State of Global Retailing A Closer Look at Russia Artem Bektemirov, CEO Pharmacy Chain 36.6 NRF Annual Meeting 16 January 2005

2 Soviet-Style Retailing

3 Retailing Today

4 Shopping at Apteka 36.6

5 RUSSIA: #1 EMERGING RETAIL GROWTH MARKET RankingCountry Country Risk Market Attractiveness Market Saturation Time PressureScore 1Russia India China A.T. Kearney’s 2004 Global Retail Development Index

6  Market Growth: 10% annual growth in the next 5 years. Already one of the 10 largest retail markets in the world.  Strong Economy: Driven by strong trade balance, growth in productivity and investment, and fiscal responsibility.  Market Opportunities: With rising incomes, consumers seek greater quality and choice offered by modern formats.  Government Support: Relatively liberal policies in consumer economy balance traditional hurdles.  Strong Local Players Emerging: Russia retailers now emerging with operating efficiencies comparable to international benchmarks. WHY RUSSIA IS #1 RETAIL GROWTH MARKET

7 RUSSIA’S TWO ECONOMIES Consumer-BasedResource-Based % of GDP50%25% Growth Rate ( )15-20%10-15% Gov’t InfluenceLimitedSignificant Privatization Entrepreneurial start ups after 1990s Privatized State Resources in 1990s Political RisksAdequateVery High Company SizeSMEs and MMEsDomestic Blue Chips ConcentrationVaries by SectorHigh InvestmentUnder-investedHighly-invested

8 Real growth of consumer income and retail turnover % y-o-y Source: State statistic committee, IRG estimations 6-Year Annual Average: Retail: 9.1% Income: 10.3% RUSSIA’S RETAIL MARKET: $170 BILLION AND GROWING

9 Source: GKS, UFG, Euromonitor RETAIL MARKET SEGMENTS Annual Forecast Growth * Electronics 15% DIY 14% Food 12% Cosmetics 11% Pharmaceuticals 9% *nominal USD, CAGR Pharmaceuticals

10 5% Food 36% Electronics 9% DIY 6% Pharmaceuticals Source: UFG Research Top-5 Players’ Marketshare RUSSIAN RETAIL MARKET REMAINS FRAGMENTED Food: Metro Electronics: Eldorado Pharmaceuticals: 36.6 DIY: Starik Hottabych Top Russian Retailers

11 Sales per Square Meter (2002) USD FOOD RETAIL: RUSSIA vs. INTERNATIONAL

12 Sales per Square Meter (2003) USD PHARMACY RETAIL CHAINS: RUSSIA vs. INTERNATIONAL

13 RUSSIAN RETAIL: FUTURE TRENDS  New Formats: New and different formats (DIY, convenience stores).  Consolidation: Small chains bought by larger retailers.  Regional Expansion: Cities with population +1 million.  Foreign Retailers: Continued expansion over next years.  Large Format Retail: Trade centers and hypermarkets.

14 RUSSIAN RETAIL: MAIN BARRIERS  Capital: Lack of investments for domestic retail chain development.  Consumer Income: Low income of Russian population outside Moscow.  Real Estate Shortage/Prices: Lack of space and high rental and purchase prices.  Competition: Particularly with unorganized trade and open markets.  Bureaucracy & Red Tape.

15 Source: Pharmexpert, RMBC, DSM, 36.6 Moscow Regions Russia 3,671 4,038 4,442 4,886 5,375 5,805 6, CAGR* Russia 9.3% Regions 10% Moscow 5.8% *Compound Annual Growth Rate USD Millions PHARMACEUTICAL MARKET FORECAST

16 * Includes medical devices (blood pressure meters, thermometers, glucometers, etc.), first aid (adhesive bandages, wound care materials, etc.), patient care products, specialty hosiery and support products. Source: Euromonitor, Pharmexpert, Supplier data, Internal estimates Dietary supplements Other* Total PPh CAGR Total PPh 18% Other 20% Supplements 15.8% USD Millions PARA-PHARMACEUTICAL MARKET FORECAST

17 Sources: AIPM/RMBC, UFG, GKS, Euromonitor GROWTH Y-o-Y, % MARKET USD billions COSMETICS AND TOILETRIES MARKET FORECAST Diapers 16.1% Sanitary Protection 15.5% Skin Care 14.6% Fastest Growing % CAGR ( )

Pharmacy Chain 36.6 Russia’s Leading Health and Beauty Retailer

19 sales in EBITDA was 9.3% in market capitalization. 20% of shares placed in 2003 IPO. topline annual growth: 30% in retail, 20% in manufacturing. in 7 Russian regions. purchases in 4th quarter in the generic portfolio of Veropharm. skilled personnel and experienced management team. 250 pharmacies 145 million 25 % 290 products 6000 employees million 7.3 million 36.6 AT A GLANCE

pharmacies 7 regions 30 million customers MURMANSK31 ST.PETERSBURG 4 MOSCOW &92 LOGISTIC REGION NIZHNY NOVGOROD40 VORONEZH & 5 TULA ULYANOVSK 9 BASHKIRIA EXPANSION

21 Source: Gallup Media Survey, 2003 Also leads in: attendance 49% purchases 40% 36.6 IS RUSSIA’S MOST RECOGNIZABLE BRAND

22 We strive to increase the value of the company by providing our customers with a reason to come back. CUSTOMER VALUE PROPOSITION  Convenient locations.  Reliable quality products.  Excellent shopping experience.  Wide assortment.  Competitive prices.

23 By 2008 : $800 million in sales 10% of market 60 million customers 36.6 TODAY & TOMORROW $55 $76 $45 $39 STORES 2003 SALES 2003 USD millions 36.6 o3rigla first aid natur produkt

24 Address: Moscow, 36 Bolshaya Pochtovaya str. Tel.: +7 (095) Fax: +7 (095)