AFK Sistema : Anaudited financial results for the second quarter ended June 30, 2014

Anaudited financial results for the second quarter ended June 30, 2014

Moscow, Russia- August 28, 2014 - Sistema JSFC ("Sistema" or the "Company", together with its subsidiaries, "the Group") (LSE: SSA), the largest publicly-traded diversified holding company in Russia and the CIS, today announces its unaudited consolidated US GAAP financial results for the second quarter ended June 30, 2014.

SECOND QUARTER FINANCIAL HIGHLIGHTS

• Consolidated revenues up 4.2% YoY in dollar terms and 15.3% YoY in rouble terms to US$ 8.8 billion
• Adjusted OIBDA down 1.2% YoY in dollar terms, but grew by 9.4% YoY in rouble terms to US$ 2.1 billion, with an adjusted OIBDA margin of 23.8%
• Adjusted net income attributable to Sistema grew by 47.7% YoY to US$ 509.6 million
• Net debt at the Corporate Holding level amounted to US$ 828 million as at June 30, 2014, compared to US$ 491 million as of March 31, 2014. The cash position at the Corporate Holding level amounted to US$ 947 million.

KEY CORPORATE HIGHLIGHTS IN THE SECOND QUARTER OF 2014

• Sistema's ordinary shares were included in the First Tier (top) quotation list of the Moscow Exchange.
• The Annual General Meeting of Shareholders ("AGM") approved a total dividend payment on Sistema's shares of RUB 19.9 billion, representing a payment of RUB 2.06 per ordinary share. The dividends were paid in full in July 2014.
• Completed the reorganisation of Sistema-Invest CJSC and eliminated the cross ownership structure of Bashneft. As a result, Sistema's effective ownership at Bashneft now amounts to 78.8%.
• Acquired a 10.8% stake in OZON Holdings Limited ("OZON"), one of Russia's largest e-commerce businesses, for US$ 75 million. MTS also acquired a 10.8% stake in OZON at the same price.
• Signed binding agreements with Fresenius Kabi, a German pharmaceutical company, and Zenitco Finance Management, another shareholder[3] of Binnopharm CJSC, to establish a pharmaceuticals joint venture ("JV") for operations in Russia and the CIS. The JV will combine 100% of Binnopharm and 100% of Fresenius Kabi's Russian and CIS business. Upon completion, Sistema will own 37% of the JV.
• Sistema's subsidiary LLC LesInvest signed legally binding agreements with the Bank of Moscow to acquire 100% of OJSC Segezha Pulp and Paper Mill and 100% of LLC Derevoobrabotka-Proekt, together with all of their debt obligations to the Bank of Moscow.
• Acquired 49% of the ordinary shares of CJSC Business Nedvizhimost from CJSC MGTS-Nedvizhimost, for RUB 3.1 billion. As a result, Sistema's ownership in CJSC Business Nedvizhimost increased to 100%.

Mikhail Shamolin, President and Chief Executive Officer of Sistema, commented:

"Our solid set of second quarter results demonstrates the resilience of our businesses in the face of changing market conditions. The key highlights for the period include an 11.5% year-on-year increase in oil production at Bashneft, the highest annual growth rate recorded in Russia amongstoil producers; continued growth in MTS' subscriber base, as the operator maintains its leading market position; and strong margins achieved by Detsky mir, following the retailer's efforts to improve its business efficiency.

In line with our efforts to diversify our portfolio, add new growth opportunities and attract leading global companies as partners in our Russian businesses, Sistema announced several important M&A transactions in the reporting period. During the second quarter, we acquired a stake in OZON Holdings Limited, giving us an entry to the e-commerce market; we also established a joint venture with Fresenius Kabi in our pharmaceutical business; and we invested in the pulp and paper industry leaders.

Looking ahead, we are optimistic about the prospects of the Russian economy. As a long-term investor Sistema continues to see attractive domestic opportunities and by using our disciplined investment approach we are well placed to capture them".