Almaty Kus OJSC (Kazakhstan) - production and sales

/KASE, using documents of the Listing Commission of KASE, July 25, 01/ - - The information is published regarding admission of Almaty Kus securities into category "A" of the official listing. The securities include bonds of the second emission and preferred shares of the third emission. Almaty Kus OJSC is a coordinating and controlling body of production and sales activity. Coordination and control activity is implemented though direct setting of quality standards and competitive selection of leaseholders and distributors. Leaseholders Four poultry farms (Chapaevsk, Kaskelen, Abai, and Avat) are being leased to four independent legal entities (or leaseholders): Ak-kanat LLP, Alatau LLP, Karasai LLP and Avat Kus LLP correspondingly. The terms of contracts between lessor and leaseholders are being reviewed every half a year. The leaseholders' functions are purchasing of fodder from Almaty Kus, production and selling of eggs - a major output of the poultry farms. The leaseholders are obliged to sell only Almaty Kus production. The latter controls production process and activity of Leaseholders by setting prices and quality standards. Revenues of the Company depend on production volumes of Almaty Kus. Production of eggs (million units) and meat (tons), sale revenues (KZT m) of leased poultry farms ---------------------------------------- eggs meat -------------- -------------- Фабрика volume income volume income -------- ------ ------ ------ ------ 1998 ------------------------------------------ Chapayev 131 566 1,145 115 Abay 30 130 211 21 Kaskelen 22 95 221 22 Avat 0 0 0 0 -------- ------ ------ ------ ------ Total: 182 791 1,577 158 -------- ------ ------ ------ ------ 1999 ------------------------------------------ Chapayev 118 771 1,079 135 Abay 52 340 467 58 Kaskelen 20 131 205 26 Avat 0 0 0 0 -------- ------ ------ ------ ------ Total: 190 1,242 1,751 219 -------- ------ ------ ------ ------ 2000 ------------------------------------------ Chapayev 129 934 1,165 163 Abay 38 275 390 55 Kaskelen 22 159 223 31 Avat 2 14 140 6 -------- ------ ------ ------ ------ Total: 191 1,382 1,918 255 ---------------------------------------- Revenues of Leaseholders of Almaty Kus OJSC broken down by type of production, KZT m -------------------------------------------------------------- Type of revenues 1998 1999 2000 ----------------------------------------- ----- ----- ----- Income from egg sales 791 1,241 1,383 Income from meat sales 158 219 255 Income from sales of secondary production 43 45 47 Income from sales of egg powder 93 125 135 Income from sales of poultry fodder ( ( 102 ----------------------------------------- ----- ----- ----- Total: 1,084 1,629 1,922 -------------------------------------------------------------- Distributors The company franchises Seimar trade mark to twenty four independent legal entities and individuals. The distributors are set purchase eggs from Almaty- Kus and distribute them through retail trade network. Each of them are granted with exclusive right to distribute Seimar production representing Seimar consortium in regions. They are also free to set final prices, conclude agreements with retail traders and develop sales policy. In turn, the Company are responsible for quality control. Competition The company sells 90% of produced output in the city of Almaty and Almaty region. According to Brief Market Consult researches Almaty Kus is the outstanding leader of the egg market in named regions. Other competitors are Ak Kus JSC, Bent JSC, Bertra JSC and Semipalatinsk Poultry Farm. The sales markets Almaty region is one of the major regions of egg production. At present, Almaty Kus takes 75% of the market in Almaty region. Throughout Kazakhstan the main competitors are Kostanai Poultry Farm JSC (20% of the market), Ai-Dan LLP (Kyzyl-Orda), and Ust-Kamenogorsk JSC. The Company's share in Kazakhstan market equals 37%. The management of Almaty Kus considers that eggs market has already undergone its development stage. Nevertheless, there is still room for further growth. It is assumed that such growth is constrained by purchasing power of population. Thus, expected growth of income would lead to higher sales of eggs. In turn, slowdown in incomes would not lead to comparable decline of demand as eggs are among prior goods in the consumers' basket. The broadening of the sales market will take place due to restructuring of production facilities.