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Lev KhasisCEO of X5 Retail Group N.V.”The strong financial performance of X5 Retail Group in 2006 and the specific progress in integration ofPyaterochka and Perekrestok clearly demonstrate that we are passing smoothly through the integrationprocess, stepping now into the period of capitalisation on practical synergies of the merger. We are inprocess of building a solid multi-format foundation to continue our further expansion in the role of themain consolidator of the Russian food retail market. I am excited and confident about our future.”Today, Perekrestok is one of the leading nationalsupermarket chains and one of the first chains inthe history of domestic retail. The chain consists ofthree store formats: convenience stores, supermarketsand city hypermarkets. The first Perekrestok store wasopened in Moscow in September 1995. Perekrestok’s Netsales was US $373 million in 2003 and by the end of 2006net sales reached US $1.5 billion. As of April 2007,Perekrestok stores operated in 15 Russian regions, includingMoscow and the Moscow region, St. Petersburg,Samara, Kazan, Tolyatti, Volgograd, Nizhny Novgorod,Voronezh, Lipetsk, Rostov-on-Don, Krasnodar, Yaroslavl,Ioshkar-Ola, Cheboksary and others. In 2005, Perekrestokentered into other CIS markets by acquiring the SPARsupermarket chain in Ukraine.The Pyaterochka soft discounter chain was founded in1999. By the beginning of 2000, the company consistedof 16 stores and turnover for 2000 was US $70 million.By the end of 2006, Pyaterochka’s net sales were US$1.97 billion. At December 31, 2006, Pyaterochka andits franchised stores had a presence in 12 RussianHistoryregions, Kazakhstan and Ukraine. In May 2005,Pyaterochka launched a successful IPO on the LondonStock Exchange (LSE) and raised approximately US$600 million, which were used to further develop thechain.As of 31 December 2006, the Group had 605 franchisedPyaterochka soft discount stores located in Russia,Ukraine and Kazakhstan. There were 10 franchisedPerekrestok stores in Moscow.On 18 May 2006, the Perekrestok supermarket chainand the Pyaterochka soft discounter chain merged. InOctober 2006, the united company was renamedX5 Retail Group N.V. The Company’s shares are listed onthe London Stock Exchange (LSE) under the ticker“FIVE”. As of 31 December 2006, the total number of theGroup’s stores (including franchises) was 1,234. Therewere 451 Pyaterochka soft discounters located inMoscow (222), St. Petersburg (204), and Ekaterinburg(25). There also were 168 company-owned Perekrestoksupermarkets in Russia’s central regions and in Ukraine,including 100 stores in Moscow.Concept and StrategyAAfter the merger of Pyaterochka and Perekrestok, the Company started creating an integratedplatform for future growth. From May until the end of 2006, two key objectives were successfullyreached: a successful beginning of integration process and continuous rapid growth. InMarch 2007, X5 Retail Group N.V. announced the Company’s 5-year development strategy.In 2007, the Group plans to conclude the integration process and build a durable multi-formatplatform for future growth. The Group’s long-term strategy focuses on multi-format growth andinvesting in technological development in such areas as logistics, IT, and HR – the key factors ofthe Company’s competitiveness in the future.The five-year development strategy of X5 Retail Group N.V. in Russia is supported by the SupervisoryBoard and key Group shareholders. Management team has been brought together that processes allthe necessary resources for carrying out the approved strategy.Х5 Today: Operation GeographyTotal stores as of 31 December 2006 –1234 (including franchisees)Russia – 1179 storesUkraine – 27 storesKazakhstan – 28 storesTotal company managed stores:Perekrestok storesPyaterochka storesCombined storesX5 Retail Group N.V. TodayGroup N.V. today is the undisputed leader of food retail and the only multi-formatoperator in Russia, with a significant regional presence. The Group’s Net sales reachedX5Retailnearly US $3.6 billion in 2006 with the total net trading area of X5 Retail Group N.V.stores of approximately 466,000 m2. In 2006, approximately 446 million people shopped in theGroup’s stores. More than 33 thousand people work in the Company.Note: The map shows coverage of X5 RetailGroup N.V. managed stores (including franchisees),excluding Ukraine and Kazakhstan.62 / ALFA GROUP / ANNUAL REPORT 2006 ALFA GROUP / ANNUAL REPORT 2006 2004 / 63