X5 RETAIL GROUP STRATEGY

1. X5 RETAIL GROUPSTRATEGY March 15, 2007

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3. Table of Contents: • Russian Food Retail Market • Company • Expansion Strategy • Format Strategy • Integration • Support Functions (Strategy of Logistic, IT, HR) • Conclusions p.4 p.8 p.16 p.20 p.27 p.31 p.36

4. Russian Food Retail Market

5. Russian Food Retail Market (overview) Main characteristics: attractive, large, with high potential of growth, unsaturated, with low competition, with short period of advantages to catch Official Russian Food Retail market (2006) – USD 146 bln Total Russian Food Retail Market (2006) – USD 233 bln (incl. “grey” part) Share of modern formats – 15% (of total market) Share of Top 10 in modern retail chains – 53% (of total market) Share of X5 Retail Group on the market – 1.7% (of total market) Key Russian food retail operators Source of info: FSGS, analysts, media reports

6. Forecast of Russian Retail Market Growth $146 bln. 37% $233 bln. 15% $18.4bln. (53%) 2006 year 2011 year $bln, incl VAT • Official Russian food retail market $281 bln. • Estimated share of «grey» market 30% • Total Russian food retail market $405bln. • Share of modern formats in total Russian food retail market 35% • TOP 10 modern food retail chains (share) $106bln.(75%) • Forecasted annual average growth rate for 5 year period of Total Russian food retail market is12% per year. • Average growth rate of top-10 in 5 year period is expected at a level of 42%. Source of info: FSGS, analysts, media reports

7. Perspectives of Modern Formats • in Russian Retail Trade Perspectives of retail formats, (bln.$) Change of the format structure in modern retail trade, (%) Share of modern trade (of total Russian market) * TRRM 405 2011 г. 2006 г. CAGR 12% * TRRM 15% 35% 233 CAGRof the formats: Hypermarket – 39% Discounter – 33% Supermarket – 20% * - Total Russian Retail Market • The main formats in Russia are discounters, • supermarkets, hypermarkets. • It’s expected that the fastest growing market • segments in 5-year period will be hypermarkets and • discounters (CAGR respectively39% and 33%). Source of info: analysts and media reports

8. Company

9. History Key milestones • Pyaterochka franchise operations start • Private Label development program start • The largest DC opened in North-West Russia • 100th store opened • Ukraine & Kazakhstan markets entry • IPOat LSE • 18 St. Petersburg and 25 Moscow Kopeyka stores acquisition • A.Rogachev and A.Girda founded Pyaterochka chain • 16 stores opened in St.Petersburg  Pyaterochka enters to Moscow market 1995 1998 2002 2003 2004 2005 2006  Perekriostok chain founded by Alfa Group Consortium • 20 supermarkets opened • 1st DC acquired • 1st Perekriostok hypermarket opened • Regional expansion start • Templeton Investment foundation buys 7.7% of Perekriostok stock • 75 supermarkets opened • SPARMiddle Volga chain acquired • «365» chain acquired in Yaroslavl’ • Gastronomy production started • 90 supermarkets opened • Ukraine market entry via 4 Kiev stores chain acquisition Merger of Pyaterochka and Perekriostok 2002 2003 2004 2005 1999 2001 Pyaterochka & Perekriostok chains development in 2003-2007F period th.m2 th.m2 PEREKRIOSTOK PYATEROCHKA CAGR (03-06): 32% CAGR (03-06): 38%

10. X5 Retail Group Today • X5 Retail Group – is the leader of the Russian Food Retail Market • Net sales – USD 3.485 bln • Number of company own managed stores – 619 • Net selling space – 466,000 sq.m. • Geography of operations – Russia (9 regional offices), Ukraine, Kazakhstan (franchising stores) • Number of customers in 2006 – 445,871,769.

11. X5 Retail Group Today St. Petersburg Pskov Veliky Novgorod Cherepovez Tver’ Vologda Yaroslavl Smolensk MOSCOW Kostroma Kaluga Bryansk Ivanovo Vladimir Kirov Tula Orel Ryazan Kursk Lipetsk Yoshkar-Ola Perm Arzamas Cheboksary Belgorod Izhevsk Saransk Kazan Penza Tambov Voronezh Ulyanovsk Ekaterinburg Toglyatty Ufa Saratov Samara Tyumen Chelyabinsk Rostov-na-Donu Volgograd Novorossiysk Orenburg Krasnodar Sochi Elista Stavropol Astrakhan 2006: Total Retail Sales by the Regions (mln.$, VAT excl.) 2006: Share of Retail Sales by the Regions (%) Moscow 1’924 North-West 1’124 Nizhny Novgorod 158 Samara 78 South 70 Tatarstan 49 Ural 35 Ukraine 27 Centr.- Chernozemny 20 TOTAL: 3485 Total Stores including Ukraine: - 619 Perekriostok stores - 47 (excl.4 stores in Ukraine) Pyaterochka stores - 25 Combined: Moscow: Perekriostok - 100 Pyaterochka - 222 St. Petersburg: Perekriostok - 17 Pyaterochka - 204

12. New Mission, Vision and Value NEW MISSION: «We are improving the quality of your life» VISION: «Leadership. Always.» • VALUES: • Respecting individuality • Servicing customer needs • Striving for excellence

13. Corporate Rules • Be proud of your company. Trust in it • We are one team. Trust and support each other • Employees of the company are its key value • Be purposeful, energized, emotional and enjoy what you do • Our opportunities are defined by our objectives • Defining your priorities, focus on result • We do what adds value to our customers only • To stay competitive we must be the best in cost efficiency • Learn from your competitors, to be more efficient and successful than they • are • We are socially responsible company

14. Strategic objectives Building-up platform for further growth • The two key objectives for 2006 – start of integration and uninterrupted fast growth – were being met successfully • In 2007 X5 plans to finalize the integration process and build up a solid multi-format platform for further growth • The Group’s long-term strategy is focused on investments into multi-format growth and upgrading its technological competitive advantages in logistics, IT, HR and other key support functions The key strategic objectives of X5 going forward • Maintain the leadership position on the Russian market • Play role of the market consolidator in Russia • Ensure highest return on shareholders capital in the sector

15. 2007 key objectives and projections Key objectives 2007: CapEx Projections (mln.$, VAT excl.) • add at least 150’000 sq.m. of net selling space • expand supermarket chain across all regions of the European part of Russia • expand discounter chain in Moscow area, enter Samara and Nizhny Novgorod regions • develop hypermarket format, with the aim of massive roll-out starting from 2009 TOTAL at least 700 New stores 2007 450 2007: New DCs opening (th.sq.m) Rented 44.0 Owned 19.3 TOTAL: 63.3

16. Expansion Strategy

17. Focus on Russia and Ukraine «Х5» target regions for expansion RUSSIA is the PRIMARY course for expansion for now UKRAINE expansion strategy will be finalised and announced during 2007 X5 X5

18. Focus on the most attractive regions Population (>100 th. people) Share % Geographical zone Share % Area (mln.m2) Share % Market volume mln.$ European part and Urals 53 000 2.8 16% 75% 100 800 84% Siberia 7 300 2.7 16% 10% 14 400 12% Other regions 10 000 11.5 68% 15% 4 800 4% 100% Total (towns With population more than 100 th.): 70 300 (50%) 17.1 Total (allpopulation): 142 000 100% 120 000 100% X5 Retail Group will grow both organically and by means of M&A 3-rd priority 1-st priority 2-nd priority Zone №1 – European part and Urals Zone №2 – Siberian regions * Concentration of population, territory and market volume by Russian regions in 2005 Zone №3 – Other regions of Russia In its 5-year strategy, X5 Retail Group concentrates on the regions of the European part of Russia, which have the highest density of population and represent the largest part (84%) of food retail market. Source of info: analysts and media reports * - official data

19. M&A Strategy Main objective for M&A is toprovide sustainable growth of X5 shareholder value (price per share) through acquisition on financially attractive terms of strategically located and growing retail chains to enable Company’s strategy for long-term market leadership and to obtain access to new retail technologies and market segments European part and Urals Purchasing of retail chains with trade areas, suitable for organization of discounter, supermarket and hypermarket formats and attractive for investments Regions with the own stores of X5 as at the end of 2006 year Regions of western Siberia Creation of joint ventures or purchase of shares in the leading companies on the local market (organization of self dependent growth centers under X5 control with out withdrawing of operating resources of X5) There are no own stores as at the end of 2006 Other regions of Russia Selling of franchising contracts and possible creation of JVs to pass under X5 control in a longer term perspective No own stores are planed to be opened on this territory during 5 years

20. Format Strategy

21. Format Strategy To increase market penetration and maintain high growth rates, X5 Retail Group focuses on MULTI-FORMAT STRATEGY: Soft Discounters Hypermarket Supermarkets

22. Soft Discounters 2006 Format Concept As of 31 December 2006 X5 Retail Group operated 451 own discounter stores, with total net selling space of 257,000 sq.m., and net sales of 1,973 bln. USD Trade area (average) - 600 м² Assortment(average) - 3500SKUs Non-food - 10% Price - EDLP Value Proposition Future Format Development • Next to customers apartments • Low prices • Balanced assortment • Guaranteed quality of goods • Focus on efficiency • Increase % of centralized deliveries • Investment into price • High speed of opening (multiple centers of growth) • Optimization of assortment • Advertising and Promo activities • Loyalty programs • Increase share of fresh food • Increase contribution of Private Labels

23. Supermarkets 2006 Format Concept As of 31 December 2006, X5 Retail Group operated 168supermarkets stores, with total net selling space of 209,000 sq.m, and net sales of 1.512bln USD Trade area - 800, 1200, 1600, 4000 sq.m. Assortment - 15 000 – 25 000SKUs Price- high/low Quality - high Environment - friendly, welcoming Non-food - 20-30% Value Proposition Future Format Development • Perekriostok is the best in fresh fruits and vegetables, own bakery products, meat and fish products • Good location: close to customers apartments or «on their way home». Easy access, convenient parking. • Saving customers’ time • Accent on effectiveness • Increase % of centralized deliveries • Rationalization of assortment • Increase participation in fresh up to 60% • Increase contribution of Private Labels • Focus on standardization • Increase efficiency of ratio between trade and total areas

24. Hypermarkets – New Format • for the Company • The segment of hypermarkets is expected to be the most attractive and fast growing in the next five years • Among international operators only and are represented in the market, which gives huge room for growth • Consumer profile: a customer gives a premium to the format (everything under one roof) • The hypermarkets can provide the necessary speed of growth and increase the purchasing power

25. Hypermarket • Hypermarkets will allow to maintain high growth rates, increase market share and purchasing power • This format has high turnover and efficient low-cost operations, uses a smart pricing strategy (high/low) to create a low-price image • Supported by highly disciplined commercial and operational policy based on negative working capital Price: When I shop in Frank I do a cheap shopping Atmosphere: I’ll find a happy (friendly) atmosphere Promotions-Campaigns: I’m always surprised. I’ll get a good deal Staff: The people is friendly, willing to help, they know the business and what they are talking about Assortment: They did the best selection for me. I can cover almost all my needs

26. Drivers for Hypermarket format development • Building up platform for massive roll-out of hypermarkets starting from 2009 • land bank in process of creation (over 20 land plots secured, other 60 in progress) • X5 plans to open around 70 hypermarkets organically over next 5-7 years • Focus on Development projects - building own bigger trade centers in priority regions • Karusel chain acquisition • option excersisable from January 1, 2008 • ca. 25 hypermarkets by the beginning of 2008 • the potential acquisition fits well into X5 format strategy

27. Integration

28. Integration objectives • Integrate “Perekriostok” and “Pyaterochka” chains: • Implement the best practices from both companies • Find and implement synergies to increase operating profit and reduce expenses • Create organizational structure and business processes (including multi-format regional offices) to support high growth rate of the company • Create mechanism to integrate all companies from future M&A deals to support our growth and consolidation of the sector that means

29. Priorities of Integration People Purchasing Non-commercial purchasing Finance IT Logistics Commercial Non-commercial Headcount Support • Cross compare • Retroactive application • Scale Negotiation • Franchising Scale negotiations • Cross compare suppliers information • Negotiate scale (Discount Credit) • Central Head Office • Regional Structure • Stores • Logistics consolidation and delivery centralization SYNERGIES

30. New Management Team • Following the merger • a new international management team composed of professionals with extensive and successful experience in major Russian companies and leading international retail chains was built up • Lev Khasis, CEO, former Chairman of Perekrestok Supervisory Board, over 10 years in retail business, PhD in Retail Economics, Chairman of Russian Retail Association • Vitaliy Podolskiy, CFO, MBA from the University of Chicago, over 10 years of finance experience with leading investment banks and multinationals • Antonio Melo, COO, around 20 years of experience in retail with Makro • Pawel Musial, CCO, 10 year experience in retail with Tesco, Hit and Perekrestok • Dariush Bator, Perekrestok GM, over 10 years of experiense in retail with Tesco and Perekrestok • Andrei Gusev, M&A Director, MBA from the University of Pensylvania, over 5 years of M&A activity with Alfa-Group • Yuri Kobaladze, Corporate Affairs Director, probably Russia’s best professional in this area • Yulia Anokhina, HR Director, over 10 years in HR with leading Russian (YUKOS) and international companies (Bristol-Myers Squibb, Reemtsma) that means

31. Support Functions- Logistic Strategy- IT- HR

32. 2006 Logistic operations and objectives Locations – DCs in Moscow and St Petersburg Level of centralization – 50% for discounters; 25% for supermarkets DCs total area– 69’000 sq.m. (excl. 3PL operators): - Rented area – 6’000 sq.m. - Owned area – 63’000 sq.m. • Strategic objective of X5 Retail Group • to build uniform logistic infrastructure (DC network with transportation fleet) to support operations in all formats Target level of centralization: - 85% for discounters - 75% for supermarkets and hypermarkets DC types: - Regional DC (FMCG and Fresh) - National DC (SMCG, strategic goods: import & private label) - Both DC types will be company managed

33. X5 DCs Locations in European Russia - National DC location St. Petersburg Pskov Planned total area of national and regional DC’s in 2011 about 600’000 - 700’000 sq.m. Veliki Novgorod Cherepovets Tver’ Vologda Smolensk Yaroslavl Kostroma Moscow Vladimir Kaluga Bryansk Ivanovo Nizhni Novgorod Kirov Tula Orel Ryazan Kursk Yoshkar-Ola Lipetsk Perm Cheboksary Belgorod Saransk Izhevsk Tambov Kazan Penza Voronezh Ekaterinburg Ulyanovsk Saratov Togliatti Tyumen Samara Ufa Rostov-na-Donu Chelyabinsk Volgograd Orenburg Novorossiysk Krasnodar Sochi Stavropol Astrakhan

34. IT Mission and Goals Competitor Chain Increase IT costs efficiency as % of turnover Support company expansion with IT capabilities Provide X5 with competitive advantages through stability, development and innovations Provide stability & support for company operations optimization Build effective process-oriented IT organization Build professional united team Future IT landscape Stores Integration Bus Access Control Management SC planning and execution Customer Management LDAP Decision Support System Category Management Data warehouse Merchandising Financial Management HR Management New IT Platform Implementation

35. Human Resources Strategy • The main asset are the employees • The main priorities of HR • Create a uniform corporate culture • Build efficient system of recruiting, training and retaining employees to support high growth • Increase staff efficiency, improve productivity and decrease staff turnover

36. Conclusions

37. KEY TAKE-OUTS • X5 Retail Group has corporate 5-year strategic plan in Russia* and objectives, supported by its Supervisory Board and key shareholders, new core management team in place and access to necessary resources; • X5 Retail Group’s key long-term objective is to maintain and reinforce its position as the leading Russian chain in each format and market in which it operates, to provide our shareholders with superior return on investment in the industry; • X5 Retail Group is a multi-format chain, with primary focus on three core retail formats, namely discounters, supermarkets and hypermarkets; • X5 has been and intend to remain the consolidator of the fragmented Russian retail market: • X5 Retail Group plans to grow both organically and by M&A • Organic growth will remain the primary growth engine, with X5 Development and “green filed” construction as fast-growing area of its expansion especially in hypermarkets • X5 will actively develop JVs and partnerships with other market players such as developers, financial institutions, suppliers and other partners to promote growth and new products and services to its consumers • X5 key internal priorities will be: • Completion of integration of two organizations, development of “know-how” and organizational platform for a fast and efficient integration of retail companies • Creation of own SCM chain, including of DCs network and transport fleet to ensure unparallel and sustainable competitive advantage • Implementation of “best-in-class” IT system to support efficiently growing business needs, including SCM, CRM and IMS • Become an Employer of Choice, by building HR processes of recruiting, training and retaining employees to support growing demand of employees on each level * X5 strategy in Ukraine will be finalised and announced during 2007