#1Детский мир LAM ÖLLAH... Detsky Mir - Investor Presentation #1 Russian specialized children's goods retailer April 2018 ОБУВЬ 8-14 ОБУВЬ 8-14 50 Detsky Mir RETAIL CHAIN#2Disclaimer THIS DOCUMENT IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR PURCHASE ANY SECURITIES DETSKY MIR RETAIL CHAIN Certain information in this document is forward-looking, and reflect Detsky Mir's current expectations and projections about future events, which reflect various assumptions made by Detsky Mir. These assumptions may or may not prove to be correct and no representation is made as to the accuracy of such information. By their nature, forward-looking statements involve known and unknown risk and uncertainty because they relate to future events and circumstances. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Detsky Mir does not undertake any obligation to update or revise any forward-looking statements in this document, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward- looking statements, which speak only as of the date of this document. This document is strictly confidential to the recipient may not be distributed to the press or any other person, and may not be reproduced in any other form. No reliance may be placed for any purpose whatsoever on the information contained in this document or on its completeness. No representation or warranty, express or implied, is given by or on behalf of Detsky Mir or any of its directors, officers or employees or any other person as to the accuracy or completeness of the information contained in this document and no liability whatsoever is accepted by Detsky Mir or its affiliates, advisors, agents, directors, officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any errors or omissions of information or use of such information or otherwise arising in connection therewith. This document does not constitute an offer of securities for sale in the United States of America. Neither this document nor any copy of it, nor the information contained herein, in whole or in part, may be taken or transmitted into, or distributed, directly or indirectly in or to the United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. No securities of Detsky Mir have been or will be registered under the United States Securities Act of 1933 or the securities laws of any state of the United States, and unless so registered may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. This document is only addressed to persons in member states of the European Economic Area who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC and amendments thereto). In addition, in the United Kingdom, this document is only directed at (1) qualified investors who are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or high net worth entities falling within Article 49(2)(a)-(d) of the Order or (2) persons to whom it may otherwise lawfully be communicated. This document is not an offer or an invitation to make offers or advertisement of securities in the Russian Federation.#3Agenda 1 Detsky Mir at a glance 2 Summary performance post IPO 3 Our investment case re-cap 4 Financial results DETSKY MIR RETAIL CHAIN 3#41 Russia's Children Goods Retail Market Leader Combining Growth and Shareholder Returns Key Facts #1 BRAND SHOP Detsky Mir is the undisputed #1 player in the specialized children's goods market in Russia "Detsky Mir" is an iconic brand with 99% prompted awareness¹ 556 Detsky Mir branded stores in 207 Russian cities, 22 stores in 12 cities in Kazakhstan and 44 Early Learning Center ("ELC") stores as of 31 December 2017 Average store size of c.1,400 sqm, located in modern shopping malls with product range of 20,000-30,000 SKUs Diversified product portfolio³ 2017 Large items and other² 10% Strong Operating and Financial Results³ Number of Stores DETSKY MIR RETAIL CHAIN CAGR 2013 - 2017: 25% 622 525 425 252 322 2014 2015 2016 2017 2013 Total Revenue (RUB bn) CAGR 2013-2017: 28% 97,0 79,5 60,5 45,4 36,0 Revenue Newborns 33% Toys 32% 2013 2014 2015 2016 2017 2017 RUB 97bn Adjusted EBITDA4 (RUB bn) 7.7% 9.8% 10.2% 10.3% 11.0% Fashion 25% CAGR 2013-2017: 40% 10,7 Leading Market Position 2017 Structure of Children's Goods Retail Market in Russia (%) Other (incl. non-organized retail market) 8,2 4,5 6,2 2,8 Internet 10% General Food Retailers 40% 10% 50% Detsky Mir Specialized Stores 40% 50% Other Players Source: Company data, Ipsos Comcon 1 Source: "Children Goods Market in Russia" report by Ipsos Comcon ("Ipsos Comcon report"). Poll was conducted in December 2017 2 Including large items, stationery, sports and seasonal goods 3 The Group's consolidated financial statements for 2013 under US GAAP, 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under US GAAP and IFRS 2013 2014 2015 2016 2017 % margin Dividend payments (cash flow basis, RUB bn) CAGR 2013-2017: 83% 1,9 3,0 4,4 4,8 0,4 2013 2014 2015 2016 2017 4 Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program#52 Delivering Strong Earnings Growth in the First Year Post IPO DETSKY MIR RETAIL CHAIN 1 2 3 4 5 Store openings Continuous expansion, exceeding initial openings guidance by 50% in 2017 Like-for-like² growth Affected by decelerating inflation and declining birth rates, yet still superior LFLs2 vs. all other listed Russian retailers • 1041 new Detsky Mir branded stores opened in 2017 Not less than 250 stores in the pipeline for 2018 - 2021 21.9% total revenue growth in 2017 7.2% LFL² sales growth in 2017 with 12.2% LFL² traffic growth Profitability Significant improvement due to further decreases in personnel³ and rental costs as % of sales Cash generation Continuously outstanding cash conversion metrics and free cash flow generation and decreasing leverage • Adj. EBITDA4 growth of 30% Record high Adj. EBITDA4 Margin of 11% Adj. net income growth of 44% Cash conversion 5 of 77% Adj.Net Debt / Adj. EBITDA4 of 1.0x despite attractive average dividend yield of 6.8% in 20177 Online Continued rapid growth in online sales 67% y-o-y online sales growth Share of online sales in total sales grew by >100bps y-o-y reaching c.5% 1 In 2017, Detsky Mir closed six stores as part of the Company's ongoing rationalisation programme 2 LfL growth includes only DM stores in Russia that have been in operations for at least 12 full calendar months 3 Excluding share-based compensation and cash bonuses under the LTI program 4 Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program 5 Calculated as (Adjusted EBITDA - Adjusted Capex) / Adjusted EBITDA 6 Adjusted Net debt is calculated as total borrowings less cash and cash equivalent / adjusted for the loan issued to CJSC "DM Finance" (Sistema's subsidiary) on 3 July 2013 7 Calculated as dividend per share paid in 2017 (based on total dividends paid in 2017 of RUB4,767m, shares outstanding of 738.6m) divided by average share price in 2017#62 Key Business Initiatives in 2017 DETSKY MIR RETAIL CHAIN Enhancement of the private label assortment in all categories Share of private labels has grown in each of the four sales categories ■ Share of private labels in the total sales increased from 24% to ~27% Focus on toys private labels supporting traffic and margins Share of private labels in revenue 2016 2017 Toys 8% 10% Mobicaro Diapers 1% 4% baby Gi Fashion 75% 79% ■ Successful introduction of the diapers private label BabyGo Baby Go Large items 33% 46% Other goods 22% 27% Tombi Direct imports sourcing for branded products Number of private labels in fashion category reaching 29 (incl, 4 brands launched in 2017) ■ Significant shift towards direct imports vs. purchases from distributors / intermediaries, incl. toys category Share of direct imports in toys grew from 1% in 2016 to 6% in 2017 ■ Positive impact on the profitability in line with the private label products Toys share of private labels and direct imports 16% 9% 10% 8% 6% 1% 2016 2017 ■Direct imports ■Private label Ongoing upgrade of the online platform and customer offering New Composite Customer Service Level KPI introduced for each delivery channel and call center, incl. - "Ideal Instore" initiative targeting 90% of online orders to be ready for collection within 1 hour after placement (vs 45% in 4Q'17) Upgraded "In-store pickup"1 functionality reaching 56.2% of online sales for full year 2017 _ ■ Improved focus on UI/UX – full re-design of the "Customer Cart / Check Out" 1 Upgraded "In-store pickup" implies that online assortment that are not presented in offline stores can be dispatched from Detsky Mir warehouse and delivered via the Company's logistics system to any store of the chain preferred by customer. Implemented in Oct-2017 6#72 Our Top-Line Performance in Context of the Macro Environment CPI Inflation² (y-o-y) Detsky Mir Total Sales¹ (y-o-y growth) 26,8% Detsky Mir LFL Sales1 (y-o-y growth) 21,4% 11,2% 19,8% 19,8% 7,2% 6,1% 4,8% Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 Q2 2017 2017 Q3 2017 Q4 2017 CBR target inflation rate of 4% 4,6% 4,2% 3,4% 2,6% Real Disposable Income (y-o-y) (0,6%) (1,3%) (1,8%) (2,9%) Q1 2017 Q2 2017 Q3 Q4 Q1 Q2 Q3 2017 2017 2017 2017 2017 Q4 2017 Source: CBR, Rosstat, Ipsos Comcon 1 Based on unaudited consolidated financial statements 2 Calculated as average for the respective three months Detsky Mir RETAIL CHAIN Children's Goods Market Market growth of ~1% yoy (nominal terms) in 2017#82 Sustainable Profitable Growth Translating into Strong Cash Generation and Returns DETSKY MIR RETAIL CHAIN Market Leading LFL Growth... 2017 (%) ...As Well As Total Revenue Growth ... 2017 (%) 25,5 7.2 21,9 19,2 ...Growing Sales Density... Sales per sqm YoY Growth, 2017, % 2,7 5.4 12,2 2,3 0.9 (2,3) 3,0 2,3 6,4 1,4) (4,4) (5,6) (3.4) (7,4) Base 1 Detsky Mir >X5RETAILGROUP LENTA MATHHT >X5RETAILGROUP Detsky Mir LENTA MATHHT >X5RETAILGROUP LENTA МАГНИТ DETSKY MIR ■LFL Traffic Growth ■LFL Ticket Growth ...Growing Adj.EBITDA Margin... 2017 (%) 11,0 10,3 10,4 9,7 10,0 8,0 7,7 7,7 2 Detsky Mir OLENTA MATHHT >X5RETAILGROUP Source: Public reports of companies ...Superior Cash Conversion³... ...And Unmatched ROIC4 2017 (%) 2017 (%) 85,9 76,9 19,4 12,0 23,1 17,2 20,6 16,5 DETSKY MIR [MATHHT) X5RETAILGROUP LENTA DETSKY MIR MATHHT >>X5RETAIL GROUP OLENTA Based on the most recent available consolidated financial statements for other companies. Financial measures of other companies shown on this slide may be calculated differently and may not be directly comparable LfL growth in RUB terms. LfL growth includes only Detsky Mir stores in Russia that have been in operation for at least 12 full calendar months. Revenue of each store included in LfL comparison represents retail revenue of the store (incl. VAT, excluding plastic bags) for respective period but excludes store revenue for those months in which the store was not operating for 3 days or more. 2 Adjusted EBITDA as per Detsky Mir disclosure ³Calculated as (Adjusted EBITDA LTM - Adjusted Capex LTM) / Adjusted EBITDA LTM 4 Calculated as EBIT / Average Invested Capital. For Detsky Mir Invested capital is adjusted for amounts receivable under a loan granted to CJSC "DM-Finance". Operating profit is adjusted for LTI expense. 8#92 Why Detsky Mir Is Very Different from Market structure the Food Retail? DETSKY MIR RETAIL CHAIN 2016 17% Market share 2017 20% DETSKY MIR RETAIL CHAIN Leading Russian food retailers 8% (#1) n/a Competition for new locations Low High Gap #1 to #2 4.0x1 1.1x (Revenue 2016) ROIC 2016 61%2 18-29%4 Average dividend yield 6.8%3 2017 (cash flow basis) Source: Company data, Infoline, companies disclosures and reportings 1 Based on 2016 revenue for Korablik of RUB20.0 Bn (according to Ipsos Comcon) 2 Invested capital is adjusted for amounts receivable under a loan granted to CJSC "DM-Finance". Operating profit is adjusted for LTI expense 3 Calculated as dividend per share paid in 2017 (based on total dividends paid in 2017 of RUB4,767m, shares outstanding of 738.6m) divided by average share price in 2017 4 Includes Magnit, Lenta, X5 0-3.0%4 9#103 Detsky Mir - The Leader of the Attractive Russian Children's Retail Sector Experienced management team with well-established governance and supportive shareholders 6 6 Asset light sustainable business model providing attractive shareholder return 5 5 RETAIL Expansion platform designed for future growth 4 1 #1 player in a large, fragmented market with attractive fundamentals Detsky MiR CHAIN 2 DETSKY MIR RETAIL CHAIN Iconic, category defining brand with attractive multi- category customer proposition 3 Well-defined four-pillar growth strategy: (A) taking over whitespace; (B) growing e-commerce platform; (C) focus on traffic generation and (D) execution excellence 10#11#1 Player in a Large, Fragmented Market with Attractive Fundamentals Detsky Mir RETAIL CHAIN Steadily Growing Children Population 2011-2021F Russian Children Population (under 12 y.o., m) CAGR 2017- 2021F: 0.5% 19,1 19,6 20,2 20,8 21,7 22,2 22,6 22,8 23,0 23,2 23,1 III Large and Growing Addressable Market 2011-2021F Russian Children's Goods Market (Nominal Prices, RUBbn) CAGR 2011-2017: 4.8% CAGR 2017-2021F: 1.0% 396 437 487 500 516 521 525 530 536 541 547 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F Source: Ipsos Comcon report Source: Ipsos Comcon report With Proven Resilience in Downturn Times Compared to Many Other Retail Segments YoY, Nominal Growth in RUB terms (%) Destky Mir is The Largest Specialty Children Goods Retailer with Rapidly Growing Market Share Detsky Mir Market Shares in Russia (%) 7,4% (1,6%) (5,6%) (4,9%) (1,0%) (3,7%) (6,8%) (6,0%) (10,0%) (14,1%) Consumer Furniture Fashion Electronics 8,3% 3,0% 1,0% 3,7% 3,4% 2,5% DIY Real GDP Children's Nominal FMCG Goods GDP ■2014-2015 2015-2016 Source: Rosstat, Ipsos Comcon report 50% 44% 32% 24% 20% 17% 17% 14% 16% 13% 10% 7% 8% 6% 2011 2012 2013 2014 2015 2016 2017 ■Total Children's Retail Market Source: Company data, Ipsos Comcon report Specialized Children's Goods Sales Channel 11#122 Iconic, Category Defining Brand with Attractive Multi-Category Customer Proposition Leading Customer Proposition Brand Positioning Iconic Russian household name with 70-year history 99% prompted awareness Product Offering and Convenience One-stop-shop across key children's categories Product range of 20,000 - 30,000 SKUs Fashionable clothes, seasonal collections Special terms arrangements with leading manufacturers Convenient locations Attractive Pricing and Promotions Price segment from medium to medium low Quality servicing Highly competitive pricing in baby food and hygiene products Periodic sales and promotions ✓ Loyalty Program 18.1m loyalty cards as of December 2017 11.5m contact base of users as of December 2017 Average ticket for loyalty card holders is significantly higher vs. customers without cards Detsky MiR RETAIL CHAIN Omni-channel Sales Established online store with rapidly growing assortment Comprehensive omni-channel offering strategy Bigger and Better Than Competition Detsky Mir Total Number of Stores (4Q17) Net Store Openings in 2017 Stores in Moscow and Moscow Region (4Q17) Stores in Other Regions (4Q17) 5561.2 #1881,2 #1 1662 #1 3902 204 15 151 кораблик Дочки- 161 10 Сыночки WA Average Selling Space per Store (ths. sqm) Poll: Prompted Brand Awareness (Dec-17) Poll: Purchases in L12M (Dec-17) 1.43 99% 79% 53 0.7 40% 42 52 109 1.2 mothercare 109 1 55 55 Для мам и малышей GereMOT 56 Source: Company data, Ipsos Comcon report 1 Excluding Kazakhstan 2 Excluding ELC stores 3 New store roll-out: gross space 54 0.5 51% 96% 21% 12% -11 1 55 55 1.0 58% 11% 48% 12#133 Well-Defined Four-Pillar Growth Strategy DETSKY MIR CHAIN RETAIL A Taking over Whitespace in Large and Small Cities Number of Stores (incl. ELC) Visible Expansion Pipeline 216 2012 Source: Company data 252 CAGR 2012 - 2017: 24% 322 425 525 622 5781 DM stores 120 Cities with no DM Presence 65 Malls identified as priority locations for DM (in the cities of presence) 40 Replacing competitors (specialized stores) 25 Medium-term target locations in Kazakhstan Moscow and Moscow Region 166 25 58 15 5 12 4 92 56 3 20 13 67 54 10 8 19 18 5 5 10 7 6 63 4 22 11 22 25 5 2013 2014 2015 2016 2017 Central Siberian Ural Volga Southern North-Western Kazakhstan 1 Only Detsky Mir branded stores as of 31-Dec-17 13#143 Well-Defined Four-Pillar Growth Strategy (cont'd) B Continuous development of our online platform... 133m website visits in 2017 (+37% YoY) 86% free traffic 50,000 SKU offering Desktop and Mobile web-site User-Friendly Customer Cart Key achievements in 2017 " DETSKY MIR CHAIN RETAIL New Composite Customer Service Level KPI introduced for each delivery channel and call center Increased focus on UI/UX - full re-design of the "Customer Cart / Check Out" Upgraded "In-store pickup2 functionality Increased focus on UI/UX - full redesign of the "Customer Cart / Check Out" Successfully introduced regular "Cyber-Monday" sales in the online store (2.0x-3.0x higher revenues vs ordinary trading days) " SAP Hybris implemented Delivery methods 2.4m orders in 2017 (+118% yoy) (800) 230-00-00 Детский мир LEGO C23 ФЕВРАЛЯ Can КУПИТЬ In-store pickup² 56.2% of online revenue in 2017 Courier¹ 43.8% of online revenue in 2017 Desktop Key initiatives for 2018 Tablet Mobile Full redesign of website interface, incl. product listing Last mile delivery in remote regions Improvement in SEO traffic "Ideal Instore" target - 90% of online orders to be ready for collection within 1 hour after placement (vs 45% in 4Q'17) Number of "Cyber Mondays" to be increased up to 18 Source: Company data 1 Includes delivery to specified address and to pick-up point 2 Includes online orders for assortment that is not presented in offline stores but dispatched from Detsky Mir warehouse and delivered via the Company's logistics system to any store of the chain preferred by customer. Implemented in Oct-2017 14#153 Well-Defined Four-Pillar Growth Strategy (cont'd) B...Resulting in Exponential Growth Across All Key Metrics Accelerated Online Revenue Growth (RUB bn) 1,2 0.2% 0.5% 0.6% 1.0% CAGR 2011-2017 of 121% 2.1% In Jan-Feb-183 (6.3%) 3.5% 4.8% Upgraded "In-store asi Launched In-store pickup 2,8 Launched Online 1,3 0,04 0,1 0,2 0,4 2011 2012 2013 2014 2015 2016 ■ Online Revenue Online as a % of Total Revenue Continuous growth in traffic and in particular improving conversion... 0.8% Company data 63,4 2015 0,5 1.2% 1.8% 133,4 97,2 2016 pickup 4,6 2017 2,4 1,1 ■Online visitors, m ■Online orders, m 2017 Conversion rate, % DETSKY MIR RETAIL CHAIN Russian Top-5 Online Children's Goods Stores (Online Sales Volume in 2017, RUB bn, incl. VAT) DETSKY MIR Mamsy ozon.ru Дочки- Сыночки 2,7 2,6 2,4 myToys 2,3 TOY.RU 2,0 акушерство 1,9 1) кораблик 1,8 BABADŮ 1,6 Market Share (%) Source: Ipsos Comcon, Datainsight 5,1 driven by the increasing share of regional sales (value of online orders) 000000006 13,9% 13,8% 10,0% 29,1% 39,6% 35,0% 60,8% 51,1% 46,6% 2015 ■Other regions 2016 2017 ■Moscow ■Saint-Petersburg 1 The Group's consolidated financial statements for 2011-2013 under US GAAP, 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under US GAAP and IFRS 2 Including in-store pickup 3 Based on preliminarily Detsky Mir sales in Russia 15#163 C Well-Defined Four-Pillar Growth Strategy (cont'd) DETSKY MIR RETAIL CHAIN Competitive Pricing and Effective Merchandising with Focus on Traffic Generating Categories Drive Strong LfL Revenue Growth and Growing Gross Profit per sqm Competitive Pricing Medium to medium-low prices traffic-generating categories Effective Marketing and Merchandising Innovative store concepts based on highly interactive formats Strong LfL Growth1 (%) 15.3% 14.6% 13.7% 4,8% 12.3% 7.2% ✓ Highly competitive pricing in 5,2% 8,3% 5,9% ✓ Focus on best-in-class customer experience 12,2% 10,0% 8,9% 5,0% 6,0% ✓ Powerful CRM driving marketing efforts -4,4% 2013 2014 2015 2016 2017 ■Number of Tickets LFL Average Ticket LFL Discounts and loyalty programmes Product Segment Gross Margin Traffic Generation Revenue Breakdown² (%) Growing Gross Profit per sqm³ 100 100 CAGR 2013-2017: 2.9% Newborns ✓ ✓ ✓ 20 20 33 33 48,6 49,7 45,5 38 Toys ✓ ✓ 32 Fashion 49,9 51,1 27 27 25 2013 2014 2015 2016 2017 ■Growing Gross Profit per sqm (RUB 000) Large items ✓ ✓ 15 10 and other 2013 2017 Source: Company Data 1LfL growth includes only DM stores in Russia that have been in operations for at least 12 full calendar months. Revenue of each store included in LfL comparison represents retail revenue of the store (incl. VAT, excluding plastic bags) for respective period but excludes store revenue for those months in which the store was not operating for 3 days or more. 2 Retail revenue only 3 Calculated by dividing gross profit for the period by average selling space for the period (calculated in thousands of square metres as simple average of selling space as of the beginning and as of the end of the period) 16#173 Well-Defined Four-Pillar Growth Strategy (cont'd) D Focus on Execution Excellence to Achieve Superior Operating Margins Improvement of 330bps in Adj. EBITDA¹ margin since 2013 driven by: ✓ Store operation improvements Adjusted EBITDA¹ (RUBm) Optimization of IT platforms and personnel Reduction in Adj.SG&A³ as a % of revenue by over 820bps since 2013 Personnel per Store and Rent Costs Reductions CAGR 2013-2017: 40% 13,1% 12,8% 11,7% 26 24 10,3% 9,8% 4 463 2 771 22 20 18 2013 2014 2015 2016 2017 Personnel per Store 2 Rent & Utility Expenses as % of Revenue Adjusted SG&A Expenses as % of Revenue³ 31,0% 2013 28,2% 25,9% 23,7% 22,8% 2014 2015 2016 2017 2013 2014 Adjusted EBITDA Margin (%) 7,7% 6 185 DETSKY MIR RETAIL CHAIN 8 203 10 663 2015 2016 2017 11,0% 10,2% 10,3% 9,8% 2013 2014 2015 2017 2016 Source: The Group's consolidated financial statements for 2013 under US GAAP and 2014-2017 under IFRS. For the line items and the periods presented, there was no difference between the calculation of numbers or presentation under US GAAP and IFRS 1 Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program 2 Excluding personnel in headquarters 3 Adjusted SG&A expenses are calculated excluding Depreciation and Amortisation and additional bonus payments under the LTI program 17#184 Expansion Platform Designed for Future Growth DETSKY MIR RETAIL CHAIN Store Management and Rollout Strict investment hurdles for store openings: Focus on high-traffic shopping centres Opportunistically consider standalone locations Flexible approach to store formats with size ranging from 500 to 2,000+ sqm Limited Capex per sqm due to asset-light business model with only 4 owned stores, including DM store on Prospect Vernadskogo (Moscow) Strong Infrastructure Backbone Distribution & Logistics Well-established import trade competencies and in- house customs department: Direct import contracts accounted for c.25% of 2017 revenue 2 modern DC in Moscow region of approximately 70,000 and 20,000 sqm Target centralization level1 of 75%² is achieved ■ Increasing importance of e-Commerce as part of the omni-channel sales strategy In September 2017 Detsky Mir signed a preliminary rent agreement for a 46,000 sqm class A DC in Ural (Chelyabinsk region) for 10 years, likely to be launched in 1H 2018 New DC in the north of Moscow region being considered for a 2019 launch Detsky Mir and ELC Network of 622 Stores2 Across Russia and Kazakhstan IT Infrastructure Set-up SAP system manages on-stock balances IT-infrastructure is able to support up to 800 stores with in-store pickup function SAP Hybris (e-commerce platform) implemented in 2017 Imported goods Moscow Kazakhstan Siberian Ural Volga Cities with over 1 million inhabitants Cities with less than 1 million inhabitants Existing distribution centers Kazakhstan 1 Centralization level measured as ratio of cost of goods delivered to DM stores directly from DM's DCs to the total cost of goods delivered to DM stores 2 As of 31 December 2017 Southern Northwerstern Central Moscow 18#195 Asset Light Sustainable Business Model Providing Attractive Shareholder Return Attractive New Store Economics and Disciplined Roll-out... ■Capex of c. RUB 13m per 1 standard DM store Strict investment criteria Detsky Mir RETAIL CHAIN ... Resulting in Strong Returns¹... 2013 2014 2015 2016 2017 Revenue Growth 30% 26% 33% 31% 22% IRR hurdle rate of 40% on 7-year cash flows (not accounting for terminal value) Selling Space Growth 10% 22% 26% 21% 15% Total maturity period - 18-24 months ■ Targeted EBITDA breakeven in 4 months after a store opening Adj. EBITDA², RUBbn 2.8 4.5 6.2 8.2 10.7 ■ Payback period of 2.5-3.0 years B ...Supported by Well-Controlled Rental Costs... D ■ Primarily locations in high-traffic modern shopping malls ■Mostly more than 5-year rental agreements with fixed annual increases Unilateral termination rights for Detsky Mir (with reasonable notice periods) ...and a Leading ROIC5 in Global Retail Context CY20166 (%) Capex, RUBbn (0.8) (1.9) (5.3) (1.7) (2.5) Pividends, RUBbn (0.4) (1.9) (3.0) (4.4) (4.8) Adj. Net Debt³/Adj. EBITDA² 1.8x 0.6x 1.7x 1.4x 1,0x Adjusted ROIC4.5 56% 88% 78% 61% 86% 79 Median: 21 5 61 39 28 29 25 21 17 16 19 18 15 9 Median: 19 Median: 32 63 80 49 تنا 36 28 19 17 CLICKS POKA RENNER CCC Detsky Mir | High Performance Specialty Retailers RaiaDrogasil bm Liverpool XXL LPP five BEL°W MATHHT OLENTA >X5 PLACH carter's JUMB9 Baby Bunting mothercare Для мам и малышей Russian Food Retailers Children's Goods Retailers Source: Companies disclosures and reporting 1 The Group's consolidated financial statements for 2013 under US GAAP and 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under US GAAP and IFRS 2 Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program 3 Adj. Net Debt is calculated as total borrowings (long term borrowings and short-term borrowings and current portion of long-term borrowings) less cash and cash equivalents adjusted for amounts receivable under the loan issued to CJSC "DM-Finance" 4 Calculated as operating profit divided by average capital invested (simple average of capital invested as at the respective dates). Capital invested is calculated as net debt plus total equity (deficit) 5 Invested capital is adjusted for amounts receivable under a loan granted to CJSC "DM-Finance", carrying amount of Yakimanka building and, for the year ended 31 December 2015, the net book value of the building occupied by the Bekasovo distribution centre and its equipment (which was completed in 2015, but was not operational for most of 2015). Operating profit is adjusted for LTI expense 6 Calendarized to December year end 19#206 Experienced Management Team With Well-Established Governance and Supportive Shareholders DETSKY MIR RETAIL CHAIN Highly Experienced Management... Vladimir Chirakhov Chief Executive Officer ■Joined in 2012 Held senior positions at Korablik, M.video Anna Garmanova Chief Financial Officer Joined in 2008 Held senior positions at Podruzhka, Understanding and Reconciliation Fund Farid Kamalov Chief Operating Officer Joined in 2012 Held senior positions at MediaMarkt, Korablik, M.video Pavel Pischikov E-Commerce Director Joined in 2017 ■ Previously E-Commerce Director at Dochki-synochki Maria Davydova Deputy CEO for Commercial Affairs Joined in 2013 Held senior positions at Enter, Svyaznoy, MDK, Arbat Prestige Maria Volodina Apparel and Footwear Commercial Director ■Joined in 2011 ■Held senior positions at Sela, Reebok Rus, Kira Plastinina, TJ Collection Tatiana Mudretsova Marketing Director Joined in 2014 Held senior positions at Osnova Telecom, Beeline, DDB and Publicis Vyacheslav Mikhnenko Head of Logistics Joined in 2012 ■ Previously Operational Logistics Director at X5 and Chief Logistics Officer at Kopeyka ...With Strong Track Record... Adj. EBITDA Margin³, % Revenue Growth², % New Stores Openings¹ New Management Team 103 100 104 56 47 33 21 2011 2012 2013 2014 2015 2016 2017 I I $0,3% 33,2% 31.4% 26,2% 21,9% 20,1% 15,1% I 2011 2012 2013 2014 2015 2016 2017 I 9,8% 10,2% 10,3% 11,0% ,7% 6,0% 3,5% 2011 2012 2013 2014 2015 2016 2017 ...Supported by a Strong Governance Framework... BoD of 10 members including 4 INEDs Established Audit, Strategy and Nomination and Remuneration committees at least 2 INEDs are members of each of the committees ...and a Prominent Shareholder Base JOINT STOCK FINANCIAL CORPORATION SISTEMA 52.1% RUSSIA-CHINA INVESTMENT FUND Free Float 14.0% 33.9% DETSKY MIR RETAIL CHAIN 1 Doesn't include ELC stores 2 The Group's consolidated financial statements for 2011 - 2013 under US GAAP, 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under US GAAP and IFRS 3 Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program 20#214 Traffic-Led Revenue Growth Exceptional Revenue Growth Trajectory... (RUBm) DETSKY MIR RETAIL CHAIN ...Underpinned by Strong and Consistent Like For Like Growth¹... CAGR 2013-2017: 28% 15.3% 14.6% 13.7% 97 003 12.3% 7.2% 79 547 4,8% 5,2% 60 544 8,3% 5,9% 45 446 12,2% 36 001 10,0% 8,9% 5,0% 6,0% -4,4% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 ■Revenue (RUBm) Number of Tickets LFL Average Ticket LFL Product Gross Segment Margin Traffic Generation Newborns 20 20 ...and Selling Space Growth (k sqm) Revenue Breakdown (%) 24 29 29 Toys ✓ ✓ ✓ ✓ 38 38 38 35 35 25 25 31 33 33 25 25 33 33 CAGR 2013-2017: 21% 390 22 320 32 25 25 491 688 596 15 11 11 10 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Fashion ✓ ✓ ✓ 27 27 26 26 Large items ✓ ✓ and other ✓✓ 15 13 Source: Company data. Note: The Company's consolidated financial statements for 2013 under US GAAP and 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under GAAP vs IFRS. 1 Includes only Detsky Mir branded stores in Russia. LfL growth includes only DM stores in Russia that have been in operation for at least 12 full calendar months. Revenue of each store included in LfL comparison represents retail revenue of the store (incl. VAT, excluding plastic bags) for respective period but excludes store revenue for those months in which the store was not operating for 3 days or more. 21#224 Relentless Focus on SG&A Optimisation Underpinning Margin Expansion Continuous Optimisation of Personnel Expense... Personnel per Store¹ 26 26 24 22 222 20 20 DETSKY MIR RETAIL CHAIN ...while Growing Sales Density Offsetting Declines in Gross Margin... 38,6% 38,0% 36,2% 34,1% 33,8% 48,6 49,7 49,9 51,1 18 45,5 2013 2014 2015 2016 2017 ...Ensuring Strong Positive Operating Leverage... Adjusted SG&A expenses as % of revenue² 2013 2014 2015 2016 2017 Gross Profit Margin (%) Gross Profit per sqm³ (RUB 000) ...Resulting in Sustainable Margin Expansion 11,0% 31,0% 9,8% 10,2% 10,3% 28.2% 7,7% 3,8% 25.9% 10 663 1.6% 3,8% 23,7% 22,8% 1,7% 3,0% 8 203 1,8% 3,2% 3,3% 12,5% 1,3% 1.6% 6 185 10,0% 9,6% 8,9% 8,1% 4 463 2 771 13,1% 12,8% 11,7% 10,3% 9,8% 2013 2014 2015 2016 ■Rent & Utility ■Payroll Advertising & Marketing 2017 ■ Other 2013 2014 2015 2016 2017 Adjusted EBITDA (RUBm) Adjusted EBITDA Margin (%) Source: Company data. Note: The Company's consolidated financial statements for 2013 under US GAAP and 2014-2017 under IFRS. For the line items and the periods presented, there was no difference between the calculation of numbers or presentation under GAAP vs IFRS Excluding personnel in headquarters 2 SG&A expenses exclude D&A expenses and adjusted for LTI bonuses, as well as Income received from partial termination of employees' right to receive shares under the LTI program 3 Calculated per average space for the period 4Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program 22#234 Converting Earnings Growth Into Strong Cash Flow Generation Profile... Comments ■ Strong conversion of EBITDA into Operating Cash Flow and Free Cash Flow Limited working capital financing needs due to attractive payment terms / long payables, and improved inventory turnover in 2017 Decrease in financing expense on the back of deleveraging and decreasing interest rates ■ Disciplined capex focused on store openings and selective investments in IT & infrastructure; limited maintenance capex requirements Strong Cash Conversion and Returns on Capital 72% 64% 60% Cash Flow (RUBm) DETSKY MIR RETAIL CHAIN 2013 2014 2015 2016 2017 Adjusted EBITDA² 2,771 4,463 6,185 8,203 10 663 Changes in NWC (93) (1,640) (4,300) (362) (1,123) Cash Income Taxes Paid (477)4 (657) (1,190) (1,468) (1,523) Net Finance Expense Paid (507) (795) (1,879) (1,813) (1,645) Other Operating Cash Flow 331 121 505 1,285 708 79% 77% Operating Cash Flow 2,025 1,492 (679) 5,844 7,080 88% 78% 56% 61% 86% Capital Expenditure DC Construction (772) (1,945) (5,308) (1,747) (2,468) (330) (2,842) Store Openings, IT & Maintenance (772) (1,615) (2,465) (1,747) (2,468) 2013 2014 Adj. ROIC¹ 2015 2016 2017 ▪ (Adj. EBITDA LTM - Adj. Capex LTM) / Adj. EBITDA LTM Source: The Group's consolidated financial statements for 2013 under US GAAP and 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under US GAAP and IFRS. Calculated as operating profit LTM, adjusted for the effect of disposal of Yakimanka building in 2014 and LTI bonus payments, incl. Income received from partial termination of employees' right to receive shares under the LTI program, divided by average capital invested. Capital invested is calculated as Net Debt plus total equity/(deficit) minus amounts receivable under a loan granted to CJSC "DM-Finance" and, for the year ended 31 December 2015, the net book value of the building occupied by the Bekasovo distribution centre and its equipment (which was completed in 2015, but was not operational for most of 2015). Free Cash Flow 1,253 (453) (5,987) 4,097 4,612 2 Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program 3 Adjusted for one-off items. 4 Calculated as Income tax expense plus deferred tax income benefit 23#244 ...Imminently Shared with our Shareholders via Consistent Dividend Payments Flow Comments ■ Asset-light cash generative model underpinning significant dividend paying capacity Adjusted Net Income¹ (RUBm) Detsky Mir RETAIL CHAIN 5,7% 4,8% 3,2% 3,7% 3,6% - Dividends as major differentiator from the majority of Russian high- growth food retailers 5 501 Ability to consistently maintain sound leverage levels despite significant dividend payout 3 827 2 189 Dividend policy: payout of at least 50% of consolidated IFRS net profit of 1 685 the previous year 1 153 Historically, up to 100% of net income under RAS paid out Typically two dividend payments per year (9M interim and full year) 4.8bn RUB distributed in dividends in 2017 with respect to Q4 2016 and 9m 2017 Dividends as % of Adjusted EBITDA and Adjusted Net Income 36% 15% 136% 116% 110% 87% 54% 48% 42% 45% 2013 2014 Adjusted Net Income 1 2015 2016 2017 Adjusted Net Income margin History of Dividend Payments (cash flow basis) (RUBm) 6.8% 1 856 420 CAGR 2013-2017: 83% 4 427 4 767 2 973 2013 Source: Company datal 2014 2015 2016 2017 1 2 As % of current year Adjusted Net Income As % of current year Adjusted EBITDA 2013 2014 ■Total Dividends, RUBm 2015 2016 2017 Average dividend yield³ Note: The Company's consolidated financial statements for 2013 under US GAAP and 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under GAAP vs IFRS. 1 Adjusted for the one-off effect relating to disposal of the building occupied by the Yakimanka Gallery in 2014 (together with related tax effects), as well as additional bonus accruals and Income received from partial termination of employees' right to receive shares under the LTI program 2 Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program 3 Calculated as dividend per share paid in 2017 (based on total dividends paid in 2017 of RUB4,767m, shares outstanding of 738.6m) divided by average share price in 2017. 24#254 Conservative Financial Policy and Stable Leverage Comments Commitment to a conservative financial policy Fully RUB denominated debt to match RUB revenue Relationships with multiple Russian and international banks Leverage 1,2 as of 31-December-2017 is 1.0x of vs. 4.0x average covenant level across the loan portfolio Weighted average interest rate³ - 10.3% (as of 31 December 2017) Incl. RUB 3bn outstanding bond with fixed annual coupon rate of 9.5 p.p. and a three-year put option Predominantly fixed interest rates across the portfolio No contingent off-balance sheet liabilities 31-December-17 Debt Repayment Schedule (RUBm) 4 635 2018 1 958 2019 6 689 2020 309 2021 DETSKY MIR RETAIL CHAIN Leverage 1,2 dynamics ☐ Detsky Mir provided CJSC "DM-Finance" (Sistema's subsidiary) with the loan to buy out 25% stake from Sberbank in 2013. Most of the loan (RUB4,875m including interest) was repaid in January/February 2016 RUB1.1 bn fully repaid on February 27, 2017 " Total debt-RUB 13.6bn, Net Debt - RUB 10.4bn as of 31-December-2017 1,8x 1,7x 1,4x 1,0x 2013 0,6x 2014 2015 2016 Adjusted Net Debt¹/ Adjusted EBITDA² Weighted average interest rate³ dynamics (%) 2017 12,0% 11,2% 10,5% 10,3% 10,3% 31-Dec-16 31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17 Source: Company data Note: The Company's consolidated financial statements for 2013 under US GAAP and 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under GAAP vs IFRS. 1 Adjusted Net debt is calculated as total borrowings less cash and cash equivalent / adjusted for the loan issued to CJSC "DM Finance" (Sistema's subsidiary) on 3 July 2013 2 Adj. EBITDA is calculated as profit for the year before income tax, FX gain/loss, gain on acquisition of controlling interest in associate, impairment of goodwill, net finance expense, D&A, adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014, as well as share-based compensation and cash bonuses under the LTI program 3 Calculated on the basis of the weighted interest rates applying to the specified indebtedness (weighted by the principal amount of such indebtedness) as of the dates specified. 25 25#26Guidance Update Near Term guidance at IPO Store Count ■ ~70 new stores Revenue Driven by store openings, LFL & ramp ups DETSKY MIR RETAIL CHAIN 2017 fact >100 new stores opened Mid- to Long-Term guidance at IPO ☐ ~250 new stores in 2017-2020 (increased to 300 in Nov-17) Updated guidance ~70 new stores in 2018 At least 250 new stores in 2018-2021 ☐ Driven by store openings, LFL & ramp ups LFL Revenue Growth Low double-digit growth below 2016, including effect of new store ramp-ups and 103 new stores entering LFL panel in 2017 7.2% LFL growth, outperforming the market ■Slightly positive traffic growth, below inflation ticket growth, plus effect of new store ramp ups Single-digit growth, outperforming the market Gross Margin Decline, but by less than 2016 vs 2015, as process of offline price reductions to match online is complete ☐ Stable Rent & Utility Expenses Further meaningful decline as % of revenue vs 2016, with virtually no rise in rent/sqm in a continued soft rentals market Rents/sqm rise first slightly above inflation then in line with inflation, so stable as % of revenue Personnel Expenses² Further meaningful decline as % of revenue vs 2016, on operating leverage No change in guidance No change in guidance Stable to slightly declining as % of No change in guidance revenue Adjusted ■ Double-digit supported by expectations of EBITDA Margin SG&A efficiency gains and new store ramp-ups more than offsetting the effect of lower gross margins ☐ Double-digit Source: Company data 1 In 2017, Detsky Mir closed six stores as part of the Company's ongoing rationalisation programme 2 Adjusted for share-based compensation and cash bonuses under the LTI program No change in guidance 26 26#27Детский мир Appendix и были ОБУВЬ 8-14 ОБУВЬ 8-14 50#28Top Management Compensation Structure Overview Annual Compensation Structure DETSKY MIR RETAIL CHAIN Fixed CEO <<CEO-1>> 50% 50% - 80% Department Heads 70% - 85% Total 50% 20% - 50% 15% - 30% Variable incl. Financial¹ 25% 6% -17% 3% -9% Incl. Functional² 25% 14% -33% 10.5% -21% Last LTI Programme New Equity-Based Compensation Programme Pre-IPO liquidity event ■2015 award - triggered by RCIF transaction; %-based payment linked to valuation increase ■ Vesting at liquidity event; payable over 3 years (last tranche to be paid in June 2017) ■ Accruals and payments fully disclosed in IFRS accounts At IPO ■%-based payment linked to valuation increase at IPO ■ Amount calculated as 3% from the differential between new liquidity event (i.e. IPO) price and RCIF price in 2015 ■50%/50% cash and share based payments (via purchases of shares in the open market) After IPO ■ Approved by the Board of Directors in August 2017 ■ Covers the 3-year period to February 2020, the third anniversary of the Company's IPO, senior management in continuing employment by the Company as of that anniversary will be eligible for share grants from a share pool equivalent in value to up to 2% of the increase in the Company's stock market value (including dividend payments) over the period. ■The LTIP also provides for cash payments expected to total around RUB 500 million (plus any social taxes); of this amount, around RUB 250 million was paid in January 2018, while payment of the balance remains approved by BoD and will be paid on the first workday of January 2019 Incentive programme to cement management long-term focus on shareholder value creation 1 Financial KPIs - EBITDA, net income, revenues 2 Functional KPIs - specific operational KPIs, individual for each role 28#29Case Study: Gaining Market Share in Baby Food and Diapers Sales Baby Food Sales by Channel in Russia Detsky Mir's market share + 5.0 p.p. 24,5% -2.2 p.p. 27,2% -2.8 p.p. 29,4% -0.9 p.p. 12,0% -0.8 p.p. 11,2% (13,3% 13,0% (8,3% +3.0 p.p. (11,3% +2.0 p.p. 17,9% -0.9 p.p. 17,0% -0.2 p.p. 16,9% 34,2% 31,5% +1.0 p.p 32,4% +1.7 p.p. FY2015 FY2016 FY2017 ■Supermarkets ■Hypermarkets ■Detsky Mir Standalone children's stores ■Minimarkets Diapers Sales by Channel in Russia Detsky Mir's market share + 9.3 p.p.. 28,6% -2.6 p.p. 26,0% -2.4 p.p. 23,6% 18,5% 19,3% -0.8 p.p. 20,2% -0.9 p.p. (13,0% +4.2 p.p. (17,1% +5.1 p.p. (22,3% 23,8% -0.9 p.p. 22,9% -2.1 p.p. 20,8% +0.2 p.p. 14,5% 14,7% FY2016 +0.2 p.p. 14,9% FY2017 FY2015 ■Supermarkets ■ Hypermarkets ■Detsky Mir ■Standalone children's stores ■Minimarkets Comments DETSKY MIR RETAIL CHAIN ■Baby food and Diapers remain key categories for children's goods stores as traffic generators ■Only children's goods specialized stores offer a full range of Baby Food and Diapers products unlike hypermarkets which are focused on "bestsellers" SKU ■ Detsky Mir gained market share away from other channels ■ Notably, Detsky Mir has outperformed supermarkets and hypermarkets which have been the largest sales channel for baby food historically ■Detsky Mir's Baby Food market share increased from 8.3% in 2015 to 13.3% in 2017 ■Detsky Mir's Diapers market share increased from 13.0% in 2015 to 22.3% in 2017 Detsky Mir's shares in the baby food and diapers markets have almost doubled over several years Source: AC Nielsen 29#30Net Trade Working Capital Overview Focus on Constant Improvement & Optimization of NWC1,2 (RUB m) 8 636 143 d. 24 796 17 346 5,5% 4,3% 11 124 3,2% 2,6% 173 d. 164 d. 1 457 144 d. 1 331 2 710 3 855 15 d. 11 d. 16 d. 18 d. 2013 152 d. (9 168) 2014 142 d. (10 993) 2015 158 d. (16 718) 176 d. DETSKY MIR RETAIL CHAIN 26 440 150 d. 4,4% 2 244 8 d. 139 d. (25 215) (24 387) 2016 2017 Inventories ■Increase in trade working capital in 2015 mainly driven by - Change of margin structure (shift from front to back thus higher retro-bonuses thus increased AR) Company has opened new DC, initial fill-up resulted in inventory level growth Increase in number of new stores also resulted in inventory level growth Source: Company data. Receivables Payables ■ Improvements in 2016 achieved via Improved logistics processes efficiency - Improved AR: retro-bonuses are calculated and received on a monthly basis instead of quarterly effective beginning of 2016 NWC as % of Revenue - ■ Improvements in 2017 achieved via Improved Inventories turnover on the back of optimization of current stock as well as purchases of new goods (positively affected gross margin) and additional promotions agreed with and compensated by suppliers ■Changes in Payables turnover due to an increase in imports and private label purchases (positive effect on gross margin) and better turnover of goods sold with "on being sold" payment condition Note: The Company's consolidated financial statements for 2013 under US GAAP and 2014-2017 under IFRS. For the line items and the periods presented, there was no difference between the calculation of numbers or presentation under GAAP vs IFRS. 1 Net trade working capital calculated as Receivables + Inventories - Payables 2 Days of Inventories / Receivables / Payables turnover calculated as corresponding metric divided by COGS/Revenue / COGS multiplied by 365 for FY numbers. 30#311Q'15/ 1Q'14 2Q'15/ 2Q'14 3Q'15/ 3Q'14 4Q'15/ 4Q'14 1Q'16/ 1Q'15 2Q'16/ 2Q'15 18.9% 3Q'16/ 3Q'15 Robust Like-for-Like Performance Like-for-like revenue (in RUB)* x.x% LFL turnover growth LFL number of tickets growth LFL average ticket growth 14.5% 13.6% 14.0% 13.4% 12.2% 11.7% 10,0% 3,0% 7.2% 11.2% 4.8% 6.1% 9.0% 8,6% 10,2% 7,6% 7,8% 12,2% 8,0% 4,6% 11,2% 7,2% 3,8% 4,0% I 3,4% 1,1% 1,7% Like-for-like revenue growth for 2017 13,3% 14,1% 10,7% 10,5% Children's Food retail Electronics retail -1,9% 7,2% -4,0% 5,4% -5,4% 4,1% -6,0% 0,9% 4Q'16/ 4Q'15 LFL growth Total Average ticket Number of tickets Source: Company data, publicly available data with respect to other companies LFL growth 2015 LFL growth 2016 13.7% 8.3% 5.0% *LfL growth in RUB terms. LfL growth includes only DM stores in Russia that have been in operations for at least 12 full calendar months. 12.3% 5.9% 6.0% 1Q'17/ 1Q'16 Detsky Mir demonstrated attractive revenue growth rate (LFL +7.2%) for 2017 2Q'17/ 2Q'16 3Q'17/ 3Q'16 31 4Q'17/ 4Q'16 LFL growth 2017 Detsky Mir RETAIL CHAIN Comments Strong growth of the like-for-like sales was a result of competitive pricing policy marketing activities and improvements in merchandising Focus on attracting of new customers as result double digit LFL number of tickets growth in 2017 New openings under new store concept, attractive loyalty program and competitive prices are key factors supporting further like- for-like growth (3,4%) (10,9%) Detsky X5 Lenta Magnit Dixy M.Video Mir 7.2% (4.4%) 12.2%#32Financial Performance Summary (RUBm, unless specified otherwise)1 Comments 2013 2014 2015 2016 2017 Number of stores 252 322 425 525 622 Detsky Mir stores 224 278 381 480 578 ELC stores 27 43 44 45 44 Sales growth Selling space (k sqm) 320 390 491 596 688 Revenue 36,001 45,446 60,544 79,547 97,003 % total sales growth 30.3% 26.2% 33.2% 31.4% 21.9% % LFL sales growth² 15.3% 14.6% 13.7% 12.3% 7.2% Revenue per sqm³ 118 128 137 146 151 (RUB thousand/sqm) Improved operating efficiency Online sales4 227 443 1,260 2,776 4,637 Share of online sales 0.6% 1.0% 2.1% 3.5% 4.8% Gross profit 13,908 17,263 21,904 27,108 32,798 Margin, % 38.6% 38.0% 36.2% 34.1% 33.8% Gross profit per sqm³ 46 49 50 50 51 (RUB thousand/sqm) Adjusted SG&A5 11,155) 12,807) 15,708 18,885 22,127 Superior EBITDA margins % of revenue 31.0% 28.2% 25.9% 23.7% 22.8% Adjusted EBITDA6 2,771 4,463 6,185 8,203 10,663 Margin, % 7.7% 9.8% 10.2% 10.3% 11.0% Adjusted Profit for the period? 1,153 1,685 2,189 3,827 5,501 Margin, % 3.2% 3.7% 3.6% 4.8% (5.7%) Capex Total Debt 5,922 9,716 18,359 14,638 13,592 Cash and cash equivalents (860) (1,670) (1,934) (2,445) (3,155) Adjusted Net Debt 5,062 2,806 10,618 11,133 10,436 Adjusted Net Debt / Adjusted 1.8x 0.6x 1.7x 1.4x 1.0x EBITDA Capex % of revenue Dividends paid (772) 2.1% (1,945) 4.3% (5,308) 8.8% (1,747) 2.2% (2,468) 2.5% (420) (1,856) (2,973) (4,427) (4,767) DETSKY MIR RETAIL CHAIN ■Strong support from both network expansion and LFL ■Solid LFL Sales growth rates ■ Accelerated rate of new openings in 2017 (+104 stores⁹) ■Slightly declining gross margin due to investment in price leadership to support traffic and LFL growth ■ Over 800bps improvement in SG&A as % of sales over five years (-93bps 2017 vs. 2016) ■Major SG&A optimisation measures implemented by the new management team since 2013 ■Over 320bps margin increase over five years (+68bps 2017 vs. 2016) ■Double-digit EBITDA margin achieved in 2015 and maintained in 2016 - 2017, expected to be maintained in 2018 ■ Asset-light business model allows to achieve superior cash flow generation Conservative financial policy ■Leverage as of 31-December-2017 is 1.0x vs. 4.0x average leverage covenant level across the loan portfolio Attractive returns for shareholders ■Continuous dividend payout pattern ■Yearly dividend payments increased more than 10-fold from 2013 Source: Company data 1 The Group's consolidated financial statements for 2011-2013 under US GAAP and 2014-2017 under IFRS. For the line items and the years presented, there was no difference between the calculation of numbers or presentation under US GAAP and IFRS 2 LfL growth in RUB terms. LfL growth includes only DM stores in Russia that have been in operation for at least 12 full calendar months 3 Calculated per average space for the year 4 Including in-store pickup 5 Adjusted SG&A expenses are calculated excluding Depreciation and Amortisation, as well as additional bonus payments and Income received from partial termination of employees' right to receive shares under the LTI program 6 Calculated as EBITDA, adjusted for the one-off effect relating to disposal of the building occupied by the Yakimanka Gallery in 2014, as well as additional share-based compensation expense and Income received from partial termination of employees' right to receive shares under the LTI program 7 Adjusted for the one-off effect relating to disposal of the building occupied by the Yakimanka Gallery in 2014 (together with related tax effects), as well as additional bonus accruals and Income received from partial termination of employees' right to receive shares under the LTI program 8 Adjusted Net Debt is calculated as Net Debt adjusted for amounts receivable under the loan issued to CJSC "DM-Finance" (Sistema's subsidiary), fully repaid on February 27, 2017. 9 In 2017, Detsky Mir closed six stores as part of the Company's ongoing rationalisation programme 32#33Our Operating Performance vs Share Price Performance RUB Share price performance since IPO Share price performance +6.2% Company's performance in 2017 Sales 2017 +21.9% yoy Dividends paid in 2017: RUB4.8bn, average dividend yield1 of 6.9% 13.1% Adjusted EBITDA 2017 +30.0% yoy Adjusted Net income 2017 +43.8% yoy 115 110 Total shareholders return 105 100 Share price performance since Feb-17 to 7-Dec-17: +19% 2-May-17: Announcement of the court claim filled by Rosneft and Bashneft against Sistema 95 95 90 90 85 80 80 75 припи 7-Dec-17:Rosneft and Bashneft filed a new claim against Sistema 12-Dec-17:Injunction over Sistema's shares in Detsky Mir DETSKY MIR RETAIL CHAIN 19-Feb-18:Removal of restrictive measures on shares of Detsky Mir 22-Dec-17: Sistema signed an amicable agreement with Rosneft, Bashneft 70 Feb-17 Mar-17 IPO Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Detsky Mir Nov-17 Dec-17 Jan-18 Feb-18 Share price as of 5 March 2018 1 Calculated as dividend per share paid in 2017 (based on total dividends of RUB4,767m, shares outstanding of 738.6m) divided by average share price since IPO 33