Company Announcements

July 16 2019                                                                                                            For immediate release

MAIL.RU GROUP LIMITED

Games and eSports partnership based around ESforce

July 16, 2019. Mail.ru Group Limited (MAIL.LI, hereinafter referred to as "the Company" or "the Group"), one of the largest Internet companies in the Russian-speaking Internet market, today announces the creation of a partnership around ESforce eSports business with Modern Pick (the "Transaction"), which will allow Mail.ru Group and Modern Pick to build a well-diversified eSports business, with presence in Russia/CIS as well as Europe, with access to a broader games portfolio and expertise in AAA+ games development, eSports teams, broadcasting, video production, streaming, tournament organization and venues, combined with an extensive set of media and global brand partnerships.

The BoD of Mail.ru Group approved signing of the partnership agreement. Implied valuation of ESforce as part of the transaction is $110mn (including SK Gaming, catering and merchandise businesses, disposed by Mail.ru Group previously for >$10mn, implied overall valuation of all ESforce assets acquired by Mail.ru Group totals $120mn+). Mail.ru Group is to transfer 51% stake of ESforce into Modern Pick. The transaction is anticipated to be completed in the coming months, with ESforce to be deconsolidated from the Mail.ru Group's financials as of Q2 results reporting on a pro forma basis. In FY 2018, ESforce generated RUB2.7bn in revenues and had an EBITDA of RUB0.7bn.

Following the closure of the deal, Mail.ru Group will work with ESforce on arms-length basis, including around target advertising activity using Mail.ru Group's services.

Deal structure:

·      MRG already holds 3% of Modern Pick

·      MRG transfers 51% of ESforce as contribution to Modern Pick at an implied $56mn valuation ($110mn for 100%) with the combined company having a total initial value of $350mn

·      The ultimate long term size of MRG's stake will depend on a number of operational KPIs for the combined company set for 2022 and could increase or decrease from initial level

·      MRG will remain 49% shareholder of ESforce post transaction

·      Third year ratchet: Mail.ru Group's share is to be re-valuated depending on 2022 financial performance. In case the combined 2022 revenue is below certain minimum threshold MRG may exit the merged company and get 51% of ESforce shares back. Mail.ru Group also has an option to reverse the deal in case certain fundraising and asset consolidation conditions agreed as part of the Transaction are not met by Modern Pick

We remain committed to games and eSports and see this partnership as adding optionality around new monetization channels for our existing and future game content, potential to operate eSports leagues and generally play a much larger role on the global eSports market, which offers significant growth potential, in our view, having already risen by 75% since 2016 to $865.1mn in 2018 and expected to break $1bn in revenues this year, according to Newzoo. PwC sees the global e-sports market growing at a 2018-22F CAGR of 18%, from $805mn in 2018 to $1,580mn in 2022.

We expect synergies from access to a much broader European sponsorship market with wide opportunities in eSports and media projects as well as from broadening our non-violent games portfolio, attractive for sponsorship. This also means an opportunity for MY.GAMES to receive access to global advertisers and opens up opportunities for cooperation and global expansion with overall diversification of our games and eSports business.

Commenting on the transaction Vladimir Nikolsky, COO (Russia) at Mail.ru Group, said: "We are very pleased to be entering into this new business together with Modern Pick, the strong partner who works in close cooperation with such brands as ZDF, Red Bull, etc. We are pleased with the progress that ESF has made since our acquisition but we see larger opportunities for the business being part of a wider eco-system. This is entirely constant with our strategy of leveraging our dominant position in our home market while also working with partners in some areas.  We look forward to working with our talented and energetic partners to further expand ESF's reach and user offering."

Commenting on the transaction Mathias Lauda, Vice president at Modern Pick, said: "We are really excited to be able grow the business jointly with Mail.ru Group and gain the ESF distribution expertise and the wider partnership with Mail.ru Group to expand the reach of our world class racing games. There are obvious synergies between Modern Pick with its great partnership network of ZDF and Red Bull amongst others and the ever expanding eSports network of ESF.  With the number of racing and arcade genre games continuing to increase interest from the wider auto industry continues to increase both in terms of brand recognition and also as a new avenue for marketing. We look forward to working together in this."

For further information please contact:

Investors

Tatiana Volochkovich

Phone: +7 495 725 6357 extension: 3434

Mobile: +7 905 594 6604

E-mail: t.volochkovich@corp.mail.ru

Press

Sergei Luchin

Mobile: +7 (925) 347-83-81  

E-mail: s.luchin@corp.mail.ru

Cautionary Statement regarding Forward Looking Statements and Disclaimers

This press release contains statements of expectation and other forward-looking statements regarding future events or the future financial performance of the Group. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "forecast", "intend", "will", "could", "may" or "might", the negative of such terms or other similar expressions including "outlook" or "guidance". The forward-looking statements in this release are based upon various assumptions that are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and may be beyond the Group's control. Actual results could differ materially from those discussed in the forward looking statements herein. Many factors could cause actual results to differ materially from those discussed in the forward looking statements included herein, including competition in the marketplace, changes in consumer preferences, the degree of Internet penetration and online advertising in Russia, concerns about data security, claims of intellectual property infringement, adverse media speculation, changes in political, social, legal or economic conditions in Russia, exchange rate fluctuations, and the Group's success in identifying and responding to these and other risks involved in its business, including those referenced under "Risk Factors" in the Group's public filings. The forward-looking statements contained herein speak only as of the date they were made, and the Group does not intend to amend or update these statements except to the extent required by law to reflect events and circumstances occurring after the date hereof.

About Mail.ru Group:

Mail.ru Group, international brand My.com (MAIL.LI, listed since November 5, 2010) is the largest internet business in Russia in terms of total daily audience (Mediascope Web Index Desktop+Mobile, Russia, population aged 12-64 in the cities 100,000+, April 2019).

Mail.ru Group is developing an integrated communications and entertainment platform. The Company owns Russia's leading email service and one of Russia's largest internet portals, Mail.Ru; the two largest Russian language social networks, VKontakte (VK) and Odnoklassniki (OK); Russia's largest MMO games, such as Warface, Skyforge and Perfect World, and global mobile games, such as War Robots and Hustle Castle; and instant messaging services ICQ, Agent Mail.ru and TamTam. The Company operates two largest food delivery businesses in Russia, Delivery Club and ZakaZaka, and a location-based mobile marketplace Youla.

The Company owns Pixonic, a mobile games developer, and ESforce, one of the largest eSports businesses globally. The Company's portfolio also includes a leading OpenStreetMap-based offline mobile maps and navigation service MAPS.ME and a controlling stake in GeekBrains, an online education platform for developers. In addition, Mail.ru Group holds equity stakes in a number of small venture capital investments in various Internet companies in Russia, other CIS countries and Israel.

Mail.ru Group is actively involved in IT education in Russia and has a number of education centers in partnership with major Russian universities. Mail.ru Group also holds Russia's most important programming contests.

About Modern Pick:

Modern Pick is one of the leading worldwide developers and publishers in the segment of non violent games, with a special focus on racing games and ambition to become one of the market leaders in eSports. The company is originally based in Europe, while having offices in London, Barcelona, Moscow and Singapore and with Advisors and team members representing all continents and important areas of global games industry. The team has a proven track record of developing AAA racing games. It offers proprietary game engine technology serving the most popular platforms in the industry. The company holds direct ownership of the IP for multiple leading racing games titles globally and offers a sizeable pipeline of new non-violent game titles.