer of the brands to The Coca-Cola Company on a
cost-neutral basis. In relation to juice acquisitions, we each own
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50% of the jointly acquired entities to date, the Multon Z.A.O. group and Fresh & Co, which we account for as joint ventures.
In 2006, we jointly acquired with The Coca-Cola Company Fresh & Co., a Serbian juice producer. In 2006, we also jointly acquired with
The Coca-Cola Company Fonti del Vulture S.r.l., an Italian mineral water company. In 2005, we jointly acquired with The Coca-Cola
Company the Multon Z.A.O. group, a Russian juice manufacturer and Vlasinka d.o.o., a Serbian mineral water company. In 2005, we also
acquired Bankya Mineral Waters Bottling Company EOOD, a Bulgarian mineral water company. We subsequently sold the Bankia trademark
to The Coca-Cola Company. For additional information on these acquisitions, see Item 5 “Operating and Financial Review and
Prospects—Major recent transactions.”
Amounts payable to and receivable from The Coca-Cola Company
At December 31, 2006, The Coca-Cola Company owed us € 65.9 million, as compared to € 68.6 million as at December 31, 2005, and €
45.1 million as at December 31, 2004. We owed The Coca-Cola Company a total of € 110.8 million compared to € 92.0 million and €
69.3 million as at December 31, 2006, 2005 and 2004, respectively.
Other transactions with The Coca-Cola Company
We enter into a number of other transactions with The Coca-Cola Company in the context of our business relationship. In 2005, we sold
trademarks to The Coca-Cola Company for total cash proceeds of € 6.4 million. The entire amount related to the sale of the Bankia water
brand. In 2004, we sold trademarks to The Coca-Cola Company for total cash proceeds of € 11.2 million. Of this, € 8.6 million related to the
sale of Gotalka water brands, particularly Bistra, and the remainder to the sale of the Bosnian water brand, Olimpija. The € 2.6 million payment
for the Olimpija brand was outstanding as at December 31, 2004, and payment was received in the first quarter of 2005.
Other income primarily comprises rent, facility and other costs of € 2.0 million in 2006 compared to € 2.1 million in 2005 and € 1.7
million in 2004 and a toll-filling relationship in Poland of € 15.6 million in 2006 compared to € 11.4 million in 2005 (there was no such income
in 2004). Other expenses in 2006 relate to facility costs charged by The Coca-Cola Company, a toll-filling relationship and shared costs. These
other expenses amounted to € 4.0 million in 2006, € 1.4 million in 2005 and € 4.2 million in 2004. Other than with respect to toll-filling
arrangements, balances are included in selling, delivery and administrative expenses.
During 2006, we sold € 16.6 million of finished goods and raw materials to The Coca-Cola Company, compared to sales of € 11.8 million
for 2005 and € 8.4 million for 2004. We purchased € 0.8 million of fixed assets from The Coca-Cola Company for the year ended
December 31, 2004. No fixed assets were purchased in the years ended December 31, 2006 or 2005.
All transactions with The Coca-Cola Company are conducted on an arm’s length basis.
Other Coca-Cola Bottlers
In 2006, we purchased € 2.5 million of finished goods compared to € 0.8 million in 2005 and € 1.6 million in 2004, and incurred expenses
of € 1.6 million in 2006 (no expenses were incurred in either 2005 or 2004) to other Coca-Cola bottlers where The Coca-Cola Company has
significant influence. At December 31, 2006, we owed to such bottlers € 0.4 million compared to € 0.2 million as at December 31, 2005. As at
December 31, 2006, these bottlers owed to us € 0.4 million (there were no outstanding balances as at December 31, 2005).
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Our relationship with The Kar-Tess Group
Supply agreement with Frigoglass S.A.
Until June 2000, we owned 20% of Frigoglass S.A., a company listed on the Athens Stock Exchange which manufactures coolers, PET
resin, glass bottles, crowns and plastics. Boval S.A. of the Kar-Tess Group currently owns 44.1% of Frigoglass S.A.
Under the terms of a supply agreement that we entered into with Frigoglass S.A. in 1999 initially set to expire on December 31, 2004, but
extended in June 2004, on substantially similar terms, to December 31, 2008, we are obligated to obtain at least 60% of our annual
requirements of coolers, glass bottles, PET resin, PET preforms, as well as plastic closures, crates, sleeves and labels from Frigoglass S.A. The
prices at which we purchase these products are agreed between us and Frigoglass S.A. at the beginning of each year. If an agreement is not
reached, the applicable prices will be determined based on the average prices of non-exclusive other primary European suppliers to The
Coca-Cola Company’s European bottlers. We have the status of most favored customer of Frigoglass S.A., which means that the price to us
must be less than the prices charged to other customers of Frigoglass S.A. that do not have this status and any orders placed by us must be dealt
with in absolute priority with respect to orders from those other customers. Frigoglass S.A., however, is not required to apply most favored
customer pricing for any product for which they provide us with less than 50% of our annual supply requirements. In addition, most favored
customer status does not apply to any products which we purchase from Frigoglass S.A. which are categorized as commodities and for which
we have requested, and have received, fixed prices.
In 2006, we made purchases from Frigoglass S.A. totaling € 209.4 million compared to € 143.8 million in 2005 and € 165.1 million in
2004. In 2006, we purchased from Frigoglass S.A. € 33.7 million of raw and packaging materials and € 175.7 million of coolers and other cold
drink equipment and spare parts. This compares with € 55.8 million and € 88.0 million, respectively, in 2005 and € 66.3 million and €
98.8 million, respectively, in 2004. As at December 31, 2006, we owed a net balance of € 14.7 million to Frigoglass S.A. in connection with
the supply agreement, compared to € 6.1 million as at December 31, 2005. All transactions with Frigoglass S.A. are conducted on an arm’s
length basis. Frigoglass S.A. has a controlling interest in Frigoglass Industries (Nigeria) Limited, a company in which we have a 16.0%
effective interest through our investment in Nigerian Bottling Company plc.
Leventis Overseas and AG Leventis (Nigeria) plc
Leventis Overseas and AG Leventis (Nigeria) plc are related to us by way of common directors where significant influence exists. During
2006, our Nigerian subsidiary purchased from Leventis Overseas and AG Leventis (Nigeria) plc chemicals, raw materials, spare parts and fixed
assets totaling € 18.5 million. This compares to € 9.9 million for 2005 and € 6.8 million for 2004. In 2006, we incurred rental expenses of €
0.2 million, compared to rental expenses of € 1.1 million and € 0.9 for 2005 and 2004, respectively. At December 31, 2006, we owed to
Leventis Overseas and AG Leventis (Nigeria) plc € 2.0 million and Leventis Overseas and AG Leventis (Nigeria) plc owed € 0.1 million to us,
compared to € 2.2 million and € 0.2 million, respectively, as at December 31, 2005.
Plias S.A.
Plias S.A. is related to us by way of some common shareholdings. In 2006 and 2005, we made no sales of finished goods to Plias S.A. and
its subsidiaries, compared with sales of € 3.8 million in 2004. During 2006, we made no purchases of finished goods and fixed assets from
Plias S.A., compared to € 0.8 million in 2005. There were no such purchases in 2004. At December 31, 2006, there were no receivables from
and payables to Plias S.A. and its subsidiaries, compared to a net receivable of € 0.7 million as at December 31, 2005.
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The shareholders’ agreement between The Kar-Tess Group and The Coca-Cola Company Entities
General
On November 3, 1999, The Kar-Tess Group and The Coca-Cola Company Entities entered into a shareholders’ agreement, which became
effective at the date of the acquisition of Coca-Cola Beverages plc by Hellenic Bottling Company S.A. and which governs many important
aspects of their relationship. The following summarizes certain provisions of the shareholders’ agreement.
Restriction on transfer
The shareholders’ agreement restricts the sale of our ordinary shares owned by The Kar-Tess Group and The Coca-Cola Company Entities
with a view toward maintaining the combined shareholdings of The Kar-Tess Group and The Coca-Cola Company Entities above 50%. In
addition, The Coca-Cola Company Entities have agreed not to dispose of any of our shares if the disposition results in their shareholding falling
below 22% of our outstanding share capital. However, The Kar-Tess Group and The Coca-Cola Company Entities have also agreed to
negotiate in good faith an agreement that allows transfer of our ordinary shares below these minimum thresholds provided that they continue to
jointly control us.
Composition of our board of directors
The Kar-Tess Group and The Coca-Cola Company Entities agreed that the initial composition of our board of directors would be ten
directors comprising:

two directors designated by The Coca-Cola Company Entities;

four directors designated by The Kar-Tess Group; and

the remaining directors jointly designated by The Kar-Tess Group and The Coca-Cola Company Entities.
The Kar-Tess Group and The Coca-Cola Company Entities have also agreed to cast the votes attaching to their ordinary shares so that
each other’s nominees are elected to our board of directors and, in the event that there are more or less than ten directors on our board, so that
The Kar-Tess Group and The Coca-Cola Company Entities maintain their respective proportional representation on our board of directors.
Either shareholder may request by written notice to the other shareholder that a director nominated by such shareholder be removed and the
other shareholder has agreed to procure that any necessary action is taken in accordance with our articles of association and Greek law to
remove or replace such director and to fill the board vacancy with a new director nominated by the shareholder requesting the removal and
replacement.
Decisions of our board of directors
The Kar-Tess Group and The Coca-Cola Company Entities have agreed to seek to convene an extraordinary general meeting of our
shareholders to replace our board of directors in the event a resolution is passed by our board of directors in circumstances where a
representative director of either The Kar-Tess Group or The Coca-Cola Company Entities has voted against such resolution to:

engage in any business other than the bottling of beverages;

incur any indebtedness, including in the form of guarantees, or approve capital expenditures in excess of $10 million;

enter into any arrangements providing for payments or other consideration in excess of $10 million;
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
sell, lease, exchange, transfer or otherwise dispose of all or substantially all of our assets or sell the majority of the value of our
assets, if not in the ordinary course of business, unless such sale is in connection with a sale-leaseback transfer;

appoint our top executive (managing director); or

approve our annual budget and annual business plan.
Our articles of association provide that approval of these matters requires the vote of two-thirds of our directors and a quorum of
three-quarters of the total number of the members of our board of directors.
Shareholder approvals
The Kar-Tess Group and The Coca-Cola Company Entities have agreed to consult before every vote, and to vote against any proposal
where either of them has indicated its intention to reject such proposal, on any of the following matters:

a modification of our articles of association;

any increase or decrease of our share capital;

the merger or consolidation of our company with or into another company;

the liquidation or dissolution of our company; or

the general assignment for the benefit of creditors of, or the appointment of a custodian, receiver or trustee for, any part of our assets.
The Kar-Tess Group and The Coca-Cola Company Entities also entered into a supplemental agreement on March 3, 2000, providing that,
after the termination of the shareholders’ agreement, for so long as any of The Kar-Tess Group or The Coca-Cola Company Entities is a
shareholder in our company, each of The Kar-Tess Group and The Coca-Cola Company Entities will vote their ordinary shares against any
proposal to liquidate or dissolve our company unless they have separately agreed to the contrary.
Termination
No party or group of parties may unilaterally terminate the shareholders’ agreement prior to August 2008. This reflects the agreement of
our two major shareholders, announced on August 15, 2003, to extend the previous term of the agreement which originally extended to
August 2005. However, at any time the parties may agree to terminate the shareholders’ agreement, which would also be terminated if we cease
to exist or if one group of parties elects to terminate it upon breach of the agreement by the other group of parties. After August 2008, the
shareholders’ agreement will remain in force unless terminated by either group of parties on three months’ written notice.
The relationship agreement among us, The Kar-Tess Group and The Coca-Cola Company Entities
General
On August 29, 2000, in connection with the listing of our ordinary shares on the London Stock Exchange, or the LSE, we, The Kar-Tess
Group and The Coca-Cola Company Entities entered into a relationship agreement in accordance with Rule 3.12 of the Listing Rules of the
Financial Services Authority.
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Enforcement of relationship agreement and obligation to maintain independent directors
The Kar-Tess Group and The Coca-Cola Company Entities have agreed to cast the votes attaching to their ordinary shares, and to procure
(so far as they are reasonably able) that the directors nominated by them on our board of directors vote at all times in a manner so as to ensure
that:

the terms of the relationship agreement are fully implemented.

we comply with all our obligations under the relationship agreement.

changes in our articles of association do not contradict the relationship agreement.

there are at least two independent directors on our board of directors at any given time.
“Independent directors” are directors free from any business relationship with The Kar-Tess Group or The Coca-Cola Company Entities
that could materially interfere with the exercise of their independent judgment in relation to matters concerning our company.
Quorum and voting restrictions
The Coca-Cola Company Entities have agreed not to cast the votes attaching to their ordinary shares or be counted in any quorum at any
of our general meetings and to procure (so far as they are reasonably able) that no director nominated by The Coca-Cola Company Entities
votes or is counted in any quorum in relation to any of the following matters:

transactions between us (including any of our directors, officers or employees) and any member (including any director, officer or
employee of such member) of The Coca-Cola Company’s Group or any of its associates;

any matter in which any member of The Coca-Cola Company’s Group or any of its associates is interested; and

any decision by our company concerning the enforcement of its rights under the relationship agreement.
The Kar-Tess Group have agreed not to cast the votes attaching to their ordinary shares or be counted in any quorum at any of our general
meetings and to procure (so far as they are reasonably able) that no director nominated by The Kar-Tess Group votes or is counted in any
quorum in relation to any of the following matters:

transactions between us (including any of our directors, officers or employees) and any member (including any director, officer or
employee of such member) of The Kar-Tess Group or any of its associates;

any matter in which any member of The Kar-Tess Group or any of its associates is interested; and

any decision by our company concerning the enforcement of its rights under the relationship agreement.
Each of The Kar-Tess Group and The Coca-Cola Company Entities has also agreed to procure (so far as they are reasonably able) that, to
the extent applicable, it casts its votes attaching to the shares it holds and participate in our general meetings in a manner consistent with the
obligations of The Kar-Tess Group and The Coca-Cola Company Entities, as applicable, described above.
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Exceptions to quorum and voting restrictions
There are two exceptions to these voting restrictions:

Directors nominated by The Kar-Tess Group or by The Coca-Cola Company Entities may be counted for quorum purposes but
cannot speak or vote on any of the matters that require a two-thirds voting majority of our directors as described above under “The
shareholders’ agreement between The Kar-Tess Group and The Coca-Cola Company Entities—Decisions of our board of directors”.

The Kar-Tess Group and The Coca-Cola Company Entities can vote and their votes are counted for quorum purposes on these
matters when they are required by the shareholders’ agreement to vote against a resolution as described above under “The shareholders’
agreement between The Kar-Tess Group and The Coca-Cola Company Entities—Shareholder approvals”.
Other obligations of The Kar-Tess Group and The Coca-Cola Company Entities
The Kar-Tess Group and The Coca-Cola Company Entities have agreed severally as to themselves to ensure that, for so long as they are
able to exercise 30% of the voting rights attaching to our ordinary shares or can control the appointment of a majority of our board of directors,
any transactions or other arrangements between any of them and us will be conducted at arm’s length. However, such agreement does not limit
or restrict the rights of any member of The Coca-Cola Company’s group as set forth in The Coca-Cola Company’s bottlers’ agreements with
us.
The Kar-Tess Group and The Coca-Cola Company Entities have also agreed that, as long as they jointly hold 30% or more of the voting
rights attaching to our ordinary shares, they will not take actions in breach of the relationship agreement that will render our company
unsuitable for listing pursuant to the Listing Rules unless a new relationship agreement satisfactory to the LSE is entered into among us, The
Kar-Tess Group and The Coca-Cola Company Entities.
Conflict
If there is any conflict between the provisions of the relationship agreement and the shareholders’ agreement, the provisions of the
relationship agreement will prevail.
Termination
The relationship agreement will terminate if The Kar-Tess Group and The Coca-Cola Company Entities, acting jointly, are no longer able
to exercise 30% of the voting rights attaching to our ordinary shares and can no longer control the appointment of a majority of our board of
directors or our ordinary shares are delisted from the LSE.
ITEM 8
FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Consolidated Statements and Other Financial Information
You should read Item 18 “Financial Statements.”
Legal proceedings
The Greek Competition Authority issued a decision on January 25, 2002, imposing a fine on us of approximately € 2.9 million for certain
discount and rebate practices and required changes to our commercial practices with respect to placing coolers in certain locations and lending
them free of charge.
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On June 16, 2004, the fine was reduced on appeal to € 1.8 million. On June 29, 2005, the Greek Competition Authority requested that we
provide information on our commercial practices as a result of a complaint by certain third parties regarding our compliance with the decision
of January 25, 2002. On October 7, 2005, we were served with notice to appear before the Greek Competition Authority.
On June 14, 2006, the Greek Competition Authority issued a decision imposing a daily penalty of € 5,869 for each day that we failed to
comply with the decision of January 25, 2002. The Greek Competition Authority imposed this penalty for the period from February 1, 2002 to
February 16, 2006, resulting in a total penalty of € 8.7 million. On August 31, 2006, we deposited an amount of € 8.9 million, reflecting the
amount of the fine and applicable tax, with the Greek authorities. This deposit was a prerequisite to filing an appeal pursuant to Greek law. As a
result of this deposit, we have increased the charge to our financial statements in connection with this case to € 8.9 million. We also incurred
consulting fees and additional expenses of € 0.4 million in connection to this case. We believe that we have substantial legal and factual
defenses to the Authority’s decision.
In relation to the Greek Competition Authority’s decision of January 25, 2002, one of our competitors has filed a lawsuit claiming
damages in an amount of € 7.7 million. At present, it is not possible to predict the outcome of this lawsuit or quantify the likelihood or
materiality of any potential liability arising from it. We have not provided for any losses related to this case.
Our Bulgarian subsidiaries are participating in two waste recovery organizations in order to discharge their obligations under the
Bulgarian Waste Management Act. On March 10, 2006, the Minister of Environment and Waters of Bulgaria issued an Ordinance stating that
these organizations had not sufficiently proven their compliance with the Bulgarian Waste Management Act and consequently that all
participants in these organizations should pay waste recovery fees for 2005. This Ordinance was subsequently amended. As a result of this
amendment, we believe that our Bulgarian subsidiaries have no further liabilities for waste recovery fees for 2005.
In recent years, customs authorities in some Central and East European countries have attempted to challenge the classification under
which we import concentrate into these countries to produce our products. Local authorities have argued that a classification with higher
customs duties than the current classification should apply. In the past, such issues were successfully resolved in most of these countries. We
still have several cases outstanding before the Romanian customs authorities and courts. While we have won appeals of several cases to the
Romanian Supreme Court, the Romanian Supreme Court has ruled against us in two cases. We believe that we have legal and factual support
for its position, which is consistent with the customs classification standards adopted by the European Union, and will continue to oppose the
position taken by the Romanian customs authorities. However, it is not possible to quantify the likelihood of any potential liability arising from
these legal proceedings due to the legal uncertainty surrounding customs duties in Romania prior to Romania’s accession to the European
Union. If we were to become liable to pay all claims of the Romanian customs authorities, the amount payable would be approximately € 14.2
million. We have made a provision for € 2.7 million of this amount, relating to the cases that we have lost before the Romanian Supreme Court.
In March 2002, the Lagos State Government applied to the High Court of the State of Lagos for an injunction against Nigerian Bottling
Company plc, or NBC, our operating subsidiary in Nigeria, seeking payment from NBC of € 1.3 million in arrears of sales tax for the period
from January to May 2001, inclusive of a 5% penalty for alleged late payment. The initial hearing of this case was held on April 16, 2003. The
case continues. In July 2001, the Manufacturers Association of Nigeria, or the MAN, on behalf of its members separately challenged the
constitutionality of the law, which introduced the sales tax in 2000 before the High Court of the State of Lagos. In November, 2003, the High
Court of the State of Lagos ruled in favor of the Lagos State Government, denying relief, in part, by declaring the Lagos Sales Tax Law valid
only in respect of intra-state trade while the federal VAT Law was declared valid only for inter-state
133
trade. The MAN has appealed the ruling of the High Court of the State of Lagos to the Federal Court of Appeal. We are a member of the MAN.
If the outcome of these proceedings is unfavorable to us, other Nigerian states may decide to impose a similar sales tax on sales of our
products. No hearing has commenced yet in respect of the appeal.
Other than these actions, we are not subject to any litigation, arbitration, government proceedings, regulatory actions or other disputes that,
individually or in the aggregate, involve potential liabilities that could have a material adverse effect on the results of our operations, cash flow
or financial condition, nor are we aware that any such disputes are pending or threatened against us or any of our subsidiaries.
Dividends policy
You should read Item 3A, “Key Information—Selected Financial Data—Dividends and Dividend Policy” for a discussion of the
Company’s policy on dividend distributions.
B.
Significant Changes
Not applicable.
134
ITEM 9
THE OFFER AND LISTING
A. Offer and Listing Details
The following table sets forth, for the periods indicated, the reported high and low market quotations in euro for our ordinary shares on the
main market of the Athens Stock Exchange.
euro per ordinary
share
High
Low
Calendar Year
2002
2003
2004
2005
2006
2007 (through June 15, 2007)
Financial Quarter
2004
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2005
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2006
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2007
First Quarter
Second Quarter (through June 15, 2007)
Month
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007 (through June 15, 2007)
17.50
18.34
22.74
25.48
30.00
34.40
13.16
11.36
16.96
17.68
22.30
27.90
21.18
22.74
20.50
18.92
16.96
19.20
17.34
17.04
20.54
23.28
25.46
25.48
17.68
20.20
22.68
22.12
25.82
27.56
27.18
30.00
23.86
22.30
22.90
25.34
32.20
34.40
27.90
30.18
30.00
31.28
32.20
32.00
33.40
34.40
34.20
27.50
29.00
28.88
27.90
30.18
32.20
32.30
On August 19, 2003, we announced our intention to effect a leveraged re-capitalization with a view towards improving the efficiency of
our capital structure. The leveraged re-capitalization provided for a capital return of € 2.00 per ordinary share to all shareholders of Coca-Cola
Hellenic Bottling Company S.A. The record date for the capital return payment was November 28, 2003. The capital return payment to
135
shareholders began on December 5, 2003 and as of December 31, 2003, € 472.9 million had been disbursed to shareholders.
Our market capitalization as at June 15, 2007, was approximately € 8.1 billion.
The following table sets forth, for the periods indicated, the reported high and low market quotations in US dollars for our ADSs in the
United States.
dollars per ADS
High
Low
Calendar Year
2002 (from October 10, 2002)
2003
2004
2005
2006
2007 (through June 15, 2007)
Financial Quarter
2004
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2005
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2006
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2007
First Quarter
Second Quarter (through June 15, 2007)
Month
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007 (through June 15, 2007)
16.30
21.15
28.09
31.55
39.98
46.49
13.50
13.30
21.05
23.10
28.33
37.66
27.63
28.09
25.40
25.77
21.40
23.58
21.05
21.43
27.11
28.55
31.55
29.86
23.10
26.06
27.29
26.01
31.41
33.29
34.34
39.98
28.95
28.33
29.65
32.40
42.64
46.49
37.66
40.58
39.98
41.15
41.98
42.64
45.40
46.48
46.49
36.98
37.83
38.30
37.66
40.58
43.57
43.92
Furthermore, fluctuations in the exchange rates between the euro and the US dollar may affect the relative market prices of the ADSs in
the United States.
B. Plan of Distribution
Not applicable.
136
C. Markets
We have been listed on the Athens Exchange, or the ATHEX, since 1991, and we are part of the ATHEX Composite Index. We are one of
the largest companies, based on market capitalization, quoted on the ATHEX. Our ordinary shares trade on the ATHEX under the symbol
“EEEK”. The ATHEX is the primary trading market for our ordinary shares. Our shares are also listed on the London Stock Exchange and the
Australian Stock Exchange. In addition, our ordinary shares are listed on the New York Stock Exchange under the symbol “CCH”. Our shares
trade on the New York Stock Exchange in the form of ADSs evidenced by American depositary receipts or ADRs. Each ADS represents one
ordinary share. We have a sponsored ADR facility, with The Bank of New York acting as Depositary.
As at December 2006, and based exclusively on external research performed by Thomson Financial’s IR Channel, there were 60 holders
of our ordinary shares in the United States holding an aggregate of 19,197,567 ordinary shares, or approximately 7.9% of our current total
outstanding share capital. In addition, 56,741,386 ordinary shares, or 23.4%, were attributable to The Coca-Cola Company Entities. Given that
the research was conducted in December 2006, the actual portion of our ordinary shares beneficially owned by US holders and the number of
beneficial US holders may vary considerably.
The Athens Exchange
Following authorization by Law 3152/2003, the Athens Exchange issued on June 8, 2004 the Athens Exchange Regulation, or the
Regulation, which came into effect on June 16, 2004. The Regulation contains in a consolidated form provisions which were previously
included in a large number of decisions that were issued by the Athens Exchange itself and certain other competent authorities, such as the
former Derivatives Exchange, either in their original form or amended. Finally, following authorization by Law 3177/2005, the Regulation was
substantially amended and all the existing markets of the Athens Exchange were abolished. Currently, the Athens Exchange consists of two
markets: the Securities Market and the Derivatives Market. The securities of companies listed on the Securities Market are classified into one
of five (5) main categories:

the Big Cap Category,

Small and Medium Cap Category,

Fixed Income Securities Category,

the Under Surveillance Category and

the Special Stock Exchange Characteristics Category.
When securities are listed for the first time on the Securities Market of the Athens Exchange they will fall within one of the first three
categories.
As at April 20, 2007, 90 companies had shares classified in the Big Cap category of the ATHEX, 172 companies had shares classified in
the Small and Mid Cap category, 16 companies had shares classified in the Special Stock Exchange Characteristics Category and 19 companies
had shares classified in the Under Surveillance Category. The Big Cap Category consists of those companies that have a market capitalization
of more than € 100 million, free float more than 20% and that meet certain annual liquidity criteria. The annual liquidity limit stands at 15%,
however certain exceptions may apply and the limit may be reduced to 10%. Also in this category the companies that participate need to meet
all of the following criteria of financial performance: shareholders equity of no less than € 15 million, cumulative 3 year EBITDA of no less
than € 16 million and no less than € 4 million per annum, cumulative three year pre-tax profits of no less than € 12 million and no less than € 3
million per annum. The companies that have either a small free float (less than 10%) or low annual liquidity or high bid/ask trading spread or
small annual turnover figure are classified in the special financial purpose category, while companies that are in financial distress are
137
classified in the under surveillance category. In all other cases the companies are classified under the Small and Mid Cap category.
The Greek capital markets and the Athens Exchange in particular are regulated under a series of laws enacted by the Greek Parliament,
decisions and regulations issued by the Ministry of Economy and Finance, the board of directors of the Hellenic Capital Markets Commission,
and the board of directors of the Athens Exchange. On May 31, 2001, the Athens Exchange was upgraded by the Morgan Stanley Composite
Index from an emerging to a developed market status. Finally, the creation of stock and derivatives exchanges in addition to the stock and
derivatives markets of the Athens Exchange and the Athens Derivatives Exchange has been permitted in the Hellenic Republic pursuant to Law
3152/2003. The operating license of these exchanges is granted by the Hellenic Capital Markets Commission, provided these exchanges fulfill
certain capital and other requirements set forth in that law and in a ministerial decision of the Minister of Economy and Finance yet to be
issued.
Membership in the ATHEX
Membership is required for brokerage firms in order to effect transactions on the Athens Exchange and is subject to approval by the board
of directors of the Athens Exchange and licensing by the Hellenic Capital Markets Commission. In addition, brokerage firms must appoint at
least one official representative who is authorized to conduct transactions on the Athens Exchange, who must fulfill certain qualifications
required by law and pass an examination given by the Hellenic Capital Markets Commission. For companies established in Greece, the
minimum capital requirement in order to obtain a license to operate a brokerage firm or an Investment Services Firm and qualify as an Athens
Exchange member is € 0.6 million.
All transactions through the ATHEX may only be carried out by brokers that are members of the ATHEX. Membership in the ATHEX is
subject to the licensing requirements stipulated in the Investment Services Directive and to the approval of the ATHEX board of directors.
Brokerage firms that are members of the ATHEX must appoint at least one official representative authorized to conduct ATHEX transactions,
who must fulfill certain qualifications required by law and pass an examination given by the Hellenic Capital Markets Commission.
Members of the Athens Exchange may engage in transactions through the Automated Exchange Trading System (OASIS), an electronic
trading system, on behalf of their customers or on their own behalf. As at April 20, 2007, the ATHEX had 74 members, the vast majority of
which were brokerage firms. Pursuant to the EU Investment Services Directive, which was implemented in Greece in April 1996 pursuant to
Law 2396/1996, investment services may only be provided by investment services companies with a minimum share capital of € 0.6 million, or
€ 3 million if engaging in underwriting, and which have received an appropriate operating license from the Capital Markets Commission. In
addition, the Hellenic Capital Markets Commission has also introduced rules relating to the performance of portfolio management by
Investment Services Firms. Orders Companies are companies that are only allowed to receive and transfer their customers’ orders to
Investment Services Firms, and are prohibited from dealing in Athens Exchange transactions on behalf of their customers or from acting as a
custodian for their customers’ shares or cash. The receipt and transfer of shares by Orders Companies is governed by Law 2396/1996 and the
Hellenic Capital Markets Commission’s decisions. Pursuant to the Regulation, Investment Services Firms established in the European Union or
the European Economic Area may become remote members of the Athens Exchange without being required to have a permanent establishment
in Greece. Nevertheless, they would need to appoint (a) a local custodian to clear and settle stock exchange transactions and any other actions
in relation to which they would be otherwise required to perform by being physically present in Greece, and (b) a local person to act as their
representative and as agent for service of process.
138
Stock market indices
The most widely followed index in Greece is the ATHEX Main Market Composite Index, a market capitalization index that tracks the
price movement in the shares of 60 leading Greek companies. In addition, the FTSE/ATHEX20 Index was introduced in September 1997 to
track the price movement of the shares of the 20 largest companies. As of June 15, 2007, our market capitalization represented approximately
5.77% of the ATHEX Main Market Composite Index and approximately 3.39% of the FTSE/ATHEX20 Index.
The following table sets out the movement of the ATHEX Main Market Composite Index. The highs and lows are for the periods
indicated, and the close is on the last trading day of the period.
Year
High
Low
Close
2002
2003
2004
2005
2006
2007 (through June 15, 2007)
2,646.4
2,310.5
2,788.7
3,663.9
4,395.4
4,973.2
1,727.1
1,467.3
2,227.3
2,818.3
3,379,3
4,344.8
1,748.4
2,263.6
2,786.2
3,663.9
4,394.1
4,900.5
Trading on the ATHEX
ATHEX trading takes place every week from Monday to Friday, except for public holidays. The daily trading session starts at 10.30 a.m.
and ends at 4:30 p.m., Athens time for the Big Cap category. For the Mid and Small Cap categories the trading starts at 10.30 a.m. and
concludes at 12.00 p.m. and the trading resumes again at 02.00 p.m. and ends at 4.30 p.m. On both cases there is a pre-opening session
followed by a continuous automated matching session.
A pre-opening session, operating through a call auction method, precedes the trading session from 10:00 a.m. until 10.30 a.m. for the Big
Cap and the Mid and Small Cap categories. The call auctions provide for the entry of orders to be collected and then executed in a batch.
Auction matching takes place at one price. The objective of the pre-opening auction is to maximize the volume of shares traded at the auction
price by calculating the price at which the greatest number of securities can be matched. For the Big Cap category the after hours trading
session is between 4:39 p.m. - 4.45 pm (randomly) while until 5:00 p.m. trades can be executed “at Closing” or “at the Volume Weighted
Average Price” in the case of block trades. Between 4.30 p.m. until 4.39 p.m. - 4.45 p.m. the closing price of the securities is determined
through call auctions. For the Mid and Small Cap category there is also an after hours trading session from 4:30 p.m. to 5.00 p.m. for orders
placed with instructions to execute “at Closing”.
The trading system of the ATHEX is fully automated and orders can be placed from remote locations. After the pre-opening auction
session, orders are executed in continuous trading following the price and time priority rule: orders are ranked by price, and orders at the same
price are ranked based on time of entry into the system. Incoming orders always match pre-existing orders already included in the ranked list.
Buy and sell orders can be matched in any number of multiples of the lot size authorized for a particular security. Depending on the order’s
price type (limit or market), the order matches against eligible orders in the book, progressing from the best price to the worst available until
the order’s quantity is exhausted.
If no “limit order” exists (or an order for which the price is specified) for a security on a given day, the system uses the previous closing
price as the opening price. If limit orders have been entered at a specified price prior to the commencement of the trading period, the system
uses these orders to determine the opening prices.
On November 28, 2005, the ATHEX introduced different fluctuation limits for the various security classes. The FTSE/ATHEX20
securities prices may fluctuate up to 10% from the closing price of the
139
preceding trading session. However, if all incoming purchase orders remain at the 10% limit up or if all sale orders remain at the 10% limit
down for 15 minutes, the limit is abandoned. For all other securities, excluding the two special categories described in a previous chapter
(Special Stock Exchange Characteristics securities and securities Under Surveillance) prices may fluctuate up to 10% from the closing price of
the preceding trading session. However, if all incoming purchase orders remain at the 10% limit up or if all sale orders remain at the 10% limit
down for 15 minutes, the 10% limit for the particular security is then extended by a further 10%. The price of a security that is classified on any
of the two special categories (Under Surveillance or Special Stock Exchange Characteristics) may fluctuate on the auction market at a limit of
20% range. Newly listed securities are allowed to fluctuate freely during the first three sessions of their listing.
Trades of equity securities with a value exceeding € 0.6 million, or representing at least 5% of a listed company’s share capital, may be
conducted through the ATHEX subject to a special procedure. Under this special procedure, the parties involved, the number of shares to be
sold and the price range are pre-agreed. These trades, known as block trades, may be conducted through a special procedure of the electronic
trading system. The number of parties that may participate in a block trade is limited to three persons as either buyers or sellers, with only one
person on the other side of the trade. This limitation in the number of parties involved does not apply to block trades made in the context of
new listings or offerings of existing shares. Block trades may take place at prices that follow certain rules based on the price deviation
percentage from the latest traded price and if no such price exists, the closing price for the shares on the previous session:

At the current price of the security, when the value of the block trade ranges form € 0.6 million to € 1.2 million.

At 5% of the current price of the security, when the value of the block trade ranges from € 1.2 million to € 2.4 million.

At 10% of the current price of the security, when the value of the block trade is greater than € 2.4 million.
Block trades require the approval of the ATHEX’s Trading Committee.
The above price limitations do not apply in the following instances:

when the shares transferred equal or exceed 5.0% of the total number of shares of the company (independent of the percentages of
shares in particular categories i.e., preferred or common);

For block trades exceeding € 30 million of (i) majority Greek government-owned listed companies’ shares or (ii) block trades of
listed companies with total assets exceeding € 1.5 billion.

For transfers of share blocks by underwriters who acquired shares for stabilization purposes in the context of a public offering or a
public offering combined with a private placement in the Greek market.
For purposes of calculating the allowed price deviation of the block trade, all block trades effected simultaneously are aggregated in order
to determine the block trade size provided that the selling parties do not appear as buying parties in other block trades aggregated under this
rule.
All prices of completed transactions are published on electronic screens in the ATHEX, although the prices of block trades do not affect
the trade price. All transactions require cash settlement within three business days of the trade date. Trades are noted in the official register of
the ATHEX, and all information on bids and offers is made available to Telerate and Reuters on a continuous basis. Bond trading is conducted
by agreement among brokers on the electronic system.
Shares may be traded in lots of 1, 5, 10 and 25 shares according to the trading lot size of each security.
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Prices of all securities listed on the ATHEX are published in the ATHEX official daily price bulletin.
Equity securities representing up to 0.5% of the total number of equity securities of the same class of a listed company may be traded over
the counter without being subject to the price fluctuation limitations, provided that neither party is participating in the transaction in the course
of its business and relevant trade is settled in cash.
Market regulation
Under Greek law, regulation of securities trading activities on the ATHEX is subject to similar restrictions to those imposed in other
jurisdictions in the European Union and in the United States. However, because we are a foreign private issuer our directors, officers and
principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the
US Securities Exchange Act of 1934.
Under Greek legislation, members of the board of directors, managers, auditors, supervising authorities of listed companies, shareholders,
other professionals with access to confidential information and individuals who represent any of the foregoing are prohibited from acquiring or
disposing, directly or indirectly, securities due to, or through the use of, such confidential information. Insider trading prohibitions are extended
to any third party that has acquired confidential information that could not have been provided only by one of the foregoing persons.
Confidential information is that which has not been made public, is specific and concerns one or more issuers of securities or one or more
securities, and which, if announced to the public, could have a material effect on the price of such securities.
All persons with access to confidential information may disclose it to third parties only within their ordinary course of business. Under no
circumstances can such persons disclose confidential information to third parties for the purpose of such third parties acquiring or disposing
securities which are traded on the ATHEX.
Civil and criminal charges can be imposed for insider trading violations. The competent authority for monitoring insider dealing
infringements is the Capital Market Commission. However, because we are a foreign private issuer our directors, officers and principal
shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the US Securities
Exchange Act of 1934.
Settlement, clearance and the central securities depositary
Settlement of both registered and bearer shares listed on the ATHEX is effected through the Central Securities Depositary, the CSDep.
The CSDep was founded in February 1991 as a société anonyme. The CSDep is responsible for settling and clearing ATHEX transactions and
holding the shares deposited with it in book entry form. The CSDep is administered by its board of directors. Its shareholders are the ATHEX,
banks and portfolio investment companies.
Book entry of listed securities was introduced by virtue of Law 2396/1996, as amended. The dematerialization of Greek shares
commenced in March 1999, with the market becoming fully dematerialized in December 1999.
To participate in the dematerialized system of securities, the SAT, each investor is required to open a SAT account, which is identified by
a SAT account number. Shareholders who wish to open a SAT account can appoint one or more ATHEX members or custodian banks as
authorized operators of their SAT accounts. Only the authorized operators have access to balances and other information concerning a SAT
account.
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The settlement and clearance procedure through the CSDep consists of three stages:

First, a notification by the ATHEX to the CSDep of the transactions completed within each trading day. More specifically, on trade
date T, following the closing of the trading day, the ATHEX sends electronically to the CSDep a file containing information on the
trading activity of the day. The file is downloaded to the Dematerialized Securities System (DSS), where securities and values of trades
(buy or sell) are aggregated per investor, broker, security and type of trade, and then the weighted average value of the trade is
calculated by dividing the total value of the trades by the quantity of securities traded (trade averaging).

Second, a notification by the brokers to the CSDep of the SAT account of the seller and buyer and the number of shares to be debited
and credited to their respective SAT accounts. The brokers are required to notify to the CSDep each trade along with the broker’s
account for the securities to be credited or debited to the relevant accounts. This is completed by day T+3. Following the notification of
the SAT account of the seller, the shares sold are “temporarily blocked” for transfer purposes. Under Greek law, a person may not enter
into sales of securities on the ATHEX if such person does not have full and unencumbered title to, and possession of, the securities
being sold at the time the order is matched. Short sales of securities listed on the ATHEX are strictly regulated by the Capital Markets
Commission and permitted in the case of contracts previously executed on the ADEX.

Third, the settlement cycles are carried out on day T+3 in time intervals determined by the CSDep, which also transfers the securities
from the securities accounts of the sellers to the securities accounts of the buyers and simultaneously executes the equivalent debits and
credits of the brokers’ cash accounts in the cash settlement bank. The settlement is multilateral and is executed in accordance with the
delivery versus payment principle. By day T+3, brokers are required to deposit in the cash account, which they hold for this purpose in
the cash settlement bank, the amount of cash corresponding to their cash obligation. The results of the settlement, as reflected in the
investors’ securities accounts and the brokers’ cash accounts, are deemed final and irrevocable. Bilateral clearance is also possible in
exceptional circumstances, and in accordance with the CSDep regulations. The transfer of shares is affected by debiting the SAT
account of the seller and crediting the SAT account of the buyer on the settlement date.
Liabilities of brokerage firms resulting from their trading activities are guaranteed by the Athens Exchange Guarantee Fund, to which each
ATHEX member contributes, and which is operated as a separate legal entity.
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
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ITEM 10
ADDITIONAL INFORMATION
A. Share Capital
Share capital and denomination
The nominal value of our issued and paid-up share capital as of December 31, 2006, is € 121,033,958 divided into 242,067,916 ordinary
bearer shares with a par value of € 0.50 each. No specific classes of stock are provided for in our articles of association and no special rights
attach to any of our ordinary shares. There are no authorized but unissued ordinary shares.
Development in share capital
Date
March 20, 2000
August 9, 2000
November 22, 2001
May 20, 2002
October 1, 2003
November 10, 2003
December 23, 2003
December 22, 2004
December 21, 2005
December 20, 2006
Transaction
Issue of shares (1)
Issue of shares (2)
Capitalization of reserves (3)
Capitalization of reserves (4)
Leveraged re-capitalization (5)
Leveraged re-capitalization (5)
Issue of shares (6)
Issue of shares (7)
Issue of shares (8)
Issue of shares (9)
Total number
of shares
142,938,836
236,668,596
236,668,596
236,668,596
236,668,596
236,668,596
236,925,277
238,260,129
240,692,002
242,067,916
€
€
€
€
€
€
€
€
€
€
Par value
0.29 per share
0.29 per share
0.30 per share
0.31 per share
2.50 per share
0.50 per share
0.50 per share
0.50 per share
0.50 per share
0.50 per share
Nominal increase
(decrease) in euro
392.08
27,506,899.49
1,545,378.21
2,366,685.96
518,304,225.24
(473,337,192.00 )
128,340.50
667,426.00
1,215,936.50
687,957.00
Share capital
in euro
41,948,301.10
69,455,200.59
71,000,578.80
73,367,264.76
591,671,490.00
118,334,298.00
118,462,638.50
119,130,064.50
120,346,001.00
121,033,958.00
(1)
Issued in connection with the absorption by way of merger of 3I S.A., previously a wholly owned subsidiary of The Kar-Tess Group, by us. The merger, which became
effective on April 3, 2000, involved the simultaneous issuance of 17,035,610 of our ordinary shares to The Kar-Tess Group and the cancellation of 17,034,274 of our
ordinary shares held by 3I S.A. at the time.
(2)
Issued pursuant to the scheme of arrangement for the acquisition of Coca-Cola Beverages plc. This increase was initially approved by the extraordinary general meeting
of our shareholders held on April 19, 2000, which authorized an increase in our share capital of up to € 33,000,242.70 depending on the amount actually paid up. The
extraordinary general meeting of our shareholders held on August 9, 2000 determined this amount to be € 27,506,899.49 and amended the articles of association
accordingly.
(3)
Approved at an extraordinary general meeting of our shareholders held on November 22, 2001, in connection with a resolution to increase the par value of our shares
from GRD100, or € 0.29, to GRD102.225 or € 0.30, in order to convert our share capital to euro as required by Greek law. The amount of the share capital increase was paid
through the capitalization of a share premium reserve of € 1,545,378.21 in our financial statements for the year ended December 31, 2001.
(4)
Approved at the annual general meeting of our shareholders held on May 20, 2002, in connection with a resolution to increase the par value of our shares from € 0.30 to
€ 0.31, in order to increase our share capital by the amount of € 2,366,685.96, which resulted from a revaluation of our land and buildings as required by Article 21 of Law
2065/92.
(5)
On August 19, 2003, we announced our intention to effect a leveraged re-capitalization with a view towards improving the efficiency of our capital structure. In
connection with the leveraged re-capitalization, we held an extraordinary general meeting on September 15, 2003, which approved a share capital increase through the
capitalization of € 518,304,225.24 of additional paid-in capital (reflecting an increase of the par value of ordinary shares from € 0.31 to € 2.50 per ordinary share). This
capital increase was approved by the Greek Ministry of Development on September 24, 2003 and consummated on October 1, 2003 with the payment of certain related
taxes. On October 1, 2003, the board of directors called a second extraordinary general meeting which took place on October 31, 2003 and which approved a share capital
decrease of € 473,337,192.00 (reflecting a decrease of the par value of ordinary shares from € 2.50 to € 0.50 per ordinary share) and the return of € 2.00 per ordinary share
to all shareholders of Coca-Cola Hellenic Bottling Company S.A. The capital decrease was approved by the Greek Ministry of Development on November 10, 2003 and the
Athens Stock Exchange was duly notified at its board meeting of November 14, 2003. The capital return payment to shareholders began on December 5, 2003. As at
December 31, 2003, € 472.9 million had been returned to shareholders. The leveraged re-capitalization resulted in a capital return of € 2.00 per ordinary share to all
shareholders of Coca-Cola Hellenic Bottling Company S.A. The capital return and the payment of taxes and related expenses of € 4.0 million were financed with the net
proceeds from the offering of $900.0 million notes. These notes were issued in September 2003, by Coca-Cola Hellenic Bottling Company S.A. through Coca-Cola HBC
Finance B.V. by means of a private, in the United States, and offshore placement in an aggregate principal amount of $500.0 million due in 2013 and in an aggregate
principal amount of $400.0 million due in 2015. In December 2003, an exchange offer was made by Coca-Cola
143
Hellenic Bottling Company S.A. in order to effect the exchange of the privately placed notes for similar notes registered with the SEC. Acceptances under the offer, which
was finalized in February 2004, were $898.1 million.
(6)
On December 23, 2003, our board of directors resolved to increase the share capital of our company by 256,681 ordinary shares, following the exercise of stock options
by option holders pursuant to our stock option plans. Total proceeds from this issue of shares were € 3,371,556.03.
(7)
On December 22, 2004, our board of directors resolved to increase the share capital of our company by 1,334,852 ordinary shares, following the exercise of stock options
by option holders pursuant to our stock option plans. Total proceeds from this issue of shares were € 19,211,254.97.
(8)
On December 21, 2005, our board of directors resolved to increase the share capital of our company by 2,431,873 ordinary shares, following the exercise of stock options
by option holders pursuant to our stock option plans. Total proceeds from this issue of shares were € 36,655,271.38.
(9)
On December 21, 2006, our board of directors resolved to increase the share capital of our company by 1,375,914 ordinary shares, following the exercise of stock options
by option holders pursuant to our stock option plans. Total proceeds from this issue of shares were € 22,634,670.71.
B. Memorandum and Articles of Association
Term, object and purposes
We are incorporated under the name Coca-Cola Hellenic Bottling Company S.A. and we are registered in Greece in the Registry of
Sociétés Anonymes under number 13630/06/B/86/49. The term of our company expires on December 31, 2070, but it can be extended by
shareholders’ resolution. Article 2 of our articles of association provides that our object includes the establishment of plants in Greece and
abroad, the production and packaging in all types of packaging of the products of The Coca-Cola Company, the production, distribution,
trading, import and export in any kind of packaging of any other refreshments, natural juices, water and, in general, food and beverage
products, as well as any goods and items, including packaging materials, bearing the trademarks of such products and the provision of
administrative and related services to our subsidiaries and other related affiliates.
Dividends
Determination of dividends
We distribute dividends each fiscal year out of our non-consolidated net income as determined under IFRS. This is in line with European
Union regulation and recently enacted Greek legislation has provided that Greek publicly-traded companies must prepare their statutory
financial statements in accordance with IFRS, effective for the fiscal year commencing January 1, 2005. Dividends may only be distributed
after between 5% and 30% of our net income has been deducted for the formation of a reserve account. We make deductions until the amount
of the reserve equals one-third of our authorized share capital. After we have made the relevant deductions, we are required to pay dividends
which must be the greater of 6% of the paid-up share capital or 35% of our net income. These statutory provisions may be overriden in certain
circumstances, subject to obtaining the necessary supermajority approval by our shareholders
We may distribute any net income not otherwise distributed by way of dividend to our shareholders if this is approved by a majority of our
shareholders at a general meeting following a proposal from our board of directors.
The amount distributed to shareholders may not exceed the aggregate of the accumulated net income and any reserves approved for
distribution by the shareholders, less the amount required to be retained as a reserve under Greek law and our articles of association. We may
not distribute dividends to the extent that it would reduce our shareholders’ equity below the aggregate of our paid-up share capital and any
statutory reserves.
144
Interim dividends
We may declare interim dividends only if:

at least 20 days prior to the date of distribution, an unaudited accounting report prepared by our board of directors reflecting our
financial position as of a reasonably recent date is published in an Athens daily newspaper which, in the board of directors’ opinion, has
a sufficiently large national circulation;

the accounting report is published in the Greek Bulletin for Sociétés Anonymes and Companies with Limited Liability of the
Governmental Gazette; and

the accounting report is submitted to the competent supervisory authority.
Interim dividends so distributed may not exceed one half of the net income shown in the accounting report.
Payment of dividends
Dividends must be paid to our shareholders on a date fixed either by our shareholders at a general meeting or by our board of directors, if
the board has been so authorized by our shareholders. The payment date must commence within seven working days of the record date for the
payment of dividends, as determined and published by our company. Any dividend that has remained unclaimed for five years from the date of
its declaration will be forfeited to the benefit of the Republic of Greece and cease to remain owed by us.
Undistributed dividends
There are provisions of Greek law providing for a minimum dividend that we are obliged to distribute if we have profits on an
unconsolidated basis. Such minimum dividend is the higher of 35% of our net income on an unconsolidated basis or 6% of our paid up share
capital. We may distribute dividends amounting to less than 35% of our net income on the basis of a shareholders’ resolution passed by a
supermajority of at least 65% of our paid up share capital. The undistributed dividends are transferred to a special reserve account and must be
converted into new ordinary shares within four years from the creation of the account for delivery as bonus shares to our shareholders
registered as at the date of the conversion in proportion to the number of ordinary shares held by each shareholder at the conversion date.
Alternatively, the undistributed dividends can be transferred into reserves or otherwise applied by a shareholders’ resolution at a general
meeting passed by a supermajority representing at least 67% of our paid-up share capital. In order, however, to distribute dividends amounting
to less than 6% of our paid-up share capital, a unanimous shareholders’ resolution is required.
Liquidation rights
Upon liquidation, our net assets must be distributed to our shareholders in cash and in proportion to the number of ordinary shares held by
each of them.
145
Shareholders’ meetings and notices
As a general matter, the board of directors convenes the annual general meeting and determines the items on the agenda. However,
shareholders holding 5% or more of our paid-up share capital also have the right to convene a general meeting of our shareholders. You should
read “Rights of major shareholders” below for additional information on the rights of our major shareholders. The annual general meeting must
be held in Maroussi, Athens, once a year within the first six months following the end of our fiscal year. The annual general meeting:

approves the financial statements for the preceding fiscal year;

approves the management and the auditors’ report;

votes to release the members of the board of directors from any liability incurred from their management or the auditors from any
liability incurred from their audit;

votes on the distribution of dividends;

votes on the appointment of the auditors for the next financial year; and

decides on any other matter on the agenda.
The invitation to attend a general meeting must be submitted to the local prefecture for publication in the Government Gazette and must be
published at least twenty calendar days prior to the date of the meeting (the date of publication and the date of convocation being excluded) in a
daily newspaper published in Athens which, in the board of directors’ opinion, has a sufficiently large national circulation, in one of the daily
financial papers determined by the Minister of Commerce and in one local paper published in the prefecture of our registered offices. The
invitation must also be prominently displayed at our registered offices at least twenty calendar days prior to the date of the meeting. The
invitation for an adjourned meeting must be prominently displayed at our registered offices and published in the newspapers determined by the
Minister of Commerce at least ten calendar days prior to the date of the meeting. The invitation must state the place, date and time of the
meeting as well as the items on the agenda. The invitation does not set forth management’s or any other party’s proposals relating to the items
on the agenda.
Extraordinary general meetings may be convened:

by the board of directors if required by law;

at any other time when a meeting is considered necessary by the board; or

pursuant to a request submitted by the holders of 5% or more of our paid-up share capital.
As a foreign private issuer, we will generally be exempt from the proxy rules contained in the US Securities Exchange Act of 1934,
requiring US issuers to comply with notice and disclosure requirements relating to the solicitation of proxies for shareholders meetings. The
notice of or invitation to attend the general meeting of the shareholders of a Greek company typically sets forth only the items on the agenda
for such meeting and it does not include management’s recommendations with respect to such items. As a result, if you participate in a general
meeting of our shareholders through a representative, you may not be able to give him or her voting instructions with advance knowledge of
management’s position on the items included in the agenda for that meeting.
Voting rights
Every ordinary share gives its holder the right to vote. Unless a poll is requested in accordance with our articles of association, votes are
taken on a show of hands. At the request of shareholders representing 5% or more of our paid-up share capital, resolutions must be passed by
poll. The manner and form of the
146
casting of votes at a general meeting are determined by the chairman of the general meeting in accordance with our articles of association.
Greek law does not permit cumulative voting.
There are no limitations imposed by Greek law or the articles of association on the right of non-residents or foreign persons to hold or vote
our ordinary shares other than those limitations that would generally apply to all shareholders.
Conditions
Our articles of association provide that:

each shareholder may participate in any general meeting either in person or through a representative. Persons under age or under
judicial supervision and legal entities must be represented by their legal representatives (documents of representation need not be
notarized, as long as they are dated and signed by the person issuing them);

five days prior to a general meeting, the shareholder must deposit with our treasury department a certificate issued by the Central
Securities Depositary, the CSD, stating that such ordinary shares have been transferred to the special account of the shareholder and are
blocked from transfer to third parties, or the receipt evidencing deposit of the CSD certificate with the Deposits and Loans Fund or with
any banking institution, in Greece or abroad. Shareholders may deposit a CSD certificate with a banking institution abroad if the
invitation to the relevant general meeting specifies the banking institution with which the CSD certificate may be deposited;

five days prior to a general meeting, powers of attorney and any other authorization document of persons representing shareholders
must also be deposited with us. We will deliver to the depositary a receipt, which serves as a permit for its bearer to attend the relevant
general meeting;

failure by a shareholder to comply promptly with the procedures described above deprives the shareholder of his or her right to
participate in a general meeting, unless the general meeting permits otherwise; and

forty-eight hours prior to any general meeting, a list of shareholders having the right to vote at the meeting and/or their
representatives must be prominently displayed at our registered office. The list must indicate the names of the shareholders and of their
representatives, if any, their addresses and the number of ordinary shares and votes held by each of them.
Ordinary quorum and voting majority
The quorum necessary for a valid general meeting is one-fifth of the paid-up share capital. There is no minimum quorum required for an
adjourned meeting held twenty days following the general meeting that did not meet the quorum requirement. Resolutions may be validly
passed by an absolute majority (50% plus one) of the share capital present and entitled to vote. In the absence of a quorum, the general meeting
is adjourned.
Matters requiring extraordinary quorum and supermajority approval
A quorum of 67% of the holders of our share capital and a supermajority of 90% of the share capital present and entitled to vote, which is
higher than that required by law, is required to pass resolutions concerning the following matters:

a merger;

decreases and increases in share capital;

issuance of any debt securities;
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
the decision not to distribute dividends where the minimum dividend required to be paid is 35% of our net income;

any change in the method of distribution of dividends;

any increase in shareholders’ obligations;

any restrictions or the abolition of pre-emptive rights;

any change of our registered offices;

any change in our country of incorporation;

the establishment of extraordinary reserve funds or other reserve funds in excess of the compulsory reserve fund required pursuant to
our articles of association and Greek law;

our dissolution and the appointment of a receiver, trustee or custodian for our company or any part of our assets;

any change to our term, objects and purposes; and

any change in our articles of association.
In the absence of the 67% quorum, the general meeting is adjourned, the next meeting requires a quorum of 55% and, if this is not met
either, a third meeting is convened to which a quorum of 50% plus one applies.
Our articles of association provide that any amendment to such articles that would change the rights of its shareholders is subject to the
extraordinary quorum and supermajority approval requirements described above. However, certain fundamental shareholder rights, including
the right to vote, the right to participate in a general meeting, the right to receive dividends and liquidation rights, are expressly provided for by
Greek law and cannot be revoked or modified by the general meeting of shareholders.
Action by written consent
The concept of written consent, under which shareholders of, for example, a Delaware company may as a general matter pass resolutions
by written consent in lieu of holding a meeting, does not exist under Greek law. It is, however, legal and a commonly used procedure for listed
companies to ask shareholders to grant a power of attorney to the chairman of the board of directors in connection with the issues put on the
agenda for a general meeting.
Rights of major shareholders
Under Greek corporate law shareholders holding 5% or more of our paid-up share capital have the right to:

convene a general meeting;

postpone a resolution (exercisable only once in relation to each resolution) of an annual or extraordinary general meeting for more
than thirty days;

five days prior to the day of a general meeting, request from the board of directors information concerning any amount paid by us
within the two most recent years to members of the board, executives or our other employees, as well as details of any other
consideration paid to such persons and any information necessary to consider the items included in the agenda of a general meeting.
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The board of directors may refuse to disclose the requested information for good and substantial reasons, which must be set forth in the
minutes of the general meeting. On the other hand, if, for example, we were a Delaware company, any of our shareholders, irrespective of the
size of his or her shareholdings, would have the right to inspect our books and records and make copies of such documents; and

request a competent court to review our operations if the shareholder believes that the company is not being managed properly.
Shareholders holding 10% or more of our paid-up share capital have the right to:

object to the approval by our shareholders at a general meeting of a contract between us and a director or other related person if the
contract falls outside the scope of our normal business; and

object to the approval by our shareholders at a general meeting of any remuneration or compensation granted to the directors not
expressly provided for by Greek law or our articles of association.
Shareholders holding 25% or more of our paid-up share capital have the right to object to a resolution of a general meeting concerning the
settlement or waiver by us of any claim for damages against any of our directors. Finally, shareholders holding 33% or more of our paid-up
share capital and not represented on our board of directors have the right to request from the board of directors, five days prior to the day of a
general meeting, particular information relating to our assets and the development of our corporate affairs. The board of directors may refuse to
give such information for good and substantial reasons, which must be set forth in the minutes of the general meeting. Furthermore,
shareholders holding 33% or more of our paid-up share capital and not represented on our board of directors have the right to petition a
competent court to order an audit in connection with a possible mismanagement of our corporate affairs. The petitioners must show probable
cause before the court will order an audit.
Shareholder appointment of directors
Under Greek law, the articles of association of a Greek company may grant a specific shareholder or shareholders the right to appoint,
without election at a general meeting, their representatives to the board of directors up to an aggregate of no more than one-third of the total
number of board members. Our articles of association do not currently provide for any such special appointments.
Removal of directors
Under Greek law, directors may be removed at any time by a resolution approved by a simple majority of shareholders present at a general
meeting. Directors appointed by shareholders may be removed at any time by the shareholders who appointed them. Our articles of association
do not currently provide for any such special appointments. Furthermore, shareholders representing at least 10% of our paid-up share capital
may request the court to dismiss a director for a serious breach of duty.
Board of directors
Our board of directors is appointed by our shareholders at a general meeting for a three-year term.
Directors’ liability
In accordance with Greek law, directors who negligently or deliberately inflict damage or losses on our company in connection with the
performance of their duties, especially relating to the preparation of the annual financial statements, are liable to us for such damage. The
annual general meeting customarily releases our directors from liability, but the shareholders may retain specific claims, in connection with the
approval of the annual financial statements provided that such release is limited to the general
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management of our company during the fiscal year of approved accounts. In addition, a general meeting may release a director from liability
for any specific claims we may have against him or her, provided that two years have already lapsed since the cause of action arose against the
director and a minority representing at least 25% of our paid-up share capital does not object to such resolution. In contrast, most US federal
and state laws prohibit a company from releasing a director from liability if he or she has acted in bad faith or has breached his or her duty of
loyalty.
In general, actions for damages as against directors for loss incurred by the Company are exercised under Greek law through the company,
rather than through derivative actions, a remedy typically available to shareholders of US companies. However, under certain limited
circumstances the shareholders of a Greek company may have the right to bring an action against directors on behalf of the company. Our
board of directors may decide by a simple majority to bring an action on behalf of us against any of its members. In addition, if our
shareholders so resolve at a general meeting by an absolute majority, or if shareholders representing 33% of our paid-up share capital so
request, we are under an obligation to bring a claim for damages against members of the board of directors for mismanagement of corporate
affairs within six months either from the day of the general meeting or from the day such request is submitted to us. We are then represented in
court by special independent representatives appointed either at a general meeting or by the court.
We have obtained insurance against our executive officers’ and directors’ potential liability under US securities laws.
Issue of share capital
Subject to the pre-emptive rights contained in our articles of association, our share capital may be increased by a resolution of the
shareholders. A quorum of 67% of the holders of our share capital and a supermajority of 90% of the share capital present and entitled to vote
is required to pass the resolution.
Issue of shares for non-cash consideration
Greek corporate law requires a valuation of non-cash assets offered as payment for an issue of shares. Under Greek law, a commission set
up by the Greek Ministry of Development must determine the value of the assets.
Issue of shares in connection with a business combination
We are required to obtain approval from the Ministry of Development and the ATHEX, if we decide to increase our share capital for any
reason, including for the purpose of a merger with another company or for the acquisition of shares in another company, in which case the
Ministry of Development or the ATHEX is more likely to undertake a substantive review of the proposed transaction.
Pre-emptive rights and appraisal rights
Under Greek law, all share capital increases, including increases in the form of convertible bonds but excluding those for non-cash
consideration, must be offered first on a pre-emptive basis to our existing shareholders. Pre-emptive rights may only be waived or restricted by
a resolution of the general meeting upon delivery of a written report from the board of directors justifying the reasons for the proposed waiver.
A quorum of 67% of the holders of our share capital and a supermajority of 90% of the share capital present and entitled to vote is required to
pass the resolution. Shareholders of many US companies typically have no pre-emptive rights. For example, under Delaware law shareholders
have no pre-emptive rights unless these rights are specifically granted in a Delaware company’s certificate of incorporation.
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Unlike the shareholders of a US company, under Greek law our shareholders have no appraisal rights in connection with merger
transactions involving us.
Rights issues
The time period for the exercise of rights under a rights issue is fixed by a resolution of the general meeting and may not be less than one
month, during which time our ordinary shares must be traded on the ATHEX. All new shares not acquired by our shareholders may be
allocated by the board of directors in its sole discretion and may be offered to non-shareholders at a price that is at least equal to that of the
rights issue.
Rights of purchase and redemption of our ordinary shares
Under Greek law, we are prohibited from acquiring our own ordinary shares, except:

in connection with a redemption or reduction of our share capital;

if ordered by a court for the purpose of repaying our debts;

with respect to ordinary shares which have been donated to us by a shareholder;

as a result of a transfer of all of our assets; or

in the context of a purchase of ordinary shares for the purpose of distributing them to our employees or to the employees of one of
our affiliates.
We may also acquire our ordinary shares up to a maximum of 10% of our share capital in order to support the price of our ordinary shares
in circumstances in which our shareholders determine that the share price is substantially lower than that which would correspond to the state
of the market, given our financial condition and prospects. The shareholders resolution must specify the maximum number of ordinary shares
to be purchased, the high and low prices at which we may purchase the ordinary shares and the time period of the redemption program, which
may not exceed 12 months from the date of the resolution. The shareholder resolution must be immediately notified to the Athens Stock
Exchange and published in one political and one financial newspaper and in the ATHEX Daily Official List at least 10 days before the start of
the time period of the redemption program. The board of directors may decide to acquire the shares in stages within the time period and upper
limit set by the general meeting of shareholders upon prior notification of the ATHEX and publication of the relevant board resolution in one
political and one financial newspaper. Under Greek law, we are required to fund a share buy-back exclusively from funds that could be
distributed to shareholders as dividends.
The day following the expiration of the time period during which we may be authorized to purchase our ordinary shares, we must submit
to the Hellenic Capital Market Commission and the ATHEX a statement setting forth the number of ordinary shares acquired, the average
acquisition price, the total number of treasury shares as at that date, as well as the percentage of share capital which corresponds to this number.
This information is published in the ATHEX Daily Official List and is disclosed to our shareholders at the following general meeting. The
purchased shares must be fully paid-up and acquired from the broad investing public. Any ordinary shares so acquired must be sold within
three years of purchase, which may be extended for a further two years upon application to the Hellenic Capital Market Commission, or
otherwise must be cancelled. Both the decision to sell and the decision to cancel such shares must be communicated to the ATHEX. All
ordinary shares so acquired do not have voting rights but may be taken into account for the purpose of assessing a quorum.
As a general matter, in light of the restrictions on the ability of a Greek company to repurchase its own shares under Greek law described
above, we are subject to a share repurchase regime that could be more restrictive than that applicable to US companies.
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Disclosure of interests in shares
Under Greek law, any person who acquires or sells, directly or indirectly, shares, as a result of which the percentage of such person’s
voting rights reaches, directly or indirectly, exceeds or falls below the limits of 5%, 10%, 20%, 1  3 , 50% or 2  3 of our total voting rights, must
inform us and the ATHEX in writing within one day of the later of the date of acquisition or sale or the date when the person became aware of
the transaction.
A similar obligation exists for a shareholder who owns more than 10% of our total voting rights when the percentage of the shareholder’s
voting rights is increased or decreased by 3% or more, and for any member of the board of directors or any executive officer who acquires or
disposes of 3% or more of our total voting rights, irrespective of his or her total percentage. Furthermore, directors and senior managers must
notify us and we, in turn, must notify the ATHEX, with respect to each transaction in our ordinary shares unless their total transactions in our
ordinary shares in one calendar year do not exceed € 5,000.
Greek law requires any of our shareholders holding at least 10% of any class of our shares to report to the ATHEX, in advance of any
acquisition or transfer of more than 5% of the same class of shares, the exact volume, and timing of the transaction as well as the name of any
broker or underwriter used in connection with such acquisition or transfer. This information is then published in the Daily Bulletin of the
ATHEX.
According to a recently enacted law that will enter into force as of July 1, 2007 the above thresholds and time limit will be amended. As a
result, any person who acquires or sells, directly or indirectly, shares, as a result of which the percentage of such person’s voting rights reaches,
directly or indirectly, exceeds or falls below the limits of 5%, 10%, 15%, 20%, 25%, 1  3 , 50% or 2  3 of our total voting rights, will have to
inform us and the ATHEX in writing within three days of the date of acquisition or sale.
Adoption of anti-takeover measures by our board of directors
Unlike the laws of many states in the United States, Greek law prevents directors from adopting anti-takeover measures in the case of a
hostile bid, including the implementation of a shareholder rights plan or a so-called “poison pill”, without prior shareholder approval. In
addition, there is no provision in our articles of association that will have the effect of delaying, deferring or preventing a change of control.
C.
Material Contracts
You should read Item 5, “Operating Financial Review and Prospects,” and Item 7B, “Major Shareholders and Related Party
Transactions—Related Party Transactions” for a discussion of our material contracts.
D.
Exchange Controls
There are currently no exchange controls in Greece that would restrict the payment of dividends or other capital distributions to a holder of
ordinary shares or ADSs outside Greece, and there are currently no restrictions in Greece that would affect the right of a non-Greek holder of
ordinary shares or ADSs to dispose of his or her shares or ADSs, as the case may be, and receive the proceeds of such disposal outside Greece.
All forms of capital movement in and out of Greece have been deregulated. Foreign investors may purchase securities listed on the
ATHEX, as well as Greek Government bonds and treasury bills. Repatriation of capital and dividends and any other income on securities is
fully deregulated.
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Potential purchasers of listed companies’ shares should consult their professional advisers in connection with the internal procedures and
requirements established by credit institutions in Greece with regard to such repatriation.
E.
Taxation
Greek taxation
Introduction
The following is a summary of material Greek tax considerations that may be relevant to the ownership and disposition of the ordinary
shares and ADSs. The summary does not purport to be nor should it be relied upon as a comprehensive description or analysis of all the tax
considerations which may be relevant to a decision to hold the ordinary shares or ADSs.
This summary is based on tax laws and regulations in effect in Greece on the date of this annual report which are subject to change
without notice. Potential purchasers should consult their own tax advisers concerning the overall Greek tax (including Greek capital gains,
inheritance or succession, and gift tax) or other tax consequences of the ownership and disposition of the ordinary shares or ADSs.
Corporate taxation
The net income of Greek société anonymes was taxed at a flat rate of 35% until 2004. The rate was reduced to 32% in 2005, to 29% in
2006 and to 25% in 2007.
Taxation of dividends
No withholding taxes are imposed by Greece on the payment of dividends on the ordinary shares.
Taxation of capital gains
Under Article 38 of Law 2238/94, capital gains resulting from the sale of securities listed on the ATHEX by enterprises incorporated in
Greece or foreign enterprises operating through a permanent establishment in Greece maintaining double entry accounting records are not
subject to income tax, provided that such gains are maintained in a special reserve account in the accounting records. In the case of distribution
of the reserve or dissolution of the enterprise, these gains are added to the account of the enterprise and will be taxed accordingly.
Capital gains from the sale of listed securities earned by natural persons, whether Greek or foreign residents, and enterprises incorporated
in Greece or foreign enterprises operating through a permanent establishment in Greece without obligation to maintain double entry accounting
records, are exempt from taxation. Foreign enterprises not operating in Greece through a permanent establishment are also exempt from Greek
taxes, subject to the provisions of the applicable double taxation treaty, if any. Pursuant to Article 27 of Law 2703/1999, capital gains from the
sale of securities listed on stock exchanges outside Greece, including the ADSs, earned by Greek natural persons or legal entities without
obligation to maintain double entry accounting records are also exempt from taxation. Legal entities that maintain double entry accounting
records are not subject to income tax, provided that such gains are maintained in a special reserve account in the accounting records. In the case
of distribution of the reserve or dissolution of the enterprise, these gains are added to the account of the enterprise and will be taxed
accordingly. Capital gains of US holders (as defined below in United States Taxation—Introduction) who are not Greek residents on the sale or
other disposition of the ordinary shares or ADSs will not be subject to income tax in Greece.
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Transfer taxes and charges
A transfer tax is imposed on transfers of ATHEX-listed securities at the rate of 0.15% of the purchase price. The tax is borne by the seller
and is charged by the Central Securities Depositary to brokers, which in turn charge their clients. In addition, a levy is charged to both the
purchaser and the seller by the Central Securities Depositary of approximately 0.06% of the value of the transaction to cover settlement costs
and a freely negotiable commission and other costs are paid to the brokers by each of the buyer and seller.
Stamp duty
The issuance and transfer of shares as well as the payment of dividends is exempt from stamp duty.
Inheritance or succession taxes
Inheritance or succession taxes are payable in Greece on shares of Greek domiciled companies on a progressive system which depends on
the degree of the relationship between the deceased and the beneficiary. The taxable basis for stock exchange listed shares is prescribed in Law
2961/2001, as currently in force.
Gift tax (donation taxes)
A similar system of progressive taxation applies to the donation of listed shares.
United States Taxation
Introduction
This section describes the material United States federal income tax consequences of owning ordinary shares or ADSs. It applies to you
only if you are a US holder, as defined below, and you hold your ordinary shares or ADSs as capital assets for tax purposes. This section does
not apply to you if you are a member of a special class of holders subject to special rules, including:

a dealer in securities or currencies,

a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings,

a tax-exempt organization,

a life insurance company,

a person liable for alternative minimum tax,

a person that actually or constructively owns 10% or more of the voting stock of Coca-Cola Hellenic Bottling Company S.A.,

a person that holds ordinary shares or ADSs as part of a straddle or a hedging or conversion transaction, or

a person whose functional currency is not the US dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations,
published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. In addition,
this section is based in part upon the representations of the Depositary and the assumption that each obligation in the deposit agreement and any
related agreement will be performed in accordance with its terms.
154
In general, and taking into account this assumption, for United States federal income tax purposes, if you hold ADRs evidencing ADSs,
you will be treated as the owner of the ordinary shares represented by those ADSs. Exchanges of ordinary shares for ADSs, and ADSs for
ordinary shares, generally will not be subject to United States federal income tax.
You are a US holder if you are a beneficial owner of ordinary shares or ADSs and you are for United States federal income tax purposes:

a citizen or resident of the United States,

a United States domestic corporation,

an estate whose income is subject to United States federal income tax regardless of its source, or

a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons
are authorized to control all substantial decisions of the trust.
This section does not apply to you if you are a beneficial owner of ordinary shares or ADSs who is not a United States person for United
States federal income tax purposes.
You should consult your own tax advisor regarding the United States federal, state, local and other tax consequences of owning and
disposing of ordinary shares and ADSs in your particular circumstances. Currently, a reciprocal tax treaty, with a protocol thereto, is in effect
between the United States and Greece. You should consult your tax advisers with respect to the effect of such treaty (and the protocol thereto)
on owning and disposing of ordinary shares or ADSs in your particular circumstances.
This discussion addresses only United States federal income taxation.
Taxation of dividends
Under the United States federal income tax laws, and subject to the passive foreign investment company rules discussed below, if you are
a US holder, the gross amount of any dividend paid by us out of our current or accumulated earnings and profits (as determined for United
States federal income tax purposes) is subject to United States federal income taxation. If you are a non-corporate US holder, dividends paid to
you in taxable years beginning before January 1, 2011 that constitute qualified dividend income will be taxable to you at a maximum tax rate of
15% provided that you hold the ordinary shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the
ex-dividend date and meet other holding period requirements. Dividends paid by us with respect to our ordinary shares or ADSs generally will
be qualified dividend income. The dividend is taxable to you when you, in the case of ordinary shares, or the Depositary, in the case of ADSs,
receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to
United States corporations in respect of dividends received from other United States corporations.
The amount of the dividend distribution that you must include in your income as a US holder will be the US dollar value of the euro
payments made, determined at the spot euro/US dollar rate on the date the dividend distribution is includable in your income, regardless of
whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the
period from the date you include the dividend payment in income to the date you convert the payment into US dollars will be treated as
ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will
be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and
accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital
to the extent of your basis in the ordinary shares or ADSs and thereafter as capital gain.
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Dividends will be income from sources outside the United States, but dividends paid in taxable years beginning before January 1, 2007
generally will be “passive income” or “financial services income”, and dividends paid in taxable years beginning after December 31, 2006 will,
depending on your circumstances, be “passive” or “general” income which, in either case, is treated separately from other types of income for
purposes of computing the foreign tax credit allowable to you. In addition, special rules apply in determining the foreign tax credit limitation
with respect to dividends that are subject to the maximum 15% tax rate.
Distributions of additional ordinary shares to you with respect to ordinary shares or ADSs that are made as part of a pro rata distribution to
all our shareholders generally will not be subject to United States federal income tax.
Taxation of capital gains
Subject to the passive foreign investment company rules discussed below, if you are a US holder and you sell or otherwise dispose of your
ordinary shares or ADSs, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between
the US dollar value of the amount that you realize and your tax basis, determined in US dollars, in your ordinary shares or ADSs. Capital gain
of a non-corporate US holder recognized in taxable years beginning before January 1, 2011 is generally taxed at a maximum rate of 15% where
the holder has a holding period greater than one year. The gain or loss will generally be income or loss from sources within the United States
for foreign tax credit limitation purposes.
Passive Foreign Investment Company Rules
We believe that our ordinary shares and ADSs should not be treated as stock of a passive foreign investment company, or PFIC, for
United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to
change.
If we were to be treated as a PFIC, and you are a US holder that did not make a mark-to-market election, you would be subject to special
rules with respect to: (i) any gain realized on the sale or other disposition of ordinary shares or ADSs and (ii) any excess distribution that we
make to you (generally, any distributions during a single taxable year that are greater than 125% of the average annual distributions received in
respect of the ordinary shares or ADSs during the three preceding taxable years or, if shorter, the holding period for the ordinary shares or
ADSs).
Under these rules: (i) the gain or excess distribution will be allocated ratably over the holding period for the ordinary shares or ADSs,
(ii) the amount allocated to the taxable year in which the US holder realized the gain or excess distribution will be taxed as ordinary income,
(iii) the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year, and (iv) the
interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.
In addition, notwithstanding any election you make with regard to the ordinary shares or ADSs, dividends that you receive from us would
not constitute qualified dividend income to you if we were a PFIC either in the taxable year of the distribution or the preceding taxable year.
Dividends that you receive that do not constitute qualified dividend income are not eligible for taxation at the 15% maximum rate applicable to
qualified dividend income. Instead, you must include the gross amount of any such dividend paid by us out of our accumulated earnings and
profits (as determined for United States federal income tax purposes) in your gross income, and it will be subject to tax at rates applicable to
ordinary income.
If you own ordinary shares or ADSs during any year that we are a PFIC, you must file an Internal Revenue Service Form 8621.
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F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the informational requirements of the US Securities Exchange Act of 1934, as they apply to foreign private issuers, and
will file reports and other information with the SEC. As a foreign private issuer, we are exempt from Exchange Act rules regarding the content
and furnishing of proxy statements to shareholders and our officers, directors and principal shareholders are exempt from the reporting and a
short-swing profit recovery provisions contained in Section 16 of the Exchange Act. The reports and other information can be inspected and
copied at the public reference facilities of the SEC located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. You
may also obtain copies of such material from the Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington DC 20549, at prescribed rates. You may obtain more information concerning the operation of the Public Reference Section of the
SEC by calling the SEC at 1-800-SEC-0330. The SEC filings are also available to the public from commercial document retrieval services and,
for filings made on or after November 4, 2002, at the website maintained by the SEC at www.sec.gov.
We furnish holders of our ordinary shares with annual reports containing consolidated financial statements audited by independent
accountants. We file quarterly financial statements under cover of Form 6-K. We also furnish other reports as we may determine or as required
by law.
I. Subsidiary Information
See Item 4C, “Information on the Company—Organizational Structure”.
ITEM 11
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
You should read Item 5, “Operating and financial review and prospects—Market risk” for quantitative and qualitative disclosures about
market risk.
ITEM 12
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
157
PART II
ITEM 13
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15
a.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We have evaluated, under the supervision and with the participation of our management, including our managing director and our chief
financial officer, our disclosure controls and procedures as of December 31, 2006 pursuant to Rule 13a-15 of the Securities Exchange Act of
1934, as amended. Based on that evaluation, these officers have concluded that our disclosure controls and procedures are effective in
providing reasonable assurance that material information required to be included in this annual report is accumulated and communicated to
them on a timely basis.
In some of the environments in which we operate, businesses like ours are exposed to a heightened risk of loss due to fraud and criminal
activity. We have established a system of internal controls and procedures and regular review of our financial records designed to identify and
correct control weaknesses so as to minimize such losses before they could become material to our results or financial position. From time to
time, we have experienced acts of fraud and criminal activity in our Nigerian operations. We take all such incidents seriously and conduct
extensive investigations through our internal audit department and in co-ordination with local authorities, so that appropriate disciplinary
measures are taken. In 2006, the individual and aggregate impact of all such incidents was immaterial.
b.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over the Coca-Cola Hellenic Bottling Company’s
financial reporting. Coca-Cola Hellenic Bottling Company S.A.’s internal control over financial reporting is a process designed under the
supervision of its managing director and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external reporting purposes in accordance with US GAAP. Management conducted an
evaluation of the effectiveness of internal control over financial reporting based on the Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that Coca-Cola
Hellenic Bottling Company’s internal control over financial reporting was effective as at December 31, 2006.
Internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s assessment of the effectiveness of internal control over financial reporting as at December 31, 2006 was audited by
PricewaterhouseCoopers S.A., an independent registered public accounting firm, as stated in their report which is included herein.
158
c.
Attestation Report of the Registered Public Accounting Firm
The attestation report called for by Item 15(c) of the Form 20-F is included on pages F-1 and F-2.
d.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal controls over financial reporting for the year ended December 31, 2006 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting apart from the gradual implementation of SAP
software applications, which we expect to further strengthen our internal control environment. For additional information on our
implementation of SAP, see item 4B, “Information on the Company—Business Overview—Information technology”.
ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors believes that Mr. Kent Atkinson, the chairman of our audit committee, and Mr. Nigel Macdonald are audit
committee financial experts as such term is defined for purposes of section 407 of the Sarbanes-Oxley Act of 2002 and the rules promulgated
thereunder.
ITEM 16B CODE OF ETHICS
We have adopted a code of ethics covering our senior management and directors. This code of ethics complies with the standards
prescribed in the Sarbanes-Oxley Act of 2002. We also have in place a corporate code of business conduct applicable to all our employees,
which is available on our website at www.coca-colahbc.com.
ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees and All Other Fees
Audit fees
Fees for audit services paid to PricewaterhouseCoopers S.A. and affiliates totaled approximately € 8.0 million for the year ended
December 31, 2006, including fees associated with the annual integrated audit and reviews of our quarterly reports, prepared in accordance
with US GAAP, IFRS, and local statutory audits. Fees for audit services paid to PricewaterhouseCoopers S.A. and affiliates totaled
approximately € 4.7 million for the year ended December 31, 2005, including fees associated with the annual audit and reviews of our quarterly
reports, prepared in accordance with US GAAP, IFRS, and local statutory audits.
Audit related fees
Fees paid to PricewaterhouseCoopers S.A. and affiliates for audit related services totaled approximately € 0.1 million for the year ended
December 31, 2006 as compared to € 0.8 million for the year ended December 31, 2005. Audit related services for 2005 principally included
due diligence work and advisory services in relation to the Sarbanes-Oxley Act of 2002.
Tax fees
Fees paid to PricewaterhouseCoopers S.A. and affiliates for tax services, including tax compliance, tax advice and planning, totaled
approximately € 1.0 million in 2006 and € 1.1 million in 2005.
159
All other fees
Other than the fees described above, no other amounts were paid to PricewaterhouseCoopers S.A. or affiliates in respect of the years
ended December 31, 2006 and December 31, 2005.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Our audit committee pre-approves all audit and permissible non-audit services provided by the independent auditors. These services may
include audit services, audit related services, tax services and other services. The audit committee has adopted a policy of pre-approval of
services provided by the independent auditors.
Under the policy, pre-approval is generally provided for work associated with registration statements under the Securities Act of 1933 (for
example, comfort letters or consents); statutory or other financial audit work under IFRS or according to local requirements; due diligence
work for potential acquisitions or disposals; attestation services not required by statute or regulation; adoption of new accounting
pronouncements or auditing and disclosure requirements and accounting or regulatory consultations; internal control reviews and assistance
with internal control reporting requirements; review of information systems security and controls; tax compliance, tax planning and related tax
services, excluding any tax service prohibited by regulatory or other oversight authorities; expatriates and other individual tax services; and
assistance and consultation on questions raised by regulatory agencies. For each proposed service, the independent auditor is required to
provide detailed back-up documentation at the time of approval to permit the audit committee to make a determination whether the provision of
such services would impair the independent auditor’s independence.
In respect of the fiscal year ended December 31, 2007, our audit committee has approved in advance certain permitted services across our
business. These services are (i) statutory or other financial audit work, (ii) audit related work, such as services related to employee benefit
plans, due diligence and consultation on financial accounting and internal control matters, and (iii) tax compliance, planning and advice.
ITEM 16D EXEMPTION FROM THE LISTING STANDARDS OF AUDIT COMMITTEES
None. Our board of directors has determined that all members of our audit committee satisfy the independence requirement of Rule 10A-3
of the US Securities and Exchange Act of 1934, as amended.
ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PERSONS
None.
160
PART III
ITEM 17
FINANCIAL STATEMENTS
See Item 18.
ITEM 18
FINANCIAL STATEMENTS
The following consolidated financial statements, together with the report thereon of PricewaterhouseCoopers, are filed as part of this
Annual Report:
Page
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income—Years Ended December 31, 2006, 2005 and 2004
Consolidated Balance Sheets—December 31, 2006 and 2005
Consolidated Statements of Shareholders’ Equity—Years Ended December 31, 2006, 2005 and 2004
Consolidated Statements of Cash Flows—Years Ended December 31, 2006, 2005 and 2004
Notes to Consolidated Financial Statements
ITEM 19
F-1
F-3
F-4
F-6
F-9
F-10
EXHIBITS
The following exhibits are filed as part of this Annual Report:
Exhibit
Number
1.1
1.2
2.1
2.2
2.3
2.4
3.1
3.2
3.3
Description
Articles of Association of Coca-Cola Hellenic Bottling Company S.A., as last amended on June 17,
2002*
Articles of Association of Coca-Cola HBC Finance B.V., as last amended on May 20, 2002**
€6 00.0 million Multicurrency Revolving and Swingline Facilities Agreement with a € 250.0 million
Swingline Option, dated August 1, 2005 for Coca-Cola Hellenic Bottling Company S.A., arranged by
Citigroup Global Markets Limited and Deutsche Bank AG with Deutsche Bank AG, London Branch
acting as Swingline Agent and as Facility Agent
Amended and Restated Trust Deed relating to € 2.0 billion Euro Medium-Term Note Program among
Coca-Cola HBC Finance plc and Coca-Cola HBC Finance B.V., as issuers, Citicorp Trustee Company
Limited, as trustee, and Coca-Cola Hellenic Bottling Company S.A., Coca-Cola HBC Finance plc and
Coca-Cola HBC Finance B.V., as guarantors
Indenture, among Coca-Cola HBC Finance B.V., Coca-Cola Hellenic Bottling Company S.A. and The
Bank of New York, dated September 17, 2003**
Form of new notes of Coca-Cola HBC Finance B.V. and guarantees relating thereto (included in
Exhibit 2.3)**
Shareholders’ Agreement dated November 3, 1999 by and among The Coca-Cola Export Corporation,
Barlan, Inc., Atlantic Industries, Coca-Cola Overseas Parent Limited, Refreshment Product
Services, Inc., Kar-Tess Holding S.A., Boval S.A. and Socomex S.A.*
Amendment to the Shareholders’ Agreement of November 3, 1999, dated March 3, 2000 by and
among The Coca-Cola Export Corporation, Barlan, Inc., Atlantic Industries, Coca-Cola Overseas
Parent Limited, Refreshment Product Services, Inc., Kar-Tess Holding S.A., Boval S.A. and Socomex
S.A.*
Amendment to the Shareholders’ Agreement of November 3, 1999, as initially amended on March 3,
2000, dated August 7, 2003 by and among The Coca-Cola Export Corporation, Barlan, Inc., Atlantic
Industries, Coca-Cola Overseas Parent Limited, Refreshment Product Services, Inc., Kar-Tess
Holding S.A., Boval S.A. and Socomex S.A.**
161
3.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
7.1
8.1
11.1
12
13
15
Relationship Agreement dated August 29, 2000 by and among The Coca-Cola Export Corporation,
Barlan, Inc., Atlantic Industries, Coca-Cola Overseas Parent Limited, Refreshment Product
Services, Inc., Kar-Tess Holding S.A., Boval S.A., Socomex S.A. and Hellenic Bottling Company
S.A. (subsequently Coca-Cola Hellenic Bottling Company S.A.)*
Form of European Bottlers’ Agreement*
European Bottlers’ Agreement for Greece entered into with effect from June 1, 1997, by and among
The Coca-Cola Company, The Coca-Cola Export Corporation and Hellenic Bottling Company S.A.*
Form of International (Non-European) Bottlers’ Agreement*
Form of Distribution Agreement*
Supply Agreement dated June 8, 2004 between Frigoglass S.A. and Coca-Cola Hellenic Bottling
Company S.A.***
Agreement dated November 23, 2001 by and between The Coca-Cola Export Corporation,
International Beverages, Jayce Enterprises Limited, Coca-Cola Molino Beverages limited and 3E
(Cyprus) for the sale and purchase of shares in Star Bottling Limited (Cyprus), LLC Coca-Cola
Stavropolye Bottlers and Coca-Cola Molino Beverages Limited*
Letter from The Coca-Cola Company, dated August 15, 2003**
Form of Letter from The Coca-Cola Company waiving certain provisions of bottlers’ agreements for
our countries that entered the European Union on May 1, 2004***
Statement re Computation of Ratios
Subsidiaries of the Registrant (provided under “Business—Subsidiaries” in the Annual Report)
Code of Ethics***
Certifications of Managing Director and Chief Financial Officer pursuant to Section 302 of the Public
Company Accounting Reform and Investor Protection Act of 2002
Certifications of Managing Director and Chief Financial Officer pursuant to Section 906 of the Public
Company Accounting Reform and Investor Protection Act of 2002****
Consents of Independent Registered Public Accounting Firms
*
Incorporated by reference to the Registration Statement on Form 20-F of Coca-Cola Hellenic Bottling Company S.A. filed with
the SEC on October 8, 2002.
**
Incorporated by reference to the Registration Statement on Form F-4 of Coca-Cola HBC Finance B.V. and Coca-Cola Hellenic
Bottling Company S.A. filed with the SEC on November 13, 2003.
***
Incorporated by reference to the Annual Report on Form 20-F of Coca-Cola Hellenic Bottling Company S.A. for the year ended
December 31, 2003, as filed with the SEC on June 30, 2004.
****
Furnished but not filed.
162
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
COCA-COLA HELLENIC BOTTLING COMPANY S.A.
(Registrant)
By:
/s/ JAN GUSTAVSSON
Name: Jan Gustavsson
Title: General Counsel and Company Secretary
Date: June 29, 2007
163
Report of Independent Registered Public Accounting Firm
To the shareholders and Board of Directors of Coca-Cola Hellenic Bottling Company S.A.
We have completed an integrated audit of Coca-Cola Hellenic Bottling Company S.A. and its subsidiaries’ 2006 consolidated financial
statements and of its internal control over financial reporting as of December 31, 2006 and audits of its 2005 and 2004 consolidated financial
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our
audits, are presented below.
Consolidated financial statements
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders’ equity and
cash flows present fairly, in all material respects, the financial position of Coca-Cola Hellenic Bottling Company S.A. and its subsidiaries at
December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for defined benefit
pension and other postretirement plans effective December 31, 2006.
Internal control over financial reporting
Also, in our opinion, management’s assessment included in “Management’s Annual Report on Internal Control Over Financial
Reporting”, appearing in Item 15(b) of the 2006 Annual Report on Form 20-F, that the Company maintained effective internal control over
financial reporting as of December 31, 2006 based on criteria established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2006, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the
Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting,
evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such
other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
F- 1
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers S.A.
Athens, Greece
May 2, 2007
F- 2
Coca-Cola Hellenic Bottling Company S.A.
Consolidated Statements of Income
2006
Net sales revenue
Cost of goods sold
Gross profit
Selling, delivery, administrative expenses and other operating items
Operating profit
Interest expense
Interest income
Other income
Other expense
Income before income taxes
Income tax expense
Share of income of equity method investees
Minority interests
Net income before cumulative effect of accounting change
Cumulative effect of accounting change for Statement No. 123 (R) adoption,
net of applicable income taxes of € 0.2 million
Net income
€
Basic net income per share
Diluted net income per share
€
€
€
Year ended December 31,
2005
(In millions of euro,
except per share amounts)
5,372.2 €
(3,282.3 )
2,089.9
(1,630.8 )
459.1
(86.3 )
10.3
0.4
(0.1 )
383.4
(89.2 )
24.8
(4.8 )
314.2
(0.8 )
313.4 €
1.30
1.30
Refer to Notes to the Consolidated Financial Statements
F- 3
€
€
4,633.9 €
(2,749.9 )
1,884.0
(1,433.3 )
450.7
(56.2 )
3.3
2.5
(3.0 )
397.3
(111.8 )
23.9
(10.5 )
298.9
2004
4,201.9
(2,500.9 )
1,701.0
(1,279.2 )
421.8
(66.9 )
6.6
4.2
(8.3 )
357.4
(77.4 )
5.2
(13.1 )
272.1
—
298.9
€
—
272.1
1.25
1.25
€
€
1.15
1.14
Coca-Cola Hellenic Bottling Company S.A.
Consolidated Balance Sheets
As at December 31,
2006
2005
(In millions of euro)
Assets
Current assets:
Cash and cash equivalents
Trade accounts receivable, less allowances of € 36.4 million in 2006 and €
33.0 million in 2005
Inventories
Receivables from related parties
Taxes receivable
Deferred income taxes
Prepaid expenses
Derivative assets
Other current assets
Total current assets
Property, plant and equipment:
Land
Buildings
Returnable containers
Production and other equipment
Less accumulated depreciation
Construction in progress
Advances for equipment purchases
Investment in equity method investees
Deferred income taxes
Derivative assets
Other tangible non-current assets
Franchise rights
Goodwill and other intangible assets
Total assets
Refer to Notes to the Consolidated Financial Statements
F- 4
€
288.7
640.4
389.7
90.8
9.9
44.4
86.8
4.8
61.5
1,617.0
132.8
854.2
241.1
2,801.5
4,029.6
(1,769.9 )
2,259.7
156.3
70.2
2,486.2
316.9
35.8
—
35.9
1,997.4
798.4
€ 7,287.6
€
168.5
560.8
359.8
70.9
7.9
53.3
85.0
12.5
38.6
1,357.3
105.3
781.8
265.7
2,458.7
3,611.5
(1,560.6 )
2,050.9
142.3
29.3
2,222.5
294.2
22.1
21.7
30.7
1,996.4
789.9
€ 6,734.8
Coca-Cola Hellenic Bottling Company S.A.
Consolidated Balance Sheets (Continued)
As at December 31,
2006
2005
(In millions of euro)
Liabilities and shareholders’ equity
Current liabilities:
Short-term borrowings
Accounts payable
Accrued expenses
Amounts payable to related parties
Deposit liabilities
Income taxes payable
Deferred income
Deferred income taxes
Derivative liabilities
Current portion of long-term debt
Current portion of capital lease obligations
Total current liabilities
Long-term liabilities:
Long-term debt, less current portion
Capital lease obligations, less current portion
Cross currency swap payables relating to borrowings
Employee benefit obligations
Deferred income taxes
Deferred income
Other long-term liabilities
Total long-term liabilities
Minority interests
Shareholders’ equity:
Ordinary shares, € 0.50 par value: 242,067,916 (2005: 240,692,002)
shares authorized, issued and outstanding
Additional paid-in capital
Deferred compensation
Retained earnings
Accumulated other comprehensive income
Total shareholders’ equity
Total liabilities and shareholders’ equity
Refer to Notes to the Consolidated Financial Statements
F- 5
€
€
269.3
274.3
480.4
160.1
100.7
46.8
25.6
5.4
1.2
—
33.9
1,397.7
€
310.0
200.4
412.0
115.7
137.1
75.0
7.9
4.9
1.3
243.9
19.8
1,528.0
1,516.4
82.2
122.0
151.4
683.1
89.1
24.0
2,668.2
65.0
1,278.4
50.3
43.3
117.7
678.2
28.6
16.4
2,212.9
70.6
121.0
1,719.0
(0.7 )
1,190.2
127.2
3,156.7
7,287.6
120.3
1,693.2
(0.5 )
949.0
161.3
2,923.3
6,734.8
€
Coca-Cola Hellenic Bottling Company S.A.
Consolidated Statements of Shareholders’ Equity
Ordinary shares
Number
of shares
Amount
As at January 1, 2004
Net income for 2004
Currency translation adjustment, net
of applicable income taxes of €
(8.2) million
Change in minimum pension liability,
net of applicable income taxes of €
0.7 million
Change in fair value of
derivatives, net of applicable
income taxes of € 0.6 million
Loss on derivatives reclassified
into earnings from other
comprehensive income, net of
applicable income taxes of €
(0.7) million
Unrealized gain on available-for-sale
investments, net of applicable
income taxes of € (0.1) million
Comprehensive income
Stock issued to employees exercising
stock options
Cash dividends ( € 0.20 per share)
As at December 31, 2004
Additional
paid-in
Deferred
Retained
capital
compensation
earnings
(In millions, except per share data)
€ 1,639.2
€
(0.9 )
€ 492.1
—
—
272.1
Accumulated
other
comprehensive
income
236.9
—
€ 118.5
—
—
—
—
—
—
68.4
68.4
—
—
—
—
—
(3.4 )
(3.4 )
—
—
—
—
—
(11.4 )
(11.4 )
—
—
—
—
—
6.9
6.9
—
—
—
—
—
0.3
0.3
332.9
1.4
—
238.3
0.6
—
€ 119.1
18.6
—
1,657.8
—
—
68.2
19.2
(47.4 )
2,561.0
€
€
—
—
(0.9 )
—
(47.4 )
€ 716.8
Refer to Notes to the Consolidated Financial Statements
F- 6
€
Total
€
7.4
—
€
€
2,256.3
272.1
Coca-Cola Hellenic Bottling Company S.A.
Consolidated Statements of Shareholders’ Equity (Continued)
Ordinary shares
Number
of shares
Amount
As at January 1, 2005
Net income for 2005
Currency translation adjustment, net
of applicable income taxes of €
(4.2) million
Change in minimum pension
liability, net of applicable
income taxes of € 0.5 million
Change in fair value of derivatives,
net of applicable income taxes
of € 0.0 million
Loss on derivatives reclassified
into earnings from other
comprehensive income, net of
applicable income taxes of €
(0.4) million
Unrealized gain on available-for-sale
investments, net of applicable
income taxes of € (0.3) million
Comprehensive income
Stock issued to employees
exercising stock options
Changes in deferred
compensation related to Employee
Share Ownership Plan
Cash dividends ( € 0.28 per share)
As at December 31, 2005
Additional
paid-in
Deferred
Retained
capital
compensation
earnings
(In millions, except per share data)
€ 1,657.8
€
(0.9 )
€ 716.8
—
—
298.9
Accumulated
other
comprehensive
income
238.3
—
€ 119.1
—
—
—
—
—
—
91.2
91.2
—
—
—
—
—
(1.3 )
(1.3 )
—
—
—
—
—
(0.1 )
(0.1 )
—
—
—
—
—
2.3
2.3
—
—
—
—
—
1.0
1.0
392.0
2.4
1.2
35.4
—
—
—
36.6
—
—
240.7
—
—
€ 120.3
—
—
1,693.2
€
€
0.4
—
(0.5 )
—
(66.7 )
€ 949.0
Refer to Notes to the Consolidated Financial Statements
F- 7
€
Total
€
68.2
—
—
—
161.3
€
€
2,561.0
298.9
0.4
(66.7 )
2,923.3
Coca-Cola Hellenic Bottling Company S.A.
Consolidated Statements of Shareholders’ Equity (Continued)
Ordinary shares
Number
of shares
Amount
As at January 1, 2006
Net income for 2006
Currency translation adjustment,
net of applicable income taxes of € 2.3
million
Change in minimum pension liability, net of
applicable income taxes of € (0.2) million
Change in fair value of derivatives, net of
applicable income taxes of € 0.1 million
Unrealized gain on
available-for-sale investments,
net of applicable income taxes of € (0.6)
million
Loss on derivatives reclassified into earnings
from other comprehensive income, net of
applicable income taxes of € (0.1) million
Comprehensive income
Adoption of FAS 158:
Minimum pension liability adjustment, net
of applicable income taxes of € (4.1)
million
Unrecognized losses and prior service cost,
net of applicable income taxes of € 10.3
million
Stock issued to employees exercising stock
options
Stock option compensation
Changes in deferred compensation related to
Employee Share Ownership Plan
Cash dividends ( € 0.30 per share)
As at December 31, 2006
Additional
paid-in
Deferred
Retained
capital
compensation
earnings
(In millions, except per share data)
€ 1,693.2
€
(0.5 )
€
949.0
—
—
313.4
Accumulated
other
comprehensive
income
240.7
—
€ 120.3
—
—
—
—
—
—
(11.8 )
(11.8 )
—
—
—
—
—
0.1
0.1
—
—
—
—
—
(0.3 )
(0.3 )
—
—
—
—
—
1.8
1.8
—
—
—
—
—
0.5
0.5
303.7
—
—
—
—
—
12.0
12.0
—
—
—
—
—
(36.4 )
(36.4 )
1.4
—
0.7
—
21.8
4.0
—
—
—
—
—
—
22.5
4.0
—
—
242.1
—
—
€ 121.0
—
—
1,719.0
€
€
(0.2 )
—
(0.7 )
€
Refer to Notes to the Consolidated Financial Statements
F- 8
—
(72.2 )
1,190.2
€
Total
€
161.3
—
—
—
127.2
€
€
2,923.3
313.4
(0.2 )
(72.2 )
3,156.7
Coca-Cola Hellenic Bottling Company S.A.
Consolidated Statements of Cash Flows
Year ended December 31,
2006
2005
2004
(In millions of euro)
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation
Amortization
Stock option compensation expense
Deferred income taxes
Gain on disposals of non-current assets
Impairment charges on property, plant and equipment
Minority interests
Share of income of equity method investees
Cumulative effect of accounting change for Statement No.123 (R) adoption,
before income taxes
Changes in operating assets and liabilities, net of effect of acquisitions:
Trade accounts receivable and other current assets
Inventories
Accounts payable and accrued expenses
Net cash provided by operating activities
Investing activities
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Cash payments for acquisitions, net of cash acquired
Proceeds from sale of trademarks
Return of investment of equity method investees
Proceeds from sale of investments
Purchase of investments
Net cash used in investing activities
Financing activities
Proceeds from issuance of debt
Repayments of debt
Support payments from The Coca-Cola Company for cold drink equipment
placement
Payments on capital lease obligations
Return of capital to shareholders
Proceeds from issue of shares
Dividends paid to shareholders of the Company and to minority
interests
Net cash provided by (used in) financing activities
Effect of exchange rates on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
€ 313.4
330.2
0.7
4.0
13.2
(14.1 )
24.5
4.8
(24.8 )
1.0
309.7
0.2
—
11.1
(13.1 )
0.9
10.5
(23.9 )
—
€ 272.1
285.8
—
—
(35.7 )
(6.3 )
3.6
13.1
(5.2 )
—
(54.7 )
(22.8 )
117.7
693.1
(51.6 )
(13.2 )
15.7
545.2
(25.3 )
(35.0 )
22.6
489.7
(560.0 )
37.7
(78.1 )
—
5.6
10.0
(1.7 )
(586.5 )
(427.5 )
27.4
(196.0 )
9.0
—
5.1
(3.1 )
(585.1 )
(360.8 )
21.0
(3.1 )
8.6
—
6.7
(0.5 )
(328.1 )
696.8
(662.5 )
586.9
(373.4 )
725.9
(854.5 )
54.8
(20.4 )
—
22.5
16.7
(16.6 )
—
36.6
6.4
(11.7 )
(0.4 )
19.2
(76.8 )
14.4
(0.8 )
120.2
168.5
€ 288.7
(75.5 )
174.7
2.4
137.2
31.3
€ 168.5
(52.5 )
(167.6 )
1.8
(4.2 )
35.5
€ 31.3
Refer to Notes to the Consolidated Financial Statements
F- 9
€ 298.9
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements
1. Organization and Significant Accounting Policies
Organization
Coca-Cola Hellenic Bottling Company S.A. is incorporated in Greece and took its present form in August 2000 through the acquisition of
Coca-Cola Beverages plc by Hellenic Bottling Company S.A. Coca-Cola Hellenic Bottling Company S.A. and its subsidiaries (collectively the
‘Company’) are principally engaged in the production and distribution of alcohol-free beverages under franchise from The Coca-Cola
Company. The Company distributes its products in Europe and Nigeria. Information on the Company’s operations by segment is included in
Note 18.
Coca-Cola Hellenic Bottling Company S.A.’s shares are listed on the Athens Stock Exchange, with secondary listings on the London and
Australian Stock Exchanges. Coca-Cola Hellenic Bottling Company S.A.’s American Depositary Receipts (ADRs) are listed on the New York
Stock Exchange.
Basis of Presentation and Consolidation
The consolidated financial statements include the accounts of Coca-Cola Hellenic Bottling Company S.A. and its subsidiaries.
Investments in affiliates, in which Coca-Cola Hellenic Bottling Company S.A. has significant influence, are accounted for under the equity
method. Our investments in other companies are carried at cost or fair value, as appropriate. All significant intercompany accounts and
transactions, including the intercompany portion of transactions with equity method investees, are eliminated on consolidation.
In accordance with Financial Accounting Standards Board (‘FASB’) Statement No. 141, Business Combinations , we account for all
business combinations by the purchase method. Furthermore, we recognize intangible assets apart from goodwill if they arise from contractual
or legal rights or if they are separable from goodwill.
We use the equity method to account for our investments over whose operating and financial policies we have the ability to exercise
significant influence. Consolidated net income includes our share of the net income of these investments.
Where necessary, comparative figures have been reclassified to conform with changes in presentation in the current year.
Use of Estimates
In conformity with generally accepted accounting principles, the preparation of financial statements for the Company requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure
of contingent assets and liabilities in the financial statements and accompanying notes. Although these estimates are based on management’s
knowledge of current events and actions that may be undertaken in the future, actual results may ultimately differ from estimates.
Risks and Uncertainties
The Company’s operations could be adversely affected by termination or non-renewal of our bottlers’ agreements with The Coca-Cola
Company; marketing and product development activities effectiveness; weaker consumer demand for carbonated soft drinks; adverse economic
conditions in our emerging and
F- 10
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
developing countries; regulation by competition law authorities of the European Union and national states; increased concentration of retailers
and independent wholesalers; product issues such as contamination or product recalls; adverse weather conditions; price increases in and
shortages of raw materials and packaging materials; exchange rate fluctuations; the ability to repatriate profits; changes in regulatory
environment; duties or tariffs; and changes in the method or rate of taxation.
The Company monitors our operations with a view to minimize the impact to our overall business that could arise as a result of the
inherent risks in our business.
Revenue Recognition
Revenues are recognized when all of the following conditions are met: evidence of a binding arrangement exists (generally, purchase
orders), products have been delivered and there is no future performance required and amounts are collectible under normal payment terms.
Revenue is stated net of sales discounts, listing fees and marketing and promotional incentives paid to customers. Listing fees are
incentives provided to customers for carrying the Company’s products in their stores. Fees that are subject to contractual-based term
arrangements are amortized over the term of the contract. All other listing fees are expensed as incurred. The amount of listing fees capitalized
at December 31, 2006 was € 33.7 million (2005: € 19.2 million, 2004: € 7.1 million). Of this balance, € 19.5 million (2005: € 11.5 million,
2004: € 3.8 million) was classified as prepaid expenses (current) and the remainder as other non-current assets. Listing fees expensed for the
year ended December 31, 2006 amounted to € 66.0 million with € 53.3 million and € 33.8 million for 2005 and 2004, respectively. Marketing
and promotional incentives paid to customers during 2006 amounted to € 100.8 million with € 80.2 million in 2005, and € 89.0 million in 2004.
We receive certain payments from The Coca-Cola Company in order to promote sales of Coca-Cola branded products. Contributions for
price support and marketing and promotional campaigns in respect of specific customers are recognized as an offset to promotional incentives
paid to customers. These reimbursements are accrued and matched to the expenditure with which they relate. In 2006, such contributions
totaled € 29.9 million as compared to € 17.6 million and € 21.1 million in 2005 and 2004, respectively. Franchise incentive arrangements are
described under that heading below.
Where we distribute third party products, we recognize the related revenue earned based on the gross amount invoiced to the customer
where we act as principal, take title to the products and have assumed the risks and rewards of ownership. We recognize revenue on the basis of
the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier), where the Company acts as an agent
without assuming the relevant risks and rewards.
Warehouse Costs
Warehouse costs represent the expenses associated with operating Company-owned or leased warehouse facilities used to store finished
goods. Warehousing costs are included in delivery expenses. Such costs amounted to € 182.7 million in 2006 with € 151.4 million and € 127.7
million in 2005 and 2004, respectively.
F- 11
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
Distribution Costs
Distribution costs represent those costs that are incurred to transport products to the buyer’s designated location. These costs include the
fees charged by third party shipping agents and expenses incurred in running our own trucking fleet. Distribution costs are included in delivery
expenses. In 2006, the distribution costs totaled € 294.2 million, compared with € 236.3 million and € 211.1 million for 2005 and 2004,
respectively.
Advertising Expense
Advertising costs are expensed as incurred and were € 169.6 million in 2006 with € 151.8 million and € 129.1 million during 2005 and
2004, respectively. Advertising costs are included within selling expenses.
Interest Expense
Interest costs are expensed as incurred and include interest on loans, overdrafts, capital leases and amortization of debt issuance costs.
Interest costs are capitalized for all qualifying assets that require a period of time to get them ready for their intended use. Qualifying assets are
assets constructed or otherwise produced for the Company’s own use.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash
and cash equivalents of € 288.7 million (2005: € 168.5 million) comprise cash balances and short-term deposits. Of which time deposits were €
205.9 million in 2006 and € 75.0 million in 2005.
Trade Accounts Receivable
The Company records trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated
uncollectible accounts to reflect any loss anticipated on the trade accounts receivable balances and charged to the provision for doubtful
accounts. The allowance is calculated based on our history of write-offs, level of past due accounts based on the contractual term of the
receivables and our relationships with and economic status of our customers.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost for raw materials and consumables is determined either on a first-in,
first-out or weighted average basis depending on the type of inventory. Cost for work in progress and finished goods is comprised of the cost of
direct materials and labor plus attributable overheads.
Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.
F- 12
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
Property, Plant and Equipment
Property, plant and equipment are initially stated at cost. Depreciation is computed using the straight-line method. The estimated useful
lives are as follows:
Freehold buildings
Leasehold buildings and improvements
Production equipment
Vehicles
Computer hardware and software
Marketing equipment
Fixtures and fittings
Returnable containers
40 years
over the term of the lease, up to 40 years
5 to 12 years
5 to 8 years
3 to 7 years
3 to 7 years
8 years
3 to 12 years
Production and other equipment include coolers used to distribute beverages for immediate consumption. Depreciation includes
amortization of assets under capital leases.
The Company capitalizes certain computer software development costs associated with internal-use software (related to the
implementation of the SAP software platform), including external direct costs of materials, services consumed and payroll costs for employees
devoting time to a software project. Costs incurred during the preliminary project stage, as well as costs for maintenance and training, are
expensed as incurred. The total unamortized computer software costs in 2006 and 2005 were € 89.9 million and € 71.5 million, respectively.
The total amount charged to the income statement for amortization of capitalized computer software costs was € 8.8 million in 2006, € 7.0
million in 2005 and € 6.5 million in 2004.
Intangible Assets
Intangible assets consist primarily of franchise rights related to the bottlers’ agreements with The Coca-Cola Company, trademarks, water
rights, customer contracts, distribution rights and goodwill. The franchise agreements contain performance requirements and convey to the
franchisee the rights to distribute and sell products of the franchisor within designated territories over specified periods of time. The Coca-Cola
Company does not grant perpetual franchise rights outside of the United States. The Company believes its franchise agreements will continue
to be renewed at each expiration date and, therefore, essentially have an indefinite useful life.
The Company determines the useful life of its trademarks after considering potential limitations that could impact the life of the
trademark, such as technological limitations, market limitations and the intent of management with regards to the trademark. All the trademarks
recorded by the Company have been assigned an indefinite useful life as they have an established sales history in the applicable region. It is our
intention to receive a benefit from them indefinitely and there is no indication that this will not be the case. We evaluate the useful life assigned
to the trademarks on an annual basis. If the trademarks were determined to have finite lives, they would be amortized over their useful lives.
In accordance with FASB Statement No. 142, Goodwill and Other Intangible Assets (‘Statement No. 142’), goodwill and indefinite lived
intangible assets (including franchise rights and trademarks) are not amortized, but are reviewed at least annually for impairment. Finite-lived
intangible assets are amortized over their estimated useful lives.
F- 13
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
We test for goodwill impairment using the two-step process described in Statement No. 142. The first step is a screen for potential
impairment, while the second step measures the amount of impairment. Fair values are derived using discounted cash flow analysis, based on
cash flow assumptions consistent with our internal planning, discounted at rates reflecting market comparability adjusted to the Company’s
facts and circumstances. We evaluate franchise rights and trademarks for impairment by comparing the applicable carrying value to the fair
value determined based on the present value of estimated future cash flows from such assets.
Franchise Incentive Arrangements
The Coca-Cola Company, at its sole discretion, provides the Company with various incentives, including contributions toward the
purchase of cold drink equipment. Payments are made on the placement of cold drink equipment and are based on franchise incentive
arrangements. The recognition of income in relation to such payments is over the life of the asset. The terms and conditions of these
arrangements require reimbursement if certain conditions stipulated in the agreements are not met, including principally minimum volume
requirements. Management believes the risk of reimbursement is remote. Total support payments from The Coca-Cola Company for the
placement of cold drink equipment were € 83.3 million in 2006, compared with € 26.6 million in 2005 and € 15.0 million in 2004.
Impairment of Long-Lived Assets
The Company evaluates impairment of long-lived assets in accordance with the provisions of FASB Statement No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets . Impairment losses on long-lived assets used in operations are recorded by the Company
when events and circumstances indicate the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets
are less than the carrying amounts of those assets. The impairment losses are measured by comparing the fair value of the assets to their
carrying amounts.
Conditions that may indicate an impairment issue exists include an economic downturn in a market or a change in the assessment of future
operations. In the event that a condition is identified that may indicate an impairment issue exists, an assessment is performed using a variety of
methodologies, including cash flow analysis, estimates of sales proceeds and independent appraisals. Where applicable, an appropriate discount
rate is utilized, based on location - specific economic factors.
F- 14
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
Investments in Securities
The Company classifies its investments in debt and equity securities into the following categories: trading, held-to-maturity and
available-for-sale. The classification is dependent on the purpose for which the investment was acquired. Trading and available-for-sale
investments are carried at fair value. Investments that are acquired principally for the purpose of generating a profit from short-term
fluctuations in price are classified as trading investments and included in current assets. During the period, the Company did not hold any
investments in the trading investments category. Investments with a fixed maturity that management has the intent and ability to hold to
maturity are classified as held-to-maturity and are included in non-current assets, except for maturities within 12 months from the balance sheet
date, which are classified as current assets. Investments intended to be held for an indefinite period of time, which may be sold in response to
needs for liquidity or changes in interest rates, are classified as available-for-sale, and are classified as non-current assets, unless they are
expected to be realized within 12 months of the balance sheet date or unless they will need to be sold to raise operating capital.
Investments are recognized on the day they are transferred into the Company and derecognized on the day when they are transferred out of
the Company. The cost of purchase includes transaction costs. Unrecognized gains and losses arising from changes in the value of
available-for-sale investments are recognized in equity. For investments traded in active markets, fair value is determined by reference to Stock
Exchange quoted bid prices. For other investments, fair value is estimated by reference to the current market value of similar instruments or by
reference to the discounted cash flows of the underlying net assets. When securities classified as available-for-sale are sold or impaired, the
accumulated fair value adjustments are recognized in the income statement as other income or other expense, as appropriate.
Held-to-maturity investments are carried at amortized cost using the effective yield method. Gains and losses on held-to-maturity
investments are recognized in income, when the investments are derecognized or impaired.
Available-for-sale investments were valued at € 6.5 million at December 31, 2006 (2005: € 8.6 million). In 2006 and 2005, the whole
amount was recorded in other tangible non-current assets.
Income Taxes
Income taxes have been provided using the liability method in accordance with FASB Statement No. 109, Accounting for Income Taxes .
The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely
than not.
Foreign Currency Translation
The financial statements of foreign subsidiaries operating in non hyper-inflationary countries have been translated into euro in accordance
with FASB Statement No. 52, Foreign Currency Translation (‘Statement No. 52’). All asset and liability accounts have been translated using
exchange rates in effect at the balance sheet date. Income statement amounts have been translated using the average monthly exchange rates.
The gains and losses resulting from the changes in exchange rates from year to year have been reported in accumulated other comprehensive
income.
Entities that operated in hyper-inflationary environments remeasured their financial statements in accordance with Statement No. 52.
Remeasurement gains and losses are included in other income or other
F- 15
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
expense, as appropriate. The Company’s subsidiary in Belarus operated in a hyper-inflationary environment in 2005. It ceased applying
hyper-inflationary accounting with effect from January 1, 2006. The Company’s subsidiary in Serbia ceased applying hyper-inflationary
accounting with effect from January 1, 2005.
Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional
currency are included in net income. In 2006, transaction gains were € 2.0 million as compared to € 0.7 million of transaction gains in 2005 and
€ 5.9 million of transaction losses in 2004. Transaction gains and losses are included within operating profit unless they relate to debt, in which
case the gains and losses are classified as other income or other expense as appropriate.
Leases
Rentals paid under operating leases are charged to the income statement on a straight-line basis over the life of the lease.
Leases of property, plant and equipment, where the Company has substantially all the risks and rewards of ownership, are classified as
capital leases. Capital leases are capitalized at the inception of the lease at the lower of the fair value of the leased assets and the present value
of the minimum lease payments.
Each lease payment is allocated between liability and finance charges to achieve a constant rate on the finance balance outstanding. The
interest element of the finance cost is charged to the income statement over the lease period. Property, plant and equipment acquired under
capital leases is depreciated in accordance with the Company policy for owned assets of the same class unless there is no reasonable certainty
that the Company will obtain ownership of the asset at the end of the lease term. In this case, property, plant and equipment acquired under
capital lease is depreciated over the shorter of the useful life of the asset and the lease term.
Derivative Financial Instruments
The Company uses derivative financial instruments, including interest rate swaps, options, currency and commodity derivatives.
Derivative financial instruments are initially recognized in the balance sheet at cost and are subsequently remeasured at their fair value.
Changes in the fair value of derivative financial instruments are recognized periodically in either income or in shareholders’ equity as a
component of comprehensive income depending on whether the derivative financial instrument qualifies for hedge accounting, and if so,
whether it qualifies as a fair value hedge or a cash flow hedge. Generally, changes in fair values of derivative financial instruments accounted
for as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the
hedged risks. Changes in fair values of derivative financial instruments accounted for as cash flow hedges, to the extent they qualify for hedge
accounting, are recorded in accumulated other comprehensive income, net of deferred taxes. Changes in fair values of derivative financial
instruments not qualifying as hedges are reported in income.
At the inception of the transaction, the Company documents the relationship between hedging instruments and hedged items, as well as its
risk management objective and the strategy for undertaking various hedge transactions. This process includes linking all derivatives designated
to specific firm commitments or forecast transactions. The Company also documents its assessment, both at the hedge
F- 16
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
inception and on an ongoing basis, of whether the derivative financial instruments that are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged items.
Costs Associated with Exit or Disposal Activities
The Company has applied FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities (‘Statement
No. 146’) to exit and disposal activity initiated after December 31, 2002. Pursuant to Statement No. 146, the liability for costs associated with
exit or disposal activity should be recognized, and measured at fair value, when the liability is incurred rather than at the date an entity commits
to an exit plan. The result is that for one-time termination benefits, such as severance pay and other termination indemnities, where the benefit
arranged requires employees to serve beyond the minimum retention period, the costs of the one-time termination benefit are recognized over
the term of the retention period. Statement No. 146 also addresses accounting for other costs associated with an exit or disposal activity, such as
costs to consolidate or close functions and relocate employees. A liability for such costs must be recognized and measured at its fair value in
the period incurred. In the case of contract termination costs, such as in respect of operating leases, a liability is recognized and measured at its
fair value (less any economic benefit), when the entity terminates the contract in accordance with the contract terms. A liability for costs that
will continue to be incurred under a contract for its remaining term without economic benefit to the entity is to be recognized and measured at
its fair value when the entity ceases to use the right conveyed by the contract.
Employee Benefits—Statutory Termination and Pension Plans
The Company accounts for the statutory termination benefits and pension plans in accordance with the provisions of FASB Statement
No. 87, Employers’ Accounting for Pensions (‘Statement No. 87’), including the application of actuarial methods and assumptions in
conjunction with professional actuaries and the related disclosure provisions of FASB Statement No. 132 (Revised 2003), Employers’
Disclosures about Pensions and Other Postretirement Benefits (‘Statement No. 132 (R)’). The Company adopted Statement No. 87 as at
January 1, 1999, as it was not feasible to apply Statement No. 87 for these plans as at January 1, 1989, the effective date specified in the
standard. The amortization periods for the transition obligations range from 10 to 18 years.
A number of the Company’s operations have long service benefits in the form of jubilee plans. These plans are measured at the present
value of estimated future cash outflows with immediate recognition of actuarial gains and losses.
During the year, the Company also adopted FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans—an amendment of FASB Statement No. 87, 88, 106 and 132 (R) . (‘Statement No. 158’). Statement No. 158 requires that
previously disclosed but unrecognized actuarial gains or losses, prior service costs or benefits and transitional obligations or assets be
recognized generally through adjustment to accumulated other comprehensive income and the funded status of the defined benefit plans to be
recognized on the balance sheet. (Refer to Note 10, Employee Benefit Obligations, and relevant section of Note 1, Adoption of New
Accounting Standards).
F- 17
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
Share-Based Payments
The Company issues share based payments in the form of stock options and stock appreciation rights to its senior managers. Effective
January 1, 2006, the Company adopted FASB Statement No. 123 (Revised 2004), Share-Based Payment (‘Statement No. 123 (R)’) which
requires compensation costs related to share based payments to be recognized in the financial statements for all awards granted after the
required effective date and for awards modified, repurchased or cancelled after that date. The compensation cost has been determined based on
the grant date fair value of the equity or liability instrument issued. The Company adopted Statement No. 123 (R), using the modified version
of the prospective application. (Refer to Note 20, Stock Option Compensation Plans, and Note 21, Stock Appreciation Rights and the relevant
section of Note 1, Adoption of New Accounting Standards).
Net Income per Share
The Company computes basic net income per share by dividing net income by the weighted average number of shares outstanding.
Diluted net income per share includes the dilutive effect of stock-based compensation awards, if any.
Contingencies
The Company is involved in various legal proceedings and tax matters. Due to their nature, such legal proceedings and tax matters involve
inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management
assesses the probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate (refer
to Note 16, Commitments and Contingencies).
Adoption of New Accounting Standards
In December 2004, the FASB issued Statement No. 123 (Revised 2004), Share-Based Payment (‘Statement No. 123 (R)’). The Statement
requires compensation costs related to share based payments to be recognized in the financial statements. Under the Statement, the
compensation cost is determined based on the grant date fair value of the equity or liability instrument issued. The Statement is applicable to
share based payment transactions excluding employee share purchase plans that meet certain criteria. Statement No. 123 (R) replaces APB
Opinion No. 25, Accounting for Stock Issued to Employees . The Statement applies to all awards granted after the required effective date and to
awards modified, repurchased or cancelled after that date. As at the required effective date, which is January 1, 2006 the Company adopted
Statement No. 123 (R), using the modified version of the prospective application. Further details are available in Note 20, Stock Option
Compensation Plans, and Note 21, Stock Appreciation Rights.
In March 2005, the Securities and Exchange Commission (the ‘SEC’) staff issued Staff Accounting Bulletin No. 107, Share-Based
Payment (‘SAB No. 107’) to assist preparers by simplifying some of the implementation challenges of Statement No. 123 (R) while enhancing
the information that investors receive. SAB No. 107 creates a framework that is based on two overriding themes: (a) considerable judgment
will be required by preparers to successfully implement Statement No. 123 (R), specifically when valuing employee stock options; and
(b) reasonable individuals, acting in good faith, may conclude differently on the fair value of employee stock options. Key topics covered by
SAB No. 107
F- 18
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
include: (a) valuation models—SAB No. 107 reinforces the flexibility allowed by Statement No. 123 (R) to choose an option-pricing model
that meets the standard’s fair value measurement objective; (b) expected volatility—SAB No. 107 provides guidance on when it would be
appropriate to rely exclusively on either historical or implied volatility in estimating expected volatility; and (c) expected term—the new
guidance includes examples and some simplified approaches to determining the expected term under certain circumstances. The Company
applied the principles of SAB No. 107 in conjunction with its adoption of Statement No. 123 (R).
In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error Corrections (‘Statement No. 154’) , a replacement of
APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements.
Statement No. 154 applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a
change in accounting principle. Statement No. 154 requires retrospective application to prior periods’ financial statements of a voluntary
change in accounting principle unless it is impracticable. The Company has adopted the policy with effect from January 1, 2006. The adoption
of Statement No. 154 has not had an impact on the Company’s financial statements.
In February 2006, the FASB issued Statement No. 155, Accounting for Certain Hybrid Financial Instruments — an amendment of FASB
Statements No. 133 and 140 (‘Statement No. 155’). Statement No. 155 provides entities with relief from having to separately determine the fair
value of an embedded derivative that would otherwise be required to be bifurcated from its host contract in accordance with Statement No. 133.
Statement No. 155 allows an entity to make an irrevocable election to measure such a hybrid financial instrument at fair value in its entirety,
with changes in fair value recognized in earnings. The election may be made on an instrument-by-instrument basis and can be made only when
a hybrid financial instrument is initially recognized or when certain events occur that constitute a remeasurement (i.e., new basis) event for a
previously recognized hybrid financial instrument. An entity must document its election to measure a hybrid financial instrument at fair value,
either concurrently or via a pre-existing policy for automatic election. Once the fair value election has been made, that hybrid financial
instrument may not be designated as a hedging instrument pursuant to Statement No. 133. The Statement is effective for all financial
instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity’s first fiscal year that
begins after September 15, 2006. Upon adoption, an entity may elect fair value measurement for existing financial instruments with embedded
derivatives that had previously been bifurcated pursuant to Statement No. 133. The Company is currently evaluating the expected effect of
adoption of this standard on its financial statements.
In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (‘Interpretation No. 48’). The
Interpretation provides guidance on recognition, measurement, classification, interest and penalties, and disclosure of tax positions.
Interpretation No. 48 establishes a two-step approach for recognizing and measuring tax benefits. The first step is recognition: The enterprise
must determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the
‘more-likely-than-not’ recognition threshold, the enterprise should presume that the position will be examined by the appropriate taxing
authority that has full knowledge of all relevant information. The second step is measurement: A tax position that meets the
‘more-likely-than-not’ recognition threshold is measured to determine the amount of benefit to recognize
F- 19
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized
upon ultimate settlement. Interpretation No. 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect
the effect of this interpretation to have a material impact on its financial statements.
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (‘Statement No. 157’). Statement No. 157 defines fair
value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures
about fair value measurements. Statement No. 157 is effective for fiscal years beginning after November 15, 2007 and for interim periods
within those fiscal years. The Company is currently evaluating the expected effect of adoption of this standard on its financial statements.
In September 2006, the FASB issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans (‘Statement No. 158’). Statement 158 amends certain requirements of Statement No. 87, Employers’ Accounting for Pensions
(‘Statement No. 87’), Statement No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits (‘Statement No. 88’), Statement No. 106, Employers’ Accounting for Postretirement Benefits other than Pensions
(‘Statement No. 106’), and Statement No. 132 (R). The main effect of the new Statement is that the funded status of all postretirement plans
will have to be recorded on the balance sheet. The funded status is measured as the difference between the fair value of the plan’s assets and its
benefit obligation. Under Statement No. 87, Statement No. 88 and Statement No. 106, the amount recognized was the funded status reduced by
deferred actuarial losses (or increased by deferred actuarial gains), prior service costs and any transitional obligation remaining. Under
Statement No. 158, these items will now be recorded in equity. Statement No. 158 is effective prospectively for fiscal years ending after
December 15, 2006. The incremental effect of applying Statement No. 158 on individual line items in the Statement of Financial Position is
shown in Note 10, Employee Benefit Obligations.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effect of Prior Year Misstatements when
Qualifying Misstatements in Current Year Financial Statements (‘SAB No. 108’). SAB No. 108 provides guidance on the consideration of the
effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108
establishes a dual approach that requires quantification of financial statement errors based on both the roll-over method and iron curtain method
regarding the effects of each of the Company’s balance sheets and statement of operations and the related financial statement disclosures. SAB
No. 108 permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after
November 15, 2006, by recording the necessary correcting adjustments to the carrying values of assets and liabilities as at the beginning of that
year with the offsetting adjustments recorded to the opening balance of retained earnings. The adoption of SAB No. 108 did not have an impact
on the Company’s financial statements.
F- 20
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
1.
Organization and Significant Accounting Policies (Continued)
In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including
an amendment of FASB Statement No. 115 (‘Statement No. 159’). Statement No. 159 permits an entity to measure certain financial assets and
financial liabilities at fair value, without having to apply complex hedge accounting provisions. The fair value option may be elected on an
instrument-by-instrument basis, with a few exceptions, as long as it is applied to the instrument in its entirety. The fair value option election is
irrevocable, unless a new election date occurs. The new Statement establishes presentation and disclosure requirements to help financial
statement users understand the effect of the entity’s election on its earnings, but does not eliminate disclosure requirements of other accounting
standards. Assets and liabilities that are measured at fair value must be displayed on the face of the balance sheet. Statement No. 159 is
effective as at the beginning of an entity’s first fiscal year that begins after November 15, 2007 and must be applied prospectively. Early
adoption is permitted as of the beginning of a fiscal year on or before November 15, 2007, provided the entity also elects to apply the
provisions of FASB Statement No. 157, Fair Value Measurement . The Company is currently assessing the effect of the new Statement on its
financial statements.
2. Business Combinations
During 2006, the Company acquired controlling interests or increased its controlling interest in the following entities:
Location
Lanitis Bros Public
Limited
Fonti del Vulture
S.r.l.
Yoppi Kft.
Acquisition of minority
interests
Total acquisitions
Effective date
of acquisition
Net
tangible
assets
applicable
Goodwill
Franchise
arising
rights
(In millions)
Trademarks
Other
intangible
assets
Amount of
consideration
Cyprus (a)
04.05.2006
€ 57.7
€—
€ 8.8
€ 5.4
€ 0.6
€ 72.5
Italy (b)
Hungary (c)
07.05.2006
08.22.2006
3.6
0.3
2.2
1.4
—
—
—
—
—
0.2
5.8
1.9
2.7
€ 64.3
—
€ 3.6
0.4
€ 9.2
0.3
€ 5.7
—
€ 0.8
3.4
€ 83.6
Cyprus (a)
(In millions)
Total consideration for acquisition of controlling interests or increase in controlling interest
Plus: cash payment for acquisition of equity investment in Fresh & Co d.o.o.
Less: cash and cash equivalent balances acquired
Less: cash payments deferred for 2007
Plus: payments made for acquisition of Vendit Ltd in 2005.
Plus: payments made for acquisition of Gotalka in 2004
Cash payments for acquisitions, net of cash acquired
F- 21
€ 83.6
9.0
(14.1 )
(0.6 )
0.1
0.1
€ 78.1
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
2.
Business Combinations (Continued)
2006
a)
Acquisition of Lanitis Bros Public Limited
On April 5, 2006, the Company successfully completed the tender offer for the outstanding share capital of Lanitis Bros Public Limited
(‘Lanitis Bros’), a beverage company in Cyprus, with a strong portfolio of products and a long, successful tradition. Following completion of
the tender offer, the Company acquired 95.43% of the share capital of Lanitis Bros. The total consideration paid for these shares was € 71.5
million (excluding acquisition costs) with the assumption of debt of an additional € 5.6 million.
Following completion of the tender offer, the Company initiated a mandatory buy-out process in accordance with Cypriot law for the
purposes of acquiring the remaining shares in Lanitis Bros. Lanitis Bros has been delisted from the Cyprus Stock Exchange. As at
December 31, 2006, the Company had acquired an additional 11,218,735 shares representing 4.48% of the share capital of Lanitis Bros for a
total consideration of € 3.4 million, bringing its participation to 99.91%. The later share acquisition resulted in the recording of approximately €
0.7 million of identifiable intangible assets of which € 0.4 million relates to franchise rights and € 0.3 million relates to trademarks.
The fair values of the significant assets and liabilities assumed and goodwill arising are as follows (in millions):
Acquired
on
April 5, 2006
Property, plant and equipment
Long-term investments
Inventories
Other current assets
Cash and cash equivalents
Short-term borrowings
Deferred tax liabilities
Other current liabilities
Fair value of net tangible assets acquired
Franchise rights
Trademarks
Other identifiable intangible assets
Fair value of net assets acquired before minority interest
Minority interest
Fair value of net assets acquired
Acquisition of
minority
interests
€ (1.8 )
—
—
—
—
—
0.2
—
(1.6 )
0.4
0.3
—
€ (0.9 )
4.3
€ 72.5
€ 3.4
€ 41.0
0.1
9.5
21.4
14.1
(5.6 )
(2.2 )
(17.8 )
60.5
9.2
5.7
0.6
€ 76.0
(0.1 )
€ 75.
9
€ 71.5
1.0
€ 72.5
€ 3.4
—
€ 3.4
€ 74.
9
1.0
€ 75.9
Cash paid to former shareholders
Costs of acquisition
Total consideration
Total
€ 42.8
0.1
9.5
21.4
14.1
(5.6 )
(2.4 )
(17.8 )
62.1
8.8
5.4
0.6
€ 76.9
(4.4 )
The contribution of Lanitis Bros to the results of the Group was an income of € 8.0 million for the year ended December 31, 2006. The
acquisition has resulted in the Company recording € 9.2 million of franchise
F- 22
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
2.
Business Combinations (Continued)
rights, € 5.7 million of trademarks and € 0.6 million of other separately identifiable intangible assets in its established countries segment.
b)
Acquisition of Fonti del Vulture S.r.l.
On July 5, 2006, the Company acquired, jointly with The Coca-Cola Company, 100% of Fonti del Vulture S.r.l., a producer of high
quality mineral water in Italy with significant water reserves. The Company effectively purchased the operating assets and liabilities of two
production facilities in the south for € 5.2 million (excluding acquisition costs and net of debt assumed), whilst The Coca-Cola Company
effectively purchased the national mineral-water brands ‘Lilia’ and ‘Lilia Kiss’ (still and sparkling) for € 5.2 million (excluding acquisition
costs and net of debt assumed).
The fair values of the significant assets and liabilities assumed and goodwill arising, which are preliminary and pending finalization of the
purchase price allocation, are as follows (in millions):
€ 30.6
1.7
7.3
2.4
(11.8 )
(13.8 )
(11.4 )
(1.4 )
3.6
2.2
€ 5.8
Property, plant and equipment
Inventories
Other current assets
Other non-current assets
Short-term borrowings
Other current liabilities
Long-term borrowings
Other non-current liabilities
Fair value of net tangible assets acquired
Goodwill arising on acquisition
Fair value of net assets acquired
€
Cash paid to former shareholders
Costs of acquisition
Total consideration
€
5.
2
0.6
5.8
The contribution of Fonti del Vulture S.r.l. to the results of the Group was a loss of € 2.2 million for the year ended December 31, 2006.
The acquisition has resulted in the Company recording € 2.2 million of goodwill in its established countries segment.
The goodwill arising on the acquisition of Fonti del Vulture S.r.l. is attributable to expected future cash flows (including the effect of
synergies) in excess of the value of identifiable assets.
c)
Acquisition of Yoppi Kft.
On August 22, 2006, the Company acquired 100% of Yoppi Kft., a hot beverages vending operator in Hungary. Total consideration for the
acquisition was € 1.9 million with the assumption of debt of an additional € 0.1 million.
F- 23
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
2.
Business Combinations (Continued)
The fair values of the significant assets and liabilities assumed and goodwill arising are as follows (in millions):
€ 0.4
0.1
(0.1 )
(0.1 )
0.3
0.2
1.4
€ 1.9
Property, plant and equipment
Inventories
Short-term borrowings
Other non-current liabilities
Fair value of net tangible assets acquired
Customer contracts
Goodwill arising on acquisition
Fair value of net assets acquired
€ 1.
9
Cash paid to former shareholders
The contribution of Yoppi Kft. to the results of the Group was negligible for the year ended December 31, 2006. The acquisition has
resulted in the Company recording € 1.4 million of goodwill and € 0.2 million of customer contracts in its developing countries segment.
The goodwill arising on the acquisition of Yoppi Kft. is attributable to synergies from enhancement of vending operations in Hungary.
2005
a)
Acquisition of Vlasinka d.o.o.
On April 14, 2005, the Company acquired 100% of the shares of the Serbian mineral water company, Vlasinka d.o.o., together with The
Coca-Cola Company. The Company’s share of the acquisition consideration was € 10.5 million (excluding acquisition costs). The Company
effectively purchased the operating assets and liabilities of the business at Surdulica in Southern Serbia, whilst The Coca-Cola Company
effectively purchased the mineral water brand, ‘Rosa’, for € 10.5 million.
The final fair values of the significant assets and liabilities assumed and goodwill arising are as follows (in millions):
As reported
2005
Adjustments
2006
Final
fair values
Property, plant and equipment
Inventories
Other current assets
Current liabilities
Non-current liabilities
Fair value of net tangible assets acquired
Goodwill arising on acquisition
Fair value of net assets acquired
€
3.8
0.5
1.8
(3.0 )
(0.2 )
2.9
8.0
€ 10.9
€ —
—
(0.1 )
(1.3 )
—
(1.4 )
1.4
€ —
€ 3.8
0.5
1.7
(4.3 )
(0.2 )
1.5
9.4
€ 10.9
Cash paid to former shareholders
€ 10.
5
0.4
€ 10.9
€ —
—
€ —
€ 10.
5
0.4
€ 10.9
Costs of acquisition
Total consideration
F- 24
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
2.
Business Combinations (Continued)
The contribution of Vlasinka d.o.o. to the results of the Group was negligible for the year ended December 31, 2005. The acquisition has
resulted in the Company recording € 9.4 million of goodwill in its emerging countries segment.
The goodwill arising on the acquisition of Vlasinka d.o.o. is attributable to expected future cash flows (including the effect of synergies) in
excess of the value of identifiable assets.
b)
Acquisition of Bankya Mineral Waters Bottling Company EOOD
On June 2, 2005, the Company acquired 100% of the Bulgarian mineral water company, Bankya Mineral Waters Bottling Company
EOOD. (‘Bankya’). The acquisition includes production facilities located just outside of Sofia and the mineral water brand ‘Bankia’. Total
consideration for the acquisition was € 10.7 million (excluding acquisition costs), with the assumption of debt of an additional € 2.2 million.
The final fair values of the significant assets and liabilities assumed and goodwill arising are as follows (in millions):
€
Property, plant and equipment
Inventories
Other current assets
Cash and cash equivalents
Current liabilities
Long-term borrowings
Other non-current liabilities
Fair value of net tangible assets acquired
Water rights
Trademarks
Goodwill arising on acquisition
Fair value of net assets acquired
€
€
Cash paid to former shareholders
Costs of acquisition
Total consideration
€
3.5
0.2
0.6
0.1
(1.7 )
(2.2 )
(1.5 )
(1.0 )
1.0
6.4
4.5
10.9
10.7
0.2
10.9
The contribution of Bankya to the results of the Group was a loss of € 1.5 million for the year ended December 31, 2005. The acquisition
has resulted in the Company recording € 4.5 million of goodwill, € 6.4 million of trademarks and € 1.0 million of water rights in its emerging
countries segment. The Bankia trademark was subsequently sold to The Coca-Cola Company in 2005 for € 6.4 million.
The goodwill arising on the acquisition of Bankya is attributable to expected future cash flows (including the effect of synergies) in excess
of the value of identifiable assets.
c)
Acquisition of Vendit Limited
On September 28, 2005, the Company acquired 100% of Vendit Limited, one of the largest independent vending operators in the Republic
of Ireland. The total consideration for the acquisition was € 5.9 million (excluding acquisition costs) with the assumption of debt of an
additional € 0.8 million.
F- 25
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
2.
Business Combinations (Continued)
The final fair values of the significant assets and liabilities assumed and goodwill arising are as follows (in millions):
As reported
2005
€
Property, plant and equipment
Inventories
Other current assets
Cash and cash equivalents
Short-term borrowings
Long-term borrowings
Other current liabilities
Other non-current liabilities
Fair value of net tangible assets acquired
Customer contracts
Goodwill arising on acquisition
Fair value of net assets acquired
€
€
Cash paid to former shareholders
Costs of acquisition
Total consideration
€
0.9
0.2
0.6
0.2
(0.1 )
(0.7 )
(0.8 )
(0.6 )
(0.3 )
1.0
5.5
6.2
5.9
0.3
6.2
Adjustments
2006
€
€
€
€
Final
fair values
—
—
—
—
—
—
—
—
—
—
0.1
0.1
€
€
—
0.1
0.1
€
€
0.9
0.2
0.6
0.2
(0.1 )
(0.7 )
(0.8 )
(0.6 )
(0.3 )
1.0
5.6
6.3
5.9
0.4
6.3
The contribution of Vendit Limited to the results of the Group was negligible for the year ended December 31, 2005. The acquisition has
resulted in the Company recording € 5.6 million of goodwill and € 1.0 million of customer contracts in its established countries segment.
The goodwill arising on the acquisition of Vendit Limited is attributable to synergies from enhancement of vending operation in the
Republic of Ireland.
3. Equity Investments
The operating results include our proportionate share of income from our equity investments. The effective interest held in and carrying
value of the equity investments as at December 31 are (in millions):
Effective
interest held
2006
Effective
interest held
2005
Nigeria
Poland
Switzerland
16 %
50 %
50 %
Austria
FYROM/Bulgaria
Russian Federation
Serbia
Cyprus
20 %
50 %
50 %
50 %
35 %
Country of operation
Frigoglass Industries Limited
Multivita Sp.z o.o.
Valser Springs GmbH
PET to PET Recycling Österreich
GmbH
Brewinvest S.A.
Multon Z.A.O. group
Fresh & Co d.o.o.
Heineken Lanitis Cyprus Ltd
Total equity investments
F- 26
Carrying
value
2006
Carrying
value
2005
16 %
50 %
50 %
€
€
—
50 %
50 %
—
—
1.0
52.8
244.3
7.3
—
€ 316.9
9.6
1.6
0.3
12.0
1.8
0.3
—
53.5
226.6
—
—
€ 294.2
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
3.
Equity Investments (Continued)
On March 13, 2006, the Company acquired, jointly with The Coca-Cola Company, 100% of Fresh & Co d.o.o. (‘Fresh and Co’), the
leading producer of fruit juices in Serbia. The acquisition includes a production facility located at Subotica and the juice and nectar brands
‘Next’ and ‘Su-Voce’. The total consideration for the transaction was € 17.1 million (excluding acquisition costs) with the assumption of debt
of an additional € 23.5 million. The Company’s share of the purchase price and debt was € 20.3 million. The acquired entity is a joint venture
and is being accounted for under the equity method.
On April 20, 2005, the Company completed jointly with The Coca-Cola Company the acquisition of the Multon Z.A.O. group, a leading
juice producer in the Russian Federation. Multon Z.A.O. group has production facilities in Moscow and St. Petersburg and produces and
distributes juice products under the brands, Rich, Nico and Dobry. The total consideration for the acquisition was US$471.0 million ( € 359.9
million) (excluding acquisition costs), plus the assumption of debt of US$35.9 million ( € 27.4 million). The Company’s share of the purchase
price and debt was US$253.5 million ( € 193.7 million) (excluding acquisition costs). The acquisition is a joint venture and is being accounted
for under the equity method.
4. Franchise Rights, Goodwill and Other Intangible Assets
The following table sets forth the carrying value of intangible assets subject to, and not subject to amortization, as at December 31 (in
millions):
2006
Intangible assets not subject to amortization
Franchise rights
Goodwill
Trademarks
Minimum pension liability
Intangible assets subject to amortization
Water rights
Customer contracts
Distribution rights
Total intangible assets
2005
€
1,997.4
760.5
34.8
—
2,792.7
€
1,996.4
756.7
29.0
1.1
2,783.2
€
1.9
0.8
0.4
2,795.8
€
2.2
0.9
—
2,786.3
€
€
In accordance with Statement No. 142, an impairment assessment was conducted at December 31, 2006, December 31, 2005 and
December 31, 2004. No impairment was indicated.
F- 27
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
4.
Franchise Rights, Goodwill and Other Intangible Assets (Continued)
The changes in the carrying amount of intangible assets were as follows (in millions):
Goodwill
Other
intangible
assets
1,987.4
€ 734.6
€
—
—
18.0
—
2.0
(0.2 )
20.0
(0.2 )
(1.4 )
—
5.5
756.7
—
(0.8 )
(0.3 )
33.2
(4.7 )
(0.8 )
17.5
2,786.3
3.6
—
6.5
(0.7 )
19.3
(0.7 )
—
(1.3 )
0.2
37.9
1.5
(1.3 )
(9.3 )
2,795.8
Franchise
rights
As at January 1, 2005
Intangible assets arising on current period
acquisitions
Amortization
Reduction of valuation allowance on net operating
losses from acquisitions
Adjustment in relation to minimum pension liability
Foreign exchange differences
As at December 31, 2005
Intangible assets arising on current period
acquisitions
Amortization
Adjustment to goodwill arising on prior period
acquisitions
Adjustment in relation to minimum pension liability
Foreign exchange differences
As at December 31, 2006
€
(3.3 )
—
12.3
1,996.4
9.2
—
—
—
(8.2 )
1,997.4
€
1.5
—
(1.3 )
€ 760.5
€
32.5
Total
€
€
2,754.5
The changes in the carrying amount of goodwill by segment were as follows (in millions):
As at January 1, 2005
Goodwill arising on current period acquisitions
Reduction of valuation allowance on net operating
losses from acquisitions
Foreign exchange differences
As at December 31, 2005
Goodwill arising on current period acquisitions
Adjustment to goodwill arising on prior period
acquisitions
Foreign exchange differences
As at December 31, 2006
Established
countries
Developing
countries
Emerging
countries
Total
€
€
€ 20.7
12.5
€ 734.6
18.0
€
596.3
5.5
117.6
—
—
(1.4 )
600.4
2.2
—
5.2
122.8
1.4
0.1
(4.8 )
597.9
—
1.3
125.5
F- 28
€
(1.4 )
1.7
33.5
—
1.4
2.2
€ 37.1
(1.4 )
5.5
756.7
3.6
1.5
(1.3 )
€ 760.5
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
5. Selling, Delivery, Administrative Expenses and Other Operating Items
Selling, delivery, administrative expenses and other operating items consisted of the following for the years ended December 31
(in millions):
2006
Selling expenses
Delivery expenses
Administrative expenses
Other operating items
Total selling, delivery, administrative expenses and other operating
items
€
€
2005
828.4
476.9
335.1
(9.6 )
1,630.8
2004
€
720.4
387.7
325.2
—
€
624.1
338.9
316.2
—
€
1,433.3
€
1,279.2
Other operating items in 2006 consist of the cost of a fine imposed by the Greek Competition Authority of € 9.3million (refer to Note 16,
Commitments and Contingencies) and a gain on sale of the Company’s site in Dublin of € 18.9 million.
6. Allowance for Doubtful Debts
The movement in the allowance for doubtful debts was as follows for the years ended December 31 (in millions):
2006
2005
€ 33.0
6.8
(3.5 )
0.1
€ 36.4
As at January 1
Charged to income
Uncollectible amounts written off, net of recoveries
Foreign currency translation
As at December 31
€ 31.8
5.9
(5.0 )
0.3
€ 33.0
2004
€ 25.8
7.9
(1.9 )
—
€ 31.8
7. Inventories
Inventories consisted of the following at December 31 (in millions):
Finished goods
Raw materials and work in progress
Consumables
Payments on account
Total inventories
F- 29
2006
2005
€ 157.7
157.3
72.7
2.0
€ 389.7
€ 128.7
166.9
57.9
6.3
€ 359.8
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
8. Long-term Debt and Short-term Borrowings
Long-term debt consisted of the following at December 31 (in millions):
Interest rate %
€ 233 million of the ‘ € 625 million’ Eurobond
matured on June 27, 2006
€ 350 million Eurobond maturing on March 24, 2009
€ 500 million Eurobond maturing on July 15, 2011
US$500 million notes maturing on September 17, 2013
US$400 million notes maturing on September 17, 2015
Other debt
Total long-term debt
Less: current portion
Total long-term debt, less current portion
Fixed 5.25% €
Euribor plus margin
Fixed 4.375%
Fixed 5.125%
Fixed 5.5%
€
2006
2005
— €
349.3
498.5
369.5
299.1
—
1,516.4
—
1,516.4 €
241.2
—
518.0
417.9
339.9
5.3
1,522.3
(243.9 )
1,278.4
Other long-term debt is carried at floating rates based on various types of Inter Bank Offer Rates or ‘IBOR’.
Maturities of long-term debt for the years subsequent to December 31, 2006 are (in millions):
€
2007
2008
2009
2010
2011
2012 and thereafter
Total long-term debt
€
—
—
349.3
—
498.5
668.6
1,516.4
€ 2 billion Euro Medium Term Note (EMTN) Program
On July 12, 2004, the Company announced a successful tender offer for € 322.0 million of the outstanding debt on the Eurobond which
matured in June 2006. On the same date, the Company successfully completed, through its wholly owned subsidiary Coca-Cola HBC Finance
B.V., a € 500.0 million bond issue. The issue was completed as part of the Company’s EMTN program and has a term of seven years. Proceeds
from the issue were used to finance the tender offer and to partially fund the repayment of the € 300.0 million Eurobond in December 2004.
On March 24, 2006, the Company completed, through its wholly owned subsidiary Coca-Cola HBC Finance plc, the issue of a € 350.0
million 3-year Euro-denominated floating rate bond. The transaction was executed under the Company’s EMTN program. Proceeds from the
bond offering were used to fund the repayment of the remaining € 233.0 million outstanding debt under the Company’s € 625.0 million 5.25%
Eurobond, which matured on June 27, 2006, as well as to provide short-term liquidity at the completion of certain acquisitions made in the
year. Contractual interest repricing dates for the bond are the 24th day of March, June, September and December of each year until maturity.
F- 30
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
8.
Long-term Debt and Short-term Borrowings (Continued)
As at December 31, 2006, a total of € 850.0 million in Eurobonds has been issued under EMTN program. A further amount of €
1,150.0 million is available for issuance. The bonds are not subject to any financial covenants.
Syndicated Loan Facility
As at December 31, 2004, Coca-Cola Hellenic Bottling Company S.A. had a € 900.0 million syndicated loan facility, of which the first
tranche of € 450.0 million matured on May 14, 2005. During August 2005, Coca-Cola Hellenic Bottling Company S.A. replaced its remaining
€ 450.0 million syndicated loan facility with a € 600.0 million facility issued through various financial institutions expiring on August 1, 2010.
This facility is used as a backstop to the € 1.0 billion global commercial paper program and carries a floating interest rate over EURIBOR and
LIBOR. The facility allows the Company to draw down, on one to five days notice, amounts in tranches and repay them in periods ranging
from one to six months, or any other period agreed between the financial institutions and the Company. No amounts have been drawn under the
syndicated loan facility.
SEC Registered Notes
On September 17, 2003, Coca-Cola Hellenic Bottling Company S.A. successfully completed, through its wholly owned finance subsidiary
Coca-Cola HBC Finance B.V., a US$900.0 million ( € 681.9 million at December 31, 2006 exchange rates) global offering of privately placed
notes with registration rights. The first tranche consisted of an aggregate principal amount of US$500.0 million ( € 378.8 million) due in 2013
and the second tranche consisted of an aggregate principal amount of US$400.0 million ( € 303.1 million) due in 2015. The net proceeds of the
offering were used to refinance certain outstanding debt, including the repayment of € 200.0 million bonds which matured on December 17,
2003, the leveraged re-capitalization of the Group and the acquisition of Römerquelle GmbH. In December 2003, an exchange offer was made
by Coca-Cola Hellenic Bottling Company S.A. in order to effect the exchange of the privately placed notes for similar notes registered with the
US Securities and Exchange Commission (SEC). Acceptances under the offer, which was finalized in February 2004, were US$898.1 million.
The notes are fully, unconditionally and irrevocably guaranteed by Coca-Cola Hellenic Bottling Company S.A. These notes are not subject to
financial covenants.
SEC Registered US$2 billion Program
In December 2003, the Company filed a registration statement with the SEC for a shelf registration. The amount registered was
US$2.0 billion. As at May 2, 2007, no amounts had been drawn under the shelf registration.
F- 31
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
8. Long-term Debt and Short-term Borrowings (Continued)
Short-term borrowings at December 31, consisted of (in millions):
Commercial Paper
Bank overdraft facilities
Other short-term borrowings
Total short-term borrowings
2006
2005
€ 184.0
66.2
19.1
€ 269.3
€ 210.0
86.1
13.9
€ 310.0
In March 2002, the Company established a € 1.0 billion global commercial paper program with various financial institutions to further
diversify its short-term funding sources. The program consists of a multi-currency Euro-commercial paper facility and a US-dollar
denominated US commercial paper facility. The commercial paper notes may be issued either as non-interest bearing notes sold at a discount or
as interest bearing notes at a fixed or at a floating rate, or by reference to an index or formula. All commercial paper issued under the program
must be repaid within 1 to 365 days.
The weighted average interest on short-term borrowings was 5.1%, 4.7% and 6.8% at December 31, 2006, 2005 and 2004, respectively.
Total interest paid during the years ended December 31, 2006, 2005 and 2004 was € 82.4 million, € 53.9 million and € 60.2 million,
respectively.
The total amount of interest cost incurred in 2006 was € 90.4 million (2005: € 59.3 million, 2004: € 66.9 million). The amount of interest
expensed in 2006 was € 86.3 million (2005: € 56.2 million, 2004: € 66.9 million) and the amount of interest capitalized in 2006 was €
4.1 million (2005: € 3.1 million, 2004: nil).
9. Income Taxes
Pre-tax income taxes for the years ended December 31, arose in the following jurisdictions (in millions):
2006
€
Greece
Other
Income before income taxes
21.9
361.5
€ 383.4
F- 32
2005
€
64.5
332.8
€ 397.3
2004
€
61.9
295.5
€ 357.4
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
9.
Income Taxes (Continued)
Significant components for income taxes attributable to income before income taxes for the years ended December 31 are as follows (in
millions):
2006
Current:
Greece
Other
Total current tax
Deferred:
Greece
Other
Total deferred tax
Total current and deferred tax
2005
€ 19.3
56.6
75.9
€
(2.5 )
15.8
13.3
€ 89.2
(6.7 )
17.8
11.1
€ 111.8
2004
€
30.1
70.6
100.7
42.4
70.6
113.0
(20.8 )
(14.8 )
(35.6 )
€ 77.4
The above provision for deferred income taxes includes a net (charge) credit for the effect of changes in tax laws and rates of € 3.9 million
in 2006, € (1.3) million in 2005 and € 17.9 million in 2004.
Deferred tax liabilities and assets are comprised of the following at December 31 (in millions):
2006
Deferred tax liabilities:
Intangible assets
Tax in excess of book depreciation
Foreign investments
Other
Total gross deferred tax liabilities
Deferred tax assets:
Net operating loss (‘NOL’) carry-forwards
Liabilities and provisions
Book in excess of tax depreciation
Pensions and benefit plans
Other
Total gross deferred tax assets
Valuation allowance for deferred tax assets
Net deferred tax assets
Net deferred tax liabilities
F- 33
2005
€ 570.7
134.3
9.1
(3.0 )
€ 711.1
€ 577.1
139.7
9.1
9.1
€ 735.0
€
36.9
34.0
6.0
11.0
21.3
109.2
(6.4 )
€ 102.8
€
€ 608.3
€ 607.7
45.7
27.9
23.8
8.4
32.6
138.4
(11.1 )
€ 127.3
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
9.
Income Taxes (Continued)
A summary of valuation allowance movements is as follows (in millions):
2006
2005
€ 11.1
(4.5 )
—
—
—
(0.2 )
€ 6.4
As at January 1
Charged (credited) to income
Credit related to recognition of pre-acquisition deferred tax assets
Currency translation adjustments
Expired NOLs
Other movements
As at December 31
2004
€ 17.4
(3.4 )
(4.7 )
1.4
—
0.4
€ 11.1
€ 11.8
8.6
(2.4 )
0.1
(0.3 )
(0.4 )
€ 17.4
The reconciliation of income tax computed at the statutory rate applicable in Greece to the Company’s income tax expense is as follows
(in millions):
2006
Amount
Greek statutory expense
Lower tax rates of other countries
Additional local taxes
Tax holidays or exemptions
Non-deductible expenses
Capital investment incentives
Income not subject to tax
Changes in tax laws and rates
Change in valuation allowance
NOLs with no current benefit
Other, net
Total income tax expense
€ 111.2
(23.0 )
19.7
(3.1 )
21.7
(4.3 )
(16.5 )
(3.9 )
(5.5 )
1.0
(8.1 )
€ 89.2
2005
Percent
29.0
(6.0 )
5.1
(0.8 )
5.7
(1.1 )
(4.4 )
(1.0 )
(1.4 )
0.2
(2.0 )
23.3
Amount
€ 127.1
(28.9 )
16.9
(1.7 )
27.3
(3.8 )
(24.2 )
1.3
(3.4 )
1.6
(0.4 )
€ 111.8
2004
Percent
32.0
(7.3 )
4.3
(0.4 )
6.7
(1.0 )
(6.1 )
0.3
(2.1 )
0.4
1.3
28.1
Amount
€ 125.1
(30.6 )
5.9
(4.4 )
36.5
(7.7 )
(22.3 )
(17.9 )
(1.6 )
1.9
(7.5 )
€ 77.4
Percent
35.0
(8.6 )
1.7
(1.2 )
10.2
(2.2 )
(6.2 )
(5.0 )
(0.4 )
0.5
(2.1 )
21.7
At December 31, 2006, the Company had net operating tax loss carry-forwards (NOLs) of € 153.1 million (2005: € 180.7 million, 2004: €
267.0 million) for income tax purposes. € 85.3 million of NOLs expire between 2007 and 2011. € 4.4 million of NOLs expire between 2012
and 2014. € 63.4 million of NOLs do not expire, because they were generated in tax jurisdictions where NOLs do not have expiration dates. For
financial reporting purposes, a valuation allowance of € 6.4 million (2005: € 11.1 million, 2004: € 11.9 million) has been recognized to offset a
portion of the deferred tax asset related to these carry-forwards.
No income taxes are provided on the undistributed earnings of foreign subsidiaries, where those earnings are considered to be permanently
invested. Total undistributed earnings in such foreign subsidiaries amounted to approximately € 1,272.3 million at December 31, 2006 (2005: €
1,094.8 million). Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to Greek income
taxes (net of foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized
deferred income tax liabilities is not practicable because of the complexities associated with its hypothetical calculation.
F- 34
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
9.
Income Taxes (Continued)
Total tax paid during the years ended December 31, 2006, 2005 and 2004 was € 95.9 million, € 101.5 million, and € 105.0 million,
respectively.
10. Employee Benefit Obligations
The total accrued benefit liability for the defined benefit plan is as follows (in millions):
2006
Defined benefit plans
Statutory termination indemnities
Pension plans
Long service benefits—jubilee plans
Total defined benefit plans
€ 112.2
37.5
6.3
€ 156.0
2005
€
89.3
23.0
6.1
€ 118.4
Employees of the Company’s subsidiaries in Nigeria, Greece, Bulgaria, Serbia, Montenegro, Croatia, Poland, Romania, Slovenia and
Austria are entitled to statutory termination benefits generally based on each employee’s length of service, employment category and
remuneration.
Statutory termination benefits obligations also include the liability for severance indemnities related to employees of the Italian subsidiary.
The severance indemnity liability is based on each employee’s length of service, employment category and remuneration. There is no vesting
period or funding requirement associated with the liability. Consistent with the provisions of Emerging Issues Task Force (‘EITF’) No. 88-1,
Determination and Vested Benefit Obligations for a Defined Benefit Plan , the liability recorded in the balance sheet is the amount that the
employee would be entitled to, on the expected date of termination.
The Company’s subsidiaries in the Republic of Ireland, Northern Ireland, Greece, Switzerland and Austria sponsor defined benefit pension
plans. Of the four plans in the Republic of Ireland, three have plan assets as do the two plans in Northern Ireland, the plan in Greece and the
plans in Switzerland. The Austrian plans do not have plan assets.
The Company provides long service benefits in the form of jubilee plans to its employees in Austria, Nigeria, Croatia, Slovenia and
Poland.
F- 35
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
10.
Employee Benefit Obligations (Continued)
Summarized information regarding the defined benefit obligation for the above plans is as follows (in millions):
2006
Present value of defined obligation at the beginning of the year
Service cost
Interest cost
Plan participants’ contributions
Past service cost arising from amendments
Curtailment/settlements
Arising on acquisition of subsidiaries
Benefits paid
Actuarial loss
Foreign currency translation
Present value of defined benefit obligation at the end of the year
€ 342.6
19.9
16.2
3.5
—
2.5
1.2
(30.8 )
7.8
(6.0 )
€ 356.9
2005
€ 301.2
19.1
17.2
4.2
0.8
1.2
—
(24.9 )
19.3
4.5
€ 342.6
The pension plans and statutory termination obligations have a measurement date of December 31.
The total accumulated benefit obligation for all defined benefit plans is € 298.2 million and € 281.9 million as at December 31, 2006 and 2005,
respectively.
Summarized information for the fair value of plan assets is as follows (in millions):
2006
€ 188.9
11.9
9.9
3.5
(10.2 )
(3.1 )
€ 200.9
Fair value of plan assets at the beginning of the year
Actual return on plan assets
Actual employers’ contributions
Actual participants’ contributions
Actual benefits paid
Foreign currency translation
Fair value of plan assets at the end of the year
2005
€ 155.9
22.5
10.4
4.2
(5.0 )
0.9
€ 188.9
Benefits paid from pension benefit plans during 2006 and 2005 include € 0.3 million and € 0.2 million, respectively, of payments relating
to unfunded pension plans that were paid from Company assets. All the benefits paid from statutory termination and long service benefits
during 2006 and 2005 of € 20.3 million and € 19.7 million, respectively, were paid from Company assets, because these plans are unfunded.
The discount rate reflects the current rate at which the pension liabilities could be effectively settled considering the timing of expected
payments for plan participants. In estimating this rate, we consider rates of return on high quality fixed-income investments. For our plans in
the Eurozone area, Northern Ireland and Switzerland, which comprise approximately 90% of our projected benefit obligations, we consider the
International Index Company’s iBoxx Euro Corporates AA 10+ Bond Index, the International Index Company’s iBoxx Sterling Corporates AA
15+ Bond Index and AA-rated corporate Swiss bonds, respectively, in the determination of the appropriate discount rate assumptions. For our
plans in other countries, we use, where available, government bond yields of appropriate terms in setting the discount rate.
F- 36
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
10. Employee Benefit Obligations (Continued)
The weighted average rate we will utilize to measure our pension obligation as at December 31, 2006 and calculate our 2007 expense will
be 4.66%, which is a decrease from 4.83% used in determining the 2006 expense.
The net defined benefit obligations are as follows (in millions):
2006
2005
€
Present value of defined benefit obligations
Fair value of plan assets
Funded status
Unrecognized actuarial loss
Unrecognized net transition liability
Unrecognized past service benefit
Net defined benefit obligations
Amounts recognized in the balance sheet consist of:
Accrued benefit liability
Intangible asset
Accumulated other comprehensive income
Net defined benefit obligations
(356.9 )
200.9
(156.0 )
—
—
—
€ ( 156 .0 )
€
€
(156.0 )
—
—
(156.0 )
€
(4.6 )
(151.4 )
—
—
€ (156.0 )
€
€
Included in:
Current liabilities
Long-term liabilities
Goodwill and other intangible assets
Accumulated other comprehensive income
Total
(342.6 )
188.9
(153.7 )
53.8
0.9
(1.6 )
€ ( 100 .6 )
(118.4 )
1.1
16.7
€ ( 100 .6 )
€
(0.7 )
(117.7 )
1.1
16.7
€ ( 100 .6 )
Amounts recognized in accumulated other comprehensive income as at December 31, consist of (in millions):
2006
€ 48.1
(1.4 )
—
€ 46.7
Actuarial loss
Prior service benefit
Minimum pension liability
Total
2005
€
—
—
16.7
€ 16.7
The estimated amounts to be amortized from accumulated other comprehensive income into net periodic benefit cost in the financial year
2007 consist of (in millions):
€ 1.4
(0.1 )
€ 1.3
Actuarial loss
Prior service benefit
Total
F- 37
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
10.
Employee Benefit Obligations (Continued)
Information for pension plans with an accumulated benefit obligation in excess of plan assets as at December 31 (in millions):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2006
2005
€ 348.9
293.0
194.6
€ 311.5
259.7
165.0
The weighted average assumptions used in computing the net benefit obligation consist of the following for the years ended December 31:
Discount rate
Rate of compensation increase
Pension increases
2006
%
2005
%
4.66
3.94
0.85
4.83
4.12
0.63
The expense recognized in the income statement consists of the following for the years ended December 31 (in millions):
2006
€ 19.9
16.2
(9.7 )
0.9
2.4
(0.1 )
7.0
€ 36.6
Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Recognized net actuarial obligation loss
Amortization of unrecognized past service costs
Curtailment/settlement
Net periodic benefit cost
2005
2004
€ 19.1
17.2
(9.4 )
0.8
1.8
(0.1 )
1.2
€ 30.6
€ 18.6
17.1
(8.4 )
0.8
1.0
0.3
1.3
€ 30.7
The weighted average assumptions used in computing the net periodic benefit cost consist of the following for the years ended
December 31:
Discount rate
Expected return on assets
Rate of compensation increase
Pension increase
F- 38
2006
%
2005
%
4.83
5.04
4.12
0.63
5.54
5.63
4.62
0.60
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
10.
Employee Benefit Obligations (Continued)
Plan assets were invested as follows:
Asset category:
Equity securities
Debt securities
Real estate
Cash
Other
Total
2006
%
2005
%
45
43
8
3
1
100
44
48
5
2
1
100
Equity securities include ordinary shares in the Company in the amount of € 0.4 million (0.2% of the plan assets) and € 0.3 million (0.2%
of the plan assets) as at December 31, 2006 and 2005, respectively.
The investment objectives of the Greek fund are to optimize returns from the fund at an acceptable level of risk and within the requirement
of the local law. The fund invests mainly in one year bonds to allow a reasonable level of liquidity as the majority of obligations have vested.
The fund is restricted by legal requirements, which do not allow more than 30% of the total fund to be invested in equity securities. In addition,
the fund guarantees a minimum return of 2.5%.
The Foundation Board of the Swiss pension plan appoints a pension fund manager who is responsible for the investment of pension fund
assets and choice of investment strategy made to optimize return to pension fund members. Bond portfolio management is delegated to at least
two independent banks, and property management is delegated to a professional property company. Performance is reviewed regularly by the
pension fund manager who reports semi-annually to the Foundation Board. The pension investment strategy is set in accordance with relevant
Swiss legislation (BVV 2, ART 50-59). This sets out maximum percentages which can be held in different asset classes and makes certain
diversity requirements. The investment policy states that the portfolio should be invested with an appropriate risk diversification. If risks are
suitably covered, then the investment strategy can include a slightly wider risk profile, which would include overseas equities. The broad
investment strategy at December 31, 2006 is to hold approximately 58% in bonds, 27% in equities, 11% in property, 3% in cash and 1% in
other items under the investments.
The overall investment policy of the Republic of Ireland plans is determined by the trustees in consultation with Coca-Cola Bottling
Company (Dublin) Limited and their professional advisors. The investment objectives of these plans are to maximize investment returns over
the long-term within the necessary constraints of prudence and caution. In order to achieve this goal, the plan’s assets are invested primarily in
high quality equity holdings. Responsibility for day to day investment decisions such as stock selection is delegated by the trustees to the
investment managers. The performance of the investment managers is monitored on a regular basis by the trustees.
There are no restrictions under local legislation regarding the type of assets that the plans may hold. However for the purpose of
determining whether the plans meet the minimum funding standard specified under Irish legislation, it is not permissible to include assets
invested in the sponsoring employer. There are also restrictions relating to large holdings in individual stocks. The broad investment strategy at
F- 39
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
10.
Employee Benefit Obligations (Continued)
December 31, 2006 is to hold approximately 74% in equities, 17% in bonds, 7% in property and 2% in cash.
To develop our expected long-term rate of return assumptions, the Company, in consultation with its advisors, uses forward-looking
assumptions in the context of historical returns and volatilities for each asset class, as well as correlations among asset classes. Adjustments are
made to the expected long-term rate of return assumptions annually based upon revised expectations of future investment performance of the
overall capital markets, as well as changes to local laws that may affect the investment strategy. The expected long-term rate of return
assumption used in computing 2006 net periodic pension cost for the plans was 5.04%.
Cash Flow
(in
millions
of euro)
Estimated future benefit payments
2007
2008
2009
2010
2011
Years 2012-2016
4.7
11.8
11.9
14.3
17.3
108.1
The Company plans to contribute € 9.2 million to its pension plans in 2007.
The incremental effect of applying FASB Statement No. 158 on individual line items in the Consolidated Balance Sheet as at
December 31, 2006, is as follows (in millions):
Prior to
AML* and
FASB 158
Adjustment
Employee benefit obligations
€
(106.0 )
Deferred income taxes (non-current
liabilities)
(694.4 )
Minority interest
(67.3 )
Accumulated other comprehensive
income
(163.6 )
Total shareholders’ equity
(3,193.1 )
*
Additional Minimum Pension Liability
Adjustment
for AML* in
accordance
with FASB 87
€
(16.1 )
4.1
—
12.0
12.0
Post AML*
and pre
FASB 158
Subtotal
€
(122.1 )
(690.3 )
(67.3 )
(151.6 )
(3,181.1 )
Adjustment
to initially
apply
FASB 158
€
(33.9 )
7.2
2.3
24.4
24.4
After
application of
FASB 158
€
(156.0 )
(683.1 )
(65.0 )
(127.2 )
(3,156.7 )
Defined contribution plans
The Company also sponsors defined contribution plans covering employees at five subsidiaries. The expense recognized in the income
statement in 2006 for the defined contribution plans is € 7.0 million (2005: € 6.3 million, 2004: € 6.5 million).
F- 40
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
11. Restructuring
During 2006, the Company recorded restructuring charges of € 68.8 million before tax, comprising cash restructuring charges of € 53.0
million, accelerated depreciation of € 6.3 million and impairment charges of property, plant and equipment of € 9.5 million. The restructuring
charges primarily relate to initiatives in Greece, Nigeria, Ireland and Croatia.
In Greece, the production in the Athens plant ceased on February 24, 2006. In addition, on March 10, 2006, the Greek warehouses in
Messologi, Corfu and Rhodes closed. These initiatives are expected to support the growth of the Greek business as well as yield significant
operating efficiency benefits in future years. We undertook additional restructuring in Greece in December, following an organizational
streamlining across the administrative support and logistic functions. Of the total restructuring charges for 2006 (cash and non-cash) relating to
our initiatives in Greece, € 16.6 million was recorded in cost of goods sold and € 5.5 million in selling, delivery and administrative expenses.
In Nigeria, restructuring charges in 2006 amounted to € 7.9 million (cash and non-cash). Production that was carried out at the Onitsha
and Makurdi plants has been transferred to other production sites within Nigeria. In addition, our Nigerian operation is investing in a new
production facility in Abuja, to further consolidate its leadership position and enhance its long-term competitiveness and growth. Of the total
restructuring charges for 2006 (cash and non-cash) relating to our initiatives in Nigeria, € 4.1 million was recorded in cost of goods sold and €
3.8 million in selling, delivery and administrative expenses.
In Ireland, the project to develop a single all-island production facility is proceeding well. During 2006, we recorded € 19.1 million of
restructuring charges and € 6.3 million of accelerated depreciation, mainly reflected in cost of goods sold. We expect to incur further cash
charges of approximately € 8.0 million, which have not been provided for at December 31, 2006, under FASB Statement No. 146, Accounting
for Costs Associated with Exit or Disposal Activities .
In Croatia, € 5.1 million of restructuring charges have been recorded in 2006 in connection with the rationalization of the delivery function
by outsourcing it to third party contractors. Of the total restructuring charges for 2006 (cash and non-cash) in Croatia, € 1.3 million was
recorded in cost of goods sold and € 3.8 million in selling, delivery and administrative expenses.
A further € 8.3 million of restructuring charges (cash and non-cash) were incurred in relation to other restructuring activities, of which €
3.8 million were recorded in established countries, € 2.3 million in developing countries and € 2.2 million in emerging countries. Of the total
restructuring charges discussed above, € 5.4 million was recorded in selling, delivery and administrative expenses and € 2.9 million in cost of
goods sold.
The table below summarizes accrued restructuring costs included within accrued expenses and amounts charged against the accrual (in
millions):
2006
€
As at January 1
Arising during the year
Utilized during the year
As at December 31
9.0
53.0
(39.8 )
€ 22.2
F- 41
2005
€ 7.1
10.1
(8.2 )
€ 9.0
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
12. Impairment of Bottles
Following review of the Company’s three-year plan during the second half of 2006, management decided to accelerate the implementation
of the refillable bottle strategy in the fourth quarter. The implementation of this strategy led to the booking of a non-cash charge on certain
refillable PET and glass bottles and crates in Austria, Bulgaria, Nigeria, Poland, Greece and some other markets for a total of € 15.1 million. Of
the total impairment charges recorded in 2006, € 13.6 million was recorded in cost of goods sold and € 1.5 million in selling, delivery,
administrative expenses and other operating items.
13. Assets Held for Sale
It is the Company’s intention to dispose of certain land and buildings as part of the restructuring plan in Greece (refer to Note 11,
Restructuring). As at December 31, 2006, the net book value of these assets was € 1.8 million. The proceeds from the sale of assets classified as
held for sale, net of disposal costs, is expected to exceed their carrying value. These assets are recorded in ‘Other current assets’.
14. Employee Share Ownership Plan
The Company operates an employee share ownership plan, The Coca-Cola HBC Stock Purchase Plan, in which eligible employees can
participate. The Human Resources Committee of the board of directors determines eligibility. Under the terms of this plan, employees have the
opportunity to invest 1% to 15% of their salary in the Company’s shares by contributing to the plan monthly. Coca-Cola Hellenic Bottling
Company S.A. will match up to a maximum of 3% of the employee’s salary by way of contribution. Matching shares are purchased monthly
and vest 350 days after the purchase. In order to adapt the plan to the Greek legal framework in the case of employees resident in Greece, the
Company matches the Greek resident employees’ contribution up to a maximum of 5% of their salary with an annual employer contribution,
which is made in December of each year, and matching shares purchased in December vest immediately.
Shares forfeited (i) are held in a reserve account by the CCHBC Employee Share Purchase Trust, (ii) do not revert back to the Company,
and (iii) may be used to reduce future matching contributions. The cost of shares purchased by the Company’s matching contributions is
amortized over twelve months and the unamortized deferred compensation is included as a component of shareholders’ equity. The expense for
2006, 2005 and 2004 amounted to € 3.0 million, € 2.2 million and € 2.1 million, respectively. Dividends received in respect of shares held by
the trust accrue to the employees. Shares held by the trust are treated as outstanding for purposes of determining earnings per share. In 2006,
the fair value of unvested shares held by the trust was € 2.3 million (2005: € 1.5 million) and the number of unvested shares was 76,280
(2005: 58,851).
F- 42
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
15.
Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income are as follows (in millions):
As at January 1, 2004
Currency translation adjustment, net of applicable
income taxes of € 8.2 million
Change in fair value of derivatives, net of applicable
income taxes of € 0.6 million
Loss on derivatives reclassified into earnings
from other comprehensive income, net of
applicable income taxes of € 0.7 million
Change in minimum pension liability, net of
applicable income taxes of € 0.7 million
Unrealized gain on available-for-sale
investments, net of applicable income taxes of €
0.1 million
As at December 31, 2004
Currency translation adjustment, net of applicable
income taxes of € (4.2) million
Change in fair value of derivatives, net of applicable
income taxes of € 0.0 million
Loss on derivatives reclassified into earnings
from other comprehensive income, net of
applicable income taxes of € (0.4) million
Change in minimum pension liability, net of
applicable income taxes of € 0.5 million
Unrealized gain on available-for-sale
investments, net of applicable income taxes of €
(0.3) million
As at December 31, 2005
Currency translation adjustment, net of applicable
income taxes of € 2.3 million
Change in fair value of derivatives, net of applicable
income taxes of € 0.1 million
Loss on derivatives reclassified into earnings
from other comprehensive income, net of
applicable income taxes of € (0.1) million
Change in minimum pension liability, net of
applicable income taxes of € (0.2) million
Unrealized gain on available-for-sale
investments, net of applicable income taxes of €
(0.6) million
Adoption of FASB Statement No. 158
Minimum pension liability adjustment, net of
applicable income taxes of € (4.1) million
Unrecognized losses and prior service cost,
net of applicable income taxes of € 10.3 million
As at December 31, 2006
(1)
Currency
translation
adjustments (1)
€
12.2
Derivative
financial
instruments
gains
(losses)
€
1.8
Unrealized
gain on
availablefor-sale
investments
€
0.8
€
Total
7.4
—
—
—
—
68.4
—
(11.4 )
—
—
—
(11.4 )
—
6.9
—
—
—
6.9
—
—
(3.4 )
—
—
(3.4 )
—
80.6
—
(2.7 )
—
(10.8 )
—
—
0.3
1.1
0.3
68.2
91.2
—
—
—
—
91.2
—
(0.1 )
—
—
—
(0.1 )
—
2.3
—
—
—
2.3
—
—
(1.3 )
—
—
(1.3 )
—
(0.5 )
—
(12.1 )
—
—
1.0
2.1
1.0
161.3
(11.8 )
—
—
—
—
(11.8 )
—
(0.3 )
—
—
—
(0.3 )
—
0.5
—
—
—
0.5
—
—
0.1
—
—
0.1
—
—
—
—
1.8
1.8
—
—
12.0
—
—
12.0
68.4
—
171.8
€
Minimum
pension
liability
€
(7.4 )
Unrecognized
losses and
prior service
cost
—
—
160.0
€
—
(0.3 )
Includes amounts related to equity method investees
F- 43
€
—
—
€
(36.4 )
(36.4 )
€
—
3.9
( 36.4 )
€ 127.2
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
16.
Commitments and Contingencies
Leases
The Company leases certain vehicles and production equipment under capital leases. Property, plant and equipment included the following
amounts for leases that have been capitalized at December 31 (in millions):
2006
2005
€
Land and buildings
Plant and equipment
Less amortization
Total leases
22.6
133.7
(41.6 )
€ 114.7
€ 11.6
82.0
(31.1 )
€ 62.5
The Company leases certain premises under non-cancelable lease agreements that may be adjusted for increases on an annual basis based
on the inflation rate. These leases may be renewed for periods ranging from one to five years.
Future minimum payments under capital leases and non-cancelable operating leases with initial terms of one year or more consisted of the
following at December 31, 2006 (in millions):
Capital leases
€
2007
2008
2009
2010
2011
2012 and thereafter
Total minimum lease payments
Amounts representing interest
Present value of net minimum lease payments
€
€
Long-term portion of capital leases
Current portion of capital leases
Total capital leases
€
39.0
32.8
27.4
12.7
5.8
9.7
127.4
Operating leases
€
€
31.4
28.6
24.3
17.1
15.4
12.3
129.1
(11.3 )
116.1
82.2
33.9
116.1
Rental expense for operating leases of property was € 21.6 million and for plant and equipment was € 28.7 million in 2006. The rental
expense for the two classes of assets was € 20.5 million and € 21.8 million in 2005 and € 18.5 million and € 28.0 million in 2004, respectively.
Security over assets
Assets held under capital lease have been pledged as security in relation to the liabilities under capital leases.
F- 44
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
16.
Commitments and Contingencies (Continued)
Other
The Greek Competition Authority issued a decision on January 25, 2002, imposing a fine on the Group of approximately € 2.9 million for
certain discount and rebate practices and required changes to its commercial practices with respect to placing coolers in certain locations and
lending them free of charge. On June 16, 2004, the fine was reduced on appeal to € 1.8 million. On June 29, 2005, the Greek Competition
Authority requested that the Group provide information on its commercial practices as a result of a complaint by certain third parties regarding
the Group’s level of compliance with the decision of January 25, 2002. On October 7, 2005, the Group was served with notice to appear before
the Greek Competition Authority.
On June 14, 2006, the Greek Competition Authority issued a decision imposing a daily penalty of € 5,869 for each day the Group failed to
comply with the decision of January 25, 2002. The Greek Competition Authority imposed this penalty for the period from February 1, 2002 to
February 16, 2006, resulting in a total of € 8.7 million. On August 31, 2006, the Company deposited an amount of € 8.9 million, reflecting the
amount of the fine and applicable tax, with the Greek authorities. This deposit was a prerequisite to filing an appeal pursuant to Greek law. As a
result of this deposit, we have increased the charge to our financial statements in connection with this case to € 8.9 million. We also incurred
consulting fees and additional expenses of € 0.4 million in connection to this case. The Group believes that it has substantial legal and factual
defenses to the Authority’s decision.
In relation to the Greek Competition Authority’s decision of January 25, 2002, one of our competitors has filed a lawsuit claiming
damages in an amount of € 7.7 million. At present, it is not possible to predict the outcome of this lawsuit or quantify the likelihood or
materiality of any potential liability arising from it. The Company has not provided for any losses related to this case.
The Company’s Bulgarian subsidiaries are participating in two waste recovery organizations in order to discharge their obligations under
the Bulgarian Waste Management Act. On March 10, 2006, the Minister of Environment and Waters of Bulgaria issued an Ordinance stating
that these organizations had not sufficiently proven their compliance with the Bulgarian Waste Management Act and consequently that all
participants in these organizations should pay waste recovery fees for 2005. This Ordinance was subsequently amended. As a result of this
amendment, the Company believes that its Bulgarian subsidiaries have no further liabilities for waste recovery fees for 2005.
In recent years, customs authorities in some Central and East European countries have attempted to challenge the classification under
which the Company imports concentrate into these countries to produce our products. Local authorities have argued that a classification with
higher customs duties than the current classification should apply. In the past, such issues were successfully resolved in most of these countries.
The Company still has several cases outstanding before the Romanian customs authorities and courts. While the Company has won appeals of
several cases to the Romanian Supreme Court, the Romanian Supreme Court has ruled against the Company in two cases. The Company
believes that it has legal and factual support for its position, which is consistent with the customs classification standards adopted by the
European Union, and will continue to oppose the position taken by the Romanian customs authorities. However, it is not possible to quantify
the likelihood of any potential liability arising from these legal proceedings due to the legal uncertainty surrounding customs duties in Romania
prior to Romania’s accession to the European Union. If the Company were to become liable to pay all claims of the Romanian customs
authorities, the amount payable would be approximately € 14.2 million. The
F- 45
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
16.
Commitments and Contingencies (Continued)
Company has made a provision for € 2.7 million of this amount, relating to the cases that the Company has lost before the Romanian Supreme
Court.
The Company is also involved in various other legal proceedings. Management believes that any liability to the Company that may arise
as a result of these pending legal proceedings will not have a material adverse effect on the financial condition of the Company taken as a
whole.
The Company’s tax filings are routinely subjected to audit by tax authorities in most of the jurisdictions in which we conduct business.
These audits may result in assessments of additional taxes. The Company provides additional tax in relation to the outcome of such tax
assessments, to the extent that a liability is probable and estimable.
At December 31, 2006, the Company had capital commitments over the next year of € 167.1 million (2005: € 73.9 million, 2004: € 60.4
million).
At December 31, 2006, the Company had commitments to purchase € 181.4 million (2005: € 336.6 million, 2004: € 167.0 million) of raw
materials over the next years.
17.
Financial Instruments
Derivative Financial Instruments
The Company only uses derivatives for economic hedging purposes. The following is a summary of the Company’s risk management
strategies and the effect of these strategies on the Company’s consolidated financial statements.
Interest Rate
The Company uses interest rate swap and option cap agreements to manage its interest-rate risk exposure. The swap agreements utilized
by the Company effectively modify the Company’s exposure to interest rate risk by converting the Company’s € 500.0 million in 2006 (2005: €
733.0 million) fixed-rate debt to a floating rate based on EURIBOR (refer to Note 8, Long-term Debt and Short-term Borrowings). The
notional amount of the swaps is € 500.0 million in 2006 (2005: € 733.0 million). During both 2006 and 2005, the Company used a combination
of interest rate swaps and currency swaps to convert the Company’s US$500.0 million and US$400.0 million notes issues in the US market
from fixed-rate US dollar denominated debt to a floating-rate based on EURIBOR (refer to Note 8, Long-term Debt and Short-term
Borrowings). The agreements involve the receipt of fixed-rate amounts in exchange for floating-rate interest payments over the life of the
agreements without an exchange of the underlying principal amount.
Interest rate swap agreements are classified as current or non-current depending on an assessment of the period over which they are
expected to be held.
During the year ended December 31, 2006, the Company recognized € 0.1 million of net losses related to interest rate swaps which did not
qualify for hedge accounting (2005: net losses of € 3.0 million, 2004: net losses of € 1.5 million). All amounts have been included in other
income or expense in the consolidated statements of income for the years ended December 31, 2006, 2005 and 2004, respectively.
Over the period 2003 to 2004, the Company purchased interest rate caps on floating rate debt. The decision to purchase options versus
using swaps was taken in order to continue benefiting from the lower
F- 46
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
17.
Financial Instruments (Continued)
floating interest rate environment, while having in place protection against adverse interest rate movements. The options are marked to market
with gains and losses taken to the statement of income. The option premiums are expensed in the statement of income through the option
revaluation process. The Company has benefited from lower interest costs and, consequently, recognized a gain of € 0.4 million (2005: a loss of
€ 1.4 million, 2004: a loss of € 4.2 million) in relation to these items in the statement of income within interest expense.
Foreign Currency
The Company is exposed to the effect of foreign currency risk on expenditures and sales that are denominated in a currency other than the
functional currency of the operation with the exposure. From time to time, the Company uses forward and option contracts to hedge a portion
of its anticipated foreign currency denominated expenditures and sales. All of the forward and option exchange contracts have maturities of less
than one year after the balance sheet date.
At December 31, 2006, the Company had recorded € 0.3 million of unrealized gains in accumulated other comprehensive income (2005: €
2.6 million unrealized losses), as a result of the hedge contracts, which, if realized, will be recorded in operating expenses and net sales
revenue, when the underlying transaction affects operating results. The net fair values of the forward and option contracts, including embedded
derivatives, of € 2.6 million and € 2.1 million at December 31, 2006 and 2005, respectively, are included within other current assets and other
current liabilities.
During 2003, the Company purchased cross currency swaps to cover the currency risk related to the US$500.0 million and US$400.0
million notes (refer to Note 8, Long-term Debt and Short-term Borrowings). At December 31, 2006, the fair value of the cross currency swaps
represented a payable of € 122.0 million (2005: € 43.3 million). The cross currency swaps were recorded as a long-term liability, as the
maturity of the instruments matched the underlying notes. The € 78.7 million loss (2005: € 99.8 million gain) on the cross currency swaps
during 2006 was offset by the € 78.7 million gain (2005: € 99.8 million loss) recorded on the translation of the dollar denominated debt to euro.
Sugar
The Company is exposed to the effect of changes in the price of sugar. To manage a portion of the risk of sugar costs, the Company uses
sugar futures contracts traded on regulated futures exchanges. The sugar futures contracts entered into typically have maturities of up to 18
months after the balance sheet date. The changes in market values of such contracts have historically been highly effective at offsetting sugar
price fluctuations. The outstanding sugar futures at December 31, 2006 correspond to the purchase of 17,000 metric tons of white sugar (2005:
nil). At December 31, 2006, the Company recorded € 10.3 million of losses in its cost of sales, as a result of the sugar futures contracts (2005:
nil).
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, trade
accounts receivable and derivatives.
F- 47
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
17. Financial Instruments (Continued)
The Company maintains cash and cash equivalents balances with various financial institutions. The financial institutions are located
throughout the countries in which the Company operates. It is the Company’s policy to limit exposure to any one institution.
Concentrations of customer credit risk are limited due to the large number of entities comprising the Company’s customer base.
Counterparties to derivative instruments expose the Company to credit risk in the event of non-performance. The Company limits this
exposure by diversifying among counterparties with high credit ratings.
Fair Values of Financial Instruments
Cash and cash equivalents:
The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value.
Accounts receivable and accounts payable:
payable approximate their fair value.
The carrying amounts reported in the balance sheet for accounts receivable and accounts
Long and short-term debt: The carrying amounts of the Company’s borrowings under its short-term revolving credit arrangements
approximate their fair value. The fair value of the Company’s long-term debt is estimated using current market prices.
Foreign exchange forward and option contracts, interest rate swaps and options, cross currency swaps and commodity futures: The
fair values of the Company’s foreign exchange forward and option contracts, interest rates swaps and options, cross currency swaps, and
commodity contracts are estimated based on dealer quotes and independent market valuations.
The carrying amounts and fair value of the Company’s derivative financial instruments and long-term debt, at December 31 were as
follows (in millions):
2006
Carrying value
Derivative assets:
Interest rate swaps
Interest rate options
Foreign currency option contracts
Forward foreign exchange contracts
Total derivative assets (current)
Interest rate swaps
Total derivative assets (non-current)
Total derivative assets
€
€
—
1.1
—
3.7
4.8
—
—
4.8
F- 48
Fair value
€
€
—
1.1
—
3.7
4.8
—
—
4.8
2005
Carrying value
€
€
8.4
0.7
0.1
3.3
12.5
21.7
21.7
34.2
Fair value
€
€
8.4
0.7
0.1
3.3
12.5
21.7
21.7
34.2
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
17.
Financial Instruments (Continued)
2006
Carrying value
Derivative liabilities:
Interest rate swaps
Foreign currency option contracts
Forward foreign exchange contracts
Total derivative liabilities (current)
Cross currency swaps
Interest rate swaps
Total derivative liabilities (non-current)
Total derivative liabilities
Long-term debt (including current portion)
€
Fair value
€
€
0.1
0.2
0.9
1.2
122.0
10.8
132.8
134.0
€
1,516.4
2005
Carrying value
€
€
0.1
0.2
0.9
1.2
122.0
10.8
132.8
134.0
€
1,520.5
Fair value
€
€
—
—
1.3
1.3
43.3
1.6
44.9
46.2
€
—
—
1.3
1.3
43.3
1.6
44.9
46.2
€
1,522.3
€
1,531.2
The fair values of derivative financial instruments at December 31, designated as cash flow hedges were (in millions):
2006
Contracts with positive fair values:
Forward foreign exchange contracts
€
Contracts with negative fair values:
Foreign currency option contracts
Forward foreign exchange contracts
0.1
€ (0.1 )
(0.3 )
€ (0.4 )
2005
€
0.3
€
—
(0.8 )
€ (0.8 )
Hedging Horizon
The Company is hedging its exposure to the variability of future cash flows for forecasted transactions, excluding those forecasted
transactions related to the payment of variable interest on existing financial instruments, for a maximum period of twelve months.
The fair values of derivative financial instruments at December 31, designated as fair value hedges were (in millions):
Contracts with positive fair values:
Interest rate swaps
Forward foreign exchange contracts
F- 49
2006
2005
€ —
0.5
€ 0.5
€ 29.9
—
€ 29.9
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
17.
Financial Instruments (Continued)
2006
Contracts with negative fair values:
Interest rate swaps
Foreign currency option contracts
Forward foreign exchange contracts
2005
€ (10.8 )
(0.1 )
(0.5 )
€ (11.4 )
€ (1.6 )
—
(0.5 )
€ (2.1 )
The fair values of derivative financial instruments at December 31, for which hedge accounting has not been applied, were (in millions):
2006
Contracts with positive fair values:
Interest rate swaps
Interest rate options
Foreign currency option contracts
Forward foreign exchange contracts
€
€
Contracts with negative fair values:
Interest rate swaps
Forward foreign exchange contracts
Cross currency swaps
€
—
1.1
—
3.1
4.2
(0.1 )
(0.1 )
(122.0 )
€ (122.2 )
2005
€
€
0.2
0.7
0.1
3.0
4.0
€
—
—
(43.3 )
€ (43.3 )
18. Segment Information
The Company has one business, being the production, distribution and sale of alcohol-free ready-to-drink beverages. Coca-Cola Hellenic
Bottling Company S.A. operated in 28 countries during 2006 (including our equity investment based in the Former Yugoslav Republic of
Macedonia (‘FYROM’)). Financial results are reported in the following segments:
Established countries:
Developing countries:
Emerging countries:
Austria, Cyprus, Greece, Italy, Northern Ireland, Republic of Ireland and
Switzerland.
Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and
Slovenia.
Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, FYROM, Moldova,
Montenegro, Nigeria, Romania, Russia, Serbia and Ukraine.
The Company’s operations in each of its segments presented have similar economic characteristics, production processes, customers, and
distribution methods. The Company evaluates performance and allocates resources primarily based on cash operating profit. The accounting
policies of the Company’s reportable segments are the same as those described in Note 1, Organization and Significant Accounting Policies.
F- 50
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
18. Segment Information (Continued)
There are no material amounts of sales or transfers between Coca-Cola Hellenic Bottling Company S.A.’s segments, nor are there
significant export sales from Greece. The net sales revenue attributed to Greece in 2006, the Company’s country of domicile, is € 599.5 million
in 2006 (2005: € 560.0 million, 2004: € 599.4 million).
2006
2005
2004
(In millions, for the year ended
December 31)
Net sales revenue
Established
Developing
Emerging
€
€
Cash Operating Profit (COP)
Established
Developing
Emerging
€
Depreciation
Established
Developing
Emerging
Impairment charges
Established
Developing
Emerging
Amortization
Established
Developing
Emerging
Stock option compensation
Established
Developing
Emerging
Operating profit
Established
Developing
Emerging
2,473.5
993.2
1,905.5
5,372.2
€
366.1
142.8
309.6
818.5
€
€
371.2
116.9
273.4
761.5
€
€
2,244.9
732.7
1,224.3
4,201.9
368.5
105.0
237.7
711.2
(125.9 )
(66.1 )
(138.2 )
(330.2 )
(120.1 )
(68.9 )
(120.7 )
(309.7 )
(119.1 )
(64.4 )
(102.3 )
(285.8 )
(13.3 )
(4.1 )
(7.1 )
(24.5 )
—
(0.9 )
—
(0.9 )
(3.6 )
—
—
(3.6 )
(0.6 )
(0.1 )
—
(0.7 )
(0.1 )
(0.1 )
—
(0.2 )
—
—
—
—
(1.3 )
(0.7 )
(2.0 )
(4.0 )
—
—
—
—
—
—
—
—
251.0
47.0
152.7
450.7
245.8
40.6
135.4
421.8
225.0
71.8
162.3
459.1
F- 51
€
2,261.8
841.1
1,531.0
4,633.9
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
18.
Segment Information (Continued)
2006
2005
2004
(In millions, for the year ended
December 31)
Interest expense
Established
Developing
Emerging
Corporate
Intersegment interest expense
Interest income
Established
Developing
Emerging
Corporate
Intersegment interest income
Income tax expense
Established
Developing
Emerging
Corporate
Share of income of equity method investees
Established
Developing
Emerging
Subtotal
Reconciling items:
Other income
Other expense
Minority interests
Net income before cumulative effect of accounting change
€
(74.1 )
(4.0 )
(14.1 )
(121.4 )
127.3
(86.3 )
(36.9 )
(2.5 )
(12.3 )
(80.9 )
76.4
(56.2 )
(38.9 )
(2.3 )
(3.4 )
(87.7 )
65.4
(66.9 )
2.8
2.0
2.5
130.3
(127.3 )
10.3
2.7
1.1
1.6
74.3
(76.4 )
3.3
1.2
4.3
1.7
64.8
(65.4 )
6.6
(43.4 )
(15.5 )
(21.0 )
(9.3 )
(89.2 )
(70.3 )
(11.8 )
(28.3 )
(1.4 )
(111.8 )
(27.5 )
(9.8 )
(36.7 )
(3.4 )
(77.4 )
(0.3 )
(0.2 )
25.3
24.8
318.7
—
—
23.9
23.9
309.9
—
—
5.2
5.2
289.3
0.4
(0.1 )
(4.8 )
314.2
2.5
(3.0 )
(10.5 )
298.9
4.2
(8.3 )
(13.1 )
272.1
€
€
2006
2005
2004
(In millions, for the year
ended December 31)
Capital expenditure
Established
Developing
Emerging
€
183.5
94.1
282.4
€ 560.0
F- 52
€
107.9
77.4
242.2
€ 427.5
€
108.1
74.9
177.8
€ 360.8
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
18.
Segment Information (Continued)
2006
Investments in equity method investees
Established
Developing
Emerging
2005
(In millions, as at
December 31)
€
1.1
1.6
314.2
€ 316.9
2006
Total assets
Established
Developing
Emerging
Corporate / intersegment receivables
€
€
3,789.4
1,426.6
1,987.1
84.5
7,287.6
€
€
0.3
1.8
292.1
€ 294.2
0.3
0.3
59.9
€ 60.5
2005
(In millions, as at
December 31)
€
€
3,625.6
1,312.4
1,741.9
54.9
6,734.8
2004
2004
€
€
3,538.6
1,260.2
1,187.9
(8.1 )
5,978.6
The long-lived assets attributed to Greece as at December 31, 2006, the Company’s country of domicile, were € 189.4 million (2005: €
194.3 million and 2004: € 203.1).
19. Shareholders’ Equity
Issued Capital and Additional Paid-in Capital
On December 20, 2006, the Company’s board of directors resolved to increase the share capital of the Company by 1,375,914 ordinary
shares, following the exercise of stock options by option holders pursuant to the Company’s stock option plan. Proceeds from the issue of the
shares were € 22.5 million. This was recorded as € 0.7 million to issued capital and € 21.8 million to additional paid-in capital.
On December 21, 2005, the Company’s board of directors resolved to increase the share capital of the Company by 2,431,873 ordinary
shares, following the exercise of stock options by option holders pursuant to the Company’s stock option plan. Proceeds from the issue of the
shares were € 36.6 million. This was recorded as € 1.2 million to issued capital and € 35.4 million to additional paid-in capital.
On December 22, 2004, the Company’s board of directors resolved to increase the share capital of the Company by a total of 1,344,852
ordinary shares, following the exercise of stock options by option holders pursuant to the Company’s stock option plan. Proceeds from the
issue of the shares were € 19.2 million. This was recorded as € 0.6 million to issued capital and € 18.6 million to additional paid-in capital.
Retained earnings
Retained earnings include tax free, partially taxed and statutory reserves particular to the various countries in which the Company
operates. The amount of retained earnings of the parent entity, Coca-Cola Hellenic Bottling Company S.A., on which there are restrictions on
distribution, is € 31.5 million (2005: € 28.0 million).
F- 53
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
19.
Shareholders’ Equity (Continued)
At December 31, 2006, an amount of € 80.1 million (2005: € 55.3 million) of the total retained earnings balance related to the Company’s
share of income from equity method investments.
20.
Stock Option Compensation Plans
The Company operates a stock-based compensation plan, under which certain key employees are granted awards of stock options, based
on an employee’s performance and level of responsibility. Options are granted at an exercise price of the average price of the Company’s
shares at close of trading on the Athens Stock Exchange over the last ten working days before the date of the grant. Options vest in one-third
increments each year for three years and can be exercised for up to ten years from the date of award.
Stock options are approved by the Board of Directors upon the recommendation of the Human Resources Committee after reviewing
management advice and based on a view of competitive market conditions for employee remuneration and employees’ performance.
At the Annual General Meeting in June 2005, shareholders approved the adoption of a multi-year plan to grant stock options to senior
managers for up to a maximum of 4,950,000 shares, subject to approval of the Board of Directors. Under this authorization, the Board of
Directors approved in December 2006 the grant of stock options for 1,010,800 shares. In March 2006, a grant of stock options for 50,000
shares was approved. In June 2006, a new grant of stock options for 30,000 shares was also approved.
During 2006, the Board approved an amendment to the rules of all Company’s stock option compensation plans. In accordance with the
amendment, in the event of an equity restructuring, the Company shall make an equitable adjustment to the terms of the stock options. The
incremental fair value granted as a result of this modification is nil.
Prior to January 1, 2006, the Company accounted for the plans under the measurement and recognition of APB Opinion No. 25,
Accounting for Stock Issued to Employees , and related interpretations, as permitted by Statement No. 123. Stock based compensation was
included as a pro forma disclosure in the financial statement notes.
Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement 123 (R), using the
modified-prospective transition method. Under this transition method, stock option compensation cost in 2006 includes the portion vesting in
the period for (1) all share-based payments granted prior to, but not vested as at January 1, 2006, and (2) all share-based payments granted
subsequently to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of Statement No. 123 (R).
Compensation expense recorded for the year ended December 31, 2006 for all stock options was € 4.0 million and out of this amount € 2.1
million was related to stock options vested in 2006. Results for the prior period have not been restated. The change from applying the original
provisions of Statement No. 123 to adoption of Statement 123 (R) didn’t have an impact on basic and diluted earnings per share.
F- 54
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
20.
Stock Option Compensation Plans (Continued)
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition
provisions of Statement No. 123 to options granted under the Company’s stock options plans in the years ended December 31, 2005 and
December 31, 2004 (in millions, except per share data).
Net income as reported
Add: Stock option employee compensation expense included in net income, net of
applicable income tax
Deduct: Total stock option compensation expense determined under fair value
based method for all awards, net of applicable income tax
Pro forma net income
Earnings per share:
Basic—as reported
Diluted—as reported
Basic—pro forma
Diluted—pro forma
2005
2004
€ 298.9
€ 272.1
0.1
—
(3.6 )
€ 295.4
(4.3 )
€ 267.8
€
€
€
€
€
€
€
€
1.25
1.25
1.24
1.23
1.15
1.14
1.13
1.13
The fair values of options granted in 2006, 2005 and 2004 were estimated using the binomial option-pricing model. Previous years grants
continue to be valued using the Black-Scholes model. We believe the binomial model more accurately reflects the value of the options
compared to the Black-Scholes option-pricing model. Because the Company’s employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in
management’s opinion, the Black-Scholes model did not necessarily provide a reliable single measure of the fair value of the Company’s
employee stock options. The fair value of each option grant was calculated on the date of grant with the following assumptions (weighted
average):
Year ended December 31
2006
€
Weighted average fair value of options granted
Risk free interest rates
Expected volatility
Dividend yield
Expected life
2005
2004
6.3 €
5.7 €
5.0
4.3 %
3.7 %
5.0 %
20.8 %
25.2 %
25.9 %
1.0 %
1.2 %
1.5 %
4.1 years
4.8 years
5.1 years
Expected stock price volatility is based on the historical volatility of the Company’s stock, and the expected dividend yield is based on the
Company’s most recent annual dividend payout and the market price of the Company’s share in Athens Stock Exchange on December 29,
2006. The risk free interest rate is based on the average Eurobond rate for the option period. The calculation also takes into account the
Company’s experience of early exercise.
F- 55
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
20.
Stock Option Compensation Plans (Continued)
A summary of stock option activity under all plans is as follows:
Number
of stock
options
Weighted
average
exercise price
Outstanding at January 1, 2006
Granted
Exercised
Forfeited
Outstanding at December 31, 2006
3,847,059
1,090,800
(1,375,914 )
(117,927 )
3,444,018
€
Exercisable at December 31, 2006
1,619,745
Weighted
average
remaining
contractual
life (years)
Aggregate
intrinsic
value
(in millions)
€
18.19
27.77
16.45
19.07
21.89
7.3
€
26.6
€
17.27
5.1
€
18.9
The following table summarizes information on options outstanding:
Exercise
price
2001 Stock Option Plan
Sub Plan 1
Sub Plan 2
Sub Plan 3
Sub Plan 4
Sub Plan 6
2003 A Plan
2003-2004 Plan /
2003 Grant
2003-2004 Plan /
2004 Grant
2005-2009 Plan /
2005 Grant
2005-2009 Plan /
2006A Grant
2005-2009 Plan /
2006B Grant
2005-2009 Plan /
2006 Grant
Total
Vesting
status 2006
Vesting dates
for further
increments
Vesting dates
for further
increments
Vesting dates
for further
increments
End of option
period
Number of
stock options
outstanding
€ 23.32
20.97
17.06
14.68
14.53
12.95
fully vested
fully vested
fully vested
fully vested
fully vested
fully vested
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
07.11.2008
09.29.2008
12.08.2009
12.12.2010
12.12.2011
12.10.2012
233,218
631
180,848
472,218
220,810
28,500
16.76
fully vested
—
—
—
12.14.2013
99,334
18.63
two-thirds
12.03.2007
—
—
12.02.2014
354,791
23.30
one-third
12.02.2007
12.02.2008
—
12.01.2015
762,868
24.85
none
03.21.2007
03.21.2008
03.21.2009
03.20.2016
50,000
23.02
none
06.23.2007
06.23.2008
06.23.2009
06.22.2016
30,000
28.06
none
12.13.2007
12.13.2008
12.13.2009
12.12.2016
1,010,800
3,444,018
The total estimated compensation cost related to non-vested awards not yet recognized is € 7.8 million. We expect to recognize this
compensation expense over the weighted average period of 1.65 years. The Company has a policy of issuing new shares upon stock option
exercise.
21. Stock Appreciation Rights
The Company operates a stock-based compensation plan, under which certain key employees are granted stock appreciation rights
(‘SARs’), based on an employee’s performance and level of
F- 56
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
21.
Stock Appreciation Rights (Continued)
responsibility. The terms of the SARs are based upon the basic terms and conditions of stock option grants except that instead of shares, the
holders receive a payment equal to the positive difference between the market price of the Company’s shares at the date of exercise and the
exercise price. SARs vest in one-third increments each year for three years and can be exercised for up to ten years from the date of award.
Stock appreciation rights are approved by the Board of Directors upon the recommendation of the Human Resources Committee after
reviewing management advice and based on a view of competitive market conditions for employee remuneration and employees’ performance.
Prior to January 1, 2006, the Company measured the liability incurred under SARs at intrinsic value.
Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement 123 (R), using the
modified-prospective transition method. Under this transition method, we recognized the effect of initially measuring the liability at its fair
value, net of any related tax effect, as the cumulative effect of a change in accounting principle amounting to € 0.8 million. The liability will be
remeasured at fair value at each reporting period and is recorded in ‘Accrued expenses’. For the year ended December 31, 2006, we recognized
compensation expense of € 1.0 million.
The option pricing model used was the binomial model. Expected stock price volatility is based on the historical volatility of the
Company’s stock and the expected dividend yield is based on the Company’s most recent annual dividend payout. The risk free interest rate is
based on the average Eurobond rate for the option period. The calculation also takes into account the early exercise experience.
A summary of SARs activity under all plans is as follows:
Number
of SARs
Weighted
average
exercise price
Outstanding at January 1, 2006
Exercised
Forfeited
Outstanding at December 31, 2006
531,482
(218,239 )
(28,269 )
284,974
€
Exercisable at December 31, 2006
274,306
Weighted
average remaining
contractual
life (years)
Aggregate
intrinsic value
(in millions)
€
18.37
16.86
21.54
19.21
3.2
€
3.0
€
19.08
3.0
€
2.9
The inputs used for the valuation of SARs are the same as those used for stock option compensation (refer to Note 20, Stock Option
Compensation Plans) with the exception of risk free risk interest rates which were 4.1%.
F- 57
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
21. Stock Appreciation Rights (Continued)
The following table summarizes information on SARs outstanding:
Phantom Option Plan
1998 A
1999
2000
2001
2003
2004
2005
Total
Exercise
price
Vesting
status 2006
€ 23.32
17.06
14.68
14.53
16.76
18.63
23.30
fully vested
fully vested
fully vested
fully vested
fully vested
two-thirds
one-third
Vesting
dates for
further
increments
—
—
—
—
—
12.03.2007
12.02.2007
Vesting
dates for
further
increments
—
—
—
—
—
—
12.02.2008
End of
option
period
Number of
SARs
outstanding
07.11.2008
12.08.2009
12.12.2010
12.12.2011
12.14.2013
12.02.2014
12.01.2015
111,339
80,035
44,900
23,700
4,000
10,000
11,000
284,974
As at December 31, 2006, there was €0.04 million of total unrecognized compensation cost related to SARs, which is expected to be
recognized over a weighted average period of 1.27 years. Total liability paid during 2006 in respect of the exercise of SARs was € 2.0 million
(2005: € 0.7 million and 2004: € 1.1 million).
22.
Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share for the years ending December 31 (in millions):
Numerator:
Net income
Denominator (number of shares):
Basic weighted average ordinary shares outstanding
Diluted effect of stock options
Diluted weighted average ordinary shares outstanding
2006
2005
2004
€ 313.4
€ 298.9
€ 272.1
240.7
0.7
241.4
238.3
1.4
239.7
237.0
1.0
238.0
23. Other Income
Other income of € 0.4 million in 2006 (2005: € 2.5 million, 2004: € 4.2 million) consists of gains on interest rate swaps that were not
eligible for hedge accounting of € 0.1 million, € 0.2 million of exchange gains and € 0.1 million of external dividends received (in 2005 gains
on sale of financial investments of € 2.1 million, € 0.3 million of exchange gains and € 0.1 of external dividends received, and in 2004, gains on
interest rate swaps of € 3.5 million and € 0.7 of exchange gains).
24. Other Expense
Other expense of € 0.1 million in 2006 (2005: € 3.0 million, 2004: € 8.3 million) consists of losses on interest rate swaps that were not
eligible for hedge accounting (in 2005: € 3.0 million of losses on interest rate swaps and in 2004, exchange losses of € 3.4 million and € 4.9
million of losses on interest rate swaps).
F- 58
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
25. Related Party Transactions
The Coca-Cola Company
As at December 31, 2006, The Coca-Cola Company indirectly owned 56,741,386 shares in Coca-Cola Hellenic Bottling Company S.A.
This represented 23.4% (2005: 23.6%) of the issued share capital of Coca-Cola Hellenic Bottling Company S.A. The Coca-Cola Company
considers Coca-Cola Hellenic Bottling Company S.A. to be a ‘key bottler’, and has entered into bottlers’ agreements with Coca-Cola Hellenic
Bottling Company S.A. in respect of each of Coca-Cola Hellenic Bottling Company S.A.’s territories. All the bottlers’ agreements entered into
by The Coca-Cola Company and Coca-Cola Hellenic Bottling Company S.A. are Standard International Bottlers’ agreements. The terms of the
bottlers’ agreements grant Coca-Cola Hellenic Bottling Company S.A.’s territories the right to produce and the exclusive right to sell and
distribute the beverages of The Coca-Cola Company. Consequently, Coca-Cola Hellenic Bottling Company S.A. is obliged to purchase all its
requirements for concentrate for The Coca-Cola Company’s beverages from The Coca-Cola Company, or its designee, in the ordinary course
of business. These agreements extend to 2013 and may be renewed at The Coca-Cola Company’s discretion until 2023.
The Coca-Cola Company owns or has applied for the trademarks that identify its beverages in all of Coca-Cola Hellenic Bottling
Company S.A.’s countries. The Coca-Cola Company has authorized Coca-Cola Hellenic Bottling Company S.A. and certain of its subsidiaries
to use the trademark Coca-Cola in their corporate names.
Total purchases of concentrate, finished products and other materials from The Coca-Cola Company and its subsidiaries amounted to €
1,136.9 million, € 994.9 million and € 907.4 million for the years ended December 31, 2006, 2005 and 2004, respectively.
The Coca-Cola Company makes discretionary marketing contributions to Coca-Cola Hellenic Bottling Company S.A.’s operating
subsidiaries. The participation in shared marketing agreements is at The Coca-Cola Company’s discretion and, where co-operative
arrangements are entered into, marketing expenses are shared. Such arrangements include the development of marketing programs to promote
The Coca-Cola Company’s beverages.
Total contributions received from The Coca-Cola Company for marketing and promotional incentives amounted to € 50.4 million, € 39.8
million and € 47.0 million for the years ended December 31, 2006, 2005 and 2004, respectively. Contributions for price support and marketing
and promotional campaigns in respect of specific customers are recorded in net sales revenue as an offset to promotional incentives paid to
customers. In 2006, such contributions totaled € 29.9 million as compared to € 17.6 million and € 21.1 million in 2005 and 2004, respectively.
Contributions for general marketing programs are recorded as an offset to selling expenses. In 2006, these contributions totaled € 20.5 million,
compared with € 22.2 million and € 25.9 million in 2005 and 2004, respectively. The Coca-Cola Company has also customarily made
additional payments for marketing and advertising direct to suppliers as part of the shared marketing arrangements. The proportion of direct
and indirect payments, made at The Coca-Cola Company’s discretion, will not necessarily be the same from year to year.
In addition, support payments from The Coca-Cola Company for the placement of cold drink equipment were € 83.3 million, € 26.6
million and € 15.0 million for the years ended December 31, 2006, 2005 and 2004, respectively.
The Company purchased € 0.8 million of fixed assets from The Coca-Cola Company in the year ended December 31, 2004. No fixed
assets were purchased in the years ended December 31, 2006 and 2005.
F- 59
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
25.
Related Party Transactions (Continued)
During 2006, the Company sold € 16.6 million of finished goods and raw materials to The Coca-Cola Company (2005: € 11.8 million,
2004: € 8.4 million).
Other income primarily comprises rent, facility and other costs of € 2.0 million in 2006 (2005: € 2.1 million, 2004: € 1.7 million) and a
toll filling relationship in Poland of € 15.6 million (2005: € 11.4 million, 2004: nil). Other expenses in 2006 relate to facility costs charged by
The Coca-Cola Company, a toll filling relationship and shared costs. These other expenses amounted to € 4.0 million in 2006 (2005: € 1.4
million, 2004: € 4.2 million). With the exception of the toll-filling arrangements, balances are included in selling, delivery and administrative
expenses.
In 2005, the Company received € 6.4 million from The Coca-Cola Company for the sale of the water brand trademark, Bankia and € 2.6
for the Bosnian water brand, Olimpija, which was sold in 2004.
At December 31, 2006, the Company had a total of € 65.9 million (2005: € 68.6 million, 2004: € 45.1 million) due from The Coca-Cola
Company, and a total amount due to The Coca-Cola Company of € 110.8 million (2005: € 92.0 million, 2004: € 69.3 million).
Beverage Partners Worldwide
Beverage Partners Worldwide is a 50/50 joint venture between The Coca-Cola Company and Nestlé. The Company purchased inventory
from Beverage Partners Worldwide amounting to € 73.0 million, € 44.2 million and € 27.8 million for the years ended December 31, 2006,
2005 and 2004, respectively. At December 31, 2006, the Company owed € 6.5 million (2005: € 2.4 million, 2004: € 1.2 million) and was owed
€ 1.4 million (2005: € 0.4 million, 2004: € 2.0 million).
The Kar-Tess Group
The Kar-Tess Group owned 71,848,182 shares in Coca-Cola Hellenic Bottling Company S.A. as at December 31, 2006. This represented
29.7% (2005: 29.9%) of the issued share capital of Coca-Cola Hellenic Bottling Company S.A. The Kar-Tess Group owns 44% of Frigoglass
S.A. (refer to discussion below).
Frigoglass S.A.
Frigoglass S.A. is a manufacturer of coolers, PET resin, glass bottles, crowns and plastics that is listed on the Athens Stock Exchange.
Frigoglass S.A. has a controlling interest in Frigoglass Industries Limited, a company in which Coca-Cola Hellenic Bottling Company S.A. has
a 16.0% (2005: 16.0%) effective interest, through its investment in Nigerian Bottling Company plc. The Kar-Tess Group is a major shareholder
of Frigoglass S.A. (refer to discussion above).
Under the terms of a supply agreement entered into in 1999, and extended in 2004 on substantially similar terms, the Company is obliged
to obtain at least 60% (at prices which are negotiated on an annual basis and which must be competitive) of its annual requirements for coolers,
glass bottles, PET resin, PET preforms, as well as plastic closures, crates, sleeves and labels from Frigoglass S.A. The current agreement
expires on December 31, 2008. Coca-Cola Hellenic Bottling Company S.A. has the status of most favored customer of Frigoglass S.A., on a
non-exclusive basis.
F- 60
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
25.
Related Party Transactions (Continued)
Purchases from Frigoglass S.A. and its subsidiaries amounted to € 209.4 million, € 143.8 million and € 165.1 million for the years ended
December 31, 2006, 2005 and 2004, respectively. These purchases are comprised of coolers and related materials and containers. As at
December 31, 2006, the Company owed € 14.8 million (2005: € 7.0 million, 2004: € 17.6 million) and was owed € 0.1 million (2005: € 0.9
million, 2004: € 0.7 million).
Leventis Overseas and AG Leventis (Nigeria) plc
Leventis Overseas and AG Leventis (Nigeria) PLC are related to the Company by way of common directors where significant influence
exists. During 2006, the Company purchased € 11.5 million (2005: nil, 2004: nil) of finished goods and other materials and € 7.0 million of
fixed assets (2005: € 9.9 million, 2004: € 6.8 million) from Leventis Overseas and AG Leventis (Nigeria) plc, and incurred rental expenses of €
0.2 million (2005: € 1.1 million, 2004: € 0.9 million). At December 31, 2006, the Company owed € 2.0 million (2005: € 2.2 million, 2004: €
0.8 million) and was owed € 0.1 million (2005: € 0.2 million, 2004: € 0.1 million).
Plias S.A.
Plias S.A. is related to the Company by way of some common shareholdings. In 2006 and 2005, the Company made no sales of finished
goods (2004: € 3.8 million) to Plias S.A. In 2006, the Company made no purchases of finished goods (2005: € 0.8 million, 2004: nil) and fixed
assets (2005: nil, 2004: € 2.3 million) from Plias S.A. At December 31, 2006, there were no receivables from (2005: € 0.8 million, 2004: € 11.3
million) and payables to (2005: € 0.1 million, 2004: € 5.7) Plias S.A. and its subsidiaries.
J&P Avax S.A.
J&P Avax S.A. may be deemed related to the Company through Mr Leonidas Ioannou who is chairman of J&P Avax S.A. and was a
member of the Company’s Board from January 1981 to July 2006. In 2006, the Company purchased € 16.2 million of fixed assets from J&P
Avax S.A. (2005: nil, 2004: nil). At December 31, 2006, the Company owed to J&P Avax S.A. € 2.0 million (2005: nil, 2004: nil).
Other Coca-Cola bottlers
In 2006, the Company purchased € 2.5 million of finished goods (2005: € 0.8 million, 2004: € 1.6 million) from, and incurred expenses of
€ 1.6 million (2005: nil, 2004: nil) to other Coca-Cola bottlers where The Coca-Cola Company has significant influence. At December 31,
2006, the Company owed € 0.4 million (2005: € 0.2 million, 2004: € 0.1 million) and was owed € 0.4 million (2005: nil, 2004: nil).
Brewinvest S.A.
The Company has a 50% interest in a joint venture, Brewinvest S.A., a group of companies engaged in the bottling and distribution of beer
in Bulgaria and beer and soft drinks in FYROM. In 2006 and 2005, the Company made no sales of packaging materials to (2004: € 0.2 million)
and no purchases of finished goods from (2005: € 11.7 million, 2004: € 11.3 million) Brewinvest S.A. At December 31, 2006, the Company
owed € 1.0 million (2005: € 0.9 million, 2004: nil) to Brewinvest S.A. (refer to Note 3, Equity Investments).
F- 61
Coca-Cola Hellenic Bottling Company S.A.
Notes to Consolidated Financial Statements (Continued)
25.
Related Party Transactions (Continued)
Multon Z.A.O. group
The Company has a 50% interest in a joint venture, Multon Z.A.O. group, a juice producer in Russia. In 2006, the Company purchased €
14.2 million of finished products (2005: € 2.6 million), € 1.1 million of raw materials (2005: nil) and € 0.6 million of fixed assets (2005: nil)
from Multon Z.A.O. group and sold raw materials of € 0.6 million (2005: € 1.6 million) and € 1.8 million of fixed assets (2005: € 6.4 million)
to Multon Z.A.O. group. At December 31, 2006, the Company owed € 22.6 million (2005: € 10.9 million) to Multon Z.A.O. group (refer to
Note 3, Equity Investments).
Fresh & Co d.o.o.
The Company has a 50% interest in a joint venture, Fresh & Co d.o.o., the leading producer of fruit juices in Serbia. In 2006, the Company
issued a loan to Fresh & Co d.o.o., the balance of which was € 22.9 at December 31, 2006 (refer to Note 3, Equity Investments).
26. Subsequent Events
On April 23, 2007, the Company agreed to acquire 100% of Eurmatik S.r.l., a vending operator in Italy. The total consideration for the
transaction is € 15.8 million (including debt but excluding acquisition costs). The final purchase price is subject to certain adjustments. The
transaction is also subject to regulatory approval.
27. Subsequent Events (Unaudited) Occurring After the Date of Audit Report
On May 31, 2007, the Company announced the completion of the acquisition of 100% of Eurmatik S.r.l., a local full-line vending operator
in Italy. Eurmatik S.r.l. has a long tradition in the Italian vending industry and is currently operating in all segments of the vending business
such as hot and cold beverages, water and snacks. At this stage, the total consideration for the acquisition is € 15.8 million with no debt
assumed (excluding acquisition costs). The final consideration is subject to changes for final working capital adjustments. Transaction costs are
approximately € 0.5 million.
F- 62
Exhibit 2.1
LIMITED LIABILITY PARTNERSHI P
CONFORMED COPY
COCA-COLA HELLENIC BOTTLING COMPANY S.A.
ARRANGED BY
DEUTSCHE BANK AG
CITIGROUP GLOBAL MARKETS LIMITED
WITH
DEUTSCHE BANK AG, LONDON BRANCH
ACTING AS SWINGLINE AGENT
DEUTSCHE BANK AG, LONDON BRANCH
ACTING AS FACILITY AGENT
MULTICURRENCY REVOLVING AND SWINGLINE
FACILITIES AGREEMENT
€600,000,000
FACILITIES AGREEMENT WITH A €250,000,000 SWINGLINE
OPTION
CONTENTS
Clause
Page
1.
Definitions and Interpretation
1
2.
The Facility
13
3.
Purpose
13
4.
Conditions Of Utilisation
13
5.
Utilisation
15
6.
Utilisation - Swingline Loans
16
7.
Swingline Loans
18
8.
Optional Currencies
19
9.
Repayment
21
10.
Prepayment And Cancellation
21
11.
Interest
24
12.
Interest Periods
25
13.
Changes To The Calculation Of Interest
25
14.
Fees
26
15.
Tax Gross Up And Indemnities
28
16.
Increased Costs
31
17.
Other Indemnities
32
18.
Mitigation By The Lenders
33
19.
Costs And Expenses
34
20.
Guarantee And Indemnity
35
21.
Representations
38
22.
Information Undertakings
41
23.
General Undertakings
44
24.
Events Of Default
47
25.
Changes To The Lenders
51
26.
Changes To The Obligors
54
27.
Role Of The Agents And The Arranger
55
28.
Conduct Of Business By The Finance Parties
59
29.
Sharing Among The Lenders
60
30.
Payment Mechanics
62
31.
Set-Off
64
32.
Notices
64
33.
Calculations And Certificates
66
34.
Partial Invalidity
66
35.
Remedies And Waivers
66
36.
Amendments And Waivers
66
37.
Counterparts
67
38.
Governing Law
68
39.
Enforcement
68
SCHEDULE 1
THE ORIGINAL PARTIES
Part I The Obligors
Part II The Original Lenders
Part III The Original Swingline Lenders
Part IV The Material Subsidiaries
69
69
70
71
72
SCHEDULE 2
CONDITIONS PRECEDENT
73
SCHEDULE 3
UTILISATION REQUESTS
75
Part I
Part II Utilisation Requests
75
76
SCHEDULE 4
MANDATORY COST FORMULAE
77
SCHEDULE 5
FORM OF TRANSFER CERTIFICATES
80
Part I
Part II LMA Transfer Certificate (PAR)
80
82
SCHEDULE 6
FORM OF COMPLIANCE CERTIFICATE
86
SCHEDULE 7
EXISTING SECURITY
87
SCHEDULE 8
TIMETABLES
88
Part I Non-Swingline Loans
Part II Swingline Loans
88
90
SCHEDULE 9
DISCLOSURE
91
THIS AGREEMENT is dated 1 August 2005 and made
BETWEEN :
(1)
(2)
COCA-COLA HELLENIC BOTTLING COMPANY S.A. , incorporated in the Republic with registered no.
13630-06-B-86-49 (the “ Company ”);
THE SUBSIDIARIES of the Company listed in Part I of Schedule 1 as borrowers (the “ Borrowers ”);
(3)
THE SUBSIDIARIES of the Company listed in Part I of Schedule 1 as guarantors (together with the Company, the “
Guarantors ”);
(4)
DEUTSCHE BANK AG and CITIGROUP GLOBAL MARKETS LIMITED (whether acting individually or together the “
Arranger ”);
(5)
THE FINANCIAL INSTITUTIONS listed in Part II and Part III of Schedule 1 (the “ Original Lenders ”);
(6)
DEUTSCHE BANK AG, LONDON BRANCH as swingline agent of the Lenders (the “ Swingline Agent ”); and
(7)
DEUTSCHE BANK AG, LONDON BRANCH as facility agent of the Lenders (the “ Facility Agent ”).
IT IS AGREED as follows:
SECTION 1
INTERPRETATION
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
In this Agreement:
“ Affiliate ” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary
of that Holding Company.
“ Agents ” means the Facility Agent and the Swingline Agent.
“ Agent’s Spot Rate of Exchange ” means the Facility Agent’s spot rate of exchange for the purchase of the relevant currency with the
Base Currency in the London foreign exchange market at or about 11:00 a.m. on a particular day.
“ Anchor or Key Bottler ” means any person which has been designated as such by Coca-Cola, being a “select business partner of the
Coca-Cola system, in which Coca-Cola holds an equity interest, whose strategic goals are aligned with those of Coca-Cola, with strong
financial management and resources and a commitment to long term growth”.
1
“ Anchor or Key Bottler Status ” means, at any time, with respect to any party, that such party is recognised at such time by
Coca-Cola, as being an Anchor or Key Bottler.
“ Authorisation ” means an authorisation, consent, approval, resolution, licence, exemption, filing or registration.
“ Availability Period ” means the period from and including the date of this Agreement to, in the case of revolving advances, the date
falling one Month before the relevant Termination Date or, in the case of swingline advances, 7 days before the relevant Termination
Date.
“ Available Commitment ” means, in relation to a Facility, a Lender’s Commitment under that Facility minus:
(a)
(b)
the Base Currency Amount of its participation in any outstanding Loans under that Facility; and
in relation to any proposed Utilisation, the Base Currency Amount of its participation in any Loans that are due to be
made under that Facility on or before the proposed Utilisation Date, other than that Lender’s participation in any Loans that
are due to be repaid or prepaid under that Facility on or before the proposed Utilisation Date.
“ Available Facility ” means, in relation to a Facility, the aggregate for the time being of each Lender’s Available Commitment in
respect of a Facility.
“ Base Currency ” means Euro.
“ Base Currency Amount ” means, in relation to a Loan, the amount specified in the Utilisation Request delivered by a Borrower for
that Loan (or, if the amount requested is not denominated in the Base Currency, that amount converted into the Base Currency at the
Agent’s Spot Rate of Exchange on the date which is three Business Days before the Utilisation Date or, if later, on the date the Facility
Agent receives the Utilisation Request) adjusted to reflect any repayment or prepayment, consolidation or division of the Loan.
“ Break Costs ” means the amount (if any) by which:
(a)
the interest which a Lender should have received for the period from the date of receipt of all or any part of its
participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum had
the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;
exceeds:
(b)
the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid
Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day
following receipt or recovery and ending on the last day of the current Interest Period.
2
“ Business Day ” means a day (other than a Saturday or Sunday) on which banks are open for general business in London and:
(a)
(b)
(in relation to any date for payment or purchase of a currency other than Euro) the principal financial centre of the
country of that currency; or
(in relation to any date for payment or purchase of Euro) any TARGET day.
“ Coca-Cola ” means The Coca-Cola Company.
“ Commitment ” means a Facility Commitment and/or a Swingline Commitment.
“ Compliance Certificate ” means a certificate substantially in the form set out in Schedule 6 ( Form of Compliance Certificate ).
“ Confidentiality Undertaking ” means a confidentiality undertaking substantially in the most recently published recommended form
of the LMA or in any other form agreed between the Company and the Facility Agent.
“ Default ” means an Event of Default or any event or circumstance specified in Clause 24 ( Events of Default ) which would (with the
expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any
of the foregoing) be an Event of Default.
“ DNB ” means the Dutch Central Bank ( De Nederlandsche Bank N.V. ).
“ Dutch Banking Act ” means the Dutch Act on the Supervision of Credit Institutions 1992 ( Wet toezicht kredietwezen 1992 ) as
amended from time to time.
“ Dutch Borrower ” means Coca Cola HBC Finance B.V.
“ Dutch Civil Code ” means the Dutch Civil Code ( Burgerlijk Wetboek ).
“ Dutch Obligor ” means an Obligor incorporated in The Netherlands.
“ EURIBOR ” means, in relation to any Loan in Euro:
(a)
(b)
the applicable Screen Rate; or
(if no Screen Rate is available for the period of that Loan) the arithmetic mean of the rates (rounded upwards to four
decimal places) as supplied to the Facility Agent at its request quoted by the relevant Reference Banks to leading banks in the
European interbank market,
as of the Specified Time on the Quotation Day for the offering of deposits in Euro for a period comparable to the Interest Period for that
Loan.
“ Euro ” or “ € ” means the single currency of the Participating Member States.
“ Event of Default ” means any event or circumstance specified as such in Clause 24 ( Events of Default ).
3
“ Exemption Regulation ” means the Exemption Regulation dated 26 June 2002 (as amended from time to time) of the Ministry of
Finance of The Netherlands ( Vrijstellingsregeling Wet toezicht kredietwezen 1992 ), as promulgated in connection with the Dutch
Banking Act.
“ Existing Facility ” means the €900,000,000 multicurrency revolving and swingline facilities agreement dated 14 May 2002 between,
among others, the Company as borrower, Coca-Cola HBC Finance B.V., Coca-Cola HBC Finance PLC and the Company as
guarantors, the arrangers and the original lenders named therein, and HSBC Investment Bank plc as facility agent.
“ Facility ” means the Revolving Facility or the Swingline Facility.
“ Facility Commitment ” means:
(a)
in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading “
Commitment ” in Part II of Schedule 1 ( The Original Parties ) and the amount of any other Commitment transferred to it
under this Agreement; and
(b)
in relation to any other Lender, the amount in the Base Currency of any Commitment transferred to it under this
Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
“ Facility Loan ” means a loan made or to be made under the Facility or the principal amount outstanding for the time being of that
loan and, unless the context requires otherwise, shall include a Swingline Loan.
“ Facility Office ” means the office or offices notified by a Lender to the Facility Agent in writing on or before the date it becomes a
Lender (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will
perform its obligations under this Agreement.
“ Fee Letter ” means the agency fee letter dated on or about the date of this Agreement between the Facility Agent and the Company
and the fee letter dated 1 July 2005 between the Arranger and the Company in respect of certain fees.
“ Finance Document ” means this Agreement, any Fee Letter and any other document designated as such by the Facility Agent and the
Company.
“ Finance Party ” means an Agent, the Arranger or a Lender.
“ Finance PLC ” means Coca-Cola HBC Finance PLC.
“ Financial Indebtedness ” means any indebtedness for or in respect of:
(a)
moneys borrowed;
(b)
any amount raised by acceptance under any acceptance credit facility;
4
(c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any
similar instrument;
(d)
the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with IAS, be
treated as a finance or capital lease;
(e)
receivables sold or discounted (other than any receivables to the extent they are sold or discounted on a non-recourse
basis);
(f)
any amount raised under any other transaction (including any forward sale or purchase agreement) having the
commercial effect of a borrowing;
(g)
any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or
price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into
account);
(h)
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or
any other instrument issued by a bank or financial institution; and
(i)
the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to
(h) above,
but excluding indebtedness owing by a member of the Group to another member of the Group.
“ Group ” means the Company and its Subsidiaries for the time being.
“ Holding Company ” means, in relation to a company or corporation, any other company or corporation in respect of which it is a
Subsidiary.
“ IAS ” means International Accounting Standards.
“ Information Package ” means the package of documents in the form approved by the Company containing certain information
concerning the Group and the Facilities which, at the Company’s request and on its behalf, was distributed to the Original Lenders
before the date of this Agreement.
“ Interest Period ” means, in relation to a Loan, each period determined in accordance with Clause 12 ( Interest Periods ), or Clause
7.4 ( Interest Period ) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 11.3 ( Default interest ).
“ Lender ” means:
(a)
any Original Lender; and
(b)
any bank or financial institution which has become a Party in accordance with Clause 25 ( Changes to the Lenders ),
5
which in each case has not ceased to be a Party in accordance with the terms of this Agreement and includes a Swingline Lender unless
the context otherwise requires.
“ LIBOR ” means, in relation to any Loan:
(a)
(b)
the applicable Screen Rate; or
(if no Screen Rate is available for the currency or period of that Loan) the arithmetic mean of the rates (rounded
upwards to four decimal places) as supplied to the Facility Agent at its request quoted by the relevant Reference Banks to
leading banks in the London interbank market,
as of the Specified Time on the Quotation Day for the offering of deposits in the currency of that Loan and for a period comparable to
the Interest Period for that Loan.
“ Loan ” means a Facility Loan or a Swingline Loan.
“ LMA ” means the Loan Market Association.
“ Majority Lenders ” means:
(a)
until the Total Commitments have been reduced to zero, a Lender or Lenders whose Facility Commitments aggregate
more than 66 2/3 per cent. of the Total Commitments (or, if the Total Commitments have been reduced to zero and there are no
Loans then outstanding, aggregated more than 66 2/3 per cent. of the Total Commitments immediately prior to the reduction);
or
(b)
2/3
at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate more than 66
per cent. of all the Loans then outstanding.
“ Mandatory Cost ” means the percentage rate per annum calculated by the Facility Agent in accordance with Schedule 4 ( Mandatory
Cost formulae ).
“ Margin ” means 0.20 per cent. per annum.
“ Material Adverse Effect ” means a material adverse effect on (a) the business or financial condition of the Group taken as a whole;
(b) the ability of the Obligors to perform and comply with their material obligations under any Finance Document or (c) the validity or
enforceability of any material provision of the Finance Documents or the rights or remedies of any Finance Party thereunder.
“ Material Subsidiary ” means, at any time, a subsidiary of the Company which has turnover representing (when rounded to the
nearest whole number) 5 per cent. or more of consolidated turnover of the Group (calculated on a consolidated basis).
Compliance with the condition set out above shall be determined by reference to the most recent annual Compliance Certificate
delivered pursuant to Clause 22.2 ( Compliance Certificate ) and/or the latest audited financial statements of such subsidiary
(consolidated in the case of a subsidiary which itself has subsidiaries) and the latest audited consolidated financial statements of the
Group, provided that :
6
(a)
if a subsidiary has been acquired or disposed of since the date as at which the latest audited consolidated financial
statements of the Group were prepared, such financial statements shall be adjusted in order to take into account the
acquisition, or disposal, of such subsidiary (such adjustment being certified by the Company as representing an accurate
reflection of the revised consolidated turnover of the Group);
(b)
if, in the case of any subsidiary which itself has subsidiaries, no consolidated financial statements are prepared and
audited, its consolidated turnover shall be determined on the basis of pro forma consolidated financial statements of the
relevant subsidiary and its subsidiaries, prepared for this purpose by the Company; and
(c)
if any intra-group transfer or re-organisation takes place, the audited financial statements of the Group and of all
relevant subsidiaries shall be adjusted by the Company in order to take into account such intra-group transfer or
reorganisation.
A report by the auditors of the Company (which shall be prepared on the request of the Facility Agent (acting reasonably)) that a
subsidiary is or is not a Material Subsidiary shall, in the absence of manifest error, be conclusive and binding on all parties hereto.
“ Month ” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next
calendar month, except that:
(a)
if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that
calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;
and
(b)
if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end
on the last Business Day in that calendar month.
The above rules will only apply to the last Month of any period.
“ Obligor ” means a Borrower or a Guarantor.
“ Optional Currency ” means a currency (other than the Base Currency) which complies with the conditions set out in Clause 4.3 (
Conditions relating to Optional Currencies ).
“ Original Financial Statements ” means:
(a)
in relation to the Company, the audited consolidated financial statements of the Group for the financial year ended 31
December 2004; and
(b)
in relation to each Borrower, the audited financial statements of that Borrower for the financial year ended 31
December 2004.
7
“ Participating Member State ” means any member state of the European Communities that adopts or has adopted the Euro as its
lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.
“ Party ” means a party to this Agreement and includes its successors in title, permitted assigns and permitted transferees.
“ PMP ” means a “professional market party” within the meaning of the Exemption Regulation.
“ Policy Guidelines ” means the 2005 Dutch Central Bank’s Policy Guidelines (issued in relation to the Exemption Regulation) dated
29 December 2004 ( Beleidsregel 2005 kernbegrippen markttoetreding en handhaving Wtk 1992 ) as amended from time to time.
“ Qualifying Lender ” has the meaning given to it in Clause 15 ( Tax gross-up and indemnities ).
“ Quotation Day ” means, in relation to any period for which an interest rate is to be determined:
(a)
(if the currency is Sterling) the first day of that period;
(b)
(if the currency is Euro) two TARGET Days before the first day of that period; or
(c)
(for any other currency) two Business Days before the first day of that period,
unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will
be determined by the Facility Agent in accordance with market practice in the Relevant Interbank Market (and if quotations for that
currency and period would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation
Day will be the last of those days).
“ Reference Banks ” means:
(a)
for the purpose of the determination of LIBOR and Mandatory Cost, the principal London offices of Deutsche Bank
AG and Citibank, N.A.,
(b)
for the purpose of the determination of EURIBOR, the principal London offices of Deutsche Bank AG and Citibank,
N.A., and
(c)
for the purpose of paragraph (a) of Clause 7.3, the principal London offices of Deutsche Bank AG and Citibank, N.A.,
or, in each case, such other banks as may be appointed by the Facility Agent in consultation with the Company.
“ Relevant Interbank Market ” means in relation to Euro, the European interbank market and, in relation to any other currency, the
London interbank market.
8
“ Repeating Representations ” means each of the representations set out in Clauses 21.1 ( Status ) to 21.4 ( Power and authority ),
Clause 21.6 ( Governing law and enforcement ), paragraph (a) of Clause 21.9 ( No default ), Clause 21.13 ( Pari passu ranking ) and
Clause 21.14 ( No proceedings pending or threatened ).
“ Republic ” means the Hellenic Republic.
“ Revolving Facility ” means the revolving loan facility made available under this Agreement as described in Clause 2.1 ( The Facility
).
“ Rollover Loan ” means one or more Facility Loans (not being a Swingline Loan):
(a)
made or to be made on the same date that one or more maturing Loans is or are due to be repaid;
(b)
the aggregate amount of which is equal to or less than the maturing Loans;
(c)
in the same currency as the maturing Loans (unless it arose as a result of the operation of Clause 8.2 ( Unavailability of
a currency )); and
(d)
made or to be made to the same Borrower for the purpose of refinancing the maturing Loans.
“ Screen Rate ” means:
(a)
in relation to LIBOR, the British Bankers Association Interest Settlement Rate for the relevant currency and period;
and
(b)
in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union
for the relevant period,
displayed on the appropriate page of the Telerate screen. If the agreed page is replaced or service ceases to be available, the Facility
Agent may specify another page or service displaying the appropriate rate after consultation with the Company and the Lenders.
“ Security ” means a mortgage, prenotation of mortgage, charge, pledge, lien or other security interest securing any obligation of any
person or any other agreement or arrangement having a similar effect.
“ Specified Time ” means a time determined in accordance with Schedule 8 ( Timetables ).
“ Sterling ” and “ £ ” means the lawful currency of the United Kingdom for the time being.
“ Subsidiary ” of a company or corporation (a “ Holding Company ”) means any company or corporation:
(a)
which is controlled (directly or indirectly) by that Holding Company; or
9
(b)
more than half the issued share capital of which is beneficially owned (directly or indirectly) by that Holding Company;
or
(c)
which is a Subsidiary of another Subsidiary of that Holding Company,
and for these purposes, a company or corporation shall be treated as being controlled by another if that other company or corporation is
able to control the composition of its board of directors or equivalent body, or to direct the actions of that board or equivalent body.
“ Swingline Agent ” means Deutsche Bank AG, London Branch.
“ Swingline Commitment ” means:
(a)
in relation to a Swingline Lender on the date of this Agreement, the amount set opposite its name under the heading “
Swingline Commitment ” in Part III of Schedule 1 ( The Original Parties ) as its Swingline Commitment and the amount of
any other Swingline Commitment transferred to it under this Agreement; and
(b)
in relation to any other Swingline Lender, the amount of any Swingline Commitment transferred to it under this
Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
“ Swingline Facility ” means the swingline facility made available under this Agreement as part of the Facility as described in Clause
2.2 ( Swingline Facility ).
“ Swingline Lenders ” means:
(a)
(b)
an Original Lender listed in Part III of Schedule 1 as a Swingline Lender; or
any other person who becomes a Swingline Lender after the date of this Agreement in accordance with Clause 25 (
Changes to the Lenders ),
which in each case has not ceased to have a Swingline Commitment.
“ Swingline Loan ” means a Loan made or to be made under the Swingline Facility or the principal amount outstanding for the time
being of that loan.
“ Swiss Francs ” means the lawful currency of Switzerland for the time being.
“ TARGET ” means Trans-European Automated Real-time Gross Settlement Express Transfer payment system.
“ TARGET Day ” means any day on which TARGET is open for the settlement of payments in Euro.
“ Tax ” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable
in connection with any failure to pay or any delay in paying any of the same).
10
“ Taxes Act ” means the Income and Corporation Taxes Act 1988.
“ Termination Date ” means the date which is 60 months after the date of this Agreement.
“ Total Commitments ” means the aggregate of the Facility Commitments being €600,000,000 at the date of this Agreement.
“ Total Swingline Commitments ” means the aggregate of the Swingline Commitments, being €250,000,000 as at the date of this
Agreement.
“ Transfer Certificate ” means a certificate substantially in one of the forms set out in Schedule 5 ( Form of Transfer Certificates ) or
any other form agreed between the Facility Agent and the Company.
“ Transfer Date ” means, in relation to a transfer, the later of:
(a)
the proposed Transfer Date specified in the Transfer Certificate; and
(b)
the date on which the Facility Agent executes the Transfer Certificate.
“ Unpaid Sum ” means any sum due and payable but unpaid by an Obligor under the Finance Documents.
“ US Dollars ” or “ $ ” means the lawful currency of the United States of America.
“ Utilisation ” means a utilisation of a Facility.
“ Utilisation Date ” means the date of a Utilisation, being the date on which the relevant Loan is to be made.
“ Utilisation Request ” means a notice substantially in the form set out in Part I (or, as the case may be, Part II) of Schedule 3 (
Utilisation Request ).
“ VAT ” means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.
1.2
Construction
(a)
Any reference in this Agreement to:
(i)
“ assets ” includes present and future properties, revenues and rights of every description;
(ii)
the “ European interbank market ” means the interbank market for Euro operating in Participating Member
States;
(iii)
a “ Finance Document ” or any other agreement or instrument is a reference to that Finance Document or other
agreement or instrument as amended or novated;
(iv)
“ indebtedness ” includes any obligation (whether incurred as principal or as surety) for the payment or repayment
of money, whether present or future, actual or contingent;
11
(v)
a “ person ” includes any person, firm, company, corporation, government, state or agency of a state or any
association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing;
(vi)
a “ regulation ” includes any regulation, rule, official directive, request or guideline (whether or not having the
force of law but, if not having the force of law, which is generally complied with by those to whom it is addressed) of
any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other
authority or organisation;
(vii)
a provision of law is a reference to that provision as amended or re-enacted; and
(viii)
unless a contrary indication appears, a time of day is a reference to London time.
(b)
Dutch Terms
In this Agreement, where it relates to a Dutch entity, a reference to:
(i)
(c)
1.3
a winding-up, administration or dissolution includes a Dutch entity being:
(A)
declared bankrupt ( failliet verklaard );
(B)
dissolved ( ontbonden );
(ii)
a moratorium includes surséance van betaling and granted a moratorium includes surséance verleend ;
(iii)
a trustee in bankruptcy includes a curator ;
(iv)
an administrator includes a bewindvoerder ;
(v)
a(n) (administrative) receiver does not include a curator or bewindvoerder ; and
(vi)
an attachment includes a beslag .
Section, Clause and Schedule headings are for ease of reference only.
(d)
Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in
connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(e)
A Default (other than an Event of Default) is “ continuing ” if it has not been remedied or waived and an Event of
Default is “ continuing ” if it has not been waived.
Third Party Rights
A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy
the benefit of any term of this Agreement.
12
SECTION 2
THE FACILITY
2.
THE FACILITY
2.1
The Facility
Subject to the terms of this Agreement, the Lenders make available to the Borrowers a multicurrency revolving loan facility
incorporating the Swingline Facility in an aggregate amount equal to the Total Commitments.
2.2
Swingline Facility
Subject to the terms of this Agreement the Swingline Lenders make available to the Borrowers a swingline loan facility, available in
Euro in an aggregate amount equal to the Total Swingline Commitments.
2.3
Lenders’ rights and obligations
(a)
The obligations of each Lender under the Finance Documents are several. Failure by a Lender to perform its
obligations under the Finance Documents does not affect the obligations of any other Party under the Finance
Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b)
The rights of each Lender under or in connection with the Finance Documents are separate and independent rights and
any debt arising under the Finance Documents to a Lender from an Obligor shall be a separate and independent debt.
(c)
A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the
Finance Documents.
3.
PURPOSE
3.1
Purpose
3.2
(a)
Each Borrower shall apply all amounts borrowed by it under the Facility for the general corporate purposes of the
Group.
(b)
Each Borrower shall apply all amounts borrowed by it under the Swingline Facility towards refinancing any note or
other instrument maturing under a Euro commercial paper programme of a member of the Group. A Swingline Loan may
not be applied in repayment or prepayment of another Swingline Loan.
Monitoring
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4.
CONDITIONS OF UTILISATION
4.1
Initial conditions precedent
No Borrower may deliver a Utilisation Request unless the Facility Agent has received all of the documents and other evidence listed in
Schedule 2 ( Conditions precedent ) in form
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and substance satisfactory to the Facility Agent. The Facility Agent shall notify the Company and the Lenders promptly upon being so
satisfied.
4.2
Further conditions precedent
The Lenders will only be obliged to comply with Clause 5.4 ( Lenders’ participation ) if on the date of the Utilisation Request and on
the proposed Utilisation Date:
(a)
in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed Loan and, in the
case of any other Loan, no Default is continuing or would result from the proposed Loan; and
(b)
4.3
the Repeating Representations to be made by each Obligor are true in all material respects.
Conditions relating to Optional Currencies
(a)
(b)
A currency will constitute an Optional Currency in relation to a Loan if:
(i)
it is readily available in the amount required and freely convertible into the Base Currency in the Relevant
Interbank Market on the Quotation Day and the Utilisation Date for that Loan; and
(ii)
it is Sterling, US Dollars, Swiss Francs or it has been approved by the Facility Agent (acting on the instructions of
all the Lenders) on or prior to receipt by the Facility Agent of the Utilisation Request for that Loan.
If by the Specified Time the Facility Agent has received a written request from the Company for a currency to be
approved under paragraph (a)(ii) above, the Facility Agent will notify the Lenders of that request by the Specified
Time. Based on any responses received by the Facility Agent by the Specified Time, the Facility Agent will confirm to the
Company by the Specified Time:
(i)
(ii)
4.4
whether or not the Lenders have granted their approval; and
if approval has been granted, the minimum amount (and, if required, integral multiples) for any subsequent
Utilisation in that currency.
Maximum number of Loans
(a)
A Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation more than 10 Facility Loans
would be outstanding.
(b)
Any Loan made by a single Lender under Clause 8.2 ( Unavailability of a currency ) shall not be taken into account in
this Clause 4.4.
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SECTION 3
UTILISATION
5.
UTILISATION
5.1
Delivery of a Utilisation Request
Subject to Clause 6 ( Utilisation - Swingline Loans ) a Borrower may utilise a Facility by delivery to the Facility Agent of a duly
completed Utilisation Request not later than the Specified Time.
5.2
Completion of a Utilisation Request
(a)
Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:
(i)
the proposed Utilisation Date is a Business Day within the Availability Period applicable to that Facility;
(ii)
the currency and amount of the Utilisation comply with Clause 5.3 ( Currency and amount );
(iii)
the proposed Interest Period complies with Clause 12 ( Interest Periods ); and
(iv)
(b)
5.3
Only one Loan may be requested in each Utilisation Request.
Currency and amount
(a)
The currency specified in a Utilisation Request must be the Base Currency or an Optional Currency.
(b)
The amount of the proposed Loan must be:
(i)
(ii)
5.4
it specifies the account and bank (which must be in the principal financial centre of the country of the currency of the
Utilisation or, in the case of Euro, the principal financial centre of a Participating Member State in which banks are
open for general business on that day or London) to which the proceeds of the Utilisation are to be credited.
if the currency selected is the Base Currency a minimum of €5,000,000 or, if less, the Available Facility; or
if the currency selected is an Optional Currency, a minimum amount (or an integral multiple, if required) specified by
the Facility Agent pursuant to paragraph (b)(ii) of Clause 4.3 ( Conditions relating to Optional Currencies ) or, if less,
the equivalent in such Optional Currency of the Available Facility.
Lenders’ participation
(a)
If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Loan available
through its Facility Office.
15
(b)
The amount of each Lender’s participation in each Loan will be equal to the proportion borne by its Available Commitment
to the Available Facility immediately prior to making the Loan.
(c)
The Facility Agent shall notify each Lender of the amount, currency and the Base Currency Amount of each Loan by the
Specified Time.
6.
UTILISATION - SWINGLINE LOANS
6.1
General
The following provisions do not apply to Swingline Loans:
6.2
6.3
(a)
Clause 5 ( Utilisation );
(b)
Clause 8 ( Optional currencies );
(c)
Clause 11 ( Interest ) as it applies to the calculation of interest on a Loan but not default interest on an overdue amount;
(d)
Clause 12 ( Interest Periods ); and
(e)
Clause 13 ( Changes to the calculation of interest ).
Delivery of a Utilisation Request for Swingline Loans
(a)
A Borrower may utilise the Swingline Facility by delivery to the Swingline Agent (copied to the Facility Agent) of a duly
completed Utilisation Request in the form of Part II of Schedule 3 ( Utilisation Request - Swingline Loans ) not later than the
Specified Time.
(b)
Each Utilisation Request for a Swingline Loan must be sent to the Swingline Agent to the address in London notified by the
Swingline Agent for this purpose with a copy to the Facility Agent at the address referred to in Clause 32 ( Notices ).
Completion of a Utilisation Request for Swingline Loans
(a)
Each Utilisation Request for a Swingline Loan is irrevocable and will not be regarded as having been duly completed unless:
(i)
it identifies the Borrower;
(ii)
it specifies that it is for a Swingline Loan;
(iii)
the proposed Utilisation Date is a Business Day within the Availability Period;
(iv)
the Swingline Loan is denominated in Euro;
16
(v)
(vi)
(b)
6.4
6.5
the amount of the proposed Swingline Loan is not more than the Available Facility under the Swingline Facility and
is a minimum of €1,000,000 or, if less, the Available Facility under the Swingline Facility; and
the proposed Interest Period:
(A)
does not overrun the Termination Date; and
(B)
is a period of not more than five TARGET Days; and
(C)
ends on a TARGET Day.
Only one Swingline Loan may be requested in each Utilisation Request.
Swingline Lenders participation
(a)
If the conditions set out in this Agreement have been met each Swingline Lender shall make its participation in each
Swingline Loan available through its Facility Office in London or in the principal financial centre of a Participating Member
State.
(b)
The relevant Swingline Lenders will only be obliged to comply with paragraph (a) above if on the date of the Utilisation
Request and on the proposed Utilisation Date:
(i)
no Default is continuing or would result from the proposed Utilisation; and
(ii)
the Repeating Representations to be made by each Obligor are true in all material respects.
(c)
The amount of each Swingline Lender’s participation in each Swingline Loan will be equal to the proportion borne by its
Available Commitment to the Available Facility immediately prior to making the Swingline Loan, adjusted to take account of
any limit applying under Clause 6.5 ( Relationship with the Facility ).
(d)
The relevant Swingline Agent shall determine the Base Currency Amount of each Swingline Loan and notify each Swingline
Lender of the amount of each Swingline Loan and its participation in that Swingline Loan by the Specified Time.
Relationship with the Facility
(a)
Notwithstanding any other term of this Agreement a Lender is only obliged to participate in a Facility Loan or a Swingline
Loan to the extent that it would not result in the Base Currency Amount of its participation and that of a Lender which is its
Affiliate in the Facility Loans (including the Swingline Loans) exceeding its Facility Commitment.
(b)
Where, but for the operation of paragraph (a) above, the Base Currency Amount of a Lender’s participation and that of a
Lender which is its Affiliate in the Facility Loans (including the Swingline Loans) would have exceeded its
17
Facility Commitment, the excess will be apportioned among the other Lenders participating in the relevant Loan pro rata
according to their relevant Commitments. This calculation will be applied as often as necessary until the Loan is apportioned
among the relevant Lenders in a manner consistent with paragraph (a) above.
6.6
Automatic Facility Loan
(a)
In the event that a Borrower does not repay a Swingline Loan made to it in full on the last day of its Interest Period, on the
Business Day falling 3 Business Days prior to such day, that Borrower shall be deemed to have served a Utilisation Request
for a Facility Loan (not being a Swingline Loan) to be made on such day in the amount and currency of such Swingline Loan
and with an Interest Period of 5 Business Days and such Facility Loan shall be made on such day in accordance with Clause
5.4 ( Lenders’ participation ) and the proceeds thereof applied in repayment of the said Swingline Loan.
(b)
(c)
Clause 4.2 ( Further conditions precedent ) shall not apply to any Facility Loan to which this Clause 6.6 refers.
In the circumstances set out in paragraph (a) above, to the extent that it is not possible to make a Facility Loan due to the
insolvency of a Borrower, the Lenders will indemnify (pro-rata to their Facility Commitments) the Swingline Lenders for any
loss that they incur as a result of the relevant Swingline Loan.
7.
SWINGLINE LOANS
7.1
Repayment of Swingline Loans
Each Borrower that has drawn a Swingline Loan shall repay that Swingline Loan on the last day of its Interest Period.
7.2
7.3
Voluntary Prepayment of Swingline Loans
(a)
The Borrower to which a Swingline Loan has been made may prepay at any time (without any premium or penalty) the
whole of that Swingline Loan.
(b)
Unless a contrary indication appears in this Agreement, any part of a Swingline Facility which is prepaid may be reborrowed
in accordance with the terms of this Agreement.
Interest
(a)
The rate of interest on each Swingline Loan for any day during its Interest Period is the aggregate of 0.20 per cent. per
annum and the rate per annum determined by the Swingline Agent to be the arithmetic mean of the rates (rounded upwards to
four decimal places) as supplied to the Swingline Agent at its request quoted by the relevant Reference Banks as being their
then generally applicable rate for same day funding in Euro to leading banks in the
18
European interbank market save that if only one Reference Bank is able to provide the rates as described above, each
Swingline Lender shall supply the Swingline Agent with its rate for same day funding in Euro to leading banks in the
European interbank market and the rate of interest payable to each Swingline Lender shall be the aggregate of 0.20 per cent.
per annum and such rate.
(b)
The Swingline Agent shall promptly notify the relevant Swingline Lender and the Borrower of the determination of the rate
of interest under paragraph (a) above.
(c)
If any day during an Interest Period is not a TARGET Day the rate of interest on a Swingline Loan on that day will be the
rate applicable to the immediately preceding TARGET Day.
(d)
7.4
7.5
Each Borrower shall pay accrued interest on each Swingline Loan made to it on the last day of its Interest Period.
Interest Period
(a)
Each Swingline Loan has one Interest Period only which shall not exceed a period of 5 TARGET Days.
(b)
The Interest Period for a Swingline Loan must be selected in the relevant Utilisation Request.
Conditions of assignment or transfer of the Facility
Notwithstanding any other term of this Agreement (including Clause 25 ( Changes to the Lenders )), each Lender shall ensure that at all
times its Facility Commitment is not less than:
(a)
its Swingline Commitment; or
(b)
if it does not have a Swingline Commitment, the Swingline Commitment of a Lender which is its Affiliate.
8.
OPTIONAL CURRENCIES
8.1
Selection of currency
A Borrower (or the Company on behalf of a Borrower) shall select the currency of a Loan in a Utilisation Request.
8.2
Unavailability of a currency
If before the Specified Time on any Quotation Day:
(a)
the Facility Agent has received notice from a Lender that the Optional Currency requested is not readily available to it in the
amount required; or
(b)
a Lender notifies the Facility Agent that compliance with its obligation to participate in a Loan in the proposed Optional
Currency would contravene a law or regulation applicable to it,
the Facility Agent will give notice to the relevant Borrower to that effect by the Specified Time on that day. In this event, any Lender
that gives notice pursuant to this Clause 8.2 will be required to participate in the Loan in the Base Currency (in an amount equal to that
Lender’s
19
proportion of the Base Currency Amount or, in respect of a Rollover Loan, an amount equal to that Lender’s proportion of the Base
Currency Amount of the maturing Loan that is due to be repaid) and its participation will be treated as a separate Loan denominated in
the Base Currency during that Interest Period.
8.3
Facility Agent’s calculations
Each Lender’s participation in a Loan will be determined in accordance with paragraph (b) of Clause 5.4 ( Lenders’ participation ).
20
SECTION 4
REPAYMENT, PREPAYMENT AND CANCELLATION
9.
REPAYMENT
9.1
Repayment of Facility Loans
Each Borrower which has drawn a Facility Loan shall repay that Facility Loan on the last day of its Interest Period.
10.
PREPAYMENT AND CANCELLATION
10.1
Illegality
If it becomes unlawful in any jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund
its participation in any Loan:
(a)
that Lender shall promptly notify the Facility Agent upon becoming aware of that event;
(b)
upon the Facility Agent notifying the Company, the Commitment of that Lender will be immediately cancelled; and
(c)
10.2
each Borrower shall repay that Lender’s participation in the Loans made to that Borrower on the last day of the Interest
Period for each Loan occurring after the Facility Agent has notified the Company or, if earlier, the date specified by the
Lender in the notice delivered to the Facility Agent (being no earlier than the last day of any applicable grace period
permitted by law).
Change of control
(a)
If any person or group of persons acting in concert gains control of the Company:
(i)
subject to any obligation on the Borrowers or the Company preventing the same, which is imposed by law, the City
Code on Takeovers and Mergers or any relevant Stock Exchange, the Company shall promptly notify the Facility
Agent upon becoming aware of that event;
(ii)
if the Majority Lenders so require within 15 days, the Facility Agent and the Company shall enter into negotiations in
good faith (for a period of not more than 30 days) with a view to agreeing alternative terms for continuing the
Facilities, and during that 30 day period no Borrower may make a Utilisation (except for a Rollover Loan) unless
otherwise agreed by the Majority Lenders;
(iii)
any alternative basis agreed pursuant to sub-paragraph (ii) above shall, with the prior consent of all the Lenders and
the Company, be binding on all Parties;
(iv)
if within 30 days after the Facility Agent has so requested the Company to enter into negotiations no alternative basis
has been so agreed then, if the Majority Lenders so require within 30 days after the end of that 30 day period, the
Facility Agent shall, by not less than 30 days’ notice to the
21
Company, cancel the Facilities and declare all outstanding Loans, together with accrued interest, and all other amounts
accrued under the Finance Documents immediately due and payable, whereupon the Facilities will be cancelled and all
such outstanding amounts will become immediately due and payable.
(b)
(c)
10.3
For the purpose of paragraph (a) above “ control ” has the meaning given to it in section 416(2) of the Taxes Act.
For the purpose of paragraph (a) above “ acting in concert ” has the meaning given to it in the City Code on Takeovers and
Mergers.
Voluntary cancellation
The Company may, if it gives the Facility Agent not less than 5 Business Days’ (or such shorter period as the Majority Lenders may
agree) prior notice, cancel the whole or any part (being a minimum amount of €5,000,000) of an Available Facility. Any cancellation
under this Clause 10.3 shall reduce the Commitments of the Lenders rateably under that Facility.
10.4
Voluntary prepayment of Loans
The Borrower to which a Loan has been made may, if it gives the Facility Agent not less than 5 Business Days’ (or such shorter period
as the Majority Lenders may agree) prior notice, prepay the whole or any part of a Loan (but if in part, being an amount that reduces the
Base Currency Amount of the Loan by a minimum amount of €5,000,000).
10.5
Right of repayment and cancellation in relation to a single Lender
(a)
If:
(i)
any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 15.2 ( Tax
gross-up ); or
(ii)
any Lender claims indemnification from the Borrowers under Clause 15.3 ( Tax indemnity ) or Clause 16.1 (
Increased costs ),
the Company may, whilst the circumstance giving rise to the requirement or indemnification continues, give the Facility Agent notice
of cancellation of the Commitment of that Lender and/or its intention to procure the repayment of that Lender’s participation in the
Loans.
(b)
On receipt of a notice referred to in paragraph (a) above the Commitment of that Lender shall immediately be reduced to
zero.
(c)
On the last day of each Interest Period which ends after the Company has given notice under paragraph (a) above (or, if
earlier, the date specified by the Company in that notice), each Borrower to which a Loan is outstanding shall repay that
Lender’s participation in that Loan.
22
10.6
Restrictions
(a)
Any notice of cancellation or prepayment given by any Party under this Clause 10 shall be irrevocable and, unless a contrary
indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to
be made and the amount of that cancellation or prepayment.
(b)
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to
any Break Costs, without premium or penalty.
(c)
Except where repayment occurs pursuant to paragraph (c)(ix)(B)(2) of Clause 23.3 ( Negative Pledge ), or where any other
contrary indication appears in this Agreement, any Facility Loan which is prepaid may be reborrowed in accordance with the
terms of this Agreement.
(d)
The Borrowers shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at
the times and in the manner expressly provided for in this Agreement.
(e)
(f)
No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.
If the Facility Agent receives a notice under this Clause 10 it shall promptly forward a copy of that notice to either the
Company or the affected Lender, as appropriate.
23
SECTION 5
COSTS OF UTILISATION
11.
INTEREST
11.1
Calculation of interest
The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:
(a)
Margin;
(b)
LIBOR or, in relation to any Loan in Euro, EURIBOR; and
(c)
Mandatory Cost, if any.
The rate of interest on Swingline Loans will be determined in accordance with Clause 7.3 ( Interest ).
11.2
Payment of interest
The Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if the
Interest Period is longer than six Months, on the dates falling at six monthly intervals after the first day of the Interest Period).
11.3
Default interest
(a)
If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the
overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which is the
sum of 1 per cent. per annum and the rate which would have been payable if the overdue amount had, during the period of
non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration
selected by the Facility Agent (acting reasonably).
(b)
If the overdue amount is principal of a Loan and became due on a day other than the last day of an Interest Period relating to
that Loan, the first Interest Period applicable to that overdue amount shall be of a duration equal to the unexpired portion of
that Interest Period and the rate of interest on that overdue amount for that Interest Period shall be the sum of 1 per cent. per
annum and the rate applicable to it immediately before it became due.
(c)
Any interest accruing under this Clause 11.3 shall be immediately payable by the Obligor on demand by the Facility Agent.
(d)
11.4
Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each
Interest Period applicable to that overdue amount but will remain immediately due and payable.
Notification of rates of interest
The Facility Agent shall promptly notify the Lenders and the relevant Borrower of the determination of a rate of interest under this
Agreement.
24
12.
INTEREST PERIODS
12.1
Selection of Interest Periods
12.2
(a)
A Borrower (or the Company on behalf of a Borrower) may select an Interest Period for a Loan in the Utilisation Request
for that Loan.
(b)
Subject to this Clause 12, a Borrower (or the Company) may select an Interest Period of 1, 2, 3 or 6 Months or any other
period agreed between the Company and the Facility Agent (acting on the instructions of all the Lenders).
(c)
An Interest Period for a Loan shall not extend beyond the Termination Date applicable to its Facility.
(d)
Each Facility Loan has one Interest Period only.
Non-Business Days
If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next
Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
13.
CHANGES TO THE CALCULATION OF INTEREST
13.1
Absence of quotations
Subject to Clause 13.2 ( Market disruption ), if LIBOR or, if applicable, EURIBOR is to be determined by reference to the Reference
Banks but a Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR or
EURIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.
13.2
Market disruption
(a)
If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender’s
share of that Loan for the Interest Period shall be the rate per annum which is the sum of:
(i)
(ii)
(iii)
(b)
the Margin;
the rate notified to the Facility Agent by that Lender as soon as practicable and in any event before interest is due to
be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that
Lender of funding its participation in that Loan from whatever source it may reasonably select; and
the Mandatory Cost, if any, applicable to that Lender’s participation in the Loan.
In this Agreement “ Market Disruption Event ” means:
(i)
at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or
only one of the Reference Banks supplies a rate to the Facility Agent to determine LIBOR or, if applicable, EURIBOR
for the relevant currency and period; or
25
(ii)
13.3
13.4
before close of business in London on the Quotation Day for the relevant Interest Period, the Facility Agent receives
notifications from a Lender or Lenders (whose participations in a Loan exceed 35 per cent. of that Loan) that the cost to
it of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR or, if applicable,
EURIBOR.
Alternative basis of interest or funding
(a)
If a Market Disruption Event occurs and the Facility Agent or the Company so requires, the Facility Agent and the Company
shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for
determining the rate of interest.
(b)
Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the
Company, be binding on all Parties.
Break Costs
(a)
Each Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs
attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an
Interest Period for that Loan or Unpaid Sum.
(b)
Each Lender shall, as soon as reasonably practicable after a demand by the Facility Agent, provide a certificate confirming
the amount of its Break Costs for any Interest Period in which they accrue.
14.
FEES
14.1
Commitment Fee
14.2
(a)
The Borrowers shall pay to the Facility Agent (for the account of each Lender) a fee in the Base Currency computed daily at
the rate of 0.06 per cent. per annum on that Lender’s Available Commitment under the Facility on each day during the
Availability Period applicable to the Facility
(b)
The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the
Availability Period, on the last day of the Availability Period and on the cancelled amount of the relevant Lender’s
Commitment at the time the cancellation is effective.
Participation fee
The Borrowers shall pay to the Facility Agent for the account of each Lender a participation fee in the amount and at the times agreed
in a Fee Letter.
14.3
Arrangement fee
The Borrowers shall pay to the Facility Agent for the account of each Arranger an arrangement fee in the amount and at the times
agreed in a Fee Letter.
14.4
Utilisation fee
(a)
The Borrowers shall pay to the Facility Agent (for the account of each Lender) a fee in the Base Currency computed at the
applicable rate on each Lender’s
26
participation in the Loans for the Availability Period. The “ applicable rate ” for any day on which the amount of its
participation in the Loans:
(i)
(ii)
(iii)
is less than 33 1 / 3 per cent. of the amount of its Commitment on that day is zero;
equals or exceeds 33 1 / 3 per cent. but is less than 66 2 / 3 per cent. of the Facility on that day is 0.025 per cent. per
annum; and
equals or exceeds 66 2 / 3 per cent., of the amount of the Facility on that day is 0.05 per cent. per annum.
In relation to any day on which a Lender’s Commitment equals zero but its
participation in the Loans does not, for the
purpose of calculating the utilisation fee its Commitment shall be deemed to be the amount at which it stood immediately
before it first equalled zero.
(b)
14.5
The accrued utilisation fee is payable on the last day of each successive period of three Months which ends during the
Availability Period applicable to the Facility, on the last day of the Availability Period applicable to the Facility and at the
time the cancellation of the relevant Lender’s Commitment is effective or, if later, the last day on which any part of its
participation in the Loans becomes repayable.
Agency Fee
The Company shall pay to the Facility Agent (for the account of the Agents) an agency fee in the amount and at the times agreed in a
Fee Letter.
27
SECTION 6
ADDITIONAL PAYMENT OBLIGATIONS
15.
TAX GROSS UP AND INDEMNITIES
15.1
Definitions
(a)
In this Clause 15:
“ Protected Party ” means a Finance Party which is or will be, for or on account of Tax, subject to any liability or required to
make any payment in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or
receivable) under a Finance Document.
“ Qualifying Lender ” means a Lender which is (on the date a payment falls due):
(i)
within the charge to United Kingdom corporation tax as respects that payment and that is a Lender in respect of an
advance made by a person that was a bank (as defined for the purpose of section 349 of the Taxes Act in section 840A
of the Taxes Act) at the time that advance was made; or
(ii)
entitled to the payment under a double taxation agreement in force on the date (subject to the completion of any
necessary formalities) without a Tax Deduction (a “ Treaty Lender ”).
“ Tax Credit ” means a credit against, relief or remission for, or repayment of any Tax.
“ Tax Deduction ” means a deduction or withholding for or on account of Tax from a payment under a Finance
Document.
“ Tax Payment ” means an increased payment made by an Obligor to a Finance Party under Clause 15.2 ( Tax
gross-up ) or a payment under Clause 15.3 ( Tax indemnity ).
15.2
(b)
In this Clause 15 a reference to “ determines ” or “ determined ” means a determination made in the absolute discretion of
the person making the determination.
(c)
If section 349 or section 840A of the Taxes Act is repealed, modified, extended or re-enacted, the Facility Agent may at any
time and from time to time (with the consent of the Company, acting reasonably) amend the definition of “ Qualifying
Lender ” in such manner as will leave the parties hereto in substantially the same commercial position as on the date of this
Agreement by giving notice of the amended definition to the Company and the Lenders.
Tax gross-up
(a)
Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by
law.
28
(b)
The Company or a Lender shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is
any change in the rate or the basis of a Tax Deduction) notify the Facility Agent accordingly. If the Facility Agent receives
such notification from a Lender it shall notify the Company and that Obligor.
(c)
If a Tax Deduction is required by law to be made by an Obligor (provided, in the case of a Tax Deduction for payments
made by Finance PLC, such Tax Deduction occurs in one of the circumstances set out in paragraph (d) below), the amount of
the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an
amount equal to the payment which would have been due if no Tax Deduction had been required.
(d)
The circumstances referred to in paragraph (c) above are where a person entitled to the payment:
(i)
15.3
is an Agent or the Arranger (on its own behalf); or
(ii)
is a Qualifying Lender, unless that Qualifying Lender is a Treaty Lender and Finance PLC is able to demonstrate that
the Tax Deduction is required to be made as a result of the failure of that Qualifying Lender to comply with paragraph
(g) below; or
(iii)
is not or has ceased to be a Qualifying Lender to the extent that this altered status results from any change after the
date of this Agreement in (or in the interpretation, administration, or application of) any law or double taxation
agreement or any published practice or published concession of any relevant taxing authority.
(e)
If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in
connection with that Tax Deduction within the time allowed and in the minimum amount required by law.
(f)
Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the
Obligor making that Tax Deduction shall deliver to the Facility Agent for the Finance Party entitled to the payment an
original receipt, certified copy thereof or, if unavailable, evidence reasonably satisfactory to that Finance Party that the Tax
Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.
(g)
A Treaty Lender and Finance PLC shall co-operate in completing any procedural formalities necessary for Finance PLC to
obtain authorisation to make that payment without a Tax Deduction.
Tax indemnity
(a)
The Borrowers shall (within three Business Days of demand by the Facility Agent) pay to a Protected Party an amount equal
to the loss, liability or cost which that Protected Party determines has been (directly or indirectly) suffered for or on account
of Tax by that Protected Party.
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(b)
Paragraph (a) above shall not apply with respect to any Tax assessed on a Finance Party:
(i)
under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or
jurisdictions) in which that Finance Party is treated as resident for tax purposes; or
(ii)
under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts
received or receivable in that jurisdiction,
if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be
received or receivable) by that Finance Party.
(c)
(d)
15.4
A Protected Party making, or intending to make, a claim pursuant to paragraph (a) above shall promptly notify the Facility
Agent of the event which will give, or has given, rise to the claim, following which the Facility Agent shall notify the
Company.
A Protected Party shall, on receiving a payment from an Obligor under this Clause 15.3, notify the Facility Agent.
Tax Credit
If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
(a)
a Tax Credit is attributable to that Tax Payment; and
(b)
that Finance Party has obtained, utilised and retained that Tax Credit as determined on an affiliated group basis,
the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same
after-Tax position as it would have been in had the Tax Payment not been made by the Obligor.
15.5
Stamp taxes
The Borrowers shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability
that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.
15.6
Value added tax
(a)
All consideration payable under a Finance Document by an Obligor to a Finance Party shall be deemed to be exclusive of
any VAT. If VAT is chargeable, the Obligor shall pay to the Finance Party (in addition to and at the same time as paying the
consideration) an amount equal to the amount of the VAT.
(b)
Where a Finance Document requires an Obligor to reimburse a Finance Party for any costs or expenses, that Obligor shall
also at the same time pay and
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indemnify that Finance Party against all VAT incurred by that Finance Party in respect of the costs or expenses save to the
extent that that Finance Party is entitled to repayment or credit in respect of VAT.
16. ￠￠￠￠￠￠￠￠ )NCREASED #OSTS
16.1
Increased costs
(a)
(b)
Subject to Clause 16.3 ( Exceptions ) the Borrowers shall, within three Business Days of a demand by the Facility Agent,
pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its
Affiliates as a result of (i) the introduction of or any change in (or in the interpretation or application of) any law or regulation
or (ii) compliance with any law or regulation made after the date of this Agreement.
In this Agreement “ Increased Costs ” means:
(i)
a reduction in the rate of return from the Facility or on a Finance Party’s (or its Affiliate’s) overall capital;
(ii)
an additional or increased cost;
(iii)
additional costs in connection with compliance with maintenance of capital pursuant to Basel II; or
(iv)
a reduction of any amount due and payable under any Finance Document,
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having
entered into its Commitment or funding or performing its obligations under any Finance Document.
16.2
16.3
Increased cost claims
(a)
A Finance Party intending to make a claim pursuant to Clause 16.1 ( Increased costs ) shall notify the Facility Agent of the
event giving rise to the claim, following which the Facility Agent shall promptly notify the Company.
(b)
Each Finance Party shall, as soon as practicable after a demand by the Facility Agent, provide a certificate confirming the
amount of its Increased Costs.
Exceptions
(a)
Clause 16.1 ( Increased costs ) does not apply to the extent any Increased Cost is:
(i)
(ii)
attributable to a Tax Deduction required by law to be made by an Obligor;
compensated for by Clause 15.3 ( Tax indemnity ) (or would have been compensated for under Clause 15.3 ( Tax
indemnity ) but was not so compensated solely because one of the
31
exclusions in paragraph (b) of Clause 15.3 ( Tax indemnity ) applied);
(b)
(iii)
compensated for by the payment of the Mandatory Cost; or
(iv)
attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.
In this Clause 16.3, a reference to a “ Tax Deduction ” has the same meaning given to the term in Clause 15.1 ( Definitions
).
17.
/THER )NDEMNITIES
17.1
Currency indemnity
(a)
If any sum due from an Obligor under the Finance Documents (a “ Sum ”), or any order, judgment or award given or made
in relation to a Sum, has to be converted from the currency (the “ First Currency ”) in which that Sum is payable into
another currency (the “ Second Currency ”) for the purpose of:
(i)
making or filing a claim or proof against that Obligor;
(ii)
obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
that Obligor shall as an independent obligation, within three Business Days of demand, indemnify each Finance Party to whom that
Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the
rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange
available to that person at the time of its receipt of that Sum.
(b)
17.2
Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency
or currency unit other than that in which it is expressed to be payable.
Other indemnities
The Borrowers shall (or shall procure that an Obligor will), within three Business Days of demand, indemnify each Lender against any
cost, loss or liability incurred by that Lender as a result of:
(a)
the occurrence of any Event of Default;
(b)
a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any
cost, loss or liability arising as a result of Clause 29 ( Sharing among the Lenders );
(c)
funding, or making arrangements to fund, its participation in a Loan requested by a Borrower in a Utilisation Request but
not made by reason of the operation
32
of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Lender alone);
or
(d)
17.3
a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by a Borrower or the
Company.
Indemnity to the Facility Agent
The Borrowers shall promptly indemnify the Facility Agent against any cost, loss or liability incurred by the Facility Agent (acting
reasonably) as a result of:
(a)
investigating any event which it reasonably believes is a Default; or
(b)
entering into or performing any foreign exchange contract for the purposes of Clause 8 ( Optional Currencies ); or
(c)
acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately
authorised.
18.
-ITIGATION "Y 4HE ,ENDERS
18.1
Mitigation
(a)
(b)
18.2
Each Finance Party shall, in consultation with the Company, take all reasonable steps to mitigate any circumstances which
arise and which would result in any amount becoming payable under, or cancelled pursuant to, any of Clause 10.1 ( Illegality
), Clause 15 ( Tax gross-up and indemnities ) or Clause 16 ( Increased costs ) including (but not limited to) transferring its
rights and obligations under the Finance Documents to another Affiliate or Facility Office.
Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.
Limitation of liability
(a)
The Borrowers shall indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a
result of steps taken by it under Clause 18.1 ( Mitigation ).
(b)
A Finance Party is not obliged to take any steps under Clause 18.1 ( Mitigation ) if, in the opinion of that Finance Party
(acting reasonably), to do so might be prejudicial to it.
19.
#OSTS !ND %XPENSES
19.1
Transaction expenses
Subject to any cap separately agreed between the Arranger and any Obligor, the Borrowers shall promptly on demand pay the Facility
Agent and the Arranger the amount of all costs and expenses (including legal fees) reasonably incurred by any of them in connection
with the negotiation, preparation, printing, execution and syndication of:
33
19.2
(a)
this Agreement and any other documents referred to in this Agreement; and
(b)
any other Finance Documents executed after the date of this Agreement.
Amendment costs
If (a) an Obligor requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 30.9 ( Change of
currency ), the Borrowers shall, within three Business Days of demand, reimburse the Facility Agent for the amount of all costs and
expenses (including legal fees) reasonably incurred by the Facility Agent in responding to, evaluating, negotiating or complying with
that request or requirement.
19.3
Enforcement costs
The Borrowers shall, within three Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including
legal fees) incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance
Document.
34
SECTION 7
GUARANTEE
20.
'UARANTEE !ND )NDEMNITY
20.1
Guarantee and indemnity
Each Guarantor irrevocably and unconditionally jointly and severally:
20.2
(a)
guarantees to each Finance Party punctual performance by each Borrower of all that Borrower’s obligations under the
Finance Documents;
(b)
undertakes with each Finance Party that whenever a Borrower does not pay any amount when due under or in connection
with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor;
and
(c)
indemnifies each Finance Party immediately on demand against any cost, loss or liability suffered by that Finance Party if
any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall
be equal to the amount which that Finance Party would otherwise have been entitled to recover.
Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance
Documents, regardless of any intermediate payment or discharge in whole or in part.
20.3
Reinstatement
If any payment by an Obligor or any discharge given by a Finance Party (whether in respect of the obligations of any Obligor or any
security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:
(a)
(b)
20.4
the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and
each Finance Party shall be entitled to recover the value or amount of that security or payment from each Obligor, as if the
payment, discharge, avoidance or reduction had not occurred.
Waiver of defences
The obligations of each Guarantor under this Clause 20 will not be affected by an act, omission, matter or thing which, but for this
Clause, would reduce, release or prejudice any of its obligations under this Clause 20 (without limitation and whether or not known to it
or any Finance Party) including:
(a)
(b)
any time, waiver or consent granted to, or composition with, any Obligor or other person;
the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of
any member of the Group;
35
(c)
the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any
rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any
formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
(d)
any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an
Obligor or any other person;
(e)
(f)
(g)
20.5
any amendment (however fundamental) or replacement of a Finance Document or any other document or security;
any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other
document or security; or
any insolvency or similar proceedings.
Immediate recourse
Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed
against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause
20. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
20.6
Appropriations
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been
irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:
20.7
(a)
refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee
or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit
(whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and
(b)
hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantor’s
liability under this Clause 20.
Deferral of Guarantors’ rights
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been
irrevocably paid in full and unless the Facility Agent otherwise directs, no Guarantor will exercise any rights which it may have by
reason of performance by it of its obligations under the Finance Documents:
(a)
to be indemnified by an Obligor;
(b)
to claim any contribution from any other guarantor of any Obligor’s obligations under the Finance Documents; and/or
36
(c)
20.8
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties
under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance
Documents by any Finance Party.
Additional security
This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any
Finance Party.
37
SECTION 8
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
21.
2EPRESENTATIONS
Each Obligor makes the representations and warranties set out in this Clause 21 (other than 21.20 ( PMP Representations - Lenders ) to
each Finance Party on the date of this Agreement.
21.1
21.2
Status
(a)
It is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.
(b)
It and each of its Material Subsidiaries has the power to own its assets and carry on its business as it is being conducted.
Binding obligations
The obligations expressed to be assumed by it in each Finance Document are, subject to any general principles of law limiting its
obligations which are specifically referred to in any legal opinion delivered pursuant to Clause 4 ( Conditions of Utilisation ), legal,
valid, binding and enforceable obligations.
21.3
Non-conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not and will not conflict
with:
(a)
any law or regulation applicable to it, breach of which could reasonably be expected to have a Material Adverse Effect;
(b)
the constitutional documents of any member of the Group; or
(c)
21.4
any agreement or instrument binding upon it or any member of the Group or any of its or any member of the Group’s assets
breach of which could reasonably be expected to have a Material Adverse Effect.
Power and authority
It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and
delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.
21.5
Validity and admissibility in evidence
All Authorisations required or desirable:
(a)
(b)
to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is
a party; and
to make the Finance Documents to which it is a party admissible in evidence in its jurisdiction of incorporation,
have been obtained or effected and are in full force and effect.
38
21.6
21.7
Governing law and enforcement
(a)
The choice of English law as the governing law of the Finance Documents will be recognised and enforced in its jurisdiction
of incorporation, subject to any general principles of law which are specifically referred to in any legal opinion delivered
pursuant to Clause 4 ( Conditions of Utilisation ).
(b)
Any judgment obtained in England in relation to a Finance Document will be recognised and enforced in its jurisdiction of
incorporation, subject to any general principles of law which are specifically referred to in any legal opinion delivered
pursuant to Clause 4 ( Conditions of Utilisation ).
Deduction of Tax
Neither Borrower is required under the law of its jurisdiction of incorporation in force at the date of this Agreement to make any
deduction for or on account of Tax from any payment it may make under any Finance Document provided that , in the case of
payments by Finance PLC, each Lender falls within the definition of Qualifying Lender in Clause 15.1 ( Definitions ).
21.8
No filing or stamp taxes
Under the law of its jurisdiction of incorporation in force at the date of this Agreement it is not necessary that the Finance Documents
be filed, recorded or enrolled with any court or other authority in that jurisdiction or that, except as described in any legal opinion
delivered pursuant to Clause 4 ( Conditions of Utilisation ), any stamp, registration or similar tax be paid on or in relation to the
Finance Documents or the transactions contemplated by the Finance Documents.
21.9
No default
(a)
(b)
21.10
No Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.
No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is
binding on it or any of its Material Subsidiaries or to which its (or its Material Subsidiaries’) assets are subject which might
reasonably be expected to have a Material Adverse Effect.
No misleading information
(a)
Any factual information provided by or on behalf of a member of the Group and contained in the Information Package was
true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.
(b)
So far as it is aware, nothing has occurred or been omitted from the Information Package, and no information has been given
or withheld, that results in the information contained in the Information Package being untrue or misleading in any material
respect.
39
21.11
Financial statements
(a)
(b)
21.12
Its Original Financial Statements were prepared in accordance with IAS consistently applied.
Its Original Financial Statements give a true and fair view of its financial condition and operations (consolidated in the case
of the Company) as at the end of and for the relevant financial year unless expressly disclosed to the contrary in those
financial statements or in writing by the Company to the Facility Agent before the date of this Agreement.
No Material Adverse Change
There has been no material adverse change in its business or financial condition (or the business or consolidated financial condition of
the Group taken as a whole, in the case of the Company) since the date as at which the Original Financial Statements were prepared.
21.13
Pari passu ranking
Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and
unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
21.14
No proceedings pending or threatened
Save as disclosed in Schedule 8 ( Disclosure ), no litigation, arbitration or administrative proceedings of or before any court, arbitral
body or agency which are reasonably likely to be adversely determined and, if so adversely determined, might reasonably be expected
to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against it or any of its
Subsidiaries.
21.15
No Winding-up
No Material Subsidiary or Obligor has taken any corporate action nor have any other steps been taken or legal proceedings been started
or (to the best of its knowledge and belief) threatened against such Material Subsidiary or Obligor for its winding-up, dissolution,
administration or re-organisation (whether by voluntary arrangement, scheme of arrangement or otherwise) or for the appointment of a
receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of it or any or all of its assets or
revenues.
21.16
Security
No Security exists over all or any of the present or future revenues or assets of any member of the Group (except as permitted under
paragraphs (c)(i) to (xi) of Clause 23.3 ( Negative Pledge )).
21.17
Material Subsidiaries
Each member of the Group which, as at the date of this Agreement, is a Material Subsidiary is listed in Part IV of Schedule 1 ( Material
Subsidiaries ).
21.18
Ownership of Borrowers
Each Borrower is a wholly-owned Subsidiary of the Company.
40
21.19
Dutch Banking Act
Subject to the representations set out in Clause 21.20 ( PMP Representations - Lenders ) each Dutch Obligor is in compliance with the
Dutch Banking Act and any regulations issued pursuant thereto (including, but not limited to, the Policy Guidelines and the Exemption
Regulation).
21.20
21.21
PMP Representations - Lenders
(a)
Each Lender which is a party to this Agreement on the date hereof represents and warrants to the Dutch Borrower that it is a
PMP and (ii) it is aware that it does not benefit from the (creditor) protection offered by the Dutch Banking Act when lending
monies to persons or entities which are subject to the prohibition of Section 82 of the Dutch Banking Act.
(b)
If on the date on which a New Lender as defined in Clause 25.1 ( Assignments and transfers by the Lenders ) becomes a
Lender, it is a requirement of Dutch law that such New Lender is a PMP, each New Lender represents and warrants to the
Borrower on the date on which it becomes a party to this Agreement as a Lender that it is a PMP.
(c)
Each such Lender and New Lender acknowledges that the Dutch Borrower has relied upon such representation and
warranty.
Tax Status
No notice under Section 36 of the Tax Collection Act ( Invorderingswet 1990 ) or section 16d of the Social Insurance Coordination Act
( Coördinatiewet Sociale Verzekeringen ) has been given by any member of the Group.
21.22
Repetition
The Repeating Representations are deemed to be made by each Obligor by reference to the facts and circumstances then existing on the
date of each Utilisation Request and the first day of each Interest Period.
22.
)NFORMATION 5NDERTAKINGS
The undertakings in this Clause 22 remain in force from the date of this Agreement for so long as any amount is outstanding under the
Finance Documents or any Commitment is in force.
22.1
Financial statements
The Company shall supply to the Facility Agent in sufficient copies for all the Lenders:
(a)
as soon as the same become available, but in any event within 120 days after the end of each of its financial years:
(i)
its audited consolidated financial statements for that financial year; and
(ii)
the financial statements (audited, if prepared) of each Obligor for that financial year; and
41
(b)
22.2
22.3
22.4
as soon as the same become available, but in any event within 90 days after the end of each half of each of its financial years
its consolidated financial statements (if produced) for that financial half year.
Compliance Certificate
(a)
The Company shall supply to the Facility Agent, with each set of financial statements delivered pursuant to paragraph (a)(i)
of Clause 22.1 ( Financial statements ), a Compliance Certificate listing the Material Subsidiaries as at the end of the relevant
financial year.
(b)
Each Compliance Certificate shall be signed by two directors of the Company and, if requested by the Facility Agent stating
that it is of the opinion that such Compliance Certificate is inaccurate (such opinion to be based on reasonable grounds) the
Company shall deliver a further Compliance Certificate in relation to the relevant financial statements, by the Company’s
auditors.
Requirements as to financial statements
(a)
Each set of financial statements delivered by the Company pursuant to Clause 22.1 ( Financial statements ) shall be certified
by a director or other senior officer of the relevant company as fairly representing its (or, as the case may be, its consolidated)
financial condition and operations as at the end of and for the period in relation to which those financial statements were
drawn up.
(b)
The Company shall procure that each set of financial statements of an Obligor delivered pursuant to Clause 22.1 ( Financial
statements ) is prepared using IAS, accounting practices and financial reference periods consistent with those applied in the
preparation of the Original Financial Statements for that Obligor unless, in relation to any set of financial statements, it
notifies the Facility Agent that there has been a change in IAS, the accounting practices or reference periods in which case the
Company shall deliver to the Facility Agent:
(i)
a description of any change necessary for those financial statements to reflect the IAS, accounting practices and
reference periods upon which that Obligor’s Original Financial Statements were prepared; and
(ii)
sufficient information, in form and substance as may be reasonably required by the Facility Agent, to enable the
Lenders to make an accurate comparison between the financial position indicated in those financial statements and that
Obligor’s Original Financial Statements.
Information: miscellaneous
The Company shall supply to the Facility Agent (in sufficient copies for all the Lenders, if the Facility Agent so requests):
(a)
all documents dispatched by the Company to its shareholders (or any class of them) or its creditors generally at the same
time as they are dispatched; and
42
(b)
22.5
22.6
promptly, such further information regarding the financial condition, business and operations of any member of the Group as
any Finance Party (through the Facility Agent) may reasonably request.
Notification of default
(a)
Each Obligor shall notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon
becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another
Obligor).
(b)
Promptly upon a request by the Facility Agent, the Company shall supply to the Facility Agent a certificate signed by two of
its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying
the Default and the steps, if any, being taken to remedy it).
“Know your customer” checks
(a)
If:
(i)
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation
made after the date of this Agreement;
(ii)
any change in the status of an Obligor or the composition of the shareholders of an Obligor after the date of this
Agreement; or
(iii)
a proposed assignment or transfer by a Lender of any of its rights and/or obligations under this Agreement to a party
that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with “know
your customer” or similar identification procedures in circumstances where the necessary information is not already available
to it, each Obligor shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such
documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any
Lender (for itself or, in the case of the event described in paragraph (iii) above, on behalf of any prospective new Lender) in
order for the Agent, such Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to
carry out and be satisfied with the results of all necessary “know your customer” or other checks in relation to any relevant
person pursuant to the transactions contemplated in the Finance Documents.
(b)
Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other
evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied with the
results of all necessary “know your customer” or other checks on Lenders or prospective new Lenders pursuant to the
transactions contemplated in the Finance Documents.
43
23.
'ENERAL 5NDERTAKINGS
The undertakings in this Clause 23 remain in force from the date of this Agreement for so long as any amount is outstanding under the
Finance Documents or any Commitment is in force.
23.1
Authorisations
Each Obligor shall promptly:
(a)
obtain, comply with and do all that is necessary to maintain in full force and effect; and
(b)
supply certified copies to the Facility Agent of,
any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its material
obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence (subject to any
general principles of law which are referred to in any legal opinion delivered pursuant to Clause 4 ( Conditions of Utilisation )) in its
jurisdiction of incorporation of any material provision of any Finance Document.
23.2
Compliance with laws
Each Obligor shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its
ability to perform its obligations under the Finance Documents.
23.3
Negative pledge
(a)
(b)
No Obligor shall (and the Company shall ensure that no Material Subsidiary will) create or permit to subsist any Security
over any of its assets.
No Obligor shall (and the Company shall ensure that no Material Subsidiary will):
(i)
(ii)
(iii)
(iv)
sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by
an Obligor or any other member of the Group;
sell, transfer or otherwise dispose of any of its receivables on recourse terms;
enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or
made subject to a combination of accounts; or
enter into any other preferential arrangement having a similar effect,
in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of
financing the acquisition of an asset.
(c)
Paragraphs (a) and (b) above do not apply to:
44
(i)
any Security listed in Schedule 7 ( Existing Security ) except to the extent the principal amount secured by that
Security exceeds the amount stated in that Schedule;
(ii)
any netting or set-off arrangement entered into by an Obligor or a Material Subsidiary in the ordinary course of its
banking arrangements for the purpose of netting debit and credit balances;
(iii)
(iv)
any lien arising by operation of law and in the ordinary course of trading;
any Security over or affecting any asset acquired by an Obligor or a Material Subsidiary after the date of this
Agreement if:
(A)
the Security was not created in contemplation of the acquisition of that asset by that Obligor or Material
Subsidiary;
(B)
the principal amount secured has not been increased in contemplation of or since the acquisition of that asset by
that Obligor or Material Subsidiary; and
(C)
(v)
any Security over or affecting any asset of any company which becomes a Material Subsidiary after the date of this
Agreement, where the Security is created prior to the date on which that company becomes a member of the Group, if:
(A)
(B)
(C)
(vi)
(vii)
(viii)
(ix)
the Security is removed or discharged within 6 months of the date of acquisition of such asset;
the Security was not created in contemplation of the acquisition of that company;
the principal amount secured has not increased in contemplation of or since the acquisition of that company;
and
the Security is removed or discharged within 6 months of that company becoming a Material Subsidiary;
any title transfer or retention of title arrangement entered into by an Obligor or a Material Subsidiary in the normal
course of its trading activities on the counterparty’s standard or usual terms;
any Security which has been approved by the Majority Lenders;
any Security arising on any goods or related documents of title arising in the ordinary course of business in favour of
any bank or other financial institution in connection with the raising of finance directly in connection with the purchase
of such goods;
any transaction falling within paragraph (b)(i) above:
(A)
to the extent that the aggregate consideration received for the relevant asset, together with all previous assets
sold, transferred or
45
disposed of does not exceed €125,000,000, or its equivalent in other currencies; or
(B)
if the consideration received for the relevant asset sold, transferred or disposed of, when aggregated with the
consideration received for all previous assets sold, transferred or disposed of, exceeds €125,000,000 or its,
equivalent in other currencies:
(1)
all or part of the Available Facilities is, within 15 Business Days, cancelled in accordance with Clause
10.3 ( Voluntary cancellation ) and/or (at the Company’s discretion)
(2)
all or part of the Loans then outstanding are, on or before the end of the then current Interest Period (or if
such Interest Period ends within 10 Business Days, the next succeeding Interest Period), prepaid in
accordance with Clause 10.4 ( Voluntary prepayment ) (in which case the amount so prepaid shall not be
available for redrawing and the Commitments shall be reduced accordingly)
and the aggregate amount (in the Base Currency) so cancelled and/or prepaid is not less than the amount of the excess consideration
over €125,000,000 detailed in paragraph (A) above;
23.4
(x)
any Security not falling within paragraphs (i) to (ix) above, provided that the aggregate amount of indebtedness
secured by all Security falling within this paragraph shall not, at any time, exceed €100,000,000; and
(xi)
any Security for the sole purpose of extending, renewing or replacing in whole or in part indebtedness secured by any
Security referred to in the foregoing paragraphs (i) to (x), inclusive, or in this paragraph (xi), provided that the
principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at
the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to
all or part of the property which secured the Security so extended, renewed or replaced.
Disposals
(a)
(b)
No Obligor shall (and the Company shall ensure that no Material Subsidiary will) enter into a single transaction or a series
of transactions (whether related or not and whether voluntary or involuntary) to sell, lease, transfer or otherwise dispose of
any asset.
Paragraph (a) above does not apply to any sale, lease, transfer or other disposal:
(i)
made in the ordinary course of business for fair market value;
46
(ii)
of assets in exchange for other assets comparable or superior as to type, value and quality;
(iii)
of obsolete assets;
(iv)
by any member of the Group to an Obligor or Material Subsidiary;
(v)
on arms length terms to Coca-Cola;
(vi)
on arms length terms of the Group’s 50 per cent. interest in Brewinvest S.A.;
(vii)
which is permitted pursuant to Clause 23.3 ( Negative pledge ); or
(viii)
23.5
where the higher of the market value or consideration receivable (when aggregated with the higher of the market
value or consideration receivable for any other sale, lease, transfer or other disposal, other than any permitted under
paragraphs (i) to (vii) above) does not exceed €100,000,000 in any financial year.
Merger
Save to the extent permitted under Clause 23.4 ( Disposals ) or with the prior consent of the Majority Lenders, no Obligor shall (and the
Company shall ensure that no other Material Subsidiary will) enter into any amalgamation, demerger, merger or corporate
reconstruction other than any intra-Group merger ( provided that , in the case of any intra-Group merger between members of the
Group and any Obligor, that Obligor is the surviving entity).
23.6
Change of business
The Company shall procure that no substantial change is made to the general nature of the business of the Company or the Group or the
Obligors taken as a whole from that carried on at the date of this Agreement.
24.
%VENTS /F $EFAULT
Each of the events or circumstances set out in Clause 24 is an Event of Default.
24.1
Non-payment
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in
which it is expressed to be payable unless:
(a)
its failure to pay is caused by administrative or technical error; and
(b)
payment is made within 3 Business Days of its due date.
24.2
Obligations
(a)
An Obligor does not comply with any provision of the Finance Documents (other than that referred to in Clause 24.1 (
Non-payment )).
47
(b)
24.3
No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied
within 21 days of the Facility Agent giving notice to the Company or the Company becoming aware of the failure to comply.
Misrepresentation
Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered
by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading in
any material respect when made or deemed to be made.
24.4
Cross default
(a)
Any Financial Indebtedness of an Obligor or a Material Subsidiary is not paid when due nor within any originally
applicable grace period.
(b)
Any Financial Indebtedness of an Obligor or a Material Subsidiary is declared to be or otherwise becomes due and
payable prior to its specified maturity as a result of an event of default (however described).
(c)
Any commitment for any Financial Indebtedness of an Obligor or a Material Subsidiary is cancelled or suspended by a
creditor of an Obligor or a Material Subsidiary as a result of an event of default (however described).
(d)
Any creditor of an Obligor or a Material Subsidiary becomes entitled to declare any Financial Indebtedness of an
Obligor or a Material Subsidiary due and payable prior to its specified maturity as a result of an event of default (however
described).
(e)
No Event of Default will occur under this Clause 24.4 if
(i)
(ii)
24.5
the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within
paragraphs (a) to (d) above is less than €25,000,000 (or its equivalent in any other currency or currencies); or
in respect of paragraph (d), the relevant creditor is taking no significant action in respect of the relevant default.
Insolvency
(a)
An Obligor or Material Subsidiary is unable or admits inability to pay its debts as they fall due, suspends making
payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or
more of its creditors with a view to rescheduling any of its indebtedness.
(b)
The value of the assets of an Obligor or a Material Subsidiary is less than its liabilities (taking into account contingent
and prospective liabilities) resulting in a state of affairs which renders that Obligor or Material Subsidiary insolvent under
applicable local law.
48
(c)
24.6
A moratorium is declared in respect of all or any substantial part of the indebtedness of an Obligor or a Material
Subsidiary.
Insolvency proceedings
Any corporate action, legal proceedings or other procedure or step is taken in relation to:
(a)
the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or
reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of an Obligor or Material Subsidiary
other than a solvent liquidation or reorganisation of an Obligor or a Material Subsidiary;
(b)
a composition, assignment or arrangement with any creditor of an Obligor or a Material Subsidiary;
(c)
the appointment of a liquidator (other than in respect of a solvent liquidation), receiver, administrator, administrative
receiver, compulsory manager or other similar officer in respect of an Obligor or a Material Subsidiary or any of its assets; or
(d)
enforcement of any Security over any assets of an Obligor or any member of the Group having an aggregate value of
and in respect of indebtedness aggregating not less than the amount specified in paragraph (e)(i) of Clause 24.4 ( Cross
default ),
or any analogous procedure or step is taken in any jurisdiction.
24.7
Creditors’ process
Any expropriation, attachment, sequestration, distress or execution affects the whole or any material part of the assets of an Obligor or
a Material Subsidiary and is not discharged within 30 days.
24.8
Ownership of the Obligors
A Borrower is not or ceases to be a Subsidiary which is wholly-owned (as to ordinary share capital) by the Company.
24.9
Unlawfulness
It is or becomes unlawful for an Obligor to perform any of its material obligations under the Finance Documents.
24.10
Repudiation
An Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document.
24.11
Loss of Anchor or Key Bottler Status
The Company loses its Anchor or Key Bottler Status.
24.12
Tax Status
A notice under Section 36 of the Tax Collection Act ( Invorderingswet 1990 ) or section 16d of the Social Insurance Coordination Act)
( Coördinatiewet Sociale Verzekeringen ) has been given by any member of the Group.
49
24.13
Acceleration
On and at any time after the occurrence of an Event of Default the Facility Agent may, and shall if so directed by the Majority Lenders,
by notice to the Company:
(a)
cancel the Total Commitments whereupon they shall immediately be cancelled;
(b)
declare that all or part of the Loans, together with accrued interest, and all other amounts accrued under the Finance
Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or
(c)
declare that all or part of the Loans be payable on demand, whereupon they shall immediately become payable on
demand by the Facility Agent on the instructions of the Majority Lenders.
50
SECTION 9
CHANGES TO PARTIES
25.
#HANGES 4O 4HE ,ENDERS
25.1
Assignments and transfers by the Lenders
Subject to this Clause 25, a Lender (the “ Existing Lender ”) may:
(a)
(i)
assign any of its rights; or
(ii)
transfer by novation any of its rights and obligations,
to another bank or financial institution (the “ New Lender ”) provided that the New Lender is a Qualifying Lender, as defined in
paragraph (a) Clause 15.1 ( Definitions ).
(b)
25.2
Any assignment or transfer by a Lender of its Commitment under this Clause 25 must be in a minimum amount of
€5,000,000.
Conditions of assignment or transfer
(a)
The consent of the Company (acting reasonably) is required for an assignment or transfer by a Lender, unless the
assignment or transfer is (a) to another Lender or an Affiliate of a Lender; or (b) made at a time when an Event of Default is
continuing.
(b)
The consent of the Company to an assignment or transfer must not be unreasonably withheld or delayed. The
Company will be deemed to have given its consent fifteen Business Days after the Lender has requested it unless consent is
expressly refused by the Company (acting reasonably) within that time.
(c)
The consent of the Company to an assignment or transfer must not be withheld solely because the assignment or
transfer may result in an increase to the Mandatory Cost.
(d)
An assignment will only be effective on receipt by the Facility Agent of written confirmation from the New Lender (in
form and substance satisfactory to the Facility Agent) that the New Lender will assume the same obligations to the other
Finance Parties as it would have been under if it was an Original Lender.
(e)
A transfer will only be effective if the procedure set out in Clause 25.5 ( Procedure for transfer ) is complied with. If
the Existing Lender’s Facility Commitment exceeds its Swingline Commitment the Existing Lender may transfer or assign its
Facility Commitment without transferring or assigning its Swingline Commitment until its Facility Commitment is equal to
its Swingline Commitment. Thereafter a transfer or assignment by that Existing Lender to a New Lender of its Commitment
shall only be effective if it transfers or assigns its share of each Facility pro rata.
51
(f)
The performance by the Agent of all “know your customer” or other checks relating to any person that it is required to
carry out in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the
Lender and the New Lender.
(g)
If:
(i)
a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility
Office; and
(ii)
as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be
obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 15 ( Tax
gross-up and indemnities ) or Clause 16 ( Increased Costs ),
then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the
same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or
change had not occurred.
25.3
Assignment or transfer fee
The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Facility Agent (for its own account) a
fee of €1,500 unless such assignment or transfer is to an Existing Lender or an Affiliate of the Existing Lender whereby no fee will be
payable.
25.4
Limitation of responsibility of Existing Lenders
(a)
Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no
responsibility to a New Lender for:
(i)
the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;
(ii)
the financial condition of any Obligor;
(iii)
the performance and observance by any Obligor of its obligations under the Finance Documents or any other
documents; or
(iv)
the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or
any other document,
and any representations or warranties implied by law are excluded.
(b)
Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
(i)
has made (and shall continue to make) its own independent investigation and assessment of the financial condition
and affairs of each Obligor and its related entities in connection with its participation in this Agreement
52
and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance
Document; and
(ii)
(c)
25.5
will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities
whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.
Nothing in any Finance Document obliges an Existing Lender to:
(i)
accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this
Clause 25; or
(ii)
support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any
Obligor of its obligations under the Finance Documents or otherwise.
Procedure for transfer
(a)
Subject to the conditions set out in Clause 25.2 ( Conditions of assignment or transfer ) a transfer is effected in
accordance with paragraph (b) below when the Facility Agent executes an otherwise duly completed Transfer Certificate
delivered to it by the Existing Lender and the New Lender. The Facility Agent shall, as soon as reasonably practicable after
receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement
delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.
(b)
On the Transfer Date:
(i)
to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and
obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from further
obligations towards one another under the Finance Documents and their respective rights against one another shall be
cancelled (being the “ Discharged Rights and Obligations ”);
(ii)
each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights
against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor and the New
Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;
(iii)
the Facility Agent, the Arranger, the New Lender and other Lenders shall acquire the same rights and assume the
same obligations between themselves as they would have acquired and assumed had the New Lender been an Original
Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the
Facility
53
Agent, the Arranger and the Existing Lender shall each be released from further obligations to each other under this
Agreement; and
(iv)
25.6
the New Lender shall become a Party as a “ Lender ”.
Disclosure of information
Any Lender may disclose to any of its Affiliates and any other person:
(a)
to (or through) whom that Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and
obligations under this Agreement;
(b)
with (or through) whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or
any other transaction under which payments are to be made by reference to, this Agreement or any Obligor; or
(c)
to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation,
any information about any Obligor, the Group and the Finance Documents as that Lender shall consider appropriate if, in relation to
paragraphs (a) and (b) above, the person to whom the information is to be given has entered into a Confidentiality Undertaking.
26.
#HANGES 4O 4HE /BLIGORS
26.1
Assignments and transfer by Obligors
No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.
54
SECTION 10
THE FINANCE PARTIES
27.
2OLE /F 4HE !GENTS !ND 4HE !RRANGER
27.1
Appointment of the Agents
(a)
Each of the Arranger and the Lenders appoints each Agent to act as its agent under and in connection with the Finance
Documents.
(b)
Each of the Arranger and the Lenders authorises each Agent to exercise the rights, powers, authorities and discretions
specifically given to it under or in connection with the Finance Documents together with any other incidental rights, powers,
authorities and discretions.
27.2
Duties of the Agents
(a)
Each Agent shall promptly forward to a Party the original or a copy of any document which is delivered to it for that
Party by any other Party.
(b)
If an Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the
circumstance described is a Default, it shall promptly notify the Lenders.
(c)
The Agents shall promptly notify the Lenders of any Default arising under Clause 24.1 ( Non-payment ).
(d)
Each Agent’s duties under the Finance Documents are solely mechanical and administrative in nature.
27.3
(a)
(b)
27.4
Notwithstanding any other term of this Agreement, the obligations of each Arranger under this Agreement are several;
the failure of any Arranger to perform such obligations shall not relieve any other Arranger of any of their respective
obligations or liabilities under this Agreement, nor shall any Arranger be responsible for the obligations of any other Arranger
under this Agreement.
No fiduciary duties
(a)
(b)
27.5
Role of the Arranger
Except as specifically provided in the Finance Documents, the Arranger has no obligations of any kind to any other
Party under or in connection with any Finance Document.
Nothing in this Agreement constitutes an Agent or the Arranger as a trustee or fiduciary of any other person.
No Agent nor the Arranger shall be bound to account to any Lender for any sum or the profit element of any sum
received by it for its own account.
Business with the Group
Each Agent and the Arranger may accept deposits from, lend money to and generally engage in any kind of banking or other business
with any member of the Group.
55
27.6
Rights and discretions of the Agents
(a)
Each Agent may rely on:
(i)
(ii)
(b)
(c)
(d)
27.7
any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and
any statement made by a director, authorised signatory or employee of any person regarding any matters which
may reasonably be assumed to be within his knowledge or within his power to verify.
Each Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that:
(i)
no Default has occurred (unless it has actual knowledge of a Default arising under Clause 24.1 ( Non-payment ));
(ii)
any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised; and
(iii)
any notice or request made by the Company (other than a Utilisation Request) is made on behalf of and with the
consent and knowledge of all the Obligors.
Each Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other
experts.
Each Agent may act in relation to the Finance Documents through its personnel and agents.
Majority Lenders’ instructions
(a)
Unless a contrary indication appears in a Finance Document, each Agent shall (a) act in accordance with any
instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from acting or exercising
any right, power, authority or discretion vested in it as Agent) and (b) not be liable for any act (or omission) if it acts (or
refrains from taking any action) in accordance with such an instruction of the Majority Lenders.
(b)
Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be
binding on all the Lenders and the Arranger.
(c)
Each Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the
Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT)
which it may incur in complying with the instructions.
(d)
In the absence of instructions from the Majority Lenders (or, if appropriate, the Lenders), each Agent may act (or
refrain from taking action) as it considers to be in the best interest of the Lenders.
56
(e)
27.8
No Agent is authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or
arbitration proceedings relating to any Finance Document.
Responsibility for documentation
No Agent nor the Arranger:
(a)
is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by
an Agent, the Arranger, an Obligor or any other person given in or in connection with any Finance Document or the
Information Package; or
(b)
is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other
agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance
Document.
27.9
27.10
Exclusion of liability
(a)
Without limiting paragraph (b) below, no Agent will be liable for any action taken by it under or in connection with
any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
(b)
No Party may take any proceedings against any officer, employee or agent of that Agent in respect of any claim it
might have against that Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to
any Finance Document and any officer, employee or agent of an Agent may rely on this Clause.
(c)
No Agent will be liable for any delay (or any related consequences) in crediting an account with an amount required
under the Finance Documents to be paid by it if that Agent has taken all necessary steps as soon as reasonably practicable to
comply with the regulations or operating procedures of any recognised clearing or settlement system used by it for that
purpose.
(d)
Nothing in this Agreement shall oblige the Agent or the Arranger to carry out any “know your customer” or other
checks in relation to any person on behalf of any Lender and each Lender confirms to the Agent and the Arranger that it is
solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such
checks made by the Agent or the Arranger.
Lenders’ indemnity to the Agents
Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the
Total Commitments immediately prior to their reduction to zero) indemnify each Agent, within three Business Days of demand, against
any cost, loss or liability incurred by that Agent (otherwise than by reason of that Agent’s gross negligence or wilful misconduct) in
acting as Agent under the Finance Documents (unless that Agent has been reimbursed by an Obligor pursuant to a Finance Document).
57
27.11
Resignation of the Agents
(a)
An Agent may resign and appoint one of its Affiliates acting through an office in the United Kingdom as successor by
giving notice to the Lenders and the Company.
(b)
Alternatively an Agent may resign by giving notice to the Lenders and the Company, in which case the Majority
Lenders (with the agreement of the Company, not to be unreasonably withheld) may appoint a successor Agent (acting in the
case of the Facility Agent through an office in the United Kingdom or, in the case of the Swingline Agent, the principal
financial centre of a Participating Member State or London).
(c)
If the Majority Lenders have not appointed a successor Agent in accordance with paragraph (b) above within 30 days
after notice of resignation was given, the retiring Agent (with the agreement of the Company, not to be unreasonably
withheld) may appoint a successor Agent (acting in the case of the Facility Agent through an office in the United Kingdom
or, in the case of the Swingline Agent, the principal financial centre of a Participating Member State or London).
(d)
The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and
provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent
under the Finance Documents.
(e)
An Agent’s resignation notice shall only take effect upon the appointment of a successor.
(f)
Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of
the Finance Documents but shall remain entitled to the benefit of this Clause 27. Its successor and each of the other Parties
shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original
Party.
(g)
After consultation with the Company, the Majority Lenders may, by notice to an Agent, require it to resign in
accordance with paragraph (b) above. In this event, the relevant Agent shall resign in accordance with paragraph (b) above.
27.12
Confidentiality
(a)
In acting as agent for the Finance Parties, each Agent shall be regarded as acting through its agency division which
shall be treated as a separate entity from any other of its divisions or departments.
(b)
If information is received by another division or department of an Agent, it may be treated as confidential to that
division or department and that Agent shall not be deemed to have notice of it.
(c)
Notwithstanding any other provision of any Finance Document to the contrary, neither Agent and no Arranger is
obliged to disclose to any other person (i) any
58
confidential information or (ii) any other information if the disclosure would or might in its reasonable opinion constitute a
breach of any law or a breach of a fiduciary duty.
27.13
Relationship with the Lenders
(a)
Each Agent may treat each Lender as a Lender, entitled to payments under this Agreement and acting through its
Facility Office unless it has received not less than five Business Days prior notice from that Lender to the contrary in
accordance with the terms of this Agreement.
(b)
Each Lender shall supply the Facility Agent with any information required by the Facility Agent in order to calculate
the Mandatory Cost in accordance with Schedule 4 ( Mandatory Cost formulae ).
27.14
Credit appraisal by the Lenders
Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance
Document, each Lender confirms to each Agent and the Arranger that it has been, and will continue to be, solely responsible for
making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document
including but not limited to:
(a)
27.15
the financial condition, status and nature of each member of the Group;
(b)
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement,
arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance
Document;
(c)
whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective
assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any
other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any
Finance Document; and
(d)
the adequacy, accuracy and/or completeness of the Information Package and any other information provided by an
Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by
the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of,
under or in connection with any Finance Document.
Reference Banks
If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Facility
Agent shall (in consultation with the Company) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.
28.
#ONDUCT /F "USINESS "Y 4HE &INANCE 0ARTIES
No provision of this Agreement will:
59
(a)
interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
(b)
oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent,
order and manner of any claim; or
(c)
oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in
respect of Tax.
29.
3HARING !MONG 4HE ,ENDERS
29.1
Payments to Lenders
If a Lender (a “ Recovering Lender ”) receives or recovers any amount from an Obligor other than in accordance with Clause 30 (
Payment mechanics ) and applies that amount to a payment due under the Finance Documents then:
(a)
the Recovering Lender shall, within three Business Days, notify details of the receipt or recovery to the Facility Agent;
(b)
the Facility Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Lender
would have been paid had the receipt or recovery been received or made by the Facility Agent and distributed in accordance
with Clause 30 ( Payment mechanics ), without taking account of any Tax which would be imposed on the Facility Agent in
relation to the receipt, recovery or distribution; and
(c)
the Recovering Lender shall, within three Business Days of demand by the Facility Agent, pay to the Facility Agent an
amount (the “ Sharing Payment ”) equal to such receipt or recovery less any amount which the Facility Agent determines
may be retained by the Recovering Lender as its share of any payment to be made, in accordance with Clause 30.5 ( Partial
payments ).
29.2
Redistribution of payments
The Facility Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance
Parties (other than the Recovering Lender) in accordance with Clause 30.5 ( Partial payments ).
29.3
Recovering Lender’s rights
(a)
On a distribution by the Facility Agent under Clause 29.2 ( Redistribution of payments ), the Recovering Lender will be
subrogated to the rights of the Finance Parties which have shared in the redistribution.
(b)
If and to the extent that the Recovering Lender is not able to rely on its rights under paragraph (a) above, the relevant
Obligor shall be liable to the
60
Recovering Lender for a debt equal to the Sharing Payment which is immediately due and payable.
29.4
Reversal of redistribution
If any part of the Sharing Payment received or recovered by a Recovering Lender becomes repayable and is repaid by that Recovering
Lender, then:
(a)
each Lender which has received a share of the relevant Sharing Payment pursuant to Clause 29.2 ( Redistribution of
payments ) shall, upon request of the Facility Agent, pay to the Facility Agent for account of that Recovering Lender an
amount equal to its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering
Lender for its proportion of any interest on the Sharing Payment which that Recovering Lender is required to pay); and
(b)
that Recovering Lender’s rights of subrogation in respect of any reimbursement shall be cancelled and the relevant
Obligor will be liable to the reimbursing Lender for the amount so reimbursed.
29.5
Exceptions
(a)
This Clause 29 shall not apply to the extent that the Recovering Lender would not, after making any payment pursuant
to this Clause, have a valid and enforceable claim against the relevant Obligor.
(b)
A Recovering Lender is not obliged to share with any other Lender any amount which the Recovering Lender has
received or recovered as a result of taking legal or arbitration proceedings, if:
(i)
(ii)
it notified the other Lenders of the legal or arbitration proceedings; and
the other Lender had an opportunity to participate in those legal or arbitration proceedings but did not do so as
soon as reasonably practicable having received notice or did not take separate legal or arbitration proceedings.
61
SECTION 11
ADMINISTRATION
30.
PAYMENT MECHANICS
30.1
Payments to the Agents
(a)
On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor
or Lender shall make the same available to the Facility Agent or the Swingline Agent (unless a contrary indication appears in
a Finance Document) for value on the due date at the time and in such funds specified by the relevant Agent as being
customary at the time for settlement of transactions in the relevant currency in the place of payment.
(b)
Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to
Euro, in the principal financial centre in a Participating Member State or London) with such bank as the relevant Agent
specifies.
30.2
Distributions by the Agents
Each payment received by the Facility Agent or the Swingline Agent under the Finance Documents for another Party shall, subject to
Clause 30.3 ( Distributions to an Obligor ) and Clause 30.4 ( Clawback ), be made available by the relevant Agent as soon as
practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the
account of its Facility Office), to such account as that Party may notify to the relevant Agent by not less than five Business Days’ notice
with a bank in the principal financial centre of the country of that currency (or, in relation to Euro, in the principal financial centre of a
Participating Member State or London).
30.3
Distributions to an Obligor
Each Agent may (with the consent of the Obligor or in accordance with Clause 31 ( Set-off )) apply any amount received by it for that
Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the
Finance Documents or in or towards purchase of any amount of any currency to be so applied.
30.4
Clawback
(a)
Where a sum is to be paid to an Agent under the Finance Documents for another Party, that Agent is not obliged to pay
that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its
satisfaction that it has actually received that sum.
(b)
If an Agent pays an amount to another Party and it proves to be the case that the relevant Agent had not actually
received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by that
Agent shall on demand refund the same to that Agent together with interest on that amount from the date of payment to the
date of receipt by that Agent, calculated by that Agent to reflect its cost of funds.
62
30.5
Partial payments
(a)
(b)
(c)
30.6
If an Agent receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor
under the Finance Documents, that Agent shall apply that payment towards the obligations of that Obligor under the Finance
Documents in the following order:
(i)
first , in or towards payment pro rata of any unpaid fees, costs and expenses of the Agents or the Arranger under
the Finance Documents;
(ii)
secondly , in or towards payment pro rata of any accrued interest or commission due but unpaid under this
Agreement;
(iii)
thirdly , in or towards payment pro rata of any principal due but unpaid under this Agreement; and
(iv)
fourthly , in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.
The Facility Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv)
above.
Paragraphs (a) and (b) above will override any appropriation made by an Obligor.
No set-off by Obligors
All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of
any deduction for) set-off or counterclaim.
30.7
Business Days
(a)
Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in
the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b)
During any extension of the due date for payment of any principal or an Unpaid Sum under this Agreement interest is
payable on the principal or Unpaid Sum at the rate payable on the original due date.
30.8
Currency of account
(a)
Subject to paragraphs (b) to (e) below, the Base Currency is the currency of account and payment for any sum due from
an Obligor under any Finance Document.
(b)
A repayment of a Loan or Unpaid Sum or a part of a Loan or Unpaid Sum shall be made in the currency in which that
Loan or Unpaid Sum is denominated on its due date.
(c)
Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was
denominated when that interest accrued.
63
(d)
Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or
Taxes are incurred.
(e)
30.9
Change of currency
(a)
(b)
31.
Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.
Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the
central bank of any country as the lawful currency of that country, then:
(i)
any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the
currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by
the Facility Agent (acting reasonably and after consultation with the Company); and
(ii)
any translation from one currency or currency unit to another shall be at the official rate of exchange recognised
by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the
Facility Agent (acting reasonably and after consultation with the Company).
If a change in any currency of a country occurs, this Agreement will, to the extent the Facility Agent (acting reasonably
and after consultation with the Company) specifies to be necessary, be amended to comply with any generally accepted
conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.
SET-OFF
While an Event of Default is continuing, a Finance Party may set off any matured obligation due from an Obligor under the Finance
Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that
Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different
currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose
of the set-off.
32.
NOTICES
32.1
Communications in writing
Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise
stated, may be made by fax or letter.
32.2
Addresses
The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party
for any communication or document to be made or delivered under or in connection with the Finance Documents is:
64
(a)
(b)
in the case of the Company or any other Obligor, that identified with its name below;
in the case of each Lender, that notified in writing to the Facility Agent on or prior to the date on which it becomes a
Party; and
(c)
in the case of each Agent, that identified with its name below,
or any substitute address or fax number or department or officer as the Party may notify to the Facility Agent (or the Facility Agent
may notify to the other Parties, if a change is made by the Facility Agent) by not less than five Business Days’ notice.
32.3
Delivery
(a)
Any communication or document made or delivered by one person to another under or in connection with the Finance
Documents will only be effective:
(i)
(ii)
if by way of fax, when received in legible form; or
if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the
post postage prepaid in an envelope addressed to it at that address,
and, if a particular department or officer is specified as part of its address details provided under Clause 32.2 ( Addresses ), if addressed
to that department or officer.
(b)
Any communication or document to be made or delivered to an Agent will be effective only when actually received by
that Agent and then only if it is expressly marked for the attention of the department or officer identified with the relevant
Agent’s signature below (or any substitute department or officer as the relevant Agent shall specify for this purpose).
(c)
All notices from or to an Obligor shall be sent through the Facility Agent or, where appropriate, the relevant Swingline
Agent and copied to the Facility Agent.
(d)
Any communication or document made or delivered to the Company in accordance with this Clause will be deemed to
have been made or delivered to each of the Obligors.
32.4
Notification of address and fax number
Promptly upon receipt of notification of an address and fax number or change of address and fax number pursuant to Clause 32.2 (
Addresses ) or changing its own address and fax number, the Facility Agent shall notify the other Parties.
32.5
English language
(a)
Any notice given under or in connection with any Finance Document must be in English.
65
(b)
All other documents provided under or in connection with any Finance Document must be:
(i)
(ii)
in English; or
if not in English, and if so required by the Facility Agent, accompanied by a certified English translation and, in
this case, the English translation will prevail unless the document is a constitutional, statutory or other official
document.
33.
CALCULATIONS AND CERTIFICATES
33.1
Accounts
In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts
maintained by a Finance Party are prima facie evidence of the matters to which they relate.
33.2
Certificates and Determinations
Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest
error, conclusive evidence of the matters to which it relates.
33.3
Day count convention
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the
actual number of days elapsed and a year of in the case of Sterling, 365 days, in the case of any other currency 360 days or, in any case
where the practice in the Relevant Interbank Market differs, in accordance with that market practice.
34.
PARTIAL INVALIDITY
If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of
any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of
such provision under the law of any other jurisdiction will in any way be affected or impaired.
35.
REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents
shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the
exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.
36.
AMENDMENTS AND WAIVERS
36.1
Required consents
(a)
Subject to Clause 36.2 ( Exceptions ) any term of the Finance Documents may be amended or waived
66
only with the consent of the Majority Lenders and the Obligors and any such amendment or waiver will be binding on all
Parties.
(b)
36.2
The Facility Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause.
Exceptions
(a)
An amendment or waiver that has the effect of changing or which relates to:
(i)
the definition of “ Majority Lenders ” in Clause 1.1 ( Definitions );
(ii)
an extension to the date of payment of any amount under the Finance Documents;
(iii)
a reduction in the Margin or the amount of any payment of principal, interest, fees or commission payable;
(iv)
an increase in Commitment;
(v)
a change to the Borrowers or Guarantors;
(vi)
any provision which expressly requires the consent of all the Lenders;
(vii)
Clause 2.2 ( Lenders’ rights and obligations ), Clause 25 ( Changes to the Lenders ) or this Clause 36; or
(viii)
any extension of an Availability Period,
shall not be made without the prior consent of all the Lenders.
(b)
37.
An amendment or waiver which relates to the rights or obligations of the Facility Agent or the Arranger may not be
effected without the consent of the Facility Agent or the Arranger.
COUNTERPARTS
Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the
counterparts were on a single copy of the Finance Document.
67
SECTION 12
GOVERNING LAW AND ENFORCEMENT
38.
GOVERNING LAW
This Agreement is governed by English law.
39.
ENFORCEMENT
39.1
Jurisdiction of English courts
(a)
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this
Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a “ Dispute ”).
(b)
The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and
accordingly no Party will argue to the contrary.
(c)
This Clause 39.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from
taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance
Parties may take concurrent proceedings in any number of jurisdictions.
39.2
Service of process
Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in
England and Wales):
(a)
irrevocably appoints Finance PLC, at its registered office for the time being, (being at the date hereof at 1 Queen
Caroline Street, London W6 9HQ), to act as its agent to accept service of process in relation to any proceedings before the
English courts in connection with any Finance Document; and
(b)
agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings
concerned.
This Agreement has been entered into on the date stated at the beginning of this Agreement.
68
SCHEDULE 1
THE ORIGINAL PARTIES
Part I
The Obligors
Name of Borrower
Registration number (or equivalent, if any)
COCA-COLA HBC FINANCE B.V. (having its corporate seat in Amsterdam)
COCA-COLA HBC FINANCE PLC
Name of Guarantor
34154633
4197906
Registration number (or equivalent, if any)
COCA-COLA HBC FINANCE B.V. (having its corporate seat in Amsterdam)
COCA-COLA HBC FINANCE PLC
COCA-COLA HELLENIC BOTTLING COMPANY S.A.
69
34154633
4197906
13630-06-B-86-49
Part II
The Original Lenders
Name of Original Lender
Commitment (Euro)
Citibank, N.A., London Branch
76,000,000
Deutsche Bank AG, London Branch
76,000,000
Credit Suisse
76,000,000
HSBC Bank plc
76,000,000
ING Bank N.V. Dublin Branch
76,000,000
ABN AMRO Bank N.V.
40,000,000
Alpha Bank A.E.
40,000,000
Bank of America, N.A.
40,000,000
JPMorgan Chase Bank, N.A.
40,000,000
The Governor and Company of the Bank of Ireland
30,000,000
Raiffeisen Zentralbank Oesterreich AG
30,000,000
600,000,000
70
Part III
The Original Swingline Lenders
Name of Original Swingline Lender
Swingline Commitment
(Euro)
Citibank, N.A., London Branch
33,500,000
Deutsche Bank AG, London Branch
33,500,000
Credit Suisse
33,500,000
HSBC Bank plc
33,500,000
ING Bank N.V. Dublin Branch
33,500,000
ABN AMRO Bank N.V.
17,500,000
Alpha Bank A.E.
17,500,000
Bank of America, N.A.
17,500,000
JPMorgan Chase Bank, N.A.
17,500,000
The Governor and Company of the Bank of Ireland
12,500,000
Raiffeisen Zentralbank Oesterreich AG
0
€
71
250,000,000
Part IV
The Material Subsidiaries
Name of Material Subsidiary
3E (Cyprus) Limited
CC Beverages Holdings II B.V.
Coca-Cola Bevande Italia S.r.l.
Coca-Cola Beverages Holdings Limited
Coca-Cola Molino Beverages Limited
Jayce Enterprises Limited
LLC Coca-Cola HBC Eurasia
Star Bottling Limited
Coca-Cola Beverages A.G.
Coca-Cola HBC Romania Ltd
Coca- Cola Beverages Polska sp.zo.o.
Nigerian Bottling Company plc
Coca-Cola Beverages Austria GmbH
Coca-Cola Bottling Company (Dublin) Limited
Molino Beverages Holding S.a.r.l.
Molino Soft Drinks Holding S.a.r.l.
72
SCHEDULE 2
CONDITIONS PRECEDENT
CONDITIONS PRECEDENT TO INITIAL UTILISATION
1.
Obligors
(a)
(b)
A copy of the constitutional documents of each Obligor.
A copy of the articles of association ( statuten ) and of each Dutch Obligor as well as an extract ( uittreksel ) from the
relevant Chamber of Commerce ( Kamer van Koophandel ) of such Dutch Obligor(s).
(c)
A copy of a resolution of the board of directors of each Obligor:
(i)
(ii)
(iii)
(d)
(e)
approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and
resolving that it execute the Finance Documents to which it is a party;
authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and
authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices
(including any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance
Documents to which it is a party.
A copy of the resolution of the shareholders of each Dutch Obligor approving the resolutions of the board of managing
directors and the transactions contemplated thereby and appointing an authorised person to represent the relevant Dutch
Obligor in case of a conflict of interest.
A specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above.
(f)
A specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above in relation
to the Finance Documents and such other evidence as may be required to ensure that the Finance Parties are in compliance
with the Wet Identificatie Financiële Dienstverlening .
(g)
A copy of a resolution signed by all the holders of the issued shares in Finance PLC, approving the terms of, and the
transactions contemplated by, the Finance Documents to which Finance PLC is a party.
(h)
A certificate of the Company (signed by a director or any other authorised signatory of the Company) confirming that
borrowing or guaranteeing, as appropriate, the aggregate Commitments of the Lenders would not cause any borrowing,
guaranteeing or similar limit binding on any Obligor to be exceeded.
(i)
A certificate of the relevant Obligor (signed by a director or any other authorised signatory) certifying that each copy
document relating to it specified
73
in this Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
2.
Legal opinions
(a)
A legal opinion of Clifford Chance LLP, legal advisers to the Arranger and the Facility Agent in England, substantially
in the form distributed to the Original Lenders prior to signing this Agreement.
(b)
A legal opinion of Clifford Chance LLP, legal advisers to the Arranger and the Facility Agent in The Netherlands,
substantially in the form distributed to the Original Lenders prior to signing this Agreement.
(c)
A legal opinion of Moratis, Passas, legal advisers to the Arranger and the Facility Agent in the Republic, substantially
in the form distributed to the Original Lenders prior to signing this Agreement.
3.
Other documents and evidence
(a)
Evidence that any process agent referred to in Clause 39.2 ( Service of process ) has accepted its appointment.
(b)
A copy of any other Authorisation or other document, opinion or assurance which the Facility Agent considers to be
necessary or desirable in connection with the entry into and performance of the transactions contemplated by any Finance
Document or for the validity and enforceability of any Finance Document, and in respect of which the Facility Agent has
notified the Company prior to the date of this Agreement.
(c)
The Original Financial Statements.
(d)
Evidence that the fees, costs and expenses then due from the Company and the Borrowers pursuant to Clause 14 ( Fees
) and Clause 19 ( Costs and expenses ) have been paid or will be paid by the first Utilisation Date.
(e)
Confirmation from HSBC Investment Bank plc in its capacity as facility agent under the Existing Facility that no loan
is outstanding under the Existing Facility, together with a copy of an irrevocable notice given by the Company to HSBC
Investment Bank plc in its capacity as facility agent under the Existing Facility cancelling the Existing Facility in full.
74
SCHEDULE 3
UTILISATION REQUESTS
Part I
From:
[Coca-Cola HBC Finance B.V./Coca-Cola HBC Finance PLC]
To:
Deutsche Bank AG, London Branch as Facility Agent
Dated:
Dear Sirs
Coca-Cola Hellenic Bottling Company S.A. - €600,000,000 Facilities Agreement
dated 1 August 2005 (the “Facilities Agreement”)
1.
We wish to borrow a Loan on the following terms:
Proposed Utilisation Date:
2.
[•] (or, if that is not a Business Day, the next Business Day)
Currency of Loan:
[•]
Amount:
[•] or, if less, the Available Facility (or, if the amount requested is an
Optional Currency, its equivalent in the Optional Currency).
Interest Period:
[•]
We confirm that each condition specified in Clause 4.2 ( Further conditions precedent ) is satisfied on the date of this Utilisation
Request.
3.
The proceeds of this Loan should be credited to [account].
4.
This Utilisation Request is irrevocable.
Yours faithfully
authorised signatory for
[name of relevant Borrower]
75
Part II
Utilisation Requests
Swingline Loans
From:
[Coca-Cola HBC Finance B.V./Coca-Cola HBC Finance PLC]
To:
[Swingline Agent]
cc:
Deutsche Bank AG, London Branch as Facility Agent
Dated:
Dear Sirs
Coca-Cola Hellenic Bottling Company S.A. - €600,000,000
Facilities Agreement dated 1 August 2005 (The “Facilities Agreement”)
1.
We wish to borrow a Swingline Loan on the following terms:
Proposed Utilisation Date:
[•] [(or, if that is not a TARGET Day, the next TARGET Day]**
Facility to be utilised:
[Swingline Facility]**
Amount:
[Euro]** [•] or, if less, the Available Facility
Interest Period:
[•]
2.
We confirm that each condition specified in paragraph (b) of Clause 6.4 ( Swingline Lenders participation ) is satisfied on the
date of this Utilisation Request.
3.
The proceeds of this Swingline Loan should be credited to [account].
4.
This Utilisation Request is irrevocable.
Yours faithfully
authorised signatory for
[ name of relevant Borrower ]
76
3#(%$5,% _
MANDATORY COST FORMULAE
1.
The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements
of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its
functions) or (b) the requirements of the European Central Bank.
2.
On the first day of each Interest Period (or as soon as possible thereafter) the Facility Agent shall calculate, as a percentage rate, a
rate (the “ Additional Cost Rate ”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be
calculated by the Facility Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage
participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.
3.
The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage
notified by that Lender to the Facility Agent as the cost of complying with the minimum reserve requirements of the European Central
Bank.
4.
The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Facility
Agent as follows:
(a)
in relation to a Sterling Loan:
per cent. per annum
(b)
in relation to a Loan in any currency other than Sterling:
per cent. per annum.
Where:
A
is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from
time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio
requirements.
B
is the percentage rate of interest (excluding the Margin and the Mandatory Cost) payable for the relevant Interest Period
on the Loan.
C
is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest
bearing Special Deposits with the Bank of England.
D
is the percentage rate per annum payable by the Bank of England to the Facility Agent on interest bearing
Special Deposits.
77
E
5.
is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Facility Agent as being
the average of the most recent rates of charge supplied by the Reference Banks to the Facility Agent pursuant to paragraph 7
below and expressed in pounds per £1,000,000.
For the purposes of this Schedule:
(a)
“ Eligible Liabilities ” and “ Special Deposits ” have the meanings given to them from time to time under or pursuant to the
Bank of England Act 1998 or (as may be appropriate) by the Bank of England;
(b)
“ Fees Rules ” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as
may be in force from time to time in respect of the payment of fees for the acceptance of deposits; and
(c)
“ Fee Tariffs ” means the fee tariffs specified in the Fee Rules under the activity group A.1 Deposit acceptors (ignoring any
minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and
(d)
“ Tariff Base ” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.
6.
In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in
the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal places.
7.
If requested by the Facility Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services
Authority, supply to the Facility Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant
to the Fees Rules in respect of the Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that
financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.
8.
Each Lender shall supply any information required by the Facility Agent for the purpose of calculating its Additional Cost Rate. In
particular, but without limitation, each Lender shall supply the following information in writing on or prior to the date on which it
becomes a Lender:
(a)
its jurisdiction of incorporation and the jurisdiction of its Facility Office; and
(b)
any other information that the Facility Agent may reasonably require for such purpose.
Each Lender shall promptly notify the Facility Agent in writing of any change to the information provided by it pursuant to this
paragraph.
9.
The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E
above shall be determined by the Facility Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above
78
and on the assumption that, unless a Lender notifies the Facility Agent to the contrary, each Lender's obligations in relation to cash
ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office
in the same jurisdiction as its Facility Office.
10.
The Facility Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under
compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to
paragraphs 3, 7 and 8 above is true and correct in all respects.
11.
The Facility Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the
Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to
paragraphs 3, 7 and 8 above.
12.
Any determination by the Facility Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost
Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.
13.
The Facility Agent may from time to time, after consultation with the Company and the Lenders, determine and notify to all Parties
any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any
requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in
any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest
error, be conclusive and binding on all Parties.
79
3#(%$5,% _
FORM OF TRANSFER CERTIFICATES
Part I
To:
Deutsche Bank AG, London Branch as Facility Agent
From:
[The Existing Lender] (the “ Existing Lender ”) and [The New Lender] (the “ New Lender ”)
Dated:
Coca-Cola Hellenic Bottling Company S.A. - €600,000,000 Facilities Agreement
dated 1 August 2005 (the “Facilities Agreement”)
1.
We refer to Clause 25.5 ( Procedure for transfer):
(a)
The Existing Lender and the New Lender agree to the Existing Lender and the New Lender transferring by novation all or
part of the Existing Lender's Commitment, rights and obligations referred to in the Schedule in accordance with Clause 25.5 (
Procedure for transfer).
(b)
The proposed Transfer Date is [•].
(c)
The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause
32.2 ( Addresses) are set out in the Schedule.
2.
The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in paragraph (c) of Clause 25.4 (
Limitation of responsibility of Existing Lenders).
3.
The New Lender hereby represents and warrants to the Dutch Borrower that (i) it is a PMP and (ii) it is aware that it does not benefit
from the (creditor) protection offered by the Dutch Banking Act when lending monies to persons or entities which are subject to the
prohibition of Section 82 of the Dutch Banking Act.
4.
This Transfer Certificate is governed by English law.
80
THE SCHEDULE
Commitment/rights and obligations to be transferred
[ insert relevant details ]
[Facility Office address, fax number and attention details for notices and account details for payments.]
[Existing Lender]
[New Lender]
By:
By:
This Transfer Certificate is accepted by the Facility Agent and the Transfer Date is confirmed as [•].
Deutsche Bank AG, London Branch
By:
81
Part II
LMA Transfer Certificate (PAR)
BANK:
Date:
TRANSFEREE:
This Transfer Certificate is entered into pursuant to (i) the agreement (the “ Sale Agreement ”) evidenced by the Confirmation dated [•]
between the Bank and the Transferee (acting directly or through their respective agents) and (ii) the Credit Agreement.
On the Transfer Date, the transfer by way of novation from the Bank to the Transferee on the terms set out herein and in the Credit Agreement
shall become effective subject to:
(a)
the Sale Agreement and the terms and conditions incorporated in the Sale Agreement;
(b)
the terms and conditions annexed hereto; and
(c)
the schedule annexed hereto,
all of which are incorporated herein by reference.
The Bank
The Transferee
[•]
[•]
By:
By:
82
The Schedule
Credit Agreement Details:
Borrower(s):
Credit Agreement Dated:
Guarantor(s):
Agent Bank:
Security:
Total Facility Amount:
Governing Law:
Additional Information:
Transfer Details:
Nature (Revolving, Term, Acceptances
Guarantee/Letter of Credit, Other):
Final Maturity:
Participation Transferred:
Commitment Transferred:
Drawn Amount (details below): ( 1)
No
Undrawn Amount:
Settlement Date:
Details of outstanding Credits(1)
Specify in respect of each Credit:
Transferred Portion (amount):
Facility:
Nature:
Yes (specify)
Term
Revolver
Guarantee/Letter of Credit
Details of other Credits are set out on the attached sheet
Administration Details
Bank's Receiving Account:
Transferee's Receiving Account:
Addresses
Bank
[•]
Address:
Telephone:
Facsimile:
Telex:
Attn/Ref:
Transferee
[•]
Address:
Telephone:
Facsimile:
Telex:
Attn/Ref:
(1) As at the date of the Transfer Certificate
83
Acceptance
Other (specify)
TERMS AND CONDITIONS
These are the Terms and Conditions applicable to the transfer certificate including the Schedule thereto (the “ Transfer Certificate ”) to which
they are annexed.
1.
Interpretation
In these Terms and Conditions words and expressions shall (unless otherwise expressly defined herein) bear the meaning given to them
in the Transfer Certificate, the Credit Agreement or the Sale Agreement.
2.
Transfer
The Bank requests the Transferee to accept and procure the transfer by novation of all or a part (as applicable) of such participation of
the Bank under the Credit Agreement as is set out in the relevant part of the Transfer Certificate under the heading “ Participation
Transferred ” (the “ Purchased Assets ”) by counter-signing and delivering the Transfer Certificate to the Facility Agent at its address
for the service of notice specified in the Credit Agreement. On the Transfer Date the Transferee shall pay to the Bank the Settlement
Amount as specified in the pricing letter between the Bank and the Transferee dated the date of the Transfer Certificate (adjusted, if
applicable, in accordance with the Sale Agreement) and completion of the transfer will take place.
3.
Effectiveness of Transfer
The Transferee hereby requests the Facility Agent to accept the Transfer Certificate as being delivered to the Facility Agent pursuant to
and for the purposes of the Credit Agreement so as to take effect in accordance with the terms of the Credit Agreement on the Transfer
Date or on such later date as may be determined in accordance with the terms thereof.
4.
Transferee’s Undertaking
The Transferee hereby undertakes with the Facility Agent and the Bank and each of the other parties to the Credit Documentation that it
will perform in accordance with its terms all those obligations which by the terms thereof will be assumed by it after delivery of the
Transfer Certificate to the Facility Agent and satisfaction of the conditions (if any) subject to which the Transfer Certificate is to take
effect.
5.
Payments
5.1
Place
All payments by either party to the other under the Transfer Certificate shall be made to the Receiving Account of that other
party. Each party may designate a different account as its Receiving Account for payment by giving the other not less than five
Business Days notice before the due date for payment.
84
5.2
Funds
Payments under the Transfer Certificate shall be made in the currency in which the amount is denominated for value on the due date at
such times and in such funds as are customary at the time for settlement of transactions in that currency.
6.
The Facility Agent
The Facility Agent shall not be required to concern itself with the Sale Agreement and may rely on the Transfer Certificate without
taking account of the provisions of such agreement.
7.
Assignment of Rights
The Transfer Certificate shall be binding upon and enure to the benefit of each party and its successors and permitted assigns provided
that neither party may assign or transfer its rights thereunder without the prior written consent of the other party.
8.
Governing Law and Jurisdiction
The Transfer Certificate (including, without limitation, these Terms and Conditions) shall be governed by and construed in accordance
with the laws of England, and the parties submit to the non-exclusive jurisdiction of the English courts.
Each party irrevocably appoints the person described as process agent (if any) specified in the Sale Agreement to receive on its behalf
service of any action, suit or other proceedings in connection with the Transfer Certificate. If any person appointed as process agent
ceases to act for any reason the appointing party shall notify the other party and shall promptly appoint another person incorporated
within England and Wales to act as its process agent.
85
3#(%$5,% _
&ORM /F #OMPLIANCE #ERTIFICATE
To:
Deutsche Bank AG, London Branch as Facility Agent
From:
Coca-Cola Hellenic Bottling Company S.A.
Dated:
Dear Sirs
Coca-Cola Hellenic Bottling Company S.A. - Euro 600,000,000 Facilities Agreement
dated [  ] 2005 (the “Facilities Agreement”)
9.
We refer to the Facilities Agreement. This is a Compliance Certificate. Terms defined in the Facilities Agreement have the same
meaning in this Compliance Certificate.
We confirm that as at [  ], the following Subsidiaries are Material Subsidiaries:
10.
[  ].
11.
[We confirm that no Default is continuing.] *
Signed:
Director of [ Company ]
Director of [ Company ]
[ insert applicable certification language ]
for and on behalf of
[name of auditors of the Company]
*
If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy
it.
86
3#(%$5,% _
%XISTING 3ECURITY
Name of Member of Group
Total Principal Amount of
Indebtedness Secured
Security
NIL
87
3#(%$5,% _
TIMETABLES
Part I
Non-Swingline Loans
“D-
” refers to the number of Business Days before the relevant Utilisation Date/the first day of the relevant Interest Period.
Loans in Euro
Loans in
Sterling
Loans in other
currencies
Request for approval as an Optional
Currency, if required (Clause 4.3 ( Conditions
relating to Optional Currencies))
N/A
N/A
D-5
10:00 a.m.
Facility Agent notifies the Lenders of the
request (Clause 4.3 ( Conditions relating to
Optional Currencies))
N/A
N/A
D-5
3:00 p.m.
Responses by Lenders to the request (Clause
4.3 ( Conditions relating to Optional
Currencies))
N/A
N/A
D-4
1:00 p.m.
Facility Agent notifies the Company if a
currency is approved as an Optional Currency
in accordance with Clause 4.3 ( Conditions
relating to Optional Currencies)
N/A
N/A
D-4
5:00 p.m.
Delivery of a duly completed Utilisation
Request (Clause 5.1 (Delivery of a Utilisation
Request)) or a Selection Notice (Clause 12.1 (
Selection of Interest Periods))
D-2
8.30 a.m.
D-1
10:00 a.m.
D-3
10:00 a.m.
88
Loans in
Sterling
Loans in other
currencies
N/A
D-1
11:00 a.m.
D-3
11:00 a.m.
D-2
9.30 a.m.
D-1
1.00 p.m.
D-3
1.00 p.m.
Facility Agent receives a notification from a
Lender under Clause 8.2 ( Unavailability of a
currency)
N/A
D-1
3.00 p.m.
D-3
3:00 p.m.
Facility Agent gives notice in accordance
with Clause 8.2 ( Unavailability of a
currency)
N/A
D-1
5:00 p.m.
D-3
5:00 p.m.
Facility Agent gives notice in accordance
with Clause 30.9 ( Change of Currency)
N/A
D-1
11:00 a.m.
D-3
11:00 a.m.
Quotation Day as of 11:00
a.m. London time)
Quotation Day as of
11:00 a.m.
Quotation Day as of 11:00 a.m.
Loans in Euro
Facility Agent determines (in relation to a
Utilisation) the Base Currency Amount of the
Loan, if required under Clause 5.4 ( Lenders’
participation)
Facility Agent notifies the Lenders of the
Loan in accordance with Clause 5.4 (
Lenders’ participation)
LIBOR is fixed
89
Part II
Swingline Loans
“ D ” - refers to the number of Business Days before the relevant Utilisation Date/the first day of the relevant Interest Period.
Loans in Euro
Delivery of a duly completed
Utilisation Request under Clause
6.2 ( Delivery of a Utilisation
Request for Swingline Loans)
D
10.00 a.m.
(London time)
Swingline Agent notifies each
Swingline Lender of the amount
of its participation in the
Swingline Loan under Clause 6.4
( Swingline Lenders
participation)
D
11:00 a.m.
(London time)
Swingline Agent determines rate
for same day Euro under Clause
7.3 ( Interest)
D
12.00 a.m.
(London time)
90
3#(%$5,% _
DISCLOSURE
1.
The Greek Competition Authority issued a decision on January 25, 2002, imposing a fine on the Company of approximately €2.9
million for certain discount and rebate practices and requiring changes to its commercial practices with respect to placing coolers in
certain locations and lending them free of charge. The fine related to its commercial dealings with certain wholesalers during the period
from 1991 to 1999. On March 27, 2002, the Company appealed this decision before the Athens Administrative Court of Appeal. The
complainants in the initial proceedings before the Greek Competition Authority also filed a counter appeal against the Greek
Competition Authority’s decision, challenging the dismissal of part of their complaints by such authority. On June 16, 2004, the Athens
Administrative Court of Appeal issued its decision partly upholding the Company’s appeal. In particular, the Court of Appeal decided
to reduce the amount of the fine to €1.8 million and upheld the required changes to the Company’s commercial practices with respect to
coolers. The counter appeals filed against the Company were rejected. In relation to this court decision, one of the Company’s
competitors has filed a lawsuit against us claiming €7.7 million in compensation for damages which he allegedly sustained as a result of
the commercial practices of the Company described above. At present it is not possible to predict the outcome of this lawsuit or
quantify the likelihood or materiality of any potential liability arising from it. On June 29, 2005, the Greek Competition Authority
requested the Company to provide information regarding its commercial practices as a result of a complaint by a third party regarding
its level of compliance with its decision of January 25, 2002. At this time the Company cannot predict if the Greek Competition
Authority will take any further action. In its decision dated January 25, 2002, the Greek Competition Authority indicated that it also
intends to review the Company’s commercial practices in the future consumption channel and with key accounts in Greece. To date, the
Company has received no further notification from the Greek Competition Authority with respect to this review. It is not possible to
predict the outcome of this review or to quantify the likelihood or materiality of any potential liability arising from this proceeding as
far as it relates to the Company’s commercial practices in the future consumption channel and with key accounts in Greece.
2.
Local authorities in Romania have argued that a classification different from the classification which the Company currently uses
should apply. As a result of such different classification, the Company would be required to pay additional customs
duties retroactively for past imports of concentrate as well as for all future imports. Since November 2001, the Company has won 20
cases in the Romanian courts brought against it by the Romanian customs authorities. However, in October 2003, the Romanian
Supreme Court ruled against the Company position in one decision, resulting in a judgment of approximately €2.1 million in customs
duties, associated VAT and penalties. There are a number of additional cases relating to concentrate classification pending before the
Romanian courts. It is not possible to quantify the likelihood or materiality of any potential liability arising from these legal
proceedings due to the legal uncertainty surrounding customs duties in Romania.
91
3.
In March 2002, the Lagos State Government applied to the High Court of the State of Lagos for an injunction against Nigerian
Bottling Company plc, or NBC, the Company’s operating subsidiary in Nigeria, seeking payment from NBC of approximately €4
million in arrears of sales tax for the period from January to May 2001, inclusive of a 5% penalty for alleged late payment. The initial
hearing of this case was held on April 16, 2003. The case continues. In July 2001, the Manufacturers Association of Nigeria, or the
MAN, on behalf of its members separately challenged the constitutionality of the law, which introduced the sales tax in 2000 before the
High Court of the State of Lagos. In November, 2003, the High Court of the State of Lagos ruled in favour of the Lagos State
Government, denying relief, in part, by declaring the Lagos Sales Tax Law valid only in respect of intra state trade while the federal
VAT Law was declared valid only for inter state trade. The MAN has appealed the ruling of the High Court of the State of Lagos to the
Federal Court of Appeal. NBC is a member of the MAN. If the outcome of these proceedings is unfavourable to NBC, other Nigerian
states may decide to impose a similar sales tax on sales of its products. No hearing has commenced yet in respect of the appeal.
92
SIGNATURES
The Company
COCA-COLA HELLENIC BOTTLING COMPANY S.A.
Address:
9, Fragoklissias Street
Marousi
15125 Athens
Greece
Fax No:
+30 10 6195 515
Attention:
Chris Nolan
By: CHRIS NOLAN
Seal of Coca-Cola Hellenic Bottling Company S.A. attached in the presence of SUSAN DAVIES
Signed at: 4 Castle Row
London
W4 4JQ
The Borrowers
COCA-COLA HBC FINANCE B.V.
Address:
Watermanweg 20-36
3067 GG Rotterdam
The Netherlands
By: CHRIS NOLAN
Seal of Coca-Cola HBC Finance B.V. attached in the presence of SUSAN DAVIES
Signed at: 4 Castle Row
London
W4 4JQ
With a copy to:
Coca-Cola Hellenic Bottling Company S.A.
Address:
9, Fragoklissias Street
93
Marousi
15125 Athens
Greece
Fax No:
+30 10 6195 515
Attention:
Chris Nolan
COCA-COLA HBC FINANCE PLC
Address:
1 Queen Caroline Street
London W6 9HQ
By: CHRIS NOLAN
Seal of Coca-Cola HBC Finance PLC attached in the presence of SUSAN DAVIES
Signed at: 4 Castle Row
London
W4 4JQ
With a copy to :
Coca-Cola Hellenic Bottling Company S.A.
Address:
9, Fragoklissias Street
Marousi
15125 Athens
Greece
Fax No:
+30 10 6195 515
Attention:
Chris Nolan
The Guarantors
COCA-COLA HBC FINANCE B.V.
Address:
Watermanweg 20-36
3067 GG Rotterdam
The Netherlands
By: CHRIS NOLAN
Seal of Coca-Cola HBC Finance B.V. attached in the presence of SUSAN DAVIES
94
Signed at: 4 Castle Row
London
W4 4JQ
With a copy to :
Coca-Cola Hellenic Bottling Company S.A.
Address:
9, Fragoklissias Street
Marousi
15125 Athens
Greece
Fax No:
+30 10 6195 515
Attention:
Chris Nolan
COCA-COLA HBC FINANCE PLC
Address:
1 Queen Caroline Street
London W6 9HQ
By: CHRIS NOLAN
Seal of Coca-Cola HBC Finance PLC attached in the presence of SUSAN DAVIES
Signed at: 4 Castle Row
London
W4 4JQ
With a copy to :
Coca-Cola Hellenic Bottling Company S.A.
Address:
9, Fragoklissias Street
Marousi
15125 Athens
Greece
Fax No:
+30 10 6195 515
Attention:
Chris Nolan
COCA-COLA HELLENIC BOTTLING COMPANY S.A.
95
Address:
9, Fragoklissias Street
Marousi
15125 Athens
Greece
Fax No:
+30 10 6195 515
Attention:
Chris Nolan
By: CHRIS NOLAN
Seal of Coca-Cola Hellenic Bottling Company S.A. attached in the presence of SUSAN DAVIES
Signed at: 4 Castle Row
London
W4 4JQ
The Arrangers
DEUTSCHE BANK AG
By: KARL-HEINZ HENWICK
PIERRE GOFFIN
CITIGROUP GLOBAL MARKETS LIMITED
By: CHRISTOPHER ROGER BENHAM
as attorney
The Original Lenders
For the purpose of the Dutch Banking Act, each Lender expressly confirms the representations given by it in Clause 21.20 ( PMP
Representations-Lenders ).
CITIBANK, N.A., LONDON BRANCH
By: ELIZABETH ANN MACADIE
CHRISTOPHER ROGER BENHAM
as attorney
as attorney
96
DEUTSCHE BANK AG, LONDON BRANCH
By: R SCICLUNA
R SEDLACEIC
CREDIT SUISSE
By: ELIZABETH ANN MACADIE
CHRISTOPHER ROGER BENHAM
as attorney
as attorney
HSBC BANK PLC
By: DEBORAH LEERHSEN
ING BANK N.V. DUBLIN BRANCH
By: SEAN HASSETT
ALAN DUFFY
Vice President
Director, Head of Lending
JPMORGAN CHASE BANK, N.A.
By: JOHN BLACKBOROUGH
ABN AMRO BANK N.V.
By: CHRISTINE HEMHENT
JONPAUL DE ATH
ALPHA BANK A.E.
By: ELIZABETH ANN MACADIE
CHRISTOPHER ROGER BENHAM
as attorney
as attorney
BANK OF AMERICA, N.A.
By: ELIZABETH ANN MACADIE
as attorney
97
CHRISTOPHER ROGER BENHAM
as attorney
THE GOVERNOR AND THE COMPANY OF THE BANK OF IRELAND
By: ELIZABETH ANN MACADIE
CHRISTOPHER ROGER BENHAM
as attorney
as attorney
RAIFFEISEN ZENTRALBANK OESTERREICH AG
By: ELIZABETH ANN MACADIE
CHRISTOPHER ROGER BENHAM
as attorney
as attorney
The Swingline Agent
DEUTSCHE BANK AG, LONDON BRANCH
Address:
Winchester House
1 Great Winchester Street
London EC2N 2DB
Fax No:
+44 20 7547 6419
Attention:
Elizabeth Macadie / Maria de Lellis
By: ELIZABETH ANN MACADIE
CHRISTOPHER ROGER BENHAM
The Facility Agent
DEUTSCHE BANK AG, LONDON BRANCH
Address:
Winchester House
1 Great Winchester Street
London EC2N 2DB
Fax No:
+44 20 7547 6419
Attention:
Elizabeth Macadie / Maria de Lellis
By: ELIZABETH ANN MACADIE
CHRISTOPHER ROGER BENHAM
98
Exhibit 2.2
CONFORMED COPY
COCA-COLA HBC FINANCE PLC
and
COCA-COLA HBC FINANCE B.V.
as Issuers
CITICORP TRUSTEE COMPANY LIMITED
as Trustee
COCA-COLA HELLENIC BOTTLING COMPANY S.A.
COCA-COLA HBC FINANCE PLC
and
COCA-COLA HBC FINANCE B.V.
as Guarantors
AMENDED AND RESTATED
TRUST DEED
RELATING TO
€ 2,000,000,000
EURO MEDIUM TERM NOTE PROGRAMME
CONTENTS
Clause
Page
1.
Definitions And Interpretation
2
2.
Amount And Issue Of The Notes
9
3.
Covenant To Repay
10
4.
The Notes
13
5.
Guarantee And Indemnity
14
6.
Covenant To Comply With The Trust Deed
15
7.
Covenants By The Issuers And The Guarantors
16
8.
Amendments, Substitution And Accession
19
9.
Enforcement
24
10.
Application Of Moneys
25
11.
Terms Of Appointment
27
12.
Costs And Expenses
33
13.
Appointment And Retirement
36
14.
Notices
38
15.
Law And Jurisdiction
40
16.
Severability
41
17.
Contracts (Rights Of Third Parties) Act 1999
41
18.
Counterparts
41
SCHEDULE 1
TERMS AND CONDITIONS
42
Part A Form Of Temporary Global Note
Part B Form Of Permanent Global Note
Part C Form Of Definitive Bearer Note
Part D Form Of Coupon
Part E Form Of Talon
43
43
55
62
66
68
SCHEDULE 2
SCHEDULE 3
PROVISIONS FOR MEETINGS OF NOTEHOLDERS
69
THIS TRUST DEED is made on 30 May 2007.
BETWEEN :
(1)
COCA-COLA HBC FINANCE PLC and COCA-COLA HBC FINANCE B.V. (with its corporate seat in Amsterdam) ( each
in relation to the Notes (as defined below) issued by it, the “ Issuer ” and together the “ Issuers ”);
(2)
COCA-COLA HELLENIC BOTTLING COMPANY S.A, COCA-COLA HBC FINANCE PLC and COCA-COLA HBC
FINANCE B.V. (with its corporate seat in Amsterdam) (each the “ Guarantor ” and together the “ Guarantors ”); and
(3)
CITICORP TRUSTEE COMPANY LIMITED (the “ Trustee ”, which expression includes, where the context admits, all
persons for the time being the trustee or trustees of this Trust Deed).
WHEREAS
(A)
The Issuers have established a Euro Medium Term Note Programme pursuant to which the Issuers may issue from time to time
Notes as set out herein (the “ Programme ”). Notes up to a maximum nominal amount from time to time outstanding of Euro
2,000,000,000 (subject to increase as provided in the Dealer Agreement (as defined below)) (the “ Programme Limit ”) may be issued
pursuant to the said Programme.
(B)
The Guarantors have authorised the giving of their guarantee in relation to the Notes to be issued under the Programme subject to
and in accordance with the Conditions and this Trust Deed.
(C)
The parties have agreed to amend and restate the trust deed dated 7 March 2006 entered into between them (the “ Original Trust
Deed ”) on the terms of this Trust Deed.
(D)
The Trustee has agreed to act as trustee of this Trust Deed on the following terms and conditions.
NOW THIS TRUST DEED WITNESSES AND IT IS HEREBY DECLARED as follows:
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
In this Trust Deed the following expressions have the following meanings:
“ Agents ” means, in relation to the Notes of any Series, the Principal Paying Agent, the other Paying Agents, the Calculation Agent or
any of them;
“ Appointee ” means any delegate, agent, nominee or custodian appointed pursuant to the provisions of this Trust Deed;
“ Auditors ” means the auditors for the time being of the relevant Issuer or, as the context may require, the relevant Guarantor and, if
there are joint auditors, means all or any one of such joint auditors or, in the event of any of them being unable or unwilling to carry out
any action requested of them pursuant to this Trust Deed, means such other firm of
2
chartered accountants in England as may be nominated in writing by the Trustee for the purpose;
“ Authorised Signatory ” means:
(a)
in relation to the Issuers, any Director of the relevant Issuer or any other person or persons notified to the Trustee by
any such Director as being an Authorised Signatory pursuant to sub-clause 7.18 ( Authorised Signatories ); and
(b)
in relation to the Guarantors, any Director of the relevant Guarantor or any other person or persons notified to the
Trustee by any Director of the relevant Guarantor as being an Authorised Signatory pursuant to sub-clause 7.18 ( Authorised
Signatories ).
“ Base Prospectus ” has the meaning ascribed thereto in the Dealer Agreement;
“ Calculation Agent ” means, in relation to the Notes of any Series, the institution at its Specified Office initially appointed as
calculation agent in relation to such Notes pursuant to the relevant Paying Agency Agreement and/or, if applicable, Successor
calculation agent in relation to such Notes at its Specified Office;
“ Clearstream, Luxembourg ” means Clearstream Banking, société anonyme ;
“ Conditions ” means the terms and conditions to be endorsed on, or incorporated by reference in, the Notes of any Series, in the form
set out in Schedule 1 or in such other form, having regard to the terms of the Notes of the relevant Series, as may be agreed between the
relevant Issuer, the relevant Guarantors, the Principal Paying Agent, the Trustee and the relevant Dealer(s) as modified and
supplemented by the Final Terms applicable to such Series, as any of the same may from time to time be modified in accordance with
this Trust Deed and any reference in this Trust Deed to a particular numbered Condition shall be construed in relation to the Notes of
such Series accordingly;
“ Contractual Currency ” means, in relation to any payment obligation of any Note, the currency in which that payment obligation is
expressed and, in relation to Clause 12.1 ( Remuneration ), pounds sterling or such other currency as may be agreed between the
relevant Issuer and the Trustee from time to time;
“ Couponholder ” means the holder of a Coupon;
“ Coupons ” means any bearer interest coupons in or substantially in the form set out in Part D of Schedule 2 appertaining to the
Notes of any Series and for the time being outstanding or, as the context may require, a specific number thereof and includes any
replacement Coupons issued pursuant to Condition 15 and, where the context so permits, the Talons appertaining to the Notes of such
Series;
“ Dealer Agreement ” means the agreement between the Issuers, the Guarantors and the Dealers named therein concerning the
purchase of Notes to be issued pursuant to the Programme as amended from time to time or any restatement thereof for the time being
in force;
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“ Dealers ” means any person appointed as a Dealer by the Dealer Agreement and any other person which the relevant Issuer may
appoint as a Dealer and notice of whose appointment has been given to the Principal Paying Agent and the Trustee by the Issuer in
accordance with the provisions of the Dealer Agreement but excluding any entity whose appointment has been terminated in
accordance with the terms of the Dealer Agreement and notice of whose termination has been given to the Principal Paying Agent and
the Trustee by the relevant Issuer in accordance with the provisions of the Dealer Agreement and references to the “ relevant Dealer(s)
” mean, in relation to any Note, the Dealer(s) with whom the relevant Issuer has agreed the issue and purchase of such Note;
“ Director ” means any Director of the relevant Issuer (or the relevant Guarantor, as applicable) from time to time;
“ Euroclear ” means Euroclear Bank S.A./N.V.;
“ Event of Default ” means any one of the circumstances described in Condition 13;
“ Extraordinary Resolution ” has the meaning set out in Schedule 3;
“ Final Terms ” has the meaning ascribed to it in the Dealer Agreement;
“ Fixed Rate Note ” means a Note on which interest is calculated at a fixed rate payable in arrear on a fixed date or dates in each year
and on redemption or on such other dates as may be agreed between the relevant Issuer and the relevant Dealer(s) (as indicated in the
applicable Final Terms);
“ Floating Rate Note ” means a Note on which interest is calculated at a floating rate payable at intervals of one, two, three, six or
twelve months or at such other intervals as may be agreed between the relevant Issuer and the relevant Dealer(s) (as indicated in the
applicable Final Terms);
“ Global Note ” means, in relation to any Series, any Temporary Global Note and/or Permanent Global Note issued or to be issued
pursuant to Clause 4.1;
“ Issue Date ” means, in relation to any Note, the date of issue of such Note pursuant to the Dealer Agreement or any other relevant
agreement between the relevant Issuer, the relevant Guarantors and the relevant Dealer(s);
“ Interest Commencement Date ” means, in relation to any interest-bearing Note, the date specified in the applicable Final Terms
from which such Note bears interest or, if no such date is specified therein, the Issue Date;
“ Liabilities ” means any loss, damage, cost, charge, claim, demand, expense, judgment, action, proceeding or other liability
whatsoever (including, without limitation, in respect of taxes, duties, levies, imposts and other charges) and including any value added
tax or similar tax charged or chargeable in respect thereof and legal fees and expenses on a full indemnity basis;
“ Material Subsidiary ” has the meaning given to it in the Conditions;
4
“ Noteholder ” and (in relation to a Note) “ holder ” means the bearer of a Note;
“ Notes ” means the bearer notes of each Series constituted in relation to or by this Trust Deed which shall be in or substantially in the
form set out in Schedule 2 and, for the time being outstanding or, as the case may be, a specific number thereof and includes any
replacement Notes of such Series issued pursuant to Condition 15 and (except for the purposes of Clause 4.1 ( Global Notes ) and 4.3 (
Signature )) each Global Note in respect of such Series for so long as it has not been exchanged in accordance with the terms thereof;
“ outstanding ” means, in relation to the Notes of any Series, all the Notes of such Series other than:
(a)
those which have been redeemed in accordance with this Trust Deed;
(b)
those in respect of which the date for redemption in accordance with the provisions of the Conditions has occurred and
for which the redemption moneys (including all interest accrued thereon to the date for such redemption) have been duly paid
to the Trustee or the Principal Paying Agent in the manner provided for in the Paying Agency Agreement (and, where
appropriate, notice to that effect has been given to the Noteholders in accordance with Condition 19) and remain available for
payment in accordance with the Conditions;
(c)
those which have been purchased and surrendered for cancellation as provided in Condition 10 and notice of the
cancellation of which has been given to the Trustee;
(d)
those which have become void under Condition 14;
(e)
those mutilated or defaced Notes which have been surrendered or cancelled and in respect of which replacement Notes
have been issued pursuant to Condition 15;
(f)
(for the purpose only of ascertaining the aggregate nominal amount of Notes outstanding and without prejudice to the
status for any other purpose of the relevant Notes) those Notes which are alleged to have been lost, stolen or destroyed and in
respect of which replacements have been issued pursuant to Condition 15;
provided that for each of the following purposes, namely:
(i)
the right to attend and vote at any meeting of the holders of Notes of any Series;
(ii)
the determination of how many and which Notes of any Series are for the time being outstanding for the purposes of
Clauses 9.1 ( Legal Proceedings ) and 8.1 ( Waiver ), Conditions 13 and 18 and Schedule 3; and
(iii)
any discretion, power or authority, whether contained in this Trust Deed or provided by law, which the Trustee is
required to exercise in or by reference to the interests of the holders of the Notes of any Series or any of them;
5
those Notes (if any) of the relevant Series which are for the time being held by any person (including but not limited to the Issuers, the
Guarantors, or any of their Subsidiaries) for the benefit of the Issuers, the Guarantors, or any of their Subsidiaries of either shall (unless
and until ceasing to be so held) be deemed not to remain outstanding;
“ Paying Agency Agreement ” means, in relation to the Notes of any Series, the agreement appointing the initial Paying Agents and
the Calculation Agent in relation to such Series and any other agreement for the time being in force appointing Successor paying agents
or a Successor calculation agent in relation to such Series, together with any agreement for the time being in force amending or
modifying with the prior written approval of the Trustee any of the aforesaid agreements in relation to such Series;
“ Paying Agents ” means, in relation to the Notes of any Series, the several institutions (including, where the context permits, the
Principal Paying Agent) at their respective Specified Offices initially appointed pursuant to the relative Paying Agency Agreement
and/or, if applicable, any Successor paying agents in relation to such Series at their respective Specified Offices;
“ Permanent Global Note ” means, in relation to any Series, a Global Note to be issued pursuant to Clause 4.1 in the form or
substantially in the form set out in Part B of Schedule 2, with such modifications (if any) as may be agreed between the relevant Issuer,
the relevant Guarantors, the Paying Agent, the Trustee and the relevant Dealer(s).
“ Potential Event of Default ” means an event or circumstance which could, with the giving of notice, lapse of time, the issuing of a
certificate and/or fulfilment of any other requirement provided for in Condition 13, become an Event of Default;
“ Principal Paying Agent ” means, in relation to the Notes of any Series, the institution at its Specified Office initially appointed as
issuing and principal paying agent in relation to such Series pursuant to the relative Paying Agency Agreement or, if applicable, any
Successor principal paying agent in relation to such Series at its Specified Office;
“ Relevant Date ” has the meaning ascribed to it in Condition 14;
“ relevant Guarantors ” means Coca-Cola Hellenic Bottling Company S.A. (in respect of Notes issued by Cola-Cola HBC Finance
PLC and Coca-Cola HBC Finance B.V.) Coca-Cola HBC Finance PLC (in respect of Notes issued by Coca-Cola HBC Finance B.V.)
and Coca-Cola HBC Finance B.V. (in respect of Notes issued by Cola-Cola HBC Finance PLC);
“ repay ” includes “ redeem ” and vice versa and “ repaid ”, “ repayable ”, “ repayment ”, “ redeemed ”, “ redeemable ” and “
redemption ” shall be construed accordingly;
“ Series ” means a Tranche of Notes together with any further Tranche or Tranches of Notes expressed to be consolidated and form a
single series with the Notes of the original Tranche and the terms of which are identical (save for the Issue Date and/or the Interest
Commencement Date but including as to whether or not the Notes are listed);
“ Special Conditions ” means, in relation to any Series of Notes, the Conditions applicable thereto which are not in the form set out in
the Schedule 1;
6
“ Specified Office ” means, in relation to any Agent in respect of any Series, either the office identified with its name in the Conditions
of such Series or any other office notified to any relevant parties pursuant to the Paying Agency Agreement;
“ Subsidiary ” has the meaning given to it in the Conditions;
“ Successor ” means, in relation to the Paying Agents, such other or further person as may from time to time be appointed pursuant to
the Paying Agency Agreement as a Paying Agent;
“ Successor in Business ” means any company which as a result of any amalgamation, merger or reconstruction the terms of which
have previously been approved by the Trustee, or which, as a result of any agreement with the Guarantor (or any previous substitute
under Clause 8.3) ( Substitution ) which has previously been approved by the Trustee, owns beneficially the whole or substantially the
whole of the undertaking, property and assets owned by the Guarantor prior to such amalgamation, merger, reconstruction or agreement
coming into force and where, in the case of any company which will own the whole or substantially the whole of the undertaking,
property or assets of the Guarantor as stated, the substitution of that company as principal debtor under this Trust Deed, the Notes and
the Coupons would not be materially prejudiced to the interests of the Noteholders in the opinion of the Trustee;
“ Talonholder ” means the holder of a Talon;
“ Talons ” means any bearer talons appertaining to the Notes of any Series or, as the context may require, a specific number thereof
and includes any replacement Talons issued pursuant to Condition 15;
“ Temporary Global Note ” means, in relation to any Series, a Global Note to be issued pursuant to Clause 4.1 in the form or
substantially in the form set out in Part A of Schedule 2, with such modifications (if any) as may be agreed between the relevant Issuer,
the relevant Guarantors, the Paying Agent, the Trustee and the relevant Dealer(s).
“ this Trust Deed ” means this Trust Deed and the Schedules (as from time to time modified in accordance with the provisions
contained herein) and (unless the context requires otherwise) includes any deed or other document executed in accordance with the
provisions hereof (as from time to time modified as aforesaid) and expressed to be supplemental hereto;
“ Tranche ” means all Notes of the same Series with the same Issue Date and Interest Commencement Date;
“ Trustee Acts ” means both the Trustee Act 1925 and the Trustee Act 2000 of England and Wales;
“ Written Resolution ” means, in relation to any Series, a resolution in writing signed by or on behalf of all holders of Notes of such
Series who for the time being are entitled to receive notice of a meeting in accordance with the provisions of this Trust Deed whether
contained in one document or several documents in like form, each signed by or on behalf of one or more such Noteholders;
7
“ Zero Coupon Note ” means a Note that is in bearer form and that constitutes a claim for a fixed sum against the relevant Issuer and
on which interest does not become due during their tenor or other Notes which qualify as savings certificates as defined in the Dutch
Savings Certificates Act ( Wet inzake spaarbewijzen ).
1.2
Principles of interpretation
In this Trust Deed:
1.2.1
Statutory modification : a provision of any statute shall be deemed also to refer to any statutory modification or
re-enactment thereof or any statutory instrument, order or regulation made thereunder or under such modification or
re-enactment;
1.2.2
Additional amounts : principal and/or interest in respect of the Notes of any Series shall be deemed also to include
references to any additional amounts which may be payable under Condition 12, any redemption amounts which may be
payable under Condition 10 and any premium;
1.2.3
Relevant Currency: “relevant currency” shall be construed as a reference to the currency in which payments in respect
of the Notes and/or Receipts and/or Coupons of the relevant Series are to be made as indicated in the applicable Final Terms;
1.2.4
Tax : costs, charges or expenses shall include any value added tax or similar tax charged or chargeable in respect
thereof;
1.2.5
Enforcement of rights : an action, remedy or method of judicial proceedings for the enforcement of rights of creditors
shall include, in respect of any jurisdiction other than England, references to such action, remedy or method of judicial
proceedings for the enforcement of rights of creditors available or appropriate in such jurisdictions as shall most nearly
approximate thereto;
1.2.6
Clauses and Schedules : a Schedule or a Clause, sub-clause, paragraph or sub-paragraph is, unless otherwise stated, to
a schedule hereto or a clause, sub-clause, paragraph or sub-paragraph hereof respectively;
1.2.7
Clearing systems : Euroclear and/or Clearstream, Luxembourg shall, wherever the context so admits, be deemed to
include references to any additional or alternative clearing system approved by the relevant Issuer, the relevant Guarantors
and the Trustee;
1.2.8
Trust corporation: a trust corporation denotes a corporation entitled by rules made under the Public Trustee Act 1906
to act as a custodian trustee or entitled pursuant to any other legislation applicable to a trustee in any jurisdiction other than
England to act as trustee and carry on trust business under the laws of the country of its incorporation; and
1.2.9
Gender : words denoting the masculine gender shall include the feminine gender also, words denoting individuals shall
include companies, corporations
8
and partnerships, words importing the singular number shall include the plural and, in each case, vice versa .
1.3
1.2.10
Listing: References in this Deed to Notes being or to be “listed on the London Stock Exchange” shall be to Notes that
are or are to be admitted to the Official List of the Financial Services Authority (in its capacity as competent authority for the
purposes of Part VI of the Financial Services and Markets Act 2000, the “ FSA ”) and to trading on the Gilt Edged and Fixed
Interest Market of the London Stock Exchange plc (the “ London Stock Exchange ”), and the terms “to list” and “listing” on
the London Stock Exchange shall be construed accordingly.
1.2.11
Prospectus Directive: all references in this Agreement to a Directive include any relevant implementing measure of
each Member State of the European Economic Area which has implemented such Directive and all references to the
“Prospectus Directive” shall include Commission Regulation (EC) No. 809/2004.
The Conditions
In this Trust Deed, unless the context requires or the same are otherwise defined, words and expressions defined in the Conditions and
not otherwise defined herein shall have the same meaning in this Trust Deed.
1.4
Headings
The headings and sub-headings are for ease of reference only and shall not affect the construction of this Trust Deed.
1.5
The Schedules
The schedules are part of this Trust Deed and shall have effect accordingly.
1.6
Amendment and Restatement
The Original Trust Deed shall be amended and restated on the terms of this Trust Deed. Any Notes issued on or after the date of this
Trust Deed shall be issued pursuant to this Trust Deed. This does not affect any Notes issued prior to the date of this Trust Deed.
Subject to such amendment and restatement, the Original Trust Deed shall continue in full force and effect.
2.
AMOUNT AND ISSUE OF THE NOTES
2.1
Amount of the Notes
The Notes will be issued in Series in an aggregate nominal amount from time to time outstanding not exceeding the Programme Limit
and for the purpose of determining such aggregate nominal amount Clause 4.1.13 of the Dealer Agreement shall apply.
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2.2
Prior to each Issue Date
By not later than 3.00 p.m. (London time) on the fourth business day in London (which for this purpose shall be a day on which
commercial banks are open for business in London) preceding each proposed Issue Date, the relevant Issuer shall:
2.2.1
2.2.2
deliver or cause to be delivered to the Trustee a copy of the applicable Final Terms; and
notify the Trustee in writing without delay of the Issue Date and the nominal amount of the Notes of the relevant
Tranche.
The Trustee shall be deemed to have approved the Final Terms if it has not objected in writing to all or any of the terms thereof within
two business days of the Trustee receiving the Final Terms in accordance with Clause 2.2 provided that if no Special Conditions apply
to the relevant Tranche or, as the case may be, the relevant Series of Notes, the Trustee shall not be required in any case to approve
such Final Terms. In the event that the Trustee indicates as soon as practicable after receipt within such period that it does not approve
of the provisions of the Final Terms then the Tranche or, as the case may be, the Series of Notes relating to such Final Terms shall not
be issued until such time as the Trustee shall so approve the Final Terms.
2.3
Constitution of Notes
Upon the issue of the Temporary Global Note, initially representing the Notes of any Tranche, such Notes shall become constituted by
this Trust Deed without further formality.
2.4
Further legal opinions
Before the first issue of Notes occurring after each anniversary of this Trust Deed, on each occasion when a legal opinion is delivered
to a Dealer(s) pursuant to Clause 5.10 of the Dealer Agreement and on such other occasions as the Trustee so requests, each of the
relevant Issuer and the relevant Guarantors will procure at its cost that further legal opinions in such form and with such content as the
Trustee may require from the legal advisers specified in the Dealer Agreement or in the relevant jurisdiction approved by the Trustee
are delivered to the Trustee provided that the Trustee shall not be required to approve the applicable legal opinions if there are no
Special Conditions opined upon therein. In each such case, receipt by the Trustee of the relevant opinion shall be a condition precedent
to the issue of Notes pursuant to this Trust Deed.
3.
COVENANT TO REPAY
3.1
Covenant to repay
Each Issuer covenants with the Trustee that it shall, as and when the Notes of any Series or any of them become due to be redeemed or
any principal on the Notes of any Series or any of them becomes due to be repaid in accordance with the Conditions, unconditionally
pay or procure to be paid to or to the order of the Trustee in immediately available freely transferable funds in the relevant currency the
principal amount of the Notes of such Series or any of them becoming due for payment on that date and shall (subject to the provisions
of the Conditions and except in the case of Zero Coupon Notes), until all such payments (both before and after judgment or other order)
are duly
10
made, unconditionally pay or procure to be paid to or to the order of the Trustee as aforesaid on the dates provided for in the Conditions
interest on the principal amount (or such other amount as may be specified in the Final Terms) of the Notes or any of them of such
Series outstanding from time to time as set out in the Conditions (subject to Clause 3.3 ( Interest on Floating Rate Notes following
Event of Default )) provided that :
3.1.1
every payment of principal or interest in respect of such Notes or any of them made to the Principal Paying Agent in the
manner provided in the Paying Agency Agreement shall satisfy, to the extent of such payment, the relevant covenant by the
relevant Issuer contained in this Clause except to the extent that there is default in the subsequent payment thereof to the
relevant Noteholders or Couponholders (as the case may be) in accordance with the Conditions;
3.1.2
if any payment of principal or interest in respect of such Notes or any of them is made after the due date, payment shall
be deemed not to have been made until either the full amount is paid to the relevant Noteholders or Couponholders (as the
case may be) or, if earlier, the seventh day after notice has been given to the relevant Noteholders in accordance with the
Conditions that the full amount has been received by the Principal Paying Agent or the Trustee except, in the case of payment
to the Principal Paying Agent, to the extent that there is failure in the subsequent payment to the Noteholders or
Couponholders (as the case may be) under the Conditions; and
3.1.3
in any case where payment of the whole or any part of the principal amount due in respect of any Note is improperly
withheld or refused upon due presentation of the relevant Note, interest shall accrue on the whole or such part of such
principal amount (except in the case of Zero Coupon Notes, to which the provision of Condition 8 shall apply) from the date
of such withholding or refusal until the date either on which such principal amount due is paid to the relevant Noteholders or,
if earlier, the seventh day after notice has been given to the relevant Noteholders in accordance with the Conditions that the
full amount payable in respect of the said principal amount is available for collection by the relevant Noteholders provided
that on further due presentation of the relevant Note such payment is in fact made.
The Trustee will hold the benefit of this covenant and the covenant in Clause 6 ( Covenant to comply with the Trust Deed ) on trust for
the Noteholders in accordance with their respective interests.
3.2
Following an Event of Default
At any time after any Event of Default or Potential Event of Default shall have occurred, the Trustee may:
3.2.1
by notice in writing to the relevant Issuer, the relevant Guarantors, the Principal Paying Agent and the other Agents
require the Principal Paying Agent and the other Agents or any of them:
(a)
to act thereafter, until otherwise instructed by the Trustee, as Agents of the Trustee under the provisions of this
Trust Deed on the terms provided in
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the Paying Agency Agreement (with consequential amendments as necessary and save that the Trustee’s liability under
any provisions thereof for the indemnification, remuneration and payment of out-of-pocket expenses of the Agents
shall be limited to amounts for the time being held by the Trustee on the trusts of this Trust Deed in relation to the
Notes on the terms of this Trust Deed and available to the Trustee for such purpose) and thereafter to hold all Notes and
Coupons and all sums, documents and records held by them in respect of Notes and Coupons on behalf of the Trustee;
and/or
(b)
3.2.2
3.3
to deliver up all Notes and Coupons and all sums, documents and records held by them in respect of Notes and
Coupons to the Trustee or as the Trustee shall direct in such notice provided that such notice shall be deemed not to
apply to any document or record which the relevant Agent is obliged not to release by any law or regulation; and
by notice in writing to the relevant Issuer and the relevant Guarantors require each of them to make all subsequent
payments in respect of Notes and Coupons to or to the order of the Trustee and, with effect from the issue of any such notice
until such notice is withdrawn, proviso 3.1.1 to Clause 3.1 ( Covenant to repay ) and (so far as it concerns payments by the
relevant Issuer) Clause 10.4 ( Payments to Noteholders and Couponholders ) shall cease to have effect.
Interest on Floating Rate Notes following Event of Default
If Floating Rate Notes become immediately due and repayable under Condition 13 the rate and/or amount of interest payable in respect
of them will be calculated at the same intervals as if such Notes had not become due and repayable, the first of which will commence
on the expiry of the Interest Period (as defined in the Conditions) during which the Notes become so due and repayable in accordance
with Condition 7 (with consequential amendments as necessary) except that the rates of interest need not be published.
3.4
Currency of payments
All payments in respect of, under and in connection with this Trust Deed and the Notes to the relevant Noteholders and Couponholders
shall be made in the relevant currency as required by the Conditions.
3.5
Separate Series
The Notes of each Series shall form a separate Series of Notes and accordingly, unless for any purpose the Trustee in its absolute
discretion shall otherwise determine, all the provisions of this Trust Deed shall apply mutatis mutandis separately and independently to
the Notes of each Series and in such Clauses and Schedule the expressions “ Notes ”, “ Noteholders ”, “ Coupons ”, “ Couponholders
”, “ Talons ” and “ Talonholders ” shall be construed accordingly.
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4.
THE NOTES
4.1
Global Notes
4.1.1
4.1.2
4.1.3
4.2
The Notes of each Tranche will initially be together represented by a Temporary Global Note. Each Temporary Global
Note shall (save as may be specified in the applicable Final Terms) be exchangeable, in accordance with its terms, for
interests in a Permanent Global Note or Notes in definitive form.
Each Permanent Global Note shall be exchangeable, in accordance with its terms, for Notes in definitive form.
All Global Notes shall be prepared, completed and delivered to a common depositary for Clearstream, Luxembourg and
Euroclear in accordance with the Dealer Agreement or to another depositary in accordance with any other agreement between
the relevant Issuer and the relevant Dealer(s) and, in each case, in accordance with the Paying Agency Agreement. The
applicable Final Terms shall be annexed to each Global Note.
Notes in definitive form
Notes in definitive form will be security printed in accordance with applicable legal and stock exchange requirements substantially in
the form set out in Part C of Schedule 2. Any Coupons and Talons will also be security printed in accordance with the same
requirements and will be attached to the Notes in definitive form at the time of issue. Notes in definitive form will be endorsed with
the Conditions.
4.3
Signature
The Global Notes and the Notes in definitive form will be signed manually or in facsimile by a duly authorised person designated by
the relevant Issuer and will be authenticated manually by or on behalf of the Principal Paying Agent. The relevant Issuer may use the
facsimile signature of a person who at the date such signature was originally produced was such a duly authorised person even if at the
time of issue of any Global Note or Note in definitive form he no longer holds that office. Global Notes and Notes in definitive form
so executed and duly authenticated will be binding and valid obligations of such Issuer.
4.4
Entitlement to treat holder as owner
Each of the Issuers, the Guarantors, the Trustee and any Agent may deem and treat the holder of any Note as the absolute owner of such
Note, free of any equity, set-off or counterclaim on the part of such Issuer against the original or any intermediate holder of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing thereon or any notice of
previous loss or theft of such Note) for all purposes and, except as ordered by a court of competent jurisdiction or as required by
applicable law, the Issuers, the Guarantors, the Trustee and the Paying Agent shall not be affected by any notice to the contrary. All
payments made to any such holder shall be valid and, to the extent of the sums so paid, effective to satisfy and discharge the liability for
the moneys payable upon the Notes.
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5.
GUARANTEE AND INDEMNITY
5.1
Guarantee
The relevant Guarantors hereby unconditionally and irrevocably, jointly and severally guarantee to the Trustee the due and punctual
payment of all sums expressed to be payable by the relevant Issuer under this Trust Deed or in respect of the Notes or Coupons, as and
when the same becomes due and payable, whether at maturity, upon early redemption, upon acceleration or otherwise, according to the
terms of this Trust Deed and the Notes and Coupons. In case of the failure of the relevant Issuer to pay any such sum as and when the
same shall become due and payable, the relevant Guarantors hereby agree to cause such payment to be made as and when the same
becomes due and payable, whether at maturity, upon early redemption, upon acceleration or otherwise, as if such payment were made
by the relevant Issuer.
5.2
Indemnity
The relevant Guarantors agree that as an independent primary obligation, they shall pay to the Trustee on demand sums sufficient to
indemnify the Trustee and each Noteholder and Couponholder against any Liability sustained by the Trustee or such Noteholder or
Couponholder by reason of the non-payment as and when the same shall become due and payable of any sum expressed to be payable
by the relevant Issuer under this Trust Deed or in respect of the Notes, whether by reason of any of the obligations expressed to be
assumed by the relevant Issuer in this Trust Deed or the Notes being or becoming void, voidable or unenforceable for any reason,
whether or not known to the Trustee or such Noteholders or Couponholder or for any other reason whatsoever.
5.3
Unconditional payment
If an Issuer defaults in the payment of any sum expressed to be payable by that Issuer under this Trust Deed or in respect of the Notes
or Coupons as and when the same shall become due and payable, the relevant Guarantors shall immediately and unconditionally pay or
procure to be paid to or to the order of the Trustee in the relevant currency in same day, freely transferable funds the amount in respect
of which such default has been made; provided that every payment of such amount made by the relevant Guarantors to the Principal
Paying Agent in the manner provided in the Paying Agency Agreement shall be deemed to cure pro tanto such default by the relevant
Issuer and shall be deemed for the purposes of this Clause 5 to have been paid to or for the account of the Trustee except to the extent
that there is failure in the subsequent payment of such amount to the Noteholders and Couponholders in accordance with the
Conditions, and everything so paid by the relevant Guarantors in accordance with the Paying Agency Agreement shall have the same
effect as if it had been paid thereunder by the relevant Issuer.
5.4
Unconditional obligation
The relevant Guarantors agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of this Trust Deed or any Note or Coupon, or any change in or amendment hereto or thereto, the absence of any action to
enforce the same, any waiver or consent by any Noteholder or Couponholder or by the Trustee with respect to any provision of this
Trust Deed or the Notes, the obtaining of any judgment against the relevant Issuer or any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or defence of a guarantor.
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5.5
Guarantor’s obligations continuing
The relevant Guarantors waive diligence, presentment, demand of payment, filing of claims with a court in the event of merger or
bankruptcy of either Issuer, any right to require a proceeding first against either Issuer, protest or notice with respect to any Note or the
indebtedness evidenced thereby and all demands whatsoever. The relevant Guarantors agree that the guarantee and indemnity
contained in this Clause 5 is a continuing guarantee and indemnity and shall remain in full force and effect until all amounts due as
principal, interest or otherwise in respect of the Notes or Coupons or under this Trust Deed shall have been paid in full and that the
relevant Guarantors shall not be discharged by anything other than a complete performance of the obligations contained in this Trust
Deed and the Notes and Coupons.
5.6
Subrogation of Guarantor’s rights
The relevant Guarantors shall be subrogated to all rights of the Noteholders against each Issuer in respect of any amounts paid by any
relevant Guarantor pursuant hereto; provided that the relevant Guarantors shall not without the consent of the Trustee be entitled to
enforce, or to receive any payments arising out of or based upon or prove in any insolvency or winding up of the relevant Issuer in
respect of, such right of subrogation until such time as the principal of and interest on all outstanding Notes and Coupons and all other
amounts due under this Trust Deed and the Notes and Coupons have been paid in full. Furthermore, until such time as aforesaid the
relevant Guarantors shall not take any security or counter-indemnity from the relevant Issuer in respect of such Guarantors’ obligations
under this Clause 5.
5.7
No implied waivers
If any payment received by the Trustee or the Principal Paying Agent pursuant to the provisions of this Trust Deed or the Conditions
shall, on the subsequent bankruptcy, insolvency, corporate reorganisation or other similar event affecting either Issuer, be avoided,
reduced, invalidated or set aside under any laws relating to bankruptcy, insolvency, corporate reorganisation or other similar events,
such payment shall not be considered as discharging or diminishing the liability of the Guarantors whether as guarantor, principal
debtor or indemnifier and the guarantee and indemnity contained in this Clause 5 shall continue to apply as if such payment had at all
times remained owing by the relevant Issuer and the relevant Guarantors shall indemnify and keep indemnified the Trustee and the
Noteholders on the terms of the guarantee and indemnity contained in this Clause.
5.8
Suspense account
Any amount received or recovered by the Trustee (otherwise than as a result of a payment by the Issuer to the Trustee in accordance
with Clause 3) from any Guarantor in respect of any sum payable by either Issuer under this Trust Deed or the Notes or Coupons may
be placed in a suspense account and kept there for so long as the Trustee thinks fit.
6.
COVENANT TO COMPLY WITH THE TRUST DEED
6.1
Covenant to comply with the Trust Deed
The Issuers and the Guarantors each hereby covenant with the Trustee to comply with those provisions of this Trust Deed and the
Conditions which are expressed to be binding
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on it and to perform and observe the same. The Notes and the Coupons are subject to the provisions contained in this Trust Deed, all of
which shall be binding upon the Issuers, the Guarantors, the Noteholders, the Couponholders and all persons claiming through or under
them respectively.
6.2
Trustee may enforce Conditions
The Trustee shall itself be entitled to enforce the obligations of the Issuers and the Guarantors under the Notes and the Conditions as if
the same were set out and contained in this Trust Deed which shall be read and construed as one document with the Notes.
7.
COVENANTS BY THE ISSUERS AND THE GUARANTORS
Each of the Issuers and each of the Guarantors hereby covenant with the Trustee that, so long as any of the Notes remain outstanding, it
will:
7.1
Books of account: at all times keep and procure that all of its Material Subsidiaries keep such books of account as may be
necessary to comply with all applicable laws and so as to enable the financial statements of the relevant Issuer and the relevant
Guarantor to be prepared and allow the Trustee and any person appointed by it, to whom the relevant Issuer, relevant Guarantor or
Material Subsidiary shall have no reasonable objection, free access to the same during normal business hours for the purposes of the
discharge or exercise of the duties, trusts, powers, authorities and discretions vested in the Trustee under this Trust Deed or by
operation of law and to discuss the same with responsible officers of the relevant Issuer or the relevant Guarantor;
7.2
Event of Default: give notice in writing to the Trustee forthwith upon becoming aware of any Event of Default or Potential
Event of Default and without waiting for the Trustee to take any further action;
7.3
Certificate of Compliance: provide to the Trustee within 14 days of any request by the Trustee and at the time of the despatch
to the Trustee of its annual balance sheet and profit and loss account, and in any event not later than 180 days after the end of its
financial year, a certificate in the English language, signed by two Authorised Signatories of the relevant Issuer, or the relevant
Guarantor, as the case may be, certifying that up to a specified date not earlier than seven days prior to the date of such certificate (the “
Certified Date ”) the relevant Issuer, or the relevant Guarantor, as the case may be, has complied with its obligations under this Trust
Deed (or, if such is not the case, giving details of the circumstances of such non-compliance) and that as at such date there did not exist
nor had there existed at any time prior thereto since the Certified Date in respect of the previous such certificate (or, in the case of the
first such certificate, since the date of this Trust Deed) any Event of Default or Potential Event of Default or other matter which could
affect the relevant Issuer’s or the relevant Guarantor’s ability to perform its obligations under this Trust Deed or (if such is not the case)
specifying the same;
7.4
Accounts in relation to the Material Subsidiaries : ensure that such accounts are prepared as may be necessary to determine
which Subsidiaries are Material Subsidiaries and procure that the Auditors prepare and deliver to the Trustee at the time of issue of
every audited consolidated balance sheet of the relevant Issuer and at any other time
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upon the request of the Trustee a certificate or report specifying the Material Subsidiaries at the date of such balance sheet or request.
7.5
Certificate relating to Material Subsidiaries: give to the Trustee, as soon as reasonably practicable after the acquisition or
disposal of any company which thereby becomes or ceases to be a Material Subsidiary or after any transfer is made to any Subsidiary
which thereby becomes a Material Subsidiary, a certificate by the Auditors to such effect.
7.6
Financial statements: send to the Trustee and to the Principal Paying Agent (if the same are produced) as soon as practicable
after their date of publication and in the case of annual financial statements in any event not more than 180 days after the end of each
financial year, two copies in the English language of the relevant Issuer’s and the relevant Guarantor’s annual balance sheet and profit
and loss account and of every balance sheet, profit and loss account, report or other notice, statement or circular issued (or which under
any legal or contractual obligation should be issued) to the members or holders of debentures or creditors (or any class of them) of the
relevant Issuer or the relevant Guarantor, as the case may be, in their capacity as such at the time of the actual (or legally or
contractually required) issue or publication thereof and procure that the same are made available for inspection by Noteholders and
Couponholders at the Specified Offices of the Paying Agents as soon as practicable thereafter;
7.7
Information: so far as permitted by applicable law, at all times give to the Trustee such information, opinions, certificates and
other evidence as it shall require and in such form as it shall reasonably require (including, without limitation, the certificates called for
by the Trustee pursuant to Clause 7.3 (Certificate of Compliance) for the performance of its functions;
7.8
Notes held by the Issuers and the Guarantors: send to the Trustee forthwith upon being so requested in writing by the
Trustee a certificate of the relevant Issuer or, as the case may be, the relevant Guarantor (signed on its behalf by two Authorised
Signatories) setting out the total number of Notes of each Series which at the date of such certificate are held by or for the benefit of the
relevant Issuer or, as the case may be, the relevant Guarantor, or any Subsidiary of such Issuer or such Guarantor;
7.9
Execution of further Documents: so far as permitted by applicable law, at all times execute all such further documents and do
all such further acts and things as may be necessary at any time or times in the opinion of the Trustee to give effect to the provisions of
this Trust Deed;
7.10
Notices to Noteholders: send or procure to be sent to the Trustee not less than three days prior to the date of publication, for the
Trustee’s approval, one copy of each notice to be given to the Noteholders in accordance with the Conditions and not publish such
notice without such approval and, upon publication, send to the Trustee two copies of such notice (such approval, unless so expressed,
not to constitute approval of such notice for the purpose of Section 21 of the Financial Services and Markets Act 2000);
7.11
Notification of non-payment: use its best endeavours to procure that the Principal Paying Agent notifies the Trustee forthwith
in the event that it does not, on or before the
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due date for payment in respect of the Notes or Coupons of any Series or any of them receive unconditionally the full amount in the
relevant currency of the moneys payable on such due date on all such Notes or Coupons;
7.12
Notification of late payment: in the event of the unconditional payment to the Principal Paying Agent or the Trustee of any sum
due in respect of any of the Notes or the Coupons or any of them being made after the due date for payment thereof, forthwith give
notice to the Noteholders that such payment has been made;
7.13
Notification of redemption or payment: not less than the number of days specified in the relevant Condition prior to the
redemption or payment date in respect of any Note or Coupon give to the Trustee notice in writing of the amount of such redemption or
payment pursuant to the Conditions and duly proceed to redeem or pay such Notes or Coupons accordingly;
7.14
Tax or optional redemption: if an Issuer gives notice to the Trustee that it intends to redeem the Notes pursuant to Condition
10 the relevant Issuer shall, prior to giving such notice to the Noteholders, provide such information to the Trustee as the Trustee
requires in order to satisfy itself of the matters referred to in such Condition;
7.15
Obligations of Agents: observe and comply with its obligations and use all reasonable endeavours to procure that the Agents
observe and comply with all their obligations under the Paying Agency Agreement and notify the Trustee immediately it becomes
aware of any material breach or failure by an Agent in relation to the Notes or Coupons;
7.16
Change of taxing jurisdiction: if before the Relevant Date for any Note or Coupon the relevant Issuer or the relevant
Guarantors shall become subject generally to the taxing jurisdiction of any territory or any political sub-division thereof or any
authority therein or thereof having power to tax other than or in addition to the United Kingdom, The Netherlands or, as the case may
be, the Hellenic Republic, immediately upon becoming aware thereof it shall notify the Trustee of such event and (unless the Trustee
otherwise agrees) enter forthwith into a trust deed supplemental hereto, giving to the Trustee an undertaking or covenant in form and
manner satisfactory to the Trustee in terms corresponding to the terms of Condition 12 with the substitution for (or, as the case may be,
the addition to) the references therein to the United Kingdom, The Netherlands or, as the case may be, the Hellenic Republic, of
references to that other or additional territory to whose taxing jurisdiction, or that of a political subdivision thereof or an authority
therein or thereof, the relevant Issuer or the relevant Guarantor shall have become subject as aforesaid, such trust deed also to modify
Condition 12 so that such Condition shall make reference to that other or additional territory;
7.17
Listing: if the Notes are admitted to listing, trading and/or quotation at all times use its best endeavours to maintain the admission
to listing, trading and/or quotation of the Notes of each Series on the listing authority, stock exchange(s) and/or quotation system(s) (if
any) on which they are admitted to listing, trading and/or quotation on issue as indicated in the applicable Final Terms or, if it is unable
to do so having used all reasonable endeavours or if the maintenance of such admission to listing, trading and/or quotation is agreed by
the Trustee to be unduly burdensome or impractical, use its best endeavours to obtain and maintain an admission to listing, trading
and/or quotation of the
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Notes on such other listing authority, stock exchange(s), securities market(s) and/or quotation system(s) (if any) as the relevant Issuer
and the relevant Guarantors may (with the approval of the Trustee) decide and give notice of the identity of such other listing authority,
stock exchange(s), securities market(s) and/or quotation systems (if any) to the Noteholders;
7.18
Authorised Signatories: upon the execution hereof and thereafter forthwith upon any change of the same, deliver to the Trustee
(with a copy to the Principal Paying Agent) a list of the Authorised Signatories of the relevant Issuer, or, as the case may be, the
relevant Guarantor, together with certified specimen signatures of the same;
7.19
Payments: pay moneys payable by it to the Trustee hereunder without set off, counterclaim, deduction or withholding, unless
otherwise compelled by law and in the event of any deduction or withholding compelled by law pay such additional amount as will
result in the payment to the Trustee of the amount which would otherwise have been payable by it to the Trustee hereunder; and
7.20
Notification of amendment to Dealer Agreement:
notify the Trustee of any amendment to the Dealer Agreement.
8.
AMENDMENTS, SUBSTITUTION AND ACCESSION
8.1
Waiver
The Trustee may, without any consent or sanction of the Noteholders or Couponholders and without prejudice to its rights in respect of
any subsequent breach, condition, event or act, from time to time and at any time, but only if and in so far as in its opinion the interests
of the Noteholders shall not be materially prejudiced thereby, authorise or waive, on such terms and conditions (if any) as shall seem
expedient to it, any breach or proposed breach of any of the covenants or provisions contained in this Trust Deed or the Notes or
Coupons or determine that any Event of Default or Potential Event of Default shall not be treated as such for the purposes of this Trust
Deed; any such authorisation, waiver or determination shall be binding on the Noteholders and the Couponholders and, if, but only if,
the Trustee shall so require, the relevant Issuer shall cause such authorisation, waiver or determination to be notified to the Noteholders
as soon as practicable thereafter in accordance with the Conditions; provided that the Trustee shall not exercise any powers conferred
upon it by this Clause in contravention of any express direction by an Extraordinary Resolution or of a request in writing made by the
holders of not less than 25 per cent. in aggregate principal amount of the Notes then outstanding (but so that no such direction or
request shall affect any authorisation, waiver or determination previously given or made) or so as to authorise or waive any such breach
or proposed breach relating to any of the matters the subject of the Reserved Matters as specified and defined in Schedule 3.
8.2
Modifications
The Trustee may from time to time and at any time without any consent or sanction of the Noteholders or Couponholders concur with
the relevant Issuer and the relevant Guarantors in making (a) any modification to this Trust Deed (other than in respect of Reserved
Matters as specified and defined in Schedule 3 or any provision of this Trust Deed referred to in that specification) or the Notes which
in the opinion of the Trustee it
19
may be proper to make provided the Trustee is of the opinion that such modification will not be materially prejudicial to the interests of
the Noteholders or (b) any modification to this Trust Deed or the Notes if in the opinion of the Trustee such modification is of a formal,
minor or technical nature or made to correct a manifest error. Any such modification shall be binding on the Noteholders and the
Couponholders and, unless the Trustee otherwise agrees, the relevant Issuer shall cause such modification to be notified to the
Noteholders as soon as practicable thereafter in accordance with the Conditions.
8.3
Substitution
8.3.1
Procedure : The Trustee may, without the consent of the Noteholders or the Couponholders, agree to the substitution, in
place of an Issuer (or any previous substitute under this Clause) of any Subsidiary or Successor in Business of an Issuer or
Guarantor (hereinafter called the “ Substituted Obligor ”) as the principal debtor under this Trust Deed in relation to the
Notes and Coupons of any Series if:
(a)
a trust deed is executed or some other written form of undertaking is given by the Substituted Obligor to the
Trustee, in form and manner satisfactory to the Trustee, agreeing to be bound by the terms of this Trust Deed, the Notes
and the Coupons with any consequential amendments which the Trustee may deem appropriate as fully as if the
Substituted Obligor had been named in this Trust Deed and on the Notes and the Coupons as the principal debtor in
place of the Issuer (or of any previous substitute under this Clause);
(b)
the relevant Issuer, the relevant Guarantors and the Substituted Obligor execute such other deeds, documents and
instruments (if any) as the Trustee may require in order that the substitution is fully effective and (unless the
Substituted Obligor is a Guarantor) the relevant guarantee contained in Clause 5 ( Guarantee and Indemnity ) is fully
effective in relation to the obligations of the Substituted Obligor and comply with such other requirements as the
Trustee may direct in the interests of the Noteholders and the Couponholders;
(c)
the Trustee has received and is satisfied (by way of legal opinions or otherwise) that (i) the Substituted Obligor has
obtained all governmental and regulatory approvals and consents necessary for its assumption of liability as principal
debtor in respect of the Notes and the Coupons in place of the Issuer (or such previous substitute as aforesaid), (ii) the
relevant Guarantors have obtained all governmental and regulatory approvals and consents necessary for the guarantee
to be fully effective as described in sub-clause (b) above and (iii) such approvals and consents are at the time of
substitution in full force and effect;
(d)
(without prejudice to the generality of the preceding sub-clauses of this sub-clause 8.3.1) where the Substituted
Obligor is incorporated, domiciled or resident in or is otherwise subject generally to the taxing jurisdiction of any
territory or any political sub-division thereof or any authority of or in
20
such territory having power to tax (the “ Substituted Territory ”) other than or in addition to the territory, the taxing
jurisdiction of which (or to any such authority of or in which) the Issuer is subject generally (the “ Issuer’s Territory
”), the Substituted Obligor will (unless the Trustee otherwise agrees) give to the Trustee an undertaking in form and
manner satisfactory to the Trustee in terms corresponding to the terms of Condition 12 with the substitution for the
reference in that Condition to the Issuer’s Territory of references to the Substituted Territory and in such event the
Trust Deed and Notes and Coupons will be interpreted accordingly;
(e)
without prejudice to the rights of reliance of the Trustee under sub-clause 8.3.4 ( Directors’ certification ) the
Trustee is satisfied that the said substitution is not materially prejudicial to the interests of the Noteholders;
(f)
Moody’s Investors Service Inc. and Standard & Poor’s Rating Services, a division of The McGraw-Hill
Companies, Inc., have confirmed in writing to the Trustee that the substitution of the Substituted Obligor will not result
in a downgrading of the then current credit rating of such rating agencies applicable to the class of debt represented by
the Notes;
8.3.2
Change of law: In connection with any proposed substitution of the relevant Issuer or any previous substitute, the
Trustee may, in its absolute discretion and without the consent of the Noteholders or the Couponholders agree to a change of
the law from time to time governing the Notes and the Coupons and this Trust Deed provided that such change of law, in the
opinion of the Trustee, would not be materially prejudicial to the interests of the Noteholders.
8.3.3
Extra duties : The Trustee shall be entitled to refuse to approve any Substituted Obligor if, pursuant to the law of the
country of incorporation of the Substituted Obligor, the assumption by the Substituted Obligor of its obligations hereunder
imposes responsibilities on the Trustee over and above those which have been assumed under this Trust Deed;
8.3.4
Directors’ certification : If any two directors of the Substituted Obligor certify that immediately prior to the
assumption of its obligations as Substituted Obligor under this Trust Deed the Substituted Obligor is solvent after taking
account of all prospective and contingent liabilities resulting from its becoming the Substituted Obligor, the Trustee need not
have regard to the financial condition, profits or prospects of the Substituted Obligor or compare the same with those of the
relevant Issuer (or of any previous substitute under this Clause);
8.3.5
Interests of Noteholders : In connection with any proposed substitution, the Trustee shall not have regard to, or be in
any way liable for, the consequences of such substitution for individual Noteholders or the Couponholders resulting from
their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any
particular territory. No
21
Noteholder or Couponholder shall, in connection with any such substitution, be entitled to claim from the relevant Issuer any
indemnification or payment in respect of any tax consequence of any such substitution upon individual Noteholders or
Couponholders.
8.3.6
Release of Issuer : Any agreement by the Trustee pursuant to sub-clause 8.3.1 ( Procedure ) shall, if so expressed,
operate to release the Issuer (or such previous substitute as aforesaid) from any or all of its obligations as principal debtor
under the Notes and this Trust Deed. Not later than fourteen days after the execution of any such documents as aforesaid and
after compliance with the said requirements of the Trustee, the Substituted Obligor shall cause notice thereof to be given to
the Noteholders; and
8.3.7
Completion of substitution : Upon the execution of such documents and compliance with the said requirements, the
Substituted Obligor shall be deemed to be named in this Trust Deed and the Notes and Coupons as the principal debtor in
place of the Issuer (or of any previous substitute under this Clause) and this Trust Deed, the Notes and the Coupons shall
thereupon be deemed to be amended in such manner as shall be necessary to give effect to the substitution and without
prejudice to the generality of the foregoing any references in this Trust Deed, in the Notes and Coupons to the Issuer shall be
deemed to be references to the Substituted Obligor.
8.4
Accession of Issuers and Guarantors
8.4.1
Procedure : The Trustee may, without the consent of the Noteholders or the Couponholders, agree to the accession of
any Subsidiary of an Issuer or Guarantor (hereinafter called the “ Additional Obligor ”) as an additional issuer or guarantor
under this Trust Deed in relation to the Notes and Coupons of any Series if:
(a)
a trust deed is executed or some other written form of undertaking is given by the such Additional Obligor to the
Trustee, in form and manner satisfactory to the Trustee, pursuant to which such Additional Obligor agrees to be bound
by the terms of this Trust Deed, the Notes and the Coupons with any consequential amendments which the Trustee may
deem appropriate as fully as if the Additional Obligor had been named in this Trust Deed and on the Notes and
Coupons as an issuer or a guarantor;
(b)
the Issuers, the Guarantors and the Additional Obligor execute such other deeds, documents and instruments (if
any) as the Trustee may require in order that the accession is fully effective and (unless the Additional Obligor is the
Guarantor) the guarantee contained in Clause 5 ( Guarantee and Indemnity ) is fully effective in relation to the
obligations of the Additional Obligor and comply with such other requirements as the Trustee may direct in the
interests of the Noteholders and the Couponholders;
(c)
the Trustee has received and is satisfied by way of legal opinion or otherwise) that (i) the Additional Obligor has
obtained all governmental
22
and regulatory approvals and consents necessary for its accession and assumption of liability as a principal debtor or
guarantor in respect of the Notes and the Coupons, (ii) the Guarantors have obtained all governmental and regulatory
approvals and consents necessary for the guarantee to be fully effective as described in sub-clause (b) above and (iii)
such approvals and consents are at the time of substitution in full force and effect;
(d)
(without prejudice to the generality of the preceding sub-clauses of this sub-clause 8.4.1) where the Additional
Obligor is incorporated, domiciled or resident in or is otherwise subject generally to the taxing jurisdiction of any
territory or any political sub-division thereof or any authority of or in such territory having power to tax (the “
Substituted Territory ”) other than or in addition to the territory, the taxing jurisdiction of which (or to any such
authority of or in which) an Issuer is subject generally (the “ Issuer’s Territory ”), the Additional Obligor will (unless
the Trustee otherwise agrees) give to the Trustee an undertaking in form and manner satisfactory to the Trustee in terms
corresponding to the terms of Condition 12 with the substitution for the reference in that Condition to the Issuer’s
Territory of references to the Substituted Territory and in such event the Trust Deed and Notes, Receipts and Coupons
will be interpreted accordingly;
(e)
without prejudice to the rights of reliance of the Trustee under sub-clause 8.4.3 ( Directors’ certification ) the
Trustee is satisfied that the said substitution is not materially prejudicial to the interests of the Noteholders;
(f)
Moody’s Investors Services Inc. and Standard & Poor’s, a division of McGraw-Hill Companies, Inc., have
confirmed in writing to the Trustee that the accession of the Additional Obligor will not result in a downgrading of the
then current credit rating of such rating agencies applicable to the class of debt represented by the Notes;
8.4.2
Extra duties : The Trustee shall be entitled to refuse to approve any Additional Obligor if, pursuant to the law of the
country of incorporation of the Substituted Obligor, the assumption by the Substituted Obligor of its obligations hereunder
imposes responsibilities on the Trustee over and above those which have been assumed under this Trust Deed;
8.4.3
Directors’ certification : If any two directors of the Additional Obligor certify that immediately prior to the assumption
of its obligations as an Additional Obligor under this Trust Deed the Additional Obligor is solvent after taking account of all
prospective and contingent liabilities resulting from its becoming an Additional Obligor, the Trustee need not have regard to
the financial condition, profits or prospects of the Additional Obligor;
8.4.4
Interests of Noteholders : In connection with any proposed accession, the Trustee shall not have regard to, or be in any
way liable for, the consequences
23
of such accession for individual Noteholders or the Couponholders resulting from their being for any purpose domiciled or
resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory. No Noteholder or
Couponholder shall, in connection with any such accession, be entitled to claim from the relevant Issuer or Guarantor any
indemnification or payment in respect of any tax consequence of any such accession upon individual Noteholders or
Couponholders;
8.4.5
Accession : Not later than fourteen days after the execution of a Deed of Accession and any other documents as
aforesaid and after compliance with the said requirements of the Trustee, the Additional Obligor shall cause notice thereof to
be given to the Noteholders; and
8.4.6
Completion of accession: Upon the execution of such documents and compliance with the said requirements, the
Additional Obligor shall be deemed to be named in this Trust Deed and the Notes and Coupons as a principal debtor or
guarantor and this Trust Deed, the Notes and the Coupons shall thereupon be deemed to be amended in such manner as shall
be necessary to give effect to the accession and without prejudice to the generality of the foregoing any references in this
Trust Deed, in the Notes and Coupons after the date of accession to an Issuer or a Guarantor (as the case may be) shall be
deemed to be references to the Additional Obligor.
9.
ENFORCEMENT
9.1
Legal proceedings
The Trustee may at any time, at its discretion and without further notice, institute such proceedings against the relevant Issuer as it may
think fit to recover any amounts due in respect of the Notes which are unpaid or to enforce any of its rights under this Trust Deed or the
Conditions but it shall not be bound to take any such proceedings unless it shall have been so directed by an Extraordinary Resolution
or so requested in writing by the holders of at least one-quarter in principal amount of the outstanding Notes and it shall have been
indemnified and/or secured to its satisfaction against all liabilities, proceedings, claims and demands to which it may thereby become
liable and all costs, charges and expenses which may be incurred by it in connection therewith and provided that the Trustee shall not
be held liable for the consequence of taking any such action and may take such action without having regard to the effect of such action
on individual Noteholders or Couponholders. Only the Trustee may enforce the provisions of the Notes or this Trust Deed and no
Noteholder or Couponholder shall be entitled to proceed directly against the relevant Issuer or the relevant Guarantor unless the
Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.
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9.2
Evidence of default
If the Trustee (or any Noteholder or Couponholder where entitled under this Trust Deed so to do) makes any claim, institutes any legal
proceeding or lodges any proof in a winding up or insolvency of the relevant Issuer or the relevant Guarantor under this Trust Deed or
under the Notes, proof therein that:
9.2.1
as regards any specified Note within a given Series, the relevant Issuer has made default in paying any principal due in
respect of such Note shall (unless the contrary be proved) be sufficient evidence that the relevant Issuer has made the like
default as regards all other Notes in respect of which a corresponding payment is then due;
9.2.2
as regards any specified Coupon the relevant Issuer has made default in paying any interest due in respect of such
Coupon shall (unless the contrary be proved) be sufficient evidence that such Issuer has made the like default as regards all
other Coupons in respect of which a corresponding payment is then due; and
9.2.3
as regards any Talon, the relevant Issuer has made default in exchanging such Talon for further Coupons and a further
Talon as provided by its terms shall (unless the contrary be proved) be sufficient evidence that such Issuer has made the like
default as regards all other Talons which are then available for exchange;
and for the purposes of 9.2.1 and 9.2.2 a payment shall be a “corresponding” payment notwithstanding that it is due in respect of a Note
of a different denomination from that in respect of the above specified Note.
10.
APPLICATION OF MONEYS
10.1
Application of moneys
All moneys received by the Trustee in respect of the Notes of any Series or amounts payable under this Trust Deed will despite any
appropriation of all or part of them by the relevant Issuer or the relevant Guarantor (including any moneys which represent principal or
interest in respect of Notes or Coupons which have become void under the Conditions) be held by the Trustee on trust to apply them
(subject to Clause 10.2 ( Investment of moneys )):
10.1.1
firstly, in payment or satisfaction of those costs, charges, expenses and liabilities incurred by the Trustee in the
preparation and execution of the trusts of this Trust Deed (including remuneration of the Trustee);
10.1.2
secondly, in or towards payment pari passu and rateably of all interest remaining unpaid in respect of the Notes of the
relevant Series and all principal moneys due on or in respect of the Notes of that Series provided that where the Notes of
more than one Series have become so due and payable, such monies shall be applied as between the amounts outstanding in
respect of the different Series pari passu and rateably (except where, in the opinion of the Trustee, such monies are paid in
respect of a specific Series or several specific Series, in which event such monies shall be applied solely to the amounts
outstanding in respect of that Series or those Series respectively); and
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10.1.3
10.2
thirdly, the balance (if any) in payment to the relevant Issuer or, if such moneys were received from a Guarantor, that
Guarantor.
Investment of moneys
If the amount of the moneys at any time available for payment of principal and interest in respect of the Notes of any Series under
Clause 10.1 ( Application of moneys ) shall be less than a sum sufficient to pay at least one-tenth of the principal amount of the Notes of
such Series then outstanding, the Trustee may, at its discretion, invest such moneys upon some or one of the investments hereinafter
authorised with power from time to time, with like discretion, to vary such investments; and such investment with the resulting income
thereof may be accumulated until the accumulations together with any other funds for the time being under the control of the Trustee
and available for the purpose shall amount to a sum sufficient to pay at least one-tenth of the principal amount of the Notes of such
Series then outstanding and such accumulation and funds (after deduction of any taxes and any other deductibles applicable thereto)
shall then be applied in the manner set out in Clause 10.1.
10.3
Authorised Investments
Any moneys which under this Trust Deed may be invested by the Trustee may be invested in the name or under the control of the
Trustee in any of the investments for the time being authorised by English law for the investment by trustees of trust moneys or in any
other investments, whether similar to those aforesaid or not, which may be selected by the Trustee or by placing the same on deposit in
the name or under the control of the Trustee with such bank or other financial institution as the Trustee may think fit and in such
currency as the Trustee in its absolute discretion may determine and the Trustee may at any time vary or transfer any of such
investments for or into other such investments or convert any moneys so deposited into any other currency and shall not be responsible
for any Liability occasioned by reason of any such investments or such deposit whether by depreciation in value, fluctuation in
exchange rates or otherwise.
10.4
Payment to Noteholders and Couponholders
The Trustee shall give notice to the Noteholders in accordance with the Conditions of the date fixed for any payment under Clause 10.1
( Application of Moneys ). Any payment to be made in respect of the Notes or Coupons of any Series by the relevant Issuer, the
relevant Guarantors or the Trustee may be made in the manner provided in the Conditions, the Paying Agency Agreement and this
Trust Deed and any payment so made shall be a good discharge to the extent of such payment by such Issuer, the relevant Guarantors or
the Trustee (as the case may be).
10.5
Production of Notes and Coupons
Upon any payment under Clause 10.4 ( Payment to Noteholders and Couponholders) of principal or interest, the Note or Coupon in
respect of which such payment is made shall, if the Trustee so requires, be produced to the Trustee or the Paying Agent by or through
whom such payment is made and the Trustee shall in respect of a Note or Coupon, (a) in the case of part payment, enface or cause such
Paying Agent to enface a memorandum of the amount and date of payment thereon or (b) in the case of payment in full, cause such
Note or Coupon to be surrendered or shall cancel or procure the same to be cancelled and shall certify or procure the certification of
such cancellation.
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10.6
Noteholders to be treated as holding all Coupons
Wherever in this Trust Deed the Trustee is required or entitled to exercise a power, trust, authority or discretion under this Trust Deed,
the Trustee shall, notwithstanding that it may have express notice to the contrary, assume that each Noteholder is the holder of all
Coupons and Talons appertaining to each Note of which he is the holder.
11.
TERMS OF APPOINTMENT
By way of supplement to the Trustee Acts, it is expressly declared as follows:
11.1
Reliance on Information
11.1.1
Advice : The Trustee may in relation to this Trust Deed act on the opinion or advice of or a certificate or any
information obtained from any lawyer, banker, valuer, surveyor, broker, auctioneer, accountant or other expert (whether
obtained by the Trustee, an Issuer, or a Guarantor, any Subsidiary or any Agent) and which advice or opinion may be
provided on such terms (including as to limitations on liability) as the Trustee may consider in its sole discretion to be
consistent with prevailing market practice with regard to advice or opinions of that nature and shall not be responsible for any
Liability occasioned by so acting; any such opinion, advice, certificate or information may be sent or obtained by letter,
telegram, telex, cablegram or facsimile transmission and the Trustee shall not be liable for acting on any opinion, advice,
certificate or information purporting to be so conveyed although the same shall contain some error or shall not be authentic;
11.1.2
Certificate of Directors or Authorised Signatories : the Trustee may call for and shall be at liberty to accept a certificate
signed by two Authorised Signatories or other person duly authorised on their behalf as to any fact or matter prima facie
within the knowledge of the relevant Issuer or the relevant Guarantor, as the case may be, as sufficient evidence thereof and a
like certificate to the effect that any particular dealing, transaction or step or thing is, in the opinion of the person so
certifying, expedient as sufficient evidence that it is expedient and the Trustee shall not be bound in any such case to call for
further evidence or be responsible for any Liability that may be occasioned by its failing so to do;
11.1.3
Certificate of Auditors : a certificate of the Auditors that in their opinion a Subsidiary is or is not or was or was at any
particular time or during any particular period a Material Subsidiary shall, in the absence of manifest error, be conclusive and
binding on the relevant Issuer, the relevant Guarantors, the Trustee, the Noteholders and the Couponholders;
11.1.4
Resolution or direction of Noteholders : the Trustee shall not be responsible for acting upon any resolution purporting to
be a Written Resolution or to have been passed at any meeting of the Noteholders in respect whereof minutes have been made
and signed or a direction of a specified percentage of Noteholders, even though it may subsequently be found that there was
some defect in the constitution of the meeting or the passing of the resolution or the making of the directions or that for any
reason the resolution purporting to be a Written Resolution or to have been passed at any Meeting or the making of the
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directions was not valid or binding upon the Noteholders and the Couponholders;
11.1.5
Reliance on certification of clearing system : the Trustee may call for and shall be at liberty to accept and place full
reliance on as sufficient evidence thereof and shall not be liable to any Issuer, any Guarantor or any Noteholder or
Couponholder by reason only of either having accepted as valid or not having rejected an original certificate or letter of
confirmation purporting to be signed on behalf of Euroclear, Clearstream, Luxembourg or any other relevant clearing system
in relation to any matter;
11.1.6
Noteholders as a class : whenever in this Trust Deed the Trustee is required in connection with any exercise of its
powers, trusts, authorities or discretions to have regard to the interests of the Noteholders, it shall have regard to the interests
of the Noteholders as a class and in particular, but without prejudice to the generality of the foregoing, shall not be obliged to
have regard to the consequences of such exercise for any individual Noteholder resulting from his or its being for any purpose
domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory;
11.1.7
Trustee not responsible for investigations : the Trustee shall not be responsible for, or for investigating any matter which
is the subject of, any recital, statement, representation, warranty or covenant of any person contained in this Trust Deed, the
Notes or any other agreement or document relating to the transactions herein or therein contemplated or for the execution,
legality, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in evidence thereof;
11.1.8
No Liability as a result of the delivery of a certificate : the Trustee shall have no Liability whatsoever for any loss, cost,
damages or expenses directly or indirectly suffered or incurred by an Issuer, the relevant Guarantors, any Noteholder,
Couponholder or any other person as a result of the delivery by the Trustee to an Issuer of a certificate as to material prejudice
pursuant to Condition 13 ( Events of Default ) on the basis of an opinion formed by it in good faith;
11.1.9
No obligation to monitor : the Trustee shall be under no obligation to monitor or supervise the functions of any other
person under the Notes or any other agreement or document relating to the transactions herein or therein contemplated and
shall be entitled, in the absence of actual knowledge of a breach of obligation, to assume that each such person is properly
performing and complying with its obligations;
11.1.10
Notes held by an Issuer etc : in the absence of knowledge or express notice to the contrary, the Trustee may assume
without enquiry (other than requesting a certificate of the relevant Issuer or relevant Guarantor under sub-clause 7.8 ( Notes
held by the Issuers and the Guarantors ), that no Notes are for the time being held by or for the benefit of such Issuer or such
Guarantor or any Subsidiary of such Issuer or such Guarantor;
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11.1.11
Forged Notes : the Trustee shall not be liable to any Issuer, any Guarantor or any Noteholder or Couponholder by reason
of having accepted as valid or not having rejected any Note or Coupon as such and subsequently found to be forged or not
authentic;
11.1.12
Events of Default : the Trustee shall not be bound to give notice to any person of the execution of this Trust Deed or to
take any steps to ascertain whether any Event of Default or Potential Event of Default has happened and, until it shall have
actual knowledge or express notice to the contrary, the Trustee shall be entitled to assume that no such Event of Default or
Potential Event of Default has happened and that each of the Issuers and each of the Guarantors is observing and performing
all the obligations on its part contained in the Notes and Coupons and under this Trust Deed and no event has happened as a
consequence of which any of the Notes may become repayable;
11.1.13
Legal Opinions : the Trustee shall not be responsible to any person for failing to request, require or receive any legal
opinion relating to any Notes or for checking or commenting upon the content of any such legal opinion;
11.1.14
Programme Limit : the Trustee shall not be concerned, and need not enquire, as to whether or not any Notes are issued
in breach of the Programme Limit;
11.1.15
Trustee not Responsible: the Trustee shall not be responsible for the execution, delivery, legality, effectiveness,
adequacy, genuineness, validity, enforceability or admissibility in evidence of this Trust Deed or any other document relating
thereto and shall not be liable for any failure to obtain any rating of Notes (where required), any licence, consent or other
authority for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity, performance, enforceability or
admissibility in evidence of this Trust Deed or any other document relating thereto. In addition the Trustee shall not be
responsible for the effect of the exercise of any of its powers, duties and discretions hereunder;
11.1.16
Freedom to Refrain: notwithstanding anything else herein contained, the Trustee may refrain from doing anything
which would or might in its opinion be contrary to any law of any jurisdiction or any directive or regulation of any agency or
any state of which would or might otherwise render it liable to any person and may do anything which is, in its opinion,
necessary to comply with any such law, directive or regulation; and
11.1.17
Right to Deduct or Withhold: notwithstanding anything contained in this Trust Deed, to the extent required by any
applicable law, if the Trustee is or will be required to make any deduction or withholding from any distribution or payment
made by it hereunder or if the Trustee is or will be otherwise charged to, or is or may become liable to, tax as a consequence
of performing its duties hereunder whether as principal, agent or otherwise, and whether by reason of any assessment,
prospective assessment or other imposition of liability to taxation of whatsoever nature and whensoever made upon the
Trustee, and whether in connection with or arising from any sums received or distributed by it or to which it may be entitled
under this Trust Deed (other than in connection
29
with its remuneration as provided for herein) or any investments or deposits from time to time representing the same,
including any income or gains arising therefrom or any action of the Trustee in connection with the trusts of this Trust Deed
(other than the remuneration herein specified) or otherwise, then the Trustee shall be entitled to make such deduction or
withholding or, as the case may be, to retain out of sums received by it an amount sufficient to discharge any liability to tax
which relates to sums so received or distributed or to discharge any such other liability of the Trustee to tax from the funds
held by the Trustee upon the trusts of this Trust Deed.
11.2
Trustee’s powers and duties
11.2.1
Trustee’s determination : The Trustee may determine whether or not a default in the performance or observance by an
Issuer or a Guarantor of any obligation under the provisions of this Trust Deed or contained in the Notes or Coupons is
capable of remedy and if the Trustee shall certify that any such default is, in its opinion, not capable of remedy such
certificate shall be conclusive and binding upon such Issuer, such Guarantor, the Noteholders and the Couponholders;
11.2.2
Determination of questions : the Trustee as between itself and the Noteholders and the Couponholders shall have full
power to determine all questions and doubts arising in relation to any of the provisions of this Trust Deed and every such
determination, whether made upon a question actually raised or implied in the acts or proceedings of the Trustee, shall be
conclusive and shall bind the Trustee, the Noteholders and the Couponholders;
11.2.3
Trustee’s discretion : the Trustee shall (save as expressly otherwise provided herein) as regards all the trusts, powers,
authorities and discretions vested in it by this Trust Deed or by operation of law have absolute and uncontrolled discretion as
to the exercise or non-exercise thereof and the Trustee shall not be responsible for any Liability that may result from the
exercise or non-exercise thereof but, whenever the Trustee is under the provisions of this Trust Deed bound to act at the
request or direction of the Noteholders, the Trustee shall nevertheless not be so bound unless first indemnified and/or
provided with security to its satisfaction against all actions, proceedings, claims and demands to which it may render itself
liable and all costs, charges, damages, expenses and liabilities which it may incur by so doing;
11.2.4
Trustee’s consent : any consent given by the Trustee for the purposes of this Trust Deed may be given on such terms
and subject to such conditions (if any) as the Trustee may require;
11.2.5
Conversion of currency : where it is necessary or desirable for any purpose in connection with this Trust Deed to convert
any sum from one currency to another it shall (unless otherwise provided by this Trust Deed or required by law) be converted
at such rate(s) of exchange, in accordance with such method and as at such date for the determination of such rate(s) of
exchange as may be specified by the Trustee in its absolute discretion as relevant but having regard to the current rates of
exchange and any rate of exchange, method and date so
30
specified shall be binding on the relevant Issuer, the relevant Guarantors, the Noteholders and the Couponholders;
11.2.6
Application of proceeds : the Trustee shall not be responsible for the receipt or application by any Issuer of the proceeds
of the issue of the Notes, the exchange of any Temporary Global Note for any Permanent Global Note or Notes in definitive
form, the exchange of any Permanent Global Note for Notes in definitive form, or the delivery of any Note or Coupon to the
persons entitled to them;
11.2.7
Error of judgment : the Trustee shall not be liable for any error of judgment made in good faith by any officer or
employee of the Trustee assigned by the Trustee to administer its corporate trust matters;
11.2.8
Agents : the Trustee may, in the conduct of the trusts of this Trust Deed instead of acting personally, employ and pay an
agent on any terms, whether or not a lawyer or other professional person, to transact or conduct, or concur in transacting or
conducting, any business and to do or concur in doing all acts required to be done by the Trustee (including the receipt and
payment of money) and the Trustee shall not be responsible for any loss, liability, expense, demand, cost, claim or
proceedings incurred by reason of the misconduct, omission or default on the part of any person appointed by it hereunder or
be bound to supervise the proceedings or acts of any such person, provided that the Trustee shall have exercised reasonable
care in selecting such person.
11.2.9
Delegation : the Trustee may, in the execution and exercise of all or any of the trusts, powers, authorities and
discretions vested in it by this Trust Deed, act by responsible officer(s) for the time being of the Trustee and the Trustee may
also whenever it thinks fit, whether by power of attorney or otherwise, delegate to any person(s) or fluctuating body of
persons (whether being a joint trustee of this Trust Deed or not) all or any of the trusts, powers, authorities and discretions
vested in it by this Trust Deed and any such delegation may be made upon such terms and conditions and subject to such
regulations (including power to sub-delegate with the consent of the Trustee) as the Trustee may think fit in the interests of
the Noteholders and the Trustee shall not be bound to supervise the proceedings or acts of and shall not in any way or to any
extent be responsible for any loss, liability, expense, demand, cost, claim or proceedings incurred by reason of the
misconduct, omission or default on the part of such delegate or sub-delegate, provided that the Trustee shall have exercised
reasonable care in selecting such person;
11.2.10
Custodians and nominees: the Trustee may appoint and pay any person to act as a custodian or nominee on any terms in
relation to such assets of the trust as the Trustee may determine, including for the purpose of depositing with a custodian this
Trust Deed or any document relating to the trust created hereunder and the Trustee shall not be responsible for any loss,
liability, expense, demand, cost, claim or proceedings incurred by reason of the misconduct, omission or default on the part of
any person appointed by it hereunder or be bound to supervise the
31
proceedings or acts of any such person; the Trustee is not obliged to appoint a custodian if the Trustee invests in securities
payable to bearer, provided that the Trustee shall have exercised reasonable care in selecting such person; and
11.2.11
11.3
Confidential information : the Trustee shall not (unless required by law or ordered so to do by a court of competent
jurisdiction) be required to disclose to any Noteholder or Couponholder confidential information or other information made
available to the Trustee by the relevant Issuer or the relevant Guarantor in connection with this Trust Deed and no Noteholder
or Couponholder shall be entitled to take any action to obtain from the Trustee any such information.
Financial matters
11.3.1
Professional charges : any trustee being a banker, lawyer, broker or other person engaged in any profession or business
shall be entitled to charge and be paid all usual professional and other charges for business transacted and acts done by him or
his partner or firm on matters arising in connection with the trusts of this Trust Deed and also his properly incurred charges in
addition to disbursements for all other work and business done and all time spent by him or his partner or firm on matters
arising in connection with this Trust Deed, including matters which might or should have been attended to in person by a
trustee not being a banker, lawyer, broker or other professional person;
11.3.2
Expenditure by the Trustee : nothing contained in this Trust Deed shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of its duties or the exercise of any right, power, authority or
discretion hereunder if it has grounds for believing the repayment of such funds or adequate indemnity against, or security
for, such risk or liability is not reasonably assured to it; and
11.3.3
Trustee may enter into financial transactions with an Issuer : no Trustee and no director or officer of any corporation
being a Trustee hereof shall by reason of the fiduciary position of such Trustee be in any way precluded from making any
contracts or entering into any transactions in the ordinary course of business with any Issuer, any Guarantor or any Subsidiary
of an Issuer or a Guarantor, or any person or body corporate directly or indirectly associated with any Issuer, any Guarantor
or any Subsidiary of an Issuer or a Guarantor, or from accepting the trusteeship of any other debenture stock, debentures or
securities of any Issuer, any Guarantor or any Subsidiary of an Issuer or a Guarantor or any person or body corporate directly
or indirectly associated with any Issuer, any Guarantor or any Subsidiary of an Issuer or a Guarantor, and neither the Trustee
nor any such director or officer shall be accountable to the Noteholders, the Couponholders, the Issuers, the Guarantors or any
Subsidiaries of an Issuer or a Guarantor, or any person or body corporate directly or indirectly associated with an Issuer, a
Guarantor or any Subsidiaries of an Issuer or a Guarantor, for any profit, fees, commissions, interest, discounts or share of
brokerage earned, arising or resulting from any such contracts or transactions and the Trustee and any such director or officer
shall also be at liberty to retain the same for its or his own benefit.
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11.4
Disapplication
Section 1 of the Trustee Act 2000 shall not apply to the duties of the Trustee in relation to the trusts constituted by this Trust Deed.
Where there are any inconsistencies between the Trustee Acts and the provisions of this Trust Deed, the provisions of this Trust Deed
shall, to the extent allowed by law, prevail and, in the case of any such inconsistency with the Trustee Act 2000, the provisions of this
Trust Deed shall constitute a restriction or exclusion for the purposes of that Act.
11.5
Trustee liable for negligence
None of the provisions of this Trust Deed shall in any case in which the Trustee has failed to show the degree of care and diligence
required by it as trustee, having regard to the provisions of this Trust Deed conferring on the Trustee any powers, authorities or
discretions, relieve or indemnify the Trustee against any liability for breach of trust or any liability which by virtue of any rule of law
would otherwise attach to it in respect of any negligence, wilful default, breach of duty or breach of trust of which it may be guilty in
relation to its duties under this Trust Deed.
12.
COSTS AND EXPENSES
12.1
Remuneration
12.1.1
Normal remuneration: The relevant Issuer or, failing whom, the relevant Guarantors, shall pay to the Trustee
remuneration for its services as trustee as from the date of this Trust Deed, such remuneration to be at such rate as may from
time to time be agreed between such Issuer and the Trustee. Such remuneration shall be payable in advance on the
anniversary of the date hereof in each year and the first payment shall be made on the date hereof. Such remuneration shall
accrue from day to day and be payable (in priority to payments to the Noteholders or Couponholders up to and including the
date when, all the Notes having become due for redemption, the redemption moneys and interest thereon to the date of
redemption have been paid to the Principal Paying Agent or the Trustee, provided that if upon due presentation (if required
pursuant to the Conditions) of any Note, payment of the moneys due in respect thereof is improperly withheld or refused,
remuneration will commence again to accrue).
12.1.2
Extra remuneration: In the event of the occurrence of an Event of Default or a Potential Event of Default or the
Trustee considering it expedient or necessary or being requested by an Issuer or a Guarantor to undertake duties which the
Trustee and such Issuer or such Guarantor agree to be of an exceptional nature or otherwise outside the scope of the normal
duties of the Trustee under this Trust Deed, such Issuer or, failing whom, the relevant Guarantors, shall pay to the Trustee
such additional remuneration as shall be agreed between them.
12.1.3
Value added tax: The relevant Issuer or, failing whom, the relevant Guarantors, shall in addition pay to the Trustee an
amount equal to the amount of any value added tax or similar tax chargeable in respect of its remuneration under this Trust
Deed.
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12.1.4
Failure to agree:
(a)
(b)
In the event of the Trustee and the relevant Issuer or Guarantor failing to agree:
(in a case to which sub-clause 12.1.1 applies) upon the amount of the remuneration; or
(in a case to which sub-clause 12.1.2 applies) upon whether such duties shall be of an exceptional nature or
otherwise outside the scope of the normal duties of the Trustee under this Trust Deed, or upon such additional
remuneration,
such matters shall be determined by an investment bank (acting as an expert and not as an arbitrator) selected by the Trustee
and approved by the relevant Issuer or, failing such approval, nominated (on the application of the Trustee) by the President
for the time being of The Law Society of England and Wales (the expenses involved in such nomination and the fees of such
investment bank being payable by such Issuer or, failing whom, the relevant Guarantors) and the determination of any such
investment bank shall be final and binding upon the Trustee, the Issuers and the Guarantors.
12.1.5
Expenses : The relevant Issuer or, failing whom, the relevant Guarantors shall also pay or discharge all costs, charges
and expenses properly incurred by the Trustee in relation to the preparation and execution of, the exercise of its powers and
the performance of its duties under, and in any other manner in relation to, this Trust Deed, including but not limited to legal
and travelling expenses and any stamp, issue, registration, documentary and other taxes or duties paid or payable by the
Trustee in connection with any action taken or contemplated by or on behalf of the Trustee for enforcing, or resolving any
doubt concerning, or for any other purpose in relation to, this Trust Deed.
12.1.6
Indemnity : The relevant Issuer or, failing whom, the relevant Guarantors shall following a request from the Trustee,
indemnify the Trustee (a) in respect of all liabilities and expenses incurred (both before and after a request) by it or by any
Appointee or other person appointed by it to whom any trust, power, authority or discretion may be delegated by it in the
execution or purported execution of the trusts, powers, authorities or discretions vested in it by this Trust Deed and (b) against
all liabilities, actions, proceedings, costs, claims and demands in respect of any matter or thing done or omitted in any way
relating to this Trust Deed (both before and after a request from the Trustee) provided that it is expressly stated that
Clause 11.5 ( Trustee liable for negligence ) shall apply in relation to these provisions.
12.1.7
Payment of amounts due : All amounts payable pursuant to sub-clause 12.1.5 ( Expenses ) and 12.1.6 ( Indemnity ) shall
be payable by the relevant Issuers or, failing whom, the relevant Guarantors on the date specified in a demand by the Trustee
and in the case of payments actually made by the Trustee prior to such demand shall carry interest at the rate of three per cent.
per annum above the base rate from time to time of The Royal Bank of Scotland plc from the date specified in such demand,
and in all other cases shall (if not paid on the date
34
specified in such demand or, if later, within three days after such demand and, in either case, the Trustee so requires) carry
interest at such rate from the date specified in such demand. All remuneration payable to the Trustee shall carry interest at
such rate from the due date thereof.
12.2
12.1.8
Apportionment of expenses : The Trustee shall apportion the costs, charges, expenses and liabilities incurred by the
Trustee in the preparation and execution of the trusts of this Trust Deed (including remuneration of the Trustee) between the
several Series of Notes in such manner and in such amounts as it shall, in its absolute discretion, consider appropriate.
12.1.9
Discharges : Unless otherwise specifically stated in any discharge of this Trust Deed the provisions of this Clause 12.1
( Remuneration ) shall continue in full force and effect notwithstanding such discharge.
12.1.10
Payments: All payments to be made by an Issuer or a Guarantor to the Trustee under this Trust Deed shall be made free
and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever
nature imposed, levied, collected, withheld or assessed by or within any relevant jurisdiction or any authority therein or
thereof having power to tax, unless such withholding or deduction is required by law. In that event, the relevant Issuer or the
relevant Guarantor, shall pay such additional amounts as would have been received by it had no such withholding or
deduction been required.
Stamp duties
The relevant Issuer or, failing whom, the relevant Guarantors will pay all stamp duties, registration taxes, capital duties and other
similar duties or taxes (if any) payable in the United Kingdom or The Netherlands or the Hellenic Republic on (a) the constitution and
issue of the Notes, (b) the initial delivery of the Notes, (c) any action taken by the Trustee (or any Noteholder or Couponholder where
permitted or required under this Trust Deed so to do) to enforce the provisions of the Notes or this Trust Deed and (d) the execution of
this Trust Deed. If the Trustee (or any Noteholder or Couponholder where permitted under this Trust Deed so to do) shall take any
proceedings against an Issuer or a Guarantor in any other jurisdiction and if for the purpose of any such proceedings this Trust Deed or
any Notes is taken into any such jurisdiction and any stamp duties or other duties or taxes become payable thereon in any such
jurisdiction, the relevant Issuer will pay (or reimburse the person making payment of) such stamp duties or other duties or taxes
(including penalties).
12.3
Exchange rate indemnity
12.3.1
Currency of Account and Payment : The Contractual Currency is the sole currency of account and payment for all sums
payable by the relevant Issuer under or in connection with this Trust Deed, the Notes and the Coupons including damages;
12.3.2
Extent of Discharge : An amount received or recovered in a currency other than the Contractual Currency (whether as a
result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding up or dissolution
35
of an Issuer, a Guarantor or otherwise) by the Trustee or any Noteholder or Couponholder in respect of any sum expressed to
be due to it from such Issuer and/or such Guarantor will only discharge such Issuer and/or such Guarantor to the extent of the
Contractual Currency amount which the recipient is able to purchase with the amount so received or recovered in that other
currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date
on which it is practicable to do so); and
12.3.3
12.4
Indemnity : If that Contractual Currency amount is less than the Contractual Currency amount expressed to be due to
the recipient under this Trust Deed or the Notes or the Coupons, the relevant Issuer or, failing whom, the relevant Guarantors
will indemnify it against any liability sustained by it as a result. In any event, such Issuer will indemnify the recipient against
the cost of making any such purchase.
Indemnities separate
The indemnities in this Clause 12 constitute separate and independent obligations from the other obligations in this Trust Deed, will
give rise to separate and independent causes of action, will apply irrespective of any indulgence granted by the Trustee and/or any
Noteholder or Couponholder and will continue in full force and effect despite any judgment, order, claim or proof for a liquidated
amount in respect of any sum due under this Trust Deed or the Notes or the Coupons or any other judgment or order. Any such
Liability as referred to in sub-clause 12.3.3 ( Indemnity ) shall be deemed to constitute a Liability suffered by the Trustee, the
Noteholders and the Couponholders and no proof or evidence of any actual Liability shall be required by the Issuers or the relevant
Guarantors or their liquidator or liquidators.
13.
APPOINTMENT AND RETIREMENT
13.1
Appointment of Trustees
The power of appointing new trustees of this Trust Deed shall be vested in the relevant Issuer but no person shall be appointed who
shall not previously have been approved by an Extraordinary Resolution of the Noteholders of the relevant Issuer. A trust corporation
may be appointed sole trustee hereof but subject thereto there shall be at least two trustees hereof one at least of which shall be a trust
corporation. Any appointment of a new trustee hereof shall as soon as practicable thereafter be notified by the Issuers to the Agents
and the Noteholders. The Noteholders shall together have the power, exercisable by Extraordinary Resolution, to remove any trustee
or trustees for the time being hereof. The removal of any trustee shall not become effective unless there remains a trustee hereof (being
a trust corporation) in office after such removal or until a trust corporation is appointed as successor.
36
13.2
Co-trustees
Notwithstanding the provisions of Clause 13.1 ( Appointment of Trustees ), the Trustee may, upon giving prior notice to the Issuers and
the Guarantors but without the consent of the Issuers, the Guarantors or the Noteholders or the Couponholders, appoint any person
established or resident in any jurisdiction (whether a trust corporation or not) to act either as a separate trustee or as a co-trustee jointly
with the Trustee:
13.2.1
13.3
if the Trustee considers such appointment to be in the interests of the Noteholders or the Couponholders; or
13.2.2
for the purposes of conforming to any legal requirements, restrictions or conditions in any jurisdiction in which any
particular act or acts are to be performed; or
13.2.3
for the purposes of obtaining a judgment in any jurisdiction or the enforcement in any jurisdiction either of a judgment
already obtained or of this Trust Deed.
Attorneys
The Issuers and the Guarantors each hereby irrevocably appoints the Trustee to be its attorney in its name and on its behalf to execute
any such instrument of appointment. Such a person shall (subject always to the provisions of this Trust Deed) have such trusts,
powers, authorities and discretions (not exceeding those conferred on the Trustee by this Trust Deed) and such duties and obligations as
shall be conferred on such person or imposed by the instrument of appointment. The Trustee shall have power in like manner to
remove any such person. Such proper remuneration as the Trustee may pay to any such person, together with any attributable costs,
charges and expenses incurred by it in performing its function as such separate trustee or co-trustee, shall for the purposes of this Trust
Deed be treated as costs, charges and expenses incurred by the Trustee.
13.4
Retirement of Trustees
Any Trustee for the time being of this Trust Deed may retire at any time upon giving not less than three calendar months’ notice in
writing to the Issuers and the Guarantors without assigning any reason therefor and without being responsible for any costs occasioned
by such retirement. The retirement of any Trustee shall not become effective unless there remains a trustee hereof (being a trust
corporation) in office after such retirement. The Issuers and the Guarantors each hereby covenant that in the event of the only trustee
hereof which is a trust corporation giving notice under this Clause it shall use its best endeavours to procure a new trustee, being a trust
corporation, to be appointed and if the Issuers do not procured the appointment of a new trustee within 30 days of the expiry of the
Trustee notice referred to in this Clause 13.4, the Trustee shall be entitled to procure forthwith a new trustee.
13.5
Competence of a majority of Trustees
Whenever there shall be more than two trustees hereof the majority of such trustees shall (provided such majority includes a trust
corporation) be competent to execute and exercise all the trusts, powers, authorities and discretions vested by this Trust Deed in the
Trustee generally.
37
13.6
Powers additional
The powers conferred by this Trust Deed upon the Trustee shall be in addition to any powers which may from time to time be vested in
it by general law or as the holder of any of the Notes, the Receipts or the Coupons.
13.7
Merger
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Clause, without the execution or filing of any paper or any further act on the part of any of
the parties hereto.
14.
NOTICES
14.1
Addresses for notices
All notices and other communications hereunder shall be made in writing and in English (by letter, telex or fax) and shall be sent as
follows:
14.1.1
Issuers :
(a)
If to Coca-Cola HBC Finance PLC, to it at:
Coca-Cola HBC Finance PLC
9 Fragoklissias Street
151 25 Maroussi
Athens
Greece
Fax:
Attention:
(b)
+30 210 618 3378
Grant Millard
If to Coca-Cola HBC Finance B.V., to it at:
Coca-Cola HBC Finance B.V.
Prins Bernhardplein 200
1097 JB Amsterdam
The Netherlands
Fax:
Attention:
+312 0527 1986
Yvonne Theuns
38
14.1.2
Trustee:
if to the Trustee, to it at:
Citicorp Trustee Company Limited
14 th Floor
Citigroup Centre
Canada Square
London E14 5LB
Fax:
+44 20 7500 5248
Attention:
14.1.3
Guarantors:
Agency & Trust
if to Coca-Cola HBC Finance PLC to it at:
Coca-Cola HBC Finance PLC
9 Fragoklissias Street
15 125 Maroussi
Athens
Greece
Fax:
+30 210 618 3378
Attention:
Grant Millard
14.1.4
Guarantors:
if to Coca-Cola Hellenic Bottling Company S.A. to it at:
Coca-Cola Hellenic Bottling Company S.A.
9 Fragoklissias Street
151 25 Maroussi
Athens
Greece
Fax:
+30 210 618 3378
Attention:
Kostas Sfakakis
14.1.5
Guarantors:
if to Coca-Cola HBC Finance B.V. to it at:
Coca-Cola HBC Finance B.V.
Prins Bernhardplein 200
1097 JB Amsterdam
The Netherlands
14.1.6
Fax:
+312 0527 1986
Attention:
Yvonne Theuns
A notice sent to an Issuer or a Guarantor should be copied to:
Coca-Cola Hellenic Bottling Company S.A.
9 Fragoklissias Street
151 25 Maroussi
39
Athens
Greece
Fax:
+30 210 618 3378
Attention:
14.2
Kostas Sfakakis
Effectiveness
Every notice or other communication sent in accordance with Clause 14.1 shall be effective as follows:
14.2.1
14.2.2
Letter or fax : if sent by letter, it shall be deemed to have been delivered 7 days after the time of despatch and if sent by
fax it shall be deemed to have been delivered at the time of despatch; and
Telex : if sent by telex, upon receipt by the sender of the addressee’s answerback at the end of transmission;
provided that any such notice or other communication which would otherwise take effect after 4.00 p.m. on any particular day shall
not take effect until 10.00 a.m. on the immediately succeeding business day in the place of the addressee.
14.3
No Notice to Couponholders
Neither the Trustee nor the Issuers nor Guarantors shall be required to give any notice to the Couponholders for any purpose under this
Trust Deed and the Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the
Noteholders in accordance with Condition 19.
15.
LAW AND JURISDICTION
15.1
Governing Law
This Trust Deed and the Notes and all matters arising from or connected with them shall be governed by, and construed in accordance
with, English law.
15.2
English Courts
The courts of England have exclusive jurisdiction to settle any disputes (a “ Dispute ”), arising from or connected with this Trust Deed
or the Notes (including a dispute regarding the existence, validity or termination of this Trust Deed or the Notes) or the consequences of
their nullity.
15.3
Appropriate forum
The parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and, accordingly that they
will not argue to the contrary.
15.4
Rights of the Trustee and Noteholders to take proceedings outside England
Clause 15.2 ( English Courts ) is for the benefit of the Trustee and the Noteholders only. As a result, nothing in this Clause 15 ( Law
and Jurisdiction ) prevents the Trustee and any of the Noteholders from taking proceedings relating to a Dispute (“ Proceedings ”) in
any other courts with jurisdiction. To the extent allowed by law, the Trustee or any of the Noteholders may take concurrent
Proceedings in any number of jurisdictions.
40
15.5
Process agent
The Issuers and the Guarantors each agree that the documents which start any Proceedings and any other documents required to be
served in relation to those Proceedings may be served on it by being delivered to Coca-Cola HBC Finance PLC at One Silk Street,
London EC2Y 8HQ or if different, its registered office for the time being or at any other address of the Issuers or the Guarantors in
Great Britain at which process may be served on such person in accordance with Part XXIII of the Companies Act 1985. If such
person is not or ceases to be effectively appointed to accept service of process on behalf of the Issuers and the Guarantors, the Issuers
and the Guarantors (acting together) shall, on the written demand of the Trustee, appoint a further person in England to accept service
of process on their behalf and, failing such appointment within 15 days, the Trustee shall be entitled to appoint such a person by written
notice addressed to the Issuers and the Guarantors. Nothing in this paragraph shall affect the right of the Trustee or (when they are
entitled to do so) any of the Noteholders to serve process in any other manner permitted by law. This clause applies to Proceedings in
England and to Proceedings elsewhere but not to proceedings in The Netherlands.
15.6
Power of Attorney
If Coca-Cola HBC Finance B.V. is represented by an attorney or attorneys in connection with the signing and/or execution and/or
delivery of this Trust Deed or any agreement or document referred to herein or made pursuant hereto and the relevant power or powers
of attorney is or are expressed to be governed by the laws of The Netherlands, it is hereby expressly acknowledged and accepted by the
other parties hereto that such laws shall govern the existence and extent of such attorney’s or attorney’s authority and the effects of the
exercise thereof.
16.
SEVERABILITY
In case any provision in or obligation under this Trust Deed shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
17.
CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any provision of this Trust Deed under the Contracts (Rights of Third Parties) Act 1999.
18.
Counterparts
This Trust Deed may be executed in any number of counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF this Trust Deed has been executed as a deed by the parties hereto and is intended to be and is hereby
delivered on the date first before written.
41
SCHEDULE 1
TERMS AND CONDITIONS
42
3#(%$5,% _
Part A
Form Of Temporary Global Note
Series Number: [
]
Serial Number: [
[Tranche Number: [
]
]]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED
STATES INCOME TAX LAWS, INCLUDING LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED
STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED.
[COCA-COLA HBC FINANCE PLC
COCA-COLA HBC FINANCE B.V.](1)
irrevocably and unconditionally guaranteed by
[COCA-COLA HELLENIC BOTTLING COMPANY S.A.]
[COCA-COLA HBC FINANCE PLC]
[COCA-COLA HBC FINANCE B.V.](2)
EURO MEDIUM TERM NOTE PROGRAMME
TEMPORARY GLOBAL NOTE
representing up to
[ Aggregate principal amount of Tranche ]
[ Title of Notes ]
This global Note is a Temporary Global Note without interest coupons issued in respect of an issue of [ aggregate principal amount of Tranche
] in aggregate principal amount of [ title of Notes ] (the “ Notes ”) by [Coca-Cola HBC Finance PLC / Coca-Cola HBC Finance B.V. (with its
corporate seat in Amsterdam)] (the “ Issuer ”).
This Temporary Global Note is issued subject to and in accordance with the Conditions and an amended and restated trust deed (as amended,
supplemented or restated from time to time, the “ Trust Deed ”) dated 30 May 2007 between the [Issuer, [Coca-Cola HBC Finance PLC /
Coca-Cola HBC Finance B.V.] and Coca-Cola Hellenic Bottling Company S.A. and [Coca-Cola HBC Finance PLC/Coca-Cola HBC Finance
B.V.] as Guarantors and Citicorp Trustee Company Limited as Trustee (the “ Trustee ”, which expression includes all persons for the time
being
(1) Delete as Applicable
(2) Delete as Applicable
43
appointed Trustee or Trustees under the Trust Deed) and is subject to an amended and restated paying agency agreement (as amended,
supplemented or restated from time to time, the “ Paying Agency Agreement ”) dated 30 May 2007 between the Issuer, [Coca-Cola HBC
Finance PLC / Coca-Cola HBC Finance B.V.] and Coca-Cola Hellenic Bottling Company S.A. and [Coca-Cola HBC Finance PLC/Coca-Cola
HBC Finance B.V.] as Guarantors, Citibank, N.A., the Trustee and certain other financial institutions names therein. References herein to the “
Conditions ” shall be to the Terms and Conditions of the Notes as set out in Schedule 1 to the Trust Deed as supplemented, replaced and
modified by the final terms applicable to the Notes (the “ Final Terms ”) but, in the event of any conflict between the provisions of the
Conditions and the information in the Final Terms, the Final Terms will prevail. Words and expressions defined in the Conditions shall bear
the same meanings when used in this Temporary Global Note.
The Issuer for value received promises, subject as hereinafter provided and subject to and in accordance with the Conditions and the Trust
Deed, to pay to the bearer hereof on the Maturity Date or on such earlier date as the same may become payable in accordance therewith, the
amount payable under the Conditions in respect of such Notes on each such date or, in the case of instalment notes, in respect of each such
Note for the time being from time to time represented hereby, such instalment amounts on such dates as may be specified in the Conditions,
and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this Temporary Global Note calculated and
payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed, upon
presentation and, at maturity, surrender of this Temporary Global Note at the specified office of the Principal Paying Agent or such other
specified office as may be specified for this purpose in accordance with the Conditions or at the specified office of any of the other Paying
Agents located outside the United States from time to time appointed by the Issuer in respect of the Notes.
Except as specified herein, the bearer of this Temporary Global Note is entitled to the benefit of the Conditions and of the same obligations on
the part of the Issuer as if such bearer were the bearer of the Notes represented hereby and to the benefit of those provisions of the Conditions
(and the obligations on the part of the Issuer contained therein) applicable specifically to Temporary Global Notes, and all payments under and
to the bearer of this Temporary Global Note shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in
respect of the Notes.
Subject as provided in the Conditions with respect to Partly Paid Notes, on or after the expiry of the period that ends forty days after
completion of the distribution of this Tranche of Notes as certified by the relevant Dealer(s) to the Principal Paying Agent (the “ Distribution
Compliance Period ”), this Temporary Global Note may be exchanged for, as specified in the relevant Final Terms, either Definitive Bearer
Notes in substantially the form set out in Schedule 2 of the Trust Deed or a Permanent Global Note substantially in the form set out in Schedule
2 of the Trust Deed. An exchange for Definitive Bearer Notes or, as the case may be, a Permanent Global Note will be made only on or after
the end of the Distribution Compliance Period and upon presentation or, as the case may be, surrender of this Temporary Global Note to the
Principal Paying Agent at its specified office and upon and to the extent of delivery to the Principal Paying Agent of a certificate or certificates
issued by Euroclear Bank S.A./N.V. (“ Euroclear ”) or Clearstream Banking, société anonyme (“ Clearstream, Luxembourg ”) or any other
relevant clearing system and dated not earlier than the end of the Distribution Compliance Period in
44
substantially the form set out in Annex 1 hereto or, as the case may be, in the form that is customarily issued in such circumstances by such
other clearing system. Any Definitive Bearer Notes will be made available for collection by the persons entitled thereto at the specified office
of the Principal Paying Agent.
The bearer of this Temporary Global Note shall not (unless, upon due presentation of this Temporary Global Note for exchange for a
Permanent Global Note or for delivery of Definitive Bearer Notes, such exchange or delivery is improperly withheld or refused and such
withholding or refusal is continuing at the relevant payment date) be entitled to receive any payment in respect of the Notes represented by this
Temporary Global Note which falls due on or after the end of the Distribution Compliance Period or be entitled to exercise any option on a date
after the end of the Distribution Compliance Period.
Payments of interest otherwise falling due before the end of the Distribution Compliance Period will be made only upon presentation of this
Temporary Global Note at the specified office of any of the Paying Agents outside the United States and upon and to the extent of delivery to
the relevant Paying Agent of a certificate or certificates issued by Euroclear or Clearstream, Luxembourg or by any other relevant clearing
system and dated not earlier than the relevant interest payment date in substantially the form set out in Annex II hereto or, as the case may be,
in the form that is customarily issued in such circumstances by such other clearing system.
On any occasion on which a payment of interest is made in respect of this Temporary Global Note the Issuer shall procure that the same is
noted on the Schedule hereto.
On any occasion on which a payment of principal is made in respect of this Temporary Global Note or on which this Temporary Global Note is
exchanged in whole or in part as aforesaid or on which Notes represented by this Temporary Global Note are to be cancelled or (in the case of
Partly Paid Notes) forfeited, the Issuer shall procure that (i) the aggregate principal amount of the Notes in respect of which such payment is
made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive form or which are to be cancelled
or forfeited and (ii) the remaining principal amount of this Temporary Global Note (which shall be the previous principal amount hereof less
the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Temporary Global Note shall for
all purposes be as most recently so noted.
On each occasion on which an option is exercised in respect of any Notes represented by this Temporary Global Note, the Issuer shall procure
that the appropriate notations are made on the Schedule hereto.
In the case of Partly Paid Notes, on each occasion that payment is made to the Issuer in accordance with the Conditions in respect of the Notes
represented by this Temporary Global Note, the Issuer shall procure that (i) the aggregate principal amount of such payment and (ii) the
increased principal amount of this Temporary Global Note (which shall be the previous principal amount hereof plus the amount referred to at
(i)) are noted on the Schedule hereto, whereupon the principal amount of this Temporary Global Note shall for all purposes be as most recently
so noted.
Claims in respect of principal and interest (as each is defined in the Conditions) in respect of this Temporary Global Note shall become void
unless it is presented for payment within a
45
period of 10 years (in the case of principal) and 5 years (in the case of interest) after the due date for payment.
The bearer of this Temporary Global Note shall (unless this Temporary Global Note represents only one Note) be treated as two persons for the
purposes of any quorum requirements of a meeting of Holders and, at any such meeting, as having one vote in respect of each principal amount
of Notes equal to the minimum denomination of the Notes for which this Temporary Global Note may be exchanged.
Cancellation of any Note represented by this Temporary Global Note that is required by the Conditions to be cancelled (other than upon its
redemption) shall be effected by reduction in the principal amount of this Temporary Global Note representing such Note on its presentation or
to the order of any Paying Agent for endorsement in the Schedule hereto, whereupon the principal amount hereof shall be reduced for all
purposes by the amount so cancelled and endorsed.
Notes may only be purchased by the Issuer if they are purchased together with the right to receive all future payments of interest and Instalment
Amounts (if any) thereon.
Any option of the Issuer provided for in the Conditions shall be exercised by the Issuer giving notice to the Holders within the time limits set
out in and containing the information required by the Conditions, except that the notice shall not be required to contain the certificate numbers
of Notes drawn in the case of a partial exercise of an option and accordingly no drawing of Notes shall be required.
Any option of the Holders provided for in the Conditions may be exercised by the bearer of this Temporary Global Note giving notice to the
Principal Paying Agent and the Trustee within the time limits relating to the deposit of Notes with a Paying Agent set out in the Conditions
substantially in the form of the notice available from any Paying Agent, except that the notice shall not be required to contain the certificate
numbers of the Notes in respect of which the option has been exercised, and stating the principal amount of Notes in respect of which the
option is exercised and at the same time presenting this Temporary Global Note to a Paying Agent acting on behalf of the Principal Paying
Agent, for notation accordingly in the Schedule hereto.
This Temporary Global Note and all matters arising from or connected with it are governed by, and shall be construed in accordance with,
English law.
This Temporary Global Note shall not be valid for any purpose until authenticated for and on behalf of Citibank, N.A. as Principal Paying
Agent.
46
AS WITNESS the facsimile or manual signature of a duly authorised officer on behalf of the Issuer.
[Coca-Cola HBC Finance PLC / Coca-Cola HBC Finance B.V.]
By:
ISSUED in London as of
AUTHENTICATED for and on behalf of
CITIBANK, N.A. , as
Principal Paying Agent without recourse,
warranty or liability
By:
47
THE SCHEDULE
Payments, Delivery of Definitive Bearer Notes, Exchange for
Permanent Global Note, Exercise of Options, Forfeiture (in the case of Partly Paid Notes)
and Cancellation of Notes
Date of
payment,
delivery,
exchange,
exercise of
option (and
date upon
which
exercise is
effective) or
cancellation
Aggregate
amount of
Partly Paid
Instalments
then paid
(in the case
of Partly
Paid Notes)
Amount of
interest
then paid
Amount of
principal
then paid
Aggregate
principal
amount of
this
Temporary
Global Note
then
exchanged
for the
Permanent
Global Note
Aggregate
principal
amount of
Definitive
Bearer
Notes then
delivered
48
Aggregate
principal
amount of
Notes then
cancelled
or, in the
case of
Partly Paid
Notes,
forfeited
Aggregate
principal
amount in
respect of
which
option is
exercised
Remaining
principal
amount of
this
Temporary
Global Note
Authorised
signature
ANNEX I
[Form of certificate to be given in relation to exchanges of this Temporary Global Note for the Permanent Global Note or Definitive Bearer
Notes:]
[Coca-Cola HBC Finance PLC / Coca-Cola HBC Finance B.V.]
Euro 2,000,000,000 Medium Term Note Programme
[ Aggregate principal amount and title of Notes ]
(the “ Securities ” )
This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member
organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “ Member
Organisations ”) substantially to the effect set forth in the Trust Deed as of the date hereof, [ ] principal amount of the above-captioned
Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, any trust
(if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have
the authority to control all substantial distributions of the trust), any estate the income of which is subject to United States Federal income
taxation regardless of its source (“ United States persons ”), (ii) is owned by United States persons that (a) are foreign branches of United
States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“ financial institutions ”)) purchasing for
their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof (as such terms “acquired
through” and “holding through” are described in U.S. Treasury Regulations Section 1.163-5(c) (2)(i)(D)(6)) foreign branches of United States
financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its
agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions
for purposes of resale during the distribution compliance period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and
to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i)
or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a
person within the United States or its possessions.
As used herein, “ United States ” means the United States of America (including the States and the District of Columbia); and its “ possessions
” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.
We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest)
any portion of the Temporary Global security excepted in such certifications and (ii) that as of the date hereof we have not received any
notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any
portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and
cannot be relied upon as at the date hereof.
49
We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification
is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.
Date:
[
]
[Euroclear Bank S.A./N.V.,/Clearstream Banking, société anonyme ]
By:
[authorised signature]
50
ANNEX II
[Form of certificate to be given in relation to payments of interest falling due before the expiration of the Distribution Compliance Period:]
[COCA-COLA HBC FINANCE PLC / COCA-COLA HBC FINANCE B.V.]
Euro 2,000,000,000 Medium Term Note Programme
[ Aggregate principal amount and title of Notes ]
(the “ Securities ” )
This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member
organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “ Member
Organisations ”) substantially to the effect set forth in the Trust Deed as of the date hereof, [ ] principal amount of the above-captioned
Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, any trust
(if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have
the authority to control all substantial distributions of the trust), any estate the income of which is subject to United States Federal income
taxation regardless of its source (“ United States persons ”), (ii) is owned by United States persons that (a) are foreign branches of United
States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“ financial institutions ”)) purchasing for
their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof (as such terms “acquired
through” and “holding through” are described in U.S. Treasury Regulations Section 1.163-5(c) (2)(i)(D)(6)) foreign branches of United States
financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its
agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions
for purposes of resale during the distribution compliance period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and
to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i)
or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a
person within the United States or its possessions.
[As used herein, “ United States ” means the United States of America (including the States and the District of Columbia); and its “
possessions ” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.]
We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest)
any portion of the Temporary Global security excepted in such certifications and (ii) that as of the date hereof we have not received any
notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any
portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and
cannot be relied upon as at the date hereof.
51
We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification
is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.
Date:
[
]
[Euroclear Bank S.A./N.V./Clearstream Banking, société anonyme ]
By:
[authorised signature]
52
ANNEX III
[Form of account holder’s certification referred to in the preceding certificates:]
[COCA-COLA HBC FINANCE PLC / COCA-COLA HBC FINANCE B.V.]
Euro 2,000,000,000 Medium Term Note Programme
[ Aggregate principal amount and title of Notes ]
(the “ Securities ” )
This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are
owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, any trust (if a court
within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the
authority to control all substantial distributions of the trust), any estate the income of which is subject to the United States Federal income
taxation regardless of its source (“ United States persons ”), (ii) are owned by United States person(s) that (a) are foreign branches of a United
States financial institution (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv)) (“ financial institutions ”) purchasing for their
own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof (as such terms “acquired through”
and “holding through” are described in U.S. Treasury Regulations Section 1.163-5(c) (2)(i) (D)(6)) foreign branches of United States financial
institutions (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that
you may advise the issuer or the issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for
purposes of resale during the distribution compliance period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in
addition if the owner of the Securities is a United States or foreign financial institution described in clause (iii) above (whether or not also
described in clause (i) or (ii)) this is further to certify that such financial institution has not acquired the Securities for purposes of resale
directly or indirectly to a United States person or to a person within the United States or its possessions.
As used herein, “ United States ” means the United States of America (including the States and the District of Columbia); and its “ possessions
” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the
Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such
date, and in the absence of any such notification it may be assumed that this certification applies as of such date.
This certification excepts and does not relate to [ ] of such interest in the above Securities in respect of which we are not able to certify and
as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any rights or collection of any interest)
cannot be made until we do so certify.
53
We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification
is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.
Date:
[
]
[Account Holder] as or as agent for the beneficial owner of the Securities.
By:
[authorised signature]
54
Part B
Form Of Permanent Global Note
Series Number: [
]
Serial Number: [
[Tranche Number: [
]]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED
STATES INCOME TAX LAWS, INCLUDING LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED
STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED.
[COCA-COLA HBC FINANCE PLC
COCA-COLA HBC FINANCE B.V.](1)
irrevocably and unconditionally guaranteed by
[COCA-COLA HELLENIC BOTTLING COMPANY S.A.
COCA-COLA HBC FINANCE PLC
COCA-COLA HBC FINANCE B.V.](2)
EURO MEDIUM TERM NOTE PROGRAMME
PERMANENT GLOBAL NOTE
representing up to
[ Aggregate principal amount of Tranche ]
[ Title of Notes ]
This global Note is a Permanent Global Note without interest coupons issued in respect of an issue of [ aggregate principal amount of Tranche
] in aggregate principal amount of [ title of Notes ] (the “ Notes ”) by [Coca-Cola HBC Finance PLC / Coca-Cola HBC Finance B.V. (with its
corporate seat in Amsterdam)] (the “ Issuer ”).
This Permanent Global Note is issued subject to and in accordance with the Conditions and an amended and restated trust deed (as amended,
supplemented or restated from time to time, the “ Trust Deed ”) dated 30 May 2007 between the Issuer, [Coca-Cola HBC Finance PLC /
Coca-Cola HBC Finance B.V.] and Coca-Cola Hellenic Bottling Company S.A. and [Coca-Cola HBC Finance PLC/Coca-Cola HBC Finance
B.V.] as Guarantors and Citicorp Trustee Company Limited as Trustee (the “ Trustee ”, which expression includes all persons for the time
being appointed Trustee or Trustees under the Trust Deed) and is subject to an amended and restated paying agency agreement (as amended,
supplemented or restated from time to time, the
(1) Delete as Applicable
(2) Delete as Applicable
55
]
“ Agency Agreement ”) dated 30 May 2007 between the Issuer, [Coca-Cola HBC Finance PLC / Coca-Cola HBC Finance B.V.] and
Coca-Cola Hellenic Bottling Company S.A. and [Coca-Cola HBC Finance PLC/Coca-Cola HBC Finance B.V.] as Guarantors, Citibank, N.A.,
the Trustee and certain other financial institutions names therein. References herein to the “Conditions” shall be to the Terms and Conditions
of the Notes as set out in Schedule 1 to the Trust Deed as supplemented, replaced and modified by the final terms applicable to the Notes (the “
Final Terms ”) attached hereto but, in the event of any conflict between the provisions of the Conditions and the information in the Final
Terms, the Final Terms will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this
Permanent Global Note.
The Issuer for value received, subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer upon the
Maturity Date and/or on such earlier date(s) as the same may become due and repayable in accordance therewith, the amount payable under the
Conditions in respect of such Notes on each such date or, in the case of instalment notes, in respect of each such Note for the time being from
time to time represented hereby, such instalment amounts on such dates as may be specified in the Conditions, and to pay interest (if any) on
the nominal amount of the Notes from time to time represented by this Permanent Global Note calculated and payable as provided in the
Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed, upon presentation and, at
maturity, surrender of this Permanent Global Note at the specified office of the Principal Paying Agent or such other specified office as may be
specified for this purpose in accordance with the Conditions or at the specified office of any of the other Paying Agents located outside the
United States from time to time appointed by the Issuer in respect of the Notes.
Except as specified herein, the bearer of this Permanent Global Note is entitled to the benefit of the Conditions and of the same obligations on
the part of the Issuer as if such bearer were the bearer of the Notes represented hereby and to the benefit of those provisions of the Conditions
(and the obligations on the part of the Issuer contained therein) applicable specifically to Permanent Global Notes, and all payments under and
to the bearer of this Permanent Global Note shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in
respect of the Notes.
Interests in this Permanent Global Note may be exchanged in whole, but not in part, for Definitive Bearer Notes substantially in the form set
out in Schedule 2 of the Trust Deed if (a) an Event of Default occurs as set out in Condition 13; (b) either of Euroclear Bank S.A./N.V. (“
Euroclear ”) or Clearstream Banking, société anonyme (“ Clearstream, Luxembourg ”) or any other clearance system by which the Notes
have been accepted for clearing is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces
an intention to cease business permanently or in fact does so; or (c) it is specified in the relevant Final Terms, and upon the bearer’s request; or
(d) if the Issuer, by reason of any change in, or amendment to, the laws of the [ insert the jurisdiction of the Issuer ], is or will be required to
make any deduction or withholding from any payment under the Notes which would not be required if such Notes were in definitive form, such
exchange will be made upon presentation of this Permanent Global Note by the bearer hereof at the specified office from time to time of the
Principal Paying Agent specified above. The aggregate amount of Definitive Bearer Notes issued upon exchange of this Permanent Global
Note will be equal to the aggregate nominal amount of this Permanent Global Note. Whenever this Permanent Global
56
Note is to be exchanged for Definitive Bearer Notes, the Issuer shall procure the prompt delivery of such Definitive Bearer Notes, duly
authenticated and where and to the extent applicable, with Receipts, Coupons and Talons attached in an aggregate principal amount equal to the
principal amount of this Permanent Global Note to the bearer hereof against its surrender at the specified office of the Principal Paying Agent
within 60 days of the bearer requesting such exchange. Upon such exchange this Permanent Global Note shall be cancelled by the Principal
Paying Agent.
On any occasion on which a payment of interest is made in respect of this Permanent Global Note the Issuer shall procure that the same is
noted on the Schedule hereto.
On any occasion on which a payment of principal is made in respect of this Permanent Global Note or on which this Permanent Global Note is
exchanged in whole or in part as aforesaid or on which Notes represented by this Permanent Global Note are to be cancelled or (in the case of
Partly Paid Notes) forfeited, the Issuer shall procure that (i) the aggregate principal amount of the Notes in respect of which such payment is
made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive form or which are to be cancelled
or forfeited and (ii) the remaining principal amount of this Permanent Global Note (which shall be the previous principal amount hereof less the
amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Note shall for all
purposes be as most recently so noted.
In the case of Partly Paid Notes, on each occasion that payment is made to the Issuer in accordance with the Conditions in respect of the Notes
represented by this Permanent Global Note, the Issuer shall procure that (i) the aggregate principal amount of such payment and (ii) the
increased principal amount of this Permanent Global Note (which shall be the previous principal amount hereof plus the amount referred to at
(i)) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Note shall for all purposes be as most recently
so noted.
Insofar as the Temporary Global Note by which the Notes were initially represented has been exchanged in part only for this Permanent Global
Note and is then to be further exchanged as to the remaining principal amount or part thereof for this Permanent Global Note, then upon
presentation of this Permanent Global Note to the Principal Paying Agent at its specified office and to the extent that the aggregate principal
amount of such Temporary Global Note is then reduced by reason of such further exchange, the Issuer shall procure that (i) the aggregate
principal amount of the Notes in respect of which such further exchange is then made and (ii) the new principal amount of this Permanent
Global Note (which shall be the previous principal amount hereof plus the amount referred to at (i) above) are noted on the Schedule hereto,
whereupon the principal amount of this Permanent Global Note shall for all purposes be as most recently noted.
On each occasion on which an option is executed in respect of any Notes represented by this Permanent Global Note, the Issuer shall procure
that the appropriate notations are made on the Schedule hereto.
Claims in respect of principal and interest (as each is defined in the Conditions) in respect of this Permanent Global Note shall become void
unless it is presented for payment within a period
57
of 10 years (in the case of principal) and 5 years (in the case of interest) after the due date for payment.
The bearer of this Permanent Global Note shall (unless this Permanent Global Note represents only one Note) be treated as two persons for the
purposes of any quorum requirements of a meeting of Holders and, at any such meeting, as having one vote in respect of each principal amount
of Notes equal to the minimum denomination of the Notes for which this Permanent Global Note may be exchanged.
Cancellation of any Note represented by this Permanent Global Note that is required by the Conditions to be cancelled (other than upon its
redemption) shall be effected by reduction in the principal amount of this Permanent Global Note representing such Note on its presentation or
to the order of any Paying Agent for endorsement in the Schedule hereto, whereupon the principal amount hereof shall be reduced for all
purposes by the amount so cancelled and endorsed.
Notes may only be purchased by the Issuer if they are purchased together with the right to receive all future payments of interest and Instalment
Amounts (if any) thereon.
Any option of the Issuer provided for in the Conditions shall be exercised by the Issuer giving notice to the Holders within the time limits set
out in and containing the information required by the Conditions, except that the notice shall not be required to contain the certificate numbers
of Notes drawn in the case of a partial exercise of an option and accordingly no drawing of Notes shall be required.
Any option of the Holders provided for in the Conditions may be exercised by