Bashneft and Rosneft sue Sistema for damages

The amount of the lawsuit is the sum of dividends that the Defendants withdrew from Bashneft from 2009 through 2014, less taxes paid.

The court of first instance has established that AFK Sistema, in unlawful possession of assets, in the period preceding the return of the company to the state according to the court ruling, and aided by various schemes, including the unlawful payment of unprecedented dividends in its favor, consistently removed from Bashneft the resources necessary to ensure the Company's normal, undisrupted and technically safe operations.

This activity resulted in breaches of the deadlines and quality of maintenance and repair and in equipment wear leading, inter alia, to accidents at the Ufa Group's plants. All of this resulted in the need to raise many billions of additional funds to guarantee the industrial safety of Bashneft enterprises.

Rosneft undertook every effort to achieve an out-of-court settlement. The position of the Company was voiced publicly three months ago. Rosneft, in the interests of the stable operation of enterprises that are part of Sistema and of the overall Russian economy, declared its readiness to rest on the decision of the lower court and refrain from leveling additional legal demands. The Company also offered Sistema assistance in organizing loans, in the event they proved to be necessary in order to pay off the losses.

In developing their efforts for an out-of-court settlement, Rosneft and Bashneft involved as an intermediary in talks with the Defendants the Russian Direct Investment Fund (RDIF), an independent investment consulting structure possessing the highest professional reputation, which was delegated all the necessary authority in full. But since all our efforts did not produce results due to the Defendants' essential rejection from a dialog and the lack of any constructive proposals to settle the dispute on their part, Rosneft and Bashneft will continue their efforts, in the interests of our shareholders, aimed at the compensation of losses and the return of funds illegally withdrawn by the Defendants.

Claims for the return of funds removed in the form of dividends are consistent with the ruling of the court of first instance in which the Defendant is deemed to be a shareholder acting in bad faith in unlawful possession of shares and guilty of willfully inflicting damages on Bashneft and removing property and assets for its own benefit.