KRASNODAR, 31 August, 2006: OJSC “Magnit” (the “Company”; RTS: MGNT), Russia’s leading retail chain in terms of both number of stores and customers, is pleased to release its 1H06 reviewed by Deloitte and Touche financial results prepared in accordance with IFRS.

During 1H06 Magnit opened 182 stores and increased its selling space by 41.7% YoY, from 316.60 th. sq. metres at the end of 1H05 to 448.50 th. sq. metres at the end of 1H06.

Net revenue of the company in rouble terms increased by 52.8% YoY, from 19.40 bn roubles in 1H05 to 29.66 bn roubles in 1H06. The net revenue increase was due to both an increase in selling space and a 12.1% increase in like-for-like sales in rouble terms (ex. VAT). The like-for-like sales increase was in turn driven by both a traffic inflow 2.87% and the increase in the average ticket 8.91%.

Net revenue in USD terms increased by 54.8% YoY, from $694 mln in 1H05 to $1074 mln in 1H06.

The gross margin improved from 14.3% in 1H05 to 17.6% in 1H06 due to better purchasing terms, as well as an improvement in in-house logistics.

The EBITDA margin improved considerably, from 2.4% in 1H05 to 4.4% in 1H06, due to an expansion in the gross margin, while offset by higher wages and rent costs. EBITDA more than doubled, from $16.57 mln in 1H05 to $47.21 mln in 1H06.

In 1H06 the company achieved $20.91 mln in net income vs. $4.12 mn in 1H05.

The Company’s CEO, Sergey Galitskiy, commenting on the published 1H2006 results said the following:

“We added 182 stores in 1H06 and enjoyed strong like-for-like sales which allows us to comfortably upgrade our full year net sales expectations to $2.39 bn excl. VAT.

At the same time we are not satisfied with efficiency of the company demonstrated in 1H06.

Challenging situation on the alcohol market had a negative impact both on sales and gross margin in 2Q-3Q. In June for instance we had to sell alcohol products at discounted prices in order to lower the accumulated stock and thus protect the business from possible losses. The large volume of alcohol was also returned to our distribution centers.

Despite this negative one-off factor we envisage a continuation of gross margin increase which should be driven by our hard work in supply chain and assortment.

Operating expenses of the company in 1H06 excluding rent stayed at the level of 10% of sales, which is above our target.

For better control over business we initiated the process of extension of rent period in our leased stores for longer-term leases, which had a negative impact on 1H06 rent costs, while made rents more stable in the mid-term. We are also actively acquiring real estate using the IPO proceeds, which should positively affect our margins.

We took a strategic decision to enter the hypermarket format, which would allow us to get access to the broader base of consumers. In September we will start construction works on six best sites in our home markets in the regions of Russia.”

1H 2006 audited financial and operating results