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Financial Corporation "Sistema"

September 13, 2012

Sistema announces unaudited financial results for the second quarter ended June 30, 2012

Moscow, Russia- September 13, 2012 - Sistema JSFC ("Sistema", the "Group" or the "Company") (LSE: SSA), the largest diversified publicly-traded investment company in Russia and the CIS, today announces its unaudited consolidated US GAAP financial results for the second quarter ended June 30, 2012.

The Group's consolidated results for the second quarter of 2012 were impacted by a 10.8% year-on-year rouble depreciation against the US dollar. A non-cash one-off loss ("one-off") of US$ 1,079.0 million was also recognised relating to impairments and provisions with regard to MTS' operations in Uzbekistan.


- Consolidated revenues of US$ 8.1 billion, down 6.3% YoY

- OIBDA without one-off down 7.4% YoY to US$ 2.0 billion, with an OIBDA margin of 25.1%

- Operating income without one-off down 7.2% YoY to US$ 1.2 billion, with an operating margin of 15.2%

- Net loss attributable to the Group of US$ 161.9 million and net income without one-off of US$ 407.8 million

- Net debt at the Corporate Holding level reduced to US$ 5.3 million as of June 30, 2012 from US$ 1,390.5 million as of June 30, 2011.


- Signed an agreement with OJSC INTER RAO UES regarding the terms of the reorganisation of OJSC Bashkirenergo. Following the reorganisation, Bashkirenergo will be split into JSC Bashkirian Power Grid Company, which will combine power grid assets, and OJSC Bashenergoactiv, which will integrate power generation assets. In accordance with the agreement, INTER RAO UES will own more than 75% of the voting shares of Bashenergoactiv, while more than 75% of the voting shares of Bashkirian Power Grid Company will be owned by Sistema. INTER RAO UES will also pay Sistema an amount of up to RUB 14 billion in cash and promissory notes.

- Announced a joint venture with RZ Agro Ltd, an agricultural company controlled by certain members of the Louis-Dreyfus family. The joint venture consists of agricultural assets of both parties totalling approximately 90,000 ha.  

- Agreed to join forces with MTS in developing and managing the multimedia content portal (formerly Sistema contributed RUB 496.1 million to Stream's charter capital and will obtain a 55% stake, subject to regulatory approvals.

- Issued a US$ 500 million Eurobond with an annual interest rate of 6.95% and a maturity in May 2019.

- Commenced a US$ 300 million buyback programme in respect of Sistema's Global Depository Receipts and ordinary shares. The Company spent approximately US$ 100 million during this period.

- The AGM approved payment of annual dividends of RUB 0.28 per ordinary share for the twelve months ended December 31, 2011, amounting to a total of RUB 2.7 billion (approximately US$ 82.3 million).

- Elected three new members to the Board of Directors - Brian Dickie, Jeannot Krecké and Marc Holtzman, and therefore expanding the number of Independent Directors on the Board to eight out of 13 members. Detailed biographies can be found on Sistema's corporate web site.

Mikhail Shamolin, President and Chief Executive Officer of Sistema, commented:

"We are pleased to report second quarter results reflecting a solid operational performance in our key investments. Despite the effects of rouble depreciation and one-off write down in MTS, we are seeing consistent and sustainable growth in our portfolio companies.

In the reporting quarter MTS has delivered excellent profitability with margins excluding one-off increasing to 44.4% year-on-year as the company continued to benefit from its focused strategy and growth in voice and data products. Similar operational momentum was maintained in Bashneft, which increased production by 2% year-on-year and optimised its downstream sales, which helped mitigate some of the impact from softer oil prices and higher export duty in the second quarter.

The Developing Assets portfolio also reported some key milestones. Detsky mir continued its store expansion with 11 new openings resulting in revenue growth of 12% year-on-year in rouble terms. It reduced its expenses and was able to significantly narrow down OIBDA loss despite seasonal effects. RTI completed its consolidation of SITRONICS and continued to progress its merger plans with NVision. The merger benefits for the enlarged RTI are already very evident as it lowered its SG&A by 41% year-on-year and reduced debt by 17%.

Sistema continues to review a number of sector opportunities and our deal pipeline is expanding, some of which we hope to realise in the near future. In the second half of 2012, our focus will also be on resolving the situation around our Indian telecom operations. Auction prices announced by the regulator are unjustifiably high and no decision on auction participation will be taken until our case is heard in our Curative Petition to the Supreme Court."




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