X5 + Karusel X5 + Karusel Transforming the Russian Transforming - PowerPoint PPT Presentation

X5 + Karusel X5 + Karusel Transforming the Russian Transforming the Russian Food Retail Landscape Food Retail Landscape 11 April 2008

Compelling Investment Proposition Compelling Investment Proposition Significant Step-Up in Scale of X5’s Business Immediate Position as a Leading Hypermarket Operator Excellent Geographic Fit Acquisition of High Quality Assets Financially Compelling Acquisition 2

Transaction Highlights Transaction Highlights � Transaction Acquisition of 100% of shares in Formata Holding BV, owner of the Structure Karusel Hypermarket chain � Value determined by formula in the Option Agreement (1) � Equity value: USD 920 - 970 million Transaction Value � Includes estimated value of Karusel land and real estate under construction � Considered Up to 25% of equity value can be paid in X5 shares to current shareholders of Karusel Funding Structure � Remainder in cash, potentially funded through equity financing � Transaction approved by the Supervisory Board on 10 April 2008 Approvals − Subject to satisfactory due diligence and Federal Antimonopoly Service (FAS) approval � Final purchase price dependent on valuation of real estate and to be determined by May 2008 Timing � Closing expected on 1 July 2008 3 (1) Detailed information on the formula is provided in Appendices, page 15 Source: X5 Retail Group

Karusel Overview Karusel Overview Business Highlights # 4 Hypermarket Operator in Russia � #4 hypermarket operator in Russia both by sales and net selling area as at 31 December 2007 4,600 Net Sales, USDm � Strong presence in key markets Net Selling Area, '000 sq. m. 3,200 − 23 stores located in St. Petersburg & North West region, Moscow region, Nizhny Novgorod & Dzerzhinsk, Volgograd, and Izhevsk 1,700 � Extensive real estate portfolio and land bank 831 650 (1) − All existing hypermarkets as at 31 March 2008 are 351 377 272 115 115 96 84 owned − 3 stores under construction Metro Auchan Lenta Karusel O'Key Mosmart � Strong historical revenue growth and attractive margin Note: Figures as at 31 December 2007 structure Cumulative Store Opening Schedule Net Sales, Margins & Store Count 23 22 22 22 Net Sales, USDm 19 19 Gross Margin % # of Stores 24.9% 23.7% 11 22 9 21.6% 19 7 6 3 6 831 1 1 1 361 84 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2004 2005 2006 2007 2008 FY 2005 FY 2006 FY 2007 Sources: Karusel public data, Company filings and websites, Business Analytica and X5 estimates 4 (1) Karusel estimated 2007 net selling area from public sources

Significant Step- -Up in Scale of Business Up in Scale of Business Significant Step EOP 2007 Net Selling Area 2007 Share in Top-10 Retailers+Karusel (2) 23.8% (1) 724 ‘000 sq.m. 652 20.6% 609 17.8% 14.2% 12.4% 351 272 224 6.6% 5.8% 5.5% 5.4% 4.5% 177 (1) 151 147 132 115 3.9% 3.2% 100 7th Continent 7th Continent Auchan Dixy Auchan X5 + Karusel Magnit Kopeyka Lenta Ramstore Karusel X5+Karusel Magnit Dixy Karusel X5 Metro Viktoria X5 Metro Lenta Kopeyka Viktoria Ramstore � The combined X5 and Karusel entity would have market share of 23.8% in the Top-10 Russian food retailers + Karusel, which translates into 3.2% market share in the total food retail market of Russia (3) � Significant lead ahead of its closest competitors – over 30% gap in terms of sales Sources: Company filings, Business Analytica 5 (1) Karusel estimated 2007 net selling area from public sources (2) Share of top 10 food retailers and Karusel in Russia in 2007 (3) In accordance with Business Analytica report, in 2007 the size of the total food retail market of Russia amounted to USD 190 bln

Vaulting into a Leading Position in Hypermarkets Vaulting into a Leading Position in Hypermarkets Evolution of Russian Modern Food Retail (1) Russian Hypermarket Operators Store Count [2] 2004 2007 18.2% 43.8% 27.5% 39 37 (2) 26 (2) 22 17 15 12 10 Metro X5 + Lenta Karusel Auchan X5 O'Key Mosmart Karusel Russian Hypermarket Operators Sales (3) 28.7% 37.4% 4,600 44.4% 3,200 18.7% 33.3% 1,700 1,224 Share of modern formats in Russian food retail (1) 831 650 393 377 Discounters Supermarkets Hypermarkets Metro Auchan Lenta X5 + Karusel O'Key X5 Mosmart Karusel Note: Figures as at 31 December 2007 Note: Figures as at 31 December 2007 � Significant enhancement of presence in hypermarkets - the fastest growing format in the Russian Food Retail Market � The acquisition of Karusel would result in a portfolio of 39 (2) hypermarkets for the X5 Group Sources: Business Analytica 6 (1) For cities above 100,000 inhabitants (2) One additional Karusel hypermarket was opened in March 2008, one additional X5 hypermarket was opened in February 2008 (3) Based on net sales

Excellent Geographic Fit Excellent Geographic Fit St. Petersburg & North West region – 15 stores in operation Moscow region – and 1 store under construction 4 stores St. Petersburg Yaroslavl – 1 store under construction Nizhny Novgorod & Dzerzhinsk – 2 stores Yaros lavl Izhevsk – MOSCOW 1 store N.Novgorod Regions of X5 operations Perm Izhevsk Karusel Hypermarkets as Kazan Voronezh of March 2008 Yekaterinburg Ufa Tyumen Saratov Samara Rostov-na-Donu Chelyabinsk Volgograd Yekaterinburg – 1 store Volgograd under construction – 1 store � Almost 20% addition to X5 net selling area � Karusel stores complement existing X5’s existing regional presence, maximizing efficiency � X5 asset base will be enhanced through the addition of high quality locations and ownership of Karusel stores 7 Source: Karusel filings, Karusel website

Significant Synergy Benefits Significant Synergy Benefits Synergies Sources � Improvement in sales per sq.m of existing Karusel stores through − Improvement in assortment − Rebranding Sales − More competitive pricing & active − Layout improvement promotions � Enhancement of X5-Karusel combined purchasing power & better Gross purchasing terms/contracts Margin � Leveraging of X5 logistics infrastructure � Optimization of management & administrative overheads � Retail operating expense leverage – economies of scale EBITDA � Better non-commercial purchasing � Total integration costs expected to be USD � Total annualized synergies expected to 150 mln in 2008 and 2009 positively impact cash flow by USD 70 mln after full integration and re-styling into Mercado concept 8

Mercado Hypermarket Concept Mercado Hypermarket Concept Layouts, Racking Communication Assortment Strategy Pricing & Promotions & Equipment � Focus on Fresh � Great prices & strong � Improved Non-Food � Mercado Supercentre − Wider choice promotions display brand − Image of very low � Increased Dry Food � Strong price − Better availability prices through space allocation communication, use of � Local assortment promotions � Consolidated Fresh bright colours � Better Food/Non-Food − Campaigns & � Mercado advertising areas balance seasonal planning � Improved overall leaflets emphasizing � Focus on household in − Aggressive Food & Fresh ambience Non-Food � Stronger price image in advertising in � Private label neighborhoods TV campaigns 9 Source: X5 Retail Group

Integration Plan Plan Integration Rebranding, change in layout, improvement of Sales End of 2008 assortment and introduction of X5’s pricing policy Purchasing End of 2008 Centralisation of purchasing function (X5 & Karusel) Logistics/Supply End of 2008 Integration of Karusel stores into X5’s logistics IT Replacement of Karusel’s systems with X5 IT platform End of 2008 Overheads Integration of Karusel stores into X5’s regional offices End of 2008 Launch of a unified advertising campaign for the Advertising Q3 - Q4 2008 Mercado brand 10 Source: X5 Retail Group

Improving Performance Improving Performance 2007 2008 2009 ▲ Full year contribution of stores opened in ▲ Opening of two new stores currently 2007 under construction ▲ One new store opened in March ▲ Like-for-Like normalizing at Mercado Net Sales 831 level ▲ Early benefits of Mercado re-branding (USD m) ▲ Significant benefits of Mercado re- ▲ Competitive pricing to drive sales density branding ▼ Short-term closing of stores for re- branding, integration and IT upgrade ▼ Limited margin investment in customer Normalizing at Mercado level Gross Margin 24.9% retention and store re-launch ▲ Synergies enhancement ▲ Start of synergies enhancement ▼ Short-term closing of stores for integration EBITDA Margin 8.4% ▼ One-off integration costs � Mercado normalized performance expected to achieve margins above Karusel historical levels in 2009 � Synergy and scale benefits further underpin attraction of the transaction 11 Source: X5 Retail Group, Karusel website