SSA: JSFC Sistema: Half-yearly Report

  SSA: JSFC Sistema: Half-yearly Report

UK Regulatory Announcement

MOSCOW

FOR IMMEDIATE RELEASE

August 30, 2013

    UNAUDITED FINANCIAL RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2013

Moscow, Russia – August 30, 2013 – Sistema JSFC (“Sistema” or the “Company”,
together with its subsidiaries, “the Group”) (LSE: SSA), the largest
publicly-traded diversified holding company in Russia and the CIS, today
announces its unaudited consolidated US GAAP financial results for the second
quarter ended June 30, 2013.

SECOND QUARTER HIGHLIGHTS

  *Consolidated revenues up 6.7% YoY to US$ 8.5 billion
  *Adjusted OIBDA^1 up 9.4% YoY to US$ 2.1 billion, with an adjusted OIBDA
    margin of 25.1%
  *Consolidated net income attributable to the Group significantly increased
    YoY to US$ 527.9 million. Adjusted net income attributable to the Group^2
    amounted to US$ 345.1 million.
  *Net debt^3 at the Corporate Holding level amounted to US$ 1.4 billion as
    of June 30, 2013, compared to US$ 1.5 billion as of March 31, 2013.

KEY CORPORATE HIGHLIGHTS IN 2Q 2013 AND POST REPORTING PERIOD

  *Sale of 49% in RussNeft for US$ 1.2 billion. The transaction was completed
    in July 2013.
  *Sale of 70% of Sistema’s shares in SG-trans to Financial Alliance^4 for
    RUB 12.0 billion. The price of the deal is based on the valuation of
    SG-trans excluding SG-trading.
  *Sale of 15% of Sistema’s shares in SG-trans to Unirail for RUB 2.5
    billion. The transaction was completed in July 2013.
  *Sistema’s AGM approved annual dividends of RUB 0.96 per Sistema’s ordinary
    share for the twelve months ended December 31, 2012, amounting to a total
    of RUB 9.264 billion. The dividends were paid in full in August 2013.
  *New appointments to Sistema’s Management Board: Vsevolod Rozanov as Senior
    Vice-President and Chief Financial Officer; Alexey Buyanov as First
    Vice-President, Portfolio Manager; and Alexey Chupin as Vice-President,
    Portfolio Manager.

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

“We are pleased to announce another strong set of quarterly results with
excellent year-on-year revenue and OIBDA growth. Our numbers were largely
driven by solid operating performance across our entire investment base and
consistent execution of Sistema’s strategy.

The key highlights for the period include continued growth of data services
resulting in higher OIBDA and OIBDA margins at MTS; improved production and
higher oil product sales at Bashneft; substantially narrowed OIBDA loss at
SSTL and excellent double digit revenue and OIBDA increase at Detsky mir,
where a combination of new stores, improved product range and reduction in
operating costs led Detsky mir to outperform seasonal weaknesses.

Importantly, over the course of the last few months, we also achieved an
impressive amount of cash inflows as a result of several announced deals. The
restructuring of our transportation assets delivered over US$ 430 million
while in our energy holdings, Sistema divested its investment in RussNeft for
a US$ 1.2 billion cash consideration. Such deals serve to underline our track
record of sourcing unique investment opportunities in Russia, securing them at
attractive valuations, contributing our value added insight and monetising
investment with substantial return.

Combined with the expected dividend flow, Sistema is on track to deliver
record cash generation in 2013. This will provide us with the opportunity to
further deleverage the holding centre, strengthen our M&A capabilities and
increase rewards to shareholders”.

Conference call information

Sistema’s management will host an analyst conference call today at 11 am
(London time) / 12 pm (CET) / 2 pm (Moscow Time) to present and discuss the
second quarter results.

The dial-in numbers for the conference call are:

UK/ International: +44 20 8515 2313

US: +1 480 629 9835

And quote the conference call title: “Sistema Second Quarter 2013 Financial
Results”.

A replay of the conference call will be available on the Company’s website
www.sistema.com for 7 days after the event.

For further information, please visit www.sistema.com or contact:

Investor Relations        Public Relations

Evgeniy Chuikov           Ekaterina Tsukanova
                        
Tel: +7 (495) 692 11 00   Tel. :+7 (495) 228 1536

ir@sistema.ru             pr@sistema.ru

FINANCIAL SUMMARY

                                            Year-on-             Quarter-on-
                        2Q 2013  2Q 2012  Year      1Q 2013  Quarter
                                            Change               Change

(US$ millions)
Revenues                8,472.7  7,941.2  6.7%      8,345.5  1.5%
Adjusted OIBDA           2,130.2   1,947.5   9.4%       1,970.7   8.1%
Operating income         1,671.2   1,187.7   40.7%      1,157.3   44.4%
Adjusted operating       1,325.1   1,187.7   11.6%      1,157.3   14.5%
income
Net income/ (loss)
attributable to          527.9     (162.8)   -          349.8     50.9%
Sistema
Adjusted net income
attributable to          345.1     375.6     (8.1%)     349.8     (1.3%)
Sistema

GROUP OPERATING REVIEW

Sistema’s consolidated revenues increased by 6.7% year-on-year and by 1.5%
quarter-on-quarter in the second quarter of 2013, largely as a result of solid
operating performance at Bashneft, MTS’ growing income from data services, and
Detsky mir’s increased profitability from new store openings. The year-on-year
revenue increase also reflected the consolidation of NVision Group in the
second half of 2012.

Selling, general and administrative (SG&A) expenses increased by 11.3%
year-on-year, but were down 0.8% quarter-on-quarter to US$ 1,056.1 million in
the second quarter of 2013. Depreciation, depletion and amortisation expenses
increased by 6.0% year-on-year to US$ 805.1 million.

The Group’s adjusted OIBDA increased 9.4% year-on-year and by 8.1%
quarter-on-quarter, resulting from growth of the high-margin data services
segment at MTS, higher sales of oil products at Bashneft and reduced loss at
SSTL. The Group’s adjusted OIBDA margin was 25.1% in the reporting quarter,
compared to 24.5% in the corresponding period of 2012 and 23.6% in the first
quarter of 2013.

Adjusted consolidated net income attributable to Sistema fell by 8.1%
year-on-year and 1.3% quarter-on-quarter, mainly due to foreign exchange
losses in the amount of US$ 175 million. Consolidated net income attributable
to Sistema increased significantly to US$ 527.9 million, reflecting MTS’
recognised gains from settled disputes related to Bitel LLC.

OPERATING REVIEW^5

MTS

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            3,082.4  2,989.3  3.1%          3,053.1  1.0%
Adjusted OIBDA       1,402.4   1,305.6   7.4%           1,302.6   7.7%
Operating income     1,153.1   770.5     49.7%          718.4     60.5%
Net income/ (loss)
attributable to      426.5     (360.0)   -              225.0     89.5%
Sistema

MTS reported a 3.1% year-on-year increase in revenues in the second quarter of
2013 as a result of the growth in its data services consumption. MTS’ revenues
were up 1.0% quarter-on-quarter, reflecting the seasonal increase in roaming
services. MTS’ subscriber base totalled 97.5 million^6 customers as of June
30, 2013, demonstrating a 6.5% year-on-year increase as a result of the
resumed its operations in Turkmenistan.

MTS’ OIBDA in the second quarter of 2013 reflected a recognised gain from
compensation related to the settlement of the disputes over Bitel LLC.
Adjusted OIBDA was up 7.4% year-on-year and 7.7% quarter-on-quarter in the
reporting period due to continued revenue growth from high-margin data
services. The adjusted OIBDA margin was 45.5% in the reporting period,
compared to 43.7% in the second quarter of 2012 and 42.7% in the first quarter
of 2013.

The average monthly service revenue per subscriber (ARPU) in Russia grew by
3.0% year-on-year to RUB 306 in the reporting quarter. The quality of the
Russian subscribers’ base continued to improve with monthly minutes of use
(MOU) increasing by 7.4% quarter-on-quarter to 332 minutes.

In the fixed broadband business, the number of households passed expanded by
1.7% and reached 12.1 million at the end of the second quarter of 2013. The
pay-TV customer base totalled 2.8 million subscribers at the end of the
reporting quarter, while the number of broadband Internet subscribers stood at
2.3 million.

In June 2013, MTS’ AGM approved annual dividends of RUB 14.6 per ordinary MTS
share (approximately RUB 29.2 per ADR) for the 2012 fiscal year, amounting to
a total of RUB 30.2 billion.

In June 2013, MTS, Altimo, Nomihold Securities Inc. and other associated
parties reached an agreement to settle all disputes that have arisen from
investing in Bitel LLC, formerly the leading mobile telephony operator in the
Kyrgyz Republic.

In May 2013, MTS was named as one of the BRANDZ™ Top 100 Most Powerful Brands,
a ranking published by the Financial Times and Millward Brown Optimor, a
leading global market research and consulting firm.

In April 2013, MTS’ Board of Directors approved a new dividend policy, which
stipulates that for the calendar years 2013-2015, MTS aims to pay out a
minimum dividend distribution of an amount equal to at least 75% of Free Cash
Flow for the relevant financial period or, if greater, RUB 40.0 billion per
year. The Board also recommended that MTS begins to pay out dividends on a
semi-annual basis using interim and full year financial results.

Bashneft

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            4,269.4  4,081.3  4.6%          4,128.8  3.4%
OIBDA                725.0     704.3     2.9%           689.8     5.1%
Operating income     578.5     545.9     6.0%           547.3     5.7%
Net income
attributable to      333.9     278.8     19.8%          307.3     8.7%
Sistema

Bashneft’s revenues increased by 4.6% year-on-year and by 3.4%
quarter-on-quarter, mainly as a result of higher sales of oil products in the
domestic market, as well as an increase in exports.

In the reporting quarter, Bashneft’s OIBDA was up 2.9% year-on-year and 5.1%
quarter-on-quarter, reflecting revenue growth, as well as a decrease in export
duties. The OIBDA margin slightly declined year-on-year to 17.0%.

Following the introduction of horizontal drilling at the Arlanskoe and
Afanasiev oil fields in Bashkortostan, Bashneft’s oil production increased by
3.0% year-on-year to 3.9 million tonnes. The company sold 5.1 million tonnes
of oil and petrochemical products in the second quarter of 2013, a 7.3%
year-on-year increase, with exports amounting to 1.0 million tonnes of crude
oil and 2.5 million tonnes of oil products.

Refining volumes were up 6.7% year-on-year to 5.3 million tonnes of crude oil
following extensive maintenance works in 2012 and growing demand in 2013. In
the reporting quarter, the average refining depth increased to 86.0% and
light-product yield grew to 61.2%.

As of June 30, 2013, Bashneft owned and operated a total of 481 petrol
stations.

In June 2013, the AGM of Bashneft’s shareholders approved the 2012 dividend
payment of RUB 24 per ordinary registered share and per preferred registered
share. In August 2013, the dividends were paid in full. In addition, the Board
of Directors will consider paying interim dividends for the nine months of
2013 in October 2013 based on Bashneft’s performance.

In June 2013, Bashneft sold 832,082 of its ordinary and 4,730,528 of its
preferred shares, which were bought back as part of the reorganisation in 2012
and account for 2.45% of Bashneft’s authorized share capital, to United
Platform S.A. (Luxembourg), a financial investor, for US$ 257 million. This
price was based on the market value of Bashneft’s shares. Under the approved
terms of the transaction, United Platform S.A will grant Bashneft the right to
buy back this block of shares within six months after completing the
transaction under the terms agreed upon by the parties.

Bashkirian Power Grid Company (BPGC)

                          2Q      2Q      Year-on-Year   1Q       Quarter-on-
(US$ millions)           2013   2012   Change        2013    Quarter
                                                                  Change
Revenues                 91.9   88.2   4.2%          112.7   (18.4%)
OIBDA                     27.7    38.9    (28.8%)        50.0     (44.7%)
Operating income          14.8    28.0    (47.2%)        36.8     (59.8%)
Net income attributable   14.6    8.6     70.0%          23.1     (36.6%)
to Sistema

Bashkirian Power Grid Company’s revenues grew by 4.2% year-on-year, largely
due to an increase in new customers, higher electricity output and tariffs
indexation effective from July 2012. The company’s revenues were down 18.4%
quarter-on-quarter, reflecting a seasonal decline in consumption.

In the second quarter of 2013, OIBDA decreased year-on-year and
quarter-on-quarter as a result of maintenance works carried out at the
facilities, as well as the planned increase in labour costs.

Distribution grid losses decreased by 0.06 p.p year-on-year to 5.3% in the
second quarter of 2013, following the installation of highly accurate
electricity meters. Transmission grid losses decreased by 0.2 p.p.
year-on-year to 1.3%.

Sistema Shyam TeleServices Ltd. (SSTL)

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            51.9     77.2     (32.8%)       65.0     (20.2%)
OIBDA                (39.3)    (83.8)    -              (39.0)    -
Operating loss       (56.0)    (102.2)   -              (55.9)    -
Net loss
attributable to      (83.3)    (125.1)   -              (45.0)
Sistema

SSTL’s revenues decreased by 32.8% year-on-year and 20.2% quarter-on-quarter
in the reporting period, as a result of the company closing its operations in
13 circles. The company’s revenues from the nine circles it continues to
operate in were up 2.4% quarter-on-quarter in local currency.

The OIBDA loss narrowed year-on-year reflecting SSTL’s cost optimisation
programme and strict control over marketing and other expenses.
Quarter-on-quarter OIBDA remained stable mainly due to depreciation of the
local currency against the US dollar. The company’s SG&A decreased by 41.6%
year-on-year and by 1.3% quarter-on-quarter.

SSTL’s total wireless (voice and data) subscriber base declined by 41.0%
year-on-year to 9.8 million customers as of June 30, 2013. Blended mobile ARPU
amounted to US$ 1.6. The overall decrease in the subscriber base resulted from
the closure of circles, although the subscriber base and its quality continued
to increase in the nine circles the company operates in. Subscribers’ monthly
minutes of use (MOU) increased by 11.0% quarter-on-quarter to 328 minutes.

Non-voice revenues from both data and VAS accounted for 34.4% of the company’s
total revenues in the reporting period.

In April 2013, Dmitry Shukov was appointed CEO of SSTL. Dmitry formerly held
senior management positions at Tele2 Russia and MTS.

Sistema Mass Media^7

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            22.9     20.0     14.7%         10.7     114.9%
OIBDA                4.6       1.6       190.5%         (2.9)     -
Operating income/    0.02      (8.2)     -              (5.7)     -
(loss)
Net loss
attributable to      (2.1)     (9.9)     -              (4.9)     -
Sistema

Sistema Mass Media’s revenues grew by 14.7% year-on-year and more than doubled
quarter-on-quarter, mainly as a result of revenues generated from
Stream.ru’s^8 VAS services. SMM’s OIBDA demonstrated a significant
year-on-year and quarter-on-quarter increase, reflecting the growth in
revenues, the optimisation of administrative expenses, as well as the success
of a new management incentive programme aimed at improving business
efficiency.

In the second quarter of 2013, the Stream-TV subscriber base increased by
25.0% year-on-year reaching 8.5 million subscribers. From April 1, 2013, all
Stream-TV channels were added into MTS’ “Mobile TV” package offering. The RWS
content library grew by 7.0% year-on-year and amounted to 1,616 hours as of
June 30, 2013.

In June 2013, Vladimir Khanumyan was appointed as the new Chief Executive
Officer of SMM. Mr. Khanumyan was previously a member of the company’s
Management Board and held the positions of First Vice President and Managing
Director at the company.

RTI

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            479.6    365.7    31.2%         505.6    (5.1%)
OIBDA                17.3      6.6       163.4%         2.9       495.6%
Operating loss       (8.3)     (12.8)    -              (20.9)    -
Net loss
attributable to      (29.9)    (16.0)    -              (12.6)    -
Sistema

RTI is comprised of four principal business units (“BU”) – Defence Solutions
BU, Comprehensive Security Systems BU, Microelectronics Solutions BU and
System Integration BU.

RTI revenues increased by 31.2% year-on-year, mainly as a result of growing
revenue in Defence Solutions BU, the work completed under the Intelligent
Transportation System project, R&D work done in Microelectronics Solutions BU,
and the consolidation of NVision Group in the third quarter of 2012. NVision
accounted for 43% of RTI’s revenue in the second quarter of 2013.

The increase in year-on-year and quarter-on-quarter OIBDA mainly resulted from
revenue growth, as well as the sale of a 3% stake in a Greek subsidiary
INTRACOM TELECOM in 2012.

In May 2013, NVision completed modernising the underlying IT infrastructure
and installing modern video monitoring systems at the Moscow stadium
“Locomotive”.

In April 2013, RTI consolidated 97.18% of ordinary shares of JSC Research
Institute of Long-Range Radio Communication (NPK “NIIDAR”) as part of the
mandatory offer made to the company’s shareholders for the buyout of voting
ordinary shares.

Binnopharm

                                           Year-on-Year   1Q      Quarter-on-
(US$ millions)        2Q 2013  2Q 2012  Change        2013   Quarter
                                                                  Change
Revenues              27.6     15.6     77.2%         19.9   39.1%
OIBDA                  7.6       3.5       115.8%         4.1     86.0%
Operating income       5.9       2.4       145.3%         2.2     163.0%
Net income
attributable to        6.6       0.7       829.0%         1.4     357.2%
Sistema

Binnopharm’s revenues grew by 77.2% year-on-year and 39.1% quarter-on-quarter,
mainly as a result of active development of the distribution segment by
expanding its product line and regional footprint, as well as increasing its
shipments of the Regevak vaccine in the reporting quarter. Binnopharm’s OIBDA
grew year-on-year and quarter-on-quarter with the OIBDA margin reaching 27.5%.

In April 2013, Binnopharm completed the merger with Alium Group of Companies,
a producer of infusion solutions and blood substitutes. The company is now
finalising technical upgrades to modernise production of infusion solutions,
which will position it as the most advanced factory in Russia. New equipment
will help it to produce high-quality products meeting GMP requirements by
2014.

In April 2013, Pavel Medvedev was appointed as the new Chief Executive Officer
of Binnopharm with immediate effect. Mr. Medvedev previously held the position
of Deputy CEO at the company.

MTS Bank

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            202.9    170.1    19.3%         206.7    (1.9%)
OIBDA                (20.0)    (6.6)     -              (10.7)    -
Operating loss       (24.9)    (11.4)    -              (15.6)    -
Net loss
attributable to      (14.0)    (7.7)     -              (14.0)    -
Sistema

In the second quarter of 2013, MTS Bank’s revenues were up 19.3% year-on-year,
as a result of an increase in interest and commission income following the
development of the bank’s retail business. The loan portfolio from joint
projects with MTS grew by 26.4% quarter-on-quarter to US$ 363 million. The
bank also reported a 13.1% growth in the loan portfolio to individuals for the
second quarter of 2013. The OIBDA loss is mainly due to an increase in loan
provisions and recognised loss from the revaluation and sale of debt
securities. In the second half of 2013, MTS Bank’s management plans to
compensate losses with the growing scale of its retail business.

MTS Bank’s loan portfolio, excluding leases, increased by 14.7% year-on-year
to US$ 6,444 million. The interest income from retail and corporate client
transactions grew by 25.6% year-on-year and by 2.6% quarter-on-quarter to US$
171.0 million.

In the second quarter of 2013, MTS Bank, in partnership with CJSC RTK,
launched a SIM-card with a built-in “MTS Money” function, based on the
contactless technology PayPass. In addition, during the reporting quarter, MTS
Bank opened six additional offices in MTS retail outlets.

Detsky mir

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            238.5    173.7    37.3%         222.3    7.3%
OIBDA                10.0      (0.9)     -              (15.1)    -
Operating income/    5.1       (5.4)     -              (20.1)    -
(loss)
Net income/ (loss)
attributable to      0.9       (5.8)     -              (14.7)    -
Sistema

Detsky mir’s revenues increased by 37.3% year-on-year and by 7.3%
quarter-on-quarter, mainly as a result of store expansion, changes in the
company’s commercial policy, and an improved product offering and marketing
approach to attract more visitors. Detsky mir reported positive OIBDA in the
second quarter of 2013, reflecting revenue growth, optimisation of headcount
in the new stores and a new incentive programme for the sales division.

The network of retail outlets amounted to 224 stores, including 22 Early
Learning Centre (ELC) franchised stores, located in 99 cities across Russia
and Kazakhstan. The aggregate retail space was 297,000 sq.m. as of June 30,
2013. In the second quarter of 2013, Detsky mir opened four new stores and one
ELC store.

In June 2013, the AGM of OJSC Detsky mir – Centre’s shareholders approved
dividends for 2012 in the amount of RUB 420 million.

Intourist

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            24.4     23.0     6.5%          16.3     50.2%
OIBDA                5.2       1.8       185.4%         0.6       748.3%
Operating income/    4.4       (0.4)     -              (1.4)     -
(loss)
Net income/ (loss)
attributable to      0.3       (6.9)     -              (2.7)     -
Sistema

Intourist’s revenues grew by 6.5% year-on-year despite a reduction in the
number of rooms owned following the sale of Oktyabrskaya hotel in Nizhny
Novgorod, as well as depreciation of the Russian rouble against the US dollar.
Revenue growth was supported by positive market trends, increased tourist flow
and management’s efforts to strengthen the hotel business. The company
reported a 50.2% quarter-on-quarter increase in revenues as a result of
positive seasonality effects and growing occupancy in the spring holiday and
summer period.

In the second quarter of 2013, Intourist demonstrated strong year-on-year and
quarter-on-quarter OIBDA growth, mainly as a result of an increase in revenues
and reduction of the company’s expenses, achieved by outsourcing of certain
functions.

The number of rooms owned, managed and rented in the reporting quarter
remained at the level of the first quarter of 2013.

Medsi

                                         Year-on-Year             Quarter-on-
(US$ millions)      2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                  Change
Revenues            72.4     46.9     54.5%         74.8     (3.1%)
OIBDA                5.2       5.6       (6.9%)         10.0      (48.1%)
Operating income     3.3       2.1       (54.8%)        5.0       (33.1%)
Net (loss)/ income
attributable to      (0.3)     (0.9)     -              0.6       -
Sistema

In the second quarter of 2013, Medsi’s revenues increased by 54.5%
year-on-year, as a result of integrating its assets with the Medical Centre
for the Mayor and Government of Moscow (SUE), as well as an increase in number
of visits and the average bill. Revenue fell by 3.1% quarter-on-quarter mainly
due to rouble depreciation against the US dollar. The company’s OIBDA
decreased year-on-year and quarter-on-quarter, largely due to the costs
associated with the increased number of fixed payment contracts in the newly
acquired in-patient facilities.

In the reporting quarter, the number of patient visits and services provided
increased by 19.0% and by 53.0% year-on-year, respectively, as a result of the
integration with SUE assets. The average bill in rouble terms grew by 32.0%
year-on-year to RUB 1,560, following an increase in market prices for medical
services and the development of a hospital care segment.

As of June 30, 2013, Medsi’s network consisted of 30 medical clinics, 3
hospitals and 79 first aid stations with the total floor space of healthcare
facilities exceeding 173,000 sq.m.

In May 2013, Alexei Chupin was appointed President of the Medsi Group of
companies.

CORPORATE

                                        Year-on-Year             Quarter-on-
(US$ millions)     2Q 2013  2Q 2012  Change        1Q 2013  Quarter
                                                                 Change
OIBDA^9            (30.1)   (31.6)   -             (33.8)   -
Net (loss)/income   (149.6)   106.4     -              (68.6)    -
Indebtedness        1,746.8   1,640.0   6.5%           1,789.5   (2.4%)

The Corporate segment comprises the companies that control and manage the
Company’s interests in its subsidiaries.

The dividends declared by Sistema's subsidiaries in the second quarter 2013,
which are assigned to the Corporate and Other category, amounted to US$ 588.6
million.

The Corporate segment’s SG&A decreased quarter-on-quarter by 9.6% to US$ 33.9
million.

In June 2013, the AGM of Sistema’s shareholders approved the payment of annual
dividends of RUB 0.96 per ordinary share for the twelve months ended December
31, 2012, amounting to a total of RUB 9.264 billion. The dividends were paid
in August 2013.

In June 2013, Sistema signed two binding Sale Purchase Agreements with
Bradinor Holdings Limited (“Bradinor”) and Cromeld Management Limited
(“Cromeld”) for the sale by the Company of 25% and 24% stakes in OJSC Oil and
Gas Company RussNeft, respectively, for US$ 1.2 billion. The sale was
completed in July 2013.

In May 2013, the Board approved the following new appointments to Sistema’s
Management Board with effect from June 1, 2013: Vsevolod Rozanov as Senior
Vice-President and Chief Financial Officer; Alexey Buyanov as First
Vice-President, Portfolio Manager and Alexey Chupin as Vice-President,
Portfolio Manager.

In May 2013, in line with the Company’s Long-Term Incentive Programme,
approximately 0.3% of ordinary shares of Sistema’s charter capital was granted
to certain members of Sistema’s management and its Board of Directors.

In April 2013, Sistema completed another stage of the planned reorganisation
and strategic integration of its transportation assets – SG-trans and
Financial Alliance LLC. At this stage of the reorganisation, Sistema sold 70%
of its shares in SG-trans to Financial Alliance for RUB 12.0 billion. The
price of the deal is based on the valuation of SG-trans, excluding SG-trading.

FINANCIAL REVIEW

Net cash provided by operations decreased by 17.7% year-on-year and increased
by 17.3% quarter-on-quarter to US$ 1,385.2 million.

Net cash used in investing activities totalled US$ 878.3 million in the
reporting quarter, compared to US$ 1,680.8 million in the corresponding period
of 2012. The Group’s capital expenditure decreased year-on-year by 21.6% to
US$ 805.2 million due to reduced CAPEX at MTS.

The Group received US$ 389.0 million from sale of SG-Trans, net of cash
disposed, including US$ 338.0 million from the sale of 70% of SG-trans to
Financial Alliance and US$ 51.1 million from the sale of 15% of SG-trans to
Unirail as an advance payment. The Group also spent US$ 525.0 million on
increasing banking assets and US$ 496.8 million on increasing short-term
investments and investments in affiliates, whereas proceeds from sale of
short-term investments totalled US$ 484.2 million.

Net cash inflow from financing activities more than doubled year-on-year and
amounted to US$ 474.8 million. The Group’s proceeds from borrowings in the
reporting quarter totalled US$ 1,012.1 million, whereas the principal payments
on long-term and short-term borrowings amounted to US$ 1,188.6 million. The
Group also received US$ 683.0 million from the decrease in banking
liabilities.

The Group’s cash balances of continuing operations nearly doubled year-on-year
to US$ 2,056.7 million as of June 30, 2013 (excluding an amount of US$ 1,809.2
million which comprises the Group’s banking activities).

The Group’s net debt (short-term and long-term debt less cash and cash
equivalents and highly liquid deposits) decreased by 2.9% year-on-year to US$
12,716.5 million as of June 30, 2013.

SIGNIFICANT EVENTS FOLLOWING THE END OF THE REPORTING PERIOD

MTS

In August 2013, the Uzbek authorities, having failed to dispose of the assets
of Uzdunrobita, MTS’s wholly owned subsidiary in Uzbekistan, by way of two
rounds of auctions, have reached out directly to Uzdunrobita creditors
offering to purchase Uzdunrobita’s assets. MTS understands that the
liquidation administrator has now proposed that the creditors of Uzdunrobita
purchase these assets. Should this proposal not succeed, the liquidation
administrator may transfer all of Uzdunrobita’s assets to the local
authorities. The Uzbek operation is presented as discontinued in the reporting
quarter, with all Uzdunrobita assets fully provided, and corresponding losses
recognized, in the income statement for 2012.

In August 2013, MTS’ Board of Directors set the date for the company’s the EGM
for September 30, 2013. The Board also recommended that the EGM approves
semi-annual dividends of RUB 5.22 per ordinary MTS share (RUB 10.44 per ADR)
amounting to a total of RUB 10.8 billion on the basis of the company’s first
half of 2013 financial and operating results.

In July 2013, MTS and Nokia Siemens Networks (“NSN”), one of the world’s
largest suppliers of telecommunications equipment, announced an agreement to
jointly develop telecommunications infrastructure and build 4G networks in the
Moscow region and Russia’s Central Federal District.

Bashneft

In August 2013, Bashneft’s EGM approved the sale of a 98% stake in United
Petrochemical Company to Sistema for RUB 6.2 billion. The transaction value
was determined based on an independent appraisal made by one of the Big Four
audit firms. The transaction forming part of Bashneft’s strategy for divesting
its non-core assets, is expected to be completed before the end of the third
quarter of 2013.

Corporate

In July 2013, Sistema completed the sale of a 49% stake in OJSC Oil and Gas
Company RussNeft, for a total cash consideration of US$ 1.2 billion.

In July 2013, Sistema completed another stage in the reorganisation of the
Group’s transportation assets under the SG-trans brand: Sistema sold a 15%
stake in SG-trans to Unirail Holdings Limited for RUB 2.5 billion.

In July 2013, in line with the remuneration structure for the members of
Sistema’s Board of Directors, shareholdings in the Company of six members have
been increased by 121,010 shares and by 115,691 shares for each of five other
board members (three of whom received shares for the first time). Each
allocation represents approximately 0.0013% of the 9,650,000,000 total shares
issued. Based on the closing GDR price on the London Stock Exchange as of July
11, 2013 of US$ 20.65 per GDR, this equates to an indicative value of
approximately US$ 1.347 million.

In July 2013, Sistema’s Detsky mir-Centre, through its wholly owned subsidiary
signed an agreement with Sberbank of Russia to buy back a 25% + 1 share stake
in Detsky mir for RUB 4.5 billion. This transaction was financed by Detsky
mir’s own resources and debt. As a result of this transaction, Sistema now
owns (directly and indirectly) 100% of Detsky mir.

                                     ***

For further information, please visit www.sistema.com or contact:

Investor Relations        Public Relations

Evgeniy Chuikov           Ekaterina Tsukanova
                        
Tel: +7 (495) 692 11 00   Tel.: +7 (495) 228 1536

ir@sistema.ru             pr@sistema.ru

Sistema is the largest publicly-traded diversified holding company in Russia
and the CIS, which invests in and is a major shareholder of companies serving
over 100 million customers in the sectors of telecommunications, high
technology, oil and energy, radars and aerospace, banking, retail, mass-media,
tourism and healthcare services. Founded in 1993, the Company reported
revenues of US$ 8.5 billion for the second quarter of 2013, and total assets
of US$ 44.4 billion as at June 30, 2013. Sistema’s global depository receipts
are listed under the symbol “SSA” on the London Stock Exchange. Sistema’s
ordinary shares are listed under the symbol “AFKS” on the MICEX-RTS Stock
Exchange. Sistema was ranked number 315 in the 2011 edition of the Fortune
Global 500 list. Website: www.sistema.com

The Company is not an investment company, and is not and will not be
registered as such, under the U.S. Investment Company Act of 1940.

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. In addition, there is
no assurance that the new contracts entered into by our subsidiaries
referenced above will be completed on the terms contained therein or at all.
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

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2013 AND 2012

(Amounts in thousands of U.S. dollars, except per share amounts)

                     Six months ended                    Three months ended
                                                    
                     June 30,                            June 30,
                     2013            2012              2013            2012
                                                                                       
Sales            $   16,426,551    $   15,426,582    $   8,284,536     $   7,779,758
Revenue from
banking              391,682           311,837           188,162           161,413
activities
                                                                        
TOTAL REVENUES       16,818,233        15,738,419        8,472,698         7,941,171
                                                                                       
Cost of sales,
exclusive of
depreciation,
depletion and        (6,323,239)       (5,966,040)       (3,163,336)       (2,876,217)
amortization
shown
separately
below
Cost related
to banking
activities,
exclusive of
depreciation         (264,201)         (169,421)         (121,834)         (94,186)
and
amortization
shown
separately
below
Selling,
general and          (2,121,022)       (1,891,831)       (1,056,145)       (949,179)
administrative
expenses
Depreciation,
depletion and        (1,618,463)       (1,539,590)       (805,068)         (759,789)
amortization
Transportation       (461,393)         (387,077)         (239,129)         (207,461)
costs
Impairment of
long-lived
assets other
than goodwill        (53,767)          (88,836)          (37,579)          (23,906)
and provisions
for other
assets
Taxes other
than income          (3,448,711)       (3,262,399)       (1,721,023)       (1,758,176)
tax
Other
operating            (86,062)          (13,449)          (38,165)          (34,382)
expenses, net
Equity in
results of           41,057            (38,234)          34,711            (50,190)
affiliates
Gain on Bitel        346,100           -                 346,100           -
resolution
                                                                        
OPERATING            2,828,532         2,381,542         1,671,230         1,187,685
INCOME
                                                                                       
Interest             122,975           149,057           71,318            74,869
income
Change in fair
value of             (1,315)           (1,218)           (665)             (616)
derivative
instruments
Interest
expense, net         (643,255)         (703,493)         (317,406)         (352,858)
of amounts
capitalized
Foreign
currency             (205,076)         (1,132)           (175,069)         (152,700)
losses
                                                                        
Income from
continuing
operations           2,101,861         1,824,756         1,249,408         756,380
before income
tax
                                                                                       
Income tax           (545,334)         (519,906)         (304,981)         (204,533)
expense
                                                                        
Income from
continuing           1,556,527         1,304,850         944,427           551,847
operations
                                                                                       
Loss from
discontinued
operations,          (8,588)           (999,191)         (4,513)           (1,019,554)
net of income
tax effect
                                                                        
NET INCOME       $   1,547,939     $   305,659       $   939,914       $   (467,707)
                                                                                       
Noncontrolling       (670,262)         (86,959)          (412,061)         304,948
interest
                                                                        
NET INCOME
attributable     $   877,677       $   218,700       $   527,853       $   (162,759)
to Sistema
JSFC
                                                                                       
Income per
share, basic         9.52              2.34              5.72              (1.74)
and diluted,
U.S. cent

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2013 AND DECEMBER 31, 2012

(Amounts in thousands of U.S. dollars, except share amounts)

                                     June 30, 2013     December 31, 2012
                                                                             
ASSETS
                                                                             
CURRENT ASSETS:
Cash and cash equivalents          $   2,056,725       $   1,859,217
Short-term investments                 1,540,742           1,214,869
Assets from banking activities,
current portion (including cash        4,794,047           4,342,984
and cash equivalents of
$1,809,224 and $769,411)
Accounts receivable, net               2,459,774           2,261,159
VAT receivable                         551,089             610,975
Inventories and spare parts            1,893,062           1,812,776
Deferred tax assets, current           357,408             348,773
portion
Assets related to discontinued         82,598              476,681
operations
Other current assets                   1,900,033           1,673,010
                                                          
Total current assets                   15,635,478          14,600,444
                                                                             
NON-CURRENT ASSETS:
Property, plant and equipment,         19,118,680          20,843,125
net
Advance payments for non-current       210,447             230,773
assets
Goodwill                               1,602,044           1,753,233
Other intangible assets, net           2,404,267           2,149,983
Investments in affiliates              1,845,902           1,482,721
Assets from banking activities,        2,297,127           2,255,709
net of current portion
Debt issuance costs, net               95,534              155,895
Deferred tax assets, net of            342,028             314,210
current portion
Long-term investments                  250,339             269,180
Other non-current assets               606,307             599,135
                                                          
Total non-current assets               28,772,675          30,053,964
                                                          
TOTAL ASSETS                       $   44,408,153      $   44,654,408

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2013 AND DECEMBER 31, 2012(CONTINUED)

(Amounts in thousands of U.S. dollars, except share amounts)

                                     June 30, 2013     December 31, 2012
                                                                             
LIABILITIES AND SHAREHOLDERS’
EQUITY
                                                                             
CURRENT LIABILITIES:
Accounts payable                   $   2,592,986       $   2,470,565
Liabilities from banking               4,568,725           4,131,390
activities, current portion
Taxes payable                          749,310             763,301
Deferred tax liabilities,              226,661             139,842
current portion
Subscriber prepayments, current        508,366             606,856
portion
Accrued expenses and other             3,214,452           2,633,032
current liabilities
Short-term loans payable               319,438             292,260
Current portion of long-term           2,686,969           2,862,264
debt
Liabilities related to                 59,678              444,487
discontinued operations
                                                          
Total current liabilities              14,926,585          14,343,997
                                                                             
LONG-TERM LIABILITIES:
Long-term debt, net of current         11,931,733          12,447,374
portion
Subscriber prepayments, net of         100,357             112,805
current portion
Liabilities from banking
activities, net of current             613,752             1,057,072
portion
Deferred tax liabilities, net of       1,981,173           2,005,990
current portion
Asset retirement obligation            226,543             228,627
Postretirement benefits                80,649              89,038
obligation
Property, plant and equipment          77,267              88,380
contributions
Other long-term liabilities            621,443             250,599
                                                          
Total long-term liabilities            15,632,917          16,279,885
                                                          
TOTAL LIABILITIES                      30,559,502          30,623,882
                                                                             
Commitments and contingencies          -                   -
                                                                             
Redeemable non-controlling             747,661             731,661
interests
                                                                             
SHAREHOLDERS’ EQUITY:
Share capital (9,650,000,000
shares issued; 9,234,619,148 and
9,209,574,962 shares outstanding       30,057              30,057
with par value of 0.09 Russian
Rubles, respectively)
Treasury stock (415,380,852 and
440,425,038 shares with par            (472,525)           (501,109)
value of 0.09 Russian Rubles,
respectively)
Additional paid-in capital             2,783,461           2,882,819
Retained earnings                      7,651,375           7,111,088
Accumulated other comprehensive        (1,018,185)         (325,571)
loss
                                                          
Total Sistema JSFC shareholders’       8,974,183           9,197,284
equity
                                                                             
Non-redeemable noncontrolling          4,126,807           4,101,581
interests
                                                                             
TOTAL EQUITY                           13,100,990          13,298,865
                                                          
TOTAL LIABILITIES AND EQUITY       $   44,408,153      $   44,654,408

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(Amounts in thousands of U.S. dollars)

                                                 Six months ended June 30,
                                                   2013          2012
                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES:
                                                                             
Net income                                     $   1,547,939   $   305,659
                                                                             
Loss from discontinued operations                  8,588           999,191
Income from continuing operations                  1,556,527       1,304,850
                                                                             
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation, depletion and amortization           1,618,463       1,539,590
Equity in net income of investees                  (41,057)        38,234
Deferred income tax expense/(benefit)              235,027         (40,762)
Foreign currency transactions losses               205,076         1,132
Gain on Bitel resolution, net of cash              (221,100)       -
received of $125,000
Impairment of long-lived assets other than         53,767          88,836
goodwill and provisions for other assets
Loss on disposal of property, plant and            6,669           13,115
equipment
Amortization of connection fees                    (15,438)        (14,565)
Allowance for loan losses                          133,426         30,689
Dividends received from affiliates                 29,884          24,972
Non-cash compensation to employees                 11,014          -
Other non-cash items                               64,314          31,829
                                                                             
Changes in operating assets and liabilities,
net of effects from purchase of businesses:
Trading securities                                 (182,261)       11,088
Accounts receivable                                (472,218)       (399,576)
VAT receivable                                     37,402          141,827
Inventories and spare parts                        (329,121)       54,314
Other current assets                               (233,167)       (170,257)
Accounts payable                                   74,300          68,125
Subscriber prepayments                             (49,935)        (74,498)
Taxes payable                                      46,699          88,551
Accrued expenses and other liabilities             54,717          (9,844)
                                                                             
Net cash provided by operating activities of       2,582,988       2,727,650
continuing operations
Net cash (used in) / provided by operating         (17,288)        205,870
activities of discontinued operations
                                                                             
Net cash provided by operating activities      $   2,565,700   $   2,933,520

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 (CONTINUED)

(Amounts in thousands of U.S. dollars)

                                             Six months ended June 30,
                                               2013            2012
                                                                             
CASH FLOWS FROM INVESTING ACTIVITIES:
                                                                             
Payments for purchases of property,        $   (1,283,727)   $   (1,618,046)
plant and equipment
Payments for purchases of intangible           (202,447)         (158,542)
assets
Proceeds from/(payments for) purchases
of businesses, including/(net of) cash         42,188            (60,541)
acquired
Purchase of investments in affiliated          (304,388)         -
companies
Payments for purchases of long-term            (27,011)          (397,274)
investments
Payments for purchases of short-term           (839,090)         (1,997,819)
investments
Payments for purchases of other                (7,568)           (162,396)
non-current assets
(Increase) /decrease in restricted cash        (15,049)          37,863
Cash disposed on loss of control of the        -                 (49,238)
subsidiary less consideration received
Proceeds from sale of subsidiaries, net        389,011           -
of cash disposed
Proceeds from sale of property, plant          46,874            24,889
and equipment
Proceeds from sale of long-term                -                 192,223
investments
Proceeds from sale of other non-current        1,863             18,919
assets
Proceeds from sale of short-term               676,507           235,341
investments
Net decrease/(increase) in loans to            54,740            (629,628)
customers of the banking division
                                                                             
Net cash used in investing activities          (1,468,097)       (4,564,249)
                                                                             
CASH FLOWS FROM FINANCING ACTIVITIES:
                                                                             
Proceeds from short-term borrowings, net       25,205            54,664
Net increase in deposits from customers        371,897           531,211
of the banking division
Proceeds from sale of treasure stock           -                 73,083
Proceeds from long-term borrowings             2,326,315         1,748,403
Debt issuance costs                            (4,690)           (10,860)
Principal payments on long-term                (2,482,583)       (2,154,881)
borrowings
Acquisition of non-controlling interests       (27,073)          (627,108)
in existing subsidiaries
Proceeds from capital transactions with        8,623             73,987
shares of existing subsidiaries
Purchases of treasury shares                   -                 (33,352)
                                                                             
Net cash provided by / (used in)               217,694           (344,853)
financing activities
                                                                             
Effect of foreign currency translation         (77,294)          (54,953)
on cash and cash equivalents
                                                                             
Net increase/(decrease) in cash and cash       1,238,003         (2,030,535)
equivalents
                                                                             
Cash and cash equivalents at the
beginning of the period (including cash        2,629,544         4,320,423
of discontinued operations)
                                                                             
Cash and cash equivalents at the end of
the period (including cash of                  3,867,547         2,289,888
discontinued operations)
                                                                             
Cash and cash equivalents of
discontinued operations at the end of          (1,598)           (271,379)
the period
                                                                
Cash and cash equivalents of continuing    $   3,865,949     $   2,018,509
operations at end of the period *
                                                                             
CASH PAID DURING THE PERIOD FOR:
Interest paid, net of amounts              $   (650,300)     $   (700,043)
capitalized
Income taxes paid                              (286,146)         (562,554)
                                                                             
* Cash and cash equivalents at the end
of the period comprised of the
following:
Non-banking activities                     $   2,056,725     $   1,133,291
1. Banking activities                          1,809,224         885,218
                                                                             
                                           $   3,865,949     $   2,018,509

SISTEMA JSFC AND SUBSIDIARIES

UNAUDITED SEGMENTAL BREAKDOWN FOR THE  SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(Amounts in thousands of U.S. dollars)

For the six                                                                                   Total
months ended       MTS         Bashneft    SSTL       MTS Bank   RTI        Corporate  reportable  Other      Total
June 30, 2013                                                                                 segments
                                                                                                                                  
Net sales to
external            6,125,868    8,394,627    116,868     391,682     750,035     22,037      15,801,117   1,017,116   16,818,233
customers ^(a)
Intersegment        9,638        3,483        -           17,908      235,189     19,040      285,258      73,659      358,917
sales
Equity in results   22,495       4,602        -           -           (4,406)     -           22,691       9,640       32,331
of affiliates
Net interest        -            -            -           (29,551)    -           -           (29,551)     -           (29,551)
expense ^(b)
Depreciation,
depletion and       1,152,150    289,045      33,600      9,676       49,421      7,907       1,541,799    76,664      1,618,463
amortization
Operating           1,898,972    1,144,162    (111,866)   (40,444)    (29,214)    (71,774)    2,789,836    58,144      2,847,980
income/(loss)
Interest income     48,228       82,685       5,022       -           16,993      43,393      196,321      7,047       203,368
Interest expense    273,370      156,786      68,246      -           68,374      80,046      646,822      56,958      703,780
Income tax          2. 323,787   239,367      -           (8,224)     (16,327)    3. 2,114    540,717      4,617       545,334
expense/(benefit)
Segment assets      16,012,426   14,756,183   917,573     7,520,115   3,569,388   3,203,095   45,978,780   3,986,727   49,965,507
Indebtedness ^(c)   7,531,759    3,223,608    692,743     -           1,441,156   1,746,834   14,636,100   302,040     14,938,140
Capital             841,282      460,413      9,575       11,991      46,219      68,224      1,437,704    48,470      1,486,174
expenditures ^(d)

For the six                                                                                   Total
months ended       MTS         Bashneft    SSTL       MTS Bank   RTI        Corporate  reportable  Other      Total
June 30, 2012                                                                                 segments
                                                                                                                                  
Net sales to                                                                                  4.
external            5,884,218    7,998,686    158,131     311,837     601,645     18,828      14,973,345   765,074     15,738,419
customers ^(a)
Intersegment        3,266        5,666        -           15,356      241,273     15,906      5. 281,467   15,489      296,956
sales
Equity in results   9,729        (42,225)     -           -           (2,751)     -           (35,247)     (5,076)     (40,323)
of affiliates
Net interest        -            -            -           (3,656)     -           -           (3,656)      -           (3,656)
expense ^(b)
Depreciation,
depletion and       1,069,122    306,250      36,008      9,562       43,534      5,500       1,469,976    69,614      1,539,590
amortization
Operating           1,433,558    1,233,148    (191,851)   (4,243)     (15,552)    (66,694)    2,388,366    3,564       2,391,930
income/(loss)
Interest income     58,655       90,710       4,224       -           4,254       64,451      222,294      60,936      283,230
Interest expense    309,299      176,185      88,073      -           35,000      78,449      687,006      54,257      741,263
Income tax          6. 230,784   277,646      -           559         4,794       (3,478)     510,305      9,601       519,906
expense/(benefit)
Segment assets      15,098,554   14,321,568   866,396     7,028,732   2,062,221   4,338,747   43,716,218   4,383,152   48,099,370
Indebtedness ^(c)   7,292,959    3,881,451    1,402,713   -           1,046,447   1,639,995   15,263,565   327,643     15,591,208
Capital             1,124,127    440,122      29,790      14,980      58,847      11,651      1,679,517    97,071      1,776,588
expenditures ^(d)

(a) Interest income and expenses of the MTS Bank are presented as revenues
from financial services and cost of financial services, correspondingly, in
the Group’s consolidated financial statements.

(b) Represents the net interest result of banking activities. In reviewing the
performance of MTS Bank, the chief operating decision maker reviews the net
interest result, rather than the gross interest amounts.

(c) Represents the sum of short-term and long-term debt.

(d) Represents purchases of property, plant and equipment and intangible
assets.

Attachment A

Non-GAAP financial measures. This press release includes financial information
prepared in accordance with accounting principles generally accepted in the
United States of America, or US GAAP, as well as other financial measures
referred to as non-GAAP. The non-GAAP financial measures should be considered
in addition to, but not as a substitute for, the information prepared in
accordance with US GAAP.

Operating Income Before Depreciation and Amortization (OIBDA) and OIBDA
margin. OIBDA represents operating income before depreciation and
amortization. OIBDA margin is defined as OIBDA as a percentage of our net
revenues. Our OIBDA may not be similar to OIBDA measures of other companies;
is not a measurement under accounting principles generally accepted in the
United States and should be considered in addition to, but not as a substitute
for, the information contained in our consolidated statement of operations. We
believe that OIBDA provides useful information to investors because it is an
indicator of the strength and performance of our ongoing business operations,
including our ability to fund discretionary spending such as capital
expenditures, acquisitions of businesses and other investments and our ability
to incur and service debt. While depreciation and amortization are considered
operating costs under generally accepted accounting principles, these expenses
primarily represent the non-cash current period allocation of costs associated
with long-lived assets acquired or constructed in prior periods. Our OIBDA
calculation is commonly used as one of the bases for investors, analysts and
credit rating agencies to evaluate and compare the periodic and future
operating performance and value of companies. OIBDA can be reconciled to our
consolidated statements of operations as follows:

Operating income and OIBDA reconciliation

                          2Q 2013  2Q 2012  1Q 2013
Operating Income            1,671.2   1,187.7   1,157.3
One off items               346.1     -         -
Adjusted operating income   1,325.1   1,187.7   1,157.3
Depreciation, depletion
                            805.1     759.8     813.4
and amortization
Adjusted OIBDA              2,130.2   1,974.5   1,970.7

Net income reconciliation

                    2Q 2013  2Q 2012  1Q 2013
Net income/ (loss)    527.9     (162.8)   349.8
One off items         182.8     538.4     -
Adjusted net income   345.1     375.6     349.8

^1 See Attachment A for definitions and reconciliation of adjusted OIBDA to
GAAP financial measures. The adjustment includes recognised gains from settled
disputes related to Bitel LLC.

^2 See Attachment A for definitions and reconciliation of adjusted net income
attributable to the Group to GAAP financial measures.

^3 Including highly liquid deposits.

^4 Sistema owns 50% stake in Financial Alliance

^5 Here and from hereon, the comparison of period to period revenues are
presented on an aggregated basis, excluding revenues from intra-segment
(between entities in the same segment) transactions, but before inter-segment
(between entities in different segments) eliminations, unless accompanied by
the word “consolidated”. Amounts attributable to individual companies, where
appropriate, are shown prior to both intra-segment and inter-segment
eliminations and may differ from respective standalone results due to certain
reclassifications and adjustments.

^6 Excluding Belarus subscribers

^7 Financial results of Stream.ru are included into SMM segment for all
periods presented.

^8 Stream.ru is under the operational management of SMM and is owned by
Sistema (55%) and MTS (45%). For reporting purposes, Stream.ru’s financial
results were allocated to SMM’s segment.

^9 Here and further, OIBDA and net income (loss) of the Corporate & Other
category are shown without an effect of intragroup dividends.

Contact:

JSFC Sistema
 
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