We are constantly improving our corporate governance system in conformity with the requirements of Russian legislation, regulatory bodies, and international financial organizations. It allows us to improve interaction between the company's business divisions and perform effective supervision of their activity, which is in line with the interests of our customers and JSC SITRONICS shareholders. The corporate governance system also ensures efficient interaction with our companies' shareholders, protection of minority shareholders, and the necessary level of information disclosure.

Audit and Budget Committees have been created within the framework of SITRONICS corporate governance improvement. The main function of the Audit Committee is to provide the Board of Directors with objective information and consultation on financial reports, the auditor's competence and independence, quality of auditor's services, as well as accuracy and efficiency of the company's in-house audit.

The Budget Committee analyses and monitors development and implementation of the company's business and investment plans, and submits its recommendations on those issues to the Board of Directors. JSC SITRONICS is continuously enhancing interaction within the company's business divisions. For instance, after the acquisition of the majority stake in the Greek company, INTRACOM TELECOM in summer 2006, coordination boards were established for effective integration of the acquired asset into the SITRONICS structure.

SITRONICS is also improving its communication with the company's shareholders on issues concerning the protection of minority shareholders, identifying and settling of potential corporate conflicts. A special department for cooperation with investors and analysts of investment banks has been created in SITRONICS to ensure a constructive dialogue with institutional investors and to provide them with all required information.

In February 2006, SITRONICS received credit ratings from international rating agencies Moody's (B3) and Fitch Ratings (B-).

Relations with the Major Shareholder

SITRONICS is a subsidiary of JSFC SISTEMA - the largest private sector consumer services company in Russia and the CIS. As part of SISTEMA, the company has access to necessary financial and management resources.

This enables SITRONICS to make considerable investments in corporate governance systems and human resources, to develop its R&D potential, and to expand to fast-growing markets. We supply our products and services in the field of telecommunications to companies, which are part of JSFC SISTEMA, such as МТS, the largest Eastern European mobile communication operator with a subscriber base exceeding 60 million, and МGТS, Moscow's municipal fix line operator with over 4.2 million subscribers.

By implementing large-scale projects for such big clients, SITRONICS has gained highly valuable experience, which is used in new large-scale projects for third-party clients outside SISTEMA.