The merger of Alliance UniChem and Boots was completed on 31 July 2006. The historic information below is an extract taken from the Merger Prospectus issued to shareholders on 5 June 2006.

Introduction

The Boots Group is a health and beauty group with operations in retail and manufacturing. Its products are sold in 17 countries, it employs approximately 63,000 people in total and operates approximately 1,500 health and beauty stores with an aggregate selling area of approximately 680,000 square metres. Boots sells a wide range of products under the “Boots” brand and also owns a number of UK market leading brands by revenue such as “No 7” and “Soltan”. Boots’ international division, BRI, has “Boots” branded implants in host retailers’ stores in 14 countries as well as approximately 95 owned stores in Asia. For the year ended 31 March 2006, the Boots Group generated trading profit from continuing operations of £335.9 million on revenue from continuing operations of £5,027.4 million. As at 31 March 2006, Boots had net assets of £1,651.5 million.

History

The Boot family began trading in 1849, selling herbal remedies from a small store in Goose Gate, Nottingham. In the 1870s the business began to develop under the management of Jesse Boot. He employed qualified pharmacists and opened a network of new stores, which, by 1900 had expanded to 181. This rapid rate of expansion was due to the success of Jesse’s business philosophy of buying in bulk and passing the benefit of reduced prices onto his customers. His policy of superior goods at competitive prices delivered with expert care meant that the Boots name became synonymous with quality, value and service.

The retail business was supported by a burgeoning manufacturing capability, and diversification into pharmaceutical research and development. By the 1930s, there were over 1000 Boots stores selling a wide range of products, including the new cosmetic range No7 and the suncare brand Soltan. The first overseas store also opened – in New Zealand in 1936.

To support the stores, Boots commissioned the development of new factories at a site in Beeston, on the outskirts of Nottingham, which remains Boots’ manufacturing and administrative centre. Following the Second World War the company continued to expand its manufacturing and research capabilities (which included an agricultural division), and the creation of the National Health Service in 1948, lead to a vast increase in dispensing.

More recent decades have seen the introduction of brands such as 17 cosmetics and new business ventures such as Boots Opticians. Today, Boots is the UK’s leading health and beauty retailer, with the largest share of the OTC market, and it also sells Boots brand products through an international business, which currently operates in 14 countries.

Business Overview

The Boots Group is a leading health and beauty retailer in the UK.

It operates three principal businesses: Boots The Chemists (“BTC”), Boots Opticians (“BOL”) and Boots Retail International (“BRI”).

BTC comprises the Boots Group’s health and beauty retail business in the UK and the Republic of Ireland. BOL comprises the Boots Group’s optical and eye-care business in the UK. BRI comprises the Boots Group’s international business. These businesses are supported by (amongst others) the Boots Group’s manufacturing functions.

Boots’ strategy during the past three years has been to create shareholder value by investing to become a more modern, efficient and competitive health and beauty retail business.

To implement this strategy, Boots has sought to:

• refocus on its core health business by, in particular, investing in its dispensing category;
• reinforce its comprehensive beauty and toiletries offering and grow its own-brand and exclusive product ranges such as “No 7”, “Soltan” and “17”, which Boots believes helps to differentiate its products from those of its competitors;
• offer better value for its customers by, in particular, reducing prices on its products (particularly in its toiletries category) and to grow its “Advantage Card” membership;
• open new stores, mainly in edge-of-town locations, and modernise its stores to improve their convenience and accessibility;
• offer expert customer care including by investing in training of its pharmacists; and
• invest in its supply and information technology functions to make them more efficient.