Magnit Annual Report 2009

FY2009 Annual Report · Magnit

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TABLE OF CONTENTS

1. KEY OPERATIONAL AND FINANCIAL HIGHLIGHTS ....................... 4

22.. MMIISSSSIIOONN ............................................................................................................ 5

33.. CCHHIIEEFF EEXXEECCUUTTIIVVEE OOFFFFIICCEERR’’SS SSTTAATTEEMMEENNTT ......................................... 6

55.. IINNFFOORRMMAATTIIOONN OONN TTHHEE BBOOAARRDD MMEEMMBBEERRSS ........................................ 9

66.. RREEPPOORRTT OOFF TTHHEE BBOOAARRDD OONN 22000099 OOPPEERRAATTIIOONNSS .............................. 16

77.. MMAAIINN 22000099 CCOORRPPOORRAATTEE EEVVEENNTTSS ........................................................... 23

88.. PPOOSSIITTIIOONN OOFF TTHHEE CCOOMMPPAANNYY IINN TTHHEE SSEECCTTOORR ................................ 25

99.. PPRRIIOORRIITTYY DDIIRREECCTTIIOONNSS OOFF TTHHEE CCOOMMPPAANNYY’’SS OOPPEERRAATTIIOONN......... 39

1100.. PPRRIIOORRIITTYY DDIIRREECCTTIIOONNSS OOFF TTHHEE CCOOMMPPAANNYY’’SS DDEEVVEELLOOPPMMEENNTT 41

1111.. IINNFFOORRMMAATTIIOONN OONN TTHHEE PPAAIIDD DDIIVVIIDDEENNDDSS ..................................... 44

1122.. SSEECCUURRIITTIIEESS................................................................................................... 45

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JJOOIINNTT--SSTTOOCCKK
AACCCCOORRDDIINNGG TTOO TTHHEE FFEEDDEERRAALL LLAAWW ““OONN
CCOOMMPPAANNIIEESS””,, MMAADDEE WWIITTHHIINN TTHHEE YYEEAARR 22000099.. ..................................... 51

1144.. LLIISSTT 00FF 22000099 TTRRAANNSSAACCTTIIOONNSS DDEECCLLAARREEDD AASS RREELLAATTEEDD--PPAARRTTYY
IINN AACCCCOORRDDAANNCCEE WWIITTHH TTHHEE FFEEDDEERRAALL LLAAWW OONN ““JJOOIINNTT--SSTTOOCCKK
CCOOMMPPAANNIIEESS”” ..................................................................................................... 54

1155.. MMAAIINN RRIISSKK FFAACCTTOORRSS RREELLAATTEEDD TTOO TTHHEE ССOOMMPPAANNYY
OOPPEERRAATTIIOONN...................................................................................................... 102

1166.. IINNFFOORRMMAATTIIOONN OONN TTHHEE CCOOMMPPLLIIAANNCCEE WWIITTHH TTHHEE FFFFMMSS CCOODDEE
OOFF CCOORRPPOORRAATTEE CCOONNDDUUCCTT OOFF RRUUSSSSIIAANN FFEEDDEERRAATTIIOONN ................ 131

1177.. IINNFFOORRMMAATTIIOONN OONN TTHHEE AAUUDDIITTOORR AANNDD TTHHEE CCOONNSSUULLTTAANNTT OOFF
TTHHEE CCOOMMPPAANNYY................................................................................................ 146

ANNEX TO 2009 ANNUAL REPORT OF OJSC “MAGNIT”.................. 148

ANNEX № 1. OJSC “Magnit” and it’s subsidiaries financial report prepared
according to the International Financial Reporting Standards for the year
ended December 31, 2009. .................................................................................... 148

ANNEX № 2. RAS Accounting report of CJSC “Tander” for the year 2009 148

ANNEX № 3. RAS Accounting report of OJSC “Magnit” for the year 2009
................................................................................................................................. 148

1. KEY OPERATIONAL AND FINANCIAL HIGHLIGHTS 11

Number of opened stores, NET

Total number of stores

Selling space, sq. m.

Number of customers

Net sales, million RUR

Net sales, million USD2

Gross profit, million RUR

Gross profit, million USD

Gross margin, %

EBITDAR3, million RUR

EBITDAR, million USD

EBITDAR margin, %

EBITDA, million RUR

EBITDA, million USD

EBITDA margin, %

EBIT, million RUR

EBIT, million USD

EBIT margin, %

Net profit, million RUR

Net profit, million USD

Net profit margin, %

Capitalization as of 31.12.2009, million RUR4

Capitalization as of 31.12.2009, million USD

646

3,228

1,059,867

1,013.44

169,860.97

5,354.49

39,884.61

1,257.27

23.5%

20,017.98

631.02

11.8 %

16,162.55

509.49

9.5%

12,892.41

406.40

7.6%

8,728.77

275.15

5.1%

159,945.14

5,041.91

1 Audited financial statements prepared in compliance with IFRS
2 Figures in dollar terms are based on the average exchange rate for 2009 of 31.7231 RUR per 1 US$
3 Management accounts
4 RTS (88,975,073 ordinary shares, admitted to trading, × 1797.63991 rubles market value as of 31.12.2009)

22.. MMIISSSSIIOONN

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-- OOnn--ggooiinngg iimmpprroovveemmeennttss iinn tteecchhnnoollooggyy;;

-- AAddeeqquuaattee ccoommppeennssaattiioonn ffoorr oouurr eemmppllooyyeeeess..

33.. CCHHIIEEFF EEXXEECCUUTTIIVVEE OOFFFFIICCEERR’’SS SSTTAATTEEMMEENNTT

«Results of the Company’s operations in 2009

may be estimated as positive. We achieved good EBITDA

margin and net profit results. Record number of openings

of convenience stores supported the course of the

Company at active expansion. Autumn offering of shares

on the London Stock Exchange enabled to end the year

with extremely low net debt to EBITDA ratio.

But life is going forward. We will once again have to prove that our achievements are not

coincidental. We are reviewing the results but all our thoughts are of the future.

2010 expansion plan will demand investments within 1 billion dollars from the Company.

Quality investing of such an amount anticipates serious efforts for our part. We plan to significantly

increase the rate of hypermarket openings significantly and estimate to end the current year with 55-60

operating outlets of such format. We pay great significance to accumulation of the land plots for future

hypermarkets which will enable us not only not to reduce but to significantly increase the number of

openings in the nearest few years.

Focus on the hypermarket format expansion is not the sign of detraction to convenience stores.

We plan to spend substantial funds not only to open not less than 500 such outlets but to buy a lot of

land plots, construct new stores and buy out leased premises.

Investments in traffic on competitive markets will become one of the Company’s main focuses in

2010.

Reduction of logistics costs, improvement of purchasing conditions and everyday work to enhance

the internal business processes are strategic directions of the Company’s operations.

Construction and launching of new distribution centers and increase of the number of owned

vehicles to more than two thousand this year will allow us to intensify deliveries to stores through in-

house logistics system in the nearest time.»

Chief executive officer of OJSC “Magnit”
S. Galitsky

44.. IINNFFOORRMMAATTIIOONN OONN TTHHEE PPEERRSSOONN IINN TTHHEE PPOOSSIITTIIOONN OOFF AA

SSOOLLEE EEXXEECCUUTTIIVVEE BBOODDYY

As of April 13, 2006 Sergey Galitskiy is elected a Chief Executive Officer by the
resolution of the Board of directors of April 12, 2006. On March 31, 2009 the Board of directors
(minutes of 31.03.2009) has adopted a decision on prolongation of the chief executive officer’s
authorities for the new period.

Biographical information of the person in the position of a sole executive body:

Name: Sergey Galitskiy
Date of birth: 14.08.1967
Education: Mr. Galitskiy graduated from Kuban State University with a degree in

Economics in 1992

Positions occupied in the Company and other companies in the last five years including

plural offices:

1) Period: 25.04.1996 – 27.06.2006.
Organization: CJSC “Tander”.
Position: CEO;

2) Period: 28.06.2002 – 18.04.2006.
Organization: CJSC “Tander”.
Position: member of the Board;

3) Period: 01.04.2004 – present day.
Organization: OJSC “Magnit”.
Position: member of the Board;

4) Period: 13.04.2006 – present day.
Organization: OJSC “Magnit”.
Position: CEO

Stockholding of CEO in the Company’s share capital: 40.5442% (as of 31.12.2009).
Ordinary shares, owned by CEO: 40.5442% (as of 31.12.2009).

Information on transactions of acquisition/alienation of the Company’s shares, made by

the person in the position of a sole executive body during the reporting period:

№

Date of
operation

02.09.2009

21.10.2009

18.12.2009

Operation

Number of shares

Type of shares

Alienation of
securities
Alienation of
securities
Acquisition of
securities

1 747 379

4 000 000

4 611 525

Ordinary nominal uncertified
shares
Ordinary nominal uncertified
shares
Ordinary nominal uncertified
shares

29.12.2009

Acquisition of
securities

647 083

Ordinary nominal uncertified
shares

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((RREEFFUUNNDD OOFF CCHHAARRGGEESS)) PPAAIIDD AACCCCOORRDDIINNGG TTOO TTHHEE RREESSUULLTTSS AACCHHIIEEVVEEDD IINN TTHHEE
FFIINNAANNCCIIAALL YYEEAARR

Under Clause 7 of Regulations “On the chief executive officer of OJSC “Magnit”, ratified
by the resolution of the annual general shareholders’ meeting of 28.01.2008 (minutes of meeting
of 04.02.2008 and previous editions), the wage rate and other payments set upon CEO are
determined by the labor contract agreed with CEO.

Remuneration of CEO of OJSC “Magnit” in 2009 amounted to 15,224,830.60 rubles.

55.. IINNFFOORRMMAATTIIOONN OONN TTHHEE BBOOAARRDD MMEEMMBBEERRSS

Dmitriy Chenikov – the Chairman of the Board.
Date of birth: 08.09.1965
Education:

graduate

Krasnodar

Polytechnic

Institute,

engineer/constructor/technologist, candidate of technical sciences.

Positions occupied in the Company and other companies in the last five years including

plural offices:

1) Period: 22.01.2001 – 31.08.2007.
Organization: CJSC “Tander”.
Position: Director, Discounter format development;

2) Period: 12.04.2006 – 24.06.2008.
Organization: OJSC “Magnit”.
Position: member of the Board;

3) Period: 01.09.2007 – 08.01.2008.
Organization: CJSC “Tander”.
Position: Regional Director;

4) Period: 09.01.2008 – present day.
Organization: CJSC “Tander”.
Position: Director, Nonfood products acquisition;

5) Period: 18.09.2007 – 24.02.2009.
Organization: LLC “Tandem”.
Position: member of the Board;

6) Period: 25.06.2008 – present day.
Organization: OJSC “Magnit”.
Position: Chairman of the Board;

7) Period: 15.12.2008 – 01.04.2009
Organization: LLC “Magnit – Nizhniy Novgorod”.
Position: member of the Board.

Shareholding of the person in the issuer’s charter capital: 0.1574% (as of 31.12.2009).
Ordinary shares owned by the person: 0.1574% (as of 31.12.2009).
Information on transactions of acquisition/alienation of the Company’s shares made by

the person occupying the position of the sole executive body (CEO):

№

Date of
operation

23.07.2009

Operation

Number of shares

Type of shares

Alienation of
securities

80,000

Ordinary nominal
uncertified shares

Andrey Arutyunyan
Date of birth: 12.01.1969.
Period: a graduate of Kuban State University with a degree in Economics, 1991.
Positions occupied in the issuer and other companies in the last five years including

plural offices:

1) Period: 28.06.2002 – 18.04.2006.
Organization: CJSC “Tander”.
Position: member of the Board;

2) Period: 01.12.2003 – present day.
Organization: OJSC “Magnit”.
Position: first Deputy CEO;

3) Period: 01.04.2004 – 24.06.2008.
Organization: OJSC “Magnit”.
Position: Chairman of the Board;

4) Period: 01.10.2004 – 31.06.2009
Organization: CJSC “Tander”.
Position: Director of Development department;

5) Period: 30.01.2006 – 01.04.2009.
Organization: LLC “Magnit – Nizhniy Novgorod”.
Position: Chairman of the Board;

6) Period: 25.06.2008 – present day.
Organization: OJSC “Magnit”.
Position: member of the Board;

7) Period: 13.12.2008 – 24.02.2009.
Organization: LLC “Tandem”.
Position: member of the Board.

8) Period: 01.07.2009 – present day
Organization: CJSC “Tander”.
Position: Deputy chief executive officer in charge of development.

Shareholding of the person in the issuer’s charter capital: 0.2099% (as of 31.12.2009).
Ordinary shares owned by the person: 0.2099% (as of 31.12.2009).

Information on transactions of acquisition/alienation of the Company’s shares made by

the Board member during the reporting period:

During the reporting period no transactions of acquisition/alienation of the Company’s

shares were made.

Butenko Valeriy Vladimirovich
Date of birth: 25.11.1965

Education:
higher - in 1988 graduated from Novorossiysk higher engineering sea school -
navigator engineer.

Positions occupied in the issuer and other companies in the last five years including

plural offices:

1) Period: 01.03.2004- 31.07.2009.
Organization: CJSC “Tander”.
Position: Director in charge of .reviser and analytica job.

2) Period: 09.05.2004- 28.05.2005.
Organization: CJSC “Tander”.
Position: Member of the Board of directors.

3) Period: 29.05.2005- 31.03.2009.
Organization: CJSC “Tander”.
Position: Member of the Revisory Committee.

4) Period: 01.04.2004- 24.06.2009.
Organization: OJSC “Magnit”.
Position: Chairman of the Revisory Committee.

5) Period: 25.06.2009 – present days
Organization: OJSC “Magnit”.
Position: Member of the Board of directors.

6) Period: 01.08.2009- present days
Organization: CJSC “Tander”.
Position: Deputy chief executive officer in charge of .reviser and analytica job.

Shareholding of the person in the issuer’s charter capital: 0.0809% (as of 31.12.2009).
Ordinary shares owned by the person: 0.0809% (as of 31.12.2009).

Information on transactions of acquisition/alienation of the Company’s shares made by

the Board member during the reporting period:

During the reporting period no transactions of acquisition/alienation of the Company’s

shares were made.

Westman Johan Mattias
Date of birth: 05.02.1966.
Education: Stockholm School of Economics, 1992, master’s degree in Business

Administration; Linguistic School of Sweden Armed Forces, 1997.

Positions occupied in the Company and other companies in the last five years including

plural offices:

1) Period: 1996 - present day.
Organization: Prosperity Capital Management (UK) Ltd.
Position: CEO;

2) Period: 08.04.2006 – present day.
Organization: OJSC “Magnit”.
Position: member of the Board.

Shareholding of the person in the Company’s charter capital: no share.
Ordinary shares owned by the person: no share.

Information on transactions of acquisition/alienation of the Company’s shares made by

the Board member during the reporting period:

During the reporting period no transactions of acquisition/alienation of the Company’s

shares were made.

Sergey Galitskiy
Date of birth: 14.08.1967 .
Education: a graduate of Kuban State University with a degree in Economics in 1992.
Positions occupied in the Company and other companies in the last five years including

plural offices:

1) Period: 25.04.1996 – 27.06.2006.
Organization: CJSC “Tander”.
Position: CEO;

2) Period: 28.06.2002 – 18.04.2006.
Organization: CJSC “Tander”.
Position: member of the Board;

3) Period: 01.04.2004 – present day.
Organization: OJSC “Magnit”.
Position: member of the Board;

4) Period: 13.04.2006 – present day.
Organization: OJSC “Magnit”.
Position: CEO.

Shareholding of the person in the Company’s charter capital: 40.5442% (as of 31.12.2009).
Ordinary shares owned by the person: 40.5442% (as of 31.12.2009).

Information on transactions of acquisition/alienation of the Company’s shares made by

the person occupying the position of the sole executive body:

№

Date of
operation

02.09.2009

21.10.2009

18.12.2009

Operation

Number of shares

Type of shares

Alienation of
securities
Alienation of
securities
Acquisition of
securities

1 747 379

4 000 000

4 611 525

Ordinary nominal uncertified
shares
Ordinary nominal uncertified
shares
Ordinary nominal uncertified
shares

29.12.2009

Acquisition of
securities

647 083

Ordinary nominal uncertified
shares

Alexey Makhnev
Date of birth: 24.05.1976
Education: higher - in 1998 graduated from Saint Petersburg University of economics
and finance - Ph.D. in Economics

Positions occupied in the Company and other companies in the last five years including

plural offices:

1) Period: 07.2004– 11.2006
Organization: CJSC “United financial group”.
Position: vice president, corporate finance department;

2) Period: 12.2006 – 08.2007
Organization: LLC “Deutsche Bank”.
Position: director, corporate finance governance.

3) Period: 09.2007– 12.2008;
Organization: LLC “Morgan Stanley Bank”.
Position: vice president, investment banking Department.

4) Period: 12.2008 – 05.2009;
Organization: LLC “Morgan Stanley Bank”.
Position: executive director, investment banking Department.

5) Period: 05.2009– present days;
Organization: CJSC “VTB Capital”.
Position: managing director, Head of Consumer sector and Retail direction, investment

banking on global markets Department.

6) Period: 25.06.2009 – present days;
Organization: OJSC "Magnit";
Position: member of the board of directors.

Shareholding of the person in the issuer’s charter capital: no share.
Ordinary shares owned by the person: no share.
Information on transactions of acquisition/alienation of the Company’s shares made by

the Board member during the reporting period:

During the reporting period no transactions of acquisition/alienation of the Company’s

shares were made.

Khachatur Pombukhchan
Date of birth: 16.03.1974.
Education: a graduate of Kuban State University, applied mathematics, 1995; Russian

Corresponding finance and economics institute with a degree in Economics, 1998

Positions occupied in the issuer and other companies in the last five years including

plural offices

1) Period: 26.07.2004 – 01.03.2006.
Organization: OJSC “Mobile TeleSystems“.
Position: Director, Office sales and service department;

2) Period: 05.12.2005 – 01.03.2006.
Organization: CJSC “Tander”.
Position: Marketing director (part-time);

3) Period: 02.03.2006 – 03.05.2008.
Organization: CJSC “Tander”.
Position: Marketing director;

4) Period: 29.11.2006 – 26.05.2009
Organization: CJSC “Digital Gallery”.
Position: member of the Board;

5) Period: 04.05.2008 – 30.06.2008
Organization: CJSC “Tander”.
Position: first Deputy CFO;

6) Period: 19.06.2008 – present day.
Organization: LLC “Magnit Finance”.
Position: CEO;

7) Period: 25.06.2008 – present day.
Organization: OJSC “Magnit”.
Position: member of the Board;

8) Period: : 01.07.2008 – present day.
Organization: CJSC “Tander”.
Position: CFO;

9) Period: 01.07.2008 – present day.
Organization: OJSC “Magnit”.
Position: CFO;

10) Period: 15.12.2008 – 01.04.2009
Organization: LLC “Magnit – Nizhniy Novgorod”.
Position: member of the Board;

11) Period: 13.12.2008 –24.02.2009.
Organization: LLC “Tandem”.
Position: member of the Board.

Shareholding of the person in the issuer’s charter capital: no share.
Ordinary shares owned by the person: no share.

Information on transactions of acquisition/alienation of the Company’s shares made by

the Board member during the reporting period:

During the reporting period no transactions of acquisition/alienation of the Company’s

shares were made.

RREEMMUUNNIIRRAATTIIOONN CCRRIITTEERRIIAA AANNDD AAMMOOUUNNTT OOFF RREEMMUUNNEERRAATTIIOONN ((RREEFFUUNNDD OOFF
CCHHAARRGGEESS)) OOFF EEVVEERRYY MMEEMMBBEERR OOFF CCOOMMPPAANNYY’’SS BBOOAARRDD OOFF DDIIRREECCTTOORRSS PPAAIIDD
AACCCCOORRDDIINNGG TTOO TTHHEE RREESSUULLTTSS AACCHHIIEEVVEEDD IINN TTHHEE RREEPPOORRTTIINNGG YYEEAARR

In 2009 upon the resolution of shareholders’ meeting of 25.06.2009 (minutes of meeting
of 25.06.2009) the Board members were paid remuneration for participation in the board
operation in 2008 in the amount of 9,533,132.02 (nine million five hundred thirty three thousand
one hundred thirty two) rubles 02 kopecks.

According to Regulations “On OJSC “Magnit” Board of Directors”, ratified by the
resolution of the annual General Shareholders’ meeting of 08.04.2006 (minutes of meeting of
12.04.2006), remuneration of the Board members is paid upon the resolution of general
shareholders’ meeting in the form of remuneration for participation in the board operation and
remuneration for the achieved results.

Remuneration for participation in the board operation amounts to 120,000 (one hundred

twenty thousand) rubles per month.

Remuneration to the independent director for participation in the board operation

amounts to 30,000 (thirty thousand) USD per year, additionally

- 2,000 (two thousand) US dollars for participation by personal presence in each meeting

in the form of joint presence of the board,

- 500 (hundred) US dollars for participation by directing the written opinion for each
meeting in the form of joint presence of the board, or for participation in each meeting in
absentee form.

Year-end bonus, based on the operation results, is also paid to the members of the board
in addition to the remuneration. Fixed amount of year-end bonus is paid to the members of the
board after approval of appropriate annual financial report by the general shareholders’
meeting of the Company.

66.. RREEPPOORRTT OOFF TTHHEE BBOOAARRDD OONN 22000099 OOPPEERRAATTIIOONNSS

Within 2009 the Board of directors of OJSC “Magnit” operated in two structures.
The structure of the Board of directors (elected by annual general shareholders’ meeting

on June, 25 2008, minutes of July 09,2008):

№

Full name of a member of the board of directors

Date of birth

Andrey Aroutunyan

Pierre Bruno Charles Boushut

Westmann Mattias Johan

Sergey Galitsky

Vladimir Gordeychuk

Khachatur Pombukhchan

Dmitry Chenikov

12.01.1969

22.08.1955

05.02.1966

14.08.1967

15.08.1961

16.03.1974

08.09.1965

The structure of the Board of directors (elected by annual general shareholders’ meeting

on June, 25 2009, minutes of June, 25 2009):

№

Full name of a member of the board of directors

Date of birth

Andrey Aroutunyan

Valeriy Butenko

Westmann Mattias Johan

Sergey Galitsky

Alexey Makhnev

Khachatur Pombukhchan

Dmitry Chenikov

12.01.1969

25.11.1965

05.02.1966

14.08.1967

24.05.1976

16.03.1974

08.09.1965

The current Board of directors includes four independent directors, they are Valeriy

Butenko, Westmann Mattias Johan, Alexey Makhnev, and_ Dmitry Chenikov.

Dmitriy Chenikov was elected a Chairman of the Board of directors by the unanimous
resolution at the first Board meeting of 11.08.2009, Valeriy Butenko was appointed a Deputy
Chairman and Khachatur Pombukhchan was elected a Secretary of the Board.

The Board of directors of the Company operated under the Law “On joint-stock
companies” and the Charter of the Company, Regulations of the Board of directors of OJSC
“Magnit”, and Regulations of the Committees of the Board of directors.

According to the provisions of the corporate documents, during the reporting period the
following committees of the Board operated to provide its efficiency and prepare the most
important issues attributed to the competence of the Board of directors:

HR and Remuneration Committee of the Board of Directors:

Full name of a member of the board of
directors

Alexey Makhnev

Andrey Aroutunyan

Dmitry Chenikov

Position in the committee

chairman of the committee

member of the committee

Audit Committee of the Board of Directors:

Full name of a member of the board of
directors

Position in the committee

№

1 Westmann Mattias Johan

chairman of the committee

Valeriy Butenko

member of the committee

Khachatur Pombukhchan

member of the committee

During 2009 the Board of directors held 13 meetings and examined 98 issues. All the

meetings of the Board of directors were held in the form of joint presence.

Main issues considered by the Board of directors in 2009:

Date of meeting

Considered issues

04.02.2009

31.03.2009

Suggestions on the issues to be placed on the agenda of the annual
shareholders’ meeting were viewed
The nominees for election into the Board of directors were considered and
put in the list at the annual shareholders’ meeting
The nominees for the auditor position were considered and put in the list at
the annual shareholders’ meeting
The decision to hold an extraordinary general shareholders’ meeting was
adopted
The decisions on approval of interested party transactions were adopted.

The regulations on the information policy of open joint-stock company
“Magnit” in new edition was ratified.
The decision on prolongation of CEO’s authorities for the new period was
adopted

31.03.2009

The decisions on approval of interested party transactions were adopted.

31.03.2009

09.04.2009

27.04.2009

The decision on the determination of the price of the transaction the
approval of which is included to the agenda of the general shareholders’
meeting was adopted.
The decision on approval of interested party transaction was adopted.

The decision on convocation of the annual shareholders’ meeting was
adopted.

27.04.2009

The annual report over 2008 financial year was preliminarily approved and
was submitted for consideration of the general shareholders’ meeting.
The recommendations to the general shareholders’ meeting on the profit
distribution, including the dividend amount on OJSC “Magnit” shares and
procedure of it’s payment, and losses following the results of 2008 financial
year and the 1st quarter 2009 were approved.
The decision on the determination of the price of the transaction the
approval of which is included to the agenda of the general shareholders’
meeting was adopted.
The regulations on the dividend policy of open joint-stock company
“Magnit” was ratified in new edition.

27.04.2009

The amount of the auditor’s services payment was determined.

21.05.2009

The nominees for election into the Board of directors were considered and
put in the list at the annual shareholders’ meeting.

21.05.2009

The decision on approval of interested party transaction was adopted.

22.06.2009

The decisions on approval of interested party transactions were adopted

11.08.2009

The Chairman of the Board of directors, the Deputy Chairman of the Board
of directors and the Secretary of the Board of OJSC “Magnit” were elected
The members of the Audit Committee of the Board of directors of OJSC
“Magnit” and its Chairman were elected
The members of the HR and Remuneration Committee of the Board of
directors of OJSC “Magnit” and its Chairman were elected
The head of the internal audit was appointed, the regulations on the
financing and operating activities internal control of OJSC “Magnit” was
ratified.
The regulations on information policy of OJSC “Magnit” in new edition
was ratified.

11.08.2009

The decisions on approval of interested party transactions were adopted.

11.08.2009

The decision on convocation of the extraordinary shareholders´meeting
was adopted.

11.08.2009

02.09.2009

The decision on the determination of the price of the transaction the
approval of which is included to the agenda of the general shareholders’
meeting was adopted.
The decision to increase charter capital of OJSC “Magnit” by issuing
additional shares was adopted
The decision on additional issue of securities and the prospectus to be
represented in FFMS of Russia were ratified

02.09.2009

The decisions on approval of interested party transactions were adopted.

02.09.2009

19.10.2009

The decision on the determination of the price of the transaction the
approval of which is included to the agenda of the general shareholders’
meeting was adopted.
The decision on the determination of the price of the transaction it’s
approval related to the additional securities issue were adopted.

29.10.2009

03.11.2009

The offering price of ordinary nominal uncertified shares of OJSC “Magnit”
of additional issue was determined

The decisions on the determination of the price of the transaction and
approval of a major transaction related to the additional securities issue
(the Underwriting Agreement) were adopted.
The decisions on the determination of the price of the transaction and
approval of a major transaction related to the providing of loan to CJSC
“Tander” were adopted.

24.11.2009

The decision on approval of interested party transaction was adopted.

23.12.2009

The Regulations on the Bonus Programme and the HR and Remuneration
Committee under the CEO of CJSC “Tander” was ratified.

The decision on issue of securities (exchange bonds of БО-01, БО-02, БО-03,
БО-04 series) was adopted.

The Decisions on issue of securities and Prospectus of securities (exchange
bonds of БО-01, БО-02, БО-03, БО-04 series) were ratified.

The decision on approval of major transaction (several associated
transactions) on issue by public offering of exchange bonds of БО-01, БО-
02, БО-03, БО-04 series.

23.12.2009

The additional agreement to the labour contract with the person in the
position of sole executive body of OJSC “Magnit” was ratified.

Besides, within the reporting period the issues relating to the determination position of
the OJSC “Magnit” on the realization of the voting rights on the Company’s stocks and shares
of the other organizations (economic companies) were examined by the Board of directors of
OJSC “Magnit” in accordance with the Clause 14.2 of the Charter. Thus, the meetings with the
examined issues concerning the definition of the OJSC “Magnit” representative position under
the realization of the voting rights on the Company’s owned shares of CJSC “Tander”, share in
LLC “Magnit Finance”, LLC “Magnit - Ninzhniy Novgorod”, and “AgroTorg”were held in
February, March, April, May, June, August, November, and December of the year 2009.

The Company’s management achieved the following results in 2009:

1. Net sales of the Company increased by 27.79% from 132,921.22 million rubles in 2008
to 169,860.97 million rubles in 2009. Revenue growth in dollar terms amounted to 0.12%: from
US$ 5,347.81 million to US$ 5,354.49 million due to significant change of US$ exchange rate5.

2. Number of the Company’s stores increased from 2,568 “convenience stores” and 14
hypermarkets in 2008 to 3,204 and 24 correspondingly in 2009, total selling space of the stores
increased from 823.51 thousand sq. m. to 1,059.87 thousand sq. m.

5 Based on the average exchange rate for 2009 of 31.7231 RUR per 1 US$, 2008 – 24.8553 RUR per 1 US$.

3500

3000

2500

2000

1500

1000

500

3228

2582

2197

3204

2568

2194

1893

1500

1014

368

610

2002

2003

2004

2005

2006

2007

2008

2009

Convenience Stores

Hypermarkets

3. Number of customers increased by 17.80% from 860.34 million in 2008 to 1,013.44

million in 2009.

4. Share of sales of private label products in 2009 increased insignificantly to 12.28%
while the number of private label SKUs reduced from 700 in 2008 to 530 in 2009. The Company
plans to further increase the share of sales of the private label products firstly by expanding the
offer of these products in “Magnit” hypermarkets mainly in the non-food segment.

800

600

400

200

6,3%

5,1%

265

162

12,12%

12,08%

12,28%

10,9%

8,2%

700

508

551

530

14%

12%

10%

2003

2004

2005

2006

2007

2008

2009

Number of SKUs

Share in retail sales

5. In 2009 the Company opened a distribution center in Togliatti (previously there
operated a leased distribution center). Launch of the new distribution center improved the
quality of service in the Volga region. Total space of 9 distribution centers as of December 31,
2009 amounted to 185,537 thousand sq. m.

6. During the reporting year the fleet of the Company’s vehicles increased by 288 trucks,
total number of vehicles amounted to 1,453 which resulted in the considerable reduction of
transportation costs.

7. In 2009 the Company increased the share of products processed via its distribution

centers to 78% which is also one of the gross margin drivers.

8. The Company was actively working with its personnel increasing their loyalty and
developing corporate culture. In 2009 average weighted number of the Company’s employees

amounted to 75,745 out of which 58,606 are in-store personnel; 10,638 people are engaged in
distribution; 4,419 people - in regional branches and 2,082 are employees of the head office.
Average salary in the Company in 2009 amounted to 123,714 rubles.

The regulations on the Bonus programme and the HR Committee under the chief
executive officer of CJSC “Tander” ratified by the Board of directors on December 23, 2009 is
aimed to additional motivation of its key personnel providing high growth rates of the
Company. Maximum value of the program for 2009 can amount to 147,357 shares of the
Company (number of securities with the total value as of the date of the decision of not more
than 7% of the net profit of the Company for 2008 in accordance with IFRS. Realization of the
current stage of the program will be completed in 2011. Participants of this program can include
employees who have been working for the Company for not less than 8 years including at least
2 years in executive positions starting from the head of department as well as key employees
who deliver high growth rates of the Company.

9. In 2009 the Company continued to work with its customers and to develop its
marketing program. However the reduction of the disposable income affected LFL sales,
average ticket and traffic results.

4.1% LFL revenue growth of 2009 vs. 2008 in ruble terms was driven principally by 5.8%

average ticket growth, while traffic remained negative and amounted to minus 1.5%.

25,0%

20,0%

15,0%

10,0%

5,0%

0,0%

-5,0%

21,7%

18,8%

14,8%

13,9%

5,8%

4,1%

2007

-0,8%

2008

-2,3%

2009

-1,5%

LFL sales

LFL average ticket

LFL traffic

Gross margin improved from 21.7% in 2008 to 23.5% in 2009. Gross profit in rubles
increased by 38.39% from 28,820.57 million RUR (US$ 1,159.54 million) to 39,884.61 million RUR
(US$ 1,257.27 million).

EBITDA increased by 61.89% from 9,983.50 million RUR (US$ 401.67 million) in 2008 to
16,162.55 million RUR (US$ 509.49 million) in 2009. Net debt/EBITDA ratio for 2009 amounted
to 0.09.

2009 net income increased by 86.88% and amounted to 8,728.77 million RUR (US$

275.15 million) vs. 4,670.69 million RUR (US$ 187.92 million) in 2008.

4 000

3 000

2 000

1 000

19,9%

3 677

6,0%

2,7%

2007

21,7%

23,5%

25%

20%

15%

10%

5 354

9,5%

5,1%

2009

5 348

7,5%

3,5%

2008

Sales

Gross margin

EBITDA margin

NI margin

US$ million

On the whole, the Board of Directors of the Company considers the achieved financial

and economic results positive and complying with 2009 target plans.

Following the results of the conducted work the Board of the Company’s directors
recommends the annual general shareholders’ meeting to approve the activity of the
Company’s management bodies during 2009 and to ratify 2009 annual report submitted for
the meeting agenda.

77.. MMAAIINN 22000099 CCOORRPPOORRAATTEE EEVVEENNTTSS

January

The decisions on approval of related party transactions are adopted by the
extraordinary shareholders’ meeting.

March

April

June

July

August

September

October

The Regulations on the information policy of OJSC “Magnit” is ratified.

CJSC “Tander” regional branch is established in Perm of the Perm region.
The Board of directors made a a decision on prolongation of the authorities of
Chief executive officer of OJSC “Magnit”.

The Regulations on the dividend policy of OJSC “Magnit” is ratified in the new
edition.

The decisions on approval of related party transactions are adopted by the
extraordinary shareholders’ meeting.

The new membership of the OJSC “Magnit” Board of directors including four
independent directors is formed by the annual general shareholders’ meeting.

The decision to pay dividends following the results of 2008 financial year and the
1Q 2009 is adopted by the annual general shareholders’ meeting.

The decision on prolongation of CJSC “Tander” CEO’s authorities is adopted.
Shares of OJSC “Magnit” are transferred to the quotation list “A” level 2 of OJSC
“RTS”.

The Board of directors forms the committees of the Board appoints the chairman,
deputy chairman and secretary of the Board of Directors.

Shares of OJSC “Magnit” are transferred to the quotation list “A” level 2 of CJSC
“MICEX Stock Exchange”.
CJSC “Tander” regional branch is established in Kirov of Kirovsk region.
Board of directors made a decision to increase the charter capital of OJSC
“Magnit” by means of offering of additional ordinary nominal uncertified shares.
The offering and floatation outside Russian Federation of OJSC “Magnit”
ordinary nominal uncertified shares in the amount of 16,762,946 (sixteen million
seven hundred sixty two thousand nine hundred forty six) shares are permitted
by Russian FFMS.
Road-show with OJSC “Magnit” top management is held.
The Board of directors approves the Underwriting agreement as a major
transaction.
The price of offering of OJSC “Magnit” ordinary nominal uncertified shares of
additional issue is determined.
The decisions on approval of related party transactions are adopted by the
extraordinary shareholders’ meeting.

November

Notification on the results of additional issue of the OJSC “Magnit” ordinary
nominal uncertified shares in the amount of 5 729 413 (five million seven
hundred twenty nine thousand four hundred and thirteen) shares is filed to
Russian FSFM.

Under the foreign law the securities (global depository receipts, “GDRs”)
certifying the rights to the OJSC “Magnit” ordinary nominal shares are issued by
JPMorgan Chase Bank, N. A.

The decision on issue of securities (exchange bonds of БО-01, БО-2, БО-3, БО-4
series) was adopted.

December

The charter of OJSC “Magnit” in the new edition is registered on the basis of the
decision on increase of the charter capital.

CJSC “Tander” regional branch is established in Nizhniy Tagil of the Sverdlovsk
region.

88.. PPOOSSIITTIIOONN OOFF TTHHEE CCOOMMPPAANNYY IINN TTHHEE SSEECCTTOORR

RRUUSSSSIIAANN MMAARRKKEETT

The section was prepared with the use of materials of IA Infoline and public sources of

Companies.

The retail business was one of the most dynamically growing sectors in Russian
economy, which is proved by the growth rates of the turnover of the mass of commodities
maintained at twice higher growth rate level than GDP within the years of 2003 - 2008. In 2009
the sector demonstrates the slowdown rates lower than of GDP and industrial production.
According to the estimates of Ministry of Economic Development, shortfall of the working
capital of trading organizations and tendency to increase inventory turnover inevitably leads to
assortment reduction.

In 2009 the retail turnover amounted to 14,516.9 billion rubles which is 94.5% to the level
of 2008 in terms of mass of commodities. At that in December 2009 the turnover amounted to
1,518.4 billion rubles or 96.4% growth y-o-y. December traditionally faced the growth of food
and non-food consumption as compared to November due to the increase of New Year sales. As
a result the retail turnover of food products grew by 22%, while the turnover of non-food
products - by 18.5%. However, the turnover growth remained negative relative to December
2008. The food market showed 0.1% decrease in December 2009 vs. December 2008 (in
November 2009 the figure was 2.4%). The demand increase in non-food segment was
insignificant, and the decrease of retail turnover amounted to 6.9% relative to December 2008
(in November 2009 the figure was 10%). Thus, after the downturn peak the retail turnover faced
gradual improvement during the IV quarter in September 2009 due to positive dynamics of real
income of the population which increased by 1.9% in 2009, besides it grew by 7.6% in December
2009 as compared to December 2008.

From January to November 2009 decline of the population real income and deterioration
in consumer confidence during the economic crisis caused not only the reduction of food and
non-food consumption but change of consumption patterns in Russia on the whole (even
savings volume increased in bank accounts). The major factors of this change were as follows:

§ growth of food products share in retail turnover and significant reduction in purchases

of durable goods (cars, household appliances etc);

§ decrease of consumer demand due to the rising trend to save and decrease of real
income of the population. The reduction of consumer credit, particularly due to the high
interest rates, stimulates demand reduction especially for durable goods (cars, furniture,
household appliances). At the same time unemployment in the III-IV quarters of 2009 ceased to
increase and there was seen a growth of employment;

§ consumers’ disappointment in store chains (primarily in small regional retailers) who
were unable to provide low prices and their reorientation towards purchasing food products in
the markets. Thus, one of the most important trends in retail business development is
recognition of price factor and consumer flow from supermarkets to hypermarkets and from
hypermarkets to discounters, as well as from stores to markets, as the key motivation for
choosing a place for shopping.

Major retail chains switched their store format to discounter by reducing costs, and thus

tried to maintain traffic (“Pyaterochka”, “Holiday”, “Novye torgovye sistemi” etc).

The year of 2009 was marked by strengthening of retailers’ competition for decreasing
consumer spending, and also by network trading with retail markets within the conditions of

-5

-10

-15

-20

1600

1400

1200

the reduction of consumer spending. It should be noted that while in August 2009 the retail
turnover in money terms exceeded the rates of August 2008, in September the turnover
decreased by 0.6%. In October the retail turnover in money terms was still lower as compared to
2008, however, the gap was almost completely reduced, and figures of 2009 appeared to be
higher starting November.

Dynamics of the key market figures in 2005-2009 as a % to the corresponding period of the
preceding year

16,7

15,9

13,8 13,3

12,7

10,7 10,4

10,5
8,4

14,1

11,9

13,3

13,4

11,2
9

10,1

17,9 17,6

16,5

15,1 15,1

13,8
11,8 12,3 12,1

15,4 16,1
14,8
13,4

19,6

18,7

21,6

20,5

18,7

15,8 15,8

16,7

14,4 14,4

12,5

11,3 10,8

9,3

7,2

10,5

8,2

5,4

6,7

4,8

2,5

3,6

2,6

2,1

-2,4

-3 -5,1
-4

0,3

-5,3

I Q 2005 III Q 2005 I Q 2006 III Q 2006 I Q 2007 III Q 2007 I Q 2008 III Q 2008 Dec 2008

Growth rate of retail turnover
Growth rate of food products turnover
Growth rate of non-food products turnover

-2,1

-3,2

-2,7 -3,1

-10,3

-5,6

-6,5

-8,4

-9,7

-1,3
-3

-4,8

Feb 2009 April 2009 June2009

July 2009 Sept 2009 Nov 2009

-0,1

-2,4

-3,6

-3,8

-4,5

-6,2 -5,6

-8,2

-8,4

-9,8 -9,9

-6,4

-6,9

-10

-11,6

-13,1 -13,8

-12,6

Source: IA Infoline

At that December faced the increase of non-food consumption, and the retail turnover in
absolute terms was higher than in December 2008. Dynamics of the retail turnover in 2007-2009
is represented in the graphical chart.

Dynamics of retail turnover in 2007-2009, bn RUR.

1518,4

1453,6

1167,5

1108,6

1177,8

1131,6

1207,5

1179,7

1226,1

1223,2

1229,5

1237,3

1269

1272

1258,3

1238,9

1229,1

890,3

929,3

940,1

993,9

1012,9

1078,1

1050,1

1042,5

1069,9

1131,3

1138,3

1000

937,9

958

791,2

814,3

834,9

855,9

718,2

718,9

800

600

400

January

February

March

April

May

June

July

August

September

October

November

December

2009 (in current prices)

2008 (in prices of 2008)

2007 (in prices of 2007)

Year

2006

2007

Dynamics of retail turnover in 2006-2009

Turnover, billion RUR

As % (1) to the corresponding
period of the pervious year

Source: IA Infoline

8693.4

10757.8

113.9

115.2

Year

2008

2009

Turnover, billion RUR

As % (1) to the corresponding
period of the pervious year

13853.2

14516.9

113

94.5

Source: Federal State Statistics Service

SSTTRRUUCCTTUURREE OOFF RREETTAAIILL TTUURRNNOOVVEERR BBYY PPRROODDUUCCTT TTYYPPEESS

In December 2009 the share of food products in retail turnover in Russia amounted to
48.9% (in December 2008 the figure was 48.0%). Reduction of share of non-food products ceased
in the II half of 2009, while the share of food products was decreasing from 49.7% in May till
October 2009. However, there was seen a trend brake in November-December, and the share of
food products increased again.

Dynamics of food products share in retail turnover in 2005-2009, %

5
0

n
a
J

5
0
r
a

5
0

y
a
M

5
0

l
u
J

5
0

p
e
S

5
0

v
o
N

6
0

n
a
J

6
0
r
a

6
0

y
a
M

6
0

l
u
J

6
0

p
e
S

6
0

v
o
N

7
0

n
a
J

7
0
r
a

7
0

y
a
M

7
0

l
u
J

7
0

p
e
S

7
0

v
o
N

8
0

n
a
J

8
0
r
a

8
0

y
a
M

8
0

l
u
J

8
0

p
e
S

8
0

v
o
N

9
0

n
a
J

9
0
r
a

9
0

y
a
M

9
0

l
u
J

9
0

p
e
S

9
0

v
o
N

It should be noted that data for 2009 and previous years are not fully comparable, as in
2002-2008 the data on food, including beverages, was provided by Federal State Statistics
Service excluding tobacco goods, while in 2009 tobacco goods were included. At the same time,
the growth trend of the share of food products was observed in 2009, despite the
misrepresentation introduced by statistics service.

Index

Retail turnover

Food

Non-food

Share of food, %

Share of non-food, %

Structure of retail turnover in 2002-2009, billion RUR
2002

2003

2004

2006

2007

2005

2008

2009

3765

1754

2011

46,6

53,4

4529

2092

2437

46,2

53,8

5642

2578

3064

45,7

54,3

7038

8690

10866,2 13853,2 12988,5

3216

3945

4884,9 6270,8

7062,4

3822

4745

5981,3 7582,4

7454,5

45,7

54,3

45,4

54,6

45,0

55,0

45,26

54,73

48,6

51,1

Source: Federal State Statistics Service

There were significant changes in the structure of sales of basic goods in 2009. Most
important of them were a significant reduction of the cars’ share and the increase of the share of
petrol, vegetables and potatoes.
1 Dynamics of retail turnover in the mass of commodities

SSTTRRUUCCTTUURREE OOFF RREETTAAIILL TTUURRNNOOVVEERR BBYY TTYYPPEESS OOFF TTRRAADDIINNGG
OORRGGAANNIIZZAATTIIOONNSS

In December 2009 the retail turnover was by 86.4% formed by trading organizations and
individual entrepreneurs operating outside the market, while the share of retail markets and
fairs amounted to 13.6% (vs. 86.8% and 13.2% in December 2008 correspondingly). At that in
December 2009 the turnover of trading organizations declined by 3.7%, while the sales in the
markets - by 3.6% vs. December 2008. Thus, by the end of the year there was no trend of
consumer flow from stores to retail markets due to the intensification of price competition.
Generally, the decrease of turnover of trading organizations amounted to 6% and to 2% for
markets.

Turnover of trading organizations and markets in 2002-2009, billion RUR

Index

2002

2003

2004

2005

2006

2007

2008

2009

Retail turnover

3765

4529

5642

7038

8690

10866.2

13853.2

14516.9

Turnover of trading
organizations

Sales of goods on clothes,
mixed and food markets

Share of trading
organizations, %

2838.8

3451.1

4420.5

5558.2

6987

9214.5

12015.9

12536.4

926.2

1077.9

1254.1

1479.8

1703

1651.7

1837.3

1980.5

75.4

76.2

77.9

79.0

80.4

84.8

86.7

86.4

Share of markets, %

24.6

23.8

22.1

21.0

19.6

15.2

13.3

13.6

Source: Federal State Statistics Service

In 2009 the population was purchasing 12.5% of food and 17% of non-food products in

the retail markets and fairs.

The share of markets and individual entrepreneurs increased by 0.4 pps and 0.9 pps
correspondingly in the structure of the retail turnover by types of organizations. At the same
time the share of small business reduced by 0.5 pps, and the share of big and medium
organizations reduced by 0.7 pps. Thus traditional retail and small business were hit in a most
significant way during the economic crisis. Dynamics of the structure of retail turnover in
Russia by types of organizations is represented in the graphical chart.

Structure of retail turnover for 9M 2009, %

Markets
13,5%

Big and medium organizations
(including retail chains)
35,1%

Individual entrepreneurs outside
the market
25,8%

Small business
25,5%

Structure of retail turnover by types of organizations in 2006-2009, %

100%

80%

60%

40%

20%

32,7

22,3

25,3

19,7

2006

37,3

22,2

25,2

15,3

2007

35,2

26,3

25,2

13,3

2008

34,5

25,8

26,1

13,6

2009

Markets
Small business

Individual entrepreneurs outside the market
Big and medium organizations (including chains)

In 2004–2009 the reduction of markets’ share in the retail turnover was accompanied by
the reduction of their number (the most intensive reduction had appeared in 2007 and 1Q 2008,
after that the situation stabilized) due to their liquidation or conversion into shopping
complexes: as of January 1, 2005 there were 6.44 thousand markets in Russia, as of January 1,
2008 – about 4.7 thousand, as of April 1, 2008 – 3.8 thousand, as of November 1, 2008 – 3.74
thousand, as of January 1, 2009 – 3.73 thousand and as of December 1, 2009 – 3.57 thousand.
Compared to December 1, 2008 their number decreased by 155 units generally due to closing or
reorganization of universal type markets (their number decreased by 127 units). At the same
time the number of agricultural markets increased from 178 to 200 units (within the period of
December 2008 - 2009).

Dynamics of the number of markets in Russia and their share in the retail turnover in 2004-2009

8000
7000
6000
5000
4000
3000
2000
1000
0

2004

2005

2006

2007

2008

December 1, 2009

Number of markets in Russia as of the end of the year
Share of markets in Russia's retail turnover (right scale), %

As of December 1, 2009 the number of trading posts amounted to 983.3 thousand, which
shows a decrease by 51.1 thousand (by 5%) vs. December 1, 2008. At that as of January 1, 2007
the average market consisted of 204 trading posts, as of January 1, 2008 – 245 posts, as of
January 1, 2009 – 277 posts, as of December 1, 2009 – 275.1 posts.

RREEGGIIOONNAALL SSTTRRUUCCTTUURREE OOFF RREETTAAIILL TTUURRNNOOVVEERR

Regional structure of Russian retail turnover is distinct by heterogeneity: 52.5% of retail
turnover is constituted by 11 subjects of Russian Federation (Moscow, Moscow region, Saint-
Petersburg, Ekaterinburg region, Krasnodar region, Samara region, the Republic of Tatarstan
and Bashkortostan, Tyumen region, Chelyabinsk and Rostov regions). In 2009 the share of 11
largest regions decreased vs. 53.1% in 2008.

Structure of retail turnover by federal districts of Russian Federation in 2009, %

Southern
13,3%

Volga
18,3%

North-West
9,2%

Urals
10,5%

Siberian
11,0%

Central
33,7%

Far-East
4,1%

Structure of retail turnover by subjects of Russian Federation in 2009, %

Sverdlovsk region
3,8%

Tyumen region
3,7%

Chelyabinsk region
2,5%

Other
47,5%

Samara region
2,7%

Tatarstan
2,7%

Bashkortostan
3,2%

Rostov region
2,7%

Krasnodar region
3,8%

Saint-Petersburg
4,0%

Moscow region
6,2%

Moscow
17,2%

In 2008 the retail turnover increased in all federal districts and subjects of Russian
Federation, however, in 2009 it increased only in 20 out of 83 regions. At the same time the retail
turnover declined in 43 regions in December 2009 vs. December 2008, however it was
significantly better than in November (in 64 regions), October (in 69 regions) and September (in
71 regions).

Regional structure of retail turnover of Russian Federation in 2002-2009, %

Region

2002

2003

2004

2005

2006

2007

2008

2009

Central Federal District

Moscow

Moscow region

40.2

27.3

4.0

39.2

26.1

4.3

37.4

22.9

5.3

35.9

21.1

5.7

34.7

19.0

6.1

33.45

33.67

17.08

6.18

6.41

17.24

38.9

24.6

5.2

Region

2002

2003

2004

2005

2006

2007

2008

2009

North-West Federal District

Saint-Petersburg

Southern Federal District

Volga Federal District

Urals Federal District

Siberian Federal District

Far-East Federal District

9.3

3.7

10.6

16.6

7.9

11.5

4.2

9.2

3.9

10.5

16.6

8.4

11.6

4.2

9.0

3.6

10.7

16.7

8.8

11.7

4.2

8.9

3.5

11.5

17.1

9.3

11.7

4.1

9.3

4.0

11.7

17.4

10.0

11.6

4.0

9.4

4.1

12.3

17.9

10.4

11.5

3.9

9.21

4.08

9.21

4.03

12.80

13.26

18.37

18.33

10.83

10.50

11.59

10.96

3.75

4.06

Source: Federal State Statistics Service

At the end of 2009 the most dramatic decline (more than 5%) of the retail turnover
among the largest regions (the share in the turnover of Russian Federation more than 1%) was
seen in Kemerovo region – by 21.2%, Altai region – by 19.4%, Rostov region – by 15.3%,
Tyumen region – by 13.2%, Nizhniy Novgorod region – by 10.0%, Saint-Petersburg – by 9.4%,
Omsk region – 9.1%, Samara region – by 9.0%, Irkutsk region – 8.2%, Novosibirsk region – by
7.8%, Moscow region – by 7.7%, Perm region – by 6.2%, Krasnoyarsk region – by 6.3%, Saratov
region – by 5.2% and Chelyabinsk region – by 5.1%. The growth among the big regions was
shown only in Krasnodar region (by 0.5%), Stavropol region (1%) and the Republic of Dagestan
(by 10.6%).

Growth of retail turnover by districts in 2007 - 2009, % to the corresponding period of the
pervious year, in comparable prices

111,7

110,8

114,5

110,3

121,1

116,5

117,7

115,2

120,1

118,1

2007

2008

2009

113,9

111,5

110,3

109,5

95,2

92,8

97,6

94,9

92,3

100,2

89,3

125

120

115

110

105

100

Central

North-West

South

Volga

Urals

Siberian

Far-East

SSTTAATTEE RREEGGUULLAATTIIOONN OOFF RREETTAAIILL BBUUSSIINNEESSSS

According to the Federal Law № 381 – FL “On the principles of state regulation of trade
activity in the Russian Federation” which came into effect on December 28, 2009, it is strictly
prohibited for the food retail chains (with the threshold of dominance on retail market within
the boundaries of one region, municipal area or urban district exceeding 25%) to acquire and
rent additional selling space within the boundaries of the corresponding political territory. The
Law does not apply to agricultural consumer cooperative and organizations of consumer
cooperation.

The Law “On the principles of state regulation of trade activity in the Russian
Federation” is also designated to regulate cooperation of retail chains and suppliers. The Law
№ 381 – FL introduced special legal control and assigned a list of terms which cannot be
imposed by food suppliers and their buyers (retail chains) upon each other. Specifically, these

terms include: price reduction by suppliers till such level which with the determination of the
trade mark-up will not exceed the bottom price for this product sold by economic entities
performing corresponding activity; payment for the change in the product assortment;
responsibility for a failure to observe obligation on goods supply on more favorable terms than
for other economic entities; suppliers fee for the access to the trade objects within one retail
chain. Wholesale trade under commission agreement is also prohibited by the Law.
Establishment of prohibition on substitution of persons under the product supply agreement
through assignment of a claim and liability for noncompliance with this regulation is not
allowed. Due payment period for some food products was set. For example, the products with
the 10-days expiry period should be paid for within 10 working days from the date of
acceptance of goods, for the products with the 30-days expiry period the payment due period is
up to 30 calendar days, and for all the rest food products including alcohol drinks – up to 45
calendar days. The Law № 381 – FL came into force on February 1, 2010. The terms of food
supply agreements which had been entered into prior to the stated date should be brought into
compliance with the law requirements within 180 days starting from the Law effective date.

At the moment there are no sanctions for violation of the Retail Law, and they will be set
upon the amendments to the Code of the Russian Federation on Administrative Violations (the
amendments are in the process of approval as of March 2010).

MMAAIINN CCOOMMPPEETTIITTOORRSS66

The concentration level of the Russian food retail market is quite low – the share of 3
largest players makes up about 8% of the market, which considerably yields to comparable
figures in Eastern and Western European countries.

Such a low capital concentration creates conditions for competition intensification
among retail chains in the nearest future. Currently competition development is expressed in
capturing the extra markets due to the growth of the chain itself including the franchising
schemes as well as M&A deals. As a result, the chains operating in the Russian market actively
increase their presence in Moscow and regions which leads to the record indices of the business
growth.

X5 Retail Group
X5 Retail Group N.V. (LSE: FIVE, Moody's - "B1", S&P - "BB-") is Russia’s largest food

retailer in terms of sales. It operates under two brands of “Pyaterochka” and “Perekrestok”.

The merger of “Pyaterochka” and “Perekrestok” companies took place on May 18, 2006

aiming at creation of the largest company in the food retail market in Russia.

As of January 1, 2009 X5 Retail Group was represented in 45 cities of European part of
Russia and Ural, also in Ukraine, and operated 1,372 stores with the selling space of 1,063
thousand sq. m. The chain consists of 1,039 “Pyaterochka” stores in the format of a soft
discounter, 275 “Perekrestok” supermarkets and 58 "Karusel" hypermarkets. During 2009 the
selling space of X5 Retail Group increased by 189 thousand sq. m., including purchase of
“Paterson”, the number of stores increased by 271 which includes 191 “Pyaterochka”
discounters, 68 “Perekrestok” supermarkets, 12 "Karusel" hypermarkets. Within the crisis
environment X5 Retail Group introduced the practice of closing inefficient stores: in 2009 5
supermarkets were re-branded in discount stores and 19 stores were closed (3 supermarkets
and 16 discounters). As of January 1, 2010 the number of franchise stores amounted to 620 in
Russia, including 549 “Pyaterochka” discounters, 52 “Perekrestok-Express” mini-markets and
19 “Paterson” supermarkets.

In general, for the year 2009 consolidated net retail sales (including sales of acquired
"Karusel" and “Paterson” chains on the basis of consolidation as of June 30, 2008 and December
1, 2009 correspondingly) amounted to 275,183 million RUR or 8,675 million USD, which shows
an increase by 33% in ruble or 4% in dollar terms vs. 2008. Pro-forma net retail sales increased
by 25% in ruble terms (including pro-forma sales of acquired "Karusel" chain from January 1,
2008). Results of acquired stores of “Paterson” chain were included only in results of December
2009. Pro-forma net retail sales decreased by 2% in dollar terms due to the negative effect of
ruble devaluation. Like-for-like sales increased by 10%, while traffic grew by 5%.

As of January 1, 2010 X5 Retail Group operated 23 distribution centers (in 11 cities) with
the total warehousing space of 309 thousand sq. m., and are located in Moscow and Perm
regions, Saint-Petersburg, Voronezh, Rostov-on-Don and Kazan.

METRO Cash & Carry
As of February 1, 2010 METRO Cash & Carry operated 52 shopping centers in 35
regions. During January 2010 the number of trading objects in the chain remained unchanged.
Four shopping centers were opened in 2009 (Bryansk, Zheleznodorozhnyi, Kirov, Novosibirsk),
thus the opening plan was fully implemented. As of January 1, 2010 total selling spaces of the

6 Source: IA Infoline, open sources of the Company

Company amounted to 461.3 thousand sq. m., which shows the increase by 31.9 thousand sq. m.
from the beginning of 2009.

In 2009 worldwide sales decreased by 3.6% and amounted to 65.5 billion euro.

Auchan
As of February 1, 2010 Auchan operated 38 objects. 24 “Auchan” hypermarkets were
opened in 11 regions (12 – in Moscow and Moscow region, 3 – in Saint-Petersburg, 2 – in
Rostov-on-Don, 1
in Adygeya, Samara, Krasnodar, Ekaterinburg, Nizhniy Novgorod,
Novosibirsk, Omsk). In 2009 3 “Auchan” stores were opened in Moscow, Saint-Petersburg,
Omsk, and also one hypermarket’s space was increased (Auchan-Marfino in Moscow). Besides,
Auchan operates 12 "Auchan-city" mini-hypermarkets (opened after re-branding of "Ramstor"
hypermarkets) in Moscow (7 stores), Ekaterinburg (1 stores), Moscow region (2) and St.
Petersburg (1). 2 stores of new “Raduga” format were added to the chain in Kaluga and Penza
that were opened in December 2009. The total selling space of stores amounted to 386.6
thousand sq. m. Also 2 “Auchan Sad” hypermarkets were opened in 2009. For January 2010 the
number of chain objects remained unchanged.

During 2009 5 trading objects were opened, while the selling space almost increased by

47 thousand sq. m.

Dixy
As of February 1, 2010 the total store base of OJSC “Dixy Group” reached 533 (510
"Minimart" economy
“Dixy” discounters, 15
supermarkets) and the selling space increased by 188.6 thousand sq. m. In January 2010 retail
chain “Dixy” closed 4 stores (2 stores in Moscow, in Saint-Petersburg and Chelyabinsk). Chain
stores of OJSC “Dixy Group” operate in 3 federal districts of Russia: Central, North-West and
the Urals.

"Megamart" compact hypermarkets, 8

In 2009 sales of “Dixy Group” increased by 12% vs. 2008 and amounted to 54,208 billion
RUR. Total sales in dollar terms amounted to 1,708.8 billion USD which is by 12% less than in
2008. Retail sales of "DIXY" stores amounted to 45,121 billion RUR (1,422.3 million USD) which
is by 11% in ruble terms higher than in 2008 but 13% less in dollar terms. Retail sales of
"Megamart" amounted to 6,324 billion RUR (199.4 million USD), which is by 23.1% higher than
in 2008, but 3.5% less in dollar terms. Retail sales of "Minimart" amounted to 2,001 million RUR
(63.1 million USD), which is by 12.9% higher than in 2008, but 11.6% less in dollar terms. Retail
sales of “VMart” convenience stores amounted to 68 million RUR (2.1 million USD). Within
March-April 2009 all 12 “VMart” convenience stores were closed. Revenue from other
operations, including marketing, sublease and wholesale amounted to 694 million RUR (21.9
million USD).

Lenta
As of February 1, 2010 "Lenta" operated 36 hypermarkets located in Saint-Petersburg,
Ninzhniy Novgorod, Novosibirsk, Tyumen, Krasnodar, Volgograd, Velikiy Novgorod,
Petrozavodsk, Astrakhan, Togliatti, Naberezhnye Chelny, Barnaul, Penza and Saratov, Omsk
and Novorossiysk. The total selling space of the chain amounted to 274.4 thousand sq. m. In
April, 2009 2 "Lenta" hypermarkets were opened in Omsk and Novorossiysk.

O'KEY
"O'KEY" Group is a multi-format retail chain consisting of "O'KEY" hypermarkets and

"O'KEY - Express" supermarkets.

As of February 1, 2010 "O'KEY" chain operated 46 shopping complexes in the territory of
Russia: 14 hypermarkets and 13 supermarkets are located in Saint-Petersburg and Leningrad
region, 1 hypermarket is in Moscow, 1 hypermarket and 1 supermarket are in Moscow region, 2
hypermarkets are in Murmansk, 2 hypermarkets are in Krasnodar, 2 hypermarkets are in
Rostov-on-Don, 1 hypermarket and 3 supermarkets are in Volgograd, 1 hypermarket is in
Togliatti, Stavropol, Nizhniy Novgorod, 2 hypermarkets and 1 supermarket are located in
Krasnoyarsk. As of February 1, 2010 the total selling space of "O'KEY" chain approximately
amounted to 233 thousand sq. m. Besides, "O'KEY" Group owns shopping and entertainment
center “Podsolnukh” in Saint-Petersburg. Generally, the Company opened 5 "O'KEY"
hypermarkets (in Saint-Petersburg, Stavropol, Noginsk, Krasnoyarsk and Moscow) and 4
"O'KEY - Express" supermarkets (Lobnya town, Moscow region, Saint-Petersburg, Krasnoyarsk,
Volzhsk) in 2009. During the year the total selling space increased by 40 thousand sq. m.

Number of stores of the largest FMCG retailers in 2005-2009, eop.

Legal name

”Magnit”,OJSC

X5 Retail Group N.V.

Brand
Pyaterochka
Perekrestok
Karusel
Magnit
Magnit Hypermarket
“Auchan", company limited Auchan, Auchan-City
“METRO Cash and Carry”,
company limited
Lenta
“Lenta", company limited
“O'key", company limited O'key, O'key-express Hypermarket, supermarket
Discounter, supermarket,
Megamart, Minimart,
hypermarket
Dixy

Main formats
Convenience store
Supermarket
Hypermarket
Convenience store
Hypermarket
Hypermarket

“Dixy-group”, OJSC
(DISCOUNTcenter, CJSC)

Metro Cash&Carry

Hypermarket

2005
326
120
6
1501
0
7

9
6

2006
451
168
19
1892
0
14

14
13

2007
674
194
22
2194
3
18

26
24

2008
848
207
46
2565
14
33

34
37

2009
1039
275
58
3204
24
38

36
46

211

326

388

493

537

Total selling space of FMCG retailers in Russia in 2005-2009, eop, thousand sq. m.

Legal name

X5 Retail Group N.V.(2)

”Magnit”,OJSC
”Magnit”,OJSC
“Auchan", company
limited
“METRO Cash and
Carry”, company limited
“Lenta", company
limited
“O'key", company
limited
“Dixy-group”, OJSC
(DISCOUNTcenter,
CJSC)

Brand
Pyaterochka
Perekrestok
Karusel
Magnit

Main formats
Convenience store
Supermarket
Hypermarket
Convenience store

2005
196.3
140.7
34.4
381.0

2006
257.4
208.7
109.0
522.9

2007
357.5
251.7
126.0
640.1

2008
419.2
222.4
232.5
767.1

2009
493.0
284.4
285.6
977.2

Magnit Hypermarket

Hypermarket

0.0

11.6

56.4

82.7

Auchan, Auchan-City

Hypermarket

108.7

198.1

250.6

340.1

386.6

Metro Cash&Carry

Hypermarket

199.4

263.8

358.2

429.4

465.3

Lenta

Hypermarket

77.0

119.7

177.0

232.7

247.4

O'key, O'key-express Hypermarket, supermarket 50.3

90.8

149.2

191.7

232.7

Megamart, Minimart,
Dixy

Discounter, supermarket,
hypermarket

75.4

129.9

151.0

190.9

206.0

Dynamics of net sales (excluding VAT) of the largest FMCG retailers in 2005-2009, billion RUR

Legal name

X5 Retail Group N.V.

”Magnit”,OJSC
“Auchan", company
limited

Brand
Pyaterochka
Perekrestok
Karusel
Magnit

Main formats
Convenience store
Supermarket
Hypermarket
Discounter, hypermarket

Auchan, Auchan-City

Hypermarket

“METRO Cash and
Carry”, company limited
“O'key", company limited O'key, O'key-express Hypermarket, supermarket

Metro Cash&Carry

Hypermarket

Data
IFRS
IFRS
IFRS

IFRS

RAS

IFRS

2008 2009

2005 2006
2007
38.32 53.63 75.38 110.95 148.35
28.72 40.66 49.75 67.15 73.19
31.16 41.71 53.55
2.39
9.8
94.04 132.4 169.6
44.53 68.1

42.37 54.36

90.6

128.1

78.63 86.97 111.2

10.9 16.63 30.533 51.14

Legal name
“Lenta", company limited

“Dixy-group”, OJSC
(DISCOUNTcenter,
CJSC)

Brand
Lenta
Dixy
Megamart
Minimart
V-mart

Main formats
Hypermarket
Discounter
hypermarket
supermarket,
Convenience store

Data
IFRS
IFRS
IFRS
IFRS
IFRS

2008 2009
-
50.8

2005 2006
24.06
16

2007
32.9
20.07 27.12 32.25 40.654 45.121
6.324
3.2
2.001
1.2
0.241 0.068
0

-
-
-

5
2

(2) In 2005-2007 data for the chain “Perekrestok” reflects figures of supermarkets and hypermarkets. Following the
results of 2008 the hypermarkets of “Perekrestok” and “Karusel” are united in the line “hypermarket”

CCOOMMPPEETTEETTIIVVEE AADDVVAANNTTAAGGEESS OOFF ““MMAAGGNNIITT”” CCHHAAIINN

Multi-format business
Implementation of the strategic decision to develop the additional format of
hypermarket allows the Group to conduct more profound segmentation of the existing markets
and to consider the population with different income level as the potential customers while
simultaneously achieving high efficiency of turnover per store and the average ticket as well as
fast rates of business growth. Moreover, the pricing policy of the Group allows it to compete
with open-air markets with the focus on customers with income below the average.

Strong regional coverage
The group of “Magnit” companies has considerable experience of operation in the
regions: in 2002 – 2009 the impressive growth of the Group turnover was a result of its
expansion into the cities with a population of less than 500 thousand people. In the nearest
future the regions are expected to face the growth of consumer demand, what creates the
favorable conditions for medium-term operation dynamics of the Group.

The largest chain in the Russian Federation in terms of stores number
In terms of stores number “Magnit” chain takes the first place in Russia which positively
effects cooperation with the largest food and beverages producers promoting their products on
the regional markets. First of all it is seen in favorable purchasing terms and corresponding
profitability improvement.

Recognized brand
According to the independent expert research, IGD in particular, Russian customers pay
significant attention to the brand when purchasing non-food and food items. Moreover, loyalty
of Russian customer to one or another brand is higher vs. European citizens, which makes
Russian customers less sensitive to the increase of product prices. Therefore, large store chain
under “Magnit” brand allows the Group to strengthen its positions in the market of presence.

Effective logistics system
Developed logistics system, distribution centers and own fleet of vehicles, allow the
Group to strictly monitor its delivery costs. Due to distribution centers operation the company
manages to reduce the purchasing prices and the store load upon goods acceptance, which
together contributes to more efficient business organization.

The Group applies highly efficient automated stock replenishment system, which gives

opportunity to achieve high turnover level as well as to reduce costs.

99.. PPRRIIOORRIITTYY DDIIRREECCTTIIOONNSS OOFF TTHHEE CCOOMMPPAANNYY’’SS OOPPEERRAATTIIOONN

Based in Krasnodar, in the Southern region of Russia, open joint-stock company “Magnit”
(the “Company”) is a holding company for a group of entities that operate in the retail industry
under the “Magnit” name. The chain of “Magnit” stores is one of the leading operators in the
Russian food retail market. As of December 31, 2009 the chain consisted of 3,204 convenience
stores and 24 hypermarkets in 1,048 locations in the Russian Federation.

About two-thirds of the Company’s stores are located in cities with a population of less
than 500 thousand. Most of its stores are located within the Southern, Central and Volga
regions. The Company also operates stores in the North-Western and Urals regions. By the end
of 2009 stores located in the Southern Federal district accounted for 1,167, in Volga region - 807,
Central Region – 954, in the North-West and Ural regions the number of stores amounted to 161
and 139 correspondingly.

Central: 954 stores
3 Distribution centers

North-West:
161 stores

Urals:
139 stores
1 Distribution center

Volga:
807 stores
2 Distribution centers

Southern:
1,167 stores
3 Distribution centers

As of December 31, 2009 the Company operates the in-house logistics system consisting
of 9 modern distribution centers: three of them are located in Southern Federal district
(Kropotkin, Bataysk and Slavyansk-On-Kuban), two are in Volga Federal district (Engels and

Togliatti), another three distribution centers are based in Central Federal district (Tver, Oryol
and Ivanovo), and one in Urals Federal district (Chelyabinsk).

City

Federal District

Warehousing space,
sq. m.

Number of serviced
stores

Bataysk

Southern

Kropotkin

Southern

Slavyansk-On-
Kuban

Southern

Engels

Togliatti

Tver

Oryol

Ivanovo

Volga

Central

Chelyabinsk

Ural

15,504

30,048

20,496

19,495

17,566

10,714

12,197

43,365

16,152

273

470

256

429

397

263

485

352

303

Total

185,537

3 228

The Company operates automated stock replenishment system and a fleet of 1,453

vehicles.

1100.. PPRRIIOORRIITTYY DDIIRREECCTTIIOONNSS OOFF TTHHEE CCOOMMPPAANNYY’’SS

DDEEVVEELLOOPPMMEENNTT

Within the medium-term development outlook the Company marks out the

following directions:

• Further expansion of the chain due to the growing coverage of the key

markets as well as organic expansion in the least developed regions

• Development of

the multi-format business-model

through active

implementation of the hypermarket format

• Forming the high level of the key audience loyalty to the brand

• Achievement and retention of the leading position in the industry in terms of

expenses level

Chain development

In the nearest 2-3 years the Company plans to keep high rates of business
growth, opening not less than 250 convenience stores per year in the cities with the
population up to 500,000 people.

The key territories for the Company are Southern, Volga and Central regions, it is
planned to increase the number of stores in Urals. In the long-term outlook the
management of the chain does not exclude the opportunity of entering the markets of
Siberia and the Far East.

Development of the multi-format model

Currently the Company is actively expanding into two formats: traditional
format – “convenience store” – and a new one – “hypermarket” – on the developed
territories.

The Company opens its hypermarkets mainly in the cities with population from
50,000 to 500,000 citizens, at that the retail outlet is located inside the city (within the
city boundaries).

As of 31.12.2009 the Company has 24 operating hypermarkets: