Moscow, Russia – December 11, 2008 – Sistema-Hals (LSE, MICEX, RTS: HALS), one of the largest real estate development companies in Russia and the CIS, today announces its unaudited consolidated financial results for the first nine months of 2008 in accordance with US GAAP.

Financial highlights for 9 months of 2008

· For the nine months ended September 30, 2008 revenues increased by 57.0% to USD 325.8 million compared to USD 207.5 million for the nine months ended September 30, 2007.

· For the nine months ended September 30, 2008 operating income increased to USD 26.9 million compared to operating loss of USD 71.8 million for the nine months ended September 30, 2007.

· For the nine months ended September 30, 2008 OIBDA increased to USD 42.9 million compared to the negative OIBDA of USD 63.0 million for the nine months ended September 30, 2007.

· For the nine months ended September 30, 2008 net loss amounted to USD 72.5 million compared to the net loss of USD 77.6 million for the nine months ended September 30, 2007.

· As of September 30, 2008 total assets increased by 21.4% to USD 2,129.9 million compared to total assets in the amount of USD 1,755.1 million as of December 31, 2007.

 Subsequent events

In December 2008, the Group announced changes to the terms of its credit agreements with Bank VTB. Under the new terms, the five-year credit facilities for the amounts of USD 500 million and USD 200 million granted by Bank VTB in 2007 were converted into roubles at the rate of the Russian Central Bank as of December 2, 2008. The effect of the conversion is loss in the amount of USD 96.8 million. The credit interest rate is 15% per annum both for the USD 500 million credit (the previous rate was 8.5% per annum) and for the USD 200 million credit (the previous rate was LIBOR+5.43% per annum). The requirement for covenants (financial indicators) for FY2008 is cancelled and will take effect in FY2009.

In October 2008, after expiration of the terms of bank guarantee (issued by Deutsche Bank, in the amount of 64 million euro) for the advance payment by Siemens in favour of Sistema-Hals for construction works, Siemens requested Deutsche Bank to return the advanced payment. Hereinafter Sistema-Hals compensated the sum equal to the paid bank guarantee on Deutsche Bank demand. At the moment Siemens and Sistema-Hals has negotiated to sign new financial agreement and are working on the details of the agreement now.

In December 2008, a credit facility agreement was signed with Bank VTB for the amount of RUR 7.0 billion repayable in 2 years. The drawdown period is 10 months.

Also in December 2008 the Group sold interests in two of its subsidiaries - Organizator and PSO Sistema-Hals, which represented the Project and Construction Management segment of the Group.

In light of the rapidly deteriorating market situation, especially since October 2008, in December 2008 the Company completed a major strategic review of all its operations to take adequate  measures to overcome the current challenging market conditions and to reposition the Company for growth in the medium and long term as the economic situation improves in Russia and globally. The outcome of this review is outlined in a separate release issued today together with the 9M 2008 release.

As part of the strategic review Sistema-Hals has undertaken its own internal valuation of the projects and assets portfolio independently valued twice a year by C&WS&R,  an independent valuation agency, the most recent of which was taken as at 1 July 2008.  Due to the rapidly deteriorating market conditions especially since October 2008, Sistema-Hals is aware that this is not an accurate reflection of the current value of the portfolio. According to the preliminary management assumptions and estimates, the value of primary projects in the Company’s portfolio is likely to have devalued by 15-20% to date compared with the valuation of C&WS&R. The rest of the portfolio might have been affected to a significantly larger extent. However, internal estimates carry a significant amount of uncertainty to the unprecedented depth of the financial crisis and due to the current absence of transaction experience in Russia. A revised valuation by C&WS&R will be undertaken in early 2009 as part of the regular valuation reports accompanying semiannual and annual results releases.

Conference call

Sistema-Hals will held a conference call on December 11, 2008 at 5:00 pm Moscow time
(2:00 pm London, 9:00 am NY) on 9m 2008 US GAAP financial results and plans for 2009.

All the materials will be available since December 11, 2008 at 3:00 pm Moscow time (12:00 am London, 7:00 am NY) at the Company’s web site: https://www.sistema-hals.ru/en/investor_relations/

Participant dial in numbers:  

+44 (0)203 003 2666 UK Local              

8 10 8002 1774 011 Russia Local

+7 499 272 4337 Moscow Local