PPrreelliimmiinnaarriillyy rraattiiffiieedd
bbyy tthhee rreessoolluuttiioonn ooff tthhee BBooaarrdd
ooff OOJJSSCC ““MMaaggnniitt”” ooff AApprriill 2200,, 22001122,,
mmiinnuutteess ooff AApprriill 2200,, 22001122
RRaattiiffiieedd
bbyy tthhee rreessoolluuttiioonn ooff tthhee annual general shareholders' meeting
of OJSC “Magnit”
minutes w/№ of May 28, 2012
22001111 AANNNNUUAALL RREEPPOORRTT
OOPPEENN JJOOIINNTT--SSTTOOCCKK CCOOMMPPAANNYY
““MMAAGGNNIITT””
1188 KKoollkkhhoozznnaayyaa ssttrreeeett,, KKrraassnnooddaarr,, 335500004422,, RRuussssiiaann FFeeddeerraattiioonn
CChhiieeff EExxeeccuuttiivvee OOffffiicceerr
__________________________________________ SS.. GGaalliittsskkiiyy
CChhiieeff AAccccoouunnttaanntt
__________________________________________
II.. KKuullaakkoovvaa
sseeaall
KKRRAASSNNOODDAARR 22001122
2
TABLE OF CONTENTS
11.. KKEEYY FFIINNAANNCCIIAALL AANNDD OOPPEERRAATTIINNGG RREESSUULLTTSS ............................................................5
22.. MMIISSSSIIOONN ..................................................................................................................................7
33.. CCHHIIEEFF EEXXEECCUUTTIIVVEE OOFFFFIICCEERR’’SS SSTTAATTEEMMEENNTT................................................................8
44.. IINNFFOORRMMAATTIIOONN OONN TTHHEE PPEERRSSOONN IINN TTHHEE PPOOSSIITTIIOONN OOFF AA SSOOLLEE EEXXEECCUUTTIIVVEE
BBOODDYY .............................................................................................................................................9
55.. IINNFFOORRMMAATTIIOONN OONN TTHHEE CCOOLLLLEEGGIIAALL EEXXEECCUUTTIIVVEE BBOODDYY MMEEMMBBEERRSS
((MMAANNAAGGEEMMEENNTT BBOOAARRDD)) aass ooff DDeecceemmbbeerr 3311,, 22001111 ........................................................10
66.. IINNFFOORRMMAATTIIOONN OONN TTHHEE BBOOAARRDD MMEEMMBBEERRSS aass ooff DDeecceemmbbeerr 3311,, 22001111 ................13
77.. RREEPPOORRTT OOFF TTHHEE BBOOAARRDD OONN 22001111 OOPPEERRAATTIIOONNSS .....................................................20
88.. MMAAIINN 22001111 CCOORRPPOORRAATTEE EEVVEENNTTSS..................................................................................26
99.. PPOOSSIITTIIOONN OOFF TTHHEE CCOOMMPPAANNYY IINN IINNDDUUSSTTRRYY...........................................................28
1100.. PPRRIIOORRIITTYY AARREEAASS OOFF TTHHEE CCOOMMPPAANNYY’’SS OOPPEERRAATTIIOONNSS .......................................41
1111.. PPRRIIOORRIITTYY DDIIRREECCTTIIOONNSS OOFF TTHHEE CCOOMMPPAANNYY’’SS DDEEVVEELLOOPPMMEENNTT.......................43
1122.. IINNFFOORRMMAATTIIOONN OONN TTHHEE PPAAIIDD DDIIVVIIDDEENNDDSS............................................................45
1133.. SSEECCUURRIITTIIEESS.........................................................................................................................46
1144.. TTRRAANNSSAACCTTIIOONNSS,, CCOONNSSIIDDEERREEDD MMAAJJOORR TTRRAANNSSAACCTTIIOONNSS AACCCCOORRDDIINNGG TTOO
TTHHEE FFEEDDEERRAALL LLAAWW ““OONN JJOOIINNTT--SSTTOOCCKK CCOOMMPPAANNIIEESS””,, MMAADDEE WWIITTHHIINN TTHHEE
YYEEAARR 22001111 ...................................................................................................................................58
1155.. LLIISSTT 00FF 22001111 TTRRAANNSSAACCTTIIOONNSS DDEECCLLAARREEDD AASS RREELLAATTEEDD--PPAARRTTYY IINN
AACCCCOORRDDAANNCCEE WWIITTHH TTHHEE FFEEDDEERRAALL LLAAWW OONN ““JJOOIINNTT--SSTTOOCCKK CCOOMMPPAANNIIEESS”” .60
1166.. MMAAIINN RRIISSKK FFAACCTTOORRSS RREELLAATTEEDD TTOO TTHHEE ССOOMMPPAANNYY OOPPEERRAATTIIOONN ................83
1177.. IINNFFOORRMMAATTIIOONN OONN TTHHEE CCOOMMPPLLIIAANNCCEE WWIITTHH TTHHEE FFFFMMSS CCOODDEE OOFF
CCOORRPPOORRAATTEE CCOONNDDUUCCTT OOFF RRUUSSSSIIAANN FFEEDDEERRAATTIIOONN .............................................110
1188.. IINNFFOORRMMAATTIIOONN OONN TTHHEE AAUUDDIITTOORR AANNDD TTHHEE CCOONNSSUULLTTAANNTT OOFF TTHHEE
CCOOMMPPAANNYY ...............................................................................................................................125
19.
INFORMATION ON VOLUMES OF ENERGY RESOURCES UTILIZATION
WITHIN THE YEAR 2011 ......................................................................................................127
AANNNNEEXX TTOO 22001111 AANNNNUUAALL RREEPPOORRTT OOFF OOJJSSCC ““MMAAGGNNIITT””
ANNEX № 1: Consolidated financial statements of OJSC “Magnit” for the year
ended December 31, 2011
ANNEX № 2: RAS Accounting report of JSC “Tander” for the year 2011
ANNEX № 3: RAS Accounting report of OJSC “Magnit” for the year 2011
3
4
11.. KKEEYY FFIINNAANNCCIIAALL AANNDD OOPPEERRAATTIINNGG RREESSUULLTTSS
201 key operating results:
Number of opened stores, NET
convenience stores
hypermarkets
cosmetics stores
convenience stores
hypermarkets
cosmetics stores
convenience stores
hypermarkets
cosmetics stores
convenience stores
hypermarkets
cosmetics stores
Total number of stores
Selling space, th sq. m.
Number of customers, mn
LFL results:
1 254
1,004
42
208
5 309
5 006
93
210
1 970,16
1 637,83
282,24
50,09
1 644,43
1 550,27
90,17
3,98
LFL growth 12М 2011 – 12М 20101 Convenience stores Hypermarkets Total
9,67%
Average ticket (excl. VAT), RUR
1,29%
Traffic
11,09%
Sales, RUR
10,17%
1,29%
11,59%
5,26%
1,32%
6,65%
1 Based on 1 956 convenience stores which were opened by July 1, 2009 and 14 hypermarkets which were opened by May 1, 2009, i.e.
based on the result of the convenience stores that had been operating for not less than six months and hypermarkets that had been
operating for not less than eight months and have achieved a mature level of sales.
5
convenience stores2
hypermarkets2
cosmetics stores2
wholesale2
convenience stores2
hypermarkets2
cosmetics stores2
wholesale2
2011 key financial results:
Net sales, mn RUR
Net sales, mn US$34
Gross profit, mn RUR
Gross profit, mn US$3
Gross margin, %
EBITDAR, mn RUR.
EBITDAR, mn US$
EBITDAR margin, %
EBITDA, mn RUR
EBITDA, mn US$
EBITDA margin, %
EBIT, mn RUR
EBIT, mn US$
EBIT margin, %
Net profit, mn RUR
Net profit, mn US$3
Net profit margin, %
Market capitalization, mn RUR5
Market capitalization, mn USD6
2 Management accounts
3 Audited financial statements prepared in accordance with IFRS
4 Based on the average exchange rate for 2011 of 29,3874 RUR per US$ 1
5 CJSC «MICEX Stock Exchange»
6 Based on the exchange rate for 30.12.2011 of 32,0197 RUR per US$ 1
6
335 699,95
287 731,79
46 982,79
892,82
92.55
11 423,26
9 790,99
1 598,74
30,38
3,15
81 663,45
2 778,86
24,33%
34 636,97
1 178,63
10,32%
27 604,14
939,32
8,22%
19 624,21
667,78
5,85%
12 303,84
418,68
3,67%
261 649,67
8 171,52
22.. MMIISSSSIIOONN
“WWee wwoorrkk hhaarrdd ttoo iinnccrreeaassee tthhee pprroossppeerriittyy ooff oouurr ccuussttoommeerrss bbyy
mmiinniimmiizziinngg tthheeiirr eexxppeennddiittuurree oonn qquuaalliittyy ccoonnssuummeerr ggooooddss tthhrroouugghh::
-- EEffffiicciieenntt uussee ooff tthhee CCoommppaannyy''ss rreessoouurrcceess;;
-- OOnn--ggooiinngg iimmpprroovveemmeennttss iinn tteecchhnnoollooggyy;;
-- AAddeeqquuaattee ccoommppeennssaattiioonn ffoorr oouurr eemmppllooyyeeeess””
7
33.. CCHHIIEEFF EEXXEECCUUTTIIVVEE OOFFFFIICCEERR’’SS SSTTAATTEEMMEENNTT
“In 2011 we strengthened our market positions and this is a very positive result for us.
We overcame the negative EBITDA margin dynamics of the first half of the year and, in
our opinion, we did a good job on the cost side. This year was the most successful for
us in terms of store openings: and it is over the course of time that we will understand
how interesting this year was to us. Because it is quite a hard work to open 1 000
stores, 42 hypermarkets and 200 cosmetics stores and we are satisfied with what we
did.
Besides we conducted share placement this year. It was not easy and we thank
investors for trusting us so that this placement was completed.
These are the main events and the results of the year 2011 – generally we are satisfied
with its takeaways and are grateful to our investors for their support during this
time.”
.
Chief Executive Officer of OJSC “Magnit”
Sergey Galitskiy
8
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: 01.04.2004 – present day
Organization: OJSC “Magnit”
Position: member of the Board;
2) Period: 13.04.2006 – present day
Organization: OJSC “Magnit”
Position: CEO;
3) Period: 15.07.2010 – present day
Organization: OJSC “Magnit”
Position: Chairman of the Management board.
Stockholding of CEO in the Company’s share capital: 38,6659% (as of 31.12.2011).
Ordinary shares, owned by CEO: 38,6659% (as of 31.12.2011).
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:
During the reporting period no transactions of acquisition/alienation of the Company’s
shares were made.
CCEEOO RREEMMUUNNIIRRAATTIIOONN CCRRIITTEERRIIAA AANNDD AAMMOOUUNNTT OOFF CCEEOO RREEMMUUNNEERRAATTIIOONN
((RREEFFUUNNDD OOFF CCHHAARRGGEESS)) PPAAIIDD AACCCCOORRDDIINNGG TTOO TTHHEE RREESSUULLTTSS AACCHHIIEEVVEEDD IINN TTHHEE
FFIINNAANNCCIIAALL YYEEAARR
Under Clause 6 of Regulations “On the chief executive officer of OJSC “Magnit”, ratified
by the resolution of the annual general shareholders’ meeting of 24.06.2010 (minutes of meeting
of 28.06.2010 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 2011 amounted to 72,017,011.00 rubles.
9
IINNFFOORRMMAATTIIOONN OONN TTHHEE CCOOLLLLEEGGIIAALL EEXXEECCUUTTIIVVEE BBOODDYY
55..
MMEEMMBBEERRSS ((MMAANNAAGGEEMMEENNTT BBOOAARRDD)) aass ooff DDeecceemmbbeerr 3311,, 22001111
Name: Sergey Galitskiy - Chairman of the Management board
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: 01.04.2004 – present day
Organization: OJSC “Magnit”
Position: member of the Board;
2) Period: 13.04.2006 – present day
Organization: OJSC “Magnit”
Position: CEO;
3) Period: 15.07.2010 – present day
Organization: OJSC “Magnit”
Position: Chairman of the Management board.
Stockholding of CEO in the Company’s share capital: 38, 6659% (as of 31.12.2011).
Ordinary shares, owned by CEO: 38, 6659% (as of 31.12.2011).
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:
During the reporting period no transactions of acquisition/alienation of the Company’s
shares were made.
Name: Alexander Barsukov
Date of birth: 08.07.1977
Education: higher - graduated from Rostov Law Institute of Ministry of interior of
Russian Federation with a degree in law in 1998.
Positions occupied in the Company and other companies in the last five years including
plural offices:
1) Period: 02.10.2006 – 15.07.2008
Organization: JSC “Tander”
Position: Naberezhnye Chelny Branch Manager;
2) Period: 16.07.2008 – present days
Organization: JSC “Tander”
Position: Hypermarkets sales director;
3) Period: 15.07.2010 – present days
10
Organization: OJSC “Magnit”
Position: Management board member.
Stockholding of the person in the Company’s share capital: 0.0004% (as of 31.12.2011).
Ordinary shares, owned by the person: 0.0004% (as of 31.12.2011).
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:
During the reporting period no transactions of acquisition/alienation of the Company’s
shares were made.
Name: Nikita Churikov
Date of birth: 02.10.1982
Education: higher - graduated from Kuban State University with a degree in Law in
2004.
Positions occupied in the Company and other companies in the last five years including
plural offices:
1) Period: 02.10.2006 – 26.10.2007
Organization: JSC AUK “Status"
Position: Chief specialist of law department with head of department duties;
2) Period: 29.10.2007 – 01.06.2008
Organization: JSC "Tander"
Position: Leading lawyer of corporate governance department;
3) Period: 02.06.2008 – 03.05.2009
Organization: JSC "Tander"
Position: deputy head of corporate governance department;
4) Period: 04.05.2009 – present days
Organization: JSC "Tander"
Position: head of corporate governance department;
5) Period: 13.07.2011– present days
Organization: OJSC "Magnit"
Position: Member of the Management Board;
Stockholding of the person in the Company’s share capital: 0.00004% (as of 31.12.2011).
Ordinary shares, owned by the person: 0.00004% (as of 31.12.2011).
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:
During the reporting period no transactions of acquisition/alienation of the Company’s
shares were made.
Name: Alexander Pisarenko
Date of birth: 11.04.1964
11
Education: higher - graduated from Krasnodar Polytechnic Institute in 1986, mechanic
engineer of refrigeration and compressor equipment.
Positions occupied in the Company and other companies in the last five years including
plural offices:
1) Period: 22.05.2006 – 05.08.2007
Organization: JSC “Tander”
Position: Povolzhsky area manager;
2) Period: 06.08.2007 – 30.11.2007
Organization: JSC “Tander”
Position: Area Manager, Area Directorate;
3) Period: 01.12.2007 – 20.04.2008
Organization: JSC “Tander”
Position: Area Manager, Staff;
4) Period: 21.04.2008 – present day
Organization: JSC “Tander”
Position: “Magnit” stores Sales Director;
5) Period: 15.07.2010 – present days
Organization: OJSC “Magnit"
Position: Management board member.
Stockholding of the person in the Company’s share capital: 0.0018% (as of 31.12.2011).
Ordinary shares, owned by the person: 0.0018% (as of 31.12.2011).
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:
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 MMEEMMBBEERRSS OOFF CCOOMMPPAANNYY’’SS MMAANNAAGGEEMMEENNTT
PPAAIIDD
FFOOLLLLOOWWIINNGG TTHHEE RREESSUULLTTSS OOFF TTHHEE RREEPPOORRTTIINNGG YYEEAARR
BBOOAARRDD
According to Regulations on collegial executive body (Management Board) of OJSC
“Magnit” the remuneration of a Management Board member consists of remuneration under
labor contract or additional agreement to it. The Management Board members can be
remunerated every year from the amount of net profit according year accounting report.
Payment terms and order shall be determined by the Board of directors. The salary for the work
within Management Board according to labor contract constitutes 50 000 rubles.
The remuneration to Management Board members of OJSC “Magnit” paid in 2011 amounted to
2,447,607.28 rubles (the amount does not include the remuneration received by S. Galitskiy as
chief executive officer).
12
66.. IINNFFOORRMMAATTIIOONN OONN TTHHEE BBOOAARRDD MMEEMMBBEERRSS aass ooff DDeecceemmbbeerr 3311,, 22001111
Khachatur Pombukhchan – the Chairman of the Board
Date of birth: 16.03.1974.
Education: a graduate of Kuban State University, applied mathematics, 1996; Russian
Corresponding finance and economics institute with a degree in Economics, 2000.
Positions occupied in the issuer and other companies in the last five years including
plural offices
1) Period: 02.03.2006 – 03.05.2008
Organization: JSC “Tander”
Position: Marketing director;
2) Period: 29.11.2006 – 26.05.2009
Organization: JSC “Digital Gallery”
Position: member of the Board;
3) Period: 09.01.2008 – 03.05.2008
Organization: ЗАО «Тандер»
Position: first Deputy CFO (joint appointment);
4) Period: 04.05.2008 – 30.06.2008
Organization: JSC “Tander”
Position: first Deputy CFO;
5) Period: 19.06.2008 – present day
Organization: LLC “Magnit Finance”
Position: CEO;
6) Period: 25.06.2008 – present day
Organization: OJSC “Magnit”
Position: member of the Board;
7) Period: 01.07.2008 – present day
Organization: JSC “Tander”
Position: CFO;
8) Period: 01.07.2008 – present day
Organization: OJSC “Magnit”
Position: CEO;
9) Period: 15.12.2008 – 01.04.2009
Organization: LLC “Magnit – Nizhniy Novgorod”
Position: member of the Board;
10) Period: 13.12.2008 –24.02.2009
Organization: LLC “Tandem”
Position: member of the Board.
13
11) Period: 24.06.2010 – present day
Organization: OJSC “Magnit”
Position: Chairman of the BOD.
Stockholding of the person in the Company’s share capital: 0.0046% (as of 31.12.2011).
Ordinary shares, owned by the person: 0.0046% (as of 31.12.2011).
Information on transactions of acquisition/alienation of the Company’s shares, made by
the person in the position of Chairman of the Board during the reporting period:
Operation
Number of shares
Type of shares
Acquisition of
Ordinary nominal
securities
Acquisition of
securities
2 120
1 607
uncertified shares
Ordinary nominal
uncertified shares
Acquisition of
Ordinary nominal
securities
Acquisition of
securities
Acquisition of
securities
Acquisition of
securities
Acquisition of
securities
75
83
75
80
90
95
uncertified shares
Ordinary nominal
uncertified shares
Ordinary nominal
uncertified shares
Ordinary nominal
uncertified shares
Ordinary nominal
uncertified shares
Ordinary nominal
20.09.2011
Acquisition of
№
Date of
operation
1
11.01.2011
2
18.04.2011
3
25.04.2011
4
18.05.2011
5
20.06.2011
6
20.07.2011
17.08.2011
7
8
14
securities
uncertified shares
9
21.10.2011
105
Acquisition of
Ordinary nominal
securities
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: 01.12.2003 – present day.
Organization: OJSC “Magnit”.
Position: first Deputy CEO;
2) Period: 01.04.2004 – 24.06.2008.
Organization: OJSC “Magnit”.
Position: Chairman of the Board;
3) Period: 01.10.2004 – 30.06.2009
Organization: JSC «Tander».
Position: Director of Development department;
4) Period: 30.01.2006 – 01.04.2009.
Organization: LLC “Magnit – Nizhniy Novgorod”.
Position: Chairman of the Board;
5) Period: 25.06.2008 – present day.
Organization: OJSC “Magnit”.
Position: member of the Board;
6) Period: 13.12.2008 – 24.02.2009.
Organization: LLC “Tandem”.
Position: member of the Board.
7) Period: 01.07.2009 – present day
Organization: JSC «Tander».
Position: Deputy chief executive officer in charge of development.
Shareholding of the person in the issuer’s charter capital: 0. 2024% (as of 31.12.2011).
Ordinary shares owned by the person: 0.2024% (as of 31.12.2011).
Information on transactions of acquisition/alienation of the Company’s shares, made by
the person in the position of Board member during the reporting period:
During the reporting period no transactions of acquisition/alienation of the Company’s
shares were made.
15
Valeriy Butenko
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: JSC «Tander»
Position: Director in charge of reviser and analytical job;
2) Period: 29.05.2005- 31.03.2009
Organization: JSC «Tander»
Position: Member of the Revision Committee;
3) Period: 01.04.2004- 24.06.2009
Organization: OJSC “Magnit”
Position: Chairman of the Revision Committee;
4) Period: 25.06.2009 – present days
Organization: OJSC “Magnit”
Position: Member of the Board of directors;
5) Period: 01.08.2009- present days
Organization: JSC «Tander»
Position: Deputy chief executive officer in charge of reviser and analytical job.
Shareholding of the person in the issuer’s charter capital: 0. 0784% (as of 31.12.2011).
Ordinary shares owned by the person: 0. 0784% (as of 31.12.2011).
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: Mr. Galitskiy graduated from Kuban State University with a degree in
Economics in 1992
1) Period: 01.04.2004 – present day
Organization: OJSC “Magnit”
Position: member of the Board;
2) Period: 13.04.2006 – present day
Organization: OJSC “Magnit”
Position: CEO;
16
3) Period: 15.07.2010 – present day
Organization: OJSC “Magnit”
Position: Chairman of the Management board.
Stockholding of CEO in the Company’s share capital: 38, 6659% (as of 31.12.2011).
Ordinary shares, owned by CEO: 38, 6659% (as of 31.12.2011).
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:
During the reporting period no transactions of acquisition/alienation of the Company’s
shares were made.
Alexander Zayonts
Date of birth: 10.01.1967
Education: higher, Moscow D. Mendeleev Institute of Chemical Technology – chemical-
process engineer.
Positions occupied in the Company and other companies in the last five years including
plural offices:
1) Period: 04.2003 - 12.2007
Organization: OJSC “M.Video Company”
Position: vice-president, BOB Member;
2) Period: 01.2008 – present days
Organization: LLC "Domashniy Interier"
Position: General Director;
3) Period: 01.12.2009 – present days
Organization: LLC "Obiedinennye resursy"
Position: BOD member;
4) Period: 24.06.2010 – present days
Organization: OJSC "Magnit"
Position: BOD member.
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.
Alexey Makhnev
Date of birth: 24.05.1976
17
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: 12.2006 – 08.2007
Organization: LLC “Deutsche Bank”
Position: director, corporate finance governance.
2) Period: 09.2007– 12.2008
Organization: LLC “Morgan Stanley Bank”
Position: vice president, investment banking Department;
3) Period: 12.2008 – 05.2009
Organization: LLC “Morgan Stanley Bank”
Position: executive director, investment banking Department;
4) 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;
5) 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.
Aslan Skhachemukov
Date of birth: 22.08.1962
Education: higher – in 1987 graduated from of Krasnodar Order of the Red Banner of
Labour Polytechnic Institute, industrial engineer.
Positions occupied in the Company and other companies in the last five years including
plural offices:
1) Period: 01.07.04 – 15.10.07
Organization: OJSC "Kubanskiy Standart"
Position: Chairman of the BOD;
2) Period: 01.10.07 – present days
Organization: JSC «Tander»
Position: Deputy General Director;
3) Period: 23.06.2011 – present days
18
Organization: OJSC «Magnit»
Position: member of the BOD;
Shareholding of the person in the issuer’s charter capital: 0.0009% (as of 31.12.2011).
Ordinary shares owned by the person: 0.0009% (as of 31.12.2011).
Information on transactions of acquisition/alienation of the Company’s shares made by
the person occupying the position of a Board member:
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
According to Regulations “On OJSC “Magnit” Board of Directors”, ratified by the
resolution of the annual General Shareholders’ meeting of 24.06.2010 (minutes of meeting of
28.06.2010), 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.
On June 23, 2011 the General shareholders´ meeting made a decision not to pay year-end
bonus, based on the operation results (minutes of 23.06.2011)
In 2011 upon the resolution of shareholders’ meeting of 23.06.2011 (minutes of meeting
of 23.06.2011) the Board members were paid remuneration for participation in the board
operation in 2010 in the amount of 8,853,100.00 (eight million eight hundred fifty three
thousand one hundred) rubles 00 kopecks.
19
77.. RREEPPOORRTT OOFF TTHHEE BBOOAARRDD OONN 22001111 OOPPEERRAATTIIOONNSS
Within 2011 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 24, 2010, minutes of June 28, 20010):
№
Full name of a member of the board of directors
Date of birth
1.
2.
3.
4.
5.
6.
7.
Andrey Arutyunyan
Valeriy Butenko
Sergey Galitskiy
Alexander Zayonts
Alexey Makhnev
Khachatur Pombukhchan
Dmitry Chenikov
12.01.1969
25.11.1965
14.08.1967
10.01.1967
24.05.1976
16.03.1974
08.09.1965
The structure of the Board of directors (elected by annual general shareholders’ meeting
on June 23, 2011, minutes of June 23, 2011):
№
Full name of a member of the board of directors
Date of birth
1.
2.
3.
4.
5.
6.
7.
Andrey Arutyunyan
Valeriy Butenko
Sergey Galitskiy
Alexander Zayonts
Alexey Makhnev
Khachatur Pombukhchan
Aslan Shkhachemukov
12.01.1969
25.11.1965
14.08.1967
10.01.1967
24.05.1976
16.03.1974
22.08.1962
The current Board of directors includes four independent directors; they are Valeriy
Butenko, Alexander Zayonts, Alexey Makhnev, and Aslan Shkhachemukov.
Khachatur Pombukhchan was elected a Chairman of the Board of directors by the
unanimous resolution at the first Board meeting of 13.07.2011, Valeriy Butenko was appointed a
Deputy Chairman and Andrey Arutyunyan 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:
20
HR and Remuneration Committee of the Board of Directors:
Full name of a member of the board of
directors
Position in the committee
Alexey Makhnev
Valeriy Butenko
Alexander Zayonts
chairman of the committee
member 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
Alexander Zayonts
Alexey Makhnev
chairman of the committee
member of the committee
Aslan Shkhachemukov
member of the committee
№
1
2
3
№
1
2
3
During 2011 the Board of directors held 19 meetings and examined 100 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 2011:
Date of meeting
Considered issues
04.02.2011
04.02.2011
04.02.2011
04.02.2011
04.02.2011
03.03.2011
23.03.2011
25.04.2011
25.04.2011
16.05.2011
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 decisions on securities issue (exchange-traded bonds to the bearer of
BO-05, BO-06 series) were made.
The decision on approval of the major transaction on placement of the
exchange-traded bonds of BO-05, BO-06 series by open subscription was
made.
The decision on approval of transaction under the paragraph 33, point 14.2
of the article 14.2 of OJSC “Magnit”.
The decision on calling of the extraordinary shareholders’ meeting was
adopted.
The decision on calling of the annual shareholders’ meeting was adopted.
The annual report over 2010 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 2010 financial
year were approved.
21
The recommendations to the general shareholders’ meeting on the
dividend amount on OJSC “Magnit” shares and procedure of it’s payment
following the results of the 1st quarter 2011 financial year were approved.
The decision on approval of the related party transaction was adopted.
The decision on disposal of the share in the charter capital of LLC “Magnit
– Nizhniy Novgorod” owned by the Company was adopted.
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 members of Management Board were elected.
The decision on approval of the related party transaction was adopted.
The decision on placement of securities (exchange-traded bonds to the
bearer of BO-07, BO-08, BO-09 series) was adopted.
The decision to approve the major transaction on placement of securities
(exchange-traded bonds to the bearer of BO-07, BO-08, BO-09 series) was
adopted.
The decision on determination of OJSC “Magnit” business priorities was
adopted.
The decisions on approval of the related party transactions were adopted.
The decision on calling of the extraordinary shareholders’ meeting was
adopted.
The decisions on approval of the related party transactions were adopted.
The decision on augmentation of OJSC “Magnit” charter capital by public
offering of additional shares was adopted.
The Decision on additional securities issue and the Prospectus were
ratified.
The decision on the determination of the price of the transaction the
approval of which is included to the agenda of the extraordinary general
shareholders’ meeting was adopted.
The decision on approval of the related party transaction was adopted.
The decision on approval of related party transaction was adopted.
The decision on determination of the price for major transaction (Placement
Agreement) was adopted.
The decision on approval of the major transaction was adopted.
The price of securities placement (ordinary registered shares of OJSC
“Magnit”) was determined.
The decisions on approval of the related party transactions were adopted.
The decisions on ratification of the Regulations on Bonus Programme and
CEO’s HR and remunerations Committee of JSC “Tander” was adopted.
The decision on payment of bonus to the person in the position of CEO of
OJSC “Magnit” following 2011 results was adopted.
The decision on approval of the additional agreement to the contract
entered with a person executing the sole executive body powers of OJSC
“Magnit” was adopted.
16.05.2011
20.06.2011
20.06.2011
13.07.2011
13.07.2011
13.07.2011
13.07.2011
13.07.2011
14.07.2011
14.07.2011
30.08.2011
30.08.2011
06.10.2011
06.10.2011
06.10.2011
06.10.2011
27.10.2011
09.11.2011
28.11.2011
30.11.2011
30.11.2011
02.12.2011
22.12.2012
22.12.2012
27.12.2011
27.12.2011
22
27.12.2011
The decision on approval of the additional agreement to the contract on
sale and purchase of share in the charter capital of LLC “Magnit – Nizhniy
Novgorod” was adopted.
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”, LLC “Tandem” and “AgroTorg”
were held in February, March, April, June, July, August, September, October, November, and
December of the year 2011.
The management of the Company achieved the following results in 2011:
1. Revenue of the Company increased by 42.13% from 236,193.55 million rubles in 2010
to 335,699.95 million rubles in 2011. Top line growth was due to an increase in selling space as
well as to a 11.09% increase of like-for-like sales (excl. VAT). Revenue growth in dollar terms
amounted to 46.88%: from US$ 7,777.40 million to US$ 11,423.26 million7.
2. During 2011 the Company added 1,254 stores (1,004 convenience stores, 42
hypermarkets and 208 cosmetics stores). The total store base as of December 31, 2011 reached
5,309 stores (5,006 convenience stores, 93 hypermarkets and 210 cosmetics stores). Total selling
space of the stores increased by 38.51% from 1,422.38 thousand sq. m. to 1,970.16 thousand sq.
m.
3. Number of customers increased by 26.31% from 1,301.90 million in 2010 to 1,644.43
million in 2011.
4. Share of sales of private label products in 2011 increased insignificantly to 14% while
the number of private label SKUs increased from 614 in 2010 to 637 in 2011. 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.
7 Based on the average exchange rate for 2011 of 29.3874 RUR per 1 US$, 2010 – 30.3692 RUR per 1 US$.
23
Number of Items
Share in Retail Sales
5. In 2011 the Company opened owned distribution centers in Erzovka village
(Volgograd region), Dzerzhinsk (Nizhny Novgorod region) and Izhevsk. Launch of the new
distribution centers improved the quality of service in the Volga and Central regions. Total
space of 14 distribution centers as of December 31, 2011 amounted to 323,431 thousand sq. m.
6. During the reporting year the fleet of the Company’s vehicles increased by 1,264
trucks, total number of vehicles amounted to 3,906 which resulted in the considerable reduction
of transportation costs.
7. In 2011 the Company increased the share of products processed via its distribution
centers from 79% in 2010 to 82% which is also one of the gross margin drivers.
8. The Company was actively working with its employees increasing their loyalty and
developing corporate culture. In 2011 average weighted number of the Company’s employees
amounted to 123,506 out of which 87,088 are in-store personnel; 24,443 people are engaged in
distribution; 8,217 people - in regional branches and 3,758 are employees of the head office.
Average salary in the Company in 2011 amounted to 19,560 rubles.
9. 11.09% LFL revenue growth of 2011 vs. 2010 in ruble terms was driven by 9.67%
average ticket growth and 1.29% traffic growth.
24
10. Gross margin increased from 22.38% in 2010 to 24.33% in 2011 due to continued
improvement of purchasing terms. Gross profit in rubles increased by 54.49% from 52,858.39
million RUR (US$ 1,740.53 million) to 81,663.45 million RUR (US$ 2,778.86 million).
11. EBITDA increased by 43.92% from 19,179.96 million RUR (US$ 631.56 million) in
2010 to 27,604.14 million RUR (US$ 939.32 million) in 2011. Net debt/EBITDA ratio (in ruble
terms) at the end of 2011 amounted to 1.26.
12. 2011 net income increased by 21.41% and amounted to 12,303.84 million RUR (US$
418.68 million) vs. 10,134.11 million RUR (US$ 333.70 million) in 2010.
7 000
5 000
3 000
1 000
23,5
5 354
9,5
5,1
2009
22,4
7 777
8,1
4,3
2010
24,3
11 423
8,2
3,7
2011
25
20
15
10
5
0
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 in line with 2011 targets.
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 2011 and to ratify 2011 annual report submitted for
the meeting agenda.
25
88.. MMAAIINN 22001111 CCOORRPPOORRAATTEE EEVVEENNTTSS
January
February
March
April
The decision on approval of OJSC “Magnit” Auditor is adopted at the
extraordinary shareholders’ meeting.
The decision on approval of related party transaction is adopted by the annual
shareholders’ meeting.
“National Rating Agency” rated reliability of OJSC “”Magnit” on “AA” level –
very high reliability second level.
Exchange-traded bonds of BO-05 series were admitted to trading in the process
of circulation within listing procedure by inclusion into the quotation list “A”
level 1 of CJSC “MICEX Stock Exchange”.
OJSC “Magnit” exchange-traded bonds of BO-01, BO-02, BO-03, BO-04 series
were transferred to the “A” level 1 quotation list at MICEX Stock Exchange.
OJSC “Magnit” has placed within one day exchange-traded bonds of BO-05
series in full in the total amount of 5 billion rubles.
OJSC “Magnit” has placed within one day exchange-traded bonds of BO-06
series in full in the total amount of 5 billion rubles.
Exchange-traded bonds of BO-06 series were included into the quotation list “A”
level 1 of CJSC “MICEX Stock Exchange”.
May
The decisions on approval of related party transactions are adopted by the
annual shareholders’ meeting.
The new membership of the OJSC “Magnit” Board of directors including four
independent directors is formed by the annual general shareholders’ meeting.
June
The decision to pay dividends following the results of 2010 financial year and the
1st quarter 2011 financial year is adopted by the annual general shareholders’
meeting.
The decisions on approval of major related party transactions are adopted by the
annual shareholders’ meeting.
The membership of the OJSC “Magnit” Management Board was formed by the
Board of directors.
July
The Board of directors forms the committees of the Board appoints the chairman,
deputy chairman and secretary of the Board of Directors.
The decision on securities issue (exchange-traded bonds to the bearer of BO-07,
BO-08, BO-09 series) was adopted.
October
Board of directors made a decision to increase the charter capital of OJSC
“Magnit” by means of offering of additional ordinary registered shares.
The Board of directors approves the Placement agreement as a major transaction.
The price of offering of OJSC “Magnit” ordinary registered shares of additional
issue is determined.
The decision on approval of the related party transaction and the major related-
November
December
26
party transaction are adopted by the extraordinary shareholders’ meeting.
The Notification of the results of the additional issue of nominal registered
shares of OJSC “Magnit” in the amount of 5,586,282 (five million five hundred
eighty six thousand two hundred eighty two) is submitted to FSFM.
Ordinary registered shares of the additional issue №1-01-60525-Р-006D of
10.11.2011 were admitted to trading at MICEX Stock Exchange in the process of
circulation without listing procedure.
27
99.. PPOOSSIITTIIOONN OOFF TTHHEE CCOOMMPPAANNYY IINN IINNDDUUSSTTRRYY
RRUUSSSSIIAANN MMAARRKKEETT
This section was prepared with the use of the following materials: IA Infoline, public
sources of companies.
Retail turnover amounted to 19 075 billion RUR in 2011 which is 107.2% to the level of
2010 in terms of mass of commodities. In December 2011 turnover increased by 9.5% compared
to December 2010 and amounted to 2 042.5 billion RUR.
Dynamics of the key figures of the consumer market in 2005-2011, % Y-o-Y
25
20
15
10
5
0
-5
-10
-15
16,7 15,9
15
13,8 13,3 14,1
11,9
10,7 10,4
12,7
10,5
8,4
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
0,3
0,4
0,2
5
0
Q
1
5
0
Q
2
5
0
Q
3
5
0
Q
4
6
0
Q
1
6
0
Q
2
6
0
Q
3
6
0
Q
4
7
0
Q
1
7
0
Q
2
7
0
Q
3
7
0
Q
4
8
0
Q
1
8
0
Q
2
8
0
Q
3
8
0
Q
4
9
0
Q
1
-0,7
9
0
Q
2
-1,2
9
0
Q
4
9
0
Q
3
Growth rate of retail turnover
Growth rate of food turnover
Growth rate of non-food turnover
-5,1
-4,4
-5,5
-8,6
-9,1
-9,3
-12,3
8,1
6,9
5,7
9,5
8,4
7,3
11
7,4
3,7
3,7
2,2
0,9
11,8
11
10,9 10,7
7,6
5,1
6,3
9
6,1
5,2
1,4
1,3
7,9
3,8
9,1
7,1
7,2
3,6
0
1
Q
1
0
1
Q
2
0
1
Q
3
0
1
Q
4
0
1
0
2
Y
F
1
1
Q
1
1
1
Q
2
1
1
Q
3
1
1
Q
4
1
1
0
2
Source: IA Infoline
According to the moderately positive forecast of the Ministry of Economic Development
and Trade of Russia, published on September 21, 2011, growth rate of retail turnover in 2011
was expected on the level of 5.3% (in 2012 – 5.5%, in 2012 – 5.3%, 2014 – 5.5%). However,
according to the trend of 2011 it exceeded the forecasts and amounted to 7%. Monthly dynamics
of the retail turnover in Russia in 2005-2011 is provided in the diagram.
Dynamics of retail turnover and monetary base in 2005-2011, bn RUR
Retail turnover (in current prices), bn RUR
Monetary base (in broad definition), bn RUR
9 000
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
5
0
n
a
J
5
0
r
p
A
5
0
l
u
J
5
0
t
c
O
6
0
n
a
J
6
0
r
p
A
6
0
l
u
J
6
0
t
c
O
7
0
n
a
J
7
0
r
p
A
7
0
l
u
J
7
0
t
c
O
8
0
n
a
J
8
0
r
p
A
8
0
l
u
J
8
0
t
c
O
9
0
n
a
J
9
0
r
p
A
9
0
l
u
J
9
0
t
c
O
0
1
n
a
J
0
1
r
p
A
0
1
l
u
J
0
1
t
c
O
1
1
n
a
J
1
1
r
p
A
1
1
l
u
J
1
1
t
c
O
Source: IA Infoline
2200
2000
1800
1600
1400
1200
1000
800
600
400
28
Dynamics of retail turnover in Russia in 2006-2011 гг.
Period
Turnover, bn RUR8As a %9 to the corresponding period of the preceding year
FY 2006
FY 2007
FY 2008
FY 2009
1Q
2Q
1H
3Q
4Q
FY 2010
1Q
2Q
1H
3Q
9M 2011
October 2011
November 2011
December 2011
4Q 2011
FY 2011
8 693.4
10 757.8
13 853.2
14 602.5
3 625.7
3 934.5
7 560.2
4 203.8
4 704.6
16 468.6
4 182.8
4 575.8
8 758.6
4 883.6
13 642.2
1 697.4
1 692.9
2 042.5
5 432.8
19 075
113.9
115.2
113.0
95.1
102.2
106.9
104.6
108.4
107.4
106.3
105.2
106.1
105.7
107.9
106.4
109.0
108.6
109.5
109.1
7.2
Source: date of the Federal State Statistics Service and the Ministry of Economic Development and Trade
SSTTRRUUCCTTUURREE OOFF RREETTAAIILL TTUURRNNOOVVEERR BBYY TTYYPPEESS OOFF PPRROODDUUCCTTSS
Within the structure of retail turnover non-food group of products demonstrated the
highest average annual rate of growth in 2005-2008 and 2010-2011. Long-term dynamics and
structure of retail turnover by types of products is presented in the diagram. Retail turnover in
2011 increased by 7.2% compared to 2010 and amounted to 19 075 billion RUR, at that
consumption of food products increased by 3.6%, non-food – by 10.7%.
Dynamics of retail turnover by types of products in 2005-2011, %
25
20
15
12,8
10
5
0
-5
-10
15,1
14,1
11
10,5
8,7
11
5,9
16,8
16,1
19,1
17,2
12,4
12,6
13,6
13,5
8,5
9,1
9,8
6
6,3
5,1
7,6
7,2
3,6
10,7
2005
2006
2007
2008
2009
-1,3
-1,6
-4,5
-3,6
-8,3
2010
-2,8
2011
Total retail turnover
Food products
Alcohol drinks
Food
Non-food
Source: IA Infoline
In December 2011 positive consumption dynamics was noted, retail turnover in
December 2011 increased by 9.5%, consumption of food products increased by 7.8%, non-food –
by 11.1%. Note that data of the Federal State Statistics Service for 2009-2011 and preceding years
8 Данные уточнены по итогам обследования Росстатом субъектов малого предпринимательства на апрель 2011 года
9 Dynamics of retail turnover in terms of mass of commodities
29
are not fully compatible as the data for 2002-2008 on food products including beverages was
provided by the Federal State Statistics Service without tobacco products but starting from 2009
– with tobacco products. Therefore the graph below provides adjusted data on the share of food
products (excluding tobacco products).
Dynamics of share of food products in retail turnover in 2005-2011, %
50
49
48
47
46
45
44
5
0
n
a
J
5
0
r
a
M
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
M
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
0
1
n
a
J
0
1
r
a
0
1
y
a
M
0
1
l
u
J
0
1
p
e
S
0
1
v
o
N
1
1
n
a
J
1
1
r
a
M
1
1
y
a
M
1
1
l
u
J
1
1
p
e
S
1
1
v
o
N
M
M
Share of food products in retail turnover (excl. tobacco products), %
Share of food products in retail turnover (incl. tobacco products), %
Polynominal (Share of food products in retail turnover (incl. tobacco products), %)
M
M
Source: IA Infoline
After the sharp decline in the end of 2008 and in the beginning of 2009 there was a
slowdown of the decline of the non-food share in the 2H 2009. In November-December 2009 the
trend was broken and the share of food started to grow again and achieved its peak in February
2010. By the beginning of 2011 there was a trend of growth of the share of food products (up to
49.2% in December and 48.7% average for the year), which continued in January and February
2011 (when the maximum was achieved throughout the entire monitoring of this figure – 50%).
Since March 2011 due to outstripping growth rates of non food products the share of food
products demonstrated the trend to decline approaching the pre-crises level. However, in
December 2011 the share of food products amounted to 47.5% and the share of non-food
products in the retail turnover in Russia amounted to 52.5% (in December 2010 – 48.8% and
51.2% correspondingly). At that overall in 2011 the share of food products amounted to 47.8%
vs. 48.6% for 2010.
Structure of retail turnover by groups of products in 2002-201110
Figures
Retail turnover
food products
non-food products
share of food products, %
share of non-food products, %
2009
2008
2006
2003
2004 2005
2002
2011
2007
3 765 4 530 5 642 7 042 8 712 10 869 13 915 14 603 16 435,8 19 075
9 117.9
1 822 2 164 2 671 3 316 4 061 5 022
9 957.2
1 944 2 365 2 972 3 725 4 651 5 847
47.8
46.2
48.4
52.2
53.8
51.6
7 104
7 499
48.6
51.4
Source: data of the Federal State Statistics Service
8 004.2
8 431.6
48.7
51.3
6 510
7 405
46.8
53.2
47.8
52.2
47.3
52.7
47.1
52.9
46.6
53.4
2010
10 For comparison with 2009-2011 data on the turnover and the share of food products in 2002-2008 are adjusted for tobacco products
30
Structure of retail turnover by groups of products in 201111
Figure
I 2011 II 2011 III 2011IV 2011V 2011 VI 2011VII 2011VIII 2011IX 2011X 2011 XI 2011XII 2011
1 362.11 356.0 1 464.7 1 490.6 1 532.4 1 552.8 1 594.2 1 648.2 1 641.2 1 697.4 1 692.9 2 042.5
Retail turnover
769.7 796.1 795.7 970.2
672.9 673.9 716.2 722.9 740.1 743.8 762.0
food products
871.5 901.3 897.2 1 072.3
689.2 682.1 748.5 767.7 792.3 809.0 832.2
non-food products
46.9
47.8
48.5
share of food products, %
49.4 49.7
53.1
52.2
51.5
share of non-food products, % 50.6 50.3
774.7
873.5
47.0
53.0
48.9
51.1
47.9
52.1
47.0
53.0
46.9
53.1
47.5
52.5
48.3
51.7
Source: data of the Federal State Statistics Service
SSTTRRUUCCTTUURREE OOFF RREETTAAIILL TTUURRNNOOVVEERR BBYY TTYYPPEESS OOFF OORRGGAANNIIZZAATTIIOONNSS
Within the structure of retail turnover by types of organizations in 2011 the trend of
decline of the share of open markets (by 1 percentage point) and individual entrepreneurs (by
0.8 percentage point) continued. At the same time the share of large and mid organizations
(mostly these are retail networks) increased by 1.4 percentage points and the share of small
enterprises – by 0.4 p.p. Dynamics of the structure of retail turnover in Russia by types of
organizations is presented in the diagram.
Structure of formation of retail turnover in 2006-2011 by types of
organizations, %
100%
80%
60%
40%
20%
0%
32,7
22,3
25,3
19,5
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
36,5
25,1
25,9
12,5
2010
37,9
25,5
25,1
11,5
2011
Open markets
Individual entrepreneurs
Small enterprises
Large and mid enterprises
Source: IA Infoline
In December 2011 88.9% of retail turnover was formed by trading organizations and
individual entrepreneurs operating not on the open markets, the share of retail markets and
fairs amounted to 11.1% (in December 2011 – 87.8% and 12.2% correspondingly). In December
2011 compared to November 2010 turnover of trading organizations increased by 10.9% and
sales of the open markets decreased by 0.8. Compared to November 2011 trading organizations
demonstrated turnover growth by 21.0% while sales of the open markets grew by 12.9%.
Overall in 2011 88.5% of retail turnover was formed by trading organizations and individual
entrepreneurs operating not on the open markets and the share of retail markets and fairs
amounted to 11.5% (in 2010 – 87.5% and 12.5% correspondingly). In 2011 vs. 2010 turnover of
trading organizations increased by 8.4% while sales of the open markets declined by 1.1%.
11 For comparison with 2009-2011 data on the turnover and the share of food products in 2002-2008 are adjusted for tobacco products
31
Turnover of trading organizations and open markets in 2002-2010, bn RUR.
2010
Figure
2009
Retail turnover
turnover of trading organizations
sales of open markets
share of trading organizations, %
share of open markets, %
2008
2007
2006
2003
4 529
2004
5 642
2005
7 038 8 690 10 866.2 13 853.2 14 602.5 16 453.8
2011
2002
3 765
19 075
2 838.8 3 451.1 4 420.5 5 558.2 6 987 9 214.5 12 015.9 12 610.3 14 364.2 16 881.4
2 193.6
926.2 1 077.9 1 254.1 1 479.8 1 703 1 651.7
88.5
75.4
11.5
24.6
79.0
21.0
Source: data of the Federal State Statistics Service
1 992.2
86.4
13.6
2 089.6
87.3
12.7
1 837.3
86.7
13.3
80.4
19.6
77.9
22.1
76.2
23.8
84.8
15.2
Turnover of trading organizations and open markets in 2011, bn RUR
Retail turnover
Figure
I 2011 II 2011 III 2011 IV 2011 V 2011 VI 2011 VII 2011 VIII 2011 IX 2011 X 2011 XI 2011 XII 2011
1 362.1 1 356.0 1 464.7 1 490.6 1 532.4 1 552.8 1 594.2 1 648.2 1 641.2 1 697.4 1 692.9 2 042.5
turnover of trading organizations 1 187.8 1 186.5 1 294.8 1 320.7 1 360.8 1 378.9 1 415.6 1 462.0 1 450.8 1 500.5 1 493.1 1 815.8
226.7
sales of open markets
88.9
share of trading organizations, %
11.1
share of open markets, %
174.3 169.5 169.9 169.9 171.6 173.9
88.8
87.2
11.2
12.8
190.4 196.9 199.8
88.2
88.4
88.4
11.8
11.6
11.6
88.8
11.2
Source: data of the Federal State Statistics Service
178.6
88.8
11.2
186.2
88.7
11.3
88.4
11.6
87.5
12.5
88.6
11.4
During 2011 citizens purchased 9% of food products on retail markets and fairs, their
non-food sales form more than 14% of turnover. The role of open markets is still significant in
provision of consumers with meat, fruits and vegetables, clothes, shoes, stockings, flooring,
carpets. At that weight of open markets in the total sales of audio and video equipment,
household electronics does not exceed 4%.
Note that continuing decrease of the markets share in retail turnover is conditioned by
the decline of their competitiveness and accompanied by the reduction of their number and the
total number of market slots (at the same time the level of use of market slots is almost
unchanged). Decline of competitiveness of retail markets is explained by the improvement of
the product mix quality in the fresh category in retail chains as well as by the fact that the
dynamics of prices on food sold on retail markets is generally repeating the trend of change of
consumer prices on the peer food products sold in all retail formats overall while the level of
prices on the most part of food products sold at open markets exceeded the level of retail
chains. The main reason of the reduction of the number of the retail markets is their gradual
transformation in the shopping centers (roofed shopping rows). Thus in 2004-2009 the decline
of the share of open markets in the retail turnover was accompanied by the reduction of their
number (the most active reduction was in 2007 and 1Q 2008 following which the situation
stabilized) due to liquidation or conversion in shopping centers.
As of January 1, 2012 there were 3,159 retail markets functioning on the territory of the
Russian Federation During 2011 268 markets were closed or converted to shopping centers
including 186 versatile markets, 21 specialized food markets, 38 merchandize markets, 1
agricultural market, 3 DIY markets and 10 markets of the other specialization. The number of
market slots on the open markets as of January 1, 2012 amounted to 896.3 thousand. Compared
to January 1, 2011 their number reduced by 64.8 thousand or 6.7%. At that as of January 1, 2012
there were 283.7 slots per 1 market on average.
Versatile markets amount to 73.2% of the total number of markets (as of January 1, 2011
– 72.9%), merchandize markets – 8.8% (9.2%), agricultural and agricultural cooperative markets
– 7.9% (7.3%), food markets – 4.2% (4.5%), DIY markets – 2.1% (2.0%), radio and electrical
household appliances – 0.1% (0.1%), markets of the other specialization – 3.7% (4.0%). The level
of actual use of the market slots as of January 1, 2012 amounted to 72.4% average for the
Russian Federation vs. 73.7% y-o-y.
Main economic entities are still individual entrepreneurs. As of January 1, 2012
entrepreneurs rented 696.7 thousand market slots or 77.8% of their total number. The level of
their use amounted to 76.2% y-o-y (as of January 1, 2011 – 77.5%).
32
RREEGGIIOONNAALL SSTTRRUUCCTTUURREE OOFF RREETTAAIILL TTUURRNNOOVVEERR
Regional structure of retail turnover in Russia is uneven: 11 territorial subjects generated
51.79% of retail turnover in 2011 (Moscow, Moscow region, Saint-Petersburg, Sverdlovsk
region, Krasnodar region, Samara region, Republics of Tatarstan and Bashkortostan, Tyumen
region, Chelyabinsk and Rostov regions).
Structure of retail turnover by federal districts of
the Russian Federation in 2011, %
Southern
9,0%
North-Caucasian
5,0%
Volga
18,1%
North-Western
9,3%
Central
34,3%
Far-Eastern
3,9%
Urals
9,6%
Siberian
10,8%
Structure of retail turnover by subject of the
Russian federation in 2011, %
Krasnodar region
6,4%
Tyumen region
6,0%
Rebublic of
Tatarstan
2,6%
Rostov region
3,3%
Sverdlovk region
6,2%
Saint-Petersburg
7,2%
Samara region
1,4%
Rebublic of
Bashkortostan
1,8%
Chelyabinsk
region
1,3%
Other
28,8%
Moscow region
12,1%
Moscow
22,9%
Source: IA Infoline
The share of the other regions (apart from the largest 11) increased in 2003-2009 and in
2010 for the first time in 10 years there was a decline conditioned by faster than average in
Russia recovery of consumer demand in Moscow, Sverdlovsk region and Republics of
Bashkortostan and Tatarstan. In 2011 the share of the other regions resumed its grow and
amounted to 48.21%.
Dynamics of share of 69 regions of the Russian Federation (apart
from 11 largest) in retail turnover in 2003-2011, %
47,1%
46,6%
47,8%
47,4%
48,2%
44,7%
45,1%
45,4%
45,7%
49%
48%
47%
46%
45%
44%
43%
42%
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: IA Infoline
In 2011 Central federal district, Moscow region in particular, North-Caucasian and
Siberian federal districts demonstrated the most dynamic growth rate of the share of retail
turnover while retail turnover in the most of the regions in 2011 demonstrated decline – North-
Western, Southern, Volga, Urals and Far-Eastern federal districts.
Region
Regional structure of retail turnover of the Russian Federation in 2003-2011, %
2010
34.10
6.15
17.54
9.40
4.23
9.07
4.79
18.11
9.96
10.59
Central federal district
Moscow region
Moscow
North-Western federal district
Saint-Petersburg
Southern federal district
North-Caucasian federal district
Volga federal district
Urals federal district
Siberian federal district
2006
35.8
5.7
20.9
9.4
4.1
8.0
3.6
17.5
10.0
11.7
2007
34.7
6.1
19.0
9.4
4.1
8.5
3.8
17.9
10.4
11.5
2003
39.2
4.3
26.0
9.1
3.6
7.7
3.0
16.7
8.4
11.7
2004
38.4
5.1
24.3
9.3
3.8
7.8
3.4
16.7
8.7
11.6
2005
36.9
5.3
22.5
9.5
4.0
7.9
3.7
16.9
9.3
11.7
2008
33.5
6.4
17.1
9.2
4.1
8.8
4.0
18.4
10.8
11.6
2009
33.7
6.1
17.3
9.4
4.2
8.7
4.6
18.3
10.3
10.9
2011
34.33
6.22
17.42
9.30
4.01
9.00
5.01
18.09
9.63
10.78
33
Far-Eastern federal district
Region
2003
4.2
2004
4.1
2005
4.1
2006
4.1
2007
3.9
2008
3.7
2009
4.1
2010
3.99
2011
3.86
Source: data of the Federal State Statistics Service
In 2011 there were no regions to demonstrate the highest decline of the retail turnover
volumes (more than 5%) compared to January- November 2011 among largest regions (the
share of the retail turnover in the Russian Federation is above 1%) as well as the decline within
the range of 5%. The highest growth (more than 12%) was demonstrated by Voronezh region
(17.4%), Omsk region (15.5%), Altai Territory (13%) and Sverdlovsk region (12%).
Growth of retail turnover by districts in 2007 - 2011, % Y-o-Y, in comparable prices
111,7
110,8
108
106,3
114,5
110,3
105,4
105,6
109,4
106,9
109,4
109,7
105,2
95,2
92,8
94
125
120
115
110
105
100
95
90
85
80
117,7
115,2
120,1
118,1
106,2
104,9
106,3
102,5
94,9
92,3
2007
2008
2009
2010
2011
113,9
111,5
110,3
109,5
107,9
102,4
104,7
104,4
100,2
89,3
Central
North-Western
Southern
North-Caucasian
Volga
Urals
Siberian
Far-Eastern
Source: IA Infoline
In 2001-2008 in most of the regions there was dynamic growth of retail turnover
expressed in physical terms after which dynamics appeared to be negative during 10 months
(from March to December 2009). At that from November 2009 the number of regions, where
retail turnover is growing, started to increase again and achieved its maximum (76) in August
2010. However there was a decline from September and it amounted to 64 in October 2010
(down to the level of March 2010, i.e. the crisis period in economy), it increased immaterially in
November to 68 regions and sharply declined to 60 regions in December, in February 2011 it
increased to 67 regions and then in March 2011 it reduced to 64, in April 2011 it increased to 67,
in July 2011 - to 73, in August 2011 – to 71, in September – to 76, in October 2011 it reduced to 74
and in November and December 2011 – to 73. Overall in 2011 there was a y-o-y decline of
turnover in 7 regions.12
Number of regions with positive dynamics of retail turnover in
physical terms, Y-o-Y
80
70
60
50
40
30
20
10
0
Feb06
M ay06
A ug06
N ov06
Feb07
M ay07
A ug07
N ov07
Feb08
M ay08
A ug08
N ov08
Feb09
M ay09
A ug09
N ov09
Feb10
M ay10
A ug10
N ov10
Feb11
M ay11
A ug11
N ov11
Source: IA Infoline
12 80 subjects of the Russian Federation were included in the analysis (excluding Khanty-Mansiisk Autonomous District, Yamal-
Nenets and Nenets Autonomous Area), which existed as of June 1, 2011 (data for 2006-2009 are adjusted for consolidation).
34
GGOOVVEERRNNMMEENNTT RREEGGUULLAATTIIOONN OOFF RREETTAAIILL TTRRAADDEE
According to the Federal Law № 381 – FL “On fundamental principles of government
regulation of trade activity in the Russian Federation” which came into effect on February 1,
2010, food retail chains (with the threshold of dominance on retail market within the boundaries
of one region, municipal area or urban district exceeding 25%) are prohibited from acquiring
and renting additional selling space within the boundaries of the corresponding administrative-
territorial entity. The law does not apply to agricultural consumer cooperatives and
organizations of consumer cooperation.
The law “On fundamental principles of government regulation of trade activity in the
Russian Federation” also aims to regulate cooperation of retail chains and suppliers. The law №
381 – FL introduced special legal regulation with regard to food supplies and formalized a list
of terms which cannot be imposed by food suppliers and their buyers (retail chains) upon each
other. In particular, these terms include: reduction of price by suppliers to the level which will
not exceed the minimum selling price of this product by economic entities performing
corresponding activity subject to the determination of the trade mark-up; payment for the
change in the product mix; responsibility for a failure to observe obligation on goods supply on
more favorable terms than for other economic entities; fee paid by suppliers for access to trade
objects within one retail chain. Wholesale trade under commission agreement is prohibited. It is
prohibited to set a ban on substitution of persons under the food supply agreement through
assignment of a claim and liability for noncompliance with this regulation. Credit term for some
food products was set. For example, products with up to 10-days expiry period should be paid
for within 10 working days from the date of acceptance of goods, for products with up to 30-
days expiry period the payment due period is up to 30 calendar days, and for the rest food
products including alcoholics drinks – up to 45 calendar days.
MMAAIINN CCOOMMPPEETTIITTOORRSS1133
The concentration level of the Russian food retail market is quite low – the share of 3
largest players makes up about 10% 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 development of competition is expressed in
capturing extra markets due to growth of the chain itself including franchising schemes as well
as M&A deals. As a result, chains operating in the Russian market actively increase their
presence in Moscow and regions which leads to record rates of business growth.
X5 Retail Group
As at 31 December 2011, X5 had 3,002 company-operated stores. It has the leading
market position in both Moscow and St. Petesrburg and a significant presence in the European
part of Russia. Its store base includes 2,525 soft discounters, 330 supermarkets, 77 hypermarkets
and 70 convenience stores. The company operates 29 distribution centers across the Russian
Federation.
As at 31 December 2011, X5’s franchisees operated 658 stores across Russia.
13 Source: IA Infoline, public sources of companies.
35
For the full year 2011, net sales totaled USD 15,455 mln, EBITDA reached USD 1,130 mln,
and net profit amounted to USD 302 mln.
METRO Cash & Carry
Metro Cash and Carry is the largest operating company of cash & carry international
business format (wholesale) of Metro Group. The holding is represented in 33 countries of the
world with 2,200 stores.
As of January 1, 2012 "Metro Cash & Carry" LLC operates 62 trading centers in 41
regions of Russia. Total selling space of the company as of December 1, 2011 amounted to 523.5
thousand sq. m.
In 2006-2008 "Metro Cash & Carry" used to open 8-9 stores per year, however since 2009
“Metro group” reduced its expansion rate not only in Russia but in the other countries too. Four
trading centers were opened in 2009 in Russia (Bryansk, Zheleznodorozhny, Kirov,
Novosibirsk). In 2011 the company opened 7 Metro C&C hypermarkets in Kemerovo region,
Chelyabinsk region, Altai territory, Republic of Udmurtia, Tatarstan and Chuvash Republic, as
well as in Smolensk region.
Sales of METRO Cash & Carry, Russia for 2011 amounted to 3.4 billion euro (which
represents growth of 17% compared to 2010).
Auchan
Auchan is a large hypermarket chain operating on the Russian market since 2002. As of
January 1, 2012 Auchan in Russia operated 49 trading objects (including 1 in reconstruction). 33
“Auchan” hypermarkets were opened in 14 regions (14 - in Moscow and Moscow region, 4 – in
St. Petersburg, 2 – in Rostov-on-Don, Novosibirsk, Samara, 1 in Adygeya, Krasnodar,
Ekaterinburg, Nizhniy Novgorod, Omsk, Voronezh, Ufa, Kazan and Chelyabinsk). Also
Auchan operates 14 “Auchan-city” mini-hypermarkets (that were opened as a result of
rebranding of hypermarkets of “Ramstore” chain) in Moscow (8 stores), Ekaterinburg (1),
Moscow region (2), Novosibirsk (1) and St. Petersburg (2). Also the chain consists of 2 stores of
new “Raduga” format in Kaluga and Penza that were opened in December 2009.
Total selling space of the stores as of January 1, 2012 amounted to more than 497
thousand sq. m. In 2011 the number of trading objects of the chain increased by five
hypermarkets in the Republics of Bashkortostan (Ufa) and Tatarstan (Kazan), Novosibirsk,
Samara and Chelyabinsk regions.
According to LLC “Auchan” management accounts, sales of the company for nine
months of 2011 amounted to 142.69 billion rubles, net profit for the reporting period amounted
to 5.7 billion rubles.
The management of Auchan Group of Companies plans to achieve annual sales of 100
billion euro by 2018, at that, 2010 sales of Auchan chain in the world amounted to 42.5 billion
euro.
Dixy
“Dixy” Group of Companies is one of Russia's leading retailers of foods and everyday
products. The company specializes in developing neighborhood store supermarkets in Moscow,
St. Petersburg and three federal districts of Russia: Central, Northwest and Urals and also in
Kaliningrad region, which together account for more than half of the retail market for foods and
everyday products in the Russian Federation. As of December 31, 2011 the company operated
1,119 stores, including: 868 “Dixy” neighborhood stores, 201 neighborhood stores under the
“Kvartal”, “Deshevo”, “Semeynaya Kopilka” brands, 23 “Victoria” supermarkets, 18
“MEGAMART” compact hypermarkets, 8 “MINIMART” economic supermarkets and 1
36
“CASH” (“cash&carry”) store.
The company is the third largest in terms of the amount of sales, selling space and the
number of stores among the national retailers operating in the food segment. The total number
of employees of the company exceeds 33 thousand.
Net selling space of the Group as of December 31, 2011 amounted to 405,066 sq. m.
In 2010 total sales of “Dixy” Group of Companies amounted to 64.7 billion rubles,
“Victoria” Group of Companies - 34 billion rubles.
Lenta
“Lenta” company operating the hypermarket chain of the same name was founded in
1993. As of January 1, 2012 "Lenta" hypermarkets located in Saint-Petersburg, Nizhny
Novgorod, Novosibirsk, Tyumen, Krasnodar, Volgograd, Veliky Novgorod, Petrozavodsk,
Astrakhan, Togliatti, Naberezhnye Chelny, Barnaul, Penza and Saratov, Omsk, Novorossiysk,
Tver and Rostov region.
Total selling space of the chain as of January, 1 2012 amounted to 292.25 thousand sq. m.
In 2011 three “Lenta” hypermarkets were opened in Volgograd, Novosibirsk and Tver
regions.
The company has about 14 thousand employees. More than 3.5 persons throughout
Russia are holders of loyal customer cards of the chain.
Sales of “Lenta” retail chain at the end of 2010 amounted of 70.6 billion rubles increasing
by 27% compared to 55.6 billion rubles for 2009.
О'KEY
"O'KEY" group of companies is a multi-format retail chain consisting of "O'KEY"
hypermarkets and "O'KEY - Express" supermarkets.
As of January 1, 2012 "O'KEY" chain operated 71 stores in Russia: 17 hypermarkets and
18 supermarkets in Saint-Petersburg and Leningrad region, 2 hypermarkets and 3 supermarkets
in Moscow, 1 hypermarket and 1 supermarket in Moscow region, 2 hypermarkets in
Murmansk, 4 hypermarkets and 1 supermarket in Krasnodar, 2 hypermarkets in Rostov-on-
Don, 1 hypermarket and 2 supermarkets in Volgograd, 1 hypermarket in Stavropol, Togliatti,
Nizhniy Novgorod, Ufa, Lipetsk, Voronezh, Novosibirsk, Volzhsk, Omsk and Saratov, 2
hypermarkets and 1 supermarket in Astrakhan, 2 hypermarkets and 1 supermarket in
Krasnoyarsk, as well as 1 supermarket in Novocherkassk.
As of January 1, 2012 total selling space of "O'KEY" chain amounted to about 346
thousand sq. m.
In 2011 one hypermarket in Saint-Petersburg was closed for reconstruction (after the
collapse of the roof) and was reopened after it, the company opened 7 "O'KEY - Express"
supermarkets in Saint-Petersburg, Kolpino, Leningrad region, Lyubertsy and 7 "O'KEY"
hypermarkets in Novosibirsk, Saint-Petersburg, Omsk, Astrakhan, Saratov and Moscow region.
Unaudited sales of “О'KEY” chain at the end of 2011 amounted to 92.212 billion rubles,
having increased by 12.9% compared to 81.688 billion rubles for 2010. In 2011 like-for-like
amounted to 5.3% compared to 7.7% for 2010. Average ticket amounted to 5.5% compared to
3.3% for 2010. Traffic for 2011 decreased to 0.2% compared to 4.3% for 2010.
37
Number of stores of the largest FMCG retailers in 2007-2011, eop.
Legal name
Brand
X5 Retail Group N.V.
”Magnit”,OJSC
Pyaterochka
Perekrestok
Karusel
Perekrestok-Express, CityMag
Kopeyka
Magnit
Magnit Hypermarket
Magnit Cosmetic
Auchan, Auchan-City, Nasha Raduga
Metro C&C
“Auchan”, company
limited
“МЕТRО Cash and Carry”,
company limited
“O'key”, company limited O'key, O'key-express
“Lenta”, company limited Lenta
“Dixy-group”, OJSC
“Victoria” Group of
Companies, OJSC
Megamart, Minimart, Dixy
Victoria, Cash, Deshevo, Kvartal,
Semeynaya Kopilka
Main formats14
D
S
H
CS
CS, S
D
H
C
H
H
S, H
H
D, S, H
2007
674
194
22
0
438
2194
3
0
18
39
24
26
388
2008
848
207
46
0
517
2568
14
0
33
48
37
34
493
2009 2010 2011
1039 1392 1918
301 321
275
71
58
77
70
45
0
587
657 616
3204 4004 5006
93
51
24
210
2
0
38
44
49
52
57
62
46
36
537
71
57
39
42
646 894
CS, S, H, D
194
215
208
258 225
Total selling space of FMCG retailers in Russia in 2007-2011, eop, thousand sq. m.
Legal name
Brand
X5 Retail Group N.V.
”Magnit”,OJSC
Pyaterochka
Perekrestok
Karusel
Perekrestok-Express, CityMag
Kopeyka, Kopeyka-Super
Magnit
Magnit Hypermarket
Magnit Cosmetic
Metro C&C
Auchan, Auchan-City, Raduga
“Auchan”, company
limited
“МЕТRО Cash and Carry”,
company limited
“O'key”, company limited Lenta
“Lenta”, company limited Megamart, Minimart, Dixy
“Dixy-group”, OJSC
“Victoria” Group of
Companies, OJSC
Victoria, Cash, Deshevo, Kvartal,
Semeynaya Kopilka
Lenta
Main formats
D
S
H
CS
CS, S
D
H
C
2007
357,5
251,7
126
-
-
640,1
11,6
0
2008
419,2
222,4
232,5
-
-
767,1
56,4
0
2009
493
284,4
285,6
-
-
978,5
81,4
0
2011
2010
735,2
586,3
333,89
313,0
371,3
351,8
12,7
9,2
296,0
274,2
1256,8 1637,8
282,2
165,1
50,1
0,4
H
H
S, H
H
Д, S, H
CS, S, H
250,6
340,1
386,6
451,3
497,0
351,5
430,4
466,3
502
538,5
149,2
177,0
191,7
232,7
232,7
247,4
287,4
268,3
346,0
292,3
148,8
191
206
227,9
286,7
99,8
109,7
104,6
121,3
118,4
Dynamics of net sales (excluding VAT) of the largest FMCG retailers in 2007-2011, billion RUR
Legal name
Brand
Main formats Data
Pyaterochka
Perekrestok
Karusel, Pyaterochka-Maxi
Perekrestok-Express
Kopeyka, Kopeyka-Super
D
S
H
CS
D, S
IFRS, 2011 –
unaudited
accounts
X5 Retail Group N.V.
2008
2009
2010
2011
2007
75,38 110,95 148,35 188,28 230,42
98,69
49,75 67,15 73,19
66,63
31,16 41,71 53,55
2,99
–
53,52
–
34,940 51,60 56,15
83,13
61,12
1,86
61,21
–
Pyaterochka, Perekrestok, Karusel,
Pyaterochka-Maxi, Perekrestok-
Express, Kopeyka
CS, D, S, H
”Magnit”,OJSC
“Auchan”, company
limited
“МЕТRО Cash and
Carry”,
company limited
Magnit
Auchan, Auchan-City, Nasha Raduga
Metro C&C
“O'key”, company limited O'key, O'key-express
D, H
H
H
S, H
IFRS (2010 – incl.
Kopeyka stores),
2011 – unaudited
accounts
IFRS
136,10 207,20 275,08 342,58 452,48
94,04 132,4 169,86 236,14 335,70
RAS
90,6
128,1 158,36 178,1
IFRS
89,2
111,2 114,30 117,99
-
-
IFRS, 2011 –
unaudited
accounts
30,533 51,14 67,88
82,67
92,21
14 Key: D - Discounter, H - Hypermarket, S - Supermarket, CS - Convenience Store, C – Cosmetics Store
38
Legal name
Brand
Main formats Data
2007
2008
2009
2010
32,9
50,8
55,60
70,60
2011
-
“Lenta”, company limited Lenta
H
Megamart, Minimart, Dixy, Victoria,
Cash, Deshevo, Kvartal
CS, D, S, H
“Dixy-group”, OJSC
Dixy
Megamart
Minimart
V-mart
marketing
D
H
S
CS
-
Victoria, Cash, Deshevo, Kvartal
CS, S, H
MA
IFRS, 2011 –
consolidation
with “Victoria”
Group of
Companies
IFRS, 2011 –
неаудированная
отчетность
RAS (“Victoria”
Group of
Companies) 2011
– pro forma
“Dixy” Group of
Companies
36,65
48,3
54,26
64,80 102,23
32,25 40,65 45,13
6,32
5
2,00
2
0,07
0,24
0,74
0,49
3,2
1,2
0
0
54,39
7,26
2,18
0,00
0,90
68,9
8,52
2,43
0,00
1,28
26,5
31,9
32,89
36,80
40,63
CCOOMMPPEETTIITTIIVVEE AADDVVAANNTTAAGGEESS OOFF ““MMAAGGNNIITT””
Multi-format business
Implementation of the strategic decision to develop the additional format of
hypermarket allows the Group to conduct more profound segmentation of existing markets and
consider population with different income level as potential customers as well as to achieve
high results of turnover per store and average ticket and fast rates of business growth.
Moreover, pricing policy of the Group allows it to compete with open markets targeting
customers also with income below the average.
Strong regional coverage
“Magnit” group of companies has considerable experience of operation in regions: in
2002 – 2011 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 highest growth of consumer demand, what creates favorable conditions for
medium-term dynamics of the Group business.
Russia’s largest chain in terms of number of stores
In terms of number of stores “Magnit” is the largest retailer in Russia which has a
positive impact on cooperation with the largest food and beverage producers promoting their
products on the regional markets. First of all it reflects in favorable purchasing terms and
corresponding efficiency 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 price-sensitive. Therefore, large store chain under “Magnit” brand
allows the Group to strengthen its positions in the occupied market niche.
Efficient logistics system
39
Developed logistics system, distribution centers and own fleet of vehicles enable the
Group to strictly monitor its delivery costs. Operating distribution centers results in lower
purchase prices and less pressure on the store at goods acceptance which ultimately contributes
to more efficient business organization.
The Group employs highly efficient automated stock replenishment system, which gives
opportunity to achieve high turnover level as well as to reduce costs.
40
1100.. PPRRIIOORRIITTYY AARREEAASS OOFF TTHHEE CCOOMMPPAANNYY’’SS OOPPEERRAATTIIOONNSS
Based in Krasnodar, in the Southern region of Russia, open joint-stock company
“Magnit” 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, 2011 the chain consisted of 5,309 stores: 5,006
convenience stores, 93 hypermarkets and 210 cosmetics stores in 1,389 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, North-Caucasian, Central
and Volga regions. The Company also operates stores in the North-Western, Urals and Siberian
regions. By the end of 2011 stores located in the Southern Federal district accounted for 1,289, in
the Volga region – 1,662, North-Caucasian – 302, Central – 1,270, North-Western – 348, the
number of stores in the Urals and Siberian regions amounted to 372 and 57 correspondingly.
North-Western:
320 convenience stores
5 hypermarkets
23 cosmetics stores
1 distribution center
Central:
1,204 convenience stores
16 hypermarkets
50 cosmetics stores
4 distribution centers
Southern:
1,198 convenience stores
38 hypermarkets
62 cosmetics stores
3 distribution centers
Volga:
1,580 convenience stores
26 hypermarkets
56 cosmetics stores
5 distribution centers
North-Caucasian:
289 convenience stores
6 hypermarkets
7 cosmetics stores
Urals:
359 convenience stores
2 hypermarkets
11 cosmetics stores
1 distribution center
Siberian:
56 convenience stores
1 cosmetics store
As of December 31, 2011 the Company operates in-house logistics system consisting of
14 modern distribution centers (DCs): three of them are located in the Southern Federal district
(Kropotkin, Bataysk and Slavyansk-On-Kuban), five are in the Volga Federal district (Engels,
Togliatti, Erzovka, Dzerzhinsk, Izhevsk), another four DCs are based in the Central Federal
district (Tver, Oryol, Ivanovo and Tambov), , one in the Urals Federal district (Chelyabinsk) and
one in the North-Western Federal district (Veliky Novgorod).
41
City
Federal District
Warehousing
space, sq. m.
Number of
serviced stores
% of total DC
turnover
Bataysk
Southern
17,407
Kropotkin
Southern
30,048
Slavyansk-on-
Kuban
Engels
Togliatti
Erzovka
(Volgograd)
Dzerzhinsk
Izhevsk
Tver
Oryol
Tambov
Ivanovo
Southern
20,496
Volga
Volga
Volga
Volga
Volga
19,495
19,157
26,074
30,523
23,988
Central
13,136
Central
14,326
Central
26,733
Central
43,365
Veliky Novgorod
North-Western
21,060
Chelyabinsk
Urals
17,623
432
509
313
336
516
307
358
382
231
360
340
505
219
501
Total
323,431
5 309
8.42%
8.47%
8.78%
5.70%
8.65%
8.49%
6.60%
1.69%
4.82%
8.28%
6.79%
9.99%
4.82%
8.50%
100%
The Company operates automated stock replenishment system and a fleet of 3,906
vehicles.
42
1111.. PPRRIIOORRIITTYY DDIIRREECCTTIIOONNSS OOFF TTHHEE CCOOMMPPAANNYY’’SS
DDEEVVEELLOOPPMMEENNTT
The Company marks out the following mid-term development trends:
• Further expansion of the chain by increasing the density of coverage of the
key markets as well as organic expansion in the least developed regions of
Russia;
• Development of
through active
the multi-format business-model
implementation of the hypermarket format and continuing development of
cosmetics stores;
• Building of the high level loyalty of the key audience to the brand
•
Implementation of additional measures to minimize costs and improve
profitability;
Chain expansion
In the nearest 2-3 years the Company plans to keep high pace of business growth
with the annual number of openings of not less than 500 convenience stores and not less
than 400 cosmetics stores in the cities with the population from 5,000 people and about
50 hypermarkets in the cities with the population from 50,000 people.
The key territories of presence for the Company are Southern, Volga and Central
regions, it is planned to increase the number of stores in Urals and Siberia regions. In
the long-term outlook the management of the chain does not exclude the opportunity of
entering the market of the Far East.
Development of the multi-format model
Currently the Company is actively expanding into three formats: “convenience
store”, hypermarket and a new format – “cosmetics store” (drogerie). In contrast to
“traditional” formats, stores under “Magnit Cosmetic” brand offer non-food
assortment: hygiene items, household chemicals, cosmetics and perfumery.
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 in the city (within the city
boundaries) and targets people living within the radius of 7 km.
Based on location (size of the location or of the area in a large city) there are 3 sub-
formats of the hypermarket:
“small” with the selling space of up to 3,000 sq. m. (excluding rental space);
“medium” with the selling space of 3,000 – 5,000 sq. m. (excluding rental space);
43
“large” with the selling space of over 5,000 sq. m.; (excluding rental space).
Strategic development of the hypermarket format will enable to conduct deeper
segmentation of the existing markets and consider population with different income as
potential customers on the back of high turnover per store and average ticket as well as fast
pace of business growth.
The Group has also started to study a new segment of the etail market and in the end of
2010 launched 2 trial stores of a new format – “drogerie”. Unlike “traditional” formats stores
under “Magnit Kosmetik” brand offer a mix of non-food group of products: personal care
products, household chemicals, cosmetics and perfumery goods. There were 208 cosmetics
stores opened in 2011.
Pricing policy of the Company allows it to compete with open markets considering
customers with income below average as the target audience.
Brand recognition and customer loyalty
The Company management takes measures to adjust its formats to changing
customers’ preferences. In the regions with the highest purchasing power the work is
carried out with the traditional assortment of the convenience store towards its
expansion in favor of more expensive products (for example, ready-made cookery and
semi-prepared meat).
Within the complex measures taken to increase the loyalty to the “Magnit” brand
the analysis is carried out to study the customers’ preferences to adjust marketing
program to the peculiarities of different formats.
As an additional factor of the brand popularity the management of the Company
plans to improve the service in its stores through corresponding work with its
employees.
Minimization of expenses
The main drivers of successful development in the above direction are further
improvement of the logistics processes and investments in the IT system which will
provide the Company with maximum effective stock transport flow management
systems, and will contribute to its transformation into the leader in terms of cost
control.
Active introduction of private label products to the assortment is in place to
increase Company’s profitability.
The status of Russia’s leading chain in terms of number of stores and customers
supports the Company’s efficient cooperation with suppliers and achievement of most
favorable purchasing terms.
Development of direct import, first of all direct import of fresh fruits and
vegetables, will also contribute to minimization of logistics costs.
44
1122.. IINNFFOORRMMAATTIIOONN OONN TTHHEE PPAAIIDD DDIIVVIIDDEENNDDSS
It was resolved by the annual general shareholders’ meeting of June 23, 2011 (minutes of
23.06.2011) to pay dividends on ordinary nominal shares of OJSC “Magnit” following the
results of 2010 financial year and the 1st quarter of 2011 financial year.
Information on the paid dividends:
Dividend period: 2010 year.
Amount of announced (accrued) dividends on shares of the category (type) per share,
RUB:
- the dividend amount accrued on one ordinary registered share, following the results of
2010 financial year - 6.57 rubles.
Total amount of announced (accrued) dividends on all shares of the category, RUB:
- total amount of announced (accrued) dividends following the results of 2010 financial
year on all shares of the category: 584,566,229.61 rubles.
Dividend period: 1st quarter of 2011 year.
Amount of announced (accrued) dividends on shares of the category (type) per share,
RUB:
- the dividend amount accrued on one ordinary registered share, following the results of
the 1st quarter of 2011 financial year - 4.67 rubles.
Total amount of announced (accrued) dividends on all shares of the category, RUB:
- total amount of announced (accrued) dividends following the results of the 1st quarter
of 2011 financial year on all shares of the category - 415,513,590.91 rubles.
Total amount of the dividends paid on all issuer’s shares of the category, RUB:
999,549,168.88.
The dividends payment was effected in money terms with the assistance of the Registrar
of the Company, OJSC “United registration Company” (19 Leninskaya Sloboda street, Moscow)
as an entity providing services on dividends payment.
The announced dividends were not paid in full as the result of the mistakes in payment
details indicated by shareholders.
45
1133.. SSEECCUURRIITTIIEESS
AAUUTTHHOORRIIZZEEDD CCAAPPIITTAALL SSTTOOCCKK
The authorized capital stock of the Company determines the minimum amount of assets
that guarantees its creditors’ interests.
As of December 31, 2011 authorized capital stock of the open joint-stock company
“Magnit” amounts to 945,613.55 rubles. It consists of 94,561,355 ordinary registered uncertified
shares with the nominal value of 0.01 rubles.
The Company is entitled to offer additional ordinary registered shares in the amount of
106,288,645 with the nominal value of 0.01 rubles (authorized shares).
Information on the listed shares of OJSC “Magnit” as of 31.12.2011:
Description of
security
Number of state
registration
Date of state
registration
Nominal,
RUR.
Total number
of securities
Ordinary registered
uncertified shares
1-01-60525-Р
04.03.2004
0.01
88,975,073
Ordinary registered
uncertified shares
1-01-60525-Р-
006D
10.11.2011
0.01
5,586,282
Total:
94,561,355
Structure of OJSC “Magnit” share capital as of 31.12.2011:
Number of registered
persons
Name
Share in the charter
capital, %
Legal entities
including nominal holders
Individuals
Total:
10
9
14
24
57.76
57.76
42.24
100
Information on OJSC “Magnit” outstanding shares listed outside the Russian
Federation in accordance with the foreign law of securities of foreign issuers certifying rights
in respect of the above shares of the Company:
Category (type) of shares outstanding outside the Russian Federation: ordinary
registered shares;
Percentage of shares outstanding outside the Russian Federation as a % of the total
number of shares of the corresponding category (type): 28.75%;
name, address of the foreign issuer which securities certify the rights in respect of the
shares of the Company of the corresponding category (type): JP Morgan Chase Bank, N. A., 4
New York Plaza, 13th Floor, New York, 10004 New York United States of America);
short description of the program (type of the program) of the securities issue of the
foreign issuer certifying the rights in respect of the shares of the corresponding category (type):
in accordance with foreign law JPMorgan Chase Bank, N. A. issued securities (global depositary
46
receipts, “GDRs”) certifying the rights in respect of the ordinary registered shares of OJSC
“Magnit”;
information on obtaining a permit of the federal executive body for the securities market
to list the issuer’s shares of the corresponding category (type) outside the Russian Federation (if
applicable):
- in accordance with the order of FFMS of Russia of March 27, 2008 № 08-661/pz-i
offering and listing outside the Russian Federation of ordinary registered uncertified shares of
OJSC “Magnit”, state registration number of the securities issue 1-01-60525-P of 04.03.2004, state
registration number of the additional securities issue 1-01-60525-Р-004D of 20.03.2008 in the
amount of 11,522,000 (eleven million five hundred and twenty two thousand) ordinary
registered uncertified shares is permitted;
- in accordance with the order of FFMS of Russia of October 02, 2009 № 09-3132/pz-i
offering and listing outside the Russian Federation of ordinary registered uncertified shares of
OJSC “Magnit”, state registration number of the securities issue 1-01-60525-P of 04.03.2004, state
registration number of the additional securities issue 1-01-60525-Р-005D of 02.10.2009 in the
amount of 16 792 946 (sixteen million seven hundred ninety two four thousand nine hundred
forty six) ordinary registered uncertified shares is permitted;
name of the foreign trade organizer (trade organizers) through which securities of the
foreign issuer certifying the rights in respect of the issuers’ shares are listed (if there is such a
listing):London Stock Exchange.
BBOONNDDSS
Bond issue of LLC “Magnit Finance” of 01 series:
In 2005 the Company entered stock market offering its investors bond issue by limited
liability company “Magnit Finance”, subsidiary of OJSC “Magnit”. The bond issue enabled the
Company to optimize its debt portfolio and work out methods of cooperation with investors for
the purpose of further introduction of the Company’s shares to the market.
Issue included 2 million securities with the nominal value of 1 thousand rubles
guaranteed by OJSC “Magnit” and JSC “Tander”. Issue was outstanding for 3 years. The main
objective of the bond issue was to refinance short-term debt of the group. Not less than 75% of
raised funds were channeled for these purposes, and the remaining funds were spent on
“Magnit” retail chain development.
The offering of the certified interest-bearing non-convertible bonds payable to bearer of
01 series with the obligatory centralized deposit of LLC “Magnit Finance” on the MICEX stock
exchange commenced on November 23, 2005. The number of the placed securities amounted to
2,000 thousand securities which constitutes 100% of the total number of securities subject to
placement. The bond issue was realized in full in the course of auction in the fist day of
placement.
On November 19, 2008 LLC “Magnit Finance” fulfilled its obligations to bond holders on
time and in full and redeemed the nominal value of bonds of 01 series.
Bond issue of LLC “Magnit Finance” of 02 series:
In 2007 the Company offered its investors the second bond issue by limited liability
company “Magnit Finance”, subsidiary of OJSC “Magnit”.
47
Issue included 5 million securities with the nominal value of 1 thousand rubles
guaranteed by OJSC “Magnit” and JSC “Tander”. Issue will be outstanding for 5 years. The
second bond issue was conditioned by the necessity of refinancing short-term liabilities of the
group.
The offering of the certified interest-bearing non-convertible bonds payable to bearer of
02 series with the obligatory centralized deposit of LLC “Magnit Finance” on the MICEX stock
exchange commenced on March 30, 2007. The number of the placed securities amounted to
5,000 thousand securities which constitutes 100% of the total number of securities subject to
placement. The bond issue was realized in full in the course of auction in the fist day of
placement.
Parameters of the bond issue of LLC “Magnit Finance” of 02 series:
Date and the number of state registration
Volume of the issue
Number of securities
Nominal value of each security
Offering price
Date of placement
Method of placement
Redemption date
Number of coupons
Trading code
ISIN code
Interest rate on the basis of the auction results
1 coupon interest rate
2 coupon interest rate
3 coupon interest rate
4 coupon interest rate
5 coupon interest rate
6 coupon interest rate
7 coupon interest rate
8 coupon interest rate
9 coupon interest rate
10 coupon interest rate
№ 4-02-36102-R of March 6, 2007
5,000,000,000 rubles
5,000,000 bonds
1,000 rubles
100% of nominal value
30.03.2007
open subscription
1,820 day from the date of placement
(23.03.2012)
10
RU000A0JP4W7
RU000A0JP4W7
8.20 %
8.20 %
8.20 %
8.20 %
8.20 %
8.20 %
8.20 %
8.20 %
8.20 %
8.20 %
8.20 %
The first coupon yield of 02 series bond issue was paid on September 28, 2007. The total
amount of yield paid on the second coupon amounted to 204.45 million rubles, the amount of
yield of the second coupon paid per one bond amounted to 40.89 rubles.
The second coupon yield of 02 series bond issue was paid on March 28, 2008. The total
amount of yield paid on the second coupon amounted to 204.45 million rubles, the amount of
yield of the second coupon paid per one bond amounted to 40.89 rubles.
The third coupon yield of 02 series bond issue was paid on September 26, 2008. The total
amount of yield paid on the third coupon amounted to 204.45 million rubles, the amount of
yield of the third coupon paid per one bond amounted to 40.89 rubles.
48
The forth coupon yield of 02 series bond issue was paid on March 27, 2009. The total
amount of yield paid on the forth coupon amounted to 204.45 million rubles, the amount of
yield of the forth coupon paid per one bond amounted to 40.89 rubles.
The fifth coupon yield of 02 series bond issue was paid on September 25, 2009. The total
amount of yield paid on the fifth coupon amounted to 204.45 million rubles, the amount of yield
of the forth coupon paid per one bond amounted to 40.89 rubles.
The sixth coupon yield of 02 series bond issue was paid on March 26, 2010. The total
amount of yield paid on the fifth coupon amounted to 204.45 million rubles, the amount of yield
of the forth coupon paid per one bond amounted to 40.89 rubles.
The seventh coupon yield of 02 series bond issue was paid on September 24, 2010. The
total amount of yield paid on the fifth coupon amounted to 204.45 million rubles, the amount of
yield of the forth coupon paid per one bond amounted to 40.89 rubles.
The eighth coupon yield of 02 series bond issue was paid on March 25, 2011. The total
amount of yield paid on the fifth coupon amounted to 204.45 million rubles, the amount of yield
of the forth coupon paid per one bond amounted to 40.89 rubles.
The ninth coupon yield of 02 series bond issue was paid on September 23, 2011. The total
amount of yield paid on the fifth coupon amounted to 204.45 million rubles, the amount of yield
of the forth coupon paid per one bond amounted to 40.89 rubles.
Based on trading for the period from 11.01.2011 to 30.12.2011 the weighted average price
of transactions with bonds of 02 series varied from min 96.80 % (05.10.11) to max 102.00 %
(18.03.11) of the nominal value. Acknowledgeable quotation within this period fluctuated from
min 96.80% (05.10.11) to max 101.86% (22.04.11).
Bond issue of OJSC “Magnit” of BO-01 series:
In 2010 the Company offered its investors the first Exchange-traded bond issue.
Issue included 1 million securities with the nominal value of 1 thousand rubles. Issue
will be outstanding for 3 years. The issue of the exchange-traded bonds of BO-01 series aims to
attract funds to finance operating activity and expansion of “Magnit” group of companies, to
decrease value of credit portfolio as well as to build public credit history.
The offering of the certified interest-bearing non-convertible Exchange-traded bonds
payable to bearer of BO-01 series with the obligatory centralized deposit of OJSC “Magnit” on
the MICEX stock exchange commenced on September 13, 2010. The number of the placed
securities amounted to 1 million securities which constitutes 100% of the total number of
securities subject to placement. The bond issue was realized in full in the course of auction in
the fist day of placement.
Parameters of the bond issue of OJSC “Magnit” of BO-01 series:
Date and the number of state registration
Volume of the issue
Number of securities
Nominal value of each security
Offering price
Date of placement
Method of placement
Redemption date
Number of coupons
№ 4B02-01-60525-P of February 02, 2010
1,000,000,000 rubles
1,000,000 bonds
1,000 rubles
100% of nominal value
13.09.2010
open subscription
1,092 day from the date of placement
(09.09.2013)
6
49
Trading code
ISIN code
Interest rate on the basis of the auction results
1 coupon interest rate
2 coupon interest rate
3 coupon interest rate
4 coupon interest rate
5 coupon interest rate
6 coupon interest rate
RU000A0JR118
RU000A0JR118
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
The first coupon yield of BO-01 series Exchange-traded bond issue was paid on March
14, 2011. The total amount of yield paid on the second coupon amounted to 41.14 million rubles,
the amount of yield of the second coupon paid per one bond amounted to 41.14 rubles.
The second coupon yield of BO-01 series Exchange-traded bond issue was paid on
September 12, 2011. The total amount of yield paid on the second coupon amounted to 41.14
million rubles, the amount of yield of the second coupon paid per one bond amounted to 41.14
rubles.
Based on trading for the period from 11.01.2011 to 30.12.2011 the weighted average price
of transactions with Exchange-traded bonds of BO-01 series varied from min 99.00 % (10.10.11)
to max 102.65 % (04.08.11) of the nominal value. Acknowledgeable quotation within this period
fluctuated from min 99.93% (22.11.11) to max 101.45% (01.04.11).
Bond issue of OJSC “Magnit” of BO-02 series:
In 2010 the Company offered its investors the second Exchange-traded bond issue.
Issue included 1 million securities with the nominal value of 1 thousand rubles. Issue
will be outstanding for 3 years. The issue of the exchange-traded bonds of BO-02 series aims to
attract funds to finance operating activity and expansion of “Magnit” group of companies, to
decrease value of credit portfolio as well as to build public credit history.
The offering of the certified interest-bearing non-convertible Exchange-traded bonds
payable to bearer of BO-02 series with the obligatory centralized deposit of OJSC “Magnit” on
the MICEX stock exchange commenced on September 13, 2010. The number of the placed
securities amounted to 1 million securities which constitutes 100% of the total number of
securities subject to placement. The bond issue was realized in full in the course of auction in
the fist day of placement.
Parameters of the bond issue of OJSC “Magnit” of BO-02 series:
Date and the number of state registration
Volume of the issue
Number of securities
Nominal value of each security
Offering price
Date of placement
Method of placement
Redemption date
Number of coupons
Trading code
50
№ 4B02-02-60525-P of February 02, 2010
1,000,000,000 rubles
1,000,000 bonds
1,000 rubles
100% of nominal value
13.09.2010
open subscription
1,092 day from the date of placement
(09.09.2013)
6
RU000A0JR126
ISIN code
Interest rate on the basis of the auction results
1 coupon interest rate
2 coupon interest rate
3 coupon interest rate
4 coupon interest rate
5 coupon interest rate
6 coupon interest rate
RU000A0JR126
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
The first coupon yield of BO-02 series Exchange-traded bond issue was paid on March
14, 2011. The total amount of yield paid on the second coupon amounted to 41.14 million rubles,
the amount of yield of the second coupon paid per one bond amounted to 41.14 rubles.
The second coupon yield of BO-02 series Exchange-traded bond issue was paid on
September 12, 2011. The total amount of yield paid on the second coupon amounted to 41.14
million rubles, the amount of yield of the second coupon paid per one bond amounted to 41.14
rubles.
Based on trading for the period from 11.01.2011 to 30.12.2011 the weighted average price
of transactions with Exchange-traded bonds of BO-02 series varied from min 99.30%
(15.12.2011) to max 102.60% (04.08.2011) of the nominal value. Acknowledgeable quotation
within this period fluctuated from min 100.34% (27.01.2011-03.02.2011) to max 101.32%
(31.03.2011 - 13.04.2011).
Bond issue of OJSC “Magnit” of BO-03 series:
In 2010 the Company offered its investors the third Exchange-traded bond issue.
Issue included 1.5 million securities with the nominal value of 1 thousand rubles. Issue
will be outstanding for 3 years. The issue of the exchange-traded bonds of BO-03 series aims to
attract funds to finance operating activity and expansion of “Magnit” group of companies, to
decrease value of credit portfolio as well as to build public credit history.
The offering of the certified interest-bearing non-convertible Exchange-traded bonds
payable to bearer of BO-03 series with the obligatory centralized deposit of OJSC “Magnit” on
the MICEX stock exchange commenced on September 13, 2010. The number of the placed
securities amounted to 1.5 million securities which constitutes 100% of the total number of
securities subject to placement. The bond issue was realized in full in the course of auction in
the fist day of placement.
Parameters of the bond issue of OJSC “Magnit” of BO-03 series:
Date and the number of state registration
Volume of the issue
Number of securities
Nominal value of each security
Offering price
Date of placement
Method of placement
Redemption date
Number of coupons
Trading code
№ 4B02-03-60525-P of February 02, 2010
1,500,000,000 rubles
1,500,000 bonds
1,000 rubles
100% of nominal value
13.09.2010
open subscription
1,092 day from the date of placement
(09.09.2013)
6
RU000A0JR142
51
ISIN code
Interest rate on the basis of the auction results
1 coupon interest rate
2 coupon interest rate
3 coupon interest rate
4 coupon interest rate
5 coupon interest rate
6 coupon interest rate
RU000A0JR142
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
The first coupon yield of BO-03 series Exchange-traded bond issue was paid on March
14, 2011. The total amount of yield paid on the second coupon amounted to 61.71 million rubles,
the amount of yield of the second coupon paid per one bond amounted to 41.14 rubles.
The second coupon yield of BO-03 series Exchange-traded bond issue was paid on
September 12, 2011. The total amount of yield paid on the second coupon amounted to 61.71
million rubles, the amount of yield of the second coupon paid per one bond amounted to 41.14
rubles.
Based on trading for the period from 11.01.2011 to 30.12.2011 the weighted average price
of transactions with Exchange-traded bonds of BO-03 series varied from min 99.00 %
(28.09.2011 and 10.10.2011) to max 102.60% (04.08.2011) of the nominal value. There was no
acknowledgeable quotation within this period.
Bond issue of OJSC “Magnit” of BO-04 series:
In 2010 the Company offered its investors the fourth Exchange-traded bond issue.
Issue included 2 million securities with the nominal value of 1 thousand rubles. Issue
will be outstanding for 3 years. The issue of the exchange-traded bonds of BO-04 series aims to
attract funds to finance operating activity and expansion of “Magnit” group of companies, to
decrease value of credit portfolio as well as to build public credit history.
The offering of the certified interest-bearing non-convertible Exchange-traded bonds
payable to bearer of BO-04 series with the obligatory centralized deposit of OJSC “Magnit” on
the MICEX stock exchange commenced on September 13, 2010. The number of the placed
securities amounted to 2 million securities which constitutes 100% of the total number of
securities subject to placement. The bond issue was realized in full in the course of auction in
the fist day of placement.
Parameters of the bond issue of OJSC “Magnit” of BO-04 series:
Date and the number of state registration
Volume of the issue
Number of securities
Nominal value of each security
Offering price
Date of placement
Method of placement
Redemption date
Number of coupons
Trading code
ISIN code
52
№ 4B02-04-60525-P of February 02, 2010
2,000,000,000 rubles
2,000,000 bonds
1,000 rubles
100% of nominal value
13.09.2010
open subscription
1,092 day from the date of placement
(09.09.2013)
6
RU000A0JR159
RU000A0JR159
Interest rate on the basis of the auction results
1 coupon interest rate
2 coupon interest rate
3 coupon interest rate
4 coupon interest rate
5 coupon interest rate
6 coupon interest rate
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
8.25 %
The first coupon yield of BO-04 series Exchange-traded bond issue was paid on March
14, 2011. The total amount of yield paid on the second coupon amounted to 82.28 million rubles,
the amount of yield of the second coupon paid per one bond amounted to 41.14 rubles.
The second coupon yield of BO-04 series Exchange-traded bond issue was paid on
September 12, 2011. The total amount of yield paid on the second coupon amounted to 82.28
million rubles, the amount of yield of the second coupon paid per one bond amounted to 41.14
rubles.
Based on trading for the period from 11.01.2011 to 30.12.2011 the weighted average price
of transactions with Exchange-traded bonds of BO-04 series varied from min 97.00 % (30.12.11)
to max 102.48 % (03.08.11) of the nominal value. Acknowledgeable quotation within this period
fluctuated from min 99.68% (29.12.11 and 30.12.11) to max 102.26% (15.06.2011).
Bond issue of OJSC “Magnit” of BO-05 series:
In 2011 the Company offered its investors the fifth Exchange-traded bond issue.
Issue included 5 million securities with the nominal value of 1 thousand rubles. Issue
will be outstanding for 3 years. The issue of the exchange-traded bonds of BO-05 series aims to
attract funds to finance operating activity and expansion of “Magnit” group of companies, to
decrease value of credit portfolio as well as to build public credit history.
The offering of the certified interest-bearing non-convertible Exchange-traded bonds
payable to bearer of BO-05 series with the obligatory centralized deposit of OJSC “Magnit” on
the MICEX stock exchange commenced on March 4, 2011. The number of the placed securities
amounted to 5 million securities which constitutes 100% of the total number of securities subject
to placement. The bond issue was realized in full in the course of auction in the fist day of
placement.
Parameters of the bond issue of OJSC “Magnit” of BO-05 series:
Date and the number of state registration
Volume of the issue
Number of securities
Nominal value of each security
Offering price
Date of placement
Method of placement
Redemption date
Number of coupons
Trading code
ISIN code
№ 4B02-05-60525-P of February 16, 2011
5,000,000,000 rubles
5,000,000 bonds
1,000 rubles
100% of nominal value
04.03.2011
open subscription
1,092 day from the date of placement
(28.02.2014)
6
RU000A0JR9N3
RU000A0JR9N3
53
Interest rate on the basis of the auction results
1 coupon interest rate
2 coupon interest rate
3 coupon interest rate
4 coupon interest rate
5 coupon interest rate
6 coupon interest rate
8.00 %
8.00 %
8.00 %
8.00 %
8.00 %
8.00 %
8.00 %
The first coupon yield of BO-05 series Exchange-traded bond issue was paid on
September 2, 2011. The total amount of yield paid on the second coupon amounted to 199.45
million rubles, the amount of yield of the second coupon paid per one bond amounted to 39.89
rubles.
Based on trading for the period from 11.01.2011 to 30.12.2011 the weighted average price
of transactions with Exchange-traded bonds of BO-05 series varied from min 94.38 % (30.12.11)
to max 110.00 % (30.11.11) of the nominal value. Acknowledgeable quotation within this period
fluctuated from min 98.48% (02.12.11) to max 101.7% (08.06.2011).
Bond issue of OJSC “Magnit” of BO-06 series:
In 2011 the Company offered its investors the fourth Exchange-traded bond issue.
Issue included 5 million securities with the nominal value of 1 thousand rubles. Issue
will be outstanding for 3 years. The issue of the exchange-traded bonds of BO-06 series aims to
attract funds to finance operating activity and expansion of “Magnit” group of companies, to
decrease value of credit portfolio as well as to build public credit history.
The offering of the certified interest-bearing non-convertible Exchange-traded bonds
payable to bearer of BO-06 series with the obligatory centralized deposit of OJSC “Magnit” on
the MICEX stock exchange commenced on April 26, 2011. The number of the placed securities
amounted to 5 million securities which constitutes 100% of the total number of securities subject
to placement. The bond issue was realized in full in the course of auction in the fist day of
placement.
Parameters of the bond issue of OJSC “Magnit” of BO-06 series:
Date and the number of state registration
Volume of the issue
Number of securities
Nominal value of each security
Offering price
Date of placement
Method of placement
Redemption date
Number of coupons
Trading code
ISIN code
Interest rate on the basis of the auction results
1 coupon interest rate
2 coupon interest rate
№ 4B02-06-60525-P of February 16, 2011
5,000,000,000 rubles
5,000,000 bonds
1,000 rubles
100% of nominal value
26.04.2011
open subscription
1,092 day from the date of placement
(22.04.2014)
6
RU000A0JRFQ4
RU000A0JRFQ4
7.75 %
7.75 %
7.75 %
54
3 coupon interest rate
4 coupon interest rate
5 coupon interest rate
6 coupon interest rate
7.75 %
7.75 %
7.75 %
7.75 %
The first coupon yield of BO-06 series Exchange-traded bond issue was paid on October
25, 2011. The total amount of yield paid on the second coupon amounted to 193.2 million rubles,
the amount of yield of the second coupon paid per one bond amounted to 38.64 rubles.
Based on trading for the period from 11.01.2011 to 30.12.2011 the weighted average price
of transactions with Exchange-traded bonds of BO-06 series varied from min 94.98 % (25.10.11)
to max 102.90 % (19.09.11) of the nominal value. Acknowledgeable quotation within this period
fluctuated from min 94.98% (25.10.11) to max 100.75% (21.07.2011).
SSHHAARREESS TTRRAADDIINNGG
The shares of OJSC “Magnit” entered the Russian stock market in April 2006.
On April 14, 2006 the shares of OJSC “Magnit” were admitted to trading in the section of
the List “Listed securities but not included into the quotation lists” of non-profit partnership
““Russian Trading System” Stock Exchange”.
On April 24, 2006 trading of OJSC “Magnit” shares in the List of non-listed securities of
Close joint-stock company “MICEX Stock Exchange” commenced.
On April 28, 2006 the IPO of OJSC “Magnit” on the Russian Trading System (RTS) and
the Moscow Interbank Currency Exchange (MICEX) was completed.
The price of one share of OJSC “Magnit” in the course of offering on RTS and MICEX
was determined on the level of 27 USD. Proceeds from the stock comprising 18.94% of the
charter capital amounted to 368,355 million USD. Deutsche UFG functioned as an IPO
coordinator; foreign investors could participate by purchasing the securities of “Magnit”
according to the rule “S”.
Since December 11, 2007 the shares of OJSC “Magnit” have been included into the
Quotation list “B” of OJSC “Russian Trading System” Stock Exchange”. OJSC “Magnit” shares
have been admitted to trading in the corresponding list on December 13, 2007.
On December 21, 2007 OJSC “Magnit” shares were included in the quotation list “B” of
CJSC “MICEX SE” and admitted to trading in the corresponding list.
On February 13, 2008 OJSC “Magnit” announced its intention to list global depositary
receipts (“GDRs”) representing its ordinary shares on the London Stock Exchange in connection
with an offering by the Company of 11,300,000 newly issued ordinary shares in the form of
GDRs and shares (including as part of the exercise of statutory pre-emptive rights by the
existing shareholders of the Company and by a Company’s shareholder of ordinary shares in
the form of shares and GDRs.
The offer price was set at 42.50 USD per share. The offer price in ruble terms was et
based on the rate of 23.4450 rubles per dollar.
A total of 9,719,638 shares including the shares in the form of GDRs were allocated to
international institutional investors. In connection with the offering the selling shareholders has
granted the joint bookrunners an over-allotment option to purchase up to an additional 506,585
shares in the form of GDRs at the offer price per GDR which was exercised in full.
55
Conditional dealings in the GDRs commenced on the London Stock Exchange on April
16, 2008 (5 GDRs representing an interest in one share). Admission of the GDRs to the Official
List of the UK Listing Authority occurred on April 22, 2008.
Free float of OJSC “Magnit” as of 30.06.2008 amounted to 35.48%. Proceeds from the
offering amounted to approximately 480.25 million USD and were used to finance further
expansion of the Company’s chain of hypermarkets as well as to continue the expansion of its
convenience store operations and further development of its logistics capabilities.
In 2009 ordinary shares of the Company were included (transferred) into the Quotation
list “A” of the second level at the Moscow Interbank Currency Exchange and “Russian Trading
System” Stock Exchange”.
On September 2, 2009 OJSC “Magnit” announced its intention to offer additional shares
at 65 USD per ordinary share and 13 USD per GDR.
A total of 5,680,000 newly issued ordinary shares in the form of GDRs have been
allocated to international institutional investors, resulting in a total free float of 46.51% of the
Company’s issued share capital as of December 31, 2009.
Gross proceeds to the Company from the follow-on offering amounted to approximately
369.2 USD and used to finance further expansion of its chain of hypermarkets as well as to
continue the expansion of its convenience stores operations and further development of its
logistic capabilities.
Since November 14, 2010 shares of OJSC “Magnit” have been included (transferred) into
the Quotation list “A” of the first level at the “Russian Trading System” Stock Exchange”.
According to trading held from 01.01.2010 to 31.12.2010 on MICEX Stock Exchange
weighted average price of the shares trading fluctuated from min 1,918.71 rubles (27.02.2010) to
max 4,125.29 rubles (13.12.2010).
According to the Instruction of CJSC “MICEX Stock Exchange ” № 1387-p of 29.12.2010
OJSC “Magnit” shares are included in (transferred to) the quotation list “A” of the first level of
CJSC “MICEX Stock Exchange”.
On November 30, 2011 OJSC “Magnit” announced its intention to offer newly issued
ordinary shares via an accelerated bookbuild placing to Russian and international institutional
investors.
In connection with the placement the Company has registered with the Russian Federal
Financial Market Service 10,813,516 new shares to be placed through an open subscription.
The offer price in the Placement has been set at US$ 85 per new share. Payments for
shares in rubles were made at an exchange rate of US$1 = RUB 30.8486.
The Company placed 5,586,282 ordinary shares out of which 4,117,648 shares were
allocated to investors resulting in a free float of 53.83% of the Company’s issued share capital as
of December 31, 2011.
Gross proceeds to the Company from the placement of additional shares amounted to
approximately US$ 475 mn and used to finance its capital expenditure program aimed at
further expansion of its chain of hypermarkets as well as the expansion of its convenience store
operations and the further development of its logistics capabilities.
On December 19, 2011 ordinary shares of OJSC “Magnit” were excluded from the
Quotation list “A” of the first level of OJSC “RTS Stock Exchange” as a result of its
reorganization through merger with CJSC MICEX.
56
According to trading held from 01.01.2011 to 31.12.2011 on MICEX Stock Exchange the
average weighted price of shares transactions varied from min 2,648.8 rubles (13.10.2011) to
max 4,346.96 (13.01.2011).
Market capitalization of OJSC “Magnit” as of 30.12.2011 amounted to 261,649.67 million
rubles according to OJSC “MICEX SE”.
57
1144.. TTRRAANNSSAACCTTIIOONNSS,, CCOONNSSIIDDEERREEDD MMAAJJOORR TTRRAANNSSAACCTTIIOONNSS
JJOOIINNTT--SSTTOOCCKK
AACCCCOORRDDIINNGG TTOO TTHHEE FFEEDDEERRAALL LLAAWW ““OONN
CCOOMMPPAANNIIEESS””,, MMAADDEE WWIITTHHIINN TTHHEE YYEEAARR 22001111
1.
Date of transaction (date of the contract)
Type, subject, essentials of
including civil rights and obligations
determined, changed or
transaction
the
transaction,
to be
the
terminated by
parties and beneficiaries under transaction
term of obligations fulfillment under transaction
amount of transaction in money terms and per cent
of the balance sheet assets of the issuer
–
and
Agreement
(together –
30.11.2011
Placement Agreement
related
Instruction Letter governed by the laws of
the «Placement
England
transactions,
Agreement»), and other
the
contracts and documents under
(together with
Placement Agreement
Placement
the
“Transaction”).
(a) Morgan Stanley & Co. International
plc, VTB Capital plc and/or their affiliates
and other parties that may be indicated in
the Placement Agreement as placement
agents (hereinafter together referred to as
“Placement Agents”), (b) the Company
and (c) other parties, subject to regulation
of the Indemnity under the Placement
Agreement.
Until the fulfillment of the obligations
under the transaction by the parties.
The price (amount of obligations) shall
consist of the Company’s obligations
under the Placement Agreement, including
the Company’s obligations according to
articles 7, 8, 12.3.5 and 12.3.6 of the
Placement Agreement. The Price () of the
property that may be directly or indirectly
disposed by the Company (amount of the
Company’s obligations) may amount to 25
(twenty five) or more per cent of the
Company’s
assets
determined according to the accounting
report for the latest reporting period, but
shall not exceed 50 (fifty) per cent of the
Company’s
assets
determined according to the accounting
report for the latest reporting period.
balance
balance
sheet
sheet
issuer’s assets value as of the date of termination of
accounting period (quarter, year), preceding the
date of transaction (date of the contract) and for
which the account is made according to the
legislation of Russian Federation
information on the approval of transaction is such The transaction was approved.
The balance sheet assets value of the
Company as of September 30, 2011
amounts to 42,548,057 thousand rubles.
58
transaction is acknowledged as a major or a
related-party transaction
type of transaction (major transaction; related-
party transaction; major related-party transaction )
issuer’s authority which made a decision on
approval of transaction
date of decision on approval of transaction
date and number of the minutes of meeting of
issuer’s authority when the decision on approval of
the transaction was made
Major transaction
Board of directors of OJSC “Magnit”
30.11.2011
Minutes № w/n of 30.11.2011
59
1155.. LLIISSTT 00FF 22001111 TTRRAANNSSAACCTTIIOONNSS DDEECCLLAARREEDD AASS RREELLAATTEEDD--
PPAARRTTYY IINN AACCCCOORRDDAANNCCEE WWIITTHH TTHHEE FFEEDDEERRAALL LLAAWW OONN ““JJOOIINNTT--
SSTTOOCCKK CCOOMMPPAANNIIEESS””
1
Date of transaction
Subject and essentials of transaction
Parties of transaction
06.04.2011
Provision of the Company’s guarantee to the
Agreement on Crediting in Russian rubles
№00GA3L of 08.11.2010.
The Lender: Open
«ALFA-BANK;
The Guarantor: OJSC "Magnit"
The Borrower: JSC "Tander"
Joint-Stock Company
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock Company “Tander” (JSC "Tander")
Reason for which such entity is considered
related-party for transaction
is OJSC "Magnit”
Magnit Finance LLC
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a beneficiary
under the transaction.
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
the date of
accounting period preceding
transaction, %
15.20
5,086,506.85
is duly performing
Loan maturity date is 15.11.2013; the guarantee
shall mature within one year after the loan
repayment date.
JSC
it’s
“Tander”
obligations before the Lender. There was no
situation when the demand on fulfillment of
JSC "Tander's outstanding obligations could
have been raised before the Guarantor.
the
transaction was approved by
The
extraordinary general shareholders’ meeting on
January 20, 2011, minutes № w/n of January 20,
2011.
Term
for
transaction
fulfillment of obligations under
Information
obligations
on
fulfillment
of mentioned
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
60
2
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
Company
14.06.2011
Provision of the interest-bearing loan by the
Company.
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC
is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
“Tander”
(JSC
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
obligations
fulfillment of obligations under
of mentioned
fulfillment
on
5,000,000
12.88
13.06.2014
The Lender´s obligations are fulfilled on time
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
The
the
transaction was approved by
extraordinary general shareholders’ meeting
on May 19, 2011, minutes № w/n of May 19,
2011.
Other information on transaction indicated at the
issuer’s discretion
none
3
Date of transaction
Subject and essentials of transaction
Parties of transaction
06.07.2011
Provision of the Company’s guarantee to the
Credit Agreement №КС-714000/2011/00051 of
25.04.2011
The Lender – VTB Bank (open joint-stock
company)
The Guarantor – Open Joint-Stock company
"Magnit"
The Beneficiary - JSC "Tander" (the Borrower)
61
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
is OJSC "Magnit”
Magnit Finance LLC
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a beneficiary
under the transaction.
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
the date of
accounting period preceding
transaction, %
5.26%
2,039,506.85
Term
for
transaction
fulfillment of obligations under
Information
obligations
on
fulfillment
of mentioned
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
is 23.04.2014,
is duly performing
Loan maturity date
the
guarantee is provided for the term of 2,191
(two thousand one hundred ninety nine) days
from the contract execution date.
JSC “Tander”
it’s
obligations before the Lender. There was no
situation when the demand on fulfillment of
JSC "Tander”'s outstanding obligations could
have been raised before the Guarantor.
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
4
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
62
12.07.2011
Provision of the interest-bearing loan by the
Company.
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
is OJSC "Magnit”
Magnit Finance LLC
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
Company
“Tander”
(JSC
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
100,000
0.23
05.07.2014
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
for
Term
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lender’s obligations are fulfilled on time
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
5
Date of transaction
Subject and essentials of transaction
let Oktiabria, Krasniy
01.09.2011
Provision of the built-in store, located at 30,
of
50
Krasnosulinskiy
territory,
Russia, for payment into the temporary
possession and use to the Lessee by the Lessor.
region, Rostov
Sulin
Parties of transaction
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
(JSC
“Tander”
Company
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
is OJSC "Magnit”
Magnit Finance LLC
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
the date of
accounting period preceding
24,000
0.02
63
31.08.2021
on
fulfillment
fulfillment of obligations under
transaction, %
for
Term
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
none
The Lessor’s obligations are fulfilled
The transaction was approved by the Board of
directors on August 30, 2011, minutes №w/n of
August 30, 2011.
6
Date of transaction
Subject and essentials of transaction
Parties of transaction
01.09.2011
Provision of the non-living premises, located
at 5, Obukhova street, Zverevo, Rostov
territory, Russia,
into the
temporary possession and use to the Lessee by
the Lessor.
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
for payment
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
(JSC
“Tander”
Company
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
is OJSC "Magnit”
Magnit Finance LLC
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
31,200
0.07
31.08.2021
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
the date of
accounting period preceding
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lessor’s obligations are fulfilled
The transaction was approved by the Board of
directors on August 30, 2011, minutes №w/n of
August 30, 2011.
64
7
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
01.09.2011
Provision of the non-living built-in premises
№ 7 and 9, located at38, Kosmonavtov street,
Lipetsk, Lipetsk territory, Russia, for payment
into the temporary possession and use to the
Lessee by the Lessor.
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC
is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
Company
“Tander”
(JSC
28,200
0.02
31.08.2021
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
for
Term
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lessor’s obligations are fulfilled
The transaction was approved by the Board of
directors on August 30, 2011, minutes №w/n of
August 30, 2011.
8
Date of transaction
Subject and essentials of transaction
Parties of transaction
02.09.2011
Provision of the non-living built-in premises
№ 1 located at 6 Lenina avenue, Liski,
Voronezh territory, Russia, for payment into
the temporary possession and use to the
Lessee by the Lessor.
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
65
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
(JSC
“Tander”
Company
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
is OJSC "Magnit”
Magnit Finance LLC
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
49,200
0.11
Term
for
transaction
fulfillment of obligations under
01.09.2021
on
fulfillment
of mentioned
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
The Lessor’s obligations are fulfilled
The transaction was approved by the Board of
directors on August 30, 2011, minutes №w/n of
August 30, 2011.
9
Date of transaction
Subject and essentials of transaction
Parties of transaction
02.09.2011
Provision of the non-living built-in premises
located at 124 Dachniy avenue, Voronezh,
Voronezh territory, Russia, for payment into
the temporary possession and use to the
Lessee by the Lessor.
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
66
“Tander”
Company
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
(JSC
jointly with its affiliates owning more than
20 per cent of voting shares of the Company
that is a party in the transaction, and a party
under the transaction.
15,600
0.04
01.09.2021
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
the date of
accounting period preceding
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lessor’s obligations are fulfilled
The transaction was approved by the Board of
directors on August 30, 2011, minutes №w/n of
August 30, 2011.
10
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
Company
the property –
05.09.2011
Sale and purchase of
transformer substation
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC
is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
“Tander”
(JSC
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
fulfillment of obligations under
fulfillment
on
8,066.48
0.02
13.09.2011
of mentioned The obligations are fulfilled
67
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
The transaction was approved by the Board of
directors on August 30, 2011, minutes №w/n of
August 30, 2011.
11
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
Company
13.09.2011
Provision of the interest-bearing loan by the
Company.
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
is OJSC "Magnit”
Magnit Finance LLC
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
“Tander”
(JSC
378,000
0.87
06.09.2016
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lender’s obligations are fulfilled
The transaction was approved by the Board of
directors on August 30, 2011, minutes №w/n of
August 30, 2011.
12
Date of transaction
Subject and essentials of transaction
Parties of transaction
68
12.10.2011
Sale and purchase of share in the charter
capital of “Alkotrading” LLC
The Seller: JSC “Tander”
The Buyer: OJSC “Magnit»”
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
is OJSC "Magnit”
Magnit Finance LLC
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
9,900
0.02
12.10.2011
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
the date of
accounting period preceding
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Seller’s and the Buyer’s obligations were
fulfilled on time
The transaction was approved by the Board of
directors on October 6, 2011, minutes №w/n of
October 6, 2011.
13
Date of transaction
Subject and essentials of transaction
Parties of transaction
store
of
located
09.11.2011
the
Provision
Supermarket
II
Neighbourhood, Uvarovo, Tambov territory,
for payment into the temporary possession
and use to the Lessee by the Lessor.
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
at
Full and short firm name (names) of the legal entity
or surname, name, patronymic name of a person
that is considered related-party for the transaction
Reason for which such entity is considered related-
party for transaction
(JSC
“Tander”
Company
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than
69
20 per cent of voting shares of the Company
that is a party in the transaction, and a party
under the transaction.
128,947.2
0.3
10.10.2021
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
The Lender’s obligations are fulfilled
The transaction was approved by the Board
of directors on October 6, 2011, minutes
№w/n of October 6, 2011.
none
14
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
“Tander”
Company
09.11.2011
Contribution to the Assets of “AgroTorg”
Shareholder: OJSC «Magnit»
Beneficiary Company: to “AgroTorg” LLC
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC
is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a party
under the transaction.
(JSC
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
the date of
accounting period preceding
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on c
fulfillment of obligations under
of mentioned
fulfillment
on
133,824
0.31
16.11.2011
The Shareholder’s obligations are fulfilled
70
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
15
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
15.11.2011
Provision of the Company’s guarantee to the
Credit Agreement №КС-714000/2011/00117 of
12.09.2011
The Lender – VTB Bank (open joitn-stock
company)
The Guarantor – Open Joint-Stock company
"Magnit"
The Beneficiary - JSC "Tander" (the Borrower)
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC
is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a beneficiary
under the transaction.
Company
“Tander”
(JSC
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
3.20
1,359,671. 23
Term
for
transaction
fulfillment of obligations under
Information
obligations
on
fulfillment
of mentioned
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
is 23.04.2014,
is duly performing
the
Loan maturity date
guarantee is provided for the term of 2,191
(two thousand one hundred ninety nine) days
from the contract execution date.
JSC “Tander”
it’s
obligations before the Lender. There was no
situation when the demand on fulfillment of
JSC "Tander”'s outstanding obligations could
have been raised before the Guarantor.
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
71
16
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
21.11.2011
Provision of the guarantee under which the
Guarantor shall be responsible before the
Lender for the fulfillment of the obligations
assumed by the Borrower under the Credit
Contract № 8619/452/20162 of 21.11.2011
The Lender – Sberbank of Russia (open joint-
stock company)
The Guarantor – Open Joint-Stock company
"Magnit"
The Beneficiary (the Borrower) - JSC "Tander"
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC
is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction, and a beneficiary
under the transaction.
Company
“Tander”
(JSC
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
fulfillment of obligations under
1,250,000
2.94
19.11.2017
Information
obligations
on
fulfillment
of mentioned
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
is duly performing
it’s
JSC “Tander”
obligations before the Lender. There was no
situation when the demand on fulfillment of
JSC "Tander”'s outstanding obligations could
have been raised before the Guarantor.
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
17
Date of transaction
Subject and essentials of transaction
72
25.11.2011
Provision by the Company of the interest-
Parties of transaction
bearing loan
The Lender: OJSC "Magnit"
The Borrower: LLC "Selta"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction.
76,000
0.18
23.11.2012
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
for
Term
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lender’s obligations are fulfilled
The transaction was approved by the Board of
directors on July 13,2011, minutes of July 13,
2011
18
Date of transaction
Subject and essentials of transaction
Parties of transaction
29.11.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: LLC "Selta"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction.
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
624,000
1.47
fulfillment of obligations under 27.11.2012
73
on
fulfillment
of mentioned
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
The Lender’s obligations are fulfilled
The transaction was approved by the Board of
directors on July 13,2011, minutes of July 13,
2011
19
Date of transaction
Subject and essentials of transaction
Parties of transaction
Full and short firm name (names) of the legal entity
or surname, name, patronymic name of a person
that is considered related-party for the transaction
Reason for which such entity is considered related-
party for transaction
06.12.2011
Provision of the non-living building located
at34 Karla Marksa street, Prokhladniy, the
Kabardino-Balkarian Republic, for payment
into the temporary possession and use to the
Lessee by the Lessor.
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than
20 per cent of voting shares of the Company
that is a party in the transaction, and a party
under the transaction.
Company
“Tander”
(JSC
19,920
0.05
06.10.2021
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
The Lender’s obligations are fulfilled
The transaction was approved by the Board
of directors on October 6, 2011, minutes
№w/n of October 6, 2011.
none
20
74
Date of transaction
Subject and essentials of transaction
Parties of transaction
07.12.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction and a party under
the transaction.
1,946,830
4.58
06.12.2014
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lender’s obligations are fulfilled
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
21
Date of transaction
Subject and essentials of transaction
Parties of transaction
08.12.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction and a party under
the transaction..
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance 4.66
1,981,620.4
75
fulfillment of obligations under
sheet assets as of the termination date of the last
the date of
accounting period preceding
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
07.12.2014
The Lender’s obligations are fulfilled
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
22
Date of transaction
Subject and essentials of transaction
Parties of transaction
12.12.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction.
2,000,000
4.7
10.12.2014
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
the date of
accounting period preceding
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lender’s obligations are fulfilled
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
23
Date of transaction
Subject and essentials of transaction
76
13.12.2011
Provision by the Company of the interest-
bearing loan
Parties of transaction
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction and a party under
the transaction.
2,000,000
4.7
01.12.2014
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lender’s obligations are fulfilled
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
24
Date of transaction
Subject and essentials of transaction
Parties of transaction
13.12.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction and a party under
the transaction.
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
4.7
2,000,000
77
03.12.2014
on
fulfillment
of mentioned
fulfillment of obligations under
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
The Lender’s obligations are fulfilled
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
25
Date of transaction
Subject and essentials of transaction
Parties of transaction
13.12.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction and a party under
the transaction.
2,000,000
4.7
05.12.2014
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
for
Term
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lender’s obligations are fulfilled
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
26
Date of transaction
Subject and essentials of transaction
Parties of transaction
13.12.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal Joint-Stock
Company
“Tander”
(JSC
78
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
"Tander")
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction and a party under
the transaction.
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
for
Term
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
2,000,000
4.7
08.12.14
none
The Lender’s obligations are fulfilled
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
27
Date of transaction
Subject and essentials of transaction
Parties of transaction
13.12.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction.
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
for
Term
transaction
Information
obligations
fulfillment of obligations under
of mentioned
fulfillment
on
2,108,700
4.90
10.12.2016
The Lender’s obligations are fulfilled
79
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
none
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
28
Date of transaction
Subject and essentials of transaction
Parties of transaction
13.12.2011
Provision by the Company of the interest-
bearing loan
The Lender: OJSC "Magnit"
The Borrower: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Joint-Stock
"Tander")
Company
“Tander”
(JSC
Reason for which such entity is considered related-
party for transaction
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than 20
per cent of voting shares of the Company that
is a party in the transaction and a party in the
transaction.
1,071,549.6
2.52
11.11.2014
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
none
The Lender’s obligations are fulfilled
The transaction was approved by the annual
general shareholders’ meeting on June 23, 2011,
minutes № w/n of June 23, 2011.
29
Date of transaction
Subject and essentials of transaction
Parties of transaction
of
street,
14.12.2011
Provision
the
non-living premises of a store located at10
village,
Pochtovaya
Moscow territory, for payment into the
temporary possession and use to the Lessee by
the Lessor.
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
Lotoshino
Full and short firm name (names) of the legal Magnit Finance Limited Liability Company
80
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
(JSC
“Tander”
Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than
20 per cent of voting shares of the Company
that is a party in the transaction, and a party
under the transaction.
76,800
0.18
01.11.2021
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
for
Term
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
The Lender’s obligations are fulfilled
The transaction was approved by the Board of
directors on October 6, 2011, minutes №w/n of
October 6, 2011.
none
30
Date of transaction
Subject and essentials of transaction
Parties of transaction
of
20.12.2011
Provision
the
non-living premises located at199 Gorkogo
street, Kanevskaya
stanitsa, Krasnodar
territory, for payment into the temporary
possession and use to the Lessee by the Lessor.
The Lessor: OJSC "Magnit"
The Lessee: JSC "Tander"
Full and short firm name (names) of the legal
entity or surname, name, patronymic name of a
person that is considered related-party for the
transaction
Reason for which such entity is considered related-
party for transaction
(JSC
“Tander”
Company
Magnit Finance Limited Liability Company
(Magnit Finance LLC);
Joint-Stock
"Tander")
Magnit Finance LLC is OJSC "Magnit”
shareholder jointly with its affiliates owning
more than 20 per cent of voting shares of the
Company that is a party in the transaction.
JSC "Tander" is OJSC "Magnit” shareholder
jointly with its affiliates owning more than
20 per cent of voting shares of the Company
81
that is a party in the transaction, and a party
under the transaction.
46,800
0.11
07.11.2021
fulfillment of obligations under
Transaction amount in money terms, thousand
rubles.
Transaction amount in per cent of issuer’s balance
sheet assets as of the termination date of the last
accounting period preceding
the date of
transaction, %
Term
for
transaction
Information
obligations
Issuer’s authority which made a decision on
approval of transaction, date of decision (date and
number of minutes of proceedings)
Other information on transaction indicated at the
issuer’s discretion
of mentioned
fulfillment
on
The Lender’s obligations are fulfilled
The transaction was approved by the Board of
directors on October 6, 2011, minutes №w/n of
October 6, 2011.
none
82
1166.. MMAAIINN RRIISSKK FFAACCTTOORRSS RREELLAATTEEDD TTOO TTHHEE ССOOMMPPAANNYY
OOPPEERRAATTIIOONN
Since OJSC “Magnit” and its subsidiaries operate within one group of companies of
OJSC “Magnit” (hereafter - “the Group”, retail chain “Magnit” or “the Company”), the risks are
mainly described for the entire Group in general.
The description of risks provided herein is not complete or limiting, but renders the
Company’s own viewpoint and assessment. Along with the risks specified, other risks not
included in the report may affect the investments into OJSC “Magnit” shares. Other risks,
including those the Company is not aware of or which seem insignificant at the present time,
may lead to reduction of earnings, increase of expenses or other events and (or) consequences,
due to which the price of Company’s securities may decline.
In case one or several risks hereof arise, OJSC “Magnit” will take all the possible
measures and apply the best efforts to minimize the effect from negative changes.
Today it is impossible to define particular actions of the Company in any risk
conditions, as the elaboration of the adequate measures is impeded by the
indeterminate character of the situation in future. The character of measures to be taken
will depend on the situation conditions in each specific case. OJSC “Magnit” cannot
guarantee that the measures taken to overcome negative changes will considerably affect the
situation, as the majority of the described risks are beyond the Company’s control.
Risk Management Policy of the Company.
Generally the Company and the Group apply system approach of risk management. The
key constituent elements of the risk management policy in each focus area are:
Risk identification
Risk assessment methodology
Elaboration and implementation of comprehensive risk management framework
Ongoing monitoring of risk status
Risk management is applied to the entire Group.
As for the industry risks, the market environment is estimated in the medium-term and
long-term perspective based on the macroeconomic forecasts of MEDT and sell-side analysts.
The estimation of the prospective demand is based on the forecasts on the population income
sector and consumption level. The industry trends in respect of diverse trade formats,
breakdown of demand by formats and competitive environment are also estimated.
The development strategy aimed at the consolidation of competitive positions and the
increase of market share of the Company is elaborated on the basis of the conducted analysis.
In terms of country and regional risks, the Company monitor political and economic
situation, as well as estimate the risk level of natural disasters, possible cease of transport
communication in the regions where “Magnit” stores are located. Territorial diversification of
the group operation of “Magnit” companies contributes to risk reduction.
As for financial risks, the level of interest rate, currency exchange, credit and liquidity
risks are estimated.
Interest risk management is carried out through seeking the most optimal ways of
financing and through coordination of fundraising terms with the terms of implementation of
the projects under financing. To provide for the optimization of the received funds the Group
83
works out its credit history, expands the data base of potential creditors and diversifies
instruments for their attraction.
The reduction of funding costs is achieved through the policy of information
transparency improvement. One of the tools of interest risk management is forecasting the
interest rate changes, and assessment of the appropriate leverage level of the Company with an
allowance for such overall interest rate changes.
Regarding the currency risks, the Company estimates the analysts’ forecasts on the
possible fluctuations of the exchange rate and takes decisions on the acceptable level of the
currency exposure and direction. Since “Magnit” receives all earnings in Russian rubles and do
not possess assets denominated in foreign currency, the Company does not take liabilities in
foreign currency in order to minimize currency risks.
In terms of liquidity risks, the Company and the Group in general maintain balanced
terms’ ratio of assets and liabilities.
Regarding credit risks, the Company applies analysis of financial position of
counteragents and the limits’ system.
Legal risks management is based on the strict observance of the actual Russian
legislation. Legal department monitors all changes in legislation, which refer to the company’s
activity, and conducts legal inspection of all the contracts and agreements.
IINNDDUUSSTTRRYY RRIISSKKSS
Risks related to customer demand and competition
Negative changes of macroeconomic conditions and the decrease of customer demand
in Russia may adversely affect sales and income of the Group
The Group operates in the retail sector of food products and goods of primary necessity.
The development of the retail sector, where the Group operates, in many aspects
depends on macroeconomic factors because the demand for the consumer goods is determined
by the population disposable income.
In case of economic instability the reduction of the actual disposable income of
population may lead to deterioration of the growth dynamics and sector profitability. It should
be noted that the state of Russian economy is mainly determined by the price for oil and other
energy and mineral resources on the world market. Price decline for mineral resources will
negatively affect the economy of Russian Federation on the whole due to the dominant share of
raw materials in GDP. Deterioration of the economic situation will also result in the reduction
of the purchasing power in the country.
Consumer demand on the markets where the Group operates depends on a number of
factors which are beyond Group’s control, including demographic factors, consumer
preferences and their spending capacity. The reduction of the consumer demand or fluctuations
of consumer preferences may dramatically reduce sales and income of the Group and
substantially affect business activity, financial state and results of the Group and the Company.
Moreover, the seasonality of the consumer demand may lead to considerable fluctuations of the
Group operation results in different periods of time.
High level of competition may lead to decline of the Group’s market share and its
revenue.
As of December 31, 2011 the Group operates in 7 federal districts and in more
than 1,389 locations of the Russian Federation with the highest concentration in the
84
Southern, North-Caucasian, Central and Volga regions. Magnit stores also operate in
the Central, Urals and Siberian regions. Russian retail market of the Southern Federal
district is quite competitive and is represented by the majority of big Russian players and
a number of foreign peers.
Russian retail sector is characterized by a high level of competition. The Group competes
with a big number of Russian and international players. In recent years the consumer demand
growth in Russia has attracted new participants and led to the intensification of competition.
Retail chains compete with each other mainly for store locations, product quality, service and
price, assortment range and store conditions. Entrance of additional players to the Russian
market may intensify competition even more and reduce the operating efficiency of the Group.
Main competitors to the Group in “convenience” format are “Pyaterochka”, “Dixy” and
“Kopeika”, while in “hypermarket” format these are “Auchan”, “Perekrestok”,
“Karusel”, “Lenta”, “O’key”. The Group also competes with regional and local retail
chains, individual groceries and open markets.
Some of the Group’s competitors which are present on the market today, and also those
planning to enter the Russian market, are big international companies and apparently have
more opportunities to attract resources than the Group. Moreover, many other international
players including those surpassing the Group in financial and other opportunities will enter the
Russian market in the nearest years through acquisition of local players or establishing their
own chains from the ground up.
If the above process is intensive, the competition level may substantially increase, and
thus negatively affect the market share of the Group and its competitive position. The ability of
“Magnit” retail chain to retain its competitive position depends on its opportunities to maintain
and adjust the existing stores and launch the new stores in favorable locations, as well as to
offer competitive prices and services. There is no guarantee that the Group will be able to
successfully compete with the existing competitors and the new ones in the future.
On the current stage of competitive activity the considerable risks for the Group are also
connected with more aggressive approach applied by the main competitors to the Group, such
as winning the additional target markets through the expansion based on franchising schemes.
Such approach enables the competitors to expand their presence in many regions of Russia as
well as to considerably reduce costs of the new stores opening. The Group does not apply
franchising schemes which may lead to serious reduction of flexibility in geographical coverage,
and as a result to the loss of a considerable market share.
These factors together with the economic environment and strategy of the discount
pricing may lead to further competition intensification and negatively affect business, financial
position and operational results of the Group and the Company.
Risks related to the intensive growth.
Failure of the Group’s strategy of intensive expansion may hamper its further growth.
As of December 31, 2011 the stores operating under “Magnit” trade mark are located in
the Southern Federal district (1,298), Central Federal district (1,270), Volga Federal district
(1,662), North-Caucasian Federal district (302), North-Western Federal district (348), Urals
Federal district (372) and Siberian Federal district (57).
Following its strategy the Group plans to considerably increase the number of its stores
in the above regions maintaining the same development rates as well as to further expand its
chain in a number of subjects of Russian Federation. The development strategy of the Group
makes it dependent on the economic conditions and some other factors.
85
The successful roll-out of the Group’s development strategy depends on its ability to
identify and acquire the suitable premises or land plots for store construction on commercially
reasonable terms, to open new stores in due time in compliance with the Group standards, to
employ, train and keep extra store and management personnel and to integrate new stores into
the Group’s existing operation on a profitable basis. It is impossible to guarantee that the Group
will achieve the target growth and that the new stores will profit. Among other factors, the
development strategy plans also depend on the general economic situation, availability of
financing and no negative changes in legislation. There is no guarantee that operational,
administrative, financial and human resources will be sufficient for successful implementation
of the Group’s development strategy. Moreover, there is no guarantee that the expansion plans,
if carried out, will have no negative impact on the quality of service and sales profitability.
Expansion of the Group through acquisition of other companies or their assets may be
fraught with different risks which may have serious negative impact on the economic
activity of the Group and its financial position.
The Group does not rule out the possibility to expand its operation through acquisitions.
Acquisition opportunities presuppose certain risks, including failure to identify the objectives
for acquisition, and/or to carry out adequate complex inspection of their operation and/or
financial position, financial risks and operation expenses which may be considerably higher
than the estimated ones. Moreover, there is a risk of incapability to assimilate the operation and
employees of the acquired companies, deficiency of installation and integration of all the
required systems and control, the risk of customer loss, as well as the risk of entering the
markets, where the Group has no or minor experience, and/or markets with the limited access
to the necessary logistic support and distribution network, as well as the risk of business
interruption and diffusion of the Group management resources. If the Group is not able to
successfully integrate its acquisitions, such failures may have a material negative effect on its
financial position and results of operation.
Failure to raise enough funds may prevent the Group from realization of its
expansion plans.
Implementation of the Group’s expansion strategy may require
large capital
expenditures. There’s no guarantee that the operational cash flow of the Group and/or
borrowings from financial institutions or proceeds received from the stock market would be
enough to finance its scheduled expenses in the nearest future. If the Group fails to raise
enough funds to finance its capital expenditures, there is risk of reduction or cease of expansion.
Rapid growth of the Group may lead to deficiency of administrative, industrial and
financial resources.
Historically volume of the Group’s operations has been growing fast. The growth is
expected to continue in the projected future which may lead to the significant lack of
administrative, operational and financial resources. As a result, “Magnit” retail chain will have
particularly to continue the
its operational and financial systems,
administrative management and techniques. The Group will also have to achieve strict
coordination of operation of transportation, technical, accounting, legal, financial, marketing,
warehouse and store personnel. If the Group fails to manage the above tasks, its operation and
financial position may seriously suffer.
improvement of
Moreover, the Group may experience difficulties with application, expansion and
improvement of its management information system due to the ongoing growth. If the Group
fails to maintain its management information system, financial accounting and in-house audit
systems at a proper level, its economic activity and financial position may substantially suffer.
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There is a risk of target audience reduction in the course of time. Gradual
increase/decrease of population income may lead to the attrition of “Magnit” chain customers,
and as a result to the material negative effect on the Group. The Russian food retail market is
subject to changing customers’ preferences, needs and trends. The Group’s target audience is
mainly the consumers with low or medium income level. If the level of disposable consumer
income continues to grow nationwide (either generally or in certain federal districts, especially
in the Southern Federal District where the Group collects a larger share of the total revenue), the
Group may not be able to adjust quickly enough the product assortment in the stores to the
changes in consumer trends, and thus will lose a part of its target audience. As a result of such
changes, the number of customers shopping at “Magnit” stores may decline (or increase more
slowly than previously), or the average ticket in “convenience” format may decline (or increase
more slowly than previously), which would have a material adverse effect on business, results
of operation, financial position and prospects of the Group.
Risks related to investments in and lease of real estate.
Lack of reliable information about the real estate market in Russian Federation makes
it difficult to estimate the value of the real estate owned by the Group.
The amount of reliable public information and research concerning the real estate
market in Russia is limited. The volume of the available data is not that comprehensive and
complete as similar data on the real estate market in other industrially developed countries. The
lack of information makes it difficult to assess the market value and the rent price of the real
estate in Russia. Therefore, there is no confidence that the price set to the real estate of the
Group reflects its market value.
The value of Group’s investments into real estate may decline.
The Group in whole and the Company in particular make substantial investments into
the real estate for store premises. The market of any goods including commercial property is
subject to fluctuations. Market value of the real estate may decline or grow due to different
factors, i.e.:
a) changes in the competitive environment;
b) changes of the attractiveness level of the real estate on the Russian market in general and
on the regional markets where the property objects of the Company are located due to
the changes of the country and regional risks;
c) fluctuations of the demand for commercial real estate.
As a result of any negative changes on the real estate market, the value of the real estate
acquired by the Company or its subsidiaries may decline and thus negatively affect the assets’
value of the Group. Thus, in case of disposal of such property the Group won’t be able to
compensate its acquisition costs, what may negatively affect the financial position of the Group
and the Company.
Inability to obtain rights on the suitable real estate object on commercially reasonable
terms, to protect rights of the Group for the real estate or to construct new stores on the
acquired land plots may have a material adverse effect on the economic operation and
financial position of the Group.
Ability of the Group to open new stores largely depends on identification and lease
and/or acquisition of the premises appropriate for its needs on commercially reasonable terms.
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The property market in large cities of Russia is highly competitive, and in conditions of
favorable economic environment the competition for and therefore the cost of high quality land
plots may increase. However, there’s no guarantee that the Group will manage to exercise it in
the future. If due to any reason, including competition from the third parties seeking similar
land plots and premises, the Group is not able to identify and obtain the new objects in due
time, the Group’s anticipated growth will be negatively affected. Even after the Group procures
rights on the suitable land plots and premises, it may experience difficulties or delays when
obtaining permissions from various regional authorities, required for the exercise of the Group
rights to use, renovate or reequip the stores. Therefore, there’s no guarantee that the Group will
successfully identify, lease and/or purchase the suitable property objects on acceptable terms or
upon the necessity.
Failure to renew lease contracts for the stores or extend them on reasonable terms may
have materially adverse effect on the economic activity and financial position of the Group.
There can be no guarantee that the Group will be able to extend the lease contracts on
reasonable terms, and even that there will be the opportunity itself to extend the lease contracts
as they expire, the share of which is large enough. If the Group is not able to extend the lease
contracts for its stores as they expire or lease another suitable objects on reasonable terms, or if
the actual lease contracts of the Group are terminated for any reason (including loss of right on
such objects by the lessor), or if the contract terms are revised in the prejudice of the Group, it
may have a negative impact on its financial position and operation results.
Deficiency of professional building contractors may negatively affect
the
development strategy of the Group.
The ability of the Group to construct and update specially constructed new stores is
extremely important for its strategy and commercial success. The Group operates in the markets
which face the deficiency of highly-skilled contractors able to build new stores in due time and
in compliance with standardized requirements of the Group. There’s no guarantee that the
Group will be able to find the properly trained and experienced team of designers for building
and launching new stores in due time. Failure of the Group to construct and develop new stores
on the newly acquired land plots may have a substantial negative impact on its potential to
follow its strategy and to achieve the required financial position and operation results.
Dispute of the Group’s rights for the real estate or cessation of the Group’s projects
for new stores’ construction may have materially adverse effect on the economic activity and
financial position of the Group.
Group’s activity includes obtaining ownership and lease rights for land plots and
premises for the new stores. In addition, the Group owns buildings and facilities where its
offices are located. Russian land and property legislation is complex and often ambiguous, and
may contain contradictory provisions at the federal and regional levels. In particular, it is not
always clear which state authority is entitled to lend particular land plots, besides the
procedures of construction approval are complex and subject to challenge or complete abolition.
Construction and environmental regulations often contain the requirements which are in
practice impossible to meet in full. As a result, ownership and lease rights of the Group for land
plots and premises may be challenged by governmental authorities and third parties, and thus,
its construction projects may be delayed or cancelled.
Under Russian law, real estate transactions may be disputed on many grounds,
including ineligibility of the property seller or right holder to dispose such property, breach of
internal corporate requirements of the counterparty and failure to register the transfer of rights
88
in the unified state register. As a result, violations in previous real estate transactions may lead
to invalidation of such transactions with individual property objects, and thus, may affect the
rights of the Group for this property.
Moreover, Russian law does not require certain encumbrances over real estate
(including leases for less than one year and uncompensated use agreements) to be registered
with the unified state register to legally validate the charge. In addition, the time limits within
which the charge liable for registration in the unified state register should be entered into this
register, are not stipulated in the law. Therefore, there is always a risk that the third parties may
register at any moment or claim the existence of encumbrances (of which the Group had not
been aware of) over the real estate of the Group whether owned or leased.
Risks related to the increase of costs
Unionization of the Group employees may have a material adverse effect on its
financial position and operation results.
At the present time the majority of Group employees do not league any labor unions. If
the considerable part of Group employees league labor unions, it may substantially affect the
payroll costs of the Group and/or settlement of labor conflicts, and as a result may have a
substantial negative impact on financial position and operation results of the Group.
Risks related to the possible fluctuations of the prices for raw materials, services
applied by the Group within its activity (separately on the internal and external markets),
and their influence on the Group’s activity and its fulfillment of obligations on the
securities:
The Company and the Group operate only on the Russian internal market. The
Company and the Group do not operate on or plan to expand into the external market. The
information about the risks described refers to the internal market.
The increase of the Group’s expenses may have a material adverse effect on its
profitability.
The operating efficiency of the Company and its subsidiaries largely depend on the
prices for the products purchased for the retail sale, as well as on the prices for the services used
by them in their operation and on the amount of rent payment for movable and real property
and construction, acquisition and opening costs. Changes in the agreement processes and
procedures of obtaining rights for the land plots (including lease right), fluctuations of the
norms and regulations applicable to the Group activity, town-planning, tax and environmental
legislations in particular, may entail the increase of new opening costs or costs for the use of the
premises, as well as the increase of the payback period of the stores.
The growth of the Group’s expenses may affect its profitability. The growth of the
purchase prices, the installation costs, the price for land plots (other real estate) and amount of
rent payment, as well as the growth of employees’ wages may lead to the substantial growth of
the Group’s expenses, and thus, seriously affect the Company profitability in case if the Group
is not able to adequately increase the sale prices due to low purchasing capacity of the
population in particular. Since the retail chain of the Group while working with one of the most
economical formats mainly targets at customers with the income below the average, the Group
is substantially subject to the above risk. Decrease of profitability may negatively affect the
ability of the Company’s relevant authority to decide on the payment of yield on the securities
and the market value of the Company’s securities as well as affect the fulfillment of obligations
on the placed bonds in full.
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Risks related to the possible fluctuations of the prices on products and/or services of
the Company (separately on the domestic and foreign markets), and their influence on the
Company’s activity and its fulfillment of obligations on the securities:
The Company and the Group operate only on the Russian local market. The Company
and the Group do not operate on or plan to expand into the foreign market. The information
about the risks described refers to the internal market.
The reduction of prices for products at “Magnit” stores may lead to the profitability
decrease of the Group.
Changes of product prices at “Magnit” stores are largely determined by changes of
purchase prices of the Group. The Group is doing their best not to increase the mark up for the
products. Product price changes may affect the level of purchasing capacity of the population.
The price growth is mainly forecasted within the inflation, which as well affects the decrease of
the purchasing capacity of the population. The deterioration of macroeconomic environment
and decrease of the purchasing capacity of the population may also lead to the decline of selling
prices. If the purchase prices are less reduced than the selling prices, it will lead to the decline of
Group profitability. The dramatic deterioration of macroeconomic situation and intensification
of competition may force “Magnit” chain to cut the prices for products in order to maintain the
target turnover growth and market share, which may also lead to the profitability decline.
The assumed actions of the Company in case of industrial fluctuations:
In case one or several risks arise the Company will undertake all possible measures to
reduce the effect of the existing fluctuations. It deems impossible to determine the specific
measures of the Group regarding any risk hereof, as it is hard to work out adequate measures
due to uncertainty of further situation development. The character of the applied actions will
depend on the specific situation of every case. The Company cannot guarantee that the
activities taken to overcome negative fluctuations will lead to considerable changes in the
situation, as most of the risks hereof are out of the Company’s control.
In case of situation deterioration in the industry sector the Company plans:
a) if possible, to further expand its operation in order to reduce the prime cost of goods
and diversify some risks;
b) to carry out the diversification between the most and the least perspective stores and to
cut the most unattractive stores;
c) to extend the territory of its operation by choosing the most profitable regions of
Russian Federation in terms of growth prospects;
d) to carry out adequate changes in pricing policy for maintaining the demand for goods
on the necessary level;
e) to optimize the expenses;
f)
to continue engaging of highly-skilled specialists as well as to enter into agreements
with reliable specialists only, counteragents, contractors, which will allow to minimize
risks and carry out the detailed analysis of the scheduled operation of the Company in
order to reduce the prime cost of the investments, minimize the expenses’ structure and
receive more profit.
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CCOOUUNNTTRRYY AANNDD RREEGGIIOONNAALL RRIISSKKSS
The Company and JSC “Tander” (the main operating company of the Group which
controls trading assets and is the Group’s center of revenue consolidation) are registered as a
tax-payer in the Southern Federal district, Krasnodar. As of December 31, 2011 the Group
operates in 7 federal districts in 1,389 locations of the Russian Federation. The Group does not
operate outside the Russian Federation.
As the Group operates in the Russian Federation, the main country and regional risks
affecting the operation of the Group and the Company are the risks within the Russian
Federation. However, due to the globalization of the world economy, considerable deterioration
of the economic situation in the world may lead to the serious economic recession in Russia and
as a result to the reduction of demand for consumer goods.
Despite the fact that during the last few years all public spheres in Russia saw positive
changes, i.e. the economy grew, some positive political stability was achieved, Russia is still the
state with the rapidly developing and changing political, economic and financial systems. The
risks of the industrial production decline, inflation, the increase of the national debt, negative
dynamics of the currency exchange rates, increase of unemployment, etc., have significantly
increased within the global financial and economic crisis. All this may lead to the drop in the
living standards in the country and negatively affect the operation of the Group, as the main
target customers of the “Magnit” chain are people with average income and income below
average. Apart from the risks of economic character, Russia is subject to the political and
regulatory risks to a greater extent than other countries with the developed market economy.
Political risks:
Political instability in Russia may have a negative effect on the investments in the
country as well as on the price for the Company’s shares.
Since 1991 Russia has moved from one party state with the centralized planned
economy to democratic state with the market economy. Russian political system remains
vulnerable to the public discontent and disorders among individual social and ethnic
communities. Substantial political instability may have a considerable negative effect on the
value of foreign investments into Russia including the price for the Company’s shares.
Changes in the government, major political changes and lack of consensus between
different branches of government and economic groups may also lead to disruption or converse
turn of economic, political and judicial reforms. Any significant contradictions on the course of
the future reforms, breakdown or resignation of reform policy, political instability and rise of
conflicts between powerful economic groups may negatively affect the operation of the Group,
its financial results and development prospects as well as the value of investments into Russia
and the price for the Company’s shares.
Reconsideration of reforms or state policy in respect of some individuals may have an
adverse negative effect on Company’s business and on the investment potential of Russia.
During the presidential term of Vladimir Putin and after the election of Dmitriy
Medvedev the political and economic situation in Russia has generally become more stable and
favorable for investors. However any political discussions over the course of future reforms or
reconsideration of the existing reforms may lead to deterioration of Russian investment climate
91
that may limit the ability of the Group to receive financing on the international financial
markets, reduce Company’s sales in Russia or otherwise negatively affect Group’s business,
operation results, financial position and prospects.
In the recent past our law-enforcement authorities have opened cases against some
Russian companies, their officials and shareholders for tax evasion and related tax violations.
Some cases resulted in the imprisonment and repayment of understated taxes. Reportedly, such
companies were Yukos, TNK-BP and Vimpelcom. Some analysts consider that such
prosecutions demonstrate a willingness to reconsider key political and economic reforms of the
recent decade. Other analysts, however, believe that these prosecutions are isolated cases and
do not signal any deviation from large-scale political or economic reforms.
Conflicts between federal and regional authorities and other conflicts may set an
unfavorable economic environment which may have an adverse effect on the operation and
financial position of the Group.
Distribution of powers between federal and regional authorities, as well as between
different authorities on the federal level in some cases remains obscure. Therefore, Russian
political system is subject to certain internal contradictions and conflicts between federal and
regional authorities regarding different issues, particularly, tax collection, property right for
land, powers to regulate individual industry sectors and regional autonomy. Conflicts between
different authorities may have serious adverse effect on the price of the Company’s shares.
Besides, ethnical, religious and other segregations periodically provoke public tension
and sometimes result into conflicts including the armed ones. For example, the continuous
conflict in Chechnya negatively affected economic and political situation in Chechnya, the
neighboring regions and Russia on the whole. Terrorist activity and counter measures aimed at
the elimination of violence, particularly by imposing emergency rule in certain territorial
subjects of the Russian Federation may have an adverse negative effect on the potential of
Russian business on the whole and Group performance in particular, especially, taking into
consideration the significant scale of Group’s operation in the Southern federal district.
Social instability may lead to frustration among population, induce the call for
powers’ change, outbreaks of nationalism or violence.
Failure of the Russian government to adequately address social problems led in the past
and may lead in the future to frustration among population. Such frustration may have social,
economic and political consequences, e.g. call for the change of powers, growth of nationalism
enhanced by the call for property nationalization, expropriation and constraints on overseas
property in Russia, as well as the increase of violence. Any of the above may have an adverse
negative effect on confidence in Russia’s social environment and investment potential, restrict
our operations and lead to the losses or otherwise affect Group’s business, operation results,
financial position and prospects.
Economic risks:
Deterioration of the economic situation in the Southern Federal district may arise from
the substantial changes in the economic situation in Russia, including dramatic fluctuations of
the national currency exchange rate, which may result in the reduction of the number of the
roundabout industrial enterprises and agriculture of all forms of ownership, unemployment
growth, decrease of the purchasing power of population. Such a scenario may lead to the
92
interruption of the investment program of the Group, slowdown of Group development rates
on the territory of the Southern Federal district and other regions of the Russian Federation, as
well as the slowdown of the revenue base growth.
Economic instability in Russia may affect the consumer demand which may have a
serious negative impact on the Company’s business.
Any of the risks provided herein previously experienced by the Russian economy may
seriously influence the investment climate in Russia and the Company’s activity. Russian
economy suffered from the following negative events in the past:
Significant declines in GDP;
Hyperinflation;
Currency instability;
High ratio level of state debt/GDP;
Weak banking system which provides Russian enterprises with the limited liquidity;
Large amount of unprofitable enterprises which continue to operate due to deficiency of
effective bankruptcy procedure;
Wide use of barter and non-liquid bills in settlements of commercial transactions;
Prevalent practice of tax evasion;
Growth of black economy;
Continuous capital outflow;
High level of corruption and penetration of the organized crime into the economy;
Serious growth of unemployment and underemployment level;
Low living standards of the substantial part of the Russian population
Russian economy faced abrupt downturns. In particular, the period of rapidly
deteriorating economic situation after August 17, 1998 when government defaulted on its ruble-
denominated bonds, the Central Bank of Russia stopped to support the ruble, and temporary
restrictions were imposed on certain foreign currency payments. These actions resulted in
immediate and severe ruble devaluation and sharp increase of inflation rate, dramatic decline of
Russian share and bonds quotes as well as failure of the Russian issuers to raise funds on the
international capital markets.
The problems were aggravated by almost a complete collapse of Russian banking sector
after the events of August 17, 1998, which is proved by the recall of banking licenses of a
number of Russian top banks. This even more reduced the opportunity of banking sector to
provide stable liquidity to Russian companies and resulted in the widespread loss of bank
deposits.
Crisis of bank liquidity and consequently possible substantial reduction of legally
capable units of the credit and financial systems, substantial appreciation of the borrowed
resources which will result in economy growth slowdown, rise of unemployment level and
significant increase of the inflation rate are possible effects of crisis situations in the global and
European economy. Moreover, fluctuations of the world prices for oil and gas, ruble weakening
to US dollar and other currencies, as well as consequences of monetary policy regression or
other factors may in future negatively affect Russian economy and Group’s business, especially
its expansion plans.
Physical infrastructure of Russia is in extremely poor condition which may lead to
interruptions in the effective financial and economic activity.
Physical infrastructure of Russia was mainly set up in the soviet times and has not been
adequately funded and maintained in the recent years. The rail and road networks, power
generation and transmission, communication system and building stock were particularly
93
affected. Electricity and heat deficiency in some regions of Russia dramatically disrupted their
economies. Condition of roads throughout Russia is also improper, and many of them do not
meet the minimum requirements of safety standards.
Deterioration of Russian physical infrastructure damages the national economy, disrupts
goods and cargo transportation, adds costs to business activity in Russia and may lead to
interruptions in financial and economic activity thus negatively affecting the business of the
Group and price of the Company’s shares.
The fluctuations of global economy may negatively affect the economy of Russia,
limiting the access of the Company to the capital and negatively influencing the purchasing
power of the final consumers of the products sold by “Magnit” chain stores.
Russian economy is vulnerable to market downturns and economic slowdowns in other
countries of the world. According to former practice, financial problems or exacerbated
perception of investment risks in the countries with developing economy may reduce the
volume of foreign investments in Russia, thus affecting Russian economy. As Russia produces
and exports large volume of natural gas, oil and other energy and mineral resources, Russian
economy is especially vulnerable to commodity prices, and decline in such prices may
slowdown or shake the economic development of Russia. These events may severely limit
Group’s access to the capital and have a negative effect on the purchasing power of the Group’s
consumers.
Social risks:
Social instability may lead to the increased support of resumption of the statism,
nationalism and violation, having serious negative effect on the opportunities of the Group
to effectively operate its business.
Social instability may lead to the increased support of resumption of the statism,
nationalism and violation, having serious negative effect on the opportunities of the Company
to effectively operate its business. Inability of the government and many private companies to
pay out the wages in time, and altogether deceleration of wages and benefits vs. rapidly
growing living costs, led in the past and may lead in the future to labor and social disorders.
Similar actions, labor and social disorders may have negative political, social and economic
consequences including the nationalism growth, imposing limitations on the foreign
involvement in Russian economy and the violence growth. All of the events above may lead to
the restrictions on activity of the Group and loss of its profits.
Crime and corruption may have an adverse negative effect on the operation and
financial position of the Group.
According to the reports of the local and international press, the level of the organized
criminal activity has considerably grown. Additionally, diverse publications indicate that some
members of the Russian media regularly publish biased articles for remuneration. The Group
activity may be affected by illegal actions, corruption and accusation of the Group of illegal
operation and therefore have a negative impact on the Group’s operation and price of
Company’s shares.
Risks related to the fiscal policy of the Government of the Russian Federation:
The Company pays taxes to the federal, regional and local budgets. Within the economy
transformation there is a risk of changes of the enterprise activity tax treatment. Tax legislation
and peculiarities of tax accounting in Russia often change and bear ambiguous interpretation.
94
The process of tax legislation reforming has not been completed yet. In case of stiffening of the
tax legislation and increase of tax burden, the financial position of the Group may deteriorate.
Prospective measures of the Company in case if changes of the situation in the
country and region have negative effect on the Group’s operation.
The majority of the above risks of economic, political and legal character are out of the
Company’s control due to the global scale of the threat they present.
The Companies of the Group have reached the certain level of financial stability which
helps to overcome the short-term negative economic fluctuations in the country. In case if
significant political and economic instability which will negatively affect the operation and the
profit of the Group arises in Russia, the Company plans to undertake comprehensive measures
of crisis management aiming at mobilization of business and maximum reduction of the
negative effect of political and economic situation in the country and region on the business of
the main companies of the Group.
It deems impossible to determine the specific measures of the Group regarding any risk
hereof, as it is hard to work out adequate measures due to uncertainty of further situation
development. The character of the applied actions will depend on the specific situation of every
case. Company cannot guarantee that the activities taken to overcome negative fluctuations will
lead to considerable change in the situation as most of the risks hereof are out of the Company’s
control.
However, in case of negative effect of the country and regional fluctuations on the
Group’s operation, the Company plans to carry out the following common arrangements to
maintain the Group’s profitability:
•
•
•
•
if possible, to save main assets until the situation improves;
to undertake measures focused on the life support of the Group employees and on its
productivity;
to carry out adequate pricing adjustments to keep up the demand on the products on the
proper level;
to optimize the expenses, including measures on purchasing prices reduction and wages
expenses limitation;
to revise the program of capital investment.
•
To minimize the risks related to the force majeure circumstances (military conflicts, riots,
natural disasters, state of emergency) the Company reflects the possibility of such events within
its contract activity.
The Company acts under paragraph 401 of the Civil Code of the Russian Federation
which states that the person who does not exercise the obligations due to force majeure
circumstances provided herein does not bear responsibility to the counterparty.
To reduce the above risks the Group plans to further operate in different regions of
Russia to diversify risks.
Risks related to the possible military conflicts, state of emergency and strikes in the
country and regions where the Company is registered as a tax payer and/or operates its
business:
The Company is a registered taxpayer and operates mainly in the Southern Federal
District. Political and social risks are of primary concern for the Southern Federal District
among the factors of the regional investment risk due to the potential hot spots on the frontiers
of territories of the Northern Caucasian republics and proximity to the Chechen republic.
95
Major risks are connected with the fact that private capitals (investments) may be
nationalized in case of a sudden change of policy course or destroyed in case of the armed
conflict. However the major area of the Southern Federal District is occupied by the subjects of
the Russian Federation with favorable conditions for business development and with the
regional risk level of not below average figures throughout the country. It’s worth noting that
the Company does not operate in the territory of the Chechen republic and Ingushetiya, social
and political instability of which substantially aggravate the integral index of the Southern
Federal District risks.
Practically all Northern Caucasian republics face substantial social-ethnical instability,
thus, economic and political risks remain high. Along with that, the South of Russia is
characterized by the rapid growth of industrial production, accommodation provision, increase
of the real income of population, and the financial market of the region playing a significant
part in the process.
Russian Federation is a multinational country consisting of the regions with different
social and economic development levels; thus, it is impossible to completely eliminate the
possibility of internal tension in Russia including the armed conflicts. The Company as well
cannot absolutely exclude risks related to the emergency state.
Risks related to the geographical peculiarities of the country (countries) and the
region where the Company is registered as a tax payer and/or performs the main activity,
including high threat of natural disasters, possible stop of transport connection due to
remoteness and/or inaccessibility, etc.
According to EMERCOM of Russia, factors of industrial, natural or terrorist character
represent one of the most real threats to the stable social-economic development of the country,
increase of the living standards of population and fortification of the national security of
Russian Federation.
The terrorism level recently escalated leads to the continuous danger of terrorism acts on
the whole territory of the Group’s operation.
The regions with the Group’s presence may face the drastic consequences of
conflagrations on the economic objects and in the public sector, accidents and failures of utility
systems and transport, natural fire, dangerous hydro-meteorological phenomena (strong winds,
frosts, heavy snowfalls and heavy rains), earthquakes, land subsidence and sinkhole collapse,
contagion outbreaks among people and animals. Exposure to natural and climatic risks,
including natural disasters (hurricanes, floods, earthquakes, etc) is distinctive geographical
feature of the Southern Federal District.
The geographical peculiarities of the region do not eliminate the risk of possible stop of
transport connection due to remoteness and/or inaccessibility of the city.
Ecological risks:
Accidents at the environmentally hazardous industrial facilities of the Russian
Federation and environmental pollution may have a negative effect on the Group’s activity.
In respect of all four components of the environment (air, water sources, soil and land
resources, wildlife) large industrial cities face the unfavorable ecological situation for
population. According to some reports, up to 15% of the Russian territory is zones of ecological
disaster. The above factors negatively affect the health of the nation. Moreover, nuclear and
other dangerous objects are located in the territory of Russia, while the system of control over
ecologically dangerous objects is not sufficiently effective. Accidents on these objects and an
96
unfavorable ecological situation in large Russian industrial cities may have an adverse negative
effect on the Group’s activity.
FINANCIAL RISKS
Exposure to risks of changes of the interest rates, foreign currency exchange
rates related to the Company’s operation or hedging carried out by the Company to
reduce unfavorable consequences of the risks indicated above:
The Company is exposed to risks related to the changes of interest rates. The Group’s
companies raise borrowed funds to finance business development of the Group and to expand
its resource base. Changes of the interest rates may have substantial negative effect on the
operation results of the companies of the Group.
The Group does not export its production, and all its main obligations are ruble
denominated. Import products comprise a certain share of revenue, which makes the Company
dependent on the possible fluctuations of exchange rates.
The Company does not hedge its risks.
Exposure of the financial position of the Company, its liquidity, funding sources,
operation results, etc., to the foreign exchange movements (currency risks).
Over the last fifteen years Russia faced considerable fluctuations of the exchange rate of
Russian ruble to the foreign currencies. Substantial ruble devaluation may result in the
reduction of the relative cost of ruble-denominated sales and assets of the Group, such as bank
deposits and accounts receivable. Additionally, decrease of the ruble exchange rate may lead to
the decline of the dollar cost of tax deductions arising from the realization of capital
investments, since the balance sheet assets will reflect their mark-up in ruble terms at the
moment of acquisition.
The Group does not export its production, and all its main obligations are ruble
denominated. Import products comprise a certain share of revenue, which makes the Company
dependent on the possible foreign exchange fluctuations. In case of such fluctuations, the Group
is able to modify the structure of goods sales in favor of Russian counterparts, which may
potentially reduce the sales growth rate. Thus, the rise of such risk may have an adverse
negative effect on the Group’s revenue and profitability.
The Group purchases and plans to purchase in future the import equipment and
vehicles for foreign currency, thus, considerable decline of the ruble exchange rate may lead to
the increase of the Group’s expenses in ruble terms and negatively affect the results of its
operation.
Dramatic changes of the exchange rate may have an adverse negative effect on the
country economy on the whole and lead to the decline of the purchasing power.
Prospective measures of the Company in case if currency fluctuations and interest
rates have negative effect on the Group operation.
In case if movements of exchange rates and interest rates are negative for the Company,
it plans to carry out tough policy of cost saving. However, it should be taken into consideration,
that part of the risk cannot be completely neutralized, since the indicated risks mainly lie
beyond Company’s control but depend on the general economic situation in the country.
Inflation influence on the payment on securities. Inflation indices which the
Company considers to be critical, and potential actions which may be taken by the Company
to reduce risks specified herein.
97
The Company faces inflation risks which may have an adverse negative effect on its
business activity. The purchasing prices on the products depend on the overall price level in
Russia. The acceleration of inflation growth rates may affect the financial performance of the
Group. The growth of the purchasing prices may lead to further increase of retail prices on the
products and goods sold by the Company and its subsidiaries, and as a result negatively
influence the competitive environment of the Group.
If the exchange rate of ruble to US dollar increases simultaneously with inflation, the
Group may face expenses increase in dollar terms on certain cost items. Some expense items of
the Group, such as payroll, expenses on construction, rent and utilities are sensitive to the
overall growth of the price level in Russia. Within competitive pressure or legal restrictions the
Group may not be able to properly increase its prices in order to retain our profit rate.
Consequently, high inflation growth rate may increase the Group’s expenses, and there’s no
guarantee that the Group will be able to maintain or increase its profit rate.
Inflation growth in the Russian Federation may also entail the overall growth of the
interest rates.
Inflation indices critical for the Company:
Today the 30-35% level of inflation is considered critical by the Company. Serious
acceleration of the price increase rate may lead to the growth of Company’s expenses, loan
funds costs, and result in the profitability downturn. Therefore, in case of dramatic excess of
actual inflation indices over the forecasts of the Russian Federation Government, the Company
plans to take all required measures to limit the other expenses’ growth (not related to the
purchase of the products for disposal), to reduce the account receivables and its average term.
Risks arising from bank operations:
Russian bank system is yet underdeveloped, a new bank crisis may have a negative
effect on the operation of the Group and its financial position
Russian bank and other financial systems are not properly developed and regulated, and
Russian legislation related to banks and bank accounts may be interpreted ambiguously and
applied inconsistently. Financial crisis of 1998 led to the bankruptcy and liquidation of many
Russian banks and almost completely destroyed the developing market of crediting of
commercial banks.
Within the period from April to July 2004 Russian bank sector experienced one more
serious disruption. As a result of rumors spread over the market as well as certain problems
with legislative regulation and liquidity, several banks faced difficulties with liquidity and were
not able to attract capital on the inter-bank market or with clients. Simultaneously, many
individuals and corporations withdrew their deposits from these banks. Some of these private
Russian banks turned bankrupt, were liquidated or substantially reduced their scope of activity.
Generally, this situation did not have an adverse effect on foreign banks and Russian banks
owned by or under the management of the government
Additionally, many Russian banks do not meet international banking standards, and the
transparency of the Russian bank sector to a certain extent falls behind the international level.
Supervision of bank activity is also often insufficient, whereby many Russian banks do not
observe the actual instructions of the Central Bank of the Russian Federation regarding loan
criteria, credit quality, loan loss provision, risks’ diversification and other requirements.
Application of more severe regulations or interpretations may result into undercapitalization or
insolvency of some banks.
98
Before global financial crises Russian banks were increasing credit financing rapidly,
which, as considered by many, was accompanied by deterioration of level of refund guarantee
from the borrowers. Moreover, stability of the local corporate security market led to the
accumulation of ruble bonds issued by the Russian companies in the investment portfolio of
Russian banks, which even more aggravated the level of risks attributable to the Russian banks’
assets.
The global financial crisis led to collapse and buyout of some Russian banks and serious
liquidity decline of others. Return level of the majority of Russian banks was also seriously
affected. Indeed, due to financial crisis and on the background of reports on difficulties faced by
Russian bank and financial organizations, the government had to make substantial investments
into the bank system. As a rule the Group supports relations and keeps its accounts only with a
limited number of reliable creditworthy Russian banks, including open joint-stock company
“Sberbank of Russia” (OJSC “Sberbank of Russia”), OPEN JOINT-STOCK COMPANY “ALFA-
BANK” (OJSC “ALFA-BANK”), VTB Bank (open joint-stock company (OJSC “VTB Bank”),
“Gazprombank” (open joint-stock company), (GPB (OJSC), OJSC “Joint-stock commercial bank
“Rosbank” (OJSC AKB “ROSBANK”). Bankruptcy or insolvency of one or several specified
banks may negatively affect our business. Continuing or aggravation of bank crisis, bankruptcy
or insolvency of banks with which we keep our funds may lead to inaccessibility to the cash
assets for several days and influence our opportunity to complete bank operations in Russia or
to the loss of all our deposits, which may have substantial negative effect on our business
activity, operation results, financial position and prospects.
Risks related to the transfer pricing:
Ambiguity of law on transfer pricing regulations alongside with deficiency of
accurate and authentic information about the market prices may have negative effect on
the financial performance of the Group.
Russian law on transfer pricing regulations which came into effect in 1999 stipulates that
taxation authorities have are entitled to make amendments to the transfer pricing and to levy
additional taxes in case of 20% dispersion between the price and market price. Since Russian
law on transfer pricing regulations is not precise enough, taxation authorities and arbitration
courts are free to interpret the applicable regulations.
Due to the ambiguity of transfer pricing regulations taxation authorities may dispute the
prices of transactions of the Company and its subsidiaries and adjust the accrued taxes.
Financial report statements of the Company mostly subject to changes under
the foregoing financial risks. Risks, probability of risks and nature of changes in
reporting.
Expenses and profit are mostly exposed to the influence of the foregoing financial
risks. In case of unfavorable change of the situation, the expenses will be the first to grow
and will entail profit reduction correspondingly.
In case of inflation growth and/or currency rate growth and therefore the expenses
growth, the Group may increase the prices on the products for sale.
In case of negative effect of fluctuations of the exchange rate, inflation and interest rates on
the operation of the Group, the following measures are to be taken:
•
revision of the financing structure;
99
• optimization of the cost-based items of the operation;
•
•
revision of the programs of capital investments and loans;
increase the receivables turnover.
At the moment hedging of the foregoing risks is not carried out.
Liquidity risks:
The risks provided herein create the liquidity risk, i.e. the risk of losses due to deficiency
of funds within the established terms and as a result, risk of inability of the Group to fulfill its
obligations. Such risk event may entail penalties, fines, injury to the goodwill of the Group, etc.
The Group manages liquidity risk through analysis of the scheduled cash flows.
Exposure of the financial report statements to the foregoing financial risks:
Risks
Probability
Nature of changes in the report
Interest rates
growth
high
Inflation rates
growth
high
increase the cost of
Interest rates growth will
borrowings for the Group, thus it may have negative
effect on the Group’s financial position, particularly,
will increase the operational expenditures of the
Group and reduce its profit.
Inflation rates growth will lead to the increase of the
prime cost expenses (raw commodities costs, payroll
expenses, etc.). At the same time the acceleration of
the inflation rate growth will result in the growth of
the consumer prices for the Group products and
correspondingly increase the sales of the Group, so
that
the Group expenses will be
compensated by the increase of the product prices.
Such inflation will also lead to devaluation of the real
price on the ruble obligation.
the part of
Change of the
exchange rate of
US dollar to ruble
Risk of due
obligation
fulfillment
high
It does not produce strong effect, as the main profits
and losses of the Company are ruble denominated.
medium
Failure of the Group to fulfill its obligations in due
time may entail penalties, fines, etc., which will result
in unscheduled expenses and reduce the Group’s
profit. In connection herewith, the Group carries out
the policy of the cash flows’ planning.
100
LLEEGGAALL RRIISSKKSS
The Company and the Group operate only on the Russian internal market. The
Company and the Group do not operate on or plan to expand into the external market. The
information about the risks described refers to the internal market.
Certain transactions with participation of the Group’s companies may be declared
related party transactions. Similar transactions may, in particular, include sales and purchase
agreements on final products, purchase of shares, render of services. If disputes on such
transactions and actual approvals to such transactions are successfully contested in favor of the
complainant party, or otherwise the Group’s companies will be prevented in the future from
getting the approval to the transactions which require special approval under legislation of the
Russian Federation, it may limit the flexibility of the Group’s companies in operating and have
negative effect on the Group’s operational results.
In practice, corporate governance standards remain underdeveloped in many Russian
companies, the minority shareholders of which may have difficulties in exercising their legal
rights and bear losses. Though the Federal Law “On Joint-Stock Companies” enables the
shareholder owning not less than 1% of the company’s offered shares has the right to file a
claim against the management which caused damages/losses to the company, Russian courts
have poor experience in dealing with such claims.
Thus, the real opportunities of the investor to get the compensation from the Company
are limited. As a result the protection of minority shareholders rights is limited.
Civil code and Federal Law “On Joint-Stock Companies” provide that the joint-stock
company’s shareholders do not bear responsibility for its obligations and are only exposed to
risks of investment loss. However, in case if the legal entity becomes bankrupt due to the
actions of the owners (participants), the owner of the legal entity property or other bodies
which are entitled to duly instruct or otherwise regulate the legal entity, these bodies may be
subject to holding subsidiary liability for obligations of the legal entity in case of insufficiency of
legal entity property.
Consequently, the Company being a parent company to its subsidiaries with more than
50% of the charter capital directly or indirectly owned by the Company, it may be entitled to the
responsibility for the obligations in the foregoing cases. Responsibility for subsidiaries’
obligations may have a material negative effect on the Company.
Securing shareholders rights under the Russian legislation may entail additional
expenses and may result in the downturn of the Company’s financial results. According to the
Russian legislation, shareholders voted against or not participated in voting on certain issues
have the right to claim from the Company the redemption of their shares at the market price
under the Russian legislation. Such right is provided to the shareholders voted against or not
participated in voting on the following issues:
reorganization;
major transaction which is to be approved by the general shareholders meeting;
incorporation of amendments restricting the shareholders rights to the Charter or
ratification of Charter in new edition;
Company’s liabilities on redemption of shares may have material negative effect on the
cash flows of the Company and its ability to support Group’s debt.
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Legal risks related to the Russian Federation:
Weakness of the Russian legal system and imperfection of the Russian legislation
provide vague environment for investments and business activity.
Effective legal system required to support market economy functioning in Russia is still
developing. Many key laws have only recently become effective. Insufficient consensus on the
volume, contents and time limits of economic and political reforms, rapid development of the
Russian legal system which did not always coincide with the trend of the market interrelations
development in a number of cases resulted in ambiguity, noncompliance and inconsistence of
the law provisions and by-laws.
Moreover, Russian legislation very often contemplates implementing regulations that
have not yet been promulgated, leaving substantial gaps in the law regulatory infrastructure. In
some cases the new laws and regulations are ratified without all-around consideration by the
interested parties of the civil law circle and do not contain any adequate transitional
regulations, which lead to serious difficulties upon application.
Drawbacks of the Russian legal system may affect the ability of the Group to exercise its
legal rights under the agreements or to defend against claims from the third parties. There is no
guarantee that the state and judicial authorities as well as third parties will not challenge
against Group’s meeting the requirements of laws and by-laws.
Risks related to the changes in currency regulation:
Currency legislation of the Russia Federation is exposed to quite frequent changes. In
connection herewith risks of regulation procedure changes in execution of a number of
exchange operations may occur. Considerable fluctuations in currency regulation and currency
control legislation may impede Company’s performance of obligations under the agreements
with counterparties. The risks herein are considered by the Company management to have the
same effect on the Group as on all other parties of the market.
Risks related to the protection of investors’ rights:
Russian legislation related to the investors’ rights protection might be less favorable and
developed than the legislation of other countries with the developed market economy.
Moreover, the investors may face in future the risk of adverse changes in legislation. The
returns of the foreign investors received from investments into the Company’s shares may be
taxed in accordance with the Russian legislation. Degradation of the overall economic and
political situation in the country may lead to the toughening of the currency regulation and
control norms and limitations on the transactions with the Company’s shares.
Risks related to the changes in tax legislation:
Tax legislation of the Russian Federation is subject to the relatively frequent changes.
The risks herein are considered by the Company management to have the same effect on the
Group as on all other parties of the market
Changes in Russian legislation system may have negative effect on the Group’s activity.
The following changes may have negative effect on the Group’s operation:
Incorporation of amendments to the legal acts on taxes and charges on the tax rates
increase;
Imposing of new types of taxes.
•
•
102
The foregoing substantial and other changes in tax legislation may result in the increase
of the tax payments and consequently in the reduction of the Company’s net profit. Changes in
the Russian tax legislation may have material negative effect on the investment attractiveness of
the Company’s shares.
Russian companies are making substantial payments on a great amount of taxes. These
taxes include, in particular:
•
Income tax
• Value added tax;
• Excise taxes;
• Land tax;
• Property tax.
Legislation regulations and by-laws governing the foregoing taxes do not have a vast
application history as compared to other countries; thus, the law enforcement practice is often
ambiguous or has not been formed yet. At the moment we have only a limited number of
commonly accepted interpretations and explanations of tax legislation. Different ministries and
authorities often have different opinions on the interpretation of the tax legislation, thus
creating ambiguity and grounds for the conflict. According to legislation, tax declarations and
some other legal papers, e.g. customs documents, may be checked and examined by different
inspectors who are entitled to charge penalties, fines and interests for the arrears of payments.
Usually the completeness and accuracy of the tax payment may be verified within three years
upon the tax year expiration. The fact of tax verification for any year creates the grounds for
verification of the same declaration for several times within a three year period. These factors
provide for the Russian tax risks which are considerably higher than the usual risks in the
countries with a more developed taxation system.
The tax system in Russia changes on a frequent basis, and the tax legislation is
inconsistently applied on the federal, regional and local levels. In some cases new tax rules
cause the retroactive effect. In addition to the material tax burden these circumstances
complicate the tax planning and adoption of the correspondent decisions. In spite of the
Group’s willingness to comply with the legislation, inaccuracy of the legislation puts the Group
at the risk of payment of considerable penalties and fines and may lead to the increase of tax
burden. Today the tax collection system is relatively ineffective, and the government may have
to introduce new taxes to increase its earnings.
Thus, the Company may have to pay considerably higher taxes which may negatively
affect the business activity of the Company. In recent years the taxation system of the Russian
Federation met significant fluctuations under the tax reform. However, new tax legislation still
gives freedom to the local tax authorities and creates a number of undecided questions, which
complicates the tax planning and adoption of the correspondent decisions.
Financial reporting of Russian companies for the purpose of tax accounting is not
consolidated. Thus, every Russian legal entity pays Russian taxes separately and cannot use the
losses of other companies within one group to reduce the tax burden.
Risk related to the inability of foreign investors to take out return on shares
Today Russian legislation on dividends payment provides that dividends on shares in
ruble terms may be distributed among the shareholders without limitations. The ability of
foreign investors to convert rubles into any freely convertible currency (FCC) depends on the
availability of such currency on the Russian exchange markets. Though the market for
conversion of rubles into FCC exists in Russia, including interbank currency exchange, after-
markets and currency futures markets, the future development of this market remains vague.
103
Risks related to the changes of the rules of customs clearance and duties
Changes of the rules of customs clearance and duties may entail the increase of the
purchasing prices on the import goods and thus the reduction of the Group’s profit.
Risks related to the changes of licensing requirements to the primary activity of the
Company or licensing of the use rights for objects limited in the turnover (including natural
resources).
The core business of the Company is coordination of Group companies’ operation, the
lease of property and retail business which is not subject to licensing. The companies of the
Group have licenses for retail sale of alcohol beverages consumed not on the spot of purchase.
In case of changes of licensing requirements, the Company will operate under the new
requirements including license re-issuance and new licenses’ obtaining.
Risks related to the changes in judicial practice on the issues of the Company’s
business (including licensing issues), which may have negative effect on the results of the
Company’s operation as well as on the results of the current legal proceedings in which the
Company participates.
OJSC “Magnit” and other companies of the Group do not participate in legal
proceedings which could have a substantial material effect on the financial and economic
activity of the Group. However, the changes in the judicial practice on the issues of licensing,
consumer protection, property rights protection, taxation and other issues of substantial
significance for the Group’s operation may negatively affect the results of its operation if the
corresponding judicial disputes arise.
RRIISSKKSS RREELLAATTEEDD TTOO TTHHEE CCOOMMPPAANNYY’’SS OOPPEERRAATTIIOONN
Risks peculiar for the Company
Risks related to the inability to extend the Company’s license for a particular type of
activity or for the use of objects limited in the turnover (including natural resources):
The core business of the Company is coordination of Group companies’ operation, the
lease of property and retail business which is not subject to licensing. The Group sells a wide
range of product assortment, and today the retail sale of alcohol is subject to licensing for all
Group’s enterprises engaged in such activity.
The Group has licenses for retail sale of alcohol consumed not at the point of sale. In case
of changes in the requirements for licensing, the Company will operate under the new
requirements, including the license re-issuance and new licenses’ obtaining.
Risks related to the possible liability of the Company for the third party’s debts
including the subsidiaries of OJSC “Magnit”:
The Company together with JSC “Tander” (the main operating company of the Group
which controls trading assets and is the Group’s center of revenue consolidation) stand as a
guarantor on the bond loans of LLC “Magnit Finance” in the amount of 5 billion rubles, the
issue aim of which is refinancing of short-term debt of the Group and implementation of the
Group’s investment program on expansion of “hypermarket” format. The guarantee is
represented in the amount of the total nominal value of the bonds and aggregate coupon profit
on bonds. If LLC “Magnit Finance” is not able to fulfill the obligations on the bond loans in full,
this will have substantial unfavorable consequences for the Group’s operation.
104
Risks related to the possible customer loss the turnover of which amounts to not less
than 10 percent of the total sales of products (works, services) of the Company:
The receivers of the OJSC “Magnit” services are its subsidiaries. Therefore, the operation
of the Company and the risk of loss of its main consumers are determined by the financial
condition and position of the entire Group.
Other risks related to the Company’s operation
As the Company exercise functions of the holding company of the Group the Company
significantly depends on the operations of its subsidiaries.
Risks related to the possible restriction of competition:
Russian legislation limits the activity of the bodies which occupy the dominant position
on the market. If any of the Group’s companies is declared the body occupying the dominant
position, its activity (including pricing policy) may be restricted. Such situation may have
negative effect on the economic activity of the Group and its regional expansion strategy.
Some legislation initiatives aimed at competition protection and regulation of trade
activity may have negative consequences for the Group’s business. Specifically, in accordance
with the Federal Law № 381 – FL “On the principles of state regulation of trade activity in the
Russian Federation” effective from February 1, 2010 food chains (which threshold of dominance
on the retail market within the boundaries of the region, municipal area or urban district
exceeds 25%) are prohibited from purchasing and renting additional selling space within the
boundaries of the relevant administrative-territorial entity. Agricultural consumer cooperatives
and organizations of consumer cooperation are not subject to this prohibition.
Risks related to the implementation of the long-term strategy of the Group:
One of the main components of the long-term strategy of the Group is the expansion of
existing store chain. The expansion of the chain will have the following directions: within the
existing formats and the introduction to the market of the new formats. Within geographical
position the chain will expand within the traditional framework of the Southern region as well
as in the other regions of Russia.
The strategy success will depend on a number of factors within and out of Company’s
control. These factors include:
-Ability to raise enough funds for capital investments. If the Group fails to raise enough
funds for chain expansion at the scheduled scale, the Group may have to considerably limit the
scale of expansion and take disadvantageous position versus competitors who will develop
their business activity faster, which may lead to the loss of the market share and deterioration of
the operation results;
-Ability of the operating professional team to carry out the projects on business
expansion and subsequently to manage it. The abilities of the operating management team may
turn out to be insufficient for maintenance of the operation efficiency within the conditions of
dynamic expansion. Business expansion makes it more complicated to manage the Group in
terms of operation and increases the workload upon employees. Therefore, the improvement of
operational and financial systems together with control measures and procedures will be
required. Furthermore, the systems of purchasing, logistics, information technologies,
accounting, financing, marketing and sales will need to be revised. If the Group fails to update
the management system in time, it may negatively affect the business activity, operating results
and financial position;
105
-Success of the Group’s regional expansion will largely depend on its ability to identify
attractive opportunities on the markets of the potential growth, on the ability to successfully
implement assortment matrix for each region and establish the purchasing system as well as on
ability to manage the operation on the new local markets. Thus, the Group may not achieve the
expected profit and/or lose the part of the funds invested in the new projects;
-Implementation of the effective marketing strategy which will provide not lower level
of the effectiveness of sales or insignificant decline of sales than the Group experienced in the
past. Due to the increase of the competition in retail sector, the effectiveness of the Group’s
marketing campaign may considerably decrease which will reduce the amount of its customers
and consequently reduce the sales turnover. The chain expansion in the territory of one urban
area may result in the cannibalization which will lead to the reduction of the sales turnover in
the average within the stores of the Group;
-The Group’s growth strategy foresees changes in the business activity model
concerning the ownership rights on the sales areas. Within the development of the
operating formats the Group will carry out the independent construction/acquisition of
premises and purchase the equipment for the stores, which will mainly affect the
structure of its assets and operating results and, therefore, the performance indicators;
-Availability of the necessary space areas and land plots for the new stores. The market
may not have the sufficient number of areas suitable for store constructions, which may
slowdown the expansion rates against the scheduled strategy and result in the loss of the
Group’s market share in favor of competitors;
-Competition level in the corresponding regions at the moment of the store openings by
the Group may prove to be extremely high for Group to penetrate, which will not allow to
achieve the required profitability level;
- Within the economic slowdown on the regional markets, geographical expansion may
turn out to be not as successful as expected by the Group, which may have negative effect on
the Company’s business and profitability.
The risk related to management members’ loss and failure to engage qualified
employees in the future:
The future success of the Group will largely depend on the ongoing cooperation with
the top management of the Group, particularly with the following managers: Vladimir
Gordeychuk, Andrey Arutyunyan, Khachatur Pombukhchan, Eduard Smetanin, Valeriy
Butenko. According to the labor contracts entered between the Group’s companies and the
bodies indicated above, they have the right to resign office by filing the notification 1 month
prior to the dismissal. The Group is not insured from the harm which can be caused to the
Group by the loss (discharge) of its leading specialists and top managers.
The Company strives to hire the most qualified and experienced personnel, and adjust
its compensation policy to the changing standards of the Russian labor market.
The loss of one or more managers or failure to attract and motivate extra highly skilled
employees required for effective management of a large-scale business may have material
negative effect on the business activity, operating results and financial position of the Group
Risks related to the accounting and control system:
The system of the Group’s financial and management reporting currently operating is
based on the volume of operations exercised by the Group within the certain period of time. In
case of substantial business expansion of the Group, the technical level of the accounting and
control system may fail to meet the requirements of the information processing efficiency and
106
lead to the delays in receiving the adequate data for making tactic and strategic management
decisions and thus damage the effective operation of the Group.
The risks related to the computer network failure:
Managing and processing of operational and financial information in the Group is
carried out via electronic devices of information transmission and processing including the
network of the personal computers, access to Internet and system of financial accounting and
automated system of stock management. As a result, operational effectiveness of the Group as
well as its ability to render adequate data to adopt accurate management decisions depend on
the correct and stable work of computer and information networks.
The systems and their functioning are subject to operation failures, which may be caused
by human factor, natural disasters, blackouts, computer viruses, willful acts of vandalism and
similar factors. There is no guarantee that there will be no serious breakdowns and delays in the
future. Any blackout in computer network or system breakdowns and delays may lead to the
sudden service interruptions, failures in the stock registration system, degradation of the
customer service quality and damage to the goodwill of the Company, mistakes in the
management decisions which may result in the loss of customers, the growth of operating
expenses and financial losses.
Risks related to the operations with the large cash flows:
The specific character of the Company’s business activity and the current level of the
bank sector development in Russia provide that the substantial part of the Group’s operations is
exercised with the cash funds. Thus, the risk of insufficient payments caused by unintentional
actions of the Group’s personnel as well as by deliberate thefts and robberies increases.
Risks related to the sale of private label products:
As a way of attracting customers and strengthening the consumer loyalty for private
label, the Group plans to continue the sale of private label products. Therefore, there exists the
probability of potential customer claims to the quality of the Group’s private label products.
High product quality is of the utmost importance for the private label, and chain operators are
exposed to serious risks while promoting poor quality products under private label. Claims to
the quality or other characteristics of such products may dramatically damage the image of the
Company on the whole, the brand attractiveness for the Company customers and lead to
considerable financial losses.
Risks related to the quality of products for sale:
There is a risk related to the Group’s responsibility for the quality of products sold at the
Group’s stores as well as the risk of filing a claim due to the harm to life and health. According
to the agreements entered into with the majority of suppliers, the producer takes the material
liability for the quality of sold products, provided that the Group observes the necessary
storage conditions.
Such claims may also be addressed to the seller of the products at the discretion of a
complainant. Any similar situation may damage the Company’s image and reputation, reduce
the market share of the Group and negatively affect its financial position. Moreover, there is a
risk related to the careless attitude of the Group personnel to the storage conditions of the
products, which may lead to legal material liability of the Group under such claims
Risks related to the protection of intellectual property:
107
If the Group fails to protect its rights for the intellectual property or withstand claims for
the intellectual property from the third parties, connected with the violation of their rights, the
Group may lose its rights or bear serious responsibility for damages
For execution and protection of its rights for intellectual property, the Group firstly
relies on copyright, trade marks rights, legislation on commercial secret protection, on its user
policy, on the license agreements and the restrictions on the information disclosure. Despite the
above precautionary measures, third parties may illegally copy or otherwise receive or use
intellectual property of the Group. On the whole Russia does not provide enough protection of
the rights for the intellectual property as compared to many other countries with the developed
economy. Failure of the Group to protect the rights for the intellectual property from violation
and misappropriation may negatively affect its financial position and the ability of the Group to
develop its business activity. Moreover, the Group may be involved in the legal proceedings on
protection of its rights for intellectual property or on establishing the validity and the scope of
rights of other parties. Any lawsuit may lead to substantial expenses, distraction of the
management and of the Group resources, which may negatively affect the operation and
financial position of the Group.
Conduct of premature policy on securing interests in terms of intellectual property of
the Group may seriously hinder its future business activity
The Group is on the stage of intensive development and expansion of all its business
spheres. Measures on securing the rights of the Group for certain objects of intellectual property
have to be taken on the basis of the existing plans of commercial development and go ahead of
any commercial activity. Insufficient experience of Russian companies in elaborating policy
related to the objects of intellectual property produces the whole set of risks of unfavorable
effect, including the inability of the Group to use the promoted trade marks for individual
products (services) in a number of countries, conflicts with employees, involved specialists and
organizations regarding determination of rights for jointly manufactured products and split of
the use rights on these products between the Group and other bodies.
The “Magnit” trade mark is used by other participants of the sales turnover as a
component of the company name, which may have material effect on the operation of the
Group.
The Group invested substantial funds in promotion of its “Magnit” brand on the
Russian market, which is also the part of the company name for the private label products of
the Group. Due to “Magnit” brand the Group achieved great success in its operation.
Meanwhile, the trademark “Magnet” in Latin letters in the certain classes is registered in
the name of the third party. Today, the scope of legal protection for trademarks rights for
trading organizations, provided by the Russian law, is not completely clear. A certain risk of
interests’ conflict between the owners of the trademark “Magnit” (or ‘’Magnet”) definitely
exists, the Group might be forced to re-brand its stores. The expenses for such re-branding may
negatively affect the operation results of the Group.
Moreover, due to the fact that Russian legislation provides limited protection for the
company names on the market, there exist a number of other organizations using “Magnit” in
their names. Business activity of some of them has partially similar features to the operation of
the Group. The Group cannot prevent these organizations from using such names, and this may
result in negative effect of these companies’ activity on the business activity and reputation of
the Group.
108
Risks related to the development of a new brand:
The expansion strategy of the Group presupposes the growth of sales share of the
products under “Magnit” brand (“for “Magnit” stores”). As of December 31, 2011 this figure
amounted to 14%. However it should be noted that together with the increasing number of
hypermarkets, the sales share of “private label” represented by 640 items in both formats may
reduce as the total assortment of a hypermarket amounts 14,300 SKUs on average, while the
product mix of a convenience store amounts to 3,100.
The scheduled growth may prove to be unachievable if the commercial expenses for
popularization of such brand will considerably exceed the Group’s relevant budget. Alongside,
the creation of the new brands may weaken the existing brands and require additional
investments for maintaining their market position.
Risks related to insufficiency of insurance coverage for damages arising from the
interruption of activity, damages to the Group’s property or responsibility to the third
parties:
Insurance may turn out to be ineffective.
The Group does not apply insurance for interruption of its business activity, bringing to
responsibility for products quality, fire (except for stocks and supplies) or changes in core
management, and does not enter into insurance agreements on real estate property, distribution
center, stores or stocks at the warehouses (with rare exception). Moreover, the Group does not
form special reserve or other funds to cover possible losses or settle claims with the third
parties. Thus, such events may drastically disrupt the Group’s operation, cause considerable
damage and/or require expenses which will not be compensated. All the foregoing
circumstances may have negative effect on the business activity of the Group, its financial
position and prospects.
A major accident may result in substantial property losses and incapability to restore
it.
If in case of a major accident one or more objects of the Group (e.g. the headquarters in
Krasnodar, distribution center or hypermarket) are seriously damaged, the Company may not
be able to resume its activity within the established time period. The Group does not exercise
the insurance or form special funds to cover such accidents. Any such accident may have
negative effect on the Group’s business activity, its operation results, financial position and
prospects.
109
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OOFF CCOORRPPOORRAATTEE CCOONNDDUUCCTT OOFF RRUUSSSSIIAANN FFEEDDEERRAATTIIOONN 1155
№
Clause of the code of corporate conduct
Observed/
not observed
Note
General Shareholders’ Meeting
1.
2.
3.
4.
Notification of shareholders on holding the
general shareholders’ meeting not later than
30 days prior to the date of a meeting
irrespective the questions of the agenda, if
otherwise is not provided by the legislation.
in
the
Shareholders’ ability to study the list of
persons entitled to participate in the general
shareholders’ meeting, starting from the
date of notification on holding of the
general meeting up to the closing of the
general meeting
joint
presence, and in case if the general meeting
is held in absentee form – up to the closing
date of acceptance of voting ballots.
the
Shareholders’
information (materials) which
is to be
submitted within the preparation for the
general shareholders’ meeting via electronic
communication facilities, including Internet.
form of
ability
study
to
extract,
Shareholder’s ability to introduce a question
to the general meeting agenda or to call the
general meeting without submitting the
the
shareholders’
register
registration of his/her share rights
is
recorded in the system of shareholders’
register, and in case if his/her rights are
registered
-
sufficiency of the custody account extract to
exercise the above rights.
custody account
the
in
if
Observed
Paragraph 13.10 of the OJSC
“Magnit” Charter.
Observed
Article 24 of the Regulation on
the OJSC
“Magnit” general
shareholders’ meeting.
Paragraph 4.14 article 4 of the
Regulation on OJSC “Magnit”
information policy.
Article 22 of the Regulation on
the OJSC
“Magnit” general
shareholders’ meeting.
Paragraph 5.1.3, 5.1.4 article 5 of
the Regulation on
the OJSC
“Magnit” information policy.
Observed
Paragraph 13.11 of the OJSC
“Magnit” Charter.
Article 28 of the Regulation on
“Magnit” general
the OJSC
shareholders’ meeting.
Paragraph 5.4 article 5 of the
Regulation on OJSC “Magnit”
information policy.
Article 5 and paragraph 2, article
13 of the Regulation on the OJSC
“Magnit” general shareholders’
meeting.
Observed
15 The information is disclosed according to the “Methodical recommendations on the content and form of information
disclosure in compliance with the corporate code of conduct in the annual reports of joint-stock companies”, ratified by the
FFMS of 30.04.2003 № 03-849/р.
110
Observed/
not observed
Observed
upon the fact
Not observed
Note
to provide
the
According to paragraph 2 article
29 of the Regulation on the OJSC
“Magnit” general shareholders’
meeting, the Company makes all
the
arrangements
general
attendance
of
the
shareholders’ meeting by
members of
the board of
directors, sole executive body,
members
auditing
committee and other bodies of
the company. They are liable for
providing qualified answers to
the questions of the meeting
participants.
-
the
of
Observed
Article 42 of the Regulation on
the OJSC
“Magnit” general
shareholders’ meeting.
Board of directors
Observed
Paragraph 14.2. of
“Magnit” Charter
the OJSC
№
Clause of the code of corporate conduct
Availability in the company Charter or
internal documents of the requirement on
the obligatory attendance of the general
CEO,
meeting
shareholders’
management board members, members of
the board of directors, members of the
auditing committee and the auditor of the
joint - stock company.
by
The obligatory attendance by the candidates
of the general shareholders meetings with
agenda items on the election of the members
of the board, CEO, management bodies,
members of the auditing committee, and
items on the appointment of the auditor of
the joint-stock company.
Availability in the internal documents of the
joint-stock company of
the registration
procedure of
the general shareholders
meeting participants.
Availability in the Charter of the joint-stock
company of the right of the board members
to annually
financial and
economic plan of the joint-stock company.
ratify
the
5.
6.
7.
8.
9.
Availability of
risk management
structure in the joint-stock company, ratified
by the board of directors.
the
Not observed
board
“Magnit”
to which
Article 5 of the Regulation on the
OJSC
of
directors.
Paragraphs 6.7, article 6 of the
Regulation on the Committees of
the board of OJSC “Magnit”,
according
the
assessment of efficiency and
internal control
procedures of
the
financial and
related
economic
the
of
activity
Company and arrangement of
recommendations
the
improvement of such system
refer to the competence of the
Audit Committee.
on
to
Paragraph 3.1. and 6 article 1,
paragraph 2.4., article 2 of the
Regulation on the internal control
111
№
Clause of the code of corporate conduct
Observed/
not observed
Note
of financial and economic activity
of OJSC “Magnit”.
Observed
Not applicable Under paragraph 14.2. of the
the
OJSC “Magnit” Charter,
election of the sole executive
body of the company refers to the
competence of the Company’s
board of directors.
Under paragraph 14.2. of the
OJSC “Magnit” Charter,
the
ratification of the agreement with
the person exercising the rights of
the company’s sole executive
body and members of collegial
the
to
executive body refers
competence
the OJSC
“Magnit” board of directors.
of
According to article 7 of the
Regulation on the committees of
the OJSC “Magnit” board of
the
directors, elaboration of
eligibility criteria of candidates
for
the positions of CEO,
members of collegial executive
the main
body, directors of
structural departments of
the
Company, and work-out of the
remuneration procedure for CEO,
Management board members and
highly qualified employees of the
Company,
the
refer
to
the HR and
competence of
Remuneration Committee.
According to paragraph 14.2. of
the OJSC “Magnit” Charter,
ratification of the agreement with
the person exercising the right of
the sole executive body and
members of collegial executive
body (Management board) of the
the
refers
company
competence
the OJSC
of
“Magnit” board of directors.
-
to
Observed
Not observed
10. Availability
in the
joint-stock company
charter of the right of the board to decide on
suspension of authority of CEO, appointed
by the general shareholders’ meeting.
11. Availability
in the
joint-stock company
charter of the right of the board to set the
requirements for the qualification and the
amount
of CEO,
management board members, directors of
the main structural departments of the joint-
stock company.
remuneration
of
12. Availability
in the
joint-stock company
charter of the right of the board to ratify the
conditions of the agreements with CEO and
management board members.
in the
internal documents of
joint-stock company
13. Availability
charter or
the
requirement that the votes of the board
and management
members,
members, are not counted in ratifying the
agreement conditions with CEO (managing
company, manager) and management board
if CEO
112
№
Clause of the code of corporate conduct
members.
14. Presence in the board of directors of the
joint-stock company of not less than 3
independent directors eligible for the Code
of corporate conduct.
Observed/
not observed
Observed
Observed
Observed
Observed
Observed
15. Absence in the joint-stock company board of
directors of members who were found
guilty of committing economic crimes and
crimes against the government, interests of
public service and local authorities, or
members
enforced
administrative penalty for entrepreneurial
or financial crimes, crimes related to taxes
and fees, securities market.
which
were
16. Absence in the joint-stock company board of
directors of members who are the member,
board
(manager), management
CEO
member or the employee of the legal entity
which is a competitor to the joint-stock
company.
in the
17. Availability
joint-stock company
Charter of the requirement on the election to
the board of directors by cumulative voting.
18. Availability in the internal documents of the
joint-stock company of the duty of the board
members to avoid any actions that will lead
or potentially may lead to the conflict
between their interests and interests of the
joint-stock company, and in case such a
conflict arises - the duty to disclose the
information about this conflict to the board
of directors.
19. Availability in the internal documents of the
joint-stock company of the duty of the board
members to notify the board in writing on
the intention to make a transaction with
securities of the joint-stock company, being
Observed
Note
guilty
found
According to paragraph 1 article
33 of the Regulation on the OJSC
“Magnit” board of directors, the
board must include not less than
one independent member.
Four independent directors were
elected to the Board of directors,
they are:
1) Valery Butenko.
2) Alexander Zayonts;
3) Alexey Makhnev;
4) Aslan Shakhachemukov.
The company does not hold
information about any members
of the OJSC “Magnit” board of
directors
of
committing economic crimes and
crimes against the government,
interests of public service and
local authorities, or members
enforced
who
for
administrative
entrepreneurial
financial
crimes, crimes related to taxes
and fees, securities market.
The company does not hold
information about any OJSC
“Magnit” board of directors
members being
the members,
CEO
(manager), management
board member or the employee
of the legal entity which is a
competitor to OJSC “Magnit”.
Paragraph 14.7. of
“Magnit” Charter.
penalty
or
the OJSC
were
Article 7 and 32 of the Regulation
on the OJSC “Magnit” board of
directors.
Paragraph 7.4.10 article 7 of the
Regulation on the committees of
the OJSC “Magnit” board of
directors.
Article 7 of the Regulation on the
of
OJSC
directors.
“Magnit”
board
Article 7, paragraphs 11.6-11.7
113
№
Clause of the code of corporate conduct
the member of this company or of its
subsidiary (dependant) companies, and to
disclose the information on the transactions
with such securities as well.
20. Availability in the internal documents of the
joint-stock company of the requirement to
hold the meetings of the board not less than
once in six weeks.
21. Holding of the joint-stock company board
meeting within
year
the
periodically but not less than once in six
weeks.
reported
22. Availability in the internal documents of the
joint-stock company of the board meetings
procedure.
Observed/
not observed
Note
article 11 of the Regulation on the
information policy of OJSC
“Magnit”.
Not observed According to paragraph 1 article
22 of the Regulation on the OJSC
“Magnit” board of directors,
board meetings are held upon
necessity but not less than once in
three months.
Not observed During 2011 the OJSC “Magnit”
board meetings were held not
less than once a month, except for
January when board meetings
were not held.
The regulations on the Board of
directors of OJSC “Magnit”
Observed
23. Availability in the internal documents of the
joint-stock company of the Regulation on
the obligatory approval by the board of
company
directors of
transactions at the amount of 10 and more
percent of the assets value of the company
excluding transactions entered into on a
regular economic activity basis.
joint-stock
the
24. Availability in the internal documents of the
joint-stock company of the right of the
board of directors to get from the joint-stock
company executive bodies and directors of
the
the main
information which is essential for them to
exercise functions, and the responsibility for
failure to submit such information
structural departments
25. Presence of the board committee of strategic
planning or assignment of the functions
hereof to the other committee (except for the
audit committee and HR and remuneration
114
of
of
the
Not observed According to paragraph 14.2. of
the OJSC “Magnit” Charter, the
transactions
approval
interrelated
(including several
transactions)
on acquisition,
alienation, directly or indirectly,
by the company and possibility of
assets,
alienation
amounting to 5 or more percent
of the balance sheet assets of the
its subsidiaries
company and
(“the Group”), defined on the
basis of the
last consolidated
report of the Group, prepared in
IFRS,
accordance with
excluding
the
offering of the common shares of
the company and transactions in
the usual economic activity,
refers to the competence of the
board of directors.
Article 6 and 9 of the Regulation
on the OJSC “Magnit” board of
directors.
transactions on
Observed
the
Article 6 of the Regulation on the
OJSC
information
policy.
“Magnit
Not observed
The possibility of establishing the
committee is considered.
№
Clause of the code of corporate conduct
committee)
26. Presence of the board committee (audit
committee) which advises on the joint-stock
company auditor
the board, and
to
cooperates with the board and revision
committee of the joint-stock company.
27. Presence
in
committee of
the audit
independent and non-executive directors
only.
Observed/
not observed
Observed
Observed
28. Management of the audit committee is
executed by the independent director.
Observed
29. Availability in the internal documents of the
joint-stock company of the right of all the
audit committee members to access any
documents and information of the joint-
stock company, provided that the do not
disclose the confidential information.
30. Establishment of the board committee (HR
and Remuneration
committee), which
function is to set the candidates criteria for
the board members and work out the
remuneration policy of
joint-stock
company.
the
Observed
Observed
Note
Alexander
committees
The Audit Committee of the
is
board
“Magnit”
OJSC
established in the Company.
The document assigning
the
functions to the audit committee
is the Regulation on the board
committees of OJSC “Magnit”.
According to the paragraph 6.4,
article 6 of the Regulation on the
of OJSC
board
“Magnit”, the audit committee
must have
independent
an
director.
the Audit
The members of
Committee of OJSC “Magnit” are
independent directors:
1)
(independent director);
2) Alexey Makhnev (independent
director);
3) Aslan Shkhachemukov
(independent director).
According to the point 6.5 of the
article 6 of the Regulation on the
of OJSC
board
“Magnit”,
independent
director only can be in charge of
the Audit Committee.
The Chairman of the board Audit
Committee of OJSC “Magnit” is
Alexander
the
independent director.
Paragraph 4.8 of the article 4 of
the Regulation on
the board
committees of OJSC “Magnit”.
committees
the
Zayonts,
Zayonts
and
“Magnit”
Paragraphs 11.5, 11.8, 11.12 of the
article 11 of the Regulation on the
information
OJSC
policy.
HR
Remuneration
Committee of the board of OJSC
“Magnit” is established in the
Company.
the
The document assigning
functions
and
to
Remuneration committee is the
Regulation
board
on
committees of OJSC “Magnit”.
the HR
the
115
№
Clause of the code of corporate conduct
31. Management of the HR and Remuneration
Committee is executed by the independent
director.
Observed/
not observed
Observed
32. Absence
in the HR and Remuneration
Committee of the officials of the joint-stock
company
Оbserved
33. Establishment of the risks committee of the
board or assignment of the functions hereof
to the other committee (except for the audit
committee and the HR and Remuneration
committee).
Not observed
Note
in
and
the HR
Alexey Makhnev (independent
director) is the Chairman of the
HR
Remuneration
Committee of the OJSC “Magnit”
board.
There are no officials of the
and
company
Remuneration Committee (except
members of
the Board of
directors).
Members of the Committee are:
1) Alexey Makhnev,
2) Valeriy Butenko,
3) Alexander Zayonts.
The committee establishment is
under consideration.
conflict management
34. Establishment of the board committee of
corporate
or
assignment of the functions hereof to the
other committee
the audit
committee and the HR and Remuneration
committee).
(except
for
35. Absence in the committee of the corporate
joint-stock
the
conflict management of
company officials.
36. Management of
the corporate conflict
management committee is executed by the
independent director.
37. Availability of the internal documents of the
joint-stock company ratified by the board,
which
of
the
establishment and operation of the board
committees.
procedure
provide
Not observed
The committee establishment is
under consideration.
Not observed
See clause 34
Not observed
See clause 34
Observed
The Regulation on the board
committees of OJSC “Magnit” is
ratified by the board of OJSC
“Magnit”.
38. Availability in the charter of the joint-stock
company of the procedure of the board
quorum determination, which provides the
obligatory participation of the independent
directors in the board meetings.
Not observed
-
Executive bodies
39. Presence of the collegial executive body
joint-stock
body)
the
of
(managing
company.
Observed
-
116
№
Clause of the code of corporate conduct
40. Presence
in
the
charter or
internal
documents of the joint-stock company of the
regulation on the obligatory managing body
approval of the transactions with real estate,
receipt of credit by the joint-stock company,
if the transactions herein do not refer to the
major transactions and do not relate to the
regular economic activity of the joint-stock
company.
41. Availability in the internal documents of the
joint-stock company of the coordination
procedure of operations which are outside
the framework of financial and economic
activity of the joint-stock company.
42. Absence
in
the
joint-stock
company
executive bodies of members who are the
member, CEO
(manager), management
board member or the employee of the legal
entity which is a competitor to the joint-
stock company.
in
the
penalty
joint-stock
43. Absence
administrative
crimes against
company
executive bodies of members who were
found guilty of committing economic crimes
the government,
and
local
interests of public service and
authorities, or members which were
enforced
for
entrepreneurial or financial crimes, crimes
related to taxes and fees, securities market.
If the functions of the sole executive body
are
the management
organization or the manager – compliance
of CEO and management members of the
management organization or the manager
with the requirements set to CEO and
management members of the joint-stock
company.
44. Presence
exercised
by
in
for
the
the
charter or
(the manager)
the
in
internal
documents of the joint-stock company of the
management
prohibition
to exercise
organization
similar
competing
company, and to be involved in any other
joint-stock
property relations with
company, except for providing services to
the
(the
management organization
manager).
functions
the
Observed/
not observed
Observed
Note
Paragraph 16.2 of the article 6 of
the Charter
Observed
Observed
Observed
the board
The procedure of
the Company
resolutions of
within its competence is provided
by the internal documents of
OJSC “Magnit” – the Charter of
the Company, the Regulation on
the board of OJSC “Magnit”.
The OJSC “Magnit” executive
bodies do not have among its
is a
members a person who
member,
(manager),
CEO
management board member or
the employee of the legal entity
which is a competitor to the joint-
stock company.
The company does not hold
information about any members
of the OJSC “Magnit” executive
bodies
of
committing economic crimes and
crimes against the government,
interests of public service and
local authorities, or members
administrative
were
penalty for entrepreneurial or
financial crimes, crimes related to
taxes and fees, securities market.
enforced
found
guilty
Not observed No management organization
(manager).
117
№
Clause of the code of corporate conduct
Observed/
not observed
Note
Observed
Paragraphs 18.1. – 18.2. of the
Charter of OJSC “Magnit”.
Article 5 of the Regulation on the
sole executive body of OJSC
“Magnit”.
Article 9 of the Regulations on
the
collegial executive body
(Management Board) of OJSC
“Magnit”.
Not observed
See clause 44
to
Not observed According to the article 69 of the
Federal Law “On the joint-stock
companies”, the executive bodies
of the joint-stock company are
the board of
accountable
directors, therefore the right of
the management board members
to get the information about the
operation and activity of the
executive bodies is essential and
does not require any special
prescription.
-
Observed
45. Availability in the internal documents of the
joint-stock company of the duty of the
executive bodies to avoid any actions that
will lead or potentially may lead to the
conflict between their interests and interests
of the joint-stock company, and in case such
a conflict arises - the duty to disclose the
information about this conflict to the board
of directors.
46. Presence
in
the
charter or
internal
documents of the joint-stock company of the
selection criteria
the management
for
organization (manager).
47. Reporting by the executive bodies on their
activity to the board on a monthly basis.
48. Determination in contracts and agreements
entered into by the joint-stock company
with CEO
(management organization,
manager) and management board members
of the responsibility for breach and violation
of regulations on confidentiality and insider
information.
The secretary of the company
(the
secretary of
49. Presence in the joint-stock company of the
special official
the
company), whose duty is to provide the
compliance of the bodies and officials of the
joint-stock company with the procedural
requirements which ensure the exercise of
rights and legal interests of the joint-stock
company.
50. Availability
in
the charter or
internal
documents of the joint-stock company of the
procedure of appointment (election) of the
company’s secretary and assignment duties
to the secretary of the company.
Not observed
-
Not observed
-
118
№
Clause of the code of corporate conduct
51. Availability in the charter of the joint-stock
company of
the
candidates for the secretary position of the
company.
the requirements
to
Observed/
not observed
Not observed
-
Note
Substantial corporate actions
52. Presence
in
the
charter or
internal
documents of the joint-stock company of the
requirement on major transactions approval
before its settlement.
53. The
obligatory
the
independent appraiser for the assessment of
the subject of the major transaction.
involvement
of
the
share
stake of
54. Presence in the charter of the joint-stock
company of the prohibition on any actions
within the acquisitions (mergers) of the
major
joint-stock
company, aimed at the interests protection
of the executive bodies (members of such
joint-stock
bodies) and members of the
and
company
board
deteriorating
the
shareholders as compared to the present
(particularly, prohibition on the decision of
issue additional shares,
the board
shares or
securities
securities providing the right for acquisition
of company’s shares, before the end of the
presumptive date of shares acquisition,
even if the right to make such a decision is
provided by the Charter).
directors,
of
convertible
position
into
the
of
to
Not observed
-
Not observed
-
Since 01.07.2006
the prohibition on
realization of any
of such actions by
the company
management
authorities is
determined by the
article 84.6 of the
Federal Law “On
joint-stock
companies”,
which makes the
inclusion of such
regulations in the
Charter
unreasonable.
of
of
the offering by
the
According to the article 84.6 of
the Federal Law “On joint-stock
companies”, after receipt by the
open company of optional or
obligatory offer, the decisions on
the following issues are taken
only by the general shareholders’
meeting of the open company:
- increase of the charter capital of
the open company through the
offering of the additional shares
within the limits of number and
the
(types)
categories
announced shares;
the open
-
company
securities,
convertible into shares, including
the options of the open company;
- approval of the transaction or
several interrelated transactions
on acquisition, alienation or
possibility of alienation by the
open company of assets, directly
or indirectly, with the value of 10
or more percents of the balance
sheet value of the open company,
determined on the basis of its
accounting report for the last
reporting date,
if only such
transactions are not made in the
process of the ordinary economic
activity of the open company or
were not made before the open
company receives optional or
obligatory offer, and if the open
company receives the optional or
obligatory offer to acquire the
publicly traded securities, prior
to the information disclosure on
119
№
Clause of the code of corporate conduct
Observed/
not observed
Note
acquisition by
the delivery of the corresponding
offer to the open company;
- approval of the related party
transactions;
-
the open
company of the allocated shares
in cases provided by the present
Federal Law;
- increase of the remuneration to
the persons
the
the management
in
positions
bodies of the open company,
determination of conditions of
cessation of
their authorities,
of
including
increase of the compensations
paid out to these persons in case
of cessation of their authorities.
-
determination
occupying
Not observed
Observed
Paragraph 8.7 of the Charter of
OJSC “Magnit”.
Not observed
-
55. Availability in the charter of the joint-stock
company of the requirement on obligatory
involvement of the independent appraiser
for the assessment of the current market
price of the shares and possible changes of
their market price in the result of a merger.
56. Absence in the joint-stock company charter
of the acquirer’s release from the obligation
to offer
the
ordinary shares of the company, owned by
them, (securities convertible into ordinary
shares) within a merger.
the shareholders selling
57. Presence in the joint-stock company charter
or internal documents of the requirement on
obligatory involvement of the independent
appraiser for the assessment of shares’
conversion ratio within reorganization.
Information disclosure
58. Availability of
the
internal document
ratified by the board of directors, stipulating
the rules and approaches of the joint-stock
disclosure
company
(Regulations on information policy).
information
to
59. Availability in the internal documents of the
joint-stock company of the requirement to
disclose the
information on the shares
offering, on persons who intend to acquire
the offered shares, including the major share
stake, and on whether the senior officials of
the joint-stock company will take part in
120
Observed
Not observed
is
on
Regulation
ratified by
The
the
information policy of OJSC
“Magnit”
the
the board of
resolution of
directors of OJSC “Magnit” on
July 15, 2010, minutes of meeting
w/o N of July 15, 2010.
Information disclosure is carried
the
in accordance with
out
requirements
actual
of
legislation of Russian Federation.
the
№
Clause of the code of corporate conduct
acquisition of the shares offered by the
company.
Observed/
not observed
Note
60. Availability
of
list
the
joint-stock company
in the
internal documents
of
information, documents and materials
the
should be provided
which
the
shareholders
questions
general
submitted
shareholders’ meeting.
to
for consideration of
to
the
Observed
Paragraph 13.11 of the Charter of
OJSC “Magnit”.
Articles 26-28 of the Regulation
on
the general shareholders’
meeting of OJSC “Magnit”.
Paragraphs 5.4 article 5 of
Regulation on the OJSC “Magnit”
information policy.
61. Availability of the website of the joint-stock
company and regular disclosure of the
information about the joint-stock company
on its website.
Observed
http://www.magnit-info.ru
62. Availability in the internal documents of the
joint-stock company of the requirement to
disclose information about the transactions
of the joint-stock company with persons
referred to the top officials of the joint-stock
company by
, and about
the charter
transactions of joint-stock company with
organizations in which 20 or more percents
of the charter capital of the joint-stock
company directly or indirectly are owned
joint-stock
by
company, or organizations, which can be
otherwise considerably influenced by the
persons hereof.
top officials of
the
the
63. Availability in the internal documents of the
joint-stock company of the requirement to
disclose
the
transactions which may affect the market
joint-stock
value of the shares of the
company
information about all
the
64. Availability of
the
internal document
ratified by the board of directors on the use
of material information on the activity of the
joint-stock company, shares and other
securities of the company and transactions
with them, which is not public and the
disclosure of which can considerably affect
the market value of shares and other
securities of the joint-stock company.
Not observed
Information disclosure is carried
the
in accordance with
out
requirements
actual
of
legislation of Russian Federation.
the
Observed
Information disclosure is carried
the
in accordance with
out
requirements
actual
of
legislation of Russian Federation
the
Observed
article
Paragraphs
3,
3.3
paragraphs 4.8-4.9 article 4 of the
Regulation on the OJSC “Magnit”
information policy.
The
the
Regulation
information policy of OJSC
the
“Magnit”
resolution of
the board of
directors of OJSC “Magnit” on
July 15, 2010, minutes of meeting
w/o N of July 15, 2010.
(is ratified by
on
121
№
Clause of the code of corporate conduct
Observed/
not observed
Note
Control over financial and economic activity
65. Availability of procedures of the internal
control over the financial and economic
activity of the joint-stock company, ratified
by the board of directors.
Observed
Observed
Observed
Observed
66. Presence of a special department of the
the
joint-stock
company
compliance with the procedures of the
internal control (supervision and auditing
department)
regulating
67. Availability in the internal documents of the
joint-stock company of the requirement for
the board to determine the structure and
members of supervision and auditing
department of the joint-stock company
68. Absence
in
the revision and auditing
department of members who were found
guilty of committing economic crimes and
crimes against the government, interests of
public service and local authorities, or
members
enforced
administrative penalty for entrepreneurial
or financial crimes, crimes related to taxes
and fees, securities market
which
were
is
ratified by
Regulation on the internal control
financial and economic
over
activity of OJSC “Magnit” as
amended
the
resolution of the OJSC “Magnit”
board of directors on July 15,
2010, minutes w/o N as of July 15,
2010.
Internal audit department
is
established in the Company. The
document assigning the functions
to the service – Regulation on the
internal control over financial
and any economic activity of
OJSC “Magnit”.
Paragraph 3 of the article 3 of the
Regulation on the internal control
over
financial and economic
activity of OJSC “Magnit”.
The company does not hold
information about any members
of the OJSC “Magnit” revision
and auditing department found
guilty of committing economic
crimes and crimes against the
government, interests of public
service and local authorities, or
enforced
members
were
for
administrative
entrepreneurial
financial
crimes, crimes related to taxes
and fees, securities market.
penalty
or
Observed
-
Not observed
-
69. Absence
in
the revision and auditing
department of members who are
the
member of the executive body of the joint-
stock company or who are the members,
CEO (manager), management member or
the employee of the legal entity which is a
competitor to the joint-stock company.
70. Availability in the internal documents of the
joint-stock
the date of
company of
submitting the documents and materials for
assessment of the realized financial and
the revision and
to
economic activity
auditing department, and responsibility of
the officials and employees of the joint-stock
company for not submitting them in time.
122
№
Clause of the code of corporate conduct
71. Availability
in the
joint-stock company
internal documents of the obligation of the
revision and auditing department to inform
the detected
the audit committee of
breaches, and in case of absence of the audit
committee – to inform the board of directors
of the joint-stock company.
Observed/
not observed
Observed
Note
Paragraph 4.9 article 3 of the
Regulation on the internal control
over
financial and economic
activity of OJSC “Magnit”.
Not observed
-
72. Presence in the internal documents of the
joint-stock company of the requirement on
preliminary assessment by the revision and
auditing department of operations not
provided by the economic and financial
plan of the joint-stock company (irregular
operations).
73. Availability
in the
joint-stock company
internal documents of
approval
procedure for irregular operation with the
board.
the
Not observed
-
74. Availability of
the
internal document
ratified by the board, which determines the
procedure of the revision commission’s
inspection of the financial and economic
activity of the joint-stock company.
Observed
on
the
Regulation
revision
commission of OJSC “Magnit” is
ratified by the annual general
shareholders’ meeting of OJSC
“Magnit” on
June 24, 2010,
minutes of meeting w/o N of
June 28, 2010.
75. The assessment by the audit committee of
its
the
before
the shareholders at
auditors’
the
submission
to
general shareholders’ meeting.
conclusion
Observed
Paragraph 6.7. article 6 of the
Regulation on the committees of
the board of OJSC “Magnit”.
Dividends
76. Availability of
the
internal document
ratified by the board of directors, which
in adoption of
regulates
the board
the amount of
recommendations on
dividends (Regulations on dividend policy).
77. Availability in the Regulation on dividend
policy of the procedure of determination of
the minimum share of net profit of the joint-
stock company for dividend payment, and
conditions under which the dividends on
privileged shares are not paid out or paid
out partially, the dividend amount on
which is set in the charter of the joint-stock
company.
78. Release of the information on dividend
joint-stock company and
policy of the
amendments
the periodical,
provided by the charter of the joint-stock
to
in
it
Observed
Observed
the dividend
Regulation on
policy of OJSC “Magnit”
is
ratified by the resolution of the
board of OJSC “Magnit” on July
15, 2010, minutes w/o N as of July
15, 2010.
Paragraphs 2.4 and 2.5 of the
article 2 of the Regulation on
dividend
of OJSC
policy
“Magnit”.
There are no privileged shares in
the Company.
Observed
The Regulation on dividend
policy of OJSC “Magnit”
is
posted on the OJSC “Magnit”
website.
123
№
Clause of the code of corporate conduct
Observed/
not observed
Note
company for release of the announcements
on holding of the general shareholders’
meeting
above
the
joint-stock company
information on the
website.
and placing of
124
1188.. IINNFFOORRMMAATTIIOONN OONN TTHHEE AAUUDDIITTOORR AANNDD TTHHEE CCOONNSSUULLTTAANNTT OOFF
TTHHEE CCOOMMPPAANNYY
Under the resolution of the annual general shareholders’ meeting of June 23, 2011
(minutes of 23.06.2011) the auditing firm LLC AF “Faber Lex” was appointed as the Company
auditor for RAS for the year 2011.
Choosing the auditing firm the following factors were considered: operation period of
the firm, the price of services provided, staff and their qualification.
Information on the Company’s Auditor which conducted audit of the Company for
the year 2011 according to the Russian Accounting standards:
In 2011 Limited Liability Company Auditing firm “Faber Lex” (LLC AF “Faber
Lex”)was the auditor of the Company, address: 144/2 Krasnykh Partizan street, Krasnodar,
Russian Federation.
LLC AF “Faber Lex” is a member of Moscow Audit chamber according to the Decision
of Management of June 27, 2007, ·№ 108. Number of certificate 1726 of July 09, 2007, Principal
Register Applicant Number 10203002910.
Telephone number: +7 (861) 220-03-20, 221-41-42, 226-41-41, 226-45-22, 226-38-15, 226-44-
54.
Information on the Company’s Auditor which conducted the audit of the Company
report over the year 2011 according to IFRS:
The audit of the Company´s report for the year 2011 according to International Financial
Reporting Standards was conducted by Limited
liability Company “Ernst&Young”
(Ernst&Young LLC) address: building 1, 77, Sadovnicheskaya naberezhnaya, Moscow, 115035,
Russian Federation.
Ernst&Young LLC is a member of Russian Audit Chamber according to the Decision of
the Board of Noncommercial partnership of Russian Audit Chamber of December 28, 2009,
certificate number 3028 of December 28, 2009, Principal Register Applicant Number 10201017420.
Telephone number: +7 (495) 755-97-00
Information on the financial consultant of the Company on the securities
market, which signed the securities prospectus registered on 06.03.2006:
Full name of organization
Short name of organization
Open Joint-Stock Company «Federal Fund
Corporation»
OJSC «FFC»
Address
25 Ostozhenka str., Moscow, Russia
Phone number (including city code)
+7 (495) 737-86-30
Fax number (including city code)
+7 (495) 737-86-32
Website of the financial consultant to disclose
the information about the Issuer under the
requirements of the Regulation on information
www.fscorp.ru
125
disclosure by the issuer of securities, ratified
by FFMS
License for exercising the activity on securities
market
Date of issue
Validation period
Issuing authority
License of the professional participant of
the securities market for brokerage activity
№ 077-06174-100000, License of the
professional participant of the securities
market for dealer activity № 077-06178-
010000
August 29, 2003
Non-expiry (for an indefinite term)
Federal Financial Markets Service
Services provided by the financial consultant:
- Preparation of the draft prospectus according to the information provided by the
Company;
-
Signing of the prospectus approved by the Company, after adequate verification
based on all the documents provided by the Company, according to the written inquiries of the
Financial consultant and receipt of the proper written certifications of the Company on
reliability, adequacy and completeness of the information contained in the above indicated
document and to be included in the prospectus, except the part, verified by the auditor and/or
appraiser;
- Expertise of the documents filed to the registration authority for prospectus
registration;
-
Signing of documentation, which might be required from the Company for
organization of securities floatation with the trade institutors;
- Advice services on securities issue, including information disclosure on the
securities market under the regulations of legislation.
126
19. INFORMATION ON VOLUMES OF ENERGY RESOURCES
UTILIZATION WITHIN THE YEAR 2011
Kind of energy resources
Electrical energy
Utilization
volume terms
2,530,678 kW
Thermal energy
714.2 Gcal
Gas
27,316.1 thousand cub.m.
capacity
in
Utilization capacity in money
terms, thousand rubles
11879.5
699.9
158.4
127
AANNNNEEXX TTOO 22001111 AANNNNUUAALL RREEPPOORRTT OOFF OOJJSSCC ““MMAAGGNNIITT””
ANNEX № 1: Consolidated financial statements of OJSC
“Magnit” for the year ended December 31, 2011.
ANNEX № 2: RAS Accounting report of JSC “Tander” for the year
2011:
(cid:1) Auditor’s report of “Faber Leks” Audit Limited Liability Company of the
annual accounting report of JSC “Tander” for the financial year 2011
(cid:1) Accounting reports of JSC “Tander” for the year 2011
(cid:1) Explanations to the balance sheet and profit and loss statement of JSC
"Tander" for the year 2011
(cid:1) Explanatory note to the accounting report of JSC "Tander" for the year 2011
ANNEX № 3: RAS Accounting report of OJSC “Magnit” for the
year 2011:
(cid:1) Auditor’s report of “Faber Leks” Audit Limited Liability Company of the
annual accounting report of OJSC “Magnit” for the financial year 2011
(cid:1) Accounting reports of CJSC “Magnit” for the year 2011
(cid:1) Explanations to the balance sheet and profit and loss statement of OJSC
"Magnit" for the year 2011
(cid:1) Explanatory note to the accounting report of OJSC "Magnit" for the year 2011
128