Moscow , June 29, 2004 . Sistema today announced its consolidated financial and operating results for the full year ended December 31, 2003, prepared in accordance with US GAAP. Solid organic growth across the business portfolio, continued acquisitions and consolidation of MTS in Sistema's accounts led to an increase in net revenues of 323% to reach $3.76 billion. Adjusted EBITDA grew by 387% to $1.80 billion, while net income rose by 133%, amounting to $387 million. Sistema's total consolidated assets increased in 2003 by 192% to $6.84 billion, with shareholders' equity adding 66% to reach $989 million.

Commenting on the results of the year, Evgeny Novitsky, President and CEO of Sistema, said: “The year of Sistema's tenth anniversary has marked a new era in the company's development. This is evident through both our new approaches to managing our portfolio and running the business, and the change in the markets' perception of the company. Having completed a number of landmark M&A and capital markets transactions, including two Eurobond issues, acquisition of an additional 10% in MTS, 50% of Comstar and 50% of Kosmos-TV, and the full divestiture of Sistema's oil business, we are now even stronger positioned to benefit from the ongoing growth in our core service-oriented industries”.

Financial Highlights of 2003

The revenue growth of 323% in 2003 was primarily driven by the consolidation of MTS, which contributed $2,638.2 million to the increase. Other growth drivers included the acquisition of Comstar and consolidation of Concern RTI-Sistemy ($66.5 million and $29.1 million, respectively). The organic growth in our revenues was attributable to increases in the revenues of our telecommunications segment (excluding MTS and Comstar) of $122.3 million, in our insurance segment of $47.2 million, in our technology segment of $14.6 million, in our finance and securities segment of $20.9 million and in our other businesses segment (excluding Concern RTI-Sistemy) of $39.4 million.

The telecommunications segment continued to be the largest revenue contributor, with its share of revenues increasing in 2003 to 86.4% from 53.4% in 2002 primarily due to the consolidation of MTS. MGTS led the organic growth in the segment as its revenues grew by $80.0 million, or 26.6%, over 2002, primarily due to increases in tariffs for residential and government subscribers that took place in November 2002 and in June 2003.

Our insurance segment continued to benefit from our strategic partnership with Allianz AG, a leader in the global insurance market. Insurance segment revenues grew by 33.5%, as we continued to introduce new insurance products (such as OMTPL insurance) and to expand our client base. The increase in operational volumes in our finance and securities segment resulted in revenue growth of 57.1%, to $57.5 million in 2003.

Our Adjusted EBITDA margin increased to 47.9% of revenues in 2003, compared with 41.6% for 2002. In terms of absolute growth, Adjusted EBITDA grew by 387.0% to $1,799.4 million, compared to $369.6 million for 2002.

In the reporting period, we also saw a decline in the net income margin, from 18.7% to 10.3%. The decrease was primarily due to the change in the accounting method for our investment in MTS, which resulted in higher interest expense and effective tax rate.

In June 2004, Sistema's annual general meeting of shareholders approved regular dividend of 18.5 rubles ($0.64) per ordinary share for the year 2003. The total amount of the dividend to be paid is 149.85 million rubles ($5.17 million), which equals to approximately 1.3% of Sistema's consolidated net income under US GAAP.

Operational Highlights of 2003 and 1H 2004

From the operational standpoint, the reporting year was dominated by M&A and capital markets transactions. In April, Sistema became the first Russian holding company to enter the Eurobond market by successfully placing 5-year notes for the amount of $350 million with a coupon of 10.25%. The proceeds of the bond offering allowed Sistema to exercise its call option with T-Mobile to purchase an additional 10% stake in MTS for a total consideration of $371 million in cash.

In December 2002 and February 2003, Sistema sold 100% of its voting shares in FPK Kedr-M, a network of 30 gasoline stations located in Moscow, to a third party for the total consideration of $45 million.

During 2003, we acquired 33.0% of common voting shares of Belkamneft, 100.0% of Consortium-12, 100.0% of Baikal Oil and 24.0% of Sistema-Neft, our holding company for the oil business line, for the total cash consideration of $186.8 million. In December, we sold our interests in companies operating in the oil industry to a third party for total cash consideration of $292.5 million and a promissory note with fair value of $15.9 million maturing in 2004.

In November, the company acquired 50% in Comstar ZAO and 50% in Kosmos-TV ZAO in a transaction worth approximately $35 million. The deal increased Sistema's voting power in Comstar to 100%, allowing it to consolidate the results of Comstar's operations in its accounts. In May 2004 Sistema announced that its alternative fixed-line operators, including Comstar, MTU-Inform and Telmos, would begin operating as a single entity under the new Comstar United Telesystems brand.

Note: Adjusted EBITDA includes minority interest

On November 19, 2003 , Moody's Investor Service assigned a Senior Implied Long-Term rating of B1 to Sistema, citing sizeable asset base, positive track record with solid growth prospects and strong consolidated cash flow generation as key credit positives. On March 9, 2004 , Standard & Poor's upgraded Sistema from B- to B on liquidity improvement and strong performance of its telecom assets.

In January 2004, Sistema followed on its earlier success in the international debt markets by placing a 7-put-3 year issue for the amount of $350 million with a coupon of 8.875%. The proceeds from the offering allowed Sistema to refinance a significant part of its short-term indebtedness, including a $100 million CLN issue maturing in February 2004.

Throughout the reporting period and thereafter, Sistema continued to work on improving its corporate governance and disclosure practices. This included creation of the International Advisory Council to the Board of Directors and the Board Corporate Governance Committee, establishment of the Investor Relations Department and the Corporate Secretary position, and introduction of semi-annual US GAAP reporting. In June 2004, the Euromoney magazine noted Sistema's success in making the company more transparent and understandable to its existing and potential investors by naming it “Best corporate borrower in Eastern Europe ”.

Sistema is one of Russia 's largest diversified holding companies. In 2003, the company reported sales of $3.76bn., with total assets exceeding $6.8bn. Founded in 1993, Sistema currently owns and actively manages a diversified portfolio of assets in the following sectors: telecommunications (MTS, MGTS, Comstar United Telesystems and others), technology (Mikron, as well as a number of other microelectronics enterprises), insurance (ROSNO), finance and securities (MBRD), real estate (Sistema-Hals), travel services (Intourist), retail (Detsky Mir) and others. Additional information is available at www.sistema.ru .

For information, please contact:

Investor Relations Press Service

Andre Bliznyuk Olga Pestereva

Tel.: +7 095 730 1543 Tel. +7 095 730 1705

bliznyuk @ sistema . ru pestereva @ sistema . ru

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Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Sistema. You can identify forward looking statements by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might” the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema and its operations.

SISTEMA JSFC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2003 and 2002

(in U.S. dollars and in thousands)

SISTEMA JSFC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2003 and 2002

(in U.S. dollars and in thousands)