OAO JSFC OAO Shareholders “22” May 2009 Minutes “” ___ 2009 of Meeting No

Preliminarily approved by Approved by the Annual the Board of Directors of General Meeting of Sistema Sistema JSFC OAO JSFC OAO Shareholders “22” May 2009 Minutes “__” _____ 2009 of Meeting No. 04-09 Minutes of Meeting No. __

SISTEMA Joint-Stock Financial Corporation Public Joint-Stock Company [OAO]

ANNUAL REPORT for 2008

Completed in accordance with requirements of the “Regulation for disclosure of information by issuers of issuable securities” (Order of the Federal Service for Financial Markets of 10 October 2006 N 06-117/pz-n). The financial information presented in this Annual Report is based on data of the accounting statements compiled in accordance with Russian legislation and also contains elements from the consolidated financial statements compiled in accordance with international standards. All data presented in this Report are fixed as of 31 December 2008.

Moscow, 2009

1 TABLE OF CONTENTS

1. Company’s positioning in the sector 4 1.1 Profile of Sistema JSFC OAO operations 4 1.2 Sistema JSFC OAO assets 4

2. Priority directions of the activity 7 2.1 Sistema JSFC OAO strategy 7 2.2 Determining the strategy and principles for asset portfolio management 7

3. Report of the Company’s Board of Directors on results of the 8 Company’s development 8 3.1 Key events of 2008 11 3.2 Financial results of activities according to the RBAS 13 3.3 Financial results of activities under the US GAAP 16 3.4 Sistema JSFC OAO credit ratings 16 3.5 Dividend policy, report on payment of declared (paid) dividends on Sistema JSFC OAO shares

4. Prospects and strategy of development 17 4.1 Results of activities and development strategy of operating companies 17

5. Description of main risk factors 46 5.1 Financial risks 46 5.2 Sectoral risks 47 5.3 Country risks 52 5.4 Administrative risks 53

6. Corporate governance system 54 6.1 General Meeting of Shareholders 55 6.2 Board of Directors 55 6.3 President 57 6.4 Management Board 58 6.5 Development of the corporate governance in 2008 58

7. Criteria determining remuneration of the members of the 60 Company’s Board of Directors and its top management

8. Appendices 61 8.1 Brief professional background of members of the Board of Directors and their 61 stakes in the Sistema JSFC OAO capital

8.2 Information about transactions made by members of the Sistema JSFC OAO 66 Board of Directors with shares of the Company for the period from 1 January to 31 December 2008 8.3 Brief professional background of the Sistema JSFC OAO President and members 68

2 of the Board of Management 8.4 Information about quantity of Sistema JSFC OAO shares owned by the President 73

and members of the Management Board 8.5 List of transactions, which were made by the Company in the accounting year 74 and which in accordance with the Federal Law “On Joint-Stock Companies” are

recognized as major transactions, and other transactions, which in accordance with the Company’s Articles of Association are covered by the procedure for

approval of major transactions 8.6 List of transactions, which were made by the Company in the accounting year of 74 2008 and which in accordance with the Federal Law “On Joint-Stock Companies” are recognized as related parties’ transactions 8.7 Information about Sistema JSFC compliance with requirements of the Code of 79 Corporate Conduct

3 1. COMPANY’S POSITIONING IN THE SECTOR

1.1 Profile of Sistema JSFC OAO operations SISTEMA Joint-Stock Financial Corporation Public Joint-Stock Company [OAO] is the largest public diversified corporation in Russia and CIS whose assets are concentrated in the fastest growing and promising sectors of the service industries. Sistema JSFC OAO was founded in 1993 and is the only public holding in Russia controlling large public assets in different businesses.

As a result of the IPO, which took place in February 2005, 19% of Sistema JSFC OAO shares in a form of Global Depositary Receipts (GDR) were admitted to auction in the official quotation list of the London Stock Exchange under the symbol of SSA. Ordinary shares of Sistema JSFC OAO are also included to the quotation list “B” of the RTS exchange under the symbol of AFKS and to the quotation list “B” of the Moscow Stock Exchange under the symbol of SIST.

The asset portfolio counts ten strategic business directions: telecommunications, real estate, hi- tech, finances, retail, mass media, tourism, radio engineering, medicine and pharmaceutics.

On the whole, the companies controlled by Sistema JSFC OAO serve more than 100 million consumers in Russia, CIS and Eastern and Western Europe. The Sistema JSFC OAO efforts are concentrated on development of high technologies not only for the maximum increase of shareholders’ long-term profits but also with the purpose to develop the economy of Russia and those markets where we work.

At present the basis of the Sistema JSFC OAO competitive stability is composed by:

Effective financial policy; Wide diversification; Highly professional team of managers.

1.2 Sistema JSFC OAO assets

Sistema JSFC OAO

Telecom assets Consumer assets Technology and Financial investments industry MTS – 54% Sistema Hals – 80% SkyLink – 50% ComStar – 53% MBRD – 87% Sitronix – 71% MTT – 50% Shyam – 74% Detskiy Mir – 96% RTI – 100% SvyazInvest – 25%+1 SMM – 100% Intourist - 66% BinnoPharm – 100% BashTEK > 25% Medsi – 100%

4 Description of assets

MTS The largest cellular communication operator in Russia and CIS countries with the subscriber base of more than 95 million subscribers The MTS brand became the first and only Russian brand, which entered the number of one hundred leading world brands according to the BRANDZ™ rating published by the Financial Times and leading international survey agency Millward Brown ComStar Leading supplier of complex telecommunication solutions in Russia ComStar UTS Group of Companies includes MGTS OAO, which is the leader of the Moscow market of fixed communication services, and ComStar Direct Company, which is the largest supplier of broadband Internet access services ComStar UTS and Stream TV work in 6 federal districts of the Russian Federation (with the exception of the Far East) servicing nearly 4 million telephone subscribers – individuals, more than 1 million apartment subscribers of broadband access and nearly 2.1 million subscribers of pay TV Shyam Disposes of radio frequencies in 22 licensed districts, which cover all 28 administrative states and 7 union territories of India Shyam has 280 thousand subscribers of fixed communication in Rajasthan and expands its network and range of provided services In September 2008 Shyam has launched a mobile communication network of CDMA 800 MHz standard under the Rainbow brand in the state of Rajasthan SMM A vertically integrated holding, which develops a media business within Sistema JSFC. At present the priority direction for the company is development of pay TV Sistema Hals The largest diversified company, which works in the real estate market of Russia and CIS Since the beginning of its activities in 1994 Sistema Hals has successfully completed more than 30 projects with the total area of approximately 300 000 sq. m. Among them the headquarters of DaimlerChrysler, Hals Tower office building, Pipe Metallurgical Company’s headquarters, MaMaison network hotel MBRD As of the end of 2008 the Bank had 17 regional centres opened. MBRD also owns DalComBank (Khabarovsk) and East-West United Bank (Luxemburg) According to RBC Rating Agency, MBRD entered TOP-10 largest mortgage banks of Russia in 2007 with respect to granted mortgage credits Detskiy Mir Holds the leading position in the Russian market of goods for children in Russia. Detskiy Mir is one of the oldest and most recognizable retails brand, which has won the consumers’ confidence and has been known for more than 50 years As of the end of 2008 the retail network has increased up to 130 shops. The total trading area of the network came to 223.2 thousand sq. metres

Intourist The largest travel agency of Russia. Intourist was established in 1929 and at present is the leading operator in the rapidly growing market of travel services For the third time in a row Intourist is at the head of the annual sectoral rating of the Largest Travel Agencies of Russia compiled by TourInfo Information Agency. According to the rating, the total number of customers serviced by Intourist Group of Companies in 2008 compared with indices of 2007 has grown on 30.5% and exceeded 1.1 million people Medsi Includes more than 30 clinics in Moscow and regions, and also a medical emergency service. In addition to that, Medsi Group of Companies ZAO [Private Joint-Stock

5 Company] unites the following companies: American Hospital Group OOO [Limited Liability Company] (American Medical Centres brand) — a family clinic for VIP and foreigners, a Medsi ZAO clinic for adults, a Medsi II OAO children’s clinic, Family Medicine Corporation ZAO and also a network of Medsi Fitness fitness and wellness clubs In the third quarter of 2008 the total number of patients was 105500 people

Sitronics One of the leading suppliers of solutions in the field of telecommunications, information technologies and microelectronics in Russia and CIS countries with the growing presence in the Central and Eastern Europe, in the Middle East and Africa It serves more than 3,500 customers. The total number of employees is more than 10,000 persons where more than 4,500 are engaged in R&D Sitronix entered the rating of Deloitte Technology Fast 500 EMEA (500 fastest growing companies in the high-tech sector in 2008) RTI A large Russian defence company, which implements projects in the high-tech area unique on their complexity It is included in the TOP 20 enterprises of the Russian Defence-Industrial Complex according to the rating of enterprises of the Defence-Industrial Complex compiled by the Centre for Analysis of Strategies and Technologies (AST Centre) It operates in the market of B2G and B2B projects. The B2G portfolio of orders till 2017 is 8.1 billion dollars BinnoPharm It concentrates on development of three business directions: research activity, production of own highly marginal medicines and contractual production of generics Apart from that, the company is involved in trade operations — first of all, import of pharmaceutical preparations and materials

Bashkir Fuel and Energy Assets Enterprises of the group hold leading positions in the fuel and energy market of the Republic of Bashkortostan. They represent links of the single production chain — from extraction of oil to petrochemical processing The group of companies of the Bashkir Fuel and Energy Complex is included in ten largest oil-production companies of Russia (11.7 million tons in 2008) and holds the fifth place in oil processing (21 million tons in 2008)

* After 31 December 2008 the Sistema JSFC OAO portfolio underwent significant changes. So, in April 2009 Sistema JSFC OAO has brought the participating interests in enterprises of the Bashkir Fuel and Energy Complex* to controlling ones. In March 2009 the Sistema JSFC OAO share in MTT OAO intercity and international communication operator was sold and Sistema JSFC OAO has concluded an agreement with VTB Bank for selling a part of its shares in Sistema Hals. The transaction will be made in two stages: at the first stage, which is currently already completed, VTB acquires 19.5% of the company’s shares and gets a call option for the remaining 31.5%.

* The following enterprises are included: BashNeft ANK, Ufa Oil Refinery OAO, NovOil OAO, UfaNefteChem OAO, UfaOrgSynthesis OAO and BashkirNefteProduct OAO. 6 2. PRIORITY DIRECTIONS OF THE ACTIVITY

2.1 Sistema JSFC OAO strategy The Sistema JSFC OAO Mission reflects the shareholders' aspiration to develop a large-scale competitive diversified business in the consumer and high-tech areas in Russia and other CIS countries and also in selected foreign emerging markets. In accordance with the Mission, Sistema JSFC OAO sets the following strategic targets for itself for the next three to five years: The Sistema JSFC Total Shareholder Return should surpass the RTS index and the Sistema JSFC internal value of capital Reduction of the market discount to the value of the Sistema JSFC net assets down to the level of 25% Preservation of the financial stability Strengthening of leading positions in the key markets and also assurance of stable cash flow from operated businesses Reduction of the corporate centre’s expenses down to the level of the best world standards Improvement of corporate management and business culture

2.2 Determining the strategy and principles for asset portfolio management

Along with the main strategic priorities, Sistema JSFC intends to continue to develop the key business directions and focus on optimizing the current portfolio of assets, increasing the share of non-public businesses and also extracting the maximum possible synergies between the controlled businesses. Sistema JSFC intends to achieve the set strategic targets through active participation in development and control of businesses, focusing on effective investments and weighed approach to financing. Increasing the volume of operations in main directions of activities is planned not only at the expense of the organic accretion but also through acquisitions and strategic partnerships. To achieve the set strategic targets, especially in conditions of the world economic uncertainty, Sistema JSFC has defined a three-step approach to manage its business: All businesses (current projects and new investments) should attain self-repayment in the medium run and independently serve own financial liabilities All businesses (current projects and new investments) should create value (IRR>WACC, NPV>0), where the capital value will be determined every six months, and consider the changing economic situation All businesses should uninterruptedly search for exclusive investment possibilities, which may appear only during the period of economic uncertainty The Sistema JSFC management intends to adopt fast and effective portfolio resolutions with respect to each business, which do not conform to the above-listed criteria. The conformity of all businesses with the three-step approach of guarantee achievement of the set strategic targets. The companies included in the Sistema JSFC OAO portfolio are divided to three business units responsible for control and implementation of corresponding companies’ strategies. Telecommunication Assets Business Unit; Consumer Assets Business Unit; High-Tech and Industry Business Unit.

7 3. REPORT OF THE COMPANY’S BOARD OF DIRECTORS ON RESULTS OF THE COMPANY’S DEVELOPMENT

3.1 Key events of 2008

2 January 2008 Sistema Hals OAO, which is one of the largest diversified companies in the real estate market of Russia and CIS, announces engagement of Saraya Company, which is one of the largest Arab holdings in the area of real estate, as a strategic partner and co- investor to develop a project for construction of Camellia resort complex in Sochi under the Saraya brand

15 January 2008 Sistema JSFC OAO becomes a nation-wide cellular operator in India. On 10 January 2008 the Department of Telecommunications of India (DTI, Department of Telecommunications) has issued letters of guarantee to Shyam Telelink Ltd. to obtain universal telecommunication licences for 21 districts of India. The licences give the right to the operator to build networks and to provide services both of fixed and cellular communication. Together with the Shyam Telelink Ltd. Already available similar licence for the state of Rajasthan the newly obtained licences will assure the complete pan-Indian coverage for the company.

18 January 2008 Sistema JSFC OAO has increased its stake in the authorized capital stock of the Indian telecommunication operator Shyam Telelink Ltd from 10% to 51%. The amount of the transaction came to 46.74 million dollars

31 January 2008 Sistema JSFC has additionally acquired 50.48% of shares of DalComBank OAO. The amount of the transaction came to 2.64 billion roubles. As a result, Sistema JSFC has brought its share in the bank’s authorized capital stock to 98.65%

6 February 2008 Sistema JSFC OAO has completed the merger of medical assets in Medsi Group of Companies ZAO Holding, which on 100% belongs to Sistema JSFC.

12 February 2008 Sistema JSFC OAO has opened its office in New Delhi, India.

21 February 2008 Sistema JSFC OAO has registered in the Federal Service for Financial Markets the issue of documentary non-convertible interest bearing bonds payable to bearer Series 01 with the total volume of 6 billion roubles. The quantity of securities of the issue is 6 million bonds. The par value of each security of the issue is 1 thousand roubles. The issue has been given the State Registration Number 4-01-01669-A.

13 March 2008 On results of the auction the rate of the first and second coupons of the Sistema JSFC OAO bonds Series 01 (the State Registration Number of the securities issue is 4-01-01669-A) was determined in the amount of 9.45% per anum. The bonds were fully placed. During the auction there were bids placed with the total volume of 9.132 billion roubles.

15 April 2008 Sistema JSFC has repaid the Euro Bond loan for the amount of 350

8 million dollars

15 April 2008 The Sistema JSFC OAO subsidiary Shyam Telelink Ltd. has received an official notice of the Department of Telecommunications of India (DTI, Department of Telecommunications) of granted radio frequencies in the range of 800 MHz to operate in eight licensed districts of the country

15 May 2008 The Sistema JSFC OAO subsidiary Shyam Telelink Ltd. has received an official notice of the Department of Telecommunications of India (DTI, Department of Telecommunications) of granted radio frequencies in the band of 800 MHz to operate in two new licensed districts of the country

29 May 2008 Sistema JSFC has announced the appointment of Mr Leonid Melamed the President of Sistema JSFC. The resolution was adopted at the meeting of the Corporation’s Board of Directors held on 29 May.

06 June 2008 The Sistema JSFC OAO shares were included to the quotation list “B” of the MICEX under the AFKS sticker

06 June 2008 Sistema JSFC OAO has announced a successful completion of the transaction with ABN AMRO Bank to engage a multi-tranche syndicated credit in the amount of 613.3 million dollars US

18 June 2008 Shyam Telelink Ltd. has obtained a spectrum of radio frequencies in 4 new districts of India

28 July 2008 Sistema JSFC OAO has announced reorganization of its management structure approved by the Corporation’s Board of Directors on 26 July 2008. Lied in the basis of the new Sistema JSFC organizational management structure is the matrix model formed in whose accordance along with the Functional Complexes were three Business Units responsible for management of subsidiaries

14 August 2008 Sistema JSFC OAO has increased its share in DalComBank OAO (Khabarovsk) from 98.65% to 100%. The increase took place as a result of shares buy-out from the bank’s minority shareholders at a fair price. The amount of the transaction came to nearly 72 million roubles

29 August 2008 Standard & Poor’s (S&P) credit rating agency has raised the Sistema JSFC OAO corporate rating from level “BB-” to “BB”. The forecast is Stable.

29 August 2008 According to the study performed by the RBC Rating Agency, the Moscow Bank for Reconstruction and Development became one of the best among mortgage banks in the Russian market. On results of the first six months of 2008 it took the 9th place on the number of made transactions improving its indices on 1 position compared with results of the 2007 rating and also the 13th place on the volume of granted mortgage credits.

5 September 2008 The Sistema JSFC OAO subsidiary - the largest cellular communication operator in Russia and CIS countries Mobile TeleSystems OAO announces the signing of an agreement with the 9 American Apple Inc. for iPhone sales in Russia.

11 September 2008 The European financial magazine Euromoney has recognized the Sistema JSFC subsidiary Moscow Bank for Reconstruction and Development JSCB (OAO) as the Best Bank in the field of corporate management in developing countries of Europe in 2008.

25 September 2008 Standard Bank Russia (Standard Bank ZAO) acted as the organizer of the project for engaging a credit facility in the amount of 62.2 million dollars US for the Sistema JSFC OAO subsidiary Medsi Group of Companies ZAO for the term of 78 months

30 September 2008 Sistema JSFC OAO has announced that Shyam Telelink Ltd. (Shyam Telelink), which is the Sistema JSFC subsidiary in India, has launched a mobile communication network of CDMA 800 MHz standard for commercial operation in the state of Rajasthan under the Rainbow trademark.

21 October 2008 Medsi Group of Companies ZAO has engaged a credit of UniCredit Bank in the amount of 581.8 million roubles for the term of 7 years - the received funds will be directed for creating a network of family clinics in the Moscow Region. Sistema JSFC OAO has acted as a guarantor regarding the transaction for Medsi Group of Companies ZAO.

30 October 2008 Mobile TeleSystems OAO, the largest cellular communication operator in Russia and CIS countries, and Vodafone company, which is a leading international operator of mobile communication, announce conclusion of an exclusive strategic non-stock partnership directed at expansion of marketing and process possibilities of both companies. The four-year agreement on partnership covers the territory of Russia, Ukraine, Uzbekistan, Turkmenistan and Armenia.

13 November 2008 Sistema Invest OAO, which is included to Sistema JSFC, has concluded a package contract in the field of management with majority shareholders of enterprises of the Bashkir Fuel and Energy Complex (BashNeft ANK OAO, UfaOrgSynthesis OAO, BashkirNefteProduct OAO, Ufa Oil Refinery OAO, NovOil OAO and UfaNefteChem OAO)

27 November 2008 Sistema JSFC entered Top-10 of the rating of the best employers in the Russian Federation compiled based on the survey of the E- Xecutive Managers Community participants. At that, Sistema JSFC appeared to be the only representative of the category “Stock market, investment and management companies” in the rating top ten.

1 December 2008 SITRONIX OAO announces conclusion of a credit agreement with the State Corporation of the Bank for Development and Foreign Economic Activities (VneshEconomBank) for the amount of $230 million. The agreement has been concluded for 12 months with possible prolongation with the parties’ consent. The credit funds will be used to refinance credits for $125 million and $75 million granted by Dresdner Bank AG accordingly in November 2007 and March 2008 for the term of one year. The engaged funds will also be used to refinance other short-term borrowings granted in 2006 and 2007.

10 29 December 2008 Allianz ROSNO Life Insurance Company and the Moscow Bank for Reconstruction and Development have launched a joint social project directed at support of population in the Nizhniy Novgorod Region.

3.2 Sistema JSFC OAO financial results according to the RBAS

Indices 2008

Revenues, thousand roubles 12 544 356 Gross profit, thousand roubles 9 607 401 Net income (loss) of the accounting period, thousand roubles -106 744 574 Return on equity, % -28.61% Return on assets, % -24.69% Net profitability ratio, % -851% Profitability of products (sales), % 76.22% Capital turnover rate 0,031 Amount of outstanding loss as of the accounting date, thousand roubles -106 744 574,00 Ratio between outstanding loss as of the accounting date and balance currency 0.25

Revenue structure Thousand roubles Indices 2008

Interest in authorized capital stocks: dividends receivable 11 956 808 Lease of real estate 382 335 Agent’s commissions and of guarantee 205 213 TOTAL: 12 544 356 The main business activity of Sistema JSFC OAO is management of shares and holdings of stock in commercial organizations.

Structure of other incomes and expenses: Thousand roubles Indices 2008

Interest receivable 833 815 Interest payable - 2 564 917 Other incomes 88 895 273 Other expenses - 204 038 072 TOTAL: - 116 873 901 The main factor of the loss obtained for 2008 was negative reappraisal of investments in shares listed in the MICEX.

11 Indices of effectiveness

Indices 2008

Value of issuer’s net assets, thousand roubles 373 053 104,0 Ratio of the amount of engaged funds to the equity and reserves, % 15.75% Ratio of the amount of short-term liabilities to the equity and reserves, % 5,97% Coverage of payments to service debts, % -5.53 Level of past-due accounts , % 0% Turnover rate of accounts receivable, times 3.11 Share of dividends in the profit, % (on results of 2007) 1% Labour productivity, thousand roubles/people 41 675.60 Amortization to the volume of revenues 1%

On results of 2008 the net assets came to 373 053.1 million roubles falling on 22.6% compared with 2007. The main share in the structure of borrowed funds is held by long-term liabilities. The accounts receivable and payable are current ones.

Analysis if the issuer’s solvency and credit risk level shows that on the whole the issuer possesses both own resources and a possibility to engage additional credit resources without a significant risk that repayment of such funds will be prejudiced.

Indices of financial stability

Indices 2008

Working capital, thousand roubles -32 138 177 Index of permanent asset 1,09 Coefficient of current liquidity 1.19 Coefficient of fast liquidity 1.19 Coefficient of equity autonomy 0.86

The issuer’s indices of liquidity and solvency are satisfactory.

The amount of the issuer’s equity capital is sufficient to execute short-term liabilities and to cover current operating expenses. As of the end of 2008 the company’s equity capital is 373 053 104 thousand roubles; as of the said date the volume of short-term liabilities is 22 776 881 thousand roubles; the prime cost for 2008 came to 2 936 955 thousand roubles.

12 Liabilities and equity capital, structure of borrowed funds.

The share of the equity capital in the structure of the company’s liabilities is 86%. 14%

Собственный капитал Обязательства 86%

Liabilities and equity capital - Equity capital - Liabilities

The share of the short-term debts in the total volume of the company’s liabilities is 62%.

38% Долгосрочная задолженность

Краткосрочная задолженность 62%

Structure of borrowed funds - Long-term debts - Short-term debts

3.3 Consolidated financial results of Sistema JSFC OAO activities under the US GAAP In accordance with on non-audited statements of US GAAP, in 2008 Sistema JSFC OAO has demonstrated growth on main financial indices. The crisis factors have exerted an aggregate negative affect on the net income in the amount of $1.5 billion. Million Dollars US 2008 2007 2006 2005 PROFIT AND LOSS STATEMENT Revenues 16 671 13 411 10 267 7 594 Amortization 2 316 1 747 (1 286) (1 025) OIBDA 5 489 4 942 3 977 2 958 Margin 32,9% 36,9% 38.7% 39,0% Operating income 3 173 3 195 2 691 1 934 Margin 19,0% 23,9% 26.2% 25.5% Net income/loss 61,9 1 572 813 534 Margin 0.4% 11.7% 7,9% 7,0% 13 BALANCE SHEET Assets 29 158 28 397 20 191 13 091 Total debt 10 661 8 350 6 872 4 371 Cash and cash equivalents 1 991 1 062 502 483 Short-term financial investments 617 909 544 594 CASH FLOW STATEMENT Cash flows from operating activities 3 825 2 723 2 116 1 793 Cash flows from investment activities (5 874) (5 754) (5 317) (4 276) Cash flows from investment activities 3 269 3 244 3 289 2 468 CAPEX (4 270) (3 111) (2 371) (2 484)

Telecommunication Assets Business Unit

Telecommunication Assets continue their successful development. The Business Unit’s profitability is still at a high level. Revenues of the Telecommunications Business Unit have grown on 5.2% in the 4th quarter of 2008 compared with the 4th quarter of 2007 and on 23.9% in 2008 compared with 2007 and came to 72.4% of the whole revenues of the Group on results of 2008. Telecommunications Business Unit’s OIBDA has fallen on 11% in the 4th quarter of 2008 compared with the 4th quarter of 2007. Nevertheless, in 2008 Telecommunications Business Unit’s OIBDA has grown on 17% compared with 2007. The OIBDA margin came to 47.4% in 2008. The net income has fallen on 26.3% in 2008 compared with 2007 mainly as a result of non-monetary write-offs from exchange rate differences for the amount of $602 million.

14 Technologies and Industry Business Unit

In 2008 enterprises of the Technologies and Industry Business Unit has demonstrated growing revenues and a positive index of OIBDA. Revenues of the Technologies and Industry Business Unit have grown on 21.6% in 2008 compared with 2007 and came to 12.5% of the whole revenues of the Group on results of 2008. OIBDA of the Technologies and Industry Business Unit has grown on 239.6% in the 4th quarter of 2008 compared with the 4th quarter of 2007 and on 417.7% in 2008 compared with 2007. The OIBDA margin came to 7.1% in 2008. The net loss of the Technologies and Industry Business Unit in 2008 compared with 2007 decreased from – $165 million down to - $50 million mainly as a result of non-monetary write-off from exchange rate differences for the amount of $65 million. On results of the year the Business Unit has not only demonstrated growing revenues but also has improved its profitability

Consumer Assets Business Unit

In 2008 the Consumer Assets Business Unit has demonstrated planned development. Revenues of the Consumer Assets Business Unit have grown on 40.8% in 2008 compared with 2007 and came to 15.0% of the whole revenues of the Group on results of 2008. The Business Unit’s OIBDA index has fallen in 2008 compared with 2007 mainly as a result of write-off of non- monetary losses from the decreased value of assets and low operating results of Sistema Hals OAO. The Consumer Assets Business Unit’s net loss in 2008 has happened mainly as a result of non-monetary write-offs from exchange rate differences for the amount of $185 million. The decreased value of assets has led to write-offs on transactions dealt with DalComBank purchase and recognition of the debt on the contract between Sistema Hals OAO and Siemens Company.

3.4 Sistema JSFC OAO credit ratings

Agency 4th quarter of 2008 Fitch Ratings Ltd ВB- (negative forecast) Eldon House, 2 Eldon Street London EC2M 7UA UK Standard & Poor’s BB (stable forecast) Garden House raised on 18 Finsbury Circus 28.08.2008 London EC2M 7NJ UK Moody’s Investors Service Limited Ba3 (being reviewed) 2 Minster Court, Mincing Lane, London EC3R 7XB UK

3.5 Dividend policy, report on payment of declared (paid) dividends on Sistema JSFC OAO shares In making its recommendations to the Shareholders’ Annual General Meeting with respect to payments of dividends the Board of Directors is guided by the dividend policy approved in April 2008. Dividends are determined based on performance in the previous financial year, and the recommended payout level is up to 40% of the Company’s consolidated net income under the US GAAP. This policy is directed at payment of substantial dividends in a predictable volume and preserves a possibility to reinvest the obtained profits in order to maintain the Company’s stable development.

At the Annual General Meeting on 28 June 2008 the shareholders have approved dividends in the amount of 2 412 500 000.00 roubles or 0.25 roubles per share* (Minutes of Meeting No. 1- 08). The total volume of the dividends paid within 60 days after adoption of the resolution on dividend payment was 2 354 761 250.00 roubles.

* Splitting of Sistema JSFC OAO ordinary nominal shares took place on 13 November 2007. 16 As of 31 December 2008 the dividends were fully paid. A tax on incomes in a form of dividends paid to foreign legal entities in the amount of 76 924 935.05 roubles and a tax on incomes of individual non-residents in the amount of 8 133.75 roubles were also deducted from the total amount of the dividends.

4. PROSPECTS AND STRATEGY OF DEVELOPMENT

4.1 Results of activities and development strategy of operating companies

Telecommunication Assets Business Unit US GAAP, thousand USD 2008 2007 Revenues 12 081 513 9 748 543 OIBDA 5 723 418 4 987 590 Net income 869 499 1 179 511 Debt 5 510 790 4 477 511

MTS OAO US GAAP, thousand USD 2008 2007 Revenues 10 245 294 8 252 378 OIBDA 5 140 329 4 223 394 Net income 1 075 436 1 105 355

MTS is the largest cellular communication operator in Russia and CIS countries with respect to the number of subscribers, revenues and market capitalization. As of 31 December 2008 the company’s subscriber base was 95.66 million subscribers. The company was established in 1993 and today provides mobile communication services in Russia, Ukraine, Uzbekistan, Turkmenistan, Armenia and Republic of Belarus whose aggregate population is nearly 230 million people. Since July 2000 MTS shares circulate in the New York Stock Exchange under the MBT ticker, and since November 2003 – in the MICEX under the MTSI ticker. Sistema JSFC owns 52.8% of MTS shares. Approximately 46.7% of shares are in free circulation.

Operational & Financial Results

Regardless of the non-simple situation in the market, MTS has confidently finished the year 2008. Against the background of the growing subscriber base and increasing volumes of voice traffic and data transmission, the company’s revenue increased on 24.2% up to $10.245 billion (in 2007 – $8.252 billion). The consolidated OIBDA in the accounting year has grown on 21.7% up to $5.140 billion, and thanks to stricter control over the costs the OIBDA profitability has increased up to 50.2%.

The MTS consolidated subscriber base in 2008 has grown on 9.38 million people up to 95.66 million, where 7.2 million new subscribers appeared in Russia, 2.85 million – in Uzbekistan, 640 000 – in Armenia and 520 000 – in Belarus. In Ukraine the number of MTS subscribers decreased on 1.88 million, but nevertheless, the company managed to preserve the occupied market share.

The MTS revenue in Russia has grown on 27% up to $7.84 billion (in 2007 – $6.18 billion). The confident growth of this index was assured by engagement of new subscribers and increased voice traffic and data transmission. MTS has preserved the leading position in most markets of

17 its presence: 34% in Russia; 33% in Ukraine; 46% in Uzbekistan; 87% in Turkmenistan, 79% in Armenia and 52% in Belarus.1

In May 2008 the company has launched a network of the third generation (3G) in Russia. In the beginning of 2009 the 3G network has already worked in 20 cities of the country. Spread of the 3G technology will allow MTS tom offer additional services to subscribers, including the value- added services, for example, wireless access to the Internet. The successful launch of the 3G network opens new possibilities before the company to increase the customers’ loyalty and to increase the ARPU. In December 2008 MTS has also launched the 3G network in Uzbekistan – initially in the centre of Tashkent with further expansion to other areas.

In October 2008 MTS has started sales in Russia of iPhone 3G™. Buyers of the device may either choose one of the existing MTS tariffs or to become connected to a special plan (i-Onliner and SIM) when they are going to actively use the Internet.

Also in October the company has signed an agreement with Vodafone on exclusive strategic non-stock partnership. The four-year agreement will allow the two largest operators of mobile communication in Europe2 to unite the efforts in the area of marketing and promotion of new technologies to the markets of Russia, Ukraine, Uzbekistan, Turkmenistan and Armenia. In particular, this partnership will help MTS to get favourable conditions for supply of equipment and for consulting services regarding development of networks, CRM and key account management. The agreement also gives Exclusive rights to MTS for distribution of a number of products, services and devices, which have successfully proved themselves in other markets.

Last year the company has introduced a number of important changes to the management structure with the purpose to continue the successful work and to maintain leadership in the markets of Russia and CIS countries in the future. In May Mr Mikhail Shamolin was appointed the President and Director General of MTS. With the purpose to strengthen the corporate management the composition of the Board of Directors was expanded in October from seven to nine people where three members will be independent. The MTS successes in the area of corporate management once again were recognized by Standard & Poor’s, which has conferred one of the highest ratings of corporate management – 7.3 on the Russian scale.

In January 2008 the company has completed redemption of five-year Euro Bonds for the amount of $400 million placed in January 2003. During the year MTS has placed three issues of rouble bonds for the total amount of 30 billion roubles. The received funds were used for general corporate needs.

In 2008 MTS has got further confirmations of its brand’s popularity and recognisability in Russia and CIS countries. In April MTS became the only Russian company, which entered the list of 100 most influential brands of BRANDZ™ compiled by Millwood Brand and The Financial Times. In December MTS has reached an agreement with an Indian communication operator Sistema Shyam TeleServices for their use of the MTS brand in the local market.

The MTS successes in the area of the 3G network launch and creation of new possibilities in the market of mobile communication were recognized in the Russian Mobile VAS Awards 2008 where the company has got awards in five nominations – “The best cellular operator in the VAS area”, “Mobile content”, “Community and user content”, “User convenience”, “Innovation business model”.

Also noted was the MTS success in the area of elaboration of services and tariff plans oriented at different segments of the audience including young people, female audience, family, labour migrants, small business representatives and corporate customers. For using the segment approach in the area of mobile products and services creation MTS has received the

1 Source: AC&M Consulting 2 Source: Informa Telecoms & Media, operators are ranked based on the subscriber base 18 international prize “Global Telecoms Business Innovation Awards 2008” in the nomination “Innovations in the field of marketing strategy and development of services”.

Strategy & Outlook

The company’s short-term and long-term strategy based on the formula “3+2” sets a target to strengthen the MTS positions as the leading communication brand in the CIS and to assure increasing issued share capital.

Achievement of these long-term targets is based on the following main priorities in the company’s work:

1. Assurance of the best customer experience including differentiation of the network quality, optimization of capital investments and development of the mono-brand distribution network; 2. Development of data transmission services and content based on balanced development of the EDGE and 3G technologies; 3. Expansion in the CIS countries and in the emerging markets providing for merger and takeover transactions only in the Russian Federation and CIS and only subject to available financing;

+1. Cost effectiveness summed up from effective optimization of operational costs and directing the capital investments for support of strategic projects; +2. Development of MTS Group with the emphasis on optimization of business processes and optimization of the organizational structure.

ComStar UTS OAO US GAAP, thousand USD 2008 2007 Revenues 1 647 664 1 562 384 OIBDA 690 054 639 318 Net income 94 494 26 018

ComStar United TeleSystems is a national operator of fixed communication, which operates in 69 regions of Russia and possesses a potential access to more than 48 million subscribers. ComStar is the leading Russian Internet provider with more than a million of residential subscribers and two million pay TV users. ComStar controls the operator of telephone communication “The Moscow Urban Telephone Network” (MGTS), and thanks to that has an access to the last mile, to 3.6 million Moscow apartments, that is 97% of all households in the capital city. ComStar is the leading provider of broadband Internet in Moscow and one of preferred suppliers of integrated telecommunication services for corporate users. Thanks to acquisition of Stream TV at the end of 2008 the company has got an access to 3.6 million subscribers in Russian regions. Sistema JSFC owns 53% of ComStar UTS shares.

Operational & Financial Results

In 2008 ComStar demonstrated confident growing revenues maintaining a high level of profitability. Regardless of the non-simple situation in the market the company has managed to achieve positive results at the expense of strict control over the costs and by increasing the business effectiveness. In 2008 the company’s revenue has grown on 11% excluding the nonrecurring compensation from the Federal budget that was received in the second and third

19 quarters of 2007. The growth reflected the acquisition of Digital Telephone Networks South ZAO and Regional Technical Centre OAO in the fourth quarter of 2007 and Interlink and Ural Telephone Company in 2008, growing long distance communication traffic and traffic related to introduction of the CPP (Calling Party Pays) principle. The growth was negatively affected by the 9% regulatory reduction in the price for the MGTS unlimited tariff plan from 01 February 2008, cancellation of the compensation surcharge for intercity and international calls from the beginning of 2008 and change in the interconnect regime from 01 March 2008.

The significant change in the Russian rouble / US dollar exchange rate in the fourth quarter also adversely affected the company’s annual financial results. The adjusted OIBDA, excluding the US$ 36.5 million of the Federal Budget nonrecurring payments received in 2007 and payments to the management under the stock option plan in 2007 and 2008, was up 14% compared with the previous year and came to US$ $690 million while the adjusted OIBDA profitability was 41.4%. The main factors assuring the high profitability were decreased personnel costs, reduced transportation costs, optimization of marketing and distribution costs, 9% decrease of the MGTS unlimited tariff rate from 1 February 2008 and growing traffic of calls from landline to mobile phones. In addition to that, the company’s profit was affected by movement toward the next phase of broadband development strategy due to saturation of the market and also by consolidation of a number of less profitable regional operators that took place in the fourth quarter of 2007 and in the second and third quarters of 2008.

Traditional Segment

MGTS is a telecommunication company, which provides traditional fixed communication services in the Moscow metropolitan area. The company has nearly 3.6 million of residential subscribers and 747 000 corporate customers. MGTS owns 97% of telephone lines in Moscow, and the company provides infrastructure for ComStar Group. ComStar controls 55.73% of MGTS.

ComStar invests significant funds in upgrading the MGTS network. As of the end of 2008 ComStar owned 4.85 million active lines.

Since the end of 2007 ComStar has been actively promoting broadband Internet services under the MGTS brand. With the purpose to engage new subscribers who did not use broadband Internet before that the company has worked out introductory and post-paid tariffs. The company reckons that by 2011 more than a third of all MGTS subscribers will be connected to broadband Internet.

In 2008, substantial progress was achieved in modernization of the network. In accordance with the modernization program started in February, the network bandwidth was increased from 6 Mbits/s to 24 Mbits/s by extending the fibre to the curb (FTTC) that made it possible to install routers (DSLAM) closer to the subscriber. Fibre-optic cables to the home have also been laid in priority high-traffic areas right to subscriber terminals (FTTH solution); at that, ADSL2+ technology was used in all buildings.

From 2003 to 2008 MGTS has increased the level digitalization of its network from 13% to 63% and plans to complete this long-term project by 2012. Within the network digitalization project ComStar plans upgrading of some sections using the IMS technology (IP Multimedia Subsystem) following the successful pilot test of the project in 2008.

The main driver of revenue growth for ComStar was changed tariffs, which are regulated by the Federal Service for Tariffs (FST). Under the FST resolution, the subscriber fee under the unlimited tariff plan for residential subscribers was reduced from 1 February 2008 on 9%. Apart from that, from March 2008 the Federal Service for Tariffs has abolished the fixed fee for connection monthly charged from operators connected to the MGTS network. Instead, the average cost per one minute of connection to the company’s network for outside operators was

20 increased from 1 July 2008 at the average on 25%. On 2 December 2008 the FST have adopted new tariffs for connection of outside operators to the company’s local network to be effective from 1 March 2009. The MGTS regulated tariffs for subscribers at the average were increased on 8%.

For 2008 the number of residential subscribers has grown to 3.614 million; at that, selection of tariff plans mainly remains unchanged – 50.5% of residential users still choose the unlimited tariff plan, 28% use per-minute payment, and the remaining 21.5% - combined plan. On results of the year the residential ARPU has grown to 297.2 roubles due to increased traffic from landline to mobile phones and reduced cost of the unlimited tariff plan in February 2008. Through 2008 the traffic from landline to mobile phones increased on 32% and came to 1.745 billion minutes.

The number of active corporate users during the year has grown on 9% coming to 7 300, and the ARPU of corporate users has risen on 5% up to 5 934.3 roubles. This was a consequence of growing volume of traffic from landline to mobile phones on 40% to 771 million minutes. As of the end of 2008, 12.8% of the MGTS corporate users were using the unlimited tariff plan, 5.5% – per-minute payment, the remaining 81.7% – combined plan.

Alternative segment in Moscow

The number of residential users of Stream, a trademark under which ComStar offers services of broadband access, pay TV and voice communication, during the year has grown on 8% coming to 699 000 subscribers. During the year the traffic from landline to mobile phones doubled and came to 9 million minutes. The number of corporate users fell on 8% while traffic from landline to mobile phones in this segment has grown on 33% coming to 339 million minutes.

The ComStar priority objectives are to increase the ARPU in the premium segment and to increase the number of broadband access users in Moscow. For example, in August ComStar obtained access codes to provide long-haul communication services. As a consequence, by the end of the year nearly 90% of corporate users of alternative services in Moscow connected themselves to ComStar long-haul communication.

With the rapid growth in the number of laptops and other mobile devices, ComStar began to expand mobile broadband coverage in Moscow that is based on WiFi and WiMAX technologies. As part of a strategic partnership with FON International, ComStar with participation of Sistema/Coral Fund and a number of international technology companies, ComStar started to build a WiFi network in Moscow. In January 2009 ComStar began testing operation of the WiFi network of 802.16 standard in the Moscow City Business Complex. The full-scale commercial use will commence later in 2009. Not long before that, in September 2008 ComStar has performed a successful trial of WiMax mobile technology.

During the whole year of 2008 ComStar had been working on higher access speed for its users. New tariff plans appeared in September with the access speed of up to 20 Mbits/s. In October 2008 ComStar started provision of HDTV services that became an example of how the MGTS network acceleration allows for appearance of new high quality services for home and office.

Alternative segment in regions of Russia and CIS countries

The number of residential subscribers in Russian regions for 2008 has grown by six times up to 505 000 thanks to acquisition of Digital Telephone Networks South ZAO and Regional Technical Centre OAO in the fourth quarter of 2007 and Interlink and Ural Telephone Company in 2008. The residential ARPU in 2008 was 240 roubles compared with 289 roubles in 2007. The ARPU dilution was a consequence of both of the growing number of new connections and consolidation of regional operators who initially possessed a less profitable subscriber base.

21 Traffic of residential users from landline to mobile phones for the year increased by four times and was 59 million minutes.

In 2008 it was a significant – by six times – growth in the number of corporate users. The Corporate subscribers’ ARPU in 2008 was 4 118 roubles compared with 5 764 roubles a year before. The Statistics of the subscriber base and corporate users’ ARPU in 2008 was affected by the same factors as in case of residential subscribers. Corporate subscribers’ traffic from landline to mobile phones has grown by five times and came to 79 million minutes for the year.

The last year was marked by the ComStar transformation from a Moscow operator with growing regional business to a leading all-Russian alternative operator of fixed communication, which operates in six Russian Federal Districts out of seven. At the end of 2008 regions were bringing 10% of the whole revenues of the company compared with 8% in 2007.

Acquisition of regional assets of Stream TV became an important step for the company. Stream TV is the largest pay TV operator in Russia, which provides services of cable TV and broadband access to the Internet in 40 Russian cities with the total population of more than 15 million people. After closing the transaction, ComStar has got access to 3.6 million households and acquired more than 1.8 million subscribers, which compose 17% of the Russian pay TV market, and more than 205 000 users of broadband Internet.

Integration of Stream TV regional operations began in September. Starting from 2009 the company began modernization of separate sections of the Stream TV network with the use of Fibre To The Building (FTTB) solutions in order to bring Double-Play and Triple-Play services to subscribers as quickly as possible.

In 2008 ComStar proceeded with acquisition of alternative regional operators, which hold leading positions in their markets and possess a long-term potential for growth. In June 2008 ComStar has acquired 100% of Interlink Group of Companies that includes InterSvyaz Service ZAO and Inter TV Media OOO, which operate under the Interlink brand in the Ryazan Region and Central Federal District. In July 2008 ComStar has acquired the largest alternative operator in the Ural Federal District.

Already after completion of the accounting period, in February 2009 ComStar has announced a programme to restructure its regional business; it is directed at integration of Stream TV with the existing business in regions. Nearly 80 legal entities were united in one ComStar Regions ZAO, which in its turn is a 100% subsidiary of ComStar UTS. The asset management was reorganized at the inter-regional level with a head regional centre in each six federal districts where ComStar is present.

In the CIS ComStar continued to develop business in the rapidly growing telecommunication markets of Ukraine and Armenia. In Ukraine ComStar has upgraded the network in order to make provision of Triple-Play services possible for residential subscribers. In November the company has announced completed construction of a new generation data transmission network and backbone network connecting telecommunication networks in Russia and Ukraine. In November in Armenia the company has commissioned the first national WiFi network of 802.16 standard. The solemn ceremony of the network launch was attended by the President of the Russian Federation Dmitriy Medvedev and the President of Armenia Serzh Sargsyan.

Strategy & Outlook

The ComStar strategy called “‘Five Angles of Attack” was founded on the belief that only strongest players are able to succeed in the fight for leadership in the modern highly competitive global telecommunication market. Now, at the height of the world economic crisis, a competent and clearly formed strategy possesses a special value for companies, which intend to take part in the market consolidation.

22 The Five Angles of Attack Strategy is designed for the period till 2011, was adopted in July 2007 and had been being implemented during 2008. The Five Angles - the Structure, Broadband Access, MGTS, Regions and SvyazInvest – are not just directions where the company’s management concentrates. Every angle includes a number of projects with their targets and quantitative benchmarks. Objectives of each angle correspond to the company’s mission – to serve consumers providing them with modern and high quality services, to increase their loyalty to the company so achieving a stable growth of its revenues and profits and increase of its stock value. According to the Strategy, by the year 2011 ComStar will become the largest telecommunication company in Russia, a recognized leader of the Moscow market of broadband access and wire communication services on the whole and a leading alternative operator of hard-wire services in Russian regions.

During 2008 ComStar has achieved significant successes in each direction of its operation (angles) implementing a number of important projects such as construction of its own long-haul communication network, construction of the WiMax network in Moscow, active expansion in regions through acquisition of Stream TV and purchase of leading regional operators, consolidation of ComStar Direct and implementation of a number of other projects, which strengthen the Group’s positions in the market and increase its long-term potential for growth.

SMM OAO US GAAP, thousand USD 2008 2007 Revenues 223 984 137 037 OIBDA 60 561 23 191 Net income 13 599 1 178

Sistema Mass Media (SMM) is one of the largest Russian companies involved in creation and distribution of content for non-air TV and other media platforms and resources. The Company’s main objective is to build an integrated business dealt with creation and control of content. This includes production of content, aggregation of licenses from right holders and its distribution via different platforms. During the last years SMM has been actively developing in the market of advertising, press, TV broadcasting and communication. As a result of the restructuring carried out in 2004-2007 the company has left some assets. This allowed it to concentrate resources on the most advanced high-tech segments of the media market based on such technologies as DVB-H and IPTV.

SMM includes Russian World Studios (RWS), which was founded in 1998 and is one of the largest independent production companies and makers of television serials in Russia, as well as the Maxima Communications Group. The company also includes Stream TV, one of the largest pay TV channels in Russia. Stream TV has five own channels for which SMM produces programmes and manages distribution and advertising. On the whole the Stream TV audience is 3.8 million apartments and more than 12 million viewers. Stream is also involved in aggregation of content from other TV channels and provides VOD services to ComStar UTS, which is the Sistema JSFC cable network operator. Sistema JSFC owns 100% of SMM.

Operational & Financial Results

In 2008, SMM reported a 98% year-on-year increase in revenues to US $223.9 million, compared to $96.4 million in 2007. OIBDA increased 161% to US $60.6 million

The year saw major developments as SMM moved to complete restructuring in line with its long-term strategy. In June 2008, Mr Andrei Smirnov was appointed the SMM Director General and a new strategy for SMM development of SMM was approved. As a part of this strategy, the regional assets of Stream TV, which is the leading pay TV operator in Russia, were transferred into management of ComStar UTS and the sale of these assets was

23 completed by the end of 2008. In January 2009, it was announced that Stream TV assets related to generation and distribution of content including for popular Stream TV channels were transferred to SMM Finance, a 100% subsidiary of SMM.

In 2008 the company has performed preparatory work dealt with relaunching of all existing channels in January 2009 and also development and implementation of concepts of two new channels - Psychology and Living World. In working out the content for these channels, SMM is oriented towards certain market niches and different segments of the audience of pay TV users who represent the middle class especially well-off and socially mobile people in the age of 25-60. Among the company’s existing customers are federal and regional pay TV operators. SMM is also looking for new customers among operators of mobile communication, Internet companies and on-air television channels.

During the year a new corporate structure was created for RWS. Sistema JSFC became its shareholder at the end of 2007. During the year over 500 hours of serial production were completed; this made it possible to get revenue in the amount of approximately $500 million. Apart from that, development of the movie business went quite fast and the studio has recruited gifted cinema professionals, for example such as the renowned producer Sergei Chliyants.

In 2008 RWS has released a full-length film “Antidur”. Apart from that, three more projects were also completed: a full-length motion picture “The Year of Deception” and serials “Sea Patrol 2” and “Love is Not What it Seems”. In the beginning of 2009 the studio in St. Petersburg was shooting the film “Chameleon-Chimera”. And other 11 projects are at the stage of preparation; three more - in production.

In July 2008, the first stage of the new RWS St. Petersburg cinema complex was commissioned. This is the first world-class cinema studio built in Russia over the last 60 years. It offers unique possibilities for production of cinema and multimedia content for all existing and developing media platforms including Internet and mobile TV. The total area of the studio is 11,000 sq. m and includes four film studios with the area of 750 sq. m each with a water pool to film water scenes, two film studios with the area of 350 sq. m, a Dolby Premier studio, eight video-editing studios and three sound-editing studios. Approximately another 4,000 sq. m are occupied by offices and support services.

The company is actively developing cooperation with partners; and the latest such joint international project involving RWS was a short film “Spirit” directed by Joseph Fiennes. The film won the Cinema for Peace award at the 2008 Berlin Film Festival. RWS also provided its services for such international films as “Leningrad” with Gabriel Byrne and “Pu-239” produced by HBO Films and Beacon Pictures. RWS also acted as a co-producer in the Russian- language part of the motion picture “Icon” with Patrick Swayze and produced by Hallmark Entertainment.

In 2008 against the background of more intensive competition Maxima Communication Group was able to maintain its market positions. It remains to be the largest non-network advertising agency in Russia with the market share of 2.5% on results of 2008. On this index Maxima is included in the Top 20 largest advertising agencies in Russia and holds the second place in the segment of outdoor advertising. In 2008 the company took the third place in the Grand Prix category at the Idea Advertising Festival.

In 2008 within the SMM general strategy of concentration on content Maxima has launched a new business direction – sales house. The company also continued its expansion to rapidly developing regional advertising markets and opened a subsidiary in Novosibirsk – Maxima Siberia. The agency has also worked out and started implementation of a new development strategy designed till 2012.

24 Also in 2008 SMM continued to develop the digital TV direction through its subsidiary Digital TV (DTV). The company proceeded with works regarding deployment transmission networks in 17 large cities of Russia in the DVB-H format. The project implementation plans were somewhat delayed because at present the company works with regulating authorities to obtain a frequency plan for digital broadcasting.

Strategy & Outlook

The SMM strategy is directed at creation of a leading media holding in Russia involved in creation and distribution of content in four segments: television, cinema, advertising and mobile and Internet content. The company intends to implement these objectives through a balanced combination of the organic accretion and pointed acquisitions of other media companies.

Based on the existing content the company plans to establish the largest Russian non-air TV broadcasting company concentrating on production, gathering and distribution of TV content and services. In the cinema sector SMM sets an objective to enter leading positions in creation and distribution of films, TV programmes and animated content and also to increase capacities regarding production of films in Russia and abroad. In the advertising segment the company’s target is to gain leadership in most advanced communication segments and sales of advertising space in traditional and new mass media. In the segment of mobile and Internet content the SMM strategy is directed at assuring the leadership on this arising market of aggregation and distribution of mobile content and creation of inter-platform content for new media with the purpose of the most effective monetization of content based on mobile communication and Internet.

High-Tech and Industry Business Unit US GAAP, thousand USD 2008 2007 Revenues 2 532 448 2 082 796 OIBDA 180 224 56 736 Net income 50 034 164 604 Debt 821 473 617 205

SITRONIX OAO US GAAP, thousand USD 2008 2007 Revenues 2 000 940 1 619 604 OIBDA 135 723 102 465 Net income 41 495 176 753

SITRONIX OAO is the largest company of the high-tech sector in the Eastern Europe that operates in the field of telecommunication solutions, information technologies, system integration and consulting as well as design and production of microelectronic products. Sitronix’s own representative offices and branches work in 32 countries of the world. At that, the company serves more than 3 500 customers and exports its products and services to more than 62 countries. At present the company employs more than 10 000 people. In 2007 Sitronix has successfully carried out IPO in the London Stock Exchange. The company’s shares are also included in quotation lists of RTS and Moscow Stock Exchange. Sistema JSFC owns 61.33% of the Sitronix OAO shares.

Operational & Financial Results

For the whole 2008 Sitronix continued optimization of the existing product line concentrating on fastest growing and highly marginal segments of the modern high-tech market. Regardless of the extremely complex situation in the markets of the company’s presence, on results of the 25 year Sitronix has managed to achieve a significant growth of revenues and to assure positive EBITDA. The company’s revenue in 2008 has grown on 23.5% – from $1.62 billion to $2.001 billion. OIBDA in 2008 came to $135.7 million compared with the loss of $101.1 million in 2007. The OIBDA profitability in 2008 came to 6.8%.

Telecommunication Solutions

In 2008 the Sitronix Telecommunication Solutions division has strengthened its positions in the market thanks to new contracts and entry to new markets and also optimization of costs. Sitronix has successfully expanded the sphere of its business interests entering new markets and strengthened its positions in such rapidly growing directions as Africa, Middle East and Asia.

In 2008 Sitronix Telecommunication Solutions and Intracom Telecom have concluded new contracts with such largest global telecommunication companies as Vodafone (Czech Republic), T-Mobile (Slovakia), Globul (Bulgaria), Mediacom (Poland), Smart Telecom (Ireland), MTS (Russia, Ukraine, Belarus, Uzbekistan), ComStar UTS (Russia), K-Telecom (Armenia), KazakhTelecom (Kazakhstan), Shyam Teleservices (India) and Warid Telecom (Uganda and Congo).

Information Technologies

In 2008 the Sitronix Information Technologies division maintained its positions of the leading system integrator in the CIS. In June 2008 the Sitronix’s Quasar Micro division was transferred under the Sitronix umbrella brand, and the company was renamed to Sitronix Information Technologies. Integration and rebranding took place after Sitronix has increased its share in Quasar Micro up to 87% in March 2008.

During the whole 2008 Sitronix Information Technologies carried elaboration and introduction of information infrastructure projects for production and financial companies in Russia and CIS countries and also their governmental bodies. In October Sitronix Information Technologies has announced commercial launch of a line of Sitronix Daterium™ mobile data processing centres (MDPC) designed jointly with specialists of RosAtom State Corporation. Also in 2008 the company started implementation of a project dealt with installation of a wireless WiMax network for ComStar.

Sitronix proceeded with the work over a number of large infrastructure projects financed by the State such as: Global Navigation System (GLONASS) jointly with RosCosmos Federal Space Agency and Ministry of Communication, Electronic Russia 2002-2010 jointly with the Ministry of Economic Development and Electronic Education 2006-2010 jointly with the Ministry of Education and Science. The company was introducing the MIOS solutions (Multiservice Information and Communications Educational Network – MIOS) in Moscow, Saint Petersburg, Kazan, Sochi, and Astrakhan and also in a number of CIS countries.

In 2008 Sitronix has obtain a licence of the Federal Security Service of the Russian Federation for design of certified solutions to protect confidential information. According to the licence terms, the company may provide its technology to a number of State bodies including the Administration of the President, the Federal Assembly, the Government as well as the Supreme and the Constitutional Courts.

Microelectronics

In 2008 the Sitronix Microelectronic Solutions division remained to be the leading Russian manufacturer of microelectronics on all main indices – technological level, volume of production and sales and export supplies. The company is also one of the key participants of private and

26 State partnership programmes, which carry out scientific research. In 2008 one of the first ones in Russia the company has obtained a certificate of conformity with ISO 14000 standard in environmental management. The company continued its successful cooperation with the Moscow Metro underground railways monthly supplying nearly 25 million transport tickets with the use of the RFID technology. The company also supplies RFID cards for transportation enterprises in Magnitogorsk and Tyumen.

During 2008 Sitronix has designed 25 new types of microprocessors. It presented three new products created with the use of the 0.18 micron technology – chips for identification cards and electronic passports, RFID chips for non-contact cards and memory cards.

The Sitronix Smart Technology division controls nearly 25% of the Russian market of SIM cards and is one of the largest suppliers for cellular operators in Russia and CIS countries.

Consumer Services and Goods

In 2008 Sitronix has continued restructuring the Sitronix Consumer Services and Goods direction in accordance with the strategy within which the company will concentrate on highly marginal products and services and will be adapted to the changed situation in the market. The year-on-year revenue was lower due to terminated release of unprofitable products. In particular, the company has terminated assemblage of consumer electronics in Zelenograd. As a result of the implemented restructuring strategy the business direction profitability increased.

Strategy & Outlook

The Sitronix strategy was worked out with the purpose to minimize the negative effect of the current economic crisis and to derive benefit from long-term trends of the Russian and global high-tech market. The state and State companies begin to play more and more important role in the Russian economy. They invest big funds in large infrastructure projects. At the same time, both the State and individual customers demand integrated and completed process solutions. Assemblage and design of new products in high-tech sectors more and more shifts to the Eastern Europe and countries of the Asian-Pacific region. All the above factors provide Sitronix with unique possibilities in the high-tech market in Russia and abroad.

Sitronix intends to actively use the tools of partnership with the largest technology companies and also to engage its own research and development potential in order to provide customers with integrated and coordinated solutions. Prospects of the company’s development are based on its positions in rapidly growing markets. The company intends to use its geographic coverage, its global experience and its constantly expanding portfolio of products and services, which are offered at competitive prices, to win new rapidly growing markets by offering products with the optimum balance of price-quality. Apart from that, Sitronix will strengthen and expand its positions among the largest customers offering new and integrated solutions to them.

RTI Systems OAO US GAAP, thousand USD 2008 2007 Revenues 471 463 374 972 OIBDA 55 067 45 883 Net income 5 822 16 960

RTI Systems Concern OAO is a large defence-industrial holding, which unites leading Russian enterprises with enormous scientific and production potential and experience in

27 implementation of complex and high-tech projects. RTI Systems Concern is included in the TOP-20 enterprises of the Russian Defence-Industrial Complex.

The Concern is specialized in design and introduction of large system projects in the following fields: radio electronics, aerospace and ground control systems, mechanotronics and robotics. It also acts as lead contractor in creation of information elements for ground-based ballistic missile defence systems and organizes technical operations of the existing group of anti-missile defence systems (AMDS) and space surveillance systems (SSS). Its main customers are the Ministry of Defence, the Ministry of Emergency, the Federal Security Service, and the State Corporation for Atomic Energy and the Ministry of Internal Affairs.

Major projects carried out by RTI Systems include the Voronezh next-generation radar station and creation of the National Emergency Situations Control Centre (NESCC) ordered by the Ministry of Emergency of Russia.

Operational & Financial Results

In 2008 RTI Systems Concern demonstrated an impressive growth of financial indices. Incomes have grown on 25.6% from $375 million to $471 million. The OIBDA has increased on 20% from $45.9 million to $55.1 million. As of the end of the accounting period the RTI Systems’ portfolio of orders came to $5.1 billion.

The State defence order composes a significant part of the Concern’s incomes. According to the Centre for Analysis of Strategies and Technologies (AST Centre), on its incomes RTI Systems is on the 11th place in the Russian rating of defence companies and on the 10th place on sales of military technologies and technologies of dual destination. On its revenues per one worker the company is in the TOP-5 in the all-Russian list and in the first ten on the index of clear profitability.

In 2008 as part of a contract with the Ministry of Defence the Concern has fulfilled the System Project for development of information elements of ballistic missile defence; and it has also formed its proposals for the draft State Armaments Program for 2011-2020. In addition to that, in 2008 RTI Systems has signed a contract for the term till 2011 to produce equipment for Voronezh-M Factory Assembled Ready (FAR) Radar Station.

In April 2008, RTI Systems handed over the NESCC to the Minister of Emergency of Russia for trial operation. Visiting the centre, Vladimir Putin, in his speech for the journalists noted the following: “There are virtually no analogues in the world. There are centres, but only in Russia – on such level”.

In 2008 the Concern has acquired 74.9% of shares of the Austrian company Watt Drive. The purchase made it possible jointly with UralElectro OAO to carry out design and manufacture of high-tech electric motors and electric drives for domestic and foreign markets.

Also during the year the Concern has signed an agreement of cooperation between RTI Systems and the Mozhaiskiy Military Space Academy that made it possible to completely fulfil the State order through the mutually beneficial use of the available scientific and technical groundworks and human resources.

In 2008 on commission of the Ministry of Industry and Trade of Russia the company’s specialists took part in preparation of a number of documents regarding planned target development of armaments and military technology for the Russian Armed Forces for the period till 2020-2025. In particular, there compiled was a list of scientific achievements and critical technologies whose development is required to maintain the Russian defence potential.

28 In 2008 RTI Systems has performed preliminary design work on the project “Aeropost of Zonal Security and Communication, one of the pilot projects being developed as a part of the Agreement for Development of Strategic Partnerships between RosAtom Federal Corporation for Atomic Energy and Sistema JSFC signed in May 2008. Determined there were composition and technical images of main components of the Aeropost of Zonal Security and Communication.

In the accounting period the Concern has fully completed the works on the project for creation of Voronezh DM FAR Radar Station. In 2008 it was delivered to experimental combat duty. Apart from that, successfully completed was the State testing of Voronezh-M FAR Radar Station in the township of Lekhtusi; and preliminary testing of Daryal U Radar Station was performed with a new computer complex and FPO; Podsolnukh [Sunflower] FAR Radar Station was assembled and adjusted.

Strategy & Outlook

The strategic goal for RTI Systems Concern for 2009 is in the maximum to concentrate on key State contracts while simultaneously increasing the efficiency of R&D and production work.

The company has possibilities to engage additional volumes of State defence orders. Due to the planned reduction of the Russian Armed Forces the functions of operation and maintenance of radio engineering equipment used in ballistic missile defence facilities are supposed to be transferred to defence-industrial holdings.

The Concern considers its participation in additional tenders for core Federal Target Programs (FTP), for example such as Reducing Risks and Easing Consequences of Emergencies FTP, which presupposes development of the NESCC network for the Ministry of Emergency of Russia. Also considered is a possibility to participate in programmes such as Development of Systems for State Management in Risk Minimization of Emergency and Catastrophic Situations FTP, which are new for the company.

RTI Systems intends to continue development of technologies in the segment of geoinformatics and radio navigation. It is planned to participate in GLONASS FTP whose target is to create a domestic satellite navigation system.

In the area of mechanotronics RTI Systems are aimed at winning the leading positions as a system integrator, which offers effective engineering solutions based on its own unique designs in the area of integrated system solutions for electric drives. The Concern also considers possibilities for development of cooperation and integration between enterprises of the Mechanotronics segment - Watt Drive and UralElectro. Integration and cooperation imply entry of the Austrian manufacturer’s products to the Russian market and search for export opportunities for UralElectro’s products.

The Concern’s long-term strategy presupposes both development of its own innovative technologies and use of the best Russian and global experience in order to get the global competitive advantage.

The strategy of the Radio Engineering and Aerospace Control Systems and Communication segments includes their further internal integration with the purpose to gain quality growth. The strategic priority of both segments is intensive development of own research potential with the purpose of creating new products in demand in the Russian and foreign markets.

The main objective of the new segment of geoinformatics and radio navigation established in 2008 is to form the largest player in the market of navigation and geoinformation services, which such player actively uses the mechanisms of the State-private partnership and acts in the interests of the State and business.

BinnoPharm ZAO US GAAP, thousand USD 2008 2007 Revenues 41 702 63 012 OIBDA -12 229 -1 257 Net income -15 743 -5 538

BinnoPharm ZAO was established in 2006 for consolidation and control of the Sistema JSFC pharmaceutical and biotechnology assets and at present is one of the largest Russian biotechnology companies.

In 2009 the company plans to open Russia’s largest pharmaceutical factory in Zelenograd fully complying with the GMP standards. The new enterprise will manufacture the market needed medicinal preparations in a form of tablets, capsules, aerosols and ampoules. The company’s prospective portfolio includes genetically engineered preparations in a form of vials and syrettes designed for treatment of socially significant diseases such as oncological diseases, diseases of liver, viral infections and neurodegenerative diseases. BinnoPharm has already launched industrial full cycle production of vaccine against hepatitis B for adults and children. At present the BinnoPharm’s scientists-developers work over creation of new biotechnology medicines and new forms.

BinnoPharm on 100% belongs to Sistema JSFC.

Operational & Financial Results

The BinnoPharm's revenues in 2008 came to $41.7 million compared with $69.1 million in 2007. On results of the year the company had negative OIBDA. The financial results of the year reflect investments in new production capacities as well as closure of a number of productions for reconstruction In 2008 BinnoPharm has registered 14 ready medicinal preparations and substances. As of the end of the year 39 more preparations and substances were in the process of registration, and six preparations, including genetically engineered ones, - at the final stage of development. In 2008 a new team of managers placed themselves at the head of the enterprise and a strategy and programme of BinnoPharm development were worked out. In 2008 the company commenced implementation of a number of large strategic projects within the private-State partnership. The activities were directed at engagement of scientific personnel, cooperation with educational institutions and consolidation of manufacturers in the area of biotechnologies for pharmaceutics. In 2008 BinnoPharm began registration of Russia’s made vaccine against hepatitis in five African countries including Nigeria, as well as in Russia and in Tadzhikistan. BinnoPharm considers its competitive advantages as a reliable foundation for future growth. At present BinnoPharm disposes of the Russia’s only production of biotechnology genetically engineered full-cycle medicinal preparations, which represent products with a high added value. The company concentrates on production of ampoules, which are in demand in the hospital segment as relatively cheap and effective medicines.

BinnoPharm disposes of the Russia’s only fully equipped laboratory to control quality of bioengineering preparations. The company’s unique team of biotechnology scientists assures the capacity to develop new preparations without prior acquisition of rights to intellectual property. The company’s scientific and production base gives a possibility to develop new markets for prophylaxis and treatment of virus diseases.

30 Strategy & Outlook

In 2009 BinnoPharm will complete construction of a production and logistic centre in the city of Zelenograd, which will become the Russia’s largest enterprise for production of medicinal preparations fully compliant with the GMP standards. The enterprise will dispose of the Russia’s largest capacities for production of ampoules under the GMP standards and almost the Russia’s only GMP production of 10 ml ampoules. One of the first products to be made on the industrial scale will be aerosol preparations for treatment of respiratory diseases. This production will use technologies without the ozone layer destroying Freon. It will be unique for Russia.

The company plans to continuously expand the range of manufactured preparations, as well as the range of strategic partners’ preparations whose distribution BinnoPharm will be involved in. These, first of all, include preparations for the hospital sector of the market, vaccines, antibacterial preparations, preparations for treatment of respiratory diseases and many others. At the same time, the share of medicinal preparations with a low added value will decrease in the company’s portfolio.

Opening of its own research centre in the nearest outlook will allow BinnoPharm to scale the R&D work, which is performed by teams of the company’s scientists and technologists in partnership with research and scientific-and-production organizations, to industrial production volumes and also to create new complex preparations and their new forms. The centre will become a facility to consolidate efforts for creation of genetically modified preparations providing unique possibilities for their promotion in the market.

The company’s main strategy during the economic crisis is to win the hospital sector of injection preparations and bringing the maximum quantity of bioengineering preparations to the market – biogenerics mainly destined for the hospital sector of the market. After the crisis the company plans to develop branded generics in order to achieve leading positions in target therapeutic classes in the retail and hospital sectors of the pharmaceutical market.

BinnoPharm plans to bring its new pharmaceutical production to the maximum output by 2011 that will allow the company to enter the group of three leaders of domestic pharmaceutical industry.

Consumer Assets Business Unit US GAAP, thousand USD 2008 2007 Revenues 2 596 507 1 844 466 OIBDA -197 103 185 860 Net income -457 461 65 230 Debt 2 102 484 1 779 588

MBRD JSCB US GAAP, thousand USD 2008 2007 Revenues 725 429 399 627 OIBDA 55 842 63 383 Net income 23 529 27 586

MBRD (Moscow Bank for Reconstruction and Development) is one of the largest Russian universal banks with a developed nation-wide retail network. The bank offers a complete set of services for individual and corporate customers. The bank began to offer its services to 31 individual customers in 2004; the retail business model was worked out jointly with consultants from Deloitte & Touché CIS. Sistema JSFC owns 87% of the MBRD shares.

Operational & Financial Results

In 2008, which appeared to be extremely difficult for the whole Russian banking system, MBRD has fully demonstrated the strength of its strategy achieving a stable growth of incomes from retail business and presenting a number of innovative products to the market. The bank’s administration showed abilities for weighed and prudent management in conditions of complex and rapidly changing environment. The bank’s incomes have grown on 81% to $725.4 million compared with $399.6 million in 2007. OIBDA decreased on 12% and came to $55.8 million. The bank has managed to minimize the negative impact of the financial crisis, which burst out in September 2008, by suspending the action of most consumer crediting programmes and accumulating the funds from the retail and interbanking markets so supporting the liquidity.

During the whole 2008 MBRD continued to pursue its strategy of retail business development and attracting of new customers offering a wide line of new products, which meet the needs of individual customers. The volume of funds in term accounts has increased on 7.8% – from $575.9 million in 2007 to $620.8 million in 2008. In 2008 the volume of funds in current accounts has decreased down to $14.1 million from $22.2 million a year before. The number of customers for the accounting period has doubled – from 8 602 to 16 851. The volume of credits granted to individuals including securitized car loans has increased on 3.6% and came to 4.289 billion roubles ($172.5 million3).

In 2008 MBRD proceeded with development and implementation of mortgage crediting programmes as a constituent part of the whole complex of services for individual customers. MBRD is an active participant of the Federal Mortgage Programme being implemented within the agreements concluded with the Home Mortgage Lending Agency [HMLA] and regional operators. In October 2008 a new agreement of cooperation was signed with HMLA providing for a possibility of direct refinancing of granted mortgage credits in the Agency.

Altogether granted in 2008 were 4 308 mortgage credits for the total amount of 9.49 billion roubles ($381.7 million). As of 1 January 2009 the portfolio of mortgage credits was 10.95 billion roubles ($440.5 million4); that is on 63% more than a year before. According to RBC Rating, in 2008 in the rating of Russian banks MBRD took the 11th place on the number of granted mortgage credits and the 14th place – on the volume of the granted credits.

In 2008 the portfolio of target consumer credits has exceeded the mark of 1 billion roubles: as of 1 January 2009 the portfolio of target consumer crediting was 1.217 billion roubles ($41.7 million). The year-on-year growth was 102.5%. The bank managed to achieve high dynamics of the portfolio growth at the expense of expanded spectrum of target express crediting programmes in different segments of the market, attractive crediting terms as well as simplicity in connection of new retail outlets and optimization of business processes.

In 2008 the portfolio of car loans has increased on 6.3% and came to 4.83 billion roubles ($194.3 million) thanks to the launched new car loan programmes, simplified loan application process and reduced interest rates. The bank offered several innovative products to its customers including loans to buy used vehicles “From hands to hands” (without intermediaries) and loans to buy motor engineering and water transport.

Issuance and service of bank cards is another point of the MBRD business growth. The total number of issued MasterCard and Visa cards reached 155 370. In 2008 the credit portfolio on bank cards has increased on 71% and reached 1.045 billion roubles ($58.3 million). In February 2008 the bank has simplified the system of compilation of rates for payroll project; thanks to

3 At the average exchange rate of the Central Bank of the Russian Federation of 24.86 roubles for $1 4 At the exchange rate of the Central Bank of the Russian Federation as of 1 January 2009 of 29.20 roubles for $1 32 that, for the year the number of corporate customers has grown on 34%. In August 2008 the bank has launched a project called Active Sales of credit cards. The bank’s two pilot regional centres in Tomsk and Yekaterinburg began to offer credit cards to borrowers with positive credit history under a new technology.

In the end of 2008 in accordance with the market demands MBRD began to issue credit cards with a grace period. In December 2008 the bank customers had a possibility to get a credit card with a grace period and with a credit limit in the amount of 85% of the available deposit funds.

Regardless of the extremely difficult conditions in the corporate sector in the second half of 2008 the bank has managed to achieve good results in this direction. The total volume of deposits attracted from corporate customers in 2008 came to 22.9 billion roubles ($921.2 million); the volume of credits granted to corporate borrowers – 36.7 billion roubles ($1.48 billion). On results of 2008 the bank’s client base has got substantially renewed and increased; the bank has managed to achieve this both thanks to introduction of new products and at the expense of improved service provision technologies. This led to growth in commission revenues on 40% up to 688 million roubles ($27.68 million).

At present the bank’s customers are multiple companies from a number of industrial sectors and service industries. One of priority directions of the MBRD activities traditionally was cooperation with the Government of Moscow. Such cooperation included provision of credits and of guarantee for projects implemented under the municipal administration’s patronage. In 2006 MBRD has launched acquiring business, and for the period of 2007-2008 the number of EFTPOS terminals for cashless settlements in points of sales has grown as much as twice, and the volume of cashless transactions on them – four times as much.

Due to the difficult situation in the Russian and global financial markets in 2008 MBRD was pursuing a conservative strategy for investment business development directed at minimizing the credit and market risks and also the liquidity risk. This cautious strategy was reflected in the decision to form a portfolio of securities only from instruments included on the Collateral List of the Bank of Russia, as well as in substantial reduction of the volume of hypothecation and reverse REPO transactions along with operative monitoring and review of existing limits.

During 2008 the bank’s main efforts were concentrated on attracting resources from financial markets and from the Bank of Russia, increasing the commission revenues and expanding the spectrum of services provided to customers. During 2008 in financial markets MBRD has attracted nearly 1 billion roubles (approximately $40 million) by placing paper loans for the term from three months to one year. The bank has also placed two issues of roubles bonds with the term of circulation of five years for the amount of 6 billion roubles ($241.4 million). During the year MBRD has attracted 20.4 billion roubles ($820.6 million) from the Bank of Russia at the rate corresponding to the rate of refinancing as of the deal closure (from 8.25% to 12.00% per anum).

In April 2008 within implementation of the programme to attract medium-term funds in financial markets MBRD has got a Dresdner Bank credit for the amount of $75 million for the term of 18 months. In July regardless of the severe market conditions MBRD has attracted a syndicated credit for the amount of 40 million Euros from a group of international banks with WestLB at the head for the term of six months and with a possibility of prolongation for another six months.

In 2008 the bank has substantially strengthened its positions in the brokerage market regardless of the fierce competition in this segment. For 2008 the number of MBRD customers has grown on 90%, the volume of customer transactions has grown on more than 50% compared with 2007 and the commission revenue has actually increased as much as twice.

In February 2008 MBRD has launched a project of car loan securitization. During 2008 within the project the bank has organized engagement of intermediary financing for the amount of 2.67 billion roubles ($107.4 million). But because of instability in the financial markets, already in 33 December the cost of servicing the engaged funds has increased, As a result of that, MBRD has decided to buy out the special legal entity’s issue terminating the engagement of foreign financing.

Also at the end of 2008 MBRD has embarked on securitization of mortgage assets by organizing the issue of mortgage bonds according to the Russian legislation. It is planned to implement the issuance of bonds for the amount of up to 3 billion roubles in the first half of 2009.

In 2008 MBRD has strengthened its positions in the market of export and trade financing services first of all at the expense of competitive terms of the offered services – in particular, granting of loans to customers with maturity dates from five to 10 years and low interest rate. The average annual portfolio of such transactions in 2008 has grown more than twice and came to $187 million. Limits of short-term trade financing have grown on 30% up to $350 million.

In 2008 the bank reorganized the network of its regional centres opening the Siberian Regional Directorate, which includes three regional centres located in the Siberian Federal District. At present the network of the bank’s regional centres covers six federal districts out of seven – these are the Central, North-Western, Southern, Volga Area, Siberian and Ural federal districts. As of 1 January 2009 the network of the bank’s regional centres was covering 31 regions with 70 points of presence in 51 cities of Russia.

The bank’s successes in servicing its corporate and individual customers in 2007 and 2008 were marked with a number of awards: so, in 2008 the international financial magazine Euromoney has recognized MBRD as the best bank of the Eastern Europe in the field of corporate management. MBRD was also awarded with the RBC prize of Financial Olympus in the category of Retail Bank in the nomination Dynamics and Development.

Strategy & Outlook

The financial crisis burst out in 2008 and its consequences for the Russian economy and banking system have made MBRD correct the development strategy with the purpose to minimize risks and to increase financial stability. This task is being solved through diversifying the client base, restructuring the credit portfolio, centralizing the processes of decision making on credit and financial issues, optimizing the business processes and the number of the bank’s employees. To achieve its targets, the bank makes qualitative changes in the management system – transfer to a management system, which corresponds to a large bank, based on the system of business planning and budgeting, creation of a modern system of incentives and introduction of advanced administrative reporting practices. It makes it possible to assess financial results of separate business units’ activities and to engage employees to the process of cost reduction and profitability increase.

The largest shareholder is Sistema JSFC. It makes a substantial contribution to assurance of the bank’s financial stability. At the end of 2008 a decision was made to centralize the holding’s financial flow management system based on MBRD. The shareholder has implemented a programme regarding increase of the banking group’s capital5 and to transfer its assets under the MBRD direct management. Sistema JSFC and MBRD have jointly worked out a plan of crisis management measures for 2009 contemplating assurance of liquidity and preservation of the business profitability and quality of the credit portfolio.

The bank actively cooperates with State authorities, and first of all – with the Bank of Russia providing assistance in solution of vitally important problems standing before the country’s economy and financial system. In the beginning of 2009 the bank resumed its joint work with

5 The Group includes MBRD, DalComBank, North-Western United Bank and a number of leasing companies 34 HMLA to offer mortgage credits to population. Jointly with HMLA MBRD is implementing a programme of restructuring the mortgage debts for customers whose financial situation worsened as a result of the crisis.

The financial crisis represents not only a threat but also an opportunity for the bank to restructure the business and to lay a foundation for further growth. The bank continues its work dealt with update of its IT-platforms. Regardless of a certain reduction in the staff, the bank does not move to closure of retail network points but instead converts the credit and payment offices in large Russian cities into offices capable of providing customers with a full range of banking services. In seeking out new retail and corporate customers, the Bank is now focusing on offer of savings, settlement and commission products rather than credit products as it was before.

The Bank remains committed to implementation of its strategy of developing a universal bank that offers classic banking services for individual and corporate customers as well as investment services. MBRD is oriented at medium and large corporate clients both in Moscow and in regions. To ensure the financial stability, MBRD makes stricter requirements to borrowers and implements a set of measures to deal with past-due accounts. In the retail business, the bank concentrates on increasing the quality of services and the customers’ loyalty. MBRD also invests significant funds in modernization of process infrastructure and at the same time continues to expand its retail network. In addition to that, the bank is seeking to maintain the volumes of crediting to customers at the same level simultaneously increasing the requirements to borrowers and restructuring the past-due accounts.

Sistema Hals OAO US GAAP, thousand USD 2008 2007 Revenues 362 237 452 198 OIBDA -127 402 56 727 Net income -304 065 26 568

Sistema Hals is one of the largest Russian developers, which operates in such fields as development, asset management and upkeep of buildings. A wide range of the provided services allows the company to control all stages of facilities’ lifecycle – from the conceptual design to management of the constructed building. Since the time of its establishment in 1994 Sistema Hals has successfully completed nearly 40 projects with the total area of 340 thousand sq. m. Among them – a building of the Russian office of DaimlerChrysler, the Hals Tower office complex, headquarters of the Pipe Metallurgical Company (TMK), a hotel of MaMaison international network (Orco Property Group), Detskiy Mir shopping and entertainment centre in Kazan and a number of blocks of apartments in the Moscow suburb of Kuntsevo.

Since 2006 the company’s shares have been traded on the Moscow Interbank Currency Exchange (MICEX) under the HALS ticker, and in Russian Trading System (RTS) since 2007. The Sistema Hals' Global Depository Receipts (GDR) were admitted for trade on the main market of the London Stock Exchange since November 2006 under the HALS ticker.

In April 2009 Sistema JSFC has signed an agreement with VTB Bank to sell a part of its owned shares. According to the terms of the call option execution, VTB will get 51% of Sistema Hals shares. Sistema JSFC will continue its active participation in managing the company through minority holdings of 20%.

35 Operational & Financial Results

Regardless of the non-simple conditions formed in the Russian real estate market, in 2008 the Sistema Hals consolidated revenues have decreased on 19.8 % down to $362.2 million compared with $452 million in 2007. On results of the year the company has negative OIBDA.

According to an independent appraisal performed by Cushman & Wakefield Stiles & Riabokobylko (C&WS&R), as of 1 January 2009 the value of the company’s stake in properties and projects was $2 060 million.

As of the end of 2008 the Sistema Hals portfolio was composed of 104 projects and properties. The planned total area of 80 projects will be nearly 4.5 million m2 and nearly 500 hectares of plots of land. The total area of the company’s 25 real estate properties is approximately 177 240 m2 and more than 350 hectares of plots of land. The company’s portfolio includes offices of A and B classes, shopping centres, elite homes, business class homes, cottage settlements, multifunctional hotel complexes and plots of land.

In 2008 the Sistema Hals real estate development division was selling apartments and individual houses in properties located in Moscow in Simferopol Proyezd, in Michurin Prospect, Dnepropetrovsk Street and Rublyovskoye Shosse. As of the end of the year the company has sold 77% apartments in Primavera residential complex, all apartments in a block of apartments on 25 Dnepropetrovsk Street, 72% of apartments in Diplomat residential complex, 91% of apartments in Izumrudnaya Dolina [Emerald Valley] block of apartments on 111A Rublyovskoye Shosse. The company has also successfully sold car spaces in a separately standing parking in Aviatory Street and 80% of plots of land in the cottage settlement of Aurora in the village of Stepankovo, Moscow Region.

Sold during the year within the process of the company’s portfolio optimization were a project for construction of an administrative building in the centre of Moscow in Rochdelskaya Street and a complex of buildings in March 8 Street.

The main source of earnings in the asset management segment were incomes from letting cottages in the Serebryanyi Bor on lease. In 2008 the company began to let the 2nd stage of the project on lease – 20 cottages with the total area of nearly 4 774 m2. Altogether on the results of the year Sistema Hals has let 99 cottages on lease with the total area of 26 536 m2. The company’s average incomes from letting cottages on lease were $1000 per m2. In August 2008 the managed asset portfolio was supplemented with Danilovskiy Fort Business Centre.

In the accounting year Sistema Hals jointly with a French company Apsys commenced the retail spaces on lease in Leto shopping and entertainment complex. During the year the company has signed agreements with such large lessees as Media Mart, Russian Ice, MONEX Trading (Mothercare, Claire’s, Next, The Body Shop, Starbucks), Lady and Gentleman, KFC, L’Etoile, Sephora and also with almost 30 other lessees.

In 2008 the company has implemented a number of large projects for customers, which are included in Sistema JSFC Group. In May the company has completed construction of the first stage of RWS film studio in Saint Petersburg, and in July started restoration and reconstruction of the Detskiy Mir building in Lubyanka Square.

In 2008 the portfolio of real estate under the Sistema Hals management included properties with the total area of approximately 288 000 m2 located in six Russian regions. The company’s customers in this business segment are large Russian and foreign corporation – Japan Airlines, Metromedia International Group, Raiffeisenbank, Scandinavian Airlines, Siemens, Western Union, Sistema JSFC, MTS, Detskiy Mir, Intourist, Rosno, MosDachaTrust, MGTS, Nafta Moscow GMK, Mobile Drilling Systems, UralSib Leasing Company, Chibo CIS, Warley Parsons International, Stelt Telecom, Trabond Limited and Oscar Service.

36 In 2008 within the corporate structure optimization process Sistema Hals has adopted a resolution to leave the segment of infrastructural construction as a non-core one. It was decided to concentrate the efforts on priority segments - development and management of assets. In November the company has sold its stakes in the Engineering and Construction Association of Sistema Hals (51%) and Organizator OOO (51%).

On 7 April 2009 Sistema JSFC has concluded an agreement with VTB Bank to sell a part of its shares in Sistema Hals. The transaction will be made in two stages: at the first stage, which is currently already completed, VTB acquires 19.5% of the company’s shares and gets a call option for the remaining 31.5%. At the second stage, VTB may execute the call option subject to getting an approval of the deal from regulating authorities. After closure of the deal VTB will own 51% of Sistema Hals shares. The parties have also agreed on the terms of restructuring the company’s debt to VTB.

Strategy & Outlook

After selling a part of its holding to VTB, Sistema JSFC will own a minority holding (20%) of Sistema Hals. The corporation will continue its active participation in operative management of the company being aimed at creation and growth of its stock value.

In December 2008 the company’s Board of Directors has adopted an crisis management strategy. According to this strategy, Sistema Hals plans to maintain cash flows by selling a number of projects with the purpose to finance the production programme and to repay debts. The company has distinguished key highly profitable projects, which need financing, and also projects whose implementation cannot be stopped by the virtue of obligations before partners. The secondary projects will be sold, and the released resources will be concentrated on priority fields. Within the cost reduction programme it is planned to reduce commercial and administrative-executive expenses as much as twice. Sistema Hals intends to attract outside financing and to refinance the available debts when required.

In 2009 the company plans to complete sale of apartments in unit blocks in Simferopol Proyezd, in Michurin Prospect and Rublyovskoye Shosse, and also to sell plots of land in the cottage settlement of Aurora. These projects are at their final stages and do not need additional financing. Apart from that, Sistema Hals plans to begin sales of apartments under the programme of MGTS facilities redevelopment. In May 2008 the company has concluded an agreement with a leading Italian architectural bureau Giugiaro Architettura for design of interiors in the apart-hotel in Milyutinskiy Pereulok.

The Sistema Hals’ strategic target is to win leading positions among Russian developers through achieving the stable financial position, implementing a number of unique projects, available strong internal competences and competitive advantages and also available promising projects for further implementation and accretion of the stock value. The company will use its 15-year experience, knowledge of the Russian real estate market and managerial expertise as a foundation for creation of a more diversified and profitable portfolio.

Strategy Sistema Hals implies creation of a diversified portfolio of rentable and saleable real estate properties in main segments of the market including office real estate of A and B classes, shopping and entertainment complexes, hotels and business class homes. In particular, the company plans to concentrate its efforts on implementing the current projects in the segment of office real estate of A and B classes and increasing the share of rentable assets by saving the unique and most profitable properties in the portfolio. Residential real will remain to be one of the key sources for the company to finance implementation of long-term commercial real estate projects and on-going activities.

Sistema Hals plans to fully use benefits of strategic partnership with international companies. Thanks to cooperation with Apsys the company has a number of unique competitive advantages in development of retail trade real estate projects. Sistema Hals intends to develop

37 partnership with the French company and to increase the number of joint projects. Sistema Hals also plans to use partnership with an Arab company Saraya for further development of projects in the area of hotel real estate.

Detskiy Mir Centre OAO US GAAP, thousand USD 2008 2007 Revenues 801 969 597 224 OIBDA 16 792 36 131 Net income - 36 072 6 357

Detskiy Mir Group of Companies is a leading operator of trade with children’s goods in Russia. This one of the most well-known and popular Russian brands with a fifty-year history. At present the Group unites a nation-wide network of Detskiy Mir shops, C-Toys Company and Yakimanka Children’s Gallery Luxury Centre. The total trading area is more than 220 800 square metres. C- Toys Company is one of the leading distributors of children’s goods in Russia; it operates under licences for production and distribution of toys and children’s clothes of such well-known firms as The Walt Disney Company, Warner Bros., Nickelodeon, Sony Pictures, Marvel and others, and also has its own production of licensed carnival costumes. Yakimanka Children’s Gallery is a luxury centre in Moscow of a full concept shop format with goods for children under 14 years with the trading area of 3 560 square metres. The head company of the Group is Detskiy Mir Centre OAO whose all 100% shares belong to Sistema JSFC.

Operational & Financial Results

Regardless of the difficult situation in the market in the last quarter of 2008, Detskiy Mir has shown impressive growth rates. The Group has achieved a noticeable increase in sales both at the expense of the organic accretion and continuing expansion of trading areas. In 2008 the Detskiy Mir’s revenue has grown on 34% up to $801.9 million compared with $597.2 million in 2007. The OIBDA index has dropped on 53% and was $16.7 million. The comparable sales in shops opened before 31 December 2006 have grown on 27%.

In May 2008 the Group has opened its one hundredth shop, which is located in the city of Magnitogorsk. By the end of the year the Group already included 130 shops with the total trading area of 220 800 m2. Approximately 70% of this space falls on shops located beyond the Moscow metropolitan area and its outskirts. In 2008 the average area of one shop was 1 700 m2. Altogether in 2008 Detskiy Mir has opened 40 shops with the total trading area of 62 300 m2. In December in Moscow the Group has opened Yakimanka Children’s Gallery Luxury Centre with the total area of 3 600 m2. In July 2008 the flagship Detskiy Mir shop in Lubyanka Square in Moscow was closed for capital reconstruction. Considering this shop, altogether in 2008 six shops with the trading area of 15 400 m2 were relocated or closed.

Flexibility of the Detskiy Mir format and the experience accumulated in the area of operation in regional markets make it possible to quickly adapt the product range matrix to customers’ changing needs. In 2008, when the sector of retail trade began to feel reduction of consumer spending, this flexibility appeared to be especially important. The crisis gave Detskiy Mir a possibility to strengthen its leadership in the market of children’s products, to acquire new customers, and in some cases – to get on lease trading areas, which are attractive on their location but were occupied by competitors before.

In 2008 the key strategic target for Detskiy Mir was improvement and rationalization of its management and corporate structure. The team of top managers was replenished by new high

38 class professionals. The Group has worked out and introduced a system of key performance indicators (KPI).

In 2008 the Group has completed an important work for reorganizing the management and reporting systems and to make them more effective and transparent. A three-level system of management has been created, with stores accountable to regional trading representative offices, which in their turn report to the Corporate Centre. 11 representative offices have been created, which carry out management of stores in their corresponding regions. The structure of the Detskiy Mir Centre management company was also streamlined through consolidation of five subsidiaries and became more transparent and efficient.

In 2008 the Group has also made steps in reorganizing the logistics system transferring the corresponding functions to Wholesale and Logistics Company included in the Group. The company has consolidated all operations of such kind in a rented Class A warehouse with the area of 21 400 m2 located in Kryokshino Logistic Park.

Mutual relations with suppliers were also optimized: settlements with 99% of C-Toys suppliers are now made with the use of letters of credits with post-financing. More than 30% of the Detskiy Mir suppliers’ goods turnover is served through factoring. In July the Group has concluded an agreement with a Swiss company SGS for additional inspection of quality of sold products and audit of suppliers. Detskiy Mir Group of Companies has also introduced its own Quality Mark, which of guarantee that goods meet high standards of the company and of the Russian legislation in the area of quality and safety.

Apart from that, this year the Group has attracted additional funds to expand business and to restructure debts: $20.5 million were issued by Raiffeisenbank Austria, $20 million – UniCredit Bank, and another $50 million - the European Bank for Reconstruction and Development (EBRD). Besides, an agreement was reached with Raiffeisenbank for refinancing the credit in the amount of 50 million Euros to roubles. Nomos Bank has approved the opening of a credit limit in the amount of 300 million roubles, MetalInvestBank has granted a limit of factoring transactions for the amount of 478 million roubles.

The Group continues to fulfil its undertaken social obligations: in 2008 almost 16 million roubles were allocated for charitable purposes. Detskiy Mir Group of Companies has come forward with an initiative to create a non-commercial organization, which is called Association of Enterprises in the Industry of Children’s Goods and has united the largest players in the Russian market of children’s goods.

In March 2008 the Detskiy Mir’s advantages were confirmed by the status of the National Leader in Trade with Children’s Goods awarded to the company at the annual ceremony of the Russian Trade Olympus Prize. The prize was founded by the elite of the Russian industry with the support of the country’s government and regulating authorities. Detskiy Mir was also recognized as the Most Efficient Real Go-Getter and Best Among Equal Ones on results of the traditional competition “Retailer Best. Best Among Own Ones”.

In April the company became the 33rd one in the rating of fifty largest retail networks in Russia compiled by Kommersant newspaper. Detskiy Mir was also placed among two hundred most transparent companies in Russia and took the 16th place among all retailers in the May review of the Sekret Firmy magazine.

Strategy & Outlook

The development strategy of Detskiy Mir Group of Companies presupposes expansion of the nation-wide network of shops under the Detskiy Mir brand, increasing effectiveness of all processes, reduction of costs and stronger competitive advantages.

39 In 2009 the Group will continue its expansion mainly through thoroughly rectified opening of new shops with attractive location, which frequently appears to be empty thanks to withdrawal of competitive players from the market. Projects for which funds will be allocated in 2009 are being selected with the maximum carefulness because on the whole the investment volumes have been reduced.

With the purpose to increase the effectiveness the Group applies both new administrative approaches and IT solutions. Now it assimilates the enterprise resource planning (ERP) system, which helps managers to be more informed and efficient in decision making. The Group proceeds with optimizing the logistics; this will make it possible to reduce costs and will assure integrity of reserves and effective cooperation with suppliers. On the whole the business processes are being adjusted in accordance with the restructuring completed in 2007. The Group’s management focuses on most efficient use of circulating assets.

The Group intends to fully use its competitive advantages. A wide range of the company’s high quality goods will be adjusted to meet buyers’ preferences in the changed economic conditions. The Group will develop private-label goods, which on the one hand are more marginal, and on the other hand – more affordable for the buyer. The CRM system will help the Group to rest upon the large accumulated client base and also will give it an access to wider client bases of other companies, which are included in the Sistema JSFC Consumer Assets Business Unit.

Intourist VAO [All-Russian Joint-Stock Company] US GAAP, thousand USD 2008 2007 Revenues 615 560 374 027 OIBDA 37 656 28 017 Net income 765 10 658

Intourist was created in 1929. Over decades the company has been being a kind of Russia’s business card abroad, and with its help the country’s residents have been opening the most amazing corners of the world for themselves. After the laps of 80 years Intourist still remains to be a flagship of the Russian travel industry, the largest holding represented in all segments of travel industry and hospitality from mass tourism to organization of exclusive and corporate tours.

Today Intourist Group of Companies is a vertically integrated tourist holding, which represents Intourist VAO management company and 4 business divisions – tour operations (Intourist NTK – National Travel Agency), hotel business (Intourist Hotel Group), retail sales (Intourist Travel Shop) and transportation services (Intourist Transportation Services). The company is present in 80 regions of Russia and cooperates with 7000 partners in 168 countries around the world. Being a recognized leader in the market of inbound tourism, Intourist receives visitors from 70 countries. The company’s hotel business includes own hotels and hotels that belong to partners in Russia, Czech Republic, Italy and Turkey. Sistema JSFC owns 65.1% of the Intourist’s shares.

Operational & Financial Results

In 2008 Intourist demonstrated positive dynamics of financial indices in all business directions. In 2008 the company’s turnover has grown on 73.7% from $516.3 million to $896.6 million. The revenue has grown on 64.5% from $374.0 million to $615.5 million. OIBDA has increased on 30% and came to $37.6 million.

In the accounting period Intourist maintained its positions in the market of inbound tourism with the share of 9.8%, compared with 10.5% in 2007. Some decrease of the company’s presence in the market is connected with lower growth rates compared with the market of excursion and

40 educational tourism on the whole. During the year Intourist was predominantly focusing on promotion of products with a high added value and exclusive tours.

In 2008 Intourist has strengthened its positions in the market of outbound tourism having increased the market share from 5.6% in 2007 to 8.3%. The company actively operates in directions of mass (Turkey, Egypt) and sub-mass (Spain, Italy, Greece, Czech Republic, Bulgaria, Thailand, Tunisia etc.) tourism. In the winter season of 2008-2009 Intourist NTK has offered new international tours including Goa (India) and also Indonesia, Malaysia, Singapore, Vietnam and Cambodia. The growth in new directions allows the company to diversify operations and to minimize risks. At the same time, it creates additional synergy between the tour operations and transportation divisions.

The mass tourism directions such as Turkey and Egypt naturally constitute 34% and 45% of all sales of tours abroad. In 2008 Moscow and Saint Petersburg have generated 70% of all sales; at the same time, the company continued its expansion in regional markets having started to offer tours from Stavropol, Samara, Rostov-on-Don, Yekaterinburg, Chelyabinsk, Novosibirsk, Perm and Krasnodar.

In 2008 Intourist has acquired Orient Travel Agency, which is one of the leading operators of domestic tourism. In the accounting period its market share was 1.5%. Earlier Intourist offered tours to districts in the vicinity of Moscow, to Saint Petersburg, Karelia and historic cities of the Golden Ring but was not involved in domestic tourism in the mass segment.

In 2008 the company maintained positions of the largest operator in the hotel business; at that, as of the end of the year the total room stock under its management counted 5700 rooms, were 3200 rooms were in Russian hotels and 2500 – in hotels located abroad. For comparison, in 2007 the Intourist’s room stock was only 2400 rooms where 2300 – in Russia. A significant part of the Intourist’s Russian room stock is in Moscow where the company manages, in particular, such well-known hotels as Peking and Cosmos. At the same time, the market is also rapidly growing in regions – for example, in July 2008 Intourist Hotel Group has received for its management for the term of 15 years a municipal hotel Elets in the Lipetsk Region. In the accounting period Intourist Hotel Group carried out rebranding that should strengthen its image as the leading hotel operator in Russia.

For the period of 2008 the room stock under the Intourist’s management beyond Russia has increased from 100 rooms to 2500. In May the company has got on lease for the term of 5 years a five-star hotel Justiniano Club Belek in Belek, Turkey. The hotel is managed by the subsidiary \Intourist Hotel İşletmesi, which was established tom provide Intourist NTK with an access to the room stock of the most popular hotels in Turkey’s resort cities. Also in May 2008 Intourist has concluded a contract with International Hotel Investments (IHI), a division of the Maltese Corinithia Palace Hotel Company Limited. The subject matter of the contract is creation of a joint venture to develop a network of four- and five-star hotels in Russia.

In April 2008 the company has concluded a club deal to engage a credit in the amount of $50 million. Its organizers were the Moscow offices of HSBC and Raiffeisenbank. In October a third creditor, Commerzbank AG, has joined the club deal granting additional $17 million. So, the total volume of the credit came to $67 million. The loan term is 3 years; the interest rate is floating and varies in the range from 5% to 5.25% per anum. The engaged funds were directed to corporation-wide purposes among which is financing of on-going activities, construction projects of the hotel division and M&A.

In May 2008 Intourist has completed a deal regarding acquisition of Intourist USA located in Florida. The company was founded in 1930 as an American representative office of the Soviet Intourist, and since 2001 the company became to work in the American market as an independent operator. At present, Intourist USA has efficient technologies for visa formalization and has established a good reputation in the USA market. Apart from that, for a long time the

41 company had been working under the Intourist brand that significantly facilitates the promotion in the American market.

In June 2008 for the first time an independent director with an international experience became a member of the company’s Board of Directors – Mr John Theodore Lindquist. Invitation of an independent director of an international level to the Board of Directors is evidence of a significant progress in the area of corporate management, increased information transparency and conformity with global standards of business running.

In July 2008 Intourist has concluded a contract to develop tourist infrastructure in the Tver Region. The agreement has been concluded within implementation of the Programme for Development of Hotel Network in Capital Cities of the Central Federal District approved for implementation in December 2007.

At the end of 2008 Intourist Travel Shop Company has completed a deal regarding acquisition of 74% of RossTour, a leading network of travel agencies in the Ural region. The purchase of RossTour made it possible to increase the effectiveness of activities of the Intourist Travel Shop’s division of retail sales and at the same time to strengthen positions of the company’s tour-operation business in the Urals.

On results of 2008 TourInfo sectoral association for the third time in a row has called Intourist the Largest Travel Agency in Russia. In September 2008 Kommersant newspaper jointly with the Association of Russian Managers has placed the Intourist’s President Mr Alexander Arutyunov on the first place in the rating of the Top-1000 Russian Managers in the Service section.

Strategy & Outlook

In the future, Intourist intends to maintain its leading position in the Russian tourist market and to strengthen positions in segments of domestic, inbound and outbound tourism using the synergy between different business divisions. In 2009 the company plans to increase its share in the shrinking market of outbound tourism in order to fully use this in 2010 and 2011 when the market will resume its growth. The Intourist’s key objective in the hotel business is to increase operating effectiveness through cost reduction. In the retail business the company intends to focus on increasing the effectiveness of points of sales and further market consolidation through purchasing and taking on lease the travel agencies’ points with favourable location.

In the long run the Intourist’s strategic objective is to maintain leadership in Russia and CIS countries and to enter the TOP-10 European operators. The company’s strategic approach includes continuation of the vertical integration that will allow it to create additional value promoting the single Intourist brand for all business units. Intourist plans to continue development of the retail network and to more actively use sales through the Internet. The company’s strategy also includes such targets as creation of its own charter airline in partnership with one of the leading air carriers and possible alliance with one of European operators.

Medsi Group of Companies ZAO US GAAP, thousand USD 2008 2007 Revenues 124 836 68 662 OIBDA 4 628 9 610 Net income - 4 276 4 964

Medsi Group of Companies ZAO is the Russia’s largest nation-wide network company, which provides medical services and health strengthening services in Moscow and other regions of the country. Today Medsi unites more than 30 clinics, which provide medical assistance, 42 including a VIP-level clinic Medsi American Medical Centre, two children’s polyclinics, in-patient department, medical emergency service and also a network of medical fitness and wellness clubs. Sistema JSFC owns 100% of the Medsi ZAO shares.

Operational & Financial Results

In 2008 Medsi has demonstrated good results - managed to achieve a significant growth of revenues. The company was actively investing in business expansion in regions and undertook expansion in the fitness segment of the market. In 2008 the company’s revenue came to $124.8 million compared with $68.6 million in 2007. OIBDA on results of the year was $4.6 million. In 2008 the revenue per one square metre has increased on 21%. The number of clubs and clinics has grown from 28 to 37. The number of visits to the clinics’ doctors has grown on 25% and was 2 761 000 while the total number of customers has grown to 328 000. The quantity of provided services has grown on 56.5% up to 4 913 000.

The Medsi’s share in the extremely fragmented Moscow market has increased from 0.85% in 2007 to 1.2% in 2008. The company expects that in 2009 its market share will reach 1.7%. In the market of voluntary medical insurance the Medsi’s share in 2008 has grown from 1.9% to 2.2%; the forecast for 2009 is 3.2%.

In 2008 all services of the company were moved under a single umbrella brand – Medsi Group of Companies. The Group carried out rebranding of all its companies and has established a single concept of the brand, logo and brand book. For 2009 the Group plans a large-scale marketing campaign directed at promotion of the Medsi brand. The fundamental concept of the brand is the idea of a healthy way of life, which suites such areas as fitness, wellness and spa services.

During the year the company continued the development of its network in Moscow and regions. Three clinics of primary reception were opened in Moscow and in the Moscow Region. An in- patient department was opened in Moscow based on CentrSoyuz, and a station of emergency and acute medical care has appeared in Novorizhskoye Shosse. The first primary reception clinic in the Russian Far East was opened in the city of Yuzhno Sakhalinsk.

Regardless of the difficult conditions in the market, Medsi has acted as the sectoral consolidator. The company has managed to attract highly qualified personnel including doctors and specialists. In general, it is possible to say that with the crisis the process of searching for and engaging in the work of specialists in the medical field became substantially simpler. As other medical companies withdraw from market, their patients go to other providers of medical services including Medsi. Since the beginning of 2009 Medsi has been holding negotiations with a number of such clinics regarding their purchase or transfer under management.

In 2008 Medsi continued to introduce advanced technologies and innovations, which make it possible to achieve high quality of patients’ service and at the same time to optimize business processes that is especially important in the light of the company’s rapid growth. Medsi has started to move to a single register of services in its clinics; such transition gives an advantage when working with insurance companies. Also in 2008 the Group has adopted a single standard to equip consulting rooms of primary reception doctors – now in every clinic the primary reception consulting rooms are obligatorily equipped with modern medical equipment as well as computers and printers. Standards of the Medsi clinics’ equipment exceed the requirements made by the federal legislation and confirm the Medsi’s reputation as a company with a highest quality of services.

In 2008 the Group started introduction of the CRM (Customer Relations Management) information system designed to assure the sales department’s activities. The system has made it possible to unite client bases of all Medsi’s clinics. The company also began a transition to the Medical Information System (MIS), an innovative software product, which automates all aspects of modern clinics’ activities. The MIS makes it possible to keep a single electronic medical card

43 of the patient; this provides a doctor from any clinic with a possibility to get all information related to a particular patient. The system’s capabilities will allow doctors to clearly follow medical standards of treatment and to have all necessary information at hand for quality provision of services. Application of the MIS will make it possible to control every medical institution’s activities and to get medical and administrative Statistics in different sections on-line real time.

The Medical Information System is closely tied with another Medsi’s project – Patient’s Personal Cabinet. The Personal Cabinet represents a protected portal where the patient may see the whole history of his/her relations with the company, may book an appointment to see a doctor or leave a message to his/her personal curator. The portal is protected according to the latest safety standards and reliably keeps the patient’s personnel information.

In 2008 in response to the growing demands of the market the company has created a project called Treatment Abroad. The main objective of the project is to provide medical services with engagement of foreign specialists or treatment and prophylaxis institutions in European countries and Israel. The target audience of the project is individuals, patients under voluntary medical insurance, leading employees of large Russian and western companies served in Medsi’s clinics. The project’s launch made it possible to provide a closed cycle of service and continuity of patients’ treatment. In spite of the fact that due to the influence of the financial crisis the patients’ flow turned out to be smaller than the forecasted one, the project remains to be an important and rapidly growing part of the company’s business.

In 2008 the company’s resources were mainly directed at development of the infrastructure and integration of the Medsi’s assets. To minimize the crisis influence, the company was actively optimizing the expenses. Nevertheless, in 2008 Medsi has acquired Family Medicine Corporation, a company, which represents a unique market model to serve VIP-patients; in particular, it offers services of personal doctors-curators to patients.

In addition to that, to provide services of in-patient departments to patients inside the network the company has acquired a large hospital for 150 beds with the area of 10 000 square metres. This is a multifield medical institution where doctors perform a wide spectrum of operations, including with the use of endoscopic methods. The hospital was connected to the general information network of Medsi’s clinics.

In December 2008 Medsi was awarded a Company of the Year prize in the nomination For Contribution to Preserving the Nation’s Health.

Strategy & Outlook

The Medsi’s principal strategic objective for 2009 is to become a leader of the Russian market of private medicine using strong positions in the key segments of the market such as services of policlinics, hospital services, services for VIP patients, children’s clinics, fitness and accompanying services, treatment abroad.

In 2009 the company intends to use the crisis created opportunities, for example, with respect to increasing the market share and its consolidation. Along with that, the company expects reduction of its plans for the network expansion due to more expansive foreign crediting. At present, the company’s first priority is to complete construction of and to commission seven primary reception clinics and a clinical and diagnostic centre whose construction began in 2007.

Considering the financial instability caused by the crisis, Medsi has adjusted its marketing strategy. Now the Medsi’s priority segment is insurance companies because cooperation with them makes it possible to be oriented at long-term (from 6 months to 1 year) guaranteed receipt

44 of financial funds for corporate policies. The share of insurance companies under the programmes of children registration is approximately 50%; other 50% fall on the share of individuals. It is explained by the fact that, as a rule, companies usually do not offer policies for employees’ children within corporate registration under voluntary medical insurance.

45 5. DESCRIPTION OF MAIN RISK FACTORS

There are numerous risks that the Corporation’s business could face. They represent processes and factors on which Sistema JSFC OAO has little influence if any. Therefore, effective assessment and management of risks is an important component of the strategy.

Risk management is carried out in a centralized manner within the framework of provisions and regulations approved both at the Sistema JSFC OAO level and at the level of its subsidiaries. This process touches all activities of the Corporation and is directed at revelation and reduction of probability and impact of any events that may exert a negative influence. Corresponding arrangements are called to assure reasonable guarantee for implementing the strategic targets of the company's activities.

Political Climate

On the whole the political situation in Russia over the last year was characterized as comparatively stable. At the same time, instability in several neighbouring CIS member states has increased, especially accounting for the fact economies of those countries remain to be dependent on the influence of different political forces.

5.1 Financial risks

Economic situation

Economic development in Russia was uneven in 2008. The first half of the year has shown Russian economy’s dynamic growth thanks to record-high prices for raw materials and energy carriers. With the start of the second half of the year the developing global crisis has increased the negative influence on Russia’s economic development.

According to the Ministry for Economic Development, in 2008 the GDP growth was 5.6% (compared to 8.1% in 2007) with consecutive slowdown from 8.5% in the I quarter, 7.5% - in the II quarter, 6.2% - in the III quarter, to 1.1% - in the fourth quarter.

Growth of people’s real available cash income, which was one of the main drivers of economic growth, on results of 2008 was just 2.7% (the similar index on results of 2007 was 12.1%).

For January-December 2008 the consumer market inflation came to 13.3% exceeding the corresponding indices for the previous five years, including that of 2007 (11.9%) - on 1.4% and 2006 (9%) - on 4.3% The accelerated inflation in 2008 was significantly determined by a noticeable growth of prices for raw materials and foodstuffs in international markets. However, in the fourth quarter of 2008 there was a trend of slower inflation. In December the consumer price index has grown on 0.7% up to the level of the previous month while a year before the growth was 1.1%.

In 2008 the balance of payments of the Russian Federation has shown a sharp change of the last years’ trends. In 2005-2007 the total scale of clear private capital move across the border has exceeded its inflow that even against the background of the record positive balance of the current transactions account has caused reduction of international reserves for the first time since 1998. Nevertheless, the Russia’s accumulated international reserves allowed it to compensate the negative trends in the transboundary move of capital and to sustain the mass withdrawal of funds by non-residents.

46 On results of 2008 the volume of gold and currency reserves of the Russian Federation has dropped on 10.8% and as of 1 January 2009 was 427.1 billion dollars US. Along with that, on the magnitude of this index Russia is still on the third place in the world.

The problem of unusual dependence of the Russian economy and economies of the CIS countries on prices for hydrocarbon raw continues to be a substantial risk. In the CIS countries there is a risk that positive economic trends may become weaker as a result of political instability or pursuit to strengthen the State interference in the economy.

Currency exchange rate

Possible changes of exchange rate of the rouble, euro and grivna to the American dollar represent a risk for Sistema JSFC. Worsening conditions of trade and flight of capital connected with the aggravating situation in the world financial markets are potentially creating a devaluation pressure on the rouble that may negatively affect the companies of Sistema JSFC Group.

Stock markets

There is a risk that dynamics of Russian companies’ shares will be inferior to their analogues in other emerging markets. The main reasons of that are methods to form their fair evaluation and current level of liquidity both of the global and Russian markets. There is also a risk of capital flight from the stock market due to the global reduction of liquidity, more difficult access to borrowed funds, political risks and reappraisal of market development prospects.

Interest rate and other credit risks

In the current situation the changes of interest rates in the market of capitals will not lead to a noticeable increase of our costs because the overwhelming part of our borrowings has a fixed interest rate

Though in the future in further engagement of resources for investment development we may face a situation of rising prices for engaged funds.

Changes of interest rates in the Russian and international markets caused by credit shrinkage and reduced level of liquidity in the banking system may substantially affect the cost of borrowings and terms of additional capital engagement. Sistema JSFC runs business in capital- intensive sectors; therefore, changes in the cost of borrowings may negatively affect the Corporation’s development.

5.2 Sectoral risks

TELECOMMUNICATIONS

Sistema JSFC OAO Telecommunications Business Unit is one of the largest private telecommunication associations in Russia. Companies of this direction operate in two main sectors the description of whose sectoral risks is presented below:

Fixed communication including the Internet, data transmission and long-haul communication. Mobile communication including the Internet, data transmission and long-haul communication.

47 It is necessary to note that some sectoral risks of one sector at the same time could be favourable opportunities for another one.

Fixed communication Reduced level of consumed of fixed communication services because of difficult situation in financial markets, growing unemployment, and fallen level of wages. Further weakening of the rouble significantly reduces the growth rates of dollar revenues fixed communication operators. This risk is especially urgent for operators whose tariffs are regulated by the State. 75% of MGTS OAO services fall under the State regulation. Significant reduction of traffic of long-haul communication operators because operators of the Large Group of Three implement licences of intercity and international communication and actively build its own intercity and international networks. This factor increases the risk of traffic withdrawal from MTT OAO to own networks of MTS OAO, ComStar UTS OAO and MegaPhone OAO. Tough competition and appearance of new players in the rapidly growing market of broadband access in Moscow and in regions of the Russian Federation may lead to loss of ComStar UTS OAO share in the market of broadband access; Development of high-speed access technologies that compete with ADSDL – FTTx, WiFi, WiMax, 3G and also house networks and networks of cable TV. The weakening rouble leads to a necessity to review mutual settlements with representatives of network equipment. This risk is especially urgent for operators, which actively build modern networks (MTS OAO, ComStar UTS OAO) and provide a wide spectrum of additional services including mobile data transmission, video conference link and others. The crisis in the world financial markets makes opportunities to engage credits much more difficult and leads to growth of their cost.

Mobile communication The difficult situation in financial markets exerts negative influence on the growth of incomes and purchasing activity of mobile communication consumers in a larger degree than on consumers of fixed communication. The fixed communication operators’ risks are substantially smaller because by the virtue of a number of factors their subscribers change their consumer preferences on a slower pace. Devaluation of local currencies leads to significant reduction of dollar revenue growth rate. There is a possibility of significant drop of MTS OAO revenues in Ukraine. Devaluation of the Russian rouble leads to problems with liquidity and solvency of cellular operators. MTS OAO is better protected from this problem than its closest competitor VympelCom OAO thanks to the lower amount of the debt load. Rejection of hedging of debt items may lead to significant currency exchange losses and turn the cellular operators’ profit into loss; Development of high-speed access that compete with CDMA-450 and 3G – WiFi, WiMax. The MTS OAO implementation of the 3G technology leads to duplication of the service already offered by SkyLink, though availability of the network makes it possible to compete with other operators of the Large Group of Three and also to expand the zone covered by the provided mobile data transmission services. Growing competition in the sector of wireless data transmission in regional markets from the direction of fixed-line operators. The growing competition in all segments of mobile communication from the direction of operators of the Large Group of Three and also operators, which work with alternative technologies (mobile WiMax) may lead to reduction in the MTS OAO profits from the main activities and loss of the market share. The growing competition from the direction of discount operators may lead to withdrawal of subscribers and also forced reduction of service one minute cost and therefore - to significant reduction of the MTS OAO profits.

48 Implementation of licences of intercity and international networks and building of the MTS OAO own network leads to duplication of the infrastructure already existing in the group of companies of the business direction, though availability of the network allows MTS OAO tom significantly reduce the costs in conditions of the aggravating macroeconomic situation. Acquisition of one of the competitors by a large global mobile operator with an access to the western market of capitals may worsen the MTS OAO ability to compete in investments in building of networks and base infrastructure. Gradual entry to the market of virtual operators (for example, Corbina Telecom) may lead to further growth of competition in the market. Negative impact of competition on the company’s financial indices – use of IP telephony by mobile operators of the Large Group of Three. Loss of a number of the MTS OAO corporate customers within general reduction of operating expenses because of the financial crisis; Loss of the market share and increasing withdrawal of subscribers because VympelCom OAO offers a full spectrum of telecommunication services after acquisition of Golden Telecom OAO. The adopted law on preserving the telephone number when shifting from one cellular communication operator to another one (MNP) may increase subscribers withdrawal. The VympelCom OAO Acquisition of 49.9% of EvroSet shares and the Alfa Bank purchase of the Dixis controlling interest may bring MTS OAO to loss of its leadership with respect to active subscriber base and also to loss of the leadership on its incomes as soon as in the beginning of 2009. High competition of the market where Shyam Telelink Ltd. operates leads to the ARPU drop and large withdrawal of subscribers. Apart from that, the company’s financial results in a significant degree depend on availability in the market of cheap mobile phones capable to support the CDMA 800MHz standard.

Companies of the Sistema JSFC OAO telecommunication direction adhere to an active strategy to counteract these risks. The efforts are concentrated on assuring the effective management and interaction with the purpose to increase the stock value. The group has prepared and is carrying out the whole number of arrangements directed both at the general strengthening of the telecommunication group and its separate parts. In particular, special emphasis is placed on effectiveness of costs - CAPEX and ОPEX, and also optimization of business processes of the group of companies. Apart from that, along with new services the group introduces new tariff plans, which allow our companies to successfully compete in the market, and also begins to actively use convergent possibilities provided by our unique portfolio of telecommunication businesses.

HI-TECH AND INDUSTRY

High-Tech and Industry Business Unit operates in the markets of large system science intensive projects among which it is possible to distinguish production of telecommunication equipment and software, information technologies and system integration, microelectronics, production of electronics and production of systems for defence destination. The Business Unit carries out its activities both in the domestic and in the foreign markets.

Determining the risks, their minimization and management of processes, which cause uncertainty, is one of the key objectives of the Business Unit’s management in organizing the operating activities and adopting the strategic resolutions. The below-presented list of risks is not exhaustive, though includes all main risks, which are the most significant in the management’s view:

The difficult economic situation with a high degree of probability may entail reduction of capital expenditure of the company’s customers, and as a consequence – drop of sales. There is a risk of loss, termination or worsening of relations with suppliers and sellers that may have a negative reflection on the company’s financial and operational results.

49 The sectors where the company runs its activities are characterized by a high level of competition, fast changes in their technology, frequent improvements, bringing of new products to the market and growing consumer demands. Many of the competitors are more known in the market, possess large client bases and significantly large capabilities in the field of financing, technology, marketing, distribution and other resources compared with the High-Tech and Industry business direction’s companies that gives them certain advantages and is determined by us as a risk of competition. In determining a principal contractor for a large project, State enterprises may have priority before private enterprises with higher effectiveness. One of important customers of the Business Unit enterprises’ products is the State. In conditions of the being cut income part of the State budget there is a risk of reduction in volumes of financing for the State Armament Programme and Federal Target Programmes where the Business Unit’s enterprises participate. Risk of an increasing gap between a high level of R&D and obsolescent production base. Risk connected with the age disproportion of employees of the Business Unit’s enterprises. The Business Unit’s enterprises employ experienced designers of the senior age group. The inflow of young specialists grows, though there are practically no experienced specialists of the middle age group. This problem is also related to the labour market. Such situation may lead to a situation that in several years the enterprises may face a shortage of chief designers and chief engineers.

CONSUMER ASSETS

Consumer Assets Business Unit carries out its activities in the markets directed at meeting the demands of immediate consumers of goods and services. The Business Unit’s companies work in the following sectors: financial services, retail trade, medicine and tourism.

Finances

Finances Business Direction is represented by the following banks: MBRD JSCB OAO, DalComBank OAO and East-West United Bank S.A., Luxemburg. The banking activities in Russia are conjugated with high risks. Along with that, the Russian State’s monetary and credit policy is directed at consolidating the banking sector’s stability and protecting the interest of the bank’s depositors and creditors. The relatively small size of the Russia’s banking system (as of 01.01.2008 the banking system’s aggregate assets were just 61.0% of the GDP) makes its subjected to influence from the general situation in the economy of the Russian Federation; The substantial risk factors inherent in the Russian banking system are deficit of liquidity, low capitalization of a significant number of Russian banks, incompleteness of the reforms being carried out by the Bank of Russia in lending agencies’ business accounting and accounting statements as well as imperfect existing banking legislation regarding assurance of creditors’ rights and prudential supervision over lending agencies’ activities; Competition becomes sharper in the market of banking services, especially to win deposits of individuals. The more intense competition and increasing borrowing cost lead to higher rates on deposits and/or on granted credits that may negatively affect the banking business’s profitability. A noticeable risk factor of the Russian banking system is the crisis state of the Russian industry; this noticeably increases the risk of growing past-due accounts both in the corporate sector and with respect to individuals, especially in depressed regions. MBRD JSCB OAO and DalComBank OAO always adhered to a conservative credit policy. It restrained the banks’ development during the best years, though turned out to be a big advantage at the current stage.

50 Trade

Trade Business Direction is represented by Detskiy Mir Centre OAO and other subsidiaries and controlled companies united by Detskiy Mir trademark. Also in 2007, Sistema JSFC OAO started to develop TS Retail project contemplating creation of network for retail trade with mobile phones and portable electronics as well as services of other business directions of the Group. The main risks of this business direction are: Possible reduction of population size, changes in the level of incomes and changes in social priorities of the country’s population may lead to falling demand of children’s goods; Insufficient purchasing power of population in regions may potentially slow down the plans of the business direction’s development; the economic crisis of 2008 may lead to termination in growth and even reduction of consumer demand; The risk of more expensive import may lead to reduced profitability of trade with imported goods and may stimulate consideration of possible increasing the share of domestic goods in trade assortment as well as possible organization of own production; The insufficiently developed transport and information infrastructure in regions may create difficulties for development in regions and further management of the regional network; Due to a large number of retail outlets with a similar name the Detskiy Mir brand may be diluted. If in the future the court or the Russian Agency for Patents and Trademarks RosPatent recognizes the third parties’ right to use the Detskiy Mir trademark, our capabilities to restrict the use of this brand by other entities will be limited; this in its turn will reduce the value of our own Detskiy Mir brand. It will also negatively affect our plans regarding development of the business direction’s activities in regions and the products and services represented by this brand because it may lead to higher costs of advertising and marketing or to a necessity to develop a new brand; The closure of the central Detskiy Mir shop for scheduled reconstruction in July 2008 led to planned reduction of revenues in the 3rd quarter; this was considered in the plan of the business direction’s development and was compensated by opening of new shops in the 4th quarter. However, there is a remaining risk that the reconstruction will take a longer period than planned; A high competition among retail networks of mobile phone sales may lead to unprofitability of the new TS Retail network; The TS Retail concept based on differentiation may turn out to be insufficiently needed by customers or its communication to consumers by means of marketing may require expenses exceeding the economically justified level. This risk has been materialized; the substantial difference of TS Retail from what is habitual for consumers has negatively affected the revenue showings.

Medicine

Medicine Business Direction is represented by Medsi Group of Companies ZAO and its subsidiaries. We distinguish the following main risks in this business direction’s activities:

In conditions of the crisis there is a possibility of reduction in the income the sector gets from insurance companies, which sell policies of voluntary medical insurance to corporate borrowers. Though this trend did not manifest itself so far. A significant risk for the sector’s development is a sharp growth in the cost of imported medical equipment, components and consumables. The development of the sector of payable non-public medicine may be negatively affected by increased wages of medical staff in State institutions. A negative factor restraining the sector’s development is a noticeable (nearly 30-40% of total expenses in payable medicine) contribution of the underground medicine (private payments of individuals to doctors); this leads to an uncontrolled growth of customers’ expenses in the group of severe diseases or states (malignant tumours, staying in

51 resuscitation department etc.) while the very institutions, which provide such services, do not observe any growth in their incomes.

Tourism

Tourism Business Direction is represented by Intourist VAO and its subsidiaries. We distinguish the following main risks in activities of this business direction: In conditions of the aggravating macroeconomic situation in Russia and in the world its necessary to state that in the shortest run the tourist market growth will be replaced by its reduction. Travel services are referred to the category of consumer expenses subjected to reduction when the general level of people’s incomes drops; this makes it possible to predict reduction in the volumes of the tourist market with advance rates compared with other sectors of the consumer market. According to some expert opinions, in 2009 the Russian tourist market will be reduced on 20-30% in real terms. The biggest drop should be expected in the segment of inbound tourism. In conditions of the global economic recession, western consumers will reduce their total expenses for tourism and also will shift to cheaper and mass segments of tourist products. The unjustifiably high prices for tours to Russia with the extremely limited list of the offered travel services and low level of customer service led to the Russia’s positioning as an expensive non-mass destination the demand of which will be significantly decreasing. Devaluation of the rouble will make it possible to partially compensate the reduced demand; this will lead to lower prices for western tourists. On the whole, the reduction of inbound tourist flow in 2009 is expected on 30-50%. The outbound tourist flow will also be subjected to reduction. In addition to the general decrease in the number of tourists, it is also necessary to expect lower average cost of tourist vouchers, shorter duration of tours and shifting of the demand to cheaper segments regarding the destinations and level of the service. Apart from the domestic Russian market the zone of the Intourist VAO economic interests includes foreign markets of developed countries of the Western Europe, America, economic leaders of the Asian region and countries of the Middle East and Far East. Therefore, the Intourist VAO activities are strongly affected by risks connected with the stability of the global economy, changes in the geopolitical situation, terrorism as well as with global natural disasters and epidemics, which exert a depressing influence on the global economy and geographic mobility of population. Forming of tourist flows to Russia may also be directly affected by stagnation and negative economic growth of the leading world economies, in particular of such countries as USA, Japan, China and EU countries. A negative influence may also be exerted by destabilization of the geopolitical situation that could be seen during the last time as a result of more energetic manifestation of the global terrorism, separatism and local armed conflicts. Among other risks that influence the outbound tourism are also risks of destabilization of situation in the receiving countries, possible epidemics and natural cataclysms.

5.3 Country risks During the last years the Government of Russia has been carrying out administrative and economic reforms, which have led to stabilization of the macroeconomic situation and improvement of the investment climate. But, nevertheless, the Russian economy is subjected to influence of market ups and downs and slower paces of development in the global economy. Also because Russia produces and exports large volumes of natural gas and oil, the Russian economy is especially vulnerable for changes in the global prices for energy carriers.

Under the influence of the global financial crisis the country observes lower growth rates of its economy, narrower access to refinancing and decreased incomes of population. Nevertheless, the Government of Russia along with the largest economies of the world takes a number of 52 measures to exit the formed situation; and one of such measures is to maintain liquidity of the banking system.

Since the Russian legislation is in the process of its formation, there is some uncertainty in the area of investments and commercial activities as well as risks connected with the lower scale of legal protection of investors’ rights. The federal and local legislation not always coincide, and sometimes also contradict each other. Imperfection of the judicial system may lead to longer legal proceedings, and as a consequence - to higher related costs. Apart from that, changes in Russian taxation system and ambiguity in the existing Russian tax legislation may lead to higher tax rates or become a reason of current or historically stipulated tax complaints to the company.

5.4 Administrative risks

Risks connected with integration of existing or newly acquired companies.

In a significant degree the growth of Sistema JSFC Group of Companies is due to multiple acquisitions made in the past periods as well as acquisitions planned for the future. The results of such acquisitions in many respects will depend on how effectively the new enterprises are integrated to the structure of our Corporation. We cannot guarantee that such integration will be completely successful and timely. The integration requires significant temporal costs, attention from the direction of the company’s top management responsible for current activities.

The integration may be conjugated with significant complications because the Corporation’s culture is different from cultures of new companies; apart from that, it may be necessary to adopt unpopular measures with the purpose to reduce the costs. Difficulties connected with the transitional period and integration processes may exert a substantial unfavourable influence on the united company’s incomes, expenses and activity results.

Due to the rapid growth and expanded activities, our company may experience difficulties with assurance of adequate managerial and production resources; this may restrict our company’s opportunities for expanding its activities.

Sistema JSFC Group of Companies has achieved a substantial growth and development of its activities over a relatively short period of time, and we reckon that this trend will remain in the foreseeable future. Such growth has led to complication of our economic activities and responsibility vested in the management. In this connection the load on our administrative and production resources has increased. Future results of our activities in a large degree depend on showings in the work of the limited number of the top management members and technical specialists.

To assure further growth and development, we need to continue improvement of our production and financial system as well as means and procedures of administrative control. We should also assure close interaction of our services.

The Corporation’s successful activities will also depend on how capable we are to attract, keep and encourage qualified personnel.

53 6. Corporate governance system

Principles of corporate governance

Sistema JSFC OAO was of the first ones Russian companies starting development of the corporate management system in accordance with the highest international standards and still remains to be a leader with respect to its information openness and transparency. The structure of the Corporation’s corporate management is built on several main principles: transparency of all processes for investors and partners, active and professional Board of Directors, consistency and collective nature of decision making. Sistema JSFC OAO is guided by these principles in all directions of its activities including strategic and financial management, corporate management, accounting statements, audit, risk management, personnel policy and social policy.

The principles and procedures of Sistema JSFC OAO corporate management are fixed in the Articles of Association and in a number of internal documents, which in the aggregate determine the structure and competence of the Corporation’s managerial and control bodies. The Code of Corporate Conduct and the Code of Ethics contain additional obligations of Sistema JSFC OAO in the area of openness, social responsibility as well as ethical principles of business conduct.

Structure of corporate governance

The Corporation’s main managerial bodies are the General Meeting of Shareholders, Board of Directors, President and Board of Management. The Board of Directors and the President have acting committees, which prepare recommendations to form the Sistema JSFC OAO policy in corresponding fields.

Structure of Sistema JSFC OAO governing bodies

54 6.1 General Meeting of Shareholders

The principal managerial body of Sistema JSFC OAO is the General Meeting of Shareholders. Its activities are regulated by legislation of the Russian Federation on joint-stock companies, provisions of the Articles of Association and by internal documents of the Corporation. The procedure to hold the General Meeting of Shareholders fully assures observance of shareholders’ rights. Information and materials for the meeting are provided to shareholders in the Russian and English version 30 days before the meeting and are also published in the Sistema JSFC OAO official website www.sistema.ru. Along with a notice of coming meeting, the shareholders also receive ballot papers. To vote, it is not obligatory for a shareholder to personally attend the meeting. All meetings of Sistema JSFC OAO shareholders are held in convenient locations in the vicinity of the company’s head office.

In 2008 one Annual General Meeting of Shareholders was held on 28 June 2009. The Annual General Meeting of Sistema JSFC OAO Shareholders has approved the Annual Reports and Financial Statements, distributed the profits and approved the dividends; the Meeting has also elected members of the Board of Directors, approved the auditors and adopted new internal documents regulating the work procedures of the Sistema JSFC OAO Board of Directors and Board of Management.

6.2 Board of Directors

The Board of Directors is responsible for the Sistema JSFC OAO strategic management. It determines the Corporation’s development strategy, works out plans of strategic and financial development, determines investment principles, assesses the management effectiveness and risks, approves regulations for corporate management, approves transactions and carries out control over the Corporation’s activities on the whole.

Composition of the Board of Directors

The Board of Directors includes 10 members: V. P. Evtushenkov, A. Yu. Goncharuk, A. I. Gorbatovski, R. Sommer, D. L. Zubov, V. V. Kopiev, E. G. Novitsky, S. Newhouse, R. Skidelsky and S. E. Cheryomin. Four members of the Board of Directors are independent directors.

The composition of the Board of Directors as of the end of 2008 was elected at the Annual General Meeting of Shareholders on 28 June 2008. The number of the Board’s members is 10 people.

Composition of the Board of Directors elected on 28 June 2008*: 1 Vladimir Petrovich Evtushenkov 2 Alexander Yurievich Goncharuk 3 Alexander Ivanovich Gorbatovski 4 Ron Sommer 5 Dmitriy Lvovich Zubov 6 Vyacheslav Vsevolodovich Kopiev 7 Evgeniy Grigorievich Novitsky 8 Stephen Newhouse 9 Robert Skidelsky 10 Sergei Evgeniyevich Cheryomin

* See brief professional background and information about the stake of members of the Board of Directors in the Sistema JSFC OAO Authorized Capital Stock in the Appendices. 55

Of the total composition of the Board of Directors: Executive Directors 1 S. E. Cheryomin Non-Executive Directors 5 V. P. Evtushenkov, A. Yu. Goncharuk, D. L. Zubov, V. V. Kopiev, E. G. Novitsky Independent Directors 4 A. I. Gorbatovski, R. Sommer, S. Newhouse, R. Skidelsky

Changes in the composition of the Board of Directors

Acting as of the beginning of 2008 was the composition of the Board of Directors elected at the General Meeting of Shareholders on 30 June 2007. After election of the new Board of Directors on 28 June 2008 Sergei Alexeyevich Drozdov and Alexander Lvovich Leiviman have withdrawn from its composition; Sergei Evgeniyevich Cheryomin and Robert Skidelsky were elected instead of them. Other members of the Board of Directors were re-elected for a new term.

Meetings of the Board of Directors as a rule are held on a scheduled basis. In 2008 the Board of Directors has held 13 sessions: 10 scheduled sessions with personal presence and 3 by correspondence on the issues, which required immediate solution.

Each session considered from three to five main strategic agenda questons, which are in the Board’s competence, such as the strategy of the Corporation’s development, financial strategy and financial statements, risk management, internal control and audit, corporate management and HR issues. Other issues, which are related to the competence of the Board of Directors, such as approval of transactions, formal resolutions regarding issuance of securities, adoption of updated regulations, were included in Board’s agenda when required. Altogether in 2008 the Board of Directors has considered 109 agenda items.

In 2008 the main focus of the Board of Directors was placed on the issues of strategic development, financial strategy and risks and corporate governance.

Committees of the Board of Directors Sistema JSFC OAO has five acting committees of the Board of Directors: - for Audit, - for Rewards and Appointments, - for Corporate Conduct, - for Investors Relations, - for Strategy.

Committee for Audit Composition of the Committee for Audit includes three people*: the Committee’s Chairman A. I. Gorbatovski, the Committee’s members E. G. Novitsky and S. Newhouse. The Committee’s Secretary is L. V. Gorbatova. The Committee for Audit supervises preparation of financial statements and internal audit of Sistema JSFC OAO and its subsidiaries, coordinates the work of the departments of internal control and audit. Apart from that, the Committee carries out supervision over the work of outside auditors, gives recommendations regarding appointments and amount of rewards and is an intermediary in the solution of disputable questions, which outside auditors and the Corporation’s management may have. In 2008 the Committee for Audit was gathered together seven times.

* as of 31.12.2008 56 Committee for Rewards and Appointments Composition of the Committee for Rewards and Appointments includes five people*: the Committee’s Chairman V. P. Evtushenkov and also the Committee’s members - A. Yu. Goncharuk, D. L. Zubov, V. V. Kopiev and R. Skidelsky. The Committee’s Secretary is V. Ermakov. The Committee for Rewards and Appointments determines the company’s personnel policy, gives recommendations to the Board of Directors regarding appointments to leading positions and proposes candidates for election to the Boards of Directors of subsidiaries and affiliated companies. The Committee also works out recommendations regarding salaries and rewards for managers of the top chain. In 2008 the Committee for Rewards and Appointments was gathered together twice.

Committee for Corporate Conduct Composition of the Committee for Corporate Conduct includes eight people*: the Committee’s Chairman V. V. Kopiev and the Committee’s members A. Goldin, I. V. Belikov, S. A. Drozdov, V. Ermakov, I. O. Petrov, A. S. Semyonov and S. E. Cheryomin. The Committee’s Secretary is E. G. Tulupov. The Committee for Corporate Conduct works out proposals regarding improvement of corporate conduct standards and raising the quality of corporate management of subsidiaries and affiliated companies. Apart from that, it supervises compliance with the existing legislation, with the Corporation’s Articles of Association and internal normative documents. The Committee for Corporate Conduct is responsible for prevention and solution of corporate and ethical conflicts. In 2008 it was gathered together eight times.

Committee for Investors Relations Composition of the Committee for Investors Relations includes five people*: the Committee’s Chairman R. Sommer and the Committee’s members A. V. Abugov, A. N. Buyanov, S. Newhouse and S. E. Cheryomin. The Committee’s Secretary is I. P. Potekhina. The Committee’s principal task is to work out the corporate policy for relations with investors in Russia and abroad. The Committee presents the corresponding recommendations to the Board of Directors. In 2008 the Committee was gathered together six times.

Committee for Strategy Composition of the Committee for Strategy includes 11 people*: the Committee’s Chairman V. P. Evtushenkov, Deputy Chairman of the Committee A. Yu. Goncharuk and the Committee’s members A. V. Abugov, A. N. Buyanov, S. A. Drozdov, R. Sommer, D. L. Zubov, V. V. Kopiev, L. A. Melamed, V. G. Saveliev and S. E. Cheryomin. The Committee’s Secretary is A. V. Abugov. The Committee examines and analyses the issues of Sistema JSFC OAO strategic development in all business directions. In 2008 it was gathered together eight times.

6.3 President

The President of Sistema JSFC OAO is a permanent sole executive managerial body whose main task is to carry out management of current activities with the purpose to assure the Company’s profitability and competitiveness and its financial and economic stability, secured rights of shareholders and social guarantees of the Company’s personnel. The President acts within his competence and in his activities is accountable to the Board of Directors and to the General Meeting of Shareholders of the Company

On 29 May 2008 Leonid Adolfovich Melamed has been elected the President of Sistema JSFC

* as of 31.12.2008 г. 57 OAO.

Leonid Adolfovich Was born in 1967 in Moscow. Melamed In 1992 graduated from the Moscow Sechenov Medical Academy in the President of Sistema JSFC speciality of Medical Business. OAO. Candidate of Medical Sciences. Chairman of the Sistema JSFC OAO Board of 02.1992-09.1997 – ROSNO OAO, Director of the Centre of Medical Insurance, Management Deputy Chairman of the Board of Management, First Deputy Chairman of the Board of Management. 09.1997-09.2003 – ROSNO OAO, First Deputy Director General. 09.2003-04.2006 - ROSNO OAO, Director General. 04.2006-05.2008 – Mobile TeleSystems OAO, President. 05.2008 - present time – Sistema JSFC OAO, President.

Member of the Board of Directors of ROSNO OAO, Member of the Sistema Charity Fund Council.

6.4 Management Board

The Board of Management is responsible for current management of Sistema JSFC OAO. It determines principles to execute the strategy of the Corporation’s development, works out plans of development, determines investment procedures, assesses the effectiveness of the personnel’s work, and preliminarily examines the issues brought to consideration of the Board of Directors. Composition of the Board of Management includes 12 members*: L. A. Melamed – Chairman of the Board of Management, President of the Company, A. V. Abugov, R. F. Almakayev, S. F. Boev, A. N. Buyanov, A. Goldin, S. A. Drozdov, F. V. Evtushenkov, D. G. Muratov, V. G. Saveliev, I. P. Potekhina and S. E. Cheryomin. As a rule, sittings of the Board of Management are held once a fortnight.**

For the period from 31 December 2008 to 30 April 2009 D. G. Muratov and V. G. Saveliev withdrew from composition of the Board of Management due to their transfer to another work.

6.5 Development of the corporate governance system in 2008

In 2008 the Corporation has implemented a number of arrangements for further development of the corporate management system.

In June 2008 a fourth independent director entered the composition of the Board of Directors – Robert Skidelsky. The increased number of independent directors in the Board’s composition contributed to larger independence of the Board and higher level of unbiased approach and openness in discussion of items of the sittings’ agenda. Appearance of Robert Skidelsky, a well- known economist, also contributes to higher level of competences of the company’s Board of Directors in the area of economy and international economic relations.

Also in June 2008 the Board of Directors has approved the strategy of the Corporation’s corporate social responsibility and issued a Memorandum of Sistema JSFC Group of Companies on principles of the corporate social responsibility. The Memorandum presents the

* as of 31.12.2008 ** See the brief professional background of the President and members of the Board of Management of Sistema JSFC OAO in the Appendices 58 main provisions of the corporate social responsibility policy. This document became a basis for adopting the corporate social responsibility policies in Sistema JSFC Group of Companies and building the system of reference indices of effectiveness to account calculation indices of the Corporation’s social activities within the strategy in the field of the corporate social responsibility contemplating the “increase of life quality through innovations”.

Reorganization of the Sistema JSFC OAO managerial structures was performed in July 2008. It resulted in introduction of the matrix management structure, which has Business Units directly responsible for business development and functional complexes.

Sistema JSFC OAO continued its practice of internal rating of corporate management in the Group’s companies. The showings revealed as a result of expert examination were used to work out plans for further development of corporate management systems in the subsidiaries.

In October 2008 the Sistema JSFC OAO Board of Directors has held an extraordinary sitting on issues dealt with management of the Corporation in conditions growing financial crisis. During preparation for the sitting the Board of Directors has worked out a plan of crisis management measures and introduced new forms of regular financial information for the Board’s sittings. Also on results of the sitting the Board has made extraordinary disclosure of the Corporation’s current financial indices for the investment community with the purpose to forestall speculations regarding the Sistema JSFC OAO financial position.

59 7. Criteria determining remuneraton of the members of the Company’s Board of Directors and its top management

Reward to members of the Sistema JSFC OAO Board of Directors is calculated based on the “Regulation for rewards and compensations paid to members of the Company’s Board of Directors” approved in 2006. This Regulation provides for payment to members of the Board of Directors: of fixed amounts for participation in sittings of the Board of Directors and Committees; fixed amounts for execution of functions of the Chairman and Deputy Chairmen of the Board of Directors as well as for chairmanship in Committees of the Board of Directors; on results of the year members of the Board of Directors receive an additional reward on results of the work in a form of a fixed sum a half of which is paid in shares (250 000 – 325 000 USD); also, in case of growth of the Corporation’s capitalization on results of the year, members of the Board of Directors receive an additional reward in the amount of 0.1% from the capitalization growth.

The amount of the reward for Sistema JSFC OAO executive management depends on results of the Corporation’s activities on the whole, on results of the work of the structural divisions, which are within the particular manager’s responsibility, and fulfilment by the manager of the targets set in the individual plan. The system of material incentives for Sistema JSFC OAO managers in 2008 consisted of the following elements: Monthly official salary determined in accordance with the internal system of labour remuneration grades; Annual additional reward paid subject to continuing labour relations between the worker and Sistema JSFC OAO as of 31 December of the year for which the said additional reward is paid; Bonus for fulfilment of the individual plan; Bonus for special achievements in the work including implementation of large-scale projects, which were of substantial importance for Sistema JSFC OAO in the accounting year.

The Sistema JSFC OAO management is also covered by the option programme, which became effective in 2008 with the term of execution of options of 3 years: for phantom shares of Sistema JSFC OAO and public subsidiaries; for ordinary shares of non-public subsidiaries.

No payment of a reward for the work of members of the executive management within composition of the Sistema JSFC OAO Board of Management is provided for.

In 2008 The total amount of the reward paid to the President, to members of the Board of Directors and to members of the executive bodies of the Sistema JSFC OAO management was 729 946 257.00 roubles. The total amount of the reward paid to members of the Board of Directors for the period from the time of election on 28 June 2008 till the time of holding the Annual General Meeting of Shareholders in 2009 on 28 April 2009 is approximately 102 231 234.00 roubles. This sum is subject to adjustment depending on quotations of the Company’s Global Depositary Receipts in the London Stock Exchange and participation of members of the Board of Directors in sittings of the Board of Directors and Committees of the Board of Directors in May-June 2008 in accordance with the “Regulation for rewards and compensations paid to members of the Sistema JSFC OAO Board of Directors” approved by Resolution of the General Meeting of Sistema JSFC OAO Shareholders, Minutes of Meeting No. 1-06 of 30 June 2006.

60 8. APPENDICES

8.1 BRIEF PROFESSIONAL BACKGROUND OF MEMBERS OF THE BOARD OF DIRECTORS AND THEIR STAKES IN THE SISTEMA JSFC OAO CAPITAL

Stake in the authorized Full name, Title Brief biographical details capital stock*

Vladimir Petrovich Was born in 1948 in the Smolensk Region. 62.13 % Evtushenkov In 1973 graduated from the Moscow Mendeleyev Chemical-Engineering Chairman of the Board of Institute, in 1980 – Economic Faculty of the Moscow State University. Directors In 1975-1982 had been working as a Machine Shop Manager, Deputy Director, Chief Engineer of the Karacharovo Factory of Plastics, from 1982 to 1987 – Chief Engineer, First Deputy Director General of Polymer Scientific and Production Association. In 1987 was appointed the Head of Technical Department, in 1988 – Head of the Main Department of Science and Technology of the Moscow City Executive Committee, in 1990 – the Chairman of the Moscow Municipal Committee for Science and Technology.

In 1993 together with a group of like-minded persons has formed Sistema Joint-Stock Financial Corporation. At present is the principal shareholder and the Chairman of the Sistema JSFC OAO Board of Directors.

Member of the Bureau of the Board of Management of the Russian Union of Industrialists and Entrepreneurs since 2000; since 2001 is at the head of the Committee for Industrial Policy of the Russian Union of Industrialists and Entrepreneurs. Member of the Board of Management of the Chamber of Commerce and Industry of the Russian Federation since 2002, Chairman of the Russian- Arab Business Council established by the Chamber of Commerce and Industry of the Russian Federation in 2003.

Member of the Government Commission for Scientific and Innovation Policy , Council of Science and High-Tech under the President of the Russian Federation, Council of Competitiveness and Business Undertakings under the Government of the Russian Federation and of the National Council of Corporate Management. Doctor of Economic Sciences.

In 2004 was elected the Chairman of the Council of Trustees of the Fund for Development of the State Russian Museum “Friends of the Russian Museum”. Head of the Council of Sistema Charity Fund.

Alexander Yurievich Was born in 1956 in Sevastopol. 1.88 % Goncharuk In 1978 graduated from the Sevastopol Higher Navy and Engineering First Deputy Chairman of the School, and in 1987 — the Grechko Navy Academy. Board of Directors From 1987 to 1991 was serving in the Navy Headquarters in a position of the senior officer. Then was the head of Leader Joint-Stock Insurance Company. From 1995 to 1998 — Vice-President of Sistema JSFC OAO, from March 2006 to May 2008 – President of the Corporation. Working in the Corporation he was at the head of the Board of Directors of MTS (in 1998 and from 2002 to 2003), Sistema Telecom ZAO (1998 - 2003) and Sitronix Concern OAO (2003 - 2006)

61 Member of the Sistema JSFC Board of Directors since 1996.

At present is the First Deputy Chairman of the Sistema JSFC OAO Board of Directors, Chairman of the Board of Directors of Sistema Invest OAO, was elected to the Boards of Directors of Sistema Hals OAO, BashNeft OAO, NovOil OAO, Ufa Oil Refinery OAO, UfaNefteChem OAO, UfaOrgSynthesis OAO, BashkirNefteProduct OAO, member of the Sistema Charity Fund Council.

Alexander Ivanovich Was born in 1954 in Moscow. 1.78 % Gorbatovski In 1978 graduated from the Moscow Power Engineering Institute, and in Independent Director 1988 — the Moscow Ordzhonikidze Institute of Management. From 1971 to 1980 had been working in workers and engineers positions in different Moscow enterprises. In 1980-1988 — on a party work: the Second Secretary of the District Committee of the Young Communist League, Secretary of the Party Committee of Polymer Scientific and Production Association, Instructor of the Department of Heavy Industry and Power Engineering of the CPSU Moscow City Committee. since 1988 — Director of Engineering Works No. 3 of PromVenitlation Scientific and Production Association (later - MMZ No. 3 OAO), Chairman of the MMZ No. 3 Board of Directors.

During the period from 1993 to 1997 was at the head of Kedr-M FPC Joint- Stock Company, and from 1997 to 2002 — of Sistema Neft OAO. Since 2004 is an Independent Director of Sistema JSFC OAO, Chairman of the Committee for Audit.

Ron Sommer Was born in 1949 0.0015 % Studied mathematics in the Vienna University where in 1971 has received a Independent Director Doctor’s Degree. The beginning of the professional activity is connected with the company Nixdorf Group in New York, Paderborn and in Paris. In 1980 took a post of the Managing Director in the German branch of Sony Group. In 1986 became the Chairman of the Board of Management of Sony Deutschland, and in 1990 was appointed the President and Principal Operating Director of Sony Corporation in USA. In 1993 was transferred to Sony Europe to the same position. From May 1995 to July 2002 was the Chairman of the Deutsche Telekom AG Board of Management.

He is a member of the Board of Directors of Motorola’s, TATA Consultancy Services, Weather Investments and of the Supervisory Board of Munich Reinsurance as well as a member of the Blackstone Group’s International Advisory Council.

In 2003-2005 - Chairman of the Sistema JSFC OAO International Advisory Council. In 2005 was elected an independent member of the Corporation’s Board of Directors, at present Mr Sommer is also the Chairman of the Committee for Investors Relations.

Dmitriy Lvovich Zubov Was born in 1954 in the Gorkiy Region. 0.88 %

Deputy Chairman of the Board In 1977 graduated from the Moscow Ordzhonikidze Aviation Institute, of Directors Doctor of Economic Sciences. In 1978-79 had been working as a foreman at the Lukhovitsy Engineering Plant, in 1979-1983 — Secretary of the Young Communist League’s Committee. From 1983 to 1986 was at the head of the All-Union School for 62 Training of Team Leaders for Komsomol and Youth Collectives, in 1986- 1988 had been working in the Department of Working Youth of the Central Committee of the Young Communist League, in 1988-1989 was the Head of the All-Union Centre of Housing Cooperatives for Youth. In 1989-1991 worked in the capacity of the Deputy Director General of the All-Union Centre of Cinema and Television for Children and Youth. In 1992-1996 was the Director General of Alon Close-Type Joint-Stock Company, then held managerial positions in MosEximBank, IBN Sistema OAO and PromChemVest ZAO.

In Sistema JSFC has been working since 1999, including in the capacity of the Deputy Chairman of the Board of Directors since 2000; was elected to the Boards of Directors of Sistema Hals OAO, System Project ZAO, and member of the Sistema Charity Fund Council.

Vyacheslav Vsevolodovich Was born in 1954 in Moscow. 0.051 % Kopiev In 1977 graduated from the Faculty of Cybernetics of the Moscow Deputy Chairman of the Board Engineering and Physical Institute, in 1993 - the Faculty of Jurisprudence of of Directors the Russian Academy of Management, and in 1994 – the Economic Faculty of the International Academy of Marketing and Management.

From 1977 to 1990 - on Komsomol and public work, Secretary of the Krasnogvardeiskiy District Committee of the Young Communist League, Deputy Chairman of the Moscow City Council of Young Scientists and Specialists and of the Moscow City Council for Development of Scientific and Technical Creativity of Youth under the Executive Committee of the Moscow City Soviet of Workers’ Deputies, First Secretary of the Moscow City Committee of the Young Communist League, Second Secretary of the Central Committee of the Young Communist League.

From 1989 - on managerial work in the Board of Management of the Union of Scientific and Engineering Societies, in 1992-97 - Director for International Relations and Innovation Activities of this Union. From 1990 to 1997 – Chairman of the Board of Directors of Sputnik AO, since 1995 – Deputy Chairman of the Executive Committee of the Russian-British Chamber of Commerce and Industry. In 1997 was appointed the Vice-President of Sistema JSFC OAO, from 2000 to 2003 – Senior Vice-President, Head of the Outer Business Environment Forming Complex. Since 2003 - Deputy Chairman of the Sistema JSFC OAO Board of Directors. Chairman of the Board of Directors of Intourist VAO OAO, was elected to the Boards of Directors of TV Centre OAO, Deputy Chairman of the Sistema Charity Fund Council, Chairman of the Sistema JSFC OAO Committee for Corporate Conduct. Candidate of Technical Sciences. Candidate of Legal Sciences. Author of more than 70 scientific works.

Evgeniy Grigorievich Was born in 1957 in the Tomsk Region. 1.99 % Novitsky In 1985 graduated from the Moscow Bauman Higher Technical School. In Member of the Board of 1989-1990 studied management in the Moscow State Institute of Directors International Relations and in the Manchester Business School (The University of Manchester, Great Britain). In 1985-1987 had been working as an engineer-mathematician in the Moscow Bauman Higher Technical School, and in 1987-1990 studied at the post-graduate course of the Moscow Bauman Higher Technical School. In 1991-95 was at the head of creation and production of a series of Russian- made computers as well as of organization of IBM computer assemblage at

63 Quantum Factory (in Zelenograd), was the Chairman of the Board of Directors of IVK (Information and Innovation Company) - a Russian company, which operates in the field of information technologies. Author of a monograph and of a number of publications, member of the Board of Trustees of the Moscow Bauman Higher Technical School. Candidate of Economic Sciences.

Since 1995 has been working in Sistema JSFC OAO as the President of the Company, and from January 2005 to February 2006 was the Chairman of the Corporation’s Board of Directors. At present — member of the Sistema JSFC OAO Board of Directors, member of the Committee for Audit, member of the Sistema Charity Fund Council.

Stephan F. Newhouse Was born in 1947 0.0015 % In 1969 has received a Bachelor Degree in the Yale University. After Independent Director servicing as an officer in the USA Navy in 1969-1972 he continued his study in the Harvard Business School and in 1975 has received an Honours Master’s Degree in the area of business management. In 1975-1979 had been working in the Section of Investment Banking Services at First Boston Corporation, Director of Harbor Point Limited and Bermuda’s based Recurrent Insurance Company and Shanghai AJ Trust Company, a Chinese group, which provides financial services. Hold offices of the President of Morgan Stanley and Chairman of the Board of Directors of Morgan Stanley International Inc., a holding, which unites all subsidiaries of Morgan Stanley beyond the North America. Started his activity in Morgan Stanley in 1979; in 1988 was appointed the Managing Director, in 1997 — Vice-President, in 2000 — President of Morgan Stanley International, and in December 2003 — President of Morgan Stanley. In this position was working to April 2005. In 1998 Mr Newhouse was also appointed a member of the Management Committee of Morgan Stanley controlling company.

Since 2007 till present – independent Director, member of the Sistema JSFC OAO Board of Directors, member of the Committee for Audit.

Robert Skidelsky Was born in 1939. - Studied in the Brighton College, carried out research work in the Nuffield Independent Director College in Oxford. In 1967 published his first book “Politicos and economic recession. The Labour Government in 1929-31”. Is an honourable professor of political economy in the University of Warwick. Member of the British Academy since 1994. In 1991 R. Skidelsky became a member of the House of Lords, was a shadow finance minister in 1998-1999, from 1991 to 2001 - Chairman of the Commission for Social and Economic Policy. Beginning from 2002 — Chairman of the Centre for Globalization Research (London).

Since 2003 - Independent Director of Janus Capital Inc. and Director Transnational Insights Consulting Company. Speaks Russian, is the President of LabRus Investment Club, Director of the Moscow School of Political Studies and Head of the Our Talents Fund (Moscow). Is also one of managing directors of the Manhattan Institute.

In 2008 was elected to Sistema JSFC OAO Board of Directors as an independent director.

Sergei Evgeniyevich Cheremin Was born in 1963 in Kislovodsk. 0.0001 % In 1989 graduated from the Moscow State Institute of International Member of the Board of Relations in the speciality of International Journalism, and 2003 - the post-

64 Directors graduate course of the Faculty of International Economic Relations at the Moscow Lomonosov State University in the speciality of the World Economy. Candidate of Economic Sciences. In 1992 went through in-depth training at the University of New York under the curriculum of Investments and International Settlements, and in 1993 — in the Fairfield University (USA) under the curriculum for training of banking specialists.

In 1991-1992 — First Deputy Chairman of the Board of Management of PrintBank Commercial Bank, 1992-1998 — Chairman of the Board of Management of the Moscow Export and Import Bank, 1998-2000 — Vice- President of the Ural Trust Bank, 2000-2003 — Adviser to the President, and then the President of North-Eastern Alliance Commercial Bank.

In 2004 was appointed the Chairman of the MBRD JSCB Board of Management, 2005-2008 - Vice-President, Head of the Sistema JSFC OAO Complex of External Relations, 2008 till present – Senior Vice-President, Head of the Sistema JSFC OAO Complex of External Relations. At present - Chairman of the Board of Directors of MBRD JSCB OAO, EAST-WEST UNITED BANK S.A., DalComBank OAO; was elected to the Boards of Directors of Sistema JSFC OAO, NIS OAO, SISTEMA SHYAM TELESERVICES, Member of the Sistema JSFC OAO Management Board.

65 8.2 INFORMATION ABOUT TRANSACTIONS MADE BY MEMBERS OF THE SISTEMA JSFC OAO BOARD OF DIRECTORS WITH SHARES OF THE COMPANY FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2008

Member of the Board of Date of transaction Transaction content Transaction subject Directors V. P. Evtushenkov 17.07.2008 Entry of securities in the owner’s 64 732 ordinary nominal shares personal account

D. L. Zubov 17.07.2008 Entry of securities in the owner’s 64 732 ordinary nominal shares personal account

V. V. Kopiev 17.07.2008 Entry of securities in the owner’s 64 732 ordinary nominal shares personal account

A. Yu. Goncharuk 17.07.2008 Entry of securities in the owner’s 64 732 ordinary nominal shares personal account

05.09.2008 Securities write-off from the 11 000 000 ordinary nominal owners’ personal account shares

A. I. Gorbatovski 17.07.2008 Entry of securities in the owner’s 64 732 ordinary nominal shares personal account

E. G. Novitsky 21.03.2008 Securities write-off from the 7 500 000 ordinary nominal shares owners’ personal account, entry of securities in the nominal holder’s personal account 25.04.2008 Securities write-off from the 47 900 000 ordinary nominal owners’ personal account, entry shares of securities in the nominal holder’s personal account 30.05.2008 Securities write-off from the 32 150 000 ordinary nominal owners’ personal account, entry shares of securities in the nominal holder’s personal account 17.07.2008 Entry of securities in the owner’s 64 732 ordinary nominal shares personal account 05.09.2008 Entry of securities in the owner’s 11 000 000 ordinary nominal personal account. shares

08.09.2008 Securities write-off from the 1 714 000 ordinary nominal shares owners’ personal account, entry of securities in the nominal holder’s personal account 08.09.2008 Securities write-off from the 3 000 000 ordinary nominal shares owners’ personal account, entry of securities in the nominal holder’s personal account.

66 09.09.2008 Securities write-off from the 2 133 732 ordinary nominal shares owners’ personal account, entry of securities in the nominal holder’s personal account.

R. Sommer 17.07.2008 Entry of securities in the owner’s 67 708 ordinary nominal shares personal account.

29.09.2008 Securities write-off from the 67 708 ordinary nominal shares owners’ personal account, entry of securities in the nominal holder’s personal account Stephen Newhouse 17.07.2008 Entry of securities in the owner’s 67 708 ordinary nominal shares personal account

29.09.2008 Securities write-off from the 67 708 ordinary nominal shares owners’ personal account, entry of securities in the nominal holder’s personal account.

67 8.3 BRIEF PROFESSIONAL BACKGROUND OF THE SISTEMA JSFC OAO PRESIDENT AND MEMBERS OF THE BOARD OF MANAGEMENT

Leonid Adolfovich Melamed Leonid Melamed was born in 1967 in Moscow.

President of Sistema JSFC He is a graduate of the Sechenov Moscow Medical Academy and holds OAO. PhD in Medicine. Chairman of the Sistema JSFC OAO Board of Management Leonid Melamed is the President and CEO of Sistema from May 29, 2008. Prior to his current role, he served as the President and CEO of Mobile TeleSystems OJSC (MTS) from June 14, 2006. He is a member of the Board of Directors of MTS from June 23, 2006.

Prior to joining MTS, Leonid Melamed worked at ROSNO between 1991 and 2006, and served as the Director General and Chairman of the Management Board since 2003.

Between 2004 and 2006, Mr. Melamed served as the Chairman of the Expert Council on Insurance Legislation, part of the Russian State Duma Committee on Credit Organizations and Financial Markets.

Mr. Melamed has won numerous awards in Russia for his successes in strategic leadership and operational efficiency. For instance, in 2004, Mr. Melamed was named «Person of the Year» in the annual «People of the Year» project by internet holding company Rambler. He was also selected as one of the 250 «Young Global Leaders» by the World Economic Forum in 2007.

In 2008, Mr. Melamed joined the Board of the GSM Association, the global trade association for the mobile industry. Anton Vladimirovich Abugov Was born in 1976 in Mytishchi, Moscow Region.

First Vice-President- Head of In 1998 graduated from the Academy of the National Economy under the Government the Sistema JSFC OAO Strategy of the Russian Federation in the speciality of Management. and Development Complex. Member of the Sistema JSFC 09.1995-02.1999 – United Financial Group Close-Type Joint-Stock Company, Deputy OAO Board of Management. Executive Officer of the Department of Transactions with Securities, Trader. 02.1999-01.2002 – United Financial Group ZAO, Head of the Department of Corporate Finances. 09.2003-08.2006 – RosBank JSCB, Managing Director – Head of the Division of Corporate Finances. 08.2006 – present time – Sistema JSFC OAO, First Vice-President, Head of the Strategy and Development Complex.

Member of the Board of Directors: MTS OAO, SkyLink ZAO, SMM OAO, Intourist VAO OAO, BinnoPharm ZAO, Sistema Hals OAO. Chairman of the Board of Directors: Detskiy Mir Centre OAO, VRS ZAO (earlier - RVS).

Vitaliy Gennadievich Saveliev Was born in 1954 in Tashkent.

First Vice-President, Head of In 1977 graduated from the Leningrad Kalinin Polytechnical Institute in the speciality the Sistema JSFC OAO of Mechanical Engineer. Telecommunication Assets Business Unit. 10.1995-01.1996 – Menatep Bank, Head of Representative Office in Saint Petersburg. Member of the Sistema JSFC 01.1996-09.2001 – Menatep Saint Petersburg JSCB, Chairman of the bank’s Board of OAO Board of Management. Management. 09.2001-05.2002 – GasProm OAO, Deputy Chairman of the Board of Management. 07.2002-04.2004 – Communication Operators Group United Company OOO, Vice- President for Financial Matters. 04.2004-10.2007 – Ministry of Economic Development and Trade of the Russian Federation, Deputy Minister. 68 11.2007-08.2008 – Sistema JSFC OAO, First Vice-President, Head of the Telecommunication Assets Development Complex. 08.2008-04.2009 – Sistema JSFC OAO, First Vice-President, Head of Telecommunication Assets Business Unit.

Member of the Board of Directors: SHYAM TELELINK LIMITED, MBRD JSCB OAO, OAO SvyazInvest. Chairman of the Board of Directors: MTS OAO, ComStar UTS OAO, SMM OAO, SkyLink ZAO.

Sergei Fedotovich Boev Was born in 1953 in Moscow

Vice-President, Head of the In 1978 graduated from All-Union Correspondence Institute of Law in the speciality of Sistema JSFC OAO High-Tech Jurisprudence. and Industry Business Unit. In 1984 - the Moscow Ordzhonikidze Institute of Management in the speciality of Member of the Sistema JSFC Economy and Management in Industry. OAO Board of Management. Doctor of Economic Sciences, Professor.

11.1984-09.1999 – Mints Radio-Engineering Institute, Deputy Chief Accountant, Chief Accountant, Deputy Director, Deputy Director General for Economy, Director General. 09.1999-10.2000 – High-Tech and Strategic Systems Scientific and Industrial Company, Director General. 10.2000-02.2008 – Radio-Engineering and Information Systems Concern OAO, Director General. 02.2008-08.2008 – Sistema JSFC OAO, Vice-President for Development of Target Programmes and Non-Public Assets. 08.2008- present time – Sistema JSFC OAO, Vice-President, Head of High-Tech and Industry Business Unit.

Chairman of the Board of Directors: Radio-Engineering and Information Systems Concern OAO, Mints RTI OAO, NIIDAR OAO, STZ OAO, YARZ OAO, Planeta Experimental-Design Bureau OAO, DMZ Kamov OAO. Member of the Board of Directors: Pyramid Scientific and Production Enterprise OAO, BinnoPharm ZAO, Intellect Telecom OAO, NIS OAO, UralElectro OAO. Member of the Board of Trustees of CPS NOU, Member of the Sistema Charity Fund Council.

Felix Vladimirovich Was born in 1978 in Moscow. Evtushenkov In 2000 graduated from the Griboyedov Institute of International Law and Economy in Vice-President, Head of the the speciality of Jurisprudence. Sistema JSFC OAO Consumer Assets Business Unit. 06.1999-05.2000 – Sistema Invest ZAO, Assistant to the President. Member of the Sistema JSFC 06.2000-12.2000 – Sistema JSFC OAO, Executive Director of the Department of OAO Board of Management. Industry. 12.2000-03.2006 – Sistema Hals ZAO, Deputy Director General, Director General. 03.2006-06.2008 – Sistema Hals OAO, President. 07.2008 - present time - Sistema JSFC OAO, Vice-President, Head of the Consumer Assets Business Unit.

Chairman of the Board of Directors: Sistema Hals OAO, Sistema Hals North-West ZAO. Member of the Board of Directors: MosDachaTrust OAO, Sistema Hals Engineering and Construction ZAO, Detskiy Mir Centre OAO, Telecom Development ZAO, New City Centre OAO, Intourist VAO OAO, Medsi Group of Companies ZAO, SoyuzComint OOO. Member of the Sistema Charity Fund Council.

Alexei Nikolayevich Buyanov Was born in 1969 in Moscow.

69 Senior Vice-President, Head of In 1992 graduated from the Moscow Physicotechnical Institute in the speciality of the Sistema JSFC OAO Finance Applied Mathematics and Physics, Engineer-Physicist. and Investment Complex. Member of the Sistema JSFC 08.1992-02.1994 – Trainee Researcher at the Institute of Problems of Mechanics, the OAO Board of Management. Russian Academy of Sciences. 02.1994-11.1995 – Sistema JSFC OAO, Main Specialists, Leading Specialist, Executive Director. 11.1995-02.1998 – Sistema Invest ZAO, Head of Division, Vice-President, First Vice- President. 03.1998-06.2002 – Mobile TeleSystems OAO, Vice-President for Investments and Securities. 07.2002–09.2002 – Sistema JSFC OAO, Vice-President, Head of the Department of Financial Restructuring. 09.2002-03.2005 – Sistema JSFC OAO, First Vice-President. 04.2005 - present time – Sistema JSFC OAO, Senior Vice-President, Head of the Finance and Investment Complex.

Member of the Board of Directors: Sistema Hals OAO, System Project ZAO, MBRD JSCB OAO, EAST-WEST UNITED BANK S.A., ECU GEST HOLDING S.A., Sistema Holdings Ltd., MTS OAO, Intourist VAO OAO, BinnoPharm ZAO. Member of the Sistema Charity Fund Council.

Sergei Alexeyevich Drozdov Was born in 1970 in Arkhangelsk. Senior Vice-President, Head of the Sistema JSFC OAO Property In 1993 graduated from the Ordzhonikidze State Academy of Management in the Complex. speciality of Economy and Management in Mechanical Engineering, Planning Member of the Sistema JSFC Engineer. OAO Board of Management. Candidate of Economic Sciences.

08.1993-10.1994 – Yugorskiy Joint-Stock Bank, Economist in the Division of Trust Operations and Funds, Deputy Head of the Division of Securities Trust Operations, Head of the Department of Work with Securities. 11.1994-09.1995 – Moscow Property Fund, Head of the Department of Financial Innovations and Marketing. 10.1995-03.1998 – Sistema JSFC OAO, Executive Director, Deputy Head of the Department of Development and Investments. 03.1998-04.2002 – Sistema Invest ZAO, Vice-President, First Vice-President. 04.2002-09.2002 – Sistema JSFC OAO, Head of the Department of Corporate Property, Acting First Vice-President. 09.2002-04.2005 – Sistema JSFC OAO, First Vice-President 04.2005 - present time – Sistema JSFC OAO, Senior Vice-President, Head of the Property Complex.

Chairman of the Board of Directors: Sistema Telecom ZAO, REESTR OAO, Sistema Invest OAO, Medsi Group of Companies ZAO.

Member of the Board of Directors: Sistema JSFC OAO, MTS OAO, ComStar UTS OAO, SMM OAO, VRS ZAO, Detskiy Mir Centre OAO, Intourist VAO OAO, Sistema Hals OAO, RTI Systems Concern OAO, BinnoPharm ZAO, System Project ZAO, Sistema Invest OAO, Sistema Inventure ZAO, BashNeft OAO, NovOil OAO, Ufa Oil Refinery OAO, UfaNefteChem OAO, UfaOrgSynthesis OAO, BashkirNefteProduct OAO, Region NTR AO OAO, Premier Avia OAO, Jet Air Group OAO, SkyLink ZAO, MedExpress ZAO, Centre Telco ZAO, Safeti AB OOO. Member of the Sistema Charity Fund Council.

Was born in 1963 in Kharkov. Ruslan Fydorovich Almakayev In 1994 graduated from the Kharkov State Pedagogical University in the speciality of Teacher of Mathematics, Informatics and Computer Engineering.

70 Vice-President, Head of the In 2003 graduated from the Krasnodar State University in the speciality of Systematic Sistema JSFC OAO Economic Processes. Administrative Complex. 1993-1995 – Eurasia Commercial and Industrial Company Close-Type Joint-Stock Member of the Sistema JSFC Company, Deputy Director General. OAO Board of Management. 1995-2002 – Russian AviaFund Regional Public Fund for Protection of Servicemen of Air Force and Workers of Aviation Complex, Deputy Director General. 04.2002-06.2003 – Sistema JSFC OAO, Head of the Department of Non-Corporate Restructuring. 07.2003-03.2004 – System Project OAO, Director General. 04.2004-03.2005 – Sistema JSFC OAO, Vice-President for Regional and Venture Projects. 04.2005-08.2008 – Sistema JSFC OAO, Vice-President, Head of the Complex of Economic and Information Security. 08.2008 - present time – Sistema JSFC OAO, Vice-President, Head of the Administrative Complex.

Chairman of the Board of Directors: BinnoPharm ZAO, System Project ZAO, Region NTR AO OAO. Member of the Board of Directors: SMM OAO, Region NTR AO OAO, BashNeft OAO, NovOil OAO, Ufa Oil Refinery OAO, UfaNefteChem OAO, UfaOrgSynthesis OAO, BashkirNefteProduct OAO, Safeti AB OOO.

Anna Goldin Was born in 1963 in Leningrad. Graduated from the University of California in Berkeley, Boalt Hall, Doctor of Law. Vice-President, Head of the 1990-1998 - Latham & Watkins, Lawyer. Sistema JSFC OAO Complex of 1999-2007 - Latham & Watkins, Partner, Managing Partner. Legal Matters. 06.2007 - present time – Sistema JSFC OAO, Vice-President, Head of the Complex of Member of the Sistema JSFC Legal Matters. OAO Board of Management. Member of the Board of Directors: ComStar UTS OAO, VRS ZAO, Thema Production S.A., Detskiy Mir Centre OAO, BinnoPharm ZAO, TS Retail OAO.

Sergei Evgeniyevich Cheryomin Was born in 1963 in Kislovodsk.

Vice-President, Head of the In 1989 graduated from the Moscow State Institute of International Relations in the Sistema JSFC OAO Complex of speciality of International Journalism. Candidate of Economic Sciences. External Relations. 08.1989-11.1991 – Pravda Editorial Office, Special Correspondent of the Department Member of the Sistema JSFC of International Information. OAO Board of Management. 11.1991-05.1992 – PrintBank Commercial Bank, First Deputy Chairman of the bank’s Board of Management. 06.1992-12.1998 – MosExiBank, Chairman of the Board of Management. 12.1998-04.2000 – Ural Trust Bank, Vice-President, Director of the Moscow Regional Centre. 04.2000-09.2003 – North-Eastern Alliance Joint-Stock Commercial Bank, Adviser to the President. 09.2003-04.2005 – MBRD JSCB, Adviser to the Chairman of the Board of Management, First Deputy Chairman of the Board of Management, Chairman of the Board of Management. 04.2005-07.2008 – Sistema JSFC OAO, Vice-President, Head of the Complex of External Relations. 07.2008 - present time – Sistema JSFC OAO, Senior Vice-President, Head of the Complex of External Relations.

Chairman of the Board of Directors: MBRD JSCB OAO, DalComBank OAO, East- West United Bank S.A.

Member of the Board of Directors: Sistema JSFC OAO, NIS OAO, Intourist VAO OAO, SHYAM TELELINK LIMITED

Irina Petrovna Potekhina Was born in 1960 in the Cossack village of Maryanskaya, Krasnodar Territory.

Head of the Sistema JSFC OAO In 1982 graduated from the Leningrad Institute of Textile and Light Industry. Complex of Corporate In 2003 – the North-West Academy of State Service, Saint Petersburg, in the speciality Relations. of Public Relations. Member of the Sistema JSFC 03.1990-06.1994 – Komsomolskaya Pravda newspaper, Own Correspondent. OAO Board of Management. 06.1994-12.2001 – Director General of the Komsomolskaya Pravda in Saint Petersburg. 12.2001-10.2003 – Vice Governor, member of the Government of Saint Petersburg. 09.2004-04.2005 – Prof-Media Print OAO, Director General. 04.2005-09.2008 – Sistema JSFC OAO, Head of the Department of Public Relations, Director of the Department of Relations with State Authorities and Public Organizations. 09.2008 - present time – Sistema JSFC OAO, Head of the Complex of Corporate Relations.

Member of the Board of Directors: SMM OAO, Maxima RA OAO, RosBalt IA ZAO.

72 8.4 INFORMATION ABOUT QUANTITY OF SISTEMA JSFC OAO SHARES OWNED BY THE PRESIDENT AND MEMBERS OF THE MANAGEMENT BOARD

Members of the Board of Management Quantity of owned shares Leonid Adolfovich Melamed - Anton Vladimirovich Abugov - Vitaliy Gennadievich Saveliev - Alexei Nikolayevich Buyanov 19 300 000 of Sistema JSFC OAO shares Sergei Alexeyevich Drozdov 19 440 732 of Sistema JSFC OAO shares Ruslan Fydorovich Almakayev - Anna Goldin 8 386 000 of Sistema JSFC OAO shares Denis Geliyevich Muratov - Sergei Evgeniyevich Cheryomin 700 000 of Sistema JSFC OAO shares Sergei Fedotovich Boev - Felix Vladimirovich Evtushenkov - Irina Petrovna Potekhina -

73 8.5 LIST OF TRANSACTIONS, WHICH WERE MADE BY THE COMPANY IN THE ACCOUNTING YEAR AND WHICH IN ACCORDANCE WITH THE FEDERAL LAW “ON JOINT-STOCK COMPANIES” ARE RECOGNIZED AS MAJOR TRANSACTIONS, AND OTHER TRANSACTIONS, WHICH IN ACCORDANCE WITH THE COMPANY’S ARTICLES OF ASSOCIATION ARE COVERED BY THE PROCEDURE FOR APPROVAL OF MAJOR TRANSACTIONS

During 2008 Sistema JSFC OAO did not make transactions, which in accordance with the Federal Law “On Joint-Stock Companies” are recognized as large transactions, and also other transactions, which in accordance with the Company’s Articles of Association are covered by the procedure for approval of large transactions

8.6 LIST OF TRANSACTIONS, WHICH WERE MADE BY THE COMPANY IN THE ACCOUNTING YEAR OF 2008 AND WHICH IN ACCORDANCE WITH THE FEDERAL LAW “ON JOINT-STOCK COMPANIES” ARE RECOGNIZED AS RELATED PARTIES’ TRANSACTIONS

Ref. No. of Minutes of Meeting of the Persons recognized as body that approved Contractors under Transaction subject Sum of the transaction interested in the the transaction and the transaction transaction date of the adopted resolution Board of Directors V. P. Evtushenkov Granting of subordinated 1 000 000 000.00 Minutes of MBRD JSCB OAO A. N. Buyanov loan to Sistema JSFC roubles Meeting No. 1-08 S. E. Cheryomin OAO 09.02.2008 F. V. Evtushenkov Board of Directors V. P. Evtushenkov Minutes of Acquisition of shares of 6 750 000 000.00 A. N. Buyanov Meeting No. 3-08 MBRD JSCB OAO MBRD JSCB OAO roubles S. E. Cheryomin 15.03.2008 F. V. Evtushenkov

Board of Directors A. Yu. Goncharuk Minutes of Provision of independent 82 000 000.00 dollars A. V. Abugov Dresdner Bank AG Meeting No. 3-08 liability for Sitronix OAO US S. G. Aslanyan 15.03.2008 D. G. Muratov Board of Directors V. P. Evtushenkov Minutes of Granting of subordinated A. N. Buyanov MBRD JSCB OAO 500 000 000.00 roubles Meeting No. 4-08 loan S. E. Cheryomin 26.04.2008 F. V. Evtushenkov Board of Directors V. P. Evtushenkov Minutes of Granting of subordinated A. N. Buyanov MBRD JSCB OAO 750 000 000.00 roubles Meeting No. 4-08 loan S. E. Cheryomin 26.04.2008 F. V. Evtushenkov UniCredit Bank Board of Directors Guarantee for Medsi ZAO (ZAO) as a legal 11 700 000.00 dollars Minutes of obligations successor of US V. P. Evtushenkov Meeting No. 4-08 International Moscow 26.04.2008 Bank ZAO

UniCredit Bank Board of Directors (ZAO) as a legal Minutes of Guarantee for Medsi ZAO 18 025 000.00 dollars V. P. Evtushenkov successor of Meeting No. 4-08 obligations US International Moscow 26.04.2008 Bank ZAO

74 Ref. No. of Minutes of Meeting of the Persons recognized as body that approved Contractors under Transaction subject Sum of the transaction interested in the the transaction and the transaction transaction date of the adopted resolution Board of Directors Minutes of Guarantee for obligations MBRD JSCB OAO V. P. Evtushenkov Meeting No. 5-08 18 900 000.00 roubles of Jet Air Group OAO Jet Air Group OAO 29.05.2008

Board of Directors OAO “MBRD” Minutes of Guarantee for obligations (OAO) 8 100 000.00 roubles V. P. Evtushenkov Meeting No. 5-08 of Premier Avia OAO Premier Avia OAO 29.05.2008 Board of Directors Minutes of Guarantee for obligations UniCredit Bank Meeting No. 6-08 of MedExpress Company 581 800 000.00 roubles S. A. Drozdov (ZAO) 28.06.2008 ZAO

Board of Directors Guarantee for obligations Standard Bank Minutes of 62 200 000.00 dollars of MedExpress Company (ZAO) S. A. Drozdov Meeting No. 6-08 US ZAO 28.06.2008 Board of Directors The European Bank Guarantee for obligations Minutes of for Reconstruction 50 000 000.00 dollars S. A. Drozdov of Detskiy Mir Centre Meeting No. 6-08 and Development US A. V. Abugov OAO 28.06.2008 (EBRD) V. P. Evtushenkov Board of Directors S. E. Cheryomin Minutes of Guarantee for obligations A. V. Abugov 881 280 000.00 roubles Meeting No. 7-08 of RVS ZAO MBRD JSCB OAO A. N. Buyanov 26.07.2008 A. Goldin V. G. Saveliev Member of the Board of Directors Gift of 3 % of shares of Sistema JSFC OAO Minutes of RTI Systems Concern Board of Free of charge S. F. Boev Meeting No. 7-08 OAO Management 26.07.2008 S. F. Boev Board of Directors Minutes of Guarantee for obligations Société Générale 19 985 402.30 dollars S. E. Cheryomin Meeting No. 8-08 of Shyam Telelink Ltd Bank US V. G. Saveliev 20.09.2008

Board of Directors Minutes of Guarantee for obligations Société Générale 1 175 611.90 dollars S. E. Cheryomin Meeting No. 8-08 of Shyam Telelink Ltd Bank US V. G. Saveliev 20.09.2008 V. P. Evtushenkov Board of Directors D. L. Zubov Minutes of Pledge of shares of 1 846 960 500.00 A. Yu. Goncharuk VTB Bank OAO Meeting No. 8-08 Sistema Hals OAO roubles F. V. Evtushenkov 20.09.2008 S. A. Drozdov A. N. Buyanov V. P. Evtushenkov Board of Directors D. L. Zubov Minutes of Guarantee for obligations A. Yu. Goncharuk Deutsche Bank AG 105 000 000.00 Euros Meeting No. 8-08 of Sistema Hals OAO F. V. Evtushenkov 20.09.2008 S. A. Drozdov A. N. Buyanov Board of Directors Issuance of banking V. P. Evtushenkov Deutsche Bank AG 30 000 000.00 Euros Minutes of guarantee for obligations D. L. Zubov

75 Ref. No. of Minutes of Meeting of the Persons recognized as body that approved Contractors under Transaction subject Sum of the transaction interested in the the transaction and the transaction transaction date of the adopted resolution Meeting No. 8-08 of Sistema Hals OAO A. Yu. Goncharuk 20.09.2008 F. V. Evtushenkov S. A. Drozdov A. N. Buyanov Board of Directors Minutes of Guarantee for obligations 25 000 000.00 dollars FBME Bank Ltd. A. N. Buyanov Meeting No. 9-08 of Sistema Holding US 18.10.2008 Limited

12 849 649 977.40 roubles, including: 1) Sistema JSFC V. P. Evtushenkov, OAO guarantee for A. Yu. Goncharuk, the amount of Board of Directors D. L. Zubova Issuance of guarantee and 2 086 000 000.00 Minutes of S. E. Cheryomin, pledge of shares for credit VTB Bank OAO roubles; Meeting No. 10-08 A. V. Abugov, obligations of Sistema 2) Pledge of 30 % of 03.11.2008 A. N. Buyanov, Hals OAO shares of MBRD S. A. Drozdov, JSCB OAO; F. V. Evtushenkov 3) Pledge of 5 749 023 shares of Sistema Hals OAO.

Board of Directors Minutes of 230 000 000.00 dollars S. E. Cheryomin Loan agreement in favour Shyam Telelink Ltd Meeting No. 10-08 of Shyam Telelink Ltd US. V. G. Saveliev 03.11.2008 8 061 219 309.20 roubles, including: 1) Sistema JSFC V. P. Evtushenkov, OAO guarantee for A. Yu. Goncharuk, the amount of Board of Directors D. L. Zubova Issuance of guarantee and 4 229 000 000.00 Minutes of S. E. Cheryomin, pledge of shares for credit VTB Bank OAO roubles; Meeting No. 10-08 A. V. Abugov, obligations of Sistema 2) Pledge of 21 % of 03.11.2008 A. N. Buyanov, Hals OAO shares of MBRD S. A. Drozdov, JSCB OAO; F. V. Evtushenkov 3) Pledge of 1 610 484 shares of Sistema Hals OAO Board of Directors Purchase of 1 of one Minutes of Sistema Inventure ordinary nominal share of 23 500.00 roubles S. A. Drozdov Meeting No. 11-08 RTI Systems Concern ZAO 15.11.2008 OAO Board of Directors Minutes of Sale of 990 ordinary REESTR OAO 430 000.00 roubles S. A. Drozdov Meeting No. 11-08 nominal shares of R- 15.11.2008 BROCK ZAO Board of Directors Minutes of 80 000 000.00 dollars S. E. Cheryomin Granting of loan to Shyam Telelink Ltd Meeting No. 11-08 Shyam Telelink Limited US V. G. Saveliev 15.11.2008 Board of Directors Minutes of Of guarantee for 230 000 000.00 dollars VneshEconomBank D. G. Muratov Meeting No. 11-08 obligations of Sitronix US 15.11.2008 OAO

76 Ref. No. of Minutes of Meeting of the Persons recognized as body that approved Contractors under Transaction subject Sum of the transaction interested in the the transaction and the transaction transaction date of the adopted resolution Shareholder who jointly Board of Directors Access with his/her affiliated Minutes of Issuance of guarantee for 230 000.000.00 dollars Telecommunication persons owns more than Meeting No. 11-08 obligations of MGTS US Cooperatief U.A. 20% of Sistema JSFC 15.11.2008 Finance S.A. OAO voting shares Board of Directors Guarantee for obligations Minutes of 230 000 000.00 dollars of Sitronix OAO with the VneshEconomBank D. G. Muratov Meeting No. 12-08 sum of the principal debt US 20.12.2008 of 230 million dollars US Board of Directors S. A. Drozdov Minutes of Guarantee for obligations Raiffeisen Bank ZAO 164 455 102.00 Euros A. Goldin Meeting No. 12-08 of Detskiy Mir Centre A. V. Abugova 20.12.2008 OAO Board of Directors S. E. Cheryomin Minutes of Guarantee for credit in Punjab National 160 000 000.00 dollars V. G. Saveliev Meeting No. 12-08 favour of Shyam Telelink Bank US A. Goldin 20.12.2008 Ltd. S. A. Drozdov V. P. Evtushenkov A. Yu. Goncharuk, Conclusion of an D. L. Zubov individual contract L. A. Melamed Board of Directors (policy) for insurance of F. V. Evtushenkov Minutes of property accountability ROSNO OAO 700 000.00 dollars US S. A. Drozdov Meeting No. 12-08 risk of (i) Sistema JSFC A. N. Buyanov 20.12.2008 OAO, (ii) subsidiaries and A. V. Abugov controlled companies of V. G. Saveliev Sistema JSFC OAO A. Goldin D. G. Muratov V. P. Evtushenkov A. Yu. Goncharuk, Conclusion of a collective D. L. Zubov L. A. Melamed Board of Directors contract (policy) for F. V. Evtushenkov Minutes of insurance of property ROSNO OAO 300 000.00 dollars US S. A. Drozdov Meeting No. 12-08 accountability risk of A. N. Buyanov 20.12.2008 Sistema Hals OAO, Sitronix OAO, ComStar A. V. Abugov UTS OAO (ii) V. G. Saveliev A. Goldin D. G. Muratov At the price not lower Board of Directors Pledge of shares of the market value of Minutes of shares of Sitronix OAO Sitronix OAO to secure VneshEconomBank D. G. Muratov Meeting No. 12-08 debt obligations of on the date the shares 20.12.2008 Sitronix OAO are transferred to pledge An agreement of a letter Board of Directors S. E. Cheryomin of credit and an 5 000 000.00 dollars Minutes of ABN AMRO Bank V. G. Saveliev agreement to open a letter US Meeting No. 12-08 N.V., India. S. A. Drozdov of credit to secure credit 20.12.2008 obligations of Shyam A. Goldin Telelink Limited

77 Ref. No. of Minutes of Meeting of the Persons recognized as body that approved Contractors under Transaction subject Sum of the transaction interested in the the transaction and the transaction transaction date of the adopted resolution Sistema JSFC OAO, Ecu Gest, members V. P. Evtushenkov of the Sistema JSFC A. Yu. Goncharuk OAO Board of L. A. Melamed Management L. A. 20 000.000.00 dollars A. V. Abugov Melamed, Agreements for US for each of the R. F. Almakayev Board of Directors A. V. Abugov, R. F. compensation of legal and above-named members S. F. Boev Minutes of Almakayev, other costs or losses for of the Board of A. N. Buyanov Meeting No. 12-08 S. F. Boev, A. N. members of the Sistema Management under A. Goldin 20.12.2008 Buyanov, A. Goldin, JSFC OAO Board of each individual S. A. Drozdov S. A. Drozdov, F. V. Management Agreement F. V. Evtushenkov Evtushenkov, D. G. D. G. Muratov Muratov, I. P. I. P. Potekhina Potekhina, V. G. Saveliev V. G. Saveliev (as beneficiaries) Board of Directors Amendment of the S. F. Boev Minutes of essence of the contract of 60 000.000.00 dollars VneshEconomBank S. A. Drozdov Meeting No. 13-08 guarantee for obligations US D. G. Muratov 29.12.2008 of RTI Systems Concern OAO

78 8.7 INFORMATION ABOUT SISTEMA JSFC COMPLIANCE WITH REQUIREMENTS OF THE CODE OF CORPORATE CONDUCT

Provision of the Code of Corporate Conduct Observed / not Notes observed General Meeting of Shareholders 1 Announcement about holding the General Meeting of Observed This norm has been introduced to the Company’s Shareholders should be made mot later than 30 days Articles of Association before its holding unless longer term is provided for by legislation.

2 Procedure of announcement about holding the Observed Announcement about the meeting is sent to General Meeting of Shareholders should provide shareholders by mail and is published in the shareholders with a possibility to properly prepare Company’s website themselves for participation in the meeting.

3 Shareholder’s possibility to familiarize themselves Observed Shareholders have got the right to familiarize with the list of persons, who have got the right to themselves with the list of persons, who have got attend the General Meeting of Shareholders, starting the right to attend the General Meeting of from the date of announcement about holding the Shareholders, addressing to the Company’s General Meeting of Shareholders and to closure of the Corporate Secretary. Such possibility is provided General Meeting of Shareholders with personal for by the Status of the General Meeting of presence, and in case of the General Meeting of Shareholders. Shareholders by correspondence – to the date of final acceptance of ballot papers 4 Shareholder’s possibility to familiarize themselves Observed The Company provides such information at with the information (materials), which is subject to shareholders’ requests sent by mail or electronic presentation during preparation to hold the General communication. Meeting of Shareholders, through electronic means of communication. 5 Shareholder’s available possibility to introduce an Observed No requirements to prove his/her rights item to agenda of the General Meeting of documentarily, with the exception of the extract Shareholders or to demand convocation of the from the depo account, to shareholders are made. General Meeting of Shareholders without presenting Provided for by the Status of the General Meeting an extract from the Register of Shareholders if his/her of Sistema JSFC OAO Shareholders (approved rights and shares are accounted in the system of by the General Meeting of Sistema JSFC OAO keeping the Register of Shareholders, and in the event Shareholders, Minutes of Meeting No. 2-05 of when his/her rights to shares are registered in the depo 30.06.2005 with additions and amendments of account - sufficiency of an extract from the depo 30.06.2006 (Minutes of Meeting of the General account to exercise the above-said rights. Meeting of Shareholders No. 1-06)

6 Availability in the Joint-Stock Company’s internal Observed Regulated by the Status of the General Meeting documents of procedures to register participants of the of Shareholders. General Meeting of Shareholders

Work of the Board of Directors

1 Availability in the Joint-Stock Company’s Articles of Observed In accordance with the Company’s Articles of Association of authority of the Board of Directors Association, the competence of the Board of regarding annual approval of the Joint-Stock Directors includes: “determining the priority Company’s financial and business plan directions of the Company’s activities, determining the strategy of the Company’s development, approving the Company’s annual budgets (financial plans), considering the main directions of subsidiaries’ activities and development strategy”.

79 2 Availability of the Board of Directors approved Observed Appendix 3 to Minutes of Meeting of the Board procedure for risk management in the Joint-Stock of Directors No. 03-09 of 22.04.2009 Company 3 Availability of the Board of Directors’ right to Observed The competence of the Board of Directors determine requirements to qualification and amount includes the following issues: appointment of the of reward of the Director General, heads of the Joint- President of the Company; determining the Stock Company’s main structural divisions quantitative composition of the Board of Management, election of its members; approving the terms of agreement with the President and with members of the Company’s Board of Management; early termination of authority of the President of the Company and members of the Company’s Board of Management, approving the principles for assessing the work and the system of rewards as well as carrying out the control over activities of the Company’s top officials, which are in direct subordination to the Company’s President 4 Availability in the Joint-Stock Company’s Articles of Observed In accordance with the Company’s Articles of Association of the Board of Directors’ right to Association, terms of agreements with the approve terms of agreements with the Director President and members of the Company’s Board General and members of the Board of Management of Management shall be approved by the Board of Directors 5 Availability in the composition of the Joint-Stock Observed As of the end of 2008 composition of the Board Company’s Board of Directors of not less than 3 of Directors includes four members of the Board independent directors who meet requirements of the of Directors who meet criteria of the Code of Code of Corporate Conduct Corporate Conduct for independent directors.

6 Absence in the composition of the Joint-Stock Observed The Company undertakes efforts to study this Company’s Board of Directors of persons who were issue and does not dispose of information about recognized guilty in committing the crimes in the such offences committed by members of its field of economic activities or crimes against the State Board of Directors power, interests of the state service and service in local governments or which were imposed with administrative penalties for offences in the area of business undertakings or in the area of finances, taxes or levies or equity market

7 Absence in the composition of the Joint-Stock Observed Company’s Board of Directors of persons who are a participant, director general (head), member of a managerial body or an employee of a legal entity, which competes with the Joint-Stock Company 8 Availability in the Joint-Stock Company’s internal Observed The Status of the Board of Directors determines documents of requirements about holding the sittings that its sittings, as a rule, shall be held not less of the Board of Directors not less often than once in often than once in a month. 13 sittings of the six weeks Board of Directors were held in 2008. 9 Holding the sittings of the Joint-Stock Company’s Observed 13 sittings of the Board of Directors were held Board of Directors during the year, for which the during 2008. Joint-Stock Company’ s Annual Report is compiled, with the periodicity of not less often than once in six weeks 10 Availability in the Joint-Stock Company’s internal Observed Procedure to hold sittings of the Board of documents of the procedure to hold sittings of the Directors is determined by the Regulation for Board of Directors work of the Sistema JSFC OAO Board of Directors

80 11 Availability in the Joint-Stock Company’s internal Observed Provided for in the Status of the Board of documents of the right of members of the Board of Directors. Provision of information is reached by Directors to get from the executive bodies and heads participation of the Company’s Vice-Presidents of the Joint-Stock Company’s main structural and other officials in sittings of the Board of divisions the information necessary for Directors as well as with the help of weekly implementation of their functions information bulletins for members of the Board of Directors. 12 Availability of a committee of the Board of Directors Observed The Company has established the Committee of for Strategic Planning the Board of Directors for Strategy

13 Availability of a committee of the Board of Directors Observed The Company has established the Committee of (the Committee for Audit), which recommends to the the Board of Directors for Audit Board of Directors the Joint-Stock Company’s Auditor and interacts with the latter and with the Joint-Stock Company’s Audit Commission 14 Establishment of a committee of the Board of Observed The Company has established the Committee of Directors (the Committee for Personnel and Rewards) the Board of Directors for Rewards and whose function to determine criteria to select Appointments. The Committee’s functions are candidates to members of the Board of Directors and determined in the Status of the Committee for to elaborate the Joint-Stock Company’s policy in the Rewards and Appointments. area of rewards 15 Management of the Committee for Personnel and Not observed The Committee is managed by the Chairman of Rewards by an independent director the Board of Directors 16 Availability of the Board of Directors approved Observed The Company has approved Statuses of internal documents of the Joint-Stock Company, Committees of the Board of Directors, which which provide for a procedure for forming and work determine the Committees’ competence, of committees of the Board of Directors procedure for their creation and activities 17 Availability in the Joint-Stock Company’s Articles of Not observed The quorum of the Board of Directors is Association of a procedure to determine the quorum determined according to the number of members of the Board of Directors that makes it possible to of the Board of Directors attending the sitting assure mandatory participation of independent regardless of their status of an independent, non- directors in sittings of the Board of Directors executive or executive director 18 The issuer’s internal documents should provide for Observed At present, the said obligation is reflected in the obligations of members of the Board of Directors, Code of Corporate Conduct (see Article 2.2., members of the collective executive managerial Clause 3, Paragraph 7 of the Code), in the Status body, person who carries out functions of the sole of the Board of Directors (approved by the executive body, including the management General Meeting of Sistema JSFC OAO organization and its officials, to disclose information Shareholders, Minutes of Meeting No. 2-04 of about the issuer’s possession of securities as well as 1.09.2004), (Clause 5.2. Paragraph 8) in the about sale and (or) purchase of the issuer’s securities. Status of the Sistema JSFC OAO Board of Management (approved by Resolution of the General Meeting of Sistema JSFC OAO Shareholders, Minutes of Meeting No. 1-06 of 30 June 2006) (Clause 3.7.) Executive bodies

1 Availability of the Joint-Stock Company’s collective Observed The Company has formed a collective executive executive body (board of management) body – the Company’s Board of Management. (provided for by the Articles of Association)

2 Availability in the Joint-Stock Company’s internal Observed Procedures to agree on transactions that are not documents of procedures to agree on transactions, included to the budget are fixed in the which are beyond the Joint-Stock Company’s Corporation’s budget policy, regulation to agree financial and business plan on contracts, regulation to make transactions regarding mergers and takeovers. When necessary, resolution of the Board of Directors introduces amendments to the Budget 3 Absence in the composition of executive bodies of Observed persons who are a participant, director general (head),

81 member of a managerial body or an employee of a legal entity, which competes with the Joint-Stock Company 4 Absence in the composition of the Joint-Stock Observed Company’s executive bodies of persons who were recognized guilty in committing the crimes in the field of economic activities or crimes against the State power, interests of the state service and service in local governments or which were imposed with administrative penalties for offences in the area of business undertakings or in the area of finances, taxes or levies or equity market. 5 Availability in the Joint-Stock Company’s Articles of Observed Provided for by the Company’s Articles of Association or internal documents of a prohibition for Association the management organization (for the manager) to perform similar functions in a competing company as well as to be in any other property relations with the Joint-Stock Company apart from provision of services of the management organization (manager) 6 Availability in the Joint-Stock Company’s internal Observed Such requirements are contained in the Status of documents of obligations of executive bodies to the Board of Directors, Status of the Board of refrain from actions, which lead or potentially may Management, Status of the President and in the lead to an emerging conflict between their interests agreement with the President and members of the and interests of the Joint-Stock Company, and in case Company’s Board of Management. of emergence of such conflict of an obligation to inform the Board of Directors of that

7 Availability in the Joint-Stock Company’s Articles of Not observed It is not necessary because there is no the Association or internal documents of criteria to select management organization and there are no plans the management organization (manager) to engage the same to perform functions of the Company’s sole executive body. 8 Presentation by the Joint-Stock Company’s executive Observed The Board of Directors monthly considers bodies of monthly reports about their work to the financial results of the work. The Company’s Board of Directors management monthly compiles a report about the most important events and provides it to members of the Board of Directors.

9 The issuer’s internal documents should provide for Observed At present, the said obligation is reflected in the obligations of members of the Board of Directors, Code of Corporate Conduct and in the Status of members of the collective executive managerial the Board of Directors. For executive bodies body, person who carries out functions of the sole such obligation is provided for in the Status of executive body, including the management the President and in the Status of the Board of organization and its officials, to disclose information Management. about the issuer’s possession of securities as well as about sale and (or) purchase of the issuer’s securities. 10 Determining in agreements concluded by the Joint- Observed There is a requirement regarding observation of Stock Company with the Director General confidential information in the Agreement with (management organization, manager) a liability for the President and members of the Company’s failure to comply with regulations regarding the use Board of Management. of confidential and housekeeping information

Corporate Secretary

1. Availability in the Joint-Stock Company of a special Observed The Company has appointed the Corporate official (secretary of the Company) whose duty Secretary is to assure compliance of the Joint-Stock Company’s bodies and officials with procedural requirements, which guarantee implementation of rights and legal interests of the Company’s shareholders 2 Availability in the Joint-Stock Company’s Articles of Observed The Board of Directors has approved the Status Association or internal documents of a procedure to of the Corporate Secretary; the Status contains appoint (elect) the secretary of the Company and responsibilities of the Corporate Secretary and 82 availability of the Company secretary’s procedure of his/her appointment. responsibilities 3 Availability in the Joint-Stock Company’s Articles of Partially observed Such requirements are presented in the Status of Association of requirements to the candidacy of the the Corporate Secretary Company’s secretary Substantial corporate actions

1 Availability in the Joint-Stock Company’s Articles of Partially observed Regardless of absence of this norm in the Articles Association or internal documents of a requirement to of Association, this requirement is observed in approve a large transaction before it is made practice. 2 Mandatory engagement of an independent appraiser Observed to assess the market value of the property, which is a subject of a large transaction 3 Availability in the Joint-Stock Company’s Articles of Not observed Such actions are hardly probable because there is Association of a prohibition to undertake any actions a controlling shareholder during acquisition of large holdings of the Joint-Stock Company’s shares (takeover), which such actions are directed at protection of rights of executive bodies (members of such bodies) and members of the Board of Directors of the Joint-Stock Company and also aggravate the shareholders’ position compared with the current one (in particular, of a prohibition for the Board of Directors to adopt a resolution before completion of the assumed time of shares acquisition to issue additional shares, to issue securities, convertible shares or securities, which give the right to acquire the Company’s shares, even if the right to adopt such resolution is given to the Board of Directors by the Articles of Association) 4 Absence in the Joint-Stock Company’s Articles of Observed Association of a stipulation releasing the acquirer from an obligation to make a proposal to the shareholders to sell his/her owned ordinary shares of the Company (issued securities convertible to ordinary shares) during takeover 5 Availability in the Joint-Stock Company’s Articles of Not observed Association or internal documents of a requirement regarding mandatory engagement of an independent appraiser to determine the ratio of shares conversion during reorganization Disclosure of information

1 Availability of an internal document, which is Observed There are approved Regulation for Information approved by the Board of Directors and determine the Policy Joint-Stock Company’s regulations for and approaches to disclosure of information (Regulation for Information Policy) 2 Availability in the Joint-Stock Company’s internal Observed The list of additionally provided information is documents of a list of information, documents and contained in the Code of Corporate Conduct, materials, which should be provided to shareholders Regulation for Information Policy and internal to solve the issues put to the General Meeting of regulations of the Company. Shareholders 3 Disclosure of financial information about the Joint- Observed Annually disclosed are financial statements Stock Company’s activities according to the RBAS standards. Quarterly disclosed are financial statements according to the US GAAP standards.

83 4 Use of additional forms and methods of information Observed The Company has established the Department for disclosure Work with Investors. It regularly has meetings with investors and organizes road shows. The Department maintains the corporate website in the Internet with extensive information about the Company’s activities. 5 The issuer should disclose information about the Observed The said information is disclosed within the amount of rewards received by members of the Board Issuer’s Annual Report and Quarterly Report and of Directors, members of the collective executive Prospectus of Issuance of the Company’s body and by the person who performs functions of the Securities. The Company has adopted and sole executive body, including the management published the Regulation for Rewards and organization and the manager. Compensations Paid to Members of the Company’s Board of Directors. 6 The Joint-Stock Company’s availability of the Observed The address in the Internet: www.sistema.ru Internet website and regular disclosure of information about the Joint-Stock Company in such website

7 Availability in the Joint-Stock Company’s internal Partially observed Observed with respect to execution of legislative documents of a requirement for disclosure of requirements regarding transactions with the information about the Joint-Stock Company’s interest of related parties transactions with persons who in accordance with the Articles of Association are referred to the Joint-Stock Company’s top officials as well as about the Joint- Stock Company’s transactions with organizations where the Joint-Stock Company’s top officials directly or indirectly own 20 and more percent of the Joint-Stock Company’s authorized capital stock or on which such persons may exert substantial influence otherwise 8 Availability in the Joint-Stock Company’s internal Observed Observed within the requirement of the documents of a requirement for disclosure of Resolution of the Federal Service for Financial information about all transactions, which may exert Markets of the Russian Federation on disclosure influence on the market value of the Joint-Stock of information. Company’s shares 9. Availability of an internal document approved by the Observed There is a corresponding Section in the Board of Directors for use of substantial information Regulation for Information Policy about the Joint-Stock Company’s activities, shares and other securities of the Company and transactions with them when such information is not commonly available and whose disclosure may exert substantial influence on the market value of the Joint-Stock Company’s shares and other securities Control over financial and business activities

1 Availability of procedures approved by the Board of Observed The Company has approved the Status of the Directors for internal control over the Joint-Stock Complex of Internal Control and Audit Company’s financial and business activities 2. Availability of the Joint-Stock Company’s special Observed The Company has established the Complex of division, which assures compliance with procedures Internal Control and Audit of internal control (control and audit services) 3 Availability in the Joint-Stock Company’s internal Observed In accordance with the Company’s Articles of documents of a requirement for the Board of Association and Status of the Complex of Directors to determine the structure and composition Internal Control and Audit, the Head of the of the Joint-Stock Company’s control and audit Department is to be approved by the Company’s services Board of Directors

84 4 Absence in the composition of the control and audit Observed The Company undertakes efforts to study this services of persons who were recognized guilty in issue and does not dispose of information about committing the crimes in the field of economic such offences committed by persons who work in activities or crimes against the State power, interests the composition of its control and audit services of the state service and service in local governments or which were imposed with administrative penalties for offences in the area of business undertakings or in the area of finances, taxes or levies or equity market

5 Absence in the composition control and audit services Observed of persons who are included in the composition of the Joint-Stock Company’s executive bodies as well as persons who are participants, a director general (head), members of managerial bodies or employees of a legal entity, which competes with the Joint-Stock Company 6 Availability in the Joint-Stock Company’s internal Partially observed No time line is determined in the internal documents of a time line for presentation to the documents regarding presentation of documents. control and audit service of documents and materials The Department of Internal Control and Audit for assessing a made financial and business has a constant access to current information about transaction as well as a liability of the Joint-Stock the made financial and business transactions Company’s officials and employees for their failure to present the same within the said time line 7 Availability in the Joint-Stock Company’s internal Observed In accordance with the Status of the Committee documents of an obligation of the control and audit for Audit and Status of Department of Internal services to inform the committee for audit, and if the Control and Audit, the Department files reports to latter is not available – to the Joint-Stock Company’s the Committee for Audit on audit results Board of Directors, about revealed breaches 8 Availability of a requirement for the control and audit Partially observed This function is performed by the Company’s service to perform preliminary assessment of financial service expediency to make transactions, which are not provided for by the Joint-Stock Company’s financial and business plan 9 Availability of an internal document, which is Observed The Company has approved the Regulation on approved by the Board of Directors and determine a Procedures for Internal Control for Sistema JSFC procedure for the audit commission to carry out audits OAO Financial and Business Activities of the Joint-Stock Company’s financial and business activities 10 Assessment by the Committee for Audit of the audit Observed In accordance with the Status of the Committee report prior to its presentation to shareholders at the for Audit, on 17 April 2008 the Committee for General Meeting of Shareholders Audit has examined the Report of the Company’s Auditors. Dividends

1 Availability of the Board of Directors approved Observed The Company has approved Regulation for internal document the Board of Directors is guided by Dividend Policy in accepting the recommendations regarding the amount of dividends (Regulation for Dividend Policy)

2 Publishing the information about the Joint-Stock Observed The Regulation is published in the Company’s Company’s dividend policy and amendments website in the Internet introduced therein in a periodical provided for by the Joint-Stock Company’s Articles of Association to publish notices of holding the General Meetings of Shareholders, as well as placement of the said information on the Joint-Stock Company’s website in the Internet

______L. A. Melamed President

______V. V. Platoshin Chief Accountant