Magnit : Annual report of PJSC “Magnit” for 2023

Annual Report 2023

Resilience through changes

About the Report

The Annual Report of Public Joint-Stock Company Magnit for 2023 (hereinafter also referred to as PJSC Magnit or the Company) (the Annual Report or the Report) was prepared based on the information available to PJSC Magnit and its subsidiaries (hereinafter together referred to as the Group or Magnit Group)

as at 31 December 2023, unless otherwise implied by the meaning or content of the information provided.

This Annual Report was drafted in accordance with applicable laws, is addressed to a wide range of stakeholders and reflects the key performance results of Magnit for 2023 in such matters asstrategic and corporate governance as well

as financial and operating results. The Report meets the following requirements and guidelines:

• regulations of the Central Bank of the Russian Federation (the Bank of Russia) No. 714-P On Disclosing Information by Issuers of Issue- Grade Securities dated 27 March 2020;
• letter of the Bank of Russia No. 06-52/2463 On the Corporate Governance Code dated 10 April 2014;
• letter of the Bank of Russia No. IN-06-28/102 On Disclosing the Corporate Governance
  Code Compliance Report in a Public Joint-
  Stock Company's Annual Report dated 27 December 2021;
• Moscow Exchange listing rules;
• letter of the Bank of Russia No. IN-06-28/49 On Recommendations for Public Joint- Stock Companies to Disclose Non-Financial Information Regarding their Operations dated 12 July 2021;
• Federal Law No. 261-FZ On Energy Saving and Improving Energy Efficiency and Amendments to Certain Legislative Acts of the Russian Federation dated 23 November 2009.

Financial indicators referred to in this Annual Report are disclosed based on Magnit's consolidated financial statements under

the International Financial Reporting Standards (IFRS) for 2023 as audited by Centre for Audit Technologies and Solutions.

The Annual Report should be read as a whole taking into account the content of all sections as well as the notes and the explanations herein.

In addition to official information on the activities of Magnit, this Annual Report contains information obtained from third parties and from sources which Magnit finds to be reliable. However, the Company does not guarantee the accuracy of this information, as it may be abridged or incomplete.

Disclaimer

Forward-looking statements contained in this Annual Report, including all statements concerning the Company's intentions, opinions, or current expectations regarding its performance, financial position, liquidity, growth prospects, strategy and the industry in which Magnit operates,

are not based on actual circumstances. Such terms as "assume," "believe", "expect", "predict", "intend", "plan", "project", "consider" and "could" along with other similar expressions as well as those used in the negative usually indicate the predictive nature of the statement. Forward- looking statements are characterised by risks and uncertainties since they relate to events and depend on circumstances that may not occur in the future.

Annual Report 2023

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Magnit offers no guarantees that the actual results, scope, or indicators of its performance or the industry in which the Company operates will correspond

to the results, scope, or performance indicators clearly expressed or implied in any forward-looking statements contained in this Annual Report

or elsewhere. The recipients of the information presented in the Annual Report should not base their assumptions solely on it. Magnit is not liable for any losses that any person may incur due to the fact that the above person relied on forward-looking statements.

Except as expressly envisaged by applicable law, the Company assumes no obligation to distribute or publish any updates or changes to forward- looking statements reflecting any changes

in expectations or new information as well as subsequent events, conditions, or circumstances.

How to use the online version of the Report

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Link to online materials

Link to more information in the Report

Annual Report 2023

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Contents

Company	Strategy	Business	Sustainable	Corporate	Appendices
overview	report	overview	development	governance

Magnit in focus	8	Management	32	2023 performance	58	Our sustainability	120	Corporate governance	136	Report on compliance	164
		statement				approach		framework		with the principles
Key highlights	10			Format overview	60					and recommendations
		Market overview	36			Stakeholder	122	General Meeting	138	of the Corporate
Geographical coverage	11			E-commerce	81	engagement		of Shareholders		Governance Code
		Strategy	44
Business model	12			Customer experience	84	2023 performance	124	Board of Directors	138	Major transactions	208
		Innovation	46	and marketing
Investment case	14	and digital solutions		communications				Management Board	140	Related party	208
										transactions
Key developments	16			Private labels	93			Corporate Secretary	141
of 2023				and own production						Resource consumption	208
								Internal control and risk	141
Resilience through	20			Suppliers	102			management system		Glossary	209
changes
				Logistics	108			Business ethics	148	Contacts	211
				and transport				and anticorruption
				Financial review	113			Shareholder and investor	152
								engagement

For the online version of the Report, see the Company's official website magnit.ru

Annual Report 2023

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29,165 stores

in Russia and the Republic of Uzbekistan

Resilience through changes

Company overview

8 Magnit in focus

10 Key highlights

11 Geographical coverage

12 Business model

14 Investment case

16 Key developments of 2023

20 Resilience through changes

	>5 thous. suppliers
p. 24	cooperate with Magnit

p. 11

	>360 thous. employees
p. 10	work at Magnit Group

Company overview

Magnit in focus

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8 | 9

Magnit is one of Russia's leading food retail chains founded in 1994 in Krasnodar. Today, we are the country's largest retail operator by the number of stores and geographical coverage.

29,165		>360
stores		thous. employees
in 67 regions of Russia and in	as at 31 December 2023
the Republic of Uzbekistan

10,053		~17 mln
thous. sq. m		customers daily
selling space

Magnit is one of Russia's largest retailers with a total selling space of 10,053 thous. sq. m and 29,165 stores

of various formats operating in 67 regions of Russia and in the Republic of Uzbekistan.

Our multiformat model includes convenience and drogerie stores, supermarkets and pharmacies under the Magnit and DIXY brands. In 2023, Magnit launched the V1 chain of hard discounters, which focuses on a limited range of quality products at appealing prices to meet all of the key consumer needs. Customers can also shop across the Company's formats online, choosing between regular or express delivery options.

Magnit boasts one of the largest logistics network in Russia. The Company is continuously developing its own logistics infrastructure while also testing new logistics formats. Today, Magnit operates 45 distribution centres, warehousing facilities with a total area of 1.9 mln sq. m, and fleet of over 5,700 trucks, making it one of Russia's largest own fleets.

Magnit is actively developing private labels to offer unique products with excellent value for money. Magnit's private label portfolio includes over 50 brands and around 5,500 SKUs. The portfolio boasts over 45 unique brands from various product groups and price segments. Available only in Magnit stores, private label items are made predominantly by Russian businesses and by Magnit's in-house facilities.

Our mission, culture and values

At Magnit, we are committed to continuous operational improvement and professionalism in all areas of activity, while aiming to deliver exceptional quality and customer service.

We highly value the principles of teamwork and respect for each other and our customers, and encourage open and constructive dialogue and effective cross-functional cooperation.

We implement best practices and innovative technologies in our operations and seek to build a better future for all.

The Magnit Group includes, inter alia,

PJSC Magnit and its subsidiaries JSC Tander, JSC DIXY Ug, Selta LLC, and Retail Import LLC.

For the list of the key Group companies, see ourconsolidated financial statements.

Magnit's sustainability strategy to 2025, "Retail with Purpose", sets ambitious goals, promotes a sustainable corporate culture and focuses on embedding sustainability principles into all aspects and facets of our business.

76.4 mln	300
loyalty card holders	thous. tonnes
	of in-house produce in 20231

Core formats

New formats

Magnit is the only retailer in Russia with its own food production capacities. It operates 20 production facilities, including six agricultural and 14 dry food and confectionery complexes.

Our values

Customers at the heart of everything we do

Caring for our customers	Stronger together
We build long-lasting	We achieve success through
connections with our	teamwork, incorporating
customers. Our team members	the views of our employees.
are regular shoppers at Magnit
stores and can easily relate
to customers.

Focusing on results	Taking responsibility
We strive to accomplish	We scrupulously follow
our goals in the most	the Company's principles
efficient manner.	and we take responsibility
	for our decisions.

18,701	Magnit convenience	1,176	My Price stores
	stores²			1	Net of contract manufacturing.
7,740	Drogerie stores³	53	First Choice discounters⁴
2	Including convenience stores, Magnit City stores,
2,235	DIXY convenience				My Price soft discounters and First Choice hard
	stores			3	discounters.
489	Supermarkets			The names drogerie, drogerie stores, cosmetics
			stores and Magnit Cosmetic are interchangeable.
				4	The names First Choice and V1 are interchangeable.

Company overview

Annual Report 2023

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Key highlights

Operational and financial highlights

ESG metrics

Number of stores			Headcount, thous.
20,725	21,564	26,077	27,405	29,165	308	316	357	361	361
2019	2020	2021	2022	2023	2019	2020	2021	2022	2023

Number of tickets, mln

Revenue, RUB bln

31%	81%
reduction in specific greenhouse	employee satisfaction rate
gas emissions vs the 2019 base
year
26.7% in 2022	79.8% in 2022

59%		408,934
reduction in specific food	waste	direct beneficiaries received
generation vs the 2019	base year	support from Magnit
52.5% in 2022
86%
employee engagement
rate

4,690	4,641	5,147	5,932	6,190	1,369	1,554	1,856	2,352	2,545
2019	2020	2021	2022	2023	2019	2020	2021	2022	2023

84.9% in 2022

Geographical coverage

Convenience

Supermarkets2

Drogeries3

Convenience

Distribution

Agricultural

Production

stores1

stores

centres

facilities

sites

North

603

19

272

1

Caucasian

Federal District

EBITDA margin, %

Net income margin, %

6.1	7.0	7.2	6.8	6.5	1.2	2.4	2.8	1.4	2.6
2019	2020	2021	2022	2023	2019	2020	2021	2022	2023

Note: financial metrics are provided in accordance with IAS 17.

Southern	2,904			123			1,363					8	4			8
Federal District
Central Federal	4,921			83			1,988	1,770			15	2			2
District
Volga Federal	4,885			123			1,928					10					4
District
Northwestern	2,170			35			749	465			4
Federal District
Urals Federal	1,958			82			873					4
District
Siberian	1,260			24			497					3
Federal District
Total	18,701			489			7,740	2,235			45	6			14
					Magnit			DIXY
		29,165 stores								1 Magnit convenience stores also include Magnit
										City, My Price and First Choice stores.
		4,287 cities and townships		2	Magnit supermarkets include Magnit Family
							supermarkets and superstores.
		7 federal districts
			3	70 drogerie stores operate in Uzbekistan.

Company overview

Business model

Focus on caring for our customers Our stakeholders

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Our Sustainability Strategic Framework sets an ambitious goal for embedding sustainability in every aspect

of the business and its processes across five key areas.

The number one

Leadership

Creation of a 100%

Positive impact

Improvement in the quality

employer

in environmental

responsible supply

on the quality of life

of life for consumers

in the industry

impact reduction

chain

of all Russians

and local communities

Сustomers Employees Suppliers

~17 mln	>360 thous.	>5 thous.
customers daily	people employed	suppliers
	by the Company1

Shareholders

~300 thous.

shareholders3

Government	Local communities
and regulators
Magnit liaises with executive	Magnit aims to integrate sustainability
and legislative government agencies	principles into all aspects of its
nationally and regionally in strict	operations.
compliance with applicable laws, acting
as the industry's number one expert.

Our strengths

Multiformat and omni-channel

>29 thous.	76.4 mln
stores, including convenience	participants
stores, supermarkets, drogeries,	of the cross-format
discounters, and pharmacies	loyalty programme
42%	>12 mln
customers shopping across	monthly active users (MAU)
more than two formats	of Magnit's mobile app

Recognised supreme quality and breadth of range

~5.5 thous.	20%
private label SKUs	share of private
	labels in sales
175	3,590
quality control	laboratory tests
laboratories	per year

Own production capabilities and private labels

6 51

agricultural private

complexeslabels

14

production facilities

One of the largest supply chain networks in Russia

1.9mlnsq.m	5.7 thous.
of warehouse space	trucks
45	in 7
distribution	federal
centres	districts

Value for our stakeholders

Everywhere

for our customers

• Adapting existing and creating new formats tailored to specific customer needs in different localities
• Implementing CVM2 tools
• Developing online shopping and delivery services
• Improving availability of goods by leveraging new technology and communications development

Rewarding		Cooperating
our employees		with our suppliers
• Stable wages		•	Engaging local suppliers
• Employee benefits and perks	•	Inviting supplier representatives
• Professional and career growth		to work at Magnit's offices
opportunities for employees	•	Special cooperation conditions
at all levels		with farming enterprises

Delivering returns to our shareholders

• Strong capital discipline with a focus on returns in all investment decisions

Economic contribution

• Supporting social and economic development in the regions
  of operation
• Hosting regional procurement sessions
• Making timely tax payments

Supporting local communities

• New jobs
• Social and charitable programmes in the regions where we operate
• Reducing environmental impact

~RUB 7 bln

of discounts offered to pensioners in 2023

1,078 stores

redesigned in 2023

38 hours

of training in Magnit's Corporate Academy per employee per year

81%

employee satisfaction rate

86

business events held for suppliers

>2.5thous.	>170
local suppliers	farming partners

42%	RUB 172 bln	~RUB 600 mln
ROI of new store openings4	of taxes paid in 2023	committed for charitable efforts
RUB 42 bln		1,530 tonnes	31%
amount of dividends announced		of products	reduction
in 2023 and paid after the reporting		distributed under	in specific CO2
period		charitable projects	emissions5

• As at December 2023.

• As at December 2023.

2 CVM - customer value management.

4 ROI = OCF for the year with the ramp-up phase / CAPEX.

• Vs the 2019 base year.

Company overview

Investment case

Annual Report 2023

14 | 15

Market potential

For investors, we offer exposure to a sizeable market with potential for organic expansion and further consolidation.

• Sizeable market with increasing penetration of modern food retail and opportunities for organic expansion.
• Fragmented market with high potential for further consolidation.
• Growing market share of major players.
• New niches and growth opportunities coming along in the consistently growing e-grocery segment.

Leading player

Magnit is one of the largest food retailers in Russia, with a well-developed infrastructure, a strong customer base, a recognisable brand, and a growing market share.

• Multiformat offering with four core formats covering a range of shopping missions
  in grocery, drogerie and pharma segments.
• Wide coverage: 29,165 stores in 4 287 cities and townships across seven federal districts.
• 12.8%1 market share in food retail sales.
• Serving customers in all highly populated Russian regions (67 regions, 76.4 mln loyalty cards).
• Established distribution chain, with
  45 distribution centres and one of the largest own truck fleets in Russia.
• The only vertically integrated retailer in Russia: 20 own production facilities and agricultural complexes.

Growth ambitions

On track to speed up profitable return-driven growth leading to further market share gains.

• Acceleration of value-accretive organic growth.
• Smart expansion implying high profitability targets for new openings.
• Selective small to mid- size value-accretive M&As to strengthen market positions.
• Adherence to sustaining high return requirements for new projects.
• Store redesign programme to improve sales density.
• Building a leading e-grocery platform to account for over 5% of total turnover.
• Proactive forays into adjacent value-accretive niches.

Efficiency gains

We are consistently working to unlock the Company's huge potential to grow the business.

• Further CVP improvement.
  In 2023, the Company unveiled three new CVP concepts
  for DIXY, Magnit Convenience, and Magnit Pharmacy stores.
• CVP initiatives to enhance consumers' perception and experience with a focus on expanding the range of private labels, farm and healthy products and on revamping store interiors.
• Increase in sales density partly through redesign acceleration and process improvements.
• Extension of consumer offering complimentary to the core business: in 2023, the Company piloted the Magnit Ultra-Convenience and V1 hard discounter formats.

Dividends

Strong capital discipline with a focus on returns in all investment decisions with a view to generating substantial dividend payments.

• Focus on the quality of new store openings as a way to maximise ROI.
• Keeping Net Debt / EBITDA at a comfortable level.
• Clear plan to improve working capital with a focus on stock days optimisation.
• Value accretion for shareholders to deliver consistently solid dividends.

• Source: Magnit analysis.

Company overview

Key developments of 2023

JanuaryFebruary

March

Annual Report 2023

16 | 17

May

June

July

Magnit launches technology to check shelf life of labelled goods at checkout

Magnit launches

a specialised Internet store Magnit Cosmetic Online

Magnit once again tops consumer sector ESG ranking by the National Rating Agency (NRA)

Business

Finance and corporate events

Achievements

ESG

External source link

Magnit places exchange- traded bonds worth

RUB 30 bln on the Moscow Stock Exchange

Analytical Credit Rating Agency (ACRA) assigns credit rating to exchange-traded bonds of PJSC Magnit

Magnit launches its own hard discounter store format under the V1 or First Choice brand

Magnit introduces technology to check shelf life of labelled goods

in all stores

Magnit becomes the first retailer in Russia with certified organic production

Magnit provides 20 tonnes of products to people in need under food sharing programme

Magnit launches leaf vegetable growing center

Magnit deploys joint on-shelf availability management system

Magnit expands its test scope for the new Magnit Convenience Plus format

April

Magnit brands win four prizes at Private Label Awards

Magnit named finalist in E+ Awards, a major accolade recognising effectiveness in marketing communications, with Skrepyshi-NEW campaign

Magnit wins Data Award for excellence in training data management experts

Magnit opens its first V1 (First Choice) hard discounter in Moscow

Magnit and Aggregion launch new de-identified data processing service

First students graduate from Magnit's own Business Analysis School

Magnit to roll out AI- assisted cosmetics selection technology

Magnit scales extended barcode technology to control shelf life of goods

Magnit and partners create a standard of green packaging for e-commerce

Magnit announces a Tender Offer to shareholders by its subsidiary for Magnit's ordinary shares

Magnit wins two categories of Loyalty Awards Russia

Magnit integrates Magnit Delivery service into its core mobile app

Magnit self-checkouts to run on the Company's own software

Magnit opens third new superstore in Moscow

DIXY launches a project to collect unwanted clothes in its stores

Company overview

Annual Report 2023

18 | 19

August

September

October

November

December

Events after

the reporting period

DIXY introduces reverse	Magnit completes purchase
franchising programme	of Shares under the Tender
	Offer

Magnit launches
a project in Karelia	Magnit wins the first
for producing fertilisers from	Retail Tech project contest
food waste

Magnit introduces new loyalty promotion - Gold of the Magnit Sea

Magnit to develop inclusive volunteering programme together with the Enjoyable Ageing charitable foundation

Business

Finance and corporate events

Achievements

ESG

External source link

Magnit becomes the winner of Quality of Service

and Consumer Rights awards

Magnit migrates its Loyalty Programme to the Russian Software

V1 hard discounter chain launches its first distribution center

Magnit signs an agreement to acquire a stake in Samberi, the largest retailer in the Far East

Magnit announces

an additional Tender Offer to shareholders by its subsidiary for Magnit's ordinary shares

Magnit together with largest product suppliers develops eco-friendly advertising package standard

Magnit wins forty-seven prizes at Quality Assurance Awards 2023

DIXY develops a new store concept and launched store remodeling programme

Magnit finalises the deal to acquire KazanExpress marketplace

Magnit opens a brewery in Moscow superstore

Expert RA assigns ruAAA credit rating to PJSC Magnit

Magnit announces results of the Annual General Shareholders Meeting

V1 hard discounters chain start testing loyalty programme

Magnit starts piloting

the Magnit Ultra-Convenience format

Magnit develops a new convenience store concept

Magnit opens a new superstore in Krasnodar

Magnit becomes a strategic partner

of the Hermitage Museum

Magnit fully completes the process of acquisition of shares in the tender offers

ACRA upgrades the credit rating of PJSC Magnit to AAA(RU) level, stable outlook, and its bonds - to AAA(RU) level

Magnit pays dividends announced in 2023 in the amount of RUB 42 bln or RUB 412.13

per share

Magnit announces

the appointment of Evgeny Sluchevsky as its Chief Executive Officer as of 17 May 2024.

Mr. Sluchevsky previously served as the Company's Director

of Agricultural and Production Complex

Magnit develops a new pharmacy concept and opened the first revamped Magnit Pharmacy location in Moscow