Sistema JSFC (“Sistema”) (LSE: SSA), the largest diversified public financial corporation in Russia and the CIS, today announces that Sistema’s subsidiary CJSC Medsi Group of Companies (“Medsi”) - a leader in the Moscow and Russian private healthcare market - has commenced a merger of assets with the State Unitary Enterprise Medical Centre under the Administration of the Mayor of Moscow and the Moscow Government (“SUE”), a large group of healthcare institutions in Moscow. The combined entity will operate under the Medsi name.

Moscow, Russia– April 5, 2012 – Sistema JSFC (“Sistema”) (LSE: SSA), the largest diversified public financial corporation in Russia and the CIS, today announces that Sistema’s subsidiary CJSC Medsi Group of Companies (“Medsi”) - a leader in the Moscow and Russian private healthcare market - has commenced a merger of assets with the State Unitary Enterprise Medical Centre under the Administration of the Mayor of Moscow and the Moscow Government (“SUE”), a large group of healthcare institutions in Moscow. The combined entity will operate under the Medsi name.

The aim of the new, integrated Medsi is to establish a unified system of full-service medical care, ensuring high standards of quality and the use of advanced technologies in the treatment of patients. The company will attract the international experience and expertise of leading industry partners to create an effective and modern system for the management of healthcare facilities in Russia. The use of best international practices for managing investments in healthcare, and for ensuring the operational efficiency of healthcare facilities, will enable the company to create a new industry-wide model, which can then be further expanded within the Russian healthcare sector.

Sergey Sobyanin, the Mayor of Moscow, commented: “In order to achieve a fundamental improvement in Russian healthcare, we need to attract up-to-date foreign medical experience and innovative ideas. The successful implementation of new technologies in treatment and in the management of healthcare enterprises cannot be achieved in one clinic alone, even if that clinic has the benefit of financial support. The radical transformation of healthcare nationally is only possible if best practices are put into effect on a greater scale. The Moscow Government and Sistema are taking the first step in acquiring the necessary experience by creating a significant platform for developing new methods in the treatment and organisation of medical care in Russia.”

Vladimir Evtushenkov, Chairman of the Board of Directors of Sistema, added: “Medsi is a leader in the private healthcare market within the Moscow region and in Russia, which is why the Moscow Government has chosen Medsi as its partner in this unique project, and we are grateful for this opportunity. The integrated Medsi company will attract international experience and investment, which will help us to develop modern standards of treatment and up-to-date technologies. These in turn will improve the quality of the healthcare services that are provided. Furthermore, we will be able to modernise certain technical aspects of medical facilities and upgrade healthcare infrastructure. Through implementing this joint project with Moscow’s SUE, Medsi will benefit from acquiring unique experience that will provide it with the opportunity to create a truly modern solution in the field of healthcare, which can then be further expanded.”

Within the framework of this transaction, Medsi has initiated an additional share issuance via a closed subscription in favour of two parties – SUE and a legal entity registered in the Eurozone, through which investment funds will make their investments into Medsi. SUE will pay for the shares issued to it with its property, which has a market value of RUB 6.043 billion, and will receive a 25.02% stake in the integrated company. SUE will become a Medsi shareholder upon the completion of the transfer of the designated healthcare assets, which is expected to happen by the end of 2012.

The second party participating in the additional share issuance will contribute RUB 6.035 billion in cash and will hold a 24.98% stake in the integrated company. Investment funds will finance the project, including the implementation of the investment programme of the new company, which involves the repair, modernisation and equipping of healthcare institutions in Moscow, and the development of Medsi’s network in the regions.

As a result of the transaction, Sistema, which is providing the business and assets of Medsi as the platform for the integration, will hold a 50% stake in the integrated company.  

Following the merger, Medsi will operate 22 out-patient clinics in Moscow, including specialised children’s clinics and large clinical-diagnostic centres; 11out-patient clinics in the regions; three in-patient hospitals with a total of 1,160 beds in Moscow; over 80 first-aid posts across the country; its own ambulance service; three wellness centres in Moscow and three health resorts in Moscow and the Crimea. The total area of Medsi medical facilities will be more than 230 thousand sq.m.